<PAGE> 1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): July 20, 1999
-------------------------
ALTERRA HEALTHCARE CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 1-11999 39-1771281
(State or other jurisdiction of (Commission file number) (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
-------------------------
450 N. SUNNYSLOPE ROAD, SUITE 300
BROOKFIELD, WISCONSIN 53005
(Address of principal executive offices)
(414) 789-9565
(Registrant's telephone number, including area code)
================================================================================
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On July 20, 1999, Alterra Healthcare Corporation (the "Company" or
"Registrant") consummated a synthetic lease transaction (the "Transaction")
relating to 20 assisted living and Alzheimer's/dementia care residences that
were previously owned and operated by HCR Manor Care, Inc. and its affiliates
("HCR"). Pursuant to the Transaction, an affiliate of Key Bank National
Association acquired the 20 residences for an aggregate purchase price of
approximately $139.9 million (including closing costs) and simultaneously
therewith leased the 20 residences to AHC Tenant, Inc., a wholly-owned
subsidiary of the Company. Mortgage financing for the acquisition in the amount
of $130.4 million was provided by Greenwich Capital Financial Products, Inc. and
credit enhancement of this financing in the form of a surety bond was provided
by a member of the Zurich Financing Services Group. The Company's leases of
these 20 residences have a term of ten years, reflect initial rental payments
based on a lease constant of 9.66% and contain an option to purchase the 20
residences at the end of the lease term for a pre-negotiated fixed price. For
financial accounting purposes, leases for 13 of the residences will be treated
as operating leases and leases for seven residences will be treated as capital
leases.
On December 31, 1998, the Company agreed to purchase 29 assisted living
and Alzheimer's/dementia care residences from HCR for approximately $200
million. The Transaction involved 20 of these 29 residences. The purchase price
for these 20 residences was determined based upon arms' length negotiations
between HCR and the Company. The Company expects to complete its acquisition of
the remaining eight HCR residences in the third quarter of 1999 (HCR and the
Company have removed one residence from the purchase transaction). The Company's
agreement to acquire these residences from HCR is a component of the previously
announced strategic alliance between the Company and HCR, which alliance is
summarized in the Company's Current Report on Form 8-K dated January 4, 1999.
The 20 residences that are the subject of the Transaction include 11
Alzheimer's/dementia care residences and nine assisted living residences for
frail elderly, and are located in the states of Arizona, California, Colorado,
Florida, Georgia, Kansas, Nevada, North Carolina, New Jersey, Ohio and Virginia.
Three of the 20 residences were acquired by the Company from HCR in April 1999,
and hence were sold to the synthetic lessor by the Company. Except for two
residences that commenced operations after July 20, 1999, each of these 20
residences was operated by HCR prior to the sale by HCR.
On July 21, 1999, the Registrant issued a press release announcing the
consummation of the Transaction, a copy of which is filed as an exhibit hereto
and incorporated herein by this reference.
2
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(a) Financial Statements of Business Acquired. Pursuant to Rule 3-05(b)
of Regulation S-X, no financial statements of the businesses acquired in the
Transaction are required to be filed herewith.
(b) Pro Forma Financial Information. Pursuant to Rule 11-01(b) of
Regulation S-X, pro forma financial information relating to the Transaction is
not required to be filed herewith.
(c) Exhibits. The following exhibits are filed herewith either by
incorporation by reference or by direct transmission via "EDGAR."
2.1 Agreement of Purchase and Sale (Construction Residences) by
and between HCR Manor Care, Inc. and the Registrant dated
as of December 31, 1998 (schedules to this agreement, which
are listed in the table of contents of the agreement, have
been omitted pursuant to Item 601(b)(2) of Regulation S-K;
the Registrant agrees to furnish supplementally to the
Commission, upon request, a copy of these exhibits and
schedules) (incorporated by reference to Exhibit 2.1 of the
Registrant's Form 10-K for the year ended December 31,
1998).
2.2 Agreement of Purchase and Sale (Operating Residences) by
and between HCR Manor Care, Inc. and the Registrant dated
as of December 31, 1998 (schedules to this agreement, which
are listed in the table of contents of the agreement, have
been omitted pursuant to Item 601(b)(2) of Regulation S-K;
the Registrant agrees to furnish supplementally to the
Commission, upon request, a copy of these exhibits and
schedules) (incorporated by reference to Exhibit 2.2 of the
Registrant's Form 10-K for the year ended December 31,
1998).
2.3 Addendum dated December 31, 1998 by and between HCR Manor
Care, Inc. and the Registrant.
2.4 Amendment to Agreements of Purchase and Sale dated as of
June 30, 1999 between the Registrant, HCR Manor Care, Inc.
and certain of its affiliates.
2.5 Master Lease Agreement dated as of July 16, 1999 between
Pita General Corporation ("Synthetic Lessor") and AHC
Tenant, Inc. ("AHC Tenant"), a wholly-owned subsidiary of
the Registrant (Annex A to this agreement has been filed
as Exhibit A to the Loan Agreement filed as Exhibit 2.6
hereto).
3
<PAGE> 4
2.6 Loan Agreement dated as of July 16, 1999 between Synthetic
Lessor, AHC Tenant and Greenwich Capital Financial
Products, Inc. ("Lender"), including the Master Glossary of
Definitions included as Exhibit A thereto (other exhibits
and schedules to this agreement, which are listed and
summarized in the table of contents to the agreement, have
been omitted pursuant to Item 601(b)(2) of the Regulation
S-K; the Registrant agrees to furnish supplementally to the
Commission, upon request, a copy of these exhibits and
schedules).
2.7 Participation Agreement dated as of July 16, 1999 between
AHC Tenant, Synthetic Lessor, Lender, SELCO Service
Corporation ("SELCO"), The First National Bank of Chicago
("FNB"), ZC Specialty Insurance Company ("ZC") and the
Registrant.
2.8 Trust Agreement dated as of July 16, 1999 between FNB,
Lender, ZC, AHC Tenant, Synthetic Lessor, SELCO and the
Registrant.
2.9 Flow of Funds Agreement dated as of July 16, 1999 between
Synthetic Lessor, Lender, ZC, FNB, AHC Tenant, the
Registrant and certain other parties thereto.
2.10 Reimbursement Agreement dated as of July 16, 1999 between
ZC, AHC Tenant and Synthetic Lessor (exhibits and schedules
to this agreement, which are listed and summarized in the
table of contents to the agreement, have been omitted
pursuant to Item 601(b)(2) of the Regulation S-K; the
Registrant agrees to furnish supplementally to the
Commission, upon request, a copy of these exhibits and
schedules).
2.11 Guaranty dated as of July 16, 1999 executed by the
Registrant.
2.12 Promissory Note dated as of July 16, 1999 executed by
Synthetic Lessor.
99.1 Press release dated July 21, 1999
4
<PAGE> 5
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.
Dated: August 3, 1999
ALTERRA HEALTHCARE CORPORATION
(Registrant)
By: /s/Thomas E. Komula
---------------------------------------
Thomas E. Komula, Senior Vice
President, Chief Financial Officer,
Treasurer and Secretary
5
<PAGE> 6
EXHIBIT INDEX
2.1 Agreement of Purchase and Sale (Construction Residences) by and between
HCR Manor Care, Inc. and the Registrant dated as of December 31, 1998
(schedules to this agreement, which are listed in the table of contents
of the agreement, have been omitted pursuant to Item 601(b)(2) of
Regulation S-K; the Registrant agrees to furnish supplementally to the
Commission, upon request, a copy of these exhibits and schedules)
(incorporated by reference to Exhibit 2.1 of the Registrant's Form 10-K
for the year ended December 31, 1998).
2.2 Agreement of Purchase and Sale (Operating Residences) by and between
HCR Manor Care, Inc. and the Registrant dated as of December 31, 1998
(schedules to this agreement, which are listed in the table of contents
of the agreement, have been omitted pursuant to Item 601(b)(2) of
Regulation S-K; the Registrant agrees to furnish supplementally to the
Commission, upon request, a copy of these exhibits and schedules)
(incorporated by reference to Exhibit 2.2 of the Registrant's Form 10-K
for the year ended December 31, 1998).
2.3 Addendum dated December 31, 1998 by and between HCR Manor Care, Inc.
and the Registrant.
2.4 Amendment to Agreements of Purchase and Sale dated as of June 30, 1999
between the Registrant, HCR Manor Care, Inc. and certain of its
affiliates.
2.5 Master Lease Agreement dated as of July 16, 1999 between Pita General
Corporation ("Synthetic Lessor") and AHC Tenant, Inc. ("AHC Tenant"), a
wholly-owned subsidiary of the Registrant (Annex A to this agreement
has been filed as Exhibit A to the Loan Agreement filed as Exhibit 2.6
hereto).
2.6 Loan Agreement dated as of July 16, 1999 between Synthetic Lessor, AHC
Tenant and Greenwich Capital Financial Products, Inc. ("Lender"),
including the Master Glossary of Definitions included as Exhibit A
thereto (other exhibits and schedules to this agreement, which are
listed and summarized in the table of contents to the agreement, have
been omitted pursuant to Item 601(b)(2) of the Regulation S-K; the
Registrant agrees to furnish supplementally to the Commission, upon
request, a copy of these exhibits and schedules).
2.7 Participation Agreement dated as of July 16, 1999 between AHC Tenant,
Synthetic Lessor, Lender, SELCO Service Corporation ("SELCO"), The
First National Bank of Chicago ("FNB"), ZC Specialty Insurance Company
("ZC") and the Registrant.
<PAGE> 7
2.8 Trust Agreement dated as of July 16, 1999 between FNB, Lender, ZC, AHC
Tenant, Synthetic Lessor, SELCO and the Registrant.
2.9 Flow of Funds Agreement dated as of July 16, 1999 between Synthetic
Lessor, Lender, ZC, FNB, AHC Tenant, the Registrant and certain other
parties thereto.
2.10 Reimbursement Agreement dated as of July 16, 1999 between ZC, AHC
Tenant and Synthetic Lessor (exhibits and schedules to this agreement,
which are listed and summarized in the table of contents to the
agreement, have been omitted pursuant to Item 601(b)(2) of the
Regulation S-K; the Registrant agrees to furnish supplementally to the
Commission, upon request, a copy of these exhibits and schedules).
2.11 Guaranty dated as of July 16, 1999 executed by the Registrant.
2.12 Promissory Note dated as of July 16, 1999 executed by Synthetic Lessor.
99.1 Press release dated July 21, 1999.
<PAGE> 1
EXHIBIT 2.3
ADDENDUM
THIS ADDENDUM (this "Addendum") dated this 31st day of December, 1998,
is by and between HCR Manor Care, Inc., a Delaware corporation ("HCR") and
Alternative Living Services, Inc., a Delaware corporation ("ALS").
WHEREAS, on the date of this Addendum HCR and ALS have entered into an
Agreement of Purchase and Sale (Construction Residences) (the "Construction
Purchase Agreement") and an Agreement of Purchase and Sale (Operating
Residences) (the "Operating Purchase Agreement" and, together with the
Construction Purchase Agreement, the "Agreements");
WHEREAS, the parties wish to set forth in this Addendum certain
agreements they have reached with respect to certain changes they shall make to
the Agreements after the date hereof, notwithstanding anything to the contrary
set forth in the Agreements.
NOW, THEREFORE, intending to be legally bound, the parties agree as
follows:
1. Terms designated with an initial capital letter and not otherwise
defined herein shall have the meanings ascribed to such terms in the respective
Agreements amended hereby.
2. Within thirty (30) days after the date hereof, the parties shall
amend and/or restate the Agreements to provide as follows:
A. Development Fees. In consideration of development services
rendered by HCR and/or its subsidiaries with respect to the Construction
Residences up to and including December 31, 1998, ALS shall pay to HCR, at the
time of the first Residence Closing (whether for a Construction Residence or
Operating Residence) development fees of $4,000,000. In addition, in
consideration of development services to be rendered by HCR and/or its
subsidiaries with respect to the Construction Residences after December 31, 1998
and until the completion thereof and rendered with respect to the Operating
Residences, ALS shall pay to HCR aggregate development fees of $6,000,000, which
shall be payable upon the Residence Closing of each Construction Residence (with
the proportion of such $6,000,000 payable upon any such Residence Closing being
equal to its proportionate share of the aggregate purchase price for all
Construction Residences as indicated on Annex 1 hereto).
B. Withdrawal Fee. In the event that any Operating Residence
or Construction Residence is not sold by Seller to Purchaser and a Withdrawal
Condition (as hereinafter defined) exists with respect thereto, Seller shall
promptly pay to Purchaser a "Withdrawal Fee" with respect to such Residence in
the amount set forth opposite such Residence's name on Annex 1 hereto. A
"Withdrawal Condition" shall be deemed to exist if any of the following occur:
(i) One or more conditions to Purchaser's obligation to close
is not satisfied (and is not waived by Purchaser) and such Residence
is withdrawn pursuant to Sections 14.C or 14.D of the applicable
Agreement (unless Purchaser and Seller agree upon a substitute
residence therefor in accordance with Section 14.D of the applicable
Agreement);
<PAGE> 2
(ii) Purchaser breaches its obligation to purchase, or Seller
breaches its obligation to sell, such Residence under the applicable
Agreement; or
(iii) Such Residence is not sold by Purchaser to Seller for any
reason (unless Purchase and Seller agree upon a substitute residence
therefor in accordance with Section 14.D of the applicable
Agreement).
C. Liquidated Damages. The liquidated damages payable by Purchaser
upon any breach of its obligation to purchase an Operating Residence or
Construction Residence under the applicable Agreement shall be an amount equal
to the product of $5,000,000 times the amount of the allocated purchase price
for such Residence as set forth on Annex 1 hereof divided by $185,000,000,
unless no Residence Closings occur under either Agreement, in which event
liquidated damages shall be $9,000,000 for all of the Residences.
D. Purchase Price. The purchase price for the Operating Residences
and the Construction Residences pursuant to the Agreements shall be as set forth
in Annex 2 hereto.
3. Pending the amendment and/or restatement of the Agreements in the
manner contemplated by paragraph 2 hereof, this Addendum shall constitute an
amendment of each of the Agreements effective as of the date hereof.
IN WITNESS WHEREOF, the parties have executed this Addendum on the date
first set forth above.
HCR MANOR CARE, INC.
BY: /s/ R. Jeffrey Bixler
-------------------------------------------------
R. Jeffrey Bixler
Vice President and General Counsel
ALTERNATIVE LIVING SERVICES, INC.
BY: /s/ Thomas E. Komula
-------------------------------------------------
Thomas E. Komula
Senior Vice President and Chief Financial Officer
<PAGE> 3
ANNEX 1
ALLOCATION OF DEVELOPMENT AND WITHDRAWAL FEES PAYABLE
CONSTRUCTION RESIDENCES
<TABLE>
<CAPTION>
PROPERTY ALLOCATED DEVELOPMENT TOTAL AMOUNT WITHDRAWAL FEE
NUMBER NAME PURCHASE PRICE FEE PAYABLE PAYABLE PAYABLE
- ------ ---- -------------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
22 Colorado Springs $ 5,365,000 $ 607,330 $ 5,972,330 $ 145,000
23 Charlotte $ 4,995,000 $ 565,445 $ 5,560,445 $ 135,000
24 Emerson $ 9,342,500 $1,057,592 $10,400,092 $ 252,500
25 Palmer Ranch $12,210,000 $1,382,199 $13,592,199 $ 330,000
26 Lynnwood $ 5,365,000 $ 607,330 $ 5,972,330 $ 145,000
27 Decatur $ 5,365,000 $ 607,330 $ 5,972,330 $ 145,000
28 Roanoke $ 4,995,000 $ 565,445 $ 5,560,445 $ 135,000
29 Denver $ 5,365,000 $ 607,330 $ 5,972,330 $ 145,000
----------- ---------- ----------- ----------
$53,002,500 $6,000,000 $59,002,500 $1,432,500
=========== ========== =========== ==========
</TABLE>
OPERATING RESIDENCES
<TABLE>
<CAPTION>
WITHDRAWAL FEE
NUMBER PROPERTY NAME ALLOCATED PURCHASE PRICE PAYABLE
- ------ ------------- ------------------------ --------------
<S> <C> <C> <C>
1 Whittier $ 3,977,500 $ 228,033
2 Brea $ 4,902,500 $ 281,063
3 Laguna Palm $ 9,342,500 $ 535,611
4 Denidun $ 5,272,500 $ 302,276
5 Sarasota $ 6,475,000 $ 371,216
6 Boyton Beach $ 7,030,000 $ 403,034
7 Boyton Village $ 6,752,500 $ 387,125
8 Westlake $ 4,070,000 $ 233,336
9 Woodridge $ 4,625,000 $ 265,154
10 Tucson $ 8,880,000 $ 509,096
11 Fulton County (AC) $ 4,995,000 $ 286,367
12 Cobb County $ 4,347,500 $ 249,245
13 Mesa $ 4,717,500 $ 270,457
14 Fulton County (SH) $ 7,492,500 $ 429,550
15 Reno $ 4,810,000 $ 275,760
16 West Orange $12,395,000 $ 710,613
17 Overland Park $ 6,105,000 $ 350,004
18 Citrus Heights $ 6,105,000 $ 350,004
19 Peoria $ 4,625,000 $ 265,154
20 Wayne $10,082,500 $ 578,036
21 Sun City West $ 4,995,000 $ 286,367
----------- ----------
$31,997,500 $7,567,500
=========== ==========
</TABLE>
<PAGE> 4
ANNEX 2
ALLOCATION OF TOTAL ACQUISITION COST
RELATING TO THE OPERATING AND CONSTRUCTION RESIDENCES
<TABLE>
<CAPTION>
NUMBER PROPERTY NAME STATUS ALLOCATED PURCHASE PRICE
- ------ ------------- ------ ------------------------
<S> <C> <C> <C>
OPERATING RESIDENCES
1 Whittier Operating $ 3,977,500
2 Brea Operating $ 4,902,500
3 Laguna Palm Operating $ 9,342,500
4 Denidun Operating $ 5,272,500
5 Sarasota Operating $ 6,475,000
6 Boyton Beach Operating $ 7,030,000
7 Boyton Village Operating $ 6,752,500
8 Westlake Operating $ 4,070,000
9 Woodridge Operating $ 4,625,000
10 Tucson Operating $ 8,880,000
11 Fulton County (AC) Operating $ 4,995,000
12 Cobb County Operating $ 4,347,500
13 Mesa Operating $ 4,717,500
14 Fulton County (SH) Operating $ 7,492,500
15 Reno Operating $ 4,810,000
16 West Orange Operating $ 12,395,000
17 Overland Park Operating $ 6,105,000
18 Citrus Heights Operating $ 6,105,000
19 Peoria Operating $ 4,625,000
20 Wayne Operating $ 10,082,500
21 Sun City West Operating $ 4,995,000
------------
$ 31,997,500
CONSTRUCTION RESIDENCES
22 Colorado Springs Under Construction $ 5,365,000
23 Charlotte Under Construction $ 4,995,000
24 Emerson Under Construction $ 9,342,500
25 Palmer Ranch Under Construction $ 12,210,000
26 Lynnwood Under Construction $ 5,365,000
27 Decatur Under Construction $ 5,365,000
28 Roanoke Under Construction $ 4,995,000
29 Denver Under Construction $ 5,365,000
------------
$ 53,002,500
TOTAL OPERATING AND CONSTRUCTION $ 85,000,000
LICENSING FEE $ 5,000,000
DEVELOPMENT FEE $ 10,000,000
TOTAL ACQUISITION COST $200,000,000
============
</TABLE>
<PAGE> 1
EXHIBIT 2.4
AMENDMENT TO AGREEMENTS OF PURCHASE AND SALE
===============================================================================
THIS AMENDMENT TO AGREEMENTS OF PURCHASE AND SALE dated as of the 30th
day of June, 1999, is by and among HCR Manor Care, Inc., a Delaware corporation,
ManorCare Health Services, Inc., a Delaware corporation, Manor Care, Inc., a
Delaware corporation, Manor Care of Dunedin, Inc., a Delaware corporation, Manor
Care of Sarasota, Inc., a Florida corporation, ManorCare of Boynton Beach, Inc.,
a Florida corporation, Manor Care of Arizona, Inc., a Delaware corporation,
Colewood Limited Partnership, a Maryland limited partnership, ManorCare of
Meadow Park, Inc., a Washington corporation and Roanoke Arden, L.L.C., a
Delaware limited liability company (collectively referred to as the "Seller")
and Alterra Healthcare Corporation f/k/a Alternative Living Services, Inc., a
Delaware corporation ("Purchaser").
W I T N E S S E T H:
WHEREAS, certain of the parties referred to as the Seller and Purchaser
entered into an Agreement of Purchase and Sale (Operating Residences) dated as
of December 31, 1998, as amended, (the "Operating Residence Agreement"),
pursuant to which the Seller agreed to sell and the Purchaser agreed to buy
certain assisted living facilities (the "Operating Residences") owned by Seller
as more fully described in the Operating Residence Agreement and certain of the
parties referred to as the Seller and Purchaser entered into an Agreement of
Purchase and Sale (Construction Residences) dated as of December 31, 1998, (the
"Construction Residence Agreement"), pursuant to which the Seller agreed to sell
and the Purchaser agreed to buy certain other assisted living facilities then
under construction (the "Construction Residences") owned by Seller as more fully
described in the Construction Residence Agreement (the Operating Residence
Agreement and the Construction Residence Agreement are jointly referred to as
the "Residence Agreements"); and
WHEREAS, by Addendum dated December 31, 1998 (the "Addendum"), the
parties modified the Residence Agreements to provide for certain development
fees payable to HCR Manor Care, Inc. ("HCR") in consideration of development
services rendered after December 31, 1998 by HCR with respect to the
Construction Residences and the Operating Residences; and
WHEREAS, on April 19, 1999, the parties to the Operating Residence
Agreement amended the Operating Residence Agreement by Joinder Agreement and
Amendment No. 1 to Agreement of Purchase and Sale; and
WHEREAS, subsequent to April 19, 1999 the parties entered into another
amendment to the Residence Agreements extending the termination date to June 25,
1999; and
<PAGE> 2
WHEREAS, the Seller and Purchaser desire to amend the Residence
Agreements, and the Addendum as amended to date, as more particularly set forth
herein; and
WHEREAS, capitalized terms used herein and not otherwise defined shall
have the meanings set forth in the Residence Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, and intending to be legally bound hereby, the
parties hereto hereby covenant and agree as follows:
1. The third sentence of paragraph 4 of each Residence Agreement is
amended to read as follows:
Notwithstanding the foregoing, in the event that all
conditions to closing with respect to any Residence have been
either satisfied or waived by the party for whose benefit they
were imposed, closing for such Residence shall be held at
10:00 a.m. on a date agreed to by Seller and Buyer at the
offices of Rogers & Hardin LLP, 2700 International Tower, 229
Peachtree St., N.E., Atlanta, Georgia 30303, but in no event
later than September 30, 1999.
2. Paragraph 23 of the Operating Residence Agreement and paragraph 24
of the Construction Residence Agreement are amended by substituting "September
30, 1999" for "June 25, 1999" and July 31, 1999, respectively.
3. Paragraph 2.A. of the Addendum is amended to read as follows:
A. Development Fees. In consideration of development
services rendered by HCR and/or its subsidiaries with respect
to the Construction Residences up to and including December
31, 1998, ALS shall pay to HCR, at the time of the first
Residence Closing (whether for a Construction Residence or
Operating Residence) development fees of $4,000,000. In
addition, in consideration of development services rendered
with respect to the Construction Residences after December 31,
1998 and to be rendered after execution hereof until the
completion thereof, and with respect to the Operating
Residences, ALS shall pay to HCR aggregate development fees of
$6,000,000 which shall be payable as follows: (i) $4,010,471
in respect of the Construction Residences referred to on Annex
1 hereto as Colorado Springs, Charlotte, Emerson, Decatur,
Roanoke and Denver shall be payable on June 30, 1999 and shall
be non-refundable, notwithstanding the subsequent failure of
the parties to consummate the purchase and sale of any such
residence by September 30, 1999, and (ii) the balance,
$1,989,529 with respect to the Construction Residences
referred to on Annex 1 hereto as Lynwood and Palmer Ranch
shall be payable in the amount set forth on Annex 1 upon the
Residence Closing of each such Construction Residence.
-2-
<PAGE> 3
4. Except as expressly amended hereby, the Residence Agreements and the
Addendum shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto, by their duly authorized
officers, have executed and delivered this Amendment to Agreements of Purchase
and Sale as of the date first above written.
SELLER:
HCR MANOR CARE, INC., a Delaware corporation
By: /s/ R. Jeffrey Bixler
-----------------------------------------------
Name: R. Jeffrey Bixler
---------------------------------------------
Its: Vice President and General Counsel
---------------------------------------------
MANOR CARE, INC., a Delaware corporation
By: /s/ R. Jeffrey Bixler
-----------------------------------------------
Name: R. Jeffrey Bixler
---------------------------------------------
Its: Vice President and General Counsel
---------------------------------------------
MANORCARE HEALTH SERVICES, INC., a Delaware
corporation
By: /s/ R. Jeffrey Bixler
---------------------------------------------
Name: R. Jeffrey Bixler
---------------------------------------------
Its: Vice President and General Counsel
---------------------------------------------
MANOR CARE OF DUNEDIN, INC., a Delaware
corporation
By: /s/ R. Jeffrey Bixler
---------------------------------------------
Name: R. Jeffrey Bixler
---------------------------------------------
Its: Vice President and General Counsel
---------------------------------------------
MANOR CARE OF SARASOTA, INC., a Florida
corporation
By: /s/ R. Jeffrey Bixler
-----------------------------------------------
Name: R. Jeffrey Bixler
---------------------------------------------
Its: Vice President and General Counsel
---------------------------------------------
[SIGNATURES CONTINUED ON NEXT PAGE]
-3-
<PAGE> 4
MANOR CARE OF BOYNTON BEACH, INC.,
a Florida corporation
By: /s/ R. Jeffrey Bixler
---------------------------------------------
Name: R. Jeffrey Bixler
---------------------------------------------
Its: Vice President and General Counsel
---------------------------------------------
COLEWOOD LIMITED PARTNERSHIP, a
Maryland limited partnership
By: AMERICAN HOSPITAL BUILDING CORPORATION,
a Delaware corporation, as its General
Partner
By: /s/ R. Jeffrey Bixler
----------------------------------------
Name: R. Jeffrey Bixler
---------------------------------------
Its: Vice President and General Counsel
---------------------------------------
MANOR CARE OF MEADOW PARK, INC., a Washington
corporation
By: /s/ R. Jeffrey Bixler
--------------------------------------------
Name: R. Jeffrey Bixler
--------------------------------------------
Its: Vice President and General Counsel
--------------------------------------------
MANOR CARE OF ARDEN, L.L.C., a Delaware limited
liability company
By: MANOR CARE , INC., a Delaware corporation, as
its sole Member
By: /s/ R. Jeffrey Bixler
--------------------------------------------
Name: R. Jeffrey Bixler
--------------------------------------------
Its: Vice President and General Counsel
--------------------------------------------
[SIGNATURES CONTINUED ON NEXT PAGE]
-4-
<PAGE> 5
PURCHASER:
ALTERRA HEALTHCARE CORPORATION, a Delaware
corporation
By: /s/ Thomas E. Komula
--------------------------------------------
Name: Thomas E. Komula
--------------------------------------------
Its: Senior Vice President
--------------------------------------------
-5-
<PAGE> 1
EXHIBIT 2.5
Master Lease Agreement
Dated As Of
July 16, 1999
By And Between
Pita General Corporation, As Owner-Lessor
And
AHC Tenant, Inc., As Lessee
==============================================================================
To the extent that this Master Lease constitutes chattel paper, as such term is
defined in the Uniform Commercial Code as in effect in any applicable
jurisdiction, no security interest in this Master Lease may be created through
the transfer or possession of any counterpart other than the Original Executed
Counterpart. See Section 44.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Heading Page
<S> <C> <C>
Section 1. Definitions.............................................................................
Section 2. Agreement to Lease; Acceptance Procedure................................................
Section 3. Term....................................................................................
Section 4. Type of Lease...........................................................................
Section 5. Rental..................................................................................
Section 6. Use.....................................................................................
Section 7. Net Lease; Nonterminability.............................................................
Section 8. Taxes and Other Charges; Laws and Agreements............................................
Section 9. Liens...................................................................................
Section 10. Ownership of the Leased Properties......................................................
Section 11. Owner's Disclaimer; Acknowledgment by Lessee............................................
Section 12. Ground Leases...........................................................................
Section 13. Maintenance; Quiet Enjoyment............................................................
Section 14. Compliance with Legal Requirements......................................................
Section 15. Insurance and Casualty..................................................................
Section 16. [Intentionally Reserved.................................................................
Section 17. Additions and Improvements; Removal.....................................................
</TABLE>
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<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
Section 18. Right of Entry..........................................................................
Section 19. Assignments and Subleasing..............................................................
Section 20. Environmental Matters...................................................................
Section 21. [Intentionally Reserved]................................................................
Section 22. [Intentionally Reserved]................................................................
Section 23. Events of Default.......................................................................
Section 24. Remedies upon Default...................................................................
Section 25. Owner's Right to Perform for Lessee.....................................................
Section 26. [Intentionally Reserved]................................................................
Section 27. Further Assurances......................................................................
Section 28. Notices.................................................................................
Section 29. Lessee's Return and Purchase Options....................................................
Section 30. Third Party Sale of Leased Properties...................................................
Section 31. End of Term Adjustment Applicable to Operating Lease Properties.........................
Section 32. Procedure for Owner Conveyance..........................................................
Section 33. [Intentionally Reserved]................................................................
Section 34. Time of the Essence; Manner of Payment..................................................
Section 35. Return of Operating Leased Properties...................................................
Section 36. [Intentionally Reserved]................................................................
</TABLE>
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<PAGE> 4
<TABLE>
<CAPTION>
<S> <C> <C>
Section 37. Recording...............................................................................
Section 38. No Reliance.............................................................................
Section 39. Miscellaneous...........................................................................
Section 40. Venue; Governing Law....................................................................
Section 41. Estoppel Certificate....................................................................
Section 42. Survival Of Representations, Warranties And Covenants...................................
Section 43. Nonrecourse.............................................................................
Section 44. Counterparts............................................................................
Attachments to Master Lease:
Annex A Master Glossary of Definitions
Exhibit A Form of Lease Supplement
Exhibit B Assigned Values
Exhibit C Ground Lease Properties
Exhibit D Contingent Surety Rental
Exhibit E Maximum Lessee Risk Amounts
</TABLE>
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<PAGE> 5
MASTER LEASE AGREEMENT
This Master Lease Agreement (as supplemented by the Lease Supplements,
this "Master Lease"), dated as of July 16, 1999, by and between Pita General
Corporation, an Illinois corporation, as owner-lessor hereunder ("Owner") and
AHC Tenant, Inc., a Delaware corporation, as lessee hereunder ("Lessee").
PRELIMINARY STATEMENT
This instrument is intended as a Master Lease pursuant to which the
Owner shall lease to the Lessee certain parcels of Land (as hereinafter
defined), together with related Improvements, Equipment and Appurtenant Rights
(all as hereinafter defined) as may be specifically identified in one or more
Lease Supplements in the form attached as Exhibit A hereto. The leasing of any
Leased Property (as defined in Section 2 hereof) identified in a Lease
Supplement shall be made in accordance with the terms of such Lease Supplement
and the terms of this Master Lease. Acquisitions of each Leased Property shall
be financed by Loans and Equity Advances (both as hereinafter defined) provided
by Noteholder (as hereinafter defined) and Owner, respectively.
The Master Lease provides for a term (the "Basic Lease Term") only. At
the end of such Basic Lease Term, Lessee shall have the option to purchase the
Leased Properties.
In consideration of the mutual covenants and agreements herein
contained, the parties hereto agree as follows:
Section 1. Definitions.
Unless the context otherwise requires, and except as specifically
provided herein, each of the capitalized terms shall have the meaning set forth
in the Master Glossary of Definitions attached as Annex A to this Master Lease,
as the same may be amended, modified or supplemented from time to time.
Unless otherwise expressly stated, the words "this Master Lease,"
"herein," "hereunder," "hereof" or other like words mean and include this
Master Lease, all exhibits hereto, each Lease Supplement hereto and each
amendment hereto.
Section 2. Agreement To Lease; Acceptance Procedure.
On the terms and subject to the conditions set forth in the
Participation Agreement, this Master Lease, each Lease Supplement and the other
Transaction Documents, including, without limitation, the satisfaction or
waiver of the conditions set forth in Article III of the Participation
Agreement, (a) Owner agrees to acquire from Seller or Guarantor or any
Affiliate of Guarantor, as applicable, on the applicable Property Closing Date
each Leased Property, and (b) Owner agrees to lease, let and demise unto
Lessee, and Lessee agrees to lease, rent and take possession from Owner, all of
the Owner's right, title and interest in (i) the Land identified in a duly
executed Lease Supplement, (ii) all Improvements now or hereafter constructed
thereon (other than
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<PAGE> 6
Improvements located on any portion of the Land subject to a Ground Lease),
(iii) all Equipment located thereon or used in connection therewith and (iv)
all Appurtenant Rights thereto (the Land, Improvements, Equipment, and all such
Appurtenant Rights are collectively referred to herein as a "Leased Property")
specified in each Lease Supplement duly executed and delivered by Owner and
Lessee. Each lease of a Leased Property shall be subject to the covenants,
agreements, terms, conditions, limitations and provisions hereinafter set forth
and in the applicable Lease Supplement. Lessee hereby agrees that execution by
Lessee on each Basic Lease Term Commencement Date of a Lease Supplement
covering the Leased Property identified therein, shall, without further act,
constitute an irrevocable acceptance by the Lessee of such Leased Property for
purposes of this Master Lease and of the other Transaction Documents on the
terms set forth herein and therein and that such Leased Property shall be
deemed to be included in the leasehold estate of this Master Lease subject to
the terms of this Master Lease as of the Basic Lease Term Commencement Date for
such Leased Property.
On the Additional Properties Closing Date, the amounts set forth on
Exhibit E hereto shall be recalculated to reflect the leasing of the additional
Leased Properties hereunder and Owner and Lessee shall substitute a new Exhibit
E hereto on such date.
Section 3. Term.
The Basic Lease Term with respect to the Leased Property specified in
each Lease Supplement shall commence on the Basic Lease Term Commencement Date
specified in the applicable Lease Supplement, and, unless this Master Lease is
sooner terminated pursuant to the provisions hereof, shall end on August 1,
2009 (the "Lease Term Expiration Date").
Section 4. Type of Lease.
Each Leased Property shall be designated by Lessee either a Capital
Lease Property or an Operating Lease Property, and such designation shall be
contained in the relevant Lease Supplement.
Section 5. Rental.
Lessee shall pay Base Rental, Contingent Surety Rental, Additional
Rental and Termination Rental to the Persons entitled to receive the same in
accordance with each Lease Supplement, the Flow of Funds Agreement, and the
other Transaction Documents in the amounts, at the times and in the manner set
forth therein and below, such amounts constituting in the aggregate the total
of the rental payable under this Master Lease, as follows:
(a) Base Rental. For each Leased Property subject to the terms of this
Master Lease, Lessee hereby agrees to pay to, or as directed by, the Owner, the
Base Rental monthly in arrears on the first day of each month commencing
September 1, 1999 (subject to the final paragraph of this Section 5(a)) during
the Term (each a "Rent Payment Date") in an aggregate amount equal to the sum
of (i) Surety Base Rental, (ii) Loan Base Rental and (iii) Owner Base Rental,
determined as set forth below:
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<PAGE> 7
(x) "Surety Base Rental" on any Rent Payment Date means an amount
equal to the result obtained by multiplying (i) by (ii) by (iii), where (i) is
1.38%; (ii) is the Aggregate Loan Balance (but without giving effect to any
payments thereof by the Surety or the Backstop Insurer), determined as of the
immediately proceeding Rent Payment Date and (iii) is a fraction where (y) the
numerator is the number of days from and including the immediately preceding
Rent Payment Date to but excluding the Rent Payment Date of calculation (except
in the case of the calculation occurring on September 1, 1999, in which case
the numerator shall be 31) and (z) the denominator is 360. Surety Base Rental
shall be paid to Surety at such account as Surety shall direct in writing.
(y) "Loan Base Rental" on any Rent Payment Date means all of the
following amounts then due and payable with respect to the Aggregate Loan
Balance: (a) interest at the Initial Interest Rate prior to the Additional
Properties Closing Date, and at the Interest Rate thereafter commencing with
the Rent Payment Date in the second calendar month after the Additional
Properties Closing Date; provided that if an Event of Default shall have
occurred and be continuing, interest shall be paid at the Default Rate
applicable to the Loan, plus (b) scheduled principal payments on the Note prior
to maturity, as set forth in the Note. Loan Base Rental shall be paid to
Noteholder and otherwise calculated in accordance with the Loan Agreement and
the Note. For purposes of the calculation of Loan Base Rental, the Aggregate
Loan Balance shall be deemed not to be reduced by any payment of any Lease
Balance pursuant to Section 15(g).
(z) "Owner Base Rental" means, on any Rent Payment Date, all Yield due
and payable with respect to the Aggregate Equity Balance. Yield payable on the
Aggregate Equity Balance for any Interest Period shall be equal to LIBOR for
the relevant Interest Period plus 240 basis points (2.40%); provided that if
the circumstances described in Section 10.6 of the Participation Agreement
apply, the Yield shall be the Alternate Rate for the relevant Interest Period
plus 240 basis points (2.40%). If a Lease Event of Default shall have occurred
and be continuing, the Yield shall be increased by 400 basis points (4.00%).
Yield shall be converted from an annual rate to a daily rate on the basis of a
360 day year and applicable to the actual number of days elapsed. Owner Base
Rental shall be paid to Owner at the account set forth on Schedule 1 to the
Participation Agreement or such other account as Owner may direct.
Surety Base Rental and Loan Base Rental for the period from the
Closing Date through July 31, 1999 shall be paid by Lessee on the Closing Date
as prepaid rent hereunder, and Surety Base Rental and Loan Base Rental
applicable to the initial Leased Properties from the Rent Payment Date in the
month in which the Additional Properties Closing Date occurs to but not
including the Additional Properties Closing Date and for the Leased Properties
(including the Additional Properties) for the period from the Additional
Properties Closing Date to the end of the calendar month in which the
Additional Leased Properties Closing Date shall occur, shall be paid by Lessee
on the Additional Properties Closing Date as prepaid rent hereunder. Owner Base
Rental shall be paid as first provided above.
(b) Additional Rental. In addition to the Base Rental and Contingent
Surety Rental, Lessee agrees during the Term to pay as additional rental to the
Owner or the Person entitled to receive the same in accordance with this Master
Lease and the other Transaction Documents, any and all of the following amounts
(the "Additional Rental"), promptly as the same shall become
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<PAGE> 8
due and owing, or where no due date is specified, promptly after demand by the
Person entitled thereto, and in the event of any failure to pay any Additional
Rental, Owner shall have all rights, remedies and powers provided for herein or
by law or equity or otherwise as in the case of nonpayment of Base Rental:
(i) On each Rent Payment Date, the Imposition Deposits
required by (and as defined in) Section 8(a)(1) hereof, such amounts
to be paid into the Tax and Insurance Escrow Fund maintained by the
Trustee;
(ii) On each Rent Payment Date, the trustee fees payable on
such date pursuant to the Trust Agreement;
(iii) On each Rent Payment Date, one twelfth of the Available
Bed Capital Improvement Amount, such amount to be paid into the
Capital Improvements Account maintained by the Trustee;
(iv) As and when due under the Trust Agreement, the deposits
required to be made into the Lease Reserve Account as required by the
Trust Agreement;
(v) All indemnities, fees, costs and expenses which the
Lessee is obligated to pay pursuant to the terms of this Master Lease
and the other Transaction Documents;
(vi) All other amounts, liabilities and obligations which
Lessee assumes or agrees to pay hereunder or under any other
Transaction Document to Owner or others (other than Base Rental,
Contingent Surety Rental or Termination Rental);
(vii) Any other late fees, charges, additional interest,
Prepayment Consideration, make-whole amounts, or any other payments
payable by Owner or Lessee, without duplication, to Noteholder,
Surety, Trustee or other Person resulting from, as a consequence of or
in connection with, the Lessee's failure to pay, when due, Base
Rental, Contingent Surety Rental, Additional Rental or Termination
Rental or any other payment owing in respect hereof in accordance with
the terms of this Master Lease or any other Transaction Document on
the date fixed for such payment or upon notice from Owner after the
occurrence of a Lease Event of Default; and
(viii) Without limitation of the foregoing provisions, in the
event Lessee shall fail to pay Base Rental, Additional Rental payable
pursuant to clauses (i) through (iii) above, Termination Rental or any
other payment owing in respect hereof in accordance with the terms of
this Master Lease, within three (3) days after the date on which it
becomes due, or any other Additional Rental within 10 days after the
date on which it becomes due, Lessee shall thereupon automatically
become obligated immediately to pay to Owner or the Person entitled
thereto without demand or notice from Owner or such Person, an amount
equal to two and one-half percent (2.5%) of any sum which is not paid
when due (the "Late Charge").
(c) Contingent Surety Rental. On each Rent Payment Date, Lessee hereby
agrees to
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<PAGE> 9
pay to, or as directed by, Owner, additional rental ("Contingent Surety
Rental") in an amount equal to the lesser of
(A) the applicable amount determined pursuant to Exhibit D,
and
(B) the result obtained by multiplying (i) by (ii) by (iii)
where (i) is the applicable percentage set forth below minus 1.38%,
(ii) is the Aggregate Loan Balance (but without giving effect to any
payments thereof by the Surety or the Backstop Insurer), determined as
of the immediately preceding Rent Payment Date and (iii) is a fraction
where (y) the numerator is the number of days from and including the
immediately preceding Rent Payment Date to but excluding the Rent
Payment Date of calculation (except in the case of the calculation
occurring on September 1, 1999, in which case the numerator shall be
31) and (z) the denominator of which is 360.
For purposes of clause (B) above, the applicable percentages shall be
as follows:
<TABLE>
<CAPTION>
Applicable
Year of Term Percentage
<S> <C>
Closing Date to July 31, 2000 1.38%
August 1, 2000 to July 31, 2001 1.65%
August 1, 2001 to July 31, 2002 1.93%
August 1, 2002 to July 31, 2003 2.22%
August 1, 2003 to July 31, 2004 2.51%
August 1, 2004 to July 31, 2005 2.82%
August 1, 2005 to July 31, 2006 2.87%
August 1, 2006 to July 31, 2007 2.92%
August 1, 2007 to July 31, 2008 2.98%
August 1, 2008 to the Maturity 3.05%
Date
</TABLE>
(d) Termination Rental. In addition to payment of any accrued and
unpaid Base Rental, Contingent Surety Rental and Additional Rental then due,
Lessee agrees to pay on the Lease Term Expiration Date or such earlier date as
this Master Lease may be terminated in accordance with its terms with respect
to each Leased Property (whether such date occurs on the Lease Term Expiration
Date, or earlier as a consequence of the exercise by Lessee of its purchase
option under Section 29(b), the exercise of remedies by Owner pursuant to
Section 24 following a Lease Event of Default, the circumstances described in
Section 15(g), or otherwise), to the Owner or such other Person entitled
thereto under this Master Lease and the other Transaction Documents,
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<PAGE> 10
the applicable following amount (the "Termination Rental") computed as of the
date of payment:
(i) in respect of the purchase of all of the Leased
Properties by Lessee pursuant to Section 29(b), the sum of (A) the
Aggregate Lease Balance, plus (B)(1) the Termination Premium if the
purchase is consummated on the Lease Term Expiration Date, or (2) if
the purchase is consummated on an earlier date, the Discounted
Termination Premium and the Discounted Future Base Surety Premiums; or
(ii) in respect of a Lease Event of Default, the sum of the
Aggregate Lease Balance, plus the Discounted Termination Premium and
the Discounted Future Base Surety Premiums; or
(iii) in respect of a casualty or Condemnation with respect to
any Leased Property where the Noteholder has not elected or is not
required to make insurance proceeds or Condemnation awards available
to rebuild or restore such Leased Property pursuant to Section 15, the
Lease Balance for such Leased Property, plus the applicable Property
Discounted Termination Premium and Property Discounted Future Base
Surety Premium; or
(iv) in respect of a return of the Leased Properties as
provided in Section 29(a) the sum of:
(A) the Lease Balance with respect to each Capital
Lease Property, and
(B) the End of Term Adjustment with respect to each
Operating Lease Property.
(e) All payments of Base Rental, Contingent Surety Rental, Additional
Rental and Termination Rental shall be paid by bank wire transfer of
immediately available funds not later than 10:00 a.m. Chicago time on the date
due (and payments made after such time on such date shall be deemed to have
been made on the next day). Owner hereby directs Lessee to pay each component
of Base Rental to the Person entitled thereto as contemplated in Section 5(a),
and each payment of Contingent Surety Rental, Additional Rental and Termination
Rental directly to the Person entitled thereto as such Person shall direct. Any
payments which are stated to be due on a day which is not a Business Day shall
be due on the next succeeding Business Day.
(f) Nothing in this Section 5 concerning Rental is intended to limit
any indemnification obligations undertaken by Lessee pursuant to any provision
of this Master Lease or any other Transaction Document.
(g) The obligation of Lessee to pay all amounts set forth in this
Section 5 shall survive the termination of this Master Lease.
Section 6. Use.
(a) Lessee shall use (and cause any sublessee under any sublease
permitted pursuant to
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Section 19 hereof to use) the Leased Properties, including related amenities as
assisted living facilities, skilled nursing facilities, sub acute facilities or
facilities providing dementia care, senior care or adult day care, and for any
other uses incidental thereto and for no other purposes. Lessee shall not use
(and shall not permit any permitted sublessee to use) any Leased Property or
any part thereof for any purpose or in any manner that would materially
adversely affect the fair market value, utility, remaining useful life or
residual value of such Leased Property. Lessee shall use (and cause any
permitted sublessee to use) each Leased Property in compliance with (a) any
Legal Requirements, except to the extent permitted by Section 14, (b) any
insurance policies required by Section 15, and (c) all of the Transaction
Documents. Lessee shall pay, or cause to be paid, all charges and costs
required in connection with the use of the Leased Properties in accordance with
this Master Lease and the other Transaction Documents.
(b) Without limiting the provisions of Section 6(a), Lessee shall
conduct or cause to be conducted, the operations of the Assisted Living
Facilities at all times in a manner at least consistent with Alterra's
customary practice as of the date hereof, including without limitation, the
following:
(i) to maintain the standard of care for the residents of
the Assisted Living Facilities at a level in accordance with customary
and prudent industry standards;
(ii) to operate the Assisted Living Facilities in a prudent
manner and in compliance at all time in all material respects with
applicable laws and regulations relating thereto, including, without
limitation, to the extent applicable, Title 42 of the United States
Code and related regulations, including the Medicare Regulations, the
Medicaid Regulations, federal and state self-referral and
anti-kickback statues and regulations, Title 31 of the United States
Code, including the False Claims Act, applicable skilled nursing
facility and assisted living facility licensure laws; and public
health statutes and regulations;
(iii) to obtain within the time frames required by applicable
laws, rules and regulations and thereafter keep, in Owner's, Lessee's,
Sublessee's or Manager's name, as applicable, any required Permits and
cause all Permits, Reimbursement Contracts, and any other agreements
necessary for the use and operation of the Assisted Living Facilities
or as may be necessary for participation in Medicaid and/or Medicare,
each as applicable;
(iv) to maintain sufficient Inventory and Equipment of types
and quantities at the Assisted Living Facilities to enable the
operations of the Assisted Living Facilities to be adequately
performed;
(v) to maintain or cause to be maintained in good repair,
working order and condition all material properties used in the
business of Lessee, including the Leased Properties, and will make or
cause to be made all appropriate repairs, renewals and replacements
thereof. Without limitation of the foregoing, Lessee will operate and
maintain, or cause to be operated and maintained, the Leased
Properties in a manner consistent with the Budget. Subject to Section
17 hereof, Lessee will repair, or cause to be repaired, the Leased
Properties to which any casualty has occurred to at least the
condition existing prior to any such casualty. All work required or
permitted under this
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<PAGE> 12
Master Lease shall be performed in a workmanlike manner and in
compliance with all applicable laws;
(vi) to maintain sufficient cash in order to satisfy the
working capital needs of the Assisted Living Facilities; and
(vii) to continuously operate or cause to be continuously
operated, the Leased Properties as Assisted Living Facilities.
Section 7. Net Lease; Nonterminability.
(a) This Master Lease is a "net lease." Any present or future law to
the contrary notwithstanding, all costs, expenses and obligations of every kind
and nature whatsoever relating to the Leased Properties and the appurtenances
thereto and the use and occupancy thereof by Lessee or anyone claiming by,
through or under Lessee which may arise or become due during or with respect to
the period constituting the Term hereof applicable to each Leased Property
shall be paid by Lessee, and Lessee shall indemnify the Indemnified Parties
against any of the foregoing as provided herein and in the other Transaction
Documents. Lessee assumes, during the Term of this Master Lease applicable to
each Leased Property, the sole responsibility for the condition, use,
operation, maintenance, subletting and management of such Leased Property;
neither Owner nor any other Indemnified Party shall have any responsibility in
respect thereof, nor shall Owner nor any other Indemnified Party have any
liability for damage incurred by any Person or for damage to the property of
Lessee or any sublessee of Lessee for any reason whatsoever. Without limiting
the generality of the foregoing, during the Term of this Master Lease, Lessee
shall perform all of the obligations of the sublessor under any subleases
affecting all or any part of the Leased Properties which Lessee may hereinafter
enter into as sublessor and all of the obligations of the Owner under the
Ground Leases as set forth in Section 12.
(b) Lessee acknowledges and agrees that its obligations hereunder,
including, without limitation, its obligations to pay Base Rental, Contingent
Surety Rental, Additional Rental, and Termination Rental shall be absolute,
unconditional and irrevocable under any and all circumstances and shall not be
subject to cancellation, termination, modification or repudiation by Lessee.
This Master Lease shall not terminate, nor shall Lessee have any right
to terminate this Master Lease (except as specifically permitted by this Master
Lease), and Lessee shall perform all obligations hereunder, including the
payment of all Base Rental, Contingent Surety Rental, Additional Rental and
Termination Rental, without notice, demand, counterclaim, set-off, deduction,
defense or recoupment, and without abatement, suspension, deferment, diminution
or reduction for any reason, including, without limitation, any past, present or
future claims which Lessee may have against the Owner, Noteholder, Surety,
Trustee, Equity Investor, or any other Person for any reason whatsoever; any
defect (whether patent or latent) in the Leased Properties or any portion
thereof, or in the title, condition, design, construction, habitability or
fitness for a particular use thereof; any damage to or destruction or loss of
all or part of the Leased Properties; any restriction, deprivation
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<PAGE> 13
(including eviction) or prevention of, or any interference with or interruption
of, any use or occupancy of the Leased Properties (whether due to any defect in
or failure of Owner's title to the Leased Properties, any Owner Lien or
otherwise); any condemnation, requisition or other taking or sale of the use,
occupancy or title to the Leased Properties; any action, omission or breach on
the part of the Owner or any other Person under this Master Lease or other
Transaction Documents (including without limitation, any breach of the Owner's
or such Person's representations and warranties set forth in the Transaction
Documents) or under any other agreement between Owner or any such Person and
Lessee, or any other indebtedness or liability, howsoever and whenever arising,
of Owner, any Assignee or Lessee to any other Person, or by reason of
insolvency, bankruptcy or similar proceedings by or against Owner, any
Assignee, Lessee or any other Person; the inadequacy or inaccuracy of the
description of the Leased Properties or the failure to demise and let to Lessee
the property intended to be leased hereby; Lessee's acquisition of ownership of
the Leased Properties or any sale or other disposition of the Leased
Properties; the impossibility or illegality of performance by Owner or Lessee
or both; the failure of Owner to deliver possession of the Leased Properties on
the applicable Property Closing Dates; any action of any court, administrative
agency or other Governmental Authority; or any other cause, whether similar or
dissimilar to the foregoing, any present or future law notwithstanding; it being
the intention of the parties hereto that all Base Rental, Contingent Surety
Rental, Additional Rental and Termination Rental payable by Lessee hereunder
shall continue to be payable in all events and in the manner and at the times
herein provided, without notice or demand, unless the obligation to pay the
same shall be terminated pursuant to the express provisions of this Master
Lease.
(c) Lessee will remain obligated under this Master Lease in accordance
with its terms, and will not take any action to terminate, rescind or avoid
this Master Lease for any reasons (except as specifically permitted by this
Master Lease), notwithstanding any bankruptcy, insolvency, reorganization,
liquidation, dissolution or other proceeding affecting Owner or any assignee of
Owner or any other Person, or any action with respect to this Master Lease
which may be taken by any receiver, trustee or liquidator, or any assignee of
Owner or any other Person or by any court in any such proceeding. Lessee waives
all rights at any time conferred by statute or otherwise to quit, terminate or
surrender this Master Lease or the Leased Properties (except as otherwise
expressly provided in Sections 15 or 29 hereof), or to any abatement,
reduction, deferment or set-off of any Base Rental, Contingent Surety Rental,
Additional Rental and Termination Rental, or other sum payable by Lessee
hereunder or under any other Transaction Document, for damage, loss or expense
suffered by Lessee on account of any cause referred to in this Section 7 or
otherwise.
Section 8. Taxes and Other Charges; Laws and Agreements.
(a)(1) Lessee shall deposit pursuant to Section 5(b)(i) of this Master
Lease, during the Term, an amount sufficient to accumulate with Trustee on
behalf of Owner the entire sum required to pay, when due (A) the premiums for
the insurance required pursuant to Section 15 hereof and such other insurance
as Owner may require under Section 15(a) of this Master Lease to the extent
escrow of such amounts are required by Owner or Trustee in accordance with
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<PAGE> 14
Section 8(f) hereof, and (B) the yearly Taxes, all as reasonably estimated from
time to time by Owner, plus one-twelfth of such estimate. The amounts deposited
under the preceding sentence are collectively referred to in this Master Lease
as the "Imposition Deposits." The obligations of Lessee for which the
Imposition Deposits are required are collectively referred to in this Master
Lease as "Impositions." The amount of the Imposition Deposits shall be
sufficient to enable Trustee on behalf of Owner to pay each Imposition before
the respective due dates thereof. Trustee shall maintain records indicating how
much of the monthly Imposition Deposits and how much of the aggregate
Imposition Deposits held by Trustee on behalf of Owner are held for the purpose
of paying property taxes, insurance premiums and each other obligation of
Lessee for which Imposition Deposits are required. Any waiver by Owner of the
requirement that Lessee remits Imposition Deposits to Trustee must be consented
to by the Trustee.
(2) Imposition Deposits shall be held in the Tax and Insurance Escrow
Fund maintained by Trustee.
(3) Lessee shall direct the applicable Governmental Authority (and
insurance providers, when applicable) to deliver the invoices and bills for all
Impositions for which escrows are then required under Section 8(a)(1) to
Trustee. Subject to the provisions of subsection (5) below, if Trustee receives
a bill or invoice for an Imposition, Trustee shall apply the Imposition
Deposits held by Trustee to pay Impositions. Trustee shall have no obligation
to pay any Imposition to the extent it exceeds Imposition Deposits then held by
Trustee and Lessee shall pay any such deficiency upon Trustee's demand.
Lessee's failure to pay any such amount within ten (10) days after Trustee's
demand therefor shall constitute a Lease Event of Default. Trustee may pay an
Imposition according to any bill, statement or estimate from the appropriate
Governmental Authority or insurance company without inquiring into the accuracy
of the bill, statement or estimate or into the validity of the Imposition.
(4) If at any time the amount of the Imposition Deposits held by
Trustee for payment of a specific Imposition exceeds the amount reasonably
deemed necessary by Trustee plus one-twelfth of such estimate, the excess shall
be credited against future installments of Imposition Deposits. If at any time
the amount of the Imposition Deposits held by Trustee for payment of a specific
Imposition is less than the amount reasonably estimated by Trustee to be
necessary plus one-twelfth of such estimate, Lessee shall pay to Trustee the
amount of the deficiency within fifteen (15) days after notice from Trustee and
failure to pay such amount within said period shall constitute a Lease Event of
Default.
(5) Subject to the terms of the Trust Agreement, if a Lease Event of
Default has occurred and is continuing, Trustee may apply any Imposition
Deposits, in any amounts and in any order as Trustee determines, in Trustee's
discretion, to pay any Impositions or, unless prohibited by applicable law, as
a credit to the obligations of Lessee under this Master Lease and the other
Transaction Documents. Upon indefeasible payment in full of the obligations of
Lessee under this Master Lease and the other Transaction Documents, Trustee
shall refund to Lessee any Imposition Deposits held by Trustee.
(b) Notwithstanding the provisions of paragraph (a) of this Section 8
and the provisions of Section 9 and so long as no Lease Default or Lease Event
of Default shall have occurred,
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Lessee shall have the right to contest, by appropriate legal proceedings, (i)
any Tax, Lien or other encumbrance which affects the Leased Properties, or (ii)
any order or other direction issued by any Governmental Authority which affects
the Lessee or the Leased Properties, and to postpone payment of or compliance
with the same during the pendency of such contest, provided that (i) no part of
the Leased Properties nor any Base Rental, Contingent Surety Rental, Additional
Rental or Termination Rental or other sums payable by Lessee hereunder shall,
in the opinion of the Owner, Trustee and any other applicable Indemnified
Party, be in danger of being sold, forfeited, attached or lost, (ii) there
shall not exist (x) any interference with the use and occupancy of the Leased
Properties or any part thereof, (y) any interference with the payment of Base
Rental, Contingent Surety Rental, Additional Rental or Termination Rental, or
(z) any likelihood of an adverse effect on the Liens and security interests
created by the Transaction Documents or the right, title and interest of Owner
in the Leased Properties or on the fair market value, utility or remaining
useful life of the Leased Properties or any interest therein or the continued
economic operation thereof, (iii) the commencement and continuation of such
proceedings shall suspend the collection thereof from, and suspend the
enforcement thereof against Leased Properties and the Person on whom such tax,
charge, levy, assessment, Lien or other encumbrance is sought to be imposed,
(iv) Lessee shall promptly prosecute such contest to a final settlement or
conclusion, or if Lessee deems it advisable to abandon such contest, Lessee
shall promptly pay or perform the obligation which was the subject of such
contest, (v) at no time during such contest shall there be a risk of the
imposition of criminal liability or unindemnified civil liability on any
Indemnified Person for failure to comply therewith, (vi) reserves to the extent
required by GAAP are maintained against any adverse determination of such
proceeding, and (vii) if requested by Owner or Trustee, Lessee shall have
either (A) deposited with Trustee an amount in immediately available funds
equal to 100% of such Tax, Lien or other encumbrance, or (B) posted an
equivalent bond for security issued by a surety or other issuer reasonably
acceptable to Trustee and containing such terms which are reasonably acceptable
to Trustee.
Notwithstanding the foregoing, (A) Lessee shall not postpone the
payment of any such Tax, Lien or other encumbrance, or the payment or
performance of any such order or other direction, if such postponement shall
permit the Leased Properties, or any Lien thereon created by such item being
contested, to be sold or foreclosed by a Governmental Authority for the
non-payment thereof and (B) Lessee shall not postpone compliance with any such
order or other direction if Owner will thereby be subject to criminal
prosecution, or if any Governmental Authority shall be in a position according
to applicable law to commence and carry out any action which would prevent
compliance with the same or to foreclose or sell any Lien affecting all or part
of the Leased Properties which shall have arisen by reason of such postponement
or failure of compliance.
(c) Subject to the provisions of Sections 8(a) and 8(d) hereof, Lessee
shall pay, or cause to be paid, all Taxes when due and before the addition of
any interest, fine, penalty or cost for nonpayment.
(d) Subject to Section 8(a)(5) hereof, Lessee shall not be obligated
to pay Taxes, insurance premiums (if then being escrowed pursuant to Section
8(f) hereof) or any other individual Imposition to the extent that sufficient
Imposition Deposits are held by Trustee on behalf of Owner for the purpose of
paying that specific Imposition.
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(e) Lessee shall promptly deliver to Trustee copies of all notices of,
and invoices for, Impositions, and if Lessee pays any Imposition directly,
Lessee shall promptly furnish to Trustee receipts evidencing such payments.
(f) Lessee shall not be required to pay Imposition Deposits with
respect to insurance premiums under Section 8(a)(1)(A) unless and until (i)
Lessee fails to maintain any of the insurance coverages required under Section
15(a), (ii) any other Lease Default shall occur under Sections 15(a) or 15(b),
or (iii) any other Lease Event of Default shall have occurred and be
continuing; whereupon Lessee shall be required to escrow Imposition Deposits
for insurance premiums in accordance with Section 8(a)(1)(A) of this Master
Lease immediately upon Trustee's demand therefor.
Section 9. Liens.
Lessee represents and warrants that on each Property Closing Date with
respect to a Leased Property being leased by Owner to Lessee, Owner shall have
good and marketable title to the Land and any Improvements subject only to
Permitted Liens. Subject to the provisions of paragraph (b) of Section 8,
Lessee will promptly, but in any event no later than thirty (30) days after the
filing thereof but in any event prior to the enforcement of the same, at its
own expense, remove and discharge of record, by bond or otherwise, any charge,
Lien, security interest or encumbrance upon any Leased Property or any portion
thereof, upon any Base Rental, Contingent Surety Rental, Additional Rental,
Termination Rental or other sums payable by Lessee under this Master Lease or
the other Transaction Documents which arises for any reason (except for Owner
Liens) including all Liens which arise out of Lessee's possession, use,
construction, operation and/or occupancy of the Leased Properties, but not
including any Permitted Liens. Nothing contained in this Master Lease shall be
construed as constituting the consent or request of Owner, express or implied,
to or for the performance by any contractor, laborer, materialman, or vendor of
any labor or services or for the furnishing of any materials for construction,
alteration, addition, repair or demolition of or to the Leased Properties or
any part thereof. Notice is hereby given that Owner will not be liable for any
labor, services or materials furnished or to be furnished to Lessee, or to
anyone holding an interest in the Leased Properties or any part thereof by,
through or under Lessee, or for any operating expenses, utility charges, real
property taxes or assessments, and that no mechanic's or other Liens therefor
shall attach to or affect the interest of Owner in and to the Leased
Properties. In the event of the failure of Lessee to discharge any charge,
Lien, security interest or encumbrance within the time period set forth above
and otherwise as aforesaid, except during the pendency of any contest permitted
and conducted pursuant to paragraph (b) of Section 8, Owner may (but shall not
be required to) discharge such items by payment or bond or both, and Lessee
will repay to Owner, upon demand, any and all amounts paid therefor, or by
reason of any liability on such bond, and also any and all reasonable
incidental expenses, including attorney's fees, incurred by Owner in connection
therewith, together with interest on such amounts at the Owner Default Rate
from the date paid by Owner to the date of repayment. If practicable, Owner
shall give prior written notice to Lessee of its intent to discharge any Lien,
but the failure of Owner to give such notice shall not limit or restrict
Owner's rights or remedies under this Master Lease.
Section 10. Ownership of the Leased Properties.
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(a) It is the intent of the parties hereto that for financial
accounting purposes this Master Lease, with respect to Operating Lease
Properties but not Capital Lease Properties, constitutes an "operating lease"
pursuant to SFAS 13, and for purposes of bankruptcy and federal, state and
local income tax law, the transaction contemplated hereby is a financing
arrangement. The parties further intend that Lessee shall be treated as owner
of the Leased Properties for income tax purposes and shall be entitled to all
deductions for depreciation thereof. Owner shall take no action inconsistent
with such treatment.
(b) It is the intent of the parties hereto that (i) for all purposes
other than financial accounting purposes, the obligations of the Lessee under
this Master Lease to pay Base Rental, Contingent Rental, Additional Rental,
Termination Rental or Lease Balance in connection with any purchase of the
Leased Properties pursuant to this Master Lease shall be treated as payments of
interest on and principal of, respectively, loans from the Owner to Lessee, and
(ii) this Master Lease grants to Owner a security interest and/or deed of
trust/mortgage on the portions of the Leased Properties which constitute
interests in real property, and a security interest and lien on the portions of
the Leased Properties which do not constitute interests in real property, in
each case to secure the Lessee's performance under and payment of all amounts
under this Master Lease and the other Transaction Documents. Owner and Lessee
acknowledge and agree that notwithstanding anything to the contrary contained
in this Master Lease or any of the other Lease Documents, this Master Lease and
any and all Liens and security interests granted or created hereunder or
thereunder shall be subordinate to any and all Liens and security interests in
favor of Trustee or any other Person under the Mortgages or the other
Transaction Documents (other than the Lease Documents) and Lessee and Owner
shall have no right to enforce or attempt to enforce any such Liens or security
interests or exercise any rights or remedies relating thereto so long as any of
the Loan Obligations remain outstanding or the Trust Agreement remains in
effect (provided the foregoing shall not limit any rights with respect to
Excluded Collateral or Excepted Rights).
(c) Specifically, without limiting the generality of subsection (a) of
this Section 10, the Owner and the Lessee intend and agree that in the event of
any insolvency or receivership proceedings or a petition under the United
States bankruptcy laws or any other applicable insolvency laws or statute of
the United States of America or any State or Commonwealth thereof affecting the
Lessee and the Owner, the transactions evidenced by this Master Lease are loans
made by the Owner as unrelated third party lender to the Lessee secured by the
Leased Properties (it being understood that the Lessee hereby, mortgages,
grants, bargains, sells, releases, confirms, conveys, assigns, transfers and
sets over to the Owner, and grants a security interest in, the Leased
Properties (consisting of a fee mortgage with respect to all right, title and
interest of the Lessee in and to the fee title to, and reversionary interest
in, the Land and Improvements) and a leasehold mortgage on the Lessee's
leasehold estate under this Master Lease, all to secure such loans, effective
on the date hereof, to have and to hold such interests in the Leased Properties
unto the Owner and its successors and assigns, forever, provided always that
these presents are upon the express condition that, if all amounts due under
this Master Lease shall have been paid and satisfied in full, then this
instrument and the estate hereby granted shall cease and become void.
(d) Specifically, but without limiting the generality of subsection
(b) of this Section 10,
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the Owner and the Lessee further intend and agree that, with respect to that
portion of the Leased Properties constituting personal property, for the
purpose of securing the Lessee's obligations for the repayment of the
abovedescribed loans from the Owner to the Lessee, (i) this Master Lease shall
also be deemed to be a security agreement and financing statement within the
meaning of Article 9 of the Uniform Commercial Code; (ii) the conveyance
provided for hereby shall be deemed to be a grant by the Lessee to the Owner of
a lien and security interest in all of the Lessee's present and future right,
title and interest in and to such portion of the Leased Properties, including
but not limited to the Lessee's leasehold estate therein and all proceeds of
the conversion, voluntary or involuntary, of the foregoing into cash,
investments, securities or other property, whether in the form of cash,
investments, securities or other property to secure such loans, effective on
the date hereof, to have and to hold such interests in the Leased Properties
unto the Owner and its successors and assigns, forever, provided always that
these presents are upon the express condition that, if all amounts due under
this Master Lease and the other Transaction Documents shall have been paid and
satisfied in full, then this instrument and the estate hereby granted shall
cease and become void; (iii) the possession by the Owner of notes and such
other items of property as constitute instruments, money, negotiable documents
or chattel paper shall be deemed to be "possession by the secured party" for
purposes of perfecting the security interest pursuant to Section 9-305 of the
Uniform Commercial Code; and (iv) notifications to Persons holding such
property, and acknowledgments, receipts or confirmations from financial
intermediaries, bankers or agents (as applicable) of the Lessee shall be deemed
to have been given for the purpose of perfecting such security interest under
applicable Legal Requirements.
Section 11. Owner's Disclaimer; Acknowledgment by Lessee.
Each Leased Property is demised and let in its condition as of the
applicable Property Closing Date without any representation and warranty,
express or implied, by Owner subject to (i) Permitted Liens, (ii) the rights of
parties in possession, (iii) the state of title as of the date the Owner
acquires the Land, (iv) any state of facts which an accurate survey or physical
inspection might show, (v) the existing environmental condition of such Leased
Property, (vi) all applicable laws, rules, regulations, ordinances and
restrictions, including, without limitation, all Environmental Laws, now in
effect or hereafter adopted by any Governmental Authority having jurisdiction,
and (vii) any violation of such laws, rules, regulations, ordinances and
restrictions occurring on, before or after the applicable Property Closing
Date. As of each Property Closing Date, Lessee shall be deemed to have examined
the relevant Leased Property and the Owner's title and interest thereto and to
have found as between Lessee and Owner (and each Person claiming by, through or
under Owner) the same to be satisfactory for all purposes, and the execution by
Lessee of the Lease Supplement covering such Leased Property shall be deemed to
be conclusive evidence of Lessee's acceptance of such Leased Property and
Lessee's satisfaction therewith.
Owner has not made an inspection of the Leased Properties and makes no
representation or warranty, express or implied, with respect to the Leased
Properties or any portion thereof or the location, use, description, design,
merchantability, habitability, environmental condition, compliance with
specifications, condition, operation, absence from defects (patent or latent),
durability or fitness for a particular purpose of the Leased Properties or any
portion thereof; and
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all risks incidental to the Leased Properties shall be borne by the Lessee and
neither the Owner, nor any of its assignees or successors in interest, shall
have any responsibility with respect thereto. Without limiting the generality
of the foregoing, in the event of any defect or deficiency of any nature in the
Leased Properties or any portion thereof, whether patent or latent, whether
discoverable by Lessee, neither Owner, nor any of its assignees or successors
in interest, shall have any responsibility or liability with respect thereto or
for any direct or indirect damage to Persons or property resulting therefrom,
or for Lessee's loss of use of the Leased Properties, or any portion thereof,
or for any interruption in Lessee's business caused by Lessee's inability to
use the Leased Properties, or any portion thereof, for any reason whatsoever.
The provisions of this Section 11 have been negotiated by Lessee and Owner and
are intended to be a complete exclusion and disclaimer by Owner of any and all
warranties by Owner with respect to the Leased Properties or any portion
thereof, whether express or implied, and whether arising under the Uniform
Commercial Code, any other applicable law or otherwise (except as expressly
otherwise set forth herein). Lessee represents and warrants to Owner that the
provisions of this Section 11 are enforceable by Owner and its successors in
interest and assigns against Lessee (and those claiming by, through or under
Lessee) and that neither Owner, nor any of its assignees or successors
interest, shall have any liability for any of the matters subject to this
disclaimer.
Section 12. Ground Leases.
Certain portions of the Land with respect to certain of the Leased
Properties identified in Exhibit C hereto (the "Ground Lease Properties") are
leased by an Affiliate of Seller (the "Ground Lessee") pursuant to the terms
and conditions of the Ground Leases. Lessee consents to the Ground Leases and
acknowledges receipt of executed copies thereof. Lessee agrees that its rights
to the Ground Lease Properties are subject to the rights of the Ground Lessee
under the Ground Leases. Lessee agrees that during the Term it will perform for
and on behalf of Owner all obligations of Owner under the Ground Leases as and
when due. Owner hereby appoints and constitutes Lessee its non-exclusive agent
and attorney-in-fact during the Term to assert and enforce, from time to time,
in the name and for the account of Owner and Lessee, as their interests may
appear, but in all cases at the sole cost and expense of Lessee, the rights of
Owner and the obligations of Ground Lessee under the Ground Leases; provided
such agency and power of attorney shall be revocable at any time by Owner or
Controlling Party on behalf of Owner.
Section 13. Maintenance; Quiet Enjoyment.
(a) In addition to the other covenants contained in this Master Lease,
Lessee hereby further represents, warrants, covenants and agrees that during
the Term of this Master Lease:
(i) Lessee acknowledges that with respect to any existing
Improvements, such Improvements are in good condition, repair and
appearance. Lessee shall, at its sole cost and expense, keep and
maintain the Improvements, including any altered, rebuilt, additional
or substituted buildings, structures and other improvements thereto,
in good condition and repair, ordinary wear and tear excepted, and in
no event less than the standards applied by Lessee or Alterra in the
operation of other comparable properties owned or leased by Lessee or
its Affiliates. Lessee will, subject to the provisions of Section 17
hereof, make all structural and nonstructural, and ordinary and
extraordinary
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changes, repairs and replacements, foreseen or unforeseen, which may
be required, whether or not caused by its act or omission, to be made
upon or in connection with the Improvements in order to keep the same
in such condition, including taking, or causing to be taken, action
necessary to maintain the Leased Properties in compliance with the
provisions of any casualty insurance policy with respect to the Leased
Properties and any applicable Legal Requirements, including all
applicable Environmental Law. Lessee shall provide or cause to be
provided all security service, custodial service, salvage service,
janitorial service and other services necessary for the proper upkeep
and maintenance of the Leased Properties.
(ii) Lessee covenants to perform or observe all terms,
covenants or conditions of any Permitted Liens, easement, supply, or
maintenance agreements, or other agreements necessary for the
operation of the Leased Properties, in each case, to which it may at
any time be a party or to which the Leased Properties or any portion
thereof is subject at any time or any other like matters which now or
hereafter affect the Leased Properties. Lessee shall, at its sole cost
and expense, use its reasonable efforts, consistent with sound
business practice, to enforce compliance with any Permitted Liens,
easement, supply, or maintenance agreements or similar agreements
benefiting the Leased Properties or any portion thereof by any other
Person subject to such agreement, provided, however, that if a failure
to comply with any of the foregoing would materially and adversely
affect the utility, fair market value or useful life of the Leased
Properties, the Lessee shall be obligated to enforce compliance with
the same. Lessee expressly waives the right to make repairs at the
expense of the Owner pursuant to any law at any time in effect that
would impose any such obligations on a lessor or give any such rights
to a lessee. Lessee shall not abandon the Leased Properties or any
portion thereof or commit waste thereon.
(iii) If any Improvements situated on the Leased Properties at
any time during the Term of this Master Lease shall (A) encroach upon
any property, street or rightofway adjoining or adjacent to such
Leased Property, or (B) violate the agreements or conditions contained
in any restrictive covenant affecting such Leased Property or any part
thereof, or (C) impair the rights of others under or obstruct any
easement or rightofway to which such Leased Property is subject and,
as a result of any of the events described in (A), (B), or (C) above,
there is a material and adverse effect on the operations of such
Leased Property by Lessee or the utility, fair market value or useful
life of such Leased Property, then, promptly after the written request
of Owner or any Person affected by any such encroachment, violation,
impairment or obstruction, Lessee shall, at its expense, either (x)
obtain effective waivers or settlements of all claims, liabilities and
damages resulting from each such encroachment, violation, impairment
or obstruction whether the same shall affect Owner, Lessee, any other
Indemnified Party or any one or more of the foregoing, or (y) make
such changes in the Improvements on such Leased Property and take such
other action as shall be necessary to remove such encroachments or
obstructions and to end such violations or impairments, including, if
necessary, the alteration or relocation of any Improvement on the
Leased Property. Any such alteration or removal shall be made in
conformity with the requirements of Section 17 to the same extent as
if such alteration or removal were an alteration under Section 17 of
this Master Lease and there shall be no abatement of Base Rental,
Contingent Surety Rental, Additional Rental or Termination
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Rental by reason of such alteration or removal.
(iv) Notwithstanding anything to the contrary contained
herein, Owner shall have no obligation to incur any expense of any
kind or character in connection with the management, operation or
maintenance of the Leased Properties during the Term of this Master
Lease. Notwithstanding anything to the contrary contained herein,
Owner shall not be required at any time to make any improvements,
alterations, changes, additions, repairs or replacements of any nature
whatsoever in or to the Leased Properties. Lessee shall use and
operate the Leased Properties or cause the Leased Properties to be
used and operated only by personnel authorized by Lessee, and Lessee
shall use reasonable precautions to prevent loss or damage to the
Leased Properties from fire and other hazards.
(v) Lessee shall pay all charges for utility, communication
and other services on or about the Leased Properties, whether or not
payment therefor shall become due after the Term of this Master Lease
applicable to such Leased Properties, provided that the Lessee shall
have the right to contest any such charges in good faith in accordance
with Section 8(b).
(vi) Other than the provisions of Section 13(b) hereof,
Lessee shall perform all covenants and agreements (except for those
covenants and agreements which are by their express terms capable of
being, or specifically required to be, performed solely by Owner
acting alone) which it and/or Owner agree to perform under the Loan
Documents and the other Transaction Documents. Lessee shall perform
all covenants and agreements under any other Transaction Documents to
which it is a party.
(b) Owner hereby covenants and agrees that during the Term with
respect to any Leased Property, it shall not take any affirmative action and
will not suffer or permit any action by any Person acting by, through or under
Owner (exclusive of Lessee, Guarantor, Trustee, Noteholder, Surety, their
respective Related Parties, and any other Person acting by, through or under
any of them) which will interfere with the quiet use and enjoyment of the
Leased Properties by Lessee, unless such interference (i) occurs on or after
any Lease Event of Default or (ii) is necessary to maintain or protect the
utility, fair market value or useful life of the Leased Properties. Owner
agrees that during the Term and prior to the occurrence of a Lease Event of
Default, it will not affirmatively grant or suffer or permit to attach any
Owner Liens arising through it or, except as provided in Sections 15, 19(b) or
pursuant to an Owner Conveyance, transfer any interest in any of the Leased
Properties.
Owner further covenants and agrees that, so long as no Lease Default
or Lease Event of Default shall have occurred and provided that Lessee shall
bear all associated costs (and, at Owner's written request, Lessee shall
advance to Owner amounts necessary to pay such costs prior to their incurrence
and until the amounts requested are actually advanced to Owner, Owner shall
have no obligation to take the actions to which such advances relate), it shall
take all reasonably necessary actions as owner of the Leased Properties as
reasonably requested by Lessee (i) to permit Lessee or its nominee to exercise
Owner's rights under any covenants, conditions and restriction agreements
affecting the Leased Properties which may be necessary to enable the
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Lessee to use the Leased Properties for their intended purposes; and (ii)
subject to Owner's and Noteholder's consent, to grant and/or to convey such
necessary and reasonable utility easements or rights of passage over the Leased
Properties as may be necessary to enable the Lessee to operate the Leased
Properties for the uses permitted under Section 6 hereof. Owner also covenants
and agrees to comply with its obligations under the other Transaction Documents
to which it is a party; provided, however, that Owner shall have no liability
with respect to any failure so to comply that is caused by or results from, in
whole or in part, the failure of Lessee to pay or perform its obligations under
this Master Lease or the other Transaction Documents to which Lessee is a
party.
Section 14. Compliance with Legal Requirements.
Lessee shall, at Lessee's own cost and expense, (A) comply, in all
material respects, with all covenants and restrictions of record and applicable
laws, ordinances, rules and regulations relating to the Leased Properties,
including, without limitation, as applicable, Title 42 of the United States
Code and related regulations, including the Medicare Regulations, the Medicaid
Regulations, federal and state self-referral and anti-kickback statues and
regulations, Title 31 of the United States Code, including the False Claims
Act; applicable skilled nursing facility and assisted living facility licensure
laws; applicable public health statues and regulations; the Americans with
Disabilities Act and the regulations thereunder, and all laws, ordinances,
rules and regulations relating to zoning, setback requirements and building
codes, (B) maintain in full force and effect and observe and comply in all
material respects with all of the terms and conditions of all Regulatory
Permits now held or hereafter acquired or required and comply in all material
respects with any and other Permits now held or hereafter acquired by any of
them, and (C) perform, observe, comply and fulfill all of its obligations,
covenants and conditions contained in any material Contractual Obligation,
including the Transaction Documents, and not suffer or permit any default or
event of default (giving effect to applicable notice and cure rights) to exist
under any of the foregoing. To the extent the matters set forth in clauses (A)
and (B) above create obligations which are imposed on or applicable to the
Owner as owner of the Leased Properties, Lessee shall comply with such
obligations as if Lessee were the owner of the Leased Properties, regardless of
whether any such obligations, by their terms, are nominally imposed on Lessee
or Owner.
Lessee shall, at its sole cost and expense, comply with all provisions
of insurance policies required pursuant to Section 15 hereof, and with the
provisions of all Permitted Liens and all contracts, agreements, instruments
and restrictions existing at the commencement of this Master Lease or
thereafter suffered or permitted by Lessee, affecting the Leased Properties or
any part thereof or the ownership, occupancy, use, operation or possession
thereof except where, other than in the case of insurance (for which the
following exception shall not apply), such failure to so perform and comply
will not have a material and adverse effect on the operations of the Leased
Properties by Lessee or the utility, fair market value or useful life of any
Leased Property. Lessee shall at all times comply with the terms of and perform
its obligations under any assignment to Trustee of this Master Lease and any
consent of Lessee to such assignment.
Notwithstanding the foregoing provisions of this Section 14 and so
long as no Lease Default or Lease Event of Default shall have occurred, Lessee
shall have the right to contest, any
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order or other direction issued by any Governmental Authority in accordance
with Section 8(b).
Section 15. Insurance and Casualty.
(a) So long as this Master Lease is in effect, Lessee shall maintain
at its sole cost and expense, and provide satisfactory evidence thereof to
Owner on an annual basis (or at such other times when renewed), the following
insurance coverages in such amounts and with such deductibles as follows:
(i) Professional liability insurance in an amount at least
equal to $1,000,000.00 per occurrence and $1,000,000.00 in the
aggregate, on an "occurrence" basis covering each of the Assisted
Living Facilities and the activities conducted therein. The deductible
for such coverage shall not exceed $25,000;
(ii) General liability insurance in an amount at lease equal
to $1,000,000.00 per occurrence and $1,000,000.00 in the aggregate,
covering each of the Assisted Living Facility and the activities
conducted therein. The deductible for such coverage shall not exceed
$25,000;
(iii) Umbrella insurance covering professional liability
umbrella coverage attaching at each of the above-referenced limits of
coverage, and having a limit each occurrence and in the aggregate of
$20,000,000 and additional excess liability coverage with limits of
$30,000,000;
(iv) "Allrisk" coverage on the Improvements, Equipment and
Inventory in an amount not less than the replacement cost thereof,
insuring against such potential causes of loss as shall be required by
Owner, including but not limited to loss or damage from wind, fire,
hail, lightening, ice, earthquake, subsidence, boiler and machinery
and sprinkler leakage. The permitted deductibles for the foregoing
coverages shall be as follows: earthquake, not to exceed the greater
of $100,000 or five percent (5%) of insured value; windstorm, not to
exceed $25,000, except with respect to Leased Properties located in
the State of Florida, as to which the aggregate deductible applicable
to all such Leased Properties shall not exceed $200,000;
(v) Business interruption insurance (including rental value
if any portion of any Leased Property or any Assisted Living Facility
is leased in whole or part) equal to not less than twelve (12) months
estimated gross lost profits and continuing Operating Expenses;
(vi) Workers' compensation and employers' liability insurance
as required by the laws of the state where each Leased Property is
located;
(vii) If and to the extent that Lessee should engage in any
material modification, alteration or construction on or with respect
to any of the Leased Properties, builder's risk insurance (under the
all risk completed value form) for the applicable Improvements in an
amount acceptable to Owner and including "soft" costs;
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(viii) "Ordinance and law" coverage for each of the Leased
Properties and Assisted Living Facilities based on risks related to
reconstruction limitations under governing laws and ordinances, in
amounts acceptable to the Owner.
(ix) "Difference in conditions" insurance including flood,
earthquake and earthquake sprinkler leakage with a limit of
$25,000,000 per occurrence and deductibles not to exceed $25,000; and
(x) Automobile liability insurance coverage with a limit at
least equal to $1,000,000 per occurrence, no aggregate limit.
The insurance coverages required under Section 15(a)(iv) may be
effected under a blanket policy or policies covering the Leased Properties and
other property and assets not constituting part of the Leased Properties;
provided that such certificates of insurance evidencing the coverage required
herein shall specify any sublimits in such blanket policy applicable to the
Leased Properties, which amounts shall not be less than the amounts required
pursuant to Section 15(a)(iv) and which shall in any case comply in all other
respects with the requirements of this Section 15.
In connection with Lessee's or Guarantor's annual insurance review
(which shall occur at least one time every 12 calendar months), Lessee shall be
required to engage an Insurance Consultant (defined below) to undertake a
review of Lessee's then existing insurance coverage in light of then current
industry standards for hospital or health care services of the type similar to
that in which Lessee is then currently engaged and based upon such review,
Lessee shall either increase the amount of its coverages to meet such industry
standards or shall be permitted to make reasonable modifications to the amounts
and deductibles under the insurance coverages required to be maintained under
this Section 15(a) provided that (A) prior to making any modification to any
insurance coverage, Lessee shall deliver to Owner, Noteholder and Trustee a
certificate of an Insurance Consultant or Insurance Consultants (hereinafter
defined) indicating that the insurance coverages as proposed to be maintained
are: (1) reasonable based on then prevailing insurance industry market
conditions, (2) customary for corporations engaged in the same or similar
activities as Lessee and (3) adequate to protect the Leased Properties and the
operations thereof and (B) Owner, Trustee and Noteholder shall have delivered
its prior written approval of such coverages, amounts and deductibles. In any
event, in connection with any such insurance review by such Insurance
Consultant, such Insurance Consultant shall deliver to Owner, Noteholder and
Surety a letter to the effect that Lessee's insurance coverages meet the
requirements of the Transaction Documents as modified by any modification
approved pursuant to this Section 15. "Insurance Consultant" means a Person who
in the case of an individual is not an employee or officer of Guarantor, Lessee
or any Affiliate thereof and which, in the case of a corporation or other
business entity, is not an Affiliate of Guarantor or Lessee, appointed by
Lessee and reasonably satisfactory to Owner, Noteholder and Trustee, qualified
to survey risks and to recommend insurance coverage for hospital or health care
facilities and services of the type involved, and having a favorable reputation
for skill and experience in such surveys and such recommendations, and which
may include a broker or agent with whom Lessee transacts business.
(b) Each of the policies described in Sections 15(a)(i), (ii), (iii),
(viii) and (xi) shall name
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Owner, Trustee, Equity Investor, Noteholder and Surety as an additional
insured, and the policies described in Sections 15(a)(iv)-(vii), (ix) and (x)
shall name Trustee for the benefit of the Beneficiaries as mortgagee and loss
payee under a standard noncontributory mortgagee and loss payable clause so
long as the Trust Agreement remains in effect, and thereafter Owner shall be
mortgagee and loss payee, and shall provide that Owner and Trustee shall
receive not less than thirty (30) days written notice prior to cancellation.
The proceeds of any of the policies described in Sections 15(a)(ii)-(x) hereof
shall be payable by check payable to Trustee, delivered to Trustee, and such
proceeds shall be applied by Trustee, at its option in accordance with the
Trust Agreement, either (i) to the payment of the applicable Lease Balance
(without premium) and related amounts pursuant to Section 15(g) below, or (ii)
to the repair and/or restoration of the affected Leased Property and Inventory
damaged or taken. Provided that no Lease Event of Default or Springing Lock Box
Event has occurred and is continuing, proceeds paid under the policies
described in Section 15(a)(vi) shall be made available to Lessee to be applied
in accordance with the Flow of Funds Agreement. Each of the policies described
in Sections 15(a)(iii), (iv), (v) and (vii) hereof, as of the Closing Date,
must be written by an insurer or insurers each having a rating of A- or better
from Standard & Poor's (provided, however, that within six (6) months after the
Closing Date, such policies must be written by insurers having ratings of A or
better from Standard & Poor's) and a Best rating of A- or better and otherwise
reasonably acceptable to Noteholder and the remaining coverages shall be
provided by insurers reasonably acceptable to Owner. If Lessee shall fail to
cause the insurance policies described in Sections 15(a)(iii), (iv), (v) and
(vii) to be written by insurers having ratings of A or better from Standard &
Poor's within six (6) months after the Closing Date (which condition may be
satisfied by means of reinsurance arrangements acceptable to Owner in its sole
discretion), such failure shall constitute a Lease Event of Default hereunder.
Notwithstanding the foregoing, Lessee may collect insurance proceeds paid under
the policies described in Sections 15(a)(iv), (v) and (vii)-(x) above in
connection with claims not in excess of Two Hundred Fifty Thousand Dollars
($250,000) (the "Casualty Amount"), or in the event that such proceeds are
collected by Owner, Noteholder or Trustee same shall be paid over to Lessee
(without application of the conditions of Section 15(c) below), provided that
(i) no Lease Default or Lease Event of Default shall have occurred and be
continuing, (ii) Lessee gives notice to Owner, Noteholder and Trustee of the
related fire or casualty within ten (10) Business Days after the occurrence
thereof (which notice shall include Lessee's good faith estimate of the amount
of the damage to the affected Assisted Living Facility) and (iii) Lessee
applies such proceeds to the repair and/or restoration of the Leased Property
and Inventory damaged in accordance with the terms and conditions hereof.
(c) Trustee shall make the net proceeds of insurance (after payment of
Owner's, Noteholder's (and/or Trustee's) reasonable costs and expenses)
available to Lessee for Lessee's repair, restoration and replacement of the
Leased Property and Inventory damaged on the following terms and subject to
satisfaction in Owner's and Trustee's discretion, of each of the following
conditions:
(i) At the time of such loss or damage and at all times
thereafter while Trustee is holding any portion of such proceeds,
there shall exist no Lease Default or Lease Event of Default;
(ii) Owner and Trustee determine that the applicable Leased
Property and
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Inventory for which loss or damage has resulted shall be capable of
being restored to its preexisting condition and utility, in all
material respects and in compliance with all applicable zoning,
building and other laws and codes with a value equal to or greater
than that which existed prior to such loss or damage ("Pre-existing
Condition"), there will be sufficient funds to so restore such Leased
Property and Inventory and such restoration shall be capable of being
completed prior to the expiration of business interruption insurance
as determined by an independent inspector;
(iii) Owner and Trustee determine that Operating Revenues from
the Assisted Living Facilities, after restoration and repair of the
affected Leased Property and Inventory to the Pre-existing Condition
and expiration of such stabilization period acceptable to Owner and
Noteholder (or Trustee), will be sufficient to meet all operating
costs and other expenses, payments for reserves and loan repayment
obligations (including any obligations under any permitted subordinate
financing) relating to the Assisted Living Facilities and maintain an
LCR at least equal to (A) that existing at the date of this Master
Lease for casualties occurring during the first eighteen (18) months
of the Term and (B) 1.4:1 for casualties occurring thereafter;
(iv) restoration and repair of the affected Leased Property
and Inventory to the Pre-existing Condition will be completed within
one year of the date of the loss or casualty to such Leased Property
and Inventory, but in no event later than six months prior to the
Lease Term Expiration Date;
(v) less than fifty (50%) percent of the total floor area of
the Improvements of the affected Leased Property has been damaged or
destroyed or rendered unusable as a result of such fire or casualty;
(vi) Within thirty (30) days following the date of such loss
or damage, Lessee shall have given Owner, Noteholder and Trustee
written notice of its desire to have such proceeds applied for
purposes of restoration; and
(vii) Within sixty (60) days following the date of notice
under the preceding subsection 15(c)(vi), Lessee shall have provided
to Owner, Noteholder and Trustee all of the following:
(A) complete plans and specifications, satisfactory
to Owner, Noteholder, and/or Trustee for restoration, repair
and replacement of the Leased Property and Inventory damage
to their Pre-existing Condition;
(B) if the loss or damage exceeds the Casualty
Amount, a duly executed fixed-price or guaranteed maximum
cost construction contract together with a performance bond
insuring completion of the work in accordance with such plans
and specifications;
(C) a certificate of insurance evidencing builder's
risk insurance in such amounts as are reasonably satisfactory
to Owner, Noteholder and/or Trustee and
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naming Trustee, for the benefit of the parties to the Trust
Agreement, as loss payee;
(D) Such additional funds as are required below;
and
(E) Copies of all Permits necessary to complete
such work in accordance with the plans and specifications.
(d) If Owner or, so long as the Trust Agreement remains in effect,
Trustee elects to make the insurance proceeds or Condemnation awards available
for the restoration and repair of the affected Leased Property and Inventory in
accordance with the foregoing conditions, Lessee agrees that, if at any time
during the restoration and repair, the cost of completing such restoration and
repair, as determined by Owner or Trustee, exceeds the undisbursed insurance
proceeds or Condemnation awards, Lessee shall, immediately upon demand by Owner
or Trustee, deposit the amount of such excess with Trustee, and Trustee shall
first disburse such deposit to pay for the costs of such restoration and repair
on the same terms and conditions as the insurance proceeds or Condemnation
awards are disbursed. If Lessee deposits such excess with Trustee and if, after
completion of the restoration or repair, any funds remain from the combination
of insurance proceeds and the funds so deposited with Trustee by Lessee, and if
no Lease Default or Lease Event of Default shall have occurred and be
continuing, then Trustee shall disburse to Lessee such remaining funds provided
that Trustee shall not be obligated to disburse any amount in excess of the
amount that Lessee shall have so deposited.
(e) If the insurance proceeds or Condemnation awards are held by
Trustee to reimburse Lessee for the cost of restoration and repair of the
affected Leased Property and Inventory, Lessee shall restore the affected
Leased Property and Inventory to its Pre-existing Condition or other condition
as Owner or Trustee may approve in writing, and Lessee shall promptly begin
such restoration and at all times thereafter diligently prosecute such
restoration to completion. Owner or Trustee may, at Owner's or Trustee's
option, condition disbursement of said proceeds or Condemnation awards on
Owner's and/or Trustee's approval of such plans and specifications of an
architect satisfactory to Owner and/or Trustee, contractor's cost estimates,
architect's certificates, waivers of liens, sworn statements of mechanics and
materialmen and such other evidence of costs, percentage completion of
construction, application of payments; and satisfaction of liens as Owner
and/or Trustee may reasonably require. Lessee shall remain liable for the
payment of all Rental with respect to the affected Leased Property except as
provided in Section 15(g) hereof. Any amount of insurance proceeds remaining in
Trustee's possession after full and final payment and discharge of all
obligations of Lessee under the Transaction Documents shall be refunded to
Lessee or otherwise paid in accordance with applicable law. If any Leased
Property and Inventory is sold at foreclosure or if Trustee or any Beneficiary
acquires title to any Leased Property and Inventory, Trustee or such
Beneficiary, as applicable, shall have all of the right, title and interest of
Lessee in and to any insurance policies and unearned premiums thereon and in
and to the proceeds resulting from any damage to, or Condemnation awards from
any Condemnation affecting such Leased Property and Inventory prior to, or
Condemnation awards from any Condemnation affecting such sale or acquisition.
(f) All building materials and completed repair and restoration work
and in all fixtures
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and equipment acquired with such proceeds shall become the property of Owner
and shall be subject to this Master Lease and the relevant Lease Supplement,
and Trustee shall have a first lien and security interest in all such building
materials and completed repair and restoration work and in all fixtures and
equipment acquired with such proceeds, and Owner and Lessee shall execute and
deliver, at Lessee's expense, such mortgage, deed of trust, security
agreements, financing statements and other instruments as Trustee shall request
to create, evidence, or perfect such lien and security interest; and
(g) In the event and to the extent such insurance proceeds or
Condemnation awards are not required or used for the repair, restoration and
replacement of the affected Leased Property and Inventory for which a loss or
damage has occurred or affected by a Condemnation, or in the event Lessee is
not entitled to or does not timely make the election to have insurance proceeds
or Condemnation awards applied or Condemnation awards to the restoration of
such Leased Property or Inventory, or, having made such election, fail 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 (subject to the terms of the Trust Agreement, if applicable) Owner, if
required by Trustee, shall be entitled on any Rent Payment Date designated by
Trustee without notice to or consent from Lessee, to cause Trustee to apply
such proceeds, or the balance thereof, at Trustee's direction either
(i) to the payment of the following amounts applicable to the affected
Leased Property in accordance with the Trust Agreement: (A) all unpaid Base
Rental and Contingent Surety Rental, (B) all Additional Rental then or thereby
accrued or incurred, (C) the Lease Balance, (D) the applicable Property
Discounted Termination Premium and Property Discounted Future Base Surety
Premium, and (E) all other amounts due and owing under the Transaction
Documents, and if such insurance proceeds are insufficient to pay the amounts
set forth above, Lessee shall on such Rent Payment Date pay to Owner an amount
equal to the shortfall and upon payment in full of the amounts set forth above,
so long as no Lease Default or Lease Event of Default shall have occurred and
be continuing, this Master Lease with respect to the affected Leased Property
shall terminate and Owner shall convey such Leased Property to Lessee pursuant
to an Owner's Conveyance; provided that if such proceeds or Condemnation
awards, when combined with Lessee's payment described above, are insufficient
to repay the Equity Balance, unless Trustee takes action with respect to such
non-payment such failure to repay the Equity Balance shall constitute a Tolling
Default and Lessee shall continue to pay Owner Base Rental with respect to the
affected Leased Property notwithstanding the termination of this Master Lease
with respect to such Leased Property, and provided further that if the Equity
Balance is repaid, Lessee will deposit with Trustee into the I and C Account an
amount equal to such Equity Balance as cash collateral for Lessee's obligations
under the Transaction Documents; or
(ii) to the repair, restoration and/or replacement of all or any part
of such Leased Property and Inventory for which a loss or damage has occurred.
Whether or not such insurance proceeds or Condemnation awards are sufficient to
pay for the costs of such restoration, Lessee must rebuild to the Pre-existing
Condition or such other condition as Owner and Trustee may approve in writing.
(h) Lessee hereby appoints Trustee, so long as the Trust Agreement
remains in effect,
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and thereafter Owner, attorneyinfact to cause the issuance of or an endorsement
of any insurance policy to bring Lessee into compliance herewith and, as
limited above, at Owner's or Trustee'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 Owner, Noteholder or Trustee be
liable for failure to collect any amounts payable under any insurance policy.
(i) (1) Lessee shall notify Owner and Trustee promptly after it has
knowledge of the commencement or threat of any action or proceeding relating to
any condemnation or other taking or conveyance in lieu thereof of all or any
part of a Leased Property, whether direct or indirect (a "Condemnation").
Lessee shall appear in and prosecute or defend any proceeding relating to any
Condemnation unless otherwise directed by Owner or Trustee in writing. Lessee
authorizes and appoints Trustee, so long as the Trust Agreement remains in
effect, and thereafter Owner, as attorney-in-fact for Lessee to commence,
appear in and prosecute, in Lessee's or such Person's name, any action or
proceeding relating to any Condemnation and to settle or compromise any claim
in connection with any Condemnation. This power of attorney is coupled with an
interest and therefore is irrevocable. However, nothing contained in this
Section 15(i) shall require Owner, Noteholder or Trustee to incur any expense
or take any action with respect to any Condemnation. Lessee hereby transfers
and assigns to Trustee for the benefit of the Beneficiaries all right, title
and interest of Lessee in and to any award or payment with respect to (i) any
Condemnation, and (ii) any damage to a Leased Property caused by governmental
action that does not result in a Condemnation.
(2) Owner agrees that Trustee shall make the net amount of such awards
or proceeds (after deducting reasonable costs and expenses incurred by Owner,
Noteholder and Trustee) from a partial (but not total) Condemnation of any
Leased Property available to Lessee for the restoration or repair of such
Leased Property subject to satisfaction in Owner's (and/or Noteholder's or
Trustee's) discretion of each of the conditions set forth in Section 15(c);
except that for purposes of this Section 15(i) all references in Section 15(c)
to: (A) "Pre-existing Condition" shall be deemed to mean the restoration and/or
repair of such Leased Property to an economically viable whole, in compliance
with all applicable zoning, building and other laws and codes and (B) damage or
destruction shall be deemed to mean the taking of any portion of such Leased
Property pursuant to the Condemnation. Notwithstanding the foregoing, the net
proceeds of any award from a Condemnation affecting all or substantially all of
a Leased Property shall be applied as provided in Section 15(g). Unless
Noteholder in its sole discretion otherwise agrees in writing, any application
of any awards or proceeds shall not affect the obligation of Lessee to pay Loan
Base Rental for the affected Leased Property. Lessee agrees to execute such
further evidence of assignment of any awards or proceeds from any Condemnation
as Owner or Trustee may require.
Section 16. [Intentionally Reserved].
Section 17. Additions and Improvements; Removal.
Lessee shall at its own expense make additions or improvements to the
Leased Properties which are required by Legal Requirements or necessary to
repair or maintain the Leased
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<PAGE> 30
Properties in the condition required by this Master Lease. Lessee shall not
alter (except in accordance with the terms of the Trust Agreement or the
Mortgages) or change the use of any Leased Property in any material respect or
enter into any management agreement for any Leased Property other than the
Management Agreements or except as expressly hereinafter provided enter into
any operating lease for any Assisted Living Facility (other than the Master
Lease, the Joint Venture Subleases and the Licensing Subleases), unless Lessee
first notifies Owner and Trustee and provides Owner and Trustee a copy of the
proposed lease agreement or management agreement, obtains Owner's and Trustee's
written consent thereto, which consent may be withheld in Owner's and Trustee's
sole and absolute discretion, and obtains and provides Owner and Trustee with
subordination agreements in form satisfactory to Owner and Trustee, as
determined by Owner and Trustee in Owner's and Trustee's sole and absolute
discretion, from (i) such manager pursuant to which such manager shall agree
that, upon an Event of Default under the Loan Agreement or a Lease Event of
Default, Trustee may terminate such management agreement and/or (ii) such
lessee pursuant to which such lessee shall subordinate its rights to all rights
of Owner and Trustee. Notwithstanding the foregoing, Lessee may (without
obtaining Owner's or Trustee's consent pursuant to the foregoing (but upon at
least ten (10) Business Days prior written notice to Owner and Trustee)), make
alterations or improvements (collectively, "Alterations") to any Assisted
Living Facility of 60 beds or less provided that the cost of any such
Alterations individually, or in the aggregate for any 12-month period, does not
exceed $100,000 and to any Assisted Living Facility of more than 60 beds
provided that the cost of any such Alterations individually, or in the
aggregate for any 12-month period, does not exceed $250,000. Each such
improvement (and all fixtures and equipment included as a part thereof) shall
be deemed a part of the Leased Properties and become part of Owner's property;
provided that if Lessee returns the Leased Properties to Owner in accordance
with the provisions of Section 35, and no Lease Event of Default is then
existing, Lessee may remove, at the expiration of the Term, all equipment and
personal property placed or installed in or upon the Leased Properties by
Lessee or under its authority, other than equipment or personal property (i)
financed with Loans or Equity Advances or any replacements for such equipment
or personal property, (ii) which are required by applicable Legal Requirements,
or (iii) which cannot be readily removed from a Leased Property without (x)
causing damage to such Leased Property which cannot be readily repaired or (y)
materially impairing the value of such Leased Property; provided further that
Lessee shall repair any damage to such Leased Property resulting from such
removal.
Section 18. Right Of Entry.
Representatives of the Owner, Trustee, Noteholder and Surety shall
have the right to enter upon the Leased Properties and, subject to the
residents' rights of privacy and legal requirements with respect to
confidentiality of records (i) to review and copy Lessee's records regarding
the Leased Properties) at reasonable times during business hours and (ii) to
inspect the same (including, without limitation, the use of photographic and
video equipment) for any purpose connected with the rights or obligations of
the parties under this Master Lease. Provided that no Lease Default or Lease
Event of Default has occurred, such party shall give the Lessee reasonable
advance notice of its intent to enter any Leased Property, and shall be
accompanied by a representative of Lessee at all times. If a Lease Default or
Lease Event of Default shall have occurred and be continuing, any such entry or
inspection shall be at the cost and expense of Lessee.
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Section 19. Assignments and Subleasing.
(a) By Lessee. Except as otherwise expressly set forth below, lessee
shall not, without the prior written consent of owner in each instance,
sublease or otherwise relinquish possession of any leased property or any part
thereof, or assign, transfer, mortgage or encumber its rights, interests or
obligations hereunder, to any person and any such attempted sublease,
relinquishment, assignment, transfer or encumbering by lessee shall be null and
void; provided, however, that Lessee shall have the right to enter into
Residency Agreements without Owner's or Trustee's consent provided that such
Residency Agreements are substantially in the applicable form delivered on the
Closing Date. Lessee shall not merge or consolidate with any other Person or
make any Disposition.
Notwithstanding the foregoing, Lessee may (i) enter into the Joint
Venture Subleases (as to any future Joint Venture Subleases, in substantially
the form of those entered into on the Closing Date) or, if required by
applicable law, Licensing Subleases substantially in the form delivered on the
Closing Date, and (ii) sublet any portion of any Leased Property at any time,
for all or any portion of the remaining Term pursuant to a sublease which is
not a material sublease; provided, however that as to subleases other than (x)
Joint Venture Subleases (as to which clause (ii) below shall not apply) and (y)
monthtomonth subleases (as to which clauses (iv) and (v) below shall not
apply), the following conditions are met:
(i) Lessee remains primarily liable hereunder (as a principal and not
as a surety), and the Guaranty of Guarantor continues in effect, or Guarantor
becomes primarily liable under this Master Lease (as a principal and not as a
surety), (ii) Lessee certifies in writing to Owner and Trustee, in advance of
such sublease or assignment, that such sublease or assignment does not
materially adversely affect the value of any Leased Property, and such
certification is satisfactory to the Owner and Trustee in their sole and
absolute discretion; (iii) the proposed sublease provides that it terminates no
later than the day prior to the Lease Term Expiration Date or provides that if
it extends beyond the Lease Term Expiration Date and the Lessee does not
exercise its option to purchase the Leased Properties at the end of the Term,
such sublease shall automatically terminate on the Lease Term Expiration Date,
(iv) the sublease expressly states that it is subject and subordinate to this
Master Lease, and shall be subject to termination by Owner or its Assignee upon
the occurrence of a Lease Event of Default, (v) the proposed sublease contains
provisions regarding use, Lien lifting, maintenance, insurance, additions and
improvements, right of entry, environmental matters, repossession after default
and further assurances all in favor of the Lessee, as sublessor under the
proposed sublease, which are, in the reasonable determination of the Owner, no
less favorable to the Lessee, as sublessor, than the corresponding provisions
of this Master Lease are to the Owner, (vi) the Lessee will execute and deliver
any documents and instruments and take any actions reasonably required by Owner
to collaterally assign the Lessee's interest in and rights under the sublease
to the Owner, and (vii) Lessee notifies the Owner and Trustee in writing of the
sublease and delivers an executed copy thereof to Owner and Trustee.
Lessee shall not amend any Joint Venture Sublease without the prior
written consent of Owner, Noteholder and Surety.
(b) By Owner. This Master Lease and all Base Rental, Contingent Surety
Rental,
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Additional Rental (except for the Excepted Rights) and Termination
Rental due and to become due hereunder is being contemporaneously assigned by
Owner to Trustee for the benefit of the Beneficiaries, and Owner is
contemporaneously herewith granting a security interest in this Master Lease,
the Base Rental, Contingent Surety Rental, all Additional Rental (except for
the Excepted Rights) and Termination Rental due and to become due hereunder,
and shall grant, on the Property Closing Date applicable to each Leased
Property, a Mortgage with respect to such Leased Property to the Trustee for
the benefit of the Beneficiaries under the applicable Transaction Documents.
Lessee and Owner agree that the Base Rental, Contingent Surety Rental, all
Additional Rental (other than the Excepted Rights) and Termination Rental shall
be paid on behalf of Owner as provided in Section 5(e). Lessee agrees to
execute any assignments of leases and rents and other documents that may be
reasonably requested by Owner or Trustee to effect, evidence or perfect the
security interest of Trustee in the Leased Properties and rents payable with
respect thereto. Lessee acknowledges receipt of an executed counterpart of the
Loan Agreement, the Reimbursement Agreement and the other Transaction
Documents. Any Person to whom any sale, assignment, transfer or grant of
security interest is made by Owner that is permitted hereunder is herein called
an "Assignee."
Without limiting the foregoing or any of the provisions of Section 7
hereof, Lessee further acknowledges and agrees that (i) the rights of the
Trustee, Surety, Owner, Equity Investor, and Noteholder in and to the sums
payable by Lessee under any provision of this Master Lease shall not be subject
to any abatement whatsoever and shall not be subject to any defense, set-off,
counterclaim or recoupment whatsoever, whether by reason of failure of or
defect in Owner's title, or any interruption from whatsoever cause in the use,
operation or occupancy of the Leased Properties, or any damage to, loss,
destruction, reduction or impairment of the Leased Properties for any reason
whatsoever, or by reason of any other indebtedness or liability, howsoever and
whenever arising, of Owner to Lessee or to any other Person or for any cause
whatsoever, it being the intent hereof that Lessee shall be unconditionally and
absolutely obligated to pay on behalf of Owner in accordance with Section 5(e)
the Base Rental, Contingent Surety Rental, all Additional Rental (except as to
Excepted Rights which remain payable directly to Owner or Equity Investor) and
all Termination Rental; (ii) Lessee's covenants, representations and warranties
in this Master Lease, the Participation Agreement, and the other Transaction
Documents shall be deemed to be made to and for the benefit of Trustee, Surety,
Equity Investor and the Noteholder as well as Owner; and (iii) Trustee, Surety
and the Noteholder shall be entitled to the benefit of all covenants and
obligations to be performed by Lessee under this Master Lease, except Lessee's
covenants and obligations relating to Excepted Rights. Notwithstanding the
assignment to Trustee, prior to foreclosure of Owner's rights hereunder by
Trustee, or the acquisition of title to or possession of the Leased Properties
by Trustee, Lessee and Owner acknowledge that all obligations of Owner to
Lessee under this Master Lease shall be and remain enforceable by Lessee
against, and only against, Owner. If a mortgagee or lender who has taken
security in the Leased Properties shall succeed to the rights of the Owner
under this Master Lease, whether through possession or foreclosure action, deed
in lieu thereof or exercise of power of sale or delivery of a new lease or
deed, then at the request of such party so succeeding to Owner's rights
("Successor Owner"), the Lessee shall be deemed to have attorned to and
recognized such Successor Owner as the lessor under this Master Lease and the
applicable Lease Supplements, and shall promptly execute and deliver any
instrument that such Successor Owner may reasonably request to evidence such
attornment. Upon such attornment, this Master
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Lease and the applicable Lease Supplements shall continue in full force and
effect as if it were a direct lease between the Lessee and the Successor Owner,
and all of the terms, covenants and conditions of this Master Lease and the
applicable Lease Supplements shall remain applicable after such attornment.
Section 20. Environmental Matters.
Section 20.1. Prohibited Activities and Conditions. Except for the
matters described in Section 20.2, Lessee 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 any Leased Property;
(b) The transportation and disposal of any Hazardous
Materials to, from, or across any Leased Property;
(c) Any occurrence or condition on any Leased Property or
any other property of Lessee, which occurrence or condition is or may
be in violation of Environmental Law or give rise to liabilities under
Environmental Laws; or
(d) Any violation of or noncompliance with the terms of any
Environmental Law or any Environmental Permit with respect to any
Leased Property, the use or operation of any Leased Property, or any
property of Lessee; or
(e) The creation of any lien imposed by operation of, or
pursuant to, any Environmental Law.
The matters described in clauses (a) through (e) above are referred to
collectively in this Section 20 as "Prohibited Activities and Conditions" and
individually as a "Prohibited Activity and Condition."
Section 20.2. Exclusions. Notwithstanding any other provision of
Section 20.1 to the contrary, Prohibited Activities and Conditions shall not
include (a) the safe and lawful use and storage of customary quantities of (1)
pre-packaged supplies, medical waste, cleaning materials, petroleum products or
other Hazardous Materials which are customarily and lawfully used in the
operation and maintenance of comparable assisted living facilities, (2)
cleaning materials, personal grooming items and other items sold in
pre-packaged containers for consumer use and used by occupants of the Assisted
Living Facilities; (3) the presence on the Leased Properties of asbestos or
asbestos-containing materials where the same are not required under
Environmental Law to be removed, encapsulated or otherwise abated or where the
same have been encapsulated or otherwise abated in accordance with
Environmental Laws and where Lessee has complied with Environmental Law with
respect to any O&M Program, notices or warnings required under Environmental
Law to be performed or given concerning such asbestos or asbestos-containing
materials; (4) petroleum products used in the operation and maintenance of
motor vehicles from time to time located on any Leased Property's parking
areas, so long as all of the foregoing are
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used, stored, handled, transported and disposed of in compliance with
Environmental Law, and (b) activities normal, customary and lawful in the
operation of comparable assisted living facilities and nursing home facilities.
Section 20.3. Preventive Action. Lessee shall take all appropriate
steps (including the inclusion of appropriate provisions in any Subleases
approved by Owner and Noteholder which are executed after the date of this
Master Lease) to prevent its employees, agents, contractors, tenants and
occupants of any of the Assisted Living Facilities from causing or permitting
any Prohibited Activities and Conditions.
Section 20.4. O & M Program Compliance. If an O&M Program or O&M
Programs have been established with respect to Hazardous Materials, Lessee
shall comply in a timely manner with, and cause all employees, agents, and
contractors thereof and any other persons present on the Leased Properties to
comply with the applicable O&M Program. All costs of performance of Lessee's
obligations under any O&M Program shall be paid by Lessee, and Owner's and
Noteholder's out-of-pocket costs incurred in connection with the monitoring and
review of any O&M Program and Lessee's performance shall be paid by Lessee upon
demand by such Person. Owner and Noteholder shall have the right, but not the
obligation, to review and, if Owner or Noteholder so elects, to approve any O&M
Program proposed to be established by Lessee.
Section 20.5. [Intentionally Reserved].
Section 20.6. Notice of Certain Events. Lessee shall promptly notify
Owner and Noteholder in writing and in reasonable detail of any and all of the
following that may occur:
(a) Lessee's or Manager's discovery of any Prohibited
Activity and Condition.
(b) Lessee's or Manager's receipt of or knowledge of any
complaint, order, demand, request for information, notice of
violation, investigation, testing, proposed testing 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 any Leased Property or any other property that is adjacent
to any Leased Property.
(c) Any representation or warranty in Section 4.33 of the
Participation Agreement which becomes untrue at any time after the
date of this Master Lease.
Any such notice given by Lessee shall not relieve Lessee of, or result
in waiver of, any obligation under this Master Lease or any of the other
Transaction Documents.
Section 20.7. Costs of Inspection. Lessee shall pay promptly the costs
of any environmental inspections, tests or audits required by Owner, Noteholder
or Trustee in connection with any foreclosure or deed in lieu of foreclosure,
or, if required by Owner, Noteholder or Trustee, as a condition of Owner's,
Noteholder's or Trustee's consent to any "Transfer" (as defined in the
Mortgages), or required by Owner or Noteholder following a reasonable
determination by Owner or Noteholder that Prohibited Activities and Conditions
may
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exist.
Section 20.8. Remedial Work. If any investigation, site monitoring,
containment, clean-up, removal, restoration or other remedial work ("Remedial
Work") is necessary to comply with any Environmental Law or order of any
Governmental Authority that has or acquires jurisdiction over the Leased
Properties or the use, operation or improvement of the Leased Properties under
any Environmental Law, Lessee shall, by the earlier of (1) the applicable
deadline required by Environmental Law or (2) thirty (30) days after notice
from Owner or Noteholder 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 and in accordance with
applicable Environmental Law. If Lessee fails to begin on a timely basis or
diligently prosecute any required Remedial Work, Owner or Noteholder may, at
its option, cause the Remedial Work and any other efforts deemed necessary by
Owner or Noteholder in its sole and absolute discretion, to be completed, in
which case Lessee shall reimburse Owner or Noteholder on demand for all costs
of doing so.
Section 20.9. Cooperation with Governmental Authorities. Lessee 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.
Section 21. [Intentionally Reserved].
Section 22. [Intentionally Reserved].
Section 23. Events of Default.
The occurrence of any one or more of the following shall constitute a
"Lease Event of Default" hereunder:
(a) The failure by Lessee to make any payment of Termination
Rental when due, or any payment of Base Rental, Contingent Surety
Rental or Additional Rental payable pursuant to clauses (i) through
(iv), inclusive, of Section 5(b) within three (3) days after the same
becomes due; or
(b) Any failure by Lessee to pay any other Additional Rental
within ten (10) days after the same shall become due; or
(c) Lessee's failure to deliver or cause to be delivered the
financial statements and information set forth in Sections 4.5, 4.7
and 4.8 of the Loan Agreement within the times required when such
failure is not cured within twenty (20) days following written notice
to Lessee thereof; or
(d) Breach or default by Lessee under Sections 3.27, 3.28,
4.4, 4.12, 4.13, 4.14, 4.31, Article V or Article VIII of the Loan
Agreement, Sections 19, 29, 30, 31, or 35 of this Master Lease, or by
Guarantor under Section 9.5 of the Participation Agreement; or
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(e) The failure of Lessee or Guarantor properly and timely
to perform or observe any covenant or condition set forth in this
Master Lease or the other Transaction Documents and not otherwise
described elsewhere in this Section 23 and such failure is not fully
cured within thirty (30) days after receipt by Lessee or Guarantor of
notice of such failure; or, if such failure is not capable of being
cured within said thirty (30) day period such failure is not cured
within such additional period as may be reasonably required to cure
such failure (but in no event to exceed ninety (90) days from the date
of notice) provided that Lessee or Guarantor commences such cure
within the initial thirty (30) day period and diligently prosecutes
same to completion and provided further that, in the case of a failure
by Borrower, Lessee, any Sublessee or Manager to obtain any Regulatory
Permit in accordance with Section 3.11 of the Loan Agreement, such
initial thirty (30) day period shall not be extended for any
additional period pursuant to the foregoing if such extension would
have a Material Adverse Effect; or
(f) The filing by Lessee 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
(g) The entry by a court of competent jurisdiction of an
order, judgment, or decree approving a petition filed against Lessee
or Guarantor which such 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, earnings, profits or income thereof which
appointment shall remain unvacated and unstayed for an aggregate of
sixty (60) days (whether or not consecutive); or
(h) [Intentionally Reserved];
(i) Any certificate, statement, representation, warranty or
audit heretofore or hereafter furnished by or on behalf of Lessee or
Guarantor pursuant to or in connection with this Master Lease or any
other Transaction Document or as an inducement to any party to enter
into the transactions contemplated by the Transaction Documents,
proves (i) to have been false in any material respect at the time when
the facts therein set forth were stated or certified, or proves to
have omitted any substantial contingent or
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unliquidated liability or claim against Lessee or Guarantor, including
a Contingent Obligation or (ii) with respect to financial statements,
books and records not to have been prepared in accordance with GAAP or
on the date of execution of this Master Lease there shall have been
any materially adverse change in any of the acts previously disclosed
by any such certificate, statement, representation, warranty or audit,
which change shall not have been disclosed in writing at or prior to
the time of such execution; or
(j) The failure of Lessee to correct, within the time
deadlines set by any applicable Medicare, Medicaid or other applicable
reimbursement programs or licensing agency, any deficiency which would
result in the following actions by such agency with respect to any
Assisted Living Facility:
(i) The action by the Medicaid or Medicare
programs, any other governmental agency or actor, or any
other third party payer to suspend or offset an amount of
more than $250,000 to recoup overpayments or recover improper
payments;
(ii) an involuntary termination of any Reimbursement
Contract representing more than $2,000,000 of annual
Operating Revenues or any Regulatory Permit; or
(iii) a ban on new admissions generally or any ban of
thirty (30) days or more on admission of patients otherwise
qualifying for Medicaid or Medicare coverage or other
reimbursement; or
(k) Lessee, any Sublessee or Manager (in its capacity as
Manager of any Assisted Living Facility) or any Assisted Living
Facility shall be finally assessed fines or penalties by any state or
any Medicare, Medicaid, health or licensing agency having jurisdiction
over such Persons or the Assisted Living Facilities in excess of
$25,000 for a single Assisted Living Facility or $150,000 in the
aggregate for all Assisted Living Facilities during any calendar year
(which fines or penalties are not paid on a timely basis), or Lessee,
any Sublessee or Manager (in its capacity as Manager of any Assisted
Living Facility) or any Assisted Living Facility should agree to pay
in lieu of such fines or penalties an amount in settlement of any
action to any state or any Medicare, Medicaid, health or licensing
agency having jurisdiction over such Persons or the Assisted Living
Facilities in excess of $25,000 as related to a single Assisted Living
Facility or $150,000 in the aggregate for all Assisted Living
Facilities during any calendar year (which settlement is not paid on a
timely basis); or
(l) A final judgment in excess of $100,000 (individually or
in the aggregate) shall be rendered by a court of law or equity
against Lessee, Guarantor or Manager or any of their respective
assets, 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 such Lessee,
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Guarantor or Manager, 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 Owner and Noteholder; or
(m) if any provision of any organizational documents
affecting the purpose for which Lessee is formed is amended or
modified in any manner which is reasonably likely to result in a
Material Adverse Effect on the Loan, the Equity Investment or the
security therefor, or if Lessee or any member or shareholder of Lessee
fails to perform or enforce the provisions of any organizational
documents in a manner that is reasonably likely to result in a
Material Adverse Effect on the Loan, the Equity Investment or security
therefor; or
(n) The occurrence of an "Event of Default" relating to
Lessee or Guarantor as that term is defined in the Trust Agreement or
the Loan Agreement; or
(o) Any dissolution or attempted dissolution of Lessee or
Guarantor; or
(p) The occurrence of a Downgrade Surety Default which
results in the S&P Rating of the Surety or the Backstop Insurer being
downgraded below Investment Grade or being withdrawn or Qualified (any
such Downgrade Surety Default or withdrawal or Qualification an
"Investment Grade Downgrade"):
(i) on or before the second (2nd) anniversary of the Closing
Date, if the Net Operating Income from the Leased Properties
for the preceding twelve (12) calendar months (or the period
from the Closing Date to the last day of the calendar month
preceding the occurrence of such Investment Grade Downgrade,
if less than twelve (12) months), shall be less than the
projected net operating income from the Leased Properties for
such period as set forth in Schedule 4.10 of the Loan
Agreement, unless within ten (10) Business Days after Lessee
receives notice of the occurrence of such Investment Grade
Downgrade, Lessee delivers to Trustee for deposit into the
Additional Reserve Account under Article 3 of the Trust
Agreement the sum of $10,000,000; or
(ii) at any time after the second (2nd) anniversary of the
Closing Date, if Lessee has not achieved a DSCR of at least
1.40:1.00 for the trailing twelve (12) calendar months; or
(q) The existence of any other Surety Default (other than a
Downgrade Surety Default); or
(r) Any of the Transaction Documents to which Lessee or
Guarantor is a party for any reason ceases to be in full force and
effect or is declared to be null and void, or Lessee or Guarantor
denies that it has any further liability (as distinguished from denial
of the existence of a Lease Default or Lease Event of Default) under
any Transaction Documents to which it is party, or gives notice to
such effect; or
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(s) Lessee or Sublessee is enjoined, restrained or in any
way prevented by the order of any court or any administrative or
regulatory agency from conducting all or any material part of its
business and such order continues for more than 30 days; or
(t) (i) Lessee or Guarantor shall default in the payment
when due of any payment obligation under Indebtedness with an
outstanding principal balance in excess of $1 million or under any
lease agreement involving payment of rent in an aggregate amount in
excess of $1 million, in either case, now existing or hereafter
entered into by Lessee or Guarantor (any such Indebtedness or lease
obligations, "Material Indebtedness"), which default shall continue
after the expiration of any applicable notice or cure periods therein
provided, or (ii) the acceleration of any Material Indebtedness (or
termination of any lease evidencing Material Indebtedness).
Notwithstanding anything in this Section, all requirements of notice
shall be deemed eliminated if Owner is prevented from declaring a Lease 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. The provisions of paragraph (e) above do not
provide a cure for Lease Events of Default under other paragraphs of this
Section 23.
Section 24. Remedies Upon Default.
A Lease Event of Default with respect to one Leased Property shall
constitute a Lease Event of Default with respect to all Leased Properties. Upon
the occurrence and during the continuance of a Lease Event of Default, the
Owner may exercise one or more of the following remedies with respect to any or
all of the Leased Properties:
(a) The Owner may take action at law or in equity to collect any
payments then due or thereafter to become due under this Master Lease or any
Lease Supplement or any other Transaction Document, or to enforce performance
and observance of any term, covenant or condition of this Master Lease or any
Lease Supplement or any other Transaction Document applicable to Lessee.
(b) The Owner may, in addition to or in lieu of taking such action at
law or in equity as it may otherwise be entitled to, terminate the leasehold
estate created hereby by giving Lessee not less than ten (10) days' prior
written notice of the date Owner elects to make such termination effective
(such notice period is referred to as the "Standstill Period") and, subject to
the Lessee's rights under Section 24(e) below, the Owner may upon or after the
completion of the Standstill Period repossess the Leased Properties without
further notice, and without being deemed guilty of any manner of trespass and
without prejudice to any remedies which might otherwise be used to demand, sue
for or collect arrears of Base Rental, Contingent Surety Rental, Additional
Rental and Termination Rental and any other accrued obligations of Lessee under
this Master Lease, the applicable Lease Supplement or any other Transaction
Document, and Lessee hereby waives all statutory rights (including without
limitation rights of redemption, if any, to the extent such rights may be
lawfully waived); provided, however, that if the Term then in effect would
otherwise expire during said Standstill Period, the Standstill Period shall end
on the Lease Term Expiration Date. In calculating the amount of any deficiency
for which Lessee shall be liable hereunder, there
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shall be included, in addition to Base Rental, Contingent Surety Rental,
Additional Rental and Termination Rental, the value of all other amounts and
obligations agreed to be paid or performed by Lessee under this Master Lease
and the other Transaction Documents. In calculating the amounts to be paid by
Lessee pursuant to the foregoing sentence, there shall also be included all of
the Owner's or Trustee's reasonable expenses in connection with any sale or
reletting of each Leased Property, including, without limitation, all
repossession costs, brokerage commissions, fees for legal services and expenses
of preparing such Leased Property for such sale or reletting, it being agreed
by Lessee that the Owner may, but shall not be obligated to, (A) relet the
Leased Properties or any other portion thereof for a term or terms which may at
the Owner's option be equal to or less than or exceed the period which would
otherwise have constituted the balance of the Term then in effect and may grant
such concessions and free rent as the Owner in its reasonable judgment
considers advisable or necessary to relet the same, or (B) make such
alterations, repairs and decorations in or to the Leased Property as the Owner
in its reasonable judgment considers advisable or necessary to sell or relet
the same Leased Property. No action of the Owner in accordance with the
foregoing or failure to sell or relet or to collect rent upon reletting shall
operate or be construed to release or reduce Lessee's liability hereunder.
(c) Whether or not Owner shall have exercised, or shall thereafter at
any time exercise, any of its rights under subsection (a) or (b) above with
respect to the Leased Properties (but subject to Lessee's rights set forth in
Section 24(e) hereof), Owner, by written notice to Lessee specifying a payment
date, may demand that Lessee pay to Owner, and Lessee shall pay to Owner, on
the payment date specified in such notice (the "Liquidated Damage Payment
Date") which shall not be earlier than the end of the Standstill Period and
shall not be later than the end of the Term, as liquidated damages for loss of
a bargain and not as a penalty (in lieu of the Base Rental and Contingent
Surety Rental due for the Leased Properties for any Rental Period commencing
after the Liquidated Damage Payment Date and in lieu of the exercise by Owner
of its remedies under subsection (b) above in the case of a reletting of the
Leased Properties or with respect to a sale of the Leased Properties and in
lieu of all other remedies or compensation for failure to recover the Lease
Balances and/or the End of Term Adjustment), the sum, as of the Liquidated
Damage Payment Date, of (i) all unpaid Base Rental and Contingent Surety
Rental, (ii) all unpaid Additional Rental, (iii) the Aggregate Lease Balance,
plus the Discounted Termination Premium and Discounted Future Base Surety
Premiums, (iv) the Prepayment Consideration due and payable on the Note and (v)
all other amounts due under the Transaction Documents, and, on payment of all
such amounts, Owner shall convey the Leased Properties to Lessee as an Owner's
Conveyance as provided in Section 32 below.
(d) Owner may exercise any other right or remedy which may be
available to it under applicable law (including, without limitation, the right
to foreclose the Lien of this Master Lease as a mortgage or to exercise any
permitted power of sale as if this Master Lease were a deed of trust and the
right to obtain the appointment of a receiver without notice to Lessee) or
proceed by appropriate court action to enforce the terms hereof or to recover
damages for the breach hereof or to rescind this Master Lease or any Lease
Supplement. The remedies herein conferred upon and reserved to the Owner are
not intended to be exclusive of any other available remedy or remedies which
the Owner may have at law or in equity, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy given under this
Master Lease or now or hereafter existing at law or in equity. No delay or
omission to exercise any right or power
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accruing upon any Lease Event of Default shall impair any such right or power
or shall be construed to be a waiver thereof, but any such right and power may
be exercised from time to time and as often as may be deemed expedient. In
order to entitle the Owner to exercise any remedy reserved to it in this
Section, it shall not be necessary to give any notice, other than such notice
as may be required in this Section.
In addition, Lessee shall be liable for all costs and expenses,
including without limiting the generality of the foregoing, reasonable
attorney's fees, incurred by Owner, Equity Investor or any Assignee (including
Trustee, Surety and Noteholder) by reason of the occurrence of any Lease Event
of Default or the exercise of Owner's remedies with respect thereto, including
all costs and expenses incurred in connection with the surrender of the Leased
Properties in accordance with Section 35 hereof or in placing the Leased
Properties in the condition required by said Section. No express or implied
waiver by Owner of any Lease Event of Default shall in any way be, or be
construed to be, a waiver of any future or subsequent Lease Event of Default.
To the extent permitted by applicable law, Lessee hereby waives any rights now
or hereafter conferred by statute or otherwise which may require Owner to sell,
lease or otherwise use the Leased Properties in mitigation of Owner's damages
as set forth in this Section 24 or which may otherwise limit or modify any of
Owner's rights and remedies in this Section 24.
Notwithstanding any provision contained in this Master Lease to the
contrary, any and all remedies available to Owner upon the occurrence and
continuance of a Lease Event of Default shall survive the termination of this
Master Lease.
(e) If Owner terminates this Master Lease as a result of the existence
of a Lease Event of Default and/or notifies the Lessee that it elects to
repossess any Leased Property, the Lessee shall be entitled to require the
Owner to exercise the remedies set forth in Section 24(c) hereof in lieu of
repossessing the Leased Properties, or in lieu of terminating this Master
Lease, by delivering to the Owner, at any time during the Standstill Period,
written notice of its election to have Owner exercise its remedies under
Section 24(c). Unless the Owner specifies another date as the Liquidated Damage
Payment Date pursuant to the notice required under Section 24(c) hereof, the
Liquidated Damage Payment Date shall be the first Business Day after the last
day of the Standstill Period. The payments due on the Liquidated Damage Payment
Date shall be paid to Trustee on behalf of Owner for application pursuant to
the Trust Agreement. If no notice of such election by Lessee is received by
Owner within the Standstill Period or if Lessee fails to make all payments due
on the Liquidated Damage Payment Date, the Owner may pursue any of the remedies
set forth in this Section 24 and Lessee shall have no further rights under this
Section 24(e).
Section 25. Owner's Right to Perform for Lessee.
If Lessee fails to make any payment of Rental required to be made by
it hereunder or fails to obtain the insurance required by Section 15 hereof or
to otherwise perform or comply with any of its agreements contained herein,
Owner may (but shall not be required) itself, after notice to Lessee (provided
that such notice need not be given prior to the payment by Owner of any
insurance premiums), make such payment or perform or comply with such
agreement, and the amount of such payment and the amount of the expenses of
Owner incurred in connection with
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such payment or the performance of or compliance with such agreement, together
with interest on all such amounts at the Owner Default Rate shall be due and
payable by Lessee upon demand by Owner; provided, however, that no such
payment, performance or compliance by Owner shall be deemed to cure or waive
any Lease Event of Default hereunder.
Section 26. [Intentionally Reserved].
Section 27. Further Assurances.
Lessee will at its own cost and expense promptly and duly execute and
deliver to Owner and any Assignee of Owner such other documents and assurances,
including, without limitation, such amendments to this Master Lease or the
Lease Supplements as may be reasonably required by Owner or by any Assignee of
Owner, joinder of any mortgage or deed of trust necessary to encumber Lessee's
equitable interests in the Leased Properties and Uniform Commercial Code
financing statements and continuation statements, and will take such further
action as Owner or any Assignee of Owner may from time to time reasonably
request in order to carry out more effectively the intent and purposes of this
Master Lease, the Lease Supplements and the other Transaction Documents and to
establish and protect the rights and remedies created or intended to be created
in favor of Owner, any Assignee of Owner or any other Indemnified Party and
their respective rights, title and interests in and to the Leased Properties or
portions thereof.
Section 28. Notices.
All notices provided for or required under the terms and provisions
hereof shall be in writing, and shall be given in the manner and shall be
effective as provided in the Participation Agreement.
Section 29. Lessee's Return and Purchase Options.
(a) So long as no Tolling Default shall have occurred and no Lease
Default or Lease Event of Default shall have occurred and be continuing, Lessee
may elect to return all, but not less than all, of the Leased Properties by
giving the Owner written notice thereof no later than 394 days prior to the
last day of the Term, in which case the Leased Properties shall be returned to
Owner in accordance with the provisions of Section 35 hereof, and the
provisions of Section 31(a) hereof shall apply (unless delivered to a bidder in
accordance with Section 30(b) hereof, in which case the provisions of Section
31(b) shall apply). Such notice shall be automatically revoked if Lessee has
not delivered, in recordable form, such instruments as Owner shall require to
protect Owner's interest in the Leased Properties or to publish notice of or to
create, maintain and protect the Lien and security interest intended to be
created by this Master Lease in favor of Owner and caused such instruments to
be filed in all applicable public offices no later than 367 days prior to the
last day of the Term. Owner will collaterally assign such instruments to
Trustee (except to the extent, if any, that such instruments relate to Excepted
Rights or Excluded Collateral) pursuant to instruments reasonably satisfactory
to Trustee. If Lessee has not given written notice of its election to return as
provided above Lessee shall have been conclusively deemed to have elected to
purchase the Leased Properties on the Lease Term
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Expiration Date as provided in Section 29(b) below. The return option election
shall automatically be revoked if a Tolling Default has occurred or if there
exists a Lease Default, Lease Event of Default or a total casualty or total
Condemnation with respect to a Leased Property at any time after the return
option is elected or if Lessee fails to comply with each of the terms of
Sections 30, 31 and 35 of this Master Lease, and Lessee shall be deemed to have
elected to purchase the Leased Properties pursuant to Section 29(b). In
connection with any return of the Leased Properties or purchase of the Leased
Properties on any date prior to the Maturity Date, Lessee shall pay and perform
the obligations of Owner under Section 6 of the Note in accordance therewith
and shall take such other actions as Owner shall request to enable Owner to
comply with its obligations to Noteholder in connection therewith.
(b) If this Master Lease shall not have been earlier terminated,
Lessee shall have the option to purchase all, but not less than all, of the
Leased Properties on any Rent Payment Date after August 1, 2003, or on the
Lease Term Expiration Date, for an amount, computed as of such Rent Payment
Date, or the Lease Term Expiration Date, as the case may be, equal to the sum
of the following amounts: (i) all unpaid Base Rental and Contingent Surety
Rental, (ii) all Additional Rental then or thereby accrued or incurred, (iii)
the Aggregate Lease Balance, plus the Termination Premium if the purchase is
consummated on the Lease Term Expiration Date, or if the purchase is
consummated on an earlier date, the Discounted Termination Premium and
Discounted Future Base Surety Premiums, (iv) if such purchase occurs prior to
the Maturity Date, any amounts required to be paid pursuant to Section 6 of the
Note, and (v) all other amounts due and owing under the Transaction Documents.
To exercise such purchase option on a Rent Payment Date, Lessee shall give
written notice of its intent to purchase at lease ninety (90) days prior to the
Rent Payment Date upon which the purchase is to be effected. If Lessee does not
elect to return the Leased Properties in accordance with Section 29(a) above as
of the end of the Term or if a Tolling Default shall have occurred or a Lease
Default or Lease Event of Default shall have occurred and be continuing, the
Lessee will be conclusively deemed to have elected to exercise its option to
purchase the Leased Properties on the Lease Term Expiration Date pursuant to
this Section 29(b). If Lessee is deemed to have exercised such option to
purchase, Lessee shall be required to purchase the Leased Properties on the
Lease Term Expiration Date by paying on such date the amounts set forth above
in this Section 29(b).
Section 30. Third Party Sale of Leased Properties.
(a) Remarketing Obligations. If Lessee elects to return all Leased
Properties in accordance with Section 29(a) above, then Lessee shall have the
obligation during the final three hundred sixty-four (364) days of the Term
(the "Remarketing Period"), to use such commercially reasonable efforts as
would be made by a self-interested property owner in each respective area where
each Leased Property is located to actively market commercial property to
obtain bona fide bids for the Leased Properties from prospective purchasers who
are financially capable of purchasing the Leased Properties for cash on an
as-is, where-is basis, without recourse or warranty, on the terms and
conditions set forth in Section 32 hereof applicable to Owner's Conveyances.
The Lessee shall be responsible for hiring brokers reasonably acceptable to
Owner and promptly upon Owner's request, shall permit inspection of the Leased
Properties and any maintenance records relating to the Leased Properties by
Owner, Assignee or any potential purchasers, and shall otherwise do all things
reasonably necessary to sell and deliver possession of
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the Leased Properties to any purchaser. All such marketing of the Leased
Properties shall be at Lessee's sole cost and expense. The Lessee shall allow
the Owner and any potential purchaser access to the Leased Properties for
purposes of showing the same. All bids received by Lessee prior to the end of
the Term in respect of the Leased Properties, shall be immediately certified to
Owner and Trustee in writing, setting forth the amount of such bid and the name
and address of the Person or entity submitting such bid. Notwithstanding the
foregoing, Owner and Trustee shall have the right, but not the obligation, to
seek bids for the Leased Properties during the Remarketing Period.
(b) Delivery of Leased Property to Third Party Buyer. Not later than
the Lease Term Expiration Date, Lessee shall deliver each Leased Property to
the bidder, if any, who shall have submitted such highest bid during the
Remarketing Period, and Owner shall simultaneously therewith sell (or cause to
be sold), its ownership in such Leased Property to such bidder, provided, that
Owner shall not be obligated to sell any Leased Property if either (x) all of
the conditions set forth in Sections 29(a), 29(b), 30(c), 31(a) and 35 have not
been complied with on or before the Lease Term Expiration Date, or (y) the Net
Proceeds of Sale of all Leased Properties, when added to all amounts paid by
Lessee under Section 31(a) with respect to the Leased Properties, would be less
than the sum, as of the date of payment, of the following amounts: (i) all
unpaid Base Rental and Contingent Surety Rental, (ii) all unpaid Additional
Rental, (iii) the Aggregate Lease Balance, plus the Termination Premium, (iv)
if such return occurs prior to the Maturity Date, any amounts required to be
paid pursuant to Section 6 of the Note, and (iv) any other amounts due and
owing under the Transaction Documents.
(c) Delivery of Reports. Owner shall have the right in its sole
discretion, but not the obligation, to retain a third party as its agent for
the purpose of determining compliance of the Lessee with the conditions
applicable to a return of the Leased Properties pursuant to Section 35, at
Lessee's sole cost and expense. Upon the request of Owner and at Lessee's sole
cost and expense, Lessee shall provide Owner with a written report describing
in reasonable detail Lessee's efforts during the Remarketing Period to obtain
bona fide bids for the purchase of the Leased Properties, including a list of
all Persons approached for the purpose of soliciting bids to purchase such
Leased Properties.
(d) Leased Properties Indemnity. In the event that (a) Lessee elects
to return the Leased Properties; and (b) after paying the amounts specified in
Section 31(a), the Aggregate Lease Balance shall not have been reduced to zero,
then Lessee shall promptly pay over to Owner on the Lease Term Expiration Date
the shortfall unless Lessee delivers a report from an appraiser selected by the
Owner in form and substance satisfactory to the Owner and Trustee and using
approved methods satisfactory to the Owner and Trustee which establishes that
the reasons for the actual fair market value of the Leased Properties as of the
Lease Term Expiration Date being less than the stabilized value anticipated in
the appraisal delivered pursuant to the Participation Agreement was not due to
any of the following events, circumstances or conditions, whether or not
permitted under this Master Lease: (i) the failure to maintain the Leased
Properties as required by this Master Lease and the other Transaction
Documents, and in at least as good a condition as it was in on the applicable
Property Closing Date, ordinary wear and tear excepted; (ii) the carrying out
of or the failure to undertake any modifications, improvements or alterations
whether or not permitted pursuant to the Transaction Documents; (iii) the
existence of any
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environmental condition at or affecting the Leased Properties whether or not
such condition existed on the applicable Property Closing Date; (v) any defect,
exception, easement, restriction or other encumbrance on or title to for the
Leased Properties whether or not created or existing on the applicable Property
Closing Date; (vi) the dependence of the Leased Properties on any improvement
or facility not fully located on the Leased Properties (except for
government-provided utilities existing and benefiting the Leased Properties as
of the date hereof the benefits of which are lost for reasons other than the
fault of Lessee and which could not have been retained through the exercise by
Lessee of commercially reasonable efforts to keep such utilities in place); or
(vii) any other cause or condition within the power of Lessee to control or
affect other than ordinary wear and tear.
Section 31. End of Term Adjustment Applicable to Leased Properties.
(a) If Lessee returns all of the Leased Properties to Owner in
accordance with the provisions of Section 29(a), whether or not a third party
sale is consummated with respect to such Leased Properties in accordance with
Section 30(b) hereof, then Lessee shall pay to Trustee on behalf of Owner, on
the Lease Term Expiration Date, the sum, as of the date of payment, of the
following amounts with respect to the Leased Properties:
(i) all unpaid Base Rental and Contingent Surety Rental;
(ii) all unpaid Additional Rental (other than Termination
Premium);
(iii) with respect to the Capital Lease Properties, either
(A) the Lease Balances applicable thereto, if all of the Limited Lessee
Risk Conditions have been met, or (B) the Lease Balances and Property
Termination Premium applicable thereto if all of the Limited Lessee
Risk Conditions have not been met;
(iv) with respect to the Operating Lease Properties,
either (each of (A) and (B) of this subsection (iv) referred to as an
"End of Term Adjustment") (A) the Maximum Lessee Risk Amounts then
applicable to such Operating Lease Properties, if all of the Limited
Lessee Risk Conditions have been met, or (B) the Lease Balances and
Property Termination Premium applicable thereto if all of the Limited
Lessee Risk Conditions have not been met;
(v) if such return occurs prior to the Maturity Date, any
amounts required to be paid pursuant to Section 6 of the Note; and
(vi) all other amounts, without duplication, due and owing
under the Transaction Documents (other than Termination Premium).
If Owner shall then sell the Leased Properties and the Lessee has not paid the
sums due to the Owner under this Section 31(a), the total selling price
realized from any third party sale of the Leased Properties after the Lease
Term Expiration Date shall be retained by the Owner. If at the time of any such
sale the Lessee has already paid an amount equal to the sum of the applicable
End of Term Adjustment for the Operating Lease Properties and the applicable
amount set forth
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in (iii) above for the Capital Lease Properties, plus any other amounts due
hereunder, then the Lessee shall be paid the lesser of (i) the Net Proceeds of
Sale or (ii) the sum of the applicable End of Term Adjustment paid by Lessee,
and such balance shall be paid to Lessee by way of a refund of rentals. Any Net
Proceeds of Sale remaining after the payment to Lessee shall be retained by the
Owner.
(b) This Section 31(b) shall apply only if a sale of all of the Leased
Properties to a third party has been consummated on or prior to the Lease Term
Expiration Date pursuant to Section 30(b) hereof. If the Net Proceeds of Sale
of the Leased Properties, together with the amounts then paid by Lessee
pursuant to Section 31(a), exceed the minimum required amount described in the
proviso contained in Section 30(b), Owner shall pay to Lessee such excess as an
adjustment to the Rental paid or payable under this Master Lease; provided,
however, that Owner shall have the right to offset against such adjustment
payable by Owner, any other amounts then due and payable from Lessee to Owner,
Trustee, Surety, Equity Investor, Noteholder or any other Indemnified Party
hereunder or under any other Transaction Documents.
(c) With respect to any Leased Property returned to Owner and not sold
pursuant to Section 30(b) hereof, Lessee shall remain liable for the payment
of, and upon the consummation by Owner of the sale of such Leased Properties
after the Lease Term Expiration Date, Lessee shall pay or reimburse Owner for
the payment of all applicable sales, excise, transfer, recording or other taxes
imposed as a result of such sale, and fees and all expenses incurred by Owner
as a result of such sale, including, without limitation, expenses incurred in
titling and registering the conveyance of Owner's title to such Leased
Property, title insurance fees and expenses, survey fees, fees for
environmental audits and fees and expenses of counsel, but the Lessee shall not
be required to pay or reimburse Owner for any tax based upon or measured solely
by Owner's gross, net or taxable income realized upon such sale or any taxes
payable in the nature of capital gains, unless any such tax is in lieu of or a
substitute for any sales, excise, transfer or recording taxes imposed as a
result of a sale of such Leased Property.
Section 32. Procedure for Owner Conveyance.
In the event of an Owner's Conveyance with respect to any Leased
Property, the terms and conditions of this Section 32 shall apply. On the
closing date for such transfer: (a) The Owner shall receive, at a closing where
all events described in Sections 32(a) and 32(b) hereof shall occur
simultaneously, all Base Rental, Contingent Surety Rental, Additional Rental
and Termination Rental then due and payable and unpaid and all other sums due
and payable by Lessee under this Master Lease and the other Transaction
Documents, at the date of consummation of the transfer, with respect to such
Leased Property.
(b) Each Owner's Conveyance shall be made by quitclaim deed (or such
other instrument of conveyance which effects a transfer of the Owner's rights
to such Leased Property without warranty of title on the part of the Owner)
together with such bills of sale or deeds, or such other instruments as may be
appropriate in the circumstances, which shall transfer all of the Owner's
right, title and interest in and to such Leased Property to Lessee or third
party, as the case may be. Owner's transfer of its ownership in such Leased
Property shall be on an as-is, where-is basis, without any representation or
warranty, either expressed or implied, as to the
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design, condition, quality, capacity, merchantability, habitability,
durability, suitability or fitness of such Leased Property for any particular
purpose, or any other matter concerning such Leased Property or any portion
thereof. Lessee and, if applicable, any third party shall waive any claim
(including any claim based on strict or absolute liability in tort or
infringement) it might have against Owner for any loss, damage (including
incidental or consequential damage) or expense caused by such Leased Property
or by Lessee's loss of use thereof for any reason whatsoever. Owner shall
convey all of its then right, title and interest in and to such Leased Property
to Lessee or third party, as the case may be, free and clear of any Owner Liens
attributable to it, but other than as to Owner Liens arising through Owner, no
representation or warranty shall be made by Owner as to the existence of any
other Liens or encumbrances (including other Permitted Liens) on such Leased
Property as of the date of sale or any other matter whatsoever.
(c) The Lessee shall have paid all charges and expenses incident to
the transfer of the Leased Property pursuant to an Owner's Conveyance,
including, without limitation, all transfer taxes, recording fees, title
insurance premiums and federal, state and local taxes arising as a result of
such transfer. Lessee shall have paid all fees and expenses of Owner's counsel
and Trustee's counsel reasonably incurred by reason of the transfer.
Section 33. [Intentionally Reserved].
Section 34. Time of the Essence; Manner of Payment.
The provisions of this Master Lease and each Lease Supplement
requiring the payment by Lessee to the Owner or to any third party, whether
such payments are for Base Rental, Contingent Surety Rental, Additional Rental,
Termination Rental, or otherwise, are of the essence of this Master Lease, and
time is of the essence for any payment and performance of such obligations of
Lessee set forth herein.
Section 35. Return of Leased Properties.
(a) Upon the expiration or earlier termination of the Term (unless
Lessee has purchased the Leased Properties), Lessee will vacate and surrender
and deliver possession of the Leased Properties to Owner, subject to the rights
of residents under Residency Agreements (which shall be assigned to Owner's
designated licensed operator pursuant to an assignment in form and substance
satisfactory to Owner), in broom clean condition and in the condition required
pursuant to Section 13(a) hereof.
Lessee shall remove from the Leased Properties on or prior to such
expiration or earlier termination of this Master Lease, all personal property,
furniture and fixtures (other than equipment and fixtures which form a part of
the building systems or which were financed by Loans and Equity Advances or
which are required by applicable Legal Requirements, or which cannot be readily
removed from the Leased Properties without (x) causing damage to the Leased
Properties which cannot be readily repaired or (y) materially impairing the
value of the Leased Properties) situated thereon which are not the property of
Owner, and shall repair any damage caused by such removal. Property not so
removed shall become the property of Owner, and Owner may cause such property
to be removed from the Leased Properties and disposed of, and
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Lessee shall pay the reasonable cost of any such removal and disposition and of
repairing any damage caused by such removal.
If requested by Owner, Lessee will arrange for the Manager or another
qualified operator licensed to operate the Leased Properties on behalf of Owner
and will cause the Manager to cooperate with the transition of the Leased
Properties from Lessee to Owner, including the provision of consultant and
management services, data processing services, accounting services and other
administrative and clerical functions. In addition, Lessee shall take all
actions requested by Owner to facilitate the transfer of all licenses and
permits necessary to operate the Leased Properties to Owner's designated
Operator on or prior to the return of the Leased Properties to Owner.
(b) Except for surrender upon the expiration or earlier termination of
the applicable Term in accordance with the terms of this Master Lease, no
surrender to Owner of this Master Lease or of the Leased Properties shall be
valid or effective unless agreed to and accepted in writing by Owner and any
Assignee of Owner.
(c) Without limiting the generality of the foregoing, upon the
surrender and return of the Leased Properties to Owner pursuant to this Section
35, each surrendered Leased Property shall (i) be capable of being immediately
utilized by a third-party purchaser or third-party lessee as an assisted living
facility and/or nursing home facility, as applicable, without further
inspection, construction, repair, replacement, alterations or improvements,
licenses, permits, or approvals, except for any of the foregoing required
solely by virtue of the change in ownership, use, occupancy or operation of
such Leased Property, (ii) be in accordance and compliance with all Legal
Requirements and Environmental Law including, without limitation, any of the
foregoing required to effect a change in ownership, use or occupancy of such
Leased Property other than licensure requirements applicable to the transferee
or its operator, (iii) be free and clear of all Liens, other than any Permitted
Liens described in clauses (a), (b) and (e) of the definition thereof and Owner
Liens.
Lessee shall have completed all alterations or improvements to such
Leased Property which it shall be required or shall have elected to make and
shall have completed all repairs and restorations required by Section 15, and
there shall be no outstanding contests pursuant to Sections 8(b) or 14 of this
Master Lease. Owner shall have the right in its sole discretion, but not the
obligation, to retain a third party as its agent for the purpose of determining
compliance of the Lessee with the conditions applicable to a return of the
Leased Properties pursuant to this Section 35, at Lessee's sole cost and
expense.
(d) On or prior to the date of such surrender and return of any Leased
Property, Owner shall have received from Lessee, at Lessee's expense, evidence
satisfactory to Owner and each Assignee, of compliance with the provisions of
this Section 35, including without limitation, an environmental assessment for
such Leased Property addressed to the Owner and otherwise in form and substance
satisfactory to Owner and each Assignee or, in lieu of addressing to such
parties directly, accompanied by a letter permitting Owner and each Assignee to
rely thereon, performed by an independent, licensed professional engineer
satisfactory to Owner and each Assignee, and which assessment
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(x) shall be sufficient in scope to determine compliance with the
applicable Environmental Law, (y) shall reveal no actual or potential
environmental liabilities which cannot be remediated by Lessee as provided in
the following clause (z), and (z) if such environmental assessment reveals the
need for additional review, Lessee shall have provided such additional
information or environmental assessments as are required by Owner and each
Assignee and, subject to Section 20 hereof, any remediation recommended therein
to be performed shall have been performed prior to the Lease Term Expiration
Date, and evidence of compliance with Section 35(c)(ii).
(e) Upon such return of any Leased Property to Owner, Lessee shall
deliver to Owner a then current title insurance policy or a binding commitment
to issue a title insurance policy written by a title insurance company
reasonably acceptable to Owner (with such endorsements and affirmative
coverages as Owner shall request), insuring good and marketable title in such
Leased Property in an amount equal to the Lease Balance plus the Termination
Premium determined as of the Lease Term Expiration Date, unencumbered except
for Owner Liens. Upon the request of Owner, Lessee shall continue to maintain
its insurance policies for such Leased Property required under Section 15
hereof if able to do so on a commercially reasonable basis, provided that Owner
pays or reimburses Lessee for its pro rata costs thereof.
(f) Unless the Leased Properties have been returned to Owner in the
condition required under Section 35(a) through (d) hereof on the Lease Term
Expiration Date the election to return the Leased Properties shall be
automatically revoked and Lessee shall be deemed to have elected to purchase
the Leased Properties pursuant to Section 29(b) on the Lease Term Expiration
Date and shall pay all amounts due in connection with such purchase on such
date.
(g) The provisions of this Section 35 are of the essence of this
Master Lease, and any breach thereof shall be deemed a Lease Event of Default
hereunder, and upon application to any court of equity having jurisdiction in
the premises, Owner shall be entitled to a decree against Lessee requiring
specific performance of the covenants of Lessee set forth in this Section 35.
Section 36. [Intentionally Reserved].
Section 37. Recording.
Lessee will execute, acknowledge, deliver and cause to be recorded or
filed in the manner and place required by any present or future law, a
memorandum hereof, in order to publish notice of this Master Lease and the
Lease Supplements. If Lessee shall fail to comply with this Section 37, Owner
and any Assignee shall be and is hereby irrevocably appointed the agent and
attorney in fact of Lessee, to comply therewith, but this sentence shall not
prevent any default in the observance of this Section 37 by Lessee from
constituting a Lease Event of Default in accordance with the provisions of this
Master Lease.
Section 38. No Reliance.
Lessee and Owner hereby mutually acknowledge that in negotiating the
terms of this Master Lease and all other related agreements and documents, each
has sought, obtained and
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relied exclusively upon such accounting, actuarial, tax and legal advice from
its own or other independent sources as it has deemed necessary, and Lessee
further acknowledges that neither Lessee, Owner, Equity Investor, Trustee,
Surety, Noteholder or any Assignee nor any of their respective Affiliates or
personnel has represented or warranted the legal, tax, economic, accounting, or
other consequences of the terms and provisions hereof and of the other related
agreements and documents.
Section 39. Miscellaneous.
Any provision of this Master Lease which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating or diminishing Owner's rights under the remaining provisions
hereof, and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by applicable law, Lessee hereby waives
any provision of law which renders any provision of this Master Lease
prohibited or unenforceable in any respect. No term or provision of this Master
Lease may be amended, altered, waived, discharged or terminated orally, but may
be amended, altered, waived, discharged or terminated only by an instrument in
writing signed by a duly authorized officer of the party against which the
enforcement of the amendment, alteration, waiver, discharge or termination is
sought and provided that Trustee's written consent thereto shall have been
obtained. A waiver on any one occasion shall not be construed as a waiver on a
future occasion. All of the covenants, conditions and obligations contained in
this Master Lease shall be binding upon and shall inure to the benefit of the
respective successors and assigns of Owner and (subject to the restrictions of
Section 19 hereof) Lessee. This Master Lease, any Lease Supplement, any
Memorandum of Lease and each related instrument, document, agreement and
certificate and the other Transaction Documents, collectively constitute the
complete and exclusive statement of the terms of the agreement between Owner
and Lessee with respect to the leasing of the Leased Properties, and cancel and
supersede any and all prior oral or written understandings with respect
thereto.
Section 40. Venue; Governing Law.
Lessee agrees that at Owner's sole election any suit, action or
proceeding brought by Owner against Lessee in connection with or arising out of
this Master Lease may be brought in any federal or state court in Cook County,
Illinois, and Lessee waives personal service of all process upon it and
consents that service of process may be made by mail or messenger directed to
it at its address set forth above and that service so made shall be deemed to
be completed upon the earlier of actual receipt or three (3) days after the
same shall have been posted to Lessee's said address. Nothing herein contained
shall affect Owner's right to serve legal process in any other manner permitted
by law or to bring any suit, action or proceeding against Lessee or its
property in the courts of any other jurisdiction. Except as otherwise provided
in this Section 40, this Master Lease shall in all respects be governed by, and
constructed in accordance with, the laws of the State of Illinois, including
all matters of construction, validity and performance:
(a) The procedures governing the enforcement by owner of its remedies
against Lessee hereunder or under the other Transaction Documents after the
occurrence of a Lease Event of Default with respect to the Leased Properties,
including by way of illustration, but not in
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limitation, power of sale, actions for ejectment, foreclosure, for injunctive
relief or for the appointment of a receiver shall be governed by the laws of
the state where such Leased Property is located;
(b) In respect of each Leased Property, Owner shall comply with
applicable law in the state where such Leased Property is located to the extent
required by the law of such jurisdiction in connection with the exercise of
remedies to terminate this leasehold or to conduct a sale pursuant to any power
of sale or to foreclose the security interests and Liens created hereunder or
under the other Transaction Documents with respect to the Leased Properties;
(c) In respect of each Leased Property, matters of real estate,
landlordtenant and property law shall be governed by the laws of the state
where such Leased Property is situated.
Section 41. Estoppel Certificate.
Lessee agrees from time to time, upon not less than ten (10) days'
prior written notice from Owner or Trustee, to execute, acknowledge and deliver
to Owner or Trustee or any other Person designated by Owner or Trustee, a
statement in form and substance reasonably satisfactory to the Person
requesting same certifying that this Master Lease and the Lease Supplements are
unmodified and in full force and effect (or if there have been modifications,
that this Master Lease and the Lease Supplements are in full force and effect
as modified and stating the modifications), the dates to which Base Rental,
Contingent Surety Rental, Additional Rental, and Termination Rental have been
paid, and stating whether or not, to the best knowledge of the signer of the
certificate, Owner is in default in performance of any covenant, agreement or
condition in this Master Lease and, if so, specifying each such default of
which the signer may have knowledge, it being intended that any such statement
may be relied upon by any prospective purchasers of any Leased Property, any
assignee of Owner, Equity Investor, Trustee, Surety or any Noteholder or any
prospective mortgage lender.
Section 42. Survival of Representations, Warranties and Covenants.
All representations, warranties, agreements, covenants and obligations
of Lessee herein are material, shall be deemed to have been relied upon by
Owner, and, unless by their express terms expire as of an earlier date, shall
survive and continue in full force and effect notwithstanding the expiration or
earlier termination of this Master Lease in whole or in part, including the
expiration or termination of the Term with respect to any Leased Property.
Section 43. Nonrecourse.
Any provision of this Master Lease to the contrary notwithstanding,
the liability of the Owner hereunder, if any, shall be satisfied solely from
the Leased Properties. No recourse under or upon any representation, warranty,
obligation, covenant or agreement contained herein or for any claim based
hereon or in respect hereto shall be had against Owner, the Equity Investor or
any past, present or future officer, director, stockholder, Affiliate, member,
employee, agent, or attorneys, as such, of the Owner, the Equity Investor or
any of their respective assets or properties.
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Section 44. Counterparts.
This Master Lease may be executed by one or more parties to this
Master Lease on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument. Delivery by any party of telecopied copies of executed counterparts
hereof shall constitute execution and delivery hereof by such party. The single
executed original of this Master Lease marked "THIS COUNTERPART IS THE ORIGINAL
EXECUTED COUNTERPART" on the signature page thereof and containing the
signature of the Trustee on the signature page thereof shall be the original
executed counterpart of this Master Lease (the "Original Executed
Counterpart"). Upon execution hereof, the Original Executed Counterpart has
been delivered to Trustee for the benefit of the Beneficiaries. To the extent
that this Master Lease constitutes chattel paper, as such term is defined in
the Uniform Commercial Code as in effect in any applicable jurisdiction, no
security interest in this Master Lease may be created through the transfer or
possession of any counterpart other than the Original Executed Counterpart.
[SIGNATURES ON NEXT PAGE]
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In Witness Whereof, the parties hereto have caused this Master Lease
to be duly executed by their duly authorized representatives effective as of
the date first written above.
Pita General Corporation
(OWNER)
By: /s/Mindy Berman
--------------------------
Name: Mindy Berman
Title: Vice President
AHC Tenant, Inc.
(LESSEE)
By: /s/ Mark W. Ohlendorf
--------------------------
Name: Mark W. Ohlendorf
Title: Senior Vice President
[THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART].
The First National Bank of Chicago, as Trustee
By: /s/ Jeffrey L. Kinney
--------------------------
Name: Jeffrey L. Kinney
Title: Vice President
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EXHIBIT A
LEASE SUPPLEMENT NO. [_____]
This Lease Supplement No. [___] (this "Lease Supplement"), dated July
___, 1999, by and between Pita General Corporation, an Illinois corporation, as
owner-lessor hereunder ("Owner") and AHC Tenant, Inc., a Delaware corporation,
as lessee hereunder ("Lessee").
PRELIMINARY STATEMENT
Whereas, Owner and Lessee have entered into that certain Master Lease
Agreement dated as of July ___, 1999 (the "Master Lease") pursuant to which the
Owner has agreed, subject to the terms and conditions therein set forth, to
lease, let and demise unto Lessee, and the Lessee has agreed to lease, rent and
take possession from Owner, all of the Owner's right, title and interest in the
Leased Properties identified in one or more Lease Supplements entered into
between Owner and Lessee;
Whereas, Owner has acquired certain properties, including that certain
parcel of improved real property located in [INSERT PROPERTY LOCATION], more
particularly described in Exhibit A attached hereto (the "Land"). Lessee wishes
to lease the Land and the hereinafter defined Leased Property from Owner. The
date upon which this Lease Supplement becomes effective is the date of this
Lease Supplement; and
Whereas, Owner and Lessee desire to supplement the terms and
provisions of the Master Lease, by specifically including the Leased Property
described herein with the Leased Properties subject to the Master Lease, and
setting forth other terms and conditions specifically applicable thereto. In
consideration of the premises and other good and valuable consideration
received, the parties hereby agree to supplement the Master Lease as follows.
Section 1. Definitions.
Unless the context otherwise requires, and except as specifically
provided herein, each of the capitalized terms shall have the meaning set forth
in the Master Glossary of Definitions attached to the Master Lease as Annex A,
as the same may be amended, modified or supplemented from time to time.
Unless otherwise expressly stated, the words "this Lease Supplement,"
"herein," "hereunder," "hereof" or other like words mean and include this Lease
Supplement, all exhibits hereto and each amendment hereto.
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Section 2. Terms and Provisions of Master Lease.
This Lease Supplement supplements, amends and is an integral part of
the Master Lease. The Master Lease shall remain in full force and effect, as
supplemented hereby.
Section 3. Leased Property.
This Lease Supplement applies to (i) the Land identified in Exhibit A
hereto, (ii) all Improvements now or hereafter constructed on the Land [INSERT
FOR GL PROPERTIES: (OTHER THAN IMPROVEMENTS LOCATED ON ANY PORTION OF THE LAND
SUBJECT TO A GROUND LEASE)], (iii) all Equipment located thereon or used in
connection therewith, (iv) all Contractual Rights, and (iv) all Appurtenant
Rights with respect to the Land (the Land, Improvements, Equipment, Contractual
Rights and Appurtenant Rights are collectively referred to herein as the
"Leased Property"). The Owner and Lessee hereby agree that the Leased Property
shall constitute on the Property Closing Date a "Leased Property" under the
Master Lease.
Section 4. Basic Lease Term.
The Basic Lease Term applicable to the Leased Property under this
Lease Supplement shall commence on the date of this Lease Supplement (the
"Basic Lease Term Commencement Date") and, unless the Lease is sooner
terminated pursuant to the provisions thereof, shall end on August 1, 2009 (the
"Lease Term Expiration Date").
Section 5. Type of Lease.
The Leased Property covered by this Lease Supplement is a [CAPITAL
LEASE PROPERTY] [OPERATING LEASE PROPERTY] as defined in the Master Lease.
Section 6. Base Rental.
The Base Rental applicable to the Leased Property shall be determined
pursuant to Section 5(a) of the Master Lease.
Section 7. Lease Balance.
The Lease Balance applicable to the Leased Property as of any Rent
Payment Date shall be determined in accordance with the Master Lease.
Section 8. [For Operating Lease Property: Maximum Lessee Risk
Percentage.
The Maximum Lessee Risk Amount applicable to the Leased Property shall
be equal to the product of the Maximum Lessee Risk Percentage (expressed as a
decimal) set forth in Exhibit E to the Master Lease, multiplied by the sum of
(i) the Lease Balance plus (ii) the applicable Property Termination Premium.]
-55-
<PAGE> 56
[For Capital Lease Property: [Intentionally Reserved]]
Section 9. Other Terms and Conditions.
Simultaneous with the execution of this Lease Supplement, the Owner
and the Lessee shall execute a Memorandum of Lease in the form attached hereto
as Exhibit B (the "Memorandum of Lease"), or in such other form as may be
reasonably acceptable to the Owner, suitable for recording in the relevant real
estate records of the jurisdiction in which the Leased Property is located, and
upon execution thereof, the terms and conditions of the Memorandum of Lease
shall be deemed to be incorporated into and an integral part of this Lease
Supplement.
Section 10. Miscellaneous.
(a) On and after the date hereof, each reference to the "Master
Lease," "Lease," "hereunder," "hereof," "herein" or words of like import shall
mean and be a reference to the Master Lease as supplemented hereby.
(b) The execution, delivery and effectiveness of this Lease Supplement
shall not, except as expressly provided herein, operate as a waiver of any
right, power or remedy of any party hereto, nor constitute a waiver of, or
consent to and departure from, any provision of the Master Lease, any other
Transaction Document or any other documents, instruments and agreements
executed in connection therewith.
(c) This Lease Supplement shall be governed by and construed in
accordance with the laws of the State of Illinois, including all matters of
construction, validity, effect and performance.
(d) Section and Article headings in this Lease Supplement are included
herein for convenience of reference only and shall not constitute a part of
this Lease Supplement for any other purpose.
(e) This Lease Supplement may be executed by one or more parties to
this Lease Supplement on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument. Delivery by any party of telecopied copies of executed counterparts
hereof shall constitute execution and delivery hereof by such party.
(f) The single executed original of this Lease Supplement marked "this
Counterpart is the Original Executed Counterpart" on the signature page thereof
and containing the signature of the Trustee on the signature page thereof shall
be the original executed counterpart of this Supplement (the "Original Executed
Counterpart"). Upon execution hereof, such Original Executed Counterpart has
been delivered to Trustee for the benefit of the Beneficiaries. To the extent
that this Lease Supplement constitutes chattel paper, as such term is defined
in the Uniform Commercial Code as in effect in any applicable jurisdiction, no
security interest in this Lease Supplement may be created through the transfer
or possession of any counterpart other than the Original Executed Counterpart.
-56-
<PAGE> 57
Section 11. Successors and Assigns.
The terms and conditions of this Lease Supplement shall be binding
upon and inure to the benefit of each of the parties hereto and to their
respective successors and assigns.
[SIGNATURES ON NEXT PAGE]
-57-
<PAGE> 58
In Witness Whereof, the parties hereto have caused this Lease
Supplement be duly executed by their duly authorized representatives effective
as of the date first written above.
Pita General Corporation, as lessor
(Owner)
By
Name: ______________________________________
Title: _____________________________________
AHC Tenant, Inc., as lessee
(Lessee)
By
Name: ______________________________________
Title: _____________________________________
-58-
<PAGE> 59
[THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART].
The First National Bank of Chicago, as Trustee
By
Name: ________________________________________
Title: _______________________________________
-59-
<PAGE> 60
LEGAL DESCRIPTION
Exhibit A
(to Lease Supplement)
<PAGE> 61
FORM OF MEMORANDUM OF LEASE
Exhibit A
(to Lease Supplement)
<PAGE> 62
EXHIBIT B
ASSIGNED VALUES
<TABLE>
<CAPTION>
Closing Date Leased Properties:
Leased Property Stabilized Value
<S> <C>
Mesa, Arizona $ 6,000,000
Sun City West, Arizona 6,800,000
Brea, California 7,700,000
Whittier, California 6,100,000
Colorado Springs, Colorado 7,300,000
Overland Park, Kansas 7,100,000
Charlotte, North Carolina 6,300,000
Emerson, New Jersey 19,200,000
Tucson, Arizona 10,900,000
Wayne, New Jersey 15,000,000
West Orange, New Jersey 17,000,000
Reno, Nevada 6,300,000
Peoria, Arizona 5,800,000
Citrus Heights, California 7,300,000
West Lake, Ohio 6,300,000
Roanoke, Virginia 6,800,000
Boynton Village, Florida 7,900,000
Dunedin, Florida 8,000,000
Decatur, Georgia 6,800,000
Cobb County, Georgia 4,100,000
Additional Properties Closing Date Leased Properties:
Leased Property Stabilized Value
Laguna Palm Terrace, California $ 18,900,000
Denver, Colorado 7,900,000
Boynton Beach, Florida 9,700,000
Sarasota, Florida 9,500,000
Lynwood, Washington 8,200,000
Palmer Ranch ALF, Florida 20,700,000
Fulton County SH, Georgia 7,200,000
Fulton County AC, Georgia 5,100,000
</TABLE>
Exhibit A
(to Lease Supplement)
<PAGE> 63
EXHIBIT C
GROUND LEASE PROPERTIES
The Leased Properties located in:
Tucson, Arizona
Sarasota, Florida
Wayne, New Jersey
West Orange, New Jersey
Reno, Nevada
Lynnwood, Washington
Exhibit A
(to Lease Supplement)
<PAGE> 64
EXHIBIT D
CONTINGENT SURETY RENTAL
Contingent Surety Rental: For each Lease Year after the first Lease
Year, fifty percent (50%) of the cumulative Gross Revenue Increase throughout
the Base Lease Term. In no case shall the Contingent Surety Rental be a
negative amount. During the first Lease Year, the Contingent Surety Rental
shall be zero ($0).
Gross Revenue Increase: Throughout the Base Lease Term, the cumulative
increase, if any, in aggregate Gross Revenues of the Leased Properties over
Initial Lease Month Aggregate Gross Revenues. Initial Lease Month Aggregate
Gross Revenues shall be determined by annualizing the Gross Revenues of the
facilities during their first full calendar month of operations during Lease
Year one. "Lease Year" means the period from the August 1, 1999 through and
including July 31 of the immediately succeeding year, and then each successive
period from August 1 to the including July 31 of successive years during the
Base Lease Term.
Gross Revenue: Shall mean, for any period, all income received by the
Lessee or any Joint Venture (or the Manager on their behalf), without
duplication, from any person or entity, including, without limitation, all rent
or income from any Residency Agreement, which, in accordance with GAAP, is
included in the Lessee's or such Joint Venture's financial statements as
revenue determined on an accrual basis for the applicable period based upon the
most recently available financial statements or reports required pursuant to
the Loan Agreement and Reimbursement Agreement, modified, if necessary, to
include, without duplication, all such income arising from any of the
following:
(a) condemnation proceeds under a temporary taking to the
extent that such proceeds are compensation for lost rent; and
(b) business interruption insurance proceeds.
Notwithstanding the foregoing, Gross Revenues shall not include (i) any
condemnation or insurance proceeds (other than the types described in clauses
(a) and (b) above), (ii) any proceeds resulting from the sale, exchange,
transfer, financing or refinancing of all or any part of any Property or (iii)
any funds released from the Capital Improvements Account.
Exhibit A
(to Lease Supplement)
<PAGE> 65
EXHIBIT E
PERCENTAGE FOR DETERMINING
MAXIMUM LESSEE RISK AMOUNT
(APPLICABLE ONLY FOR OPERATING LEASE PROPERTIES)
73.9040% (Based on the aggregate Lease Balances for the Operating
Lease Properties as of the Lease Term Expiration Date plus the Property
Termination Premiums for the Operating Lease Properties).
[The percentage set forth above shall be recalculated on the
Additional Properties Closing Date to give effect to the transactions occurring
on the Additional Properties Closing Date.]
Exhibit A
(to Lease Supplement)
<PAGE> 1
EXHIBIT 2.6
------------------------------------
LOAN AGREEMENT
Dated as of July 16, 1999
------------------------------------
By and Among
PITA GENERAL CORPORATION,
Borrower
AHC TENANT, INC.,
Lessee
and
GREENWICH CAPITAL FINANCIAL PRODUCTS, INC.,
Noteholder
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
LIST OF SCHEDULES................................................................................................iv
ARTICLE I DEFINITIONS, ACCOUNTING PRINCIPLES, UCC TERMS...........................................................1
ARTICLE II TERMS OF THE LOAN.....................................................................................18
2.1 THE LOAN; ADVANCES.....................................................................................18
2.2 SECURITY FOR THE LOAN..................................................................................18
2.3 USE OF PROCEEDS........................................................................................18
2.4 SURETY BOND............................................................................................18
2.5 TRUST AGREEMENT........................................................................................18
2.6 PREPAYMENT.............................................................................................19
2.7 INTENTIONALLY DELETED..................................................................................19
2.8 INTENTIONALLY DELETED..................................................................................19
2.9 CONDITIONS TO CLOSING..................................................................................19
2.10 CONDITIONS TO ADDITIONAL PROPERTIES CLOSING............................................................25
ARTICLE III REPRESENTATIONS AND WARRANTIES OF BORROWER PARTIES...................................................28
3.1 ORGANIZATION, POWERS, CAPITALIZATION, GOOD STANDING, BUSINESS..........................................28
3.2 AUTHORIZATION OF BORROWING, ETC........................................................................29
3.3 PENDING MATTERS........................................................................................30
3.4 INDEBTEDNESS AND CONTINGENT OBLIGATIONS................................................................30
3.5 INVESTMENT COMPANY ACT; PUHCA..........................................................................30
3.6 FOREIGN PERSON.........................................................................................30
3.7 BANKRUPTCY.............................................................................................30
3.8 SOLVENCY...............................................................................................31
3.9 PENDING MATTERS........................................................................................31
3.10 FINANCIAL STATEMENTS ACCURATE..........................................................................31
3.11 COMPLIANCE WITH LAWS...................................................................................32
3.12 MAINTAIN BED CAPACITY..................................................................................33
3.13 PAYMENT OF TAXES AND PROPERTY IMPOSITIONS..............................................................33
3.14 TITLE TO COLLATERAL....................................................................................34
3.15 PRIORITY OF MORTGAGES..................................................................................34
3.16 ZONING, OTHER LAWS.....................................................................................34
3.17 CONDITION OF IMPROVEMENTS AND PROPERTIES...............................................................35
3.18 DISCLOSURE.............................................................................................36
3.19 LEGAL NAMES............................................................................................36
3.20 EMPLOYEE BENEFIT PLANS.................................................................................36
3.21 INTELLECTUAL PROPERTY..................................................................................37
3.22 PROCEEDINGS PENDING....................................................................................37
3.23 COMPLIANCE WITH APPLICABLE LAWS........................................................................37
3.24 MANAGEMENT AGREEMENTS..................................................................................37
3.25 1934 ACT...............................................................................................37
3.26 USE OF PROCEEDS AND MARGIN SECURITY....................................................................38
3.27 NO PLAN ASSETS.........................................................................................38
3.28 GOVERNMENTAL PLAN......................................................................................38
3.29 YEAR 2000..............................................................................................38
3.30 LEGAL OPINIONS.........................................................................................39
3.31 LEASES; AGREEMENTS.....................................................................................39
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE IV AFFIRMATIVE COVENANTS OF BORROWER PARTIES.............................................................40
4.1 PAYMENT OF LOAN/PERFORMANCE OF LOAN OBLIGATIONS........................................................40
4.2 MAINTENANCE OF EXISTENCE...............................................................................40
4.3 ACCRUAL AND PAYMENT OF TAXES...........................................................................40
4.4 INSURANCE; CASUALTY AND CONDEMNATION...................................................................40
4.5 FINANCIAL AND OTHER INFORMATION........................................................................47
4.6 GAAP...................................................................................................50
4.7 ACCOUNTANTS' REPORTS...................................................................................50
4.8 BOOKS AND RECORDS......................................................................................50
4.9 PAYMENT OF INDEBTEDNESS................................................................................51
4.10 BUDGET APPROVAL PROCESS................................................................................51
4.11 ANNUAL OWNERSHIP REPORT................................................................................52
4.12 MATERIAL ADVERSE CHANGE; MATERIAL ADVERSE EFFECT.......................................................52
4.13 EVENTS OF DEFAULT, ETC.................................................................................52
4.14 LITIGATION.............................................................................................53
4.15 INSURANCE..............................................................................................53
4.16 CONDUCT OF BUSINESS....................................................................................53
4.17 PERIODIC SURVEYS.......................................................................................54
4.18 MANAGEMENT AGREEMENT...................................................................................54
4.19 UPDATED APPRAISALS.....................................................................................54
4.20 COMPLY WITH COVENANTS, LAWS AND CONTRACTUAL OBLIGATIONS................................................55
4.21 TAXES AND OTHER CHARGES................................................................................55
4.22 COST REPORTS...........................................................................................55
4.23 VENDOR AGREEMENTS......................................................................................55
4.24 CERTIFICATE............................................................................................55
4.25 TRANSACTION DOCUMENTS..................................................................................56
4.26 NOTICE OF FEES OR PENALTIES............................................................................56
4.27 MAINTENANCE OF ASSUMPTIONS IN LEGAL OPINIONS...........................................................56
4.28 NOTEHOLDER'S EXPENSES..................................................................................56
4.29 MATERIAL AGREEMENTS....................................................................................56
4.30 INSPECTION.............................................................................................57
4.31 ERISA..................................................................................................57
4.32 ASSISTED LIVING FACILITY CONSULTANT....................................................................57
4.33 PLACE OF BUSINESS......................................................................................58
ARTICLE V NEGATIVE COVENANTS OF BORROWER PARTIES.................................................................58
5.1 ASSIGNMENT OF LICENSES AND PERMITS.....................................................................58
5.2 NO LIENS; EXCEPTIONS...................................................................................58
5.3 DISPOSITION OF ASSETS..................................................................................59
5.4 CHANGE OF BUSINESS.....................................................................................59
5.5 CHANGES IN ACCOUNTING..................................................................................59
5.6 INTENTIONALLY OMITTED..................................................................................60
5.7 TRANSFER OF OWNERSHIP INTERESTS........................................................................60
5.8 RESTRICTION ON FUNDAMENTAL CHANGES.....................................................................60
5.9 TRANSACTIONS WITH AFFILIATES...........................................................................60
5.10 CHANGE OF USE..........................................................................................61
5.11 INTENTIONALLY DELETED..................................................................................61
5.12 DIVIDENDS, DISTRIBUTIONS AND REDEMPTIONS...............................................................61
5.13 INDEBTEDNESS...........................................................................................61
5.14 BANKRUPTCY, RECEIVERS, SIMILAR MATTERS.................................................................61
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C> <C>
5.15 NO NEGATIVE PLEDGES....................................................................................62
5.16 CHANGES RELATING TO INDEBTEDNESS.......................................................................62
5.17 CONTINGENT OBLIGATIONS.................................................................................62
5.18 ERISA..................................................................................................62
5.19 SINGLE PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS COVENANTS AND WARRANTIES.............................63
5.20 ADDITIONAL SINGLE PURPOSE, BANKRUPTCY REMOTE COVENANTS.................................................66
5.21 APPLICATION OF CERTAIN COVENANTS TO SUBLESSEES.........................................................66
5.22 MANAGEMENT.............................................................................................66
ARTICLE VI ENVIRONMENTAL HAZARDS.................................................................................67
6.1 PROHIBITED ACTIVITIES AND CONDITIONS...................................................................67
6.2 EXCLUSIONS.............................................................................................67
6.3 PREVENTIVE ACTION......................................................................................68
6.4 O & M PROGRAM COMPLIANCE...............................................................................68
6.5 LESSEE'S ENVIRONMENTAL REPRESENTATIONS AND WARRANTIES..................................................68
6.6 NOTICE OF CERTAIN EVENTS...............................................................................70
6.7 COSTS OF INSPECTION....................................................................................70
6.8 REMEDIAL WORK..........................................................................................71
6.9 COOPERATION WITH GOVERNMENTAL AUTHORITIES..............................................................71
ARTICLE VII EVENTS OF DEFAULT AND REMEDIES.......................................................................71
7.1 EVENTS OF DEFAULT......................................................................................71
7.2 REMEDIES...............................................................................................75
ARTICLE VIII RESTRICTIONS ON TRANSFER............................................................................76
8.1 RESTRICTIONS ON TRANSFER AND ENCUMBRANCES..............................................................76
8.2 ASSUMABILITY...........................................................................................76
ARTICLE IX MISCELLANEOUS.........................................................................................78
9.1 WAIVER.................................................................................................78
9.2 COSTS AND EXPENSES.....................................................................................79
9.3 PERFORMANCE OF NOTEHOLDER..............................................................................80
9.4 INDEMNIFICATION........................................................................................80
9.5 EVIDENCE OF COMPLIANCE.................................................................................86
9.6 HEADINGS...............................................................................................86
9.7 U.S. CURRENCY..........................................................................................86
9.8 SURVIVAL OF COVENANTS..................................................................................86
9.9 NOTICES, ETC...........................................................................................86
9.10 BENEFITS...............................................................................................89
9.11 SECONDARY MARKET TRANSACTIONS GENERALLY................................................................89
9.12 COOPERATION; LIMITATIONS...............................................................................89
9.13 INFORMATION............................................................................................91
9.14 ADDITIONAL PROVISIONS..................................................................................91
9.15 SUPERSEDES PRIOR AGREEMENTS: COUNTERPARTS..............................................................92
9.16 INCONSISTENCIES........................................................................................92
9.17 CONTROLLING LAW........................................................................................92
9.18 WAIVER OF JURY TRIAL...................................................................................92
9.19 SUBROGATION............................................................................................93
9.20 COMPLIANCE WITH LAWS...................................................................................93
9.21 INTERPRETATION.........................................................................................94
9.22 NON-EXCLUSIVITY OF REMEDIES............................................................................94
</TABLE>
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<PAGE> 5
<TABLE>
<S> <C> <C>
9.23 SERVICER; TRUSTEE......................................................................................95
9.24 OBLIGATIONS OF THE BORROWER PARTIES....................................................................95
9.25 LIMITATION OF LIABILITY................................................................................95
9.26 NO DUTY................................................................................................95
9.27 WAIVERS OF DEFENSES OF GUARANTORS AND SURETIES.........................................................96
9.28 MARSHALING; PAYMENTS SET ASIDE.........................................................................98
9.29 NO FIDUCIARY RELATIONSHIP..............................................................................98
9.30 FURTHER ASSURANCES.....................................................................................98
9.31 SPECIAL CIRCUMSTANCES FURTHER ASSURANCES...............................................................99
9.32 NON-RECOURSE LOAN......................................................................................99
</TABLE>
Exhibit A - Master Glossary of Definitions
Exhibit B-1 - List of Initial Properties
Exhibit B-2 - List of Additional Properties
Exhibit C - Disbursement Schedule
Exhibit D - Ground Leases
Exhibit E - Subleases; Sublessees
Exhibit F - Form of Agreed Upon Procedures
LIST OF SCHEDULES
Schedule 2.9(p) - Appraised Value of Individual Properties
Schedule 3.1(c) - Jurisdictions in Which Borrower Parties Qualified
Schedule 3.1(e) - Addresses of Borrower Parties; Offices, Places of Business,
Location of Properties
Schedule 3.2(b) - Required Consents - Contractual Obligations of Borrower
Parties
Schedule 3.9 - Pending Matters Against Lessee or the Properties
Schedule 3.11-1 - Available Beds/Licensed Beds
Schedule 3.11-2 - List of Permits
Schedule 3.19 - Legal Names
Schedule 3.20(a) - Schedule of Plans
Schedule 3.20(b)-1- Non-Exempt Prohibited Transactions
Schedule 3.20(b)-2 - Obligations Arising from Loan
Schedule 3.21 - Intellectual Property
Schedule 3.31(d) - Rent Rolls
Schedule 4.10 - Financial Projections
Schedule 4.29 - Material Agreements
Schedule 6.5 - Environmental Reports
Schedule 6.5(c) - UST's
-5-
<PAGE> 6
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "AGREEMENT") is made effective as of the 16th
day of July 1999, by and between PITA GENERAL CORPORATION, an Illinois
corporation ("BORROWER"), AHC TENANT, INC., a Delaware corporation ("Lessee")
and GREENWICH CAPITAL FINANCIAL PRODUCTS, INC., a Delaware corporation having an
address at 600 Steamboat Road, Greenwich, Connecticut 06830 (together with its
successors and assigns, "NOTEHOLDER"). Borrower and Lessee are collectively
referred to herein as "BORROWER PARTIES" and individually as a "BORROWER PARTY".
RECITALS:
Borrower has requested that Noteholder make a loan to Borrower in the
principal sum of up to the lesser of (i) TWO HUNDRED ONE MILLION AND NO/100
DOLLARS ($201,000,000) and (ii) the Maximum Loan Amount (hereinafter defined)
(said principal amount so borrowed and Borrower's obligation to repay the same
together with all interest and other amounts required under the Note
(hereinafter defined) may be referred to as the "LOAN") which Loan is to be
secured by, among other items, the Collateral (hereinafter defined) in which
Borrower has granted (or hereafter shall grant) any Lien pursuant to the Loan
Documents including the Property (hereinafter defined). Noteholder 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 Terms contained in this Agreement shall, unless otherwise defined
below or elsewhere herein or unless the context otherwise indicates, have the
meanings assigned to them in the Master Glossary of Definitions attached hereto
as EXHIBIT "A". To the extent of any inconsistencies between the defined terms
set forth herein and the Master Glossary of Definitions, this Agreement shall
control. Terms which are not defined herein or in the Master Glossary of
Definitions shall have the meanings, if any, assigned to them by the Uniform
Commercial Code in effect in the State of Illinois. As used in this Agreement,
the following terms shall have the following meanings unless the context hereof
shall otherwise indicate:
"ACCOUNTS" means any right of Borrower, Lessee, Sublessees or Manager
to payment of goods sold or leased or for services rendered at or with respect
to the Properties or the Assisted Living Facilities, including, without
limitation, (i) all accounts arising from the operation of the Assisted Living
Facilities and (ii) all rights 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 Assisted Living Facilities, including rights to payment
pursuant to the Reimbursement Contracts. Accounts shall include the proceeds
thereof (whether cash or noncash, moveable or immoveable, tangible or
<PAGE> 7
intangible) received from the sale, exchange, transfer, collection or other
disposition or substitution thereof. Accounts includes Instruments which are
proceeds of Accounts.
"ACCREDITATION" means certification by a generally recognized
independent agency or other organization that a facility fully complies with the
standards set by such agency or organization for operation of such a facility.
"ADDITIONAL ADVANCE" is defined in Section 2.1(b) hereof.
"ADDITIONAL PROPERTIES" means, collectively, the properties listed on
EXHIBIT "B-2" hereto which Borrower intends to acquire on the Additional
Properties Closing Date; and which Exhibit B-2 shall be amended on the
Additional Properties Closing Date to reflect the Additional Properties actually
acquired by Borrower on the Additional Properties Closing Date.
"ADDITIONAL PROPERTIES CLOSING DATE" means the date upon which Borrower
shall acquire one or more Additional Properties in accordance with the terms and
conditions hereof; but in no event later than the Additional Properties Outside
Date.
"ADDITIONAL PROPERTIES OUTSIDE DATE" means the date which is sixty (60)
days after the Initial Closing Date.
"ADVANCE(S)" is defined in Section 2.1(b).
"AFFILIATE" shall mean, 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, any of the Stock of
such Person (excluding stockholders of Alterra), and (iii) each of such Person's
officers, directors, members, joint venturers and partners. For purposes of this
definition, "CONTROL" (including with correlative meanings, the terms
"CONTROLLING", " CONTROLLED BY" and "UNDER COMMON CONTROL WITH") means the
possession directly or indirectly of the power to direct or cause the direction
of the management and policies of a Person, whether through the ownership of
voting securities, by contract or otherwise.
"ALLOWED INDEBTEDNESS" means (i) the Loan, (ii) trade payables incurred
in the normal course of business; provided that such trade payable is payable
not more than (90) days after the original invoice date and is not overdue by
more than thirty (30) days, and (iii) and Equipment Leases entered into by
Lessee or any Sublessee (or Manager on their behalf); provided that the
Indebtedness outstanding under such Equipment Leases relating to (A) any
Assisted Living Facility having 60 beds or less shall not, at any time, exceed
$100,000, in the aggregate for such Assisted Living Facility, and (B) any
Assisted Living Facility having more than 60 beds shall not, at any time, exceed
$250,000, in the aggregate for such Assisted Living Facility.
"ALTERATIONS" is defined in Section 5.10 hereof.
"ALTERRA" means Alterra Healthcare Corporation, a Delaware corporation.
-7-
<PAGE> 8
"APPRAISAL" is defined in Section 2.9(p).
"APPROVED ACCOUNTANTS" is defined in Section 4.5(a).
"ASSIGNMENTS" mean, collectively, the Assignments of Leases, the
Assignments of Management Agreements and the Assignments of Memoranda of Lease.
"ASSIGNMENTS OF LEASES" mean, collectively, (i) those certain Absolute
Assignments of Leases and Rents, dated of even date herewith, executed by
Borrower and Lessee to Trustee, for the benefit of the Beneficiaries assigning
all of Borrower's and Lessee's respective right, title and interest in and to
the Master Lease, the Subleases and other Leases, (ii) those certain Joint
Assignments of Leases and Rents, dated of even date herewith, executed by
Manager, Lessee and the Sublessees to Trustee, for the benefit of the
Beneficiaries, assigning all of their respective right, title and interest in
and to the Residency Agreements and the Sublessees' right title and interest in
and to the Licensing Subleases and (iii) any other Assignments of Leases and
Rents or other similar agreements hereafter executed by Borrower, Lessee, any
Sublessee and/or Manager in favor of Trustee with respect to the Additional
Properties.
"ASSIGNMENTS OF MANAGEMENT AGREEMENTS" means, collectively, (i) that
certain Collateral Assignment of Management Agreement, dated of even date
herewith, executed by Lessee to Trustee, for the benefit of the Beneficiaries,
(ii) that certain Collateral Assignment of Management Agreement, dated of even
date herewith executed by the Sublessees to Trustee for the benefit of the
Beneficiaries, and (iii) any Collateral Assignments of Management Agreement,
hereafter executed by Lessee or any Sublessee with respect to the Additional
Properties.
"ASSIGNMENTS OF MEMORANDA OF LEASE" means, collectively, those certain
Collateral Assignments of Memorandum of Lease from Borrower to Trustee for the
benefit of the Beneficiaries.
"ASSISTED LIVING CONSULTANT" is defined in Section 4.32 hereof.
"ASSISTED LIVING FACILITIES" means the assisted living facilities
located on the Properties, as they may now or hereafter exist, together with any
other general or specialized care facilities, if any (including any Alzheimer's
or dementia care unit, skilled nursing facility, sub acute facility, or any
facility providing senior care, residential care, assisted care or adult day
care and services incidental thereto), now or hereafter located on the
Properties.
"ASSUMPTION FEE" is defined in Section 8.2 (c)(i) hereof.
"ASSUMPTION FEE PERCENTAGE" is defined in Section 8.2(c)(i) hereof.
"AVAILABLE BED CAPITAL IMPROVEMENT AMOUNT" is defined in Section 4.25
hereof.
"AVAILABLE BEDS" means the beds at each of the Assisted Living
Facilities, as shown on
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SCHEDULE 3.11-1 hereto as of the Closing Date, as same may be revised following
Borrower's acquisition of any Additional Properties on the Additional Properties
Closing Date and as hereafter adjusted pursuant to the terms of the Transaction
Documents.
"BENEFICIARY" means any Person for whose benefit the Trustee is holding
a Lien under the Transaction Documents pursuant to the Trust Agreement.
"BENEFIT PLAN" means a pension plan as defined in Section 3(2) of ERISA
(other than a Multiemployer Plan) (i) in respect of which Lessee or any ERISA
Affiliate is, or within the immediately preceding six years was, an "employer"
as defined in Section 3(5) of ERISA, and (ii) that is subject to (A) the funding
requirements of Section 302 of ERISA or Section 412 of the Code or (B) Title IV
of ERISA.
"BORROWER PARTY SECRETARY" is defined in Section 2.9(g) hereof.
"BUDGET" is defined in Section 4.10 hereof.
"BUSINESS DAY" means a day, other than Saturday or Sunday or another
day on which commercial banks in New York City are authorized or required by law
to be closed.
"CASUALTY AMOUNT" is defined in Section 4.4(b) hereof.
"CERCIS" is defined in Section 6.5(h) hereof
"CHARTER DOCUMENTS" are defined in Section 3.1(a) hereof.
"CLAIM" is defined in Section 9.4(c) hereof
"CLOSING DATE" means the initial date on which all or any part of the
Loan is disbursed by the Noteholder to or for the benefit of Borrower.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, and the regulations promulgated and rulings issued thereunder.
"COLLATERAL" means, collectively, all of Borrower's, Lessee's,
Sublessees' and Manager's ( in its capacity as Manager or otherwise with respect
to the Properties) respective right, title and interest in and to the
Properties, Improvements, Equipment, Rents, Accounts, Deposit Accounts, General
Intangibles, Instruments, Inventory, Money, Permits (to the full extent
assignable), Reimbursement Contracts, Stock (in and to Borrower, Lessee and/or
the Sublessees), Defeasance Collateral (as defined in the Note) and all Proceeds
of the foregoing, all whether now owned or hereafter acquired, and including
replacements, additions, accessions, substitutions, and products thereof and
thereto, and all other rights, interest and property of every kind, real and
personal which is or hereafter may become subject to a Lien in favor of
Noteholder or the Trustee as security for any of the Loan Obligations, but
excluding the Excluded Collateral and the Excepted Rights.
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"CON" means a certificate of need or similar permit or approval from a
Governmental Authority related to the construction, alteration or modification
of services provided at an Assisted Living Facility.
"CONDEMNATION" is defined in Section 4.4(d).
"CONTINGENT OBLIGATION", as applied to any Person, means any direct or
indirect liability, contingent or otherwise, of that Person: (A) with respect to
any indebtedness, lease, dividend or other obligation of another if the primary
purpose or intent of the Person incurring such liability, or the primary effect
thereof, is to provide assurance to the obligee of such liability that such
liability will be paid or discharged, or that any agreements relating thereto
will be complied with, or that the holders of such liability will be protected
(in whole or in part) against loss with respect thereto; (B) with respect to any
letter of credit issued for the account of that Person or as to which that
Person is otherwise liable for reimbursement of drawings; (C) under any interest
rate swap agreement, interest rate cap agreement, interest rate collar agreement
or other similar agreement or arrangement designed to protect against
fluctuations in interest rates; or (D) under any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect that Person against fluctuations in currency values. Contingent
Obligations shall include (i) the direct or indirect guaranty, endorsement
(other than for collection or deposit in the ordinary course of business),
co-making, discounting with recourse or sale with recourse by such Person of the
obligation of another, (ii) the obligation to make take-or-pay or similar
payments if required regardless of nonperformance by any other party or parties
to an agreement, and (iii) any liability of such Person for the obligations of
another through any agreement to purchase, repurchase or otherwise acquire such
obligation or any property constituting security therefor, to provide funds for
the payment or discharge of such obligation or to maintain the solvency,
financial condition or any balance sheet item or level of income of another. The
amount of any Contingent Obligation shall be equal to the amount of the
obligation so guaranteed or otherwise supported or, if not a fixed and
determined amount, the maximum amount so guaranteed or otherwise supported.
"CONTRACTUAL OBLIGATION", as applied to any Person, means any
indenture, mortgage, deed of trust, contract, undertaking, agreement or other
instrument to which that Person is a party or by which it or any of its
properties is bound or to which it or any of its properties is subject,
including, without limitation, the Transaction Documents.
"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.
"ENDORSEMENT" is defined in Section 8.2(c)(iv) hereof.
"ENVIRONMENTAL LAW" means any present and future federal, state, or any
of local statute, law, rule, ordinance, regulation, common law, code, provision
of a lease of any of the Properties, order or decree regulating, relating to,
imposing liability or standards of conduct concerning, or otherwise pertaining
to or addressing the protection of the environment,
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<PAGE> 11
Hazardous Materials, community or worker health and safety, any chemical
substance or mixture or any other hazardous, toxic, special or dangerous waste,
substance or constituent, whether solid, liquid or gas. Environmental Law
includes, but is not limited to, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), the Resource
Conservation and Recovery Act of 1976, as amended, the Toxic Substances Control
Act, as amended, the Occupational Safety and Health Act, as amended, and any
analogous state Environmental Law.
"ENVIRONMENTAL PERMIT" means any Permit (as defined hereinafter) issued
under any Environmental Law or pertaining to or related to protection of the
environment, worker or community health and safety or to Hazardous Materials
with respect to any activities or businesses conducted on or in relation to any
of the Properties and/or the Improvements.
"ENVIRONMENTAL REPORTS" means, collectively, the environmental reports
listed on SCHEDULE 6.5 attached hereto.
"EQUIPMENT" means all beds, linen, televisions, carpeting, telephones,
cash registers, computers, lamps, glassware, rehabilitation equipment and
medical equipment, restaurant and kitchen equipment, photocopy machines and
other office equipment, automobiles, vans and other motor vehicles and other
furniture, fixtures and equipment, whether now owned or hereafter acquired, and
all renewals and replacements thereof and substitutions therefor, and located on
or in the Assisted Living Facilities or Improvements or used or useful in
connection with the operation thereof; but the term "Equipment" shall exclude
any personal property or equipment relating to the Initial Properties acquired
by the Sublessees after the Closing Date (or in the case of personal property or
equipment relating to the Additional Properties, acquired after the Additional
Property Closing Date) using funds other than the proceeds of the Loan; and
provided that with respect to any items which are leased pursuant to an
assignable lease and not owned, the Equipment shall include the leasehold
interest only together with any options to purchase any of said items and any
additional or greater rights with respect to such items which may hereafter be
acquired, but the foregoing shall not be construed to mean that such leasing
shall be permitted hereunder and under the other Loan Documents.
"EQUIPMENT LEASE" means any lease of Equipment or purchase money
financing incurred with respect to the purchase of Equipment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder.
"ERISA AFFILIATE" means any (i) corporation which is a member of the
same controlled group of corporations (within the meaning of Section 414(b) of
the Code) as Lessee, (ii) partnership or other trade or business (whether or not
incorporated) under common control (within the meaning of Section 414(c) of the
Code) with Lessee, (iii) member of the same affiliated service group (within the
meaning of Section 414(m) of the Code) as Lessee or any corporation described in
clause (i) above or any partnership or trade or business described in clause
(ii) above or (iv) other Person which is required to be aggregated with Lessee
pursuant to Regulations promulgated under Section 414(o) of the Code.
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"EVENT OF DEFAULT" means any "Event of Default" as defined in Article
VII.
"EXCEPTED RIGHTS" means the right of Borrower or SELCO to receive and
to demand, collect, sue for or otherwise obtain indemnity payments, expenses and
fees (including interest which may from time to time accrue thereon) under the
Master Lease or any other Transaction Document and the proceeds of any liability
insurance payable to Borrower or SELCO under insurance policies of Lessee or any
Sublessee pursuant to which Borrower or SELCO is entitled to be named as insured
or additional insured and any rights of Borrower relating to the Excluded
Collateral.
"EXCLUDED COLLATERAL" means all right, title and interest of Borrower
(if any) and SELCO in and to that certain $9,975,000 letter of credit issued by
Firstar Bank Milwaukee, N.A., in favor of SELCO, any replacement or substitute
letter of credit or other Acceptable Replacement Collateral or other collateral
therefor, the Excluded Collateral Agreement, all income and proceeds of any of
the foregoing, all rights of Borrower (if any) and /or SELCO with respect
thereto, including without limitation the right to draw thereon and enforce the
obligation of Guarantor with respect thereto, and all Excepted Rights of
Borrower and SELCO.
"EXCLUDED COLLATERAL AGREEMENT" means the Excluded Collateral and
Indemnity Agreement, dated of even date herewith, between Guarantor and SELCO.
"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.
"EXISTING LEASES" is defined in Section 2.9(w).
"FINANCING FEE" means the non-refundable financing fee equal to one
percent (1%) of each Advance of the Loan, which shall be due and payable to
Noteholder in two (2) installments upon the Closing Date and the Additional
Closing Date.
"FLOW OF FUNDS AGREEMENT" means that certain Flow of Funds Agreement,
dated of even date herewith, among Borrower, Lessee, Guarantor, Surety,
Noteholder, Trustee and the Sublessees.
"GAAP" means, generally accepted accounting principles as set forth in
Statement on Auditing Standards No. 69 entitled "The Meaning of Present Fairly
in Conformity with Generally Accepted Accounting Principles in the Independent
Auditor's Report" issued by the Auditing Standards Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board that are applicable to the
circumstances as of the date of determination.
"GCFP" means Greenwich Capital Financial Products, Inc., a Delaware
corporation, and its successors and assigns.
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"GENERAL INTANGIBLES" means all intangible personal property of
Borrower, Lessee and/or Manager (in its capacity as Manager or otherwise with
respect to the Properties) and all renewals and replacements thereof and
substitutions therefor (other than Accounts, Rents, Instruments, Inventory,
Money, Permits, Reimbursement Contracts and the "Alterra Systems" and "Alterra
Marks" licensed pursuant to Section 1.3 of the Management Agreements).
"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 Assisted
Living Facilities, the Properties and/or the Improvements or the use, operation
or improvement thereof.
"GROUND LEASES" means those certain Ground Leases, entered into on or
before the date hereof, among Affiliates of HCR, covering portions of the
Properties located in Tucson, Arizona, Reno, Nevada, Wayne, New Jersey and West
Orange, New Jersey, the lessor's interests under which Ground Leases will be
assigned to Borrower on the Closing Date and which Ground Leases are more
particularly described on EXHIBIT "D" attached hereto; and which Exhibit "D"
shall be amended on the Additional Properties Closing Date to include the
Additional Properties located in Sarasota, Florida and Lynwood, Washington to
the extent acquired on the Additional Properties Closing Date .
"GUARANTOR" means Alterra in its capacity as guarantor under the
Guaranty.
"GUARANTY" means that certain Guaranty of even date herewith executed
by Alterra pursuant to which Alterra has guaranteed all of Lessee's obligations
under the Master Lease and the other Transaction Documents.
"HAZARDOUS MATERIALS" means any pollutant, hazardous substance,
radioactive substance or waste, restricted hazardous waste, hazardous materials,
hazardous air pollutant, flammable materials, explosives, toxic substance, toxic
air contaminant, asbestos or asbestos-containing materials, urea formaldehyde
foam insulation, underground storage tanks, whether empty or containing any
substance, Radon gas, polychlorinated biphenyls and compounds containing them,
hazardous waste, extremely hazardous waste, special waste, lead and lead-based
paint, petroleum or petroleum-derive substances or wastes (including, without
limitation, hydraulic oil, oil, gasoline or diesel fuel) and includes, but is
not limited to, all of the items above as defined in any Environmental Law or
any hazardous or toxic constituent thereof, as well as any other substance which
is required by any Governmental Authority or under any Environmental Law to be
investigated, cleaned up, removed, treated, monitored, controlled or otherwise
abated or the presence of which requires notice or warnings to be given, in all
cases whether now or in the future.
"HCR" means HCR Manor Care, Inc., a Delaware corporation.
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"IMPROVEMENTS" means all buildings, structures and improvements of
every nature whatsoever now or hereafter situated on the Properties, including,
but not limited to, all gas and electric fixtures, radiators, heaters, engines
and machinery, boilers, tanks, 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 as to any Person, 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, (iii)
obligations, whether or not assumed, and whether or not recourse, secured by
Liens or payable out of the proceeds or production from accounts and/or property
now or hereafter owned or acquired, (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, and (v) notes
payable and drafts accepted representing extensions of credit whether or not
representing obligations for borrowed money.
"INDEMNIFIED CLAIMS" is defined in Section 9.4(a) hereof
"INDEMNIFIED PARTIES" is defined in Section 9.4(a) hereof
"INDIVIDUAL PROPERTY" shall mean a portion of the Property on which one
or more Assisted Living Facilities is located which constitutes a single,
separate tax lot and which is a legally subdivided parcel of real property which
may be separated, mortgaged or conveyed.
"INITIAL ADVANCE" is defined in Section 2.1(b) hereof.
"INITIAL PROPERTIES" means, collectively, the parcels of real estate
more particularly listed or described on EXHIBIT "B-1" hereto.
"INSTRUMENTS" means all instruments, chattel paper, documents or other
writings (including, without limitation, all ledger sheets, computer records and
printouts, data bases, programs, books of account and files relating thereto)
relating to the Properties or the Assisted Living Facilities, or the operation
thereof, by Borrower, Lessee, the Sublessees or Manager.
"INVOLUNTARY BORROWER PARTY BANKRUPTCY" is defined in Section 5.14(b)
hereof.
"LEGAL REQUIREMENTS" means any applicable law, statute, treaty,
ordinance, code, governmental rule, regulation or official directive or order of
any Governmental Authority.
"LICENSING SUBLEASES" means those certain Sub-Subleases, dated of even
date herewith, between certain Sublessees and Manager, entered into to comply
with licensing requirements with respect to the Properties located in the States
of Arizona, California, Florida, New Jersey and Virginia and any similar leases,
subleases, sub-subleases, licenses or occupancy agreements entered into for
licensing purposes after the date hereof with respect to the Additional
Properties.
"LIEN" means any voluntary or involuntary mortgage, security deed, deed
of trust, lien,
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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 Transaction Documents.
"LOAN" is defined in the Recitals to this Agreement.
"LOAN DOCUMENTS" means, collectively, this Agreement, the Note and the
Security Documents.
"LOAN OBLIGATIONS" means the aggregate of all principal and interest
(including interest at the Default Rate, as applicable) owing from time to time
under the Note and all expenses, charges and other amounts from time to time
owing to Noteholder under the Note, this Agreement, or any of the other
Transaction Documents and all covenants, agreements and other obligations from
time to time owing to, or for the benefit of, Noteholder pursuant to the
Transaction Documents.
"MANAGEMENT AGREEMENTS" means, collectively, (i) that certain
Management Agreement, dated of even date herewith, between Manager and Lessee,
(ii) those certain Management Agreements, dated of even date herewith, between
Manager and each of the respective Sublessees, with respect to the Initial
Properties, and (iii) any Management Agreements, entered into between Manager or
another manager and any Sublessees relating to the Additional Properties, each
of the foregoing Management Agreements obligating the Manager to operate and
manage the Assisted Living Facilities.
"MANAGER" means Alterra and any successor manager of the Assisted
Living Facilities approved by Noteholder in writing.
"MARGIN STOCK" has the meaning specified in Regulation U.
"MASTER LEASE" means that certain Master Lease Agreement of even date
herewith, between Borrower, as lessor, and Lessee, as lessee, together with all
supplements thereto and all memorandums thereof, and as same may be modified or
amended.
"MATERIAL ADVERSE EFFECT" means (A) a material adverse effect upon the
business, operations, properties, assets or condition (financial or otherwise)
of Borrower or Lessee or (B) the impairment of the ability of Borrower or Lessee
to perform its non-monetary obligations under any Transaction Documents, or (C)
the impairment of the ability of Noteholder to enforce or collect any of the
Loan Obligations. In determining whether any individual event would result in a
Material Adverse Effect, notwithstanding that such event does not of itself have
such effect, a Material Adverse Effect shall be deemed to have occurred if the
cumulative effect of such event and all other then occurring events and existing
conditions would result in a Material Adverse Effect.
"MATERIAL MODIFICATION" is defined in Section 9.12 hereof.
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"MATURITY DATE" means the original maturity date set forth in the Note.
"MAXIMUM LOAN AMOUNT" means, as of the Closing Date or the Additional
Properties Closing Date, as the case may be, an amount equal to the least of the
following: (a) ninety percent (90%) of the projected fair market value, at
stabilization, of the Properties which are then included in the Collateral
(including the Properties to be acquired on such date) as indicated in the
Appraisals for such Properties, (b) ninety-seven percent (97%) of the aggregate
purchase price of all of the Properties then included in the Collateral
(including the Properties to be acquired on such date), together with all
related transaction costs incurred in connection with the acquisition of the
Properties (but excluding any amounts funded into the Operating Reserve Account
as described in Section 2.9(k) and any other Reserves funded in connection with
the consummation of the transactions contemplated hereby), (c) and one hundred
twenty percent (120%) of the real estate value of the Properties (i.e. the value
of the underlying land and Improvements located on each Property, excluding
personal property, working capital and intangibles) and (d) $ 201,000,000.
"MEDICAID" means that certain program of medical assistance, funded
jointly by the federal government and the states, including but not limited to
the Medi-Cal program administered by the State of California ("MEDI-CAL"), for
impoverished individuals who are aged, blind and/or disabled, and for members of
families with dependent children, which program is more fully described in Title
XIX of the Social Security Act (42 U.S.C. 1396 et seq.) and the regulations
promulgated thereunder.
"MEDICAID CERTIFICATION" means, with respect to any Person, health care
facility, or Assisted Living Facility, certification by HCFA or a state agency
or entity under contract with HCFA that such Person, facility or Assisted Living
Facility, as applicable, fully complies with all the conditions of participation
set forth in Medicaid Regulations.
"MEDICAID REGULATIONS" means, collectively, (i) all federal statutes
(whether set forth in Title XIX of the Social Security Act (42 U.S.C. ss.ss.
1396 et seq.) or elsewhere) affecting the medical assistance program established
by Title XIX of the Social Security Act; (ii) all applicable provisions of all
federal rules, regulations, manuals, orders and administrative, reimbursement
and other guidelines of all Governmental Authorities (whether or not having the
force of law) promulgated pursuant to or in connection with the statutes
described in clause (i) above; (iii) all state statutes enacted and all state
plans for medical assistance, including, but not limited to, Medi-Cal, and state
plan amendments filed by the state with HCFA in connection with the statutes and
provisions described in clauses (i) and (ii) above; and (iv) all applicable
provisions of all rules, regulations, manuals, orders and administrative,
reimbursement, and other guidelines of all Governmental Authorities (whether or
not having the force of law) promulgated pursuant to or in connection with any
of the foregoing, in each case as may be amended, supplemented or otherwise
modified from time to time.
"MEDICARE" means that certain federal program providing health
insurance for eligible elderly and other individuals, under which physicians,
hospitals, skilled nursing homes, home
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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.ss. 1395 et
seq.) and the regulations promulgated thereunder.
"MEDICARE CERTIFICATION" means, with respect to any Person, health care
facility, or Assisted Living Facility, certification by HCFA or a state agency
or entity under contract with HCFA that such Person, facility or Assisted Living
Facility, as applicable, complies with the conditions of participation set forth
in Medicare Regulations.
"MEDICARE REGULATIONS" means, collectively, all federal statutes
(whether set forth in Title XVIII of the Social Security Act (42 U.S.C. ss.ss.
1395 et seq.) or elsewhere) affecting the health insurance program for the aged
and disabled established by Title XVIII of the Social Security Act, together
with all applicable provisions of all rules, regulations, manuals, orders and
administrative, reimbursement and other guidelines of all Governmental
Authorities promulgated pursuant to or in connection with any of the foregoing
(whether or not having the force of law), as each may be amended, supplemented
or otherwise modified from time to time.
"MONEY" means all monies, revenues, 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 Assisted Living Facilities.
"MORTGAGES" means, collectively, (i) those certain Mortgages,
Assignments of Rents and Security Agreements, (ii) those certain Deeds of Trust,
Assignments of Rents and Security Agreements, and (iii) those certain Deeds to
Secure Debt, Assignment of Rents and Security Agreements, each of even date
herewith, from Borrower and Lessee in favor of or for the benefit of the Trustee
and encumbering the Initial Properties, or which may hereafter be executed by
Borrower and Lessee in favor of Trustee and encumbering the Additional
Properties, as same may be amended or modified.
"MULTIEMPLOYER PLAN" means a "Multiemployer Plan" as defined in Section
3(37) or Section 4001(a)(3) of ERISA which is, or within the immediately
preceding six (6) years was, contributed to by any Lessee or ERISA Affiliate or
under which any Lessee or ERISA Affiliate has any obligation.
"NOTE" means the Promissory Note of even date herewith in the principal
amount of the Loan and executed by Borrower.
"NPL" is defined in Section 6.5(h) hereof.
"NPR" is defined in Section 4.22 hereof.
"O&M PROGRAM" means a written program of operations and maintenance
relating to any Hazardous Materials in, on or under the Property or
Improvements.
"OFFICER'S CERTIFICATE" means, as to any Person which is not a natural
person, a
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certificate of the duly authorized and elected officer or signatory for such
Person containing such certifications as the context in which this term is used
shall require.
"OUTSIDE DIRECTOR" is defined in Section 5.20(c) hereof.
"PARTICIPATION AGREEMENT" means that certain Participation Agreement,
dated of even date herewith, among Borrower, Lessee, Alterra, Noteholder,
Surety, Trustee and SELCO.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.
"PERSON" means any natural person, firm, corporation, limited liability
company, partnership, trust, joint venture, association or other or other
organizations, whether or not legal entities, and public bodies, governments and
agencies and political subdivisions thereof and their respective permitted
successors and assigns (or in the case of a governmental Person, the successor
functional equivalent of such Person).
"PERMITS" means CONs, Accreditations, Medicaid Certifications, Medicare
Certifications, Regulatory Permits, and all other such federal, state and local
approvals, licenses, filings, permits and certificates required, used or useful
in connection with the ownership, operation, use or occupancy of the Properties
or the Assisted Living Facilities, including, without limitation, certificates
of occupancy, business licenses, state health department licenses, Environmental
Permits, food service licenses, licenses to conduct business and all such other
permits, filings, licenses and rights, obtained from, or sent to any
governmental, quasi-governmental or private person or entity whatsoever.
"PERMITTED LIENS" shall have the meaning ascribed to such term in
Section 5.2 of this Agreement.
"PLAN" means an employee benefit plan as defined in Section 3(3) of
ERISA and subject to ERISA in respect of which any Borrower Party or any ERISA
Affiliate is, or within the immediately preceding six (6) years was, an
"employer" as defined in Section 3(5) of ERISA.
"PLEDGE AGREEMENTS" means collectively, (i) that certain Pledge
Agreement (SELCO), of even date herewith, executed by SELCO to Trustee, for the
benefit of the Beneficiaries, pursuant to which SELCO has pledged its stock
ownership interest in Borrower, (ii) that certain Stock Pledge Agreement (AHC
Tenant Stock), dated of even date herewith, executed by Alterra to Trustee, for
the benefit of the Beneficiaries, pursuant to which Alterra has pledged its
Stock ownership interest in Lessee and (iii) that certain Pledge Agreement,
dated of even date herewith, executed by Alterra to Trustee, for the benefit of
the Beneficiaries, pursuant to which Alterra has pledged its general partners'
interests in the Sublessees.
"PRE-EXISTING CONDITION" is defined in Section 4.4(c)(ii) hereof.
"PROCEEDS" means all proceeds (including proceeds of insurance and
condemnation) from the sale, exchange, transfer, collection, loss, damage,
disposition, substitution or replacement of
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any of the Collateral.
"PROHIBITED ACTIVITIES AND CONDITIONS" and a "PROHIBITED ACTIVITY AND
CONDITION" are defined in Section 6.1 hereof.
"PROPERTIES" means, from the Closing Date until the Additional
Properties Closing Date, the Initial Properties, and upon the closing of the
Additional Advance on the Additional Properties Closing Date, collectively, the
Initial Properties and the Additional Properties.
"RATING AGENCIES" means Standard & Poor's, Moody's Investors Services,
Duff & Phelps Credit Rating Co., Fitch Investors Services L.P., and/or such
other rating agency or agencies selected by the Noteholder in its sole
discretion.
"REGULATION T" means Regulation T of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"REGULATION U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"REGULATION X" means Regulation X of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"REGULATORY PERMITS" is defined in Section 3.11 hereof.
"REIMBURSEMENT CONTRACTS" means all third party reimbursement contracts
for the Assisted Living Facilities which are now or hereafter in effect with
respect to residents or patients qualifying for coverage under the same,
including, but not limited to, Medicare, Medicaid and private insurance
agreements, and any successor program or other similar reimbursement program
and/or private insurance agreements.
"RELEASE" means the release, spill, emission, leaking, pumping,
injection, presence, deposit, disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor environment or into or out of any property,
including the movement of Hazardous Materials through or in the air, soil,
surface water, groundwater or property.
"REMEDIAL WORK" is defined in Section 6.8 hereof.
"RENT ROLLS" means the schedules of residents and rents payable under
the Residency Agreements for each of the respective Properties attached hereto
as Schedule 3.31(d).
"RENTS" means all rent and other payments of whatever nature from time
to time payable to Borrower or Lessee pursuant to the Master Lease, the Ground
Leases, the Subleases, the Licensing Subleases or pursuant to any other leases
or subleases of the Properties or the Assisted Living Facilities, or for retail
space or other space at the Properties (including, without limitation, rights to
payment earned under leases for space in the Improvements for the operation of
ongoing
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retail businesses such as newsstands, barbershops, beauty shops, physicians'
offices, pharmacies and specialty shops).
"REQUIRED CASUALTY/CONDEMNATION PAYMENT" means an amount equal to the
sum of (i) the product of (A) the outstanding principal amount of the Loan as of
the date of the occurrence of any fire or casualty to any Property or the
effective date of the taking or transfer of all or any portion of any Property
pursuant to a Condemnation and (B) a fraction (1) the numerator of which is the
Net Operating Income of the affected Property for the most recent period prior
to such casualty or condemnation (or prior to June 30, 2002, the stabilized
appraised value for such Property as set forth in the Appraisal for such
Property delivered to Noteholder hereunder) and (2) the denominator of which is
the Net Operating Income for all of the Properties for such period (or prior to
June 30, 2002, the stabilized appraised values for all of the Properties as set
forth in the Appraisals delivered to Noteholder hereunder) and (ii) any other
accrued and unpaid interest and any other sums and amounts then payable
hereunder or under the other Loan Documents.
"RESERVES" means, collectively, the accounts and reserves described in
Article III of the Trust Agreement.
"RESIDENCY AGREEMENTS" shall mean a residential lease or occupancy
agreement between Manager (as agent for Lessee or a Sublessee, as the case may
be), as lessor, and a resident, as lessee, pursuant to which a resident agrees
to lease a room or apartment at an Assisted Living Facility.
"SECONDARY MARKET TRANSACTION" is defined in Section 9.11 hereof.
"SECURITIES" (whether or not capitalized) means any stock, shares,
voting trust certificates, bonds, debentures, options, warrants, notes, or other
evidences of indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general any instruments commonly known as "securities" or any
certificates of interest, shares or participations in temporary or interim
certificates for the purchase or acquisition of, or any right to subscribe to,
purchase or acquire, any of the foregoing.
"SECURITIZATION" means a rated offering of securities representing
direct or indirect interests in one or more loans or the right to receive income
therefrom.
"SECURITY AGREEMENT" means the Security Agreement of even date herewith
executed by Borrower in favor of the Trustee.
"SECURITY DOCUMENTS" means, collectively, the Mortgages, Security
Agreements, Pledge Agreements, Lockbox Agreement, Assignment of Leases and
Rents, Assignment of Management Agreements, Assignment of Purchase Agreements
and any other agreement, document or instrument heretofore, now or at any time
hereafter executed by Borrower, Lessee or any Person evidencing the grant by
Borrower, Lessee or any such Person of a Lien on any property or assets of
Borrower, Lessee or such Person, as applicable, in favor of the Trustee to
secure all or any part of the Secured Obligations, in each case as amended,
restated, supplemented or otherwise
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modified from time to time pursuant to the terms thereof or otherwise; provided,
however, the term "Security Documents" shall not include the Excluded Collateral
Agreement.
"SELCO" means SELCO Service Corporation, an Ohio corporation, which is
the sole shareholder of Borrower.
"SINGLE PURPOSE ENTITY" means an entity which meets the requirements
set forth with respect to the Borrower Parties in Sections 5.19 and 5.20 of this
Agreement, together with any other guidelines published from time to time by the
Rating Agency.
"STOCK" shall mean all shares, options, warrants, general or limited
partnership interests, member 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 OF MANAGEMENT AGREEMENTS" means that certain
Subordination of Management Agreements, dated of even date herewith, by and
between Manager, Lessee, the Sublessees and Noteholder covering each of the
Management Agreements.
"SUBLEASED PROPERTIES" means the Properties which are subject to
Subleases as set forth on Exhibit E attached hereto as of the Closing Date; and
any Additional Properties which are hereafter subject to Subleases.
"SUBLEASES" means those certain Sublease Agreements of even date
herewith, between Lessee and each of the respective Sublessees, covering each of
the Properties, as more particularly described on Exhibit E attached hereto, and
any Sublease Agreements which may hereafter be entered into by Lessee with
respect to the Additional Properties.
"SUBLESSEES" means the entities holding the sublessee's interest under
each of the Subleases as more particularly described on Exhibit E attached
hereto and any entities which may hold the sublessee's interest under any
Subleases hereafter entered into with respect to the Additional Properties.
"SURETY" means ZC Specialty Insurance Company, a Texas corporation.
"SURVEY" is defined in Section 2.9(o) hereof.
"TERMINATION EVENT" means (i) a Reportable Event with respect to any
Benefit Plan; (ii) the withdrawal of Lessee or any ERISA Affiliate from a
Benefit Plan during a plan year in which or Lessee Party or any ERISA Affiliate
was a "substantial employer" as defined in Section 4001(a)(2) of ERISA; (iii)
the imposition of an obligation on Lessee or any ERISA Affiliate under Section
4041 of ERISA to provide affected parties written notice of intent to terminate
a Benefit
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<PAGE> 22
Plan in a distress termination described in Section 4041(c) of ERISA; (iv) the
institution by the PBGC of proceedings to terminate a Benefit Plan; (v) any
event or condition which would constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any
Benefit Plan; or (vi) the partial or complete withdrawal of Lessee or any ERISA
Affiliate from a Multiemployer Plan.
"TITLE COMPANY" means Chicago Title Insurance Company, or such other
title insurance company as may be designated by Noteholder.
"TITLE POLICIES" means the mortgagee policies of title insurance issued
to Trustee on the Closing Date (or Additional Facilities Closing Date) in
connection with the Mortgages.
"TRANSACTION DOCUMENTS" means, collectively, the Loan Documents, the
Security Documents, the Lease Documents and the Insurance Documents, and any
supplements, amendments, modifications, extensions, restatements or
rearrangements of any or all of such instruments; but excluding in all cases,
the Excluded Collateral Agreement.
"TRANSFER" defined in Section 6.7 hereof.
"TRUST AGREEMENT" means the Trust Agreement dated of even date
herewith, by and among Trustee, Noteholder, Surety, Guarantor, Lessee, Borrower
and SELCO.
"TRUSTEE" means The First National Bank of Chicago, a national banking
association, acting in its capacity as trustee under the Trust Agreement.
"WAIVING PARTY" is defined in Section 9.27 hereof.
1.2 Singular terms shall include the plural forms and vice versa, as
applicable, of the terms defined.
1.3 All accounting terms used in this Agreement shall be construed in
accordance with GAAP, except as otherwise specified.
1.4 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 therefore.
1.5 All references herein to "Medicaid" and "Medicare" shall be deemed
to any successor program thereto.
ARTICLE II TERMS OF THE LOAN
2.1 THE LOAN; ADVANCES. (a) Borrower has agreed to borrow the Loan
from Noteholder, and Noteholder has agreed to make the Loan to Borrower, subject
to the compliance
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with and observance of all the terms, conditions, covenants, and provisions of
this Agreement and the other Transaction Documents. The Borrower Parties have
made the covenants, representations, and warranties herein and therein as a
material inducement to Noteholder to make the Loan.
(b) The Loan shall be funded by Lender in no more than two
(2) advances. The initial advance in the original principal amount of
$130,400,000 (the "Initial Advance") shall be disbursed on the Closing Date
subject to satisfaction of the conditions set forth in Section 2.9; and an
additional advance (the "Additional Advance"; together with the Initial Advance,
collectively, the "Advances", and each, an "Advance") in the principal amount of
up to the lesser of (i) $70,600,000 and (ii) an amount equal to the difference
between (A) the Maximum Loan Amount and (B) the amount of the Initial Advance,
shall be disbursed on the Additional Properties Closing Date subject to
satisfaction of the conditions set forth in Section 2.10 hereof.
2.2 SECURITY FOR THE LOAN. The Loan will be evidenced by, among other
instruments, the Note, and shall be secured by the Security Documents. In
addition, the Loan is the subject of the surety undertaking set forth in the
Surety Bond.
2.3 USE OF PROCEEDS. The proceeds of the Loan shall be disbursed in
accordance with the schedule of sources and uses attached hereto as EXHIBIT "C".
2.4 SURETY BOND. It is a condition of Noteholder's obligation to make
the Loan that the Borrower has arranged for the issuance of the Surety Bond in
form and substance and in a notional amount satisfactory to the Noteholder.
2.5 TRUST AGREEMENT. Borrower has, simultaneously with the closing of
the Loan and its acquisition of Initial Properties and related Assisted Living
Facilities, Improvements, Equipment and other Collateral, obtained credit
accommodations from the Surety which are secured by certain assets of Borrower.
In order to establish the respective rights and priorities of the Noteholder and
the Surety and to facilitate the administration and disposition of the
Collateral and proceeds thereof for the benefit of the Beneficiaries, Borrower,
Noteholder, Surety and certain other parties have entered into the Trust
Agreement pursuant to which the Trustee shall hold and administer the Mortgages
and all security interests, liens or pledges of Collateral granted in favor of
Trustee or any Beneficiary. Borrower has acknowledged and consented to the terms
of the Trust Agreement and agrees that Noteholder may delegate any or all of its
rights hereunder to the Trustee (or any other assignee or successor to
Noteholder or Trustee) to the extent provided herein and in the Trust Agreement.
Further, so long as the Trust Agreement shall be in effect, the Controlling
Party shall be entitled to exercise the rights and remedies, and shall be
responsible for the performance of the obligations of, Noteholder hereunder to
the extent and as provided in the Trust Agreement.
2.6 PREPAYMENT. The Loan may only be prepaid to the extent permitted
under and in accordance with the Note.
2.7 INTENTIONALLY DELETED.
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2.8 INTENTIONALLY DELETED.
2.9 CONDITIONS TO CLOSING. In addition to the applicable conditions
set forth elsewhere herein, the obligation of Noteholder to fund the Initial
Advance is subject to the prior or concurrent satisfaction or waiver of the
conditions set forth below. Where in this Section 2.9 any documents, instruments
or information are to be delivered to Noteholder, then the condition shall not
be satisfied unless (i) the same shall be in form and substance satisfactory to
Noteholder, and (ii) if so required by Noteholder, Lessee shall deliver to
Noteholder a certificate duly executed by Lessee stating that the applicable
document, instrument or information is true and complete and does not omit to
state any information without which the same might reasonably be deemed
materially misleading.
(a) TRANSACTION DOCUMENTS. On or prior to the Closing Date,
the Borrower Parties shall execute and deliver or cause to be executed and
delivered to Noteholder or Trustee, as the case may be, all of the Transaction
Documents, each, unless otherwise noted, of even date herewith, duly executed,
in form and substance satisfactory to Noteholder and in quantities designated by
Noteholder (except for the Note, of which only the original thereof shall be
signed), which Transaction Documents shall become effective upon the Closing
Date.
(b) PERFORMANCE OF AGREEMENTS, TRUTH OF REPRESENTATIONS AND
WARRANTIES. Each Borrower Party and all other Persons executing any agreement on
behalf of any Borrower Party shall have performed in all material respects all
agreements which this Agreement provides shall be performed on or before the
Closing Date. The representations and warranties contained herein and in the
other Transaction Document shall be true, correct and complete in all material
respects on and as of the Closing Date.
(c) SEARCHES. Noteholder shall have received certified
copies of UCC, judgment, tax lien, bankruptcy and litigation search reports with
respect to Alterra and such other parties as Noteholder may reasonably request,
all dated not more than thirty (30) days prior to the Closing Date, and
delivered on or prior to the Closing Date.
(d) OPINIONS OF COUNSEL. On or before the Closing Date,
Noteholder shall have received from counsel for Borrower, Lessee, the Sublessees
and Alterra, their written opinions as to such matters as Noteholder shall
reasonably request, including opinions to the effect that (i) the applicable
Borrower Party or Alterra is duly formed, validly existing, and in good
standing, (ii) this Agreement and the other Transaction Documents to which the
applicable Borrower Party or Alterra are a party have been duly authorized,
executed and delivered and are enforceable against Borrower in accordance with
their terms (subject to customary qualifications and exceptions), (iii) the
Trust Agreement, the Flow of Funds Agreement, the Lockbox Agreement, the
Security Agreement and the Pledge Agreements are enforceable against Lessee, the
Sublessees and Alterra in accordance with their terms (subject to customary
qualifications and exceptions) and create valid and perfected security interests
in and to the Accounts, Alterra's ownership interests in Lessee and the
Sublessees and certain other collateral thereunder; and (iv) the Borrower would
not be substantively consolidated with its sole stockholder in a bankruptcy
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proceeding of such stockholder. Also on or before the Closing Date, Noteholder
shall have received an opinion of Lessee's local counsel in each state where any
of the Properties is located as to the enforceability of the Mortgages covering
Properties in such state and such other matters as Noteholder may reasonably
request. By execution of this document, Lessee authorizes and directs such
counsel to render such opinions and deliver the same to Noteholder on or before
the Closing Date. In addition, on or before the Closing Date, Noteholder shall
have received such other opinions of counsel as Noteholder shall reasonably
require.
(e) CLOSING CERTIFICATE. On the Closing Date, Noteholder
shall have received certificates of even date herewith executed on behalf of
Lessee by the chief financial officer (or similar officer of Lessee) truly and
correctly stating that: (i) on such date, no Default or Event of Default has
occurred and is continuing; (ii) no material adverse change in the financial
condition or operations of the business of Alterra or to the best of his
knowledge after due inquiry the Properties or the projected cash flow of Alterra
or to the best of his knowledge after due inquiry the Properties has occurred
since March 31, 1999 (or if there has been any change, specifying such change in
detail); (iii) the representations and warranties set forth in this Agreement
are true and correct in all material respects on and as of such date with the
same effect as though made on and as of such date (or if any such
representations or warranties require qualification, specifying such
qualification in detail); (iv) there has been no material change in any of the
documents, instruments, or information delivered to Noteholder pursuant to this
Article (or if there has been any change, specifying such change in detail); and
(v) Lessee on such date is in compliance with all the terms and provisions set
forth in this Agreement on its part to be observed and performed, and (vi) after
giving effect to the Loan, the fair salable value of the assets of Lessee will
exceed the probable liability on its debts, that Lessee will be able to pay its
debts as they mature and that Lessee will not have unreasonably small capital to
conduct its business. Noteholder shall also have received a certificate executed
by a duly authorized officer of Borrower certifying as to the matters described
in clauses (i) and (iii) (in each case, as to Borrower only) above.
(f) INSURANCE POLICIES AND ENDORSEMENTS. On or prior to the
Closing Date, Noteholder shall have received copies of certificates of insurance
(dated not more than twenty (20) days prior to the Closing Date) regarding
insurance required to be maintained under this Agreement and the other Loan
Documents, together with endorsements satisfactory to Noteholder naming Trustee
as an additional insured and loss payee for the benefit of the Beneficiaries, as
required by Noteholder, under such policies. In addition, as to any
environmental insurance that Lessee or any Sublessee may have as to the
Properties, the same shall be endorsed to Trustee as required by Noteholder.
(g) CERTIFICATES OF FORMATION AND GOOD STANDING. On or prior
to the Closing Date, Noteholder shall have received copies of the organizational
documents and filings of each Borrower Party, Manager and the Sublessees,
together with good standing certificates (or similar documentation) (including
verification of tax status) from the state of its formation, from the state in
which its principal place of business is located, from each state where any of
the Properties is located and from all states in which the laws thereof require
such Person to be qualified and/or licensed to do business. Each such
certificate shall be dated not more than thirty (30) days prior to the Closing
Date, as applicable, and certified by the applicable Secretary of
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State or other authorized governmental entity. In addition, on or before the
Closing Date the secretary or corresponding officer of each Borrower Party,
Manager and the Sublessees, or the secretary or corresponding officer of the
partner, member, trustee, or other Person as required by such Borrower Party's,
Manager's or Sublessee's organizational documents (as the case may be, the
"BORROWER PARTY SECRETARY") shall have delivered to Noteholder a certificate
stating that the copies of the organizational documents as delivered to
Noteholder are true and complete and are in full force and effect, and that the
same have not been amended except by such amendments as have been so delivered
to Noteholder.
(h) CERTIFICATES OF INCUMBENCY AND RESOLUTIONS. On or prior
to the Closing Date, Noteholder shall have received certificates of incumbency
and resolutions of each Borrower Party and its constituents as requested by
Noteholder, approving and authorizing the Loan and the execution, delivery and
performance of the Loan and Surety Documents, certified as of the Closing Date
by the Borrower Party Secretary as being in full force and effect without
modification or amendment.
(i) FINANCIAL STATEMENTS. On or prior to the Closing Date,
Noteholder shall have received such financial statements and other financial
information as shall be satisfactory to Noteholder for Lessee, Alterra and for
each of the Properties. If any such statements are not available for any of the
Assisted Living Facilities, Lessee shall provide such financial reports as are
available. All such financial statements shall be certified to Noteholder by
Lessee or Alterra (through its chief financial officer or other authorized
officer), which certification shall be in form and substance reasonably
satisfactory to Noteholder.
(j) PROJECTIONS. On or prior to the Closing Date, Noteholder
shall have received and reasonably approved the proforma projections for the
Assisted Living Facilities for the remainder of the current calendar year and
for the immediately succeeding calendar year. Such projections are attached
hereto as SCHEDULE 4.10.
(k) JOINT VENTURE PARTNERS' CONTRIBUTIONS; OPERATING
RESERVE. The constituent partners of each of the Sublessees shall have funded
their total initial capital contributions of at least $9,200,000 due as of the
Closing Date in accordance with the limited partnership agreements of each of
the respective Sublessees; and such sum shall have been deposited with Trustee
into the Operating Reserve Account in accordance with Article III of the Trust
Agreement.
(l) DOCUMENTATION REGARDING EXISTING INDEBTEDNESS. Prior to
the Closing Date, Noteholder shall have received payoff demand letters and
wiring instructions from each lender or other obligee of the existing
indebtedness secured by the Properties which is required to be repaid pursuant
to this Agreement.
(m) MANAGEMENT AGREEMENTS. Prior to the Closing Date,
Noteholder shall have received certified copies of each of the Management
Agreements pertaining to the Assisted Living Facilities; and on the Closing
Date, Noteholder shall have received the Subordination of Management Agreements,
duly executed by the Manager.
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(n) TITLE POLICIES. Prior to the Closing Date, Noteholder
shall have received a preliminary title report or title commitment for each of
the Properties. Prior to the Closing Date, Noteholder shall have received and
approved a marked title commitment for issuance of a Title Policy for each of
the Mortgages, and as of the Closing Date the Title Company shall be irrevocably
committed and prepared immediately to issue the Title Policies. The Title
Policies shall be in form and substance satisfactory to Noteholder. Without
limitation, Noteholder may require that the Title Policies be issued on the 1992
ALTA form by the Title Company, together with such reinsurance and direct access
agreements as Noteholder may require, insuring that each Mortgage constitutes a
valid first and prior enforceable lien on Borrower's and Lessee's respective
interests in the applicable Property and the Improvements (including any
easements appurtenant thereto) subject only to such exceptions to coverage as
are acceptable to Noteholder. The Title Policies shall contain such endorsements
as Noteholder may require (and which are available in the applicable state where
a Property is located) in form acceptable to Noteholder, including "tie-in"
endorsements, pending disbursement endorsements, deletion of the creditors'
rights exception and any exception relating to loss or damage resulting from any
recharacterization of the Master Lease as a mortgage or other security
instrument and affirmative insurance or endorsement coverages insuring against
creditors' rights risks.
(o) SURVEY. On or prior to the Closing Date, Noteholder
shall have received surveys of each Property, certified in each case to
Noteholder, Surety and their respective successors, assigns and designees and to
the Title Company by a surveyor reasonably satisfactory to Noteholder (the
"SURVEYS"). All surveys shall contain the minimum detail for land Surveys as
most recently adopted by ALTA/ASCM, shall comply with Noteholder's survey
requirements and shall contain Noteholder's standard form certification. Said
Surveys shall show no state of facts or conditions reasonably objectionable to
Noteholder.
(p) APPRAISAL. Prior to the Closing Date, Noteholder shall
have received an independent appraisal, dated not more than sixty (60) days
prior to the Closing Date, for each of the Properties from a state certified
appraiser engaged by Noteholder, which indicates the fair market value of the
Properties is as set forth in SCHEDULE 2.9(P), and is otherwise reasonably
satisfactory to Noteholder in its sole discretion in all respects (each an
"APPRAISAL"). Each such appraisal shall conform in all respects to the
requirements for appraisals set forth in the Financial Institutions Reform and
Recovery Act of 1989 and the regulations promulgated thereunder (as if
Noteholder were an institution under the jurisdiction thereof) and the Uniform
Standards of Professional Appraisal Practices of the Appraisal Foundation.
(q) LICENSES, PERMITS AND APPROVALS. On or prior to the
Closing Date, Noteholder shall have received copies of final, unconditional
certificates of occupancy issued with respect to each of the Properties and each
Assisted Living Facility, together with all material Permits (other than
Regulatory Permits which Lessee is unable to obtain prior to the Closing Date
which Lessee shall obtain and deliver in accordance with Section 3.11 hereof)
required for Borrower to own and Lessee and any Sublessee to use, occupy,
operate and maintain the Assisted Living Facilities, the Properties and the
Improvements. Notwithstanding the foregoing, it as acknowledged and agreed that,
subject to the terms and conditions of Section 3.2 of the Trust
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Agreement, Lessee shall be permitted to deliver to Noteholder a temporary
certificate of occupancy with respect to the Assisted Living Facility located in
West Orange, New Jersey.
(r) AGREEMENTS. On or prior to the Closing Date, Noteholder
shall have received certified copies of all material operating agreements,
service contracts and Equipment Leases, if any, relating to Borrower's ownership
and Lessee's and/or any Sublessee's operation of the Properties and the Assisted
Living Facilities.
(s) ZONING. On or prior to the Closing Date, Noteholder
shall have received evidence reasonably satisfactory to Noteholder as to the
zoning and subdivision compliance of the Property.
(t) PROPERTY CONDITION REPORTS; ENVIRONMENTAL REPORTS. On or
before the Closing Date, Noteholder shall have received property condition
reports for the Assisted Living Facilities, which shall be prepared by an
engineer or other consultant satisfactory to Noteholder and otherwise shall be
in form and substance satisfactory to Noteholder in its sole discretion (such
reports, the "PROPERTY CONDITION REPORTS"). Such Property Condition Reports
shall set forth any items of deferred maintenance at the Assisted Living
Facilities. On or before the Closing Date, Noteholder shall have received
Environmental Reports for each of the Properties and Assisted Living Facilities
which shall be prepared by an environmental engineer or consultant and be in
form and substance satisfactory to Noteholder in its sole discretion, together
with a letter from the preparer thereof entitling Noteholder to rely on such
Environmental Reports.
(u) DEPOSITS. The deposits required herein, including
without limitation, in addition to the deposit into the Operating Reserve
Account referenced in Section 2.9(k) above, any other initial deposits into the
Reserves and Accounts, if any, shall have been made (and at Lessee's option, the
same may be made from the proceeds of the Loan).
(v) MASTER LEASE. On or before the Closing Date, Noteholder
shall have received certified copies of the Master Lease and same shall be in
full force and effect and no defaults shall exist thereunder, and Noteholder
shall have received such estoppel certificates and subordination agreements as
Noteholder may reasonably require, duly executed by the Lessee.
(w) LEASES, ESTOPPELS. Prior to the Closing Date, Noteholder
shall have received certified copies of (i) the Ground Leases, (ii) the
Subleases, (iii) any and all other material leases or subleases of all or any
part of a Property or Improvements (other than the Residency Agreements) (all of
such leases or subleases described in this clause (iii) existing as of the date
hereof, or on the Additional Properties Closing Date relating to the Additional
Properties, collectively, the "EXISTING LEASES"), and (iv) the form of Residency
Agreement, and prior to the Closing Date, Noteholder shall have received such
estoppel certificates and subordination agreements from the parties to the
Ground Leases, the Subleases and the Leases as Noteholder may reasonably
require, duly executed by such parties.
(x) OTHER REVIEW. Noteholder shall have completed all other
review of the Borrower Parties, Alterra, the Properties, the Assisted Living
Facilities and the Improvements and
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such other items as it reasonably determines relevant, and shall have determined
based upon such review to fund the Loan.
(y) LEGAL FEES; CLOSING EXPENSES. Lessee shall have paid any
and all reasonable legal fees and expenses of counsel to Noteholder, together
with all recording fees and taxes, title insurance premiums, and other
reasonable costs and expenses related to the closing of the transactions
contemplated by the Transaction Documents.
(z) FINANCING FEE. Lessee shall have paid to Noteholder the
portion of the non-refundable Financing Fee payable with respect to the Initial
Advance, which portion shall be fully-earned, due and payable on the Closing
Date whether or not the Additional Advance of the Loan is disbursed and which
Borrower and Lessee hereby acknowledge constitutes fair and reasonable
compensation to Noteholder for making the Initial Advance.
(aa) MINIMUM EQUITY. Borrower shall have delivered to
Noteholder evidence that Borrower has contributed consideration towards the
purchase of the Properties from sources other than the Loan of not less than
$9,500,000 and that Borrower has spent all of such initial equity in connection
with the acquisition of the Properties (including transaction costs associated
therewith).
(bb) INTEREST RATE HEDGE AGREEMENT. Lessee shall have
reimbursed Noteholder for all costs and expenses incurred by or on behalf of
Noteholder in connection with Noteholder's purchase of an interest rate cap or
hedge agreement covering Noteholder from potential losses which may be suffered
or incurred by Noteholder in connection with the funding of the Additional
Advance as a result of interest rate fluctuations between the date hereof and
the Additional Properties Closing Date (a "HEDGE"), which Hedge shall be in form
and substance issued by a financial institution acceptable to Noteholder in
Noteholder's sole discretion.
(cc) PRE-CLOSING MANAGEMENT FEES. On or prior to the Closing
Date, Noteholder shall have received and approved a schedule setting forth the
amount of the pre-closing fees and costs to be paid to Manager on or before the
Closing Date (from the capital contributions of the limited partners of the
Sublessees) pursuant to Section 4.1(a) of the Management Agreement; which
schedule shall include the amount of such fees payable for each Property and a
reasonably detailed breakdown and description by Property of the services and
costs covered thereby.
(dd) JOINT VENTURE AGREEMENTS. Noteholder shall have
received certified, duly executed copies of the limited partnership agreements
for each of the Sublessees which shall be in form and substance satisfactory to
Noteholder.
2.10 CONDITIONS TO ADDITIONAL PROPERTIES CLOSING . In addition to the
applicable conditions set forth elsewhere herein, the obligation of Noteholder
to fund the Additional Advance of the Loan is subject to the satisfaction or
waiver of the conditions set forth below on or before the Additional Properties
Closing Date. Where in this Section 2.10 any documents, instruments or
information are to be delivered to Noteholder, then the condition shall not be
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satisfied unless (i) the same shall be in form and substance satisfactory to
Noteholder, and (ii) if so required by Noteholder, Lessee shall deliver to
Noteholder a certificate duly executed by Lessee stating that the applicable
document, instrument or information is true and complete and does not omit to
state any information without which the same might reasonably be deemed
materially misleading. In the event that Borrower and/or Lessee shall fail to
satisfy any of the conditions with respect to one or more of the Additional
Properties on or prior to the Additional Properties Closing Date, Noteholder may
elect in its sole discretion (but shall not be obligated) to reduce the amount
of the Additional Advance and close the financing of one or more of such
Additional Properties as to which the conditions of Sections 2.9 and 2.10 have
been satisfied.
(a) PERFORMANCE OF AGREEMENTS; TRUTH OF REPRESENTATIONS AND
WARRANTIES. Each Borrower Party and all other Persons executing any agreement on
behalf of any Borrower Party shall have performed in all material respects all
agreements which this Agreement provides shall be performed on or before the
Additional Properties Closing Date. The representations contained herein and in
the other Transaction Documents shall be true, correct and complete in all
material respects as of the Additional Properties Closing Date.
(b) NO DEFAULT. No Default or Event of Default shall have
occurred hereunder or under any of the other Loan Documents.
(c) ADDITIONAL PROPERTIES TRANSACTION DOCUMENTS. Borrower,
Lessee, the Sublessees and Manager, as applicables shall have executed and
delivered any and all documents and agreements required in connection with the
acquisition of the Additional Properties including, without limitation,
Mortgages, Assignments of Leases, Subleases, Management Agreements and
Assignments of Management Agreement relating to the Additional Properties and
any amendments or modifications to this Agreement, the Master Lease, the
existing Subleases, Lease Supplements or any of the other Transaction Documents
which may be required by Noteholder in connection with the acquisition of the
Additional Properties.
(d) TITLE POLICIES; DATE-DOWN ENDORSEMENTS. Lessee shall
have delivered to Noteholder and Noteholder shall have approved the Title
Policies for the Additional Properties complying with the conditions of Section
2.9(n) and date-down endorsements from the Title Company with respect to the
Title Policies for the Initial Properties, at Lessee's expense, which
endorsements shall (i) bring the effective date of the Title Policies for the
Initial Properties forward to the date of disbursement of the Additional
Advance, (ii) add the amount of the Additional Advance to the aggregate amount
of insurance afforded by the Title Policies, (iii) show no new exceptions to
title, other than those approved in writing by Noteholder and (iv) indicate as a
matter of information any subordinate matters appearing of record since the date
of the Title Policies with respect to the Initial Properties or the most recent
endorsement thereto. Lessee specifically agrees that if any such endorsement
lists any liens or security interest affecting the Initial Properties, other
than the liens and security interests of the Mortgages and the other Loan
Documents and any Permitted Liens, Noteholder shall not be obligated to make the
Additional Advance unless and until such security interests or liens have been
removed or bonded over to Noteholder's satisfaction.
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(e) JOINT VENTURE PARTNERS' CONTRIBUTIONS. The constituent
partners of each of the Sublessees entering into Subleases with respect to the
Additional Properties shall have funded their required initial capital
contributions in accordance with their respective limited partnership agreements
and the constituent partners of the other Sublessees shall have funded any
additional capital contributions required to have been funded as of the
Additional Properties Closing Date, and all of such contributions shall have
been deposited with Trustee into the Operating Reserve Account in accordance
with Article III of the Trust Agreement.
(f) PROPERTY CONDITION REPORTS, ENVIRONMENTAL REPORTS AND
APPRAISALS. Lender shall have received Property Condition Reports, Environmental
Reports and Appraisals with respect to the Additional Properties, each prepared
or updated not more than 60 days prior to the Additional Properties Closing
Date. In addition, if any of the original Property Condition Reports.
Environmental Reports or Appraisals for the Initial Properties were dated more
than thirty (30) days prior to the Closing Date, Lessee shall have delivered to
Noteholder updates of such Property Condition Reports, Environmental Reports and
Appraisals dated not more than thirty (30) days prior to the Closing Date (and
disclosing no defects or conditions not disclosed in the original reports and no
adverse change in the appraised value from the original Appraisals). Lessee's
failure to deliver any such updated Property Condition Reports, Environmental
Reports or Appraisals for the Initial Properties required pursuant to the
foregoing sentence on or before the earlier to occur of (i) the date which is
thirty (30) days after the date hereof and (ii) the Additional Properties
Closing Date shall constitute an Event of Default.
(g) CONDITIONS. Each of the conditions set forth in Section
2.9 (other than the conditions of Sections 2.9(c), 2.9(i) (but only to the
extent that financial statements and financial information with respect to the
Additional Properties acceptable to Noteholder have been received by Noteholder
prior to the date hereof), 2.9(k), 2.9(m) (unless any of the Additional
Properties are managed by a separate manager and/or under a separate management
agreement in which case Noteholder shall have received a Subordination of
Management Agreement duly executed by each such manager) and 2.9(aa)), shall
have been satisfied or waived in writing by Noteholder on or before the
Additional Properties Closing Date; provided, however, that any references in
said Section 2.9 to the "Properties" shall for purposes of this Section 2.10
mean the Additional Properties being acquired on the Additional Properties
Closing Date. In addition, Lessee and Alterra shall have delivered to Noteholder
legal opinions from Holleb & Coff, or other Illinois counsel to such parties,
which counsel shall be reasonably acceptable to Noteholder, that this Agreement,
the Loan Documents and each of the other Transaction Documents to which Lessee
and Alterra are a party are enforceable against such parties in accordance with
their terms under Illinois law (subject to customary qualifications and
exceptions). Failure of Alterra and Lessee to deliver such opinions on or before
the earlier to occur of (i) thirty (30) days from the date hereof and (ii)
Additional Properties Closing Date, shall constitute an Event of Default.
(h) AMENDED SURETY BOND. Noteholder shall have received an
amended Surety Bond and Backstop Policy covering the full amount of the Loan as
of the Additional Properties Closing Date.
(i) FINANCING FEE. Lessee shall have paid to Noteholder the
balance of the
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Financing Fee payable with respect to the Additional Advance of the Loan.
If Borrower wishes to request that Noteholder disburse the
Additional Advance to Borrower for purposes of the acquisition of the Additional
Properties, Borrower (or Lessee on behalf of Borrower) shall give Noteholder at
least five (5) Business Days' notice of the proposed Additional Properties
Closing Date which notice shall be accompanied by copies of the Appraisals and
the financial statements and information required under Section 2.9(i) for the
Additional Properties to the extent not previously delivered. Promptly after
receipt of such notice and documents (and in any event prior to the Additional
Properties Closing Date), Noteholder shall send notice to Borrower and Lessee of
the amount of the Additional Advance.
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF BORROWER PARTIES
A. REPRESENTATIONS AND WARRANTIES OF BORROWER PARTIES.
To induce Noteholder to enter into this Agreement, and to make the Loan
to Borrower, each of the Borrower Parties, as to itself and its Affiliates,
represents and warrants to Noteholder that the statements set forth in this
Article III pertaining to such party, are true, correct and complete as of the
date hereof and will be true, correct and complete as of the Closing Date and as
of the Additional Properties Closing Date.
3.1 ORGANIZATION, POWERS, CAPITALIZATION, GOOD STANDING,
BUSINESS.
(a) ORGANIZATION AND POWERS. Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Illinois. Lessee is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. SELCO is a corporation, duly
organized, validly existing and in good standing under the laws of the State of
Ohio. SELCO is the sole stockholder of Borrower. Alterra is the sole stockholder
of Lessee. Each Borrower Party has all requisite power and authority to own and
operate its properties, to carry on its business as now conducted and proposed
to be conducted, and to enter into each Loan and Surety Document to which it is
a party and to perform the terms thereof. The articles of incorporation and
by-laws (each, as amended, the "CHARTER DOCUMENTS") for each of the Borrower
Parties contain all provisional terms necessary in each case for the Borrower
Parties to comply with Sections 5.19 and 5.20, as applicable, hereof.
(b) CAPITALIZATION; OWNERSHIP. No Borrower Party has any (i)
direct or indirect interest in, including without limitation stock, partnership
interest or other securities of, any other Person except as set forth herein, or
(ii) direct or indirect loan, advance or capital contribution to any other
Person, including all indebtedness and accounts receivable from that other
Person. All issued and outstanding shares of capital stock of each Borrower
Party which is a corporation are duly authorized and validly issued, fully paid,
nonassessable, free and clear of all Liens (other than Permitted Liens), and
such shares were issued in compliance with all applicable state and federal laws
concerning the issuance of securities. There are no preemptive or other
outstanding rights, options, warrants, conversion rights or similar agreements
or understandings for the purchase or acquisition of any shares of capital stock
or other securities of such entities.
(c) QUALIFICATION. Each Borrower Party is duly qualified and
in good standing in the state of its formation. Borrower and Lessee are also
duly qualified and in good standing in the states where the Properties are
located, or in the case of Borrower will be so duly qualified as soon as
reasonably practicable and in any event within thirty (30) days following the
Closing Date. In addition, each Borrower Party is duly qualified and in good
standing in each state where it is necessary to carry on its present business
and operations, except in jurisdictions in which the failure to be qualified and
in good standing could not reasonably be expected to have a Material Adverse
Effect. All jurisdictions in which each Borrower Party is qualified to do
business are set forth on SCHEDULE 3.1(C).
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(d) BUSINESS; ASSETS. Each Borrower Party is and has always
engaged only in the businesses permitted hereunder. The sole assets of Borrower
are the Collateral in which it has granted or shall grant a Lien pursuant to the
Loan Documents, including the Properties, the Assisted Living Facilities and all
Improvements, its interest in the Master Lease and the Ground Leases, Permits,
if any, and personal property appurtenant or related thereto and its interest in
the Excluded Collateral. The sole assets of Lessee are its leasehold interests
in and to the Properties, Improvements and Assisted Living Facilities and
Equipment under the Master Lease, its sublessor's interest in the Subleases and
its right, title and interest, if any, in and to the Permits, if any, and
personal property appurtenant or related thereto and the Excluded Collateral.
(e) ADDRESSES. All offices and places of business of each of
the Borrower Parties, and the location of all properties in which any of them
has any interest are set forth in SCHEDULE 3.1(E). The principal place of
business and the chief executive office of each Borrower Party is so designated
on said Schedule.
3.2 AUTHORIZATION OF BORROWING, ETC .
(a) AUTHORIZATION OF BORROWING. Borrower has the power and
authority to incur the Indebtedness evidenced by the Transaction Documents. The
execution, delivery and performance by each Borrower Party of each of the
Transaction Documents to which it is a party and the consummation of the
transactions contemplated thereby, have been duly authorized by all necessary
corporate action.
(b) NO CONFLICT. The execution, delivery and performance by
each Borrower Party of the Transaction Documents to which it is a party and the
consummation of the transactions contemplated thereby, do not and will not: (1)
violate (x) any provision of law applicable to any Borrower Party; (y) the
Charter Documents of any Borrower Party; or (z) any order, judgment or decree of
any court or other agency of government binding on any Borrower Party or any of
their Affiliates; (2) conflict with, result in a breach of or constitute (with
due notice or lapse of time or both) a default under any material Contractual
Obligation of any Borrower Party or any of their Affiliates; (3) result in or
require the creation or imposition of any material Lien (other than the Lien of
the Transaction Documents and the Lien or other interest of SELCO or its
Affiliates in and to the Excluded Collateral) upon the Property or assets of any
Borrower Party or any of their Affiliates; or (4) except as set forth on
SCHEDULE 3.2(B), require any approval or consent of any Person under any
material Contractual Obligation of any Borrower Party, which approvals or
consents have been obtained on or before the dates required under such
Contractual Obligation, but in no event later than the Closing Date.
(c) GOVERNMENTAL CONSENTS. The execution, delivery and
performance by each Borrower Party of the Transaction Documents to which it is a
party, and the consummation of the transactions contemplated thereby, and the
execution, delivery and performance by Borrower of the Master Lease and by
Lessee of the Master Lease and the Subleases and the consummation of the
transactions contemplated thereby, do not and will not require any registration
with, consent or approval of, or notice to, or other action to, with or by, any
federal, state or other governmental authority or regulatory body, except for
the Permits required to be
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obtained by Borrower, Lessee, the Sublessees or the Manager in connection with
the operation of the Assisted Living Facilities as set forth in Section 3.11 and
except for the recording of the Mortgages, Assignments of Leases, other Security
Documents and/or UCC-1's in the applicable recorders' or filing offices. In
addition to any covenants hereunder relating to Permits, Lessee shall diligently
proceed to obtain or satisfy all consents, approvals, and requirements set forth
in Section 3.11.
(d) BINDING OBLIGATIONS. This Agreement is, and the other
Transaction Documents, including the Note, when executed and delivered will be,
the legally valid and binding obligations of each Borrower Party, as applicable,
each enforceable against the Borrower Parties, as applicable, in accordance with
their respective terms, subject to bankruptcy, insolvency, moratorium,
reorganization and other similar laws affecting creditor's rights. No Borrower
Party has any defense or offset to any of its obligations under the Transaction
Documents. No Borrower Party has any claim or right of set off against
Noteholder or any Affiliate of Noteholder.
3.3 PENDING MATTERS. There are no judgments outstanding against any
Borrower Party nor is there any action, charge, claim, demand, suit, petition,
inquiry or investigation pending or, to the best knowledge of such Borrower
Party, after due inquiry, threatened against it.
3.4 INDEBTEDNESS AND CONTINGENT OBLIGATIONS. As of the Closing Date,
none of the Borrower Parties shall have any Indebtedness or Contingent
Obligations except for the Loan Obligations and the Allowed Indebtedness.
3.5 INVESTMENT COMPANY ACT; PUHCA. No Borrower Party is: (i) an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended; (ii) a "holding
company" or a "subsidiary company" of a "holding company" or an "affiliate" of
either a "holding company" or a "subsidiary company" within the meaning of the
Public Utility Holding Company Act of 1935, as amended; or (iii) subject to any
other law that purports to restrict or regulate its ability to borrow money.
3.6 FOREIGN PERSON. No Borrower Party is a "foreign person" within the
meaning of Section 1445(f)(3) of the Code.
3.7 BANKRUPTCY. No Borrower Party is a debtor, and no property of any
of them (including any Property) is property of the estate, in any voluntary or
involuntary case under the Bankruptcy Code or under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect. No Borrower Party
and no property of any of them is under the possession or control of a receiver,
trustee or other custodian. No Borrower Party has made any assignment for the
benefit of creditors. No such assignment or bankruptcy or similar case or
proceeding is now contemplated.
3.8 SOLVENCY. As of and from and after the Closing Date, the Borrower
Parties (after giving effect to the transactions contemplated by the Transaction
Documents), in the aggregate; (A) own and will own assets the fair saleable
value of which are (1) greater than the
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total amount of liabilities (including Contingent Obligations) of the Borrower
Parties and (2) greater than the amount that will be required to pay the
probable liabilities of such Borrower Parties' then existing debts as they
become absolute and matured considering all financing alternatives and potential
asset sales reasonably available to Borrower Parties; (B) has capital that is
not insufficient in relation to their business as presently conducted or any
contemplated or undertaken transaction; and (C) do not intend to incur and do
not believe that they will incur debts beyond their ability to pay such debts as
they become due.
B. REPRESENTATIONS AND WARRANTIES OF LESSEE.
To induce Noteholder to enter into this Agreement, and to make the Loan
to Borrower, Lessee represents and warrants to Noteholder that the following
statements set forth in Sections 3.9 through 3.31 inclusive, are true, correct
and complete as of the date hereof and will be, true, correct and complete as of
the Closing Date and as of the Additional Properties Closing Date.
3.9 PENDING MATTERS . Except as set forth on SCHEDULE 3.9 or as
described in Section 3.22, there are no judgments outstanding against any of the
Properties nor is there any action, charge, claim, demand, suit, petition,
inquiry or investigation pending, or to the best of Lessee's knowledge, after
due inquiry, threatened against any of the Properties. The actions, charges,
claims, demands, suits, proceedings, petitions, investigations and arbitrations
set forth on SCHEDULE 3.9 hereto and described in Section 3.22 will not result,
if adversely determined, and could not reasonably be expected to result, either
individually or in the aggregate, in any Material Adverse Effect and do not
relate to and will not affect the consummation of the transactions contemplated
hereby or under any of the Transaction Documents. Lessee is not in violation,
breach or default of any agreement, the violation of which could have a Material
Adverse Effect, and Lessee is not in violation of any order, judgment, or decree
of any court, or, in any material respect, of any statute or governmental
regulation to which it is subject.
3.10 FINANCIAL STATEMENTS ACCURATE . All financial statements
concerning Lessee, Alterra or any of their respective Affiliates or the
Properties provided by or on behalf of Lessee or Alterra to Noteholder have been
prepared on a basis consistent with the audited financial statements of Alterra
(in the case of Lessee, Alterra, or their respective Affiliates) or HCR (with
respect to the Properties) consistently applied and present (as of the dates
thereof) the respective financial conditions of the Persons covered thereby and
the results of their operations for the periods then ending. All operating
statements, income reports and other financial data regarding Lessee, Alterra
and the Assisted Living Facilities heretofore provided by or on behalf of Lessee
are, to the best knowledge of Lessee after due inquiry, true correct and
complete and present fairly, the financial condition and, results of, such
operations. There has been no material adverse change in the financial
condition, operations, or prospects of Lessee, Alterra or to the best knowledge
of Lessee after due inquiry any Assisted Living Facility since the dates of such
statements except as fully disclosed in writing with the delivery of such
statements.
3.11 COMPLIANCE WITH LAWS . Borrower, Lessee, each Sublessee and/or
Manager (and/or with respect to nursing home beds within the Properties located
in Laguna Palm Terrace, California and Palmer Ranch, Florida, HCR), as the case
may be, is, or will be within sixty (60)
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days following the Closing Date or the Additional Properties Closing Date, as
the case may be (or, in the case of the Assisted Living Facilities located in
California and Florida, such longer period as may be reasonably necessary with
the exercise of diligence), the lawful owner of all Permits necessary for the
proper and lawful operation of the Assisted Living Facilities as an assisted
living facility (or, in the case of a portion of the Properties located in
Laguna Palm Terrace in Laguna Hills, California and Palmer Ranch in Sarasota,
Florida as skilled nursing facilities) under applicable Legal Requirements;
during any interim period pending which the Permits shall not be held in the
name of the applicable party, the Assisted Living Facilities can and will be
lawfully operated pursuant to consents, waivers or provisional Permits or under
subleases or management agreements. Lessee has no knowledge of any fact, event
or condition which would cause any of such Permits to not be duly issued or
transferred to Borrower, Lessee, any Sublessee or Manager, as applicable, within
the applicable time period set forth above. To the extent such Permits are not
held in the name of the applicable party as of the Closing Date, or the
Additional Properties Closing Date, as the case may be, Lessee has obtained, or
has caused the applicable party to obtain, all requisite consents necessary to
permit Lessee, the applicable Sublessee or Manager to operate or cause to be
operated the Assisted Living Facilities and, as of the Closing Date, has filed,
or has caused the applicable party to file, all necessary applications to obtain
such Permits. The Permits held in the name of the applicable party as of the
Closing Date or the Additional Properties Closing Date, as the case may be, or
for which applications have been or will be made constitute all of the
Regulatory Permits and all other material permits, licenses and certificates
required for the use and occupancy thereof. The number of licensed and Available
Beds at each Assisted Living Facility is set forth on SCHEDULE 3.11-1 hereto for
the Initial Properties, which Schedule will be amended as of the Additional
Properties Closing Date to include the Additional Properties. As of the Closing
Date with respect to the Initial Properties and as of the Additional Properties
Closing Date with respect to the Additional Properties, Lessee, each Sublessee
and Manager, as well as the operation of the Assisted Living Facility are or
will be in compliance and at all times will remain in compliance in all material
respects with the applicable provisions of skilled nursing facility, residential
care, personal care, adult care, boarding home and/or assisted living facility
laws, rules, regulations and published interpretations to which each Assisted
Living Facility is subject, including, without limitation, the Medicare
Regulations and Medicaid Regulations, as applicable. SCHEDULE 3.11-2 describes
all Permits required under applicable Legal Requirements by any federal or state
health agency or similar agency or body in connection with operation of the
Initial Properties as Assisted Living Facilities which Schedule will be amended
as of the Additional Properties Closing Date to include the Additional
Properties (collectively, "Regulatory Permits"), all of which are, or will, in
no more than sixty (60) days following the Closing Date or the Additional
Properties Closing Date, as the case may be (or, in the case of the Assisted
Living Facilities located in California and Florida, such longer period as may
be reasonably necessary with the exercise of diligence), be held in the name of
Borrower, Lessee, Sublessees and/or Manager, as applicable. No waivers of any
laws, rules, regulations or requirements (including, but not limited to minimum
square foot requirements per bed) are required for the Assisted Living
Facilities to operate at the licensed bed capacities listed on SCHEDULE 3.11-1
and in compliance with applicable Legal Requirements. None of the Assisted
Living Facilities which are Initial Properties participate in Medicare, Medicaid
or any other third party reimbursement program. All Reimbursement Contracts to
the extent applicable to the Assisted Living Facilities which are Additional
Properties will be applied for as of the Additional
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Properties Closing Date and will be received within sixty (60) days of the
Additional Properties Closing Date, and payment will be made thereunder
retroactive to the date of application and Borrower, Lessee, each Sublessee and
Manager, as applicable, are as of the Closing Date with respect to the Initial
Properties, and will be as of the Additional Properties Closing Date with
respect to the Additional Properties, in good standing with all the respective
agencies governing such applicable skilled nursing facility and assisted living
facility licenses, and if applicable Medicare Certifications, Medicaid
Certifications and Reimbursement Contracts. Lessee, Sublessee and Manager, as
applicable, will be current as of the Additional Properties Closing Date in the
payment of all so-called provider specific taxes or other assessments with
respect to any Reimbursement Contracts. Each Assisted Living Facility (other
than the Assisted Living Facilities which are not yet operating, as set forth on
SCHEDULE 3.11-1) is currently operated in material compliance with applicable
Regulatory Permits and Legal Requirements as a skilled nursing facility or
assisted living facility and its licensed bed capacity is set forth in SCHEDULE
3.11-1. In the event the Trustee or any Beneficiary acquires any Assisted Living
Facility through foreclosure or otherwise, under current law neither the Trustee
nor any such Beneficiary nor a subsequent manager, a subsequent lessee or any
subsequent purchaser (through foreclosure or otherwise) must obtain a CON prior
to applying for or receiving a license to operate the Assisted Living Facility
and certification to receive Medicare and Medicaid payments (and their successor
programs) for patients having coverage thereunder, provided that (i) the number
of beds and the scope of services provided are not changed and (ii) that the
Trustee, Beneficiary or subsequent manager, lessee or purchaser submits prior
notification of such change to the applicable regulatory agency.
3.12 MAINTAIN BED CAPACITY . Neither Lessee, any Sublessee nor the
Manager has granted to any third party the right to reduce the number of
licensed beds in any Assisted Living Facility or to apply for approval to
transfer the right to any of the licensed Assisted Living Facility beds to any
other location. Except as expressly permitted otherwise under the Trust
Agreement, Lessee shall maintain, or cause to be maintained, the number of
Available Beds at each Assisted Living Facility set forth in SCHEDULE 3.11-1 and
within a variance of ten percent (10%) shall maintain or cause to be maintained
the number of beds at each Assisted Living Facility at the
licensure/certification levels set forth in SCHEDULE 3.11-1.
3.13 PAYMENT OF TAXES AND PROPERTY IMPOSITIONS . Lessee has timely
filed all federal, state, and local tax returns which it is required to file and
has timely paid, or made adequate provision for the payment of, all taxes,
assessments, fees and other governmental charges upon such Person and upon its
properties, assets, income and franchises, including without limitation,
provider taxes. All such returns and reports are complete and accurate in all
respects and none of the United States income tax returns of Lessee are under
audit. There is not presently pending (and to the best of Lessee's knowledge,
after due inquiry, there is not contemplated) any special assessment against any
Property, the Improvements, any other Collateral, or any part thereof except as
may be set forth in any of the Title Policies. No part of any Property is
included or assessed under or as part of another tax lot or parcel comprising
property other than such Property, and no part of any other property is included
or assessed under or as part of the tax lots or parcels comprising any Property.
No tax liens have been filed and to the best knowledge of Lessee, no claims are
being asserted with respect to any such taxes. The
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charges, accruals and reserves on the books of Lessee in respect of any taxes or
other governmental charges are in accordance with GAAP.
3.14 TITLE TO COLLATERAL . Borrower and Lessee, collectively, have good
and marketable fee simple title to all of the Collateral, subject to no lien,
mortgage, pledge, encroachment, zoning violation, or encumbrance, except
Permitted Liens and except as set forth on Schedule 3.9, none of which Liens
materially interfere with the security intended to be provided by the Mortgages
or the current use of the Properties and the Improvements. All Improvements
situated on the Properties are situated wholly within the boundaries of
respective parcels comprising such Property, except as disclosed by the Surveys
of the Properties. Borrower, Lessee or the applicable Sublessees own and will
own at all times all personal property relating to the Properties, the
Improvements and the Assisted Living Facilities (other than personal property
which is owned by residents or tenants of the Properties), subject only to
Permitted Liens. Without limitation of the foregoing, Borrower, Lessee or the
applicable Sublessees own all furnishings, fixtures and equipment located at the
Properties that are used by Lessee or the applicable Sublessees or which are
necessary for or integral to the operation of the Assisted Living Facilities,
free and clear of any lease, lien or encumbrance except the Permitted Liens and
except as set forth on Schedule 3.9. No Person has any option or other right to
purchase all or any portion of the Collateral or any interest therein.
3.15 PRIORITY OF MORTGAGES . The Mortgages constitute a valid first
lien against Borrower's and Lessee's respective interests in the real and
personal property described therein, prior to all other liens or encumbrances,
including those which may hereafter accrue, excepting only Permitted Liens and
except as set forth on Schedule 3.9, none of which Permitted Liens or other
Liens materially interfere with the security intended to be provided by the
Mortgages or the current use of the Property and the Improvements.
3.16 ZONING, OTHER LAWS . Each of the Properties is zoned for its
current uses (including the use identified in the definition of Assisted Living
Facilities) under applicable federal and state laws, which zoning designations
are unconditional, in full force and effect, and are beyond all applicable
appeal periods or is the subject of a valid variance or conditional use permit
permitting such uses. The Properties, the Improvements and the Assisted Living
Facilities and the operations thereon are in material compliance with all
applicable covenants and restrictions of record, zoning, subdivision and land
use laws, regulations and ordinances, all applicable health, fire, and building
codes, and all other laws applicable to the Properties, the Improvements or the
Assisted Living Facilities, including without limitation the Americans with
Disabilities Act. Lessee does not know of any illegal activities relating to
controlled substances on or at the Property or any portion thereof. All permits,
licenses and certificates required for the lawful use and operation of the
Properties and the Improvements, including, but not limited to, all certificates
of occupancy, or the equivalent and all Regulatory Permits have been obtained
and are current and in full force and effect or application therefor has been
made. In the event that all or any part of the Improvements located on the
Properties are destroyed or damaged, said Improvements can be legally
reconstructed to substantially their condition prior to such damage or
destruction, and thereafter exist for the same use without violating any zoning
or other ordinances applicable thereto and without the necessity of obtaining
any variances or special permits, other than
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customary demolition, building and other construction related permits. Each
Assisted Living Facility contains enough permanent parking spaces (both regular
spaces and handicap spaces) to satisfy all requirements imposed by applicable
laws with respect to parking or a waiver of such requirements has been obtained.
No legal proceedings are pending or, to the best knowledge of Lessee after due
inquiry, are threatened with respect to the zoning of the Properties or any
portion thereof. Neither the zoning nor any other right to construct, use or
operate any Property is in any way dependent upon or related to any real estate
other than such Property. No tract map, parcel map, condominium plan,
condominium declaration, or plat of subdivision will be recorded or permitted to
be recorded, by Lessee with respect to any Property or portion thereof without
Noteholder's prior written consent.
3.17 CONDITION OF IMPROVEMENTS AND PROPERTIES . All Improvements are in
good condition and repair. Lessee is not aware of any latent or patent
structural or other significant defect or deficiency in the Improvements. City
water supply, storm and sanitary sewers, and electrical, gas and telephone
facilities are available to the Properties within the boundary lines of the
Properties or through appurtenant easements, are fully connected to the
Improvements and are fully operational, are sufficient to meet the reasonable
needs of the Properties as now used or presently contemplated to be used, and no
other utility facilities are necessary to meet the reasonable needs of the
Properties as now used or presently contemplated to be used. The design and
as-built conditions of the Properties and Improvements are such that surface and
storm water does not accumulate on the Properties (except in facilities
specifically designed for the same) and does not drain from the Properties
across land of adjacent property owners in any manner which would have a
Material Adverse Effect on any of the Properties or the Improvements. Except as
may be set forth on the Surveys, no part of any Property is within a flood plain
and none of the Improvements create any encroachment over, across or upon such
Property's boundary lines, rights of way or easements, and no building or other
improvements on adjoining land create such an encroachment which could
reasonably be expected to have a Material Adverse Effect. All public roads and
streets necessary for service of and access to the Properties for the current
and contemplated uses thereof have been completed and are serviceable and are
physically and legally open for use by the public. Any liquid or solid waste
disposal, septic or sewer system located at the Properties is in good and safe
condition and repair and in compliance with all applicable laws.
3.18 DISCLOSURE . No financial statements, financial document or any
other document, certificate or written statement furnished to Noteholder by or
on behalf of Lessee or Alterra for use in connection with the Loan, including
without limitation all schedules and exhibits to this Agreement, contains any
untrue representation, warranty or statement of a material fact, and none omits
or will omit to state a material fact necessary in order to make the statements
contained herein or therein not materially misleading.
3.19 LEGAL NAMES . To the best knowledge of Lessee, the legal names of
the entities which have owned and operated the Assisted Living Facilities at all
times during the preceding five (5) years are as set forth in SCHEDULE 3.19
hereto.
3.20 EMPLOYEE BENEFIT PLANS .
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(a) Except as disclosed on SCHEDULE 3.20(A), neither Lessee
nor any ERISA Affiliate maintains or contributes to or has any obligation
(including a contingent obligation) with respect to any Plan. Except as
disclosed on Schedule 3.20(a), each Plan which is intended to be qualified under
Section 401(a) of the Code as currently in effect has been determined by the
Internal Revenue Service to be so qualified, and each trust related to any such
Plan has been determined to be exempt from federal income tax under Section
501(a) of the Code as currently in effect. Each Plan (i) has been administered
in all material respects in accordance with its terms and (ii) complies in form,
and has been maintained and operated in all material respects in accordance,
with the requirements of ERISA and, where applicable, the Code. There are no
actions, suits or claims (other than routine claims for benefits) pending nor,
to the knowledge of Lessee or any ERISA Affiliate, threatened with respect to
any Plan. Lessee and each ERISA Affiliate has complied in all material respects
with the applicable requirements of Part 6 of Title I of ERISA.
(b) Neither Lessee nor any ERISA Affiliate maintains or
contributes to any employee welfare benefit plan within the meaning of Section
3(1) of ERISA which provides benefits to employees after termination of
employment other than as specifically required by Part 6 of Title I of ERISA.
Neither Lessee nor any Person that is or was an ERISA Affiliate at any time
during the immediately preceding six years has ever maintained, been required to
contribute to, been required to pay any amount or had any obligation (whether
actual or contingent) with respect to any Benefit Plan or Multiemployer Plan.
Except as disclosed on SCHEDULE 3.20(B)-1, neither Lessee nor any ERISA
Affiliate, nor any fiduciary of any Plan, has engaged in any nonexempt
prohibited transaction described in Section 406 of ERISA or Section 4975 of the
Code. Except as disclosed on SCHEDULE 3.20(B)-2, neither Lessee nor any ERISA
Affiliate has by reason of the transactions contemplated hereby, any obligation
to make any payment to any employee pursuant to any Plan or existing contract or
arrangement. Neither Lessee nor any ERISA Affiliate is the grantor of a grantor
trust established pursuant to Subpart E of Subchapter J of the Code.
3.21 INTELLECTUAL PROPERTY . Set forth on SCHEDULE 3.21 is a complete
listing of all of the material patents, trademarks, tradenames, technology and
other intellectual property rights used in the ownership, operation and
management of the businesses of Lessee.
3.22 PROCEEDINGS PENDING . There are no proceedings pending, or, to the
best of Lessee's knowledge, after due inquiry threatened, to acquire through the
exercise of any power of condemnation, eminent domain, or similar proceeding all
or any part of any Property (except a certain condemnation proceeding affecting
a portion of the Tucson, Arizona Property as disclosed in the title report
therefor), the Equipment, the Improvements or any interest therein, or to enjoin
or similarly prevent or restrict the use of any Property or the operation of the
Assisted Living Facilities in any manner.
3.23 COMPLIANCE WITH APPLICABLE LAWS . Each Assisted Living Facility
and its operations, the Properties and the Improvements comply in all material
respects with all covenants and restrictions of record and applicable laws,
ordinances, rules and regulations, including, without limitation, to the extent
applicable, Title 42 of the United States Code and related
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regulations, including the Medicare Regulations, the Medicaid Regulations,
federal and state self-referral and anti-kickback statutes and regulations;
Title 31 of the United States Code, including the False Claims Act; skilled
nursing facility or assisted living facility licensure laws and regulations;
public health statues and regulations; the Americans with Disabilities Act and
the regulations thereunder, and all laws, ordinances, rules and regulations
relating to zoning, setback requirements (except as may be shown on any of the
Surveys for the Properties approved by Noteholder) and building codes and there
are no waivers of any building codes currently in existence for any of the
Assisted Living Facilities, Properties or Improvements. Lessee has filed in a
timely manner all reports, documents and other materials required to be filed
with any governmental bureau, agency or instrumentality (and the information
contained in each of such filings is true, correct and complete in all
respects), except where failure to make such filings would not have a Material
Adverse Effect. Lessee has retained all records and documents required to be
retained pursuant to any law, ordinance, rule, regulation, order, policy,
guideline or other requirement of any governmental authority, except where
failure to retain such records would not subject such party or any of its
Affiliates, partners, officers, trustees, or employees to criminal liability and
could not reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect.
3.24 MANAGEMENT AGREEMENTS . The Management Agreements are each in full
force and effect and there are no defaults (either monetary or non-monetary) by
the parties thereto.
3.25 1934 ACT . The proceeds of the Note will not be used to acquire
any equity security of a class that is registered pursuant to Section 12 of the
Securities Exchange Act of 1934.
3.26 USE OF PROCEEDS AND MARGIN SECURITY . Borrower shall use the
proceeds of the Loan to acquire the Properties and pay transaction costs as
contemplated by the schedule of sources and uses attached hereto as Exhibit G.
No portion of the proceeds of the Loan shall be used by Borrower or Lessee in
any manner that might cause the borrowing or the application of such proceeds to
violate Regulation U, Regulation T or Regulation X or any other regulation of
the Board of Governors of the Federal Reserve System.
3.27 NO PLAN ASSETS . Lessee is not and will not be (i) an employee
benefit plan as defined in Section 3(3) of ERISA which is subject to ERISA, (ii)
a plan as defined in Section 4975(e)(1) of the Code which is subject to Section
4975 of the Code, or (iii) an entity whose underlying assets constitute "plan
assets" of any such employee benefit plan or plan for purposes of Title I of
ERISA or Section 4975 of the Code.
3.28 GOVERNMENTAL PLAN . Lessee is not and will not be a "governmental
plan" within the meaning of Section 3(32) of ERISA and transactions by or with
the Borrower Parties are not and will be not subject to state statutes
applicable to Lessee regulating investments of and fiduciary obligations with
obligations with respect to governmental plans.
3.29 YEAR 2000 . The management information systems (including all
computer
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hardware and software), all equipment containing embedded microchips, of Lessee
and Manager, whether owned, licensed, leased or otherwise utilized by Lessee and
Manager, and required in the conduct of their respective businesses and the
performance of all obligations of Lessee and Manager under the Transaction
Documents ("LESSEE AND MANAGER MIS SYSTEMS"), and such systems of those parties
with whom Lessee and Manager MIS Systems must interface, will, no later than
August 30, 1999, be free of any material problem, infirmity or defect (and so
tested and confirmed by Lessee and Manager to be free of any material problem,
infirmity or defect) as respects to the "Year 2000 Problem" and/or any "9/9/99
Problem." To wit, the Lessee and Managers MIS System will be "Y2K COMPLIANT"
such that the management information systems will not: (i) experience any
material malfunctions or other material usage problem or failure in connection
with the year 2000 and subsequent years as distinct from the 1900 years, or
relating to improper expirations, terminations or data loss on or following
September 9, 1999 as a result of the 9/9/99 Problem; or (ii) result in any
material loss or liability sustained in connection with: (x) the conduct of
their business or the performance of any obligations under the Transaction
Documents, including but not limited to the recording, storing, processing,
calculating, comparing, sequencing or presenting by electronic means of calendar
dates or spans of time from, into and between the twentieth and twenty-first
centuries (including leap year calculations); and (y) the generation,
transmission, delivery, receipt of and any use or reliance on information or
calculations dependent on or relating to calendar dates or spans of time from,
into and between the twentieth and twenty-first centuries (including leap year
calculations) (the "Y2K PROBLEM"). The cost to Lessee and Manager of any
reprogramming and testing of Lessee and Manager MIS Systems and of the
reasonably foreseeable consequences of any reprogramming required to assure that
Lessee and Manager MIS Systems are Y2K Complaint, or of systems and equipment
failures to such Lessee and Manager (including reprogramming errors and the
failure of other's systems and equipment) will not result in an Event of Default
or a Material Adverse Effect. To the best knowledge of Lessee, the Lessee and
Manager MIS Systems are at present, and with ordinary upgrading and maintenance,
will continue for the term of this Agreement to be sufficient to permit each of
Lessee and Manager to conduct its business and to perform all of their
respective obligations under the Transaction Documents without Material Adverse
Effect.
3.30 LEGAL OPINIONS . Lessee has reviewed and is familiar with all
opinions of legal counsel designated by Lessee and Alterra to be delivered in
connection with the Loan. None of the assumptions with respect to Alterra,
Lessee or the Properties set forth in such opinions is incorrect.
3.31 LEASES; AGREEMENTS .
(a) AGREEMENTS. Lessee has provided Noteholder with true and
complete copies of all material contracts and agreements affecting the Assisted
Living Facilities, Properties, Improvements and the operation and management
thereof, including, the Master Lease, the Ground Leases, the Subleases, the
Management Agreement, the leasing brokerage agreements, if any, and any and all
other material leases, tenancies or other material contracts or agreements
relating to the use, maintenance, development, operation or management thereof
(other than the Residency Agreements as to which Lessee has delivered the
standard form thereof only). Except for the rights of Manager pursuant to the
Management Agreements, no Person has any right or
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obligation to manage any Property or to receive compensation in connection with
such management or any right or obligation to sell, lease, or solicit purchasers
or tenants for any Property, or (except for cooperating outside brokers) to
receive compensation in connection with such sale or leasing.
(b) LEASE ISSUES. There are no legal proceedings commenced
(or, to the best of the knowledge of Lessee, threatened) against Lessee by any
tenant or former tenant. No rental in excess of one month's rent has been
prepaid under any of the Residency Agreements or any material leases. Each of
the Residency Agreements and any material leases is valid and binding on the
parties thereto in accordance with its terms. The execution of this Agreement
and the other Transaction Documents will not constitute an event of default
under any of the Residency Agreements or any Leases.
(c) NO RENT CONTROL. No portion of any Property is subject
to any form of rent control, stabilization or regulation.
(d) NO UNDISCLOSED TENANTS. Except for the Master Lease, the
Subleases, the Ground Leases, the Licensing Subleases, the Residency Agreements
described in the Rent Rolls attached hereto as SCHEDULE 3.31(D) and any other
leases delivered to Noteholder on or before the date hereof, there are no
material Leases affecting all or any portion of any of the Properties. Except
for Lessee, the Sublessees, the Manager under the Licensing Subleases, the
tenants under the Ground Leases and the tenants identified in the Existing
Leases that have been delivered to Noteholder and except for Assisted Living
Facility residents, no Person has any right to occupy any portion of any of the
Properties or the Assisted Living Facilities, and to the knowledge of Lessee
after due inquiry, no Person is so occupying any portion of any of the
Properties or the Assisted Living Facilities.
ARTICLE IV AFFIRMATIVE COVENANTS OF BORROWER PARTIES
A. COVENANTS OF BORROWER PARTIES.
Each Borrower Party, as to itself, agrees with and covenants unto the
Noteholder that such Borrower Party shall perform and comply, or cause the
performance and compliance, with all covenants in Sections 4.1 and 4.2
applicable to such Borrower Party.
4.1 PAYMENT OF LOAN/PERFORMANCE OF LOAN OBLIGATIONS . Borrower shall
duly and punctually pay or cause to be paid the principal and interest of the
Note in accordance with its respective 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.
4.2 MAINTENANCE OF EXISTENCE . Maintain in full force and effect its
existence as a corporation, and all rights and franchises material to such
Person's business, and, in each jurisdiction in which the character of the
property owned by such Person or in which the transaction of its business makes
qualification necessary, maintain good standing.
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B. COVENANTS OF LESSEE.
Lessee agrees with and covenants unto the Noteholder that Lessee shall
perform and comply, or cause the performance and compliance, with all of the
following covenants set forth in Sections 4.3 through 4.33 inclusive.
4.3 ACCRUAL AND PAYMENT OF TAXES . During each fiscal year, Lessee
shall make adequate provision for the payment of and pay before any fine or
penalty is incurred 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), Taxes (as defined in the
Mortgages), 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.
4.4 INSURANCE; CASUALTY AND CONDEMNATION ..
(a) At all times while the Loan Obligations are outstanding,
Lessee shall maintain at its sole cost and expense, and provide satisfactory
evidence thereof to Noteholder on an annual basis (or at such other times when
renewed) the following insurance coverages in such amounts and with such
deductibles as follows:
(i) Professional liability insurance in an amount at
least equal to $1,000,000 per occurrence, and $1,000,000 in the aggregate, on an
"occurrence" basis covering each of the Assisted Living Facilities and the
activities conducted therein. The deductible for such coverage shall not exceed
$25,000;
(ii) General liability insurance in an amount at least
equal to $1,000,000 per occurrence, and $1,000,000 in the aggregate, covering
each of the Assisted Living Facilities and the activities conducted therein. The
deductible for such coverage shall not exceed $25,000;
(iii) Umbrella insurance covering professional liability
umbrella coverage attaching at each of the above referenced limits of coverage,
and having a limit each occurrence and in the aggregate of $20,000,000; and
additional excess liability coverage with limits of $30,000,000;
(iv) "All-risk" coverage on the Improvements, Equipment
and Inventory in an amount not less than the replacement cost thereof, insuring
against such potential causes of loss as shall be required by Noteholder,
including but not limited to loss or damage from wind, fire, hail, lightening,
ice, earthquake, subsidence, boiler and machinery and sprinkler leakage. The
permitted deductibles for the foregoing coverages shall be as follows:
earthquake, not to exceed the greater of $100,000 or five percent (5%) of
insured value; windstorm, not to exceed $25,000, except with respect to
Properties located in the State of Florida, as to which the aggregate deductible
applicable to all such Properties, shall not exceed $200,000;
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(v) Business interruption insurance (including rental
value if any portion of any Property or any Assisted Living Facility is leased
in whole or part) equal to not less than twelve (12) months estimated lost
profits and continuing Operating Expenses;
(vi) Workers' compensation and employers' liability
insurance as required by the laws of the states where each Property is located;
(vii) If and to the extent that Lessee should engage in
any material modification, alteration or construction on or with respect to any
of the Properties, builder's risk insurance (under an all risk, completed value
form) for the applicable Improvements in an amount acceptable to Noteholder and
including "soft" costs;
(viii) "Ordinance and law" coverage for each of the
Properties and Assisted Living Facilities based on risks related to
reconstruction limitations under governing laws and ordinances, in amounts
acceptable to the Noteholder;
(ix) "Difference in conditions" insurance including,
flood, earthquake and earthquake sprinkler leakage with a limit of $25,000,000
per occurrence and deductibles not to exceed $25,000; and
(x) Automobile liability insurance coverage with a
limit at least equal to $1,000,000, per occurrence, no aggregate limit.
The insurance coverages required under Section 4.4(a)(iv) may be
effected under a blanket policy or policies covering the Properties and other
property and assets not constituting part of the Properties; provided that such
certificates of insurance evidencing the coverage required herein shall specify
any sublimits in such blanket policy applicable to the Properties, which amounts
shall not be less than the amounts required pursuant to Section 4.4(a)(iv) and
which shall in any case comply in all other respects with the requirements of
this Section 4.4.
In connection with Lessee's or Guarantor's annual insurance review
(which shall occur at least one time every 12 calendar months), Lessee shall be
required to engage an Insurance Consultant (defined below) to undertake a review
of Lessee's then existing insurance coverage in light of then current industry
standards for hospital or health care services of the type similar to that in
which Lessee is then currently engaged and based upon such review, Lessee shall
either increase the amount of its coverages to meet such industry standards or
shall be permitted to make reasonable modifications to the amounts and
deductibles under the insurance coverages required to be maintained under this
Section 4.4(a) provided that (A) prior to making any modification to any
insurance coverage, Lessee shall deliver to Noteholder and Trustee a certificate
of an Insurance Consultant or Insurance Consultants (hereinafter defined)
indicating that the insurance coverages as proposed to be maintained are
reasonable based on then prevailing insurance industry market conditions,
customary for corporations engaged in the same or similar activities as Lessee
and adequate to protect the Properties and the operations and (B) Trustee and
Noteholder shall have delivered its prior written approval of such coverages,
amounts and deductibles. In any event, in connection with any such insurance
review by such Insurance Consultant, such Insurance Consultant shall deliver to
Lender and Surety a letter to the effect that
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Lessee's insurance coverages meet the requirements of the Transaction Documents
as modified by any modification approved pursuant to this Section 4.4.
"INSURANCE CONSULTANT" means a Person who in the case of an individual is not an
employee or officer of Guarantor, Lessee or any Affiliate thereof and which, in
the case of a corporation or other business entity is not an Affiliate of
Guarantor or Lessee, appointed by Lessee and reasonably satisfactory to
Noteholder and Trustee, qualified to survey risks and to recommend insurance
coverage for hospital or health care facilities and services of the type
involved, and having a favorable reputation for skill and experience in such
surveys and such recommendations, and which may include a broker or agent with
whom Lessee transacts business.
(b) Each of the policies described in Sections 4.4(a)(i),
(ii), (iii), (viii) and (xi) shall name Trustee, Borrower, Lessee, Noteholder
and Surety as additional insured parties, and the policies described in
4.4(a)(iv)-(vii), (ix) and (x) shall name Trustee for the benefit of the
Beneficiaries as loss payee under a standard noncontributory mortgagee and loss
payable clause, and shall provide that Trustee shall receive not less than
thirty (30) days written notice prior to cancellation. The proceeds of any of
the policies described in Sections 4.4(a)(iv)-(x) hereof shall be payable by
check payable to Trustee, delivered to Trustee, and such proceeds shall be
applied by Trustee, at its option in accordance with the Trust Agreement, either
(i) to the full or partial payment or prepayment of the Loan Obligations
(without premium), or (ii) to the repair and/or restoration of the Improvements,
Equipment and Inventory damaged or taken. Provided that no Event of Default or
Springing Lock Box Event has occurred and is continuing, proceeds paid under the
policies described in Section 4.4(a)(vi) shall be made available to Lessee to be
applied in accordance with the Flow of Funds Agreement. Each of the policies
described in Sections 4.4(a)(iii), (iv), (v) and (vii) hereof, as of the Closing
Date, must be written by an insurer or insurers each having a rating of A - or
better from Standard & Poor's (provided, however, that within six (6) months
after the Closing Date, such policies must be written by insurers having ratings
of A or better from Standard & Poor's), and a Best rating of A- or better and
otherwise reasonably acceptable to Noteholder and, the remaining coverages shall
be provided by insurers reasonably acceptable to Noteholder. If Lessee shall
fail to cause the insurance policies described in Sections 4.4(a)(iii), (iv),
(v) and (vii) to be written by insurers having ratings of A or better from
Standard & Poor's within six (6) months after the Closing Date (which condition
may be satisfied by means of reinsurance arrangements acceptable to Noteholder
in its sole discretion), such failure shall constitute an Event of Default
hereunder. Notwithstanding the foregoing, Lessee may collect insurance proceeds
paid under the policies described in Sections 4.4(a)(iv), (v) and (vii)-(x)
above in connection with claims not in excess of Two Hundred Fifty Thousand
Dollars ($250,000) (the "CASUALTY AMOUNT"), or in the event that such proceeds
are collected by Noteholder or Trustee same shall be paid over to Lessee
(without application of the conditions of Section 4.4(c) below), provided that
(i) no Default or Event of Default shall have occurred and be continuing, (ii)
Lessee gives notice to Noteholder and Trustee of the related fire or casualty
within ten (10) Business Days after the occurrence thereof (which notice shall
include Lessee's good faith estimate of the amount of the damage to the affected
Assisted Living Facility) and (iii) Lessee applies such proceeds to the repair
and/or restoration of the Improvements, Equipment and Inventory damaged in
accordance with the terms and conditions hereof.
(c) Noteholder agrees that Trustee shall make the net
proceeds of insurance
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(after payment of Noteholder's (and/or Trustee's) reasonable costs and expenses)
available to Lessee for Lessee's repair, restoration and replacement of the
Improvements, Equipment and Inventory damaged on the following terms and subject
to satisfaction in Noteholder's (and/or Trustee's) discretion, of each of the
following conditions:
(i) At the time of such loss or damage and at all times
thereafter while Noteholder (or Trustee) is holding any portion of such
proceeds, there shall exist no Default or Event of Default;
(ii) Noteholder (or Trustee) determines that the
applicable Property, 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 and in compliance with all
applicable zoning, building and other laws and codes with a value equal to or
greater than that which existed prior to such loss or damage ("PRE-EXISTING
CONDITION"), there will be sufficient funds to so restore such Property,
Improvements, Equipment and Inventory and such restoration shall be capable of
being completed prior to the expiration of business interruption insurance as
determined by an independent inspector;
(iii) Noteholder (or Trustee) determines that Operating
Revenues from the Assisted Living Facilities, after restoration and repair of
the affected Property, Improvements, Equipment, and Inventory to the
Pre-existing Condition and expiration of such stabilization period acceptable to
Noteholder (or Trustee), will be sufficient to meet all operating costs and
other expenses, payments for reserves and loan repayment obligations (including
any obligations under any permitted subordinate financing) relating to the
Assisted Living Facilities and maintain an LCR at least equal to (A) that
existing at the origination of the Loan for casualties occurring during the
first eighteen (18) months of the term of the Loan and (B) 1.4 : 1 for
casualties occurring thereafter;
(iv) restoration and repair of the affected Property,
Improvements, Equipment, and Inventory to the Pre-existing Condition will be
completed within one year of the date of the loss or casualty to such Property,
Improvements, Equipment, or Inventory, but in no event later than six months
prior to the Maturity Date;
(v) less than fifty (50%) percent of the total floor
area of the Improvements of the affected Property has been damaged or destroyed
or rendered unusable as a result of such fire or casualty;
(vi) Within thirty (30) days following the date of such
loss or damage, Lessee shall have given Noteholder and Trustee written notice of
its desire to have such proceeds applied for purposes of restoration; and
(vii) Within sixty (60) days following the date of
notice under the preceding subsection 4.4(c)(vi), Lessee shall have provided to
Noteholder and/or Trustee all of the following:
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(A) complete plans and specifications,
satisfactory to Noteholder, and/or Trustee
for restoration, repair and replacement of
the Improvements, Equipment and Inventory
damage to their Pre-existing Condition;
(B) if the loss or damage exceeds the
Casualty Amount, a duly executed fixed-price
or guaranteed maximum cost construction
contract together with a performance bond
insuring completion of the work in
accordance with such plans and
specifications;
(C) a certificate of insurance evidencing
builder's risk insurance in such amounts as
are reasonably satisfactory to Noteholder
and/or Trustee and naming Trustee, for the
benefit of the parties to the Trust
Agreement, as loss payee;
(D) Such additional funds as are required
below; and
(E) Copies of all Permits necessary to
complete such work in accordance with the
plans and specifications.
(d) (i) Lessee shall notify Noteholder and Trustee promptly
after it has knowledge of the commencement or threat of any action or proceeding
relating to any condemnation or other taking, or conveyance in lieu thereof, of
all or any part of any Property, whether direct or indirect (a "CONDEMNATION").
Lessee shall appear in and prosecute or defend any proceeding relating to any
Condemnation unless otherwise directed by Noteholder or Trustee in writing.
Borrower and Lessee each hereby authorize and appoint Noteholder and Trustee as
attorneys-in-fact for Borrower and Lessee to commence, appear in and prosecute,
in Noteholder's, Trustee's, Borrower's or Lessee's name, any action or
proceeding relating to any Condemnation and to settle or compromise any claim in
connection with any Condemnation. This power of attorney is coupled with an
interest and therefore is irrevocable. However, nothing contained in this
Section 4.4(d) shall require Noteholder or Trustee to incur any expense or take
any action with respect to any Condemnation. Borrower and Lessee each hereby
transfers and assigns to Noteholder and Trustee all right, title and interest of
Borrower and Lessee in and to any award or payment with respect to (A) any
Condemnation, and (B) any damage to any Property caused by governmental action
that does not result in a Condemnation.
(ii) Noteholder agrees that Trustee shall make the net
amount of such awards or proceeds (after deducting reasonable costs and expenses
incurred by Noteholder and Trustee) from a partial (but not total) Condemnation
of any Property, available to Lessee for the restoration or repair of such
Property and Improvements subject to satisfaction in Noteholder's (and/or
Trustee's) discretion of each of the conditions set forth in Section 4.4(c);
except that for purposes of this Section 4.4(d) all references in Section 4.4(c)
to: (A) "Pre-existing Condition" shall be deemed to mean the restoration and/or
repair of such Property and Improvements to an economically viable whole, in
compliance with all applicable zoning, building and other laws and codes and (B)
damage or destruction of the Improvements shall be deemed to mean the taking of
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any portion of such Property or Improvements pursuant to the Condemnation.
Notwithstanding the foregoing, the net proceeds of any award from a Condemnation
affecting all or substantially all of any Property, shall be applied to the
prepayment of the Loan Obligations (without premium). Unless Noteholder or
Trustee otherwise agrees in writing, any application of any awards or proceeds
to the Obligations shall not extend or postpone the due date of any monthly
installments referred to in the Note, including any Imposition Deposits, or
change the amount of such installments. Borrower and Lessee each agree to
execute such further evidence of assignment of any awards or proceeds from any
Condemnation as Noteholder or Trustee may require.
(e) If Trustee elects to make the insurance proceeds or
Condemnation awards available for the restoration and repair of the affected
Property, Improvements, Equipment, and Inventory in accordance with the
foregoing conditions, Lessee agrees that, if at any time during the restoration
and repair, the cost of completing such restoration and repair, as determined
reasonably by Noteholder or Trustee, exceeds the undisbursed insurance proceeds
or Condemnation awards, Lessee shall, immediately upon demand by Noteholder or
Trustee, deposit the amount of such excess with Trustee, and Trustee shall first
disburse such deposit to pay for the costs of such restoration and repair on the
same terms and conditions as the insurance proceeds or Condemnation awards are
disbursed. If Lessee deposits such excess with Trustee and if, after completion
of the restoration or repair, any funds remain from the combination of insurance
proceeds or Condemnation awards and the funds so deposited with Trustee by
Lessee, and if no Default or Event of Default shall have occurred and be
continuing, then Trustee shall disburse to Lessee such remaining funds provided
that Trustee shall not be obligated to disburse any amount in excess of the
amount that Lessee shall have so deposited.
(f) If the insurance proceeds or Condemnation awards are
held by Trustee to reimburse Lessee for the cost of restoration and repair of
the affected Property, Improvements, Equipment, and Inventory, Lessee shall
restore the affected Property, Improvements, Equipment, and Inventory to its
Pre-existing Condition or other condition as Noteholder or Trustee may approve
in writing, and Lessee shall promptly begin such restoration and at all times
thereafter diligently prosecute such restoration to completion. Noteholder or
Trustee may, at Noteholder's or Trustee's option, condition disbursement of said
proceeds or Condemnation awards on Noteholder's or Trustee's approval of such
plans and specifications of an architect satisfactory to Noteholder or Trustee,
contractor's cost estimates, architect's certificates, waivers of liens, sworn
statements of mechanics and materialmen and such other evidence of costs,
percentage completion of construction, application of payments; and satisfaction
of liens as Noteholder or Trustee may reasonably require. If the insurance
proceeds or Condemnation awards are applied to the payment of the Loan
Obligations, any such application of proceeds to principal shall not extend or
postpone the due dates of the monthly installments due under the Note or
otherwise under the Loan Documents including, without limitation, any Imposition
Deposits under the Mortgages, or change the amounts of such installments. Any
amount of insurance proceeds or Condemnation awards remaining in Trustee's
possession after full and final payment and discharge of all obligations secured
hereby shall be refunded to Lessee or otherwise paid in accordance with
applicable law. If any Property, Improvements, Equipment, and Inventory is sold
at foreclosure or if Noteholder or Trustee acquires title to any Property,
Improvements, Equipment, and
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Inventory, Noteholder or Trustee shall have all of the right, title and interest
of Lessee in and to any insurance policies and unearned premiums thereon and in
and to the proceeds resulting from any damage to, or Condemnation awards from
any Condemnation affecting such Property, Improvements, Equipment, and Inventory
prior to such sale or acquisition.
(g) Noteholder and Trustee shall have a first lien and
security interest in all building materials and completed repair and restoration
work and in all fixtures and equipment acquired with such proceeds, and Borrower
and Lessee shall execute and deliver, at Lessee's expense, such mortgage, deed
of trust, security agreements, financing statements and other instruments as
Noteholder shall request to create, evidence, or perfect such lien and security
interest; and
(h) In the event and to the extent such insurance proceeds
or Condemnation awards are not required or used for the repair, restoration and
replacement of the affected Property, Improvements, Equipment and Inventory for
which a loss or damage has occurred or affected by a Condemnation, or in the
event Lessee is not entitled to or does not timely make the election to have
insurance proceeds or Condemnation awards applied to the restoration of such
Property, Improvements, Equipment, or Inventory, or, having made such election,
fail 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 (subject to the terms of the Trust Agreement, if applicable) Noteholder
shall be entitled, without notice to or consent from Borrower or Lessee, to
cause Trustee to apply such proceeds, or the balance thereof, at Noteholder's
option either (i) to the full or partial payment or prepayment of the Loan
Obligations (without premium) in the manner aforesaid in accordance with the
Trust Agreement; provided, however, that if such insurance proceeds or
Condemnation awards are insufficient to pay the Required Casualty/Condemnation
Payment and any other amounts due under the Transaction Documents as a result of
such casualty or Condemnation, Lessee shall be required to pay to Trustee, for
application in accordance with the Trust Agreement, an amount equal to such
shortfall within ten (10) days after demand therefor by Noteholder or Trustee,
or (ii) to the repair, restoration and/or replacement of all or any part of such
Property, Improvements, Equipment and Inventory for which a loss or damage has
occurred. Upon any payment in full of the Required Casualty/Condemnation Payment
with respect to any Property pursuant to the foregoing provisions, provided that
no Default or Event of Default shall have occurred and be continuing, Noteholder
shall release or cause the Trustee to release the Mortgage encumbering the
applicable Property and all other Liens and security interests relating to such
Property. If Noteholder or Trustee has agreed to make insurance proceeds or
Condemnation awards available to reimburse Lessee, as aforesaid, and whether or
not such insurance proceeds are sufficient to pay for the costs of such
restoration, Lessee must rebuild to the Pre-existing Condition or such other
condition as Noteholder may approve in writing.
(i) Lessee hereby appoints each of Noteholder and Trustee as
attorney-in-fact to cause the issuance of or an endorsement of any insurance
policy to bring Lessee into compliance herewith and, as limited above, at
Noteholder's or Trustee'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;
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however, in no event will Noteholder or Trustee be liable for failure to collect
any amounts payable under any insurance policy.
4.5 FINANCIAL AND OTHER INFORMATION . Lessee shall provide or cause
Manager to provide to Noteholder the following financial statements and
information on a continuing basis during the term of the Loan:
(a) Within one hundred twenty (120) days after the end of
the fiscal year of Lessee and each Sublessee, unaudited financial statements
thereof, prepared by Lessee or Manager, which statements shall be prepared on a
basis consistent with the audited financial statements of Alterra (so long as
Alterra is Manager, and thereafter in accordance with GAAP), consistently
applied, and shall include a balance sheet and a statement of income and
expenses for the year then ended, certified by an authorized officer of the
Lessee, to be true and correct, to the best of his or her knowledge, information
and belief. Together with such annual financial statements, Lessee shall also
provide or cause Manager to provide an agreed upon procedures report with
respect to the operations of the Assisted Living Facilities, on a consolidated
basis, prepared by a Big Five or other nationally recognized accounting firm or
independent certified public accountants acceptable to Noteholder ("APPROVED
ACCOUNTANTS") which report shall verify the accuracy of reported income and
expenses for the year then ended and shall be substantially in the form attached
hereto as Exhibit F and otherwise in form and substance reasonably acceptable to
Noteholder. Within one hundred twenty (120) days following the end of each
fiscal year during the term of the Loan, Lessee will deliver a written statement
by its independent certified public accountants (1) stating that such
examination has included a review of Sections 4.5 and 4.6 of this Agreement as
such terms relate to Lessee and its compliance with accounting matters and also
a review of the Flow of Funds Agreement, (2) stating whether, in connection with
such examination, any failure to comply therewith has come to their attention,
and (3) if such a condition or event has come to their attention, specifying the
nature and period of existence thereof.
(b) Simultaneously with the filing of such reports with the
SEC, copies of Alterra's annual reports on Form 10-K and quarterly reports on
Form 10-Q. In the event that Alterra shall cease to be a publicly-traded entity,
within one hundred twenty (120) days after the end of the fiscal year of the
Alterra, audited financial statements of Alterra prepared by Approved
Accountants, 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, certified by the chief financial officer of Alterra to
accurately represent the financial condition of the Alterra to the best of his
or her knowledge, information and belief.
(c) Within thirty (30) days after the end of each month,
true and complete copies of unaudited monthly statements of operations of the
Assisted Living Facilities, prepared on a basis consistent with the audited
financial statements of Alterra (so long as Alterra is Manager, and thereafter
in accordance with GAAP), consistently applied, which statements shall include
statements of income and expenses for the month then ended, certified in the
case of each Assisted Living Facility, by the authorized officer of Lessee and
by the chief financial officer of Manager to be true, correct and complete to
the best of his or her knowledge, information and
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belief after due inquiry. Monthly statements of operations shall show the
separate operations of each of the Assisted Living Facilities.
(d) Within forty-five (45) days of the end of each calendar
quarter, true and complete copies of unaudited statements of operations of
Lessee, each Sublessee and of Alterra, prepared on a basis consistent with the
audited financial statements of Alterra (so long as Alterra is Manager, and
thereafter in accordance with GAAP), which statements shall include a statement
of income and expenses for the quarter then ended, certified by the chief
financial officer of Alterra and an authorized officer of Lessee or such
Sublessee, to the best of his or her knowledge or belief after due inquiry, to
accurately represent the financial condition of the Manager, Lessee or such
Sublessee, respectively. Quarterly financial statements of operations shall show
the separate operations of each of the Assisted Living Facilities.
(e) Within forty-five (45) days of the end of each calendar
quarter, utilization reports including a statement of the number of bed days
available and the actual patient days incurred for the quarter, together with
quarterly census information of each Assisted Living Facility as of the end of
such quarter in sufficient detail to show patient-mix (i.e., private, Medicare,
Medicaid, and V.A.) as of the end of such quarter, certified by the chief
financial officer of Manager to be true and correct, to the best of his or her
knowledge, information and belief after due inquiry.
(f) Within thirty (30) days after the end of each calendar
month, operating statements for each Property prepared on an accrual basis and
in form satisfactory to Noteholder, (i) for such month, (ii) for the year to
date, including a comparison of budgeted to actual income and expenses and on a
quarterly basis an explanation of material variances, and (iii) for the 12-month
period ending in and including the subject month.
(g) As soon as available, but in no event more than thirty
(30) days after the filing deadline, as may be extended from time to time,
copies of all federal, state and local tax returns of Lessee, together with all
supporting documentation and required schedules certified by the authorized
officer of Lessee as true, correct and complete.
(h) Within twenty (20) days of filing or receipt, all copies
of Medicaid cost reports and any amendments thereto filed with respect to the
Assisted Living Facilities, and copies of all responses, audit reports, or other
inquiries with respect to such cost reports, in each case certified by an
authorized officer of Lessee and the chief financial officer of Manager as true,
correct and complete.
(i) Within ten (10) days of receipt, a true, correct and
complete copy of the Medicaid Rate Calculation Worksheet (or the equivalent
thereof) issued by the appropriate Medicaid Agency for each Assisted Living
Facility.
(j) Within five (5) days of receipt, true, correct and
complete copies of any and all notices (regardless of form) from any and all
licensing and/or certifying agencies that the operating license and/or the
Medicare and/or Medicaid certification or other third party
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reimbursement program of any Assisted Living Facility is being downgraded to a
substandard category, revoked, or suspended or that any such action is pending
or threatened.
(k) Evidence of payment by Lessee or the Sublessees or by
Manager on behalf of Lessee or the Sublessees of any applicable provider bed
taxes or similar taxes, which taxes Lessee hereby agrees to pay as and when due.
(l) Within thirty (30) days after the end of each calendar
month, an aged accounts receivable report for each Assisted Living Facility
separately, in sufficient detail to show amounts due from each class of
patient-mix (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.
(m) Within forty-five (45) days of the end of each calendar
quarter, a certificate of an authorized officer of Lessee and the chief
financial officer of Manager certifying to the best of his or her knowledge
compliance with the covenants and requirements set forth above.
(n) Within forty-five (45) days of the end of each calendar
quarter during the term of the Loan, a certificate duly executed on behalf of
Lessee by its authorized officer, in form and substance satisfactory to
Noteholder, stating that, to the best of Lessee's knowledge after due inquiry,
there does not exist any Default or Event of Default under the Transaction
Documents (or if any exists, specifying the same in detail), and stating the
then-applicable LCR and DSCR, and stating to the best of Lessee's knowledge
after due inquiry that all financial statements, reports, calculations, and
other information theretofore or therewith submitted to Noteholder by or on
behalf of Lessee and Manager are true and materially complete and do not omit to
state any material information without which the same might reasonably be
misleading.
The Noteholder reserves the right to require such other financial information of
Lessee, the Sublessees, Manager and/or any Assisted Living Facility, in such
form and at such other times (including monthly or more frequently) as
Noteholder shall reasonably deem necessary, and Lessee agrees promptly to
provide or to cause to be provided, such information to Noteholder to the extent
the same is reasonably available or obtainable. All financial statements must be
in the form and detail as Noteholder may from time to time reasonably request.
4.6 GAAP . Lessee shall maintain systems of accounting established and
administered in accordance with sound business practices and sufficient in all
respects to permit preparation of financial statements on a basis consistent
with the audited financial statements of Alterra. All financial statements of
Alterra shall be prepared in accordance with GAAP, consistently applied.
4.7 ACCOUNTANTS' REPORTS . Promptly upon receipt thereof, Lessee shall
deliver copies of all significant reports submitted by independent public
accountants in connection with each annual, interim or special audit of the
financial statements or other affairs of Alterra made by such accountants,
including the comment letter submitted by such accountants to management in
connection with the annual audit.
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4.8 BOOKS AND RECORDS . Lessee shall keep and maintain at all times at
the Manager's principal place of business and/or at the Assisted Living
Facilities, or the principal place of business of Lessee to the extent required
by law, 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 Assisted Living Facilities, and copies of all written
contracts, leases (if any), and other instruments which affect the Property,
which books, records, contracts, leases (if any) and other instruments shall be
subject to examination and inspection at any reasonable time by Noteholder or
its agents or representatives (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, and subject to the residents' rights of privacy and legal requirements
with respect to confidentiality of medical records), provided, however, if an
Event of Default has occurred and is continuing, Lessee shall deliver, or cause
Manager to deliver, to the fullest extent permitted by law, to Noteholder and
Trustee upon written demand all books, records, contracts, leases (if any) and
other instruments relating to the Assisted Living Facilities or their respective
operations and Lessee authorizes Noteholder and/or Trustee to obtain a credit
report on Lessee, Manager or any Borrower Party at any time.
4.9 PAYMENT OF INDEBTEDNESS . Lessee shall duly and punctually pay or
cause to be paid all other Indebtedness now owing or hereafter incurred by
Lessee in accordance with the terms of such Indebtedness, except such
Indebtedness owing to those other than Noteholder which is being contested in
good faith by Lessee in accordance with the Transaction Documents and with
respect to which any execution against properties of Lessee have been
effectively stayed and for which reserves and collateral for the payment and
security thereof have been established as determined by Noteholder in its
reasonable discretion.
4.10 BUDGET APPROVAL PROCESS .
Within sixty (60) days following the Closing Date and,
thereafter, prior to the end of each calendar year during the term of the Loan,
Lessee shall, or shall cause Manager to, submit to Noteholder, a proposed annual
operating and capital expenditures budget for the Assisted Living Facilities for
the following calendar year. Such budget shall provide detail on a
month-by-month basis for all Operating Revenues, Operating Expenses and capital
improvement requirements (and is referred to herein as the "BUDGET"). The
Noteholder shall have the right to reasonably approve or disapprove the Budget
and Lessee shall change or cause such changes to be made to the Budget as are
reasonably necessary to obtain Noteholder's reasonable approval. Once the
Noteholder approves such Budget, it shall become effective for the next calendar
year subject to the provisions below. If the Noteholder has not approved the
Budget on or prior to December 31 of the calendar year which is about to expire,
the projections for the new calendar year as set forth on SCHEDULE 4.10 subject
to such adjustments as are necessary to achieve, in the most economic fashion,
compliance with all applicable Legal Requirements, shall be deemed to be the
Budget during such new calendar year until such time as the Noteholder approves
the new Budget. Lessee shall notify Noteholder of any proposed changes to the
Budget (following final approval thereof as aforesaid) which contemplate or
result in a change in projected Net Operating Income of more than ten percent
(10%), and any such proposed change shall be subject to Noteholder's prior
written approval as provided above. Following the Closing Date and until
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approval of the Budget as described above, the projections attached hereto as
SCHEDULE 4.10 shall be deemed to be the Budget.
Pursuant to the Trust Agreement, the Noteholder has delegated
certain rights to the Controlling Party as more fully set forth therein. Lessee
agrees that if, at any time, Noteholder shall become the Controlling Party or if
the Trust Agreement shall cease to be in effect, then as of such event and for
so long thereafter as such event shall continue, Noteholder shall, in addition
to its foregoing rights of approval, be entitled to review the then current
Budget, notwithstanding that the same may already have been approved in
accordance with the above provisions and the Trust Agreement. In connection with
such review, Noteholder shall be entitled to request, and Lessee shall effect,
such changes as Noteholder shall reasonably determine to be necessary or
desirable.
4.11 ANNUAL OWNERSHIP REPORT . Together with its annual financial
statements, Lessee shall deliver to Noteholder a written statement duly executed
on behalf of Lessee or the applicable Sublessee by the chief executive officer
or secretary of the entity, in form and substance satisfactory to Noteholder,
identifying in particularity and detail all direct ownership and beneficial
interests in Lessee or such Sublessee and stating whether any such interest is
encumbered or pledged, in each case as of the date of delivery of such notice.
4.12 MATERIAL ADVERSE CHANGE; MATERIAL ADVERSE EFFECT .
(a) Promptly upon Lessee becoming aware thereof, and in any event
within 10 days of so becoming aware, deliver to Noteholder notice of any
material adverse change in the operation of any of the Properties, Improvements
or the Assisted Living Facilities, to include, but not be limited to: any
statement of material operating and/or physical plant deficiencies; material
violations of applicable law; limitations on license or provider agreements;
bans on admissions; suspension of payments; freeze or reduction in Medicaid
rate; notice of overpayment; or being the subject of any investigation relating
to patient abuse, fraud, kickbacks, or other alleged illegal payment practices.
(b) Promptly upon Lessee or Borrower becoming aware thereof,
deliver to Noteholder notice of the occurrence of any other event which would
reasonably be expected to have a Material Adverse Effect on the business,
operations or financial condition of a Borrower Party or on the ability of such
Borrower Party to perform or comply with any of the terms and conditions of this
Agreement, the Note or any other Loan and Surety Document.
4.13 EVENTS OF DEFAULT, ETC .
(a) Promptly upon Lessee or Borrower obtaining knowledge of any of
the following events or conditions, deliver to Noteholder a certificate executed
on its behalf by its chief financial officer or similar officer specifying the
nature and period of existence of such condition or event and what action Lessee
or any Affiliate thereof has taken, is taking and proposes to take with respect
thereto: (1) any condition or event that constitutes an Event of Default or
Default; or (2) any Material Adverse Effect with respect to Lessee.
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(b) Promptly upon Lessee or Borrower becoming aware thereof, and
in any event within three Business Days of so becoming aware deliver to
Noteholder, notice of any material default beyond applicable grace periods by a
Borrower Party under any material agreement or instrument to which it is a party
or by which it or any of its properties may be subject or bound, together with a
written statement of Lessee setting forth the details thereof.
4.14 LITIGATION . Promptly upon Lessee obtaining knowledge of (1) the
institution of any action, suit, proceeding, governmental investigation or
arbitration against or affecting a Borrower Party, Sublessee or any Property not
previously disclosed in writing by Lessee to Noteholder or (2) any material
development in any action, suit, proceeding, governmental investigation or
arbitration at any time pending against or affecting a Borrower Party, Sublessee
or any Property of a Borrower Party which, in each case, is reasonably likely to
have a Material Adverse Effect, Lessee will give notice thereof to Noteholder
and provide such other information as may be reasonably available to them to
enable Noteholder and its counsel to evaluate such matter.
4.15 INSURANCE . Within the thirty (30 day) period prior to the end of
each insurance policy year of Lessee, deliver a report in form and substance
reasonably satisfactory to Noteholder outlining all material insurance coverage
maintained as of the date of such report by Lessee, and all material insurance
coverage planned to be maintained by Lessee in the subsequent insurance policy
year.
4.16 CONDUCT OF BUSINESS . Lessee shall conduct or cause to be
conducted, the operations of the Assisted Living Facilities at all times in a
manner at least consistent with Alterra's customary practice as of the date
hereof, including without limitation, the following:
(a) to maintain the standard of care for the residents of the
Assisted Living Facilities at a level in accordance with customary and prudent
industry standards;
(b) to operate the Assisted Living Facilities in a prudent manner
and in compliance at all times in all material respects with applicable laws and
regulations relating thereto, including, without limitation, to the extent
applicable, Title 42 of the United States Code and related regulations,
including the Medicare Regulations, if applicable, the Medicaid Regulations, if
applicable, federal and state self-referral and anti-kickback statutes and
regulations, Title 31 of the United States Code, including the False Claims Act;
applicable skilled nursing facility and assisted living facility licensure laws;
and public health statues and regulations.
(c) to obtain within the time frames required by applicable laws,
rules and regulations and thereafter keep, in Borrower's, Lessee's, Sublessee's
or Manager's name, as applicable, any required Permits and cause all Permits,
Reimbursement Contracts, and any other agreements necessary for the use and
operation of the Assisted Living Facilities or as may be necessary for
participation in Medicaid and/or Medicare, each, as applicable;
(d) to maintain sufficient Inventory and Equipment of types and
quantities at
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the Assisted Living Facilities to enable the operations of the Assisted Living
Facilities to be adequately performed;
(e) to maintain or cause to be maintained in good repair, working
order and condition all material properties used in the business of Lessee,
including the Properties, Improvements, and Equipment, and will make or cause to
be made all appropriate repairs, renewals and replacements thereof. Without
limitation of the foregoing, Lessee will operate and maintain, or cause to be
operated and maintained, the Properties, Improvements, and Equipment in a manner
consistent with the Budget. Lessee will repair, or cause to be repaired, the
Properties, Improvements, and Equipment to which any casualty has occurred to at
least the condition existing prior to any such casualty. All work required or
permitted under this Agreement shall be performed in a workmanlike manner and in
compliance with all applicable laws;
(f) to maintain sufficient cash, in order to satisfy the working
capital needs of the Assisted Living Facilities; and
(g) to continuously operate or cause to be continuously operated,
the Properties and Improvements as Assisted Living Facilities.
4.17 PERIODIC SURVEYS . Lessee shall furnish to Noteholder, or cause
Manager to furnish to Noteholder, (a) within twenty (20) days of receipt, a copy
of any Medicare, Medicaid or any licensing agency survey, report, and any
material statement of deficiency and material follow-up surveys, and any plans
of correction related thereto and (b) within a reasonable time, any
correspondence or other documents relating to surveys, licensure, compliance
with Medicare and Medicaid conditions of participation relating to matters which
might have a Material Adverse Effect on any Assisted Living Facility.
4.18 MANAGEMENT AGREEMENT . Lessee shall maintain the Management
Agreements in full force and effect and timely perform, or cause to be timely
performed, all of Lessee's and/or each Sublessee's obligations thereunder and
enforce, or cause to be enforced, performance of all obligations of the Manager
thereunder and not permit the termination, amendment or assignment of the
Management Agreements except on the terms permitted in the Trust Agreement.
Neither Lessee nor any Sublessee will enter into any other management agreement
without Noteholder's prior written consent, which may be withheld in the sole
and absolute discretion of Noteholder.
4.19 UPDATED APPRAISALS . For so long as the Loan remains outstanding,
if any Event of Default shall occur and be continuing hereunder, or if, in
Noteholder's reasonable judgment, a material depreciation in the value of any
Property (or any portion thereof) shall have occurred, then in any such event,
Noteholder or Trustee may cause any or all of the Properties (or any portion
thereof) to be appraised by an appraiser selected by Noteholder, and in
accordance with Noteholder's appraisal guidelines and procedures then in effect,
and Lessee agrees to cooperate in all respects with such appraisals and furnish
to the appraisers all requested information regarding the Properties and
Assisted Living Facilities as applicable. If an Event of Default shall have
occurred and be continuing or if such appraisal discloses that material
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depreciation in the value of any Property has occurred, Lessee agrees to pay all
reasonable costs incurred by Noteholder or Trustee in connection with such
appraisal which costs shall be secured by the Mortgages and shall accrue
interest at the Default Rate until paid.
4.20 COMPLY WITH COVENANTS, LAWS AND CONTRACTUAL OBLIGATIONS . Lessee
shall (A) comply, in all material respects, with all covenants and restrictions
of record and applicable laws, ordinances, rules and regulations, including,
without limitation, Title 42 of the United States Code and related regulations,
including the Medicare Regulations, if applicable, the Medicaid Regulations, if
applicable, federal and state self-referral and anti-kickback statutes and
regulations; Title 31 of the United States Code, including the False Claims Act;
applicable skilled nursing facility and assisted living facilities licensure
laws; applicable public health statues and regulations; the Americans with
Disabilities Act and the regulations thereunder, and all laws, ordinances, rules
and regulations relating to zoning, setback requirements and building codes, (B)
maintain in full force and effect and observe and comply with all of the terms
and conditions of all Regulatory Permits now held or hereafter acquired and
comply in all material respects with any and other Permits now held or hereafter
acquired by any of them, and (C) perform, observe, comply and fulfill all of its
respective obligations, covenants and conditions contained in any material
Contractual Obligation, including the Transaction Documents, and not suffer or
permit any default or event of default (giving effect to applicable notice and
cure rights) to exist under any of the foregoing.
4.21 TAXES AND OTHER CHARGES . Subject to Lessee's right to contest the
same as set forth in Section 9(d) of the Mortgages, Lessee shall pay all taxes,
assessments, charges, claims for labor, supplies, rent, and other obligations as
and when due which have given or, may give rise to a Lien against any of the
Properties, except Permitted Liens.
4.22 COST REPORTS . Lessee shall timely file Medicare and Medicaid and
other third party cost reports in an accurate manner and provide to Noteholder,
within a reasonable period of time, copies of all cost reports, as applicable,
and correspondence relating to Medicare and Medicaid and other third party cost
reports, notices of program reimbursement ("NPR") and all other documents
relating to cost reimbursement, each, as applicable.
4.23 VENDOR AGREEMENTS . Lessee shall have and maintain, on behalf of
each Assisted Living Facility, written agreements with vendors in compliance
with the Medicare prospective payment system, and otherwise comply with the
rules, regulations and requirements related to the Medicare prospective payment
system, each, as applicable.
4.24 CERTIFICATE . Upon Noteholder's written request in connection with
a Secondary Market Transaction, Lessee shall furnish Noteholder with a
certificate stating that Lessee has complied with and is in compliance with all
terms, covenants and conditions of the Transaction Documents to which Lessee 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 that the
representations and warranties contained herein are true and correct with the
same effect as though made on the date of such certificate and do not omit any
material fact (or if, as of such date, any representation or warranty has become
untrue or then omits to state a material fact, describing same with
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reasonable detail). In addition, at Noteholder's request, the Lessee shall
promptly provide evidence satisfactory to Noteholder of compliance with any
representation, warranty or covenant specified in such request.
4.25 TRANSACTION DOCUMENTS . Lessee shall comply with the terms of and
perform all obligations under the Transaction Documents which are to be
performed in favor of Noteholder or Trustee, including without limitation, all
obligations to fund Reserves as and when required as set forth in the Trust
Agreement, the Flow of Funds Agreement and any other Transaction Documents and
to the extent such obligations are by their terms to be performed for the
benefit of the Beneficiaries. Without limitation, each calendar year Lessee
shall cause an amount equal to $300.00 per Available Bed (such aggregate annual
amount, the "AVAILABLE BED CAPITAL IMPROVEMENT AMOUNT") to be deposited into the
Capital Improvements Account (at the rate of $25.00 per Available Bed per
month).
4.26 NOTICE OF FEES OR PENALTIES . Lessee shall immediately notify
Noteholder, upon Lessee's knowledge thereof, of the assessment by any state or
any Medicare, Medicaid, health or licensing agency of any fines or penalties in
excess of $25,000 against Borrower, Lessee, any Sublessee, Manager (in its
capacity as Manager of any Assisted Living Facility) or any Assisted Living
Facility.
4.27 MAINTENANCE OF ASSUMPTIONS IN LEGAL OPINIONS . Lessee shall not
cause or suffer any of the assumptions with respect to Lessee, Alterra or the
Properties set forth in any opinions of its legal counsel delivered in
connection with the Loan to be incorrect.
4.28 NOTEHOLDER'S EXPENSES . Lessee shall pay, on demand by Noteholder,
all reasonable expenses, charges, costs and fees (including reasonable
attorneys' fees and expenses) in connection with the negotiation, documentation,
administration, servicing, and collection of the Loan. On the Closing Date and
the Additional Facilities Closing Date, Noteholder may pay directly from the
proceeds of the Loan each of the foregoing expenses.
4.29 MATERIAL AGREEMENTS . Except for the Management Agreements, the
Master Lease, the Subleases, the Licensing Subleases, the Residency Agreements
(provided same are substantially in the form of the standard residency
agreements delivered to Noteholder hereunder for the respective states in which
the Assisted Living Facilities are located), the Existing Leases identified on
Schedule 4.29 or Permitted Liens, neither Lessee nor any Sublessee shall enter
into or become obligated under any material agreement pertaining to the Assisted
Living Facilities, Properties, Improvements, and Equipment, unless the same may
be terminated without cause and without payment of a penalty or premium, on not
more than thirty (30) day's prior written notice.
4.30 INSPECTION . Lessee shall permit Noteholder and any of its
authorized representatives designated by Noteholder to visit and inspect during
normal business hours, each Assisted Living Facility and its business, including
its financial and accounting records, and to make copies and take extracts
therefrom, and to discuss its affairs, finances and business with its officers
and independent public accountants (with Lessee's representative(s) present), at
such reasonable times during normal business hours and as often as may be
reasonably requested (and
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subject to resident's privacy rights and legal requirements with respect to
confidentiality of medical records). Unless an Event of Default has occurred,
Noteholder shall provide advance written notice of at least three (3) Business
Days prior to visiting or inspecting the Assisted Living Facilities, Lessee's or
Manager's offices. Lessee shall reimburse Noteholder for annual site-inspection
costs and expenses equal to not more than One Thousand Dollars ($1,000) per
Assisted Living Facility as and to the extent incurred by Noteholder.
4.31 ERISA . (a) Lessee shall deliver to Noteholder, at Lessee's
expense, the following information and notices as soon as possible, and in any
event within ten (10) Business Days: (i) after Lessee or any ERISA Affiliate
knows or has reason to know that a Termination Event has occurred, written
notice of such Termination Event; (ii) after Lessee or any ERISA Affiliate knows
or has reason to know that a prohibited transaction (as defined in Section 406
of ERISA or Section 4975 of the Code) involving Lessee or ERISA Affiliate or
Plan has occurred, written notice describing such transaction and the proposed
corrective action; (iii) after the filing thereof with the Internal Revenue
Service, a copy of each funding waiver request filed with respect to any Benefit
Plan after the occurrence thereof, (iv) notification of any increases in the
benefits of any Benefit Plan or the contributions required under any
Multiemployer Plan; (v) after receipt by Lessee or any ERISA Affiliate of any
favorable or unfavorable determination letter from the IRS regarding the
qualification of a Plan under Section 401(a) of the Code, copies of each such
letter; (vi) after receipt by Lessee or any ERISA Affiliate of any notice of the
Pension Benefit Guaranty Corporation's intention to terminate a Benefit Plan or
to have a trustee appointed to administer a Benefit Plan, a copy of each such
notice; and (vii) after receipt by Lessee or any ERISA Affiliate of a notice
from a Multiemployer Plan regarding imposition of withdrawal liability, a copy
of such notice. For purposes of this paragraph (a), Lessee shall be deemed to
know all facts known by the administrator of any Plan of which Lessee or any
ERISA Affiliate is the plan sponsor.
(b) Lessee shall establish, maintain and operate, or cause the
ERISA Affiliates to establish, maintain and operate, all Plans to comply in all
material respects with the provisions of ERISA, the Code, and all other
applicable laws, and the regulations and interpretations thereunder and the
respective requirements of the governing documents for such Plans.
4.32 ASSISTED LIVING FACILITY CONSULTANT . Upon the occurrence and
during the continuance of a Springing Lockbox Event or Event of Default,
Noteholder shall be entitled to retain, at Lessee's cost and expense, a
consultant ("ASSISTED LIVING FACILITY CONSULTANT" ) who is experienced in issues
related to health care generally and assisted living facilities specifically,
which consultant may advise Noteholder and Trustee on matters specifically
relating to the maintenance and operation of the Assisted Living Facilities,
including without limitation, matters pertaining to insurance and the Budget. In
addition, upon the occurrence and during the continuance of a Springing Lock Box
Event or Event of Default, Noteholder shall be entitled to retain such Assisted
Living Facility Consultant on an annual basis at Lessee's cost and expense for
the limited purpose of advising Noteholder in its review of the Budget
contemplated by Section 4.10 hereof. The reasonable fees and expenses of such
Assisted Living Facility Consultant shall constitute a part of the Loan
Obligations and shall be secured by the Transaction Documents.
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4.33 PLACE OF BUSINESS . Borrower and Lessee shall each provide
Noteholder with not less than thirty (30) days prior written notice of any
change in its chief executive office or principal place of business. In
addition, Borrower shall, at Lessee's expense, provide Noteholder with such
other information and amendatory financing statements as Noteholder may request
in connection therewith.
ARTICLE V NEGATIVE COVENANTS OF BORROWER PARTIES
5.1 ASSIGNMENT OF LICENSES AND PERMITS . Lessee shall not assign or
transfer, or permit any Sublessee to assign or transfer, any of its interest in
any Permits or Reimbursement Contracts (including rights to payment thereunder)
pertaining to the Assisted Living Facilities, or assign, transfer, or remove or
permit any other person to assign, transfer, or remove any records pertaining to
the Assisted Living Facilities including, without limitation, patient records,
medical and clinical records (except for removal of such patient records as
directed by the patients owning such records and the removal or surrender of
patient and/or other records as may be required to comply with applicable laws
or governmental orders), without Noteholder's prior written consent, which
consent may be granted or refused in Noteholder's sole discretion; provided,
however, that Lessee may dispose of records in accordance with applicable
provisions of law and Lessee's policies but not earlier than four (4) years
after final audit of the periods to which such records relate.
5.2 NO LIENS; EXCEPTIONS . Lessee shall not create, incur, assume or
suffer to exist, and Borrower shall not grant or create, any Lien upon or with
respect to any Property, the Assisted Living Facilities or any of such Borrower
Party's 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":
(a) Liens at any time existing in favor of the Trustee and
securing obligations under the Transaction Documents;
(b) the Master Lease the Ground Leases, the Licensing Subleases
and the Subleases (subject to the terms of the subordination and non-disturbance
agreements, among Lessee, Noteholder and each of the Sublessees and among
Borrower, Noteholder and the lessees under the Ground Leases, all in form and
substance acceptable to Noteholder);
(c) 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 by Lessee to Noteholder and discharged by
Lessee by payment, bonding or otherwise, within thirty (30) days after the
filing thereof in a manner satisfactory to Noteholder in Noteholder's sole
discretion;
(d) Liens for current year's taxes, assessments or governmental
charges or levies not delinquent, but in no case any Lien which has arisen under
operation of, or pursuant to, any Environmental Law;
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(e) Liens, exceptions and encumbrances described in the Schedule
B-1 to the Title Policies and approved by Noteholder prior to the Closing Date
(or in the case of the Title Policies covering the Additional Properties, prior
to the Additional Properties Closing Date);
(f) Liens evidencing Equipment Leases included within the
definition of Allowed Indebtedness; and
(g) Liens on the Excluded Collateral.
5.3 DISPOSITION OF ASSETS . Except as otherwise expressly permitted
hereunder or under the other Transaction Documents, neither Borrower nor Lessee
shall sell, lease, (except pursuant to Residency Agreements substantially in the
form of the standard residency agreements delivered to Noteholder hereunder for
the respective states in which the Assisted Living Facilities are located)
transfer, assign, pledge, mortgage or otherwise hypothecate or otherwise dispose
of any Property or any portion thereof, without the prior written consent of the
Noteholder, which consent may be granted or refused in Noteholder's sole
discretion; provided, however, that Borrower or SELCO may dispose of the
Excluded Collateral as permitted under the Trust Agreement.
5.4 CHANGE OF BUSINESS . Lessee shall not make any material change in
the nature of business as it is being conducted as of the date hereof without
the express written consent of Noteholder; provided, however, that changes in
the nature or type of services offered at any Assisted Living Facility shall not
violate the foregoing covenant so long as such Assisted Living Facility
continues to be used solely for purposes within the uses described in the
definition of "Assisted Living Facilities" herein.
5.5 CHANGES IN ACCOUNTING . Lessee shall not make any change to the
existing methods of accounting, unless the system of accounting post change
continues to be on a basis of accounting consistent with the audited financial
statements of Alterra and sound business practices 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.
5.6 INTENTIONALLY OMITTED .
5.7 TRANSFER OF OWNERSHIP INTERESTS . Except as otherwise expressly
permitted hereunder or under the Participation Agreement, permit any change in
the ownership interests in Borrower, Lessee or any Sublessee (other than the
purchase by Alterra or a wholly-owned subsidiary of Alterra of partnership
interests in the Sublessees in accordance with the limited partnership
agreements of the Sublessees) without the prior written consent of Noteholder
which may be granted or withheld in Noteholder's sole discretion.
5.8 RESTRICTION ON FUNDAMENTAL CHANGES . No Borrower Party shall:
(a) (i) amend, modify or waive (or permit any other Person
to do so) any term
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or provision of such Borrower Party's Charter Documents unless required by law;
or (ii) liquidate, wind-up or dissolve (or permit any other Person to do so)
such Borrower Party.
(b) (i) except as provided in Article VIII hereof or as
expressly provided under the Participation Agreement, issue, sell, assign,
pledge, convey, dispose or otherwise encumber (or permit any other Person to do
so) any stock, membership interest, partnership interest, or other equity or
beneficial interest in any Borrower Party or grant any options, warrants,
purchase rights or other similar agreements or understandings with respect
thereto; or (ii) acquire by purchase or otherwise (or permit any other Person to
do so) all or any part of the business or assets of, or stock or other evidence
of beneficial ownership of, any such Borrower Party.
5.9 TRANSACTIONS WITH AFFILIATES . Lessee shall not pay any management,
consulting, director or similar fees to any Affiliate of Lessee or to any
director, officer or employee thereof, nor directly or indirectly enter into or
permit to exist any transaction (including the purchase, sale, lease or exchange
of any property or the rendering of any service) with any Affiliate of or with
any director, officer or employee of Lessee, except transactions in the ordinary
course of and pursuant to the reasonable requirements of the business of Lessee
and upon fair and reasonable terms which are fully disclosed to Noteholder prior
to consummation and are no less favorable to Lessee than would be obtained in a
comparable arm's length transaction with a Person that is not an Affiliate of
Lessee. Other than the Management Agreements, the Master Lease, the Subleases
and the Licensing Subleases, each agreement of Lessee with any Affiliate of
Lessee shall be for a term not to exceed one year, and shall provide that the
same may be terminated by Noteholder at its option without penalty or premium
during the continuation of an Event of Default, and shall provide that no
payments may be made thereunder when any Event of Default shall exist or in any
event prior to the payment of debt service on the Loan. Lessee shall not make
any payment or permit any payment to be made to any Affiliate of Lessee when any
Event of Default shall exist.
5.10 CHANGE OF USE . Lessee shall not alter (except in accordance with
the terms of the Trust Agreement or the Mortgages) or change the use of the
Property or Improvements in any material respect or permit any management
agreement for the Property or Improvements other than the Management Agreements
or enter into any operating lease for any Assisted Living Facility (other than
the Master Lease and the Subleases), unless Lessee first notifies Noteholder and
provides Noteholder a copy of the proposed lease agreement or management
agreement, obtains Noteholder's written consent thereto, which consent may be
withheld in Noteholder's sole and absolute discretion, and obtains and provides
Noteholder with a subordination agreement in form satisfactory to Noteholder, as
determined by Noteholder in its sole and absolute discretion, from such manager
or lessee subordinating their respective rights to all rights of Noteholder.
Notwithstanding the foregoing, Lessee may (without obtaining Noteholder's
consent pursuant to the foregoing (but upon at least ten (10) Business Days
prior written notice to Noteholder and Trustee), make alterations or
improvements (collectively, "ALTERATIONS") to any Assisted Living Facility of 60
beds or less provided that the cost of any such Alterations individually, or in
the aggregate for any twelve (12) month period, does not exceed $100,000 and to
any Assisted Living Facility of more than 60 beds provided that the cost of any
such Alterations individually, or
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in the aggregate for any twelve (12) month period, does not exceed $250,000.
5.11 INTENTIONALLY DELETED .
5.12 DIVIDENDS, DISTRIBUTIONS AND REDEMPTIONS . Neither Borrower nor
Lessee shall make any distribution of cash or other assets to any of its
partners or constituents except as permitted by and in accordance with the Flow
of Funds Agreement, and except for a transfer of the Excluded Collateral or any
proceeds thereof to any shareholders of Borrower upon the occurrence of an Event
of Default or a Lease Event of Default.
5.13 INDEBTEDNESS . Neither Borrower nor Lessee shall create, incur,
assume or suffer to exist any Indebtedness, whether secured or unsecured or
subordinate or prior to the Loan Obligations, other than Allowed Indebtedness
and any indebtedness of Borrower to any of its shareholders secured by the
Excluded Collateral.
5.14 BANKRUPTCY, RECEIVERS, SIMILAR MATTERS .
(a) VOLUNTARY CASES. No Borrower Party shall commence a
voluntary case under the Bankruptcy Code or under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect.
(b) INVOLUNTARY CASES, RECEIVERS, ETC. No Borrower Party or
Affiliate of such Borrower Party shall apply for, consent to, or aid, solicit,
support, or otherwise act, cooperate or collude to cause the appointment of or
taking possession by, a receiver, trustee or other custodian for all or a
substantial part of the assets of such Borrower Party. As used in this
Agreement, an "INVOLUNTARY BORROWER PARTY BANKRUPTCY" shall mean any involuntary
case under the Bankruptcy Code or any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, in which such Borrower Party is a debtor
or any portion of the Property is property of the estate therein. No Borrower
Party and no Affiliate of such Borrower Party shall file a petition for, consent
to the filing of a petition for, or aid, solicit, support, or otherwise act,
cooperate or collude to cause the filing of a petition for an Involuntary
Borrower Party Bankruptcy. In any Involuntary Borrower Party Bankruptcy, such
Borrower Party or any Affiliate of any Borrower Party shall, without the prior
written consent of Noteholder, consent to the entry of any order, file any
motion, or support any motion (irrespective of the subject of the motion), and
no Borrower Party or any such Affiliate shall file or support any plan of
reorganization. Each Borrower Party having any interest in any Involuntary
Borrower Party Bankruptcy shall do all things reasonably requested by Noteholder
to assist Noteholder in obtaining such relief as Noteholder shall seek, and
shall in all events vote as directed by Noteholder. Without limitation of the
foregoing, each such Borrower Party shall do all things reasonably requested by
Noteholder to support any motion for relief from stay or plan of reorganization
proposed or supported by Noteholder. Nothing in this provision shall obligate
any Borrower Party or Affiliate to act contrary to any order of any court, which
order was not sought or acquiesced in at the direction of Noteholder or by any
Borrower Party or any Affiliate.
5.15 NO NEGATIVE PLEDGES . No Borrower Party shall enter into or assume
any
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agreement (other than the Transaction Documents) prohibiting the creation or
assumption of any Lien upon its properties or assets, whether now owned or
hereafter acquired.
5.16 CHANGES RELATING TO INDEBTEDNESS . Other than accounts payable to
trade creditors, Lessee shall not change or amend (or allow for the change or
amendment to) the terms of any Indebtedness (other than Allowed Indebtedness)
without the prior written consent of Noteholder.
5.17 CONTINGENT OBLIGATIONS . No Borrower Party shall be or become
liable as a guarantor, surety or otherwise for any obligation of any other
Person or for any Contingent Obligation of any kind except for obligations
created by the Allowed Indebtedness.
5.18 ERISA . Lessee shall not and shall not permit any ERISA Affiliate:
(a) Without Noteholder's prior written consent, to
establish, maintain, contribute to or become obligated to contribute to any (i)
Benefit Plan, (ii) Multiemployer Plan or (iii) welfare benefit plan which
provides benefits to employees after termination of employment other than as
required by Part 6 of Title I of ERISA:
(b) To engage in any prohibited transaction described in
Section 406 of ERISA or Section 4975 of the Code for which a statutory or class
exemption is not applicable or a private exemption has not been previously
obtained from the U.S. Department of Labor and for which a civil penalty
pursuant to Section 502(i) of ERISA or excise tax pursuant to Section 4975 of
the Code in excess of $25,000 is imposed;
(c) To permit any accumulated funding deficiency (within the
meaning of Section 302 of ERISA or Section 412 of the Code) in excess of $25,000
with respect to any Benefit Plan, whether or not waived;
(d) To terminate any Benefit Plan under circumstances which
would result in any liability under Title IV of ERISA;
(e) To fail to make any contribution or payment to any
Multiemployer Plan which any Borrower Party or ERISA Affiliate may be required
to make under any agreement relating to such Multiemployer Plan; or
(f) To fail to maintain any Plan in material compliance with
the applicable provisions of ERISA and the Code.
5.19 SINGLE PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS COVENANTS AND
WARRANTIES . Each Borrower Party, as to itself, hereby represents, warrants and
covenants as of the Closing Date and also until such time as all Loan
Obligations are paid in full, that absent express advance written waiver from
Noteholder, which may be withheld in Noteholder's sole discretion, such Borrower
Party:
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(a) does not as to itself own and will not own any assets
other than its respective interests in the Assisted Living Facilities,
Properties (including the Master Lease, the Subleases and the Ground Leases),
Improvements, Equipment and Inventory (including incidental personal property
necessary for the operation thereof and proceeds therefrom) (and in the case of
Borrower its interests in the Excluded Collateral) or;
(b) is not engaged and will not engage in any business,
directly or indirectly, other than the ownership, leasing, management,
subleasing and /or operation of the Assisted Living Facilities, Properties,
Improvements, Equipment and Inventory (including incidental personal property
necessary for the operation thereof and proceeds therefrom);
(c) will not enter into any contract or agreement with any
partner, member, shareholder, trustee, beneficiary, principal or Affiliate of
any Borrower Party except upon terms and conditions that are intrinsically fair
and substantially similar to those that would be available on an arms-length
basis with third parties other than such Affiliate;
(d) has not incurred and will not incur any debt, secured or
unsecured, direct or contingent (including guaranteeing any obligation), other
than as expressly permitted under Section 5.13;
(e) has not made and will not make any loan or advances to
any Person (including any of its Affiliates), other than as expressly permitted
under Section 5.13;
(f) is and reasonably expects to remain solvent and pay its
own liabilities, indebtedness, and obligations of any kind from its own separate
assets as the same shall become due;
(g) has done or caused to be done and will do all things
necessary to preserve its existence, and will not, nor will any partner, member,
shareholder, trustee, beneficiary, or principal thereof amend, modify or
otherwise change such Borrower Party's partnership certificate, partnership
agreement, articles of incorporation, by-laws, articles of organization,
operating agreement, or other organizational documents in any manner;
(h) shall continuously maintain its existence and be
qualified to do business in all states necessary to carry on its business,
including without limitation, the states where the Properties are located;
(i) will conduct and operate its business in the manner
permitted under the Transaction Documents subject to the adequacy of cash flow;
(j) will maintain books and records and bank accounts
separate from those of its partners, members, shareholders, trustees,
beneficiaries, principals, Affiliates, and any other Person;
(k) will be, and at all times will hold itself out to the
public as, a legal entity
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separate and distinct from any other Person (including any of its partners,
members, shareholders, trustees, beneficiaries, principals and Affiliates, and
any Affiliates of any of the same), and not as a department or division of any
Person and will correct any known misunderstanding regarding the separate
identity of such Borrower Party;
(l) Borrower will file its own tax returns;
(m) has and reasonably expects 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;
(n) will not seek, acquiesce in, or suffer or permit its
liquidation, dissolution or winding up, in whole or in part;
(o) will not enter into any transaction of merger or
consolidation, or acquire by purchase or otherwise all or substantially all of
the business or assets of, or any stock or beneficial ownership of, any Person;
(p) Borrower will not commingle or permit to be commingled
its funds or other assets with those of any other Person;
(q) except as expressly provided in the Transaction
Documents, has and will 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 other Person;
(r) except as expressly provided for in the Transaction
Documents, does not and will not hold itself out to be responsible for the debts
or obligations of any other Person;
(s) except as expressly provided for in the Transaction
Documents, has not and will not guarantee or otherwise become liable on or in
connection with any obligation of any other Person;
(t) subject to the adequacy of cash flow, shall not do any
act which would make it impossible to carry on its ordinary business;
(u) will not possess or assign any Collateral for other than
a business or company purpose;
(v) will not breach the covenants of Article VIII or
Sections 5.4 or 5.8 applicable to it;
(w) except as expressly provided in the Transaction
Documents, shall not hold title to its assets other than in its name;
(x) shall not institute proceedings to be adjudicated
bankrupt or insolvent;
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consent to the institution of bankruptcy or insolvency proceedings against it;
file a petition seeking, or consent to, reorganization or relief under any
applicable federal or state law relating to bankruptcy; consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestration (or
other similar official) of it or a substantial part of its property; or make any
assignment for the benefit of creditors; or admit in writing its inability to
pay its debts generally as they become due;
(y) Borrower shall comply with all of the assumptions,
statements, certifications, representations, warranties and covenants regarding
or made by Borrower contained in or appended to the nonconsolidation opinion of
Borrower's legal counsel delivered to Noteholder concurrently with Closing;
(z) will not agree to enter into or consummate any
transaction which would render the representations set forth in Sections 3.27 or
3.28 untrue at any time;
(aa) will not fail to pay the salaries of its own employees
and maintain a sufficient number of employees in light of its contemplated
business operations;
(bb) fail to allocate any overhead for shared office space
in a fair and reasonable manner.
5.20 ADDITIONAL SINGLE PURPOSE, BANKRUPTCY REMOTE COVENANTS . In
addition to their respective obligations under Section 5.19, each of Borrower
and Lessee, for itself, hereby represents, warrants and covenants as of the
Closing Date and until such time as all Loan Obligations are paid in full, that
without Noteholder's prior written consent, which may be withheld in
Noteholder's sole discretion, Borrower and Lessee:
(a) shall not, without the authorization and direction of
its Outside Director, institute proceedings for itself to be adjudicated
bankrupt or insolvent; consent to the institution of a bankruptcy or insolvency
proceedings against it; file a petition seeking, or consent to, reorganization
or relief under any applicable federal or state law relating to bankruptcy;
consent to the appointment of a receiver, liquidator, assignee, trustee,
sequestration (or other similar official) for itself or a substantial part of
its property; make any assignment for the benefit of creditors; or admit in
writing its inability to pay its debts generally as they become due; or admit in
writing its ability to pay its debts generally as they become due;
(b) shall not, without the affirmative vote of its Outside
Director, for itself (i) liquidate or dissolve, in whole or in part; (ii)
consolidate, merge or enter into any form of consolidation with or into any
other Person, nor convey, transfer or lease its assets substantially as an
entirety to any Person nor permit any Person to consolidate, merge or enter into
any form of consolidation with or into itself, nor convey, transfer or lease its
assets substantially as an entirety to any Person; and (iii) amend any
provisions of its charter containing provisions similar to those contained in
this Article V;
(c) shall promptly elect and at all times maintain at least
one independent director (an "OUTSIDE DIRECTOR"), who shall be reasonably
satisfactory to Noteholder and shall
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not have been at the time of such individual's appointment as Outside Director,
and may not have been at any time during the preceding five (5) years, (i) a
shareholder of, or an officer, director, partner or employee of, Borrower or
Lessee or their respective shareholders, members, subsidiaries or Affiliates,
(ii) a customer of, or supplier to, Borrower or Lessee or their respective
shareholders, members, subsidiaries or Affiliates, (iii) a Person controlling or
under common control with any such shareholder, director, partner, member,
supplier or customer, or (iv) a member of the immediate family of any such
shareholder, member, officer, director, partner, employee, supplier or customer.
5.21 APPLICATION OF CERTAIN COVENANTS TO SUBLESSEES . Lessee shall not
permit any of the Sublessees to incur any Indebtedness other than Allowed
Indebtedness, nor with respect to any of their assets, incur any Lien other than
Permitted Liens.
5.22 MANAGEMENT . Lessee shall provide competent and responsible
management for the Properties by a professional management company pursuant to
written Management Agreements, in each case satisfying the criteria set forth
herein. Without Noteholder's prior written consent both as to the form of the
Management Agreement and the identity of the Manager, Lessee shall not enter
into, modify or amend, or permit to be entered into, modified or amended, any
Management Agreement, or permit any change in the identity of any Manager, or
otherwise retain the services of any management company. Without limitation of
the foregoing, each Management Agreement or the Subordination of Management
Agreements shall provide that (i) the management fees payable thereunder shall
not exceed the prevailing amount for fees for management of properties of
comparable size, quality, and tenant mix in the market where the Property is
located, (ii) if the Manager is an Affiliate of Lessee, no Management Fee shall
be payable at or with respect to any time when an Event of Default has occurred
and is continuing and (iii) the Management Agreements shall be terminable at
Noteholder's option without penalty or premium upon the occurrence of an Event
of Default (subject to the approval of the Sublessees if and to the extent
required under the Assignments of Management Agreement).
ARTICLE VI ENVIRONMENTAL HAZARDS
6.1 PROHIBITED ACTIVITIES AND CONDITIONS . Except for the matters
described in Section 6.2, Lessee 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 any
Property or any Improvements;
(b) The transportation and disposal of any Hazardous
Materials to, from, or across any the Property and Improvements;
(c) Any occurrence or condition on any Property or in the
Improvements or any other property of Lessee, which occurrence or condition is
or may be in violation of
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Environmental Law or give rise to liabilities under Environmental Laws;
(d) Any violation of or noncompliance with the terms of any
Environmental Law or any Environmental Permit with respect to any Property, the
Improvements the use or operation of any Property or the Improvements or any
property of Lessee; or
(e) The creation of any lien imposed by operation of, or
pursuant to, any Environmental Law.
The matters described in clauses (a) through (e) 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 Section 6.1 to
the contrary, "Prohibited Activities and Conditions" shall not include (a) the
safe and lawful use and storage of customary quantities of (1) pre-packaged
supplies, medical waste, cleaning materials, petroleum products or other
Hazardous Materials which are customarily and lawfully used in the operation and
maintenance of comparable assisted living facilities, (2) cleaning materials,
personal grooming items and other items sold in pre-packaged containers for
consumer use and used by occupants of the Assisted Living Facilities; (3) the
presence on the Properties and/or Improvements of asbestos or
asbestos-containing materials where the same are not required under
Environmental Law to be removed, encapsulated or otherwise abated and where
Lessee has complied with Environmental Law with respect to any O&M Program,
notices or warnings required under Environmental Law to be performed or given
concerning such asbestos or asbestos-containing materials; (4) petroleum
products used in the operation and maintenance of motor vehicles from time to
time located on any Property's parking areas, so long as all of the foregoing
are used, stored, handled, transported and disposed of in compliance with
Environmental Law, and (b) activities normal, customary and lawful in the
operation of comparable nursing homes.
6.3 PREVENTIVE ACTION . Lessee shall take all appropriate steps
(including the inclusion of appropriate provisions in any Leases approved by
Noteholder which are executed after the date of this Agreement) to prevent its
employees, agents, contractors, tenants and occupants of any of the Assisted
Living Facilities from causing or permitting any Prohibited Activities and
Conditions.
6.4 O & M PROGRAM COMPLIANCE . If an O&M Program or O&M Programs have
been established with respect to Hazardous Materials, Lessee shall comply in a
timely manner with, and cause all employees, agents, and contractors thereof and
any other persons present on the Property to comply with the applicable O&M
Program. All costs of performance of Lessee's obligations under any O&M Program
shall be paid by Lessee, and Noteholder's out-of-pocket costs incurred in
connection with the monitoring and review of any O&M Program and Lessee's
performance shall be paid by Lessee upon demand by Noteholder. Any such
out-of-pocket costs of Noteholder which Lessee fails to pay promptly shall
become an additional part of the Loan Obligations. Noteholder shall have the
right, but not the obligation, to review and, if Noteholder
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so elects, to approve any O&M Program proposed to be established by Lessee.
6.5 LESSEE'S ENVIRONMENTAL REPRESENTATIONS AND WARRANTIES . Lessee
represents and warrants to Noteholder that, to the best of its knowledge based
on its review of, and except as set forth in, the Environmental Reports
described on SCHEDULE 6.5 hereto:
(a) Lessee has not at any time caused, permitted or suffered
to exist any Prohibited Activities and Conditions.
(b) Lessee or the applicable Sublessee has all Environmental
Permits required to carry on its business with respect to its Assisted Living
Facilities, Properties and Improvements and each of such Environmental Permits
is in full force and effect and each of Lessee and/or the applicable Sublessee
is in compliance with the terms and conditions thereof and the transactions
contemplated by this Agreement shall not cause any of such Environmental Permits
to lapse or become invalid. No event has occurred with respect to any 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.
(c) Except as disclosed on SCHEDULE 6.5(C), the Properties
and the Improvements do not now contain any underground storage tanks, and, to
the best of Lessee's knowledge after reasonable and diligent inquiry, the
Properties and the Improvements have not contained any underground storage tanks
in the past. If there is an underground storage tank located on any Property or
the Improvements which has been previously disclosed by Lessee to Noteholder in
writing, that tank strictly complies with all requirements of Environmental Law.
(d) Each of Lessee and/or the applicable Sublessee has
complied and is in compliance with all limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in any Environmental Law applicable to the Properties and/or
Improvements or any property of Lessee.
(e) No notice, notification, demand, request for
information, citation, summons or order has been issued, no complaint or notice
of violation has been filed or served, no penalty has been assessed, no
investigation or review is pending or threatened by any Governmental Authority
or any other Person with regard or with respect to the Release of Hazardous
Materials, the disposal or arrangement for disposal of Hazardous Materials,
noise emissions, Hazardous Materials, violation or alleged violation of
Environmental Law at, to or from the Property, the Improvements, the use or
operation of either, or any property owned by Lessee.
(f) Neither the Properties nor any Improvements contains any
treatment, storage or disposal facility requiring an Environmental Permit.
(g) No asbestos or asbestos-containing material is or has
been present at the Properties or the Improvements in violation of any
Environmental Law except as disclosed to the Noteholder by Lessee prior to the
Closing Date.
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(h) Neither Lessee nor any of its predecessors has
transported or arranged for the transportation of any Hazardous Materials from
the Properties or Improvements to any location that is listed on the National
Priorities List ("NPL") under CERCLA, listed for possible inclusion on the NPL
in the Comprehensive Environmental Response and Liability Information System
("CERCLIS"), or is listed on any similar state or local list or that is the
subject of federal, state or local enforcement actions or other investigations.
(i) No Hazardous Material has been recycled, treated, stored
or Released by Borrower or Lessee except in accordance with applicable
Environmental Law.
(j) No oral or written notification of a Release of a
Hazardous Material has been filed by or on behalf of Lessee with respect to any
portion of the Property and/or Improvements and no portion of the Property
and/or Improvements or other property owned by Lessee is listed or proposed for
listing on the NPL, CERCLIS or any similar state or local list of sites
requiring investigation or remediation.
(k) No liens have arisen under or pursuant to any
Environmental Law on any of the Properties and/or Improvements, and no
governmental action has been taken or is in process that could subject any such
Property or Improvements to such liens and Lessee is not required to place any
notice or restriction relating to the presence of Hazardous Materials at any of
the Properties and/or Improvements.
(l) All environmental investigations, studies, audits,
tests, reviews or other analyses conducted by, or that are in the possession of
Lessee, relating to any Property and/or Improvements have been delivered to
Noteholder prior to the Closing Date.
(m) Lessee has no knowledge of any facts, events or
conditions relating to any Properties and/or Improvements which could reasonably
be expected to interfere with or prevent continued compliance with any
Environmental Law, give rise to any liability under Environmental Law, or
otherwise form the basis of any claim, action, suit, proceeding, hearing or
investigation against or involving Lessee, any Properties and/or Improvements
under any Environmental Law.
The representations and warranties in this Article VI shall be
continuing representations and warranties that shall be deemed to be made by
Lessee as of the Closing Date and throughout the term of the Loan until the Loan
Obligations have been paid in full.
6.6 NOTICE OF CERTAIN EVENTS . Lessee shall promptly notify
Noteholder in writing and in reasonable detail of any and all of the following
that may occur:
(a) Lessee's or Manager's discovery of any Prohibited
Activity and Condition.
(b) Lessee's or Manager's receipt of or knowledge of any
complaint, order, demand, request for information, notice of violation,
investigation, testing, proposed testing 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
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matters affecting any Property, the Improvements or any other property that is
adjacent to any 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 Lessee shall not relieve Lessee of,
or result in waiver of, any obligation under this Agreement, the Note, or any of
the other Loan Documents.
6.7 COSTS OF INSPECTION . Lessee shall pay promptly the costs of
any environmental inspections, tests or audits required by Noteholder or Trustee
in connection with any foreclosure or deed in lieu of foreclosure, or, if
required by Noteholder or Trustee, as a condition of Noteholder's or Trustee's
consent to any "TRANSFER" (as defined in the Mortgages), or required by
Noteholder following a reasonable determination by Noteholder that Prohibited
Activities and Conditions may exist. Any such costs incurred by Noteholder or
Trustee (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 Lessee 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, removal, restoration or other remedial work ("REMEDIAL
WORK") is necessary to comply with any Environmental Law or order of any
Governmental Authority that has or acquires jurisdiction over the Property, the
Improvements or the use, operation or improvement of the Properties under any
Environmental Law, Lessee shall, by the earlier of (1) the applicable deadline
required by Environmental Law or (2) thirty (30) days after notice from
Noteholder 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 and in accordance with applicable
Environmental Law. If Lessee fails to begin on a timely basis or diligently
prosecute any required Remedial Work, Noteholder may, at its option, cause the
Remedial Work and any other efforts deemed necessary by Noteholder in its sole
and absolute discretion, to be completed, in which case Lessee shall reimburse
Noteholder on demand for all costs of doing so. Any reimbursement due from
Lessee to Noteholder shall become part of the Loan Obligations.
6.9 COOPERATION WITH GOVERNMENTAL AUTHORITIES . Lessee 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.
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:
(a) The failure by Borrower or Lessee to make any scheduled
payment amount, due under the Note, this Agreement or any of the Transaction
Documents in respect of the Loan Obligations (whether such amount is interest,
principal, deposits into the Tax and
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Insurance Escrow Fund, Capital Improvements Account and any other scheduled
reserve payments required under the Transaction Documents or otherwise) within
three (3) days after the same becomes due; or
(b) Any failure by Borrower or Lessee to pay any Loan
Obligation other than a scheduled payment amount within ten (10) days after the
same shall become due.
(c) Lessee's failure to deliver or cause to be delivered the
financial statements and information set forth in Sections 4.5, 4.7 and 4.8
above within the times required when such failure is not cured within twenty
(20) days following Noteholder's written notice to Lessee thereof; or
(d) Breach or default under Sections 3.27, 3.28, 4.4, 4.12,
4.13, 4.14, 4.31, Article V or Article VIII hereof;
(e) The failure of Borrower, Lessee or Manager properly and
timely to perform or observe any covenant or condition set forth in this
Agreement or the other Transaction Documents and not otherwise described
elsewhere in this Section 7.1 and such failure is not fully cured within thirty
(30) days after receipt by Borrower or Lessee of notice from Noteholder of such
failure; or, if such failure is not capable of being cured within said thirty
(30) day period such failure is not cured within such additional period as may
be reasonably required to cure such failure (but in no event to exceed ninety
(90) days from the date of notice) provided that Borrower or Lessee commences
such cure within the initial thirty (30) day period and diligently prosecutes
same to completion; and provided further that, in the case of a failure by
Borrower, Lessee, any Sublessee or Manager to obtain any Regulatory Permit in
accordance with Section 3.11, such initial thirty (30) day period shall not be
extended for any additional period pursuant to the foregoing if such extension
would have a Material Adverse Effect ; or
(f) The filing by any Borrower Party or the Manager 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
(g) The entry by a court of competent jurisdiction of an
order, judgment, or decree approving a petition filed against any Borrower Party
or the Manager which such 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
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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, earnings, profits or
income thereof which appointment shall remain unvacated and unstayed for an
aggregate of sixty (60) days (whether or not consecutive); or
(h) Intentionally Omitted; or
(i) Any certificate, statement, representation, warranty or
audit heretofore or hereafter furnished by or on behalf of Borrower, Lessee or
Manager pursuant to or in connection with this Agreement (including, without
limitation, representations and warranties contained herein or in any of the
Loan and Surety Documents for the benefit of Noteholder) or as an inducement to
Noteholder to make the Loan to Borrower, proves (i) to have been false in any
material respect at the time when the facts therein set forth were stated or
certified, or proves to have omitted any substantial contingent or unliquidated
liability or claim against Borrower, Lessee or Manager, including a Contingent
Obligation or (ii) with respect to financial statements, books and records not
to have been prepared in accordance with GAAP or on the date of execution of
this Agreement there shall have been any materially adverse change in any of the
acts previously disclosed by any such certificate, statement, representation,
warranty or audit, which change shall not have been disclosed to Noteholder in
writing at or prior to the time of such execution; or
(j) The failure of Lessee to correct, within the time
deadlines set by any applicable Medicare, Medicaid or other applicable
reimbursement programs or licensing agency, any deficiency which would result in
the following actions by such agency with respect to any Assisted Living
Facility:
(i) The action by the Medicaid or Medicare programs,
any other governmental agency or actor, or any other third
party payer to suspend or offset an amount of more than
$250,000 to recoup overpayments or recover improper
payments.
(ii) a termination of any Reimbursement Contract
representing more than $2,000,000 in annual Operating
Revenues or any Regulatory Permit; or
(iii) a ban on new admissions generally or any ban of
thirty (30) days or more on admission of patients otherwise
qualifying for Medicaid or Medicare coverage or other
reimbursement; or
(k) Lessee, any Sublessee or Manager (in its capacity as
Manager of any Assisted Living Facility) or any Assisted Living Facility shall
be assessed fines or penalties by any state or any Medicare, Medicaid, health or
licensing agency having jurisdiction over such Persons or the Assisted Living
Facilities in excess of $25,000 for a single Assisted Living Facility or
$150,000 in the aggregate for all Assisted Living Facilities during any calendar
year (which fines are not paid on a timely basis), or Lessee, any Sublessee or
Manager (in its capacity as Manager of any Assisted Living Facility) or any
Assisted Living Facility should agree to pay in lieu of such fines or penalties
an amount in settlement of any action to any state or any Medicare, Medicaid,
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health or licensing agency having jurisdiction over such Persons or the Assisted
Living Facilities in excess of $25,000 as related to a single Assisted Living
Facility or $150,000 in the aggregate for all Assisted Living Facilities during
any calendar year (which settlement is not paid on a timely basis).
(l) A final judgment in excess of $100,000 (individually or
in the aggregate) shall be rendered by a court of law or equity against Lessee
or Manager or any of their respective assets, 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 Lessee or
Manager, 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 Noteholder; or
(m) If any provision of any organizational documents
affecting the purpose for which any Borrower Party is formed is amended or
modified in any manner which is reasonably likely to result in a Material
Adverse Effect on the Loan or the security therefor, or if any Borrower Party or
any member of such Borrower Party fails to perform or enforce the provisions of
any organizational documents in a manner that is reasonably likely to result in
a Material Adverse Effect on the Loan or security therefor;
(n) The occurrence of an "EVENT OF DEFAULT" as that term is
defined in the Trust Agreement or the Master Lease, or the failure of any Person
which is a party to the Trust Agreement to pay or perform any obligations to the
Noteholder under the Trust Agreement beyond any grace period provided therein;
or
(o) Any dissolution or attempted dissolution of any Borrower
Party;
(p) The occurrence of a Downgrade Surety Default which
results in the S&P Rating of the Surety or the Backstop Insurer being downgraded
below Investment Grade, being withdrawn or Qualified (any such Downgrade Surety
Default, withdrawal or Qualification, an "Investment Grade Downgrade"):
(i) on or before the second (2nd) anniversary of the
Closing Date, if the Net Operating Income from the
Properties for the preceding twelve (12) calendar months (or
the period from the Closing Date to the last day of the
calendar month preceding the occurrence of such Investment
Grade Downgrade, if less than twelve (12) months), shall be
less than the projected net operating income from the
Properties for such period as set forth in Schedule 4.10,
unless within ten (10) Business Days after Lessee receives
notice of the occurrence of such Investment Grade Downgrade,
Lessee delivers to Trustee for deposit into the Additional
Reserve Account under Article 3 of the Trust Agreement the
sum of $10,000,000; or
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(ii) at any time after the second (2nd) anniversary
of the Closing Date, if Lessee has not achieved a DSCR of at
least 1.40:1.00 for the trailing twelve (12) calendar
months;
(q) The existence of any other Surety Default (other than a
Downgrade Surety Default);
(r) Any default (including expiration of any applicable
grace or cure periods) or Event of Default under any of the Transaction
Documents not otherwise described hereinabove; .
(s) Any of the Transaction Documents for any reason ceases
to be in full force and effect or is declared to be null and void, or any Person
who is a party thereto, other than Noteholder, denies that it has any further
liability (as distinguished from denial of the existence of a Default or Event
of Default) under any Transaction Document to which it is party, or gives notice
to such effect;
(t) Any Borrower Party or Sublessee is enjoined, restrained
or in any way prevented by the order of any court or any administrative or
regulatory agency from conducting all or any material part of its business and
such order continues for more than 30 days; or
(u) (i) Lessee or Guarantor shall default in the payment
when due of any payment obligation under any Indebtedness with an outstanding
principal balance in excess of $1 million or under any lease agreement involving
payment of rent in an aggregate amount in excess of $1 million now existing or
hereafter entered into by Lessee or Guarantor (any such Indebtedness or lease
obligations, "MATERIAL INDEBTEDNESS"), which default shall continue after the
expiration of any applicable notice or cure period therein provided or (ii) the
acceleration of any Material Indebtedness (or the termination of any lease
evidencing Material Indebtedness).
Notwithstanding anything in this Section, all requirements of notice
shall be deemed eliminated if Noteholder or Trustee 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. The provisions of paragraph (e) above do
not provide a cure for Events of Default under other paragraphs of this Section
7. 1.
7.2 REMEDIES . Subject to the terms of the Trust Agreement, upon
the occurrence of any one or more of the foregoing Events of Default:
(a) Upon the occurrence of any Event of Default described in
the foregoing subsections 7.1(f) or 7.1(g), (excluding any such Event of Default
respecting Manager) the unpaid principal amount of and accrued interest and fees
on the Loan and all other Loan Obligations shall automatically become
immediately due and payable, without presentment, demand, protest, notice of
intent to accelerate, notice of acceleration or other requirements of any kind,
all of which are hereby expressly waived by Borrower and Lessee. Upon the
occurrence and during the continuance of any other Event of Default, at the
option of Noteholder, which may be exercised
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without notice or demand to anyone, all or any portion of the Loan and the other
Loan Obligations shall immediately become due and payable.
(b) Upon the occurrence and during the continuance of any
Event of Default, (including any Event of Default under Sections 7.1(f) and
7.1(g) respecting Manager) Noteholder shall have the right to exercise all
rights and remedies which are specified in any Loan Document or otherwise
available at law or in equity. Without limitation of the foregoing, Noteholder
may cease or suspend any and all performance required of Noteholder under the
Transaction Documents upon the occurrence of any Event of Default.
(c) If any Event of Default shall occur and be continuing,
then there shall be no requirement of notice and time to cure for any other or
subsequent Default.
ARTICLE VIII RESTRICTIONS ON TRANSFER
8.1 RESTRICTIONS ON TRANSFER AND ENCUMBRANCES . Except for a
Transfer and Assumption consented to by Noteholder in accordance with Section
8.2, Permitted Liens or (as to Borrower) as expressly permitted under the
Participation Agreement, neither Borrower nor Lessee shall cause or suffer to
occur any sale, transfer, pledge, or encumbrance of (i) all or any part of any
of its interest in the Properties or Improvements, or any interest therein, or
(ii) any direct ownership or beneficial interest in such Borrower Party.
8.2 ASSUMABILITY .
(a) In the event Borrower and Lessee desire to transfer all
of their respective interests in the Properties (but not less than all) to
another party (the "TRANSFEREE BORROWER") and have (i) the Transferee Borrower
become a party to the Note and assume all of Borrower's and Lessee's obligations
under the Loan Documents and the Lease Documents, (ii) indemnitors acceptable to
Noteholder in its sole discretion execute and deliver to Noteholder indemnities,
in form and substance acceptable to Noteholder, and (iii) replacement pledgors
acceptable to Noteholder in its sole discretion pledge all of the ownership
interests in the Transferee Borrower (collectively, a "TRANSFER AND
ASSUMPTION"), Borrower may make a written application to Noteholder for
Noteholder's consent to the Transfer and Assumption, subject to the conditions
set forth in paragraphs (b) and (c) of this Section. Together with such written
application, Lessee will pay to Noteholder the reasonable review fee then
required by Noteholder. Lessee also shall pay on demand all of the reasonable
costs and expenses incurred by Noteholder, including reasonable attorneys' fees
and expenses, and including the fees and expenses of Rating Agencies and other
outside entities, in connection with considering any proposed Transfer and
Assumption, whether or not the same is permitted or occurs. No Transfer and
Assumption shall be permitted prior to the Defeasance Lockout Expiration Date
(as defined in the Note).
(b) Noteholder shall not unreasonably withhold its consent
to a one time
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Transfer and Assumption after the Defeasance Lockout Expiration Date provided
and upon the conditions that:
(i) No Default or Event of Default has occurred and is
continuing;
(ii) Lessee has submitted to Noteholder true, correct and
complete copies of any and all information and documents of any kind requested
by Noteholder concerning the Property or Properties to be transferred,
Transferee Borrower, the replacement indemnitors, and pledgors, and Borrower;
(iii) Evidence satisfactory to Noteholder has been provided
showing that the Transferee Borrower and such of its Affiliates as shall be
designated by Noteholder comply and will comply with Sections 5.19 and 5.20
hereof, as those provisions may be modified by Noteholder taking into account
the ownership structure of Transferee Borrower and its Affiliates;
(iv) If the Loan, by itself or together with other loans,
has been the subject of a Securitization, then Noteholder shall have received
confirmation from all applicable Rating Agencies that the Transfer and
Assumption will not result in a downgrade, qualification, or withdrawal of any
rating then if effect for the securities issued in connection therewith;
(v) If the Loan has not been the subject of a
Securitization, then Noteholder shall have determined in its reasonable
discretion (taking into consideration such factors as Noteholder may determine,
including the attributes of the loan pool in which the Loan might reasonably be
expected to be securitized) that no rating for any securities that would be
issued in connection with such Securitization will be diminished, qualified or
withheld by reason of the Transfer and Assumption;
(vi) Lessee shall have paid all of Noteholder's reasonable
costs and expenses in connection with considering the Transfer and Assumption,
and shall have paid the amount requested by Noteholder as a deposit against
Noteholder's costs and expenses in connection with the effecting the Transfer
and Assumption;
(vii) Lessee, the Transferee Borrower, and the replacement
guarantors, indemnitors, and pledgors shall have indicated in writing in form
and substance reasonably satisfactory to Noteholder their readiness and ability
to satisfy the conditions set forth in Paragraph (c) below;
(viii) The identity, experience, and financial condition of
the Transferee Borrower and the replacement guarantors, indemnitors, and
pledgors shall be satisfactory to Noteholder; and
(ix) If the Surety Bond is then still in effect, the
Transferee Borrower shall be a corporation, partnership, limited liability
company or other business entity organized in the State of Illinois.
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(c) If Noteholder consents to the Transfer and Assumption,
the Transferee Borrower and/or Lessee as the case may be, shall deliver the
following to Noteholder on or before the effective date of such Transfer and
Assumption.
(i) Lessee shall deliver to Noteholder an assumption fee
(the "Assumption Fee") equal to 1.0% (the "Assumption Fee Percentage") of the
then unpaid principal balance of the Loan. Notwithstanding the foregoing, the
Assumption Fee Percentage shall be .5% if the Transferee Borrower is Alterra or
an Affiliate of Alterra;
(ii) Borrower (at Lessee's expense), Lessee, Transferee
Borrower, the original and replacement guarantors and indemnitors, and the
original and replacement pledgors shall execute and deliver to Noteholder any
and all documents required by Noteholder, in form and substance required by
Noteholder, in Noteholder's sole discretion;
(iii) Counsel to the Transferee Borrower and replacement
guarantors, indemnitors, and pledgors shall deliver to Noteholder opinions in
form and substance satisfactory to Noteholder as to such matters as Noteholder
shall require, which may include opinions as to substantially the same matters
as were required in connection with the origination of the Loan;
(iv) Lessee shall cause to be delivered to Noteholder, an
endorsement (relating to the change in the identity of the vestee and execution
and delivery of the Transfer and Assumption documents) to Noteholder's Title
Policies in form and substance acceptable to Noteholder in Noteholder's
reasonable discretion (the "ENDORSEMENT"); and
(v) Lessee shall deliver to Noteholder a payment in the
amount of all remaining unpaid costs incurred by Lender in connection with the
Transfer and Assumption, including but not limited to, Lender's attorneys fees
and expenses, all recording fees, and all fees payable to the title company for
the delivery to Lender of the Endorsement.
ARTICLE IX MISCELLANEOUS
9.1 WAIVER . No remedy conferred upon, or reserved to, the Noteholder
in this Agreement or any of the other Transaction 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 Noteholder (whether by Noteholder, Trustee, Surety or
Controlling Party) shall not affect any subsequent right of Noteholder to
exercise the same. No course of dealing among Borrower, Lessee and Noteholder
(or Trustee, Surety or Controlling Party) or any delay on the part of Noteholder
(or Surety, Trustee or Controlling Party) in exercising any of its rights or
remedies shall operate as a waiver of any of the Noteholder's rights. No waiver
(whether by Noteholder, Surety, Trustee or Controlling Party) 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 Noteholder.
9.2 COSTS AND EXPENSES . Lessee will bear all taxes, fees and expenses
(including actual attorneys' fees and expenses of counsel for the Noteholder or
Trustee, including consultants
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and other parties involved in reviewing and examining the Collateral) in
connection with the Loan, the Note, the preparation of this Agreement and the
other Transaction Documents, the negotiation and preparation of the Transaction
Documents and all documents related thereto (including any amendments hereafter
made), any modifications to the Transaction Documents or any of them required in
connection with Noteholder's efforts to obtain a rating upon the Loan, the
Surety Bond or any security related to the Loan or the Note, and in connection
with any other modifications thereto and the recording or filing of any of the
Transaction Documents. If, at any time, a Default occurs or Noteholder or
Trustee 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 other Transaction Documents, or if
Noteholder 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
Noteholder or Trustee 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 Transaction Documents, any
Collateral, Borrower Party or Manager, 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 Noteholder or Trustee by any of the Transaction
Documents, then in any such events, all of the attorney's fees arising from such
services, including attorneys' and consultant's 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
Lessee to the Noteholder payable on demand of the Noteholder or Trustee. Lessee
shall pay throughout the term of the Loan, on demand by Noteholder, all
reasonable expenses, charges, costs and fees (including reasonable attorneys'
fees and expenses) in connection with the negotiation, documentation,
administration, servicing, enforcement and collection of the Loan including,
without limitation, customary special servicing fees including work-out fees and
liquidation costs or expenses payable to special servicers in Securitizations.
On the Closing Date and the Additional Properties Closing Date, Noteholder may
pay directly from the proceeds of the Loan the foregoing expenses incurred by
Noteholder as of the Closing Date or Additional Properties Closing Date, as the
case may be. Without limiting the foregoing, Lessee 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 Transaction
Documents, the Loan Obligations, or the filing of any financing statements or
other instruments required to effectuate the purposes of this Agreement, and
should Lessee fail to do so, Lessee agrees to reimburse Noteholder and Trustee
for the amounts paid by Noteholder or Trustee, together with penalties or
interest, if any, incurred by Noteholder or Trustee as a result of such
underpayment or nonpayment. Such amounts shall constitute a portion of the Loan
Obligations, shall be secured by the Mortgages and shall bear interest at the
greater of (i) the Default Rate (as defined in the Note) and (ii) the prime rate
as then published in the Wall Street Journal, from the date advanced until
repaid.
Lessee shall also reimburse Noteholder, Trustee and Surety for such
parties' respective reasonable costs and expenses, including reasonable
attorney's fees and expenses, incurred in connection with or in anticipation of
any Secondary Market Transaction and all reasonable costs or expenses incurred
in connection with amending, clarifying or restructuring of the Loan and Surety
Documents as necessary to permit a Secondary Market Transaction on terms
satisfactory
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to Noteholder; provided, however, in no event shall Lessee be required to pay
costs and expenses in an aggregate amount in excess of $500,000 in respect of
the collective costs and expenses of Noteholder, Trustee and Surety in
connection with all Secondary Market Transactions pursuant to the foregoing and
in connection with all Surety Transactions under Section 10.06 of the
Reimbursement Agreement. Lessee and Guarantor shall each be required to pay its
own and Borrower's costs and expenses (including attorneys' fees and expenses)
incurred in connection with any Secondary Market Transaction or Surety
Transaction and each of Noteholder, Trustee and Surety shall be required to pay
its own and Borrower's costs and expenses, if any, in excess of the amount to be
paid by Lessee under the foregoing sentence.
9.3 PERFORMANCE OF NOTEHOLDER . At its option, upon Lessee's
failure to do so and irrespective of whether notice has been given and whether
any time in which to cure has elapsed, the Noteholder or Trustee may make any
payment or do any act on such Lessee's behalf that such Lessee or others are
required to do to remain in compliance with this Agreement or any of the other
Loan Documents, and Lessee agrees to reimburse the Noteholder or Trustee (as
applicable), on demand, for any payment made or expense incurred by Noteholder
or Trustee pursuant to the foregoing authorization, including, without
limitation, attorneys' fees, and until so repaid any sums advanced by Noteholder
or Trustee shall constitute a portion of the Loan Obligations, shall be secured
by the Mortgages and the other Transaction Documents and shall bear interest at
the Default Rate (as defined in the Note) from the date advanced until repaid.
9.4 INDEMNIFICATION .
(a) LESSEE SHALL, AT ITS SOLE COST AND EXPENSE, PROTECT,
DEFEND, INDEMNIFY AND HOLD HARMLESS THE INDEMNIFIED PARTIES (AS DEFINED BELOW)
FROM AND AGAINST ANY AND ALL CLAIMS, SUITS, LIABILITIES (INCLUDING, WITHOUT
LIMITATION, STRICT LIABILITIES), ACTIONS, PROCEEDINGS, OBLIGATIONS, DEBTS,
DAMAGES, REMEDIATION COSTS, LOSSES, COSTS, EXPENSES, DIMINUTIONS IN VALUE,
FINES, PENALTIES, CHARGES, FEES, INVESTIGATORY FEES, EXPENSES, 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, FEES OF EXPERT WITNESSES AND
CONSULTANTS AND OTHER COSTS OF DEFENSE) (COLLECTIVELY, "INDEMNIFIED CLAIMS")
IMPOSED UPON OR INCURRED BY OR ASSERTED AGAINST NOTEHOLDER OR ANY OF THE
INDEMNIFIED PARTIES BY REASON OF OR IN ANY MANNER RELATING TO (A) OWNERSHIP OF
THE LOAN, THE NOTE (INCLUDING AS TRUSTEE UNDER ANY TRUST AGREEMENT EXECUTED IN
CONNECTION WITH ANY SECURITIZATION BACKED IN WHOLE OR IN PART BY THE LOAN OR
OTHERWISE ARISING FROM SUCH TRUSTEE'S EXERCISE OF ITS POWERS AND DUTIES
THEREUNDER), THE MORTGAGES OR ANY OF THE OTHER LOAN DOCUMENTS, THE PROPERTIES OR
ANY INTEREST THEREIN OR RECEIPT OF ANY RENTS (AS DEFINED IN THE MORTGAGES); (B)
SUBJECT TO THE LIMITATIONS OF SECTION 9.2, ANY AMENDMENT TO, OR RESTRUCTURING
OF, THE LOAN OBLIGATIONS, ANY OF THE TRANSACTION DOCUMENTS; (C) THE
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NEGOTIATION, EXECUTION, DELIVERY, PERFORMANCE, OWNERSHIP OR ENFORCEMENT OF THE
PROVISIONS OF THE MORTGAGES OR THE NOTE OR ANY OF THE OTHER TRANSACTION
DOCUMENTS, WHETHER OR NOT SUIT IS FILED IN CONNECTION WITH SAME, OR IN
CONNECTION WITH BORROWER, 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 PROPERTY OR ADJACENT PARKING AREAS, STREETS OR WAYS; (F) ANY FAILURE ON
THE PART OF BORROWER OR LESSEE TO PERFORM OR COMPLY WITH ANY OF THE TERMS OF
THIS AGREEMENT OR ANY OF THE OTHER TRANSACTION DOCUMENTS; (G) ANY CLAIMS BY ANY
BROKER, PERSON OR ENTITY CLAIMING TO HAVE PARTICIPATED IN ARRANGING THE MAKING
OF THE LOAN; (H) ANY FAILURE OF THE PROPERTIES, THE IMPROVEMENTS OR ANY PART
THEREOF TO BE IN COMPLIANCE WITH ANY APPLICABLE LAWS; (I) ANY AND ALL CLAIMS AND
DEMANDS WHATSOEVER WHICH MAY BE ASSERTED AGAINST NOTEHOLDER BY REASON OF ANY
ALLEGED OBLIGATIONS OR UNDERTAKINGS ON ITS PART TO PERFORM OR DISCHARGE ANY OF
THE TERMS, COVENANTS, OR AGREEMENTS CONTAINED IN ANY LEASE AGREEMENT OR ANY
REPLACEMENT OR RENEWAL THEREOF OR SUBSTITUTION THEREFOR; (J) PERFORMANCE OF ANY
LABOR OR SERVICES OR THE FURNISHING OF ANY MATERIALS OR OTHER PROPERTIES WITH
RESPECT TO THE PROPERTIES, THE IMPROVEMENTS OR ANY PART THEREOF, (K) 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 TRANSACTIONS IN CONNECTION WITH WHICH THE LOAN ARE MADE; (L) ANY
MISREPRESENTATION MADE TO NOTEHOLDER IN THIS AGREEMENT OR IN ANY OF THE OTHER
TRANSACTION DOCUMENTS; (M) ANY TAX ON THE MAKING AND/OR RECORDING OF THE
MORTGAGES, THE NOTE OR ANY OF THE OTHER TRANSACTION DOCUMENTS; (N) THE VIOLATION
OF ANY REQUIREMENTS OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS
AMENDED; (O) ANY FINES OR PENALTIES ASSESSED OR ANY CORRECTIVE COSTS INCURRED BY
NOTEHOLDER IF ANY PROPERTY OR IMPROVEMENTS IS DETERMINED TO BE IN VIOLATION OF
ANY COVENANTS, RESTRICTIONS OF RECORD, OR ANY APPLICABLE LAWS, ORDINANCES, RULES
OR REGULATIONS; (P) ANY BREACH OF ANY REPRESENTATION OR WARRANTY OF BORROWER OR
LESSEE IN ARTICLE VI OF THIS AGREEMENT; (Q) ANY FAILURE OF BORROWER OR LESSEE TO
PERFORM
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ANY OF ITS OBLIGATIONS UNDER ARTICLE VI OF THIS AGREEMENT; (R) THE EXISTENCE OR
ALLEGED EXISTENCE OF ANY PROHIBITED ACTIVITY AND CONDITION; (S) THE RELEASE OR
ALLEGED OR THREATENED RELEASE OF HAZARDOUS MATERIALS IN, ON, UNDER OR FROM ANY
PROPERTY OR THE IMPROVEMENTS; (T) THE ACTUAL OR ALLEGED VIOLATION OF ANY
ENVIRONMENTAL LAW; OR (U) THE ENFORCEMENT BY ANY OF THE INDEMNIFIED PARTIES OF,
OR THE ASSERTION BY BORROWER OF ANY DEFENSE TO ITS OBLIGATIONS UNDER, THE
PROVISIONS OF THIS SECTION 9.4 OR ANY MATTER PERTAINING TO OR ARISING OUT OF THE
RELATED DOCUMENTS OR THE TRANSACTION DOCUMENTS. ANY AMOUNTS PAYABLE TO
NOTEHOLDER OR TRUSTEE BY REASON OF THE APPLICATION OF THIS SECTION 9.4, SHALL
BECOME IMMEDIATELY DUE AND PAYABLE, SHALL CONSTITUTE A PORTION OF THE LOAN
OBLIGATIONS, SHALL BE SECURED BY THE TRANSACTION DOCUMENTS AND SHALL ACCRUE
INTEREST AT THE DEFAULT RATE (AS DEFINED IN THE NOTE). THE OBLIGATIONS AND
LIABILITIES OF LESSEE UNDER THIS SECTION 9.4 SHALL SURVIVE ANY TERMINATION,
SATISFACTION, ASSIGNMENT, ENTRY OF ANY JUDGMENT OF FORECLOSURE OR EXERCISE OF
ANY POWER OF SALE OR DELIVERY OF ANY DEED IN LIEU OF FORECLOSURE OF ANY
MORTGAGE. FOR PURPOSES OF THIS SECTION 9.4, THE TERM "INDEMNIFIED PARTIES" MEANS
GCFP, NOTEHOLDER, SURETY, TRUSTEE 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 ENCUMBRANCES
CREATED BY THE MORTGAGES ARE OR WILL HAVE BEEN RECORDED, ANY PERSON WHO MAY HOLD
OR ACQUIRE OR WILL HAVE HELD A FULL OR PARTIAL INTEREST IN THE COLLATERAL OR THE
LOAN (INCLUDING, WITHOUT LIMITATION, ANY INVESTOR IN ANY SECURITIES BACKED IN
WHOLE OR IN PART BY THE LOAN AND ANY TRUSTEE UNDER ANY TRUST AGREEMENT EXECUTED
IN CONNECTION WITH ANY SUCH SECURITIES) 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 PROPERTIES,
THE IMPROVEMENTS OR ANY PORTION THEREOF, WHETHER DURING THE TERM OF A MORTGAGE
OR AS A PART OF OR FOLLOWING A FORECLOSURE THEREOF AND INCLUDING, WITHOUT
LIMITATION, ANY SUCCESSORS BY MERGER, CONSOLIDATION, OR ACQUISITION OF ALL OR A
SUBSTANTIAL PORTION OF NOTEHOLDER'S OR TRUSTEE'S ASSETS AND BUSINESS).
(b) COUNSEL SELECTED AND PAID FOR BY LESSEE TO DEFEND
INDEMNIFIED PARTIES SHALL BE SUBJECT TO THE APPROVAL OF THE APPLICABLE
INDEMNIFIED PARTY. NOTWITHSTANDING ANYTHING CONTAINED HEREIN, ANY INDEMNIFIED
PARTY MAY ELECT TO RESIST OR DEFEND AND/OR
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SETTLE ANY CLAIM OR LEGAL PROCEEDING AT THE LESSEE'S EXPENSE IF SUCH INDEMNIFIED
PARTY HAS REASON TO BELIEVE THAT ITS INTERESTS DIVERGE FROM OTHER INTERESTS
BEING REPRESENTED BY SUCH COUNSEL AND IN ANY CIRCUMSTANCES IN WHICH THE
INDEMNITY UNDER THIS AGREEMENT APPLIES, NOTEHOLDER MAY EMPLOY ITS OWN LEGAL
COUNSEL AND CONSULTANTS TO PROSECUTE, DEFEND OR NEGOTIATE ANY CLAIM OR LEGAL OR
ADMINISTRATIVE PROCEEDING AND NOTEHOLDER, WITH THE PRIOR WRITTEN CONSENT OF
LESSEE (WHICH SHALL NOT BE UNREASONABLY WITHHELD, DELAYED OR CONDITIONED) MAY
SETTLE OR COMPROMISE ANY ACTION OR LEGAL OR ADMINISTRATIVE PROCEEDING. LESSEE
SHALL REIMBURSE THE INDEMNIFIED PARTIES UPON DEMAND FOR ALL COSTS AND EXPENSES
INCURRED BY THE INDEMNIFIED PARTIES, INCLUDING ALL COSTS OF SETTLEMENTS ENTERED
INTO IN GOOD FAITH, AND THE FEES AND OUT OF POCKET EXPENSES OF SUCH ATTORNEYS
AND CONSULTANTS (BUT LESSEE SHALL BE OBLIGATED TO BEAR THE EXPENSE OF AT MOST
ONLY ONE SUCH SEPARATE COUNSEL FOR EACH INDEMNIFIED PARTY). NOTHING CONTAINED
HEREIN SHALL PREVENT AN INDEMNIFIED PARTY FROM EMPLOYING SEPARATE COUNSEL IN ANY
SUCH ACTION AT ANY TIME AND PARTICIPATING IN THE DEFENSE THEREOF AT ITS OWN
EXPENSE.
(c) LESSEE SHALL NOT, WITHOUT THE PRIOR WRITTEN CONSENT OF
THOSE INDEMNIFIED PARTIES WHO ARE NAMED AS PARTIES TO A CLAIM OR LEGAL OR
ADMINISTRATIVE PROCEEDING (A "CLAIM") SETTLE OR COMPROMISE THE CLAIM IF THE
SETTLEMENT (i) RESULTS IN THE ENTRY OF ANY JUDGMENT THAT DOES NOT INCLUDE AS AN
UNCONDITIONAL TERM THE DELIVERY BY THE CLAIMANT OR PLAINTIFF TO NOTEHOLDER OF A
WRITTEN RELEASE OF THOSE INDEMNIFIED PARTIES, SATISFACTORY IN FORM AND SUBSTANCE
TO NOTEHOLDER; OR (ii) MAY MATERIALLY AND ADVERSELY AFFECT ANY INDEMNIFIED
PARTY, AS DETERMINED BY SUCH INDEMNIFIED PARTY IN ITS SOLE DISCRETION.
(d) THE LIABILITY OF LESSEE TO INDEMNIFY THE INDEMNIFIED
PARTIES SHALL NOT BE LIMITED OR IMPAIRED BY ANY OF THE FOLLOWING, OR BY ANY
FAILURE OF LESSEE OR ANY GUARANTOR TO RECEIVE NOTICE OF OR CONSIDERATION FOR ANY
OF THE FOLLOWING:
(i) THE VALIDITY, REGULARITY OR ENFORCEABILITY OF THE
TRANSACTION DOCUMENTS OR ANY OTHER INSTRUMENT OR DOCUMENT EXECUTED OR DELIVERED
IN CONNECTION THEREWITH.
(ii) ANY ALTERATION, AMENDMENT, MODIFICATION, RELEASE,
TERMINATION OR CANCELLATION OF ANY LOAN AND SURETY DOCUMENT, OR ANY CHANGE IN
THE TIME, MANNER OR PLACE OF PAYMENT OF, OR IN ANY OTHER TERM IN RESPECT OF, ALL
OR ANY OF THE OBLIGATIONS OF BORROWER CONTAINED IN ANY LOAN AND SURETY DOCUMENT.
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(iii) ANY EXTENSION OF THE MATURITY OF THE NOTE OR ANY
WAIVER OF, OR CONSENT TO ANY DEPARTURE FROM, ANY PROVISION CONTAINED IN ANY
RELATED DOCUMENT.
(iv) THE ACCURACY OR INACCURACY OF ANY REPRESENTATIONS
AND WARRANTIES MADE BY BORROWER OR LESSEE UNDER THIS AGREEMENT OR ANY OTHER LOAN
AND SURETY DOCUMENT.
(v) ANY NEGLIGENCE BY THE INDEMNIFIED PARTIES IN THE
ADMINISTRATION OR ENFORCEMENT OF BORROWER'S OR LESSEE'S OBLIGATIONS UNDER THE
TRANSACTION DOCUMENTS OR ANY DELAY IN ENFORCING SUCH OBLIGATIONS OR IN REALIZING
ON ANY SECURITY FOR THE LOAN OBLIGATIONS.
(vi) ANY ACTION BY ANY INDEMNIFIED PARTY AT ANY TIME
OR IN ANY MANNER TO PARTICIPATE IN THE MANAGEMENT OR CONTROL OF, TAKE POSSESSION
OF (WHETHER PERSONALLY, BY AGENT OR BY APPOINTMENT OF A RECEIVER), OR TAKING
TITLE TO, THE PROPERTY OR ANY PORTION THEREOF, WHETHER BY FORECLOSURE, DEED IN
LIEU OF FORECLOSURE, SALE UNDER POWER OF SALE PURSUANT TO THE MORTGAGES OR
OTHERWISE.
(vii) ANY CHANGE, BETWEEN THE CLOSING DATE AND THE DATE
ON WHICH ALL OF THE OBLIGATIONS HEREUNDER ARE PAID IN FULL, IN APPLICABLE LAW,
INCLUDING WITHOUT LIMITATION, ANY ENVIRONMENTAL LAW, THE EFFECT OF WHICH MAY BE
TO MAKE A LENDER OR A NOTEHOLDER OR MORTGAGEE LIABLE IN RESPECT OF ANY OF SUCH
OBLIGATIONS.
(viii) THE RELEASE OF BORROWER, LESSEE OR ANY OTHER
PERSON, BY NOTEHOLDER, SURETY, TRUSTEE OR BY OPERATION OF LAW, FROM PERFORMANCE
OF ANY OBLIGATION UNDER ANY OF THE TRANSACTION DOCUMENTS.
(ix) THE RELEASE OR SUBSTITUTION IN WHOLE OR IN PART
OF ANY SECURITY FOR THE LOAN OBLIGATIONS.
(x) ANY FAILURE TO PROPERLY PERFECT ANY LIEN OR
SECURITY INTEREST GIVEN AS SECURITY FOR THE LOAN OBLIGATIONS.
(e) LESSEE SHALL, AT ITS OWN COST AND EXPENSE, DO ALL OF THE
FOLLOWING:
(i) PAY OR SATISFY ANY JUDGMENT OR DECREE THAT MAY BE
ENTERED AGAINST ANY INDEMNIFIED PARTY OR INDEMNIFIED PARTIES
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IN ANY LEGAL OR ADMINISTRATIVE PROCEEDING INCIDENT TO ANY MATTERS AGAINST WHICH
INDEMNIFIED PARTIES ARE ENTITLED TO BE INDEMNIFIED UNDER THIS AGREEMENT.
(ii) REIMBURSE INDEMNIFIED PARTIES FOR ANY EXPENSES
PAID OR INCURRED IN CONNECTION WITH ANY MATTERS AGAINST WHICH INDEMNIFIED
PARTIES ARE ENTITLED TO BE INDEMNIFIED UNDER THIS AGREEMENT.
(iii) REIMBURSE INDEMNIFIED PARTIES FOR ANY AND ALL
EXPENSES, INCLUDING FEES AND COSTS OF ATTORNEYS, CONSULTANTS AND EXPERT
WITNESSES, PAID OR INCURRED IN CONNECTION WITH THE ENFORCEMENT BY INDEMNIFIED
PARTIES OF THEIR RIGHTS UNDER THIS AGREEMENT, OR IN MONITORING AND PARTICIPATING
IN ANY LEGAL OR ADMINISTRATIVE PROCEEDING.
(f) THE PROVISIONS OF THIS SECTION 9.4 SHALL BE IN ADDITION
TO ANY AND ALL OTHER OBLIGATIONS AND LIABILITIES THAT BORROWER OR LESSEE MAY
HAVE UNDER THE APPLICABLE LAW OR UNDER THE OTHER RELATED DOCUMENTS, AND EACH
INDEMNIFIED PARTY SHALL BE ENTITLED TO INDEMNIFICATION UNDER THIS AGREEMENT
WITHOUT REGARD TO WHETHER NOTEHOLDER OR THAT INDEMNIFIED PARTY HAS EXERCISED ANY
RIGHTS AGAINST THE PROPERTIES AND/OR THE IMPROVEMENTS OR ANY OTHER SECURITY,
PURSUED ANY RIGHTS AGAINST ANY GUARANTOR, OR PURSUED ANY OTHER RIGHTS AVAILABLE
UNDER THE LOAN AND SURETY DOCUMENTS OR APPLICABLE LAW. THE OBLIGATIONS OF LESSEE
TO INDEMNIFY THE INDEMNIFIED PARTIES UNDER THIS AGREEMENT 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 ANY MORTGAGE.
(g) THE PROVISIONS OF THIS SECTION 9.4 SHALL NOT REQUIRE
INDEMNIFICATION OF ANY INDEMNIFIED PARTY FOR CLAIMS (WHICH WOULD OTHERWISE
CONSTITUTE INDEMNIFIED CLAIMS) ARISING SOLELY FROM THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF SUCH INDEMNIFIED PARTY OR THE BREACH BY SUCH INDEMNIFIED
PARTY OF ITS OBLIGATION UNDER THE TRANSACTION DOCUMENTS (BUT SUCH BREACH SHALL
NOT AFFECT LESSEE'S INDEMNIFICATION OBLIGATIONS TO ANY OTHER INDEMNIFIED PARTY).
9.5 EVIDENCE OF COMPLIANCE . Promptly following request by Noteholder,
each Borrower Party shall provide such documents and instruments as shall be
reasonably satisfactory to Noteholder to evidence compliance with any provision
of the Loan and Surety Documents applicable to such Borrower Party.
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9.6 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.
9.7 U.S. CURRENCY . All payments to be made hereunder by Borrower or
any Borrower Party shall be made to Noteholder in lawful currency of the United
States of America at the address of Noteholder set forth above or at such other
address as Noteholder shall designate in writing.
9.8 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 Noteholder,
notwithstanding any investigation made by or on behalf of Noteholder, and shall
survive the execution and delivery to Noteholder of the Note, this Agreement and
the other Loan and Surety Documents. Further, it is the intention of the parties
hereto, and GCFP shall be entitled, that notwithstanding the occurrence of any
Secondary Market Transaction, to rely on all protections afforded to Noteholder,
including without limitation, the protections afforded under SECTION 9.4 hereof,
as if GCFP were expressly named herein.
9.9 NOTICES, ETC . Unless otherwise specifically provided herein, any
notice or other communication required or permitted to be given shall be in
writing addressed to the respective party as set forth below and may be
personally served, telecopied, telexed or sent by overnight courier service or
United States mail and shall be deemed to have been given: (A) if delivered in
person, when delivered; (B) if delivered by telecopy, on the date of
transmission if transmitted on a Business Day before 6:00 pm (New York Time) or,
if not, on the next succeeding Business Day; (C) if delivered by nationally
recognized overnight courier, one day after delivery to such courier properly
addressed; or (D) if by U.S. Mail, three (3) Business Days after depositing in
the United States mail, with postage paid and properly addressed.
If to Borrower, notice shall be sent to:
Pita General Corporation
c/o SELCO Services Corporation
129 Public Square
Cleveland, Ohio 44114
Attention: Robert Bowes, Esq.
Telephone: (216) 689-5089
Facsimile: (216) 689-5681
with a copy to:
Keycorp Leasing
54 State Street
Albany, New York 12207
Attn: Donald C. Davis
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and with a copy to:
Key Global Finance
30 Federal Street
Boston, Massachusetts 02110
Attn: Mindy Berman
Telephone: (617) 654-2777
Facsimile: (617) 654-2727
If to Lessee, notice shall be sent to:
AHC Tenant, Inc.
c/o Alterra Healthcare Corporation
450 North Sunnyslope Road
Suite 300
Brookfield, Wisconsin 53005
Attn: Mark Ohlendorf, Senior Vice President Finance
Telephone: (414) 641-7432
Facsimile: (414) 789-6182
with copies to:
Rogers & Hardin
229 Peachtree Street - International Tower
International Tower
Atlanta, Georgia 30303
Attn: Miriam Dent, Esq.
Telephone: (404) 420-4644
Facsimile: (404) 525-2224
If to Noteholder:
Greenwich Capital Financial Products, Inc.
600 Steamboat Road, Level 2
Greenwich, Connecticut 06830
Attn: Paul Nidenberg
Telephone: (203) 618-2347
Facsimile: (203) 618-2052
with copies to:
Sidley & Austin
875 Third Avenue
New York, New York 10022
Attn: Robert L. Boyd, Esq.
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Telephone: (212) 906-2252
Facsimile: (212) 906-2021
And to:
ZC Specialty Insurance Company
One Exchange Place
Suite 100
Jersey City, New Jersey 07302
Attention: General Counsel
Facsimile: (201) 309-3040
Confirmation: (201) 332-1400
with copies to:
Zurich Centre Group, LLC
One Chase Manhattan Plaza, 44th Floor
New York, New York 10005
Attention: General Counsel
Facsimile: (212) 898-5444
Confirmation: (212) 898-5350
The Zurich Centre
90 Pitt's Bay Road
Pembroke HM 08
P.O. Box HM 1788
Hamilton HM HX, Bermuda
Attention: Manager-ZC Specialty Insurance Company
Facsimile: (441) 295-3705
Confirmation: (441) 295-8501
And to:
The First National Bank of Chicago
One First National Plaza, Suite 0126
Chicago, Illinois 60670-0126
Attn: Corporate Trust Services Division
Telephone: (312) 407-0192
Facsimile: (312) 407-1708
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.
Notwithstanding the foregoing, all material communications, including without
limitations, communications pertaining to "Default," "Events of Default" or
events or occurrences which
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have, will or could result in a Material Adverse Effect shall be given in
writing and delivered by a nationally recognized overnight courier within one
day after delivery to such courier with receipt thereof to be confirmed
telephonically by the sending party.
9.10 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.
9.11 SECONDARY MARKET TRANSACTIONS GENERALLY . Noteholder shall have
the right to engage in one or more Secondary Market Transactions, and to
structure and restructure all or any part of the Loan, including without
limitation in multiple tranches, as wraparound loans, or for inclusion in a
REMIC or other Securitization. Without limitation, Lender shall have the right
to cause the Note and the Mortgage to be split into a first and a second
mortgage loan, or into a one or more loans secured by mortgages and by the
equity pledges and other security interests included in the Collateral on the
date hereof, in whatever proportion Lender determines, and thereafter to engage
in Secondary Market Transactions with respect to all or any part of the
indebtedness and loan documentation. Borrower and Lessee acknowledge that it is
the intention of the parties that all or a portion of the Loan will be
securitized and that all or a portion of the Loan will be rated by one or more
Rating Agencies. Subject to the provisions of Section 9.12, Borrower and Lessee
further acknowledge that additional structural modifications may be required to
satisfy issues raised by one or more Rating Agencies. As used herein, "SECONDARY
MARKET TRANSACTION" means any of (i) the sale, assignment, or other transfer of
all or any portion of the Loan Obligations or the Transaction Documents or any
interest therein to one or more investors, (ii) the sale, assignment, or other
transfer of one or more participation interests in the Loan Obligations or
Transaction Documents to one or more investors, or (iii) the transfer or deposit
of all or any portion of the Loan Obligations or Loan and Surety Documents to or
with one or more trusts or other entities which may sell certificates or other
instruments to investors evidencing an ownership interest in the assets of such
trust or the right to receive income or proceeds therefrom.
9.12 COOPERATION; LIMITATIONS . (a) Borrower Parties shall use all
reasonable efforts and cooperate reasonably and in good faith with Noteholder,
at Lessee's expense, in effecting any such restructuring or Secondary Market
Transaction. Such cooperation shall include without limitation, executing and
delivering such reasonable amendments to the Transaction Documents as Noteholder
may request, provided however that no such amendment in connection with any
Secondary Market Transaction shall diminish the rights or materially increase
the obligations of the Borrower Parties or SELCO under the Transaction Documents
modify (i) the interest rate payable under the Note or the Rent payable under
the Master Lease in any material respect; (ii) the stated maturity date of the
Note, (iii) the amortization of the principal amount of the Note, (iv) any other
material economic terms of the Loan Obligations or the Master Lease (including,
without limitation, any modification described in Section 2.10(f) of the Trust
Agreement)(any such modification described in the foregoing clauses (i)-(iv), a
"MATERIAL MODIFICATION"). Such cooperation also shall include Lessee's using
best efforts to obtain such certificates and assurances from governmental
entities and others as Noteholder may request. In addition to their obligations
under Section 9.2 hereof and subject to the limitations thereof, Lessee shall
pay for any item that is requested by Noteholder in connection with a Secondary
Market Transaction that was a
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requirement for the closing of Loan, but which was waived in connection with
such closing.
(b) Without limiting the foregoing, in the event that any amendment or
modification of the Transaction Documents in connection with any Secondary
Market Transaction does not constitute a Material Modification but in the
reasonable opinion of an Approved Accountant would result in a loss of
Guarantor's "synthetic lease" treatment of the Master Lease for financial
accounting purposes (a "MATERIAL ACCOUNTING CHANGE"), notwithstanding anything
to the contrary contained herein, in the Note or the other Loan Documents,
Lessee shall have the option (the "NOTE PURCHASE OPTION") to purchase the Note
for a purchase price (the "NOTE PURCHASE PRICE") equal to the Purchase
Percentage (defined below) of the principal outstanding under the Note, together
with all accrued and unpaid interest thereon and any other Loan Obligations then
outstanding (other than any Prepayment Consideration otherwise due under the
Note). Lessee may elect to exercise the Note Purchase Option by delivery of
written notice of such election to Noteholder within five (5) Business Days
after Noteholder's request for the proposed modification of the Transaction
Documents giving rise to such Material Accounting Change (which request is
accompanied by a description of the principal terms of the proposed amendment)
together with (i) the sum of five percent (5%) of the then outstanding principal
amount of the Loan (the "INITIAL Deposit") by wire transfer to Noteholder of
immediately available federal funds in accordance with Noteholder's instructions
and (ii) a letter from an Approved Accountant or other evidence reasonably
acceptable to Noteholder that such proposed modification would result in a
Material Accounting Change. Provided that no Event of Default shall have
occurred and be continuing as of the date of Lessee's exercise of the Note
Purchase Option or as of the date of purchase of the Note and Lessee timely
exercises the Note Purchase Option in accordance with the foregoing conditions,
Lessee shall have the right pursuant to the Note Purchase Option to purchase the
Note upon payment to Noteholder of the Note Purchase Price (net of the Deposit),
by wire transfer in accordance with Noteholder's instructions, on or before the
date (the "NOTE PURCHASE DATE") which is ninety (90) days after the date of
Noteholder's request for the proposed modification of the Transaction Documents.
Lessee may extend the Note Purchase Date for an additional ninety (90) days (the
"OUTSIDE NOTE PURCHASE DATE") by delivery to Noteholder of notice thereof
together with amount equal to an additional five percent (5%) of the then
outstanding principal amount of the Loan (the "ADDITIONAL DEPOSIT"; together
with the Initial Deposit, the "DEPOSIT") before the Note Purchase Date. If
Lessee fails to extend the Note Purchase Option and does not consummate the
purchase of the Note in accordance with the foregoing, on or before the Note
Purchase Date, or having so extended the Note Purchase Option fails to
consummate the purchase of the Note on or before the Outside Note Purchase Date,
the Note Purchase Option shall be void and of no further force or effect
whatsoever, Noteholder shall be entitled to retain the Deposit as liquidated
damages for Lessee's failure to purchase the Note and Lessee shall be required
to execute and deliver the proposed modifications to the Transaction Documents
notwithstanding such Material Accounting Change.
For purposes of the foregoing, the Purchase Percentage shall be equal
to, as of any date of determination, a price, expressed as a percentage of par,
at which Noteholder carries the Loan on its regularly maintained internal
position sheets (and Noteholder shall provide Lessee upon request copies of
relevant excerpts from its position sheets), adjusted to take into account any
hedge profits and losses that would be incurred by Noteholder upon the
simultaneous unwinding
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of any hedging arrangements entered into by Noteholder with respect to its
rights under the Loan.
9.13 INFORMATION . The Borrower Parties shall provide such information
and documents relating to the Borrower Parties, Manager, the Sublessees, the
Assisted Living Facilities, Properties, Improvements and the business and
operations of all of the foregoing as Noteholder may reasonably request in
connection with any such Secondary Market Transaction. Noteholder shall be
permitted to share all such information with the investment banking firms,
Rating Agencies, accounting firms, law firms, other third party advisory firms,
potential investors, and other parties involved in any proposed Secondary Market
Transaction. Any such information may be incorporated into offering documents
for the Secondary Market Transactions. Noteholder and all of the aforesaid
third-party advisors and professional firms and investors shall be entitled to
rely upon such information, and Lessee shall indemnify, defend, and hold
harmless Noteholder from and against any losses, claims, damages and liabilities
that arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in such information provided by Lessee,
any Sublessee or Alterra or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated in such
information provided by Lessee, any Sublessee or Alterra or necessary in order
to make the statements in such information provided by Lessee, any Sublessee or
Alterra not materially misleading. Noteholder may publicize the existence of the
Loan Obligations in connection with Noteholder's Secondary Market Transaction
activities or otherwise.
9.14 ADDITIONAL PROVISIONS . In any Secondary Market Transaction,
Noteholder may transfer its obligations under this Agreement and under the other
Loan Documents (or may transfer the portion thereof corresponding to the
transferred portion of the Loan Obligations), and thereafter Noteholder shall be
relieved of any obligations hereunder and under the other Loan Documents so
transferred arising after the date of said transfer with respect to the
transferred interest. Each transferee investor shall become a "NOTEHOLDER"
hereunder and "LENDER" or other applicable party under the Transaction
Documents. In the event Noteholder transfers any or all of its obligations to
multiple transferee investors and such investors become "Noteholders", one such
Noteholder or Servicer shall act as the representative for all Noteholders, and
shall receive notices, approve or deny requests, and otherwise act on behalf of
all Noteholders.
9.15 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 Noteholder 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 Noteholder. 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.
9.16 INCONSISTENCIES . The Loan shall be governed by the terms and
provisions set forth in this Agreement and the other Loan Documents and in the
event of any inconsistencies between the terms of the other Loan Documents and
the terms of this Agreement, the terms of this Agreement shall control;
provided, however that so long as the Trust Agreement shall be in effect, the
Controlling Party shall be entitled to exercise the rights and remedies of
Noteholder to
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the extent and as provided in the Trust Agreement. In the event of any
inconsistencies between the terms of the Loan Documents and the Transaction
Documents, the terms of the Loan Documents shall control, except in the event of
any inconsistency between the terms of the Loan Documents and the Trust
Agreement, in which event the terms of the Trust Agreement shall prevail.
9.17 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 ILLINOIS AND THE
PARTIES HERETO SUBMIT (AND WAIVE ALL RIGHTS TO OBJECT) TO NON-EXCLUSIVE PERSONAL
JURISDICTION IN THE STATE OF ILLINOIS AND AGREE TO VENUE IN ANY COURT IN SUCH
JURISDICTION, INCLUDING ANY FEDERAL COURTS SITTING IN SUCH JURISDICTION.
9.18 WAIVER OF JURY TRIAL . EACH PARTY HERETO HEREBY WAIVES ANY RIGHT
THAT IT 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 OTHER LOAN DOCUMENTS, OR (B) IN ANY WAY CONNECTED WITH
OR PERTAINING OR RELATED TO OR INCIDENTAL TO ANY DEALINGS OF NOTEHOLDER 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 OTHERWISE. BORROWER AND LESSEE AGREE THAT
NOTEHOLDER MAY FILE A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE
OF THE KNOWING, VOLUNTARY, AND BARGAINED AGREEMENT OF EACH OF BORROWER AND
LESSEE IRREVOCABLY TO WAIVE ITS RIGHTS TO TRIAL BY JURY AS AN INDUCEMENT OF
NOTEHOLDER 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, LESSEE AND NOTEHOLDER SHALL INSTEAD BE TRIED IN A COURT OF
COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
9.19 SUBROGATION . Borrower and Lessee acknowledge that the Surety may
obtain rights in the Loan Documents, by way of subrogation, as a result of a
payment under the Surety Bond and that such payments by Surety shall not reduce
the Loan Obligations of Borrower and Lessee arising hereunder.
9.20 COMPLIANCE WITH LAWS . It is the intent of the parties that the
execution, delivery, and performance of the Loan Documents, the transactions
provided for therein and
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contemplated thereby, and all matters incidental and related thereto or arising
therefrom, shall be in strict compliance with, and that they shall each comply
and, conform strictly with, all laws applicable to and governing the Loan
Documents, as from time to time in effect, including applicable usury laws. This
provision shall not be deemed to alter the choice of governing law in the Loan
Documents. In furtherance thereof, the Noteholder and Borrower stipulate and
agree that none of the terms and provisions contained in, or pertaining to, the
Loan Documents shall ever be construed to create a contract for, or obligating
any Person to pay for the use or forbearance or detention of money, interest at
a rate or in an amount in excess of the maximum rate or maximum amount of
interest lawfully permitted or allowed to be, contracted for, charged, received,
taken, or reserved under such laws. For such purposes as to each of the Loan
Documents, (i) "interest" shall include the aggregate of all amounts which
constitute, or are deemed to constitute, interest under the law applicable to
the Loan Documents and the transactions thereunder, that is, contracted for,
chargeable, receivable (whether received or deemed to have been received ),
taken, or reserved under each such document, and (ii) unless otherwise specified
therein, all computations of the maximum amount of interest permitted or allowed
under such applicable law will be made on the basis of the actual number of days
elapsed over a 360-day year . Neither Borrower nor any other Person shall ever
be required to pay interest on, or with respect to any of, the Loan Documents at
a rate or in an amount in excess of the maximum rate or maximum amount of
interest that may be lawfully contracted for, charged, received, taken, or
reserved under such applicable law, AND THE PROVISIONS OF THIS PARAGRAPH SHALL
CONTROL OVER ALL OTHER PROVISIONS OF THE LOAN DOCUMENTS. If the effective rate
or amount of interest which would otherwise be payable would exceed the maximum
rate or maximum amount of interest, the Noteholder or any other holder of the
Note or other obligation is allowed by such applicable law to change, contract
for, take, reserve, or receive, or in the event the Noteholder or any holder of
the Note or other obligation shall change, contract for, take, reserve, or
receive money that is deemed to constitute interest which would, in the absence
of this provision, increase the effective rate or amount of interest payable
under the Loan Documents to a rate or amount in excess of that permitted or
allowed to be charged, contracted for, taken reserved, or received under such
applicable law then in effect, then the amount of interest which would otherwise
be payable shall be limited to, and the Loan Documents shall in all respects be
construed and applied so as to conform to, the maximum amount allowed pursuant
to then applicable law, and, if no maximum amount or rate is then in effect,
then as may otherwise be authorized and allowed under such laws, as now or
hereafter construed by the courts having jurisdiction. Any amount(s) charged,
contracted for, received, taken or reserved that are deemed to constitute
interest determined to be in excess of the. maximum rate or maximum amount of
interest permitted by applicable law shall be immediately returned or credited
to the account of the Borrower or other Person entitled thereto upon such a
determination, including a determination by a court of competent jurisdiction.
All amounts contracted for, charged, received, reserved, paid, or agreed to be
paid in connection with any note or other obligation which would under
applicable law be deemed "interest" (or if not so deemed, would be deemed an
amount that would be included in the calculation of the maximum rate or maximum
amount of interest allowed pursuant to applicable law), shall, to the maximum
extent not prohibited by applicable law, be amortized, prorated, allocated, and
spread throughout the full term of the Loan Documents and any loans, as the case
may be; provided that, if the Note or other obligation is paid and performed in
full prior to the end of the full existence thereof and the
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amount paid thereon exceeds the maximum lawful rate or amount, the Noteholder
shall refund to the Borrower or such Person entitled thereto the amount of such
excess, or credit the amount of such excess against the principal amount of such
note or other obligation (as applicable) and, in such event, it is expressly
agreed that the Noteholder shall not be subject to any penalties provided by any
laws for contracting for, charging, taking, reserving, or receiving interest in
excess of the maximum rate.
9.21 INTERPRETATION . In this Agreement (unless otherwise specified),
the singular includes the plural and the plural includes the singular; words
importing any gender include the other genders; references to statutes are to be
construed as including all statutory provisions consolidating, amending or
replacing the statute referred to; references to "writing" include printing,
typing, lithography and other means of reproducing words in a tangible, visible
form; the words "including," "includes" and "include" shall be deemed to be
followed by the words "without limitation"; references to articles, sections (or
subdivisions of sections), recitals, exhibits, annexes or schedules are those of
this Agreement unless otherwise indicated; references to agreements and other
contractual instruments shall be deemed to include all subsequent amendments and
other modification to such instruments, but only to the extent such amendments
and other modification are not prohibited by the terms of this Agreement or
specifically excluded therefrom; the phrase "and/or" shall be deemed to mean the
words both preceding and following such phrase, or either of them; references to
the parties and to Persons include their respective permitted successors and
assigns; and, in the case of governmental Persons, Persons succeeding to their
respective functions and capacities; and references to times of day shall be to
Chicago, Illinois time unless specifically provided otherwise.
9.22 NON-EXCLUSIVITY OF REMEDIES . Upon the occurrence and continuance
of an Event of Default, the Noteholder may exercise any right, power or remedy
permitted to it by law (whether by suit in equity, action at law or both), and
whether for specific performance of any agreement contained in this Agreement or
the other Loan Documents or in aid of the exercise of any right or power granted
in this Agreement or the other Loan Documents, or otherwise, it being intended
by the parties hereto that no remedy is to be exclusive and that each remedy is
to be cumulative. No course of dealing on the part of the Noteholder or any
delay or failure on the part of the Noteholder to exercise any right shall
operate as a waiver of such right or otherwise prejudice the Noteholder's
rights, powers and remedies. If Borrower or Lessee fails to pay when due any
amount owed hereunder, Lessee shall be obligated to pay to the Noteholder, to
the extent permitted by law, such further amount as shall be sufficient to cover
the cost and expenses, including, but not limited to, reasonable attorneys'
fees, or collecting any sums due or otherwise enforcing any of tile Noteholder's
rights.
9.23 SERVICER; TRUSTEE . All rights of the Noteholder hereunder may
exercised by the Servicer or Trustee, as applicable. The Servicer or Trustee, as
applicable shall be entitled to the benefit of all obligations of any of the
Borrower Parties in favor of Noteholder.
9.24 OBLIGATIONS OF THE BORROWER PARTIES . Except as expressly
provided, the obligations of Lessee hereunder are not those of the other
Borrower Parties. The Borrower Parties other than Lessee are parties to this
Agreement only with regard to the representations,
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warranties, and covenants specifically applicable to them.
9.25 LIMITATION OF LIABILITY . Neither Noteholder, nor any
affiliate, officer, director, employee, attorney, or agent of Noteholder, shall
have any liability with respect to, and Borrower and Lessee each hereby waives,
releases, and agrees not to sue any of them upon, any claim for any special,
indirect, incidental, or consequential damages suffered or incurred by Borrower
or Lessee in connection with, arising out of, or in any way related to, this
Agreement or any of the other Transaction Documents, or any of the transactions
contemplated by this Agreement or any of the other Transaction Documents, other
than the gross negligence or willful misconduct of Noteholder or damages
resulting from Noteholder's liquidation, draw down or other efforts to realize
upon the Excluded Collateral in violation of the terms of this Agreement or the
other Transaction Documents. Borrower and Lessee each hereby waives, releases,
and agrees not to sue Noteholder or any of Noteholder's affiliates, officers,
directors, employees, attorneys, or agents for punitive damages in respect of
any claim in connection with, arising out of, or in any way related to, this
Agreement or any of the other Transaction Documents, or any of the transactions
contemplated hereby or thereby except to the extent same is caused by the gross
negligence or willful misconduct of a Noteholder.
9.26 NO DUTY . All attorneys, accountants, appraisers, and other
professional Persons and consultants retained by Noteholder shall have the right
to act exclusively in the interest of Noteholder and shall have no duty of
disclosure, duty of loyalty, duty of care, or other duty or obligation of any
type or nature whatsoever to any Borrower Party or Affiliates thereof, or any
other Person.
9.27 WAIVERS OF DEFENSES OF GUARANTORS AND SURETIES .
To the extent that Lessee or any Affiliate thereof (in this
Article, a "WAIVING PARTY") is deemed for any reason to be a guarantor or surety
of or for any other Borrower Party or to have rights or obligations in the
nature of the rights or obligations of a guarantor or surety (whether by reason
of execution of a guaranty, provision of security for the obligations of
another, or otherwise) then this Article shall apply to Lessee or such Affiliate
thereof. This Section 9.27 shall not affect the rights of the Waiving Party
other than to waive or limit rights and defenses that Waiving Party would have
(i) in its capacity as a guarantor or surety or (ii) in its capacity as one
having rights or obligations in the nature of a guarantor or surety.
Waiving Party hereby waives diligence, presentment, demand
of payment, filing of claims with a court in the event of receivership or
bankruptcy of any of the other Borrower Parties, protest or notice with respect
to any of the obligations of any of the other Borrower Parties, setoffs and
counterclaims and all presentments, demands for performance, notices of
nonperformance, protests, notices of protest, notices of dishonor and notices of
acceptance, the benefits of all statutes of limitation, and all other demands
whatsoever (and shall not require that the same be made on any of the other
Borrower Parties as a condition precedent to the obligations of Waiving Party),
and covenants that the Transaction Documents will not be discharged, except by
complete payment and performance of the obligations evidenced and secured
thereby, except only as limited by the express contractual provisions of the
Transaction Documents. Waiving
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Party further waives all notices that the principal amount, or any portion
thereof, and/or any interest on any instrument or document evidencing all or any
part of the obligations of any of the other Borrower Parties to Noteholder is
due, notices of any and all proceedings to collect from any of the other
Borrower Parties or any endorser or any other guarantor of all or any part of
their obligations, or from any other person or entity, and, to the extent
permitted by law, notices of exchange, sale, surrender or other handling of any
security or collateral given to Noteholder to secure payment of all or any part
of the obligations of any of the other Borrower Parties.
Except only to the extent provided otherwise in the express
contractual provisions of the Transaction Documents, Waiving Party hereby agrees
that all of its obligations under the Transaction Documents shall remain in full
force and effect, without defense, offset or counterclaim of any kind,
notwithstanding that any right of Waiving Party against any of the other
Borrower Parties or defense of Waiving Party against Noteholder may be impaired,
destroyed, or otherwise affected by reason of any action or inaction on the part
of Noteholder. Waiving Party waives all rights and defenses arising out of an
election of remedies by the Noteholder or Trustee, even though that election of
remedies, such as a non- judicial foreclosure with respect to security for a
guaranteed obligation, may have destroyed the Waiving Party's rights of
subrogation and reimbursement against the other Borrower Parties by the
operation of Section 580d of the California Code of Civil Procedure or
otherwise. Waiving Party waives all rights and defenses that it may have because
the obligations of any other Borrower Party is secured by real property. This
means, among other things: (i) the Trustee may collect from Waiving Party
without first foreclosing on any real or personal property collateral pledged by
the other Borrower Party; (ii) if the Trustee forecloses on real property
collateral pledge, by any other Borrower Party, (A) the amount of the debt may
be reduced only by the price for which that collateral is sold at the
foreclosure sale, even if the collateral is worth more than the sale price and
(B) the Trustee may collect from the Waiving Party even if the Trustee, by
foreclosing on the real property collateral, has destroyed any right the Waiving
Party may have collect from another Borrower Party. This is an unconditional and
irrevocable waiver of any rights and defenses the Waiving Party may have because
the other Borrower Party's debt is secured by real property. These rights and
defenses include, but are not limited to, any rights or defenses based upon
Sections 580a, 580b, 580d, or 726 of the California Code of Civil Procedure.
Noteholder is hereby authorized, without notice or demand,
from time to time, (a) to renew, extend, accelerate or otherwise change the time
for payment of, or other terms relating to, all or any part of the obligations
of any of the other Borrower Parties; (b) to accept partial payments on all or
any part of the obligations of any of the other Borrower Parties; (c) to take
and hold security or collateral for the payment of all or any part of the
obligations of any of the other Borrower Parties; (d) to exchange, enforce,
waive and release any such security or collateral for such obligations; (e) to
apply such security or collateral and direct the order or manner of sale thereof
as in its discretion it may determine; (f) to settle, release, exchange,
enforce, waive, compromise or collect or otherwise liquidate all or any part of
such obligations and any security or collateral for such obligations. Any of the
foregoing may be done in any manner, and Waiving Party agrees that the same
shall not affect or impair the obligations of Waiving Party under the
Transaction Documents.
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Waiving Party hereby assumes responsibility for keeping
itself informed of the financial condition of all of the other Borrower Parties
and any and all endorsers and/or other guarantors of all or any part of the
obligations of the other Borrower Parties, and of all other circumstances
bearing upon the risk of nonpayment of such obligations, and Waiving Party
hereby agrees that Noteholder shall have no duty to advise Waiving Party of
information known to it regarding such condition or any such circumstances.
Waiving Party agrees that neither Noteholder nor any person
or entity acting for or on behalf of Noteholder shall be under any obligation to
marshal any assets in favor of Waiving Party or against or in payment of any or
all of the obligations secured hereby. Waiving Party further agrees that, to the
extent that any of the other Borrower Parties or any other guarantor of all or
any part of the obligations of the other Borrower Parties makes a payment or
payments to Noteholder, or Noteholder receives any proceeds of collateral for
any of the obligations of the other Borrower Parties, which payment or payments
or any part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid or refunded, then, to the
extent of such payment or repayment, the part of such obligations which has been
paid, reduced or satisfied by such amount shall be reinstated and continued in
full force and effect as of the time immediately preceding such initial payment,
reduction or satisfaction.
Waiving Party (i) shall have no right of subrogation with
respect to the obligations of the other Borrower Parties and (ii) waives any
right to enforce any remedy that Noteholder now has or may hereafter have
against any of the other Borrower Parties any endorser or any guarantor of all
or any part of such obligations or any other person, and Waiving Party waives
any benefit of, and any right to participate in, any security or collateral
given to Noteholder to secure the payment or performance of all or any part of
such obligations or any other liability of the other parties to Noteholder.
Waiving Party agrees that any and all claims of it may have
against any of the other Borrower Parties, any endorser or any other guarantor
of all or any part of the obligations of the other Borrower Parties, or against
any of their respective properties, shall be subordinate and subject in right of
payment to the prior payment in full of all obligations secured hereby.
Notwithstanding any right of any of the Waiving Party to ask, demand, sue for,
take or receive any payment from the other Borrower Parties, all rights, liens
and security interests of Waiving Party, whether now or hereafter arising and
howsoever existing, in any assets of any of the other Borrower Parties (whether
constituting part of the security or collateral given to Noteholder to secure
payment of all or any part of the obligations of the other Borrower Parties or
otherwise) shall be and hereby are subordinated to the rights of Noteholder in
those assets.
9.28 MARSHALING; PAYMENTS SET ASIDE . Noteholder shall not be
under any obligation to marshal any assets in favor of any Person or against or
in payment of any or all of the Loan Obligations. To the extent that any Person
makes a payment or payments to Noteholder, or Noteholder enforces its remedies
or exercises its rights of set off, and such payment or payments or the proceeds
of such enforcement or set off or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside and/or required to be
repaid to a trustee, receiver or any other party under any bankruptcy law, state
or federal law,
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common law or equitable cause, then to the extent of such recovery, the Loan
Obligations or part thereof originally intended to be satisfied, and all Liens,
if any, rights and remedies therefor, shall be revived and continued in full
force and effect as if such payment had not been made or such enforcement or set
off had not occurred.
9.29 NO FIDUCIARY RELATIONSHIP . No provision in this Agreement or in
any of the other Transaction Documents and no course of dealing between the
parties shall be deemed to create any fiduciary duty by Noteholder to Borrower,
Lessee or any other Person.
9.30 FURTHER ASSURANCES . Each of the Borrower Parties shall from time
to time execute, at Lessee's expense, and/or deliver such documents, agreements,
financing statements, and reports, and perform such acts as Noteholder at any
time may reasonably request to carry out the purposes and otherwise implement
the terms and provisions and the rights and benefits intended to be provided to
Noteholder in this Agreement and the Transaction Documents. Without limiting the
generality of the foregoing and in addition to the agreements of Borrower and
Lessee under Sections 9.12 and 9.13 hereof, Borrower and Lessee, in recognition
of the complexity of the transactions contemplated hereby, covenant and agree to
cooperate fully, reasonably and in good faith with Noteholder and its agents and
representatives in taking all reasonable and necessary actions, at Lessee's
expense, to make effective for Noteholder the benefits which the parties hereto
have intended Noteholder to realize. Such actions may include without limitation
amending or restructuring of the Transaction Documents as necessary to correct
inconsistencies or errors provided that no such amendment or restructuring shall
diminish the rights of the Borrower Parties or SELCO under the Transaction
Documents as intended by the parties, result in a Material Modification or
otherwise materially increase the obligations of the Borrower Parties or SELCO
hereunder or under the other Transaction Documents.
9.31 SPECIAL CIRCUMSTANCES FURTHER ASSURANCES . The parties acknowledge
that to accommodate a time-sensitive business opportunity this transaction has
been closed on a highly expedited basis and the economic terms of the Loan would
be less favorable to the Borrower Parties if the Noteholder did not believe that
it could include the Loan in a rated securitization transaction. The Borrower
Parties agree that they shall promptly comply, at Lessee's expense, with any
reasonable request made by Noteholder within a reasonable time after the Closing
Date or Additional Properties Closing Date, provided that Noteholder states in
good faith that such request (i) is to provide to Noteholder or Surety a benefit
that either of them had intended to obtain in this transaction , or (ii) is to
provide a benefit that would customarily or reasonably be provided in a
comparable transaction, or (iii) is to satisfy any request of any Rating Agency
or to conform to customary commercial mortgage loan securitization standards.
Without limitation, such requests may be for any modification of the transaction
structure or for execution and delivery by Borrower Parties or others of
modifications and amendments of any of the Transaction Documents, legal opinions
customarily rendered by counsel to borrowers in rated securitization
transactions (other than a nonconsolidation opinion with respect to Lessee) or
as requested by any Rating Agency, title insurance endorsements, and other
items, or for new or replacement documents and instruments, all of the foregoing
to be at Lessee's expense (subject to the limitations of Section 9.2 with
respect to costs and expenses in connection with Secondary Market Transactions
and Surety Transactions). Lessee shall pay all costs and expenses of
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Noteholder and Surety, including their reasonable attorneys' fees, incurred in
connection with post-closing transaction review and in connection with such
post-closing modifications, amendments, and new items. Notwithstanding the
foregoing, absent manifest error, the Borrower Parties shall not be required to
consent to a Material Modification of the Loan. Nothing in this Section shall
diminish any rights of Noteholder or Surety under any other provision of the
Transaction Documents. Nothing in any other such provision of the Transaction
Documents shall diminish any rights of Noteholder or Surety under this Section.
9.32 NON-RECOURSE LOAN
(a) Except as otherwise provided herein, Noteholder shall
not enforce the liability and obligation of Borrower to perform and observe the
obligations contained in this Agreement, the Note or the Transaction Documents
by any action or proceeding wherein a money judgment shall be sought against
Borrower or SELCO, except that Noteholder may bring a foreclosure action, action
for specific performance or other appropriate action or proceeding to enable
Noteholder to enforce and realize upon the Mortgages or other Transaction
Documents, and the Properties or any of them; provided, however, that any
judgment in any action or proceeding shall be enforceable against Borrower only
to the extent of Borrower's interest in the Properties.
(b) Notwithstanding the foregoing, Borrower and SELCO shall
be personally liable in the amount of any loss, damage or cost resulting or
arising from (i) fraud or intentional misrepresentation by Borrower or SELCO in
connection with obtaining the Loan evidenced by the Notes, (ii) Borrower's or
SELCO's misappropriation or misapplication of Rents in violation of the Flow of
Funds Agreement or any other Transaction Document, (iii) Borrower's or SELCO's
violation of the provisions of Section 5.2, 5.3, 5.7 or 5.8 and (iv) upon the
occurrence of any Event of Default with respect to Borrower under Section
7.1(f); provided, however, that SELCO shall only be liable for any loss, damage
or cost resulting or arising from any of the foregoing acts of Borrower or
matters with respect to Borrower occurring or existing during the period that
SELCO is Borrower's controlling shareholder.
(c) No provision of this Section 9.32 shall (i) affect the
enforcement of the Guaranty, or any other guaranty or similar agreement executed
in connection with the debt evidenced by the Note, (ii) release or reduce the
debt evidenced by the Note, (iii) impair the lien of the Mortgages or any other
Transaction Documents, (iv) impair the rights of Noteholder to enforce any
provisions of the Transaction Documents, (v) limit Noteholder's ability to
obtain a deficiency judgment or judgment on the Note or otherwise against any
Borrower Party to the extent necessary to obtain any amount for which such
Borrower Party may be liable in accordance with this Section 9.32 or any other
Transaction Documents or (vi) modify or affect the liabilities or obligations of
Lessee, Guarantor, Manager or any Sublessee under any of the Transaction
Documents.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
properly executed as of the date first above written.
BORROWER:
PITA GENERAL CORPORATION,
an Illinois corporation
By: /s/ Mindy Berman
------------------------------------------
Name: Mindy Berman
Its: Vice President
OTHER BORROWER PARTIES:
LESSEE:
AHC TENANT, INC.,
a Delaware corporation
By: /s/ Mark W. Ohlendorf
------------------------------
Name: Mark W. Ohlendorf
Title: Vice President
NOTEHOLDER:
GREENWICH CAPITAL FINANCIAL
PRODUCTS, INC, a Delaware corporation
By: /s/ Warren Ashenmil
-------------------------
Name: Warren Ashenmil
Title: Senior Vice President
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EXHIBIT A
MASTER GLOSSARY OF DEFINITIONS
This MASTER GLOSSARY OF DEFINITIONS provides a definition for each of
the defined terms contained in the Transaction Documents. To the extent of any
inconsistency between the defined terms set forth herein and any definition set
forth in a particular Transaction Document, the definition provided by the
Transaction Documents shall control. All cross-references to defined terms set
forth in the Loan Agreement and all exhibits thereto shall continue and survive
the termination or expiration of the Loan Agreement and are incorporated by
reference herein.
"ACCEPTABLE LETTER OF CREDIT" is defined in Section 1.5 of the Trust
Agreement.
"ACCEPTABLE REPLACEMENT COLLATERAL" is defined in Section 9.8 of the
Participation Agreement.
"ACCOUNTS" is defined in Section 1.1 of the Loan Agreement and Section
1.01 of the Reimbursement Agreement.
"ACCREDITATION" is defined in Section 1.1 of the Loan Agreement.
"ACQUISITION AGREEMENTS" shall mean those two (2) certain agreements
dated as of December 31, 1998, each as amended, between Alterra and Seller
pursuant to which Alterra is obligated to purchase from, and Seller is obligated
to sell to Alterra, up to twenty-nine (29) assisted living facilities on the
terms and conditions set forth therein, as such agreements have been assigned to
Owner.
"ACQUISITION COSTS" shall mean the costs incurred in connection with
the acquisition of a Leased Property including the Land and any Improvements
existing as of the date of acquisition, including, without limitation, all
Transaction Expenses.
"ACTUAL MONTHLY OPERATING LOSS" is defined in Section 3.15 of the Trust
Agreement.
"ADDITIONAL ADVANCE" is defined in Section 1.1 of the Loan Agreement.
"ADDITIONAL PROPERTIES CLOSING DATE" is defined in Section 1.1 of the
Loan Agreement.
"ADDITIONAL PROPERTIES" is defined in Section 1.1 of the Loan
Agreement.
"ADDITIONAL PROPERTIES OUTSIDE DATE" is defined in Section 1.1 of the
Loan Agreement.
"ADDITIONAL RENTAL" is defined in Section 5(b) of the Master Lease.
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"ADDITIONAL RESERVE ACCOUNT" shall have the meaning assigned to such
term in Section 3.16 of the Trust Agreement.
"ADVANCE(S)" is defined in Section 2.1 (b) of the Loan Agreement..
"AFFILIATE" is defined in Section 1.1 of the Loan Agreement.
"AGGREGATE EQUITY BALANCE" shall mean, as of any date, the sum of the
Equity Balances on such date for each and every Leased Property.
"AGGREGATE LEASE BALANCE" shall mean, as of any date, the sum of the
Lease Balances on such date for each and every Leased Property.
"AGGREGATE LOAN BALANCE" shall mean, at any date, the sum of the Loan
Balances on such date for each and every Leased Property.
"AHC" means AHC Tenant, Inc., a Delaware corporation.
"ALLOWED INDEBTEDNESS" is defined in Section 1.1 of the Loan Agreement.
"ALTERATIONS" is defined in Section 1.1 of the Loan Agreement.
"ALTERNATE RATE" means the Federal Funds Effective Rate plus 1%.
"ALTERNATE RATE ADVANCE" shall mean any Equity Advance during any
Interest Period with respect to which Yield is based upon the Alternate Rate.
"ALTERRA" means Alterra Healthcare Corporation, a Delaware corporation.
"APPRAISAL" is defined in Section 1.1 of the Loan Agreement.
"APPROVED ACCOUNTANTS" is defined in Section 1.1 of the Loan Agreement.
"APPURTENANT RIGHTS" shall mean all agreements, easements, rights of
way or use, rights of ingress or egress, privileges, appointments, tenements,
hereditaments, and other rights and benefits at any time belonging or pertaining
to any Land, including the use of any streets, ways, alleys, vaults or strips of
land adjoining, abutting, adjacent or contiguous to such Land and all permits,
licenses, and rights, whether or not of record, granted to or conferred upon the
Land.
"ARTICLE 1 EVENT" as defined in Section 1.7 of the Trust Agreement.
"ARTICLE 1 EVENT NOTICE" as defined in Section 1.7 of the Trust
Agreement.
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"ASSIGNED VALUE" for any Leased Property means (a) prior to June 30,
2002, the amount set forth on Exhibit B to the Master Lease, and (b) thereafter,
the Net Operating Income of such Leased Property for the immediately preceding
fiscal quarter.
"ASSIGNED VALUE FACTOR" for any Leased Property means a fraction, the
numerator of which is the Assigned Value for such Leased Property and the
denominator of which is the Assigned Value of all Leased Properties then subject
to the Lease.
"ASSIGNEE" is defined in Section 19(b) of the Master Lease.
"ASSIGNMENTS" is defined in Section 1.1 of the Loan Agreement.
"ASSIGNMENTS OF LEASES" is defined in Section 1.1 of the Loan
Agreement.
"ASSIGNMENTS OF MANAGEMENT AGREEMENTS" is defined in Section 1.1 of the
Loan Agreement.
"ASSIGNMENTS OF MEMORANDA OF LEASE" is defined in Section 1.1 of the
Loan Agreement.
"ASSIGNMENTS OF PURCHASE AGREEMENTS" shall mean those certain
Collateral Assignments of Purchase Agreements of even date herewith executed by
Borrower in favor of Trustee for the benefit of the Trustee and the
Beneficiaries.
"ASSISTED LIVING FACILITIES" is defined in Section 1.1 of the Loan
Agreement.
"ASSISTED LIVING FACILITY CONSULTANT" is defined in Section 1.1 of the
Loan Agreement.
"ASSUMPTION FEE" is defined in Section 1.1 of the Loan Agreement.
"ASSUMPTION FEE PERCENTAGE" is defined in Section 1.1 of the Loan
Agreement.
"AUTHORIZED OFFICER" is defined in Section 1 of the Insurance Surety
Bond.
"AVAILABLE BED CAPITAL IMPROVEMENT AMOUNT" is defined in Section 1.1 of
the Loan Agreement.
"AVAILABLE BEDS" is defined in Section 1.1 of the Loan Agreement.
"BACKSTOP INSURER" means Centre Reinsurance (US) Limited, a Bermuda
exempted company, and its successors and assigns.
"BACKSTOP POLICY" means the Backstop Insurance Surety Bond dated as of
even date herewith, from Backstop Insurer in favor of Trustee guaranteeing the
payment when due of all
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liabilities of Surety arising under the Surety Bond.
"BALANCED OWED" is defined in paragraph 42 of the Mortgages.
"BANKRUPTCY CODE" means Title 11 of the United States Code, as amended.
"BANKRUPTCY/INVALIDITY SURETY DEFAULT" is defined in Section 1.2 of the
Trust Agreement.
"BASE RENTAL" shall mean the amounts set forth in Section 5 of the
Master Lease payable on each Rental Payment Date pursuant to Section 5(a) of the
Master Lease.
"BASE SURETY PREMIUM" means a premium payable (a) on the Closing Date
in advance for the period from the Closing Date to and including July 31, 1999
in an amount equal to $59,984.00; and (b) in arrears on the second and each
subsequent Distribution Date and on the date of payment of the Note in full
(without giving effect to any payments thereof which may be made by the Surety
or the Backstop Insurer), equal to the result obtained by multiplying (i) by
(ii) by (iii), where (i) is the percentage set forth below applicable to such
Distribution Date; (ii) is the outstanding principal amount of the Note (but
without giving effect to any payments thereof by the Surety or the Backstop
Insurer), determined as of the immediately proceeding Distribution Date and
(iii) is a fraction where (y) the numerator is the number of days from and
including the immediately preceding Distribution Date to but excluding the
Distribution Date of calculation (except in the case of the calculation
occurring on September 1, 1999, in which case the numerator shall by 31) and (z)
the denominator is 360;
For purposes of clause (i) above, the applicable percentages shall be
as follows:
<TABLE>
<S> <C>
Closing Date to July 31, 2000 .38%
August 1, 2000 to July 31, 2001 1.65%
August 1, 2001 to July 31, 2002 1.93%
August 1, 2002 to July 31, 2002 2.22%
August 1, 2003 to July 31, 2004 2.51%
August 1, 2004 to July 31, 2005 2.82%
August 1, 2005 to July 31, 2006 2.87%
August 1, 2006 to July 31, 2007 2.92%
August 1, 2007 to July 31, 2008 2.98%
August 1, 2008 to the Maturity Date 3.05%
</TABLE>
"BASIC LEASE TERM" for any Leased Property shall have the meaning
specified in the applicable Lease Supplement.
"BASIC LEASE TERM COMMENCEMENT DATE" for any Leased Property shall have
the meaning specified in the applicable Lease Supplement.
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"BENEFICIARY OR BENEFICIARIES" shall mean, individually or
collectively, as the context may require, Lender, Surety, Borrower and/or any
Person that subsequently becomes a lawful Holder; in no event shall Lessee,
SELCO or Guarantor ever be deemed to be a "Beneficiary".
"BENEFIT PLAN" is defined in Section 1.1 of the Loan Agreement.
"BENEFITTED ITEM" shall mean each item of indebtedness, obligation or
liability described in the Categories.
"BOND" shall have the meaning contained in the Whereas clauses to the
Reimbursement Agreement.
"BORROWER" shall mean Pita General Corporation, an Illinois
corporation.
"BORROWER PARTY SECRETARY" is defined in Section 1.1 of the Loan
Agreement.
"BORROWER PRIORITY CATEGORY SHORTFALL AMOUNT" is defined in Section 2.1
of the Flow of Funds Agreement.
"BORROWER REQUIRED CASUALTY/CONDEMNATION PAYMENT" shall mean the Equity
Balance relating to the affected Property.
"BUDGET" is defined in Section 1.1 of the Loan Agreement.
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in New York City, New York or Chicago, Illinois are
required or authorized by law to close.
"CALL OPTION" is defined in Section 7.3 of the Joint Venture
Agreements.
"CAP EX. REIMBURSEMENT REQUEST" shall have the meaning set forth in
Section 3.2(c) of the Trust Agreement.
"CAPITAL IMPROVEMENTS" shall mean the collective reference to the
Initial Capital Improvements together with any capital improvements made
pursuant to Section 3.2 of the Trust Agreement.
"CAPITAL IMPROVEMENTS ACCOUNT" means the account established pursuant
to Section 3.2(a) of the Trust Agreement.
"CAPITAL IMPROVEMENTS FUNDS" is defined in Section 3.2(a) of the Trust
Agreement.
"CAPITAL LEASE PROPERTY" shall mean a Leased Property designated by
Lessee as a "Capital Lease Property" in the relevant Lease Supplement and
intended by Owner and Lessee to
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be treated for financial accounting purposes of Lessee as covered by a "Capital
Lease" under SFAS 13.
"CAPITAL PROCEEDS" shall mean (i) any and all Operating Revenues from
the Properties from and after the occurrence of an Event of Default and the
termination of the Flow of Funds Agreement (provided that, prior to the
occurrence of an Event of Default and termination of the Flow of Funds
Agreement, all Operating Revenues shall be disbursed in accordance with the Flow
of Funds Agreement), (ii) all other income and proceeds realized from the
liquidation of the Collateral through the exercise by any Party of any rights or
remedies under any of the Transaction Documents (but excluding (x) proceeds from
the JV Springing Collateral Account and (y) insurance proceeds or condemnation
awards), and (iii) any proceeds realized from the purchase, return or
disposition of the Properties pursuant to Sections 29 and 31 of the Lease.
"CASUALTY" is defined in paragraph 12 of the Mortgages.
"CASUALTY AMOUNT" is defined in Section 1.1 of the Loan Agreement and
in Section 15(b) of the Master Lease Agreement.
"CATEGORY" means each numbered subparagraph of Section 2.1 of the Flow
of Funds Agreement and shall include all Benefitted Items specified in each such
subparagraph.
"CERCLA" is defined in the definition of Environmental Laws.
"CERCLIS" is defined in Section 1.1 of the Loan Agreement.
"CHANGE OF CONTROL" is defined in Section 9.10 of the Participation
Agreement.
"CHANGE OF CONTROL AND CONSENT" shall mean, upon Surety's failure to
cure certain Surety Defaults in accordance with the time frames set forth in
Article 1 of the Trust Agreement, that the Surety is no longer the Controlling
Party under the Trust Agreement (as limited by the definition of
"Non-Controlling Party"), but is instead the Non-Controlling Party under the
Trust Agreement, and Lender is no longer the Non-Controlling Party hereunder,
but is instead the Controlling Party hereunder; provided that Surety will not be
permitted to assume or continue to exercise the rights of the Non-Controlling
Party (and to the extent that any action or inaction otherwise is not permitted
without consent or approval of the Non-Controlling Party, then such consent
requirement shall no longer apply) contained in the Trust Agreement or the Loan
Documents if Backstop Insurer's S&P Rating is downgraded below Investment Grade
or such S&P Rating is withdrawn, Qualified or upon the occurrence of a "Surety
Event of Default."
"CHARTER DOCUMENTS" is defined in Section 1.1 of the Loan Agreement.
"CLAIM" is defined in Section 1.1 of the Loan Agreement.
"CLOSING DATE" is defined in Section 1.1 of the Loan Agreement.
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"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLATERAL" means collectively, (i) any and all real and personal
property and any and all tangible and intangible assets or other property
(including, without limitation, the Deposit Accounts) which is or hereafter may
become subject to a Lien in favor of Trustee or any Beneficiary, whether by way
of direct or indirect security or by way of assignment (including, without
limitation, any collateral assignment), in each case, as security for any of the
Secured Obligations, excluding any Posting of Collateral by the Surety and the
Excluded Collateral, and (ii) any and all title insurance proceeds from any loan
policy of title insurance on any of the Properties.
"COLLATERAL COLLECTION EXPENSES" means, without limitation, all costs
and expenses incurred by Trustee or Controlling Party (or by a Servicer on their
behalf) under the Trust Agreement or any of the Security Documents when acting
with a good faith belief that its actions are not contrary to the provisions
thereof, including without limitation in connection with (1) administration of
the Loan following a default thereon, (2) the realization upon, protection,
insuring, management or operation of the Collateral (whether before or after
acquisition thereof by Trustee through foreclosure or deed in lieu thereof), (3)
enforcing or defending any Lien on the Collateral (including UCC filings) or (4)
any other action taken under or in connection with the Trust Agreement or any of
the Security Documents, such costs and expenses to include reasonable fees and
expenses incurred for or by legal counsel for Trustee (including in-house
counsel), Controlling Party or a Servicer in connection with the foregoing,
customary fees paid (for example, "Special Servicing" fees, workout fees and
liquidation fees) paid to a Servicer following a default on the Loan and any
other costs, expenses or liabilities incurred by Trustee or Controlling Party
(or by a Servicer on their behalf) for which such Person is entitled to be
reimbursed or indemnified pursuant to the Trust Agreement or any Collateral
Document.
"COMMONLY CONTROLLED ENTITY" means an entity, whether or not
incorporated, which is under common control with the Guarantor 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.
"CON" is defined in Section 1.1 of the Loan Agreement.
"CONDEMNATION" is defined in Section 1.1 of the Loan Agreement.
"CONTINGENT SURETY RENTAL" is defined in Section 5(c) of the Master
Lease.
"CONTINGENT OBLIGATION" is defined in Section 1.1 of the Loan
Agreement.
"CONTROLLING PARTY" shall mean Surety and any of its designees;
provided, however, that after a Change of Control and Consent, Lender shall
become the Controlling Party together with any of its designees.
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"CONTRACTUAL OBLIGATION" is defined in Section 1.1 of the Loan
Agreement.
"CORRESPONDENT LOCKBOX AGREEMENT" shall mean that certain Correspondent
Wholesale Lockbox Authorization of even date herewith by and among Firstar Bank
Illinois, Firstar Bank Milwaukee, N.A., Lessee, Guarantor and the Joint
Ventures.
"DEBT SERVICE COVERAGE RATIO OR DSCR" means, for any applicable period
of calculation, the ratio of (i) Net Operating Income for such period to (ii)
the sum of interest and principal on payments due on the Note during such
period.
"DEFAULT" is defined in Section 1.1 of the Loan Agreement.
"DEFAULT NOTICE" means a written notice to Trustee from a Holder or
other party to the Trust Agreement that an Event of Default has occurred and is
continuing.
"DEFAULT RATE" shall mean an interest rate per annum equal to four (4%)
percent, plus (A) in the case of a payment of Rent to be used by the Owner to
make a payment in respect of the Loan, the Interest Rate (as defined in the
Note), (B) in the case of a payment of Rent in respect of the Equity Balance,
the applicable Yield, (C) in the case of a payment of the Reimbursement
Obligations, the Interest Rate (as defined in the Note).
"DEFERRED MANAGEMENT FEES" means the Management Fees payable pursuant
to the JV Management Agreements (and not Management Fees payable pursuant to any
other Management Agreement, or payable with respect to any Properties originally
subject to the JV Management Agreements but which have ceased to be subject to
the JV Management Agreements, or to any Management Fees payable after January
31, 2001 [as the JV Management Agreements provide for a reduction in Management
Fees by such date so that the deferral contemplated by this definition will no
longer be necessary]) calculated as of each Distribution Date to be the sum of
the following amounts for each related Distribution Period: (i) 50% of the
Management Fees (but only for Distribution Periods ending after the last day of
January, 2000) relating to the Six Month Properties; and (ii) 50% of the
Management Fees (but only for Distribution Periods ending after the last day of
July, 2000) relating to the Twelve Month Properties.
"DEFICIENCY" is defined in Section 1 of the Surety Bond and the
Backstop Policy, as applicable.
"DEPOSIT ACCOUNTS" shall mean, collectively, the Capital Improvements
Account, the Lease Reserve Account, the Lockbox Account, the I and C Account,
the Tax and Insurance Escrow Fund, the Letter of Credit Proceeds Account, the
Lessee Letter of Credit Proceeds Account, the JV Springing Collateral Account,
the Operating Reserve Account, the Additional Reserve Account and all other
present and future deposit accounts of any of Borrower, Lessee, Guarantor or any
of the Joint Ventures created pursuant to any of the Transaction Documents, and
all funds from time to time on deposit in any of the foregoing deposit accounts.
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"DESIGNATED SUM" is defined in Section 1.6(b) of the Trust Agreement.
"DISCOUNTED FUTURE BASE SURETY PREMIUMS" shall mean, as of the date of
any determination the Future Base Surety Premiums discounted to present value as
of such date using a discount rate equal to the Interest Rate.
"DISCOUNTED TERMINATION PREMIUM" shall mean, as of the date of any
determination, the Termination Premium discounted to present value as of such
date using a discount rate equal to the Interest Rate.
"DISPOSITION" shall mean, with respect to any Person, any sale,
assignment, transfer or other disposition by such Person of (i) the stock or
other equity interests in such Person, other than, with respect to Guarantor
only, any sale, assignment, transfer or other disposition of the stock in
Guarantor, (ii) any business, operating entity, division or segment thereof, or
(iii) any other property (whether real or personal, tangible or intangible) of
such Person, other than (x) in the ordinary course of business (it being
understood that the sale of inventory in connection with bulk transfers shall
not be deemed to be in the ordinary course of business), (y) the sale or other
disposition of any property which in the reasonable opinion of such Person is
obsolete or no longer useful in the conduct of its business, or (z) the sale of
investment securities made for fair value.
"DISTRIBUTION DATE" shall mean the first Business Day of each month,
with the first Distribution Date under the Flow of Funds Agreement to occur on
August 1, 1999.
"DISTRIBUTION ESTIMATE SHORTFALL" shall mean on each Distribution Date
the dollar amount by which the Benefitted Items specified in Categories 2.1(i)
to and including 2.1(xv) (for purposes of such calculation utilizing for
Operating Expenses in 2.1(i), the Distribution Operating Expense Estimate) for
such Distribution Date cumulatively exceed the Operating Revenue for such
Distribution Date.
"DISTRIBUTION OPERATING EXPENSE ESTIMATE" is defined in Section 2.1 of
the Flow of Funds Agreement.
"DISTRIBUTION PERIOD" shall mean the period from each Distribution Date
to, but not including, the immediately succeeding Distribution Date, provided
that the first Distribution Period under the Flow of Funds Agreement shall
commence on the Closing Date and end on July 31, 1999.
"DOLLARS" and "$" means lawful money of the United States of America.
"DOWNGRADE NOTICE FROM SURETY" is defined in Section 1.1 of the Trust
Agreement.
"DOWNGRADE SURETY DEFAULT" means when the S&P Rating of Backstop
Insurer is not A+ ("single A plus") or higher or at any time such rating is
withdrawn or Qualified ; provided,
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however, if S&P does not provide the relevant rating, the foregoing tests in
this definition shall be established by reference to equivalent ratings by
Moody's (assuming that the Backstop Insurer has a public claims-paying ability
or financial strength rating from Moody's at such time).
"DUE FOR PAYMENT" is defined in Section 1 of the Surety Bond and
Section 1 of the Backstop Policy.
"EARLY TERMINATION PREMIUM" shall mean as of any calculation date the
sum of (i) an amount equal to the discounted present value of the Termination
Premium (using a discount rate equal to the Interest Rate), plus (ii) the
aggregate amount of Surety Base Rental that would have been payable under the
Master Lease through the Maturity Date, discounted to present value to the Early
Termination Premium Payment Date using a discount rate equal to the Interest
Rate, plus (iii) the aggregate amount of Contingent Surety Rental that would
have been payable under the Master Lease through the Maturity Date (assuming
that all of the contingencies set forth in Section 5(c) of the Master Lease had
been met), discounted to present value to the Early Termination Premium Payment
Date using the Interest Rate.
"EARLY TERMINATION PREMIUM PAYMENT DATE" means the date on which all or
any portion of the Loan is prepaid or defeased prior to the Maturity Date in
accordance with Section 6 of the Note.
"EBITDAR" means earnings before interest, taxes, depreciation,
amortization, and Guarantor Rent Obligations, plus the dollar amount of the
Guarantor's minority interest in losses of unconsolidated Subsidiaries.
"EFFECTIVE DATE" is defined in Section 1 of the Surety Bond and Section
1 of the Backstop Policy.
"ELIGIBLE ACCOUNT" shall mean any of (i) an account maintained with a
federal or state chartered depository institution or trust company, the
long-term deposit or unsecured debt obligations of which are rated "A2" by
Moody's and "A" by S&P at any time such funds are on deposit therein (if such
funds are to be held for more than 30 days ), or the short-term deposits of
which are rated "P-1" by Moody's and "A-1" by S&P, at any time such funds are on
deposit therein (if such funds are to be held for 30 days or less), or (ii) a
segregated trust account or accounts maintained with a federal or state
chartered depository institution or trust company acting in its fiduciary
capacity, which, in the case of a state chartered depository institution or
trust company, is subject to regulations regarding fiduciary funds on deposit
therein substantially similar to 12 CFR ss. 9.10(b), having in either case a
combined capital and surplus of at least $50,000,000 and subject to supervision
or examination by federal or state authority.
"ELIGIBLE INSTRUMENT" shall have the meaning ascribed to such term in
Section 1.6(g) of the Trust Agreement.
"END OF TERM ADJUSTMENT" shall mean the amounts payable by Lessee
pursuant to
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Section 31(a)(iv) of the Master Lease.
"ENDORSEMENT" is defined in Section 1.1 of the Loan Agreement.
"ENVIRONMENTAL LAW" is defined in Section 1.1 of the Loan Agreement.
"ENVIRONMENTAL PERMIT" is defined in Section 1.1 of the Loan Agreement.
"ENVIRONMENTAL REPORTS" is defined in Section 1.1 of the Loan
Agreement.
"EQUIPMENT" is defined in Section 1.1 of the Loan Agreement.
"EQUIPMENT LEASE" is defined in Section 1.1 of the Loan Agreement.
"EQUITY ADVANCES" shall have the meaning specified in Section 2.3 of
the Participation Agreement.
"EQUITY AMOUNT" shall mean the aggregate of the amounts funded by SELCO
on the Initial Closing Date and the Additional Closing Date.
"EQUITY BALANCE" shall mean, with respect to any Leased Property as of
the date of any determination, the aggregate amount of the Equity Advances then
outstanding multiplied by the Assigned Value Factor.
"EQUITY COMMITMENT" shall mean $10,000,000.00.
"EQUITY INVESTOR" shall mean SELCO Service Corporation, an Ohio
corporation.
"ERISA" is defined in Section 1.1 of the Loan Agreement.
"ERISA AFFILIATE" is defined in Section 1.1 of the Loan Agreement.
"EUROCURRENCY RESERVE PERCENTAGE" means as of any date of determination
the aggregate of the then stated maximum reserve percentages (including such
marginal, special, emergency or supplemental reserves) expressly as a decimal,
applicable to such Interest Period (if more than one such percentage is
applicable, the daily average of such percentages for those days in such
Interest Period during which any such percentage shall be so applicable) by the
Board of Governors of the Federal Reserve System, any successor thereto, or any
other banking authority, domestic or foreign, to which the Owner or SELCO may be
subject in respect of any other category of liabilities including deposits by
reference to which LIBOR is determined or any category of extension of credit or
other assets that include the Equity Advances. For purposes hereof, such reserve
requirements shall include, without limitation, those imposed under Regulation D
of the Federal Reserve Board, and the Equity Advances shall be deemed to
constitute Eurocurrency Liabilities such to such reserve requirements without
benefit of credits
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for proration, exceptions or offsets which may be available from time to time to
any bank under said Regulation D.
"EVENT OF BANKRUPTCY" is defined in Section 1 of the Surety Bond and
Section 1 of the Backstop Policy.
"EVENT OF DEFAULT" shall mean, as the case may be (i) any "Event of
Default" under the Reimbursement Agreement, (ii) any "Event of Default" under
the Loan Agreement, or (iii) any "Lease Event of Default" under the Lease.
"EXCEPTED RIGHTS" is defined in Section 1.1 of the Loan Agreement.
"EXCLUDED COLLATERAL" shall mean all right, title and interest of
Borrower (if any) and SELCO in and to that certain $9,975,000 letter of credit
issued by Firstar Bank Milwaukee, N.A. in favor of SELCO, and replacement or
substitute letter of credit or other Acceptable Replacement Collateral or other
collateral therefor, the Excluded Collateral Agreement, all income and proceeds
of any of the foregoing, all rights of Borrower (if any) and/or SELCO with
respect thereto, including, without limitation, the right to draw thereon and
enforce obligations of Guarantor with respect thereto, and all Excepted Rights
of Borrower and SELCO.
"EXCLUDED COLLATERAL AGREEMENT" shall mean that certain Excluded
Collateral and Indemnity Agreement dated as of July 16, 1999 by and between
Guarantor and SELCO.
"EXCLUDED TAXES" shall have the meaning set forth in Section 10.2 of
the Participation Agreement.
"EXHIBIT" is defined in Section 1.1 of the Loan Agreement.
"EXISTING LEASES" is defined in Section 1.1 of the Loan Agreement and
Section 3.1(w) of the Participation Agreement.
"FEDERAL FUNDS EFFECTIVE RATE" shall mean, for any period, a
fluctuating interest rate per annum equal for each day during such period to (a)
the weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the preceding
Business Day) by the Federal Reserve Bank of New York; or (b) if such rate is
not so published for any day which is a Business Day, the average of the
quotations at approximately 10:00 a.m. (Chicago time) for such day on such
transactions received by the Equity Investor or any Affiliate thereof from three
federal funds brokers of recognized standing selected by it.
"FEE LETTER" means the letter agreement dated July 16, 1999, among
Trustee and the other the parties setting forth Trustee's schedule of fees to
act as Trustee and to perform Trustee's other obligations under the Flow of
Funds Agreement and the other Transaction Documents.
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"FINANCING FEE" is defined in Section 1.1 of the Loan Agreement.
"FIRST CHICAGO" shall mean The First National Bank of Chicago, a
national banking association, in its capacity as a depository institution, with
an office located at One First National Plaza, Suite IL1-0126, Chicago, Illinois
60670-0126.
"FIXTURES" means all property which is so attached to the Land or the
Improvements as to constitute a fixture under applicable law and all renewals
and replacements thereof and substitutions therefore, including: machinery,
equipment, engines, boilers, incinerators, installed building materials; systems
and equipment for the purpose of supplying or distributing heating, cooling,
electricity, gas, water, air, or light; antennas, cable, wiring and conduits
used in connection with radio, television, security, fire prevention, or fire
detection or otherwise used to carry electronic signals; telephone systems and
equipment; elevators and related machinery and equipment; fire detection,
prevention and extinguishing systems and apparatus; security and access control
systems and apparatus; plumbing systems; water heaters, ranges, stoves,
microwave ovens, refrigerators, dishwashers, garbage disposers, washers, dryers
and other appliances; light fixtures, awnings, storm windows and storm doors;
pictures, screen, blinds, shades, curtains and curtain rods; mirrors; cabinets,
paneling, rugs and floor and wall coverings; fences, trees and plants; and
exercise equipment.
"FLOW OF FUNDS AGREEMENT" means that certain Flow of Funds Agreement
dated as of even date herewith by and between Borrower, Lender, Surety, Trustee,
the Lessee, the Joint Ventures and the Guarantor, as the same may be amended,
restated, supplemented or otherwise modified from time to time in accordance
with the terms thereof and hereof.
"FORCE MAJEURE" shall mean (A) any delay due to strikes, lockouts or
other labor or industrial disturbance, civil disturbance, future order of or
delay caused by any government, court or regulatory body claiming jurisdiction
(including, without limitation delays in processing or release of necessary
permits, licenses and approvals), act of the public enemy, war, riot, sabotage,
blockade, embargo, failure or inability to secure materials, supplies or labor
through ordinary sources by reason of shortages or priority or similar
regulation or order of any government or regulatory body, lightning, earthquake,
fire, storm, hurricane, tornado, flood, washout, explosion, other acts of God,
or other events or delays reasonably beyond the control of Lessee.
"GAAP" shall mean generally accepted accounting principles as set forth
in Statement on Auditing Standards No. 69 entitled "The Meaning of Present
Fairly in Conformity with Generally Accepted Accounting Principles in the
Independent Auditor's Report" issued by the Auditing Standards Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board that are applicable
to the circumstances as of the date of determination.
"GCFP" is defined in Section 1.1 of the Loan Agreement.
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"GENERAL INTANGIBLES" is defined in Section 1.1 of the Loan Agreement.
"GOVERNMENTAL AUTHORITY" is defined in Section 1.1 of the Loan
Agreement.
"GOVERNMENTAL RULE" shall mean any statute, law, treaty, rule, code,
ordinance, regulation or order of any Governmental Authority or any judgment,
decree, injunction, writ, order or like action of any Federal, state or local
court, or other tribunal of competent jurisdiction.
"GREENWICH LOAN AGREEMENT" means the Loan Agreement.
"GROSS REVENUES" shall have the meaning set forth for such term in the
Flow of Funds Agreement.
"GROSS TAXABLE AMOUNT" means the excess, if any, of the following for
the Subleased Properties for any Tax Year (i) the Operating Revenue to the
extent such Operating Revenue is includible in "gross income" for federal income
tax purposes in such Tax Year, over (ii) the sum of (A) Operating Expenses, (B)
Surety Premiums, (C) all interest expenses and (D) depreciation and
amortization, to the extent that each of the foregoing is deductible by Lessee
or the Joint Ventures for federal income tax purposes in such Tax Year and (E)
any other expenses deductible for federal income tax purposes by Lessee or the
Joint Ventures in such Tax Year. In no event, however, shall the calculation of
Gross Taxable Amount include any capital gains or losses for federal income tax
purposes.
"GROUND LEASES" is defined in Section 1.1 of the Loan Agreement.
"GROUND LEASE PROPERTIES" means those certain Leased Properties
identified in Exhibit C to the Master Lease.
"GUARANTEE" means that certain Guaranty of even date herewith executed
by Guarantor pursuant to which Guarantor has guaranteed all of Lessee's
obligations under the Master Lease and the other Transaction Documents.
"GUARANTEED OBLIGATIONS" is defined in Section 1(a) of the Guaranty.
"GUARANTEE REVENUES" means all proceeds of the Guarantee other than
payments made in support of the Lessee's obligation to make payment pursuant to
Sections 29 and 31 of the Lease.
"GUARANTOR" is defined in Section 1.1 of the Loan Agreement.
"GUARANTOR COVENANT DEFAULT" means a breach of the Guarantor Covenants.
"GUARANTOR COVENANTS" means those certain financial covenants of the
Guarantor set
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forth in Section 9.5 of the Participation Agreement.
"GUARANTOR INTEREST OBLIGATIONS" means the sum of all interest expense
(as defined by GAAP), net of interest income.
"GUARANTOR RENT OBLIGATIONS" means lease expense as defined by GAAP.
"GUARANTOR SUBROGATION AMOUNT" means any amounts payable to the
Guarantor to reimburse it for payments pursuant to the Guarantee, or arising due
to subrogation to the rights of an entity paid through the Guarantee.
"HAZARDOUS MATERIALS" is defined in Section 1.1 of the Loan Agreement.
"HCR" is defined in Section 1.1 of the Loan Agreement.
"HCR MANAGEMENT AGREEMENTS" means the management agreements to which
Seller or an affiliate of Seller is the Manager with respect to the nursing home
beds at the Laguna Palm Terrace, California Property and the Palmer Ranch,
Florida Property in form and substance satisfactory to the Controlling Party.
"HOLDER OR HOLDERS" means, individually or collectively, as the context
may require, Lender and/or Surety, and/or any Person which subsequently becomes
a lawful holder of any of the Secured Obligations in accordance with the
requirements of Section 7.4 of the Trust Agreement; in no event shall Lessee,
Borrower or Guarantor ever be deemed to be a "Holder" hereunder.
"I AND C ACCOUNT" shall have the meaning assigned to such term in
Section 3.5 of the Trust Agreement.
"IMPOSITION DEPOSITS" is defined in Section 8(a)(1) of the Master
Lease.
"IMPOSITIONS" is defined in Section 8(a)(1) of the Master Lease.
"IMPROVEMENTS" (i) in the case of the Trust Agreement, shall have the
meaning set forth in the Recitals to the Trust Agreement, and (ii) when used in
any of the other Transaction Documents (unless otherwise defined in such
Transaction Documents) shall have the meaning set forth in Section 1.1 of the
Loan Agreement.
"INDEBTEDNESS" is defined in Section 1.1 of the Loan Agreement.
"INDEMNIFIED CLAIMS" is defined in Section 1.1 of the Loan Agreement.
"INDEMNIFIED CLAIMS" is defined in Section 10.3(b) of the Participation
Agreement.
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"INDEMNIFIED PARTIES" means Owner, Equity Investor, Trustee,
Noteholder, Surety and their respective Related Parties.
"INDIVIDUAL PROPERTY" is defined in Section 1.1 of the Loan Agreement.
"INITIAL ADVANCE" is defined in Section 1.1 of the Loan Agreement.
"INITIAL CAPITAL IMPROVEMENTS" shall have the meaning assigned to such
term in Section 3.2 of the Trust Agreement.
"INITIAL CAPITAL IMPROVEMENTS AMOUNT" shall have the meaning assigned
to such term in Section 3.2 of the Trust Agreement.
"INITIAL PROPERTIES" is defined in Section 1.1 of the Loan Agreement.
"INSOLVENCY PROCEEDING" means any proceeding commenced by or against
Borrower or Lessee under any provision of the United States Bankruptcy Code, or
under any other bankruptcy or insolvency law, including assignments for the
benefit of creditors, formal or informal moratoria, compositions, extensions
generally with their creditors, or proceedings seeking reorganization,
arrangement, or other similar relief.
"INSTRUMENTS" is defined in Section 1.1 of the Loan Agreement.
"INSURANCE AMOUNT" means, the "SURETY BOND AMOUNT" as defined in the
Bond.
"INSURANCE DEFAULT" means (i) the failure by Lessee to pay any
insurance premiums for the Properties in accordance with, or any other default
under Sections 4.4(a) or 4.4(b) of the Loan Agreement, or (ii) the occurrence of
any other Event of Default.
"INSURANCE DOCUMENTS" means, collectively, the Surety Bond, the
Backstop Policy, the Reimbursement Agreement, the Trust Agreement and the Flow
of Funds Agreement.
"INSURANCE SURETY BOND" is defined in Section 1 of the Surety Bond.
"INSURED" is defined in Section 1 of the Surety Bond and Section 1 of
the Backstop Policy.
"INSURED OBLIGATIONS" is defined in Section 1 of the Surety Bond and
Section 1 of the Backstop Policy.
"INTEREST PAYMENT DATE" shall mean with respect to any Equity Advance
(i) each Rent Payment Date commencing September 1, 1999, and (ii) any other date
on which Equity Advances are required to be repaid.
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"INTEREST PERIOD" shall mean (i) for the Equity Advance to be made on
the Closing Date, the period commencing on July 16, 1999 through August 31,
1999, and thereafter the period commencing on the first day of each succeeding
month and ending on the last day of such succeeding month, and (ii) for the
Equity Advance to be made on the Additional Properties Closing Date, the period
commencing on such date and ending on the last day of the month in which such
Additional Properties Closing Date occurs, and thereafter, the period commencing
on the first day of each month and ending on the last day of such succeeding
month; provided, however, that (A) no Interest Period with respect to any Equity
Advance shall end later than the Maturity Date, and (B) Yield shall accrue from
and including the first day of an Interest Period to but excluding the last day
of such Interest Period.
"INTEREST RATE" is defined in the Note.
"INVENTORY" is defined in Section 1.1 of the Loan Agreement.
"INVENTORY" means all inventories of food, beverages and other
comestibles held by Pita, AHC, the Joint Ventures or Alterra (as Manager) for
sale or use at or from the Land or the Assisted Living Facility, and soap, paper
supplies, medical supplies, drugs and all other such goods, wares and
merchandise held by Pita, AHC, the Joint Ventures or Alterra (as Manager) for
sale to or for consumption by residents, guests or patients of the Land or the
Assisted Living Facility and all such other goods returned to or repossessed by
Pita, AHC, the Joint Ventures or Alterra (as Manager).
"INVESTMENT GRADE" means a S&P Rating of BBB ("triple B"), or its
equivalent, or higher.
"INVOICE PAYMENT REQUEST" is defined in Section 3.2(c)(ii) of the Trust
Agreement.
"INVOLUNTARY BORROWER PARTY BANKRUPTCY" is defined in Section 1.1 of
the Loan Agreement.
"JOINDER AGREEMENT" is defined in Section 5.1 of the Flow of Funds
Agreement.
"JOINT VENTURE AGREEMENT" shall mean the partnership or membership
agreement by which a Joint Venture Sublessee is formed or organized.
"JOINT VENTURES" means the Sublessees.
"JOINT VENTURE SUBLEASE" shall mean the Subleases.
"JV INTERESTS" shall mean all of the general and limited partnership
interests in each of the Joint Ventures.
"JV MANAGEMENT AGREEMENTS" means the collective reference to those
certain Assisted Living Consultant and Operations Agreements between the
Guarantor and the Joint Ventures with
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respect to the Properties.
"JV SPRINGING COLLATERAL ACCOUNT" is defined in Section 3.14 of the
Trust Agreement.
"JV TRIGGERING EVENT" shall mean (i) shall mean the failure by
Guarantor to comply with the covenants set forth in Section 9.5 of the
Participation Agreement, (ii) the occurrence of a payment Lease Event of Default
under the Lease, which default has continued for a period of three (3) days, or
(iii) the failure of Guarantor to fund the Operating Reserve Account when
required under Section 3.15 of the Trust Agreement, which failure has continued
for a period of three (3) days.
"LAND" shall mean those certain pieces or parcels of real property
described in Exhibit A attached to the applicable Lease Supplement.
"LATE CHARGE" is defined in Section 5(b)(viii) of the Master Lease.
"LCR COMMENCEMENT DATE" shall mean June 30, 2001.
"LEASE BALANCE" shall mean, with respect to each Leased Property, as of
the date of any determination, the sum of the Loan Balance plus the Equity
Balance as of such date.
"LEASE COVERAGE PERIOD" means, as of the date of determination, a
period consisting of (i) for the period from the Closing Date to June 30, 2001,
the immediately preceding calendar quarter, and (ii) on and after July 1, 2001,
the immediately preceding two consecutive calendar quarters.
"LEASE COVERAGE RATIO" or "LCR" shall mean, for any applicable Lease
Coverage Period, a ratio (A) the numerator of which is equal to the Net
Operating Income for such Lease Coverage Period, and (B) the denominator of
which is equal to the sum of all Base Rental and Contingent Surety Rental
payments required to be made by Lessee pursuant to the Master Lease during such
Lease Coverage Period.
"LEASE DEFAULT" shall mean any fact or circumstance which constitutes,
or upon the lapse of time, or giving of notice, or both, could constitute a
Lease Event of Default.
"LEASE DOCUMENTS" means the collective reference to the Master Lease,
the Memorandums of Lease, the Lease Supplements, the Subleases, the
Participation Agreement, the Guaranty and the Sublessee Assignments.
"LEASED PROPERTY" shall have the meaning set forth in Section 2 of the
Master Lease.
"LEASE EVENT OF DEFAULT" shall have the meaning specified in
Section 23 of the Master Lease.
"LEASE RESERVE ACCOUNT" is defined in Section 3.3 of the Trust
Agreement.
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"LEASE RESERVE CAP" is defined in Section 3.3 of the Trust Agreement.
"LEASE RESERVE DEFICIENCY" is defined in Section 3.3(c) of the Trust
Agreement.
"LEASES" shall mean (i) the Ground Leases, (ii) the Subleases, (iii)
any and all other material leases or subleases of all or any party of a Leased
Property being acquired on the Closing Date (other than Residency Agreements).
"LEASE SUPPLEMENTS" means the collective reference to each Lease
Supplement (in the form of Exhibit A to the Lease between the Borrower and the
Lessee, which Lease Supplement relates to a particular Leased Property).
"LEASE TERM EXPIRATION DATE" shall have the meaning ascribed to such
term in Section 3 of the Lease.
"LEGAL REQUIREMENTS" is defined in Section 1.1 of the Loan Agreement.
"LENDER" shall mean Greenwich Capital Financial Products, Inc., a
Delaware corporation.
"LENDER-APPOINTED WRAP SURETY" is defined in Section 1.5(c)(ii) of the
Trust Agreement.
"LENDER REQUIRED CASUALTY/CONDEMNATION PAYMENT" shall have the meaning
ascribed to the term "Required Casualty/Condemnation Payment" in the Loan
Agreement.
"LESSEE" shall mean AHC Tenant, Inc., a Delaware corporation.
"LESSEE COLLATERAL ASSIGNMENT" shall mean, with respect to any
Property, the security agreement in respect of contracts, licenses and permits
in form satisfactory to Owner and Trustee, executed by Lessee in favor of
Trustee for the benefit of the Beneficiaries.
"LESSEE LETTER OF CREDIT" is defined in Section 3.3(c) of the Trust
Agreement.
"LESSEE LETTER OF CREDIT PROCEEDS ACCOUNT" is defined in Section 3.13
of the Trust Agreement.
"LESSEE MANAGEMENT AGREEMENT" means the reference to that certain
Assisted Living Consultant and Operations Agreement between the Guarantor and
the Lessee with respect to the Properties.
"LESSEE TRIGGERING EVENT" shall mean the failure by Guarantor to comply
with the covenants set forth in Section 9.5 of the Participation Agreement.
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"LESSOR" shall mean Pita General Corporation, an Illinois corporation.
"LETTER OF CREDIT PROCEEDS ACCOUNT" is defined in Section 3.12 of the
Trust Agreement.
"LIABILITIES" shall mean all losses, damages, liabilities, injuries,
claims, suits, demands, actions, proceedings, costs and expenses (including
reasonable fees and expenses of attorneys and experts).
"LIBOR" shall mean, for any Interest Period, the quotient (rounded
upwards, if necessary, to the nearest one sixteenth of one percent (1/16th of
1%) of (x) the per annum rate of interest, determined by Equity Investor in
accordance with its usual procedures (which determination shall be conclusive
absent manifest error) as of approximately 11:00 a.m. (London time) two Business
Days prior to the Closing Date and prior to each Rent Payment Date occurring
thereafter, appearing on Page 3750 of the Telerate Service (or any successor or
substitute page of such service, or any successor to or substitute for such
service providing rate quotations comparable to those currently provided on such
page of such service, as determined by the Equity Investor from time to time for
purposes of providing quotations of interest rates applicable to dollar deposits
in the London interbank market) as the rate in the London interbank market for
dollar deposits in immediately available funds with a maturity comparable to the
Interest Period divided by (y) a number equal to 1.00 minus the Eurocurrency
Reserve Percentage. In the event that such rate quotation is not available for
any reason, then the rate (for purposes of clause (x) hereof) shall be the rate,
determined by the Equity Investor, as applicable, as of approximately 11:00 a.m.
(London time) two (2) Business Days prior to the beginning of such Interest
Period, to be the average (rounded upwards, if necessary, to the nearest one
sixteenth of one percent (1/16th of 1%) of the per annum rates at which dollar
deposits in immediately available funds in an amount comparable to the then
outstanding amount of the Equity Advances and with a maturity of one (1) month
is offered to the prime banks by leading banks in the London interbank market.
LIBOR shall be adjusted automatically on and as of the effective date of any
change in the Eurocurrency Reserve Percentage.
"LIBOR ADVANCE" shall mean any Equity Advance during any Interest
Period with respect to which the Yield is based on LIBOR.
"LICENSING SUBLEASES" is defined in Section 1.1 of the Loan Agreement.
"LIEN" is defined in Section 1.1 of the Loan Agreement.
"LIMITED LESSEE RISK CONDITIONS" shall mean all of the following: (A)
no Tolling Default shall have occurred and no Lease Default or Lease Event of
Default shall have occurred and be continuing; (B) Lessee shall have performed
all obligations and complied with all conditions in connection with a return of
the Leased Properties strictly in accordance with the terms of the Master Lease;
and (C) except as expressly permitted by the Lease, no amendment, modification,
supplement, consent, waiver, approval, settlement, extension,
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compromise or accommodation of the Master Lease has been entered into or given
without the prior written consent of the Owner and Trustee.
"LIQUIDATED DAMAGES PAYMENT DATE" is defined in Section 24(c) of the
Master Lease.
"LOAN" is defined in the Recitals to the Loan Agreement.
"LOAN AGREEMENT" shall mean that certain Loan Agreement between
Borrower, Lessee and Lender, dated as of the date hereof.
"LOAN BALANCE" shall mean, with respect to any Leased Property, as of
any date of determination, the aggregate principal balance of the Note then
outstanding multiplied by the Assigned Value Factor.
"LOAN BASE RENTAL" is defined in Section 5(a) to the Master Lease.
"LOAN DEFAULT" shall mean any fact of circumstance which constitutes,
or upon the lapse of time, or giving of notice, or both could constitute a Loan
Event of Default.
"LOAN DOCUMENTS" is defined in Section 1.1 of the Loan Agreement.
"LOAN EVENT OF DEFAULT" shall mean an "Event of Default" under Section
7.1 of the Loan Agreement.
"LOAN OBLIGATIONS" shall mean the "Loan Obligations" as defined in
Section 1.1 of the Loan Agreement.
"LOCKBOX ACCOUNT" shall have the meaning ascribed to such term in
Section 3.4 of the Trust Agreement.
"LOCKBOX AGREEMENT" shall mean that certain Lockbox Agreement of even
date herewith by and among Lessee, Guarantor, the Joint Ventures, Trustee, and
Firstar Bank Illinois.
"LONDON BANKING DAY" shall mean a day on which banks are open for
business in London, England, and quoting deposit rates for dollar deposits.
"LOSSES" means as of any date, amounts that are actually paid or then
currently payable by Surety in payment or settlement of claims covered under the
Surety Bond, subject to and in accordance with the terms and conditions of the
Surety Bond, notwithstanding any increase in the coverage of the Surety Bond as
contemplated by Section 2.07 of the Reimbursement Agreement.
"MANAGEMENT AGREEMENTS" is defined in Section 1.1 of the Loan
Agreement.
"MANAGEMENT FEES" shall mean the fees payable by Lessee and the Joint
Ventures to
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Guarantor pursuant to the Management Agreements in connection with the operation
and management of the Properties by the Guarantor.
"MANAGER" means Alterra Healthcare Corporation, a Delaware corporation,
and any successor Manager of the Properties.
"MARGIN STOCK" is defined in Section 1.1 of the Loan Agreement.
"MASTER GLOSSARY OF DEFINITIONS" shall mean this Master Glossary of
Definitions.
"MASTER LEASE" means that certain Master Lease Agreement of even date
herewith between the Borrower and the Lessee, together with all Lease
Supplements thereto.
"MATERIAL ACTION" means, for purposes of any consent, waiver or other
acquiescence by Non-Controlling Party, the taking of, or omitting to take, any
of the following actions by Trustee or Lender pursuant to the Loan Documents:
(a) the disposition of insurance or condemnation proceeds unless the Lessee is
entitled thereto pursuant to Section 4.4 of the Loan Agreement or the
Controlling Party has decided to allow the Borrower or Lessee, as the case may
be, to rebuild the any of the Properties pursuant to Section 4.4 of the Loan
Agreement, (b) a change in the priority of payments set forth in Article II of
the Flow of Funds Agreement, (c) waiver of any provision of Article 3 of the
Trust Agreement, (d) replacement of the "Manager" (as defined in the Management
Agreements) pursuant to any of the Management Agreements, the Loan Agreement, or
the Assignments of Management Agreements, (e) waiver or failure to enforce any
requirements under Sections 5.1, 5.2, 5.3 (except as expressly provided for in
Section 6 of the Note), 5.4, 5.7, 5.8, 5.10, 5.12, 5.13, 5.18, 5.19, 5.20, 5.21
or 5.22 of the Loan Agreement, (f) any modification, waiver or amendment of the
Lockbox Agreement, (g) any defense to be raised by Trustee relating to the
Collateral or the Security Documents, (h) any modification, waiver or amendment
of Section 2.10 of the Loan Agreement, (i) approval of any Budget under Section
4.10 of the Loan Agreement, or approval of a capital expenditure not provided
for in the Budget as contemplated by Section 3.2(c)(ii) of the Trust Agreement,
(j) consenting to any Loan Transfer and Assumption under Section 8.2 of the Loan
Agreement, (k) any modification, waiver or amendment of the Guaranty, and (l)
any modification, waiver or amendment of any provision of any Transaction
Document affecting, or any definition of any Transaction Document referenced in,
this definition of "Material Action" or any other material modification, waiver
or amendment of any of the Transaction Documents (other than the Insurance
Documents) and (m) release from escrow and delivery by Trustee of the original
Note other than in accordance with Section 4.5 of the Trust Agreement.
"MATERIAL ADVERSE EFFECT" is defined in Section 1.1 of the Loan
Agreement.
"MATERIAL LOAN DEFAULT" shall have the meaning set forth in Section
1.4(a) of the Trust Agreement.
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"MATERIAL LOAN DEFAULT DATE" shall have the meaning set forth in
Section 1.4(a) of the Trust Agreement.
"MATERIAL MODIFICATION" is defined in Section 1.1 of the Loan
Agreement.
"MATURITY DATE" is defined in Section 1.1 of the Loan Agreement.
"MAXIMUM LESSEE RISK AMOUNT" shall mean, with respect to the Operating
Lease Properties as of any date of determination, the product of the "Maximum
Lessee Risk Percentage" set forth in Exhibit E of the Master Lease, multiplied
by the Lease Balances plus the Property Termination Premiums for all Operating
Lease Properties then subject to the Master Lease.
"MAXIMUM LOAN AMOUNT" is defined in Section 1.1 of the Loan Agreement.
"MEDICAID" is defined in Section 1.1 of the Loan Agreement.
"MEDICAID CERTIFICATION" is defined in Section 1.1 of the Loan
Agreement.
"MEDICAID REGULATIONS" is defined in Section 1.1 of the Loan Agreement.
"MEDICARE" is defined in Section 1.1 of the Loan Agreement.
"MEDICARE CERTIFICATION" is defined in Section 1.1 of the Loan
Agreement.
"MEDICARE REGULATIONS" is defined in Section 1.1 of the Loan Agreement.
"MONEY" is defined in Section 1.1 of the Loan Agreement.
"MOODY'S" shall mean "Moody's Investors Service, Inc.
"MORTGAGED PROPERTY" is defined in Section 1(m) of the Mortgage.
"MORTGAGEE" shall mean the entity identified as "Mortgagee" in the
first section of the Mortgage, together with its successors and assigns.
"MORTGAGE INSTRUMENTS" the Mortgage, as it may be amended, modified or
supplemented from time to time, together with the Other Mortgage Instruments.
"MORTGAGES" is defined in Section 1.1 of the Loan Agreement.
"MORTGAGOR" shall mean the persons or entities identified as
"Mortgagor" in the first section of the Mortgage, together with their respective
successors and assigns.
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"MULTIEMPLOYER PLAN" is defined in Section 1.1 of the Loan Agreement.
"NET OPERATING INCOME" shall mean, with respect to the applicable
period of calculation, the remainder of (i) Operating Revenues during such
period, less (ii) the sum of (A) Operating Expenses during such period, plus (B)
the amount of Management Fees payable during such period (including any accrued
and unpaid Deferred Management Fees under the Flow of Funds Agreement as of the
end of such period), net of any Management Fees which were included in Operating
Expenses during such period, (but in no event shall Management Fees be less than
5% of Operating Revenue for purposes of this definition) plus (C) capital
expenditures for such period in an amount which, on an annualized basis, would
be equal to $300 per bed, per annum, plus (D) Impositions (as defined in Section
8(a)(1) of the Master Lease) required to be escrowed for the Properties during
such period, plus (E) all payments of Allowed Indebtedness (other than the Loan)
during such period.
"NET OPERATING LOSS" means the excess, if any, of the following for the
Subleased Properties in any Tax Year: (i) the sum of (A) Operating Expenses, (B)
Surety Premiums, (C) all interest expenses and (D) depreciation and
amortization, to the extent that each of the foregoing is deductible for federal
income tax purposes in such Tax Year, and (E) any other expenses deductible for
federal income taxes by Lessee or the Joint Ventures in such Tax Year over (ii)
the Operating Revenue to the extent that such Operating Revenue is includible in
"gross income" for federal income tax purposes in such Tax Year. In no event,
however, shall the calculation of Net Operating Loss include any capital gains
or losses for federal income tax purposes.
"NET PROCEEDS OF SALE" shall mean with respect to any Leased Property
sold by Owner to a third party pursuant to Section 30(a) or 30(b) of the Master
Lease, the net amount of the proceeds of sale of such Leased Property, after
deducting from the gross proceeds of such sale (i) all sales taxes and other
taxes as may be applicable to the sale or transfer of such Leased Property, (ii)
all fees, costs and expenses of such sale incurred by Owner, (iii) any other
amounts for which, if not paid, Owner would be liable or which, if not paid,
would constitute a Lien on such Leased Property, but in determining Net Proceeds
of Sale, the amounts payable under each Loan shall not be deducted from gross
proceeds of such sale, and (iv) with respect to a sale under Section 30(a) only,
all unreimbursed costs and expenses incurred by Owner after the Termination Date
in connection with the ownership, operation and maintenance of such Leased
Property, including, without limitation, real estate taxes, insurance, utilities
and repairs, plus interest thereon at the Owner Default Rate.
"NET TAXABLE AMOUNT," means, with respect to the Joint Ventures, as of
a Tax Distribution Date the excess, if any, of (i) the Gross Taxable Amount of
the Tax Year, less (ii) the excess, if any, of (a) the sum of each Net Operating
Loss of each of the calendar years prior to the Tax Year, less (b) the sum of
each Net Operating Loss, or portion thereof, which previously offset any Gross
Taxable Amount in the calculation of Net Taxable Amount in any calendar year
prior to the Tax Year.
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"NET WORTH" shall mean shareholder's equity as defined by GAAP.
"NON-CONTROLLING PARTY" shall mean the Lender; provided, however, (i)
from and after a Change of Control and Consent of which Trustee has been
notified in writing by Lender and Surety and prior to the existence of a Surety
Event of Default, Surety shall become the Non-Controlling Party, and (ii) during
the continuance of a Surety Event of Default there shall be no Non-Controlling
Party. TRUST AGR
"NON-DOWNGRADE SURETY DEFAULT" shall mean any "Surety Default" as
defined below except for a Downgrade Surety Default. TRUST AGR
"NON-PERFORMANCE PERIOD" is defined in Section 1.2(a) of the Trust
Agreement.
"NOTE" is defined in Section 1.1 of the Loan Agreement.
"NOTEHOLDER" shall mean Greenwich Capital Financial Products, Inc, a
Delaware corporation, together with its successors and permitted assigns.
"NOTE MATURITY DATE" is defined in Section 1 of the Insurance Surety
Bond.
"NOTICE" shall mean all notices, demands and other communications.
"NOTICE OF PREFERENCE CLAIM" is defined in Section 1 of the Surety Bond
and Section 1 of the Backstop Policy
"NPL" is defined in Section 1.1 of the Loan Agreement.
"NPR" is defined in Section 1.1 of the Loan Agreement.
"OBLIGATIONS" is defined in Section 1.1(r) of the Mortgage.
"OFFICER'S CERTIFICATE" is defined in Section 1.1 of the Loan
Agreement.
"O&M PROGRAM" is defined in Section 1.1 of the Loan Agreement.
"OPERATING EXPENSES" shall mean, with respect to any period, all
operating expenses incurred by the Lessee or any Joint Venture, without
duplication, in connection with the operation of the Properties, determined on
an accrual basis, in accordance with GAAP and based upon the most recently
available financial statements or reports required pursuant to the Loan
Agreement and the Reimbursement Agreement including but not limited to the
following expenses:
(i) salaries, wages, benefits and payroll taxes;
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(ii) fees and expenses payable to the Trustee (if any);
(iii) insurance premiums (unless paid in escrow to Trustee
in accordance with Section 3.7 of the Trust Agreement);
(iv) fees and expenses of lawyers and accountants and other
professional fees incurred in the ordinary course of business in connection with
the normal day to day operation of the Properties;
(v) fees, costs and expenses in connection with the day to
day repair and maintenance of the Properties;
(vi) all utility bills relating to heating, cooling and
lighting the Properties; and
(vii) all Management Fees other than the Deferred Management
Fees.
This definition of "Operating Expenses" excludes (i) all Surety Premiums, (ii)
all interest expenses, and (iii) depreciation and amortization relating to the
Properties.
"OPERATING LEASE PROPERTY" shall mean a Leased Property designated by
Lessee as an "Operating Lease Property" in the relevant Lease Supplement and
intended by Owner and Lessee to be treated for financial accounting purposes of
Lessee as covered by an "operating lease" under SFAS 13.
"OPERATING LOSS AMOUNT" is defined in Section 3.15 of the Trust
Agreement.
"OPERATING RESERVE ACCOUNT" is defined in Section 3.15 of the Trust
Agreement.
"OPERATING RESERVE ACCOUNT REVENUES" shall mean monies disbursed from
the Operating Reserve Account.
"OPERATING REVENUE" shall mean, for any period, all income received by
the Lessee or any Joint Venture (or the Manager on their behalf), without
duplication, from any person or entity, including, without limitation, all rents
under any Sublease, all rent or income from any Residency Agreement, which, in
accordance with GAAP, is included in the Lessee's or such Joint Venture's
financial statements as revenue determined on an accrual basis for the
applicable period based upon the most recently available financial statements or
reports required pursuant to the Loan Agreement and Reimbursement Agreement,
modified, if necessary, to include, without duplication, all such income arising
from any of the following:
(a) condemnation proceeds under a temporary taking to the extent that
such proceeds are compensation for lost rent;
(b) business interruption insurance proceeds; and
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(c) monies disbursed from the Operating Reserve Account pursuant to the
Trust Agreement on the Operating Reserve Termination Date.
Notwithstanding the foregoing, Operating Revenue shall not include (i) any
condemnation or insurance proceeds (other than the types described in clauses
(a) or (b) above), (ii) any proceeds resulting from the sale, exchange,
transfer, financing or refinancing of all or any part of any Property or (iii)
any funds released from any Deposit Account.
"ORIGINAL INSURANCE SURETY BOND" is defined in Section 1 of the
Insurance Surety Bond.
"ORIGINAL INSURED OBLIGATIONS" is defined in Section 1 of the Backstop
Insurance Surety Bond.
"ORIGINAL SURETY" is defined in Section 1 of the Backstop Policy.
"ORIGINAL SURETY BOND PAYMENT DATE" is defined in Section 1 of the
Backstop Policy.
"OUTSIDE DIRECTOR" is defined in Section 1.1 of the Loan Agreement.
"OWNER" shall mean Pita General Corporation, an Illinois corporation.
"OWNER BASE RENTAL" shall have the meaning set forth in Section 5(a)(z)
of the Master Lease Agreement.
"OWNER DEFAULT RATE" is defined in Section 2.6(b) of the Participation
Agreement.
"OWNER LIEN" shall mean any Lien resulting solely from claims arising
against, or from acts or omissions of, the Owner or those acting by, through, or
under Owner (exclusive of Lessee, Guarantor, any Sublessee, Manager, Noteholder,
Surety, Trustee and their respective Related Parties, and Persons acting by,
through or under Lessee, Guarantor, any Sublessee, Manager, Surety, Trustee or
their Related Parties) other than (i) Liens granted by Owner in accordance with
the express terms and conditions of the Transaction Documents; (ii) Liens
arising as a result of Lessee failing to perform its duties under the Lease
Documents, the Participation Agreement or any other Transaction Document; and
(iii) Permitted Liens.
"OWNER'S CONVEYANCE" shall mean any of the following: (i) the transfer
by Owner of its interest in any Leased Property to Lessee pursuant to Sections
15(g) or 29(b) of the Master Lease; or (ii) the transfer by Owner of its
interest in the Leased Property to a third party pursuant to Section 30(b) of
the Master Lease.
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"PARTICIPATION AGREEMENT" means that certain Participation Agreement
dated of even date herewith among Lessee, Owner, Guarantor, Equity Investor,
Surety, Trustee and Noteholder.
"PARTIES" shall mean each of the signatories to the Trust Agreement.
"PAYMENT/CROSS-DEFAULT SURETY DEFAULT" is defined in Section 1.2(b) of
the Trust Agreement.
"PAYMENT SURETY DEFAULT" shall have the meaning set forth in the
definition of "Surety Default."
"PBGC" is defined in Section 1.1 of the Loan Agreement.
"PERFORMANCE PERIOD" is defined in Section 1.3(a) of the Trust
Agreement.
"PERMITS" is defined in Section 1.1 of the Loan Agreement.
"PERMITTED INVESTMENTS" mean book-entry securities, negotiable
instruments or securities represented by instruments in bearer or registered
form which evidence:
(a) direct obligations of, and obligations fully guaranteed as
to the full and timely payment by, the United States of America;
(b) demand deposits, time deposits or certificates of deposit
of any depository institution or trust company incorporated under the laws of
the United States of America or any State thereof and subject to supervision and
examination by Federal or State banking or depository institution authorities;
provided, however, that at the time of the investment or contractual commitment
to invest therein, the commercial paper or other short-term unsecured debt
obligations (other than such obligations the rating of which is based on the
credit of a Person other than such depository institution or trust company)
thereof shall be rated "A-1+" by Standard & Poor's and "P-1" by Moody's;
(c) commercial paper of a corporation incorporated under the
laws of the United States or any state thereof that, at the time of the
investment or contractual commitment to invest therein, is rated "A-1+" by
Standard & Poor's and "P-1" by Moody's;
(d) bankers' acceptances issued by any depository institution
or trust company referred to in clause (b) above;
(e) repurchase obligations with respect to any security that
is a direct obligation of, or fully guaranteed as to the full and timely payment
by, the United States of America or any agency or instrumentality thereof the
obligations of which are backed by the full faith and credit of the United
States of America, in either case entered into pursuant to a written
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agreement with (i) a depository institution or trust company (acting as
principal) described in clause (b) or (ii) a depository institution or trust
company the deposit of which are insured by the Federal Deposit Insurance
Corporation and whose commercial paper or other short-term unsecured debt
obligations are rated "A-1+" by Standard & Poor's and "P-1" by Moody's and whose
long-term unsecured debt obligations are rated "AAA" by Standard & Poor's and
"Aaa" by Moody's;
(f) money market mutual funds registered under the Investment
Company Act of 1940, as amended that maintain a constant net asset value and
that have a rating, at the time of such investment, in the highest investment
category granted by each of Standard & Poor's and Moody's;
(g) common trust funds rated AAAm or AAAm-G by Standard &
Poor's and Aaa by Moody's; and
(h) any other investment as may be acceptable to the Lender
and each Rating Agency;
provided that (A) no investment described hereunder shall evidence either the
right to receive (1) only interest with respect to such investment or (2) a
yield to maturity greater than 120% of the yield to maturity at par of the
underlying obligations, (B) no investment described hereunder may be purchased
at a price greater than par if such investment may be prepaid or called at a
price less than its purchase price prior to stated maturity; and (C) no
investment described hereunder may have a "r" highlighter or other comparable
qualifier attached to its rating; provided, further, that each investment
described hereunder must have (X) a predetermined fixed amount of principal due
at maturity (that cannot vary or change), (Y) an original maturity of not more
than 365 days and a remaining maturity of not more than 30 days and (Z) except
in the case of Permitted Investments described in clauses (f) and (g) above, a
fixed interest rate or an interest rate that is tied to a single interest rate
index plus a single fixed spread.
"PERMITTED LIENS" is defined in Section 1.1 of the Loan Agreement.
"PERMITTED SURETY CURE" is defined in Section 1.5(b) of the Trust
Agreement.
"PERSON" is defined in Section 1.1 of the Loan Agreement.
"PERSONAL PROPERTY CAPITAL PROCEEDS" shall mean all Capital Proceeds
that are not Real Estate Capital Proceeds.
"PITA" shall mean Pita General Corporation, an Illinois corporation.
"PLAN" is defined in Section 1.1 of the Loan Agreement.
"PLEDGE AGREEMENTS" is defined in Section 1.1 of the Loan Agreement.
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"POST COLLATERAL" or "POSTED COLLATERAL" or "POSTING OF COLLATERAL"
shall have the meaning set forth in Section 1.6 of the Trust Agreement.
"PRE-EXISTING CONDITION" is defined in Section 1.1 of the Loan
Agreement.
"PREFERENCE AMOUNT" is defined in Section 1 of the Surety Bond and in
Section 1 of the Backstop Policy, as applicable.
"PREMIUM ESCROW" shall mean that the Surety Premiums payable to Surety
from and after the date specified in Article 1 shall be deposited by Trustee
into an interest-bearing Eligible Account in the name of and under the control
of Trustee, to be distributed by Trustee as follows (but always subject to
Section 1.5 of the Trust Agreement): (i) to Surety if the applicable Surety
Default is cured prior to the end of the grace periods applicable to a Surety
Loss of Premium, (ii) in a lump sum to any Substitute Surety or Lender-Appointed
Wrap Surety as directed by the Lender, (iii) to any Surety-Appointed Wrap Surety
in such amount as may be agreed to by Surety and such Wrap Surety, or (iv) to
Lender if all of the following conditions exist: (1) all Premium Forfeiture
Conditions exist; and (2) either a Material Loan Default exists, or any of the
Bankruptcy/Invalidity Surety Defaults then exist.
"PREMIUM FORFEITURE CONDITIONS" means that (i) Backstop Insurer does
not have a S&P Rating of Investment Grade and (ii) no Substitute Surety or a
Lender-Appointed Wrap Surety then exists.
"PREMIUM FUND" is defined in Section 3.6 of the Trust Agreement.
"PREPAYMENT CONSIDERATION" shall have the meaning ascribed to such term
in the Note.
"PRIORITY A DEFERRED MANAGEMENT FEES" means as of any Distribution Date
a dollar amount equal to the lesser of (i) 50% of the Deferred Management Fee,
or (ii) 50% of the Revenue available for distribution at Category 2.1(xiii) of
the Flow of Funds Agreement.
"PRIORITY B DEFERRED MANAGEMENT FEES" means as of any Distribution Date
the remainder obtained (but not less than zero) by subtracting from the Deferred
Management Fees, the Priority (A) Deferred Management Fees, determined on such
Distribution Date.
"PROCEEDS" is defined in Section 1.1 of the Loan Agreement.
"PROHIBITED ACTIVITIES AND CONDITIONS" and a "PROHIBITED ACTIVITY AND
CONDITION" is defined in Section 1.1 of the Loan Agreement.
"PROPERTIES" (i) in the case of the Trust Agreement, shall have the
meaning set forth in the Recitals to the Trust Agreement, and (ii) when used any
of the other Transaction Documents (unless otherwise defined in such Transaction
Document), shall have the meaning set forth in Section 1.1 of the Loan
Agreement.
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"PROPERTY" shall mean any one of the Properties.
"PROPERTY CLOSING DATE" shall mean the Closing Date or the Additional
Properties Closing Date, as applicable.
"PROPERTY DISCOUNTED FUTURE BASE SURETY PREMIUMS" shall mean, with
respect to any Leased Property, as of any date of determination, the product
obtained by multiplying the Discounted Future Base Surety Premiums by the
Assigned Value Factor.
"PROPERTY DISCOUNTED TERMINATION PREMIUM" shall mean, with respect to
any Leased Property as of any date of determination, the product obtained by
multiplying the Discounted Termination Premium by the Assigned Value Factor.
"PROPERTY TERMINATION PREMIUM" shall mean, with respect to any Leased
Property, as of any date of determination, the product obtained by multiplying
the Termination Premium by the Assigned Value Factor.
"PROPOSED ACTION PLAN" is defined in Section 2.10(a) of the Trust
Agreement.
"QUALIFIED" shall mean that S&P has publicly announced that the S&P
Rating of the affected Person will, upon the occurrence of a specified event or
events, be withdrawn or dropped below Investment Grade; "Qualified" does not
mean being placed on credit watch with negative implications or being placed
under ratings review.
"RATING AGENCIES" is defined in Section 1.1 of the Loan Agreement.
"REAL ESTATE CAPITAL PROCEEDS" shall mean all Capital Proceeds which
find their source in liquidation, sale or other disposition of the Properties.
"REGULATION T" is defined in Section 1.1 of the Loan Agreement.
"REGULATION U" is defined in Section 1.1 of the Loan Agreement.
"REGULATION X" is defined in Section 1.1 of the Loan Agreement.
"REGULATORY PERMITS" is defined in Section 1.1 of the Loan Agreement.
"REIMBURSABLE AMOUNTS" as defined in the Reimbursement Agreement,
means, (i) Losses, plus (ii) any expenses incurred by or on behalf of Surety in
connection with investigating, challenging or paying any Losses, plus (iii)
interest thereon as provided in Section 2.01(b) of the Reimbursement Agreement,
less (iv) the amount realized by Surety under any Collateral which is applied to
reimburse Surety for the same.
"REIMBURSEMENT AGREEMENT" shall mean that certain Reimbursement
Agreement of even date herewith by and among Surety, Borrower and Lessee.
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"REIMBURSEMENT CONTRACTS" is defined in Section 1.1 of the Loan
Agreement.
"REIMBURSEMENT OBLIGATIONS" means the obligation of Lessee and/or
Borrower to reimburse Surety and/or Trustee (as applicable) for Reimbursable
Amounts, all Surety Premiums and all other indebtedness, obligations and
liabilities of Lessee and/or Borrower to Surety and/or the Trustee arising
hereunder, under the Trust Agreement or other Transaction Documents.
"RELATED PARTIES" shall mean, as to any Person, such Person's
Affiliates, officers, directors, legal and beneficial owners, employees, agents,
successors and permitted assigns.
"RELEASE" is defined in Section 1.1 of the Loan Agreement.
"REMARKETING PERIOD" is defined in Section 30 of the Master Lease.
"REMEDIAL WORK" is defined in Section 1.1 of the Loan Agreement,
Section 20.8 of the Master Lease and Section 8.08 of the Reimbursement
Agreement.
"REMEDIES" means, with respect to Trustee and any Beneficiary, any
action available to any of them under the Transaction Documents upon the
occurrence and continuance of an Event of Default, including without limitation,
acceleration of the maturity of the Note, seeking the appointment of a receiver
for any of the Properties, suing any guarantor or indemnitor of any Secured
Obligations, foreclosing on the Collateral pledged pursuant to the Security
Documents, or entering into a Loan modification, workout or rearrangement of any
sort each in accordance with the terms of the Trust Agreement.
"REMIC" shall mean a Real Estate Mortgage Investment Conduit within the
meaning of Section 860G of the Code.
"RENTAL" shall mean Base Rental, Contingent Surety Rental, Additional
Rental, and Termination Rental.
"RENTAL PERIOD" shall mean each period for which a payment of Base
Rental is to be made during the Basic Lease Term.
"RENT PAYMENT DATE" shall mean each date on which a payment of Base
Rental is due and payable pursuant to Section 5(a) of the Master Lease.
"RENT ROLLS" is defined in Section 1.1 of the Loan Agreement.
"RENTS" is defined in Section 1.1 of the Loan Agreement.
"REQUIRED CASUALTY/CONDEMNATION PAYMENT" is defined in Section 1.1 of
the Loan Agreement.
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"REQUIRED RATING" shall mean at least "A" by Standard & Poor's Rating
Service or "A1" by Moody's Investors Service.
"RESIDENCY AGREEMENTS" is defined in Section 1.1 of the Loan Agreement
"RESIDENT" means any resident under any Residency Agreement.
"RESIDUAL REIMBURSEMENT OBLIGATION" means the sum of all amounts paid
by Surety to Trustee pursuant to the Surety Bond or by Backstop Insurer to
Trustee pursuant to the Backstop Policy to Lender on the Lease Term Expiration
Date after giving effect to any payments made by Lessee (or by Guarantor on
Lessee's behalf), pursuant to Sections 29 and 31 of the Master Lease.
"REVENUES" shall mean collectively all Operating Revenues, Guarantee
Revenues, and all Operating Reserve Account Revenues.
"SECONDARY MARKET TRANSACTION" is defined in Section 1.1 of the Loan
Agreement.
"SECURED OBLIGATIONS" shall mean and include, collectively, the "Loan
Obligations" described in the Loan Agreement, the "Reimbursement Obligations"
described in the Reimbursement Agreement and all obligations of the Lessee under
the Master Lease, together with all other indebtedness, obligations and
liabilities, whether now existing or hereafter arising, from time to time, owed
to the Beneficiaries or any of them and secured by any of the Security
Documents.
"SECURITIES" is defined in Section 1.1 of the Loan Agreement.
"SECURITIZATION" is defined in Section 1.1 of the Loan Agreement.
"SECURITY AGREEMENTS" shall mean, collectively, (i) that certain
Security Agreement executed by Borrower in favor of Trustee for the benefit of
Trustee and the Beneficiaries and (ii) that certain Security Agreement executed
by Lessee in favor of Trustee for the benefit of the Trustee and the
Beneficiaries.
"SECURITY DOCUMENTS" shall mean, collectively, the Mortgages, Security
Agreements, Pledge Agreements, Lockbox Agreement, Assignments of Leases,
Assignments of Management Agreements, the Assignment of Purchase Agreements and
any other agreement, document or instrument heretofore, now or at any time
hereafter executed by Borrower, Lessee or any Person evidencing the grant by
Borrower, Lessee or any such Person of a Lien on any property or assets of
Borrower, Lessee or such Person, as applicable, in favor of Trustee to secure
all or any part of the Secured Obligations, in each case as amended, restated,
supplemented or otherwise modified from time to time pursuant to the terms
thereof and the Trust Agreement; provided, however, the
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term "Security Documents" shall not include the Excluded Collateral Agreement or
any Excluded Collateral.
"SELCO" is defined in Section 1.1 of the Loan Agreement.
"SELLER" shall mean HCR Manor Care, Inc., a Delaware corporation, and
any of its Affiliates party to the Acquisition Agreements as seller(s).
"SERVICER" is defined in Section 2.5 of the Trust Agreement.
"SERVICING AGREEMENT" is defined in Section 2.5 of the Trust Agreement.
"SETTLOR OR SETTLORS" means, individually or collectively, as the
context may require, the Holder and any of them, the Borrower, SELCO, Guarantor
and/or the Lessee.
"SFAS 13" shall mean Statement of Financial Accounting Standards No.
13, as amended, promulgated by the Financial Accounting Standards Board.
"SINGLE PURPOSE ENTITY" is defined in Section 1.1 of the Loan
Agreement.
"SIX MONTH PROPERTIES" mean the Properties located in Boynton Beach,
Florida; Boynton Village, Florida; Brea, California; Dunedin, Florida; Laguna
Palm Terrace, California; Reno, Nevada; Sarasota, Florida; Tucson, Arizona;
Westlake, Ohio; and Whittier, California.
"S&P RATING" means the most current claims-paying ability rating or
financial strength rating for the specified Person, as established by Standard &
Poor's Rating Service, a division of The McGraw-Hill Companies, Inc.
"SPRINGING LOCKBOX EVENT" shall mean the occurrence of any of the
following: (i) an Event of Default; or (ii) Lessee's failure to achieve a LCR of
at least 1.10:1.00 for any six (6) month period commencing on the LCR
Commencement Date and measured on a monthly basis thereafter.
"STANDSTILL PERIOD" shall have the meaning specified in Section 24(b)
of the Master Lease.
"STOCK" is defined in Section 1.1 of the Loan Agreement.
"SUBLEASED PROPERTIES" is defined in Section 1.1 of the Loan Agreement.
"SUBLEASES" is defined in Section 1.1 of the Loan Agreement.
"SUBLESSEES" is defined in Section 1.1 of the Loan Agreement.
"SUBORDINATED DEBT" shall mean any indebtedness of a person incurred at
any time the repayment of which is subordinated to other indebtedness of such
person
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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.
"SUBORDINATION OF MANAGEMENT AGREEMENTS" is defined in Section 1.1 of
the Loan Agreement.
"SUBSIDIARY" shall mean any corporation or other Person of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other individuals performing similar
functions are at the time owned by such Person or by one or more Subsidiaries of
such Person, or by such Person and one or more Subsidiaries of such Person.
"SUBSTITUTE SURETY" is defined in Section 1.5(a)(iv) of the Trust
Agreement.
"SUCCESSOR OWNER" is defined in Section 19(b) of the Master Lease.
"SUPPLEMENTAL TRUST FUNDS" means any monies which the Trustee has been
directed by the Controlling Party to disburse from the Lease Reserve Account to
pay a Benefitted Item.
"SURETY" is defined in Section 1.1 of the Loan Agreement.
"SURETY ACCELERATION EVENT" shall mean the Lender's delivery of written
notice to the Trustee and the Surety that (a) either a Material Loan Default has
occurred and is continuing or that the date of such written notice is within a
Non-Performance Period and (b) a Non-Downgrade Surety Event of Default exists or
the S&P Rating of the Backstop Insurer is below Investment grade, withdrawn or
qualified.
"SURETY-APPOINTED WRAP SURETY" is defined in Section 1.5(a)(ii) of the
Trust Agreement.
"SURETY BASE RENTAL" is defined in Section 5(a)(x) of the Master Lease.
"SURETY BOND" means the Insurance Surety Bond dated as of even date
herewith, issued by Surety to Trustee for the benefit of Lender, together with
all endorsements thereto.
"SURETY BOND AMOUNT" is defined in Section 1 of the Surety Bond, as
reduced from time to time pursuant to the terms of the Surety Bond..
"SURETY BOND PAYMENT CERTIFICATE" is defined in Section 1 of the Surety
Bond and Section 1 of the Backstop Policy.
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"SURETY BOND PAYMENT CONDITIONS" is defined in Section 1 of the Surety
Bond and Section 1 of the Backstop Policy.
"SURETY BOND PAYMENT DATE" is defined in Section 1 of the Surety Bond
and Section 1 of the Backstop Policy.
"SURETY CROSS-DEFAULT" shall mean the Surety Default described in
clause (v) of the definition of "Surety Default."
"SURETY DEFAULT" means any one or more of the following events: (i)
failure of Surety to make any payment in accordance with the terms and
conditions of the Surety Bond and failure of Backstop Insurer to make such
payment pursuant to the Backstop Policy (a "PAYMENT SURETY DEFAULT"), (ii)
Surety or Backstop Insurer has been declared insolvent or bankrupt by a court of
competent jurisdiction by an order or judgement of such court, or is a debtor in
a bankruptcy, insolvency, liquidation or rehabilitation proceeding, or an order
or decree has been entered appointing a receiver, receivers, trustee,
liquidator, custodian or custodians for any of its assets or revenues, or a
conservator, rehabilitator, liquidator, trustee or similar Person has been
appointed under applicable insurance laws with respect to Surety, Backstop
Insurer or any material asset of either Surety or Backstop Insurer, or any
proceeding shall be instituted with the consent or acquiescence of Surety or
Backstop Insurer or any plan shall be entered into by Surety or Backstop Insurer
for the purpose of effecting a composition between Surety or Backstop Insurer
and its creditors or for the purpose of adjusting the claims of such creditors,
or Surety or Backstop Insurer makes any assignment for the benefit of its
creditors, or Surety or Backstop Insurer is generally not paying its debts as
such debts become due, or Surety or Backstop Insurer files a petition under the
United States Bankruptcy Code, as amended, or Surety or Backstop Insurer is
subject to a rehabilitation or liquidation proceeding initiated by an insurance
commissioner or other similar government official with appropriate jurisdiction,
(iii) the Surety Bond or Backstop Policy has been determined to be void or
unenforceable by final, unappealable judgment of a court of competent
jurisdiction or (iv) Surety or Backstop Insurer asserts that the Surety Bond or
Backstop Policy is invalid or unenforceable, or any proceedings shall be
instituted by a government agency or authority with appropriate jurisdiction by
or with the consent of Surety or Backstop Insurer seeking to declare the Surety
Bond or Backstop Policy unenforceable, (v) a default (after any notice and grace
periods, if applicable) by Surety has occurred and is continuing under an
unconditional, irrevocable surety bond entered into by Surety which insures
principal and interest on a loan secured by commercial real estate and such
default is not cured by Backstop Insurer in accordance with the terms of any
guaranty of such surety bond, and (vi) a Downgrade Surety Default has occurred.
"SURETY DOCUMENTS" shall mean the Surety Policy and the Surety
Reimbursement Agreement.
SURETY EVENT OF DEFAULT shall mean the occurrence of a Surety Default
and the failure to effect a Permitted Surety Cure within the respective grace
periods applicable to a Surety Loss of Premium, as set forth in Article 1 of the
Trust Agreement.
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"SURETY LOSS OF PREMIUM" shall mean, at such time as the applicable
grace periods set forth in Article 1 of the Trust Agreement have expired, then
the irrevocable forfeiture by the Surety of (i) all Base Surety Premiums being
escrowed pursuant to a Premium Escrow, (ii) any Base Surety Premiums which would
otherwise be payable thereafter under the Reimbursement Agreement and (iii) the
Termination Premium; provided, however, Surety shall not lose or forfeit the
Termination Premium unless a Surety Replacement (as opposed to a Wrap Surety or
other Permitted Surety Cure) occurs.
"SURETY PREMIUMS" shall mean all amounts paid by Trustee to Surety as
premiums or fees in consideration for its issuance of the Surety Bond, including
without limitation, Base Surety Premiums, Early Termination Premiums and the
Termination Premium, together with interest accruing on any such due but unpaid
sums, as set forth in the Reimbursement Agreement.
"SURETY REIMBURSEMENT AGREEMENT" shall mean the Reimbursement Agreement
dated the Closing Date between Borrower and Surety with respect to the Surety
Bond.
"SURETY REPLACEMENT" is defined in Section 1.5(a)(iv) of the Trust
Agreement.
"SURETY REQUIRED CASUALTY/CONDEMNATION PAYMENT" shall mean, as of any
calculation date, an amount equal to (i) the discounted present value of the
Termination Premium (using a discount rate equal to the applicable Interest
Rate), multiplied by (ii) a fraction, (A) the numerator of which is the trailing
twelve month Net Operating Income for the affected Property from which the Total
Loss Casualty/Condemnation Proceeds are derived for the most recent period prior
to such casualty (or prior to June 30, 2002, the stabilized appraised value for
such Property as set forth in the Appraisal for such Property delivered pursuant
to the Loan Agreement), and (B) the denominator of which is the trailing twelve
month Net Operating Income for all the Properties for such period (or prior to
June 30, 2002, the stabilized appraised values for such Properties as set forth
in the Appraisals for such Properties delivered pursuant to the Loan Agreement).
"SURETY TRANSACTION" is defined in Section 7.14(a) of the Trust
Agreement.
"SURVEYS" is defined in Section 1.1 of the Loan Agreement.
"TANGIBLE NET WORTH" is defined in Section 9.5 of the Participation
Agreement.
"TAX DISTRIBUTION DATE" means the Distribution Date occurring after the
determination of the Tax Reimbursement Amount relating to the most recently
ended Tax Year.
"TAX AND INSURANCE ESCROW FUND" is defined in Section 3.7 of the Trust
Agreement.
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"TAX RATE" means, with respect to any Tax Year, the combined rate of
the highest federal and Wisconsin personal income tax rates of a single
taxpayer, pursuant to Section 1(c) of the Internal Revenue Code of 1986, as
amended, and Section 71.06 of the Wisconsin Statutes Annotated, respectively,
adjusted to take into account the deductibility of Wisconsin personal income
taxes for purposes of determining federal personal income taxes. Initially, the
Tax Rate shall be 43.69%, using the highest federal income tax rate of 39.6% and
the highest Wisconsin personal income tax rate of 6.77%, each of which are in
effect pursuant to federal and state income tax law, respectively, as of the
date hereof.
"TAX REIMBURSEMENT AMOUNT" with respect to the Joint Ventures, means
the product of (i) the Tax Rate and (ii) the Net Taxable Amount as of the Tax
Distribution Date.
"TAX YEAR" means, with respect to a Tax Distribution Date, the most
recently ended calendar year.
"TAXES" shall mean all taxes, assessments, vault rentals and other
charges, if any, general, special or otherwise, including all assessments for
schools, public betterments and general or local improvements, which are levied,
assessed or imposed by any public authority or quasi-public authority, and
which, if not paid, will become a lien, on the Land or the Improvements.
"TERM" shall mean, as to any Leased Property, the Basic Lease Term.
"TERM OF THIS FLOW OF FUNDS AGREEMENT" means the period from the
Closing Date to but not including the Termination Date.
"TERMINATION DATE" is defined in Section 4.9 of the Flow of Funds
Agreement.
"TERMINATION EVENT" is defined in Section 1.1 of the Loan Agreement.
"TERMINATION PREMIUM" shall mean the sum of the products resulting from
multiplying each Advance by a fraction, the numerator of which is $29,000,000
and the denominator of which is $201,000,000.
"TERMINATION PREMIUM PAYMENT DATE" shall mean the Maturity Date.
"TERMINATION RENTAL" is defined in Section 5(d) of the Master Lease.
"TITLE COMPANY" is defined in Section 1.1 of the Loan Agreement.
"TITLE POLICIES" is defined in Section 1.1 of the Loan Agreement.
"TOLLING DEFAULT" shall mean (a) any failure to repay the Equity Amount
with
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respect to a Leased Property which suffers a casualty or condemnation as
provided in Section 15(g) of the Master Lease, (b) any failure of Guarantor to
comply with its obligations under the Excluded Collateral Agreement or Section
9.8 or Article X of the Participation Agreement (c) any other Event of Default
or Lease Event of Default by Lessee or Guarantor which is waived by Controlling
Party without the consent or approval of Equity Investor or which has occurred
and is continuing without any action with respect thereto by Controlling Party
and Equity Investor has not concurred with such non-action, or (d) any amendment
to the Transaction Documents to which Borrower (acting at the direction of
Equity Investor) did not consent to or otherwise approve.
"TOTAL CAPITAL" shall mean the sum of Net Worth, Total Funded Debt and
Subordinated Debt.
"TOTAL FUNDED DEBT" shall mean, at any time, 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.
"TOTAL LOSS CASUALTY/CONDEMNATION PROCEEDS" shall mean, with respect to
each occurrence of a loss of, or damage to, Collateral, insurance proceeds or
Condemnation awards which are not made available for the repair, restoration or
replacement of the Collateral affected by such loss, damage or Condemnation in
accordance with Section 4.4 of the Loan Agreement.
"TRANSACTION DOCUMENTS" is defined in Section 1.1 of the Loan
Agreement.
"TRANSACTION EXPENSES is defined in Section 10.4 of the Participation
Agreement.
"TRANSACTION FEE" shall mean as of the Closing Date, an amount equal to
2% of each Advance.
"TRANSACTIONS" shall mean all transactions described or otherwise
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contemplated in the Lease Documents, the Loan Documents and each other
Transaction Document.
"TRANSFER" is defined in Section 1.1 of the Loan Agreement.
"TRANSFER AND ASSUMPTION" is defined in Section 1.1 of the Loan
Agreement.
"TRANSFER DOCUMENTS" is defined in Section 1 of the Surety Bond and
Section 1 of the Backstop Policy.
"TRANSFEREE" shall mean the Person to whom the Equity Investor sells,
conveys, assigns, pledges, mortgages or otherwise transfers any of its interests
in the Owner and the Transaction Documents prior to the expiration or earlier
termination of the Term.
"TRANSFEREE BORROWER" shall have the meaning set forth in Section 9.02
of the Reimbursement Agreement.
"TRIGGER DATE" is defined in Section 1.1 of the Trust Agreement.
"TRUE UP PROVISIONS" means that portion of Section 2.1 of the Flow of
Funds Agreement describing the reconciliation procedures relating to the
Distribution Operating Expense Estimate.
"TRUST AGREEMENT" means that certain Trust Agreement of even date
herewith among the Trustee, Noteholder, Surety, Guarantor, Lessee, Borrower and
SELCO.
"TRUSTEE" shall mean The First National Bank of Chicago, a national
banking association, acting in its capacity as trustee under the Trust
Agreement.
"TRUST ESTATE" shall have the meaning assigned to such term in GRANT OF
TRUST ESTATE of the Trust Agreement.
"TWELVE MONTH PROPERTIES" mean the Properties located in Citrus
Heights, California; Colorado Springs, Colorado, Fulton County, Georgia (Arden
Courts); Lynnwood, Washington; Overland Park, Kansas; Peoria, Arizona; Sun City
West, Arizona; Wayne, New Jersey; and West Orange, New Jersey.
"UCC COLLATERAL" is defined in Section 2 of the Mortgage.
"UCC OR UNIFORM COMMERCIAL CODE" shall mean the Uniform Commercial Code
in effect in the State of Illinois and the jurisdiction where any Leased
Property is situated.
"UNITED STATES BANKRUPTCY CODE" shall mean Title 11 of the United State
Code, as the
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same may be amended from time to time.
"WAIVING PARTY" is defined in Section 1.1 of the Loan Agreement.
"WEST ORANGE AMOUNT" is defined in Section 3.2 of the Trust Agreement.
"WEST ORANGE FACILITY" is defined in Section 3.2 of the Trust
Agreement.
"WRAP SURETY" is defined in Section 1.5(a)(ii) of the Trust Agreement.
"WRITTEN DIRECTION" means an instrument or instruments executed by the
Controlling Party (or if regarding a Material Action, executed by the
Controlling Party and the Non-Controlling Party) and delivered to Trustee
directing Trustee to take an action in accordance with the Trust Agreement.
"YIELD" shall mean the periodic return payable to the Owner on account
of Equity Advances as set forth in Section 2.6 of the Participation Agreement.
"ZC SPECIALTY INSURANCE" shall mean ZC Specialty Insurance Company, a
Texas insurance company.
"ZCSI SUBROGATION AMOUNTS" means any amounts payable to ZCSI on account
of Loan Obligations to which ZCSI has been subrogated as contemplated by the
Loan Agreement, the Reimbursement Agreement, the Trust Agreement or pursuant to
applicable law.
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EXHIBIT B-1
INITIAL PROPERTIES
1. 6145 East Arbor Avenue
Mesa, Arizona 85206
2. 9296 West Union Hills Drive
Peoria, Arizona 85382
3. 21739 North 151st Street
Sun City West, Arizona 85375
4. 3701 North Swan Road
Tucson, Arizona 85718
5. 285 West Central Avenue
Brea, California 92621
6. 7375 Stock Ranch Road
Citrus Heights, California 95621
7. 8101 South Painter Avenue & 8132 Friends Avenue
Whittier, California 90602
8. 2850 North Academy Boulevard
Colorado Springs, Colorado 80917
9. 1935 South Federal Highway
Boynton Beach, Florida 33435
10. 880 Patricia Avenue
Dunedin, Florida 34698
11. 475 Irvin Court
Decatur, Georgia 30030
12. 4375 Beech Haven Trail, SE
Smyrna (Cobb County), Georgia 30080
13. 11001 Oakmont
Overland Park, Kansas 66210
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14. 5326 Park Road
Charlotte, North Carolina 28209
15. 590 Old Hook Road
Emerson, New Jersey 07630
16. 820 Hamburg Turnpike
Wayne, New Jersey 07470
17. 590 Prospect Avenue
West Orange, New Jersey
18. 3105 Plumas Street
Reno, Nevada 89509
19. 27569 Detroit Road
Westlake, Ohio 44145
20. 1127 Persinger Road, SW
Roanoke, Virginia 24015
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EXHIBIT B-2
ADDITIONAL PROPERTIES
1. Laguna Palm Terrace, CA
2. Denver, CO
3. Boynton Beach, FL
4. Palmer Ranch, FL
5. Sarasota, FL
6. Fulton County (Arden Courts), GA
7. Fulton County (Spring House), GA
8. Lynnwood, WA
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EXHIBIT C
DISBURSEMENT SCHEDULE
(See Attached)
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EXHIBIT D
GROUND LEASES
B-149
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EXHIBIT E
SUBLEASES; SUBLESSEES
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EXHIBIT F
TO LOAN AGREEMENT
AGREED UPON PROCEDURES RELATED TO
THE PREPARATION OF THE INCOME
STATEMENTS OF THE ASSISTED LIVING FACILITIES
I. GENERAL
A. For each calendar (or fiscal, if applicable) year during the
term of the Loan, obtain the year end financial results of
the Assisted Living Facilities beginning with the year ended
December 31, 1999.
B. Obtain budget for each property for each calendar year
during the term of the Loan and compare to actual revenue
and expense results during such period.
C. Obtain company prepared statements of operations for each of
the Assisted Living Facilities. Agree to amounts recorded to
the company's general ledger for each of the Assisted Living
Facilities.
D. Reconcile the net operating income to net income per the
general ledger. Assess whether revenue and expense items
included in the general ledger and excluded from net
operating income represent non-operating expenses based on
the described nature of items.
E. Obtain supporting documents for each item excluded greater
than $15,000.
II. REVENUE
A. Obtain rent rolls (or other documents supporting revenue
collections) for each of the Assisted Living Facilities for
each calendar year during the term of the Loan.
B. Reconcile rent rolls to (or other documents supporting
revenue collections) the cash collected as stated in the
general ledger.
C. Obtain copies of leases (or other appropriate supporting
documentation) for 20% of the tenants from each property and
compare terms to current rent rolls.
D. Obtain lists of aged receivables and delinquency history to
identify any tenants with receivable difficulties or other
tenant disputes.
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III. EXPENSES
A. Obtain property tax bills, insurance policies, utility bills
and other supporting documentation for each property for
each calendar year during the term of the Loan for
comparison to recurring expenses such as property taxes,
insurance and utilities.
B. For other expenses (excluding individual labor costs and
benefits, which may be verified on a representative sample
basis), select all disbursements greater than $15,000 for
comparison to supporting documentation.
C. Obtain a listing of all capital expenditures during the year
for each of the Assisted Living Facilities. Compare amounts
in excess of $15,000 to supporting documents. Identify any
unusual items.
D. Review disbursement ledgers for large or unusual
disbursements to the Borrower, Lessee, Guarantor or known
related parties.
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EXHIBIT 2.7
Participation Agreement
Among
AHC Tenant, Inc.
Lessee
Pita General Corporation
Owner
Alterra Healthcare Corporation
Guarantor
SELCO Service Corporation
Equity Investor
ZC Specialty Insurance Company
Surety
The First National Bank of Chicago
as Trustee
and
Greenwich Capital Financial Products, Inc.
Noteholder
Dated as of July 16, 1999
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION HEADING PAGE
<S> <C> <C>
ARTICLE I DEFINITIONS AND RULES OF USAGE..........................................................
ARTICLE II SUMMARY OF TRANSACTIONS.................................................................
Section 2.1. Transaction Documents...................................................................
Section 2.2. Loans...................................................................................
Section 2.3. Equity Advances.........................................................................
Section 2.4. Use of Proceeds of Loans and Equity Advances............................................
Section 2.5. Records.................................................................................
Section 2.6. Equity Yield and Fees...................................................................
Section 2.7. Certain Limitations Respecting Loans and Equity Advances................................
ARTICLE III CONDITIONS PRECEDENT....................................................................
Section 3.1. Conditions to the Closing Date..........................................................
Section 3.2. Conditions to Additional Properties Closing.............................................
Section 4.1. Organization, Powers, Capitalization, Good Standing, Business...........................
Section 4.2. Authorization of Transaction, Etc.......................................................
Section 4.3. Pending Matters.........................................................................
Section 4.4. Financial Statements Accurate...........................................................
Section 4.5. Indebtedness and Contingent Obligations.................................................
Section 4.6. Compliance with Laws....................................................................
Section 4.7. Maintain Bed Capacity...................................................................
Section 4.8. Payment of Taxes and Leased Property Impositions........................................
Section 4.9. Title to Collateral.....................................................................
Section 4.10. Priority of Mortgages...................................................................
Section 4.11. Zoning, Other Laws......................................................................
Section 4.12. Condition of Leased Properties..........................................................
Section 4.14. Disclosure..............................................................................
Section 4.15. Legal Names.............................................................................
Section 4.17. Intellectual Leased Property............................................................
Section 4.18. [Intentionally Omitted].................................................................
Section 4.19. Proceedings Pending.....................................................................
Section 4.20. Compliance With Applicable Laws.........................................................
Section 4.21. Solvency................................................................................
Section 4.22. Management Agreements...................................................................
Section 4.23. 1934 Act................................................................................
Section 4.24. Use of Proceeds and Margin Security.....................................................
Section 4.25. No Plan Assets..........................................................................
Section 4.26. Governmental Plan.......................................................................
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<TABLE>
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Section 4.27. Investment Company Act; PUCHA...........................................................
Section 4.28. Foreign Person..........................................................................
Section 4.30. Legal Opinions..........................................................................
Section 4.31. Bankruptcy..............................................................................
Section 4.32. Leases; Agreements......................................................................
Section 4.33. Lessee's Environmental Representations and Warranties...................................
ARTICLE V REPRESENTATIONS AND WARRANTIES OF GUARANTOR.............................................
Section 5.1. Organization, Powers, Capitalization, Good Standing, Business...........................
Section 5.2. Authorization of Transaction, Etc.......................................................
Section 5.3. Pending Matters.........................................................................
Section 5.4. Financial Statements Accurate...........................................................
Section 5.5. Payment of Taxes and Leased Property Impositions........................................
Section 5.6. Disclosure..............................................................................
Section 5.7. Employee Benefit Plans..................................................................
Section 5.8. Intellectual Property...................................................................
Section 5.9. No Plan Assets..........................................................................
Section 5.10. Governmental Plan.......................................................................
Section 5.11. Investment Company Act; PUCHA...........................................................
Section 5.12. Foreign Person..........................................................................
Section 5.14. Legal Opinions..........................................................................
Section 5.15. Bankruptcy..............................................................................
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF OWNER.................................................
ARTICLE IX COVENANTS OF THE PARTIES................................................................
Section 9.1. Loan Agreement Covenants of Lessee......................................................
Section 9.2. Further Assurances......................................................................
Section 9.3. Transfer of Equity Investor's Interest..................................................
Section 9.4. Covenants with respect to Joint Venture Subleases.......................................
Section 9.5. Financial Covenants of Guarantor........................................................
Section 9.6. Quiet Enjoyment.........................................................................
Section 9.7. Insolvency of Owner.....................................................................
Section 9.8. Excluded Collateral Replacement.........................................................
Section 9.9. Agreements with respect to Excluded Collateral..........................................
Section 9.10. Merger, etc. of Guarantor...............................................................
ARTICLE X INDEMNITIES AND EXPENSES................................................................
Section 10.1. General Indemnification and Hold Harmless Agreement.....................................
Section 10.2 General Tax Indemnity...................................................................
Section 10.3. Environmental Indemnity.................................................................
Section 10.4. Payment of Expenses.....................................................................
Section 10.5. Reimbursement for Additional Capital Requirements.......................................
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<TABLE>
<S> <C>
Section 10.6. Change in Legality......................................................................
Section 10.7. Indemnity...............................................................................
Section 10.8. Additional Costs of Maintaining Equity Advance..........................................
Section 10.9 Enforcement.............................................................................
ARTICLE XI MISCELLANEOUS...........................................................................
Section 11.1. Headings................................................................................
Section 11.2. U.S. Currency...........................................................................
Section 11.3. Survival of Covenants...................................................................
Section 11.4. Notices, etc............................................................................
Section 11.5. Benefits................................................................................
Section 11.6. Supersedes Prior Agreements: Counterparts...............................................
Section 11.7. Controlling Law.........................................................................
Section 11.8. Waiver of Jury Trial....................................................................
Section 11.9. Interpretation..........................................................................
Section 11.10. No Duty.................................................................................
Section 11.11. Further Assurances......................................................................
Section 11.13. Non-Recourse Loan.......................................................................
Signatures.........................................................................................................
Attachments to Participation Agreement:
Schedule 1 Equity Investor
Schedule 4.2(c)(ii) Owner Licenses and Permits
</TABLE>
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PARTICIPATION AGREEMENT
PARTICIPATION AGREEMENT, dated as of July 16, 1999, among AHC Tenant,
Inc., a Delaware corporation ("Lessee"), Pita General Corporation, an Illinois
corporation ("Borrower" or "Owner"), Alterra Healthcare Corporation, a Delaware
corporation ("Guarantor"), SELCO Service Corporation, an Ohio corporation
("Equity Investor"), Greenwich Capital Financial Products, Inc. ("Noteholder"),
ZC Specialty Insurance, a Texas corporation, ("Surety"), and The First National
Bank of Chicago, as trustee ("Trustee").
The parties hereby agree as follows:
ARTICLE I
DEFINITIONS AND RULES OF USAGE
Capitalized terms used herein have the meanings assigned to them in the
Master Glossary of Definitions attached to the Master Lease as Exhibit A.
ARTICLE II
SUMMARY OF TRANSACTIONS
Section 2.1. Transaction Documents. On the Closing Date, (i) Borrower,
Lessee and Noteholder shall execute and deliver the Loan Agreement, (ii) Lessee
and Owner shall execute and deliver the Master Lease, (iii) the Borrower shall
execute the Note and deliver the Note to the Noteholder, and (iv) any and all
other Transaction Documents and the Excluded Collateral Agreement then to be
executed and delivered shall be executed and delivered by the parties thereto.
Section 2.2. Loan. On the terms and subject to the conditions set forth
in this Agreement and the Loan Agreement, the Noteholder shall make Advances of
the Loan to the Owner from time to time prior to the Additional Properties
Outside Date; provided, however, that the aggregate principal amount of the Loan
outstanding at any time shall not exceed the Maximum Loan Amount.
Section 2.3. Equity Advances. (a) On the terms and subject to the
conditions set forth in this Agreement, the Equity Investor shall make advances
("Equity Advances") to Owner from time to time prior to the Additional
Properties Outside Date; provided, however, that (i) the aggregate amount of
Equity Advances made by the Equity Investor shall not exceed the Equity
Commitment; and (ii) the aggregate amount of all Equity Advances in respect of
the Leased Properties shall not be less than 3% of the Aggregate Lease Balance.
(b) The Equity Advance to be made on the Closing Date shall be
$9,500,000. The Equity Advance to be made on the Additional Properties Closing
Date shall be equal to the lesser of (i) Transaction Expenses due and payable on
the Additional Properties Closing Date and (ii)
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the remaining Equity Commitment.
Section 2.4. Use of Proceeds of Loan and Equity Advances. (a) The Owner
shall use the proceeds of advances of the Loan and Equity Advances solely to
finance the acquisition of Leased Properties by paying Acquisition Costs and
Transaction Expenses as requested by Lessee, subject to the terms and conditions
of this Agreement and the Loan Agreement.
(b) Acquisition Costs for any Leased Property shall be funded from
Equity Advances and from Advances of the Loan, and Transaction Expenses shall be
funded from an Equity Advance; provided, however, that, under no circumstances
shall the aggregate amount of Equity Advances or the Loan for all Leased
Properties exceed the Equity Commitment or Noteholder's commitment under the
Loan Agreement, respectively.
Section 2.5. Records. The Lessee shall keep accurate records of all
Acquisition Costs and Lease Balances, including copies of all relevant invoices
and evidence of payment thereof, with sufficient detail to show each Leased
Property to which the Aggregate Lease Balance has been allocated. The Lessee
shall permit representatives of the Equity Investor, Noteholder, Trustee and
Surety to have reasonable access to such records and to make such copies of such
records as such representatives deem reasonably necessary.
Section 2.6. Equity Yield. (a) The Yield for Equity Advances shall be
LIBOR for the relevant Interest Period, plus two and four-tenths percent (2.4%);
provided that if the circumstances described in Section 10.6 apply, the Yield
shall be the Alternate Rate for the relevant Interest Period, plus two and
four-tenths percent (2.4%).
(b) If a Lease Event of Default shall have occurred and be continuing,
the Yield determined pursuant to Section 2.6(a) shall be increased by four
percent (4%). The Yield as so increased shall be the "Owner Default Rate."
(c) Yield shall be computed on the basis of the actual number of days
elapsed over a year of 360 days, and shall be payable on each Rent Payment Date.
Yield shall be paid to Equity Investor by bank wire transfer of immediately
available funds to such account as Equity Investor shall direct.
(d) Two Business Days prior to each Interest Period, Equity Investor
shall notify Lessee as to the calculation of LIBOR (or Alternate Rate, if then
applicable) for such Interest Period.
Section 2.7. Certain Limitations Respecting Loan and Equity Advances.
(a) There shall be no more than two (2) Closing Dates hereunder, each of which
must occur prior to the Additional Properties Outside Date, and neither Equity
Investor nor Noteholder shall have any obligation to make any Equity Advance or
Advance of the Loan after such date.
(b) The Interest Period with respect to all Equity Advances shall end
no later than the Lease Term Expiration Date.
(c) The obligations of Noteholder to make Advances of the Loan and the
terms of the
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Loan shall be as set forth in the Loan Agreement.
ARTICLE III
CONDITIONS PRECEDENT
Section 3.1. Conditions to the Closing Date. The obligation of
Noteholder to make an Advance of the Loan on the Closing Date is subject to the
prior or concurrent satisfaction or waiver of the conditions set forth in the
Loan Agreement. The obligation of Equity Investor to fund the initial Equity
Advance and the obligation of Surety to issue the Surety Bond is subject to the
prior or concurrent satisfaction or waiver of the conditions set forth below.
Where in this Section 3.1 any documents, instruments or information are to be
delivered to Equity Investor or Surety, then the condition shall not be
satisfied unless (i) the same shall be in form and substance satisfactory to
Equity Investor or Surety, and (ii) if so required by Equity Investor or Surety,
Lessee shall deliver to Equity Investor or Surety a certificate duly executed by
Lessee stating that the applicable document, instrument or information is true
and complete and does not omit to state any information without which the same
might reasonably be deemed materially misleading.
(a) Transaction Documents. On or prior to the Closing Date, each party
thereto shall execute and deliver or cause to be executed and delivered to
Equity Investor and Surety all of the Transaction Documents, duly executed, in
form and substance satisfactory to Equity Investor and Surety and in quantities
designated by Equity Investor or Surety (except for the Note, of which only the
original thereof shall be signed and delivered to Noteholder), which Transaction
Documents shall become effective upon the Closing Date.
(b) Performance of Agreements, Truth of Representations and Warranties.
Each party to the Transaction Documents shall have performed in all material
respects all agreements which this Agreement provides shall be performed on or
before the Closing Date. The representations and warranties contained herein and
in the other Transaction Documents shall be true, correct and complete in all
material respects on and as of the Closing Date.
(c) Searches. Equity Investor and Surety shall have received certified
copies of UCC, judgment, tax lien, bankruptcy and litigation search reports with
respect to Alterra and such other parties as Equity Investor or Surety may
reasonably request, all dated not more than thirty (30 ) days prior to the
Closing Date, and delivered on or prior to the Closing Date.
(d) Opinions of Counsel. On or before the Closing Date, Equity Investor
and Surety shall have received from counsel for Borrower, Trustee, Lessee, the
Sublessees and Alterra, their written opinions as to such matters as Equity
Investor or Surety shall reasonably request and in form and substance
satisfactory to Equity Investor and Surety. Also on or before the Closing Date,
Equity Investor and Surety shall have received an opinion of Lessee's local
counsel in each state where any of the Leased Properties being acquired on such
date is located as to the enforceability of the Mortgages covering such Leased
Properties in such state and such other matters as Equity Investor and Surety
may reasonably request. By execution of this document, Lessee authorizes and
directs such counsel to render such opinions and deliver the same to Equity
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Investor and Surety on or before the Closing Date. In addition, on or before the
Closing Date, Equity Investor and Surety shall have received such other opinions
of counsel as Equity Investor or Surety shall reasonably require.
(e) Closing Certificate. On the Closing Date, Equity Investor and
Surety shall have received certificates of even date herewith executed on behalf
of Lessee and Guarantor by the chief financial officer (or similar officer) of
Lessee or Guarantor truly and correctly stating that: (i) on such date, no Lease
Default or Lease Event of Default has occurred and is continuing; (ii) no
material adverse change in the financial condition or operations of the business
of Lessee, Alterra or, to the best of his knowledge after due inquiry, the
Leased Properties being acquired on such date or the projected cash flow of
Lessee, Alterra or, to the best of his knowledge after due inquiry, such Leased
Properties has occurred since March 31, 1999 (or if there has been any change,
specifying such change in detail); (iii) the representations and warranties set
forth in this Agreement and the other Transaction Documents are true and correct
in all material respects on and as of such date with the same effect as though
made on and as of such date (or if any such representations or warranties
require qualification, specifying such qualification in detail); (iv) there has
been no material change in any of the documents, instruments, or information
delivered to Equity Investor and Surety pursuant to this Section (or if there
has been any change, specifying such change in detail); and (v) Lessee and
Guarantor on such date are in compliance with all the terms and provisions set
forth in this Agreement and the other Transaction Documents (and in the case of
Guarantor, the Excluded Collateral Agreement) on its part to be observed and
performed, and (vi) after giving effect to the Loan and the Equity Advance, the
fair salable value of the assets of Lessee will exceed the probable liability on
its debts, that Lessee will be able to pay its debts as they mature and that
Lessee will not have unreasonably small capital to conduct its business. Equity
Investor and Surety shall also have received a certificate executed by a duly
authorized officer of Borrower certifying as to the matters described in clauses
(i), (iii) and (v) (in each case, as to Borrower only) above.
(f) Insurance Policies and Endorsements. On or prior to the Closing
Date, Equity Investor and Surety shall have received copies of certificates of
insurance (dated not more than twenty (20) days prior to the Closing Date)
regarding insurance required to be maintained under the Master Lease, together
with a certificate of Lessee's insurance broker to the effect that the insurance
maintained by Lessee complies with the requirements of the Master Lease, that
all premiums thereon have been paid and as to the adequacy of such insurance for
Lessee's intended operations.
(g) Certificates of Formation and Good Standing. On or prior to the
Closing Date, Equity Investor and Surety shall have received copies of the
organizational documents and filings of Owner, Lessee, Guarantor, Manager and
the Sublessees, together with good standing certificates (or similar
documentation) (including verification of tax status) from the state of its
formation, from the state in which its principal place of business is located,
from each state where any of the Leased Properties being acquired on such date
is located and from all states in which the laws thereof require such Person to
be qualified and/or licensed to do business. Each such certificate shall be
dated not more than thirty (30) days prior to the Closing Date, as applicable,
and certified by the applicable Secretary of State or other authorized
governmental entity. In addition, on or before the Closing Date the secretary or
corresponding officer of Owner, Lessee,
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Guarantor, Manager and the Sublessees, or the secretary or corresponding officer
of the partner, member, trustee, or other Person as required by such party's
organizational documents shall have delivered to Equity Investor and Surety a
certificate stating that the copies of the organizational documents as delivered
to Equity Investor and Surety are true and complete and are in full force and
effect, and that the same have not been amended except by such amendments as
have been so delivered to Equity Investor and Surety.
(h) Certificates of Incumbency and Resolutions. On or prior to the
Closing Date, Equity Investor and Surety shall have received certificates of
incumbency and resolutions of Owner, Lessee and Guarantor and its respective
constituents as requested by Equity Investor and Surety, approving and
authorizing the execution, delivery and performance of the Transaction Documents
to which it is a party (and in the case of Guarantor, the Excluded Collateral
Agreement), certified as of the Closing Date by an appropriate officer as being
in full force and effect without modification or amendment.
(i) Financial Statements. On or prior to the Closing Date, Equity
Investor and Surety shall have received such financial statements and other
financial information as shall be satisfactory to Equity Investor and Surety for
Lessee, Alterra and for each of the Leased Properties. If any such statements
are not available for any of the Assisted Living Facilities, Lessee shall
provide such financial reports as are available. All such financial statements
shall be certified to Equity Investor and Surety by Lessee or Alterra (through
its chief financial officer or other authorized officer), which certification
shall be in form and substance reasonably satisfactory to Equity Investor and
Surety.
(j) Projections. On or prior to the Closing Date, Equity Investor and
Surety shall have received and reasonably approved the proforma projections for
the Assisted Living Facilities for the remainder of the current calendar year
and for the immediately succeeding calendar year. Such projections are attached
to the Loan Agreement as Schedule 4.10.
(k) Joint Venture Partners' Contributions; Operating Reserve. The
constituent partners of each of the Sublessees shall have funded their total
initial capital contributions of at least $9,200,000 due as of the Closing Date
in accordance with the limited partnership agreements of each of the respective
Sublessees; and such sum shall have been deposited with Trustee into the
Operating Reserve Account in accordance with Article III of the Trust Agreement.
(l) Documentation Regarding Existing Indebtedness. Prior to the Closing
Date, Equity Investor and Surety shall have received payoff demand letters and
wiring instructions from each lender or other obligee of the existing
indebtedness secured by the Leased Properties being acquired on such date which
is required to be repaid pursuant to this Agreement or any other Transaction
Document.
(m) Management Agreements. Prior to the Closing Date, Equity Investor
and Surety shall have received certified copies of each of the Management
Agreements pertaining to the Assisted Living Facilities; and on the Closing
Date, Equity Investor and Surety shall have received the Subordination of
Management Agreements, duly executed by the Manager.
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(n) Title Insurance. Equity Investor shall have received a policy or
commitment to issue an ALTA extended policy of owner's title insurance with
respect to the Leased Properties being acquired on such date issued, or to be
issued, as the case may be, by the Title Insurance Company, dated the Closing
Date, which policy or commitment shall be satisfactory to the Equity Investor in
substance and amount and contain such endorsements and affirmative assurances as
may be requested by Equity Investor and showing no Liens on such Leased
Properties other than those approved by Equity Investor. Owner shall also
receive such reinsurance agreements as Equity Investor may reasonably request.
Surety shall have received such evidence as it shall require that the title
insurance policies required by Section 2.9(n) of the Loan Agreement have been
issued.
(o) Survey. On or prior to the Closing Date, Equity Investor and Surety
shall have received surveys of each Leased Property being acquired on such date,
certified in each case to Equity Investor, Owner and Surety and their respective
successors, assigns and designees and to the Title Company by a surveyor
reasonably satisfactory to Equity Investor and Surety (the "Surveys"). All
surveys shall contain the minimum detail for land Surveys as most recently
adopted by ALTA/ASCM, shall comply with Equity Investor's and Surety's survey
requirements and shall contain Equity Investor's and Surety's standard form
certification. Said Surveys shall show no state of facts or conditions
reasonably objectionable to Equity Investor or Surety.
(p) Appraisal. Prior to the Closing Date, Equity Investor and Surety
shall have received an independent appraisal, dated not more than sixty (60)
days prior to the Closing Date, for each of the Leased Properties being acquired
on such date from a state certified appraiser engaged by Noteholder, which
indicates the fair market value of the Leased Properties is as set forth in
Schedule 2.9(p) to the Loan Agreement and is otherwise reasonably satisfactory
to Equity Investor and Surety in its sole discretion in all respects (each an
"Appraisal"). Each such appraisal shall conform in all respects to the
requirements for appraisals set forth in the Financial Institutions Reform and
Recovery Act of 1989 and the regulations promulgated thereunder (as if
Noteholder were an institution under the jurisdiction thereof) and the Uniform
Standards of Professional Appraisal Practices of the Appraisal Foundation.
(q) Licenses, Permits and Approvals. On or prior to the Closing Date,
Equity Investor and Surety shall have received copies of final, unconditional
certificates of occupancy issued with respect to each of the Leased Properties
being acquired on such date and each related Assisted Living Facility, together
with all material Permits (other than Regulatory Permits which Lessee is unable
to obtain prior to the Closing Date, which Lessee shall obtain and deliver in
accordance with Section 4.6) required for Owner to own and Lessee and any
Sublessee to use, occupy, operate and maintain such Leased Properties and the
related Assisted Living Facilities. Notwithstanding the foregoing, it is
acknowledged and agreed that, subject to the terms of Section 3.2 of the Trust
Agreement, Lessee shall be permitted to deliver to Equity Investor and Surety a
temporary certificate of occupancy with respect to the Assisted Living Facility
located in West Orange, New Jersey.
(r) Agreements. On or prior to the Closing Date, Equity Investor and
Surety shall have received certified copies of all material operating
agreements, service contracts and Equipment Leases, if any, relating to
Borrower's ownership and Lessee's and/or any Sublessee's operation
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of the Leased Properties being acquired on such date and the related Assisted
Living Facilities.
(s) Zoning. On or prior to the Closing Date, Equity Investor and Surety
shall have received evidence reasonably satisfactory to Equity Investor and
Surety as to the zoning and subdivision compliance of the Leased Properties
being acquired on such date.
(t) Property Condition Report. On or before the Closing Date, Equity
Investor and Surety shall have received property condition reports for the
applicable Assisted Living Facilities, which shall be prepared by an engineer or
other consultant satisfactory to Equity Investor and Surety and otherwise shall
be in form and substance satisfactory to Equity Investor and Surety in its sole
discretion (such reports the "Property Condition Reports"). Such Property
Condition Reports shall set forth any items of deferred maintenance at such
Assisted Living Facilities. On or before the Closing Date, Equity Investor and
Surety shall have received Environmental Reports for each of the Leased
Properties and Assisted Living Facilities which shall be prepared by an
environmental engineer or consultant and be in form and substance satisfactory
to Equity Investor and Surety in its sole discretion, together with a letter
from the preparer thereof entitling Equity Investor and Surety to rely on such
Environmental Reports.
(u) Deposits. The deposits required herein, including without
limitation, in addition to the deposit into the Operating Reserve Account
referenced in Section 3.1(k) above, any other initial deposits into the Reserves
and Accounts, if any, shall have been made (and at Lessee's option, the same may
be made from the proceeds of the Loan and Equity Advance).
(v) Master Lease. On or before the Closing Date, Equity Investor and
Surety shall have received certified copies of the Master Lease and same shall
be in full force and effect and no defaults shall exist thereunder, and Equity
Investor and Surety shall have received such estoppel certificates and
subordination agreements as Equity Investor and Surety may reasonably require,
duly executed by the Lessee.
(w) Leases, Estoppels. Prior to the Closing Date, Equity Investor and
Surety shall have received certified copies of (i) the Ground Leases, (ii) the
Subleases, (iii) any and all other material leases or subleases of all or any
part of a Leased Property being acquired on such date (other than the Residency
Agreements) (all of such leases or subleases described in this clause (iii)
existing as of the date hereof or on the Additional Properties Closing Date
relating to the Additional Properties, collectively, the "Existing Leases"), and
(iv) the form of Residency Agreement for each state, and prior to the Closing
Date, Equity Investor and Surety shall have received such estoppel certificates
and subordination agreements from the parties to the Ground Leases, the
Subleases and the Leases as Equity Investor and Surety may reasonably require,
duly executed by such parties.
(x) Other Review. Equity Investor and Surety shall have completed all
other review of Lessee, Owner, Alterra, the Leased Properties being acquired on
such date, the related Assisted Living Facilities and such other items as it
reasonably determines relevant, and shall have determined based upon such review
to fund the Equity Advance and issue the Surety Bond, respectively.
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(y) Legal Fees; Closing Expenses. Lessee shall have paid any and all
reasonable legal fees and expenses of counsel to Equity Investor and Surety,
together with all recording fees and taxes, title insurance premiums, and other
reasonable costs and expenses related to the closing of the transactions
contemplated by the Transaction Documents and the Excluded Collateral Agreement.
In addition, Lessee shall have paid the fees of Key Global Finance and Formation
Capital LLC.
(z) Financing Fee. Lessee shall have paid to Noteholder the fee
contemplated by Section 2.9(z) of the Loan Agreement.
(aa) Equity Advance. In the case of Surety, Equity Investor shall have
made the Equity Advance for the Closing Date pursuant to Section 2.3(b).
(bb) Interest Rate Hedge Agreement. Lessee shall have reimbursed
Noteholder for all costs and expenses incurred by or on behalf of Noteholder in
connection with the matters described in Section 2.9(bb) of the Loan Agreement.
(cc) Excluded Collateral. Guarantor shall have entered into and
delivered to Equity Investor the Excluded Collateral Agreement and Guarantor
shall have delivered to Owner the Excluded Collateral and such instruments and
documents as Equity Investor may request in connection therewith.
(dd) Deeds; Bills of Sale. The Owner shall have received deeds and bills
of sale with respect to the Leased Properties being acquired on such date from
the Seller, in form and substance satisfactory to Equity Investor and Surety,
conveying good and marketable title to the Leased Properties to Owner, subject
to no Liens except Permitted Liens and those approved by Equity Investor and
Surety.
(ee) Environmental Audit. Equity Investor and Surety shall have received
an environmental audit of each Leased Property being acquired on such date in
form and substance satisfactory to Equity Investor and Surety from an
environmental consultant reasonably satisfactory to Equity Investor and Surety
and dated no earlier than six (6) months prior to the Closing Date unless
otherwise agreed by the Equity Investor and Surety. If such assessment reveals
the need for additional review or remediation, in the reasonable opinion of the
Equity Investor or Surety, such additional review as may be required by the
Equity Investor or Surety, shall be provided, and any remediation recommended
therein shall have been performed prior to the Closing Date.
(ff) Pre-Closing Management Fees. On or prior to the Closing Date,
Equity Investor and Surety shall have received and approved a schedule setting
forth the amount of the pre-closing fees and costs to be paid to Manager on or
before the Closing Date (from the capital contributions of the limited partners
of the Sublessees) pursuant to Section 4.1(a) of the Management Agreements,
which schedule shall include the amount of such fees payable for each Leased
Property and a reasonably detailed breakdown and description by Leased Property
of the services and costs covered thereby.
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(gg) Joint Venture Agreements. Equity Investor and Surety shall have
received certified, duly executed copies of the limited partnership agreements
for each of the Sublessees which shall be in form and substance satisfactory to
Equity Investor and Surety.
(hh) Proceedings Satisfactory. All proceedings taken as of the Closing
Date in connection with the transactions contemplated hereby and all documents
and papers related thereto shall be satisfactory to Owner, Surety, Noteholder
and Equity Investor and their respective counsel and such Persons shall have
received copies of such documents and papers as may be reasonably requested in
connection therewith, all in form and substance satisfactory to such Persons.
Section 3.2. Conditions to Additional Properties Closing. The
obligation of Noteholder to make an additional Advance of the Loan on the
Additional Properties Closing Date is subject to the prior or concurrent
satisfaction or waiver of the conditions set forth in the Loan Agreement. The
obligation of Equity Investor to fund the subsequent Equity Advance and the
obligation of Surety to issue the Surety Bond with respect to the second closing
is subject to the prior or concurrent satisfaction or waiver of the conditions
set forth below. Where in this Section 3.2 any documents, instruments or
information are to be delivered to Noteholder, then the condition shall not be
satisfied unless (i) the same shall be in form and substance satisfactory to
Equity Investor and Surety, and (ii) if so required by Equity Investor and
Surety, Lessee shall deliver to Equity Investor and Surety a certificate duly
executed by Lessee stating that the applicable document, instrument or
information is true and complete and does not omit to state any information
without which the same might reasonably be deemed materially misleading.
(a) Performance of Agreements; Truth of Representations and Warranties.
Each party to the Transaction Documents shall have performed in all material
respects all agreements which this Agreement provides shall be performed on or
before the Additional Properties Closing Date. The representations and
warranties contained herein and in the other Transaction Documents shall be
true, correct and complete in all material respects on and as of the Additional
Properties Closing Date.
(b) No Default. No Default, Event of Default, Lease Default or Lease
Event of Default shall have occurred under any of the Transaction Documents.
(c) Additional Properties Transaction Documents. Borrower, Lessee, the
Sublessees and Manager, as applicable shall have executed and delivered any and
all documents and agreements required in connection with the acquisition of the
Additional Properties including, without limitation, Memorandum of Leases, Lease
Supplements, Mortgages, Assignments of Leases, Subleases, Management Agreements
and Assignments of Management Agreement relating to the Additional Properties
and any amendments or modifications to this Agreement, the Master Lease, the
existing Subleases, Lease Supplements or any of the other Transaction Documents
which may be required by Equity Investor or Surety in connection with the
acquisition of the Additional Properties.
(d) Title Policies; Date-Down Endorsements. Lessee shall have delivered
to Equity Investor and Surety and Investor and Surety shall have approved the
Owner's Title Policies and
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the Title Policies for the Leased Properties (or marked-up commitments relating
thereto) being acquired on such date complying with the conditions of Section
3.1(n) and date-down endorsements from the Title Company with respect to the
Owner's Title Policies and the Title Policies for the Initial Properties, at
Lessee's expense, which endorsements shall be in form and substance satisfactory
to Equity Investor and Surety in all respects.
(e) Joint Venture Partners' Contributions. The constituent partners of
each of the Sublessees entering into a Sublease with respect to the Additional
Properties shall have funded their required initial capital contributions in
accordance with their respective limited partnership agreements and the
constituent partners of the other Sublessees shall have funded any additional
capital contributions required to have been funded as of the Additional
Properties Closing Date, and all of such contributions shall have been deposited
with Trustee into the Operating Reserve Account in accordance with Article III
of the Trust Agreement.
(f) Property Condition Reports, Environmental Reports and Appraisals.
Equity Investor and Surety shall have received Property Condition Reports,
Environmental Reports and Appraisals with respect to the Additional Properties,
each prepared or updated not more than 60 days prior to the Additional
Properties Closing Date. In addition, if any of the original Property Condition
Reports, Environmental Reports or Appraisals for the Initial Properties were
dated more than thirty (30) days prior to the Closing Date, Lessee shall have
delivered to Equity Investor and Surety updates of such Property Condition
Reports, Environmental Reports and Appraisals dated not more than thirty (30)
days prior to the Closing Date (and disclosing no defects or conditions not
disclosed in the original reports and no adverse change in the appraised value
from the original Appraisals). Lessee's failure to deliver any such updated
Property Condition Reports, Environmental Reports or Appraisals for the Initial
Properties required pursuant to the foregoing sentence on or before the earlier
to occur of (i) the date which is thirty (30) days after the date hereof and
(ii) the Additional Properties Closing Date shall constitute an Event of
Default.
(g) Conditions. Each of the conditions set forth in Section 3.1 (other
than the conditions of Sections 3.1(c), 3.1(i) (but only to the extent that
financial statements and financial information with respect to the Additional
Properties acceptable to Equity Investor and Surety have been received by
Noteholder prior to the date hereof), 3.1(k), 3.1(m) (unless any of the
Additional Properties are managed by a separate manager and/or under a separate
management agreement in which case Equity Investor and Surety shall have
received a Subordination of Management Agreement duly executed by each such
manager) and 3.1(aa), shall have been satisfied or waived in writing by Equity
Investor and Surety on or before the Additional Properties Closing Date;
provided, however, that (i) any references in said Section 3.1 to the "Leased
Properties" shall for purposes of this Section 3.2 mean the Additional
Properties being acquired on the Additional Properties Closing Date and (ii) the
amount required to be funded pursuant to Section 3.1(k) shall be $5,000,000. In
addition, Lessee and Guarantor shall have delivered to Equity Investor and
Surety legal opinions from Holleb & Coff or Illinois counsel to such parties,
which counsel shall be reasonably acceptable to Equity Investor and Surety, that
this Agreement, the other Transaction Documents to which Lessee and Alterra are
a party and the Excluded Collateral Agreement are enforceable against such
parties in accordance with their terms under Illinois law (subject to customary
qualifications and exceptions). Failure of Lessee
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and Alterra to deliver such opinions on or before the earlier to occur of (i)
thirty (30) days from the date hereof and (ii) the Additional Properties Closing
Date shall constitute a Lease Event of Default.
(h) Amended Surety Bond. Noteholder shall have received an amended
Surety Bond and Backstop Policy covering the full amount of the Loan as of the
Additional Properties Closing Date.
(i) Financing Fee. Lessee shall have paid to Noteholder the fee
contemplated by Section 2.10(j) of the Loan Agreement.
(j) Replacement Letter of Credit. Equity Investor shall have received a
new letter of credit covering the full amount of the aggregate Equity Advances
made pursuant to this Agreement as of the Additional Properties Closing Date and
otherwise issued by the same bank, and in the same form, as the letter of credit
delivered on the Closing Date.
(k) Maximum Lessee Risk Amount. The schedule of Maximum Lessee Risk
Amounts attached to the Master Lease as Exhibit E shall have been recalculated
to give effect to the leasing of the Additional Properties under the Master
Lease, the making of the Loan and Equity Advance associated therewith and the
other transactions to occur on the Additional Properties Closing Date and a new
Exhibit E to the Master Lease will be delivered.
(l) Aggregate Equity Balance. Lessee and Equity Investor shall have
executed a certificate as to the Aggregate Equity Balance, which shall be the
sum of the Equity Advances made by Equity Investor on the Closing Date and the
Additional Properties Closing Date.
If Lessee wishes to request that Noteholder disburse the Additional
Advance to Owner and Equity Investor make the related Equity Advance for
purposes of the acquisition of the Additional Properties, Lessee shall give
Owner, Equity Investor, Noteholder and Surety at least five (5) Business Days'
notice of the proposed Additional Properties Closing Date which notice shall be
accompanied by copies of the Appraisals and the financial statements and
information required under Section 3.1(i) for the Additional Properties to the
extent not previously delivered. Promptly after receipt of such notice and
documents (and in any event prior to the Additional Properties Closing Date),
Noteholder shall send notice to Owner and Lessee of the amount of the Additional
Advance.
The parties hereto acknowledge that Surety has no obligation to
increase the amount of the Surety Bond or the Backstop Policy to cover any
increase in the amount of the Loan on the Additional Properties Closing Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF LESSEE
To induce (i) the parties to enter into this Agreement and the other
Transaction
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Documents and the Excluded Collateral Documents, (ii) the Noteholder
and the Equity Investor to make the Loan and Equity Advances to Owner, and (iii)
Surety to issue the Surety Bond, Lessee represents and warrants to Owner,
Noteholder, Surety, Equity Investor and Trustee that the statements set forth in
this Article IV are true, correct and complete as of the date hereof and will
be, true, correct and complete as of the Closing Date.
Section 4.1. Organization, Powers, Capitalization, Good Standing,
Business.
(a) Organization and Powers. Lessee is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Alterra is the sole stockholder of Lessee. Lessee has all requisite power and
authority to own and operate its properties, to carry on its business as now
conducted and proposed to be conducted, and to enter into each Transaction
Document to which it is a party and to perform the terms thereof. The
certificate of incorporation and by-laws (each, as amended, the "Charter
Documents") of Lessee contain all provisional terms necessary in each case for
Lessee to comply with Section 5.19 of the Loan Agreement.
(b) Capitalization; Ownership. Lessee has no (i) direct or indirect
interest in, including without limitation stock, partnership interest or other
securities of, any other Person, or (ii) direct or indirect loan, advance or
capital contribution to any other Person, including all indebtedness and
accounts receivable from that other Person. All issued and outstanding shares of
capital stock of Lessee are duly authorized and validly issued, fully paid,
nonassessable, free and clear of all Liens (other than Permitted Liens), and
such shares were issued in compliance with all applicable state and federal laws
concerning the issuance of securities. There are no preemptive or other
outstanding rights, options, warrants, conversion rights or similar agreements
or understandings for the purchase or acquisition of any shares of capital stock
or other securities of such entities.
(c) Qualification. Lessee is duly qualified and in good standing in the
state of its formation. Lessee is also duly qualified and in good standing in
the states where the Leased Properties are located. In addition, Lessee is duly
qualified and in good standing in each state where it is necessary to carry on
its present business and operations, except in jurisdictions in which the
failure to be qualified and in good standing could not reasonably be expected to
have a Material Adverse Effect. All jurisdictions in which each Lessee is
qualified to do business are set forth on Schedule 3.1(c) to the Loan Agreement.
(d) Business; Assets. Lessee is and has always engaged only in the
businesses permitted under the Loan Agreement. The sole assets of Lessee are its
leasehold interests in and to the Leased Properties and Assisted Living
Facilities under the Master Lease, its sublessor's interest in the Subleases and
its right, title and interest, if any, in and to the Permits, if any, and
personal property appurtenant or related thereto.
(e) Addresses. All offices and places of business of Lessee, and the
location of all properties in which it has any interest are set forth in
Schedule 3.1(e) to the Loan Agreement. The principal place of business and the
chief executive office of Lessee is so designated on said Schedule.
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Section 4.2. Authorization of Transaction, Etc.
(a) Authorization of Transaction. The execution, delivery and
performance by each Lessee of each of the Transaction Documents to which it is a
party and the consummation of the transactions contemplated thereby, have been
duly authorized by all necessary corporate action.
(b) No Conflict. The execution, delivery and performance by Lessee of
the Transaction Documents to which it is a party and the consummation of the
transactions contemplated thereby, do not and will not: (1) violate (x) any
provision of law applicable to Lessee; (y) the Charter Documents of Lessee; or
(z) any order, judgment or decree of any court or other agency of government
binding on Lessee or any of its Affiliates; (2) conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a default
under any material Contractual Obligation of Lessee or any of its Affiliates;
(3) result in or require the creation or imposition of any material Lien (other
than the Liens created by the Transaction Documents) upon the Leased Properties
or assets of Lessee or any of its Affiliates; or (4) except as set forth on
Schedule 3.2(b) to the Loan Agreement, require any approval or consent of any
Person under any material Contractual Obligation of Lessee, which approvals or
consents have been obtained on or before the dates required under such
Contractual Obligation, but in no event later than the Closing Date.
(c) Governmental Consents. (i) The execution, delivery and performance
by Lessee of the Transaction Documents to which it is a party, and the
consummation of the transactions contemplated thereby do not and will not
require any registration with, consent or approval of, or notice to, or other
action to, with or by, any federal, state or other governmental authority or
regulatory body, except for the Permits required to be obtained by Borrower,
Lessee, the Sublessees or the Manager in connection with the operation of the
Assisted Living Facilities as set forth in Section 4.6 and except for the
recording of the Mortgages, Assignments of Leases, other Security Documents
and/or UCC-1's in the applicable recorders' or filing offices.
(ii) Except as set forth on Schedule 4.2(c)(ii) hereto and except for
corporate qualification and good standing in the States where the Leased
Properties are located, the execution, delivery and performance by Owner of the
Transaction Documents to which it is a party, and the consummation by Owner of
the transactions contemplated thereby, do not and will not require any
registration, filing, license, qualification or permit with, consent or approval
of, or notice or obligation to, or any other action to, with or by any federal,
state or governmental authority or regulatory body.
(iii) In addition to any covenants hereunder relating to Permits, Lessee
shall diligently proceed to obtain or satisfy all consents, approvals, and
requirements set forth in Section 4.6 or Schedule 4.2(c)(ii) hereto.
(d) Binding Obligations. This Agreement is, and the other Transaction
Documents when executed and delivered will be, the legally valid and binding
obligations of Lessee, each enforceable against Lessee in accordance with their
respective terms, subject to bankruptcy, insolvency, moratorium, reorganization
and other similar laws affecting creditor's rights. Lessee has no defense or
offset to any of its obligations under the Transaction Documents. Lessee has no
claim or right of set off against Noteholder, Surety or Equity Investor or any
Affiliate thereof.
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Section 4.3. Pending Matters. There are no judgments outstanding
against Lessee nor is there any action, charge, claim, demand, suit, petition,
inquiry or investigation pending or, to the best knowledge of Lessee, after due
inquiry, threatened against it and except as set forth on Schedule 3.9 to the
Loan Agreement or as described in Section 4.19, there are no judgments
outstanding against any of the Leased Properties nor is there any action,
charge, claim, demand, suit, petition, inquiry or investigation pending, or to
the best of Lessee's knowledge, after due inquiry, threatened against any of the
Leased Properties. The actions, charges, claims, demands, suits, proceedings,
petitions, investigations and arbitrations set forth on Schedule 3.9 to the Loan
Agreement and described in Section 4.19 will not result, if adversely
determined, and could not reasonably be expected to result, either individually
or in the aggregate, in any Material Adverse Effect and do not relate to and
will not affect the consummation of the transactions contemplated hereby or
under any of the Transaction Documents. Lessee is not in violation, breach or
default of any agreement, the violation of which could have a Material Adverse
Effect, and the Lessee is not in violation of any order, judgment, or decree of
any court, or, in any material respect, of any statute or governmental
regulation to which it is subject.
Section 4.4. Financial Statements Accurate. All financial statements
concerning Lessee, Guarantor or any of their respective Affiliates or the Leased
Properties provided by or on behalf of Lessee or Guarantor to Noteholder, Surety
and Equity Investor have been prepared on a basis consistent with the financial
statements of Guarantor (in the case of Lessee, Guarantor or their respective
Affiliates) or HCR (with respect to the Leased Properties) consistently applied
and present (as of the dates thereof) the respective financial conditions of the
Persons covered thereby and the results of their operations for the periods then
ending. All operating statements, income reports and other financial data
regarding Lessee, Guarantor and the Assisted Living Facilities heretofore
provided by or on behalf of Lessee are, to the best knowledge of Lessee after
due inquiry, true correct and complete and present fairly, the financial
condition and, results of, such operations. There has been no material adverse
change in the financial condition, operations, or prospects of Lessee, Guarantor
or to the best knowledge of Lessee after due inquiry any Assisted Living
Facility since the dates of such statements except as fully disclosed in writing
with the delivery of such statements.
Section 4.5. Indebtedness and Contingent Obligations. As of the Closing
Date, the Lessee shall have no Indebtedness or Contingent Obligations except for
the obligations under the Transaction Documents and the Allowed Indebtedness.
Section 4.6. Compliance with Laws. Borrower, Lessee, each Sublessee
and/or Manager (and/or with respect to nursing home beds within the Leased
Properties located in Laguna Palm Terrace, California and Palmer Ranch, Florida,
HCR), as the case may be, is, or will be within sixty (60) days following the
Closing Date (or in the case of the Assisted Living Facilities located in
California and Florida, such longer period as may be reasonably necessary with
the exercise of diligence), the lawful owner of all Permits necessary for the
proper and lawful operation of the Assisted Living Facilities as an assisted
living facility (or, in the case of a portion of the Leased Properties located
in Laguna Palm Terrace in Laguna Hills, California and Palmer Ranch in Sarasota,
Florida as skilled nursing facilities) under applicable Legal Requirements);
during any interim period pending which the Permits shall not be held in the
name of the applicable party, the Assisted Living Facilities can and will be
lawfully operated pursuant to consents, waivers or
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provisional Permits or under subleases or management agreements. Lessee has no
knowledge of any fact, event or condition which would cause any of such Permits
not to be duly issued or transferred to Borrower, Lessee, any Sublessee or
Manager, as applicable, within the time period set forth above. To the extent
such Permits are not held in the name of the applicable party as of the Closing
Date or the Additional Properties Closing Date, as the case may be, Lessee has
obtained, or has caused the applicable party to obtain, all requisite consents
necessary to permit Lessee, the applicable Sublessee or Manager to operate or
cause to be operated the Assisted Living Facilities and, as of the Closing Date,
has filed, or has caused the applicable party to file, all necessary
applications to obtain such Permits. The Permits held in the name of the
applicable party as of the Closing Date or the Additional Properties Closing
Date, as the case may be, or for which applications have been or will be made
constitute all of the Regulatory Permits and all other material permits,
licenses and certificates required for the use and occupancy thereof. The number
of licensed and Available Beds at each Assisted Living Facility is set forth on
Schedule 3.11-1 to the Loan Agreement for the Initial Properties, which Schedule
will be amended as of the Additional Properties Closing Date to include the
Additional Properties. As of the Closing Date with respect to the Initial
Properties and as of the Additional Properties Closing Date with respect to the
Additional Properties, Lessee, each Sublessee and Manager, as well as the
operation of each Assisted Living Facility are or will be in compliance and at
all times will remain in compliance in all material respects with the applicable
provisions of skilled nursing facility, residential care, personal care, adult
care, boarding home and/or assisted living facility laws, rules, regulations and
published interpretations to which each Assisted Living Facility is subject,
including, without limitation, the Medicare Regulations and Medicaid
Regulations, as applicable. Schedule 3.11-2 to the Loan Agreement describes all
Permits required under applicable Legal Requirements by any federal or state
health agency or similar agency or body in connection with operation of the
Initial Properties as Assisted Living Facilities which Schedule will be amended
as of the Additional Properties Closing Date to include the Additional
Properties (collectively, "Regulatory Permits"), all of which are, or will, in
no more than sixty (60) days following the Closing Date or the Additional
Properties Closing Date, as the case may be (or, in the case of the Assisted
Living Facilities located in Florida and California, such longer period as may
be reasonably necessary with the exercise of diligence), be held in the name of
Borrower, Lessee, Sublessees and/or Manager, as applicable. No waivers of any
laws, rules, regulations or requirements (including, but not limited to minimum
square foot requirements per bed) are required for the Assisted Living
Facilities to operate at the licensed bed capacities listed on Schedule 3.11-1
to the Loan Agreement and in compliance with applicable Legal Requirements. None
of the Assisted Living Facilities which are Initial Properties participate in
Medicare, Medicaid or any other third party reimbursement program. All
Reimbursement Contracts to the extent applicable to the Assisted Living
Facilities which are Additional Properties will be applied for as of the
Additional Properties Closing Date and will be received within sixty (60) days
of the Additional Properties Closing Date, and Borrower, Lessee, each Sublessee
and Manager, as applicable, are as of the Closing Date with respect to the
Initial Properties, and will be as of the Additional Properties Closing Date
with respect to the Additional Properties, in good standing with all the
respective agencies governing such applicable skilled nursing facility and
assisted living facility licenses, and if applicable, Medicare Certifications,
Medicaid Certifications and Reimbursement Contracts. Lessee, Sublessee and
Manager, as applicable, will be current as of the Additional Properties Closing
Date in the payment of all so-called provider specific taxes or other
assessments with respect to any Reimbursement Contracts. Each Assisted Living
Facility
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(other than the Assisted Living Facilities which are not yet operating as set
forth on Schedule 3.11-1 to the Loan Agreement) is currently operated in
material compliance with applicable Regulatory Permits and Legal Requirements as
a skilled nursing facility or assisted living facility and its licensed bed
capacity is set forth in Schedule 3.11-1 to the Loan Agreement. In the event the
Trustee or any Beneficiary acquires any Assisted Living Facility through
foreclosure or otherwise, under current law neither the Trustee nor any such
Beneficiary nor a subsequent manager, a subsequent lessee or any subsequent
purchaser (through foreclosure or otherwise) must obtain a CON prior to applying
for or receiving a license to operate the Assisted Living Facility and
certification to receive Medicare and Medicaid payments (and their successor
programs) for patients having coverage thereunder, provided that (i) the number
of beds and the scope of services provided are not changed and (ii) that the
Trustee, Beneficiary or subsequent manager, lessee or purchaser submits prior
notification of such change to the applicable regulatory agency.
Section 4.7. Maintain Bed Capacity. Neither Lessee, any Sublessee nor
the Manager has granted to any third party the right to reduce the number of
licensed beds in any Assisted Living Facility or to apply for approval to
transfer the right to any of the licensed Assisted Living Facility beds to any
other location. Except as expressly permitted otherwise under the Trust
Agreement, Lessee shall maintain, or cause to be maintained, the number of
Available Beds at each Assisted Living Facility set forth in Schedule 3.111 to
the Loan Agreement and within a variance of ten percent (10%) shall maintain or
cause to be maintained the number of beds at each Assisted Living Facility at
the licensure/certification levels set forth in Schedule 3.111 to the Loan
Agreement.
Section 4.8. Payment of Taxes and Property Impositions. Lessee has
timely filed all federal, state, and local tax returns which it is required to
file and has timely paid, or made adequate provision for the payment of, all
taxes, assessments, fees and other governmental charges upon such Person and
upon its properties, assets, income and franchises, including without
limitation, provider taxes. All such returns and reports are complete and
accurate in all respects and none of the United States income tax returns of
Lessee are under audit. There is not presently pending (and to the best of
Lessee's knowledge, after due inquiry, there is not contemplated) any special
assessment against any Leased Property, any other Collateral, or any part
thereof except as may be set forth in any of the Title Policies. No part of any
Leased Property is included or assessed under or as part of another tax lot or
parcel comprising property other than such Leased Property, and no part of any
other property is included or assessed under or as part of the tax lots or
parcels comprising any Leased Property. No tax liens have been filed and to the
best knowledge of Lessee, no claims are being asserted with respect to any such
taxes. The charges, accruals and reserves on the books of Lessee in respect of
any taxes or other governmental charges are in accordance with GAAP.
Section 4.9. Title to Collateral. Borrower and Lessee, collectively,
have good and marketable fee simple title to all of the Collateral, subject to
no lien, mortgage, pledge, encroachment, zoning violation, or encumbrance,
except Permitted Liens and except as set forth on Schedule 3.9 to the Loan
Agreement, none of which Liens materially interfere with the security intended
to be provided by the Mortgages or the current use of the Leased Properties. All
Improvements situated on the Land are situated wholly within the boundaries of
respective parcels
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comprising such Land, except as disclosed by the Surveys of the Leased
Properties. Borrower, Lessee or the applicable Sublessees own and will own at
all times all personal property relating to the Leased Properties and the
Assisted Living Facilities (other than personal property which is owned by
residents or tenants of the Leased Properties), subject only to Permitted Liens.
Without limitation of the foregoing, Borrower, Lessee or the applicable
Sublessees own all furnishings, fixtures and equipment located at the Leased
Properties that are used by Lessee or the applicable Sublessees or which are
necessary for or integral to the operation of the Assisted Living Facilities,
free and clear of any lease, lien or encumbrance except the Permitted Liens and
except as set forth on Schedule 3.9 to the Loan Agreement. No Person has any
option or other right to purchase all or any portion of the Collateral or any
interest therein.
Section 4.10. Priority of Mortgages. The Mortgages constitute a valid
first lien against Borrower's and Lessee's respective interests in the real and
personal property described therein, prior to all other liens or encumbrances,
including those which may hereafter accrue, excepting only Permitted Liens and
except as set forth on Schedule 3.9 to the Loan Agreement, none of which
Permitted Liens or Liens materially interfere with the security intended to be
provided by the Mortgages or the current use of the Leased Properties.
Section 4.11. Zoning, Other Laws. Except as set forth on Schedule 3.16
to the Loan Agreement, each of the Leased Properties is zoned for its current
uses (including the use identified in the definition of Assisted Living
Facilities) under applicable federal and state laws, which zoning designations
are unconditional, in full force and effect, and are beyond all applicable
appeal periods or is the subject of a valid variance or conditional use permit
permitting such uses. The Leased Properties and the Assisted Living Facilities
and the operations thereon are in material compliance with all applicable
covenants and restrictions of record, zoning, subdivision and land use laws,
regulations and ordinances, all applicable health, fire, and building codes, and
all other laws applicable to the Leased Properties or the Assisted Living
Facilities, including without limitation the Americans with Disabilities Act.
Lessee does not know of any illegal activities relating to controlled substances
on or at the Leased Property or any portion thereof. All permits, licenses and
certificates required for the lawful use and operation of the Leased Properties,
including, but not limited to, all certificates of occupancy, or the equivalent
and all Regulatory Permits have been obtained and are current and in full force
and effect or application therefor has been made. In the event that all or any
part of the Improvements located on the Leased Properties are destroyed or
damaged, said Improvements can be legally reconstructed to substantially their
condition prior to such damage or destruction, and thereafter exist for the same
use without violating any zoning or other ordinances applicable thereto and
without the necessity of obtaining any variances or special permits, other than
customary demolition, building and other construction related permits. Each
Assisted Living Facility contains enough permanent parking spaces (both regular
spaces and handicap spaces) to satisfy all requirements imposed by applicable
laws with respect to parking or a waiver of such requirements has been obtained.
No legal proceedings are pending or, to the best knowledge of Lessee after due
inquiry, are threatened with respect to the zoning of the Leased Properties or
any portion thereof. Neither the zoning nor any other right to construct, use or
operate any Leased Property is in any way dependent upon or related to any real
estate other than such Leased Property. No tract map, parcel map, condominium
plan, condominium declaration, or plat of subdivision will be recorded or
permitted to be recorded, by Lessee with respect to any Leased Property or
portion thereof without
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Owner's and Noteholder's prior written consent.
Section 4.12. Condition of Leased Properties. All Improvements are in
good condition and repair. Lessee is not aware of any latent or patent
structural or other significant defect or deficiency in the Improvements. City
water supply, storm and sanitary sewers, and electrical, gas and telephone
facilities are available to the Leased Properties within the boundary lines of
the Land or through appurtenant easements, are fully connected to the
Improvements and are fully operational, are sufficient to meet the reasonable
needs of the Leased Properties as now used or presently contemplated to be used,
and no other utility facilities are necessary to meet the reasonable needs of
the Leased Properties as now used or presently contemplated to be used. The
design and as-built conditions of the Leased Properties are such that surface
and storm water does not accumulate on the Leased Properties (except in
facilities specifically designed for the same) and does not drain from the
Leased Properties across land of adjacent property owners in any manner which
would have a Material Adverse Effect on any of the Leased Properties. Except as
set forth on the Surveys, no part of any Leased Property is within a flood plain
and none of the Improvements create any encroachment over, across or upon such
Leased Property's boundary lines, rights of way or easements, and no building or
other improvements on adjoining land create such an encroachment which could
reasonably be expected to have a Material Adverse Effect. All public roads and
streets necessary for service of and access to the Leased Properties for the
current and contemplated uses thereof have been completed and are serviceable
and are physically and legally open for use by the public. Any liquid or solid
waste disposal, septic or sewer system located at the Leased Properties is in
good and safe condition and repair and in compliance with all applicable laws.
Section 4.13. [Intentionally Omitted].
Section 4.14. Disclosure. No financial statements, financial document or
any other document, certificate or written statement furnished to Noteholder,
Equity Investor or Surety by or on behalf of Lessee or Guarantor for use in
connection with the Loan, including without limitation all schedules and
exhibits to this Agreement, contains any untrue representation, warranty or
statement of a material fact, and none omits or will omit to state a material
fact necessary in order to make the statements contained herein or therein not
materially misleading.
Section 4.15. Legal Names. To the best knowledge of Lessee, the legal
names of the entities which have owned and operated the Assisted Living
Facilities at all times during the preceding five (5) years are as set forth in
Schedule 3.19 to the Loan Agreement.
Section 4.16. Employee Benefit Plans.
(a) Except as disclosed on Schedule 3.20(a) to the Loan Agreement,
neither Lessee nor any ERISA Affiliate maintains or contributes to or has any
obligation (including a contingent obligation) with respect to any Plan. Except
as disclosed on Schedule 3.20(a) to the Loan Agreement, each Plan which is
intended to be qualified under Section 401(a) of the Code as currently in effect
has been determined by the Internal Revenue Service to be so qualified, and each
trust related to any such Plan has been determined to be exempt from federal
income tax under Section 501(a) of the Code as currently in effect. Each Plan
(i) has been administered in all
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material respects in accordance with its terms and (ii) complies in form, and
has been maintained and operated in all material respects in accordance, with
the requirements of ERISA and, where applicable, the Code. There are no actions,
suits or claims (other than routine claims for benefits) pending nor, to the
knowledge of Lessee or any ERISA Affiliate, threatened with respect to any Plan.
Lessee and each ERISA Affiliate has complied in all material respects with the
applicable requirements of Part 6 of Title I of ERISA.
(b) Neither Lessee nor any ERISA Affiliate maintains or contributes to
any employee welfare benefit plan within the meaning of Section 3(1) of ERISA
which provides benefits to employees after termination of employment other than
as specifically required by Part 6 of Title I of ERISA. Neither Lessee nor any
Person that is or was an ERISA Affiliate at any time during the immediately
preceding six years has ever maintained, been required to contribute to, been
required to pay any amount or had any obligation (whether actual or contingent)
with respect to any Benefit Plan or Multiemployer Plan. Except as disclosed on
Schedule 3.20(b)-1 to the Loan Agreement, neither Lessee nor any ERISA
Affiliate, nor any fiduciary of any Plan, has engaged in any nonexempt
prohibited transaction described in Section 406 of ERISA or Section 4975 of the
Code. Except as disclosed on Schedule 3.20(b)-2 to the Loan Agreement, neither
Lessee nor any ERISA Affiliate has by reason of the transactions contemplated
hereby, any obligation to make any payment to any employee pursuant to any Plan
or existing contract or arrangement. Neither Lessee nor any ERISA Affiliate is
the grantor of a grantor trust established pursuant to Subpart E of Subchapter J
of the Code.
Section 4.17. Intellectual Property. Set forth on Schedule 3.21 to the
Loan Agreement is a complete listing of all of the material patents, trademarks,
tradenames, technology and other intellectual property rights used in the
ownership, operation and management of the businesses of Lessee.
Section 4.18. [Intentionally Omitted].
Section 4.19. Proceedings Pending. There are no proceedings pending, or,
to the best of Lessee's knowledge, after due inquiry threatened, to acquire
through the exercise of any power of condemnation, eminent domain, or similar
proceeding all or any part of any Leased Property (except a certain condemnation
proceeding affecting a portion of the Tucson, Arizona Leased Property as
disclosed in the title report therefor), the Equipment or any interest therein,
or to enjoin or similarly prevent or restrict the use of any Leased Property or
the operation of the Assisted Living Facilities in any manner.
Section 4.20. Compliance With Applicable Laws. Each Assisted Living
Facility and its operations and the Leased Properties comply in all material
respects with all covenants and restrictions of record and applicable laws,
ordinances, rules and regulations, including, without limitation, to the extent
applicable, Title 42 of the United States Code and related regulations,
including the Medicare Regulations, the Medicaid Regulations, federal and state
self-referral and anti-kickback statutes and regulations, Title 31 of the United
States Code, including the False Claims Act; skilled nursing facility or
assisted living facility licensure laws and regulations; public health statues
and regulations; the Americans with Disabilities Act and the regulations
thereunder, and all laws, ordinances, rules and regulations relating to zoning,
setback requirements (except as
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may be shown on any of the Surveys for the Leased Properties approved by
Noteholder) and building codes and there are no waivers of any building codes
currently in existence for any of the Assisted Living Facilities or the Leased
Properties. Lessee has filed in a timely manner all reports, documents and other
materials required to be filed with any governmental bureau, agency or
instrumentality (and the information contained in each of such filings is true,
correct and complete in all respects), except where failure to make such filings
would not have a Material Adverse Effect. Lessee has retained all records and
documents required to be retained pursuant to any law, ordinance, rule,
regulation, order, policy, guideline or other requirement of any governmental
authority, except where failure to retain such records would not subject such
party or any of its Affiliates, partners, officers, trustees, or employees to
criminal liability and could not reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect.
Section 4.21. Solvency. As of and from and after the Closing Date, the
Lessee (after giving effect to the transactions contemplated by the Transaction
Documents), in the aggregate; (A) own and will own assets the fair saleable
value of which are (1) greater than the total amount of liabilities (including
Contingent Obligations) of the Lessee and (2) greater than the amount that will
be required to pay the probable liabilities of Lessee then existing debts as
they become absolute and matured considering all financing alternatives and
potential asset sales reasonably available to Lessee; (B) has capital that is
not insufficient in relation to its business as presently conducted or any
contemplated or undertaken transaction; and (C) do not intend to incur and do
not believe that they will incur debts beyond their ability to pay such debts as
they become due.
Section 4.22. Management Agreements. The Management Agreements are each
in full force and effect and there are no defaults (either monetary or
nonmonetary) by the parties thereto.
Section 4.23. 1934 Act. The proceeds of the Note and the Equity Advances
will not be used to acquire any equity security of a class that is registered
pursuant to Section 12 of the Securities Exchange Act of 1934.
Section 4.24. Use of Proceeds and Margin Security. Borrower shall use
the proceeds of the Loan and the Equity Advances to acquire the Leased
Properties and pay Transaction Expenses as contemplated by the schedule of
sources and uses attached to the Loan Agreement as Exhibit G. No portion of the
proceeds of the Loan and Equity Advances shall be used by Borrower or Lessee in
any manner that might cause the borrowing or the application of such proceeds to
violate Regulation U, Regulation T or Regulation X or any other regulation of
the Board of Governors of the Federal Reserve System.
Section 4.25. No Plan Assets. Lessee is not and will not be (i) an
employee benefit plan as defined in Section 3(3) of ERISA which is subject to
ERISA, (ii) a plan as defined in Section 4975(e)(1) of the Code which is subject
to Section 4975 of the Code, or (iii) an entity whose underlying assets
constitute "plan assets" of any such employee benefit plan or plan for purposes
of Title I of ERISA or Section 4975 of the Code.
Section 4.26. Governmental Plan. Lessee is not and will not be a
"governmental plan" within the meaning of Section 3(32) of ERISA and
transactions by or with the Lessee are not and will be not subject to state
statutes applicable to Lessee regulating investments of and fiduciary
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obligations with obligations with respect to governmental plans.
Section 4.27. Investment Company Act; PUCHA. Lessee is not: (i) an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended; (ii) a "holding
company" or a "subsidiary company" of a "holding company" or an "affiliate" of
either a "holding company" or a "subsidiary company" within the meaning of the
Public Utility Holding Company Act of 1935, as amended; or (iii) subject to any
other law that purports to restrict or regulate its ability to borrow money.
Section 4.28. Foreign Person. Lessee is not a "foreign person" within
the meaning of Section 1445(f)(3) of the Code.
Section 4.29 Year 2000. The management information systems (including
all computer hardware and software), all equipment containing embedded
microchips, of Lessee and Manager, whether owned, licensed, leased or otherwise
utilized by Lessee and Manager, and required in the conduct of their respective
businesses and the performance of all obligations of Lessee and Manager, under
the Transaction Documents ("Lessee and Manager's MIS Systems"), and such systems
of those parties with whom Lessee and Manager MIS Systems must interface, will,
no later than August 30, 1999, be free of any material problem, infirmity or
defect (and so tested and confirmed by Lessee and Manager to be free of any
material problem, infirmity or defect) as respects to the "Year 2000 Problem"
and/or any "9/9/99 Problem," to wit, the Lessee and Manager MIS System will be
"Y2K Compliant" such that the management information systems will not: (i)
experience any material malfunctions or other material usage problem or failure
in connection with the year 2000 and subsequent years as distinct from the 1900
years, or relating to improper expirations, terminations or data loss on or
following September 9, 1999 as a result of the 9/9/99 Problem; or (ii) result in
any material loss or liability sustained in connection with: (x) the conduct of
their business or the performance of any obligations under the Transaction
Documents, including but not limited to the recording, storing, processing,
calculating, comparing, sequencing or presenting by electronic means of calendar
dates or spans of time from, into and between the twentieth and twenty-first
centuries (including leap year calculations); and (y) the generation,
transmission, delivery, receipt of and any use or reliance on information or
calculations dependent on or relating to calendar dates or spans of time from,
into and between the twentieth and twenty-first centuries (including leap year
calculations) (the "Y2K Problem"). The cost to Lessee and Manager of any
reprogramming and testing of Lessee and Manager MIS Systems and of the
reasonably foreseeable consequences of any reprogramming required to assure that
Lessee and Manager MIS Systems are Y2K Compliant, or of systems and equipment
failures to such Lessee and Manager (including reprogramming errors and failure
of other's systems and equipment) will not result in an Event of Default or a
Material Adverse Effect. To the best knowledge of Lessee, the Lessee and Manager
MIS Systems are at present, and with ordinary upgrading and maintenance, will
continue for the term of the Master Lease to be, sufficient to permit each of
Lessee and Manager to conduct its business and to perform all of their
respective obligations under the Transaction Documents without Material Adverse
Effect.
Section 4.30. Legal Opinions. Lessee has reviewed and is familiar with
all opinions of legal counsel designated by Lessee and Guarantor to be delivered
in connection with the transactions contemplated hereby. None of the assumptions
with respect to Lessee, Guarantor or
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the Leased Properties set forth in such opinions is incorrect.
Section 4.31. Bankruptcy. Lessee is not a debtor, and none of its
property (including any Leased Property) is property of the estate, in any
voluntary or involuntary case under the Bankruptcy Code or under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect. Neither
Lessee nor any of its property is under the possession or control of a receiver,
trustee or other custodian. Lessee not has made any assignment for the benefit
of creditors. No such assignment or bankruptcy or similar case or proceeding is
now contemplated.
Section 4.32. Leases; Agreements.
(a) Agreements. Lessee has provided Noteholder, Equity Investor and
Surety with true and complete copies of all material contracts and agreements
affecting the Assisted Living Facilities, Leased Properties and the operation
and management thereof, including, the Master Lease, the Ground Leases, the
Subleases, the Management Agreement, the leasing brokerage agreements, if any,
and any and all other material Other Leases, tenancies or other material
contracts or agreements relating to the use, maintenance, development, operation
or management thereof (other than the Residency Agreements as to which Lessee
has delivered the standard form thereof only). Except for the rights of Manager
pursuant to the Management Agreements, no Person has any right or obligation to
manage any Leased Property or to receive compensation in connection with such
management or any right or obligation to sell, lease, or solicit purchasers or
tenants for any Leased Property, or (except for cooperating outside brokers) to
receive compensation in connection with such sale or leasing.
(b) Lease Issues. There are no legal proceedings commenced (or, to the
best of the knowledge of Lessee, threatened) against Lessee by any tenant or
former tenant. No rental in excess of one month's rent has been prepaid under
any of the Residency Agreements or any Other Leases. Each of the Residency
Agreements and any Other Leases is valid and binding on the parties thereto in
accordance with its terms. The execution of this Agreement and the other
Transaction Documents will not constitute an event of default under any of the
Residency Agreements or any Other Leases.
(c) No Rent Control. No portion of any Leased Property is subject to
any form of rent control, stabilization or regulation.
(d) No Undisclosed Tenants. Except for the Master Lease and the Lease
Supplements, the Subleases, the Ground Leases, the Licensing Subleases, the
Residency Agreements described in the Rent Rolls attached to the Loan Agreement
as Exhibit 3.31(d) and any Other Leases delivered to Noteholder, Equity Investor
and Surety, there are no material Other Leases affecting all or any portion of
any of the Leased Properties. Except for Lessee, the Sublessees, the Manager
under the Licensing Subleases, the tenants under the Ground Leases and the
tenants identified in the Existing Leases that have been delivered to
Noteholder, Equity Investor and Surety and except for Assisted Living Facility
residents, no Person has any right to occupy any portion of any of the Leased
Properties or the Assisted Living Facilities, and to the knowledge of Lessee
after due inquiry, no Person is so occupying any portion of any of the Leased
Properties or the Assisted Living Facilities.
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Section 4.33. Lessee's Environmental Representations and Warranties.
To the best of Lessee's knowledge based on its review of, and except as set
forth in, the Environmental Reports described on Schedule 6.5 to the Loan
Agreement:
(a) Lessee has not at any time caused, permitted or suffered
to exist any Prohibited Activities and Conditions.
(b) Lessee or the applicable Sublessee has all Environmental
Permits required to carry on its business with respect to its Assisted
Living Facilities and the Leased Properties and each of such
Environmental Permits is in full force and effect and each of Lessee
and/or the applicable Sublessee is in compliance with the terms and
conditions thereof and the transactions contemplated by this Agreement
shall not cause any of such Environmental Permits to lapse or become
invalid. No event has occurred with respect to any 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.
(c) Except as disclosed on Schedule 6.5(c) to the Loan
Agreement, the Leased Properties do not now contain any underground
storage tanks, and, to the best of Lessee's knowledge after reasonable
and diligent inquiry, the Leased Properties have not contained any
underground storage tanks in the past. If there is an underground
storage tank located on any Leased Property which has been previously
disclosed by Lessee to Noteholder in writing, that tank strictly
complies with all requirements of Environmental Law.
(d) Each of Lessee and/or the applicable Sublessee has
complied and is in compliance with all limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in any Environmental Law applicable
to the Leased Properties or any property of Lessee.
(e) No notice, notification, demand, request for information,
citation, summons or order has been issued, no complaint or notice of
violation has been filed or served, no penalty has been assessed, no
investigation or review is pending or threatened by any Governmental
Authority or any other Person with regard or with respect to the
Release of Hazardous Materials, the disposal or arrangement for
disposal of Hazardous Materials, noise emissions, Hazardous Materials,
violation or alleged violation of Environmental Law at, to or from the
Leased Properties, the use or operation of either, or any property
owned by Lessee.
(f) No Leased Property contains any treatment, storage or
disposal facility requiring an Environmental Permit.
(g) No asbestos or asbestos-containing material is or has
been present at the Leased Properties in violation of any Environmental
Law except as disclosed to the Noteholder, Surety and Equity Investor
by Lessee prior to the Closing Date.
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(h) Neither Lessee nor any of its predecessors has
transported or arranged for the transportation of any Hazardous
Materials from the Properties or Improvements to any location that is
listed on the National Priorities List ("NPL") under CERCLA, listed for
possible inclusion on the NPL in the Comprehensive Environmental
Response and Liability Information System ("CERCLIS"), or is listed on
any similar state or local list or that is the subject of federal,
state or local enforcement actions or other investigations.
(i) No Hazardous Material has been recycled, treated, stored
or Released by Borrower or Lessee except in accordance with applicable
Environmental Law.
(j) No oral or written notification of a Release of a
Hazardous Material has been filed by or on behalf of Lessee with
respect to any portion of the Leased Properties and no portion of the
Leased Properties or other property owned by Lessee is listed or
proposed for listing on the NPL, CERCLIS or any similar state or local
list of sites requiring investigation or remediation.
(k) No liens have arisen under or pursuant to any
Environmental Law on any of the Leased Properties, and no governmental
action has been taken or is in process that could subject any such
Leased Property to such liens and Lessee is not required to place any
notice or restriction relating to the presence of Hazardous Materials
at any of the Leased Properties.
(l) All environmental investigations, studies, audits, tests,
reviews or other analyses conducted by, or that are in the possession
of Lessee, relating to any Leased Property have been delivered to
Noteholder, Surety and Equity Investor prior to the Closing Date.
(m) Lessee has no knowledge of any facts, events or
conditions relating to any Properties and/or Improvements which could
reasonably be expected to interfere with or prevent continued
compliance with any Environmental Law, give rise to any liability under
Environmental Law, or otherwise form the basis of any claim, action,
suit, proceeding, hearing or investigation against or involving Lessee,
any Properties and/or Improvements under any Environmental Law.
The representations and warranties in this Section 4.33 shall be
continuing representations and warranties that shall be deemed to be made by
Lessee as of the Closing Date and throughout the term of the Master Lease.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF GUARANTOR
To induce (i) the parties to enter into this Agreement and the other
Transaction Documents and the Excluded Collateral Agreement, (ii) the Noteholder
and the Equity Investor to make the Loan and Equity Advances to Owner, and (iii)
Surety to issue the Surety Bond,
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Guarantor represents and warrants to Owner, Noteholder, Surety, Equity Investor
and Trustee that the statements set forth in this Article V are true, correct
and complete as of the date hereof and will be, true, correct and complete as of
the Closing Date.
Section 5.1. Organization, Powers, Good Standing, Etc.
(a) Organization and Powers. Guarantor is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Guarantor has all requisite power and authority to own and operate its
properties, to carry on its business as now conducted and proposed to be
conducted, and to enter into each Transaction Document to which it is a party
and the Excluded Collateral Agreement and to perform the terms thereof.
Guarantor has delivered to Equity Investor, Surety and Noteholder correct and
complete copies of the charter documents of Guarantor, including without
limitation, the restated certificate of incorporation, by-laws and amendments
thereto, each of which has been duly and properly filed with the Secretary of
State of the State of Delaware.
(b) Qualification. Guarantor is duly qualified and in good standing in
the state of its formation. Guarantor is also duly qualified and in good
standing in the states where the Leased Properties are located. In addition,
Guarantor is duly qualified and in good standing in each state where it is
necessary to carry on its present business and operations, except in
jurisdictions in which the failure to be qualified and in good standing could
not reasonably be expected to have a Material Adverse Effect.
(c) Address. The principal place of business and the chief executive
office of Guarantor is located in Brookfield, Wisconsin.
Section 5.2. Authorization of Transaction, Etc.
(a) Authorization of Transaction. The execution, delivery and
performance by Guarantor of each of the Transaction Documents to which it is a
party and the Excluded Collateral Agreement and the consummation of the
transactions contemplated thereby, have been duly authorized by all necessary
corporate action.
(b) No Conflict. The execution, delivery and performance by Guarantor
of the Transaction Documents to which it is a party and the Excluded Collateral
Agreement and the consummation of the transactions contemplated thereby, do not
and will not: (1) violate (x) any provision of law applicable to Guarantor; (y)
the charter documents of Guarantor; or (z) any order, judgment or decree of any
court or other agency of government binding on Guarantor or any of its
Affiliates; (2) conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any material Contractual
Obligation of Guarantor or any of its Affiliates; (3) result in or require the
creation or imposition of any material Lien (other than the Liens created by the
Transaction Documents and the Excluded Collateral Agreement) upon the Leased
Properties or assets of Guarantor or any of its Affiliates; or (4) except as set
forth on Schedule 3.2(b) to the Loan Agreement, require any approval or consent
of any Person under any material Contractual Obligation of Guarantor, which
approvals or consents have been obtained on or before the dates required under
such Contractual Obligation, but in no event later than the
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Closing Date.
(c) Governmental Consents. The execution, delivery and performance by
Guarantor of the Transaction Documents to which it is a party and the Excluded
Collateral Agreement, and the consummation of the transactions contemplated
thereby do not and will not require any registration with, consent or approval
of, or notice to, or other action to, with or by, any federal, state or other
governmental authority or regulatory body, except for the Permits required to be
obtained by Lessee, the Sublessees or the Manager in connection with the
operation of the Assisted Living Facilities as set forth in Section 4.6 and
except for the recording of the Mortgages, Assignments of Leases, other Security
Documents and/or UCC-1's in the applicable recorders' or filing offices.
(d) Binding Obligations. This Agreement is, and the other Transaction
Documents to which Guarantor is a party and the Excluded Collateral Agreement
when executed and delivered will be, the legally valid and binding obligations
of Guarantor, each enforceable against Guarantor in accordance with their
respective terms, subject to bankruptcy, insolvency, moratorium, reorganization
and other similar laws affecting creditor's rights. Guarantor has no defense or
offset to any of its obligations under the Transaction Documents or the Excluded
Collateral Agreement. Guarantor has no claim or right of set off against
Noteholder, Surety, Owner or Equity Investor or any Affiliate thereof.
Section 5.3. Pending Matters. Except as set forth on Schedule 3.9 to
the Loan Agreement, there are no judgments outstanding against any of the Leased
Properties nor is there any action, charge, claim, demand, suit, petition,
inquiry or investigation pending, or to the best of Guarantor's knowledge, after
due inquiry, threatened against any of the Leased Properties. There are no
judgments outstanding against Guarantor nor is there any action, charge, claim,
demand, suit, petition, inquiry or investigation pending or, to the best
knowledge of Guarantor, after due inquiry, threatened against it which, if
adversely determined, could reasonably be expected to result, either
individually or in the aggregate, in any Material Adverse Effect or affect the
consummation of the transactions contemplated hereby or under any of the
Transaction Documents or the Excluded Collateral Agreement. Guarantor is not in
violation, breach or default of any agreement, the violation of which could have
a Material Adverse Effect, and the Guarantor is not in violation of any order,
judgment, or decree of any court, or of any statute or governmental regulation
to which it is subject, the violation of which could have a Material Adverse
Effect.
Section 5.4. Financial Statements Accurate. All financial statements
concerning Guarantor or any of its Affiliates or the Leased Properties provided
by or on behalf of Guarantor to Noteholder, Surety and Equity Investor have been
prepared on a basis consistent with the audited financial statements of
Guarantor (in the case of Lessee, Guarantor or their respective Affiliates) or
HCR (with respect to the Leased Properties) consistently applied and present (as
of the dates thereof) the respective financial conditions of the Persons covered
thereby and the results of their operations for the periods then ending. All
operating statements, income reports and other financial data regarding
Guarantor and the Assisted Living Facilities heretofore provided by or on behalf
of Guarantor are, to the best knowledge of Guarantor after due inquiry, true,
correct and complete and present fairly, the financial condition and, results
of, such
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operations. There has been no material adverse change in the financial
condition, operations, or prospects of Guarantor or to the best knowledge of
Guarantor after due inquiry any Assisted Living Facility since the dates of such
statements except as fully disclosed in writing with the delivery of such
statements.
Section 5.5. Payment of Taxes and Property Impositions. Guarantor has
timely filed all federal, state, and local tax returns which it is required to
file or has obtained extensions therefor and has timely paid, or made adequate
provision for the payment of, all material taxes, assessments, fees and other
governmental charges upon such Person and upon its properties, assets, income
and franchises, including without limitation, provider taxes. All such returns
and reports are complete and accurate in all material respects and none of the
United States income tax returns of Guarantor are under audit. There is not
presently pending (and to the best of Guarantor's knowledge, after due inquiry,
there is not contemplated) any special assessment against any Leased Property,
any other Collateral, or any part thereof except as may be set forth in any of
the Title Policies. No part of any Leased Property is included or assessed under
or as part of another tax lot or parcel comprising property other than such
Leased Property, and no part of any other property is included or assessed under
or as part of the tax lots or parcels comprising any Leased Property. No tax
liens have been filed and to the best knowledge of Guarantor, no claims are
being asserted with respect to any such taxes. The charges, accruals and
reserves on the books of Guarantor in respect of any taxes or other governmental
charges are in accordance with GAAP.
Section 5.6. Disclosure. No financial statements, financial document or
any other document, certificate or written statement furnished to Noteholder,
Equity Investor or Surety by or on behalf of Guarantor for use in connection
with the Loan, including without limitation all schedules and exhibits to the
Loan Agreement, contains any untrue representation, warranty or statement of a
material fact, and none omits or will omit to state a material fact necessary in
order to make the statements contained herein or therein not materially
misleading.
Section 5.7. Employee Benefit Plans.
(a) Except as disclosed on Schedule 3.20(a) to the Loan Agreement,
neither Guarantor nor any ERISA Affiliate maintains or contributes to or has any
obligation (including a contingent obligation) with respect to any Plan. Except
as disclosed on Schedule 3.20(a) to the Loan Agreement, each Plan which is
intended to be qualified under Section 401(a) of the Code as currently in effect
has been determined by the Internal Revenue Service to be so qualified, and each
trust related to any such Plan has been determined to be exempt from federal
income tax under Section 501(a) of the Code as currently in effect. Each Plan
(i) has been administered in all material respects in accordance with its terms
and (ii) complies in form, and has been maintained and operated in all material
respects in accordance, with the requirements of ERISA and, where applicable,
the Code. There are no actions, suits or claims (other than routine claims for
benefits) pending nor, to the knowledge of Guarantor or any ERISA Affiliate,
threatened with respect to any Plan. Guarantor and each ERISA Affiliate has
complied in all material respects with the applicable requirements of Part 6 of
Title I of ERISA.
(b) Neither Guarantor nor any ERISA Affiliate maintains or contributes
to any employee
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welfare benefit plan within the meaning of Section 3(1) of ERISA which provides
benefits to employees after termination of employment other than as specifically
required by Part 6 of Title I of ERISA. Neither Guarantor nor any Person that is
or was an ERISA Affiliate at any time during the immediately preceding six years
has ever maintained, been required to contribute to, been required to pay any
amount or had any obligation (whether actual or contingent) with respect to any
Benefit Plan or Multiemployer Plan. Except as disclosed on Schedule 3.20(b)-1 to
the Loan Agreement, neither Guarantor nor any ERISA Affiliate, nor any fiduciary
of any Plan, has engaged in any nonexempt prohibited transaction described in
Section 406 of ERISA or Section 4975 of the Code. Except as disclosed on
Schedule 3.20(b)-2 to the Loan Agreement, neither Guarantor nor any ERISA
Affiliate has by reason of the transactions contemplated hereby, any obligation
to make any payment to any employee pursuant to any Plan or existing contract or
arrangement. Neither Guarantor nor any ERISA Affiliate is the grantor of a
grantor trust established pursuant to Subpart E of Subchapter J of the Code.
Section 5.8. Intellectual Property. Set forth on Schedule 3.21 to the
Loan Agreement is a complete listing of all of the material patents, trademarks,
tradenames, technology and other intellectual property rights used in the
ownership, operation and management of the businesses of Lessee.
Section 5.9. No Plan Assets. Guarantor is not and will not be (i) an
employee benefit plan as defined in Section 3(3) of ERISA which is subject to
ERISA, (ii) a plan as defined in Section 4975(e)(1) of the Code which is subject
to Section 4975 of the Code, or (iii) an entity whose underlying assets
constitute "plan assets" of any such employee benefit plan or plan for purposes
of Title I of ERISA or Section 4975 of the Code.
Section 5.10. Governmental Plan. Guarantor is not and will not be a
"governmental plan" within the meaning of Section 3(32) of ERISA and
transactions by or with the Guarantor are not and will be not subject to state
statutes applicable to Guarantor regulating investments of and fiduciary
obligations with obligations with respect to governmental plans.
Section 5.11. Investment Company Act; PUCHA. Guarantor is not: (i) an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended; (ii) a "holding
company" or a "subsidiary company" of a "holding company" or an "affiliate" of
either a "holding company" or a "subsidiary company" within the meaning of the
Public Utility Holding Company Act of 1935, as amended; or (iii) subject to any
other law that purports to restrict or regulate its ability to borrow money.
Section 5.12. Foreign Person. Guarantor is not a "foreign person"
within the meaning of Section 1445(f)(3) of the Code.
Section 5.13. Year 2000. The management information systems (including
all computer hardware and software), all equipment containing embedded
microchips, of Guarantor, whether owned, licensed, leased or otherwise utilized
by Guarantor, and required in the conduct of its business and the performance of
all obligations of Guarantor, under the Transaction Documents and the Excluded
Collateral Agreement ("Guarantor MIS Systems"), and such systems of those
parties with whom Guarantor's MIS Systems must interface, will, no later than
August 30, 1999,
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be free of any material problem, infirmity or defect (and so tested and
confirmed by Guarantor to be free of any material problem, infirmity or defect)
as respects to the "Year 2000 Problem" and/or any "9/9/99 Problem," to wit, the
Guarantor MIS Systems will be "Y2K Compliant" such that the management
information systems will not: (i) experience any material malfunctions or other
material usage problem or failure in connection with the year 2000 and
subsequent years as distinct from the 1900 years, or relating to improper
expirations, terminations or data loss on or following September 9, 1999 as a
result of the 9/9/99 Problem; or (ii) result in any material loss or liability
sustained in connection with: (x) the conduct of its business or the performance
of any obligations under the Transaction Documents or the Excluded Collateral
Agreement, including but not limited to the recording, storing, processing,
calculating, comparing, sequencing or presenting by electronic means of calendar
dates or spans of time from, into and between the twentieth and twenty-first
centuries (including leap year calculations); and (y) the generation,
transmission, delivery, receipt of and any use or reliance on information or
calculations dependent on or relating to calendar dates or spans of time from,
into and between the twentieth and twenty-first centuries (including leap year
calculations) (the "Y2K Problem"). The cost to Guarantor of any reprogramming
and testing of Guarantor MIS Systems and of the reasonably foreseeable
consequences of any reprogramming required to assure that Guarantor MIS Systems
are Y2K Compliant, or of systems and equipment failures to such Guarantor
(including reprogramming errors and failure of other's systems and equipment)
will not result in a Lease Event of Default or a Material Adverse Effect. To the
best knowledge of Guarantor, Guarantor MIS Systems are at present, and with
ordinary upgrading and maintenance, will continue for the terms of this
Agreement to be, sufficient to permit Guarantor to conduct its business and to
perform all of its obligations under the Transaction Documents and the Excluded
Collateral Agreement without Material Adverse Effect.
Section 5.14. Legal Opinions. Guarantor has reviewed and is familiar
with all opinions of legal counsel designated by Guarantor to be delivered in
connection with the transactions contemplated hereby. None of the assumptions
with respect to Guarantor, Lessee or the Leased Properties set forth in such
opinions is incorrect.
Section 5.15. Bankruptcy. Guarantor is not a debtor, and none of its
property is property of the estate, in any voluntary or involuntary case under
the Bankruptcy Code or under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect. Neither Guarantor nor any property of
any it is under the possession or control of a receiver, trustee or other
custodian. Guarantor not has made any assignment for the benefit of creditors.
No such assignment or bankruptcy or similar case or proceeding is now
contemplated.
Section 5.16. Lessee Representations. The representations and
warranties of Lessee in this Agreement and the other Transaction Documents and
the Excluded Collateral Documents are true and correct.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF OWNER
To induce (i) the parties to enter into this Agreement and the other
Transaction Documents, (ii) the Noteholder and the Equity Investor to make the
Loan and Equity Advances to Owner, and (iii) Surety to issue the Surety Bond,
Owner represents and warrants to Lessee, Noteholder, Surety, Equity Investor and
Trustee that the statements set forth in Article III(A) of the Loan Agreement
pertaining to Owner are true, correct and complete as of the date hereof and
will be, true, correct and complete as of the Closing Date.
ARTICLE VII
REPRESENTATION OF EQUITY INVESTOR
To induce (i) the parties to enter into this Agreement and the other
Transaction Documents, (ii) the Noteholder to make the Loan to Owner, and (iii)
Surety to issue the Surety Bond, Equity Investor represents and warrants to
Noteholder, Surety and Trustee that with respect to the source of the amounts to
be advanced by the Equity Investor pursuant to Section 2.3, no part of such
amounts constitutes assets of any employee benefit plan subject to Title I of
ERISA or Section 4975 of the Code.
ARTICLE VIII
REPRESENTATIONS OF TRUSTEE
To induce (i) the parties to enter into this Agreement and the other
Transaction Documents, (ii) the Noteholder and the Equity Investor to make the
Loan and Equity Advances to Owner, and (iii) Surety to issue the Surety Bond,
Trustee represents and warrants to Noteholder, Surety and Equity Investor that
the representations and warranties of Trustee set forth in the Trust Agreement
are true, correct and complete as of the date hereof and will be, true, correct
and complete as of the Closing Date.
ARTICLE IX
COVENANTS OF THE PARTIES
Section 9.1. Loan Agreement Covenants of Lessee. The covenants of the
Lessee set forth in the Loan Agreement are hereby incorporated by reference
herein as if set forth at length herein; provided that for purposes of this
Section 9.1, each reference to "Noteholder" in such covenants shall be deemed to
refer to Owner, Equity Investor, Surety and Noteholder.
Section 9.2. Further Assurances. Lessee and Guarantor shall cause to be
promptly and duly taken, executed, acknowledged and delivered all such further
acts, conveyances, documents and assurances as Owner, Equity Investor,
Noteholder, Surety or Trustee or may from time to time reasonably request in
order to carry out the intent and purposes of any of the Transaction Documents
or the Excluded Collateral Agreement, to better assure, preserve, protect and
perfect the Lien of any Mortgage or any other Transaction Document or the
Excluded Collateral Agreement or to more fully vest in the Owner the interests
in any Leased Property contemplated
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hereunder to be transferred to and held by the Owner, including without
limitation Sections 9.30 and 9.31 of the Loan Agreement.
Section 9.3. Transfer of Equity Investor's Interest. The Equity
Investor agrees that it shall not sell, convey, assign, pledge, mortgage or
otherwise transfer any of its interest in the Owner and the Transaction
Documents and the Excluded Collateral Agreement prior to the expiration or
earlier termination of the Term unless:
(a) the Person to whom such transfer is to be made (a
"Transferee") is (i) an institutional or corporate investor organized
under the laws of the United States or any State thereof with net worth
or, in the case of a bank or lending institution, combined capital and
surplus at the time of such transfer of at least $100,000,000
determined in accordance with generally accepted accounting principles
or (ii) any Affiliate of any such institutional or corporate investor
if such investor unconditionally guarantees the obligations so assumed
by such Affiliate pursuant to an instrument or instruments reasonably
satisfactory to Lessee, Surety and Noteholder or (iii) an Affiliate of
Equity Investor; provided that in the event of a transfer pursuant to
clause (iii) which does not qualify under clauses (i) or (ii), Equity
Investor shall remain primarily liable for all of its obligations under
this Agreement and the other Transaction Documents and the Excluded
Collateral Agreement; in addition, the Transferee shall not be Lessee
or any Affiliate of Lessee;
(b) the Lessee, Surety and Noteholder shall have received 60
days prior written notice of such transfer specifying the name and
address of any proposed transferee and such additional information as
shall be necessary to determine whether the proposed transfer satisfies
the requirements of this Section 6.1;
(c) such Transferee enters into an agreement or agreements in
form and substance reasonably satisfactory to the Lessee, Surety and
Noteholder whereby such Transferee confirms that it shall be deemed a
party to this Agreement and each other Transaction Document to which
the transferring Equity Investor is a party and the Excluded Collateral
Agreement, and agrees to be bound by all the terms of, and to undertake
all of the obligations and liabilities of the transferring Equity
Investor contained in, this Agreement and such other Transaction
Documents and the Excluded Collateral Agreement to the extent of the
interest transferred;
(d) (i) such transfer complies in all respects with and does
not violate any applicable Federal securities law and the securities
law of any applicable state, and (ii) such transfer shall not cause the
Lease (as to the Operating Lease Properties) to fail to constitute an
"operating lease" pursuant to Statement of Financial Accounting
Standards No. 13, as amended;
(e) Lessee, Surety and Noteholder shall have received an
opinion of counsel of the Transferee (which counsel shall be reasonably
acceptable to Lessee, Surety and Noteholder), confirming (i) the
existence, power and authority of, and due authorization, execution and
delivery of all relevant documentation by, the Transferee (with
appropriate
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reliance on certificates of corporate officers or public officials as
to matters of fact), and (ii) that each agreement referred to in
subparagraph (c) above is the legal, valid and binding obligation of
the Transferee, enforceable against the Transferee in accordance with
the terms thereof (subject to customary qualifications), shall be
provided, prior to such transfer to Lessee, Surety and Noteholder,
which opinion shall be in form and substance reasonably satisfactory to
each of them;
(f) Surety and Noteholder shall have received (i) an opinion
of counsel reasonably acceptable to Noteholder, Surety and Lessee
similar in form, scope and substance to the opinion regarding
"substantive consolidation" delivered by Chapman and Cutler on the
Closing Date (the "C&C Opinion") and (ii) a certificate setting forth
the representations and warranties (with respect to the Transferee)
contained in the Equity Investor's certificate attached to the C&C
Opinion as Exhibit A;
(g) in the event that as of the date of any such transfer by
Equity Investor, all or any portion of the Loan shall have been
included in any Secondary Market Transaction, Noteholder shall have
received letters from each of the applicable Rating Agencies confirming
that such transfer will not result in the withdrawal, downgrade,
qualification or suspension of the rating of any securities issued
pursuant to such Secondary Market Transaction;
(h) after giving effect to such transfer, there shall not be
more than one Equity Investor;
(i) all fees, expenses and charges of the parties hereto, the
Servicer and any rating agency involved with any Secondary Market
Transaction in which all or any part of the Loan has been included
(including, without limitation, legal fees and expenses of special
counsel) incurred in connection with each such transfer and the
delivery of the documents required above shall be paid by Equity
Investor or Transferee;
Upon any such transfer, (i) except as the context otherwise requires, such
Transferee shall be deemed "Equity Investor" or "SELCO" for all purposes, and
shall enjoy the rights and privileges and perform the obligations of the Equity
Investor hereunder and under each other Transaction Document to which the Equity
Investor is a party and the Excluded Collateral Agreement, and, except as the
context otherwise requires, each reference in this Agreement and each other
Transaction Document and the Excluded Collateral Agreement to "Equity Investor"
or "SELCO" shall thereafter be deemed to include such Transferee for all
purposes, and (ii) the transferor, except in the case of a transfer to a
Transferee described in Section 9.3(a)(iii) hereof, shall be released from all
obligations hereunder and under each other Transaction Document to which such
transferor is a party or by which such transferor is bound and the Excluded
Collateral Agreement to the extent such obligations are expressly assumed by a
Transferee. Any transfer or assignment of Equity Investor's interest in the
Owner and the Transaction Documents in violation of this Section 9.3 shall be
void and of no effect and Equity Investor shall remain liable for its
obligations hereunder and under the other Transaction Documents. Any Person
which merges or consolidates with, or acquires all or substantially all of the
assets of, Equity Investor shall meet the conditions set forth above, but
nothing in this Section 9.3 shall be construed to limit or restrict
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any direct or indirect parent corporation of the Equity Investor from
consolidating with or merging into any other corporation or to restrict another
corporation from merging into or consolidating with such parent corporation, or
the ability of any such parent corporation from selling all or substantially all
of its assets. No consent of Lessee otherwise required hereunder shall be
required if any Lease Default or Lease Event of Default shall have occurred and
be continuing. Notwithstanding any transfer, the transferor Owner Participant
shall be entitled to all benefits accrued and all rights vested prior to such
transfer, including, without limitation, rights to indemnification under any
Transaction Documents and also shall remain liable to the extent provided in the
Transaction Documents, for facts, circumstances, acts or omissions that occurred
prior to or contemporaneously with such transfer.
The foregoing requirements shall not apply to any transfer of the stock
of Owner pursuant to the Pledge Agreement relating to the stock of Owner or any
purchase of Equity Investor's interest pursuant to Section 9.13 hereof.
Section 9.4. Covenants with respect to Joint Venture Subleases.
(a) If the Put Option or the Call Option (as such terms are defined in
the Joint Venture Agreements) is exercised with respect to any Sublessee and
such exercise affects the licenses for the applicable Assisted Living Facility,
Lessee shall promptly, but in any event within 13 months after such exercise,
comply or cause compliance with all license requirements relating to such
exercise.
(b) Guarantor covenants that it will not, and will not permit any of
its Affiliates to amend Section VII of the Joint Venture Agreements or any other
Section of the Joint Venture Agreements which has the effect of amending such
Section VII or make any other material amendment of the Joint Venture Agreements
(other than amending Exhibit D to the Joint Venture Agreements to accommodate
additional capital contributions of the partners thereof). Guarantor will
promptly notify Noteholder, Surety, Trustee, Owner and Equity Investor of any
amendment described in the parenthetical to the preceding sentence.
(c) Guarantor covenants that the only Person which shall exercise the
Call Option under the Joint Venture Agreement will be Guarantor or ALS Clare
Bridge, Inc., a Delaware corporation, who is on the date hereof and at all times
hereafter shall be a wholly-owned Subsidiary of Guarantor.
Section 9.5. Financial Covenants of Guarantor.
(a) Minimum Tangible Net Worth. Guarantor shall maintain, on a
consolidated basis with all subsidiaries, at all times during the Term of the
Master Lease measured quarterly beginning with the quarter ending September 30,
1999, a minimum Tangible Net Worth of not less than the sum of $114,000,000 plus
fifty percent (50%) of the Guarantor's net income (if positive) for each quarter
beginning with the quarter ending June 30, 1999 plus seventy-five (75%) of the
net proceeds to the Guarantor of any equity capital (or equity equivalent)
securities offering received during such quarter. "Tangible Net Worth" means, at
any time, the sum at such time of Net Worth (defined as shareholder's equity as
defined by GAAP) less the total of (i) all
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assets which would be classified as intangible assets under GAAP, including
goodwill, trademarks, trademark applications, trade names, service marks, patent
applications and licenses, and deferred charges, (ii) pre-opening costs,
organizational costs and deferred financing costs, and (iii) advances or loans
made to or receivables from any unconsolidated affiliates of which the Guarantor
owns less than fifty percent (50%) or any stockholder of the Guarantor or any
affiliate.
(b) Ratio of Total Funded Debt to Total Capital. Guarantor shall
maintain on a consolidated basis with all subsidiaries a maximum ratio of Total
Funded Debt to Total Capital of seventy percent (70%) measured quarterly.
(c) Ratio of EBITDAR to Interest and Rent. Guarantor shall maintain on
a consolidated basis with all Subsidiaries a minimum ratio of EBITDAR to the sum
of Guarantor Interest Obligations plus Guarantor Rental Obligations, measured on
a rolling four-quarter basis commencing September 30, 1999, of 1.5 to 1.0.
Section 9.6. Quiet Enjoyment. Each of Owner, Equity Investor, Surety,
Noteholder and Trustee as to itself only hereby covenants and agrees that during
the Term with respect to any Leased Property, it shall not take any affirmative
action and will not suffer or permit any action by any Person acting or claiming
by, through or under it which will interfere with the quiet use and enjoyment of
the Leased Properties by Lessee, unless such interference (i) occurs on or after
any Lease Event of Default or (ii) is necessary to maintain or protect the
utility, fair market value or useful life of the Leased Properties.
Section 9.7. Insolvency of Owner. Equity Investor, Owner, Surety and
Noteholder agree that, to the fullest extent permitted by applicable law, they
will not commence any involuntary bankruptcy proceeding against Owner or Lessee
under the provisions of any applicable bankruptcy or insolvency law (as now or
hereafter in effect).
Section 9.8. Excluded Collateral Replacement. If at any time during the
Term, the long-term unsecured senior debt obligations of the entity issuing the
Excluded Collateral are not rated at least "A" by Standard & Poor's Rating
Service or "A1" by Moody's Investors Service (the "Required Rating"), Guarantor,
in cooperation with Equity Investor, shall at its own cost and expense, within
30 days of demand therefor by Equity Investor, provide to Equity Investor
Acceptable Replacement Collateral to replace the Excluded Collateral. If Lessee
fails to comply with its obligation to provide Acceptable Replacement
Collateral, Equity Investor may draw on the Excluded Collateral and either (i)
apply the proceeds thereof in connection with the acquisition of Acceptable
Replacement Collateral, or (ii) hold the proceeds thereof as cash collateral
and, in the event such proceeds are not sufficient to enable Equity Investor to
acquire Acceptable Replacement Collateral, Guarantor shall promptly, but in any
event within three days, pay Equity Investor the shortfall. If Guarantor fails
to comply with such obligation, (x) Equity Investor shall be entitled to apply
the proceeds of the Excluded Collateral to the acquisition of other collateral
acceptable to Equity Investor in its sole discretion, or to hold such proceeds
as cash collateral and Equity Investor or its custodian shall be entitled to
withhold any interest or earnings on such collateral and/or proceeds from
Guarantor until such time as the amount of such other collateral and proceeds,
plus such withheld interest or earnings, meet the criteria for Acceptable
Replacement Collateral, and (y) a Tolling Default shall be deemed to have
occurred
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and be continuing.
For purposes of this Section 9.8, "Acceptable Replacement Collateral"
means (i) a letter of credit substantially in the form of the original Excluded
Collateral in a face amount equal to 105% of the aggregate Equity Balance and
issued by a bank or trust company having the Required Rating and otherwise
reasonably acceptable to Equity Investor; or (ii) any other collateral
acceptable to Equity Investor in its sole discretion.
Any Acceptable Replacement Collateral shall be subject to the terms of
the Excluded Collateral Agreement to the same extent as the Excluded Collateral.
Lessee shall execute and deliver to Equity Investor all other documents, and
will take such other actions as Equity Investor may request, necessary or
desirable to protect and perfect the Equity Investor's right, title and interest
in such Acceptable Replacement Collateral.
Guarantor shall be responsible for all fees and expenses, including
reasonable attorney's fees, incurred in connection with this Section.
Section 9.9. Agreements with respect to Excluded Collateral. (a) Each
of the parties hereto acknowledges and agrees that the Excluded Collateral has
been provided solely for the benefit of Equity Investor and that the Excluded
Collateral, proceeds thereof and all rights with respect thereto, do not form
any part of the "Collateral" securing the Note or Owner's or Equity Investor's
obligations under the Transaction Documents, or any part of the assets of Owner.
Each party hereto (other than Equity Investor) hereby covenants and agrees for
the benefit of Equity Investor that (i) it will not take any action to seize,
realize upon, place a lien on or otherwise take action against the Excluded
Collateral; (ii) it will not interfere with Owner's or Equity Investor's
exercise of any rights or remedies under the Excluded Collateral Agreement or
Section 9.8; (iii) it will not attempt to block or take any other action to
hinder, delay or prevent Owner from transferring the Excluded Collateral or any
proceeds thereof to Equity Investor; (iv) if it receives any Excluded Collateral
or any proceeds or other payment in respect thereof, such amounts will be
promptly remitted to Equity Investor without deduction, set-off or counterclaim;
and (v) it will not assert any claim or action against Equity Investor's
realizing on the Excluded Collateral, including, without limitation, any
assertion that such realization should be avoided as a preferential payment or
that Owner is in any manner entitled thereto.
(b) Equity Investor agrees, solely for the benefit of Noteholder and
Surety, subject to subsection (c) below, that it will not draw upon the Letter
of Credit (as defined in the Excluded Collateral Agreement) except in the
following circumstances: (i) Owner has failed to receive a regularly scheduled
rental payment of Owner Base Rental for further distribution to Equity Investor
in respect of Yield and such payment default has continued for a period of three
(3) days, (ii) an event has occurred or a condition exists which is a Lease
Default, Lease Event of Default or Event of Default, and the Trustee, at the
direction of the Controlling Party, has initiated dispossessory remedies (or
other remedies against the Leased Properties) against the Lessee and/or Borrower
or (iii) the long-term debt rating of Firstar Bank Milwaukee, N.A. has fallen
below "A2" by Moody's or "A" by Standard and Poor's Ratings Services, Inc. or is
suspended or withdrawn, in each case, for a period of ninety (90) days, (iv) the
Bank (as defined in the Excluded Collateral Agreement) has given notice that it
will not renew the Letter of Credit, (v)
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the Lessee has elected to return all of the Leased Properties in accordance with
Section 29(a) of the Master Lease and the Lessee has failed to perform its
obligations under Sections 30, 31 or 35 of the Master Lease, or (vi) the Lessee
has elected to purchase (or is required to purchase) all of the Leased
Properties in accordance with Section 29(b) of the Master Lease and the Lessee
has failed to perform its obligations with respect to such purchase.
(c) Equity Investor will notify Trustee, Surety and Noteholder of its
intent to draw on the Letter of Credit as a result of an event described in
clauses (i), (ii), (v) or (vi) not less than 10 days prior to the date it
intends to make such draw.
(d) In the case of any draw described in clauses (iii) or (iv) of
Section 9.9(b), Equity Investor agrees it will either apply the proceeds thereof
to the acquisition of Acceptable Replacement Collateral or hold such proceeds as
cash collateral on the same basis as the Letter of Credit.
Section 9.10. Merger, etc. of Guarantor. Guarantor shall not consolidate
with or merge into or with any other Person, or convey, transfer or lease
substantially all of its assets in a single transaction or series of
transactions to any Person, or permit any Person or Persons acting in concert,
together with any Affiliates thereof, to in the aggregate, directly or
indirectly, control or own (beneficially or otherwise) more than 50% (by number
of shares) of the issued and outstanding stock of the Guarantor (any such
transaction a "Change of Control"); provided that a Change of Control of
Guarantor and/or Lessee resulting from (A) a sale, issuance or transfer of any
stock in Guarantor, or (B) a merger, consolidation, reorganization or other
business combination involving Guarantor shall be permitted (any such
transaction a "Permitted Transaction") without the consent of Noteholder,
Surety, Owner or Equity Investor provided that
(1) after the Permitted Transaction the Tangible Net Worth
(as defined in Section 9.5(a)) of Guarantor or its successor entity, on
a consolidated basis, is at least equal to the Tangible Net Worth of
Guarantor immediately prior to such Permitted Transaction;
(2) Guarantor or its successor entity (or Guarantor's or such
successor entity's parent corporation) is, at the time of or
immediately after such transaction, a publicly held corporation;
(3) the successor entity (if other than Guarantor) expressly
assumes in writing all of Guarantor's past, current and future
obligations and liabilities under the Guaranty, the Excluded Collateral
Agreement and each other Transaction Document to which Guarantor is a
party and the Excluded Collateral Agreement pursuant to an assumption
agreement in form and substance reasonably satisfactory to Owner,
Equity Investor, Noteholder and Surety and provides to such Persons
such certificates and legal opinions with respect to matters related to
the Permitted Transaction, and the assumption of such obligations, as
such Persons shall reasonably require; and
(4) either of the following items (i) or (ii) is complied
with:
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(i) the Permitted Transaction involves a company
in the healthcare or hospitality business; or
(ii) the Permitted Transaction involves a company
with a minimum senior unsecured debt rating of at least "BBB"
from S&P or Baa2 from Moody's.
Section 9.11. Subordination and Waiver of Bankruptcy Rights. (a) Owner
and Equity Investor acknowledge and agree that notwithstanding anything to the
contrary contained in the Master Lease or any of the other Lease Documents, any
and all Liens and security interests granted or created in favor of Owner
thereunder are and shall continue to be subject and subordinate to any and all
Liens and security interests granted in favor of Noteholder, Surety, Trustee or
any other Person in connection with the Loan under the Mortgages or any other
Transaction Documents (excluding the Lease Documents), and all of the terms,
covenants and conditions of the Loan and all advances thereunder, all interest
and other sums due under the Loan, and to any extensions, modifications,
amendments, renewals, refinancings, replacements and consolidations thereof.
Owner and Equity Investor further acknowledge and agree that they shall have no
right to enforce or attempt to enforce any Liens or security interests created
or intended to be created under the Master Lease or Lease Documents (other than
this Agreement) or exercise or attempt to exercise any rights or remedies
relating thereto so long as any of the Loan Obligations remain outstanding
(provided the foregoing shall not limit any rights with respect to the Excluded
Collateral or Excepted Rights).
(b) Each of Owner and Equity Investor further covenants and agrees that
it will not acquiesce, petition or otherwise invoke or cause any other Person to
invoke an Insolvency Proceeding with respect to Lessee or seek to appoint a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official with respect to Lessee or all or any part of its property or
assets or ordering the winding-up or liquidation of the affairs of Lessee, and
each further agrees that it shall not make any election, give any consent,
commence any action or file any motion or take any other action in any case by
or against Lessee under the Bankruptcy Code without the prior written consent of
Trustee, which consent may be given or withheld in Trustee's sole discretion.
Each of Owner and Equity Investor hereby appoints Trustee as its agent, and
grants to Trustee an irrevocable power of attorney coupled with an interest, and
its proxy, for the purposes of exercising any and all rights and taking any and
all actions available to Owner and Equity Investor in connection with any case
by or against Lessee under the Bankruptcy Code, including, without limitation,
the right to vote to accept or reject a plan, to make any election under Section
1111(b) of the Bankruptcy Code with respect to the Lease Obligations or
otherwise, and to file a motion to modify the automatic stay. Each of Owner and
Equity Investor hereby agrees that, upon the request of Trustee, it shall
execute, acknowledge and deliver to Trustee all and every such further deeds,
conveyances and instruments as Trustee may reasonably request for better
assuring and evidencing the foregoing appointment and grant (provided the
foregoing shall not limit, or assign to Trustee, any rights with respect to the
Excluded Collateral or Excepted Rights).
Section 9.12. Owner Kansas Filings. In connection with the annual filing
required by Owner with respect to the Leased Property located in the State of
Kansas referenced on Schedule 4.2(c)(ii) hereto, Lessee and Guarantor agree (i)
to give Owner written notice of the due date of
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such filing sufficiently in advance for such filing to be prepared, accompanied
by the form properly completed for execution by Owner, and (ii) file such
document in a timely manner with the appropriate regulatory authority, all at
the cost and expense of Lessee and Guarantor.
Section 9.13. Purchase of Equity Interest. (a) Controlling Party shall
have the right, but not the obligation, to purchase all but not less than all of
Equity Investor's interest in Owner and the Transaction Documents and the
Excluded Collateral Agreement upon the occurrence of a Trigger Event (as defined
below) for an amount equal to the outstanding Equity Balance plus accrued Yield
to the date of purchase plus any reasonable third party costs or expenses
(including breakage costs) arising as a result of such purchase. Controlling
Party will notify Equity Investor within five Business Days after the occurrence
of a Trigger Event if it intends to exercise such right, which notice shall
state the date (not more than 10 Business Days after the occurrence of a Trigger
Event) on which such purchase shall be made. On the date set for purchase, upon
payment of all amounts due, Equity Investor shall forthwith sell, assign,
transfer and convey to Controlling Party (without recourse, representation or
warranty of any kind except as to the absence of Owner Liens arising through
Equity Investor), all of the estate, right, title and interest of Equity
Investor in and to Owner, the Transaction Documents and the Excluded Collateral
Agreement. Controlling Party shall assume all of Equity Investor's obligations
under the Transaction Documents and the Excluded Collateral Agreement arising
subsequent to such sale. All charges and expenses required pursuant to Section
2.11 hereof in connection with the issuance of any such new Note pursuant to
this Section shall be borne by the Owner Participant.
(b) For purposes of this Section 9.13, "Trigger Event" shall mean
either (i) Equity Investor has given notice to Controlling Party that it intends
to draw on the Excluded Collateral (other than as a result of an event described
in Section 9.9(b)(iii) or (iv)), or (ii) Controlling Party desires to amend,
modify or waive any provision of the Transaction Documents which cannot be
amended, modified or waived without the consent of Owner or Equity Investor and
Owner or Equity Investor has not consented thereto after being requested to do
so by Controlling Party.
(c) The provisions of this Section 9.13 shall be binding upon any
transferee of Equity Investor's interest in Owner and the Transaction Documents
and the Excluded Collateral Agreement.
ARTICLE X
INDEMNITIES AND EXPENSES
Section 10.1. General Indemnification and Hold Harmless Agreement. (a)
Lessee and Guarantor hereby agree to indemnify and hold harmless each
Indemnified Party from and against any and all Liabilities in connection with,
pursuant to, related to or arising or allegedly arising from (i) this Agreement
or the other Transaction Documents or the Excluded Collateral Agreement; (ii)
any transaction contemplated hereby or thereby, including any Secondary Market
Transaction or restructuring transaction required by the Noteholder pursuant to
the Loan Agreement or Surety Transaction required by Surety pursuant to the
Trust Agreement; (iii) the acquisition, financing, construction, installation,
ownership, lease, sublease, ground lease, use and operation of the Leased
Properties (including patent or latent defects in the Land or
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Improvements, whether or not discoverable by Lessee, Guarantor or any
Indemnified Party), including, without limitation, any suit, demand, claim or
action arising under the Loan Documents by reason of Lessee or Guarantor being
in default or failing to otherwise perform thereunder, hereunder or under any
other Transaction Document or the Excluded Collateral Agreement; (iv) the
defense of any suit, demand, claim, action or other proceeding brought against
such Indemnified Party in connection with the foregoing; (v) the enforcement
against Lessee, Guarantor or any Sublessee of any provision of this Agreement,
the Master Lease, any Lease Supplement, or any other Transaction Document or the
Excluded Collateral Agreement; (vi) damage, injury or death to any Person or
damage to the property of any Person occurring on or about any of the Leased
Properties, including, without limitation, arising from any defect in the Land
or Improvements, or any act or omission of any Person including the defense of
any suit, demand, claim, action or other proceeding brought against such
Indemnified Party in connection with such damage or injury; (vii) any claims
based upon absolute or strict liability in tort or claims based upon patent,
trademark, tradename or copyright infringement; (viii) any action taken in good
faith by such Indemnified Party in connection with this Agreement, the Master
Lease, the other Transaction Documents, the Excluded Collateral Agreement, or
the Leased Properties; and (ix) any actions by or requirements of any
Governmental Authority; except that, as to any Indemnified Party, the foregoing
indemnities shall not apply to the following:
(i) Liabilities to the extent solely caused by the gross
negligence or willful misconduct of such Indemnified Party or its
Related Parties or the breach by such Indemnified Party of its
obligations under the Transaction Documents or the Excluded Collateral
Agreement (but such breach shall not affect Lessee's or Guarantor's
indemnification obligations to any other Indemnified Party);
(ii) the creation or existence of an Owner Lien attributable
to such Indemnified Party; or
(iv) the voluntary disposition of the Leased Properties or the
Master Lease by such Indemnified Party in direct violation of the
provisions of the Master Lease.
(b) Lessee and Guarantor shall give each Indemnified Party prompt
notice of any occurrence, event or condition known to Lessee as a consequence of
which any Indemnified Party may be entitled to indemnification hereunder. Lessee
shall forthwith upon demand of any such Indemnified Party reimburse such
Indemnified Party for reasonable amounts expended by it in connection with any
of the foregoing or pay such amounts directly. In case any action, suit or
proceeding is brought against any Indemnified Party in connection with any claim
indemnified against hereunder, such Indemnified Party will, promptly after
receipt of notice of the commencement of such action, suit or proceeding, notify
Lessee and Guarantor thereof, enclosing a copy of all papers served upon such
Indemnified Party, but failure to give such notice or to enclose such papers
shall not relieve Lessee or Guarantor from any liability hereunder. Lessee and
Guarantor may, and upon such Indemnified Party's request will, at Lessee's and
Guarantor's expense, resist and defend (or settle) such action, suit or
proceeding, or cause the same to be resisted or defended (or settled) by counsel
selected by Guarantor and reasonably satisfactory to such Indemnified Party and
in the event of any failure by Lessee and Guarantor to do so, Lessee and
Guarantor shall pay all reasonable costs and expenses (including, without
limitation,
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reasonable attorney's fees and expenses) incurred by such Indemnified Party in
connection with such action, suit or proceeding. The provisions of this Section
10.1, and the obligations of Lessee and Guarantor under this Section 10.1, shall
apply with respect to this Agreement, the Master Lease and the other Transaction
Documents and the Excluded Collateral Agreement from and after the Closing Date,
and shall survive and continue in full force and effect, notwithstanding the
expiration or earlier termination of this Agreement, the Master Lease or any
other Transaction Documents, or the Excluded Collateral Agreement, in whole or
in part, or the expiration or termination of the Term applicable to any Leased
Property, and are expressly made for the benefit of, and shall be enforceable
by, each Indemnified Party.
Section 10.2 General Tax Indemnity. Lessee and Guarantor agree to pay,
defend and indemnify and hold harmless each Indemnified Party, on an after-tax
basis, from any and all fees (including documentation, license and registration
fees), taxes (including income, gross receipts, value-added, sales, use,
property (personal and real, tangible and intangible), intangible taxes,
intangible recording taxes, documentary and stamp taxes), levies, imposts,
duties, charges, assessments or withholdings of any nature imposed by any
Governmental Authority, including all penalties and interest with respect
thereto, howsoever imposed, whether levied or imposed upon or asserted against
such Indemnified Party, Lessee, the Leased Properties, or any portion thereof by
any Federal, state or local government or taxing authority in the United States,
or by any taxing authority or governmental subdivision of a foreign country,
upon or with respect to (a) the Leased Properties or any portion thereof
(including, without limitation, all fixtures, equipment and personal property
which forms a part of the Leased Properties), (b) the acquisition, manufacture,
construction, ordering, purchase, ownership, delivery, leasing, subleasing,
re-leasing, possession, use, maintenance, registration, re-registration,
titling, re-titling, licensing, documentation, return, repossession,
foreclosure, condemnation, conveyance, assignment, sale or other application or
disposition of the Leased Properties or any other portion thereof, (c) the
rentals, receipts or earnings arising from the Leased Properties or other
portion thereof, or (d) this Agreement, the Master Lease, any Lease Supplement,
any other Transaction Document, the Excluded Collateral Agreement, the Base
Rental, Contingent Rental, Additional Rental, or Termination Rental, or other
amount payable by Lessee or Guarantor hereunder or any of the Transaction
Documents or the Excluded Collateral Agreement (collectively, "Taxes");
provided, however, that the foregoing obligation shall not apply to and nothing
in this Section shall require the payment by the Lessee or Guarantor, as to any
Indemnified Party, of any of the following, or any penalties, fines or interest
thereon ("Excluded Taxes"): (i) any taxes or impositions based upon or measured
solely by such Person's gross, net or taxable income, tax preferences or
dividends paid or taxes payable in the nature of capital gains, excess profits,
accumulated earnings or personal holding company taxes of such Person, unless,
under a statutory regime of general applicability, any such tax is in lieu of or
in substitute for any other taxes of such Person or impositions upon or with
respect to the Leased Properties which, if such other taxes or impositions were
in effect, would be payable by Lessee hereunder; (ii) any franchise, estate,
inheritance, succession or capital stock tax, (A) unless under a statutory
regime of general applicability, any such tax is in lieu of or in substitute for
any other taxes of such Person or impositions upon or with respect to the Leased
Properties which, if such other taxes or impositions were in effect, would be
payable by Lessee hereunder, and (B) other than franchise, qualification, doing
business or similar taxes imposed on Owner by any State in which a Leased
Property is located; (iii) any tax or imposition to the extent that such is
solely and directly attributable to such Person's gross negligence or willful
failure to comply with its
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obligations under Section 10(a) of the Master Lease or other breach of its
obligations under the Transaction Documents; (iv) any tax or imposition imposed
on such Person solely and directly as a result of the gross negligence or
willful misconduct of such Person (or such Person's Related Parties) or the
breach by such Person of its obligations under the Transaction Documents or the
Excluded Collateral Agreement (but such breach shall not affect Lessee's or
Guarantor's indemnification obligations to any other Indemnified Party); (v) any
withholdings (including, without limitation, any taxes arising under Section
871, 881, 1441 or 1442 of the Code and any similar withholding provisions under
state, local or foreign law) imposed as a collection device for or in
substitution or in lieu of, income taxes or franchise taxes, to the extent such
income taxes or franchise taxes would not otherwise be indemnified; and (vi) any
taxes of any such Person arising by reason of any voluntary transfer by such
Person of the Master Lease or Leased Properties or part thereof or interest
therein other than (A) a transfer by Owner pursuant to an exercise of remedies
which are enforceable after and during the occurrence of a Lease Event of
Default hereunder, (B) a transfer constituting an Owner Conveyance hereunder, or
(C) a subsequent transfer by the Trustee or any nominee, designee or affiliate
thereof if such Person purchases the Leased Properties at a foreclosure sale or
accepts a deed-in-lieu of foreclosure to the Leased Properties. For purposes of
the foregoing, "income tax" shall include any Tax based upon or measured by net
income or net receipts (including taxes based on capital gains and minimum
taxes) as well as any tax or imposition that qualifies as an "income tax" within
the meaning of United States Treasury Regulation 1.901-2. All of the obligations
contained in this Section 10.2 shall continue in full force and effect
notwithstanding the expiration or earlier termination of this Agreement, the
Master Lease in whole or in part, including the expiration or termination of the
Term with respect to the Leased Properties, and are expressly made for the
benefit of, and shall be enforceable by, each Indemnified Party. Each such
Person agrees at the request of the Lessee or Guarantor to provide an itemized
list of the Taxes imposed upon it for which it is seeking payment by Lessee and
Guarantor hereunder, including a determination of any additional payments which
may be required to fully reimburse or protect such Person for the income tax
effects attributable to payments made hereunder.
(b) Notwithstanding the provisions of paragraph (a) of this Section
10.2 and so long as no Lease Default or Lease Event of Default shall have
occurred, Lessee or Guarantor shall have the right to contest, by appropriate
legal proceedings, any Tax, and to postpone payment of or compliance with the
same during the pendency of a contest permitted and conducted pursuant to
Section 8(b) of the Master Lease.
(c) If Owner or any other Person entitled to the benefits of this
Section 10.2 receives a refund (or similar tax savings) with respect to any tax
paid by Lessee or Guarantor to or for the benefit of such Person pursuant to
this Section 10.2, such Person shall remit the refund (or similar tax savings)
to Lessee or Guarantor to the extent of any payment so made by Lessee or
Guarantor.
(d) This Section 10.2 shall continue in full force and effect
notwithstanding the expiration or earlier termination of this Agreement or the
Master Lease in whole or in part, including the expiration or termination of the
Term with respect to the Leased Properties, and is expressly made for the
benefit of, and shall be enforceable by, each Indemnified Party.
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Section 10.3. Environmental Indemnity.
(a) Lessee covenants that (i) the Leased Properties shall be kept free
of Hazardous Materials, except for those Hazardous Materials necessary for the
operation of the Leased Properties, provided that Lessee complies with all
applicable Environmental Law and Environmental Permits, and (ii) neither Lessee,
any Sublessee nor any occupant of the Leased Properties shall use, transport,
store, dispose of or in any manner deal with Hazardous Materials on the Leased
Properties, except for those Hazardous Materials necessary for the operation of
the Leased Properties, provided that such materials are used, transported,
stored and disposed of in compliance with all applicable Environmental Law and
Environmental Permits. Lessee shall comply with, and ensure compliance by all
occupants of the Leased Properties with, all applicable Environmental Law and
Environmental Permits, and shall keep the Leased Properties free and clear of
any liens imposed pursuant to such Environmental Law. Lessee shall conduct and
complete all investigations, studies, sampling, and testing, and all remedial
actions necessary to clean up and remove any Hazardous Materials from the Leased
Properties in accordance with all applicable Environmental Law.
(b) (i) Lessee and Guarantor covenant and agree at their sole cost and
expense, to protect, defend, indemnify and hold each Indemnified Party and its
Related Parties harmless from and against any and all losses (including
diminution in the value of the Leased Properties), liabilities, obligations,
claims, damages, penalties, causes of action, fines, costs and expenses,
including without limitation, litigation costs (including, without limitation,
attorneys' fees, expert and consulting fees, expenses, sums paid in settlement
of claims and any such litigation costs incurred in enforcing the obligations of
Lessee hereunder or collecting any sums due hereunder), other than, as to any
Indemnified Party, those arising solely from the willful misconduct of such
Indemnified Party (collectively, the "Indemnified Claims"), directly or
indirectly imposed upon or incurred by or asserted against such Indemnified
Party and its Related Parties, whether as owner, lessor, mortgagee, mortgagee in
possession, successor in interest to Lessee by foreclosure, exercise of power of
sale, acceptance of a deed-in-lieu of foreclosure or otherwise, or in any other
capacity, arising out of or in connection with (1) any violation of
Environmental Law; (2) any claim or lawsuit brought or threatened, settlement
reached, or government order relating to any Hazardous Materials; (3) the use,
generation, refining, manufacture, transportation, transfer, production,
processing, storage, handling, or treatment of any Hazardous Materials, on,
under, from, or affecting the Leased Properties or any other leased properties;
(4) the Release or threatened Release of any Hazardous Materials on, under,
from, or affecting the Leased Properties or any other properties; (5) any
remedial action, or imposition of standards of conduct, including the clean-up,
encapsulation, treatment, abatement, removal and/or disposal of any Hazardous
Materials on, under, from or affecting the Leased Properties or any other leased
properties; (6) any personal injury (including wrongful death) or property
damage (real or personal) arising out of or related to Hazardous Materials; (7)
any failure to obtain, maintain or comply with, any applicable Environmental
Permit; or (8) a misrepresentation or inaccuracy in any representation or
warranty or a breach of or failure to perform any covenant made by Lessee in
this Section.
(ii) Lessee and Guarantor understand and agree that their
liability to the Indemnified Parties shall arise upon the earlier to
occur of (1) the Release, discovery of, or
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the threat or suspected presence of, any Hazardous Materials, on,
under, about or affecting the Leased Properties, whether or not the
Environmental Protection Agency, any other federal agency or any state
or local environmental or other agency or political subdivision or any
court, administrative panel or tribunal has taken or threatened any
action in connection with the presence, or threatened or suspected
presence, of any Hazardous Materials or (2) the institution of any
Indemnified Claims, and not upon the realization of loss or damage.
Lessee and Guarantor shall also indemnify and hold harmless each
Indemnified Party and its Related Parties from and against all loss,
costs, damages, or expenses (including, without limitation, attorney's
fees) arising out of the enforcement of the obligations of Lessee and
Guarantor hereunder, or the assertion by Lessee or Guarantor of any
defense to its obligations hereunder.
(c) To the extent the provisions of this Section 10.3 related to Leased
Properties located in the State of California, this Section 10.3 is intended by
the parties to constitute an "environmental provision" as defined in California
Code of Civil Procedure Section 736, and the Indemnified Parties shall have all
rights and remedies provided in such section.
(d) The obligations and liabilities of Lessee and Guarantor under this
Section shall survive any termination, satisfaction, assignment, entry of a
judgment of foreclosure, exercise of any power of sale, or delivery of a deed in
lieu of foreclosure of the Master Lease, the Loan Agreement or any other
Transaction Document or the Excluded Collateral Agreement; notwithstanding the
foregoing, Lessee and Guarantor shall not have any obligations or liabilities
under this Section with respect to obligations and liabilities that Lessee or
Guarantor can prove arose solely from Hazardous Materials that (i) were not
present on the Leased Properties prior to the date that Noteholder or Surety
acquired title to the Leased properties, whether by foreclosure, exercise of a
power of sale, acceptance of a deed-in-lieu of foreclosure or otherwise and (ii)
were not the result of any act or omission of Lessee, Guarantor, Manager or any
Sublessee or any of such Persons' affiliates, agents or contractors.
(e) Any amounts payable to any Indemnified Party under this Section
shall become immediately due and payable and, if not paid within thirty (30)
days of written demand therefor, shall bear interest at the Default Rate, or the
maximum rate permitted by law from the earlier to occur of (i) the date payment
is made or loss or damage is sustained by such Indemnified Party or (ii) the
date Lessee's or Guarantor's liability shall arise pursuant to paragraph (b)(ii)
hereof, until paid.
(f) Lessee and Guarantor shall take any and all reasonable actions,
including institution of legal action against third-parties, necessary or
appropriate to obtain reimbursement, payment or compensation from such persons
responsible for the presence of any Hazardous Materials at, in, on, under or
near the Leased Properties or otherwise obligated by law to bear the cost. The
Indemnified Parties shall be and hereby are subrogated to all of Lessee's and
Guarantor's rights now or hereafter in such claims.
(g) Lessee and Guarantor shall cooperate with each Indemnified Party,
and provide access to each Indemnified Party and any professionals engaged by
such Indemnified Party, upon such Indemnified Party's request, to conduct,
contract for, evaluate or interpret any
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environmental assessments, audits, investigations, testing, sampling, analysis
and similar procedures on the Leased Properties.
(h) No delay on any Indemnified Party's part in exercising any right,
power or privilege under this Agreement shall operate as a waiver of any such
privilege, power or right.
(i) Each party hereto shall, within five (5) business days of receipt
thereof, give written notice to the other parties hereto of (i) any notice or
advice from any governmental agency or any source whatsoever with respect to
Hazardous Materials on, from or affecting the Leased Properties, and (ii) any
claim, suit or proceeding, whether administrative or judicial in nature ("Legal
Action"), brought against such party or instituted with respect to the Leased
Properties, with respect to which Lessee and Guarantor may have liability under
this Section. Such notice shall comply with the provisions of Section 11.4
hereof.
(j) Each Indemnified Party shall, at all times, be free to
independently establish to its satisfaction and in its absolute discretion the
existence or nonexistence of any fact or facts the existence or nonexistence of
which is a condition of this Section.
Section 10.4. Payment of Expenses. (a) Lessee and Guarantor agree,
whether or not the transactions contemplated by this Agreement and the other
Transaction Documents and the Excluded Collateral Agreement are consummated to
pay all fees, reasonable costs, expenses and disbursements in connection with
the closing of the transactions contemplated by this Agreement and the other
Transaction Documents and the Excluded Collateral Agreement ("Transaction
Expenses"), including, without limitation:
(i) the reasonable fees, expenses and disbursements of
Owner, Equity Investor, Trustee, Surety and Noteholder, including fees,
expenses and disbursements of their respective legal counsel;
(ii) appraisal fees, engineering fees, environmental
assessments, title insurance fees and survey costs;
(iii) the payment of Lien searches, filing and transfer fees,
and taxes, fees and expenses relating to the titling and registration
of and recording of the Master Lease, any Memorandum of Lease or any
mortgage, collateral, assignment of leases and rents, Uniform
Commercial Code financing statements and any other security documents
with respect to the Leased Properties or the transactions contemplated
hereby;
(iv) costs associated with the formation of Lessee and Owner
and the qualification of such Persons to do business in each state
where a Leased Property is located, and costs incurred by Owner or
Equity Investor in connection with any licensing requirements for the
Assisted Living Facilities;
(v) any real estate brokers' fees in respect of the sale or
transfer of each Leased Property and any and all stamp, and other
similar taxes, if any, that are payable in connection with the
transactions contemplated by this Agreement and the other
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Transaction Documents and the Excluded Collateral Agreement; and
(vi) costs, fees and expenses payable pursuant to the Loan
Agreement or any other Transaction Document and the Excluded Collateral
Agreement;
provided that the foregoing shall not include any fees which are payable only if
the transactions contemplated hereby are consummated, if such transactions are
not in fact consummated. The obligation of Lessee and Guarantor to pay all such
fees, expenses and other amounts shall survive the termination of this Agreement
and the Master Lease for any reason. All such amounts invoiced at least one (1)
Business Day prior to the Closing Date or Additional Properties Closing Date
shall be due and payable on the Closing Date or Additional Properties Closing
Date, as the case may be.
(b) Lessee and Guarantor shall pay or cause to be paid (i) all
reasonable costs and reasonable out-of-pocket expenses incurred by or on behalf
of the Owner, Equity Investor, Surety, Trustee and Noteholder, including
reasonable fees and expenses of their respective counsel, in entering into any
future amendments or supplements with respect to any of the Transaction
Documents or the Excluded Collateral Agreement, whether or not such amendments
or supplements are ultimately entered into, or giving or withholding of waivers
or consents hereto or thereto, whether or not such waivers or consents are
ultimately granted; and (ii) all reasonable out-of-pocket costs and expenses and
all Taxes, if any, of Owner or SELCO that are incurred as a consequence of the
formation and maintenance of Owner, the qualification to do business of Owner in
each State where a Leased Property is located, and ownership of the Leased
Properties by the Owner.
(c) Without limiting the generality of the foregoing, Lessee shall pay
all fees, costs and expenses of Owner and SELCO, including reasonable fees and
disbursements of their counsel, in connection with any restructuring transaction
or Secondary Market Transaction required by the Noteholder pursuant to the Loan
Agreement or Surety pursuant to the Trust Agreement, or any defeasance of the
Note pursuant to Section 6 thereof.
Section 10.5. [Intentionally Reserved].
Section 10.6. Change in Legality. Notwithstanding any other provision of
this Agreement or any other Transaction Document or the Excluded Collateral
Agreement, if any change after the date hereof in any Governmental Rule or in
the interpretation thereof (including any request, guideline or policy not
having the force of law) by any Governmental Authority charged with the
administration thereof shall make it unlawful for Equity Investor to make or
maintain a LIBOR Advance or to give effect to its obligations as contemplated
hereby with respect to a LIBOR Advance, then, by written notice to the Lessee,
Owner or Equity Investor may require that all outstanding LIBOR Advances made by
it be converted to Alternate Rate Advances, whereupon all such LIBOR Advances
shall be automatically converted to Alternate Rate Advances as of the effective
date of such notice as provided in this Section 10.6.
For purposes of this Section, a notice to the Lessee by Owner or Equity
Investor pursuant to this Section 10.6 shall be effective with respect to the
outstanding LIBOR Advances, if lawful,
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on the last day of the then current Interest Period; in all other cases, such
notice shall be effective on the date of receipt by the Lessee.
Section 10.7. Indemnity
(a) Lessee and Guarantor shall indemnify Owner and Equity Investor
against any actual loss or expense which Owner or Equity Investor sustains or
incurs as a consequence of any failure of a closing hereunder on the Closing
Date or the Additional Properties Closing Date, as applicable, after notice of
such closing shall have been given, any payment, prepayment or conversion of a
LIBOR Advance required by any other provision of this Agreement or otherwise
made on a date other than the last day of the applicable Interest Period, any
default in the payment or prepayment of the principal amount of any Equity
Advance or any part thereof or interest accrued thereon, as and when due and
payable (at the due date thereof or otherwise), or the occurrence of any Lease
Event of Default.
(b) Lessee and Guarantor shall indemnify Owner and Equity Investor
against any loss or reasonable expense sustained or incurred or to be sustained
or incurred in liquidating or employing deposits from third parties acquired to
effect or maintain any Equity Advance or any part thereof as a LIBOR Advance.
Such loss or reasonable expense shall include an amount equal to the excess, if
any, as reasonably determined by Equity Investor of (i) its cost of obtaining
the funds for the Equity Advance being paid, prepaid or converted or not
borrowed based on LIBOR, for the period from the date of such payment,
prepayment or conversion or failure to borrow to the last day of the Interest
Period for such Equity Advance (or, in the case of a failure to borrow, the
Interest Period for such Equity Advance which would have commenced on the date
of such failure to borrow)) over (ii) the amount of Yield (as reasonably
determined by Equity Investor) that would be realized by Equity Investor in
re-employing the funds so paid, prepaid or converted or not borrowed for such
period or Interest Period, as the case may be.
(c) A certificate of Equity Investor setting forth any amount or
amounts which Owner or Equity Investor is entitled to receive pursuant to this
Section shall be delivered to the Lessee and Guarantor and shall be conclusive
absent manifest error. Lessee and Guarantor shall pay all such amounts within
ten (10) days after receipt of such certificate.
Section 10.8. [Intentionally Reserved].
Section 10.9 Enforcement. Each Indemnified Party may enforce the
obligations of Lessee and Guarantor owed to it under this Article X by direct
action, suit for specific performance or otherwise; provided that such
enforcement shall not include any other remedies under the Lease.
ARTICLE XI
MISCELLANEOUS
Section 11.1. 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
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otherwise affect any of the terms hereof.
Section 11.2. U.S. Currency. All payments to be made hereunder shall be
made in lawful currency of the United States of America at the address of the
payee set forth below or at such other address as such payee shall designate in
writing.
Section 11.3. 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
Noteholder, Equity Investor and Surety, notwithstanding any investigation made
by or on behalf of Noteholder, Equity Investor and Surety, and shall survive the
execution and delivery of this Agreement and the other Transaction Documents and
the Excluded Collateral Agreement.
Section 11.4. Notices, etc. Unless otherwise specifically provided
herein, any notice or other communication required or permitted to be given
shall be in writing addressed to the respective party as set forth below and may
be personally served, telecopied, telexed or sent by overnight courier service
or United States mail and shall be deemed to have been given: (A) if delivered
in person, when delivered; (B) if delivered by telecopy, on the date of
transmission if transmitted on a Business Day before 6:00 pm (New York Time) or,
if not, on the next succeeding Business Day; (C) if delivered by nationally
recognized overnight courier, one day after delivery to such courier properly
addressed; or (D) if by U.S. Mail, four Business Days after depositing in the
United States mail, with postage paid and properly addressed.
If to Owner or Equity Investor, notice shall be sent to:
c/o SELCO Service Corporation
129 Public Square
Cleveland, Ohio 44114
Attn: Robert Bowes, Esq.
Telephone: (216) 689-5089
Facsimile: (216) 689-5681
with a copy to:
Key Global Finance
30 Federal Street
Boston, Massachusetts 02110
Attn: Mindy Berman
Telephone: (617) 654-2777
Facsimile: (617) 654-2727
If to Lessee or Guarantor:
c/o Alterra Healthcare Corporation
450 North Sunnyslope Road
Suite 300
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Brookfield, Wisconsin 53005
Attn: Mark Ohlendorf, Senior Vice President Finance
Telephone: (414) 641-7432
Facsimile: (414) 789-6182
with copies to:
Rogers & Hardin
229 Peachtree Street
International Tower
Atlanta, Georgia 30303
Attn: Miriam Dent, Esq.
Telephone: (404) 420-4644
Facsimile: (404) 525-2224
If to Noteholder:
Greenwich Capital Financial Products, Inc.
600 Steamboat Road, Level 2
Greenwich, Connecticut 06830
Attn: Paul Nidenberg
Telephone: (203) 618-2347
Facsimile: (203) 618-2052
with a copy to:
Sidley & Austin
875 Third Avenue
New York, New York 10022
Attn: Robert L. Boyd, Esq.
Telephone: (212) 906-2252
Facsimile: (212) 906-2021
And to:
ZC Specialty Insurance Company
One Exchange Place
Suite 100
Jersey City, New Jersey 07302
Attn: General Counsel
Telephone: (201) 309-3040
Facsimile: (201) 332-1400
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with copies to:
Zurich Centre Group, LLC
One Chase Manhattan Plaza, 44th Floor
New York, New York 10005
Attention: General Counsel
Facsimile: (212) 898-5350
Confirmation: (212) 898-5350
The Zurich Centre
90 Pitt's Bay Road
Pembroke HM 08
P.O. Box HM 1788
Hamilton HM HX, Bermuda
Attention: Manager-ZC Specialty Insurance Company
Facsimile: (441) 295-3705
Confirmation: (441) 295-8501
And to:
The First National Bank of Chicago
One First National Plaza, Suite IL1-0126
Chicago, Illinois 60670-0126
Attn: Global Corporate Trust Services
Telephone: (312) 407-0192
Facsimile: (312) 407-1708
If to Trustee:
The First National Bank of Chicago
One First National Plaza, Suite IL1-0126
Chicago, Illinois 60670-0126
Attn: Global Corporate Trust Services
Telephone: (312) 407-0192
Facsimile: (312) 407-1708
If to Surety:
ZC Specialty Insurance Company
One Exchange Place
Suite 100
Jersey City, New Jersey 07302
Attn: General Counsel
Telephone: (201) 309-3040
Facsimile: (201) 332-1400
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with copies to:
Zurich Centre Group, LLC
One Chase Manhattan Plaza, 44th Floor
New York, New York 10005
Attention: General Counsel
Facsimile: (212) 898-5350
Confirmation: (212) 898-5350
The Zurich Centre
90 Pitt's Bay Road
Pembroke HM 08
P.O. Box HM 1788
Hamilton HM HX, Bermuda
Attention: Manager-ZC Specialty Insurance Company
Facsimile: (441) 295-3705
Confirmation: (441) 295-8501
Any 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.
Notwithstanding the foregoing, all material communications, including
without limitations, communications pertaining to "Defaults," "Events of
Default," "Lease Defaults" or "Lease Events of Default" or events or occurrences
which have, will or could result in a Material Adverse Effect shall be given in
writing and delivered by a nationally recognized overnight courier within one
day after delivery to such courier with receipt thereof to be confirmed
telephonically by the sending party.
Section 11.5. 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.
Section 11.6. 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 the parties
in connection with the transactions contemplated hereby. This Agreement may not
be varied, altered, or amended except by a written instrument executed by an
authorized officer of each party thereto. 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.
Section 11.7. 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 Illinois
and the parties hereto submit (and waive all rights to object) to non-exclusive
personal jurisdiction in the state of Illinois and agree to venue in any court
in such jurisdiction, including any federal courts sitting in such jurisdiction.
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Section 11.8. Waiver of Jury Trial. Each party hereto hereby waives
any right that it 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 other Transaction Documents or the Excluded
Collateral Agreement, or (b) in any way connected with or pertaining or related
to or incidental to any dealings of the parties with respect to the Transaction
Documents or the Excluded Collateral Agreement or in connection with this
Agreement or the Exercise of any 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 otherwise. Each party agrees that any
other party may file a copy of this Agreement with any court as written evidence
of the knowing, voluntary, and bargained agreement of such party irrevocably to
waive its rights to trial by jury as an inducement of the other parties
entering into this Agreement and the transactions contemplated hereby, and
that, to the extent permitted by applicable law, any dispute or controversy
whatsoever (whether or not modified herein) between any of the parties shall
instead be tried in a court of competent jurisdiction by a judge sitting
without a jury.
Section 11.9. Interpretation. In this Agreement (unless otherwise
specified), the singular includes the plural and the plural includes the
singular; words importing any gender include the other genders; references to
statutes are to be construed as including all statutory provisions
consolidating, amending or replacing the statute referred to; references to
"writing" include printing, typing, lithography and other means of reproducing
words in a tangible, visible form; the words "including," "includes" and
"include" shall be deemed to be followed by the words "without limitation";
references to articles, sections (or subdivisions of sections), recitals,
exhibits, annexes or schedules are those of this Agreement unless otherwise
indicated; references to agreements and other contractual instruments shall be
deemed to include all subsequent amendments and other modification to such
instruments, but only to the extent such amendments and other modification are
not prohibited by the terms of this Agreement or specifically excluded
therefrom; the phrase "and/or" shall be deemed to mean the words both preceding
and following such phrase, or either of them; references to the parties and to
Persons include their respective permitted successors and assigns; and, in the
case of governmental Persons, Persons succeeding to their respective functions
and capacities; and references to times of day shall be to Chicago, Illinois
time unless specifically provided otherwise.
Section 11.10. No Duty. All attorneys, accountants, appraisers, and
other professional Persons and consultants retained by Noteholder, Equity
Investor or Surety shall have the right to act exclusively in the interest of
such Person and shall have no duty of disclosure, duty of loyalty, duty of care,
or other duty or obligation of any type or nature whatsoever to any other
Person.
Section 11.11. Further Assurances. The parties hereto, in recognition
of the complexity of the transactions contemplated hereby, agree to cooperate in
good faith with Equity Investor at its request in taking all reasonable and
necessary actions necessary to correct any inconsistencies or errors which
affect the rights of Equity Investor under the Transaction Documents; provided
that such party shall have determined in its good faith discretion that the
requested action will not have an adverse effect on the rights of such party
under the Transaction Documents.
Section 11.12. Non-Recourse Loan.
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(a) Except as otherwise provided herein, Noteholder, Surety and Trustee
shall not enforce the liability and obligation of Borrower to perform and
observe the obligations contained in this Agreement, the Note or the Transaction
Documents by any action or proceeding wherein a money judgment shall be sought
against Borrower or Equity Investor, except that Noteholder, Surety and Trustee
may bring a foreclosure action, action for specific performance or other
appropriate action or proceeding to enable Noteholder, Surety and Trustee to
enforce and realize upon the Mortgages or other Transaction Documents, and the
Leased Properties or any of them; provided, however, that any judgment in any
action or proceeding shall be enforceable against Borrower only to the extent of
Borrower's interests in the Leased Properties.
(b) Notwithstanding the foregoing, Borrower and Equity Investor shall
be personally liable in the amount of any loss, damage or cost resulting or
arising from (i) fraud or intentional misrepresentation by Borrower or Equity
Investor in connection with obtaining the Loan evidenced by the Notes, (ii)
Borrower's or Equity Investor's misappropriation or misapplication of Rents in
violation of the Flow of Funds Agreement or any other Transaction Document,
(iii) Borrower's or Equity Investor's violation of the provisions of Section
5.2, 5.3, 5.7 or 5.8 of the Loan Agreement and (iv) upon the occurrence of any
Event of Default with respect to Borrower under Section 7.1(f); provided,
however, that Equity Investor shall only be liable for any loss, damage or costs
resulting or arising from any of the foregoing acts of Borrower or matters with
respect to Borrower occurring or existing during the period that Equity Investor
is Borrower's controlling shareholder.
(c) No provision of this Section 11.12 shall (i) affect the enforcement
of the Guaranty, or any guaranty or similar agreement executed in connection
with the debt evidenced by the Note, (ii) release or reduce the debt evidenced
by the Note, (iii) impair the lien of the Mortgages or any other Transaction
Documents, (iv) impair the rights of Noteholder to enforce any provisions of the
Transaction Documents, (v) limit Noteholder's ability to obtain a deficiency
judgment or judgment on the Note or otherwise against any Borrower Party to the
extent necessary to obtain any amount for which such Borrower Party may be
liable in accordance with this Section 11.12 or any other Transaction Documents
or (vi) modify or affect the liabilities or obligations of Lessee, Guarantor,
Manager or any Sublessee under any of the Transaction Documents.
Section 11.13. Trustee acting as Trustee under Trust Agreement. The
Trustee will be acting hereunder not in its individual capacity, but solely in
its capacity as Trustee under the Trust Agreement. All parties to this
instrument acknowledge and agree that where there is any reference in this
Agreement to Trustee performing any activity, making any decision or
determination, approving or consenting to any matter, exercising any rights,
fulfilling any obligation, exercising any discretion, or otherwise acting in any
capacity as Trustee, Trustee will not be the party required to do so unless it
is specifically authorized or directed to do so in each instance by an
appropriate direction under the Trust Agreement, and that any such performance,
decision, determination, approval, consent, or other action to be made, taken,
given or exercised by Trustee hereunder that Trustee is not so specifically
authorized or directed to perform in each instance will be made, taken, given or
exercised by Lender, Surety or a Servicer appointed by Lender and Surety or
other applicable party under the Trust Agreement. No Person who is dealing with
Trustee in connection with the payment of the Secured Obligations,
satisfaction, modification or enforcement of this Agreement or the obligations
secured hereby or otherwise
-56-
<PAGE> 57
shall be entitled, or have any obligation, to question or investigate the
Trustee's authority hereunder or to inquire as to the terms, conditions or
provisions of the Trust Agreement.
Section 11.14. Waiver of Posting Bond. To the extent permitted by law,
each of the parties hereby waives any requirements under the unauthorized
insurance or similar laws of any jurisdiction or otherwise that Surety or the
Backstop Insurer post funds, securities or other security as a condition to its
appearance or filing of pleadings in any proceeding involving or arising with
this Agreement.
Section 11.15. Consents. Each party hereto consents to (a) the Licensing
Subleases entered into on the Closing Date with respect to the Leased Properties
located in Sun City West, Arizona, Tucson, Arizona, Boynton Beach West, Florida,
Dunedin, Florida, Mesa, Arizona and Peoria, Arizona; and (b) the Escrow
Agreement dated as of the date hereof between HCR Manor Care, Inc., Guarantor
and Chicago Title Insurance Corporation.
-57-
<PAGE> 58
IN Witness Whereof, the parties have duly executed this Agreement as of
the day and year first written above.
AHC Tenant ,Inc.
By: /s/ Mark W. Ohlendorf
-------------------------------
Name: Mark W. Ohlendorf
Title: Vice President
Alterra Healthcare Corporation
By: /s/ Mark W. Ohlendorf
-------------------------------
Name: Mark W. Ohlendorf
Title: Senior Vice President
Pita General Corporation
By: /s/ Mindy Berman
-------------------------------
Name: Mindy Berman
Title: Vice President
SELCO Service Corporation
By: /s/ Donald C. Davis
------------------------------
Name: Donald C. Davis
Title: Vice President
-58-
<PAGE> 59
Greenwich Capital Financial
Products, Inc.
By: /s/ Warren Ashenmil
--------------------------------
Name: Warren Ashenmil
Title: Senior Vice President
ZC Specialty Insurance Company
By: /s/ Lynn Finkel
-------------------------------
Name: Lynn Finkel
Title: Vice President
The First National Bank of Chicago,
as Trustee
By: /s/ Jeffrey L. Kinney
-------------------------------
Name: Jeffrey L. Kinney
Title: Vice President
-59-
<PAGE> 60
SCHEDULE 1 TO PARTICIPATION AGREEMENT
PAYMENT INSTRUCTIONS
All payments to Owner to be by bank wire transfer of immediately
available funds (identifying each payment as AHC Tenant, Inc./Pita General
Corporation) to:
Key Bank, N.A.
Albany, New York
ABA No. 021300077
For Credit to:
Account No. 325760034018
Attention: Don Davis/Key Global
or to such other account as Owner may direct from time to time.
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<PAGE> 61
SCHEDULE 4.2(C)(II) TO PARTICIPATION AGREEMENT
OWNER LICENSES AND PERMITS
ARIZONA:
The Arizona Department of Health Services, Division of Assurance and
Licensure Services requires the Assisted Living Center licensee to disclose the
existence of any lease agreement under which the facility operates. Alterra will
submit the applicable warranty deed, Lease, Sublease and Licensing Sublease for
each Arizona Leased Property upon closing.
COLORADO:
The Colorado Department of Public Health and Environment, Health
Facilities Division requires the Personal Care Boarding Home licensee to
disclose the entity holding title to the property/land for the Personal Care
Boarding Home. Alterra has submitted amended applications naming Pita General
Corporation as the owner of the Colorado Leased Properties and will submit the
applicable warranty deed, Lease, Sublease, and Management Agreement for each
Colorado Leased Property upon closing.
NEW JERSEY:
The New Jersey Department of Health and Senior Service Long Term Care
Licensing and Certification Program requires the Assisted Living Residence
licensee to disclose the entity holding title to the property/land for the
Assisted Living Residence and provide copies of signed leases within 5 days
after closing. Alterra will provide the disclosure and submit the applicable
warranty deed, Lease, Sublease, and Licensing Sublease for each New Jersey
Leased Property within 5 days after closing.
NEVADA:
None
NORTH CAROLINA:
None
VIRGINIA:
None
GEORGIA:
None
-61-
<PAGE> 62
FLORIDA:
The Agency for Health Care Administration ("AHCA") requires the
Assisted Living Facility licensee to disclose the entity holding title to the
property/land for the Assisted Living Facility. Alterra will provide amended
applications disclosing Pita General Corporation as the entity holding title to
the Florida Properties and will submit the warranty deed, Lease, Sublease and
Licensing Subsublease for each Florida Leased Property upon closing.
OHIO:
The Ohio Department of Health, Division of Quality Assurance requires
the Residential Care Facility licensee to disclose each entity holding an
ownership interest of 5% or more in the property/land for the Residential Care
Facility. Alterra will send the Department a letter disclosing the ownership
interest of Pita General Corporation upon closing.
KANSAS:
The Kansas Department of Health and Environment, Bureau of Health
Facility Regulation requires the Adult Care Home licensees to disclose the name
and address of the entity holding title to the property/land for the Adult Care
Home. The licensees are also required to disclose the existence of any/all lease
agreements and/or management agreements under which the Adult Care Home
operates. The owner of the land/property must be listed as a licensee on the
license for the Kansas Leased Property.
Alterra has amended the change of ownership application to reflect the
ownership interest of Pita General Corporation and Pita General Corporation has
submitted the disclosure form (including a balance sheet/statement of net worth)
which are the only actions required of Pita General Corporation in connection
with issuance of Adult Care Home license for the Kansas Leased Property. Alterra
will submit the applicable warranty deed, Lease, Sublease and Management
Agreement for the Kansas Leased Property upon closing.
Except for annual refiling of Part II of the Initial/Annual Report for
Adult Care Home Licenses by Pita General Corporation, there are no ongoing
filing, reporting or other obligations imposed on Pita General Corporation in
connection with the Adult Care Home licenses (other than such obligations
applicable to all licensees, which Alterra will perform on behalf such
licensees).
CALIFORNIA:
The California Department of Social Services requires the Residential
Care Facility for the Elderly licensee to disclose the entity holding title to
the property/land for the Residential Care Facility for the Elderly. Alterra
will send the Department a letter disclosing the ownership interest of Pita
General Corporation and will submit the warranty deed, Lease, Sublease,
Licensing Sublease and Management Agreement for each California Leased Property
upon closing.
-62-
<PAGE> 63
WASHINGTON:
None
-63-
<PAGE> 1
EXHIBIT 2.8
TRUST AGREEMENT
Dated as of July 16, 1999
By and Among
PITA GENERAL CORPORATION,
ZC SPECIALTY INSURANCE COMPANY,
GREENWICH CAPITAL FINANCIAL PRODUCTS, INC.,
AHC TENANT, INC.,
ALTERRA HEALTHCARE CORPORATION,
SELCO SERVICE CORPORATION,
and
THE FIRST NATIONAL BANK OF CHICAGO,
CHICAGO, ILLINOIS,
AS TRUSTEE
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
RECITALS......................................................................................... 1
GRANT OF TRUST ESTATE ........................................................................... 2
DEFINITIONS AND RULES OF CONSTRUCTION............................................................ 3
Rules of Construction................................................................... 3
ARTICLE 1
SURETY DEFAULTS/CHANGE OF CONTROL AND CONSENT.................................................... 4
Section 1.1 Notices of Certain Surety Defaults......................................... 4
Section 1.2 Surety Default During Non-Performance...................................... 4
Section 1.3 Surety Default During Performance Period................................... 6
Section 1.4 Simultaneous Surety Default and Borrower or Lessee Default................. 8
Section 1.5 Permitted Surety Cure; Wrap Surety; Substitute Surety...................... 10
Section 1.6 Surety Posting of Collateral; Premium Escrow............................... 13
Section 1.7 Notices to Trustee on Occurrence of Events under Article 1................. 15
Section 1.8 Lender Release of Posted Collateral, Premium Escrow and Letter
of Credit Proceeds Account............................................ 16
ARTICLE 2
REMEDIES; ACTIONS RELATED TO COLLATERAL.......................................................... 16
Section 2.1 Exercise of Remedies; Actions Related to Collateral........................ 16
Section 2.2 Subordination; Accounting; Adjustments..................................... 17
Section 2.3 Contesting Liens or Security Interests; No Partitioning or
Marshalling of Collateral; Contesting Obligations..................... 18
Section 2.4 Remedies Vested in Trustee; Direction of Proceedings by
Controlling Party..................................................... 18
Section 2.5 Appointment of Servicer.................................................... 18
Section 2.6 Rights and Remedies of Controlling Party; Rights of Borrower............... 19
Section 2.7 Termination of Proceedings................................................. 20
Section 2.8 Limitations on Rights of the Surety to Act as Controlling Party............ 20
Section 2.9 Controlling Party Administration of Transaction Documents.................. 20
Section 2.10 Material Action............................................................ 21
Section 2.11 Proofs of Claim............................................................ 23
Section 2.12 Subrogation................................................................ 23
Section 2.13 Transfer and Release of Surety Bond and Backstop Policy.................... 24
Section 2.14 Miscellaneous Provisions relating to the Loan Agreement.................... 24
Section 2.15 Miscellaneous Provisions relating to the Master Lease...................... 25
Section 2.16 No Plan Assets............................................................. 25
ARTICLE 3
FUNDS; DEPOSIT ACCOUNTS; SURETY BOND; LETTERS OF CREDIT.......................................... 25
Section 3.1 Intentionally Omitted...................................................... 25
Section 3.2 Capital Improvements Account............................................... 25
Section 3.3 Lease Reserve Account...................................................... 28
Section 3.4 Lockbox Account............................................................ 30
Section 3.5 I and C Account............................................................ 31
Section 3.6 Payment of Surety Premiums................................................. 31
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Section 3.7 Tax and Insurance Escrow Fund.............................................. 32
Section 3.8 Intentionally Omitted...................................................... 33
Section 3.9 Payment Procedure Pursuant to Surety Bond.................................. 33
Section 3.10 Trust Funds................................................................ 33
Section 3.11 Investment of Funds........................................................ 34
Section 3.12 Letter of Credit Proceeds Account.......................................... 34
Section 3.13 Lessee Letter of Credit Proceeds Account................................... 34
Section 3.14 JV Springing Collateral Account............................................ 35
Section 3.15 Operating Reserve Account.................................................. 35
Section 3.16 Additional Reserve Account................................................. 37
Section 3.17 Rent ...................................................................... 37
ARTICLE 4
APPLICATION OF PROCEEDS OF COLLATERAL............................................................ 38
Section 4.1 Remedies; Direction of Proceedings......................................... 38
Section 4.2 Rights in the Collateral; Application of Monies Collected.................. 38
Section 4.3 Properties................................................................. 40
Section 4.4 Additional Surety Agreements............................................... 41
Section 4.5 Additional Lender Agreements............................................... 41
ARTICLE 5
TRUSTEE.......................................................................................... 43
Section 5.1 Acceptance of Trusts; Certain Duties and Responsibilities.................. 43
Section 5.2 Fees, Charges and Expenses of Trustee...................................... 44
Section 5.3 Authorization to Execute Transaction Documents............................. 44
Section 5.4 Duties of Trustee.......................................................... 44
Section 5.5 Requesting Instructions.................................................... 45
Section 5.6 Emergency Actions.......................................................... 45
Section 5.7 Document Amendments........................................................ 45
Section 5.8 Administrative Actions..................................................... 45
Section 5.9 Trustee Acting Through Others.............................................. 46
Section 5.10 Indemnification of Trustee................................................ 46
Section 5.11 Liability of Trustee...................................................... 47
Section 5.12 No Reliance on Trustee.................................................... 47
Section 5.13 Default Notices and Related Matters....................................... 48
Section 5.14 Trustee Required; Eligibility............................................. 48
Section 5.15 Resignation and Removal of Trustee........................................ 48
Section 5.16 Concerning Any Successor Trustee.......................................... 49
Section 5.17 Successor Trustee......................................................... 49
Section 5.18 Maintenance of Records.................................................... 49
Section 5.19 Enforcement of Surety Bond................................................ 50
ARTICLE 6
SATISFACTION OF THE TRUST AGREEMENT.............................................................. 50
Section 6.1 Satisfaction of Trust Agreement............................................ 50
Section 6.2 Release by Beneficiary..................................................... 50
ARTICLE 7
MISCELLANEOUS PROVISIONS ........................................................................ 50
Section 7.1 Conflict With the Transaction Documents.................................... 50
Section 7.2 Notices.................................................................... 51
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
Section 7.3 Governing Law............................................................. 55
Section 7.4 Successor and Assigns; Assignment......................................... 55
Section 7.5 Submission to Jurisdiction................................................ 55
Section 7.6 Waiver of Jury Trial...................................................... 55
Section 7.7 Severability.............................................................. 56
Section 7.8 Amendments; Servicer...................................................... 56
Section 7.9 Counterparts.............................................................. 56
Section 7.10 Limitations on Recourse................................................... 56
Section 7.11 Intentionally Omitted..................................................... 56
Section 7.12 Reimbursement of Payments Made to Trustee................................. 56
Section 7.13 No Third Party Beneficiaries.............................................. 56
Section 7.14 Surety Transactions....................................................... 57
Section 7.15 Secondary Market Transactions............................................. 58
Section 7.16 Waiver of Posting Bond.................................................... 61
Section 7.17 Security Agreement under Article 9 of the UCC............................. 61
</TABLE>
iii
<PAGE> 5
TRUST AGREEMENT
THIS TRUST AGREEMENT, dated as of July 16, 1999 (together with all
supplements and amendments hereto, this "TRUST AGREEMENT"), is by and among PITA
GENERAL CORPORATION, an Illinois corporation ("BORROWER"), ZC SPECIALTY
INSURANCE COMPANY, a Texas corporation ("SURETY"), GREENWICH CAPITAL FINANCIAL
PRODUCTS, INC., a Delaware corporation ("LENDER"), ALTERRA HEALTHCARE
CORPORATION, a Delaware corporation ("GUARANTOR"), AHC TENANT, INC., a Delaware
corporation ("LESSEE"), SELCO SERVICE CORPORATION, an Ohio corporation
("SELCO"), and THE FIRST NATIONAL BANK OF CHICAGO, a national banking
association duly established, existing and authorized to accept and execute
trusts of the character herein set out under and by virtue of the laws of the
United States of America, with its principal corporate trust office located in
Chicago, Illinois ("TRUSTEE").
RECITALS
A. Lender has agreed to make a loan to Borrower in the principal amount
not to exceed $201,000,000.00 (U.S.) (the "LOAN") pursuant to, among other
documents, that certain Loan Agreement dated as of even date herewith, by and
between Borrower and Lender ("LOAN AGREEMENT") in order to finance the
acquisition of up to twenty eight (28) Assisted Living Facilities (collectively,
"IMPROVEMENTS"), to be located on certain real parcels of property
(collectively, the "LAND") as specifically set forth in the Mortgages (the
Improvements and the Land shall collectively be referred to herein as the
"PROPERTIES"). The Loan is evidenced by that certain Note dated as of even date
herewith (the "NOTE") executed by Borrower in favor of Lender, and the Loan is
secured by the Security Documents (as hereinafter defined).
B. Concurrently with and as a condition to the making of the Loan in
the amount disbursed on the Closing Date (as hereinafter defined), Trustee, at
the direction of Lender, is requiring Surety to issue to Trustee the Insurance
Surety Bond dated as of even date herewith (the "SURETY BOND"), insuring the
Loan in the amount disbursed on the Closing Date, and Trustee, at the direction
of Lender, is requiring Backstop Insurer (as hereinafter defined) to issue the
Backstop Policy (as hereinafter defined), to support the payments under the
Surety Bond, as set forth in the Backstop Policy. As a condition to Surety
providing the Surety Bond, Surety, Borrower and Lessee have entered into that
certain Reimbursement Agreement dated as of even date herewith (the
"REIMBURSEMENT AGREEMENT"), under which Borrower is obligated to reimburse
Surety for all indebtedness, obligations and liabilities of Borrower to Surety
arising thereunder (collectively, the "REIMBURSEMENT OBLIGATIONS").
C. Surety, Lender and Borrower desire to (i) define their respective
rights with respect to the Collateral (as hereinafter defined) securing the
Secured Obligations (as hereinafter defined), (ii) define the rights and duties
of Trustee with respect to the Collateral and the Secured Obligations and (iii)
provide for other miscellaneous duties (including, without limitation, the
iv
<PAGE> 6
application of the Capital Proceeds) and rights of Trustee in connection with
the foregoing transactions.
GRANT OF TRUST ESTATE
NOW, THEREFORE, in consideration of the premises, and the acceptance by
Trustee of its obligations hereunder, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
each of the Settlors (as hereinafter defined) to the extent it now has or
hereafter acquires any interest therein, by these presents does grant, bargain,
sell, alienate, remise, release, convey, assign, transfer, mortgage,
hypothecate, pledge, set over, confirm and grant a security interest in, to
Trustee, forever, all and singular, the Collateral, including, without
limitation, (i) any interest any Settlor may have in the Capital Improvements
Account, the Lease Reserve Account, the Lockbox Account, the I and C Account,
the Premium Fund, the Tax and Insurance Escrow Fund, the Letter of Credit
Proceeds Account, the Lessee Letter of Credit Proceeds Account, the JV Springing
Collateral Account, the Operating Reserve Account and the Additional Reserve
Account, and (ii) any and all property of every kind and nature which, from time
to time hereafter, is delivered, conveyed, pledged, assigned or transferred to
Trustee pursuant to this Trust Agreement or any of the other Transaction
Documents, in each case together with any and all profits, proceeds or
distributions thereof or therefrom, to secure the prompt and complete payment
and performance of the Secured Obligations. On the Additional Properties Closing
Date, each of the Settlors shall confirm the foregoing grant of a security
interest with respect to any new Collateral, provided, however, the failure to
issue such written confirmation shall not affect the creation or validity of
Trustee's security interest in such additional collateral. To the extent any
property is delivered, conveyed, pledged, assigned or transferred to Trustee
after the date hereof pursuant to the preceding clause (iii) (whether on the
Additional Properties Closing Date or otherwise), the Parties shall endeavor to
inform Trustee of the addition of such property to the Collateral, provided that
the failure to so notify Trustee shall not affect the grant by the Settlor of an
interest in such subsequently acquired Collateral;
TO HAVE AND TO HOLD all said property, rights, privileges, and
franchises of every kind and description, real, personal, or mixed, hereby and
hereafter (by supplemental instrument or otherwise) granted, bargained, sold,
alienated, remised, released, conveyed, assigned, transferred, mortgaged,
hypothecated, pledged, set over or confirmed as aforesaid, or intended, agreed,
or covenanted so to be, together with all the appurtenances thereto appertaining
(said properties, rights, privileges, and franchises including any cash and
securities hereafter deposited or required to be deposited with Trustee or in
any of the accounts described in Article 3 hereof, excluding the Surety Bond and
the Backstop Policy, being herein collectively referred to as the "TRUST
ESTATE") unto Trustee and its successors and assigns forever;
BUT IN TRUST, NEVERTHELESS, as to the Collateral, for the benefit and
security of the Beneficiaries from time to time of the Secured Obligations in
the order of priority as herein expressly provided and, as to the remainder of
the Trust Estate, for the benefit of the
2
<PAGE> 7
Beneficiaries as their interests are herein expressly provided, in each case, to
secure the prompt and complete payment and performance of the Secured
Obligations;
AND IT IS HEREBY COVENANTED AND DECLARED that the Trust Estate, the
Surety Bond, the Backstop Policy and the proceeds thereof, are to be held and
applied by Trustee, subject to the further covenants, conditions and trusts
hereinafter set forth, and the Parties do hereby covenant and agree, as follows:
DEFINITIONS AND RULES OF CONSTRUCTION
All capitalized terms used herein to the extent not defined herein, or
not defined by reference to any other agreement, shall have the meaning set
forth in the Master Glossary dated July 16, 1999 (the "MASTER GLOSSARY"). Terms
which are not defined herein or in the Master Glossary shall have the meanings
ascribed to them in the Loan Agreement (as defined in the Master Glossary). In
the event that the Loan Agreement shall have been terminated or no longer be in
effect, any defined terms in Section 1.1 of the Loan Agreement or any exhibits
attached thereto shall be made a part hereof as if such Section 1.1 of the Loan
Agreement or any exhibits attached thereto were stated herein.
RULES OF CONSTRUCTION . For all purposes of this Trust Agreement,
except as otherwise expressly provided or unless the context otherwise requires:
(a) The terms defined in this Article include the plural as well
as the singular.
(b) All accounting terms not otherwise defined herein shall have
the meanings assigned to them, and all computations herein
provided for must be made, in accordance with GAAP.
(c) All references in this instrument to designated "Articles,"
"Sections" and other subdivisions are to the designated
Articles, Sections and other subdivisions of this instrument as
originally executed.
(d) All references in this instrument to designated "Articles,"
"Sections" and other subdivisions of any Loan Document are to
the designed Articles, Section and other subdivisions of such
Loan Document as originally executed.
(e) The words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Trust Agreement as a whole and not
to any particular Article, Section or other subdivision.
(f) The Articles and section headings herein are for convenience
only and shall not affect the construction hereof.
(g) All references herein to any party or person shall include all
such party's or person's permitted successors and assigns.
3
<PAGE> 8
ARTICLE 1
SURETY DEFAULTS/CHANGE OF CONTROL AND CONSENT
1.1 SECTION NOTICES OF CERTAIN SURETY DEFAULTS. At all times during the
Term of the Surety Bond, Surety shall give written notice to Lender, Trustee and
the Lessee (i) promptly and in any case not later than ten (10) days after
Surety becomes aware of any Downgrade Surety Default (a "DOWNGRADE NOTICE FROM
SURETY"), and (ii) promptly and in any case not later than ten (10) days after
Surety has received written notice of the existence of a Surety Cross-Default,
although the failure to provide (absent Surety bad faith) either of the notices
set forth in clauses (i) or (ii) above shall not result in forfeiture of Surety
Premiums or benefits owed to Surety. As used in this Trust Agreement, the
"TRIGGER DATE" shall mean that date that is the earliest of (x) Lender's receipt
of the Downgrade Notice From Surety (or Surety's bad faith in failing to give
Lender notice of a Downgrade Surety Default), (y) Lender's receipt of notice
from Surety of existence of a Surety Cross-Default (or Surety's bad faith in
failing to give Lender notice of a Surety Cross-Default), and (z) notice from
Lender or Trustee to Surety of the existence of a Surety Default.
1.2 SECTION SURETY DEFAULT DURING NON-PERFORMANCE.
(a) Downgrade Surety Default. For that time period (x) commencing on
the date hereof through the LCR Commencement Date and (y) thereafter, during any
period in which the Lessee has not achieved a DSCR of at least 1.40:1.00 for a
continuous twelve (12) calendar month operating period (either such time period
being a "NON-PERFORMANCE PERIOD"), upon the occurrence of a Downgrade Surety
Default:
(i) a Change of Control and Consent shall occur unless Surety
shall, within the following time periods (as expressed in ALL
CAPITALIZED LETTERS in the following clauses of Sections
1.2-1.4 below), cure such Downgrade Surety Default pursuant to
the applicable Permitted Surety Cure (provided, however, that
a Change of Control and Consent shall occur immediately and
automatically and there shall be no such grace period days if
at any time the S&P Rating of the Surety or the Backstop
Insurer is below Investment Grade or such S&P Rating is
withdrawn or suspended):
(A) on or before that date which is THIRTY (30) DAYS after
the Trigger Date;
(B) or if Surety Posts Collateral, equal in value to
twenty-five percent (25%) of the then outstanding
principal amount of the Loan, before the end of the time
period described in the preceding clause (such Posting
of Collateral by Surety being a "25% POSTING"), SIXTY
(60) DAYS after the Trigger Date;
4
<PAGE> 9
(C) or if Surety Posts Collateral which, when aggregated
with Collateral previously Posted by Surety, equals
forty percent (40%) of the then outstanding principal
amount of the Loan (a "40% POSTING") before the end of
the time period described in the preceding clause,
NINETY (90) DAYS after the Trigger Date;
(D) or if Surety Posts Collateral which, when aggregated
with Collateral previously Posted by Surety, equals
fifty-five percent (55%) of the then outstanding
principal amount of the Loan ( a "55% POSTING") before
the end of the time period described in the preceding
clause, ONE HUNDRED TWENTY (120) DAYS after the Trigger
Date; and
(ii) a Premium Escrow shall occur unless Surety shall, within the
following time periods (all counted from the Trigger Date),
cure such Downgrade Surety Default pursuant to the applicable
Permitted Surety Cure:
(A) THIRTY (30) DAYS after the Trigger Date;
(B) or if Surety completes a 25% Posting (as this and all
other Postings of Collateral by Surety are measured on a
cumulative basis, aggregated with Collateral previously
Posted by Surety, as described further in Section 1.6(d)
below) before the end of the time period described in
the preceding clause, SIXTY (60) DAYS after the Trigger
Date;
(C) or if Surety completes a 40% Posting before the end of
the time period described in the preceding clause,
NINETY (90) DAYS after the Trigger Date;
(D) or if Surety completes a 55% Posting before the end of
the time period described in the preceding clause, ONE
HUNDRED TWENTY (120) DAYS after the Trigger Date; and
(iii) Notwithstanding the occurrence of a Change of Control and
Consent or a Premium Escrow, during a Non-Performance Period,
upon the occurrence of a Downgrade Surety Default, Surety
shall be obligated to complete a 25% Posting within THIRTY
(30) DAYS after the Trigger Date, provided, however, the
failure to effect such a 25% Posting shall not accelerate any
other time periods set forth herein or result in a Surety Loss
of Premium; and
(iv) a Surety Loss of Premium shall occur unless Surety shall,
within ONE HUNDRED TWENTY (120) DAYS after the Trigger Date,
cure such Downgrade Surety Default pursuant to the applicable
Permitted Surety Cure, including without limitation, by
completing a 55% Posting.
5
<PAGE> 10
(b) Payment/Cross-Default Surety Defaults. During a Non-
Performance Period, upon the occurrence of any Surety Default of the types set
forth in clause (i) and (v) of the definition of "Surety Default" (a
"PAYMENT/CROSS-DEFAULT SURETY DEFAULT"):
(i) a Change of Control and Consent shall occur immediately and
automatically;
(ii) Surety shall have THIRTY (30) DAYS from the Trigger Date to
either cure such Payment/Cross-Default Surety Default pursuant
to the applicable Permitted Surety Cure or to suffer a Premium
Escrow; and
(iii) Surety shall have THIRTY (30) DAYS from the Trigger Date to
either cure such Payment/Cross-Default Surety Default pursuant
to the applicable Permitted Surety Cure or to suffer a Surety
Loss of Premium.
(c) Bankruptcy/Invalidity Surety Defaults. During a Non-
Performance Period, upon the occurrence of any Surety Default of the types set
forth in clauses (ii), (iii) and (iv) of the definition of "Surety Default" (a
"BANKRUPTCY/INVALIDITY SURETY DEFAULT"), a Change of Control and Consent, a
Premium Escrow and a Surety Loss of Premium shall occur immediately and
automatically.
1.3 SECTION SURETY DEFAULT DURING PERFORMANCE PERIOD.
(a) Downgrade Surety Default. During any period (a "PERFORMANCE PERIOD")
which occurs after the LCR Commencement Date that the Lessee has achieved a DSCR
of at least 1.40:1.00 for the trailing twelve (12) calendar months, upon the
occurrence of a Downgrade Surety Default:
(i) a Change of Control and Consent shall occur unless Surety
shall, within the following time periods (all counted from the
Trigger Date), cure such Downgrade Surety Default pursuant to
the applicable Permitted Surety Cure (provided, however, that
a Change of Control and Consent shall occur immediately and
automatically and there shall be no such grace periods if at
any time the S&P Rating of the Surety or the Backstop Insurer
is below Investment Grade or such S&P Rating is withdrawn or
suspended):
(A) THIRTY (30) DAYS after the Trigger Date;
(B) or if Surety Posts Collateral equal in value to ten
percent (10%) of the then outstanding principal amount
of the Loan (a "10% POSTING") before the end of the time
period described in the preceding clause, SIXTY (60)
DAYS after the Trigger Date;
(C) or if Surety Posts Collateral equal in value to twenty
percent (20%) of the then outstanding principal balance
of the Loan (a "20% POSTING")
6
<PAGE> 11
before the end of the time period described in the
preceding clause, NINETY (90) DAYS after the Trigger
Date;
(D) or if a Surety Posts Collateral equal in value to thirty
percent (30%) of the then outstanding principal balance
of the Loan (a "30% POSTING") Posting before the end of
the time period described in the preceding clause, ONE
HUNDRED TWENTY (120) DAYS after the Trigger Date;
(E) or if Surety Posts Collateral equal in value to forty
percent (40%) of the then outstanding principal balance
of the Loan (a "40% POSTING") before the end of the time
period described in the preceding clause, ONE HUNDRED
FIFTY (150) DAYS after the Trigger Date;
(F) or if Surety Posts Collateral equal in value to fifty
percent (50%) of the then outstanding principal balance
of the Loan (a "50% POSTING") before the end of the time
period described in the preceding clause, ONE HUNDRED
EIGHTY (180) DAYS after the Trigger Date; and
(ii) a Premium Escrow shall occur unless Surety shall, within the
following time periods (all counted from the Trigger Date),
cure such Downgrade Surety Default pursuant to the applicable
Permitted Surety Cure:
(A) SIXTY (60) DAYS after the Trigger Date;
(B) or if Surety completes a 10% Posting before the end of
such 60-day grace period described in the preceding
clause, NINETY (90) DAYS after the Trigger Date;
(C) or if Surety completes a 20% Posting before the end of
the time period described in the preceding clause, ONE
HUNDRED TWENTY (120) DAYS after the Trigger Date;
(D) or if Surety completes a 30% Posting before the end of
the time period described in the preceding clause, ONE
HUNDRED FIFTY (150) DAYS after the Trigger Date;
(E) or if Surety completes a 40% Posting before the end of
the time period described in the preceding clause, ONE
HUNDRED EIGHTY (180) DAYS after the Trigger Date;
(F) or if Surety completes a 50% Posting before the end of
the time period described in the preceding clause, TWO
HUNDRED TEN (210) DAYS after the Trigger Date; and
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(iii) a Surety Loss of Premium shall occur unless Surety shall,
within THREE HUNDRED SIXTY-FIVE (365) DAYS from the Trigger
Date, cure such Downgrade Surety Default pursuant to the
applicable Permitted Surety Cure, including without
limitation, by completing a 50% Posting.
(b) Payment/Cross Default Surety Defaults. During the Performance
Period, upon the occurrence of any of the Payment/Cross Default Surety Defaults:
(i) a Change of Control and Consent, shall occur immediately and
automatically;
(ii) Surety shall have THIRTY (30) DAYS from the Trigger Date to
either cure such Payment/Cross Default Surety Default pursuant
to the applicable Permitted Surety Cure or to suffer a Premium
Escrow; and
(iii) in the case of any Payment/Cross Default Surety Default,
Surety shall have SIXTY (60) DAYS from the Trigger Date to
either cure such Non-Downgrade Surety Default pursuant to the
applicable Permitted Surety Cure or to suffer a Surety Loss of
Premium.
(c) Bankruptcy/Invalidity Surety Defaults. During a Performance Period,
upon the occurrence of any Bankruptcy/Invalidity Surety Default, a Change of
Control and Consent, a Premium Escrow and a Surety Loss of Premium shall occur
immediately and automatically.
1.4 SECTION SIMULTANEOUS SURETY DEFAULT AND BORROWER OR LESSEE DEFAULT.
(a) Simultaneous Downgrade Surety Default. Notwithstanding anything in
Sections 1.2 and 1.3 above, if at any time that a Downgrade Surety Default
exists there also exists an Event of Default under the Loan Agreement or the
Master Lease (i) involving the bankruptcy or insolvency of the Borrower or the
Lessee, (ii) involving the Borrower's failure to pay any monetary sums due under
the Loan Documents in accordance with the terms of such Loan Documents or
Lessee's or Guarantor's failure to pay any monetary sums due under the Loan
Documents or Lease Documents, (iii) described in Section 7.1(d) of the Loan
Agreement, exclusive of the reference to Section 4.4 contained therein, (iv)
involving the incurrence of Indebtedness or Liens in violation of the
Indebtedness and Lien covenants set forth in the Loan Agreement, (v) involving
any failure by the Borrower or the Lessee to maintain the requisite amount of
insurance as required by Section 4.4 of the Loan Agreement, which failure
affects Properties of the Borrower or the Lessee which represent more than 15%of
the Net Operating Income of the Borrower or the Lessee or (vi) a termination of
any Permit or Reimbursement Contract which failure materially adversely affects
Properties which represent more than 5% of the Net Operating Income of the
Lessee (collectively, a "MATERIAL LOAN DEFAULT" and the date on which a Material
Loan Default first occurs, a "MATERIAL LOAN DEFAULT DATE"):
(i) a Change of Control and Consent shall occur unless Surety
shall, within the time period described below in this clause,
cure such Downgrade Surety
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Default pursuant to the applicable Permitted Surety Cure
(provided, however, that a Change of Control and Consent shall
occur immediately and automatically and there shall be no such
grace periods if at any time the S&P Rating of Backstop
Insurer is below Investment Grade or such S&P Rating is
withdrawn or Qualified): (i) ten (10) days from the Trigger
Date if at such time a Material Loan Default exists or (ii) if
the date upon which a Material Loan Default occurs there also
exists a Downgrade Surety Default, the earlier of (a) ten (10)
days from the date upon which such Material Loan Default
occurs and (b) the expiration of the applicable grace period
with respect to such Downgrade Surety Default, as set forth in
Sections 1.2 and 1.3 above;
(ii) a Premium Escrow shall occur unless Surety shall, within the
time period described below in this clause, cure such
Downgrade Surety Default pursuant to the applicable Permitted
Surety Cure: (i) thirty (30) days from the Trigger Date if at
such time a Material Loan Default exists or (ii) if the date
upon which a Material Loan Default occurs there also exists a
Downgrade Surety Default, the earlier of (a) thirty (30) days
from the date upon which such Material Loan Default occurs and
(b) the expiration of the applicable grace period with respect
to such Downgrade Surety Default, as set forth in Sections 1.2
and 1.3 above; and
(iii) a Surety Loss of Premium shall occur unless Surety shall,
within the time period described below in this clause, cure
such Downgrade Surety Default pursuant to the applicable
Permitted Surety Cure, including without limitation, by
completing a 50% Posting: (i) thirty (30) days from the
Trigger Date if at such time a Material Loan Default exists or
(ii) if the date upon which a Material Loan Default occurs
there also exists a Downgrade Surety Default, the earlier of
(a) thirty (30) days from the date upon which such Material
Loan Default occurs and (b) the expiration of the applicable
grace period with respect to such Downgrade Surety Default, as
set forth in Sections 1.2 and 1.3 above;.
(b) Simultaneous Payment/Cross-Default Surety Defaults. Notwithstanding
anything in Sections 1.2 and 1.3 above, if at any time there is the simultaneous
existence of a Material Loan Default and any of the Payment/Cross-Default Surety
Defaults:
(i) a Change of Control and Consent shall occur immediately and
automatically;
(ii) a Premium Escrow shall occur unless Surety shall, within the
time period described below in this clause, cure such
Non-Downgrade Surety Default pursuant to the applicable
Permitted Surety Cure: (i) ten (10) days from the Trigger Date
if at such time a Material Loan Default exists or (ii) if the
date upon which a Material Loan Default occurs there also
exists a
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Payment/Cross-Default Surety Default, the earlier of (a) ten
(10) days from the date upon which such Material Loan Default
occurs and (b) the expiration of the applicable grace period
with respect to such Payment/Cross-Default Surety Default, as
set forth in Sections 1.2 and 1.3 above; and
(iii) a Surety Loss of Premium shall occur unless Surety shall,
within the time period described below in this clause, cure
such Surety Default pursuant to the applicable Permitted
Surety Cure: (i) ten (10) days from the Trigger Date if at
such time a Material Loan Default exists or (ii) if the date
upon which a Material Loan Default occurs there also exists a
Payment/Cross-Default Surety Default, the earlier of (a) ten
(10) days from the date upon which such Material Loan Default
occurs and (b) the expiration of the applicable grace period
with respect to such Payment/Cross-Default Surety Default, as
set forth in Sections 1.2 and 1.3 above;.
(c) Simultaneous Bankruptcy/Invalidity Surety Defaults. Notwithstanding
anything in Sections 1.2 and 1.3 above, if at any time there is the simultaneous
existence of a Material Loan Default and any of the Bankruptcy/Invalidity Surety
Defaults, a Change of Control and Consent, Premium Escrow and Surety Loss of
Premium shall occur immediately and automatically.
1.5 SECTION PERMITTED SURETY CURE; WRAP SURETY; SUBSTITUTE SURETY.
(a) Upon the occurrence of certain Non-Downgrade Surety Defaults described
below in this clause (a) Surety may take any of the following actions, at its
own cost and expense, within the time periods described in Sections 1.2 through
1.4 above, to cure any such default:
(i) as to a Payment Surety Default, Surety or Backstop Insurer may
pay in full the amounts then due and payable under the Surety
Bond or Backstop Policy, respectively;
(ii) as to any Surety Cross-Default, Surety may arrange for a Wrap
Surety to reinsure in writing the obligations of Surety
hereunder, under the Surety Bond and the other Insurance
Documents, in accordance with the provisions of clause (c)
below. As used herein, "WRAP SURETY" shall mean: either (i)
another insurance company, reinsurer, surety or other Person
authorized under law to issue reinsurance and having an S&P
Rating of AA ("double A") or higher or if S&P does not provide
a rating, an equivalent or higher rating by Moody's or (ii)
one or more irrevocable, unconditional letters of credit,
available for sight drafts, in an amount equal to the
principal amount of the Loan then outstanding plus 65 days
worth of interest, issued by one or more banks or other
entities having an S&P Rating of AA ("double A") or higher or
if S&P does not provide a rating, an equivalent or higher
rating by Moody's (such letter or letters of credit meeting
the requirements of this clause (ii) and acceptable in form
and substance to Lender in its reasonable
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discretion being an "ACCEPTABLE LETTER OF CREDIT"); provided,
however, no arrangement for a Wrap Surety shall be a Permitted
Surety Cure hereunder unless each of the relevant rating
agencies confirms in writing that such arrangement will result
in the rating then assigned to any securitization transaction
relating to the Note to be no lower than AA ("double A") or
its equivalent (any such Wrap Surety arranged for by Surety,
in accordance with the requirements of clause (c) below, shall
be hereinafter referred to as a "SURETY-APPOINTED WRAP
SURETY");
(iii) as to any Payment/Cross-Default Surety Default, upon at least
thirty (30) days' irrevocable notice to Lender, Surety or
Backstop Insurer may pay to Lender all amounts then
outstanding under the Note, including unpaid principal,
accrued interest, Default Rate interest (if any) and the
Prepayment Consideration (as defined in the Note), provided
that the Surety or the Backstop Insurer shall not be permitted
to make such a payment if the Note is then included in a REMIC
and such a payment would constitute a prohibited transaction,
cause such REMIC to cease to qualify as a REMIC or otherwise
violate any rules relating to REMICS or if the Note is then
included in or owned by an entity other than a REMIC and such
payment would be prohibited under, or would violate any rules
governing, the tax qualification or tax status of such entity,
and, in any case, to the extent that the Surety or the
Backstop Insurer desires to effect the cure set forth in this
subclause (iii) in such case, it shall as a condition to such
cure, cause its counsel to deliver an opinion in form and
substance satisfactory to the Lender to the effect that no
such prohibited transaction, cessation of qualification or
violation will occur as a result of such payment; and
(iv) as to any Payment/Cross-Default Surety Default, Surety may
arrange for a Substitute Surety to assume in writing all
obligations of Surety hereunder (a "SURETY REPLACEMENT"), in
accordance with the requirements of clause (d) below, provided
that prior to or contemporaneously with any Substitute Surety
arrangement, Surety must pay all outstanding amounts owing
under the Surety Bond. As used herein, "SUBSTITUTE SURETY"
shall mean an insurance company, re-insurer, surety or other
Person having an S&P Rating of AA ("double A") or higher or if
S&P does not provide a rating, an equivalent or higher rating
by Moody's; provided that Lender shall have received written
confirmation from each of the relevant Rating Agencies that
such Substitute Surety will result in the rating then assigned
to any securitization transaction relating to the Note (or the
effective rating of the Loan) to be no lower than AA ("double
A") or its equivalent.
(b) Upon the occurrence of a Downgrade Surety Default, Surety may take
any of the following actions, at its own cost and expense, within the time
period described in Sections 1.2 through 1.4 above, to cure any such default
(the following actions, together with the cure actions
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set forth in clause (a) above with respect to Non-Downgrade Surety Defaults
shall be hereinafter collectively referred to as "PERMITTED SURETY CURES"):
(i) Surety may timely complete any of the cures described in
clauses (a) (ii) through (a)(iv) above (construing, for
purposes of this clause, any reference in any of such clauses
(a)(ii) through (a)(iv) above to "Payment Surety Default",
"Surety Cross-Default" or "Payment/Cross-Default Surety
Default" to be deemed instead to be a reference to a
"Downgrade Surety Default");
(ii) Surety may Post Collateral in such amounts and at such times
as required under Sections 1.2(a)(iv), 1.3(a)(iii) or
1.4(a)(iii) above, and in accordance with the requirements of
Section 1.6 below;
(c)(i) A Wrap Surety shall (x) unconditionally and irrevocably
reinsure (pursuant to a written agreement substantially in the
form of the Backstop Policy), or (y) in the case of an
Acceptable Letter of Credit, support the obligations of Surety
hereunder, under the Surety Bond and the other Insurance
Documents, such that Lender, Trustee and the other
beneficiaries of the obligations of Surety under such
Insurance Documents shall have direct access to and recourse
against such Wrap Surety (subject to the terms of this Trust
Agreement) as if such Wrap Surety were the equivalent of the
"Backstop Insurer" under such Insurance Documents (as
determined by the Lender in its reasonable discretion). Such a
Written Agreement shall, in each case, be accompanied by
opinions of counsel of recognized standing substantially in
the form of opinions of counsel for the Backstop Insurer
delivered to the Lender, or in the case of an Acceptable
Letter of Credit modified mutatis mutandis (in each case as
determined by the Lender in its reasonable discretion). For a
Surety-Appointed Wrap Surety, the Parties agree to execute and
deliver such additional instruments as may be reasonably
required by Surety and/or Wrap Surety in order to confirm
their respective rights and obligations hereunder. Trustee
acknowledges that such a Wrap Surety may require that Written
Directions that would otherwise only need to be given by
Surety may thereafter require consent by Wrap Surety, that
(subject to terms of this Trust Agreement) Surety Premiums may
be shared between Surety and Wrap Surety, and that some or all
of the Collateral that has been Posted in accordance with
Section 1.6 below may be returned to Surety while other
portions thereof may continue to be pledged to support the
obligations of the Surety under the Surety Bond.
Notwithstanding the forgoing, no Wrap Surety shall be
permitted hereunder unless Lender has received written
confirmation from each of the relevant rating agencies that
such Wrap Surety will result in the rating then assigned to
any securitization transaction relating to the Note (or the
effective rating of the Loan) to be no lower than AA ("double
A") or its equivalent.
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(ii) During the continuance of a Surety Event of Default, or if the
rating of the Surety or Backstop Insurer is reduced below
Investment Grade or otherwise withdrawn or suspended, Lender
may itself arrange for a Wrap Surety (a "LENDER-APPOINTED WRAP
SURETY") which may receive as compensation all Surety Premiums
thereafter arising (other than the Termination Premium) and
any Premium Escrow then existing.
(d)(i) If there is a Surety Replacement, the Substitute Surety
must assume in writing, pursuant to an assumption agreement in
form and substance satisfactory to Lender, or pursuant to an
Acceptable Letter of Credit, all obligations of Surety
hereunder (including Section 5.10 hereof), under the Surety
Bond and the other Insurance Documents, and immediately upon
such assumption or execution of such documents, Surety and
Backstop Insurer shall be automatically and irrevocably
relieved from their respective obligations under the Surety
Bond, Backstop Policy and the other Insurance Documents, and
shall have no further rights thereunder, provided, however,
any such replacement shall not be permitted unless Lender has
received written confirmation from each of the relevant rating
agencies that such replacement will result in the rating then
assigned to any securitization transaction relating to the
Note (or the effective rating of the Loan) to be no lower than
AA ("double A") or its equivalent, and provided further, if
the cure described in this paragraph is made pursuant to an
Acceptable Letter of Credit, Surety hereby acknowledges that
it shall remain liable for the obligations of Surety under
Section 5.10 of this Trust Agreement.
(ii) During the continuance of a Surety Event of Default, or if the
rating of the Surety or Backstop Insurer is reduced below
Investment Grade or otherwise withdrawn or suspended, a Surety
Loss of Premium shall occur and Lender may itself arrange for
a Substitute Surety. Even during the continuance of any such
Surety Event of Default, any such Surety Replacement by Lender
shall be conditioned upon the satisfaction of the other
conditions set forth in Section (d)(i) above. Surety hereby
acknowledges that pursuant to any such Surety Replacement
arranged by Lender, Lender shall be entitled to use the amount
of the Premium Escrow in connection with the arrangement of
such Surety Replacement, and the Surety shall automatically
and irrevocably forfeit all Surety Premiums thereafter
accruing, including the Termination Premium, without further
action on the part of the Surety or any other Person.
(iii) Upon completion of any Surety Replacement arrangement (whether
arranged by Surety, Lender or otherwise), Lender shall
promptly (and in any case within three Business Days of the
effectiveness of such Surety Replacement) direct Trustee to
release to Surety any and all Posted Collateral, the Premium
Escrow, the Surety Bond and the Backstop Policy in accordance
with Section 1.8 to this Trust Agreement.
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(e) Lender acknowledges that if Surety Posts Collateral in such amounts
and at such times as permitted under Sections 1.2 through 1.4 above, Surety may
delay the time when a Change of Control and Consent, a Premium Escrow and a
Surety Loss of Premium would otherwise occur in accordance with Sections 1.2
through 1.4 above. Lender further acknowledges that a 55% Posting (as to a
Non-Performance Period) or a 50% Posting (as to a Performance Period) within the
time periods described in Sections 1.2 through 1.4 above, shall constitute a
cure of the Downgrade Surety Defaults described therein.
1.6 SECTION SURETY POSTING OF COLLATERAL; PREMIUM ESCROW.
(a) (i) For purposes of Section 1.2 through 1.5 of this Trust
Agreement, a "POSTING" of a letter of credit as collateral (a
"POSTING OF COLLATERAL") shall be deemed to have occurred upon
the delivery of a letter of credit satisfying the requirements
of clause (ii) of Section 1.5(a).
(ii) For purposes of Sections 1.2 through Section 1.5 of this Trust
Agreement, a "POSTING" of any instrument (other than a letter
of credit) as collateral (a "POSTING OF COLLATERAL") shall be
deemed to have occurred upon the satisfaction of the following
conditions: (A) Surety grants and conveys to Trustee (for and
on behalf of Lender), as security for the obligations of
Surety under the Surety Bond, a valid and enforceable first
lien on and first perfected security interest in one or more
Eligible Instruments (as hereinafter defined), in each case
free and clear of any other lien, encumbrance or claim on such
Eligible Instrument, (B) such Eligible Instruments satisfy the
maturity conditions set forth in subsection (b) below, and (C)
Surety delivers to Trustee and Lender a legal opinion in form
and substance reasonably satisfactory to Lender, to the effect
that Trustee has a valid and enforceable first perfected
security interest in such Eligible Instruments. Without
limiting the foregoing, Surety shall from time to time, as and
when reasonably requested by Lender, deliver to Trustee and
Lender one or more instruments confirming the pledge described
in the preceding clause (A) and one or more opinions of
counsel in form and substance reasonably satisfactory to the
Lender to the effect that Trustee has a valid and enforceable
first perfected security interest in any Posting of Collateral
(other than a letter of credit) then pledged to Trustee.
(b) For purposes of Section 1.6(a), (i) if Eligible Instruments are
pledged as a Posting of Collateral during the Non-Performance Period, a portion
of such Eligible Instruments equal in value to the Designated Sum (as defined
below) shall have a maturity, as of the date as of which they are pledged
pursuant to such Section 1.6(a), that is not more than one year, and the
remainder of such Eligible Instruments shall have a maturity, as of the date as
of which they are pledged pursuant to such Section 1.6(a), that does not exceed
the remaining number of full calendar months from the date of such pledge to and
including the Maturity Date and (ii) if Eligible Instruments are pledged as a
Posting of Collateral during the Performance Period, such
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Eligible Instruments shall have a maturity not exceeding the remaining number of
full calendar months from the date of the pledge to and including the Maturity
Date. "DESIGNATED SUM" means an amount equal to the greater of (A) zero and (B)
the remainder of (x) the product of (1) the principal amount outstanding under
the Loan at the time of the Posting, multiplied by (2) the number of full
calendar months from the date of the Posting to and including the Maturity Date,
multiplied by (3) the Interest Rate (as defined in the Note) divided by 12 less
(y) the amount of any Acceptable Letter of Credit that is then issued in favor
of Trustee as described in Section 1.6(a)(i).
(c) The parties hereto acknowledge and agree that the amount of a
Posting of Collateral required to be Posted hereunder by Surety in order to
effect a Permitted Surety Cure in accordance with Section 1.5 above, shall not
in any event exceed as to a Non-Performance Period, fifty-five percent (55%) and
as to a Performance Period, fifty percent (50%) of the outstanding principal
balance of the Note at the time such Posting of Collateral is required to be
Posted in accordance with Sections 1.2 through 1.4 above.
(d) The parties hereto acknowledge that the Posting requirements, and
the periodic increases to such Posting requirements, shall be measured on a
cumulative basis, aggregated with all Posting of Collateral previously Posted by
Surety to the extent not otherwise used or released. The value of any Posting of
Collateral shall be the market value of such Posted Collateral, as calculated by
Lender in its good faith discretion, and shall be established as of the time
such Posted Collateral is originally Posted.
(e) Upon the execution and delivery to Trustee of a binding and
enforceable agreement by a Surety-Appointed Wrap Surety to reinsure all
obligations of Surety under the Surety Bond, in accordance with all applicable
requirements of Section 1.5 and the other provisions of this Trust Agreement,
Trustee shall, within three (3) Business Days following direction of the Surety
and the Wrap Surety (and the written consent of the Lender) to do so, (i)
deliver to or at the direction of the Surety and Wrap Surety one or more
instruments releasing the lien of this Trust Agreement on any Posting of
Collateral that consists of instruments other than letters of credit and (ii)
deliver to or at the direction of Surety and Wrap Surety the original documents
evidencing Posted Collateral that consists of letters of credit. Upon the
payment in full (by Surety or Backstop Insurer) of the Surety Bond Amount
pursuant to a claim under the Surety Bond, Trustee shall, within three (3)
Business Days following direction of Surety to do so, (i) deliver to or at the
direction of Surety one or more instruments releasing the lien of this Trust
Agreement on any Posted Collateral that consists of instruments other than
letters of credit and (ii) deliver to or at the direction of Surety the original
documents evidencing Posted Collateral that consists of letters of credit.
(f) Following the occurrence of any Surety Event of Default, Trustee
shall continue to hold (for the benefit of Lender), as security for the
obligations of Surety under the Surety Bond and the obligations of Backstop
Insurer under the Backstop Policy, any and all Posted Collateral that has been
pledged to Trustee, except as provided in the next succeeding sentence.
Following the occurrence of any Payment Surety Default and Surety or Backstop
Insurer's failure to cure such default by paying sums then due under the Surety
Bond or the Backstop Policy (as
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applicable) within the notice and grace period set forth in Sections 1.2 through
1.4 above, Trustee shall, upon receipt of and in accordance with written
instructions from Lender, and in such order as Lender shall instruct, liquidate
amounts on deposit in the Premium Fund, sell and liquidate, in a commercially
reasonable manner, the Posted Collateral as directed by Lender, and draw upon
any letter of credit posted as Posted Collateral; in each case to satisfy sums
then due and payable under the Surety Bond.
(g) For purposes of this Section 1.6, "ELIGIBLE INSTRUMENT" shall mean
any of the following: (i) cash, or (ii) Permitted Investments without regard to
clause (Y) of the further proviso thereof.
1.7 SECTION NOTICES TO TRUSTEE ON OCCURRENCE OF EVENTS UNDER ARTICLE 1.
Lender shall with reasonable promptness give written notice to Trustee and
Surety ("ARTICLE 1 EVENT NOTICE") if Lender determines that any of the following
(each an "ARTICLE 1 EVENT") have occurred: (i) a Change of Control and Consent
has occurred, (ii) a Permitted Surety Cure has been effected or a cure period
has been extended, (iii) a Premium Escrow is required or permitted, (iv) a
Surety Default or Surety Event of Default has occurred, (v) a Wrap Surety or a
Lender-Appointed Wrap Surety has been appointed in accordance with this Trust
Agreement, (vi) a Surety Replacement has been effected in accordance with this
Trust Agreement, (vii) a Posting of Collateral has been completed, (viii) an
Acceptable Letter of Credit has been issued in accordance with Section 1.5
hereof, or (ix) the applicable conditions to a Surety Loss of Premium have been
satisfied, in each case pursuant to Article 1 hereof. Trustee shall be entitled
to rely upon, and shall be protected in acting upon, a determination by the
Lender that an Article 1 Event has occurred. Such Article 1 Event Notice shall
be prominently identified as such and shall set forth with specificity which of
the foregoing events has occurred. Trustee shall not incur any liability in
connection with, and shall act in accordance with, any such Article 1 Event
Notice. Lender hereby covenants and agrees that it shall only issue such an
Article 1 Event Notice upon the actual occurrence of one of the events set forth
in clauses (i) through (ix) above, and to the extent Lender issues such a notice
when the event or events set forth therein have not actually occurred (as
determined pursuant to the provisions of this Trust Agreement), Surety shall be
entitled to all actions at equity or at law (including without limitation, any
breach of contract action) available to it.
1.8 SECTION LENDER RELEASE OF POSTED COLLATERAL, PREMIUM ESCROW AND LETTER
OF CREDIT PROCEEDS ACCOUNT. Upon the termination, expiration, cessation or cure
of any event giving rise to a Posting of Collateral (including the issuance of
any letters of credit) or to the establishment of a Premium Escrow, except to
the extent that the establishment and the maintenance of such Posting is
required under Article 1 of this Trust Agreement in order to continue the
existence of such cure, Lender shall, as applicable, (i) release, or direct
Trustee to release, its security interest or other interest in such Posted
Collateral and direct Trustee to return such Posted Collateral to Surety, (ii)
except as otherwise provided in the definition of "Premium Escrow," release, or
direct Trustee to release, its security interest or other interest in such
Premium Escrow and direct Trustee to return the amount on deposit therein to
Surety, (iii) in the case of any letters of credit, return, or direct Trustee to
return, the original of any such letters of credit (together with all
certificates and attachments thereto) to Surety, and (iv) release its security
interest or other interest in the Letter of Credit Proceeds Account, if any, and
direct Trustee to return the amounts
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on deposit therein (if any) to Surety. Upon any Surety Replacement, Lender shall
instruct Trustee to release its security interests or other interests in any
Posted Collateral previously Posted by Surety, and shall release and direct
Trustee to release and return such Posted Collateral to Surety, together with
the Surety Bond and Backstop Policy for cancellation by the Surety.
ARTICLE 2
REMEDIES; ACTIONS RELATED TO COLLATERAL
2.1 SECTION EXERCISE OF REMEDIES; ACTIONS RELATED TO COLLATERAL. Each of
the Beneficiaries agrees that it shall not exercise, or direct Trustee to
exercise, any Remedies each such Beneficiary or Trustee, as applicable, may
have, as a result of the occurrence and continuance of any Event of Default,
except as permitted in this Trust Agreement. Each Beneficiary agrees that it
will have recourse to the Collateral only through Trustee, that it shall have no
independent recourse thereto and that it shall refrain from exercising any
rights or Remedies under the Transaction Documents which have or may have arisen
or which may arise as a result of an Event of Default or an acceleration of any
of the Secured Obligations, except as otherwise permitted in this Trust
Agreement (including, without limitation, Section 5.19 below). Each of the
Parties agrees that any proceeds of any casualty insurance policy with respect
to any of the Properties and any condemnation awards with respect to any of the
Properties shall, subject to any rights of Lessee set forth in the Master Lease,
be applied in accordance with Section 4.2 hereof, and any monies realized on the
Collateral (including without limitation in the event of the liquidation or sale
of the assets of Borrower or Lessee by reason of any Insolvency Proceedings
against Borrower or Lessee) shall be applied as set forth in Section 4.2 hereof.
Nothing contained in this Trust Agreement shall prevent any Beneficiary from
raising any defenses in any action in which it has been made a party defendant
or has been joined as a third party and controlling the litigation of such
defense, except that Trustee shall direct and control any defense directly
relating to the Collateral, or any one or more of the Security Documents, as
directed by a Written Direction and in accordance with the provisions of this
Trust Agreement. In addition, nothing contained in this Trust Agreement shall
prevent any Beneficiary from enforcing its rights under this Trust Agreement
against any other Beneficiary, Lessee, Guarantor or Trustee. In the case of
Borrower, nothing contained in this Section 2.1 shall be interpreted as
modifying the restrictions upon Borrower contained in Section 2.6(b).
2.2 SECTION SUBORDINATION; ACCOUNTING; ADJUSTMENTS.
(a) Each Beneficiary agrees that its right to receive payment of
Secured Obligations owed to it will be subordinate to the rights of the
Beneficiaries with a superior right to payment as set forth in Article II of the
Flow of Funds Agreement or Section 4.2 hereof. Such subordination shall be
accomplished by the application of the Revenues on each Distribution Date in the
order described in Article II of the Flow of Funds Agreement and Section 4.2
hereof and by the other terms of this Trust Agreement.
(b) Each of the Parties agrees to render an accounting to Trustee or
any of the other Parties of the amounts of the outstanding Secured Obligations,
receipts of payments from Borrower or Lessee or amounts realized from the
Collateral and of other items relevant to the
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provisions of this Trust Agreement upon the reasonable request from one of the
Parties as soon as reasonably practicable after such request. Upon the written
request of any Beneficiary, Trustee agrees to render an accounting for any
amount received by Trustee under this Trust Agreement.
(c) Each of the Beneficiaries agrees that to the extent any payment of
any Secured Obligations is made to it hereunder, under the Reimbursement
Agreement, under any of the Transaction Documents or otherwise, it shall, unless
(x) the Beneficiaries which are entitled to receive payment in higher priority
to such Beneficiary have been paid all amounts then entitled to the benefits of
such higher priority or (y) such Beneficiary is Lender and such payment
constitutes proceeds of the Surety Bond or the Backstop Policy, hold such funds
in trust for the benefit of such Beneficiaries entitled to such payment and
shall promptly (and in any case, within three (3) Business Days) pay such funds
to Trustee. Trustee shall apply any such amounts received by it as provided and
in accordance with Section 4.2 hereof or Article II of the Flow of Funds
Agreement, as applicable.
(d) Each of the Beneficiaries agrees that, notwithstanding anything to
the contrary contained in the Lease Documents or any other Transaction
Documents, all Liens created or arising pursuant to the Lease Documents shall be
subordinate to all Liens created or arising pursuant to the Loan Documents.
2.3 SECTION CONTESTING LIENS OR SECURITY INTERESTS; NO PARTITIONING OR
MARSHALLING OF COLLATERAL; CONTESTING OBLIGATIONS.
(a) No Party shall contest the validity, perfection, priority or
enforceability of or seek to avoid, have declared preferential or fraudulent or
have set aside any Lien or other security granted or assigned to: (i) Trustee,
(ii) Borrower or (iii) SELCO with respect to the Excluded Collateral Agreement;
each Party hereby agrees to cooperate in the defense of any action contesting
the validity, perfection, priority or enforceability of such Liens.
(b) Notwithstanding anything to the contrary contained in any
Transaction Document, except as provided in this Trust Agreement, no Party shall
have the right, as against any other Party, to have any of the Collateral, or
any security interest or other property being held as security for all or any
part of the Secured Obligations by Trustee, partitioned, or to file a complaint
or institute any proceeding at law or in equity to have any of the Collateral or
any such security interest or other property partitioned, and each Party hereby
waives any such right. Each Party hereby waives any and all rights, as against
any other Party, to have the Collateral, or any part thereof, marshaled upon any
foreclosure of any of the Liens securing the Secured Obligations.
(c) No Party shall contest the validity or enforceability of or seek to
avoid, have declared fraudulent or have set aside any Secured Obligations. In
the event any Secured Obligations are invalidated, avoided, declared fraudulent
or set aside for the benefit of Borrower or Lessee, each Party agrees that such
Secured Obligations shall nevertheless be considered to be outstanding for all
purposes of this Trust Agreement.
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2.4 SECTION REMEDIES VESTED IN TRUSTEE; DIRECTION OF PROCEEDINGS BY
CONTROLLING PARTY. All rights of action under the Transaction Documents (other
than the Surety Bond and the Backstop Policy), at law or in equity, including
the right to file proof of claims with respect to any of the Secured Obligations
may be enforced by Trustee without the possession of any of the Secured
Obligations or the production thereof in any trial or other proceedings relating
thereto. However, Trustee shall have no obligation or responsibility to exercise
or initiate any right, remedy, claim or other action under or pursuant to any
Transaction Document unless and until Trustee has received an appropriate
Written Direction. Any such suit or proceeding instituted by Trustee shall be
brought in its name as Trustee without the necessity of joining as plaintiffs or
defendants any Beneficiaries, and any recovery of judgment shall be for the
benefit of the Beneficiaries in accordance with priorities established in the
Flow of Funds Agreement and in this Trust Agreement. Trustee shall have the
right to decline to comply with any Written Direction if Trustee is advised by
counsel in writing that the action so directed may not lawfully be taken.
2.5 SECTION APPOINTMENT OF SERVICER. The Parties hereby acknowledge and
agree that Lender may, at the expense of Guarantor (which expense shall not
exceed $25,000), appoint a servicer (or a servicer and a "special servicer") of
nationally recognized standing with experience in servicing loans secured by
Assisted Living Facilities (such servicer and any "special servicer", the
"SERVICER") which is on a list of servicers approved by the Rating Agency and
which Servicer will agree to act as servicer pursuant to a servicing agreement
in form and substance satisfactory to Lender, with the consent of Surety, which
consent shall not be withheld if such agreement does not vitiate or otherwise
deprive Surety of any of its rights or benefits under this Trust Agreement (the
"SERVICING AGREEMENT"). Notwithstanding such appointment, all Parties shall
continue to copy Surety on all notices which it is entitled to receive hereunder
and Lender shall be free from time to time to terminate such Servicer and
appoint a new servicer from time to time to the extent such new servicer
satisfies the criteria set forth in this Section 2.5. The ordinary monthly fees
of the Servicer shall be the expenses of the Lender. With respect to the
foregoing: (i) Trustee may, and shall if it receives a Written Direction, become
a party to the Servicing Agreement for the purpose of performing any of its
duties hereunder through the Servicer as contemplated by Section 5.9 hereof;
(ii) Trustee's duties and rights hereunder may be modified by the Servicing
Agreement without the consent of any Party hereto other than the Lender and
Trustee, provided that the modification does not adversely affect the rights of
any Beneficiary; (iii) the Servicer shall be entitled to receive payments
pursuant to this Trust Agreement of any amounts (including Collateral Collection
Expenses and other Loan Obligations) owing to it under the Servicing Agreement
to the extent Trustee would be entitled to be paid the amount hereunder if it
had performed the actions giving rise to the same, and the payments to said
Servicer shall be entitled to the same priority hereunder as Trustee would have
been entitled to; and (iv) the Servicer shall be entitled to all indemnities and
protections provided Trustee hereunder to the extent it is performing duties
which Trustee would otherwise have performed hereunder.
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2.6 SECTION RIGHTS AND REMEDIES OF CONTROLLING PARTY; RIGHTS OF BORROWER.
(a) Rights and Remedies of Controlling Party. The Controlling Party
shall not have any right to institute any suit, action or proceeding in equity
or at law for the exercise of any Remedy or the realization upon the Collateral
or for the appointment of a receiver or any other proceedings under the
Transaction Documents, unless: (i) an Event of Default under the Loan Agreement
shall have occurred, and (ii) such Controlling Party shall have offered Trustee
reasonable opportunity (but in no event more than ten (10) days) either to
proceed to exercise the powers herein granted or to institute such action, suit
or proceeding in its own name, and unless Trustee shall thereafter fail or
refuse to exercise the powers herein granted, or to institute such action, suit
or proceeding in its own name; and such notification and direction are hereby
declared in every case at the option of Trustee to be conditions precedent to
the execution of the powers and trusts granted by this Trust Agreement and to
any action or cause of action for the enforcement of this Trust Agreement, or
for the appointment of a receiver or for any other remedy hereunder; it being
understood and intended that no one or more Parties (including the Controlling
Party) shall have any right in any manner whatsoever to affect, disturb or
prejudice the Liens on the Collateral by its, his or their action or to enforce
any right hereunder except in the manner herein provided, and that all
proceedings at law or in equity shall be instituted, had and maintained in the
manner herein provided.
(b) Rights of Borrower. Until all of the Secured Obligations described
in clauses (i) through (vii) of Section 4.2(a) of this Trust Agreement and
clauses (i) through (vi) of Section 4.2(b) of this Trust Agreement have been
paid and satisfied in full, Borrower shall not have the right to exercise, or be
entitled to direct Trustee to exercise, any Remedies or institute any suit,
action or proceeding for the enforcement of the Secured Obligations owed to it.
Upon payment in full of all amounts owed to the Surety, Backstop Surety and
Lender constituting Secured Obligations and receipt by the Trustee of written
acknowledgment of the same from the Surety, Backstop Surety and Lender, Trustee
shall be entitled to rely upon directions delivered to it by Borrower as to all
matters relating to this Trust Agreement. In no event shall the Borrower become
a Controlling Party or Non-Controlling Party under this Trust Agreement.
Notwithstanding the foregoing or any other provision in this Trust Agreement to
the contrary, if a payment default has occurred under the Master Lease and such
default remains uncured for a period of thirty (30) days, or if SELCO is
otherwise permitted to draw upon the Excluded Collateral in accordance with the
terms set forth in the Participation Agreement, SELCO may exercise its remedies
under the Excluded Collateral Agreement with respect to the Excluded Collateral.
2.7 SECTION TERMINATION OF PROCEEDINGS. In case Trustee shall have
proceeded to enforce any right under this Trust Agreement or any Loan Document
by the appointment of a receiver, or otherwise, and such proceedings shall have
been discontinued or abandoned for any reason, or shall have been determined
adversely to Trustee, then and in every case the Parties shall, subject to any
determination in such proceeding, be restored to their former position and
rights hereunder with respect to the Collateral, and all rights, remedies and
powers of Trustee shall continue as if no such proceedings had been taken.
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2.8 SECTION LIMITATIONS ON RIGHTS OF THE SURETY TO ACT AS CONTROLLING
PARTY. Notwithstanding anything contained in this Trust Agreement to the
contrary, if a Change of Control and Consent has occurred and is continuing, the
Surety shall have no rights to act as Controlling Party and Lender shall be the
Controlling Party. This Section 2.8 shall not in any way limit or affect the
rights of Surety to act, prior to a Surety Event of Default, as Non-Controlling
Party under the terms of this Trust Agreement.
2.9 SECTION CONTROLLING PARTY ADMINISTRATION OF TRANSACTION DOCUMENTS. In
addition to all of the specific rights granted to the Controlling Party pursuant
to this Trust Agreement (including, without limitation, the rights granted to
the Controlling Party under the other provisions of this Article 2), the
Controlling Party shall have the right, unless otherwise expressly limited by
the terms hereof (such as in Section 2.6 or in the case of Material Actions
addressed in Section 2.10 below or in Section 2.10(f) hereof), to take, through
Trustee, all actions under all of Transaction Documents (other than the Surety
Bond and Backstop Policy) which are available to any Beneficiary, including,
without limitation, (i) the right, upon the occurrence of an Event of Default
under the Loan Agreement to direct the Lender, in writing, to accelerate all
principal and interest due on the Note, (ii) the right to direct Trustee to
grant any consent under such Transaction Documents (other than the Surety Bond
and the Backstop Policy) or waive any breach of any provision, representation or
covenant set forth in the Transaction Documents, (iii) the right, upon the
occurrence of an Event of Default under the Master Lease to direct the Borrower,
in writing, to accelerate all of the obligations of the Lessee under the Master
Lease or otherwise effect any remedy available to the Borrower under the Master
Lease, and (iv) the right to direct the actions taken by Trustee with respect to
the Borrower or the Lessee, the Collateral and any of the other rights in favor
of Trustee pursuant to the Transaction Documents, including without limitation,
power of sale or judicial foreclosure of the liens against any of the
Properties, seeking the judicial appointment of a receiver or receivers for all
or any portion of the Properties, pursuing all rights and remedies against all
Deposit Accounts and other pledged or escrowed funds and foreclosure of all
property pledged pursuant to the Security Documents. In furtherance of the
foregoing, each of Lender and Borrower hereby agrees that so long as Surety is
the Controlling Party hereunder, neither Lender nor Borrower shall, nor shall it
have the right to, declare an Event of Default under the Loan Agreement or the
Master Lease (as applicable) or accelerate all or any portion of the Loan or any
of the obligations of the Lessee under the Master Lease. Trustee shall be
allowed to assume that any Written Direction from the Controlling Party is
authorized under this Trust Agreement or is within the rights of the Controlling
Party hereunder until Trustee is otherwise notified in writing by the
Non-Controlling Party. Trustee shall provide the Non-Controlling Party with a
copy of any Written Direction received by Trustee from the Controlling Party.
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2.10 SECTION MATERIAL ACTION; PROHIBITED ACTIONS.
(a) Each of Surety and Lender hereby covenants and agrees that if it is
the Controlling Party, it shall provide prompt written notice to (i) the other
if it proposes to instruct Trustee to take any Material Action and (ii) to
Borrower if it proposes to instruct Trustee to take the Material Action
described in clause (b) of the definition of "Material Action." Notwithstanding
anything contained in this Trust Agreement to the contrary, (i) Trustee shall
take no action that it has been advised in writing by Lender or Surety
constitutes a "Material Action" hereunder, unless Trustee has first received a
Written Direction executed by both the Controlling Party and the Non-Controlling
Party, if any, and (ii) the Controlling Party shall not take, or instruct
Trustee to take, any Material Action without receiving the prior consent of the
Non-Controlling Party, if any. Unless Trustee has received written notice from
either Lender or Surety that any action or matter constitutes a "Material
Action," Trustee shall be allowed to assume that any action, proposal or matter
before it is not a Material Action and is authorized by the terms of this Trust
Agreement or an applicable Loan Document. Trustee shall have no duty or
obligation to inquire or investigate any matter to determine whether or not it
is a Material Action or is authorized or allowed under this Trust Agreement or
any other Transaction Document. If within ten (10) Business Days following its
receipt of written notice as contemplated by the first sentence of this
paragraph, the Non-Controlling Party does not either consent to a course of
action regarding a Material Action as described in the notice (which notice
shall be prominently and clearly identified as a notice of Material Action and
setting forth in detail the proposed Material Action) from the Controlling Party
(the "PROPOSED ACTION PLAN") or send a notice specifying the Non-Controlling
Party's objections thereto, the Proposed Action Plan shall be deemed to be
acceptable to the Non-Controlling Party. If the Non-Controlling Party does
timely object to the Proposed Action Plan, and the Controlling Party and
Non-Controlling Party (if any) are not able to resolve their dispute, the action
or course of action described in the Proposed Action Plan shall not be taken.
(b) Surety hereby acknowledges, covenants and agrees for the benefit of
Lender that (i) Surety shall not itself take and shall not instruct Trustee to
take any of the following actions in regard to any of the Transaction Documents
without the prior written consent of the Lender: (u) agree in writing (or
otherwise in a manner binding on Lender) to any change in the Interest Rate, the
Maturity Date or the prepayment restrictions set forth in the Note, (v) agree in
writing (or otherwise in a manner binding on Lender) to modify or waive any
provision of the Loan Documents that would affect the timing or amount of any
scheduled payments under the Note or any provision of Section 2 of the Note, (w)
forgive in writing (or otherwise in a manner binding on Lender) any amounts
payable under the Note, (x) the release or impairment of the lien of Trustee on
any material portion of the Collateral, (y) any action that would have the
effect of impairing the ability of Trustee or the Lender to enforce the Loan
Documents in accordance with their respective terms or any action that would
have the effect of amending or modifying the terms and conditions of Section 4.4
of the Loan Agreement, or (z) any action that would have the effect of impairing
the value of the Collateral as security for the Loan, and (ii) Surety, if it is
the Controlling Party, shall instruct Trustee to enforce the Remedies under the
Loan Documents in the case of any Event of Default under the Loan Agreement
specified in Section 7.1(d) of the
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Loan Agreement if such Event of Default results, or will result in, a material
impairment of the value of, or the ability of the Lender to timely realize upon,
the Collateral as security for the Loan. The foregoing actions described in
clause (i) above shall be forbidden actions of Surety regardless of whether
Surety is the Controlling Party or the Non-Controlling Party hereunder. Except
as set forth in clause (ii) of the first sentence of this paragraph, the
foregoing shall not limit or affect Surety's right, while Surety is the
Controlling Party, to waive or forbear (so long as such waiver or forbearance is
not in writing or made in a way otherwise binding on Lender) from pursuing some
or all Remedies against Borrower upon the occurrence of an Event of Default.
(c) Lender hereby acknowledges, covenants and agrees for the benefit of
Surety that, prior to a Surety Event of Default or a downgrade of Surety's or
Backstop Insurer's S&P Rating below Investment Grade, Lender shall not itself
take and shall not instruct Trustee to take, without the prior written consent
of the Surety, any of the following actions in regard to the Note or the Loan
Agreement: (i) modify in writing the Interest Rate or the Maturity Date, or (ii)
agree in writing to forbear from collecting some or all of the regularly
scheduled principal, interest, escrows and other reserves provided for in the
Loan Documents, or (iii) modify in writing the Note to increase the principal
balance or the rate of amortization thereunder. The foregoing shall be forbidden
actions of Lender regardless of whether Lender is the Controlling Party or the
Non-Controlling Party hereunder. The foregoing shall not limit or affect
Lender's right, while Lender is the Controlling Party, to waive or forbear (so
long as such waiver or forbearance is not writing) from pursuing some or all
Remedies against Borrower upon the occurrence of an Event of Default.
(d) Trustee shall take no action that it has been advised in writing by
Lender or Surety constitutes an action described in clause (i) of Section
2.10(b) or any of clauses (i) through (iii) of Section 2.10(c). Unless Trustee
has received written notice from either Lender or Surety that any action,
proposal or matter before it constitutes an action described in clause (i) of
Section 2.10(b) or any of clauses (i) through (iii) of Section 2.10(c), Trustee
shall be allowed to assume that any action or matter before it is not such an
action. Trustee shall have no duty or obligation to inquire or investigate any
matter to determine whether or not it is such an action.
(e) Notwithstanding any provision of this Trust Agreement to the
contrary, all rights of Lender under Section 4.4 of the Loan Agreement shall be
exercisable exclusively by Lender.
(f) Notwithstanding anything in this Trust Agreement or any other
Transaction Document to the contrary (including, without limitation, Sections
7.14 and 7.15 hereof), no changes or modifications shall be made to any
Transaction Document to which Borrower is a party without Borrower's prior
written consent if such change or modification: (1) increases the term of the
Master Lease or the Note; (2) adversely affects the priority or timing of the
payments due to Borrower under either the Trust Agreement or the Flow of Funds
Agreement; (3) changes the Maximum Lessee Risk Amount; (4) adversely changes any
indemnities payable to Borrower or SELCO under the Transaction Documents; (5)
decreases the Yield, increases the Interest Rate payable under the Note (unless
such increase is offset by a corresponding reduction in Surety Premiums),
increases the aggregate principal amount of the Note, decreases the Rent payable
under the Master Lease or otherwise adversely affects the timing of any payments
due to
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Borrower with respect to the foregoing; (6) materially and adversely affects the
insurance requirements of any insurance policy that names the Borrower as an
additional insured; (7) adversely changes Sections 29, 30, 31 or 35 of the
Master Lease; or (8) changes in the definition of a Tolling Default or to this
Section 2.10(f).
(g) Notwithstanding anything in this Trust Agreement or any other
Transaction Document to the contrary, Controlling Party may not waive the
consequences of a Tolling Default under Sections 29(a), 29(b) or 31(a) of the
Master Lease.
2.11 SECTION PROOFS OF CLAIM. Notwithstanding any provision to the contrary
contained in this Trust Agreement, the Controlling Party shall have the right or
privilege to file, in its own name and in the name of the Non-Controlling Party,
proofs of claim under the United States Bankruptcy Code in connection with any
Insolvency Proceeding against Borrower, Guarantor or the Lessee, but any amounts
received in any such Insolvency Proceedings as a result of any such claims shall
be paid to Trustee and disbursed in accordance with Section 4.2 of this Trust
Agreement.
2.12 SECTION SUBROGATION. Each of the Parties acknowledges and consents to
the Surety's subrogation rights contained in Section 9.19 of the Loan Agreement,
and each further acknowledges and agrees that Surety shall be subrogated to all
rights of Lender and Lender's rights in and to the Borrower and the Lessee and
the Collateral to the extent of any payments made by Surety under the Surety
Bond in connection with the Loan; provided, however, all such subrogation rights
are subordinate in payment and priority to the rights of Lender as contained in
this Trust Agreement and the Flow of Funds Agreement. Nothing in this Trust
Agreement shall limit or affect the rights of the Surety as a subrogee of the
Parties of any Secured Obligation, or as assignee of the Holder of any Secured
Obligation, or any other rights Surety has apart from this Trust Agreement by
virtue of subrogation resulting from a payment made by Surety under the Surety
Bond or by Backstop Insurer under the Backstop Policy; provided, however, Surety
shall not enforce any of its subrogation rights against Borrower or the
Collateral until such time as the Loan Obligations have been repaid in full.
Without limiting any other provision of this Trust Agreement, the Parties agree
to execute such instruments and take such actions as are, in the good faith
determination of Surety, necessary to confirm such subrogation and the rights of
Surety to receive any sums due in respect of the Secured Obligations (all of
which are subordinate in payment and priority to the rights of Lender as
contained in this Trust Agreement and the Flow of Funds Agreement), in each case
at the expense of Surety and following receipt of written request from Surety,
including the instrument proposed to be executed or description of the action
proposed to be taken. Borrower acknowledges that to the extent payments are made
by Surety or Backstop Insurer under, respectively, the Surety Bond or the
Backstop Policy, such payments shall not reduce the principal balance of the
Note, or interest thereon, for which Borrower is obligated to repay, even though
they may reduce the Surety Bond Amount for which Surety is liable under the
Surety Bond and for which Backstop Insurer is liable under the Backstop Policy;
provided, however, Surety shall not collect any sum outstanding under the Note
which it has already collected under the Reimbursement Agreement, and Surety
shall not collect any sum outstanding under the Reimbursement Agreement which it
has already collected under the Note.
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2.13 SECTION TRANSFER AND RELEASE OF SURETY BOND AND BACKSTOP POLICY. Each
of the Parties hereby agrees and acknowledges that, subject to the provisions
set forth in the Surety Bond and the Backstop Policy, the Surety and the
Backstop Insurer may transfer and assign their respective rights and obligations
under such Surety Bond and Backstop Policy to any entity, and in connection with
any such transfer, Trustee shall, at the direction of the Controlling Party,
accept delivery of any new Surety Bond or Backstop Policy, as the case may be,
issued by such entity, and release to the Surety and the Backstop Insurer its
Surety Bond and/or Backstop Policy, as the case may be, for cancellation. On and
after the date on which any entity delivers such a new Surety Bond or Backstop
Policy (as the case may be), such entity shall become the "Surety" or the
"Backstop Insurer," as applicable, for the purposes of all of the Loan
Documents.
2.14 SECTION MISCELLANEOUS PROVISIONS RELATING TO THE LOAN AGREEMENT.
(a) Lender covenants and agrees to notify Surety, no later than 5:00
p.m. on the same date that it notifies Trustee (so that Trustee may subsequently
make a demand for payment under the Surety Bond) of the occurrence of any Event
of Default relating to the non-payment of principal or interest on the Note.
(b) Borrower covenants and agrees to notify Surety immediately upon
becoming aware that it will not be able to make any payment of principal or
interest on the Note.
(c) Borrower hereby agrees that, at the request of Surety, Borrower
shall, to the extent permitted by applicable law, defease the Note subject to
and in accordance with its provisions, provided that Surety arranges for and
pays for the requisite Defeasance Collateral (as defined in the Note) and
provided that Surety pays all costs and expenses in connection with any such
defeasance. Surety hereby acknowledges to Lender that it is familiar with the
terms and conditions of Sections 6(b) through 6(i) of the Note. Borrower hereby
irrevocably grants to Surety a power of attorney, coupled with an interest, to
defease the Note, upon prior written notice to Borrower, in the name of and on
behalf of Borrower, all as permitted under the Note and to the extent permitted
under applicable law. To the extent any such defeasance occurs at the direction
of Surety, Surety shall be the Controlling Party for the remaining term of the
Surety Bond (without regard to the operation of any other provision hereunder,
including, without limitation, any provisions relating to Change of Control and
Consent set forth in Article 1 hereof.)
(d) Lessee covenants and agrees to notify Surety immediately upon
becoming aware that it will not be able to make any payment of Rent due under
the Master Lease.
2.15 SECTION MISCELLANEOUS PROVISIONS RELATING TO THE MASTER LEASE. Borrower
covenants and agrees to notify Surety, no later than 5:00 p.m. on the same date
that it notifies Trustee of the occurrence of any Event of Default relating to
any non-payment of Rent under the Master Lease.
2.16 SECTION NO PLAN ASSETS. Surety hereby represents and warrants to
Trustee and to the Lender that neither Surety nor Backstop Insurer is or will be
(i) an employee benefit plan (as
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defined in Section 3(3) of ERISA) which is subject to ERISA, (ii) a plan as
defined in Section 4975(e)(1) of the Code which is subject to Section 4975 of
the Code, or (iii) an entity any of whose underlying assets constitute "plan
assets" of any such employee benefit plan or plan for purposes of Title I of
ERISA or Section 4975 of the Code. In the event that on any date on which any
payment is required to be made by Surety under the Surety Bond or by Backstop
Insurer under the Backstop Policy, the foregoing representation is not accurate,
Surety shall take all such actions as may be necessary, including, but not
limited to, applying for an individual prohibited transaction exemption from the
United States Department of Labor, so that any required payments may be made by
Surety under the Surety Bond without violating the "prohibited transaction"
restrictions set forth in Section 406 of ERISA and Section 4975 of the Code.
ARTICLE 3
FUNDS; DEPOSIT ACCOUNTS; SURETY BOND; LETTERS OF CREDIT
3.1 SECTION INTENTIONALLY OMITTED
3.2 SECTION CAPITAL IMPROVEMENTS ACCOUNT.
(a) Establishment of Capital Improvements Account. Trustee has
established a separate account at First Chicago, meeting the requirements of an
Eligible Account, which account shall be known as the "CAPITAL IMPROVEMENTS
ACCOUNT", account number 204685-000. Upon execution of this Trust Agreement,
Lessee shall deposit with Trustee an amount equal to $225,000 (the "INITIAL
CAPITAL IMPROVEMENTS AMOUNT"). $125,000 of the Initial Capital Improvements
Amount shall be used to satisfy, within 180 days of the Closing Date, those
capital improvements set forth in the Property Condition Reports prepared by
Environmental Management Group, Inc. (the "INITIAL CAPITAL IMPROVEMENTS"), which
Property Condition Reports have been delivered to and approved by Lender in
connection with the Closing, which capital improvements the Lessee hereby agrees
to complete, in a good and workmanlike manner free of any liens or claims.
$100,000 of the Initial Capital Improvements Amount (the "WEST ORANGE AMOUNT")
shall be held until all conditions to the issuance of an "unconditional
certificate of occupancy" for the Assisted Living Facility located in West
Orange, New Jersey (the "WEST ORANGE FACILITY") have been satisfied. Lessee's
failure to secure an "unconditional certificate of occupancy" for the West
Orange Facility on or before September 15, 1999 shall constitute an Event of
Default. Provided that Lessee shall obtain and deliver such "unconditional
certificate of occupancy" with respect to the West Orange Facility in form and
substance acceptable to Lender on or before September 15, 1999, Controlling
Party shall direct Trustee to promptly release the West Orange Amount to the
Lessee. In addition to the Initial Capital Improvements Amount, from time to
time as required by the Flow of Funds Agreement, the Lessee shall deliver
additional monies to Trustee, which additional amounts Trustee shall deposit in
the Capital Improvements Account, and which sums, together with the Initial
Capital Improvements Amount shall be designated as "CAPITAL IMPROVEMENTS FUNDS."
(b) Initial Capital Improvements and Agreement to Complete
Improvements. Upon execution hereof, the Lessee shall commence the Initial
Capital Improvements immediately following the date hereof and shall at all
times thereafter diligently pursue the completion of all
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Initial Capital Improvements. For all Capital Improvements included in the
Budget or otherwise authorized by the Controlling Party subsequent to the date
hereof, Lessee (or its designee) shall complete such improvements within the
time frame set forth in the Budget or within 12 months within the date such
Capital Improvements are so authorized by the Controlling Party or within such
other completion period as Controlling Party may specify in writing. All Capital
Improvements shall be made in a good and workmanlike manner and shall be
completed free and clear of any mechanic's or materialman's liens and
encumbrances. Lessee shall pay all costs necessary for completion of the Capital
Improvements without regard to the sufficiency of the funds in the Capital
Improvements Account.
(c) Disbursements from the Capital Improvements Account.
(i) Upon written request from Lessee, the Controlling Party
may authorize Trustee to disburse to Lessee amounts from the Capital
Improvements Account to reimburse the Lessee for the actual cost of any
Capital Improvement. No disbursement shall be made unless Controlling
Party has determined that such disbursement complies with the
requirements of this Section 3.2 and authorized Trustee in writing to
make such disbursement.
(ii) To the extent that a particular capital expenditure has
been provided for in the Budget or previously approved in writing by
the Controlling Party, Lessee shall be entitled to payment of invoices
presented to the Controlling Party so long as the following procedures
are followed: Lessee shall submit a request for payment of an invoice
in writing (an "INVOICE PAYMENT REQUEST") which (i) sets forth the
Capital Improvement (from the Budget or from the approval by the
Controlling Party) for which such request relates, (ii) states whether
such payment relates to equipment, materials or labor, or a combination
thereof, (iii) to the extent such payment relates to equipment or
materials, gives a brief summary of the items purchased and their
purpose, (iv) to the extent such payment relates to labor, gives a
brief description of the labor performed and its purpose, and (v)
attaches the applicable invoice for payment, clearly indicating the
items covered thereby and for which of the Properties such invoice
relates. Upon presentation of an Invoice Payment Request in form and
substance satisfactory to the Controlling Party, the Controlling Party
shall instruct Trustee to withdraw the applicable amount from the
Capital Improvements Account and remit the funds to Lessee for payment
of such invoice.
(iii) To the extent the Lessee has already paid for a budgeted
or otherwise approved Capital Improvement, Lessee may make a request
for reimbursement and disbursement from the Capital Improvements
Account, which request (a "CAP EX. REIMBURSEMENT REQUEST") shall be
made by a Lessee on a form provided or approved by the Controlling
Party and which shall specify (i) the specific Capital Improvement for
which payment is requested, (ii) the quantity and price of each item
purchased if the Capital Improvement includes the purchase or
replacement of specific items (such as appliances), (iii) the price of
all materials (grouped by type or category) used in any Capital
Improvement other than the purchase or replacement of specific items,
and (iv)
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the cost of all contracted labor or other services involved in the
Capital Improvement for which such request for disbursement is made.
The requesting Lessee shall certify that the Capital Improvements
covered by the requisition have been completed in a good and
workmanlike manner and in accordance with any plans and specifications
previously approved by the Controlling Party and that all such Capital
Improvements are in compliance with all applicable laws, ordinances,
rules and regulations of any governmental authority, agency or
instrumentality having jurisdiction over any of the Properties. Each
request for reimbursement shall include copies of invoices for all
items or materials purchased and all labor or services provided and
include evidence of payment satisfactory to the Controlling Party.
(iv) If (i) the cost of a Capital Improvement exceeds $50,000,
(ii) the contractor performing the work with respect to a Capital
Improvement under a written contract requires periodic payments, and
(iii) the Controlling Party has approved in writing in advance such
periodic payments, a request for disbursement from the Capital
Improvements Account may be made by Lessee after completion of a
portion of the work under such contract, (provided that the contract
requires payment upon completion of such portion of the work), but only
if (1) the materials for which the request for disbursement has been
made are on site at the Property and are properly secured or have been
installed in the Property, (2) the remaining funds in the Capital
Improvements Account designated by the Controlling Party for such
Capital Improvement are, in Controlling Party's judgment, sufficient to
complete that Capital Improvement, (3) if required by the Controlling
Party, each contractor or subcontractor receiving payment under such
contract has provided a release of liens for amounts previously paid to
that contractor or subcontractor and a mechanics' lien waiver from such
contractor or subcontractor duly recorded, if appropriate, all in form
and substance satisfactory to Controlling Party, (4) the Controlling
Party has approved the plans and specifications for such Capital
Improvement, and (5) if required by the Controlling Party, Lessee shall
provide an architect's certificate in connection with such Capital
Improvement in form and substance satisfactory to Controlling Party.
(v) The Lessee shall not make a request for disbursement from
the Capital Improvements Account more frequently than once in any
calendar month. Other than in connection with the final request for
disbursement, Lessee shall not request disbursements from the Capital
Improvements Account in an amount of less than $5,000.
Notwithstanding the foregoing, if any time Controlling Party shall certify that
an Event of Default has occurred and is continuing, then Controlling Party may
direct Trustee to disburse funds from the Capital Improvements Account either to
pay any unpaid amounts in the order of priority set forth in Article II of the
Flow of Funds Agreement, or applied as if the same were proceeds of Collateral
in accordance with Section 4.2 of this Trust Agreement. Such a direction from
Controlling Party will instruct Trustee with specificity exactly which Parties
are to receive disbursements and the amounts thereof.
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(d) Completion of Capital Improvements. Trustee's disbursement
of Capital Improvements Funds or other acknowledgment of completion of any
Capital Improvement shall not be deemed a certification by Lender, Surety or
Trustee that the Capital Improvement has been completed in accordance with
applicable building, zoning or other codes, ordinances, statutes, laws,
regulations or requirements of any governmental authority or agency. Lessee
shall at all times have the sole responsibility for insuring that all Capital
Improvements are completed in accordance with all such governmental
requirements.
(e) Investment. Monies in the Capital Improvements Account
shall be invested in Permitted Investments by Trustee pursuant to Section 3.11
hereof and earnings thereon shall be credited to the Capital Improvements
Account.
3.3 SECTION LEASE RESERVE ACCOUNT.
(a) Establishment of Lease Reserve Account. Trustee has established a
separate account at First Chicago under Trustee's sole dominion and control,
meeting the requirements of an Eligible Account, which account shall be known as
the "Lease Reserve Account", account no. 204685-001 (the "LEASE RESERVE
ACCOUNT"). Each of Lessee, Guarantor and Borrower hereby acknowledges that it
has no further ownership of the Lease Reserve Account and funds therein and has
no rights thereto, except as expressly provided herein.
(b) Funding of Lease Reserve Account. In accordance with the provisions
of Article II of the Flow of Funds Agreement, Lessee or Guarantor, as
applicable, shall make deposits into the Lease Reserve Account up to the then
applicable Lease Reserve Cap (as defined below). Notwithstanding the foregoing,
so long as a Lessee Triggering Event has not occurred, Lessee's and Guarantor's
obligation to fund the Lease Reserve Account on any Distribution Date shall be
limited to the amount of excess Revenues, if any, available after payment of all
Benefitted Items specified in Category 2.1(i) to and including Category 2.1
(xiii) of the Flow of Funds Agreement ("NET CASH FLOW") on such Distribution
Date. With respect to any Lease Coverage Period, the amount required to be
maintained by Lessee in the Lease Reserve Account shall be determined based upon
the Lease Coverage Ratio during such Lease Coverage Period as set forth in the
chart below (such amount, the "LEASE RESERVE CAP"):
<TABLE>
<CAPTION>
Lease Coverage Ratio (or LCR) The amount of the Lease Reserve Cap shall be:
----------------------------- --------------------------------------------
<S> <C>
the product of:
LCR greater than 1.40 1 multiplied by the sum of the
immediately preceding month's Base
Rental and Contingent Surety Rental
LCR greater than 1.35, but less
than or equal to 1.40 2 multiplied by the sum of the
immediately preceding month's Base
Rental and Contingent Surety Rental
</TABLE>
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<TABLE>
<S> <C>
LCR greater than 1.30, but less
than or equal to 1.35 3 multiplied by the sum of the immediately preceding
month's Base Rental and Contingent Surety Rental
LCR greater than 1.20, but less
than or equal to 1.30 6 multiplied by the sum of the immediately preceding month's
Base Rental and Contingent Surety Rental
LCR greater than 1.10, but less
than or equal to 1.20 12 multiplied by the sum of the immediately preceding month's
Base Rental and Contingent Surety Rental (the "MAXIMUM REQUIRED
LCR AMOUNT")
LCR less than or equal to 1.10 The greater of (i) the product of 12 multiplied by the sum of the
immediately preceding month's Base Rental and Contingent Surety
Rental, and (ii) Net Cash Flow during all Lease Coverage Periods for
which the LCR is less than or equal to 1.10.
</TABLE>
(c) Lessee Triggering Event. Upon the occurrence of a Lessee Triggering
Event, if the balance in the Lease Reserve Account is less than the amount of
the Lease Reserve Cap required at such time as determined by the Controlling
Party, the Controlling Party shall instruct Trustee to (i) require Lessee to
deposit cash into the Lease Reserve Account in an amount equal to the Lease
Reserve Deficiency (as hereinafter defined), or (ii) establish the Lessee Letter
of Credit Proceeds Account described in Section 3.13 hereof and require the
Lessee to post an irrevocable and unconditional letter of credit from a
financial institution having a long term debt rating of "A" or higher from S&P
and otherwise acceptable to the Controlling Party (a "LESSEE LETTER OF CREDIT")
in an amount equal to the Lease Reserve Deficiency. "LEASE RESERVE DEFICIENCY"
shall mean an amount equal to the difference between (i) the amount of the Lease
Reserve Cap required at any time (not to exceed the Maximum Required LCR
Amount), and (ii) the actual balance in the Lease Reserve Account at such time.
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(d) Disbursements from the Lease Reserve Account. At any time that a
Borrower Priority Category Shortfall Amount (as defined in the Flow of Funds
Agreement) (other than with respect to Categories 2.1(xiii) through (xvi)) shall
exist, Controlling Party may direct Trustee to disburse funds from the Lease
Reserve Account (i) to pay any shortfall in any Benefitted Item under the Flow
of Funds Agreement, or (ii) if the Controlling Party has certified to Trustee
that an Event of Default has occurred and is continuing, to be applied as if the
same were proceeds of Collateral in accordance with Section 4.2(b) of this Trust
Agreement. Such a direction from Controlling Party will instruct Trustee with
specificity exactly which entities are to receive disbursements and the amounts
thereof. Notwithstanding the foregoing, Lessee shall not be relieved of its
obligation to pay any amounts paid from monies in the Lease Reserve Account.
(e) Monies in the Lease Reserve Account shall be invested in Permitted
Investments pursuant to Section 3.11 hereof and earnings thereon shall be
credited to the Lease Reserve Account.
(f) So long as an Event of Default has not occurred and is continuing,
monies in the Lease Reserve Account on any Distribution Date in excess of the
applicable Lease Reserve Cap shall be disbursed and applied by Trustee as if
such amounts were Operating Revenue in accordance with Article II of the Flow of
Funds Agreement and Section 4.2 of this Trust Agreement, as applicable.
3.4 SECTION LOCKBOX ACCOUNT.
(a) Establishment of Lockbox Account. Trustee has directed Lessee to
establish a separate account at Firstar Bank Illinois, located in Chicago,
Illinois, in the name of the Trustee pursuant to the Correspondent Lockbox
Agreement, meeting the requirements of an Eligible Account, which account shall
be known as the "Lockbox Account" account number 422579-059 (the "LOCKBOX
ACCOUNT"). Borrower, Lessee and Trustee acknowledge and agree that all Operating
Revenues shall be deposited into the Lockbox Account which shall be disbursed
pursuant to the terms of this Trust Agreement and the Flow of Funds Agreement.
Each of Borrower, Guarantor and Lessee hereby acknowledges that it has no
further ownership of the Lockbox Account and funds therein and has no rights
thereto, except as expressly provided in the Lockbox Agreement and this Trust
Agreement.
(b) Disbursements from the Lockbox Account Prior to Springing Lockbox
Event. Prior to a Springing Lockbox Event, the Lessee shall withdraw funds from
the Lockbox Account and apply such funds in accordance with the terms of this
Trust Agreement and the Flow of Funds Agreement.
(c) Disbursements from the Lockbox Account Upon Springing Lockbox
Event. At all times after the occurrence of a Springing Lockbox Event, neither
Lessee, Guarantor nor Borrower shall have the right to withdraw any funds from
the Lockbox Account and funds shall only be withdrawn from the Lockbox Account
by Trustee and disbursed as follows: (i) upon the
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<PAGE> 36
written request of Lessee or Guarantor accompanied by such certifications,
invoices and documentation as may be required by the Controlling Party,
Controlling Party, on a monthly basis, in advance, shall instruct Trustee in
writing to withdraw a specified amount from the Lockbox Account up to an amount
equal to 115% of the amount of monthly Operating Expenses set forth in the most
recent Budget approved by the Controlling Party pursuant to the Loan Agreement,
which amount shall be disbursed by Trustee to Lessee or Guarantor for
application in accordance with Section 2 of the Flow of Funds Agreement in
payment of such Operating Expenses; and (ii) on a monthly basis after the
disbursements by Trustee from the Lockbox Account in accordance with the
foregoing clause (i), Trustee shall disburse the remaining amount in the Lockbox
Account in accordance with Section 2 of the Flow of Funds Agreement.
Notwithstanding the foregoing, upon the occurrence of the Termination Date, all
amounts in the Lockbox Account shall be disbursed pursuant to Section 4.2 of
this Trust Agreement. Each of Lessee, Guarantor and Borrower hereby irrevocably
appoints each of Trustee, Servicer and Controlling Party and such agents as may
be designated by such persons as attorney in fact for Lessee and Borrower to
execute or endorse checks and other receipts and to do all things deemed
necessary or convenient by Trustee, Servicer or Controlling Party to effect
possession and control of the funds in the Lockbox Account. Monies in the
Lockbox Account shall be invested in Permitted Investments pursuant to Section
3.11 hereof.
3.5 SECTION I AND C ACCOUNT.
(a) Establishment of I and C Account. Trustee has established a
separate account at First Chicago, meeting the requirements of an Eligible
Account, and which account shall be known as the "I AND C ACCOUNT", account
number 204685-002. Amounts received by Trustee in respect of any insurance
proceeds or Condemnation awards shall be deposited in the I and C Account and
shall be disbursed pursuant to this Section 3.5. Each of Borrower and Lessee
hereby acknowledges that it has no further ownership of the I and C Account and
funds therein and has no rights thereto, except as expressly provided in this
Trust Agreement.
(b) Disbursements from I and C Account. Upon Trustee's receipt of a
Written Direction, funds in the I and C Account that do not constitute Total
Loss Casualty/Condemnation Proceeds shall be disbursed by Trustee pursuant to
Section 4.4 of the Loan Agreement. Funds in the I and C Account that constitute
Total Loss Casualty/Condemnation Proceeds shall be disbursed by Trustee, upon
Trustee's receipt of a Written Direction, pursuant to Section 4.2(c) of this
Trust Agreement. In the event that the Total Loss Casualty/Condemnation Proceeds
of the affected Property for which a loss or damage has occurred are
insufficient to fully fund the payments required under Section 4.2(c) of this
Trust Agreement with respect to such loss or damage, Trustee, upon receipt of a
Written Direction, shall instruct Lessee to deposit cash into the I and C
Account in an amount sufficient to fully fund the payments required under
Section 4.2(c) of this Trust Agreement with respect to such loss or damage.
Monies in the I and C Account shall be invested in Permitted Investments
pursuant to Section 3.11 hereof and interest thereon shall be credited to the I
and C Account.
3.6 SECTION PAYMENT OF SURETY PREMIUMS. Trustee has established a separate
account at First Chicago meeting the requirements of an Eligible Account, which
account shall be known as
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<PAGE> 37
the "Premium Fund", account number 204685-003 (the "PREMIUM FUND"). Trustee
shall deposit into the Premium Fund all funds received by Trustee on account of
Surety Premiums. The Premium Fund shall be held for the sole and exclusive
benefit of Surety until such time, if any, when a Premium Escrow has occurred or
a Surety Loss of Premium has occurred, after which time funds in the Premium
Fund constituting Base Surety Premiums shall be held for the benefit of Lender.
Trustee shall pay to Surety (or, following a Surety Loss of Premium, as directed
by Lender, except that the Termination Premium and the Early Termination Premium
shall always be payable to Surety or a Surety Replacement, as applicable) the
following amounts:
(a) The Base Surety Premium, which shall be payable in accordance with
Article II of the Flow of Funds Agreement until the Termination Date has
occurred, at which time Base Surety Premiums shall be payable in accordance with
the terms and provisions of Section 4.2 of this Trust Agreement and the
Reimbursement Agreement.
(b) The Termination Premium, which shall be payable upon the
Termination Premium Payment Date in accordance with the terms and provisions of
Section 4.2 of this Trust Agreement and the Reimbursement Agreement.
(c) The Early Termination Premium, which shall be payable in accordance
with the terms and provisions of Section 4.2 of this Trust Agreement and the
Reimbursement Agreement.
(d) Trustee shall, upon receipt of a Written Direction, enforce its
right to receive any of the foregoing payments from Borrower. Borrower hereby
promises to pay to Trustee all Surety Premiums that Trustee is obligated to pay
under this Section 3.6 and the Reimbursement Agreement. Trustee hereby promises
to pay to Surety all Surety Premiums in the Premium Fund to which Surety is
entitled. Upon Trustee's receipt of notice from Lender that a Premium Escrow or
a Surety Loss of Premium has occurred, Trustee promises to pay funds in the
Premium Fund constituting Base Surety Premiums to, or as directed by, Lender.
(e) Monies in the Premium Fund shall be invested in Permitted
Investments by Trustee pursuant to Section 3.11 hereof and interest thereon
shall be credited to the Premium Fund.
(f) Disbursements from the Tax and Insurance Escrow Fund. Prior to an
Event of Default and upon Trustee's receipt of Written Direction, monies in the
Tax and Insurance Escrow Fund shall be disbursed by Trustee to pay insurance
premiums on the Properties, if applicable, and real estate taxes and assessments
on the Properties, as more particularly described in Sections 4 and 9 of the
Mortgages. Monies in the Tax and Insurance Escrow Fund shall be invested in
Permitted Investments pursuant to Section 3.11 hereof and earnings thereon up to
an amount of $60,000 per annum shall be for the benefit of Lender and earnings
thereon in excess of $60,000 per annum shall be credited against amounts to be
deposited by Lessee in the Tax and Insurance Escrow Fund as the same become due.
3.7 SECTION INTENTIONALLY OMITTED.
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3.8 SECTION PAYMENT PROCEDURE PURSUANT TO SURETY BOND. The Parties
acknowledge and confirm that they have received and are familiar with the terms
of the Surety Bond. Trustee hereby accepts delivery of the Surety Bond and the
Backstop Policy for the sole and exclusive benefit of Lender. At the direction
of Lender, and upon receipt of written notice from Lender that a Deficiency (as
such term is defined in the Surety Bond) has occurred, Trustee shall execute and
deliver to Surety the Surety Bond Payment Certificate (as defined in the Surety
Bond), which shall be presented to Trustee by Lender in a completed form except
for Trustee's signature. Upon receipt of written notice that Lender has been
ordered to reimburse a Preference Amount (as defined in the Surety Bond),
Trustee shall execute and deliver to the Surety the Notice of Preference Claim
(as defined in the Surety Bond), which shall be presented to Trustee by Lender
in a completed form except for Trustee's signature. Trustee shall deliver such
Surety Bond Payment Certificate or Notice of Preference Claim to the Surety
within two (2) Business Days of receipt from Lender. Trustee shall direct Surety
to remit any payment by Surety on the Surety Bond directly to Lender or other
Holder of the Note, and if Trustee nevertheless receives any such payment, it
shall immediately remit the same to Lender. No Holder other than Lender or other
Holder of the Note shall have any interest in payments pursuant to the Surety
Bond or the Backstop Insurer.
3.9 SECTION TRUST FUNDS. All monies received by Trustee under the
provisions of this Trust Agreement shall be deemed to be trust funds to be held
and applied in accordance with the provisions hereof and shall be fully and
continuously held for the benefit of the Beneficiaries. Such monies shall not be
subject to lien or attachment of any creditor of any Settlor, Beneficiary or
Trustee. If any monies held by Trustee pursuant to this Trust Agreement (except
for payments received by Trustee under the Surety Bond or the Backstop Policy)
are requested to be disbursed by any Beneficiary, and such disbursement is not
approved by Written Direction or other approval to the extent required
hereunder, Trustee may request such approval or consent by Controlling Party,
and if such approval or consent is not given or rejected within five (5)
Business Days after Trustee's written request, Trustee shall make a second
request, designated in ten-point type "SECOND AND FINAL NOTICE," and if such
second notice is not responded to within ten (10) Business Days of such second
notice, Trustee is hereby authorized and directed to make the requested
disbursement. Notwithstanding anything to the contrary contained herein, if a
court of competent jurisdiction finds that Guarantor, and each of the Settlors
to the extent any of them acquires any interest therein, has not fully granted,
bargained, sold, alienated, remised, released, conveyed, assigned, transferred,
mortgaged, hypothecated, pledged, set over and confirmed to Trustee, all and
singular (i) the Collateral and (ii) any and all property of every kind and
nature which, from time hereafter, is delivered, conveyed, pledged, assigned or
transferred to Trustee pursuant to this Trust Agreement, then Guarantor and each
Settlor hereby acknowledge that each has pledged and granted a security interest
therein to Trustee pursuant to the terms of the Security Documents and other
Transaction Documents.
3.10 SECTION INVESTMENT OF FUNDS. Monies held by Trustee hereunder shall be
invested by Trustee only in Permitted Investments upon a Written Direction. Any
investment of funds in a Deposit Account described above shall be made in the
name of Trustee (in its capacity as such). Trustee shall not be responsible for
any loss resulting from any such investment, including without limitation any
loss from the redemption or sale of any such investment. All income
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<PAGE> 39
derived from the investment of monies in a particular Deposit Account shall be
deposited in that Deposit Account, unless otherwise specified, for application
in accordance with the provisions of this Trust Agreement or the other
Transaction Documents, if applicable. If Trustee receives no Written Direction
as described in the first sentence of this Section, Trustee shall invest all
such monies in an investment of the type set forth in clause (f) of the
definition of Permitted Investments.
3.11 SECTION LETTER OF CREDIT PROCEEDS ACCOUNT.
(a) Establishment of Letter of Credit Proceeds Account. Trustee has
established a separate account at First Chicago meeting the requirements of an
Eligible Account, which account shall be known as the "LETTER OF CREDIT PROCEEDS
ACCOUNT", account number 204685-005. If any letter of credit issued pursuant to
Article 1 hereof is drawn in accordance with the terms and provisions hereof and
thereof, the proceeds of such drawing shall be deposited into the Letter of
Credit Proceeds Account.
(b) Disbursements from the Letter of Credit Proceeds Account. Upon
presentation to Trustee of a certificate signed by Lender certifying that a
Payment Surety Default or a Surety Acceleration Event has occurred and is
continuing, Trustee shall disburse the amounts requested from the Letter of
Credit Proceeds Account to or at direction of Lender as specified by Lender in
such certification. Monies in the Letter of Credit Proceeds Account shall be
invested in Permitted Investments by Trustee pursuant to Section 3.11 hereof and
interest thereon shall be credited to the Letter of Credit Proceeds Account.
3.12 SECTION LESSEE LETTER OF CREDIT PROCEEDS ACCOUNT.
(a) Establishment of Lessee Letter of Credit Proceeds Account. Trustee
has established a separate account at First Chicago meeting the requirements of
an Eligible Account, which account shall be known as the "LESSEE LETTER OF
CREDIT PROCEEDS ACCOUNT", account number 204685-006. If any Lessee Letter of
Credit issued pursuant to Section 3.3 hereof is drawn in accordance with the
terms and provisions hereof and thereof, the proceeds of such drawing shall be
deposited into the Lessee Letter of Credit Proceeds Account. Each of Lessee and
Guarantor hereby acknowledges that it has no further ownership of the Lessee
Letter of Credit Proceeds Account and funds therein and has no rights thereto,
except as expressly provided in the Security Documents.
(b) Disbursements from the Lessee Letter of Credit Proceeds Account.
Monies shall be disbursed by the Trustee from the Lessee Letter of Credit
Proceeds Account in the same manner as monies are disbursed from the Lease
Reserve Account pursuant to Section 3.3(d). Monies in the Lessee Letter of
Credit Proceeds Account shall be invested in Permitted Investments pursuant to
Section 3.11 hereof and interest thereon shall be credited to the Lessee Letter
of Credit Proceeds Account.
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3.13 SECTION JV SPRINGING COLLATERAL ACCOUNT.
(a) Establishment of JV Springing Collateral Account. Trustee has
established a separate account at First Chicago meeting the requirements of an
Eligible Account, which account shall be known as the "JV SPRINGING COLLATERAL
ACCOUNT", account number 204685-007. Upon the occurrence of a JV Triggering
Event and at the direction of the Controlling Party, Guarantor shall immediately
fund the JV Springing Collateral Account with cash or a letter of credit from a
financial institution acceptable to the Controlling Party in an amount equal to
107% of the sum of (x) the estimated purchase price of the JV Interests
(including any deferred amounts which may be due to the limited partners in any
Joint Venture under Sections 7.3(d) and (e) of any Joint Venture Agreement, such
amounts, the "Deferred JV Amounts") and (y) the projected capital contributions
to be made by the limited partners in the Joint Ventures to fund operating
losses from the Properties during the next three months, each as determined by
the Controlling Party. The amount required to be maintained by Guarantor in the
JV Springing Collateral Account shall be increased or decreased quarterly (on a
calendar basis) to reflect any increases or decreases in the estimated purchase
price of the JV Interests (including the Deferred JV Amounts) and the projected
capital contributions to be made by the limited partners in the Joint Ventures
to fund operating losses from the Properties during the applicable calendar
quarter, each as determined by the Controlling Party. Guarantor hereby
acknowledges that it has no further ownership of the JV Springing Collateral
Account and funds therein and has no rights thereto, except as expressly
provided herein.
(b) Disbursements from JV Springing Collateral Account. Upon
presentation to the Controlling Party of a Purchase of JV Interests Certificate
(as hereinafter defined) executed by the Guarantor, the Controlling Party shall
instruct Trustee to, and Trustee shall, disburse the applicable portion of the
proceeds in the JV Springing Collateral Account (as specified in such Purchase
of JV Interests Certificate) to the Controlling Party solely for the purpose of
purchasing the JV Interests specified in such Purchase of JV Interests
Certificate. As used herein, the term "PURCHASE OF JV INTERESTS CERTIFICATE"
shall mean a certificate duly executed by Guarantor that sets forth (i) the
amount invested by the limited partner whose JV Interest is being purchased,
(ii) a calculation, in reasonable detail, setting forth the amount to be paid to
such limited partner based upon the amount set forth in the foregoing clause
(i), and basis upon which the purchase price was calculated based upon the
applicable Joint Venture Agreement relating to such JV Interest, and (iii) the
wire transfer instructions for the disbursement of the proceeds used to purchase
the JV Interests of such Joint Venture, which instructions shall provide that
such proceeds be directly payable to the seller of such JV Interests. Promptly
upon the purchase of any JV Interests, Guarantor shall provide the Controlling
Party with evidence of the transfer of such JV Interests to Guarantor, in form
and substance satisfactory to the Controlling Party. Monies in the JV Springing
Collateral Account shall be invested in Permitted Investments by Trustee
pursuant to Section 3.11 hereof and interest thereon shall be credited to the JV
Springing Collateral Account.
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3.14 SECTION OPERATING RESERVE ACCOUNT.
(a) Establishment of Operating Reserve Account. Trustee has established
a separate account at First Chicago meeting the requirements of an Eligible
Account, which account shall be known as the "OPERATING RESERVE ACCOUNT",
account number 204685-008. Upon execution of this Trust Agreement, Guarantor
shall deposit not less than $9,264,286 of proceeds received from the Joint
Ventures on the Closing Date into the Operating Reserve Account. On the
Additional Properties Closing Date, Guarantor shall deposit an additional amount
of not less than $5,000,000 of proceeds received from the Joint Ventures or
funded by Guarantor on the Additional Properties Closing Date into the Operating
Reserve Account. Each of Lessee and Guarantor hereby acknowledges that it has no
further ownership of the Operating Reserve Account and funds therein and has no
rights thereto, except as expressly provided herein.
(b) Additional Deposits into the Operating Reserve Account. On November
15, 1999, Lessee shall provide Surety and Lender with a written report
calculating the Operating Loss Amount (as hereinafter defined) for the month of
September, 1999. Not later than two (2) Business Days following November 15,
1999, Guarantor shall deposit funds into the Operating Reserve Account in an
amount equal to such Operating Loss Amount. Thereafter, within forty-five (45)
days after the end of each month, commencing with the month ending October,
1999, Lessee shall provide Surety and Lender with a written report calculating
the Operating Loss Amount for such month. Not later than two (2) Business Days
after the delivery of each such report, Guarantor shall deposit funds into the
Operating Reserve Account in an amount equal to the Operating Loss Amount for
such month; provided that, when the aggregate of all deposits made by Guarantor
into the Operating Reserve Account, including deposits made pursuant to
subsection 3.15(a), equals $17,000,000 (without regard to any withdrawals
therefrom), (i) Lessee shall no longer be obligated to provide Surety and Lender
with a monthly written report calculating the Operating Loss Amount and (ii)
Guarantor shall no longer be obligated to deposit funds into the Operating
Reserve Account.
As used herein, the term "OPERATING LOSS AMOUNT" shall mean, for any
period of calculation, an amount equal to the greater of (i) the number four
multiplied by the Actual Monthly Operating Loss (as hereinafter defined), and
(ii) the sum of the projected monthly operating losses set forth in Schedule
4.10 to the Loan Agreement for the six month period commencing with the month
immediately following the month in which the Operating Loss Amount calculation
occurs; provided that, if the six month period ends on a date after the last
date set forth in Schedule 4.10 to the Loan Agreement, the term "OPERATING LOSS
AMOUNT" shall mean the number four multiplied by the Actual Monthly Operating
Loss.
As used herein, the term "ACTUAL MONTHLY OPERATING LOSS" shall mean,
for any period of calculation, an amount equal to the lesser of (i) the number
zero and (ii) (A) the Operating Revenues for the most recent month in which
Lessee has delivered to Lender the monthly financial statements required under
the Loan Agreement, minus (B) the sum for such month of the amounts of
Categories (i) through (xiii) set forth in the Flow of Funds Agreement.
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(c) Disbursements from Operating Reserve Account.
(i) So long as no Event of Default exists, Lessee shall be
permitted to withdraw funds from the Operating Reserve Account to fund
operating losses at one or more of the Properties upon delivery of an
Operating Reserve Account Certificate in the form attached hereto as
Exhibit A, which funds shall be applied in accordance with Article II
of the Flow of Funds Agreement; provided that, prior to November 15,
1999, Lessee shall not be permitted to withdraw funds from the
Operating Reserve Account if the remaining balance in the Operating
Reserve Account after such requested withdrawal would be less than
$6,000,000. If an Event of Default exists at any time, Lessee shall
have no right to withdraw funds from the Operating Reserve Account and
funds therein shall be disbursed by Trustee, after Trustee's receipt of
a Written Direction, in accordance with Section 4.2 of this Trust
Agreement.
(ii) So long as no Event of Default exists, upon the later to
occur of (i) ALS-Clare Bridge, Inc.'s or Guarantor's purchase of the
last limited partnership interest under all of the Joint Venture
Agreements, and (ii) Lessee's achieving a LCR of at least 1.00:1.00 for
any Lease Coverage Period, Trustee shall disburse, after Trustee's
receipt of a Written Direction, any funds remaining in the Operating
Reserve Account as Operating Revenues governed by the Flow of Funds
Agreement.
(iii) Monies in the Operating Reserve Account shall be invested
in Permitted Investments by Trustee pursuant to Section 3.11 hereof and
interest thereon shall be credited to the Operating Reserve Account.
3.15 SECTION ADDITIONAL RESERVE ACCOUNT.
(a) Establishment of Additional Reserve Account. Trustee has
established a separate account at First Chicago meeting the requirements of an
Eligible Account, which account shall be known as the "ADDITIONAL RESERVE
ACCOUNT", account number 204685-009. Upon the occurrence of a default under
Section 7.1(p)(i) of the Loan Agreement and at the direction of Lender, Trustee
shall instruct the Lessee to deposit cash into the Additional Reserve Account in
an amount equal to $10,000,000. If Lessee deposits cash in the Additional
Reserve Account in such amount within ten (10) Business Days following Trustee's
instruction, no Event of Default shall occur by virtue of the default under
Section 7.1(p)(i) of the Loan Agreement. Lessee hereby acknowledges that it has
no further ownership of the Additional Reserve Account and funds therein and has
no rights thereto, except as expressly provided in the Loan Agreement and this
Trust Agreement.
(b) Disbursements from Additional Reserve Account. So long as no Event
of Default exists other than a Downgrade Surety Default, if Lessee achieves a
DSCR of at least 1.40:1.00 during any consecutive twelve month period following
Lessee's deposit of cash into the Additional Reserve Account pursuant to Section
3.16(a), then the funds in the Additional Reserve Account shall be disbursed by
Trustee in accordance with Article II of the Flow of Funds Agreement. Upon
presentation to Trustee of a certificate signed by the Controlling Party
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certifying that an Event of Default has occurred and is continuing (other than
an Event of Default caused by a Downgrade Surety Default), Trustee shall
disburse the proceeds in the Additional Reserve Account in accordance with
Section 4.2(b) of this Trust Agreement. Monies in the Additional Reserve Account
shall be invested in Permitted Investments by Trustee pursuant to Section 3.11
hereof and interest thereon shall be credited to the Additional Reserve Account.
3.16 SECTION RENT. Any payments of Rent made by Lessee to Trustee shall be
made on behalf of and at the direction of Borrower.
ARTICLE 4
APPLICATION OF PROCEEDS OF COLLATERAL
4.1 SECTION REMEDIES; DIRECTION OF PROCEEDINGS. If an Event of Default has
occurred and is continuing, each Party agrees that it shall not exercise, and
Controlling Party shall not direct Trustee to exercise, any Remedies any of them
or Trustee may have under the Transaction Documents, except as permitted in this
Trust Agreement. Upon the occurrence and during the continuance of an Event of
Default under the Loan Agreement that comes to the attention of Trustee or a
Party, such Person shall deliver written notice thereof to the other Parties
(other than Borrower) within two (2) Business Days of becoming aware thereof,
and the Controlling Party shall be entitled, at its option, to direct or refrain
from directing Trustee to exercise any Remedies, except as to Material Actions,
which shall be addressed in accordance with Section 2.9 above. Notwithstanding
the foregoing, Trustee shall only be deemed to be aware of any Event of Default
and be required to notify the other Parties of such Event of Default to the
extent set forth in Section 5.13 below. Upon the occurrence and during the
continuance of an Event of Default under the Loan Agreement, the Controlling
Party, shall be entitled to exercise (subject to Section 2.10 hereof), or direct
Trustee to exercise, as applicable, by a Written Direction executed and
delivered to Trustee, any Remedies in order to realize on the Collateral or for
the appointment of a receiver or any other proceedings under the Transaction
Documents.
4.2 SECTION RIGHTS IN THE COLLATERAL; APPLICATION OF MONIES COLLECTED.
(a) Any Real Estate Capital Proceeds realized and received by Trustee
after (i) the occurrence of an Event of Default or (ii) the Lease Term
Expiration Date, shall be applied on a daily basis in the following order:
(i) to the payment of all Collateral Collection Expenses
and of all fees of, and expenses and advances incurred or made by,
Trustee or any other amounts owed or due to Trustee under this Trust
Agreement;
(ii) to Lender, in payment of all Loan Obligations (including
amounts equal to the difference between the Default Rate and the
Interest Rate) other than (1) those specified in clause (iii) below, or
(2) those related to the Subrogation Amount, until Lender acknowledges
receipt of all such amounts owed to it;
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(iii) to Lender, in payment of principal and interest (at the
Interest Rate) due on the Note, first to payment of interest and then
to payment of principal, excluding any Subrogation Amount, until Lender
acknowledges receipt of all such amounts due on the Note;
(iv) to Surety, an amount equal to all Reimbursement
Obligations and all Subrogation Amounts then due and owing to Surety
other than Reimbursement Obligations in respect of the Residual
Reimbursement Obligation or any interest due thereon, or the
Termination Premium or Early Termination Premium, until the Surety
acknowledges receipt of all such amounts owed to it;
(v) to each of Surety and Borrower, pari passu, (1) in the case
of the Surety, in payment of interest due on the Residual Reimbursement
Obligation, until Surety acknowledges receipt of all such amounts owed
to Surety, and (2) in the case of Borrower, in payment of the Yield,
until Borrower acknowledges receipt of the Yield;
(vi) to each of Surety and Borrower, pari passu, (1) in the
case of the Surety, in payment of the Residual Reimbursement
Obligation, until Surety acknowledges receipt of all such amounts owed
to Surety, and (2) in the case of Borrower, provided that no Lease
Event of Default exists, in payment of the Equity Amount until Borrower
acknowledges receipt of the full Equity Amount;
(vii) to Surety, an amount equal to the Termination Premium or
Early Termination Premium;
(viii) to Borrower, an amount equal to any other liabilities
owed to Borrower, until Borrower acknowledges receipt of all such
amounts; and
(ix) if any surplus remains, to Lessee or as a court of
competent jurisdiction may direct.
(b) Any Personal Property Capital Proceeds received by Trustee after
(i) the occurrence of an Event of Default or (ii) the Lease Term Expiration
Date, shall be applied on a daily basis in the following order:
(i) to the payment of all Collateral Collection Expenses and of
all fees of, and expenses and advances incurred or made by, Trustee or
any other amounts owed or due to Trustee under this Trust Agreement;
(ii) to Lender, in payment of all Loan Obligations (including
amounts equal to the difference between the Default Rate and the
Interest Rate) other than (1) those specified in clause (iii) below or
(2) those related to the Subrogation Amount, until Lender acknowledges
receipt of all such amounts owed to it;
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(iii) to Lender, in payment of principal and interest (at the
Interest Rate) due on the Note, first to payment of interest and then
to payment of principal, excluding any Subrogation Amount, until Lender
acknowledges receipt of all such amounts due on the Note;
(iv) to Surety, an amount equal to principal and interest (at
the Interest Rate) on the Note which is payable to the Surety as a
Subrogation Amount, or payable as Reimbursement Obligations arising out
of and equal in amount to the payment of Insured Obligations (as
defined in the Surety Bond), first to payment of interest and then to
payment of principal, until the Surety acknowledges receipt of all such
amounts owed to it;
(v) in payment of Reimbursement Obligations, other than the
Termination Premium and the Early Termination Premium, to the extent
not paid in any of the foregoing clauses, until Surety acknowledges
receipt of all such amounts owed to Surety;
(vi) to each of Surety and Borrower, pari passu, (1) in the
case of the Surety, in payment of the Termination Premium and Early
Termination Premium, until Surety acknowledges receipt of the full
Termination Premium and Early Termination Premium, and (2) in the case
of Borrower, provided no Lease Event of Default exists, in payment of
the Equity Amount until Borrower acknowledges receipt of the full
Equity Amount;
(vii) to Borrower, in an amount equal to any other liabilities
owed to Borrower, until Borrower acknowledges receipt of all such
amounts; and
(viii) if any surplus remains, to Lessee or as a court of
competent jurisdiction may direct.
(c) Total Loss Casualty/Condemnation Proceeds received by Trustee shall
be applied by Trustee in the following order:
(i) to Lender, in payment of the Lender Required Casualty/
Condemnation Payment, until Lender acknowledges receipt of such amount;
(ii) to Surety, in payment of the Surety Required
Casualty/Condemnation Payment, until Surety acknowledges receipt of
such amount; and
(iii) to Borrower, in payment of the Borrower Required
Casualty/Condemnation Payment, until Borrower acknowledges receipt of
such amount.
Notwithstanding anything to the contrary contained in this Trust Agreement,
Section 4.2 of this Trust Agreement shall continue to be operative in spite of
the fact that all obligations of Surety or Backstop Insurer under the Surety
Bond or Backstop Policy, respectively, have been satisfied.
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4.3 SECTION PROPERTIES. Notwithstanding any provision to the contrary
contained in this Trust Agreement or any of the Security Documents, Trustee
shall not be required to acquire possession of or take any other action with
respect to the Properties, upon a Written Direction, if as a result of any such
action, Trustee would be considered to hold title to, to be a
"mortgagee-in-possession" of, or to be an "Owner" or "operator" of the
Properties within the meaning of any Environmental Law, or Trustee otherwise
determines in its sole and absolute discretion that it would incur any liability
related to any of the Properties under Environmental Laws or any other
liability, unless Trustee receives adequate security as set forth in Section 5.4
below.
4.4 SECTION ADDITIONAL SURETY AGREEMENTS. Until the expiration of the Term
of the Surety Bond and the payment of all sums payable to Trustee under the
Surety Bond:
(a) If, at the direction of Lender as permitted hereby, Trustee
commences an action to foreclose the Mortgages, Surety shall not interpose any
defense or counterclaim to, or otherwise contest, such action and hereby waives
any defenses or counterclaims it may have with respect to such action.
(b) Intentionally Omitted.
(c) If there shall occur an Event of Bankruptcy (as defined in the
Surety Bond) with respect to Borrower, Surety shall not, if a Surety Event of
Default is then existing or Backstop Insurer's S&P Rating is below Investment
Grade, (i) oppose or support any opposition of any motion for relief from stay
filed by or at the direction of Lender, or any plan of liquidation or
reorganization that Lender supports or votes for, (ii) vote for or otherwise
support any plan of liquidation or reorganization without the prior written
consent of Lender, or (iii) object to the entry of any order opposing any cash
collateral stipulation, adequate protection stipulation or similar stipulation
executed by or at the direction of Lender.
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4.5 SECTION ADDITIONAL LENDER AGREEMENTS.
(a) Trustee, by its execution and delivery of this Trust Agreement,
hereby acknowledges receipt of the original Note and agrees to maintain
possession of the Note in a secure and safe location. Trustee agrees to, and the
Parties acknowledge that Trustee shall, hold the Note as custodian for Lender
exclusively. Trustee shall deliver the Note to Surety within two (2) Business
Days following its receipt of a Written Direction from Surety requesting such
delivery, which Written Direction shall set forth a statement to the effect that
possession of the Note by Surety is necessary or reasonably desirable for the
enforcement by Surety of any rights it may have under the Security Documents or
this Trust Agreement and that Surety is then entitled under this Trust Agreement
to enforce such rights. Surety shall be entitled to such possession solely for
the purposes and to the extent described in the preceding sentence. To the
extent that the Note is released to Surety, Surety shall retain custody of the
Note in accordance with customary and prudent commercial practices for custody
of promissory notes similar to the Note, and shall promptly return the Note to
Trustee when the Surety's possession thereof is no longer necessary or desirable
as aforesaid. Notwithstanding the foregoing, Trustee shall not release the Note
to Surety at any time when Trustee has notice that a Surety Default has occurred
and is continuing. Trustee shall deliver the Note to Lender within two (2)
Business Days following request by Lender at any time that Lender constitutes
the Controlling Party and possession of the Note by Lender is necessary or
reasonably desirable for the enforcement by Lender of any rights it may have
under the Security Documents or this Trust Agreement and Lender shall return the
Note to Trustee when possession by Lender is no longer necessary or desirable as
aforesaid, provided that Lender shall be entitled to retain possession of the
Note at any time and from time to time after the occurrence of a Surety Default.
Trustee shall from time to time, as requested by Lender, deliver to or at the
direction of Lender a written acknowledgment to the effect that the Note is in
the possession of Trustee as custodian for Lender as described above, unless
Trustee has delivered the Note to Surety or Lender pursuant to the provisions
set forth above. Upon written request of Lender at any time after the Note has
been released to Surety and prior to return of the Note by Surety to Trustee,
Surety shall execute and deliver to Lender a written acknowledgment to the
effect that the Note is in the possession of Surety, as custodian for Lender.
Lender hereby agrees to reasonably cooperate with Trustee and/or Surety to
accomplish the purposes set forth in this paragraph.
(b) Lender acknowledges and agrees that, at any time at Surety's sole
discretion and notwithstanding any contrary provisions in the Note and other
Security Documents, during the existence of any Event of Default (other than a
cross-default to the Reimbursement Agreement) under the Loan Agreement prior to
a Secondary Market Transaction (as defined below), Surety may purchase the Note
upon at least thirty (30) days' prior written notice to Lender and upon payment
in full of the Purchase Percentage (as defined below) of all principal then
outstanding (after deducting the aggregate amount of principal payments made by
Surety under the Surety Bond), and 100% of accrued interest and other Loan
Obligations then outstanding (and any Loan Obligation that would have existed if
the Borrower had prepaid the Note in full on such date), except that Surety
shall only pay one-half of the Prepayment Consideration, as defined in and
required under the Note. The provisions of this clause (b) are applicable only
to Surety, and have
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no applicability to Borrower and confer no rights of any sort upon Borrower. For
purposes of the foregoing, the "PURCHASE PERCENTAGE" shall be equal to, as of
any date of determination, the greater of (i) 100% and (ii) a price, expressed
as a percentage of par, at which Lender carries the Loan on its regularly
maintained internal position sheets (and Lender shall provide a Surety upon
request copies of relevant excerpts from its position sheets) (without regard to
the existence of a Loan Event of Default or any material breach of covenant or
representation under the Loan or any of the Security Documents or Insurance
Documents), as adjusted to take into account any hedge profits and losses that
would be incurred by Lender upon the simultaneous unwinding of any hedging
arrangements entered into by Lender with respect to its rights under the Loan).
(c) Lender further acknowledges and agrees that during the existence of
any Event of Default under the Loan Agreement (other than a cross-default to the
Reimbursement Agreement) at any time after a Secondary Market Transaction, that
Surety may purchase the Note upon at least thirty (30) days' prior written
notice to Lender and upon payment in full of all principal then outstanding
(after deducting the aggregate amount of principal payments made by Surety under
the Surety Bond), and 100% of accrued interest and other Loan Obligations then
outstanding (and any Loan Obligation that would have existed if Borrower had
prepaid the Note in full on such date). Upon payment by Surety of the required
sums required described above in this clause (c), Lender shall execute such
documentation, including instruments of assignment and transfer, to evidence or
more fully effectuate the transfer of the Note and the Security Documents, as
Surety may reasonably request, in each case at the expense of Surety and
following request by Surety (which request contains the instrument proposed to
be executed). Upon any such purchase of the Note, Surety shall be the
Controlling Party hereunder and shall exclusively administer and manage all
affairs concerning the Note and the Loan Documents without the necessity of any
consent or approval of Lender, and Lender shall instruct Trustee to accept an
endorsement of the Surety Bond from Trustee discharging Surety from all further
liability thereunder.
(d) LENDER SHALL, AT ITS SOLE COST AND EXPENSE, PROTECT, DEFEND,
INDEMNIFY AND HOLD HARMLESS SURETY, ANY AFFILIATES OF SURETY AND THEIR
RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS FROM AND AGAINST ANY AND
ALL CLAIMS, SUITS, LIABILITIES, ACTIONS, PROCEEDINGS, COSTS, LOSSES (INCLUDING
WITHOUT LIMITATION, ANY SURETY PREMIUMS THAT WOULD OTHERWISE HAVE BEEN PAYABLE
TO SURETY UNDER ANY OF THE LOAN DOCUMENTS PRIOR TO A SURETY EVENT OF DEFAULT),
FEES, DAMAGES, AWARDS, PUNITIVE DAMAGES, AND FORESEEABLE AND UNFORESEEABLE
CONSEQUENTIAL DAMAGES, OF WHATEVER KIND OR NATURE (INCLUDING BUT NOT LIMITED TO
REASONABLE ATTORNEYS FEES, FEES OF EXPERT WITNESSES AND CONSULTANTS AND OTHER
COSTS OF DEFENSE), IMPOSED UPON OR INCURRED BY OR ASSERTED AGAINST THE
APPLICABLE INDEMNIFIED PARTY BY REASON OF OR IN ANY MANNER RELATING TO LENDER'S
FAILURE TO TIMELY FUND ONE OR MORE OF THE ADVANCES THAT LENDER IS REQUIRED TO
MAKE UNDER SECTION 2.1 OF THE LOAN AGREEMENT, AS IT MAY BE AMENDED FROM TIME TO
TIME. THE PROVISIONS OF THIS PARAGRAPH SHALL SURVIVE, AND SHALL CONTINUE TO BE
APPLICABLE TO
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THE ORIGINAL "LENDER" NAMED HEREIN, NOTWITHSTANDING ANY ASSIGNMENT OF SOME OR
ALL OF LENDER'S INTERESTS HEREUNDER OR UNDER THE NOTE.
(e) Lender shall provide to Surety and Trustee contemporaneous copies
of the notices provided by Lender to Borrower and/or Lessee under Section 1.3 of
the Note regarding the applicable interest rate for the outstanding balance of
the Note.
(f) If, at the direction of Surety as permitted hereby, Trustee
commences an action to foreclose the Mortgages, Lender shall not interpose any
defense or counterclaim to, or otherwise contest, such action and hereby waives
any defenses or counterclaims it may have with respect to such action.
ARTICLE 5
TRUSTEE
5.1 SECTION ACCEPTANCE OF TRUSTS; CERTAIN DUTIES AND RESPONSIBILITIES.
Trustee accepts and agrees to execute the trusts imposed upon it by this Trust
Agreement, but only upon the terms and conditions set forth in this Trust
Agreement. By its execution and delivery of this Trust Agreement, (a) Trustee
acknowledges the assignment of the Trust Estate to it as trustee and declares
that it holds and will hold the Trust Estate in trust, upon the conditions
herein set forth, for the use and benefit of all present and future
Beneficiaries in accordance with their rights hereunder, and (b) Trustee
acknowledges that it holds the Surety Bond and the Backstop Policy for the
exclusive benefit of Lender. Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Trust Agreement and no implied
covenants or obligations should be read into this Trust Agreement or the Loan
Documents against Trustee. The permissive right of Trustee to do things
enumerated in this Trust Agreement shall not be construed as a duty.
5.2 SECTION FEES, CHARGES AND EXPENSES OF TRUSTEE. Trustee shall be
entitled to payment by and from (i) Borrower for the Base Surety Premium, Early
Termination Premium and Termination Premium to be paid to Surety and (ii) Lessee
or Guarantor for Trustee's fees as provided in the Fee Letter for its services
rendered hereunder and for payment or reimbursement for all advances, counsel
fees and other expenses made or incurred by Trustee in connection with this
Trust Agreement, the Servicing Agreement, any of the Security Documents or the
Surety Bond. Trustee shall have a right of payment prior to incurring advances,
fees, costs and expenses. The obligations of Borrower, Lessee and Guarantor
under this Section 5.2 to compensate Trustee or to pay or reimburse Trustee for
expenses, disbursements or advances shall survive satisfaction and discharge of
this Trust Agreement and the resignation and removal of Trustee.
5.3 SECTION AUTHORIZATION TO EXECUTE TRANSACTION DOCUMENTS. The Settlors
hereby authorize and direct Trustee to execute and deliver at the closing each
of the Transaction
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Documents requiring execution and delivery by it as of the date hereof, and
Trustee hereby agrees to take such action.
5.4 SECTION DUTIES OF TRUSTEE. Subject to Trustee's having been directed to
take an action by the Controlling Party in accordance with the terms of this
Trust Agreement, each Beneficiary hereby irrevocably authorizes Trustee to take
such action on behalf of such Beneficiary under the provisions of the Loan
Documents (other than the Surety Bond and the Backstop Policy), and all other
instruments, documents and agreements referred to therein (other than the Surety
Bond and the Backstop Policy), and to exercise such powers thereunder, as in
each case are specifically delegated to Trustee by the terms thereof and such
other powers as are reasonably incidental thereto. Upon receiving such
direction, Trustee is hereby irrevocably authorized to take all actions on
behalf of the Beneficiaries to enforce their rights and remedies provided for in
the Loan Documents (other than Surety Bond and the Backstop Policy) or by
applicable law with respect to the Collateral and the Liens thereon granted to
secure the Secured Obligations. Trustee agrees to make such demands and give
such notices under those Loan Documents (other than the Surety Bond and the
Backstop Policy) in its favor as may be requested pursuant to a Written
Direction, and to take such actions (including, subject to the next sentence,
advancing its own funds as necessary) to enforce the Security Documents and to
foreclose upon, collect, manage and dispose of the Collateral or any portion
thereof when and as it may be directed pursuant to a Written Direction as may be
permitted under this Trust Agreement; provided that Trustee shall not be
required to take any action that is contrary to law or the terms of this Trust
Agreement. If Trustee determines, in good faith, that the potential Collateral
Collection Expenses or any liability that could be incurred by Trustee resulting
from such action are likely to exceed the amounts available for distribution to
Trustee or there is not adequate security or indemnity, in Trustee's good faith
opinion, for such liabilities, and so notifies the Beneficiary or Beneficiaries
which have given Trustee the direction to take such action, unless and until
Trustee is provided adequate security and indemnity against the Collateral
Collection Expenses and other liabilities which may be incurred by it in taking
such action and complying with any such request or direction, including such
reasonable advances as may be requested by Trustee, Trustee will not be required
to follow such direction. In administering its rights and responsibilities
hereunder, Trustee shall take such actions as it has agreed to take hereunder or
as it is instructed to take by Written Direction, subject to the other
provisions of this Trust Agreement relating to any such action. Without limiting
the generality of the foregoing, Trustee agrees to (i) administer the Loan,
and/or cooperate in such administration with the Servicer contemplated in
Section 2.5, and (ii) provide to Surety and Lender (a) monthly statements of all
sums then on deposit in each of the accounts described in Article 3 above,
including description of the Permitted Investments in which all or a portion of
such accounts are invested; and (b) promptly following receipt by Trustee,
provide Surety and Lender with copies of any written notice relating to the
Collateral received by Trustee from a Person who is not a party to this Trust
Agreement.
5.5 SECTION REQUESTING INSTRUCTIONS. Subject to Section 1.3 above, Trustee
may at any time request Written Directions from the Controlling Party as to any
course of action or other matter relating to the performance of its duties under
this Trust Agreement with respect to the Loan Documents , and the Controlling
Party shall respond to such request in a reasonably prompt manner. Trustee shall
have the right at any time to seek instructions concerning its obligations
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hereunder from any court of competent jurisdiction. Trustee shall have no
obligation or responsibility to exercise or initiate any right, remedy, claim or
other action under or pursuant to any Loan Document unless and until Trustee has
received an appropriate instruction pursuant to this Trust Agreement, including
those instructions of Lender regarding the Surety Bond and Backstop Policy.
5.6 SECTION EMERGENCY ACTIONS. If Trustee has asked the Controlling Party
for Written Direction following the occurrence of an Event of Default under the
Loan Agreement and if the Controlling Party has not yet responded to such
request, Trustee may, but shall not be obligated to, take such actions with
regard to such Event of Default that Trustee, in good faith, believes to be
reasonably required to protect the Collateral from damage or destruction;
provided, however, that once Written Direction has been received by Trustee in
respect of such Event of Default, the actions of Trustee shall be governed
thereby and Trustee shall not take any further action which would be contrary
thereto.
5.7 SECTION DOCUMENT AMENDMENTS. An amendment, supplement, modification,
restatement or waiver of any provision of any Loan Document or the execution or
acceptance by Trustee of any Collateral Document not in effect on the date
hereof shall be effective if, and only if, consented to in writing by Lender and
Surety (provided the consent of Surety shall not be required if a Surety Event
of Default then exists). Notwithstanding the forgoing, (i) the Controlling Party
shall, in accordance with the provisions of this Trust Agreement (including,
without limitation, Section 2.8 hereof, but subject to the provisions of Section
2.9 hereof), be entitled to grant any consents and waivers under the Loan
Documents (other than the Surety Bond and the Backstop Policy), and (ii) Trustee
shall not consent to any amendment, supplement, modification or restatement to
any provision of the Surety Bond or the Backstop Policy without the prior
written consent of the Lender.
5.8 SECTION ADMINISTRATIVE ACTIONS. Trustee shall take such actions
hereunder and under the Security Documents, at the direction of the Controlling
Party as the Controlling Party may deem necessary or appropriate to perfect or
continue the perfection of the Liens on the Collateral for the benefit of the
Beneficiaries pursuant to the terms hereof; provided, however, Lender shall be
responsible for the preparation and filing of any continuation financing
statements or other Security Documents.
5.9 SECTION TRUSTEE ACTING THROUGH OTHERS. Trustee may perform any of its
duties under this Trust Agreement and the other Security Documents by or through
attorneys (which attorneys may be the same attorneys who represent any of the
Beneficiaries), agents or other Persons reasonably deemed appropriate by
Trustee. In addition, Trustee may act in good faith reliance upon the opinion or
advice of attorneys (including its in-house counsel), accountants and other
experts selected by Trustee, and any action so taken in such good faith reliance
shall be authorized and protected. In all cases Trustee may pay, and shall be
indemnified hereunder by Lessee, Guarantor and the Beneficiaries with respect
to, compensation and expenses of all such attorneys, agents or other Persons as
may be employed in connection with the performance of its duties under this
Trust Agreement and the other Security Documents.
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5.10 SECTION INDEMNIFICATION OF TRUSTEE. WITHOUT LIMITING ANY PROVISIONS OF
THE OTHER LOAN DOCUMENTS, LESSEE, SURETY AND LENDER HEREBY JOINTLY AND SEVERALLY
AGREE TO INDEMNIFY, DEFEND AND HOLD TRUSTEE, ITS OFFICERS, DIRECTORS, EMPLOYEES
AND AGENTS (INCLUDING, BUT NOT LIMITED TO, ANY ATTORNEYS ACTING AT THE DIRECTION
OR ON BEHALF OF TRUSTEE) HARMLESS AGAINST ANY AND ALL COSTS, CLAIMS, DAMAGES,
PENALTIES, LIABILITIES, LOSSES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO,
COURT COSTS AND REASONABLE ATTORNEYS' FEES AND EXPENSES AND REASONABLE EXPERT
WITNESS AND CONSULTANTS' FEES AND EXPENSES AND ANY CLAIMS OR LOSSES IN
CONNECTION WITH ENVIRONMENTAL LAWS) THAT MAY BE INCURRED BY OR ASSERTED AGAINST
TRUSTEE OR ANY SUCH OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS BY REASON OF ITS
STATUS AS TRUSTEE HEREUNDER OR WHICH PERTAIN, WHETHER DIRECTLY OR INDIRECTLY, TO
THIS TRUST AGREEMENT, THE LOAN DOCUMENTS, INCLUDING, WITHOUT LIMITATION, THE
SURETY BOND OR TO ANY ACTION OR FAILURE TO ACT OF TRUSTEE HEREUNDER OR
THEREUNDER, EXCEPT TO THE EXTENT ANY SUCH ACTION OR FAILURE TO ACT BY TRUSTEE
CONSTITUTES GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. THE JOINT AND SEVERAL
OBLIGATIONS OF LESSEE, SURETY AND LENDER UNDER THIS SECTION 5.10 SHALL SURVIVE
THE PAYMENT IN FULL OF THE SECURED OBLIGATIONS, THE TERMINATION OF THIS TRUST
AGREEMENT AND THE RESIGNATION OR REMOVAL OF TRUSTEE AND SHALL NOT BE AFFECTED BY
ANY OBLIGATION WHICH BORROWER, SURETY OR LENDER MIGHT HAVE TO PROVIDE
INDEMNIFICATION UNDER THIS TRUST AGREEMENT. NOTWITHSTANDING THE FOREGOING, UPON
ANY SURETY REPLACEMENT, SURETY SHALL BE RELIEVED OF ITS INDEMNIFICATION
OBLIGATIONS UNDER THIS TRUST AGREEMENT FROM AND AFTER THE DATE OF SUCH SURETY
REPLACEMENT IF, AND ONLY IF, THE SUBSTITUTE SURETY IS AN INSURANCE COMPANY,
REINSURER, SURETY COMPANY OR OTHER PERSON HAVING AN S&P RATING OF AA ("DOUBLE
A") OR HIGHER OR IF NOT RATED BY S&P, AN EQUIVALENT OR HIGHER RATING BY MOODY'S,
AND THE SUBSTITUTE SURETY AGREES TO BE BOUND BY THIS INDEMNIFICATION.
5.11 SECTION LIABILITY OF TRUSTEE. In the absence of gross negligence or
willful misconduct, Trustee will not be liable to Lessee, Guarantor, SELCO or
any Beneficiary for any action or failure to act or any error or judgment,
negligence, mistake or oversight on its part or on the part of any of its
officers, directors, employees or agents. Notwithstanding the foregoing, in the
event that Trustee receives payment from Surety under the Surety Bond or from
Backstop Insurer under the Backstop Policy (i) before 1:00 p.m. (C.T.) on a
Business Day and fails to remit such amounts to Lender by the close of that
Business Day, or (ii) after 1:00 p.m. (C.T.) on a Business Day and fails to
remit such amounts to Lender by the close of the following Business Day, in each
case Trustee shall be liable to Lender for interest at the Interest Rate on any
such amounts which Trustee does not remit to Lender within the foregoing time
frames, which interest shall accrue until such amounts are remitted to Lender.
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5.12 SECTION NO RELIANCE ON TRUSTEE.
(a) Neither Trustee nor any of its officers, directors, employees or
agents (including, but not limited to, any attorneys acting at the direction or
on behalf of Trustee) shall be deemed to have made any representations or
warranties, express or implied, with respect to, nor shall Trustee or any such
officer, director, employee or agent be liable to Borrower, Lessee, Lender,
Surety, Backstop Insurer or any Beneficiary or be responsible for, (i) any
representations, warranties or recitals made by any party other than Trustee in
the Transaction Documents or any other agreement, certificate, instrument or
document executed by a party other than Trustee in connection therewith, (ii)
the due or proper execution or authorization of this Trust Agreement or any
Transaction Document by any party other than Trustee, or the effectiveness,
enforceability, validity, genuineness or collectibility as against any party
other than Trustee of any Transaction Document or any other agreement,
certificate, instrument or document executed by a party other than Trustee in
connection therewith, (iii) the present or future solvency or financial worth of
any party other than Trustee, or (iv) the value, condition, existence or
ownership of any of the Collateral or the existence or perfection of any Lien
upon the Collateral (whether now or hereafter held or granted) or the
sufficiency of any action, filing, notice or other procedure taken or to be
taken to perfect, attach or vest any Lien on the Collateral.
(b) Trustee shall not be required, either initially or on a continuing
basis, to (i) make any inquiry, investigation, evaluation or appraisal
respecting, or enforce performance by any Person of, any of the covenants,
agreements or obligations of such Person under any Transaction Document, or (ii)
undertake any other actions other than actions expressly required or directed to
be taken by it under this Trust Agreement. Nothing in this Trust Agreement or
any of the Transaction Documents, expressed or implied, is intended to or shall
be so construed as to impose upon Trustee any obligations, duties or
responsibilities except as set forth in this Trust Agreement.
(c) Trustee shall be protected in acting upon any notice, request,
consent, certificate, order, affidavit, letter, telegram, telecopy or other
paper or document given to it by any Person reasonably and in good faith
believed by it to be genuine and correct and to have been signed or sent by such
Person. Trustee shall have no duty to inquire as to the performance or
observance of any of the terms, covenants or conditions of any Transaction
Documents. Trustee will not be required to inspect the properties or books and
records of any Person for any purpose, including to determine compliance by such
Person with its covenants respecting the perfection and/or priority of security
interests.
5.13 SECTION DEFAULT NOTICES AND RELATED MATTERS. Trustee shall not be
required to take notice or be deemed to have notice of any Event of Default
unless Trustee has been specifically notified in writing of such Event of
Default by delivery to Trustee of a Default Notice specifying that it is a
"Default Notice" under this Trust Agreement or any other Transaction Document.
Upon such notice to Trustee, Trustee shall promptly give written notice of such
Event of Default to Surety and Lender, but in any event within two (2) Business
Days of receipt of such Default Notice. In all instances hereunder where:
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(i) any party complies or fails to comply with any
standards, measures or other requirements; or
(ii) the requirements of any definition of a term or terms
defined in any Transaction Document have been or have
not been met; or
(iii) there is an Event of Default under a Transaction
Document or a default or causing of a default of any
kind by any party under any other Transaction
Document,
Trustee will not be deemed to be aware of any such matter, and will be under no
obligation to act, refrain from acting, give notice, make any decision, give or
take any direction, make any determination or perform any other requirement of
Trustee hereunder unless and until Trustee has been given a Written Direction,
and which, if related to any default, states boldly at the top of the notice
that it is a "Default Notice" and stating with specificity the nature of the
default.
5.14 SECTION TRUSTEE REQUIRED; ELIGIBILITY. There shall at all times be a
Trustee hereunder which shall be a bank or trust company organized under the
laws of the United States of America or any state thereof, authorized to
exercise corporate trust powers, subject to supervision or examination by
federal or state authorities, and having a reported combined capital and surplus
of at least $250,000,000 and a S&P rating of A ("single A"). If at any time
Trustee shall cease to be eligible in accordance with the provisions of this
Section, it shall resign immediately in the manner provided in Section 5.15
hereof. No resignation or removal of Trustee and no appointment of a successor
Trustee shall become effective until the successor Trustee (meeting the
requirements of this Section 5.14) has accepted its appointment under Section
5.16 hereof.
5.15 SECTION RESIGNATION AND REMOVAL OF TRUSTEE. Trustee may resign at any
time by giving written notice thereof to Lender and Surety. If an instrument of
acceptance by a successor Trustee is not delivered to Trustee within thirty (30)
days after the giving of such notice of resignation, the resigning Trustee may,
at the expense of Lessee, petition any court of competent jurisdiction for the
appointment of a successor Trustee. Trustee may be removed at any time by an
instrument or concurrent instruments in writing signed by Surety (prior to the
occurrence of a Surety Event of Default) and Lender, which notice shall be
effective upon the earlier of (i) fifteen (15) days from receipt of such written
instrument or (ii) Trustee completing an orderly transition process to the
successor trustee, which transition shall begin immediately upon receipt by
Trustee of such written instrument. A successor Trustee otherwise meeting the
requirements hereof shall be appointed by the Controlling Party with the written
consent of the Non-Controlling Party.
5.16 SECTION CONCERNING ANY SUCCESSOR TRUSTEE. Every successor Trustee
appointed hereunder shall (i) have its principal office located in the State of
Illinois or such other jurisdiction for which, in each case, such successor
Trustee shall deliver an opinion of counsel to Surety and Lender stating that
solely as a result of such successor Trustee, the Surety Premiums will not be
subject to taxation in the State of Illinois or other applicable jurisdiction as
the case may be, and that the issuance of the Surety Bond and Backstop Policy
will not be in violation of
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the laws of the State of Illinois or other applicable jurisdiction as the case
may be, and (ii) execute, acknowledge and deliver to its predecessor and also to
the other Parties an instrument in writing accepting such appointment hereunder,
and thereupon such successor, without any further act, deed or conveyance, shall
become fully vested with all the estates, properties, rights, powers, trusts,
duties and obligations of its predecessor; but such predecessor shall,
nevertheless, on the written request of Lender or Surety, execute and deliver an
instrument transferring to such successor Trustee all the estates, properties,
rights, powers and trusts of such predecessor hereunder; and every predecessor
Trustee shall deliver all securities and monies held by it as Trustee hereunder
to its successor. The predecessor shall execute and deliver all instruments
necessary to effect transfer to such successor of the Collateral. Should any
instrument in writing from Lessee or any Beneficiary be required by any
successor Trustee for more fully and certainly vesting in such successor the
estate, rights, powers and duties hereby vested or intended to be vested in the
predecessor, any and all such instruments in writing shall, on request, be
executed, acknowledged and delivered by Lessee or such Beneficiary. The
resignation of any Trustee and the instrument or instruments removing any
Trustee and appointing a successor hereunder, together with all other
instruments provided for in this Article shall be filed and/or recorded by the
successor Trustee in each recording office, if any, where this Trust Agreement
shall have been filed and/or recorded.
5.17 SECTION SUCCESSOR TRUSTEE. Any corporation or association into which
Trustee may be converted or merged, or with which it may be consolidated, or to
which it may sell or transfer its corporate trust business and assets as a whole
or substantially as a whole, or any corporation or association resulting from
any such conversion, sale, merger, consolidation or transfer to which it is a
party, ipso facto, shall be and become successor Trustee hereunder and vested
with all of the title to the whole property or trust estate and all the trusts,
powers, discretion, immunities, privileges and all other matters as was its
predecessor, without the execution or filing of any instrument or any further
act, deed or conveyance on the part of and of the Parties, anything herein to
the contrary notwithstanding.
5.18 SECTION MAINTENANCE OF RECORDS. Trustee agrees to maintain such records
with respect to any and all monies or investments held by Trustee pursuant to
the provisions hereof in accordance with its customary and routine practices for
maintenance of records and investments. Trustee shall perform additional record
keeping and investment services in excess of its customary practices upon the
reasonable request of the Controlling Party, provided that Trustee shall be
entitled to receive additional reasonable compensation from the Controlling
Party for the performance of such additional services.
5.19 SECTION 5.19 ENFORCEMENT OF SURETY BOND. Trustee shall enforce
(including by way of appropriate legal proceedings) the Surety Bond and/or the
Backstop Policy for the benefit of Lender as directed by Lender. Trustee may
condition the taking of any such action upon receipt by Trustee of adequate
security and indemnity against the expenses or liabilities that may be incurred
by it in taking such action. Trustee shall pay to Lender or its designee, on the
day of Trustee's receipt thereof, any amount received by Trustee as the insured
under either the Surety Bond or the Backstop Policy.
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ARTICLE 6
SATISFACTION OF THE TRUST AGREEMENT
6.1 SECTION SATISFACTION OF TRUST AGREEMENT. This Trust Agreement and the
estate and rights granted hereunder shall cease, terminate, and become null and
void upon three hundred eighty-five (385) days after payment by Borrower or
Lessee of all Secured Obligations and all other sums payable hereunder by
Borrower or Lessee. Upon the request of Borrower or Lessee or Trustee (at the
direction of the Controlling Party), each Beneficiary shall execute an
instrument acknowledging satisfaction of the Secured Obligations owed to it. The
satisfaction and discharge of this Trust Agreement shall be without prejudice to
the rights of Trustee to charge and be reimbursed in accordance with the
provisions of this Trust Agreement, for any expenditures or liabilities that it
may thereafter incur in connection herewith.
Any monies, funds, securities or other property remaining on deposit
under this Trust Agreement shall, upon the full satisfaction of this Trust
Agreement, forthwith be transferred, paid over and distributed to Lessee.
Upon payment in full of the Loan Obligations, Lender shall instruct
Trustee to deliver to Surety the Surety Bond and the Backstop Policy for
cancellation.
6.2 SECTION RELEASE BY BENEFICIARY. After payment in full of all Secured
Obligations owed to a Beneficiary, such Beneficiary agrees that it will execute
any and all such releases to evidence satisfaction of such Secured Obligations.
ARTICLE 7
MISCELLANEOUS PROVISIONS
7.1 SECTION CONFLICT WITH THE TRANSACTION DOCUMENTS. The Parties agree
that in the event of any conflict between the provisions of this Trust Agreement
and the provisions of any of the Transaction Documents, the provisions of this
Trust Agreement shall control.
7.2 SECTION NOTICES. Unless otherwise specifically provided herein, any
notice, direction, instruction or other communication required or permitted to
be given shall be in writing addressed to the respective party as set forth
below and shall be personally served, telecopied, sent by facsimile or delivered
by a nationally recognized overnight courier service and shall be deemed to have
been received: (A) if delivered in person, when delivered, (B) if delivered by
telecopy or facsimile, on the date of transmission if transmitted on a Business
Day before 6:00 p.m. (New York time), or, if not, on the next succeeding
Business Day, or (C) if delivered by a nationally recognized overnight courier
service, one Business Day after delivery to such courier properly addressed:
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To Trustee at:
The First National Bank of Chicago
One First National Plaza, Suite IL1-0126
Chicago, Illinois 60670-0126
Attention: Corporate Trust Services Division
Telephone: (312) 407-0192
Facsimile: (312) 407-1708
with copy to:
Ungaretti & Harris
3300 Three First National Plaza
Chicago, Illinois 60602
Attention: James E. Lentz, Esq.
Telephone: (312) 977-4417
Facsimile: (312) 977-4405
To Borrower at:
Pita General Corporation
c/o SELCO Services Corporation
127 Public Square
Cleveland, Ohio 44114
Attention: Robert Bowes, Esq.
Telephone: (216) 689-5089
Facsimile: (216) 689-5681
with copy to:
Key Global Finance
30 Federal Street
Boston, Massachusetts 02110
Attention: Ms. Mindy Berman
Telephone: (617) 654-2777
Facsimile: (617) 654-2727
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and a copy to:
Pita General Corporation
c/o Keycorp Leasing
54 State Street
Albany, New York 12207
Attention: Donald C. Davis
Telephone: (518) 486-8984
Facsimile: (518) 486-8172
(a) To Surety at:
ZC Specialty Insurance Company
One Exchange Place
Suite 1000
Jersey City, New Jersey 07302
Attention: General Counsel
Facsimile: (201) 309-3040
Confirmation: (201) 332-1400
with copies to:
Zurich Centre Group, LLC
One Chase Manhattan Plaza, 44th Floor
New York, New York 10005
Attention: General Counsel
Facsimile: (212) 898-5444
Confirmation: (212) 898-5350
The Zurich Centre
90 Pitt's Bay Road
Pembroke HM O8
P.O. Box HM 1788
Hamilton HM HX, Bermuda
Attention: Manager- ZC Specialty Insurance Company
Facsimile: (441) 295-3705
Confirmation: (441) 295-8501
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To Lender at:
Greenwich Capital Financial Products, Inc.
600 Steamboat Road, Level 2
Greenwich, Connecticut 06830
Attention: Paul Nidenberg, Senior Vice President
Telephone: (203) 618-2347
Facsimile: (203) 618-2052
with copy to:
Sidley & Austin
875 Third Avenue
New York, New York 10022
Attention: Robert L. Boyd, Esq.
Telephone: (212) 906-2252
Facsimile: (212) 906-2021
To Guarantor or Lessee at:
Alterra Healthcare Corporation
450 N. Sunnyslope Road, Suite 300
Brookfield, Wisconsin 53005
Attention: Mark Ohlendorf, Senior Vice President
Finance
Telephone: (414) 641-7432
Facsimile: (414) 789-6182
with copy to:
Rogers & Hardin
229 Peach Tree Street-Int'l Tower
Atlanta, Georgia 30303
Attention: Caroline Dobbins, Esq.
Telephone: (404) 420-4644
Facsimile: (404) 525-2224
Any party may change its address for notices by written notice
to Trustee. Trustee shall disseminate the new address information to the other
Parties. All notices for purposes of indicating a change of address shall take
effect thirty (30) days following Trustee's receipt thereof.
7.3 SECTION GOVERNING LAW. This Trust Agreement shall be governed by and
construed in accordance with the applicable laws of the State of Illinois,
without regard to conflict of law principles.
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7.4 SECTION SUCCESSOR AND ASSIGNS; ASSIGNMENT. This Trust Agreement shall
be binding upon the Parties and their respective legal representatives,
successors and assigns. ANY SUCCESSOR OR ASSIGNEE HOLDER OF THE NOTE OR OF A
BENEFICIAL INTEREST UNDER THIS TRUST AGREEMENT SHALL BE SUBJECT TO THE TERMS OF
THIS TRUST AGREEMENT, INCLUDING WITHOUT LIMITATION, ALL INDEMNIFICATION
OBLIGATIONS SET FORTH HEREIN. Each of the Parties acknowledges that Lender may,
at its option, sell participation interests in the Loan or in this Trust
Agreement to other participating financial institutions (provided that Lender
shall remain responsible for the performance of its obligations hereunder and
the other Holders shall continue to deal solely and directly with Lender in
connection with Lender's rights and obligations under this Trust Agreement), or
Lender may assign its interest in the Loan or in this Trust Agreement (i) to any
of its affiliates, or (ii) to a warehouse lender and its successors and assigns
as security for a loan, or (iii) to other assignees, subject to the consent of
Surety, which consent shall not be unreasonably withheld, or (iv) to a trustee,
custodian or other entity in connection with a Secondary Market Transaction;
provided, however, any assignee of any obligation of Lender under this Trust
Agreement shall be required to acknowledge, in a written instrument delivered to
Trustee and Surety, such assignee's assumption of such obligation, and provided,
further, Lender shall have no right to assign its obligations which have accrued
under Section 5.10 of this Trust Agreement prior to any assignment in accordance
with this Section 7.4.
7.5 SECTION SUBMISSION TO JURISDICTION. EACH OF THE PARTIES HEREBY
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES
FEDERAL OR ILLINOIS STATE COURT, AND EACH OF THE PARTIES HEREBY IRREVOCABLY
AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR
HEREAFTER HAVE AS TO VENUE OF ANY SUCH ACTION OR PROCEEDING BROUGHT IN SUCH A
COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT
THE RIGHT OF TRUSTEE OR ANY HOLDER TO BRING PROCEEDINGS AGAINST BORROWER OR
LESSEE IN THE COURTS OF ANY JURISDICTION. ANY JUDICIAL PROCEEDING BY BORROWER OR
LESSEE AGAINST TRUSTEE OR ANY HOLDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS TRUST
AGREEMENT SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS.
7.6 SECTION WAIVER OF JURY TRIAL. EACH OF THE PARTIES HEREBY WAIVES ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS TRUST AGREEMENT AND THE TRANSACTION DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
7.7 SECTION SEVERABILITY. If any one or more of the covenants, agreements,
provisions or terms of this Trust Agreement shall be for any reason whatsoever
held invalid or unenforceable, then such covenant(s), agreement(s), provision(s)
or term(s) shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Trust Agreement and shall in no way affect the
validity or enforceability of the other provisions of this Trust Agreement.
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7.8 SECTION AMENDMENTS; SERVICER.
This Trust Agreement may not be amended or modified except by a written
instrument signed by the Parties, except as provided in Sections 2.9, 2.10 and
7.14 hereof, subject to Section 2.10(f) hereof, and except that Article 1 and
other sections of this Trust Agreement may be amended by written agreement
solely between Surety and Lender (so long as no additional obligations are
imposed upon Trustee, Borrower or Lessee in such amendment and provided that
copies of any such amendments are provided to Trustee, Borrower and Lessee). Any
subsequent Holder of the Note shall automatically succeed to the rights and
obligations of Lender or other prior Holder of the Note under this Trust
Agreement upon compliance with Section 7.4 above.
7.9 SECTION COUNTERPARTS. This Trust 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.
7.10 SECTION LIMITATIONS ON RECOURSE. Except as set forth in Section 9.32
of the Loan Agreement, none of the members, managers, partners, officers,
shareholders, principals, directors or agents of Borrower shall have any
personal liability for and on account of any non-payment of the Secured
Obligations or any amounts that may become due under any of the Loan Documents,
or for the non-performance of any of the obligations to be performed by Borrower
under this Trust Agreement or any other Loan Document or for any breach of any
covenant, representations or warranty made by Borrower hereunder.
7.11 SECTION INTENTIONALLY OMITTED.
7.12 SECTION REIMBURSEMENT OF PAYMENTS MADE TO TRUSTEE. SURETY SHALL
REIMBURSE TO LENDER, PROMPTLY UPON LENDER'S DEMAND THEREFOR, ANY AMOUNT PAID BY
LENDER TO TRUSTEE PURSUANT TO ARTICLE 5 HEREOF, UNLESS SUCH AMOUNTS WERE PAYABLE
BY LENDER SOLELY DUE TO LENDER'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
7.13 SECTION NO THIRD PARTY BENEFICIARIES. The provisions of this Trust
Agreement are for the sole benefit of the signatories hereto, and it is
specifically intended by the undersigned that no party shall be a third-party
beneficiary hereunder. In addition, each of Lessee and Guarantor hereby
acknowledges and agrees that the Trust Estate is held by Trustee for the sole
benefit of the Beneficiaries and their successors and assigns, and Lessee and
Guarantor are entering into this Trust Agreement solely to acknowledge and
consent to the provisions hereof and to covenant and agree to various
obligations set forth herein; Lessee and Guarantor shall have no right or
ability to enforce or seek enforcement of any provision of this Trust Agreement
and shall have no right or ability to assert or contend that any provision of
this Trust Agreement affects or modifies its duties and obligations set forth in
each of the Transaction Documents, each of which is a separate and independent
obligation among Lessee, Guarantor and the other signatories or beneficiaries of
each such Transaction Document.
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7.14 SECTION SURETY TRANSACTIONS.
(a) Surety Transactions Generally. Subject to Lender approval, Surety
shall have the right to engage in one or more Surety Transactions, and to
structure and restructure all or any part of the Surety Bond and Backstop Policy
in connection therewith, including such amendments to representations and
warranties in the Loan Documents as may be appropriate. Without limitation,
Surety shall have the right, subject to Lender approval, in any structuring or
restructuring, to reduce the Surety Bond Amount, to cause the Note and the
Mortgages to be split into a first and a second priority mortgage loan, or into
one or more loans secured by mortgages in whatever priority and proportion
Surety determines, with Lender's approval, and thereafter, if Surety so elects,
to engage in Surety Transactions with respect to all or any part of the
indebtedness evidenced by the Loan and loan documentation. The Parties
acknowledge that it is the intention of the Parties that the obligations of
Surety and Backstop Insurer under, respectively, the Surety Bond and Backstop
Policy may be reduced, rearranged, restructured or modified pursuant to
agreement between Surety and Lender. As used herein, "SURETY TRANSACTION" means,
subject to compliance with the limitations set forth in clause (b) below, any
one or more of (i) obtaining reinsurance from a third party with respect to the
risk insured by the Surety Bond, (ii) assigning or participating all or any part
of such risk to a third party, (iii) altering the Surety Bond so that not all of
the principal and interest on the Note is insured (including without limitation,
reducing the Surety Bond Amount accordingly), (iv) if multiple Notes are
created, altering the Surety Bond so that only a particular Note or Notes are
insured (including without limitation, reducing the Surety Bond Amount
accordingly), (v) subsequent to any act described in clauses (iii) or (iv) of
this sentence, altering the Surety Bond to insure any portion of the Note or
Notes which were uninsured to an amount not exceeding any previous Surety Bond
Amount, (vi) amending the Loan Documents to reflect the changes to the Surety
Bond described in the preceding clauses, or (vii) such other modifications,
rearrangements and supplements to the Surety Bond, Backstop Policy and other
Loan Documents as Surety may require to effect the above-described transactions.
(b) Cooperation; Limitations. If Lender has approved a Surety
Transaction, all Parties shall use all reasonable efforts and cooperate
reasonably and in good faith with Surety in effecting any such restructuring or
Surety Transaction. Such cooperation shall include without limitation, providing
information regarding the Note and executing and delivering such reasonable
amendments to the Loan Documents as Surety may request, provided, however, that
such amendment shall be subject to Section 2.10(f) hereof and, provided,
further, that no such amendment shall diminish the rights of any of the Parties
under the Transaction Documents or modify (i) the aggregate of (A) the Base
Surety Premium rate and (B) the interest rate payable under the Note; (ii) the
stated maturity date of the Note, (iii) the principal amount or the aggregate
amortization of the principal amount of the Note (or multiple notes if the Note
is split), (iv) the non-recourse or guaranty and indemnification provisions of
the Loan, (v) the Rent payable under the Master Lease, or (v) any other economic
terms of the Secured Obligations. Lessee hereby expressly acknowledges that the
economic terms of the Secured Obligations shall not be affected if Lender and
Surety, in their sole discretion, re-order certain payments and reserves set
forth in Section 4.2 of this Trust Agreement. Such cooperation also shall
include
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using commercially reasonable efforts to obtain such certificates and
assurances from governmental entities and others as Surety may request.
Notwithstanding the foregoing, Lessee shall be responsible only for its own and
Borrower's legal fees and expenses incurred in connection with such Surety
Transaction. Trustee shall be entitled to reimbursement by Lender and Surety for
its costs and expenses and reasonable compensation for any action required of
Trustee under this paragraph.
(c) Information. The Parties shall provide such information and
documents in their possession relating to the Loan, the Parties, the Backstop
Insurer, the Properties, the Improvements, the Equipment and the business and
operations of all of the foregoing as Surety may reasonably request in
connection with any Surety Transaction. Surety shall be permitted to share all
such information with the investment banking firms, rating agencies, accounting
firms, law firms, other third party advisory firms, potential investors, and
other parties involved in any proposed Surety Transaction. Any such information
may be incorporated into offering documents for the Surety Transaction. Surety
and all of the aforesaid third-party advisors and professional firms and
investors shall be entitled to rely upon such information, and Lessee shall
indemnify, defend, and hold harmless Surety from and against any losses, claims,
damages and liabilities that arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in such information
provided by Lessee and relating to Lessee, Guarantor or the Properties, or arise
out of or are based upon the omission to state therein a material fact required
to be stated in such information provided by Lessee and relating to Lessee,
Guarantor or the Properties, or necessary in order to make the statements in
such information provided by Lessee and relating to Lessee, Guarantor or the
Properties not materially misleading; provided, in each case, that Lessee has
been afforded the opportunity to review and comment on such information.
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7.15 SECTION SECONDARY MARKET TRANSACTIONS.
(a) Secondary Market Transactions Generally. Lender shall have the
right to engage in one or more Secondary Market Transactions, and to structure
and restructure all or any part of the Loan, including without limitation in
multiple tranches, as a wraparound loan, or for inclusion in a REMIC or other
securitization. Without limitation, Lender shall have the right, in any
structuring or restructuring, to cause the Note and the Mortgages to be split
into a first and a second priority mortgage loan, or into one or more loans
secured by mortgages and the Collateral in whatever priority and proportion
Lender determines, and thereafter, if Lender so elects, to engage in Secondary
Market Transactions with respect to all or any part of the indebtedness and loan
documentation. The Parties acknowledge that it is the intention of the Parties
that all or a portion of Loan may be securitized and that all or a portion of
the securities issued in connection therewith may be rated by one or more Rating
Agencies. The Parties further acknowledge that additional structural
modifications may be required to satisfy issues raised by one or more Rating
Agencies. As used herein, "Secondary Market Transaction" means, subject to
compliance with the limitations set forth in clause (b) below, any of (i) the
sale, assignment, pledge or other transfer of all or any portion of the Loan
Obligations or the Loan Documents and Insurance Documents or any interest
therein to or for the benefit of one or more investors, (ii) the sale,
assignment, pledge or other transfer of one or more participation interests in
the Loan Obligations or Loan Documents and Insurance Documents to one or more
investors, or (iii) the transfer, deposit and/or pledge of all or any portion of
the Loan Obligations or Loan Documents and Insurance Documents to or with one or
more trusts or other entities which may issue certificates, notes, bonds or
other instruments (for purposes of this Section, "Securities") that evidence an
ownership interest in, or are secured by, the assets of such trust or the right
to receive income or proceeds therefrom.
(b) Cooperation; Limitations. The Parties shall use all reasonable
efforts and cooperate reasonably and in good faith with Lender, at Lessee's
expense (subject to the limitations set forth in Section 9.2 of the Loan
Agreement and Section 10.06 of the Reimbursement Agreement), in effecting any
such restructuring or Secondary Market Transaction, including such amendments to
representations and warranties in the Loan Documents and Insurance Documents as
may be appropriate. Such cooperation shall include without limitation, executing
and delivering such reasonable amendments to the Loan Documents and Insurance
Documents as Lender may request, provided, however, that such amendment shall be
subject to the terms of Section 2.10(f) hereof and provided, further, that no
such amendment in connection with any Secondary Market Transaction shall
diminish the rights of any of the Parties under the Transaction Documents or
modify (i) the aggregate of (A) the Surety Premiums and (B) the interest rate
payable under the Note; (ii) the stated maturity date of the Note, (iii) the
principal amount or the aggregate amortization of the principal amount of the
Note (or multiple notes if the Note is split), (iv) Rent payable under the
Master Lease, (v) any other economic terms of the Secured Obligations, or (vi)
the non-recourse or guaranty and indemnification provisions of the Loan and the
Master Lease. Such cooperation also shall include Lessee's using commercially
reasonable efforts to obtain such certificates and assurances from governmental
entities and others as Lender may request. In the case of the Surety, such
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<PAGE> 65
cooperation, subject to the preceding sentence and the following sentence, shall
include (i) cooperating with Lender in enforcing Sections 9.11 and 9.12 of the
Loan Agreement as requested by the Lender, (ii) the taking of such action
(including the consent to amendments to the Insurance Documents) as are
necessary for S&P to assign an AA ("double A") rating to the Securities (or an
effective AA ("double A") rating to the Loan if the Loan is pooled with other
mortgage loans and/or if there will be more than one class of Security issued)
and the exercise of its commercially reasonable efforts to take such action as
is necessary to obtain an AA ("double A") rating (or its equivalent) of the
Securities (or an effective AA ("double A") rating of the Loan) from another
nationally-recognized statistical rating organization and (iii) an agreement to
provide on a quarterly basis, for the benefit of the holders of the Securities,
financial information concerning itself and the Backstop Insurer of the type
provided pursuant to paragraph (c) below. Notwithstanding the foregoing, (x)
Lessee shall pay for any item that is requested by Lender in connection with a
Secondary Market Transaction that was a requirement of the Closing unless waived
in writing by Lender in connection with the Closing, (y) Surety shall not be
required under this paragraph to take any action that would result in any
material adverse change to the economic benefits of the transaction to Surety,
(z) except as described in the preceding clause (x), each of Borrower and Lessee
shall be responsible only for its own legal fees and expenses incurred in
connection with such Secondary Market Transaction. Trustee shall be entitled to
reimbursement by Lender and Surety for its costs and expenses and reasonable
compensation for any action required of Trustee under this paragraph.
(c) Information. The Parties shall provide such information and
documents relating to the Parties, the Backstop Insurer, the Assisted Living
Facilities, the Properties, the Improvements and the business and operations of
all of the foregoing (including certified and, if available, audited financial
statements of Surety and the Backstop Insurer, which may be provided on a
consolidated basis) as Lender may reasonably request in connection with any
Secondary Market Transaction. Lender shall be permitted to share all such
information with the investment banking firms, rating agencies, accounting
firms, law firms, other third party advisory firms, potential investors, and
other parties involved in any proposed Secondary Market Transaction. Any such
information may be incorporated into offering documents for the Secondary Market
Transactions. Lender and all of the aforesaid third-party advisors and
professional firms and investors shall be entitled to rely upon such
information, and Lessee shall indemnify, defend, and hold harmless Lender from
and against any losses, claims, damages and liabilities that arise out of or are
based upon any untrue statement or alleged untrue statement of any material fact
contained in such information provided by Lessee and relating to Lessee,
Guarantor or the Properties, or arise out of or are based upon the omission or
alleged omission (except for omissions of information disclosed to Lender
pursuant to paragraph (d) below) to state therein a material fact required to be
stated in such information provided by Lessee and relating to Lessee, Guarantor
or the Properties, or necessary in order to make the statements in such
information provided by Lessee and relating to Lessee, Guarantor or the
Properties not materially misleading. Lender may publicize the existence of the
Loan Obligations in connection with Lender's Secondary Market Transaction
activities or otherwise.
(d) Additional Provisions. In any Secondary Market Transaction, Lender
may transfer its obligations under this Trust Agreement and under the other Loan
Documents (or may transfer
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the portion thereof corresponding to the transferred portion of the Loan
Obligations of Borrower) to a Person which assumes, in a writing delivered to
Surety, the obligations of Lender which are transferred thereto, and thereafter
Lender shall be relieved of any obligations hereunder and under the other Loan
Documents arising after the date of said transfer with respect to the
transferred interest. Each transferee investor shall become a "Lender"
hereunder. In such case, Trustee shall have no right to seek indemnification, or
the payment of any other sums payable to Trustee hereunder by Lender as Holder,
from the successor to Lender hereunder for time periods prior to such
successor's becoming the Lender hereunder, other than by way of application of
Section 4.2. In connection with any such transfer, Lender shall notify Trustee
of the name, address, facsimile and phone number of such new "Lender." In the
event Lender transfers any or all of its obligations to multiple transferee
investors and such investors become "Lenders," one such Lender or a servicer
appointed on their behalf (appointed pursuant to Section 2.5 of this Trust
Agreement) shall act as the representative for all Lenders, and shall receive
notices, approve or deny requests, and otherwise act on behalf of all Lenders.
Surety hereby covenants and agrees to provide to Lender and Lessee, which each
of Lender and Lessee covenants to maintain in the most strict confidence (and to
require other Persons to maintain in strict confidence) until and unless such
information becomes publicly available, prior to and in preparation for a
Secondary Market Transaction, a certification that shall state whether Surety's
rating is "under review" by any Rating Agency and whether, to Surety's best
knowledge, any other material adverse event exists regarding Surety.
7.16 SECTION WAIVER OF POSTING BOND. To the extent permitted by law, each of
the Parties hereby waives any requirements under the unauthorized insurance or
similar laws of any jurisdiction or otherwise that the Surety or the Backstop
Insurer post funds, securities or other security as a condition to its
appearance or filing of pleadings in any proceeding involving or arising with
this Trust Agreement.
7.17 SECTION SECURITY AGREEMENT UNDER ARTICLE 9 OF THE UCC. Each Settlor
hereby agrees and acknowledges that this Trust Agreement shall constitute, among
other things, a security agreement under Article 9 of the Uniform Commercial
Code (as defined in the Master Glossary).
[SIGNATURE PAGES FOLLOW]
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<PAGE> 67
IN WITNESS WHEREOF, the Parties have caused this Trust Agreement to be
duly executed by their duly authorized officers, as of the day and year first
above written.
"BORROWER":
PITA GENERAL CORPORATION,
An Illinois corporation
By: /s/ Mindy Berman
----------------------------------------
Mindy Berman
Vice President
"SURETY":
ZC SPECIALTY INSURANCE COMPANY,
a Texas corporation
By: /s/ Lynn Finkel
----------------------------------------
Lynn Finkel
Vice President
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<PAGE> 68
"LENDER":
GREENWICH CAPITAL FINANCIAL PRODUCTS,
INC., a Delaware corporation
By: /s/ Warren Ashenmil
----------------------------------------
Warren Ashenmil
Senior Vice President
"GUARANTOR":
ALTERRA HEALTHCARE CORPORATION,
a Delaware corporation
By: /s/ Mark Ohlendorf
----------------------------------------
Mark Ohlendorf
Senior Vice President
"LESSEE":
AHC TENANT, INC.,
a Delaware corporation
By: /s/ Mark Ohlendorf
----------------------------------------
Mark Ohlendorf
Vice President
"SELCO":
SELCO SERVICE CORPORATION, an Ohio
Corporation
By: /s/ Donald C. Davis
----------------------------------------
Donald C. Davis
Vice President
"TRUSTEE":
THE FIRST NATIONAL BANK OF CHICAGO,
As Trustee
By: /s/ Jeffrey L. Kinney
----------------------------------------
Jeffrey L. Kinney
Vice President
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EXHIBIT A
OPERATING RESERVE ACCOUNT CERTIFICATE
The First National Bank of Chicago
One First National Plaza, Suite IL1-0126
Chicago, Illinois 60670-0126
Attention: Jeffrey L. Kinney, Vice President,
Corporate Trust Services Division
Re: Operating Reserve Account, Account Number 204685-008
Ladies and Gentlemen:
Reference is made to that certain Trust Agreement dated as of July __, 1999
(as the same may be amended, restated, supplemented or otherwise modified from
time to time, the "Trust Agreement"), by and among The First National Bank of
Chicago, a national banking association, as trustee (in such capacity,
"Trustee"), AHC Tenant Inc., a Delaware corporation ("Lessee"), and the other
parties which are signatories thereto. All capitalized terms used herein but not
elsewhere defined shall have the respective meanings ascribed to such terms in
the Trust Agreement.
On ____________, ______, Lessee hereby requests that $____________ of funds
in the Operating Reserve Account be disbursed (the "Operating Reserve Account
Disbursement") to Lessee via wire transfer to the following account:
[Bank] _____________________
[City, State] ______________
ABA Routing No. ____________
Account No. ________________
Account Name _______________
Lessee hereby certifies to Trustee, Surety and Lender that:
1. no Event of Default exists; and
2. the Operating Reserve Account Disbursement shall be used solely to
fund operating losses at one or more of the Properties.
Very truly yours,
AHC TENANT, INC. a Delaware corporation
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
[DATE]
<PAGE> 1
EXHIBIT 2.9
FLOW OF FUNDS AGREEMENT
This Flow of Funds Agreement (the "AGREEMENT") is made as of
July 16, 1999 among ZC Specialty Insurance Company, a Texas corporation
("ZCSI"); Pita General Corporation, an Illinois corporation (the "BORROWER");
AHC Tenant, Inc., a Delaware corporation (the "LESSEE"); Alterra Healthcare
Corporation, a Delaware corporation (the "GUARANTOR"); Greenwich Capital
Financial Products, Inc., a Delaware corporation (the "LENDER") and each of the
Joint Ventures from time to time party hereto, either by execution of a
signature page hereto as of the date hereof, or by execution of a Joinder
Agreement after the date hereof (each a "JOINT VENTURE" and collectively, the
"JOINT VENTURES"), and The First National Bank of Chicago, a national banking
association with its principal corporate trust office located in Chicago,
Illinois duly established, existing and authorized to act as trustee under the
Trust Agreement (the "TRUSTEE"). Each entity which has executed a copy hereof is
hereinafter referred to individually as a "PARTY" and all such entities are
referred to collectively as the "PARTIES".
W I T N E S S E T H:
WHEREAS, the Lender has agreed to make a loan in two tranches to
Borrower in a principal amount not to cumulatively exceed $201,000,000.00 (the
"LOAN") pursuant to, among other documents, that certain Loan Agreement dated as
of even date herewith, by and among Borrower, Lessee and Lender, in order to
finance the acquisition of up to twenty eight (28) assisted living facilities to
be located on certain parcels of real property (as more particularly described
in the Loan Agreement, the "PROPERTIES"). The Loan is evidenced by that certain
Note dated as of July 16, 1999 (the "NOTE") executed by Borrower in favor of
Lender, and the Loan is secured by the Security Documents;
WHEREAS, concurrently with and as a condition to the making of the
Loan, Trustee, at the direction of Lender, is requiring ZCSI to issue to Trustee
the Surety Bond insuring the Note, and Trustee, at the direction of Lender, is
requiring Backstop Insurer to issue the Backstop Policy, to support the payments
under the Surety Bond, as set forth in the Backstop Policy. As a condition to
ZCSI providing the Surety Bond, ZCSI, Borrower and Lessee have entered into that
certain Reimbursement Agreement, under which Borrower is obligated to reimburse
ZCSI for all indebtedness, obligations and liabilities of Borrower to ZCSI
arising thereunder;
<PAGE> 2
WHEREAS, ZCSI, Lender and Borrower desire to (i) define their
respective rights with respect to the Collateral securing the Secured
Obligations, (ii) define the rights and duties of Trustee with respect to the
Collateral and the Secured Obligations and (iii) provide for other miscellaneous
duties (including, without limitation, the application of the Capital Proceeds)
and rights of Trustee in connection with the foregoing transactions. In order to
accomplish the foregoing, ZCSI, Borrower, Lender, Lessee, Trustee, Guarantor and
certain other parties are entering into the Trust Agreement;
WHEREAS, the Borrower is leasing the Properties to the Lessee which is
in turn subleasing the Properties to the Joint Ventures for ultimate use by the
individual residents. The payments made by the Residents, together with other
Revenues and the Properties constitute a significant portion of the Collateral.
In furtherance of the general objective of defining rights in the Collateral and
as a condition of issuing the Surety Bond and making the Loan, the Lender and
ZCSI have required the Joint Ventures, the Borrower, the Guarantor, the Trustee
and the Lessee to enter into this Flow of Funds Agreement;
NOW, THEREFORE, in consideration of the premises set forth herein, the
parties hereby agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATIONS
SECTION 1.1. DEFINITIONS. Capitalized terms used herein to the extent
not defined herein, or not defined by reference to any other agreement, shall
have the meaning set forth in the Master Glossary dated July 16, 1999.
SECTION 1.2. INTERPRETATION. In this Agreement (unless otherwise
specified), the singular includes the plural and the plural the singular; words
importing any gender include the other genders; references to statutes are to be
construed as including all statutory provisions consolidating, amending or
replacing the statute referred to; references to "writing" include printing,
typing, lithography and other means of reproducing words in a tangible, visible
form; the words "including", "includes" and "include" shall be deemed to be
followed by the words "without limitation"; references to articles, sections (or
subdivisions of sections), recitals, exhibits, annexes or schedules are those of
this Agreement unless otherwise indicated; references to agreements and other
contractual instruments shall be deemed to include all subsequent amendments and
other modifications to such instruments, but only to the extent such amendments
and other modifications are not prohibited by the terms of this Agreement or
specifically excluded therefrom; the phrase "and/or" shall be deemed to mean the
words both preceding and following such phrase, or either of them; references to
the parties and to Persons include their respective permitted successors and
assigns and, in the case of governmental Persons, Persons succeeding to their
respective functions and capacities; and reference to times of day shall be to
New York, New York time unless specifically provided otherwise.
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<PAGE> 3
ARTICLE II
APPLICATION OF OPERATING REVENUE, AND LEASE PAYMENTS
SECTION 2.1. APPLICATION OF OPERATING REVENUE. On each Distribution
Date the Lessee shall determine Operating Revenues during the immediately
preceding Distribution Period, and the Lessee shall undertake a good faith
estimate of Operating Expenses during the immediately preceding Distribution
Period (the "DISTRIBUTION OPERATING EXPENSE ESTIMATE"). To the extent a
Distribution Estimate Shortfall exists, the Lessee shall supplement Operating
Revenues with other Revenues, sourced as described in Section 2.2, until the
Revenues available for distribution on such Distribution Date are sufficient to
pay in full Categories 2.1(i) to and including 2.1(xv) (or it has been
determined by the Lessee that total Revenues from all sources are insufficient
to do so). In addition, to the extent the Controlling Party directs the Trustee
to remit Supplemental Trust Funds to the Lessee for application to pay
designated Benefitted Items, the Lessee shall accept receipt of such
Supplemental Trust Funds and apply the same solely to said designated Benefitted
Items. In the case of the second and all succeeding Distribution Dates, the
Lessee shall reconcile the Distribution Operating Expense Estimate from the
immediately preceding Distribution Date against the actual Operating Expenses
for the corresponding preceding Distribution Period. To the extent that such
reconciliation reveals that any Party received more than it was entitled to on
the preceding Distribution Date, such Party (or Parties, as the case may be)
shall refund to the Lessee, as applicable, the amount of such overpayment it
received (which refund may be fully or partially effected by a debit up to the
positive amount owed to such Party on the current Distribution Date). If any
such overpayment was originally funded from Guarantee Revenues, Operating
Reserve Account Revenues, or Supplemental Trust Funds, the Lessee shall remit
the same to the Guarantor or the Trustee (for redeposit into the source Account)
as appropriate. To the extent any Party received less than the amount it was
entitled to receive on the prior Distribution Date, then the current Operating
Expenses shall be increased by the amount of such shortfall and such Party's (or
Parties') applicable portion of the current Revenues shall be increased on the
current Distribution Date in an amount equal to such shortfall. On the then
current Distribution Date the Lessee, shall apply Revenues for the immediately
preceding Distribution Period, in payment of the following items, in the
following order of priority. The Parties agree that Lessee shall be deemed to
first utilize all Operating Revenues until exhausted and then to use other
Revenues in the order specified in Section 2.2. If there are insufficient
Revenues to pay a given Category in full and if such Category does not specify
an order of payment, then the Lessee shall pay each of the Benefitted Items
within such Category pro rata based upon a fraction where the denominator is the
cumulative amount of Benefitted Items within such Category and the numerator for
a particular Benefitted Item is the amount of such Benefitted Item.
Notwithstanding the foregoing, in the case of Category 2.1 (i) below, the Lessee
(prior to the occurrence of a Springing Lockbox Event) may pay Benefitted Items
in such Category from any Revenues and in any order of priority - other than the
amounts payable to the Trustee which must be paid first - (as compared to other
Benefitted Items in this Category only) and on any day prior to the Distribution
Date. In no event shall any ZCSI Subrogation Amounts be paid except at Category
2.1(vi).
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<PAGE> 4
(i) Operating Expenses, first to the Trustee until the
Trustee is fully paid, and thereafter to all other
entities entitled to the same;
(ii) to the Trustee for deposit into the Tax and Insurance
Escrow Fund, 1/12th of yearly real property tax
assessments for all of the Properties, and if an
Insurance Default has occurred, 1/12th of the yearly
insurance premiums for the insurance coverages
required to be maintained by Lessee under Section 4.4
of the Loan Agreement.
(iii) to the Lender, Loan Obligations (including amounts
equal to the difference between the Default Rate and
the Interest Rate) then due and payable, other than
principal and interest (at the Interest Rate) on the
Note;
(iv) to the Lender, principal and interest (at the
Interest Rate) then due and payable on the Note,
first to payment of interest and then to the payment
of principal;
(v) to the Trustee for deposit in the Capital
Improvements Account, an amount equal to one twelfth
of the Available Bed Capital Improvement Amount for
the current year;
(vi) to ZCSI, ZCSI Subrogation Amounts then due and
payable (other than the Termination Premium;)
(vii) to the Trustee, Base Surety Premiums then due and
payable;
(viii) to the entities entitled thereto, Allowed
Indebtedness then due and payable;
(ix) to the entities entitled to the same, amounts not
otherwise provided for in items 2.1(i) through and
including 2.1(viii), for which monies are unavailable
from the applicable Accounts under the Trust
Agreement and which have been approved by the
Controlling Party in writing (it being agreed that to
the extent such amounts are intended to be used for
Capital Improvements, such amounts shall be paid to
the Trustee for deposit into the Capital Improvements
Account under the Trust Agreement);
(x) to the Borrower, the Yield then due and payable;
(xi) to ZCSI, the Reimbursement Obligations (other than
the Termination Premiums and without duplication of
payments of ZCSI Subrogation Amounts) which are then
due and owing except to the extent such Reimbursement
Obligations are specifically provided for in another
category;
(xii) if the Distribution Date is also a Tax Distribution
Date, to the Joint Ventures, the Tax Reimbursement
Amount;
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<PAGE> 5
(xiii) to the Manager, the Priority A Deferred Management
Fees;
(xiv) to the Trustee, an amount for deposit into the Lease
Reserve Account up to the Lease Reserve Cap;
(xv) to the Manager, the Priority B Deferred Management
Fees; and
(xvi) the balance, if any, to the Lessee.
If on any Distribution Date there is insufficient cash to satisfy the
applicable amount owing in any of the above Categories 2.1(i) to and including
(xiv) (the amount of any such insufficiency at any such Category, each a
"BORROWER PRIORITY CATEGORY SHORTFALL AMOUNT") then, such Borrower Priority
Category Shortfall Amount shall continue to be owed and accrue and shall be
payable from Revenue available on the next Distribution Date, subordinate in
payment to all amounts owed on the next Distribution Date in any Categories of a
higher priority. No funds shall be applied under this Section 2.1 to a
subordinate category until all current amounts and all Borrower Priority
Category Shortfall Amounts have been paid in all applicable senior Categories.
SECTION 2.2. SUPPLEMENTING OPERATING REVENUES WITH OTHER REVENUES. To
the extent a Distribution Estimate Shortfall exists the Lessee shall supplement
Operating Revenue with other Revenues in the following order of priority
(provided that, prior to the earlier of: (i) the date on which cumulative
deposits to the Operating Reserve Account equals or exceeds $17,000,000
(regardless of withdrawals therefrom) or (ii) November 17, 1999; Operating
Reserve Account Revenues shall be utilized only to the extent that after giving
effect to such utilization the balance in the Operating Reserve Account is at
least six million dollars ($6,000,000.00)):
(i) As needed to pay in full the Benefitted Items
specified in Categories 2.1(i) to and including
Category 2.1(iv), first from Operating Reserve
Account Revenues until the same is exhausted and then
from Guarantee Revenue;
(ii) As needed to pay in full Benefitted Items specified
in Category 2.1(v), first from Guarantee Revenues,
and if the same is for any reason unavailable, then
from Operating Reserve Account Revenues until the
same is exhausted;
(iii) As needed to pay in full the Benefitted Items
specified in Categories 2.1(vi) to and including
Category 2.1(viii), first from Operating Reserve
Account Revenues until the same are exhausted and
then from Guarantee Revenues;
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<PAGE> 6
(iv) As needed to pay in full the Benefitted Items
specified in Categories 2.1(ix) and 2.1(x) from
either or both Operating Reserve Account Revenue or
Guarantee Revenues;
(v) As needed to pay in full the Benefitted Items
specified in Category 2.1(xi) to and including
Category 2.1(xii) first from Operating Reserve
Account Revenue until the same are exhausted and then
from Guarantee Revenues;
(vi) subsequent to the occurrence and during the
continuance of a Lessee Triggering Event, as needed
to pay in full the Benefitted Item specified in
Category 2.1(xiv) from Guarantee Revenues, it being
acknowledged that except as provided in the foregoing
clause of this Section 2.2(vi), during the Term of
this Flow of Funds Agreement, Guarantee Revenues and
Operating Reserve Account Revenues shall not be
available to fund the Benefitted Item specified in
Category 2.1(xiv);
(vii) As needed to pay in full the Benefitted Items
specified in Categories 2.1(xiii) and (xv), from
Guarantee Revenues; Operating Reserve Account
Revenues shall not be available to fund the
Benefitted Items specified in Categories 2.1 (xiii)
and (xv); and
(viii) Guarantee Revenues and Operating Reserve Account
Revenues shall not be available to fund the
Benefitted Items specified in Category 2.1(xvi).
SECTION 2.3. REPORTING. Within forty five (45) days after the
Distribution Date the Lessee shall deliver to the Trustee, the Lender, the
Borrower and ZCSI a report containing a description of all amounts disbursed
under Sections 2.1 and 2.2.
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<PAGE> 7
ARTICLE III
REMEDIES; ACTIONS RELATED TO REVENUES
SECTION 3.1. EXERCISE OF REMEDIES; ACTIONS RELATED TO REVENUE. Each of
the Parties hereto agrees that it shall not exercise any right or remedy such
Party may have with regard to the Revenues except as permitted in the Trust
Agreement. Each of the Parties agrees that any proceeds of any casualty
insurance policy with respect to any of the Properties and any condemnation
awards with respect to any of the Properties shall, subject to any rights of
Lessee set forth in the Lease, be applied in accordance with Section 3.5 of the
Trust Agreement, and subsequent to the Term of this Flow of Funds Agreement
Revenues (including without limitation in the event of the liquidation or sale
of the assets of Borrower or Lessee by reason of any Insolvency Proceeding
against Borrower or Lessee) shall be applied as set forth in Section 4.2 of the
Trust Agreement. Nothing contained in this Flow of Funds Agreement shall prevent
any Party from raising any defenses in any action in which it has been made a
party defendant or has been joined as a third party and controlling the
litigation of such defense, except that Trustee shall direct and control any
defense directly relating to the Revenues, or any one or more of the Security
Documents, as directed by a Written Direction and in accordance with the
provisions of the Trust Agreement
SECTION 3.2. SUBORDINATION; ACCOUNTING; ADJUSTMENTS.
(a) Each Party agrees that its right to receive payment of any of the
Benefitted Items specified in any of the Categories owed to it will be
subordinate to the rights of the Parties with a superior right to payment as set
forth in Article II of this Flow of Funds Agreement or Section 4.2 of the Trust
Agreement. Such subordination shall be accomplished by the application of
Revenues on each Distribution Date in the order described in Article II of this
Flow of Funds Agreement and Section 4.2 of the Trust Agreement and by the other
terms of the Trust Agreement.
(b) Each of the Parties agrees that to the extent any payment of any
Benefitted Item specified in any of the Categories is made to it hereunder, or
otherwise (other than from the Excluded Collateral), it shall, unless the
Parties which are entitled to receive payment in higher priority to such Party
have been paid all Benefitted Items then entitled to higher priority, hold such
funds in trust for the benefit of such other Parties and shall promptly (and in
any case, within three (3) Business Days) pay such funds to the Trustee to be
applied by the Trustee to payment of the appropriate Party as directed by the
Controlling Party.
(c) Each of the Parties agrees that all Liens created or arising
pursuant to the Lease Documents shall be subordinate to all Liens created or
arising pursuant to the Loan Documents.
7
<PAGE> 8
SECTION 3.3. CONTESTING LIENS OR SECURITY INTERESTS; NO PARTITIONING OR
MARSHALLING OF REVENUES.
(a) No Party shall contest the validity, perfection, priority or
enforceability of or seek to avoid, have declared fraudulent or have set aside
any Lien granted or assigned to Trustee or any interest in or involving the
Excluded Collateral whether arising pursuant to the Excluded Collateral
Agreement or otherwise and each Party hereby agrees to cooperate in the defense
of any action contesting the validity, perfection, priority or enforceability of
such Liens.
(b) Except as provided in the Trust Agreement, no Party shall have the
right, as against any other Party, to have any of the Revenues partitioned, or
to file a complaint or institute any proceeding at law or in equity to have any
of the Revenues partitioned, and each Party hereby waives any such right. Each
Party hereby waives any and all rights, as against any other Party, to have the
Revenues, or any part thereof, marshaled upon any foreclosure of any of the
Liens securing the Secured Obligations.
(c) No Party shall contest the validity or enforceability of or seek to
avoid, have declared fraudulent or have set aside any Secured Obligations. In
the event any Secured Obligations are invalidated, avoided, declared fraudulent
or set aside for the benefit of Borrower or Lessee, each Party agrees that such
Secured Obligations shall nevertheless be considered to be outstanding for all
purposes of this Flow of Funds Agreement and the Trust Agreement.
SECTION 3.4. SUBROGATION. Each of the Parties acknowledges and consents
to ZCSI's subrogation rights contained in Section 9.19 of the Loan Agreement,
and each further acknowledges and agrees that ZCSI shall be subrogated to all
rights of Lender and Lender's rights against the Borrower and the Lessee in and
to the Revenues to the extent of any payments made by ZCSI under the Surety Bond
in connection with the Loan; provided, however, all such subrogation rights are
subordinate in payment and priority to the rights of Lender as contained in the
Trust Agreement and this Flow of Funds Agreement. Nothing in this Flow of Funds
Agreement shall limit or affect the rights of ZCSI as a subrogee of any Secured
Obligation, or as assignee of the Holder of any Secured Obligation, or any other
rights ZCSI has apart from this Flow of Funds Agreement or the Trust Agreement
by virtue of subrogation resulting from a payment made by ZCSI under the Surety
Bond; provided, however, ZCSI shall not enforce any of its subrogation rights
against Borrower, Lessee, Guarantor or the Revenues until such time as the Loan
Obligations have been repaid in full. The parties hereto acknowledge that to the
extent payments are made by ZCSI or Backstop Insurer under, respectively, the
Surety Bond or the Backstop Policy, such payments shall not reduce the principal
balance of the Note, or interest thereon, for which Borrower is obligated to
repay, even though they may reduce the Surety Bond Amount for which ZCSI is
liable under the Surety Bond and for which Backstop Insurer is liable under the
Backstop Policy; provided, however, ZCSI shall not collect any sum outstanding
under the Note which it has already collected under the Reimbursement Agreement,
and ZCSI shall not collect any sum outstanding under the Reimbursement Agreement
which it has already collected under the Note.
8
<PAGE> 9
SECTION 3.5. FLOW OF FUNDS AGREEMENT ABSOLUTE AND UNCONDITIONAL.
(a) This Flow of Funds Agreement shall be a continuing, absolute and
unconditional agreement (subject only to its own terms), and shall remain in
full force and effect through the Term of this Flow of Funds Agreement;
(b) This Flow of Funds Agreement shall in no wise be affected or
impaired by any sale, pledge, surrender, compromise, settlement, release,
renewal, extension, indulgence, alteration, substitution, exchange, change in,
modification, amendment to or other disposition of any of the Benefitted Items
or any of the Transaction Documents or any obligation, liability or
indebtedness, created or evidenced by the Transaction Documents, either express
or implied. This Flow of Funds Agreement shall in no wise be affected or
impaired by any acceptance by any Party of any security for, or other guarantors
upon, any of the Benefitted Items or by any failure, neglect or omission on the
part of any Party to realize upon or protect any of the Benefitted Items, or any
collateral or security therefor, or to exercise any Lien upon or right of
appropriation of any moneys, credits or property toward the liquidation of the
Benefitted Items, or by any application of payments or credits thereon.
ARTICLE IV
MISCELLANEOUS
SECTION 4.1. NOTICES. Unless otherwise specifically provided herein,
any notice, direction, instruction or other communication required or permitted
to be given shall be in writing addressed to the respective Party as set forth
next to its signature on the execution pages hereto (including the execution
pages of any Joinder Agreement) and shall be personally served, telecopied, sent
by facsimile or delivered by a nationally recognized overnight courier service
and shall be deemed to have been received: (A) if delivered in person, when
delivered, (B) if delivered by telecopy or facsimile, on the date of
transmission if transmitted on a Business Day before 6:00 p.m. (New York time),
or, if not, on the next succeeding Business Day, or (C) if delivered by a
nationally recognized overnight courier service, one Business Day after delivery
to such courier properly addressed. Any Party may change its address for notices
by written notice to Trustee. Trustee shall disseminate the new address
information to the other Parties. all notices for purposes of indicating a
change of address shall take effect thirty (30) days following Trustee's receipt
thereof.
SECTION 4.2. AMENDMENTS AND WAIVERS. Any provision of this Agreement
may be amended or waived if, but only if, such amendment or waiver is in writing
and is signed by each of the Parties.
SECTION 4.3. SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall be binding upon and inure to the benefit of each of the Parties and their
respective successors and assigns.
9
<PAGE> 10
SECTION 4.4. GOVERNING; LAW, SUBMISSION TO JURISDICTION.
(A) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO ILLINOIS CHOICE
OF LAW PRINCIPLES.
(B) EACH OF THE PARTIES HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE
JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE COURT SITTING IN
CHICAGO, ILLINOIS IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AGREES THAT ALL
CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN
ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE
AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT
OR THAT SUCH COURT IS AN INCONVENIENT FORUM. ANY JUDICIAL PROCEEDING BY ANY
PARTY HERETO AGAINST ZCSI OR ANY AFFILIATE OF ZCSI INVOLVING, DIRECTLY, OR
INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT, RELATED TO, OR CONNECTED WITH
THIS AGREEMENT SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS.
SECTION 4.5. COUNTERPARTS; INTEGRATION. This Agreement may be signed
in any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement supersedes any and all prior agreements and understandings, oral
or written, relating to the subject matter hereof.
SECTION 4.6. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HEREBY
IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE RELATED DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
SECTION 4.7. RATIFICATION OF OBLIGATIONS. Nothing in this Agreement
shall limit, restrict, modify or alter the obligations of Lessee, Borrower and
Guarantor under the Transaction Documents to pay Rent, Reimbursement Obligations
and the Loan Obligations, respectively, strictly in accordance with the terms
thereof.
SECTION 4.8. WAIVER OF POSTING BOND. To the extent permitted by law,
each of the Parties hereby waives any requirements under the unauthorized
insurance or similar laws of any jurisdiction or otherwise that ZCSI or the
Backstop Insurer post funds, securities or other security as a condition to its
appearance or filing of pleadings in any proceeding involving or arising with
this Flow of Funds Agreement.
10
<PAGE> 11
SECTION 4.9. TERM OF THE FLOW OF FUNDS AGREEMENT. This Agreement shall
terminate upon (i) the occurrence of an "Event of Default" as defined in the
Trust Agreement and (ii) delivery of written notice declaring the Agreement
terminated by the Controlling Party to the Parties (the "TERMINATION DATE"). In
furtherance thereof, the Parties agree that upon such termination the priority
of payment provisions contained in Article II hereof shall, as to all Revenues
not previously thereto distributed in accordance with said Article II, be
inoperative and void. Notwithstanding the foregoing the True Up Provisions shall
remain operative (excluding any provision thereof relating to the application of
Revenues after the Termination Date to pay underestimated Operating Expenses) as
to all Revenues distributed prior to the Termination Date. In addition Article
III, Sections 4.1, 4.4, 4.5, 4.6, 4.7, 4.8 and Article V shall remain effective
subsequent to the Termination Date.
SECTION 4.10. SPRINGING LOCKBOX EVENT. Notwithstanding any other
provision hereof, subsequent to the occurrence of a Springing Lockbox Event, the
provisions of Section 3.4 of the Trust Agreement shall control to the extent the
same differ from the provisions of this Flow of Funds Agreement.
SECTION 4.11. TRUSTEE. The Parties hereto acknowledge and agree that
Trustee is acting hereunder not in its individual capacity, but solely in its
capacity as Trustee under the Trust Agreement, and that where there is any
reference herein to Trustee performing any activity, making any decision or
determination, approving or consenting to any matter, exercising any rights,
fulfilling any obligation, exercising any discretion or otherwise acting in any
capacity, Trustee will not take such action unless it is specifically authorized
or directed to do so in each instance pursuant to the Trust Agreement.
ARTICLE V
JOINT VENTURES
SECTION 5.1. JOINT VENTURES AND JOINDER AGREEMENTS. Each of the
Parties acknowledge and agree that on or prior to the Additional Properties
Closing Date, new Joint Ventures will be formed which will have an interest in
the Properties financed on such Additional Properties Closing Date, and as a
condition to such funding, such new Joint Ventures will be, and will be required
to become a party to this Flow of Funds Agreement by execution of a Joinder
Agreement in the form of Exhibit A hereto (the "JOINDER AGREEMENT") By its
execution hereof, each Party consents to such new Joint Ventures becoming a
Party to this Flow of Funds Agreement in accordance with the provision of this
Section 5.1.
SECTION 5.2. CONFIRMATORY GRANT. Each of the Joint Ventures hereby
acknowledges that it has granted a lien and security interest in the Revenues,
including any portion of the Revenues deposited in any Account, and any other
monies held by the Trustee as part of the Trust Estate (to the extent that it
has any right, title or interest in the same) pursuant to that certain Joint
Assignment of Leases and Rents dated as of July 16, 1999 (the "JOINT
ASSIGNMENT"). In order to further perfect and assure such grants, and not in
limitation thereof, each Joint Venture hereby grants to the Trustee a lien and
security interest in all Revenues
11
<PAGE> 12
including all Revenues deposited into any Account and all monies held by the
Trustee as part of the Trust Estate, and all proceeds thereof, to secure
indebtedness, obligations and liabilities otherwise secured by the Joint
Assignment.
SECTION 5.3. JOINT VENTURE AGREEMENTS. Each of the Joint Ventures shall
transmit directly to the Trustee all monies to be funded from time to time to
the Joint Venture by its partners pursuant to the Joint Venture Agreements for
deposit by the Trustee into the Operating Reserve Account. Each Joint Venture
agrees that such direction is absolute and unconditional, coupled with an
interest and irrevocable. The Joint Ventures agree to not reduce such amounts
payable by its partners or members by agreement or by setoff. Each of the Joint
Ventures agrees that monies deposited into the Operating Reserve Account shall
be disbursed by the Trustee in accordance with the Trust Agreement. Each of the
Joint Ventures agree that it has no right title or interest, legal or equitable,
in any monies in the Operating Reserve Account, or any other Account except as
may be specifically provided in the Trust Agreement.
[SIGNATURE PAGE TO FOLLOW]
12
<PAGE> 13
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of date first above written:
<TABLE>
<S> <C>
"BORROWER":
Address: PITA GENERAL CORPORATION,
Pita General Corporation an Illinois corporation
c/o SELCO Service Corporation
127 Public Square
Cleveland, Ohio 44114 By: /s/ Mindy Berman
Attention: Robert Bowes, Esq. ---------------------------------------
Fax: (216) 689-5681 Name: Mindy Berman
Telephone: (216) 689-5089 Title: Vice President
"GUARANTOR":
Address: ALTERRA HEALTHCARE CORPORATION,
Alterra Healthcare Corporation a Delaware corporation
450 N. Sunnyslope Road, Suite 300
Brookfield, Wisconsin 53005 By: /s/ Mark Ohlendorf
Attention: Mark Ohlendorf --------------------------------------
Senior Vice President Finance Name: Mark Ohlendorf
Telephone: (414) 641-7432 Title: Senior Vice President
Facsimile: (414) 789-6182
"ZCSI":
Address: ZC SPECIALTY INSURANCE COMPANY,
ZC Specialty Insurance Company a Texas corporation
One Exchange Place, Suite 1000
Jersey City, New Jersey 07302 By: /s/ Lynn Finkel
Attention: General Counsel --------------------------------------
Facsimile: (201) 309-3040 Name: Lynn Finkel
Confirmation: (201) 332-1400 Title: Vice President
"LENDER"
Address: GREENWICH CAPITAL FINANCIAL PRODUCTS, INC.,
Greenwich Capital Financial Products, Inc. a Delaware corporation
600 Steamboat, Level 2
Greenwich, Connecticut 06830 By: /s/ Warren Ashenmil
Attention: Paul Nidenberg --------------------------------------
Senior Vice President Name: Warren Ashenmil
Telephone: (203) 618-2347 Title: Senior Vice President
Facsimile: (203) 618-2052
</TABLE>
13
<PAGE> 14
<TABLE>
<S> <C>
"JOINT VENTURE"
Address:
c/o Alterra Healthcare Corporation CLARE BRIDGE OF CITRUS HEIGHTS L.P., CLARE BRIDGE OF
450 N. Sunnyslope Road, Suite 300 COBB COUNTY L.P., CLARE BRIDGE OF COLORADO SPRINGS
Brookfield, Wisconsin 53005 L.P., CLARE BRIDGE OF DECATUR L.P., CLARE BRIDGE OF
Attention: Mark Ohlendorf EAST MESA L.P., CLARE BRIDGE OF OVERLAND PARK L.P.,
Senior Vice President Finance CLARE BRIDGE OF PEORIA L.P., CLARE BRIDGE OF RENO
Telephone: (414) 641-7432 L.P., CLARE BRIDGE OF ROANOKE L.P., CLARE BRIDGE OF
Facsimile: (414) 789-6182 SOUTH PARK L.P., CLARE BRIDGE OF SUN CITY WEST DEER
VALLEY L.P., WYNWOOD OF BOYNTON BEACH WEST L.P., WYNWOOD
OF BREA L.P., WYNWOOD OF DUNEDIN L.P., WYNWOOD OF
EMERSON L.P., WYNWOOD OF TUCSON L.P., WYNWOOD OF
WAYNE L.P., WYNWOOD OF WESTLAKE L.P., WYNWOOD OF WEST
ORANGE, L.P. AND WYNWOOD OF WHITTIER
L.P.
By: Alterra Healthcare Corporation, the sole
general partner of each of the foregoing limited
partnerships
By: /s/ Mark Ohlendorf
-----------------------------------------------------
Mark Ohlendorf
Senior Vice President
By: TPI-HCR, LLC, the sole limited partner of
each of the foregoing limited partnerships
By: Twin Oaks Capital, L.L.C., its managing member
By: /s/ Ronald G. Kenny
--------------------------------------------
Ronald G. Kenny
President
</TABLE>
<PAGE> 15
<TABLE>
<S> <C>
"LESSEE":
AHC TENANT, INC.,
Address: a Delaware corporation
c/o Alterra Healthcare Corporation
450 N. Sunnyslope Road, Suite 300
Brookfield, Wisconsin 53005 By: /s/ Mark Ohlendorf
-----------------------------------------
Attention: Mark Ohlendorf Name: Mark Ohlendorf
Senior Vice President Finance Title: Vice President
Telephone: (414) 641-7432
Facsimile: (414) 789-6182
"TRUSTEE"
Address: THE FIRST NATIONAL BANK OF CHICAGO, as Trustee
The First National Bank of Chicago
One First National Plaza, Suite 0126 By: /s/ Jeffrey L. Kinney
Chicago, Illinois 60670-0126 -----------------------------------------
Attention: Corporate Trust Services Division Name: Jeffrey L. Kinney
Telephone: (312) 407-0192 Title: Vice President
Facsimile: (312) 407-1708
</TABLE>
<PAGE> 16
SCHEDULE I
BASE SURETY FEE AMOUNT
<TABLE>
<S> <C>
From the Closing Date to but not including the first anniversary thereof: 1.38%
From the Closing Date to but not including the second anniversary thereof: 1.65%
From the Closing Date to but not including the third anniversary thereof: 1.93%
From the Closing Date to but not including the fourth anniversary thereof: 2.22%
From the Closing Date to but not including the fifth anniversary thereof: 2.51%
From the Closing Date to but not including the sixth anniversary thereof: 2.82%
From the Closing Date to but not including the seventh anniversary thereof: 2.87%
From the Closing Date to but not including the eighth anniversary thereof: 2.92%
From the Closing Date to but not including the ninth anniversary thereof: 2.98%
Thereafter: 3.05%
</TABLE>
<PAGE> 17
EXHIBIT A
JOINDER AGREEMENT
Date:
----------------------
Reference is hereby made to that certain Flow of Funds Agreement dated
as of July ___, 1999, ZC Specialty Insurance Company, a Texas corporation; Pita
General Corporation, an Illinois corporation; AHC Tenant, Inc., a Delaware
corporation; Alterra Healthcare Corporation, a Delaware corporation; Greenwich
Capital Financial Products, Inc., a Delaware corporation, and the other "Joint
Ventures" from time to time party thereto (as amended and supplemented from time
to time, the "FLOW OF FUNDS AGREEMENT"). All capitalized terms not otherwise
defined herein shall have the same meaning herein as in the Flow of Funds
Agreement or as incorporated therein.
The below named Joint Venture (the "JOINT VENTURE") agrees that
effective as of the date of the acceptance hereof by the Controlling Party, the
Joint Venture shall for all purposes be a Party to the Flow of Funds Agreement
and bound by all the terms and provisions thereof.
As of the above stated date, the Joint Venture reconfirms the grant of
lien and security interest contained in Section 5.2 of the Flow of Funds
Agreement.
Joint Venture agrees that this Joinder Agreement shall be a supplement
to the Flow of Funds Agreement only for the purpose of binding Joint Venture and
shall not alter the terms of the Flow of Funds Agreement for any other "Party"
as defined therein.
Joint Venture's Name: "JOINT VENTURE":
--------------------
Joint Venture's Address: [NAME OF THE LIMITED PARTNER OF
----------------- EACH JOINT VENTURE]
-----------------
Attention:
Telephone: ------- By:
------------------------------- -----------------------------
Telecopier: Name:
------------------------------- -----------------------------
Title:
--------------------------
<PAGE> 18
Accepted as of :
-----------------
[CONTROLLING PARTY]
By:
----------------------------
Its:
------------------------
<PAGE> 1
EXHIBIT 2.10
EXECUTION COPY
REIMBURSEMENT AGREEMENT
Dated as of July 16, 1999
By and Among
ZC SPECIALTY INSURANCE COMPANY,
PITA GENERAL CORPORATION
AND
AHC TENANT, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C> <C>
ARTICLE I
DEFINITIONS AND INTERPRETATION....................................................................... 1
Section 1.01 Definitions............................................................... 1
Section 1.02 Interpretation............................................................ 5
ARTICLE II
REIMBURSEMENT OBLIGATIONS; PREMIUMS;
SURETY PERFORMANCE; BOND REPLACEMENT................................................................. 5
Section 2.01 Reimbursement and Other Payments by Lessee and/or Borrower................ 5
Section 2.02 General Provisions as to Payments......................................... 6
Section 2.03 Term of Agreement......................................................... 7
Section 2.04 Compliance with Laws...................................................... 7
Section 2.05 Acknowledgment of Surety Subrogation Rights............................... 8
Section 2.06 Performance of Surety..................................................... 8
Section 2.07 Replacement of Bond....................................................... 8
ARTICLE III
OBLIGATION TO POST SECURITY.......................................................................... 9
Section 3.01 Collateral................................................................ 9
ARTICLE IV
EVENTS OF DEFAULT.................................................................................... 9
Section 4.01 Events of Default......................................................... 9
Section 4.02 Remedies.................................................................. 13
Section 4.03 Non-Exclusivity of Remedies............................................... 14
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BORROWER PARTIES................................................... 14
Section 5.01 Organization, Powers, Capitalization, Good Standing, Business............. 14
Section 5.02 Authorization of Borrowing, Etc........................................... 15
Section 5.03 Pending Matters........................................................... 16
Section 5.04 Indebtedness and Contingent Obligations................................... 16
Section 5.05 Investment Company Act; PUCHA............................................. 16
Section 5.06 Foreign Person............................................................ 17
Section 5.07 Bankruptcy................................................................ 17
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
Section 5.08 Solvency.................................................................. 17
Section 5.09 Pending Matters........................................................... 17
Section 5.10 Financial Statements Accurate............................................. 18
Section 5.11 Compliance with Laws...................................................... 18
Section 5.12 Maintain Bed Capacity..................................................... 20
Section 5.13 Payment of Taxes and Property Impositions................................. 20
Section 5.14 Title to Collateral....................................................... 20
Section 5.15 Priority of Mortgages..................................................... 20
Section 5.16 Zoning, Other Laws........................................................ 21
Section 5.17 Condition of Improvements and Properties.................................. 21
Section 5.18 Disclosure................................................................ 22
Section 5.19 Legal Names............................................................... 22
Section 5.20 Employee Benefit Plans.................................................... 22
Section 5.21 Intellectual Property..................................................... 23
Section 5.22 Proceedings Pending....................................................... 23
Section 5.23 Compliance With Applicable Laws........................................... 23
Section 5.24 Management Agreements..................................................... 23
Section 5.25 1934 Act.................................................................. 23
Section 5.26 Use of Proceeds and Margin Security....................................... 24
Section 5.27 No Plan Assets............................................................ 24
Section 5.28 Governmental Plan......................................................... 24
Section 5.29 Year 2000................................................................. 24
Section 5.30 Legal Opinions............................................................ 25
Section 5.31 Leases; Agreements........................................................ 25
ARTICLE VI
NEGATIVE COVENANTS OF BORROWER PARTIES............................................................... 26
Section 6.01 Assignment of Licenses and Permits........................................ 26
Section 6.02 No Liens; Exceptions...................................................... 26
Section 6.03 Disposition of Assets..................................................... 27
Section 6.04 Change of Business........................................................ 27
Section 6.05 Changes in Accounting..................................................... 27
Section 6.06 Intentionally Omitted..................................................... 27
Section 6.07 Transfer of Ownership Interests........................................... 27
Section 6.08 Restriction on Fundamental Changes........................................ 27
Section 6.09 Transactions with Affiliates.............................................. 28
Section 6.10 Change of Use............................................................. 28
Section 6.11 Intentionally Deleted..................................................... 29
Section 6.12 Dividends, Distributions and Redemptions.................................. 29
Section 6.13 Indebtedness.............................................................. 29
Section 6.14 Bankruptcy, Receivers, Similar Matters.................................... 29
Section 6.15 No Negative Pledges....................................................... 30
</TABLE>
3
<PAGE> 4
<TABLE>
<S> <C> <C> <C>
Section 6.16 Changes Relating to Indebtedness.......................................... 30
Section 6.17 Contingent Obligations.................................................... 30
Section 6.18 ERISA..................................................................... 30
Section 6.19 Single Purpose, Bankruptcy-Remote Representations
Covenants and Warranties.................................................. 30
Section 6.20 Additional Single Purpose, Bankruptcy Remote Covenants.................... 33
Section 6.21 Application of Certain Covenants to Sublessees............................ 34
Section 6.22 Management................................................................ 34
ARTICLE VII
AFFIRMATIVE COVENANTS .......................................................................... 34
Section 7.01 Payment of Loan/Performance of Loan and
Reimbursement Obligations................................................. 35
Section 7.02 Maintenance of Existence.................................................. 35
Section 7.03 Accrual and Payment of Taxes.............................................. 35
Section 7.04 Insurance, Casualty and Condemnation...................................... 35
Section 7.05 Financial and Other Information........................................... 42
Section 7.06 GAAP...................................................................... 44
Section 7.07 Accountants' Reports...................................................... 45
Section 7.08 Books and Records......................................................... 45
Section 7.09 Payment of Indebtedness................................................... 45
Section 7.10 Budget Approval Process................................................... 45
Section 7.11 Annual Ownership Report................................................... 46
Section 7.12 Material Adverse Change; Material Adverse Effect.......................... 46
Section 7.13 Events of Default, etc.................................................... 46
Section 7.14 Litigation................................................................ 47
Section 7.15 Insurance................................................................. 47
Section 7.16 Conduct of Business....................................................... 47
Section 7.17 Periodic Surveys.......................................................... 48
Section 7.18 Management Agreement...................................................... 48
Section 7.19 Updated Appraisals........................................................ 49
Section 7.20 Comply with Covenants, Laws and Contractual Obligations................... 49
Section 7.21 Taxes and Other Charges................................................... 49
Section 7.22 Cost Reports.............................................................. 49
Section 7.23 Vendor Agreements......................................................... 49
Section 7.24 Certificate............................................................... 50
Section 7.25 Loan and Surety Documents................................................. 50
Section 7.26 Notice of Fees or Penalties............................................... 50
Section 7.27 Maintenance of Assumptions in Legal Opinions.............................. 50
Section 7.28 Surety's Expenses......................................................... 50
Section 7.29 Material Agreements....................................................... 50
Section 7.30 Inspection................................................................ 51
</TABLE>
4
<PAGE> 5
<TABLE>
<S> <C> <C> <C>
Section 7.31 ERISA..................................................................... 51
Section 7.32 Assisted Living Facility Consultant....................................... 51
Section 7.33 Place of Business......................................................... 52
ARTICLE VIII
ENVIRONMENTAL HAZARDS .......................................................................... 52
Section 8.01 Prohibited Activities and Conditions...................................... 52
Section 8.02 Exclusions................................................................ 53
Section 8.03 Preventive Action......................................................... 53
Section 8.04 O & M Program Compliance.................................................. 53
Section 8.05 Lessee's Environmental Representations and Warranties..................... 53
Section 8.06 Notice of Certain Events.................................................. 55
Section 8.07 Costs of Inspection....................................................... 55
Section 8.08 Remedial Work............................................................. 56
Section 8.09 Cooperation with Governmental Authorities................................. 56
ARTICLE IX
RESTRICTIONS ON TRANSFER .......................................................................... 56
Section 9.01 Restrictions on Transfer and Encumbrances................................. 56
Section 9.02 Assumability.............................................................. 56
Section 10.01 Notices, etc.............................................................. 59
Section 10.02 No Waivers................................................................ 62
Section 10.03 Amendments and Waivers.................................................... 62
Section 10.04 No Partnership, Etc....................................................... 62
Section 10.05 Time of the Essence....................................................... 62
Section 10.06 Costs and Expenses........................................................ 62
Section 10.07 Successors and Assigns.................................................... 64
Section 10.08 Governing; Law, Submission to Jurisdiction................................ 64
Section 10.09 Counterparts; Integration................................................. 65
Section 10.10 Waiver of Jury Trial...................................................... 65
Section 10.11 Indemnification........................................................... 65
Section 10.12 Evidence of Compliance.................................................... 71
Section 10.13 Headings.................................................................. 71
Section 10.14 U.S. Currency............................................................. 71
Section 10.16 Performance of Surety..................................................... 71
Section 10.17 Limitation of Surety Liability............................................ 72
Section 10.18 Usury Savings............................................................. 72
Section 10.19 Assignment in Lieu of Satisfaction........................................ 72
Section 10.20 Controlling Party......................................................... 72
Section 10.22 Waivers of Defenses of Guarantors and Sureties............................ 73
</TABLE>
5
<PAGE> 6
<TABLE>
<S> <C> <C> <C>
ARTICLE XI
APPLICATION OF PROPERTY REVENUE...................................................................... 75
Section 11.01 Application of Property Revenue........................................... 75
Section 11.02 Termination Premium....................................................... 75
ARTICLE XII
LIMITED RECOURSE .................................................................................... 75
Section 12.01 Non-Recourse Loan......................................................... 75
EXHIBITS AND SCHEDULES:
Exhibit A - Insurance Surety Bond
Exhibit B - Master Glossary of Definitions
Schedule 2.9(p) - Appraised Value of Individual Properties
Schedule 5.1(c) - Jurisdictions in which Borrower Parties Qualified
Schedule 5.1(e) - Offices and Places of Business of Borrower Parties
Schedule 5.2(b) - Required Consents - Contractual Obligations of Borrower Parties
Schedule 5.3 - Pending Matters of Borrower Parties
Schedule 5.9 - Pending Matters of Lessee or the Properties
Schedule 5.11-1 - Available Beds/Licensed Beds
Schedule 5.11-2 - Permits of Lessee
Schedule 5.16 - Zoning
Schedule 5.19 - Legal Names of Lessee
Schedule 5.20(a) - Employee Benefit Plans
Schedule 5.20(b)-1 - Non-Exempt Prohibited Transactions
Schedule 5.20(b)-2 - Obligations Arising from Loan
Schedule 5.21 - Intellectual Property
Schedule 5.31(d) - Rent Rolls
Schedule 7.10 - Financial Projections
Schedule 8.5 - Environmental Reports
Schedule 8.5(c) - UST's
</TABLE>
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REIMBURSEMENT AGREEMENT
THIS REIMBURSEMENT AGREEMENT (this "AGREEMENT") dated as of July 16,
1999 is by and among ZC SPECIALTY INSURANCE COMPANY, a Texas corporation
("SURETY"), AHC TENANT, INC., a Delaware corporation ("AHC" or "LESSEE") and
PITA GENERAL CORPORATION, an Illinois corporation ("BORROWER"). Borrower and
Lessee (as hereinafter defined) are collectively referred to herein as
"BORROWER PARTIES" and individually as a "BORROWER PARTY."
WHEREAS, Surety has issued an Insurance Surety Bond to The First
National Bank of Chicago, as trustee under that certain Trust Agreement dated
as of even date herewith, a copy of which Insurance Surety Bond is attached
hereto as Exhibit "A" (the "BOND").
WHEREAS, as a condition to Surety providing the Bond, Surety has
required, among other things, that Borrower and AHC enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the undertakings
herein set forth and intending to be legally bound, Surety and Borrower hereby
agree as follows:
ARTICLE I DEFINITIONS AND INTERPRETATION
SECTION 1.01 DEFINITIONS All capitalized terms not otherwise defined
herein shall have the meanings ascribed thereto in the Master Glossary (as
defined below). Terms which are not defined herein or in the Master Glossary
shall have the meanings ascribed to them in the Loan Agreement (as defined
below). For purposes hereof, the following terms shall have the following
meanings: In the event that the Loan Agreement shall have been terminated or no
longer be in effect, any defined terms in Section 1.1 of the Loan Agreement or
any exhibits attached thereto shall be made a part hereof as if such Section
1.1 of the Loan Agreement or any exhibits attached thereto were stated herein.
SECTION 1.02 INTERPRETATION In this Agreement (unless otherwise
specified), the singular includes the plural and the plural the singular; words
importing any gender include the other genders; references to statutes are to
be construed as including all statutory provisions consolidating, amending or
replacing the statute referred to; references to "writing" include printing,
typing, lithography and other means of reproducing words in a tangible, visible
form; the words "including," "includes" and "include" shall be deemed to be
followed by the words "without limitation"; references to articles, sections
(or subdivisions of sections), recitals, exhibits, annexes or schedules are
those of this Agreement unless otherwise indicated; references to agreements
and other contractual instruments shall be deemed to include all subsequent
amendments and other modifications to such instruments, but only to the extent
such amendments and other modifications are not prohibited by the terms of this
Agreement or specifically excluded therefrom; the phrase "and/or" shall be
deemed to mean the words both preceding and following such phrase, or either of
them; references to the parties and to Persons include their respective
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<PAGE> 8
permitted successors and assigns; in the case of governmental Persons, Persons
succeeding to their respective functions and capacities; and reference to times
of day shall be to Chicago, Illinois time unless specifically provided
otherwise; all accounting terms used in this Agreement shall be construed in
accordance with GAAP, except as otherwise specified; and references to the
chief financial officer of Lessee shall be deemed to refer to the chief
financial officer of Guarantor.
ARTICLE II REIMBURSEMENT OBLIGATIONS; PREMIUMS; SURETY
PERFORMANCE; BOND REPLACEMENT
SECTION 2.01 REIMBURSEMENT AND OTHER PAYMENTS BY LESSEE AND/OR
BORROWER.
a. (i) Borrower agrees to pay Surety and/or Trustee, as
applicable, for all Reimbursement Obligations. If the time for payment of any
of said Reimbursement Obligations is not specified herein, then such
Reimbursement Obligations shall be payable on written demand.
(ii) Reimbursable Amounts shall be due and payable on
the Business Day on which payments are made by Surety under the Bond without
any requirement of notice to Borrower from Surety. To the extent Borrower makes
payments on the Note relating to amounts which were paid by Surety on the Bond,
Borrower shall receive a credit on the Reimbursable Amounts for such amounts.
Similarly, if Reimbursable Amounts are paid to Surety by Borrower on account of
payments made by Surety on the Bond, Surety shall give credit to amounts owed
on the Note.
b. Borrower agrees to pay to Surety interest on any and all
Reimbursement Obligations for each day from the date when due until such amount
is paid in full, whether before or after judgment, payable on demand, at a per
annum rate equal to the Default Rate.
c. Borrower's Reimbursement Obligations under this
Agreement are absolute, unconditional and irrevocable and shall be performed in
accordance with the terms of this Agreement notwithstanding:
(i) any lack of validity or enforceability of any of
the Transaction Documents;
(ii) any amendment or waiver of or any consent to
departure from all or any of the provisions of any Transaction Document;
(iii) the existence of any Default or the exercise of
any remedy;
(iv) any act or omission to act or delay by Surety that
might, but for the provisions of this Section, constitute a legal or equitable
discharge of any of Borrower's obligations hereunder;
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<PAGE> 9
(v) any of the terms and conditions of any
reinsurance agreement between Surety and any other Person; or
(vi) any claim, right of set-off, defense or other
rights that Borrower may have at any time against Surety or any other Person,
whether in connection with the Transaction Documents or any unrelated
transaction.
d. Borrower agrees to pay on the Closing Date the
Transaction Fee to the Trustee.
SECTION 2.02 GENERAL PROVISIONS AS TO PAYMENTS.
(a) Borrower shall make each payment of Reimbursement
Obligations, fees, commissions and other amounts payable hereunder, not later
than 3:00 p.m. (New York City time) on the date when due, in Federal or other
funds immediately available in New York City, to Surety at its address referred
to in Section 10.01 hereof. If such payment of Reimbursement Obligations, fees,
commissions or other amounts payable hereunder shall be due on a day which is
not a Business Day, the date for payment thereof shall be extended to the next
succeeding Business Day.
SECTION 2.03 TERM OF AGREEMENT.
This Agreement is effective commencing on the date hereof. This
Agreement shall remain in full force and effect until the later of (i) the date
on which Surety's obligations under the Bond are terminated or have expired
(including without limitation, all obligations regarding Preference Amounts),
or (ii) the date on which all Reimbursement Obligations of Borrower to Surety
have been irrevocably paid and satisfied in full. Any termination of this
Agreement pursuant hereto or any other termination of this Agreement, shall not
terminate or otherwise affect in any way any liability or obligations of any
party hereto to the extent such liability or obligation relates to events
occurring or circumstances existing prior to or as of, or as a result of such
termination.
SECTION 2.04 COMPLIANCE WITH LAWS.
It is the intent of the parties that the execution, delivery, and
performance of the Transaction Documents, the transactions provided for therein
and contemplated thereby, and all matters incidental and related thereto or
arising therefrom, shall be in strict compliance with, and that they shall each
comply and conform strictly with, all laws applicable to and governing the
Transaction Documents, as from time to time in effect, including any applicable
usury laws. This provision shall not be deemed to alter the choice of governing
law in the Transaction Documents. In furtherance thereof, Surety, Lessee and
Borrower stipulate and agree that none of the terms and provisions contained
in, or pertaining to, the Transaction Documents shall ever be construed to
create a contract for, or obligating any Person to pay for, the use or
forbearance or detention of money, interest at a rate or in an amount in excess
of the maximum rate or maximum amount of
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<PAGE> 10
interest lawfully permitted or allowed to be, contracted for, charged,
received, taken, or reserved under such laws. For such purposes, as to each of
the Transaction Documents, (i) "interest" shall include the aggregate of all
amounts which constitute, or are deemed to constitute, interest under the law
applicable to the Transaction Documents and the transactions thereunder, that
is contracted for, chargeable, receivable (whether received or deemed to have
been received), taken, or reserved under each such document, and (ii) unless
otherwise specified therein, all computations of the maximum amount of interest
permitted or allowed under such applicable law will be made on the basis of the
actual number of days elapsed over a 365 or 366 day year, whichever is
applicable. THE PROVISIONS OF THIS PARAGRAPH SHALL CONTROL OVER ALL OTHER
PROVISIONS OF THE TRANSACTION DOCUMENTS. If the effective rate or amount of
interest which would otherwise be payable would exceed the maximum rate or
maximum amount of interest Surety or any other holder of the Note or other
obligation is allowed by such applicable law to charge, contract for, take,
reserve, or receive, or in the event Surety or any holder of the Note or other
obligation shall charge, contract for, take, reserve, or receive money that is
deemed to constitute interest which would, in the absence of this provision,
increase the effective rate or amount of interest payable under the Transaction
Documents to a rate or amount in excess of that permitted or allowed to be
charged, contracted for, taken, reserved, or received under such applicable law
then in effect, then the amount of interest which would otherwise be payable
shall be limited to, and the Transaction Documents shall in all respects be
construed and applied so as to conform to, the maximum amount allowed pursuant
to then applicable law, and, if no maximum amount or rate is then in effect,
then as may otherwise be authorized and allowed under such laws, as now or
hereafter construed by the courts having jurisdiction. Any amount(s) charged,
contracted for, received, taken, or reserved that are deemed to constitute
interest determined to be in excess of the maximum rate or maximum amount of
interest permitted by applicable law shall be immediately returned or credited
to the account of Borrower or other Person entitled thereto upon such a
determination, including a determination by a court of competent jurisdiction.
All amounts contracted for, charged, received, reserved, paid, or agreed to be
paid in connection with any note or other obligation which would under
applicable law be deemed "interest" (or if not so deemed, would be deemed an
amount that would be included in the calculation of the maximum rate or maximum
amount of interest allowed pursuant to applicable law), shall, to the maximum
extent not prohibited by applicable law, be amortized, prorated, allocated, and
spread throughout the full term of the Transaction Documents and any loans, as
the case may be; provided that, if the Note or other obligation is paid and
performed in full prior to the end of the full existence thereof exceeds the
maximum lawful rate or amount, Surety shall refund to Borrower or such Person
entitled thereto the amount of such excess, or credit the amount of such excess
against the principal amount of such note or other obligation (as applicable)
and, in such event, it is expressly agreed that Surety shall not be subject to
any penalties provided by any laws for contracting for, charging, taking,
reserving, or receiving interest in excess of the maximum rate.
SECTION 2.05 ACKNOWLEDGMENT OF SURETY SUBROGATION RIGHTS. Each of
Borrower and Lessee acknowledges the subrogation rights of Surety under Section
9.19 of the Loan Agreement and Section 2.12 of the Trust Agreement.
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<PAGE> 11
SECTION 2.06 PERFORMANCE OF SURETY. At its option, upon either
Borrower's or Lessee's failure to do so and irrespective of whether notice has
been given and whether any time in which to cure has elapsed, Surety may make
any payment or do any act on such Borrower's or Lessee's behalf that Borrower,
Lessee or others are required to do to remain in compliance with this Agreement
or any of the other Transaction Documents, and each of Borrower and Lessee
agrees to reimburse Surety, on demand, for any payment made or expense incurred
by Surety pursuant to the foregoing authorization, including, without
limitation, attorneys' fees, and until so repaid any sums advanced by Surety
shall constitute a portion of the Reimbursement Obligations, shall be secured
by the Mortgage and other Collateral Documents and shall bear interest at the
Default Rate from the date advanced until repaid, provided, however, absent a
Lease Event of Default, in no event shall Surety be entitled to seek
reimbursement from the Lessee for Reimbursable Amounts except pursuant to the
Flow of Funds Agreement and Section 4.2 of the Trust Agreement.
SECTION 2.07 REPLACEMENT OF BOND. Borrower acknowledges that pursuant
to and subject to the terms and conditions of Section 7.14 of the Trust
Agreement, Surety may reduce, rearrange or increase the Surety Bond Amount (as
defined in the Bond), and Surety may enter into other Surety Transactions (as
defined in the Trust Agreement). Borrower agrees that amounts paid by Surety
under the Surety Bond shall be a liability of Borrower owed as a part of the
Losses hereunder and for all other purposes hereof, notwithstanding any
reduction, rearrangement or increase in the Surety Bond Amount (up to the
maximum Surety Bond Amount set forth in the Bond as of today's date). Borrower
acknowledges that Surety has no obligation or commitment to alter or amend the
Bond. Nevertheless, Borrower hereby agrees that Surety may, subject to the
provisions of Section 7.14 of the Trust Agreement and Section 10.06 herein,
take any act it deems necessary to effect one or more Surety Transactions,
including an increase in the amount of coverage provided under the Surety Bond
up to the maximum Surety Bond Amount set forth in the Bond as of today's date,
without the necessity of any future consent or direction of Borrower. Borrower
hereby agrees that if Surety takes any such action, the same shall not in any
manner affect, reduce or void Borrower's Reimbursement Obligations.
ARTICLE III OBLIGATION TO POST SECURITY
SECTION 3.01 COLLATERAL. All Reimbursement Obligations of Borrower
and Lessee to Surety hereunder shall at all times be entitled to the benefit of
the Collateral, and such Reimbursement Obligations are secured, pursuant to the
Mortgage, the Pledge Agreement, Security Agreement and the other Transaction
Documents, by a mortgage lien on, pledge of and security interest in the
Collateral.
ARTICLE IV EVENTS OF DEFAULT
SECTION 4.01 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 or Lessee to pay any
Reimbursement Obligations which it is obligated to pay hereunder within ten
(10) days after the same become due; or
(b) The failure by Borrower or Lessee to make any scheduled
payment amount, due under the Note, the Surety Bond, this Agreement or any of
the Transaction Documents in respect of the Loan Obligations (whether such
amount is interest, principal, deposits into the Tax and Insurance Escrow Fund,
Capital Improvements Account and any other scheduled reserve payments required
under the Transaction Documents or otherwise) within three (3) days after the
same becomes due; or
(c) Any failure by Borrower or Lessee to pay any Loan
Obligation other than a scheduled payment amount within ten (10) days after the
same shall become due.
(d) Lessee's failure to deliver or cause to be delivered the
financial statements and information set forth in Sections 7.05, 7.07 and 7.08
hereof within the times required when such failure is not cured within twenty
(20) days following Surety's written notice to Lessee thereof; or
(e) Breach or default under Sections 5.27, 5.28, 7.04, 7.12,
7.13, 7.14, 7.31, or Article VI or Article IX hereof;
(f) The failure of Borrower, Lessee or Manager properly and
timely to perform or observe any covenant or condition set forth in this
Agreement or the other Transaction Documents and not otherwise described
elsewhere in this Section 4.01 and such failure is not fully cured within
thirty (30) days after receipt by Borrower or Lessee of notice from Surety of
such failure; or, if such failure is not capable of being cured within said
thirty (30) day period such failure is not cured within such additional period
as may be reasonably required to cure such failure (but in no event to exceed
ninety (90) days from the date of notice) provided that Borrower or Lessee
commences such cure within the initial thirty (30) day period and diligently
prosecutes same to completion; and provided further that, in the case of a
failure by Borrower, Lessee, any Sublessee or Manager to obtain any Regulatory
Permit in accordance with Section 5.11 hereof, such initial thirty (30) day
period shall not be extended for any additional period pursuant to the
foregoing if such extension would have a Material Adverse Effect; or
(g) The filing by any Borrower Party or the Manager 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
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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
(h) The entry by a court of competent jurisdiction of an
order, judgment, or decree approving a petition filed against any Borrower
Party or the Manager which such 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, earnings, profits or income thereof which appointment shall
remain unvacated and unstayed for an aggregate of sixty (60) days (whether or
not consecutive); or
(i) Intentionally Omitted; or
(j) Any certificate, statement, representation, warranty or
audit heretofore or hereafter furnished by or on behalf of Borrower, Lessee or
Manager pursuant to or in connection with this Agreement (including, without
limitation, representations and warranties contained herein or in any of the
Loan and Surety Documents for the benefit of Surety) or as an inducement to
Surety to issue the Surety Bond proves (i) to have been false in any material
respect at the time when the facts therein set forth were stated or certified,
or proves to have omitted any substantial contingent or unliquidated liability
or claim against Borrower, Lessee or Manager, including a Contingent Obligation
or (ii) with respect to financial statements, books and records not to have
been prepared in accordance with GAAP or on the date of execution of this
Agreement there shall have been any materially adverse change in any of the
acts previously disclosed by any such certificate, statement, representation,
warranty or audit, which change shall not have been disclosed to Surety in
writing at or prior to the time of such execution; or
(k) The failure of Lessee to correct, within the time
deadlines set by any applicable Medicare, Medicaid or other applicable
reimbursement programs or licensing agency, any deficiency which would result
in the following actions by such agency with respect to any Assisted Living
Facility:
(i) The action by the Medicaid or Medicare programs,
any other governmental agency or actor, or any other third
party payer to suspend or offset an amount of more than
$250,000 to recoup overpayments or recover improper payments.
(ii) a termination of any Reimbursement Contract
representing more than $2,000,000 in annual Operating Revenues
or any Regulatory Permit; or
(iii) a ban on new admissions generally or any ban of
thirty (30) days or
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more on admission of patients otherwise qualifying for Medicaid
or Medicare coverage or other reimbursement; or
(l) Lessee, any Sublessee or Manager (in its capacity as
Manager of any Assisted Living Facility) or any Assisted Living Facility shall
be finally assessed fines or penalties by any state or any Medicare, Medicaid,
health or licensing agency having jurisdiction over such Persons or the
Assisted Living Facilities in excess of $25,000 for a single Assisted Living
Facility or $150,000 in the aggregate for all Assisted Living Facilities during
any calendar year (which fines are not paid on a timely basis), or Lessee, any
Sublessee or Manager (in its capacity as Manager of any Assisted Living
Facility) or any Assisted Living Facility should agree to pay in lieu of such
fines or penalties an amount in settlement of any action to any state or any
Medicare, Medicaid, health or licensing agency having jurisdiction over such
Persons or the Assisted Living Facilities in excess of $25,000 as related to a
single Assisted Living Facility or $150,000 in the aggregate during any
calendar year (which settlement is not paid on a timely basis).
(m) final judgment in excess of $100,000 (individually or in
the aggregate) shall be rendered by a court of law or equity against Lessee or
Manager or any of their respective assets, 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
Lessee or Manager, 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 Surety, or
(n) If any provision of any organizational documents
affecting the purpose for which any Borrower Party is formed is amended or
modified in any manner which is reasonably likely to result in a Material
Adverse Effect on the Reimbursement Obligations or the security therefor, or if
any Borrower Party or any member of such Borrower Party fails to perform or
enforce the provisions of any organizational documents in a manner that is
reasonably likely to result in a Material Adverse Effect on the Reimbursement
Obligations or security therefor;
(o) The occurrence of an "EVENT OF DEFAULT" as that term is
defined in the Trust Agreement or the Master Lease, or the failure of any
Person which is a party to the Trust Agreement to pay or perform any
obligations to the Surety under the Trust Agreement beyond any grace period
provided therein; or
(p) Any dissolution or attempted dissolution of any Borrower
Party;
(q) Any default (including expiration of any applicable
grace or cure periods) or Event of Default under any of the Transaction
Documents not otherwise described hereinabove;
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(r) Any of the Transaction Documents for any reason ceases
to be in full force and effect or is declared to be null and void, or any
Person who is a party thereto, other than Surety, denies that it has any
further liability (as distinguished from denial of the existence of a Default
or Event of Default) under any Transaction Document to which it is party, or
gives notice to such effect; or
(s) Any Borrower Party or Sublessee is enjoined, restrained
or in any way prevented by the order of any court or any administrative or
regulatory agency from conducting all or any material part of its business and
such order continues for more than 30 days;
(t) (i) Lessee or Guarantor shall default in the payment
when due of any payment obligation under any Indebtedness having an outstanding
principal balance in excess of $1 million or under any lease agreement
involving payment of rent in an aggregate amount in excess of $1 million now
existing or hereafter entered into by Lessee or Guarantor (any such
Indebtedness or lease obligations, "MATERIAL INDEBTEDNESS"), which default
shall continue after the expiration of any applicable notice or cure period
therein provided or (ii) the acceleration of any Material Indebtedness or the
termination of any lease evidencing Material Indebtedness; or
(u) The failure by any Borrower Party to apply any funds
received by Borrower or Lessee according to the Flow of Funds Agreement.
Notwithstanding anything in this Section, all requirements of notice
shall be deemed eliminated if Surety or Trustee 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. The provisions of paragraph (f) above do
not provide a cure for Events of Default under other paragraphs of this Section
4.01.
SECTION 4.02 REMEDIES. Subject to the terms of the Trust Agreement,
upon the occurrence of any one or more of the foregoing Events of Default,
Surety may, at its option:
a. Declare the entire unpaid principal of the Reimbursement
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 Properties 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 Transaction
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Documents.
d. Exercise the rights and remedies of setoff and/or
banker's lien against the interest of Borrower and/or Lessee in and to every
account and other property of Borrower and/or Lessee which is in the possession
of Surety 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
Transaction Documents, including, without limitation, the Bond or the Trust
Agreement.
f. Direct the Trustee, to accelerate the Note and otherwise
exercise its remedies under the Trust Agreement.
g. Exercise all rights and remedies afforded to Surety
pursuant to Section 4.02 of this Agreement or to Lender under Section 7.2 of
the Loan Agreement and/or Section 15 of the Mortgage.
h. Waive any such Event of Default.
SECTION 4.03 NON-EXCLUSIVITY OF REMEDIES. Upon the occurrence and
continuance of an Event of Default, Surety may, subject at all times to the
terms and conditions of the Trust Agreement, exercise any right, power or
remedy permitted to it by law (whether by suit in equity, action at law or
both), and whether for specific performance of any agreement contained in this
Agreement or the Transaction Documents or in aid of the exercise of any right
or power granted in this Agreement or the Transaction Documents, or otherwise,
it being intended by the parties hereto that no remedy is to be exclusive and
that each remedy is to be cumulative. No course of dealing on the part of
Surety or any delay or failure on the part of Surety to exercise any right
shall operate as a waiver of such right or otherwise prejudice Surety's rights,
power and remedies. If Borrower fails to pay when due any amount owed
hereunder, Borrower shall be obligated to pay to Surety, to the extent
permitted by law, such further amount as shall be sufficient to cover the cost
and expenses, including but not limited to reasonable attorneys' fees, or
collecting any sums due or otherwise enforcing any of Surety's rights.
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BORROWER PARTIES
A. REPRESENTATIONS AND WARRANTIES OF BORROWER PARTIES.
To induce Surety to enter into this Agreement, and to issue the Bond,
Borrower and where applicable, Lessee, as to itself and its Affiliates hereby
unconditionally covenants, represents and warrants to Surety (which covenants,
representations and warranties have been relied upon by Surety in issuing the
Bond) that the statements set forth in this Article V are true, correct and
complete as of the date hereof and will be true, correct and complete as of the
Closing Date and as of the Additional Properties Closing Date:
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SECTION 5.01 ORGANIZATION, POWERS, CAPITALIZATION, GOOD STANDING,
BUSINESS.
(a) ORGANIZATION AND POWERS. Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Illinois. Lessee is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. SELCO is a corporation, duly
organized, validly existing and in good standing under the laws of the State of
Ohio. SELCO is the sole stockholder of Borrower. Alterra is the sole
stockholder of Borrower. Each Borrower Party has all requisite power and
authority to own and operate its properties, to carry on its business as now
conducted and proposed to be conducted, and to enter into each Loan and Surety
Document to which it is a party and to perform the terms thereof. The articles
of incorporation and by-laws (each as amended, the "CHARTER DOCUMENTS") contain
all provisional terms necessary in each case for the Borrower Parties to comply
with Sections 5.19 and 5.20 of the Loan Agreement and Sections 6.19 and 6.20 of
this Agreement, as applicable.
(b) CAPITALIZATION; OWNERSHIP. No Borrower Party has any (i)
direct or indirect interest in, including without limitation stock, partnership
interest or other securities of, any other Person except as set forth herein,
or (ii) direct or indirect loan, advance or capital contribution to any other
Person, including all indebtedness and accounts receivable from that other
Person. All issued and outstanding shares of capital stock of each Borrower
Party which is a corporation are duly authorized and validly issued, fully
paid, nonassessable, free and clear of all Liens, (other than Permitted Liens)
and such shares were issued in compliance with all applicable state and federal
laws concerning the issuance of securities. There are no preemptive or other
outstanding rights, options, warrants, conversion rights or similar agreements
or understandings for the purchase or acquisition of any shares of capital
stock or other securities of such entities.
(c) QUALIFICATION. Each Borrower Party is duly qualified and
in good standing in the state of its formation. Borrower and Lessee are also
duly qualified and in good standing in the states where the Properties are
located, or in the case of Borrower will be so duly qualified as soon as
reasonably practicable and in any event within thirty (30) days following the
Closing Date. In addition, each Borrower Party is duly qualified and in good
standing in each state where it is necessary to carry on its present business
and operations, except in jurisdictions in which the failure to be qualified
and in good standing could not reasonably be expected to have a Material
Adverse Effect. All jurisdictions in which each Borrower Party is qualified to
do business are set forth on SCHEDULE 5.1(C) hereto.
(d) BUSINESS ASSETS. Each Borrower Party is and has always
engaged only in the businesses permitted hereunder. The sole assets of Borrower
are the Collateral in which it has granted or shall grant a Lien pursuant to
the Transaction Documents, including the Properties, the Assisted Living
Facilities and all Improvements, its interest in the Master Lease and the
Ground Leases, Permits, if any, and personal property appurtenant or related
thereto and
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its interest in the Excluded Collateral. The sole assets of Lessee are its
leasehold interests in and to the Properties, Improvements, Assisted Living
Facilities and Equipment under the Master Lease, its sublessor's interest in
the Subleases, and its right, title and interest, if any, in and to the
Permits, if any, and personal property appurtenant or related thereto and the
Excluded Collateral.
(e) ADDRESSES. All offices and places of business of each of
the Borrower Parties, and the location of all properties in which any of them
has any interest are set forth in SCHEDULE 5.1(E) hereto. The principal place
of business and the chief executive office of each Borrower Party is so
designated on said SCHEDULE 5.1(E).
SECTION 5.02 AUTHORIZATION OF BORROWING, ETC.
(a) AUTHORIZATION OF BORROWING. Borrower has the power and
authority to incur the Indebtedness evidenced by the Transaction Documents. The
execution, delivery and performance by each Borrower Party of each of the
Transaction Documents to which it is a party and the consummation of the
transactions contemplated thereby, have been duly authorized by all necessary
corporate action.
(b) NO CONFLICT. The execution, delivery and performance by
each Borrower Party of the Transaction Documents to which it is a party and the
consummation of the transactions contemplated thereby, do not and will not: (1)
violate (x) any provision of law applicable to any Borrower Party; (y) the
Charter Documents of any Borrower Party; or (z) any order, judgment or decree
of any court or other agency of government binding on any Borrower Party or any
of their Affiliates; (2) conflict with, result in a breach of or constitute
(with due notice or lapse of time or both) a default under any material
Contractual Obligation of any Borrower Party or any of their Affiliates; (3)
result in or require the creation or imposition of any material Lien (other
than the Lien of the Transaction Documents and the Lien or other interest of
SELCO or its Affiliates in and to the Excluded Collateral) upon the Property or
assets of any Borrower Party or any of their Affiliates; or (4) except as set
forth on SCHEDULE 5.2(B) hereto require any approval or consent of any Person
under any material Contractual Obligation of any Borrower Party, which
approvals or consents have been obtained on or before the dates required under
such Contractual Obligation, but in no event later than the Closing Date.
(c) GOVERNMENTAL CONSENTS. The execution, delivery and
performance by each Borrower Party of the Transaction Documents to which it is
a party, and the consummation of the transactions contemplated thereby, and the
execution, delivery and performance by Borrower of the Master Lease and by
Lessee of the Master Lease and the Subleases and the consummation of the
transactions contemplated thereby, do not and will not require any registration
with, consent or approval of, or notice to, or other action to, with or by, any
federal, state or other governmental authority or regulatory body, except for
the Permits required to be obtained by Borrower, Lessee, the Sublessees or the
Manager in connection with the operation of the Assisted Living Facilities as
set forth in Section 5.11 hereof, and except for the recording of the
Mortgages, Assignment of Leases, other Security Documents and/or the UCC-1's in
the
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applicable recorders' or filing offices. In addition to any covenants hereunder
relating to Permits, Lessee shall diligently proceed to obtain or satisfy all
consents, approvals, and requirements set forth on SCHEDULE 5.11 hereto.
(d) BINDING OBLIGATIONS. This Agreement is, and the other
Transaction Documents, including the Note and the Mortgage, when executed and
delivered will be, the legally valid and binding obligations of each Borrower
Party, as applicable, each enforceable against the Borrower Parties, as
applicable, in accordance with their respective terms, subject to bankruptcy,
insolvency, moratorium, reorganization and other similar laws affecting
creditor's rights. No Borrower Party has any defense or offset to any of its
obligations under the Transaction Documents. No Borrower Party has any claim or
right of set off against Surety or any Affiliate of Surety.
SECTION 5.03 PENDING MATTERS. There are no judgments outstanding
against any Borrower Party nor is there any action, charge, claim, demand,
suit, petition, inquiry or investigation pending or, to the best knowledge of
such Borrower Party, after due inquiry, threatened against it.
SECTION 5.04 INDEBTEDNESS AND CONTINGENT OBLIGATIONS. As of the
Closing Date, none of the Borrower Parties shall have any Indebtedness or
Contingent Obligations except for the Reimbursement Obligations and the Allowed
Indebtedness.
SECTION 5.05 INVESTMENT COMPANY ACT; PUCHA. No Borrower Party is: (i)
an "investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940, as amended; (ii) a
"holding company" or a "subsidiary company" of a "holding company" or an
"affiliate" of either a "holding company" or a "subsidiary company" within the
meaning of the Public Utility Holding Company Act of 1935, as amended; or (iii)
subject to any other law that purports to restrict or regulate its ability to
borrow money.
SECTION 5.06 FOREIGN PERSON. No Borrower Party is a "foreign person"
within the meaning of Section 1445(f)(3) of the Code.
SECTION 5.07 BANKRUPTCY. No Borrower Party is a debtor, and no
property of any of them (including any Property) is property of the estate, in
any voluntary or involuntary case under the Bankruptcy Code or under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect. No Borrower Party and no property of any of them is under the
possession or control of a receiver, trustee or other custodian. No Borrower
Party has made any assignment for the benefit of creditors. No such assignment
or bankruptcy or similar case or proceeding is now contemplated.
SECTION 5.08 SOLVENCY. As of and from and after the Closing Date, the
Borrower Parties (after giving effect to the transactions contemplated by the
Transaction Documents), in the aggregate; (A) own and will own assets the fair
saleable value of which are (1) greater than the
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total amount of liabilities (including Contingent Obligations) of the Borrower
Parties and (2) greater than the amount that will be required to pay the
probable liabilities of such Borrower Parties' then existing debts as they
become absolute and matured considering all financing alternatives and
potential asset sales reasonably available to Borrower Parties; (B) has capital
that is not insufficient in relation to their business as presently conducted
or any contemplated or undertaken transaction; and (C) do not intend to incur
and do not believe that they will incur debts beyond their ability to pay such
debts as they become due.
B. REPRESENTATIONS AND WARRANTIES OF LESSEE.
To induce Surety to enter into this Agreement, and to issue the Bond,
Lessee hereby unconditionally covenants, represents and warrants to Surety that
the following statements, set forth in Sections 5.09 through 5.31 inclusive,
are true, correct and complete as of the date hereof and will be, true, correct
and complete as of the Closing Date and as of the Additional Properties Closing
Date.
SECTION 5.09 PENDING MATTERS. Except as set forth on SCHEDULE 5.9
hereto or as described in Section 5.22 herein, there are no judgments
outstanding against any of the Properties nor is there any action, charge,
claim, demand, suit, petition, inquiry or investigation pending, or to the best
of Lessee's knowledge, after due inquiry, threatened against any of the
Properties. The actions, charges, claims, demands, suits, proceedings,
petitions, investigations and arbitrations set forth on SCHEDULE 5.9 hereto and
described in Section 5.22 herein will not result, if adversely determined, and
could not reasonably be expected to result, either individually or in the
aggregate, in any Material Adverse Effect and do not relate to and will not
affect the consummation of the transactions contemplated hereby or under any of
the Transaction Documents. Lessee is not in violation, breach or default of any
agreement, the violation of which could have a Material Adverse Effect, and
Lessee is not in violation of any order, judgment, or decree of any court, in
any material respect, of any statute or governmental regulation to which it is
subject.
SECTION 5.10 FINANCIAL STATEMENTS ACCURATE. All financial statements
concerning Lessee, Alterra or any of their respective Affiliates or the
Properties provided by or on behalf of Lessee or Alterra to Surety have been
prepared on a basis consistent with the audited financial statements of Alterra
(in the case of Lessee, Alterra, or their respective Affiliates or HCR (with
respect to the Properties) consistently applied and present (as of the dates
thereof) the respective financial conditions of the Persons covered thereby and
the results of their operations for the periods then ending. All operating
statements, income reports and other financial data regarding Lessee, Alterra
and the Assisted Living Facilities heretofore provided by or on behalf of
Lessee are, to the best knowledge of Lessee after due inquiry, true correct and
complete and present fairly, the financial condition and, results of, such
operations. There has been no material adverse change in the financial
condition, operations, or prospects of Lessee, Alterra or to the best knowledge
of Lessee after due inquiry, any Assisted Living Facility since the dates of
such statements except as fully disclosed in writing with the delivery of such
statements.
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SECTION 5.11 COMPLIANCE WITH LAWS. Borrower, Lessee, each Sublessee
and/or Manager (and/or with respect to nursing home beds within the Properties
located in Laguna Palm Terrace, California and Palmer Ranch, Florida, HCR), as
the case may be, is, or will be within sixty (60) days following the Closing
Date or the Additional Properties Closing Date, as the case may be (or, in the
case of the Assisted Living Facilities located in California and Florida, such
longer period as may be reasonably necessary with the exercise of diligence),
the lawful owner of all Permits necessary for the proper and lawful operation
of the Assisted Living Facilities as an assisted living facility (or, in the
case of a portion of the Properties located in Laguna Palm Terrace in Laguna
Hills, California and Palmer Ranch in Sarasota, Florida as skilled nursing
facilities) under applicable Legal Requirements; during any interim period
pending which the Permits shall not be held in the name of the applicable
party, the Assisted Living Facilities can and will be lawfully operated
pursuant to consents, waivers or provisional Permits or under subleases or
management agreements. Lessee has no knowledge of any fact, event or condition
which would cause any of such Permits to not be duly issued or transferred to
Borrower, Lessee, any Sublessee or Manager, as applicable, within the
applicable time period set forth above. To the extent such Permits are not held
in the name of the applicable party as of the Closing Date, or the Additional
Properties Closing Date, as the case may be, Lessee has obtained, or has caused
the applicable party to obtain, all requisite consents necessary to permit
Lessee, the applicable Sublessee or Manager to operate or cause to be operated
the Assisted Living Facilities and, as of the Closing Date, has filed, or has
caused the applicable party to file, all necessary applications to obtain such
Permits. The Permits held in the name of the applicable party as of the Closing
Date or the Additional Properties Closing Date, as the case may be, or for
which applications have been or will be made constitute all of the Regulatory
Permits and all other material permits, licenses and certificates required for
the use and occupancy thereof. The number of licensed and Available Beds at
each Assisted Living Facility is set forth on SCHEDULE 5.11-1 hereto for the
Initial Properties, which Schedule will be amended as of the Additional
Properties Closing Date to include the Additional Properties. As of the Closing
Date with respect to the Initial Properties and as of the Additional Properties
Closing Date with respect to the Additional Properties, Lessee, each Sublessee
and Manager, as well as the operation of the Assisted Living Facility are or
will be in compliance and at all times will remain in compliance in all
material respects with the applicable provisions of skilled nursing facility,
residential care, personal care, adult care, boarding home and/or assisted
living facility laws, rules, regulations and published interpretations to which
each Assisted Living Facility is subject, including, without limitation, the
Medicare Regulations and Medicaid Regulations, as applicable. SCHEDULE 5.11-2
hereto describes all Permits required under applicable Legal Requirements by
any federal or state health agency or similar agency or body in connection with
operation of the Initial Properties as Assisted Living Facilities, which
Schedule will be amended as of the Additional Properties Closing Date to
include the Additional Properties (collectively, "REGULATORY PERMITS"), all of
which are, or will, in no more than sixty (60) days following the Closing Date
or the Additional Properties Closing Date, as the case may be (or, in the case
of the Assisted Living Facilities located in California and Florida, such
longer period as may be reasonably necessary with the exercise of diligence),
be held in the name of Borrower, Lessee, Sublessees and/or Manager, as
applicable. No waivers of any laws, rules, regulations or requirements
(including, but not limited to minimum square foot requirements per
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bed) are required for the Assisted Living Facilities to operate at the licensed
bed capacities listed on SCHEDULE 5.11-1 hereto and in compliance with
applicable Legal Requirements. None of the Assisted Living Facilities which are
Initial Properties participate in Medicare, Medicaid or any other third party
reimbursement program. All Reimbursement Contracts to the extent applicable to
the Assisted Living Facilities which are Additional Properties will be applied
for as of the Additional Properties Closing Date and will be received within
sixty (60) days of the Additional Properties Closing Date, and payment will be
made thereunder retroactive to the date of application, and Borrower, Lessee,
each Sublessee and Manager, as applicable, are as of the Closing Date with
respect to the Initial Properties, and will be as of the Additional Properties
Closing Date with respect to the Additional Properties, in good standing with
all the respective agencies governing such applicable skilled nursing facility
and assisted living facility licenses, and if applicable, Medicare
Certifications, Medicaid Certifications and Reimbursement Contracts. Lessee,
Sublessee and Manager, as applicable, will be current, as of the Additional
Properties Closing Date, in the payment of all so-called provider specific
taxes or other assessments with respect to any Reimbursement Contracts. Each
Assisted Living Facility (other than the Assisted Living Facilities which are
not yet operating, as set forth on SCHEDULE 5.11-1 hereto) is currently
operated in material compliance with applicable Regulatory Permits and Legal
Requirements as a skilled nursing facility or assisted living facility and its
licensed bed capacity is set forth in SCHEDULE 5.11-1 hereto. In the event the
Trustee or any Surety, Lender, or Borrower acquires any Assisted Living
Facility through foreclosure or otherwise, under current law neither the
Trustee nor any such Surety, Lender, or Borrower nor a subsequent manager, a
subsequent lessee or any subsequent purchaser (through foreclosure or
otherwise) must obtain a CON prior to applying for or receiving a license to
operate the Assisted Living Facility and certification to receive Medicare and
Medicaid payments (and their successor programs) for patients having coverage
thereunder, provided that (i) the number of beds and the scope of services
provided are not changed and (ii) that the Trustee, Surety, Lender, Borrower or
subsequent manager, lessee or purchaser submits prior notification of such
change to the applicable regulatory agency.
SECTION 5.12 MAINTAIN BED CAPACITY. Neither Lessee, any Sublessee nor
the Manager has granted to any third party the right to reduce the number of
licensed beds in any Assisted Living Facility or to apply for approval to
transfer the right to any of the licensed Assisted Living Facility beds to any
other location. Except as expressly permitted otherwise under the Trust
Agreement, Lessee shall maintain, or cause to be maintained, the number of
Available Beds at each Assisted Living Facility set forth in SCHEDULE 5.11-1
hereto and within a variance of ten percent (10%) shall maintain or cause to be
maintained the number of beds at each Assisted Living Facility at the
licensure/certification levels set forth in SCHEDULE 5.11-1 hereto.
SECTION 5.13 PAYMENT OF TAXES AND PROPERTY IMPOSITIONS. Lessee has
timely filed all federal, state, and local tax returns which it is required to
file and has timely paid, or made adequate provision for the payment of, all
taxes, assessments, fees and other governmental charges upon such Person and
upon its properties, assets, income and franchises, including without
limitation, provider taxes. All such returns and reports are complete and
accurate in all respects and none of the United States income tax returns of
Lessee are under audit. There is not
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presently pending (and to the best of Lessee's knowledge, after due inquiry,
there is not contemplated) any special assessment against any Property, the
Improvements, any other Collateral, or any part thereof, except as may be set
forth in any of the Title Policies. No part of any Property is included or
assessed under or as part of another tax lot or parcel comprising property
other than such Property, and no part of any other property is included or
assessed under or as part of the tax lots or parcels comprising any Property.
No tax liens have been filed and to the best knowledge of Lessee, no claims are
being asserted with respect to any such taxes. The charges, accruals and
reserves on the books of Lessee in respect of any taxes or other governmental
charges are in accordance with GAAP.
SECTION 5.14 TITLE TO COLLATERAL. Borrower and Lessee, collectively,
have good and marketable fee simple title to all of the Collateral, subject to
no lien, mortgage, pledge, encroachment, zoning violation, or encumbrance,
except Permitted Liens and except as set forth on SCHEDULE 5.9 hereto, none of
which Liens materially interfere with the security intended to be provided by
the Mortgages or the current use of the Properties and the Improvements. All
Improvements situated on the Properties are situated wholly within the
boundaries of respective parcels comprising such Property, except as disclosed
by the Surveys of the Properties. Borrower, Lessee or the applicable Sublessees
own and will own at all times all personal property relating to the Properties,
the Improvements and the Assisted Living Facilities (other than personal
property which is owned by residents or tenants of the Properties), subject
only to Permitted Liens. Without limitation of the foregoing, Borrower, Lessee
or the applicable Sublessees own all furnishings, fixtures and equipment
located at the Properties that are used by Lessee or the applicable Sublessees
or which are necessary for or integral to the operation of the Assisted Living
Facilities, free and clear of any lease, lien or encumbrance except the
Permitted Liens and except as set forth on SCHEDULE 5.9 hereto. No Person has
any option or other right to purchase all or any portion of the Collateral or
any interest therein.
SECTION 5.15 PRIORITY OF MORTGAGES. The Mortgages constitute a valid
first lien against Borrower's and Lessee's respective interests in the real and
personal property described therein, prior to all other liens or encumbrances,
including those which may hereafter accrue, excepting only Permitted Liens and
except as set forth on SCHEDULE 5.9 hereto, none of which Permitted Liens or
other Liens materially interfere with the security intended to be provided by
the Mortgages or the current use of the Property and the Improvements.
SECTION 5.16 ZONING, OTHER LAWS. Each of the Properties is zoned for
its current uses (including the use identified in the definition of Assisted
Living Facilities), under applicable federal and state laws which zoning
designations are unconditional, in full force and effect, and are beyond all
applicable appeal periods or is the subject of a valid variance or conditional
use permit permitting such uses. The Properties, the Improvements and the
Assisted Living Facilities and the operations thereon are in material
compliance with all applicable covenants and restrictions of record, zoning,
subdivision and land use laws, regulations and ordinances, all applicable
health, fire, and building codes, and all other laws applicable to the
Properties, the Improvements or the Assisted Living Facilities, including,
without limitation, the Americans with Disabilities Act.
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Lessee does not know of any illegal activities relating to controlled
substances on or at the Property or any portion thereof. All permits, licenses
and certificates required for the lawful use and operation of the Properties
and the Improvements, including, but not limited to, all certificates of
occupancy, or the equivalent and all Regulatory Permits have been obtained and
are current and in full force and effect or application therefor has been made.
In the event that all or any part of the Improvements located on the Properties
are destroyed or damaged, said Improvements can be legally reconstructed to
substantially their condition prior to such damage or destruction, and
thereafter exist for the same use without violating any zoning or other
ordinances applicable thereto and without the necessity of obtaining any
variances or special permits, other than customary demolition, building and
other construction related permits. Each Assisted Living Facility contains
enough permanent parking spaces (both regular spaces and handicap spaces) to
satisfy all requirements imposed by applicable laws with respect to parking or
a waiver of such requirements has been obtained. No legal proceedings are
pending or, to the best knowledge of Lessee after due inquiry, are threatened
with respect to the zoning of the Properties or any portion thereof. Neither
the zoning nor any other right to construct, use or operate any Property is in
any way dependent upon or related to any real estate other than such Property.
No tract map, parcel map, condominium plan, condominium declaration, or plat of
subdivision will be recorded or permitted to be recorded, by Lessee with
respect to any Property or portion thereof without Surety's prior written
consent.
SECTION 5.17 CONDITION OF IMPROVEMENTS AND PROPERTIES. All
Improvements are in good condition and repair. Lessee is not aware of any
latent or patent structural or other significant defect or deficiency in the
Improvements. City water supply, storm and sanitary sewers, and electrical, gas
and telephone facilities are available to the Properties within the boundary
lines of the Properties or through appurtenant easements, are fully connected
to the Improvements and are fully operational, are sufficient to meet the
reasonable needs of the Properties as now used or presently contemplated to be
used, and no other utility facilities are necessary to meet the reasonable
needs of the Properties as now used or presently contemplated to be used. The
design and as-built conditions of the Properties and Improvements are such that
surface and storm water does not accumulate on the Properties (except in
facilities specifically designed for the same) and does not drain from the
Properties across land of adjacent property owners in any manner which would
have a Material Adverse Effect on any of the Properties or the Improvements.
Except as may be set forth on the Surveys, no part of any Property is within a
flood plain and none of the Improvements create any encroachment over, across
or upon such Property's boundary lines, rights of way or easements, and no
building or other improvements on adjoining land create such an encroachment
which could reasonably be expected to have a Material Adverse Effect. All
public roads and streets necessary for service of and access to the Properties
for the current and contemplated uses thereof have been completed and are
serviceable and are physically and legally open for use by the public. Any
liquid or solid waste disposal, septic or sewer system located at the
Properties is in good and safe condition and repair and in compliance with all
applicable laws.
SECTION 5.18 DISCLOSURE. No financial statements, financial document
or any other
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document, certificate or written statement furnished to Surety by or on behalf
of Lessee or Alterra for use in connection with the Loan, including without
limitation all schedules and exhibits to this Agreement, contains any untrue
representation, warranty or statement of a material fact, and none omits or
will omit to state a material fact necessary in order to make the statements
contained herein or therein not materially misleading.
SECTION 5.19 LEGAL NAMES. To the best knowledge of Lessee, the legal
names of the entities which have owned and operated the Assisted Living
Facilities at all times during the preceding five (5) years are as set forth in
SCHEDULE 5.19 hereto.
SECTION 5.20 EMPLOYEE BENEFIT PLANS.
(a) Except as disclosed on SCHEDULE 5.20(A) hereto, neither
Lessee nor any ERISA Affiliate maintains or contributes to or has any
obligation (including a contingent obligation) with respect to any Plan. Except
as disclosed on SCHEDULE 5.20(A) hereto, each Plan which is intended to be
qualified under Section 401(a) of the Code as currently in effect has been
determined by the Internal Revenue Service to be so qualified, and each trust
related to any such Plan has been determined to be exempt from federal income
tax under Section 501(a) of the Code as currently in effect. Each Plan (i) has
been administered in all material respects in accordance with its terms and
(ii) complies in form, and has been maintained and operated in all material
respects in accordance, with the requirements of ERISA and, where applicable,
the Code. There are no actions, suits or claims (other than routine claims for
benefits) pending nor, to the knowledge of Lessee or any ERISA Affiliate,
threatened with respect to any Plan. Lessee and each ERISA Affiliate has
complied in all material respects with the applicable requirements of Part 6 of
Title I of ERISA.
(b) Neither Lessee nor any ERISA Affiliate maintains or
contributes to any employee welfare benefit plan within the meaning of Section
3(1) of ERISA which provides benefits to employees after termination of
employment other than as specifically required by Part 6 of Title I of ERISA.
Neither Lessee nor any Person that is or was an ERISA Affiliate at any time
during the immediately preceding six years has ever maintained, been required
to contribute to, been required to pay any amount or had any obligation
(whether actual or contingent) with respect to any Benefit Plan or
Multiemployer Plan. Except as disclosed on SCHEDULE 5.20(B)-1 hereto, neither
Lessee nor any ERISA Affiliate, nor any fiduciary of any Plan, has engaged in
any nonexempt prohibited transaction described in Section 406 of ERISA or
Section 4975 of the Code. Except as disclosed on SCHEDULE 5.20(B)-2 hereto,
neither Lessee nor any ERISA Affiliate has by reason of the transactions
contemplated hereby, any obligation to make any payment to any employee
pursuant to any Plan or existing contract or arrangement. Neither Lessee nor
any ERISA Affiliate is the grantor of a grantor trust established pursuant to
Subpart E of Subchapter J of the Code.
SECTION 5.21 INTELLECTUAL PROPERTY. Set forth on SCHEDULE 5.21
hereto, is a complete listing of all of the material patents, trademarks,
tradenames, technology and other intellectual
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property rights used in the ownership, operation and management of the
businesses of Lessee.
SECTION 5.22 PROCEEDINGS PENDING. There are no proceedings pending,
or, to the best of Lessee's knowledge, after due inquiry threatened, to acquire
through the exercise of any power of condemnation, eminent domain, or similar
proceeding all or any part of any Property (except a certain condemnation
proceeding affecting a portion of the Tucson, Arizona Property as disclosed in
the title report therefor), the Equipment, the Improvements or any interest
therein, or to enjoin or similarly prevent or restrict the use of any Property
or the operation of the Assisted Living Facilities in any manner.
SECTION 5.23 COMPLIANCE WITH APPLICABLE LAWS. Each Assisted Living
Facility and its operations, the Properties and the Improvements comply in all
material respects with all covenants and restrictions of record and applicable
laws, ordinances, rules and regulations, including, without limitation, to the
extent applicable, Title 42 of the United States Code and related regulations,
including the Medicare Regulations, the Medicaid Regulations, federal and state
self-referral and anti-kickback statutes and regulations; Title 31 of the
United States Code, including the False Claims Act; skilled nursing facility or
assisted living facility licensure laws and regulations; public health statues
and regulations; the Americans with Disabilities Act and the regulations
thereunder, and all laws, ordinances, rules and regulations relating to zoning,
setback requirements (except as may be shown on any of the Surveys for the
Properties approved by Surety) and building codes and there are no waivers of
any building codes currently in existence for any of the Assisted Living
Facilities, Properties or Improvements. Lessee has filed in a timely manner all
reports, documents and other materials required to be filed with any
governmental bureau, agency or instrumentality (and the information contained
in each of such filings is true, correct and complete in all respects), except
where failure to make such filings would not have a Material Adverse Effect.
Lessee has retained all records and documents required to be retained pursuant
to any law, ordinance, rule, regulation, order, policy, guideline or other
requirement of any governmental authority, except where failure to retain such
records would not subject such party or any of its Affiliates, partners,
officers, trustees, or employees to criminal liability and could not reasonably
be expected to have, either individually or in the aggregate, a Material
Adverse Effect.
SECTION 5.24 MANAGEMENT AGREEMENTS. The Management Agreements are
each in full force and effect and there are no defaults (either monetary or
non-monetary) by the parties thereto.
SECTION 5.25 1934 ACT. The proceeds of the Note will not be used to
acquire any equity security of a class that is registered pursuant to Section
12 of the Securities Exchange Act of 1934, as amended.
SECTION 5.26 USE OF PROCEEDS AND MARGIN SECURITY. Borrower shall use
the proceeds of the Loan to acquire the Properties and pay transaction costs as
contemplated by the schedule of sources and uses attached hereto as EXHIBIT G.
No portion of the proceeds of the Loan shall
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be used by Borrower or Lessee in any manner that might cause the borrowing or
the application of such proceeds to violate Regulation U, Regulation T or
Regulation X or any other regulation of the Board of Governors of the Federal
Reserve System.
SECTION 5.27 NO PLAN ASSETS. Lessee is not and will not be (i) an
employee benefit plan as defined in Section 3(3) of ERISA which is subject to
ERISA, (ii) a plan as defined in Section 4975(e)(1) of the Code which is
subject to Section 4975 of the Code, or (iii) an entity whose underlying assets
constitute "plan assets" of any such employee benefit plan or plan for purposes
of Title I of ERISA or Section 4975 of the Code.
SECTION 5.28 GOVERNMENTAL PLAN. Lessee is not and will not be a
"governmental plan" within the meaning of Section 3(32) of ERISA and
transactions by or with the Borrower Parties are not and will be not subject to
state statutes applicable to Lessee regulating investments of and fiduciary
obligations with obligations with respect to governmental plans.
SECTION 5.29 YEAR 2000. The management information systems (including
all computer hardware and software), all equipment containing embedded
microchips, of Lessee and Manager, whether owned, licensed, leased or otherwise
utilized by Lessee and Manager, and required in the conduct of their respective
businesses and the performance of all obligations of Lessee and Manager under
the Transaction Documents ("LESSEE AND MANAGER MIS SYSTEMS"), and such systems
of those parties with whom Lessee and Manager MIS Systems must interface, will,
no later than August 30, 1999, be free of any material problem, infirmity or
defect (and so tested and confirmed by Lessee and Manager to be free of any
material problem, infirmity or defect) as respects to the "Year 2000 Problem"
and/or any "9/9/99 Problem". To wit, the Lessee and Managers MIS System will be
"Y2K COMPLIANT" such that the management information systems will not: (i)
experience any material malfunctions or other material usage problem or failure
in connection with the year 2000 and subsequent years as distinct from the 1900
years, or relating to improper expirations, terminations or data loss on or
following September 9, 1999 as a result of the 9/9/99 Problem; or (ii) result
in any material loss or liability sustained in connection with: (x) the conduct
of their business or the performance of any obligations under the Transaction
Documents, including but not limited to the recording, storing, processing,
calculating, comparing, sequencing or presenting by electronic means of
calendar dates or spans of time from, into and between the twentieth and
twenty-first centuries (including leap year calculations); and (y) the
generation, transmission, delivery, receipt of and any use or reliance on
information or calculations dependent on or relating to calendar dates or spans
of time from, into and between the twentieth and twenty-first centuries
(including leap year calculations) (the "Y2K PROBLEM"). The cost to Lessee and
Manager of any reprogramming and testing of Lessee and Manager MIS Systems and
of the reasonably foreseeable consequences of any reprogramming required to
assure that Lessee and Manager MIS Systems are Y2K Complaint, or of systems and
equipment failures to such Lessee and Manager (including reprogramming errors
and the failure of other's systems and equipment) will not result in an Event
of Default or a Material Adverse Effect. To the best knowledge of Lessee, the
Lessee and Manager MIS Systems are at present, and with ordinary upgrading and
maintenance, will continue for the term of this Agreement to be
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sufficient to permit each of Lessee and Manager to conduct its business and to
perform all of their respective obligations under the Transaction Documents
without Material Adverse Effect.
SECTION 5.30 LEGAL OPINIONS. Lessee has reviewed and is familiar with
all opinions of legal counsel designated by Lessee and Alterra to be delivered
in connection with the Loan and the issuance of the Bond. None of the
assumptions with respect to Alterra, Lessee or the Properties set forth in such
opinions is incorrect.
SECTION 5.31 LEASES; AGREEMENTS.
(a) AGREEMENTS. Lessee has provided Surety with true and
complete copies of all material contracts and agreements affecting the Assisted
Living Facilities, Properties, Improvements and the operation and management
thereof, including, the Master Lease, the Ground Leases, the Subleases, the
Management Agreement, the leasing brokerage agreements, if any, and any and all
other material leases, tenancies or other material contracts or agreements
relating to the use, maintenance, development, operation or management thereof
(other than the Residency Agreements as to which Lessee has delivered the
standard form thereof only). Except for the rights of Manager pursuant to the
Management Agreements, no Person has any right or obligation to manage any
Property or to receive compensation in connection with such management or any
right or obligation to sell, lease, or solicit purchasers or tenants for any
Property, or (except for cooperating outside brokers) to receive compensation
in connection with such sale or leasing.
(b) LEASE ISSUES. There are no legal proceedings commenced
(or, to the best of the knowledge of Lessee, threatened) against Lessee by any
tenant or former tenant. No rental in excess of one month's rent has been
prepaid under any of the Residency Agreements or any material leases. Each of
the Residency Agreements and any material leases is valid and binding on the
parties thereto in accordance with its terms. The execution of this Agreement
and the other Transaction Documents will not constitute an event of default
under any of the Residency Agreements or any Leases.
(c) NO RENT CONTROL. No portion of any Property is subject
to any form of rent control, stabilization or regulation.
(d) NO UNDISCLOSED TENANTS. Except for the Master Lease, the
Subleases, the Ground Leases, the Licensing Subleases, the Residency Agreements
described in the Rent Rolls attached hereto as SCHEDULE 5.31(D) and any other
leases delivered to Surety on or before the date hereof, there are no material
Leases affecting all or any portion of any of the Properties. Except for
Lessee, the Sublessees, the Manager under the Licensing Subleases, the tenants
under the Ground Leases and the tenants identified in the Existing Leases that
have been delivered to Surety and except for Assisted Living Facility
residents, no Person has any right to occupy any portion of any of the
Properties or the Assisted Living Facilities, and to the knowledge of Lessee
after due inquiry, no Person is so occupying any portion of any of the
Properties or the Assisted
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Living Facilities.
ARTICLE 6
VI NEGATIVE COVENANTS OF BORROWER PARTIES
SECTION 6.01 ASSIGNMENT OF LICENSES AND PERMITS. Lessee shall not
assign or transfer, or permit any Sublessee to assign or transfer, any of its
interest in any Permits or Reimbursement Contracts (including rights to payment
thereunder) pertaining to the Assisted Living Facilities, or assign, transfer,
or remove or permit any other person to assign, transfer, or remove any records
pertaining to the Assisted Living Facilities including, without limitation,
patient records, medical and clinical records (except for removal of such
patient records as directed by the patients owning such records and the removal
or surrender of patient and/or other records as may be required to comply with
applicable laws or governmental orders), without Surety's prior written
consent, which consent may be granted or refused in Surety's sole discretion;
provided, however, that Lessee may dispose of records in accordance with
applicable provisions of law and Lessee's policies but not earlier than four
(4) years after final audit of the periods to which such records relate.
SECTION 6.02 NO LIENS; EXCEPTIONS. Lessee shall not create, incur,
assume or suffer to exist, and Borrower shall not grant or create, any Lien
upon or with respect to any Property, the Assisted Living Facilities or any of
such Borrower Party's 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":
(a) Liens at any time existing in favor of the Trustee and
securing obligations under the Transaction Documents;
(b) the Master Lease, the Ground Leases, the Licensing
Subleases and the Subleases (subject to the terms of the subordination and
non-disturbance agreements, among Lessee, Lender and each of the Sublessees and
among Borrower, Lender and the Lessees under the Ground Leases, all in form and
substance acceptable to Surety);
(c) 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 by Lessee to Surety and
discharged by Lessee by payment, bonding or otherwise, within thirty (30) days
after the filing thereof in a manner satisfactory to Surety in Surety's sole
discretion;
(d) Liens for current year's taxes, assessments or
governmental charges or levies not delinquent, but in no case any Lien which
has arisen under operation of, or pursuant to, any Environmental Law;
(e) Liens, exceptions and encumbrances described in the
Schedule B-1 to the
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Title Policies and approved by Surety prior to the Closing Date (or in the case
of the Title Policies covering the Additional Properties, prior to the
Additional Properties Closing Date);
(f) Liens evidencing Equipment Leases included within the
definition of Allowed Indebtedness; and
(g) Liens on the Excluded Collateral.
SECTION 6.03 DISPOSITION OF ASSETS. Except as otherwise expressly
permitted hereunder or under the other Transaction Documents, neither Borrower
nor Lessee shall sell, lease (except pursuant to Residency Agreements
substantially in the form of the standard residency agreements delivered to
Surety hereunder for the respective states in which the Assisted Living
Facilities are located), transfer, assign, pledge, mortgage or otherwise
hypothecate or otherwise dispose of any Property or any portion thereof,
without the prior written consent of the Surety, which consent may be granted
or refused in Surety's sole discretion; provided, however, that Borrower or
SELCO may dispose of the Excluded Collateral as permitted under the Trust
Agreement.
SECTION 6.04 CHANGE OF BUSINESS. Lessee shall not make any material
change in the nature of business as it is being conducted as of the date hereof
without the express written consent of Surety; provided, however, that changes
in the nature or type of services offered at any Assisted Living Facility shall
not violate the foregoing covenant so long as such Assisted Living Facility
continues to be used solely for purposes within the uses described in the
definition of "Assisted Living Facilities" herein.
SECTION 6.05 CHANGES IN ACCOUNTING. Lessee shall not make any change
to the existing methods of accounting, unless the system of accounting post
change continues to be on a basis of accounting consistent with the audited
financial statements of Alterra and sound business practices 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.
SECTION 6.06 INTENTIONALLY OMITTED.
SECTION 6.07 TRANSFER OF OWNERSHIP INTERESTS. Except as otherwise
expressly permitted hereunder or under the Participation Agreement, permit any
change in the ownership interests in Borrower, Lessee or any Sublessee (other
than the purchase by Alterra or a wholly-owned subsidiary of Alterra of
partnership interests in the Sublessees in accordance with the limited
partnership agreements of the Sublessees) without the prior written consent of
Surety which may be granted or withheld in Surety's sole discretion.
SECTION 6.08 RESTRICTION ON FUNDAMENTAL CHANGES. No Borrower Party
shall:
(a) amend, modify or waive (or permit any other Person to do
so) any term or provision of such Borrower Party's Charter Documents unless
required by law; or (ii) liquidate,
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wind-up or dissolve (or permit any other Person to do so) such Borrower Party.
(b) except as provided in Article IX hereof or as expressly
provided under the Participation Agreement, issue, sell, assign, pledge,
convey, dispose or otherwise encumber (or permit any other Person to do so) any
stock, membership interest, partnership interest, or other equity or beneficial
interest in any such Borrower Party or grant any options, warrants, purchase
rights or other similar agreements or understandings with respect thereto; or
(ii) acquire by purchase or otherwise (or permit any other Person to do so) all
or any part of the business or assets of, or stock or other evidence of
beneficial ownership of, any such Borrower Party.
SECTION 6.09 TRANSACTIONS WITH AFFILIATES. Lessee shall not pay any
management, consulting, director or similar fees to any Affiliate of Lessee or
to any director, officer or employee thereof, nor directly or indirectly enter
into or permit to exist any transaction (including the purchase, sale, lease or
exchange of any property or the rendering of any service) with any Affiliate of
or with any director, officer or employee of Lessee, except transactions in the
ordinary course of and pursuant to the reasonable requirements of the business
of Lessee and upon fair and reasonable terms which are fully disclosed to
Surety prior to consummation and are no less favorable to Lessee than would be
obtained in a comparable arm's length transaction with a Person that is not an
Affiliate of Lessee. Other than the Management Agreements, the Master Lease and
the Subleases and the Licensing Subleases, each agreement of Lessee with any
Affiliate of Lessee shall be for a term not to exceed one year, and shall
provide that the same may be terminated by Surety at its option without penalty
or premium during the continuation of an Event of Default, and shall provide
that no payments may be made thereunder when any Event of Default shall exist
or in any event prior to the payment of debt service on the Surety Bond. Lessee
shall not make any payment or permit any payment to be made to any Affiliate of
Lessee when any Event of Default shall exist.
SECTION 6.10 CHANGE OF USE. Lessee shall not alter (except in
accordance with the terms of the Trust Agreement or the Mortgages) or change
the use of the Property or Improvements in any material respect or permit any
management agreement for the Property or Improvements other than the Management
Agreements or enter into any operating lease for any Assisted Living Facility
(other than the Master Lease and the Subleases), unless Lessee first notifies
Surety and provides Surety a copy of the proposed lease agreement or management
agreement, obtains Surety's written consent thereto, which consent may be
withheld in Surety's sole and absolute discretion, and obtains and provides
Surety with a subordination agreement in form satisfactory to surety, as
determined by Surety in its sole and absolute discretion, from such manager or
lessee subordinating their respective rights to all rights of Surety.
Notwithstanding the foregoing, Lessee may (without obtaining Surety's consent
pursuant to the foregoing (but upon at least ten (10) Business Days prior
written notice to Surety and Trustee), make alterations or improvements
(collectively, "ALTERATIONS") to any Assisted Living Facility of 60 beds or
less provided that the cost of any such Alterations individually, or in the
aggregate for any twelve (12) month period, does not exceed $100,000 and to any
Assisted Living Facility of more than 60 beds provided that the cost of any
such Alterations individually, or in the aggregate for any twelve (12)
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month period, does not exceed $250,000.
SECTION 6.11 INTENTIONALLY DELETED.
SECTION 6.12 DIVIDENDS, DISTRIBUTIONS AND REDEMPTIONS. Neither
Borrower nor Lessee shall make any distribution of cash or other assets to any
of its partners or constituents except as permitted by and in accordance with
the Flow of Funds Agreement, and except for a transfer of the Excluded
Collateral or any proceeds thereof to any shareholders of Borrower upon the
occurrence of an Event of Default or a Lease Event of Default.
SECTION 6.13 INDEBTEDNESS. Neither Borrower nor Lessee shall create,
incur, assume or suffer to exist any Indebtedness, whether secured or unsecured
or subordinate or prior to the Reimbursement Obligations, other than Allowed
Indebtedness and any indebtedness of Borrower to any of its shareholders
secured by the Excluded Collateral.
SECTION 6.14 BANKRUPTCY, RECEIVERS, SIMILAR MATTERS.
(a) VOLUNTARY CASES. No Borrower Party shall commence a
voluntary case under the Bankruptcy Code or under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect.
(b) INVOLUNTARY CASES, RECEIVERS, ETC. No Borrower Party or
Affiliate of such Borrower Party shall apply for, consent to, or aid, solicit,
support, or otherwise act, cooperate or collude to cause the appointment of or
taking possession by, a receiver, trustee or other custodian for all or a
substantial part of the assets of such Borrower Party. As used in this
Agreement, an "INVOLUNTARY BORROWER PARTY BANKRUPTCY" shall mean any
involuntary case under the Bankruptcy Code or any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, in which such
Borrower Party is a debtor or any portion of the Property is property of the
estate therein. No Borrower Party and no Affiliate of such Borrower Party shall
file a petition for, consent to the filing of a petition for, or aid, solicit,
support, or otherwise act, cooperate or collude to cause the filing of a
petition for an Involuntary Borrower Party Bankruptcy. In any Involuntary
Borrower Party Bankruptcy, such Borrower Party or any Affiliate of any Borrower
Party shall, without the prior written consent of Surety, consent to the entry
of any order, file any motion, or support any motion (irrespective of the
subject of the motion), and no Borrower Party or any such Affiliate shall file
or support any plan of reorganization. Each Borrower Party having any interest
in any Involuntary Borrower Party Bankruptcy shall do all things reasonably
requested by Surety to assist Surety in obtaining such relief as Surety shall
seek, and shall in all events vote as directed by Surety. Without limitation of
the foregoing, each such Borrower Party shall do all things reasonably
requested by Surety to support any motion for relief from stay or plan of
reorganization proposed or supported by Surety. Nothing in this provision shall
obligate any Borrower Party or Affiliate to act contrary to any order of any
court, which order was not sought or acquiesced in at the direction of Surety
or by any Borrower Party or any Affiliate.
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SECTION 6.15 NO NEGATIVE PLEDGES. No Borrower Party shall enter into
or assume any agreement (other than the Transaction Documents) prohibiting the
creation or assumption of any Lien upon its properties or assets, whether now
owned or hereafter acquired.
SECTION 6.16 CHANGES RELATING TO INDEBTEDNESS. Other than accounts
payable to trade creditors, Lessee shall not change or amend (or allow for the
change or amendment to) the terms of any Indebtedness (other than Allowed
Indebtedness) without the prior written consent of Surety.
SECTION 6.17 CONTINGENT OBLIGATIONS. No Borrower Party shall be or
become liable as a guarantor, surety or otherwise for any obligation of any
other Person or for any Contingent Obligation of any kind except for
obligations created by the Allowed Indebtedness.
SECTION 6.18 ERISA. Lessee shall not and shall not permit any ERISA
Affiliate:
(a) Without Surety's prior written consent, to establish,
maintain, contribute to or become obligated to contribute to any (i) Benefit
Plan, (ii) Multiemployer Plan or (iii) welfare benefit plan which provides
benefits to employees after termination of employment other than as required by
Part 6 of Title I of ERISA:
(b) To engage in any prohibited transaction described in
Section 406 of ERISA or Section 4975 of the Code for which a statutory or class
exemption is not applicable or a private exemption has not been previously
obtained from the U.S. Department of Labor and for which a civil penalty
pursuant to Section 502(i) of ERISA or excise tax pursuant to Section 4975 of
the Code in excess of $25,000 is imposed;
(c) To permit any accumulated funding deficiency (within the
meaning of Section 302 of ERISA or Section 412 of the Code) in excess of
$25,000 with respect to any Benefit Plan, whether or not waived;
(d) To terminate any Benefit Plan under circumstances which
would result in any liability under Title IV of ERISA;
(e) To fail to make any contribution or payment to any
Multiemployer Plan which any Borrower Party or ERISA Affiliate may be required
to make under any agreement relating to such Multiemployer Plan; or
(f) To fail to maintain any Plan in material compliance with
the applicable provisions of ERISA and the Code.
SECTION 6.19 SINGLE PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS
COVENANTS AND WARRANTIES. Each Borrower Party, as to itself, hereby represents,
warrants and covenants as of
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the Closing Date and also until such time as all Loan Obligations and
Reimbursement Obligations are paid in full, that absent express advance written
waiver from Surety which may be withheld in Surety's, sole discretion, such
Borrower Party:
(a) does not as to itself own and will not own any assets
other than its respective interests in the Assisted Living Facilities,
Properties (including the Master Lease, the Subleases and the Ground Leases),
Improvements, Equipment and Inventory (including incidental personal property
necessary for the operation thereof and proceeds therefrom) (and in the case of
Borrower its in the Excluded Collateral);
(b) is not engaged and will not engage in any business,
directly or indirectly, other than the ownership leasing, management,
subleasing and/or operation of the Assisted Living Facilities, Properties,
Improvements, Equipment and Inventory (including incidental personal property
necessary for the operation thereof and proceeds therefrom);
(c) will not enter into any contract or agreement with any
partner, member, shareholder, trustee, beneficiary, principal or Affiliate of
any Borrower Party except upon terms and conditions that are intrinsically fair
and substantially similar to those that would be available on an arms-length
basis with third parties other than such Affiliate;
(d) has not incurred and will not incur any debt, secured or
unsecured, direct or contingent (including guaranteeing any obligation), other
than as expressly permitted under Section 6.13;
(e) has not made and will not make any loan or advances to
any Person (including any of its Affiliates), other than as expressly permitted
under Section 6.13;
(f) is and reasonably expects to remain solvent and pay its
own liabilities, indebtedness, and obligations of any kind from its own
separate assets as the same shall become due;
(g) has done or caused to be done and will do all things
necessary to preserve its existence, and will not, nor will any partner,
member, shareholder, trustee, beneficiary, or principal thereof amend, modify
or otherwise change such Borrower Party's partnership certificate, partnership
agreement, articles of incorporation, by-laws, articles of organization,
operating agreement, or other organizational documents in any manner;
(h) shall continuously maintain its existence and be
qualified to do business in all states necessary to carry on its business,
including without limitation, the states where the Properties are located;
(i) will conduct and operate its business in the manner
permitted under the Transaction Documents subject to the adequacy of cash flow;
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(j) will maintain books and records and bank accounts
separate from those of its partners, members, shareholders, trustees,
beneficiaries, principals, Affiliates, and any other Person;
(k) will be, and at all times will hold itself out to the
public as, a legal entity separate and distinct from any other Person
(including any of its partners, members, shareholders, trustees, beneficiaries,
principals and Affiliates, and any Affiliates of any of the same), and not as a
department or division of any Person and will correct any known
misunderstanding regarding the separate identity of such Borrower Party;
(l) Borrower will file its own tax returns;
(m) has and reasonably expects 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;
(n) will not seek, acquiesce in, or suffer or permit its
liquidation, dissolution or winding up, in whole or in part;
(o) will not enter into any transaction of merger or
consolidation, or acquire by purchase or otherwise all or substantially all of
the business or assets of, or any stock or beneficial ownership of, any Person;
(p) Borrower will not commingle or permit to be commingled
its funds or other assets with those of any other Person;
(q) except as expressly provided in the Transaction
Documents, has and will 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 other Person;
(r) except as expressly provided for in the Transaction
Documents, does not and will not hold itself out to be responsible for the
debts or obligations of any other Person;
(s) except as expressly provided for in the Transaction
Documents, has not and will not guarantee or otherwise become liable on or in
connection with any obligation of any other Person;
(t) subject to the adequacy of cash flow, shall not do any
act which would make it impossible to carry on its ordinary business;
(u) will not possess or assign any Collateral for other than
a business or company purpose;
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(v) will not breach the covenants of Article IX or Sections
6.04 or 6.08 applicable hereto;
(w) except as expressly provided in the Transaction
Documents, shall not hold title to its assets other than in its name;
(x) shall not institute proceedings to be adjudicated
bankrupt or insolvent; consent to the institution of bankruptcy or insolvency
proceedings against it; file a petition seeking, or consent to, reorganization
or relief under any applicable federal or state law relating to bankruptcy;
consent to the appointment of a receiver, liquidator, assignee, trustee,
sequestration (or other similar official) of it or a substantial part of its
property; or make any assignment for the benefit of creditors; or admit in
writing its inability to pay its debts generally as they become due;
(y) Borrower shall comply with all of the assumptions,
statements, certifications, representations, warranties and covenants regarding
or made by Borrower contained in or appended to the nonconsolidation opinion of
Borrower's legal counsel delivered to Lender and Surety concurrently with the
Closing Date;
(z) will not agree to enter into or consummate any
transaction which would render the representations set forth in Sections 5.27
and 5.28 of this Agreement untrue at any time;
(aa) will not fail to pay the salaries of its own employees
and maintain a sufficient number of employees in light of its contemplated
business operations; and
(bb) fail to allocate any overhead for shared office space in
a fair and reasonable manner.
SECTION 6.20 ADDITIONAL SINGLE PURPOSE, BANKRUPTCY REMOTE COVENANTS.
In addition to their respective obligations under Section 6.19 above, each of
Borrower and Lessee, for itself, hereby represents, warrants and covenants as
of the Closing Date and until such time as all Loan Obligations and
Reimbursement Obligations are paid in full, that without Surety's prior written
consent, which may be withheld in Surety's sole discretion, Borrower and
Lessee:
(a) shall not, without the authorization and direction of
its Outside Director, institute proceedings for itself to be adjudicated
bankrupt or insolvent; consent to the institution of a bankruptcy or insolvency
proceedings against it; file a petition seeking, or consent to, reorganization
or relief under any applicable federal or state law relating to bankruptcy;
consent to the appointment of a receiver, liquidator, assignee, trustee,
sequestration (or other similar official) for itself or a substantial part of
its property; make any assignment for the benefit of creditors; or admit in
writing its inability to pay its debts generally as they become due; or admit
in writing its ability to pay its debts generally as they become due;
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(b) shall not, without the affirmative vote of its Outside
Director, for itself (i) liquidate or dissolve, in whole or in part; (ii)
consolidate, merge or enter into any form of consolidation with or into any
other Person, nor convey, transfer or lease its assets substantially as an
entirety to any Person nor permit any Person to consolidate, merge or enter
into any form of consolidation with or into itself, nor convey, transfer or
lease its assets substantially as an entirety to any Person; and (iii) amend
any provisions of its charter containing provisions similar to those contained
in this Article VI;
(c) shall promptly elect and at all times maintain at least
one independent director (an "OUTSIDE DIRECTOR"), who shall be reasonably
satisfactory to Surety and shall not have been at the time of such individual's
appointment as Outside Director, and may not have been at any time during the
preceding five (5) years, (i) a shareholder of, or an officer, director,
partner or employee of, Borrower or Lessee or their respective shareholders,
members, subsidiaries or Affiliates, (ii) a customer of, or supplier to,
Borrower or Lessee or their respective shareholders, members, subsidiaries or
Affiliates, (iii) a Person controlling or under common control with any such
shareholder, director, partner, member, supplier or customer, or (iv) a member
of the immediate family of any such shareholder, member, officer, director,
partner, employee, supplier or customer.
SECTION 6.21 APPLICATION OF CERTAIN COVENANTS TO SUBLESSEES. Lessee
shall not permit any of the Sublessees to incur any Indebtedness other than
Allowed Indebtedness, nor with respect to any of their assets, incur any Lien
other than Permitted Liens.
SECTION 6.22 MANAGEMENT. Lessee shall provide competent and
responsible management for the Properties by a professional management company
pursuant to written Management Agreements, in each case satisfying the criteria
set forth herein; provided, however that the JV Management Agreement of even
date herewith shall be deemed to satisfy such criteria. Without the Controlling
Party's prior written consent both as to the form of the Management Agreement
and the identity of the Manager, Lessee shall not enter into, modify or amend,
or permit to be entered into, modified or amended, any Management Agreement, or
permit any change in the control or identity of any Manager, or otherwise
retain the services of any management company. Without limitation of the
foregoing (unless consented to by Surety), each Management Agreement or the
Subordination of Management Agreements shall provide that (i) the management
fees payable thereunder shall not exceed the prevailing amount for fees for
management of properties of comparable size, quality, and tenant mix in the
market where the Property is located, (ii) if the Manager is an Affiliate of
Lessee, no Management Fee shall be payable at or with respect to any time when
an Event of Default has occurred and is continuing, and (iii) the Management
Agreements shall be terminable at Surety's option without penalty or premium
upon the occurrence of an Event of Default (subject to the approval of the
Sublessees if and to the extent required under the Assignments of Management
Agreement).
ARTICLE VII
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AFFIRMATIVE COVENANTS
A. COVENANTS OF BORROWER PARTIES.
Each Borrower Party, as to itself, agrees with and covenants unto the
Surety that, so long as the Bond remains in effect or any Reimbursement
Obligations remains unpaid, such Borrower Party shall perform and comply, or
cause the performance and compliance, with all covenants in Sections 7.01 and
7.02 of this Agreement applicable to such Borrower Party.
SECTION 7.01 PAYMENT OF LOAN/PERFORMANCE OF LOAN AND REIMBURSEMENT
OBLIGATIONS. Borrower shall duly and punctually pay or cause to be paid the
principal and interest of the Note and the Loan Obligations in accordance with
the terms of the Loan Documents and duly and punctually pay and perform or
cause to be paid or performed all Reimbursable Amounts hereunder.
SECTION 7.02 MAINTENANCE OF EXISTENCE. Maintain in full force and
effect its existence as a corporation, and all rights and franchises material
to such Person's business, and, in each jurisdiction in which the character of
the property owned by such Person or in which the transaction of its business
makes qualification necessary, maintain good standing.
B. COVENANTS OF LESSEE.
Lessee agrees with and covenants unto the Surety that Lessee shall
perform and comply, or cause the performance and compliance, with all of the
following covenants set forth in Sections 7.03 through 7.33 inclusive.
SECTION 7.03 ACCRUAL AND PAYMENT OF TAXES. During each fiscal year,
Lessee shall make adequate provision for the payment of and pay before any fine
or penalty is incurred 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), Taxes (as defined in the
Mortgages), 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.
SECTION 7.04 INSURANCE, CASUALTY AND CONDEMNATION.
(a) At all times while the Reimbursement Obligations are
outstanding, Lessee shall maintain at its sole cost and expense, and provide
satisfactory evidence thereof to Surety on an annual basis (or at such other
times when renewed) of the following insurance coverages in such amounts and
with such deductibles as follows:
(i) Professional liability insurance in an amount at
least equal to
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$1,000,000 per occurrence, and $1,000,000 in the aggregate, on an "occurrence"
basis covering each of the Assisted Living Facilities and the activities
conducted therein. The deductible for such coverage shall not exceed $25,000;
(ii) General liability insurance in an amount at least
equal to $1,000,000 per occurrence, and $1,000,000 in the aggregate, covering
each of the Assisted Living Facilities and the activities conducted therein.
The deductible for such coverage shall not exceed $25,000;
(iii) Umbrella insurance covering professional
liability umbrella coverage, attaching at each of the above referenced limits
of coverage, and having a limit each occurrence and in the aggregate of
$20,000,000 and additional excess liability coverage with limits of
$30,000,000;
(iv) "All-risk" coverage on the Improvements,
Equipment and Inventory in an amount not less than the replacement cost
thereof, insuring against such potential causes of loss as shall be required by
Noteholder, including but not limited to loss or damage from wind, fire, hail,
lightening, ice, earthquake, subsidence, boiler and machinery and sprinkler
leakage. The permitted deductibles for the foregoing coverages shall be as
follows: earthquake, not to exceed the greater of $100,000 or five percent (5%)
of insured value; windstorm, not to exceed $25,000, except with respect to
Properties located in the State of Florida, as to which the aggregate
deductible applicable to all such Properties, shall not exceed $200,000.
(v) Business interruption insurance (including rental
value if any portion of any Property or any Assisted Living Facility is leased
in whole or part) equal to not less than eighteen (18) months estimated lost
profits and continuing Operating Expenses;
(vi) Workers' compensation and employers' liability
insurance as required by the laws of the states where each Property is located;
(vii) If and to the extent that Lessee should engage in
any material modification, alteration or construction on or with respect to any
of the Properties, builder's risk insurance (under an all risk, completed value
form) for the applicable Improvements in an amount acceptable to Noteholder and
including "soft" costs;
(viii) "Ordinance and law" coverage for each of the
Properties and Assisted Living Facilities based on risks related to
reconstruction limitations under governing laws and ordinances, in amounts
acceptable to the Noteholder;
(ix) "Difference in conditions" insurance including,
flood, earthquake and earthquake sprinkler leakage with a limit of $25,000,000
per occurrence and deductibles not to exceed $25,000; and
(x) Automobile liability insurance coverage with a
limit at least equal to
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$1,000,000, per occurrence, no aggregate limit.
The insurance coverages required under Section 7.04(a)(iv)
hereof may be effected under a blanket policy or policies covering the
Properties and other property and assets not constituting part of the
Properties; provided that such certificates of insurance evidencing the
coverage required herein shall specify any sublimits in such blanket policy
applicable to the Properties, which amounts shall not be less than the amounts
required pursuant to Section 7.04(a)(iv) hereof and which shall in any case
comply in all other respects with the requirements of this Section 7.04.
In connection with Lessee's or Guarantor's annual insurance
review (which shall occur at least one time every 12 calendar months), Lessee
shall be required to engage an Insurance Consultant (defined below) to
undertake a review of Lessee's then existing insurance coverage in light of
then current industry standards for hospital or health care services of the
type similar to that in which Lessee is then currently engaged and based upon
such review, Lessee shall either increase the amount of its coverages to meet
such industry standards or shall be permitted to make reasonable modifications
to the amounts and deductibles under the insurance coverages required to be
maintained under this Section 7.04(a) provided that (A) prior to making any
modification to any insurance coverage, Lessee shall deliver to Surety and
Trustee a certificate of an Insurance Consultant or Insurance Consultants
(hereinafter defined) indicating that the insurance coverages as proposed to be
maintained are reasonable based on then prevailing insurance industry market
conditions, customary for corporations engaged in the same or similar
activities as Lessee and adequate to protect the Properties and the operations
and (B) Trustee and Surety shall have delivered its prior written approval of
such coverages, amounts and deductibles. In any event, in connection with any
such insurance review by such Insurance Consultant, such Insurance Consultant
shall deliver to Lender and Surety a letter to the effect that Lessee's
insurance coverages meet the requirements of the Transaction Documents as
modified by any modification approved pursuant to this Section 7.04. "INSURANCE
CONSULTANT" means a Person who in the case of an individual is not an employee
or officer of Guarantor, Lessee or any Affiliate thereof and which, in the case
of a corporation or other business entity is not an Affiliate of Guarantor or
Lessee, appointed by Lessee and reasonably satisfactory to Surety and Trustee,
qualified to survey risks and to recommend insurance coverage for hospital or
health care facilities and services of the type involved, and having a
favorable reputation for skill and experience in such surveys and such
recommendations, and which may include a broker or agent with whom Lessee
transacts business.
(b) Each of the policies described in Sections 7.04(a)(i),
(ii), (iii), (viii) and (xi) hereof shall name Trustee, Borrower, Lessee,
Lender and Surety as additional insured parties, and the policies described in
Sections 7.04(a)(iv)-(vii), (ix) and (x) hereof shall name Trustee for the
benefit of the Lender, Surety and Borrower as loss payee under a standard
noncontributory mortgagee and loss payable clause, and shall provide that
Trustee shall receive not less than thirty (30) days written notice prior to
cancellation. The proceeds of any of the policies described in Sections
7.04(a)(iv)-(x) hereof shall be payable by check payable to Trustee, delivered
to Trustee, and such proceeds shall be applied by Trustee, at its option in
accordance with the Trust
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Agreement, either (i) to the full or partial payment or prepayment of the Loan
Obligations (without premium), or (ii) to the repair and/or restoration of the
Improvements, Equipment and Inventory damaged or taken. Provided that no Event
of Default or Springing Lock Box Event has occurred and is continuing, proceeds
paid under the policies described in Section 7.04(a)(vi) hereof shall be made
available to Lessee to be applied in accordance with the Flow of Funds
Agreement. Each of the policies described in Sections 7.04(a)(iii), (iv), (v)
and (vii) hereof, as of the Closing Date, must be written by an insurer or
insurers each having a rating of A - or better from Standard & Poor's
(provided, however, that within six (6) months after the Closing Date, such
policies must be written by insurers having ratings of A- or better from
Standard & Poor's), and a Best rating of A or better and otherwise reasonably
acceptable to Surety, and, the remaining coverages shall be provided by
insurers reasonably acceptable to Surety. If Lessee shall fail to cause the
insurance policies described in Sections 7.04(a)(iii), (iv), (v) and (vii)
hereof to be written by insurers having ratings of A or better from Standard &
Poor's within six (6) months after the Closing Date (which condition may be
satisfied by means of reinsurance arrangements acceptable to Noteholder in its
sole discretion), such failure shall constitute an Event of Default hereunder.
Notwithstanding the foregoing, Lessee may collect insurance proceeds paid under
the policies described in Sections 7.04(a)(iv), (v) and (vii)-(x) above in
connection with claims not in excess of Two Hundred Fifty Thousand Dollars
($250,000) (the "CASUALTY AMOUNT"), or in the event that such proceeds are
collected by Noteholder or Trustee same shall be paid over to Lessee (without
application of the conditions of Section 7.04(c) below), provided that (i) no
Default or Event of Default shall have occurred and be continuing, (ii) Lessee
gives notice to Surety and Trustee of the related fire or casualty within ten
(10) Business Days after the occurrence thereof (which notice shall include
Lessee's good faith estimate of the amount of the damage to the affected
Assisted Living Facility) and (iii) Lessee applies such proceeds to the repair
and/or restoration of the Improvements, Equipment and Inventory damaged in
accordance with the terms and conditions hereof.
(c) Surety agrees that Trustee shall make the net proceeds
of insurance (after payment of Surety's (and/or Trustee's) reasonable costs and
expenses) available to Lessee for Lessee's repair, restoration and replacement
of the Improvements, Equipment and Inventory damaged on the following terms and
subject to satisfaction in Surety's (and/or Trustee's) discretion, of each of
the following conditions:
(i) At the time of such loss or damage and at all
times thereafter while Surety (or Trustee) is holding any portion of such
proceeds, there shall exist no Default or Event of Default;
(ii) Surety (or Trustee) determines that the
applicable Property, 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 and in compliance with all
applicable zoning, building and other laws and codes with a value equal to or
greater than that which existed prior to such loss or damage ("PRE-EXISTING
CONDITION"), there will be sufficient funds to so restore such Property,
Improvements, Equipment and Inventory and such
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restoration shall be capable of being completed prior to the expiration of
business interruption insurance as determined by an independent inspector;
(iii) Surety (or Trustee) determines that Operating
Revenues from the Assisted Living Facilities, after restoration and repair of
the affected Property, Improvements, Equipment, and Inventory to the
Pre-existing Condition and expiration of such stabilization period acceptable
to Surety (or Trustee), will be sufficient to meet all operating costs and
other expenses, payments for reserves and loan repayment obligations (including
any obligations under any permitted subordinate financing) relating to the
Assisted Living Facilities and maintain a LCR at least equal to (A) that
existing at the origination of the Loan for casualties occurring during the
first eighteen (18) months of the term of the Loan and (B) 1.4 : 1 for
casualties occurring thereafter;
(iv) restoration and repair of the affected Property,
Improvements, Equipment, and Inventory to the Pre-existing Condition will be
completed within one year of the date of the loss or casualty to such Property,
Improvements, Equipment, or Inventory, but in no event later than six months
prior to the Maturity Date;
(v) less than fifty (50%) percent of the total floor
area of the Improvements of the affected Property has been damaged or destroyed
or rendered unusable as a result of such fire or casualty;
(vi) Within thirty (30) days following the date of
such loss or damage, Lessee shall have given Surety and Trustee written notice
of its desire to have such proceeds applied for purposes of restoration; and
(vii) Within sixty (60) days following the date of
notice under the preceding subsection 7.04(c)(vi), Lessee shall have provided
to Surety and/or Trustee all of the following:
(A) complete plans and specifications,
satisfactory to Surety, and/or Trustee for
restoration, repair and replacement of the
Improvements, Equipment and Inventory damage to
their Pre-existing Condition;
(B) if the loss or damage exceeds the Casualty
Amount, a duly executed fixed-price or guaranteed
maximum cost construction contract together with
a performance bond insuring completion of the
work in accordance with such plans and
specifications;
(C) a certificate of insurance evidencing
builder's risk insurance in such amounts as are
reasonably satisfactory to Surety and/or Trustee
and naming Trustee, for the benefit of the
parties to the
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Trust Agreement, as loss payee;
(D) Such additional funds as are required
below; and
(E) Copies of all Permits necessary to
complete such work in accordance with the plans
and specifications.
(d) (i) Lessee shall notify Surety and Trustee promptly after
it has knowledge of the commencement or threat of any action or proceeding
relating to any condemnation or other taking, or conveyance in lieu thereof, of
all or any part of any Property, whether direct or indirect (a "CONDEMNATION").
Lessee shall appear in and prosecute or defend any proceeding relating to any
Condemnation unless otherwise directed by Surety or Trustee in writing.
Borrower and Lessee each hereby authorize and appoint Surety and Trustee as
attorneys-in-fact for Borrower and Lessee to commence, appear in and prosecute,
in Surety's, Trustee's, Borrower's or Lessee's name, any action or proceeding
relating to any Condemnation and to settle or compromise any claim in
connection with any Condemnation. This power of attorney is coupled with an
interest and therefore is irrevocable. However, nothing contained in this
Section 7.04(d) shall require Surety or Trustee to incur any expense or take
any action with respect to any Condemnation. Borrower and Lessee each hereby
transfers and assigns to Surety and Trustee all right, title and interest of
Borrower and Lessee in and to any award or payment with respect to (A) any
Condemnation, and (B) any damage to any Property caused by governmental action
that does not result in a Condemnation.
(ii) Surety agrees that Trustee shall make the net
amount of such awards or proceeds (after deducting reasonable costs and
expenses incurred by Surety and Trustee) from a partial (but not total)
Condemnation of any Property, available to Lessee for the restoration or repair
of such Property and Improvements subject to satisfaction in Surety's (and/or
Trustee's) discretion of each of the conditions set forth in Section 7.04(c);
except that for purposes of this Section 7.04(d) all references in Section
7.04(c) to: (A) "Pre-existing Condition" shall be deemed to mean the
restoration and/or repair of such Property and Improvements to an economically
viable whole, in compliance with all applicable zoning, building and other laws
and codes and (B) damage or destruction of the Improvements shall be deemed to
mean the taking of any portion of such Property or Improvements pursuant to the
Condemnation. Notwithstanding the foregoing, the net proceeds of any award from
a Condemnation affecting all or substantially all of any Property, shall be
applied to the prepayment of the Reimbursement Obligations (without premium).
Unless Surety or Trustee otherwise agrees in writing, any application of any
awards or proceeds to the Obligations shall not extend or postpone the due date
of any monthly installments referred to in the Note, including any Imposition
Deposits, or change the amount of such installments. Borrower and Lessee each
agree to execute such further evidence of assignment of any awards or proceeds
from any Condemnation as Surety or Trustee may require.
(e) If Trustee elects to make the insurance proceeds or
Condemnation awards available for the restoration and repair of the affected
Property, Improvements, Equipment, and
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Inventory in accordance with the foregoing conditions, Lessee agrees that, if
at any time during the restoration and repair, the cost of completing such
restoration and repair, as determined reasonably by Surety or Trustee, exceeds
the undisbursed insurance proceeds or Condemnation awards, Lessee shall,
immediately upon demand by Surety or Trustee, deposit the amount of such excess
with Trustee, and Trustee shall first disburse such deposit to pay for the
costs of such restoration and repair on the same terms and conditions as the
insurance proceeds or Condemnation awards are disbursed. If Lessee deposits
such excess with Trustee and if, after completion of the restoration or repair,
any funds remain from the combination of insurance proceeds or Condemnation
awards and the funds so deposited with Trustee by Lessee, and if no Default or
Event of Default shall have occurred and be continuing, then Trustee shall
disburse to Lessee such remaining funds provided that Trustee shall not be
obligated to disburse any amount in excess of the amount that Lessee shall have
so deposited.
(f) If the insurance proceeds or Condemnation awards are
held by Trustee to reimburse Lessee for the cost of restoration and repair of
the affected Property, Improvements, Equipment, and Inventory, Lessee shall
restore the affected Property, Improvements, Equipment, and Inventory to its
Pre-existing Condition or other condition as Surety or Trustee may approve in
writing, and Lessee shall promptly begin such restoration and at all times
thereafter diligently prosecute such restoration to completion. Surety or
Trustee may, at Surety's or Trustee's option, condition disbursement of said
insurance proceeds or Condemnation awards on Surety's or Trustee's approval of
such plans and specifications of an architect satisfactory to Surety or
Trustee, contractor's cost estimates, architect's certificates, waivers of
liens, sworn statements of mechanics and materialmen and such other evidence of
costs, percentage completion of construction, application of payments; and
satisfaction of liens as Surety or Trustee may reasonably require. If the
insurance proceeds or Condemnation awards are applied to the payment of the
Reimbursement Obligations, any such application of proceeds to principal shall
not extend or postpone the due dates of the monthly installments due under the
Note or otherwise under the Loan and Surety Documents including, without
limitation, any Imposition Deposits under the Mortgages, or change the amounts
of such installments. Any amount of insurance proceeds or Condemnation awards
remaining in Trustee's possession after full and final payment and discharge of
all obligations secured hereby shall be refunded to Lessee or otherwise paid in
accordance with applicable law. If any Property, Improvements, Equipment, and
Inventory is sold at foreclosure or if Surety or Trustee acquires title to any
Property, Improvements, Equipment, and Inventory, Surety or Trustee shall have
all of the right, title and interest of Lessee in and to any insurance policies
and unearned premiums thereon and in and to the proceeds resulting from any
damage to or Condemnation awards from any condemnation, such Property,
Improvements, Equipment, and Inventory prior to such sale or acquisition.
(g) Surety and Trustee shall have a first lien and security
interest in all building materials and completed repair and restoration work
and in all fixtures and equipment acquired with such proceeds, and Borrower and
Lessee shall execute and deliver, at Lessee's expense, such mortgage, deed of
trust, security agreements, financing statements and other instruments as
Surety shall request to create, evidence, or perfect such lien and security
interest; and
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(h) In the event and to the extent such insurance proceeds
or Condemnation awards are not required or used for the repair, restoration and
replacement of the affected Property, Improvements, Equipment and Inventory for
which a loss or damage has occurred or affected by a Condemnation, or in the
event Lessee is not entitled to or does not timely make the election to have
insurance proceeds or Condemnation awards applied to the restoration of such
Property, Improvements, Equipment, or Inventory, or, having made such election,
fail 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 (subject to the terms of the Trust Agreement, if applicable)
Surety shall be entitled without notice to or consent from Borrower or Lessee
to apply such proceeds, or the balance thereof, at Surety's option either (i)
to the full or partial payment or prepayment of the Reimbursement Obligations
(without premium) in the manner aforesaid in accordance with the Trust
Agreement; provided, however, that if such insurance proceeds or Condemnation
awards are insufficient to pay the Required Casualty/Condemnation Payment and
any other amounts due under the Transaction Documents as a result of such
casualty or Condemnation, Lessee shall be required to pay to Trustee, for
application in accordance with the Trust Agreement, an amount equal to such
shortfall within ten (10) days after demand therefor by Noteholder or Trustee,
or (ii) to the repair, restoration and/or replacement of all or any part of
such Property, Improvements, Equipment and Inventory for which a loss or damage
has occurred. Upon any payment in full of the Required Casualty/Condemnation
Payment with respect to any Property pursuant to the foregoing provisions,
provided that no Default or Event of Default shall have occurred and be
continuing, Noteholder shall release or cause the Trustee to release the
Mortgage encumbering the applicable Property and all other Liens and security
interests relating to such Property, or (iii) to the repair, restoration and/or
replacement of all or any part of such Property, Improvements, Equipment and
Inventory for which a loss or damage has occurred. If Surety or Trustee has
agreed to make insurance proceeds or Condemnation awards available to reimburse
Lessee, as aforesaid, and whether or not such insurance proceeds are sufficient
to pay for the costs of such restoration, Lessee must rebuild to the
Pre-existing Condition or such other condition as Surety may approve in
writing.
(i) Lessee hereby appoints each of Surety and Trustee as
attorney-in-fact to cause the issuance of or an endorsement of any insurance
policy to bring Lessee into compliance herewith and, as limited above, at
Surety's or Trustee'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 Surety or Trustee be liable for failure to collect any amounts
payable under any insurance policy.
SECTION 7.05 FINANCIAL AND OTHER INFORMATION. Lessee shall provide or
cause Manager to provide to Surety the following financial statements and
information on a continuing basis during the term of the Loan:
(a) Within one hundred twenty (120) days after the end of
the fiscal year of Lessee and each Sublessee, unaudited financial statements
thereof, prepared by Lessee or
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Manager, which statements shall be prepared on a basis consistent with the
audited financial statements of Alterra, (so long as Alterra is Manager, and
thereafter in accordance with GAAP), consistently applied, and shall include a
balance sheet and a statement of income and expenses for the year then ended,
certified by an authorized officer of the Lessee, to be true and correct, to
the best of his or her knowledge, information and belief. Together with such
annual financial statements, Lessee shall also provide or cause Manager to
provide an agreed upon procedures report with respect to the operations of the
Assisted Living Facilities, on a consolidated basis, prepared by a Big Five or
other nationally recognized accounting firm or independent certified public
accountants acceptable to Surety ("APPROVED ACCOUNTANTS") which report shall
verify the accuracy of reported income and expenses for the year then ended and
shall be substantially in the form attached hereto as Exhibit F and otherwise
in form and substance reasonably acceptable to Surety in its sole discretion.
Within one hundred twenty (120) days following the end of each fiscal year
during the term of the Loan, Lessee will deliver a written statement by its
independent certified public accountants (1) stating that such examination has
included a review of Sections 7.05 and 7.06 of this Agreement as such terms
relate to Lessee and its compliance with accounting matters and also a review
of the Flow of Funds Agreement, (2) stating whether, in connection with such
examination, any failure to comply therewith has come to their attention, and
(3) if such a condition or event has come to their attention, specifying the
nature and period of existence thereof.
(b) Simultaneously with the filing of such reports with the
SEC, copies of Alterra's annual reports on Form 10-K and quarterly reports on
Form 10-Q. In the event that Alterra shall cease to be a publicly-traded
entity, within one hundred twenty (120) days after the end of the fiscal year
of Alterra, audited financial statements of Alterra prepared by Approved
Accountants, 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, certified by the chief financial officer of Alterra to
accurately represent the financial condition of Alterra to the best of his or
her knowledge, information and belief.
(c) Within thirty (30) days after the end of each month,
true and complete copies of unaudited monthly statements of operations of the
Assisted Living Facilities, prepared on a basis consistent with the audited
financial statements of Alterra (so long as Alterra is Manager, and thereafter
in accordance with GAAP), consistently applied, which statements shall include
statements of income and expenses for the month then ended, certified in the
case of each Assisted Living Facility, by the authorized officer of Lessee and
by the chief financial officer of Alterra, to be true, correct and complete to
the best of his or her knowledge, information and belief after due inquiry.
Monthly statements of operations shall show the separate operations of each of
the Assisted Living Facilities.
(d) Within forty-five (45) days of the end of each calendar
quarter, true and complete copies of unaudited statements of operations of
Lessee, [each Sublessee] and of Alterra, prepared on a basis consistent with
the audited financial statements of Alterra (so long as Alterra is Manager, and
thereafter in accordance with GAAP), which statements shall include a statement
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of income and expenses for the quarter then ended, certified by the chief
financial officer of Alterra and an authorized officer of Lessee [or such
Sublessee], to the best of his or her knowledge or belief after due inquiry, to
accurately represent the financial condition of the Manager, Lessee [or such
Sublessee], respectively. Quarterly financial statements of operations shall
show the separate operations of each of the Assisted Living Facilities.
(e) Within forty-five (45) days of the end of each calendar
quarter, utilization reports including a statement of the number of bed days
available and the actual patient days incurred for the quarter, together with
quarterly census information of each Assisted Living Facility as of the end of
such quarter in sufficient detail to show patient-mix (i.e., private, Medicare,
Medicaid, and V.A.) as of the end of such quarter, certified by the chief
financial officer of Manager to be true and correct, to the best of his or her
knowledge, information and belief after due inquiry.
(f) Within thirty (30) days after the end of each calendar
month, operating statements for each Property prepared on an accrual basis and
in form satisfactory to Surety, (i) for such month, (ii) for the year to date,
including a comparison of budgeted to actual income and expenses and on a
quarterly basis an explanation of material variances, and (iii) for the
12-month period ending in and including the subject month.
(g) As soon as available, but in no event more than thirty
(30) days after the filing deadline, as may be extended from time to time,
copies of all federal, state and local tax returns of Lessee, together with all
supporting documentation and required schedules certified by the authorized
officer of Lessee as true, correct and complete.
(h) Within twenty (20) days of filing or receipt, all copies
of Medicaid cost reports and any amendments thereto filed with respect to the
Assisted Living Facilities, and copies of all responses, audit reports, or
other inquiries with respect to such cost reports, in each case certified by an
authorized officer of Lessee and the chief financial officer of Manager as
true, correct and complete.
(i) Within ten (10) days of receipt, a true, correct and
complete copy of the Medicaid Rate Calculation Worksheet (or the equivalent
thereof) issued by the appropriate Medicaid Agency for each Assisted Living
Facility.
(j) Within five (5) days of receipt, true, correct and
complete copies of any and all notices (regardless of form) from any and all
licensing and/or certifying agencies that the operating license and/or the
Medicare and/or Medicaid certification or other third party reimbursement
program of any Assisted Living Facility is being downgraded to a substandard
category, revoked, or suspended or that any such action is pending or
threatened.
(k) Evidence of payment by Lessee or the Sublessees or by
Manager on behalf of Lessee or the Sublessees of any applicable provider bed
taxes or similar taxes, which taxes
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Lessee hereby agrees to pay as and when due.
(l) Within thirty (30) days after the end of each calendar
month, an aged accounts receivable report for each Assisted Living Facility
separately, in sufficient detail to show amounts due from each class of
patient-mix (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.
(m) Within forty-five (45) days of the end of each calendar
quarter, a certificate of an authorized officer of Lessee and the chief
financial officer of Manager certifying to the best of his or her knowledge
compliance with the covenants and requirements set forth above.
(n) Within forty-five (45) days of the end of each calendar
quarter during the term of the Loan, a certificate duly executed on behalf of
Lessee by its authorized officer, in form and substance satisfactory to Surety,
stating that to the best of Lessee's knowledge after due inquiry, there does
not exist any Default or Event of Default under the Transaction Documents (or
if any exists, specifying the same in detail), and stating the then-applicable
LCR and DSCR, and stating to the best of Lessee's knowledge after due inquiry
that all financial statements, reports, calculations, and other information
theretofore or therewith submitted to Surety by or on behalf of Lessee and
Manager are true and materially complete and do not omit to state any material
information without which the same might reasonably be misleading.
The Surety reserves the right to require such other financial information of
Lessee, the Sublessees, Manager and/or any Assisted Living Facility, in such
form and at such other times (including monthly or more frequently) as Surety
shall reasonably deem necessary, and Lessee agrees promptly to provide or to
cause to be provided, such information to Surety to the extent the same is
reasonably available or obtainable. All financial statements must be in the
form and detail as Surety may from time to time reasonably request.
SECTION 7.06 GAAP. Lessee shall maintain systems of accounting
established and administered in accordance with sound business practices and
sufficient in all respects to permit preparation of financial statements on a
basis consistent with the audited financial statements of Alterra. All
financial statements shall be prepared in accordance with GAAP, consistently
applied.
SECTION 7.07 ACCOUNTANTS' REPORTS. Promptly upon receipt thereof,
Lessee shall deliver copies of all significant reports submitted by independent
public accountants in connection with each annual, interim or special audit of
the financial statements or other affairs of Alterra made by such accountants,
including the comment letter submitted by such accountants to management in
connection with the annual audit.
SECTION 7.08 BOOKS AND RECORDS. Lessee shall keep and maintain at all
times at the Manager's principal place of business and/or at the Assisted
Living Facilities, or the principal place of business of Lessee to the extent
required by law, complete and accurate books of account and records (including
copies of supporting bills and invoices) adequate to reflect correctly the
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results of the operation of the Assisted Living Facilities, and copies of all
written contracts, leases (if any), and other instruments which affect the
Property, which books, records, contracts, leases (if any) and other
instruments shall be subject to examination and inspection at any reasonable
time by Surety or its agents or representatives (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, and subject to the residents' rights of privacy and legal
requirements with respect to confidentiality of medical records), provided,
however, if an Event of Default has occurred and is continuing, Lessee shall
deliver, or cause Manager to deliver, to the fullest extent permitted by law,
to Surety and Trustee upon written demand all books, records, contracts, leases
(if any) and other instruments relating to the Assisted Living Facilities or
their respective operations and Lessee authorizes Surety and/or Trustee to
obtain a credit report on Lessee, Manager or any Borrower Party at any time.
SECTION 7.09 PAYMENT OF INDEBTEDNESS. Lessee shall duly and
punctually pay or cause to be paid all other Indebtedness now owing or
hereafter incurred by Lessee in accordance with the terms of such Indebtedness,
except such Indebtedness owing to those other than Surety which is being
contested in good faith by Lessee in accordance with the Transaction Documents
and with respect to which any execution against properties of Lessee have been
effectively stayed and for which reserves and collateral for the payment and
security thereof have been established as determined by Surety in its
reasonable discretion.
SECTION 7.10 BUDGET APPROVAL PROCESS.
Within sixty (60) days following the Closing Date and,
thereafter, prior to the end of each calendar year during the term of the Loan,
Lessee shall, or shall cause Manager to, submit to Surety, a proposed annual
operating and capital expenditures budget for the Assisted Living Facilities
for the following calendar year. Such budget shall provide detail on a
month-by-month basis for all Operating Revenues, Operating Expenses and capital
improvement requirements (and is referred to herein as the "BUDGET"). The
Surety shall have the right to reasonably approve or disapprove the Budget and
Lessee shall change or cause such changes to be made to the Budget as are
reasonably necessary to obtain Surety's reasonable approval. Once the Surety
approves such Budget, it shall become effective for the next calendar year
subject to the provisions below. If the Surety has not approved the Budget on
or prior to December 31 of the calendar year which is about to expire, the
projections for the new calendar year as set forth on SCHEDULE 7.10 subject to
such adjustments as are necessary to achieve, in the most economic fashion,
compliance with all applicable Legal Requirements, shall be deemed to be the
Budget during such new calendar year until such time as the Surety approves the
new Budget. Lessee shall notify Surety of any proposed changes to the Budget
(following final approval thereof as aforesaid) which contemplate or result in
a change in projected Net Operating Income of more than ten percent (10%), and
any such proposed change shall be subject to Surety's prior written approval as
provided above. Following the Closing Date and until approval of the Budget as
described above, the projections attached hereto as SCHEDULE 7.10 shall be
deemed to be the Budget.
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Pursuant to the Trust Agreement, the Surety has delegated
certain rights to the Controlling Party as more fully set forth therein. Lessee
agrees that if, at any time, Surety shall become the Controlling Party or if
the Trust Agreement shall cease to be in effect, then as of such event and for
so long thereafter as such event shall continue, Surety shall, in addition to
its foregoing rights of approval, be entitled to review the then current
Budget, notwithstanding that the same may already have been approved in
accordance with the above provisions and the Trust Agreement. In connection
with such review, Surety shall be entitled to request, and Lessee shall effect,
such changes as Surety shall reasonably determine to be necessary or desirable.
SECTION 7.11 ANNUAL OWNERSHIP REPORT. Together with its annual
financial statements, Lessee shall deliver to Surety a written statement duly
executed on behalf of Lessee or the applicable Sublessee by the chief executive
officer or secretary of the entity, in form and substance satisfactory to
Surety, identifying in particularity and detail all direct and indirect
ownership and beneficial interests in Lessee or such Sublessee and stating
whether any such interest is encumbered or pledged, in each case as of the date
of delivery of such notice.
SECTION 7.12 MATERIAL ADVERSE CHANGE; MATERIAL ADVERSE EFFECT.
(a) Promptly upon Lessee becoming aware thereof, and in any
event within 10 days of so, becoming aware, delivered to Surety, notice of any
material adverse change in the operation of any of the Properties, Improvements
or the Assisted Living Facilities, to include, but not be limited to: any
statement of material operating and/or physical plant deficiencies; material
violations of applicable law; limitations on license or provider agreements;
bans on admissions; suspension of payments; freeze or reduction in Medicaid
rate; notice of overpayment; or being the subject of any investigation relating
to patient abuse, fraud, kickbacks, or other alleged illegal payment practices.
(b) Promptly upon Lessee or Borrower becoming aware thereof,
delivered to Surety, notice of the occurrence of any other event which would
reasonably be expected to have a Material Adverse Effect on the business,
operations or financial condition of a Borrower Party or on the ability of such
Borrower Party to perform or comply with any of the terms and conditions of
this Agreement, the Note, the Surety Bond or any other Loan and Surety
Documents.
SECTION 7.13 EVENTS OF DEFAULT, ETC.
(a) Promptly upon Lessee or Borrower obtaining knowledge of
any of the following events or conditions, deliver to Surety a certificate
executed on its behalf by its chief financial officer or similar officer
specifying the nature and period of existence of such condition or event and
what action Lessee or any Affiliate thereof has taken, is taking and proposes
to take with respect thereto: (1) any condition or event that constitutes an
Event of Default or Default; or (2) any Material Adverse Effect with respect to
Lessee.
(b) Promptly upon Lessee or Borrower becoming aware thereof,
and in any
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event within three Business Days of so becoming aware, delivery to Surety,
notice of any material default beyond applicable grace periods by a Borrower
Party under any material agreement or instrument to which it is a party or by
which it or any of its properties may be subject or bound, together with a
written statement of Lessee setting forth the details thereof.
SECTION 7.14 LITIGATION. Promptly upon Lessee obtaining knowledge of
(1) the institution of any action, suit, proceeding, governmental investigation
or arbitration against or affecting a Borrower Party, Sublessee or any Property
not previously disclosed in writing by Lessee to Surety or (2) any material
development in any action, suit, proceeding, governmental investigation or
arbitration at any time pending against or affecting a Borrower Party,
Sublessee or any Property of a Borrower Party which, in each case, is
reasonably likely to have a Material Adverse Effect, Lessee will give notice
thereof to Surety and provide such other information as may be reasonably
available to them to enable Surety and its counsel to evaluate such matter.
SECTION 7.15 INSURANCE. WITHIN THE THIRTY (30 DAY) PERIOD PRIOR TO
THE END OF EACH INSURANCE POLICY YEAR OF LESSEE, DELIVER A REPORT IN FORM AND
SUBSTANCE REASONABLY SATISFACTORY TO SURETY OUTLINING ALL MATERIAL INSURANCE
COVERAGE MAINTAINED AS OF THE DATE OF SUCH REPORT BY LESSEE, AND ALL MATERIAL
INSURANCE COVERAGE PLANNED TO BE MAINTAINED BY LESSEE IN THE SUBSEQUENT
INSURANCE POLICY YEAR.
SECTION 7.16 CONDUCT OF BUSINESS. Lessee shall conduct or cause to be
conducted, the operations of the Assisted Living Facilities at all times in a
manner at least consistent with Alterra's customary practice thereof as of the
date hereof, including without limitation, the following:
(a) to maintain the standard of care for the residents of
the Assisted Living Facilities at a level in accordance with customary and
prudent industry standards;
(b) to operate the Assisted Living Facilities in a prudent
manner and in compliance at all times in all material respects with applicable
laws and regulations relating thereto, including, without limitation, to the
extent applicable, Title 42 of the United States Code and related regulations,
including the Medicare Regulations, if applicable, the Medicaid Regulations, if
applicable, federal and state self-referral and anti-kickback statutes and
regulations; Title 31 of the United States Code, including the False Claims
Act; applicable skilled nursing facility and assisted living facility licensure
laws; and public health statutes and regulations.
(c) to obtain within the time frames required by applicable
laws, rules and regulations and thereafter keep, in Borrower's, Lessee's,
Sublessee's or Manager's name, as applicable, any required Permits and cause
all Permits, Reimbursement Contracts, and any other agreements necessary for
the use and operation of the Assisted Living Facilities or as may be necessary
for participation in Medicaid and/or Medicare, each, as applicable;
(d) to maintain sufficient Inventory and Equipment of types
and quantities at
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the Assisted Living Facilities to enable the operations of the Assisted Living
Facilities to be adequately performed;
(e) to maintain or cause to be maintained in good repair,
working order and condition all material properties used in the business of
Lessee, including the Properties, Improvements, and Equipment, and will make or
cause to be made all appropriate repairs, renewals and replacements thereof.
Without limitation of the foregoing, Lessee will operate and maintain, or cause
to be operated and maintained, the Properties, Improvements, and Equipment in a
manner consistent with the Budget. Lessee will repair, or cause to be repaired,
the Properties, Improvements, and Equipment to which any casualty has occurred
to at least the condition existing prior to any such casualty. All work
required or permitted under this Agreement shall be performed in a workmanlike
manner and in compliance with all applicable laws;
(f) to maintain sufficient cash, in order to satisfy the
working capital needs of the Assisted Living Facilities; and
(g) to continuously operate or cause to be continuously
operated, the Properties and Improvements as Assisted Living Facilities.
SECTION 7.17 PERIODIC SURVEYS. Lessee shall furnish to Surety, or
cause Manager to furnish to Surety, (a) within twenty (20) days of receipt, a
copy of any Medicare, Medicaid or any licensing agency survey, report, and any
material statement of deficiency and material follow-up surveys, and any plans
of correction related thereto and (b) within a reasonable time, any
correspondence or other documents relating to surveys, licensure, compliance
with Medicare and Medicaid conditions of participation relating to matters
which might have a Material Adverse Effect on any Assisted Living Facility.
SECTION 7.18 MANAGEMENT AGREEMENT. LESSEE SHALL MAINTAIN THE
MANAGEMENT AGREEMENTS IN FULL FORCE AND EFFECT AND TIMELY PERFORM, OR CAUSE TO
BE TIMELY PERFORMED, ALL OF LESSEE'S AND/OR EACH SUBLESSEE'S OBLIGATIONS
THEREUNDER AND ENFORCE, OR CAUSE TO BE ENFORCED, PERFORMANCE OF ALL OBLIGATIONS
OF THE MANAGER THEREUNDER AND NOT PERMIT THE TERMINATION, AMENDMENT OR
ASSIGNMENT OF THE MANAGEMENT AGREEMENTS EXCEPT ON THE TERMS PERMITTED IN THE
TRUST AGREEMENT. NEITHER LESSEE NOR ANY SUBLESSEE WILL ENTER INTO ANY OTHER
MANAGEMENT AGREEMENT WITHOUT SURETY'S PRIOR WRITTEN CONSENT, WHICH MAY BE
WITHHELD IN THE SOLE AND ABSOLUTE DISCRETION OF SURETY.
SECTION 7.19 UPDATED APPRAISALS. For so long as the Loan remains
outstanding, if any Event of Default shall occur and be continuing hereunder,
or if, in Surety's reasonable judgment, a material depreciation in the value of
any Property (or any portion thereof) shall have occurred, then in any such
event, Surety or Trustee may cause any or all of the Properties (or any portion
thereof) to be appraised by an appraiser selected by Surety, and in accordance
with Surety's appraisal guidelines and procedures then in effect, and Lessee
agrees to cooperate in all respects
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with such appraisals and furnish to the appraisers all requested information
regarding the Properties and Assisted Living Facilities as applicable. If an
Event of Default shall have occurred and be continuing or if such appraisal
discloses that material depreciation in the value of any Property has occurred,
Lessee agrees to pay all reasonable costs incurred by Surety or Trustee in
connection with such appraisal which costs shall be secured by the Mortgages
and shall accrue interest at the Default Rate until paid.
SECTION 7.20 COMPLY WITH COVENANTS, LAWS AND CONTRACTUAL OBLIGATIONS.
Lessee shall (A) comply, in all material respects, with all covenants and
restrictions of record and applicable laws, ordinances, rules and regulations,
including, without limitation, Title 42 of the United States Code and related
regulations, including the Medicare Regulations, if applicable, federal and
state self-referral and anti-kickback statutes and regulations; Title 31 of the
United States Code, including the False Claims Act; applicable skilled nursing
facility and assisted living facility licensure laws; applicable public health
statues and regulations; the Americans with Disabilities Act and the
regulations thereunder, and all laws, ordinances, rules and regulations
relating to zoning, setback requirements and building codes, (B) maintain in
full force and effect and observe and comply with all of the terms and
conditions of all Regulatory Permits now held or hereafter acquired and comply
in all material respects with any and other Permits now held or hereafter
acquired by any of them, and (C) perform, observe, comply and fulfill all of
its respective obligations, covenants and conditions contained in any material
Contractual Obligation, including the Transaction Documents, and not suffer or
permit any default or event of default (giving effect to applicable notice and
cure rights) to exist under any of the foregoing.
SECTION 7.21 TAXES AND OTHER CHARGES. Subject to Lessee's right to
contest the same as set forth in Section 9(d) of the Mortgages, Lessee shall
pay all taxes, assessments, charges, claims for labor, supplies, rent, and
other obligations as and when due which have given or, may give rise to a Lien
against any of the Properties, except Permitted Liens.
SECTION 7.22 COST REPORTS. Lessee shall timely file Medicare and
Medicaid and other third party cost reports in an accurate manner and provide
to Surety, within a reasonable period of time, copies of all cost reports, as
applicable, and correspondence relating to Medicare and Medicaid and other
third party cost reports, notices of program reimbursement ("NPR") and all
other documents relating to cost reimbursement, each, as applicable.
SECTION 7.23 VENDOR AGREEMENTS. Lessee shall have and maintain, on
behalf of each Assisted Living Facility, written agreements with vendors in
compliance with the Medicare prospective payment system, and otherwise comply
with the rules, regulations and requirements related to the Medicare
prospective payment system, each, as applicable.
SECTION 7.24 CERTIFICATE. Upon Surety's written request in connection
with a Secondary Market Transaction, Lessee shall furnish Surety with a
certificate stating that Lessee has complied with and is in compliance with all
terms, covenants and conditions of the Transaction Documents to which Lessee is
a party and that there exists no Default or Event of
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Default or, if such is not the case, that one or more specified events have
occurred, and that the representations and warranties contained herein are true
and correct with the same effect as though made on the date of such certificate
and do not omit any material fact (or if, as of such date, any representation
or warranty has become untrue or then omits to state a material fact,
describing same with reasonable detail). In addition, at Surety's request, the
Lessee shall promptly provide evidence satisfactory to Surety of compliance
with any representation, warranty or covenant specified in such request.
SECTION 7.25 LOAN AND SURETY DOCUMENTS. Lessee shall comply with the
terms of and perform all obligations under the Transaction Documents which are
to be performed in favor of Surety or Trustee, including without limitation,
all obligations to fund Reserves as and when required as set forth in the Trust
Agreement, the Flow of Funds Agreement and any other Transaction Documents and
to the extent such obligations are by their terms to be performed for the
benefit of the Beneficiaries. Without limitation, each calendar year Lessee
shall cause an amount equal to $300.00 per Available Bed (such aggregate annual
amount, the "AVAILABLE BED CAPITAL IMPROVEMENT AMOUNT") to be deposited into
the Capital Improvements Account (at the rate of $25.00 per Available Bed per
month).
SECTION 7.26 NOTICE OF FEES OR PENALTIES. Lessee shall immediately
notify Surety, upon Lessee's knowledge thereof, of the assessment by any state
or any Medicare, Medicaid, health or licensing agency of any fines or penalties
in excess of $25,000 against Borrower, Lessee, any Sublessee, Manager (in its
capacity as Manager of any Assisted Living Facility), or any Assisted Living
Facility.
SECTION 7.27 MAINTENANCE OF ASSUMPTIONS IN LEGAL OPINIONS. Lessee
shall not cause or suffer any of the assumptions with respect to Lessee,
Alterra or the Properties set forth in any opinions of its legal counsel
delivered in connection with the Loan to be incorrect.
SECTION 7.28 SURETY'S EXPENSES. Lessee shall pay, on demand by
Surety, all reasonable expenses, charges, costs and fees (including reasonable
attorneys' fees and expenses) in connection with the negotiation,
documentation, administration, servicing, and collection of the Loan. On the
Closing Date and the Additional Facilities Closing Date, Surety may pay
directly from the proceeds of the Loan each of the foregoing expenses.
SECTION 7.29 MATERIAL AGREEMENTS. Except for the Management
Agreements, the Master Lease, the Subleases, the Licensing Subleases, the
Residency Agreements (provided same are substantially in the form of the
standard residency agreements delivered to Surety hereunder for the respective
states in which the Assisted Living Facilities are located), the Existing
Leases identified on SCHEDULE 7.29 hereto or Permitted Liens, neither Lessee
nor any Sublessee shall enter into or become obligated under any material
agreement pertaining to the Assisted Living Facilities, Properties,
Improvements, and Equipment, unless the same may be terminated without cause
and without payment of a penalty or premium, on not more than thirty (30) day's
prior written notice.
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SECTION 7.30 INSPECTION. Lessee shall permit Surety and any of its
authorized representatives designated by Surety to visit and inspect during
normal business hours, each Assisted Living Facility and its business,
including its financial and accounting records, and to make copies and take
extracts therefrom, and to discuss its affairs, finances and business with its
officers and independent public accountants (with Lessee's representative(s)
present), at such reasonable times during normal business hours and as often as
may be reasonably requested (and subject to resident's privacy rights and legal
requirements with respect to confidentiality of medical records). Unless an
Event of Default has occurred, Surety shall provide advance written notice of
at least three (3) Business Days prior to visiting or inspecting the Assisted
Living Facilities, Lessee's or Manager's offices. Lessee shall reimburse
Noteholder for annual site-inspection costs and expenses equal to not more than
One Thousand Dollars ($1,000) per Assisted Living Facility as and to the extent
incurred by Noteholder.
SECTION 7.31 ERISA. (a) Lessee shall deliver to Surety, at Lessee's
expense, the following information and notices as soon as possible, and in any
event within ten (10) Business Days: (i) after Lessee or any ERISA Affiliate
knows or has reason to know that a Termination Event has occurred, written
notice of such Termination Event; (ii) after Lessee or any ERISA Affiliate
knows or has reason to know that a prohibited transaction (as defined in
Section 406 of ERISA or Section 4975 of the Code) involving Lessee or ERISA
Affiliate or Plan has occurred, written notice describing such transaction and
the proposed corrective action; (iii) after the filing thereof with the
Internal Revenue Service, a copy of each funding waiver request filed with
respect to any Benefit Plan after the occurrence thereof, (iv) notification of
any increases in the benefits of any Benefit Plan or the contributions required
under any Multiemployer Plan; (v) after receipt by Lessee or any ERISA
Affiliate of any favorable or unfavorable determination letter from the IRS
regarding the qualification of a Plan under Section 401(a) of the Code, copies
of each such letter; (vi) after receipt by Lessee or any ERISA Affiliate of any
notice of the Pension Benefit Guaranty Corporation's intention to terminate a
Benefit Plan or to have a trustee appointed to administer a Benefit Plan, a
copy of each such notice; and (vii) after receipt by Lessee or any ERISA
Affiliate of a notice from a Multiemployer Plan regarding imposition of
withdrawal liability, a copy of such notice. For purposes of this paragraph
(a), Lessee shall be deemed to know all facts known by the administrator of any
Plan of which Lessee or any ERISA Affiliate is the plan sponsor.
(b) Lessee shall establish, maintain and operate, or cause
the ERISA Affiliates to establish, maintain and operate, all Plans to comply in
all material respects with the provisions of ERISA, the Code, and all other
applicable laws, and the regulations and interpretations thereunder and the
respective requirements of the governing documents for such Plans.
SECTION 7.32 ASSISTED LIVING FACILITY CONSULTANT. Upon the occurrence
and during the continuance of a Springing Lockbox Event or Event of Default,
Surety shall be entitled to retain, at Lessee's cost and expense, a consultant
("ASSISTED LIVING FACILITY CONSULTANT") who is experienced in issues related
to health care generally and assisted living facilities specifically,
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which consultant may advise Surety and Trustee on matters specifically relating
to the maintenance and operation of the Assisted Living Facilities, including
without limitation, matters pertaining to insurance and the Budget. In
addition, upon the occurrence and during the continuance of a Springing Lock
Box Event or Event of Default, Surety shall be entitled to retain such Assisted
Living Facility Consultant on an annual basis at Lessee's cost and expense for
the limited purpose of advising Surety in its review of the Budget contemplated
by Section 7.10 hereof. The reasonable fees and expenses of such Assisted
Living Facility Consultant shall constitute a part of the Reimbursement
Obligations and shall be secured by the Transaction Documents.
SECTION 7.33 PLACE OF BUSINESS. Borrower and Lessee shall each
provide Surety with not less than thirty (30) days prior written notice of any
change in its chief executive office or principal place of business. In
addition, Borrower shall, at Lessee's expense, provide Surety with such other
information and amendatory financing statements as Surety may request in
connection therewith.
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ARTICLE VIII
ENVIRONMENTAL HAZARDS
SECTION 8.01 PROHIBITED ACTIVITIES AND CONDITIONS. Except for
matters described in Section 8.02, Lessee 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 any
Property or any Improvements;
(b) The transportation and disposal of any Hazardous
Materials to, from, or across any Property and Improvements;
(c) Any occurrence or condition on any Property or in the
Improvements or any other property of Lessee, which occurrence or condition is
or may be in violation of Environmental Law or give rise to liabilities under
Environmental Laws;
(d) Any violation of or noncompliance with the terms of any
Environmental Law or any Environmental Permit with respect to any Property, the
Improvements the use or operation of any Property or the Improvements or any
Property of Lessee; or
(e) The creation of any lien imposed by operation of, or
pursuant to, any Environmental Law.
The matters described in clauses (a) through (e) above are referred to
collectively in this Article VIII as "PROHIBITED ACTIVITIES AND CONDITIONS" and
individually as a "PROHIBITED ACTIVITY AND CONDITION."
SECTION 8.02 EXCLUSIONS. Notwithstanding any other provision of
Section 8.01 to the contrary, "Prohibited Activities and Conditions" shall not
include (a) the safe and lawful use and storage of customary quantities of (1)
pre-packaged supplies, medical waste, cleaning materials, petroleum products or
other Hazardous Materials which are customarily and lawfully used in the
operation and maintenance of comparable assisted living facilities, (2)
cleaning materials, personal grooming items and other items sold in
pre-packaged containers for consumer use and used by occupants of the Assisted
Living Facilities; (3) the presence on the Properties and/or Improvements of
asbestos or asbestos-containing materials where the same are not required under
Environmental Law to be removed, encapsulated or otherwise abated and where
Lessee has complied with Environmental Law with respect to any O&M Program,
notices or warnings required under Environmental Law to be performed or given
concerning such asbestos or asbestos-containing materials; (4) petroleum
products used in the operation and maintenance of motor vehicles from time to
time located on any Property's parking areas, so long as all of the foregoing
are used, stored, handled, transported and disposed of in compliance with
Environmental Law, and (b) activities normal, customary and lawful in the
operation of
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comparable Assisted Living Facilities.
SECTION 8.03 PREVENTIVE ACTION. Lessee shall take all appropriate
steps (including the inclusion of appropriate provisions in any Leases approved
by Surety which are executed after the date of this Agreement) to prevent its
employees, agents, contractors, tenants and occupants of any of the Assisted
Living Facilities from causing or permitting any Prohibited Activities and
Conditions.
SECTION 8.04 O & M PROGRAM COMPLIANCE. If an O&M Program or O&M
Programs have been established with respect to Hazardous Materials, Lessee
shall comply in a timely manner with, and cause all employees, agents, and
contractors thereof and any other persons present on the Property to comply
with the applicable O&M Program. All costs of performance of Lessee's
obligations under any O&M Program shall be paid by Lessee, and Surety's
out-of-pocket costs incurred in connection with the monitoring and review of
any O&M Program and Lessee's performance shall be paid by Lessee upon demand by
Surety. Any such out-of-pocket costs of Surety which Lessee fails to pay
promptly shall become an additional part of the Reimbursement Obligations.
Surety shall have the right, but not the obligation, to review and, if Surety
so elects, to approve any O&M Program proposed to be established by Lessee.
SECTION 8.05 LESSEE'S ENVIRONMENTAL REPRESENTATIONS AND WARRANTIES.
Lessee represents and warrants to Surety that, to the best of its knowledge
based on its review of, and except as set forth in, the Environmental Reports
described on SCHEDULE 8.05 hereto:
(a) Lessee has not at any time caused, permitted or suffered
to exist any Prohibited Activities and Conditions.
(b) Lessee or the applicable Sublessee has all Environmental
Permits required to carry on its business with respect to its Assisted Living
Facilities, Properties and Improvements and each of such Environmental Permits
is in full force and effect and each of Lessee and/or the applicable Sublessee
is in compliance with the terms and conditions thereof and the transactions
contemplated by this Agreement shall not cause any of such Environmental
Permits to lapse or become invalid. No event has occurred with respect to any
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.
(c) Except as disclosed on SCHEDULE 8.5(C) hereto, the
Properties and the Improvements do not now contain any underground storage
tanks, and, to the best of Lessee's knowledge after reasonable and diligent
inquiry, the Properties and the Improvements have not contained any underground
storage tanks in the past. If there is an underground storage tank located on
any Property or the Improvements which has been previously disclosed by Lessee
to Surety in writing, that tank strictly complies with all requirements of
Environmental Law.
(d) Each of Lessee and/or the applicable Sublessee has
complied and is in
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compliance with all limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations schedules and timetables contained in
any Environmental Law applicable to the Properties and/or Improvements or any
property of Lessee.
(e) No notice, notification, demand, request for
information, citation, summons or order has been issued, no complaint or notice
of violation has been filed or served, no penalty has been assessed, no
investigation or review is pending or threatened by any Governmental Authority
or any other Person with regard or with respect to the Release of Hazardous
Materials, the disposal or arrangement for disposal of Hazardous Materials,
noise emissions, Hazardous Materials, violation or alleged violation of
Environmental Law at, to or from the Property, the Improvements, the use or
operation of either, or any property owned by Lessee.
(f) Neither the Properties nor any Improvements contains any
treatment, storage or disposal facility requiring an Environmental Permit.
(g) No asbestos or asbestos-containing material is or has
been present at the Properties or the Improvements in violation of any
Environmental Law except as disclosed to the Surety by Lessee prior to the
Closing Date.
(h) Neither Lessee nor any of its predecessors, has
transported or arranged for the transportation of any Hazardous Materials from
the Properties or Improvements to any location that is listed on the National
Priorities List ("NPL") under CERCLA, listed for possible inclusion on the NPL
in the Comprehensive Environmental Response and Liability Information System
("CERCLIS"), or is listed on any similar state or local list or that is the
subject of federal, state or local enforcement actions or other investigations.
(i) No Hazardous Material has been recycled, treated, stored
or Released by Borrower or Lessee except in accordance with applicable
Environmental Law.
(j) No oral or written notification of a Release of a
Hazardous Material has been filed by or on behalf of Lessee with respect to any
portion of the Property and/or Improvements and no portion of the Property
and/or Improvements or other property owned by Lessee is listed or proposed for
listing on the NPL, CERCLIS or any similar state or local list of sites
requiring investigation or remediation.
(k) No liens have arisen under or pursuant to any
Environmental Law on any of the Properties and/or Improvements, and no
governmental action has been taken or is in process that could subject any such
Property or Improvements to such liens and Lessee is not required to place any
notice or restriction relating to the presence of Hazardous Materials at any of
the Properties and/or Improvements.
(l) All environmental investigations, studies, audits,
tests, reviews or other analyses conducted by, or that are in the possession of
Lessee, relating to any Property and/or
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Improvements have been delivered to Surety prior to the Closing Date.
(m) Lessee has no knowledge of any facts, events or
conditions relating to any Properties and/or Improvements which could
reasonably be expected to interfere with or prevent continued compliance with
any Environmental Law, give rise to any liability under Environmental Law, or
otherwise form the basis of any claim, action, suit, proceeding, hearing or
investigation against or involving Lessee, any Properties and/or Improvements
under any Environmental Law.
The representations and warranties in this Article VIII shall be
continuing representations and warranties that shall be deemed to be made by
Lessee as of the Closing Date, throughout the term of the Loan, and in any
case, until the Loan Obligations and Reimbursement Obligations have been paid
in full.
SECTION 8.06 NOTICE OF CERTAIN EVENTS. Lessee shall promptly notify
Surety in writing and in reasonable detail of any and all of the following that
may occur:
(a) Lessee's or Manager's discovery of any Prohibited
Activity and Condition.
(b) Lessee's or Manager's receipt of or knowledge of any
complaint, order, demand, request for information, notice of violation,
investigation, testing, proposed testing 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 any Property, the Improvements or any other
property that is adjacent to any Property.
(c) Any representation or warranty in this Article VIII
which becomes untrue at any time after the date of this Agreement.
Any such notice given by Lessee shall not relieve Lessee of, or
result in a waiver of, any obligation under this Agreement, the Surety Bond, or
any of the other Transaction Documents.
SECTION 8.07 COSTS OF INSPECTION. Lessee shall pay promptly the costs
of any environmental inspections, tests or audits required by Surety or Trustee
in connection with any foreclosure or deed in lieu of foreclosure, or, if
required by Surety or Trustee, as a condition of Surety's or Trustee's consent
to any "TRANSFER" (as defined in the Mortgages), or required by Surety
following a reasonable determination by Surety that Prohibited Activities and
Conditions may exist. Any such costs incurred by Surety or Trustee (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 Lessee fails to pay promptly shall become an additional part
of the Reimbursement Obligations.
SECTION 8.08 REMEDIAL WORK. If any investigation, site monitoring,
containment,
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clean-up, removal, restoration or other remedial work ("REMEDIAL WORK") is
necessary to comply with any Environmental Law or order of any Governmental
Authority that has or acquires jurisdiction over the Property, the Improvements
or the use, operation or improvement of the Properties under any Environmental
Law, Lessee shall, by the earlier of (1) the applicable deadline required by
Environmental Law or (2) thirty (30) days after notice from Surety 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 and in accordance with applicable Environmental Law. If Lessee
fails to begin on a timely basis or diligently prosecute any required Remedial
Work, Surety may, at its option, cause the Remedial Work and any other efforts
deemed necessary by Surety in its sole and absolute discretion, to be
completed, in which case Lessee shall reimburse Surety on demand for all costs
of doing so. Any reimbursement due from Lessee to Surety shall become part of
the Reimbursement Obligations.
SECTION 8.09 COOPERATION WITH GOVERNMENTAL AUTHORITIES. Lessee 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.
ARTICLE IX
RESTRICTIONS ON TRANSFER
SECTION 9.01 RESTRICTIONS ON TRANSFER AND ENCUMBRANCES. Except for a
Transfer and Assumption consented to by Lender in accordance with Section 9.02,
Permitted Liens or (as to Borrower) as expressly permitted under the
Participation Agreement, neither Borrower nor Lessee shall cause or suffer to
occur any sale, transfer, pledge, or encumbrance of (i) all or any part of any
of its interests in the Properties or Improvements, or any interest therein,
except as permitted in Section 6.07 hereof and Section 9.3 of the Participation
Agreement, any direct ownership or beneficial interest in such Borrower Party.
SECTION 9.02 ASSUMABILITY.
(a) In the event Borrower and Lessee desire to transfer all
of their respective interests in the Properties (but not less than all) to
another party (the "TRANSFEREE BORROWER") and have (i) the Transferee Borrower
become a party to the Note and the Surety Bond and assume all of Borrower's and
Lessee's obligations respectively, as the case may be, under the Transaction
Documents (including, without limitation, this Agreement), (ii) indemnitors
acceptable to Surety in its sole discretion execute and deliver to Surety
indemnities, in form and substance acceptable to Surety, and (iii) replacement
pledgors acceptable to Surety in its sole discretion pledge all of the
ownership interests in the Transferee Borrower (collectively, a "TRANSFER AND
ASSUMPTION"), Borrower may make a written application to Surety for Surety's
consent to the Transfer and Assumption, subject to the conditions set forth in
paragraphs (b) and (c) of this Section. Together with such written application,
Lessee will pay to Surety the reasonable review fee then required by Surety.
Lessee also shall pay on demand all of the reasonable costs and expenses
incurred by Surety, including reasonable attorneys' fees and
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expenses, and including the fees and expenses of Rating Agencies and other
outside entities, in connection with considering any proposed Transfer and
Assumption, whether or not the same is permitted or occurs. No Transfer and
Assumption shall be permitted prior to the Defeasance Lockout Expiration Date
(as defined in the Note).
(b) Surety shall not unreasonably withhold its consent to a
one time Transfer and Assumption after the Defeasance Lockout Expiration Date
provided and upon the conditions that:
(i) No Default or Event of Default has occurred and
is continuing;
(ii) Lessee has submitted to Surety true, correct and
complete copies of any and all information and documents of any kind requested
by Surety concerning the Property or Properties to be transferred, Transferee
Borrower, the replacement indemnitors, and pledgors, and Borrower;
(iii) Evidence satisfactory to Surety has been provided
showing that the Transferee Borrower and such of its Affiliates as shall be
designated by Surety comply and will comply with Sections 6.19 and 6.20 hereof,
as those provisions may be modified by Surety taking into account the ownership
structure of Transferee Borrower and its Affiliates;
(iv) If the Loan, by itself or together with other
loans, has been the subject of a Securitization, then Surety shall have
received confirmation from all applicable Rating Agencies that the Transfer and
Assumption will not result in a downgrade, qualification, or withdrawal of any
rating then if effect for the securities issued in connection therewith;
(v) If the Loan has not been the subject of a
Securitization, then Surety shall have determined in its reasonable discretion
(taking into consideration such factors as Surety may determine, including the
attributes of the loan pool in which the Loan might reasonably be expected to
be securitized) that no rating for any securities that would be issued in
connection with such Securitization will be diminished, qualified or withheld
by reason of the Transfer and Assumption;
(vi) Lessee shall have paid all of Surety's reasonable
costs and expenses in connection with considering the Transfer and Assumption,
and shall have paid the amount requested by Surety as a deposit against
Surety's costs and expenses in connection with the effecting the Transfer and
Assumption;
(vii) Lessee, the Transferee Borrower, and the
replacement guarantors, indemnitors, and pledgors shall have indicated in
writing in form and substance reasonably satisfactory to Surety their readiness
and ability to satisfy the conditions set forth in Paragraph (c) below;
(viii) The identity, experience, and financial condition
of the Transferee
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Borrower and the replacement guarantors, indemnitors, and pledgors shall be
satisfactory to Surety; and
(ix) If the Surety Bond is then still in effect, the
Transferee Borrower shall be a corporation, partnership, limited liability
company or other business entity organized in the State of Illinois.
(c) If Surety consents to the Transfer and Assumption, the
Transferee Borrower and/or Lessee as the case may be, shall deliver the
following to Surety on or before the effective date of such Transfer and
Assumption.
(i) Lessee shall deliver to Surety an assumption fee
(the "Assumption Fee") equal to 1.0% (the "Assumption Fee Percentage") of the
then unpaid principal balance of the Loan. Notwithstanding the foregoing, the
Assumption Fee Percentage shall be .5% if the Transferee Borrower is Alterra or
an Affiliate of Alterra;
(ii) Borrower (at Lessee's expense), Lessee,
Transferee Borrower, the original and replacement guarantors and indemnitors,
and the original and replacement pledgors shall execute and deliver to Surety
any and all documents required by Surety, in form and substance required by
Surety, in Surety's sole discretion;
(iii) Counsel to the Transferee Borrower and
replacement guarantors, indemnitors, and pledgors shall deliver to Surety
opinions in form and substance satisfactory to Surety as to such matters as
Surety shall require, which may include opinions as to substantially the same
matters as were required in connection with the origination of the Loan;
(iv) Lessee shall cause to be delivered to Surety, an
endorsement (relating to the change in the identity of the vestee and execution
and delivery of the Transfer and Assumption documents) to Surety's Title
Policies in form and substance acceptable to Surety in Surety's reasonable
discretion (the "ENDORSEMENT"); and
(v) Lessee shall deliver to Surety a payment in the
amount of all remaining unpaid costs incurred by Lender in connection with the
Transfer and Assumption, including but not limited to, Surety's attorneys fees
and expenses, all recording fees, and all fees payable to the title company for
the delivery to Surety of the Endorsement
ARTICLE X
MISCELLANEOUS
SECTION 10.01 NOTICES, ETC. Unless otherwise specifically provided
herein, any notice or other communication required or permitted to be given
shall be in writing addressed to the respective party as set forth below and
may be personally served, telecopied, telexed or sent by overnight courier
service or United States mail and shall be deemed to have been given: (A) if
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delivered in person, when delivered; (B) if delivered by telecopy, on the date
of transmission if transmitted on a Business Day before 6:00 pm (New York Time)
or, if not, on the next succeeding Business Day; (C) if delivered by nationally
recognized overnight courier, one day after delivery to such courier properly
addressed; or (D) if by U.S. Mail, three (3) Business Days after depositing in
the United States mail, with postage paid and properly addressed.
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If to Borrower, notice shall be sent to:
Pita General Corporation
c/o SELCO Service Corporation
129 Public Square
Cleveland, Ohio 44114
Attention: Robert Bowes, Esq.
Telephone: (216) 689-5089
Facsimile: (216) 689-5681
with copies to:
Key Global Finance
30 Federal Street
Boston, Massachusetts 02110
Attn: Ms. Mindy Berman
Telephone: (617) 654-2777
Facsimile: (617) 654-2727
KeyCorp Leasing
54 State Street
Albany, New York 12207
Attn: Mr. Donald C. Davis
If to Lessee, notice shall be sent to:
AHC Tenant, Inc.
c/o Alterra Healthcare Corporation
450 North Sunnyslope Road
Suite 300
Brookfield, Wisconsin 53005
Attn: Mark Ohlendorf, Senior Vice President Finance
Telephone: (414) 641-7432
Facsimile: (414) 789-6182
with copies to:
Rogers & Hardin
229 Peachtree Street - International Tower
International Tower
Atlanta, Georgia 30303
Attn: Miriam Dent, Esq.
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Telephone: (404) 420-4644
Facsimile: (404) 525-2224
If to Lender:
Greenwich Capital Financial Products, Inc.
600 Steamboat Road, Level 2
Greenwich, Connecticut 06830
Attn: Paul Nidenberg
Telephone: (203) 618-2347
Facsimile: (203) 618-2052
with copies to:
Sidley & Austin
875 Third Avenue
New York, New York 10022
Attn: Robert L. Boyd, Esq.
Telephone: (212) 906-2252
Facsimile: (212) 906-2021
If to Surety:
ZC Specialty Insurance Company
One Exchange Place
Suite 100
Jersey City, New Jersey 07302
Attention: General Counsel
Facsimile: (201) 309-3040
Confirmation: (201) 332-1400
with copies to:
Zurich Centre Group, LLC
One Chase Manhattan Plaza, 44th Floor
New York, New York 10005
Attention: General Counsel
Facsimile: (212) 898-5444
Confirmation: (212) 898-5350
The Zurich Centre
90 Pitt's Bay Road
Pembroke HM 08
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P.O. Box HM 1788
Hamilton HM HX, Bermuda
Attention: Manager-ZC Specialty Insurance Company
Facsimile: (441) 295-3705
Confirmation: (441) 295-8501
And to:
The First National Bank of Chicago
One First National Plaza, Suite 0126
Chicago, Illinois 60670-0126
Attn: Corporate Trust Services Division
Telephone: (312) 407-0192
Facsimile: (312) 407-1708
Any 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.
Notwithstanding the foregoing, all material communications, including without
limitations, communications pertaining to "Default," "Events of Default" or
events or occurrences which have, will or could result in a Material Adverse
Effect shall be given in writing and delivered by a nationally recognized
overnight courier within one day after delivery to such courier with receipt
thereof to be confirmed telephonically by the sending party.
SECTION 10.02 NO WAIVERS. No remedy conferred upon, or reserved to,
Surety in this Agreement or any of the other Transaction 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 Surety (whether by Surety, Trustee,
Lender or Controlling Party) shall not affect any subsequent right of Surety to
exercise the same. No course of dealing among Borrower, Lessee and Surety (or
Trustee, Lender or Controlling Party) or any delay on the part of Surety (or
Lender, Trustee or Controlling Party) in exercising any of its rights or
remedies shall operate as a waiver of any of the Surety's rights. No waiver
(whether by Lender, Surety, Trustee or Controlling Party) of any Default under
this Agreement or any of the other Transaction Documents shall extend to or
shall affect any subsequent or other then existing Default or shall impair any
rights, remedies or powers of Surety.
SECTION 10.03 AMENDMENTS AND WAIVERS. Any provision of this Agreement
may be amended or waived if, but only if, such amendment or waiver is in
writing and is signed by Borrower, Lessee and Surety.
SECTION 10.04 NO PARTNERSHIP, ETC.. The relationship between Surety
and Borrower is
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solely that of surety and borrower. Surety has no fiduciary or other special
relationship with or duty to Borrower or Lessee and none is created by the
Transaction Documents or this Agreement. Nothing contained in the Transaction
Documents, and no action taken or omitted pursuant to the Transaction
Documents, is intended or shall be construed to create any partnership, joint
venture, association or special relationship between Borrower or Lessee on the
one hand and Surety on the other hand or in any way make Surety a co-principal
with Borrower or Lessee with reference to the Property, or otherwise. In no
event shall Surety's rights and interests under the Transaction Documents be
construed to give Surety the right to control, or be deemed to indicate that
Surety is in control of, the business, properties, management or operations of
Borrower or Lessee. Each of Borrower and Lessee acknowledges that Lender,
Surety and Trustee, shall be involved in the administration of the Loan and the
Master Lease, and each of Borrower and Lessee authorizes the sharing of
information among such parties in connection with the performance of their
respective obligations and protection of their respective interests. Each of
Borrower and Lessee further acknowledges that Lender and Surety are not agents
of one another and the knowledge of one shall not be imputed to the other.
SECTION 10.05 TIME OF THE ESSENCE. Time is of the essence in the
performance of every covenant and agreement under this Agreement.
SECTION 10.06 COSTS AND EXPENSES. Lessee will bear all taxes, fees
and expenses (including actual attorneys' fees and expenses of counsel for
Surety or Trustee, including consultants and other parties involved in
reviewing and examining the Collateral) in connection with the Loan, the Note,
the Surety Bond, the preparation of this Agreement and the other Transaction
Documents, the negotiation and preparation of the Transaction Documents and all
documents related thereto (including any amendments hereafter made), any
modifications to the Transaction Documents or any of them required in
connection with Lender's efforts to obtain a rating upon the Loan, the Surety
Bond or any security related to the Loan or the Note, any modification to the
Transaction Documents in connection with any Surety Transaction pursuant to
Section 7.14 of the Trust Agreement, and in connection with any other
modifications to the Transaction Documents and the recording or filing of any
of the Transaction Documents, provided, however, the obligations of the Lessee
shall be limited to $500,000 in the aggregate in connection with any amendments
or modifications to the Transaction Documents in connection with the Lender
getting the Loan rated as set forth above and any Surety Transactions pursuant
to this Section 7.14 of the Trust Agreement and/or Secondary Market
Transactions pursuant to Section 7.15 of the Trust Agreement; provided,
however, Lessee has agreed to pay all costs and expenses of the Borrower. If,
at any time, a Default occurs or Surety or Trustee becomes a party to any suit
or proceeding in order to protect its interests or priority in any collateral
for any of the Reimbursement Obligations or its rights under this Agreement or
any of the other Transaction Documents, or if Surety is made a party to any
suit or proceeding by virtue of the Loan or the Surety Bond, this Agreement or
any Collateral and as a result of any of the foregoing, the Surety or Trustee
employs counsel to advise or provide other representation with respect to this
Agreement, or to collect the balance of the Reimbursement Obligations, or to
take any action in or with respect to any suit or proceeding relating to this
Agreement, any of the other Transaction
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Documents, any Collateral, Borrower Party or Manager, or to protect, collect,
or liquidate any of the security for the Reimbursement Obligations, or attempt
to enforce any security interest or lien granted to the Surety or Trustee by
any of the Transaction Documents, then in any such events, all of the
attorney's fees arising from such services, including attorneys' and
consultant's 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 Lessee to Surety payable on demand
of Surety or Trustee. Lessee shall pay throughout the term of the Loan and
while the Surety Bond is still in effect, on demand by Surety, all reasonable
expenses, charges, costs and fees (including reasonable attorneys' fees and
expenses) in connection with the negotiation, documentation, administration,
servicing, enforcement and collection of the Loan and Surety Bond including,
without limitation, customary special servicing fees including work-out fees
and liquidation costs or expenses payable to special servicers in
Securitizations. On the Closing Date and the Additional Properties Closing
Date, Surety may pay directly from the proceeds of the Loan and Surety Bond the
foregoing expenses incurred by Surety as of the Closing Date or Additional
Properties Closing Date, as the case may be. Without limiting the foregoing,
Lessee 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 Transaction Documents, the Reimbursement Obligations, or
the filing of any financing statements or other instruments required to
effectuate the purposes of this Agreement, and should Lessee fail to do so,
Lessee agrees to reimburse Surety and Trustee for the amounts paid by Surety or
Trustee, together with penalties or interest, if any, incurred by Surety or
Trustee as a result of such underpayment or nonpayment. Such amounts shall
constitute a portion of the Reimbursement Obligations, shall be secured by the
Mortgages and shall bear interest at the greater of (i) the Default Rate (as
defined in the Note) and (ii) the prime rate as then published in the Wall
Street Journal, from the date advanced until repaid.
Lessee shall also reimburse Surety, Trustee and Lender for such
parties' respective reasonable costs and expenses, including reasonable
attorney's fees and expenses, incurred in connection with or in anticipation of
any Secondary Market Transaction and all reasonable costs or expenses incurred
in connection with amending, clarifying or restructuring of the Transaction
Documents as necessary to permit a Secondary Market Transaction on terms
satisfactory to Surety, provided, however, in no event shall Lessee be required
to pay costs and expenses in an aggregate amount in excess of $500,000 in
respect of the collective costs and expenses of Trustee, Lender and Surety in
connection with all Secondary Market Transactions pursuant to the foregoing and
in connection with all Surety Transactions under Section 7.14 of the Trust
Agreement. Lessee and Guarantor shall each be required to pay its own and
Borrower's costs and expenses (including attorneys' fees and expenses) incurred
in connection with any Secondary Market Transaction or Surety Transaction and
each of Lender, Trustee and Surety shall be required to pay its own and
Borrower's costs and expenses, if any, in excess of the amount to be paid by
Lessee under the foregoing sentence.
SECTION 10.07 SUCCESSORS AND ASSIGNS. The provisions of this
Agreement shall be
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binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. Without the prior written consent of Surety,
no assignments of this Agreement are permitted by Borrower Party. Surety may
assign and delegate its rights and obligations hereunder to any Person
affiliated with Surety without the consent of Borrower Party.
SECTION 10.08 GOVERNING; LAW, SUBMISSION TO JURISDICTION.
A. 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 ILLINOIS AND THE
PARTIES HERETO SUBMIT (AND WAIVE ALL RIGHTS TO OBJECT) TO NON-EXCLUSIVE
PERSONAL JURISDICTION IN THE STATE OF ILLINOIS AND AGREE TO VENUE IN ANY COURT
IN SUCH JURISDICTION, INCLUDING ANY FEDERAL COURTS SITTING IN SUCH
JURISDICTION.
B. BORROWER AND LESSEE EACH HEREBY IRREVOCABLY SUBMIT TO
THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE
COURT SITTING IN CHICAGO IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO ANY TRANSACTION DOCUMENT AND BORROWER AND LESSEE EACH HEREBY IRREVOCABLY
AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVE ANY OBJECTION IT MAY NOW OR
HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT
IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN
SHALL LIMIT THE RIGHT OF SURETY TO BRING PROCEEDINGS AGAINST BORROWER OR LESSEE
IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY BORROWER OR
LESSEE AGAINST SURETY OR ANY AFFILIATE OF SURETY INVOLVING, DIRECTLY, OR
INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT, RELATED TO, OR CONNECTED WITH
ANY TRANSACTION DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS.
SECTION 10.09 COUNTERPARTS; INTEGRATION. This Agreement may be signed
in any number of counterparts, each of which shall be an original, with the
same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement constitutes the entire agreement and understanding
among the parties hereto and supersedes any and all prior agreements and
understandings, oral or written, relating to the subject matter hereof.
SECTION 10.10 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES
ANY RIGHT THAT IT MAY HAVE TO A TRIAL BY JURY ON ANY CLAIM, COUNTERCLAIM,
SETOFF, DEMAND, ACTION OR CAUSE OF ACTION (A)
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ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT OR THE LOAN OR OTHER
TRANSACTION DOCUMENTS, OR (B) IN ANY WAY CONNECTED WITH OR PERTAINING OR
RELATED TO OR INCIDENTAL TO ANY DEALINGS OF SURETY AND/OR BORROWER WITH RESPECT
TO THE TRANSACTION 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 OTHERWISE. BORROWER AND LESSEE AGREE THAT SURETY
MAY FILE A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE
KNOWING, VOLUNTARY, AND BARGAINED AGREEMENT OF EACH OF BORROWER AND LESSEE
IRREVOCABLY TO WAIVE ITS RIGHTS TO TRIAL BY JURY AS AN INDUCEMENT OF LENDER TO
MAKE THE LOAN AND THE SURETY TO ISSUE THE SURETY BOND, AND THAT, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, ANY DISPUTE OR CONTROVERSY WHATSOEVER (WHETHER OR
NOT MODIFIED HEREIN) BETWEEN BORROWER, LESSEE, LENDER AND SURETY SHALL INSTEAD
BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A
JURY.
SECTION 10.11 INDEMNIFICATION. (a) LESSEE SHALL, AT ITS SOLE COST AND
EXPENSE, PROTECT, DEFEND, INDEMNIFY AND HOLD HARMLESS THE INDEMNIFIED PARTIES
(AS DEFINED BELOW) FROM AND AGAINST ANY AND ALL CLAIMS, SUITS, LIABILITIES
(INCLUDING, WITHOUT LIMITATION, STRICT LIABILITIES), ACTIONS, PROCEEDINGS,
OBLIGATIONS, DEBTS, DAMAGES, REMEDIATION COSTS, LOSSES, COSTS, EXPENSES,
DIMINUTIONS IN VALUE, FINES, PENALTIES, CHARGES, FEES, INVESTIGATORY FEES,
EXPENSES, 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, FEES OF EXPERT
WITNESSES AND CONSULTANTS AND OTHER COSTS OF DEFENSE) (COLLECTIVELY,
"INDEMNIFIED CLAIMS") IMPOSED UPON OR INCURRED BY OR ASSERTED AGAINST SURETY OR
ANY OF THE INDEMNIFIED PARTIES BY REASON OF OR IN ANY MANNER RELATING TO (A)
OWNERSHIP OF THE LOAN, THE NOTE (INCLUDING AS TRUSTEE UNDER ANY TRUST AGREEMENT
EXECUTED IN CONNECTION WITH ANY SECURITIZATION BACKED IN WHOLE OR IN PART BY
THE LOAN OR OTHERWISE ARISING FROM SUCH TRUSTEE'S EXERCISE OF ITS POWERS AND
DUTIES THEREUNDER), THE MORTGAGES, SURETY BOND OR ANY OF THE OTHER TRANSACTION
DOCUMENTS, THE PROPERTIES OR ANY INTEREST THEREIN OR RECEIPT OF ANY RENTS (AS
DEFINED IN THE MORTGAGES); (B) SUBJECT TO THE LIMITATIONS OF SECTION 10.06, ANY
AMENDMENT TO, OR RESTRUCTURING OF, THE REIMBURSEMENT OBLIGATIONS, ANY OF THE
TRANSACTION DOCUMENTS, THE SURETY BOND,
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THE TRUST AGREEMENT OR THE FLOW OF FUNDS AGREEMENT; PROVIDED, HOWEVER, IN THE
CASE OF ANY AMENDMENT OR RESTRUCTURING OF THE REIMBURSEMENT OBLIGATIONS IN
CONNECTION WITH ANY "SURETY TRANSACTION" TO SECTION 7.14 OF THE TRUST AGREEMENT
OR "SECONDARY MARKET TRANSACTION" PURSUANT TO SECTION 7.15 OF THE TRUST
AGREEMENT, THE LESSEE'S OBLIGATIONS PURSUANT TO THIS SECTION 10.11 SHALL BE
LIMITED TO THE AMOUNT SET FORTH IN SECTION 10.06 HEREOF; (C) THE NEGOTIATION,
EXECUTION, DELIVERY, PERFORMANCE, OWNERSHIP OR ENFORCEMENT OF THE PROVISIONS OF
THE MORTGAGES, THE NOTE OR THE SURETY BOND OR ANY OF THE OTHER TRANSACTION
DOCUMENTS, THE SURETY BOND, THE TRUST AGREEMENT OR THE FLOW OF FUNDS AGREEMENT
WHETHER OR NOT SUIT IS FILED IN CONNECTION WITH SAME, OR IN CONNECTION WITH
BORROWER, 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 PROPERTY OR
ADJACENT PARKING AREAS, STREETS OR WAYS; (F) ANY FAILURE ON THE PART OF
BORROWER OR LESSEE TO PERFORM OR COMPLY WITH ANY OF THE TERMS OF THIS AGREEMENT
OR ANY OF THE OTHER TRANSACTION DOCUMENTS; (G) ANY CLAIMS BY ANY BROKER, PERSON
OR ENTITY CLAIMING TO HAVE PARTICIPATED IN ARRANGING THE MAKING OF THE LOAN;
(H) ANY FAILURE OF THE PROPERTIES, THE IMPROVEMENTS OR ANY PART THEREOF TO BE
IN COMPLIANCE WITH ANY APPLICABLE LAWS; (I) ANY AND ALL CLAIMS AND DEMANDS
WHATSOEVER WHICH MAY BE ASSERTED AGAINST SURETY BY REASON OF ANY ALLEGED
OBLIGATIONS OR UNDERTAKINGS ON ITS PART TO PERFORM OR DISCHARGE ANY OF THE
TERMS, COVENANTS, OR AGREEMENTS CONTAINED IN ANY LEASE AGREEMENT OR ANY
REPLACEMENT OR RENEWAL THEREOF OR SUBSTITUTION THEREFOR; (J) PERFORMANCE OF ANY
LABOR OR SERVICES OR THE FURNISHING OF ANY MATERIALS OR OTHER PROPERTIES WITH
RESPECT TO THE PROPERTIES, THE IMPROVEMENTS OR ANY PART THEREOF, (K) 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 TRANSACTIONS IN CONNECTION WITH WHICH THE LOAN
ARE MADE; (L) ANY MISREPRESENTATION MADE TO SURETY
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IN THIS AGREEMENT OR IN ANY OF THE OTHER TRANSACTION DOCUMENTS; (M) ANY TAX ON
THE MAKING AND/OR RECORDING OF THE MORTGAGES, THE NOTE OR ANY OF THE OTHER
TRANSACTION DOCUMENTS; (N) THE VIOLATION OF ANY REQUIREMENTS OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED; (O) ANY FINES OR PENALTIES
ASSESSED OR ANY CORRECTIVE COSTS INCURRED BY SURETY IF ANY PROPERTY OR
IMPROVEMENTS IS DETERMINED TO BE IN VIOLATION OF ANY COVENANTS, RESTRICTIONS OF
RECORD, OR ANY APPLICABLE LAWS, ORDINANCES, RULES OR REGULATIONS; (P) ANY
BREACH OF ANY REPRESENTATION OR WARRANTY OF BORROWER OR LESSEE IN ARTICLE VIII
OF THIS AGREEMENT; (Q) ANY FAILURE OF BORROWER OR LESSEE TO PERFORM ANY OF ITS
OBLIGATIONS UNDER ARTICLE VIII OF THIS AGREEMENT; (R) THE EXISTENCE OR ALLEGED
EXISTENCE OF ANY PROHIBITED ACTIVITY AND CONDITION; (S) THE RELEASE OR ALLEGED
OR THREATENED RELEASE OF HAZARDOUS MATERIALS IN, ON, UNDER OR FROM ANY PROPERTY
OR THE IMPROVEMENTS; (T) THE ACTUAL OR ALLEGED VIOLATION OF ANY ENVIRONMENTAL
LAW; OR (U) THE ENFORCEMENT BY ANY OF THE INDEMNIFIED PARTIES OF, OR THE
ASSERTION BY BORROWER OF ANY DEFENSE TO ITS OBLIGATIONS UNDER, THE PROVISIONS
OF THIS SECTION 10.11 OR ANY MATTER PERTAINING TO OR ARISING OUT OF THE RELATED
DOCUMENTS OR THE TRANSACTION DOCUMENTS. ANY AMOUNTS PAYABLE TO SURETY OR
TRUSTEE BY REASON OF THE APPLICATION OF THIS SECTION 10.11, SHALL BECOME
IMMEDIATELY DUE AND PAYABLE, SHALL CONSTITUTE A PORTION OF THE REIMBURSEMENT
OBLIGATIONS, SHALL BE SECURED BY THE TRANSACTION DOCUMENTS AND SHALL ACCRUE
INTEREST AT THE DEFAULT RATE (AS DEFINED IN THE NOTE). THE OBLIGATIONS AND
LIABILITIES OF LESSEE UNDER THIS SECTION 10.11 SHALL SURVIVE ANY TERMINATION,
SATISFACTION, ASSIGNMENT, ENTRY OF ANY JUDGMENT OF FORECLOSURE OR EXERCISE OF
ANY POWER OF SALE OR DELIVERY OF ANY DEED IN LIEU OF FORECLOSURE OF ANY
MORTGAGE. FOR PURPOSES OF THIS SECTION 10.11, THE TERM "INDEMNIFIED PARTIES"
MEANS LENDER, SURETY, TRUSTEE 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 ENCUMBRANCES CREATED BY
THE MORTGAGES ARE OR WILL HAVE BEEN RECORDED, ANY PERSON WHO MAY HOLD OR
ACQUIRE OR WILL HAVE HELD A FULL OR PARTIAL INTEREST IN THE COLLATERAL OR THE
LOAN (INCLUDING, WITHOUT LIMITATION, ANY INVESTOR IN ANY SECURITIES BACKED IN
WHOLE OR IN PART BY THE LOAN AND ANY TRUSTEE UNDER ANY TRUST AGREEMENT EXECUTED
IN CONNECTION WITH ANY SUCH SECURITIES) 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
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HOLDS OR ACQUIRES OR WILL HAVE HELD A PARTICIPATION OR OTHER FULL OR PARTIAL
INTEREST IN THE LOAN OR THE PROPERTIES, THE IMPROVEMENTS OR ANY PORTION
THEREOF, WHETHER DURING THE TERM OF A MORTGAGE OR AS A PART OF OR FOLLOWING A
FORECLOSURE THEREOF AND INCLUDING, WITHOUT LIMITATION, ANY SUCCESSORS BY
MERGER, CONSOLIDATION, OR ACQUISITION OF ALL OR A SUBSTANTIAL PORTION OF
SURETY'S OR TRUSTEE'S ASSETS AND BUSINESS).
(b) COUNSEL SELECTED AND PAID FOR BY LESSEE TO DEFEND
INDEMNIFIED PARTIES SHALL BE SUBJECT TO THE APPROVAL OF THE APPLICABLE
INDEMNIFIED PARTY. NOTWITHSTANDING ANYTHING CONTAINED HEREIN, ANY INDEMNIFIED
PARTY MAY ELECT TO RESIST OR DEFEND AND/OR SETTLE ANY CLAIM OR LEGAL PROCEEDING
AT THE LESSEE'S EXPENSE IF SUCH INDEMNIFIED PARTY HAS REASON TO BELIEVE THAT
ITS INTERESTS DIVERGE FROM OTHER INTERESTS BEING REPRESENTED BY SUCH COUNSEL
AND IN ANY CIRCUMSTANCES IN WHICH THE INDEMNITY UNDER THIS AGREEMENT APPLIES,
SURETY MAY EMPLOY ITS OWN LEGAL COUNSEL AND CONSULTANTS TO PROSECUTE, DEFEND OR
NEGOTIATE ANY CLAIM OR LEGAL OR ADMINISTRATIVE PROCEEDING AND SURETY, WITH THE
PRIOR WRITTEN CONSENT OF LESSEE (WHICH SHALL NOT BE UNREASONABLY WITHHELD,
DELAYED OR CONDITIONED) MAY SETTLE OR COMPROMISE ANY ACTION OR LEGAL OR
ADMINISTRATIVE PROCEEDING. LESSEE SHALL REIMBURSE THE INDEMNIFIED PARTIES UPON
DEMAND FOR ALL REASONABLE COSTS AND EXPENSES INCURRED BY THE INDEMNIFIED
PARTIES, INCLUDING ALL COSTS OF SETTLEMENTS ENTERED INTO IN GOOD FAITH, AND THE
REASONABLE FEES AND OUT OF POCKET EXPENSES OF SUCH ATTORNEYS AND CONSULTANTS
(BUT LESSEE SHALL BE OBLIGATED TO BEAR THE EXPENSE OF AT MOST ONLY ONE SUCH
SEPARATE COUNSEL FOR EACH INDEMNIFIED PARTY). NOTHING CONTAINED HEREIN SHALL
PREVENT AN INDEMNIFIED PARTY FROM EMPLOYING SEPARATE COUNSEL IN ANY SUCH ACTION
AT ANY TIME AND PARTICIPATING IN THE DEFENSE THEREOF AT ITS OWN EXPENSE.
(c) LESSEE SHALL NOT, WITHOUT THE PRIOR WRITTEN CONSENT OF
THOSE INDEMNIFIED PARTIES WHO ARE NAMED AS PARTIES TO A CLAIM OR LEGAL OR
ADMINISTRATIVE PROCEEDING (A "CLAIM") SETTLE OR COMPROMISE THE CLAIM IF THE
SETTLEMENT (i) RESULTS IN THE ENTRY OF ANY JUDGMENT THAT DOES NOT INCLUDE AS AN
UNCONDITIONAL TERM THE DELIVERY BY THE CLAIMANT OR PLAINTIFF TO SURETY OF A
WRITTEN RELEASE OF THOSE INDEMNIFIED PARTIES, SATISFACTORY IN FORM AND
SUBSTANCE TO SURETY; OR (ii) MAY MATERIALLY AND ADVERSELY AFFECT ANY
INDEMNIFIED PARTY, AS DETERMINED BY SUCH INDEMNIFIED PARTY IN ITS SOLE
DISCRETION.
(d) THE LIABILITY OF LESSEE TO INDEMNIFY THE INDEMNIFIED
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PARTIES SHALL NOT BE LIMITED OR IMPAIRED BY ANY OF THE FOLLOWING, OR BY ANY
FAILURE OF LESSEE OR ANY GUARANTOR TO RECEIVE NOTICE OF OR CONSIDERATION FOR
ANY OF THE FOLLOWING:
(i) THE VALIDITY, REGULARITY OR ENFORCEABILITY OF THE
TRANSACTION DOCUMENTS OR ANY OTHER INSTRUMENT OR DOCUMENT EXECUTED OR DELIVERED
IN CONNECTION THEREWITH.
(ii) ANY ALTERATION, AMENDMENT, MODIFICATION, RELEASE,
TERMINATION OR CANCELLATION OF ANY LOAN AND SURETY DOCUMENT, OR ANY CHANGE IN
THE TIME, MANNER OR PLACE OF PAYMENT OF, OR IN ANY OTHER TERM IN RESPECT OF,
ALL OR ANY OF THE OBLIGATIONS OF BORROWER CONTAINED IN ANY LOAN AND SURETY
DOCUMENT.
(iii) ANY EXTENSION OF THE MATURITY OF THE NOTE OR ANY
WAIVER OF, OR CONSENT TO ANY DEPARTURE FROM, ANY PROVISION CONTAINED IN ANY
RELATED DOCUMENT.
(iv) THE ACCURACY OR INACCURACY OF ANY REPRESENTATIONS
AND WARRANTIES MADE BY BORROWER OR LESSEE UNDER THIS AGREEMENT OR ANY OTHER
LOAN AND SURETY DOCUMENTS
(v) ANY NEGLIGENCE BY THE INDEMNIFIED PARTIES IN THE
ADMINISTRATION OR ENFORCEMENT OF BORROWER'S OR LESSEE'S OBLIGATIONS UNDER THE
TRANSACTION DOCUMENTS OR ANY DELAY IN ENFORCING SUCH OBLIGATIONS OR IN
REALIZING ON ANY SECURITY FOR THE REIMBURSEMENT OBLIGATIONS.
(vi) ANY ACTION BY ANY INDEMNIFIED PARTY AT ANY TIME
OR IN ANY MANNER TO PARTICIPATE IN THE MANAGEMENT OR CONTROL OF, TAKE
POSSESSION OF (WHETHER PERSONALLY, BY AGENT OR BY APPOINTMENT OF A RECEIVER),
OR TAKING TITLE TO, THE PROPERTY OR ANY PORTION THEREOF, WHETHER BY
FORECLOSURE, DEED IN LIEU OF FORECLOSURE, SALE UNDER POWER OF SALE PURSUANT TO
THE MORTGAGES OR OTHERWISE.
(vii) ANY CHANGE, BETWEEN THE CLOSING DATE AND THE DATE
ON WHICH ALL OF THE REIMBURSEMENT OBLIGATIONS HEREUNDER ARE PAID IN FULL, IN
APPLICABLE LAW, INCLUDING WITHOUT LIMITATION, ANY ENVIRONMENTAL LAW THE EFFECT
OF WHICH MAY BE TO MAKE A LENDER OR SURETY OR MORTGAGEE LIABLE IN RESPECT OF
ANY OF SUCH REIMBURSEMENT OBLIGATIONS.
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(viii) THE RELEASE OF BORROWER, LESSEE OR ANY OTHER
PERSON, BY LENDER, SURETY, TRUSTEE OR BY OPERATION OF LAW, FROM PERFORMANCE OF
ANY OBLIGATION UNDER ANY OF THE TRANSACTION DOCUMENTS.
(ix) THE RELEASE OR SUBSTITUTION IN WHOLE OR IN PART
OF ANY SECURITY FOR THE REIMBURSEMENT OBLIGATIONS.
(x) ANY FAILURE TO PROPERLY PERFECT ANY LIEN OR
SECURITY INTEREST GIVEN AS SECURITY FOR THE REIMBURSEMENT OBLIGATIONS.
(e) LESSEE SHALL, AT ITS OWN COST AND EXPENSE, DO ALL OF THE
FOLLOWING:
(i) PAY OR SATISFY ANY JUDGMENT OR DECREE THAT MAY BE
ENTERED AGAINST ANY INDEMNIFIED PARTY OR INDEMNIFIED PARTIES IN ANY LEGAL OR
ADMINISTRATIVE PROCEEDING INCIDENT TO ANY MATTERS AGAINST WHICH INDEMNIFIED
PARTIES ARE ENTITLED TO BE INDEMNIFIED UNDER THIS AGREEMENT.
(ii) REIMBURSE INDEMNIFIED PARTIES FOR ANY EXPENSES
PAID OR INCURRED IN CONNECTION WITH ANY MATTERS AGAINST WHICH INDEMNIFIED
PARTIES ARE ENTITLED TO BE INDEMNIFIED UNDER THIS AGREEMENT.
(iii) REIMBURSE INDEMNIFIED PARTIES FOR ANY AND ALL
EXPENSES, INCLUDING FEES AND COSTS OF ATTORNEYS, CONSULTANTS AND EXPERT
WITNESSES, PAID OR INCURRED IN CONNECTION WITH THE ENFORCEMENT BY INDEMNIFIED
PARTIES OF THEIR RIGHTS UNDER THIS AGREEMENT, OR IN MONITORING AND
PARTICIPATING IN ANY LEGAL OR ADMINISTRATIVE PROCEEDING.
(iv) THE PROVISIONS OF THIS SECTION 10.11 SHALL BE IN
ADDITION TO ANY AND ALL OTHER OBLIGATIONS AND LIABILITIES THAT BORROWER OR
LESSEE MAY HAVE UNDER THE APPLICABLE LAW OR UNDER THE OTHER RELATED DOCUMENTS,
AND EACH INDEMNIFIED PARTY SHALL BE ENTITLED TO INDEMNIFICATION UNDER THIS
AGREEMENT WITHOUT REGARD TO WHETHER SURETY OR THAT INDEMNIFIED PARTY HAS
EXERCISED ANY RIGHTS AGAINST THE PROPERTIES AND/OR THE IMPROVEMENTS OR ANY
OTHER SECURITY, PURSUED ANY RIGHTS AGAINST ANY GUARANTOR, OR PURSUED ANY OTHER
RIGHTS AVAILABLE UNDER THE LOAN AND SURETY DOCUMENTS OR APPLICABLE LAW. THE
OBLIGATIONS OF LESSEE TO INDEMNIFY THE
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INDEMNIFIED PARTIES UNDER THIS AGREEMENT SHALL SURVIVE ANY REPAYMENT OR
DISCHARGE OF THE REIMBURSEMENT 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 ANY MORTGAGE.
(v) THE PROVISIONS OF THIS SECTION 10.11 SHALL NOT
REQUIRE INDEMNIFICATION OF ANY INDEMNIFIED PARTY FOR CLAIMS (WHICH WOULD
OTHERWISE CONSTITUTE INDEMNIFIED CLAIMS) ARISING SOLELY FROM THE BREACH OF
CONTRACT, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNIFIED PARTY OR
THE BREACH BY SUCH INDEMNIFIED PARTY OF ITS OBLIGATION UNDER THE TRANSACTION
DOCUMENTS (BUT SUCH BREACH SHALL NOT AFFECT LESSEE'S INDEMNIFICATION
OBLIGATIONS TO ANY OTHER INDEMNIFIED PARTY).
SECTION 10.12 EVIDENCE OF COMPLIANCE. PROMPTLY FOLLOWING REQUEST BY
SURETY, EACH BORROWER PARTY SHALL PROVIDE SUCH DOCUMENTS AND INSTRUMENTS AS
SHALL BE REASONABLY SATISFACTORY TO SURETY TO EVIDENCE COMPLIANCE WITH ANY
PROVISION OF THE TRANSACTION DOCUMENTS APPLICABLE TO SUCH BORROWER PARTY.
SECTION 10.13 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.
SECTION 10.14 U.S. CURRENCY. ALL PAYMENTS TO BE MADE HEREUNDER BY
BORROWER OR ANY BORROWER PARTY SHALL BE MADE TO SURETY IN LAWFUL CURRENCY OF
THE UNITED STATES OF AMERICA AT THE ADDRESS OF SURETY SET FORTH ABOVE OR AT
SUCH OTHER ADDRESS AS SURETY SHALL DESIGNATE IN WRITING.
SECTION 10.15 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 Surety, notwithstanding any investigation made by or on behalf of Surety,
and shall survive the execution and delivery to Surety of the Note, the Surety
Bond, this Agreement and the other Loan and Surety Documents. Further, it is
the intention of the parties hereto, and Lender and Surety shall be entitled,
that notwithstanding the occurrence of any Secondary Market Transaction, to
rely on all protections afforded to Noteholder, including without limitation,
the protections afforded to Noteholder as an Indemnified Party under Section
10.11 hereof, as if Lender and Surety were expressly named herein.
SECTION 10.16 PERFORMANCE OF SURETY. At its option, upon Lessee's
failure to do so and irrespective of whether notice has been given and whether
any time in which to cure has elapsed, the Surety or Trustee may make any
payment or do any act on such Lessee's behalf that such Lessee or others are
required to do to remain in compliance with this Agreement or any of the
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other Transaction Documents, and Lessee agrees to reimburse the Surety or
Trustee (as applicable), on demand, for any payment made or expense incurred by
Surety or Trustee pursuant to the foregoing authorization, including, without
limitation, attorneys' fees, and until so repaid any sums advanced by Surety or
Trustee shall constitute a portion of the Reimbursement Obligations, shall be
secured by the Mortgages and the other Transaction Documents and shall bear
interest at the Default Rate from the date advanced until repaid.
SECTION 10.17 LIMITATION OF SURETY LIABILITY. Neither Surety, nor any
affiliate, officer, director, employee, attorney, or agent of Surety, shall
have any liability with respect to, and Borrower and Lessee hereby waives,
releases, and agrees not to sue any of them upon, any claim for any special,
indirect, incidental, or consequential damages suffered or incurred by Borrower
and/or Lessee in connection with, arising out of, or in any way related to,
this Agreement, the Trust Agreement or any of the other Transaction Documents,
or any of the transactions contemplated by this Agreement or any of the other
Transaction Documents, other than the gross negligence or willful misconduct of
Surety. Borrower and Lessee hereby waives, releases, and agrees not to sue
Surety or any of Surety's affiliates, officers, directors, employees,
attorneys, or agents for punitive damages in respect of any claim in connection
with, arising out of, or in any way related to, this Agreement, the Trust
Agreement or any of the other Transaction Documents, or any of the transactions
contemplated hereby or thereby except to the extent same is caused solely by
the gross negligence or willful misconduct of Surety.
SECTION 10.18 USURY SAVINGS. This Agreement, the Mortgage and the
Note are subject to the express condition that at no time shall Borrower or
Lessee be obligated or required to pay interest on the Reimbursable Amounts or
the Lessee pay any Reimbursement Obligations (other than Reimbursable Amounts)
or loan charges at a rate which could subject the holder of the Note or Surety
Bond to either civil or criminal liability as a result of being in excess of
the maximum interest rate which Borrower or Lessee is permitted by Applicable
Law to contract or agree to pay, all as more fully set forth in Section 13.17
of the Note the terms of which are hereby incorporated herein by reference.
SECTION 10.19 ASSIGNMENT IN LIEU OF SATISFACTION. Upon full and
complete discharge of all of the Reimbursement Obligations, the Loan
Obligations and including without limitation, any Prepayment Consideration (as
defined in Section 6 of the Note) and pursuant to the terms of this Agreement,
Surety shall, upon the written request of Borrower or Lessee, given prior to
the release hereof, assign, without representation, warranty or recourse of any
kind, this Agreement and the Bond to Borrower's designee; provided, however,
that such assignment shall be consummated pursuant to documents consistent with
the terms of this Section 10.19 and otherwise satisfactory to Surety in its
reasonable discretion and at no cost or risk to Surety in excess of the cost or
risk which Surety would realize upon the issuance of any release of a bond and
provided, further, that all costs and expenses of Surety, including without
limitation, reasonable attorneys' fees and costs, associated with such
assignment shall be borne by Lessee.
SECTION 10.20 CONTROLLING PARTY. Notwithstanding anything herein to
the contrary, the
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parties hereto acknowledge and agree that the rights and privileges afforded to
Surety hereunder are subject to the limitations set forth in the Trust
Agreement, including without limitation, the right of the Controlling Party (as
defined therein) to make certain consents and decisions in connection with the
Transaction Documents, including this Agreement, except as such Controlling
Party's rights are circumscribed by Section 2.9 of the Trust Agreement.
Notwithstanding the foregoing, from and after satisfaction in full of the Loan
Obligations and the Reimbursement Obligations, Surety shall be entitled to
directly exercise any and all rights it may hold under this Agreement, without
reference to the Trust Agreement.
SECTION 10.21 WAIVER OF POSTING BOND. To the extent permitted by law,
each of the Lender, the Lessee and the Borrower hereby waives any requirements
under the unauthorized insurance or similar laws of any jurisdiction or
otherwise that the Surety post funds, securities or other security as a
condition to its appearance or filing of pleadings in any proceeding involving
or arising with this Reimbursement Agreement.
SECTION 10.22 WAIVERS OF DEFENSES OF GUARANTORS AND SURETIES.
To the extent that Lessee or any Affiliate thereof (in this
Article, a "WAIVING PARTY") is deemed for any reason to be a guarantor or
surety of or for any other Borrower Party or to have rights or obligations in
the nature of the rights or obligations of a guarantor or surety (whether by
reason of execution of a guaranty, provision of security for the obligations of
another, or otherwise) then this Article shall apply to Lessee or such
Affiliate thereof. This Section 10.22 shall not affect the rights of the
Waiving Party other than to waive or limit rights and defenses that Waiving
Party would have (i) in its capacity as a guarantor or surety or (ii) in its
capacity as one having rights or obligations in the nature of a guarantor or
surety.
Waiving Party hereby waives diligence, presentment, demand of
payment, filing of claims with a court in the event of receivership or
bankruptcy of any of the other Borrower Parties, protest or notice with respect
to any of the obligations of any of the other Borrower Parties, setoffs and
counterclaims and all presentments, demands for performance, notices of
nonperformance, protests, notices of protest, notices of dishonor and notices
of acceptance, the benefits of all statutes of limitation, and all other
demands whatsoever (and shall not require that the same be made on any of the
other Borrower Parties as a condition precedent to the obligations of Waiving
Party), and covenants that the Transaction Documents will not be discharged,
except by complete payment and performance of the obligations evidenced and
secured thereby, except only as limited by the express contractual provisions
of the Transaction Documents. Waiving Party further waives all notices that the
principal amount, or any portion thereof, and/or any interest on any instrument
or document evidencing all or any part of the obligations of any of the other
Borrower Parties to Noteholder is due, notices of any and all proceedings to
collect from any of the other Borrower Parties or any endorser or any other
guarantor of all or any part of their obligations, or from any other person or
entity, and, to the extent permitted by law, notices of exchange, sale,
surrender or other handling of any security or collateral given to Surety to
secure payment of all or any part of the obligations of any of the other
Borrower Parties.
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Except only to the extent provided otherwise in the express
contractual provisions of the Transaction Documents, Waiving Party hereby
agrees that all of its obligations under the Transaction Documents shall remain
in full force and effect, without defense, offset or counterclaim of any kind,
notwithstanding that any right of Waiving Party against any of the other
Borrower Parties or defense of Waiving Party against Surety may be impaired,
destroyed, or otherwise affected by reason of any action or inaction on the
part of Surety. Waiving Party waives all rights and defenses arising out of an
election of remedies by the Surety or Trustee, even though that election of
remedies, such as a non-judicial foreclosure with respect to security for a
guaranteed obligation, may have destroyed the Waiving Party's rights of
subrogation and reimbursement against the other Borrower Parties by the
operation of Section 580d of the California Code of Civil Procedure or
otherwise. Waiving Party waives all rights and defenses that it may have
because the obligations of any other Borrower Party are secured by real
property. This means, among other things: (i) Trustee may collect from Waiving
Party without first foreclosing on any real or personal property collateral
pledged by the other Borrower Party; and (ii) if Trustee forecloses on real
property collateral pledged by any other Borrower Party, (A) the amount of the
debt may be reduced only by the price for which that collateral is sold at the
foreclosure sale, even if the collateral is worth more than the sale price and
(B) Trustee may collect from the Waiving Party even if Trustee, by foreclosing
on the real property collateral, has destroyed any right the Waiving Party may
have to collect from another Borrower Party. This is an unconditional and
irrevocable waiver of any rights and defenses the Waiving Party may have
because the other Borrower Party's debt is secured by real property. These
rights and defenses include, but are not limited to, any rights or defenses
based upon Sections 580a, 580b, 580d or 726 of the California Code of Civil
Procedure.
Surety is hereby authorized, without notice or demand, from
time to time, (a) to renew, extend, accelerate or otherwise change the time for
payment of, or other terms relating to, all or any part of the obligations of
any of the other Borrower Parties; (b) to accept partial payments on all or any
part of the obligations of any of the other Borrower Parties; (c) to take and
hold security or collateral for the payment of all or any part of the
obligations of any of the other Borrower Parties; (d) to exchange, enforce,
waive and release any such security or collateral for such obligations; (e) to
apply such security or collateral and direct the order or manner of sale
thereof as in its discretion it may determine; (f) to settle, release,
exchange, enforce, waive, compromise or collect or otherwise liquidate all or
any part of such obligations and any security or collateral for such
obligations. Any of the foregoing may be done in any manner, and Waiving Party
agrees that the same shall not affect or impair the obligations of Waiving
Party under the Transaction Documents.
Waiving Party hereby assumes responsibility for keeping itself
informed of the financial condition of all of the other Borrower Parties and
any and all endorsers and/or other guarantors of all or any part of the
obligations of the other Borrower Parties, and of all other circumstances
bearing upon the risk of nonpayment of such obligations, and Waiving Party
hereby agrees that Noteholder shall have no duty to advise Waiving Party of
information known to it
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regarding such condition or any such circumstances.
Waiving Party agrees that neither Surety nor any person or
entity acting for or on behalf of Surety shall be under any obligation to
marshal any assets in favor of Waiving Party or against or in payment of any or
all of the obligations secured hereby. Waiving Party further agrees that, to
the extent that any of the other Borrower Parties or any other guarantor of all
or any part of the obligations of the other Borrower Parties makes a payment or
payments to Surety, or Surety receives any proceeds of collateral for any of
the obligations of the other Borrower Parties, which payment or payments or any
part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid or refunded, then, to the
extent of such payment or repayment, the part of such obligations which has
been paid, reduced or satisfied by such amount shall be reinstated and
continued in full force and effect as of the time immediately preceding such
initial payment, reduction or satisfaction.
Waiving Party (i) shall have no right of subrogation with
respect to the obligations of the other Borrower Parties and (ii) waives any
right to enforce any remedy that Surety now has or may hereafter have against
any of the other Borrower Parties any endorser or any guarantor of all or any
part of such obligations or any other person, and Waiving Party waives any
benefit of, and any right to participate in, any security or collateral given
to Surety to secure the payment or performance of all or any part of such
obligations or any other liability of the other parties to Surety.
Waiving Party agrees that any and all claims of it may have
against any of the other Borrower Parties, any endorser or any other guarantor
of all or any part of the obligations of the other Borrower Parties, or against
any of their respective properties, shall be subordinate and subject in right
of payment to the prior payment in full of all obligations secured hereby.
Notwithstanding any right of any of the Waiving Party to ask, demand, sue for,
take or receive any payment from the other Borrower Parties, all rights, liens
and security interests of Waiving Party, whether now or hereafter arising and
howsoever existing, in any assets of any of the other Borrower Parties (whether
constituting part of the security or collateral given to Surety to secure
payment of all or any part of the obligations of the other Borrower Parties or
otherwise) shall be and hereby are subordinated to the rights of Surety in
those assets.
ARTICLE XI
APPLICATION OF PROPERTY REVENUE
SECTION 11.01 APPLICATION OF PROPERTY REVENUE. Pursuant to the terms
of the Flow of Funds Agreement and Section 4.2 of the Trust Agreement, as
applicable, gross revenue from each of the Properties shall be disbursed in the
order of priority as set forth in Article II of the Flow of Funds Agreement and
Section 4.2 of the Trust Agreement, including without limitation, amounts
necessary to pay Base Surety Premiums and other Reimbursement Obligations
arising from time to time.
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<PAGE> 82
SECTION 11.02 TERMINATION PREMIUM. On the Termination Premium Payment
Date, Lessee shall pay to Trustee the Termination Premium.
ARTICLE XII
LIMITED RECOURSE
SECTION 12.01 NON-RECOURSE LOAN.
(a) Except as otherwise provided herein, Surety shall not
enforce the liability and obligation of Borrower to perform and observe the
obligations contained in this Agreement, the Note, the Surety Bond or the
Transaction Documents by any action or proceeding wherein a money judgment
shall be sought against Borrower or SELCO, except that Surety may bring a
foreclosure action, action for specific performance or other appropriate action
or proceeding to enable Surety to enforce and realize upon this Agreement, the
Mortgages or other Transaction Documents, and the Properties or any of them;
provided, however, that any judgment in any action or proceeding shall be
enforceable against Borrower only to the extent of Borrower's interest in the
Properties.
(b) Notwithstanding the foregoing, Borrower and SELCO shall
be personally liable in the amount of any loss, damage or cost resulting or
arising from (i) fraud or intentional misrepresentation by Borrower or SELCO in
connection with obtaining the Loan evidenced by the Note and the Surety Bond,
(ii) Borrower's or SELCO's misappropriation or misapplication of Rents in
violation of the Flow of Funds Agreement or any other Transaction Documents,
(iii) Borrower's or SELCO's violation of the provisions of Sections 6.02, 6.03,
6.07 or 6.08 and (iv) upon the occurrence of any Event of Default with respect
to Borrower under Section 4.01(g); provided, however, that SELCO shall only be
liable for any loss, damage or cost resulting or arising from any of the
foregoing acts of Borrower or matters with respect to Borrower occurring or
existing during the period that SELCO is Borrower's controlling shareholder.
(c) No provision of this Section 12.01 shall (i) affect the
enforcement of the Guaranty, or any other guaranty or similar agreement
executed in connection with the debt evidenced by the Note and the Surety Bond,
(ii) release or reduce the debt evidenced by the Note and the Surety Bond,
(iii) impair the lien of the Mortgages or any other Transaction Documents, (iv)
impair the rights of Surety to enforce any provisions of the Transaction
Documents, (v) limit Surety's ability to obtain a deficiency judgment or
judgment on the Note, the Surety Bond or otherwise against any Borrower Party
to the extent necessary to obtain any amount for which such Borrower Party may
be liable in accordance with this Section 12.01 or any other Transaction
Documents or (vi) modify or affect the liabilities or obligations of Lessee,
Guarantor, Manager or any Sublessee under any of the Transaction Documents.
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[SIGNATURES APPEAR ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
"SURETY"
ZC SPECIALTY INSURANCE COMPANY,
a Texas corporation
By: /s/ Lynn Finkel
---------------
Name: Lynn Finkel
Title: Vice President
"BORROWER"
PITA GENERAL CORPORATION, an Illinois corporation
By: /s/ Mindy Berman
----------------
Name: Mindy Berman
Title: Vice President
"LESSEE"
AHC TENANT, INC. a Delaware corporation
By: /s/ Mark W. Ohlendorf
---------------------
Name: Mark W. Ohlendorf
Title: Vice President
<PAGE> 85
EXHIBIT A
INSURANCE SURETY BOND
<PAGE> 86
EXHIBIT B
MASTER GLOSSARY OF DEFINITIONS
(See Attached)
<PAGE> 1
EXHIBIT 2.11
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT dated as of July 16, 1999 (this "Guaranty"), is
made by Alterra Healthcare Corporation, a Delaware corporation (the
"Guarantor"), for the benefit of The First National Bank of Chicago, a national
banking association, as trustee ("Trustee") for the benefit of the Beneficiaries
under the Trust Agreement (as hereinafter defined).
For the purposes hereof, all capitalized terms used herein which are
not defined herein shall, except where otherwise indicated, have the respective
meanings assigned thereto in the Master Glossary of Definitions (the "Master
Glossary") attached as Annex A to the Master Lease referred to below.
W I T N E S S E T H
A. AHC Tenant, Inc., a Delaware corporation ("Lessee") is a
wholly-owned subsidiary of Guarantor.
B. Reference is made to the Transaction Documents including, without
limitation, the Master Lease of even date herewith (the "Master Lease") between
Lessee and Pita General Corporation, an Illinois corporation ("Owner"). The
Master Lease as supplemented by the Lease Supplements is hereinafter referred to
as the "Lease".
C. Lessee is the tenant under the Lease covering the Leased Properties.
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, and as a condition precedent to each Beneficiary's
execution and delivery of the Transaction Documents to which such Beneficiary is
a party, and as inducement to each Beneficiary to enter into the transactions
contemplated thereby and in consideration of the mutual covenants contained
therein, Guarantor hereby agrees as follows:
Section 1. Guaranty of Obligations. (a) Guarantor does hereby
absolutely, irrevocably and unconditionally guarantee, as primary obligor and
not merely as a surety, without offset or deduction of any kind whatsoever, to
Trustee for the benefit of each Beneficiary under the Transaction Documents to
which such Beneficiary is a party:
(i) the full and prompt payment by Lessee of all of its
payment obligations under the Lease (including, without limitation,
each Lease Supplement) and the other Transaction Documents, when due
(whether on the stated date of payment, on demand, by acceleration or
otherwise), whether such obligations now exist or arise hereafter,
including, without limitation, all Base Rental, Contingent Surety
Rental, Additional Rental, Termination Rental, indemnity payments and
payments of costs, fees and
<PAGE> 2
expenses and all damages (whether such damages are provided for in the
Lease, any other Transaction Documents or are otherwise allowable by
law) in respect of the failure or the refusal by Lessee to make any
such payment or to perform any obligation of Lessee under the
Transaction Documents, strictly in accordance with the terms of the
Lease and such other Transaction Documents; and
(ii) the punctual performance and observance by Lessee of all
other terms, conditions, covenants and agreements contained in the
Lease and the other Transaction Documents to be performed or observed
by Lessee, including, without limiting the generality of the foregoing,
the provisions pertaining to the insurance of the Leased Properties,
strictly in accordance with the terms of the Lease; and
Guarantor agrees that if for any reason whatsoever Lessee shall fail to make any
such payment or to perform or observe any such term, condition, covenant or
agreement under the Lease or any of the other Transaction Documents to be
performed by Lessee as and when due, Guarantor shall duly and punctually pay,
perform, and observe the same (all of the aforesaid amounts, obligations, terms,
conditions, covenants and agreements are hereinafter called the "Guaranteed
Obligations"). If Guarantor fails to pay any amount hereunder when due,
Guarantor shall pay interest, on demand, on such amount at the applicable
Default Rate, to the Person entitled thereto.
(b) Guarantor agrees that its obligations hereunder are absolute,
irrevocable and unconditional and shall not be affected by: (i) the genuineness,
validity, legality, regularity or enforceability of the Lease, or any other
Transaction Document, and any of Lessee's obligations under the Lease, or any
other Transaction Document, or any amendment, termination, waiver or other
modification of the Lease, or any other Transaction Document, (except that any
such amendment, termination, waiver or modification agreed to in writing by
Controlling Party and by any permitted assignee of Controlling Party pursuant to
Paragraph 6 hereof in accordance with the Transaction Documents shall be given
effect when determining the obligations of Guarantor hereunder), or (ii) any
substitution, release or exchange of collateral for or other guaranty of any of
the Guaranteed Obligations without the consent of Guarantor, or (iii) any
priority or preference to which any other obligations of Lessee may be entitled
over Lessee's obligations under the Lease or any other Transaction Document, or
(iv) any other circumstances that might otherwise constitute a legal or
equitable defense to or discharge of the obligations of a surety or guarantor,
including, without limitation, any defense arising out of the laws of the United
States, or any state thereof or any other jurisdiction that would either exempt,
modify or delay the due or punctual payment and performance of the obligations
of Guarantor hereunder.
Without limiting the generality of the foregoing, it is agreed that the
occurrence of any one or more of the following shall not affect the liability of
Guarantor hereunder: (i) the extension of the time for or waiver of, at any time
or from time to time, without notice to Guarantor, Lessee's performance of or
compliance with any of its obligations under the Lease or any other Transaction
Document (except that any such extension or waiver agreed to in writing by
Controlling Party and by any permitted assignee of Controlling Party pursuant to
Paragraph 6 hereof in accordance with the Transaction Documents shall be given
effect in determining the obligations of Guarantor hereunder); (ii) any
assignment, transfer, sublease or other arrangement
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<PAGE> 3
(whether or not permitted under the Lease) by which Lessee transfers or loses
control of the use of the Leased Properties; (iii) any defect in the title,
condition, operation or fitness for use of, or damage to or loss or destruction
of, the Leased Properties, or any of them, whether or not due to the fault of
Lessee; (iv) any merger or consolidation of Lessee or Guarantor into or with any
other Person; (v) any change in the ownership of Lessee or Guarantor or any
other Person or any action taken with respect to the Lease or any other
Transaction Document by any trustee or receiver of any of the foregoing, or by
any court; (vi) any right or claim of set-off, counterclaim, deduction,
abatement, suspension, deferment, diminution, reduction, or other defense of
Lessee or Guarantor or any other right or claim that either Lessee or Guarantor
has or might have against any Person, whether in connection with the
transactions referred to herein or any unrelated transaction; (vii) any
invalidity or unenforceability or disaffirmance of the Lease or any other
Transaction Document against or by Lessee or any provision hereof or of the
Lease or any other Transaction Document or any provision thereof; (viii) any
doctrine of force majeure or frustration; (ix) the condemnation or similar
taking of all or any portion of the Leased Properties (except that the
provisions of the Lease relating to condemnation shall be given effect in
determining the obligations of the Guarantor hereunder with respect to
condemnation); or (x) any other occurrence whatsoever, foreseen or unforeseen,
whether similar or dissimilar to the foregoing, whether or not Guarantor shall
have notice or knowledge of any of the foregoing, which might otherwise
constitute a legal or equitable discharge or defense of Guarantor.
The obligations of Guarantor set forth herein constitute the full
recourse obligations of Guarantor enforceable against it to the full extent of
all its assets and properties, notwithstanding any provision in the Loan
Agreement or the other Transaction Documents limiting the liability of the Owner
or the Equity Investor or any other Person, or any agreement by the Trustee,
Surety or the Lender to look for payment with respect thereto solely to the
Leased Properties.
(c) This Guaranty is an absolute, present and continuing guaranty of
payment and performance and not of collectibility and is in no way conditional
or contingent upon any attempt to collect from Lessee any unpaid amounts due or
otherwise to enforce performance by Lessee. Guarantor specifically agrees that
it shall not be necessary or required, and that Guarantor shall not be entitled
to require, that Trustee or any Beneficiary (i) file suit or proceed to obtain
or assert a claim for personal judgment against Lessee for the Guaranteed
Obligations, or (ii) make any effort at collection of the Guaranteed Obligations
from Lessee, or (iii) foreclose against or seek to realize upon any security now
or hereafter existing for the Guaranteed Obligations, or (iv) file suit or
proceed to obtain or assert a claim for personal judgment against any other
Person liable for the Guaranteed Obligations, or make any effort at collection
of the Guaranteed Obligations from any such other Person, or exercise or assert
any other right or remedy to which Trustee or any Beneficiary is or may be
entitled in connection with the Guaranteed Obligations or any security or other
guaranty therefor, or (v) assert or file any claim against the assets of Lessee
or any other guarantor or other Person liable for the Guaranteed Obligations, or
any part thereof, before or as a condition of enforcing the liability of
Guarantor under this Guaranty or requiring payment or performance, as the case
may be, of the Guaranteed Obligations by Guarantor hereunder, or at any time
thereafter, it being understood that any election of remedies exercised by
Trustee or any Beneficiary under the Lease or any other Transaction Document,
including any reletting of the Leased Properties, shall not affect Guarantor's
obligations under this Guaranty. Guarantor further agrees that, without limiting
the generality of this Guaranty, if a Lease Event of
3
<PAGE> 4
Default shall have occurred and Trustee or Controlling Party shall be prevented
by law from exercising its remedies (or any of them) under the Lease or any
other Transaction Document, then such Person shall be entitled to receive
hereunder from Guarantor with respect to the Guaranteed Obligations, upon demand
therefor, the sums that would have otherwise been due from Lessee had such
remedies been able to be exercised. Guarantor hereby unconditionally waives any
requirement that, as a condition precedent to the enforcement of the obligations
of Guarantor hereunder, Lessee or all or any one or more of any other guarantor
of any of the Guaranteed Obligations be joined as parties to any proceedings for
the enforcement of any provisions of this Guaranty. Without limiting the
generality of the foregoing, Guarantor hereby waives any requirement that
Trustee or any Beneficiary protect, secure, effect or insure any security
interest or lien or any property subject thereto or exhaust any right to take
any action against any person or any collateral (including any rights relating
to marshaling of assets).
(d) In the event that the Lease or any other Transaction Document shall
be terminated, modified or in any way affected as a result of the rejection or
disaffirmance thereof by any trustee, receiver, liquidator, agent or other
representative of Lessee or any of the property of Lessee in any assignment for
the benefit of creditors or in any bankruptcy, insolvency, reorganization,
arrangement, readjustment, liquidation, dissolution or similar proceeding,
Guarantor's obligations hereunder shall continue to the same extent as if the
Lease or such Transaction Document had not been so rejected or disaffirmed.
Guarantor shall and does hereby waive all rights and benefits which might accrue
to it by reason of any such assignment or proceeding and Guarantor agrees that
it is and shall be liable for the full amount of the Guaranteed Obligations
irrespective of and without regard to any modification, limitation or discharge
of liability of Lessee that may result from or in connection with any such
assignment or proceeding. Moreover, as described in Section 10 of the Master
Lease, it is the intention of Lessee and Owner that for financial accounting
purposes the Master Lease with respect to the Operating Lease Properties, but
not Capital Lease Properties constitutes an "operating lease" pursuant to
pursuant to SFAS 13, as amended, and for purposes of bankruptcy and federal,
state and local income tax law, the transaction contemplated thereby is a
financing arrangement. Lessee and Owner further intend that Lessee shall be
treated as owner of the Leased Properties for income tax purposes and shall be
entitled to all deductions for depreciation thereof. Accordingly, Lessee's
obligations under the Transaction Documents, and Guarantor's obligations under
this Guaranty, are intended by the parties to legally constitute unconditional
debt obligations, not lease obligations, and the Guaranteed Obligations shall
not be subject to any defenses or limitations applicable to lease obligations,
but not debt obligations, including, without limitation, any requirement that
Owner mitigate its damages through reletting the Leased Properties, or any
limitation imposed by Section 502(b)(6) and 506(b) of the Bankruptcy Code,
whether the debtor in the bankruptcy case is Lessee or Guarantor.
(e) Guarantor shall pay all costs, expenses and damages incurred
(including, without limitation, reasonable attorneys' fees and expenses) in
connection with (i) any action or appeal to enforce the obligations of Lessee
under the Lease or any other Transaction Document, and (ii) any action to
enforce the obligations of Guarantor under this Guaranty.
Section 2. Agreements of Guarantor. Guarantor agrees, for the benefit
of each Beneficiary that:
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<PAGE> 5
(a) Estoppel Certificates. During the term of the Lease, Guarantor
shall promptly, but in no event later than ten (10) days after request by
Trustee or any Beneficiary execute, acknowledge and deliver to Trustee or such
Beneficiary, as the case may be, or to any prospective transferee thereof, a
certificate stating that this Guaranty is unmodified and in full force and
effect (or if there have been modifications, that this Guaranty is in full force
and effect as modified, and identifying the modification thereto).
(b) Merger, Etc. Guarantor shall comply with the provisions of Section
9.10 of the Participation Agreement, which provisions are incorporated herein by
this reference, and shall cause any surviving entities of Guarantor to comply
with such provisions.
Section 3. Subrogation. Notwithstanding anything to the contrary in
this Guaranty, during the term of this Guaranty, Guarantor shall have no rights
(direct or indirect) of subrogation, contribution, reimbursement,
indemnification or other rights of payment or recovery from any person or entity
(including, without limitation, the Lessee) for any payments made by the
Guarantor hereunder, and Guarantor hereby waives (but only for the duration of
the term of this Guaranty) any such rights of subrogation, contribution,
reimbursement, indemnification and other rights of recovery which they may have
or hereafter acquire during the term of this Guaranty.
Section 4. Waiver; Guaranty Absolute and Unconditional. Guarantor
irrevocably waives any and all notice of (a) the creation, renewal, extension or
accrual of any of the Guaranteed Obligations, (b) notice of or proof of reliance
by Trustee or Beneficiaries upon this Guaranty or acceptance of this Guaranty,
and (c) any amendment, waiver or modification of the Lease or any other
Transaction Document; the Guaranteed Obligations, and any of them, shall
conclusively be deemed to have been created, contracted or incurred in reliance
upon this Guaranty; and all dealings between Lessee or Guarantor, on the one
hand, and Trustee and Beneficiaries, on the other hand, shall likewise be
conclusively presumed to have been had or consummated in reliance upon this
Guaranty. Guarantor waives notice of the acceptance of this Guaranty and of the
performance or nonperformance by Lessee, demand for payment from Lessee or any
other Person, notice of nonpayment or failure to perform on the part of Lessee,
diligence, presentment, protest, dishonor and, to the fullest extent permitted
by law, all other demands or notices whatsoever, other than the request for
payment or performance hereunder. The obligations of Guarantor shall be absolute
and unconditional and shall remain in full force and effect until satisfaction
of all of the Guaranteed Obligations, and without limiting the generality of the
foregoing shall not be released, discharged or otherwise affected by the
existence of any claims, set-off defense or other rights that Guarantor may have
at any time and from time to time against Trustee or any Beneficiary, whether in
connection herewith or any unrelated transactions.
Section 5. Reinstatement. This Guaranty shall continue to be effective,
or reinstated, as the case may be, if at any time payment, or any part thereof,
of any of the Guaranteed Obligations (i) is rescinded or must otherwise be
restored or returned by any Beneficiary upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of Lessee or upon or as a result of
the appointment of a receiver, intervenor or conservator of, or trustee or
similar officer for, Lessee or any substantial part of its property, or
otherwise, all as though such payments had
5
<PAGE> 6
not been made, or (ii) is returned to Lessee by reason of a decree, moratorium
or other sovereign act of any Governmental Authority.
Section 6. Assignment of Guaranty. Any Beneficiary may assign, and
create a security interest in, any or all of its rights hereunder to and for the
benefit of any other Beneficiary or any transferee or assignee of its interest
in the Transaction Documents. Guarantor acknowledges and agrees that the
Beneficiaries (and their permitted assignees) may rely on this Guaranty in
connection with the making available of their commitments under the Transaction
Documents.
Section 7. Term of Guaranty. This Guaranty shall continue in full
force and effect and shall not be discharged until such time as all of the
Guaranteed Obligations shall be indefeasibly paid or satisfied in full and all
the agreements of Lessee and Guarantor hereunder and under the Lease and the
other Transaction Documents shall have been duly performed in full. Indefeasible
payment or performance of all of the Guaranteed Obligations by Lessee shall
satisfy the obligation of Guarantor hereunder.
Section 8. Paragraph Headings. The paragraph headings used in this
Guaranty are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
Section 9. No Waiver; Cumulative Remedies. Trustee and Controlling
Party shall not, by any act (except by a written instrument pursuant to
Paragraph 10 hereof), delay, indulgence, omission or otherwise, be deemed to
have waived any right or remedy hereunder or any breach of any of the terms and
conditions hereof. No failure to exercise, nor any delay in exercising, on the
part of Trustee or Controlling Party of any right, power or privilege hereunder
shall operate as a waiver thereof. No single or partial exercise of any right,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. A waiver by
Trustee or Controlling Party of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which such
Person, or any other Beneficiary would otherwise have on any future occasion.
The rights and remedies herein provided are cumulative, may be exercised singly
or concurrently and are not exclusive of any rights or remedies provided by law.
Section 10. Waivers and Amendments; Successors and Assigns. None of the
terms or provisions of this Guaranty may be waived, amended, supplemented or
otherwise modified, except by a written instrument executed by Guarantor and
Controlling Party. This Guaranty shall be binding upon and inure to the benefit
of Guarantor, Trustee, Beneficiaries and their respective successors and
assigns.
Section 11. Notices. All notices provided for or required under the
terms and provisions hereof shall be in writing, and shall be given in the
manner and shall be effective as provided in the Participation Agreement.
Section 12. Survival. All representations and warranties made in
writing by Guarantor herein shall survive the execution and delivery of this
Guaranty regardless of any investigation made by any Beneficiary or any other
Person.
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<PAGE> 7
Section 13. Severability. Any provision of this Guaranty that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or any provision in the Lease or
any other Transaction Document, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable any provision
hereof in any other jurisdiction.
Section 14. Integration. This Guaranty represents the agreement of the
Guarantor with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by Trustee or any Beneficiary or
Guarantor relative to the subject matter hereof not expressly set forth herein.
SECTION 15. VENUE; GOVERNING LAW. THIS GUARANTY AND THE RIGHTS AND
GUARANTEED OBLIGATIONS OF GUARANTOR UNDER THIS GUARANTY SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
ILLINOIS. GUARANTOR AGREES THAT AT THE SOLE ELECTION OF CONTROLLING PARTY ANY
SUIT, ACTION OR PROCEEDING BROUGHT BY CONTROLLING PARTY AGAINST GUARANTOR IN
CONNECTION WITH OR ARISING OUT OF THIS GUARANTY MAY BE BROUGHT IN ANY FEDERAL OR
STATE COURT IN COOK COUNTY, ILLINOIS, AND GUARANTOR WAIVES PERSONAL SERVICE OF
ALL PROCESS UPON IT AND CONSENTS THAT SERVICE OF PROCESS MAY BE MADE BY MAIL OR
MESSENGER DIRECTED TO IT AT THE ADDRESS SET FORTH IN THE PARTICIPATION
AGREEMENT, AND THAT SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON THE
EARLIER OF ACTUAL RECEIPT AND THREE (3) DAYS AFTER THE SAME SHALL HAVE BEEN
POSTED TO GUARANTOR'S ADDRESS. NOTHING HEREIN CONTAINED SHALL AFFECT ANY
BENEFICIARY'S RIGHT TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW
OR TO BRING ANY SUIT, ACTION OR PROCEEDING AGAINST GUARANTOR OR ITS PROPERTY IN
THE COURTS OF ANY OTHER JURISDICTION.
SECTION 16. WAIVERS OF JURY TRIAL. GUARANTOR AND, BY ITS ACCEPTANCE
HEREOF, TRUSTEE AND BENEFICIARIES HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE
TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS GUARANTY AND
FOR ANY COUNTERCLAIM THEREIN.
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<PAGE> 8
IN WITNESS WHEREOF, the undersigned has caused this Guaranty to be duly
executed and delivered as of the date first above written.
GUARANTOR:
ALTERRA HEALTHCARE CORPORATION
By: /s/ Mark W. Ohlendorf
--------------------------------------------
Name: Mark W. Ohlendorf
--------------------------------------
Title: Senior Vice President
--------------------------------------
8
<PAGE> 1
EXHIBIT 2.12
PROMISSORY NOTE
$201,000,000.00 JULY 16, 1999
FOR VALUE RECEIVED, the undersigned PITA GENERAL CORPORATION, an
Illinois corporation ("BORROWER"), hereby promises to pay to GREENWICH CAPITAL
FINANCIAL PRODUCTS, INC., a Delaware corporation (together with its successors
and assigns, the "NOTEHOLDER"), or order, at 600 Steamboat Road, Greenwich,
Connecticut 06830 or at such other place as the holder hereof may designate in
writing to the Borrower, the principal sum of up to TWO HUNDRED ONE MILLION AND
NO/100 DOLLARS ($201,000,000.00), together with interest on the unpaid balance
from the date of this Note at the rate hereinafter set forth. The principal
amount so advanced to Borrower, and Borrower's obligation to repay the same
together with all interest and other amounts required hereunder may be referred
to as the "LOAN."
This Promissory Note ("NOTE") is executed pursuant to the terms of a
Loan Agreement of even date herewith (the "LOAN AGREEMENT") by and among the
Borrower, AHC Tenant, Inc., a Delaware corporation ("LESSEE"), and the
Noteholder. Capitalized terms used in this Note without definition shall have
the meanings ascribed to such terms in the Loan Agreement.
THIS NOTE SHALL BE PAID ON THE TERMS AND SUBJECT TO THE CONDITIONS
WHICH ARE HEREINAFTER SET FORTH:
Section 1. Interest Rate.
1.1. Interest Rate. Except as otherwise provided in this Section 1,
interest shall accrue on the outstanding balance of this Note from and after the
date that the Initial Advance is funded pursuant to the Loan Agreement (the
"FUNDING DATE"), until this Note is paid in full, at the interest rates
calculated from time to time in accordance with Section 1.3.
1.2. Default Rate. Notwithstanding the foregoing, after the occurrence
of an Event of Default and for so long as such Event of Default continues and in
any event from and after the Maturity Date (hereinafter defined), the principal
balance outstanding hereunder shall bear interest until paid in full at a rate
per annum equal to the lesser of (a) four percent (4%) in excess of the Interest
Rate (hereinafter defined) otherwise applicable under this Note and (b) the
maximum rate permitted by applicable law.
1.3. Computation of Interest. (a) Interest on the principal balance
outstanding hereunder shall be computed on the basis of a 360-day year, and
shall be charged for the actual number of days elapsed during any month or other
accrual period.
<PAGE> 2
(b) Interest shall accrue on the outstanding principal balance
of this Note from and after the Funding Date until this Note is paid in full at
the fixed rate of interest calculated in accordance with the following:
(i) Interest on the Initial Advance (as defined in
the Loan Agreement) shall accrue from and after the Funding
Date until the Additional Advance Date (hereinafter defined)
at the fixed rate of seven and fifty-four one hundredths
percent (7.54%) per annum (the "INITIAL INTEREST RATE").
(ii) From and after the date upon which Noteholder
funds the Additional Advance (such date, the "ADDITIONAL
ADVANCE DATE") in accordance with and subject to the
conditions set forth in Section 2.10 of the Loan Agreement,
interest shall accrue on the outstanding principal balance of
this Note at a blended rate (the "INTEREST RATE") determined
by Noteholder equal to the dollar-weighted average of the
Initial Interest Rate and the Additional Advance Interest Rate
(hereinafter defined) and calculated as the sum of the
products of (x) each of the Initial Interest Rate and the
Additional Advance Interest Rate and (y) a fraction (1) the
numerator of which is the amount of the corresponding Advance
applicable thereto and (2) the denominator of which is the
total of all Advances (which sum shall be rounded up to the
nearest 1/8th). By way of illustration only, the blended rate
on total advances of $7,500,000 comprised of two separate
advances of $5,000,000 and $2,500,000, accruing interest at
the per annum rates of 8% and 9%, respectively, would be
8.375% per annum. Noteholder shall notify Borrower within five
(5) Business Days following the occurrence of the Additional
Advance Date of the amount of the Interest Rate and shall be
entitled to append such notice to this Note. Absent manifest
error, Noteholder's determination of the Interest Rate shall
be conclusive.
(iii) The "ADDITIONAL ADVANCE INTEREST RATE" shall
mean (i) from the date hereof until July 31, 1999, a fixed
rate of interest per annum equal to one hundred eighty five
(185) basis points over the bid side yield for the actively
traded 10 year United States Treasury Note as determined by
Noteholder (the "TREASURY RATE") and (ii) thereafter a fixed
rate of interest per annum equal to a spread as determined by
Noteholder in its sole discretion over the then applicable
Treasury Rate as determined by Noteholder. Noteholder shall
notify Borrower in writing of its calculation of the
Additional Advance Interest Rate within three (3) Business
Days following the Additional Advance Date, which notices may
be attached hereto by Noteholder. Absent manifest error,
Noteholder's determination of the Additional Advance Interest
Rate shall be conclusive.
1.4. Reimbursement for Increased Costs or Reduced Return. If any
law or guideline or interpretation or application thereof by any governmental
authority charged with the interpretation or administration thereof or
compliance with any request or directive of any governmental authority (whether
or not having the force of law) now existing or hereafter adopted subjects any
Noteholder of this Note to any tax or changes the basis of taxation with
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respect to this Note, the Loan or payments by Borrower of principal, interest or
other amounts due from Borrower hereunder or thereunder (except for taxes on the
overall net income or overall gross receipts of Noteholder imposed as a result
of a present or former connection between the jurisdiction of the government or
taxing authority imposing such tax and the Noteholder or otherwise; provided,
that this exclusion shall not apply to a connection arising solely from
Noteholder having executed, delivered, or performed its obligations under or
having received a payment under, or having enforced any of the Loan Documents),
by an amount which Noteholder deems to be material, Noteholder may from time to
time notify Borrower of the amount determined in good faith (using any averaging
and attribution methods) by Noteholder (which determination shall be conclusive)
to be necessary to compensate Noteholder for such imposition, and Borrower shall
pay the same to Noteholder within five (5) days after receipt of such notice. If
Borrower is by law prohibited from paying any such amount, Noteholder may elect
to declare the unpaid balance hereof and all interest accrued thereon
immediately due and payable. Such amount shall be due and payable by Borrower to
Noteholder five (5) days after such notice is given.
Section 2. Principal and Interest Payments. On the date hereof,
Borrower shall pay to Noteholder or the Noteholder's designee, interest at the
Initial Interest Rate for the period from the date hereof to and including the
last day of the current calendar month. Thereafter, interest shall be payable
monthly, in arrears, at the Initial Interest Rate, on the first day of each
calendar month commencing on the first day of the second full calendar month
after the date hereof until the Additional Advance Date. On the Additional
Advance Date, Borrower shall pay to Noteholder interest on the outstanding
principal amount of this Note (a) at the Initial Interest Rate for the period
from the immediately preceding payment date to, but not including, the
Additional Advance Date and (b) at the Interest Rate from the Additional Advance
Date to the last day of the calendar month in which the Additional Advance Date
occurs. Thereafter, commencing on the first day of the second full calendar
month after the Additional Advance Date, Borrower shall pay to Noteholder equal
monthly installments of principal and interest in the amount determined by
Noteholder to be equal to the amount which would pay all interest monthly in
arrears at the Interest Rate and fully amortize entire principal amount under
this Note over a period of thirty (30) years after the Additional Advance Date.
Any increase in interest due to application of the Default Rate shall be added
to the otherwise applicable monthly payment, or at Noteholders' option shall be
payable upon demand.
Section 3. Application of Payments. Subject to the Flow of Funds
Agreement and the Trust Agreement, payments received hereunder shall be applied
first to reimbursable costs and expenses, second to interest, and then to
principal.
Section 4. [Intentionally omitted.]
Section 5. Maturity Date. To the extent not sooner due and payable
pursuant to the Loan Documents, all principal, interest, and other amounts
outstanding hereunder and under the Loan Documents shall be and become due and
payable on August 1, 2009 (the "MATURITY DATE").
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Section 6. Prepayment; Defeasance.
(a) The principal balance of this Note may not be prepaid in whole or
in part except as expressly permitted pursuant hereto.
(b) Subject to compliance with and satisfaction of the terms and
conditions of this Section 6 and provided that no Event of Default exists,
Noteholder may elect (in its sole and absolute discretion) to grant to Borrower
the right to elect on any Monthly Payment Date (hereinafter defined) after the
Defeasance Lockout Period Expiration Date (hereinafter defined), to obtain
release of all (but not less than all) of the Mortgaged Properties (hereinafter
defined) from the lien of the Mortgages (such event being hereinafter referred
to as a "DEFEASANCE") by delivering the applicable Defeasance Collateral
(hereinafter defined) to Noteholder as security for the payment of the Loan.
"MONTHLY PAYMENT DATE" shall mean the first day of each calendar month prior to
the Maturity Date. "DEFEASANCE LOCKOUT PERIOD EXPIRATION DATE" shall mean the
later to occur of (a) the last day of the forty-third (43rd) month following the
date hereof or (b) the last day of the twenty-fifth (25th) month following the
"startup day" within the meaning of Section 860(a)(9) of the IRS Code (defined
below) of a REMIC Trust (hereinafter defined).
(c) As a condition precedent to any Defeasance and prior to any release
of the Mortgaged Properties under the Loan Documents, all of the following
requirements shall have been met:
i. Borrower shall provide not less than sixty (60) days prior
written notice to Noteholder of the Monthly Payment Date upon which
Borrower intends to effect a Defeasance hereunder (the "DEFEASANCE
Date").
ii. All accrued and unpaid interest and all other sums due
under this Note, the Mortgages and the other Loan Documents up to the
Defeasance Date, including, without limitation, all costs and expenses
incurred by Noteholder or its agents in connection with such Defeasance
(including without limitation, the reasonable fees and expenses
incurred by attorneys and accountants in connection with the review of
the proposed Defeasance Collateral and the preparation of the
Defeasance Security Agreement (hereinafter defined) and related
documentation), shall be paid in full on or prior to the Defeasance
Date.
(iii) At Noteholder's election, Borrower or Lessee shall have
delivered to the Noteholder all necessary documents to amend and
restate this Note to reflect that all of the real property security for
this Note has been defeased (the "DEFEASED NOTE"). After defeasance of
all of the Mortgaged Properties, the Defeased Note shall be secured
solely by the Defeasance Collateral delivered in connection with the
Defeasance.
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(iv) Borrower (or Lessee) shall execute and deliver to
Noteholder any and all certificates, opinions, documents or instruments
required by Noteholder in connection with the Defeasance, including,
without limitation, a pledge and security agreement satisfactory to
Noteholder in its sole discretion creating a first priority lien in
favor of Noteholder in the Defeasance Collateral (a "DEFEASANCE
SECURITY AGREEMENT"), which shall provide among other things, that any
excess received by Noteholder from the Defeasance Collateral over the
amounts payable by Borrower hereunder shall be held by Noteholder as
additional security, and that any excess remaining after payment in
full of all obligations of Borrower under the Loan Documents shall be
refunded to Borrower.
(v) Borrower or Lessee on behalf of Borrower shall have
delivered to Noteholder an opinion of counsel in form and substance
satisfactory to Noteholder stating that (a) the Defeasance Collateral
and the proceeds thereof have been duly and validly assigned and
delivered to Noteholder, that Noteholder has a valid, perfected, first
priority lien and security interest in the Defeasance Collateral
delivered and the proceeds thereof, and that the Defeasance Security
Agreement is enforceable against Borrower in accordance with its terms
and (b) if the Noteholder of this Note shall at the time of the
Defeasance be a REMIC (defined below), (1) the Defeasance Collateral
has been validly assigned to the REMIC Trust which holds this Note (the
"REMIC TRUST"), (2) the Defeasance has been effected in accordance with
the requirements of Treasury Regulation 1.860(g)-2(a)(8) (as such
regulation may be amended or substituted from time to time) and will
not be treated as an exchange pursuant to Section 1001 of the IRS Code
and (3) the tax qualification and status of the REMIC Trust as a REMIC
will not be adversely affected or impaired as a result of the
Defeasance. The term "REMIC" shall mean a "real estate mortgage
investment conduit" within the meaning of Section 860D of the IRS Code.
"IRS CODE" shall mean the United States Internal Revenue Code of 1986,
as amended, and the related Treasury Department regulations, including
temporary regulations.
(vi) Borrower or Lessee on behalf of Borrower shall have
delivered to Noteholder written confirmation from each Rating Agency
that such Defeasance will not result in a withdrawal, downgrade or
qualification of the respective ratings by the applicable Rating Agency
of any securities in connection with the applicable securitization
which are then outstanding in effect immediately prior to such
Defeasance. If required by any Rating Agency, Borrower shall, at
Lessee's expense, also deliver or cause to be delivered a
non-consolidation opinion with respect to Borrower or the Defeasance
Obligor (hereinafter defined) in form and substance satisfactory to
Noteholder and the Rating Agencies.
(vii) Borrower shall have satisfied such additional criteria
as Noteholder then shall require in connection with defeasance of
mortgage loans generally.
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(viii) In connection with any Defeasance hereunder, Borrower
may, or at the option of Noteholder shall, in each instance at Lessee's
expense, establish or designate a successor entity acceptable to
Noteholder in its sole and absolute discretion (the "DEFEASANCE
OBLIGOR") and in such event, Borrower shall transfer and assign all of
its obligations, rights and duties under and to the Defeased Note
together with the Defeasance Collateral to such Defeasance Obligor.
Such Defeasance Obligor shall assume the obligations under the Defeased
Note and any Defeasance Security Agreement as well as under such
provisions of the Loan Documents as Noteholder may designate, in each
case pursuant to an assumption agreement in form and substance
satisfactory to Noteholder in its sole discretion. As conditions to
such assignment and assumption, Borrower shall (i) deliver to
Noteholder an opinion of counsel (delivered by counsel satisfactory to
Noteholder in its sole discretion) in form and substance satisfactory
to Noteholder stating, among other things, that such assumption
agreement is enforceable against Borrower and such successor entity in
accordance with its terms and that this Note, the Defeasance Security
Agreement and the Loan Documents as so assumed, are enforceable against
such successor entity in accordance with their respective terms, and
(ii) pay all reasonable costs and expenses incurred by Noteholder or
the Trustee or their respective agents in connection with such
assignment and assumption (including without limitation, the review of
the proposed transferee and the preparation of the assumption and
related documentation), and, after Defeasance of all of the Mortgaged
Properties, Borrower shall be relieved of its obligations under such
documents and the Loan Documents (except for provisions of the Loan
Documents pertaining to indemnification, choice of law, waivers,
payment of costs and attorneys' fees, and other provisions which by
their terms expressly survive payment in full).
(ix) Each of the obligations of the United States of America
that is part of the Defeasance Collateral shall be duly endorsed as
directed by Noteholder or accompanied by a written instrument of
transfer in form and substance wholly satisfactory to Noteholder
(including, without limitation, such instruments as may be required by
the depository institution holding such securities or by the issuer
thereof, as the case may be, to effectuate book entry transfers and
pledges through the book entry facilities of such institution) in order
to perfect upon the delivery of the Defeasance Collateral the first
priority security interest therein in favor of the Noteholder in
conformity with all applicable state and federal laws governing the
granting of such security interest. Borrower shall authorize and direct
that the payments received from such obligations shall be made directly
to Noteholder or Noteholder's designee and applied to satisfy the
obligations of Borrower or, if applicable, Defeasance Obligor, under
the Defeased Note.
(x) Any revenue, documentary stamp or intangible taxes or
any other tax or charge due in connection with the creation of the
Defeased Note, the modification of this Note, or otherwise required to
accomplish the Defeasance shall be paid by Borrower simultaneously with
the occurrence of the Defeasance.
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(xi) The term "DEFEASANCE COLLATERAL" as used herein shall
mean direct, non-callable obligations of the Treasury of the United
States of America, for which its full faith and credit is pledged, that
provide for payments prior, but as close as possible, to all successive
Monthly Payment Dates occurring after the Defeasance Date, with each
such payment being equal to or greater than the amount of the
corresponding installment of principal, interest, and other sums
required to be paid hereunder and under the other Loan Documents,
including the payment in full of all obligations then outstanding
hereunder and under the Loan.
(xii) Upon compliance with all of the requirements and
conditions pertaining to Defeasance set forth in Sections 6(b) through
and including 6(g) above, Noteholder shall release or cause the release
of the applicable Mortgaged Property from the lien of the Mortgages and
the other Loan Documents in accordance with the terms hereof and
thereof. All costs and expenses of Noteholder incurred in connection
with the Defeasance and any release of Collateral, including, without
limitation, Noteholder's counsel's fees and expenses and the costs of
acquiring and administering the Defeasance Collateral, shall be paid by
Borrower simultaneously with the delivery of the release documentation.
(xiii) Prepayment; Prepayment Consideration. If any prepayment
of all or any portion of the principal balance hereunder occurs,
whether in connection with acceleration of the unpaid principal balance
of this Note or in any other circumstances whatsoever, or if any of the
Mortgages or other security instruments is satisfied or released by
foreclosure (whether by power of sale or judicial proceeding), deed in
lieu of foreclosure or by any other means, then Borrower shall
therewith pay the Prepayment Consideration. The foregoing shall not
create any right of prepayment. Borrower shall have no right whatsoever
to prepay all or any portion of the principal balance of this Note,
except only as follows:
(a) Borrower shall not be required to pay any
Prepayment Consideration with respect to prepayment of any
portion of the principal amount of this Note required by
Noteholder or Trustee as a result of the application of
insurance proceeds or condemnation awards; and
(b) Further, provided Borrower is not in default
hereunder or under any of the Loan Documents and provides not
less than 30 days' prior written notice thereof to Noteholder,
Borrower shall have the right to pay all (but not less than
all) obligations then outstanding under the Loan Documents,
including, without limitation, the entire outstanding
principal amount of the Loan, all accrued and unpaid interest
thereon and any other amounts due hereunder, under the Loan
Agreement or other Loan Documents, within the six (6) month
period immediately prior to the Maturity Date. In such case,
there shall be no Prepayment Consideration due, except that if
any such prepayment occurs on any day other than the
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first day of a calendar month, then in addition to the
prepayment amount, Borrower also shall pay to Noteholder the
amount of interest that would have accrued under the Note on
the amount being prepaid from and including the prepayment
date to the first day of the following month.
(c) The "PREPAYMENT CONSIDERATION" shall be the
amount equal to the greater of (i) two percent (2%) of the
Loan balance at the time of prepayment, or (ii) the sum of one
percent (1%) of the Loan balance at the time of prepayment,
plus the excess, if any, of (A) the amount of the monthly
interest which would otherwise be payable on the principal
balance being prepaid from the date of the first day of the
calendar month immediately following the date of prepayment
(unless prepayment is tendered on the first day of any
calendar month during the term of this Note, in which case
from the date of prepayment) to and including the Maturity
Date; over (B) the amount of the monthly interest the
Noteholder would earn if the principal balance being prepaid
were reinvested for the period from the first day of the
calendar month immediately following the date of prepayment
(unless prepayment is tendered on the first day of any
calendar month during the term of this Note, in which case
from the date of prepayment) to and including the Maturity
Date at the Treasury Rate (as hereinafter defined), such
difference to be discounted to present value at the Treasury
Rate.
(d) The "TREASURY RATE" shall be the annualized yield
on securities issued by the United States Treasury having a
maturity corresponding to the remaining term to the originally
scheduled Maturity Date of this Note, as quoted in Federal
Reserve Statistical Release [H. 15(519)] under the heading
"U.S. Government Securities - Treasury Constant Maturities"
for the Treasury Rate Determination Date (as defined below),
converted to a monthly equivalent yield. If yields for such
securities of such maturity are not shown in such publication,
then the Treasury Rate shall be determined by Noteholder by
linear interpolation between the yields of securities of the
next longer and next shorter maturities. If said Federal
Reserve Statistical Release or any other information necessary
for determination of the Treasury Rate in accordance with the
foregoing is no longer published or is otherwise unavailable,
then the Treasury Rate shall be reasonably determined by
Noteholder based on comparable data.
(e) The term "TREASURY RATE DETERMINATION DATE" shall
mean the date which is five banking days prior to the
scheduled prepayment date.
Section 7. Method of Payment. Each payment of the debt evidenced by
this Note shall be paid directly to the Noteholder in lawful tender of the
United States of America. Each
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such payment shall be paid by 1:00 p.m. Eastern Standard Time on the date such
payment is due, except if such date is not a Business Day, such payment shall
then be due on the first Business Day after such date. Any payment received
after 1:00 p.m. Eastern Standard Time shall be deemed to have been received on
the immediately following Business Day for all purposes, including, without
limitation, the accrual of interest on principal. All payments by Borrower shall
be made without deduction, defense, set off or counterclaim and in immediately
available funds.
Section 8. Security. The debt evidenced by this Note is to be secured
by, among other things, those Mortgages of even date herewith from Borrower to
Trustee, as trustee under the Trust Agreement (such Mortgages, together with any
additional Mortgages hereafter delivered by Borrower in connection with its
acquisition of additional Mortgaged Properties, as any of same may be amended or
modified, collectively, the "MORTGAGES"), and encumbering certain parcels of
real property being acquired on the date hereof (and which may hereafter be
acquired) by Borrower, as more particularly described in the Mortgages (each a
"MORTGAGED PROPERTY" and collectively the "MORTGAGED PROPERTIES.").
Section 9. Default.
9.1. Events of Default. Anything in this Note to the contrary
notwithstanding, if Borrower shall fail to pay any amount owing hereunder within
three (3) days after the same become due, or upon the occurrence of any other
Event of Default (as defined in the Loan Agreement), then at the option of the
holder hereof and without notice, the entire principal amount and all interest
accrued and outstanding hereunder and all other amounts outstanding under any of
the Loan Documents shall at once become due and payable, and the holder hereof
may exercise any and all of its rights and remedies under any of the Loan
Documents or pursuant to applicable law. The holder hereof may also accelerate
such obligations and exercise such remedies at any time after the occurrence of
any Event of Default, regardless of any prior forbearance. Further provisions
regarding acceleration are set forth in the Loan Agreement and the Loan
Documents.
9.2. No Impairment of Rights. Nothing herein shall be deemed in any way
to alter or impair any right which the Noteholder has under this Note or the
Mortgages, or any of the other Loan Documents at law or in equity, to accelerate
such debt on the occurrence of any other Event of Default provided herein or
therein, whether or not relating to this Note.
9.3. Late Fees. Without limiting the generality of the foregoing
provisions of this Section, if any interest or principal or other sums due
hereunder or otherwise payable by Borrower under the Loan Documents is not paid
within five (5) days after the date on which it becomes due, the Borrower shall
thereupon automatically become obligated immediately to pay to the Noteholder a
late charge equaling two and one-half percent (2.5%) of the amount of such
payment ("LATE FEE"), which shall be due and payable immediately and without
demand; provided that such Late Fees shall not, together with other interest to
be paid on the indebtedness evidenced by this Note or indebtedness arising under
any instrument securing the payment hereof, exceed the maximum interest
permitted under applicable law.
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9.4. CONFESSION OF JUDGMENT. UPON THE OCCURRENCE OF AN EVENT OF
DEFAULT, BORROWER HEREBY SUBMITS (AND WAIVES ALL RIGHTS TO OBJECT) TO
NONEXCLUSIVE PERSONAL JURISDICTION IN THE STATE OF ILLINOIS AND AUTHORIZES ANY
ATTORNEY DESIGNATED BY THE NOTEHOLDER OR ANY CLERK OF ANY COURT OF RECORD IN THE
STATE OF ILLINOIS OR ELSEWHERE TO APPEAR FOR BORROWER IN ANY COURT OF RECORD AND
CONFESS JUDGMENT AGAINST BORROWER WITHOUT PRIOR HEARING IN FAVOR OF THE
NOTEHOLDER FOR, AND IN THE AMOUNT OF ALL OR ANY PART OF THE ENTIRE AMOUNT OF
PRINCIPAL, INTEREST, AND OTHER OBLIGATIONS THEN OUTSTANDING UNDER THIS NOTE AND
THE OTHER LOAN DOCUMENTS, AND COSTS OF SUIT AND ACTUAL ATTORNEYS' FEES INCURRED
BY NOTEHOLDER IN CONNECTION WITH SUCH CONFESSION OF JUDGMENT. THE NOTEHOLDER
AGREES THAT IN ENFORCING ANY JUDGMENT BY CONFESSION, THE NOTEHOLDER SHALL NOT
DEMAND SOLELY WITH RESPECT TO ATTORNEYS' FEES INCURRED BY THE NOTEHOLDER IN
CONNECTION WITH SUCH INDEBTEDNESS FOR WHICH SUCH JUDGMENT IS ORDERED, ANY
AMOUNTS IN EXCESS OF THE ACTUAL AMOUNT OF ATTORNEYS' FEES CHARGED OR BILLED TO
THE NOTEHOLDER.
BORROWER HEREBY WAIVES AND RELEASES, TO THE EXTENT PERMITTED
BY APPLICABLE LAW, NOTEHOLDER AND ITS ATTORNEYS FROM ALL PROCEDURAL ERRORS,
DEFECTS AND IMPERFECTIONS IN ANY PROCEEDINGS INSTITUTED BY NOTEHOLDER WITH
RESPECT TO THIS NOTE OR ANY OF THE LOAN DOCUMENTS AND HEREBY KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY WAIVES ALL RIGHTS OF EXEMPTION, APPEAL, STAY OR
EXECUTION, INQUISITION AND OTHER RIGHTS TO WHICH BORROWER MAY OTHERWISE BE
ENTITLED UNDER THE CONSTITUTION AND LAWS OF THE UNITED STATES OF AMERICA OR OF
ANY STATE OR POSSESSION OF THE UNITED STATES OF AMERICA NOW IN FORCE AND WHICH
MAY HEREAFTER BE ENACTED. BORROWER HEREBY CONSENTS TO THE IMMEDIATE EXECUTION OF
SUCH JUDGMENT. THE AUTHORITY AND POWER TO APPEAR FOR AND ENTER JUDGMENT AGAINST
BORROWER SHALL NOT BE EXHAUSTED BY ONE OR MORE EXERCISES THEREOF OR BY ANY
IMPERFECT EXERCISE THEREOF AND SHALL NOT BE EXTINGUISHED BY ANY JUDGMENT ENTERED
PURSUANT THERETO. SUCH AUTHORITY MAY BE EXERCISED ON ONE OR MORE OCCASIONS OR
FROM TIME TO TIME IN THE SAME OR DIFFERENT JURISDICTIONS AS OFTEN AS THE
NOTEHOLDER SHALL DEEM NECESSARY AND DESIRABLE, FOR ALL OF WHICH THIS NOTE SHALL
BE SUFFICIENT WARRANT.
9.5. Absolute Obligations; Joint and Several Liability. Subject to the
provisions of Section 9.32 of the Loan Agreement, all obligations of Borrower
hereunder and under the Loan Documents are absolute, and shall be performed
without defense or offset. Without limitation, the failure of funds to be
available under the Flow of Funds Agreement or the Trust Agreement shall not
excuse Borrower's obligations to make payment hereunder.
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Section 10. Costs of Enforcement. Borrower shall pay to the Noteholder
and Trustee on demand the amount of any and all expenses incurred by the
Noteholder or Trustee (a) in enforcing their respective rights hereunder or
under the Mortgages and/or the Loan Documents, or in determining the rights and
obligations or any parties hereto or thereto, or (b) as the result of a default
or breach by Borrower or any guarantor in performing their respective
obligations under the Loan Documents, including but not limited to the
reasonable expense of collecting any amount owed hereunder, and of any and all
reasonable attorneys' fees incurred by Noteholder or Trustee, whether suit be
brought or not, or (c) in protecting the security hereof. Such expenses shall be
added to the principal amount hereof, shall be secured by the Mortgages and
shall accrue interest at the Interest Rate. Without limitation, such costs and
expenses to be reimbursed by Borrower shall include reasonable attorneys' fees
and expenses incurred in any Bankruptcy case or proceeding any in any appeal.
Section 11. Borrower's Waiver of Certain Rights. Borrower hereby waives
the exercise of any and all exemption rights which it holds at law or in equity
with respect to the debt evidenced by this Note, and of any and all rights which
it holds at law or in equity to require any valuation or appraisal, or to have
or receive any presentment, protest, demand and notice of dishonor, protest,
demand and nonpayment as a condition to the Noteholder's exercise of any of its
rights under this Note or the other Loan Documents.
Section 12. Certain Rights and Waivers. From time to time, without
affecting the obligation of Borrower or its successors or assigns to pay the
outstanding principal balance of this Note and observe the covenants of the
undersigned contained herein and in the other Loan Documents, and without
affecting the guaranty of any person or entity for payment of the outstanding
principal balance of this Note, without giving notice to or obtaining the
consent of the undersigned, the successors or assigns of the undersigned or
guarantors, and without liability on the part of the holder hereof, the holder
hereof may, at the option of the holder hereof, extend the time for payment of
said outstanding principal balance or any part thereof, reduce the payments
thereon, release anyone liable on any of said outstanding principal balance,
accept a renewal of this Note, (with or without the consent of any guarantor)
modify the terms and time of payment of said outstanding principal balance, join
in any extension or subordination agreement, release any security given herefor,
(with or without the consent of any guarantor) take or release other or
additional security, and agree in writing with the undersigned to modify the
rate of interest or period of amortization of this Note or change the amount of
the monthly installments payable hereunder.
Section 13. General.
13.1. Applicable Law. THIS NOTE SHALL BE DEEMED TO BE A CONTRACT
ENTERED INTO PURSUANT TO ILLINOIS LAW AND SHALL IN ALL RESPECTS BE GOVERNED,
CONSTRUED, APPLIED, AND ENFORCED IN ACCORDANCE WITH THE LAWS OF SUCH
JURISDICTION (WITHOUT REGARD TO THE PRINCIPLES THEREOF GOVERNING CONFLICTS OF
LAWS).
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13.2. Headings. The headings of the Sections, subsections, paragraphs
and subparagraphs hereof are provided herein for and only for convenience of
reference, and shall not be considered in construing their contents.
13.3. Construction. As used herein, all references made (i) in the
neuter, masculine or feminine gender shall be deemed to have been made in all
such genders, (ii) in the singular or plural number shall be deemed to have been
made, respectively, in the plural or singular number as well, and (iii) to any
Section, Subsection, paragraph or subparagraph shall, unless therein expressly
indicated to the contrary, be deemed to have been made to such Section,
Subsection, paragraph or subparagraph of this Note.
13.4. Severability. No determination by any court, governmental body or
otherwise that any provision of this Note or any amendment hereof is invalid or
unenforceable in any instance shall affect the validity or enforceability of (a)
any other provision hereof or (b) such provision in any circumstance not
controlled by such determination. Each such provision shall be valid and
enforceable to the fullest extent allowed by, and shall be construed wherever
possible as being consistent with, applicable law and, as necessary, this Note
shall be construed as if such invalid, illegal or unenforceable provisions or
part thereof had never been contained herein, but only to the extent of its
invalidity or unenforceability.
13.5. No Waiver. The Noteholder shall not be deemed to have waived the
exercise of any right which it holds hereunder unless such waiver is made
expressly and in writing. No delay or omission by the Noteholder in exercising
any such right (and no allowance by the Noteholder to the Borrower of an
opportunity to cure a default in performing its obligations hereunder) shall be
deemed a waiver of its future exercise. No such waiver made as to any instance
involving the exercise of any such right shall be deemed a waiver as to any
other such instance, or any other such right. Further, acceptance by Noteholder
or Trustee of all or any portion of any sum payable under, or partial
performance of any covenant of, this Note, the Mortgages or any of the other
Loan Documents, whether before, on, or after the due date of such payment or
performance, shall not be a waiver of Noteholder's or Trustee's right either to
require prompt and full payment and performance when due of all other sums
payable or obligations due thereunder or hereunder or to exercise any of
Noteholder's or Trustee's rights and remedies hereunder or thereunder.
13.6. Offset. Upon the occurrence of an Event of Default, the
Noteholder and/or Trustee are hereby authorized to set-off against the Loan (or
any portion thereof) any and all credits, money, stocks, bonds or other security
or property of any nature whatsoever on deposit with, or held by, or in the
possession of the Noteholder and/or Trustee, to the credit of or for the account
of Borrower, without notice to or consent of Borrower.
13.7. Non-Exclusivity of Rights and Remedies. None of the rights and
remedies herein conferred upon or reserved to Noteholder or Trustee is intended
to be exclusive of any other right or remedy contained herein or in any of the
other Loan Documents and each and every such right and remedy shall be
cumulative and concurrent, and may be enforced separately, successively or
together, and may be exercised from time to time as often as may be deemed
necessary or desirable by Noteholder or Trustee.
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13.8. Incorporation by Reference. Borrower covenants and agrees to
keep and perform, or cause to be kept and performed, all agreements, conditions,
covenants and provisions of the Loan Documents strictly in accordance with their
terms.
13.9. Waivers. Borrower waives presentment, protest and demand, notice
of protest, demand and dishonor and nonpayment of this Note, and all other
notices in connection with the delivery, acceptance, performance, default or
enforcement of this Note, except such notices as are expressly required to be
given by the terms hereof.
13.10. Business Purpose. Borrower represents and warrants that the Loan
is being obtained solely for commercial, investment or business purposes and is
not for personal, family or household purposes.
13.11. Modification. This Note may be modified, amended, discharged or
waived only by an agreement in writing signed by the party against whom
enforcement of such modification, amendment, discharge or waiver is sought.
13.12. Time of the Essence. Time is strictly of the essence of this
Note.
13.13. Negotiable Instrument. Borrower agrees that this Note shall be
deemed a negotiable instrument, even though this Note may not otherwise qualify,
under applicable law, absent this paragraph, as a negotiable instrument.
13.14. Interest Rate after Judgment. If judgment is entered against
Borrower on this Note, the amount of the judgment entered (which may include
principal, interest, fees and costs) shall bear interest at the above described
Default Rate, to be determined on the date of the entry of the judgment.
13.15. Relationship. Borrower and Noteholder intend that the
relationship between them shall be solely that of debtor and creditor. Nothing
contained in this Note or in any of the other Loan Documents shall be deemed or
construed to create a partnership, tenancy-in-common, joint tenancy, joint
venture or co-ownership by or between Borrower and Noteholder.
13.16 Relief from Automatic Stay. To the extent permitted under
applicable law, Borrower hereby agrees that, in consideration of Noteholder's
agreement to make the Loan and in recognition that the following covenant is a
material inducement for Noteholder to make the Loan, in the event that Borrower
shall (i) file with any bankruptcy court of competent jurisdiction or be the
subject of any petition under any section or chapter of Title 11 of the United
States Code, as amended ("BANKRUPTCY CODE"), or similar law or statute; (ii) be
the subject of any order for relief issued under the Bankruptcy Code or similar
law or statute; (iii) file or be the subject of any petition seeking any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution, or similar relief under any present or future federal or state act
or law relating to bankruptcy, insolvency, or other relief for debtors; (iv)
have sought or consented to or acquiesced in the appointment of any trustee,
receiver, conservator, or liquidator, or (v) be the subject of an order,
judgment or decree entered by any court of competent jurisdiction approving a
petition filed against Borrower for any reorganization, arrangement,
composition, readjustment,
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liquidation, dissolution, or similar relief under any present or future federal
or state act or law relating to bankruptcy, insolvency or relief for debtors,
then, subject to court approval, then Noteholder shall thereupon be entitled
(and Borrower hereby irrevocably consents to, and will not contest, and agrees
to stipulate to) relief from any automatic stay or other injunction imposed by
Section 362 of the Bankruptcy Code, or similar law or statute (including,
without limitation, relief from any exclusive period set forth in Section 1121
of the Bankruptcy Code) or otherwise, on or against the exercise of the rights
and remedies otherwise available to Noteholder or Trustee as provided in the
Transaction Documents, and as otherwise provided by law, and Borrower hereby
irrevocably waives its rights to object to such relief.
13.17. Usury Spreading. It is expressly stipulated and agreed to be the
intent of Borrower and Noteholder at all times to comply with the applicable law
governing the amount of interest payable on or in connection with this Note and
the Loan evidenced hereby (or applicable United States federal law to the extent
that it permits Noteholder hereof to contract for, charge, take, reserve, or
receive a greater amount of interest than under the laws of the State of
Illinois). If the applicable law is ever finally judicially interpreted so as to
render usurious any amount called for under this Note or under the Mortgages or
under any of the other Transaction Documents, or contracted for, charged, taken,
reserved or received with respect to Loan, or if acceleration of the maturity of
this Note or if any prepayment by Borrower results in Borrower having paid any
interest in excess of that permitted under applicable law, then it is Borrower's
and the Noteholder's express intent that all excess amounts theretofore
collected by the Noteholder be credited on the principal balance of this Note
(or, if this Note has been or would thereby be paid in full, refunded to the
Borrower), and the provisions of this Note, the Mortgages and the other
Transaction Documents immediately be deemed reformed and the amounts thereafter
collectible hereunder and thereunder reduced, without the necessity of the
execution of any new documents, so as to comply with applicable law, but so as
to permit the recovery of the fullest amount otherwise called for hereunder and
thereunder. The right to accelerate the maturity of this Note does not include
the right to accelerate any interest which has not otherwise accrued on the date
of such acceleration, and Noteholder does not intend to collect any unearned
interest in the event of acceleration. All sums due and payable to Noteholder
for the use, forbearance or detention of the Loan evidenced hereby shall, to the
extent permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full term of such Loan until payment in full so that the rate or
amount of interest on account of such Loan does not exceed the applicable usury
ceiling. Notwithstanding any provision contained in this Note, the Mortgages or
in any of the other Transaction Documents that permits the compounding of
interest, including, without limitation, any provision by which any accrued
interest is added to the principal amount of this Note, the total amount of
interest that Borrower is obligated to pay and the Noteholder is entitled to
receive with respect to this Note shall not exceed the amount calculated on a
simple (i.e. noncompounded) interest basis at the highest lawful rate of
interest on principal amounts actually advanced to or for the account of
Borrower, including all current and prior advances and any advances made
pursuant to the Mortgages or other Transaction Documents (such as for the
payment of taxes, insurance premiums and similar expenses and costs).
13.18. Notices. All notices required or permitted under the terms of
this Note shall be given and be deemed effective as provided in the Loan
Agreement.
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13.19. Authority. Borrower represents that Borrower has full power,
authority and legal right to execute, deliver and perform its obligations
pursuant to this Note, the Mortgages and the other Transaction Documents to
which it is a party and that this Note, the Mortgages and the other Transaction
Documents constitute valid and binding obligations of Borrower.
13.20 BALLOON PAYMENT. BORROWER UNDERSTANDS AND ACKNOWLEDGES THAT THIS
NOTE AND THE OTHER TRANSACTION DOCUMENTS DO NOT PROVIDE FOR FULL AMORTIZATION OF
THE PRINCIPAL SUM AND, THEREFORE, UPON THE MATURITY DATE OR EARLIER
ACCELERATION, A BALLOON PAYMENT OF THE THEN OUTSTANDING BALANCE OF THE PRINCIPAL
SUM WILL BE REQUIRED, ALONG WITH PAYMENT IN FULL OF OTHER SUMS DUE HEREUNDER.
13.21 RIGHTS AND REMEDIES UNDER THIS NOTE. ALL RIGHTS AND REMEDIES OF
THE NOTEHOLDER OR NOTEHOLDER'S DESIGNEE ARISING UNDER THIS NOTE SHALL BE SUBJECT
TO AND IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THE TRUST AGREEMENT.
13.22 Non-Recourse Loan. Except as otherwise provided in Section 9.32
of the Loan Agreement or as expressly provided in any other Transaction
Document, neither Borrower nor its shareholders, officers or employees shall be
personally liable for payment of the principal amount of the Loan, interest
thereon or any other sums due under this Note, the Loan Agreement or any other
Transaction Document.
[SIGNATURE PAGE(S) FOLLOW]
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IN WITNESS WHEREOF, Borrower has caused this Note to be executed as of
the day and year first above written, and the obligations under this Note shall
be binding upon Borrower's successors and assigns.
BORROWER:
PITA GENERAL CORPORATION
an Illinois Corporation
By: /s/ Mindy Berman
-------------------------------
Name: Mindy Berman
Title: Vice President
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EXHIBIT 99.1
FOR IMMEDIATE RELEASE:
CONTACT: GARY KASTEL, DIRECTOR OF INVESTOR RELATIONS
(800) 236-3454 (414) 641-7492
ALTERRA HEALTHCARE CORPORATION COMPLETES $140 MILLION CLOSING ON
HCR MANORCARE ASSET ACQUISITION UNDER NEW FINANCING ARRANGEMENT
(Brookfield, WI - July 21, 1999) Alterra Healthcare Corporation (AMEX: ALI), the
nation's largest and one of the most experienced providers of healthcare
assisted living services, reported that it has completed and funded a $140
million acquisition and financing transaction related to its acquisition of 20
properties from HCR ManorCare (NYSE:HCR). This closing relates to the previously
announced agreement to acquire 29 residences from HCR for a total of
approximately $200 million. The residences were financed under a synthetic lease
arrangement with an initial effective lease rate of 9.66%.
Alterra expects eight of the remaining residences to close in the third quarter
as final financing, regulatory, and construction due diligence are completed and
requisite approvals are received. One residence has been removed from the
purchase.
Greenwich Capital Financial Products, Inc., an affiliate of Greenwich Capital
Markets, Inc., is the lender in the arrangement. Credit enhancement through a
surety bond was provided by a member of the Centre group of companies, a member
of the Zurich Financial Services Group. Key Global Finance, a unit of KeyBank
National Association, assisted in lease structuring. Formation Capital also
assisted in arranging the financing. The synthetic lease treatment provides
benefits similar to ownership including tax depreciation and an opportunity to
repurchase the residences at the end of the 10-year lease term for a
pre-negotiated fixed price.
"We are very excited about this financing structure," commented Bill Lasky,
President and CEO. "Greenwich and Centre bring a new level of sophistication to
our financing strategies and provide a new source of capital to the Company."
Lasky added, "All facets of our new alliance with HCR ManorCare are now well
under way. In the second quarter we completed the initial contribution of
development projects to our development joint venture with HCR, and in the third
quarter we expect to move additional projects into this joint venture and to
complete the purchase of the remaining eight HCR residences. We are also
building on the other components of our alliance with HCR, including the
roll-out of more extensive ancillary services within the Alterra residence
system."
As of July 20, 1999, and including these acquisitions, the Company operated or
managed 409 residences with a total capacity of 18,365. Alterra offers
supportive and healthcare services to our nation's frail elderly and is the
nation's largest operator of free-standing
<PAGE> 2
Alzheimer's/dementia care residences. ALS currently operates in 27 states and
has residences under construction and development in many of its existing
markets as well as in five additional states.
The Company's common stock is traded on the American Stock Exchange under the
symbol "ALI."
The statements in this release relating to matters that are not historical facts
are forward-looking statements based on management's beliefs and assumptions
using currently available information. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable, it
cannot give any assurances that these expectations will prove to be correct.
Such statements involve a number of risks and uncertainties, including, but not
limited to, substantial debt and operating lease payment obligations, operating
losses associated with new residences, the ability to manage rapid growth and
business diversification, the need for additional financing, development and
construction risks, risks associated with acquisitions, competition,
governmental regulation and other risks and uncertainties detailed in the
reports filed by the Company with the Securities and Exchange Commission. Should
one or more of these risks materialize (or the consequences of such a
development worsen), or should the underlying assumptions prove incorrect,
actual results could differ materially from those forecasted or expected. The
Company assumes no duty to publicly update such statements.
