<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-11999
ALTERNATIVE LIVING SERVICES, INC.
DELAWARE 39-1771281
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
450 N. SUNNYSLOPE ROAD, SUITE 300
BROOKFIELD, WI
53005
(Address of principal executive offices)
(Zip Code)
(414)641-5100
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
AS OF MAY 12, 1999, THERE WERE 22,068,303 SHARES OF THE REGISTRANT'S COMMON
STOCK, PAR VALUE $0.01, OUTSTANDING.
(Number of shares outstanding of each class of the issuer's classes of common
stock, as of the latest practical date.)
<PAGE> 2
ALTERNATIVE LIVING SERVICES, INC.
INDEX
Part I. Financial Information
<TABLE>
<CAPTION>
PAGE NO.
---------
Item 1. Financial Statements:
<S> <C>
Condensed Consolidated Balance Sheets as of March 31, 1999 (unaudited) 1
and December 31, 1998................................................................
Unaudited Condensed Consolidated Statements of Operations for the 2
Three Months Ended March 31, 1999 and 1998...........................................
Unaudited Condensed Consolidated Statements of Cash Flows for the 3
Three Months Ended March 31, 1999 and 1998...........................................
Notes to Condensed Consolidated Financial Statements.................................... 4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................................ 5 - 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk.............................. 9
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K........................................................ 10 - 11
</TABLE>
<PAGE> 3
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALTERNATIVE LIVING SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
-------------- -----------------
(unaudited)
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents..................................... $ 41,395 $ 49,934
Accounts receivable........................................... 5,882 4,045
Pre-opening costs, net of amortization........................ -- 7,856
Note receivable............................................... 24,083 10,986
Other current assets.......................................... 19,533 18,031
-------------- -----------------
Total current assets...................................... 90,893 90,852
-------------- -----------------
Property and equipment, net....................................... 709,424 640,211
Long-term investments............................................. 6,069 4,504
Goodwill, net..................................................... 5,207 5,243
Other assets...................................................... 42,256 37,000
============== =================
Total assets.............................................. $853,849 $777,810
============== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term obligations................. $4,392 $4,376
Short-term notes payable...................................... 14,058 8,363
Accounts payable.............................................. 17,595 28,666
Accrued expenses.............................................. 17,348 15,723
Deferred rent and refundable deposits......................... 7,115 5,419
-------------- -----------------
Total current liabilities................................. 60,508 62,547
-------------- -----------------
Long-term obligations, less current installments.................. 370,645 286,984
Convertible debt.................................................. 228,600 228,600
Deferred gain on sale and other................................... 12,941 18,347
Minority interest................................................. 1,510 4,220
Stockholders' equity:
Common stock.................................................. 221 219
Additional paid-in capital.................................... 178,967 177,864
Retained earnings (accumulated deficit)....................... 457 (971)
-------------- -----------------
Total stockholders' equity................................ 179,645 177,112
============== =================
Total liabilities and stockholders' equity................ $853,849 $777,810
============== =================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
1
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ALTERNATIVE LIVING SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
------------------------------
1999 1998
-------------- -----------
Revenue:
<S> <C> <C>
Resident service fees................................................................. $77,122 $45,651
Other................................................................................. 5,769 833
-------------- -----------
Operating revenue................................................................. 82,891 46,484
Operating expenses:
Residence operations.................................................................. 47,099 29,444
Lease expense......................................................................... 14,459 8,989
General and administrative............................................................ 9,618 4,802
Depreciation and amortization......................................................... 4,025 3,397
-------------- -----------
Total operating expense............................................................... 75,201 46,632
Operating income (loss)........................................................... 7,690 (148)
Other income (expense):
Interest expense, net................................................................. (6,464) (729)
Lease income.......................................................................... 4,889 --
Other, net............................................................................ -- (27)
Equity in income (losses) of unconsolidated affiliates................................ 82 (12)
Minority interest in losses of consolidated subsidiaries.............................. 2,295 4,499
-------------- -----------
Total other income, net........................................................... 802 3,731
Income before income taxes and the cumulative effect of a change in accounting 8,492 3,583
principle.............................................................................
Income taxes.......................................................................... 3,227 --
-------------- -----------
Income after taxes................................................................ 5,265 3,583
Cumulative effect of a change in accounting principle, net of tax benefit of $2,409
(see Note 3) ........................................................................ (3,837) --
-------------- -----------
Net income............................................................................ $ 1,428 $ 3,583
============== ===========
Earnings per common share - basic and diluted:
Income before cumulative effect of a change in accounting principle................... $ 0.24 $ 0.16
Cumulative effect on prior periods (to December 31, 1998) of changing to a different
method .......................................................................... (0.18) --
-------------- -----------
Net income per common share - basic and diluted....................................... $ 0.06 $ 0.16
============== ===========
Weighted average common and common equivalent shares outstanding:
Basic................................................................................. 22,068 21,761
============== ===========
Diluted............................................................................... 22,551 22,344
============== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
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ALTERNATIVE LIVING SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------------
1999 1998
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income.................................................................... $1,428 $ 3,583
Adjustment to reconcile net income to net cash provided by (used in) operating
activities:
Depreciation and amortization................................................. 4,025 3,397
Deferred income taxes......................................................... (1,015) --
Equity in net (income) loss from investments in unconsolidated affiliates..... (82) 12
Minority interest in losses of consolidated subsidiaries...................... (2,295) (4,499)
Tax effect of stock options exercised......................................... 460 --
Increase in net resident receivable........................................... (2,136) (1,881)
Decrease (increase) in capitalized pre-opening costs (see Note 3)............ 7,856 (3,811)
Decrease (increase) in other current assets................................... (1,502) 2,107
Increase (decrease) in accounts payable....................................... (3,544) 5,149
Increase in accrued expenses.................................................. 3,393 60
Decrease in accrued merger charges............................................ (72) (2,448)
Changes in other assets and liabilities, net.................................. 1,742 (1,346)
------------- -------------
Net cash provided by operating activities....................................... 8,258 323
------------- -------------
Cash flows from investing activities:
Payments for property, equipment and project development costs ............... (79,282) (82,206)
Increase in notes receivable.................................................. (13,097) --
Acquisitions of facilities, net of cash...................................... -- (8,477)
Changes in investments in and advances to unconsolidated affiliates........... (500) (7,017)
Purchase of joint venture interest............................................ (15,235) (1,826)
Increase in long-term investments............................................. (1,565) --
Decrease in short-term investments............................................ -- 40,000
------------- -------------
Net cash used in investing activities........................................... (109,679) (59,526)
------------- -------------
Cash flows from financing activities:
Repayments of short term borrowings........................................... -- (13,314)
Repayments of long-term obligations........................................... (45,122) (10,932)
Proceeds from issuance of debt................................................ 128,863 30,926
Proceeds from issuance of convertible debt.................................... -- 18,750
Payments for financing costs.................................................. (3,905) (1,900)
Proceeds from sale/leaseback transactions..................................... 8,401 12,320
Issuance of common stock and other capital contributions...................... 645 9,442
Contributions by minority partners and minority stockholders.................. 4,000 2,493
------------- -------------
Net cash provided by financing activities....................................... 92,882 47,785
------------- -------------
Net decrease in cash and cash equivalents....................................... (8,539) (11,418)
------------- -------------
Cash and cash equivalents:
Beginning of period.......................................................... 49,934 79,838
------------- -------------
End of period................................................................ $41,395 $ 68,420
============= =============
Supplemental disclosure of cash flow information:
Cash paid for interest, including amounts capitalized......................... $6,130 $ 1,627
============= =============
Cash paid for income taxes.................................................... $2,499 $ 1,256
============= =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 6
ALTERNATIVE LIVING SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) BASIS OF PRESENTATION
The condensed consolidated balance sheets as of March 31, 1999 and
December 31, 1998, the condensed consolidated statements of operations for the
three months ended March 31, 1999 and 1998 and the condensed consolidated
statements of cash flows for the three months ended March 31, 1999 and 1998
contained herein include the accounts of Alternative Living Services, Inc. (the
"Company") and its affiliates which are under the common financial control of
the Company. All significant intercompany accounts have been eliminated in
consolidation. In the opinion of management, all adjustments (consisting only of
normal recurring items) necessary for a fair presentation of such condensed
consolidated financial statements have been included. The results of operations
for the three months ended March 31, 1999, are not necessarily indicative of the
results to be expected for the full fiscal year.
The condensed consolidated financial statements do not include all
information and footnotes necessary for a complete presentation of financial
position, results of operations, and cash flows in conformity with generally
accepted accounting principles. The accompanying condensed consolidated
financial statements should be read in conjunction with the audited consolidated
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K for the year ended December 31, 1998.
(2) FINANCING
The Company obtained $128.9 million in mortgage financing during the
first quarter of 1999. The terms for these financings range from three to
twenty-five years, currently bear floating interest rates ranging from 7.2% to
7.6% and are secured by 32 residences.
The Company obtained $8.4 million in sale/leaseback financing from a
real estate investment trust ("REIT") during the first quarter of 1999. The
initial lease term for this arrangement is 12 years, and the weighted average
effective lease rate is 9.5%. Any gain or loss arising from the sale of
residences to the REIT has been deferred and will be amortized into income in
proportion to rental expense over the initial term of the lease.
(3) CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE
In the first quarter of 1999, the Company adopted the Statement of
Position No. 98-5, "Reporting on the Costs of Start-up Activities." This
Statement provides guidance on the financial reporting of start-up activities
and organization costs. It requires costs of start-up activities and
organization costs to be expensed when incurred. The Company's prior practice
was to capitalize such costs and amortize them over a one year period after
residence opening in the case of start-up costs and five years in the case of
organizational costs. This Statement is required to be adopted for fiscal years
beginning after December 15, 1998 and accordingly, was adopted by the Company
effective January 1, 1999. The cumulative effect of the accounting change
reflected in the condensed consolidated statement of operations for the three
months ended March 31, 1999 was $3.8 million, net of tax.
(4) RECLASSIFICATIONS
Certain reclassifications have been made in the 1998 financial
statements to conform with the 1999 financial statement presentation.
4
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The Company's continued growth has had a significant impact on its
results of operations and accounts for most of the changes in its results
between the first three months of 1999 and 1998. As of March 31, 1999 and 1998,
the Company operated or managed 369 and 253 residences with aggregate capacity
of 15,841 and 10,717 residents, respectively. The Company is constructing or
developing approximately 132 residences with aggregate capacity of 7,042 as of
March 31, 1999. For the three months ended March 31, 1999, the Company generated
operating revenue of $82.9 million and realized operating income of $7.7 million
and net income of $5.3 million prior to the cumulative effect of a change in
accounting.
Since 1993, the Company has grown as a result of its development and
acquisition activities, which have focused on purposeful built, free-standing
assisted living residences. The Company intends to continue its development
strategy and, at March 31, 1999, was constructing 61 residences and developing
an additional 71 residences.
On December 31, 1998, the Company entered into a strategic alliance
with HCR Manor Care. The alliance includes four principal arrangements:
- - The Company will acquire from HCR Manor Care up to 29 Alzheimer's/dementia
care and assisted living residences with a capacity for 2,611 residents
located in 12 states for $200 million in cash. The Company completed the
acquisition of certain of these residences in April 1999 and expects to
complete the acquisition of the remaining residences in the second quarter
of 1999.
- - HCR Manor Care and the Company will establish and capitalize a joint
venture to develop $500 million of ALS-branded Alzheimer's/dementia care
and assisted living residences in HCR's core markets over the next three to
five years. The Company expects to begin joint development under this
arrangement in the second quarter of 1999 and to continue joint development
activities over a three to five year period.
- - HCR Manor Care has the right to license from ALS the use of ALS' Clare
Bridge(R) service mark, to share various best practices, and to engage in
joint marketing activities relating to HCR's remaining Alzheimer's/dementia
care residences. The Company and HCR Manor Care executed definitive
agreements with respect to this arrangement in April 1999.
- - HCR Manor Care and ALS have agreed to form a new company to provide a
variety of ancillary services to ALS' resident population, including
rehabilitation therapy and hospice care. The Company and HCR Manor Care
executed definitive agreements with respect to this arrangement in April
1999.
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
1998
Residence Service Fees. Residence service fees for the three months ended March
31, 1999 were $77.1 million representing an increase of $31.4 million, or 69%,
from the $45.7 million for the comparable 1998 period. Substantially all of this
increase resulted from the addition of newly constructed residences and other
residences acquired by the Company. The Company operated or managed 369 and 253
residences at March 31, 1999 and 1998, respectively.
5
<PAGE> 8
Other Revenues. Other revenues for the three months ended March 31, 1999 were
$5.8 million, an increase of $5.0 million over the $800,000 of other revenue for
the three months ended March 31, 1998. The increase is attributable to
management fees on a greater number of residences which were either managed for
third parties or for entities in which the Company held a minority ownership
position in the 1999 period versus the 1998 period. As of March 31, 1999, the
Company had 64 residences under these structures compared to 40 such residences
as of March 31, 1998. The increase in other revenue was also impacted by $2.2
million of development fees recognized in the first quarter of 1999 in
connection with development activities conducted by the Company on behalf of
third parties.
Residence Operating Expenses. Residence operating expenses for the three months
ended March 31, 1999 increased to $47.1 million from $29.4 million in the
comparable period in 1998 due to the increased number of residences operated
during the 1999 period. Operating expenses as a percentage of residence service
fee revenue for the three months ended March 31, 1999 and 1998 were 61.1% and
64.5%, respectively.
Lease Expense. Lease expense for the three months ended March 31, 1999 was $14.5
million, compared to $9.0 million in the comparable 1998 period. Such increase
was primarily attributable to the utilization of additional sale/leaseback
financing totaling $146 million during 1998.
General and Administrative Expense. For the three months ended March 31, 1999,
general and administrative expenses before costs related to the $1.8 million
write-off of existing signage and other expenses associated with the name change
from Alternative Living Services to Alterra were $7.8 million, compared to $4.8
million for the comparable 1998 period, representing a decrease as a percentage
of operating revenue to 9.4% in the 1999 period from 10% in the 1998 period. The
increase in expenses was primarily attributable to salaries, related payroll
taxes and employee benefits for additional corporate personnel retained to
support the Company's actual and anticipated growth.
Depreciation and Amortization. Depreciation and amortization for the three
months ended March 31, 1999 was $4.0 million, representing an increase of
$600,000, or 18.5%, from the $3.4 million of depreciation and amortization for
the comparable 1998 period. This increase resulted primarily from depreciation
of fixed assets on the larger number of new residences that were operated by the
Company during the three months ended March 31, 1999, versus the comparable
period in 1998. This increase was offset by the elimination of amortization on
pre-opening costs which are now expensed when they are incurred.
Interest Expense, Net. Interest expense, net of interest income, was $6.5
million for the three months ended March 31, 1999, compared to $729,000 for the
comparable period in 1998. Gross interest expense (before interest
capitalization and interest income) for the 1999 period was $9.8 million
compared to $5.7 million for the 1998 period, an increase of $4.1 million. This
increase is primarily attributable to an increase in the amount of mortgage
financing used in the 1999 period as compared to the 1998 period. The Company
capitalized $2.5 million of interest expense in the 1999 period compared to $3.1
million in the comparable 1998 period due primarily to a decrease in assets
under construction financed using general corporate funds in 1999 compared to
1998. Interest income for the 1999 period was $791,000 as compared to $1.8
million for the 1998 period. This decrease was primarily due to a reduction in
average cash and investment balances from 1998 to 1999. The large 1998 balance
was due to proceeds from the Company's concurrent offering of common stock and
5.25% convertible subordinated debentures in December 1997.
Lease Income. The Company recorded $4.9 million of lease income on real estate
owned by the Company and leased to unconsolidated minority-owned joint ventures
for the three months ended March 31, 1999. The lease income received from these
unconsolidated minority-owned joint venture entities is generally equal to the
debt service amounts payable by the Company in respect of the leased real
estate. These leasing arrangements permit the Company to finance the leased real
estate as owned assets in the ordinary course of the Company's financing
activities. The Company had no such arrangements for the same period in 1998.
6
<PAGE> 9
Minority Interest in Losses of Consolidated Subsidiaries. Minority interest in
losses of consolidated subsidiaries for the three months ended March 31, 1999
was $2.3 million, representing a decrease of $2.2 million from $4.5 million for
the comparable 1998 period. The decrease was primarily attributable to the
decrease in the number of residences in various stages of lease-up that were
owned by the Company in consolidated joint venture arrangements during the 1999
period. During the first quarter of 1999, the Company had an average of 21
residences held in these joint venture arrangements compared to an average of 42
residences held in similar joint venture arrangements during the comparable 1998
period.
Income Taxes. For the three months ended March 31, 1999, the Company recorded a
current income tax provision of $2.8 million and recognized a $400,000 deferred
tax liability resulting in a current income tax expense of $3.2 million before
the effect of a cumulative change in accounting. No income tax provision was
recorded for the same period in 1998 due to the utilization of net operating
loss carryforwards.
Cumulative Effect of Change in Accounting Principle. During the three months
ended March 31, 1999, the Company incurred a cumulative effect of a change in
accounting principle of $3.8 million relating to the adoption of SOP 98-5, which
requires that costs of start-up activities and organization costs be expensed as
incurred.
Net Income. As a result of the foregoing, the net income for the three months
ended March 31, 1999 was $1.4 million compared to $3.6 million for the
comparable 1998 period.
LIQUIDITY AND CAPITAL RESOURCES
For the three months ended March 31, 1999 and 1998 cash flow from
operations was $8.3 million and $323,000, respectively. Cash flows provided by
operations in the 1999 and 1998 periods were partially offset by cash flow
deficits resulting from the Company's development of new residences, which
typically incur cash flow deficits during the lease-up period. A significant
number of these new residences were owned in consolidated joint venture
arrangements. Consistent with the terms of these arrangements, operating
deficits included in cash flow from operations of $2.3 million and $4.5 million
for the three months ended March 31, 1999 and 1998, respectively, were charged
against equity contributions of minority partners.
During the three months ended March 31, 1999, the Company closed on
approximately $92.9 million of new financing on newly developed assets, which
included approximately $55 million of debt used to refinance properties having
prior debt balances of $45.1 million. Financing was provided through $8.4
million of sale/leaseback financing and $4.0 million of minority partner
contributions.
This new financing along with approximately $8.5 million in available
cash and investments and cash from operations was used to fund $79.3 million in
construction and development activity, $15.2 million in joint venture buy-outs,
and $13.0 million of construction bridge financing under third party development
arrangements.
In March 1999, the Company had working capital of $30.4 million
compared to working capital of $90.5 million at March 31, 1998. The decrease was
due to the utilization of $77 million in cash and investments generated by the
December 1997 equity and convertible debt offerings subsequently used to fund
additional construction and development activities during 1998.
To achieve its growth objectives, the Company will need to obtain
sufficient financing to fund its development, construction and acquisition
activities. The Company has plans to develop or acquire approximately $525
million of residences (inclusive of the $200 million purchase from HCR Manor
Care) for the 12-month period ending March 31, 2000. Historically, the Company
has financed its development program and acquisitions through a combination of
various forms of real estate financing (mortgage and sale/leaseback financing),
capital contributions from joint venture partners and the sale of its
securities. The Company has executed non-binding letters of intent with various
healthcare REITs with approximately $114 million of remaining commitments at
March 31, 1999. The Company also had available $264 million of remaining
financing commitments from conventional lenders
7
<PAGE> 10
, as of March 31, 1999 which financing is accessible by the Company upon
satisfying the respective lender property underwriting. In addition, the Company
will require approximately $200 million to acquire the 29 residences it has
agreed to purchase from HCR Manor Care. The Company expects to finance this
transaction through a separate financing arrangement. In addition to financing
construction and development costs, the Company will require capital resources
to meet its operating and working capital needs incurred primarily in connection
with the start-up and lease-up phases of new residences. The Company believes
that its cash on hand, financing under these commitments, other debt and equity
financing that the Company expects to be able to access and equity contributions
from its joint venture development partners will be sufficient to fund its
growth strategy for the next 12 months.
A lack of funds may require the Company to delay or eliminate all or
some of its development projects and acquisition plans. In addition, the Company
may require additional financing to enable it to acquire additional residences,
to respond to changing economic conditions, to expand the Company's development
program or to account for changes in assumptions related to its development
program. There can be no assurance that any newly constructed residences will
achieve a stabilized occupancy level and attain a resident mix that meet the
Company's expectations or generate sufficient positive cash flow to cover
operating and financing costs associated with such residences. There can be no
assurance that the Company will be successful in securing additional financing
or that adequate funding will be available and, if available, will be on terms
that are acceptable to the Company.
The Company is obligated under certain of its joint venture
arrangements to purchase the equity interests of its joint venture partners at
fair market value upon the election of such partners. Within the next twelve
months, the Company will become subject to such contingent purchase obligations
with respect to equity interests held by joint venture partners, exercisable at
their election, related to certain of the Company's residences. At such times,
or earlier, as such contingent purchase obligations are exercisable, the Company
may also elect to exercise its rights to purchase such interests. Based on a
number of assumptions, including assumptions as to the number of residences to
be developed with joint venture partners, the timing of such development, the
time at which such options may be exercised and the fair market value of such
residences at the date such options are exercised, the Company estimates that it
may require approximately $35 million to $40 million to satisfy these purchase
obligations during the 12 month period ended March 31, 2000.
IMPACT OF INFLATION
To date, inflation has not had a significant impact on the Company.
Inflation could, however, affect the Company's results of operations due to the
Company's dependence on its senior resident population who rely on liquid assets
and relatively fixed incomes to pay for the Company's services. As a result, the
Company may not be able to increase residence service fees to account fully for
increased operating expenses. In structuring its fees, the Company attempts to
anticipate inflation levels, but there can be no assurance that the Company will
be able to anticipate fully or otherwise respond to any future inflationary
pressures. In addition, given the significant amount of construction and
development activity which the Company anticipates, inflationary pressures could
affect the Company's cost of new product deployment and financing. There can be
no assurances that financing will be available on terms acceptable to the
Company.
YEAR 2000 ISSUE
As a result of certain computer programs being written using two digits
rather than four to define the applicable year, computer systems that have date
sensitive software may recognize a date using "00" as the year 1900 rather than
the year 2000 (the so-called "Year 2000 Issue"). This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices or
engage in normal business activities.
The Company has evaluated its computer systems to determine what
modification (if any) are necessary
8
<PAGE> 11
to make such systems compatible with the year 2000 requirements. However,
because many of the Company's computer systems have been put into service within
the last several years, or are currently being replaced with year 2000 compliant
systems, the Company does not expect any such modifications to have a material
adverse effect on the Company's consolidated financial position or results of
operations. There can be no assurance, however, that the computer systems of
other companies on which the Company's systems rely will be timely modified, or
that a failure to modify such systems by another company, or modifications that
are incompatible with the Company's systems, would not have a material adverse
effect on the Company.
FORWARD-LOOKING STATEMENTS
The statements in this quarterly report relating to matters that are
not historical facts are forward-looking statements based on management's belief
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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk represents the risk of changes in value of a financial
instrument, derivative or non-derivative, caused by fluctuations in interest
rates, foreign exchange rates and equity prices. Changes in these factors cause
fluctuations in the Company's earnings and cash flows.
The Company performed a sensitivity analysis which presents the
hypothetical change in fair value of those financial instruments held by the
Company at March 31, 1999 which are sensitive to changes in interest rates.
Market risk is estimated as the potential change in fair value resulting from an
immediate hypothetical one percentage point parallel shift in the yield curve.
The fair value of the debt included in the analysis is $195.1 million. Although
not expected, a one percentage point change in the interest rates would have
caused the Company's annual interest expense to change by approximately $2.0
million. Accordingly, a significant increase in LIBOR based interest rates could
have a material adverse effect on the Company's earnings.
Although a majority of the debt and lease payment obligations of the
Company as of or during the three months ended, March 31, 1999 are not subject
to floating interest rates, indebtedness that the Company may incur in the
future may bear interest at a floating rate. Debt and annual operating lease
payment obligations will continue to increase as the Company pursues its growth
strategy.
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The Company does not presently use financial derivative instruments to
manage its interest costs. The Company does not use foreign currency exchange
rate forward contracts or commodity contracts and does not have foreign currency
exposure as of March 31, 1999.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.1 Master Loan Agreement between ALS West, Inc., the Company and
Guaranty Federal Bank, F.S.B., as agent, and the Lenders
named therein, dated as of January 8, 1999
10.2 Amended and Restated Financing and Security Agreement (Master
Agreement) between ALS Holdings, Inc., et al, as Borrower,
and Bank United, as agent, dated as of February 12, 1999
10.3 Amended Schedule of Additional Bank United Mortgage,
Assignment and Security Agreements which are substantially
similar to the Form of Mortgage attached as Exhibit 10.53 to
the Company's 10-K for the period ending December 31, 1998
10.4 Loan Agreement between ALS Financing II, Inc. and GMAC
Commercial Mortgage Corporation dated as of March 23, 1999
10.5 Lease and Security Agreement between the Company and SELCO
Service Corporation dated as of February 10, 1999
10.6 Amended Schedule of Additional NHI Leases which are
substantially similar to the Form of Lease attached as
Exhibit 10.57 to the Company's 10-K for the period ending
December 31, 1998
10.7 Employment Agreement dated as of January 1, 1999 by and
between the Company and William F. Lasky
10.8 Bridge Loan Agreement between the Company and Third Party
Investors I, L.L.C. dated as of December 31, 1998
10.9 Management Fee Loan Agreement between the Company and Third
Party Investors I, L.L.C. dated as of December 31, 1998
10.10 Working Capital Loan Agreement between the Company and Third
Party Investors I, L.L.C. dated as of December 31, 1998
10.11 Phase II Bridge Loan Agreement between the Company and Third
Party Investors I, L.L.C. dated as of March 31, 1999
10.12 Phase II Management Fee Loan Agreement between the Company
and Third Party Investors I, L.L.C. dated as of March 31,
1999
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10.13 Phase II Working Capital Loan Agreement between the Company
and Third Party Investors I, L.L.C. dated as of March 31,
1999
10.14 Form of Development Agreement ("Development Agreement") by
and between the Company and Third Party Investors I, L.L.C.
dated as of March 31, 1999
10.15 Schedule of additional Development Agreements which are
substantially in the form of Development Agreement attached
as Exhibit 10.14
10.16 Form of Assisted Living Consultant and Management Services
Agreement ("Management Agreement") by and between the Company
and Third Party Investors I, L.L.C. dated as of March 31,
1999
10.17 Schedule of additional Assisted Living Consultant and
Management Services Agreements which are substantially in the
form of Management Agreement attached as Exhibit 10.16
11.1 Statement Regarding Computation of Net Income (Loss) Per
Share.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K: The Registrant filed the following report with the
Securities and Exchange Commission on Form 8-K during the quarter ended
March 31, 1999:
On January 4, 1999, the Company filed a Current Report on
Form 8-K dated January 4, 1999 reporting under Item 5 thereof
the following:
On January 4, 1999, the Registrant issued a press
release announcing that it had entered into a strategic
business alliance with HCR Manor Care, Inc., a copy of
which is filed as an exhibit thereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Brookfield, State of
Wisconsin, on the 13th day of May, 1999.
ALTERNATIVE LIVING SERVICES, INC.
Date: May 13, 1999 By: /s/ Thomas E. Komula
---------------------------------------
Thomas E. Komula
Senior Vice President, Treasurer, Chief
Financial Officer and Secretary
(Principal Financial Officer)
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EXHIBIT 10.1
================================================================================
MASTER LOAN AGREEMENT
-------------------------------------------------------
ALS WEST, INC.
ALTERNATIVE LIVING SERVICES, INC.
and
GUARANTY FEDERAL BANK, F.S.B., AS AGENT
and
THE LENDERS NAMED HEREIN
-------------------------------------------------------
$50,000,000
January 8, 1999
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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Page
<S> <C>
MASTER LOAN AGREEMENT.............................................................................................1
ARTICLE I - Definitions and References............................................................................1
Section 1.1. Defined Terms........................................................................1
Section 1.2. Exhibits and Schedules; Additional Definitions......................................13
Section 1.3. Amendment of Defined Instruments....................................................14
Section 1.4. References and Titles...............................................................14
Section 1.5. Calculations and Determinations.....................................................14
ARTICLE II - The Loans...........................................................................................14
Section 2.1. Commitments to Lend.................................................................14
Section 2.2. Project Loans.......................................................................15
Section 2.3. Requests for Advances...............................................................15
Section 2.4. Continuations and Conversions of Existing Advances..................................16
Section 2.5. Use of Proceeds.....................................................................17
Section 2.6. Fees................................................................................18
Section 2.7. Extension of Project Loan Maturity Date.............................................18
Section 2.8. Lease and Sublease..................................................................20
ARTICLE III - Payments to Lenders................................................................................20
Section 3.1. General Procedures..................................................................20
Section 3.2. Capital Reimbursement...............................................................21
Section 3.3. Increased Cost of LIBOR Advances....................................................22
Section 3.4. Availability........................................................................22
Section 3.5. Funding Losses......................................................................23
Section 3.6. Reimbursable Taxes..................................................................23
Section 3.7. Reimbursement Requests; Replacement of Lenders......................................25
ARTICLE IV - Conditions Precedent to Lending.....................................................................25
Section 4.1. Application for a Project Loan......................................................25
Section 4.2. Additional Conditions Precedent to Initial Advance..................................26
Section 4.3. Additional Conditions Precedent.....................................................27
Section 4.4. Releases............................................................................27
ARTICLE V - Representations and Warranties.......................................................................28
Section 5.1. Organization and Good Standing......................................................28
Section 5.2. Authorization.......................................................................28
Section 5.3. No Conflicts or Consents............................................................28
Section 5.4. Enforceable Obligations.............................................................28
Section 5.5. Initial Financial Statements........................................................28
Section 5.6. Other Obligations and Restrictions. ................................................29
Section 5.7. Full Disclosure.....................................................................29
</TABLE>
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<TABLE>
<S> <C> <C>
Section 5.8. Litigation..........................................................................29
Section 5.9. ERISA Plans and Liabilities.........................................................29
Section 5.10. Names and Places of Business........................................................29
Section 5.11. Insider.............................................................................29
Section 5.12. Environmental and Other Laws........................................................30
Section 5.13. Subsidiary..........................................................................30
Section 5.14. Participation Agreements............................................................30
ARTICLE VI - Affirmative Covenants...............................................................................30
Section 6.1. Payment and Performance.............................................................30
Section 6.2. Books, Financial Statements and Reports.............................................30
Section 6.3. Other Information and Inspections...................................................32
Section 6.4. Notice of Material Events and Change of Address.....................................32
Section 6.5. Maintenance of Existence and Qualifications.........................................33
Section 6.6. Maintenance of Properties...........................................................33
Section 6.7. Payment of Expenses.................................................................33
Section 6.8. Performance on Related Person's Behalf..............................................33
Section 6.9. Insurance...........................................................................33
Section 6.10. Interest............................................................................33
Section 6.11. Evidence of Compliance..............................................................34
Section 6.12. Solvency............................................................................34
Section 6.13. Agreement to Deliver Security Documents.............................................34
Section 6.14. Bank Accounts; Offset...............................................................34
Section 6.15. Maintain Existence and Business.....................................................35
Section 6.16. Debt Coverage Ratio.................................................................35
Section 6.17. Minimum Tangible Net Worth..........................................................35
Section 6.18. Leverage Ratio......................................................................35
Section 6.19. EBITDAR.............................................................................35
Section 6.20. Capital Expenditures................................................................35
ARTICLE VII - Negative Covenants.................................................................................36
Section 7.1. Ownership...........................................................................36
Section 7.2. Limitation on Mergers, Issuances of Securities......................................36
Section 7.3. Limitation on Additional Debt.......................................................36
ARTICLE VIII - Events of Default and Remedies....................................................................36
Section 8.1. Events of Default...................................................................36
Section 8.2. Remedies............................................................................40
ARTICLE IX - Agent...............................................................................................40
Section 9.1. Appointment and Authority...........................................................40
Section 9.2. Exculpation, Agent's Reliance, Etc..................................................41
Section 9.3. Credit Decisions....................................................................42
Section 9.4. Indemnification.....................................................................42
Section 9.5. Rights as Lender....................................................................42
</TABLE>
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<TABLE>
<S> <C> <C>
Section 9.6. Sharing of Set-Offs and Other Payments..............................................43
Section 9.7. Investments.........................................................................43
Section 9.8. Benefit of Article IX...............................................................43
Section 9.9. Resignation.........................................................................44
ARTICLE X - Miscellaneous........................................................................................45
Section 10.1. Waivers and Amendments; Acknowledgments.............................................45
Section 10.2. Survival of Agreements; Cumulative Nature...........................................47
Section 10.3. Notices.............................................................................47
Section 10.4. Payment of Expenses; Indemnity......................................................48
Section 10.5. Joint and Several Liability; Parties in Interest; Assignments.......................49
Section 10.6. Confidentiality.....................................................................51
Section 10.7. Governing Law; Submission to Process................................................51
Section 10.8. Limitation on Interest..............................................................52
Section 10.9. Termination; Limited Survival.......................................................53
Section 10.10. Severability........................................................................53
Section 10.11. Counterparts........................................................................53
Section 10.12. Waiver of Jury Trial................................................................53
</TABLE>
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Schedules and Exhibits:
<TABLE>
<CAPTION>
Lender Schedule
<S> <C>
Schedule 1 - Security Schedule
Schedule 2 - Places of Business
Exhibit A - Promissory Note
Exhibit B - Request for Advance
Exhibit C - Continuation/Conversion Notice
Exhibit D - Certificate Accompanying Financial Statements
Exhibit E - Financing Statement - Borrower
Exhibit F - Assignment and Acceptance Agreement
Exhibit G - Financing Statement - Lessee
Exhibit H - Financing Statement - Company
Exhibit I - Certification of Non-Foreign Status
Exhibit J - Security Agreement
Exhibit K - Guaranty
Exhibit L - Pre-Closing Document List
Exhibit M - Loan Application
Exhibit N - Mortgage
Exhibit O - Notice and Agreement
Exhibit P - Loans to One Borrower Affidavit
Exhibit Q - Collateral Assignment
Exhibit R - Project Loan Certificate
Exhibit S - Project Loan Agreement
Exhibit T - Assignment of Leases and Rents
Exhibit U - Subordination of Management Agreement
Exhibit W - Monthly/Quarterly Financial Statement and Census Data
Exhibit X - Subordination, Nondisturbance and Attornment Agreement
</TABLE>
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<PAGE> 6
MASTER LOAN AGREEMENT
THIS MASTER LOAN AGREEMENT is made as of January 8, 1999, by and among
ALS West, Inc., a Delaware corporation (herein called "BORROWER"), Alternative
Living Services, Inc., a Delaware corporation (the "Company"), Guaranty Federal
Bank, F.S.B, individually and as agent (herein called "AGENT") and the Lenders
referred to below. In consideration of the mutual covenants and agreements
contained herein the parties hereto agree as follows:
ARTICLE I - Definitions and References
Section 1.1. Defined Terms. As used in this Agreement, each of the
following terms has the meaning given it in this Section 1.1 or in the sections
and subsections referred to below:
"ADMINISTRATIVE NOTICES" means, with respect to a Project, all (i)
Deficiency Notices, (ii) all Agency inspection reports, audits, surveys,
investigations, reviews and evaluations, and (iii) all notices and written
communications from any state or any Agency relating to material adjustments in
reimbursement amounts or to rate reviews, modifications of rates, inflation
adjustments, rate agreements, and the like.
"ADVANCES" has the meaning given it in Section 2.2.
"AFFILIATE" means, as to any Person, each other Person that directly or
indirectly (through one or more intermediaries or otherwise) controls, is
controlled by, or is under common control with, such Person. A Person shall be
deemed to be "controlled by" any other Person if such other Person possesses,
directly or indirectly, power
(a) to vote 50% or more of the securities (on a fully diluted
basis) having ordinary voting power for the election of directors or
managing general partners or members;
(b) to direct or cause the direction of the management and
policies of such Person whether by contract or otherwise.
"AGENCY" means, with respect to a Project, the Health Care Financing
Administration, the Drug Enforcement Administration, the Environmental
Protection Agency, any other state or federal licensing or regulatory authority
(including any licensing or regulatory authority responsible for administering
or dispensing Medicaid or Medicare payments or any other third party payor
billing policies, procedures, limitations or restrictions), or any other public
or private agency or organization, including without limitation, any public or
private accreditation agency or organization.
"AGENT" means Guaranty Federal Bank, F.S.B, as Agent hereunder, and its
successors in such capacity.
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<PAGE> 7
"AGREEMENT" means this Master Loan Agreement.
"APPLICABLE LIBOR MARGIN" means, with respect to a particular Project
Loan, (i) two and one-quarter percent (2.25%) per annum, and (ii) two percent
(2%) per annum during an Extension Period for such Project Loan provided the
Project related to the Project Loan has maintained a Debt Coverage Ratio
(computed using a 25-year amortization prior to the Second Extension Period and
a 23-year amortization thereafter) of at least 1.2 to 1 for three (3)
consecutive months.
"ASSIGNMENT OF LEASES AND RENTS" means an Assignment of Leases and
Rents substantially in the form attached as Exhibit T.
"BANK PARTIES" means Agent and all Lenders. "BANK PARTY" means any one
of the Bank Parties.
"BASE RATE" means the Agent's Prime Rate. As used in this paragraph,
Agent's "Prime Rate" means the base commercial rate of interest as announced
from time to time by Agent (which may not be the lowest, best or most favorable
rate of interest which Agent may charge on loans to its customers). If Agent's
Prime Rate changes after the date hereof the Base Rate shall be automatically
increased or decreased, as the case may be, without notice to Borrower from time
to time as of the effective time of each change in Agent's Prime Rate. The Base
Rate shall in no event, however, exceed the Highest Lawful Rate.
"BASE RATE ADVANCE" means an Advance which does not bear interest at
the LIBOR Adjusted Rate.
"BORROWER" means ALS West, Inc., a Delaware corporation.
"BORROWING" means a borrowing of new Advances of a single Type pursuant
to Section 2.3 or a continuation or conversion of existing Advances into a
single Type (and, in the case of LIBOR Advances, with the same Interest Period)
pursuant to Section 2.4.
"BUSINESS DAY" means a day, other than a Saturday or Sunday, on which
commercial banks are open for business with the public in Dallas, Texas. Any
Business Day in any way relating to LIBOR Advances (such as the day on which an
Interest Period begins or ends) must also be a day on which, in the reasonable
judgment of Agent, significant transactions in dollars are carried out in the
interbank eurocurrency market.
"CERTIFICATE OF OCCUPANCY" means a certificate of occupancy and use
authorizing the use and occupancy of a Project issued by the appropriate
Tribunal.
"CERTIFICATION OF NON-FOREIGN STATUS" means a certificate by Borrower
as required by Section 1445 of the Internal Revenue Code of 1986, in the form
attached as Exhibit I.
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<PAGE> 8
"COLLATERAL" means all property of any kind which is subject to a Lien
in favor of Lenders (or in favor of Agent for the benefit of Lenders) or which,
under the terms of any Security Document, is purported to be subject to such a
Lien.
"COLLATERAL ASSIGNMENT" means a Collateral Assignment substantially in
the form attached as Exhibit Q.
"COMMITMENT" means the amount of $50,000,000.
"COMMITMENT PERIOD" means the period which is twelve (12) months from
the date of this Agreement.
"COMPANY" means Alternative Living Services, Inc., a Delaware
corporation.
"CONSOLIDATED" refers to the consolidation of any Person, in accordance
with GAAP, with its properly consolidated subsidiaries. References herein to a
Person's Consolidated financial statements, financial position, financial
condition, liabilities, etc. refer to the consolidated financial statements,
financial position, financial condition, liabilities, etc. of such Person and
its properly consolidated subsidiaries.
"CONTINUATION/CONVERSION NOTICE" means a written or telephonic request,
or a written confirmation, made by Borrower which meets the requirements of
Section 2.4.
"CURRENT ASSETS" means all cash, cash equivalents, customers' accounts
and other receivables due within one year from statement date, inventory,
deposits, marketable securities and prepaid expenses to be consumed within one
year from statement date.
"CURRENT LIABILITIES" means all amounts due or to become due within one
year from statement date.
"CURRENT RATIO" means the ratio of Current Assets to Current
Liabilities.
"DCR RATE" means, on any given date, the higher of the (i) Base Rate or
LIBOR Adjusted Rate selected by the Borrower during the applicable period, and
(ii) the Treasury Based Rate for such period.
"DEBT" means, as to any Person, (i) all obligations of such Person for
borrowed money or for the deferred purchase price of property or services (other
than accounts payable arising in the ordinary course of business) or evidenced
by bonds, notes, debentures or similar instruments, (ii) all obligations of such
Person under leases that are required to be capitalized under GAAP, (iii) all
Debt of others secured by a Lien on any asset of such Person, whether or not
such Debt is assumed by such Person and (iv) all Debt of others guaranteed by
such Person.
"DEBT COVERAGE RATIO" means a fraction, the numerator of which is the
Net Operating Income from a Project for the applicable calendar month and the
denominator of which is the sum of (i) an amount equivalent to interest on the
Project Loan for such Project during such
3
<PAGE> 9
calendar month at a per annum rate of interest equal to the DCR Rate, and (ii)
an amount determined as of the beginning of the same calendar month which, if
paid monthly, would fully amortize the outstanding principal balance of such
Project Loan on a straight-line basis in 25 years, if computed prior to the
Second Extension Period, and 23 years, in connection with calculations for
obtaining the Second Extension and during the Second Extension Period.
"DEFAULT" means any Event of Default and any default, event or
condition which would, with the giving of any requisite notices and the passage
of any requisite periods of time, constitute an Event of Default.
"DEFAULTING LENDER" is defined in Section 3.1.
"DEFICIENCY NOTICES" means, with respect to a Project, all notices and
other written communications from any Agency, Governmental Authority or agent
which licenses, regulates, certifies, accredits or evaluates the Project Related
Persons, the Project or the Project Related Persons' operation of the Project
alleging that a Project Related Person, the Project or a Project Related
Person's operation of the Project in whole or in part fails to comply or, if
corrective action is not taken, shall fail to comply, in a manner which would
cause a Material Adverse Change, with, any or all of the Agency's or
Governmental Authority's requirements for and conditions of licensing,
regulation, certification or accreditation by or participation in programs of
the Agency or Governmental Authority or otherwise relating to the continuous
operation of all or any portion of the Project or a Project Related Person's
programs or its eligibility or entitlement to receive reimbursement from any
Agency or Governmental Authority.
"EBITDAR" means for any period, for any Person (including consolidated
entities), determined in accordance with GAAP, the sum of (a) the net income (or
net loss) plus (b) all amounts treated as expenses for depreciation, Interest
Expense and the amortization of intangibles (including deferred finance charges)
of any kind to the extent included in the determination of such net income (or
loss), plus (c) all accrued taxes on or measured by income to the extent
included in the determination of such net income (or loss), plus (d) all rental
expense; all of the foregoing without duplication.
"EBITDAR COVERAGE" means EBITDAR divided by the sum of (i) all interest
expense as defined by GAAP, net of interest income, and (ii) lease expense as
defined by GAAP.
"ELIGIBLE TRANSFEREE" means a Person which either (a) is a Lender, or
(b) is consented to as an Eligible Transferee by Agent and, so long as no
Default is continuing, by Borrower, which consents in each case will not be
unreasonably withheld (provided that no Person organized outside the United
States may be an Eligible Transferee if Borrower would be required to pay
withholding taxes on interest or principal owed to such Person).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, together with all rules and regulations promulgated
with respect thereto.
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<PAGE> 10
"EVENT OF DEFAULT" has the meaning given it in Section 8.1.
"EXTENSION PERIOD" means, with respect to a Project Loan, the First
Extension Period or Second Extension Period, as the case may be.
"FINANCING STATEMENTS - BORROWER" means financing statements
substantially in the form attached as Exhibit E.
"FINANCING STATEMENTS - COMPANY" means financing statements
substantially in the form attached as Exhibit H.
"FINANCING STATEMENTS - LESSEE" means financing statements
substantially in the form attached as Exhibit G.
"FIRST EXTENSION PERIOD" means, with respect to a Project Loan, a
period of twelve (12) months commencing on the first day after the Project Loan
Maturity Date for such Project Loan.
"FISCAL QUARTER" means a three-month period ending on the last day of
March, June, September or December of any year.
"FISCAL YEAR" means a twelve-month period ending on December 31 of any
year.
"GAAP" means those generally accepted accounting principles and
practices which are recognized as such by the Financial Accounting Standards
Board (or any generally recognized successor) and which, in the case of Company
and its Consolidated subsidiaries, are applied for all periods after the date
hereof in a manner consistent with the manner in which such principles and
practices were applied to the Initial Financial Statements. If any change in any
accounting principle or practice is required by the Financial Accounting
Standards Board (or any such successor) in order for such principle or practice
to continue as a generally accepted accounting principle or practice, all
reports and financial statements required hereunder with respect to Company and
its Consolidated subsidiaries may be prepared in accordance with such change
after notice of such change is given to Agent.
"GFB" means Guaranty Federal Bank, F.S.B, in its capacity as a Lender
hereunder.
"GUARANTOR" means the Company.
"GUARANTEED DEBT" means all Debt of others guaranteed by the Company
whether by (a) a guaranty, direct or indirect, in any manner, of any part or all
of such obligation, or (b) an agreement, direct or indirect, contingent or
otherwise, the purpose of which is to insure in any way the payment or
performance (or payment of damages in the event of nonperformance) of any part
or all of such obligation.
"HAZARDOUS MATERIALS" means, with respect to a Project, in addition to
all "hazardous substances" described in the Mortgage, any hazardous or
infectious medical waste, including,
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<PAGE> 11
without limitation, cultures and stocks of infectious agents and associated
biologicals, pathological wastes, human and animal blood specimens and blood
products, anatomical materials, blood, blood-soiled articles, contaminated
materials, micro-biological laboratory waste, sharps, chemical waste, infectious
waste, chemotherapeutic waste and radioactive waste.
"HIGHEST LAWFUL RATE" means, with respect to each Lender, the maximum
nonusurious rate of interest that such Lender is permitted under applicable Law
to contract for, take, charge, or receive with respect to its Advances. All
determinations herein of the Highest Lawful Rate, or of any interest rate
determined by reference to the Highest Lawful Rate, shall be made separately for
each Lender as appropriate to assure that the Loan Documents are not construed
to obligate any Person to pay interest to any Lender at a rate in excess of the
Highest Lawful Rate applicable to such Lender. To the extent that Chapter 303 of
the Texas Finance Code is applicable, the "weekly ceiling" specified in such
Chapter 303 is the applicable ceiling, provided that, if any applicable law
permits greater interest, the law permitting the greater interest shall apply.
"INITIAL ADVANCE" means, with respect to each Project Loan, the first
Advance under such Project Loan.
"INITIAL FINANCIAL STATEMENTS" means, (i) the audited annual
Consolidated and consolidating financial statements of the Company and its
subsidiaries dated as of December 31, 1997 and (ii) the unaudited quarterly
Consolidated and consolidating financial statements of the Company and its
subsidiaries dated as of September 30, 1998.
"INTEREST PERIOD" means, with respect to each particular LIBOR Advance
in a Borrowing under a Project Loan, a period of 1, 2, or 3 months (or if
available, 4, 5, 6, 9 or 12 months), as specified in the Request for Advance
applicable thereto, beginning on and including the date specified in such
Request for Advance (which must be a Business Day), and ending on but not
including the same day of the month as the day on which it began (e.g., a period
beginning on the third day of one month shall end on but not include the third
day of another month), provided that each Interest Period which would otherwise
end on a day which is not a Business Day shall end on the next succeeding
Business Day (unless such next succeeding Business Day is the first Business Day
of a calendar month, in which case such Interest Period shall end on the
immediately preceding Business Day). No Interest Period may be elected which
would extend past the Project Loan Maturity Date for such Project Loan.
"LATE PAYMENT RATE" means, at the time in question, four percent
(4.0%) per annum plus the Base Rate then in effect; provided that, with respect
to any LIBOR Advance with an Interest Period extending beyond the date such
LIBOR Advance becomes due and payable, "LATE PAYMENT RATE" shall mean four
percent (4.0%) per annum plus the related LIBOR Adjusted Rate. The Late Payment
Rate shall never exceed the Highest Lawful Rate.
"LAW" means any statute, law, regulation, ordinance, rule, treaty,
judgment, order, decree, permit, concession, franchise, license, agreement or
other governmental restriction of the United States or any state or political
subdivision thereof or of any foreign country or any department, province or
other political subdivision thereof.
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<PAGE> 12
"LEASE AGREEMENT" means, with respect to a Project, a lease of that
Project between Borrower, as lessor, and Lessee, as lessee.
"LENDERS" means each signatory hereto (other than Borrower) including
GFB and the successors or assignees of each such party as holder of a Note.
"LENDING OFFICE" means, with respect to any Lender, the office, branch,
or agency through which it funds its LIBOR Advances; and, with respect to Agent,
the office, branch, or agency through which it administers this Agreement.
"LESSEE" means the lessee under a Lease Agreement.
"LIABILITIES" means, as to any Person, all indebtedness, liabilities
and obligations of such Person, whether matured or unmatured, liquidated or
unliquidated, primary or secondary, direct or indirect, absolute, fixed or
contingent, and whether or not required to be considered pursuant to GAAP.
"LIBOR ADVANCE" means an Advance which is properly designated as a
LIBOR Advance pursuant to Section 2.3 or 2.4. Each LIBOR Advance shall in no
event be less than $500,000 and must be an integral multiple of $100,000.
"LIBOR ADJUSTED RATE" means, with respect to each particular LIBOR
Advance, the rate per annum (expressed as a percentage) calculated by Agent to
be equal to the sum of (a) the quotient of the LIBOR Rate for the LIBOR Advance
and Interest Period in question divided by (1 minus the Reserve Requirement),
rounded up to the nearest 1/100 of 1%, and (b) the Applicable LIBOR Margin. No
LIBOR Adjusted Rate shall ever exceed the Highest Lawful Rate.
"LIBOR REFERENCE SOURCE" means the display for eurodollar rates
provided on The Bloomberg (a data service), viewed by accessing the global
deposits segment of money market rates; or, at the option of Agent, the display
for eurodollar rates on such other service selected from time to time by Agent
and determined by Agent to be comparable to The Bloomberg, which other service
may include Reuters Monitor Money Rates Service.
"LIBOR RATE" means, the rate determined by Agent (rounded upward, if
necessary, to the nearest 1/16 of 1%) equal to the offered rate (and not the bid
rate) for deposits in U.S. Dollars of amounts comparable to the particular LIBOR
Advance and the related Interest Period, as set forth on the LIBOR Reference
Source at approximately 10:00 a.m. (Dallas, Texas time) on the first day of the
applicable Interest Period.
"LICENSES" means, with respect to a Project, any and all licenses,
certificates of need, certificate of need waivers, operating permits,
franchises, and other licenses, authorizations, certifications, permits, or
approvals, other than construction permits, issued by, or on behalf of, any
Governmental Authority now existing or at any time hereafter issued, with
respect to the acquisition, construction, renovation, expansion, leasing,
ownership and/or operation of
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the Project, accreditation of the Project, and/or the participation or
eligibility for participation in any third party payor or reimbursement programs
(but specifically excluding any and all Participation Agreements), any and all
operating licenses issued by any Governmental Authority, any and all
pharmaceutical licenses and other licenses related to the purchase, dispensing,
storage, prescription or use of drugs, medications, and other "controlled
substances," and any and all licenses relating to the operation of food or
beverage facilities or amenities, if any.
"LIEN" means, with respect to any property or assets, any right or
interest therein of a creditor to secure Liabilities owed to him or any other
arrangement with such creditor which provides for the payment of such
Liabilities out of such property or assets or which allows him to have such
Liabilities satisfied out of such property or assets prior to the general
creditors of any owner thereof, including any lien, mortgage, security interest,
pledge, deposit, production payment, rights of a vendor under any title
retention or conditional sale agreement or lease substantially equivalent
thereto, tax lien, mechanic's or materialman's lien, or any other charge or
encumbrance for security purposes, whether arising by Law or agreement or
otherwise, but excluding any right of offset which arises without agreement in
the ordinary course of business. "LIEN" also means any filed financing
statement, any registration of a pledge (such as with an issuer of
uncertificated securities), or any other arrangement or action which would serve
to perfect a Lien described in the preceding sentence, regardless of whether
such financing statement is filed, such registration is made, or such
arrangement or action is undertaken before or after such Lien exists.
"LOAN" has the meaning given it in Section 2.1.
"LOAN APPLICATION" means a loan application substantially in the form
of Exhibit M.
"LOAN DOCUMENTS" means this Agreement, the Notes, the Security
Documents, and all other agreements, certificates, documents and instruments and
writings at any time delivered in connection herewith or therewith.
"LOANS TO ONE BORROWER AFFIDAVIT" means a Loan to One Borrower
Affidavit substantially in the form of Exhibit P to be delivered for the benefit
of GFB.
"MAJORITY LENDERS" means the Lenders whose aggregate Percentage Shares
equal or exceed sixty-six and two-thirds percent (66 2/3 %).
"MANAGED CARE PLANS" means, with respect to a Project, any health
maintenance organization, preferred provider organization, individual practice
association, competitive medical plan, referral service or similar arrangement,
entity, organization, or Person.
"MANAGEMENT AGREEMENT" means, with respect to a Project, a Management
Agreement or Assisted Living Consultant and Operations Agreement approved by
Agent.
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"MANAGER" means, with respect to a Project, the Company or a manager
approved by Agent.
"MATERIAL ADVERSE CHANGE" means a material and adverse change to (a)
any Related Person's financial condition, (b) the operations or properties of
any Related Person, (c) any Related Person's ability to timely pay the
Obligations, or (d) the enforceability of the material terms of any Loan
Documents.
"MORTGAGE" means a Deed of Trust, Mortgage and Security Agreement or
Mortgage and Security Agreement, conveying a Project to the Trustee named
therein or Agent, as the case may be, to secure the payment of the Obligations,
substantially in the form attached as Exhibit N.
"NET OPERATING INCOME" means the gross income received from the
operation of a Project for the period in question, less expenses incurred and/or
paid in connection with the operation and maintenance of the Project that are
allocable to such period (based upon an assumed management fee of five percent
(5%) and annual capital expenditures equal to the greater of $200 per unit and
actual capital expenditures), computed without regard to and before reduction of
depreciation, amortization or debt service, but otherwise in accordance with
GAAP.
"NET WORTH" means, at any time, the sum of shareholders' equity in the
Company according to GAAP plus convertible Subordinated Debt of the Company, if
any.
"NOTES" has the meaning given it in Section 2.2. "NOTE" means any one
of the Notes.
"NOTICE AND AGREEMENT" means an instrument executed pursuant to
Subsection 26.02 of the Texas Business and Commerce Code, substantially in the
form attached as Exhibit O.
"OBLIGATIONS" means all Liabilities from time to time owing by any of
the Related Persons to any Bank Party under or pursuant to any of the Loan
Documents. "OBLIGATION" means any part of the Obligations.
"OPERATING AGREEMENTS AND MANAGEMENT CONTRACTS" means, with respect to
a Project, any and all contracts and agreements previously, now or at any time
hereafter entered into by the Project Related Persons with respect to the
acquisition, construction, renovation, expansion, ownership, operation,
maintenance, use or management of the Project or otherwise concerning the
operations and business of the Project, including, without limitation, a
Management Agreement, any and all service and maintenance contracts, any
employment contracts, any and all management agreements, any and all consulting
agreements, laboratory servicing agreements, pharmaceutical contracts,
physician, other clinician or other professional services provider contracts,
therapy referral, food and beverage service contracts, and other contracts for
the operation and maintenance of, or provision of services to, the Project.
"PARTICIPATION AGREEMENTS" means, with respect to a Project, any and
all third party payor participation or reimbursement agreements now or at any
time hereafter existing for the benefit of the Project Related Persons relating
to rights to payment or reimbursement from, and claims
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against, private insurers, Managed Care Plans, employee assistance programs,
Blue Cross and/or Blue Shield, federal, state and local Governmental
Authorities, including without limitation, Medicare, Medicaid, CAMPUS, VA and
other third party payers.
"PATIENT ADMISSION AGREEMENTS" means, with respect to a Project, any
and all contracts, authorizations, agreements and/or consents executed by, or on
behalf of any patient or other Person seeking services from the Project Related
Persons pursuant to which the Project Related Persons provide or furnish
long-term care and related services at the Project, including the consent to
treatment and assignment of the payment of benefits by a third party.
"PERCENTAGE SHARE" means, with respect to any Lender (a) when used in
Sections 2.2 or 2.6, in any Request for Advance or when no Advances are
outstanding hereunder, the percentage set forth opposite such Lender's name on
the Lender Schedule attached hereto or any schedule delivered by Agent pursuant
to Section 10.5(c)(ii), and (b) when used otherwise, the percentage obtained by
dividing (i) the sum of the unpaid principal balance of such Lender's Advances
at the time in question, by (ii) the sum of the aggregate unpaid principal
balance of all Advances at such time.
"PERSON" means an individual, corporation, partnership, limited
liability company, association, joint stock company, trust or trustee thereof,
estate or executor thereof, unincorporated organization or joint venture,
Tribunal, or any other legally recognizable entity.
"POST-FORECLOSURE PLAN" has the meaning given to such term in Section
9.10.
"PRESCRIBED FORMS" has the meaning given to such term in Section 3.6.
"PROJECT" and "PROJECTS" have the meaning given to such terms in
Section 2.1. Each Project shall be an assisted living facility.
"PROJECT CLOSING" has the meaning given to such term in Section 4.1.
"PROJECT COSTS" means the costs to refinance and lease up a Project.
"PROJECT LOAN" has the meaning given to such term in Section 2.1.
"PROJECT LOAN AGREEMENT" has the meaning given to such term in Section
2.2.
"PROJECT LOAN CERTIFICATE" has the meaning given to such term in
Section 2.2.
"PROJECT LOAN CLOSING DATE" means the date upon which the Initial
Advance of the Project Loan for a particular Project is made. In no event may a
Project Loan Closing Date be after the Commitment Period.
"PROJECT LOAN DOCUMENTS" means the Loan Documents executed in
connection with a particular Project Loan and the related Project.
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"PROJECT LOAN MATURITY DATE" means, with respect to a particular
Project Loan, the date which is thirty (30) months after the Project Loan
Closing Date for such Project Loan.
"PROJECT RELATED PERSONS" means, with respect to a Project, the
Borrower, the Lessee under the Lease Agreement for such Project and any
Sublessee or Manager. "PROJECT RELATED PERSON" means any one of the Project
Related Persons.
"REGISTER" has the meaning given to such term in Section 10.5(f).
"RELATED PERSONS" means the Borrower and Company. "RELATED PERSON"
means any one of the Related Persons.
"REQUEST FOR ADVANCE" means a written or telephonic request, or a
written confirmation, made by Borrower which meets the requirements of Section
2.3.
"REGULATION D" means Regulation D of the Board of Governors of the
Federal Reserve System, as from time to time amended or supplemented.
"RESERVE REQUIREMENT" means the average maximum rate at which reserves
(including any marginal, supplemental or emergency reserves) are required to be
maintained under Regulation D by member banks of the Federal Reserve System in
New York City with deposits exceeding one billion U.S. Dollars against
"Eurocurrency Liabilities" for the applicable term of a Project Loan, as such
quoted term is used in Regulation D. Without limiting the effect of the
foregoing, the Reserve Requirement shall reflect any other reserves required by
the Federal Reserve System to be maintained by such member banks by reason of
any Regulation against (a) any category of liabilities which includes deposits
by reference to which the LIBOR Rate is to be determined as provided in this
Agreement or (b) any category of extensions of credit or other assets which
includes loans the interest rate on which is determined on the basis of rates
referred to in the definition of "LIBOR Rate" set forth above.
"RESIDENT AGREEMENTS" means, with respect to a Project, any and all
contracts and agreements executed by, or on behalf of any resident or other
Person seeking residency or occupancy in the Project and related services from
the Project Related Persons.
"SECOND EXTENSION PERIOD" means, with respect to a Project Loan, a
period of twelve (12) months commencing on the first day after the expiration of
the First Extension Period.
"SECURITY DOCUMENTS" means the instruments listed in the Security
Schedule with respect to each Project and all other security agreements, deeds
of trust, mortgages, chattel mortgages, pledges, guaranties, financing
statements, continuation statements, extension agreements and other agreements
or instruments now, heretofore, or hereafter delivered by or caused to be
delivered by the Related Persons to Agent or the Lenders in connection with this
Agreement or any transaction contemplated hereby to secure or guarantee the
payment of any part of the Obligations or the performance of the Related
Persons' other duties and obligations under the Loan Documents.
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"SECURITY SCHEDULE" means Schedule 1 hereto.
"SENIOR DEBT" means the Consolidated Debt of the Company which is not
Subordinated Debt.
"SNDA" means a Subordination, Nondisturbance and Attornment Agreement
substantially in the form attached as Exhibit X.
"SUBLEASE AGREEMENT" means, with respect to a Project, a sublease of
that Project between a Lessee, as sublessor, and Sublessee, as sublessee.
"SUBLESSEE" means the Company.
"SUBORDINATED DEBT" means
(i) the Company's $143,750,000 aggregate original principal
amount of 5.25% convertible subordinated debentures due December 15,
2002;
(ii) the Company's $50,000,000 aggregate original principal
amount of 7.00% convertible subordinated debentures due June 1, 2004;
(iii) the Company's $35,000,000 aggregate original principal
amount of 6.75% convertible subordinated debentures due June 30, 2006;
(iv) Consolidated Debt of the Company which is subordinated to
payment of the Obligations on terms comparable to those contained in
any of the indentures related to the Subordinated Debt described in the
foregoing clauses (i), (ii) and (iii); and
(v) Consolidated Debt of the Company which is subordinated to
payment of the Obligations in a manner approved by Agent.
"SUBSIDIARY" means, with respect to any Person, any corporation,
limited liability company, association, partnership, joint venture, or other
business or corporate entity, enterprise or organization which is directly or
indirectly (through one or more intermediaries) controlled by or owned more than
fifty percent by such Person.
"SUBORDINATION OF MANAGEMENT AGREEMENT" means a Subordination of
Management Agreement substantially in the form attached as Exhibit U.
"SUBSIDIARY" means, with respect to any Person, any corporation,
association, partnership, joint venture, or other business or corporate entity,
enterprise or organization which is directly or indirectly (through one or more
intermediaries) controlled by or owned fifty percent or more by such Person.
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"TANGIBLE NET WORTH" means, with respect to a Person, the remainder of
(i) all assets of the Person, other than intangible assets (including as
intangible assets such assets as patents, copyrights, licenses, franchises,
goodwill, trade names, trade secrets, leases required to be capitalized on the
Person's financial statements under GAAP, and any unallocated excess costs of
investments in subsidiaries over equity in underlying net assets at dates of
acquisition), minus (ii) all indebtedness of the Person and its subsidiaries
required to be included in the Person's balance sheet under GAAP, but excluding
obligations under capitalized leases.
"TOTAL CAPITAL" means, at any time, the sum of Net Worth and Total
Funded Debt.
"TOTAL FUNDED DEBT" means, at any time, the aggregate amount of the
Company's Senior Debt, including contingent liabilities created by way of
Guaranteed Debt.
"TREASURY NOTE RATE" means the Treasury Constant Maturity Series yields
reported, for the latest day for which such yields shall have been so reported
as of the applicable Business Day, in Federal Reserve statistical Release
H.15(519) (or any comparable successor publication) for actively traded U.S.
Treasury securities having a constant maturity equal to ten (10) years. Such
implied yield shall be determined, if necessary, by (i) converting U.S. Treasury
bill quotations to bond-equivalent yields in accordance with accepted financial
practice and (ii) interpolating linearly between reported yields. The term
"Business Day" as used in this paragraph means a day on which banks are open for
business in New York, New York.
"TREASURY BASED RATE" means a rate per annum equal to the Treasury Note
Rate plus two and one-quarter percent (2.25%).
"TRIBUNAL" means any government, any arbitration panel, any court or
any governmental department, commission, board, bureau, agency or
instrumentality of the United States of America or any state, province,
commonwealth, nation, territory, possession, county, parish, town, township,
village or municipality, whether now or hereafter constituted and/or existing.
"TYPE" means, with respect to any Advances, the characterization of
such Advances as either Base Rate Advances or LIBOR Advances.
Section 1.2. Exhibits and Schedules; Additional Definitions. All
Exhibits and Schedules attached to this Agreement are a part hereof for all
purposes. Reference is hereby made to the Security Schedule for the meaning of
certain terms defined therein and used but not defined herein, which definitions
are incorporated herein by reference.
Section 1.3. Amendment of Defined Instruments. Unless the context
otherwise requires or unless otherwise provided herein the terms defined in this
Agreement or any other Loan Document which refer to a particular agreement,
instrument or document also refer to and include all renewals, extensions,
supplements, modifications, amendments and restatements of such agreement,
instrument or document, provided that nothing contained in this section shall be
construed to authorize any such renewal, extension, supplement, modification,
amendment or restatement.
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Section 1.4. References and Titles. All references in this Agreement to
Exhibits, Schedules, articles, sections, subsections and other subdivisions
refer to the Exhibits, Schedules, articles, sections, subsections and other
subdivisions of this Agreement unless expressly provided otherwise. Titles
appearing at the beginning of any subdivisions are for convenience only and do
not constitute any part of such subdivisions and shall be disregarded in
construing the language contained in such subdivisions. The words "THIS
AGREEMENT", "THIS INSTRUMENT", "HEREIN", "HEREOF", "HEREBY", "HEREUNDER" and
words of similar import refer to this Agreement as a whole and not to any
particular subdivision unless expressly so limited. The phrases "THIS SECTION"
and "THIS SUBSECTION" and similar phrases refer only to the sections or
subsections hereof in which such phrases occur. The word "OR" is not exclusive,
and the word "INCLUDING" (in its various forms) means "INCLUDING WITHOUT
LIMITATION". Pronouns in masculine, feminine and neuter genders shall be
construed to include any other gender, and words in the singular form shall be
construed to include the plural and vice versa, unless the context otherwise
requires. The foregoing shall apply to all Loan Documents.
Section 1.5. Calculations and Determinations. All calculations under
the Loan Documents of interest chargeable with respect to Advances and of fees
and other charges shall be made on the basis of actual days elapsed (including
the first day but excluding the last) and a year of 360 days. Each determination
by a Bank Party of amounts to be paid under Sections 3.2 through 3.6 or with
respect to the LIBOR Adjusted Rate, LIBOR Rate, Business Day or Interest Period,
shall, in the absence of manifest error, be conclusive and binding. Unless
otherwise expressly provided herein or unless Majority Lenders otherwise consent
all financial statements and reports furnished to any Bank Party hereunder shall
be prepared and all financial computations and determinations pursuant hereto
shall be made in accordance with GAAP.
ARTICLE II - The Loans
Section 2.1. Commitments to Lend. Subject to the terms and conditions
hereof, the Lenders agree to make loans to Borrower in an amount up to
$50,000,000 in the aggregate (the "Loan") to fund the costs of financing
assisted living facilities (each such facility being referred to herein as a
"PROJECT" and collectively as the "PROJECTS"). The Loan funds allocated to
finance a particular Project and the loan of such allocated funds by Lenders
with respect to that Project are referred to herein as a "PROJECT LOAN". The
aggregate amount of all Project Loans may not exceed $50,000,000. Amounts
borrowed and repaid hereunder may not be reborrowed hereunder.
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Section 2.2. Project Loans
(a) The parties contemplate that there will be a series of
Project Loans comprising the Loan (with a Project Loan for each
Project); provided, however, no Lender shall have an obligation to make
advances hereunder with respect to a particular Project until such time
as Lenders have approved a Project Loan for such Project in accordance
with the terms hereof. Each advance made by Lenders to Borrower under a
Project Loan is referred to herein as an "ADVANCE" and collectively as
"ADVANCES". Each Lender's Advances under a Project Loan shall not
exceed such Lender's Percentage Share of the Project Loan.
(b) A Project Loan may not exceed the lesser of (1) an amount
equal to eighty percent (80%) of the Project's cash cost to reach
stabilization, or (2) an amount equal to seventy-five percent (75%) of
the stabilized appraised value of the Project. The aggregate amount of
all Advances with respect to a Project Loan may not exceed the amount
of the Project Loan. Borrower shall apply all funds from Advances under
a Project Loan to the Project Costs for the Project related to such
Project Loan.
(c) Advances will be made under a Project Loan only upon
compliance with the terms of a Project Loan Agreement (herein so
called) between Borrower, the Company and Agent substantially in the
form of Exhibit S and the terms of this Agreement.
(d) Each Project Loan shall be evidenced by one or more notes
(each herein called a "NOTE") made by Borrower payable to an individual
Lender and in an amount equal to such Lender's Percentage Share of the
Project Loan, in the form of Exhibit A. All promissory notes delivered
in connection with the Project Loans are referred to as the "NOTES").
The amount of principal owing on a Project Loan at any given time shall
be the aggregate amount of all Advances theretofore made under the
Project Loan minus all payments of principal theretofore received by
the Lenders on the Project Loan. Interest on the Project Loan shall
accrue and be due and payable as provided herein.
(e) In connection with the closing of a Project Loan, Borrower
shall deliver to Agent a Project Loan Certificate (herein so called) in
the form of Exhibit R with respect to the Project Loan.
Section 2.3. Requests for Advances. Borrower must give to Agent written
notice of any requested Advance under a Project Loan to be advanced by Lenders.
Each such notice constitutes a "REQUEST FOR ADVANCE" hereunder and must:
(a) specify (i) the aggregate amount of any such Borrowing of
new Base Rate Advances and the date on which such Base Rate Advances
are to be advanced, or (ii) the aggregate amount of any such Borrowing
of new LIBOR Advances and the date on which such LIBOR Advances are to
be advanced (which shall be the first day of the Interest Period which
is to apply thereto), and the length of the applicable Interest Period;
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(b) be received by Agent not later than 10:00 a.m., Dallas,
Texas time, the third Business Day preceding the day on which any such
Base Rate Advances or LIBOR Advances are to be made; and
(c) shall designate the Project Loan to which such Request for
Advance applies.
Each such written request or confirmation must be made in the form and substance
of the "REQUEST FOR ADVANCE" attached hereto as Exhibit B, duly completed. Upon
receipt of any such Request for Advance, Agent shall give each Lender prompt
notice of the terms thereof. If Agent notifies each Lender that all conditions
precedent to such new Advances have been met pursuant to the terms of the
related Project Loan Agreement, each Lender will on the date requested promptly
remit to Agent at Agent's office in Dallas, Texas the amount of such Lender's
new Advance in immediately available funds, and upon receipt of such funds,
unless to its actual knowledge any conditions precedent to such Advances have
been neither met nor waived as provided herein, Agent shall promptly make such
Advances available to Borrower. Unless Agent shall have received prompt notice
from a Lender that such Lender will not make available to Agent such Lender's
new Advance, Agent may in its discretion assume that such Lender has made such
Advance available to Agent in accordance with this section and Agent may if it
chooses, in reliance upon such assumption, make such Advance available to
Borrower. If and to the extent such Lender shall not so make its new Advance
available to Agent, such Lender agrees to pay or repay to Agent within three
days after demand the amount of such Advance together with interest thereon, for
each day from the date such amount was made available to Borrower until the date
such amount is paid or repaid to Agent, with interest at the Federal Funds Rate.
If such Lender does not pay or repay to Agent such amount within such three-day
period, Agent shall in addition to such amount be entitled to recover from such
Lender, on demand, interest thereon at the Late Payment Rate, calculated from
the date such amount was made available to Borrower. The failure of any Lender
to make any new Advance to be made by it hereunder shall not relieve any other
Lender of its obligation hereunder, if any, to make its new Advance, but no
Lender shall be responsible for the failure of any other Lender to make any new
Advance to be made by such other Lender.
Section 2.4. Continuations and Conversions of Existing Advances. With
respect to a Project Loan, Borrower may make the following elections with
respect to Advances already outstanding under such Project Loan: to convert Base
Rate Advances to LIBOR Advances, to convert LIBOR Advances to Base Rate Advances
on the last day of the Interest Period applicable thereto, or to continue LIBOR
Advances beyond the expiration of such Interest Period by designating a new
Interest Period to take effect at the time of such expiration. In making such
elections with respect to a Project Loan and Advances thereunder, Borrower may
combine existing Advances made pursuant to separate Borrowings into one new
Borrowing or divide existing Advances made pursuant to one Borrowing into
separate new Borrowings. To make any such election, Borrower must give to Agent
written notice of any such conversion or continuation of existing Advances, with
a separate notice given for each new Borrowing. Each such notice constitutes a
"CONTINUATION/CONVERSION NOTICE" hereunder and must:
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(a) specify the existing Advances which are to be continued or
converted and the Project Loan to which such Advances relate;
(b) specify (i) the aggregate amount of any Borrowing of Base
Rate Advances into which such existing Advances are to be continued or
converted and the date on which such continuation or conversion is to
occur, or (ii) the aggregate amount of any Borrowing of LIBOR Advances
into which such existing Advances are to be continued or converted, the
date on which such continuation or conversion is to occur (which shall
be the first day of the Interest Period which is to apply to such LIBOR
Advances), and the length of the applicable Interest Period; and
(c) be received by Agent not later than 10:00 a.m., Dallas,
Texas time, on the third Business Day preceding the day on which any
such continuation or conversion to LIBOR Advances is to occur.
Each such written request or confirmation must be made in the form and substance
of the "CONTINUATION/CONVERSION NOTICE" attached hereto as Exhibit C, duly
completed. Upon receipt of any such Continuation/Conversion Notice, Agent shall
give each Lender prompt notice of the terms thereof. Each Continuation/
Conversion Notice shall be irrevocable and binding on Borrower. During the
continuance of any Event of Default, Borrower may not make any election to
convert existing Advances into LIBOR Advances or continue existing Advances as
LIBOR Advances. If (due to the existence of a Default or for any other reason)
Borrower fails to timely and properly give any notice of continuation or
conversion with respect to a Borrowing of existing LIBOR Advances at least three
days prior to the end of the Interest Period applicable thereto, such LIBOR
Advances shall automatically be converted into Base Rate Advances at the end of
such Interest Period. No new funds shall be advanced by any Lender in connection
with any continuation or conversion of existing Advances pursuant to this
section, and no such continuation or conversion shall be deemed to be a new
advance of funds for any purpose; such continuations and conversions merely
constitute a change in the interest rate applicable to already outstanding
Advances. Notwithstanding anything to the contrary contained herein, Borrower
shall have no more than three (3) LIBOR tranches of Advances in effect at any
time with respect to a Project Loan.
Section 2.5. Use of Proceeds. In no event shall the funds from any
Advances be used directly or indirectly by any Person for personal, family,
household or agricultural purposes or for the purpose, whether immediate,
incidental or ultimate, of purchasing, acquiring or carrying any "margin stock"
or any "margin securities" (as such terms are defined respectively in Regulation
U and Regulation G promulgated by the Board of Governors of the Federal Reserve
System) or to extend credit to others directly or indirectly for the purpose of
purchasing or carrying any such margin stock or margin securities. Borrower
represents and warrants that Borrower is not engaged principally, or as one of
Borrower's important activities, in the business of extending credit to others
for the purpose of purchasing or carrying such margin stock or margin
securities.
Section 2.6. Fees.
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(a) Master Facility Fee. In consideration of the execution of
this Agreement by Lenders, the Related Persons shall pay to Agent for
the account of the Lenders a master facility fee of $62,500 on the date
hereof.
(b) Reaffirmation Fee. Provided no Default exists, the Related
Persons may extend the Commitment Period for a period of twelve (12)
months, upon payment to Agent for the account of the Lenders of a
reaffirmation fee equal to one-eighth percent (.125%) of the unused
portion of the Commitment. This reaffirmation fee shall be due and
payable on or before the expiration of the original stated maturity of
the Commitment Period.
(c) Project Loan Commitment Fee. In consideration of the
making of a Project Loan, Borrower shall pay to Agent for the account
of Lenders a commitment fee equal to three-fourths percent (0.75%) of
the amount of such Project Loan on the Project Loan Closing Date for
such Project Loan.
(d) Modification Fees. In consideration of Lenders' review and
processing of any amendment, waiver or other modification of any Loan
Document, the Related Persons will pay to Agent, if so requested, for
the account of Lenders a modification fee in the aggregate amount of
$1,000 for each such amendment, waiver or modification, due and payable
on the effective date thereof.
Section 2.7. Extension of Project Loan Maturity Date. With respect to a
Project Loan, Borrower shall have the right and option to extend the Project
Loan Maturity Date for such Project Loan (a) to a date ending upon the
expiration of the First Extension Period, and (b) upon expiration of the First
Extension Period, to a date ending upon the expiration of the Second Extension
Period, each such extension being subject to the conditions that:
(a) Borrower shall have notified Agent in writing of its
exercise of each such extension at least thirty (30) days (x) prior to
the Project Loan Maturity Date, in the case of the first such
extension, and (y) prior to the end of the First Extension Period, in
the case of the second such extension;
(b) on the date of such written notice and on the date of
commencement of the applicable Extension Period, there shall exist no
Default or Event of Default;
(c) such written notice given pursuant to clause (a) above
shall be accompanied by a fee in the amount of three-eighths percent
(.375%) of the stated principal amount of the Project Loan for the
First Extension Period, and five-eighths percent (.625%) of such stated
principal amount for the Second Extension Period;
(d) at or before the commencement of the First Extension
Period, Borrower shall deliver to the Agent evidence satisfactory to
Agent that the operation of the Project related to the Project Loan has
achieved a Debt Coverage Ratio of at least 1.2 to 1 for a period of
three (3) consecutive months prior to the beginning of the First
Extension Period
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and at or before the commencement of the Second Extension Period,
Borrower shall deliver to the Agent evidence satisfactory to the Agent
that the operation of the Project related to the Project Loan has
achieved a Debt Coverage Ratio of at least 1.3 to 1 for a period of
three (3) consecutive months prior to the beginning of the Second
Extension Period;
(e) on the date of each such written notice, the fair market
value of the Project shall be in an amount such that the related
Project Loan is less than 75% of the appraised value of the Project and
Agent, at its option, may obtain an appraisal at Borrower's expense in
order to confirm such ratio;
(f) upon each such extension, the Related Persons shall have
executed such documents as Agent deems reasonably appropriate to
evidence such extensions and shall have delivered to Agent an
endorsement to the mortgagee policy of title insurance insuring the
lien of the Mortgage, stating that the coverage of such policy has not
been reduced or terminated by virtue of such extension; and
(g) the Company shall be the lessee under the Lease Agreement
for the Project related to the Project Loan.
provided, however, the Second Extension Period shall not come into effect unless
the First Extension Period shall have been in effect. Commencing on the first
day of the month following commencement of the First Extension Period and on the
first day of each month thereafter during the First Extension Period, Borrower
shall pay an installment of principal on the Project Loan in the amount
necessary to fully amortize the outstanding balance of the Project Loan over a
twenty-five (25) year period on a straight-line basis, which installment is in
addition to accrued interest due on each such date. Commencing on the first day
of the month following commencement of the Second Extension Period, Borrower
shall pay an installment of principal on the Project Loan in the amount
necessary to fully amortize the outstanding balance of the Project Loan over a
twenty-three (23) year period on a straight-line basis, which installment is in
addition to accrued interest due on each such date. All payments of principal
shall be credited first against principal amounts bearing interest at the Base
Rate and then toward the payment of LIBOR Advances. Payments of LIBOR Advances
shall be applied in such manner as Borrower shall select; provided, however,
that Borrower shall select LIBOR Advances to be repaid in a manner designed to
minimize any losses incurred by virtue of such payment. If Borrower shall fail
to select the LIBOR Advances to which such payments are to be applied, or if a
Default has occurred and is continuing at the time of payment, then Agent shall
be entitled to apply the payment to such LIBOR Advances in the manner it deems
appropriate. Borrower shall compensate the Bank Parties for any losses incurred
by virtue of any payment of those portions of the Project Loan accruing interest
at the LIBOR Adjusted Rate prior to the last day of the relevant Interest
Period, which compensation shall be determined in accordance with the provisions
set forth in this Agreement, and any payment received pursuant to this Section
2.7 shall be applied first to losses incurred by the Bank Parties by reason of
such payment.
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Section 2.8. Lease and Sublease. (a) Borrower has informed Agent that
each Project will be subject to a Lease Agreement, Management Agreement and, in
some instances, a Sublease Agreement, each of which shall be subject and
subordinate to the Mortgage on the Project. Borrower acknowledges that each
Lease Agreement and Management Agreement (or Sublease Agreement, as the case may
be) is subject to the approval of Agent in its reasonable discretion. Assuming
Agent has approved the Lease Agreement and Management Agreement (or Sublease
Agreement, as the case may be) for a Project, Agent will enter into an SNDA with
the parties to the Lease Agreement. In addition, the parties to the Lease
Agreement and Management Agreement (or Sublease Agreement, as the case may be)
shall execute and deliver to Agent a Collateral Assignment, Subordination of
Management Agreement and Security Agreement.
(b) The Loan Documents have been prepared on the assumption that each
Project will be leased and the Lessee will enter into a Management Agreement
with Manager. If Borrower elects not to lease a Project or a Lessee elects to
sublease a Project, the Related Persons acknowledge that adjustments to the Loan
Documents may be necessary. The Related Persons agree that, in such event, the
Loan Documents will be modified, at the expense of the Related Persons, to
accommodate any such change. The modified Loan Documents must be satisfactory to
the Bank Parties in their reasonable discretion.
(c) The Bank Parties acknowledge that upon a Project achieving
stabilization, the Lease Agreement covering such Project will be assigned to the
Company and the Management Agreement terminated. The Bank Parties consent to
such assignment and termination provided the Company assumes all of the
obligations of the lessee under the Lease Agreement and any other Loan Documents
to which the lessee is a party, upon terms reasonably satisfactory to Agent and
at the expense of the Related Persons. In addition, the Company shall execute
such financing statements and other documents as shall reasonably be requested
by Agent.
ARTICLE III - Payments to Lenders
Section 3.1. General Procedures. Each Related Person will make each
payment which it owes under the Loan Documents to Agent for the account of the
Bank Party to whom such payment is owed. Each such payment must be received by
Agent not later than 11:00 a.m., Dallas, Texas time, on the date such payment
becomes due and payable, in lawful money of the United States of America,
without set-off, deduction or counterclaim, and in immediately available funds.
Any payment received by Agent after such time will be deemed to have been made
on the next following Business Day. Should any such payment become due and
payable on a day other than a Business Day, the maturity of such payment shall
be extended to the next succeeding Business Day, and, in the case of a payment
of principal or past due interest, interest shall accrue and be payable thereon
for the period of such extension as provided in the Loan Document under which
such payment is due. Each payment under a Loan Document shall be due and payable
at the place provided therein and, if no specific place of payment is provided,
shall be due and payable at the offices of Agent. When Agent collects or
receives money on account of the Obligations, Agent shall distribute all money
so collected or received, and each Bank Party shall apply all such money so
distributed, as follows:
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(a) first, for the payment of all Obligations which are then
due (and if such money is insufficient to pay all such Obligations,
first to any reimbursements due Agent under Section 6.7 or 10.4 and
then to the partial payment of all other Obligations then due in
proportion to the amounts thereof, or as Bank Parties shall otherwise
agree);
(b) then for the prepayment of amounts owing under the Loan
Documents (other than principal on the Notes) if so specified by
Borrower;
(c) then for the prepayment of principal on the Notes,
together with accrued and unpaid interest on the principal so prepaid;
and
(d) last, for the payment or prepayment of any other
Obligations.
Prior to an Event of Default, moneys collected or received by Agent with respect
to a particular Project shall be applied in the manner above against Obligations
under the Project Loan related to such Project. All payments applied to
principal or interest on any Note shall be applied first to any interest then
due and payable, then to principal then due and payable. All distributions of
amounts described in any of subsections (b), (c) or (d) above shall be made by
Agent pro rata to each Bank Party then owed Obligations described in such
subsection in proportion to all amounts owed to all Bank Parties which are
described in such subsection. Notwithstanding anything to the contrary contained
herein, in the event any Lender shall have failed to make an Advance as
contemplated under Section 2.3 hereof (a "DEFAULTING LENDER") and the Agent or
another Lender or Lenders shall have made such Advance, payment received by
Agent for the amount of such Defaulting Lender or Lenders shall not be
distributed to such Defaulting Lender or Lenders until such Advance or Advances
shall have been repaid in full to Agent or the Lender or Lenders who funded such
Advance or Advances.
Section 3.2. Capital Reimbursement. If either (a) the introduction or
implementation of or the compliance with or any change in or in the
interpretation of any Law, or (b) the introduction or implementation of or the
compliance with any request, directive or guideline from any central bank or
other governmental authority (whether or not having the force of Law) affects or
would affect the amount of capital required or expected to be maintained by any
Bank Party or any corporation controlling any Bank Party, then, upon demand by
such Bank Party, the Related Persons will pay to Agent for the benefit of such
Bank Party, from time to time as specified by such Bank Party, such additional
amount or amounts which such Bank Party shall determine to be appropriate to
compensate such Bank Party or any corporation controlling such Bank Party in
light of such circumstances, to the extent that such Bank Party reasonably
determines that the amount of any such capital would be increased or the rate of
return on any such capital would be reduced by or in whole or in part based on
the existence of the face amount of such Bank Party's Advances, or
participations in commitments under this Agreement.
Section 3.3. Increased Cost of LIBOR Advances. If any applicable Law
(whether now in effect or hereinafter enacted or promulgated, including
Regulation D) or any interpretation or
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administration thereof by any governmental authority charged with the
interpretation or administration thereof (whether or not having the force of
Law):
(a) shall change the basis of taxation of payments to any Bank
Party of any principal, interest, or other amounts attributable to any
LIBOR Advance or otherwise due under this Agreement in respect of any
LIBOR Advance (other than taxes imposed on the overall net income of
such Bank Party or any lending office of such Bank Party by any
jurisdiction in which such Bank Party or any such lending office is
located); or
(b) shall change, impose, modify, apply or deem applicable any
reserve, special deposit or similar requirements in respect of any
LIBOR Advance (excluding those for which such Bank Party is fully
compensated pursuant to adjustments made in the definition of LIBOR
Adjusted Rate) or against assets of, deposits with or for the account
of, or credit extended by, such Bank Party; or
(c) shall impose on any Bank Party or the interbank
eurocurrency deposit market any other condition affecting any LIBOR
Advance, the result of which is to increase the cost to any Bank Party
of funding or maintaining any LIBOR Advance or to reduce the amount of
any sum receivable by any Bank Party in respect of any LIBOR Advance by
an amount deemed by such Bank Party to be material,
then such Bank Party shall promptly notify Agent and Borrower in writing of the
happening of such event and of the amount required to compensate such Bank Party
for such event (on an after-tax basis, taking into account any taxes on such
compensation), whereupon (i) the Related Person shall pay such amount to Agent
for the account of such Bank Party and (ii) Borrower may elect, by giving to
Agent and such Bank Party not less than three Business Days' notice, to convert
all (but not less than all) of any such LIBOR Advances into Base Rate Advances.
Section 3.4. Availability. If (a) any change in applicable Laws, or in
the interpretation or administration thereof of or in any jurisdiction
whatsoever, domestic or foreign, shall make it unlawful or impracticable for any
Bank Party to fund or maintain LIBOR Advances, or shall materially restrict the
authority of any Bank Party to purchase or take offshore deposits of dollars
(i.e., "eurodollars") or (b) any Bank Party determines that matching deposits
appropriate to fund or maintain any LIBOR Advance are not available to it, or
(c) any Bank Party determines that the formula for calculating the LIBOR
Adjusted Rate does not fairly reflect the cost to such Bank Party of making or
maintaining loans based on such rate, then, upon notice by such Bank Party to
Borrower and Agent, Borrower's right to elect LIBOR Advances from such Bank
Party shall be suspended to the extent and for the duration of such illegality,
impracticability or restriction and all LIBOR Advances of such Bank Party which
are then outstanding or are then the subject of any Request for Advances and
which cannot lawfully or practicably be maintained or funded shall immediately
become or remain, or shall be funded as, Base Rate Advances of such Bank Party.
The Related Persons agree to indemnify each Bank Party and hold it harmless
against all costs, expenses, claims, penalties, liabilities and damages which
may result from any such change in Law, interpretation or administration. Such
indemnification shall be on an after-tax basis, taking into account any taxes
imposed on the amounts paid as indemnity.
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Section 3.5. Funding Losses. In addition to its other obligations
hereunder, the Related Persons will indemnify each Bank Party against, and
reimburse each Bank Party on demand for, any loss or expense incurred or
sustained by such Bank Party (including any loss or expense incurred by reason
of the liquidation or reemployment of deposits or other funds acquired by a Bank
Party to fund or maintain LIBOR Advances), as a result of (a) any payment or
prepayment (whether authorized or required hereunder or otherwise) of all or a
portion of a LIBOR Advance on a day other than the day on which the applicable
Interest Period ends, (b) any payment or prepayment, whether required hereunder
or otherwise, of an Advance made after the delivery, but before the effective
date, of a Continuation/Conversion Notice, if such payment or prepayment
prevents such Continuation/Conversion Notice from becoming fully effective, (c)
the failure of any Advance to be made or of any Continuation/Conversion Notice
to become effective due to any condition precedent not being satisfied or due to
any other action or inaction of a Related Person, or (d) any conversion (whether
authorized or required hereunder or otherwise) of all or any portion of any
LIBOR Advance into a Base Rate Advance or into a different LIBOR Advance on a
day other than the day on which the applicable Interest Period ends. Such
indemnification shall be on an after-tax basis, taking into account any taxes
imposed on the amounts paid as indemnity.
Section 3.6. Reimbursable Taxes. The Related Persons covenant and
agree that:
(a) The Related Persons will indemnify each Bank Party against
and reimburse each Bank Party for all present and future income, stamp
and other taxes, levies, costs and charges whatsoever imposed,
assessed, levied or collected on or in respect of this Agreement or any
LIBOR Advances (whether or not legally or correctly imposed, assessed,
levied or collected), excluding, however, any taxes imposed on or
measured by the overall net income of Agent or such Bank Party or any
lending office of such Bank Party by any jurisdiction in which such
Bank Party or any such lending office is located (all such non-excluded
taxes, levies, costs and charges being collectively called
"REIMBURSABLE TAXES" in this section). Such indemnification shall be on
an after-tax basis, taking into account any taxes imposed on the
amounts paid as indemnity.
(b) All payments on account of the principal of, and interest
on, each Bank Party's Notes, and all other amounts payable by the
Related Persons to any Bank Party hereunder, shall be made in full
without set-off or counterclaim and shall be made free and clear of and
without deductions or withholdings of any nature by reason of any
Reimbursable Taxes, all of which will be for the account of the Related
Persons. In the event of the Related Persons being compelled by Law to
make any such deduction or withholding from any payment to any Bank
Party, the Related Persons shall pay on the due date of such payment,
by way of additional interest, such additional amounts as are needed to
cause the amount receivable by such Bank Party after such deduction or
withholding to equal the amount which would have been receivable in the
absence of such deduction or withholding. If the Related Persons should
make any deduction or withholding as aforesaid, the Related Persons
shall within 60 days thereafter forward to such Bank Party
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an official receipt or other official document evidencing payment of
such deduction or withholding.
(c) If Borrower is ever required to pay any Reimbursable Tax
with respect to any LIBOR Advance, Borrower may elect, by giving to
Agent and such Bank Party not less than three Business Days' notice, to
convert all (but not less than all) of any such LIBOR Advance into a
Base Rate Advance, but such election shall not diminish the Related
Persons' obligation to pay all Reimbursable Taxes.
(d) Notwithstanding the foregoing provisions of this section,
each of the Related Persons shall be entitled, to the extent it is
required to do so by Law, to deduct or withhold (and not to make any
indemnification or reimbursement for) income or other similar taxes
imposed by the United States of America (other than any portion thereof
attributable to a change in federal income tax Laws effected after the
date hereof) from interest, fees or other amounts payable hereunder for
the account of any Bank Party, other than a Bank Party (i) who is a
U.S. person for Federal income tax purposes or (ii) who has the
Prescribed Forms on file with Agent (with copies provided to the
Related Persons) for the applicable year to the extent deduction or
withholding of such taxes is not required as a result of the filing of
such Prescribed Forms, provided that if a Related Person shall so
deduct or withhold any such taxes, it shall provide a statement to
Agent and such Bank Party, setting forth the amount of such taxes so
deducted or withheld, the applicable rate and any other information or
documentation which such Bank Party may reasonably request for
assisting such Bank Party to obtain any allowable credits or deductions
for the taxes so deducted or withheld in the jurisdiction or
jurisdictions in which such Bank Party is subject to tax. As used in
this section, "PRESCRIBED FORMS" means such duly executed forms or
statements, and in such number of copies, which may, from time to time,
be prescribed by Law and which, pursuant to applicable provisions of
(x) an income tax treaty between the United States and the country of
residence of the Bank Party providing the forms or statements, (y) the
Internal Revenue Code of 1986, as amended from time to time, or (z) any
applicable rules or regulations thereunder, permit the Related Persons
to make payments hereunder for the account of such Bank Party free of
such deduction or withholding of income or similar taxes.
Section 3.7. Reimbursement Requests; Replacement of Lenders.
(a) Notwithstanding anything in this Agreement to the
contrary, (i) no Bank Party shall be entitled to compensation or
payment or reimbursement of other amounts under Sections 3.2 through
3.6 incurred or accruing more than ninety (90) days prior to the giving
of notice to the Company (on behalf of any Related Person) of
additional costs or other amounts of the nature described in such
Sections, and (ii) no Bank Party shall demand compensation, payment or
reimbursement under Section 3.2 if it shall not at the time be the
general policy or practice of such Bank Party to demand such
compensation, payment or reimbursement in similar circumstances under
comparable provisions of other credit agreements.
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(b) If any Bank Party seeks reimbursement for increased costs
under Sections 3.2 through 3.6, then within ninety (90) days thereafter
-- provided no Event of Default then exists -- the Related Persons
shall have the right (unless such Bank Party withdraws its request for
additional compensation) to replace such Bank Party by requiring such
Bank Party to assign its Notes and its commitments hereunder to an
Eligible Transferee reasonably acceptable to Agent and to the Related
Persons, provided that: (i) all Obligations of the Related Persons
owing to such Bank Party being replaced (including such increased
costs, but excluding principal and accrued interest on the Notes being
assigned) shall be paid in full to such Bank Party concurrently with
such assignment, and (ii) the replacement Eligible Transferee shall
purchase the Notes being assigned by paying to such Bank Party a price
equal to the principal amount thereof plus accrued and unpaid interest
thereon. In connection with any such assignment, the Related Persons,
Agent, such Bank Party and the replacement Eligible Transferee shall
otherwise comply with Section 10.5. Notwithstanding the foregoing
rights of the Related Persons under this section, however, the Related
Persons may not replace any Bank Party which seeks reimbursement for
increased costs under Section 3.2 through 3.6 unless the Related
Persons are at the same time replacing all Bank Parties which are then
seeking such compensation.
ARTICLE IV - Conditions Precedent to Lending
Section 4.1. Application for a Project Loan.
(a) At such time as Borrower shall desire to obtain a Project
Loan with respect to a particular Project, Borrower shall submit to
Agent (a) a Loan Application for the Project Loan (accompanied by a
$10,000 due diligence deposit and $3,500 nonrefundable application
fee), (b) a description of the applicable Project, together with an
analysis of the local market conditions applicable thereto, and (c) a
preliminary budget of all Project Costs with respect to the Project.
The Bank Parties shall review the Loan Application and accompanying
information, and Borrower shall supply Agent with such additional
information regarding the acquisition, development, construction or
operation of the Project as Agent may reasonably require. Approval or
disapproval of the requested Project Loan shall be at the sole
discretion of the Lenders. If the Project Loan is approved, the
Borrower and the Bank Parties shall then pursue a closing (the "PROJECT
CLOSING") of the Project Loan in accordance with the terms and
conditions of this Agreement.
(b) Once a Project Loan has been approved for a Project, no
Lender has an obligation to make the Initial Advance under the Project
Loan unless Agent shall have received (1) all items described on the
Pre-Closing Document List attached as Exhibit L with respect to the
Project (including an appraisal and environmental report) and each of
such items shall be satisfactory to the Bank Parties in their sole
discretion, and (2) all of the following, at Agent's office in Dallas,
Texas, duly executed and delivered and in form, substance and date
satisfactory to the Bank Parties with respect to the Project:
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(1) each of the Security Documents;
(2) favorable opinion of counsel for the Related
Persons; and
(3) in addition to the Security Documents, all
documents, agreements and instruments required under Section
5.1 of the Project Loan Agreement, each in form satisfactory
to the Bank Parties in their sole discretion.
(c) Unusual State Requirements. Agent may employ counsel in
each state in which a Project is located to advise Agent on local law
matters and to revise the Loan Documents to conform to local law and
customary practice of sophisticated lenders in such state. Agent will,
however, inform its local counsel that the form of the Loan Documents
has already been negotiated and local counsel is to limit its comments
accordingly. Nevertheless, in the event local counsel advises Agent
that certain revisions to the Loan Documents are necessitated by local
law issues, the Loan Documents will be revised accordingly. Further, in
the event local counsel advises Agent that because of local law issues
(such as a one-action rule) it is advisable to execute Loan Documents
in a form different from that previously negotiated, the Related
Persons shall, as a further condition to Borrower obtaining the
affected Project Loan, execute or cause to be executed such documents
as are reasonably proposed by Agent and modify where necessary existing
and future Loan Documents to recognize issues raised by such local law
issues.
Section 4.2. Additional Conditions Precedent to Initial Advance. Once a
Project Loan has been approved for a Project, no Lender has any obligation to
make the Initial Advance under the Project Loan unless the following conditions
precedent have been satisfied:
(a) In the event more than sixty (60) days shall have passed
since the Bank Parties' approval of the Project Loan for the Project,
Borrower shall have provided Agent such information as Agent may
reasonably request with respect to matters provided Agent in connection
with the Loan Application which may no longer be current and such
updated information shall be satisfactory to the Bank Parties in all
respects.
Section 4.3. Additional Conditions Precedent. No Lender has any
obligation to make any Advance under a Project Loan unless the following
conditions precedent have been satisfied:
(a) All representations and warranties made by the Related
Persons in any Loan Document shall be true on and as of the date of
such Advance (except to the extent that the facts upon which such
representations are based have been changed by the extension of credit
hereunder) as if such representations and warranties had been made as
of the date of such Advance.
(b) No Default shall exist at the date of such Advance.
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(c No Material Adverse Change shall have occurred to, and no
event or circumstance shall have occurred that could cause a Material
Adverse Change to, either of the Related Persons' financial condition
or businesses.
(d Each of the Related Persons shall have performed and
complied with all agreements and conditions required in the Loan
Documents to be performed or complied with by it on or prior to the
date of such Advance.
(e The making of such Advance shall not be prohibited by any
Law and shall not subject any Lender to any penalty or other onerous
condition under or pursuant to any such Law.
(f With respect to a particular Project, the Project Related
Persons shall have satisfied all material conditions set forth in the
Project Loan Agreement for such Project.
(g Payment of all commitment, facility, agency and other fees
then due and required to be paid to any Bank Party pursuant to any Loan
Documents or any commitment agreement heretofore entered into.
Section 4.4. Releases. In the event Borrower intends to pay a Project
Loan in full and desires to obtain a release of the lien of the Mortgage and any
other Security Document filed against the Project related to such Project Loan,
Borrower shall give Agent fifteen (15) days prior written notice thereof. Upon
payment in full of the Project Loan together with all other obligations
thereunder including interest accrued thereon, Agent, at Borrower's expense,
will release the lien of the Mortgage and any other Security Document filed
against the Project related to such Project Loan provided (i) no Default exists
on the date of release, and (ii) the collective Debt Coverage Ratio for the
other Projects on the date of release is at least 1.15 to 1, if the requested
release is on or before January 1, 2000, at least 1.25 to 1, if the requested
release is after January 1, 2000 but before January 1, 2001, and at least 1.3 to
1 if the requested release is after January 1, 2001.
ARTICLE V - Representations and Warranties
To confirm each Bank Party's understanding concerning the Related
Persons and the Related Persons' businesses, properties and obligations and to
induce each Bank Party to enter into this Agreement and to extend credit
hereunder, the Related Persons represent and warrant to each Bank Party that:
Section 5.1. Organization and Good Standing. Each Related Person is
duly organized, validly existing and in good standing under the Laws of its
jurisdiction of organization, having all powers required to carry on its
business and enter into and carry out the transactions contemplated hereby.
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Section 5.2. Authorization. Each Related Person has duly taken all
action necessary to authorize the execution and delivery by it of the Loan
Documents to which it is a party and to authorize the consummation of the
transactions contemplated thereby and the performance of its obligations
thereunder. Borrower is duly authorized to borrow funds hereunder.
Section 5.3. No Conflicts or Consents. The execution and delivery by
the Related Persons of the Loan Documents to which it is a party, the
performance of its obligations under such Loan Documents, and the consummation
of the transactions contemplated by the various Loan Documents, do not and will
not (i) conflict with any provision of (1) any Law, (2) the organizational
documents of the Related Persons, or (3) any agreement, judgment, license, order
or permit applicable to or binding upon the Related Persons, (ii) result in the
acceleration of any Debt owed by the Related Persons, or (iii) result in or
require the creation of any Lien upon any assets or properties of the Related
Persons except as expressly contemplated in the Loan Documents. Except as
expressly contemplated in the Loan Documents, no consent, approval,
authorization or order of, and no notice to or filing with, any Tribunal or
third party is required in connection with the execution, delivery or
performance by the Related Persons of any Loan Document or to consummate any
transactions contemplated by the Loan Documents.
Section 5.4. Enforceable Obligations. This Agreement is, and the other
Loan Documents when duly executed and delivered will be, legal, valid and
binding obligations of each Related Person which is a party hereto or thereto,
enforceable in accordance with their terms except as such enforcement may be
limited by bankruptcy, insolvency or similar Laws of general application
relating to the enforcement of creditors' rights and general principles of
equity and except as enforcement of a Collateral Assignment and Security
Agreement may be limited by or subject to laws applicable to healthcare
providers and healthcare facilities.
Section 5.5. Initial Financial Statements. The Initial Financial
Statements fairly present the Company's Consolidated financial position at the
respective dates thereof. Between the date of the Initial Financial Statements
and the date hereof, no Material Adverse Change has occurred with respect to the
Company, except as reflected in the quarterly Initial Financial Statements. All
Initial Financial Statements were prepared in accordance with GAAP.
Section 5.6. Other Obligations and Restrictions. No Related Person has
any outstanding Liabilities of any kind (including contingent obligations, tax
assessments, and unusual forward or long-term commitments) which are, in the
aggregate, material to the Related Person or material with respect to the
Related Person's financial condition and not disclosed in writing to the Bank
Parties. Except as disclosed in writing to the Bank Parties, no Related Person
is subject to or restricted by any franchise, contract, deed, charter
restriction, or other instrument or restriction which could cause a Material
Adverse Change.
Section 5.7. Full Disclosure. No certificate, statement or other
information delivered herewith or heretofore by any Related Person to any Bank
Party in connection with the negotiation of this Agreement or in connection with
any transaction contemplated hereby contains any untrue statement of a material
fact or omits to state any material fact known to the Related Persons (other
than industry-wide risks normally associated with the types of businesses
conducted by the Related
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Persons) necessary to make the statements contained herein or therein not
misleading as of the date made or deemed made. There is no fact known to the
Related Persons that has not been disclosed to Agent in writing which could
cause a Material Adverse Change.
Section 5.8. Litigation. Except as disclosed in writing to Agent: (i)
there are no actions, suits or legal, equitable, arbitrative or administrative
proceedings pending, or to the knowledge of the Related Persons threatened,
against the Related Persons before any Tribunal which could cause a Material
Adverse Change, and (ii) there are no outstanding judgments, injunctions, writs,
rulings or orders by any such Tribunal against the Related Persons which could
cause a Material Adverse Change.
Section 5.9. ERISA Plans and Liabilities. The Related Persons have not
in the past and do not presently maintain any "employee benefit plan" as defined
in Section 3(3) of ERISA.
Section 5.10. Names and Places of Business. Except as disclosed on
Schedule 2, no Related Person has, during the preceding five years, had, been
known by, or used any other trade or fictitious name with respect to a Project.
The chief executive office and principal place of business of the Related
Persons is and has been since formed located at the address of the Related
Persons set out on Schedule 2.
Section 5.11. Insider. No Related Person or any Person having "control"
(as that term is defined in 12 U.S.C. ss. 375b(9) or in regulations promulgated
pursuant thereto) of a Related Person is a "director" or an "executive officer"
or "principal shareholder" (as those terms are defined in 12 U.S.C. ss. 375b(8)
or (9) or in regulations promulgated pursuant thereto) of any Bank Party, of a
bank holding company of which any Bank Party is a Subsidiary or of any
Subsidiary of a bank holding company of which any Bank Party is a Subsidiary.
Section 5.12. Environmental and Other Laws. (i) The Related Persons are
conducting their businesses in material compliance with all applicable federal,
state or local laws, including those pertaining to environmental matters; (ii)
none of the operations or properties of any Related Person is the subject of
federal, state or local investigation evaluating whether any material remedial
action is needed to respond to a release of any hazardous or toxic waste,
substance or constituent into the environment or to the improper storage or
disposal (including storage or disposal at offsite locations) of any such waste,
substance, or constituent; (iii) no Related Person (and to the best knowledge of
the Related Persons, no other Person) has filed any notice under any federal,
state or local law indicating that any Related Person is responsible for the
improper release into the environment, or the improper storage or disposal, of
any material amount of any hazardous or toxic waste, substance or constituent or
that any such waste, substance or constituent has been improperly released, or
is improperly stored or disposed of, upon any property of any Related Person;
and (iv) no Related Person otherwise has any known material contingent liability
in connection with the release into the environment, or the storage or disposal,
of any such waste, substance or constituent.
Section 5.13. Subsidiary. Borrower is a wholly-owned Subsidiary of the
Company.
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Section 5.14. Participation Agreements. No Project Related Person is a
party to any Participation Agreements.
ARTICLE VI - Affirmative Covenants
To conform with the terms and conditions under which each Bank Party is
willing to have credit outstanding to Borrower, and to induce each Bank Party to
enter into this Agreement and extend credit hereunder, each Related Person
warrants, covenants and agrees that until the full and final payment of the
Obligations and the termination of this Agreement, unless Majority Lenders have
previously agreed otherwise:
Section 6.1. Payment and Performance. Each Related Person will pay all
amounts due under the Loan Documents in accordance with the terms thereof and
will observe, perform and comply in all material respects with every covenant,
term and condition expressed or implied in the Loan Documents.
Section 6.2. Books, Financial Statements and Reports. Each Related
Person will at all times maintain full and accurate books of account and
records. The Company will maintain and will cause its Subsidiaries to maintain a
standard system of accounting and will furnish the following statements and
reports to Agent at the Company's expense:
(i) As soon as available, and in any event within one
hundred twenty (120) days after the end of each Fiscal Year,
complete Consolidated financial statements of the Company and
its Subsidiaries together with all notes thereto and all
consolidating working papers, prepared in reasonable detail in
accordance with GAAP, together with an opinion based on an
audit using generally accepted auditing standards, by a "Big
Five" accounting firm, or other independent certified public
accountants selected by the Company and reasonably acceptable
to Agent, stating that such Consolidated financial statements
have been so prepared. The financial statements shall contain
a Consolidated balance sheet as of the end of such Fiscal Year
and Consolidated statements of operations, owner's equity and
cash flows for such Fiscal Year, each setting forth in
comparative form the corresponding figures for the preceding
Fiscal Year. Such financial statements shall be accompanied by
an unaudited consolidating financial statement.
(ii) Intentionally Omitted.
(iii) As soon as available, and in any event within
forty-five (45) days after the end of each of the first three
Fiscal Quarters of each Fiscal Year, an internally prepared
Consolidated balance sheet of the Company and its Subsidiaries
as of the end of such Fiscal Quarter and Consolidated
statements of the Company's and its Subsidiaries' income for
the period from the beginning of the then current Fiscal Year
to the end of such Fiscal Quarter, all in reasonable
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detail and prepared in accordance with GAAP and accompanied by
a consolidating financial statement, subject to changes
resulting from normal year-end adjustments.
(iv) Once each month within thirty (30) days after month
end, unaudited monthly financial statements of the operations
of the Project, prepared in accordance with GAAP by the
Company, in its role as Manager, Lessee or Sublessee, as the
case may be, which statements shall include an operating
statement for the month then ended, together with census data
of the Project as of the end of such month, certified by a
representative of the Company to be true and correct to the
best of the representative's knowledge and belief. Such
statements shall also be prepared on a "rolling" quarterly
basis. Such statements of the Project shall be accompanied by
the Summary of Financial Statements and Census Data (in the
form attached hereto as Exhibit W) and certified by a
representative of the Company to be true and correct. Within
thirty (30) days after the end of each Fiscal Year, Company
shall submit a certified rent roll for the Project.
(v) The Company will, together with each such set of
financial statements delivered pursuant to clause (i), (iii)
or (iv) above, furnish a certificate in the form of Exhibit D
signed by the chief financial officer of the Company stating
that such financial statements present fairly in all material
respects in accordance with GAAP the Consolidated financial
condition of the Company as at the date of such financial
statements and its consolidated results of operation and cash
flows for 1the period covered thereby stating that he has
reviewed the Loan Documents, containing calculations showing
compliance (or non-compliance) at the end of such Fiscal
Quarter with the requirements of Sections 6.16 - 6.20, and
stating that no Default exists at the end of such Fiscal
Quarter or at the time of such certificate or specifying the
nature and period of existence of any such Default.
(vi) The Agent further reserves the right to require such
other financial information of Borrower, the Company, the
Lessee, and/or the Project, in such form and at such other
times (including monthly or more frequently) as Agent shall
deem reasonably necessary, and the Related Person agree
promptly to provide or to cause to be provided, such
information to Agent. All financial statements must be in the
form and detail as Agent may from time to time reasonably
request.
(vii) Such other statements and reports as shall be
required by a Project Loan Agreement.
Section 6.3. Other Information and Inspections. Each Related Person
will request in writing concerning any covenant, provision or condition of the
Loan Documents or any matter in connection with the Related Persons' businesses
and operations. Subject to the privacy rights of
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residents of the Projects, each Related Person will permit representatives
appointed by Agent, including independent accountants, auditors, agents,
attorneys, appraisers and any other Persons, to visit and inspect during normal
business hours any of such Related Person's property, including its books of
account, other books and records, and any facilities or other business assets,
and to make extra copies therefrom and photocopies and photographs thereof, and
to write down and record any information such representatives obtain, and each
Related Person shall permit Agent or its representatives to investigate and
verify the accuracy of the information furnished to Agent or any Lender in
connection with the Loan Documents and to discuss all such matters with its
officers, employees and representatives.
Section 6.4. Notice of Material Events and Change of Address Each
Related Person will promptly notify each Bank Party in writing, stating that
such notice is being given pursuant to this Agreement, of:
(a any Material Adverse Change in such Related Person's
financial condition,
(b the occurrence of any Default,
(c the filing of any suit or proceeding against any Related
Person in which an adverse decision could cause a Material Adverse
Change.
Upon the occurrence of any of the foregoing, such Related Person will take all
necessary or appropriate steps to remedy promptly any such Material Adverse
Change or Default, to protect against any such adverse claim, to defend any such
suit or proceeding, and to resolve all controversies on account of any of the
foregoing. Each Related Person will also notify Agent and Agent's counsel in
writing at least twenty (20) Business Days prior to the date that such Related
Person changes its name or the location of its chief executive office or
principal place of business or the place where it keeps its books and records
concerning the Collateral, furnishing with such notice any necessary financing
statement amendments or requesting Agent and its counsel to prepare the same.
Section 6.5. Maintenance of Existence and Qualifications. Each Related
Person will maintain and preserve its existence in full force and effect and
will qualify to do business in all states or jurisdictions where required by
applicable Law.
Section 6.6. Maintenance of Properties. Each Related Person will
maintain, preserve, protect, and keep all property used or useful in the conduct
of its business in good condition, ordinary wear and tear excepted, and in
compliance with all applicable laws, rules and regulations, and will from time
to time make all repairs, renewals and replacements needed to enable the
business and operations carried on in connection therewith to be promptly and
advantageously conducted at all times.
Section 6.7. Payment of Expenses. Each Related Person will promptly
(and in any event, within 30 days after any invoice or other statement or
notice) pay all reasonable costs and expenses incurred by or on behalf of Agent
(including reasonable attorneys' fees) in connection with (i) the negotiation,
preparation, execution and delivery of the Loan Documents, and any and
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all consents, waivers or other documents or instruments relating thereto, (ii)
the filing, recording, refiling and re-recording of any Loan Documents and any
other documents or instruments or further assurances required to be filed or
recorded or refiled or re-recorded by the terms of any Loan Document, and (iii)
the defense or enforcement of the Loan Documents or the defense of Agent's
exercise of its rights thereunder.
Section 6.8. Performance on Related Person's Behalf. If any Related
Person fails to pay any taxes, insurance premiums, expenses, attorneys' fees or
other amounts it is required to pay under any Loan Document, Agent, after thirty
(30) days notice to such Related Person (except no notice is required with
respect to the payment of insurance premiums), may pay the same. Such Related
Person shall immediately reimburse Agent for any such payments and each amount
paid by Agent shall constitute an Obligation owed hereunder which is due and
payable on the date such amount is paid by Agent.
Section 6.9. Insurance. Each Related Person will keep or cause to be
kept contractual liability coverage which insures contractual liability under
the indemnifications of the Bank Parties by each Related Person herein (but such
coverage or amount shall in no way limit such indemnifications). Each Related
Person will maintain the additional insurance coverage as described in the
respective Security Documents.
Section 6.10. Interest. Each Related Person hereby promises to each
Bank Party to pay interest at the Late Payment Rate on all Obligations
(including Obligations to pay fees or to reimburse or indemnify any Bank Party)
which such Related Person has in this Agreement promised to pay to such Bank
Party and which are not paid when due. Such interest shall accrue from the date
such Obligations become due until they are paid.
Section 6.11. Evidence of Compliance. Each Related Person will furnish
to each Bank Party at such Related Person's expense all evidence which Agent
from time to time reasonably requests in writing as to the accuracy and validity
of or compliance with all representations, warranties and covenants made by each
Related Person in the Loan Documents, the satisfaction of all conditions
contained therein, and all other matters pertaining thereto.
Section 6.12. Solvency. Upon giving effect to the issuance of the
Notes, the execution of the Loan Documents by Borrower and the consummation of
the transactions contemplated hereby, Borrower will be solvent (as such term is
used in applicable bankruptcy, liquidation, receivership, insolvency or similar
laws).
Section 6.13. Agreement to Deliver Security Documents. Each Related
Person agrees to deliver, to further secure the Obligations, whenever requested
by Agent in its sole and absolute discretion, security agreements, financing
statements and other Security Documents in form and substance satisfactory to
Agent for the purpose of granting, confirming, and perfecting first and prior
liens or security interests in any real or personal property which is at such
time Collateral or which was intended to be Collateral pursuant to any Security
Document previously executed and not then released by Agent. Each Related Person
will from time to time deliver to Agent any financing statements, continuation
statements, extension agreements and other documents, properly completed and
executed (and acknowledged when required) by each Related Person in
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form and substance satisfactory to Agent, which Agent requests for the purpose
of perfecting, confirming, or protecting any Liens or other rights in Collateral
securing any Obligations.
Section 6.14. Bank Accounts; Offset. To secure the repayment of the
Obligations each Related Person hereby grants to each Bank Party a security
interest, a lien, and a right of offset, each of which shall be in addition to
all other interests, liens, and rights of any Bank Party at common law, under
the Loan Documents, or otherwise, and each of which shall be upon and against
(a) any and all moneys, securities or other property (and the proceeds
therefrom) of each Related Person now or hereafter held or received by or in
transit to any Bank Party from or for the account of each Related Person,
whether for safekeeping, custody, pledge, transmission, collection or otherwise,
(b) any and all deposits (general or special, time or demand, provisional or
final) of each Related Person with any Bank Party, and (c) any other credits and
claims of Borrower at any time existing against any Bank Party, including claims
under certificates of deposit. At any time and from time to time after the
occurrence of any Event of Default, each Bank Party is hereby authorized to
foreclose upon, or to offset against the Obligations then due and payable (in
either case without notice to the Related Persons), any and all items
hereinabove referred to. The remedies of foreclosure and offset are separate and
cumulative, and either may be exercised independently of the other without
regard to procedures or restrictions applicable to the other.
Section 6.15. Maintain Existence and Business. Borrower will conduct
and operate its business in substantially the same manner in which it operates
on the date of this Agreement. On the date of this Agreement, the business of
Borrower is the development and ownership of senior living facilities and
related health services.
Section 6.16. Debt Coverage Ratio. With respect to a Project, during
the First Extension Period of the Project Loan related to such Project, the
Project shall continuously maintain a Debt Coverage Ratio of 1.2 to 1. During
the Second Extension Period of the Project Loan, the Project shall continuously
maintain a Debt Coverage Ratio of 1.3 to 1. Each of the foregoing shall be
measured on a "rolling" quarterly basis.
Section 6.17. Minimum Tangible Net Worth. The Tangible Net Worth of the
Company at the end of each Fiscal Quarter will not be less than the sum of (i)
$105,000,000, plus (ii) fifty percent (50%) of the Consolidated net income (but
only if a positive number) for the period beginning on October 1, 1998 and
ending on the last day of such Fiscal Quarter, plus (iii) 75% of the aggregate
amount of equity or proceeds of "equity equivalent" security offerings (after
expenses) received by the Company after the date hereof.
Section 6.18. Leverage Ratio. At the end of each Fiscal Quarter, the
ratio of Total Funded Debt to Total Capital shall not be greater than seventy
percent (70%).
Section 6.19. EBITDAR. The Company shall continuously maintain EBITDAR
Coverage of 1.2 to 1 in 1998 and 1.50 to 1 thereafter.
Section 6.20. Capital Expenditures. Commencing on the date which is two
(2) years after issuance of the Certificate of Occupancy for a Project, Lessee
shall make minimum capital expenditures for such Project, in the amount of
$200.00 per unit (in the aggregate for the Project)
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per year (which such capital expenditures may include ordinary repairs needed to
maintain or improve the conditions of the Project), and within forty-five (45)
days of the end of the Fiscal Year, provide evidence thereof satisfactory to
Agent. In determining whether or not such requirement has been met, the excess
amount of capital expenditures above $200 per unit in any year shall be carried
forward to the next year(s). In the event that Lessee shall fail to do so,
Borrower shall, upon Agent's written request, immediately establish and maintain
a capital expenditures reserve fund with Agent equal to the difference between
the required amount per unit and the amount per unit actually spent by the
Lessee. Borrower grants to Agent a right of setoff against all moneys in the
capital expenditures reserve fund, and Borrower shall not permit any other Lien
to exist upon such fund. The proceeds of such capital expenditures reserve fund
will be disbursed upon Agent's receipt of satisfactory evidence that Lessee has
made the required capital expenditures. Upon Lessee's failure to adequately
maintain the Project in good condition, Agent may, but shall not be obligated
to, make such capital expenditures and may apply the moneys in the capital
expenditures reserve fund for such purpose. To the extent there are insufficient
moneys in the capital expenditures reserve fund for such purposes, all funds
advanced by Agent to make such capital expenditures shall constitute a portion
of the Project Loan for such Project, shall be secured by the Security Documents
and shall accrue interest at the Late Payment Rate until paid. Upon an Event of
Default, Agent may apply any moneys in the capital expenditures reserve fund to
the Project Loan in accordance with the terms hereof. Routine maintenance and
repair expenses which are necessary to improve or maintain the physical
condition of the Project shall count toward the capital expenditures
requirement.
ARTICLE VII - Negative Covenants
To conform with the terms and conditions under which each Bank Party is
willing to have credit outstanding to Borrower, and to induce each Bank Party to
enter into this Agreement and make the Project Loans, each Related Person
warrants, covenants and agrees that until the full and final payment of the
Obligations and the termination of this Agreement, unless Majority Lenders have
previously agreed otherwise:
Section 7.1. Ownership The Related Persons shall not permit a direct
change in the ownership interests of Borrower without the prior written consent
of Agent, which consent may be withheld in Agent's sole discretion.
Section 7.2. Limitation on Mergers, Issuances of Securities No Related
Person will liquidate or merge or consolidate with or into any other business
entity, unless the Related Person is a surviving entity in such merger or
consolidation.
Section 7.3. Limitation on Additional Debt Borrower shall not create,
assume, incur or suffer to exist any Liabilities other than
(i) the Obligations;
(ii) trade payables and accrued expenses, each arising in the
ordinary course of business; and
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(iii) Liabilities incurred to finance up to 100% of the purchase
price of equipment or vehicles to be used in connection with a
Project and capitalized lease obligations relating to
equipment or vehicles used in connection with such Project,
provided the aggregate principal amount (or capitalized lease
obligation) of all such Liabilities outstanding at any time
does not exceed $100,000 per Project.
ARTICLE VIII - Events of Default and Remedies
Section 8.1. Events of Default Each of the following events constitutes
an Event of Default under this Agreement:
(a Borrower fails to pay any installment of principal, interest or
other charges required under the Notes within five (5) days after the same
becomes due and payable; or
(b Any Related Person fails to pay any Obligation (other than the
Obligations in clause (a) above) when due and payable, whether at a date for the
payment of a fixed installment or as a contingent or other payment becomes due
and payable or as a result of acceleration or otherwise, within ten (10) days
after written notice that the same is due; or
(c Any Related Person fails to timely and properly observe, keep
or perform any material covenant, agreement, warranty or condition herein or in
any other Loan Document required to be observed, kept or performed, other than
those referred to in any other subsection of this Section 8.1 except this
subsection (c), if such failure continues for thirty (30) days after receipt by
such Related Person of written notice and demand for the performance of such
covenant, agreement, warranty or condition, provided that if such Related Person
shall within such thirty (30) day period commence action to cure such failure
but is unable, by reason of the nature of the performance required, to cure same
within such period, and if such Related Person continues such action thereafter
diligently and without unnecessary delays, no default shall exist under this
Section 8.1(c) until the expiration of a period of time as may be reasonably
necessary to cure such failure, provided further that in any event such Related
Person shall be in default under this Section 8.1(c) if such failure is not
cured on or before ninety (90) days after receipt by such Related Person of the
above described written demand for performance; or
(d Any representation contained herein or in any other Loan
Document is false or misleading in any material respect and such representation
remains false or misleading thirty (30) days after written notice thereof from
Agent to the Related Persons; or
(e Any Related Person or a Lessee:
(i) suffers the entry against it of a judgment, decree or
order for relief by a Tribunal of competent jurisdiction in an
involuntary proceeding commenced under any applicable bankruptcy,
insolvency or other similar Law of any jurisdiction now or hereafter in
effect, including the federal Bankruptcy Code, as from time to time
amended, or has any
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such proceeding commenced against it which remains undismissed for a
period of ninety (90) days; or
(ii) commences a voluntary case under any applicable
bankruptcy, insolvency or similar Law now or hereafter in effect,
including the federal Bankruptcy Code, as from time to time amended; or
applies for or consents to the entry of an order for relief in an
involuntary case under any such Law; or makes a general assignment for
the benefit of creditors; or fails generally to pay (or admits in
writing its inability to pay) its debts as such debts become due; or
takes corporate or other action to authorize any of the foregoing; or
(iii) suffers the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of all or a substantial part of its assets or of any
part of the Collateral in a proceeding brought against or initiated by
it, and such appointment or taking possession is neither made
ineffective nor discharged within ninety (90) days after the making
thereof, or such appointment or taking possession is at any time
consented to, requested by, or acquiesced to by it; or
(iv) suffers the entry against it of a final judgment for the
payment of money in excess of $100,000 (not covered by insurance
satisfactory to Agent in its discretion), unless the same is discharged
within thirty (30) days after the date of entry thereof or an appeal or
appropriate proceeding for review thereof is taken within such period
and a stay of execution pending such appeal is obtained; or
(v) suffers a writ or warrant of attachment or any similar
process to be issued by any Tribunal against all or any substantial
part of its assets or any part of the Collateral, and such writ or
warrant of attachment or any similar process is not stayed or released
within sixty (60) days after the entry or levy thereof or after any
stay is vacated or set aside; or
(f Any Related Person or Lessee is adjudged in a final
administrative decision to have committed fraud or abuse against Medicare,
Medicaid or any other governmental health care program; or
(g The holder of any Lien on a Project or any portion thereof
(without hereby implying the consent of the Agent to the existence or creation
of such Lien) institutes foreclosure proceedings for the enforcement of its
remedies thereunder and foreclosure may occur within thirty (30) days; or
(h A default occurs under any of Sections 6.16 through 6.19; or
(i) In connection with any Project, the Project Related Persons or
the Project shall be assessed fines or penalties by any state health or
licensing agency having jurisdiction over such Persons or the Project in excess
of $100,000 which are not paid within the time period imposed by such agency; or
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(j) In connection with any Project, a Management Agreement is
terminated without the prior written approval of Agent; or
(k) A Project or any part thereof is taken on execution or other
process of law in any action against a Project Related Person; or
(l) A Project Related Person abandons all or a portion of a
Project; or
(m) Without the prior written consent of the Agent (which consent
may be withheld for any reason or for no reason), Borrower sells, leases (except
as expressly provided in the Assignment of Leases and Rents), exchanges, assigns
, transfers, conveys or otherwise disposes of, all or any part of a Project or
any interest therein (except for the disposition of worn-out or obsolete
personal property or fixtures under the circumstances described in subparagraph
2.2(g) of the Mortgage), or legal or equitable title to the Project, or any part
thereof or any interest therein (except under circumstances described in
subparagraph of the Mortgage), is vested in any other party, in any manner
whatsoever, by operation of law or otherwise, whether any of the foregoing is
voluntary or involuntary, it being understood that the consent of the Agent
required hereunder may be refused by the Agent in its sole and absolute
discretion or may be predicated upon any terms, conditions and covenants deemed
advisable or necessary in the sole and absolute discretion of the Agent,
including but not limited to the right to change the interest rate, date of
maturity or payments of principal and/or interest on the related Project Loan,
to require payment of any amount as additional consideration as a transfer fee
or otherwise and to require assumption of the obligations under the Loan
Documents; or
(n) Without the prior written consent of the Agent (which consent
may be withheld for any reason or for no reason), Borrower creates, places or
permits to be created or placed, or through any act or failure to act,
acquiesces in the placing of, or allows to remain, any deed of trust, mortgage,
voluntary or involuntary lien, whether statutory, constitutional or contractual
(except for the lien for ad valorem taxes on a Project which are not delinquent
and any lien being contested pursuant to the provisions of subparagraph 2.2(c)
of the Mortgage), security interest, encumbrance or charge, or conditional sale
or other title retention document, against or covering a Project, or any part
thereof, other than encumbrances securing Liabilities permitted under Section
7.3(iii) and encumbrances permitted by the Agent, regardless of whether the same
are expressly or otherwise subordinate to the lien or security interest created
herein or in any other Loan Document, or acquires any fixtures, equipment or
other property forming a part of the Project pursuant to a lease, license or
similar agreement, it being understood that the consent of the Agent required
hereunder may be refused by the Agent in its sole and absolute discretion or for
any reason or may be predicated upon any terms, conditions and covenants deemed
advisable or necessary in the sole and absolute discretion of the Agent
including but not limited to the right to change the interest rate, date of
maturity or payments of principal and/or interest on the related Project Loan,
to require payment of any amount as a fee or other consideration and to require
a payment on the principal of the Project Loan; or
(o) The failure of Borrower to provide or maintain any insurance
coverages required by a Mortgage or a Project Loan Agreement and such failure
continues for three (3) Business Days after receipt by Borrower of written
notice of such failure; or
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(p) Any Related Person dissolves or liquidates or merges or
consolidates, except as otherwise expressly permitted herein, or any interest in
Borrower is sold, assigned, transferred, mortgaged, pledged, encumbered, or
otherwise disposed of, voluntarily or involuntarily, without the prior written
consent of Agent; or
(q) A default occurs under a Security Agreement, Collateral
Assignment or SNDA as a result of an act or omission thereunder by a party
thereto, which default remains uncured beyond any cure period with respect
thereto; or
(r) The failure of any Project Related Person to correct, within
the time deadlines set by any applicable licensing agency, any deficiency which
would result in the following actions by such agency with respect to a Project:
(1) a termination of any License; or
(2) a ban on new admissions generally.
Upon the occurrence of an Event of Default described in subsection (e)(i),
(e)(ii) or (e)(iii) of this section, all of the Obligations shall thereupon be
immediately due and payable, without demand, presentment, notice of demand or of
dishonor and nonpayment, protest, notice of protest, notice of intention to
accelerate, declaration or notice of acceleration, or any other notice or
declaration of any kind, all of which are hereby expressly waived by the Related
Persons. Upon any such acceleration, any obligation of any Lender to make any
further Advances shall be permanently terminated. During the continuance of any
other Event of Default, Agent at any time and from time to time may (and upon
written instructions from Majority Lenders, Agent shall), without notice to the
Related Persons, do either or both of the following: (1) terminate any
obligation of Lenders to make Advances hereunder, and (2) declare any or all of
the Obligations immediately due and payable, and all such Obligations shall
thereupon be immediately due and payable, without demand, presentment, notice of
demand or of dishonor and nonpayment, protest, notice of protest, notice of
intention to accelerate, declaration or notice of acceleration, or any other
notice or declaration of any kind, all of which are hereby expressly waived by
the Related Persons.
Section 8.2. Remedies. If any Event of Default shall occur and be
continuing, each Bank Party may protect and enforce its rights under the Loan
Documents by any appropriate proceedings, including proceedings for specific
performance of any covenant or agreement contained in any Loan Document, and
each Bank Party may enforce the payment of any Obligations due it or enforce any
other legal or equitable right which it may have. All rights, remedies and
powers conferred upon Bank Parties under the Loan Documents shall be deemed
cumulative and not exclusive of any other rights, remedies or powers available
under the Loan Documents or at Law or in equity. Notwithstanding the foregoing,
no Lender may exercise any right or remedy granted to Agent. Further, no Lender
will exercise any rights, remedies or powers available to it without having
first provided the Agent fifteen (15) days prior written notice of its intent
with respect thereto.
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ARTICLE IX - Agent
Section 9.1. Appointment and Authority. Each Lender which becomes a
party to this Agreement hereby irrevocably authorizes Agent, and Agent hereby
undertakes, to receive payments of principal, interest and other amounts due
hereunder as specified herein and to take all other actions and to exercise such
powers under the Loan Documents as are specifically delegated to Agent by the
terms hereof or thereof, together with all other powers reasonably incidental
thereto. The relationship of Agent to the other Bank Parties is only that of one
commercial lender acting as administrative agent for others, and nothing in the
Loan Documents shall be construed to constitute Agent a trustee or other
fiduciary for any holder of any of the Notes or of any participation therein nor
to impose on Agent duties and obligations other than those expressly provided
for in the Loan Documents. With respect to any matters not expressly provided
for in the Loan Documents and any matters which the Loan Documents place within
the discretion of Agent, Agent shall not be required to exercise any discretion
or take any action, and it may request instructions from Lenders with respect to
any such matter, in which case it shall be required to act or to refrain from
acting (and shall be fully protected and free from liability to all Lenders in
so acting or refraining from acting) upon the instructions of Majority Lenders
(including itself), provided, however, that Agent shall not be required to take
any action which exposes it to a risk of personal liability that it considers
unreasonable or which is contrary to the Loan Documents or to applicable Law.
Upon receipt by Agent from Borrower of any communication calling for action on
the part of Lenders or upon notice from any other Bank Party to Agent of any
Default or Event of Default, Agent shall promptly notify each other Bank Party
thereof.
Section 9.2. Exculpation, Agent's Reliance, Etc.
(a) Neither Agent nor any of its directors, officers, agents,
attorneys, or employees shall be liable for any action taken or omitted to be
taken by any of them under or in connection with the Loan Documents, INCLUDING
THEIR NEGLIGENCE OF ANY KIND, except that each shall be liable for its own gross
negligence or willful misconduct. Without limiting the generality of the
foregoing, Agent (a) may treat the payee of any Note as the holder thereof until
Agent receives written notice of the assignment or transfer thereof in
accordance with this Agreement, signed by such payee and in form satisfactory to
Agent; (b may consult with legal counsel (including counsel for the Related
Persons), independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken in good faith by
it in accordance with the advice of such counsel, accountants or experts; (c)
makes no warranty or representation to any other Bank Party and shall not be
responsible to any other Bank Party for any statements, warranties or
representations made in or in connection with the Loan Documents; (d) shall not
have any duty to ascertain or to inquire as to the performance or observance of
any of the terms, covenants or conditions of the Loan Documents on the part of
the Related Persons or to inspect the property (including the books and records)
of the Related Persons; (e) shall not be responsible to any other Bank Party for
the due execution, legality, validity, enforceability, genuineness, sufficiency
or value of any Loan Document or any instrument or document furnished in
connection therewith; (f) may rely upon the representations and warranties of
the Related Persons and the Lenders in exercising its powers hereunder; and (g)
shall incur no liability under or in
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respect of the Loan Documents by acting upon any notice, consent, certificate or
other instrument or writing (including any telecopy, telegram, cable or telex)
believed by it to be genuine and signed or sent by the proper Person or Persons.
(b) Agent shall have no obligation whatsoever to any Lender or to
any other Person to assure that any Collateral exists or is owned by the Related
Persons or is cared for, protected or insured or has been encumbered or that the
Liens granted to Agent herein or in any of the other Loan Documents or pursuant
hereto or thereto have been properly or sufficiently or lawfully created,
perfected, protected or enforced or are entitled to any particular priority.
Section 9.3. Credit Decisions. Each Bank Party acknowledges that it has
independently and without reliance upon any other Bank Party, made its own
analysis of the Related Persons and the transactions contemplated hereby and its
own independent decision to enter into this Agreement and the other Loan
Documents. Each Bank Party also acknowledges that it will, independently and
without reliance upon any other Bank Party and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Loan Documents.
Section 9.4. Indemnification. Each Lender agrees to indemnify Agent (to
the extent not reimbursed by the Related Persons within ten (10) days after
demand) from and against such Lender's Percentage Share of any and all
liabilities, obligations, claims, losses, damages, penalties, fines, actions,
judgments, suits, settlements, costs, expenses or disbursements (including
reasonable fees of attorneys, accountants, experts and advisors) of any kind or
nature whatsoever (in this section collectively called "liabilities and costs")
which to any extent (in whole or in part) may be imposed on, incurred by, or
asserted against Agent growing out of, resulting from or in any other way
associated with any of the Collateral, the Loan Documents and the transactions
and events (including the enforcement thereof) at any time associated therewith
or contemplated therein (including any violation or noncompliance with any
Applicable Environmental Laws (as such term is defined in the Mortgage) by any
Person or any liabilities or duties of any Person with respect to hazardous
substances found in or released into the environment).
THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND
COSTS ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM
OR THEORY OF STRICT LIABILITY, OR ARE CAUSED, IN WHOLE OR IN PART, BY ANY
NEGLIGENT ACT OR OMISSION OF ANY KIND BY AGENT,
provided only that no Lender shall be obligated under this section to indemnify
Agent for that portion, if any, of any liabilities and costs which is
proximately caused by Agent's own individual gross negligence or willful
misconduct, as determined in a final judgment. Cumulative of the foregoing, each
Lender agrees to reimburse Agent promptly upon demand for such Lender's
Percentage Share of any costs and expenses to be paid to Agent by Borrower under
Section 10.4(a) to the extent that Agent is not timely reimbursed for such
expenses by the Related Persons as provided in such section. As used in this
section the term "Agent" shall refer not only to the Person designated as such
in Section 1.1 but also to each director, officer, agent, attorney, employee,
representative and Affiliate of such Person.
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Section 9.5. Rights as Lender. In its capacity as a Lender, Agent shall
have the same rights and obligations as any Lender and may exercise such rights
as though it were not Agent. Agent may accept deposits from, lend money to, act
as trustee under indentures of, and generally engage in any kind of business
with the Related Persons or their Affiliates, all as if it were not Agent
hereunder and without any duty to account therefor to any other Lender.
Section 9.6. Sharing of Set-Offs and Other Payments. Each Bank Party
agrees that if it shall, whether through the exercise of rights under Security
Documents or rights of banker's lien, set off, or counterclaim against the
Related Persons or otherwise, obtain payment of a portion of the aggregate
Obligations owed to it which, taking into account all distributions made by
Agent under Section 3.1, causes such Bank Party to have received more than it
would have received had such payment been received by Agent and distributed
pursuant to Section 3.1, then (a) it shall be deemed to have simultaneously
purchased and shall be obligated to purchase interests in the Obligations as
necessary to cause all Bank Parties to share all payments as provided for in
Section 3.1, and (b) such other adjustments shall be made from time to time as
shall be equitable to ensure that Agent and all Lenders share all payments of
Obligations as provided in Section 3.1; provided, however, that nothing herein
contained shall in any way affect the right of any Bank Party to obtain payment
(whether by exercise of rights of banker's lien, set-off or counterclaim or
otherwise) of indebtedness other than the Obligations. Borrower expressly
consents to the foregoing arrangements and agrees that any holder of any such
interest or other participation in the Obligations, whether or not acquired
pursuant to the foregoing arrangements, may to the fullest extent permitted by
Law exercise any and all rights of banker's lien, set-off, or counterclaim as
fully as if such holder were a holder of the Obligations in the amount of such
interest or other participation. If all or any part of any funds transferred
pursuant to this section is thereafter recovered from the seller under this
section which received the same, the purchase provided for in this section shall
be deemed to have been rescinded to the extent of such recovery, together with
interest, if any, if interest is required pursuant to Tribunal order to be paid
on account of the possession of such funds prior to such recovery.
Section 9.7. Investments. Whenever Agent in good faith determines that
it is uncertain about how to distribute to Lenders any funds which it has
received, or whenever Agent in good faith determines that there is any dispute
among Lenders about how such funds should be distributed, Agent may choose to
defer distribution of the funds which are the subject of such uncertainty or
dispute. If Agent in good faith believes that the uncertainty or dispute will
not be promptly resolved, or if Agent is otherwise required to invest funds
pending distribution to Lenders, Agent shall invest such funds pending
distribution; all interest on any such investment shall be distributed upon the
distribution of such investment and in the same proportion and to the same
Persons as such investment. All moneys received by Agent for distribution to
Lenders (other than to the Person who is Agent in its separate capacity as a
Lender) shall be held by Agent pending such distribution solely as Agent for
such Lenders, and Agent shall have no equitable title to any portion thereof.
Section 9.8. Benefit of Article IX. The provisions of this Article
(other than the following Section 9.9) are intended solely for the benefit of
Bank Parties, and no other Person,
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including the Related Persons, shall be entitled to rely on any such provision
or assert any such provision in a claim or defense against any Bank Party. Bank
Parties may waive or amend such provisions as they desire without any notice to
or consent of the Related Persons or any other Person.
Section 9.9. Resignation. Agent may resign at any time by giving sixty
(60) days prior written notice thereof to Lenders and the Related Persons. Each
such notice shall set forth the date of such resignation. Upon any such
resignation Lenders having aggregate Percentage Shares of at least sixty-six and
two thirds percent (66 2/3%) shall have the right to appoint a successor Agent.
A successor must be appointed for any retiring Agent, and such Agent's
resignation shall become effective when such successor accepts such appointment.
If, within thirty days after the date of the retiring Agent's resignation, no
successor Agent has been appointed and has accepted such appointment, then the
retiring Agent, subject to Borrower's approval provided no Default exists and
which approval may not be unreasonably withheld, may appoint a successor Agent,
which shall be a commercial bank organized or licensed to conduct a banking or
trust business under the Laws of the United States of America or of any state
thereof. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, the retiring Agent shall be discharged from its duties and
obligations under this Agreement and the other Loan Documents and the successor
Agent shall assume the duties and obligations of Agent under this Agreement and
the other Loan Documents. After any retiring Agent's resignation hereunder, the
provisions of this Article IX shall continue to inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under the Loan
Documents.
Section 9.10. Exercise of Remedies.
(a) Should Agent commence any proceeding or in any way seek to
enforce its rights or remedies under the Loan Documents, irrespective of whether
as a result thereof Agent shall acquire title to any Collateral or part thereof,
either through foreclosure, deed in lieu of foreclosure, or otherwise, each
Lender, upon demand therefor from time to time, shall contribute its share
(based on its Percentage Share) of the reasonable costs and/or expenses of any
such enforcement or acquisition, including, but not limited to, fees of
receivers or trustees, court costs, title company charges, filing and recording
fees, appraisers' fees and fees and expenses of attorneys to the extent not
otherwise reimbursed by the Related Persons. Without limiting the generality of
the foregoing, each Lender shall contribute its share (based on its Percentage
Share) of all reasonable costs and expenses incurred by Agent (including
reasonable attorneys' fees and expenses) if Agent employs counsel for advice or
other representation (whether or not any suit has been or shall be filed) with
respect to any Collateral or any part thereof, or any of the Loan Documents, or
the attempt to enforce any security interest or Lien on any of the Collateral,
or to enforce any rights of Agent or any of the Related Persons' or any other
party's obligations under any of the Loan Documents, but not with respect to any
dispute between Agent and any other Lender(s). Any loss of principal and
interest resulting from any Event of Default shall be shared by Lenders in
accordance with their respective Percentage Shares.
(b) In the event that all or any portion of the Collateral is
acquired by Agent as the result of a foreclosure or the acceptance of a deed or
assignment in lieu of foreclosure, or is
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retained in satisfaction of all or any part of the Obligations, title to any
such Collateral or any portion thereof shall be held in the name of Agent or a
nominee or subsidiary of Agent, as agent, for the ratable benefit of Agent and
Lenders. Agent shall prepare a recommended course of action for such Collateral
(the "POST-FORECLOSURE PLAN"), which shall be subject to the approval of the
Majority Lenders. In the event that Majority Lenders do not approve such
Post-Foreclosure Plan, any Lender shall be permitted to submit an alternative
Post-Foreclosure Plan to Agent and Agent shall submit any and all such
additional Post-Foreclosure Plans to the Lenders for evaluation and the approval
of Majority Lenders. Agent shall manage, operate, repair, administer, complete,
construct, restore or otherwise deal with the Collateral acquired and administer
all transactions relating thereto, including, without limitation, employing a
management agent, leasing agent and other agents, contractors and employees,
including agents for the sale of such Collateral, and the collecting of rents
and other sums from such Collateral and paying the expenses of such Collateral.
Upon demand therefor from time to time, each Lender will contribute its share
(based on its Percentage Share) of all reasonable costs and expenses incurred by
Agent pursuant to the Post-Foreclosure Plan in connection with the construction,
operation, management, maintenance, leasing and sale of such Collateral. In
addition, Agent shall render or cause to be rendered by the managing agent, to
each of the Lenders, monthly, an income and expense statement for such
Collateral, and each of the Lenders shall promptly contribute its Percentage
Share of any operating loss for such Collateral, and such other expenses and
operating reserves as Agent shall deem reasonably necessary pursuant to and in
accordance with the Post-Foreclosure Plan. To the extent there is net operating
income from such Collateral, Agent shall, in accordance with the
Post-Foreclosure Plan, determine the amount and timing of distributions to
Lenders. All such distributions shall be made to Lenders in accordance with
their respective Percentage Shares. Lenders acknowledge that if title to any
Collateral will not be held as a permanent investment but will be liquidated as
soon as practicable. Agent shall undertake to sell such Collateral or portion
thereof, at such price and upon such terms and conditions as the Majority
Lenders shall determine to be most advantageous. Any purchase money mortgage or
deed of trust taken in connection with the disposition of such Collateral or
portion thereof in accordance with the immediately preceding sentence shall name
Agent, as agent for Lenders, as the beneficiary or mortgagee. In such case,
Agent and Lenders shall enter into an agreement with respect to such purchase
money mortgage defining the rights of Lenders in the same Percentage Shares as
provided hereunder, which agreement shall be in all material respects similar to
this Agreement insofar as this Agreement is appropriate or applicable.
ARTICLE X - Miscellaneous
Section 10.1. Waivers and Amendments; Acknowledgments.
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(a) Waivers and Amendments. No failure or delay (whether by course
of conduct or otherwise) by any Bank Party in exercising any right, power or
remedy which such Bank Party may have under any of the Loan Documents shall
operate as a waiver thereof or of any other right, power or remedy, nor shall
any single or partial exercise by any Bank Party of any such right, power or
remedy preclude any other or further exercise thereof or of any other right,
power or remedy. No waiver of any provision of any Loan Document and no consent
to any departure therefrom shall ever be effective unless it is in writing and
signed as provided below in this section, and then such waiver or consent shall
be effective only in the specific instances and for the purposes for which given
and to the extent specified in such writing. No notice to or demand on any
Related Person shall in any case of itself entitle any Related Person to any
other or further notice or demand in similar or other circumstances. This
Agreement and the other Loan Documents set forth the entire understanding
between the parties hereto with respect to the transactions contemplated herein
and therein and supersede all prior discussions and understandings with respect
to the subject matter hereof and thereof, and no waiver, consent, release,
modification or amendment of or supplement to this Agreement or the other Loan
Documents shall be valid or effective against any party hereto unless the same
is in writing and signed by (i) if such party is a Related Person, by such
Related Person, (ii) if such party is Agent, by Agent, and (iii) if such party
is a Lender, by such Lender or by Agent on behalf of such Lender with the
written consent of Majority Lenders (which consent has already been given as to
the termination of the Loan Documents as provided in Section 10.9). Anything to
the contrary herein notwithstanding, Agent shall not, without the prior consent
of each individual Lender, execute and deliver on behalf of such Lender any
waiver or amendment which would: (1) increase the commitment of such Lender or
subject such Lender to any additional obligations, (2) reduce any fees payable
to such Lender hereunder, or the principal of, or interest on, such Lender's
Notes, (3) postpone any date fixed for any payment of any such fees, principal
or interest, (4) release Borrower from its obligation to pay such Lender's Notes
or (5) release Guarantor from its obligation under any Guaranty.
(b) Acknowledgments and Admissions. Each Related Person hereby
represents, warrants, acknowledges and admits that (i) it has been advised by
counsel in the negotiation, execution and delivery of the Loan Documents to
which it is a party, (ii) it has made an independent decision to enter into this
Agreement and the other Loan Documents to which it is a party, without reliance
on any representation, warranty, covenant or undertaking by Agent or any Lender,
whether written, oral or implicit, other than as expressly set out in this
Agreement or in another Loan Document delivered on or after the date hereof,
(iii) there are no representations, warranties, covenants, undertakings or
agreements by any Bank Party as to the Loan Documents except as expressly set
out in this Agreement or in another Loan Document delivered on or after the date
hereof, (iv) no Bank Party has any fiduciary obligation toward any Related
Person with respect to any Loan Document or the transactions contemplated
thereby, (v) the relationship pursuant to the Loan Documents between a Related
Person, on one hand, and each Bank Party, on the other hand, is and shall be
solely that of debtor and creditor, respectively, (vi) no partnership or joint
venture exists with respect to the Loan Documents between any Related Person and
any Bank Party, (vii) Agent is not any Related Person's Agent, but Agent for
Lenders, (viii) should an Event of Default or Default occur or exist, each Bank
Party will determine in its sole discretion and for its own reasons what
remedies and actions it will or will not exercise or take at that time, (ix)
without limiting any of the foregoing, no Related Person is relying upon any
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representation or covenant by any Bank Party, or any representative thereof, and
no such representation or covenant has been made, that any Bank Party will, at
the time of an Event of Default or Default, or at any other time, waive,
negotiate, discuss, or take or refrain from taking any action permitted under
the Loan Documents with respect to any such Event of Default or Default or any
other provision of the Loan Documents, and (x) all Bank Parties have relied upon
the truthfulness of the acknowledgments in this section in deciding to execute
and deliver this Agreement and to become obligated hereunder.
(c) Representation by Lenders. Each Lender hereby represents that
it will acquire its Notes for its own account in the ordinary course of its
lending business; however, the disposition of such Lender's property shall at
all times be and remain within its control and, in particular and without
limitation, such Lender may sell or otherwise transfer its Notes, any
participation interest or other interest in its Notes, or any of its other
rights and obligations under the Loan Documents.
(d) Joint Acknowledgment. THIS WRITTEN AGREEMENT AND THE OTHER
LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 10.2. Survival of Agreements; Cumulative Nature. All of the
Related Persons' various representations, warranties, covenants and agreements
in the Loan Documents shall survive the execution and delivery of this Agreement
and the other Loan Documents and the performance hereof and thereof, including
the making or granting of the Project Loans and the delivery of the Notes and
the other Loan Documents, and shall further survive until all of the Obligations
are paid in full to each Bank Party and all of Bank Parties' obligations to
Borrower are terminated. All statements and agreements contained in any
certificate or other instrument delivered by any Related Person to any Bank
Party under any Loan Document shall be deemed representations and warranties by
such Related Person or agreements and covenants of the Related Person under this
Agreement. The representations, warranties, indemnities, and covenants made by
the Related Persons in the Loan Documents, and the rights, powers, and
privileges granted to Bank Parties in the Loan Documents, are cumulative, and,
except for expressly specified waivers and consents, no Loan Document shall be
construed in the context of another to diminish, nullify, or otherwise reduce
the benefit to any Bank Party of any such representation, warranty, indemnity,
covenant, right, power or privilege. In particular and without limitation, no
exception set out in this Agreement to any representation, warranty, indemnity,
or covenant herein contained shall apply to any similar representation,
warranty, indemnity, or covenant contained in any other Loan Document, and each
such similar representation, warranty, indemnity, or covenant shall be subject
only to those exceptions which are expressly made applicable to it by the terms
of the various Loan Documents.
Section 10.3. Notices. All notices, requests, consents, demands and
other communications required or permitted under any Loan Document shall be in
writing, unless
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otherwise specifically provided in such Loan Document (provided that Agent may
give telephonic notices to the other Bank Parties), and shall be deemed
sufficiently given or furnished if delivered by personal delivery, by telecopy
or telex, by delivery service with proof of delivery, or by registered or
certified United States mail, postage prepaid, to Borrower at the address of
Borrower specified on the signature pages hereto and to each Bank Party at its
address specified on the signature pages hereto (unless changed by similar
notice in writing given by the particular Person whose address is to be
changed). Any such notice or communication shall be deemed to have been given
(a) in the case of personal delivery or delivery service, as of the date of
first attempted delivery during normal business hours at the address provided
herein, (b) in the case of telecopy or telex, upon receipt, or (c) in the case
of registered or certified United States mail, three (3) days after deposit in
the mail; provided, however, that no Request for Advance or
Continuation/Conversion Notice shall become effective until actually received by
Agent.
Section 10.4. Payment of Expenses; Indemnity.
(a) Payment of Expenses. Whether or not the transactions
contemplated by this Agreement are consummated, the Related Persons will
promptly (and in any event, within 30 days after any invoice or other statement
or notice) pay: (i) all transfer, stamp, mortgage, documentary or other similar
taxes, assessments or charges levied by any governmental or revenue authority in
respect of this Agreement or any of the other Loan Documents or any other
document referred to herein or therein, (ii) all reasonable costs and expenses
incurred by or on behalf of Agent (including reasonable attorneys' fees,
consultants' fees and engineering fees, travel costs and miscellaneous expenses)
in connection with (1) the negotiation, preparation, execution and delivery of
the Loan Documents, and any and all consents, waivers or other documents or
instruments relating thereto, (2) the filing, recording, refiling and
re-recording of any Loan Documents and any other documents or instruments or
further assurances required to be filed or recorded or refiled or re-recorded by
the terms of any Loan Document, and (3) the borrowings hereunder, and (iii) all
reasonable costs and expenses incurred by or on behalf of any Bank Party
(including reasonable attorneys' fees, consultants' fees and accounting fees) in
connection with the defense or enforcement of any of the Loan Documents
(including this section) (other than enforcement or defense against another Bank
Party) or the defense of any Bank Party's exercise of its rights thereunder
(other than enforcement or defense against another Bank Party). Nothing
contained herein shall alter or diminish the obligations of the Related Persons
under a Project Loan Agreement as regards the payment of expenses.
(b) Indemnity. The Related Persons agree to indemnify each Bank
Party, upon demand, from and against any and all liabilities, obligations,
claims, losses, damages, penalties, fines, actions, judgments, suits,
settlements, costs, expenses or disbursements (including reasonable fees of
attorneys, accountants, experts and advisors) of any kind or nature whatsoever
(in this section collectively called "liabilities and costs") which to any
extent (in whole or in part) may be imposed on, incurred by, or asserted against
such Bank Party growing out of, resulting from or in any other way associated
with any of the Collateral, the Loan Documents or the transactions and events
(including the enforcement or defense thereof) at any time associated therewith
or contemplated therein.
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THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND
COSTS ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM
OR THEORY OF STRICT LIABILITY, OR ARE CAUSED, IN WHOLE OR IN PART, BY ANY
NEGLIGENT ACT OR OMISSION OF ANY KIND BY ANY BANK PARTY,
provided only that no Bank Party shall be entitled under this section to receive
indemnification for that portion, if any, of any liabilities and costs which is
proximately caused by its own individual gross negligence or willful misconduct,
as determined in a final judgment. If any Person (including a Related Person or
any of its Affiliates) ever alleges such gross negligence or willful misconduct
by any Bank Party, the indemnification provided for in this section shall
nonetheless be paid upon demand, subject to later adjustment or reimbursement,
until such time as a court of competent jurisdiction enters a final judgment as
to the extent and effect of the alleged gross negligence or willful misconduct.
As used in this section the term "Bank Parties" shall refer not only to the
Persons designated as such in Section 1.1 but also to each director, officer,
agent, attorney, employee, representative and Affiliate of such Persons.
Section 10.5. Joint and Several Liability; Parties in Interest;
Assignments. (a) All Obligations which are incurred by two or more Persons shall
be their joint and several obligations and liabilities. All grants, covenants
and agreements contained in the Loan Documents shall bind and inure to the
benefit of the parties thereto and their respective successors and assigns;
provided, however, that no Related Person may assign or transfer any of its
rights or delegate any of its duties or obligations under any Loan Document
without the prior consent of Agent. No Related Person nor any Affiliates of a
Related Person shall directly or indirectly purchase or otherwise retire any
Obligations owed to any Lender nor will any Lender accept any offer to do so,
unless each Lender shall have received substantially the same offer with respect
to the same Percentage Share of the Obligations owed to it. If a Related Person
or any Affiliate of a Related Person at any time purchases some but less than
all of the Obligations owed to all Bank Parties, such purchaser shall not be
entitled to any rights of any Bank Party under the Loan Documents unless and
until the Related Person or its Affiliates have purchased all of the
Obligations.
(b) No Lender shall sell any participation interest in its
commitment hereunder or any of its rights under the Loan Documents to any Person
other than an Eligible Transferee, and then only if the agreement between such
Lender and such participant at all times provides: (i) that such participation
exists only as a result of the agreement between such participant and such
Lender and that such transfer does not give such participant any right to vote
as a Lender or any other direct claims or rights against any Person other than
such Lender, (ii) that such participant is not entitled to payment from a
Related Person under Sections 3.2 through 3.6 of amounts in excess of those
payable to such Lender under such sections (determined without regard to the
sale of such participation), and (iii) that such participant shall not be
entitled to require such Lender to take any action under any Loan Document or to
obtain the consent of such participant prior to taking any action under any Loan
Document, except for actions which would require the consent of all Lenders
under the next-to-last sentence of subsection (a) of Section 10.1. No Lender
selling such a participation shall, as between the other parties hereto and such
Lender, be relieved of any of its
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obligations hereunder as a result of the sale of such participation. Each Lender
which sells any such participation to any Person (other than an Affiliate of
such Lender) shall give prompt notice thereof to Agent and the Related Persons.
(c) Except for sales of participations under the immediately
preceding subsection (b), no Lender shall make any assignment or transfer of
any kind of its commitments or any of its rights under the Notes or under the
Loan Documents, except for assignments to an Eligible Transferee, and then only
if such assignment is made in accordance with the following requirements:
(i) Each such assignment shall apply to all Obligations owing
to the assignor Lender hereunder and to the unused portion of the
assignor Lender's commitments, so that after such assignment is made
the assignor Lender shall have a fixed (and not a varying) Percentage
Share in its Notes and be committed to make that Percentage Share of
all future Advances, the assignee shall have a fixed Percentage Share
in such Notes and be committed to make that Percentage Share of all
future Advances.
(ii) The parties to each such assignment shall execute and
deliver to Agent, for its acceptance and recording in the "Register"
(as defined below in this section), an Assignment and Acceptance in the
form of Exhibit F, appropriately completed, together with the Notes
subject to such assignment and a processing fee payable to Agent of
$2,500. Upon such execution, delivery, and payment and upon the
satisfaction of the conditions set out in such Assignment and
Acceptance, then (i) Borrower shall issue new Notes to such assignor
and assignee upon return of the old Notes to Borrower, and (ii) as of
the "Effective Date" specified in such Assignment and Acceptance the
assignee thereunder shall be a party hereto and a Lender hereunder and
Agent shall thereupon deliver to Borrower and each Lender a schedule
showing the revised Percentage Shares of such assignor Lender and such
assignee Lender and the Percentage Shares of all other Lenders.
(iii) Each assignee Lender which is not a United States person
(as such term is defined in Section 7701(a)(30) of the Internal Revenue
Code of 1986, as amended) for Federal income tax purposes, shall (to
the extent it has not already done so) provide Agent and Borrower with
the Prescribed Forms.
(d) Nothing contained in this section shall prevent or prohibit
any Lender from assigning or pledging all or any portion of its Notes to any
Federal Reserve Bank as collateral security pursuant to Regulation A of the
Board of Governors of the Federal Reserve System and any Operating Circular
issued by such Federal Reserve Bank; provided that no such assignment or pledge
shall relieve such Lender from its obligations hereunder.
(e) By executing and delivering an Assignment and Acceptance, each
assignee Lender thereunder will be confirming to and agreeing with the Related
Persons, Agent and each other Lender hereunder that such assignee understands
and agrees to the terms hereof, including Article IX hereof.
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(f) Agent shall maintain a copy of each Assignment and Acceptance
and a register for the recordation of the names and addresses of Lenders and the
Percentage Shares of, and principal amount of the Obligations owing to, each
Lender from time to time (in this section called the "REGISTER"). The entries in
the Register shall be conclusive, in the absence of manifest error, and Borrower
and each Bank Party may treat each Person whose name is recorded in the Register
as a Lender hereunder for all purposes. The Register shall be available for
inspection by the Related Persons or any Bank Party at any reasonable time and
from time to time upon reasonable prior notice.
Section 10.6. Confidentiality. Each Bank Party agrees that it will take
all reasonable steps to keep confidential any proprietary information given to
it by the Related Persons; provided, however, that this restriction shall not
apply to information which (i) has at the time in question entered the public
domain, (ii) is required to be disclosed by Law (whether valid or invalid) of
any Tribunal, (iii) is disclosed to any Bank Party's Affiliates, auditors,
attorneys, or agents, (iv) is furnished to any other Bank Party or to any
purchaser or prospective purchaser of participations or other interests in any
Loan or Loan Document, or (v) is disclosed in the course of enforcing its rights
and remedies during the existence of an Event of Default.
Section 10.7. Governing Law; Submission to Process. EXCEPT TO THE
EXTENT THAT THE LAW OF ANOTHER JURISDICTION IS EXPRESSLY ELECTED IN A LOAN
DOCUMENT, THE LOAN DOCUMENTS SHALL BE DEEMED CONTRACTS AND INSTRUMENTS MADE
UNDER THE LAWS OF THE STATE OF TEXAS AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS AND THE LAWS OF
THE UNITED STATES OF AMERICA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE
STATE AND FEDERAL COURTS SITTING IN THE STATE OF TEXAS AND AGREES AND CONSENTS
THAT SERVICE OF PROCESS MAY BE MADE UPON IT IN ANY LEGAL PROCEEDING RELATING TO
THE LOAN DOCUMENTS OR THE OBLIGATIONS BY ANY MEANS ALLOWED UNDER TEXAS OR
FEDERAL LAW. ANY LEGAL PROCEEDING ARISING OUT OF OR IN ANY WAY RELATED TO ANY OF
THE LOAN DOCUMENTS SHALL BE BROUGHT AND LITIGATED EXCLUSIVELY IN THE UNITED
STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS, DALLAS DIVISION, TO
THE EXTENT IT HAS SUBJECT MATTER JURISDICTION, AND OTHERWISE IN THE TEXAS
DISTRICT COURTS SITTING IN DALLAS COUNTY, TEXAS. THE PARTIES HERETO HEREBY WAIVE
AND AGREE NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, THAT ANY
SUCH PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE THEREOF IS
IMPROPER, AND FURTHER AGREE TO A TRANSFER OF ANY SUCH PROCEEDING TO A FEDERAL
COURT SITTING IN THE STATE OF TEXAS TO THE EXTENT THAT IT HAS SUBJECT MATTER
JURISDICTION, AND OTHERWISE TO A STATE COURT IN DALLAS, TEXAS. IN FURTHERANCE
THEREOF, THE RELATED PERSONS AND BANK PARTIES EACH HEREBY ACKNOWLEDGE AND AGREE
THAT IT WAS NOT INCONVENIENT FOR THEM TO NEGOTIATE AND RECEIVE FUNDING OF THE
TRANSACTIONS CONTEMPLATED BY THIS
50
<PAGE> 56
AGREEMENT IN SUCH COUNTY AND THAT IT WILL BE NEITHER INCONVENIENT NOR UNFAIR TO
LITIGATE OR OTHERWISE RESOLVE ANY DISPUTES OR CLAIMS IN A COURT SITTING IN SUCH
COUNTY.
Section 10.8. Limitation on Interest. Bank Parties, the Related Persons
and any other parties to the Loan Documents intend to contract in strict
compliance with applicable usury law from time to time in effect. In furtherance
thereof such Persons stipulate and agree that none of the terms and provisions
contained in the Loan Documents shall ever be construed to create a contract to
pay, for the use, forbearance or detention of money, interest in excess of the
maximum amount of interest permitted to be charged by applicable law from time
to time in effect. Neither any Related Person nor any present or future
guarantors, endorsers, or other Persons hereafter becoming liable for payment of
any Obligation shall ever be liable for unearned interest thereon or shall ever
be required to pay interest thereon in excess of the maximum amount that may be
lawfully charged under applicable law from time to time in effect, and the
provisions of this section shall control over all other provisions of the Loan
Documents which may be in conflict or apparent conflict herewith. The Bank
Parties expressly disavow any intention to charge or collect excessive unearned
interest or finance charges in the event the maturity of any Obligation is
accelerated. If (a) the maturity of any Obligation is accelerated for any
reason, (b) any Obligation is prepaid and as a result any amounts held to
constitute interest are determined to be in excess of the legal maximum, or (c)
any Bank Party or any other holder of any or all of the Obligations shall
otherwise collect moneys which are determined to constitute interest which would
otherwise increase the interest on any or all of the Obligations to an amount in
excess of that permitted to be charged by applicable law then in effect, then
all sums determined to constitute interest in excess of such legal limit shall,
without penalty, be promptly applied to reduce the then outstanding principal of
the related Obligations or, at such Bank Party's or holder's option, promptly
returned to the payor thereof upon such determination. In determining whether or
not the interest paid or payable, under any specific circumstance, exceeds the
maximum amount permitted under applicable law, the Bank Parties and the Related
Persons (and any other payors thereof) shall to the greatest extent permitted
under applicable law, (i) characterize any non-principal payment as an expense,
fee or premium rather than as interest, (ii) exclude voluntary prepayments and
the effects thereof, and (iii) amortize, prorate, allocate, and spread the total
amount of interest throughout the entire contemplated term of the instruments
evidencing the Obligations in accordance with the amounts outstanding from time
to time thereunder and the maximum legal rate of interest from time to time in
effect under applicable law in order to lawfully charge the maximum amount of
interest permitted under applicable law. As used in this section the term
"applicable Law" means the Laws of the State of Texas or the Laws of the United
States of America, whichever Laws allow the greater interest, as such Laws now
exist or may be changed or amended or come into effect in the future.
Section 10.9. Termination; Limited Survival. In their sole and absolute
discretion, the Related Persons may at any time that no Obligations are owing
elect in a written notice delivered to Agent to terminate this Agreement. Upon
receipt by Agent of such a notice, if no Obligations are then owing this
Agreement and all other Loan Documents shall thereupon be terminated and the
parties thereto released from all prospective obligations thereunder.
Notwithstanding the foregoing or anything herein to the contrary, any waivers or
admissions made by any Related Person in any Loan Document, any Obligations
under Sections 3.2 through 3.6, and any
51
<PAGE> 57
obligations which any Person may have to indemnify or compensate any Bank Party
shall survive any termination of this Agreement or any other Loan Document. At
the request and expense of the Related Persons, Agent shall prepare and execute
all necessary instruments to reflect and effect such termination of the Loan
Documents. Agent is hereby authorized to execute all such instruments on behalf
of all Lenders, without the joinder of or further action by any Lender.
Section 10.10. Severability. If any term or provision of any Loan
Document shall be determined to be illegal or unenforceable all other terms and
provisions of the Loan Documents shall nevertheless remain effective and shall
be enforced to the fullest extent permitted by applicable Law.
Section 10.11. Counterparts. This Agreement may be separately executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to constitute one
and the same agreement.
Section 10.12. Waiver of Jury Trial. THE RELATED PERSONS AND BANK
PARTIES HEREBY VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY
RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED UPON
CONTRACT, TORT OR OTHERWISE) BETWEEN OR AMONG THE RELATED PERSONS AND BANK
PARTIES ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT OR ANY OF THE
OTHER LOAN DOCUMENTS. THIS PROVISION IS A MATERIAL INDUCEMENT TO THE BANK
PARTIES TO ENTER INTO THIS AGREEMENT.
[Remainder of page intentionally left blank]
52
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IN WITNESS WHEREOF, this Agreement is executed as of the date first
written above.
ALS WEST, INC., a Delaware corporation
By: /s/ Mark W. Ohlendorf
---------------------
Name: Mark W. Ohlendorf
Title: Vice President
Address:
450 N. Sunnyslope Rd.
Suite 300
Brookfield, WI 53005
ALTERNATIVE LIVING SERVICES, INC, a
Delaware corporation
By: /s/ Mark W. Ohlendorf
---------------------
Name: Mark W. Ohlendorf
Title: Senior Vice President
Address:
450 N. Sunnyslope Rd.
Suite 300
Brookfield, WI 53005
GUARANTY FEDERAL BANK, F.S.B., a federal
savings bank, Agent and Lender
By: /s/ Deborah M. Zaycock
----------------------
Name: Deborah M. Zaycock
Title: Vice President
Address:
8333 Douglas Avenue
Dallas, Texas 75225
Attention: Commercial Real Estate Lending
Division
<PAGE> 1
EXHIBIT 10.2
AMENDED AND RESTATED
FINANCING AND SECURITY AGREEMENT
(MASTER AGREEMENT)
ALS HOLDINGS, INC., ET AL
AS BORROWER
BANK UNITED
AS AGENT
February 12, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
SECTION 1.1 CERTAIN DEFINED TERMS..................................................................1
SECTION 1.2 ACCOUNTING TERMS AND OTHER DEFINITIONAL PROVISIONS....................................17
ARTICLE II..............................................................................................17
SECTION 2.1 THE LOAN..............................................................................17
SECTION 2.2 PROCEDURE FOR ADVANCES................................................................19
SECTION 2.3 FEES..................................................................................20
SECTION 2.4 INTEREST RATE MATTERS.................................................................20
SECTION 2.5 EXTENSIONS............................................................................23
ARTICLE III.............................................................................................23
COLLATERAL..............................................................................................23
SECTION 3.1 COLLATERAL............................................................................23
SECTION 3.2 ELIGIBLE PROJECTS.....................................................................23
SECTION 3.3 GUARANTIES............................................................................24
SECTION 3.4 COLLATERAL FOR OBLIGATIONS............................................................24
SECTION 3.5 COSTS.................................................................................24
ARTICLE IV..............................................................................................24
GENERAL FINANCING PROVISIONS............................................................................24
SECTION 4.1 CONDITIONS PRECEDENT TO CREDIT FACILITY CLOSING AND ADDITION OF DEEDS OF
TRUST.................................................................................24
SECTION 4.2 CONDITIONS PRECEDENT TO ACCEPTING AN ELIGIBLE PROJECT WHICH IS UNDER
CONSTRUCTION OR TO BE CONSTRUCTED:....................................................26
SECTION 4.3 CONDITIONS PRECEDENT TO ACCEPTING AN ELIGIBLE PROJECT WHICH HAS BEEN
CONSTRUCTED OR ACQUIRED:..............................................................30
SECTION 4.4 CONDITIONS PRECEDENT TO DETERMINING ADDITIONAL AVAILABILITY UNDER
BORROWING BASE........................................................................32
SECTION 4.5 CONDITIONS UNDER WHICH AN ELIGIBLE PROJECT IS A COMPLETED PROJECT.....................35
SECTION 4.6 VERIFICATION OF OPERATING RESERVE EXPENDITURES........................................36
SECTION 4.7 ASSIGNMENTS OF PAYMENTS...............................................................36
SECTION 4.8 LIABILITY OF THE LENDERS..............................................................36
SECTION 4.9 COMPUTATION OF INTEREST AND FEES......................................................37
SECTION 4.10 LIENS; SETOFF.........................................................................37
SECTION 4.11 PAYMENT AND PERFORMANCE OF OBLIGATIONS................................................37
SECTION 4.12 PAYMENTS TO OTHERS FOR THE ACCOUNT OF THE BORROWER....................................37
SECTION 4.13 PREPAYMENT............................................................................38
ARTICLE V...............................................................................................38
REPRESENTATIONS AND WARRANTIES..........................................................................38
SECTION 5.1 GOOD STANDING.........................................................................38
SECTION 5.2 POWER AND AUTHORITY...................................................................39
SECTION 5.3 BINDING AGREEMENTS....................................................................39
SECTION 5.4 LITIGATION............................................................................39
SECTION 5.5 NO CONFLICTING AGREEMENTS.............................................................40
SECTION 5.6 FINANCIAL INFORMATION.................................................................40
SECTION 5.7 NO DEFAULT UNDER OTHER AGREEMENTS.....................................................40
SECTION 5.8 TAXES.................................................................................40
SECTION 5.9 PLACE(S) OF BUSINESS AND LOCATION OF COLLATERAL.......................................40
</TABLE>
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<TABLE>
<S> <C>
SECTION 5.10 TITLE TO PROPERTIES...................................................................41
SECTION 5.11 MARGIN STOCK..........................................................................41
SECTION 5.12 ERISA.................................................................................41
SECTION 5.13 GOVERNMENTAL CONSENT..................................................................41
SECTION 5.14 FULL DISCLOSURE.......................................................................42
SECTION 5.15 BUSINESS NAMES AND ADDRESSES..........................................................42
SECTION 5.16 LICENSES AND CERTIFICATIONS...........................................................42
SECTION 5.17 OPERATING AGREEMENTS AND MANAGEMENT CONTRACTS.........................................43
SECTION 5.18 PARTICIPATION AGREEMENTS AND RESIDENT AGREEMENTS......................................43
SECTION 5.19 COMPLIANCE WITH LAWS..................................................................43
SECTION 5.20 PRESENCE OF HAZARDOUS MATERIALS OR HAZARDOUS MATERIALS CONTAMINATION..................44
SECTION 5.21 COMPLIANCE IN ZONING..................................................................44
SECTION 5.22 PLANS AND SPECIFICATIONS..............................................................44
SECTION 5.23 BUILDING PERMITS; OTHER PERMITS.......................................................44
SECTION 5.24 UTILITIES.............................................................................44
SECTION 5.25 ACCESS; ROADS.........................................................................45
SECTION 5.26 OTHER LIENS...........................................................................45
SECTION 5.27 DEFAULTS..............................................................................45
SECTION 5.28 NATURE OF CREDIT FACILITY; USURY; DISCLOSURES.........................................45
SECTION 5.29 SURVIVAL; UPDATES OF REPRESENTATIONS AND WARRANTIES...................................45
SECTION 5.30 ACCOUNTS..............................................................................46
ARTICLE VI..............................................................................................46
CONDITIONS OF LENDING...................................................................................46
SECTION 6.1 NO DEFAULT............................................................................46
SECTION 6.2 OPINION OF COUNSEL FOR THE BORROWER...................................................47
SECTION 6.3 APPROVAL OF COUNSEL FOR THE LENDERS...................................................47
SECTION 6.4 SUPPORTING DOCUMENTS..................................................................47
SECTION 6.5 FINANCING DOCUMENTS...................................................................47
SECTION 6.6 INSURANCE.............................................................................47
SECTION 6.7 SECURITY DOCUMENTS....................................................................47
SECTION 6.8 ADDITIONAL BORROWER JOINDER SUPPLEMENT................................................48
ARTICLE VII.............................................................................................48
AFFIRMATIVE COVENANTS OF BORROWER.......................................................................48
SECTION 7.1 FINANCIAL STATEMENTS..................................................................48
SECTION 7.2 FINANCIAL COVENANTS...................................................................49
SECTION 7.3 TAXES AND CLAIMS......................................................................52
SECTION 7.4 LEGAL EXISTENCE.......................................................................52
SECTION 7.5 CONDUCT OF BUSINESS AND COMPLIANCE WITH LAWS..........................................53
SECTION 7.6 USE OF PROCEEDS.......................................................................54
SECTION 7.7 INSURANCE.............................................................................54
SECTION 7.8 MAINTENANCE OF PROPERTIES.............................................................57
SECTION 7.9 MAINTENANCE OF THE COLLATERAL.........................................................57
SECTION 7.10 OTHER LIENS, SECURITY INTERESTS, ETC..................................................57
SECTION 7.11 DEFENSE OF TITLE AND FURTHER ASSURANCES...............................................57
SECTION 7.12 SUBSEQUENT OPINION OF COUNSEL AS TO RECORDING REQUIREMENTS............................58
SECTION 7.13 BOOKS AND RECORDS.....................................................................58
SECTION 7.14 COLLECTIONS...........................................................................58
SECTION 7.15 NOTICE TO ACCOUNT DEBTORS AND ESCROW ACCOUNT..........................................59
SECTION 7.16 BUSINESS NAMES........................................................................59
SECTION 7.17 ERISA.................................................................................59
SECTION 7.18 MANAGEMENT............................................................................59
SECTION 7.19 SURVEYS...............................................................................60
</TABLE>
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<TABLE>
<S> <C>
SECTION 7.20 INSPECTIONS; COOPERATION; PAYMENT OF INSPECTING ENGINEER..............................60
SECTION 7.21 VOUCHERS AND RECEIPTS.................................................................61
SECTION 7.22 PAYMENTS FOR LABOR AND MATERIALS......................................................61
SECTION 7.23 CORRECTION OF CONSTRUCTION DEFECTS....................................................61
SECTION 7.24 FEES AND EXPENSES; INDEMNITY..........................................................62
SECTION 7.25 GOVERNMENTAL SURVEYS OR INSPECTIONS...................................................62
SECTION 7.26 COST REPORTS..........................................................................62
SECTION 7.27 UPDATED APPRAISALS....................................................................62
SECTION 7.28 NOTIFICATION OF CERTAIN EVENTS, EVENTS OF DEFAULT AND ADVERSE
DEVELOPMENTS..........................................................................63
SECTION 7.29 COMPLIANCE WITH ENVIRONMENTAL LAWS....................................................64
SECTION 7.30 HAZARDOUS MATERIALS; CONTAMINATION....................................................64
SECTION 7.31 PARTICIPATION IN REIMBURSEMENT PROGRAMS...............................................65
ARTICLE VIII............................................................................................65
NEGATIVE COVENANTS OF BORROWER..........................................................................65
SECTION 8.1 BORROWINGS............................................................................65
SECTION 8.2 DEEDS OF TRUST AND PLEDGES............................................................65
SECTION 8.3 SALE OR TRANSFER OF ASSETS............................................................66
SECTION 8.4 OTHER LIENS; TRANSFERS; "DUE-ON-SALE"; ETC............................................66
SECTION 8.5 ADVANCES AND LOANS....................................................................66
SECTION 8.6 CONTINGENT LIABILITIES................................................................66
SECTION 8.7 LICENSES..............................................................................66
SECTION 8.8 ERISA COMPLIANCE......................................................................67
SECTION 8.9 TRANSFER OF COLLATERAL................................................................67
SECTION 8.10 SALE OF ACCOUNTS OR RECEIVABLES.......................................................68
SECTION 8.11 AMENDMENTS; TERMINATIONS..............................................................68
SECTION 8.12 PROHIBITION ON HAZARDOUS MATERIALS....................................................68
SECTION 8.13 SUBSIDIARIES..........................................................................68
SECTION 8.14 MERGERS OR ACQUISITIONS...............................................................68
SECTION 8.15 CONDITIONAL SALES.....................................................................69
SECTION 8.16 CHANGES TO PLANS AND SPECIFICATION....................................................69
SECTION 8.17 CONSTRUCTION CONTRACT; CONSTRUCTION MANAGEMENT........................................69
SECTION 8.18 LINE OF BUSINESS......................................................................69
ARTICLE IX..............................................................................................69
EVENTS OF DEFAULT.......................................................................................69
SECTION 9.1 FAILURE TO PAY AND/OR PERFORM THE OBLIGATIONS.........................................69
SECTION 9.2 BREACH OF REPRESENTATIONS AND WARRANTIES..............................................70
SECTION 9.3 FAILURE TO COMPLY WITH COVENANTS......................................................70
SECTION 9.4 FAILURE TO COMPLY WITH FINANCIAL REPORTING OR BOOKS AND RECORDS.......................70
SECTION 9.5 OTHER DEFAULTS........................................................................70
SECTION 9.6 DEFAULT UNDER OTHER FINANCING DOCUMENTS...............................................70
SECTION 9.7 RECEIVER; BANKRUPTCY..................................................................70
SECTION 9.8 JUDGMENT..............................................................................70
SECTION 9.9 EXECUTION; ATTACHMENT.................................................................71
SECTION 9.10 DEFAULT UNDER OTHER BORROWINGS........................................................71
SECTION 9.11 CHANGE IN STATUS OR OWNERSHIP.........................................................71
SECTION 9.12 DAMAGE TO IMPROVEMENTS................................................................71
SECTION 9.13 MECHANIC'S LIEN.......................................................................71
SECTION 9.14 SURVEY MATTERS........................................................................71
SECTION 9.15 GENERAL CONTRACTOR DEFAULT............................................................72
SECTION 9.16 ZONING................................................................................72
SECTION 9.17 JOINT VENTURE.........................................................................72
</TABLE>
iii
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<TABLE>
<S> <C>
SECTION 9.18 JOINT VENTURE LEASES..................................................................72
ARTICLE X...............................................................................................72
RIGHTS AND REMEDIES UPON DEFAULT........................................................................72
SECTION 10.1 DEMAND; ACCELERATION..................................................................72
SECTION 10.2 FURTHER ADVANCES; IMMEDIATE ACCELERATION..............................................72
SECTION 10.3 FURTHER ADVANCES; MATERIAL ADVERSE CHANGE OR IMPAIRMENT OF POSITION...................73
SECTION 10.4 SPECIFIC RIGHTS WITH REGARD TO COLLATERAL.............................................73
SECTION 10.5 PERFORMANCE BY LENDERS................................................................75
SECTION 10.6 UNIFORM COMMERCIAL CODE AND OTHER REMEDIES............................................76
SECTION 10.7 RECEIVER OR OTHER COURT ORDER.........................................................77
ARTICLE XI..............................................................................................77
MISCELLANEOUS...........................................................................................77
SECTION 11.1 NOTICES...............................................................................77
SECTION 11.2 CONSENTS AND APPROVALS................................................................78
SECTION 11.3 REMEDIES, ETC. CUMULATIVE.............................................................78
SECTION 11.4 NO WAIVER OF RIGHTS BY THE LENDERS....................................................78
SECTION 11.5 ENTIRE AGREEMENT......................................................................79
SECTION 11.6 SURVIVAL OF AGREEMENT; SUCCESSORS AND ASSIGNS.........................................79
SECTION 11.7 EXPENSES..............................................................................79
SECTION 11.8 COUNTERPARTS..........................................................................80
SECTION 11.9 GOVERNING LAW.........................................................................80
SECTION 11.10 MODIFICATIONS........................................................................80
SECTION 11.11 ILLEGALITY...........................................................................80
SECTION 11.12 GENDER, ETC..........................................................................80
SECTION 11.13 HEADINGS.............................................................................80
SECTION 11.14 WAIVER OF TRIAL BY JURY..............................................................80
SECTION 11.15 NO WARRANTY BY LENDERS...............................................................81
SECTION 11.16 LIABILITY OF THE LENDERS.............................................................81
SECTION 11.17 LICENSE OF TRADENAME.................................................................82
SECTION 11.18 NO PARTNERSHIP.......................................................................82
SECTION 11.19 THIRD PARTIES; BENEFIT...............................................................82
SECTION 11.20 CONDITIONS; VERIFICATION.............................................................82
SECTION 11.21 SIGNS; PUBLICITY.....................................................................83
SECTION 11.22 MANDATORY ARBITRATION................................................................83
SECTION 11.23 TIME OF ESSENCE......................................................................84
</TABLE>
iv
<PAGE> 6
AMENDED AND RESTATED FINANCING AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED FINANCING AND SECURITY AGREEMENT
(the "Agreement") is made this 12th day of February, 1999, by and between ALS
HOLDINGS, INC., a Delaware corporation ("Holdings"), ALS WISCONSIN HOLDINGS,
INC., a Delaware corporation ("Wisconsin Holdings"), and BANK UNITED as agent
(the "Agent") for itself and for certain additional Lenders (as hereinafter
defined).
R E C I T A L S
A. The Lenders have made a Credit Facility available to the Borrower
and any Additional Borrowers in the original maximum principal sum of
$80,000,000 or such greater amount as may be from time to time committed by the
Agent and the other Lenders.
B. The Credit Facility is governed by a Financing and Security
Agreement dated September 28, 1998 (as amended, modified, substituted, extended
and renewed from time to time the "Existing Financing Agreement") by and between
the Borrower and the Agent on behalf of the other Lenders.
C. Pursuant to the terms of an Additional Borrower Joinder Supplement
dated December 10, 1998, Wisconsin Holdings became an Additional Borrower under
the Credit Facility.
D. The Borrower has requested and the Agent has agreed to modify
certain of the provisions of the Existing Financing Agreement as hereinafter set
forth on the condition that this Agreement be executed and delivered to the
Agent amending and restating the Existing Financing and Security Agreement in
its entirety.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises, the mutual agreements
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower and the Lender hereby
agree as follows:
DEFINITIONS
Section 1.1 Certain Defined Terms.
As used herein, the terms defined in the Preamble and Recitals hereto
shall have the respective meanings specified therein, and the following terms
shall have the following meanings:
1
<PAGE> 7
"Account", individually, and "Accounts", collectively, mean with
respect to any Borrower and with respect to the Guarantor pertaining to all
Eligible Projects, all presently existing or hereafter acquired or created
accounts, accounts receivable, contract rights, notes, drafts, instruments,
acceptances, chattel paper, leases and writings evidencing a monetary obligation
or a security interest in or a lease of goods, all rights to receive the payment
of money or other consideration under present or future contracts arising out of
or relating to any and all Eligible Projects (including, without limitation, all
rights to receive the payment of money or other consideration from, or on behalf
of, any private pay patient), or by virtue of services rendered, loans and
advances made or other considerations given, by or set forth in, or arising out
of, any present or future chattel paper, note, draft, lease, acceptance,
writing, bond, insurance policy, instrument, document or general intangible, and
all extensions and renewals of any thereof, all rights under or arising out of
present or future contracts, agreements which gave rise to any or all of the
foregoing insofar as they pertain to the Eligible Projects, including all claims
or causes of action now existing or hereafter arising in connection with or
under any agreement or document or by operation of law or otherwise, all
collateral security of any kind (including real property mortgages) given by any
person with respect to any of the foregoing, including, without limitation, all
rights to receive payment of money or other consideration from, or on behalf of,
any private pay patient, all rights to receive payments under all Resident
Agreements, and all third-party payor contracts (including Medicare and Medicaid
to the extent permitted by Law), including, but not limited to, the Veterans
Administration, Participation Agreements, and any and all depository accounts
(other than resident trust accounts) into which the proceeds of all or any
portion of such accounts may be now or hereafter deposited, and all proceeds
(cash and non-cash) of the foregoing.
"Account Debtor" means any Person who is obligated on a Receivable and
"Account Debtors" mean all Persons who are obligated on the Receivables.
"Act of Bankruptcy" means the filing of a petition in bankruptcy under
the Bankruptcy Code or the other commencement of a proceeding under any other
applicable law concerning insolvency, reorganization or bankruptcy, now or
hereafter in effect.
"Acquired Project" means a Facility, purchased by a Borrower from a
third party as a Completed Project, which has been open and operating for less
than twelve (12) months.
"Acquisition Project" means a Facility, purchased by a Borrower from a
third party as a Completed Project, which has been open and operating for twelve
(12) consecutive months or longer.
"Additional Borrower" means each Wholly Owned Subsidiary of Holdings or
ALS which is acceptable to the Agent and which has executed and delivered an
Additional Borrower Joinder Supplement and has otherwise complied with the
provisions of Section 4.1.
2
<PAGE> 8
"Additional Borrower Joinder Supplement" means an Additional Borrower
Joinder Supplement in the form to be provided by the Agent, with the blanks
appropriately completed and executed and delivered by the Additional Borrower
and by the Borrowers.
"Affiliate" means an entity in which ALS (or another entity which ALS
controls), holds an ownership interest equal to or greater than fifty-one
percent (51%).
"Agency Agreement" means that any Agency Agreement which may be
executed by and among the Agent and the other Lenders, as the same may be
amended, restated or substituted from time to time.
"Agent" means Bank United, its successors and assigns.
"Agreement" means this Financing and Security Agreement and all
amendments, extensions, restatements, substitutions and supplements hereto which
may from time to time become effective in accordance with the provisions of
Section 11.10 hereof.
"ALS" means Alternative Livings Services, Inc. a Delaware corporation.
"Architect" means the architect named in an Architect's Contract, if
any, and his or its successors and permitted assigns.
"Architect's Contract" means an agreement by and between the Borrower,
as owner, and the architect for a particular Facility, or any contract for
architectural services relating to the development of the Land and/or the
construction of the Improvements for each of the Eligible Projects made by the
Borrower and an architect and approved in writing by the Agent, as the same may
be amended from time to time with the prior written approval of the Agent.
"Banking Days" means a day on which a Lender is open for the conduct of
substantially all of its banking business at its office in the city in which the
Note is payable and must also be a day on which dealings are carried on in the
applicable interbank Eurodollar market.
"Bankruptcy Code" means the United States Bankruptcy Code, 11 U.S.C.
101 et seq.
"Borrower" means individually and/or collectively Holdings or any
Additional Borrower.
"Borrowing Base" means at any time an amount equal to the lesser of (a)
the lesser of the aggregate dollar amounts of the Deed of Trust Lien Amounts for
each of the Eligible Projects or the aggregate dollar amounts of: (i) 75% of the
appraised value of
3
<PAGE> 9
each Pool A Project, (ii) 60% of the appraised value of each Pool B Project and
(iii) 40% of the appraised value of each Pool C Project; or (b) the aggregate
dollar amount equal to 80% of the Costs Incurred to Date for each Pool A
Project, 60% of the Costs Incurred to Date for each Pool B Project, and 40% of
the Costs Incurred to Date for each Pool C Project.
"Borrowing Base Report" shall have the meaning set forth in Section
2.1(d) hereof.
"Campus Project" means more than one Facility at a single location
consisting of two or more Senior Living Facility buildings of one or more model
type.
"Chattel Paper" means a writing or writings which evidence both a
monetary obligation and a security interest in or lease of specific goods; any
returned, rejected or repossessed goods covered by any such writing or writings
and all proceeds (in any form including, without limitation, accounts, contract
rights, documents, chattel paper, instruments and general intangibles) of such
returned, rejected or repossessed goods; and all proceeds (cash and non-cash) of
the foregoing.
"Collateral" means all of the Borrower's Accounts, Equipment, General
Intangibles, documents, Chattel Paper, Instruments and Inventory, all right,
title and interest of the Borrower in and to the Operating Agreements and
Management Contracts (including, without limitation, the Management Agreement),
Resident Agreements (to the extent and only to the extent the same can be
pledged or assigned in compliance with applicable law), Physician Contracts,
Participation Agreements, the Licenses to the extent and only to the extent the
same can be pledged or assigned in compliance with applicable law (whether or
not designated with initial capital letters), and all other management
contracts, operating agreements, service agreements and any other agreements
pertaining to the Eligible Projects as those terms are defined herein and in the
Uniform Commercial Code as presently adopted and in effect in the State of
Texas, and shall also cover, without limitation, (i) any and all property
specifically included in those respective terms in this Agreement or in the
Financing Documents, (ii) all right, title and interest of the Borrower in and
to Leases or subleases, rents, royalties, issues, profits, revenues, earnings,
income or other benefits of the Property, or arising from the use or enjoyment
of the Property, or from any lease or other use and occupancy agreement
pertaining to the Property (to the extent and only to the extent the same can be
pledged or assigned in compliance with applicable law), (iii) all right, title
and interest of the Borrower under all construction, architectural and design
contracts and plans and specifications,(iv) any and all property and/or
collateral described in any of the Security Documents, including, without
limitation, this Agreement, and the Deeds of Trust, (v) any and all bank
accounts or other deposit accounts of the Borrower wherever located, and (vi)
all proceeds (cash and non-cash, including, without limitation, insurance
proceeds) of the foregoing.
"Collateral Assignments" means collectively the Collateral Assignment
of Licenses, Participation Agreements and Resident Agreements executed in
connection
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with each Facility Closing among the Borrower, the Management Company and the
Agent and the Collateral Assignment of Operating Agreements and Management
Contracts executed in connection with each Facility Closing among the Borrower,
the Management Company and the Agent.
"Commonly Controlled Entity" means an entity, whether or not
incorporated, which is under common control with the Borrower within the meaning
of Section 414(b) or (c) of the Internal Revenue Code of 1986, as amended and
the regulations promulgated or issued thereunder.
"Completion Guaranty" or "Completion Guaranties" means, individually or
collectively, a Guaranty of Completion executed by the Guarantor in favor of the
Lenders in connection with the Facility Closing for a Development Project which
is not a Completed Project.
"Completed Project" means an Eligible Project for which the Lender has
received all of the due diligence items listed in Section 4.4 hereof.
"Construction Contract" or "Construction Contracts" means, individually
or collectively, the general contractor's agreements by and between the
Borrower, as owner, and a general contractor for the development of any of the
Land and/or the construction of any of the Improvements and approved in writing
by the Agent, as the same may be amended from time to time with the prior
written approval of the Agent.
"Costs Incurred to Date" means as to an Eligible Project constructed or
under construction by a Borrower, actual costs expended by the Borrower or a
Wholly Owned Subsidiary under a Total Development Budget and reported to the
Lender through the requisition process as verified by the Lender pursuant to the
provisions of the Financing Agreement; provided, however, no cost overruns not
otherwise covered by a contingency category in the Total Development Budget will
be included in the definition of Costs Incurred to Date without the Lender's
prior written consent. "Costs Incurred to Date" for an Acquisition Project or a
completed Eligible Project means the purchase price and related expenses of
acquisition.
"Credit Facility" means the revolving line of credit in a maximum
principal sum at any one time outstanding equal to the Credit Facility Committed
Amount.
"Credit Facility Closing" shall mean the date on which the documents
evidencing and initially securing the Credit Facility are executed and delivered
to the Agent.
"Credit Facility Committed Amount" means $80,000,000 or such larger
amount, not to exceed $100,000,000, which the Lenders may from time to time
severally commit to lend to the Borrower pursuant to the terms of the Agency
Agreement, any amendment to this Agreement and the applicable Note.
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<PAGE> 11
"Debt Service" means for any period of determination the annual
principal and interest payments required to fully amortize an Eligible Project's
Costs Incurred to Date in equal monthly installments of principal and interest
based on a 25-year amortization schedule and a rate equal to 200 basis points
per annum in excess of the then current rate for ten (10) year United States
Treasury Notes, as reported in the most recent Federal Reserve Statistical
Release H.15(519) but in no event shall the rate (as calculated as aforesaid) be
less than 7.5% per annum.
"Debt Service Coverage Ratio" means the ratio of Net Operating Income
to Debt Service.
"Deed of Trust" or "Deeds of Trust" means, individually or
collectively, a Deed of Trust, Assignment and Security Agreement, a Mortgage,
Assignment and Security Agreement, an Indemnity Deed of Trust, Assignment and
Security Agreement or an Indemnity Mortgage, Assignment and Security Agreement
or comparable security documents covering Property and securing the Obligations
as the same may be from time to time amended, restated, or replaced.
"Deed of Trust Lien Amount" means the dollar amount of the Lien created
by a Deed of Trust on the Borrower's fee simple interest in an Eligible Project,
the lien amount being the lesser of (i) 75% of such Eligible Project's appraised
value at stabilization, or (ii) 80% of such Eligible Project's Total Development
Budget.
"Default" means, with respect to each Financing Document, a default
which, with the giving of notice or the passage of time, or both, would
constitute an Event of Default.
"Development Project" means a Facility being constructed by a Borrower
which has not been open and operating for more than one (1) year, or a Facility
which has been acquired by a Borrower which has been open for less than one (1)
year.
"EBITDAR" means earnings before interest, taxes, depreciation,
amortization, and Rent, plus the dollar amount of the Guarantor's minority
interest in losses of unconsolidated subsidiaries.
"Eligible Project" means any location in the United States (a) of a
Development Project, an Acquisition Project or a Stabilized Project; (b) for
which the Agent has received and reviewed all pre-closing due diligence items;
(c) for which the Agent has received a Total Development Budget including a pro
forma operating budget acceptable to the Agent; (d) for which a Facility Closing
has been completed and a Deed of Trust has been recorded on the Eligible
Project; and (e) for which Agent has received other documentation necessary to
perfect a lien on the Collateral in favor of the Bank Group.
"Enforcement Costs" means all expenses, charges, costs and fees
whatsoever (including, without limitation, attorney's fees and expenses) of any
nature whatsoever paid or incurred by or on behalf of the Lenders in connection
with (a) the collection or
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<PAGE> 12
enforcement of any or all of the Obligations, (b) the preparation of or changes
to this Agreement, the Note, the Security Documents and/or any of the other
Financing Documents, (c) the creation, perfection, collection, maintenance,
preservation, defense, protection, realization upon, disposition, sale or
enforcement of all or any part of the Collateral, including, without limitation,
those sums paid or advanced, and costs and expenses, more specifically described
in Sections 10.4 and 11.7, (d) the monitoring, administration, processing,
servicing of any or all of the Obligations and/or the Collateral (e)
post-judgment enforcement or collection actions, and (f) bankruptcy proceedings
of the Borrower.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Equipment" means all equipment, machinery, furniture and fixtures and
supplies of every nature, presently existing or hereafter acquired or created
and wherever located, together with all accessions, additions, fittings,
accessories, special tools, and improvements thereto and substitutions therefor
and all parts and equipment which may be attached to or which are necessary for
the operation and use of such personal property, whether or not the same shall
be deemed to be affixed to real property, and all rights under or arising out of
present or future contracts relating to the foregoing and all proceeds (cash and
non-cash) of the foregoing.
"Eurodollar Period" or "Eurodollar Periods" shall have the meaning set
forth in the Note.
"Eurodollar Rate" means, for any portion of the principal sum for any
Eurodollar Period therefor, the rate per annum (rounded upwards, if necessary,
to the nearest 1/100 of 1%) appearing on Telerate Page 3750 (or any successor
page) as the London interbank offered rate for deposits in Dollars at
approximately 11:00 a.m. (London Time) three (3) Banking Days prior to the first
day of such Eurodollar Period for a term comparable to such Eurodollar Period.
If for any reason such rate is not available, the term "Eurodollar Rate" shall
mean, for any Eurodollar Loan for any Eurodollar Period therefor, the rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on
Reuters Screen LIBO Page as the London interbank offered rate for deposits in
Dollars at approximately 11:00 a.m. (London Time) three (3) Banking Days prior
to the first day of such Eurodollar Period for a term comparable to such
Eurodollar Period; provided, however, if more than one rate is specified on
Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of
all such rates.
"Event(s) of Default" means the occurrence of any one or more of the
events specified in Part IX of this Agreement or in the other Financing
Documents and the continuance of such event beyond the applicable grace and/or
cure periods therefor, if any, set forth in Part IX or in the other Financing
Documents.
"Expense Payments" shall have the meaning set forth in Section 10.5
hereof.
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"Facility" and "Facilities" mean, individually or collectively, a
Senior Living Facility.
"Facility Closing" has the meaning set forth in Section 4.1 hereof.
"Financing Documents" means at any time collectively this Agreement,
the Note, the Deeds of Trust, the Guaranty Agreement, the Performance Guaranty,
any Additional Borrower Joinder Supplements, the Management Fee Subordination
Agreement, the Security Documents, and any other instrument, agreement or
document previously, simultaneously or hereafter executed and delivered by the
Borrower and/or any other Person, singly or jointly with another Person or
Persons, evidencing, securing, guarantying or in connection with any of the
Obligations and/or in connection with this Agreement, the Note and/or any of the
Security Documents, as the same may from time to time be amended, restated,
supplemented or otherwise modified.
"GAAP" means generally accepted accounting principles in effect in the
United States of America from time to time.
"General Contractor" or "General Contractors" shall mean individually
or collectively the general contractors named in the Construction Contracts and
his or its respective successors and permitted assigns.
"General Intangibles" means any and all general intangibles of every
nature, whether presently existing or hereafter acquired or created arising out
of or relating to any or all of the Eligible Projects, including without
limitation all books, correspondence, credit files, records, computer programs,
computer tapes, cards and other papers and documents in the possession or
control of the Borrower or the Guarantor, claims (including without limitation
all claims for income tax and other refunds), choses in action, judgments,
patents, patent licenses, trademarks, trademark licenses (excluding any license
to the Borrower for the "Wynwood", "Crossings", "Clare Bridge", "Wovenhearts"
"Sterling House" or "Sterling Cottage" trademarks or tradenames), licensing
agreements, rights in intellectual property, goodwill, as that term is defined
in accordance with GAAP (including all goodwill of the Borrower's business
symbolized by, and associated with, any and all trademarks, trademark licenses,
copyrights and/or service marks), royalty payments, contractual rights, rights
as lessee under any lease of real or personal property, literary rights,
copyrights, service names, service marks, logos, trade secrets, all amounts
received as an award in or settlement of a suit in damages, deposit accounts,
interests in joint ventures or general or limited partnerships, all Licenses,
construction permits, Operating Agreements and Management Contracts,
Participation Agreements, Management Agreements and Resident Agreements, and all
proceeds (cash and non-cash) of the foregoing.
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<PAGE> 14
"Governmental Authority or Authorities" means any nation or government,
any state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guarantor" means ALS.
"Guaranty Agreement" means the Guaranty of Payment Agreement by the
Guarantor of even date herewith.
"Hazardous Materials" means any flammable explosives, radioactive
materials, hazardous waste, toxic substances or related materials, including,
without limitation, asbestos, polychlorinated biphenyls, urea-formaldehyde,
radon, and any substance defined as or included in the definition of (a) any
"hazardous waste" as defined by the Resource Conservation Recovery Act of 1976,
as amended from time to time, and regulations promulgated thereunder; (b) any
"hazardous substance" as defined by the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended from time to time, and
regulations promulgated thereunder; (c) any "toxic substance" as defined by the
Toxic Substances Control Act, as amended from time to time, and regulations
promulgated thereunder; (d) any hazardous or infectious medical waste including,
but not limited to, cultures and stocks of infectious agents and associated
biologicals, pathological wastes, human and animal blood specimens and blood
products, anatomical materials, blood, blood-soiled articles, contaminated
materials, microbiological laboratory wastes, sharps, chemical wastes,
infectious wastes, chemotherapeutic wastes, and radioactive wastes; (e) any
substance, the presence of which on any property now or hereafter owned,
operated or acquired by the Borrower is prohibited or regulated under any
applicable Federal or state laws or regulations; and (f) any other substance,
pollutant, contaminant, chemical, or industrial toxic hazardous substance or
waste, including without limitation hazardous materials, which by law is
prohibited or is otherwise regulated as a hazardous material.
"Hazardous Materials Contamination" means the contamination by, release
or spill of (whether presently existing or occurring after the date of this
Agreement), Hazardous Materials of or on any property owned, operated or
controlled by the Borrower, or for which the Borrower has responsibility,
including, without limitation, improvements, facilities, soil, ground water, air
or other elements on, or of, any property now or hereafter owned, operated or
acquired by the Borrower, and any other contamination by Hazardous Materials for
which the Borrower is, or is claimed to be, responsible.
"Holdings" means ALS Holdings, Inc., a Delaware corporation.
"Hydric Soils" means any soil category upon which building would be
prohibited or restricted under applicable governmental requirements (including,
without limitation, those imposed by the U.S. Army Corps of Engineers based upon
its guidelines as to, among other things, soil, vegetation and effect on the
ecosystem).
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<PAGE> 15
"Improvements" shall have the meaning given to that term in each Deed
of Trust.
"Inspecting Engineer" shall mean such person or firm as the Agent may
from time to time appoint or designate for purposes related to the inspection of
the progress of the development of any of the Land and the construction of any
of the Improvements, conformity of construction with the applicable Plans and
Specifications, and for such other purposes as the Agent may from time to time
deem appropriate or as may be required by the terms of this Agreement.
"Instruments" means any and all notes, notes receivable, drafts,
acceptances, and similar instruments or documents, both now owned or hereafter
created or acquired arising out of or relating to the Facility (or any part
thereof).
"Interest" means the sum of all interest expense (as defined by GAAP),
net of interest income.
"Inventory" means any and all inventory of the Borrower and all right,
title and interest of the Borrower in, and to, all of its now owned and
hereafter acquired goods, merchandise and other personal property furnished
under any contract of service or intended for sale or lease arising out of or
relating to any and all Facilities, including, without limitation, all supplies
of any kind, nature or description which are used or consumed in the Borrower's
business and all documents of title or documents representing the same and all
proceeds (cash and non-cash) and products of the foregoing.
"Joint Venture" means an entity formed as a joint venture between ALS
or a Wholly Owned Subsidiary and one (1) or more joint venture partners as a
single-purpose, bankruptcy-remote legal entity.
"Joint Venture Lease" means a lease between a Borrower and a Joint
Venture to operate an Eligible Project.
"Land" shall have the meaning described in the Deeds of Trust or in
any applicable Deed of Trust as the context shall indicate.
"Laws" means all ordinances, statutes, rules, regulations, orders,
injunctions, writs or decrees of any Governmental Authority or any court or
similar entity established by any thereof.
"Lease" shall have the meaning set forth in a Deed of Trust.
"Lenders" means collectively, except as the context may otherwise
indicate, the Agent and any and all additional lenders who are or shall be from
time to time
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participating as lenders under the Credit Facility pursuant to any Agency
Agreement. "Lender" means any of the Lenders individually.
"Lender Tax" means any present or future tax, levy, cost or charge of
any nature imposed by any Governmental Authority, excluding taxes on or measured
by the net income of any Lender imposed by the Internal Revenue Service or by
any jurisdiction in which the principal or relevant lending office of such
Lender is located.
"Licenses" means any and all licenses, certificates of need, operating
permits, franchises, and other licenses, authorizations, certifications,
permits, or approvals, other than construction permits, issued by, or on behalf
of, any Governmental Authority now existing or at any time hereafter issued,
with respect to the acquisition, construction, renovation, expansion, leasing,
management, ownership and/or operation of any and all Facilities, accreditation
of any Facility, and/or the participation or eligibility for participation in
any third party payment or reimbursement programs to the extent the Borrower or
any Guarantor Subsidiary is participating in such programs (but specifically
excluding any and all Participation Agreements to the extent required by law),
any and all operating licenses issued by any state Governmental Authority, any
and all pharmaceutical licenses and other licenses related to the purchase,
dispensing, storage, prescription or use of drugs, medications, and other
"controlled substances," any and all licenses relating to the operation of food
or beverage facilities or amenities, if any, and any and all certifications and
eligibility for participation in Medicare, Medicaid, Blue Cross and/or Blue
Shield, or any of the Managed Care Plans, private insurer, employee assistance
programs or other third party payment or reimbursement programs as the same may
from time to time be amended, renewed, restated, reissued, restricted,
supplemented or otherwise modified.
"Lien" means any mortgage, deed of trust, deed to secure debt, grant,
pledge, security interest, assignment, encumbrance, judgment, lien or charge of
any kind, whether perfected or unperfected, avoidable or unavoidable, consensual
or non-consensual, including, without limitation, any conditional sale or other
title retention agreement, filed or un-filed tax liens, any lease in the nature
thereof, and the filing of or agreement to give any financing statement under
the Uniform Commercial Code of any jurisdiction.
"Liquidation Costs" shall have the meaning set forth in Section 10.6
hereof.
"Loan" shall have the meaning set forth in Section 2.1 hereof.
"Managed Care Plans" means any health maintenance organization,
preferred provider organization, individual practice association, competitive
medical plan, or similar arrangement, entity, organization, or Person.
"Management Agreement" means any and all Management Agreements entered
into or to be entered into by and between the Borrower or the Joint Venture and
the
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<PAGE> 17
Management Company relating to the management of an Eligible Facility, as the
same may from time to time be amended, restated, supplemented or otherwise
modified.
"Management Company" means ALS, its successors and assigns and any
other Person which may become the manager of the Facilities.
"Management Fee Subordination Agreement" shall have the meaning set
forth in Section 7.18 hereof.
"Material Lease" shall mean a lease of a portion of any of the Property
which generates $25,000 per year or more in gross revenue for such Property.
"Maximum Construction Period" means construction has been on-going for
not longer than the applicable period for the Facility model type as set forth
in Section 7.2.2 hereof.
"Minimum Occupancy Requirement" means for an Eligible Project a minimum
Resident Occupancy for the particular type and model of Facility as set forth in
Section 7.2.2 hereof.
"Mortgage Lien Amount" means Deed of Trust Lien Amount.
"Multiemployer Plan" shall mean a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Net Operating Income" means total operating revenue less total
operating expenses (excluding interest, federal and state income taxes,
depreciation and amortization) but including a management fee to the Management
Company of the higher of five percent (5%) of gross revenues net of management
expenses reflected in the income statement for the Facility or the actual
management fee if paid to a non-affiliate of the Guarantor for the period in
question as shown in financial information provided by the Borrowers.
"Note" shall have the meaning set forth in Section 2.1 hereof.
"Obligations" means all present and future debts, obligations, and
liabilities, whether now existing or hereafter arising, of the Borrower to the
Agent or any Lender under, arising pursuant to, in connection with and/or on
account of the provisions of this Agreement, the Note, the Deeds of Trust, each
Security Document, and any of the other Financing Documents, including, without
limitation, the principal of, and interest on, the Note, late charges,
Enforcement Costs, and other prepayment penalties (if any), letter of credit
fees or fees charged with respect to any guaranty of any letter of credit, and
also means all other present and future indebtedness, liabilities and
obligations, whether now existing or hereafter arising, of the Borrower to the
Lenders of any nature whatsoever regardless of whether such debts, obligations
and liabilities be direct, indirect, primary,
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secondary, joint, several, joint and several, fixed or contingent, and any and
all renewals, extensions and rearrangements of any such debts, obligations and
liabilities.
"Operating Agreements and Management Contracts" means any and all
contracts and agreements previously, now or at any time hereafter at any time
entered into by the Borrower with respect to the acquisition, construction or
renovation of a significant nature, expansion, ownership, operation,
maintenance, use or management of any or all of the Facilities or otherwise
concerning the operations and business of any or all of the Facilities,
including, without limitation, any and all service and maintenance contracts,
any employment contracts, any and all management agreement other than the
Management Agreements, any and all consulting agreements, laboratory servicing
agreements, pharmaceutical contracts, physician, other clinician or other
professional services provider contracts, food and beverage service contracts,
and other contracts for the operation and maintenance of, or provision of
services to, a Facility, as the same may from time to time be amended, restated,
supplemented, renewed, or modified.
"Operating Month" means the first full calendar month after the
issuance of all required Licenses for any Facility and each month thereafter.
"Operating Reserve" shall mean a reserve in an amount approved by the
Agent included in each Total Development Budget to cover the costs of leasing up
a Facility and initial operating deficits.
"Participation Agreements" means any and all third party payor
participation or reimbursement agreements now or at any time hereafter existing
for the benefit of the Borrower relating to rights to payment or reimbursement
from, and claims against, private insurers, Managed Care Plans, material
employee assistance programs, Blue Cross and/or Blue Shield, federal, state and
local Governmental Authorities, including without limitation, Medicare and
Medicaid, and other third party payors, as the same may from time to time be
amended, restated, extended, supplemented or modified.
"Performance Guaranty" means individually or collectively a Guaranty of
Performance by the Guarantor in connection with a Facility Closing.
"Permitted Equipment Financing" means equipment leases with an
aggregate present value of the total rents of not in excess of $250,000 per
Facility.
"Permitted Liens" means: (a) Liens for Taxes which are not delinquent
or which the Agent has determined in the exercise of its sole and absolute
discretion (i) are being diligently contested in good faith and by appropriate
proceedings, (ii) the Borrower has the financial ability to pay, with all
penalties and interest, at all times without materially and adversely affecting
the Borrower, and (iii) are not, and will not be with appropriate filing, the
giving of notice and/or the passage of time, entitled to priority over any Lien
of the Lenders; (b) deposits or pledges to secure obligations under workers'
compensation, social security or similar laws, or under unemployment insurance
in the ordinary course
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<PAGE> 19
of business; (c) Liens in favor of the Lenders pursuant to the Credit Facility;
(d) judgment Liens to the extent the entry of such judgment does not constitute
an Event of Default under the terms of this Agreement or result in the sale of,
or levy of execution on, any of the Collateral; (e) the Permitted Equipment
Financing; and (f) such other Liens, if any, as are identified as Permitted
Encumbrances as defined in a Deed of Trust.
"Person" shall mean and include an individual, a corporation, a
partnership, a limited liability company, a joint venture, a trust, an
unincorporated association, any Governmental Authority or any other entity.
"Plans and Specifications" shall mean any and all plans and
specifications prepared in connection with the development of the Land and/or
the construction of the Improvements for any Eligible Project which is a
Development Project and which are approved in writing by the Agent, as the same
may from time to time be amended with the prior written approval of the Agent,
including but not limited to, plans and specifications prepared by an Architect,
a copy of which have been initialed by the Borrower and the Agent for
identification and delivered to the Agent.
"Pool A Project" means any Eligible Project which, at any time when the
Borrowing Base is computed, meets the applicable Pool A covenants set forth in
Section 7.2.2 hereof.
"Pool B Project" means any Eligible Project which, when the Borrowing
Base is computed, has not met the definition of a Pool A Project for the most
recent three (3) months or which fails to meet the applicable Joint Venture
buy-out provision of Section 7.2.2(i).
"Pool C Project" means any Eligible Project which, when the Borrowing
Base is computed, has not met the definition of a Pool A Project for the most
recent six (6) months or which fails to meet the applicable Joint Venture
buy-out provision of Section 7.2.2(i).
"Post Default Rate" means the interest rate on the Note in the absence
of an Event of Default plus two percent (2%) per annum.
"Prime Rate" shall have the meaning set forth in Section 2.4.2 hereof.
"Pro Forma Operating Statement" means the Borrower's projection for not
less than 36 months from the first Operating Month including occupancy
projections and projected operating expenses and operating losses.
"Property" shall mean collectively the "Property" as that term is
defined in each of the Deeds of Trust.
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<PAGE> 20
"Receivables" means all of the Borrower's now or hereafter owned,
acquired or created Accounts, Chattel Paper, Contract Rights, General
Intangibles and Instruments, and all cash and noncash proceeds and products
thereof.
"Rent" means lease expense as defined pursuant to GAAP.
"Reportable Event" shall mean any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder.
"Requisition" or "Requisitions" shall have the meaning set forth in
Section 2.2 hereof.
"Resident Agreements" means any and all contracts, authorizations,
agreements and/or consents executed by, or on behalf of any resident or other
person seeking services from the Borrower pursuant to which the Borrower
provides or furnishes health or assisted living care and related services at any
and all of the Facilities, including the consent to treatment, assignment of
payment of benefits by third party, as the same may from time to time be
amended, restated, supplemented or modified.
"Resident Occupancy" means the number of residents who are in occupancy
at a Facility and paying fees pursuant to a resident agreement.
"Revolving Credit Expiration Date" means September 24, 2001 or any date
to which it may be extended from time to time pursuant to the terms of Section
2.5 hereof.
"Revolving Credit Termination Date" means the earlier of (a) the
Revolving Credit Expiration Date, or (b) the date on which the Credit Facility
is terminated pursuant to Article X hereof or otherwise.
"Security Documents" shall mean, collectively, any assignment,
including, without limitation, the Collateral Assignments and any assignment,
pledge agreement, security agreement, mortgage, deed of trust (including the
Deeds of Trust), leasehold mortgage, leasehold deed of trust, deed to secure
debt, financing statement, initial transaction statement and any similar
instrument, document or agreement under or pursuant to which a Lien is now or
hereafter granted to, or for the benefit of, the Lenders on any collateral to
secure the Obligations, as the same may from time to time be amended, restated,
supplemented or otherwise modified.
"Senior Living Facility" and "Senior Living Facilities" mean
individually or collectively, an assisted living facility, an independent living
facility or a dementia care facility for persons with Alzheimer's disease and
other forms of memory impairment.
"Stabilized Project" means an Eligible Project with a Resident
Occupancy of at least 85% and shall include a Development Project which has been
open for twelve (12)
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<PAGE> 21
months or longer or which has earlier achieved a ratio of Net Operating Income
to Debt Service of not less than 1.25 to 1.00 measured for three consecutive
months.
"Subordinated Debt" means any indebtedness of a person incurred at any
time the repayment of which is subordinated to other indebtedness of such person
pursuant to a written agreement and specifically including (i) the Guarantor's
$143,750,000 aggregate original principal amount of 5.25% convertible
subordinated debentures due December 15, 2002; (ii) the Guarantor's $50,000,000
aggregate original principal amount of 7.00% convertible subordinated debentures
due June 1, 2004; (iii) the Guarantor's $35,000,000 aggregate original principal
amount of 6.75% convertible subordinated debentures due June 20, 2006.
"Survey" shall mean a plat of the Land for any Facility which clearly
designates at least (i) the location of the perimeter of such Land by courses
and distances; (ii) the location of all easements, rights-of-way, alleys,
streams, waters, paths and encroachments; (iii) the location of all building
restriction lines and set-backs, however established; (iv) the location of any
streets or roadways abutting such Land; and (v) the "as-built" locations of the
Improvements located on such Land and the relation of such Improvements by
courses and distances to the perimeter of such Land, building restriction lines
and set-backs, all in conformity with the Minimum Standard Detail Requirements
for Land Title Surveys adopted by the American Congress on Surveying and Mapping
(1992 Edition).
"Taxes" means all taxes and assessments whether general or special,
ordinary or extraordinary, or foreseen or unforeseen, of every character
(including all penalties or interest thereon), which at any time may be
assessed, levied, confirmed or imposed by any Governmental Authority on the
Borrower or any of its properties or assets or any part thereof or in respect of
any of its franchises, businesses, income or profits.
"Total Capital" means the sum of Net Worth, Total Funded Debt and
Subordinated Debt.
"Total Development Budget" means the development, construction and
opening operating expense budget or acquisition and opening operating expense
budget for an Eligible Project as reviewed and approved by the Agent.
"Total Funded Debt" at any time means the sum at such time of (a)
indebtedness for borrowed money or for the deferred purchase price of property
or services, (b) any obligations in respect of letters of credit, banker's or
other acceptances or similar obligations issued or created for the account of
the Guarantor, (c) lease obligations which have been or should be, in accordance
with GAAP, capitalized on the books of the Guarantor, (d) all liabilities
secured by any property owned by the Guarantor, as the case may be, to the
extent attached to the Guarantor's interest in such property, even though the
Guarantor has not assumed or become liable for the payment thereof, and (e) in
the case of the Guarantor, any obligation of the Guarantor or a Commonly
Controlled Entity
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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 and excluding Subordinated Debt.
"Wholly Owned Subsidiary" or "Wholly Owned Subsidiaries" means one or
more subsidiaries 100% owned by ALS which is or has been created for the sole
purpose of acquiring or constructing and owning and operating a Facility.
Section 1.2 Accounting Terms and Other Definitional Provisions.
Unless otherwise defined in this Agreement, as used in this Agreement
and in any certificate, report or other document made or delivered pursuant
hereto, accounting terms not otherwise defined in this Agreement, and accounting
terms only partly defined in this Agreement, to the extent not defined, shall
have the respective meanings given to them under GAAP. Unless otherwise defined
in this Agreement, all terms used in this Agreement which are defined by the
Texas Uniform Commercial Code shall have the same meanings as assigned to them
by the Texas Uniform Commercial Code unless and to the extent varied by this
Agreement. The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, Section, subsection, schedule
and exhibit references are references to sections or subsections of, or
schedules or exhibits to, as the case may be, this Agreement unless otherwise
specified. As used in this Agreement, the singular number shall include the
plural, the plural the singular and the use of the masculine, feminine or neuter
gender shall include all genders, as the context may require. Any reference to
Land, the Improvements or the Property shall mean all or any portion of each of
the foregoing, respectively unless the context indicates that such terms refer
to an individual Facility. Reference to any one or more of the Financing
Documents and any of the Financing Documents shall mean the same as the
foregoing may from time to time be amended, restated, substituted, extended,
renewed, supplemented or otherwise modified.
ARTICLE II
BORROWING
Section 2.1 The Loan.
(a) The Lenders agree to lend to the Borrower pursuant to
the terms and conditions of this Agreement and the Borrower agrees to borrow on
a revolving basis from the Lenders from time to time the principal amount (the
"Loan") not to exceed at any time outstanding the lesser of (i) the Credit
Facility Committed Amount, or (ii) the Borrowing Base.
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(b) The obligation of the Borrower to repay the Loan shall
be evidenced by the Promissory Note of even date herewith payable to the Lender
in the form attached hereto as EXHIBIT A and any other Promissory Notes which
may be executed by the Borrower in the future payable to the Lenders in
substantially the form set forth in EXHIBIT A (collectively, as amended,
restated, substituted, extended, renewed and otherwise modified from time to
time, the "Note"). The Note shall bear interest and shall be repaid by the
Borrower in the manner and at the times set forth in the Note.
(c) The conditions precedent for making an advance under
the Loan shall be as set forth in this Agreement. Sums borrowed and repaid may
be readvanced under the terms and conditions of this Agreement.
(d) Not more frequently than monthly but at least
quarterly, the Agent will prepare a Borrowing Base Report (each a "Borrowing
Base Report") in the form attached or to be attached hereto as EXHIBIT B which
must be certified by the Borrower listing for each of the Eligible Projects (i)
the applicable Deed of Trust Lien Amount, (ii) the status of the Eligible
Facility as a Development Project, an Acquired Project or a Stabilized Project,
(iii) the Costs Incurred to Date, as described in the applicable Total
Development Budget, (iii) the length of time the Facility has been under
construction (if applicable), and (iv) its status as of the most recent
reporting date as a Pool A, Pool B or Pool C Project. The foregoing
notwithstanding, the Borrowing Base Report will be issued more frequently than
monthly if the Borrower requests the addition of an additional Eligible Project
or Projects with a value of at least $3,000,000 to the Borrowing Base; provided,
however, Borrowing Base Reports will not be issued more frequently than
semi-monthly. The Borrowing Base Report will be based on the outcome of the cost
verification procedures hereinafter described, appraisals obtained by the Agent
and other information on the Eligible Projects provided by the Borrower or
obtained by the Agent. The Borrowing Base shall be computed based on the
Borrowing Base Report most recently prepared by the Agent. In the event the
Borrower shall fail to furnish other current reports or information as
reasonably required by the Agent pursuant to the Financing Documents, or in the
event the Agent believes that a Borrowing Base Report is no longer accurate, the
Agent may, in its reasonable discretion exercised from time to time and without
limiting its other rights and remedies under the Financing Documents, upon
notice to the Borrower and the expiration of a cure period of five (5) Banking
Days, designate any Eligible Project as a Pool C Project or suspend the making
of or limit advances under the Loan. The Borrowing Base shall be subject to
reduction as a result of the following events: (i) the release of an Eligible
Project from the lien of the applicable Deed of Trust; (ii) the change of any
Eligible Project's status as a Pool A or B Project to a Pool B or C Project
respectively as determined by the Agent; or (iii) the diminution in the value of
an Eligible Project based upon an appraisal obtained pursuant to Section 7.28.
The Borrowing Base shall be subject to increase as a result of the following
events: (i) addition of Eligible Projects; (ii) increase in the Costs Incurred
to Date as determined by the Agent during the period since the last Borrowing
Base Report; or (iii) the change
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of an Eligible Project's status as a Pool B or C Project to a Pool A Project
since the date of the most recent Borrowing Base Report as determined by the
Agent.
(e) No advances may be made or be outstanding under the
Credit Facility in respect of availability under the Borrowing Base from Pool B
or C Projects until there are at least five (5) Pool A Projects in the Borrowing
Base and until and during such times as sixty percent (60%) of all Eligible
Projects in the Borrowing Base are Pool A Projects.
(f) For purposes of determining Costs Incurred to Date,
each Total Development Budget may include the cost of (i) the acquisition by the
Borrower of the Land which is the site of such Facility or, in the case of an
Acquired Facility, the Land and the Facility's Improvements including the
purchase price paid and expenses incurred in connection with due diligence and
in closing of such acquisition; (ii) the construction on the Property of a
Facility which is not an Acquired Facility containing residential units and
common facilities; (iii) marketing, staffing and similar pre-opening expenses;
and (iv) an Operating Reserve.
(g) The Borrower shall furnish to the Agent such
schedules, certificates, lists, records, reports, information and documents as
required by the Agent from time to time so that the Agent may, in its reasonable
discretion, determine the Borrowing Base.
(h) If at any time the aggregate principal amount of the
Loan outstanding exceeds the Borrowing Base, a borrowing base deficiency
("Borrowing Base Deficiency") shall exist. Each time a Borrowing Base Deficiency
exists, the Borrower shall within three (3) Banking Days of notice thereof from
the Agent either pay the amount of the Borrowing Base Deficiency and/or add
Eligible Projects to increase the Borrowing Base to an amount which is at least
equal to the aggregate principal amount outstanding under the Loan.
Section 2.2 Procedure for Advances.
(a) The Agent will make advances not more frequently than
twice during each month upon receipt of a written request from the Borrower in
the form designated by the Agent (each a Requisition, collectively, the
"Requisitions") signed by Mark W. Ohlendorf or David M. Boitano on behalf of
Borrower.
(b) Each Requisition is subject to Agent's determination
that after giving effect to the Requisition, the outstanding principal balance
of the Loan would not exceed the lesser of the then applicable Credit Facility
Committed Amount or the Borrowing Base. Each advance under the Loan shall be in
an amount of not less than $1,000,000, and in increments of $100,000 in excess
thereof. Advances or the renewal of a Eurodollar Period shall be requested by
the Borrower orally or in writing by 11:00 A.M. (Houston time) five (5) Banking
Days prior to the Banking Day on which
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the funds will be advanced or the applicable Eurodollar Period will expire. The
Agent shall have no obligation to make any advance if at the time such advance
is requested and/or is proposed to be funded, there exists an Event of Default
or an event which upon notice or lapse of time or both would constitute an Event
of Default under the Financing Documents. If the Borrower fails to advise the
Agent five (5) Banking Days in advance of the expiration of a Eurodollar Period
of its intention to either pay off such portion of the Loan or renew the
applicable Eurodollar Period, it shall be assumed by the Agent that the
Eurodollar Period is to be renewed.
(c) Unless the Agent shall have received notice from
Lender prior to the date on which such Lender is to provide funds to the Agent
for an advance to be made by such Lender that such Lender will not make
available to the Agent such funds, the Agent may assume that such Lender has
made such funds available to the Agent on the date of such advance in accordance
with the terms of the Agency Agreement and the Agent in its sole discretion may,
but the Agent shall not be obligated to, in reliance upon such assumption, make
available to the Borrower on such date a corresponding amount.
(d) In addition, if the Agent has reason to believe a
Default or an Event of Default has occurred, the Borrower hereby irrevocably
authorizes the Lenders to make advances of the Loan at any time and from time to
time, without further request from or notice to the Borrower, which the Lenders,
in their sole and absolute discretion, deems necessary or appropriate to protect
the Lenders' interests under this Agreement or otherwise, including, without
limitation, advances of the Loan made to cover interest on the Loan, fees,
and/or Enforcement Costs, prior to, on, or after the termination of this
Agreement, regardless of whether the aggregate amount of the advances of the
Loan which the Lenders may make hereunder exceeds the Credit Facility Committed
Amount. The Lenders shall have no obligation whatsoever to make any advance
under this subsection and the making of one or more advances under this
subsection shall not obligate the Lenders to make other similar advances. Any
such advances will be evidenced by the Note secured by the Collateral and the
Deeds of Trust.
Section 2.3 Fees.
The Borrower shall pay to the Agent the fees described in the Fee
Agreement between the Borrower and the Agent of even date herewith.
Section 2.4 Interest Rate Matters.
2.4.1 Lender Tax Adjustment
Each payment made by the Borrower under the Note shall either (i) be
exempt from, and be made without reduction by reason of, any Lender Tax or (ii)
to the extent that any such payment shall be subject to any Lender Tax, be
accompanied by an additional payment by the Borrower of such amount as may be
necessary so that the net
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amount received by each Lender (after deducting all applicable Taxes) is the
same as such Lender would have received had such payment not been subject to
such Lender Tax. Upon any payment of Lender Tax by the Borrower, the Borrower
shall promptly (and in any event within 30 days) furnish to the Agent and
applicable Lender such tax receipts, certificates an other evidence of such
payment as the Borrower may have or the Agent or the applicable Lender may
reasonably request.
2.4.2 Inability to Determine Eurodollar Rate.
In the event that the Agent determines (which determination shall be
conclusive absent manifest error) that, by reason of circumstances affecting the
London interbank market, quotation of Eurodollar Rates for any portion of the
Note are not being provided in the relevant amounts or for the relevant
maturities for the purpose of determining a Eurodollar Rate for any portion of
the Principal Sum, the Agent will give notice of such determination to the
Borrower and each Lender at least one day prior to the date of an advance or any
subsequent Eurodollar Period for the Loan. If any such notice is given, no
Lender shall have any obligation to make any advance or maintain any principal
sum outstanding at a Eurodollar Rate. Until the earlier of the date any such
notice has been withdrawn by the Agent or the date when the Lenders and the
Borrower have mutually agreed upon an alternate method of determining the rates
of interest payable on the Loan, as the case may be, the Borrower shall not have
the right to have additional advances or maintain any portion of the Credit
Facility at a Eurodollar Rate and interest shall accrue on all sums then
outstanding under the Note and on any additional advances at the fluctuating
prime rate of interest established and declared by the Agent from time to time
(the "Prime Rate") and shall be adjusted immediately and contemporaneously with
any change in the Prime Rate. Interest accruing at the Prime Rate shall be
computed for the actual number of days which have elapsed from the date of each
advance at the Prime Rate or the date of conversion to the Prime Rate on the
basis of a 360-day year. The Prime Rate does not necessarily represent the
lowest rate of interest charged by the Agent to Borrowers.
2.4.3 Illegality
Notwithstanding any other provision of the Financing Documents to the
contrary, in the event that it shall become unlawful for any Lender to obtain
funds in the London interbank market or for such Lender to maintain the Loan at
the Eurodollar Rate, then, by written notice to the Borrower and to the Agent,
such Lender may declare that advances will not thereafter be made or the Loan
maintained by such Lender hereunder at the Eurodollar Rate, whereupon the
Lenders and the Borrower shall mutually agree upon an alternate method of
determining the rates of interest payable on the Loan or interest shall
immediately commence to accrue at the Prime Rate as provided in Section 2.4.2.
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2.4.4 Increased Costs and Reduced Return.
(a) If any event shall occur (whether in the form of
a reserve requirement (not included in the definition of the Eurodollar Rate),
exchange control regulations, governmental charges, compliance with any
guideline or request from any central bank or other Governmental Authority,
changes in the London interbank market or the position of any Lender in such
market or otherwise) and the result of any such event is, in such Lender's
reasonable judgment, to increase the costs which such Lender determines are
attributable to its making or maintaining the Loan at the Eurodollar Rate, or
its obligation to make available the Loan at the Eurodollar Rate or to reduce
the amount of any sum received or receivable by such Lender under the Note,
then, within ten (10) days after demand by such Lender, Borrower hereby agrees
to pay to such Lender such additional amount or amounts as will compensate such
Lender for such increased cost or reduction.
(b) In addition to any amounts payable pursuant to
Section 2.4.2 if any Lender shall have determined that the applicability of any
law, rule, regulation or guideline adopted pursuant to or arising out of the
July 1988 report of the Basle Committee on Banking Regulations and Supervisory
Practices entitled "International Convergence of Capital Measurement and Capital
Standards," or the adoption after the date hereof of any other law, rule,
regulation or guideline regarding capital adequacy, or any change in any of the
foregoing or in the enforcement or interpretation or administration of any of
the foregoing by any court or any central bank or other Governmental Authority,
charged with the enforcement or interpretation or administration thereof, or
compliance by such Lender (or any lending office of such Lender) or such
Lender's holding company with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable agency, has or would have the effect of reducing the rate of
return on such Lender's capital or on the capital of such Lender's holding
company, if any, as a consequence of its making or maintaining the Loan or its
incurring any obligations under this Agreement to a level below that which such
Lender or such Lender's holding company could have achieved but for such
applicability, adoption, change or compliance (taking into consideration such
Lender's policies and the policies of such Lender's holding company with respect
to capital adequacy) by an amount deemed by such Lender to be material, then,
upon demand by such Lender, the Borrower hereby agrees to pay to such Lender
from time to time such additional amount or amounts as will compensate such
Lender or such Lender's holding company for any such reduction suffered.
(c) If any Lender shall seek payment of any amounts
from Borrower pursuant to this Section or under Section 2.4.2, it shall notify
the Borrower and the Agent of the amount payable by the Borrower to such Lender
hereunder. A certificate of such Lender seeking payment setting forth in
reasonable detail the factual basis for and the computation of the amount
specified, shall be conclusive and binding on all parties for all purposes,
absent manifest error, as to the
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amounts owned. The Borrower's obligations under this Section shall survive the
termination of this Agreement and the repayment of the Obligations.
Section 2.5 Extensions.
Provided that no Event of Default has occurred, at any time not later
than sixty (60) days nor earlier than one hundred twenty (120) days prior to the
Revolving Credit Expiration Date or any anniversary of the date of this
Agreement, the Borrower may request that the Agent and the Lenders, in their
sole discretion, may agree to extend the Revolving Credit Expiration Date one
(1) or more times for a period of twelve (12) months each.
ARTICLE III
COLLATERAL
Section 3.1 Collateral.
As security for the payment of any and all of the Obligations and for
the Borrower's performance of, and compliance with, all of the terms, covenants,
conditions, stipulations and agreements contained in the Financing Documents,
the Borrower hereby assigns, grants and conveys to the Lenders, and agrees that
the Lenders shall have, to the extent permitted by law a perfected, continuing
security interest in, all of the Collateral. The Borrower further agrees that
the Lenders shall have in respect of the Collateral all of the rights and
remedies of a secured party under the Texas Uniform Commercial Code and the
Uniform Commercial Code of those other states in which the Facilities are
located, whichever is applicable, and under other applicable Laws as well as
those provided in this Agreement. The Borrower covenants and agrees to execute
and deliver such financing statements and other instruments and filings as are
necessary in the opinion of the Agent to perfect such security interest.
Notwithstanding the fact that the proceeds of the Collateral constitute a part
of the Collateral, the Borrower may not dispose of the Collateral, or any part
thereof, other than in the ordinary course of its business or as otherwise may
be permitted by this Agreement or other Security Agreements.
Section 3.2 Eligible Projects.
The Borrower shall from time to time designate Facilities owned by
the Borrower as Eligible Projects included in the Borrowing Base pursuant to the
terms hereof. The Facilities which are then Eligible Projects shall be listed on
any future Borrowing Base Report. The Credit Facility shall be secured by (a)
the first lien Deeds of Trust on the fee simple interests of the Borrower in the
Eligible Projects, (b) a first lien security interest in all fixtures, building
materials and all other machinery, equipment and other personalty used or
installed by the Borrower or each of the premises of an Eligible Project or in
the Improvements constructed thereon, with the exception of equipment
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subject to Permitted Equipment Financing, and (c) all of the other Collateral
relating to the Eligible Projects. The Borrower may release an Eligible Project
from the lien of its Deed of Trust at any time provided no Event of Default has
occurred and is continuing and provided at least sixty percent (60%) Eligible
Projects which will remain in the Borrowing Base are Pool A Projects.
Section 3.3 Guaranties.
The Obligations are the subject of the Guaranty Agreement executed and
delivered by the Guarantor in favor of the Lenders and of one or more completion
Guaranties which may from time to time be executed and delivered by the
Guarantor.
Section 3.4 Collateral for Obligations.
The Borrower acknowledges that it is the intention of the Borrower
that the Collateral and all the Deeds of Trust be security for all of the
Obligations, both those now existing and those hereafter created or incurred by
future loans, advances, extensions of credit or otherwise and whether or not
currently contemplated by the Borrower and/or the Lenders on or about the date
hereof.
Section 3.5 Costs.
The Borrower agrees to pay on demand, to the fullest extent permitted
by applicable laws, all reasonable fees, commissions, costs, charges, travel
expenses and other expenses incurred by the Lenders, or any of them, in
connection with the taking, perfection, preservation, protection and/or release
of any security interest or lien on any of the Collateral or Deeds of Trust. The
foregoing notwithstanding, the Borrower shall not be obligated to pay the travel
expenses of the Lenders with the exception of travel expenses incurred in
connection with any enforcement actions following the occurrence of an Event of
Default.
ARTICLE IV
GENERAL FINANCING PROVISIONS.
Section 4.1 Conditions Precedent to Credit Facility Closing and
Addition of Deeds of Trust.
Conditions Precedent to Facility Closing. The following shall be
conditions precedent to the Credit Facility Closing or to the addition of a
Borrower and/or the addition of an Eligible Project to the Borrowing Base (a
"Facility Closing"):
(a) The Note, the Deeds of Trust and Security
Documents and the other Financing Documents in connection with the Eligible
Projects initially securing the Loan shall have been properly executed and
delivered to the Agent, the applicable Deeds of Trust shall be acknowledged and
recorded in the appropriate
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public office or delivered to a representative of the title company for
recording and payment shall have been made for all conveyancing and recording in
connection with the settlement of the Loan, and for any transfer or documentary
stamp taxes due under any federal, state or municipal law.
(b) The Agent shall have received and approved a
copy of the Borrower's fully executed Articles of Incorporation and By-Laws. In
connection with the provision of a Deed of Trust by an Additional Borrower, the
Agent shall have received and approved copies of all organizational documents,
including certified copies of all documents on record with the State in which
such entity is organized.
(c) The Agent shall have received and approved a
secretary's certificate of borrowing resolution authorizing the execution and
delivery of the Financing Documents and consenting to the Loan and similar
resolutions.
(d) The Agent shall have received and approved a
current certificate of good standing from the State of Delaware for Holdings and
a certificate of good standing or certificate of fact or status from the State
in which any additional Borrower is formed and certificates of authority to do
business in any state in which an Eligible Project is located.
(e) The Agent shall have received and approved an
opinion of counsel for the Borrower as to the Borrower's good standing, form,
powers and authority and as to the validity, binding effect and enforceability
of the Financing Documents.
(f) The Agent shall have received a properly
executed Additional Borrower Joinder Supplement from any Additional Borrower.
(g) The Agent shall have reviewed and approved the
Borrower's standard form of Joint Venture Lease. Any material change from such
form for an individual Eligible Project must be consented to by the Agent prior
to the Facility Closing for such Eligible Project.
(h) The Agent shall have reviewed and approved the
Borrower's standard form of Management Agreement. Any material change from such
form for an individual Eligible Project must be consented to by the Agent prior
to the Facility Closing for such Eligible Project.
(i) At the time it requests the consent of the Agent
to the inclusion of a Facility as an Eligible Project, the Borrower shall have
advised the Agent of the following information regarding the proposed new
Eligible Project (i) the type and tradename of the Facility, (ii) its status as
a Development Project, an Acquisition Project or a Stabilized Project, (iii)
whether it is a Campus Project, (iv) the stage of construction of any Facility
under construction (v) the location of the Facility including street address,
city, county and state, (vi) the name of the entity which owns the Facility
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and its relationship to ALS and any other Borrower and (vii) whether a Joint
Venture Lease is or will be applicable to the Facility. The Agent will determine
whether the Facility will be added as an Eligible Project to the Borrowing Base.
(j) the Agent shall have received a certified
financial statement in form and detail satisfactory to the Agent regarding any
Additional Borrower.
(k) In the case of any Eligible Project which is
subject to a Joint Venture Lease, the Agent shall have received a Security
Document in the form of a Pledge, Assignment and Security Agreement, in form and
substance satisfactory to the Agent, pledging to the Agent on behalf of the
Lenders the ownership interest of ALS or any Affiliate in the applicable Joint
Venture.
Section 4.2 Conditions Precedent to Accepting an Eligible Project
Which is Under Construction or to be Constructed:
(a) The Facility Closing shall have been completed.
(b) The Agent shall have received a certificate of
authority to do business for the Borrower in the jurisdiction where the Facility
is located.
(c) The Total Development Budget for such Eligible
Project shall have been reviewed and approved in writing by the Agent. Each
Total Development Budget for an Eligible Project under construction or to be
constructed shall include (A) a project summary describing such proposed
Eligible Project in reasonable detail, (B) indicating whether or not such
Facility is one of the types of projects covered by the Master Plans and
Specifications, and if such Facility involves any material deviations from the
Master Plans and Specifications, describing such deviations in reasonable
detail, (C) containing a detailed construction cost estimate and a 2-year
estimated cash flow analysis (or such longer period as is necessary to include
at least 12 complete calendar months of full commercial operation), and (D)
containing other cost, feasibility, demographic and marketing information and
analysis with respect to such Project; and all such material shall be
satisfactory in all respects to the Lender, in its reasonable discretion. Such
Total Development Budget shall demonstrate to the Agent's satisfaction in its
sole discretion that the Eligible Project will qualify and continue as a Pool A
Project. Such review for a Facility to be constructed or under construction
shall include a review of the Plans and Specifications (as hereinafter defined)
by an inspecting engineer selected by the Agent to verify that the Improvements
can be constructed for the amount set forth in the Total Development Budget.
(d) The Pro Forma Operating Statement for such
Eligible Project shall have been reviewed and approved in writing by the Agent.
Each Pro Forma Operating Statement shall demonstrate to the Agent's satisfaction
in its sole discretion that the Eligible Project will qualify and continue to
qualify as a Pool A Project.
(e) The Agent shall have received a paid policy of
title insurance (American Land Title Association Standard Form "B" Loan
Policy-Current
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Edition) covering the Facility or a valid and enforceable commitment to issue
the same, together with such reinsurance agreements and direct access agreements
as may be required by the Agent and/or endorsements to policies issued to the
Agent in connection with the Credit Facility Closing, in the amount agreed upon
by the Agent from either Chicago Title Insurance Company or Stewart Title
Insurance Company and which may be endorsed or assigned to the successors and
assigns of the Lenders and to additional Lenders without additional cost,
insuring the liens of the Deeds of Trust to be valid first liens on the
Property, free and clear of all defects, exceptions and encumbrances except such
as the Agent and its counsel shall have approved but without a creditor's rights
exception and (unless otherwise agreed by the Agent) containing affirmative
insurance against mechanic's liens.
(f) The Agent shall have received advice, in form
and substance and from a search company or other source satisfactory to the
Agent, to the effect that a UCC, judgment and tax lien search of the applicable
public records discloses no conditional sales contracts, chattel mortgages,
leases of personalty, financing statements or title retention agreements filed
or recorded against the Property except such as the Agent shall have approved.
(g) The Agent shall have received ACORD Evidence
forms evidencing all policies of insurance required by the terms hereof and by
the other Financing Documents to be in effect from a company or companies and in
form and amount satisfactory to the Agent, including without limitation, flood
insurance (in the amount required by the applicable Deed of Trust or evidence
that flood insurance is not available or otherwise required with respect to the
Property), together with written evidence, in form and substance satisfactory to
the Agent, that all fees and premiums due on account thereof have been paid in
full.
(h) The Agent shall have received and accepted an
appraisal of the Facility.
(i) Master Plans and Specifications, for Standard
Projects Already Approved, etc. The Borrower shall submit to the Agent for
approval Master Plans and Specifications covering the approximately five (5)
different types of project improvements typically constructed by the Borrower
and Affiliates. Such Master Plans and Specifications shall be approved by an
Inspecting Engineer and acceptable to the Agent (the "Master Plans and
Specifications").
(j) Delivery and Approval of Specific Plans and
Specifications for Non-Standard Projects, etc. If the Improvements for a
particular Eligible Project which the Borrower proposes be included in the
Borrowing Base are not one of the types of project improvements covered by the
Master Plans and Specifications, or involve any material design or construction
deviations (e.g., siding, roofing, foundation, unit mix, etc., exclusive of
adaptions to meet local building codes or other
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requirements) from the Master Plans and Specifications which are anticipated for
such proposed Project:
(i) The Borrower shall have submitted to the
Agent and the Inspecting Consultant (1) copies of either (x) the
proposed Plans and Specifications for the Improvements on such specific
Project, or (y) an identification of the particular Master Plans and
Specifications which will be used for such specific Project, and a
reasonably detailed description of the material deviations, if any,
from such Master Plans and Specifications which will be involved for
such Project, in either case which shall be satisfactory to the Agent
and the Inspecting Engineer, in their reasonable discretion, together
with (2) evidence satisfactory to the Agent that such Plans and
Specifications (or the Master Plans and Specifications with such
material deviations) have been approved by (or will in the normal
course of business, without undue difficulty, be approved by) all
Governmental Authorities in accordance with all applicable Legal
Requirements, and
(ii) The Agent shall have received from the
Inspecting Engineer a favorable report with respect to such Plans and
Specifications or such deviations from the Master Plans and
Specifications, as the case may be, and such report shall be
satisfactory in all respects to the Agent in its reasonable discretion.
(k) The Agent shall have received and approved a
fully executed copy of the applicable Construction Contract and the Architect's
Contract as well as any information regarding the General Contractor or the
Architect which the Agent has requested.
(l) The Agent shall have received and approved a
copy of a current Survey of the Land certified to the Agent and to the title
insurance company.
(m) The Agent shall have received and approved a
site plan for the Improvements approved by all appropriate Governmental
Authorities.
(n) The Agent shall have received from the Borrower
written evidence, in form and substance satisfactory to the Agent, from all
Governmental Authorities having or claiming jurisdiction to the effect that all
building, construction and other permits required in connection with the
development of the Land and the construction of the Improvements have been
validly issued, that all fees and bonds required in connection therewith have
been paid in full or posted, as the circumstances may require, and that the
Improvements meet zoning requirements and all sewer and storm drain
requirements.
(o) The Agent shall have received and approved a
report setting forth a construction progress schedule in form and substance
satisfactory to
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the Agent, calling for the completion of the Improvements by a date no later
than the end of the applicable Maximum Construction Period.
(p) If construction work of any kind has commenced
upon the Land or materials have been placed or stored upon the Land prior to the
recordation of the Deed of Trust among the Land Records where the Land is
located, the same shall be fully insured against by the title insurance company.
(q) The Agent shall have received and approved
evidence that the applicable General Contractor carries public liability and
property damage insurance and workers' compensation insurance in form and
amounts and issued by companies acceptable to the Agent.
(r) The Agent shall have received and accepted a
Phase I environmental audit of the applicable Facility prepared by a person or
firm acceptable to the Agent. ATEC and Giles are environmental audit firms
acceptable to the Agent.
(s) The Agent shall have received evidence
acceptable in all respects through certification by the Architect or other
source acceptable to the Agent that the applicable Improvements, when
constructed, will comply with all legal requirements regarding access and
facilities for handicapped or disabled persons, including, without limitation
and to the extent applicable to assisted living facilities (or, if applicable,
independent living facilities), The Federal Architectural Barriers Act (42
U.S.C. Section 4151 et seq.), The Fair Housing Amendments Act of 1988 (42 U.S.C.
Section 3601 et seq.), The Americans With Disabilities Act of 1990 (42 U.S.C.
Section 12101 et seq.), The Rehabilitation Act of 1973 (29 U.S.C. Section 794)
and any applicable state statutes relating to access and facilities for
handicapped or disabled persons.
(t) The Agent shall have received and approved soil
reports demonstrating that the soil conditions of the Property are suitable for
construction of the Improvements, which reports shall include evidence to the
Agent's satisfaction that there are no hydric soils on the Land.
(u) The Agent shall have received and approved
copies of any executed Material Leases and any fully executed Joint Venture
Lease of the applicable Facility or of any portion thereof and subordination and
attornment agreements acceptable to the Lender (with non-disturbance provisions
for Joint Venture Leases and if acceptable to the Agent for other Material
Leases) from each.
(v) The Agent shall have received and approved an
opinion of Borrower's outside or in-house regulatory counsel regarding licensing
requirements and the transferability of licenses and an opinion of local counsel
in the jurisdiction where the applicable Facility is located that the Financing
Documents applicable to that Facility are enforceable and for the Borrower that
neither the making nor the servicing of the Loan will subject the Lenders to a
requirement of qualifying to do
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business or taxation (except ad valorem taxes on the Property) in the State
where the applicable Facility is located and that the Loan is not usurious,
which opinion must also inform the Lenders (i) of the cost and timing of
foreclosure; (ii) of any limitations on the Lenders' right to obtain, or the
amount of, a deficiency judgment; and (iii) the existence of and details
surrounding any redemption period enjoyed by the Borrower following a sale at
foreclosure.
(w) With regard to any Deed of Trust for a Facility
located in any state having such requirement, the Agent shall have received
evidence satisfactory to the Agent that a Certificate of Need has been issued
for such Facility.
(x) The Lender shall have received and approved any
Management Agreement then in place for the Facility.
(y) The Lender shall have received and approved a
market feasibility study for the Facility satisfactory to the Lender including,
but not limited to, information regarding market occupancy rates, proposed and
existing competition, monthly rates and a Claritas Senior Life Report (or other
source acceptable to the Lender) on the defined market area for the Facility.
(z) The Lender shall have received a copy of any
acquisition contract for the Property.
(aa) If applicable in the state where the Property
is located, the Lender shall have received evidence that the Borrower has
applied for or is otherwise diligently pursuing obtaining a certificate of
occupancy for the Improvements being constructed.
Section 4.3 Conditions Precedent to Accepting an Eligible Project
Which Has Been Constructed or Acquired:
(a) The Facility Closing shall have been completed.
(b) The Agent shall have received a certificate of
authority to do business for the Borrower in the jurisdiction where the Facility
is located.
(c) The Total Development Budget for such Eligible
Project shall have been reviewed and approved in writing by the Agent consistent
with the provision of Section 2.1. Each Total Development Budget shall
demonstrate to the Agent's satisfaction in its sole discretion that the Eligible
Project will be designated as a Pool A Project.
(d) The Pro Forma Operating Statement for any such
Eligible Project which is not a Stabilized Project shall have been reviewed and
approved in writing by the Lender. Each Pro Forma Operating Statement shall
demonstrate to the Lender's satisfaction in its sole discretion that the
Eligible Project will qualify and continue to qualify as a Pool A Project.
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(e) The Agent shall have received a paid policy of
title insurance (American Land Title Association Standard Form "B" Loan
Policy-Current Edition) covering the Facility or a valid and enforceable
commitment to issue the same, together with such reinsurance agreements and
direct access agreements as may be required by the Agent and/or endorsements to
policies issued to the Agent in connection with the Credit Facility, in the
amount agreed upon by the Agent from either Chicago Title Insurance Company or
Stewart Title Insurance Company and which may be endorsed or assigned to the
successors and assigns of the Lenders and to additional Lenders without
additional cost, insuring the liens of the Deeds of Trust to be valid first
liens on the Property, free and clear of all defects, exceptions and
encumbrances except such as the Agent and its counsel shall have approved but
without a creditor's rights exception and (unless otherwise agreed by the Agent)
containing affirmative insurance against mechanic's liens.
(f) The Agent shall have received advice, in form
and substance and from a search company satisfactory to the Agent, to the effect
that a UCC, judgment and tax lien search of the applicable public records
discloses no conditional sales contracts, chattel mortgages, leases of
personalty, financing statements or title retention agreements filed or recorded
against the Property except such as the Agent shall have approved.
(g) The Agent shall have received ACORD Evidence
forms evidencing all policies of insurance required by the terms hereof and by
the other Financing Documents to be in effect from a company or companies and in
form and amount satisfactory to the Agent, including without limitation, flood
insurance (in the amount required by the applicable Deed of Trust or evidence
that flood insurance is not available or otherwise required with respect to the
Property), together with written evidence, in form and substance satisfactory to
the Agent, that all fees and premiums due on account thereof have been paid in
full.
(h) The Agent shall have received and accepted an
appraisal of the Facility.
(i) The Agent shall have received and approved a
copy of a current Survey of the Land certified to the Agent and to the title
insurance company.
(j) The Agent shall have received and accepted a
Phase I environmental audit of the applicable Facility prepared by a person or
firm acceptable to the Agent. ATEC and Giles are environmental audit firms
acceptable to the Agent.
(k) The Agent shall have received evidence
acceptable in all respects through certification by the Architect or other
source acceptable to the Agent that the applicable Improvements comply with all
legal requirements regarding access and facilities for handicapped or disabled
persons, including, without limitation and to the extent applicable to assisted
living facilities (or, if applicable, independent
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<PAGE> 37
living facilities), The Federal Architectural Barriers Act (42 U.S.C. Section
4151 et seq.), The Fair Housing Amendments Act of 1988 (42 U.S.C. Section 3601
et seq.), The Americans With Disabilities Act of 1990 (42 U.S.C. Section 12101
et seq.), The Rehabilitation Act of 1973 (29 U.S.C. Section 794) and any
applicable state statutes relating to access and facilities for handicapped or
disabled persons.
(l) The Agent shall have received and approved
copies of any executed Material Leases of the applicable Property or of any
portion thereof and any fully executed Joint Venture Lease and subordination and
attornment agreements acceptable to the Agent (with non-disturbance provisions
for Joint Venture Leases and other leases if acceptable to the Agent) from each.
(m) The Agent shall have received and approved an
opinion of Borrower's outside or in-house regulatory counsel regarding licensing
requirements and the transferability of licenses and an opinion of local counsel
in the jurisdiction where the applicable Facility is located that the Financing
Documents applicable to that Facility are enforceable and for the Borrower that
neither the making nor the servicing of the Loan will subject the Lenders to a
requirement of qualifying to do business or taxation (except ad valorem taxes on
the Property) in the State where the applicable Facility is located and that the
Loan is not usurious, which opinion must also inform the Lenders (i) of the cost
and timing of foreclosure; (ii) of any limitations on the Lenders' right to
obtain, or the amount of, a deficiency judgment; and (iii) the existence of and
details surrounding any redemption period enjoyed by the Borrower following a
sale at foreclosure.
(n) With regard to any Deed of Trust for a Facility
located in any state having such requirement, the Agent shall have received
evidence satisfactory to the Agent that a Certificate of Need has been issued
for such Facility.
(o) The Agent shall have received a copy of the
fully executed Management Agreement for the Facility.
(p) The Agent shall have received each of the items
listed in Section 4.5 hereof.
Section 4.4 Conditions Precedent to Determining Additional
Availability Under Borrowing Base.
The Lenders shall not be obligated to include any costs incurred by the
Borrower under a Total Development Budget in the calculation of the Borrowing
Base unless the conditions described in Sections 4.1, 4.2 and 4.3 and the
following additional conditions shall have been satisfied to the Agent's
satisfaction:
(a) Construction cost reports prepared by a
construction manager and certified by an officer of ALS showing the percentage
of completion and setting forth in trade breakdown form and in such detail as
may be required by the Agent,
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the amounts expended and/or costs incurred for work done and necessary materials
incorporated into the Improvements. The cost reports shall also show the
percentage of completion of each line item on the Borrower's cost breakdown
approved by the Agent. The Borrower shall submit with each cost report a
statement that the work completed to the date of such cost report is of quality
consistent with the applicable Plans and Specifications. In addition, at the
time of delivery of each cost report by the Borrower, the Borrower shall furnish
to the Agent such additional information (such as paid receipts, invoices,
statements of accounts, etc.) as the Agent may reasonably require to assure that
amounts shown in the cost report have been paid by the Borrower.
(b) Cost reports verified by the Agent's
Construction Real Estate Loan Administration Group during the period since the
issuance of the last Borrowing Base Report will be included in the calculation
of the next Borrowing Base Report. Unless otherwise agreed to by the Agent and
to the extent specifically permitted by the Agent, the process of verification
of Requisitions shall confirm the payment by the Borrower of the following costs
and expenses related to the development of the Land and the construction of the
Improvements and no others may be included in a Total Development Budget: (i)
the payment of interest when due without further authorization or consent of the
Borrower; (ii) the actual cost of the Land and all labor, services, materials,
supervision, construction fees and the like reasonably incurred by the Borrower
in connection with the construction upon the Land of the Improvements in
accordance with the Plans and Specifications; (iii) for the actual cost of
pre-opening expenses, marketing expenses and operations of the Facility to the
extent of operating deficits; (iv) for the actual cost of commitment fees,
extension fees, appraisal fees, closing or settlement costs, fees of attorneys,
engineers, architects and accountants, insurance and bond premiums, ad valorem
real estate taxes and other costs directly related to the development of the
Land and the construction, marketing, initial start-up operating of the
Improvements; and (v) for the Development Fee and other pre-opening fees.
(c) The cost verification procedure hereunder will
be administered by the Lender's Real Estate Loan Administration group.
Validation of Costs Incurred to Date for Development Projects under the
construction or constructed by a Borrower shall be based upon inspections and
certifications by or on behalf of the Lender demonstrating that the work
included in Costs Incurred to Date shown in the most current reports submitted
by the Borrower has been completed in a manner satisfactory to the Lender and
upon verification by the Lender that the Borrower has paid for the Costs
Incurred to Date shown on such requisition. In determining the percentage of
completion, the Lender shall primarily utilize the information contained in the
forms described in sub-paragraph (a) below and the supporting materials provided
in connection therewith. In addition, from time to time, at intervals which
approximate 1/3 completion, 2/3 completion and 100% completion, or more
frequently if reasonably required by the Lender, the Lender will cause the
Inspecting Engineer to make physical inspections of the Improvements to such
Eligible Project and to issue a report with respect thereto. The Lender shall
use the information so provided by the Inspecting Engineer to verify that the
construction disbursements which have theretofore been made by the Borrower
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accurately reflected the amount of construction completed at such times. It
shall not be a condition to issuing a new Borrowing Base Report reflecting
updated Costs Incurred to Date that the Lender shall have actually received a
report of the Inspecting Engineer verifying that the actual construction
completed and paid for conforms to the percentage of completion reflected in the
Borrower's reports to the Lender. Rather, it is anticipated that the Lender will
use reasonable discretion in scheduling the physical inspections and reports by
the Inspecting Engineer so that such reports may be used by the Lender as a
periodic verification of the information contained in the Borrowing Base Report.
The applicable Borrower shall make arrangements for advance payment or
reimbursement by the Borrower of the fees and expenses of the Inspecting
Engineer in making any such physical inspections. The following provisions shall
also be applicable to advances under the Loan:
(d) All reports of costs incurred shall be made on
forms approved by the Lender similar to construction loan requisition forms
detailing the purpose and application of the Costs Incurred to Date by Eligible
Project at such times as the Borrower may determine, using (x) as to "hard
costs", AIA Form 0702, or such other standardized forms or formats for
information typically used by the Borrower as shall be reasonably acceptable to
the Lender accompanied by a cost breakdown, the accuracy of which shall be
certified by the Company on behalf of such Borrower, and (y) as to "soft costs",
a standardized request form, containing such information and/or documentation,
certified by the Borrower on behalf of the applicable Borrower, as the Lender
may reasonably require hereunder.
(e) Costs Incurred to Date on Acquisition Projects
will be verified from the settlement sheet signed at the closing of the
acquisition and other records deemed acceptable by the Lender.
(f) Validation of requisitions will also be
contingent upon receipt of the most current monthly report to title to all
Eligible Projects which are under construction or have been completed less than
120 days (or such longer beyond as the Lender shall deem necessary based on
applicable mechanics' lien laws), which must be satisfactory to the Lender. If
required by the terms of the existing title insurance policy, the Agent shall
have received an endorsement which shall have the effect of advancing the
effective date of the policy to the date of the advance then being made and
increasing the coverage of the policy by an amount equal to the cost report
being verified if the policy does not by its terms provide for such an increase.
(g) No Default or Event of Default shall have
occurred and be continuing under any Note or any of the other Financing
Documents.
(h) The Improvements shall not have been materially
damaged by fire or other casualty unless the Agent shall have received proceeds
of insurance sufficient in the judgment of the Agent to effect a satisfactory
restoration of such Improvements in accordance with the terms of the Deed of
Trust.
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(i) The Agent shall have received written evidence,
in form and substance satisfactory to the Agent, in its reasonable discretion,
to the effect that all work requiring inspection by Governmental Authorities
having or claiming jurisdiction has been duly inspected and approved by such
authorities and by any rating or inspection organization, bureau, association or
office having or claiming jurisdiction.
(j) The representations and warranties made in
ARTICLE V of this Agreement shall be true and correct in all material respects
on and as of the date of the advance with the same effect as if made on such
date.
(k) All terms and conditions of the Financing
Documents required to be met as of the date of consideration applicable cost
report shall have been met to the complete satisfaction of the Agent.
(l) In the reasonable judgment of the Agent, all
work completed on the applicable Eligible Project under construction at the time
of the application for an advance has been performed in a good and workmanlike
manner and all materials and fixtures usually furnished and installed at that
stage of construction have been furnished and installed. All costs covered by
the cost report have been paid by the Borrower.
(m) At least sixty percent (60%) of the Eligible
Projects in the Borrowing Base shall be Pool A Projects. The Agent shall have
determined whether each Eligible Project is a Pool A, Pool B or Pool C Project.
(n) Before verifying any cost report for
construction costs, the Agent shall require the Borrower to obtain from the
applicable General Contractor and, if required by the applicable title insurance
company, from all subcontractors and material suppliers acknowledgments of
payment and releases of liens and rights to claim liens for work performed or
materials delivered covered by such Requisition. All such acknowledgments and
releases shall be in form of AIA Forms G706 or G706A.
Section 4.5 Conditions Under Which an Eligible Project is a Completed
Project.
The Agent shall verify that an Eligible Project is a Completed Project
based on the satisfaction of the following additional conditions:
(a) The Agent shall have received the final "as
built" Survey for the applicable Facility within sixty (60) days after the
issuance of the applicable certificate of occupancy.
(b) The Agent shall have received written evidence
from a qualified third party, in form and substance satisfactory to the Agent,
to the effect that the applicable Improvements have been substantially completed
in accordance with
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their Plans and Specifications within sixty (60) days after the issuance of the
applicable certificate of occupancy.
(c) The Agent shall have received written evidence,
in form and substance satisfactory to the Agent, to the effect that requisite
certificates for permanent occupancy or completion of the Improvements have been
validly issued.
(d) Final waivers of liens of the General
Contractor, and if required by the applicable title insurance company,
subcontractors, laborers and material suppliers have been furnished to the Agent
or, as to any disputed lien or claim of lien, a bond in form and substance
acceptable to the Agent has been provided or other arrangements satisfactory to
the Agent have been made.
(e) The Agent shall have received a copy of an
operating License for the Facility or other evidence satisfactory to the Agent
that the Facility may be lawfully operated as contemplated by the Financing
Documents.
Section 4.6 Verification of Operating Reserve Expenditures.
No portion of any costs included in the Operating Reserve shall be
verified until both a certificate of occupancy has been issued by the applicable
Governmental Authorities and, if applicable to the Facility, an operating
License has been issued for the Facility by the appropriate Governmental
Authority or Authorities. Advances from the Operating Reserve shall be for the
sole purpose of paying a portion of the Debt Service on the Loan or net
operating losses as shown on a monthly financial report for such Facility
prepared in accordance with the requirements set forth in the Financing
Agreement, and certified by the Chief Financial Officer of the Borrower.
Section 4.7 Assignments of Payments.
The Borrower agrees not to transfer, assign, pledge or hypothecate any
right or interest in any payment or advance due pursuant to this Agreement, or
any of the other benefits of this Agreement, without the prior written consent
of the Agent. Any assignment made or attempted by the Borrower without the prior
written consent of the Agent shall be void and of no effect. No consent by the
Agent to an assignment by the Borrower shall release the Borrower as the party
primarily obligated and liable under the terms of this Agreement unless the
Borrower shall be released specifically by the Agent in writing. No consent by
the Agent to an assignment shall be deemed to be a waiver of the requirement of
prior written consent by the Agent with respect to each and every further
assignment and as a condition precedent to the effectiveness of such assignment.
Section 4.8 Liability of the Lenders.
The Lenders shall in no event be responsible or liable to any person
other than the Borrower for the disbursement of or failure to disburse the Loan
proceeds or any part thereof and neither the General Contractor nor any
subcontractor, laborer or material
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supplier shall have any right or claim against the Lenders under this Agreement
or the administration thereof.
Section 4.9 Computation of Interest and Fees.
All applicable fees and interest shall be calculated on the basis of a
year of 360 days for the actual number of days elapsed pursuant to the terms of
each Note and interest shall be payable monthly in arrears.
Section 4.10 Liens; Setoff.
The Borrower hereby grants to the Lenders a continuing lien and
security interest for all the Obligations upon any and all monies, securities,
and other property of the Borrower and the proceeds thereof, now or hereafter
held or received by or in transit to, the Lenders, or any affiliate of any of
the Lenders, from or for the Borrower, and also upon any and all deposits
(general or special) and credits of the Borrower with any of the Lenders, if
any, at any time existing. During the continuance of any Event of Default under
this Agreement, each Lender is hereby authorized by the Borrower at any time and
from time to time, without notice to the Borrower, to set off, appropriate and
apply any or all items hereinabove referred to against all Obligations then
outstanding.
Section 4.11 Payment and Performance of Obligations.
The payment and performance by the Borrower of the Obligations shall be
absolute and unconditional, irrespective of any defense or any rights of
set-off, recoupment or counterclaim it might otherwise have against the Lenders,
or any of them, and the Borrower shall pay absolutely net all of the
Obligations, free of any deductions and without abatement, diminution or
set-off; and until payment in full of all of the Obligations, the Borrower: (a)
will not suspend or discontinue any payments provided for in the Note and (b)
will perform and observe all of its other agreements contained in this
Agreement, including (without limitation) all payments required to be made to
the Agent, and (c) will not terminate or attempt to terminate this Agreement or
any of the other Financing Documents to which the Borrower is a party for any
cause.
Section 4.12 Payments to Others for the Account of the Borrower
At the option of the Agent and without any request from the Borrower,
and without waiving any of its rights hereunder, the Agent may do the following:
(a) Elect to cure or avoid any default by the
Borrower under the Financing Documents by applying amounts due hereunder or
advancing the Lenders' own funds to the satisfaction of the conditions of the
Financing Documents and any amounts so applied shall be part of the Loan and
shall be secured by the Deeds of Trust and the other Collateral. The Agent
agrees to endeavor to give the Borrower notice of any such payment or performing
such act and the amount of any payment whether prior to or contemporaneously
with its making such payment or performance of such act; provided, however, that
failure to give such notice shall not constitute a waiver by the Lenders of, or
constitute a defense to, any of the rights of the Lenders under this
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Agreement, or the Deeds of Trust, including (without limitation) the right of
the Lenders to repayment of the amount of such payment.
(b) Apply amounts due hereunder to the satisfaction
of the conditions of the Financing Documents and any amounts so applied shall be
part of the Loan and shall be secured by the Deeds of Trust and other
Collateral. At the option of the Agent, and without limiting the generality of
the foregoing, the Agent may pay directly from the Loan proceeds all interest
bills rendered by the Agent in connection with the Loan, and following the
occurrence of an Event of Default may make advances directly to the General
Contractor, the title insurance company, any subcontractor or materialmen, or to
any of them jointly, and the execution hereof by the Borrower shall, and hereby
does, constitute an irrevocable authorization to so advance the proceeds of the
Loan. No further direction or authorization from the Borrower shall be necessary
to warrant such direct advances and all such advances shall satisfy pro tanto
the obligations of the Lenders hereunder and shall be secured by the Deeds of
Trust and other Collateral as fully as if made to the Borrower, regardless of
the disposition thereof by the party or parties to whom such advances is made.
Section 4.13 Prepayment.
The Borrower shall have the right to prepay the Loan in full or in
part, at any time and from time to time, upon five (5) days' prior written
notice to the Agent without premium or penalty. The foregoing notwithstanding,
in connection with any prepayment of a principal sum on any day other than the
last day of the Eurodollar Period applicable thereto, the Borrower shall pay to
the Agent upon request by the Agent, such amount as shall be sufficient to
compensate any of the Lenders for any and all losses or expenses which such
Lender may sustain or incur (including without limitation, any such loss or
expense arising from the redeployment of funds obtained by such Lender). Unless
an Event of Default has occurred, any partial prepayment shall be applied first
to such breakage costs, second to accrued and unpaid interest and third to the
outstanding principal balance of the Loan due and owing at maturity. Sums
borrowed and repaid may be readvanced. The Borrower's obligations under this
Section shall survive the termination of this Agreement and the repayment of the
Obligations.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
To induce the Lenders to make available the Credit Facility,
the Borrower represents and warrants to the Lenders that:
Section 5.1 Good Standing.
The Borrower (a) is a legal entity duly organized and existing and in
good standing under the laws of the state of formation, (b) has the power to own
its property and to carry on its business as now being conducted, and (c) is
duly qualified to do business and is in good standing in each jurisdiction in
which each Facility it owns is
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located and in which the character of the properties owned by it therein or in
which the transaction of its business makes such qualification necessary.
Section 5.2 Power and Authority
The Borrower has full power and authority to execute and deliver this
Agreement and each of the other Financing Documents executed and delivered by
it, to make the borrowing hereunder, and to incur the Obligations, all of which
have been duly authorized by all proper and necessary corporate action. No
consent or approval of holders of ownership interests in or lenders to, the
Borrower, and no consent or approval of any Governmental Authority or any third
party payor on the part of the Borrower, is required as a condition to the
validity or enforceability of this Agreement or any of the other Financing
Documents executed and delivered by the Borrower or to the payment or
performance by the Borrower of the Obligations.
Section 5.3 Binding Agreements.
This Agreement and each of the other Financing Documents executed and
delivered by the Borrower have been properly executed by the Borrower,
constitute valid and legally binding obligations of the Borrower, and are fully
enforceable against the Borrower in accordance with their respective terms.
Section 5.4 Litigation.
There are no proceedings pending before any court or arbitrator or
before or by any Governmental Authority which, in any one case or in the
aggregate, will cause a material adverse change in the financial condition or
operations of the Borrower or affect the authority of the Borrower to enter into
this Agreement or any of the other Financing Documents executed and delivered by
the Borrower. There is no pending revocation, suspension, termination,
probation, restriction, limitation or non-renewal of any License, Participation
Agreement or any similar accreditation or approval organization or Governmental
Authority for healthcare providers, including, without limitation, the issuance
of any provisional License or other License with a term of less than twelve (12)
months, as a consequence of any sanctions imposed by any Governmental Authority,
nor is there any pending assessment of any civil or criminal penalties by any
Governmental Authority, the outcome of which, if determined adversely to the
Borrower, could result in a material adverse change in the business or financial
condition of the Borrower. The Borrower does not have any appeals regarding
rates or reimbursements currently pending or contemplated before any
Governmental Authority or any administrator of any third party payor or
preferred provider program or referral source, the outcome of which, if
determined adversely to the Borrower, could result in a material adverse change
in the financial condition or operations of the Borrower. There are no Medicare
or Medicaid recoupments of any other third party payor being sought, requested
or claimed, against the Borrower, the outcome of which, if determined adversely
to the Borrower, could materially impair the Borrower's ability to pay the
Obligations, except as otherwise disclosed in writing to, and approved by, the
Agent.
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<PAGE> 45
Section 5.5 No Conflicting Agreements.
There is (a) no provision of the Borrower's Articles of Incorporation
or By-Laws and no provision of any existing mortgage, indenture, contract or
agreement binding on the Borrower or affecting its property, and (b) to the
knowledge of the Borrower no provision of law or order of court binding upon the
Borrower, which would conflict with or in any way prevent the execution,
delivery, or performance of the terms of this Agreement or of any of the other
Financing Documents executed and delivered by the Borrower, or which would be
violated as a result of such execution, delivery or performance, or, if so, all
necessary consents have been obtained.
Section 5.6 Financial Information.
All financial statements or information hereto furnished to the Lenders
with respect to the Borrower, each Facility and the Guarantor is complete and
correct in all material respects and fairly presents the financial position of
the Borrower, the Facilities and the Guarantor. There are no liabilities, direct
or indirect, fixed or contingent, of the Borrower or Guarantor which are not
reflected in the their respective financial statements or in the notes thereto
except those incurred subsequently in the ordinary course of their business.
There has been no material adverse change in the financial condition or
operations of the Guarantor since the financial statements dated June 30, 1998
(and to the Borrower's and Guarantor's knowledge, no such material adverse
change is pending), and neither the Borrower nor the Guarantor has guaranteed
the obligations of, or made any investments in or advances to, any company,
individual or other entity, except as disclosed in such information and except
those incurred subsequently in the ordinary course of their business.
Section 5.7 No Default Under Other Agreements.
The Borrower is not in default under or with respect to any obligation
under any agreement to which the Borrower is a party in any respect which could
result in a material adverse change in the financial condition or operations of
the Borrower.
Section 5.8 Taxes.
The Borrower has filed or has caused to have been filed all federal,
state and local tax or informational returns which are required by law to be
filed, and has paid or caused to have been paid all Taxes as shown on such
returns or on any assessment received by it, to the extent that such Taxes have
become due, or which are required by law to be paid, unless and to the extent
only that such Taxes, assessments and governmental charges are currently
contested in good faith and by appropriate proceedings by the Borrower and
adequate reserves therefor have been established as required under GAAP.
Section 5.9 Place(s) of Business and Location of Collateral.
The Borrower warrants that the address of the Borrower's chief
executive office is as specified in EXHIBIT C attached hereto and made a part
hereof and that the address of each other place of business of the Borrower, if
any, is as disclosed in EXHIBIT C. The Collateral and all books and records
pertaining to the Collateral are and/or will be located at the addresses
indicated on EXHIBIT C. The Borrower will immediately advise the
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<PAGE> 46
Agent in writing of the opening of any new place of business or the closing of
any existing place of business of the Borrower, and of any change in the
location of the places where the Collateral, or any part thereof, or the books
and records concerning the Collateral, or any part thereof, are kept. EXHIBIT C
may be modified from time to time to add the locations of additional Facilities.
Section 5.10 Title to Properties.
The Borrower has good and marketable title to all of its properties,
including, without limitation, the Property and the Collateral, and the Property
and the Collateral are free and clear of mortgages, pledges, liens, charges and
other encumbrances other than the Permitted Liens.
Section 5.11 Margin Stock.
None of the proceeds of the Loan will be used, directly or indirectly,
by the Borrower for the purpose of purchasing or carrying, or for the purpose of
reducing or retiring any indebtedness which was originally incurred to purchase
or carry, any "margin security" within the meaning of Regulation G (12 CFR Part
207), or "margin stock" within the meaning of Regulation U (12 CFR Part 221), of
the Board of Governors of the Federal Reserve System (herein called "margin
security" and "margin stock") or for any other purpose which might make the
transactions contemplated herein a "purpose credit" within the meaning of said
Regulation G or Regulation U, or cause this Agreement to violate any other
regulation of the Board of Governors of the Federal Reserve System or the
Securities Exchange Act of 1934 or the Small Business Investment Act of 1958, as
amended, or any rules or regulations promulgated under any of such statutes.
Section 5.12 ERISA.
With respect to any "pension plan", as defined in Section 3(2) of
ERISA, which plan is now or previously has been maintained or contributed to by
the Borrower and/or by any Commonly Controlled Entity: (a) no "accumulated
funding deficiency" as defined in Code 412 or ERISA 302 has occurred, whether or
not that accumulated funding deficiency has been waived; (b) no "reportable
event" as defined in ERISA 4043 has occurred; (c) no termination of any plan
subject to Title IV of ERISA has occurred; (d) neither the Borrower nor any
Commonly Controlled Entity has incurred a "complete withdrawal" within the
meaning of ERISA 4203 from any multiemployer plan; (e) neither the Borrower nor
any Commonly Controlled Entity has incurred a "partial withdrawal" within the
meaning of ERISA 4205 with respect to any multiemployer plan; (f) no
multiemployer plan to which the Borrower or any Commonly Controlled Entity has
an obligation to contribute is in "reorganization" within the meaning of ERISA
4241 nor has notice been received by the Borrower or any Commonly Controlled
Entity that such a multiemployer plan will be placed in "reorganization".
Section 5.13 Governmental Consent.
Neither the nature of the Borrower or of its business or properties,
nor any relationship between the Borrower and any other Person, nor any
circumstance in connection with the making of the Loan, or the offer, issue,
sale or delivery of the Note is
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<PAGE> 47
such as to require a consent, approval or authorization of, or filing,
registration or qualification with, any Governmental Authority, on the part of
the Borrower, as a condition to the execution and delivery of this Agreement or
any of the other Financing Documents, the borrowing of the principal amounts of
the Loan or the offer, issue, sale or delivery of the Note.
Section 5.14 Full Disclosure.
The financial statements referred to in this Part V do not, nor does
this Agreement, nor do any written statements furnished by the Borrower to the
Agent in connection with the making available of the Credit Facility, contain
any untrue statement of fact or knowingly omit a material fact necessary to make
the statements contained therein or herein not materially misleading. The
Borrower has not failed to disclose any fact to the Agent in writing which
materially adversely affects or, will or could prove to materially adversely
affect the properties, business, prospects, profits or condition (financial or
otherwise) of the Borrower or the ability of the Borrower to perform this
Agreement or any of the other Financing Documents.
Section 5.15 Business Names and Addresses.
The Borrower has not conducted business under any name other than its
current name, and has not conducted its business in any jurisdiction other than
those listed on EXHIBIT C. The Borrower intends to operate the Facilities under
the names set forth on EXHIBIT C. The Borrower shall promptly notify the Agent
of any change in the name of any Facility.
Section 5.16 Licenses and Certifications.
The Borrower further represents and warrants to the Lenders that, with
respect to any License it possesses or has applied for, (a) no Default or Event
of Default has occurred or is continuing under the terms of any of the Licenses,
or any condition to the issuance, maintenance, renewal and/or continuance of any
License, (b) the Borrower has paid all fees, charges and other expenses to the
extent due and payable with respect to, and has provided all information and
otherwise complied with all material conditions precedent to, the issuance,
maintenance, renewal, and continuance of all Licenses, (c) the Borrower has not
received any notice from any Governmental Authority relating to any actual or
pending suspension, revocation, restriction, or imposition of any probationary
use, of any License, nor has any License been materially amended, supplemented,
rescinded, terminated, or otherwise modified except as otherwise disclosed in
writing to, and approved by, the Agent, (d) the Borrower has not made any
previous assignment of any of the Licenses to any Person, and (e) no financing
statement covering any of the Licenses is on file in any public office except
financing statements in favor of the Lenders. Without implying any limitation to
the other representations and warranties contained in this Agreement, the
Borrower is not required by any applicable Law of any state, county or city in
which any of the Facilities is located to obtain a Certificate of Need to
operate any Facility for its intended purpose or has applied for and obtained
such Certificate(s) of Need. Licenses to operate are required in most states
where the Facilities are located and Certificates of Need are also required in
the certain states.
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Section 5.17 Operating Agreements and Management Contracts.
The Borrower has furnished to the Agent photocopies of all material
Operating Agreements and Management Contracts entered into with respect to the
Facilities, and all amendments, supplements and modifications thereto including,
without limitation, the Management Agreement. The Borrower further represents
and warrants to the Lenders that (a) all of the material Operating Agreements
and Management Contracts are or will be at the time of execution and delivery
thereof valid and binding on the parties thereto and in full force and effect,
(b) no Default or Event of Default has occurred or is continuing under the terms
of any of the material Operating Agreements and Management Contracts, and no
party thereto has attempted or threatened to terminate any such Management
Contract or Operating Agreement, (c) the Borrower has not made any previous
assignment of any Operating Agreements, Management Contracts, Management
Agreements or Management Lease to any Person, and (d) no financing statement
covering any of the Operating Agreements, Management Contracts, Management
Agreement or Management Leases is on file in any public office, except financing
statements in favor of the Lenders in connection with the Credit Facility.
Section 5.18 Participation Agreements and Resident Agreements.
(a) The Borrower has furnished to the Agent, on or
before the applicable Facility Closing, the Borrower's form of Resident
Agreement used with respect to all Facilities and, if requested by the Agent,
copies of all current, executed Resident Agreements.
(b) The Borrower further covenants to the Lenders
that, with respect to the Participation Agreements, if any, (i) to the best of
its knowledge, all Participation Agreements will be at the time of execution and
delivery thereof valid and binding on the parties thereto and in full force and
effect, and (ii) all Participation Agreements will provide for payment to the
Borrower for services rendered to residents. The Borrower represents and
warrants that as of the date hereof it has not entered into any Participation
Agreement for any Facility.
(c) To the extent the Borrower participates or will
participate in Medicare or Medicaid payment and reimbursement programs, the
Borrower has complied and will comply with all notice and other requirements
under Title XVIII and Title XIX of the Social Security Act to enable the
Borrower to participate in the Medicare and Medicaid payment and reimbursement
programs.
Section 5.19 Compliance with Laws.
The Borrower is not in violation of any applicable laws of any
Governmental Authority pertaining to employment practices, health standards or
controls, environmental and occupational standards or controls or order of any
court or arbitrator, the violation of which, considered in the aggregate, would
result in a material adverse change in the financial condition or operations of
the Borrower. The Borrower is in compliance with all material accreditation
standards and requirements to which it is subject. The Borrower has obtained or
will obtain all Licenses necessary to the
43
<PAGE> 49
ownership of its property or to the conduct of its activities which, if not
obtained, could materially adversely affect the ability of the Borrower to
conduct its activities of operating each Facility as a Senior Living Facility,
including, without limitation if and as required by any Governmental Authorities
for the dispensing, storage, prescription, disposal, and use of drugs,
medications and other "controlled substances" and for the maintenance of
cafeteria and other food and beverage facilities or services or the condition
(financial or otherwise) of the Borrower.
Section 5.20 Presence of Hazardous Materials or Hazardous Materials
Contamination.
The Borrower has not placed Hazardous Materials on any real property
owned, controlled or operated by the Borrower or for which the Borrower is
responsible. To the best of the Borrower's knowledge, no Hazardous Materials are
located on any real property owned, controlled or operated by the Borrower or
for which the Borrower is responsible, except for reasonable quantities of
necessary supplies for use by the Borrower in the ordinary course of its current
line of business and stored, used and disposed of in accordance with applicable
Laws, and no property owned, controlled or operated by the Borrower has ever
been used by the Borrower or, to the best of the Borrower's knowledge, by any
other Person as a manufacturing, storage, or dump site for Hazardous Materials
nor is such property affected by Hazardous Materials Contamination, except as
may be disclosed in any Phase I environmental assessment delivered to the Agent.
Section 5.21 Compliance in Zoning.
The anticipated use of each Eligible Project complies with applicable
zoning ordinances, regulations and restrictive covenants affecting such Land,
all use requirements of any Governmental Authority having jurisdiction have been
satisfied, and no violation of any law or regulation exists with respect
thereto.
Section 5.22 Plans and Specifications.
The Borrower represents and warrants that, to the extent required by
applicable law or any effective restrictive covenant, the Plans and
Specifications for each Eligible Project have been approved by all Governmental
Authorities having or claiming jurisdiction and by any beneficiary of any such
restrictive covenant.
Section 5.23 Building Permits; Other Permits.
All building, construction and other permits then necessary or required
in connection with the development of the Land and the construction of the
Improvements have been or, will be on a timely basis, unless otherwise agreed to
by the Agent, validly issued and all fees and bonds required in connection
therewith have been paid or posted, as the circumstances may require.
Section 5.24 Utilities.
All utility services necessary for the development of all the Land and
the construction of the Improvements for each Eligible Project and the operation
thereof for
44
<PAGE> 50
their intended purpose are or will be available at the boundaries of all the
Land, including, without limitation, telephone service, water supply, storm and
sanitary sewer facilities, natural gas (if available) and electric facilities.
Section 5.25 Access; Roads.
All roads and other accesses necessary for the development of all the
Land and the construction of all the Improvements for all Eligible Projects and
full utilization thereof for their intended purposes have either been completed
or the necessary rights of way therefor have either been or will be acquired by
the appropriate Governmental Authorities or have been or will be dedicated to
public use and accepted by such Governmental Authorities and all necessary steps
have been taken by the Borrower or such Governmental Authorities to assure the
complete construction and installation thereof by a date sufficient to ensure
the timely completion of the Improvements and in no event later than the end of
the applicable Maximum Construction Period.
Section 5.26 Other Liens.
Except as otherwise provided in the Financing Documents, the Borrower
has made no contract or arrangement of any kind the performance of which by the
other party thereto would give rise to a lien on any Eligible Project.
Section 5.27 Defaults.
There is no default on the part of the Borrower under the Financing
Documents and no event has occurred and is continuing which, with notice or the
passage of time, or both, would constitute a default under the Note or any of
the other Financing Documents.
Section 5.28 Nature of Credit Facility; Usury; Disclosures.
The Borrower is a business or commercial organization, and the Credit
Facility is being made solely for the purpose of carrying on or acquiring a
business or commercial enterprise. The rate or rates of interest charged on the
Note do not, and will not, violate any applicable usury Law or interest rate
limitation. The Credit Facility is not subject to the federal Consumer Credit
Protection Act (15 U.S.C. 1601 et. seq.) nor any other federal or state
disclosure or consumer protection laws. The Credit Facility is being transacted
solely for business or commercial purposes and not for personal, family or
household purposes.
Section 5.29 Survival; Updates of Representations and Warranties.
Each Requisition shall constitute an affirmation that the foregoing
representations and warranties of the Borrower and those set forth in the other
Financing Documents are true and correct as of the date thereof and, unless the
Agent is notified to the contrary prior to the disbursement of an advance, will
be so as of the date thereof. All representations and warranties contained in or
made under or in connection with this Agreement and the other Financing
Documents shall survive the date of this Agreement and the Loan made hereunder.
The Lenders acknowledge and agree that any and all representations and
warranties contained in, or made under, or in connection with, this Agreement
may be amended, changed or otherwise modified by the Borrower at any time
45
<PAGE> 51
and from time to time after the date of this Agreement so as to accurately
reflect the matters represented and warranted therein; provided, that such
amendments, changes and/or modifications are disclosed in writing to the Agent.
The Lenders shall have no obligation to waive any Event of Default due to any
present or future inaccuracy of such representation or warranty or to agree to
any amendment, change or modification of any such representation or warranty.
Section 5.30 Accounts.
With respect to all of the Borrower's Accounts and to the best of the
Borrower's knowledge (a) they are genuine, and in all respects what they purport
to be, and are not evidenced by a judgment, an instrument, or chattel paper
(unless such judgment has been assigned and such instrument or chattel paper has
been endorsed and delivered to the Agent); (b) they represent undisputed, bona
fide transactions completed in accordance with the terms and provisions
contained in the invoices relating thereto; (c) the services rendered which
resulted in the creation of the Accounts have been delivered or rendered to and
accepted by the Account Debtor; (d) the amounts shown on the Borrower's books
and records, with respect thereto are actually and absolutely owing to the
Borrower and are not contingent for any reason; (e) there are no set-offs,
counterclaims or disputes known by the Borrower or asserted with respect
thereto, and the Borrower has made no agreement with any Account Debtor thereof
for any deduction or discount of the sum payable thereunder except regular
discounts allowed by the Borrower in the ordinary course of its business for
prompt payment; (f) there are no facts, events or occurrences known to the
Borrower which in any way impair the validity or enforcement thereof or tend to
reduce the amount payable thereunder; (g) all Account Debtors thereof, to the
best of the Borrower's knowledge, have the capacity to contract; (h) the
services furnished giving rise thereto are not subject to any Liens other than
Permitted Liens; and (i) the Borrower has no knowledge of any fact or
circumstance which would impair the validity or collectibility thereof.
ARTICLE VI
CONDITIONS OF LENDING
The making of any advance under the Loan is subject to the
conditions set forth under this Agreement and the following conditions
precedent:
Section 6.1 No Default.
No Event of Default and no event which with the giving of notice or the
passage of time would become an Event of Default has occurred and is existing
and all representations and warranties set forth herein or in the other
Financing Documents are true and correct.
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Section 6.2 Opinion of Counsel for the Borrower.
At the Facility Closing and when a lien on an Eligible Project is
subsequently granted by the Borrower, the Lenders shall receive a written
opinion of counsel for the Borrower and the Guarantor satisfactory in all
respects to the Agent.
Section 6.3 Approval of Counsel for the Lenders.
All legal matters incident to the Loan and all documents necessary in
the opinion of the Agent to make the Loan or the addition of either an Eligible
Project to the Borrowing Base or add such Deeds of Trust and related Collateral
shall be satisfactory in all material respects to counsel for the Lenders.
Section 6.4 Supporting Documents.
The Agent shall receive at the Credit Facility Closing and in
connection with the subsequent Facility Closing: (a) a certificate of a duly
authorized officer of the Borrower, in a form acceptable to the Agent in all
respects, dated as of the date hereof and certifying (i) that attached thereto
is a true, complete and correct copy of resolutions duly adopted by board of
directors of the Borrower authorizing the execution and delivery of this
Agreement, the Note and the other Financing Documents, the borrowing thereunder,
and the performance of the Obligations, and (ii) as to the incumbency and
specimen signature of the authorized officer of the Borrower executing this
Agreement, the Note and the other Financing Documents; (b) such other documents
as the Agent may reasonably require the Borrower to execute, in form and
substance acceptable to the Agent; and (c) such additional information,
instruments, opinions, documents, certificates and reports as the Agent may
reasonably deem necessary.
Section 6.5 Financing Documents.
All of the Financing Documents required by the Agent whether at the
Credit Facility Closing or any subsequent Facility Closing shall be executed,
delivered and, if deemed necessary by the Agent, recorded, all at the sole
expense of the Borrower.
Section 6.6 Insurance.
The Borrower shall have satisfied the Agent that any and all insurance
required by this Agreement is in effect as of the date of this Agreement or as
of the date of the addition of a Deed of Trust and related Collateral, and that,
to the extent required by the Financing Documents, the Lenders have been named
as an insured lienholder.
Section 6.7 Security Documents.
In order to perfect the lien and security interest created by this
Agreement, the Borrower shall have executed and delivered to the Agent all
Security Documents (in form and substance acceptable to the Agent in its sole
discretion) deemed necessary by the Agent, in a sufficient number of
counterparts for recordation, and, at the Borrower's sole expense, shall record
all such financing statements and Security Documents, or cause them to be
recorded, in all public offices deemed necessary by the Agent.
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Section 6.8 Additional Borrower Joinder Supplement.
In order to add an Additional Borrower, under the Credit Facility,
confirm that such additional Borrower is jointly and severally liable with
existing Borrower for all the Obligations, perfect the lien and security
interest of the Lenders in the Collateral related to the construction and
operation of any Facility encumbered by a Deed of Trust provided by an
Additional Borrower, such Additional Borrower shall execute and deliver to the
Agent, an Additional Borrower Joinder Supplement joining in the Note, this
Agreement, such assignments of Collateral and such other Security Documents as
the Agent may require and in sufficient number of counterparts for recordation,
and, at the Borrower's sole expense, shall make available for recording all such
financing statements and other Security Documents, or cause them to be recorded,
in all public offices deemed necessary to the Agent.
ARTICLE VII
AFFIRMATIVE COVENANTS OF BORROWER
Until payment in full and the performance of all of the
Obligations hereunder, the Borrower shall:
Section 7.1 Financial Statements.
Furnish to the Agent:
(a) as soon as available but in no event more than
one hundred twenty (120) days after the close of each of the Borrower's fiscal
years, (i) a copy of the consolidated annual financial statement of the Borrower
in reasonable detail satisfactory to the Agent, prepared on a basis of
accounting consistent with that of the Guarantor consistently applied, which
financial statement shall include a balance sheet of the Borrower, as at the end
of such fiscal year and a certificate of compliance signed by the Borrower's
Chief Financial Officer regarding the covenants contained in the Financing
Documents and whether there has been an event which constitutes an Event of
Default under the Financing Documents, or which would constitute such an Event
of Default with the giving of notice or the lapse of time or both, and, if so,
stating the facts with respect thereto, (ii) and the related statements of
operations in a format acceptable to the Agent;
(b) beginning with the first Operating Month, as
soon as available but in no event more than thirty (30) days after the last day
of each such calendar month, operating statements for each Eligible Project for
such month, including an income and expense statement for such period and
certified rent roll with respect to each Eligible Project then operating for
such period;
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(c) with reasonable promptness such additional
information, reports or statements as the Agent may from time to time reasonably
request; and
(d) all required financial statements, required
pursuant to Sub-paragraphs (a) and (b) hereof shall include the following
certification:
"The undersigned, as of ,
certifies that the financial information contained in the financial
statement dated , is true and complete when interpreted in
conjunction with the Guarantor's most recent annual and quarterly
financial statements, as of this date. This statement is provided
to Bank United (the "Bank") as agent for the Lenders set forth in
the Agency Agreement dated , , as amended,
restated or substituted from time to time, for the purpose of
obtaining credit or in fulfillment of the terms and conditions of
credit already provided. Accordingly, it is intended that the Bank
may rely on this information."
(e) All required financial statements required under
(a) hereof shall be accompanied by a certificate of compliance with the
applicable financial covenants signed by a responsible officer of the Borrower
and shall include the Borrower's computation of such covenants.
(f) as soon as available but in no event more than
forty-five (45) days after the close of each of the Borrower's fiscal quarters
internally prepared, consolidated and consolidating financial statements of the
Borrower, a balance sheet on a year-to-date basis and as of the close of such
period and an income and expense statement for such period, certified by a
responsible officer of the Borrowers; and
(g) in addition, the Borrower will provide or cause
the Guarantor to provide to the Agent a quarterly certificate of compliance with
financial covenants applicable to either the Borrower or the Guarantor within
thirty (30) days of the end of each of the Borrower's or the Guarantor's fiscal
quarters in the form attached hereto as EXHIBIT D and duly certified by a
responsible officer of such entity.
Section 7.2 Financial Covenants.
7.2.1 Minimum Pool A Projects.
At least sixty percent (60%) of the Eligible Projects shall qualify as
Pool A Projects. The foregoing notwithstanding, if the Borrower fails to satisfy
this covenant and at the time of such failure no more than four (4) Eligible
Projects are Pool B or Pool C Projects, such failure shall not constitute an
event of default under the Financing
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Documents unless the Borrower fails within ninety (90) days thereof to restore
the composition of the Borrowing Base to not less than sixty (60%) Pool A
Projects.
7.2.2 Pool A Project Covenants.
Each Development Project, Stabilized Project, Acquired Project or
Acquisition Project shall satisfy the applicable performance requirements
hereinafter set forth to qualify as a Pool A Project as set forth below:
(a) Maximum Construction Period. Each Development Project
will be individually monitored for on-going construction for not more than the
applicable period as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Model Sterling House
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Types WovenHearts Clare Bridge Crossings Wynwood Campus
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
<CAPTION>
Maximum
- -----------------------------------------------------------------------------------------------------------
Construction
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Period 12 months 12months 14 months 14 months 24 months
- -----------------------------------------------------------------------------------------------------------
</TABLE>
The construction period shall be measured from the date of commencement
of construction as reported by the Borrower, regardless of whether it owned the
Facility as of the commencement date, and as verified by the Agent.
(b) Minimum Occupancy Requirement. Each Development
Project shall maintain a minimum resident occupancy as of the Operating Month
shown below:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Min. Occupancy Sterling House Acquired
- -----------------------------------------------------------------------------------------------------------
Requirement WovenHearts Clare Bridge Crossings Wynwood Project.
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
50% by 6 mos by 6 mos by 7 mos by 7 mos by 6mos
- -----------------------------------------------------------------------------------------------------------
75% by 9 mos by 9 mos by 10 mos by 10 mos by 9mos
- -----------------------------------------------------------------------------------------------------------
85% by 12 mos by 12 mos by 14 mos by 14 mos by12mo
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(c) Debt Service Coverage Ratio (Stabilized
Project). Each Stabilized Project shall maintain an 85% minimum resident
occupancy requirement, and a Debt Service Coverage Ratio equal to not less than
1.25 to 1.0 as of the end of each fiscal quarter ending, as set forth below:
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<PAGE> 56
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Stabilized Projects 1Q 2Q 3Q 4Q thereafter
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
Debt Service Coverage
- ----------------------------------------------------------------------------------------------------
Ratio 1.25x 1.25x 1.25x 1.25x 1.25x
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
Rolling Historical
- ----------------------------------------------------------------------------------------------------
Operations 3 mos 6 mos 9 mos 12 mos 12mos
- ----------------------------------------------------------------------------------------------------
Test test test test test
- ----------------------------------------------------------------------------------------------------
</TABLE>
(d) Debt Service Coverage Ratio (Acquisition
Project). Each Acquisition Project, shall maintain a Debt Service Coverage Ratio
equal to not less than 1.25 to 1.0 as of the end of each fiscal quarter ending
after its acquisition, as set forth below:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Acquisition Projects 1Q 2Q 3Q 4Q 5Q thereafter
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Debt Service
- ----------------------------------------------------------------------------------------------------------
Coverage Ratio NA 1.25x 1.25x 1.25x 1.25x 1.25x
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Rolling Historical
- ----------------------------------------------------------------------------------------------------------
Operations NA 3 mos 6 mos 9 mos 12 mos 12mos
- ----------------------------------------------------------------------------------------------------------
test test test test test
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(e) Maximum Period for Opening. Each Development
Project shall be open for full operations within ninety (90) days of issuance of
its certificate of occupancy.
(f) Product Types. Provided the Agent consents to
the addition of a new product type to the Borrowing Base, Eligible Projects of
types other than those commonly designated by the tradenames "Wynwood",
"Crossings", "Clare Bridge", "Wovenhearts" or "Sterling House" shall be required
to meet the covenants set forth in 7.2.2 (a) and (b) for a "Sterling House" or
"Wovenhearts" Facility unless otherwise agreed by the Agent.
(g) Campus Projects. Except as provided in 7.2.2
(a), each Facility in a Campus Project will be measured separately for
compliance with the covenants hereunder to determine whether such Facility
qualifies as a Pool A Project.
(h) Special Conditions for Borrowing Base Consisting
of Acquisition Projects. At such time or times as the Eligible Projects in the
Borrowing Base are either all Acquisition Projects or when Acquisition Projects
must be included to meet the requirement hereunder that 60% of all Eligible
Projects be Pool A Projects, but such Acquisition Projects have been too
recently acquired to meet the Debt Service
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Coverage Ratio set forth in Section 7.2.2 (d) above, then each such new
Acquisition Project shall be tested under the Debt Service Coverage Ratio set
forth in Section 7.2.3 and must meet such test in order to qualify as a Pool A
Project for any purpose under this Agreement.
(i) Eligible Facilities Subject to Joint Venture
Leases. In the case of any Eligible Project which otherwise qualifies as a Pool
A Project which is subject to a Joint Venture Lease, ALS or an Affiliate shall
exercise its rights to buy-out the ownership interests of all other partners or
other owning entities in the Joint Venture within six (6) months from the date
on which such Eligible Project becomes a Stabilized Facility or the Eligible
Project will be classified by the Agent as a Pool B Project. If such buy-out has
not been completed within nine (9) months of the Eligible Project's becoming a
Stabilized Project, such Eligible Project will be classified by the Agent as a
Pool C Project.
(j) to the extent the Agent has agreed from time to
time in its sole discretion to modify or waive any requirements for an
individual Eligible Project to qualify as a Pool A Project, such Eligible
Project and the specific terms of such waiver are set forth on EXHIBIT E
attached hereto or any replacement EXHIBIT E which may from time to time be
attached to this Financing Agreement.
7.2.3 Debt Service Coverage Prospective Test for
Acquisition Projects.
Prior to the inclusion of any Acquisition Projects which the Borrower
has requested be included in the Borrowing Base (each, a "Prospective
Acquisition Project"), all Stabilized Projects and all Acquisition Projects
already in the Borrowing Base plus the Prospective Acquisition Project(s) shall
maintain a Debt Service Coverage Ratio of not less than 1.25 to 1.0 projected on
an annualized basis measured using the Borrowing Base Report for the most recent
three (3) months and operating statements for Prospective Acquisition Project(s)
for the same period.
Section 7.3 Taxes and Claims.
Pay and discharge all taxes, assessments and governmental charges or
levies imposed upon it or any of its income or properties prior to the date on
which penalties attach thereto, and all lawful claims which, if unpaid, might
become a lien or charge upon any of its properties; provided, however, the
Borrower shall not be required to pay any such tax, assessment, charge, levy or
claim, the payment of which is being contested in good faith and by proper
proceedings.
Section 7.4 Legal Existence.
Maintain its legal existence in good standing in the state of its
formation and in each jurisdiction where it is required to register or qualify
to do business.
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Section 7.5 Conduct of Business and Compliance with Laws.
7.5.1 Maintenance of Agreements
Do or cause to be done all things necessary to obtain, enter into,
preserve and to keep in full force and effect its material rights and its trade
names, patents, trademarks and Licenses, Participation Agreements, and Operating
Agreements and Management Contracts which are necessary for the operation of
each Facility as its respective type of Senior Living Facility and as
contemplated by the Borrower.
7.5.2 Maintenance of Agreements
Engage in and continue to engage substantially only in the business of
owning and operating a Senior Living Facility and related services in compliance
with all applicable laws of the state in which the applicable Facility is
located or any other Governmental Authority having jurisdiction over such
Facility.
7.5.3 Compliance with Laws Governing Participation
Agreements.
Comply with all applicable Laws, including, without limitation,
regulations issued under the Omnibus Budget Reconciliation Act of 1987 (OBRA'87)
(Pub.L.No. 100-203), as amended, and observe the valid requirements of
Governmental Authorities, and perform the terms of all Participation Agreements
to which it is a party, the noncompliance with or the nonobservance of which
might materially interfere with the performance of its Obligations or the proper
or prudent conduct of its business or the applicable Property.
7.5.4 Other Operating Covenants.
In addition, the Borrower covenants and agrees that it will:
(a) obtain and maintain in full force and effect all
Licenses necessary to the acquisition and/or ownership and/or operation of each
Facility including, without limitation, Licenses and other approvals related to
the storage, dispensation, use, prescription and disposal of drugs, medications
and other "controlled substances" and, to the extent offered by the Borrower,
the maintenance of cafeteria and other food and beverage facilities or services;
(b) administer, maintain and operate (or will cause
to be administered, maintained and operated) each Facility as a
revenue-producing Senior Living Facility;
(c) to the extent the Borrower participates in any
such programs, maintain and operate each Facility to meet the standards and
requirements and to provide healthcare of such quality and in such manner as
would enable the Borrower to
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participate in, and provide services in connection with, recognized medical and
healthcare insurance programs;
(d) obtain, maintain and comply with all conditions
for the continuance of all Licenses, including without limitation, Licenses
which may at any time be required by the state in which the applicable Facility
is located or other appropriate governmental entity, necessary or desirable for
the operation of each Facility as its applicable Senior Living Facility;
(e) to the extent the Borrower presently
participates or in the future will participate in such programs, obtain,
maintain and comply with all conditions for the continuance of certification
from each applicable Governmental Authority that the Borrower meets all
conditions for participation in the Medicare and Medicaid programs; and
(f) construct the Improvements entirely on the Land
without encroaching upon any easement or right-of-way or upon the land of others
in accordance with all applicable (whether present or future) laws, ordinances,
rules, regulations, requirements and orders of any Governmental Authority having
or claiming jurisdiction, including all applicable building restriction lines
and set-backs, all use or other restrictions and the provisions of any prior
agreements, declarations, covenants and all applicable zoning and subdivision
ordinances and regulations unless a variance shall have been obtained.
Section 7.6 Use of Proceeds.
Use the proceeds of the Loan for the purpose or purposes set forth in
Section 2.l and, without the prior written consent of the Agent for no other
purpose or purposes.
Section 7.7 Insurance.
Provide or cause to be provided to the Agent and maintain in full force
and effect at all times during the term of the Loan, such policies of insurance
as may be required by the terms of the Financing Documents from a company or
companies, and in form and amounts satisfactory to the Agent including, by way
of example and not by way of limitation, at least the following:
7.7.1 Builder's Risk Insurance
During any period of construction in or on an Eligible Project,
"builder's risk" insurance, including vandalism and malicious mischief and
collapse endorsements in amounts not less than the replacement cost of the
Improvements being constructed or of the Property and naming the Agent on behalf
of the Lenders as a loss payee in the mortgagee clause thereof;
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7.7.2 Property Insurance
Casualty or physical damage insurance coverage for each completed
Eligible Project affording protection against loss or damage by fire or other
hazards covered in the form of an "all-risk" 100% non-reporting fire and hazard
insurance policy with "extended coverage" endorsement and insurance for boiler
or pressure vessel explosion (if boilers or pressure vessels are located on the
Property) and such other risks as shall be customarily covered with respect to
projects similar in construction, location and use as the Property, or as the
Agent may from time to time otherwise require in amounts necessary to prevent
the application of any co-insurance provisions of any applicable policies up to
an amount not less than the greater of the full insurable value of the
Improvements (as defined in the Deed of Trust) or the aggregate principal amount
of the Obligations; no policy of insurance shall be written such that the
proceeds thereof will produce less than the minimum coverage required by this
Section by reason of co-insurance provisions or otherwise; the term "full
insurable value" means the actual replacement cost of the Property (as defined
in the Deed of Trust) (excluding foundation and excavation costs and costs of
underground flues, pipes, drains and other uninsurable items); and as to
Eligible Projects naming the Agent on behalf of the Lenders as loss payee in the
mortgagee clause thereof;
7.7.3 Liability Insurance
Comprehensive public liability insurance in amounts usually carried by
similar operations against claims for bodily injury or death and property damage
insurance for claims for damage to property (including loss of use) occurring
upon, in or about the Property naming the Agent on behalf of the Lenders as loss
payee thereunder, with such insurance to afford protection to the limit of not
less than $5,000,000 for the aggregate of all occurrences during any given
annual policy period for each Eligible Project shall name the Agent as a
certificate holder and shall prohibit cancellation or reduction in coverage upon
less than thirty (30) days prior written notice to the Agent;
7.7.4 Worker's Compensation Insurance
Workers' compensation insurance in accordance with the requirements of
applicable law or regulation naming the Agent on behalf of the Lenders as loss
payee thereunder;
7.7.5 Business Interruption Insurance
Business interruption insurance naming the Lenders as additional
insureds with respect to each Facility once a certificate of occupancy has been
issued for such Facility in an amount equal to at least twelve (12) months' debt
service on the applicable Loan; and
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7.7.6 Professional Liability Insurance
To the extent that healthcare professionals are employed by the
Borrower, medical liability, malpractice and other healthcare professional
liability insurance protecting the Borrower and its employees against claims
arising from the professional services performed by the Borrower and its
employees with limits of not less than One Million Dollars ($1,000,000.00) with
respect to injury or death for each person or occurrence and an umbrella policy
insuring against such liability in an aggregate amount of not less than Ten
Million Dollars ($10,000,000.00). In addition, the Borrower shall ensure that
all healthcare providers with whom the Borrower contracts to provide services at
any Facility are insured against claims arising from such services with limits
as set forth above.
7.7.7 Flood Insurance.
If required by applicable law or regulation, provide or cause to be
provided to the Agent a separate policy of flood insurance in the aggregate
amount of the applicable Loan or the maximum limit of coverage available with
respect to the Property, whichever is the lesser, from a company or companies
satisfactory to the Agent and written in strict conformity with the Flood
Disaster Protection Act of 1973, as amended, and all applicable regulations
adopted pursuant thereto. In the event that flood insurance is not required by
applicable law or regulation to be provided in connection with the applicable
Loan or is not otherwise available with respect to the Property, the Borrower
shall supply the Agent with written evidence, in form and substance satisfactory
to the Agent, to that effect. Any such policy shall provide that the policy may
not be surrendered, canceled or substantially modified (including, without
limitation, cancellation for nonpayment of premiums) without at least thirty
(30) days' prior written notice to any and all insureds named therein, including
the Lenders.
7.7.8 General Insurance Provisions
The Borrower shall file with the Agent, upon its request, a detailed
list of the insurance then in effect and stating the names of the insurance
companies, the amounts and rates of the insurance, dates of the expiration
thereof and the properties and risks covered thereby. Each policy of insurance
shall (a) be issued by one or more recognized, financially sound and responsible
insurance companies approved by the Agent and which are qualified or authorized
by the laws of the state in which the applicable Facility is located to assume
the risk covered by such policy, (b) with respect to the insurance described
under the preceding subsections 7.7.1, 7.7.2 and 7.7.6, have attached thereto
standard noncontributing, non-reporting mortgagee clauses in favor of and
entitling the Lenders without contribution to collect any and all proceeds
payable under such insurance, (c) provide that such policy shall not be canceled
or modified without at least thirty (30) days prior written notice to the Agent,
and (c) provide that any loss otherwise payable thereunder shall be payable
notwithstanding any act or negligence of the Borrower which might, absent such
agreement, result in a forfeiture of all or a part of
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<PAGE> 62
such insurance payment. Unless an escrow account has been established for
insurance premiums pursuant to the provisions of a Deed of Trust, the Borrower
shall promptly pay all premiums when due on such insurance and, on or prior to
the expiration date of each such policy, the Borrower shall deliver to the Agent
a renewal policy or policies marked "premium paid" and ACORD evidence of
insurance or other evidence of payment satisfactory to the Agent. The Borrower
shall immediately give the Agent notice of any cancellation of, or change in,
any insurance policy. The Lenders shall not individually or collectively,
because of accepting, rejecting, approving or obtaining insurance, incur any
liability for (i) the existence, nonexistence, form or legal sufficiency
thereof, (ii) the solvency of any insurer, or (iii) the payment of losses.
Section 7.8 Maintenance of Properties.
Keep its properties, whether owned in fee or otherwise, or leased,
including, without limitation, all of the Property, in good operating condition;
make all proper repairs, renewals, replacements, additions and improvements
thereto needed to maintain such properties in good operating condition; comply
with the provisions of all leases to which it is a party or under which it
occupies property so as to prevent any loss or forfeiture thereof or thereunder;
and comply with all laws, rules, regulations and orders applicable to its
properties or business or any part thereof.
Section 7.9 Maintenance of the Collateral.
Not permit anything to be done to the Collateral which may impair the
value thereof. Any of the Lenders or an agent designated by such Lender, shall
be permitted upon prior notice to the Borrower to enter the premises of the
Borrower and examine, audit and inspect the Collateral at any reasonable time
and from time to time without notice. The Lenders shall not have any duty to,
and the Borrower hereby releases the Lenders from, all claims of loss or damage
caused by the delay or failure to collect or enforce any of the Accounts or
Receivables or to preserve any rights against any other party with an interest
in the Collateral.
Section 7.10 Other Liens, Security Interests, etc.
Keep the Collateral and the Property free from all liens, security
interests and claims of every kind and nature, other than Permitted Liens.
Section 7.11 Defense of Title and Further Assurances.
At its expense, defend the title to the Collateral (or any part
thereof), and promptly upon request execute, acknowledge and deliver any
financing statement, renewal, affidavit, deed, assignment, continuation
statement, security agreement, certificate or other document the Agent may
reasonably require in order to perfect, preserve, maintain, protect, continue
and/or extend any lien or security interest granted to the Lenders under this
Agreement or any of the Security Documents and its priority. The Borrower shall
pay to the Agent, on demand all taxes, costs and expenses incurred by any of the
Lenders, in connection with the preparation, execution, recording and filing of
any such document or instrument.
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Section 7.12 Subsequent Opinion of Counsel as to Recording
Requirements.
Provide to the Agent a subsequent opinion of counsel as to the filing,
recording and other requirements with which the Borrower has complied to
maintain the liens and security interests in favor of the Lenders in the
Collateral in the event that the Borrower shall transfer its principal place of
business or the office where it keeps its records pertaining to the Accounts and
Receivables.
Section 7.13 Books and Records.
(a) Keep and maintain accurate books and records;
(b) make entries on such books and records in form
reasonably satisfactory to the Agent disclosing the Lenders' assignment of, and
security interest in and lien on, the Collateral and all collections received by
the Borrower on its Accounts;
(c) furnish to the Agent promptly upon request such
information, reports, contracts, invoices, lists of purchases of Inventory
(showing names, addresses and amount owing) and other data concerning Account
Debtors and the Borrower's Accounts and Inventory and all contracts and
collection(s) relating thereto as the Agent may from time to time specify; and
(d) unless the Agent shall otherwise consent in
writing, keep and maintain all such books and records mentioned in (a) above
only at the addresses listed in EXHIBIT C, and (a) permit any person designated
by any of the Lenders to enter the premises of the Borrower upon prior notice to
the Borrower and examine, audit and inspect the books and records at any
reasonable time and from time to time.
Section 7.14 Collections.
Until such time as the Agent shall notify the Borrower of the
revocation of such privilege following an Event of Default, (a) at its own
expense exercise the privilege for the account of and in trust for the Lenders
of collecting its Accounts and receiving in respect thereto all items of payment
and shall otherwise completely service all of the Accounts including (i) the
billing, posting and maintaining of complete records applicable thereto, and
(ii) the taking of such action with respect to such Accounts as the Agent may
reasonably request or in the absence of such request, as the Borrower may deem
advisable; and (b) in its discretion, grant, in the ordinary course of business,
to any Account Debtor, any rebate, refund or adjustment to which the Account
Debtor may be lawfully entitled. The Agent may, at its option but solely in
accordance with applicable law, at any time or from time to time after the
occurrence of an Event of Default hereunder, revoke the collection privilege
given to the Borrower herein by either giving notice of its assignment of, and
lien on the Collateral, subject to the provisions of Section 7.15 hereof, to the
Account Debtors or giving notice of such revocation to the Borrower.
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Section 7.15 Notice to Account Debtors and Escrow Account.
In the event that (a) a Default or an Event of Default exists, or (b)
demand has been made for any or all of the Obligations, promptly upon the
request of the Agent in such form and at such times as reasonably specified by
the Agent, give notice of the Lenders' lien on the Accounts to the Account
Debtors requiring those Account Debtors which are permitted by applicable law to
make payments thereon directly to the Agent.
Section 7.16 Business Names.
Immediately notify the Agent of any change in the name or names under
which it conducts its business.
Section 7.17 ERISA.
With respect to any pension plan which the Borrower and/or any Commonly
Controlled Entity maintains or contributes to, either now or in the future,
that: (a) such bonding as is required under ERISA 412 will be maintained; (b) as
soon as practicable and in any event within 15 days after the Borrower or any
Commonly Controlled Entity knows or has reason to know that a "reportable event"
has occurred or is likely to occur, the Borrower will deliver to the Agent a
certificate signed by its chief financial officer setting forth the details of
such "reportable event"; (c) neither the Borrower nor any Commonly Controlled
Entity will: (i) engage in or permit any "prohibited transaction" (as defined in
ERISA 406 or Code 4975) to occur; (ii) cause any "accumulated funding
deficiency" as defined in ERISA 302 and/or Code 412; (iii) terminate any pension
plan in a manner which could result in the imposition of a lien on the property
of the Borrower pursuant to ERISA 4068; (iv) terminate or consent to the
termination of any multiemployer plan; (v) incur a complete or partial
withdrawal with respect to any multiemployer plan within the meaning of ERISA
4203 and 4205; and (d) within 15 days after notice is received by the Borrower
or any Commonly Controlled Entity that any multiemployer plan has been or will
be placed in "reorganization" within the meaning of ERISA 4241, the Borrower
will notify the Agent to that effect. Upon the Agent's request, the Borrower
will deliver to the Agent a copy of the most recent actuarial report, financial
statements and annual report completed with respect to any "defined benefit
plan", as defined in ERISA 3(35).
Section 7.18 Management.
(a) Prior to the Credit Facility Closing, the
Borrower shall provide the Agent with a proposed form of Management Agreement to
be entered into by the Borrower or a Joint Venture with the Management Company.
The terms and provisions of the Management Agreement shall be fully approved by
the Lender prior to each applicable Facility Closing. The interest of the
Borrower in the Management Agreement shall be assigned to the Lender as security
for the Credit Facility.
(b) Subject to the terms of a Management Fee
Subordination Agreement by and among the Borrower, the Management Company and
the Agent executed in connection with each Facility Closing, the Borrower shall
cause the Management Company to subordinate payment of any and all management
fees
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under, or in connection with, the Management Agreement (the "Management Fees")
to payment of the Obligations, in accordance with the terms and conditions of
one or more subordination agreements in form and content acceptable to the Agent
in its reasonable discretion, and shall not amend, restate, supplement,
terminate, cancel or otherwise modify any of the terms or conditions of such
Management Agreement, in any material respect, without the prior written consent
of the Agent; however, payments of Management Fees may be made as contracted for
until the occurrence of an Event of Default.
(c) The Management Agreement shall provide that the
Borrower or subsequent owner may terminate such agreement, at the discretion of
the Borrower, upon thirty (30) days' prior written notice to the Management
Company; the Management Company shall acknowledge and consent in writing to the
assignment by the Borrower of its rights under the Management Agreement to the
Agent. The Borrower hereby agrees to enter into a Management Agreement with an
independent manager, acceptable to the Agent in its reasonable discretion, as
and when directed by the Agent, if the Management Agreement has been terminated
pursuant to the immediately preceding sentence; and it shall constitute an Event
of Default under the Financing Documents if the Borrower fails to do so. Except
as provided hereinafter, the Financing Documents shall provide that termination
of the Management Agreement without the prior written consent of the Agent shall
constitute an Event of Default under the Financing Documents. No consent of the
Lender shall be required for the termination of a Management Agreement if it is
required to meet an obligation for a License and (a) the Management Company
remains the Borrower, ALS or a Wholly Owned Subsidiary of ALS and (b) any
additional assignments of such Management Agreements required by the Agent are
provided by the Borrower.
Section 7.19 Surveys.
Upon the completion of the construction of the Improvements, the
Borrower shall furnish the Agent with an ALTA Survey with a current
certification to the Agent by a registered land surveyor of the jurisdiction in
which the Land is located. At any time the Borrower is required to furnish an
ALTA Survey to the Agent pursuant to the terms of this Agreement, the Borrower
shall also furnish an original print thereof to the title insurance company and
such Survey shall not be sufficient for the purposes of this Agreement unless
and until the title insurance company shall advise the Agent, by endorsement to
the title insurance policy or otherwise, that the Survey discloses no
violations, encroachments or other variances from applicable set-backs or other
restrictions except such as the Agent and its counsel shall approve.
Section 7.20 Inspections; Cooperation; Payment of Inspecting Engineer.
Permit the Lenders and their duly authorized representatives
(including, without limitation, the Inspecting Engineer) to enter upon any of
the Land, to inspect the Improvements and any and all materials to be used in
connection with the development of any of the Land and/or the construction of
the Improvements, to examine all detailed plans and shop drawings and similar
materials as well as all records and books of account
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maintained by or on behalf of the Borrower relating thereto and to discuss the
affairs, finances and accounts pertaining to any Facility and any of the
Improvements with representatives of the Borrower. The Borrower shall at all
times cooperate and cause the General Contractor and each and every one of its
subcontractors and materialmen to cooperate with the Lenders and their duly
authorized representatives (including, without limitation, the Inspecting
Engineer) in connection with or in aid of the performance of the Agent's or
Lenders' functions under this Agreement. The reasonable fees of any Inspecting
Engineer engaged or employed by the Agent in connection with or in aid of the
performance of the Agent's or the Lenders' functions under this Agreement shall
be paid by the Borrower.
Section 7.21 Vouchers and Receipts.
Furnish to the Agent, promptly on demand, any contracts, bills of sale,
statements, receipted vouchers or agreements pursuant to which the Borrower has
any claim of title to any materials, fixtures or other articles delivered or to
be delivered to the Land or incorporated or to be incorporated into any of the
Improvements. The Borrower shall furnish to the Agent, promptly on demand, a
verified written statement, in such form and detail as the Agent may require,
showing all amounts paid for labor and materials and all items of labor and
materials furnished or to be furnished for which payment has not been made and
the amounts to be paid therefor.
Section 7.22 Payments for Labor and Materials.
Pay when due all bills for services or labor performed and materials
supplied in connection with the development of the Land and the construction of
the Improvements. In the event any mechanics' lien or other lien or encumbrance
shall be filed or attached against the Property without the prior written
consent of the Agent in each instance, the Borrower covenants and agrees that,
within twenty (20) days after the filing of such lien, the Borrower will
promptly discharge the same by payment or filing bond or otherwise as permitted
by law; and if the Borrower fails to do so, the Agent may, at its option, in
addition to, and not in limitation of, all other rights and remedies of the
Agent in the Event of Default by the Borrower, and without regard to the
priority of said mechanics' lien or other lien or encumbrance, pay the same, and
all amounts expended by the Agent for such purpose shall constitute loans to the
Borrower and shall be secured by the Deed of Trust and the other Financing
Documents, and be due and payable forthwith by the Borrower to the Agent with
interest thereon at the Reimbursement Rate provided for in the Deed of Trust.
Section 7.23 Correction of Construction Defects.
Promptly following any demand by the Agent, correct or cause the
correction of any structural defects in the Improvements and any material
departures or deviations from the Plans and Specifications, as determined by the
Agent in its sole but reasonable discretion, not approved in writing by the
Agent.
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Section 7.24 Fees and Expenses; Indemnity.
Pay all reasonable fees, charges, costs and expenses required to
satisfy the conditions of the Financing Documents. The Borrower shall hold the
Lenders harmless and indemnify the Lenders against all claims of brokers and
"finders" arising by reason of the execution and delivery of the Financing
Documents or the consummation of the transaction contemplated hereby. Neither
party is aware of any broker having a claim for payment.
Section 7.25 Governmental Surveys or Inspections.
Furnish to the Agent upon its request, within thirty (30) days of
receipt thereof, copies of any and all annual surveys or inspections performed
by any Governmental Authority or accreditation or certification organization
with respect to any Facility.
Section 7.26 Cost Reports.
Prepare and file all applicable cost reports to all third-party payors,
if any, to the extent required by any such third-party payor and, within thirty
(30) days thereafter, notify the Agent of any settlement of any cost report
disclosed to the Agent as being open or unsettled as of the Closing Date to the
extent any such cost report would have a materially adverse effect on the
Borrower.
Section 7.27 Updated Appraisals.
In addition, the Agent shall have the right but not the obligation to
require annual updated appraisals of any or all the Property and the Facilities,
which appraisals shall be prepared by an appraiser or appraisers designated by
the Agent and shall be in all respects reasonably acceptable to the Agent which
appraisals shall include, if deemed necessary by the Agent, in its reasonable
discretion, updated discounted cash flow analysis, inspections of and commentary
on the physical status of the applicable Facility and an engineering review. The
basis of the appraisal calculations shown on such appraisal reports and all
other aspects of the appraisal reports must be satisfactory to the Agent in all
material respects. The release of such appraisal reports by the Agent to the
Borrower shall be at the Agent's sole option if the Borrower has not paid the
cost of such appraisal. If the Borrower has paid the cost of the appraisal, a
copy of the appraisal will be provided to the Borrower upon its signing of the
Agent's standard appraisal release letter. The Borrower shall reimburse the
Agent upon demand for all costs and expenses incurred by any of the Lenders with
respect to the preparation and review of all future appraisals required pursuant
to the terms hereof, if either (i) such appraisal is required by law or banking
regulation, (ii) an Event of Default has occurred under the Financing Documents,
or (iii) the Agent has a good faith reason to believe a significant change in
value has occurred in the Facility being appraised due to a material adverse
change in the Facility's occupancy status or operating performance and such
appraisal actually reflects such significant change.
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Section 7.28 Notification of Certain Events, Events of Default and
Adverse Developments.
Promptly give written notice to the Agent who will forward a copy of
the notice to the Lenders upon obtaining knowledge of the occurrence of any of
the following:
(a) any Event of Default under the Financing
Documents;
(b) any event, development or circumstance whereby
the financial statements furnished under the Financing Documents fail in any
material respect to present fairly the financial condition and operational
results of the Borrower;
(c) any judicial, administrative or arbitral
proceeding pending against the Borrower or any judicial or administrative
proceeding known by the Borrower to have been threatened against it in a written
communication which threatened proceeding, if adversely decided, could
materially adversely affect its financial condition or operations (present or
prospective);
(d) (i) the revocation, suspension, probation,
restriction, limitation or refusal to renew, or any administrative procedure
then in process for the revocation, suspension, probation, restriction,
limitation, or refusal to renew, of any License, or (ii) the decertification,
revocation, suspension, probation, restriction, limitation, or refusal to renew,
or the pending, decertification, revocation, suspension, probation, restriction,
limitation, or refusal to renew or any administrative procedure then in process
for any participation or eligibility in any third party payor program in which
the Borrower elects to participate, including, without limitation, Medicare,
Medicaid or other private insurer programs or any accreditation of the Borrower,
or (iii) the issuance or pending issuance of any License for a period of less
than twelve (12) months, as a consequence of sanctions imposed by any
Governmental Authority, or (iv) the assessment or pending assessment, of any
civil or criminal penalties by any Government Authority, any third party payor
or any accreditation organization or Person, which could materially adversely
affect the financial condition or operations of the Borrower or an Affiliate
(present or prospective) as determined by the Agent, in its sole but reasonable
discretion;
(e) any action, including, but not limited to, the
filing of any certificate of need application if required by law, the amendment
of any Facility License or certification, or the issuance of any new License or
certification for any Facility, under which the Borrower proposes (i) to develop
a new Facility or service and/or (ii) eliminate, materially expand or materially
reduce any service;
(f) any actual contingent liability or a potential
contingent liability of the Borrower of $1,000,000 or more;
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(g) any material default or failure to perform by
the Borrower, the General Contractor or any subcontractor or materialmen with
respect to the Property of if such notice relates to any matter requiring the
Agent's or the Lenders' approval hereunder; and
(h) any other development in the business or affairs
of the Borrower results in a material adverse change therein; and in each case
listed in clauses (a) through (g), inclusive, of this Section describing in
detail satisfactory to the Agent the nature thereof and, in the case, if any, of
notification under clause (a), the action the Borrower proposes to take with
respect thereto or a statement that the Borrower intends to take no action and
an explanation of the reasons for such inaction. In addition, the Borrower will
furnish to the Agent immediately after receipt thereof copies of all
administrative notices material to Borrower's business and operation of any
Facility and all responses by or on behalf of the Borrower with respect to such
administrative notices.
Section 7.29 Compliance with Environmental Laws.
If any Hazardous Materials are used, present or generated on any real
property owned or controlled by the Borrower or for which the Borrower is
responsible, use, process, distribute, handle, maintain, treat, store, dispose
of and transport such substance in compliance with all applicable laws,
including, but not limited to, those regulating PCB, underground storage tanks,
radon and medical waste tracking, as well as any laws that are enacted after the
date of this Agreement.
Section 7.30 Hazardous Materials; Contamination.
(a) Give notice to the Agent within five (5) Banking
Days of the Borrower's acquiring knowledge of the presence of any Hazardous
Materials on any property owned or controlled by the Borrower or for which the
Borrower is responsible or of any Hazardous Materials Contamination with a full
description thereof, except for reasonable quantities of necessary supplies for
use by the Borrower in the ordinary course of its current line of business and
stored, used and disposed of in accordance with applicable Laws;
(b) promptly comply with any laws requiring special
handling, maintenance, servicing, removal, treatment or disposal of Hazardous
Materials or Hazardous Materials Contamination and provide the Agent upon
request with satisfactory evidence of such compliance;
(c) provide the Agent, within thirty (30) days after
a demand by the Agent, with a bond, letter of credit or similar financial
assurance evidencing to the Agent's satisfaction that funds are available to pay
the cost of removing, treating, and disposing of such Hazardous Materials or
Hazardous Materials Contamination and discharging any lien which may be
established as a result thereof on any property owned, operated or controlled by
the Borrower or for which the Borrower is responsible; and
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(d) defend, indemnify and hold harmless the Lenders
and each of their agents, employees, trustees, successors and assigns from any
and all claims which may now or in the future (whether before or after the
termination of this Agreement) be asserted as a result of the presence of any
Hazardous Materials on any property owned, operated, controlled or managed by
the Borrower for which the Borrower is responsible for any Hazardous Materials
Contamination.
Section 7.31 Participation in Reimbursement Programs.
In the event the Borrower elects to participate in any or all plans
and/or programs for third party payment and/or reimbursement, and the revenues
derived from a single plan or program exceed ten percent (10%) of the gross
revenues of the applicable Facility, continue its participation in any and all
such plans and/or programs for third party payment and/or reimbursement from,
and claims against, private insurers or programs for payment and/or
reimbursement from federal, state and local governmental agencies and/or private
or quasi-public insurers, including, without limitation, Managed Care Plans,
Medicaid and Medicare and the Veterans Administration (as determined by the
Borrower in the good faith exercise of its prudent and commercially reasonable
business judgment). While participating in such plans, the Borrower shall comply
with any and all rules, regulations, standards, procedures and decrees necessary
to maintain the Borrower's participation in any such third party payment or
reimbursement program or plan.
ARTICLE VIII
NEGATIVE COVENANTS OF BORROWER
Until payment in full and the performance of all of the
Obligations, without the prior written consent of the Agent as permitted
pursuant to the Agency Agreement, the Borrower will not directly or indirectly:
Section 8.1 Borrowings.
Create, incur, assume or suffer to exist any liability for borrowed
money other than the Credit Facility and Permitted Equipment Financing or
unsecured loans from Affiliates which are bearing an interest rate no higher
than that then applicable to the Loan, are fully subordinated as to payment of
principal and interest (either by their terms or by separate written agreement)
to the Credit Facility; provided, however, so long as no Event of Default has
occurred or will occur upon the payment of interest on such indebtedness under
the Financing Documents, the Borrower may make scheduled payments of interest on
such debt.
Section 8.2 Deeds of Trust and Pledges.
Create, incur, assume or suffer to exist any deed of trust, mortgage,
pledge, Lien or other encumbrance of any kind upon, or any security interest in,
any of its property or
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assets, including the Collateral or impair the value thereof, whether now owned
or hereafter acquired.
Section 8.3 Sale or Transfer of Assets.
Directly or indirectly enter into any arrangement whereby the Borrower
shall sell, lease, transfer, assign or otherwise dispose of any of its assets
other than (a) sales or other disposition of assets in the ordinary course of
business for value, provided the proceeds thereof are used to pay down one or
more of the Loans or the asset sold or disposed of is replaced by one of equal
or greater value or (b) the transfer of an Eligible Project or the sale of an
Eligible Project, in either case, in which case the Borrowing Base will be
reduced by the availability attributed to such Facility.
Section 8.4 Other Liens; Transfers; "Due-on-Sale"; etc.
The Borrower shall not, without the prior written consent of the Agent,
create or permit to be created or remain with respect to any of the Property or
any part thereof or income therefrom, any mortgage, pledge, lien, encumbrance or
charge, or security interest, or conditional sale or other title retention
agreement, whether prior or subordinate to the lien of the Financing Documents,
other than in connection with the Financing Documents or as otherwise provided
or permitted therein. Except for any grant, conveyance, sale, assignment or
transfer in the ordinary course of the Borrower's business and which is
specifically conditioned upon the release of records of the lien of the Deed of
Trust and the other Financing Documents as to that Eligible Project granted,
conveyed, sold, assigned or transferred as otherwise permitted hereunder, the
Borrower shall not, without the prior written consent of the Agent, make,
create, permit or consent to any conveyance, sale, assignment or transfer of any
of the Property or any part thereof, other than in connection with the Financing
Documents or as otherwise provided or permitted therein.
Section 8.5 Advances and Loans.
Make loans or advances to any Person, including, without limitation,
Affiliates, partners and employees of the Borrower.
Section 8.6 Contingent Liabilities.
Assume, guarantee, endorse, contingently agree to purchase or otherwise
become liable upon the obligation of any Person, except by the endorsement of
negotiable instruments for deposit and collection or similar transactions in the
ordinary course of business.
Section 8.7 Licenses.
Allow any Licenses, permit, right, franchise or privilege necessary for
the ownership or operation of any Facility for the purposes for which any
Facility is intended to be used to lapse, be suspended, be revoked, be denied
renewal or be forfeited or be placed on probation unless solely due to
administrative delay by the licensing authority; to fail to receive a License
for any Facility within sixty (60) days of the issuance of a certificate of
occupancy for such Facility or to suffer the issuance or pending of any
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License for a period of less than twelve (12) months as a consequence of any
sanctions imposed by any Governmental Authority or the Assessment or pending
assessment of any civil or criminal penalties by any Governmental Authority or
any third party payor.
Section 8.8 ERISA Compliance.
(a) Restate or amend any Plan established and
maintained by the Borrower or any Commonly Controlled Entity and subject to the
requirements of ERISA, in a manner designed to disqualify such Plan and its
related trusts under the applicable requirements of the Code;
(b) permit any partners of the Borrower or any
Commonly Controlled Entity to materially adversely affect the qualified
tax-exempt status of any Plan or related trusts of the Borrower or any Commonly
Controlled Entity under the Code;
(c) engage in or permit any Commonly Controlled
Entity to engage in any Prohibited Transaction;
(d) incur or permit any Commonly Controlled Entity
to incur any Accumulated Funding Deficiency, whether or not waived, in
connection with any Plan;
(e) take or permit any Commonly Controlled Entity to
take any action or fail to take any action which causes a termination of any
Plan in a manner which could result in the imposition of a lien on the property
of the Borrower or any Commonly Controlled Entity pursuant to Section4068 of
ERISA;
(f) fail to notify the Agent that notice has been
received of a "termination" (as defined in ERISA) of any Multiemployer Plan to
which the Borrower or any Commonly Controlled Entity has an obligation to
contribute;
(g) incur or permit any Commonly Controlled Entity
to incur a "complete withdrawal" or "partial withdrawal" (as defined in ERISA)
from any Multiemployer Plan to which the Borrower or any Commonly Controlled
Entity has an obligation to contribute; or
(h) fail to notify the Agent that notice has been
received from the administrator of any Multiemployer Plan to which the Borrower
or any Commonly Controlled Entity has an obligation to contribute that any such
Plan will be placed in "reorganization" (as defined in ERISA).
Section 8.9 Transfer of Collateral.
Transfer, or permit the transfer, to another location of any of the
Collateral or the books and records related to any of the Collateral; provided,
however, that the Borrower
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may transfer the Collateral or the books and records related thereto to another
location if the Borrower shall have provided to the Agent prior to such transfer
an opinion of counsel addressed to the Agent to the effect that the Lenders'
perfected security interest shall not be affected by such move or if it shall be
affected, setting forth the steps necessary to continue the Lender's perfected
security interest together with the commencement of such steps by the Borrower
at its expense.
Section 8.10 Sale of Accounts or Receivables.
Sell, discount, transfer, assign or otherwise dispose of any of its
Accounts or Receivables of any Facility, such as accounts receivable, notes
receivable, installment or conditional sales agreements or any other rights to
receive income, revenues or moneys, however evidenced.
Section 8.11 Amendments; Terminations.
Except as otherwise provided herein, amend or terminate or agree to
amend or terminate any License, the Management Agreement, or any participation
agreement which exceeds 10% of the gross revenue of the applicable Facility, or
except in the ordinary course of business any other Management Contracts and
Operating Agreements which may have been entered into by the Borrower with
respect to any Facility and which exceeds 10% of its gross revenue, or consent
to or waive any material provisions thereof.
Section 8.12 Prohibition on Hazardous Materials.
Place, manufacture or store or permit to be placed, manufactured or
stored, any Hazardous Materials on any property owned, controlled or operated by
the Borrower or any Wholly Owned Subsidiary or for which the Borrower or any
Wholly Owned Subsidiary is responsible, except for reasonable quantities of
necessary supplies for use by the Borrower or any Wholly Owned Subsidiary in the
ordinary course of its current line of business and stored, used and disposed of
in accordance with applicable Laws.
Section 8.13 Subsidiaries.
The Borrower will not create or acquire any Subsidiaries other than
Wholly Owned Subsidiaries of which the Requisite Lenders have approved in the
exercise of their sole and absolute discretion, which approval may be
conditioned, among other things, on the execution and delivery of an Additional
Borrower Joinder Supplemental and such other Financing Documents as the Agent
may require.
Section 8.14 Mergers or Acquisitions.
Enter into any merger or consolidation or amalgamation, wind up or
dissolve itself (or suffer any liquidation or dissolution), or acquire all or
substantially all of the assets of any person, firm, joint venture or
corporation except to acquire a Wholly Owned Subsidiary.
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Section 8.15 Conditional Sales.
The Borrower shall not incorporate in the Improvements any property
acquired under a conditional sales contract, or lease, or as to which the vendor
retains title or a security interest with the exception of Permitted Equipment
Financing, without the prior written consent of the Agent.
Section 8.16 Changes to Plans and Specification.
After review and approval of a Total Development Budget by the Agent,
the Borrower shall not permit any change order increasing the price of the
Improvement for an Eligible Project by more than $50,000 for any one change
order or by more than $50,000 in the aggregate or materially altering the scope
of the Improvements, without the prior written consent of the Agent which
consent will not be unreasonably withheld.
Section 8.17 Construction Contract; Construction Management.
The Borrower shall not execute any contract or agreement or become a
party to any arrangement for the construction of any Improvements or for
construction management services with respect to any Property without the prior
written consent of the Agent.
Section 8.18 Line of Business.
Neither the Borrower nor the Guarantor nor any Subsidiary of either
will enter into any lines or areas of business if as a result, the general
nature of the business, taken on a consolidated basis, which would be engaged in
by the Borrower or the Guarantor individually or on a consolidated basis with
its subsidiaries, would be substantially changed from the general nature of the
business engaged in by the Borrower and the Guarantor on the date hereof.
ARTICLE IX
EVENTS OF DEFAULT
The occurrence of one or more of the following events shall be "Events
of Default" under this Agreement, and the terms "Event of Default" shall mean,
whenever they are used in this Agreement, any one or more of the following
events:
Section 9.1 Failure to Pay and/or Perform the Obligations.
The Borrower shall fail to
(a) make any payment of interest on the Note within
five (5) calendar days of the date when due, or
(b) pay any of the other Obligations including but
not limited to the Expense Payments and Liquidation Costs within five (5)
calendar days of the date when due, except with regard to payment of (a) any
Borrowing Base Deficiency which shall be due as provided in Section 2.1(h)
hereof, and (b) amounts due at maturity for which no notice or cure period shall
be required to be given.
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Section 9.2 Breach of Representations and Warranties.
Any material representation or warranty made in this Agreement or in
any report, certificate, opinion (including any opinion of counsel for the
Borrower), financial statement or other instrument furnished in connection with
the Obligations or with the execution and delivery of any of the Financing
Documents, shall prove to have been false or misleading when made (or, if
applicable, when reaffirmed) in any material respect.
Section 9.3 Failure to Comply with Covenants.
Default shall be made by the Borrower in the due observance and
performance of any covenant, condition or agreement contained in Article VII
hereof (except for Sections 7.8, 7.9, 7.12, 7.13, 7.17, 7.19, 7.20, 7.24, 7.27)
or in Article VIII hereof.
Section 9.4 Failure to Comply with Financial Reporting or Books and
Records.
Default shall be made by the Borrower in the due observance or
performance of Section 7.1 or 7.13, which default shall remain unremedied, and
the Borrower shall cure such default promptly, but in no event more than ten
(10) days after written notice thereof to the Borrower by the Agent.
Section 9.5 Other Defaults.
Default shall be made by the Borrower in the due observance or
performance of any other term, covenant or agreement other than as set forth in
this Article IX, which default shall remain unremedied for more than thirty (30)
days after written notice thereof to the Borrower by the Agent, unless the
nature of the failure is such that (a) it cannot be cured within the thirty (30)
day period, and (b) the Borrower institutes corrective action within the thirty
(30) day period and (c) the Borrower diligently pursues such action and
completes the cure within ninety (90) days.
Section 9.6 Default Under Other Financing Documents.
A Default shall occur under any of the other Financing Documents, and
such Default is not cured within any applicable grace period provided therein.
Section 9.7 Receiver; Bankruptcy.
An Act of Bankruptcy occurs with respect to the Borrower or the
Borrower becomes generally unable to pay its debts as they become due; provided,
however, if a proceeding with respect to an Act of Bankruptcy is filed or
commenced against the Borrower, the same shall not constitute an Event of
Default if such proceeding is dismissed within sixty (60) days from the date of
such Act of Bankruptcy.
Section 9.8 Judgment.
Unless adequately insured in the reasonable opinion of the Agent, the
entry of a final judgment against the Borrower of $1,000,000 or more or any
attachment or other levy against the property of the Borrower remains unpaid,
unstayed on appeal, undischarged, unbonded or undismissed for a period of thirty
(30) days.
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Section 9.9 Execution; Attachment.
Any execution or attachment shall be levied against the Collateral, or
any part thereof, and such execution or attachment shall not be set aside,
discharged or stayed within thirty (30) days after the same shall have been
levied.
Section 9.10 Default Under Other Borrowings.
(a) Default which continues beyond any applicable
grace period shall be made under any obligation of or guaranteed by the Borrower
equal to or greater than $1,000,000, if the effect of such default is to
accelerate the maturity of such obligation or to permit the holder or obligee
thereof to cause such obligation to become due prior to its stated maturity;
(b) Default shall be made under any obligation equal
to or greater than $20,000,000 of a consolidated Affiliate, which is otherwise
non-recourse to the Borrower, if the holder or obligee of such obligation has
commenced action on any of the remedies available to it under the obligation.
Section 9.11 Change in Status or Ownership.
The Borrower is dissolved, merged, consolidated or reorganized, or any
change occurs in the ownership of the outstanding stock of the Borrower without
the prior written consent of the Agent.
Section 9.12 Damage to Improvements.
At any time prior to the issuance of a certificate of occupancy or
completion therefor, any of the Improvements are substantially damaged or
destroyed by fire or other casualty and the Agent determines in good faith that
such Improvements cannot be restored and completed in accordance with the terms
and provisions of the Deed of Trust unless the Borrower excludes the affected
Eligible Project from the calculation of the Borrowing Base.
Section 9.13 Mechanic's Lien.
A lien for the performance of work or the supply of materials which is
perfected against any of the Land remains unsatisfied or un-bonded or for which
no other arrangements satisfactory to the Agent have been made for a period of
twenty (20) days after the date of perfection unless the Borrower excludes the
affected Eligible Project from the calculation of the Borrowing Base.
Section 9.14 Survey Matters.
Any Survey required by the Lenders during the period of construction
shows any matters not approved by the Agent and such matters not approved are
not removed within 30 days after Notice thereof by the Agent to the Borrower
unless the Borrower excludes the affected Eligible Project from the Borrowing
Base.
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Section 9.15 General Contractor Default.
The General Contractor shall have defaulted under any Construction
Contract, which default the Agent, in its sole discretion, shall deem
substantial, and the Borrower, after thirty (30) days Notice from the Agent,
shall fail to commence exercising any resulting right or remedy to which it may
be entitled thereunder and diligently pursue such right or remedy unless the
Borrower excludes the affected Eligible Project from the calculation of the
Borrowing Base.
Section 9.16 Zoning.
Any change in any zoning ordinance or any other public restriction is
enacted, limiting or defining the uses which may be made of any of the Property
or a part thereof, such that the use of any of the Property, as specified
herein, would be in material violation of such restriction or zoning change
unless the Borrower excludes the affected Eligible Project from the calculation
of the Borrowing Base.
Section 9.17 Joint Venture
ALS or any Affiliate which owns any portion of a Joint Venture shall
default in the performance of its obligations under the organizational documents
governing the Joint Venture unless the Borrower excludes the affected Eligible
Project from the Borrowing Base.
Section 9.18 Joint Venture Leases.
Any Joint Venture defaults in the performance of its obligations under
a Joint Venture Lease unless the Borrower excludes the affected Eligible Project
from the Borrowing Base.
ARTICLE X
RIGHTS AND REMEDIES UPON DEFAULT
Section 10.1 DEMAND; ACCELERATION.
THE OCCURRENCE OR NONOCCURRENCE OF AN EVENT OF DEFAULT UNDER THIS
AGREEMENT SHALL IN NO WAY AFFECT OR CONDITION THE RIGHT OF THE LENDERS TO DEMAND
PAYMENT AT ANY TIME OF ANY OF THE OBLIGATIONS WHICH ARE PAYABLE ON DEMAND
REGARDLESS OF WHETHER OR NOT AN EVENT OF DEFAULT HAS OCCURRED. Upon the
occurrence of an Event of Default, and in every such event and at any time
thereafter, the Agent may declare the Obligations due and payable, without
presentment, demand, protest, or any notice of any kind, all of which are hereby
expressly waived, anything contained herein or in any of the other Financing
Documents to the contrary notwithstanding.
Section 10.2 Further Advances; Immediate Acceleration.
Following an Event of Default the Agent may from time to time without
notice to the Borrower suspend, terminate or limit any further advances under
the Loan or other extensions of credit under this Agreement and under any of the
other Financing
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Documents. Further, upon the occurrence of an Event of Default or Default
specified in Article IX above, the unpaid principal amount of the Note (with
accrued interest thereon) and all other Obligations then outstanding, shall
immediately become due and payable in the Agent's sole discretion without
further action of any kind and without presentment, demand, protest or notice of
any kind, all of which are hereby expressly waived by the Borrower.
Section 10.3 Further Advances; Material Adverse Change or Impairment of
Position.
If the Agent determines in its reasonable discretion that (a) a
material adverse change has occurred in the financial condition or operation of
the Guarantor or the Borrower or an event has occurred which impairs the
prospect of payment of the obligations and/or the value of the Facilities or the
Collateral ( in either case, regardless of whether it would constitute an Event
of Default under this Agreement), the Agent may from time to time without notice
to the Borrower suspend, terminate or limit any further advances under the Loan
or other extensions of credit under this Agreement and refuse to include any
additional Eligible Projects in the Borrowing Base.
Section 10.4 Specific Rights With Regard to Collateral.
Following an Event of Default, in addition to all other rights and
remedies provided hereunder, the Deed of Trust, any of the Financing Documents
or as shall exist at law or in equity from time to time, the Agent may, without
further notice to the Borrower and subject to the terms of the Agency Agreement:
(a) assign any and all Operating Agreements and
Management Contracts to any Person designated by the Agent, and/or exercise all
rights and privileges of the Borrower under such contracts and agreements for
the purpose of realizing on the Collateral and to the extent and for the time
required to realize the value of the Collateral;
(b) to the extent permitted by applicable law,
(i) enter into possession of any of the
Property and perform any and all work and labor necessary to complete
the development of the Land and the construction of the Improvements
thereon (whether or not in accordance with the Plans and Specifications
thereon);
(ii) employ watchmen to protect the Property
and the Improvements; and
(iii) assume such management, operation and
control of the Property to the extent and for the time necessary to
realize the value of the Collateral;
(c) cause the Borrower to engage, contract with,
and/or hire qualified service, billing, collection and other such agents,
organizations and
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companies acceptable to the Agent to collect and/or realize upon any or all of
the Collateral and to remit the proceeds to the Agent;
(d) subject to applicable state and federal laws
pertaining to resident confidentiality, request any Account Debtor obligated on
any of the Accounts to make payments thereon directly to the Agent to the extent
permitted by applicable law, with the Agent taking control of the cash and
non-cash proceeds thereof and/or direct the Borrower to (and the Borrower shall)
turn over to the Agent immediately following receipt all payments with respect
to the Collateral in the form received (with the addition of all necessary
endorsements) and not to deposit, negotiate or otherwise deal with those
payments;
(e) compromise, extend or renew any of the
Collateral or deal with the same as it may deem advisable;
(f) make exchanges, substitutions or surrenders of
all or any part of the Collateral;
(g) remove from any of the Borrower's places of
business all books, records, ledger sheets, correspondence, invoices and
documents, relating to or evidencing any of the Collateral or without cost or
expense to the Lenders, make such use of the Borrower's place of business as may
be reasonably necessary to administer, control and collect the Collateral;
(h) demand, collect, receipt for and give renewals,
extensions, discharges and releases of any of the Collateral;
(i) institute and prosecute legal and equitable
proceedings to enforce collection of, or realize upon, any of the Collateral;
(j) settle, renew, extend, compromise, compound,
exchange or adjust claims in respect of any of the Collateral or any legal
proceedings brought in respect thereof;
(k) endorse the name of the Borrower upon any items
of payment relating to the Collateral or on any Proof of Claim in Bankruptcy
against an Account Debtor; and
(l) notify the Post Office authorities to change the
address for the delivery of mail to the Borrower to such address or Post Office
Box as the Agent may designate and receive and open all mail addressed to the
Borrower.
In addition, the Borrower shall, following an Event of Default
promptly, upon request, execute and deliver to the Agent written assignments, to
the extent permitted by
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applicable law, in form and content acceptable to the Agent, of specific
Accounts or groups of Accounts; provided, however, that the lien and/or security
interest granted to the Lenders under this Agreement shall not be limited in any
way to or by the inclusion or exclusion of Accounts within such assignments.
Such Accounts shall secure payment of the Obligations and are not sold to the
Lenders whether or not any assignment thereof, which is separate from this
Agreement, is in form absolute.
Following an Event of Default, the Lenders may also direct the Borrower
to appoint a manager for any or all of the Facilities and enter into a
management agreement with one or more management companies approved by the
Lenders, the terms of which agreement shall be approved by the Lenders.
Section 10.5 Performance by Lenders.
Following an Event of Default, the Agent without the necessity of prior
notice to or demand upon the Borrower and without waiving or releasing any of
the Obligations or any Event of Default, may (but shall be under no obligation
to) at any time thereafter make such payment or perform such act for the account
and at the expense of the Borrower, and may enter upon the premises of the
Borrower for that purpose and take all such action thereon as the Agent may
consider necessary or appropriate for such purpose. The Agent will give the
Borrower notice at least subsequently of any such performance by the Agent. All
sums so paid or advanced by the Agent and all costs and expenses (including,
without limitation, reasonable attorneys' fees and expenses) incurred in
connection therewith (the "Expense Payments") together with interest thereon
from the date of payment, advance or incurring until paid in full at the
Post-Default Rate shall be paid by the Borrower to the Agent on demand and shall
constitute and become a part of the Obligations and be secured by the Deed of
Trust. For this purpose, the Borrower hereby constitutes and appoints the
Lenders, or the Agent on behalf of the Lenders, its true and lawful
attorney-in-fact with full power of substitution to complete work on any
Eligible Project in the name of the Borrower, and hereby empowers said attorney
or attorneys as follows:
(a) To use any funds of the Borrower including any
balance which may be held in escrow and any funds which may remain un-advanced
under any of the Loan for the purpose of completing the development of any of
the Land and the construction of any of the Improvements, whether or not in the
manner called for in the Plans and Specifications;
(b) To make such additions and changes and
corrections to any of the Plans and Specifications which shall be necessary or
desirable in the judgment of the Agent to complete the development of any of the
Land and the construction of any of the Improvements;
(c) To employ such contractors, subcontractors,
agents, architects and inspectors as shall be necessary or desirable for said
purpose;
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(d) To pay, settle or compromise all existing bills
and claims which are or may be liens against any of the Property, or may be
necessary or desirable for the completion of the work or the clearance of title
to any of the Property;
(e) To execute all applications and certificates
which may be required in the name of the Borrower; and
(f) To do any and every act with respect to the
development of the Land and the construction of the Improvements which the
Borrower may do in its own behalf.
It is understood and agreed that this power of attorney shall be deemed
to be a power coupled with an interest which cannot be revoked. Said
attorney-in-fact shall also have the power to prosecute and defend all actions
or proceedings in connection with the development of the Land and the
construction of the Improvements and to take such actions and to require such
performance as the Lenders may deem necessary.
Section 10.6 Uniform Commercial Code and Other Remedies.
Upon the occurrence of an Event of Default (and in addition to all of
its rights, powers and remedies under this Agreement), the Lenders shall have
all of the rights and remedies of a secured party under the applicable Uniform
Commercial Code and other applicable laws, and the Lenders are authorized to
offset and apply to all or any part of the Obligations all moneys, credits and
other property of any nature whatsoever of the Borrower now or at any time
hereafter in the possession of, in transit to or from, under the control or
custody of, or on deposit with, any of the Lenders; and upon demand by the
Agent, the Borrower shall assemble the Collateral and make it available to the
Lenders, at a place designated by the Agent; and the Lenders or their agents may
enter upon the Borrower's premises to take possession of the Collateral, to
remove it, to render it unusable, or to sell or otherwise dispose of it.
Any written notice of the sale, disposition or other intended action by
the Lenders with respect to the Collateral which is sent by certified mail,
postage prepaid, to the Borrower at the address set forth in Section 11.1
hereof, or such other address of the Borrower which may from time to time be
shown on the Lenders' records, at least ten (10) days prior to such sale,
disposition or other action, shall constitute reasonable notice to the Borrower.
The Borrower shall pay on demand all costs and expenses, including, without
limitation, attorneys' fees and expenses, incurred by or on behalf of the
Lenders, or any of them, in preparing for sale or other disposition, selling,
managing, collecting or otherwise disposing of, the Collateral. All of such
costs and expenses (the "Liquidation Costs") together with interest thereon from
the date incurred until paid in full at the Post-Default Rate, shall be paid by
the Borrower to the Agent on demand and shall constitute and become a part of
the Obligations. Any proceeds of sale or other disposition of the Collateral
will be applied by the Lenders to the payment of the Liquidation Costs and
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<PAGE> 82
Expense Payments, and any balance of such proceeds will be applied by the
Lenders to the payment of the balance of the Obligations in such order and
manner of application as the Lenders may from time to time in its sole
discretion determine. After such application of the proceeds, any balance shall
be paid to the Borrower or to any other party entitled thereto.
Section 10.7 Receiver or Other Court Order.
Following an Event of Default, as a matter of right, following ten (10)
days notice and without regard to the adequacy of the security, and upon
application to a court of competent jurisdiction, the Lenders shall be entitled
to the immediate appointment of a receiver for all or any part of the
Collateral, and of the payments and proceeds thereof and therefrom, whether such
receivership be incidental to a proposed sale of the Collateral or otherwise,
and the Borrower hereby consent to the appointment of such a receiver and to an
order of court directing that payments, including Medicare and Medicaid
payments, be made directly to the receiver. The Borrower will pay to the
Beneficiary, upon demand, all expenses, including receiver's fees, attorney's
fees, costs and agents compensation, advanced by the Borrower and incurred
pursuant to the provisions contained in this Section.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Notices.
All notices, certificates or other communications hereunder shall be
deemed given when delivered by hand or courier, the following Bank Day after
delivery by Federal Express or similar overnight delivery service, or three (3)
Banking Days after being mailed by certified mail, postage prepaid, return
receipt requested, addressed as follows:
if to the Agent
or the Lenders: Bank United
3200 Southwest Freeway, Suite 1902
Houston, TX 77027
Attn: William B. Roberson
and
David Jones, Esq.
Office of General Counsel
Bank United
3200 Southwest Freeway, Suite 1610
Houston, Texas 77027
With a courtesy
copy to: Mays & Valentine L.L.P.
8201 Greensboro Drive, Suite 800
McLean, Virginia 22102
Attn: Margaret Ann Brown, Esq.
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<PAGE> 83
if to the Borrower: c/o Alternative Living Services, Inc.
450 North Sunnyslope Road
Brookfield, Wisconsin 53005
Attn: Mark W. Ohlendorf
With a Courtesy Rogers & Hardin
Copy to: 2700 International Tower, Peachtree Center
229 Peachtree Street, N.E.
Atlanta, GA 30303-1601
Attn: Miriam J. Dent, Esq.
Section 11.2 Consents and Approvals.
If any consent, approval, or authorization of any Governmental
Authority or of any Person having any interest therein, should be necessary to
effectuate any sale or other disposition of the Collateral, the Borrower agrees
to execute all such applications and other instruments, and to take all other
action, as may be required in connection with securing any such consent,
approval or authorization.
Section 11.3 Remedies, etc. Cumulative.
Each right, power and remedy of the Lenders as provided for in this
Agreement or in any of the other Financing Documents or now or hereafter
existing at law or in equity or by statute or otherwise shall be cumulative and
concurrent and shall be in addition to every other right, power or remedy
provided for in this Agreement or in any of the other Financing Documents or now
or hereafter existing at law or in equity, by statute or otherwise, and the
exercise or beginning of the exercise by the Lenders of any one or more of such
rights, powers or remedies shall not preclude the simultaneous or later exercise
by the Lenders of any or all such other rights, powers or remedies. In order to
entitle the Lenders to exercise any remedy reserved to it herein, it shall not
be necessary to give any notice, other than such notice as may be expressly
required in this Agreement.
Section 11.4 No Waiver of Rights by the Lenders.
No failure or delay by the Agent or the Lenders to insist upon the
strict performance of any term, condition, covenant or agreement of this
Agreement or of any of the other Financing Documents, or to exercise any right,
power or remedy consequent upon a breach thereof, including foreclosure on the
Property under the Deed of Trust shall constitute a waiver of any such term,
condition, covenant or agreement or of any such breach or preclude the Agent or
the Lenders from exercising any such right, power or remedy at any later time or
times. By accepting payment after the due date of any amount payable under this
Agreement or under any of the other Financing Documents, neither the Agent nor
the Lenders shall be deemed to waive the right either to require prompt payment
when due of all other amounts payable under this Agreement or under any of the
other Financing Documents, or to declare a default for failure to effect such
prompt payment of any such other amount.
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Section 11.5 Entire Agreement.
The Financing Documents shall completely and fully supersede all other
agreements, both written and oral, between the Lenders and the Borrower relating
to the Obligations. Neither the Lenders nor the Borrower shall hereafter have
any rights under such prior agreements but shall look solely to the Financing
Documents for definition and determination of all of their respective rights,
liabilities and responsibilities relating to the Obligations.
Section 11.6 Survival of Agreement; Successors and Assigns.
All covenants, agreements, representations and warranties made by the
Borrower herein and in any certificate, in the Financing Documents and in any
other instruments or documents delivered pursuant hereto shall survive the
making by the Lenders of the Loan and the execution and delivery of the Note,
and shall continue in full force and effect so long as any of the Obligations
are outstanding and unpaid. Whenever in this Agreement any of the parties hereto
is referred to, such reference shall be deemed to include the successors and
assigns of such party; and all covenants, promises and agreements by or on
behalf of the Borrower, which are contained in this Agreement shall inure to the
benefit of the respective successors and assigns of each of the Lenders, and all
covenants, promises and agreements by or on behalf of the Lenders which are
contained in this Agreement shall inure to the benefit of the permitted
successors and permitted assigns of the Borrower, but this Agreement may not be
assigned by the Borrower without the prior written consent of the Lenders.
Section 11.7 Expenses.
The Borrower agrees to pay all reasonable out-of-pocket expenses of the
Lenders (including the reasonable fees and expenses of the legal counsel of the
Agent or any other Lender) in connection with the preparation of this Agreement,
the issuance of the Loan hereunder, the recordation of all financing statements
and such other instruments as may be required by the Agent at the time of, or
subsequent to, the execution of this Agreement to secure the Obligations
(including any and all recordation tax and other costs and taxes incident to
recording), the administration of the Credit Facility (not otherwise
contemplated by any fee paid by the Borrower), any future modification of the
Financing Documents, the addition of Eligible Projects to the Borrowing Base, or
the enforcement of any provision of this Agreement and the collection of the
Obligations. The Borrower agrees to indemnify and save harmless the Lenders from
any liability resulting from the failure to pay any required recordation tax,
transfer taxes, recording costs or any other expenses incurred by the Lenders in
connection with the Obligations. The provisions of this Section shall survive
the execution and delivery of this Agreement and the repayment of the
Obligations. The Borrower further agrees to reimburse the Lenders upon demand
for all reasonable out-of-pocket expenses (including reasonable attorneys' fees
and legal expenses and travel expenses) incurred by the Lenders, or any of them,
in enforcing any of the Obligations or any security therefor or incurred in
connection with any bankruptcy proceeding or in any post-judgment enforcement or
collection action, together with interest at the Post-Default Rate which
agreement shall survive the termination of this Agreement and the repayment of
the Obligations.
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<PAGE> 85
Section 11.8 Counterparts.
This Agreement may be executed in any number of counterparts all of
which together shall constitute a single instrument.
Section 11.9 Governing Law.
This Agreement and all of the other Financing Documents shall be
governed by and construed in accordance with the laws of the State of Texas;
provided, however, any Deed of Trust and any financing statements covering
fixtures securing such Loan shall be governed by, and construed in accordance
with, the laws of the state in which the applicable Facility is located.
Section 11.10 Modifications.
No modification or waiver of any provision of this Agreement or of any
of the other Financing Documents, nor consent to any departure by the Borrower
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Agent, and then such waiver or consent shall be effective only
in the specific instance and for the purpose for which given. No notice to or
demand on the Borrower in any case shall entitle the Borrower to any other or
further notice or demand in the same, similar or other circumstance.
Section 11.11 Illegality.
If fulfillment of any provision hereof or any transaction related
hereto or to any of the other Financing Documents, at the time performance of
such provision shall be due, shall involve transcending the limit of validity
prescribed by law, then ipso facto, the obligation to be fulfilled shall be
reduced to the limit of such validity; and if any clause or provisions herein
contained other than the provisions hereof pertaining to repayment of the
Obligations operates or would prospectively operate to invalidate this Agreement
in whole or in part, then such clause or provision only shall be void, as though
not herein contained, and the remainder of this Agreement shall remain operative
and in full force and effect; and if such provision pertains to repayment of the
Obligations, then, at the options of the Lenders, all of the Obligations of the
Borrower to the Lenders shall become immediately due and payable.
Section 11.12 Gender, etc.
Whenever used herein, the singular number shall include the plural, the
plural the singular and the use of the masculine, feminine or neuter gender
shall include all genders.
Section 11.13 Headings.
The headings in this Agreement are for convenience only and shall not
limit or otherwise affect any of the terms hereof.
Section 11.14 Waiver of Trial by Jury.
THE BORROWER AND THE LENDERS HEREBY JOINTLY AND SEVERALLY WAIVE TRIAL
BY JURY IN ANY ACTION OR PROCEEDING TO WHICH ANY OF THEM MAY BE PARTIES, NOT
GOVERNED BY THE
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<PAGE> 86
ARBITRATION PROVISIONS OF THE NOTE [OR THE GUARANTIES] ARISING OUT OF OR IN ANY
WAY PERTAINING TO (A) THIS AGREEMENT, (B) ANY OF THE FINANCING DOCUMENTS, OR (C)
THE COLLATERAL. THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS
AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST
PARTIES WHO ARE NOT PARTIES TO THIS AGREEMENT.
This waiver is knowingly, willingly and voluntarily made by the
Borrower and the Lenders, and the Borrower and the Lenders hereby represent that
no representations of fact or opinion have been made by any individual to induce
this waiver of trial by jury or to in any way modify or nullify its effect. The
Borrower and the Lenders further represent that they have been represented in
the signing of this Agreement and in the making of this waiver by independent
legal counsel, selected of their own free will, and that they have had the
opportunity to discuss this waiver with counsel.
Section 11.15 No Warranty by Lenders.
By accepting or approving anything required to be observed, performed
or fulfilled by the Borrower or to be given to the Agent or the Lenders pursuant
to this Agreement, including, without limitation, any certificate, balance
sheet, statement of profit and loss or other financial statement, Survey,
receipt, appraisal or insurance policy, the Lenders shall not be deemed to have
warranted or represented the sufficiency, legality, effectiveness or legal
effect of the same, or of any term, provision or condition thereof and any such
acceptance or approval thereof shall not be or constitute any warranty or
representation with respect thereto by the Lenders.
Section 11.16 Liability of the Lenders.
No Lender shall be liable for another Lender's failure to fund its
ratable share of any advance under the Loan. The Lenders shall not be liable for
any other act or omission by the Lenders, or any of them, pursuant to the
provisions of this Agreement in the absence of fraud or gross negligence. The
Lenders shall incur no liability to the Borrower or any other party in
connection with the acts or omissions of any of the Lenders in reliance upon any
certificate or other paper believed by the Lenders to be genuine or with respect
to any other thing which the Lenders may do or refrain from doing, unless such
act or omission amounts to fraud or gross negligence. The Borrower hereby agrees
that the Lenders shall not be chargeable for any negligence, mistake, act or
omission of any accountant, examiner, agency or attorney employed by the
Lenders, or any of them, (except for the gross negligence or willful misconduct
of any person, corporation, partnership or other entity employed by any of the
Lenders) in making examinations, investigations or collections, or otherwise in
perfecting, maintaining, protecting or realizing upon any lien or security
interest or any other interest in the Collateral or other security for the
Obligations. In connection with the performance of their duties pursuant to this
Agreement, the Lenders may consult with counsel of their own selection, and do
anything which the Lenders may do or refrain from doing, in good faith, in
reliance upon the opinion of such counsel shall be full justification and
protection to the Lenders. The Borrower shall indemnify, defend and hold the
Lenders
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<PAGE> 87
and their successors and assigns harmless from and against any and all claims,
demands, suits, losses, damages, assessments, fines, penalties, costs or other
expenses (including reasonable attorney's fees and court costs) arising from or
in connection with this Agreement. Any indemnity provision for the benefit of
the Lenders set forth herein or in any of the Financing Documents shall extend
to any other lender who becomes a Lender under the Credit Facility. The
provisions of this Section shall survive the termination of the Credit Facility.
Section 11.17 License of Tradename.
The Borrower does hereby grant to each of the Lenders and their
affiliates and any trustee under a Deed of Trust and their management company a
license to use the Borrower's name, and the names "Wynwood", "Crossings", "Clare
Bridge", WovenHearts", or "Sterling Cottage" and "Sterling House" and any marks
associated therewith in the operation of a Facility upon such Lender's or
trustee's taking of possession or taking over management of a Facility or
acquiring title thereto at a foreclosure sale which license shall be in effect
for a period of twenty-four (24) months from the date thereof but shall be
extended for any period up to an additional six (6) months if the Borrower takes
any action to delay or obstruct the Lenders' exercise of their remedies under
the Financing Documents. The Borrower further agrees that a third-party
purchaser of a Facility may continue to operate the Facility under the
Borrower's name unless the Borrower objects in writing thereto.
Section 11.18 No Partnership.
Nothing contained in this Agreement shall be construed in a matter to
create any relationship between the Borrower and the Lenders other than the
relationship of borrower and lender and the Borrower and the Lenders other than
the relationship of borrower and lender and the Borrower and the Lenders shall
not be considered partners or co-venturers for any purpose on account of this
Agreement.
Section 11.19 Third Parties; Benefit.
All conditions to the obligation of the Lenders to make advances
hereunder are imposed solely and exclusively for the benefit of the Lenders and
their assigns and no other persons shall have standing to require satisfaction
of such conditions in accordance with their terms or be entitled to assume that
the Lenders will refuse to make advances in the absence of strict compliance
with any or all thereof and no other person shall, under any circumstances, be
deemed to be the beneficiary of such conditions, any or all of which may be
freely waived in whole or in part by the Agent at any time in the sole and
absolute exercise of its discretion pursuant to its agreements with the Lenders.
The terms and provisions of this Agreement are for the benefit of the parties
hereto and, except as herein specifically provided, no other person shall have
any right or cause of action on account thereof.
Section 11.20 Conditions; Verification.
Any condition of this Agreement which requires the submission of
evidence of the existence or non-existence of a specified fact or facts implies
as a condition to the
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existence or non-existence, as the case may be, of such fact or facts that the
Lenders shall, at all times, be free independently to establish to their
satisfaction and in its absolute discretion such existence or non-existence.
Section 11.21 Signs; Publicity.
At the Agent's request, but at the expense of the Agent, the Borrower
shall place a sign acceptable to the Borrower at a location on each of the
Eligible Projects satisfactory to the Agent, which sign shall recite, among
other things, that the Lenders are financing the development of the Land and the
construction of the Improvements. The Borrower expressly authorizes the Agent to
prepare and to furnish to the news media for publication from time to time news
releases with respect to the Credit Facility and each Eligible Project,
specifically to include but not limited to, releases detailing the Agent's and
the Lenders' involvement with the Credit Facility and the financing of any
Eligible Project, all subject to prior review by the Borrower.
Section 11.22 Mandatory Arbitration.
To the maximum extent not prohibited by law, any controversy, dispute
or claim arising out of, in connection with, or relating to this Agreement or
any other Financing Documents or any transaction provided for therein, including
but not limited to any claim based on or arising from an alleged tort or an
alleged breach of any agreement contained in any of the Financing Documents,
shall, at the request of any party to the Financing Documents (either before or
after the commencement of judicial proceedings) be settled by arbitration
pursuant to Title 9 of the United States Code, which the parties acknowledge and
agree applies to the transaction involved herein, and in accordance with the
Commercial Arbitration Rules of the American Arbitration Association (the
"AAA"). In any such arbitration proceeding: (i) all statutes of limitation which
would otherwise be applicable shall apply; and (ii) the proceeding shall be
conducted in Houston, Texas, by a single arbitrator, if the amount in
controversy is $1 million or less, or by a panel of three arbitrators if the
amount in controversy is over $1 million. All arbitrators shall be selected by
the process of appointment from a panel pursuant to Section 13 of the AAA
Commercial Arbitration Rules and each arbitrator will have AAA acknowledged
expertise in the appropriate subject matter. Any award rendered in any such
arbitration proceeding shall be final and binding, and judgment upon any such
award may be entered in any court having jurisdiction.
If any party to this Agreement or other Financing Documents files a
proceeding in any court to resolve any such controversy, dispute or claim, such
action shall not constitute a waiver of the right of such party or a bar to the
right of any other party to seek arbitration under the provisions of this
Section of that or any other claim, dispute or controversy, and the court shall,
upon motion of any party to the proceeding, direct that such controversy,
dispute or claim be arbitrated in accordance with this Section.
Notwithstanding any of the foregoing, no arbitrator or panel of
arbitrators shall possess or have the power to (i) assess punitive damages, (ii)
dissolve, rescind or reform (except that the arbitrator may construe ambiguous
terms) any Financing Document to
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which the Borrower or the Guarantor is a party, (iii) enter judgment on the
debt, (iv) exercise equitable powers or issue or enter any equitable remedies or
(v) allow discovery of attorney/client privileged information. The Commercial
Arbitration Rules of the AAA are hereby modified to this extent for the purpose
of arbitration of any dispute, controversy or claim arising out of, in
connection with, or relating to any Financing Document to which the Borrower or
the Guarantor is a party. The parties further waive, each to the other, any
claims for punitive damages, and agree that neither an arbitrator nor any court
shall have the power to assess such damages.
No provisions of, or the exercise of any rights under, this Section
shall limit or impair the right of any party to the Financing Documents before,
during or after any arbitration proceeding to take any of the following actions
or contest any of the following actions: (i) exercise self-help remedies such as
set off or repossession, (ii) foreclose (judicially or otherwise) any lien on or
security interest in any real or personal property collateral; or (iii) obtain
emergency relief from a court of competent jurisdiction to prevent the
dissipation, damage, destruction, transfer, hypothecation, pledging or
concealment of assets or of collateral securing any indebtedness, obligation or
guaranty referenced in the Financing Documents. Such emergency relief and action
to contest the same shall include equitable relief and may be in the nature of,
but is not limited to: pre-judgment attachments, garnishments, sequestrations,
appointments of receivers, or other emergency injunctive relief to preserve the
status quo.
In the event applicable law prohibits the submission of a particular
controversy, dispute or claim arising out of or in connection with any of the
Financing Documents or transactions contemplated therein to arbitration, the
parties agree that any actions or proceedings in connection therewith shall be
tried and litigated only in the state and federal courts located in the
jurisdiction in which the Property is located or any other court in which the
Lenders shall initiate legal or equitable proceedings that has subject matter
jurisdiction over the matter in controversy and to the extent permitted by
applicable law, waive any right to assert the doctrine of forum non-conveniens
or to object to the venue to the extent any proceeding is brought in accordance
with this paragraph.
Section 11.23 Time of Essence.
Time shall be of the essence for each and every provision of this
Agreement of which time is an element.
[signature page to follow]
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IN WITNESS WHEREOF, the parties hereto have signed and sealed this
Agreement on the day and year first above written.
WITNESS/ATTEST: ALS HOLDINGS, INC, a
Delaware Corporation
/s/ Joyce Hansen By: /s/ Mark W. Ohlendorf (SEAL)
- ------------------------- ------------------------
Name: Mark W. Ohlendorf
Title: Vice President and Assistant Secretary
ALS WISCONSIN HOLDINGS, INC.,
a Delaware corporation
/s/ Joyce Hansen By: /s/ Mark W. Ohlendorf (SEAL)
- ------------------------- ------------------------
Name: Mark W. Ohlendorf
Title: Vice President and Assistant Secretary
WITNESS: BANK UNITED, as Agent for the Lenders
/s/ Ellen Lockhart By: /s/ Casey Moore (SEAL)
- ------------------------- ------------------------
Name: Casey Moore
Title: Vice President
85
<PAGE> 1
EXHIBIT 10.3
AMENDED SCHEDULE OF MORTGAGES
WHICH ARE SUBSTANTIALLY IN THE FORM OF MORTGAGE
ATTACHED AS EXHIBIT 10.53 TO THE COMPANY'S FORM
10-K FOR THE PERIOD ENDING 12/31/98
<TABLE>
<CAPTION>
DATE OF
MORTGAGOR FACILITY NAME LOCATION MORTGAGE AMOUNT MORTGAGE
--------- ------------- -------- --------------- --------
<S> <C> <C> <C> <C>
ALS Holdings, Inc. Sterling House of Olathe II 751 North Somerset Terrace $2,202,505 November 18, 1998
Olathe, KS 66062
ALS Holdings, Inc. Sterling House of Topeka 5820 S.W. Drury Lane $2,992,500 November 18, 1998
Topeka, KS 66604
ALS Holdings, Inc. Sterling House of Lawrence 3220 Peterson Road $3,210,000 November 18, 1998
Lawrence, KS 66049
ALS Holdings, Inc. Sterling House of Leawood 12720 State Line Road $2,850,000 November 18, 1998
Leawood, KS 66209
ALS Holdings, Inc. Sterling House of Lenexa I 8710 Caenen Lake Road $2,325,000 November 18, 1998
Lenexa, KS 66215
ALS Holdings, Inc. Sterling House of Lenexa II 8740 Caenen Lake Road $2,325,000 November 18, 1998
Lenexa, KS 66215
ALS Wisconsin Wynwood of Appleton 5800 Pennsylvania Avenue $5,397,360 December 10, 1998
Holdings, Inc.* Grand Chute, WI
ALS Wisconsin Wynwood of Madison 1601 Wheeler Rd. $4,012,500 December 10, 1998
Holdings, Inc.* Madison, WI
ALS Holdings, Inc.* Sterling Cottage of Lady Lake I 17395 S.E. 109th Terrace Road $2,850,000 March 22, 1998
Summerfield, FL 34491
ALS Holdings, Inc.* Sterling House of Lady Lake II 17421 S.E. 109th Terrace Road $2,521,102 March 22, 1998
Summerfield, FL 34491
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
DATE OF
MORTGAGOR FACILITY NAME LOCATION MORTGAGE AMOUNT MORTGAGE
--------- ------------- -------- --------------- --------
<S> <C> <C> <C> <C>
ALS Holdings, Inc.* Sterling Cottage of Michigan City I 1300 East Coolspring Avenue $2,981,250 March 22, 1998
Michigan City, IN 46360
ALS Holdings, Inc.* Sterling House of Michigan City II 1400 East Coolspring Avenue $2,483,613 March 22, 1998
Michigan City, IN 46360
ALS Holdings, Inc.* Sterling House of Southern Pines II 101 Brucewood Road $2,925,000 March 22, 1998
Southern Pines, NC 28387
ALS Holdings, Inc.* Sterling House of Valparaiso I Corner of Appletree Lane and $2,793,143 March 22, 1998
Valparaiso Street
Valparaiso, IN 46383
ALS Holdings, Inc.* Sterling House of Valparaiso II 2601 Valparaiso Street $2,583,820 March 22, 1998
Valparaiso, IN 46383
ALS Holdings, Inc.* Clare Bridge of Pin Oak I 8015 Pin Oak Drive $9,324,992 March 22, 1998
Orlando, FL 32819
and
Wynwood of Pin Oak II 8001 Pin Oak Drive
Orlando, FL 32819
</TABLE>
*The form of mortgages entered into for these properties were conformed to meet
the requirements of applicable state law.
<PAGE> 1
EXHIBIT 10.4
(ALS Financing II)
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") is made as of the 23rd day of
March, 1999, by and between ALS FINANCING II, INC., a Delaware corporation
(together with its successors and assigns, the "Borrower"), and GMAC COMMERCIAL
MORTGAGE CORPORATION, a California corporation (together with its successors and
assigns, the "Lender").
R E C I T A L S:
A. Borrower has requested Lender to make five (5) New York Loans (as
defined herein), in the aggregate principal amount of Thirty-Five Million Two
Hundred Thirty-Nine Thousand Five Hundred Dollars ($35,239,500), the proceeds of
each of the New York Loans, in part, to be used to acquire a related Original
New York Loan (as defined herein).
B. Borrower has also requested Lender to make four (4) Other Loans
(as defined herein), in the aggregate principal amount of Nineteen Million Seven
Hundred Sixty Thousand Five Hundred Dollars ($19,760,500).
C. In the aggregate, Borrower has requested Lender to make a total
of nine (9) loans to Borrower, as provided herein, in the aggregate principal
amount of Fifty-Five Million Dollars ($55,000,000) (collectively, the "Loan").
D. This Agreement, in part, is intended to, and hereby does, amend
and restate the terms, provisions and conditions of each Original New York Loan.
This Agreement is also intended, in part, to state and set forth the terms,
provisions and conditions upon which Lender will make the Loan to Borrower.
NOW, THEREFORE, it is hereby agreed as follows:
ARTICLE 1
DEFINITIONS, ACCOUNTING PRINCIPLES, UCC TERMS.
1.1 As used in this Agreement, the capitalized terms set forth in
Schedule I attached hereto shall have the meanings set forth therein unless the
context hereof shall otherwise indicate.
1.2 Singular terms shall include the plural forms and vice versa, as
applicable, of the terms defined.
<PAGE> 2
1.3 Terms contained in this Agreement shall, unless otherwise defined
herein or unless the context otherwise indicates, have the meanings, if any,
assigned to them by the Uniform Commercial Code in effect in the State of New
York.
1.4 All accounting terms used in this Agreement shall be construed in
accordance with GAAP, except as otherwise specified.
1.5 All references to other documents or instruments shall be deemed
to refer to such documents or instruments as they may hereafter be extended,
renewed, modified, or amended and all replacements and substitutions therefor.
1.6 All references herein to "Medicaid" and "Medicare" shall be
deemed to include any successor program thereto.
ARTICLE 2
TERMS OF THE LOAN
2.1 THE LOAN. Borrower has agreed to borrow the Loan from Lender, and
Lender has agreed to make the Loan to Borrower, subject to Borrower's compliance
with and observance of the terms, conditions, covenants, and provisions of this
Agreement and the other Loan Documents, and Borrower has made the covenants,
representations, and warranties herein and therein as a material inducement to
Lender to make the Loan.
2.2 SECURITY FOR THE LOAN. The Loan will be evidenced, secured and
guaranteed by the Loan Documents.
ARTICLE 3
BORROWER'S REPRESENTATIONS AND WARRANTIES
To induce Lender to enter into this Agreement, and to make the Loan to
Borrower, Borrower represents and warrants to Lender as follows:
3.1 EXISTENCE, POWER AND QUALIFICATION. Borrower is a duly organized
and validly existing Delaware corporation, has the power to own its properties
and to carry on its business as is now being conducted, and is duly qualified to
do business and is in good standing in every jurisdiction in which the character
of the properties owned by it or in which the transaction of its business makes
its qualification necessary.
3.2 POWER AND AUTHORITY. Borrower has full power and authority to
borrow the indebtedness evidenced by the Notes and to incur the Loan Obligations
provided for herein, all of which have been authorized by all proper and
necessary action. All consents, approvals, authorizations, orders or filings of
or with any court or governmental agency or body, if any, required for the
execution, delivery and performance of the Loan Documents by the Borrower have
been obtained or made.
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<PAGE> 3
3.3 DUE EXECUTION AND ENFORCEMENT. Each of the Loan Documents to
which Borrower and Guarantor are a party has been duly executed and delivered by
such party, constitutes a valid and legally binding obligation of Borrower and
Guarantor, and will be, enforceable in accordance with its terms (except as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
receivership, moratorium, or other laws relating to the rights of creditors
generally, by general principles of equity and by regulatory restrictions
applicable to operators of assisted living/adult home facilities) and does not
violate, conflict with, or constitute any default under any law, government
regulation, decree, judgment, Borrower's or Guarantor's articles of
organization/incorporation, partnership agreement or operating agreement, as
applicable, or any other agreement or instrument binding upon Borrower and
Guarantor.
3.4 SINGLE PURPOSE ENTITY. Borrower is a Single Purpose Entity. Each
of NCBO, PCBO and WCBO is (except as restricted by the Department), a Single
Purpose Entity.
3.5 PENDING MATTERS.
(A) OPERATIONS; FINANCIAL CONDITION. Except as disclosed in
Schedule A hereto, no action or investigation is pending or, to the best of
Borrower's knowledge, threatened before or by any court or federal, state or
local government administrative agency which might result in any material
adverse change in the financial condition, operations or prospects of Borrower.
Neither the Borrower nor Guarantor are in violation of any agreement, the
violation of which might reasonably be expected to have a material adverse
effect on its business or assets, and neither the Borrower nor Guarantor are in
violation of any order, judgment, or decree of any court, or, except as
disclosed in Schedule A, any statute or governmental regulation to which it is
subject, the violation of which could reasonably be expected to have a material
adverse effect on the operation of any Facility or on any of the Collateral.
(B) CONDEMNATION OR CASUALTY. There are no proceedings
pending, or, to the best of Borrower's knowledge, threatened, to acquire through
the exercise of any power of condemnation, eminent domain or similar proceeding
any part of any Property, the related Improvements or any interest therein, or
to enjoin or similarly prevent or restrict the use of the Property or the
operation of any Facility in any manner. None of the Improvements is subject to
any unrepaired casualty or other damage, except as reported in the engineering
reports prepared for each Facility by Property Solutions, Inc. and dated as
follows:
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<TABLE>
<CAPTION>
Facility Date of Report
-------- --------------
<S> <C>
Northville 10/8/98
Utica 10/8/98
Kenmore 10/20/98
Niskayuna I 10/20/98
Niskayuna II 10/20/98
Perinton 10/20/98
Cary 10/7/98
Williamsville 10/20/98
Westampton 10/9/98
</TABLE>
3.6 FINANCIAL STATEMENTS ACCURATE. All financial statements
heretofore or hereafter provided by Borrower and Guarantor are and will be true
and complete in all material respects as of their respective dates and fairly
present the respective financial condition of Borrower and Guarantor and each
Facility, and there are no material liabilities, direct or indirect, fixed or
contingent, as of the respective dates of such statements which are not
reflected therein or in the notes thereto or in a written certificate delivered
with such statements. The financial statements of the Borrower have been
prepared on an accounting basis consistent with Guarantor's audited financial
statements. There has been no material adverse change in the financial
condition, operations, or prospects of Borrower and Guarantor since the dates of
such statements except as fully disclosed in writing with the delivery of such
statements. All financial statements of the operations of each Facility
heretofore or hereafter provided to Lender are and will be true and complete in
all material respects as of their respective dates.
3.7 COMPLIANCE WITH FACILITY LAWS.
(a) Each of the following Facilities are duly licensed and
operated as follows:
(i) with respect to the Cary Facility, as a 50-bed
"adult-care home for the aged" under the applicable laws of the State of
North Carolina;
(ii) with respect to the Niskayuna I Facility as a
52-bed "adult home" under the applicable laws of the State of New York;
(iii) with respect to the Northville Facility as a
72-bed "home for the aged" under the applicable laws of the State of
Michigan;
(iv) with respect to the Perinton Facility, as a
52-bed "adult home" under the applicable laws of the State of New York;
(v) with respect to the Utica Facility, as a 72-bed
"home for the aged" under the applicable laws of the State of Michigan;
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<PAGE> 5
(vi) with respect to the Westampton Facility, as a
50-bed "health care facility" under the applicable laws of the State of New
Jersey; and
(vii) with respect to the Williamsville Facility, as a
52-bed "adult home" under the applicable laws of the State of New York.
(b) The Kenmore Facility and the Niskayuna II Facility are
operated as residential senior housing in the State of New York and, pursuant to
applicable state law, are not required to be licensed.
(c) Lessee is the lawful owner of all operating, healthcare and
assisted living Permits for the Cary Facility, the Northville Facility, the
Utica Facility and the Westampton Facility. NCBO is the sole owner of the adult
home Permit for the Niskayuna I Facility. Borrower has acquired, and the
Guarantor has leased, the Niskayuna I Facility with the knowledge of the
applicable New York regulatory authorities. Prior approval by the Department of
Health of such acquisition and leasing is not required under the adult home New
York State law. PCBO is the sole owner of the adult home Permit for the Perinton
Facility. Borrower has acquired, and the Guarantor has leased, the Perinton
Facility with the knowledge of the applicable New York regulatory authorities.
WCBO is the sole owner of the adult home Permit for the Williamsville Facility.
Borrower has acquired, and the Guarantor has leased, the Williamsville Facility
with the knowledge of the applicable New York regulatory authorities. The sole
shareholder of NCBO, PCBO and WCBO is Colleen Endsley, a Vice-President of the
Guarantor.
(d) All Permits for the Facilities (i) are in full force and
effect, (ii) constitute all of the material permits, licenses and certificates
required for the use, operation and occupancy thereof, (iii) have not been
pledged as collateral for any other loan or Indebtedness, (iv) are held free
from restrictions or any encumbrance which would materially adversely affect the
use or operation of the applicable Facility, and (v) are not provisional,
probationary or restricted in any way. Except as disclosed in Schedule A hereto,
the Borrower, the Lessee, the applicable operator, and the Manager, as well as
the operation of each Facility, are in compliance in all material respects with
the provisions of all laws, rules, regulations and published interpretations to
which each Facility is subject. Except as disclosed in Schedule A hereto, no
waivers of any laws, rules, regulations, or requirements (including, but not
limited to, minimum foot requirements per bed or unit) are required for any
Facility to operate at its current licensed bed capacity. All Reimbursement
Contracts (if any) are in full force and effect with respect to the Facility,
and Borrower, Lessee and Manager are in good standing with all the respective
agencies governing the above-described licenses, program certifications, and
Reimbursement Contract (if any). Borrower, Lessee and Manager are current in the
payment of all so-called provider specific taxes or other assessments with
respect to such Reimbursement Contract (if any). Borrower will maintain, and
will cause Lessee, the applicable operator and/or Manager to maintain (without
allowing to lapse), the Certificate of Need, if applicable, and any required
Permits. In the event that Lender acquires the Facility through foreclosure or
otherwise, neither Lender nor a subsequent manager, a subsequent lessee or any
subsequent purchaser (through foreclosure
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<PAGE> 6
or otherwise) must obtain a Certificate of Need prior to applying for and
receiving a license to operate the Facility and certification to receive
Medicare and Medicaid payments (and its successor programs) for patients having
coverage thereunder (if any), provided that no service or bed unit complement is
changed.
3.8 MAINTAIN UNIT CAPACITY. Neither Borrower nor the Lessee nor the
holder of any Permit for any Facility has granted to any third party the right
to reduce the number of licensed bed/units in the Facility or to apply for
approval to transfer the right to any and all of the licensed Facility
units/beds to any other location.
3.9 MEDICARE AND MEDICAID. The Facilities have no patient
reimbursement agreements, cost reports or Medicare or Medicaid surveys or
provider agreements.
3.10 THIRD-PARTY PAYORS. There is no threatened or pending revocation,
suspension, termination, probation, restriction, limitation, or nonrenewal
affecting Borrower, Lessee, Manager or any Facility or any participation or
provider agreement with any third-party payor, including Medicare, Medicaid,
Blue Cross and/or Blue Shield, if applicable, and any other private commercial
insurance managed care and employee assistance program (such programs, the
"Third-Party Payors' Programs") to which Borrower or Lessee or Manager presently
is subject. All Medicare (if any), Medicaid (if any), and private insurance cost
reports and financial reports submitted by Borrower or Lessee or Manager are and
will be materially accurate and complete and have not been and will not be
misleading in any material respects. No cost reports for the Facility remain
"open" or unsettled, except as otherwise disclosed in writing.
3.11 GOVERNMENTAL PROCEEDINGS AND NOTICES. Except as disclosed in
Schedule A hereto, neither Borrower nor Lessee nor the applicable operator nor
the Facility is currently the subject of any proceeding by any governmental
agency that would, and no notice of any violation has been received from a
governmental agency that would, directly or indirectly, or with the passage of
time, have a material adverse impact on Borrower's ability to accept and/or
retain residents or result in the imposition of a fine in excess of $5,000 or a
governmental sanction, or modify, limit or annul or result in the transfer,
suspension, revocation or imposition of probationary use of any of the Permits
or would result in the appointment of a receiver or manager
3.12 PHYSICAL PLANT STANDARDS. Except as disclosed in Schedule A
hereto, each Facility and the use thereof complies in all material respects with
applicable local, state and federal building codes, fire codes, zoning codes,
use restrictions, health care, health care facility and other similar regulatory
requirements (the "Physical Plant Standards"), and no material waivers of
Physical Plant Standards exist at any Facility.
3.13 PLEDGES OF RECEIVABLES. Neither the Borrower nor the Lessee has
pledged its Accounts as collateral security for any loan or indebtedness other
than, if applicable, the Loan.
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<PAGE> 7
3.14 PAYMENT OF TAXES AND PROPERTY IMPOSITIONS. Borrower and Guarantor
have filed or have obtained appropriate extensions for filing of all federal,
state, and local tax returns which they are required to file and have paid, or
made adequate provision for the payment of, all taxes which are shown pursuant
to such returns or are required to be shown thereon or to assessments received
by Borrower or Guarantor, including, without limitation, provider taxes. All
such returns are complete and accurate in all respects. Borrower has paid or
made adequate provision for the payment of all insurance premiums, applicable
water and sewer charges, government assessments or charges, ground rents (if
applicable) and Taxes (as defined in the Mortgage) with respect to each
Property.
3.15 TITLE TO COLLATERAL. Except as provided in Section 3.27,
Borrower, Guarantor, the applicable operator or Manager, as the case may be, has
good and marketable title to all of the Collateral, subject to no lien,
mortgage, pledge, encroachment, zoning violation, or encumbrance, except
Permitted Encumbrances, which Permitted Encumbrances do not and will not
materially interfere with the security intended to be provided by the Mortgage
or the current use or operation of the Property and or the current ability of
any Facility to generate net operating income sufficient to service the Loan
allocated to such Facility as shown on Exhibit B. All Improvements situated on
the Property are situated wholly within the boundaries of the Property, and no
neighboring properties encroach onto the Property.
3.16 PRIORITY OF MORTGAGE. Each Mortgage constitutes a valid first
lien against the real and personal property described therein, prior to all
other liens or encumbrances, including those which may hereafter accrue,
excepting only Permitted Encumbrances, which Permitted Encumbrances do not and
will not materially and adversely affect (a) the ability of the Borrower to pay
in full the principal of and interest on the respective Notes when due, (b) the
security (and its value) intended to be provided by the Mortgage or (c) the
current use of the Property and the Improvements.
3.17 LOCATION OF CHIEF EXECUTIVE OFFICE. The location of Borrower's
principal place of business and chief executive office and the name and address
of the resident agent for service of process in the State of New York is set
forth on Exhibit B hereto.
3.18 DISCLOSURE. All information furnished or to be furnished by
Borrower and Guarantor to Lender in connection with the Loan or any of the Loan
Documents, is, or will be at the time the same is furnished, accurate and
correct in all material respects and complete insofar as completeness may be
necessary to provide Lender with true and accurate knowledge of the subject
matter.
3.19 TRADE NAMES. Except as shown on Exhibit G, neither the Borrower
nor the Cary Facility, which will operate under the trade name "Clare Bridge of
Cary", has ever changed its name, been known by any other name or been a party
to a merger, reorganization or similar transaction since the date acquired by
Borrower or an Affiliate thereof. Except as shown on Exhibit G, the Kenmore
Facility, which will operate under the trade name "Wynwood Commons of Kenmore"
has never changed its name, been known by any other name or been a party to a
merger, reorganization or similar transaction since the date
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<PAGE> 8
acquired by Borrower or an Affiliate thereof. Except as shown on Exhibit G, the
Niskayuna I Facility, which will operate under the trade name "Clare Bridge of
Niskayuna", has never changed its name, been known by any other name or been a
party to a merger, reorganization or similar transaction since the date acquired
by Borrower or an Affiliate thereof. Except as shown on Exhibit G, the Niskayuna
II Facility, which will operate under the trade name "Wynwood Commons of
Niskayuna", has never changed its name, been known by any other name or been a
party to a merger, reorganization or similar transaction since the date acquired
by Borrower or an Affiliate thereof. Except as shown on Exhibit G, the
Northville Facility, which will operate under the trade name "Wynwood of
Northville", has never changed its name, been known by any other name or been a
party to a merger, reorganization or similar transaction since the date acquired
by Borrower or an Affiliate thereof. Except as shown on Exhibit G, neither the
Borrower nor the Perinton Facility, which will operate under the trade name
"Clare Bridge of Perinton", has ever changed its name, been known by any other
name or been a party to a merger, reorganization or similar transaction since
the date acquired by Borrower or an Affiliate thereof. Except as shown on
Exhibit G, neither the Borrower nor the Utica Facility, which will operate under
the trade name "Wynwood of Utica", has ever changed its name, been known by any
other name or been a party to a merger, reorganization or similar transaction
since the date acquired by Borrower or an Affiliate thereof. Except as shown on
Exhibit G, neither the Borrower nor the Westampton Facility, which will operate
under the trade name "Clare Bridge of Westampton", has ever changed its name,
been known by any other name or been a party to a merger, reorganization or
similar transaction since the date acquired by Borrower or an Affiliate thereof.
Except as shown on Exhibit G, neither the Borrower nor the Williamsville
Facility, which will operate under the trade name "Clare Bridge of
Williamsville", has ever changed its name, been known by any other name or been
a party to a merger, reorganization or similar transaction since the date
acquired by Borrower or an Affiliate thereof.
3.20 ERISA. Borrower is in compliance in all material respects with
applicable provisions of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA").
3.21 OWNERSHIP. The ownership interests of the Persons comprising the
Borrower are correctly and accurately set forth on Exhibit "C" hereto.
3.22 COMPLIANCE WITH APPLICABLE LAWS. Except as disclosed in Schedule
A hereto, each Facility and its operations and the Property comply in all
material respects with all covenants and restrictions of record and applicable
laws, ordinances, rules and regulations, including, without limitation, the
Americans with Disabilities Act and the regulations thereunder, and all laws,
ordinances, rules and regulations relating to zoning, setback requirements and
building codes. There are no waivers of any building codes currently in
existence for any Facility except for waivers with respect to parking
requirements, in which case each Facility complies with the applicable parking
requirement resulting from such waiver.
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<PAGE> 9
3.23 SOLVENCY. Borrower is solvent for purposes of 11 U.S.C.ss.548,
and the borrowing of the Loan and acquisition of the Property will not render
Borrower insolvent for purposes of 11 U.S.C.ss.548.
3.24 OTHER INDEBTEDNESS. Borrower has no outstanding Indebtedness,
secured or unsecured, direct or contingent (including any guaranties), other
than (a) the Loan, (b) indebtedness which represents trade payables or accrued
expenses incurred in the ordinary course of business of owning and operating the
Property, and (c) indebtedness secured by purchase money liens or represented by
equipment or vehicle leases, provided that (i) the aggregate amount of such
indebtedness incurred with respect to any one Facility, together with the rental
income from all Leases (other than resident agreements) of space in such
Facility entered into by Borrower as landlord, does not exceed the lesser of
$500,000 or five percent (5%) of the portion of the Loan allocated to such
Facility as shown on Exhibit B, and (ii) the indebtedness secured by such liens
is used for the purchase of equipment which is unique to, or necessary for the
operation of, the Property for its Intended Use; no other debt will be secured
(senior, subordinate or pari passu) by the Property.
3.25 OTHER OBLIGATIONS. Borrower has no material financial obligation
under any indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which Borrower is a party or by which Borrower or the Property
is otherwise bound, other than obligations incurred in the ordinary course of
the operation of the Property and other than obligations under the Mortgage and
the other Loan Documents.
3.26 FRAUDULENT CONVEYANCES. Borrower (a) has not entered into this
Agreement or any of the other Loan Documents with the actual intent to hinder,
delay, or defraud any creditor and (b) has received reasonably equivalent value
in exchange for its obligations under the Loan Documents. Giving effect to the
transactions contemplated by the Loan Documents, the fair saleable value of
Borrower's assets exceeds and will, immediately following the execution and
delivery of the Loan Documents and acquisition of each Property, be greater than
Borrower's probable liabilities, including the maximum amount of its contingent
liabilities or its debts as such debts become absolute and mature. Borrower's
assets do not and, immediately following the execution and delivery of the Loan
Documents and acquisition of each Property will not, constitute unreasonably
small capital to carry out its business as conducted or as proposed to be
conducted. Borrower does not intend to, and does not believe that it will, incur
debts and liabilities (including, without limitation, contingent liabilities and
other commitments) beyond its ability to pay such debts as they mature (taking
into account the timing and amounts to be payable on or in respect of
obligations of Borrower).
3.27 WARRANTY OF TITLE. Borrower represents and warrants that (i) the
Erie County Industrial Development Agency ("Erie IDA") is the fee simple owner
of the Kenmore Facility and that Borrower has a valid leasehold estate in such
Property pursuant to a Lease Agreement dated March 1, 1995, as amended by the
First Amendment to Lease Agreement dated as of March 1, 1999, assumed by the
Borrower on the date hereof, and (ii) the Schenectady County Industrial
Development Agency ("Schenectady IDA") is the fee simple
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<PAGE> 10
owner of the Niskayuna II Facility and that Borrower has a valid legal interest
in the Niskayuna II Facility pursuant to the terms of an Installment Sale
Agreement dated as of June 1, 1995, as assigned to and assumed by the Borrower
pursuant to the Assignment and Assumption Agreement dated as of January 1, 1999,
by and between the Schenectady IDA and the Borrower. Borrower further represents
and warrants that the Borrower is the fee simple owner of the Facilities other
than the Kenmore Facility and the Niskayuna II Facility. Each Property exists as
a separate single tax parcel.
3.28 REPRESENTATIONS AND WARRANTIES. Borrower agrees that its
representations and warranties and covenants contained herein are true and
correct as of the date hereof and shall survive closing of the Loan and the
assignment and delivery of the Loan to Investor. Borrower agrees that Investor
shall be a third party beneficiary of the representations, warranties and
covenants set forth herein.
3.29 LEASE AGREEMENT. Each Lease Agreement is in full force and
effect, and there are no defaults (either monetary or nonmonetary) by Borrower
or Lessee or NCBO, PCBO or WCBO thereunder except as set forth in Schedule A
hereto.
3.30 LICENSES. Borrower has obtained (in its own name and/or in the
relevant operator's or manager's name, if any, and in any event, in the name of
the person(s) as required under all applicable legal requirements) all Permits
necessary to use and operate the Property and the Facility for its Intended Use,
and all such Permits are in full force and effect. Except as disclosed in
Schedule A hereto, the Intended Use being made of the Property and the Facility
is in conformity in all material respects with the certificate of occupancy
and/or Permits for such property and any other restrictions, covenants or
conditions affecting such property. The Property and the Facility contain all
equipment necessary to use and operate such property for its Intended Use.
3.31 APPLICABLE LAWS. Except as disclosed in Schedule A hereto,
Borrower and each Property and the Facility (and the operation thereof) are in
compliance in all material respects with the applicable provisions of all laws,
statutes, regulations, ordinances, orders, standards, restrictions and rules of
any federal, state or local government or quasi-governmental body, agency, board
or authority having jurisdiction over the operation of the Property and the
Facility, including, without limitation: (a) health care and fire safety codes,
(b) laws regulating the handling and disposal of medical or biological waste,
(c) the applicable provisions of all laws, rules, regulations and published
interpretations thereof to which the Borrower or the Property and the Facility
are subject by virtue of its Intended Use, (d) all criteria established to
classify the Property and the Facility as "housing for older persons" under the
Fair Housing Amendments Act of 1988, and (e) each of the following:
i. Title VIII of the Civil Rights Act of 1968, as amended, 42 U.S.C.
ss.ss.3601 et seq. (1996),
ii. Title VII of the Consumer Credit Protection Act, as amended, 15
U.S.C.ss.ss.1691 - 1691f(1996), and
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iii. Section 527 of the National Housing Act, as amended, 12 U.S.C.
ss.1735f-5 (1996).
3.32 MEDICARE/MEDICAID. Borrower does not currently participate in any
Medicaid or Medicare programs or any other third party payor's programs, or
other similar provider payment programs in connection with the operations of any
Property and any Facility.
3.33 PENDING PROCEEDINGS. Except as disclosed in Schedule A hereto,
neither Borrower nor the Guarantor nor the holder of any Permit nor any
Collateral nor any Facility are subject to any proceeding, suit or investigation
by any federal, state or local government or quasi-governmental body or agency
or any other administrative or investigative body, and, except as disclosed in
Schedule A, neither the Borrower nor the Guarantor nor the holder of any Permit
has received any notice from any such agency which, (a) may result in the
imposition of a material fine or alternative, interim or final sanction against
the Borrower, the Guarantor or the holder of any Permit, (b) would have a
material adverse effect on Borrower or the Guarantor or the operation of the
Collateral and the Facility, (c) would result in the appointment of a receiver
or manager, (d) would affect Borrower's or Guarantor's ability to accept and/or
retain residents for the Property, or (e) would result in the revocation,
transfer, surrender, suspension or other impairment of any Permit for the
Property.
3.34 EXECUTION OF DOCUMENTS. Neither the execution and delivery of the
Notes, any Mortgage or any other Loan Documents, Borrower's performance
thereunder, the recordation of any Mortgage, nor the exercise of any remedies by
Lender in accordance with applicable health care laws, will adversely affect the
Permit.
3.35 FEDERAL PROGRAMS; ANTITRUST LAW. Neither the Borrower nor the
Guarantor is a participant in any federal program whereby any federal, state or
local, government or quasi-governmental body or agency, may have the right to
recover funds by reason of the advance of federal funds. Neither the Borrower
nor the Guarantor has received notice of, and neither is aware of, any violation
of applicable antitrust laws.
3.36 CERTIFICATE OF NEED. In the event any existing management
agreement is terminated or Lender acquires any Property through foreclosure or
otherwise, neither Borrower, Lender, any subsequent manager, nor any subsequent
purchaser (through foreclosure or otherwise) must obtain a certificate of need
from any applicable state health care regulatory authority or agency (other than
giving such notice required under the applicable state law or regulation) prior
to applying for any applicable Permit, provided that no service is changed and
the unit complement is not changed.
3.37 TENANT ROSTER. Each tenant roster for each Property, dated March
12, 1999, and submitted by the Borrower to the Lender, contains no errors, and
is true, complete and correct as of the date thereof and accurately states both
the gross potential rents and the actual leased unit rents for the Property
within a tolerance range of 7.5 percent (7.5%).
3.38 PROPERTY CONDITION. Each Property is in good and habitable
condition and there are no deficiencies in the repair or maintenance of the
Property that threaten the health
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<PAGE> 12
or safety of its tenants and their invited guests. There is no material uncured
violation at the Property of any building or housing code or similar law or
ordinance, and the physical configuration of the Property is not in material
violation of the Americans With Disabilities Act.
3.39 ZONING. The existing use of each Property is consistent with the
zoning classification of such property or is a legal non-conforming use that is
permitted notwithstanding any inconsistency with such classification. The
Property does not violate any density or building setback requirements of
applicable zoning law and no proceedings are pending or, to the best knowledge
of the Borrower and Guarantor, threatened, which would result in a change of
zoning of any Property.
3.40 INVESTMENT QUALITY. Neither Borrower nor any of its Affiliates
knows of any fact or circumstance affecting the Borrower, the Guarantor, NCBO,
PCBO, WCBO, the Manager or the Collateral that Borrower has not disclosed to
Lender which fact or circumstance materially and adversely affects or could
materially and adversely affect the Borrower's and Guarantor's ability,
respectively, to meet its obligations under the Loan and the Loan Documents in a
timely manner.
3.41 ACCESS. The Property does not share ingress and egress through an
easement or private road or share on site or off site recreational facilities
and amenities that are not located on the Property and under the exclusive
control of the Borrower, or where there is shared ingress and egress or
amenities, there exists an easement or joint use and maintenance agreement, a
copy of which has been delivered to Lender, under which (i) access to and use
and enjoyment of the easement or private road and/or recreational facilities and
amenities is perpetual, (ii) the number of parties sharing such easement and/or
recreational facilities and amenities must be specified, and (iv) the failure to
pay any maintenance fee will not result in a loss of usage of the easement.
ARTICLE 4
AFFIRMATIVE COVENANTS OF BORROWER
Borrower agrees with and covenants unto the Lender that until the Loan
Obligations have been paid in full, Borrower shall:
4.1 PAYMENT OF LOAN/PERFORMANCE OF LOAN OBLIGATIONS. Duly and
punctually pay or cause to be paid the principal and interest of each Note in
accordance with its terms and duly and punctually pay and perform or cause to be
paid or performed all Loan Obligations hereunder and under the other Loan
Documents.
4.2 MAINTENANCE OF EXISTENCE. Maintain its existence as a Delaware
corporation, and, in each jurisdiction in which the character of the property
owned by it or in which the transaction of its business makes qualification
necessary, maintain good standing.
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4.3 MAINTENANCE OF SINGLE PURPOSE. Maintain its existence as a Single
Purpose Entity.
4.4 ACCRUAL AND PAYMENT OF TAXES. During each fiscal year, make
accurate provision for the payment of all current tax liabilities of all kinds
(including, without limitation, federal and state income taxes, franchise taxes,
payroll taxes, provider taxes (to the extent necessary to participate in and
receive maximum funding pursuant to Reimbursement Contracts, if any) and Taxes
(as defined in the Mortgage)), all required withholding of income taxes of
employees, all required old age and unemployment contributions, and all required
payments to employee benefit plans, and pay the same when they become due.
4.5 INSURANCE. Maintain or cause Lessee to maintain the following
insurance coverages with respect to the Property and each Facility:
(a) Insurance against loss or damage by fire, casualty and
other hazards as now are or subsequently may be covered by an "all risk" policy
or a policy covering "special" causes of loss, with such endorsements as Lender
may from time to time reasonably require and which are customarily required by
institutional lenders of similar properties similarly situated, including,
without limitation, building ordinance law, lightning, windstorm, civil
commotion, hail, riot, strike, water damage, sprinkler leakage, collapse,
malicious mischief, explosion, smoke, aircraft, vehicles, vandalism, falling
objects and weight of snow, ice or sleet, and covering the Facility in an amount
equal to 100% of the full insurable replacement value of the Facility (exclusive
of footings and foundations below the lowest basement floor) without deduction
for depreciation. The determination of the replacement cost amount shall be
adjusted annually to comply with the requirements of the insurer issuing the
coverage or, at Lender's election, by reference to such indexes, appraisals or
information as Lender determines in its reasonable discretion, and, unless the
insurance required by this paragraph shall be effected by blanket and/or
umbrella policies in accordance with the requirements of this Agreement, the
policy shall include inflation guard coverage that ensures that the policy
limits will be increased over time to reflect the effect of inflation. Each
policy shall, subject to Lender's approval, contain (i) a replacement cost
endorsement, without deduction for depreciation, (ii) either an agreed amount
endorsement or a waiver of any co-insurance provisions, and (iii) an ordinance
or law coverage or enforcement endorsement if the Improvements or the use of the
Property constitutes any legal nonconforming structures or uses, and shall
provide for deductibles in such amounts as Lender may permit in its sole
discretion.
(b) Commercial general liability insurance under a policy
containing "Comprehensive General Liability Form" of coverage (or a comparably
worded form of coverage) and the "Broad Form CGL" endorsement (or a policy which
otherwise incorporates the language of such endorsement), providing coverage on
an occurrence (not "claims made") basis, which policy shall include, without
limitation, coverage against claims for personal injury, bodily injury, death
and property damage liability with respect to the
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Facility and the operations related thereto, whether on or off the Property, and
the following coverages: Employee as Additional Insured, Product
Liability/Completed Operations; Broad Form Contractual Liability, Independent
Contractor, Personal Injury and Advertising Injury Protection, Medical Payment
(with a minimum limit of $5,000 per person), Broad Form Cross Suits Liability
Endorsement, where applicable, hired and non-owned automobile coverage
(including rented and leased vehicles), and, if any alcoholic beverages shall be
sold, manufactured or distributed in the Facility, liquor liability coverage,
all of which shall be in such amounts as Lender may from time to time reasonably
require, but not less than One Million Dollars ($1,000,000) per occurrence, Two
Million Dollars ($2,000,000) in the aggregate and with umbrella coverage not
less than Five Million Dollars ($5,000,000). If such policy shall cover more
than one property, such limits (other than the umbrella coverage) shall apply on
a "per location" basis. If any swimming pool is located at any Facility in the
future, such umbrella coverage shall be increased to Ten Million Dollars
($10,000,000). Such liability policy shall delete the contractual exclusion
under the personal injury coverage, if possible, and if available, shall include
the following endorsements: Notice of Accident, Knowledge of Occurrence, and
Unintentional Error and Omission.
(c) Professional liability insurance coverage in an amount equal
to not less than One Million Dollars ($1,000,000) per occurrence and One Million
Dollars ($1,000,000) in the aggregate and insuring Borrower for acts occurring
prior to the date of the Loan.
(d) Business interruption insurance (i) covering the same
perils of loss as are required to be covered by the property insurance required
under Section 4.5(a) above, (ii) in an amount equal to the projected annual net
income from the Facility plus carrying costs and extraordinary expenses of the
Property for a period of twelve (12) months, based upon Borrower's reasonable
estimate thereof as approved by Lender, (iii) including either an agreed amount
endorsement or a waiver of any co-insurance provisions, so as to prevent
Borrower, Lender and any other insured thereunder from being a co-insurer, and
(iv) providing that any covered loss thereunder shall be payable to Lender.
(e) During the period of any new construction on the Premises,
a so-called "Builder's All-Risk Completed Value" or "Course of Construction"
insurance policy in non-reporting form for any improvements under construction,
including, without limitation, for demolition and increased cost of construction
or renovation, in an amount equal to 100% of the estimated replacement cost
value on the date of completion, including "soft cost" coverage, and Workers'
Compensation Insurance covering all persons engaged in such construction, in an
amount at least equal to the minimum required by law. In addition, each
contractor and subcontractor shall be required to provide Lender with a
certificate of insurance for (i) workers' compensation insurance covering all
persons engaged by such contractor or subcontractor in such construction in an
amount at least equal to the minimum required by law, and (ii) general liability
insurance showing minimum limits of at least $5,000,000, including coverage for
products and completed operations. Each contractor and subcontractor also shall
cover Borrower and Lender as an additional insured under such liability policy
and shall indemnify and hold Borrower and Lender harmless from and against
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<PAGE> 15
any and all claims, damages, liabilities, costs and expenses arising out of,
relating to or otherwise in connection with its performance of such
construction.
(f) If the Facility contains steam boilers, steam pipes, steam
engines, steam turbines or other high pressure vessels, insurance covering the
major components of the central heating, air conditioning and ventilating
systems, boilers, other pressure vessels, high pressure piping and machinery,
elevators and escalators, if any, and other similar equipment installed in the
Improvements, in an amount equal to one hundred percent (100%) of the full
replacement cost of the Facility, which policies shall insure against physical
damage to and loss of occupancy and use of the Improvements arising out of an
accident or breakdown covered thereunder.
(g) Flood insurance with a deductible not to exceed Three
Thousand Dollars ($3,000), or such greater amount as may be satisfactory to
Lender in its sole discretion, and in an amount equal to the full insurable
value of the Facility or the maximum amount available, whichever is less, if the
Facility is located in an area designated by the Secretary of Housing and Urban
Development or the Federal Emergency Management Agency as having special flood
hazards.
(h) Workers' compensation insurance or other similar insurance
which may be required by governmental authorities or applicable legal
requirements in an amount at least equal to the minimum required by law, and
employer's liability insurance with a limit of One Hundred Thousand Dollars
($100,000) per accident and per disease per employee, and Five Hundred Thousand
Dollars ($500,000) in the aggregate for disease arising in connection with the
operation of the Property.
(i) Such other insurance coverages, in such amounts, and such
other forms and endorsements, as may from time to time be reasonably required by
Lender and which are customarily required by institutional lenders to similar
properties, similarly situated, including, without limitation, coverages against
other insurable hazards (including, by way of example only, earthquake, sinkhole
and mine subsidence), which at the time are commonly insured against and
generally available.
All insurance required under this Section 4.5 shall have a term
of not less than one year and shall be in the form and amount and with
deductibles as, from time to time, shall be reasonably acceptable to Lender,
under valid and enforceable policies issued by financially responsible insurers
either licensed to transact business in the State where the Facility is located,
or obtained through a duly authorized surplus lines insurance agent or otherwise
in conformity with the laws of such State, with (a) a rating of not less than
the third (3rd) highest rating category by either Standard & Poor's Ratings
Group, Duff & Phelps Credit Rating Co., Moody's Investors Service, Inc., Fitch
Investors Service, Inc. or any successors thereto, or (b) an A-:V rating in
Best's Key Rating Guide; provided, however, that if the initial principal
balance of the Loan is greater than Seven Million Five Hundred Thousand Dollars
($7,500,000.00), such insurer must, in lieu of such Best's rating, have a long
term senior debt rating of at least "A-" by Standard & Poor's Ratings Group.
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Certificates of Insurance shall be delivered to and held by Lender, and, upon
Lender's reasonable request, originals or certified copies of all insurance
policies shall be delivered to Lender. All such policies shall name Lender as an
additional insured, shall provide for loss payable solely to Lender and shall
contain: (a) standard "non-contributory mortgagee" endorsement or its equivalent
relating, inter alia, to recovery by Lender notwithstanding the negligent or
willful acts or omissions of Borrower and notwithstanding (i) occupancy or use
of the Facility for purposes more hazardous than those permitted by the terms of
such policy, (ii) any foreclosure or other action taken by Lender pursuant to
the Mortgage upon the occurrence of an Event of Default, or (iii) any change in
title or ownership of the Facility; and (b) a provision that such policies shall
not be canceled or amended, including, without limitation, any amendment
reducing the scope or limits of coverage, or failed to be renewed, without at
least thirty (30) days prior written notice to Lender in each instance. With
respect to insurance policies which require payment of premiums annually, not
less than thirty (30) days prior to the expiration dates of the insurance
policies obtained pursuant to this Agreement, Borrower shall pay such amount,
except to the extent Lender is escrowing sums therefor pursuant to the Loan
Documents. Not less than thirty (30) days prior to the expiration dates of the
insurance policies obtained pursuant to this Agreement, certificates evidencing
renewals of such policies bearing notations evidencing the payment of premiums
or accompanied by other evidence reasonably satisfactory to Lender of such
payment shall be delivered by Borrower to Lender. Borrower shall not carry
separate insurance, concurrent in kind or form or contributing in the event of
loss, with any insurance required under this Section 4.5. If the limits of any
policy required hereunder are reduced or eliminated due to a covered loss,
Borrower shall pay the additional premium, if any, in order to have the original
limits of insurance reinstated, or Borrower shall purchase new insurance in the
same type and amount that existed immediately prior to the loss.
If Borrower fails to maintain and deliver to Lender the
certificates of insurance required by this Agreement, Lender may, at its option,
procure such insurance and Borrower shall pay or, as the case may be, reimburse
Lender for, all premiums thereon promptly, upon demand by Lender, with interest
thereon at the Default Rate from the date paid by Lender to the date of
repayment and such sum shall constitute a part of the Loan Obligations.
The insurance required by this Agreement may, at the option of
Borrower, be effected by blanket and/or umbrella policies issued to Borrower or
to an Affiliate of Borrower covering the Facility and the properties of such
Affiliate; provided that, in each case, the policies otherwise comply with the
provisions of this Agreement and allocate to the Facility, from time to time,
the coverage specified by this Agreement, without possibility of reduction or
coinsurance by reason of, or damage to, any other property (real or personal)
named therein. If the insurance required by this Agreement shall be effected by
any such blanket or umbrella policies, Borrower shall furnish to Lender
certificates of insurance showing the amount of the insurance provided under
such policies which is applicable to the Facility.
Neither Lender nor its agents or employees shall be liable for
any loss or damage insured by the insurance policies required to be maintained
under this Agreement; it
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<PAGE> 17
being understood that (a) Borrower shall look solely to its insurance company
for the recovery of such loss or damage, (b) such insurance company shall have
no rights of subrogation against Lender, its agents or employees, and (c)
Borrower shall use its best efforts to procure from such insurance company a
waiver of subrogation rights against Lender. If, however, such insurance
policies do not provide for a waiver of subrogation rights against Lender
(whether because such a waiver is unavailable or otherwise), then Borrower
hereby agrees, to the extent permitted by law and to the extent not prohibited
by such insurance policies, to waive its rights of recovery, if any, against
Lender, its agents and employees, whether resulting from any damage to the
Facility, any liability claim in connection with the Facility or otherwise. If
any such insurance policy shall prohibit Borrower from waiving such claims, then
Borrower must obtain from such insurance company a waiver of subrogation rights
against Lender.
Net proceeds of insurance or condemnation (after payment of Lender's
reasonable costs and expenses) received at any time other than the last twelve
(12) months of the Loan term (a) in an amount less than $250,000, shall be made
available, and (b) in the amount of $250,000 or more may be made available, in
the Lender's sole discretion, to Borrower for Borrower's repair, restoration and
replacement of the Improvements, Equipment and Inventory damaged or taken on the
following terms and subject to Borrower's satisfaction of the following
conditions:
(i) The aggregate amount of all such proceeds shall
not exceed the aggregate amount of all such Loan Obligations.
(ii) At the time of such loss or damage and at all
times thereafter while Lender is holding any portion of such proceeds, there
shall exist no Default or Event of Default;
(iii) The Improvements, Equipment, and Inventory for
which loss or damage has resulted shall be capable of being restored to its
preexisting condition and utility in all material respects with a value equal to
or greater than that which existed prior to such loss or damage and such
restoration shall be capable of being completed prior to the earlier to occur of
(A) the expiration of business interruption insurance as determined by an
independent inspector or (B) the Maturity Date;
(iv) Within thirty (30) days from the date of such loss
or damage Borrower shall have given Lender a written notice electing to have the
proceeds applied for such purpose;
(v) Within sixty (60) days following the date of
notice under the preceding subparagraph (c) and prior to any proceeds being
disbursed to Borrower, Borrower shall have provided to Lender all of the
following:
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(A) complete plans and specifications for
restoration, repair and replacement of the Improvements,
Equipment and Inventory damaged to the condition, utility
and value required by (ii) above,
(B) if loss or damage exceeds $50,000,
fixed-price or guaranteed maximum cost bonded construction
contracts with a bondable contractor for completion of the
repair and restoration work in accordance with such plans
and specifications,
(C) builder's risk insurance for the full cost of
construction with Lender named under a standard mortgagee
loss-payable clause,
(D) such additional funds as in Lender's
reasonable opinion are necessary to complete such repair,
restoration and replacement, and
(E) copies of all material permits and licenses
necessary to complete the work in accordance with the plans
and specifications;
(vi) Lender may, at Borrower's expense, retain an
independent inspector to review and approve plans and specifications and
completed construction and to approve all requests for disbursement, which
approvals shall be conditions precedent to release of proceeds as work
progresses;
(vii) No portion of such proceeds shall be made
available by Lender for architectural reviews or for any other purposes which
are not directly attributable to the cost of repairing, restoring or replacing
the Improvements, Equipment and Inventory for which a loss or damage has
occurred unless the same are covered by such insurance;
(viii) Borrower shall diligently pursue such work and
shall complete such work prior to the earlier to occur of the expiration
of business interruption insurance or the Maturity Date;
(ix) The Facility continues to achieve the Debt Service
Coverage requirements set forth in Section 4.13 below;
(x) Each disbursement by Lender of such proceeds and
deposits shall be funded subject to conditions and in accordance with
disbursement procedures which a commercial construction lender would typically
establish in the exercise of sound banking practices and shall be made only upon
receipt of disbursement requests on an AIA G702/703 form (or similar form
approved by Lender) signed and certified by Borrower and, if required by the
Lender, its architect and general contractor with appropriate invoices and lien
waivers as required by Lender; and
(xi) Lender shall have a first lien security interest
in all building materials and completed repair and restoration work and
in all fixtures and equipment acquired with such proceeds, and Borrower shall
execute and deliver such mortgages, deeds
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of trust, security agreements, financing statements and other instruments as
Lender shall request to create, evidence, or perfect such lien and security
interest.
In the event and to the extent such proceeds become available
during the last twelve (12) months of the Loan term or are not permitted or
required to be used for the repair, restoration and replacement of the
Improvements, Equipment and Inventory for which a loss or damage has occurred,
or in the event Borrower fails to timely make the election to have insurance
proceeds applied to the restoration of the Improvements, Equipment, or
Inventory, or, having made such election, fails to timely comply with the terms
and conditions set forth herein, or, if the conditions set forth herein for such
application are otherwise not satisfied, then Lender shall be entitled without
notice to or consent from Borrower to apply such proceeds, or the balance
thereof, at Lender's option either (a) to the full or partial payment or
prepayment of the Loan Obligations (without premium) in the manner aforesaid, or
(b) to the repair, restoration and/or replacement of all or any part of such
Improvements, Equipment and Inventory for which a loss or damage has occurred.
Borrower agrees to give Lender written notice of any loss in
excess of $10,000 in connection with the Improvements, the Equipment or the
Inventory not more than one (1) Business Day after Borrower has knowledge
thereof.
Borrower appoints Lender as Borrower's attorney-in-fact to cause
the issuance of an endorsement of any insurance policy to bring Borrower into
compliance herewith and, as limited above, at Lender's sole option, to make any
claim for, receive payment for, and execute and endorse any documents, checks or
other instruments in payment for loss, theft, or damage covered under any such
insurance policy; provided, however, that in no event will Lender be liable for
failure to collect any amounts payable under any insurance policy.
If the Collateral is sold at a foreclosure sale or Lender
acquires title to the Collateral, Lender shall automatically succeed to all
rights of Borrower in and to any insurance policies and unearned insurance
premiums and in and to the proceeds resulting from any damage to the Collateral
prior to such sale or acquisition.
4.6 FINANCIAL AND OTHER INFORMATION. Provide Lender, or cause the
Lessee to provide to Lender, at its address set forth in Section 8.7 and at GMAC
Commercial Mortgage Corporation, 2200 Woodcrest Place, Suite 305, Birmingham,
Alabama 35209, the following financial statements and information on a
continuing basis during the term of the Loan:
(a) Within ninety (90) days after the end of each fiscal year
of each Facility and the Borrower (if different from such Facility) unaudited
financial statements of the operations of such Facility and the Borrower, which
statements shall be prepared on an accounting basis consistent with Guarantor's
audited financial statements, and shall include a balance sheet and a statement
of income and expenses for the year then ended, certified by a financial officer
of Borrower to be true and correct in all material respects.
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(b) Within one hundred twenty (120) days after the end of each
fiscal year of the Guarantor, audited consolidated financial statements of the
Guarantor prepared by KPMG Peat Marwick or any other nationally recognized
accounting firm or independent certified public accountant reasonably acceptable
to Lender, which consolidated statements shall be prepared in accordance with
GAAP and shall include a balance sheet and a statement of income and expenses
for the year then ended. In lieu of its obligations hereunder, Guarantor may
submit to Lender, upon its filing thereof, a copy of Form 10K as filed with the
United States Securities and Exchange Commission.
(c) Within one hundred twenty (120) days after the end of each
fiscal year of Borrower, and at any other time upon Lender's request, an
accounting of all security deposits held pursuant to all Leases, including the
name of the institution (if any) and the names and identification number of the
accounts (if any) in which such security deposits are held and the name of the
person to contact at such financial institution, along with any authority or
release necessary for Lender to access information regarding such accounts.
(d) Within forty-five (45) days after the end of each fiscal
quarter of each Facility and Borrower (if different from such Facility),
unaudited financial statements of the operations of such Facility and Borrower
prepared on an accounting basis consistent with Guarantor's audited financial
statements, which statements shall include a balance sheet and statement of
income and expenses for the quarter then ended, and shall be certified as true
and correct in all material respects by a financial officer of Borrower.
(e) Within forty-five (45) days after the end of each fiscal
quarter of the Guarantor, unaudited interim financial statements of the
Guarantor, prepared on an accounting basis consistent with Guarantor's audited
financial statements, which shall include a balance sheet and statement of
income and expenses for the quarter then ended, and shall be certified as true
and correct in all material respects by a financial officer of the Guarantor. In
lieu of its obligations hereunder, Guarantor may submit to Lender a copy of Form
10Q as filed by Guarantor with the United States Securities and Exchange
Commission.
(f) Within forty-five (45) days of the end of each fiscal
quarter of each Facility, a statement of the number of bed days available and
the actual resident days incurred for such quarter, together with, if
applicable, quarterly census information of such Facility as of the end of such
quarter in sufficient detail to show patient-mix (i.e., private, Medicare,
Medicaid, and V.A.), if applicable, on a daily average basis for such year
through the end of such quarter, certified by a financial officer of Borrower
and Guarantor to be true and correct. Such statements of each Facility shall be
accompanied by a summary showing the information described in Exhibit "D".
(g) Within ten (10) days of filing or receipt, all Medicare
and/or Medicaid cost reports and any amendments thereto filed with respect to
the Facility, if any, and all responses, audit reports, or other inquiries with
respect to such cost reports.
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(h) Within ten (10) days of receipt, a copy of the Medicaid Rate
Calculation Worksheet (or the equivalent thereof), if any, issued by the
appropriate Medicaid Agency for the Facility.
(i) Within ten (10) days of receipt, any and all notices
(regardless of form) from any and all licensing and/or certifying agencies that
the Facility license and/or the Medicare and/or Medicaid certification of the
Facility (if any) is being downgraded to a substandard category, revoked, or
suspended or that any such action is pending or being considered.
(j) Upon Lender's request, evidence of payment by Borrower or
Lessee of any applicable provider bed taxes or similar taxes, which taxes
Borrower agrees to pay or cause Lessee to pay.
(k) Within one hundred twenty (120) days after the end of each
of Lessee's fiscal years, and more frequently if reasonably requested by Lender,
an aged accounts receivable report for the Facility in sufficient detail to show
amounts due from each class of patient-mix, if applicable, (i.e., private,
Medicare, Medicaid and V.A.), by the account age classifications of 30 days, 60
days, 90 days, 120 days, and over 120 days.
The Lender reserves the right to require that the annual
financial statements of the Borrower be audited by a nationally recognized
accounting firm or independent certified public accountant acceptable to Lender
if (a) a monetary default continues beyond the applicable cure period, (b) if
Lender has reasonable grounds to believe that the unaudited financial statements
do not accurately represent the financial condition of the Borrower, on an
accounting basis consistent with Guarantor's audited financial statements, or
(c) Borrower fails to provide in a timely manner the statements, schedules and
reports required in this Section 4.6.
The Lender further reserves the right to require such other
financial information of Borrower, Lessee, Guarantor and/or the Facility, in
such form and at such other times (including monthly or more frequently) as
Lender shall reasonably require, and Borrower agrees promptly to provide or to
cause to be provided, such information to Lender. All financial statements must
be in the form and detail as Lender may from time to time reasonably request,
provided, however, that Lender will make reasonable efforts to use Borrower's
existing forms of reports for all purposes.
4.7 COMPLIANCE CERTIFICATE. At the time of furnishing the quarterly
operating statements required under the foregoing Section, furnish to Lender a
compliance certificate in the form attached hereto as Exhibit "E" executed by a
financial officer of Borrower and of the Lessee.
4.8 BOOKS AND RECORDS. Keep and maintain at all times at the
Facility, and upon Lender's reasonable request make available at the Borrower's
office, complete and accurate books of account and records (including copies of
supporting bills and invoices) adequate to
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reflect correctly the results of the operation of the Facility, and copies of
all written contracts, subleases (if any), and other instruments which affect
the Property, which books, records, contracts, subleases (if any) and other
instruments shall be subject to examination and inspection at any reasonable
time by Lender (upon reasonable advance notice, which for such purposes only may
be given orally, except in the case of an emergency or following an Event of
Default, in which case no advance notice shall be required); provided, however,
that if an Event of Default has occurred and is continuing, Borrower shall
deliver to Lender upon written demand all books, records, contracts, subleases
(if any) and other instruments relating to the Facility or its operation and
Borrower authorizes Lender to obtain a credit report on Borrower at any time.
4.9 PAYMENT OF INDEBTEDNESS. Duly and punctually pay or cause to be
paid all other Indebtedness now owing or hereafter incurred by Borrower in
accordance with the terms of such Indebtedness, except such Indebtedness owing
to those other than Lender which is being contested in good faith and with
respect to which any execution against properties of Borrower has been
effectively stayed and for which reserves and collateral for the payment and
security thereof have been established as determined by Lender in its sole
discretion.
4.10 RECORDS OF ACCOUNTS. Maintain all records, including records
pertaining to the Accounts of Borrower, at the principal place of business of
Borrower as set forth in this Agreement.
4.11 CONDUCT OF BUSINESS. Conduct, or cause the Lessee to conduct, the
operation of each Facility at all times in a manner consistent with the level of
operation of the Facility as of the date hereof, including without limitation,
the following:
(a) to maintain the standard of care for the residents of the
Facility at all times at a level necessary to ensure quality care for the
residents of the Facility in accordance with customary and prudent industry
standards;
(b) to operate the Facility in a prudent manner and in
compliance in all material respects with applicable laws and regulations
relating thereto and cause all Permits, Reimbursement Contracts, and any other
agreements necessary for the use and operation of the Facility or as may be
necessary for participation in the Medicaid, Medicare, or other applicable
reimbursement programs if Lessee, with prior written consent of the Lender,
which consent may be withheld in its sole discretion, elects to participate in
any such program to remain in effect without reduction in the number of licensed
beds authorized for use in the Medicaid, Medicare, or other applicable
reimbursement programs;
(c) to maintain sufficient Inventory and Equipment of types and
quantities at the Facility to enable Lessee adequately to perform operations of
the Facility for its Intended Use;
(d) to keep all Improvements and Equipment located on or used or
useful in connection with the Facility in good repair, working order and
condition, reasonable wear
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and tear excepted, and from time to time make all needed and proper repairs,
renewals, replacements, additions, and improvements thereto to keep the same in
good operating condition;
(e) to maintain sufficient cash in the operating accounts of the
Facility in order to satisfy the working capital needs of the Facility; and
(f) to keep all required Permits current and in full force and
effect.
4.12 PERIODIC SURVEYS. Furnish or cause Lessee to furnish to Lender,
within thirty (30) days of receipt, a copy of any Medicare, Medicaid, or other
licensing agency survey or report and any statement of deficiencies and/or any
other report indicating that any action is pending or being considered to
downgrade any Facility to a substandard category, and within the time period
required by the particular agency for furnishing a plan of correction also
furnish or cause to be furnished to Lender a copy of the plan of correction
generated from such survey or report for such Facility, and correct or cause to
be corrected any deficiency, the curing of which is a condition of continued
licensure or for full participation in Medicaid, Medicare or other reimbursement
program pursuant to any Reimbursement Contract for existing residents or for new
residents to be admitted with Medicaid or Medicare coverage, if Borrower or
Lessee, with the prior written consent of the Lender, which consent may be
withheld in its sole discretion, elects to participate in any such program, by
the date required for cure by such agency (plus extensions granted by such
agency).
4.13 DEBT SERVICE COVERAGE REQUIREMENTS.
(a) Maintain (commencing with the closing of the Loan), and,
within forty-five (45) days after the end of each fiscal quarter of each
Facility, provide evidence satisfactory to the Lender of the achievement of, the
following Debt Service Coverage for the Facilities ratios until the Loan
Obligations are paid in full:
(i) a Debt Service Coverage for the Facilities, after
deduction of Actual Management Fees, of not less than 1.0 to 1.0; and
(ii) a Debt Service Coverage for the Facilities, after
deduction of Assumed Management Fees, of not less than 1.25 to 1.0.
(b) If the Facilities fail for two consecutive quarters to
achieve or provide evidence of achievement of the Debt Service Coverage for the
Facilities, upon fifteen (15) days written notice to Borrower, Borrower will
deposit with Lender additional cash or other liquid collateral in an amount
which, when added to the first number of the debt service coverage calculation,
would have resulted in the noncomplying debt service coverage requirement having
been satisfied. If such failure continues for four (4) consecutive quarters
after deposit of the requisite additional cash or other liquid collateral, upon
fifteen (15) days written notice to Borrower, Borrower will deposit with Lender
additional cash or other liquid collateral (with credit for amounts currently
being held by Lender pursuant to the foregoing sentence), in an amount which, if
the same had been applied on the first day of the first
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quarter for which such noncompliance of the debt service coverage requirement
occurred to reduce the outstanding principal indebtedness of the Loan
Obligations, would have resulted in the noncomplying debt service coverage
requirement having been satisfied, and Borrower agrees promptly to provide such
additional cash or other liquid collateral. Such additional Collateral will be
held by the Lender in a standard custodial account, and shall constitute
additional collateral for the Loan Obligations and an "Account" as defined in
this Agreement, and, upon the occurrence of an Event of Default, may be applied
by the Lender, in such order and manner as the Lender may elect, to the
reduction of the Loan Obligations. Borrower shall not be entitled to any
interest earned on such additional Collateral. Provided that there is no
outstanding Default or Event of Default, such additional Collateral which has
not been applied to the Loan Obligations will be released by the Lender at such
time as Borrower provides the Lender with evidence that the required debt
service coverage requirements outlined above have been achieved and maintained
(without regard to any cash deposited pursuant to this Section 4.13) as of the
end of each of two (2) consecutive quarters.
4.14 OCCUPANCY. Maintain or cause to be maintained at all times a
daily average annual (calender year) occupancy for the Facilities, on a combined
basis for all Facilities, of eighty percent (80%) or more (based on the number
of beds available at each Facility with the minimum number of beds available at
any Facility remaining at or in excess of the number of beds set forth in the
Facility description in Schedule I); provided, however, that failure to maintain
such occupancy level shall not constitute an Event of Default if, at such time,
the Debt Service Coverage for the Facilities ratios are being achieved.
4.15 CAPITAL EXPENDITURES. Maintain and cause the Lessee to maintain
the Facilities in good condition and make minimum capital expenditures for each
Facility in each fiscal year in the average amount of $250.00 per unit, which
average shall be determined based on total capital expenditures for all
Facilities, (which capital expenditures may include those necessary for ordinary
repairs and routine maintenance), commencing the first year of the Loan term
and, within ninety (90) days of the end of such fiscal year, provide evidence
thereof satisfactory to Lender. In determining whether or not such requirement
has been met, with respect to each Facility, the Lender will carry forward to
the next year(s) the excess amount of capital expenditures made for such
Facility in excess of $250.00 per unit in any one year. In the event that
Borrower shall fail to do so, Borrower shall, upon Lender's written request,
immediately establish and maintain a capital expenditures reserve fund with
Lender equal to the difference between the required amount per unit and the
amount per unit actually spent by the Borrower. Borrower grants to Lender a
right of setoff against all moneys in the capital expenditures reserve fund, and
Borrower shall not permit any other Lien to exist upon such fund. The proceeds
of such capital expenditures reserve fund will be disbursed monthly upon
Lender's receipt of satisfactory evidence that Borrower has made the required
capital expenditures. Upon Borrower's failure to adequately maintain the
Facility in good condition, Lender may, but shall not be obligated to, make such
capital expenditures and may apply the moneys in the capital expenditures
reserve fund for such purpose. To the extent there are insufficient moneys in
the capital expenditures reserve fund for such purposes, all funds advanced by
Lender to make such capital expenditures shall constitute a portion of the Loan
Obligations, shall be secured by the Mortgage and shall accrue interest at
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the Default Rate until paid. Upon an Event of Default, Lender may apply any
moneys in the capital expenditures reserve fund to the Loan Obligations, in such
order and manner as Lender may elect. For any partial fiscal year during which
the Loan is outstanding, the required expenditure amount shall be prorated by
multiplying the total of the required amount per unit by a fraction, the
numerator of which is the number of days during such year for which all or part
of the Loan is outstanding and the denominator of which is the number of days in
such year.
4.16 [INTENTIONALLY OMITTED.]
4.17 UPDATED APPRAISALS. For so long as the Loan remains outstanding,
if any Event of Default shall occur hereunder, or if, in Lender's judgment, a
material depreciation in the value of any Property shall have occurred, then in
any such event, Lender may cause such Property to be appraised by an appraiser
selected by Lender, and in accordance with Lender's appraisal guidelines and
procedures then in effect, and Borrower agrees to cooperate in all respects with
such appraisals and furnish to the appraisers all requested information
regarding the Property and the Facility. Borrower agrees to pay all reasonable
costs incurred by Lender in connection with such appraisal which costs shall be
secured by the relevant Mortgage and shall accrue interest at the Default Rate
until paid.
4.18 COMPLY WITH COVENANTS AND LAWS. Comply, and cause the Lessee to
comply in all material respects, with all applicable covenants and restrictions
of record and all laws, ordinances, rules and regulations and keep the Facility
and the Property in compliance in all material respects with applicable laws,
ordinances, rules and regulations, including, without limitation, the Americans
with Disabilities Act and regulations promulgated thereunder, and laws,
ordinances, rules and regulations relating to zoning, health, building codes,
setback requirements, Medicaid and Medicare laws, if applicable, and keep the
Permits for the Facility in full force and effect.
4.19 TAXES AND OTHER CHARGES. Subject to Borrower's right to contest
the same as set forth in Section 9(d) of the Mortgage, pay and cause the Lessee
to pay all taxes, assessments, charges, claims for labor, supplies, rent, and
other obligations which, if unpaid, might give rise to a Lien against property
of Borrower, except Liens to the extent permitted by this Agreement.
4.20 COMMITMENT LETTER. Provide all items and pay all amounts required
by the Commitment Letter. If any term of the Commitment Letter shall conflict
with the terms of this Agreement, this Agreement shall govern and control. As to
any matter contained in the Commitment Letter, and as to which no mention is
made in this Agreement or the other Loan Documents, the Commitment Letter shall
continue to be in effect and shall survive the execution of this Agreement and
all other Loan Documents.
4.21 CERTIFICATE. Upon Lender's written request, furnish Lender with a
certificate stating that Borrower has complied with and is in compliance with
all terms, covenants and conditions of the Loan Documents to which Borrower is a
party and that there exists no
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Default or Event of Default or, if such is not the case, that one or more
specified events have occurred, and describing such event.
4.22 NOTICE OF FEES OR PENALTIES. Notify Lender, within 15 days of
Borrower's knowledge thereof, of the assessment or threat of assessment by any
state or any Medicare, Medicaid, health or licensing agency of any material
fines or penalties against Borrower, Lessee or the Facility.
4.23 LOAN CLOSING CERTIFICATION. Immediately notify Lender, in
writing, in the event any representation, warranty or covenant contained herein
or in that certain Loan Closing Certification, executed by Borrower for the
benefit of Lender of even date herewith, becomes untrue in any material respect.
4.24 LEASE AGREEMENT.
(a) Maintain each Lease Agreement, and cause the Lessee to
maintain each Lease Agreement to which it is a party, in full force and effect
and timely perform, and cause the Lessee to perform all of their respective
obligations thereunder and not permit the termination or amendment of any Lease
Agreement unless the prior written consent of Lender is first obtained (which
consent shall not be unreasonably withheld or delayed); provided, however, that
the Lender's prior consent shall not be required for termination of (i) a Lease
Agreement in the event of emergency situations (i.e. termination of the
applicable Facility's operating Permit) or for the termination of license, or
(ii) the Lease Agreement between the Erie County Industrial Development Agency
and the Borrower in connection with a purchase of the Kenmore Facility by
Borrower, or (iii) the Lease Agreement between the Schenectady County Industrial
Development Agency and the Borrower in connection with a purchase of the
Niskayuna II Facility by Borrower.
(b) In the event that bankruptcy or insolvency proceedings are
instituted by or against the Lessee, terminate the Lease Agreement (to the
extent permitted by the applicable bankruptcy court having jurisdiction over
such proceedings), upon written instruction received from Lender.
4.25 PUBLIC HEALTH AND SAFETY NOTICES. Provide any servicer of the
Loan with notice of any incident reported to any public health or safety
provider or any claim referred to its liability insurance provider immediately
after such claim is made.
4.26 MICHIGAN FACILITIES. Not less than five (5) Business Days after
the date hereof, notify the Michigan Department of Consumer and Industry
Services (a) of the change in fee ownership and lessor of the Northville
Facility and the Utica Facility and (b) that the Guarantor will continue to be
the operator and licensee of such Facility.
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ARTICLE V
NEGATIVE COVENANTS OF BORROWER
Until the Loan Obligations have been paid in full, Borrower shall not:
5.1 ASSIGNMENT OF LICENSES AND PERMITS. Assign or transfer or permit
any other party to assign or transfer any of its or their interest in the
Permits, or Reimbursement Contracts, if any, (including rights to payment
thereunder) pertaining to the Facility, or assign, transfer, or remove or permit
any other person to assign, transfer, or remove any records pertaining to the
Facility including, without limitation, resident records, medical and clinical
records (except for removal of such resident records as directed by the
residents owning such records) without Lender's prior written consent, which
consent may be granted or refused in Lender's sole discretion.
5.2 NO LIENS; EXCEPTIONS. Create, incur, assume or suffer to exist
any Lien upon or with respect to the Facility or any of its properties, rights,
income or other assets relating thereto, including, without limitation, the
Collateral, whether now owned or hereafter acquired, other than the following
permitted Liens ("Permitted Encumbrances"):
(a) Liens at any time existing in favor of the Lender;
(b) Liens which are listed in Exhibit "F" attached hereto;
(c) Inchoate Liens arising by operation of law for the purchase
of labor, services, materials, equipment or supplies, provided payment shall not
be delinquent and, if such Lien is a lien upon any of the Property or
Improvements, such Lien must be fully disclosed to Lender and bonded off and
removed from the Property and Improvements within thirty (30) days of its
creation in a manner satisfactory to Lender;
(d) Liens incurred in the ordinary course of business in
connection with workers' compensation, unemployment insurance or other forms of
governmental insurance or benefits, or to secure performance of tenders,
statutory obligations, leases and contracts (other than for money borrowed or
for credit received with respect to property acquired) entered into in the
ordinary course of business as presently conducted or to secure obligations for
surety or appeal bonds;
(e) Liens for current year's taxes, assessments or governmental
charges or levies not yet due and payable; and
(f) Liens securing indebtedness permitted under Section 3.24.
5.3 MERGER, CONSOLIDATION, ETC. Except as otherwise provided in the
Mortgage, consummate any merger, consolidation or similar transaction, or sell,
assign, lease or otherwise dispose of (whether in one transaction or in a series
of transactions), all or
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substantially all of its assets (whether now or hereafter acquired), without the
prior written consent of the Lender, which consent may be granted or refused in
Lender's sole discretion.
5.4 MAINTAIN SINGLE-PURPOSE ENTITY STATUS.
(a) Dissolve or terminate or materially amend the terms of its
certificate of incorporation, articles of organization, operating agreement or
partnership agreement, as applicable, the terms of which require Borrower to be
a Single-Purpose Entity;
(b) enter into any transaction of merger or consolidation, or
liquidate or dissolve itself (or suffer any liquidation or dissolution), or
acquire by purchase or otherwise all or substantially all the business or assets
of, or any Stock or other evidence of beneficial ownership of, any Person;
(c) guarantee or otherwise become liable on or in connection
with any obligation of any other Person;
(d) at any time own any encumbered asset other than (i) the
Property, and (ii) incidental personal property necessary for the operation of
the Property;
(e) at any time be engaged directly or indirectly, in any
business other than the ownership, management and operation of the Property;
(f) enter into any contract or agreement with any general
partner, principal, member or Affiliate of Borrower or any Affiliate of any
general partner, principal or member of Borrower except upon terms and
conditions that are intrinsically fair and substantially similar to those that
would be available on an arm's-length basis with third parties other than an
Affiliate;
(g) incur, create or assume any indebtedness, secured or
unsecured, direct or contingent (including guaranteeing any obligation), other
than (i) the Loan, (ii) indebtedness which represents trade payables or accrued
expenses incurred in the ordinary course of business of owning and operating the
Property, and (iii) indebtedness secured by purchase money liens or represented
by equipment or vehicle leases, provided that (A) the aggregate amount of such
indebtedness incurred with respect to a Facility does not exceed the lesser of
$500,000 or five percent (5%) of the portion of the Loan allocated to such
Facility as shown on Exhibit B, and (B) the indebtedness secured by such liens
is used for the purchase of equipment which is unique to, or necessary for the
operation of, the Mortgaged Property for its Intended Use; no other debt will be
secured (senior, subordinate or pari passu) by the Property;
(h) make any loans or advances to any third party (including any
Affiliate);
(i) become insolvent or fail to pay its debts from its assets as
the same shall become due;
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(j) fail to do all things necessary to preserve its existence
as a Single-Purpose Entity, and will not, nor will any partner, limited or
general, member or shareholder thereof, amend, modify or otherwise change its
partnership certificate, partnership agreement, articles of organization,
operating agreement, articles of incorporation or by-laws in a manner which
adversely affects Borrower's existence as a Single-Purpose Entity;
(k) fail to conduct and operate its business as presently
conducted and operated; provided however, that no default shall exist hereunder
if Borrower engages in activities closely related to and compatible with
assisted living/adult home facilities or offers additional services not offered
on the date hereof to the extent permitted under applicable law with respect to
assisted living/adult home facilities;
(l) fail to maintain books and records and bank accounts
separate from those of its Affiliates, including its members, general
partners or shareholders, as applicable;
(m) fail to at all times hold itself out to the public as a
legal entity separate and distinct from any other entity (including any
Affiliate thereof, including the general partner or any member or shareholder of
Borrower or any Affiliate of the general partner or any member or shareholder of
Borrower, as applicable);
(n) fail to file its own tax returns;
(o) fail to maintain adequate capital for the normal obligations
reasonably foreseeable in a business of its size and character and in light of
its contemplated business operations;
(p) seek the dissolution or winding up, in whole or in part, of
Borrower;
(q) commingle the funds and other assets of Borrower with those
of any general partner, any member, any shareholder, any Affiliate or any other
Person;
(r) fail to maintain its assets in such a manner that it is not
costly or difficult to segregate, ascertain or identify its individual assets
from those of any Affiliate or any other Person; and
(s) hold itself out to be responsible for the debts or
obligations of any other Person.
5.5 CHANGE OF BUSINESS; CHANGE OF USE. Make any material change in
the nature of its business as it is being conducted as of the date hereof or
change the use of any Facility from its Intended Use; provided, however, that
Borrower may engage in activities closely related to and compatible with
assisted living/adult home facilities and offer additional services not offered
on the date hereof to the extent permitted with respect to assisted living/adult
home facilities and under applicable Permits.
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5.6 CHANGES IN ACCOUNTING. Change its methods of accounting, unless
such change is permitted by GAAP, and provided such change does not have the
effect of curing or preventing what would otherwise be an Event of Default or
Default had such change not taken place.
5.7 ERISA FUNDING AND TERMINATION. Permit (a) the funding
requirements of ERISA with respect to any employee plan to be less than the
minimum required by ERISA at any time, or (b) any employee plan to be subject to
involuntary termination proceedings at any time.
5.8 TRANSACTIONS WITH AFFILIATES. Enter into any transaction with any
Affiliate of Borrower other than in the ordinary course of its business and on
fair and reasonable terms no less favorable to Borrower than those it could
obtain in a comparable arms-length transaction with a Person not an Affiliate.
5.9 TRANSFER OF OWNERSHIP INTERESTS. Except as otherwise provided in
the Mortgage, permit a change in the majority ownership of the stock of Borrower
as of the date of this Agreement unless the written consent of the Lender is
first obtained, which consent may be granted or refused in Lender's sole
discretion.
5.10 LEASE OR MANAGEMENT AGREEMENT. Permit and enter into any
Management Agreement or any sublease for any portion of the Facility, except as
permitted under the applicable Mortgage and Assignment of Leases and Rents, or
enter into any operating lease for the Facility (other than the Lease
Agreements), unless Borrower first notifies Lender and provides Lender a copy of
the proposed lease, sublease or management agreement, obtains Lender's written
consent thereto, which consent shall not be unreasonably withheld, and obtains
and provides Lender with a subordination agreement in form satisfactory to
Lender, as determined by Lender in its sole reasonable discretion, from such
lessee, sublessee or manager subordinating to all rights of Lender.
5.11 PLACE OF BUSINESS. Change its chief executive office or its
principal place of business, as set forth on Exhibit B hereto, without first
giving Lender at least thirty (30) days prior written notice thereof and
promptly providing Lender such information and amendatory financing statements
as Lender may request in connection therewith.
5.12 ACQUISITIONS. Directly or indirectly, purchase, lease, manage,
own, operate, or otherwise acquire any property or other assets (or any interest
therein) which are not used in connection with the operation of the Facility.
5.13 PARTICIPATION IN MEDICARE/MEDICAID; TRANSFER OF LICENSE
(a) Without the prior written consent of Lender, which may be
granted or withheld in its discretion, participate or permit any operator or
Manager of the Property to participate, in Medicare and Medicaid, or any
provider agreement under Medicare and Medicaid, or accept any residents whose
ability to reside in the Property requires that the
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Borrower, the Property or any operator or Manager participate in Medicare,
Medicaid or any similar provider program; or
(b) (i) Transfer any Permit to any location other than the
Property for which it is issued or pledge any Permit as collateral security for
any other loan or indebtedness, (ii) rescind, withdraw, modify, or otherwise
alter any Permit if doing so would have a material adverse effect on the
Property, or (iii) pledge any receivables as collateral security for any other
loan or Indebtedness or allow any operator or Manager to do so.
ARTICLE VI
ENVIRONMENTAL HAZARDS
6.1 PROHIBITED ACTIVITIES AND CONDITIONS. Except for matters covered
by a written program of operations and maintenance approved in writing by Lender
(an "O&M Program") or matters described in Section 6.2, Borrower shall not cause
or permit any of the following:
(a) The presence, use, generation, release, treatment,
processing, storage (including storage in above ground and underground storage
tanks), handling, or disposal-of any Hazardous Materials in, on or under the
Property or any Improvements;
(b) The transportation of any Hazardous Materials to, from, or
across the Property;
(c) Any occurrence or condition on the Property or in the
Improvements or any other property of Borrower that is adjacent to the Property,
which occurrence or condition is or may be in violation of Hazardous Materials
Laws; or
(d) Any violation of or noncompliance with the terms of any
Environmental Permit with respect to the Property, the Improvements or any
property of Borrower that is adjacent to the Property. The matters described in
clauses (a) through (d) above are referred to collectively in this Article VI as
"Prohibited Activities and Conditions" and individually as a "Prohibited
Activity and Condition."
6.2 EXCLUSIONS. Notwithstanding any other provision of Article VI to
the contrary, "Prohibited Activities and Conditions" shall not include the safe
and lawful use and storage of quantities of (a) pre-packaged supplies, medical
waste, cleaning materials and petroleum products customarily used in the
operation and maintenance of comparable Facilities, (b) cleaning materials,
personal grooming items and other items sold in pre-packaged containers for
consumer use and used by occupants of the Facility; and (c) petroleum products
used in the operation and maintenance of motor vehicles from time to time
located on the Property's parking areas, so long as all of the foregoing are
used, stored, handled, transported and disposed of in compliance with Hazardous
Materials Laws.
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6.3 PREVENTIVE ACTION. Borrower shall take all appropriate steps
(including the inclusion of appropriate provisions in any Leases approved by
Lender which are executed after the date of this Agreement) to prevent its
employees, agents, contractors, tenants and occupants of the Facility from
causing or permitting any Prohibited Activities and Conditions.
6.4 O& M PROGRAM COMPLIANCE. If an O&M Program has been established
with respect to Hazardous Materials, Borrower shall comply in a timely manner
with, and cause all tenants, subtenants, employees, agents, and contractors of
Borrower and any other persons present on the Property to comply with the O&M
Program. All costs of performance of Borrower's obligations under any O&M
Program shall be paid by Borrower, and Lender's out-of-pocket costs incurred in
connection with the monitoring and review of the O&M Program and Borrower's
performance shall be paid by Borrower upon demand by Lender. Any such
out-of-pocket costs of Lender which Borrower fails to pay promptly shall become
an additional part of the Loan Obligations.
6.5 BORROWER'S ENVIRONMENTAL REPRESENTATIONS AND WARRANTIES. Borrower
represents and warrants to Lender that, except as previously disclosed by
Borrower to Lender in writing:
(a) Neither Borrower nor Guarantor nor NCBO nor PCBO nor WCBO
nor the Manager has at any time caused or permitted any Prohibited Activities
and Conditions.
(b) No Prohibited Activities and Conditions exist or have
existed.
(c) The Property and the Improvements do not now contain any
underground storage tanks, and, to the best of Borrower's knowledge after
reasonable and diligent inquiry, the Property and the Improvements have not
contained any underground storage tanks in the past. If there is an underground
storage tank located on the Property or the Improvements which has been
previously disclosed by Borrower to Lender in writing, that tank complies with
all requirements of Hazardous Materials Laws.
(d) Borrower, Guarantor, NCBO, PCBO, WCBO and the Manager have
complied with all Hazardous Materials Laws, including all requirements for
notification regarding releases of Hazardous Materials. Without limiting the
generality of the foregoing, Borrower has obtained all Environmental Permits
required for the operation of the Property and the Improvements in accordance
with Hazardous Materials Laws now in effect and all such Environmental Permits
are in full force and effect. No event has occurred with respect to the Property
and/or Improvements that constitutes, or with the passing of time or the giving
of notice would constitute, noncompliance with the terms of any Environmental
Permit.
(e) There are no actions, suits, claims or proceedings pending
or, to the best of Borrower's knowledge after reasonable and diligent inquiry,
threatened that involve the Property and/or the Improvements and allege, arise
out of, or relate to any Prohibited Activity and Condition.
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(f) Neither Borrower nor Guarantor nor NCBO nor PCBO nor WCBO
nor Manager have received any complaint, order, notice of violation or other
communication from any Governmental Authority with regard to air emissions,
water discharges, noise emissions or Hazardous Materials, or any other
environmental, health or safety matters affecting the Property, the Improvements
or any other property of Borrower that is adjacent to the Property. The
representations and warranties in this Article VI shall be continuing
representations and warranties that shall be deemed to be made by Borrower
throughout the term of the Loan evidenced by the Note, until the Loan
Obligations have been paid in full.
6.6 NOTICE OF CERTAIN EVENTS. Borrower shall, and shall cause Lessee,
Manager and NCBO, PCBO and WCBO to promptly notify Lender in writing of any and
all of the following that may occur:
(a) The discovery by Borrower, Lessee, the Manager, NCBO, PCBO
or WCBO of any Prohibited Activity and Condition.
(b) The receipt by Borrower, Lessee, the Manager, NCBO, PCBO or
WCBO of or knowledge of any complaint, order, notice of violation or other
communication from any Governmental Authority or other person with regard to
present, or future alleged Prohibited Activities and Conditions or any other
environmental, health or safety matters affecting the Property, the Improvements
or any other property of Borrower that is adjacent to the Property.
(c) Any representation or warranty in this Article VI which
becomes untrue at any time after the date of this Agreement.
Any such notice given by Borrower, Lessee, the Manager, NCBO,
PCBO or WCBO shall not relieve Borrower of, or result in a waiver of, any
obligation under this Agreement, the Note, or any of the other Loan Documents.
6.7 COSTS OF INSPECTION. Borrower shall pay promptly the costs of
any environmental inspections, tests or audits ("Environmental Inspections")
required by Lender in connection with any foreclosure or deed in lieu of
foreclosure, or, if required by Lender, as a condition of Lender's consent to
any "Transfer" (as defined in the Mortgage), or required by Lender following a
reasonable determination by Lender that Prohibited Activities and Conditions may
exist. Any such costs incurred by Lender (including the fees and out-of-pocket
costs of attorneys and technical consultants whether incurred in connection with
any judicial or administrative process or otherwise) which Borrower fails to pay
promptly shall become an additional part of the Loan Obligations as provided in
Section 7 of the Mortgage.
The results of all Environmental Inspections made by Lender shall
at all times remain the property of Lender and Lender shall have no obligation
to disclose or otherwise make available to Borrower or any other party such
results or any other information obtained by Lender in connection with its
Environmental Inspections unless Lender intends to take any legal action against
Borrower to enforce its rights under Section 12.19 of the Note, pursuant to or
as a result of such Environmental Inspections. Borrower acknowledges that
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Lender cannot control or otherwise ensure the truthfulness or the accuracy of
the results of any of its Environmental Inspections and that the release of such
results to prospective bidders at a foreclosure sale of the Property and the
Improvements located therein may have a material and adverse effect upon the
amount which a party may bid at such sale. Borrower agrees that Lender shall
have no liability whatsoever as a result of delivering the results of any of its
Environmental Inspections to any third party in accordance with the terms of
this Section 6.7, and Borrower hereby releases and forever discharges Lender
from any and all claims, damages or causes of action arising out of, connected
with, or incidental to the results of, the delivery of any of Lender's
Environmental Inspections.
6.8 REMEDIAL WORK. If any investigation, site monitoring,
containment, clean-up, restoration or other remedial work ("Remedial Work") is
necessary to comply with any Hazardous Materials Laws or order of any
Governmental Authority that has or acquires jurisdiction over the Property, the
Improvements or the use, operation or improvement of the Property under any
Hazardous Materials Laws, Borrower shall, by the earlier of (a) the applicable
deadline required by Hazardous Materials Laws or (b) 30 days after notice from
Lender demanding such action, begin performing the Remedial Work, and thereafter
diligently prosecute it to completion, and shall in any event complete such work
by the time required by applicable Hazardous Materials Laws. If Borrower fails
to begin on a timely basis or diligently prosecute any required Remedial Work,
Lender may, at its option, cause the Remedial Work to be completed, in which
case Borrower shall reimburse Lender on demand for the cost of doing so. Any
reimbursement due from Borrower to Lender shall become part of the Loan
Obligations.
6.9 COOPERATION WITH GOVERNMENTAL AUTHORITIES. Borrower shall
cooperate with any inquiry by any Governmental Authority and shall comply with
any governmental or judicial order which arises from any alleged Prohibited
Activity and Condition.
6.10 INDEMNITY.
(a) Borrower shall hold harmless, defend and indemnify (i)
Lender, (ii) any prior owner or holder of the Note, (iii) the officers,
directors, partners, agents, shareholders, employees and trustees of any of the
foregoing, and (iv) the heirs, legal representatives, successors and assigns of
each of the foregoing (together, the "Indemnitees") against all proceedings,
claims, damages, losses, expenses, penalties and costs (whether initiated or
sought by any Governmental Authority or private parties), including fees and out
of pocket expenses of attorneys and expert witnesses, investigatory fees, and
remediation costs, whether incurred in connection with any judicial or
administrative process or otherwise, arising directly or indirectly from any of
the following:
(i) Any breach of any representation or warranty of Borrower
in this Article VI,
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(ii) Any failure by Borrower to perform any of its
obligations under this Article VI,
(iii) The existence or alleged existence of any
Prohibited Activity and Condition,
(iv) The presence or alleged presence of Hazardous
Materials in, on, or around under the Property, the Improvements or any property
of Borrower that is adjacent to the Property, or
(v) Actual or alleged violation of any Hazardous
Materials Laws.
(b) Counsel selected by Borrower to defend Indemnitees shall
be subject to the approval of those Indemnitees. Notwithstanding anything
contained herein, any Indemnitee may elect to defend any claim or legal or
administrative proceeding at the Borrower's expense if such Indemnitee has
reason to believe that its interests are not being adequately represented or
diverge from other interests being represented by such counsel (but Borrower
shall be obligated to bear the expense of at most only one such separate
counsel). Nothing contained herein shall prevent an Indemnitee from employing
separate counsel in any such action at any time and participating in the defense
thereof at its own expense.
(c) Borrower shall not, without the prior written consent of
those Indemnitees who are named as parties to a claim or legal or administrative
proceeding (a "Claim") settle or compromise the Claim if the settlement (i)
results in the entry of any judgment that does not include as an unconditional
term the delivery by the claimant or plaintiff to Lender of a written release of
those Indemnitees, satisfactory in form and substance to Lender or (ii) may
materially and adversely affect any Indemnitee, as determined by such Indemnitee
in its sole discretion.
(d) The liability of Borrower to indemnify the Indemnitees shall
not be limited or impaired by any of the following, or by any failure of
Borrower or any guarantor to receive notice of or consideration for any of the
following:
(i) Any amendment or modification of any Loan
Document,
(ii) Any extensions of time for performance required by
any of the Loan Documents,
(iii) The accuracy or inaccuracy of any representations
and warranties made by Borrower under this Agreement or any other Loan Document,
(iv) The release of Borrower or any other person, by
Lender or by operation of law, from performance of any obligation under any of
the Loan Documents,
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(v) The release or substitution in whole or in part of
any security for the Loan Obligations,
(vi) Lender's failure to properly perfect any lien or
security interest given as security for the Loan Obligations, and
(vii) Any provision in any of the Loan Documents
limiting Lender's recourse to property securing the Loan or limiting the
personal liability of Borrower or any other party for payment of all or any part
of the Loan.
(e) Borrower 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 Indemnitee or Indemnitees in any legal or administrative
proceeding incident to any matters against which Indemnitees are entitled to be
indemnified under this Article VI,
(ii) Reimburse Indemnitees for any expenses paid or
incurred in connection with any matters against which Indemnitees are entitled
to be indemnified under this Article VI, and
(iii) Reimburse Indemnitees for any and all expenses,
including reasonable fees and costs of attorneys and expert witnesses, paid or
incurred in connection with the enforcement by Indemnitees of their rights under
this Article VI, or in monitoring and participating in any legal or
administrative proceeding.
(f) In any circumstances in which the indemnity under this
Article VI applies, Lender may employ its own legal counsel and consultants to
prosecute, defend or negotiate any claim or legal or administrative proceeding
and Lender, with the prior written consent of Borrower (which shall not be
unreasonably withheld, delayed or conditioned) may settle or compromise any
action or legal or administrative proceeding. Borrower shall reimburse Lender
upon demand for all costs and expenses incurred by Lender, including all costs
of settlements entered into in good faith, and the reasonable fees and out of
pocket expenses of such attorneys and consultants.
(g) The provisions of this Article VI shall be in addition to
any and all other obligations and liabilities that Borrower may have under the
applicable law or under the other Loan Documents, and each Indemnitee shall be
entitled to indemnification under this Article VI without regard to whether
Lender or that Indemnitee has exercised any rights against the Property and/or
the Improvements or any other security, pursued any rights against any
guarantor, or pursued any other rights available under the Loan Documents or
applicable law. If Borrower consists of more than one person or entity, the
obligation of those persons or entities to indemnify the Indemnitees under this
Article VI shall be joint and several. The obligations of Borrower to indemnify
the Indemnitees under this Article VI shall survive any repayment or discharge
of the Loan Obligations, any foreclosure proceeding, any foreclosure sale, any
delivery of any deed in lieu of foreclosure, and any release of record of the
lien of the Mortgage.
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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 to pay any installment of principal,
interest, or other payments required under any Note, within five (5) days after
the same becomes due; or
(b) Borrower's violation of any covenant set forth in Article V
hereof; or
(c) Borrower's failure to deliver or cause to be delivered the
financial statements and information set forth in Section 4.6 above within the
times required and such failure is not cured within thirty (30) days following
Lender's written notice to Borrower thereof; or
(d) The failure of Borrower properly and timely to perform or
observe any covenant or condition set forth in this Agreement (other than those
specified in this Section 7.1) or any other Loan Documents which is not cured
within any applicable cure period as set forth herein or, if no cure period is
specified therefor, is not cured within thirty (30) days of Lender's notice to
Borrower of such Default; provided, however, that if such default cannot be
cured within such thirty (30) day period, such cure period shall be extended for
an additional sixty (60) days, as long as Borrower is diligently and in good
faith prosecuting said cure to completion; or
(e) The filing by Borrower or Guarantor or NCBO or PCBO or WCBO
of a voluntary petition, or the adjudication of any of the aforesaid Persons, or
the filing by any of the aforesaid Persons of any petition or answer seeking or
acquiescing, in any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief for itself under any present or
future federal, state or other statute, law or regulation relating to
bankruptcy, insolvency or other relief for debtors, or if any of the aforesaid
Persons should seek or consent to or acquiesce in the appointment of any
trustee, receiver or liquidator for itself or of all or any substantial part of
its property or of any or all of the rents, revenues, issues, earnings, profits
or income thereof, or the mailing of any general assignment for the benefit of
creditors or the admission in writing by any of the aforesaid Persons of its
inability to pay its debts generally as they become due; or
(f) The entry by a court of competent jurisdiction of an order,
judgment, or decree approving a petition filed against Borrower or Guarantor or
NCBO or PCBO or WCBO which petition seeks any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
present or future federal, state or other statute, law or regulation relating to
bankruptcy, insolvency, or other relief for debtors, which order, judgment or
decree remains unvacated and unstayed for an aggregate of sixty (60) days
(whether or not consecutive) from the date of entry thereof, or the appointment
of any trustee, receiver or liquidator of any of the aforesaid Persons or of all
or any substantial part of its properties or of any or all of the rents,
revenues, issues, earnings, profits or income
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thereof, which appointment shall remain unvacated and unstayed for an aggregate
of sixty (60) days (whether or not consecutive); or
(g) Unless otherwise permitted hereunder or under any other Loan
Documents, the sale, transfer, lease, assignment, or other disposition,
voluntarily or involuntarily, of the Collateral, or any part thereof, or, except
for Permitted Encumbrances as described in Section 5.2 above, any further
encumbrance of the Collateral, unless the prior written consent of Lender is
obtained, which consent may be withheld for any reason; or
(h) The failure of Borrower to take the corrective measures
required in this Agreement within the time periods specified following Lender's
demand because the Debt Service Coverage for the Facilities has not been met; or
(i) Any certificate, statement, representation, warranty or
audit heretofore or hereafter furnished by or on behalf of Borrower or Guarantor
pursuant to or in connection with this Agreement (including, without limitation,
representations and warranties contained herein or in any of the Loan Documents)
or as an inducement to Lender to make the Loan to Borrower, (i) proves to have
been false in any material respect at the time when the facts therein set forth
were stated or certified, or (ii) proves to have omitted any substantial
contingent or unliquidated liability or claim against Borrower or Guarantor, or
(iii) on the date of execution of this Agreement there shall have been any
material adverse change in any of the facts previously disclosed by any such
certificate, statement, representation, warranty or audit, which change shall
not have been disclosed to Lender in writing at or prior to the time of such
execution; or
(j) The failure of Borrower to correct or cause the Lessee to
correct, within the time deadlines set by any applicable Medicare, Medicaid or
licensing agency, any deficiency which would result in the following actions by
such agency with respect to the Facility:
(i) a termination of any Reimbursement Contract or any
Permit; or
(ii) a ban on new admissions generally or on admission
of patients otherwise qualifying for Medicare or Medicaid coverage; or
(k) The Borrower or the Facility should be assessed fines or
penalties by any state or any Medicare, Medicaid, health or licensing agency
having jurisdiction over such Persons or the Facility in excess of $25,000 which
are not paid within the time specified therefor; or
(l) A final judgment shall be rendered by a court of law or
equity against Borrower in excess of $25,000, and the same shall remain
undischarged for a period of thirty (30) days, unless such judgment is either
(i) fully covered by collectible insurance and such insurer has within such
period acknowledged such coverage in writing, or (ii) although not fully covered
by insurance, enforcement of such judgment has been effectively stayed, such
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judgment is being contested or appealed by appropriate proceedings and Borrower
or Guarantor, as the case may be, has established reserves adequate for payment
in the event such Person is ultimately unsuccessful in such contest or appeal
and evidence thereof is provided to Lender; or
(m) The occurrence of any material adverse change in the
financial condition or prospects of Borrower or Guarantor, or the existence of
any other condition which, in Lender's reasonable determination, constitutes a
material impairment of any such Person's ability to operate the Facility or of
such Person's ability to perform their respective obligations under the Loan
Documents, and is not remedied within thirty (30) days after written notice; or
(n) (i) Any Lease Agreement is terminated, with the exception of
the Lease Agreements terminated in connection with a purchase of the Kenmore
Facility and the Niskayuna II Facility by the Borrower, or (ii) a default has
occurred under any Lease Agreement which remains uncured after any applicable
cure period; or
(o) Any Management Agreement is terminated without the prior
written consent of Lender; or
(p) The occurrence of an Event of Default under any of the Notes
or other Loan Documents executed in connection therewith, as listed and
described on Schedule III attached hereto; or
(q) The occurrence of a default under any of (i) the Sublessee
Subordination and Attornment Agreements or (ii) the Collateral Pledge of License
or (iii) under the Sublessee Security Agreements.
Notwithstanding any provision in this Section 7.1, all
requirements of notice shall be deemed eliminated if Lender is prevented from
declaring an Event of Default by bankruptcy or other applicable law. The cure
period, if any, shall then run from the occurrence of the event or condition of
Default rather than from the date of notice.
7.2 REMEDIES. Upon the occurrence of any one or more of the foregoing
Events of Default, the Lender may, at its option:
(a) Declare the entire unpaid principal of the Loan Obligations
to be, and the same shall thereupon become, immediately due and payable, without
presentment, protest or further demand or notice of any kind, all of which are
hereby expressly waived;
(b) Proceed to protect and enforce its rights by action at law
(including, without limitation, bringing suit to reduce any claim to judgment),
suit in equity and other appropriate proceedings including, without limitation,
for specific performance of any covenant or condition contained in this
Agreement;
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(c) Exercise any and all rights and remedies afforded by the
laws of the United States, the states in which any of the Property or other
Collateral is located or any other appropriate jurisdiction as may be available
for the collection of debts and enforcement of covenants and conditions such as
those contained in this Agreement and the Loan Documents;
(d) Exercise the rights and remedies of setoff and/or banker's
lien against the interest of Borrower in and to every account and other property
of Borrower which is in the possession of the Lender or any person who then owns
a participating interest in the Loan, to the extent of the full amount of the
Loan; or
(e) Exercise its rights and remedies pursuant to any other Loan
Documents.
ARTICLE VIII
MISCELLANEOUS
8.1 WAIVER. No remedy conferred upon, or reserved to, the Lender in
this Agreement or any of the other Loan Documents is intended to be exclusive of
any other remedy or remedies, and each and every remedy shall be cumulative and
shall be in addition to every other remedy given hereunder or now or hereafter
existing in law or in equity. Exercise of or omission to exercise any right of
the Lender shall not affect any subsequent right of Lender to exercise the same.
No course of dealing between Borrower and Lender or any delay on the Lender's
part in exercising any rights shall operate as a waiver of any of the Lender's
rights. No waiver of any Default under this Agreement or any of the other Loan
Documents shall extend to or shall affect any subsequent or other then existing
Default or shall impair any rights, remedies or powers of Lender.
8.2 COSTS AND EXPENSES. Borrower will bear all taxes, fees and
expenses (including reasonable attorneys' fees and expenses of counsel for
Lender) in connection with the Loan, the Note, the preparation of this Agreement
and the other Loan Documents (including any amendments hereafter made), and in
connection with any modifications thereto and the recording of any of the Loan
Documents. If, at any time, a Default occurs or Lender becomes a party to any
suit or proceeding in order to protect its interests or priority in any
Collateral for any of the Loan Obligations or its rights under this Agreement or
any of the Loan Documents, or if Lender is made a party to any suit or
proceeding by virtue of the Loan, this Agreement or any Collateral and as a
result of any of the foregoing, the Lender employs counsel to advise or provide
other representation with respect to this Agreement, or to collect the balance
of the Loan Obligations, or to take any action in or with respect to any suit or
proceeding relating to this Agreement, any of the other Loan Documents, the
Lease Agreements, any Collateral, Borrower, any Guarantor or Lessee or to
protect, collect, or liquidate any of the security for the Loan Obligations, or
attempt to enforce any security interest or lien granted to the Lender by any of
the Loan Documents, then in any such events, all of the actual attorney's fees
arising from such services, including attorneys' fees for preparation of
litigation and in any appellate or bankruptcy proceedings, and any expenses,
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costs and charges relating thereto shall constitute additional obligations of
Borrower to the Lender payable on demand of the Lender. Without limiting the
foregoing, Borrower has undertaken the obligation for payment of, and shall pay,
all recording and filing fees, revenue or documentary stamps or taxes,
intangibles taxes, and other taxes, expenses and charges payable in connection
with this Agreement, any of the Loan Documents, the Loan Obligations, or the
filing of any financing statements or other instruments required to effectuate
the purposes of this Agreement, and should Borrower fail to do so, Borrower
agrees to reimburse Lender for the amounts paid by Lender, together with
penalties or interest, if any, incurred by Lender as a result of underpayment or
nonpayment. Such amounts shall constitute a portion of the Loan Obligations,
shall be secured by the Mortgage and shall bear interest at the Default Rate
from the date advanced until repaid.
8.3 PERFORMANCE OF LENDER. At its option, upon Borrower's failure to
do so, the Lender may make any payment or do any act on Borrower's behalf that
Borrower or others are inquired to do to remain in compliance with this
Agreement or any of the other Loan Documents, and Borrower agrees to reimburse
the Lender, on demand, for any payment made or expense incurred by Lender
pursuant to the foregoing authorization, including, without limitation,
reasonable attorneys' fees, and until so repaid any sums advanced by Lender
shall constitute a portion of the Loan Obligations, shall be secured by the
Mortgage and shall bear interest at the Default Rate from the date advanced
until repaid.
8.4 INDEMNIFICATION. Borrower shall, at its sole cost and expense,
protect, defend, indemnify and hold harmless the Indemnified Parties from and
against any and all claims, suits, liabilities (including, without limitation,
strict liabilities), actions, proceedings, obligations, debts, damages, losses,
costs, expenses, diminutions in value, fines, penalties, charges, fees,
judgments, awards, amounts paid in settlement, punitive damages, foreseeable and
unforeseeable consequential damages, of whatever kind or nature (including but
not limited to reasonable attorneys' fees and other costs of defense) imposed
upon or incurred by or asserted against Lender by reason of (a) ownership of the
Notes, the Mortgage, the Property or any interest therein or receipt of any
Rents; (b) any amendment to, or restructuring of, the Loan Obligations and/or
any of the Loan Documents; (c) any and all lawful action that may be taken by
Lender in connection with the enforcement of the provisions of the Mortgage or
the Notes or any of the other Loan Documents, whether or not suit is filed in
connection with same, or in connection with Borrower, the Lessee, any guarantor
and/or any partner, joint venturer, member or shareholder thereof becoming a
party to a voluntary or involuntary federal or state bankruptcy, insolvency or
similar proceeding; (d) any accident, injury to or death of persons or loss of
or damage to property occurring in, on or about the Property, the Improvements
or any part thereof or on the adjoining sidewalks, curbs, adjacent property or
adjacent parking areas, streets or ways; (e) any use, nonuse or condition in, on
or about the Property, the Improvements or any part thereof or on the adjoining
sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways;
(f) any failure on the part of Borrower, the Lessee, or any guarantor to perform
or comply with any of the terms of this Agreement or any of the other Loan
Documents; (g) any claims by any broker, person or entity claiming to have
participated in arranging on behalf of Borrower the making of the Loan evidenced
by the Notes; (h) any failure of the Property to be in
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compliance with any applicable laws; (i) performance of any labor or services or
the furnishing of any materials or other property with respect to the Property,
the Improvements or any part thereof; (j) the failure of any person to file
timely with the Internal Revenue Service an accurate Form 1099-b, statement for
recipients of proceeds from real estate, broker and barter exchange
transactions, which may be required in connection with the Mortgage, or to
supply a copy thereof in a timely fashion to the recipient of the proceeds of
the transaction in connection with which the Loan is made; (k) any
misrepresentation made to Lender in this Agreement or in any of the other Loan
Documents; (l) any tax on the making and/or recording of the Mortgage, the Notes
or any of the other Loan Documents; (m) the violation of any requirements of the
Employee Retirement Income Security Act of 1974, as amended; (n) any fines or
penalties assessed or any corrective costs incurred by Lender if the Facility or
any part of the Property is determined to be in violation of any covenants,
restrictions of record, or any applicable laws, ordinances, rules or
regulations; or (o) the enforcement by any of the Indemnified Parties of the
provisions of this Section 8.4; provided, however, that no indemnity shall be
required for any such damages, costs, liabilities, losses or judgments arising
from the gross negligence or willful misconduct of the Indemnified Party. Any
amounts payable to Lender by reason of the application of this Section 8.4 shall
become immediately due and payable and shall constitute a portion of the Loan
Obligations, shall be secured by the Mortgage and shall accrue interest at the
Default Rate. The obligations and liabilities of Borrower under this Section 8.4
shall survive any termination, satisfaction, assignment, entry of a judgment of
foreclosure or exercise of a power of sale or delivery of a deed in lieu of
foreclosure of the Mortgage. For purposes of this Section 8.4, the term
"Indemnified Parties" means Lender and any Person who is or will have been
involved in the origination of the Loan, any Person who is or will have been
involved in the servicing of the Loan, any Person in whose name the encumbrance
created by the Mortgage is or will have been recorded, any Person who may hold
or acquire or will have held a full or partial interest in the Loan (including,
without limitation, the Investor and any investor in any securities backed in
whole or in part by the Loan) as well as the respective directors, officers,
shareholder, partners, members, employees, agents, servants, representatives,
contractors, subcontractors, affiliates, subsidiaries, participants, successors
and assigns of any and all of the foregoing (including, without limitation, any
other Person who holds or acquires or will have held a participation or other
full or partial interest in the Loan or the Property, whether during the term of
the Mortgage or as a part of or following a foreclosure of the Loan and
including, without limitation, any successors by merger, consolidation or
acquisition of all or a substantial portion of Lender's assets and business).
8.5 HEADINGS. The headings of the Sections of this Agreement are for
convenience of reference only, are not to be considered a part hereof, and shall
not limit or otherwise affect any of the terms hereof.
8.6 SURVIVAL OF COVENANTS. All covenants, agreements, representations
and warranties made herein and in certificates or reports delivered pursuant
hereto shall be deemed to have been material and relied on by Lender,
notwithstanding any investigation made by or on behalf of Lender, and shall
survive the execution and delivery to Lender of the Note and this Agreement.
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8.7 NOTICES, ETC. Any notice or other communication required or
permitted to be given by this Agreement or the other Loan Documents or by
applicable law shall be in writing and shall be deemed received (a) on the date
delivered, if sent by hand delivery (to the person or department if one is
specified below) with receipt acknowledged by the recipient thereof, (b) three
(3) Business Days following the date deposited in the U.S. mail, certified or
registered, with return receipt requested, or (c) one (1) Business Day following
the date deposited with Federal Express or other national overnight carrier, and
in each case addressed as follows:
If to Borrower:
ALS Financing II, Inc.
c/o Alternative Living Services, Inc.
450 North Sunnyslope Road, Suite 300
Brookfield, Wisconsin 53005
Attention: Thomas E. Komula
Fax: (414) 789-6182
With a copy to:
Alan C. Leet, Esq.
Rogers & Hardin
2700 International Tower
229 Peachtree Street, N.E.
Atlanta, GA 30303
Fax: (404) 525-2224
provided, however, that failure to send such copies shall not render any such
notice or other communications invalid.
If to Lender:
GMAC Commercial Mortgage Corporation
650 Dresher Road
P.O. Box 1015
Horsham, Pennsylvania 19044-8015
ATTN: Servicing Department
with a copy to:
Kelly M. Wrenn, Esquire
Ballard Spahr Andrews & Ingersoll, LLP
601 13th Street, NW, Suite 1000 South
Washington, DC 20005-3807
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Either party may change its address to another single address by notice given as
herein provided, except any change of address notice must be actually received
in order to be effective.
8.8 BENEFITS. All of the terms and provisions of this Agreement shall
bind and inure to the benefit of the parties hereto and their respective
successors and assigns. No Person other than Borrower or Lender shall be
entitled to rely upon this Agreement or be entitled to the benefits of this
Agreement.
8.9 PARTICIPATION. Borrower acknowledges that Lender may, at its
option, sell participation interests in the Loan or to other participating banks
or Lender may (but shall not be obligated to) assign its interest in the Loan to
its affiliates or to other assignees, including, without limitation, the Federal
Home Loan Mortgage Corporation, to be included in its PC Program (the
"Assignee"). Borrower agrees with each present and future participant in the
Loan or Assignee of the Loan that if an Event of Default should occur, each
present and future participant or Assignee shall have all of the rights and
remedies of Lender with respect to any deposit due from the Borrower. The
execution by a participant of a participation agreement with Lender, and the
execution by the Borrower of this Agreement, regardless of the order of
execution, shall evidence an agreement between Borrower and said participant in
accordance with the terms of this Section. If the Loan is assigned to the
Assignee, the Assignee will engage an underwriter (the "Underwriter"), who will
be responsible for the due diligence, documentation, preparation and execution
of certain documents required in connection with the offering of its PCs.
Borrower agrees that Lender may, at its sole option and without notice to or
consent of the Borrower, assign its interest in the Loan to the Assignee for
inclusion in a Real Estate Mortgage Investment Conduit ("REMIC") or in the
Federal Home Loan Mortgage Corporation PC Program and, in such event, Borrower
agrees to provide the Assignee with such information as may be reasonably
required by the Underwriter in connection therewith or by an investor in any
securities backed in whole or in part by the Loan or any rating agency rating
such securities. Borrower irrevocably waives any and all right it may have under
applicable law to prohibit such disclosure, including, but not limited to, any
right of privacy, and consents to the disclosure of such information to the
Assignee, the Underwriter, to potential investors in the REMIC, and to such
rating agencies.
8.10 SUPERSEDES PRIOR AGREEMENTS; COUNTERPARTS. This Agreement and the
instruments referred to herein supersede and incorporate all representations,
promises, and statements, oral or written, made by Lender in connection with the
Loan. This Agreement may not be varied, altered, or amended except by a written
instrument executed by an authorized officer of the Lender. This Agreement may
be executed in any number of counterparts, each of which, when executed and
delivered, shall be an original, but such counterparts shall together constitute
one and the same instrument.
8.11 LOAN AGREEMENT GOVERNS. The Loan is governed by terms and
provisions set forth in this Loan Agreement and the other Loan Documents and in
the event of any irreconcilable conflict between the terms of the other Loan
Documents and the terms of this Loan Agreement, the terms of this Loan Agreement
shall control; provided, however, that in
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the event there is any apparent conflict between any particular term or
provision which appears in both this Loan Agreement and the other Loan
Documents, and it is possible and reasonable for the terms of both this Loan
Agreement and the Loan Documents to be performed or complied with, then,
notwithstanding the foregoing, both the terms of this Loan Agreement and the
other Loan Documents shall be performed and complied with.
8.12 CONTROLLING LAW. THE PARTIES HERETO AGREE THAT THE VALIDITY,
INTERPRETATION, ENFORCEMENT AND EFFECT OF THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK AND THE
PARTIES HERETO SUBMIT (AND WAIVE ALL RIGHTS TO OBJECT) TO NON-EXCLUSIVE PERSONAL
JURISDICTION IN THE STATE OF NEW YORK, FOR THE ENFORCEMENT OF ANY AND ALL
OBLIGATIONS UNDER THE LOAN DOCUMENTS, EXCEPT THAT IF ANY SUCH ACTION OR
PROCEEDING ARISES UNDER THE CONSTITUTION, LAWS OR TREATIES OF THE UNITED STATES
OF AMERICA, OR IF THERE IS A DIVERSITY OF CITIZENSHIP BETWEEN THE PARTIES
THERETO, SO THAT IT IS TO BE BROUGHT IN A UNITED STATES DISTRICT COURT, IT SHALL
BE BROUGHT IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF NEW
YORK OR ANY SUCCESSOR FEDERAL COURT HAVING ORIGINAL JURISDICTION.
8.13 WAIVER OF JURY TRIAL. BORROWER AND LENDER HEREBY WAIVE ANY RIGHT
THAT THEY MAY HAVE TO A TRIAL BY JURY ON ANY CLAIM, COUNTERCLAIM, SETOFF,
DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING OUT OF OR IN ANY WAY RELATED TO
THIS AGREEMENT OR THE LOAN OR (B) IN ANY WAY CONNECTED WITH OR PERTAINING OR
RELATED TO OR INCIDENTAL TO ANY DEALINGS OF LENDER AND/OR BORROWER WITH RESPECT
TO THE LOAN DOCUMENTS OR IN CONNECTION WITH THIS AGREEMENT OR THE EXERCISE OF
EITHER PARTY'S RIGHTS AND REMEDIES UNDER THIS AGREEMENT OR OTHERWISE, OR THE
CONDUCT OR THE RELATIONSHIP OF THE PARTIES HERETO, IN ALL OF THE FOREGOING CASES
WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER SOUNDING IN CONTRACT, TORT
OR OTHERWISE. BORROWER AND LENDER AGREE THAT EITHER PARTY MAY FILE A COPY OF
THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY, AND
BARGAINED AGREEMENT OF EITHER PARTY HERETO TO IRREVOCABLY WAIVE THEIR RIGHTS TO
TRIAL BY JURY AS AN INDUCEMENT OF LENDER TO MAKE THE LOAN AND THAT, TO THE
EXTENT PERMITTED BY APPLICABLE LAW, ANY DISPUTE OR CONTROVERSY WHATSOEVER
(WHETHER OR NOT MODIFIED HEREIN) BETWEEN BORROWER AND LENDER SHALL INSTEAD BE
TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
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(A) NONRECOURSE. NOTWITHSTANDING ANYTHING TO THE CONTRARY
HEREIN, OR IN ANY OF THE OTHER LOAN DOCUMENTS EVIDENCING THE LOAN, THE LIABILITY
OF THE BORROWER FOR THE PAYMENT OF PRINCIPAL AND INTEREST AND AGREED CHARGES,
AND THE OBSERVANCE AND PERFORMANCE OF ALL OF THE TERMS, COVENANTS, AND
CONDITIONS AND PROVISIONS OF THE NOTE AND THE OTHER LOAN DOCUMENTS, SHALL BE
LIMITED TO THE EXTENT PROVIDED IN THE MORTGAGE AND THE NOTES.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
46
<PAGE> 47
IN WITNESS WHEREOF, the Borrower and the Lender have caused this
Agreement to be properly executed, by their respective duly authorized
representatives, as of the date first above written.
WITNESS: BORROWER:
ALS FINANCING II, INC., a Delaware
corporation
/s/ Cheri Marlatte By: /s/ David M. Boitano (SEAL)
- ----------------------------- ---------------------------
Print Name: David M. Boitano
Vice President
47
<PAGE> 48
WITNESS: LENDER:
GMAC COMMERCIAL MORTGAGE
CORPORATION, a California
corporation
/s/ Georgia C. Dunn By: /s/ Philip Brooks (SEAL)
- ------------------------------ -------------------------
Print Name: Philip Brooks
Vice President
G-46
<PAGE> 1
EXHIBIT 10.5
[EXECUTION COPY]
================================================================================
LEASE AND SECURITY AGREEMENT
Dated as of February 10, 1999
between
ALTERNATIVE LIVING SERVICES INC.,
as the Lessee
and
SELCO SERVICE CORPORATION,
as the Lessor.
================================================================================
Acquisition and Improvement Program for a
Headquarters Office Facility
in Wauwatosa, Wisconsin
================================================================================
This Lease has been executed in several counterparts. To the extent, if any,
that this Lease constitutes chattel paper (as such term is defined in the
Uniform Commercial Code as in effect in any applicable jurisdiction), no lien on
this Lease may be created through the transfer or possession of any counterpart
other than the original counterpart containing the receipt therefor executed by
the Lessor on the signature page hereof.
<PAGE> 2
LEASE AND SECURITY AGREEMENT
THIS LEASE AND SECURITY AGREEMENT (this "Lease"), dated as of February
10, 1999, between SELCO SERVICE CORPORATION, an Ohio corporation, having its
principal office at c/o KeyCorp. Leasing, 54 State Street, Albany, New York
12207, and ALTERNATIVE LIVING SERVICES INC., a Delaware corporation, having its
principal office at 450 N. Sunnyslope Road, Suite 300, Brookfield, Wisconsin
53005.
W I T N E S E T H:
WHEREAS, the Lessor wishes to finance the acquisition and development
of the Land and Improvements to be used by the Lessee;
WHEREAS, the Lessor desires to lease to the Lessee, and the Lessee
desires to lease from the Lessor, the Property; and
WHEREAS, the Lessee, as Construction Agent, will construct certain
Improvements which as constructed will be the property of the Lessor and will
become part of the Property subject to the terms of this Lease;
NOW, THEREFORE, in consideration of the foregoing, and of other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1. Definitions; Interpretation. Capitalized terms used but not
otherwise defined in this Lease have the respective meanings specified in
Appendix 1 to this Lease; and the rules of interpretation set forth in Appendix
1 to this Lease shall apply to this Lease.
ARTICLE II
PURCHASE AND LEASE
2.1. Acceptance and Lease of Property. Subject to the terms and
conditions of this Lease, on the Closing Date (i) the Seller shall convey to the
Lessor, and the Lessor shall accept delivery of, the Land together with any
Improvements thereon pursuant to the terms hereof (and subject to the conditions
set forth herein) and (ii) the Lessor shall demise and lease to the
<PAGE> 3
Lessee hereunder for the Term the Lessor's interest in the Land and in such
Improvements together with any Improvements which thereafter may be constructed
thereon pursuant to the Construction Agency Agreement or this Lease, and the
Lessee hereby agrees, expressly for the direct benefit of the Lessor, to lease
from the Lessor for the Term, the Lessor's interest in the Land together with
the Lessor's interest in any Improvements on the Land and in any Improvements on
the Land which thereafter may be constructed thereon pursuant to the
Construction Agency Agreement and this Lease.
2.2. Acceptance Procedure. The Lessee hereby agrees that the execution
and delivery by the Lessee of the Memorandum of Lease substantially in the form
of Exhibit B shall, without further act, constitute the irrevocable acceptance
by the Lessee of the Land and the Improvements, respectively, for all purposes
of this Lease and the other Operative Documents on the terms set forth therein
and herein, and that all of the Property, together with any Improvements
constructed thereon pursuant to the Construction Agency Agreement and this
Lease, shall be deemed to be included in the leasehold estate of this Lease and
shall be subject to the terms and conditions of this Lease as of the Closing
Date.
2.3. Lease Term. This Lease shall be in full force and effect on the
Documentation Date. Subject to the terms of the Construction Agency Agreement
regarding extensions of the Outside Completion Date, the Base Date (the "Base
Date") will occur upon delivery of the Lease Supplement on the earlier of (x)
the date of Completion and (y) the date corresponding to twelve (12) months
after the Closing Date, or, on account of a Force Majeure Event, the Outside
Completion Date. The Base Term (the "Base Term") shall begin on the Base Date
and end on the Expiration Date, unless the Base Term is earlier terminated in
accordance with the provisions of this Lease.
2.4. Title. The Property is hereby leased to the Lessee without any
representation or warranty, express or implied, by the Lessor and subject to the
rights of parties in possession, the existing state of title (including, without
limitation, Permitted Liens other than Lessor Liens) and all applicable
Requirements of Law. The Lessee shall in no event have any recourse against the
Lessor for any defect in or exception to title to the Property other than to the
extent resulting from Lessor Liens.
ARTICLE III
FUNDING OF ADVANCES
3.1. Lessor Commitment. Subject to the conditions and terms hereof,
the Lessor shall, upon the written request of the Lessee from time to time
during the Commitment Period, make Advances on Funding Dates for the purpose of
financing the acquisition, renovation and improvement of the Property, including
Land Acquisition Costs, Property Improvement Costs, Transaction Expenses,
Capitalized Interest and the fees owed pursuant to the Fee Letter.
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<PAGE> 4
Notwithstanding any other provision hereof, the Lessor shall not be obligated to
make any Advance if, after giving effect thereto, the aggregate original amounts
of Advances would exceed the Commitment of the Lessor.
3.2. Procedures for Advances.
(a) With respect to each funding of an Advance, the Lessee, as
Construction Agent, shall give the Lessor prior written notice not
later than 10:00 a.m., New York City time, five (5) Business Days prior
to the date of the proposed funding, pursuant to a Funding Request
substantially in the form of Exhibit A (a "Funding Request"),
specifying the proposed Funding Date (the "Funding Date") and the
amount of Advance requested. Except as the parties may otherwise agree
in writing, (i) each Funding Date shall occur on the first (1st) day
(or if such day is not a Business Day, then the next succeeding
Business Day thereafter) of a month, and (ii) Advances shall be made
solely to provide the Construction Agent with funds with which to pay
or reimburse itself for Land Acquisition Costs, Property Improvements
Costs, Capitalized Interest, Transaction Expenses, the Arrangement Fee
and all fees paid or payable by the Lessee to the Lessor in connection
with the Operative Documents and any amounts paid or payable by Lessee
pursuant to Section 31.2 hereof. With respect to the initial Advance,
the Lessee may deliver a Funding Request no sooner than five (5)
Business Days but no less than two (2) Business Days prior to the
proposed Funding Date therefor, which is not required to be the first
(1st) day of the month, and in the event that the Lessor is unable to
obtain a Eurodollar Rate for the Advance requested in such Funding
Request, notwithstanding the definition of "Capitalized Interest" in
Appendix 1 hereto, the Lessor shall make available the Advance at the
Alternate Base Rate. Such Advance shall bear interest at the Alternate
Base Rate until the date on which the Lessor shall be able to obtain a
Eurodollar Rate for the amount of such Advance, at which time such
Advance shall convert and thereafter accrue interest at the Eurodollar
Rate; provided, however, that no such conversion shall occur unless the
Lessee shall have submitted a Funding Request in connection therewith.
(b) All remittances made by the Lessor for the funding of any
Advance shall be made on the applicable Funding Date in immediately
available federal funds by wire transfer to the account designated by
the Construction Agent, except that a portion of the initial Advance
shall be made (in accordance with instructions to be included in the
initial Funding Request) by wire transfer directly to the Seller and/or
to the Lessee to reimburse the Lessee for Transaction Expenses.
3.3. Capitalized Interest Advances. On each Payment Date occurring on
or prior to the Base Date, the Lessee, as Construction Agent, shall be deemed to
have requested an Advance (a "Capitalized Interest Advance") pursuant to Section
3.2 in an amount equal to the aggregate amount of accrued Capitalized Interest,
and unpaid amounts with respect to the fees
-3-
<PAGE> 5
owed pursuant to the Fee Letter and Transaction Expenses (for which invoices
have been received by Lessee sufficiently in advance pursuant to Section
31.1(a)), if any, due and payable on such Payment Date. The Funding Date with
respect to any such Capitalized Interest Advance shall be the relevant Payment
Date (provided that the Lessor's obligation to make a Capitalized Interest
Advance shall be subject to satisfaction of the conditions precedent set forth
in Section 4.3) and the proceeds of such payment shall be applied to pay such
accrued Capitalized Interest, and unpaid amounts with respect to the fees owed
pursuant to the Fee Letter and Transaction Expenses, if any. On each such
Funding Date, the Lease Balance shall be increased by an amount equal to the
Capitalized Interest Advance made on such date. The Lessor shall notify the
Lessee of the amounts to be capitalized and paid by each Capitalized Interest
Advance ten (10) days prior to the applicable Payment Date; provided, however,
that the failure of the Lessor to provide such notice shall not relieve the
Lessee of its obligation to pay same.
ARTICLE IV
CONDITIONS PRECEDENT
4.1. Documentation Date. The Documentation Date (the "Documentation
Date") shall occur on the earliest date on which the following conditions
precedent shall have been satisfied:
(a) Lease. This Lease shall have been duly authorized, executed
and delivered by the parties thereto.
(b) Construction Agency Agreement. The Construction Agency
Agreement shall have been duly authorized, executed and delivered by
the parties thereto.
(c) Fees. All fees due on the Documentation Date pursuant to the
Fee Letter shall have been paid.
(d) Lessee's Resolutions and Incumbency Certificate, etc. The
Lessee shall have delivered to the Lessor (i) a certificate of its
Secretary or an Assistant Secretary attaching and certifying as to (A)
the resolutions of the Board of Directors duly authorizing the
execution, delivery and performance by it of each Operative Document to
which it is or will be a party, (B) its certificate of incorporation
and by-laws, and (C) the incumbency and signature of persons authorized
to execute and deliver on its behalf the Operative Documents to which
it is a party and (ii) a certificate of good standing with respect to
it issued by the Secretary of State of the State of Wisconsin.
-4-
<PAGE> 6
(e) Opinion of Counsel to the Lessee. On or prior to the
Documentation Date, the Lessor shall have received an opinion of
counsel for the Lessee in form and substance satisfactory to the
Lessor.
(f) Certain Transaction Expenses. Counsel for the Lessor shall
have received, to the extent then invoiced, payment in full in cash of
all Transaction Expenses payable to such counsel pursuant to Section
31.1(a).
(g) Pledge Agreement. The Pledge Agreement shall have been duly
authorized, executed and delivered by the parties hereto.
(h) Construction Documents Assignment. The Construction Documents
Assignment shall have been duly authorized, executed and delivered by
the Construction Agent.
(i) Fee Letter. The Fee Letter shall have been duly authorized,
executed and delivered by the parties thereto.
4.2. Closing Date Conditions. The occurrence of the Closing Date (the
"Closing Date") is subject to the following conditions precedent:
(a) Operative Documents; No Default. Each of the Operative
Documents shall have been duly authorized, executed and delivered by
the Lessee in form and substance as agreed to by the parties hereto as
of the Closing Date, and shall be in full force and effect. No Default
or Event of Default shall exist under any of the Operative Documents to
which the Lessee is a party (either before or after giving effect to
the transactions contemplated by the Operative Documents), and the
Lessor shall have received a copy of each of the Operative Documents
fully executed by the Lessee (other than this Lease, of which the
Lessor shall receive the original). The Operative Documents (or
memoranda thereof), any supplements thereto and any financing
statements in connection therewith required under the Uniform
Commercial Code shall have been recorded, registered and filed, if
necessary, in such manner as to enable counsel to render the opinions
referred to in clause (c) below and to enable the title company to
issue the title insurance policies referred to in clause (i) below.
(b) Taxes. All taxes, fees and other charges in connection with
the execution, delivery, recording, filing and registration of the
Operative Documents shall have been paid or provisions for such payment
shall have been made to the reasonable satisfaction of the Lessor.
(c) Opinions of Counsel. Counsel to the Lessee in Wisconsin shall
have issued to the Lessor their opinions in form and scope satisfactory
to the Lessor.
-5-
<PAGE> 7
(d) Governmental Actions. All necessary (or, in the reasonable
opinion of the Lessor, advisable) Governmental Actions, in each case
required by any Requirement of Law applicable to the Property with
respect to obligations of Lessee which are to have been performed prior
to the Closing Date pursuant to this Lease, shall have been obtained or
made and be in full force and effect.
(e) Litigation. No action or proceeding shall have been
instituted, nor shall any action or proceeding be threatened in writing
against the Lessor or the Lessee, before any Governmental Authority,
nor shall any order, judgment or decree have been issued or proposed to
be issued by any Governmental Authority (i) to set aside, restrain,
enjoin or prevent the full performance of this Lease, any other
Operative Document or any transaction contemplated hereby or thereby or
(ii) which is reasonably likely to adversely affect the Lessee (except
where such violation is not material).
(f) Requirements of Law. The transactions contemplated by the
Operative Documents do not and will not violate any Requirement of Law
(except where such violation is not material) and do not and will not
subject the Lessor to any adverse regulatory prohibitions or
constraints.
(g) Responsible Employee's Certificate. The Lessor shall have
received a Responsible Employee's Certificate of the Lessee, in
substantially the form of Exhibit E, dated as of the Closing Date,
stating that for the Lessee (i) each and every representation and
warranty of the Lessee contained in each Operative Document to which it
is a party is true and correct on and as of the Closing Date; (ii) no
Default or Event of Default has occurred and is continuing under any
Operative Document with respect to the Lessee; (iii) each Operative
Document to which the Lessee is a party is in full force and effect
with respect to it; and (iv) the Lessee has duly performed and complied
with all covenants, agreements and conditions contained herein or in
any Operative Document required to be performed or complied with by it
on or prior to the Closing Date.
(h) Environmental Audit. The Lessor shall have received an
Environmental Audit for the Property in form and substance acceptable
to the Lessor.
(i) Survey and Title Insurance. The Lessee shall have delivered
to the Lessor an ALTA/1992 (Urban) Survey of the Property (other than
the Equipment) prepared by a licensed surveyor and meeting the Minimum
Standard Detail Requirements for ALTA/ACSM Land Title Surveys as
adopted by the American Land Title Association/American Society and
American Congress on Surveying and Mapping in 1992 certified to the
Lessor and the title company and otherwise in form reasonably
acceptable to the Lessor and an ALTA owners and lender's title
insurance policy covering the Property (other than the Equipment) in
favor of the Lessor, and a
-6-
<PAGE> 8
leasehold policy in favor of the Lessee evidencing the Lessee's
equitable ownership in the Property, each such policy to be dated as of
the Closing Date and in an amount not less than the Commitment of the
Lessor and to be reasonably satisfactory to the Lessor with
comprehensive, zoning and mechanics liens' endorsements and such other
endorsements reasonably requested by the Lessor.
(j) Recordation. The Lessor shall have received evidence
reasonably satisfactory to it that each of the Deed and the Memorandum
of Lease shall have been or are being recorded with the appropriate
Governmental Authorities (and the issuance of the title insurance
policies in clause (i) above shall be satisfactory evidence of the
foregoing), and the UCC Financing Statements with respect to the
Property shall have been or are being filed with the appropriate
Governmental Authorities.
(k) Construction Agency Agreement Supplement. On or prior to each
Closing Date, the Lessee shall have delivered to the Lessor a
Construction Agency Agreement Supplement with respect to the Property
fully executed by the Lessee, as Construction Agent, and the Lessor.
(l) Fees. All fees due on the Closing Date pursuant to the Fee
Letter shall have been paid.
(m) Certain Transaction Expenses. Counsel for the Lessor shall
have received, to the extent then invoiced, payment in full in cash of
all Transaction Expenses payable to Lessor's counsel pursuant to
Section 31.1(a).
All documents and instruments required to be delivered on the Closing Date shall
be delivered at the offices of Mayer, Brown & Platt, 1675 Broadway, New York,
New York 10019, or at such other location as may be reasonably determined by the
Lessor and the Lessee.
4.3. Conditions Precedent to each Advance. The obligation of the
Lessor to make an Advance on a Funding Date (including the initial Advance), is
subject to satisfaction or waiver of the following conditions precedent:
(a) Funding Request. The Lessor shall have received a fully
executed counterpart of the applicable Funding Request, executed by the
Lessee.
(b) Fees. The Lessee shall have paid, prior to the Lessor making
such Advance, all fees due and payable pursuant to Section 7.4.
(c) Accuracy of Representations and Warranties. On the applicable
Funding Date the representations and warranties of the Lessee contained
herein and in each of the other Operative Documents shall be true and
correct as though made on and as of
-7-
<PAGE> 9
such date, except to the extent such representations or warranties
relate solely to an earlier date, in which case such representations
and warranties shall have been true and correct on and as of such
earlier date.
(d) Litigation. Other than actions, suits or proceedings that are
being contested by the Lessee in good faith, on the applicable Funding
Date there shall not be any actions, suits or proceedings pending or,
to the knowledge of the Lessee, threatened in writing against the
Lessor or the Lessee (i) that are reasonably likely to have an adverse
effect on the Property (except for such adverse effects which are not
material) or (ii) that question the validity of the Operative Documents
or the rights or remedies of the Lessor with respect to the Lessee or
the Property under the Operative Documents.
(e) No Default. There shall not have occurred and be continuing
any Default or Event of Default under this Lease, and no Default or
Event of Default under this Lease will have occurred after giving
effect to the making of the Advance requested by such Funding Request.
(f) Commitment Amount. After giving effect to the applicable
Advance, the condition set forth in the last sentence of Section 3.1
shall not be violated.
(g) Cost of Completion. After giving effect to the applicable
Advance, the estimated as yet unpaid cost to the Construction Agent of
completing the Construction, in the aggregate, pursuant to the
Construction Documents shall not exceed the Available Commitment.
(h) Building Permits. All building permits required by any
Governmental Authority in connection with the Construction for which
the applicable Advance is being made shall have been obtained.
4.4. Post Closing Conditions. The following conditions shall be
satisfied by the Lessee:
(a) Architect's Certificate. Prior to the making of the Advance
which would result in the Lease Balance being equal to or exceeding
$5,000,000, the Lessor shall have received a certificate from the
Architect (to be paid for by funds from an Advance and added to the
Lease Balance) or as to individual matters, other qualified
professionals, in form and scope satisfactory to the Lessor, certifying
that (i) the Property as improved in accordance with the Plans and
Specifications and the contemplated use thereof by the Lessee will
comply with all Requirements of Law (except where such failure to
comply is not material) (including, without limitation, all zoning and
land use laws and Environmental Laws) and Insurance Requirements
-8-
<PAGE> 10
(except where such failure to comply is not material) and (ii) the
Plans and Specifications have been prepared in accordance with
applicable Requirements of Law (except where such failure to comply is
not material) (including, without limitation, applicable Environmental
Laws and building, planning, zoning and fire codes) and upon completion
of the Improvements in accordance with the Plans and Specifications,
such Improvements on the Property will not encroach in any manner onto
any adjoining land (except as permitted by express written easements or
as insured by appropriate title insurance).
(b) Appraisal. The Lessor shall have received prior to the making
of the Advance which would result in the Lease Balance being equal to
or exceeding $5,000,000 an Appraisal of the Property, which Appraisal
(to be paid for by funds from an Advance and added to the Lease
Balance) shall show that as of the Base Date, and as of the Expiration
Date, the Fair Market Sales Value of the Land and the Improvements to
be constructed thereon in accordance with the Plans and Specifications
shall not be less than the Commitment.
(c) Evidence of Insurance. Prior to the commencement of
Construction on the Property but in no event later than ten (10) days
subsequent to the Closing Date, the Lessor shall have received evidence
of insurance with respect to the Property (to be paid for by funds from
an Advance and added to the Lease Balance) required to be maintained
pursuant to this Lease, setting forth the respective coverages, limits
of liability, carrier, policy number and period of coverage, and
otherwise in accordance with Article XVII.
(d) Opinion of Counsel. Counsel to the Lessee shall have issued
to the Lessor on or prior to the date ten (10) days after the Closing
Date, their opinions in form and substance satisfactory to the Lessor
regarding certain matters set forth in Section 6.2(c).
The failure by the Lessee to comply with such conditions shall be an Event of
Default.
ARTICLE V
CONDITIONS TO COMPLETION
5.1. Conditions to Completion of the Property. Completion with respect
to the Property shall be deemed to have occurred for purposes of the Operative
Documents at such time as the Construction shall have been substantially
completed in accordance with the Plans and Specifications and all Applicable
Law, and the Property shall be ready for occupancy and operation, as evidenced
by certificates of the Architect, the Prime Contractor and the Construction
Agent and the issuance by the appropriate Governmental Authority of certificates
-9-
<PAGE> 11
of occupancy (or other approvals or assurances in lieu thereof which are
sufficient to permit the Lessee to occupy the Improvements lawfully) for all of
the Improvements contemplated by the Plans and Specifications, all in form and
substance reasonably satisfactory to the Lessor.
ARTICLE VI
REPRESENTATIONS
6.1. Representations of the Lessor. The Lessor represents and warrants
to the Lessee that:
(a) ERISA. The Lessor is not and will not be funding its Advances
hereunder, and is not performing its obligations under the Operative
Documents, with the assets of an "employee benefit plan" (as defined in
Section 3(3) of ERISA) which is subject to Title I of ERISA, or "plan"
(as defined in Section 4975(e)(1) of the Code).
(b) Status. The Lessor is a commercial bank, savings and loan
association, savings bank, pension plan, depository institution,
insurance company, branch or agency of a foreign bank or other similar
financial institution, or an Affiliate thereof. The Lessor is generally
engaged in the business, among other things, of leasing tangible
property and acts as the lessor in leasing such property to multiple
lessees.
(c) Power and Authority. The Lessor has the requisite power and
authority to enter into and perform under the Operative Documents to
which it is a party.
6.2. Representations of Lessee. The Lessee represents and warrants
to the Lessor that:
(a) Corporate Status. The Lessee is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware, and the Lessee has the corporate power and authority to enter
into and perform its obligations under each of the Operative Documents
to which it is or will be a party and is duly qualified to do business
as a foreign corporation in good standing in the State of Wisconsin.
The Lessee has not failed to qualify or to be in good standing in any
other jurisdiction where the failure to qualify or to be in good
standing would have an material adverse effect on the business or
financial condition of the Lessee or the ability of the Lessee to
perform its obligations under the Operative Documents, except for such
effect which is not material.
(b) Enforceability. Each of the Operative Documents, in each case
to which the Lessee is or will be a party, when executed and delivered,
will constitute legal, valid and binding obligations of the Lessee,
enforceable against the Lessee in accordance with the respective terms
thereof, except as such enforceability may be
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<PAGE> 12
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the rights of creditors generally
and by general principles of equity and except, in the case of the
Lease, as limited by Applicable Laws which may affect the remedies
provided in the Lease, which laws, however, do not make the remedies
provided in the Lease inadequate for the practical realization of the
rights and benefits provided thereby.
(c) No Violation. The execution, delivery and performance by the
Lessee of each of the Operative Documents and the other agreements or
documents referred to herein or in any other Operative Document, in
each case to which it is a party, have been duly authorized by all
necessary corporate action on the part of the Lessee and have been duly
executed and delivered, do not require any approval or consent of the
Lessee, or any trustee or holders of any indebtedness or obligations of
Lessee which have not been duly obtained, and the execution, delivery
and performance by the Lessee of each of the Operative Documents to
which it is a party and such other agreements and documents do not
contravene the Articles of Incorporation or By-laws or Code of
Regulations of the Lessee or any Applicable Law which is applicable to
the Lessee or its Subsidiaries, or contravene any provision of, or
constitute a default under any indenture, mortgage, contract or other
agreement to which the Lessee is a party or by which it or its
properties may be bound or affected.
(d) Litigation. Except as otherwise disclosed on Schedule II,
there are no suits or proceedings pending or, to the knowledge of the
Lessee, threatened in writing against or affecting the Property or the
Lessee before any Governmental Authority that question the legality,
validity or enforceability of the Operative Documents or the rights or
remedies of the Lessor with respect to the Lessee or the Property under
the Operative Documents.
(e) Governmental Actions. All Governmental Actions required for
the execution and delivery of each of the Operative Documents to which
the Lessee is or will be a party, have been obtained or made or, by the
Documentation Date, will be obtained or made, and are or, by the
Documentation Date, will be in full force and effect, and with respect
to each Funding Date, all Governmental Actions required for the
performance by the Lessee of its obligations under such Operative
Documents, and which performance is contemplated to have occurred by
such Funding Date, have been obtained or made and are in full force and
effect, and no such Governmental Actions are subject to any pending or,
to the best knowledge of the Lessee, threatened in writing, suit,
action, inquiry, investigation, proceeding or appeal (administrative,
judicial or otherwise).
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<PAGE> 13
(f) Investment Company Act. The Lessee is not an "investment
company" or a company "controlled" by an "investment company," within
the meaning of the Investment Company Act.
(g) Taxes. All Taxes, if any, due and payable in connection with
the execution, delivery, recording and filing of the Operative
Documents in connection with the transactions contemplated hereby,
shall have been paid in full on the Documentation Date (or arrangements
for payment have been made satisfying Section 4.1(b)) with respect to
Taxes incurred in connection with the transactions to be consummated on
such date.
(h) Prohibited Transactions. Assuming the accuracy of the
Lessor's representation in Section 6.1(a), the execution and delivery
by the Lessee of this Lease and the other Operative Documents to which
the Lessee is or is to become a party will not involve any prohibited
transaction within the meaning of Section 406 of ERISA or Section 4975
of the Code.
(i) Environmental Laws. Except with respect to (y) any
Environmental Laws or Government Actions the compliance with which the
Lessee is contesting as permitted pursuant to the terms hereof and
which contest the Lessee shall have previously disclosed to the Lessor
in writing, and (z) any remedial activity being conducted by Lessee or
any other Environmental Violation permitted by this Lease, the Lessee
has, to its knowledge, complied and is now in material compliance with
all Environmental Laws and any Governmental Actions issued under such
Environmental Laws, as such Governmental Actions and Environmental Laws
relate to the Property. Except as otherwise set forth in this
subsection (i), to the Lessee's knowledge, there are no circumstances
that would reasonably be expected to prevent or interfere with the
Lessee's ability to operate and maintain the Property (A) as
contemplated by the Operative Documents and (B) in compliance in all
respects with all applicable Environmental Laws and Governmental
Actions (except where such failure is not material). All known
Governmental Actions required under Environmental Laws to operate and
maintain the Property (A) have been duly obtained, made or given or
applied for, (B) where obtained, made or given are in full force and
effect and, where applied for, Lessee has no reasonable basis to
conclude that such will not be obtained, and, (C) upon the request of
the Lessor, copies thereof will be furnished to counsel to the Lessor.
Except as otherwise set forth in this subsection (i), there are no
unresolved past or pending or, to the knowledge of the Lessee,
threatened Environmental Claims against the Lessee with respect to the
Property. Except as otherwise set forth in this subsection (i), to the
knowledge of the Lessee, there are no present or past actions,
activities, circumstances, conditions, events or incidents arising from
the use, operation or maintenance of the Property, including, without
limitation, the release, emission, discharge, presence or disposal of
any Hazardous Substance from the Property that
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would reasonably be expected to (i) form the basis of an Environmental
Claim against the Lessee with respect to the Property and (ii) have a
material adverse effect on the value or the operating condition of the
Property or impair the Lessor's title thereto.
(j) Offer of Securities, etc. Except as contemplated by the
Operative Documents, the Lessee has not offered any interest in the
Property or the Lease, or any similar securities of the Lessee, to, or
solicited any offer to acquire any of the same from any Person, in
violation of Section 5 of the Securities Act or any state securities
laws, nor has it authorized any Person to take any such action, and the
Lessee has not taken any action which would subject any interest in the
Property or the Lease to the registration requirements of Section 5 of
the Securities Act or any state securities laws provided that the
Lessee makes no representations as to any actions taken by or offers
made by the Lessor.
(k) Financial Statements. The consolidated balance sheet of the
Lessee and its consolidated subsidiaries as at September 30, 1998 and
the consolidated statements of income and changes in financial position
for the fiscal year then ended, fairly present the financial condition
of the Lessee and its consolidated subsidiaries in all respects for the
periods then ended on such dates, all in accordance with GAAP
consistently applied.
(l) Property. The Property as improved in accordance with the
Plans and Specifications and the contemplated use thereof by the Lessee
and its agents, assignees, employees, lessees, licensees and tenants
will comply with all Requirements of Law (including, without
limitation, all zoning and land use laws and Environmental Laws) and
Insurance Requirements, except for such Requirements of Law as the
Lessee shall be contesting in good faith by appropriate proceedings.
Except as otherwise disclosed on Schedule II, there is no action, suit
or proceeding (including any proceeding in condemnation or eminent
domain or under any Environmental Law) pending or, to the best of the
Lessee's knowledge, threatened in writing with respect to the Lessee,
its Affiliates or the Property which adversely affects the title to, or
the use, operation or value of, the Property.
(m) Plans and Specifications. Upon Completion of the Construction
all water, sewer, electric, gas, telephone and drainage facilities and
all other utilities required to adequately service such Improvements
for its intended use will be available pursuant to adequate permits
(including any that may be required under applicable Environmental
Laws). Upon Completion of the Construction the Property will have
available all services of public facilities and other utilities
necessary for use and operation of the Property and the other
Improvements for their primary intended purposes including, without
limitation, adequate water, gas and electrical supply, storm and
sanitary sewerage facilities, telephone, other required public
utilities and means of
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access between such Improvements and public highways for pedestrians
and motor vehicles. All utilities serving the Property, or proposed to
serve the Property in accordance with the related Plans and
Specifications, are located in, and vehicular access to the
Improvements on the Property is provided by, either public
rights-of-way abutting the Property or Appurtenant Rights. All
licenses, approvals, authorizations, consents, permits (including,
without limitation, building, demolition and environmental permits,
licenses, approvals, authorizations and consents), easements and
rights-of-way, including proof and dedication, required for (x) the
use, treatment, storage, transport, disposal or disposition of any
Hazardous Substance on, at, under or from the Property during the
construction of the Improvements thereon, and (y) construction of the
Improvements in accordance with the Plans and Specifications and the
Construction Agency Agreement have either been obtained from the
appropriate Governmental Authorities having jurisdiction or from
private parties, as the case may be, or will be obtained from the
appropriate Governmental Authorities having jurisdiction or from
private parties, as the case may be, prior to commencing of the
relevant portion of any such construction or use and operation.
(n) Title. The Deed as delivered on the Closing Date is in form
and substance sufficient to convey good and marketable title to the
Property in fee simple, subject only to Permitted Liens. The Lessor
will at all times during the Term have good title to all Equipment
located on the Property and in any Improvements, subject only to
Permitted Liens.
(o) Insurance. The Lessee has obtained insurance coverage
covering the Property which meets the requirements of this Lease, and
such coverage is in full force and effect.
(p) Flood Hazard Areas. No portion of the Property is located in
an area identified as a special flood hazard area by the Federal
Emergency Management Agency or other applicable agency, or if the
Property is located in an area identified as a special flood hazard
area by the Federal Emergency Management Agency or other applicable
agency, then flood insurance has been obtained for the Property in
accordance with Section 17.2 and in accordance with the National Flood
Insurance Act of 1968, as amended.
(q) Defaults. There has not occurred any Event of Default which
is presently continuing.
(r) Use of Advances. No part of any Advance will be used directly
or indirectly for the purpose of purchasing or carrying, or for payment
in full or in part of any indebtedness of the Lessee that was incurred
for the purposes of purchasing or carrying, any margin security as such
term is defined in Section 207.2 of Regulation G
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of the Board of Governors of the Federal Reserve System (12 C.F.R.,
Chapter II, Part 207).
(s) Solvency. Taking into consideration the transactions
contemplated by this Lease and the other Operative Documents, the
Lessee reasonably believes that: (a) the fair value of the Lessee's
assets on a going concern basis exceeds the total amount of liabilities
of the Lessee, valued at the reasonably probable liability of the
Lessee with respect thereto, (b) the Lessee can pay its obligations as
they become due and (c) the Lessee does not have an unreasonably small
capital base with which to conduct its business.
6.3. Representations of the Lessee with respect to each Advance. The
Lessee represents and warrants to the Lessor as of each Funding Date on which an
Advance is made as follows:
(a) Representations. The representations and warranties of the
Lessee set forth in the Operative Documents (including the
representations and warranties set forth in Section 6.2) are true and
correct in all respects on and as of such Funding Date, except to the
extent such representations or warranties relate solely to an earlier
date, in which case such representations and warranties shall have been
true and correct on and as of such earlier date. The Lessee is in
compliance with its respective obligations under the Operative
Documents and no Default or Event of Default has occurred and is
continuing under this Lease, or the Construction Agency Agreement, or
any other Operative Document to which the Lessee is a party. No Default
or Event of Default under this Lease, the Construction Agency Agreement
or, any other Operative Document to which the Lessee is a party will
occur as a result of, or after giving effect to, the Advance requested
by the Funding Request on such date.
(b) Improvements. The Construction of the Improvements to date
has, to the knowledge of the Lessee, been performed in all respects in
a good and workmanlike manner, substantially in accordance with the
Plans and Specifications and in compliance with all Insurance
Requirements and Requirements of Law.
(c) Liens. The Lessee has not permitted Liens to be placed
against the Property other than Permitted Liens.
(d) Advance. With respect to each Advance other than a
Capitalized Interest Advance, the amount of the Advance requested
represents amounts owed by or to the Lessee or Construction Agent in
respect of Property Improvements Costs, Land Acquisition Costs,
Transaction Expenses, the Arrangement Fee and any other appropriate
amounts paid or payable by the Lessee prior to the date of such Advance
and for which the Lessee has not previously been reimbursed by an
Advance. With
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respect to each Advance (including Capitalized Interest Advances), the
conditions precedent to such Advance set forth in Article IV have been
satisfied or waived in writing by the Lessor.
ARTICLE VII
PAYMENT OF RENT; FEES
7.1. Rent.
(a) The Lessee, as Construction Agent, shall to the extent not
funded by Advances, pay Capitalized Interest then due on each Payment
Date prior to the commencement of the Base Term. The Lessee shall pay
Basic Rent on (i) each Payment Date during the Term, (ii) the date
required under Section 24.1(i) in connection with the Lessee's exercise
of the Remarketing Option, and (iii) any date on which this Lease shall
terminate.
(b) Rent shall be due and payable in lawful money of the United
States and shall be paid by a Capitalized Interest Advance (in the case
of Capitalized Interest) or by wire transfer of immediately available
funds on the due date therefor to such account or accounts at such bank
or banks or to the Lessor or in such other manner as the Lessor shall
from time to time direct in a written notice to the Lessee. The Lessor
shall provide written notice of the amount of Basic Rent due at least
five (5) days prior to each due date therefor; provided, however, that
the failure of the Lessor to provide such notice shall not affect
Lessee's obligations hereunder or impose liability on Lessor.
(c) Neither the Lessee's inability or failure for any reason
whatsoever to take possession of all or any portion of the Property
when delivered by the Lessor, shall delay or otherwise affect the
Lessee's obligation to pay Rent for such Property in accordance with
the terms of this Lease.
7.2. Payment of Rent. Rent shall be paid absolutely net to the Lessor,
so that this Lease shall yield to the Lessor the full amount thereof, without
setoff, deduction or reduction.
7.3. Supplemental Rent. The Lessee shall pay to the Lessor any and all
Supplemental Rent promptly as the same shall become due and payable, and if the
Lessee fails to pay any Supplemental Rent, the Lessor shall have all rights,
powers and remedies provided for herein or by law or equity or otherwise in the
case of nonpayment of Capitalized Interest or Basic Rent. The Lessee shall pay
to the Lessor, as Supplemental Rent, among other things, on written demand, to
the extent permitted by applicable Requirements of Law, interest at the
applicable Overdue Rate on any installment of Capitalized Interest or Basic Rent
not paid when
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due or demanded by the Lessor for the period for which the same shall be overdue
and on any payment of Supplemental Rent not paid when due or demanded by the
Lessor for the period from the due date or the date of any such demand, as the
case may be, until the same shall be paid. The expiration or other termination
of the Lessee's obligations to pay Capitalized Interest or Basic Rent hereunder
shall not limit or modify the obligations of the Lessee with respect to
Supplemental Rent. Unless expressly provided otherwise in this Lease, in the
event of any failure on the part of the Lessee to pay and discharge any
Supplemental Rent as and when due, the Lessee shall also promptly pay and
discharge any fine, penalty, interest or cost which may be assessed or added
under any agreement with a third party for nonpayment or late payment of such
Supplemental Rent, all of which shall also constitute Supplemental Rent.
7.4. Fees. The Lessee shall pay on the Closing Date all fees payable
pursuant to the Fee Letter, which fees shall be funded from the initial Advance
and will be capitalized and included in the Lease Balance. The Lessee shall
further pay all fees payable after the Closing Date pursuant to the Fee Letter
in accordance with the terms thereof.
7.5. Method of Payment. Each payment of Rent or any other amount due
hereunder that is not paid with the proceeds of a Capitalized Interest Advance
shall be made by the Lessee to the Lessor prior to 1:00 p.m., New York City time
at the place of payment designated in writing by the Lessor in funds consisting
of lawful currency of the United States of America which shall be immediately
available on the scheduled date when such payment shall be due, unless such
scheduled date shall not be a Business Day, in which case such payment shall be
made on the next succeeding Business Day. Payments received after 2:00 p.m., New
York City time on the date due shall for the purpose of Section 20.1 hereof be
deemed received on such day; provided, however, that for the purposes of the
second sentence of Section 7.3 hereof, such payments shall be deemed received on
the next succeeding Business Day and, unless the Lessor is otherwise able to
invest or employ such funds on the date received, subject to interest at the
Overdue Rate as provided in such Section 7.3.
ARTICLE VIII
QUIET ENJOYMENT; RIGHT TO INSPECT
8.1. Quiet Enjoyment. Subject to Sections 2.4 and 8.2, and subject to
the rights of the Lessor contained herein and the other terms of the Operative
Documents to which the Lessee is a party, the Lessee shall peaceably and quietly
have, hold and enjoy the Property for the Term, free of any claim or other
action by the Lessor or anyone claiming by, through or under the Lessor (other
than the Lessee) with respect to any matters arising from and after the Closing
Date. Such right of quiet enjoyment is independent of, and shall not affect the
Lessor's rights otherwise to initiate legal action to enforce, the obligations
of the Lessee under this Lease.
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<PAGE> 19
8.2. Right to Inspect. During the Term, the Lessee shall, upon
reasonable notice from the Lessor (except that no notice shall be required if an
Event of Default under this Lease has occurred and is continuing), permit the
Lessor and its authorized representatives to inspect the Property during normal
business hours, provided that such inspections shall not unreasonably interfere
with the Lessee's business operations at the Property.
ARTICLE IX
NET LEASE, ETC.
9.1. Net Lease. This Lease shall constitute a net lease. Any present
or future law to the contrary notwithstanding, this Lease shall not terminate,
nor shall the Lessee be entitled to any abatement, suspension, deferment,
reduction, setoff, counterclaim, or defense with respect to the Rent, nor shall
the obligations of the Lessee hereunder be affected (except as expressly herein
permitted and by performance of the obligations in connection therewith) by
reason of: (i) any defect in the condition, merchantability, design,
construction, quality or fitness for use of the Property or any part thereof, or
the failure of the Property to comply with all Requirements of Law, including
any inability to occupy or use the Property by reason of such non-compliance;
(ii) any damage to, removal, abandonment, salvage, loss, contamination of or
Release from, scrapping or destruction of or any requisition or taking of the
Property or any part thereof; (iii) any restriction, prevention or curtailment
of or interference with any use of the Property or any part thereof including
eviction; (iv) any defect in title to or rights to the Property or any Lien on
such title or rights or on the Property (other than Lessor Liens); (v) any
change, waiver, extension, indulgence or other action or omission or breach in
respect of any obligation or liability of or by the Lessor; (vi) any bankruptcy,
insolvency, reorganization, composition, adjustment, dissolution, liquidation or
other like proceedings relating to the Lessee or any other Person, or any action
taken with respect to this Lease by any trustee or receiver of the Lessee or any
other Person, or by any court, in any such proceeding; (vii) any claim that the
Lessee has or might have against any Person, including without limitation the
Lessor and any vendor, manufacturer, contractor of or for any portion of the
Property; (viii) any failure on the part of the Lessor to perform or comply with
any of the terms of this Lease (other than performance by Lessor of its
obligations set forth in Section 2.1 hereof), of any other Operative Document or
of any other agreement; (ix) any invalidity or unenforceability or illegality or
disaffirmance of this Lease against or by the Lessee or any provision hereof or
any of the other Operative Documents or any provision of any thereof; (x) the
impossibility or illegality of performance by the Lessee, the Lessor or both;
(xi) any action by any court, administrative agency or other Governmental
Authority; (xii) any restriction, prevention or curtailment of or interference
with the construction on or any use of the Property or any part thereof; or
(xiii) any other cause or circumstances, whether or not the Lessee shall have
notice or knowledge of any of the foregoing. The parties intend that the
obligations of the Lessee hereunder shall be covenants and agreements that are
separate and independent from any obligations of the Lessor hereunder or under
any other Operative
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Documents and the obligations of the Lessee shall continue unaffected unless
such obligations shall have been modified or terminated in accordance with an
express provision of this Lease. Nothing contained in this Section 9.1 shall
affect any claim, action or right that the Lessee may have against the Lessor or
any other Person, nor be considered as (a) a guaranty of (i) the fair market
value of any Property upon the commencement, expiration or termination of the
Construction Period or the Basic Term or (ii) the useful life of the
Improvements, (b) a prohibition of assertion of any claim against any
manufacturer, supplier, dealer, vendor, contractor, subcontractor or installer
with respect to the Improvements or the Equipment or any part thereof or (c) a
waiver by the Lessee of any of its rights under any of the Operative Documents
or of its right to assert and sue upon any claims it may have against any other
Person in one or more separate actions.
9.2. No Termination or Abatement. The Lessee shall remain obligated
under this Lease in accordance with its terms and shall not take any action to
terminate, rescind or avoid this Lease, notwithstanding any action for
bankruptcy, insolvency, reorganization, liquidation, dissolution, or other
proceeding affecting the Lessor, or any action with respect to this Lease which
may be taken by any trustee, receiver or liquidator of the Lessor or by any
court with respect to the Lessor. The Lessee hereby waives all right (i) to
terminate or surrender this Lease (except as provided herein) or (ii) to avail
itself of any abatement, suspension, deferment, reduction, setoff, counterclaim
or defense with respect to any Rent. The Lessee shall remain obligated under
this Lease in accordance with its terms and the Lessee hereby waives any and all
rights now or hereafter conferred by statute or otherwise to modify or to avoid
strict compliance with its obligations under this Lease. Notwithstanding any
such statute or otherwise, the Lessee shall be bound by all of the terms and
conditions contained in this Lease.
ARTICLE X
SUBLEASES
10.1. Subletting. The Lessee may, without the consent of the Lessor,
sublease the Property or any portion thereof to any Person. No sublease or other
relinquishment of possession of the Property shall in any way discharge or
diminish any of the Lessee's obligations to the Lessor hereunder and the Lessee
shall remain directly and primarily liable under this Lease as to the Property,
or portion thereof, so sublet. Any sublease of the Property shall expressly be
made subject to and subordinated to this Lease and to the rights of the Lessor
hereunder.
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ARTICLE XI
LESSEE ACKNOWLEDGMENTS
11.1. Condition of the Property. THE LESSEE ACKNOWLEDGES AND AGREES
THAT ALTHOUGH THE LESSOR WILL OWN AND HOLD TITLE TO THE PROPERTY, THE
CONSTRUCTION AGENT IS SOLELY RESPONSIBLE UNDER THE TERMS OF THE CONSTRUCTION
AGENCY AGREEMENT FOR THE DESIGN, DEVELOPMENT, BUDGETING AND CONSTRUCTION OF THE
IMPROVEMENTS AND ANY ALTERATIONS OR MODIFICATIONS. THE LESSEE FURTHER
ACKNOWLEDGES AND AGREES THAT IT IS LEASING THE PROPERTY "AS IS" WITHOUT
REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR IMPLIED) BY THE LESSOR AND
SUBJECT TO (A) THE EXISTING STATE OF TITLE, (B) THE RIGHTS OF ANY PARTIES IN
POSSESSION THEREOF, (C) ANY STATE OF FACTS WHICH AN ACCURATE SURVEY OR PHYSICAL
INSPECTION MIGHT SHOW, AND (D) VIOLATIONS OF REQUIREMENTS OF LAW WHICH MAY EXIST
ON THE DATE HEREOF OR ON THE CLOSING DATE. THE LESSOR HAS NOT MADE AND SHALL NOT
BE DEEMED TO HAVE MADE ANY REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR
IMPLIED) AND SHALL NOT BE DEEMED TO HAVE ANY LIABILITY WHATSOEVER AS TO THE
TITLE (OTHER THAN FOR LESSOR LIENS), VALUE, HABITABILITY, USE, CONDITION,
DESIGN, OPERATION, OR FITNESS FOR USE OF THE PROPERTY (OR ANY PART THEREOF), OR
ANY OTHER REPRESENTATION, WARRANTY OR COVENANT WHATSOEVER, EXPRESS OR IMPLIED,
WITH RESPECT TO THE PROPERTY (OR ANY PART THEREOF) AND THE LESSOR SHALL NOT BE
LIABLE FOR ANY LATENT, HIDDEN, OR PATENT DEFECT THEREIN (OTHER THAN FOR LESSOR
LIENS) OR THE FAILURE OF THE PROPERTY, OR ANY PART THEREOF, TO COMPLY WITH ANY
REQUIREMENT OF LAW.
11.2. Risk of Loss. During the Term the risk of loss of or decrease in
the enjoyment and beneficial use of such Property as a result of the damage or
destruction thereof by fire, the elements, casualties, thefts, riots, wars or
otherwise is assumed by the Lessee, and the Lessor shall in no event be
answerable or accountable therefor.
ARTICLE XII
POSSESSION AND USE OF THE PROPERTY, ETC.
12.1. Utility Charges. The Lessee shall pay or cause to be paid all
charges for electricity, power, gas, oil, water, telephone, sanitary sewer
service and all other rents and utilities used in or on the Property during the
Term. The Lessee shall be entitled to receive any credit or refund with respect
to any utility charge paid by the Lessee and the amount of any credit or refund
received by the Lessor on account of any utility charges paid by the
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Lessee, net of the costs and expenses reasonably incurred by the Lessor in
obtaining such credit or refund at the Lessee's request, shall be promptly paid
over to the Lessee.
12.2. Possession and Use of the Property. The Property may be used only
in a manner consistent with the Construction Agency Agreement and, after the
Base Date, may be used as consistent with the Plans and Specifications and in a
manner consistent with the standards applicable to properties of a similar
nature in the geographic area in which the Property is located and in any event
not less than the standards applied by the Lessee for other comparable
properties owned or leased by the Lessee. The Lessee shall pay, or cause to be
paid, all charges and costs required in connection with the use of the Property
as contemplated by this Lease and the Construction Agency Agreement. The Lessee
shall not commit or permit any waste of the Property or any part thereof.
12.3. Compliance with Requirements of Law and Insurance Requirements.
Subject to the terms of Article XVI, the Lessee, at its sole cost and expense,
shall (a) comply in all respects with all Requirements of Law (including all
Environmental Laws) and Insurance Requirements relating to the Property,
including the use, construction, operation, maintenance, repair and restoration
thereof and the remarketing thereof pursuant to Article XXIV, whether or not
compliance therewith shall require structural or extraordinary changes in the
Improvements or interfere with the use and enjoyment of the Property, and (b)
procure, maintain and comply with all licenses, permits, orders, approvals,
consents and other authorizations required for the construction, use,
maintenance and operation of the Property and for the use, operation,
maintenance, repair and restoration of the Improvements, except where such
failure to procure, maintain and comply is not material.
12.4. Assignment by Lessee. The Lessee may assign all (and not less
than all) of its rights hereunder to any other Person so long as the Lessee
remains fully liable for all of the obligations of the "Lessee" hereunder and
under the other Operative Documents.
12.5. Acceptance; Offset. On the Base Date (i) the Lessee will
unconditionally accept the Property (provided that nothing contained herein
shall be deemed a waiver by the Lessee of any right of action against Persons
with respect to title to and condition of the Property on the Closing Date or
the condition, quality or completeness of the Construction, other than the
Lessor) and (ii) no right of offset in favor of the Lessee will exist with
respect to any Rent or other sums payable under this Lease.
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ARTICLE XIII
MAINTENANCE AND REPAIR; RETURN
13.1. Maintenance and Repair; Return.
(a) The Lessee, at its sole cost and expense, shall maintain the
Property in good condition (ordinary wear and tear excepted) and make
all necessary repairs thereto, of every kind and nature whatsoever,
whether interior or exterior, ordinary or extraordinary, structural or
nonstructural or foreseen or unforeseen, in each case as required by
all Requirements of Law and Insurance Requirements (other than those
Requirements of Law or Insurance Requirements being contested by the
Lessee in good faith) and on a basis consistent with the operation and
maintenance of properties comparable in type and location to the
Property and in no event less than the standards applied by the Lessee
in the operation and maintenance of other comparable properties owned
or leased by the Lessee or its Affiliates.
(b) The Lessor shall under no circumstances be required to build
any improvements on the Property, make any repairs, replacements,
alterations or renewals of any nature or description to the Property,
make any expenditure whatsoever in connection with this Lease (other
than for Advances made in accordance with and pursuant to the terms of
this Lease and the Construction Agency Agreement) or maintain the
Property in any way. The Lessor shall not be required to maintain,
repair or rebuild all or any part of the Property, and the Lessee
waives any right to (i) require the Lessor to maintain, repair, or
rebuild all or any part of the Property, or (ii) make repairs at the
expense of the Lessor pursuant to any Requirement of Law, Insurance
Requirement, contract, agreement, or covenant, condition or restriction
in effect at any time during the Term.
(c) The Lessee shall, upon the expiration or earlier termination
of this Lease, vacate and surrender such Property to the Lessor in its
then-current, "AS IS" condition, subject to the Lessee's obligations
under Sections 12.3, 13.1(a), 14.1, 15.1, 18.1(e), 18.2 and 24.1,
unless the Lessee has purchased the Property from the Lessor as
provided herein.
ARTICLE XIV
MODIFICATIONS, ETC.
14.1. Modifications, Substitutions and Replacements. The Lessee, at its
sole cost and expense, may at any time and from time to time make alterations,
renovations, improvements and additions to the Property or any part thereof and
substitutions and replacements therefor (collectively, "Modifications");
provided, however, that: (i) except for any Modification
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required to be made pursuant to a Requirement of Law (a "Required
Modification"), no Modification shall impair the value, utility or useful life
of the Property or any part thereof from that which existed immediately prior to
such Modification; (ii) the Modification shall be done expeditiously and in a
good and workmanlike manner; (iii) except as otherwise permitted pursuant to
Article XVI, the Lessee shall comply with all Requirements of Law (including all
Environmental Laws) and Insurance Requirements applicable to the Modification,
including the obtaining of all permits and certificates of occupancy, and the
structural integrity of the Property shall not be adversely affected; (iv)
subject to the terms of Article XVI relating to permitted contests, the Lessee
shall pay all costs and expenses and shall discharge (or cause to be insured or
bonded over) within sixty (60) days after the same shall be filed (or otherwise
become effective) any Liens arising with respect to the Modification; (v) such
Modifications shall comply with Sections 12.3 and 13.1(a); and (vi) the Lessee
shall be required to obtain the prior written approval of the Lessor, which
approval shall not be unreasonably withheld, with respect to any alterations
(other than Required Modifications and/or alterations authorized by the
Construction Agency Agreement) that shall (A) affect any structural element of
the Improvements or major building system therein, except where such effect is
not material or (B) cost in excess of $3,000,000 or (C) change the nature of the
Improvements (except where such change is not material) or reduce the amount of
usable area therein (except where such reduction is not material) or the utility
thereof for the purposes contemplated by the Lessor and the Lessee as of the
date hereof. All Modifications shall remain part of the realty and shall be
subject to this Lease and title thereto shall immediately vest in the Lessor;
provided, however, that Modifications that meet each of the following conditions
shall not be subject to this Lease: (x) such Modifications are not Required
Modifications, (y) such Modifications were not financed by the Lessor and (z)
such Modifications are readily removable without impairing the value, utility or
remaining useful life of the Property. So long as no Event of Default has
occurred and is continuing, the Lessee may place upon the Property any trade
fixtures, machinery, equipment or other property belonging to the Lessee or
third parties and may remove the same at any time during the Term, subject,
however, to the terms of Section 13.1(a); provided that such trade fixtures,
machinery, equipment or other property do not impair the value, utility or
remaining useful life of the Property (except to the extent such impairment is
not material); provided, further, that the Lessee shall keep and maintain at the
Property and shall not remove from the Property (other than to the extent
removed or replaced as a consequence of permitted Modifications) any Equipment
financed or otherwise paid for (directly or indirectly) by the Lessor pursuant
to this Lease.
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ARTICLE XV
WARRANT OF TITLE; EASEMENTS
15.1. Warrant of Title.
(a) The Lessee agrees that except as otherwise provided herein
and subject to the terms of Article XVI relating to permitted contests,
the Lessee shall not directly or indirectly create or allow to remain,
and shall promptly discharge at its sole cost and expense (which shall
be paid for by funds from an Advance and added to the Lease Balance
during the Construction Period), any Lien, defect, attachment, levy,
title retention agreement or claim upon the Property or any
Modifications or any Lien, attachment, levy or claim with respect to
the Rent, other than Permitted Liens and Liens on trade fixtures,
machinery, equipment, general intangibles and other personal property
not financed by Advances.
(b) Except as otherwise expressly contained herein or in the
Construction Agency Agreement, nothing contained in this Lease shall be
construed as constituting the consent or request of the Lessor,
expressed or implied, to or for the performance by any contractor,
mechanic, laborer, materialman, supplier or vendor of any labor or
services or for the furnishing of any materials for any construction,
alteration, addition, repair or demolition of or to the Property or any
part thereof. NOTICE IS HEREBY GIVEN THAT THE LESSOR IS NOT AND SHALL
NOT BE LIABLE FOR ANY LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE
FURNISHED TO THE LESSEE, OR TO ANYONE HOLDING THE PROPERTY OR ANY PART
THEREOF THROUGH OR UNDER THE LESSEE, AND THAT NO MECHANIC'S OR OTHER
LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS SHALL ATTACH TO OR
AFFECT THE INTEREST OF THE LESSOR, IN AND TO THE PROPERTY.
15.2. Grants and Releases of Easements; Lessor's Waivers. Provided that
no Default shall have occurred and be continuing and subject to the provisions
of Articles XII, XIII and XIV the Lessor hereby consents in each instance to the
following actions by the Lessee, in the name and stead of the Lessor, but at the
Lessee's sole cost and expense (which shall be paid for by funds from an Advance
and added to the Lease Balance during the Construction Period): (a) the granting
of easements, licenses, rights-of-way and other rights and privileges in the
nature of easements reasonably necessary or desirable for the use, repair, or
maintenance of the Property as herein provided; (b) the release of existing
easements or other rights in the nature of easements which are for the benefit
of the Property; (c) if required by applicable Governmental Authority in
connection with the Construction, Modifications or restoration of the Property
in the event of a Casualty or Condemnation, the dedication or transfer of
unimproved portions of the Property for road, highway or other public purposes;
and (d) the execution of amendments to any covenants and restrictions affecting
the Property; provided,
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however, that in each case (i) such grant, release, dedication, transfer or
amendment does not impair the value, utility or remaining useful life of the
Property, (ii) such grant, release, dedication, transfer, annexation or
amendment is reasonably necessary in connection with the use, maintenance,
alteration or improvement of the Property, (iii) such grant, release,
dedication, transfer, annexation or amendment will not cause the Property or any
portion thereof to fail to comply in any respect with the provisions of this
Lease or any other Operative Documents and all Requirements of Law (including,
without limitation, all applicable zoning, planning, building and subdivision
ordinances, all applicable restrictive covenants and all applicable
architectural approval requirements); (iv) all governmental consents or
approvals required prior to such grant, release, dedication, transfer,
annexation or amendment have been obtained, and all filings required prior to
such action have been made; (v) such grant, release, dedication, transfer,
annexation or amendment will not result in any down- zoning of the Property or
any portion thereof; (vi) the Lessee shall remain obligated under this Lease and
under any instrument executed by the Lessee consenting to the assignment of the
Lessor's interest in this Lease as security for indebtedness, in each such case
in accordance with their terms, as though such grant, release, dedication,
transfer, annexation or amendment had not been effected and (vii) the Lessee
shall pay and perform any obligations of the Lessor under such grant, release,
dedication, transfer, annexation or amendment. The Lessor acknowledges the
Lessee's right to finance and to secure under the Uniform Commercial Code,
inventory, furnishings, furniture, equipment, trade fixtures, machinery,
leasehold improvements and other personal property located at the Property other
than Equipment, and Lessor agrees to execute Lessor waiver forms in favor of any
purchase money seller, lessor or lender which has financed or may finance in the
future such items. Without limiting the effectiveness of the foregoing, provided
that no Default shall have occurred and be continuing, the Lessor shall, upon
the request of the Lessee, and at the Lessee's sole cost and expense, execute
and deliver any instruments necessary or appropriate to confirm any such grant,
release, dedication, transfer, annexation or amendment to any Person permitted
under this Section 15.2 including landlord waivers with respect to any of the
foregoing.
ARTICLE XVI
PERMITTED CONTESTS
16.1. Permitted Contests in Respect of Applicable Law. If, to the
extent and for so long as (a) a test, challenge, appeal or proceeding for review
of any Applicable Law, Requirement of Law or Government Action relating to the
Property shall be prosecuted diligently and in good faith in appropriate
proceedings by the Lessee or (b) compliance with such Applicable Law,
Requirement of Law or Government Action shall have been excused or exempted by a
valid nonconforming use, variance permit, waiver, extension or forbearance, the
Lessee shall not be required to comply with such Applicable Law, Requirement of
Law or Government Action but only if and so long as any such test, challenge,
appeal, proceeding, waiver, extension, forbearance or noncompliance shall not,
in the reasonable opinion of the
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Lessor, involve (A) any risk of criminal liability being imposed on the Lessor
or the Property, or (B) any risk of (1) imminent foreclosure, forfeiture or loss
of the Property, or any part thereof that is material, or (2) the nonpayment of
Rent or (C) any substantial danger of (1) the sale of, or the creation of any
Lien (other than a Permitted Lien) on, any part of the Property, (2) civil
liability being imposed on the Lessor, or the Property, or (3) imminent
enjoyment of, or interference with, the use, possession or disposition of the
Property in any respect, except for uses, possessions or dispositions which are
not material. If the Lessor or the Lessee shall receive notice of a test,
challenge, appeal or proceeding for review of any Applicable Law, Requirement of
Law or Government Action relating to the Property, the Lessor or the Lessee, as
the case may be, shall give notice thereof to the other promptly after the
receipt of such notice.
The Lessor will not be required to join in any proceedings pursuant to
this Section 16.1 unless a provision of any Applicable Law, Requirement of Law
or Governmental Action requires, or diligent and effective pursuit of such
proceedings requires, that such proceedings be brought by or in the name of the
Lessor; and in that event the Lessor will join in the proceedings or permit them
or any part thereof to be brought in its name if and so long as (i) no Default
has occurred and is continuing and (ii) the Lessee pays all related
out-of-pocket expenses and indemnifies the Lessor to its satisfaction.
ARTICLE XVII
INSURANCE
17.1. Public Liability and Workers' Compensation Insurance.
(a) During the Term the Lessee shall procure and carry, at the
Lessee's sole cost and expense, commercial general liability insurance
for claims for bodily injury or death sustained by persons or damage to
property while on the Property and such other public liability
coverages as are ordinarily procured by the Lessee or its Affiliates
who own or operate similar properties. Such insurance shall be in an
amount of no less than $3,000,000 per incident and of no less than
$5,000,000 per occurrence and shall otherwise be on terms that are
consistent with commercially reasonable practices. The Lessor shall be
named as an additional insured on such policy. The policy shall also
specifically provide that the policy shall be considered primary
insurance which shall apply to any loss or claim before any
contribution by any insurance which the Lessor may have in force.
(b) The Lessee shall, in the construction of the Improvements
(including in connection with any Modifications thereof) and the
operation of the Property, comply with, or cause the applicable
contractor to comply with, all applicable workers' compensation laws.
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17.2. Hazard and Other Insurance. During the Term the Lessee shall
keep, or cause to be kept, the Property insured against loss or damage by fire,
earthquake, flood and other risks in the amount of no less than $3,000,000 and
otherwise on terms and in amounts that are consistent with commercially
reasonable practices. During the construction of any Improvements the Lessee
shall also maintain or cause to be maintained builders' risk insurance. All
insurance proceeds in respect of any loss or occurrence for which the proceeds
related thereto are (i) less than or equal to $3,000,000, in the absence of the
occurrence and continuance of a Default, shall be adjusted by and paid to the
Lessee for application toward the reconstruction, repair or refurbishment of the
Property and (ii) greater than $3,000,000, shall be adjusted jointly by the
Lessee and the Lessor (unless a Default has occurred and is continuing, in which
case such proceeds shall be adjusted solely by the Lessor) and held by the
Lessor for application in accordance with Article XVIII hereof.
17.3. Insurance Coverage.
(a) The insurance required to be obtained under Sections 17.1 and
17.2 may be subject to deductibles not greater than $25,000 for each.
The Lessee shall furnish the Lessor with certificates showing the
insurance required under Sections 17.1 and 17.2 to be in effect and
naming the Lessor as additional insured with respect to liability
coverage (excluding worker's compensation insurance, and naming the
Lessor as loss payee with respect to property coverage and showing the
mortgagee endorsement required by Section 17.3(c) with respect to such
coverage. All such insurance shall be at the cost and expense of the
Lessee. Such certificates shall include a provision for no less than
thirty (30) days' advance written notice by the insurer to the Lessor
in the event of cancellation or reduction of such insurance. In
addition, the Lessee shall cause the Lessor to be named as additional
insured under the liability policies maintained with respect to the
Construction.
(b) The Lessee agrees that the insurance policy or policies
required by Sections 17.2, shall include an appropriate clause pursuant
to which such policy shall provide that it will not be invalidated
should the Lessee waive, in writing, prior to a loss, any or all rights
of recovery against any party for losses covered by such policy, and
that the insurance in favor of the Lessor and its rights under and
interests in said policies shall not be invalidated or reduced by any
act or omission or negligence of the Lessee or any other Person having
any interest in the Property. The Lessee hereby waives any and all such
rights against the Lessor to the extent of payments made under such
policies.
(c) All such insurance shall be written by reputable insurance
companies that are financially sound and solvent and otherwise
reasonably appropriate considering the amount and type of insurance
being provided by such companies. Any insurance company selected by the
Lessee which is rated in Best's Insurance Guide or any
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successor thereto (or if there be none, an organization having a
similar national reputation) shall have a general policyholder rating
of "A" and a financial rating of at least "12" or be otherwise
acceptable to the Lessor. All insurance policies required by Section
17.2 shall include a standard form mortgagee endorsement in favor of
the Lessor.
(d) The Lessor may carry separate liability insurance at its sole
cost so long as (i) the Lessee's insurance is designated as primary and
in no event excess or contributory to any insurance the Lessor may have
in force which would apply to a loss covered under the Lessee's policy
and (ii) each such insurance policy will not cause the Lessee's
insurance required under this Article XVII to be subject to a
coinsurance exception of any kind.
(e) The Lessee shall pay as they become due all premiums for the
insurance required by Section 17.1 and Section 17.2, and shall renew or
replace each policy prior to the expiration date thereof. Throughout
the Term, at the time each of the Lessee's insurance policies is
renewed (but in no event less frequently than once each year), the
Lessee shall deliver to the Lessor certificates of insurance evidencing
that all insurance required by this Article XVII is being maintained by
the Lessee and is in effect.
ARTICLE XVIII
CASUALTY AND CONDEMNATION;
ENVIRONMENTAL MATTERS
18.1. Casualty and Condemnation.
(a) Subject to the provisions of this Article XVIII, if all or a
portion of the Property is damaged or destroyed in whole or in part by
a Casualty or if the use, access, occupancy, easement rights or title
to the Property or any part thereof, is the subject of a Condemnation,
then (i) in the case of a Casualty where the cost of restoration of the
Property in the reasonable judgment of the Lessor is (x) less than or
equal to $3,000,000 any insurance proceeds payable with respect to such
Casualty shall be paid directly to the Lessee, or if received by the
Lessor, shall be paid over to the Lessee for the reconstruction,
refurbishment and repair of the Property, and (y) greater than
$3,000,000 any insurance proceeds payable with respect to such Casualty
shall be paid to the Lessor but may be obtained by the Lessee, and
shall be used by the Lessee for the purpose of reconstructing,
refurbishing and repairing the Property to the condition required under
this Lease prior to the end of the Term, including, without limitation,
Completion thereof, upon submission to the Lessor of an Architect's
Certificate to the effect that such restoration can be fully effected
prior to the end of the Term, and as to the cost of such restoration,
and upon receipt of such certificate in
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form reasonably satisfactory to the Lessor such amounts shall be made
available to the Lessee in the manner contemplated by the Construction
Agency Agreement with respect to the Construction, and (ii) in the case
of a Condemnation of any part of the Land that in the reasonable
judgment of the Lessor is not a Significant Condemnation, any award or
compensation relating thereto shall be paid to the Lessee and in the
case of all other Condemnations such award or compensation shall be
paid to the Lessor to be applied in its reasonable discretion to the
restoration of the Property or toward the payment of the Lease Balance;
provided, however, that if a Default shall have occurred and be
continuing, such award, compensation or insurance proceeds shall be
paid directly to the Lessor or, if received by the Lessee, shall be
held in trust for the Lessor, and shall be paid over by the Lessee to
the Lessor. If, contrary to such provision, any such award,
compensation or insurance proceeds are paid to the Lessee, rather than
to the Lessor, the Lessee hereby agrees to transfer any such payment to
the Lessor. All amounts held by the Lessor when a Default exists
hereunder on account of any award, compensation or insurance proceeds
either paid directly to the Lessor or turned over to the Lessor shall
either be (i) paid to the Lessee for the repair of damage caused by
such Casualty or Condemnation in accordance with clause (d) of this
Section 18.1, or (ii) applied to the purchase price of the Property on
the Termination Date, with any Excess Proceeds being payable to the
Lessee.
(b) The Lessee may appear in any proceeding or action to
negotiate, prosecute, adjust or appeal any claim for any award,
compensation or insurance payment on account of any such Casualty or
Condemnation and shall pay all expenses thereof. At the Lessee's
reasonable request, and at the Lessee's sole cost and expense, the
Lessor shall participate in any such proceeding, action, negotiation,
prosecution or adjustment. The Lessor and the Lessee agree that this
Lease shall control the rights of the Lessor and the Lessee in and to
any such award, compensation or insurance payment.
(c) If the Lessor or the Lessee shall receive notice of a
Casualty for which the reasonable anticipated cost of restoration
exceeds an amount equal to 10% of the Lease Balance or of an actual,
pending or threatened Condemnation of the Property or any material
interest therein, the Lessor or the Lessee, as the case may be, shall
give notice thereof to the other promptly after the receipt of such
notice.
(d) If pursuant to this Section 18.1 and Section 19.1 this Lease
shall continue in full force and effect following a Casualty or
Condemnation with respect to the Property, the Lessee shall, at its
sole cost and expense with funds from an Advance during the
Construction Period and added to the Lease Balance (and, without
limitation, if any award, compensation or insurance payment is not
sufficient to restore such Property in accordance with this paragraph,
the Lessee shall pay the shortfall with funds from an Advance during
the Construction Period and added to the Lease Balance), promptly and
diligently repair any damage to the Property caused by such Casualty
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or Condemnation in conformity with the requirements of Sections 13.1
and 14.1 using the as-built plans and specifications for the Property
(as modified to give effect to any subsequent Modifications, any
Condemnation affecting the Property and all applicable Requirements of
Law) so as to restore the Property to at least the same condition,
operation, function and value as existed immediately prior to such
Casualty or Condemnation with such Modification as the Lessee may elect
in accordance with Section 14.1. In such event, title to the Property
shall remain with the Lessor. Upon completion of such restoration, the
Lessee shall furnish the Lessor an architect's certificate of
substantial completion and a Responsible Employee's Certificate
confirming that such restoration has been completed pursuant to this
Lease.
(e) In no event shall a Casualty or Condemnation affect the
Lessee's obligations to pay Rent pursuant to Section 7.1 or to perform
its obligations and pay any amounts due on the Expiration Date or
pursuant to Articles XXII and XXV.
(f) Any Excess Proceeds received by the Lessor in respect of a
Casualty or Condemnation shall be turned over to the Lessee.
18.2. Environmental Matters. Promptly upon the Lessee's actual
knowledge of the existence of an Environmental Violation with respect to the
Property, the Lessee shall notify the Lessor in writing of such Environmental
Violation. If the Lessor elects not to terminate this Lease pursuant to Section
19.1, at the Lessee's sole cost and expense, the Lessee shall promptly and
diligently commence any response, clean up, remedial or other action necessary
to remove, clean up or remediate the Environmental Violation in accordance with
the terms of Section 12.3. If the Lessor does not deliver a Termination Notice
with respect to such Property pursuant to Section 19.1, the Lessee shall, upon
completion of remedial action by the Lessee, cause to be prepared by an
environmental consultant reasonably acceptable to the Lessor a report describing
the Environmental Violation and the actions taken by the Lessee (or its agents)
in response to such Environmental Violation, and a statement by the consultant
that the Environmental Violation has been remedied in compliance in all respects
with applicable Environmental Law. Each such Environmental Violation shall be
remedied prior to the Expiration Date. Nothing in this Article XVIII shall
reduce or limit the Lessee's obligations under the indemnity provisions hereof.
18.3. Notice of Environmental Matters. Promptly, but in any event
within sixty (60) Business Days from the date the Lessee has actual knowledge
thereof, the Lessee shall provide to the Lessor written notice of any pending or
threatened claim, action or proceeding involving any Environmental Law or any
Release on or in connection with the Property. All such notices shall describe
in reasonable detail the nature of the claim, action or proceeding and the
Lessee's proposed response thereto. In addition, the Lessee shall provide to the
Lessor, within sixty (60) Business Days of receipt, copies of all written
communications with any Governmental Authority relating to any Environmental
Violation in connection with the
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Property. The Lessee shall also promptly provide such detailed reports of any
such environmental claims as may reasonably be requested by the Lessor. In the
event that the Lessor receives written notice of any pending or threatened
claim, action or proceeding involving any Environmental Law or any Release on or
in connection with the Property, the Lessor shall promptly give notice thereof
to the Lessee.
ARTICLE XIX
TERMINATION OF LEASE
19.1. Mandatory Termination upon Certain Events. If during the Term
either:
(i) a Significant Condemnation occurs; or
(ii) a Significant Casualty occurs; or
(iii) an Environmental Violation occurs or is discovered the cost
of remediation of which would exceed the greater of $1,000,000 and 15%
of the Lease Balance;
and the Lessor shall have given written notice to the Lessee that this Lease is
to be terminated as a consequence of the occurrence of such an event (a
"Termination Notice"), then, the Lessee shall be obligated to purchase the
Lessor's interest in the Property on or prior to the date occurring one hundred
eighty (180) days after the date of Lessor's notice of termination by paying the
Lessor an amount equal to the Lease Balance on such termination date.
19.2. Termination Procedures. On the date of the payment by the Lessee
of the Lease Balance in accordance with the Termination Notice in accordance
with Section 19.1 (such date, the "Termination Date"), this Lease shall
terminate and, concurrent with the Lessor's receipt of such payment,
(a) the Lessor shall execute and deliver to the Lessee (or to the
Lessee's designee) at the Lessee's cost and expense a special warranty
deed with respect to the Property, a grant bill of sale with respect to
the Equipment and an assignment of the Lessor's entire interest in the
Property (which shall include an assignment of all of the Lessor's
right, title and interest in and to any Net Proceeds not previously
received by the Lessor and existing subleases and security deposits
thereunder), in each case in recordable form and otherwise in
conformity with local custom and free and clear of the Lien of the
Memorandum of Lease and any Lessor Liens attributable to the Lessor;
(b) the Property shall be conveyed to such Person "AS IS" and in
its then present physical condition;
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(c) the Lessor shall, at the Lessee's sole cost and expense,
execute and deliver to Lessee and the Lessee's title insurance company,
if any, an affidavit as to the Lessor's title and the absence of Lessor
Liens, and shall, at the Lessee's sole cost and expense, execute and
deliver to Lessee a statement of termination of this Lease and the
Construction Agency Agreement with respect to the Property, releases of
any Liens created by the Operative Documents attributable to the Lessor
and termination statements for any financing statements which are then
of record naming the Lessor as the secured party;
(d) the Lessor shall convey to the Lessee an assignment of all of
Lessor's right, title and interest in and to any insurance proceeds or
award with respect to the Casualty or Condemnation giving rise to the
termination of this Lease with respect to the Property or shall convey
to the Lessee any awards, compensation or insurance proceeds in respect
of such Casualty or Condemnation theretofore or thereafter received by
the Lessor or at the request of the Lessee, such amounts shall be
applied against sums due hereunder; and
(e) in the case of a termination pursuant to clause (i) or (ii)
of Section 19.1, the Lessor shall convey to the Lessee any Net Proceeds
with respect to the Casualty or Condemnation giving rise to the
termination of this Lease theretofore received by the Lessor or at the
request of the Lessee, such amounts shall be applied against sums due
hereunder.
ARTICLE XX
EVENTS OF DEFAULT
20.1. Events of Default. The occurrence of any one or more of the
following events (whether such event shall be voluntary or involuntary or come
about or be effected by operation of law or pursuant to or in compliance with
any judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body) shall constitute an "Event of Default":
(a) the Lessee shall fail to make payment of any Capitalized
Interest or Basic Rent, Purchase Option Price, Contingent Rental
Adjustment or Lease Balance within five (5) Business Days after the due
date therefor, including, without limitation, amounts due pursuant to
Sections 19.1 or 22.1, or Article XXIV;
(b) the Lessee shall fail to make payment of any Supplemental
Rent due and payable within ten (10) Business Days after receipt of
notice thereof;
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(c) the Lessee shall fail to maintain insurance as required by
Article XVII of this Lease, or to restore the Property in the manner
and to the extent set forth at Section 18.1(a)(i)(y);
(d) The Lessee shall fail to observe or perform in any respect
any term, covenant or condition of the Lessee under this Lease or the
Operative Documents to which it is party other than those described in
Section 20.1(a), (b) or (c) hereof, and such failure shall have
continued for forty-five (45) days after the delivery to the Lessee of
written notice thereof from the Lessor; provided, however, that if such
failure is capable of cure but cannot be cured by payment of money or
cannot be cured by diligent efforts within such forty-five (45) day
period but such diligent efforts shall be properly commenced within the
cure period and the Lessee is diligently pursuing, and shall continue
to pursue diligently, remedy of such failure, the cure period shall be
extended for a reasonable additional period of time as may be necessary
to cure, not to exceed one hundred eighty (180) days from the date of
such notice or to extend beyond the Expiration Date; provided further,
that failure by the Lessee to fully comply with the requirements of
Section 24.1 hereof shall not be subject to any cure period;
(e) any representation or warranty made by the Lessee in any
of the Operative Documents to which it is a party shall prove to have
been inaccurate in any respect at the time made, except for such
inaccuracies and misstatements which are not material, and if such
inaccuracy can be cured, it shall not have been cured within forty-five
(45) days after the earlier of (i) delivery to the Lessee of written
notice thereof from the Lessor or (ii) a Responsible Employee of the
Lessee shall have knowledge of such inaccuracy;
(f) a Construction Agency Event of Default shall have occurred
and be continuing;
(g) the Lessee shall (i) admit in writing its inability to pay
its debts generally as they become due, (ii) file a petition under the
United States bankruptcy laws or any other applicable insolvency law or
statute of the United States of America or any State or Commonwealth
thereof, (iii) make a general assignment for the benefit of its
creditors, (iv) consent to the appointment of a receiver of itself or
the whole or any substantial part of its property, (v) fail to cause
the discharge of any custodian, trustee or receiver appointed for the
Lessee, or the whole or a substantial part of its property within sixty
(60) days after such appointment, or (vi) file a petition or answer
seeking or consenting to reorganization under the United States
bankruptcy laws or any other applicable insolvency law or statute of
the United States of America or any State or Commonwealth thereof;
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(h) insolvency proceedings or a petition under the United States
bankruptcy laws or any other applicable insolvency law or statute of
the United States of America or any State or Commonwealth thereof shall
be filed against the Lessee and not dismissed within sixty (60) days
from the date of its filing, or a court of competent jurisdiction shall
enter an order or decree appointing, without the consent of the Lessee,
a receiver of the Lessee or the whole or a substantial part of any of
its property and such order or decree shall not be vacated or set aside
within ninety (90) days from the date of the entry thereof;
(i) any Lien granted under any Operative Document shall, in whole
or in part, terminate, cease to be effective against, or cease to be
the legal, valid, binding and enforceable obligation of, the Lessee;
(j) the Lessee shall directly or indirectly contest the validity
of any Operative Document in any manner in any court of competent
jurisdiction or any lien granted by any Operative Document, or shall
repudiate, or purport to discontinue or terminate, the Construction
Agency Agreement, or the Construction Agency Agreement shall cease to
be a legal, valid and binding obligation or shall cease to be in full
force and effect for any reason;
(k) the Lessee fails to comply with the provisions of Section
4.4; or
(l) the Lessee shall fail to satisfy any of its obligations under
the Pledge Agreement within the applicable grace period provided
therefor, if any, for which the exclusive remedy for such Event of
Default is provided in Section 20.2(m).
20.2. Remedies. Upon the occurrence of any Event of Default and at any
time thereafter, the Lessor may, so long as such Event of Default is continuing,
do one or more of the following as the Lessor in its sole discretion shall
determine, without limiting any other right or remedy the Lessor may have on
account of such Event of Default:
(a) The Lessor may, by notice to the Lessee, rescind or terminate
this Lease as of the date specified in such notice; however, (i) no
reletting, reentry or taking of possession of the Property (or any
portion thereof) by the Lessor will be construed as an election on the
Lessor's part to terminate this Lease unless a written notice of such
intention is given to the Lessee, (ii) notwithstanding any reletting,
reentry or taking of possession, the Lessor may at any time thereafter
elect to terminate this Lease for a continuing Event of Default and
(iii) no act or thing done by the Lessor or any of its agents,
representatives or employees and no agreement accepting a surrender of
the Property shall be valid unless the same be made in writing and
executed by the Lessor.
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(b) The Lessor may (i) demand that the Lessee, and the Lessee
shall upon the written demand of the Lessor, return the Property
promptly to the Lessor in the manner and condition required by, and
otherwise in accordance with all of the provisions of, Articles XI and
XIII and Section 12.3 hereof as if the Property were being returned at
the end of the Term, and the Lessor shall not be liable for the
reimbursement of the Lessee for any costs and expenses incurred by the
Lessee in connection therewith and (ii) without prejudice to any other
remedy which the Lessor may have for possession of the Property, and to
the extent and in the manner permitted by Applicable Law, enter upon
the Property and take immediate possession of (to the exclusion of the
Lessee) the Property or any part thereof and expel or remove the Lessee
and any other Person who may be occupying the Property, by summary
proceedings or otherwise, all without liability to the Lessee for or by
reason of such entry or taking of possession, whether for the
restoration of damage to property caused by such taking or otherwise
and, in addition to the Lessor's other damages, the Lessee shall be
responsible for all costs and expenses incurred by the Lessor in
connection with any reletting, including, without limitation,
reasonable brokers' fees and all costs of any alterations or repairs
made by the Lessor.
(c) Subject to the limitation on recovery set forth in Section
5.4 of the Construction Agency Agreement, the Lessor may (i) to the
fullest extent permitted by Applicable Law sell all or any part of the
Property at public sale free and clear of any rights of the Lessee and
without any duty to account to the Lessee with respect to such action
or inaction or any proceeds (except that Net Proceeds are payable to
and shall be paid to the Lessee) with respect thereto (except to the
extent required by clause (ii) below if the Lessor shall elect to
exercise its rights thereunder) in which event the Lessee's obligation
to pay Capitalized Interest or Basic Rent hereunder for periods
commencing after the date of such sale shall be terminated or
proportionately reduced, as the case may be; and (ii) if the Lessor
shall so elect, demand that the Lessee pay to the Lessor, and the
Lessee shall pay to the Lessor, on the date of such sale, as liquidated
damages for loss of a bargain and not as a penalty (the parties
agreeing that the Lessor's actual damages would be difficult to
predict, but the aforementioned liquidated damages represent a
reasonable approximation of such amount) (in lieu of Capitalized
Interest or Basic Rent due for periods commencing on or after the
Payment Date coinciding with such date of sale (or, if the sale date is
not a Payment Date, the Payment Date next preceding the date of such
sale)), an amount equal to (A) the excess, if any, of (1) the Lease
Balance calculated as of such Payment Date (including all Rent due and
unpaid to and including such Payment Date and), over (2) the net
proceeds of such sale (that is, after deducting all costs and expenses
incurred by the Lessor incident to such conveyance, including, without
limitation, repossession costs, brokerage commissions, prorations,
transfer taxes, fees and expenses for counsel, title insurance fees,
survey costs, recording fees, and any repair costs); plus (B) interest
at the
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Overdue Rate on the foregoing amount from such Payment Date until
the date of payment.
(d) The Lessor may, at its option, elect not to terminate this
Lease and continue to collect all Capitalized Interest, Basic Rent,
Supplemental Rent, and all other amounts due the Lessor (together with
all costs of collection) and enforce the Lessee's obligations under
this Lease as and when the same become due, or are to be performed, and
at the option of the Lessor, upon any abandonment of any or all of the
Property by the Lessee or re-entry of same by the Lessor, the Lessor
may, in its sole and absolute discretion, elect not to terminate this
Lease and may make the necessary repairs in order to relet the
Property, and relet the Property or any part thereof for such term or
terms (which may be for a long term extending beyond the Term of this
Lease) and at such rental or rentals and upon such other terms and
conditions as the Lessor in its reasonable discretion may deem
advisable; and upon each such reletting all rentals actually received
by the Lessor from such reletting shall be applied to the Lessee's
obligations hereunder and the other Operative Documents in such order,
proportion and priority as the Lessor may elect in the Lessor's sole
and absolute discretion. If such rentals received from such reletting
during any period are less than the Rent with respect to such Property
to be paid during that period by the Lessee hereunder, the Lessee shall
pay any deficiency, as calculated by the Lessor, to the Lessor on the
next Payment Date.
(e) Unless the Property has been sold in its entirety, the Lessor
may, whether or not the Lessor shall have exercised or shall thereafter
at any time exercise any of its rights under paragraph (b), (c) or (d)
of this Section 20.2 with respect to the Property or portions thereof,
demand, by written notice to the Lessee specifying a date (a
"Termination Date") not earlier than 10 days after the date of such
notice, that the Lessee purchase, on such Termination Date, the
Property (or the remaining portion thereof) in accordance with the
provisions of Article XXII; provided, however, that no such written
notice shall be required upon the occurrence of any Event of Default in
clause (g) or (h) of Section 20.1.
(f) Subject to the limitation on recovery set forth in Section
5.4 of the Construction Agency Agreement, the Lessor may exercise any
other right or remedy that may be available to it under Applicable Law,
or proceed by appropriate court action (legal or equitable) to enforce
the terms hereof or to recover damages for the breach hereof. Separate
suits may be brought to collect any such damages for any period(s), and
such suits shall not in any manner prejudice the Lessor's right to
collect any such damages for any subsequent period(s), or the Lessor
may defer any such suit until after the expiration of the Term, in
which event such suit shall be deemed not to have accrued until the
expiration of the Term.
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(g) The Lessor may retain and apply against the Lessor's damages
all sums which the Lessor would, absent such Event of Default, be
required to pay to, or turn over to, the Lessee pursuant to the terms
of this Lease.
(h) If an Event of Default shall have occurred and be continuing,
the Lessor, as a matter of right and without notice to the Lessee, and
without regard to the value of the Property or the solvency of the
Lessee, shall have the right to apply to any court having jurisdiction
to appoint a receiver or receivers of any or all of the Property, and
the Lessee hereby irrevocably consents to any such appointment. Any
such receiver(s) shall have all of the usual powers and duties of
receivers in like or similar cases and all of the powers and duties of
the Lessor in case of entry, and shall continue as such and exercise
such powers until the date of confirmation of the sale of the Property
unless such receivership is sooner terminated.
(i) To the maximum extent permitted by law, the Lessee hereby
waives the benefit of any appraisement, valuation, stay, extension,
reinstatement and redemption laws now or hereafter in force and all
rights of marshalling in the event of any sale of any or all of the
Property or any interest therein.
(j) The Lessor shall be entitled to enforce payment of the
indebtedness and performance of the obligations secured hereby and to
exercise all rights and powers under this instrument or under any of
the other Operative Documents or other agreement or any laws now or
hereafter in force, notwithstanding some or all of the obligations
secured hereby may now or hereafter be otherwise secured, whether by
mortgage, security agreement, pledge, lien, assignment or otherwise.
Neither the acceptance of this instrument nor its enforcement, shall
prejudice or in any manner affect the Lessor's right to realize upon or
enforce any other security now or hereafter held by the Lessor, it
being agreed that the Lessor shall be entitled to enforce this
instrument and any other security now or hereafter held by the Lessor
in such order and manner as the Lessor may determine in its absolute
discretion. No remedy herein conferred upon or reserved to the Lessor
is intended to be exclusive of any other remedy herein or by law
provided or permitted, but each shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter
existing at law or in equity or by statute. Every power or remedy given
by any of the Operative Documents to the Lessor or to which it may
otherwise be entitled, may be exercised, concurrently or independently,
from time to time and as often as may be deemed expedient by the
Lessor.
(k) In no event shall the Lessor, in the exercise of the remedies
provided in this instrument (including, without limitation, in
connection with the assignment of rents to Lessor, or the appointment
of a receiver and the entry of such receiver on to all or any part of
the Property), be deemed a "mortgagee in possession," and the Lessor
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shall not in any way be made liable for any act, either of commission
or omission, in connection with the exercise of such remedies.
(l) An action of mortgage foreclosure as now provided or
hereafter prescribed by law, may forthwith be commenced and prosecuted
to judgment, execution and sale, for the collection of the whole amount
of the Lease Balance, together with all fees, costs and expenses of
such proceedings, including a reasonable attorney's commission. All
errors in such proceedings, together with any stays of or exemptions
from execution, or extensions of time of payment, which may be given by
any Applicable Law now in force, or which may be enacted hereafter, are
hereby forever waived and released.
(m) The Lessor may exercise any and all rights under the Pledge
Agreement against the collateral pledged thereunder.
If, pursuant to the exercise by the Lessor of its remedies pursuant to this
Section 20.2, the Lease Balance, all other amounts due and owing from the Lessee
under this Lease and the other Operative Documents have been paid in full, then
the Lessor shall remit to the Lessee any excess amounts received by the Lessor.
20.3. Waiver of Certain Rights. If this Lease shall be terminated
pursuant to Section 20.2, the Lessee waives, to the fullest extent permitted by
law, (a) any notice of re-entry or the institution of legal proceedings to
obtain re-entry or possession; (b) any right of redemption, re-entry or
repossession; (c) the benefit of any laws now or hereafter in force exempting
property from liability for rent or for debt or limiting the Lessor with respect
to the election of remedies; and (d) any other rights which might otherwise
limit or modify any of the Lessor's rights or remedies under this Article XX.
20.4. Excess Proceeds; Return of Property. If, pursuant to the exercise
by the Lessor of its remedies pursuant to Section 20.2, an amount equal to the
Lease Balance for the Property plus all other amounts due and owing from the
Lessee under this Lease and the other Operative Documents (including all accrued
and unpaid Basic Rent and all Supplemental Rent then due and owing) shall have
been paid in full in cash, then the lessor shall promptly remit to the Lessee
any excess amounts received by the Lessor and, at the sole cost and expense of
the Lessee, transfer to the Lessee (or its designee) all of the Lessor's
remaining right, title and interest in the Property (if any) in accordance with
Section 25.1(a) hereof.
20.5. Lessee's Purchase Option During Event of Default. Notwithstanding
anything to the contrary contained in this Article XX, upon any Event of Default
and during its continuance, Lessee may exercise its Purchase Option in
accordance with Section 22.1 upon written notice to the Lessor within ten (10)
days of the occurrence of such Event of Default, such purchase to occur within
(30) days of the occurrence of the exercise of such Purchase
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Option. The exercise of such Purchase Option shall, subject to the occurrence of
such sale within such thirty (30) day period, be deemed to have cured such Event
of Default; provided, however, that nothing contained in this Section 20.5 shall
preclude the Lessor from exercising the remedy provided in Section 20.2(m) upon
the occurrence and during the continuance of an Event of Default regardless of
the Lessee's election to exercise its Purchase Option pursuant to this Section
20.5.
ARTICLE XXI
TRANSFERS OF LESSOR'S INTERESTS
21.1. Assignments. Upon ten (10) days' written notice to the Lessee,
all or any part of the interest of the Lessor in, to or under this Agreement,
the other Operative Documents or the Property may be assigned or transferred by
the Lessor at any time to any assignee or transferee, including any Affiliate of
the Lessor; provided, however, that such assignee or transferee is (i) a
commercial bank, savings and loan association, savings bank, pension plan,
depository institution, insurance company, branch or agency of a foreign bank or
other similar financial institution, in each case, having a minimum capital and
surplus of $10,000,000 or (ii) an Affiliate of any institution described in
clause (i) and the obligations of such assignee or transferee hereunder are
guaranteed by such institution.
Any assignment by the Lessor of its rights under this Lease to an
entity organized under the laws of a jurisdiction other than the United States
of America or a political subdivision thereof (any such entity, a "Foreign
Transferee") shall not be effective unless the Foreign Transferee provides the
Lessee with evidence satisfactory to the Lessee that the Foreign Transferee is
entitled to receive payments under this Agreement without deduction or
withholding of United States federal income tax or United States backup
withholding tax. From and after any transfer effected in accordance with this
Section 21.1, the Lessor making such transfer shall be released, to the extent
of the obligations assumed by the Transferee, from its liability hereunder and
under the other Operative Documents to which it is or will be a party in respect
of obligations to be performed on or after the date of such transfer. Upon any
transfer by Lessor in accordance with this Section 21.1, the Transferee shall be
deemed the "Lessor" for all purposes of the Operative Documents, shall have all
rights and obligations under such Operative Documents, from the date of the
transfer and, each reference herein to the Lessor making such transfer shall
thereafter be deemed a reference to such Transferee for all purposes, except as
provided in the preceding sentence; provided that in no event shall the
obligations of the Lessee be increased or the Lessee's rights decreased.
21.2. Participations. Upon ten (10) days' written notice to the Lessee,
the Lessor may without the consent of the Lessee sell participations to one or
more commercial banks or branches or agencies of foreign banks or their
Affiliates (such banks and such Affiliates are hereinafter referred to,
collectively, as "Participants") in all or a portion of its rights and
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obligations under this Lease, the other Operative Documents or the Property
(including, without limitation, all or a portion of the Rent owing to it);
provided, however, that (i) the Lessor's obligations under this Lease and the
other Operative Documents to which it is a party shall remain unchanged, (ii)
the Lessor shall remain solely responsible to the Lessee for the performance of
such obligations, (iii) the Participant, but not the Lessor to the extent it has
assigned its interest hereunder, shall be entitled to the cost protection and
tax indemnification provisions contained in this Lease (provided that no
Participant shall be entitled to receive any greater amount pursuant to such
provisions than the Lessor would have been entitled to receive in respect of the
amount of the participation transferred by the Lessor to such Participant had
not such transfer occurred), (iv) the Lessee shall continue to deal solely and
directly with the Lessor in connection with the Lessor's rights and obligations
under this Lease and the other Operative Documents to which it is a party and in
connection with the cost protection and tax indemnification provisions of this
Lease and the other applicable and Operative Documents to which any Participant
is entitled pursuant to this Section 21.2, and (v) the Lessor shall retain the
sole right and responsibility to enforce the obligations of the Lessee relating
to this Lease, the Lease and the other Operative Documents.
ARTICLE XXII
PURCHASE PROVISIONS
22.1. Purchase Option. Provided that the Lessee shall not have given
notice of its intention to exercise the Remarketing Option, the Lessee shall
have the option (exercisable by giving the Lessor irrevocable written notice
(the "Purchase Notice") of the Lessee's election to exercise such option) to
purchase the Property on the date specified in such Purchase Notice at a price
equal to the Lease Balance theretofore accruing (the "Purchase Option Price").
The Lessee may deliver the Purchase Notice to the Lessor not less than three
hundred sixty (360) days prior to such purchase. If the Lessee exercises or is
deemed to have exercised its option to purchase the Property pursuant to this
Section 22.1 (the "Purchase Option"), the Lessor shall transfer to the Lessee or
its designee all of the Lessor's right, title and interest in and to the
Property as of the date specified in the Purchase Notice upon receipt of the
Purchase Option Price in accordance with Section 25.1(a). The Lessee may
designate, in a notice given to the Lessor not less than three (3) Business Days
prior to the closing of such purchase (time being of the essence), the
transferee or transferees to whom the conveyance shall be made (if other than to
the Lessee), in which case such conveyance shall (subject to the terms and
conditions set forth herein) be made to such designee; provided, however, that
such designation of a transferee or transferees shall not cause the Lessee to be
released, fully or partially, from any of its obligations under this Lease,
including, without limitation, the obligation to pay the Lessor the Lease
Balance on such Expiration Date.
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ARTICLE XXIII
RENEWAL OPTIONS
23.1. Renewal Options. So long as no Lease Event of Default has
occurred and is continuing, with the consent of the Lessor, the Lessee may
extend and renew the Term, beyond the initial Term for two additional periods of
one (1) year each as if the Term was continuing the ("Renewal Period"). Lessee
shall give Lessor notice of its intention to exercise a renewal option ("Renewal
Option") no less than three hundred sixty (360) days prior to the Expiration
Date; provided, however, that the Renewal Option may not be exercised if the
Lessee has exercised the Remarketing Option. In no event shall any Renewal
Period extend beyond the date seven (7) years from the Base Date.
ARTICLE XXIV
REMARKETING OPTION
24.1. Option to Remarket. Subject to the fulfillment of each of the
conditions set forth in this Section 24.1, the Lessee shall have the option (the
"Remarketing Option") to market and complete the sale of the Property for the
Lessor.
The Lessee's effective exercise and consummation of the Remarketing
Option shall be subject to the due and timely fulfillment of each of the
following provisions as to the Property as of the dates set forth below.
(a) Not later than six months prior to the Expiration Date, the
Lessee shall give to the Lessor written notice of the Lessee's exercise
of the Remarketing Option, which exercise shall be irrevocable. Failure
of the Lessee to timely provide such notice or the notice exercising
the Renewal Option pursuant to Section 23.1 shall be deemed to be an
election by the Lessee of its Purchase Option under Section 22.1.
(b) Not later than one hundred twenty (120) days prior to
Expiration Date, the Lessee shall deliver to the Lessor an
Environmental Audit for the Property. Such Environmental Audit shall be
prepared by an environmental consultant selected by the Lessor in the
Lessor's reasonable discretion and shall contain conclusions reasonably
satisfactory to the Lessor as to the environmental status of the
Property. If any such Environmental Audit indicates any exceptions, the
Lessee shall have also delivered a Phase Two environmental assessment
by such environmental consultant prior to the Expiration Date showing
the completion of the remedying of such exceptions in compliance with
Applicable Law.
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(c) On the date of the Lessee's notice to the Lessor of the
Lessee's exercise of the Remarketing Option, no Event of Default or
Default shall exist, and thereafter, no Event of Default or Default
shall exist.
(d) All of the Improvements shall have been constructed in
accordance with the Plans and Specifications. The Lessee shall have
completed in all respects all Modifications, restoration and rebuilding
of the Property pursuant to Sections 14.1 and 18.1 (as the case may
be), and shall have fulfilled in all respects all of the conditions and
requirements in connection therewith pursuant to said Sections, in each
case by the date on which the Lessor receives the Lessee's notice of
the Lessee's exercise of the Remarketing Option (time being of the
essence), regardless of whether the same shall be within the Lessee's
control. The Lessee shall have also paid the cost of all Modifications
commenced prior to the Expiration Date. The Lessee shall not have been
excused pursuant to Section 16.1 from complying with any Applicable Law
that involved the extension of the ultimate imposition of such
Applicable Law beyond the last day of the Term. Any Permitted Liens
(other than Lessor Liens) on the Property that were contested by the
Lessee shall have been removed.
(e) During the Marketing Period, the Lessee shall, as
nonexclusive agent for the Lessor, use best efforts to sell the
Lessor's interest in the Property and will attempt to obtain the
highest purchase price therefor and for not less than the Fair Market
Sales Value of all of the Property. The Lessee will be responsible for
hiring brokers and making the Property available for inspection by
prospective purchasers. The Lessee shall promptly upon request permit
inspection of the Property and any maintenance records relating to the
Property by the Lessor and any potential purchasers, and shall
otherwise do all things necessary to sell and deliver possession of the
Property to any purchaser. All such marketing of the Property shall be
at the Lessee's sole expense. The Lessee shall allow the Lessor and any
potential qualified purchaser reasonable access to the Property for the
purpose of inspecting the same.
(f) The Lessee shall submit all bids to the Lessor, and the
Lessor will have the right to submit any one or more bids. The Lessee
shall deliver to the Lessor, not less than ninety (90) days prior to
the Expiration Date, binding written unconditional (except as set forth
below), irrevocable offer or offers by such purchaser or purchasers
offering the highest bid to purchase the Property. No such purchaser
shall be the Lessee or an Affiliate of the Lessee. The written offer
must specify the Expiration Date as the closing date unless the Lessor
shall otherwise agree in its sole discretion. Any sale by the Lessee
shall be for the highest cash bid submitted to the Lessor. The
determination of the highest bid shall be made by the Lessor prior to
the end of the Marketing Period, but in any event, the Lessor shall
have no obligation to approve any bid unless such bid for the Property
equals or exceeds the Lease Balance determined as of the Expiration
Date less the Contingent Rental Adjustment payment made by the
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Lessee to the Lessor pursuant to Section 24.1(i). All bids shall be on
an all-cash basis unless the Lessor shall otherwise agree in its sole
discretion.
(g) In connection with any such sale of the Property, the Lessee
will provide to the purchaser all customary "seller's" indemnities,
representations and warranties regarding absence of Liens (except
Lessor Liens) and the condition of such Property, including, without
limitation, an environmental indemnity to the extent the same are
required by the Purchaser. The Lessee shall have obtained, at its cost
and expense, all required governmental and regulatory consents and
approvals and shall have made all filings as required by Applicable Law
in order to carry out and complete the transfer of the Property. As to
the Lessor, any such sale shall be made on an "as is, with all faults"
basis without representation or warranty by the Lessor other than the
absence of Lessor Liens. Any agreement as to such sale shall be made
subject to the Lessor's rights hereunder.
(h) The Lessee shall pay directly, and not from the sale
proceeds, all prorations, credits, costs and expenses of the sale of
the Property, whether incurred by the Lessor or the Lessee, including
without limitation, the cost of all title insurance, surveys,
environmental reports, appraisals, transfer taxes, the Lessor's
reasonable attorneys' fees, the Lessee's attorneys' fees, commissions,
escrow fees, recording fees, and all applicable documentary and other
transfer taxes.
(i) The Lessee shall pay to the Lessor on or prior to the
Expiration Date (or to such other Person as the Lessor shall notify the
Lessee in writing) an amount equal to the Contingent Rental Adjustment,
plus all Basic Rent and all other amounts hereunder which have accrued
or will accrue prior to or as of the Expiration Date, in the type of
funds specified in Section 7.5 hereof.
(j) The Lessee shall pay to the Lessor on or prior to the
Expiration Date the amounts, if any, required to be paid pursuant to
Section 26.2 hereof.
(k) If the Lessor approves any bid for the Property, the purchase
of the Property shall be consummated on or before the Expiration Date
and the gross proceeds (the "Gross Proceeds") of the sale of the
Property, less the documented expenses incurred by the Lessee under
clause (h) shall be paid directly to the Lessor; provided, however,
that if the sum of (x) the remaining Gross Proceeds from such sale plus
(y) the Contingent Rental Adjustment received by the Lessor pursuant to
clause (i) plus (z) amounts received by the Lessor pursuant to Section
26.2 hereof exceeds the Lease Balance for such Property as of such
date, then the excess shall be paid to the Lessee on such Expiration
Date.
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If one or more of the foregoing provisions shall not be fulfilled as of
the date set forth above with respect to the Property, then the Lessor shall
declare by written notice to the Lessee the Remarketing Option to be null and
void (whether or not it has been theretofore exercised by the Lessee), in which
event all of the Lessee's rights under this Section 24.1 shall immediately
terminate and the Lessee shall be obligated to purchase the Property pursuant to
Section 22.1 on the Expiration Date.
If the Lessee effectively elects the Remarketing Option and no sale of
the Property is consummated prior to the end of the Marketing Period, the Lessee
shall, in addition to making the payment required pursuant to Section 24.1(i)
above, return the Property to the Lessor (or to any other Person specified by
the Lessor). In connection with any such return of the Property, the Lessee
shall, at its own cost and expense, do each of the following:
(i) the Lessee shall, on or prior to the Expiration Date,
execute and deliver to the Lessor (or to the Lessor's designee) (A) a
deed with respect to such Property or Properties containing
representations and warranties of grantor to the Lessor (or such other
Person) regarding the absence of Liens (other than Permitted Liens of
the type described in clause (i), (viii) or (x) of the definition of
"Permitted Liens"), (B) a bill of sale with respect to any Equipment
then located on the Property and (C) an assignment of the Lessee's
entire interest in the Property (which shall include an assignment of
all of the Lessee's right, title and interest in and to any Net
Proceeds with respect to the Property not previously received by the
Lessee and an assignment of leases of the Property), in each case in
recordable form and otherwise in conformity with local custom and free
and clear of any Liens attributable to the Lessee;
(ii) the Lessee shall execute and deliver to Lessor and the
Lessor's title insurance company an affidavit as to the absence of any
Liens (other than Permitted Liens of the type described in clause (i),
(viii) or (x)), and shall execute and deliver to the Lessor a statement
of termination of this Lease to the extent relating to the Property;
(iii) the Lessee shall, on the Expiration Date, transfer
possession of the Property to the Lessor or any Person designated by
the Lessor, by surrendering the same into the possession of the Lessor
or such Person, as the case may be, in the condition required by this
Section 24.1 and in compliance with Applicable Law; and
(iv) the Lessee shall, for a period of up to one year after the
Expiration Date, cooperate reasonably with the Lessor and/or any Person
designated by the Lessor to receive the Property, which cooperation
shall include reasonable efforts with respect to the following, all of
which the Lessee shall do on or before the Expiration Date for the
Property or as soon thereafter as is reasonably practicable: providing
copies of all books and records regarding the maintenance and ownership
of the Property and all
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know-how, data and technical information relating thereto, providing a
current copy of the Plans and Specifications, granting or assigning all
assignable licenses necessary for the operation and maintenance of the
Property and cooperating reasonably in seeking and obtaining all
necessary Governmental Action. The obligations of the Lessee under this
paragraph shall survive the expiration or termination of this Lease.
Except as expressly set forth herein, the Lessee shall have no right,
power or authority to bind the Lessor in connection with any proposed sale of
the Property.
24.2. Certain Obligations Continue. During the Marketing Period, the
obligation of the Lessee to pay Rent shall continue undiminished until payment
in full to the Lessor of the Contingent Rental Adjustment and all other amounts
due to the Lessor with respect to the Property under the Operative Documents to
which the Lessee is a party. The Lessor shall have the right, but shall be under
no duty, to solicit bids, to inquire into the efforts of the Lessee to obtain
bids or otherwise to take action in connection with any such sale, other than as
expressly provided in this Article XXIV.
ARTICLE XXV
PROCEDURES RELATING TO PURCHASE OR REMARKETING
25.1. Provisions Relating to the Exercise of Purchase Option and
Conveyance Upon Remarketing and Conveyance Upon Certain Other Events.
(a) In connection with the Lessee's exercise of its Purchase
Option, upon the Expiration Date, or in connection with a purchase of
the Property under Article XIX or Section 20.2(e) hereof or the payment
of all amounts due under Sections 5.4 or 5.5 of the Construction Agency
Agreement and upon tender by the Lessee of the amounts set forth in
Article XIX, Sections 20.2(e), or 22.1 hereof or Sections 5.4 or 5.5 of
the Construction Agency Agreement, as applicable:
(i) the Lessor shall execute and deliver to the Lessee (or
to the Lessee's designee) at the Lessee's cost and expense a
special warranty deed with respect to the Property, a special
warranty bill of sale with respect to the Equipment and an
assignment of the Lessor's entire interest in the Property
(which shall include an assignment of all of the Lessor's right,
title and interest in and to any Net Proceeds not previously
received by the Lessor, an assignment of leases of the Property
and any security deposits collected by the Lessor, in each case
in recordable form and otherwise in conformity with local custom
and free and clear of the Lien of the Memorandum of Lease and
any Lessor Liens;
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(ii) the Property shall be conveyed to the Lessee "AS IS"
and in its then present physical condition; and
(iii) the Lessor shall, at the Lessee's sole cost and
expense, execute and deliver to Lessee and the Lessee's title
insurance company an affidavit as to the Lessor's title and the
absence of Lessor Liens attributable to the Lessor, and shall,
at the Lessee's sole cost and expense, execute and deliver to
Lessee a statement of termination of this Lease and the
Construction Agency Agreement, releases of any Liens created by
the Operative Documents attributable to the Lessor, and
termination statements for any financing statements which are
then of record naming the Lessor as the secured party.
(b) If the Lessee properly exercises the Remarketing Option,
then the Lessee shall, on the Expiration Date, and at its own cost,
transfer possession of the Property to the independent purchaser(s)
thereof, in each case by surrendering the same into the possession of
the Lessor or such purchaser(s), as the case may be, free and clear of
all Liens other than Lessor Liens, in good condition (as modified by
Modifications permitted by this Lease), ordinary wear and tear
excepted, and in compliance with Applicable Law. The Lessee shall, on
and within a reasonable time before and up to one year after the
Expiration Date, cooperate reasonably with the Lessor and the
independent purchaser(s) of the Property in order to facilitate the
purchase by such purchaser(s) of the Property, which cooperation shall
include the following, all of which the Lessee shall do on or before
the Expiration Date or as soon thereafter as is reasonably practicable:
providing all books and records regarding the maintenance and ownership
of the Property and all know-how, data and technical information
relating thereto, providing a current copy of the Plans and
Specifications for the Property, granting or assigning all licenses
necessary for the operation and maintenance of the Property and
cooperating reasonably in seeking and obtaining all necessary
Governmental Action. The obligations of the Lessee under this paragraph
shall survive the expiration or termination of this Lease.
ARTICLE XXVI
INDEMNIFICATION
26.1. General Indemnification. The Lessee agrees, whether or not any of
the transactions contemplated hereby shall be consummated, to assume liability
for, and to indemnify, protect, defend, save and keep harmless each Indemnitee,
on an After Tax Basis, from and against, any and all Claims arising during the
Term or thereafter that may be imposed on, incurred by or asserted against such
Indemnitee (whether because of action or omission by such Indemnitee or
otherwise), whether or not such Indemnitee shall also be indemnified as to any
such Claim by any other Person and whether or not such Claim arises or
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accrues prior to the Documentation Date or after the Expiration Date, in any way
relating to or arising out of:
(a) any of the Operative Documents or any of the transactions
contemplated thereby, and any amendment, modification or waiver in
respect thereof;
(b) the Property or any part thereof or interest therein;
(c) the purchase, design, construction, preparation,
installation, inspection, delivery, non-delivery, acceptance,
rejection, ownership, management, possession, operation, rental, lease,
sublease, repossession, maintenance, repair, alteration, modification,
addition or substitution, storage, transfer of title, redelivery, use,
financing, refinancing, operation, condition, sale (including, without
limitation, any sale pursuant to any provision hereof), return or other
disposition of all or any part or any interest in the Property during
the Term or in connection with the exercise of remedies under the Lease
or the imposition of any Lien, (or incurring of any liability to refund
or pay over any amount as a result of any Lien) or return, including,
without limitation: (1) Claims or penalties arising from any violation
of law or in tort (strict liability or otherwise), (2) latent or other
defects, whether or not discoverable, (3) any Claim based upon a
violation or alleged violation of the terms of any restriction,
easement, condition or covenant or other matter affecting title to the
Property, (4) the making of any Modifications in violation of any
standards imposed by any insurance policies required to be maintained
by the Lessee pursuant to this Lease which are in effect at any time
with respect to the Property or any part thereof, (5) any Claim for
patent, trademark or copyright infringement, and (6) Claims arising
from any public improvements with respect to the Property resulting in
any change or special assessments being levied against the Property or
any plans to widen, modify or realign any street or highway adjacent to
the Property, or any Claim for utility "tap-in" fees;
(d) the breach by the Lessee of any covenant, representation or
warranty made by it or deemed made by it in any Operative Document or
any certificate required to be delivered by any Operative Document;
(e) the retaining or employment of any broker, finder or
financial advisor by the Lessee to act on its behalf in connection with
the transactions contemplated hereby;
(f) the existence of any Lien on or with respect to the
Property, the Improvements, any Capitalized Interest or Basic Rent or
Supplemental Rent, title thereto, or any interest therein including any
Liens which arise out of the possession, use, occupancy, construction,
repair or rebuilding of the Property or by reason of labor or materials
furnished or claimed to have been furnished to the Lessee, or any of
its contractors or agents or by reason of the financing of any
personalty or equipment
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purchased or leased by the Lessee or Modifications constructed by the
Lessee, except Lessor Liens and Liens in favor of the Lessor; or
(g) subject to the accuracy of Lessor's representation set forth
in Section 6.1(a), the transactions contemplated by this Lease or by
any other Operative Document, in respect of the application of Parts 4
and 5 of Subtitle B of Title I of ERISA and any prohibited transaction
described in Section 4975(c) of the Code;
provided, however, the Lessee shall not be required to indemnify any Indemnitee
under this Section 26.1 for any of the following: (1) any Claim to the extent
resulting from the willful misconduct or gross negligence of such Indemnitee (it
being understood that the Lessee shall be required to indemnify an Indemnitee
even if the ordinary (but not gross) negligence of such Indemnitee caused or
contributed to such Claim) or the breach of any representation, warranty or
covenant of such Indemnitee set forth in any Operative Document, (2) any Claim
resulting from Lessor Liens, (3) any Claim to the extent attributable to acts or
events occurring after the expiration of the Term or the return or remarketing
of the Property so long as the Lessor is not exercising remedies against the
Lessee in respect of the Operative Documents, and (4) any Claim arising from a
breach or alleged breach by the Lessor of any agreement entered into in
connection with the assignment or participation of Rent. It is expressly
understood and agreed that the indemnity provided for herein shall survive the
expiration or termination of and shall be separate and independent from any
remedy under this Lease or any other Operative Document. Without limiting the
express rights of any Indemnitee under this Section 26.1, this Section 26.1
shall be construed as an indemnity only and not a guaranty of residual value of
the Property.
26.2. End of Term Indemnity.
(a) If the Lessee elects the Remarketing Option and there would,
after giving effect, to the proposed remarketing transactions, be a
Shortfall Amount, then prior to the Expiration Date and as a condition
to the Lessee's right to complete the remarketing of the Property
pursuant to Section 24.1, the Lessee shall cause to be delivered to the
Lessor at least 60 days prior to the Expiration Date, at the Lessee's
sole cost and expense, a report from an appraiser selected by the
Lessor and reasonably satisfactory to the Lessee in form and substance
satisfactory to the Lessor (the "End of the Term Report") which shall
state the appraiser's conclusions as to the reason for any decline in
the Fair Market Sales Value of the Property from that anticipated for
such date in the Appraisal delivered on the Closing Date.
(b) If the Lessee elects the Remarketing Option, then on or
prior to the Expiration Date the Lessee shall pay to the Lessor an
amount (not to exceed the Shortfall Amount) equal to the portion of the
Shortfall Amount that the End of the Term
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Report demonstrates was the result of a decline in the Fair Market
Sales Value of the Property due to
(i) extraordinary use, failure to maintain, to repair,
to restore, to rebuild or to replace, failure to comply with all
applicable laws, failure to use, workmanship, method of
installation or removal or maintenance, repair, rebuilding or
replacement, (excepting in each case ordinary wear and tear), or
(ii) any change to the Plans and Specifications as
submitted to the appraiser for the Appraisal after the
Documentation Date, or any Modification made to, or any
rebuilding of, the Property or any part thereof by the Lessee
other than as contemplated by the Plans and Specifications, or
(iii) the existence of any Hazardous Activity,
Hazardous Substance or Environmental Violations, or
(iv) any restoration or rebuilding carried out by the
Lessee other than as contemplated by the Plans and
Specifications, or
(v) any condemnation of any portion of the Property
pursuant to Article XVIII, or
(vi) any use of the Property or any part thereof by
the Lessee other than as set forth in the Plans and
Specifications, or
(vii) any grant, release, dedication, transfer,
annexation or amendment made pursuant to Section 15.2, or
(viii) the failure of the Lessor to have title to the
Property free and clear of all Liens (excluding Permitted
Liens), or
(ix) the existence of any sublease relating to the
Property that shall survive the Expiration Date.
26.3. Environmental Indemnity. Without limitation of the other
provisions of this Article XXVI, the Lessee hereby agrees to indemnify, hold
harmless and defend each Indemnitee from and against any and all claims
(including without limitation third party claims for personal injury or real or
personal property damage), losses (including but not limited to, to the extent
the Lease Balance has not been fully paid, any loss of value of the Property),
damages, liabilities, fines, penalties, charges, administrative and judicial
proceedings (including informal proceedings) and orders, judgments, remedial
action under Environmental Laws, requirements, enforcement actions of any kind,
and all reasonable and documented costs
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and expenses incurred in connection therewith (including but not limited to
reasonable and documented attorneys' and/or paralegals' fees and expenses),
including, but not limited to, all costs incurred in connection with any
investigation or monitoring of site conditions or any clean-up, remedial,
removal or restoration work by any federal, state or local government agency,
arising in whole or in part, out of (i) the matters and arrangements
contemplated by the Operative Documents and/or (ii) any one or more of the
following:
(a) the presence on or under the Property of any Hazardous
Substance, or any releases or discharges of any Hazardous Substance,
on, under, from or onto the Property,
(b) any activity, including, without limitation, construction,
carried on or undertaken on or off the Property, and whether by the
Lessee or any predecessor in title or any employees, agents,
contractors or subcontractors of the Lessee or any predecessor in
title, or any other Persons (including such Indemnitee), in connection
with the handling, treatment, removal, storage, decontamination,
clean-up, transport or disposal of any Hazardous Substance that at any
time are located or present on or under or that at any time migrate,
flow, percolate, diffuse or in any way move onto or under the Property,
(c) loss of or damage to any property or the environment
(including, without limitation, clean-up costs, response costs,
remediation and removal costs, cost of corrective action, costs of
financial assurance, fines and penalties and natural resource damages),
or death or injury to any Person, and all expenses associated with the
protection of wildlife, aquatic species, vegetation, flora and fauna,
and any mitigative action required by or under Environmental Laws,
(d) any claim concerning lack of compliance of the Property with
Environmental Laws, or any act or omission causing an environmental
condition at the Property that requires remediation under Environmental
Laws or would allow any Governmental Authority to record a Lien on the
land records, or
(e) any residual contamination on or under the Land, or
affecting any natural resources, and to any contamination of any
property or natural resources arising in connection with the
generation, use, handling, storage, transport or disposal of any such
Hazardous Substance, and irrespective of whether any of such activities
were or will be undertaken in accordance with applicable laws,
regulations, codes and ordinances;
provided, however, the Lessee shall not be required to indemnify any Indemnitee
under this Section 26.3 for (1) any Claim to the extent resulting from the
willful misconduct or gross negligence of such Indemnitee (it being understood
that, unless the applicable Indemnitee was
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in possession of the Property and caused the Claim, the Lessee shall be required
to indemnify an Indemnitee even if the ordinary (but not gross) negligence of
such Indemnitee caused or contributed to such Claim) or (2) any Claim to the
extent attributable to acts or events occurring after the expiration of the Term
or the return or remarketing of the Property so long as the Lessor is not
exercising remedies against the Lessee in respect of an Event of Default, or (3)
any Claim which does not result from an action, suit or proceeding unless the
Indemnitee provides the Lessee with written notice of the circumstances from
which such claim arises and allows the Lessee a reasonable opportunity to
address such circumstances as required by applicable Environmental Law in order
to minimize any such Claim. It is expressly understood and agreed that the
indemnity provided for herein shall survive the expiration or termination of and
shall be separate and independent from any remedy under this Lease or any other
Operative Document.
So long as no Default has occurred and is continuing, the Lessee shall
have the exclusive right to remediate and to control the remediation of the
circumstances related to any such Claim in accordance with Section 18.2.
26.4. Proceedings in Respect of Claims. With respect to any amount
that the Lessee is requested by an Indemnitee to pay by reason of Section 26.1
or 26.3, such Indemnitee shall, if so requested by the Lessee and prior to any
payment, submit such additional information to the Lessee as the Lessee may
reasonably request and which is in the possession of such Indemnitee to
substantiate properly the requested payment.
In case any action, suit or proceeding shall be brought against any
Indemnitee, such Indemnitee shall notify the Lessee of the commencement thereof,
and the Lessee shall be entitled, at its expense, to participate in, and, to the
extent that the Lessee desires to, assume and control the defense thereof;
provided, however, that the Lessee shall have acknowledged in writing its
obligation to fully indemnify such Indemnitee to the extent provided herein in
respect of such action, suit or proceeding, and, the Lessee shall keep such
Indemnitee fully apprised of the status of such action suit or proceeding and
shall provide such Indemnitee with all information with respect to such action
suit or proceeding as such Indemnitee shall reasonably request, and provided,
further, that the Lessee shall not be entitled to assume and control the defense
of any such action, suit or proceeding if and to the extent that, (A) in the
reasonable opinion of such Indemnitee, (x) such action, suit or proceeding
involves any risk of imposition of criminal liability or any risk of imposition
of civil liability on such Indemnitee or will involve a risk of the imminent
sale, forfeiture or loss of, or the creation of any Lien (other than a Permitted
Lien) on the Property or any part thereof unless, in the case of civil
liability, the Lessee shall have posted a bond or other security satisfactory to
the relevant Indemnitees in respect to such risk or (y) the control of such
action, suit or proceeding would involve an actual or potential conflict of
interest, (B) such proceeding involves Claims not fully indemnified by the
Lessee which the Lessee and the Indemnitee have been unable to sever from the
indemnified claim(s), or (C) an Event of Default has occurred and is continuing.
The
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Indemnitee may participate in a reasonable manner at its own expense and with
its own counsel in any proceeding conducted by the Lessee in accordance with the
foregoing. The Lessee shall not enter into any settlement or other compromise
with respect to any Claim which is entitled to be indemnified under Section 26.1
or 26.3 without the prior written consent of the Indemnitee, which consent shall
not be unreasonably withheld in the case of a money settlement not involving an
admission of liability of such Indemnitee; provided, however, that in the event
that such Indemnitee withholds consent to any settlement or other compromise,
the Lessee shall not be required to indemnify such Indemnitee under Section 26.1
or 26.3 to the extent that the applicable Claim (x) is for legal fees and
expenses incurred after the date of the proposed settlement or (y) results in a
judgment in excess of such offered money settlement.
Each Indemnitee shall at the expense of the Lessee supply the Lessee
with such information and documents reasonably requested by the Lessee as are
necessary or advisable for the Lessee to participate in any action, suit or
proceeding to the extent permitted by Section 26.1 or 26.3. Unless an Event of
Default shall have occurred and be continuing, no Indemnitee shall enter into
any settlement or other compromise with respect to any Claim which is entitled
to be indemnified under Section 26.1 or 26.3 without the prior written consent
of the Lessee, which consent shall not be unreasonably withheld, unless such
Indemnitee waives its right to be indemnified under Section 26.1 or 26.3 with
respect to such Claim.
Upon payment in full of any Claim by the Lessee pursuant to Section
26.1 or 26.3 to or on behalf of an Indemnitee, the Lessee, without any further
action, shall be subrogated to any and all claims that such Indemnitee may have
relating thereto (other than claims in respect of insurance policies maintained
by such Indemnitee at its own expense), and such Indemnitee shall execute such
instruments of assignment and conveyance, evidence of claims and payment and
such other documents, instruments and agreements as may be necessary to preserve
any such claims and otherwise cooperate with the Lessee and give such further
assurances as are necessary or advisable to enable the Lessee vigorously to
pursue such claims.
Upon receipt by any Indemnitee of a repayment or reimbursement of all
or any part of any Claim for which such Indemnitee has already received payment
by the Lessee pursuant to Section 26.1 or 26.3, such Indemnitee shall pay to the
Lessee, as promptly as practicable after the receipt thereof, the amount of such
repayment or reimbursement plus any amount received by such Indemnitee as a
component of such repayment of reimbursement representing interest in respect of
such Claim. Section 26.5(c) shall be applicable to this provision. The Lessee
shall reimburse the Indemnitee for any out of pocket costs and reasonable
internal costs incurred in determining the amount of any tax savings required to
be paid to the Lessee pursuant to Section 26.5(c).
Any amount payable to an Indemnitee pursuant to Section 26.1 or 26.3
shall be paid to such Indemnitee promptly upon receipt of a written demand
therefor from such Indemnitee,
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accompanied by a written statement describing in reasonable detail the basis for
such indemnity and the computation of the amount so payable and, if requested by
the Lessee, such determination shall be verified by a nationally recognized
independent accounting firm mutually acceptable to the Lessee and the Indemnitee
at the expense of the Lessee; provided, however, that if the Lessee has assumed
the defense of the related Claim or is paying the costs of the Indemnitee's
defense of the related claim on an ongoing basis, the Lessee shall not be
required to pay such amount to the applicable Indemnitee until such time as a
judgment is entered with respect to such Claim, the enforcement of which is not
stayed or which judgment is not bonded over, or the Claim is otherwise settled
in accordance with this Lease or lost.
26.5. General Tax Indemnity.
(a) Indemnification. During the Term, the Lessee shall pay and
assume liability for, and does hereby agree to indemnify, protect and
defend the Property and all Tax Indemnitees, and hold them harmless
against, all Impositions on an After Tax Basis.
(b) Contests. If any claim shall be made against any Tax
Indemnitee or if any proceeding shall be commenced against any Tax
Indemnitee (including a written notice of such proceeding) for any
Imposition as to which the Lessee may have an indemnity obligation
pursuant to this Section 26.5, or if any Tax Indemnitee shall determine
that any Imposition as to which the Lessee may have an indemnity
obligation pursuant to this Section 26.5 may be payable, such Tax
Indemnitee shall promptly (and in any event, within 30 days) notify the
Lessee in writing (provided that failure to so notify the Lessee within
30 days shall not alter such Tax Indemnitee's rights under this Section
26.5 except to the extent such failure precludes or materially
adversely affects the ability to conduct a contest of any indemnified
Taxes) and shall not take any action with respect to such claim,
proceeding or Imposition without the written consent of the Lessee
(such consent not to be unreasonably withheld or unreasonably delayed)
for 30 days after the receipt of such notice by the Lessee; provided,
however, that in the case of any such claim or proceeding, if such Tax
Indemnitee shall be required by law or regulation to take action prior
to the end of such 30-day period, such Tax Indemnitee shall in such
notice to the Lessee, so inform the Lessee, and such Tax Indemnitee
shall not take any action with respect to such claim, proceeding or
Imposition without the consent of the Lessee (such consent not to be
unreasonably withheld or unreasonably delayed) for 10 days after the
receipt of such notice by the Lessee unless the Tax Indemnitee shall be
required by law or regulation to take action prior to the end of such
10-day period.
The Lessee shall be entitled for a period of 30 days from
receipt of such notice from the Tax Indemnitee (or such shorter period
as the Tax Indemnitee has notified the Lessee is required by law or
regulation for the Tax Indemnitee to commence such
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contest), to request in writing that such Tax Indemnitee contest the
Imposition, at the Lessee's expense. If (x) such contest can be pursued
in the name of the Lessee and independently from any other proceeding
involving a Tax liability of such Tax Indemnitee for which the Lessee
has not agreed to indemnify such Tax Indemnitee, (y) such contest must
be pursued in the name of the Tax Indemnitee, but can be pursued
independently from any other proceeding involving a Tax liability of
such Tax Indemnitee for which the Lessee has not agreed to indemnify
such Tax Indemnitee or (z) the Tax Indemnitee so requests, then the
Lessee shall be permitted to control the contest of such claim,
provided that in the case of a contest described in clause (y), if the
Tax Indemnitee determines in good faith that such contest by the Lessee
could have a material adverse impact on the business or operations of
the Tax Indemnitee and provides a written explanation to the Lessee of
such determination, the Tax Indemnitee may elect to control or reassert
control of the contest, and provided, that by taking control of the
contest, Lessee acknowledges that it is responsible for the Imposition
ultimately determined to be due by reason of such claim, and provided,
further, that in determining the application of clauses (x) and (y) of
the preceding sentence, each Tax Indemnitee shall take any and all
reasonable steps to segregate claims for any Taxes for which the Lessee
indemnifies hereunder from Taxes for which the Lessee is not obligated
to indemnify hereunder, so that the Lessee can control the contest of
the former. In all other claims requested to be contested by the
Lessee, the Tax Indemnitee shall control the contest of such claim,
acting through counsel reasonably acceptable to the Lessee. In no event
shall the Lessee be permitted to contest (or the Tax Indemnitee
required to contest) any claim, (A) if such Tax Indemnitee provides the
Lessee with a legal opinion of counsel reasonably acceptable to the
Lessee that such action, suit or proceeding involves a risk of
imposition of criminal liability or will involve a material risk of the
sale, forfeiture or loss of, or the creation of any Lien (other than a
Permitted Lien) on the Property or any part thereof unless the Lessee
shall have posted and maintained a bond or other security reasonably
satisfactory to the relevant Tax Indemnitee in respect to such risk,
(B) if an Event of Default has occurred and is continuing unless the
Lessee shall have posted and maintained a bond or other security
satisfactory to the relevant Tax Indemnitee in respect of the Taxes
subject to such claim and any and all expenses for which the Lessee is
responsible hereunder reasonably foreseeable in connection with the
contest of such claim, (C) unless the Lessee shall have agreed to pay
and shall pay, to such Tax Indemnitee on demand all reasonable
out-of-pocket costs, losses and expenses that such Tax Indemnitee may
incur in connection with contesting such Imposition including all
reasonable legal, accounting and investigatory fees and disbursements,
or (D) if such contest shall involve the payment of the Tax prior to
the contest, unless the Lessee shall provide to the Tax Indemnitee an
interest-free advance in an amount equal to the Imposition that the
Indemnitee is required to pay (with no additional net after-tax costs
to such Tax Indemnitee). In addition for Tax Indemnitee controlled
contests and claims contested in the name of the Tax Indemnitee in a
public forum, no contest shall be required: (A) unless the amount
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of the potential indemnity (taking into account all similar or
logically related claims that have been or could be raised in any audit
involving such Tax Indemnitee for which the Lessee may be liable to pay
an indemnity under this Section 26.5(b)) exceeds $500,000 and (B)
unless, if requested by the Tax Indemnitee, the Lessee shall have
provided to the Tax Indemnitee an opinion of counsel selected by the
Lessee (which may be in-house counsel) (except, in the case of income
taxes indemnified hereunder which shall be an opinion of independent
tax counsel selected by the Tax Indemnitee and reasonably acceptable to
the Lessee) that a reasonable basis exists to contest such claim. In no
event shall a Tax Indemnitee be required to appeal an adverse judicial
determination to the United States Supreme Court.
The party conducting the contest shall consult in good faith
with the other party and its counsel with respect to the contest of
such claim for Taxes (or claim for refund) but the decisions regarding
what actions to be taken shall be made by the controlling party in its
sole judgement, provided, however, that if the Tax Indemnitee is the
controlling party and the Lessee recommends the acceptance of a
settlement offer made by the relevant Governmental Authority and such
Tax Indemnitee rejects such settlement offer then the amount for which
the Lessee will be required to indemnify such Tax Indemnitee with
respect to the Taxes subject to such offer shall not exceed the amount
which it would have owed if such settlement offer had been accepted. In
addition, the controlling party shall keep the noncontrolling party
reasonably informed as to the progress of the contest, and shall
provide the noncontrolling party with a copy of (or appropriate
excerpts from) any reports or claims issued by the relevant auditing
agents or taxing authority to the controlling party thereof, in
connection with such claim or the contest thereof.
Each Tax Indemnitee shall at the Lessee's expense supply the
Lessee with such information and documents reasonably requested by the
Lessee as are necessary or advisable for the Lessee to participate in
any action, suit or proceeding to the extent permitted by this Section
26.5(b). No Tax Indemnitee shall enter into any settlement or other
compromise or fail to appeal an adverse ruling with respect to any
claim which is entitled to be indemnified under this Section 26.5 (and
with respect to which contest is required under this Section 26.5(b))
without the prior written consent of the Lessee, unless such Tax
Indemnitee waives its right to be indemnified under this Section 26.5
with respect to such claim.
Notwithstanding anything contained herein to the contrary, a
Tax Indemnitee will not be required to contest (and the Lessee shall
not be permitted to contest) a claim with respect to the imposition of
any Tax if such Tax Indemnitee shall waive its right to indemnification
under this Section 26.5 with respect to such claim (and any claim with
respect to such year or any other taxable year the contest of which is
materially adversely affected as a result of such waiver), unless the
failure to contest such claim
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would, in the reasonable judgement of the Lessee, have an adverse
effect on the Lessee (except for such effect which is not material), in
which case such claim may be contested at the request and expense of
the Lessee, with such claim remaining subject to the indemnification
provided hereunder.
(c) Reimbursement for Tax Savings. If (x) a Tax Indemnitee or
any Affiliate thereof realizes a deduction, offset, credit or refund of
any Taxes or any other savings or benefit as a result of any indemnity
paid by the Lessee pursuant to this Section 26.5 or (y) by reason of
the incurrence or imposition of any Tax (or the circumstances or event
giving rise thereto) for which a Tax Indemnitee is indemnified
hereunder or any payment made to or for the account of such Tax
Indemnitee by the Lessee pursuant to this Section 26.5 or any payment
made by a Tax Indemnitee to the Lessee by reason of this Section
26.5(c), such Tax Indemnitee at any time actually realizes a reduction
in any Taxes for which the Lessee is not required to indemnify such Tax
Indemnitee pursuant to this Section 26.5 which reduction in Taxes was
not taken into account in computing such payment by the Lessee to or
for the account of such Tax Indemnitee or by the Tax Indemnitee to the
Lessee, then such Tax Indemnitee shall promptly pay to the Lessee (xx)
the amount of such deduction, offset, credit, refund, or other savings
or benefit together with the amount of any interest received by such
Tax Indemnitee on account of such deduction, offset, credit, refund or
other savings or benefit or (yy) an amount equal to such reduction in
Taxes, as the case may be, in either case together with an amount equal
to any reduced Taxes payable by such Tax Indemnitee as a result of such
payment; provided that no such payment shall be made so long as a
Default or Event of Default shall have occurred and be continuing but
shall be paid promptly after cure of such Default or Event of Default.
Each Tax Indemnitee agrees to take such actions as the Lessee may
reasonably request (provided in the good faith judgment of the Tax
Indemnitee, such actions would not result in a material adverse effect
on the Tax Indemnitee for which the Tax Indemnitee is not entitled to
indemnification from the Lessee) and to otherwise act in good faith to
claim such refunds and other available Tax benefits, and take such
other actions as may be reasonable to minimize any payment due from the
Lessee pursuant to this Section 26.5 and to maximize the amount of any
Tax savings available to it. The disallowance or reduction of any
credit, refund or other tax savings with respect to which a Tax
Indemnitee has made a payment to the Lessee under this Section 26.5(e)
shall be treated as a Tax for which the Lessee is obligated to
indemnify such Tax Indemnitee hereunder without regard to the
exclusions set forth in the definition of Impositions except the
exclusions set forth in clauses (iv), (v), (vi), (vii), (ix), (x),
(xi), (xiv) and (xvi) of such definition.
(d) Payments. Any Imposition indemnifiable under this Section
26.5 shall be paid directly when due to the applicable taxing authority
if direct payment is practicable and permitted. If direct payment to
the applicable taxing authority is not
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permitted or is otherwise not made, any amount payable to a Tax
Indemnitee pursuant to Section 26.5 shall be paid within thirty (30)
days after receipt of a written demand therefor from such Tax
Indemnitee accompanied by a written statement describing in reasonable
detail the amount so payable, but not before two Business Days prior to
the date that the relevant Taxes are due. Any payments made pursuant to
this Section 26.5 shall be made directly to the Tax Indemnitee entitled
thereto or the Lessee, as the case may be, in immediately available
funds at such bank or to such account as specified by the payee in
written directions to the payor, or, if no such direction shall have
been given, by check of the payor payable to the order of the payee by
certified mail, postage prepaid at its address as set forth in Schedule
I hereto. Upon the request of any Tax Indemnitee with respect to a Tax
that the Lessee is required to pay, the Lessee shall furnish to such
Tax Indemnitee the original or a certified copy of a receipt for the
Lessee's payment of such Tax or such other evidence of payment as is
reasonably acceptable to such Tax Indemnitee.
(e) Reports. In the case of any report, return or statement
required to be filed with respect to any Taxes that are subject to
indemnification under this Section 26.5 and of which the Lessee has
knowledge, the Lessee shall promptly notify the Tax Indemnitee of such
requirement and, at the Lessee's expense (i) if the Lessee is permitted
(unless otherwise requested by the Tax Indemnitee) by Applicable Law,
timely file such report, return or statement in its own name or (ii) if
such report, return or statement is required to be in the name of or
filed by such Tax Indemnitee or the Tax Indemnitee otherwise requests
that such report, return or statement for filing by such Tax Indemnitee
in such manner as shall be satisfactory to such Tax Indemnitee and send
the same to the Tax Indemnitee for filing no later than 15 days prior
to the due date therefor. In any case in which the Tax Indemnitee will
file any such report, return or statement, the Lessee shall, upon
written request of such Tax Indemnitee, provide such Tax Indemnitee
with such information as is reasonably necessary to allow the Tax
Indemnitee to file such report, return or statement.
(f) Verification. At the Lessee's request, the amount of any
indemnity payment by the Lessee or any payment by a Tax Indemnitee to
the Lessee pursuant to this Section 26.5 shall be verified and
certified by an independent public accounting firm mutually acceptable
to the Lessee and the Tax Indemnitee. The costs of such verification
shall be borne by the Lessee unless such verification shall result in
an adjustment in the Lessee's favor of the lesser of (i) $10,000, and
(ii) 5 percent of the payment as computed by the Tax Indemnitee, in
which case such fee shall be paid by the Tax Indemnitee. In no event
shall the Lessee have the right to review the Tax Indemnitee's tax
returns or receive any other confidential information from the Tax
Indemnitee in connection with such verification. Any information
provided to such accountants by any Person shall be and remain the
exclusive property of such Person and shall be deemed by the parties to
be (and the accountants will confirm in writing
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that they will treat such information as) the private, proprietary and
confidential property of such Person, and no Person other than such
Person and the accountants shall be entitled thereto and all such
materials shall be returned to such Person. Such accounting firm shall
be requested to make its determination within 30 days of the Lessee's
request for verifications and the computations of the accounting firm
shall be final, binding and conclusive upon the Lessee and the Tax
Indemnitee. The parties agree that the sole responsibility of the
independent public accounting firm shall be to verify the amount of a
payment pursuant to this Lease and that matters of interpretation of
this Lease are not within the scope of the independent accounting
firm's responsibilities.
(g) Tax Ownership. The Lessor represents and warrants that it
will not, prior to the termination of this Lease, claim ownership of
(or any tax benefits, including depreciation, with respect to) the
Property for any income tax purposes, it being understood that the
Lessee is and will remain the owner of the Property for such income tax
purposes until the termination of this Lease. If, notwithstanding the
income tax intentions of the parties as set forth herein, the Lessor
actually receives any income tax deductions, reductions in income tax
or other income tax benefit as a result of any claim for, or
recharacterization requiring such party to take, any tax benefits
attributable to ownership of the Property for income tax purposes, the
Lessor shall pay to the Lessee, together with an amount equal to any
reduced Taxes payable by such Tax Indemnitee as a result of such
payment, the amount of such income tax savings actually realized by the
Lessor (less the amount of any anticipated increase in income tax which
the Lessor determines is currently payable as a result of such claim or
recharacterization), provided that the Lessee shall agree to reimburse
the Lessor for any subsequent increase in the Lessor's income taxes
resulting from such claim or recharacterization not taken into account
in the payment made to the Lessee, up to the amount paid to the Lessee
by the Lessor. The parties agree that this Section 26.5(g) is intended
to require a payment to the Lessee if and only if the Lessor shall have
actually received an unanticipated tax savings with respect to the
Property that would not have been received if the Lessor had advanced
funds to the Lessee in the form of a loan secured by the Property in an
amount equal to the Lease Balance. Nothing in this Section 26.5(g)
shall be construed to require the Lessor to take any affirmative action
to realize any tax savings if in its good faith judgment such action
may have a material adverse affect on the Lessor.
26.6. Funding Losses. If any payment of Rent or the Lease Balance,
including pursuant to Lessee's exercise of the Purchase Option under Section
22.1, is made on any day other than the last day of an Interest Period
applicable thereto, the Lessee shall reimburse the Lessor within fifteen (15)
days after written demand for any resulting loss or expense incurred by it,
including (without limitation) any loss incurred in obtaining, liquidating or
employing deposits from third parties, swaps, hedges or similar transactions
entered into in connection
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with or in contemplation of transactions relating to the Property but excluding
loss of margin for the period after any such payment or conversion or failure to
borrow or prepay, provided that the Lessor shall have delivered to the Lessee a
certificate as to the amount of such loss or expense, which certificate shall be
conclusive in the absence of manifest error, and provided, further, that such
loss shall in no event exceed the then effective Lease Rate which would have
been payable for the balance of such Interest Period. The Lessor will, at the
request of the Lessee, furnish such additional information concerning the
determination of such loss as the Lessee may reasonably request.
26.7. Regulation D Compensation. During the Term, for so long as the
Lessor (or an Affiliate thereof) is required to maintain reserves against
"Eurocurrency Liabilities" (or any other category of liabilities which include
deposits by reference to which the Lease Rate is determined or any category of
extensions of credit or other assets which includes loans by a non-United States
office of the Lessor to United States residents), and, as a result, the cost to
the Lessor (or its Funding Office) of making or maintaining its Advances is
increased, then the Lessor may require the Lessee to pay, contemporaneously with
each payment of Rent, an additional amount at a rate per annum up to but not
exceeding the excess of (i) (A) the applicable Eurodollar Rate divided by (B)
one minus the Eurocurrency Reserve Requirements and (ii) the applicable
Eurodollar Rate. In the event that the Lessor wishes to require payment of such
additional amount, the Lessor (x) shall so notify the Lessee, in which case such
additional Rent shall be payable to the Lessor at the place indicated in such
notice with respect to each Interest Period commencing at least three Business
Days after the giving of such notice and (y) shall furnish to the Lessee at
least five Business Days prior to each date on which Rent is payable a
certificate setting forth the amount to which it is then entitled under this
Section (which shall be consistent with its good faith estimate of the level at
which the related reserves are maintained by it). Each such certificate shall be
accompanied by such information as the Lessee may reasonably request as to the
computation set forth therein.
26.8. Deposits Unavailable. If on or prior to the first day of any
Interest Period:
(a) deposits in dollars (in the applicable amounts) are not
being offered to the Lessor (or its Affiliates) in the relevant market
for such Interest Period, or
(b) the Lessor advises the Lessee that the Eurodollar Rate as
determined by the Lessor will not adequately and fairly reflect the
cost to the Lessor of funding Advances for such Interest Period,
the Lessor shall forthwith give notice thereof to the Lessee, whereupon until
the Lessor notifies the Lessee that the circumstances giving rise to such
suspension no longer exist, (i) the obligation of the Lessor to make Advances at
the Eurodollar Rate shall be suspended, (ii) any Advance made thereafter shall
be made at the Alternate Base Rate, and (iii) each outstanding Advance shall
begin to bear interest at the Alternate Base Rate on the last day of the then
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current Interest Period applicable thereto. The Lessor shall provide to the
Lessee a statement in writing of the Alternate Base Rate as calculated
hereunder.
26.9. Illegality. If during the Term, the adoption of any applicable
law, rule or regulation, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by the Lessor (or its Funding Office) with any request or
directive (whether or not having the force of law) of any such authority,
central bank or comparable agency shall make it unlawful or impossible for the
Lessor (or its Funding Office) to make, maintain or fund its Advances, and the
Lessor shall so notify the Lessee, whereupon until the Lessor notifies the
Lessee that the circumstances giving rise to such suspension no longer exist,
the obligation to make Advances shall be suspended. The Lessor, with the consent
of the Lessee (which consent shall not unreasonably be withheld), will designate
a different Funding Office if such designation will avoid the need for giving
such notice and will not, in the judgment of the Lessor, be otherwise
disadvantageous to the Lessor. If such notice is given (i) the Lessee shall be
entitled upon its request to a reasonable explanation of the factors underlying
such notice and (ii) each Advance then outstanding shall begin to bear interest
at the Alternate Base Rate either (a) on the last day of the then current
Interest Period applicable thereto, if the Lessor may lawfully continue to
maintain and fund such Advance to such day or (b) immediately, if the Lessor
shall determine that it may not lawfully continue to maintain and fund such
Advance to such day. The Lessor shall provide to the Lessee a statement in
writing of the Alternate Base Rate as calculated hereunder.
26.10. Increased Cost and Reduced Return.
(a) In the event during the Term that the adoption of any
applicable law, rule or regulation, or any change therein or in the
interpretation or application thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof or compliance by the Lessor with any request or
directive after the date hereof (whether or not having the force of
law) of any such authority, central bank or comparable agency:
(i) does or shall subject the Lessor to any additional
tax of any kind whatsoever with respect to the Operative
Documents or any Advance made by it, or change the basis or the
applicable rate of taxation of payments to the Lessor of
principal, interest or any other amount payable hereunder
(except for the imposition of or change in any tax on or
measured by the overall net income of the Lessor (other than any
such tax imposed by means of withholding));
(ii) does or shall impose, modify or hold applicable
any reserve, special deposit, insurance assessment, compulsory
loan or similar requirement against assets held by, or deposits
or other liabilities in or for the account of, advances
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or loans by, or other credit extended by, or any other
acquisition of funds by, any office of the Lessor which are not
otherwise included in determination of the rate of interest on
Advances hereunder; or
(iii) does or shall impose on the Lessor any other
condition;
and the result of any of the foregoing is to increase the cost to the
Lessor of making or maintaining Advances or to reduce any amount
receivable hereunder, then in any such case, the Lessee shall promptly
pay to the Lessor, upon demand, any additional amounts necessary to
compensate the Lessor for such increased cost or reduced amount
receivable which the Lessor deems to be material as determined by the
Lessor with respect to its Advances.
(b) If the Lessor shall have determined that, after the date
hereof the adoption of any applicable law, rule or regulation regarding
capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or any request or directive regarding capital
adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on capital of the Lessor (or any
entity directly or indirectly controlling the Lessor) as a consequence
of the Lessor's obligations under the Operative Documents to a level
below that which the Lessor (or any entity directly or indirectly
controlling the Lessor) could have achieved but for such adoption,
change, request or directive (taking into consideration its policies
with respect to capital adequacy) by an amount deemed by the Lessor to
be material, then from time to time, within fifteen (15) days after
demand by the Lessor, the Lessee shall pay to the Lessor such
additional amount or amounts as will compensate the Lessor (or its
Parent) for such reduction.
(c) The Lessor will promptly notify the Lessee of any event of
which it has knowledge, occurring after the date hereof, which will
entitle the Lessor to compensation pursuant to this Section and will,
if practicable, with the consent of the Lessee (which consent shall not
unreasonably be withheld), designate a different Funding Office or take
any other reasonable action if such designation or action will avoid
the need for, or reduce the amount of, such compensation and will not,
in the judgment of the Lessor, be otherwise disadvantageous to the
Lessor. A certificate of the Lessor claiming compensation under this
Section and setting forth in reasonable detail its computation of the
additional amount or amounts to be paid to it hereunder shall be
conclusive in the absence of manifest error. In determining such
amount, the Lessor may use any reasonable averaging and attribution
methods.
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(d) Notwithstanding the foregoing clauses (a) and (b) of this
Section 26.10, the Lessee shall only be obligated to compensate the
Lessor for any amount arising or accruing both:
(i) during (A) any time or period commencing (x) in
the case of subsection (a), not earlier than the first day of
any Interest Period in effect on the date which, and (y) in the
case of subsection (b), not earlier than the date on which the
Lessor notifies the Lessee that it proposes to demand such
compensation and identifies to the Lessee the statute,
regulation or other basis upon which the claimed compensation is
or will be based and (B) any time or period during which,
because of the retroactive application of such statute,
regulation or other basis, the Lessor did not know that such
amount would arise or accrue; and
(ii) within six months prior to any written demand
therefor, accompanied by a certificate of the Lessor claiming
compensation and setting forth in reasonable detail its
computation of the additional amount or amounts to be paid to it
hereunder.
ARTICLE XXVII
ESTOPPEL CERTIFICATES
27.1. Estoppel Certificates. At any time and from time to time upon
not less than twenty (20) days' prior request by the Lessor or the Lessee (the
"Requesting Party"), the other party (whichever party shall have received such
request, the "Certifying Party") shall furnish to the Requesting Party (but not
more than four times per year unless required to satisfy the requirements of any
sublessees and only to the extent that the required information has been
provided to the Lessor by the Lessee) a certificate signed by an individual
having the office of vice president or higher in the Certifying Party certifying
that this Lease is in full force and effect (or that this Lease is in full force
and effect as modified and setting forth the modifications); the dates to which
the Basic Rent and Supplemental Rent have been paid; to the knowledge of the
signer of such certificate, whether or not the Requesting Party is in default
under any of its obligations hereunder (and, if so, the nature of such alleged
default); and such other matters under this Lease as the Requesting Party may
reasonably request. Any such certificate furnished pursuant to this Article
XXVII may be relied upon by the Requesting Party, and any existing or
prospective mortgagee, purchaser or lender, and any accountant or auditor, of,
from or to the Requesting Party (or any Affiliate thereof).
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ARTICLE XXVIII
ACCEPTANCE OF SURRENDER
28.1. Acceptance of Surrender. No surrender to the Lessor of this
Lease or of all or any portion of the Property or of any part of any thereof or
of any interest therein shall be valid or effective unless agreed to and
accepted in writing by the Lessor, and no act by the Lessor or any
representative or agent of the Lessor, other than a written acceptance, shall
constitute an acceptance of any such surrender.
ARTICLE XXIX
NO MERGER OF TITLE
29.1. No Merger of Title. There shall be no merger of this Lease or of
the leasehold estate created hereby by reason of the fact that the same Person
may acquire, own or hold, directly or indirectly, in whole or in part, (a) this
Lease or the leasehold estate created hereby or any interest in this Lease or
such leasehold estate, (b) the fee or groundleasehold estate in the Property,
except as may expressly be stated in a written instrument duly executed and
delivered by the appropriate Person or (c) a beneficial interest in the Lessor.
ARTICLE XXX
INTENT OF THE PARTIES
30.1. Ownership of the Property. (a) It is the intent of the parties
hereto that for financial accounting purposes the Lease constitutes an
"operating lease" pursuant to Statement of Financial Accounting Standards No.
13, as amended, 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 Property
for income tax purposes and shall be entitled to all deductions for depreciation
thereof. Lessor 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 Lease to pay Capitalized Interest or Basic Rent
and Supplemental Rent or Lease Balance in connection with any purchase
of the Property pursuant to this Lease shall be treated as payments of
interest on and principal of, respectively, loans from the Lessor to
the Lessee, and (ii) this Lease grants to the Lessor a security
interest and/or deed of trust/mortgage on the portions of the Property
which constitute interests in real property, and a security interest
and lien on the portions of the Property 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 Lease and the
other Operative Documents.
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(c) Specifically, without limiting the generality of subsection
(a) of this Section 30.1, the Lessor 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
Lessor, the transactions evidenced by this Lease are loans made by the
Lessor as unrelated third party lender to the Lessee secured by the
Property (it being understood that the Lessee hereby and pursuant to
the terms of the Memorandum of Lease, mortgages, grants, bargains,
sells, releases, confirms, conveys, assigns, transfers and sets over to
the Lessor, and grants a security interest in, the Property (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 Lease, all to secure such loans, effective
on the date hereof, to have and to hold such interests in the Property
unto the Lessor and its successors and assigns, forever, provided
always that these presents are upon the express condition that, if all
amounts due under this 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 30.1, the Lessor and the Lessee further
intend and agree that, with respect to that portion of the Property
constituting personal property, for the purpose of securing the
Lessee's obligations for the repayment of the above-described loans
from the Lessor to the Lessee, (i) this Lease and the Memorandum of
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 and by the Memorandum of
Lease shall be deemed to be a grant by the Lessee to the Lessor 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 Property,
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 Property unto the Lessor and its successors and
assigns, forever, provided always that these presents are upon the
express condition that, if all amounts due under this Lease 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
Lessor 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
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interest under Applicable Law. The Lessor and the Lessee shall, to the
extent consistent with this Lease, take such actions and execute,
deliver, file and record such other documents, financing statements,
mortgages and deeds of trust, including, without limitation, the
Memorandum of Lease as may be necessary to ensure that, if this Lease
were deemed to create a security interest in the Property in accordance
with this Section, such security interest would be deemed to be a
perfected security interest with priority over all Liens other than
Permitted Liens, under Applicable Law and will be maintained as such
throughout the Term.
30.2. Grant of Lien and Power of Sale. The Lessee has agreed to grant,
and does hereby grant, the Liens, rights and remedies (including the power of
sale remedy) set forth on Exhibit B hereto, the terms of which are incorporated
by reference herein and made a part hereof as if originally set forth herein in
full.
ARTICLE XXXI
PAYMENT OF CERTAIN EXPENSES
31.1. Transaction Expenses.
(a) The Lessee shall pay, or cause to be paid from Advances
during the Construction Period, from time to time all Transaction
Expenses in respect of the transactions taking place on the
Documentation Date, the Closing Date and on each Funding Date on such
respective date; provided, however, that, if the Lessee has not
received written invoices therefor prior to such date, such Transaction
Expenses shall be paid within ten (10) Business Days after the Lessee
has received written invoices therefor.
(b) The Lessee shall pay or cause to be paid (i) all Transaction
Expenses incurred by the Lessor in entering into any future amendments
or supplements with respect to any of the Operative Documents, whether
or not such amendments or supplements are ultimately entered into, or
giving or withholding of waivers of consents hereto or thereto, in each
case which have been requested by or approved by the Lessee, (ii) all
Transaction Expenses incurred by the Lessor in connection with any
purchase of the Property by the Lessee or other Person pursuant to this
Lease and (iii) all Transaction Expenses incurred by the Lessor in
respect of enforcement of any of Lessor's rights or remedies against
the Lessee in respect of the Operative Documents.
31.2. Brokers' Fees and Stamp Taxes. The Lessee shall pay or cause to
be paid any brokers' fees incurred or otherwise caused by the Lessee and any and
all stamp, transfer and other similar taxes, fees and excises, if any, including
any interest and penalties, which are
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payable in connection with the transactions contemplated by this Lease and the
other Operative Documents.
ARTICLE XXXII
OTHER COVENANTS AND AGREEMENTS OF LESSEE
32.1. Covenants. The Lessee hereby agrees that so long as this Lease
is in effect:
(a) Information. The Lessee will deliver to the Lessor:
(i) the following financial and other information: (A)
as soon as available and in any event within sixty days after
the end of each semi-annual accounting period of the Lessee, the
semi-annual consolidated financial statements of the Lessee and
its consolidated subsidiaries (including a balance sheet as at
the end of such semi-annual accounting period and statements of
income and cash flows for such semi-annual accounting period)
prepared in accordance with GAAP (subject to normal year end
adjustments and excluding the treatment of goodwill)
consistently applied; and (B) as soon as available and in any
event within 100 days after the end of each fiscal year of the
Lessee, a copy of the annual consolidated financial statements
for such year for the Lessee and its consolidated subsidiaries
(including a balance sheet as at the end of such fiscal year and
statements of income and cash flows for such fiscal year), which
shall be prepared in accordance with GAAP consistently applied
and audited by KPMG Peat Marwick LLP or another nationally
recognized independent public accountants in accordance with
generally accepted auditing standards;
(ii) as soon as possible and in any event within five
days after a Responsible Employee of the Lessee shall have
knowledge of the occurrence of each Event of Default or each
event that, with the giving of notice or time elapse, or both,
would constitute an Event of Default continuing on the date of
such statement, a statement of the authorized officer setting
forth details of such Event of Default or event and the action
that the Lessee proposes to take with respect thereto; and
(iii) during the Term, concurrently with their being
filed, mailed or delivered, as applicable, copies of all proxy
statements, financial statements and reports which the Lessee
shall send or make available generally to its shareholders, and
copies of all reports on Forms 10-K, 10-Q and 8-K and all other
filings and reports specifically requested by the Lessor which
the Lessee or any Subsidiary may be required to file with the
Securities and Exchange Commission, any similar or corresponding
governmental commission,
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department or an agency substituted therefor or with any
securities exchange located in the United States of America.
(b) Delivery of Lease Supplement. The Lessee will execute and
deliver on the Base Date the Lease Supplement.
(c) Merger, Consolidation. The Lessee will not merge or
consolidate with any other corporation or sell or convey all or
substantially all of its assets to any person, firm or corporation,
unless (i) either the Lessee shall be the continuing corporation, or
the successor corporation (if other than the Lessee) shall be a
corporation organized and existing under the laws of the United States
of America or a state thereof and such corporation shall expressly
assume the obligations of the Lessee under this Lease and the other
Operative Documents and (ii) the Lessee or such successor corporation,
as the case may be, shall not, immediately after and as a result of
such merger or consolidation, or such sale or conveyance, be in default
in the performance of any covenant or condition in this Lease or any
other Operative Document. In the event of any such consolidation,
merger, sale or conveyance and upon any such assumption by the
successor corporation, such successor corporation shall succeed to and
be substituted for the Lessee in this Lease and the other Operative
Documents, with the same effect as if it had been originally named
herein and therein.
(d) Further Assurances. The Lessee shall take or cause to be
taken from time to time all action necessary to assure that the intent
of the parties pursuant to the Operative Documents is given effect as
contemplated by this Lease and that the Lessor holds a perfected Lien
on the Property securing the Lease Balance as contemplated by Section
30.1. The Lessee shall execute and deliver, or cause to be executed and
delivered, to the Lessor from time to time, promptly upon request
therefor, any and all other and further instruments (including
correction instruments and supplemental mortgages, deeds of trust and
security agreements) that may be reasonably requested by the Lessor to
cure any deficiency in the execution and delivery of this Lease or any
Operative Document to which it is a party.
(e) Preservation of Existence, Etc. Subject to Section 32.1(c),
the Lessee shall at all times maintain its corporate existence and
financial viability in the State of Wisconsin and shall remain
qualified to do business in the States of Wisconsin and Delaware.
(f) Compliance with Laws. The Lessee will comply in all material
respects with all applicable laws, ordinances, rules, regulations, and
requirements of governmental authorities (including, without
limitation, Environmental Laws and ERISA and the rules and regulations
thereunder) with respect to its material assets,
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including the Property, except where the necessity of compliance
therewith is contested in good faith by appropriate proceedings.
ARTICLE XXXIII
MISCELLANEOUS
33.1. Survival; Severability; Etc. Anything contained in this Lease to
the contrary notwithstanding, all claims against and liabilities of the Lessee
or the Lessor arising from events commencing prior to the expiration or earlier
termination of this Lease shall survive such expiration or earlier termination
for a period of one year except as to indemnification which shall continue to
survive. If any term or provision of this Lease or any application thereof shall
be declared invalid or unenforceable, the remainder of this Lease and any other
application of such term or provision shall not be affected thereby. If any
right or option of the Lessee provided in this Lease would, in the absence of
the limitation imposed by this sentence, be invalid or unenforceable as being in
violation of the rule against perpetuities or any other rule of law relating to
the vesting of an interest in or the suspension of the power of alienation of
property, then such right or option shall be exercisable only during the period
which shall end twenty-one (21) years after the date of death of the last
survivor of the descendants of Franklin D. Roosevelt, the former President of
the United States, Henry Ford, the deceased automobile manufacturer, and John D.
Rockefeller, the founder of the Standard Oil Company, known to be alive on the
date of the execution, acknowledgment and delivery of this Lease.
33.2. Amendments and Modifications. Neither this Lease nor any
provision hereof may be amended, waived, discharged or terminated except by an
instrument in writing in recordable form signed by the Lessor and the Lessee.
33.3. No Waiver. No failure by the Lessor or the Lessee to insist upon
the strict performance of any term hereof or to exercise any right, power or
remedy upon a default hereunder, and no acceptance of full or partial payment of
Rent during the continuance of any such default, shall constitute a waiver of
any such default or of any such term. To the fullest extent permitted by law, no
waiver of any default shall affect or alter this Lease, and this Lease shall
continue in full force and effect with respect to any other then existing or
subsequent default.
33.4. Notices. All notices, demands, requests, consents, approvals and
other communications hereunder shall be in writing (including by facsimile), and
directed to the address of the appropriate party as set forth in Schedule I.
33.5. Successors and Assigns. All the terms and provisions of this
Lease shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
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<PAGE> 70
33.6. Headings and Table of Contents. The headings and table of
contents in this Lease are for convenience of reference only and shall not limit
or otherwise affect the meaning hereof.
33.7. Counterparts. This Lease may be executed in any number of
counterparts, each of which shall be an original, but all of which shall
together constitute one and the same instrument.
33.8. GOVERNING LAW. THIS LEASE SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO CONFLICTS OF LAW PRINCIPLES OTHER THAN SS.5-1401 OF THE NEW YORK
GENERAL OBLIGATION LAW (WHICH THE PARTIES HERETO SPECIFICALLY AGREE SHALL BE
APPLICABLE), EXCEPT AS TO MATTERS RELATING TO THE CREATION OF THE LEASEHOLD
ESTATES HEREUNDER AND THE EXERCISE OF RIGHTS AND REMEDIES WITH RESPECT THERETO,
WHICH SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE
OF WISCONSIN. WITHOUT LIMITING THE FOREGOING, THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES OTHER THAN SS.5-1401 OF THE NEW
YORK GENERAL OBLIGATION LAW (WHICH THE PARTIES HERETO SPECIFICALLY AGREE SHALL
BE APPLICABLE), SHALL GOVERN THE CREATION, TERMS AND PROVISIONS OF THE
OBLIGATIONS EVIDENCED HEREBY, BUT THE LIEN CREATED HEREBY AND THE CREATION AND
THE ENFORCEMENT OF SAID LIEN SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAW OF THE STATE OF WISCONSIN.
33.9. Original Lease. The single executed original of this Lease
marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART" on the signature
page thereof and containing the receipt of the Lessor therefor on or following
the signature page thereof shall be the Original Executed Counterpart of this
Lease (the "Original Executed Counterpart"). To the extent that this 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
Lease may be created through the transfer or possession of any counterpart other
than the Original Executed Counterpart.
33.10. Waiver of Jury Trial. THE PARTIES HERETO HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS LEASE AND/OR ANY OF THE OTHER OPERATIVE DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED THEREBY, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF SUCH PARTIES. THE PARTIES
-69-
<PAGE> 71
HERETO ACKNOWLEDGE AND AGREE THAT THEY HAVE RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE PARTIES ENTERING INTO THE LEASE AND EACH SUCH OTHER OPERATIVE
DOCUMENT.
33.11. Submission to Jurisdiction. The Lessee hereby submits to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York for purposes of all legal proceedings arising out of or
relating to the Operative Documents or the transactions contemplated hereby. The
Lessee irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such
proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum.
33.12. Further Assurances. (a) The parties hereto shall promptly cause
to be taken, executed, acknowledged or delivered, at the sole expense of the
Lessee (which during the Construction Period shall be funded by an Advance and
added to the Lease Balance), all such further acts, conveyances, documents and
assurances as the other parties may from time to time reasonably request in
order to carry out and preserve the security interests and liens (and the
priority thereof or release therefrom) intended to be created pursuant to this
Lease, the other Operative Documents, the documents relating to the Secondary
Financing, and the transactions contemplated hereunder and thereunder
(including, without limitation, the preparation, execution and filing of
security documents which the parties hereto may from time to time request to be
filed or effected).
(b) The parties hereto further agree to use their best efforts to cause
a mutually agreeable entity to commit to provide financing of no greater than
ninety-seven (97%) percent of the Commitment ("Secondary Financing") pursuant to
documents satisfactory to the Lessor, at the sole expense of the Lessee. In the
event that definitive documentation of the Secondary Financing is not executed
and delivered prior to June 15, 1999, the Applicable Margin shall equal 3.0% per
annum until July 15, 1999, at which time the Applicable Margin increases to 4.0%
per annum until the Secondary Financing is consummated pursuant to documents
satisfactory to the Lessor. In the event that the Applicable Margin is increased
pursuant to the preceding sentence, the parties agree to revise the calculation
of the Contingent Rental Adjustment to maintain compliance with the Statement of
Financial Accounting Standards No. 13 as in effect at such time.
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<PAGE> 72
IN WITNESS WHEREOF, the parties have caused this Lease be duly executed
and delivered as of the date first above written.
ALTERNATIVE LIVING SERVICES INC.
By /s/ Mark W. Ohlendorf
------------------------------
Name: Mark W. Ohlendorf
Title: Senior Vice President
LEASE AND SECURITY
AGREEMENT
S-1
<PAGE> 73
Commitment: SELCO SERVICE CORPORATION
$25,000,000
By /s/ Donald C. Davis
------------------------------
Name: Donald C. Davis
Title: Vice President
Funding Office:
LEASE AND SECURITY
AGREEMENT
S-2
<PAGE> 74
THIS COUNTERPART IS NOT THE ORIGINAL EXECUTED COUNTERPART.
Receipt of this original counterpart of the foregoing Lease is hereby
acknowledged as of the date hereof.
SELCO SERVICE CORPORATION
By /s/ Donald C. Davis
------------------------------
Name: Donald C. Davis
Title: Vice President
LEASE AND SECURITY
AGREEMENT
S-3
<PAGE> 75
STATE OF ___________________)
) ss.
COUNTY OF __________________)
The foregoing instrument was acknowledged before me this day of
, 1999, by as of ALTERNATIVE LIVING
SERVICES INC., a corporation, on behalf of the corporation.
Witness my hand and official seal.
(SEAL)
-------------------------------
Notary Public
My commission expires:
<PAGE> 76
STATE OF New York )
-------------------
) ss.
COUNTY OF Albany )
-------------------
The foregoing instrument was acknowledged before me this 17th day of
February, 1999, by Donald C. Davis as Vice President of SELCO SERVICE
CORPORATION, an Ohio corporation, on behalf of the corporation.
Witness my hand and official seal.
(SEAL) /s/ Theresa R. Arnold
-------------------------------
Notary Public
My commission expires:
<PAGE> 77
SCHEDULE I
NOTICE INFORMATION
If to the Lessee:
Alternative Living Services
450 N. Sunnyslope Road
Suite 300
Brookfield, Wisconsin 53005
Telephone:
Fax:
Attention:
If to the Lessor:
SELCO Service Corporation
c/o KeyCorp. Leasing
54 State Street
Albany, New York 12207
Telephone: (518) 486-8984
Fax: (518) 486-8172
Attention: Don Davis
with a copy to:
Mayer, Brown & Platt
1675 Broadway
New York, New York 10019
Telephone: (212) 506-2570
Fax: (212) 262-1910
Attention: Barry P. Biggar, Esq.
<PAGE> 78
ANNEX 1
TO
THE LEASE
Description of Land
Parcel 16 of Certified Survey Map No. 6616, recorded on January 28, 1999, in
Reel 4487, Images 1058-1063 as Document No. 7676908, being a redivision of
Parcel 7 of Certified Survey Map No. 6485, lying in the Northeast 1/4, Southeast
1/4 and Northwest 1/4 of Section 29, Town 7 North, Range 21 East, in the City of
Wauwatosa, County of Milwaukee, State of Wisconsin.
Part of Tax Key No. 379-9999-20
A-1
<PAGE> 79
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
ARTICLE I
DEFINITIONS
<S> <C> <C>
1.1. Definitions; Interpretation.........................................................................................1
ARTICLE II
PURCHASE AND LEASE
2.1. Acceptance and Lease of Property....................................................................................1
2.2. Acceptance Procedure................................................................................................2
2.3. Lease Term..........................................................................................................2
2.4. Title...............................................................................................................2
ARTICLE III
FUNDING OF ADVANCES
3.1. Lessor Commitment...................................................................................................2
3.2. Procedures for Advances.............................................................................................3
3.3. Capitalized Interest Advances.......................................................................................3
ARTICLE IV
CONDITIONS PRECEDENT
4.1. Documentation Date..................................................................................................4
4.2. Closing Date Conditions.............................................................................................5
(a) Operative Documents; No Default................................................................5
(b) Taxes..........................................................................................5
(c) Opinions of Counsel............................................................................5
(d) Governmental Actions...........................................................................5
(e) Litigation.....................................................................................5
(f) Requirements of Law............................................................................6
(g) Responsible Employee's Certificate.............................................................6
(h) Environmental Audit............................................................................6
</TABLE>
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<PAGE> 80
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C> <C>
(i) Survey and Title Insurance.....................................................................6
(j) Recordation....................................................................................6
(k) Construction Agency Agreement Supplement.......................................................7
(l) Fees...........................................................................................7
(m) Certain Transaction Expenses...................................................................7
4.3. Conditions Precedent to each Advance................................................................................7
(a) Funding Request................................................................................7
(b) Fees...........................................................................................7
(c) Accuracy of Representations and Warranties.....................................................7
(d) Litigation.....................................................................................7
(e) No Default.....................................................................................8
(f) Commitment Amount..............................................................................8
(g) Cost of Completion.............................................................................8
(h) Building Permits...............................................................................8
4.4. Post Closing Conditions.............................................................................................8
(a) Architect's Certificate........................................................................8
(b) Appraisal......................................................................................8
(c) Evidence of Insurance..........................................................................9
ARTICLE V
CONDITIONS TO COMPLETION
5.1. Conditions to Completion of the Property............................................................................9
ARTICLE VI
REPRESENTATIONS
6.1. Representations of the Lessor.......................................................................................9
(a) ERISA..........................................................................................9
(b) Status.........................................................................................9
(c) Power and Authority...........................................................................10
6.2. Representations of Lessee..........................................................................................10
(a) Corporate Status..............................................................................10
(b) Enforceability................................................................................10
(c) No Violation..................................................................................10
(d) Litigation....................................................................................10
(e) Governmental Actions..........................................................................11
</TABLE>
-ii-
<PAGE> 81
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C> <C>
(g) Taxes.........................................................................................11
(h) Prohibited Transactions.......................................................................11
(i) Environmental Laws............................................................................11
(j) Offer of Securities, etc......................................................................12
(k) Financial Statements..........................................................................12
(l) Property......................................................................................12
(m) Plans and Specifications......................................................................13
(n) Title.........................................................................................13
(o) Insurance.....................................................................................13
(p) Flood Hazard Areas............................................................................13
(q) Defaults......................................................................................14
(r) Use of Advances...............................................................................14
6.3. Representations of the Lessee with respect to each Advance.........................................................14
(a) Representations...............................................................................14
(b) Improvements..................................................................................14
(c) Liens.........................................................................................15
(d) Advance.......................................................................................15
ARTICLE VII
PAYMENT OF RENT; FEES
7.1. Rent...............................................................................................................15
7.2. Payment of Rent....................................................................................................16
7.3. Supplemental Rent..................................................................................................16
7.4. Fees...............................................................................................................16
7.5. Method of Payment..................................................................................................16
ARTICLE VIII
QUIET ENJOYMENT; RIGHT TO INSPECT
8.1. Quiet Enjoyment....................................................................................................17
8.2. Right to Inspect...................................................................................................17
ARTICLE IX
NET LEASE, ETC.
</TABLE>
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<PAGE> 82
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
9.1. Net Lease..........................................................................................................17
9.2. No Termination or Abatement........................................................................................18
ARTICLE X
SUBLEASES
10.1. Subletting........................................................................................................18
ARTICLE XI
LESSEE ACKNOWLEDGMENTS
11.1. Condition of the Property.........................................................................................19
11.2. Risk of Loss......................................................................................................19
ARTICLE XII
POSSESSION AND USE OF THE PROPERTY, ETC.
12.1. Utility Charges...................................................................................................20
12.2. Possession and Use of the Property................................................................................20
12.3. Compliance with Requirements of Law and Insurance Requirements....................................................20
12.4. Assignment by Lessee..............................................................................................20
12.5. Acceptance; Offset................................................................................................20
ARTICLE XIII
MAINTENANCE AND REPAIR; RETURN
13.1. Maintenance and Repair; Return....................................................................................21
ARTICLE XIV
MODIFICATIONS, ETC.
14.1. Modifications, Substitutions and Replacements.....................................................................21
</TABLE>
-iv-
<PAGE> 83
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Section Page
- ------- ----
ARTICLE XV
WARRANT OF TITLE; EASEMENTS
<S> <C> <C>
15.1. Warrant of Title..................................................................................................22
15.2. Grants and Releases of Easements; Lessor's Waivers................................................................23
ARTICLE XVI
PERMITTED CONTESTS
16.1. Permitted Contests in Respect of Applicable Law...................................................................24
ARTICLE XVII
INSURANCE
17.1. Public Liability and Workers' Compensation Insurance..............................................................25
17.2. Hazard and Other Insurance........................................................................................25
17.3. Insurance Coverage................................................................................................26
ARTICLE XVIII
CASUALTY AND CONDEMNATION;
ENVIRONMENTAL MATTERS
18.1. Casualty and Condemnation.........................................................................................27
18.2. Environmental Matters.............................................................................................29
18.3. Notice of Environmental Matters...................................................................................29
ARTICLE XIX
TERMINATION OF LEASE
19.1. Mandatory Termination upon Certain Events.........................................................................29
19.2. Termination Procedures............................................................................................30
</TABLE>
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<PAGE> 84
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Section Page
- ------- ----
ARTICLE XX
EVENTS OF DEFAULT
<S> <C> <C>
20.1. Events of Default.................................................................................................31
20.2. Remedies..........................................................................................................33
20.3. Waiver of Certain Rights..........................................................................................36
20.4. Excess Proceeds; Return of Property...............................................................................36
20.5. Lessee's Purchase Option During Event of Default..................................................................37
ARTICLE XXI
TRANSFERS OF LESSOR'S INTERESTS
21.1. Assignments.......................................................................................................37
21.2. Participations....................................................................................................38
ARTICLE XXII
PURCHASE PROVISIONS
22.1. Purchase Option...................................................................................................38
ARTICLE XXIII
RENEWAL OPTIONS
23.1. Renewal Options...................................................................................................39
ARTICLE XXIV
REMARKETING OPTION
24.1. Option to Remarket................................................................................................39
24.2. Certain Obligations Continue......................................................................................43
ARTICLE XXV
PROCEDURES RELATING TO PURCHASE OR REMARKETING
</TABLE>
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<PAGE> 85
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
25.1. Provisions Relating to the Exercise of Purchase Option and Conveyance Upon Remarketing and
Conveyance Upon Certain Other Events..............................................................................43
ARTICLE XXVI
INDEMNIFICATION
26.1. General Indemnification...........................................................................................44
26.2. End of Term Indemnity.............................................................................................46
26.3. Environmental Indemnity...........................................................................................47
26.4. Proceedings in Respect of Claims..................................................................................49
26.5. General Tax Indemnity.............................................................................................51
(a) Indemnification...................................................................................51
(b) Contests..........................................................................................51
(c) Reimbursement for Tax Savings.....................................................................53
(d) Payments..........................................................................................54
(e) Reports...........................................................................................54
(f) Verification......................................................................................55
(g) Tax Ownership.....................................................................................55
26.6. Funding Losses....................................................................................................56
26.7. Regulation D Compensation.........................................................................................56
26.8. Deposits Unavailable..............................................................................................57
26.9. Illegality........................................................................................................57
26.10. Increased Cost and Reduced Return.................................................................................58
ARTICLE XXVII
ESTOPPEL CERTIFICATES
27.1. Estoppel Certificates.............................................................................................60
ARTICLE XXVIII
ACCEPTANCE OF SURRENDER
28.1. Acceptance of Surrender...........................................................................................60
</TABLE>
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<PAGE> 86
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Section Page
- ------- ----
ARTICLE XXIX
NO MERGER OF TITLE
<S> <C> <C>
29.1. No Merger of Title................................................................................................60
ARTICLE XXX
INTENT OF THE PARTIES
30.1. Ownership of the Property.........................................................................................61
30.2. Grant of Lien and Power of Sale...................................................................................62
ARTICLE XXXI
PAYMENT OF CERTAIN EXPENSES
31.1. Transaction Expenses..............................................................................................63
31.2. Brokers' Fees and Stamp Taxes.....................................................................................63
ARTICLE XXXII
OTHER COVENANTS AND AGREEMENTS OF LESSEE
32.1. Covenants.........................................................................................................63
(a) Information........................................................................................63
(b) Delivery of Lease Supplement.......................................................................64
(c) Merger, Consolidation..............................................................................64
(d) Further Assurances.................................................................................65
(e) Preservation of Existence, Etc.....................................................................65
ARTICLE XXXIII
MISCELLANEOUS
33.1. Survival; Severability; Etc.......................................................................................65
33.2. Amendments and Modifications......................................................................................66
33.3. No Waiver.........................................................................................................66
33.4. Notices...........................................................................................................66
33.5. Successors and Assigns............................................................................................66
</TABLE>
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<PAGE> 87
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
33.6. Headings and Table of Contents....................................................................................66
33.7. Counterparts......................................................................................................66
33.8. GOVERNING LAW.....................................................................................................66
33.9. Original Lease....................................................................................................67
33.10. Waiver of Jury Trial.............................................................................................67
33.11. Submission to Jurisdiction.......................................................................................67
33.12. Further Assurances...............................................................................................67
Schedules
- ---------
SCHEDULE I Notice Information
Annexes
- -------
ANNEX 1 Description of Land
Exhibits
- --------
EXHIBIT A Funding Request
EXHIBIT B Memorandum of Lease
EXHIBIT C Construction Agency Agreement
EXHIBIT D Lease Supplement
EXHIBIT E Responsible Employee's Certificate
</TABLE>
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<PAGE> 88
APPENDIX 1
to
Lease and Security Agreement
DEFINITIONS AND INTERPRETATION
A. Interpretation. In each Operative Document, unless a clear contrary intention
appears:
(i) the singular number includes the plural number and vice versa;
(ii) reference to any Person includes such Person's successors and
assigns but, if applicable, only if such successors and assigns are permitted by
the Operative Documents, and reference to a Person in a particular capacity
excludes such Person in any other capacity or individually;
(iii) reference to any gender includes each other gender;
(iv) reference to any agreement (including any Operative Document),
document or instrument means such agreement, document or instrument as amended
or modified and in effect from time to time in accordance with the terms thereof
and, if applicable, the terms of the other Operative Documents and reference to
any promissory note includes any promissory note which is an extension or
renewal thereof or a substitute or replacement therefor;
(v) reference to any Applicable Law means such Applicable Law as
amended, modified, codified, replaced or reenacted, in whole or in part, and in
effect from time to time, including rules and regulations promulgated thereunder
and reference to any section or other provision of any Applicable Law means that
provision of such Applicable Law from time to time in effect and constituting
the substantive amendment, modification, codification, replacement or
reenactment of such section or other provision;
(vi) reference in any Operative Document to any Article, Section,
Appendix, Schedule or Exhibit means such Article or Section thereof or Appendix,
Schedule or Exhibit thereto;
<PAGE> 89
(vii) "hereunder", "hereof", "hereto" and words of similar
import shall be deemed references to an Operative Document as a whole
and not to any particular Article, Section or other provision thereof;
(viii) "including" (and with correlative meaning "include")
means including without limiting the generality of any description
preceding such term; and
(ix) relative to the determination of any period of time,
"from" means "from and including" and "to" means "to but excluding".
B. Accounting Terms. In each Operative Document, unless expressly
otherwise provided, accounting terms shall be construed and interpreted, and
accounting determinations and computations shall be made, in accordance with
GAAP.
C. Conflict in Operative Documents. If there is any conflict between
any Operative Documents, such Operative Document shall be interpreted and
construed, if possible, so as to avoid or minimize such conflict but, to the
extent (and only to the extent) of such conflict, the Lease shall prevail and
control.
D. Legal Representation of the Parties. The Operative Documents were
negotiated by the parties with the benefit of legal representation and any rule
of construction or interpretation otherwise requiring the Operative Document to
be construed or interpreted against any party shall not apply to any
construction or interpretation hereof or thereof.
E. Defined Terms. Unless a clear contrary intention appears, terms
defined herein have the respective indicated meanings when used in each
Operative Document.
"Advance" means an advance of funds by the Lessor pursuant to Article
III of the Lease.
"Affiliate" means, when used with respect to any Person, any other
Person directly or indirectly Controlling or Controlled by or under direct or
indirect common control with such Person.
"After Tax Basis" means, with respect to any payment to be received,
the amount of such payment increased so that, after deduction of the amount of
all Taxes required to be paid currently by the recipient (less any Tax savings
realized currently and the present value (determined using a discount rate equal
to the Applicable Federal Rate (as defined in Section 1275(d) of the Code)) of
any Tax savings projected to be realized by the recipient as a result of the
payment of the indemnified amount) with respect to the receipt by the recipient
of such amounts, such increased payment (as so reduced) is equal to the payment
otherwise required to be made.
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<PAGE> 90
"Alternate Base Rate" means, for any period, an interest rate per annum
equal to the sum of (i) the Federal Funds Effective Rate most recently
determined by the Lessor plus .50% and (ii) the Applicable Margin. If the
aforesaid rate changes from time to time after the date of the Lease, the
Alternate Base Rate shall be automatically increased or decreased, if
appropriate and as the case may be, without notice to the Lessee as of the
effective time of each change.
"Applicable Law" means all existing and future applicable laws, rules,
regulations (including Environmental Laws) statutes, treaties, codes,
ordinances, permits, certificates, orders and licenses of and binding
interpretations by, any Governmental Authority, and applicable judgments,
decrees, injunctions, writs, orders or like action of any court, arbitrator or
other administrative, judicial or quasi-judicial tribunal or agency of competent
jurisdiction (including those pertaining to health, safety or the environment
(including, without limitation, wetlands) and those pertaining to the
construction, use or occupancy of the Property) and any restrictive covenant or
deed restriction or easement of record affecting the Property.
"Applicable Margin" means, at any time, 2% per annum or the rate
determined pursuant to Section 33.12(b) of the Lease.
"Appraisal" means an appraisal, prepared by a reputable appraiser
selected by the Lessor, of the Property as if improved in accordance with the
Plans and Specifications, which in the judgment of counsel to the Lessor,
complies with all of the provisions of the Financial Institutions Reform,
Recovery and Enforcement Act of 1989, as amended, the rules and regulations
adopted pursuant thereto, and all other applicable Requirements of Law and, in
the case of the Appraisal delivered on or prior to the Closing Date, will
appraise the Fair Market Sales Value of the Property as built in accordance with
the Plans and Specifications as of the Base Date and as of the Expiration Date.
"Appurtenant Rights" means (i) all agreements, easements, rights of way
or use, rights of ingress or egress, privileges, appurtenances, tenements,
hereditaments and other rights and benefits at any time belonging or pertaining
to the Land or the Improvements, including, without limitation, the use of any
streets, ways, alleys, vaults or strips of land adjoining, abutting, adjacent or
contiguous to the Land and (ii) all permits, licenses and rights, whether or not
of record, appurtenant to the Land.
"Architect" means the architect acting in such capacity with respect to
the Property. Any requirement in any Operative Document that a certificate of
the Architect be delivered shall be satisfied by delivery of certificate(s) from
the foregoing so long as such certificates collectively satisfy the requirements
set forth in such Operative Documents.
"Available Commitment" means, at any time, an amount equal to the
excess, if any, of (a) the amount of the Commitment over (b) the aggregate
original principal amount of all Advances.
"Base Date" is defined in Section 2.3 of the Lease.
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<PAGE> 91
"Base Term" is defined in Section 2.3 of the Lease.
"Basic Rent" means, as to any Payment Date, the sum which results from
adding all the amounts obtained by dividing (I) the product of (a) the Lease
Balance outstanding on each day during the period of time which has elapsed
since the immediately preceding Payment Date and (b) the Lease Rate for such day
by (II) 360; provided, however, that with respect to the first Basic Rent
payment, the Lease Rate shall be calculated for the number of days then elapsed
since the Funding Date therefor; provided, further, however, that for any day on
which Basic Rent is to be determined by reference to the Alternate Base Rate or
outstanding Advances are to bear interest at the Alternate Base Rate, "Lease
Rate" shall be replaced by "Alternate Base Rate" and "360" shall be replaced by
"365" in the foregoing calculation.
"Board" means the Board of Governors of the Federal Reserve System of
the United States (or any successor).
"Break Costs" means an amount equal to the amount, if any, required to
compensate the Lessor or an Affiliate of the Lessor from which the Lessor
obtained the funds necessary to make the Advances, for any losses or costs
(including, without limitation, any loss, cost or expense incurred by reason of
the liquidation or reemployment of deposits or funds acquired by the Lessor to
fund its obligations hereunder and reasonable internal charges) it or such
Affiliate incurs as a result of (w) the Lessee's payment of Rent or Lease
Balance other than on a Payment Date, (x) any Advance not being made on the date
specified therefor in the applicable Funding Request (other than as a result of
a breach by the Lessor of its obligation under Section 3.1 of the Lease to make
an Advance), (y) as a result of any conversion of the Eurodollar Rate in
accordance with Section 26.8 or 26.9 of the Lease, or (z) the payment of the
Lease Balance on any day other than the Expiration Date. A statement as to the
amount of such loss, cost or expense, prepared in good faith and in reasonable
detail and submitted by the Lessor to the Lessee, shall be conclusive and
binding for all purposes absent manifest error.
"Business Day" means each day which is not a day on which banks in New
York, New York or Boston, Massachusetts are generally authorized or obligated,
by law or executive order, to close and, in the context of determining a
Eurodollar Rate, which is also a day on which dealings in Dollars are carried on
in the London interbank eurodollar market.
"Capitalized Interest" means, as of any date, an amount equal to the
Lease Rate multiplied by the Lease Balance on such date, calculated for the
number of days then elapsed since the last Payment Date over a year of 360 days.
"Capitalized Interest Advance" is defined in Section 3.3 of the Lease.
"Casualty" means any damage or destruction of all or any portion of the
Property as a result of a fire or other casualty.
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"CERCLA" means the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, 42 U.S.C. ss.ss. 9601 et seq., as amended from time
to time, or any successor statute.
"Certifying Party" is defined in Section 27.1 of the Lease.
"Claims" means any and all obligations, liabilities, losses, actions,
suits, judgments, penalties, fines, claims, demands, settlements, costs and
expenses (including, without limitation, reasonable legal fees and expenses) of
any nature whatsoever.
"Closing Date" is defined in Section 4.2 of the Lease.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor statute thereto.
"Commitment" means the obligation of the Lessor to make Advances to the
Lessee in an aggregate principal amount not to exceed the amount set forth
opposite the Lessor's name on its signature page to the Lease.
"Commitment Period" means the period from and including the Closing
Date to but not including the date occurring on the earlier of (x) the date of
Completion and (y) the date corresponding to fifteen (15) months after the
Closing Date or (i) such earlier date on which the Commitment shall terminate as
provided in the Operative Documents, or (ii) such later date to which Completion
may be extended on account of a Force Majeure Event, but in no event beyond the
Outside Completion Date.
"Completion" means such time as the conditions set forth in Article V
of the Lease are satisfied.
"Condemnation" means any condemnation, requisition, confiscation,
seizure or other taking or sale of the use, access, occupancy, easement rights
or title to the Property or any part thereof, wholly or partially (temporarily
or permanently), by or on account of any actual or threatened eminent domain
proceeding or other taking of action by any Person having the power of eminent
domain, including an action by a Governmental Authority to change the grade of,
or widen the streets adjacent to, the Property or alter the pedestrian or
vehicular traffic flow to the Property so as to result in change in access to
such Property, or by or on account of an eviction by paramount title or any
transfer made in lieu of any such proceeding or action. A "Condemnation" shall
be deemed to have occurred on the earliest of the dates that use, occupancy or
title vests in the condemning authority.
"Construction" means the construction and installation of all
Improvements contemplated by the Plans and Specifications.
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"Construction Agency Agreement" means the Construction Agency
Agreement, dated as of the Documentation Date, between the Lessor and the
Construction Agent.
"Construction Agency Event of Default" means a "Construction Agency
Event of Default" as defined in Section 5.1 of the Construction Agency
Agreement.
"Construction Agent" means the Lessee, as construction agent under the
Construction Agency Agreement.
"Construction Documents" is defined in Section 2.4 of the Construction
Agency Agreement.
"Construction Documents Assignment" means the Construction Documents
Assignment dated as of the Documentation Date executed and delivered by the
Construction Agent.
"Construction Period" means the period commencing on the Closing Date
and ending on the Base Date.
"Contingent Rental Adjustment" means the maximum amount (calculated as
a percentage of the Fair Market Value of the Property as set forth in the
Appraisal) that when present valued with the minimum Basic Rent payments
relating to the Property to be made during the applicable Term permits the Lease
of such Improvements to be characterized as an "operating lease" in accordance
with the Statement of Financial Accounting Standards No. 13 as in effect on the
Closing Date.
"Control" means (including the correlative meanings of the terms
"controlled by" and "under common control with"), as used with respect to any
Person, the possession directly or indirectly, of the power to direct or cause
the direction of the management policies of such Person, whether through the
ownership of voting securities or by contract or otherwise.
"Deed" means a [grant] [quitclaim] deed with respect to the real
property comprising the Land, in conformity with Applicable Law and appropriate
for recording with the applicable Governmental Authorities, conveying fee simple
title to such real property to the Lessor, subject only to Permitted Liens and
otherwise in form and substance satisfactory to the Lessor.
"Default" means any event or condition which, with the lapse of time or
the giving of notice, or both, would constitute an Event of Default.
"Documentation Date" is defined in Section 4.1.
"Dollars" and "$" mean dollars in lawful currency of the United States
of America.
"End of the Term Report" is defined in Section 26.2(a) of the Lease.
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"Environmental Audit" means a Phase One environmental site assessment
(the scope and performance of which meets or exceeds ASTM Standard Practice
E1527-93 Standard Practice for Environmental Site Assessments: Phase One
Environmental Site Assessment Process) of the Property.
"Environmental Claims" means any and all administrative, regulatory or
judicial actions or causes of action, suits, obligations, liabilities, losses,
proceedings, executory decrees, judgments, penalties, fees, demands, demand
letters, orders, directives, claims (including without limitation any claims
involving liability in tort, strict, absolute or otherwise), liens, notices of
noncompliance or violation, or legal fees, costs of investigations or
proceedings, relating in any way to any Environmental Law or any Governmental
Action issued under any such Environmental Law, or arising from the presence or
release (or alleged presence or release) into the environment of any Hazardous
Substance including, without limitation, and regardless of the merit of such
claim, any and all such claims by any Governmental Authority or by any third
party for enforcement, cleanup, removal, response, remedial or other actions for
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief.
"Environmental Law" means, whenever enacted or promulgated, any
applicable Federal, state, county or local law, statute, ordinance, rule,
regulation, license, permit, authorization, approval, covenant, criteria,
guideline, administrative or court order, judgment, decree, injunction, code or
requirement or any agreement with a Governmental Authority:
(x) relating to pollution (or the cleanup, removal,
remediation or encapsulation thereof, or any other response thereto),
or the regulation or protection of human health, safety or the
environment, including air, water, vapor, surface water, groundwater,
drinking water, land (including surface or subsurface), plant, aquatic
and animal life, or
(y) concerning exposure to, or the use, containment, storage,
recycling, treatment, generation, discharge, emission, Release or
threatened Release, transportation, processing, handling, labeling,
containment, production, disposal or remediation of any Hazardous
Substance, Hazardous Condition or Hazardous Activity.
in each case as amended and as now or hereafter in effect, and any common law or
equitable doctrine (including, without limitation, injunctive relief and tort
doctrines such as negligence, nuisance, trespass and strict liability) that may
impose liability or obligations for injuries (whether personal or property) or
damages due to or threatened as a result of the presence of, exposure to, or
ingestion of, any Hazardous Substance, whether such common law or equitable
doctrine is now or hereafter recognized or developed. Environmental Laws
include, but are not limited to, CERCLA; the Resource Conservation and Recovery
Act of 1976, 42 U.S.C. ss. 6901 et seq.; the Federal Water Pollution Control
Act, 33 U.S.C. ss. 1251 et seq.; the Clean Air Act, 42 U.S.C. ss.ss. 7401 et
seq.; the National Environmental Policy Act, 42 U.S.C. ss. 4321; the Refuse Act,
33 U.S.C. ss.ss. 401 et seq.; the Hazardous Materials Transportation Act of
1975, 49 U.S.C. ss.ss. 1801-1812; the Toxic Substances Control Act, 15 U.S.C.
ss.ss. 2601 et seq.; the Federal
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Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. ss.ss. 136 et seq.; the
Safe Drinking Water Act, 42 U.S.C. ss.ss. 300f et seq., each as amended and as
now or hereafter in effect, and their state and local counterparts or
equivalents, including any regulations promulgated thereunder.
"Environmental Violation" means any activity, occurrence or condition
that violates or results in non-compliance with any Environmental Law in any
material respect.
"Equipment" means equipment, apparatus, furnishings, fittings and
personal property of every kind and nature whatsoever purchased, leased or
otherwise acquired by the Lessee using the proceeds of Advances and now or
subsequently attached to, contained in or used or usable in any way in
connection with any operation or letting of a Property, including but without
limiting the generality of the foregoing, all screens, awnings, shades, blinds,
curtains, draperies, artwork, carpets, rugs, storm doors and windows, shelving,
furniture and furnishings, heating, electrical, and mechanical equipment,
lighting, switchboards, plumbing, ventilation, air conditioning and air-cooling
apparatus, refrigerating, and incinerating equipment, escalators, elevators,
loading and unloading equipment and systems, stoves, ranges, laundry equipment,
cleaning systems (including window cleaning apparatus), telephones,
communication systems (including satellite dishes and antennae), televisions,
computers, sprinkler systems and other fire prevention and extinguishing
apparatus and materials, security systems, motors, engines, machinery, pipes,
pumps, tanks, conduits, appliances, fittings and fixtures of every kind and
description.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time or any successor Federal statute.
"Eurocurrency Reserve Requirements" means, for any day as applied to a
payment of Rent, the aggregate (without duplication) of the rates (expressed as
a decimal fraction) of reserve requirements in effect on such day (including,
without limitation, basic, supplemental, marginal and emergency reserves under
any regulations of the Board or other Governmental Authority having jurisdiction
with respect thereto) dealing with reserve requirements prescribed for
eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in
Regulation D of the Board) maintained by a member bank of the Federal Reserve
System.
"Eurodollar Rate" means the rate which shall remain in effect during
the applicable Interest Period, subject to Section 26.8 of the Lease, at which
deposits in Dollars appear with respect to a one (1) month period (or a shorter
period with respect to the first Interest Period) on the Telerate Page 3750 (or
any successor page), in each case as of 11:00 a.m. (London time) two Business
Days prior to the beginning of such Interest Period, or if such rate is not
available, then the average (rounded upward, if necessary, to the nearest
multiple of one-sixteenth of one percent) of the rates offered for Dollar
deposits to the prime banks by leading banks in the London interbank market at
or about 11:00 a.m. (London time) two Business Days prior to the beginning of
such Interest Period in the interbank eurodollar market for delivery on the
first day of such Interest Period for a one (1) month period in an amount
comparable to the amount of the Advances to be outstanding during such Interest
Period.
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"Event of Default" means a Lease Event of Default or a Construction
Agency Event of Default.
"Excess Proceeds" means the excess, if any, of the aggregate of (i) all
awards, compensation or insurance proceeds payable in connection with a Casualty
or Condemnation over the sum of the Lease Balance paid by the Lessee pursuant to
Articles XVIII and XIX of the Lease with respect to such Casualty or
Condemnation and (ii) all proceeds received by the Lessor in connection with any
sale of the Property pursuant to the Lessor's exercise of remedies under Section
20.2 of the Lease or the Lessee's exercise of the Remarketing Option under
Article XXIV of the Lease.
"Expiration Date" means, unless the Lease shall have been earlier
terminated in accordance with the provisions of the Lease or the other Operative
Documents, the date five (5) years from the Base Date or the last day of any
Renewal Period then in effect, provided under no circumstances shall the
Expiration Date extend beyond the date that is the seventh anniversary of the
Base Date.
"Fair Market Sales Value" means the amounts, which in any event shall
not be less than zero, that would be paid in cash in an arm's-length transaction
between an informed and willing purchaser and an informed and willing seller,
neither of whom is under any compulsion to purchase or sell, respectively, for
the ownership of all of the Property. The Fair Market Sales Value of the
Property shall be determined based on the assumption that, except for purposes
of Article XX and Section 26.2 of the Lease, the Property is in the condition
and state of repair required under Section 13.1 of the Lease and the Lessee is
in compliance with the other requirements of the Operative Documents.
"Federal Funds Effective Rate" means, for any day, an interest rate per
annum equal to 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 by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day which is a Business Day,
the average of quotations for such day on such transaction received by the
Lessor from three Federal funds brokers of recognized standing selected by it.
"Fixtures" means all fixtures relating to the Improvements, including
all components thereof, located in or on the Improvements, together with all
replacements, modifications, alterations and additions thereto, excepting
however any and all trade fixtures and equipment (other than Equipment)
belonging to the Lessee or any Person other than the Lessor, regardless of
whether or not attached or affixed to the Improvements.
"Fee Letter" means that certain fee letter dated as of the
Documentation Date between the Lessor and the Lessee.
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"Force Majeure Event" means any event beyond the control of the Lessee
and the Construction Agent, including, but not limited to a non-performance by
any Person other than Construction Agent under any Construction Documents so
long as Construction Agent is diligently pursuing the enforcement of rights
under such Construction Documents and/or seeking alternate means of performance,
a Casualty, a Condemnation, strikes, lockouts, adverse soil conditions, acts of
God, adverse weather conditions, inability to obtain labor or materials,
government activities (including delays or unavailability of Governmental
Action), civil commotion and enemy action; but excluding any event, cause or
condition that results from the Construction Agent's financial condition or
failure to pay or any event, cause or condition which could have been avoided by
the Lessee or which could be remedied by the Lessee through the exercise of
commercially reasonable efforts or the commercially reasonable expenditure of
funds.
"Foreign Transferee" is defined in Section 21.1 of the Lease.
"Funding Date" is defined in Section 3.2(a) of the Lease.
"Funding Office" means the office of the Lessor identified on its
signature page to the Lease as its Funding Office.
"Funding Request" is defined in Section 3.2(a) of the Lease.
"GAAP" means United States generally accepted accounting principles
(including principles of consolidation), in effect from time to time.
"Governmental Action" means all permits, authorizations, registrations,
consents, approvals, waivers, exceptions, variances, orders, judgments, written
interpretations, decrees, licenses, exemptions, publications, filings, notices
to and declarations of or with, or required by, any Governmental Authority, or
required by any Applicable Law, and shall include, without limitation, all
environmental and operating permits and licenses that are required for the use
pursuant to the Lease, occupancy, zoning and operation of the Property.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Gross Proceeds" is defined in Section 24.1(k) of the Lease.
"Hazardous Activity" means any activity, process, procedure or
undertaking that directly or indirectly (i) produces, generates or creates any
Hazardous Substance; (ii) causes or results in (or threatens to cause or result
in) the Release of any Hazardous Substance into the environment (including air,
water vapor, surface water, groundwater, drinking water, land (including surface
or subsurface), plant, aquatic and animal life); (iii) involves the containment
or storage of any
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Hazardous Substance; or (iv) would be regulated as hazardous waste treatment,
storage or disposal within the meaning of any Environmental Law.
"Hazardous Condition" means any condition that violates or threatens to
violate (except such violation which is not material), or that results in or
threatens noncompliance with, any Environmental Law (except such noncompliance
which is not material).
"Hazardous Substance" means any of the following: (i) any petroleum or
petroleum product, explosives, regulated radioactive materials, friable
asbestos, ureaformaldehyde, polychlorinated biphenyls in regulated
concentrations, lead and radon gas; (ii) any substance, material, product,
derivative, compound or mixture, mineral, chemical, waste, gas, medical waste,
or pollutant, in each case whether naturally occurring, man-made or the
by-product of any process, that is toxic, harmful or hazardous to the
environment or human health or safety, as defined under any Environmental Law;
or (iii) any substance, material, product, derivative, compound or mixture,
mineral, chemical, waste, gas, medical waste or pollutant that would support the
assertion of any claim under any Environmental Law, whether or not defined as
hazardous as such under any Environmental Law.
"Impositions" means any and all liabilities, losses, expenses and costs
of any kind whatsoever for fees, taxes, levies, imposts, duties, charges,
assessments or withholdings of any nature whatsoever and all interest, additions
to tax and penalties thereon ("Taxes") (including, without limitation,
(i) real and personal property taxes, including personal
property taxes on any property covered by the Lease that is classified
by Governmental Authorities as personal property, and real estate or ad
valorem taxes in the nature of property taxes;
(ii) sales taxes, use taxes and other similar taxes (including
rent taxes and intangibles taxes);
(iii) any excise taxes;
(iv) real estate transfer taxes, conveyance taxes, mortgage
taxes, intangible taxes, stamp taxes and documentary recording taxes
and fees;
(v) taxes that are or are in the nature of franchise, income,
value added, gross receipts, privilege and doing business taxes,
license and registration fees; and
(vi) assessments on the Property, including all assessments
for public improvements or benefits, whether or not such improvements
are commenced or completed within the Term);
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relating to or arising from or in connection with the Property or the
transactions contemplated by the Operative Documents, which at any time may be
levied, assessed or imposed by any Federal, state or local authority upon or
with respect to
(a) any Tax Indemnitee, the Property or any part thereof or
interest therein, or the Lessee or any sublessee or user of the
Property;
(b) the financing, refinancing, demolition, construction,
substitution, subleasing, assignment, control, condition, occupancy,
servicing, maintenance, repair, ownership, possession, purchase,
rental, lease, activity conducted on, delivery, insuring, use,
operation, improvement, transfer, return or other disposition of such
Property or any part thereof or interest therein;
(c) other indebtedness with respect to the Property or any
part thereof or interest therein or transfer thereof;
(d) the rentals, receipts or earnings arising from the
Property or any part thereof or interest therein;
(e) the Operative Documents or any payment made or accrued
pursuant thereto;
(f) the income or other proceeds received with respect to the
Property or any part thereof or interest therein upon the sale or
disposition thereof;
(g) any contract (including the Construction Agency Agreement)
relating to the construction, acquisition or delivery of the
Improvements or any part thereof or interest therein; or
(h) otherwise in connection with the transactions contemplated
by the Operative Documents.
Notwithstanding anything in the first paragraph of this definition (except as
provided in the final paragraph of this definition) the term "Imposition" shall
not mean or include:
(i) any Taxes or impositions (other than Taxes that are, or
are in the nature of, sales, use, rental, transfer or property taxes)
that are imposed by any Governmental Authority and that are based upon
or measured by the gross or net income or gross or net receipts
(including any minimum taxes, withholding taxes or taxes on, measured
by or in the nature of capital, net worth, excess profits, items of tax
preference, capital stock, franchise, business privilege or doing
business taxes); provided that this clause (i) shall not be interpreted
to prevent a payment from being made on an After Tax Basis if such
payment is otherwise required to be so made;
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(ii) any Tax or imposition to the extent, but only to such
extent, it relates to any act, event or omission that occurs, or
relates to a period, after the expiration or earlier termination of the
Lease (but not any Tax that relates to any period prior to the
expiration or earlier termination of the Lease with respect to the
Property to which such Tax relates unless such Tax would otherwise be
the subject of one of the exclusions described in clauses (i) through
(xix) hereof);
(iii) any Tax or imposition for so long as, but only for so
long as, it is being contested in accordance with the provisions of
Section 26.5(b) of the Lease, provided that the foregoing shall not
limit the Lessee's obligation under Section 26.5(b) of the Lease to
advance to such Tax Indemnitee amounts with respect to Taxes that are
being contested in accordance with Section 26.5(b) of the Lease (if
required to be paid to the applicable Governmental Authority
notwithstanding the pendency of such contest) or any expenses incurred
by such Tax Indemnitee in connection with such contest;
(iv) any interest or penalties imposed on a Tax Indemnitee as
a result of a breach by such Tax Indemnitee of its obligations under
Section 26.5(e) of the Lease or otherwise as a result of a Tax
Indemnitee's failure to file any return or other documents timely and
as prescribed by applicable law; provided that this clause (iv) shall
not apply (x) if such interest or penalties arise as a result of a
position taken (or requested to be taken) by the Lessee in a contest
controlled by the Lessee under Section 26.5(b) of the Lease or (y) if
such failure is attributable to a failure by the Lessee to fulfill its
obligations under the Lease with respect to any such return;
(v) any Taxes or impositions imposed upon a Tax Indemnitee
with respect to any voluntary transfer, sale, financing or other
voluntary disposition of any interest in the Property or any part
thereof, or any interest therein or any interest or obligation under
the Operative Documents, or from any sale, assignment, transfer or
other disposition of any interest in a Tax Indemnitee or any Affiliate
thereof, (other than any transfer in connection with (1) the exercise
by the Lessee of its Purchase Option or any termination option or other
purchase of the Property by the Lessee, (2) the occurrence of an Event
of Default, (3) a Casualty or Condemnation affecting the Property, or
(4) any sublease, modification or addition to the Property by the
Lessee);
(vi) any Taxes or impositions imposed on a Tax Indemnitee, to
the extent such Tax Indemnitee actually receives a credit (or otherwise
has a reduction in a liability for Taxes) in respect thereof against
Taxes that are not indemnified under the Lease (but only to the extent
such credit is not taken into account in calculating the indemnity
payment on an After Tax Basis);
(vii) any Taxes imposed on or with respect to or payable by
any Tax Indemnitee based on, measured by or imposed with respect to any
fees received by such Tax Indemnitee;
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(viii) any Taxes imposed against or payable by a Tax
Indemnitee resulting from, or that would not have been imposed but for,
the gross negligence or willful misconduct of such Tax Indemnitee;
(ix) any Taxes imposed on or payable by a Tax Indemnitee to
the extent such Taxes would not have been imposed but for a breach by
the Tax Indemnitee or any Affiliate thereof of any representations,
warranties or covenants set forth in the Operative Documents (unless
such breach is caused by the Lessee's breach of its representations,
warranties or covenants set forth in the Operative Documents);
(x) any Taxes to the extent resulting from such Tax
Indemnitee's failure to comply with the provisions of Section 26.5(b)
of the Lease, which failure precludes or adversely affects the ability
to conduct a contest pursuant to Section 26.5(b) of the Lease (unless
such failure is caused by the Lessee's breach of its obligations);
(xi) any Taxes which are included in Property Improvements
Cost or Land Acquisition Cost if and to the extent actually paid;
(xii) any Taxes that would have been imposed in the absence of
the transactions contemplated by the Operative Documents;
(xiii) any Taxes imposed on or with respect to or payable as a
result of activities of a Tax Indemnitee or Affiliate thereof unrelated
to the transactions contemplated by the Operative Documents;
(xiv) any Taxes imposed on or with respect to or payable by a
Tax Indemnitee resulting from, or that would not have been imposed but
for the existence of, any Lessor Lien;
(xv) any Tax imposed against or payable by a Tax Indemnitee to
the extent that the amount of such Tax exceeds the amount of such Tax
that would have been imposed against or payable by the original Tax
Indemnitee (or, if less, that would have been subject to
indemnification under Section 26.5 of the Lease) if the transactions
pursuant to which such Tax Indemnitee became a direct or indirect
successor, transferee or assign of the applicable original Tax
Indemnitee had never occurred; provided, however, that this exclusion
(xiv) shall not apply if such direct or indirect successor, transferee
or assign acquired its interest as a result of a transfer while an
Event of Default shall have occurred and is continuing;
(xvi) any Taxes imposed on or with respect to or payable by a
Tax Indemnitee that would not have been imposed but for an amendment,
supplement, modification, consent or waiver to any Operative Document
not initiated, requested or consented to by the Lessee unless such
amendment, supplement, modification, consent or waiver (A)
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arises due to, or in connection with there having occurred, an Event of
Default or (B) is required by the terms of the Operative Documents or
is executed in connection with any amendment to the Operative Documents
required by law and unless, in the case of a Tax Indemnitee that is a
direct or indirect successor, transferee or assign of the original Tax
Indemnitee, such Taxes would have been imposed on or with respect to or
payable by the original Tax Indemnitee if the transaction(s) pursuant
to which such Tax Indemnitee became a direct or indirect successor,
transferee or assign of the original Tax Indemnitee had never occurred;
(xvii) any Taxes in the nature of intangibles, stamp,
documentary or similar Taxes;
(xviii) any Taxes imposed on or with respect to or payable by
a Tax Indemnitee or any Affiliate because such Tax Indemnitee or any
Affiliate thereof is not a United States person within the meaning of
Section 7701(a)(30) of the Code; and
(xix) any tax imposed by its express terms in lieu of or in
substitution for a Tax not subject to indemnity pursuant to the
provisions of Section 26.5 of the Lease.
Notwithstanding the foregoing, the exclusions from the definition of Impositions
set forth in clauses (i), (ii), (v), (vii), (xvii) and (xix) (solely as applied
to clause (xix), to the extent that any such tax is imposed by its express terms
in lieu of or in substitution for a Tax set forth in clauses (i), (ii), (v),
(vii), and (xvii)) above shall not apply (but the other exclusions shall apply)
to any Taxes or any increase in Taxes imposed on a Tax Indemnitee net of any
decrease in Taxes realized by such Tax Indemnitee, to the extent that such Taxes
or Tax increase or decrease would not have occurred if on each Funding Date the
Lessor had advanced funds to the Lessee in the form of a loan secured by the
Property in an amount equal to the amount of the Advance funded on such Funding
Date, with debt service for such loan equal to the Basic Rent payable on each
Payment Date and a principal balance at the maturity of such loan in an amount
equal to the then outstanding amount of the Advances at the end of the term of
the Lease.
"Improvements" means all buildings, structures, Fixtures, Equipment,
and other improvements of every kind existing at any time and from time to time
(including those constructed pursuant to the Construction Agency Agreement and
those purchased with amounts advanced by the Lessor pursuant to the Lease) on or
under the Land, together with any and all appurtenances to such buildings,
structures or improvements, including sidewalks, utility pipes, conduits and
lines, parking areas and roadways, and including all Modifications and other
additions to or changes in the Improvements at any time.
"Indemnitee" means the Lessor, its successors, assigns, directors,
shareholders, partners, officers, employees and agents.
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"Initial Lease Balance" means the Initial Lease Balance set forth on
the Lease Supplement.
"Insurance Requirements" means all terms and conditions of any
insurance policy either required by the Lease to be maintained by the Lessee or
required by the Construction Agency Agreement to be maintained by the
Construction Agent, and all requirements of the issuer of any such policy.
"Interest Period" means:
(a) prior to the Base Date:
(i) initially, the period commencing on the Funding Date with
respect to any Advance and ending on the 1st calendar day of the next
succeeding month (or, if such day is not a Business Day, the next
Business Day thereafter); and
(ii) thereafter, each period commencing the day after the last
Business Day of the next preceding Interest Period and ending one month
thereafter; and
(b) after the Base Date:
(i) each period commencing the day after the last Business Day
of the immediately preceding Interest Period and ending one (1) month
thereafter;
provided that, the foregoing provisions relating to Interest Periods are subject
to the following:
(i) if any Interest Period would otherwise end on a day that
is not a Business Day, such Interest Period shall be extended to the
next succeeding Business Day unless the result of such extension would
be to carry such Interest Period into another calendar month in which
event such Interest Period shall end on the immediately preceding
Business Day; and
(ii) any Interest Period that would otherwise extend beyond
the Expiration Date shall end on the Expiration Date.
"Investment Company Act" means the Investment Company Act of 1940, as
amended, together with the rules and regulations promulgated thereunder.
"Land" means, the parcel of real property described on Annex 1 to the
Lease and all Appurtenant Rights attached thereto.
"Land Acquisition Cost" means the amount of an Advance funded to the
Lessee or the Construction Agent for the purpose of acquiring that portion of
the Property constituting Land
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<PAGE> 104
and paying Transaction Expenses relating to such funding and acquisition, as
such amount is set forth in the Funding Request relating to the acquisition of
the Property.
"Lease" means the Lease and Security Agreement, dated as of the
Documentation Date, between the Lessor and the Lessee.
"Lease Balance" means, as of any date of determination, an amount equal
to (i) the sum of all Advances outstanding under the Lease (including, without
limitation, Capitalized Interest Advances) and all other amounts owing by the
Lessee under the Operative Documents (including, without limitation, accrued but
unpaid Supplemental Rent), less amounts paid pursuant to Sections 18.1(a) and
22.2, if any, or any other payment by the Lessee to the Lessor constituting a
repayment of any Advances.
"Lease Default" means any event or condition which, with the lapse of
time or the giving of notice, or both, would constitute a Lease Event of
Default.
"Lease Event of Default" is defined in Section 20.1 of the Lease.
"Lease Rate" means, during any Interest Period, the rate per annum
equal to the sum of the Eurodollar Rate for such Interest Period plus the
Applicable Margin.
"Lease Supplement" means the Lease Supplement in the form of Exhibit D
to the Lease.
"Lessee" means Alternative Living Services Inc., prior to the Base
Date, as Construction Agent under the Construction Agency Agreement, and after
the Base Date, as lessee under the Lease, and its successors and assigns
expressly permitted under the Operative Documents.
"Lessor" means SELCO Service Corporation, as lessor under the Lease.
"Lessor Lien" means any Lien, true lease or sublease or disposition of
title arising as a result of (a) any claim against the Lessor not resulting from
the transactions contemplated by the Operative Documents, (b) any act or
omission of the Lessor which is not required by the Operative Documents or is in
violation of any of the terms of the Operative Documents, (c) any claim against
the Lessor with respect to Taxes or Transaction Expenses against which Lessee is
not required to indemnify Lessor pursuant to the Lease or (d) any claim against
the Lessor arising out of any transfer by the Lessor of all or any portion of
the interest of the Lessor in the Property or the Operative Documents other than
the transfer of title to or possession of the Property by the Lessor pursuant to
and in accordance with the Lease or pursuant to the exercise of the remedies set
forth in Article XX of the Lease.
"Lien" means any mortgage, deed of trust, pledge, security interest,
encumbrance, lien, easement, servitude or charge of any kind, including, without
limitation, any irrevocable license, conditional sale or other title retention
agreement, any lease in the nature thereof, or any other
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<PAGE> 105
right of or arrangement with any creditor to have its claim satisfied out of any
specified property or asset with the proceeds therefrom prior to the
satisfaction of the claims of the general creditors of the owner thereof,
whether or not filed or recorded, or the filing of, or agreement to execute as
"debtor", any financing or continuation statement under the Uniform Commercial
Code of any jurisdiction or any federal, state or local lien imposed pursuant to
any Environmental Law.
"Marketing Period" means the period commencing on the date six months
prior to the Expiration Date and ending on the Expiration Date.
"Memorandum of Lease" means the Memorandum of Lease and Lease
Supplement dated as of the Closing Date made by the Lessee in favor of the
Lessor and satisfactory in form and substance to the Lessor in order to create a
first priority mortgage lien on the Land and Improvements at any time located on
or under the Land, substantially in the form of Exhibit B to the Lease.
"Modifications" is defined in Section 14.1 of the Lease.
"Net Proceeds" means all amounts received in connection with any
Casualty or Condemnation or any sale of the Property pursuant to Lessor's
exercise of remedies under Section 20.2 of the Lease or the Lessee's exercise of
the Remarketing Option under Article XXIV of the Lease, and all interest earned
thereon, less the expense of claiming and collecting such amounts, including all
costs and expenses in connection therewith for which the Lessor is entitled to
be reimbursed pursuant to the Lease.
"Operative Documents" means the following:
(a) the Lease;
(b) the Deed;
(c) the Memorandum of Lease;
(d) the Construction Agency Agreement;
(e) the Construction Documents Assignment;
(f) the Pledge Agreement; and
(g) the Fee Letter
"Outside Completion Date" means the date occurring twelve (12) months
after the Closing Date, as such date may be extended from time to time by reason
of a Force Majeure Event; provided, however, that in no event shall the Outside
Completion Date occur later than the date occurring fifteen (15) months after
the Closing Date.
"Overdue Rate" means the lesser of (a) the highest interest rate
permitted by Applicable Law and (b) the Alternate Base Rate plus 5%.
"Participants" is defined in Section 21.2 of the Lease.
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<PAGE> 106
"Payment Date" means the last day of any Interest Period and the
Expiration Date.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permitted Liens" means with respect to the Property:
(i) the respective rights and interests of the parties to the
Operative Documents as provided in the Operative Documents;
(ii) the rights of any sublessee or assignee under a sublease
or an assignment expressly permitted by the terms of the Lease;
(iii) Liens for Taxes that either are not yet due or are being
contested in accordance with the provisions of Section 16.1 of the
Lease;
(iv) Liens arising by operation of law, materialmen's,
mechanics', workers', repairmen's, employees', carriers',
warehousemen's and other like Liens relating to the construction of the
Improvements or in connection with any Modifications or arising in the
ordinary course of business for amounts that either are not more than
60 days past due or are being diligently contested in good faith by
appropriate proceedings, so long as such proceedings satisfy the
conditions for the continuation of proceedings set forth in Section
16.1 of the Lease;
(v) Liens of any of the types referred to in clause (iv) above
that have been bonded for not less than the full amount in dispute (or
as to which other security arrangements satisfactory to the Lessor have
been made), which bonding (or arrangements) shall comply with
applicable Requirements of Law, and has effectively stayed any
execution or enforcement of such Liens;
(vi) Liens arising out of judgments or awards with respect to
which appeals or other proceedings for review are being prosecuted in
good faith and for the payment of which adequate reserves have been
provided as required by GAAP or other appropriate provisions have been
made, so long as such proceedings have the effect of staying the
execution of such judgments or awards and satisfy the conditions for
the continuation of proceedings to contest set forth in Section 16.1 of
the Lease;
(vii) easements, rights of way and other encumbrances on title
to real property pursuant to Section 15.2 of the Lease;
(viii) Lessor Liens;
(ix) Liens created by the Lessee with the consent of the
Lessor; and
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<PAGE> 107
(x) Liens described on the title insurance policy delivered to
the Lessor pursuant to the Lease, other than Liens described in clause
(iv) or (vi) above.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization,
governmental authority or any other entity.
"Plans and Specifications" means the plans and specifications for the
Construction, as more particularly described in Schedule I to, and as may be
modified pursuant to, the Construction Agency Agreement.
"Pledge Agreement" means the Pledge Agreement dated as of the
Documentation Date between the Lessee and the Lessor.
"Prime Construction Contract" means the contract dated on or about the
Closing Date between the Construction Agent and the Prime Contractor, as it may
be amended from time to time in accordance with the Construction Agency
Agreement.
"Prime Contractor" means the Person who shall, with the prior consent
of the Lessor, have been designated by the Lessee to act as the general
contractor for purposes of the Construction.
"Property" means (i) the Land and (ii) all of the Improvements at any
time located on or under the Land.
"Property Cost" means the aggregate amount of the Land Acquisition Cost
and the Property Improvements Cost.
"Property Improvements Cost" means out-of pocket costs of the
Construction Agent incurred and properly payable under the Construction
Documents in accordance with the Operative Documents.
"Purchase Notice" is defined in Section 22.1 of the Lease.
"Purchase Option" is defined in Section 22.1 of the Lease.
"Purchase Option Price" is defined in Section 22.1 of the Lease.
"Release" means any release, pumping, pouring, emptying, injecting,
escaping, leaching, dumping, seepage, spill, leak, flow, discharge, disposal or
emission of a Hazardous Substance.
"Remarketing Option" is defined in Section 24.1 of the Lease.
-20-
<PAGE> 108
"Rent" means, collectively, Capitalized Interest, the Basic Rent and
the Supplemental Rent, in each case payable under the Lease.
"Requesting Party" is defined in Section 27.1 of the Lease.
"Required Modification" is defined in Section 14.1(a) of the Lease.
"Requirement of Law" means all Federal, state, county, municipal and
other governmental statutes, laws, rules, orders, regulations, ordinances,
judgments, decrees and injunctions affecting the Property, the Improvements or
the demolition, construction, use or alteration thereof, whether now or
hereafter enacted and in force, including any that require repairs,
modifications or alterations in or to the Property or in any way limit the use
and enjoyment thereof (including all building, zoning and fire codes and the
Americans with Disabilities Act of 1990, 42 U.S.C. ss. 1201 et seq. and any
other similar Federal, state or local laws or ordinances and the regulations
promulgated thereunder) and any that may relate to environmental requirements
(including all Environmental Laws), and all permits, certificates of occupancy,
licenses, authorizations and regulations relating thereto, and all covenants,
agreements, restrictions and encumbrances contained in any instruments which are
either of record or known to the Lessee affecting the Property, the Appurtenant
Rights and any easements, licenses or other agreements entered into pursuant to
Section 15.2 of the Lease.
"Responsible Employee" means, with respect to the Lessee, its Chairman,
President, any of its corporate Vice Presidents, its corporate Controller, its
corporate Treasurer or others duly authorized by the Lessee to execute
documents.
"Responsible Employee's Certificate" means a certificate signed by any
Responsible Employee, which certificate shall certify as true and correct the
subject matter being certified to in such certificate.
"Secondary Financing" is defined in Section 33.12 of the Lease.
"Securities Act" means the Securities Act of 1933, as amended, together
with the rules and regulations promulgated thereunder.
"Seller" means the seller of the Land.
"Shortfall Amount" means, as of the Expiration Date, an amount equal to
(i) the Lease Balance, minus (ii) the Contingent Rental Adjustment received by
the Lessor from the Lessee pursuant to Section 24.1(i) of the Lease, minus (iii)
the aggregate amount of the highest, binding, written, unconditional,
irrevocable offer to purchase the Property obtained by the Lessee pursuant to
Section 24.1(f) of the Lease; provided, however, that if the sale of the
Property to the Person submitting such offer is not consummated on or prior to
the Expiration Date, then the term
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<PAGE> 109
"Shortfall Amount" shall mean an amount equal to (i) the Lease Balance, minus
(ii) the Contingent Rental Adjustment received by the Lessor pursuant to Section
24.1(i) of the Lease.
"Significant Casualty" means a Casualty that in the reasonable, good
faith judgment of the Lessor with respect to which the Lessee shall have not
complied, or otherwise cannot comply, with the terms and conditions of Section
18.1(a)(i)(y).
"Significant Condemnation" means (a) a Condemnation that involves a
taking of Lessor's entire title to the Land, or (b) a Condemnation that in the
reasonable, good faith judgment of the Lessor either (i) renders the Property
unsuitable for continued use as property of the type of such Property
immediately prior to such Condemnation or (ii) is such that restoration of the
Property to substantially its condition as existed immediately prior to such
Condemnation would (x) be impracticable or impossible or (y) cost in excess of
the greater of $1,000,000 and an amount equal to ten (10%) percent of the Lease
Balance to effect.
"Submitted Financial Statements" means the financial statements of the
Lessee for the fiscal year ended September 30, 1998 which were audited by KPMG
Peat Marwick LLP, copies of which have been delivered to the Lessor.
"Subsidiary" of any Person means any corporation, partnership, joint
venture, trust or estate of which (or in which) more than 50% of:
(a) the outstanding capital stock having Voting Power to elect
a majority of the Board of Directors of such corporation (irrespective
of whether at the time capital stock of any other class or classes of
such corporation shall or might having Voting Power upon the occurrence
of any contingency),
(b) the interest in the capital or profits of such partnership
or joint venture, or
(c) the beneficial interest of such trust or estate,
is at the time directly or indirectly owned by such Person, by such Person and
one or more of its Subsidiaries or by one or more of such Person's Subsidiaries.
"Supplemental Rent" means all amounts, liabilities and obligations
(other than Capitalized Interest and Basic Rent) which Lessee assumes or agrees
to pay to Lessor or any other Person under the Lease or under any of the other
Operative Documents, including, without limitation, Break Costs.
"Tax Indemnitee" means the Lessor.
"Taxes" is defined in the definition of Impositions.
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<PAGE> 110
"Term" means the period commencing on the Base Date and ending on the
Expiration Date.
"Termination Date" is defined in Sections 19.2 and 20.2(e) of the
Lease.
"Termination Notice" is defined in Section 19.1 of the Lease.
"Transaction Expenses" means all costs and expenses incurred in
connection with the preparation, execution and delivery of the Operative
Documents and the transactions contemplated by the Operative Documents including
without limitation:
(a) the reasonable fees, out-of-pocket expenses and
disbursements of counsel for each of the Lessor and the Lessee in
negotiating the terms of the Operative Documents and the other
transaction documents, including documents relating to the Secondary
Financing, preparing for the closing under, and rendering opinions in
connection with, such transactions and in rendering other services
customary for counsel representing parties to transactions of the types
involved in the transactions contemplated by the Operative Documents;
(b) the reasonable fees, out-of-pocket expenses and
disbursements of any law firm or other external counsel, and all
disbursements of internal counsel of the Lessor in connection with (1)
any amendment, supplement, waiver or consent with respect to any
Operative Documents or the documents relating to the Secondary
Financing requested or approved by the Lessee and (2) any enforcement
of any rights or remedies against the Lessee in respect of the
Operative Documents;
(c) any other reasonable fees, out-of-pocket expenses,
disbursements or cost of the Lessor with respect to the Operative
Documents or the documents relating to the Secondary Financing or any
of the other transaction documents;
(d) any and all Taxes and fees incurred in recording,
registering or filing any Operative Document or the documents relating
to the Secondary Financing or any other transaction document, any deed,
declaration, mortgage, security agreement, notice or financing
statement with any public office, registry or governmental agency in
connection with the transactions contemplated by the Operative
Documents or the documents relating to the Secondary Financing;
(e) any title fees, premiums and escrow costs, land and
topographical surveys, and other expenses relating to title insurance,
due diligence and investigation with respect to the Land, securing all
zoning, land use, permits and other Governmental Action with respect to
the acquisition and development of the Land or the Construction, and
the closings contemplated by the Transaction Documents or the documents
relating to the Secondary Financing; and
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<PAGE> 111
(f) all expenses relating to all Environmental Audits.
"UCC Financing Statements" means UCC financing statements appropriately
completed and executed for filing in the applicable jurisdiction in order to
protect the Lessor's interest under the Lease to the extent the Lease is a
security agreement.
"Uniform Commercial Code" and "UCC" means the Uniform Commercial Code
as in effect in any applicable jurisdiction.
"Voting Power" means, with respect to securities issued by any Person,
the combined voting power of all securities of such person which are issued and
outstanding at the time of determination and which are entitled to vote in the
election of directors of such Person, other than securities having such power
only by reason of the happening of a contingency.
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<PAGE> 1
EXHIBIT 10.6
AMENDED SCHEDULE OF NHI LEASES
WHICH ARE SUBSTANTIALLY IN THE FORM OF LEASE
ATTACHED AS EXHIBIT 10.57 TO THE
TO THE COMPANY'S FORM 10-K
FOR THE PERIOD ENDING 12/31/98
<TABLE>
<CAPTION>
LEASING ORIGINAL NHI
FACILITY NAME LOCATION COMMITMENT FEE INVESTMENT ANNUAL BASE RENT
------------- -------- -------------- ---------- ----------------
<S> <C> <C> <C> <C>
Sterling House of Gilbert 845 N. El Dorado Dr. $ 35,926.80 $ 3,592,680.00 $ 341,304.60
Gilbert, AZ 85233
Clare Bridge of Glendale 6735 W. Hillcrest Blvd. 42,108.62 4,210,862.00 400,031.89
Glendale, AZ 85310
Sterling House of Tuscon (West) 2650 W. Ina Road 33,566.17 3,356,617.00 318,878.61
Tuscon, AZ 85741
Sterling Cottage of Daytona Beach 570 National Healthcare Blvd. 29,886.15 2,988,615.00 283,918.42
Daytona Beach, FL 32114
Clare Bridge of Maitland 760 N. Wymore Road 113,372.54 11,337,254.00 1,077,039.10*
Wynwood of Maitland Maitland, FL 32751
Sterling House of Conway 872 Singleton Ridge Road 32,206.37 3,220,637.00 305,960.51
Conway, SC 29526
Sterling House of Kingsport 2424 N. John B. Dennis Hwy. 29,217.36 2,921,736.00 277,564.92
Kingsport, TN 37660
Sterling House of Gallatin 400 Hancock Road 26,053.40 2,605,340.00 247,507.30
Gallatin, TN 37066
Sterling House of Tullahoma 108 Wilson Avenue 24,076.52 2,407,652.00 228,726.94
Tullahoma, TN 37388
Clare Bridge of Tanque Verde 9050 East Tanque Verde Road 42,189.42 4,218,942.00 400,799.49
Tucson, AZ 85749
</TABLE>
* Clare Bridge of Maitland - $418,976.03; Wynwood of Maitland - $658,063.10.
<PAGE> 1
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of January 1, 1999, by and
between Alternative Living Services, Inc., a Delaware corporation, with offices
at 450 N. Sunnyslope Road, Suite 300, Brookfield, Wisconsin 53005 (the
"Company"), and William F. Lasky, residing at 1213 East Goodrich Lane, Fox
Point, Wisconsin 53217 (the "Executive").
WHEREAS, the Executive currently serves as the Chief Executive
Officer of the Company, pursuant to an Employment Agreement, dated as of
December 14, 1993, and as amended thereafter (the "Prior Agreement"); and
WHEREAS, the Company wishes the Executive to continue to serve
in that position, and the Executive is willing to do so;
NOW THEREFORE, in consideration of the mutual promises and
agreements set forth below, the Company and the Executive agree as follows:
1. Term. The Company agrees to employ the Executive and the
Executive agrees to serve, on the terms and conditions set forth herein, for a
period commencing as of January 1, 1999 and ending on December 31, 2001
("Original Term"), unless earlier terminated pursuant to the terms hereof;
provided, however, that this Agreement will automatically renew for an
additional year on January 1, 2002 and on each January 1 thereafter (such
extended period, the "Renewal Term") unless and until either party gives notice
to the other party that such party does not wish to renew this Agreement at
least ninety (90) days prior to the expiration of the then applicable Original
Term or Renewal Term. The period during which Executive is employed hereunder
(including any applicable Renewal Term) is hereinafter referred to as the
"Employment Period."
2. Duties and Services.
(a) The Executive shall serve as the Chief Executive
Officer of the Company, and shall have the duties, responsibilities and
authority as may be from time to time assigned to him by the Board of Directors
of the Company (the "Board"). At no time shall the Executive be requested to
perform duties that are not commensurate with his status as the Company's Chief
Executive Officer; provided, however, that at the request of the Board, and
without additional consideration, the Executive shall serve as a director,
executive officer, trustee or agent for the Company and its affiliates so long
as he continues as Chief Executive Officer of the Company. The Executive shall
devote substantially all of his normal working time and efforts to the
performance of his duties under this Agreement; provided, however, that the
Executive may serve as a director or officer of any charitable, religious,
civic, educational, or trade organizations to the extent that such activities,
individually or in the aggregate, do not interfere with the performance of
Executive's duties and responsibilities under this Agreement.
(b) During the Employment Period, the Company shall
nominate the Executive for election to the Board each time he is eligible to
stand for election, and, if
<PAGE> 2
elected, the Executive hereby consents to serve as a director without additional
compensation.
3. Compensation and Benefits.
(a) Base Salary. As compensation for his services
hereunder, the Company agrees to pay the Executive a base salary (the "Base
Salary") at the annual rate of four hundred thousand dollars ($400,000) per
calendar year, payable in accordance with the Company's regular payroll
practices. The Executive's Base Salary shall be subject to adjustment by the
Board or the Compensation Committee of the Board each calendar year, and may be
increased or decreased at any time (provided that such Base Salary may in no
event be less than $400,000 without the consent of Executive).
(b) Incentive Bonus; Other Bonuses. In addition to his Base
Salary, for each year of the Employment Period, the Company may pay Executive,
in the discretion of the Board or the Compensation Committee of the Board, an
incentive bonus (the "Incentive Bonus") in an amount of up to fifty percent
(50%) of his Base Salary payable in accordance with the terms of an incentive
plan to be established by the Compensation Committee of the Board.
(c) Other Benefit Plans and Fringe Benefits. The Executive
shall be eligible to participate (subject to any applicable waiting periods) in
all employee benefit plans (including, but not limited to, medical, long-term
disability and life insurance plans) maintained by the Company for the benefit
of senior executives of the Company during the Employment Period and to receive
all fringe benefits available generally to senior executives of the Company. The
Company shall be entitled, at its expense, to arrange for the purchase of "key
man" insurance on the Executive's life in an amount determined by the Board, and
the Executive shall reasonably cooperate with the Company in procuring such
insurance.
(d) Automobile Allowance. The Executive shall be entitled
to receive an automobile allowance of six hundred dollars ($600) each month,
payable in cash without the need for the Executive to submit any documentation.
(e) Stock Options. The Board of Directors of the Company or
the Compensation Committee thereof shall grant to the Executive options to
purchase shares of common stock of the Company ("Common Stock") pursuant to the
terms of the Amended and Restated 1995 Incentive Compensation Plan of the
Company, as amended from time to time (the "Plan"), which options (when taken
together with other options previously granted to Executive) shall be at least
equivalent in number of options granted to other senior executive officers of
the Company and shall otherwise be consistent with the vesting terms of the
options granted the Executive in 1998.
(f) Expenses. The Executive shall be entitled to
reimbursement for all reasonable travel and other out-of-pocket expenses
incurred in the performance of his duties hereunder ("Reimbursable Expenses"),
upon submission and approval of written statements and bills in accordance with
the regular expense reimbursement policies and procedures of the Company.
-2-
<PAGE> 3
4. Termination.
(a) For Death and Disability. The Executive's employment
hereunder shall terminate upon his death, and may be terminated by the Company
upon notice to Executive due to Disability. For purposes hereof, "Disability"
shall mean a physical or mental incapacity that renders the Executive unable to
fully discharge his duties hereunder (i) for a period of six (6) consecutive
months, or (ii) for shorter consecutive periods aggregating six months in any
period of twelve (12) consecutive months, or (iii) if, prior to the expiration
of either such six (6) month period, Executive's attending physician provides
the Company with a written prognosis that the illness, injury or other
incapacity that results in Executive's current disabled condition is reasonably
expected to prevent Executive from fully discharging the substantial and
material duties of his then current position of employment with the Company for
a period of at least six (6) consecutive months.
(b) For Cause or Without Cause. The Company may terminate
the Executive's employment hereunder at any time for Cause or without Cause. For
purposes of this Agreement, "Cause" shall mean: (A) Executive's conviction of,
or plea of guilty to, any act of fraud, misappropriation or embezzlement, or any
felony, (B) gross negligence, gross misconduct or dishonest activities by the
Executive in the discharge of his duties hereunder, or (C) the Executive's
willful and continuous failure to substantially perform his duties hereunder
(other than as a result of physical or mental illness) after written notice by
the Company to the Executive of his failure, specifying the particular act or
acts or failure to act that is the basis of such notice, and the Executive fails
to substantially correct such breach within fourteen (14) business days of his
receipt of such notice or (D) Executive's repeated engaging in conduct or
activities materially damaging to the Company, monetarily or otherwise (it being
understood, however, that neither conduct nor activities pursuant to Executive's
exercise of his good faith business judgment nor unintentional physical damage
to any property of the Company by Executive shall be a ground for such
determination by the Company). Prior to any termination hereunder, Executive
shall be given an opportunity to make a presentation to the Board at a meeting
of the Board. Following such meeting, the Board shall determine by a majority
vote whether to terminate Executive's services for "Cause" pursuant to this
Section and shall notify Executive in writing of its determination promptly,
specifying a date of termination in such notice.
(c) For Good Reason. The Executive may terminate his
employment hereunder for Good Reason. For purposes of this Agreement, "Good
Reason" shall mean and shall be deemed to exist if, without the prior written
consent or waiver of the Executive, (i) the Executive is assigned duties or
responsibilities by the Board that are inconsistent in any material respect with
the scope of the duties and responsibilities associated with his title as Chief
Executive Officer and, within ten (10) days following written notice by
Executive to the Board of Executive's objection to such duties or
responsibilities pursuant to this Section 4(c), the Board has not withdrawn such
assigned duties or responsibilities; (ii) the Executive's duties and
responsibilities as Chief Executive Officer are significantly reduced by the
Board and, within ten (10) days following written notice by the Executive to the
Board of Executive's objection to such reduction, the Board fails to reinstate
the Executive's duties and responsibilities so reduced; (iii) the Company's
failure to substantially perform
-3-
<PAGE> 4
any material term or provision of this Agreement (other than isolated,
insubstantial or inadvertent failures not occurring in bad faith and which are
remedied by the Company promptly after receipt of notice thereof given by
Executive), after written notice by the Executive to the Company of such
failure, specifying the particular act or acts or failure to act that is the
basis of such notice, and the Company fails to substantially correct such breach
within ten (10) days of its receipt of such notice, (iv) the Executive's office
location is relocated to one that is more than fifty (50) miles from the
location at which he was based immediately prior to the relocation, (v) the
Company fails to obtain the full assumption of this Agreement by a successor
corporation, or (vi) the Executive is not nominated to the Board.
5. Compensation upon Termination.
(a) For Cause. In the event of termination for Cause, the
Executive shall be entitled to receive, in lieu of any other payments or
benefits, (i) any accrued but unpaid Base Salary, (ii) any amounts due but
unpaid for any prior completed fiscal year, including any Incentive Bonus
actually awarded for such year, and (iii) any unpaid travel and other
out-of-pocket expenses previously and reasonably incurred in the performance of
his duties hereunder ("Reimbursable Expenses"). Any such Base Salary and/or
Reimbursable Expenses shall be promptly paid in a lump sum in cash; any
Incentive Bonus due shall be paid at the same time and in the same manner as
Incentive Bonuses are paid to other executives of the Company for such fiscal
year.
(b) For Death or Disability. If the Executive's employment
hereunder terminates due to death or Disability, in lieu of any payments
hereunder, he shall be entitled to (A) any accrued but unpaid Base Salary earned
through the date of death or Disability, (B) his Base Salary, at the rate in
effect on the date of death or Disability (the date of termination of
employment), as applicable, for twelve (12) months following such date, payable
to the Executive, or his beneficiary or estate, as applicable, (C) any amounts
due but unpaid with respect to any prior completed fiscal year, including any
Incentive Bonus actually awarded for such year, (D) in the case of termination
due to Disability, continue to participate, for twelve (12) months following his
date of Disability, in all employee benefit plans maintained by the Company in
which he was a participant (or shall receive from the Company the economic
equivalent of such coverage in cash). Executive agrees to cooperate with the
Company in securing life and disability insurance coverage to fund, or partially
fund, the Company's obligations under this Section 5(b).
(c) Without Cause or for Good Reason. If the Executive is
terminated by the Company without Cause (which shall include a non-renewal of
this Agreement pursuant to a notice of non-renewal by the Company pursuant to
Section 1 hereof) or the Executive terminates for Good Reason, in lieu of any
other payments or benefits, the Executive shall be entitled to receive, (i) the
sum of one and one-half (1-1/2) times his Base Salary plus one and one-half
(1-1/2) times the Incentive Bonus paid or payable with respect to the
immediately preceding fiscal year, which sum shall be paid over the 18 calendar
month period commencing after the date of his termination of employment (the
"Extended Period") in the same manner as it was paid prior to the Executive's
termination, (ii) continuation, at the
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<PAGE> 5
Company's expense, of the Executive's coverage in any group health plan (which
may be provided by payment of COBRA continuation coverage premiums), life
insurance, long-term disability and other benefit plans or programs, to the
extent permissible under the terms of such plans or law, at the level in effect
on the Executive's date of termination until the end of the Extended Period (or
the economic equivalent of such coverage paid in cash), provided that the last
day of the Extended Period shall be treated as the date of the Executive's
termination of employment solely for the purpose of determining the rights of
the Executive (and his eligible dependents, if any) to the continuation coverage
provided under Section 4980B of the Internal Revenue Code of 1986, as amended
(the "Code"), (iii) all outstanding options previously granted to the Executive
under the Plan that are not vested at the date of termination shall vest and be
exercisable for a period of one year, and (iv) the provisions of Section 8 shall
not apply; provided, however, such payments and benefits pursuant to this
Section 5(c) shall not be due and payable by the Company to Executive if
Executive (i) shall violate the provisions of clauses (i), (ii) or (iii) of
Section 8(b) hereof or (ii) during the Extended Period shall engage in or render
any services to or be employed by any Competing Business (hereinafter defined)
in the Area (hereinafter defined) in the capacity of officer, managerial or
executive employee, director, consultant or shareholder (other than as the owner
of less than five (5%) percent of the shares of a publicly-owned corporation
whose shares are traded on a national securities exchange or in the NASDAQ
National Market System.
(d) Compensation upon Voluntary Termination. If Executive
shall voluntarily resign for other than "Good Reason" (which shall include a
non-renewal of this Agreement pursuant to a notice of non-renewal by the
Executive pursuant to Section 1 hereof), he shall be entitled only to any
accrued but unpaid Base Salary, any Incentive Bonus due and payable for any
prior completed fiscal year and Reimbursable Expenses, through the date of such
resignation or termination, payable in a lump sum in cash as promptly following
such termination.
6. Resignation of Offices and Directorships. Effective upon the
termination of the Executive's employment by the Company, the Executive shall be
deemed to have resigned as an officer, director, trustee and agent, if
applicable, of the Company and its affiliates and shall execute any documents
required by the Company to evidence the same; provided, however, notwithstanding
the foregoing, Executive shall defer any resignation contemplated hereby for a
period of up to 180 days following his termination of employment if requested by
the Company in order to facilitate any notices, filings, approvals or other
procedures necessary or appropriate in connection with Executive's resignation
or the appointment of his successor.
7. Return of Company Property. Upon termination of employment
hereunder or otherwise, Executive shall immediately return all property, which
belongs to the Company.
8. Restrictive Covenants.
(a) The Executive acknowledges that the covenants herein
are necessary to protect the goodwill and other value of the Company and in view
of the unique and essential
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<PAGE> 6
nature of the services the Executive is to perform hereunder, and the
irreparable injury that would befall the Company should the Executive breach
such covenants. The Executive further acknowledges that (i) his services
hereunder are of a special, unique and extraordinary character and that his
position with the Company places him in a position of confidence and trust with
the customers and employees of the Company and allows him access to Confidential
Information (as hereinafter defined), (ii) the type and periods of restrictions
imposed by the covenants in this Section are fair and reasonable and that such
restrictions will not prevent the Executive from earning a livelihood, (iii) the
Company is engaged in the business of developing, owning, acquiring and
operating assisted living facilities and specialty care facilities for the
treatment of individuals suffering from Alzheimer's disease; (iv) the Company
conducts its business activity in and throughout the Area (as hereinafter
defined); and (v) Competing Businesses (as hereinafter defined) are engaged in
businesses like and similar to the business of the Company.
(b) Having acknowledged the foregoing, the Executive
covenants and agrees with the Company that, while he is in the Company's employ
and for a period of eighteen (18) months following his date of termination, he
will not, directly or indirectly:
(i) disclose or use for his own benefit or the benefit of
any other person, except as may be necessary in the performance of his
duties hereunder, any Confidential Information disclosed to the
Executive or of which the Executive became aware by reason of his
employment with or ownership in the Company;
(ii) solicit or divert or appropriate to any Competing
Business, directly or indirectly, on his own behalf or in the service
of or on behalf of any Competing Business, or attempt to solicit or
divert or appropriate to any such Competing Business, within the Area,
any person or entity who was a customer of the Company at any time
during the last twelve (12) months of the Executive's employment
hereunder and with whom the Executive had contact during the term of
his employment;
(iii) employ or attempt to employ or assist anyone else in
employing in any Competing Business in the Area any managerial or key
employee of the Company (whether or not such employment is full time or
is pursuant to a written contract with the Company); and
(iv) for any reason except for (a) termination by the
Company without Cause, (b) termination by Executive for "Good Reason"
or (c) expiration of the Term without renewal pursuant to Section 1
hereof by virtue of notice of non-renewal given by the Company to the
Executive pursuant to such Section, engage in or render any services to
or be employed by any Competing Business in the Area in the capacity of
officer, managerial or executive employee, director, consultant or
shareholder (other than as the owner of less than five (5%) percent of
the shares of a publicity-owned corporation whose shares are traded on
a national securities exchange or in the NASDAQ National Market
System).
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<PAGE> 7
(c) The Executive agrees that, upon the termination of his
employment for any reason whatsoever (whether voluntarily or involuntarily), he
will not take with him or retain without written authorization from the Board,
and he will promptly deliver to the Company, originals and all copies of all
papers, files or other documents containing any Confidential Information and all
other property belonging to the Company and in his possession or under his
control. Notwithstanding the immediately preceding sentence, the Executive shall
be permitted to retain any personal memorabilia belonging to him, notes taken by
him as a member of the Board, or any committee thereof, and any other such
materials which the Executive deems to be of value to him in the event the same
may be needed by the Executive in connection with the defense of any lawsuit,
action or proceeding brought against him for any reason whatsoever.
(d) For purposes of this Agreement, (i) "Area" means a one
hundred (100) mile radius of (1) the Company's principal executive offices or
(2) any assisted care facility owned, managed or operated by the Company at the
time Executive's employment hereunder is terminated; (ii) "Competing Business"
means the business of developing, owning, acquiring or operating (1) living
facilities or specialty assisted care facilities for the treatment of
individuals suffering from Alzheimer's disease and (2) ancillary businesses
substantially similar to those ancillary businesses developed, owned, acquired
or operated by the Company or its subsidiaries during the term of this Agreement
provided that either the projected gross revenues or the projected earnings
before interest, taxes, depreciation and amortization ("EBITDA") of such
ancillary business during the twelve (12) calendar months following the date of
such determination is expected to constitute at least 5% of the consolidated
revenues or EBITDA, respectively, of the Company and its subsidiaries taken as a
whole during such period; and (iii) "Confidential Information" means any and all
data and information relating to the business of the Company (whether or not
constituting a trade secret) that is, has been or will be disclosed to the
Executive or of which the Executive became or becomes aware as a consequence of
or though his relationship with the Company and that has value to the Company
and is not generally known by its competitors. Confidential Information shall
not include any data or information that has been voluntarily disclosed to the
public by the Company (except where such public disclosure has been made without
authorization by the Company), or that has been independently developed and
disclosed by others, or that otherwise enters the public domain through lawful
means. Confidential Information includes, but is not limited to, information
relating to the Company's financial affairs, processes, services, customers,
employees or employees' compensation, research, development, purchasing,
accounting or marketing.
(e) The Executive acknowledges that irreparable loss and
injury would result to the Company upon the breach of any of the covenants in
this Section and that damages arising out of such breach would be difficult to
ascertain. The Executive hereby agrees that, in addition to all other remedies
provided at low or in equity, the Company may petition and obtain from a court
of law or equity both temporary and permanent injunctive relief to prevent a
breach by the Executive of any covenant contained in this Section. The parties
hereto agree that all references to the Company in this Section shall include,
unless the context otherwise requires, all subsidiaries and affiliates of the
Company.
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<PAGE> 8
9. Change of Control
(a) If, on or before the second anniversary of a Change in
Control, (1) the Executive's employment hereunder is terminated by the Company
(or any successor to the Company employing Executive pursuant to this Agreement)
for any reason other than for Cause (which shall include a non-renewal of this
Agreement pursuant to a notice of non-renewal by the Company pursuant to Section
1 hereof), or (2) Executive terminates his employment for Good Reason, then (i)
Section 8 shall not be applicable to the Executive from and after his date of
termination, (ii) the Company shall pay the Executive, in lieu of any other
payments or benefits (other than the benefit afforded by Section 5(c)(iii)
hereof, which shall be operative), an amount equal to (A) the sum of three times
his Base Salary in effect immediately prior to such Change in Control (the
"Prior Base Salary") and three times the amount of his Incentive Bonus paid or
payable with respect to the immediately preceding fiscal year, plus (B) any
accrued but unpaid salary or benefit due and owing as of the date of termination
(including without limitation the value of any Section 9 Options or Alternative
Benefit then due and owing pursuant to Section 9(b) hereof), which amount shall
be payable in a single lump sum in cash within thirty (30) days following the
date of Executive's termination, and (iii) Executive, at the Company's expense,
shall continue to be a participant in any group health plan (which may be
provided by payment of COBRA continuation coverage premiums), and/or life
insurance, long-term disability, or other employee benefit plans maintained by
the Company (or shall receive from the Company the economic equivalent of such
coverage in cash) (at the level in effect on the Executive's date of
termination) for a period of thirty-six months following his date of
termination.
A Change in Control shall mean the happening of any of the following:
(i) Any "person," as such term is used in Section 13(d) and
14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")
(other than the Company or any subsidiary of the Company, or any
trustee or other fiduciary holding securities under an employee benefit
plan of the Company or any subsidiary) becomes the "beneficial owner"
(as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly
or indirectly, of securities of the Company representing forty percent
(40%) or more of the combined voting power of the Company's then
outstanding securities; provided, however, the provisions of this
subparagraph (i) shall not apply (and hence no Change of Control shall
be deemed to arise pursuant to this subparagraph (i)) if the Company
shall be a constituent corporation in a triangular merger if the voting
stock of the Company immediately prior to such merger is converted into
the voting stock of the parent company of the other constituent
corporation in such merger so long as no "person" or "group" (as such
terms are used under Section 13(d) and 14 (d) of the Exchange Act,
whether or not such sections are applicable) is upon the consummation
of such merger the "beneficial owner" (as that term is used under Rules
13d-3 and 13d-5 under the Exchange Act, whether or not such rules are
applicable, except that a "person" or "group" shall be deemed to have
"beneficial ownership" of all share that he or it has the right to
acquire, whether such right is exercisable immediately or only after
the passage of time or otherwise), directly or
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<PAGE> 9
indirectly through one or more intermediaries, of forty percent (40%)
or more of the total voting power represented by all of the voting
stock of such parent company;
(ii) Individuals who at the beginning of then applicable
Original Term or Renewal Term are members of the Board, together with
any new director (other than a director designated by a person who has
entered into an agreement with the Company to effect a transaction
described in clause (i), (iii) or (iv) hereof) whose election by the
Board or nomination by the Board for election by the Company's
shareholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the
beginning of such period or whose election or nomination for election
was previously so approved, shall cease for any reason to constitute at
least a majority of the members of the Board;
(iii) The shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than (x)
a merger or consolidation which would result in the voting securities
of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity or, in the case of a
triangular merger, by being converted into voting securities of the
parent company of the other constituent corporation) more than forty
percent (40%) of the combined voting power of the voting securities of
the Company, such surviving entity or parent company outstanding
immediately after such merger or consolidation or (y) a merger or
consolidation effected to implement a recapitalization of the Company
(or similar transaction) in which no "person" (as defined above in
clause (i)) acquires more than forty percent (40%) of the combined
voting power of the Company's then outstanding securities; or
(iv) The shareholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's
assets or any transaction having a similar effect.
(b) Effective upon any Change in Control (unless otherwise
agreed to by the Company and Executive):
(i) The Company and Executive shall negotiate in good faith
with respect to an increase to the Base Salary then in effect if such
an adjustment is necessary to bring the overall compensation package
payable to Executive following such Change in Control (taking into
account the scope of operations of the Company following such Change in
Control) in line with overall compensation packages payable to chief
executive officers of comparable companies within the Company's
business segment. If within sixty (60) days following such Change in
Control the Company and the Executive shall be unable to agree upon the
appropriateness of an increase in Base Salary as contemplated by this
Section 9(b)(i) or the amount of such increase, then the determination
with respect thereto shall be made by the Compensation Committee of
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<PAGE> 10
the Board of Directors of the Company as constituted immediately prior
to such Change in Control;
(ii) Provided that either (A) the Company or any successor
to the Company (the "Surviving Corporation") shall continue to have
shares of their respective common stock publicly traded on any national
stock exchange or NASDAQ following such Change in Control or (B) in the
event that upon such Change in Control the Company (or its successor by
merger) shall become a wholly-owned, first-tier subsidiary of any other
corporation (the "Parent") that has shares of common stock publicly
traded on any national stock exchange or NASDAQ at the time of such
Change in Control (as a result of a triangular merger or otherwise),
then, in the event that clause (A) of Section 9(b)(ii) shall be
applicable, the Surviving Corporation shall have an obligation to
grant, or, in the event that clause (B) of Section 9(b)(ii) shall be
applicable, the Surviving Corporation shall have an obligation to cause
its Parent to grant, stock options to Executive from time to time
during the remaining Employment Period after such Change in Control in
such amounts, upon such terms and with such frequency as are consistent
with stock option grants to Executive during the three year period
prior to such Change in Control ("Section 9 Options"); and
(iii) In the event that neither clause (A) nor (B) of Section
9(b)(ii) shall be applicable and the Surviving Corporation elects not
to grant, or to cause its Parent to grant, Section 9 Options, then the
Executive shall not be entitled to be granted Section 9 Options but the
Executive shall be entitled to receive a compensation benefit from the
Surviving Corporation that is substantially equivalent in value to the
Section 9 Options (the "Alternative Benefit"), which Alternative
Benefit shall be "earned" or vested on terms that are equivalent to the
vesting provisions of stock options granted to Executive during the
three year period prior to such Change in Control.
(c) Anything in this Agreement to the contrary
notwithstanding, in the event that the Company's independent public accountants
determine that any payment by the Company to or for the benefit of Executive,
whether paid or payable pursuant to the terms of this Agreement or otherwise,
would not be deductible by the Company for federal income tax purposes because
of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"),
then the amount payable to or for the benefit of Executive shall be reduced (but
not below zero) to an amount that maximizes the amount payable to Executive
without causing any portion of the payment to be non-deductible by the Company
because of Section 280G of the Code.
10. Arbitration. Any and all disputes or controversies arising out
of or relating to this Agreement, shall be resolved by arbitration at the office
of the American Arbitration Association nearest to the Company's executive
offices at such time before a panel of three arbitrators under the then existing
rules and regulations of the American Arbitration Association. The parties agree
that in any such arbitration, the arbitrators shall not have the power to reform
or modify this Agreement in any way and to that extent their powers are so
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<PAGE> 11
limited. The determination of the arbitrators shall be final and binding on the
parties hereto and judgment on it may be entered in any court of competent
jurisdiction. Except as required by law or as determined to be appropriate
disclosure by the Company under applicable securities laws or stock exchange
regulations, neither the Company nor Executives shall issue any press release or
make any statement which is reasonably foreseeable to become public with respect
to any arbitration or dispute between the parties without receiving the prior
written consent of the other party to the content of such press release or
statement. The Company and the Executive shall share the cost of the arbitration
proceeding equally.
11. Miscellaneous.
(a) Binding Effect. This Agreement shall inure to the
benefit of and shall be binding upon the Executive, his executor, administrator,
heirs, personal representatives and assigns, and upon the company and its
successors and assigns; provided that the obligations and duties of the
Executive may not be assigned or delegated.
(b) Governing Law. This Agreement shall be deemed to be
made in, and in all respects shall be interpreted, construed and governed by and
in accordance with, the laws of the State of Wisconsin, without giving effect to
principles of conflicts of laws.
(c) Invalid Provisions. The parties hereto agree that the
agreements, provisions and covenants contained in this Agreement (including,
without limitation, the agreements, provisions and covenants contained in
Section 8 hereof) are several and divisible, that none of such agreements,
provisions or covenants depends upon any other provision, agreement or covenant
for its enforceability, and that each such agreement, provision, and covenant
constitutes an enforceable obligation between the Company and the Executive.
Consequently, the parties hereto agree that neither the invalidity nor the
unenforceability of any agreement, provision or covenant of this Agreement shall
affect the other agreements, provisions or covenants hereof, and this Agreement
shall remain in full force and effect and be construed in all respects as if
such invalid or unenforceable agreement, provision or covenant were omitted.
(d) Assignment. Except as otherwise provided in this
Section, this Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, representatives, successors and
assigns. This Agreement shall not be assignable by the Executive, and shall be
assignable by the Company only to any corporation or other entity resulting from
the reorganization, merger or consolidation of the Company with any other
corporation or entity or any corporation or entity to or with which the
Company's business or substantially all of its business or assets may be sold,
exchanged or transferred, and it must be so assigned by the Company to, and
accepted as binding upon it by, such other corporation or entity in connection
with any such reorganization, merger, consolidation, sale, exchange or transfer
(the provisions of this sentence also being applicable to the successive such
transaction).
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<PAGE> 12
(e) Headings. The section and paragraph headings contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning of interpretation of this Agreement.
(f) No Mitigation; No Offset. In the event of the
Executive's termination of employment, he shall be under no obligation to seek
other employment and there shall be no offset against any amounts due to the
Executive hereunder on account of any remuneration the Executive may obtain from
any subsequent employment. Any amounts due the Executive hereunder are in the
nature of liquidated damages, and not in the nature of a penalty.
(g) Legal Fees. Each party hereto shall be responsible for
its legal fees incurred in connection wherewith; provided, however, that the
Company shall reimburse the Executive for legal fees and expenses incurred by
Executive in connection with the preparation of this Agreement in an amount not
to exceed $25,000.00.
(h) Notices. All communications provided for hereunder
shall be in writing and shall be deemed to be given when delivered in person or
deposited in the United States mail, first class, registered mail, return
receipt requested, with proper postage prepaid, and
If to the Executive, addressed to:
William F. Lasky
1213 East Goodrich Lane
Fox Point, Wisconsin 53217
If to the Company, addressed to:
Alternative Living Services, Inc.
450 N. Sunnyslope Road
Suite 300
Brookfield, Wisconsin 53005
Attn: Corporate Secretary and Chairman of the
Compensation Committee of the Board of
Directors
with a copy to:
Rogers & Hardin LLP
2700 International Tower, Peachtree Center
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attn: Alan C. Leet, Esq.
or at such other place or places or to such other person or persons as shall be
designated in writing by the parties hereto in the manner provided above for
notices.
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<PAGE> 13
(i) Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument.
(j) Waiver. The waiver by either party hereto of a breach
of any provision, agreement or covenant of this Agreement by the other party
hereto shall not operate or be construed as a waiver of any price or subsequent
breach of the same or any other provision, agreement or covenant by such other
party hereto.
(k) Entire Agreement. This Agreement is intended by the
parties hereto to be the final expression of their agreement and is the complete
and exclusive statement thereof notwithstanding any representation or statements
to the contrary heretofore made. This Agreement may be modified only by written
instrument signed by each of the parties hereto.
IN WITNESS WHEREOF, the Executive has duly executed, and the Company
has caused this Agreement to be duly executed by its duly authorized officer,
and the parties have caused this Agreement to be delivered, all as of the day
and year first written above.
ALTERNATIVE LIVING SERVICES, INC.
By: /s/Thomas E. Komula
---------------------------------
Its: Senior Vice President
---------------------------------
EXECUTIVE:
/s/ William F. Lasky
------------------------------------
WILLIAM F. LASKY
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<PAGE> 1
EXHIBIT 10.8
BRIDGE LOAN AGREEMENT
This Agreement, dated as of December 31, 1998, is entered into among
Third Party Investors I, L.L.C., a Delaware limited liability company
("Borrower"), and Alternative Living Services, Inc., a Delaware corporation
("Lender").
W I T N E S S E T H:
WHEREAS, Borrower has requested that Lender make loans to Borrower
in the aggregate amount of up to $30,000,000.00; and
WHEREAS, Lender is willing to make the loans to Borrower on the terms
and subject to the conditions set forth below.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
In addition to the terms defined elsewhere in this Agreement, the
following terms shall have the meanings indicated for purposes of this Agreement
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined).
"Agreement" shall mean this Loan Agreement.
"Borrower" shall mean Third Party Investors I, LLC, a Delaware limited
liability company.
"Business Day" shall mean a day on which national banks are open for
the transaction of business required for this Agreement in Milwaukee, Wisconsin.
"Closing Date" shall mean the date of this Agreement.
"Development Agreement" shall mean any development agreement entered
into by Lender and Borrower, as contemplated by Section 5.5 of the Operating
Agreement of Borrower dated as of December 31, 1998.
"Equity Pledge Agreement" shall mean that certain Equity Pledge
Agreement dated as of the date hereof between the holders of all member
interests in the Borrower (other than the Lender), as Pledgor, and Lender, as
Pledgee.
<PAGE> 2
"Event of Default" shall mean any of the events specified in Section
7.1 hereof, provided that any requirement for notice or passage of time has been
satisfied.
"Lender" shall mean Alternative Living Services, Inc., a Delaware
corporation.
"Loan" and "Loans" shall have the meanings set forth in Section 2.1
hereof.
"Loan Documents" shall mean the Note, the Equity Pledge Agreement and
any other documents executed by Borrower or its members with or for the benefit
of Lender in connection with this Agreement or the Loans.
"Management Agreement" shall mean any assisted living consultant and
management services agreement entered into by Lender and Borrower, as
contemplated by Section 5.6 of the Operating Agreement of Borrower dated as of
December 31, 1998.
"Material Adverse Effect" shall mean any act, omission or undertaking
which would, singly or in the aggregate, have (or reasonably be expected to
have) a material adverse effect upon the business, assets, liabilities,
financial condition or results of operations of a Person.
"Mortgage Financing Date" shall have the meaning set forth in Section
2.1(d).
"Note" shall mean the Bridge Loan Note, dated as of the date hereof, in
the aggregate principal amount of $30,000,000.00, made by Borrower to the order
of Lender and delivered to Lender pursuant to Section 2.1(c) hereof.
"Person" shall mean an individual, corporation, limited liability
company, partnership, trust or unincorporated organization, or a government or
any agency or political subdivision thereof.
"Taxes" shall mean, with respect to any Person, taxes, assessments or
other governmental charges or levies imposed upon such Person, its income or any
of its properties or assets.
"Unmatured Event of Default" shall mean any event or condition which,
with the lapse of time or giving of notice to Borrower contemplated hereby,
would constitute an Event of Default.
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<PAGE> 3
ARTICLE II
COMMITMENT TO LEND, BORROWING PROCEDURES, ETC.
Section 2.1 Loans
(a) Amount. Lender agrees, from the Closing Date until the Maturity
Date and upon the terms and conditions herein set forth (including, without
limitation, in Section 2.6 hereof), to make a loan or loans to Borrower in the
aggregate principal amount of up to Thirty Million Dollars ($30,000,000.00) (the
"Commitment") (each such loan in herein referred to as the "Loan," all such
loans are herein referred to as "Loans," and the aggregate amount of all such
Loans outstanding from time to time, the "Loan Amount"). Borrower shall repay
all outstanding Loans on the Maturity Date, or such earlier date if payment of
the Loans are accelerated in accordance herewith.
(b) Borrowings. In the event that Borrower shall elect to borrow
pursuant hereto, the Borrower shall give written notice to the Lender not later
than three (3) Business Days prior to the proposed date of such borrowing. Each
such notice of borrowing shall be by telecopy, promptly confirmed by letter, and
shall specify therein: (i) the date of such proposed borrowing, which shall be a
Business Day; (ii) the amount of such proposed borrowing which, when aggregated
together with the amount of all Loans made prior to such borrowing, shall not
exceed the Commitment; and (iii) the bank account or accounts to which the
proceeds of such Loan should be paid by Lender; provided, however, that in the
event that any amounts are due and owing to the Lender or any of its
subsidiaries pursuant to any such Management Agreements or Development
Agreements, then Lender shall be entitled (with the consent of the Lender, not
to be unreasonably withheld) to effect borrowings hereunder, upon Borrower's
behalf, in order to make payments of such amounts due from Borrower under any
such Management Agreements or Development Agreements, in which event Lender
shall give notice to Borrower of such Loan having been made pursuant to this
proviso of Section 2.1(b).
(c) Bridge Loan Note. The obligations of Borrower to repay the Loans
shall be evidenced by Borrower's promissory note in the form attached hereto as
Exhibit A, dated the Closing Date and payable to the order of Lender for the
principal sum of $30,000,000.00, or such Loan Amount as shall be outstanding
hereunder from time to time, with interest as therein provided. Absent manifest
error, the Lender's records with respect to Loans and the aggregate outstanding
Loan Amount shall be conclusive as to amounts owed Lender under the Note and
this Agreement.
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<PAGE> 4
(d) Payments. Unless payment of the Loans are accelerated upon
occurrence of an Event of Default pursuant to Section 7.2 hereof, the aggregate
outstanding principal amount of the Loans, together with all accrued interest
thereon, shall be due and payable on the first to occur of (i) the date upon
which the Borrower shall first incur any mortgage indebtedness (such date, the
"Mortgage Financing Date") or (ii) September 30, 1999 (such first to occur date,
the "Maturity Date").
(e) Interest Rate. The Loans shall bear interest, during the period
from and including the date of funding to (but not including) the date the Loans
are paid in full, at the per annum rates set forth in the Note.
Section 2.2 Prepayment.
The principal amount of the Loan may be repaid or prepaid in full or in
part at any time prior to the Maturity Date, without premium or penalty.
Section 2.3 Manner of Payment.
(a) Each payment (including prepayments) by Borrower on account of the
principal or interest on the Loan shall be made on the dates specified for
payment under this Agreement to the Lender in lawful money of the United States
of America in immediately available funds. Any prepayment by Borrower shall set
forth in writing whether the payment is a prepayment of principal under the
Loan.
(b) If any payment under this Agreement shall be specified to be made
upon a day which is not a Business Day, it shall be made on the next succeeding
day which is a Business Day, and such extension of time shall in such case be
included in computing interest, if any, in connection with such payment.
(c) If some or less than all amounts due from Borrower are received by
Lender, Lender shall distribute such amounts in the following order of priority:
(i) to the payment of all amounts then due and payable under this Agreement
other than interest or principal; (ii) to the payment of interest then due and
payable on the Loan; and (iii) to the repayment or prepayment of the principal
balance of the Loans.
Section 2.4 Basis of Calculation of Interest.
All interest payable hereunder shall be calculated on the basis of the
360/365 method, which computes a daily amount of interest for a hypothetical
year of 360 days, then multiplies such amount by the actual number of days
elapsed in an interest calculation period.
Section 2.5 Maximum Interest Rate.
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In no event shall the amount of interest due or payable under the Note
exceed the maximum rate of interest allowed by applicable law, and in the event
that any such payment is inadvertently paid by Borrower or inadvertently
received by Lender, then such excess sum shall be credited as a payment of
principal, unless Borrower shall notify Lender, in writing, that Borrower elects
to have such excess sum returned to it forthwith. It is the express intent
hereof that Borrower not pay, and that Lender not receive, directly or
indirectly, in any manner whatsoever, interest in excess of that which would
lawfully be paid by Borrower under applicable law.
Section 2.6 Condition to Funding.
Lender shall have no obligation to fund any portion of the Commitment
on any date to the extent that such funding would cause the outstanding Loan
Amount as of such date to exceed the product of three (3) times the aggregate
amount of Capital Contributions that have been made to Borrower (as such term is
defined in the Operating Agreement of Borrower of even date herewith) through
and including such date.
ARTICLE III
CLOSING DELIVERIES
The following deliveries shall be made simultaneously with the
execution of this Agreement:
Section 3.1 The Note.
Borrower shall deliver to Lender the Note duly executed and dated as of
the Closing Date.
Section 3.2 Equity Pledge Agreement.
The holders of all of the outstanding member interests in the Borrower
(other than the Lender) shall execute and deliver to Lender the Equity Pledge
Agreement dated as of the Closing Date, such agreement to be in form and
substance satisfactory to the Lender. The Borrower, by its execution of the
Equity Pledge Agreement, shall acknowledge the terms and provisions of such
agreement.
Section 3.3 Evidence of Approvals.
Lender shall have received from the Borrower copies of all such
documents and other evidence that it may reasonably request to confirm the
Borrower's authority to enter into the
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Agreement and the transactions contemplated hereby, and to fully perform its
obligations hereunder and thereunder.
Section 3.4 Loan Amount.
Lender shall make the initial disbursement of the Loan Amount to the
extent that any request therefor has been made pursuant to Section 2.2 of this
Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Representations and Warranties.
Borrower hereby represents and warrants that:
(a) Organization; Power; Qualification. Borrower is a Delaware limited
liability company duly organized, validly existing and in good standing under
the laws of the state of Delaware, has the power and authority, to own or lease
and operate its properties and to carry on its businesses as now being and
hereafter proposed to be conducted and is duly qualified and is in good standing
as foreign limited liability company, and is authorized to do business, in each
jurisdiction in which the character of its properties or the nature of its
business requires such qualification or authorization, and on which failure to
so qualify would have a Material Adverse Effect on Borrower.
(b) Execution and Enforceability. This Agreement has been duly executed
and delivered by Borrower, and is, and each of the Loan Documents to which
Borrower is a party is, a legal, valid and binding obligation of Borrower,
enforceable in accordance with its terms, subject, as to enforcement of
remedies, to the following qualifications: (i) an order of specific performance
and an injunction are discretionary remedies, and in particular, may not be
available where damages are considered an adequate remedy at law, and (ii) may
be limited by bankruptcy, insolvency, liquidation, reorganization,
reconstruction and other similar laws effecting enforcement of creditors' rights
generally (insofar as any such law relates to the bankruptcy, insolvency or
similar event of the Borrower).
(c) Authorization. Borrower is duly authorized to execute, deliver and
perform its obligations under this Agreement and the Loan Documents. The
execution, delivery and performance by Borrower of this Agreement and the Loan
Documents do not and will not require any consent or approval of any
governmental agency or authority.
(d) No Conflicts. The execution, delivery and performance by the
Borrower of this Agreement and the Loan Documents (i) do not and will not
conflict with: (A) any provision of law, (B) the Borrower's operating agreement
or the Delaware Limited Liability Company Act,
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(C) any material agreement binding upon Borrower, or (D) any court or
administrative order or decree applicable to Borrower, and (ii) do not and will
not require, or result in, the creation or imposition of any lien on any asset
of Borrower.
ARTICLE V
AFFIRMATIVE COVENANTS
From the date of this Agreement and thereafter until all Loans pursuant
to this Agreement, and all interest thereon, are paid in full, and unless Lender
shall otherwise consent in writing:
Section 5.1 Notices.
Borrower shall notify the Lender in writing of any of the following
immediately upon learning of the occurrence thereof, describing the same and, if
applicable, the steps being taken with respect thereto:
(a) Default. The occurrence of an Event of Default or Unmatured
Event of Default;
(b) Litigation. The institution of any litigation, arbitration
proceeding or governmental proceeding which would constitute a Material Adverse
Effect on the Borrower;
(c) Material Adverse Change. The occurrence of a material adverse
change in the business, operations or financial condition of Borrower; or
(d) Other Events. The occurrence of such other events as the Lender may
from time to time reasonably specify regarding the financial condition of
Borrower.
Section 5.2 Existence.
Borrower shall maintain and preserve its existence as a limited
liability company, and all rights, privileges, licenses, patents, patent rights,
copyrights, trademarks, tradenames, and other authority to the extent material
and necessary for the conduct of its business in the ordinary course as
conducted from time to time.
Section 5.3 Books, Records and Access.
Borrower shall maintain accurate books and records in conformance with
its method of income tax accounting. Within 15 days after receiving written
notice from Lender, Borrower shall permit reasonable access by the Lender to the
books and records of Borrower during normal business hours and permit the Lender
to make reasonable copies of such books and records.
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Section 5.4 Insurance.
Borrower shall maintain insurance to such extent and against such
hazards and liabilities as is commonly maintained by companies similarly
situated.
Section 5.5 Repair.
Borrower shall maintain, preserve and keep its properties in good
repair, working order and condition, and from time to time make all necessary
and proper repairs, renewals, replacements, additions, betterments and
improvements thereto so that at all times the efficiency thereof shall be fully
preserved and maintained except for where the failure to comply with this
Section 5.5, individually or in the aggregate, does not have a Material Adverse
Effect on Borrower.
Section 5.6 Taxes.
Borrower shall pay when due, all of its Taxes, unless and only to the
extent that Borrower is contesting such Taxes in good faith and by appropriate
proceedings and Borrower has set aside in its books reasonable reserves
therefor.
Section 5.7 Compliance.
Borrower shall comply with all statutes and governmental rules and
regulations applicable to it, except where the failure to comply with this
Section 5.7, individually or in the aggregate, does not have a Material Adverse
Effect on the Borrower.
ARTICLE VI
NEGATIVE COVENANTS
From the date of this Agreement and thereafter until the Loan Amount,
and all interest thereon, is paid in full, and unless Lender shall otherwise
consent in writing:
Section 6.1 Liquidation, Merger or Sale.
Borrower shall not, without the prior written consent of Lender:
(a) liquidate or dissolve itself (or suffer any liquidation or
dissolution) or otherwise windup its affairs;
(b) sell, lease, abandon, transfer or otherwise dispose of any real
property or of any personal property having a value of in excess of $25,000; or
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(c) be party to any merger or consolidation.
Section 6.2 Liens.
Borrower shall not create, incur or suffer to exist, any lien
(including, without limitation, any pledge, assignment, mortgage, title
retaining contract or other type of security interest) to exist on any of the
assets or property (real, personal or mixed, tangible or intangible) of the
Borrower, other than:
(i) Liens for Taxes not delinquent or for Taxes being contested
in good faith by appropriate proceedings and as to which adequate
financial reserves have been established on Borrower's books and
records;
(ii) Liens created in connection with workmen's compensation,
unemployment insurance, and social security, or to secure the
performance of bids, tenders or contracts (other than for the repayment
of borrowed money), leases, statutory obligations, surety and appeal
bonds, and other obligations of like nature made in the ordinary course
of business;
(iii) Each lien existing on the date hereof; or
(iv) Liens created in connection with purchase money mortgages or
security interests granted to secure the purchase price of assets, the
purchase of which does not violate this Agreement or any instrument
required hereunder.
Section 6.3 Distributions.
Borrower shall not make any distribution, directly or indirectly,
whether in cash or in other property, on account of or for the benefit of its
members, other than payments or distributions to Lender pursuant to this
Agreement, the other Loan Documents, or any other loans made to Borrower by
Lender.
ARTICLE VII
EVENTS OF DEFAULT & REMEDIES
Section 7.1 Events of Default.
An Event of Default shall have occurred under this Agreement:
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(a) Non-payment. If Borrower shall default in the payment when due of
any principal of, or interest on, the Loan, and such default shall not be cured
within three (3) Business Days following notice thereof from Lender.
(b) Insolvency. If Borrower becomes insolvent, or generally fails to
pay, or admits in writing its inability to pay, its debts as they mature, or
applies for, consents to, or acquiesces in, the appointment of a trustee,
receiver or other custodian for Borrower or for a substantial part of the
property of Borrower, or makes a general assignment for the benefit of
creditors; or, in the absence of such application, consent or acquiescence, a
trustee, receiver or other custodian is appointed for Borrower or for a
substantial part of the property of the Borrower and is not discharged within
sixty days; or any bankruptcy, reorganization, debt arrangement or other
proceeding under any bankruptcy or insolvency law, or any dissolution or
liquidation proceeding, is instituted by or against Borrower and, if instituted
against Borrower, is consented to or acquiesced in by Borrower or remains for
sixty days undismissed; or any warrant of attachment or similarly legal process
is issued against any substantial part of the property of Borrower which is not
released within sixty days of service.
(c) Representations and Warranties. If any representation or warranty
made under this Agreement or any statement in any certificate given by Borrower
hereunder shall be untrue, incorrect or misleading in any material respect when
made or given.
(d) Covenants. If Borrower shall default in the performance or
observance of any covenant set forth in Article V or Article VI hereof and, with
respect to any covenant set forth in Section 5.1, 5.3, 5.4, 5.5, 5.6, or 5.7,
such default shall not be cured within thirty (30) days following notice thereof
from Lender to Borrower.
(e) If there is an event of default under any of the Loan Documents,
subject to any applicable period of grace.
(f) Other Obligations. If, subject to any applicable grace period,
Borrower (i) fails to pay any indebtedness or other obligations, direct or
indirect, for borrowed money in an amount in excess of $25,000.00 (other than as
evidenced by this Agreement or the Note) owing by Borrower when due, whether at
maturity, by acceleration or otherwise, or (ii) fails to perform any term,
covenant or agreement on its part to be performed under any agreement or
instrument (other than this Agreement or under the Loan Documents) evidencing or
securing or relating to such indebtedness or other obligations, when required to
be performed, and, if as the result of such failure, the maturity date of such
indebtedness or other obligations has been accelerated.
(g) Judgments. If Borrower fails to satisfy or stay the execution by
appropriate proceedings of any judgment rendered against it in excess of
$25,000.
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Section 7.2 Remedies.
If an Event of Default shall have occurred and shall be continuing,
Lender shall have the right at its option, and in its sole discretion, to
declare all amounts outstanding under the Note and this Agreement to be
immediately due and payable (except that if an event described in Section 7.1(b)
occurs, all amounts outstanding under the Note and this Agreement shall
automatically become immediately due and payable). Lender shall promptly advise
Borrower, in writing, of any such declaration, but failure to do so shall not
impair the effect of such declaration. Lender shall also be entitled to exercise
any and all remedies available to it, at law or equity.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Waiver and Amendments.
No failure or delay on the part of Lender in the exercise of any power
or right, and no course of dealing between Borrower and Lender, shall operate as
a waiver of such power or right, nor shall any single or partial exercise of any
power or right preclude other or further exercise thereof or the exercise of any
other power or right. Remedies provided for herein are cumulative and not
exclusive of any remedies which may be available to the Lender at law or in
equity. No notice to or demand on the Borrower required hereunder or under the
Note shall in any event entitle Borrower to any other or further notice or
demand in similar or other circumstances or constitute a waiver of the right of
Lender to any other or further action and any circumstances without notice or
demand. No amendment, modification or waiver of, or consent with respect to, any
provision of this Agreement or the Note shall in any event be effective unless
the same shall be in writing and signed and delivered by Lender. Any waiver of
any provision of this Agreement or the Note, and any consent to any departure by
Borrower from the terms of any provision of this Agreement or the Note, shall be
effective only in the specific instance and for the specific purpose for which
given.
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Section 8.2 Notices
All notices and other communications required or permitted under this
Agreement shall be in writing and, if mailed by prepaid first-class mail, or
certified mail, return receipt requested, shall be deemed to have been received
on the earlier of the date shown on the receipt or three (3) Business Days after
the post-mark date thereof and, if by telecopy, shall be followed forthwith by
letter and shall be deemed to have been received upon dispatch and
acknowledgment of receipt by the recipient's telecopier machine. In addition,
notices hereunder may be delivered by hand in which event the notice shall be
deemed effective when delivered or by overnight courier, in which event the
Notice shall be deemed delivered the day after it is accepted by the courier for
next day delivery. All notices and other communications under this Agreement
shall be given to the parties hereto at the following addresses:
(i) If to Borrower:
Third Party Investors I, L.L.C.
c/o McDonald Investments, Inc.
250 Pearl Street, N.W.
Grand Rapids, Michigan 49503
Attn: Randall S. Damstra
Fax: (616) 732-3394
with a copy to (which shall not constitute notice):
Hecht & Lentz
333 Bridge, N.W., Suite 330
Grand Rapids, Michigan 49504
Attn: David M. Hecht, Esq.
Fax: (626) 776-7203
(ii) If to Lender:
Alternative Living Services, Inc.
450 N. Sunnyslope Road
Suite 300
Brookfield, Wisconsin 83005
Attn: President and CEO
Fax: 414-789-6677
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with a copy to (which shall not constitute notice):
Rogers & Hardin LLP
229 Peachtree Street, N.E.
2700 International Tower
Atlanta, Georgia 30303
Attn: Alan C. Leet, Esq.
Fax: 404-525-2224
Any party hereto may change the address to which notices shall be
directed under this Section by giving written notice of such change to the other
parties.
Section 8.3 Severability.
Any provision of this Agreement 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 the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
Section 8.4 Governing Law.
This Agreement shall be construed under and governed by the laws of the
state of Wisconsin, without giving effect to its principles of conflicts of
laws.
Section 8.5 Successors and Assigns.
This Agreement shall be binding upon Borrower and Lender and their
respective successors and assigns, and shall inure to the benefit of Borrower
and Lender and their successors and assigns. Neither Borrower nor Lender shall
assign its rights or delegate its duties hereunder without the consent of the
other party.
Section 8.6 Headings.
Headings used in this Agreement are for convenience only and shall not
be used in connection with the interpretation of any provision hereof.
Section 8.7 Counterparts.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which counterparts shall
together constitute one and the same instrument.
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Section 8.8 Expenses.
Borrower agrees to pay, and hold Lender harmless from liability for the
payment of, all reasonable costs and expenses of Lender (including reasonable
fees and expenses of counsel) in connection with any Event of Default or the
enforcement of this Agreement.
[Signature Page Follows.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by the undersigned thereunto duly authorized as of the date first
written above.
ALTERNATIVE LIVING SERVICES, INC.,
a Delaware corporation
By: /s/ Mark W. Ohlendorf
------------------------------------
Title: Senior Vice President
-------------------------------
THIRD PARTY INVESTORS I, L.L.C.
a Delaware limited liability company
By: /s/ Randall S. Damstra
------------------------------------
Title: Manager
-------------------------------
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EXHIBIT 10.9
MANAGEMENT FEE LOAN AGREEMENT
This Agreement, dated as of December 31, 1998, is entered into among
Third Party Investors I, L.L.C., a Delaware limited liability company
("Borrower"), and Alternative Living Services, Inc., a Delaware corporation
("Lender").
W I T N E S S E T H:
WHEREAS, Borrower has requested that Lender make loans to Borrower in
the aggregate amount of up to $1,200,000.00; and
WHEREAS, Lender is willing to make the loans to Borrower on the terms
and subject to the conditions set forth below.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
In addition to the terms defined elsewhere in this Agreement, the
following terms shall have the meanings indicated for purposes of this Agreement
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined).
"Agreement" shall mean this Loan Agreement.
"Borrower" shall mean Third Party Investors I, L.L.C., a Delaware
limited liability company.
"Business Day" shall mean a day on which national banks are open for
the transaction of business required for this Agreement in Milwaukee, Wisconsin.
"Closing Date" shall mean the date of this Agreement.
"Event of Default" shall mean any of the events specified in Section
7.1 hereof, provided that any requirement for notice or passage of time has been
satisfied.
"Lender" shall mean Alternative Living Services, Inc., a Delaware
corporation.
"Loan" and "Loans" shall have the meanings set forth in Section 2.1
hereof.
<PAGE> 2
"Loan Documents" shall mean the Note and any other documents executed
by Borrower or its members with or for the benefit of Lender in connection with
this Agreement or the Loans.
"Management Agreement" shall mean any Assisted Living Consultant and
Management Services Agreement entered into by Lender and Borrower, as
contemplated by Section 5.6 of the Operating Agreement of Borrower dated as of
December 31, 1998.
"Material Adverse Effect" shall mean any act, omission or undertaking
which would, singly or in the aggregate, have (or reasonably be expected to
have) a material adverse effect upon the business, assets, liabilities,
financial condition or results of operations of a Person.
"Note" shall mean the Management Fee Loan Note, dated as of the date
hereof, in the aggregate principal amount of $1,200,000.00, made by Borrower to
the order of Lender and delivered to Lender pursuant to Section 2.1(c) hereof.
"Person" shall mean an individual, corporation, limited liability
company, partnership, trust or unincorporated organization, or a government or
any agency or political subdivision thereof.
"Taxes" shall mean, with respect to any Person, taxes, assessments or
other governmental charges or levies imposed upon such Person, its income or any
of its properties or assets.
"Unmatured Event of Default" shall mean any event or condition which,
with the lapse of time or giving of notice to Borrower contemplated hereby,
would constitute an Event of Default.
ARTICLE II
COMMITMENT TO LEND, BORROWING PROCEDURES, ETC.
Section 2.1 Loans
(a) Amount. Lender agrees, from the Closing Date until the respective
Maturity Dates described in Section 2.1(d) below, and upon the terms and
conditions herein set forth, to make a loan or loans to Borrower in the
aggregate principal amount of up to One Million Two Hundred Thousand Dollars
($1,200,000.00) (the "Commitment") (each such loan in herein referred to as the
"Loan," all such loans are herein referred to as "Loans," and the aggregate
amount of all such Loans outstanding from time to time, the "Loan Amount").
Borrower shall repay all outstanding Loans in installment on the respective
Maturity Dates, or such earlier date if payment of the Loans are accelerated in
accordance herewith.
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<PAGE> 3
(b) Borrowings. As provided in Section 4.1(g) of each Management
Agreement, Borrower shall draw Loans pursuant to this Loan Agreement as and when
required to pay any management fees due to Lender during the period set forth
therein.
(c) Management Fee Loan Note. The obligations of Borrower to repay the
Loans shall be evidenced by Borrower's promissory note in the form attached
hereto as Exhibit A, dated the Closing Date and payable to the order of Lender
for the principal sum of $1,200,000.00, or such Loan Amount as shall be
outstanding hereunder from time to time, with interest as therein provided.
Absent manifest error, the Lender's records with respect to Loans and the
aggregate outstanding Loan Amount shall be conclusive as to amounts owed Lender
under the Note and this Agreement.
(d) Payments. Unless payment of the Loans are accelerated upon
occurrence of an Event of Default pursuant to Section 7.2 hereof, the aggregate
outstanding principal amount of the Loans, together with all accrued interest
thereon, shall be due and payable in installments such that each portion thereof
drawn to pay any management fee to Lender pursuant to Section 4.1(g) of any of
those certain Assistant Living Consultant and Management Services Agreements
between Borrower and Lender of even date herewith (the "Management Agreements")
shall be repaid by Borrower upon the first to occur of (i) the first anniversary
date of the opening of the facility to which such Management Agreement relates,
and (ii) the date on which such Facility first reaches a ninety-five percent
(95%) resident occupancy level (such first to occur date with respect to each
installment payment, the respective "Maturity Date").
(e) Interest Rate. Each Loan shall be non-interest bearing through the
Maturity Date thereof, but thereafter through the date the Loans are paid in
full, the Loans shall bear interest at the per annum default rate set forth in
the Note.
Section 2.2 Prepayment.
The principal amount of the Loan may be repaid or prepaid in full or in
part at any time prior to the Maturity Date, without premium or penalty.
Section 2.3 Manner of Payment.
(a) Each payment (including prepayments) by Borrower on account of the
principal or interest on the Loan shall be made on the dates specified for
payment under this Agreement to the Lender in lawful money of the United States
of America in immediately available funds. Any prepayment by Borrower shall set
forth in writing whether the payment is a prepayment of principal under the
Loan.
(b) If any payment under this Agreement shall be specified to be made
upon a day which is not a Business Day, it shall be made on the next succeeding
day which is a Business
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Day, and such extension of time shall in such case be included in computing
interest, if any, in connection with such payment.
(c) If some or less than all amounts due from Borrower are received by
Lender, Lender shall distribute such amounts in the following order of priority:
(i) to the payment of all amounts then due and payable under this Agreement
other than interest or principal; (ii) to the payment of interest then due and
payable on the Loan; and (iii) to the repayment or prepayment of the principal
balance of the Loans.
Section 2.4 Basis of Calculation of Interest.
All interest payable hereunder shall be calculated on the basis of the
360/365 method, which computes a daily amount of interest for a hypothetical
year of 360 days, then multiplies such amount by the actual number of days
elapsed in an interest calculation period.
Section 2.5 Maximum Interest Rate.
In no event shall the amount of interest due or payable under the Note
exceed the maximum rate of interest allowed by applicable law, and in the event
that any such payment is inadvertently paid by Borrower or inadvertently
received by Lender, then such excess sum shall be credited as a payment of
principal, unless Borrower shall notify Lender, in writing, that Borrower elects
to have such excess sum returned to it forthwith. It is the express intent
hereof that Borrower not pay, and that Lender not receive, directly or
indirectly, in any manner whatsoever, interest in excess of that which would
lawfully be paid by Borrower under applicable law.
ARTICLE III
CLOSING DELIVERIES
The following deliveries shall be made simultaneously with the
execution of this Agreement:
Section 3.1 The Note.
Borrower shall deliver to Lender the Note duly executed and dated as of
the Closing Date.
Section 3.2 Evidence of Approvals.
Lender shall have received from the Borrower copies of all such
documents and other evidence that it may reasonably request to confirm the
Borrower's authority to enter into the Agreement and the transactions
contemplated hereby, and to fully perform its obligations hereunder and
thereunder.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Representations and Warranties.
Borrower hereby represents and warrants that:
(a) Organization; Power; Qualification. Borrower is a Delaware limited
liability company duly organized, validly existing and in good standing under
the laws of the state of Delaware, has the power and authority, to own or lease
and operate its properties and to carry on its businesses as now being and
hereafter proposed to be conducted and is duly qualified and is in good standing
as foreign limited liability company, and is authorized to do business, in each
jurisdiction in which the character of its properties or the nature of its
business requires such qualification or authorization, and on which failure to
so qualify would have a Material Adverse Effect on Borrower.
(b) Execution and Enforceability. This Agreement has been duly executed
and delivered by Borrower, and is, and each of the Loan Documents to which
Borrower is a party is, a legal, valid and binding obligation of Borrower,
enforceable in accordance with its terms, subject, as to enforcement of
remedies, to the following qualifications: (i) an order of specific performance
and an injunction are discretionary remedies, and in particular, may not be
available where damages are considered an adequate remedy at law, and (ii) may
be limited by bankruptcy, insolvency, liquidation, reorganization,
reconstruction and other similar laws effecting enforcement of creditors' rights
generally (insofar as any such law relates to the bankruptcy, insolvency or
similar event of the Borrower).
(c) Authorization. Borrower is duly authorized to execute, deliver and
perform its obligations under this Agreement and the Loan Documents. The
execution, delivery and performance by Borrower of this Agreement and the Loan
Documents do not and will not require any consent or approval of any
governmental agency or authority.
(d) No Conflicts. The execution, delivery and performance by the
Borrower of this Agreement and the Loan Documents (i) do not and will not
conflict with: (A) any provision of law, (B) the Borrower's operating agreement
or the Delaware Limited Liability Company Act, (C) any material agreement
binding upon Borrower, or (D) any court or administrative order or decree
applicable to Borrower, and (ii) do not and will not require, or result in, the
creation or imposition of any lien on any asset of Borrower.
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<PAGE> 6
ARTICLE V
AFFIRMATIVE COVENANTS
From the date of this Agreement and thereafter until all Loans pursuant
to this Agreement, and all interest thereon, are paid in full, and unless Lender
shall otherwise consent in writing:
Section 5.1 Notices.
Borrower shall notify the Lender in writing of any of the following
immediately upon learning of the occurrence thereof, describing the same and, if
applicable, the steps being taken with respect thereto:
(a) Default. The occurrence of an Event of Default or Unmatured Event
of Default;
(b) Litigation. The institution of any litigation, arbitration
proceeding or governmental proceeding which would constitute a Material Adverse
Effect on the Borrower;
(c) Material Adverse Change. The occurrence of a material adverse
change in the business, operations or financial condition of Borrower; or
(d) Other Events. The occurrence of such other events as the Lender may
from time to time reasonably specify regarding the financial condition of
Borrower.
Section 5.2 Existence.
Borrower shall maintain and preserve its existence as a limited
liability company, and all rights, privileges, licenses, patents, patent rights,
copyrights, trademarks, trade names, and other authority to the extent material
and necessary for the conduct of its business in the ordinary course as
conducted from time to time.
Section 5.3 Books, Records and Access.
Borrower shall maintain accurate books and records in conformance with
its method of tax accounting. Within 15 days after receiving written notice from
Lender, Borrower shall permit reasonable access by the Lender to the books and
records of Borrower during normal business hours and permit the Lender to make
reasonable copies of such books and records.
Section 5.4 Insurance.
Borrower shall maintain insurance to such extent and against such
hazards and liabilities as is commonly maintained by companies similarly
situated.
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<PAGE> 7
Section 5.5 Repair.
Borrower shall maintain, preserve and keep its properties in good
repair, working order and condition, and from time to time make all necessary
and proper repairs, renewals, replacements, additions, betterments and
improvements thereto so that at all times the efficiency thereof shall be fully
preserved and maintained except for where the failure to comply with this
Section 5.5, individually or in the aggregate, does not have a Material Adverse
Effect on Borrower.
Section 5.6 Taxes.
Borrower shall pay when due, all of its Taxes, unless and only to the
extent that Borrower is contesting such Taxes in good faith and by appropriate
proceedings and Borrower has set aside in its books reasonable reserves
therefor.
Section 5.7 Compliance.
Borrower shall comply with all statutes and governmental rules and
regulations applicable to it, except where the failure to comply with this
Section 5.7, individually or in the aggregate, does not have a Material Adverse
Effect on the Borrower.
ARTICLE VI
NEGATIVE COVENANTS
From the date of this Agreement and thereafter until the Loan Amount,
and all interest thereon, is paid in full, and unless Lender shall otherwise
consent in writing:
Section 6.1 Liquidation, Merger or Sale.
Borrower shall not, without the prior written consent of Lender:
(a) liquidate or dissolve itself (or suffer any liquidation or
dissolution) or otherwise windup its
affairs;
(b) sell, lease, abandon, transfer or otherwise dispose of any real
property or of any personal property having a value of in excess of $25,000; or
(c) be party to any merger or consolidation.
Section 6.2 Liens.
Borrower shall not create, incur or suffer to exist, any lien
(including, without limitation, any pledge, assignment, mortgage, title
retaining contract or other type of security
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<PAGE> 8
interest) to exist on any of the assets or property (real, personal or mixed,
tangible or intangible) of the Borrower, other than:
(i) Liens for Taxes not delinquent or for Taxes being contested
in good faith by appropriate proceedings and as to which adequate
financial reserves have been established on Borrower's books and
records;
(ii) Liens created in connection with workmen's compensation,
unemployment insurance, and social security, or to secure the
performance of bids, tenders or contracts (other than for the repayment
of borrowed money), leases, statutory obligations, surety and appeal
bonds, and other obligations of like nature made in the ordinary course
of business;
(iii) Each lien existing on the date hereof; or
(iv) Liens created in connection with purchase money mortgages or
security interests granted to secure the purchase price of assets, the
purchase of which does not violate this Agreement or any instrument
required hereunder.
Section 6.3 Distributions.
Borrower shall not make any distribution, directly or indirectly,
whether in cash or in other property, on account of or for the benefit of its
members, other than payments or distributions to Lender pursuant to this
Agreement, the other Loan Documents, or any other loans made to Borrower by
Lender.
ARTICLE VII
EVENTS OF DEFAULT & REMEDIES
Section 7.1 Events of Default.
An Event of Default shall have occurred under this Agreement:
(a) Non-payment. If Borrower shall default in the payment when due of
any principal of, or interest on, the Loan, and such default shall not be cured
within three (3) Business Days following notice thereof from Lender.
(b) Insolvency. If Borrower becomes insolvent, or generally fails to
pay, or admits in writing its inability to pay, its debts as they mature, or
applies for, consents to, or acquiesces in, the appointment of a trustee,
receiver or other custodian for Borrower or for a substantial part of the
property of Borrower, or makes a general assignment for the benefit of
creditors; or, in the absence of such application, consent or acquiescence, a
trustee, receiver or other custodian is appointed for Borrower or for a
substantial part of the property of the Borrower
8
<PAGE> 9
and is not discharged within sixty days; or any bankruptcy, reorganization, debt
arrangement or other proceeding under any bankruptcy or insolvency law, or any
dissolution or liquidation proceeding, is instituted by or against Borrower and,
if instituted against Borrower, is consented to or acquiesced in by Borrower or
remains for sixty days undismissed; or any warrant of attachment or similarly
legal process is issued against any substantial part of the property of Borrower
which is not released within sixty days of service.
(c) Representations and Warranties. If any representation or warranty
made under this Agreement or any statement in any certificate given by Borrower
hereunder shall be untrue, incorrect or misleading in any material respect when
made or given.
(d) Covenants. If Borrower shall default in the performance or
observance of any covenant set forth in Article V or Article VI hereof and, with
respect to any covenant set forth in Section 5.1, 5.3, 5.4, 5.5, 5.6, or 5.7,
such default shall not be cured within thirty (30) days following notice thereof
from Lender to Borrower.
(e) If there is an event of default under any of the Loan Documents,
subject to any applicable period of grace.
(f) Other Obligations. If, subject to any applicable grace period,
Borrower (i) fails to pay any indebtedness or other obligations, direct or
indirect, for borrowed money in an amount in excess of $25,000.00 (other than as
evidenced by this Agreement or the Note) owing by Borrower when due, whether at
maturity, by acceleration or otherwise, or (ii) fails to perform any term,
covenant or agreement on its part to be performed under any agreement or
instrument (other than this Agreement or under the Loan Documents) evidencing or
securing or relating to such indebtedness or other obligations, when required to
be performed, and, if as the result of such failure, the maturity date of such
indebtedness or other obligations has been accelerated.
(g) Judgments. If Borrower fails to satisfy or stay the execution by
appropriate proceedings of any judgment rendered against it in excess of
$25,000.
Section 7.2 Remedies.
If an Event of Default shall have occurred and shall be continuing,
Lender shall have the right at its option, and in its sole discretion, to
declare all amounts outstanding under the Note and this Agreement to be
immediately due and payable (except that if an event described in Section 7.1(b)
occurs, all amounts outstanding under the Note and this Agreement shall
automatically become immediately due and payable). Lender shall promptly advise
Borrower, in writing, of any such declaration, but failure to do so shall not
impair the effect of such declaration. Lender shall also be entitled to exercise
any and all remedies available to it, at law or equity.
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<PAGE> 10
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Waiver and Amendments.
No failure or delay on the part of Lender in the exercise of any power
or right, and no course of dealing between Borrower and Lender, shall operate as
a waiver of such power or right, nor shall any single or partial exercise of any
power or right preclude other or further exercise thereof or the exercise of any
other power or right. Remedies provided for herein are cumulative and not
exclusive of any remedies which may be available to the Lender at law or in
equity. No notice to or demand on the Borrower required hereunder or under the
Note shall in any event entitle Borrower to any other or further notice or
demand in similar or other circumstances or constitute a waiver of the right of
Lender to any other or further action and any circumstances without notice or
demand. No amendment, modification or waiver of, or consent with respect to, any
provision of this Agreement or the Note shall in any event be effective unless
the same shall be in writing and signed and delivered by Lender. Any waiver of
any provision of this Agreement or the Note, and any consent to any departure by
Borrower from the terms of any provision of this Agreement or the Note, shall be
effective only in the specific instance and for the specific purpose for which
given.
Section 8.2 Notices
All notices and other communications required or permitted under this
Agreement shall be in writing and, if mailed by prepaid first-class mail, or
certified mail, return receipt requested, shall be deemed to have been received
on the earlier of the date shown on the receipt or three (3) Business Days after
the post-mark date thereof and, if by telecopy, shall be followed forthwith by
letter and shall be deemed to have been received upon dispatch and
acknowledgment of receipt by the recipient's telecopier machine. In addition,
notices hereunder may be delivered by hand in which event the notice shall be
deemed effective when delivered or by overnight courier, in which event the
Notice shall be deemed delivered the day after it is accepted by the courier for
next day delivery. All notices and other communications under this Agreement
shall be given to the parties hereto at the following addresses:
(i) If to Borrower:
Third Party Investors I, L.L.C.
c/o McDonald Investments, Inc.
250 Pearl Street, N.W.
Grand Rapids, Michigan 49503
Attn: Randall S. Damstra
Fax: (616) 732-3394
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<PAGE> 11
with a copy to (which shall not constitute notice):
Hecht & Lentz
333 Bridge, N.W., Suite 330
Grand Rapids, Michigan 49504
Attn: David M. Hecht, Esq.
Fax: (626) 776-7203
(ii) If to Lender:
Alternative Living Services, Inc.
450 N. Sunnyslope Road
Suite 300
Brookfield, Wisconsin 83005
Attn: President and CEO
Fax: 414-789-6677
with a copy to (which shall not constitute notice):
Rogers & Hardin LLP
229 Peachtree Street, N.E.
2700 International Tower
Atlanta, Georgia 30303
Attn: Alan C. Leet, Esq.
Fax: 404-525-2224
Any party hereto may change the address to which notices shall be
directed under this Section by giving written notice of such change to the other
parties.
Section 8.3 Severability.
Any provision of this Agreement 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 the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
Section 8.4 Governing Law.
This Agreement shall be construed under and governed by the laws of the
state of Wisconsin, without giving effect to its principles of conflicts of
laws.
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<PAGE> 12
Section 8.5 Successors and Assigns.
This Agreement shall be binding upon Borrower and Lender and their
respective successors and assigns, and shall inure to the benefit of Borrower
and Lender and their successors and assigns. Neither Borrower nor Lender shall
assign its rights or delegate its duties hereunder without the consent of the
other party.
Section 8.6 Headings.
Headings used in this Agreement are for convenience only and shall not
be used in connection with the interpretation of any provision hereof.
Section 8.7 Counterparts.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which counterparts shall
together constitute one and the same instrument.
Section 8.8 Expenses.
Borrower agrees to pay, and hold Lender harmless from liability for the
payment of, all reasonable costs and expenses of Lender (including reasonable
fees and expenses of counsel) in connection with any Event of Default or the
enforcement of this Agreement.
[Signature Page Follows]
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<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by the undersigned thereunto duly authorized as of the date first
written above.
ALTERNATIVE LIVING SERVICES, INC.,
a Delaware corporation
By: /s/ Mark W. Ohlendorf
------------------------------------------------------
Title: Senior Vice President
----------------------------------------------
THIRD PARTY INVESTORS I, L.L.C.
a Delaware limited liability company
By: /s/ Randall S. Damstra
------------------------------------------------------
Title: Manager
-----------------------------------------------
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<PAGE> 1
EXHIBIT 10.10
WORKING CAPITAL LOAN AGREEMENT
This Agreement, dated as of December 31, 1998, is entered into among
Third Party Investors I, L.L.C., a Delaware limited liability company
("Borrower"), and Alternative Living Services, Inc., a Delaware corporation
("Lender").
W I T N E S S E T H:
WHEREAS, Borrower has requested that Lender make loans to Borrower in
the aggregate amount of up to $800,000.00; and
WHEREAS, Lender is willing to make the loans to Borrower on the terms
and subject to the conditions set forth below.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
In addition to the terms defined elsewhere in this Agreement, the
following terms shall have the meanings indicated for purposes of this Agreement
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined).
"Agreement" shall mean this Loan Agreement.
"Borrower" shall mean Third Party Investors I, L.L.C., a Delaware
limited liability company.
"Business Day" shall mean a day on which national banks are open for
the transaction of business required for this Agreement in Milwaukee, Wisconsin.
"Closing Date" shall mean the date of this Agreement.
"Event of Default" shall mean any of the events specified in Section
7.1 hereof, provided that any requirement for notice or passage of time has been
satisfied.
"Lender" shall mean Alternative Living Services, Inc., a Delaware
corporation.
"Loan" and "Loans" shall have the meanings set forth in Section 2.1
hereof.
<PAGE> 2
"Loan Documents" shall mean the Note and any other documents executed
by Borrower or its members with or for the benefit of Lender in connection with
this Agreement or the Loans.
"Management Agreement" shall mean any Assisted Living Consultant and
Management Services Agreement entered into by Lender and Borrower, as
contemplated by Section 5.6 of the Operating Agreement of Borrower dated as of
December 31, 1998.
"Material Adverse Effect" shall mean any act, omission or undertaking
which would, singly or in the aggregate, have (or reasonably be expected to
have) a material adverse effect upon the business, assets, liabilities,
financial condition or results of operations of a Person.
"Note" shall mean the Management Fee Loan Note, dated as of the date
hereof, in the aggregate principal amount of $800,000.00, made by Borrower to
the order of Lender and delivered to Lender pursuant to Section 2.1(c) hereof.
"Person" shall mean an individual, corporation, limited liability
company, partnership, trust or unincorporated organization, or a government or
any agency or political subdivision thereof.
"Taxes" shall mean, with respect to any Person, taxes, assessments or
other governmental charges or levies imposed upon such Person, its income or any
of its properties or assets.
"Unmatured Event of Default" shall mean any event or condition which,
with the lapse of time or giving of notice to Borrower contemplated hereby,
would constitute an Event of Default.
ARTICLE II
COMMITMENT TO LEND, BORROWING PROCEDURES, ETC.
Section 2.1 Loans
(a) Amount. Lender agrees, from the Closing Date until the respective
Maturity Dates described in Section 2.1(d) below, and upon the terms and
conditions herein set forth, to make a loan or loans to Borrower in the
aggregate principal amount of up to Eight Hundred Thousand Dollars ($800,000.00)
(the "Commitment") (each such loan in herein referred to as the "Loan," all such
loans are herein referred to as "Loans," and the aggregate amount of all such
Loans outstanding from time to time, the "Loan Amount"). Borrower shall repay
all outstanding Loans in installment on the respective Maturity Dates, or such
earlier date if payment of the Loans are accelerated in accordance herewith.
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<PAGE> 3
(b) Borrowings. Borrower shall be entitled to draw Loans pursuant to
this Loan Agreement as and when required to fund the working capital needs of
any of the Initial Projects (as such term is defined in the Operating Agreement
of Borrower of even date herewith), other than to pay any management fees
pursuant to Section 4.1(g) of any of the Management Agreements due to Lender and
funded by Borrower under that certain Management Fee Loan Agreement between the
parties of even date herewith.
(c) Working Capital. The obligations of Borrower to repay the Loans
shall be evidenced by Borrower's promissory note in the form attached hereto as
Exhibit A, dated the Closing Date and payable to the order of Lender for the
principal sum of $800,000.00, or such Loan Amount as shall be outstanding
hereunder from time to time, with interest as therein provided. Absent manifest
error, the Lender's records with respect to Loans and the aggregate outstanding
Loan Amount shall be conclusive as to amounts owed Lender under the Note and
this Agreement.
(d) Payments. Unless payment of the Loans are accelerated upon
occurrence of an Event of Default pursuant to Section 7.2 hereof, the aggregate
outstanding principal amount of the Loans, together with all accrued interest
thereon, shall be due and payable in installments as Borrower sells or otherwise
disposes of Initial Projects (as such term is defined in the Operating Agreement
of Borrower of even date herewith) such that the aggregate Loan Amount of all
outstanding Loans made pursuant to this Agreement shall never exceed the product
of (i) the number of such Initial Projects still owned by Borrower after such
sale or other disposition, times (ii) $100,000.00 (any such sale date with
respect to which any repayment is due hereunder, the respective "Maturity
Date").
(e) Interest Rate. The Loans shall bear interest, during the period
from and including the date of funding to (but not including) the date the Loans
are paid in full, at the per annum rates set forth in the Note.
Section 2.2 Prepayment.
The principal amount of the Loan may be repaid or prepaid in full or in
part at any time prior to the Maturity Date, without premium or penalty.
Section 2.3 Manner of Payment.
(a) Each payment (including prepayments) by Borrower on account of the
principal or interest on the Loan shall be made on the dates specified for
payment under this Agreement to the Lender in lawful money of the United States
of America in immediately available funds. Any prepayment by Borrower shall set
forth in writing whether the payment is a prepayment of principal under the
Loan.
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(b) If any payment under this Agreement shall be specified to be made
upon a day which is not a Business Day, it shall be made on the next succeeding
day which is a Business Day, and such extension of time shall in such case be
included in computing interest, if any, in connection with such payment.
(c) If some or less than all amounts due from Borrower are received by
Lender, Lender shall distribute such amounts in the following order of priority:
(i) to the payment of all amounts then due and payable under this Agreement
other than interest or principal; (ii) to the payment of interest then due and
payable on the Loan; and (iii) to the repayment or prepayment of the principal
balance of the Loans.
Section 2.4 Basis of Calculation of Interest.
All interest payable hereunder shall be calculated on the basis of the
360/365 method, which computes a daily amount of interest for a hypothetical
year of 360 days, then multiplies such amount by the actual number of days
elapsed in an interest calculation period.
Section 2.5 Maximum Interest Rate.
In no event shall the amount of interest due or payable under the Note
exceed the maximum rate of interest allowed by applicable law, and in the event
that any such payment is inadvertently paid by Borrower or inadvertently
received by Lender, then such excess sum shall be credited as a payment of
principal, unless Borrower shall notify Lender, in writing, that Borrower elects
to have such excess sum returned to it forthwith. It is the express intent
hereof that Borrower not pay, and that Lender not receive, directly or
indirectly, in any manner whatsoever, interest in excess of that which would
lawfully be paid by Borrower under applicable law.
ARTICLE III
CLOSING DELIVERIES
The following deliveries shall be made simultaneously with the
execution of this Agreement:
Section 3.1 The Note.
Borrower shall deliver to Lender the Note duly executed and dated as of
the Closing Date.
Section 3.2 Evidence of Approvals.
Lender shall have received from the Borrower copies of all such
documents and other evidence that it may reasonably request to confirm the
Borrower's authority to enter into the
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<PAGE> 5
Agreement and the transactions contemplated hereby, and to fully perform its
obligations hereunder and thereunder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Representations and Warranties.
Borrower hereby represents and warrants that:
(a) Organization; Power; Qualification. Borrower is a Delaware limited
liability company duly organized, validly existing and in good standing under
the laws of the state of Delaware, has the power and authority, to own or lease
and operate its properties and to carry on its businesses as now being and
hereafter proposed to be conducted and is duly qualified and is in good standing
as foreign limited liability company, and is authorized to do business, in each
jurisdiction in which the character of its properties or the nature of its
business requires such qualification or authorization, and on which failure to
so qualify would have a Material Adverse Effect on Borrower.
(b) Execution and Enforceability. This Agreement has been duly executed
and delivered by Borrower, and is, and each of the Loan Documents to which
Borrower is a party is, a legal, valid and binding obligation of Borrower,
enforceable in accordance with its terms, subject, as to enforcement of
remedies, to the following qualifications: (i) an order of specific performance
and an injunction are discretionary remedies, and in particular, may not be
available where damages are considered an adequate remedy at law, and (ii) may
be limited by bankruptcy, insolvency, liquidation, reorganization,
reconstruction and other similar laws effecting enforcement of creditors' rights
generally (insofar as any such law relates to the bankruptcy, insolvency or
similar event of the Borrower).
(c) Authorization. Borrower is duly authorized to execute, deliver and
perform its obligations under this Agreement and the Loan Documents. The
execution, delivery and performance by Borrower of this Agreement and the Loan
Documents do not and will not require any consent or approval of any
governmental agency or authority.
(d) No Conflicts. The execution, delivery and performance by the
Borrower of this Agreement and the Loan Documents (i) do not and will not
conflict with: (A) any provision of law, (B) the Borrower's operating agreement
or the Delaware Limited Liability Company Act, (C) any material agreement
binding upon Borrower, or (D) any court or administrative order or decree
applicable to Borrower, and (ii) do not and will not require, or result in, the
creation or imposition of any lien on any asset of Borrower.
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ARTICLE V
AFFIRMATIVE COVENANTS
From the date of this Agreement and thereafter until all Loans pursuant
to this Agreement, and all interest thereon, are paid in full, and unless Lender
shall otherwise consent in writing:
Section 5.1 Notices.
Borrower shall notify the Lender in writing of any of the following
immediately upon learning of the occurrence thereof, describing the same and, if
applicable, the steps being taken with respect thereto:
(a) Default. The occurrence of an Event of Default or Unmatured Event
of Default;
(b) Litigation. The institution of any litigation, arbitration
proceeding or governmental proceeding which would constitute a Material Adverse
Effect on the Borrower;
(c) Material Adverse Change. The occurrence of a material adverse
change in the business, operations or financial condition of Borrower; or
(d) Other Events. The occurrence of such other events as the Lender may
from time to time reasonably specify regarding the financial condition of
Borrower.
Section 5.2 Existence.
Borrower shall maintain and preserve its existence as a limited
liability company, and all rights, privileges, licenses, patents, patent rights,
copyrights, trademarks, trade names, and other authority to the extent material
and necessary for the conduct of its business in the ordinary course as
conducted from time to time.
Section 5.3 Books, Records and Access.
Borrower shall maintain accurate books and records in conformance with
its method of income tax accounting. Within 15 days after receiving written
notice from Lender, Borrower shall permit reasonable access by the Lender to the
books and records of Borrower during normal business hours and permit the Lender
to make reasonable copies of such books and records.
Section 5.4 Insurance.
Borrower shall maintain insurance to such extent and against such
hazards and liabilities as is commonly maintained by companies similarly
situated.
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<PAGE> 7
Section 5.5 Repair.
Borrower shall maintain, preserve and keep its properties in good
repair, working order and condition, and from time to time make all necessary
and proper repairs, renewals, replacements, additions, betterments and
improvements thereto so that at all times the efficiency thereof shall be fully
preserved and maintained except for where the failure to comply with this
Section 5.5, individually or in the aggregate, does not have a Material Adverse
Effect on Borrower.
Section 5.6 Taxes.
Borrower shall pay when due, all of its Taxes, unless and only to the
extent that Borrower is contesting such Taxes in good faith and by appropriate
proceedings and Borrower has set aside in its books reasonable reserves
therefor.
Section 5.7 Compliance.
Borrower shall comply with all statutes and governmental rules and
regulations applicable to it, except where the failure to comply with this
Section 5.7, individually or in the aggregate, does not have a Material Adverse
Effect on the Borrower.
ARTICLE VI
NEGATIVE COVENANTS
From the date of this Agreement and thereafter until the Loan Amount,
and all interest thereon, is paid in full, and unless Lender shall otherwise
consent in writing:
Section 6.1 Liquidation, Merger or Sale.
Borrower shall not, without the prior written consent of Lender:
(a) liquidate or dissolve itself (or suffer any liquidation or
dissolution) or otherwise windup its affairs;
(b) sell, lease, abandon, transfer or otherwise dispose of any real
property or of any personal property having a value of in excess of $25,000; or
(c) be party to any merger or consolidation.
Section 6.2 Liens.
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<PAGE> 8
Borrower shall not create, incur or suffer to exist, any lien
(including, without limitation, any pledge, assignment, mortgage, title
retaining contract or other type of security interest) to exist on any of the
assets or property (real, personal or mixed, tangible or intangible) of the
Borrower, other than:
(i) Liens for Taxes not delinquent or for Taxes being contested
in good faith by appropriate proceedings and as to which adequate
financial reserves have been established on Borrower's books and
records;
(ii) Liens created in connection with workmen's compensation,
unemployment insurance, and social security, or to secure the
performance of bids, tenders or contracts (other than for the repayment
of borrowed money), leases, statutory obligations, surety and appeal
bonds, and other obligations of like nature made in the ordinary course
of business;
(iii) Each lien existing on the date hereof; or
(iv) Liens created in connection with purchase money mortgages or
security interests granted to secure the purchase price of assets, the
purchase of which does not violate this Agreement or any instrument
required hereunder.
Section 6.3 Distributions.
Borrower shall not make any distribution, directly or indirectly,
whether in cash or in other property, on account of or for the benefit of its
members, other than payments or distributions to Lender pursuant to this
Agreement, the other Loan Documents or any other loans made to Borrower by
Lender.
ARTICLE VII
EVENTS OF DEFAULT & REMEDIES
Section 7.1 Events of Default.
An Event of Default shall have occurred under this Agreement:
(a) Non-payment. If Borrower shall default in the payment when due of
any principal of, or interest on, the Loan, and such default shall not be cured
within three (3) Business Days following notice thereof from Lender.
(b) Insolvency. If Borrower becomes insolvent, or generally fails to
pay, or admits in writing its inability to pay, its debts as they mature, or
applies for, consents to, or acquiesces in, the appointment of a trustee,
receiver or other custodian for Borrower or for a substantial part of the
property of Borrower, or makes a general assignment for the benefit of
creditors;
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or, in the absence of such application, consent or acquiescence, a trustee,
receiver or other custodian is appointed for Borrower or for a substantial part
of the property of the Borrower and is not discharged within sixty days; or any
bankruptcy, reorganization, debt arrangement or other proceeding under any
bankruptcy or insolvency law, or any dissolution or liquidation proceeding, is
instituted by or against Borrower and, if instituted against Borrower, is
consented to or acquiesced in by Borrower or remains for sixty days undismissed;
or any warrant of attachment or similarly legal process is issued against any
substantial part of the property of Borrower which is not released within sixty
days of service.
(c) Representations and Warranties. If any representation or warranty
made under this Agreement or any statement in any certificate given by Borrower
hereunder shall be untrue, incorrect or misleading in any material respect when
made or given.
(d) Covenants. If Borrower shall default in the performance or
observance of any covenant set forth in Article V or Article VI hereof and, with
respect to any covenant set forth in Section 5.1, 5.3, 5.4, 5.5, 5.6 or 5.7,
such default shall not be cured within thirty (30) days following notice thereof
from Lender to Borrower.
(e) If there is an event of default under any of the Loan Documents,
subject to any applicable period of grace.
(f) Other Obligations. If, subject to any applicable grace period,
Borrower (i) fails to pay any indebtedness or other obligations, direct or
indirect, for borrowed money in an amount in excess of $25,000.00 (other than as
evidenced by this Agreement or the Note) owing by Borrower when due, whether at
maturity, by acceleration or otherwise, or (ii) fails to perform any term,
covenant or agreement on its part to be performed under any agreement or
instrument (other than this Agreement or under the Loan Documents) evidencing or
securing or relating to such indebtedness or other obligations, when required to
be performed, and, if as the result of such failure, the maturity date of such
indebtedness or other obligations has been accelerated.
(g) Judgments. If Borrower fails to satisfy or stay the execution by
appropriate proceedings of any judgment rendered against it in excess of
$25,000.
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Section 7.2 Remedies.
If an Event of Default shall have occurred and shall be continuing,
Lender shall have the right at its option, and in its sole discretion, to
declare all amounts outstanding under the Note and this Agreement to be
immediately due and payable (except that if an event described in Section 7.1(b)
occurs, all amounts outstanding under the Note and this Agreement shall
automatically become immediately due and payable). Lender shall promptly advise
Borrower, in writing, of any such declaration, but failure to do so shall not
impair the effect of such declaration. Lender shall also be entitled to exercise
any and all remedies available to it, at law or equity.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Waiver and Amendments.
No failure or delay on the part of Lender in the exercise of any power
or right, and no course of dealing between Borrower and Lender, shall operate as
a waiver of such power or right, nor shall any single or partial exercise of any
power or right preclude other or further exercise thereof or the exercise of any
other power or right. Remedies provided for herein are cumulative and not
exclusive of any remedies which may be available to the Lender at law or in
equity. No notice to or demand on the Borrower required hereunder or under the
Note shall in any event entitle Borrower to any other or further notice or
demand in similar or other circumstances or constitute a waiver of the right of
Lender to any other or further action and any circumstances without notice or
demand. No amendment, modification or waiver of, or consent with respect to, any
provision of this Agreement or the Note shall in any event be effective unless
the same shall be in writing and signed and delivered by Lender. Any waiver of
any provision of this Agreement or the Note, and any consent to any departure by
Borrower from the terms of any provision of this Agreement or the Note, shall be
effective only in the specific instance and for the specific purpose for which
given.
Section 8.2 Notices
All notices and other communications required or permitted under this
Agreement shall be in writing and, if mailed by prepaid first-class mail, or
certified mail, return receipt requested, shall be deemed to have been received
on the earlier of the date shown on the receipt or three (3) Business Days after
the post-mark date thereof and, if by telecopy, shall be followed forthwith by
letter and shall be deemed to have been received upon dispatch and
acknowledgment of receipt by the recipient's telecopier machine. In addition,
notices hereunder may be delivered by hand in which event the notice shall be
deemed effective when delivered or by overnight courier, in which event the
Notice shall be deemed delivered the day after it is accepted by the courier for
next day delivery. All notices and other communications under this Agreement
shall be given to the parties hereto at the following addresses:
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(i) If to Borrower:
Third Party Investors I, L.L.C.
c/o McDonald Investments, Inc.
250 Pearl Street, N.W.
Grand Rapids, Michigan 49503
Attn: Randall S. Damstra
Fax: (616) 732-3394
with a copy to (which shall not constitute notice):
Hecht & Lentz
333 Bridge, N.W., Suite 330
Grand Rapids, Michigan 49504
Attn: David M. Hecht, Esq.
Fax: (626) 776-7203
(ii) If to Lender:
Alternative Living Services, Inc.
450 N. Sunnyslope Road
Suite 300
Brookfield, Wisconsin 83005
Attn: President and CEO
Fax: 414-789-6677
with a copy to (which shall not constitute notice):
Rogers & Hardin LLP
229 Peachtree Street, N.E.
2700 International Tower
Atlanta, Georgia 30303
Attn: Alan C. Leet, Esq.
Fax: 404-525-2224
Any party hereto may change the address to which notices shall be
directed under this Section by giving written notice of such change to the other
parties.
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Section 8.3 Severability.
Any provision of this Agreement 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 the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
Section 8.4 Governing Law.
This Agreement shall be construed under and governed by the laws of the
state of Wisconsin, without giving effect to its principles of conflicts of
laws.
Section 8.5 Successors and Assigns.
This Agreement shall be binding upon Borrower and Lender and their
respective successors and assigns, and shall inure to the benefit of Borrower
and Lender and their successors and assigns. Neither Borrower nor Lender shall
assign its rights or delegate its duties hereunder without the consent of the
other party.
Section 8.6 Headings.
Headings used in this Agreement are for convenience only and shall not
be used in connection with the interpretation of any provision hereof.
Section 8.7 Counterparts.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which counterparts shall
together constitute one and the same instrument.
Section 8.8 Expenses.
Borrower agrees to pay, and hold Lender harmless from liability for the
payment of, all reasonable costs and expenses of Lender (including reasonable
fees and expenses of counsel) in connection with any Event of Default or the
enforcement of this Agreement.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by the undersigned thereunto duly authorized as of the date first
written above.
ALTERNATIVE LIVING SERVICES, INC.,
a Delaware corporation
By: /s/ Mark W. Ohlendorf
------------------------------------------------
Title: Senior Vice President
------------------------------------------
THIRD PARTY INVESTORS I, L.L.C.
a Delaware limited liability company
By: /s/ Randall S. Damstra
------------------------------------------------
Title: Manager
------------------------------------------
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EXHIBIT 10.11
BRIDGE LOAN AGREEMENT
(PHASE II)
This Agreement, dated as of March 31, 1999, is entered into among Third
Party Investors I, L.L.C., a Delaware limited liability company ("Borrower"),
and Alternative Living Services, Inc., a Delaware corporation ("Lender").
W I T N E S S E T H:
WHEREAS, Borrower has requested that Lender make loans to Borrower
in the aggregate amount of up to $35,000,000.00; and
WHEREAS, Lender is willing to make the loans to Borrower on the terms
and subject to the conditions set forth below.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
In addition to the terms defined elsewhere in this Agreement, the
following terms shall have the meanings indicated for purposes of this Agreement
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined).
"Agreement" shall mean this Loan Agreement.
"Borrower" shall mean Third Party Investors I, LLC, a Delaware limited
liability company.
"Business Day" shall mean a day on which national banks are open for
the transaction of business required for this Agreement in Milwaukee, Wisconsin.
"Closing Date" shall mean the date of this Agreement.
"Development Agreement" shall mean any Development Agreement entered
into by Lender and Borrower as of the date hereof (excluding any Development
Agreement entered into prior to such date, even if amended or restated on or as
of such date), as contemplated by Section 5.5 of the Operating Agreement of
Borrower dated as of December 31, 1998, as amended as of the date hereof.
<PAGE> 2
"Equity Pledge Agreement" shall mean that certain Equity Pledge
Agreement dated as of the date hereof between the holders of all member
interests in the Borrower (other than the Lender), as Pledgor, and Lender, as
Pledgee.
"Event of Default" shall mean any of the events specified in Section
7.1 hereof, provided that any requirement for notice or passage of time has been
satisfied.
"Lender" shall mean Alternative Living Services, Inc., a Delaware
corporation.
"Loan" and "Loans" shall have the meanings set forth in Section 2.1
hereof.
"Loan Documents" shall mean the Note, the Equity Pledge Agreement and
any other documents executed by Borrower or its members with or for the benefit
of Lender in connection with this Agreement or the Loans.
"Management Agreement" shall mean any assisted living consultant and
management services agreement entered into by Lender and Borrower as of the date
hereof (excluding any Assisted Living Consultant and Management Services
Agreement entered into prior to such date, even if amended or restated on or as
of such date), as contemplated by Section 5.6 of the Operating Agreement of
Borrower dated as of December 31, 1998, as amended as of the date hereof.
"Material Adverse Effect" shall mean any act, omission or undertaking
which would, singly or in the aggregate, have (or reasonably be expected to
have) a material adverse effect upon the business, assets, liabilities,
financial condition or results of operations of a Person.
"Mortgage Financing Date" shall have the meaning set forth in Section
2.1(d).
"Note" shall mean the Bridge Loan Note, dated as of the date hereof, in
the aggregate principal amount of $35,000,000.00, made by Borrower to the order
of Lender and delivered to Lender pursuant to Section 2.1(c) hereof.
"Person" shall mean an individual, corporation, limited liability
company, partnership, trust or unincorporated organization, or a government or
any agency or political subdivision thereof.
"Taxes" shall mean, with respect to any Person, taxes, assessments or
other governmental charges or levies imposed upon such Person, its income or any
of its properties or assets.
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"Unmatured Event of Default" shall mean any event or condition which,
with the lapse of time or giving of notice to Borrower contemplated hereby,
would constitute an Event of Default.
ARTICLE II
COMMITMENT TO LEND, BORROWING PROCEDURES, ETC.
Section 2.1 Loans
(a) Amount. Lender agrees, from the Closing Date until the Maturity
Date described in Section 2.1(d) below and upon the terms and conditions herein
set forth (including, without limitation, in Section 2.6 hereof), to make a loan
or loans to Borrower in the aggregate principal amount of up to Thirty Five
Million Dollars ($35,000,000.00) (the "Commitment") (each such loan in herein
referred to as the "Loan," all such loans are herein referred to as "Loans," and
the aggregate amount of all such Loans outstanding from time to time, the "Loan
Amount"). Borrower shall repay all outstanding Loans on the Maturity Date, or
such earlier date if payment of the Loans are accelerated in accordance
herewith.
(b) Borrowings. In the event that Borrower shall elect to borrow
pursuant hereto, the Borrower shall give written notice to the Lender not later
than three (3) Business Days prior to the proposed date of such borrowing. Each
such notice of borrowing shall be by telecopy, promptly confirmed by letter, and
shall specify therein: (i) the date of such proposed borrowing, which shall be a
Business Day; (ii) the amount of such proposed borrowing which, when aggregated
together with the amount of all Loans made prior to such borrowing, shall not
exceed the Commitment; and (iii) the bank account or accounts to which the
proceeds of such Loan should be paid by Lender; provided, however, that in the
event that any amounts are due and owing to the Lender or any of its
subsidiaries pursuant to any such Management Agreements or Development
Agreements, then Lender shall be entitled (with the consent of the Lender, not
to be unreasonably withheld) to effect borrowings hereunder, upon Borrower's
behalf, in order to make payments of such amounts due from Borrower under any
such Management Agreements or Development Agreements, in which event Lender
shall give notice to Borrower of such Loan having been made pursuant to this
proviso of Section 2.1(b).
(c) Bridge Loan Note. The obligations of Borrower to repay the Loans
shall be evidenced by Borrower's promissory note in the form attached hereto as
Exhibit A, dated the Closing Date and payable to the order of Lender for the
principal sum of $35,000,000.00, or such Loan Amount as shall be outstanding
hereunder from time to time, with interest as therein provided. Absent manifest
error, the Lender's records with respect to Loans and the aggregate outstanding
Loan Amount shall be conclusive as to amounts owed Lender under the Note and
this Agreement.
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<PAGE> 4
(d) Payments. Unless payment of the Loans are accelerated upon
occurrence of an Event of Default pursuant to Section 7.2 hereof, the aggregate
outstanding principal amount of the Loans, together with all accrued interest
thereon, shall be due and payable on the first to occur of (i) the date upon
which the Borrower shall first incur any mortgage indebtedness (such date, the
"Mortgage Financing Date") or (ii) September 30, 1999 (such first to occur date,
the "Maturity Date").
(e) Interest Rate. The Loans shall bear interest, during the period
from and including the date of funding to (but not including) the date the Loans
are paid in full, at the per annum rates set forth in the Note.
Section 2.2 Prepayment.
The principal amount of the Loan may be repaid or prepaid in full or in
part at any time prior to the Maturity Date, without premium or penalty.
Section 2.3 Manner of Payment.
(a) Each payment (including prepayments) by Borrower on account of the
principal or interest on the Loan shall be made on the dates specified for
payment under this Agreement to the Lender in lawful money of the United States
of America in immediately available funds. Any prepayment by Borrower shall set
forth in writing whether the payment is a prepayment of principal under the
Loan.
(b) If any payment under this Agreement shall be specified to be made
upon a day which is not a Business Day, it shall be made on the next succeeding
day which is a Business Day, and such extension of time shall in such case be
included in computing interest, if any, in connection with such payment.
(c) If some or less than all amounts due from Borrower are received by
Lender, Lender shall distribute such amounts in the following order of priority:
(i) to the payment of all amounts then due and payable under this Agreement
other than interest or principal; (ii) to the payment of interest then due and
payable on the Loan; and (iii) to the repayment or prepayment of the principal
balance of the Loans.
Section 2.4 Basis of Calculation of Interest.
All interest payable hereunder shall be calculated on the basis of the
360/365 method, which computes a daily amount of interest for a hypothetical
year of 360 days, then multiplies such amount by the actual number of days
elapsed in an interest calculation period.
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Section 2.5 Maximum Interest Rate.
In no event shall the amount of interest due or payable under the Note
exceed the maximum rate of interest allowed by applicable law, and in the event
that any such payment is inadvertently paid by Borrower or inadvertently
received by Lender, then such excess sum shall be credited as a payment of
principal, unless Borrower shall notify Lender, in writing, that Borrower elects
to have such excess sum returned to it forthwith. It is the express intent
hereof that Borrower not pay, and that Lender not receive, directly or
indirectly, in any manner whatsoever, interest in excess of that which would
lawfully be paid by Borrower under applicable law.
Section 2.6 Condition to Funding.
Lender shall have no obligation to fund any portion of the Commitment
on any date to the extent that such funding would cause the sum of the
outstanding Loan Amount as of such date plus the outstanding loan amount of
indebtedness of Borrower pursuant to the Bridge Loan Agreement between the
parties dated December 31, 1998, to exceed the product of three (3) times the
aggregate amount of Capital Contributions that have been made to Borrower (as
such term is defined in the Operating Agreement of Borrower of even date
herewith as amended as of the date hereof) through and including such date.
ARTICLE III
CLOSING DELIVERIES
The following deliveries shall be made simultaneously with the
execution of this Agreement:
Section 3.1 The Note.
Borrower shall deliver to Lender the Note duly executed and dated as of
the Closing Date.
Section 3.2 Equity Pledge Agreement.
The holders of all of the outstanding member interests in the Borrower
(other than the Lender) shall execute and deliver to Lender the Equity Pledge
Agreement dated as of the Closing Date, such agreement to be in form and
substance satisfactory to the Lender. The Borrower, by its execution of the
Equity Pledge Agreement, shall acknowledge the terms and provisions of such
agreement.
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Section 3.3 Evidence of Approvals.
Lender shall have received from the Borrower copies of all such
documents and other evidence that it may reasonably request to confirm the
Borrower's authority to enter into the Agreement and the transactions
contemplated hereby, and to fully perform its obligations hereunder and
thereunder.
Section 3.4 Loan Amount.
Lender shall make the initial disbursement of the Loan Amount to the
extent that any request therefor has been made pursuant to Section 2.2 of this
Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Representations and Warranties.
Borrower hereby represents and warrants that:
(a) Organization; Power; Qualification. Borrower is a Delaware limited
liability company duly organized, validly existing and in good standing under
the laws of the state of Delaware, has the power and authority, to own or lease
and operate its properties and to carry on its businesses as now being and
hereafter proposed to be conducted and is duly qualified and is in good standing
as foreign limited liability company, and is authorized to do business, in each
jurisdiction in which the character of its properties or the nature of its
business requires such qualification or authorization, and on which failure to
so qualify would have a Material Adverse Effect on Borrower.
(b) Execution and Enforceability. This Agreement has been duly executed
and delivered by Borrower, and is, and each of the Loan Documents to which
Borrower is a party is, a legal, valid and binding obligation of Borrower,
enforceable in accordance with its terms, subject, as to enforcement of
remedies, to the following qualifications: (i) an order of specific performance
and an injunction are discretionary remedies, and in particular, may not be
available where damages are considered an adequate remedy at law, and (ii) may
be limited by bankruptcy, insolvency, liquidation, reorganization,
reconstruction and other similar laws effecting enforcement of creditors' rights
generally (insofar as any such law relates to the bankruptcy, insolvency or
similar event of the Borrower).
(c) Authorization. Borrower is duly authorized to execute, deliver and
perform its obligations under this Agreement and the Loan Documents. The
execution, delivery and
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performance by Borrower of this Agreement and the Loan Documents do not and will
not require any consent or approval of any governmental agency or authority.
(d) No Conflicts. The execution, delivery and performance by the
Borrower of this Agreement and the Loan Documents (i) do not and will not
conflict with: (A) any provision of law, (B) the Borrower's operating agreement
or the Delaware Limited Liability Company Act, (C) any material agreement
binding upon Borrower, or (D) any court or administrative order or decree
applicable to Borrower, and (ii) do not and will not require, or result in, the
creation or imposition of any lien on any asset of Borrower.
ARTICLE V
AFFIRMATIVE COVENANTS
From the date of this Agreement and thereafter until all Loans pursuant
to this Agreement, and all interest thereon, are paid in full, and unless Lender
shall otherwise consent in writing:
Section 5.1 Notices.
Borrower shall notify the Lender in writing of any of the following
immediately upon learning of the occurrence thereof, describing the same and, if
applicable, the steps being taken with respect thereto:
(a) Default. The occurrence of an Event of Default or Unmatured
Event of Default;
(b) Litigation. The institution of any litigation, arbitration
proceeding or governmental proceeding which would constitute a Material Adverse
Effect on the Borrower;
(c) Material Adverse Change. The occurrence of a material adverse
change in the business, operations or financial condition of Borrower; or
(d) Other Events. The occurrence of such other events as the Lender may
from time to time reasonably specify regarding the financial condition of
Borrower.
Section 5.2 Existence.
Borrower shall maintain and preserve its existence as a limited
liability company, and all rights, privileges, licenses, patents, patent rights,
copyrights, trademarks, tradenames, and other authority to the extent material
and necessary for the conduct of its business in the ordinary course as
conducted from time to time.
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Section 5.3 Books, Records and Access.
Borrower shall maintain accurate books and records in conformance with
its method of income tax accounting. Within 15 days after receiving written
notice from Lender, Borrower shall permit reasonable access by the Lender to the
books and records of Borrower during normal business hours and permit the Lender
to make reasonable copies of such books and records.
Section 5.4 Insurance.
Borrower shall maintain insurance to such extent and against such
hazards and liabilities as is commonly maintained by companies similarly
situated.
Section 5.5 Repair.
Borrower shall maintain, preserve and keep its properties in good
repair, working order and condition, and from time to time make all necessary
and proper repairs, renewals, replacements, additions, betterments and
improvements thereto so that at all times the efficiency thereof shall be fully
preserved and maintained except for where the failure to comply with this
Section 5.5, individually or in the aggregate, does not have a Material Adverse
Effect on Borrower.
Section 5.6 Taxes.
Borrower shall pay when due, all of its Taxes, unless and only to the
extent that Borrower is contesting such Taxes in good faith and by appropriate
proceedings and Borrower has set aside in its books reasonable reserves
therefor.
Section 5.7 Compliance.
Borrower shall comply with all statutes and governmental rules and
regulations applicable to it, except where the failure to comply with this
Section 5.7, individually or in the aggregate, does not have a Material Adverse
Effect on the Borrower.
ARTICLE VI
NEGATIVE COVENANTS
From the date of this Agreement and thereafter until the Loan Amount,
and all interest thereon, is paid in full, and unless Lender shall otherwise
consent in writing:
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Section 6.1 Liquidation, Merger or Sale.
Borrower shall not, without the prior written consent of Lender:
(a) liquidate or dissolve itself (or suffer any liquidation or
dissolution) or otherwise windup its affairs;
(b) sell, lease, abandon, transfer or otherwise dispose of any real
property or of any personal property having a value of in excess of $25,000; or
(c) be party to any merger or consolidation.
Section 6.2 Liens.
Borrower shall not create, incur or suffer to exist, any lien
(including, without limitation, any pledge, assignment, mortgage, title
retaining contract or other type of security interest) to exist on any of the
assets or property (real, personal or mixed, tangible or intangible) of the
Borrower, other than:
(i) Liens for Taxes not delinquent or for Taxes being contested
in good faith by appropriate proceedings and as to which adequate
financial reserves have been established on Borrower's books and
records;
(ii) Liens created in connection with workmen's compensation,
unemployment insurance, and social security, or to secure the
performance of bids, tenders or contracts (other than for the repayment
of borrowed money), leases, statutory obligations, surety and appeal
bonds, and other obligations of like nature made in the ordinary course
of business;
(iii) Each lien existing on the date hereof; or
(iv) Liens created in connection with purchase money mortgages or
security interests granted to secure the purchase price of assets, the
purchase of which does not violate this Agreement or any instrument
required hereunder.
Section 6.3 Distributions.
Borrower shall not make any distribution, directly or indirectly,
whether in cash or in other property, on account of or for the benefit of its
members, other than payments or distributions to Lender pursuant to this
Agreement, the other Loan Documents, or any other loans made to Borrower by
Lender.
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ARTICLE VII
EVENTS OF DEFAULT & REMEDIES
Section 7.1 Events of Default.
An Event of Default shall have occurred under this Agreement:
(a) Non-payment. If Borrower shall default in the payment when due of
any principal of, or interest on, the Loan, and such default shall not be cured
within three (3) Business Days following notice thereof from Lender.
(b) Insolvency. If Borrower becomes insolvent, or generally fails to
pay, or admits in writing its inability to pay, its debts as they mature, or
applies for, consents to, or acquiesces in, the appointment of a trustee,
receiver or other custodian for Borrower or for a substantial part of the
property of Borrower, or makes a general assignment for the benefit of
creditors; or, in the absence of such application, consent or acquiescence, a
trustee, receiver or other custodian is appointed for Borrower or for a
substantial part of the property of the Borrower and is not discharged within
sixty days; or any bankruptcy, reorganization, debt arrangement or other
proceeding under any bankruptcy or insolvency law, or any dissolution or
liquidation proceeding, is instituted by or against Borrower and, if instituted
against Borrower, is consented to or acquiesced in by Borrower or remains for
sixty days undismissed; or any warrant of attachment or similarly legal process
is issued against any substantial part of the property of Borrower which is not
released within sixty days of service.
(c) Representations and Warranties. If any representation or warranty
made under this Agreement or any statement in any certificate given by Borrower
hereunder shall be untrue, incorrect or misleading in any material respect when
made or given.
(d) Covenants. If Borrower shall default in the performance or
observance of any covenant set forth in Article V or Article VI hereof and, with
respect to any covenant set forth in Section 5.1, 5.3, 5.4, 5.5, 5.6, or 5.7,
such default shall not be cured within thirty (30) days following notice thereof
from Lender to Borrower.
(e) If there is an event of default under any of the Loan Documents,
subject to any applicable period of grace.
(f) Other Obligations. If, subject to any applicable grace period,
Borrower (i) fails to pay any indebtedness or other obligations, direct or
indirect, for borrowed money in an amount in excess of $25,000.00 (other than as
evidenced by this Agreement or the Note) owing by Borrower when due, whether at
maturity, by acceleration or otherwise, or (ii) fails to perform any term,
covenant or agreement on its part to be performed under any agreement or
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<PAGE> 11
instrument (other than this Agreement or under the Loan Documents) evidencing or
securing or relating to such indebtedness or other obligations, when required to
be performed, and, if as the result of such failure, the maturity date of such
indebtedness or other obligations has been accelerated.
(g) Judgments. If Borrower fails to satisfy or stay the execution by
appropriate proceedings of any judgment rendered against it in excess of
$25,000.
Section 7.2 Remedies.
If an Event of Default shall have occurred and shall be continuing,
Lender shall have the right at its option, and in its sole discretion, to
declare all amounts outstanding under the Note and this Agreement to be
immediately due and payable (except that if an event described in Section 7.1(b)
occurs, all amounts outstanding under the Note and this Agreement shall
automatically become immediately due and payable). Lender shall promptly advise
Borrower, in writing, of any such declaration, but failure to do so shall not
impair the effect of such declaration. Lender shall also be entitled to exercise
any and all remedies available to it, at law or equity.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Waiver and Amendments.
No failure or delay on the part of Lender in the exercise of any power
or right, and no course of dealing between Borrower and Lender, shall operate as
a waiver of such power or right, nor shall any single or partial exercise of any
power or right preclude other or further exercise thereof or the exercise of any
other power or right. Remedies provided for herein are cumulative and not
exclusive of any remedies which may be available to the Lender at law or in
equity. No notice to or demand on the Borrower required hereunder or under the
Note shall in any event entitle Borrower to any other or further notice or
demand in similar or other circumstances or constitute a waiver of the right of
Lender to any other or further action and any circumstances without notice or
demand. No amendment, modification or waiver of, or consent with respect to, any
provision of this Agreement or the Note shall in any event be effective unless
the same shall be in writing and signed and delivered by Lender. Any waiver of
any provision of this Agreement or the Note, and any consent to any departure by
Borrower from the terms of any provision of this Agreement or the Note, shall be
effective only in the specific instance and for the specific purpose for which
given.
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<PAGE> 12
Section 8.2 Notices
All notices and other communications required or permitted under this
Agreement shall be in writing and, if mailed by prepaid first-class mail, or
certified mail, return receipt requested, shall be deemed to have been received
on the earlier of the date shown on the receipt or three (3) Business Days after
the post-mark date thereof and, if by telecopy, shall be followed forthwith by
letter and shall be deemed to have been received upon dispatch and
acknowledgment of receipt by the recipient's telecopier machine. In addition,
notices hereunder may be delivered by hand in which event the notice shall be
deemed effective when delivered or by overnight courier, in which event the
Notice shall be deemed delivered the day after it is accepted by the courier for
next day delivery. All notices and other communications under this Agreement
shall be given to the parties hereto at the following addresses:
(i) If to Borrower:
Third Party Investors I, L.L.C.
c/o McDonald Investments, Inc.
250 Pearl Street, N.W.
Grand Rapids, Michigan 49503
Attn: Randall S. Damstra
Fax: (616) 732-3394
with a copy to (which shall not constitute notice):
Hecht & Lentz
333 Bridge, N.W., Suite 330
Grand Rapids, Michigan 49504
Attn: David M. Hecht, Esq.
Fax: (626) 776-7203
(ii) If to Lender:
Alternative Living Services, Inc.
450 N. Sunnyslope Road
Suite 300
Brookfield, Wisconsin 83005
Attn: President and CEO
Fax: 414-789-6677
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<PAGE> 13
with a copy to (which shall not constitute notice):
Rogers & Hardin LLP
229 Peachtree Street, N.E.
2700 International Tower
Atlanta, Georgia 30303
Attn: Alan C. Leet, Esq.
Fax: 404-525-2224
Any party hereto may change the address to which notices shall be
directed under this Section by giving written notice of such change to the other
parties.
Section 8.3 Severability.
Any provision of this Agreement 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 the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
Section 8.4 Governing Law.
This Agreement shall be construed under and governed by the laws of the
state of Wisconsin, without giving effect to its principles of conflicts of
laws.
Section 8.5 Successors and Assigns.
This Agreement shall be binding upon Borrower and Lender and their
respective successors and assigns, and shall inure to the benefit of Borrower
and Lender and their successors and assigns. Neither Borrower nor Lender shall
assign its rights or delegate its duties hereunder without the consent of the
other party.
Section 8.6 Headings.
Headings used in this Agreement are for convenience only and shall not
be used in connection with the interpretation of any provision hereof.
Section 8.7 Counterparts.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which counterparts shall
together constitute one and the same instrument.
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Section 8.8 Expenses.
Borrower agrees to pay, and hold Lender harmless from liability for the
payment of, all reasonable costs and expenses of Lender (including reasonable
fees and expenses of counsel) in connection with any Event of Default or the
enforcement of this Agreement.
[Signature Page Follows.]
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<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by the undersigned thereunto duly authorized as of the date first
written above.
ALTERNATIVE LIVING SERVICES, INC.,
a Delaware corporation
By: /s/ Mark W. Ohlendorf
-----------------------------------------
Title: Senior Vice President
---------------------------------------
THIRD PARTY INVESTORS I, L.L.C.
a Delaware limited liability company
By: /s/ John Meilner
------------------------------------------
Title: Authorized Agent
---------------------------------------
<PAGE> 1
EXHIBIT 10.12
MANAGEMENT FEE LOAN AGREEMENT
(PHASE II)
This Agreement, dated as of March 31, 1999, is entered into among Third
Party Investors I, L.L.C., a Delaware limited liability company ("Borrower"),
and Alternative Living Services, Inc., a Delaware corporation ("Lender").
W I T N E S S E T H:
WHEREAS, Borrower has requested that Lender make loans to Borrower in
the aggregate amount of up to $1,750,000.00; and
WHEREAS, Lender is willing to make the loans to Borrower on the terms
and subject to the conditions set forth below.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
In addition to the terms defined elsewhere in this Agreement, the
following terms shall have the meanings indicated for purposes of this Agreement
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined).
"Agreement" shall mean this Loan Agreement.
"Borrower" shall mean Third Party Investors I, L.L.C., a Delaware
limited liability company.
"Business Day" shall mean a day on which national banks are open for
the transaction of business required for this Agreement in Milwaukee, Wisconsin.
"Closing Date" shall mean the date of this Agreement.
"Event of Default" shall mean any of the events specified in Section
7.1 hereof, provided that any requirement for notice or passage of time has been
satisfied.
"Lender" shall mean Alternative Living Services, Inc., a Delaware
corporation.
"Loan" and "Loans" shall have the meanings set forth in Section 2.1
hereof.
<PAGE> 2
"Loan Documents" shall mean the Note and any other documents executed
by Borrower or its members with or for the benefit of Lender in connection with
this Agreement or the Loans.
"Management Agreement" shall mean any Assisted Living Consultant and
Management Services Agreement entered into by Lender and Borrower as of the date
hereof (excluding any Assisted Living Consultant and Management Services
Agreement entered into prior to such date, even if amended or restated on or as
of such date), as contemplated by Section 5.6 of the Operating Agreement of
Borrower dated as of December 31, 1998, as amended as of the date hereof.
"Material Adverse Effect" shall mean any act, omission or undertaking
which would, singly or in the aggregate, have (or reasonably be expected to
have) a material adverse effect upon the business, assets, liabilities,
financial condition or results of operations of a Person.
"Note" shall mean the Management Fee Loan Note, dated as of the date
hereof, in the aggregate principal amount of $1,750,000.00, made by Borrower to
the order of Lender and delivered to Lender pursuant to Section 2.1(c) hereof.
"Person" shall mean an individual, corporation, limited liability
company, partnership, trust or unincorporated organization, or a government or
any agency or political subdivision thereof.
"Taxes" shall mean, with respect to any Person, taxes, assessments or
other governmental charges or levies imposed upon such Person, its income or any
of its properties or assets.
"Unmatured Event of Default" shall mean any event or condition which,
with the lapse of time or giving of notice to Borrower contemplated hereby,
would constitute an Event of Default.
ARTICLE II
COMMITMENT TO LEND, BORROWING PROCEDURES, ETC.
Section 2.1 Loans
(a) Amount. Lender agrees, from the Closing Date until the respective
Maturity Dates described in Section 2.1(d) below, and upon the terms and
conditions herein set forth, to make a loan or loans to Borrower in the
aggregate principal amount of up to One Million Seven Hundred Fifty Thousand
Dollars ($1,750,000.00) (the "Commitment") (each such loan in herein referred to
as the "Loan," all such loans are herein referred to as "Loans," and the
aggregate amount of all such Loans outstanding from time to time, the "Loan
Amount").
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<PAGE> 3
Borrower shall repay all outstanding Loans in installment on the respective
Maturity Dates, or such earlier date if payment of the Loans are accelerated in
accordance herewith.
(b) Borrowings. As provided in Section 4.1(g) of each Management
Agreement, Borrower shall draw Loans pursuant to this Loan Agreement as and when
required to pay any management fees due to Lender during the period set forth
therein.
(c) Management Fee Loan Note. The obligations of Borrower to repay the
Loans shall be evidenced by Borrower's promissory note in the form attached
hereto as Exhibit A, dated the Closing Date and payable to the order of Lender
for the principal sum of $1,750,000.00, or such Loan Amount as shall be
outstanding hereunder from time to time, with interest as therein provided.
Absent manifest error, the Lender's records with respect to Loans and the
aggregate outstanding Loan Amount shall be conclusive as to amounts owed Lender
under the Note and this Agreement.
(d) Payments. Unless payment of the Loans are accelerated upon
occurrence of an Event of Default pursuant to Section 7.2 hereof, the aggregate
outstanding principal amount of the Loans, together with all accrued interest
thereon, shall be due and payable in installments such that each portion thereof
drawn to pay any management fee to Lender pursuant to Section 4.1(g) of any
Management Agreement shall be repaid by Borrower upon the first to occur of (i)
the first anniversary date of the opening of the facility to which such
Management Agreement relates, and (ii) the date on which such Facility first
reaches a ninety-five percent (95%) resident occupancy level (such first to
occur date with respect to each installment payment, the respective "Maturity
Date").
(e) Interest Rate. Each Loan shall be non-interest bearing through the
Maturity Date thereof, but thereafter through the date the Loans are paid in
full, the Loans shall bear interest at the per annum default rate set forth in
the Note.
Section 2.2 Prepayment.
The principal amount of the Loan may be repaid or prepaid in full or in
part at any time prior to the Maturity Date, without premium or penalty.
Section 2.3 Manner of Payment.
(a) Each payment (including prepayments) by Borrower on account of the
principal or interest on the Loan shall be made on the dates specified for
payment under this Agreement to the Lender in lawful money of the United States
of America in immediately available funds. Any prepayment by Borrower shall set
forth in writing whether the payment is a prepayment of principal under the
Loan.
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<PAGE> 4
(b) If any payment under this Agreement shall be specified to be made
upon a day which is not a Business Day, it shall be made on the next succeeding
day which is a Business Day, and such extension of time shall in such case be
included in computing interest, if any, in connection with such payment.
(c) If some or less than all amounts due from Borrower are received by
Lender, Lender shall distribute such amounts in the following order of priority:
(i) to the payment of all amounts then due and payable under this Agreement
other than interest or principal; (ii) to the payment of interest then due and
payable on the Loan; and (iii) to the repayment or prepayment of the principal
balance of the Loans.
Section 2.4 Basis of Calculation of Interest.
All interest payable hereunder shall be calculated on the basis of the
360/365 method, which computes a daily amount of interest for a hypothetical
year of 360 days, then multiplies such amount by the actual number of days
elapsed in an interest calculation period.
Section 2.5 Maximum Interest Rate.
In no event shall the amount of interest due or payable under the Note
exceed the maximum rate of interest allowed by applicable law, and in the event
that any such payment is inadvertently paid by Borrower or inadvertently
received by Lender, then such excess sum shall be credited as a payment of
principal, unless Borrower shall notify Lender, in writing, that Borrower elects
to have such excess sum returned to it forthwith. It is the express intent
hereof that Borrower not pay, and that Lender not receive, directly or
indirectly, in any manner whatsoever, interest in excess of that which would
lawfully be paid by Borrower under applicable law.
ARTICLE III
CLOSING DELIVERIES
The following deliveries shall be made simultaneously with the
execution of this Agreement:
Section 3.1 The Note.
Borrower shall deliver to Lender the Note duly executed and dated as of
the Closing Date.
Section 3.2 Evidence of Approvals.
Lender shall have received from the Borrower copies of all such
documents and other evidence that it may reasonably request to confirm the
Borrower's authority to enter into the
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<PAGE> 5
Agreement and the transactions contemplated hereby, and to fully perform its
obligations hereunder and thereunder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Representations and Warranties.
Borrower hereby represents and warrants that:
(a) Organization; Power; Qualification. Borrower is a Delaware limited
liability company duly organized, validly existing and in good standing under
the laws of the state of Delaware, has the power and authority, to own or lease
and operate its properties and to carry on its businesses as now being and
hereafter proposed to be conducted and is duly qualified and is in good standing
as foreign limited liability company, and is authorized to do business, in each
jurisdiction in which the character of its properties or the nature of its
business requires such qualification or authorization, and on which failure to
so qualify would have a Material Adverse Effect on Borrower.
(b) Execution and Enforceability. This Agreement has been duly executed
and delivered by Borrower, and is, and each of the Loan Documents to which
Borrower is a party is, a legal, valid and binding obligation of Borrower,
enforceable in accordance with its terms, subject, as to enforcement of
remedies, to the following qualifications: (i) an order of specific performance
and an injunction are discretionary remedies, and in particular, may not be
available where damages are considered an adequate remedy at law, and (ii) may
be limited by bankruptcy, insolvency, liquidation, reorganization,
reconstruction and other similar laws effecting enforcement of creditors' rights
generally (insofar as any such law relates to the bankruptcy, insolvency or
similar event of the Borrower).
(c) Authorization. Borrower is duly authorized to execute, deliver and
perform its obligations under this Agreement and the Loan Documents. The
execution, delivery and performance by Borrower of this Agreement and the Loan
Documents do not and will not require any consent or approval of any
governmental agency or authority.
(d) No Conflicts. The execution, delivery and performance by the
Borrower of this Agreement and the Loan Documents (i) do not and will not
conflict with: (A) any provision of law, (B) the Borrower's operating agreement
or the Delaware Limited Liability Company Act, (C) any material agreement
binding upon Borrower, or (D) any court or administrative order or decree
applicable to Borrower, and (ii) do not and will not require, or result in, the
creation or imposition of any lien on any asset of Borrower.
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<PAGE> 6
ARTICLE V
AFFIRMATIVE COVENANTS
From the date of this Agreement and thereafter until all Loans pursuant
to this Agreement, and all interest thereon, are paid in full, and unless Lender
shall otherwise consent in writing:
Section 5.1 Notices.
Borrower shall notify the Lender in writing of any of the following
immediately upon learning of the occurrence thereof, describing the same and, if
applicable, the steps being taken with respect thereto:
(a) Default. The occurrence of an Event of Default or Unmatured Event
of Default;
(b) Litigation. The institution of any litigation, arbitration
proceeding or governmental proceeding which would constitute a Material Adverse
Effect on the Borrower;
(c) Material Adverse Change. The occurrence of a material adverse
change in the business, operations or financial condition of Borrower; or
(d) Other Events. The occurrence of such other events as the Lender may
from time to time reasonably specify regarding the financial condition of
Borrower.
Section 5.2 Existence.
Borrower shall maintain and preserve its existence as a limited
liability company, and all rights, privileges, licenses, patents, patent rights,
copyrights, trademarks, trade names, and other authority to the extent material
and necessary for the conduct of its business in the ordinary course as
conducted from time to time.
Section 5.3 Books, Records and Access.
Borrower shall maintain accurate books and records in conformance with
its method of tax accounting. Within 15 days after receiving written notice from
Lender, Borrower shall permit reasonable access by the Lender to the books and
records of Borrower during normal business hours and permit the Lender to make
reasonable copies of such books and records.
Section 5.4 Insurance.
Borrower shall maintain insurance to such extent and against such
hazards and liabilities as is commonly maintained by companies similarly
situated.
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<PAGE> 7
Section 5.5 Repair.
Borrower shall maintain, preserve and keep its properties in good
repair, working order and condition, and from time to time make all necessary
and proper repairs, renewals, replacements, additions, betterments and
improvements thereto so that at all times the efficiency thereof shall be fully
preserved and maintained except for where the failure to comply with this
Section 5.5, individually or in the aggregate, does not have a Material Adverse
Effect on Borrower.
Section 5.6 Taxes.
Borrower shall pay when due, all of its Taxes, unless and only to the
extent that Borrower is contesting such Taxes in good faith and by appropriate
proceedings and Borrower has set aside in its books reasonable reserves
therefor.
Section 5.7 Compliance.
Borrower shall comply with all statutes and governmental rules and
regulations applicable to it, except where the failure to comply with this
Section 5.7, individually or in the aggregate, does not have a Material Adverse
Effect on the Borrower.
ARTICLE VI
NEGATIVE COVENANTS
From the date of this Agreement and thereafter until the Loan Amount,
and all interest thereon, is paid in full, and unless Lender shall otherwise
consent in writing:
Section 6.1 Liquidation, Merger or Sale.
Borrower shall not, without the prior written consent of Lender:
(a) liquidate or dissolve itself (or suffer any liquidation or
dissolution) or otherwise windup its affairs;
(b) sell, lease, abandon, transfer or otherwise dispose of any real
property or of any personal property having a value of in excess of $25,000; or
(c) be party to any merger or consolidation.
Section 6.2 Liens.
Borrower shall not create, incur or suffer to exist, any lien
(including, without limitation, any pledge, assignment, mortgage, title
retaining contract or other type of security
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<PAGE> 8
interest) to exist on any of the assets or property (real, personal or mixed,
tangible or intangible) of the Borrower, other than:
(i) Liens for Taxes not delinquent or for Taxes being contested
in good faith by appropriate proceedings and as to which adequate
financial reserves have been established on Borrower's books and
records;
(ii) Liens created in connection with workmen's compensation,
unemployment insurance, and social security, or to secure the
performance of bids, tenders or contracts (other than for the repayment
of borrowed money), leases, statutory obligations, surety and appeal
bonds, and other obligations of like nature made in the ordinary course
of business;
(iii) Each lien existing on the date hereof; or
(iv) Liens created in connection with purchase money mortgages or
security interests granted to secure the purchase price of assets, the
purchase of which does not violate this Agreement or any instrument
required hereunder.
Section 6.3 Distributions.
Borrower shall not make any distribution, directly or indirectly,
whether in cash or in other property, on account of or for the benefit of its
members, other than payments or distributions to Lender pursuant to this
Agreement, the other Loan Documents, or any other loans made to Borrower by
Lender.
ARTICLE VII
EVENTS OF DEFAULT & REMEDIES
Section 7.1 Events of Default.
An Event of Default shall have occurred under this Agreement:
(a) Non-payment. If Borrower shall default in the payment when due of
any principal of, or interest on, the Loan, and such default shall not be cured
within three (3) Business Days following notice thereof from Lender.
(b) Insolvency. If Borrower becomes insolvent, or generally fails to
pay, or admits in writing its inability to pay, its debts as they mature, or
applies for, consents to, or acquiesces in, the appointment of a trustee,
receiver or other custodian for Borrower or for a substantial part of the
property of Borrower, or makes a general assignment for the benefit of
creditors; or, in the absence of such application, consent or acquiescence, a
trustee, receiver or other custodian is appointed for Borrower or for a
substantial part of the property of the Borrower
-8-
<PAGE> 9
and is not discharged within sixty days; or any bankruptcy, reorganization, debt
arrangement or other proceeding under any bankruptcy or insolvency law, or any
dissolution or liquidation proceeding, is instituted by or against Borrower and,
if instituted against Borrower, is consented to or acquiesced in by Borrower or
remains for sixty days undismissed; or any warrant of attachment or similarly
legal process is issued against any substantial part of the property of Borrower
which is not released within sixty days of service.
(c) Representations and Warranties. If any representation or warranty
made under this Agreement or any statement in any certificate given by Borrower
hereunder shall be untrue, incorrect or misleading in any material respect when
made or given.
(d) Covenants. If Borrower shall default in the performance or
observance of any covenant set forth in Article V or Article VI hereof and, with
respect to any covenant set forth in Section 5.1, 5.3, 5.4, 5.5, 5.6, or 5.7,
such default shall not be cured within thirty (30) days following notice thereof
from Lender to Borrower.
(e) If there is an event of default under any of the Loan Documents,
subject to any applicable period of grace.
(f) Other Obligations. If, subject to any applicable grace period,
Borrower (i) fails to pay any indebtedness or other obligations, direct or
indirect, for borrowed money in an amount in excess of $25,000.00 (other than as
evidenced by this Agreement or the Note) owing by Borrower when due, whether at
maturity, by acceleration or otherwise, or (ii) fails to perform any term,
covenant or agreement on its part to be performed under any agreement or
instrument (other than this Agreement or under the Loan Documents) evidencing or
securing or relating to such indebtedness or other obligations, when required to
be performed, and, if as the result of such failure, the maturity date of such
indebtedness or other obligations has been accelerated.
(g) Judgments. If Borrower fails to satisfy or stay the execution by
appropriate proceedings of any judgment rendered against it in excess of
$25,000.
Section 7.2 Remedies.
If an Event of Default shall have occurred and shall be continuing,
Lender shall have the right at its option, and in its sole discretion, to
declare all amounts outstanding under the Note and this Agreement to be
immediately due and payable (except that if an event described in Section 7.1(b)
occurs, all amounts outstanding under the Note and this Agreement shall
automatically become immediately due and payable). Lender shall promptly advise
Borrower, in writing, of any such declaration, but failure to do so shall not
impair the effect of such declaration. Lender shall also be entitled to exercise
any and all remedies available to it, at law or equity.
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ARTICLE VIII
MISCELLANEOUS
Section 8.1 Waiver and Amendments.
No failure or delay on the part of Lender in the exercise of any power
or right, and no course of dealing between Borrower and Lender, shall operate as
a waiver of such power or right, nor shall any single or partial exercise of any
power or right preclude other or further exercise thereof or the exercise of any
other power or right. Remedies provided for herein are cumulative and not
exclusive of any remedies which may be available to the Lender at law or in
equity. No notice to or demand on the Borrower required hereunder or under the
Note shall in any event entitle Borrower to any other or further notice or
demand in similar or other circumstances or constitute a waiver of the right of
Lender to any other or further action and any circumstances without notice or
demand. No amendment, modification or waiver of, or consent with respect to, any
provision of this Agreement or the Note shall in any event be effective unless
the same shall be in writing and signed and delivered by Lender. Any waiver of
any provision of this Agreement or the Note, and any consent to any departure by
Borrower from the terms of any provision of this Agreement or the Note, shall be
effective only in the specific instance and for the specific purpose for which
given.
Section 8.2 Notices
All notices and other communications required or permitted under this
Agreement shall be in writing and, if mailed by prepaid first-class mail, or
certified mail, return receipt requested, shall be deemed to have been received
on the earlier of the date shown on the receipt or three (3) Business Days after
the post-mark date thereof and, if by telecopy, shall be followed forthwith by
letter and shall be deemed to have been received upon dispatch and
acknowledgment of receipt by the recipient's telecopier machine. In addition,
notices hereunder may be delivered by hand in which event the notice shall be
deemed effective when delivered or by overnight courier, in which event the
Notice shall be deemed delivered the day after it is accepted by the courier for
next day delivery. All notices and other communications under this Agreement
shall be given to the parties hereto at the following addresses:
(i) If to Borrower:
Third Party Investors I, L.L.C.
c/o McDonald Investments, Inc.
250 Pearl Street, N.W.
Grand Rapids, Michigan 49503
Attn: Randall S. Damstra
Fax: (616) 732-3394
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<PAGE> 11
with a copy to (which shall not constitute notice):
Hecht & Lentz
333 Bridge, N.W., Suite 330
Grand Rapids, Michigan 49504
Attn: David M. Hecht, Esq.
Fax: (626) 776-7203
(ii) If to Lender:
Alternative Living Services, Inc.
450 N. Sunnyslope Road
Suite 300
Brookfield, Wisconsin 83005
Attn: President and CEO
Fax: 414-789-6677
with a copy to (which shall not constitute notice):
Rogers & Hardin LLP
229 Peachtree Street, N.E.
2700 International Tower
Atlanta, Georgia 30303
Attn: Alan C. Leet, Esq.
Fax: 404-525-2224
Any party hereto may change the address to which notices shall be
directed under this Section by giving written notice of such change to the other
parties.
Section 8.3 Severability.
Any provision of this Agreement 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 the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
Section 8.4 Governing Law.
This Agreement shall be construed under and governed by the laws of the
state of Wisconsin, without giving effect to its principles of conflicts of
laws.
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<PAGE> 12
Section 8.5 Successors and Assigns.
This Agreement shall be binding upon Borrower and Lender and their
respective successors and assigns, and shall inure to the benefit of Borrower
and Lender and their successors and assigns. Neither Borrower nor Lender shall
assign its rights or delegate its duties hereunder without the consent of the
other party.
Section 8.6 Headings.
Headings used in this Agreement are for convenience only and shall not
be used in connection with the interpretation of any provision hereof.
Section 8.7 Counterparts.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which counterparts shall
together constitute one and the same instrument.
Section 8.8 Expenses.
Borrower agrees to pay, and hold Lender harmless from liability for the
payment of, all reasonable costs and expenses of Lender (including reasonable
fees and expenses of counsel) in connection with any Event of Default or the
enforcement of this Agreement.
[Signature Page Follows]
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<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by the undersigned thereunto duly authorized as of the date first
written above.
ALTERNATIVE LIVING SERVICES, INC.,
a Delaware corporation
By: /s/ Mark W. Ohlendorf
------------------------------------
Title: Senior Vice President
------------------------------------
THIRD PARTY INVESTORS I, L.L.C.
a Delaware limited liability company
By: /s/ John Meilner
------------------------------------
Title: Authorized Agent
------------------------------------
<PAGE> 1
EXHIBIT 10.13
WORKING CAPITAL LOAN AGREEMENT
(PHASE II)
This Agreement, dated as of March 31, 1999, is entered into among
Third Party Investors I, L.L.C., a Delaware limited liability company
("Borrower"), and Alternative Living Services, Inc., a Delaware corporation
("Lender").
W I T N E S S E T H:
WHEREAS, Borrower has requested that Lender make loans to Borrower
in the aggregate amount of up to $800,000.00; and
WHEREAS, Lender is willing to make the loans to Borrower on the terms
and subject to the conditions set forth below.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
In addition to the terms defined elsewhere in this Agreement, the
following terms shall have the meanings indicated for purposes of this Agreement
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined).
"Agreement" shall mean this Loan Agreement.
"Borrower" shall mean Third Party Investors I, L.L.C., a Delaware
limited liability company.
"Business Day" shall mean a day on which national banks are open for
the transaction of business required for this Agreement in Milwaukee, Wisconsin.
"Closing Date" shall mean the date of this Agreement.
"Event of Default" shall mean any of the events specified in Section
7.1 hereof, provided that any requirement for notice or passage of time has been
satisfied.
"Lender" shall mean Alternative Living Services, Inc., a Delaware
corporation.
"Loan" and "Loans" shall have the meanings set forth in Section 2.1
hereof.
<PAGE> 2
"Loan Documents" shall mean the Note and any other documents executed
by Borrower or its members with or for the benefit of Lender in connection with
this Agreement or the Loans.
"Management Agreement" shall mean any Assisted Living Consultant and
Management Services Agreement entered into by Lender and Borrower as of the date
hereof (excluding any Assisted Living Consultant and Management Services
Agreement entered into prior to such date, even if amended or restated on or as
of such date), as contemplated by Section 5.6 of the Operating Agreement of
Borrower dated as of December 31, 1998, as amended as of the date hereof.
"Material Adverse Effect" shall mean any act, omission or undertaking
which would, singly or in the aggregate, have (or reasonably be expected to
have) a material adverse effect upon the business, assets, liabilities,
financial condition or results of operations of a Person.
"Note" shall mean the Working Capital Loan Note, dated as of the date
hereof, in the aggregate principal amount of $800,000.00, made by Borrower to
the order of Lender and delivered to Lender pursuant to Section 2.1(c) hereof.
"Person" shall mean an individual, corporation, limited liability
company, partnership, trust or unincorporated organization, or a government or
any agency or political subdivision thereof.
"Taxes" shall mean, with respect to any Person, taxes, assessments or
other governmental charges or levies imposed upon such Person, its income or any
of its properties or assets.
"Unmatured Event of Default" shall mean any event or condition which,
with the lapse of time or giving of notice to Borrower contemplated hereby,
would constitute an Event of Default.
ARTICLE II
COMMITMENT TO LEND, BORROWING PROCEDURES, ETC.
Section 2.1 Loans
(a) Amount. Lender agrees, from the Closing Date until the respective
Maturity Dates described in Section 2.1(d) below, and upon the terms and
conditions herein set forth, to make a loan or loans to Borrower in the
aggregate principal amount of up to Eight Hundred Thousand Dollars ($800,000.00)
(the "Commitment") (each such loan in herein referred to as the "Loan," all such
loans are herein referred to as "Loans," and the aggregate amount of all such
Loans outstanding from time to time, the "Loan Amount"). Borrower shall repay
all
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outstanding Loans in installment on the respective Maturity Dates, or such
earlier date if payment of the Loans are accelerated in accordance herewith.
(b) Borrowings. Borrower shall be entitled to draw Loans pursuant to
this Loan Agreement as and when required to fund the working capital needs of
any project that is the subject of any Management Agreement as of the date
hereof, other than to pay any management fees pursuant to Section 4.1(g) of any
of the Management Agreements due to Lender and funded by Borrower under that
certain Management Fee Loan Agreement between the parties of even date herewith.
(c) Working Capital Loan Note. The obligations of Borrower to repay the
Loans shall be evidenced by Borrower's promissory note in the form attached
hereto as Exhibit A, dated the Closing Date and payable to the order of Lender
for the principal sum of $800,000.00, or such Loan Amount as shall be
outstanding hereunder from time to time, with interest as therein provided.
Absent manifest error, the Lender's records with respect to Loans and the
aggregate outstanding Loan Amount shall be conclusive as to amounts owed Lender
under the Note and this Agreement.
(d) Payments. Unless payment of the Loans are accelerated upon
occurrence of an Event of Default pursuant to Section 7.2 hereof, the aggregate
outstanding principal amount of the Loans, together with all accrued interest
thereon, shall be due and payable in installments as Borrower sells or otherwise
disposes of projects that are the subject of any Management Agreement, such that
the aggregate Loan Amount of all outstanding Loans made pursuant to this
Agreement shall never exceed the product of (i) the number of such projects
still owned by Borrower after such sale or other disposition, times (ii)
$100,000.00 (any such sale date with respect to which any repayment is due
hereunder, the respective "Maturity Date").
(e) Interest Rate. The Loans shall bear interest, during the period
from and including the date of funding to (but not including) the date the Loans
are paid in full, at the per annum rates set forth in the Note.
Section 2.2 Prepayment.
The principal amount of the Loan may be repaid or prepaid in full or in
part at any time prior to the Maturity Date, without premium or penalty.
Section 2.3 Manner of Payment.
(a) Each payment (including prepayments) by Borrower on account of the
principal or interest on the Loan shall be made on the dates specified for
payment under this Agreement to the Lender in lawful money of the United States
of America in immediately available funds. Any prepayment by Borrower shall set
forth in writing whether the payment is a prepayment of principal under the
Loan.
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(b) If any payment under this Agreement shall be specified to be made
upon a day which is not a Business Day, it shall be made on the next succeeding
day which is a Business Day, and such extension of time shall in such case be
included in computing interest, if any, in connection with such payment.
(c) If some or less than all amounts due from Borrower are received by
Lender, Lender shall distribute such amounts in the following order of priority:
(i) to the payment of all amounts then due and payable under this Agreement
other than interest or principal; (ii) to the payment of interest then due and
payable on the Loan; and (iii) to the repayment or prepayment of the principal
balance of the Loans.
Section 2.4 Basis of Calculation of Interest.
All interest payable hereunder shall be calculated on the basis of the
360/365 method, which computes a daily amount of interest for a hypothetical
year of 360 days, then multiplies such amount by the actual number of days
elapsed in an interest calculation period.
Section 2.5 Maximum Interest Rate.
In no event shall the amount of interest due or payable under the Note
exceed the maximum rate of interest allowed by applicable law, and in the event
that any such payment is inadvertently paid by Borrower or inadvertently
received by Lender, then such excess sum shall be credited as a payment of
principal, unless Borrower shall notify Lender, in writing, that Borrower elects
to have such excess sum returned to it forthwith. It is the express intent
hereof that Borrower not pay, and that Lender not receive, directly or
indirectly, in any manner whatsoever, interest in excess of that which would
lawfully be paid by Borrower under applicable law.
ARTICLE III
CLOSING DELIVERIES
The following deliveries shall be made simultaneously with the
execution of this Agreement:
Section 3.1 The Note.
Borrower shall deliver to Lender the Note duly executed and dated as of
the Closing Date.
Section 3.2 Evidence of Approvals.
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Lender shall have received from the Borrower copies of all such
documents and other evidence that it may reasonably request to confirm the
Borrower's authority to enter into the Agreement and the transactions
contemplated hereby, and to fully perform its obligations hereunder and
thereunder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Representations and Warranties.
Borrower hereby represents and warrants that:
(a) Organization; Power; Qualification. Borrower is a Delaware limited
liability company duly organized, validly existing and in good standing under
the laws of the state of Delaware, has the power and authority, to own or lease
and operate its properties and to carry on its businesses as now being and
hereafter proposed to be conducted and is duly qualified and is in good standing
as foreign limited liability company, and is authorized to do business, in each
jurisdiction in which the character of its properties or the nature of its
business requires such qualification or authorization, and on which failure to
so qualify would have a Material Adverse Effect on Borrower.
(b) Execution and Enforceability. This Agreement has been duly executed
and delivered by Borrower, and is, and each of the Loan Documents to which
Borrower is a party is, a legal, valid and binding obligation of Borrower,
enforceable in accordance with its terms, subject, as to enforcement of
remedies, to the following qualifications: (i) an order of specific performance
and an injunction are discretionary remedies, and in particular, may not be
available where damages are considered an adequate remedy at law, and (ii) may
be limited by bankruptcy, insolvency, liquidation, reorganization,
reconstruction and other similar laws effecting enforcement of creditors' rights
generally (insofar as any such law relates to the bankruptcy, insolvency or
similar event of the Borrower).
(c) Authorization. Borrower is duly authorized to execute, deliver and
perform its obligations under this Agreement and the Loan Documents. The
execution, delivery and performance by Borrower of this Agreement and the Loan
Documents do not and will not require any consent or approval of any
governmental agency or authority.
(d) No Conflicts. The execution, delivery and performance by the
Borrower of this Agreement and the Loan Documents (i) do not and will not
conflict with: (A) any provision of law, (B) the Borrower's operating agreement
or the Delaware Limited Liability Company Act, (C) any material agreement
binding upon Borrower, or (D) any court or administrative order or decree
applicable to Borrower, and (ii) do not and will not require, or result in, the
creation or imposition of any lien on any asset of Borrower.
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ARTICLE V
AFFIRMATIVE COVENANTS
From the date of this Agreement and thereafter until all Loans pursuant
to this Agreement, and all interest thereon, are paid in full, and unless Lender
shall otherwise consent in writing:
Section 5.1 Notices.
Borrower shall notify the Lender in writing of any of the following
immediately upon learning of the occurrence thereof, describing the same and, if
applicable, the steps being taken with respect thereto:
(a) Default. The occurrence of an Event of Default or Unmatured
Event of Default;
(b) Litigation. The institution of any litigation, arbitration
proceeding or governmental proceeding which would constitute a Material Adverse
Effect on the Borrower;
(c) Material Adverse Change. The occurrence of a material adverse
change in the business, operations or financial condition of Borrower; or
(d) Other Events. The occurrence of such other events as the Lender may
from time to time reasonably specify regarding the financial condition of
Borrower.
Section 5.2 Existence.
Borrower shall maintain and preserve its existence as a limited
liability company, and all rights, privileges, licenses, patents, patent rights,
copyrights, trademarks, trade names, and other authority to the extent material
and necessary for the conduct of its business in the ordinary course as
conducted from time to time.
Section 5.3 Books, Records and Access.
Borrower shall maintain accurate books and records in conformance with
its method of income tax accounting. Within 15 days after receiving written
notice from Lender, Borrower shall permit reasonable access by the Lender to the
books and records of Borrower during normal business hours and permit the Lender
to make reasonable copies of such books and records.
Section 5.4 Insurance.
Borrower shall maintain insurance to such extent and against such
hazards and liabilities as is commonly maintained by companies similarly
situated.
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Section 5.5 Repair.
Borrower shall maintain, preserve and keep its properties in good
repair, working order and condition, and from time to time make all necessary
and proper repairs, renewals, replacements, additions, betterments and
improvements thereto so that at all times the efficiency thereof shall be fully
preserved and maintained except for where the failure to comply with this
Section 5.5, individually or in the aggregate, does not have a Material Adverse
Effect on Borrower.
Section 5.6 Taxes.
Borrower shall pay when due, all of its Taxes, unless and only to the
extent that Borrower is contesting such Taxes in good faith and by appropriate
proceedings and Borrower has set aside in its books reasonable reserves
therefor.
Section 5.7 Compliance.
Borrower shall comply with all statutes and governmental rules and
regulations applicable to it, except where the failure to comply with this
Section 5.7, individually or in the aggregate, does not have a Material Adverse
Effect on the Borrower.
ARTICLE VI
NEGATIVE COVENANTS
From the date of this Agreement and thereafter until the Loan Amount,
and all interest thereon, is paid in full, and unless Lender shall otherwise
consent in writing:
Section 6.1 Liquidation, Merger or Sale.
Borrower shall not, without the prior written consent of Lender:
(a) liquidate or dissolve itself (or suffer any liquidation or
dissolution) or otherwise windup its affairs;
(b) sell, lease, abandon, transfer or otherwise dispose of any real
property or of any personal property having a value of in excess of $25,000; or
(c) be party to any merger or consolidation.
Section 6.2 Liens.
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<PAGE> 8
Borrower shall not create, incur or suffer to exist, any lien
(including, without limitation, any pledge, assignment, mortgage, title
retaining contract or other type of security interest) to exist on any of the
assets or property (real, personal or mixed, tangible or intangible) of the
Borrower, other than:
(i) Liens for Taxes not delinquent or for Taxes being contested
in good faith by appropriate proceedings and as to which adequate
financial reserves have been established on Borrower's books and
records;
(ii) Liens created in connection with workmen's compensation,
unemployment insurance, and social security, or to secure the
performance of bids, tenders or contracts (other than for the repayment
of borrowed money), leases, statutory obligations, surety and appeal
bonds, and other obligations of like nature made in the ordinary course
of business;
(iii) Each lien existing on the date hereof; or
(iv) Liens created in connection with purchase money mortgages or
security interests granted to secure the purchase price of assets, the
purchase of which does not violate this Agreement or any instrument
required hereunder.
Section 6.3 Distributions.
Borrower shall not make any distribution, directly or indirectly,
whether in cash or in other property, on account of or for the benefit of its
members, other than payments or distributions to Lender pursuant to this
Agreement, the other Loan Documents or any other loans made to Borrower by
Lender.
ARTICLE VII
EVENTS OF DEFAULT & REMEDIES
Section 7.1 Events of Default.
An Event of Default shall have occurred under this Agreement:
(a) Non-payment. If Borrower shall default in the payment when due of
any principal of, or interest on, the Loan, and such default shall not be cured
within three (3) Business Days following notice thereof from Lender.
(b) Insolvency. If Borrower becomes insolvent, or generally fails to
pay, or admits in writing its inability to pay, its debts as they mature, or
applies for, consents to, or acquiesces in, the appointment of a trustee,
receiver or other custodian for Borrower or for a substantial part of the
property of Borrower, or makes a general assignment for the benefit of
creditors;
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<PAGE> 9
or, in the absence of such application, consent or acquiescence, a trustee,
receiver or other custodian is appointed for Borrower or for a substantial part
of the property of the Borrower and is not discharged within sixty days; or any
bankruptcy, reorganization, debt arrangement or other proceeding under any
bankruptcy or insolvency law, or any dissolution or liquidation proceeding, is
instituted by or against Borrower and, if instituted against Borrower, is
consented to or acquiesced in by Borrower or remains for sixty days undismissed;
or any warrant of attachment or similarly legal process is issued against any
substantial part of the property of Borrower which is not released within sixty
days of service.
(c) Representations and Warranties. If any representation or warranty
made under this Agreement or any statement in any certificate given by Borrower
hereunder shall be untrue, incorrect or misleading in any material respect when
made or given.
(d) Covenants. If Borrower shall default in the performance or
observance of any covenant set forth in Article V or Article VI hereof and, with
respect to any covenant set forth in Section 5.1, 5.3, 5.4, 5.5, 5.6 or 5.7,
such default shall not be cured within thirty (30) days following notice thereof
from Lender to Borrower.
(e) If there is an event of default under any of the Loan Documents,
subject to any applicable period of grace.
(f) Other Obligations. If, subject to any applicable grace period,
Borrower (i) fails to pay any indebtedness or other obligations, direct or
indirect, for borrowed money in an amount in excess of $25,000.00 (other than as
evidenced by this Agreement or the Note) owing by Borrower when due, whether at
maturity, by acceleration or otherwise, or (ii) fails to perform any term,
covenant or agreement on its part to be performed under any agreement or
instrument (other than this Agreement or under the Loan Documents) evidencing or
securing or relating to such indebtedness or other obligations, when required to
be performed, and, if as the result of such failure, the maturity date of such
indebtedness or other obligations has been accelerated.
(g) Judgments. If Borrower fails to satisfy or stay the execution by
appropriate proceedings of any judgment rendered against it in excess of
$25,000.
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Section 7.2 Remedies.
If an Event of Default shall have occurred and shall be continuing,
Lender shall have the right at its option, and in its sole discretion, to
declare all amounts outstanding under the Note and this Agreement to be
immediately due and payable (except that if an event described in Section 7.1(b)
occurs, all amounts outstanding under the Note and this Agreement shall
automatically become immediately due and payable). Lender shall promptly advise
Borrower, in writing, of any such declaration, but failure to do so shall not
impair the effect of such declaration. Lender shall also be entitled to exercise
any and all remedies available to it, at law or equity.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Waiver and Amendments.
No failure or delay on the part of Lender in the exercise of any power
or right, and no course of dealing between Borrower and Lender, shall operate as
a waiver of such power or right, nor shall any single or partial exercise of any
power or right preclude other or further exercise thereof or the exercise of any
other power or right. Remedies provided for herein are cumulative and not
exclusive of any remedies which may be available to the Lender at law or in
equity. No notice to or demand on the Borrower required hereunder or under the
Note shall in any event entitle Borrower to any other or further notice or
demand in similar or other circumstances or constitute a waiver of the right of
Lender to any other or further action and any circumstances without notice or
demand. No amendment, modification or waiver of, or consent with respect to, any
provision of this Agreement or the Note shall in any event be effective unless
the same shall be in writing and signed and delivered by Lender. Any waiver of
any provision of this Agreement or the Note, and any consent to any departure by
Borrower from the terms of any provision of this Agreement or the Note, shall be
effective only in the specific instance and for the specific purpose for which
given.
Section 8.2 Notices
All notices and other communications required or permitted under this
Agreement shall be in writing and, if mailed by prepaid first-class mail, or
certified mail, return receipt requested, shall be deemed to have been received
on the earlier of the date shown on the receipt or three (3) Business Days after
the post-mark date thereof and, if by telecopy, shall be followed forthwith by
letter and shall be deemed to have been received upon dispatch and
acknowledgment of receipt by the recipient's telecopier machine. In addition,
notices hereunder may be delivered by hand in which event the notice shall be
deemed effective when delivered or by overnight courier, in which event the
Notice shall be deemed delivered the day after it is accepted by the courier for
next day delivery. All notices and other communications under this Agreement
shall be given to the parties hereto at the following addresses:
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(i) If to Borrower:
Third Party Investors I, L.L.C.
c/o McDonald Investments, Inc.
250 Pearl Street, N.W.
Grand Rapids, Michigan 49503
Attn: Randall S. Damstra
Fax: (616) 732-3394
with a copy to (which shall not constitute notice):
Hecht & Lentz
333 Bridge, N.W., Suite 330
Grand Rapids, Michigan 49504
Attn: David M. Hecht, Esq.
Fax: (626) 776-7203
(ii) If to Lender:
Alternative Living Services, Inc.
450 N. Sunnyslope Road
Suite 300
Brookfield, Wisconsin 83005
Attn: President and CEO
Fax: 414-789-6677
with a copy to (which shall not constitute notice):
Rogers & Hardin LLP
229 Peachtree Street, N.E.
2700 International Tower
Atlanta, Georgia 30303
Attn: Alan C. Leet, Esq.
Fax: 404-525-2224
Any party hereto may change the address to which notices shall be
directed under this Section by giving written notice of such change to the other
parties.
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Section 8.3 Severability.
Any provision of this Agreement 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 the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
Section 8.4 Governing Law.
This Agreement shall be construed under and governed by the laws of the
state of Wisconsin, without giving effect to its principles of conflicts of
laws.
Section 8.5 Successors and Assigns.
This Agreement shall be binding upon Borrower and Lender and their
respective successors and assigns, and shall inure to the benefit of Borrower
and Lender and their successors and assigns. Neither Borrower nor Lender shall
assign its rights or delegate its duties hereunder without the consent of the
other party.
Section 8.6 Headings.
Headings used in this Agreement are for convenience only and shall not
be used in connection with the interpretation of any provision hereof.
Section 8.7 Counterparts.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which counterparts shall
together constitute one and the same instrument.
Section 8.8 Expenses.
Borrower agrees to pay, and hold Lender harmless from liability for the
payment of, all reasonable costs and expenses of Lender (including reasonable
fees and expenses of counsel) in connection with any Event of Default or the
enforcement of this Agreement.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by the undersigned thereunto duly authorized as of the date first
written above.
ALTERNATIVE LIVING SERVICES, INC.,
a Delaware corporation
By: /s/ Mark W. Ohlendorf
----------------------------------------
Title: Senior Vice President
-------------------------------------
THIRD PARTY INVESTORS I, L.L.C.
a Delaware limited liability company
By: /s/ John Meilner
---------------------------------------
Title: Authorized Agent
-------------------------------------
<PAGE> 1
EXHIBIT 10.14
[TPI GROUP 2]
DEVELOPMENT AGREEMENT
(CLARE BRIDGE OF BRICK TOWNSHIP)
THIS DEVELOPMENT AGREEMENT (the "Agreement") is made as of the 31st day
of March, 1999, by and between ALTERNATIVE LIVING SERVICES, INC., a Delaware
corporation ("Developer"), and THIRD PARTY INVESTORS I, L.L.C., a Delaware
limited liability company ("Owner").
WHEREAS, pursuant to a Purchase and Sale Agreement dated as of March
31, 1999 ("Purchase Agreement"), Owner has purchased the right to acquire,
develop and own an assisted living project (the "Facility") to be located in
_____________, _____________ County, _______________, as more particularly
described on Exhibit A (the "Site"; together with the Facility, the "Project");
WHEREAS, Owner wishes to engage Developer for certain development,
design and construction services with respect to the Facility, and Developer
desires to provide such services, pursuant to the terms set forth herein; and
WHEREAS, Owner and Developer desire herein to amend and restate the
Original Development Agreement is its entirety as of said effective date.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
APPOINTMENT OF DEVELOPER AND TERM
1.1 Appointment of Developer. Owner hereby appoints Developer and
Developer hereby accepts appointment, subject to the terms and conditions of
this Agreement, as development agent to provide certain development, design and
construction management services with respect to the Project.
1.2 Term. This Agreement shall begin upon execution by the parties and,
unless sooner terminated as provided in this Agreement, continue until the date
that the Facility is issued a certificate of occupancy (the "Term").
ARTICLE II
DUTIES AND RIGHTS OF DEVELOPER
2.1 Approval of Site. Developer has presented the Site to Owner for
approval, and Owner's execution of this Agreement evidences Owner's approval of
the Site subject to the terms and conditions of this Agreement. Developer shall
provide to Owner with respect to the Site, upon its request: (i) title and
survey information, and (ii) a Phase I environmental site assessment.
2.2 Site Development Services. If as of the date hereof, the Site is
not properly zoned for the construction and operation of the Facility, then
Developer shall seek to obtain any required rezoning for the Site to a zoning
classification (or approved special exception or similar waiver) such that the
Facility may lawfully be constructed on the Site.
2.3 Project Budget Services. Developer shall provide budgeting services
as set forth in this Section 2.3. Developer has provided to Owner a detailed pro
forma budget for the development and
<PAGE> 2
construction of the Project, setting forth all project costs, including all
development, marketing, management, guaranty fees and other costs to be paid to
Developer and any affiliates thereof. The parties hereby specifically
acknowledge that the pro forma budget includes a line item for working
capital/operating loss reserves and a contingency amount equal to five percent
(5.0%) of all known costs relating to the development, design and construction
management services provided hereunder in respect of the Facility. Developer
hereby represents that only the direct costs and expenses incurred by it and its
affiliates in the development and construction of the Project are included in
the pro forma budget, taking into account for this purpose as an element of said
direct costs all compensation of whatever nature payable to employees or other
personnel of ALS and its affiliates attributable to time spent directly on the
development and construction of the Project (including, without limitation, any
employee benefits provided to such personnel, whether or not taxable, on a
current basis or otherwise, as compensation to said personnel). Once approved by
Owner (with any revisions thereto mutually agreed upon by Developer), such pro
forma budget shall constitute the "Development Budget" for all purposes hereof
and shall be attached hereto as Exhibit "B" and thereupon become a part hereof.
The Development Budget shall be subject to the review and approval of the
construction lender for the Project. If the construction lender requires any
revisions to the Development Budget, then Owner and Developer shall cooperate in
making such revisions which shall be subject to their mutual approval, not to be
withheld unreasonably.
2.4 Design and Construction Management Services. Developer shall
provide the following design and construction management services to Owner,
except to the extent that Owner determines such services are no longer necessary
to be provided in light of the stage of development of the Project as of the
date hereof:
a. Submit to Owner for Owner's review and approval overall design plans
and schematic drawings. After approval of such preliminary plans and drawings,
Developer shall oversee the preparation of final architectural and construction
plans, which shall be submitted to Owner for its review and approval;
b. Provide and/or coordinate with third-party architects and engineers
all necessary architectural services for the Facility, including architectural,
structural, mechanical, electrical and plumbing/fire protection engineering
services;
c. Coordinate preparation of all design development documents,
including all architectural, structural, electrical, mechanical and plumbing
plans and specifications necessary for the construction of the Facility;
d. Coordinate all civil engineering services required for the Facility
as well as all services necessary for approval, acceptance and securing
construction permits from appropriate federal, state and/or local governmental
authorities having jurisdiction over the Site;
e. Prepare all construction bid documents, secure bids from the general
contractor, and assist Owner in negotiating the terms of the construction
contract. After Owner has approved the terms of the construction contract,
Developer shall have the authority to execute the construction contract as agent
for Owner;
f. Develop and review critical path schedules and updates and assist
the general contractor in developing the project schedule and updates;
g. Discuss and review with the general contractor its means and methods
of construction;
2
<PAGE> 3
h. Discuss and review with the general contractor permitting approval
and licensing issues and requirements necessary to complete and open the
Facility, and obtain (or cause the general contractor to obtain) all required
permits;
i. Perform construction management and cost control services, including
assisting Owner in obtaining the most favorable prices for construction,
equipment, finishes and furnishings, and making recommendations to Owner
regarding change orders, extensions of time and increases or decreases in the
contract sum;
j. Monitor and evaluate construction progress and make recommendations
to the general contractor and Owner as deemed necessary;
k. Assist in the resolution of critical issues impacting the progress
of work, and monitor architectural supplemental instructions and requirements
for information;
l. Provide quality control and the early detection of defects in
workmanship;
m. Review punch list items and assist in the close-out of the project;
and
n. Coordinate opening date for the Facility with Owner and the
Facility's managing agent (the "Manager").
2.5 Expenses. Owner shall provide any and all funds needed for
Developer to perform the development, design and construction management
services, as set forth in the Development Budget, and Owner shall be solely
responsible to all third-parties (i.e., engineers, attorneys and consultants) as
set forth in the Development Budget. Notwithstanding the foregoing, Developer
shall be authorized to advance, on Owner's behalf, all funds needed for
Developer to perform the development, design and construction management
services hereunder. Owner shall reimburse Developer for all Project Costs
(hereinafter defined) incurred in conjunction with the development and
construction of the Project. Developer acknowledges that all Project Costs
incurred prior to the Owner's acquisition of the Site were paid to Developer at
the closing of the Purchase Agreement, with the exception of any adjustment with
respect to the "Estimated Expenses" component of the Purchase Price paid by
Owner for the Facility pursuant to Section 2 of that certain Agreement for
Purchase and Sale of even date herewith (the "Purchase Agreement"). For purposes
of this Agreement, "Project Costs" means all such items of cost and expense
incurred by Developer in connection with the development, construction and
leasing-up of the Project, including without limitation (i) all items of cost
that Developer would normally capitalize as a component of the cost of a project
together with related preopening and start-up costs and losses; (ii) Developer's
direct cost (including costs of employees assigned to such project) associated
with performing market research, development and construction management
services, professional fees paid to third parties, and amounts paid under
construction contracts (including costs related to the general conditions of a
construction projection; (iii) to the extent Developer shall advance funds
toward the development, construction or leasing-up of the Project, the
Developer's imputed construction period interest; (iv) fees and expenses related
to debt financing for the Project; (v) contingency reserves and (vi) the
Development Fee (hereinafter defined); but only to the extent such items of cost
and expense are not payable pursuant to the Management Services and Consulting
Agreement between Owner and Developer relating to the management of the Project.
Project Costs incurred by the Developer shall be paid by Owner to Developer
within ten (10) days of Developer submitting its invoice to Owner detailing
same.
3
<PAGE> 4
2.6. Guarantee of On-Budget Completion. As soon as practicable after
execution hereof, Developer will provide Owner a guaranty of on-budget
completion, reasonably acceptable in form to Owner, related to the aggregate
Project Costs actually incurred for the Project and the seven (7) other projects
acquired by Owner from Developer pursuant to the Purchase Agreement and with
respect to which Developer has entered into a development agreement with Owner
similar to this Agreement (the "Other Projects"), which guaranty shall include
commercially customary exclusions and mechanisms by which Owner and Developer
may approve project change orders for the Project and such other projects.
ARTICLE III
DEVELOPER'S COMPENSATION
3.1 Development Fee. For the development, design and construction
management services provided pursuant to this Agreement, Developer shall be paid
a fee equal to seven percent (7%) of the Development Budget (the "Development
Fee"), which shall be deemed earned by Developer and payable by Owner as
follows:
(1) Upon completion of market approval, Site zoning and
permitting and closing of the Site acquisition (land closing), an
amount (the "Initial Payment") equal to five percent (5%) of the then
projected aggregate Project Cost based on the Development Budget (or if
such budget is not then finalized, as estimated in good faith by
Developer); and
(2) Upon the issuance of a certificate of occupancy for the
Facility, a final payment equal to (a) seven percent (7%) of the
aggregate Project Costs actually incurred in connection with the
Project less (b) the Initial Payment already paid pursuant to clause
(1) of this Section 3.1.
Current estimates of the Development Fee payable at the above-respective times
are set forth on Exhibit "C" hereto (along with similar estimates for the Other
Projects).
ARTICLE IV
TERMINATION
4.1 Termination Upon Opening. This Agreement shall terminate on the
date the Facility is issued a certificate of occupancy, unless sooner terminated
pursuant to the provisions hereof, provided that Owner's obligation to pay the
Development Fee and Developer's guaranty obligation (if any) under Section 2.6
shall survive such termination.
4.2 Termination for Default. In the event that either Owner or
Developer is in default under any material term or condition of this Agreement
or any other agreement between the Owner and Developer and fails either to cure
or comply with such term or condition or to diligently pursue such cure within
forty-five (45) days after the service of written notice of default, then the
other of them may, at the expiration of such 45-day period or such longer period
as may be reasonably necessary to cure such default, cancel and terminate this
Agreement upon ten (10) days' written notice; provided, however, that Owner may
cancel and terminate this Agreement immediately upon written notice to ALS in
connection with the sale of the Facility to a third party by reason of a
financing default of ALS as set forth in Section 3.c of the Purchase Rights and
Financing Agreement dated as of March 31, 1999, so long as Owner first repays
all indebtedness to Developer set forth in such provision as a condition to such
termination and otherwise fulfills any other conditions set forth therein. Upon
any such termination by Developer due to Owner's default (which may include
Owner's failure to proceed with the acquisition of title to the Site), the
unpaid balance of the Development Fee shall be fully due and payable.
4
<PAGE> 5
4.3 Bankruptcy of Either Party. If either Owner or Developer shall
cease to exist, for any reason, during the term of this Agreement, or in the
event a petition in bankruptcy, arrangement or reorganization is filed by or
against either of them and such petition is not dismissed within sixty (60)
days, or if either or them shall make an assignment for the benefit of creditors
or take advantage of any insolvency law, the other of them may forthwith
terminate this Agreement.
4.4 Suspension of Performance. If development of the Facility
contemplated under this Agreement is suspended for any reason described in
Section 5.4 below, including, without limitation, any cause beyond the
reasonable control of the parties hereto, then upon written notice by the Owner
to Developer (the "Notice of Suspension"), Owner may at its option (i) terminate
this Agreement without further liability to either party or (ii) suspend
Developer's performance of its obligations under this Agreement for a period of
ninety (90) days. Owner may terminate such suspension and re-commence
development of the Facility by written notice to Developer whereupon Developer
shall re-commence performing its obligations under this Agreement within thirty
(30) days of receipt of such notice.
ARTICLE V
MISCELLANEOUS PROVISIONS
5.1 Standard of Performance. Developer will devote its best efforts to
the development of the Facility as contemplated by this Agreement and will act
in good faith to cause the completion of the Facility in accordance with the
terms and conditions of this Agreement.
5.2 Proprietary Information. Any and all architectural, structural,
engineering or other construction drawings, designs, systems and methodologies
furnished by Developer or its agents to Owner in connection with the design or
construction of, or otherwise integrated in, the Facility ("Proprietary
Information") are proprietary and are the property of Developer. Owner shall not
use any Proprietary Information or cause to have any such Proprietary
Information disseminated to any third party without the written consent of
Developer; provided, however, that with respect to any such Proprietary
Information provided to Owner or integrated in the Facility, the Developer
hereby grants to Owner a non-exclusive, perpetual, transferable license to use
such Proprietary Information solely in conjunction with the ownership and/or
operation of the Facility at the Site. Without prejudice to any rights and
remedies otherwise available to Developer, Developer shall be entitled to
equitable relief by way of injunction if Owner breaches this Section 5.2. No
failure or delay by Developer in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege hereunder. Owner agrees to indemnify
Developer for any costs and expenses, including legal expenses, Developer may
incur in connection with the enforcement of this Section 5.2.
5.3 Consent. Any consent, approval or other action required or
requested under or in connection with this Agreement shall not unreasonably be
withheld or delayed and any request made or direction given hereunder or in
connection herewith shall be reasonable, it being the intention and expectation
of Owner and Developer that neither shall be capricious or arbitrary under or in
connection with this Agreement. Any determination of reasonableness under this
Section shall be made in light of the objectives of Owner, which objectives
include, without limitation, the maximization of profit and the development and
operation of the Facility as a high-quality commercially successful assisted
living community.
5.4 Force Majeure. With respect to any services to be furnished or
obligations to be performed hereunder, no party shall ever be liable for failure
to furnish or perform the same when prevented from doing so by Acts of God,
contractor delays, strike, lockout or labor unrest, explosion,
5
<PAGE> 6
sabotage, breakdown, accident, order or regulation of or by any governmental
authority, or failure of supply, or inability despite the exercise of reasonable
diligence to obtain supplies, parts or employees or others necessary to furnish
such services, or because of war, riot, civil commotion or other emergency, or
for any cause beyond its reasonable control; provided, however, that the lack of
financial resources shall never be excused.
5.5 Assignment and Subcontract. Except as specifically provided in this
Agreement, neither Owner nor Developer may assign any of its rights or delegate
any of the obligations specified in this Agreement without the prior written
consent of the other party. Developer may not subcontract any of its obligations
under this Agreement, except to its affiliates, without the prior written
consent of Owner. Notwithstanding any such subcontracting permitted or approved
hereunder, Developer will remain primarily liable for the performance of its
obligations under this Agreement.
5.6 Benefits of Agreement. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors, assigns,
legal representatives and heirs, but nothing contained in this Section shall be
deemed to constitute a consent to any assignment otherwise restricted by this
Agreement.
5.7 Indemnification.
a. Owner and Developer each agree that the other shall be and is
indemnified, defended, exonerated, and held harmless of, from and against any
claim, loss, cost, damage, expense or other liability arising out of performance
or failure to perform under this Agreement, excepting only liability
attributable to negligence, willful misconduct or willful, wanton or reckless
failure by the other party, its agents, servants, employees or independent
contractors to perform its or their respective obligations under this Agreement.
b. A person entitled to indemnification under this Section shall give
notice to the indemnitor of the claim or other circumstances giving rise to a
request for indemnification, promptly after becoming aware of same. If the
indemnitor does not notify the person to be indemnified that it has assumed the
defense of such claim within a fifteen (15) day period after receipt of the
notice of the request for indemnification, then the person entitled to
indemnification may assume the defense of such claim on behalf and at the
expense of the indemnitor. Any compromise or settlement of any such claim shall
be made only with the prior consent of the indemnitor, provided that such
consent shall not be delayed or unreasonably withheld. If the indemnitor
notifies the person to be indemnified that it has assumed the defense of such
claim, the indemnitor may compromise or settle any claim for which
indemnification is available under this Section, and the party entitled to
indemnification may participate in the defense of such claim with its own legal
counsel at its own expense.
5.8 Modification. Except as otherwise provided herein, neither this
Agreement nor any provision hereof can be modified, changed, discharged,
extended or terminated except by an instrument in writing executed by the party
against whom enforcement is sought.
5.9 Waiver. The failure to insist upon strict compliance with any of
the terms, covenants or conditions herein on one or more occasions shall not be
deemed a waiver of such terms, covenants or conditions nor shall such failure
impose any obligation to provide notice that strict compliance will be expected
in the future, nor shall nay waiver or relinquishment of any right at any one or
more times be deemed a waiver or relinquishment of such right at any other time
or times.
6
<PAGE> 7
5.10 Notices. All notices, demands, consents, approvals, and requests
given by either party to the other hereunder shall be in writing and shall be
sent by hand, by overnight courier, or by registered or certified mail, return
receipt requested, postage prepaid, to the parties at the following addresses:
If to ALS:
ALTERNATIVE LIVING SERVICES. INC.
450 North Sunnyslope Road
Suite 300
Brookfield, WI 53005
Attn: William F. Lasky
Telephone: 414/789-9565
Fax: 414/789-9592
With a copy to:
Rogers & Hardin LLP
2700 International Tower
229 Peachtree Street, NE
Atlanta, GA 30303
Attn: Alan C. Leet, Esq.
Telephone: 404/420-4616
Fax: 404/522-2224
If to Owner:
Third Party Investors I, L.L.C.
c/o McDonald Investments, Inc.
250 Pearl Street, N.W.
Grand Rapids, Michigan 49503
Attn: Randall S. Damstra
Telephone: 616/732-3396
Fax: 616/732-3394
With a copy to:
Hecht & Lentz
333 Bridge, N.W., Suite 330
Grand Rapids, Michigan 49504
Attn: David M. Hecht, Esq.
Telephone: 616/776-7200
Fax: 616/776-7203
or to such other address and to the attention of such other person as either
party may from time to time designate in writing. Notices shall be effective
upon receipt. Refusal to accept delivery shall constitute receipt.
7
<PAGE> 8
5.11 Severability. If any term or provision of this Agreement or the
application thereof to any person or circumstance is held to be invalid or
unenforceable for any reason, the remainder of this Agreement, or the
application of such term or provision to persons or circumstances other than
those as to which it is held invalid or unenforceable, shall not be affected
thereby, and each term and provision of this Agreement shall be valid and be
enforced to the fullest extent permitted by law, but only to the extent the same
continues to reflect fairly the intent and understanding of the parties
expressed by this Agreement taken as a whole.
5.12 Governing Law. To the maximum extent the parties hereto may
lawfully agree, this Agreement shall be governed by, and construed in accordance
with, the laws of the State of Wisconsin without regard to conflict of laws
principles, and shall be enforced in the state and federal Courts located in the
State of Wisconsin. Each of the parties to this Agreement submits to the
jurisdiction of the courts of that state and agrees that process may be served
upon it by registered or certified mail addressed as provided in Section 5.10.
5.13 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same document.
5.14 Mediation. The parties agree that any disputes arising hereunder
shall be submitted to non-binding mediation in accordance with the rules of the
American Arbitration Association prior to the commencement of litigation by
either patty. Any applicable statute of limitation or repose shall be tolled
from the date of filing of the request for mediation with the American
Arbitration Association until ten (10) days after the mediation is concluded.
[Signature Page Follows]
8
<PAGE> 9
IN WITNESS WHEREOF, the parties have caused their duly authorized
representatives to execute and deliver this Agreement as of the date first above
written.
DEVELOPER:
ALTERNATIVE LIVING SERVICES, INC.
By: /s/ Mark W. Ohlendorf
----------------------------------
Title: Senior Vice President
OWNER:
THIRD PARTY INVESTORS I, L.L.C.
By: /s/ John Meilner
----------------------------------
Title: Authorized Agent
9
<PAGE> 10
Exhibit C
Development Fees
(TPI Group 2)
<TABLE>
<CAPTION>
NJ NJ FL AZ AZ CA
Brick Ocean Florence Cape Coral Scottsdale I Scottsdale II Bakersfld I
Clare Bridge Sterling House Clare Bridge Clare Bridge Crossings Sterling Cottage
<S> <C> <C> <C> <C> <C> <C>
Development Fee
5% Fee - At Land Closing 295,445 192,599 189,080 - - 194,154
- -----------------------------------------------------------------------------------------------------------------------
2% Fee - At Certificate 118,178 77,039 75,632 - - 77,662
of Occupancy
- -----------------------------------------------------------------------------------------------------------------------
TOTAL DEVELOPMENT FEE 413,623 269,638 264,712 TBD TBD 271,815
=======================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
CA NV
Bakersfld II Tropicana TOTAL
Sterling House Clare Bridge
<S> <C> <C> <C>
Development Fee
5% Fee - At Land Closing 165,907 291,218 1,328,403
- --------------------------------------------------------------------------------
2% Fee - At Certificate 66,363 116,487 531,361
of Occupancy
- --------------------------------------------------------------------------------
TOTAL DEVELOPMENT FEE 232,270 407,705 1,859,764
================================================================================
</TABLE>
<PAGE> 11
EXHIBIT LIST
Exhibit A - Description of Site
Exhibit B - Development Budget
Exhibit C - Development Fee
<PAGE> 1
EXHIBIT 10.15
SCHEDULE OF DEVELOPMENT AGREEMENTS
WHICH ARE SUBSTANTIALLY IN THE FORM OF DEVELOPMENT AGREEMENT
ATTACHED AS EXHIBIT 10.14 TO THE
COMPANY'S FORM 10-Q
FOR THE PERIOD ENDING 3/31/99
<TABLE>
<CAPTION>
DATE OF
FACILITY TYPE LOCATION DEVELOPMENT AGREEMENT
- ------------- --------- ---------------------
<S> <C> <C>
Clare Bridge Louisville, Colorado December 31, 1998
Clare Bridge Highland Ranch, Colorado December 31, 1998
Sterling Cottage Savannah, Georgia December 31, 1998
Sterling House Raleigh, North Carolina December 31, 1998
Sterling Cottage Raleigh, North Carolina December 31, 1998
Sterling House Hilton Head, South Carolina December 31, 1998
Sterling Cottage Hilton Head, South Carolina December 31, 1998
Clare Bridge Brandon, Florida December 31, 1998
Clare Bridge Brick Ocean, New Jersey March 31, 1999
Sterling House Florence, New Jersey March 31, 1999
Clare Bridge Cape Coral, Florida March 31, 1999
Clare Bridge Scottsdale, Arizona March 31, 1999
Crossings Scottsdale, Arizona March 31, 1999
Sterling Cottage Bakersfield, California March 31, 1999
Sterling House Bakersfield, California March 31, 1999
Clare Bridge Tropicana, Nevada March 31, 1999
</TABLE>
<PAGE> 1
EXHIBIT 10.16
ASSISTED LIVING CONSULTANT AND MANAGEMENT SERVICES AGREEMENT
(Clare Bridge of Brick Township)
THIS ASSISTED LIVING CONSULTANT AND MANAGEMENT SERVICES AGREEMENT (the
"Agreement") is made and entered into as of March 31, 1999 by and between
ALTERNATIVE LIVING SERVICES, INC., a Delaware corporation ("ALS"), and THIRD
PARTY INVESTOR I, L.L.C., a Delaware limited liability company ("Owner").
WITNESSETH:
WHEREAS, Owner is developing a facility described in Exhibit A,
attached hereto and incorporated herein by this reference (the "Facility"), to
provide assisted living, dementia and/or specialty care services to the elderly;
WHEREAS, ALS is engaged in the business of providing consultant and
management services to owners and operators of assisted living, dementia and
other specialty care facilities ("Assisted Living Facilities") and has acquired
and/or developed procedures, systems, controls and forms to assist owners of
Assisted Living Facilities in the operation and management of such facilities;
and
WHEREAS, it is in the best interest of the Owner to contract for
consultant and management services to facilitate better operation and management
of the Facility, and ALS proposes to provide such services on a contract basis
to Owner.
NOW, THEREFORE, in consideration of the premises and of the promises
and agreements hereinafter set forth and for other good and valuable
consideration, the adequacy and sufficiency of which is hereby acknowledged,
Owner and ALS mutually agree as follows:
ARTICLE 1
MANAGEMENT AND OPERATION OF THE FACILITY
1.1 Management and Operation. During the term of this Agreement, ALS
will manage and operate the Facility in accordance with this Agreement. ALS
shall perform the services required by this Agreement in accordance with the
same procedures, practices and techniques ALS uses in performing such services
for other Assisted Living Facilities, shall seek to achieve a level of operating
quality (subject to budgetary restraints and Owner directives) that is at least
as high as that of other Assisted Living Facilities operated by ALS and shall
perform such services in accordance with customary industry standards and all
applicable federal, state and local laws, rules and regulations, orders,
judgments and decrees (hereinafter collectively referred to as "Laws"). Subject
to the provisions hereof and only to the extent permitted by applicable Laws,
Owner hereby delegates to ALS, and on and subject to the terms and conditions
hereof ALS hereby accepts and assumes, complete control and responsibility for
the management and
<PAGE> 2
operation of the Facility, and ALS shall use commercially reasonable efforts
to exercise such control and responsibility. Without limiting the generality
of the foregoing and subject to the provisions of this Agreement, ALS shall
have the following powers and authorities in connection with the performance of
its duties hereunder:
1.1.1 ALS shall enter into contracts and take such other
actions in the name of the Owner as ALS deems appropriate, in its reasonable
judgment, to assure an adequate supply of electricity, gas, fuel, water,
telephone, television, pest control, linen, garbage removal, snow removal,
elevator maintenance, landscaping services and any other services as may
reasonably be required for the proper operation and maintenance of the Facility.
1.1.2 ALS shall supervise the purchase of such inventories,
food, beverages, provisions, supplies and equipment required to properly
maintain and operate the Facility and to contract for the purchase of the same
in the name of Owner.
1.1.3 ALS may take such steps and file such applications and
reports (in the name of Owner or ALS, if required or if deemed appropriate in
the reasonable judgment of ALS) as may be required to comply with the provisions
of applicable Laws, including obtaining all necessary licenses and permits.
1.1.4 ALS may retain the services of counsel, accountants and
other professional consultants as ALS may deem necessary in its judgment for the
purpose of carrying out ALS's duties hereunder.
1.1.5 ALS may, in its own judgment, initiate in the name of
and at the expense of Owner, any and all legal actions or proceedings necessary
to collect charges or other income due the Facility, to enforce any agreements
between the Facility and third parties, to collect damages for breach or default
by any such third party, to adjust, compromise and settle all accounts, claims,
disputes and differences which the Owner may have in connection with the
operation of the Facility and to write off or make allowance for such accounts,
claims, disputes and differences as ALS may deem necessary in its judgment, so
long as, in the reasonable judgment of ALS, there is no material adverse affect
to Owner or the Facility from any such action.
1.1.6 ALS may recruit, negotiate with, hire, train, supervise,
promote, assign, establish the compensation level of, settle labor grievances
with respect to, and discharge all personnel deemed by ALS, in its own judgment,
to be necessary for the proper operation and maintenance of the Facility. All of
the employees performing services at the Facility pursuant to this Agreement
shall be employees of ALS. All salary, fringe benefits and other costs and
expenses of employment relating to the employees of Owner or ALS who perform
on-site services on a day-to-day basis at the Facility ("Facility Personnel")
shall be at Owner's expense (including the reasonably allocable cost of any such
on-site personnel whose services may be provided to more than one facility
(e.g., sales staff)). All salaries, fringe benefits and other costs and expenses
of employment for ALS employees who perform services for the Facility but who
are not Facility Personnel ("Corporate Personnel"), including, without
limitation, the Regional Director, Registered Dietician, Director of Marketing
and other corporate management of ALS,
2
<PAGE> 3
shall be at ALS's expense. The parties recognize that Corporate Personnel shall
have responsibility for multiple facilities, and will not be exclusively
dedicated to the Facility.
1.2 Independent Contractor. ALS has entered into this Agreement as an
independent contractor. Except as expressly provided herein, nothing shall be
construed or interpreted to be a delegation by Owner to ALS of any duties,
powers or responsibilities of Owner, agents or representatives, arising out of
Owner's ownership or operation of the Facility.
1.3 Non-Exclusive License. During the term of this Agreement and for a
period of ninety (90) days after termination hereof, ALS hereby grants to Owner,
subject to all the terms, provisions and conditions contained herein, a
non-exclusive license to operate the Facility utilizing the ALS System
(hereinafter defined) and ALS Marks (hereinafter defined), or such portion
thereof, as ALS shall elect to utilize in managing and operating the Facility in
accordance herewith. An election by ALS to use a certain Mark or Marks in the
operation of the Facility will not be changed without the approval of the Owner,
which approval shall not be withheld unreasonably.
1.3.1 For purposes of this Agreement, (i) "ALS System" shall
mean all formats, systems, methods, specifications, standards, procedures and
trade dress developed or utilized by ALS in operating or managing Assisted
Living Facilities, as modified from time to time; and (ii) ALS "Marks" shall
mean all service marks, trademarks, logos and commercial symbols, and any
associated designs, owned, developed or utilized by ALS and its subsidiaries in
operating or managing Assisted Living Facilities, including, without limitation,
the service marks Sterling House (R), Crossings (R), Wynwood(R), Clare Bridge
(R), WovenHearts (R) and Alternative Living Services~.
1.3.2 Notwithstanding anything to the contrary herein except
for the covenant not to compete set forth in Section 6.3, ALS retains, for
itself and its affiliates, the right in its sole discretion to:
(i) Utilize the ALS System and the ALS Marks, or any portion
thereof, in the management or operation of other Assisted Living
Facilities or in connection with any other business in which it or its
affiliates may engage, as determined by ALS in its sole discretion; and
(ii) Grant other licenses in the ALS System or ALS Marks as
ALS, in its sole discretion, deems appropriate.
Any and all improvements to the ALS System developed at the Facility shall be
and become the sole and absolute property of ALS subject to Owner's rights to
use the same as provided in this Agreement, and ALS may incorporate the same
into the ALS System and shall have the sole and exclusive right to copyright,
register and protect such improvements.
1.3.3 Owner acknowledges that Owner's right to use the ALS
System and the ALS Marks is derived solely from this Agreement and is limited to
such utilization as is expressly permitted by this Agreement. Any unauthorized
use of ALS System or the ALS Marks
3
<PAGE> 4
by Owner shall constitute a breach of this Agreement and an infringement of the
rights of ALS in and to the ALS Marks or ALS System, as applicable. The ALS
Marks shall only be utilized as specifically authorized by ALS in its capacity
as manager and operator of the Facility in accordance herewith. Owner shall not
use any ALS Mark as part of any corporate or trade name, and Owner shall conduct
its business in its own name and shall identify itself as the independent owner
of the Facility. If it becomes advisable at any time in ALS's reasonable
judgment to modify or discontinue the use of any ALS Mark or ALS System for the
betterment of the management and operation of the Facility, Owner shall comply
with ALS's direction with respect thereto upon notice by ALS to Owner. ALS has
not authorized or empowered Owner to use the ALS Marks or the ALS Systems except
as provided in this Agreement and Owner shall not employ any of the ALS Marks in
signing any contract, check, purchase agreement, negotiable instrument, legal
obligation, application for license or permit, or in any manner that may result
in liability of ALS for indebtedness or obligations of Owner.
ARTICLE 2
PRE-OPENING SERVICES
Prior to the date on which an occupancy permit is issued for the
Facility (the "Opening Date"), ALS shall provide a Regional Director to render
advice regarding the Facility, a Director of Marketing to promote the Facility
and other Corporate Personnel to provide interior design services, market
feasibility studies, initial personnel hiring and training services and the
other pre-opening and pre-leasing services.
ARTICLE 3
CORPORATE PERSONNEL SERVICES
Commencing on the Opening Date and for the remainder of the term of
this Agreement, in addition to causing the Facility Personnel to perform all
such day-to-day management and operations functions as are necessary or
appropriate to the conduct of the business of the Facility in accordance
herewith, ALS agrees to cause its Corporate Personnel to provide the following
services:
3.1 Nursing Staff and Personal Care Services. ALS will furnish the
Facility, at ALS's expense, with access to a Regional Director, who will be an
employee of ALS. The Regional Director will, under ALS's supervision, manage,
advise, and assist the director of the Facility ("Facility Director") in
establishing policies and objectives for the nursing staff and others providing
personal care services and providing resident care and services. The Regional
Director will manage, assist and advise the Facility in formulating,
implementing and maintaining a standard of care which complies with all
applicable Laws, and which meets with Owner's approval, such approval not to be
unreasonably withheld.
3.2 Activities and Social Services Programs. The Regional Director
will, under ALS's supervision, advise and assist the Program Activity Director
of the Facility in establishing activities and social services for the
Facility's residents. In addition, the Regional Director will
4
<PAGE> 5
assist the Facility in formulating, implementing and maintaining quality
activities and social services programs for residents of the Facility in
accordance with all applicable Laws.
3.3 Laundry and Housekeeping Services. The Regional Director, under
ALS's supervision, will advise and assist the Facility in establishing laundry
and housekeeping policies, philosophies and objectives to provide the Facility
with laundry and housekeeping services.
3.4 Dietary Services. ALS will furnish the Facility, at ALS's expense,
with access to a Registered Dietician who will, under ALS's supervision, advise
and assist the Facility in establishing dietary policies, philosophies,
objectives and cost control methods to provide the Facility's residents with
dietary services. The Registered Dietician will advise and assist the Facility
in formulating, implementing and maintaining such policies, philosophies,
objectives and cost control methods.
3.5 Other Services. ALS will furnish and perform consultant and
management services, data processing services, accounting services and other
administrative and clerical functions as are necessary for the proper
utilization of the administrative systems, forms and procedures developed by ALS
for use in the operation of the Facility.
3.6 Personnel of the Facility. ALS will assist the Facility in the
formulation and implementation of personnel policies and procedures and the
administration of personnel matters.
3.7 Maintenance of the Facility. ALS will furnish the Facility with
access to ALS's staff construction manager, who will, under ALS's supervision,
advise and assist the Facility Director in implementing a maintenance program
for the Facility.
ARTICLE 4
MANAGEMENT FEE
4.1 Management Fee. Except as provided in the Purchase Rights and
Financing Agreement dated as of March 31, 1999 between Owner and ALS (the
"Purchase Rights and Financing Agreement"), the management fee payable to ALS
hereunder shall be as follows:
(a) For the period commencing on the date of the execution
hereof and ending on the Opening Date (the "Preopening Period"), the Owner shall
pay to ALS a monthly fee equal to 7.50% of Projected Stabilized Revenue (as
defined herein), provided that in no event shall the Preopening Period exceed a
period of six months, and further provided that in the event that the Preopening
Period is less than six months, the Owner shall pay to ALS on the Opening Date
an amount equal to the excess of (i) the aggregate amount that would have been
paid pursuant to this Section 4.1(a) if the Preopening Period had been six
months over (ii) the aggregate amount previously paid pursuant to this Section
4.1(a);
(b) Upon the Opening Date, a fee of $25,000 related to the
initial regulatory licensure of the residence;
5
<PAGE> 6
(c) For the twelve month period (the "Initial Period")
commencing on the Opening Date, the Owner shall pay to ALS a monthly fee equal
to 7.50% of Projected Stabilized Revenue;
(d) After the Initial Period, the Owner shall pay to ALS a
monthly fee equal to 7.50% of the gross operating revenues of the Facility
("Facility Revenue").
(e) For purposes hereof:
"Projected Stabilized Revenue" shall mean the
Facility Revenue calculated on a pro forma basis based upon (i) an assumed
Facility occupancy rate of 95% and (ii) the projected average monthly revenue
attributable to an individual resident in the Facility's first year of operation
as reflected in the projections for the Facility as agreed upon by the parties.
(f) The management fee shall be payable monthly on or before
the tenth (10th) day of each calendar month following the calendar month for
which payment is made. The management fee shall be estimated by ALS based on the
estimated amount of Facility Revenue for the month for which payment is made.
Within thirty (30) days after the end of each calendar quarter, ALS shall pay to
Owner the excess, if any, of the management fees collected for such calendar
quarter over the amount due based on the actual Facility Revenue for such
quarter and, conversely, the excess of the amount due based on the actual
operating revenues for such quarter over the management fees collected for such
calendar quarter shall be paid by Owner to ALS.
(g) Until the earlier of (i) the first anniversary date of the
opening of the Facility, and (ii) the date on which the Facility first reaches a
ninety-five percent (95%) resident occupancy rate, any management fee payable
pursuant to this Section 4.1 shall be paid by Owner when due from borrowings
pursuant to that certain Management Fee Loan Agreement between the parties of
even date herewith.
(h) In the event that the Facility is damaged by fire or other
casualty and Owner receives insurance proceeds pursuant to one or more policies
of business interruption insurance, ALS shall be entitled to its management fee
hereunder in an amount equal to that portion of such proceeds intended to cover
the cost of ALS's management fee hereunder.
4.2 Expenses.
(a) ALS will perform services and incur expenses on behalf of
Owner prior to the Opening Date, and ALS shall be reimbursed at ALS's actual
cost for all pre-opening, pre-leasing, operating, sales and marketing costs
provided to Owner during the construction period, including the salary costs and
fringe benefits of the individuals described in Article 2 of this Agreement.
Such reimbursement shall be made regardless of when the Opening Date occurs.
(b) Commencing with the date hereof, except as otherwise
provided in this Agreement, Owner will be responsible for all operating costs,
expenses, fees, losses, taxes and
6
<PAGE> 7
charges which pertain to the operations of the Facility, including the wages and
other payroll expenses of the Facility Personnel. Owner will reimburse ALS for
(i) all such operating costs and expenses paid or funded by ALS on Owner's
behalf and (ii) reasonable travel, meals and lodging expenses (excluding payroll
costs) incurred by Corporate Personnel in connection with any consulting
services provided by such personnel at the Facility.
(c) ALS shall deliver to Owner periodically and as reasonably
requested by Owner schedules and statements documenting its reimbursable
expenses. ALS shall be authorized to pay itself management fees and to reimburse
itself for expenses due hereunder out of the bank account or accounts maintained
on Owner's behalf by ALS with respect to the operation of the Facility, which
accounts may be part of an integrated multi-facility cash management system.
ARTICLE 5
INSURANCE
Commencing with the Opening Date or such earlier time as construction
of the Facility is completed, ALS, on behalf of and at the expense of Owner,
will negotiate, procure and maintain in full force and effect insurance against
the fire and other hazards, personal property damage, general liability and such
other insurance as the parties hereto agree as is normally maintained by and for
the protection of the owners and operators of Assisted Living Facilities. ALS
shall be an additional insured, under the policies of fire and other hazards,
personal property damage and general liability insurance maintained by ALS on
behalf of and at Owner's expense. In addition, ALS shall maintain, at Owner's
expense, professional liability insurance and worker's compensation insurance
covering its employees and Owner and its equity owners shall be named as
additional insureds thereunder. Such insurance policies and the professional
liability and worker's compensation insurance policies shall provide that the
coverages provided thereby may not be canceled without the issuer giving thirty
(30) days prior written notice of such cancellation. ALS shall provide to Owner
upon Owner's request such certificates evidencing the insurance ALS is obligated
to maintain.
ARTICLE 6
CERTAIN RESTRICTIONS ON ALS
6.1 Approval of Certain Expenditures. Notwithstanding any provisions
herein to the contrary (except for payroll and related costs of Facility
Personnel which are not subject to the provisions below), no single non-budgeted
expenditure (excluding any expenditures made by ALS in its capacity as Developer
under that certain Development Agreement between the parties of even date
herewith) which exceeds $10,000 (or any non-budgeted expenditure of any amount
if the total non-budgeted expenditures for such fiscal year have been or would
thereby be in excess of $50,000) shall be made on Owner's behalf by ALS without
Owner's prior written approval; provided, however, that expenditures which in
the judgment of ALS involve imminent danger to life or property, or which are
immediately necessary in the reasonable judgment of ALS for the preservation and
safety of the Facility or for the safety of the residents, or which are
7
<PAGE> 8
reasonably required in the judgment of ALS to avoid the suspension of any
necessary service to the Facility, may be made by ALS irrespective of the cost
limitation imposed by this Section. Notwithstanding this authority as to such
expenditures, it is understood and agreed that ALS will, if at all possible,
confer immediately with Owner regarding every such expenditure. If ALS requests
Owner's approval with respect to any disbursement, Owner shall approve or
disapprove the same within ten (10) days, and any failure to respond shall be
deemed approval.
6.2 Compliance with Governmental Directives. ALS shall take, or cause
to be taken, any and all such further acts as may be necessary to comply with
any applicable Laws. Subject to the limitations contained in Section 6.1 of this
Agreement, ALS shall not take any action under this Section if Owner is
diligently contesting in good faith any purported non-compliance or has notified
ALS in writing of Owner's intention to contest any such purported
non-compliance. ALS shall promptly notify Owner in writing of any notice of
non-compliance within ten (10) business days following receipt.
6.3 Covenant Not to Compete. During the term of this Agreement and for
a period of six months after termination hereof (unless by the party desiring to
compete pursuant to Section 9.1(a) or (b)), each of Owner and ALS agrees that it
shall not, and it shall not permit any of its subsidiaries or other affiliates
to, own in whole or in part, operate, manage or have any interest in any
assisted living facility or any property which is being developed for operation
as an assisted living facility (excluding any such facility or property owned,
operated, managed, or under development or construction by ALS as of the date
hereof), or (in the case of ALS) license any other entity to use any of the ALS
System or ALS Marks in connection with the ownership, operation or management of
any assisted living facility, which either is located closer than three (3)
miles to the Facility or otherwise has a Primary Market Area which overlaps the
Primary Market Area of the Facility (unless, in the latter case, ALS determines
in its reasonable, good faith judgment that such facility should not have a
materially detrimental effect on the occupancy rate of the Facility); provided,
however, that in the event that ALS determines that it desires to engage in any
such activity, Owner and ALS hereby agree to use their best efforts to determine
the fair market value of the Facility and to effect the transfer of the Facility
to ALS (or its designated subsidiary or other affiliate) at such fair market
value (it being understood that if after such efforts the parties cannot reach
agreement on such fair market value, Owner shall not be obligated to transfer
the Facility to ALS pursuant hereto and ALS shall remain subject to the
restrictions contained under the terms of this section). The "Primary Market
Area" for the Facility shall mean the primary market area for the Facility
identified in the study prepared by or on behalf of ALS for purposes of
determining the feasibility of the Facility and a copy of which has heretofore
been furnished to Owner. With respect to any other facility, the "Primary Market
Area" shall mean the primary market area identified in any similar study
prepared by ALS or any third party for purposes of determining its feasibility.
Owner may assign its rights to this covenant not to compete to any purchaser of
the Facility. Each of Owner and ALS expressly acknowledges that irreparable loss
and injury would result to Owner or ALS (as the case may be) or to a party to
whom Owner may have sold the Facility upon the breach of any of the covenants
contained in this Section 6.3 and that damages arising out of such breach would
be difficult to ascertain. The parties hereby agree that, in addition to all
other remedies provided at law or in equity, Owner or ALS (as the case may be)
or any purchaser of the Facility to whom Owner has assigned its rights hereunder
may petition and obtain from a court of law or equity both
8
<PAGE> 9
temporary and permanent injunctive relief to prevent a breach by the other party
of any covenant contained in this Section 6.3.
ARTICLE 7
CONTRACTS
All contracts for the provision of care with residents of the Facility
shall be executed by ALS (assignable to Owner or any purchaser of the Facility
upon termination of the Management Agreement, to the extent permissible under
all applicable governmental licensing regulations and other law) and all other
contracts for the operation of the Facility shall be executed by ALS in the name
of Owner, and Owner hereby appoints ALS as its attorney-in-fact for the purpose
of negotiating and entering into such contracts. If ALS executes any such
contract in the name of ALS which, by its provisions, is assignable by the
parties thereto, then upon the termination of this Agreement, ALS agrees to
assign such contract to Owner, and Owner agrees to accept such contract assigned
from ALS. Effective on the effective date of such assignment, Owner shall assume
and agree to be fully bound by the terms and provisions of the assignment and
shall indemnify and hold ALS harmless from and against any and all damages,
costs or expenses arising under such contract following such effective date, and
ALS agrees not to directly solicit any residents of the Facility under such
contracts for a period of six months after termination (or during the term) of
this Agreement.
ARTICLE 8
TERM
The term of this Agreement shall commence at 12:01 a.m., Milwaukee
time, as of the date first written above and shall continue until 11:59 p.m.,
Milwaukee time, on the tenth (10th) anniversary of the date of this Agreement,
unless sooner terminated in accordance with the provisions of Article 9 hereof.
ARTICLE 9
TERMINATION
9.1 Termination. This Agreement may be terminated prior to the
expiration of the term of this Agreement, as provided in Section 8 herein,
without prejudice to any other rights or remedies available to the terminating
party under this Agreement or applicable Laws, for any of the following:
(a) Either party may terminate this Agreement immediately upon
written notice to the other party if there is a material breach by the other
party of this Agreement or any other agreement between the Owner and ALS, and if
such breach is of a nature susceptible to being cured without damage to the
other party as a result of delay in the cure thereof, such breach
9
<PAGE> 10
remains uncured for a period of sixty (60) days following written notice to the
other party setting forth the nature of the breach in reasonable detail.
(b) Either party may terminate this Agreement immediately upon
written notice to the other party if (i) a petition of bankruptcy is filed (or
other commencement of a bankruptcy or similar proceeding shall have occurred)
against the other party without its consent under applicable bankruptcy,
insolvency or similar laws as now or hereafter in effect, and such proceeding is
not dismissed within 60 days thereafter; (ii) the other party consents to the
institution of bankruptcy or insolvency proceedings against it or files a
petition, answer or consent seeking reorganization or relief (other than as a
creditor) under the U.S. Bankruptcy Code or any other federal or state law
relating to bankruptcy or insolvency; (iii) the other party consents to the
appointment of a receiver; (iv) the other party makes an assignment for the
benefit of its creditors; or (v) the other party admits in writing that it is
unable to pay its debts generally as they become due.
(c) Either party may terminate this Agreement upon thirty (30)
days written notice to the other party if: (i) the Facility has its state
operating or any equivalent license or permit suspended, revoked or otherwise
terminated; (ii) such suspension, revocation or termination remains in effect
for ninety (90) days; and (iii) such suspension, revocation or termination
materially and adversely impacts the ability of the Owner and the Manager to
continue to operate the Facility in the manner then applicable in accordance
with applicable Laws.
(d) This Agreement is automatically terminated without
liability on the part of Owner to ALS, except for accrued liabilities as of such
termination, upon the sale of the Facility to a nonaffiliate of Owner.
(e) This Agreement may be terminated by Owner immediately upon
written notice to ALS in connection with the sale of the Facility to a third
party by reason of a financing default of ALS as set forth in Section 3.c of the
Purchase Rights and Financing Agreement between the parties dated as of March
31, 1999, so long as Owner first repays all indebtedness to ALS set forth in
such provision as a condition to such termination and otherwise fulfills any
other conditions set forth therein.
9.2 Agreement to Cooperate. Upon the termination of this Agreement
pursuant to Section 9.1 hereof (other than a termination of this Agreement by
ALS pursuant to Section 9.1 (a) or (b), in which event this Section 9.2 shall
not be operative), ALS shall cooperate with Owner in connection with the
relicensing of the Facility and shall, to the extent necessary to permit the
continued, uninterrupted operation of the Facility by Owner (or its successor
manager) following such termination, permit any licenses held by ALS with
respect to the Facility to continue to be utilized by Owner or its successor
manager on terms that are customary in connection with the sale of operating
assisted living facilities in the jurisdiction in which the Facility is located
(including, as applicable, entering into lease, sublease, management or
sub-management relationships with Owner or its successors manager); provided,
however, that (i) ALS shall be entitled to require reasonable indemnification in
connection therewith and (ii)
10
<PAGE> 11
ALS's obligation under this Section 9.2 shall not extend beyond 120 days
following such termination. Owner may assign its rights pursuant to this Section
to any purchaser of the Facility.
ARTICLE 10
INDEMNIFICATION
10.1 Indemnification. Each party hereto ("Indemnifying Party") hereby
respectively covenants and agrees to indemnify, defend and hold harmless the
other party ("Indemnified Party") from and against any damages, losses, costs or
expenses, including, but not limited to, any and all claims, demands, causes of
action, court costs, fines, damages, judgments and reasonable attorneys' fees
(collectively, "Damages"), incurred by the Indemnified Party in connection with
any of the foregoing, as a result of the breach of any provision of this
Agreement by the Indemnifying Party. Further, ALS covenants and agrees to
indemnify, defend and hold harmless Owner from and against any Damages incurred
by Owner in connection with or as a result of any intentional misconduct by, or
negligence of ALS in the provision of the management and consultant services
provided in this Agreement. ALS shall be indemnified by the Owner for any
Damages sustained by ALS in connection with any action or inaction taken by ALS
in connection with the performance of its duties hereunder, provided that ALS
determines in good faith that such action or inaction is in the best interest of
the Facility or its operation, and further provided that such action or inaction
does not constitute gross negligence or intentional misconduct of ALS.
10.2 Claims for Indemnification. The Indemnified Party will give the
Indemnifying Party prompt written notice of any claim for Indemnification
required by Section 10.1; provided, however, that no failure or delay by the
Indemnified Party in providing such notice shall relieve the Indemnifying Party
of its obligations hereunder, except and to the extent that the Indemnifying
Party has been prejudiced thereby. If such claim involves any claim, assessment,
action, suit or proceeding brought by any third party ("Third Party Claim"), the
Indemnifying Party shall undertake the defense thereof and will consult with the
Indemnified Party concerning such defense during the course thereof. In the
event that the Indemnifying Party within ten (10) business days after notice of
any Third Party Claim fails to defend or to acknowledge its obligation to defend
such Third Party Claim, the Indemnified Party may, upon written notice to the
Indemnifying Party, elect to undertake the defense, compromise or settlement of
such Third Party Claim on behalf and for the account and risk of the
Indemnifying Party and without any requirement to obtain the consent of the
Indemnifying Party to any such compromise or settlement. Notwithstanding
anything herein to the contrary, the Indemnifying Party shall not, without the
Indemnified Party's written consent (such consent not to be unreasonably
withheld), settle or compromise any Third Party Claim or consent to entry of any
judgment in respect thereof, unless the Indemnifying Party delivers to the
Indemnified Party its written agreement to indemnify the Indemnified Party for
any and all Damages sustained or incurred by the Indemnified Party which result
from, arise out of or are incidental to the defense or settlement of such Third
Party Claim.
11
<PAGE> 12
ARTICLE 11
MISCELLANEOUS
11.1 Access to Books and Records. Owner shall have the right to a full,
complete and accurate accounting from ALS with respect to the operation of the
Facility and shall cooperate with ALS in every way to provide such accounting.
ALS and Owner shall have the full right and power to inspect all books, records
and pertinent documents and information of the Facility (collectively, the
"Information"), whether in the possession of Owner or ALS. Owner shall have the
right to enter upon any part of the Facility at all reasonable times for the
purpose of examining or inspecting the Information, examining or making extracts
of the books and records of the Facility or for any other purpose which the
Owner, in its discretion, shall deem necessary or advisable; provided, however,
that any examination, inspection or extracting of the Information shall be done
with as little disruption to the business of the Facility as reasonably
possible. Owner shall cooperate with ALS in every reasonable respect and shall
furnish ALS with all of the information required by it for the performance of
ALS's services under this Agreement, and shall permit ALS to examine and copy
any data in the possession and control of Owner affecting the Facility and the
provision of ALS's services under this Agreement.
11.2 Force Majeure. Neither party shall be deemed to be in violation of
this Agreement if such party is prevented from performing any of its obligations
hereunder (other than financial obligations) for any reason beyond its control,
including, without limitation, acts of God or the public enemy, the elements, or
any applicable laws.
11.3 ALS Affiliation. ALS shall provide Owner with suitable signs and
appropriate decals indicating ALS' affiliation with the Facility. It is
specifically understood, however, that such signs and decals shall remain the
property of ALS, and ALS shall have the right to reclaim and remove such signs
and decals from the premises of the Facility upon termination of this Agreement.
11.4 Confidentiality. Owner shall not, except as otherwise expressly
consented to by ALS in writing, directly or indirectly use, disclose, permit any
unauthorized person to have access to, or otherwise exploit for Owner's own
benefit or for the benefit of any other person, any Confidential Information
regarding ALS's records, plans or any other aspects of ALS's business. For
purposes hereof, the term "Confidential Information" shall mean any data or
information that is of value to ALS and not generally known to competitors of
ALS or to the public, and whose confidentiality is maintained. Confidential
Information shall include, but not be limited to, written lists of ALS's current
or potential customers, the identity of various suppliers, non-public
information about ALS's executives and employees and ALS's financial affairs,
products, processes, services, research, development, inventions, manufacture,
purchasing, accounting, engineering and marketing.
12
<PAGE> 13
11.5 Non-Employment; Availability for Employment.
(a) During the term of this Agreement and through the period
ending six (6) months thereafter, Owner shall not directly or indirectly employ,
attempt to employ or assist anyone else in employing, any Corporate Personnel of
ALS (regardless of whether such employment is full time or pursuant to a written
contract with ALS), without first obtaining the written consent of ALS. Upon
termination of this Agreement other than by ALS pursuant to Section 9.1(a) or
(b), ALS shall use its best efforts to make available to Owner or any party to
whom it has sold the Facility for employment by Owner or such other party all of
the Facility Personnel.
(b) The parties expressly acknowledges that irreparable loss
and injury would result to them upon the breach of any of the covenants
contained in this Section 11.5 and that damages arising out of such breach would
be difficult to ascertain. The parties hereby agree that, in addition to all
other remedies provided at law or in equity, a party may petition and obtain
from a court of law or equity both temporary and permanent injunctive relief to
prevent a breach by the other party of any covenant contained in this Section
11.5.
11.6 Notices. Each notice, request, demand or other communication
("Notice") by either party to the other party pursuant to this Agreement shall
be in writing, and, except for purchase orders, order acknowledgements and
routine documentation and correspondence, shall be personally delivered or sent
by certified mail, return receipt requested, postage prepaid, or by commercial
courier, charges prepaid, or by facsimile transmission (but each such Notice
sent by facsimile transmission shall be confirmed by sending the original
thereof to the other party by U.S. mail or commercial courier as provided
herein), addressed to the address of the receiving party set forth below or to
such other address as such party shall have communicated to the other party in
accordance with this Section. Any Notice hereunder shall be deemed to have been
given and received when personally delivered, on the date when sent by facsimile
or on the third business day following the date when sent by mail or commercial
courier.
If to ALS:
ALTERNATIVE LIVING SERVICES. INC.
450 North Sunnyslope Road
Suite 300
Brookfield, WI 53005
Attn: William F. Lasky
Telephone: 414/789-9565
Fax: 414/789-9592
13
<PAGE> 14
With a copy to:
Rogers & Hardin LLP
2700 International Tower
229 Peachtree Street, NE
Atlanta, GA 30303
Attn: Alan C. Leet, Esq.
Telephone: 404/420-4616
Fax: 404/522-2224
If to Owner:
Third Party Investor I, L.L.C.
c/o McDonald Investments, Inc.
250 Pearl Street, N.W.
Grand Rapids, Michigan 49503
Attn: Randall S. Damstra
Telephone: 616/732-3396
Fax: 616/732-3394
With a copy to:
Hecht & Lentz
333 Bridge, N.W., Suite 330
Grand Rapids, Michigan 49504
Attn: David M. Hecht, Esq.
Telephone: 616/776-7200
Fax: 616/776-7203
11.7 Applicable Law. The interpretation, validity, and performance of
this Agreement shall be governed by the internal laws of the State of Michigan.
Any controversy or claim arising out of or relating to this Agreement, or the
breach hereof, shall be arbitrated in the manner set forth in Section 11.13 of
this Agreement.
11.8 Successors and Assigns. Neither party shall have the right to
assign this Agreement or the rights and interest provided to such party hereby,
except with the other party's prior written consent; provided, however, that ALS
shall be permitted to assign this Agreement to an Affiliate of ALS without
Owner's consent provided that such assignment shall not operate to release ALS
from its obligations hereunder. ALS shall also have the right to employ, retain
or subcontract with other persons, firms or corporations to perform all or any
part of the services to be performed hereunder. The terms, provisions,
obligations and conditions of this Agreement shall be binding upon and shall
inure to the benefit of the successors and permitted assigns of the parties
hereto.
14
<PAGE> 15
11.9 Headings. The headings and captions used in this Agreement are for
convenience only and shall not be considered part of the subject matter of this
Agreement or used to interpret or construe any provision hereof.
11.10 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
11.11 Waiver and Compliance. Any failure of a party to comply with any
obligation, covenant, agreement or condition herein may be expressly waived in
writing by the other party, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
11.12 Entire Agreement. Each of the parties hereto intend this
Agreement to be the final expression of their agreement with respect to the
subject matter hereof and is the complete and exclusive statement thereof,
notwithstanding any representation or statements to the contrary heretofore
made. This Agreement may be modified only by written instrument signed by each
of the parties hereto.
11.13 Arbitration. Each of the parties hereto agree that any and all
controversies or claims arising out of or relating to this Agreement, or the
breach of any of its provisions, shall be settled by arbitration pursuant to the
Federal Arbitration Act, 9 U.S.C. Section 1 et seq., in accordance with the
Commercial Arbitration Rules of the American Arbitration Association. The
parties hereto further agree that the arbitrators in any such arbitration shall
not be authorized to award any punitive damages in connection with any
controversy or claim settled by arbitration hereunder. The decision of the
arbitrator in any such arbitration shall be final and binding upon the parties
and judgment upon the award may be entered in any court having jurisdiction
thereof. Any arbitration shall take place in such place as is agreed to by the
parties hereto, or, if they cannot agree, in Grand Rapids, Michigan. The
expenses of any arbitration pursuant to this Section 11.13 shall be borne by the
losing party. Arbitrations under this Agreement shall be conducted before a
panel of three (3) arbitrators, one selected and paid for by ALS, one selected
and paid for by Owner, and one selected by mutual agreement of the arbitrators
selected and paid for by both ALS and Owner. All notices in connection with an
arbitration shall be made in the manner set forth in Section 11.6 hereof.
11.14 Certain Rules of Construction. The use of the singular or
masculine pronoun in this Agreement shall include, wherever appropriate, the
plural and feminine. The language used in this Agreement will be deemed to be
the language chosen by the parties hereto to express their mutual intent and no
rule of strict construction shall be applied against any party by virtue of its
counsel having drafted this Agreement or otherwise.
11.15 No Representation as to Results. Owner acknowledges that ALS is
not the guarantor of the operating results of the Facility, and that ALS shall
have no liability to Owner hereunder for failure of the Facility to achieve
operating results projected in any business plan or projections.
15
<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered, as of the date and year first above written.
ALTERNATIVE LIVING SERVICES, INC.
By: /s/ Mark W. Ohlendorf
---------------------------------
Title: Senior Vice President
------------------------------
THIRD PARTY INVESTORS I, L.L.C.
By: /s/ John Meilner
---------------------------------
Title: Authorized Agent
------------------------------
<PAGE> 1
EXHIBIT 10.17
SCHEDULE OF MANAGEMENT SERVICES AGREEMENTS
WHICH ARE SUBSTANTIALLY IN THE FORM OF MANAGEMENT SERVICES AGREEMENT
ATTACHED AS EXHIBIT 10.16 TO THE
COMPANY'S FORM 10-Q
FOR THE PERIOD ENDING 3/31/99
<TABLE>
<CAPTION>
DATE OF
FACILITY TYPE LOCATION MANAGEMENT FEE MANAGEMENT AGREEMENT
- ------------- -------- -------------- --------------------
<S> <C> <C> <C>
Clare Bridge Louisville, Colorado 7.5% December 31, 1998
Clare Bridge Highland Ranch, Colorado 7.5% December 31, 1998
Sterling Cottage Savannah, Georgia 7.5% December 31, 1998
Sterling House Raleigh, North Carolina 7.5% December 31, 1998
Sterling Cottage Raleigh, North Carolina 7.5% December 31, 1998
Sterling House Hilton Head, South Carolina 7.5% December 31, 1998
Sterling Cottage Hilton Head, South Carolina 7.5% December 31, 1998
Clare Bridge Brandon, Florida 7.5% December 31, 1998
Clare Bridge Brick Ocean, New Jersey 8.0% March 31, 1999
Sterling House Florence, New Jersey 8.0% March 31, 1999
Clare Bridge Cape Coral, Florida 8.0% March 31, 1999
Clare Bridge Scottsdale, Arizona 8.0% March 31, 1999
Crossings Scottsdale, Arizona 8.0% March 31, 1999
Sterling Cottage Bakersfield, California 8.0% March 31, 1999
Sterling House Bakersfield, California 8.0% March 31, 1999
Clare Bridge Tropicana, Nevada 8.0% March 31, 1999
</TABLE>
<PAGE> 1
EXHIBIT 11.1 COMPUTATION OF NET INCOME PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-------------------------------------------
1999 1998
----------------- ----------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
Basic:
Net income attributable to common shares........... $ 1,428 $ 3,583
================= ================
Weighted average common shares outstanding......... 22,068 21,761
================= ================
Per share amount................................... $0.06 $ 0.16
================= ================
Diluted:
Net income......................................... $1,428 $ 3,583
Net effect of convertible debentures based on the
if-converted method, assuming 100% conversion:
$35,000,000, 6.75%, due 2006................... 391 591
$50,000,000, 7.0%, due 2004.................... 587 875
$143,750,000, 5.25%, due 2002.................. 1,295 1,887
----------------- ----------------
Net income attributable to common shares........... $ 3,701 $ 6,936
================= ================
Weighted average common shares outstanding......... 22,068 21,761
Net effect of convertible debentures based on the
if-converted method, assuming 100% conversion:
$35,000,000, 6.75%, due 2006................... 1,717 1,717
$50,000,000, 7.0%, due 2004.................... 2,469 2,469
$143,750,000, 5.25%, due 2002.................. 5,000 5,000
Net effect of dilutive stock options based on the
Treasury stock method, using average market
price............................................ 483 583
----------------- ----------------
Totals......................................... 31,737 31,530
================= ================
Per share amount................................... $ 0.12 $ 0.22
================= ================
</TABLE>
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed consolidated balance sheets and condensed consolidated statements of
operations of Alternative Living Services, Inc., filed with the Company's Form
10-Q for the period ended March 31, 1999 and is qualified in its entirety by
reference to such financial statements and related footnotes.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
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0
0
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