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 AND EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
{ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
For the Transition period from _________ to ___________
Commission file number 000-21263
INTEGRATED LIVING COMMUNITIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 52-1967027
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
24850 Old 41 Road Suite 10
Bonita Springs, FL 34135
(Address of principal executive offices)
(941) 947-7200
(Registrant's telephone number, including area code)
Indicated by check mark whether registrant (1) has filed all reports to
be filed by Section 13 or 15 (d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes ___x____ No __________
Number of shares of Registrant's common stock, $.01 par value, outstanding at
May 5, 1997: 6,697,000
---------
<PAGE>
INTEGRATED LIVING COMMUNITIES, INC.
INDEX
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - December 31, 1996 and
March 31, 1996 2
Consolidated Statements of Operations -
Three Months Ended March 31, 1996 and 1997 3
Consolidated Statement of Changes in Stockholders' Equity -
Three Months Ended March 31, 1997 4
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1996 and 1997 5
Notes to the Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Report on Form 8-K 11
Signature Page 12
<PAGE>
INTEGRATED LIVING COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
ASSETS (UNAUDITED)
------------ ------------
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 4,474,786 $ 3,855,596
Accounts receivable 719,212 750,347
Prepaid expenses and other current assets 272,830 207,041
------------ ------------
Total current assets 5,466,828 4,812,984
Property, plant and equipment, net 68,560,932 87,016,181
Other assets 1,546,909 1,607,546
------------ ------------
$ 75,574,669 $ 93,436,711
============ ============
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities:
Accounts payable $ 1,721,765 $ 2,933,642
Accrued expenses 2,176,863 1,629,089
Refundable security deposits 1,194,377 1,605,346
Current portion of note payable to affiliate 1,722,512 1,230,366
------------ ------------
Total current liabilities 6,815,517 7,398,443
Long term portion of note payable to affiliate 1,578,969 1,640,487
Other long term debt 0 17,408,272
Refundable deposits 5,079,837 5,087,036
Deferred gain on sale/leaseback 0 261,321
Unearned entrance fees 4,134,126 4,163,607
------------ ------------
Total liabilities 17,608,449 35,959,166
Stockholders' equity:
Common stock 66,979 66,979
Additional paid in capital 60,558,963 60,558,963
Accumulated deficit (2,659,722) (3,148,397)
------------ ------------
Net stockholders' equity 57,966,220 57,477,545
------------ ------------
$ 75,574,669 $ 93,436,711
============ ============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2
<PAGE>
INTEGRATED LIVING COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 AND 1997
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
--------------------------
1996 1997
----------- -----------
Revenues:
Monthly service and entrance fees $ 5,164,054 $ 8,076,902
Management services and other 451,399 351,113
----------- -----------
Total revenues 5,615,453 8,428,015
----------- -----------
Expenses:
Community operations 3,512,944 5,572,191
Corporate general and administrative 336,887 1,737,788
Rent 725,276 841,974
Depreciation and amortization 248,195 521,971
----------- -----------
Total expenses 4,823,302 8,673,924
----------- -----------
Operating income (loss) 792,151 (245,909)
Other income (expense):
Interest income 0 63,850
Interest expense (including interest on loan
payable to affiliate) 0 (306,616)
----------- -----------
Earnings (loss) before income taxes 792,151 (488,675)
Federal and state income taxes 304,978 0
----------- -----------
Net earnings (loss) $ 487,173 ($ 488,675)
=========== ===========
Weighted average common shares outstanding 3,897,900 6,697,900
=========== ===========
Earnings per common share $ 0.12 ($ 0.07)
=========== ===========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE>
INTEGRATED LIVING COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPTIAL DEFICIT TOTAL
---------------- ----------------- ---------------- ---------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1996 $66,979 $60,558,963 ($2,659,722) $57,966,220
Net loss (unaudited) 0 0 (488,675) (488,675)
---------------- ----------------- ---------------- ---------------------
Balance at March 31, 1997 (unaudited) $66,979 $60,558,963 ($3,148,397) $57,477,545
================ ================= ================ =====================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
INTEGRATED LIVING COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1996 1997
------------ -------------
Cash flow from operating activities
<S> <C> <C>
Net earnings (loss) $ 487,173 ($ 488,675)
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Deferred income taxes 172,112 0
Depreciation and amortization 248,195 521,971
Decrease (increase) in accounts receivable 137,262 (31,135)
Decrease (increase) in prepaid expenses and
other current assets (362,953) 65,789
Earned entrance fees (261,528) (185,520)
Entrance fees received 134,000 178,500
Increase in accounts payable and
accrued expenses 393,119 97,190
------------ ------------
Net cash provided by operating activities 947,380 158,120
------------ ------------
Cash flows from financing activities:
Net capital contribution from parent company 1,008,411 -
Net proceeds on sale/leaseback - 261,321
Principal payments on note payable to affiliate - (430,628)
Refundable deposits received 134,000 178,500
Refunds of deposits and entrance fees (292,980) (134,800)
------------ ------------
Net cash from financing activities 849,431 (125,607)
------------ ------------
Cash flows from investing activities:
Property, plant and equipment additions (142,368) (582,794)
Increase in other assets (642,800) (68,909)
------------ ------------
Net cash used in investing activities (785,168) (651,703)
------------ ------------
Increase (decrease) in cash 1,011,643 (619,190)
Cash, beginning of period 413,362 4,474,786
------------ ------------
Cash, end of period $ 1,425,005 $ 3,855,596
============ ============
Non-cash investing and financing activities:
Assets of facilities and land acquired $ - $ 17,408,272
Long term debt acquired $ - $ 17,408,272
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
<PAGE>
INTEGRATED LIVING COMMUNITES, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE UNAUDITED THREE MONTHS ENDED MARCH 31, 1997
1. BASIS OF PRESENTATION
Integrated Living Communities, Inc. ("ILC" or "the Company") was formed in
November 1995 through a corporate reorganization whereby the assets and
liabilities of the Integrated Living Communities Division of Integrated Health
Services, Inc. ("IHS") were transferred or leased from IHS subsidiaries to ILC
and its subsidiaries. At March 31, 1996, ILC was a wholly owned subsidiary of
IHS. In October 1996, the Company consummated an initial public offering of
4,200,000 shares of common stock (see note 2 below).
The consolidated financial statements included herein do not contain all
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles. For
further information, such as the significant accounting policies followed by
ILC, refer to the consolidated financial statements and notes thereto included
in the Company's Annual Report on Form 10-K for the year ended December 31,
1996. In the opinion of management, the consolidated financial statements
include all necessary adjustments (consisting only of normal recurring accruals)
for a fair presentation of the financial position and results of operations for
the interim periods presented. The results of operations for the interim periods
presented are not necessarily indicative of the results that may be achieved for
the full year.
2. INITIAL PUBLIC OFFERING
On October 9, 1996, ILC completed an initial public offering of 4,200,000 shares
of common stock, of which 2,800,000 shares were sold by ILC and 1,400,000 shares
were sold by IHS. The initial public offering price was $8.00 per share. This
offering reduced IHS's ownership of the Company's common stock to 37%.
3. ACQUISITIONS
In January 1997, the Company purchased four facilities in Virginia totaling 198
beds for $15.8 million. The Company financed the transaction through a bridge
loan with NationsBank which bore interest at a floating rate of libor plus 300
basis points and matured on April 29, 1997. In April 1997, the Company
refinanced this loan with a revolving credit facility from NationsBank (see Note
4).
In February 1997 the Company purchased the Jenni-Lynn Retirement Center, a 55
bed assisted living community located in W. Columbia, South Carolina, for $2.3
million. Subsequently, the Company sold this facility to and leased it back from
Capstone Capital Corporation ("Capstone") resulting in a deferred gain of
approximately $261,000. The annual rental on this facility is $257,000.
In March 1997, the Company acquired leasehold interests in two assisted living
facilities in Florida and Georgia totaling 103 beds for annual rentals of
$151,000 and $229,000, respectively.
6
<PAGE>
4. SUBSEQUENT EVENTS
In April 1997, the Company closed a revolving credit facility with NationsBank.
The facility bears interest at a rate between libor plus 225 basis points and
libor plus 300 basis points and matures in April 1998.
In April 1997, the Company completed the development of and acquired a leasehold
interest in The Manhattan Homestead, a 35 bed assisted living facility located
in Manhattan, Kansas. Annual rental is approximately $258,500.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
STATEMENTS IN THIS QUARTERLY REPORT ON FORM 10-Q CONCERNING THE COMPANY'S
BUSINESS OUTLOOK OR FUTURE ECONOMIC PERFORMANCE; ANTICIPATED PROFITABILITY,
REVENUES, EXPENSES OR OTHER FINANCIAL ITEMS; AND PRODUCT LINE GROWTH, TOGETHER
WITH OTHER STATEMENTS THAT ARE NOT HISTORICAL FACTS, ARE "FORWARD-LOOKING
STATEMENTS" AS THAT TERM IS DEFINED UNDER FEDERAL SECURITIES LAWS.
FORWARD-LOOKING STATEMENTS ARE SUBJECT TO RISKS, UNCERTAINTIES AND OTHER FACTORS
WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE STATED IN SUCH
STATEMENTS. SUCH RISKS, UNCERTAINTIES AND FACTORS INCLUDE, BUT ARE NOT LIMITED
TO, THE COMPANY'S RAPID GROWTH STRATEGY, ANTICIPATED OPERATING LOSSES, LIMITED
DEVELOPMENT EXPERIENCE, NEED FOR SUBSTANTIAL ADDITIONAL CAPITAL, SUBSTANTIAL
DEBT AND LEASE OBLIGATIONS, COMPETITION, GOVERNMENT REGULATION AND GENERAL
ECONOMIC CONDITIONS, AS WELL AS OTHER RISKS DETAILED IN THE COMPANY'S FILINGS
WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE COMPANY'S ANNUAL
REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996.
OVERVIEW
As of May 5, 1997, the Company operates 24 facilities consisting of 11 owned, 9
leased and 4 managed facilities for a total of 2,481 beds. The Company also has
28 sites in various stages of development and construction.
To achieve its growth objectives, the Company will need to obtain sufficient
financial resources to fund its development, construction, and acquisition
activities and anticipated operating losses. Accordingly, the Company's future
growth will depend on its ability to obtain additional financing on acceptable
terms. There can be no assurance additional financing will be available on
acceptable terms or at all. The Company expects negative cash flow for at least
the next year as it continues to develop and acquire assisted living facilities,
primarily as a result of the development and opening of new assisted living
facilities in each of the next three years. There can be no assurance that any
newly developed facility will achieve a stabilized occupancy rate and resident
mix that meets the Company's expectations or generates positive cash flow.
The Company intends to finance the development and acquisition of its assisted
living facilities through mortgage financing, operating leases (including
sale/leaseback transactions) and lines of credit. As a result, the Company
expects to incur substantial indebtedness and debt related payments (including
payments on operating leases) as the Company pursues its growth strategy.
Consequently, the Company anticipates that a substantial portion of the
Company's cash flow will be devoted to debt service and lease payments. There
can be no assurance that the Company will generate sufficient cash flow from
operations to cover required interest, principal and lease payments.
The Company derives its revenues from two primary sources: (i) resident fees for
the delivery of assisted living services and (ii) management services income for
the management of facilities in which the Company does not own a controlling
interest.
The Company categorizes its operating expenses as follows: (i) community
operations, which includes labor, food, advertising, and other direct operating
expense; (ii) general and administrative expenses, consisting of corporate and
other support functions; (iii) rent, which includes facility and equipment
rentals; and (iv) depreciation and amortization.
8
<PAGE>
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31, 1996
Total revenue increased $2.8 million or 50%, to $8.4 million in the first
quarter of 1997 from $5.6 million in the first quarter of 1996. Of this
increase, $2.7 million, or 96%, was due to revenue from communities acquired
after January 1, 1996. The remaining increase was due to increased revenue at
communities in operation in both periods partially offset by decreased
management fee revenue.
Community operations expense increased $2.1 million or 59%, to $5.6 million in
the first quarter of 1997 from $3.5 million in the first quarter of 1996. This
increase was primarily due to the acquisition of twelve communities after
January 1, 1996.
Corporate general and administrative expense increased $1.4 million, or 416%, to
$1.7 million in the first quarter of 1997 from $337,000 in the first quarter of
1996. This increase was primarily due to the relocation of the Company's
corporate office from Owings Mills, Maryland to Bonita Springs, Florida. In
addition, the Company increased corporate capacity in anticipation of future
growth. In the first quarter of 1996, IHS provided all of the Company's
corporate services for a fee of 6% of revenue.
Rent expense increased $117,000, or 16%, to $842,000 in the first quarter of
1997 from $725,000 in the first quarter of 1996. This increase was primarily due
to the acquisition of leasehold interests in Jenni-Lynn, Jaylene, Brantley,
Cabot Pointe, Wichita and Garden City; the corporate office; and an increase in
rent expense at The Shores and Cheyenne Place, all of which occurred subsequent
to March 31, 1996. This increase was partially offset by the acquisition of
condominium interests in the West Palm, Treemont and Vintage communities in June
of 1996 which were previously leased.
Depreciation and amortization increased $274,000, or 110%, to $522,000 in the
first quarter of 1997 from $248,000 in the first quarter of 1996. This increase
was primarily due to communities acquired subsequent to March 31, 1996 and
routine capital expenditures.
Interest expense increased from $0 in 1996 to $307,000 in 1997. This is
attributable to interest on the Company's note payable to IHS and the Company's
revolving credit facility with NationsBank used to finance the January, 1997
acquisition of four facilities in Virginia.
9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997, the Company had a net working capital deficit of $2.6 million
compared to a deficit of $1.3 million at December 31, 1996. For the three months
ended March 31, 1996 and 1997, cash flows from operating activities were
$947,000 and $158,000, respectively. Net cash provided (used) by financing
activities was $849,000 and $(126,000) in 1996 and 1997, respectively. Net cash
used in investing activities was $785,000 and $652,000 in 1996 and 1997,
respectively.
In April 1997, the Company closed a $50 million senior secured revolving credit
facility from NationsBank, SouthTrust and SunTrust. Under the senior secured
revolving credit facility, the Company can borrow up to the lesser of 75% of the
appraised value of the facilities secured in the line or six times the total
EBITDAR (as defined) of the secured facilities. Borrowings under the facility,
which matures in April 1998, bear interest at a rate between libor plus 225
basis points and libor plus 300 basis points.
In anticipation of closing the above mentioned facility, NationsBank provided
the Company with a $15.8 million bridge loan to close the acquisition of four
facilities in Virginia in January 1997. This bridge loan was subsequently
refinanced with the revolving credit facility discussed above.
The Company intends to use the NationsBank line to fund future acquisitions.
However, under the facility, the Company may borrow up to $5 million for working
capital purposes. The NationsBank line is intended to enable the Company to
complete acquisitions without long financing delays. Once the acquisition is
closed, the Company will seek longer term financing for the facility either
through a mortgage or lease. Although there can be no assurance such long-term
financing will be available on acceptable terms or at all.
In April 1997, the Company closed a $5.0 million unsecured revolving credit note
with IHS. The note, which matures in April 1998, bears interest at a rate of 12%
with a reduction in maximum principal outstanding at October 1997 and January
1998 to $4.5 million and $4.0 million, respectively. These borrowings are to be
used to assist the Company in its working capital needs.
Also in April 1997, the Company re-negotiated its existing note payable with
IHS. Under the new terms, the interest rate was reduced to 12% from 14%, with no
principal payments due until September 1997. The amended note matures on
November 20, 1998.
The Company has agreed to guaranty the indebtedness on two development sites for
one of its developers. There currently is no balance outstanding relating to
these two sites. However, the maximum amount of the guarantee on these two sites
is $4 million.
The Company currently has employment agreements with three of its officers which
provide annual base salaries aggregating $694,000.
10
<PAGE>
Part II. Other Information
Items 1 - 5 are not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Number Description
10.1 Credit agreement with NationsBank, SouthTrust and SunTrust
dated April 9, 1997
10.2 Security agreement with NationsBank dated April 9, 1997
10.3 Subordination agreement with NationsBank dated April 9, 1997
10.4 Lease agreement with The Homestead, L.C. for The Manhattan
Homestead, dated August 29, 1996
10.5 Revolving credit note with IHS dated April 30, 1997
10.6 Amended unsecured credit note with IHS dated April 30, 1997
27 Financial Data Schedule
(b) Reports on Form 8-K
Current Report on Form 8-K dated January 29, 1997 relating to the
acquisition of the Bullock facilities, as amended.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized
INTEGRATED LIVING COMMUNITIES, INC.
(Registrant)
John B. Poole
-----------------------------------------------
John B. Poole
Dated May 15, 1997 Senior Vice President - Chief Financial Officer
================================================================================
CREDIT AGREEMENT
among
INTEGRATED LIVING COMMUNITIES
HOLDING, INC.
as Borrower
and
INTEGRATED LIVING COMMUNITIES, INC.
as Parent
and
CERTAIN SUBSIDIARIES OF
THE BORROWER AND THE PARENT
as Guarantors
and
THE LENDERS IDENTIFIED HEREIN
and
NATIONSBANK, N.A. (SOUTH)
as Agent
DATED AS OF APRIL 9, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
SECTION 1 DEFINITIONS AND ACCOUNTING TERMS................................... 1
1.1 Definitions...................................................... 1
1.2 Computation of Time Periods
and Other Definition
Provisions......................................................16
1.3 Accounting Terms.................................................16
SECTION 2 CREDIT FACILITY....................................................16
2.1 Revolving Loans..................................................16
2.2 Letter of Credit Subfacility.....................................18
SECTION 3 GENERAL PROVISIONS APPLICABLE TO
LOANS AND LETTERS OF
CREDIT............................................................22
3.1 Interest.........................................................22
3.2 Place and Manner of Payments.....................................22
3.3 Prepayments......................................................23
3.4 Fees.............................................................23
3.5 Payment in full at Maturity......................................24
3.6 Computations of Interest and Fees................................24
3.7 Pro Rata Treatment...............................................24
3.8 Sharing of Payments..............................................25
3.9 Capital Adequacy.................................................27
3.10 Inability To Determine Interest Rate............................27
3.11 Illegality......................................................27
3.12 Requirements of Law.............................................27
3.13 Taxes...........................................................28
3.14 Indemnity.......................................................30
SECTION 4 GUARANTY...........................................................30
4.1 Guaranty of Payment..............................................30
4.2 Obligations Unconditional........................................30
4.3 Modifications....................................................31
4.4 Waiver of Rights.................................................31
4.5 Reinstatement....................................................31
4.6 Remedies.........................................................32
4.7 Limitation of Guaranty...........................................32
SECTION 5 CONDITIONS PRECEDENT...............................................32
5.1 Closing Conditions...............................................32
5.2 Conditions to Revolving Loans
to Finance Acquisition of New
Properties......................................................36
5.3 Conditions to All Revolving Loans................................39
SECTION 6 REPRESENTATIONS AND WARRANTIES.....................................39
6.1 Financial Condition..............................................39
6.2 No Material Change...............................................39
6.3 Organization and Good Standing...................................40
6.4 Due Authorization................................................40
6.5 No Conflicts.....................................................40
6.6 Consents.........................................................40
6.7 Enforceable Obligations..........................................40
6.8 No Default.......................................................40
6.9 Ownership........................................................40
i
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6.10 Indebtedness....................................................41
6.11 Litigation......................................................41
6.12 Taxes...........................................................41
6.13 Compliance with Law.............................................41
6.14 Compliance with ERISA...........................................41
6.15 Organization Structure..........................................42
6.16 Use of Proceeds; Margin Stock...................................42
6.17 Government Regulation...........................................43
6.18 Environmental Matters...........................................43
6.19 Solvency........................................................44
6.20 Investments.....................................................44
6.21 Location of Collateral..........................................44
6.22 Disclosure......................................................44
6.23 Licenses, etc...................................................44
6.24 No Burdensome Restrictions......................................44
6.25 Collateral Documents............................................45
6.26 Intellectual Property...........................................45
6.27 Management Agreements...........................................45
SECTION 7 AFFIRMATIVE COVENANTS..............................................45
7.1 Information Covenants............................................45
7.2 Financial Covenants..............................................48
7.3 Preservation of Existence and Franchises.........................49
7.4 Books and Records................................................49
7.5 Compliance with Law..............................................49
7.6 Payment of Taxes and Other Indebtedness..........................49
7.7 Insurance........................................................49
7.8 Maintenance of Property..........................................50
7.9 Performance of Obligations.......................................50
7.10 Use of Proceeds.................................................50
7.11 Audits/Inspections..............................................50
7.12 Additional Credit Parties.......................................50
7.13 Collateral......................................................51
7.14 Environmental Indemnity.........................................51
7.15 Abundance of Caution Properties.................................51
7.16 Environmental Assessment........................................51
7.17 Expansion of Units..............................................51
SECTION 8 NEGATIVE COVENANTS.................................................52
8.1 Indebtedness.....................................................52
8.2 Liens............................................................52
8.3 Nature of Business...............................................52
8.4 Consolidation and Merger.........................................53
8.5 Sale or Lease of Assets..........................................53
8.6 Advances, Investments and Loans..................................53
8.7 Restricted Payments..............................................53
8.8 Subordinated Debt................................................53
8.9 Transactions with Affiliates.....................................53
8.10 Fiscal Year; Organizational Documents...........................54
8.11 Limitations.....................................................54
8.12 Negative Pledges................................................54
8.13 Creation of Subsidiaries........................................54
8.14 Issuance and Sale of Subsidiary Stock...........................54
8.15 Sale Leasebacks.................................................54
ii
<PAGE>
8.16 Ownership of Assets.............................................54
8.17 Serviceable Beds................................................55
8.18 Management Agreements...........................................55
SECTION 9 EVENTS OF DEFAULT..................................................55
9.1 Events of Default................................................55
9.2 Acceleration; Remedies...........................................57
9.3 Allocation of Payments After Event of Default....................58
SECTION 10 AGENCY PROVISIONS.................................................58
10.1 Appointment.....................................................58
10.2 Delegation of Duties............................................59
10.3 Exculpatory Provisions..........................................59
10.4 Reliance on Communications......................................59
10.5 Notice of Default...............................................60
10.6 Non-Reliance on Agent and Other Lenders.........................60
10.7 Indemnification.................................................60
10.8 Agent in Its Individual Capacity................................61
10.9 Successor Agent.................................................61
SECTION 11 MISCELLANEOUS.....................................................61
11.1 Notices.........................................................61
11.2 Right of Set-Off................................................61
11.3 Benefit of Agreement............................................62
11.4 No Waiver; Remedies Cumulative..................................63
11.5 Payment of Expenses; Indemnification............................64
11.6 Amendments, Waivers and Consents................................64
11.7 Counterparts....................................................65
11.8 Headings........................................................65
11.9 Defaulting Lender...............................................65
11.10 Survival of Indemnification
and Representations and
Warranties....................................................65
11.11 Governing Law; Jurisdiction....................................65
11.12 Waiver of Jury Trial...........................................66
11.13 Time...........................................................66
11.14 Severability...................................................66
11.15 Entirety.......................................................66
11.16 Binding Effect.................................................66
11.17 Confidentiality................................................67
SCHEDULES
Schedule 1.1(a) Collateral Pool Property
Schedule 1.1(b) Commitment Percentages
Schedule 1.1(c) Subordination and Intercreditor Agreement
Schedule 6.10 Indebtedness
Schedule 6.11 Litigation
Schedule 6.15 Organization Structure
Schedule 6.18 Environmental Matters
Schedule 6.21(a) Real Property Locations
Schedule 6.21(b) Personal Property Locations
Schedule 6.21(c) Chief Executive Offices
Schedule 6.26 Intellectual Property
Schedule 7.7(a) Insurance Coverage
iii
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Schedule 8.2 Liens
Schedule 8.6 Investments
Schedule 11.1 Notices
EXHIBITS
Exhibit 2.1(b) Form of Notice of Borrowing
Exhibit 2.1(e) Form of Notice of Continuation/Conversion
Exhibit 2.1(g) Form of Revolving Loan Note
Exhibit 7.1(d) Form of Officer's Certificate
Exhibit 7.1(g) Form of Borrowing Base Certificate
Exhibit 7.12 Form of Joinder Agreement
Exhibit 11.3 Form of Assignment Agreement
iv
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT (this "Credit Agreement") is entered into as of
April 9, 1997 among INTEGRATED LIVING COMMUNITIES HOLDING, INC., a Delaware
corporation ("Borrower"), INTEGRATED LIVING COMMUNITIES, INC., a Delaware
corporation (the "Parent") and the subsidiaries of the Borrower and the Parent
identified on the signature pages hereto (such subsidiaries, together with the
Parent, individually a "Guarantor" and collectively the "Guarantors"), the
Lenders (as defined herein) and NATIONSBANK, N.A. (SOUTH) ("NationsBank"), as
Agent for the Lenders.
RECITALS
WHEREAS, the Borrower desires to enter into a $50 million revolving
credit facility; and
WHEREAS, the Lenders party hereto have agreed to make the requested
revolving credit facility available to the Borrower on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
SECTION 1
DEFINITIONS AND ACCOUNTING TERMS
1.1 DEFINITIIONS.
As used herein, the following terms shall have the meanings herein
specified unless the context otherwise requires. Defined terms herein shall
include in the singular number the plural and in the plural the singular:
"Abundance of Caution Property" shall have the meaning given
such term in Section 5.2.
"Additional Credit Party" means each Person that becomes a
Guarantor after the Closing Date, as provided in Section 7.12.
"Adjusted Eurodollar Rate" means, for the Interest Period for
each Eurodollar Loan comprising part of the same borrowing (including
conversions, extensions and renewals), a per annum interest rate determined
pursuant to the following formula:
Adjusted Eurodollar Rate = Eurodollar Rate
----------------------------------
1 - Eurodollar Reserve Percentage
"Agent" means NationsBank, N.A. (South) (or any successor
thereto) or any successor agent appointed pursuant to Section 10.9.
"Affiliate" means, with respect to any Person, any other
Person (i) directly or indirectly controlling or controlled by or under direct
or indirect common control with such Person or (ii) directly or indirectly
owning or holding five percent (5%) or more of the equity interest in such
Person. For purposes of this definition, "control" when used with respect to any
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
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"Agency Services Address" means NationsBank, N.A.,
NC1-001-15-04, 101 North Tryon Street, Charlotte, North Carolina 28255, Attn.:
Agency Services, or such other address as may be identified by written notice
from the Agent to the Borrower.
"Applicable Percentage" means for any day, the rate per annum
set forth below opposite the applicable Leverage Ratio then in effect, it being
understood that the Applicable Percentage for Eurodollar Loans shall be the
percentage set forth under the column "Eurodollar Margin":
Pricing Leverage Eurodollar
Level Ratio Margin
I less than 4.0 2.25%
-
II greater than 4.0 but less than 5.0 2.63%
-
III greater than 5.0 but less than 6.0 3.00%
-
The Applicable Percentage shall be determined and adjusted monthly on the first
day of each calendar month (each a "Rate Determination Date"); provided that:
(i) the initial Applicable Percentage shall be based on the financial
statements and information provided to the Agent on the Closing Date and shall
remain in effect at such Pricing Level until the first Rate Determination Date
to occur after the Closing Date, and
(ii) if the Borrower fails to provide the annual or quarterly
compliance certificates and related financial statements and information
required by Sections 7.1(a), (b), (c) and (e), as appropriate, or fails to
deliver copies of such certificates to the Agency Services Address as required
by Section 7.1(d), the Applicable Percentage shall be based on Pricing Level III
until such time as an appropriate compliance certificate and related financial
statements and information are delivered, whereupon the applicable Pricing Level
shall be adjusted on the first day of the next calendar month and based on the
information contained in such compliance certificate and related financial
statements and information.
Each Applicable Percentage shall be effective from a Rate Determination Date
until the next such Rate Determination Date. The Agent shall determine the
appropriate Applicable Percentage in the pricing matrix promptly on each Rate
Determination Date and shall promptly notify the Borrower and the Lenders of any
change thereof. Such determinations by the Agent shall be conclusive absent
manifest error. Adjustments in the Applicable Percentage shall be effective as
to existing Loans as well as any new Loans made.
"Average Economic Occupancy Rate" means, for each Real
Property, for the most recently ending three month period, the ratio (expressed
as a percentage) equal to the sum of the Economic Occupancy Rate for each month
in such three month period divided by 3.
"Bankruptcy Code" means the Bankruptcy Code in Title 11 of the
United States Code, as amended, modified, succeeded or replaced from time to
time.
"Base Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest whole multiple of 1/100 of 1%) equal to
the greater of (a) the Federal Funds Rate in effect on such day plus 1/2 of 1%
or (b) the Prime Rate in effect on such day. If for any reason the Agent shall
have determined (which determination shall be conclusive absent manifest error)
that it is unable after due inquiry to ascertain the Federal Funds Rate for any
reason, including the inability or failure of the Agent to obtain sufficient
quotations in accordance with the terms hereof, the Base Rate shall be
determined without regard to clause (a) of the first sentence of this definition
until the circumstances giving rise to such inability no longer exist. Any
change in the Base Rate due to a change in the Prime Rate or the Federal Funds
Rate shall be effective on the effective date of such change in the Prime Rate
or the Federal Funds Rate, respectively.
"Base Rate Loan" means any Loan bearing interest at a rate
determined by reference to the Base Rate.
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"Borrower" means Integrated Living Communities Holding, Inc.,
a Delaware corporation, together with any successors and permitted assigns.
"Borrowing Base" means, at any date of determination, the sum
of the Borrowing Base Values for each parcel of Collateral Pool Property.
"Borrowing Base Value" means, at any date of determination
with respect to each Collateral Pool Property, an amount for such Collateral
Pool Property equal to the lesser of:
(a) 75% of the appraised value of such Collateral Pool
Property (as determined pursuant to a third party appraisal delivered
to and accepted by the Agent in the sole discretion of the Agent); and
(b) the NOI for such Collateral Pool Property for the fiscal
quarter most recently ended multiplied by twenty-four (24).
"Business Day" means any day other than a Saturday, a Sunday,
a legal holiday or a day on which banking institutions are authorized or
required by law or other governmental action to close in Charlotte, North
Carolina or Sarasota, Florida; provided that in the case of Eurodollar Loans,
such day is also a day on which dealings between banks are carried on in U.S.
dollar deposits in the London interbank market.
"Capital Expenditures" means all expenditures of the Credit
Parties and their Subsidiaries which, in accordance with GAAP, would be
classified as capital expenditures, including, without limitation, Capital
Leases.
"Capital Lease" means, as applied to any Person, any lease of
any property (whether real, personal or mixed) by that Person as lessee which,
in accordance with GAAP, is or should be accounted for as a capital lease on the
balance sheet of that Person.
"Cash Equivalents" means (a) securities issued or directly and
fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) having maturities of not more
than twelve months from the date of acquisition, (b) U.S. dollar denominated
time and demand deposits and certificates of deposit of (i) any Lender, (ii) any
domestic commercial bank having capital and surplus in excess of $500,000,000 or
(iii) any bank whose short-term commercial paper rating from S&P is at least A-1
or the equivalent thereof or from Moody's is at least P-1 or the equivalent
thereof (any such bank being an "Approved Bank"), in each case with maturities
of not more than 270 days from the date of acquisition, (c) commercial paper and
variable or fixed rate notes issued by any Approved Bank (or by the parent
company thereof) or any variable rate notes issued by, or guaranteed by, any
domestic corporation rated A-1 (or the equivalent thereof) or better by S&P or
P-1 (or the equivalent thereof) or better by Moody's and maturing within six
months of the date of acquisition, (d) repurchase agreements with a bank or
trust company (including any of the Lenders) or securities dealer having capital
and surplus in excess of $500,000,000 for direct obligations issued by or fully
guaranteed by the United States of America in which a Credit Party shall have a
perfected first priority security interest (subject to no other Liens) and
having, on the date of purchase thereof, a fair market value of at least 100% of
the amount of the repurchase obligations and (e) Investments, classified in
accordance with GAAP as current assets, in money market investment programs
registered under the Investment Company Act of 1940, as amended, which are
administered by financial institutions having capital of at least $500,000,000
and the portfolios of which are limited to Investments of the character
described in the foregoing subdivisions (a) through (d).
"Change of Control" means the occurrence of any of the
following events: (i) (other than IHS) any Person or two or more Persons acting
in concert shall have acquired beneficial ownership, directly or indirectly, of,
or shall have acquired by contract or otherwise, or shall have entered into a
contract or arrangement that, upon consummation, will result in its or their
acquisition of, control over, Voting Stock of the Parent (or other securities
convertible into such Voting Stock) representing 25% or more of the combined
voting power of all Voting Stock of the Parent, (ii) IHS shall fail to own and
have the right to vote at least 25% of the outstanding Voting Stock of the
Parent, determined on a fully diluted basis after giving effect to the
conversion and exercise of all outstanding warrants, options
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and other securities of the Parent that are convertible into or exercisable for
Voting Stock of the Parent (whether or not such securities are then currently
convertible or exercisable), (iii) during any period of up to 24 consecutive
months, commencing after the Closing Date, individuals who at the beginning of
such 24 month period were directors of the Parent (together with any new
director whose election by the Parent's Board of Directors or whose nomination
for election by the Parent's shareholders was approved by a vote of at least
two-thirds 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) cease for any reason to constitute a majority of the
directors of the Parent then in office or (iv) the Parent shall fail to own and
have the right to vote 100% of the outstanding Voting Stock of the Borrower,
determined on a fully diluted basis after giving effect to the conversion and
exercise of all outstanding warrants, options and other securities of the
Borrower that are convertible into or exercisable for Voting Stock of the
Borrower. As used herein, "beneficial ownership" shall have the meaning provided
in Rule 13d-3 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934.
"Churchland Facility" means that certain assisted living
facility located at 4916 W. Norfolk Road in Portsmouth, Virginia and identified
on Schedule 1.1(a) attached hereto.
"Closing Date" means the date hereof.
"Code" means the Internal Revenue Code of 1986, as amended,
and any successor statute thereto, as interpreted by the rules and regulations
issued thereunder, in each case as in effect from time to time. References to
sections of the Code shall be construed also to refer to any successor sections.
"Collateral" means all collateral referred to in and covered
by the Collateral Documents.
"Collateral Documents" means the Security Agreement, the
Pledge Agreement, the Mortgage Documents and such other documents executed and
delivered in connection with the attachment and perfection of the Agent's
security interests, for the benefit of the Lenders, in the Real Properties and
the personal property owned by the Credit Parties, including, without
limitation, the Mortgage Policies and UCC financing statements.
"Collateral Pool Adjusted NOI" means for the fiscal quarter
most recently ending, with respect to the Collateral Pool Property, the
aggregate NOI for all Collateral Pool Property multiplied by 4.
"Collateral Pool Eligibility Conditions" means the following
conditions:
(a) Average Economic Occupancy Rate. Each Real Property must
maintain an Average Economic Occupancy Rate of ninety percent (90%) at
all times; provided, however,
(i) any Newly Constructed Facility acquired subsequent
to the date hereof shall not be required to satisfy the
above-described 90% Average Economic Occupancy Rate
requirement during the first six months of ownership by the
Borrower or a Subsidiary of the Borrower;
(ii) the Terrace Gardens Facility need only maintain an
Average Economic Occupancy Rate of seventy five percent
(75%) during the first six (6) months following the Closing
Date and shall not be required to satisfy the
above-referenced ninety percent (90%) Average Economic
Occupancy Rate requirement until such six (6) month grace
period following the Closing Date has expired;
(iii) the West Palm Beach Facility need only maintain
an Average Economic Occupancy Rate of sixty percent (60%)
during the first six (6) months following the Closing Date
and shall not be required to satisfy the above-referenced
ninety percent (90%) Average Economic Occupancy Rate
requirement until such six (6) month grace period following
the Closing Date has expired;
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(iv) the Ghent Arms Facility need only maintain an
Average Economic Occupancy Rate of eighty-five percent (85%)
during the first six (6) months following the Closing Date
and shall not be required to satisfy the above-referenced
ninety percent (90%) Average Economic Occupancy Rate
requirement until such six (6) month grace period following
the Closing Date has expired;
(v) the King's Grant Facility need only maintain an
Average Economic Occupancy Rate of seventy percent (70%)
during the six (6) months following the Closing Date and
shall not be required to satisfy the above-referenced ninety
percent (90%) Average Economic Occupancy Rate requirement
until such six (6) month grace period following the Closing
Date has expired; and
(vi) with respect to the Churchland Facility and the
Gloucester Facility, those Units which are part of the
current expansion projects at such Real Properties will not
be considered in the calculation of the Average Economic
Occupancy Rate for such Real Properties until the tenth full
calendar month following the completion of construction of
such Units.
(b) Debt Service Coverage Ratio. Each Real Property must
maintain at all times a Debt Service Coverage Ratio greater than or
equal to 1.3 to 1.0.
(c) Units/Serviceable Beds. Each Real Property must maintain
at all times at least 50 Units and 60 Serviceable Beds.
"Collateral Pool Property" means the Real Properties (other
than Abundance of Caution Property) that (i) satisfy each of the Collateral Pool
Eligibility Conditions as of the date of determination and (ii) are either (a)
identified on Schedule 1.1(a) or (b) acquired subsequent to the Closing Date by
a Subsidiary of the Borrower or the Borrower with the proceeds of Revolving
Loans and in satisfaction of each of the conditions contained in Section 5.2
hereof.
"Commitments" means the commitment of each Lender with respect
to the Revolving Committed Amount.
"Credit Documents" means this Credit Agreement, the Notes, any
Joinder Agreement, the Collateral Documents, the LOC Documents, the Fee Letter
and all other related agreements and documents issued or delivered hereunder or
thereunder or pursuant hereto or thereto.
"Credit Parties" means the Borrower and the Guarantors and
"Credit Party" means any one of them.
"Credit Party Obligations" means, without duplication, (a) all
of the obligations of the Credit Parties to the Lenders (including the Issuing
Lender) and the Agent, whenever arising, under this Credit Agreement, the Notes,
the Collateral Documents or any of the other Credit Documents to which the
Borrower or any other Credit Party is a party and (b) all liabilities and
obligations owing from such Credit Party to any Lender, or any Affiliate of a
Lender, arising under any interest rate protection agreements, commodity
purchase or option agreements or other interest or exchange rate or commodity
price hedging agreements related to the Loans and Letters of Credit
(collectively, "Hedging Agreements").
"Daily Economic Occupancy Rate" means, for each Real Property,
for each calendar day, the ratio (expressed as a percentage) equal to (i) the
number of Serviceable Beds at such Real Property minus the number of unoccupied
Serviceable Beds at such Real Property to (ii) the number of Serviceable Beds at
such Real Property.
"Debt Service Coverage Ratio" means, as of any date of
determination, (i) with respect to the applicable Newly Constructed Facility,
the ratio of (a) the NOI for such Newly Constructed Facility for the most recent
fiscal quarter multiplied by 4 to (b) the Borrowing Base Value of such Newly
Constructed Facility multiplied by 10.25, (ii) with respect to the applicable
Real Property (other than a Newly Constructed Facility), the ratio of (a) the
NOI for
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such Real Property for the most recent six month period multiplied by 2 to (b)
the Borrowing Base Value of such Real Property multiplied by 10.25 and (iii)
with respect to the applicable Abundance of Caution Property, the ratio of (a)
the NOI for such Abundance Caution Property for the most recent fiscal quarter
multiplied by 4 to (b) seventy-five percent (75%) of the acquisition cost of
such Abundance of Caution Property multiplied by 10.25.
"Default" means any event, act or condition which with notice
or lapse of time, or both, would constitute an Event of Default.
"Defaulting Lender" means, at any time, any Lender that, (a)
has failed to make an Extension of Credit required pursuant to the terms of this
Credit Agreement (but only for so long as such Extension of Credit is not made),
(b) has failed to pay to the Agent or any Lender an amount owed by such Lender
pursuant to the terms of this Credit Agreement or any of the other Credit
Documents (but only for so long as such amount has not been repaid) or (c) has
been deemed insolvent or has become subject to a bankruptcy or insolvency
proceeding or to a receiver, trustee or similar official.
"Dollars" and "$" means dollars in lawful currency of the
United States of America.
"EBITDAR" means, for any period, with respect to the Parent
and its Subsidiaries on a consolidated basis, the sum of (a) Net Income for such
period plus (b) an amount which in the determination of Net Income for such
period has been deducted for (i) Interest Expense for such period, (ii) total
Federal, state or other domestic and foreign income taxes for such period and
(iii) all depreciation, amortization and other non-cash charges for such period
plus (c) rent expense for such period, all as determined in accordance with
GAAP.
"Economic Occupancy Rate" means, for each Real Property, for
each month, the ratio (expressed as a percentage) equal to the sum of the Daily
Economic Occupancy Rate for each calendar day in such month divided by the
number of calendar days in such month.
"Effective Date" means the date, as specified by the Agent, on
which the conditions set forth in Section ClosCond ~ shall have been fulfilled
(or waived in the sole discretion of the Lenders) and on which the initial Loans
shall have been made and/or the initial Letters of Credit shall have been
issued.
"Eligible Real Estate" means, as of any date of determination,
an assisted living facility property that satisfies the following criteria: (a)
the property must have at least 50 Units and 60 Serviceable Beds, (b) the
property must be located within the United States, (c) (i) with respect to any
Operating Facility, such property must have a minimum Economic Occupancy Rate of
at least 90% for the six-month period ending immediately prior to the date of
acquisition, or (ii) with respect to any Newly Constructed Facility, such
property must have a minimum Economic Occupancy Rate of at least 80% for the
month immediately prior to the date of acquisition, (d) (i) with respect to an
Operating Facility, such property must have a Debt Service Coverage Ratio
greater than or equal to 1.3 to 1.0, or (ii) with respect to a Newly Constructed
Facility, such property must have a Debt Service Coverage Ratio greater than or
equal to 1.1 to 1.0 and (e) such property (other than Abundance of Caution
Properties which must only be otherwise satisfactory to the Agent) shall
otherwise be satisfactory to the Lenders.
"Environmental Claim" means any investigation, written notice,
violation, written demand, written allegation, action, suit, injunction,
judgment, order, consent decree, penalty, fine, lien, proceeding, or written
claim whether administrative, or judicial in nature arising (a) pursuant to, or
in connection with, an actual or alleged violation of, any Environmental Law,
(b) in connection with any Hazardous Material, (c) from any assessment,
abatement, removal, remedial, corrective, or other response action in connection
with an Environmental Law or other order of a Governmental Authority or (d) from
any actual or alleged damage, injury, threat, or harm to health, safety, natural
resources, or the environment.
"Environmental Laws" means any and all lawful and applicable
Federal, state and local statutes, laws, regulations, ordinances, rules,
judgments, orders, decrees, permits or licenses relating to the environment or
to emissions, discharges, releases or threatened releases of pollutants,
contaminants, toxic or hazardous substances or wastes into the environment
including, without limitation, ambient air, surface water, ground water, or
land, or otherwise
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relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, toxic or hazardous
substances or wastes.
"Equity Issuance" means any issuance by the Parent to any
Person of (a) shares of its capital stock (common or preferred) or other equity
interests, (b) any shares of its capital stock (common or preferred) or other
equity interests pursuant to the exercise of options (other than stock issued to
employees and directors pursuant to employees or directors stock option plans)
or warrants or (c) any shares of its capital stock (common or preferred) or
other equity interests pursuant to the conversion of any debt securities to
equity.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and any successor statute thereto, as interpreted by the rules
and regulations thereunder, all as the same may be in effect from time to time.
References to sections of ERISA shall be construed also to refer to any
successor sections.
"ERISA Affiliate" means an entity, whether or not
incorporated, which is under common control with a Credit Party or any of its
Subsidiaries within the meaning of Section 4001(a)(14) of ERISA, or is a member
of a group which includes a Credit Party and which is treated as a single
employer under Sections 414(b) or (c) of the Code.
"ERISA Event" means (i) with respect to any Plan, the
occurrence of a Reportable Event or the substantial cessation of operations
(within the meaning of Section 4062(e) of ERISA); (ii) the withdrawal of a
Credit Party, any Subsidiary of a Credit Party or any ERISA Affiliate from a
Multiple Employer Plan during a plan year in which it was a substantial employer
(as such term is defined in Section 4001(a)(2) of ERISA), or the termination of
a Multiple Employer Plan; (iii) the distribution of a notice of intent to
terminate or the actual termination of a Plan pursuant to Section 4041(a)(2) or
4041A of ERISA; (iv) the institution of proceedings to terminate or the actual
termination of a Plan by the PBGC under Section 4042 of ERISA; (v) any event or
condition which might constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan; (vi)
the complete or partial withdrawal of a Credit Party, any Subsidiary of a Credit
Party or any ERISA Affiliate from a Multiemployer Plan; (vii) the conditions for
imposition of a lien under Section 302(f) of ERISA exist with respect to any
Plan; or (viii) the adoption of an amendment to any Plan requiring the provision
of security to such Plan pursuant to Section 307 of ERISA.
"Eurodollar Loan" means a Loan bearing interest based at a
rate determined by reference to the Adjusted Eurodollar Rate.
"Eurodollar Rate" means, for any Eurodollar Loan for any
Interest 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) two Business Days prior to the first day of such
Interest Period for a term comparable to such Interest Period; provided,
however, if more than one rate is specified on Telerate Page 3750, the
applicable rate shall be the arithmetic mean of all such rates. If for any
reason such rate is not available, the term "Eurodollar Rate" shall mean, for
any Eurodollar Loan for any Interest 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) two Business Days prior to the first day
of such Interest Period for a term comparable to such Interest 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.
"Eurodollar Reserve Percentage" means, for any day, that
percentage (expressed as a decimal) which is in effect from time to time under
Regulation D of the Board of Governors of the Federal Reserve System (or any
successor), as such regulation may be amended from time to time, or any
successor regulation, as the maximum reserve requirement (including, without
limitation, any basic, supplemental, emergency, special, or marginal reserves)
applicable with respect to Eurocurrency liabilities as that term is defined in
Regulation D (or against any other category of liabilities that includes
deposits by reference to which the interest rate of Eurodollar Loans is
determined), whether or not any Lender has any Eurocurrency liabilities subject
to such reserve requirement at that time. Eurodollar Loans shall be deemed to
constitute Eurocurrency liabilities and as such shall be deemed subject to
reserve requirements without benefits of credits for proration, exceptions or
offsets that may be available from time to time to a Lender. The Adjusted
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Eurodollar Rate shall be adjusted automatically on and as of the effective date
of any change in the Eurodollar Reserve Percentage.
"Event of Default" means any of the events or circumstances
described in Section 9.1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, modified, succeeded or replaced from time to time, and the rules and
regulations promulgated thereunder.
"Existing Properties" has the meaning set forth in Section
5.1(f).
"Extension of Credit" means, as to any Lender, the making of,
or participation in, a Loan by such Lender or the issuance or extension of, or
participation in, a Letter of Credit.
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upward, if necessary, to the nearest 1/100th of 1%) 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 on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day; provided that (a) if such day is not a Business Day,
the Federal Funds Rate for such day shall be such rate on such transactions on
the next preceding Business Day and (b) if no such rate is so published on such
next preceding Business Day, the Federal Funds Rate for such day shall be the
average rate quoted to the Agent on such day on such transactions as determined
by the Agent.
"Fee Letter" means that certain letter agreement, dated as of
the Closing Date, between the Agent and the Borrower, as amended, modified,
supplemented or replaced from time to time.
"Fixed Charge Coverage Ratio" means, as of the end of each
fiscal quarter of the Parent and its Subsidiaries on a consolidated basis, for
the fiscal quarter ending on such date, the ratio of (a) (i) EBITDAR for the
applicable period minus (ii) total Federal, state or other domestic and foreign
taxes paid for the applicable period to (b) the sum of (i) Interest Expense for
the applicable period plus (ii) rent expense for the applicable period.
"Funded Debt" means, with respect to any Person, without
duplication, the sum of (a) all Indebtedness of such Person for borrowed money,
(b) all purchase money Indebtedness of such Person, (c) the principal portion of
all obligations of such Person under Capital Leases, (d) all obligations,
contingent or otherwise, relative to the face amount of all letters of credit
(other than letters of credit supporting trade payables in the ordinary course
of business), whether or not drawn, and banker's acceptances issued for the
account of such Person (it being understood that, to the extent an undrawn
letter of credit supports another obligation consisting of Indebtedness, in
calculating aggregated Indebtedness only such other obligation shall be
included), (e) all Guaranty Obligations of such Person with respect to Funded
Debt of another Person, (f) all Funded Debt of another Person secured by a Lien
on any property of such Person whether or not such Funded Debt has been assumed
by such Person, (g) all Funded Debt of any partnership or unincorporated joint
venture to the extent such Person is legally obligated or has a reasonable
expectation of being liable with respect thereto, net of any assets of such
partnership or joint venture and (h) the principal balance outstanding under any
synthetic lease, tax retention operating lease, off-balance sheet loan or
similar off-balance sheet financing product to which such Person is a party,
where such transaction is considered borrowed money indebtedness for tax
purposes but is classified as an operating lease in accordance with GAAP. The
Funded Debt of any Person shall include the Funded Debt of any partnership or
joint venture in which such Person is a general partner or joint venturer, but
only to the extent to which there is recourse to such Person for the payment of
such Funded Debt.
"GAAP" means generally accepted accounting principles in the
United States applied on a consistent basis and subject to Section 1.3 hereof.
"Ghent Arms Facility" means, that certain assisted living
facility located at 641 Redgate Avenue in Norfolk, Virginia and identified on
Schedule 1.1(a) attached hereto.
"Gloucester Facility" means, that certain assisted living
facility located at 7657 Meredith Drive in Gloucester, Virginia and identified
on Schedule 1.1(a) attached hereto.
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"Governmental Authority" means any Federal, state, local or
provincial court or governmental agency, authority, instrumentality or
regulatory body.
"Guarantor" means each of the Parent, Sarasota, the
Subsidiaries of the Borrower identified on the signature pages hereto and each
Additional Credit Party which has executed a Joinder Agreement, together with
their successors and assigns.
"Guaranty Obligations" means, with respect to any Person,
without duplication, any obligations (other than endorsements in the ordinary
course of business of negotiable instruments for deposit or collection)
guaranteeing or intended to guarantee any Indebtedness of any other Person in
any manner, whether direct or indirect, and including without limitation any
obligation, whether or not contingent, (a) to purchase any such Indebtedness or
other obligation or any property constituting security therefor, (b) to advance
or provide funds or other support for the payment or purchase of such
indebtedness or obligation or to maintain working capital, solvency or other
balance sheet condition of such other Person (including, without limitation,
maintenance agreements, comfort letters, take or pay arrangements, put
agreements or similar agreements or arrangements) for the benefit of the holder
of Indebtedness of such other Person, (c) to lease or purchase property,
securities or services primarily for the purpose of assuring the owner of such
Indebtedness or (d) to otherwise assure or hold harmless the owner of such
Indebtedness or obligation against loss in respect thereof. The amount of any
Guaranty Obligation hereunder shall (subject to any limitations set forth
therein) be deemed to be an amount equal to the outstanding principal amount (or
maximum principal amount, if larger) of the Indebtedness in respect of which
such Guaranty Obligation is made.
"Hazardous Materials" means any substance, material or waste
defined or regulated in or under any Environmental Laws.
"Hedging Agreements" has the meaning set forth in the
definition of Credit Party Obligations.
"Indebtedness" of any Person means, without duplication, (a)
all obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments, or upon
which interest payments are customarily made (c) all obligations of such Person
under conditional sale or other title retention agreements relating to property
purchased by such Person to the extent of the value of such property (other than
customary reservations or retentions of title under agreements with suppliers
entered into in the ordinary course of business), (d) all obligations, other
than intercompany items, of such Person issued or assumed as the deferred
purchase price of property or services purchased by such Person which would
appear as liabilities on a balance sheet of such Person, (e) all Indebtedness of
others secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien on, or payable out of
the proceeds of production from, property owned or acquired by such Person,
whether or not the obligations secured thereby have been assumed, (f) all
Guaranty Obligations of such Person, (g) the principal portion of all
obligations of such Person under (i) Capital Leases and (ii) any synthetic
lease, tax retention operating lease, off-balance sheet loan or similar
off-balance sheet financing product of such Person where such transaction is
considered borrowed money indebtedness for tax purposes but is classified as an
operating lease in accordance with GAAP, (h) all obligations of such Person in
respect of interest rate protection agreements, foreign currency exchange
agreements, or other interest or exchange rate or commodity price hedging
agreements, (i) the maximum amount of all performance and standby letters of
credit issued or bankers' acceptances facilities created for the account of such
Person and, without duplication, all drafts drawn thereunder (to the extent
unreimbursed), and (j) all preferred stock issued by such Person and required by
the terms thereof to be redeemed, or for which mandatory sinking fund payments
are due, by a fixed date. The Indebtedness of any Person shall include the
Indebtedness of any partnership or unincorporated joint venture in which such
Person is legally obligated or has a reasonable expectation of being liable with
respect thereto.
"Interest Expense" means, for any period with respect to any
Person, all interest expense, including the interest component under Capital
Leases, as determined in accordance with GAAP.
"Interest Payment Date" means for both the Base Rate Loans and
Eurodollar Loans, the day in each calendar month that is the last day of the
single Interest Period for Eurodollar Loans permitted pursuant to Section 2.1
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hereof beginning with the first of such dates to occur after the Closing Date,
and the Revolving Loan Maturity Date; provided, however, with respect to Base
Rate Loans, the Interest Payment Date shall mean the last day of each month and
the Revolving Loan Maturity Date. If an Interest Payment Date falls on a date
which is not a Business Day, such Interest Payment Date shall be deemed to be
the next succeeding Business Day.
"Interest Period" means as to Eurodollar Loans, a period of
one month's duration, commencing on the date of borrowing; provided, however,
(a) if any Interest Period would end on a day which is not a Business Day, such
Interest Period shall be extended to the next succeeding Business Day, (b) no
Interest Period shall extend beyond the Revolving Loan Maturity Date and (c) if
the single Interest Period begins on a day for which there is no numerically
corresponding day in the calendar month in which the single Interest Period is
to end, such Interest Period shall end on the last Business Day of such calendar
month.
"Investment" in any Person means (a) the acquisition (whether
for cash, property, services, assumption of Indebtedness, securities or
otherwise) of assets, shares of capital stock, bonds, notes, debentures,
partnership, joint ventures or other ownership interests or other securities of
such other Person or (b) any deposit with, or advance, loan or other extension
of credit to, such Person (other than deposits made in connection with the
purchase of equipment or other assets in the ordinary course of business) or (c)
any other capital contribution to or investment in such Person, including,
without limitation, any Guaranty Obligation (including any support for a letter
of credit issued on behalf of such Person) incurred for the benefit of such
Person.
"IHS" means Integrated Health Services, Inc., a Delaware
corporation.
"Issuing Lender" means NationsBank.
"Issuing Lender Fees" shall have the meaning assigned to such
term in Section 3.4(b).
"Joinder Agreement" means a Joinder Agreement substantially in
the form of Exhibit 7.12.
"King's Grant Facility" means that certain assisted living
facility located at 440 N. Lynnhaven Road in Virginia Beach, Virginia and
identified on Schedule 1.1(a) attached hereto.
"Lender" means any of the Persons identified as a "Lender" on
the signature pages hereto, and any Person which may become a Lender by way of
assignment in accordance with the terms hereof, together with their successors
and permitted assigns.
"Letter of Credit" means any letter of credit issued by the
Issuing Lender for the account of the Borrower in accordance with the terms of
Section 2.2, as such Letter of Credit may be amended, modified, extended,
renewed or replaced.
"Letter of Credit Fee" shall have the meaning given such term
in Section 3.4(b).
"Leverage Ratio" means the ratio of (a) as of the first day of
any month, the sum of Revolving Loans outstanding on such date plus LOC
obligations outstanding on such date to (b) the Collateral Pool Adjusted NOI for
the fiscal quarter ending on such date, or if such date is not the last day of a
fiscal quarter, for the fiscal quarter most recently ended.
"Lien" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, security interest, encumbrance, lien (statutory or
otherwise), preference, priority or charge of any kind, including, without
limitation, any agreement to give any of the foregoing, any conditional sale or
other title retention agreement, and any lease in the nature thereof.
"Loan" or "Loans" means the Revolving Loans (or a portion of
any Revolving Loan), individually or collectively, as appropriate.
"Loan" or "Loans" means the Revolving Loans (or a portion of
any Revolving Loan), individually or collectively, as appropriate.
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"LOC Documents" means, with respect to any Letter of Credit,
such Letter of Credit, any amendments thereto, any documents delivered in
connection therewith, any application therefor, and any agreements, instruments,
guarantees or other documents (whether general in application or applicable only
to such Letter of Credit) governing or providing for (a) the rights and
obligations of the parties concerned or at risk or (b) any collateral security
for such obligations.
"LOC Obligations" means, at any time, the sum of (a) the
maximum amount which is, or at any time thereafter may become, available to be
drawn under Letters of Credit then outstanding, assuming compliance with all
requirements for drawings referred to in such Letters of Credit plus (b) the
aggregate amount of all drawings under Letters of Credit honored by the Issuing
Lender but not theretofore reimbursed.
"LOC Participants" means all Lenders whose Revolving Loan
Commitment Percentage is greater than zero.
"Material Adverse Effect" means a material adverse effect on
(a) the business, assets, operations, condition (financial or otherwise) or
prospects of the Parent and its Subsidiaries or the Borrower and its
Subsidiaries, (b) the ability of a Credit Party to perform its respective
obligations under this Credit Agreement or any of the other Credit Documents, or
(c) the validity or enforceability of this Credit Agreement, any of the other
Credit Documents, or the rights and remedies of the Lenders hereunder or
thereunder taken as a whole.
"Materials of Environmental Concern" shall mean any gasoline
or petroleum (including crude oil or any fraction thereof) or petroleum products
or any hazardous or toxic substances, materials or wastes, defined or regulated
as such in or under any Environmental Laws, including, without limitation,
asbestos, polychlorinated biphenyls and urea formaldehyde foam insulation.
"Moody's" means Moody's Investors Service, Inc., or any
successor or assignee of the business of such company in the business of rating
securities.
"Mortgage Documents" means the Mortgages, the Mortgage
Policies and such other documents and agreements executed or delivered in
connection with the Real Properties.
"Mortgage Policies" has the meaning set forth in Section
5.1(f).
"Mortgages" has the meaning set forth in Section 5.1(f).
"Multiemployer Plan" means a Plan which is a multiemployer
plan as defined in Sections 3(37) or 4001(a)(3) of ERISA.
"Multiple Employer Plan" means a Plan (other than a
Multiemployer Plan) which a Credit Party or any ERISA Affiliate and at least one
employer other than a Credit Party or any ERISA Affiliate are contributing
sponsors.
"NationsBank" means NationsBank, N.A. (South) and its
successors and/or assigns.
"Net Cash Proceeds" means the gross cash proceeds received
from an Equity Issuance net of transaction costs payable to third parties.
"Net Income" means, for any period with respect to any Person,
the net income after taxes for such period as determined in accordance with
GAAP.
"Net Worth" means, as of any date, the shareholders' equity or
net worth of any Person, as determined in accordance with GAAP.
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"New Property" means any parcel of Eligible Real Estate
(specifically including any Newly Constructed Facility or Operating Facility)
that is being financed by the Borrower or any of its Subsidiaries with the
proceeds of Revolving Loans.
"Newly Constructed Facility" means any New Property containing
an assisted living facility property that has been in operation for a period not
exceeding nine (9) months.
"NOI" means, for any period with respect to an individual
assisted living facility or with respect to the Waterside Facility, (i) assuming
management fees for such period in an amount equal to the greater of (I) actual
management fees paid or incurred during such period with respect to such
facility or (II) five percent of gross revenues for such facility for such
period, the sum of (a) net income received and derived from the operation of
such facility for such period plus (b) total taxes with respect to such facility
for such period plus (c) all depreciation, amortization and other non-cash
charges with respect to such facility for such period minus (ii) an amount equal
to $250 per year for each Unit in such facility; provided, however, with respect
to the Churchland Facility and the Gloucester Facility, those Units which are
part of the current expansion projects at such Real Properties will not be
considered in the calculation of net income of such Real Properties until such
Units have been duly licensed in accordance with the laws of the Commonwealth of
Virginia.
"Non-Excluded Taxes" has the meaning set forth in Section
3.13.
"Note" or "Notes" means the Revolving Loan Notes, individually
or collectively, as appropriate.
"Notice of Borrowing" means a request by the Borrower for a
Revolving Loan, in the form of Exhibit 2.1(b).
"Notice of Continuation/Conversion" means a request by the
Borrower to continue an existing Eurodollar Loan to a new Interest Period or to
convert a Base Rate Loan to a Eurodollar Loan, in the form of Exhibit 2.1(e).
"Operating Facility" means any New Property containing an
assisted living facility property that has been in operation for a period in
excess of nine (9) months.
"Operating Lease" means, as applied to any Person, any lease
(including, without limitation, leases which may be terminated by the lessee at
any time) of any Property (whether real, personal or mixed) which is not a
Capital Lease other than any such lease in which that Person is the lessor.
"Parent" means Integrated Living Communities, Inc., a Delaware
corporation.
"Participation Interest" means (i) the Extension of Credit by
a Lender by way of a purchase of a participation in Letters of Credit or LOC
Obligations as provided in Section 2.2 or (ii) Revolving Loans advanced by a
Lender by way of a purchase of a participation in any Loans as provided in
Section 3.8.
"PBGC" means the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA and any successor
thereof.
"Permitted Investments" means Investments which are (a) cash
or Cash Equivalents, (b) accounts receivable created, acquired or made in the
ordinary course of business and payable or dischargeable in accordance with
customary trade terms, (c) Investments by one Credit Party in another Credit
Party; provided, however, this subclause (c) shall not permit Investments by the
Borrower and/or its Subsidiaries into the Parent in an amount exceeding
$5,000,000 in the aggregate, (d) the acquisition of New Properties in accordance
with the terms hereof, (e) earnest money and similar deposits in respect of real
property made in the ordinary course of business, and (f) the Investments
existing as of the Closing Date and set forth on Schedule 8.6.
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"Permitted Liens" means (a) Liens securing Credit Party
Obligations, (b) Liens for taxes not yet due or Liens for taxes being contested
in good faith by appropriate proceedings for which adequate reserves determined
in accordance with GAAP have been established (and as to which the property
subject to any such Lien is not yet subject to foreclosure, sale or loss on
account thereof), (c) Liens in respect of property imposed by law arising in the
ordinary course of business such as materialmens', mechanics', warehousemens',
carriers', landlords' and other nonconsensual statutory Liens which are not yet
due and payable or which are being contested in good faith by appropriate
proceedings for which adequate reserves determined in accordance with GAAP have
been established (and as to which the property subject to any such Lien is not
yet subject to foreclosure, sale or loss on account thereof), (d) Liens arising
from good faith deposits in connection with or to secure performance of tenders,
bids, leases, government contracts, performance and return-of-money bonds and
other similar obligations incurred in the ordinary course of business (other
than obligations in respect of the payment of borrowed money), (e) Liens arising
from good faith deposits in connection with or to secure performance of
statutory obligations and surety and appeal bonds, (f) easements, rights-of-way,
restrictions (including zoning restrictions), matters of plat, minor defects or
irregularities in title and other similar charges or encumbrances not, in any
material respect, impairing the use of the encumbered property for its intended
purposes, (g) judgment Liens that would not constitute an Event of Default, (h)
Liens arising by virtue of any statutory or common law provision relating to
bankers' liens, rights of setoff or similar rights as to deposit accounts or
other funds maintained with a creditor depository institution, (i) Liens
existing on the date hereof and identified on Schedule 8.2; provided that no
such Lien shall extend to any property other than the property subject thereto
on the Closing Date and (j) Permitted Encumbrances (as defined in any Mortgage
Document).
"Person" means any individual, partnership, joint venture,
firm, corporation, limited liability company, association, trust or other
enterprise (whether or not incorporated), or any Governmental Authority.
"Plan" means any employee benefit plan (as defined in Section
3(3) of ERISA) which is covered by ERISA and with respect to which a Credit
Party or any ERISA Affiliate is (or, if such plan were terminated at such time,
would under Section 4069 of ERISA be deemed to be) an "employer" within the
meaning of Section 3(5) of ERISA.
"Pledge Agreement" means that certain pledge agreement
executed and delivered by the Credit Parties in favor of the Agent, for the
benefit of the Lenders, to secure their obligations under the Credit Documents,
as amended, modified, extended, renewed or replaced from time to time.
"Prime Rate" means the per annum rate of interest established
from time to time by the Agent at its principal office in Atlanta, Georgia (or
such other principal office of the Agent as communicated in writing to the
Borrower and the Lenders) as its Prime Rate. Any change in the interest rate
resulting from a change in the Prime Rate shall become effective as of 12:01
a.m. of the Business Day on which each change in the Prime Rate is announced by
the Agent. The Prime Rate is a reference rate used by the Agent in determining
interest rates on certain loans and is not intended to be the lowest rate of
interest charged on any extension of credit to any debtor.
"Real Properties" means the Existing Properties and the New
Properties.
"Regulation D, G, T, U, or X" means Regulation D, G, T, U or
X, respectively, of the Board of Governors of the Federal Reserve System as from
time to time in effect and any successor to all or a portion thereof.
"Reportable Event" means any of the events set forth in
Section 4043(c) of ERISA, other than those events as to which the notice
requirement has been waived by regulation.
"Required Lenders" means the Lenders whose aggregate Credit
Exposure (as hereinafter defined) constitutes more than 50% of the Credit
Exposure of all Lenders at such time; provided, however, that if any Lender
shall be a Defaulting Lender at such time then there shall be excluded from the
determination of Required Lenders the aggregate principal amount of Credit
Exposure of such Lender at such time. For purposes of the preceding sentence,
the term "Credit Exposure" as applied to each Lender shall mean (a) at any time
prior to the termination of the Commitments, the sum of the Revolving Loan
Commitment Percentage of such Lender multiplied by the Revolving Committed
Amount and (b) at any time after the termination of the Commitments, the sum of
(i) the principal balance of
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the outstanding Loans of such Lender plus (ii) such Lender's Participation
Interests in the face amount of the outstanding Letters of Credit.
"Requirement of Law" means, as to any Person, the articles or
certificate of incorporation and by-laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or final,
non-appealable determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or to which
any of its material property is subject.
"Restricted Payment" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of stock
now or hereafter outstanding, except a dividend payable solely in shares of that
class to the holders of that class and (ii) any redemption, retirement, sinking
fund or similar payment, purchase or other acquisition for value, direct or
indirect, of any shares of any class of stock now or hereafter outstanding, and
(iii) any payment made to retire, or to obtain the surrender of, any outstanding
warrants, options or other rights to acquire shares of any class of stock now or
hereafter outstanding.
"Revolving Committed Amount" means FIFTY MILLION DOLLARS
($50,000,000) or such lesser amount as the Revolving Committed Amount may be
reduced pursuant to Section 2.1(d) or Section 3.3(c).
"Revolving Loan Commitment Percentage" means, for each Lender,
the percentage identified as its Revolving Loan Commitment Percentage on
Schedule 1.1(b), as such percentage may be modified in connection with any
assignment made in accordance with the provisions of Section 11.3.
"Revolving Loan Maturity Date" means April 9, 1999.
"Revolving Loans" means the Revolving Loans made to the
Borrower pursuant to Section 2.1.
"Revolving Note" or "Revolving Notes" means the promissory
notes of the Borrower in favor of each of the Lenders evidencing the Revolving
Loans provided pursuant to Section 2.1, individually or collectively, as
appropriate, as such promissory notes may be amended, modified, supplemented,
extended, renewed or replaced from time to time and as evidenced in the form of
Exhibit 2.1(g).
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw Hill, Inc., or any successor or assignee of the business of such division
in the business of rating securities.
"Sarasota" means Integrated Living Communities of Sarasota,
Inc., a Florida corporation.
"Securities Act" means the Securities Act of 1933, as amended,
modified, succeeded or replaced from time to time, and the rules and regulations
promulgated thereunder.
"Security Agreement" means that certain security agreement
executed and delivered by the Credit Parties in favor of the Agent, for the
benefit of the Lenders, to secure their obligations under the Credit Documents,
as the same may be amended, modified, extended, renewed, restated or replaced
from time to time.
"Senior Leverage Ratio" means, as of the last day of any
fiscal quarter of the Parent, with respect to the Parent and its Subsidiaries on
a consolidated basis, the ratio of (a) the sum of (i) Funded Debt on such date
plus (ii) rent expense for the fiscal quarter ending on such date multiplied by
32 to (b) EBITDAR for the fiscal quarter ending on such date multiplied by 4.
"Serviceable Beds" means, those beds located at an assisted
living facility which can be presently utilized by a patient or occupant of such
assisted living facility.
"Single Employer Plan" means any Plan which is covered by
Title IV of ERISA, but which is not a Multiemployer Plan or a Multiple Employer
Plan.
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"Solvent" means, with respect to any Person as of a particular
date, that on such date (a) such Person is able to pay its debts and other
liabilities, contingent obligations and other commitments as they mature in the
normal course of business, (b) such Person does not intend to, and does not
believe that it will, incur debts or liabilities beyond such Person's ability to
pay as such debts and liabilities mature in their ordinary course, (c) such
Person is not engaged in a business or a transaction, and is not about to engage
in a business or a transaction, for which such Person's assets would constitute
unreasonably small capital after giving due consideration to the prevailing
practice in the industry in which such Person is engaged or is to engage, (d)
the fair value of the assets of such Person is greater than the total amount of
liabilities, including, without limitation, contingent liabilities, of such
Person and (e) the present fair salable value of the assets of such Person is
not less than the amount that will be required to pay the probable liability of
such Person on its debts as they become absolute and matured. In computing the
amount of contingent liabilities at any time, it is intended that such
liabilities will be computed at the amount which, in light of all the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability.
"Subordinated Debt" means the obligations of the Parent to IHS
pursuant to that certain Unsecured Credit Note dated November 20, 1996.
"Subordination and Intercreditor Agreement" means that certain
Subordination and Intercreditor Agreement dated as of the date hereof among the
Borrower, the Agent (on behalf of the Lenders) and IHS, in the form attached
hereto as Schedule 1.1(c).
"Subsidiary" means, as to any Person, (a) any corporation more
than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time, any class or classes of such
corporation shall have or might have voting power by reason of the happening of
any contingency) is at the time owned by such Person directly or indirectly
through Subsidiaries, and (b) any partnership, association, joint venture or
other entity in which such Person directly or indirectly through Subsidiaries
has more than a 50% equity interest at any time.
"Termination Event" means (a) with respect to any Single
Employer Plan, the occurrence of a Reportable Event or the substantial cessation
of operations (within the meaning of Section 4062(e) of ERISA); (b) the
withdrawal of any Credit Party or any of its Subsidiaries or any ERISA Affiliate
from a Multiple Employer Plan during a plan year in which it was a substantial
employer (as such term is defined in Section 4001(a)(2) of ERISA), or the
termination of a Multiple Employer Plan; (c) the distribution of a notice of
intent to terminate or the actual termination of a Plan pursuant to Section
4041(a)(2) or 4041A of ERISA; (d) the institution of proceedings to terminate or
the actual termination of a Plan by the PBGC under Section 4042 of ERISA; (e)
any event or condition which might reasonably constitute grounds under Section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan; or (f) the complete or partial withdrawal of any Credit
Party or any of its Subsidiaries or any ERISA Affiliate from a Multiemployer
Plan.
"Terrace Gardens Facility" means, that certain assisted living
facility located at 1315 N. West Street in Wichita, Kansas and identified on
Schedule 1.1(a) attached hereto.
"Unit" means any room in an assisted living facility or
continuing care retirement community, as applicable, used for residential
purposes by an inhabitant or inhabitants of such assisted living facility or
continuing care retirement community.
"Unused Commitment" means, for any period, the amount by which
(a) the then applicable aggregate Revolving Committed Amount exceeds (b) the
daily average sum for such period of the outstanding aggregate principal amount
of all Revolving Loans plus the aggregate amount of LOC Obligations outstanding.
"Unused Fees" means the fees payable to the Lenders pursuant
to Section Fees ~ComFees ~.
"Voting Stock" means, with respect to any Person, capital
stock issued by such Person the holders of which are ordinarily, in the absence
of contingencies, entitled to vote for the election of directors (or persons
performing
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similar functions) of such Person, even though the right so to vote has been
suspended by the happening of such a contingency.
"Waterside Facility" means, that certain continuing care
retirement community located at 4540 Bee Ridge Road in Sarasota, Florida and
identified on Schedule 1.1(a) attached hereto.
"West Palm Beach Facility" means, that certain assisted living
facility located at 2939 S. Haverhill Road in West Palm Beach, Florida and
identified on Schedule 1.1(a) attached hereto.
1.2 Computation of Time Periods and Other Definition Provisions.
For purposes of computation of periods of time hereunder, the word
"from" means "from and including" and the words "to" and "until" each mean "to
but excluding." References in this Credit Agreement to "Articles", "Sections",
"Schedules" or "Exhibits" shall be to Articles, Sections, Schedules or Exhibits
of or to this Credit Agreement unless otherwise specifically provided.
1.3 Accounting Terms.
Except as otherwise expressly provided herein, all accounting terms
used herein shall be interpreted, and all financial statements and certificates
and reports as to financial matters required to be delivered to the Lenders
hereunder shall be prepared, in accordance with GAAP applied on a consistent
basis. All financial statements delivered to the Lenders hereunder shall be
accompanied by a statement from the Borrower that GAAP has not changed since the
most recent financial statements delivered by the Borrower to the Lenders or if
GAAP has changed describing such changes in detail and explaining how such
changes affect the financial statements. All calculations made for the purposes
of determining compliance with this Credit Agreement shall (except as otherwise
expressly provided herein) be made by application of GAAP applied on a basis
consistent with the most recent annual or quarterly financial statements
delivered pursuant to Section 7.1 (or, prior to the delivery of the first
financial statements pursuant to Section 7.1, consistent with the financial
statements described in Section 5.1(d)); provided, however, if (a) the Borrower
shall object to determining such compliance on such basis at the time of
delivery of such financial statements due to any change in GAAP or the rules
promulgated with respect thereto or (b) either Agent or the Required Lenders
shall so object in writing within 60 days after delivery of such financial
statements (or after the Lenders have been informed of the change in GAAP
affecting such financial statements, if later), then such calculations shall be
made on a basis consistent with the most recent financial statements delivered
by the Borrower to the Lenders as to which no such objection shall have been
made.
SECTION 2
CREDIT FACILITY
2.1 Revolving Loans.
(a) Revolving Loan Commitment. Subject to the terms
and conditions set forth herein, each Lender severally agrees to make
revolving loans (each a "Revolving Loan" and collectively the
"Revolving Loans") to the Borrower, in Dollars, at any time and from
time to time, during the period from and including the Effective Date
to but not including the Revolving Loan Maturity Date or such earlier
date if the Revolving Committed Amount has been terminated as provided
herein; provided, however, that (i) the sum of the aggregate principal
amount of Revolving Loans outstanding plus the aggregate amount of LOC
Obligations outstanding shall not exceed the lesser of (x) the
Revolving Committed Amount and (y) the Borrowing Base, and (ii) with
respect to each individual Lender, the Lender's pro rata share of
outstanding Revolving Loans plus such Lender's pro rata share of
outstanding LOC Obligations shall not exceed such Lender's Revolving
Loan Commitment Percentage of the Revolving Committed Amount. Subject
to the terms of this Credit Agreement (including Section 3.3), the
Borrower may borrow, repay and reborrow Revolving Loans. The
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Agent shall keep a record of the purpose for which each of the Loans
was advanced (and of repayments applied thereto), which record shall be
conclusive absent prima facie error.
(b) Method of Borrowing for Revolving Loans. The
Borrower may borrow Revolving Loans on any Business Day, provided that
the Borrower shall give the Agent irrevocable notice (which must be
received by the Agent (A) prior to 11:00 a.m., three Business Days
prior to the date of the requested borrowing of Revolving Loans that
will be Eurodollar Loans, or (B) prior to 11:00 a.m. two Business Days
prior to the date of the requested borrowing of Revolving Loans that
will be Base Rate Loans specifying (1) the amount to be borrowed, (2)
the date of the requested borrowing of Revolving Loans, (3) the purpose
for which the requested Revolving Loans will be used by the Borrower
and (4) whether such Revolving Loans shall be Base Rate Loans or
Eurodollar Loans; provided, however, that (x) there shall be only one
Interest Period applicable for all amounts outstanding hereunder
bearing interest based on the Eurodollar Rate, (y) the initial Interest
Period for Eurodollar Loans shall commence on the date that the first
Eurodollar Loan hereunder is extended and (z) any amounts thereafter
borrowed or converted hereunder which are to bear interest based on the
Eurodollar Rate may only be borrowed or converted on the first day of
the Interest Period applicable to Eurodollar Loans.
(c) Funding of Revolving Loans. Upon receipt of a
Notice of Borrowing, the Agent shall promptly inform the Lenders as to
the terms thereof. Each Lender shall make its Revolving Loan Commitment
Percentage of the requested Revolving Loans available to the Agent by
2:00 p.m. on the date specified in the Notice of Borrowing by deposit,
in Dollars, of immediately available funds at the offices of the Agent
in Charlotte, North Carolina or at such other address as the Agent may
designate in writing. The amount of the requested Revolving Loans will
then be made available to the Borrower by the Agent by crediting the
account of the Borrower on the books of such office of the Agent, to
the extent the amount of such Revolving Loans are made available to the
Agent.
No Lender shall be responsible for the failure or
delay by any other Lender in its obligation to make Revolving Loans
hereunder; provided, however, that the failure of any Lender to fulfill
its obligations hereunder shall not relieve any other Lender of its
obligations hereunder. Unless the Agent shall have been notified by any
Lender prior to 5:00 p.m. on the date preceding the date of any such
Revolving Loan that such Lender does not intend to make available to
the Agent its portion of the Revolving Loans to be made on such date,
the Agent may assume that such Lender has made such amount available to
the Agent on the date of such Revolving Loans, and the Agent in
reliance upon such assumption, may (in its sole discretion but without
any obligation to do so) make available to the Borrower a corresponding
amount. If such corresponding amount is not in fact made available to
the Agent, the Agent shall be able to recover such corresponding amount
from such Lender. If such Lender does not pay such corresponding amount
forthwith upon the Agent's demand therefor, the Agent will promptly
notify the Borrower, and the Borrower shall immediately pay such
corresponding amount to the Agent. The Agent shall also be entitled to
recover from the Lender or the Borrower, as the case may be, interest
on such corresponding amount in respect of each day from the date such
corresponding amount was made available by the Agent to the Borrower to
the date such corresponding amount is recovered by the Agent at a per
annum rate equal to (i) from the Borrower at the applicable rate for
such Revolving Loan pursuant to the Notice of Borrowing and (ii) from a
Lender at the Federal Funds Rate.
(d) Reduction or Termination of Revolving Committed
Amount. Upon at least three Business Days' notice, the Borrower shall
have the right to permanently terminate or reduce the aggregate unused
amount of the Revolving Committed Amount at any time or from time to
time; provided that (i) each partial reduction shall be in an aggregate
amount at least equal to $10,000,000 and in integral multiples of
$1,000,000 above such amount and (ii) no reduction shall be made which
would reduce the Revolving Committed Amount to an amount less than (a)
the aggregate amount of outstanding Revolving Loans plus the aggregate
amount of outstanding LOC Obligations and (b) $30,000,000. Any
reduction in (or termination of) the Revolving Committed Amount shall
be permanent and may not be reinstated.
(e) Continuations and Conversions. Subject to the
terms of Section 5.3, the Borrower shall have the option to continue
existing Eurodollar Loans upon the expiration of the current Interest
Period
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with respect thereto for a subsequent Interest Period, to convert Base
Rate Loans into Eurodollar Loans or to convert Eurodollar Loans into
Base Rate Loans; provided, however, that (i) each such continuation or
conversion must be requested by the Borrower pursuant to a written
Notice of Continuation/Conversion, in the form of Exhibit 2.1(e), in
compliance with the terms set forth below, (ii) except as provided in
Section 3.11, Eurodollar Loans may only be continued or converted into
Base Rate Loans on the last day of the single Interest Period for
Eurodollar Loans permitted pursuant to Section 2.1(b) hereof, (iii)
Base Rate Loans may only be converted into Eurodollar Loans on the
first day of the single Interest Period for Eurodollar Loans permitted
pursuant to Section 2.1(b) hereof, (iv) Eurodollar Loans may not be
continued nor may Base Rate Loans be converted into Eurodollar Loans
during the existence and continuation of a Default or Event of Default
and (v) any request to continue a Eurodollar Loan that fails to comply
with the terms hereof or any failure to request a continuation of a
Eurodollar Loan at the end of the existing Interest Period shall result
in a conversion of such Eurodollar Loan to a Base Rate Loan on the last
day of the existing Interest Period. Each continuation or conversion
must be requested by the Borrower no later than 11:00 a.m. (A) two
Business Days prior to the date for a requested conversion of a
Eurodollar Loan to a Base Rate Loan or (B) three Business Days prior to
the date for a requested continuation of a Eurodollar Loan or
conversion of a Base Rate Loan to a Eurodollar Loan, in each case
pursuant to a written Notice of Continuation/Conversion submitted to
the Agent which shall set forth whether the Borrower wishes to continue
or convert such Loans; provided, however, if the Borrower shall fail to
give any required Notice of Continuation/Conversion as described above,
or if such continuation or conversion is not permitted pursuant to the
terms above, the Loans shall automatically be converted to Base Rate
Loans on the last day of the then expiring Interest Period.
(f) Minimum Amounts. Each request for a borrowing,
conversion or continuation shall be subject to the requirements that
(i) each Loan shall be in a minimum amount of $500,000 and in integral
multiples of $100,000 in excess thereof or the remaining amount
available under the Revolving Committed Amount. All Eurodollar Loans,
because they have same Interest Period, shall be considered as one
Eurodollar Loan.
(g) Notes. The Revolving Loans made by each Lender
shall be evidenced by a duly executed promissory note of the Borrower
to each Lender in the face amount of its Revolving Loan Commitment
Percentage of the Revolving Committed Amount in substantially the form
of Exhibit 2.1(g).
2.2 Letter of Credit Subfacility.
(a) Issuance. Subject to the terms and conditions hereof and
of the LOC Documents, if any, and any other terms and conditions which
the Issuing Lender may reasonably require (so long as such terms and
conditions do not impose any financial obligation on or require any
Lien (not otherwise contemplated by this Credit Agreement) to be given
by any Credit Party or conflict with any obligation of, or detract from
any action which may be taken by, any Credit Party or their
Subsidiaries under this Credit Agreement), the Issuing Lender shall
from time to time upon request issue, in Dollars, and the LOC
Participants shall participate in, letters of credit (the "Letters of
Credit") for the account of the Borrower, from the Effective Date until
the Revolving Loan Maturity Date, in a form customarily used by and
otherwise reasonably acceptable to the Issuing Lender; provided,
however, that (i) the aggregate amount of LOC Obligations shall not at
any time exceed TWO MILLION DOLLARS ($2,000,000), (ii) the sum of the
aggregate amount of LOC Obligations outstanding plus Revolving Loans
outstanding shall not exceed the lesser of (x) the Revolving Committed
Amount and (y) the Borrowing Base and (iii) with respect to each
individual LOC Participant, the LOC Participant's pro rata share of
outstanding Revolving Loans plus its pro rata share of outstanding LOC
Obligations shall not exceed such LOC Participant's Revolving Loan
Commitment Percentage of the Revolving Committed Amount. The issuance
and expiry date of each Letter of Credit shall be a Business Day.
Except as otherwise expressly agreed upon by all the LOC Participants,
no Letter of Credit shall have an original expiry date more than one
year from the date of issuance, or as extended, shall have an expiry
date extending beyond the Revolving Loan Maturity Date. Each Letter of
Credit shall be either (x) a standby letter of credit issued to support
the obligations (including pension or insurance obligations),
contingent or otherwise, of the Borrower, or (y) a commercial letter of
credit in
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respect of the purchase of goods or services by the Borrower in the
ordinary course of business. Each Letter of Credit shall comply with
the related LOC Documents.
(b) Notice and Reports. The request for the issuance of a
Letter of Credit shall be submitted to the Issuing Lender at least
three Business Days prior to the requested date of issuance. The
Issuing Lender will, at least quarterly and more frequently upon
request, provide to the Agent for dissemination to the Lenders a
detailed report specifying the Letters of Credit which are then issued
and outstanding and any activity with respect thereto which may have
occurred since the date of the prior report, and including therein,
among other things, the account party, the beneficiary, the face
amount, and the expiry date as well as any payments or expirations
which may have occurred. The Issuing Lender will further provide to the
Agent, promptly upon request, copies of the Letters of Credit.
(c) Participations. Each LOC Participant, upon issuance of a
Letter of Credit, shall be deemed to have purchased without recourse a
risk participation from the Issuing Lender in such Letter of Credit and
the obligations arising thereunder and any collateral relating thereto,
in each case in an amount equal to its Revolving Loan Commitment
Percentage of the obligations under such Letter of Credit, and shall
absolutely, unconditionally and irrevocably assume, as primary obligor
and not as surety, and be obligated to pay to the Issuing Lender
therefor and discharge when due, its Revolving Loan Commitment
Percentage of the obligations arising under such Letter of Credit.
Without limiting the scope and nature of each LOC Participant's
participation in any Letter of Credit, to the extent that the Issuing
Lender has not been reimbursed as required hereunder or under any such
Letter of Credit, each such LOC Participant shall pay to the Issuing
Lender its Revolving Loan Commitment Percentage of such unreimbursed
drawing in same day funds on the day of notification by the Issuing
Lender of an unreimbursed drawing pursuant to the provisions of
subsection (d) hereof. The obligation of each LOC Participant to so
reimburse the Issuing Lender shall be absolute and unconditional and
shall not be affected by the occurrence of a Default, an Event of
Default or any other occurrence or event. Any such reimbursement shall
not relieve or otherwise impair the obligation of the Borrower or any
other Credit Party to reimburse the Issuing Lender under any Letter of
Credit, together with interest as hereinafter provided.
(d) Reimbursement. In the event of any drawing under any
Letter of Credit, the Issuing Lender will promptly notify the Borrower.
Unless the Borrower shall immediately notify the Issuing Lender of its
intent to otherwise reimburse the Issuing Lender, the Borrower shall be
deemed to have requested a Revolving Loan at the Base Rate in the
amount of the drawing as provided in subsection (e) hereof, the
proceeds of which will be used to satisfy the reimbursement
obligations. The Borrower shall reimburse the Issuing Lender on the day
of drawing under any Letter of Credit either with the proceeds of a
Revolving Loan obtained hereunder or otherwise in same day funds as
provided herein or in the LOC Documents. If the Borrower shall fail to
reimburse the Issuing Lender as provided hereinabove, the unreimbursed
amount of such drawing shall bear interest at a per annum rate equal to
the Base Rate plus two percent (2%). The Borrower's reimbursement
obligations hereunder shall be absolute and unconditional under all
circumstances irrespective of (but without waiver of) any rights of
set-off, counterclaim or defense to payment the applicable account
party or the Borrower may claim or have against the Issuing Lender, the
Agent, the Lenders, the beneficiary of the Letter of Credit drawn upon
or any other Person, including without limitation, any defense based on
any failure of the applicable account party, the Borrower or any other
Credit Party to receive consideration or the legality, validity,
regularity or unenforceability of the Letter of Credit. The Issuing
Lender will promptly notify the LOC Participants of the amount of any
unreimbursed drawing and each LOC Participant shall promptly pay to the
Agent for the account of the Issuing Lender, in Dollars and in
immediately available funds, the amount of such LOC Participant's
Revolving Loan Commitment Percentage of such unreimbursed drawing. Such
payment shall be made on the day such notice is received by such Lender
from the Issuing Lender if such notice is received at or before 2:00
p.m., otherwise such payment shall be made at or before 12:00 Noon on
the Business Day next succeeding the day such notice is received. If
such LOC Participant does not pay such amount to the Issuing Lender in
full upon such request, such LOC Participant shall, on demand, pay to
the Agent for the account of the Issuing Lender interest on the unpaid
amount during the period from the date the LOC Participant received the
notice regarding the unreimbursed drawing until such LOC Participant
pays such
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amount to the Issuing Lender in full at a rate per annum equal to, if
paid within two Business Days of the date of drawing, the Federal Funds
Rate and thereafter at a rate equal to the Base Rate. Each LOC
Participant's obligation to make such payment to the Issuing Lender,
and the right of the Issuing Lender to receive the same, shall be
absolute and unconditional, shall not be affected by any circumstance
whatsoever and without regard to the termination of this Credit
Agreement or the Commitments hereunder, the existence of a Default or
Event of Default or the acceleration of the obligations hereunder and
shall be made without any offset, abatement, withholding or reduction
whatsoever. Simultaneously with the making of each such payment by a
LOC Participant to the Issuing Lender, such LOC Participant shall,
automatically and without any further action on the part of the Issuing
Lender or such LOC Participant, acquire a participation in an amount
equal to such payment (excluding the portion of such payment
constituting interest owing to the Issuing Lender) in the related
unreimbursed drawing portion of the LOC Obligation and in the interest
thereon and in the related LOC Documents, and shall have a claim
against the Borrower and the other Credit Parties with respect thereto.
(e) Repayment with Revolving Loans. On any day on which the
Borrower shall have requested, or been deemed to have requested, a
Revolving Loan borrowing to reimburse a drawing under a Letter of
Credit, the Agent shall give notice to the applicable Lenders that a
Revolving Loan has been requested or deemed requested in connection
with a drawing under a Letter of Credit, in which case a Revolving Loan
borrowing comprised solely of Base Rate Loans (each such borrowing, a
"Mandatory Borrowing") shall be immediately made from all applicable
Lenders (without giving effect to any termination of the Commitments
pursuant to Section 9.2) pro rata based on each Lender's respective
Revolving Loan Commitment Percentage and the proceeds thereof shall be
paid directly to the Issuing Lender for application to the respective
LOC Obligations. Each such Lender hereby irrevocably agrees to make
such Revolving Loans immediately upon any such request or deemed
request on account of each such Mandatory Borrowing in the amount and
in the manner specified in the preceding sentence and on the same such
date notwithstanding (i) the amount of Mandatory Borrowing may not
comply with the minimum amount for borrowings of Revolving Loans
otherwise required hereunder, (ii) whether any conditions specified in
Section 5 are then satisfied, (iii) whether a Default or Event of
Default then exists, (iv) failure of any such request or deemed request
for Revolving Loans to be made by the time otherwise required
hereunder, (v) the date of such Mandatory Borrowing, or (vi) any
reduction in the Revolving Committed Amount or any termination of the
Commitments. In the event that any Mandatory Borrowing cannot for any
reason be made on the date otherwise required above (including, without
limitation, as a result of the commencement of a proceeding under the
Bankruptcy Code with respect to the Borrower or any other Credit
Party), then each such Lender hereby agrees that it shall forthwith
fund (as of the date the Mandatory Borrowing would otherwise have
occurred, but adjusted for any payments received from the Borrower on
or after such date and prior to such purchase) its Participation
Interest in the outstanding LOC Obligations; provided, further, that in
the event any Lender shall fail to fund its Participation Interest on
the day the Mandatory Borrowing would otherwise have occurred, then the
amount of such Lender's unfunded Participation Interest therein shall
bear interest payable to the Issuing Lender upon demand, at the rate
equal to, if paid within two Business Days of such date, the Federal
Funds Rate, and thereafter at a rate equal to the Base Rate.
(f) Designation of Subsidiaries as Account Parties.
Notwithstanding anything to the contrary set forth in this Credit
Agreement, a Letter of Credit issued hereunder may contain a statement
to the effect that such Letter of Credit is issued for the account of a
Subsidiary of the Borrower; provided that notwithstanding such
statement, the Borrower shall be the actual account party for all
purposes of this Credit Agreement for such Letter of Credit and such
statement shall not affect the Borrower's reimbursement obligations
hereunder with respect to such Letter of Credit.
(g) Modification and Extension. The issuance of any
supplement, modification, amendment, renewal, or extensions to any
Letter of Credit shall, for purposes hereof, be treated in all respects
the same as the issuance of a new Letter of Credit hereunder.
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(h) Uniform Customs and Practices. The Issuing Lender may have
the Letters of Credit be subject to The Uniform Customs and Practice
for Documentary Credits, as published as of the date of issue by the
International Chamber of Commerce (Publication No. 500 or the most
recent publication, the "UCP"), in which case the UCP may be
incorporated therein and deemed in all respects to be a part thereof.
(i) Responsibility of Issuing Lender. It is expressly
understood and agreed that the obligations of the Issuing Lender
hereunder to the LOC Participants are only those expressly set forth in
this Credit Agreement and that the Issuing Lender shall be entitled to
assume that the conditions precedent set forth in Section 5 have been
satisfied unless it shall have acquired actual knowledge that any such
condition precedent has not been satisfied; provided, however, that
nothing set forth in this Section 2.2 shall be deemed to prejudice the
right of any LOC Participant to recover from the Issuing Lender any
amounts made available by such LOC Participant to the Issuing Lender
pursuant to this Section 2.2 in the event that it is determined by a
court of competent jurisdiction that the payment with respect to a
Letter of Credit constituted gross negligence or willful misconduct on
the part of the Issuing Lender.
(j) Conflict with LOC Documents. In the event of any conflict
between this Credit Agreement and any LOC Document, this Credit
Agreement shall govern.
(k) Indemnification of Issuing Lender.
(i) In addition to its other obligations under this
Credit Agreement, the Borrower hereby agrees to protect,
indemnify, pay and save the Issuing Lender harmless from and
against any and all claims, demands, liabilities, damages,
losses, costs, charges and expenses (including reasonable
attorneys' fees) that the Issuing Lender may incur or be
subject to as a consequence, direct or indirect, of (A) the
issuance of any Letter of Credit or (B) the failure of the
Issuing Lender to honor a drawing under a Letter of Credit as
a result of any act or omission, whether rightful or wrongful,
of any present or future de jure or de facto government or
governmental authority (all such acts or omissions, herein
called "Government Acts").
(ii) As between the Borrower and the Issuing Lender,
the Borrower shall assume all risks of the acts, omissions or
misuse of any Letter of Credit by the beneficiary thereof. The
Issuing Lender shall not be responsible for: (A) the form,
validity, sufficiency, accuracy, genuineness or legal effect
of any document submitted by any party in connection with the
application for and issuance of any Letter of Credit, even if
it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged; (B) the
validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign any Letter of
Credit or the rights or benefits thereunder or proceeds
thereof, in whole or in part, that may prove to be invalid or
ineffective for any reason; (C) failure of the beneficiary of
a Letter of Credit to comply fully with conditions required in
order to draw upon a Letter of Credit; (D) errors, omissions,
interruptions or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex or otherwise,
whether or not they be in cipher; (E) errors in interpretation
of technical terms; (F) any loss or delay in the transmission
or otherwise of any document required in order to make a
drawing under a Letter of Credit or of the proceeds thereof;
and (G) any consequences arising from causes beyond the
control of the Issuing Lender, including, without limitation,
any Government Acts. None of the above shall affect, impair,
or prevent the vesting of the Issuing Lender's rights or
powers hereunder.
(iii) In furtherance and extension and not in
limitation of the specific provisions hereinabove set forth,
any action taken or omitted by the Issuing Lender, under or in
connection with any Letter of Credit or the related
certificates, if taken or omitted in good faith, shall not put
the Issuing Lender under any resulting liability to the
Borrower or any other Credit Party. It is the intention of the
parties that this Credit Agreement shall be construed and
applied to protect and indemnify the Issuing Lender against
any and all risks involved in the issuance of the Letters of
Credit, all of which risks are hereby assumed by the Borrower,
including, without limitation, any
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and all risks of the acts or omissions, whether rightful or
wrongful, of any present or future Government Acts. The
Issuing Lender shall not, in any way, be liable for any
failure by the Issuing Lender or anyone else to pay any
drawing under any Letter of Credit as a result of any
Government Acts or any other cause beyond the control of the
Issuing Lender.
(iv) Nothing in this subsection (k) is intended to
limit the reimbursement obligation of the Borrower contained
in this Section 2.2. The obligations of the Borrower under
this subsection (k) shall survive the termination of this
Credit Agreement. No act or omission of any current or prior
beneficiary of a Letter of Credit shall in any way affect or
impair the rights of the Issuing Lender to enforce any right,
power or benefit under this Credit Agreement.
(v) Notwithstanding anything to the contrary
contained in this subsection (k), the Borrower shall have no
obligation to indemnify the Issuing Lender in respect of any
liability incurred by the Issuing Lender arising solely out of
the gross negligence or willful misconduct of the Issuing
Lender, as determined by a court of competent jurisdiction.
Nothing in this Credit Agreement shall relieve the Issuing
Lender of any liability to the Borrower in respect of any
action taken by the Issuing Lender which action constitutes
gross negligence or willful misconduct of the Issuing Lender
or a violation of the UCP or Uniform Commercial Code (as
applicable), as determined by a court of competent
jurisdiction.
<PAGE>
SECTION 3
GENERAL PROVISIONS APPLICABLE TO LOANS
AND LETTERS OF CREDIT
3.1 Interest.
(a) Interest Rate. All Base Rate Loans shall accrue interest
at the Base Rate per annum and all Eurodollar Loans shall accrue
interest at a per annum rate equal to the Adjusted Eurodollar Rate plus
the Applicable Percentage.
(b) Default Rate of Interest. Upon the occurrence, and during
the continuance, of an Event of Default, the principal of and, to the
extent permitted by law, interest on the Loans and any other amounts
owing hereunder or under the other Credit Documents (including without
limitation fees and expenses) shall bear interest, payable on demand,
at a per annum rate equal to 2% plus the rate which would otherwise be
applicable (or if no rate is applicable, then the rate for Revolving
Loans that are Base Rate Loans plus two percent (2%) per annum).
(c) Interest Payments. Interest on Loans shall be due and
payable in arrears on each Interest Payment Date. If an Interest
Payment Date falls on a date which is not a Business Day, such Interest
Payment Date shall be deemed to be the next succeeding Business Day,
except that in the case of Eurodollar Loans where the next succeeding
Business Day falls in the next succeeding calendar month, then on the
next preceding Business Day.
3.2 Place and Manner of Payments.
All payments of principal, interest, fees, expenses and other amounts
to be made by a Credit Party under this Credit Agreement shall be received not
later than 2:00 p.m. on the date when due, in Dollars and in immediately
available funds, by the Agent for the benefit of the Lenders at its offices in
Charlotte, North Carolina. Payments received after such time shall be deemed to
have been received on the next Business Day. The Borrower shall, at the time it
makes any payment under this Credit Agreement, specify to the Agent, the Loans,
Letters of Credit, fees or other amounts payable by the Borrower hereunder to
which such payment is to be applied (and in the event that it fails to specify,
or if such application would be inconsistent with the terms hereof, the Agent
shall, subject to Section 3.7,
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distribute such payment to the Lenders in such manner as the Agent may deem
appropriate). The Agent will distribute any such payment to the Lenders on the
day received if such payment is received prior to 2:00 p.m.; otherwise the Agent
will distribute such payment to the Lenders on the next succeeding Business Day.
If the Agent fails to distribute such payment on the next succeeding Business
Day, then the amount of such payment shall bear interest payable to the Lenders,
at the rate equal to, if paid within one Business Day of such date, the Federal
Funds Rate, and thereafter at a rate equal to the Base Rate plus two percent
(2%). Whenever any payment hereunder shall be stated to be due on a day which is
not a Business Day, the due date thereof shall be extended to the next
succeeding Business Day (subject to accrual of interest and fees for the period
of such extension), except that in the case of Eurodollar Loans, if the
extension would cause the payment to be made in the next following calendar
month, then such payment shall instead be made on the next preceding Business
Day.
3.3 Prepayments.
(a) Voluntary Prepayments. The Borrower shall have the right
to prepay Loans in whole or in part from time to time without premium
or penalty; provided, however, that (i)Eurodollar Loans may only be
prepaid on three Business Days' prior written notice to the Agent and
any prepayment of Eurodollar Loans will be subject to Section 3.14,
(ii) Base Rate Loans may only be prepaid after written notice
(confirmed by a telephone call from the Borrower) to the Agent not
later than 11:00 a.m. on the Business Day of the applicable prepayment
and (iii) each such partial prepayment of Loans shall be in the minimum
principal amount of $500,000 and integral multiples of $100,000 in
excess thereof.
(b) Mandatory Prepayments. If at any time the sum of the
aggregate amount of Revolving Loans outstanding plus LOC Obligations
outstanding exceeds the lesser of (x) the Revolving Committed Amount
and (y) the Borrowing Base, the Borrower shall immediately (without
need of notice or demand therefor) make a principal payment to the
Agent in the manner and in an amount necessary to be in compliance with
Section 2.1 (to be applied as set forth in Section 3.3(c) below).
(c) Application of Prepayments. All amounts required to be
paid pursuant to Section 3.3(b) shall be applied first to Revolving
Loans and second to a cash collateral account in respect of LOC
Obligations. Within the parameters of the application set forth above,
prepayments shall be applied first to Base Rate Loans and then to
Eurodollar Loans. All prepayments hereunder shall be subject to Section
3.14.
3.4 Fees.
(a) Unused Fees. In consideration of the Revolving Committed
Amount being made available by the Lenders hereunder, the Borrower
agrees to pay to the Agent, for the pro rata benefit of each Lender
(based on each Lender's Revolving Loan Commitment Percentage of the
Revolving Committed Amount), a fee equal to one-quarter of one percent
(.25%) per annum on the Unused Commitment (the "Unused Fees"). The
accrued Unused Fees shall commence to accrue on the Effective Date and
shall be due and payable in arrears on the last Business Day of each
fiscal quarter of the Borrower (as well as on the Revolving Loan
Maturity Date and on any date that the Revolving Committed Amount is
reduced) for the immediately preceding fiscal quarter (or portion
thereof), beginning with the first of such dates to occur after the
Effective Date.
(b) Letter of Credit Fees.
(i) Letter of Credit Fee. In consideration of the
issuance of Letters of Credit hereunder, the Borrower agrees
to pay to the Issuing Lender for the pro rata benefit of the
Lenders (based on each Lender's Revolving Loan Commitment
Percentage of the Revolving Committed Amount), a fee (the
"Letter of Credit Fee") equal to two percent (2.0%) per annum
on the average daily maximum amount available to be drawn
under each such Letter of Credit from the date of issuance to
the date of expiration. The Letter of Credit Fee will be
payable upon the issuance of each applicable Letter of Credit.
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(ii) Issuing Lender Fees. In addition to the Letter
of Credit Fee, the Borrower shall pay to the Issuing Lender
for its own account, without sharing by the other Lenders, (A)
such fronting and negotiation fees as may be mutually agreed
upon by the Issuing Lender and the Borrower from time to time
and (B) the customary charges from time to time to the Issuing
Lender for its services in connection with the issuance,
amendment, payment, transfer, administration, cancellation and
conversion of, and drawings under, such Letters of Credit
(collectively, the "Issuing Lender Fees").
(c) Administrative Fees. The Borrower agrees to pay to the
Agent, for its own account, an annual fee as agreed to between the
Borrower and the Agent in the Fee Letter.
3.5 Payment in full at Maturity.
On the Revolving Loan Maturity Date, the entire outstanding principal
balance of all Revolving Loans, together with accrued but unpaid interest and
all other sums owing with respect thereto, shall be due and payable in full,
unless accelerated sooner pursuant to Section 9.
3.6 Computations of Interest and Fees.
(a) All computations of interest and fees hereunder shall be
made on the basis of the actual number of days elapsed over a year of
360 days. Interest shall accrue from and include the date of borrowing
(or continuation or conversion) but exclude the date of payment.
(b) It is the intent of the Lenders and the Credit Parties to
conform to and contract in strict compliance with applicable usury law
from time to time in effect. All agreements between the Lenders and the
Borrower are hereby limited by the provisions of this paragraph which
shall override and control all such agreements, whether now existing or
hereafter arising and whether written or oral. In no way, nor in any
event or contingency (including but not limited to prepayment or
acceleration of the maturity of any obligation), shall the interest
taken, reserved, contracted for, charged, or received under this Credit
Agreement, under the Notes or otherwise, exceed the maximum nonusurious
amount permissible under applicable law. If, from any possible
construction of any of the Credit Documents or any other document,
interest would otherwise be payable in excess of the maximum
nonusurious amount, any such construction shall be subject to the
provisions of this paragraph and such interest shall be automatically
reduced to the maximum nonusurious amount permitted under applicable
law, without the necessity of execution of any amendment or new
document. If any Lender shall ever receive anything of value which is
characterized as interest on the Loans under applicable law and which
would, apart from this provision, be in excess of the maximum lawful
amount, an amount equal to the amount which would have been excessive
interest shall, without penalty, be applied to the reduction of the
principal amount owing on the Loans and not to the payment of interest,
or refunded to the Borrower or the other payor thereof if and to the
extent such amount which would have been excessive exceeds such unpaid
principal amount of the Loans. The right to demand payment of the Loans
or any other indebtedness evidenced by any of the Credit Documents does
not include the right to receive any interest which has not otherwise
accrued on the date of such demand, and the Lenders do not intend to
charge or receive any unearned interest in the event of such demand.
All interest paid or agreed to be paid to the Lenders with respect to
the Loans shall, to the extent permitted by applicable law, be
amortized, prorated, allocated, and spread throughout the full stated
term (including any renewal or extension) of the Loans so that the
amount of interest on account of such indebtedness does not exceed the
maximum nonusurious amount permitted by applicable law.
3.7 Pro Rata Treatment.
Except to the extent otherwise provided herein:
(a) Each Revolving Loan borrowing (including, without
limitation, each Mandatory Borrowing), each payment or prepayment of
principal of any Loan, each payment of fees (other than the Issuing
Lender fees retained by the Issuing Lender for its own account and the
Administrative Fees retained by the Agent for its own account), each
reduction of the Revolving Committed Amount, and each conversion or
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continuation of any Loan, shall (except as otherwise provided in
Section 3.3(c)) be allocated pro rata among the Lenders in accordance
with the respective Revolving Loan Commitment Percentages of such
Lenders (or, if the Commitments of such Lenders have expired or been
terminated, in accordance with the respective principal amounts of the
outstanding Loans and Participation Interests of such Lenders);
provided that, if any Lender shall have failed to pay its applicable
pro rata share of any Revolving Loan, then any amount to which such
Lender would otherwise be entitled pursuant to this Section 3.7 shall
instead be payable to the Agent until the share of such Loan not funded
by such Lender has been repaid; provided further, that in the event any
amount paid to any Lender pursuant to this Section 3.7 is rescinded or
must otherwise be returned by the Agent, each Lender shall, upon the
request of the Agent, repay to the Agent the amount so paid to such
Lender, with interest for the period commencing on the date such
payment is returned by the Agent until the date the Agent receives such
repayment at a rate per annum equal to, during the period to but
excluding the date two Business Days after such request, the Federal
Funds Rate, and thereafter, at the Base Rate plus two percent (2%) per
annum; and
(b) Letters of Credit. Each payment of unreimbursed drawings
in respect of LOC Obligations shall be allocated to each LOC
Participant pro rata in accordance with its Revolving Loan Commitment
Percentage; provided that, if any LOC Participant shall have failed to
pay its applicable pro rata share of any drawing under any Letter of
Credit, then any amount to which such LOC Participant would otherwise
be entitled pursuant to this subsection (b) shall instead be payable to
the Issuing Lender; provided further, that in the event any amount paid
to any LOC Participant pursuant to this subsection (b) is rescinded or
must otherwise be returned by the Issuing Lender, each LOC Participant
shall, upon the request of the Issuing Lender, repay to the Agent for
the account of the Issuing Lender the amount so paid to such LOC
Participant, with interest for the period commencing on the date such
payment is returned by the Issuing Lender until the date the Issuing
Lender receives such repayment at a rate per annum equal to, during the
period to but excluding the date two Business Days after such request,
the Federal Funds Rate, and thereafter, the Base Rate plus two percent
(2.0%) per annum.
3.8 Sharing of Payments.
The Lenders agree among themselves that, except to the extent otherwise
provided herein, in the event that any Lender shall obtain payment in respect of
any Loan, unreimbursed drawing with respect to any LOC Obligations or any other
obligation owing to such Lender under this Credit Agreement through the exercise
of a right of setoff, banker's lien or counterclaim, or pursuant to a secured
claim under Section 506 of the Bankruptcy Code or other security or interest
arising from, or in lieu of, such secured claim, received by such Lender under
any applicable bankruptcy, insolvency or other similar law or otherwise, or by
any other means, in excess of its pro rata share of such payment as provided for
in this Credit Agreement, such Lender shall promptly pay in cash or purchase
from the other Lenders a participation in such Loans, LOC Obligations, and other
obligations in such amounts, and make such other adjustments from time to time,
as shall be equitable to the end that all Lenders share such payment in
accordance with their respective ratable shares as provided for in this Credit
Agreement. The Lenders further agree among themselves that if payment to a
Lender obtained by such Lender through the exercise of a right of setoff,
banker's lien, counterclaim or other event as aforesaid shall be rescinded or
must otherwise be restored, each Lender which shall have shared the benefit of
such payment shall, by payment in cash or a repurchase of a participation
theretofore sold, return its share of that benefit (together with its share of
any accrued interest payable with respect thereto) to each Lender whose payment
shall have been rescinded or otherwise restored. The Borrower agrees that any
Lender so purchasing such a participation may, to the fullest extent permitted
by law, exercise all rights of payment, including setoff, banker's lien or
counterclaim, with respect to such participation as fully as if such Lender were
a holder of such Loan, LOC Obligation or other obligation in the amount of such
participation. Except as otherwise expressly provided in this Credit Agreement,
if any Lender or the Agent shall fail to remit to the Agent or any other Lender
an amount payable by such Lender or the Agent to the Agent or such other Lender
pursuant to this Credit Agreement on the date when such amount is due, such
payments shall be made together with interest thereon for each date from the
date such amount is due until the date such amount is paid to the Agent or such
other Lender at a rate per annum equal to the Federal Funds Rate. If under any
applicable bankruptcy, insolvency or other similar law, any Lender receives a
secured claim in lieu of a setoff to which this Section 3.8 applies, such Lender
shall, to the extent practicable, exercise its rights in respect of such
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secured claim in a manner consistent with the rights of the Lenders under this
Section 3.8 to share in the benefits of any recovery on such secured claim.
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3.9 Capital Adequacy.
If, after the date hereof, any Lender has determined that the adoption
or the becoming effective of, or any change in, or any change by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof in the interpretation or administration
of, any applicable law, rule or regulation regarding capital adequacy, or
compliance by such Lender, or its parent corporation, 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 (or parent corporation's)
capital or assets as a consequence of its commitments or obligations hereunder
to a level below that which such Lender, or its parent corporation, could have
achieved but for such adoption, effectiveness, change or compliance (taking into
consideration such Lender's (or parent corporation's) policies with respect to
capital adequacy), then, upon notice from such Lender to the Borrower, the
Borrower shall be obligated to pay to such Lender such additional amount or
amounts as will compensate such Lender on an after-tax basis (after taking into
account applicable deductions and credits in respect of the amount indemnified)
for such reduction. Each determination by any such Lender of amounts owing under
this Section shall, absent manifest error, be conclusive and binding on the
parties hereto. This covenant shall survive the termination of this Credit
Agreement and the payment of the Loans and all other amounts payable hereunder.
3.10 Inability To Determine Interest Rate.
If prior to the first day of any Interest Period, the Agent shall have
determined in good faith (which determination shall be conclusive and binding
upon the Borrower) that, by reason of circumstances affecting the relevant
market, adequate and reasonable means do not exist for ascertaining the Adjusted
Eurodollar Rate for such Interest Period, the Agent shall give telecopy or
telephonic notice thereof to the Borrower and the Lenders as soon as practicable
thereafter, and will also give prompt written notice to the Borrower when such
conditions no longer exist. If such notice is given (a) any Eurodollar Loans
requested to be made on the first day of such Interest Period shall be made as
Base Rate Loans, (b) any Loans that were to have been converted on the first day
of such Interest Period to or continued as Eurodollar Loans shall be converted
to or continued as Base Rate Loans and (c) any outstanding Eurodollar Loans
shall be converted, on the first day of such Interest Period to Base Rate Loans.
Until such notice has been withdrawn by the Agent, no further Eurodollar Loans
shall be made or continued as such, nor shall the Borrower have the right to
convert Base Rate Loans to Eurodollar Loans.
3.11 Illegality.
Notwithstanding any other provision herein, if the adoption of or any
change in any Requirement of Law or in the interpretation or application thereof
occurring after the Closing Date shall make it unlawful for any Lender to make
or maintain Eurodollar Loans as contemplated by this Credit Agreement, (a) such
Lender shall promptly give written notice of such circumstances to the Borrower
and the Agent (which notice shall be withdrawn whenever such circumstances no
longer exist), (b) the commitment of such Lender hereunder to make Eurodollar
Loans, continue Eurodollar Loans as such and convert a Base Rate Loan to
Eurodollar Loans shall forthwith be canceled and, until such time as it shall no
longer be unlawful for such Lender to make or maintain Eurodollar Loans, such
Lender shall then have a commitment only to make a Base Rate Loan when a
Eurodollar Loan is requested and (c) such Lender's Loans then outstanding as
Eurodollar Loans, if any, shall be converted automatically to Base Rate Loans on
the respective last days of the then current Interest Period with respect to
such Loans or within such earlier period as required by law. If any such
conversion of a Eurodollar Loan occurs on a day which is not the last day of the
then current Interest Period with respect thereto, the Borrower shall pay to
such Lender such amounts, if any, as may be required pursuant to Section 3.14.
3.12 Requirements of Law.
If the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof applicable to any Lender, or compliance by
any Lender with any request or directive (whether or not having the force of
law) from any central bank or other Governmental Authority, in each case made
subsequent to the Closing Date (or, if later, the date on which such Lender
becomes a Lender):
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(a) shall subject such Lender to any tax of any kind
whatsoever with respect to any Letter of Credit, any Eurodollar Loans
made by it or its obligation to make Eurodollar Loans, or change the
basis of taxation of payments to such Lender in respect thereof (except
for Non-Excluded Taxes covered by Section 3.13 (including Non-Excluded
Taxes imposed solely by reason of any failure of such Lender to comply
with its obligations under Section 3.13(b)) and changes in taxes
measured by or imposed upon the overall net income, or franchise tax
(imposed in lieu of such net income tax), of such Lender or its
applicable lending office, branch, or any affiliate thereof);
(b) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of,
advances, loans or other extensions of credit by, or any other
acquisition of funds by, any office of such Lender which is not
otherwise included in the determination of the Adjusted Eurodollar Rate
hereunder; or
(c) shall impose on such Lender any other condition (excluding
any tax of any kind whatsoever);
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or issuing or participating in
Letters of Credit or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, upon notice to the Borrower from such Lender,
through the Agent, in accordance herewith, the Borrower shall be obligated to
promptly pay such Lender, upon its demand, any additional amounts necessary to
compensate such Lender on an after-tax basis (after taking into account
applicable deductions and credits in respect of the amount indemnified) for such
increased cost or reduced amount receivable, provided that, in any such case,
the Borrower may elect to convert the Eurodollar Loans made by such Lender
hereunder to Base Rate Loans by giving the Agent at least one Business Day's
notice of such election, in which case the Borrower shall promptly pay to such
Lender, upon demand, without duplication, such amounts, if any, as may be
required pursuant to Section 3.14. If any Lender becomes entitled to claim any
additional amounts pursuant to this Section 3.12, it shall provide prompt notice
thereof to the Borrower, through the Agent, certifying (x) that one of the
events described in this Section 3.12 has occurred and describing in reasonable
detail the nature of such event, (y) as to the increased cost or reduced amount
resulting from such event and (z) as to the additional amount demanded by such
Lender and a reasonably detailed explanation of the calculation thereof. Such a
certificate as to any additional amounts payable pursuant to this Section 3.12
submitted by such Lender, through the Agent, to the Borrower shall be conclusive
and binding on the parties hereto in the absence of manifest error. This
covenant shall survive the termination of this Credit Agreement and the payment
of the Loans and all other amounts payable hereunder.
3.13 Taxes.
(a) Except as provided below in this Section 3.13, all
payments made by the Borrower under this Credit Agreement and any Notes
shall be made free and clear of, and without deduction or withholding
for or on account of, any present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions or
withholdings, now or hereafter imposed, levied, collected, withheld or
assessed by any court, or governmental body, agency or other official,
excluding taxes measured by or imposed upon the overall net income of
any Lender or its applicable lending office, or any branch or affiliate
thereof, and all franchise taxes, branch taxes, taxes on doing business
or taxes on the overall capital or net worth of any Lender or its
applicable lending office, or any branch or affiliate thereof, in each
case imposed in lieu of net income taxes: (i) by the jurisdiction under
the laws of which such Lender, applicable lending office, branch or
affiliate is organized or is located, or in which its principal
executive office is located, or any nation within which such
jurisdiction is located or any political subdivision thereof; or (ii)
by reason of any connection between the jurisdiction imposing such tax
and such Lender, applicable lending office, branch or affiliate other
than a connection arising solely from such Lender having executed,
delivered or performed its obligations, or received payment under or
enforced, this Credit Agreement or any Notes. If any such non-excluded
taxes, levies, imposts, duties, charges, fees, deductions or
withholdings ("Non-Excluded Taxes") are required to be withheld from
any amounts payable to the Agent or any Lender hereunder or under any
Notes, (A) the amounts so payable to the Agent or such Lender shall be
increased to the extent necessary to yield to the Agent or such Lender
(after
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payment of all Non-Excluded Taxes) interest on any such other amounts
payable hereunder at the rates or in the amounts specified in this
Credit Agreement and any Notes, provided, however, that the Borrower
shall be entitled to deduct and withhold any Non-Excluded Taxes and
shall not be required to increase any such amounts payable to any
Lender that is not organized under the laws of the United States of
America or a state thereof if such Lender fails to comply with the
requirements of paragraph (b) of this Section 3.13 whenever any
Non-Excluded Taxes are payable by the Borrower, and (B) as promptly as
possible after requested the Borrower shall send to the Agent for its
own account or for the account of such Lender, as the case may be, a
certified copy of an original official receipt received by the Borrower
showing payment thereof. If the Borrower fails to pay any Non-Excluded
Taxes when due to the appropriate taxing authority or fails to remit to
the Agent the required receipts or other required documentary evidence,
the Borrower shall indemnify the Agent and any Lender for any
incremental taxes, interest or penalties that may become payable by the
Agent or any Lender as a result of any such failure. The agreements in
this subsection shall survive the termination of this Credit Agreement
and the payment of the Loans and all other amounts payable hereunder.
(b) Each Lender that is not incorporated under the laws of the
United States of America or a state thereof shall:
(i) (A) on or before the date of any payment by the
Borrower under this Credit Agreement or Notes to such Lender,
deliver to the Borrower and the Agent (x) two duly completed
copies of United States Internal Revenue Service Form 1001 or
4224, or successor applicable form, as the case may be,
certifying that it is entitled to receive payments under this
Credit Agreement and any Notes without deduction or
withholding of any United States federal income taxes and (y)
an Internal Revenue Service Form W-8 or W-9, or successor
applicable form, as the case may be, certifying that it is
entitled to an exemption from United States backup withholding
tax;
(B) deliver to the Borrower and the Agent
two further copies of any such form or certification on or
before the date that any such form or certification expires or
becomes obsolete and after the occurrence of any event
requiring a change in the most recent form previously
delivered by it to the Borrower; and
(C) obtain such extensions of time for
filing and complete such forms or certifications as may
reasonably be requested by the Borrower or the Agent; or
(ii) in the case of any such Lender that is not a
"bank" within the meaning of Section 881(c)(3)(A) of the
Internal Revenue Code, (A) represent to the Borrower (for the
benefit of the Borrower and the Agent) that it is not a bank
within the meaning of Section 881(c)(3)(A) of the Internal
Revenue Code, (B) agree to furnish to the Borrower, on or
before the date of any payment by the Borrower, with a copy to
the Agent, two accurate and complete original signed copies of
Internal Revenue Service Form W-8, or successor applicable
form certifying to such Lender's legal entitlement at the date
of such certificate to an exemption from U.S. withholding tax
under the provisions of Section 881(c) of the Internal Revenue
Code with respect to payments to be made under this Credit
Agreement and any Notes (and to deliver to the Borrower and
the Agent two further copies of such form on or before the
date it expires or becomes obsolete and after the occurrence
of any event requiring a change in the most recently provided
form and, if necessary, obtain any extensions of time
reasonably requested by the Borrower or the Agent for filing
and completing such forms), and (C) agree, to the extent
legally entitled to do so, upon reasonable request by the
Borrower, to provide to the Borrower (for the benefit of the
Borrower and the Agent) such other forms as may be reasonably
required in order to establish the legal entitlement of such
Lender to an exemption from withholding with respect to
payments under this Credit Agreement and any Notes.
Notwithstanding the above, if any change in treaty, law or regulation
has occurred after the date such Person becomes a Lender hereunder
which renders all such forms inapplicable or which would prevent such
Lender from duly completing and delivering any such form with respect
to it and such Lender so advises the Borrower and the Agent then such
Lender shall be exempt from such requirements. Each Person that shall
become a
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Lender or a participant of a Lender pursuant to Section 11.3 shall,
upon the effectiveness of the related transfer, be required to provide
all of the forms, certifications and statements required pursuant to
this subsection (b); provided that in the case of a participant of a
Lender, the obligations of such participant of a Lender pursuant to
this subsection (b) shall be determined as if the participant of a
Lender were a Lender except that such participant of a Lender shall
furnish all such required forms, certifications and statements to the
Lender from which the related participation shall have been purchased.
3.14 Idemnity.
The Borrower promises to indemnify each Lender and to hold each Lender
harmless from any loss or expense which such Lender may sustain or incur as a
consequence of (a) default by the Borrower in making a borrowing of, conversion
into or continuation of Eurodollar Loans after the Borrower has given a notice
requesting the same in accordance with the provisions of this Credit Agreement,
(b) default by the Borrower in making any prepayment of a Eurodollar Loan after
the Borrower has given a notice thereof in accordance with the provisions of
this Credit Agreement and (c) the making of a prepayment of Eurodollar Loans on
a day which is not the last day of an Interest Period with respect thereto. Such
indemnification may include an amount equal to (i) the amount of interest which
would have accrued on the amount so prepaid, or not so borrowed, converted or
continued, for the period from the date of such prepayment or of such failure to
borrow, convert or continue to the last day of the applicable Interest Period
(or, in the case of a failure to borrow, convert or continue, the Interest
Period that would have commenced on the date of such failure) in each case at
the applicable rate of interest for such Eurodollar Loans provided for herein
(excluding, however, the Applicable Percentage included therein, if any) minus
(ii) the amount of interest (as reasonably determined by such Lender) which
would have accrued to such Lender on such amount by placing such amount on
deposit for a comparable period with leading banks in the interbank Eurodollar
market. The agreements in this Section shall survive the termination of this
Credit Agreement and the payment of the Loans and all other amounts payable
hereunder.
<PAGE>
SECTION 4
GUARANTY
4.1 Guaranty of Payment.
Subject to Section 4.7 below, each of the Guarantors hereby, jointly
and severally, unconditionally guarantees to each Lender and the Agent the
prompt payment of the Credit Party Obligations in full when due (whether at
stated maturity, as a mandatory prepayment, by acceleration or otherwise). The
Guarantors additionally, jointly and severally, unconditionally guarantee to
each Lender and the Agent the timely performance of all other obligations under
the Credit Documents. This Guaranty is a guaranty of payment and not of
collection and is a continuing guaranty and shall apply to all Credit Party
Obligations whenever arising.
4.2 Obligations Unconditional.
The obligations of the Guarantors hereunder are absolute and
unconditional, irrespective of the value, genuineness, validity, regularity or
enforceability of any of the Credit Documents, or any other agreement or
instrument referred to therein, to the fullest extent permitted by applicable
law, irrespective of any other circumstance whatsoever which might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor.
Each Guarantor agrees that this Guaranty may be enforced by the Lenders without
the necessity at any time of resorting to or exhausting any other security or
collateral and without the necessity at any time of having recourse to the Notes
or any other of the Credit Documents or any collateral, if any, hereafter
securing the Credit Party Obligations or otherwise and each Guarantor hereby
waives the right to require the Lenders to proceed against the Borrower or any
other Person (including a co-guarantor) or to require the Lenders to pursue any
other remedy or enforce any other right. Each Guarantor further agrees that it
shall have no right of subrogation, indemnity, reimbursement or contribution
against the Borrower or any other Guarantor of the Credit Party Obligations for
amounts paid under this Guaranty until such time as the Lenders have been paid
in full, all Commitments under the Credit Agreement have been terminated and no
Person or Governmental Authority shall have any right to request any return or
reimbursement of funds from the Lenders in
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connection with monies received under the Credit Documents. Each Guarantor
further agrees that nothing contained herein shall prevent the Lenders from
suing on the Notes or any of the other Credit Documents or foreclosing its
security interest in or Lien on any collateral, if any, securing the Credit
Party Obligations or from exercising any other rights available to it under this
Credit Agreement, the Notes, any other of the Credit Documents, or any other
instrument of security, if any, and the exercise of any of the aforesaid rights
and the completion of any foreclosure proceedings shall not constitute a
discharge of any of any Guarantor's obligations hereunder; it being the purpose
and intent of each Guarantor that its obligations hereunder shall be absolute,
independent and unconditional under any and all circumstances. Neither any
Guarantor's obligations under this Guaranty nor any remedy for the enforcement
thereof shall be impaired, modified, changed or released in any manner
whatsoever by an impairment, modification, change, release or limitation of the
liability of the Borrower or by reason of the bankruptcy or insolvency of the
Borrower. Each Guarantor waives any and all notice of the creation, renewal,
extension or accrual of any of the Credit Party Obligations and notice of or
proof of reliance of by the Agent or any Lender upon this Guarantee or
acceptance of this Guarantee. The Credit Party Obligations, and any of them,
shall conclusively be deemed to have been created, contracted or incurred, or
renewed, extended, amended or waived, in reliance upon this Guarantee. All
dealings between the Borrower and any of the Guarantors, on the one hand, and
the Agent and the Lenders, on the other hand, likewise shall be conclusively
presumed to have been had or consummated in reliance upon this Guarantee.
4.3 Modifications.
Each Guarantor agrees that (a) all or any part of the security now or
hereafter held for the Credit Party Obligations, if any, may be exchanged,
compromised or surrendered from time to time; (b) the Lenders shall not have any
obligation to protect, perfect, secure or insure any such security interests,
liens or encumbrances now or hereafter held, if any, for the Credit Party
Obligations or the properties subject thereto; (c) the time or place of payment
of the Credit Party Obligations may be changed or extended, in whole or in part,
to a time certain or otherwise, and may be renewed or accelerated, in whole or
in part; (d) the Borrower and any other party liable for payment under the
Credit Documents may be granted indulgences generally; (e) any of the provisions
of the Notes or any of the other Credit Documents may be modified, amended or
waived; (f) any party (including any co-guarantor) liable for the payment
thereof may be granted indulgences or be released; and (g) any deposit balance
for the credit of the Borrower or any other party liable for the payment of the
Credit Party Obligations or liable upon any security therefor may be released,
in whole or in part, at, before or after the stated, extended or accelerated
maturity of the Credit Party Obligations, all without notice to or further
assent by such Guarantor, which shall remain bound thereon, notwithstanding any
such exchange, compromise, surrender, extension, renewal, acceleration,
modification, indulgence or release.
4.4 Waiver of Rights.
Each Guarantor expressly waives to the fullest extent permitted by
applicable law: (a) notice of acceptance of this Guaranty by the Lenders and of
all extensions of credit to the Borrower by the Lenders; (b) presentment and
demand for payment or performance of any of the Credit Party Obligations; (c)
protest and notice of dishonor or of default (except as specifically required in
the Credit Agreement) with respect to the Credit Party Obligations or with
respect to any security therefor; (d) notice of the Lenders obtaining, amending,
substituting for, releasing, waiving or modifying any security interest, lien or
encumbrance, if any, hereafter securing the Credit Party Obligations, or the
Lenders' subordinating, compromising, discharging or releasing such security
interests, liens or encumbrances, if any; (e) all other notices to which such
Guarantor might otherwise be entitled; and (f) demand for payment under this
Guaranty.
4.5 Reinstatement.
The obligations of the Guarantors under this Section 4 shall be
automatically reinstated if and to the extent that for any reason any payment by
or on behalf of any Person in respect of the Credit Party Obligations is
rescinded or must be otherwise restored by any holder of any of the Credit Party
Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, and each Guarantor agrees that it will indemnify
the Agent and each Lender on demand for all reasonable costs and expenses
(including, without limitation, reasonable fees of counsel) incurred by the
Agent or such Lender in connection with such rescission or restoration,
including any such costs and expenses incurred in defending against any claim
alleging that such payment constituted a preference, fraudulent transfer or
similar payment under any bankruptcy, insolvency or similar law.
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4.6 Remedies.
The Guarantors agree that, as between the Guarantors, on the one hand,
and the Agent and the Lenders, on the other hand, the Credit Party Obligations
may be declared to be forthwith due and payable as provided in Section 9 (and
shall be deemed to have become automatically due and payable in the
circumstances provided in Section 9) notwithstanding any stay, injunction or
other prohibition preventing such declaration (or preventing such Credit Party
Obligations from becoming automatically due and payable) as against any other
Person and that, in the event of such declaration (or such Credit Party
Obligations being deemed to have become automatically due and payable), such
Credit Party Obligations (whether or not due and payable by any other Person)
shall forthwith become due and payable by the Guarantors. The Guarantors
acknowledge and agree that their obligations hereunder are secured in accordance
with the terms of the Mortgage Documents and the other Collateral Documents and
that the Lenders may exercise their remedies thereunder in accordance with the
terms thereof.
4.7 Limitations.
Notwithstanding any provision to the contrary contained herein or in
any of the other Credit Documents, to the extent the obligations of any
Guarantor shall be adjudicated to be invalid or unenforceable for any reason
(including, without limitation, because of any applicable state or federal law
relating to fraudulent conveyances or transfers) then the obligations of such
Guarantor hereunder shall be limited to the maximum amount that is permissible
under applicable law (whether federal or state and including, without
limitation, the Bankruptcy Code).
SECTION 5
CONDITIONS PRECEDENT
5.1 Closing Conditions.
The obligation of the Lenders to enter into this Credit Agreement and
make the initial Revolving Loans is subject to satisfaction of the following
conditions:
(a) Executed Credit Documents. Receipt by the Agent of duly
executed copies of: (i) this Credit Agreement; (ii) the Notes; (iii)
the Collateral Documents and (iv) all other Credit Documents, each in
form and substance acceptable to the Lenders in their sole discretion.
(b) Corporate Documents. Receipt by the Agent of the
following:
(i) Charter Documents. Copies of the articles or
certificates of incorporation or other charter documents of
each Credit Party certified to be true and complete as of a
recent date by the appropriate Governmental Authority of the
state or other jurisdiction of its incorporation and certified
by a secretary or assistant secretary of such Credit Party to
be true and correct as of the Effective Date.
(ii) Bylaws. A copy of the bylaws of each Credit
Party certified by a secretary or assistant secretary of such
Credit Party to be true and correct as of the Effective Date.
(iii) Resolutions. Copies of resolutions of the Board
of Directors of each Credit Party approving and adopting the
Credit Documents to which it is a party, the transactions
contemplated therein and authorizing execution and delivery
thereof, certified by a secretary or assistant secretary of
such Credit Party to be true and correct and in force and
effect as of the Effective Date.
(iv) Good Standing. Copies of (A) certificates of
good standing, existence or its equivalent with respect to
each Credit Party certified as of a recent date by the
appropriate
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Governmental Authorities of the state or other jurisdiction of
incorporation and each other jurisdiction in which the failure
to so qualify and be in good standing would have a Material
Adverse Effect on the business or operations of a Credit Party
in such jurisdiction and (B) to the extent available, a
certificate indicating payment of all corporate franchise
taxes certified as of a recent date by the appropriate
governmental taxing authorities.
(v) Incumbency. An incumbency certificate of each
Credit Party certified by a secretary or assistant secretary
to be true and correct as of the Effective Date.
(c) Financial Statements. Receipt and approval by the Agent
of: (i) the consolidated financial statements of the Parent and its
Subsidiaries for each of the fiscal years ending December 31, 1994 and
1995, including balance sheets and income and cash flow statements,
audited by nationally recognized independent public accountants and
containing an unqualified opinion of such firm that such statements
present fairly, in all material respects, the consolidated financial
position and results of operations of the Parent and its Subsidiaries,
and are prepared in conformity with GAAP and (ii) unaudited
consolidated financial statements of the Parent and its Subsidiaries
for the twelve months ending December 31, 1996, including balance
sheets and income and cash flow statements, accompanied by a
certificate of the chief financial officer of the Parent to the effect
that such unaudited financial statements fairly present in all material
respects the financial condition of the Parent and its Subsidiaries and
have been prepared in accordance with GAAP, subject to changes
resulting from audit and normal year-end audit adjustments.
(d) Opinions of Counsel. Receipt by the Agent of opinions
(which shall cover, among other things, authority, legality, validity,
binding effect and enforceability), satisfactory to the Agent,
addressed to the Agent on behalf of the Lenders and dated as of the
Effective Date, from legal counsel to the Credit Parties.
(e) Personal Property Collateral. The Agent shall have
received, in form and substance satisfactory to the Agent:
(i) searches of Uniform Commercial Code ("UCC")
filings in the jurisdiction of the chief executive office of
each Credit Party and each jurisdiction where any Collateral
is located or where a filing would need to be made in order to
perfect the Agent's, for the benefit of the Lenders, security
interest in the Collateral, copies of the financing statements
on file in such jurisdictions and evidence that no Liens exist
other than Permitted Liens;
(ii) duly executed UCC financing statements for each
appropriate jurisdiction as is necessary, in the Agent's sole
discretion, to perfect the Agent's, for the benefit of the
Lenders, security interest in the Collateral;
(iii) all stock certificates evidencing the stock
pledged to the Agent, for the benefit of the Lenders, pursuant
to the Pledge Agreement, together with duly executed in blank
undated stock powers attached thereto; and
(iv) all instruments and chattel paper in the
possession of a Credit Party, as required by the Security
Agreement, together with allonges or assignments as may be
necessary or appropriate to perfect the Agent's, for the
benefit of the Lenders, security interest in the Collateral.
(f) Real Property Collateral. The Agent shall have received,
in form and substance satisfactory to the Agent:
(i) Mortgages. Fully executed and notarized
mortgages, deeds of trust or deeds to secure debt (each a
"Mortgage" and collectively the "Mortgages") encumbering the
fee interest of the Credit Parties in each real property asset
owned by a Credit Party set forth on Schedule 1.1(a) (each an
"Existing Property" and collectively the "Existing
Properties"), together with such UCC-1 financing statements as
the Agent shall deem appropriate with respect to each such
Existing Property.
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(ii) Legal Opinions. An opinion of counsel in the
state in which each Existing Property is located with respect
to the enforceability of the form of Mortgage and sufficiency
of the form of UCC-1 financing statements to be recorded or
filed in such state and such other matters as the Agent may
request, in form and substance satisfactory to the Agent.
(iii) Title Policies. ALTA or other appropriate form
mortgagee title insurance policies (the "Mortgage Policies")
issued by a title insurer reasonably satisfactory to the Agent
(the "Title Insurance Company"), in an amount satisfactory to
the Agent with respect to each Existing Property, assuring the
Agent that the applicable Mortgages create valid and
enforceable first priority mortgage liens on the respective
Existing Properties, free and clear of all defects and
encumbrances except Permitted Liens, which Mortgage Policies
shall contain such coverage and endorsements as shall be
satisfactory to the Agent and for any other matters that the
Agent may request and provide affirmative insurance and such
reinsurance as the Agent may request, all of the foregoing in
form and substance satisfactory to the Agent.
(iv) Surveys. Maps or plats of an as-built survey of
the sites of the Existing Properties certified to the Agent
and the Title Insurance Company in a manner satisfactory to
them, dated a date satisfactory to the Agent and the Title
Insurance Company by an independent professional licensed land
surveyor reasonably satisfactory to the Agent and the Title
Insurance Company, which maps or plats and the surveys on
which they are based shall be sufficient to delete any
standard printed survey exception contained in the applicable
Mortgage Policy and be made in accordance with the Minimum
Standard Detail Requirements for Land Title Surveys jointly
established and adopted by the American Land Title Association
and the American Congress on Surveying and Mapping in 1992 (or
such alternative standards as are satisfactory to the Agent
and the Title Insurance Company), and, without limiting the
generality of the foregoing, there shall be surveyed and shown
on such maps, plats or surveys the following: (A) the
locations on such sites of all the buildings, structures and
other improvements and the established building setback lines;
(B) the lines of streets abutting the sites and width thereof;
(C) all access and other easements appurtenant to the sites
necessary to use the sites; (D) all roadways, paths,
driveways, easements, encroachments and overhanging
projections and similar encumbrances affecting the site,
whether recorded, apparent from a physical inspection of the
sites or otherwise known to the surveyor; (E) any
encroachments on any adjoining property by the building
structures and improvements on the sites; and (F) if the site
is described as being on a filed map, a legend relating the
survey to said map.
(v) Flood Certificates. A current certification from
a registered engineer or land surveyor or other evidence
acceptable to the Agent with respect to each Existing Property
as to whether any of the improvements on such Existing
Property are located within any area designated by the
Director of the Federal Emergency Management Agency as a
"special flood hazard" area and if any improvements on the
Existing Properties are located within a "special flood
hazard" area, evidence of a flood insurance policy from a
company and in an amount satisfactory to the Agent for the
applicable portion of the premises, naming the Agent, for the
benefit of the Lenders, as mortgagee.
(vi) Appraisals. A current appraisal of each Existing
Property prepared for the benefit of the Agent by a qualified
appraiser satisfactory to the Agent and dated a date
satisfactory to the Agent, which shall indicate a fair market
value for each Existing Property acceptable to the Agent and
which shall otherwise be in form and substance satisfactory to
the Agent.
(vii) Environmental Reports. A current report of an
environmental assessment of each Existing Property of such
scope (including but not limited to the taking of soil borings
and air and groundwater samples and other above and below
ground testing) as the Agent may request, which report shall
(A) be certified to the Agent by a consulting firm acceptable
to the Agent, (B) dated a date satisfactory to the Agent, (C)
conform to the current minimum standards for the
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American Society of Testing and Materials (ASTM), and (D)
otherwise be in form and substance satisfactory to the Agent.
(viii) Zoning Evidence. Evidence satisfactory to the
Agent that each Existing Property, and the uses of each
Existing Property, are in compliance in all material respects
with all applicable laws, regulations and ordinances including
without limitation health and environmental protection laws,
erosion control ordinances, storm drainage control laws, doing
business and/or licensing laws, zoning laws (the evidence
submitted as to zoning should include the zoning designation
made for each Existing Property, the permitted uses of each
Existing Property under such zoning designation and zoning
requirements as to parking, lot size, ingress, egress and
building setbacks) and laws regarding access and facilities
for disabled persons including, but not limited to, the
federal Architectural Barriers Act, the Fair Housing
Amendments Act of 1988, the Rehabilitation Act of 1973 and the
Americans with Disabilities Act of 1990.
(ix) Engineering Report. A current engineering report
with respect to each Existing Property prepared by an engineer
satisfactory to the Agent in form and substance satisfactory
to the Agent.
(x) Management Agreements. Receipt by the Agent of a
subordination and assignment agreement satisfactory in form
and substance to the Agent with respect to the management
agreement, if any, entered into by the applicable Credit Party
with respect to each of the Existing Properties.
(g) Evidence of Insurance. Receipt by the Agent of copies of
insurance policies or certificates of insurance of the Parent and its
Subsidiaries evidencing liability and casualty insurance meeting the
requirements set forth in the Credit Documents, including, but not
limited to, naming the Agent as mortgagee and sole loss payee on behalf
of the Lenders.
(h) Material Adverse Effect. There shall not have occurred a
change since September 30, 1996 that has had or could reasonably be
expected to have a Material Adverse Effect.
(i) Litigation. There shall not exist any pending or
threatened action, suit, investigation or proceeding against a Credit
Party or any of their Subsidiaries that would have or would reasonably
be expected to have a Material Adverse Effect.
(j) Officer's Certificates. The Agent shall have received a
certificate on behalf of the Parent as of the Effective Date stating
that (i) the Parent and each of the its Subsidiaries are in compliance
with all existing financial obligations, (ii) all governmental,
shareholder and third party consents and approvals, if any, with
respect to the Credit Documents and the transactions contemplated
thereby have been obtained, (iii) no action, suit, investigation or
proceeding is pending or threatened in any court or before any
arbitrator or governmental instrumentality that purports to effect a
Credit Party or any transaction contemplated by the Credit Documents,
or could have or could be reasonably expected to have a Material
Adverse Effect, and (iv) immediately after giving effect to this Credit
Agreement, the other Credit Documents and all the transactions
contemplated therein to occur on such date, (A) each of the Credit
Parties is Solvent, (B) no Default or Event of Default exists, (C) all
representations and warranties contained herein and in the other Credit
Documents are true and correct in all material respects, and (D) the
Credit Parties are in compliance with each of the financial covenants
set forth in Section 7.2.
(k) Fees and Expenses. Payment by the Borrower of all fees and
expenses owed by it to the Lenders and the Agent, including, without
limitation, payment to the Agent of the fees set forth herein and in
the Fee Letter.
(l) Borrowing Base Certificate. Receipt by the Agent of a
Borrowing Base Certificate, in the form of Exhibit 7.1(g), dated as of
the Closing Date.
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(m) Consents and Approvals. All governmental, shareholder and
third-party consents and approvals necessary or, in the opinion of the
Agent, desirable in connection with the Loans and the transactions
contemplated under the Credit Documents shall have been duly obtained
and shall be in full force and effect, and a copy of each such consent
or approval shall have been delivered to the Agent.
(n) Due Diligence. Completion by the Lenders of all due
diligence with respect to the Credit Parties and their Subsidiaries and
each Existing Property.
(o) Financial Commitments. Receipt and review by the Agent of
the terms and conditions of all financing commitments available to the
Credit Parties and their Subsidiaries from real estate investment
trusts and any other lending institutions, specifically including IHS.
(p) Subordinated Debt Documents. Receipt by the Agent of a
certified copy of all documents evidencing the Subordinated Debt and
execution of an acceptable Subordination and Intercreditor Agreement
with respect thereto, together with an opinion of counsel (which shall
cover among things, authority, validity, binding effect and
enforceability) satisfactory to the Agent.
(q) Other. Receipt by the Lenders of such other documents,
instruments, agreements or information as reasonably requested by any
Lender, including, but not limited to, information regarding
litigation, tax, accounting, labor, insurance, pension liabilities
(actual or contingent), real estate leases, material contracts, debt
agreements, property ownership and contingent liabilities of the Credit
Parties and their Subsidiaries.
(r) Lenders'Consent. (i) The Agent shall have provided each of
the Lenders with all of the items identified in this Section 5.1 (other
than the Fee Letter), and (ii) each of the Lenders shall have approved
the form and substance of each of the items identified in this Section
5.1 (other than the Fee Letter).
5.2 Conditions to Revovling Loans to Finance Acquisition of New
Properties.
The obligation of the Lenders to advance Revolving Loans to finance the
acquisition of a New Property is subject to satisfaction of the following
conditions:
(a) Eligible Real Estate, Etc.. The New Property shall (i)
conform with the definition of Eligible Real Estate, (ii) be acquired
by a Subsidiary of the Borrower or the Borrower and is otherwise
acceptable to the Agent in its sole discretion and (iii) after such
financing, be free from all Liens other than Permitted Liens.
(b) Information. The Agent and the Lenders shall have received
information regarding the New Property in form and substance
satisfactory to the Lenders at least fifteen Business Days prior to the
date on which the Revolving Loans are requested. The Agent shall have
received telephonic notice of the Borrower's intent to deliver such
information at least five Business Days prior to the delivery thereof.
(c) Advance Amount. The Revolving Loans advanced by the
Lenders shall not exceed the acquisition cost of the New Property. The
Borrower shall provide information satisfactory in form and substance
to the Agent and the Lenders to evidence such acquisition cost.
(d) Real Property Collateral. The Agent shall have received,
in form and substance satisfactory to the Agent:
(i) Mortgage. Fully executed and notarized Mortgages
encumbering the fee interest of the Borrower or another Credit
Party in the New Property, together with such UCC-1 financing
statements as the Agent shall deem appropriate with respect to
the New Property.
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(ii) Legal Opinion. An opinion of counsel in the
state in which the New Property is located with respect to the
enforceability of the form of Mortgage and sufficiency of the
form of UCC-1 financing statements to be recorded or filed in
such state and such other matters as the Agent may request, in
form and substance satisfactory to the Agent.
(iii) Title Policies. A Mortgage Policy issued by the
Title Insurance Company in an amount satisfactory to the Agent
with respect to the New Property, assuring the Agent that the
applicable Mortgage creates a valid and enforceable first
priority mortgage lien on the New Property, free and clear of
all defects and encumbrances except Permitted Liens, which
Mortgage Policy shall contain such coverage and endorsements
as shall be satisfactory to the Agent and for any other
matters that the Agent may request and provide affirmative
insurance and such reinsurance as the Agent may request, all
of the foregoing in form and substance satisfactory to the
Agent.
(iv) Surveys. Maps or plats of an as-built survey of
the site of the New Property certified to the Agent and the
Title Insurance Company in a manner satisfactory to them,
dated a date satisfactory to the Agent and the Title Insurance
Company by an independent professional licensed land surveyor
reasonably satisfactory to the Agent and the Title Insurance
Company, which maps or plats and the surveys on which they are
based shall be sufficient to delete any standard printed
survey exception contained in the applicable Mortgage Policy
and be made in accordance with the Minimum Standard Detail
Requirements for Land Title Surveys jointly established and
adopted by the American Land Title Association and the
American Congress on Surveying and Mapping in 1992 (or such
alternative standards as are satisfactory to the Agent and the
Title Insurance Company), and, without limiting the generality
of the foregoing, there shall be surveyed and shown on such
maps, plats or surveys the following: (A) the locations on
such sites of all the buildings, structures and other
improvements and the established building setback lines; (B)
the lines of streets abutting the sites and width thereof; (C)
all access and other easements appurtenant to the sites
necessary to use the sites; (D) all roadways, paths,
driveways, easements, encroachments and overhanging
projections and similar encumbrances affecting the site,
whether recorded, apparent from a physical inspection of the
sites or otherwise known to the surveyor; (E) any
encroachments on any adjoining property by the building
structures and improvements on the sites; and (F) if the site
is described as being on a filed map, a legend relating the
survey to said map.
(v) Flood Certificates. A current certification from
a registered engineer or land surveyor or other evidence
acceptable to the Agent as to whether any of the improvements
on the New Property are located within any area designated by
the Director of the Federal Emergency Management Agency as a
"special flood hazard" area and if any improvements on such
parcel are located within a "special flood hazard" area,
evidence of a flood insurance policy from a company and in an
amount satisfactory to the Agent for the applicable portion of
the premises, naming the Agent, for the benefit of the
Lenders, as mortgagee.
(vi) Appraisals. A current appraisal of the New
Property prepared for the benefit of the Agent by a qualified
appraiser satisfactory to the Agent and dated a date
satisfactory to the Agent, which shall indicate a fair market
value for the New Property acceptable to the Agent and which
shall otherwise be in form and substance satisfactory to the
Agent.
(vii) Environmental Reports. A current report of an
environmental assessment of the New Property of such scope
(including, but not limited to, the taking of soil borings and
air and groundwater samples and other above and below ground
testing) as the Agent may request, which report shall (A) be
certified to the Agent by a consulting firm acceptable to the
Agent, (B) be dated a date satisfactory to the Agent, (C)
conform to the current minimum standards for the American
Society of Testing and Materials (ASTM), and (D) otherwise be
in form and substance satisfactory to the Agent.
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(viii) Zoning Evidence. Evidence satisfactory to the
Agent that the New Property, and the use of the New Property,
are in compliance in all material respects with all applicable
laws, regulations and ordinances including without limitation
health and environmental protection laws, erosion control
ordinances, storm drainage control laws, doing business and/or
licensing laws, zoning laws (the evidence submitted as to
zoning should include the zoning designation made for the New
Property, the permitted uses of such New Property under such
zoning designation and zoning requirements as to parking, lot
size, ingress, egress and building setbacks) and laws
regarding access and facilities for disabled persons
including, but not limited to, the federal Architectural
Barriers Act, the Fair Housing Amendments Act of 1988, the
Rehabilitation Act of 1973 and the Americans with Disabilities
Act of 1990.
(ix) Engineering Report. A current engineering report
with respect to the New Property prepared by an engineer
satisfactory to the Agent in form and substance satisfactory
to the Agent.
(x) Management Agreements. Receipt by the Agent of a
subordination and management agreement in form and substance
satisfactory to the Agent with respect to the management
agreements, if any, related to the New Property.
(xi) Taxes. Evidence satisfactory to the Agent that
all note and mortgage taxes or other taxes, where applicable,
associated with the acquisition of the New Property will be or
have been paid in full by the Borrower.
(e) Timing. The funding of the Revolving Loans advanced for
the financing of the New Property must occur within forty-five (45)
days after the Agent has notified the Borrower that the Lenders have
completed their review of the New Property and consented to the
acquisition.
(f) Financing of New Properties by a New Entity. All of the
conditions set forth in Section 7.12 must be satisfied.
(g) Additional Stock Pledge. The Agent shall have received
from the Borrower, for the benefit of the Lenders, a pledge in form and
substance satisfactory to the Agent of all of the issued and
outstanding shares of capital stock of the Subsidiary of the Borrower
intending to acquire the New Property, together with the certificates
(or other agreements or instruments) representing such shares, and all
options, contractual or otherwise, with respect thereto.
(h) Lenders' Consent. (i) The Agent shall have provided each
of the Lenders with all of items identified in this Section 5.2, and
(ii) each of the Lenders shall have approved the acquisition of such
New Property within ten (10) days of the Lenders' receipt of all of the
items identified in this Section 5.2. A Lender's failure to notify the
Agent of its objection to the acquisition of such New Property within
ten (10) days of its receipt of all of the items identified in this
Section 5.2 shall be deemed to constitute such Lender's consent to the
acquisition of such New Property.
Notwithstanding the foregoing provisions of this Section 5.2, in the
event the Borrowing Base exceeds the Revolving Committed Amount at the time the
Borrower desires to finance the acquisition of a New Property, the obligation of
the Lenders to advance Revolving Loans to finance such acquisition is subject
only to (i) the consent of the Agent and (ii) the satisfaction of the conditions
identified in Section 5.2(a), (c), (d)(i), (d)(ii), (d)(iii), (d)(iv), (d)(v),
(f) and (g) hereof. Any New Property acquired by any of the Credit Parties
pursuant to the terms of this paragraph shall not be considered a Collateral
Pool Property (meaning under no circumstances may its value be included in the
calculation of the Borrowing Base) but rather will be referred to herein as an
"Abundance of Caution Property;" provided, however, upon the occurrence of a
Default or Event of Default, the Credit Parties agree to provide the Agent, for
the benefit of the Lenders, with any and all additional due diligence items with
respect to the Abundance of Caution Properties as reasonably requested by the
Agent or any of the Lenders.
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5.3 conditions to All Revolving Loans.
In addition to the conditions precedent stated elsewhere herein, the
Lenders shall not be obligated to make new Revolving Loans nor shall an Issuing
Lender be required to issue or extend a Letter of Credit unless:
(a) Delivery of Notice and Borrowing Base Certificate. The
Borrower shall have delivered (i) in the case of any new Revolving
Loan, (a) a Notice of Borrowing, duly executed and completed, by the
time specified in Section 2.1 and (b) a Borrowing Base Certificate in
the form of Exhibit 7.1(e) (which shall include the Borrowing Base
Value of the New Property to be financed, if applicable) and (ii) in
the case of any Letter of Credit, the Issuing Lender shall have
received an appropriate request for issuance in accordance with the
provisions of Section 2.2;
(b) Representations and Warranties. The representations and
warranties made by the Credit Parties in any Credit Document are true
and correct in all material respects at and as if made as of such date
except to the extent they expressly relate to an earlier date;
(c) No Default. No Default or Event of Default shall exist or
be continuing either prior to or after giving effect thereto;
(d) No Material Adverse Effect. There shall not have occurred
any Material Adverse Effect;
(e) Availability. Immediately after giving effect to the
making of a Revolving Loan (and the application of the proceeds
thereof) or the issuance of a Letter of Credit, as the case may be, (i)
the sum of the Revolving Loans outstanding plus LOC Obligations shall
not exceed the lesser of (x) the Revolving Committed Amount and (y) the
Borrowing Base.
The delivery of each Notice of Borrowing and each request for a Letter of Credit
shall constitute a representation and warranty by the Borrower of the
correctness of the matters specified in subsections (b), (c), (d) and (e).
SECTION 6
REPRESENTATIONS AND WARRANTIES
The Credit Parties hereby represent to the Agent and each Lender that:
6.1 Financial Conditions.
The financial statements delivered to the Lenders pursuant to Section
5.1(c) and Section 7.1(a) and (b): (a) have been prepared in accordance with
GAAP and (b) present fairly the consolidated financial condition, results of
operations and cash flows of the Credit Parties and their Subsidiaries as of
such date and for such periods. Since September 30, 1996, there has been no
sale, transfer or other disposition by any Credit Party or any of their
Subsidiaries of any material part of the business or property of the Credit
Parties, taken as a whole, and no purchase or other acquisition by any of them
of any business or property (including any capital stock of any other Person)
material in relation to the consolidated financial condition of the Credit
Parties, taken as a whole, in each case, which, is not (i) reflected in the most
recent financial statements delivered to the Lenders pursuant to Section 5.1(c)
and Section 7.1 or in the notes thereto or (ii) otherwise permitted by the terms
of this Credit Agreement and communicated to the Agent.
6.2 No Material Change.
Since December 31, 1995, (a) there has been no development or event
relating to or affecting a Credit Party or any of its Subsidiaries which has had
or would be reasonably expected to have a Material Adverse Effect, and (b) no
Restricted Payments have been made or declared or are contemplated by any Credit
Party or any of its Subsidiaries.
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6.3 Organization and Good Standing.
Each Credit Party (a) is a corporation duly organized, validly existing
and in good standing under the laws of the State (or other jurisdiction) of its
organization, (b) is duly qualified and in good standing as a foreign
corporation and authorized to do business in every other jurisdiction unless the
failure to be so qualified, in good standing or authorized would not have a
Material Adverse Effect and (c) has the power and authority to own its
properties and to carry on its business as now conducted and as proposed to be
conducted.
6.4 Due Authorization.
Each Credit Party (a) has the power and authority to execute, deliver
and perform this Credit Agreement and the other Credit Documents to which it is
a party and to incur the obligations herein and therein provided for and (b) is
duly authorized to, and has been authorized by all necessary action, to execute,
deliver and perform this Credit Agreement and the other Credit Documents to
which it is a party.
6.5 No Conflicts.
Neither the execution and delivery of the Credit Documents, nor the
consummation of the transactions contemplated therein, nor the performance of or
compliance with the terms and provisions thereof by such Credit Party will (a)
violate or conflict with any provision of its organizational documents, (b)
violate, contravene or materially conflict with any Requirement of Law or any
other law, regulation (including, without limitation, Regulation U or Regulation
X), order, writ, judgment, injunction, decree or permit applicable to it, (c)
violate, contravene or conflict with contractual provisions of, or cause an
event of default under, any indenture, loan agreement, mortgage, deed of trust,
contract or other agreement or instrument to which it is a party or by which it
may be bound, the violation of which could have or might be reasonably expected
to have a Material Adverse Effect, or (d) result in or require the creation of
any Lien (other than those contemplated in or created in connection with the
Credit Documents) upon or with respect to its properties.
6.6 Consents.
Except for consents, approvals and authorizations which have been
obtained, no consent, approval, authorization or order of, or filing,
registration or qualification with, any court or Governmental Authority or third
party in respect of any Credit Party is required in connection with the
execution, delivery or performance of this Credit Agreement or any of the other
Credit Documents by such Credit Party.
6.7 Enforcable Obligations.
This Credit Agreement and the other Credit Documents have been duly
executed and delivered and constitute legal, valid and binding obligations of
each Credit Party enforceable against such Credit Party in accordance with their
respective terms, except as may be limited by bankruptcy or insolvency laws or
similar laws affecting creditors' rights generally or by general equitable
principles.
6.8 No Default.
No Credit Party, nor any of its Subsidiaries, is in default in any
respect under any contract, lease, loan agreement, indenture, mortgage, security
agreement or other agreement or obligation to which it is a party or by which
any of its properties is bound which default would have or would be reasonably
expected to have a Material Adverse Effect. No Default or Event of Default has
occurred or exists except as previously disclosed in writing to the Lenders.
6.9 Ownership.
Each Credit Party, is the owner of, and has good and marketable title
to, all of its respective assets and none of such assets is subject to any Lien
other than Permitted Liens.
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6.10 Indebtedness.
The Credit Parties have no Indebtedness except (a) as disclosed in the
financial statements referenced in Section 6.1, (b) as set forth on Schedule
6.10 and (c) as otherwise permitted by this Credit Agreement.
6.11 Litigation.
There are no actions, suits or legal, equitable, arbitration or
administrative proceedings, pending or, to the knowledge of any Credit Party,
threatened against, a Credit Party or any of its Subsidiaries which could have
or might be reasonably expected to have a Material Adverse Effect. Set forth on
Schedule 6.11 is a summary of all claims, litigation, investigations and
proceedings pending or, to the best knowledge of the Credit Parties, threatened
by or against the Credit Parties or any of their Subsidiaries or against any of
their respective properties or revenues, and none of such actions, individually
or in the aggregate, is reasonably expected to have a Material Adverse Effect.
6.12 Taxes.
Each Credit Party, and each of its Subsidiaries, has filed, or caused
to be filed, all tax returns (federal, state, local and foreign) required to be
filed and has paid (a) all amounts of taxes shown thereon to be due (including
interest and penalties) and (b) all other taxes, fees, assessments and other
governmental charges (including mortgage recording taxes, documentary stamp
taxes and intangibles taxes) owing by it, except for such taxes (i) which are
not yet delinquent or (ii) that are being contested in good faith and by proper
proceedings, and against which adequate reserves are being maintained in
accordance with GAAP. No Credit Party is aware of any proposed tax assessments
against it or any of its Subsidiaries.
6.13 Compliance with Law.
Each Credit Party, and each of its Subsidiaries, is in compliance with
all Requirements of Law and all other laws, rules, regulations, orders and
decrees (including without limitation Environmental Laws) applicable to it, or
to its properties, unless such failure to comply would not have or would not be
reasonably expected to have a Material Adverse Effect. No Requirement of Law
would be reasonably expected to cause a Material Adverse Effect.
6.14 Compliance with ERISA.
Except as would not result in a Material Adverse Effect:
(a) During the five-year period prior to the date on which
this representation is made or deemed made: (i) no ERISA Event has
occurred, and, to the best of each Credit Party's, each Subsidiary of a
Credit Party's and each ERISA Affiliate's knowledge, no event or
condition has occurred or exists as a result of which any ERISA Event
could reasonably be expected to occur, with respect to any Plan; (ii)
no "accumulated funding deficiency," as such term is defined in Section
302 of ERISA and Section 412 of the Code, whether or not waived, has
occurred with respect to any Plan; (iii) each Plan has been maintained,
operated, and funded in compliance with its own terms and in material
compliance with the provisions of ERISA, the Code, and any other
applicable federal or state laws; and (iv) no Lien in favor or the PBGC
or a Plan has arisen or is reasonably likely to arise on account of any
Plan.
(b) The actuarial present value of all "benefit liabilities"
(as defined in Section 4001(a)(16) of ERISA), whether or not vested,
under each Single Employer Plan, as of the last annual valuation date
prior to the date on which this representation is made or deemed made
(determined, in each case, in accordance with Financial Accounting
Standards Board Statement 87, utilizing the actuarial assumptions used
in such Plan's most recent actuarial valuation report), did not exceed
as of such valuation date the fair market value of the assets of such
Plan.
(c) No Credit Party, Subsidiary of a Credit Party or ERISA
Affiliate has incurred, or, to the best of each such party's knowledge,
is reasonably expected to incur, any withdrawal liability under ERISA
to any
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Multiemployer Plan or Multiple Employer Plan. No Credit Party,
Subsidiary of a Credit Party or ERISA Affiliate would become subject to
any withdrawal liability under ERISA if any such party were to withdraw
completely from all Multiemployer Plans and Multiple Employer Plans as
of the valuation date most closely preceding the date on which this
representation is made or deemed made. No Credit Party, Subsidiary of a
Credit Party or ERISA Affiliate has received any notification that any
Multiemployer Plan is in reorganization (within the meaning of Section
4241 of ERISA), is insolvent (within the meaning of Section 4245 of
ERISA), or has been terminated (within the meaning of Title IV of
ERISA), and no Multiemployer Plan is, to the best of each such party's
knowledge, reasonably expected to be in reorganization, insolvent, or
terminated.
(d) No prohibited transaction (within the meaning of Section
406 of ERISA or Section 4975 of the Code) or breach of fiduciary
responsibility has occurred with respect to a Plan which has subjected
or may subject any Credit Party, any Subsidiary of a Credit Party or
any ERISA Affiliate to any liability under Sections 406, 409, 502(i),
or 502(l) of ERISA or Section 4975 of the Code, or under any agreement
or other instrument pursuant to which any Credit Party, any Subsidiary
of a Credit Party or any ERISA Affiliate has agreed or is required to
indemnify any person against any such liability.
(e) Except as set forth in the Financial Statements, no Credit
Party, Subsidiary of a Credit Party nor any of their ERISA Affiliates
has material liability with respect to "expected post-retirement
benefit obligations" within the meaning of the Financial Accounting
Standards Board Statement 106. Each Plan which is a welfare plan (as
defined in Section 3(1) of ERISA) to which Sections 601-609 of ERISA
and Section 4980B of the Code apply has been administered in compliance
in all material respects with such sections.
6.15 Organization Structure.
(a) Set forth on Schedule 6.15 is a complete and accurate list of all
Subsidiaries of the Borrower. Information on Schedule 6.15 includes jurisdiction
of incorporation, the number of shares of each class of capital stock or other
equity interests outstanding, the number and percentage of outstanding shares of
each class owned (directly or indirectly) by the Borrower; and the number and
effect, if exercised, of all outstanding options, warrants, rights of conversion
or purchase and all other similar rights with respect thereto. The outstanding
capital stock and other equity interests of all such Subsidiaries is validly
issued, fully paid and non-assessable and is owned by the Borrower, directly or
indirectly, free and clear of all Liens. Other than as set forth in Schedule
6.15 no Subsidiary of the Borrower has outstanding any securities convertible
into or exchangeable for its capital stock nor does any such Person have
outstanding any rights to subscribe for or to purchase or any options for the
purchase of, or any agreements providing for the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any character relating to
its capital stock. Sarasota does not have any Subsidiaries.
(b) Also identified on Schedule 6.15 is the jurisdiction of
incorporation of the Borrower and Sarasota, the number and percentage of
outstanding shares of capital stock or other equity interests outstanding in the
Borrower and Sarasota; and the number and effect, if exercised, of all
outstanding options, warrants, rights of conversion or purchase and all similar
rights with respect to shares of Borrower and Sarasota. The outstanding capital
stock and other equity interests of the Borrower and Sarasota is validly issued,
fully paid and non-assessable and is owned by the Parent, directly or
indirectly, free and clear of all Liens. Other than as set forth in Schedule
6.15 neither the Borrower nor Sarasota have outstanding any securities
convertible into or exchangeable for its capital stock nor does any such Person
have outstanding any rights to subscribe for or to purchase or any options for
the purchase of, or any agreements providing for the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any character relating to
its capital stock.
6.16 Use of Proceeds; Margin Stock
The proceeds of the Loans hereunder will be used solely for the
purposes specified in Section 7.10. None of the proceeds of the Loans will be
used for the purpose of purchasing or carrying any "margin stock" as defined in
Regulation U, Regulation X or Regulation G, or for the purpose of reducing or
retiring any Indebtedness which was originally incurred to purchase or carry
"margin stock" or any "margin security" or for any other purpose which might
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constitute this transaction a "purpose credit" within the meaning of Regulation
U, Regulation X, Regulation G or Regulation T. None of the Credit Parties owns
any "margin stock."
6.17 Government Regulation.
No Credit Party nor any of its Subsidiaries is subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Investment Company Act of 1940 or the Interstate Commerce Act, each as amended.
In addition, no Credit Party nor any of its Subsidiaries is (a) an "investment
company" registered or required to be registered under the Investment Company
Act of 1940, as amended, or controlled by such a company, or (b) a "holding
company," or a "Subsidiary company" of a "holding company," or an "affiliate" of
a "holding company" or of a "Subsidiary" or a "holding company," within the
meaning of the Public Utility Holding Company Act of 1935, as amended. No
director, executive officer or principal shareholder of a Credit Party or any of
its Subsidiaries is a director, executive officer or principal shareholder of
any Lender. For the purposes hereof the terms "director," "executive officer"
and "principal shareholder" (when used with reference to any Lender) have the
respective meanings assigned thereto in Regulation O issued by the Board of
Governors of the Federal Reserve System.
6.18 Environmental Matters.
(a) Except as set forth on Schedule 6.18:
(i) Each of the Real Properties and all operations at
the Real Properties are in material compliance with all
applicable Environmental Laws, and there is no violation of
any Environmental Law with respect to the Real Properties or
the businesses operated by a Credit Party or any of its
Subsidiaries (the "Businesses"), and there are no conditions
relating to the Businesses or Real Properties that would be
reasonably expected to give rise to liability under any
applicable Environmental Laws.
(ii) No Credit Party nor any of its Subsidiaries has
received any written notice of, or inquiry from any
Governmental Authority regarding, any violation, alleged
violation, non-compliance, liability or potential liability
regarding Hazardous Materials or compliance with Environmental
Laws with regard to any of the Real Properties or the
Businesses, nor does any Credit Party or any of its
Subsidiaries have knowledge that any such notice is being
threatened.
(iii) Hazardous Materials have not been transported
or disposed of from the Real Properties, or generated,
treated, stored or disposed of at, on or under any of the Real
Properties or any other location, in each case by, or on
behalf or with the permission of, any Credit Party or any of
its Subsidiaries in a manner that would reasonably be expected
to give rise to liability under any applicable Environmental
Law.
(iv) No judicial proceeding or governmental or
administrative action is pending or, to the knowledge of any
Credit Party or any of its Subsidiaries, threatened, under any
Environmental Law to which any Credit Party or any of its
Subsidiaries is or will be named as a party, nor are there any
consent decrees or other decrees, consent orders,
administrative orders or other orders, or other administrative
or judicial requirements outstanding under any Environmental
Law with respect to any Credit Party or any of its
Subsidiaries, the Real Properties or the Businesses, in any
amount reportable under the federal Comprehensive
Environmental Response, Compensation and Liability Act or any
analogous state law, except releases in compliance with any
Environmental Laws.
(v) There has been no release or threat of release of
Hazardous Materials at or from the Real Properties, or arising
from or related to the operations (including, without
limitation, disposal) of a Credit Party or any of its
Subsidiaries in connection with the Real Properties or
otherwise in connection with the Businesses.
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(vi) None of the Real Properties contains, or to the
best of our knowledge has previously contained, any Hazardous
Materials at, on or under the Real Properties in amounts or
concentrations that, if released, constitute or constituted a
violation of, or could give rise to liability under,
Environmental Laws.
(vii) No Credit Party has assumed any liability of
any Person (other than another Credit Party) under any
Environmental Law.
(b) Each Credit Party and each of its Subsidiaries has adopted
procedures that are designed to (i) ensure that each such party, any of
its operations and each of the properties owned or leased by such party
remains in compliance with applicable Environmental Laws and (ii)
minimize any liabilities or potential liabilities that each such party,
any of its operations and each of the properties owned or leased by
each such party may have under applicable Environmental Laws.
6.19 Solvency.
Each Credit Party, is and, after consummation of the transactions
contemplated by this Credit Agreement, will be Solvent.
6.20 Investments.
All Investments of the Credit Parties are either Permitted Investments
or otherwise permitted by the terms of this Credit Agreement.
6.21 Location of Collateral
Set forth on Schedule 6.21(a) is a list of all Real Properties (with
street address, county and state where located). Set forth on Schedule 6.21(b)
is a list of all locations where any personal property of Sarasota, the Borrower
or any of the Borrower's Subsidiaries are located, including county and state
where located. Set forth on Schedule 6.21(c) is the chief executive office and
principal place of business of the Credit Parties. Schedules 6.21(a), 6.21(b)
and 6.21(c) may be updated from time to time by the Borrower by giving written
notice thereof to the Agent.
6.22 Disclosure.
Neither this Credit Agreement nor any financial statements delivered to
the Lenders nor any other document, certificate or statement furnished to the
Lenders by or on behalf of any Credit Party in connection with the transactions
contemplated hereby contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained
therein or herein not misleading.
6.23 Licenses, etc.
The Credit Parties and their Subsidiaries have obtained, and hold in
full force and effect, all franchises, licenses, permits, certificates,
authorizations, qualifications, accreditations, easements, rights of way and
other rights, consents and approvals which are necessary for the operation of
their respective businesses as presently conducted, except where the failure to
obtain the same would not have a Material Adverse Effect.
6.24 No Burdensome Restrictions.
No Credit Party nor any of its Subsidiaries is a party to any agreement
or instrument or subject to any other obligation or any charter or corporate
restriction or any provision of any applicable law, rule or regulation which,
individually or in the aggregate, would have or be reasonably expected to have a
Material Adverse Effect.
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6.25 Collateral Documents.
The Collateral Documents create valid first priority security interests
in, and first mortgage Liens on, the Collateral purported to be covered thereby,
which security interests and mortgage Liens are and will remain perfected
security interests and mortgage Liens, prior to all other Liens other than
Permitted Liens. Each of the representations and warranties made by the Credit
Parties in the Collateral Documents is true and correct in all material
respects.
6.26 Intellectual Property.
Each of the Parent, Sarasota, the Borrower and the Borrower's
Subsidiaries owns, or has the legal right to use, all trademarks, tradenames,
copyrights, technology, know-how and processes, if any, necessary for each of
them to conduct its business as currently conducted (the "Intellectual
Property") except for those the failure to own or have such legal right to use
would not be reasonably expected to have a Material Adverse Effect. Except as
provided on Schedule 6.26, no claim has been asserted and is pending by any
Person challenging or questioning the use of any such Intellectual Property or
the validity or effectiveness of any such Intellectual Property, nor does any
Credit Party know of any such claim, and the use of such Intellectual Property
by the Parent, Sarasota, the Borrower or any of the Borrower's Subsidiaries does
not infringe on the rights of any Person, except for such claims and
infringements that in the aggregate, would not be reasonably expected to have a
Material Adverse Effect.
6.27 Management Agreements.
The Borrower, Sarasota and/or any of the Borrower's Subsidiaries are
not party to any management agreement with respect to the Real Properties.
SECTION 7
AFFIRMATIVE COVENANTS
Each Credit Party hereby covenants and agrees that so long as this
Credit Agreement is in effect and until the Loans and LOC Obligations, together
with interest and fees and other obligations hereunder, have been paid in full
and the Commitments and Letters of Credit hereunder shall have terminated:
7.1 Information Covenants.
The Borrower will furnish, or cause to be furnished, to the Agent and
each of the Lenders:
(a) Annual Financial Statements. As soon as available, and in
any event within 90 days after the close of each fiscal year of the
Credit Parties, a consolidated balance sheet and income statement of
the Parent and its Subsidiaries as of the end of such fiscal year,
together with related consolidated statements of operations and
retained earnings and of cash flows for such fiscal year, setting forth
in comparative form consolidated figures for the preceding fiscal year,
all such financial information described above to be in reasonable form
and detail and (i) audited by independent certified public accountants
of recognized national standing reasonably acceptable to the Agent and
whose opinion shall be to the effect that such financial statements
have been prepared in accordance with GAAP (except for changes with
which such accountants concur) and shall not be limited as to the scope
of the audit or qualified in any manner and (ii) accompanied by a
certificate of the chief financial officer of the Parent to the effect
that such annual financial statements fairly present in all material
respects the financial condition of the Parent and its Subsidiaries and
have been prepared in accordance with GAAP, subject to changes
resulting from audit adjustments. Furthermore, the Parent shall cause
its Subsidiaries to furnish to the Lenders all audited financial
statements that are prepared on behalf of any such entities.
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(b) Quarterly Financial Statements. As soon as available, and
in any event within 45 days after the close of each fiscal quarter of
the Parent, a consolidated balance sheet and income statement of the
Parent and its Subsidiaries as of the end of such fiscal quarter,
together with related consolidated statements of operations and
retained earnings and of cash flows for such fiscal quarter in each
case setting forth in comparative form consolidated figures for (i) the
corresponding period of the preceding fiscal year and (ii) management's
proposed budget for such period, all such financial information
described above to be in reasonable form and detail and reasonably
acceptable to the Agent, and accompanied by a certificate of the chief
financial officer of the Parent to the effect that such quarterly
financial statements fairly present in all material respects the
financial condition of the Parent and its Subsidiaries and have been
prepared in accordance with GAAP, subject to changes resulting from
audit and normal year-end audit adjustments.
(c) Quarterly Operating Statements. As soon as available, and
in any event within 15 days after the close of each fiscal quarter of
the Credit Parties, an operating statement for each Collateral Pool
Property and each Abundance of Caution Property as of the end of such
fiscal quarter, together with the Average Economic Occupancy Rate for
the applicable Collateral Pool Property and the applicable Abundance of
Caution Property as of the end of such fiscal quarter, setting forth in
detail the earnings and expenses of each Collateral Pool Property and
each Abundance of Caution Property for such fiscal quarter, together
with comparative form figures for the preceding fiscal quarter, all
such information to be in reasonable form and detail and reasonably
acceptable to the Agent accompanied by a certificate of the chief
financial officer of the Borrower that such quarterly operating
statements fairly present in all material respects the financial
condition of the applicable Collateral Pool Property and the applicable
Abundance of Caution Property.
(d) Monthly Operating Statements. As soon as available, and in
any event within 15 days after the close of each calendar month, an
operating statement for each Collateral Pool Property and each
Abundance of Caution Property as of the end of each calendar month,
together with the Economic Occupancy Rate for the applicable Collateral
Pool Property and applicable Abundance of Caution Property as of the
end of such calendar month, setting forth in detail the earnings and
expenses of each Collateral Pool Property and each Abundance of Caution
Property for such calendar month, together with comparative form
figures for the preceding calendar month, all such information to be in
reasonable form and detail and reasonably acceptable to the Agent
accompanied by a certificate of the chief financial officer of the
Borrower that such monthly operating statements fairly present in all
material respects the financial condition of the applicable Collateral
Pool Property and the applicable Abundance of Caution Property.
(e) Officer's Certificate. At the time of delivery of the
financial statements and other statements provided for in Sections
7.1(a), 7.1(b) and 7(c) above, a certificate of the chief financial
officer of the Borrower, substantially in the form of Exhibit 7.1(d),
(i) demonstrating compliance with the financial covenants contained in
Section 7.2 by calculation thereof as of the end of each such fiscal
period and (ii) stating that no Default or Event of Default exists, or
if any Default or Event of Default does exist, specifying the nature
and extent thereof and what action the Borrower proposes to take with
respect thereto. The Borrower shall also deliver a copy of such
certificate to the Agency Services Address.
(f) Accountant's Certificate and Reports. Concurrently with
the delivery of the financial statements referred to in subsection
7.1(a) above, a certificate of the independent certified public
accountants reporting on such financial statements stating that in
making the examination necessary therefor no knowledge was obtained of
any Default or Event of Default, except as specified in such
certificate.
(g) Borrowing Base Certificate. Within 15 days after the end
of each fiscal quarter, a Borrowing Base Certificate as of the end of
the immediately preceding quarter, substantially in the form of Exhibit
7.1(g) and certified by the chief financial officer of the Borrower to
be true and correct as of such date.
(h) Reports. Promptly upon transmission or receipt thereof,
(i) copies of any filings and registrations with, and reports to or
from, the Securities and Exchange Commission, or any successor agency,
and copies of all financial statements, proxy statements, notices and
reports as any Credit Party or any of its Subsidiaries shall send to
its shareholders generally, (ii) copies of any and all notices
(regardless of form) or
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other reports or other information provided to or from any licensing
and/or certifying agency or other Governmental Authority with respect
to a Collateral Pool Property or Abundance of Caution Property, and
(iii) upon the written request of the Agent, all reports and written
information to and from the United States Environmental Protection
Agency, or any state or local agency responsible for environmental
matters, the United States Occupational Health and Safety
Administration, or any state or local agency responsible for health and
safety matters, or any successor agencies or authorities concerning
environmental, health or safety matters.
(i) Notices. Upon a Credit Party obtaining knowledge thereof,
such Credit Party will give written notice to the Agent immediately of
(i) the occurrence of an event or condition consisting of a Default or
Event of Default, specifying the nature and existence thereof and what
action the Borrower proposes to take with respect thereto, and (ii) the
occurrence of any of the following with respect to any Credit Party or
any of its Subsidiaries (A) the pendency or commencement of any
litigation, arbitral or governmental proceeding against any Credit
Party or any of its Subsidiaries which if adversely determined would
have or would be reasonably expected to have a Material Adverse Effect,
or (B) the institution of any proceedings against any Credit Party or
any of its Subsidiaries with respect to, or the receipt of notice by
such Person of potential liability or responsibility for violation, or
alleged violation of any federal, state or local law, rule or
regulation, including but not limited to, Environmental Laws, the
violation of which would have or would be reasonably expected to have a
Material Adverse Effect.
(j) ERISA. Upon a Credit Party or any ERISA Affiliate
obtaining knowledge thereof, the Borrower will give written notice to
the Agent promptly (and in any event within five Business Days) of: (i)
any event or condition, including, but not limited to, any Reportable
Event, that constitutes, or might reasonably lead to, a ERISA Event;
(ii) with respect to any Multiemployer Plan, the receipt of notice as
prescribed in ERISA or otherwise of any withdrawal liability assessed
against a Credit Party or any ERISA Affiliate, or of a determination
that any Multiemployer Plan is in reorganization or insolvent (both
within the meaning of Title IV of ERISA); (iii) the failure to make
full payment on or before the due date (including extensions) thereof
of all amounts which a Credit Party or any ERISA Affiliate is required
to contribute to each Plan pursuant to its terms and as required to
meet the minimum funding standard set forth in ERISA and the Code with
respect thereto; or (iv) any change in the funding status of any Plan
that could have a Material Adverse Effect; together, with a description
of any such event or condition or a copy of any such notice and a
statement by the chief financial officer of a Credit Party briefly
setting forth the details regarding such event, condition, or notice,
and the action, if any, which has been or is being taken or is proposed
to be taken by a Credit Party or any ERISA Affiliate with respect
thereto. Promptly upon request, the Borrower shall furnish the Agent
and the Lenders with such additional information concerning any Plan as
may be reasonably requested, including, but not limited to, copies of
each annual report/return (Form 5500 series), as well as all schedules
and attachments thereto required to filed with the Department of Labor
and/or the Internal Revenue Service pursuant to ERISA and the Code,
respectively, for each "plan year" (within the meaning of Section 3(39)
of ERISA).
(k) Environmental.
(i) Subsequent to a notice from any Governmental
Authority that would reasonably cause concern or during the
existence of an Event of Default, and upon the written request
of the Agent, the Borrower will furnish or cause to be
furnished to the Agent, at the Borrower's expense, an updated
report of an environmental assessment of reasonable scope,
form and depth, including, where appropriate, invasive soil or
groundwater sampling, by a consultant reasonably acceptable to
the Agent as to the nature and extent of the presence of any
Hazardous Materials on any property owned, leased or operated
by Credit Party and as to the compliance by the Credit Parties
with Environmental Laws. If the Borrower fails to deliver such
an environmental report within seventy-five (75) days after
receipt of such written request then the Agent may arrange for
same, and the Borrower hereby grants to the Agent and its
representatives access to the Real Properties and a license of
a scope reasonably necessary to undertake such an assessment
(including, where appropriate, invasive soil or groundwater
sampling). The reasonable cost of any assessment arranged for
by the Agent pursuant to
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this provision will be payable by the Borrower on demand and
added to the obligations secured by the Collateral Documents.
(ii) Each Credit Party will conduct and complete all
investigations, studies, sampling, and testing and all
remedial, removal, and other actions necessary to address all
Hazardous Materials on, from, or affecting any real property
owned or leased by a Credit Party to the extent necessary to
be in compliance with all Environmental Laws and all other
applicable federal, state, and local laws, regulations, rules
and policies and with the orders and directives of all
Governmental Authorities exercising jurisdiction over such
real property to the extent any failure would have or be
reasonably expected to have a Material Adverse Effect.
(l) Capital Expenditure Report. As soon as available, and in
any event within 15 days after the close of each fiscal quarter of the
Borrower, a Capital Expenditure budget for each of the Collateral Pool
Properties and each of the Abundance of Caution Properties detailing
the Capital Expenditures planned by the Borrower or its Subsidiaries
with respect to each of the Collateral Pool Properties and each of the
Abundance of Caution Properties for the succeeding fiscal quarter.
(m) Other Information. With reasonable promptness upon any
such request, such other information regarding the business, properties
or financial condition of the Credit Parties as the Agent or any Lender
may reasonably request.
7.2 Financial Covenants.
(a) Liquidity. The Parent, the Borrower and the other Credit
Parties on a consolidated basis shall at all times maintain (i) prior
to May 1, 1997 cash and Cash Equivalents in the aggregate in excess of
$5,000,000, (ii) from May 1, 1997 through June 30, 1997 cash and Cash
Equivalents in the aggregate in excess of $6,000,000 and (iii) from
July 1, 1997 and thereafter cash and Cash Equivalents in the aggregate
in excess of $7,000,000.
(b) Fixed Charge Coverage Ratio. The Parent and its
Subsidiaries on a consolidated basis shall maintain as of the end of
each fiscal quarter shown below, a Fixed Charge Coverage Ratio of at
least:
March 31, 1997 0.75:1.0
June 30, 1997 0.75:1.0
September 30, 1997 0.75:1.0
December 31, 1997 0.75:1.0
March 31, 1998 1.25:1.0
June 30, 1998 1.25:1.0
September 30, 1998 and each fiscal quarter ending
thereafter 1.30:1.0
(c) Senior Leverage Ratio. The Parent and its Subsidiaries on
a consolidated basis shall maintain, as of the end of each fiscal
quarter shown below, a Senior Leverage Ratio of at least:
March 31, 1998 6.50:1.00
June 30, 1998 6.25:1.00
September 30, 1998 6.15:1.00
December 31, 1998 and each fiscal quarter ending
thereafter
6.10:1.00
(d) Net Worth. At all times the Net Worth of the Parent and
its Subsidiaries on a consolidated basis shall be no less than the sum
of (i) Fifty Five Million ($55,000,000) plus (ii) an amount equal to
ninety percent (90%) of the Net Cash Proceeds from any Equity Issuance
occurring subsequent to the Closing Date.
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7.3 Preservation of Existence and Franchises.
Each of the Credit Parties will do all things necessary to preserve and
keep in full force and effect its existence, rights, franchises and authority
except as permitted by Section 8.4 or except (with respect to rights, franchises
and authority) where the failure to do so would not have or be reasonably
expected to have a Material Adverse Effect.
7.4 Books and Records.
Each of the Credit Parties will, and will cause its Subsidiaries to,
keep complete and accurate books and records of its transactions in accordance
with good accounting practices on the basis of GAAP (including the establishment
and maintenance of appropriate reserves).
7.5 Compliance with Law.
Each of the Credit Parties will, and will cause its Subsidiaries to,
comply with all laws, rules, regulations, orders, covenants and restrictions of
record, and all applicable material restrictions imposed by all Governmental
Authorities, applicable to it and its property (including, without limitation,
Environmental Laws and ERISA) if noncompliance with any such law, rule,
regulation, order, covenant or restriction would have or reasonably be expected
to have a Material Adverse Effect.
7.6 Payment of Taxes and Other Indebtedness.
Each of the Credit Parties will, and will cause its Subsidiaries to,
pay, settle or discharge (a) all taxes, assessments and governmental charges or
levies imposed upon it, or upon its income or profits, or upon any of its
properties, before they shall become delinquent, (b) all lawful claims
(including claims for labor, materials and supplies) which, if unpaid, might
give rise to a Lien upon any of its properties, and (c) except as prohibited
hereunder, all of its other Indebtedness as it shall become due; provided,
however, that a Credit Party or its Subsidiary shall not be required to pay any
such tax, assessment, charge, levy, claim or Indebtedness which is being
contested in good faith by appropriate proceedings and as to which adequate
reserves therefor have been established in accordance with GAAP, unless the
failure to make any such payment (i) would give rise to an immediate right to
foreclose on a Lien securing such amounts or (ii) would have a Material Adverse
Effect.
7.7 Insurance.
Each of the Credit Parties will, and will cause its Subsidiaries to, at
all times maintain in full force and effect insurance (including worker's
compensation insurance, liability insurance, casualty insurance and business
interruption insurance) in such amounts, covering such risks and liabilities and
with such deductibles or self-insurance retentions as are in accordance with
normal industry practice. All liability policies of the Credit Parties (other
than the Parent) shall have the Agent, on behalf of the Lenders, as an
additional insured and all casualty policies shall have the Agent, on behalf of
the Lenders, as mortgagee and loss payee with respect to the Collateral.
In the event there occurs any material loss, damage to or destruction of the
Collateral or any part thereof, the Credit Party that owns such item of
Collateral shall promptly give written notice thereof to the Agent generally
describing the nature and extent of such damage or destruction. Subsequent to
any loss, damage to or destruction of the Collateral of any Credit Party or any
part thereof, such Credit Party, whether or not the insurance proceeds, if any,
received on account of such damage or destruction shall be sufficient for that
purpose, at such Credit Party's cost and expense, will promptly repair or
replace the Collateral of such Credit Party so lost, damaged or destroyed. In
the event such Credit Party shall receive any insurance proceeds, as a result of
any loss, damage or destruction with respect to the Collateral, such Credit
Party will immediately pay over such proceeds to the Agent as cash collateral
for the Credit Party Obligations. The Agent agrees to release such insurance
proceeds to such Credit Party for replacement or restoration of the portion of
the Collateral lost, damaged or destroyed if (A) the value of the Collateral
Pool Property (not including the value of any Collateral Pool Property that was
a part of the Collateral that was lost, damaged or destroyed) exceeds the
Revolving Committed Amount, (B) within 15 days from the date the Agent receives
such insurance proceeds, the Agent
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has received written application for such release from such Credit Party,
together with evidence reasonably satisfactory to it that the Collateral lost,
damaged or destroyed has been or will be replaced or restored to its condition
immediately prior to the loss, destruction or other event giving rise to the
payment of such insurance proceeds and (C) on the date of such release no
Default or Event of Default exists. If the conditions in the preceding sentence
are not met, the Agent shall, on the first Business Day subsequent to the date
30 days after it received such insurance proceeds, apply such insurance proceeds
as a mandatory prepayment of the Credit Party Obligations for application in
accordance with the terms of Section 3.3(c). All insurance proceeds shall be
subject to the security interest of the Agent, for the benefit of the Lenders,
under the Collateral Documents.
The present insurance coverage of the Credit Parties (other than the Parent) is
outlined as to carrier, policy number, expiration date, type and amount on
Schedule 7.7(a), as Schedule 7.7(a) may be amended from time to time by written
notice to the Agent.
7.8 Maintenance of Property
Each of the Credit Parties will maintain and preserve its properties
and equipment in good repair, working order and condition, normal wear and tear
excepted and casualty and condemnation excepted, and will make, or cause to be
made, in such properties and equipment from time to time all repairs, renewals,
replacements, extensions, additions, betterments and improvements thereto as may
be needed or proper, to the extent and in the manner customary for companies in
similar businesses.
7.9 Performance of Obligations.
Each of the Credit Parties will perform in all material respects all of
its obligations under the terms of all material agreements, indentures,
mortgages, security agreements or other debt instruments to which it is a party
or by which it is bound.
7.10 Use of Proceeds.
The Borrower will use the proceeds of the Loans solely (a) to repay all
loans and obligations owing to the Agent pursuant to that certain promissory
note dated January 24, 1997, (b) to finance the acquisition of New Properties,
and (c) for other general corporate purposes of the Borrower and its
Subsidiaries; provided, however, that (i) the sum of the aggregate principal
amount of outstanding Revolving Loans made and Letters of Credit issued for
general corporate purposes of the Borrower and its Subsidiaries shall not exceed
$5,000,000.
7.11 Audits/Inspections.
Upon reasonable notice and during normal business hours, each Credit
Party will, and will cause its Subsidiaries to, permit representatives appointed
by the Agent or any Lender, including, without limitation, independent
accountants, agents, attorneys and appraisers to visit and inspect such Credit
Party's or such Subsidiary's property, including, without limitation, the Real
Properties, including its books and records, its accounts receivable and
inventory, its facilities and its other business assets, and to make photocopies
or photographs thereof and to write down and record any information such
representative obtains and shall permit the Agent or any Lender or their
respective representatives to investigate and verify the accuracy of information
provided to the Lenders and to discuss all such matters with the officers,
employees and representatives of the Credit Parties and their Subsidiaries.
7.12 Additional Credit Parties.
At the time any Subsidiary of the Borrower (not already a Credit Party
hereunder) desires to purchase a New Property, the Borrower shall so notify the
Agent and immediately shall cause such Subsidiary to (a) execute a Joinder
Agreement in substantially the same form as Exhibit 7.12, (b) execute any and
all necessary mortgages, deeds of trust, deeds to secure debt or other
appropriate real estate collateral documentation in a form substantially similar
to the Mortgages, with appropriate covenants as necessary and (c) deliver such
other documentation as the Agent may reasonably request in connection with the
foregoing, including, without limitation, appropriate UCC-1 financing
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statements, real estate title insurance policies, environmental reports,
certified resolutions and other organizational and authorizing documents of such
Subsidiary and favorable opinions of counsel to such Subsidiary (which shall
cover, among other things, the legality, validity, binding effect and
enforceability of the documentation referred to above), all in form, content and
scope reasonably satisfactory to the Agent.
7.13 Collateral.
If subsequent to the Closing Date, any of the Credit Parties (other
than the Parent) (a) acquires or leases any real property or (b) acquires any
personal property required to be delivered by the Collateral Documents or
located in a new jurisdiction not set forth on Schedule 6.21(b), the Borrower
shall promptly notify the Agent of same. The Credit Parties shall take such
action as requested by the Agent, at the Borrower's expense, to ensure the
Agent, for the benefit of the Lenders, has a first priority Lien in all assets
of the Credit Parties (other than the Parent), subject only to Permitted Liens.
7.14 Environmental Indemnity.
The Credit Parties agree that they will reimburse the Lenders for and
hereby hold the Lenders harmless from all fines or penalties made or levied
against any of the Lenders by any Governmental Authority as a result of or in
connection with (i) the use of Materials of Environmental Concern at the Real
Properties, (ii) the use of Materials of Environmental Concern at the facilities
thereon, or (iii) the use, generation, storage, transportation, discharge,
release or handling of any Materials of Environmental Concern at the Real
Properties, or as a result of any release of any Materials of Environmental
Concern onto the ground or into the water or air from or upon the Real
Properties at any time. The Credit Parties also agree that they will reimburse
the Lenders for and indemnify and hold the Lenders harmless from any and all
costs, expenses (including reasonably attorneys' fees) and for all civil
judgments or penalties incurred entered, assessed, or levied against any of the
Lenders as a result of any of the Credit Parties' use of Materials of
Environmental Concern at the Real Properties or as a result of any release of
any Materials of Environmental Concern on the ground or into the water or air by
any of the Credit Parties from or upon the Real Properties. Such reimbursement
or indemnification shall include but not be limited to any and all judgments or
penalties to recover the costs of cleanup of any such release by any of the
Credit Parties from or upon Real Properties and all reasonable expenses incurred
by the Lenders as a result of such a civil action, including but not limited to
reasonable attorneys' fees. The Credit Parties' obligations under this section
shall survive the repayment of the Loans and any deed in lieu of foreclosure or
any foreclosure of the Mortgage Documents. The environmental indemnities set
forth in this paragraph shall not be extended to any claim or liability of any
of the Lenders arising from the gross negligence or willful misconduct of any of
the Lenders occurring during any of the Lender's (i) actual possession of the
Real Properties prior to foreclosure or exercise of a power of sale or (ii)
ownership of the Real Properties after a foreclosure or exercise of such power
of sale.
7.15 Abundance of Caution Properties.
The Credit Parties agree that each of the Abundance of Caution
Properties shall satisfy at all times all of the Collateral Pool Eligibility
Conditions.
7. 16 Environmental Assessment.
The Credit Parties hereby agree that the Agent shall have the right (at
the cost and expense of the Credit Parties) to order a current environmental
assessment of any of the Collateral Pool Properties upon the reasonable request
of the Required Lenders.
7.17 Expansion of Units.
The Credit Parties hereby agree that upon the completion of the
construction of the expansion Units at the (i) Churchland Facility and (ii) the
Gloucester Facility, the Credit Parties (a) shall provide the Agent with copies
of all lien affidavits and other documentation requested by the Agent in its
sole discretion with respect to each such
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facility and (b) agree to cause the Title Company to issue an endorsement to the
applicable Mortgage Policies satisfactory in form and substance to the Agent
upon the request of the Agent in its sole discretion.
SECTION 8
NEGATIVE COVENANTS
Each Credit Party hereby covenants and agrees that so long as this
Credit Agreement is in effect and until the Loans and LOC Obligations, together
with interest, fees and other obligations hereunder, have been paid in full and
the Commitments hereunder shall have terminated:
8.1 Indebtedness.
No Credit Party (other than the Parent) will, nor will the Borrower
permit any of its Subsidiaries to, contract, create, incur, assume or permit to
exist any Indebtedness, except:
(a) Indebtedness arising under this Credit Agreement and the
other Credit Documents;
(b) Indebtedness existing as of the Closing Date as referenced
in Section 6.10 (and renewals, refinancings or extensions thereof on
terms and conditions no less favorable to such Credit Party than such
existing Indebtedness);
(c) the refinancing of Loans incurred by the Borrower to
finance the acquisition of an Abundance of Caution Property provided
that (i) the Loans used by the Borrower to originally finance such
Abundance of Caution Property are repaid in full to the Lenders with
the proceeds of such refinancing, (ii) no Default or Event of Default
exists, (iii) after the refinancing of such Abundance of Caution
Property has taken effect (including giving effect to the releases
referred to in the following paragraph), none of the Credit Parties
shall be the fee holder of such refinanced Abundance of Caution
Property and (iv) such indebtedness shall be non-recourse to all of the
Credit Parties.
In connection with a refinancing of an Abundance of Caution
Property in accordance with the conditions identified in the preceding
paragraph, the Agent agrees that it shall (and the Lenders authorize
the Agent to), at the Borrower's request and expense, deliver to the
Borrower such documentation as is reasonably necessary to evidence the
release (i) of the Agent's security interest in such Abundance of
Caution Property and (ii) in the event the Credit Party which formerly
held fee simple title to such Abundance of Caution Property no longer
owns or operates an assisted living facility on one of the Real
Properties, provide documentation as is reasonably necessary to
evidence the release of such Credit Party from all of its liabilities
and obligations under this Credit Agreement.
8.2 Liens.
No Credit Party (other than the Parent) will, nor will the Borrower
permit any of its Subsidiaries to, contract, create, incur, assume or permit to
exist any Lien with respect to any of its property or assets of any kind
(whether real or personal, tangible or intangible), whether now owned or after
acquired, except for Permitted Liens.
8.3 Nature of Business.
The Credit Parties will not, nor will they permit any of their
Subsidiaries to, alter the character of its business from that conducted as of
the Closing Date or engage in any business other than the business conducted as
of the Closing Date.
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8.4 Consolidation and Merger.
The Credit Parties will not, nor will the Borrower permit any of its
Subsidiaries to, enter into any transaction of merger or consolidation or
liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution); provided that notwithstanding the foregoing provisions of this
Section 8.4, any Subsidiary of the Borrower may be merged or consolidated with
or into the Borrower if (a) the Borrower is the continuing or surviving
corporation; (b) the Agent is given prior written notice of such action, and the
Borrower and such Subsidiary execute and deliver such documents, instruments and
certificates as the Agent may request in order to maintain the perfection and
priority of the Liens on the assets of the Credit Parties; and (c) after giving
effect thereto no Default or Event of Default exists.
8.5 Sale or Lease of Assets.
Neither the Credit Parties, nor any of the Borrower's Subsidiaries,
will (other than in the ordinary course of business for fair consideration)
convey, sell, lease, transfer or otherwise dispose of, in one transaction or a
series of transactions, all or any part of its business or assets whether now
owned or hereafter acquired.
Notwithstanding the foregoing paragraph, a Credit Party may sell any of
the Collateral Pool Properties and obtain the release of the Agent's security
interest with respect to such Collateral Pool Property provided (i) no Default
or Event of Default exists at the time of such sale and release, (ii) the
Borrowing Base shall continue to exceed the Revolving Committed Amount after
giving effect to such sale and release and (iii) after giving effect to such
sale and release, the Collateral Pool continues to consist of at least six (6)
Real Properties. Upon the sale of assets permitted by this Section 8.5, the
Agent shall deliver to the Borrower (and the Lenders hereby authorize the Agent
to), upon the Borrower's request and at the Borrower's expense, such
documentation as is reasonably necessary to evidence the release of the Agent's
security interest in such assets, including, without limitation, amendments or
terminations of UCC financing statements.
8.6 Advances, Investments and Loans.
Neither the Credit Parties, nor any of their Subsidiaries, will make
any Investments except for Permitted Investments.
8.7 Restricted Payments.
The Credit Parties will not, nor will they permit any of their
Subsidiaries to, directly or indirectly, make or permit any Restricted Payments;
provided, however, notwithstanding the above, the Borrower or any of its
Subsidiaries may pay dividends to the Parent provided no Default or Event of
Default exists or will occur as a result of such payment of dividends to the
Parent.
8.8 Subordinated Debt.
No Credit Party will (a) make or offer to make any principal payments
with respect to the Subordinated Debt other than those payments permitted
pursuant to the Subordination and Intercreditor Agreement; (b) redeem or offer
to redeem any of the Subordinated Debt; or (c) deposit any funds intended to
discharge or defease any or all of the Subordinated Debt. The Subordinated Debt
may not be amended or modified in any manner without the prior written consent
of the Required Lenders.
8.9 Transactions with Affiliates.
No Credit Party will, nor will they permit any of their Subsidiaries
to, enter into or permit to exist any transaction or series of transactions,
whether or not in the ordinary course of business, with any officer, director,
shareholder, Subsidiary or Affiliate other than on terms and conditions
substantially as favorable as would be obtainable in a comparable arm's-length
transaction with a Person other than an officer, director, shareholder,
Subsidiary or Affiliate.
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8.10 Fiscal Year; Organizational Documents.
No Credit Party will (a) change its fiscal year or (b) change its
articles or certificate of incorporation or its bylaws if such change would have
or be reasonably expected to have a Material Adverse Effect.
8.11 Limitations.
None of the Credit Parties (other than the Parent) will, nor will they
permit any of their Subsidiaries to, directly or indirectly, create or otherwise
cause, incur, assume, suffer or permit to exist or become effective any
consensual encumbrance or restriction of any kind on the ability of any such
Person to (a) pay dividends or make any other distribution on any of such
Person's capital stock, (b) pay any Indebtedness owed to the Borrower or any
other Credit Party, (c) make loans or advances to any other Credit Party or (d)
transfer any of its property to any other Credit Party, except for encumbrances
and restrictions existing under or by reason of (i) this Credit Agreement and
the other Credit Documents, (ii) the Subordinated Debt and (iii) Requirements of
Law.
8.12 Negative Pledges.
None of the Credit Parties (other than the Parent) will, nor will they
permit any of their Subsidiaries to, enter into, assume or become subject to any
agreement prohibiting or otherwise restricting the creation or assumption of any
Lien upon its properties or assets, whether now owned or hereafter acquired, or
requiring the grant of any security for such obligation if security is given for
some other obligation.
8.13 Creation of Subsidiaries.
The Credit Parties (other than the Parent) shall not form or organize
any additional subsidiary corporations other than those subsidiary corporations
of the Borrower which will acquire New Properties and become Credit Parties
hereunder.
8.14 Issuance and Sale of Subsidiary Stock.
The Borrower will not, nor will it permit any of its Subsidiaries to,
except to qualify directors where required by applicable law, sell, transfer or
otherwise dispose of, any shares of capital stock of any of its Subsidiaries or
permit any of its Subsidiaries to issue, sell or otherwise dispose of, any
shares of capital stock of any of its Subsidiaries. Furthermore, the Parent will
not, nor will it permit Sarasota to, except to qualify directors where required
by applicable law, sell, transfer or otherwise dispose of, any shares of capital
stock of Sarasota or permit Sarasota to issue, sell or otherwise dispose of, any
shares of capital stock of Sarasota.
8.15 Sale Leasebacks.
The Credit Parties (other than the Parent) will not, nor will the
Borrower permit any of its Subsidiaries to, directly or indirectly, become or
remain liable as lessee or as guarantor or other surety with respect to any
lease, whether an Operating Lease or a Capital Lease, of any Property (whether
real or personal or mixed), whether now owned or hereafter acquired, (a) which
such Person has sold or transferred or is to sell or transfer to any other
Person other than a Credit Party or (b) which such Person intends to use for
substantially the same purpose as any other Property which has been sold or is
to be sold or transferred by such Person to any other Person in connection with
such lease.
8.16 Ownership of Assets.
None of the Credit Parties (other than the Parent) will, nor will the
Borrower permit any of its Subsidiaries to, (i) own any assets other than the
Collateral Pool Properties and the Abundance of Caution Properties and those
items of furniture, equipment, supplies and other assets customarily associated
with the ownership of assisted living facilities and (ii) engage in any business
activities other than the operation of the Collateral Pool Properties or
Abundance of Caution Properties, as applicable.
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8.17 Serviceable Beds.
None of the Credit Parties will, nor will they permit any of their
Subsidiaries to, reduce the number of Serviceable Beds located at any of the
Collateral Pool Properties or any of the Abundance of Caution Properties without
first having received the prior written consent of the Lenders.
8.18 Management Agreements.
None of the Credit Parties will, nor will they permit any of their
Subsidiaries to, enter into a management agreement with respect to any of the
Collateral Pool Properties or any of the Abundance of Caution Properties without
first having (i) received the prior written consent of the Lenders and (ii)
provided the Agent, for the benefit of the Lenders, with an assignment and
subordination of such management agreement satisfactory in form and substance to
the Lenders, in their sole discretion.
SECTION 9
EVENTS OF DEFAULT
9.1 Events of Default.
An Event of Default shall exist upon the occurrence of any of the
following specified events (each an "Event of Default"):
(a) Payment. Any Credit Party shall (i) default in the payment
when due of any principal of any of the Loans, or of any reimbursement
obligations arising from drawings under Letters of Credit or (ii)
default, and such default shall continue for five or more Business
Days, in the payment when due of any interest on the Loans, or on any
reimbursement obligations arising from drawings under Letters of Credit
or of any fees or other amounts owing hereunder, under any of the other
Credit Documents or in connection herewith.
(b) Representations. Any representation, warranty or statement
made or deemed to be made by any Credit Party herein, in any of the
other Credit Documents, or in any statement or certificate delivered or
required to be delivered pursuant hereto or thereto shall prove untrue
in any material respect on the date as of which it was made or deemed
to have been made.
(c) Covenants. Any Credit Party shall:
(i) default in the due performance or observance of
any term, covenant or agreement contained in Sections 7.2,
7.3, 7.5, 7.6, 7.7, 7.10, 7.11, 7.12, 7.13, 7.14 or 8.1
through 8.18 inclusive; or
(ii) default in the due performance or observance by
it of any term, covenant or agreement (other than those
referred to in subsections (a), (b) or (c)(i) of this Section
9.1) contained in this Credit Agreement and such default shall
continue unremedied for a period of at least 30 days after the
earlier of an officer of a Credit Party becoming aware of such
default or notice thereof given by the Agent.
(d) Other Credit Documents. (i) Any Credit Party shall default
in the due performance or observance of any term, covenant or agreement
in any of the other Credit Documents (subject to applicable grace or
cure periods, if any), or (ii) any Credit Document shall fail to be in
full force and effect or to give the Agent and/or the Lenders the
security interests, liens, rights, powers and privileges purported to
be created thereby.
(e) Guaranties. The guaranty given by any of the Credit
Parties hereunder or by any Additional Credit Party hereafter or any
provision thereof shall cease to be in full force and effect, or any
Guarantor
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hereunder or any Person acting by or on behalf of such Guarantor shall
deny or disaffirm such Guarantor's obligations under such guaranty or
any Guarantor shall default in the due performance or observance of any
term, covenant or agreement on its part to be performed or observed
pursuant to such guaranty.
(f) Bankruptcy, etc. The occurrence of any of the following
with respect to any Credit Party or any of its Subsidiaries (i) a court
or governmental agency having jurisdiction in the premises shall enter
a decree or order for relief in respect of any Credit Party or any of
its Subsidiaries in an involuntary case under any applicable
bankruptcy, insolvency, receivership, liquidation, administrative
supervision or other similar law now or hereafter in effect, or appoint
a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of any Credit Party or any of its Subsidiaries or for
any substantial part of its property or ordering the winding up or
liquidation of its affairs; or (ii) an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter
in effect is commenced against any Credit Party or any of its
Subsidiaries and such petition remains unstayed and in effect for a
period of 60 consecutive days; or (iii) any Credit Party or any of its
Subsidiaries shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect,
or consent to the entry of an order for relief in an involuntary case
under any such law, or consent to the appointment or taking possession
by a receiver, liquidator, assignee, custodian, trustee, sequestrator
or similar official of such Person or any substantial part of its
property or make any general assignment for the benefit of creditors;
or (iv) any Credit Party or any of its Subsidiaries shall admit in
writing its inability to pay its debts generally as they become due or
any action shall be taken by such Person in furtherance of any of the
aforesaid purposes.
(g) Defaults under Other Agreements.
(i) Any Credit Party or any of its
Subsidiaries shall default in the performance or observance
(beyond the applicable grace period with respect thereto, if
any) of any material obligation or condition of any contract
or lease material to such Credit Party and its Subsidiaries,
taken as a whole; or
(ii) With respect to any Indebtedness (other
than Indebtedness outstanding under this Credit Agreement) of
any Credit Party or any of its Subsidiaries in an aggregate
principal amount in excess of $500,000, (A) a Credit Party or
any of its Subsidiaries shall (1) default in any payment
(beyond the applicable grace period with respect thereto, if
any) with respect to any such Indebtedness, or (2) default
(after giving effect to any applicable grace period) in the
observance or performance of any term, covenant or agreement
relating to such Indebtedness or contained in any instrument
or agreement evidencing, securing or relating thereto, or any
other event or condition shall occur or condition exist, the
effect of which default or other event or condition is to
cause, or permit, the holder or holders of such Indebtedness
(or trustee or agent on behalf of such holders) to cause
(determined without regard to whether any notice or lapse of
time is required) any such Indebtedness to become due prior to
its stated maturity; or (3) any such Indebtedness shall be
declared due and payable, or required to be prepaid other than
by a regularly scheduled required prepayment prior to the
stated maturity thereof; or (4) any such Indebtedness shall
mature and remain unpaid.
(h) Judgments. One or more judgments, orders, or decrees shall
be entered against any one or more of the Credit Parties or any of
their Subsidiaries involving a liability of $1,000,000 or more, in the
aggregate (to the extent not paid or covered by insurance provided by a
carrier who has acknowledged coverage), and such judgments, orders or
decrees shall not have been vacated, discharged or stayed or bonded
pending appeal within 30 days from the entry thereof.
(i) ERISA Events. The occurrence of any of the following
events or conditions, unless such event or occurrence would not have or
be reasonably expected to have a Material Adverse Effect: (1) any
"accumulated funding deficiency," as such term is defined in Section
302 of ERISA and Section 412 of the Code, whether or not waived, shall
exist with respect to any Plan, or any lien shall arise on the assets
of a Credit Party or any ERISA Affiliate in favor of the PBGC or a
Plan; (2) an ERISA Event shall occur with respect to a Single Employer
Plan, which is, in the reasonable opinion of the Agent, likely to
result in the
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termination of such Plan for purposes of Title IV of ERISA; (3) an
ERISA Event shall occur with respect to a Multiemployer Plan or
Multiple Employer Plan, which is, in the reasonable opinion of the
Agent, likely to result in (i) the termination of such Plan for
purposes of Title IV of ERISA, or (ii) a Credit Party or any ERISA
Affiliate incurring any liability in connection with a withdrawal from,
reorganization of (within the meaning of Section 4241 of ERISA), or
insolvency (within the meaning of Section 4245 of ERISA) of such Plan;
or (4) any prohibited transaction (within the meaning of Section 406 of
ERISA or Section 4975 of the Code) or breach of fiduciary
responsibility shall occur which may subject a Credit Party or any
ERISA Affiliate to any liability under Sections 406, 409, 502(i), or
502(l) of ERISA or Section 4975 of the Code, or under any agreement or
other instrument pursuant to which a Credit Party or any ERISA
Affiliate has agreed or is required to indemnify any person against any
such liability.
(j) Ownership. There shall occur a Change of Control.
9.2 Acceleration; Remedies.
Upon the occurrence of an Event of Default, and at any time thereafter
unless and until such Event of Default has been waived in writing by the
Required Lenders (or the Lenders as may be required hereunder), the Agent shall,
upon the request and direction of the Required Lenders, by written notice to the
Borrower, take any of the following actions:
(a) Termination of Commitments. Declare the Commitments
terminated whereupon the Commitments shall be immediately terminated.
(b) Acceleration of Loans. Declare the unpaid principal of and
any accrued interest in respect of all Loans, any reimbursement
obligations arising from drawings under Letters of Credit and any and
all other indebtedness or obligations of any and every kind owing by a
Credit Party to any of the Lenders hereunder to be due whereupon the
same shall be immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by
the Credit Parties.
(c) Cash Collateral. Direct the Borrower to pay (and the
Borrower agrees that upon receipt of such notice, or upon the
occurrence of an Event of Default under Section 9.1(f), they will
immediately pay) to the Agent additional cash, to be held by the Agent,
for the benefit of the Lenders, in a cash collateral account as
additional security for the LOC Obligations in respect of subsequent
drawings under all then outstanding Letters of Credit in an amount
equal to the maximum aggregate amount which may be drawn under all
Letters of Credit then outstanding.
(d) Enforcement of Rights. Enforce any and all rights and
interests created and existing under the Credit Documents, including,
without limitation, all rights and remedies existing under the
Collateral Documents, all rights and remedies against a Guarantor and
all rights of set-off.
Notwithstanding the foregoing, if an Event of Default specified in Section
9.1(f) shall occur, then the Commitments shall automatically terminate and all
Loans, all reimbursement obligations under Letters of Credit, all accrued
interest in respect thereof, all accrued and unpaid fees and other indebtedness
or obligations owing to the Lenders hereunder shall immediately become due and
payable without the giving of any notice or other action by the Agent or the
Lenders, which notice or other action is expressly waived by the Credit Parties.
Notwithstanding the fact that enforcement powers reside primarily with the
Agent, each Lender has, to the extent permitted by law, a separate right of
payment and shall be considered a separate "creditor" holding a separate "claim"
within the meaning of Section 101(5) of the Bankruptcy Code or any other
insolvency statute.
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9.3 Allocation of Payments After Event of Default.
Notwithstanding any other provisions of this Credit Agreement, after
the occurrence and during the continuance of an Event of Default, all amounts
collected or received by the Agent or any Lender on account of amounts
outstanding under any of the Credit Documents or in respect of the Collateral
shall be paid over or delivered as follows:
FIRST, to the payment of all reasonable out-of-pocket costs
and expenses (including without limitation reasonable attorneys' fees)
of the Agent in connection with enforcing the rights of the Lenders
under the Credit Documents and any protective advances made by the
Agent with respect to the Collateral under or pursuant to the terms of
the Collateral Documents;
SECOND, to payment of any fees owed to the Agent, for the
benefit of the Lenders, or the Issuing Lender;
THIRD, to the payment of all reasonable out-of-pocket costs
and expenses, (including, without limitation, reasonable attorneys'
fees) of each of the Lenders in connection with enforcing its rights
under the Credit Documents;
FOURTH, to the payment of the administrative fee owed to the
Agent and all accrued fees and interest payable to the Lenders
hereunder;
FIFTH, to the payment of the outstanding principal amount of
the Loans, to the payment or cash collateralization of the outstanding
LOC Obligations and to any principal amounts outstanding under Hedging
Agreements, pro rata, as set forth below;
SIXTH, to all other obligations which shall have become due
and payable under the Credit Documents and not repaid pursuant to
clauses "FIRST" through "FIFTH" above; and
SEVENTH, to the payment of the surplus, if any, to whoever may
be lawfully entitled to receive such surplus.
In carrying out the foregoing, (a) amounts received shall be applied in the
numerical order provided until exhausted prior to application to the next
succeeding category; and (b) each of the Lenders shall receive an amount equal
to its pro rata share (based on the proportion that the then outstanding Loans
held by such Lender bears to the aggregate then outstanding Loans, LOC
Obligations and obligations under Hedging Agreements) of amounts available to be
applied pursuant to clauses "THIRD", "FOURTH," "FIFTH," and "SIXTH" above; and
(c) to the extent that any amounts available for distribution pursuant to clause
"FIFTH" above are attributable to the issued but undrawn amount of outstanding
Letters of Credit, such amounts shall be held by the Agent in a cash collateral
account and applied (x) first, to reimburse the Issuing Lender from time to time
for any drawings under such Letters of Credit and (y) then, following the
expiration of all Letters of Credit, to all other obligations of the type
described in clauses "FIFTH" and "SIXTH" above in the manner provided in this
Section 9.3.
SECTION 10
AGENCY PROVISIONS
10.1 Appointment.
Each Lender hereby designates and appoints NationsBank, N.A. (South) as
Agent of such Lender to act as specified herein and the other Credit Documents,
and each such Lender hereby authorizes the Agent, as the agent for such Lender,
to take such action on its behalf under the provisions of this Credit Agreement
and the other Credit Documents and to exercise such powers and perform such
duties as are expressly delegated by the terms hereof and of the other Credit
Documents, together with such other powers as are reasonably incidental thereto.
Without limiting the
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generality of the foregoing, the Agent is authorized to execute the
Subordination and Intercreditor Agreement and releases referenced in Section
8.5. Notwithstanding any provision to the contrary elsewhere herein and in the
other Credit Documents, the Agent shall not have any duties or responsibilities,
except those expressly set forth herein and therein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Credit Agreement or any of the other Credit Documents, or shall otherwise exist
against the Agent. The provisions of this Section are solely for the benefit of
the Agent and the Lenders and none of the Credit Parties shall have any rights
as a third party beneficiary of the provisions hereof. In performing its
functions and duties under this Credit Agreement and the other Credit Documents,
the Agent shall act solely as an agent of the Lenders and does not assume and
shall not be deemed to have assumed any obligation or relationship of agency or
trust with or for any Credit Party. The Agent agrees that it shall administer
the Loans and the Credit Documents in a manner consistent with that ordinarily
employed by the Agent in the administration of similar loans for its own
account.
10.2 Delegation of Duties.
The Agent may execute any of its duties hereunder or under the other
Credit Documents by or through agents or attorneys-in-fact and shall be entitled
to advice of counsel concerning all matters pertaining to such duties. The Agent
shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care; provided, however, the
Agent shall take such action with respect to such negligent agents or
attorneys-in-fact as reasonably directed by the Required Lenders.
10.3 Exculpatory Provisions.
Neither the Agent nor any of its officers, directors, employees,
agents, attorneys-in-fact or affiliates shall be (a) liable for any action
lawfully taken or omitted to be taken by it or such Person under or in
connection herewith or in connection with any of the other Credit Documents
(except for its or such Person's own gross negligence or willful misconduct) or
(b) responsible in any manner to any of the Lenders for any recitals,
statements, representations or warranties made by any of the Credit Parties
contained herein or in any of the other Credit Documents or in any certificate,
report, document, financial statement or other written or oral statement
referred to or provided for in, or received by the Agent under or in connection
herewith or in connection with the other Credit Documents, or enforceability or
sufficiency therefor of any of the other Credit Documents, or for any failure of
the Borrower to perform its obligations hereunder or thereunder. The Agent shall
not be responsible to any Lender for the effectiveness, genuineness, validity,
enforceability, collectibility or sufficiency of this Credit Agreement, or any
of the other Credit Documents or for any representations, warranties, recitals
or statements made herein or therein or made by the Borrower or any Credit Party
in any written or oral statement or in any financial or other statements,
instruments, reports, certificates or any other documents in connection herewith
or therewith furnished or made by the Agent to the Lenders or by or on behalf of
the Credit Parties to the Agent or any Lender or be required to ascertain or
inquire as to the performance or observance of any of the terms, conditions,
provisions, covenants or agreements contained herein or therein or as to the use
of the proceeds of the Loans or use of the Letters of Credit or of the existence
or possible existence of any Default or Event of Default or to inspect the
properties, books or records of the Credit Parties. The Agent is not a trustee
for the Lenders and owes no fiduciary duty to the Lenders.
10.4 Reliance on Communications.
The Agent shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to any of the Credit Parties, independent accountants and
other experts selected by the Agent with reasonable care). The Agent may deem
and treat each Lender as the owner of its interests hereunder for all purposes
unless a written notice of assignment, negotiation or transfer thereof shall
have been filed with the Agent in accordance with Section 11.3(b). The Agent
shall be fully justified in failing or refusing to take any action under this
Credit Agreement or under any of the other Credit Documents unless it shall
first receive such advice or concurrence of the Required Lenders as it deems
appropriate or it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense
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which may be incurred by it by reason of taking or continuing to take any such
action. The Agent shall in all cases be fully protected in acting, or in
refraining from acting, hereunder or under any of the other Credit Documents in
accordance with a request of the Required Lenders (or to the extent specifically
provided in Section 11.6, all the Lenders) and such request and any action taken
or failure to act pursuant thereto shall be binding upon all the Lenders
(including their successors and assigns).
10.5 Notice of Default.
The Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default hereunder unless the Agent has
received notice from a Lender or a Credit Party referring to the Credit
Document, describing such Default or Event of Default and stating that such
notice is a "notice of default." In the event that the Agent receives such a
notice, the Agent shall give prompt notice thereof to the Lenders. Furthermore,
the Agent shall endeavor but not be required to notify the Lenders of any other
Default or Event of Default which it gains actual knowledge of. The Agent shall
take such action with respect to such Default or Event of Default as shall be
reasonably directed by the Required Lenders.
10.6 Non-Reliance on Agent and Other Lenders.
Each Lender expressly acknowledges that neither the Agent, NationsBanc
Capital Markets, Inc. ("NCMI") nor any of their officers, directors, employees,
agents, attorneys-in-fact or affiliates has made any representations or
warranties to it other than as set forth in this Credit Agreement and that no
act by the Agent, NCMI or any affiliate thereof hereinafter taken, including any
review of the affairs of any Credit Party, shall be deemed to constitute any
representation or warranty by the Agent or NCMI to any Lender. Each Lender
represents to the Agent and NCMI that it has, independently and without reliance
upon the Agent or NCMI or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, assets, operations, property, financial and
other conditions, prospects and creditworthiness of the Credit Parties and made
its own decision to make its Loans hereunder and enter into this Credit
Agreement. Each Lender also represents that it will, independently and without
reliance upon the Agent, NCMI or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit analysis, appraisals and decisions in taking or not taking action
under this Credit Agreement, and to make such investigation as it deems
necessary to inform itself as to the business, assets, operations, property,
financial and other conditions, prospects and creditworthiness of the Credit
Parties. Except for notices, reports and other documents expressly required to
be furnished to the Lenders by the Agent hereunder, the Agent and NCMI shall not
have any duty or responsibility to provide any Lender with any credit or other
information concerning the business, operations, assets, property, financial or
other conditions, prospects or creditworthiness of the Credit Parties which may
come into the possession of the Agent, NCMI or any of their officers, directors,
employees, agents, attorneys-in-fact or affiliates; provided, however, the Agent
shall provide the Lenders with copies of the Credit Documents, the conditions
precedent identified in Sections 5.1 and 5.2 and such other information
reasonably requested by a Lender; provided, further however, the Agent shall not
be required to provide the Lenders with a copy of the Fee Letter and shall not
be required to generate any additional information not supplied to the Agent by
the Borrower or any other Credit Party.
10.7 Indemnification.
The Lenders agree to indemnify the Agent in its capacity as such (to
the extent not reimbursed by the Borrower and without limiting the obligation of
the Borrower to do so), ratably according to their respective Commitments (or if
the Commitments have expired or been terminated, in accordance with the
respective principal amounts of outstanding Loans and Participation Interest of
the Lenders), from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind whatsoever which may at any time (including without limitation at
any time following payment in full of the Credit Party Obligations) be imposed
on, incurred by or asserted against the Agent in its capacity as such in any way
relating to or arising out of this Credit Agreement or the other Credit
Documents or any documents contemplated by or referred to herein or therein or
the transactions contemplated hereby or thereby or any action taken or omitted
by the Agent under or in connection with any of the foregoing; provided that no
Lender shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the gross
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negligence or willful misconduct of the Agent. If any indemnity furnished to the
Agent for any purpose shall, in the opinion of the Agent, be insufficient or
become impaired, the Agent may call for additional indemnity and cease, or not
commence, to do the acts indemnified against until such additional indemnity is
furnished. The agreements in this Section shall survive the payment of the
Credit Party Obligations and all other amounts payable hereunder and under the
other Credit Documents.
10.8 Agent in Its Individual Capacity.
The Agent and its affiliates may make loans to, accept deposits from
and generally engage in any kind of business with the Borrower or any other
Credit Party as though the Agent were not the Agent hereunder. With respect to
the Loans made and Letters of Credit issued and all obligations owing to it, the
Agent shall have the same rights and powers under this Credit Agreement as any
Lender and may exercise the same as though it were not the Agent, and the terms
"Lender" and "Lenders" shall include the Agent in its individual capacity.
10.9 Successor Agent.
The Agent may, at any time, resign upon 20 days written notice to the
Lenders. Upon any such resignation, the Required Lenders shall have the right to
appoint a successor Agent. If no successor Agent shall have been so appointed by
the Required Lenders, and shall have accepted such appointment, within 45 days
after the notice of resignation, then the retiring Agent shall select a
successor Agent provided such successor is a Lender hereunder or a commercial
bank organized under the laws of the United States of America or of any State
thereof and has a combined capital and surplus of at least $400,000,000. Upon
the acceptance of any appointment as the Agent hereunder by a successor, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations as the Agent, as
appropriate, under this Credit Agreement and the other Credit Documents and the
provisions of this Section 10.9 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was the Agent under this Credit
Agreement.
SECTION 11
MISCELLANEOUS
11.1 Notices.
Except as otherwise expressly provided herein, all notices and other
communications shall have been duly given and shall be effective (a) when
delivered, (b) when transmitted via telecopy (or other facsimile device) to the
number set out below, (c) the Business Day following the day on which the same
has been delivered prepaid to a reputable national overnight air courier
service, or (d) the third Business Day following the day on which the same is
sent by certified or registered mail, postage prepaid, in each case to the
respective parties at the address or telecopy numbers set forth on Schedule
11.1, or at such other address as such party may specify by written notice to
the other parties hereto.
11.2 Right of Set-Off
In addition to any rights now or hereafter granted under applicable law
or otherwise, and not by way of limitation of any such rights, upon the
occurrence of an Event of Default, each Lender is authorized at any time and
from time to time, without presentment, demand, protest or other notice of any
kind (all of which rights being hereby expressly waived), to set-off and to
appropriate and apply any and all deposits (general or special) and any other
indebtedness at any time held or owing by such Lender (including, without
limitation, branches, agencies or Affiliates of such Lender wherever located) to
or for the credit or the account of any Credit Party against obligations and
liabilities of such Credit Party to the Lenders hereunder, under the Notes, the
other Credit Documents or otherwise, irrespective of whether such Lender shall
have made any demand hereunder and although such obligations, liabilities or
claims, or any of them, may be contingent or unmatured, and any such set-off
shall be deemed to have been made immediately upon
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the occurrence of an Event of Default even though such charge is made or entered
on the books of such Lender subsequent thereto. Any Person purchasing a
participation in the Loans and Commitments hereunder pursuant to Section 11.3(c)
or 3.8 may exercise all rights of set-off with respect to its participation
interest as fully as if such Person were a Lender hereunder.
11.3 Benefit of Agreement.
(a) Generally. This Credit Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective successors
and assigns of the parties hereto; provided that none of the Credit
Parties may assign and transfer any of its interests without the prior
written consent of the Lenders; and provided further that the rights of
each Lender to transfer, assign or grant participations in its rights
and/or obligations hereunder shall be limited as set forth below in
subsections (b) and (c) of this Section 11.3. Notwithstanding the above
(including anything set forth in subsections (b) and (c) of this
Section 11.3), nothing herein shall restrict, prevent or prohibit any
Lender from (A) pledging its Loans hereunder to a Federal Reserve Bank
in support of borrowings made by such Lender from such Federal Reserve
Bank, or (B) granting assignments or participations in such Lender's
Loans and/or Commitments hereunder to its parent company and/or to any
Affiliate of such Lender.
(b) Assignments. In addition to the assignments permitted by
Section 11.3(a), each Lender may assign all or a portion of its rights
and obligations hereunder, pursuant to an assignment agreement
substantially in the form of Exhibit 11.3, to (i) any Lender or any
Affiliate or Subsidiary of a Lender, or (ii) any other commercial bank,
financial institution or "accredited investor" (as defined in
Regulation D of the Securities and Exchange Commission) reasonably
acceptable to the Agent and, so long as no Default or Event of Default
has occurred and is continuing, the Borrower; provided that (i) any
such assignment shall be in a minimum aggregate amount of $5,000,000
(or, if less, the remaining amount of the Commitment being assigned by
such Lender) of the Commitments and in integral multiples of $1,000,000
above such amount and (ii) each such assignment shall be of a constant,
not varying, percentage of all of the assigning Lender's rights and
obligations under the Credit Agreement. Any assignment hereunder shall
be effective upon delivery to the Agent of a duly executed assignment
agreement together with a transfer fee of $3,500 payable to the Agent
for its own account from and after the later of (i) the effective date
specified in the applicable assignment agreement and (ii) the date of
recording of such assignment in the Register pursuant to the terms of
Subsection (d) below. The assigning Lender will give prompt notice to
the Agent and the Borrower of any such assignment. Upon the
effectiveness of any such assignment (and after notice to, and (to the
extent required pursuant to the terms hereof), with the consent of, the
Borrower as provided herein), the assignee shall become a "Lender" for
all purposes of this Credit Agreement and the other Credit Documents
and, to the extent of such assignment, the assigning Lender shall be
relieved of its obligations hereunder to the extent of the Loans and
Commitment components being assigned. The Borrower agrees that upon
notice of any such assignment and surrender of the appropriate Note or
Notes, it will promptly provide to the assigning Lender and to the
assignee separate promissory notes in the amount of their respective
interests substantially in the form of the original Note or Notes (but
with notation thereon that it is given in substitution for and
replacement of the original Note or Notes or any replacement notes
thereof). Notwithstanding the foregoing, the Agent agrees that it shall
maintain a Commitment of at least $10,000,000 for its own account so
long as it is the Agent.
By executing and delivering an assignment agreement in
accordance with this Section 11.3(b), the assigning Lender thereunder
and the assignee thereunder shall be deemed to confirm to and agree
with each other and the other parties hereto as follows: (i) such
assigning Lender warrants that it is the legal and beneficial owner of
the interest being assigned thereby free and clear of any adverse
claim; (ii) except as set forth in clause (i) above, such assigning
Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or
representations made in or in connection with this Credit Agreement,
any of the other Credit Documents or any other instrument or document
furnished pursuant hereto or thereto, or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of this
Credit Agreement, any of the other Credit Documents or any other
instrument or document furnished pursuant hereto or thereto or the
financial condition of any Credit Party or the performance or
observance by any Credit Party of any of its obligations under this
Credit Agreement, any of the other Credit Documents or any other
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instrument or document furnished pursuant hereto or thereto; (iii) such
assignee represents and warrants that it is legally authorized to enter
into such assignment agreement; (iv) such assignee confirms that it has
received a copy of this Credit Agreement, the other Credit Documents
and such other documents and information as it has deemed appropriate
to make its own credit analysis and decision to enter into such
assignment agreement; (v) such assignee will independently and without
reliance upon the Agent, such assigning Lender or any other Lender, 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 this Credit Agreement and the other Credit
Documents; (vi) such assignee appoints and authorizes the Agent to take
such action on its behalf and to exercise such powers under this Credit
Agreement or any other Credit Document as are delegated to the Agent by
the terms hereof or thereof, together with such powers as are
reasonably incidental thereto; and (vii) such assignee agrees that it
will perform in accordance with their terms all the obligations which
by the terms of this Credit Agreement and the other Credit Documents
are required to be performed by it as a Lender.
The Agent hereby agrees that it shall notify each of the
Lenders of any assignment hereunder.
(c) Participations. Each Lender may sell, transfer, grant or
assign participations in all or any part of such Lender's interests and
obligations hereunder; provided that (i) such selling Lender shall
remain a "Lender" for all purposes under this Credit Agreement (such
selling Lender's obligations under the Credit Documents remaining
unchanged) and the participant shall not constitute a Lender hereunder,
(ii) no such participant shall have, or be granted, rights to approve
any amendment or waiver relating to this Credit Agreement or the other
Credit Documents except to the extent any such amendment or waiver
would (A) reduce the principal of or rate of interest on or fees in
respect of any Loans in which the participant is participating or
increase any Commitments with respect thereto, (B) postpone the date
fixed for any payment of principal (including the extension of the
final maturity of any Loan or the date of any mandatory prepayment),
interest or fees in which the participant is participating, or (C)
release all or substantially all of the collateral or guaranties
(except as expressly provided in the Credit Documents) supporting any
of the Loans or Commitments in which the participant is participating,
(iii) sub-participations by the participant (except to an Affiliate,
parent company or Affiliate of a parent company of the participant)
shall be prohibited and (iv) any such participations shall be in a
minimum aggregate amount of $5,000,000 of the Commitments and in
integral multiples of $1,000,000 in excess thereof. In the case of any
such participation, the participant shall not have any rights under
this Credit Agreement or the other Credit Documents (the participant's
rights against the selling Lender in respect of such participation to
be those set forth in the participation agreement with such Lender
creating such participation) and all amounts payable by the Borrower
hereunder shall be determined as if such Lender had not sold such
participation; provided, however, that such participant shall be
entitled to receive additional amounts under Sections 3.9, 3.12, 3.13
and 3.14 to the same extent that the Lender from which such participant
acquired its participation would be entitled to the benefit of such
cost protection provisions.
(d) Maintenance of Register. The Agent shall maintain at one
of its offices in Charlotte, North Carolina a copy of each Lender
assignment agreement delivered to it in accordance with the terms of
subsection (b) above and a register for the recordation of the identity
of the principal amount and type of each Loan outstanding hereunder,
the names, addresses and the Commitments of the Lenders pursuant to the
terms hereof from time to time (the "Register"). The Agent will make
reasonable efforts to maintain the accuracy of the Register and to
promptly update the Register from time to time, as necessary. The
entries in the Register shall be conclusive in the absence of manifest
error and the Borrower, the Agent and the Lenders may treat each Person
whose name is recorded in the Register pursuant to the terms hereof as
a Lender hereunder for all purposes of this Credit Agreement. The
Register shall be available for inspection by the Borrower and each
Lender, at any reasonable time and from time to time upon reasonable
prior notice.
11.4 No Waiver; Remedies Cumulative.
No failure or delay on the part of the Agent or any Lender in
exercising any right, power or privilege hereunder or under any other Credit
Document and no course of dealing between the Borrower or any Credit Party and
the Agent or any Lender shall operate as a waiver thereof; nor shall any single
or partial exercise of any right, power or privilege
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hereunder or under any other Credit Document preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder or thereunder. The rights and remedies provided herein are cumulative
and not exclusive of any rights or remedies which the Agent or any Lender would
otherwise have. No notice to or demand on any Credit Party in any case shall
entitle any Credit Party to any other or further notice or demand in similar or
other circumstances or constitute a waiver of the rights of the Agent or the
Lenders to any other or further action in any circumstances without notice or
demand.
11.5 Payment of Expenses; Indemnification.
The Credit Parties agree to: (a) pay all reasonable out-of-pocket costs
and expenses of (i) the Agent, the Lenders involved in the initial syndication
of the Commitments and NationsBanc Capital Markets, Inc. ("NCMI") in connection
with (A) the negotiation, preparation, execution and delivery, syndication and
administration of this Credit Agreement and the other Credit Documents and the
documents and instruments referred to therein (including, without limitation,
the reasonable fees and expenses of Moore & Van Allen, PLLC, special counsel to
the Agent and the fees and expenses of counsel for the Agent in connection with
collateral issues), and (B) any amendment, waiver or consent relating hereto and
thereto including, but not limited to, any such amendments, waivers or consents
resulting from or related to any work-out, renegotiation or restructure relating
to the performance by the Credit Parties under this Credit Agreement, (ii) the
Agent and the Lenders in connection with (A) enforcement of the Credit Documents
and the documents and instruments referred to therein, including, without
limitation, in connection with any such enforcement, the reasonable fees and
disbursements of counsel for the Agent and each of the Lenders, and (B) any
bankruptcy or insolvency proceeding of a Credit Party of any of its
Subsidiaries, and (iii) the Agent in connection with the making of any Loans for
the financing of New Properties, including, without limitation, travel costs and
costs to third parties (e.g., for appraisals, environmental reports, engineering
reports, etc.), and (b) indemnify the Agent, NCMI and each Lender, its officers,
directors, employees, representatives and Agent from and hold each of them
harmless against any and all losses, liabilities, claims, damages or expenses
incurred by any of them as a result of, or arising out of, or in any way related
to, or by reason of, any investigation, litigation or other proceeding (whether
or not the Agent, NCMI or Lender is a party thereto) related to (i) the entering
into and/or performance of any Credit Document or the use of proceeds of any
Loans (including other extensions of credit) hereunder or the consummation of
any other transactions contemplated in any Credit Document, including, without
limitation, the reasonable fees and disbursements of counsel incurred in
connection with any such investigation, litigation or other proceeding (but
excluding any such losses, liabilities, claims, damages or expenses to the
extent incurred by reason of gross negligence or willful misconduct on the part
of the Person to be indemnified), (ii) any Environmental Claim and (iii) any
claims for Non-Excluded Taxes.
11.6 Amendments, Waivers and Consents.
Neither this Credit Agreement nor any other Credit Document nor any of
the terms hereof or thereof may be amended, changed, waived, discharged or
terminated unless such amendment, change, waiver, discharge or termination is in
writing and signed by the Required Lenders and the then Credit Parties; provided
that no such amendment, change, waiver, discharge or termination shall without
the consent of each Lender affected thereby:
(a) extend the final maturity of any Loan or the time of
payment of any reimbursement obligation or any portion thereof arising
from drawings under Letters of Credit or extend or waive any scheduled
amortization payment of any Loan or any portion thereof;
(b) reduce the rate, waive or extend the time of payment of
interest (other than as a result of waiving the applicability of any
post-default increase in interest rates) thereon or fees hereunder;
(c) reduce or waive the principal amount of any Loan or of any
reimbursement obligation, or any portion thereof, arising from drawings
under Letters of Credit;
(d) increase the Commitment of the Lenders over the amount
thereof in effect (it being understood and agreed that a waiver of any
Default or Event of Default or a waiver of any mandatory reduction in
the Commitments shall not constitute a change in the terms of any
Commitment of any Lender);
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(e) release all or substantially all of the Collateral
securing the Credit Party Obligations hereunder (provided that the
Agent may, without consent from any other Lender, release any
Collateral that is sold or transferred by a Credit Party in conformance
with Section 8.5);
(f) release the Borrower or any other Credit Party from its or
their obligations under the Credit Documents;
(g) amend, modify or waive any provision of this Section or
Section 3.4(a), 3.4(b), 3.7, 3.8, 3.9, 3.10, 3.11, 3.12, 3.13, 3.14, 4,
5, 9.1(a), 9.2, 9.3, 10, 11.2, 11.3 or 11.5;
(h) reduce any percentage specified in, or otherwise modify,
the definition of Required Lenders;
(i) consent to the assignment or transfer by the Borrower (or
another Credit Party) of any of its rights and obligations under (or in
respect of) the Credit Documents;
(j) no provision of Section 2.2 may be amended without the
consent of the Issuing Lender and no provision of Section 10 may be
amended without the consent of the Agent.
11.7 Counterparts.
This Credit Agreement may be executed in any number of counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall constitute one and the same instrument. It shall not be necessary in
making proof of this Credit Agreement to produce or account for more than one
such counterpart.
11.8 Headings.
The headings of the sections and subsections hereof are provided for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Credit Agreement.
11.9 Defaulting Lender.
Each Lender understands and agrees that if such Lender is a Defaulting
Lender then notwithstanding the provisions of Section 11.6 it shall not be
entitled to vote on any matter requiring the consent of the Required Lenders or
to object to any matter requiring the consent of all the Lenders; provided,
however, that all other benefits and obligations under the Credit Documents
shall apply to such Defaulting Lender.
11.10 Survival of Indemnification and Representations and Warranties.
All indemnities set forth herein and all representations and warranties
made herein shall survive the execution and delivery of this Credit Agreement,
the making of the Loans, the issuance of the Letters of Credit and the repayment
of the Loans, the LOC Obligations and other obligations and the termination of
the Commitments hereunder.
11.11 Governing Law; Jurisdiction.
(a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS (OTHER THAN
THE MORTGAGES) AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA. Any legal action or
proceeding with respect to this Agreement or any other Credit Document
may be brought in the courts of the State of Florida, or of the United
States located in the State of Florida and, by execution and delivery
of this Credit Agreement, each Credit Party hereby irrevocably accepts
for itself and in respect of its property, generally and
unconditionally, the jurisdiction of such courts. Each Credit Party
further irrevocably consents to the service of process out of any of
the aforementioned courts in any such action or proceeding by the
mailing of copies thereof by registered or certified mail, postage
prepaid, to it at the address for notices pursuant to Section 11.1,
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such service to become effective 15 days after such mailing. Nothing
herein shall affect the right of a Lender to serve process in any other
manner permitted by law or to commence legal proceedings or to
otherwise proceed against a Credit Party in any other jurisdiction.
Each Credit Party agrees that a final judgment in any action or
proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided
by law; provided that nothing in this Section 11.11(a) is intended to
impair a Credit Party's right under applicable law to appeal or seek a
stay of any judgment.
(b) Each Credit Party hereby irrevocably waives any objection
which it may now or hereafter have to the laying of venue of any of the
aforesaid actions or proceedings arising out of or in connection with
this Credit Agreement or any other Credit Document brought in the
courts referred to in subsection (a) hereof and hereby further
irrevocably waives and agrees not to plead or claim in any such court
that any such action or proceeding brought in any such court has been
brought in an inconvenient forum.
11.12 Waiver of Jury Trial.
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF
OR RELATING TO THIS CREDIT AGREEMENT, ANY OF THE OTHER CREDIT DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
11.13 Time.
All references to time herein shall be references to Eastern Standard
Time or Eastern Daylight Time, as the case may be, unless specified otherwise.
11.14 Severability.
If any provision of any of the Credit Documents is determined to be
illegal, invalid or unenforceable, such provision shall be fully severable and
the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions.
11.15 Entirety.
(a) This Credit Agreement together with the other Credit
Documents represent the entire agreement of the parties hereto and
thereto, and supersede all prior agreements and understandings, oral or
written, if any, including any commitment letters or correspondence
relating to the Credit Documents or the transactions contemplated
herein and therein.
(b) With respect to the Mortgage governed by Kansas law, this
Credit Agreement together with the other Credit Documents are the final
expression of the agreement of the parties and represent the entire
agreement of the parties hereto and thereto and supersede any
contemporaneous oral agreement and all prior agreements and
understandings, oral or written, if any, including any commitment
letters or correspondence relating to the Credit Documents or the
transactions related herein and therein; provided, however, the parties
hereto agree that (i) the Credit Documents may be amended or modified
subsequent to the date hereof and (ii) other additional Credit
Documents may be entered into from time to time.
11.16 Binding Effect.
This Credit Agreement shall become effective at such time when all of
the conditions set forth in Section 5.1 have been satisfied or waived by the
Lenders and it shall have been executed by the Borrower, the Guarantors and the
Agent, and the Agent shall have received copies hereof (telefaxed or otherwise)
which, when taken together, bear the signatures of each Lender, and thereafter
this Credit Agreement shall be binding upon and inure to the benefit of the
Borrower, the Guarantors, the Agent and each Lender and their respective
successors and assigns.
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<PAGE>
11.17 Confidentiality.
Each Lender agrees that it will use its reasonable best efforts to keep
confidential and to cause any representative designated under Section 7.11 to
keep confidential any non-public information from time to time supplied to it
under any Credit Document; provided, however, that nothing herein shall prevent
the disclosure of any such information to (a) the extent a Lender in good faith
believes such disclosure is required by Requirement of Law, (b) counsel for a
Lender or to its accountants, (c) bank examiners or auditors or comparable
Persons, (d) any affiliate of a Lender, (e) any other Lender, or any assignee,
transferee or participant, or any potential assignee, transferee or participant,
of all or any portion of any Lender's rights under this Credit Agreement who is
notified of the confidential nature of the information or (f) any other Person
in connection with any litigation to which any one or more of the Lenders is a
party; and provided further that no Lender shall have any obligation under this
Section 11.17 to the extent any such information becomes available on a
non-confidential basis from a source other than a Credit Party or that any
information becomes publicly available other than by a breach of this Section
11.17.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
Each of the parties hereto has caused a counterpart of this Credit
Agreement to be duly executed and delivered as of the date first above written.
BORROWER:
INTEGRATED LIVING COMMUNITIES
HOLDING, INC., a Delaware corporation
By:__________________________________
Name:________________________________
Title:_______________________________
GUARANTORS: INTEGRATED LIVING COMMUNITIES,
INC., a Delaware corporation
By:__________________________________
Name:________________________________
Title:_______________________________
INTEGRATED LIVING COMMUNITIES OF
VIRGINIA BEACH, INC., a Delaware corporation
By:__________________________________
Name:________________________________
Title:_______________________________
INTEGRATED LIVING COMMUNITIES OF
REDGATE, INC., a Delaware corporation
By:__________________________________
Name:________________________________
Title:_______________________________
(Signatures Continue)
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<PAGE>
Signature Page to Integrated
Living Communities Credit Agreement
INTEGRATED LIVING COMMUNITIES OF
PORTSMOUTH, INC., a Delaware corporation
By:__________________________________
Name:________________________________
Title:_______________________________
INTEGRATED LIVING COMMUNITIES OF
GLOUCESTER, INC., a Delaware corporation
By:__________________________________
Name:________________________________
Title:_______________________________
INTEGRATED LIVING COMMUNITIES OF
SARASOTA, INC., a Florida corporation
By:__________________________________
Name:________________________________
Title:_______________________________
INTEGRATED MANAGEMENT-
CARRINGTON POINTE, INC.,
a Delaware corporation
By:__________________________________
Name:________________________________
Title:_______________________________
(Signatures Continue)
69
<PAGE>
Signature Page to Integrated
Living Communities Credit Agreement
INTEGRATED LIVING COMMUNITIES OF
WEST PALM BEACH, INC.,
a Delaware corporation
By:__________________________________
Name:________________________________
Title:_______________________________
INTEGRATED LIVING COMMUNITIES AT
TERRACE GARDENS, INC.,
a Delaware corporation
By:__________________________________
Name:________________________________
Title:_______________________________
(Signatures Continue)
70
<PAGE>
Signature Page to Integrated
Living Communities Credit Agreement
LENDERS: NATIONSBANK , N.A. (SOUTH),
individually in its capacity as a Lender and
in its capacity as Agent
By:__________________________________
Name:________________________________
Title:_______________________________
SOUTHTRUST BANK OF ALABAMA,
NATIONAL ASSOCIATION
By:__________________________________
Name:________________________________
Title:_______________________________
SUNTRUST BANK, CENTRAL FLORIDA, N.A.
By:__________________________________
Name:________________________________
Title:_______________________________
71
<PAGE>
STATE OF GEORGIA
COUNTY OF FULTON
On the ___ day of April, 1997 personally appeared ___________________,
as the _________ PRESIDENT of SunTrust Bank, Central Florida, National
Association, and before me executed the attached CREDIT AGREEMENT dated as of
April __, 1997 between Integrated Living Communities Holding, Inc. as Borrower;
Integrated Living Communities, Inc. as Parent and Certain Subsidiaries of the
Borrower and Parent; Nationsbank, N.A. (South) as Agent and the lenders
identified therein (including SunTrust Bank, Central Florida, N.A. as Lender).
IN WITNESS WHEREOF, I have hereunto set my hand and official seal, in
the state and county aforesaid.
____________________________________________
Signature of Notary Public, State of________
(Print, Type of Stamp Commissioned Name of
Notary Public) Personally known ________; OR
Produced identification Type of
identification produced:____________________
____________________________________________
(Notary Seal)
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Security Agreement") is entered into as
of April 9, 1997 among Integrated Living Communities Holding, Inc., a Delaware
corporation (the "Borrower"), Integrated Living Communities, Inc., a Delaware
corporation (the "Parent"), Integrated Living Communities of Sarasota, Inc., a
Florida corporation ("Sarasota"), the subsidiaries of the Borrower and Parent
identified on the signature pages hereto and such other subsidiaries of the
Borrower as may from time to time become a Credit Party hereunder by execution
of a Joinder Agreement (such subsidiaries together with the Parent and Sarasota
individually a "Guarantor" and collectively the "Guarantors"; the Guarantors
together with the Borrower individually a "Credit Party", and collectively the
"Credit Parties") and NationsBank, N.A. (South), as agent (in such capacity, the
"Agent") for the lenders from time to time party to the Credit Agreement
described below (the "Lenders").
RECITALS
WHEREAS, pursuant to that certain Credit Agreement, dated as of the
date hereof (as amended, modified, extended, renewed or replaced from time to
time, the "Credit Agreement"), among the Borrower, the Guarantors, the Lenders
and the Agent, the Lenders have agreed to make Loans and issue or participate in
Letters of Credit upon the terms and subject to the conditions set forth
therein; and
WHEREAS, it is a condition precedent to the effectiveness of the Credit
Agreement and the obligations of the Lenders to make their respective Loans and
to issue or participate in Letters of Credit under the Credit Agreement that the
Credit Parties shall have executed and delivered this Security Agreement to the
Agent for the ratable benefit of the Lenders.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Definitions.
(a) Unless otherwise defined herein, capitalized terms used
herein shall have the meanings ascribed to such terms in the Credit
Agreement. All terms used in this Security Agreement that are defined
in the Uniform Commercial Code in effect in the State of Florida (the
"UCC") and which are not otherwise defined herein shall have the
meanings set forth therein. For purposes of this Security Agreement,
the term "Lender" shall include any Affiliate of any Lender which has
entered into a Hedging Agreement with the Borrower.
(b) In addition, the following terms shall have the following
meanings:
<PAGE>
"Copyright Licenses": any written agreement, naming any Credit
Party as licensor, granting any right under any Copyright including,
without limitation, any thereof referred to in Schedule 1(b) hereto.
"Copyrights": (a) all registered United States copyrights in
all Works, now existing or hereafter created or acquired, all
registrations and recordings thereof, and all applications in
connection therewith, including, without limitation, registrations,
recordings and applications in the United States Copyright office
including, without limitation, any thereof referred to in Schedule 1(b)
hereto, and (b) all renewals thereof including, without limitation, any
thereof referred to in Schedule 1(b) hereto.
"Patent License": all agreements, whether written or oral,
providing for the grant by or to a Credit Party of any right to
manufacture, use or sell any invention covered by a Patent, including,
without limitation, any thereof referred to in Schedule 1(b) hereto.
"Patents": (a) all letters patent of the United States or any
other country and all reissues and extensions thereof, including,
without limitation, any thereof referred to in Schedule 1(b) hereto,
and (b) all applications for letters patent of the United States or any
other country and all divisions, continuations and
continuations-in-part thereof, including, without limitation, any
thereof referred to in Schedule 1(b) hereto.
"Trademark License": means any agreement, written or oral,
providing for the grant by or to a Credit Party of any right to use any
Trademark, including, without limitation, any thereof referred to in
Schedule 1(b) hereto.
"Trademarks": (a) all trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade
styles, service marks, logos and other source or business identifiers,
and the goodwill associated therewith, now existing or hereafter
adopted or acquired, all registrations and recordings thereof, and all
applications in connection therewith, whether in the United States
Patent and Trademark Office or in any similar office or agency of the
United States, any State thereof or any other country or any political
subdivision thereof, or otherwise, including, without limitation, any
thereof referred to in Schedule 1(b) hereto, and (b) all renewals
thereof.
"Work": any work which is subject to copyright protection
pursuant to Title 17 of the United States Code.
2. Grant of Security Interest in the Collateral. To secure the prompt
payment and performance in full when due, whether by lapse of time, acceleration
or otherwise, of the Secured Obligations (as defined in Section 3 hereof), each
Credit Party hereby grants to the Agent, for the benefit of the Lenders, a
continuing security interest in, and a right to set off against, any and all
right, title and interest of such Credit Party in and to the following, whether
now owned or existing or owned, acquired, or arising hereafter (collectively,
the "Collateral"):
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<PAGE>
(a) All equipment, including, without limitation, all
vehicles, rolling stock, machinery, tools, furniture, furnishings,
office equipment and trade fixtures;
(b) All accounts and receivables and all goods represented by
or securing accounts and receivables, including, without limitation,
all rents and tenant payments, if any;
(c) All inventory, including, without limitation, all raw
materials, all work in process and all goods held by a Credit Party for
sale or lease;
(d) All contract rights, including, without limitation, (i)
all rights under lease agreements, management agreements and tax
sharing agreements and (ii) all rights to payment of money, tax refunds
and insurance proceeds;
(e) All other general intangibles;
(f) All licenses, permits, plans and specifications, drawings,
instruments, documents, chattel paper, securities, policies and
certificates of insurance, deposits, cash or other goods;
(g) All federal, state and local tax refunds and claims of
each Credit Party, all rights in litigation of each Credit Party
presently or hereafter pending for any cause or claim (whether in
contract, tort or otherwise), and all judgments of each Credit Party
now or hereafter arising therefrom;
(h) All books, records, files, computer software and other
similar writings or evidence of each Credit Party's business;
(i) All books, records, ledger cards, files, correspondence,
computer programs, tapes, disks, and related data processing software
(owned by such Credit Party or in which it has an interest) that at any
time evidence or contain information relating to any Collateral or are
otherwise necessary or helpful in the collection thereof or realization
thereupon; and
(j) All Copyrights, Copyright Licenses, Patents, Patent
Licenses, Trademarks, Trademark Licenses, proprietary information,
designs, processes, inventions, know-how and trade secrets and all
actions of infringement, including the right to sue for and to recover
and retain all damages and profits arising from past infringements of a
Credit Party concerning any of the foregoing;
(k) All other personal property of any kind or type whatsoever
owned by a Credit Party;
(l) All accessions and additions to, and substitutions and
replacements of, any and all of the foregoing, whether now existing or
hereafter arising; and
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<PAGE>
(m) All proceeds and products of the foregoing and all
insurance relating to the foregoing Collateral and all proceeds thereof
(including, without limitation, insurance proceeds payable on account
of business interruption), whether now existing or hereafter arising.
3. Security for Obligations. The security interest created hereby in
the Collateral constitutes continuing collateral security for all of the
following, whether now existing or hereafter incurred (the "Secured
Obligations"):
(a) In the case of the Borrower, the prompt performance and
observance by the Borrower of all obligations of the Borrower under the
Credit Agreement, the Notes, this Security Agreement and the other
Credit Documents to which the Borrower is a party;
(b) Subject to clause (c) of Section 27 hereof, in the case of
the Guarantors, the prompt performance and observance by such Guarantor
of all obligations of such Guarantor under the Credit Agreement, this
Security Agreement and the other Credit Documents to which such
Guarantor is a party, including, without limitation, its guaranty
obligations arising under Section 4 of the Credit Agreement; and
(c) Subject to clause (c) of Section 27 hereof, all other
indebtedness, liabilities, obligations and expenses of any kind or
nature owing from any Credit Party to any Lender or the Agent in
connection with (i) this Security Agreement or any other Credit
Document, whether now existing or hereafter arising, due or to become
due, direct or indirect, absolute or contingent, and howsoever
evidenced, held or acquired, together with any and all modifications,
extensions, renewals and/or substitutions of any of the foregoing, (ii)
collecting and enforcing the Credit Party Obligations and (iii) all
liabilities and obligations arising under any Hedging Agreements.
The Credit Parties and the Agent, on behalf of the Lenders, hereby acknowledge
and agree that the security interest created hereby in the Collateral (i)
constitutes continuing collateral security for all of the Secured Obligations,
whether now existing or hereafter arising and (ii) is not to be construed as an
assignment of any Copyrights, Copyright Licenses, Patents, Patent Licenses,
Trademarks or Trademark Licenses.
4. Credit Parties Remain Liable. Anything herein to the contrary
notwithstanding, (a) each Credit Party shall remain liable under the contracts
and agreements of such Credit Party included in the Collateral to the extent set
forth therein and to perform all of the duties and obligations thereunder to the
same extent as if this Security Agreement had not been executed, (b) the
exercise by the Agent of any of the rights hereunder shall not release a Credit
Party from any of its duties or obligations under the contracts and agreements
included in the Collateral, and (c) neither the Agent nor any of the Lenders
shall have any obligation or liability under the contracts and agreements
included in the Collateral by reason of this Security Agreement, nor shall the
Agent or any of the Lenders be obligated to perform any of the obligations or
duties of the Credit Parties thereunder or to take any action to collect or
enforce any claim for payment assigned thereunder.
4
<PAGE>
5. Representations and Warranties. Each Credit Party hereby represents
and warrants to the Agent, for the benefit of the Lenders, that so long as any
of the Secured Obligations remain outstanding or any Credit Document or Hedging
Agreement is in effect or any Loan or Letter of Credit shall remain outstanding,
and until all of the Commitments shall have been terminated:
(a) Location of Collateral. The location of all tangible
property included in the Collateral owned by each Credit Party is as
shown on Schedule 6.21(b) to the Credit Agreement.
(b) Chief Executive Office; Books & Records. Each Credit
Party's chief executive office and chief place of business is (and for
the prior four months have been) located at the locations set forth on
Schedule 6.21(c) to the Credit Agreement, and each Credit Party keeps
its books and records at such locations.
(c) Ownership. Each Credit Party is the legal and beneficial
owner of its Collateral and has the right to pledge, sell, assign or
transfer the same. Each Credit Party's legal name is as shown in this
Security Agreement and no Credit Party has in the past five years
changed its name, been party to a merger, consolidation or other change
in structure or used any tradename except as set forth in Schedule 5(c)
attached hereto.
(d) Security Interest/Priority. This Security Agreement
creates a valid security interest in favor of the Agent, for the
benefit of the Lenders, in the Collateral of each Credit Party and,
when properly perfected by filing or registration, shall constitute a
valid perfected security interest in such Collateral, to the extent
such security can be perfected by filing under the UCC, federal law or
other applicable personal property security legislation, free and clear
of all Liens except for Permitted Liens.
(e) Receivables. (i) Each receivable of the Credit Parties and
the papers and documents relating thereto are genuine and in all
material respects what they purport to be, (ii) in the case of each
receivable which is an account receivable, each receivable arises out
of (A) a bona fide sale of goods sold and delivered by such Credit
Party (or is in the process of being delivered) or (B) services
theretofore actually rendered by such Credit Party to, the account
debtor named therein, (iii) no receivable of such Credit Party is
evidenced by any instrument or chattel paper, unless such instrument or
chattel paper has been theretofore endorsed over and delivered to the
Agent and (vi) no surety bond was required or given in connection with
any receivables of a Credit Party or the contracts or purchase orders
out of which they arose.
(f) Inventory. No inventory is held by a Credit Party pursuant
to consignment, sale or return, sale on approval or similar
arrangement.
(g) Conditions Precedent. There are no conditions precedent to
the effectiveness of this Security Agreement that have not been
satisfied or waived.
(h) Copyrights, Patents and Trademarks.
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<PAGE>
(i) Schedule 1(b) hereto includes all Copyrights,
Copyright Licenses, Patents, Patent Licenses, Trademarks and
Trademark Licenses owned by the Credit Parties in their own
names as of the date hereof.
(ii) To the best of each Credit Party's knowledge,
each Copyright, Patent and Trademark of such Obligor is valid,
subsisting, unexpired, enforceable and has not been abandoned.
(iii) Except as set forth in Schedule 1(b) hereto,
none of such Copyrights, Patents and Trademarks is the subject
of any licensing or franchise agreement.
(iv) No holding, decision or judgment has been
rendered by any Governmental Authority which would limit,
cancel or question the validity of any Copyright, Patent or
Trademark.
(v) No action or proceeding is pending seeking to
limit, cancel or question the validity of any Copyright,
Patent or Trademark, or which, if adversely determined, would
have a material adverse effect on the value of any Copyright,
Patent or Trademark.
(vi) All applications pertaining to the Copyrights,
Patents and Trademarks of each Credit Party have been duly and
properly filed, and all registrations or letters pertaining to
such Copyrights, Patents and Trademarks have been duly and
properly filed and issued, and all of such Copyrights, Patents
and Trademarks are valid and enforceable.
(vii) No Credit Party has made any assignment or
agreement in conflict with the security interest in the
Copyrights, Patents or Trademarks of each Credit Party
hereunder.
6. Covenants. Each Credit Party covenants that, so long as any of the
Secured Obligations remain outstanding or any Credit Document or Hedging
Agreement is in effect or any Loan or Letter of Credit shall remain outstanding,
and until all of the Commitments shall have been terminated, such Credit Party
shall:
(a) Other Liens. Defend the Collateral against the claims and
demands of all other parties claiming an interest therein, keep the
Collateral free from all Liens, except for Permitted Liens, and not
sell, exchange, transfer, assign, lease or otherwise dispose of the
Collateral or any interest therein, except as permitted under the
Credit Agreement.
(b) Preservation of Collateral. Keep the Collateral in good
order, condition and repair and not use the Collateral in violation of
the provisions of this Security Agreement or any other agreement
relating to the Collateral or any policy insuring the Collateral or any
applicable statute, law, bylaw, rule, regulation or ordinance.
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(c) Instruments/Chattel Paper. If any amount payable under or
in connection with any of the Collateral shall be or become evidenced
by any instrument or chattel paper, immediately deliver to the Agent
duly endorsed in a manner satisfactory to the Agent all instruments and
chattel paper representing or relating to the Collateral.
(d) Change in Location or Name. Not, without providing 30 days
prior written notice to the Agent and without filing such amendments to
any previously filed financing statements as the Agent may require, (i)
change the location of its chief executive office and chief place of
business (as well as its books and records) from the locations set
forth on Schedule 6.21(c) to the Credit Agreement, (ii) change the
location of its Collateral from the locations set forth for such Credit
Party on Schedule 6.21(b) to the Credit Agreement, or (iii) change its
name, be a party to a merger, consolidation or other change in
structure or use any tradename other than as set forth on Schedule 5(c)
attached hereto.
(e) Inspection. At all times allow the Agent and any Lender or
their representatives to visit and inspect the Collateral to the extent
set forth in Section 7.11 of the Credit Agreement.
(f) Perfection of Security Interest. Execute and deliver to
the Agent such agreements, assignments or instruments (including
affidavits, notices, reaffirmations and amendments and restatements of
existing documents, as the Agent may reasonably request) and do all
such other things as the Agent may reasonably deem necessary or
appropriate (i) to assure to the Agent the effectiveness and priority
of its security interests hereunder, including, but not limited to, (A)
such financing statements (including renewal statements) or amendments
thereof or supplements thereto or other instruments as the Agent may
from time to time reasonably request in order to perfect and maintain
the security interests granted hereunder in accordance with the UCC,
(B) with regard to Copyrights, a Notice of Grant of Security Interest
in Copyrights in the form of Schedule 5(f)(i) attached hereto, (C) with
regard to Patents, a Notice of Grant of Security Interest in Patents
for filing with the United States Patent and Trademark Office in the
form of Schedule 5(f)(ii) attached hereto and (D) with regard to
Trademarks, a Notice of Grant of Security Interest in Trademarks for
filing with the United States Patent and Trademark Office in the form
of Schedule 5(f)(iii) attached hereto and any other personal property
security legislation in the appropriate state(s) or province(s), (ii)
to consummate the transactions contemplated hereby and (iii) to
otherwise protect and assure the Agent of its rights and interests
hereunder. To that end, each Credit Party agrees that the Agent may
file one or more financing statements disclosing the Agent's security
interest in any or all of the Collateral of such Credit Party without,
to the extent permitted by law, such Credit Party's signature thereon,
and further each Credit Party also hereby irrevocably makes,
constitutes and appoints the Agent, its nominee or any other Person
whom the Agent may designate, as such Credit Party's attorney in fact
with full power and for the limited purpose to sign in the name of such
Credit Party any such financing statements, or amendments and
supplements to financing statements, renewal financing statements,
notices or any similar documents which in the Agent's reasonable
discretion would be necessary, appropriate or convenient in order to
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perfect and maintain perfection of the security interests granted
hereunder, such power, being coupled with an interest, being and
remaining irrevocable so long as the Credit Agreement is in effect or
any amounts payable thereunder or under any other Credit Document, any
Letter of Credit, any Hedging Agreement or any Loan shall remain
outstanding, and until all of the Commitments thereunder shall have
terminated. Each Credit Party hereby agrees that a carbon, photographic
or other reproduction of this Security Agreement or any such financing
statement is sufficient for filing as a financing statement by the
Agent without notice thereof to such Credit Party wherever the Agent
may in its sole discretion desire to file the same. In the event for
any reason the law of any jurisdiction other than Florida becomes or is
applicable to the Collateral of any Credit Party or any part thereof,
or to any of the Secured Obligations, such Credit Party agrees to
execute and deliver all such instruments and to do all such other
things as the Agent in its sole discretion reasonably deems necessary
or appropriate to preserve, protect and enforce the security interests
of the Agent under the law of such other jurisdiction (and, if a Credit
Party shall fail to do so promptly upon the request of the Agent, then
the Agent may execute any and all such requested documents on behalf of
such Credit Party pursuant to the power of attorney granted
hereinabove). If any Collateral is in the possession or control of a
Credit Party's agents and the Agent so requests, such Credit Party
agrees to notify such agents in writing of the Agent's security
interest therein and, upon the Agent's request, instruct them to hold
all such Collateral for the Lenders' account and subject to the Agent's
instructions. Each Credit Party agrees to mark its books and records to
reflect the security interest of the Agent in the Collateral.
(g) Treatment of Receivables. Not grant or extend the time for
payment of any receivable, or compromise or settle any receivable for
less than the full amount thereof, or release any Person or property,
in whole or in part, from payment thereof, or allow any credit or
discount thereon, other than as normal and customary in the ordinary
course of a Credit Party's business.
(h) Covenants Relating to Copyrights.
(i) Employ the Copyright for each Work with such
notice of copyright as may be required by law to secure
copyright protection.
(ii) Not do any act or knowingly omit to do any act
whereby any material Copyright may become invalidated and (A)
not do any act, or knowingly omit to do any act, whereby any
material Copyright may become injected into the public domain;
(B) notify the Agent immediately if it knows, or has reason to
know, that any material Copyright may become injected into the
public domain or of any adverse determination or development
(including, without limitation, the institution of, or any
such determination or development in, any court or tribunal in
the United States or any other country) regarding a Credit
Party's ownership of any such Copyright or its validity; (C)
take all necessary steps as it shall deem appropriate under
the circumstances, to maintain and pursue each application
(and to obtain the relevant registration) and to maintain each
registration of each material Copyright
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owned by a Credit Party including, without limitation, filing
of applications for renewal where necessary; and (D) promptly
notify the Agent of any material infringement of any material
Copyright of a Credit Party of which it becomes aware and take
such actions as it shall reasonably deem appropriate under the
circumstances to protect such Copyright, including, where
appropriate, the bringing of suit for infringement, seeking
injunctive relief and seeking to recover any and all damages
for such infringement.
(iii) Not make any assignment or agreement in
conflict with the security interest in the Copyrights of each
Credit Party hereunder.
(i) Covenants Relating to Patents and Trademarks.
(i) (A) Continue to use each Trademark on each and
every trademark class of goods applicable to its current line
as reflected in its current catalogs, brochures and price
lists in order to maintain such Trademark in full force free
from any claim of abandonment for non-use, (B) maintain as in
the past the quality of products and services offered under
such Trademark, (C) employ such Trademark with the appropriate
notice of registration, (D) not adopt or use any mark which is
confusingly similar or a colorable imitation of such Trademark
unless the Agent, for the ratable benefit of the Lenders,
shall obtain a perfected security interest in such mark
pursuant to this Security Agreement, and (E) not (and not
permit any licensee or sublicensee thereof to) do any act or
knowingly omit to do any act whereby any Trademark may become
invalidated.
(ii) Not do any act, or omit to do any act, whereby
any Patent may become abandoned or dedicated.
(iii) Notify the Agent immediately if it knows, or
has reason to know, that any application or registration
relating to any Patent or Trademark may become abandoned or
dedicated, or of any adverse determination or development
(including, without limitation, the institution of, or any
such determination or development in, any proceeding in the
United States Patent and Trademark Office or any court or
tribunal in any country) regarding a Credit Party's ownership
of any Patent or Trademark or its right to register the same
or to keep and maintain the same.
(iv) Whenever a Credit Party, either by itself or
through an agent, employee, licensee or designee, shall file
an application for the registration of any Patent or Trademark
with the United States Patent and Trademark Office or any
similar office or agency in any other country or any political
subdivision thereof, a Credit Party shall report such filing
to the Agent within five Business Days after the last day of
the fiscal quarter in which such filing occurs. Upon request
of the Agent, a Credit Party shall execute and deliver any and
all agreements, instruments, documents and papers as the Agent
may request to evidence the Agent's security
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interest in any Patent or Trademark and the goodwill and
general intangibles of a Credit Party relating thereto or
represented thereby.
(v) Take all reasonable and necessary steps,
including, without limitation, in any proceeding before the
United States Patent and Trademark Office, or any similar
office or agency in any other country or any political
subdivision thereof, to maintain and pursue each application
(and to obtain the relevant registration) and to maintain each
registration of the Patents and Trademarks, including, without
limitation, filing of applications for renewal, affidavits of
use and affidavits of incontestability.
(vi) Promptly notify the Agent after it learns that
any Patent or Trademark included in the Collateral is
infringed, misappropriated or diluted by a third party and
promptly sue for infringement, misappropriation or dilution,
to seek injunctive relief where appropriate and to recover any
and all damages for such infringement, misappropriation or
dilution, or take such other actions as it shall reasonably
deem appropriate under the circumstances to protect such
Patent or Trademark.
(vii) Not make any assignment or agreement in
conflict with the security interest in the Patents or
Trademarks of each Credit Party hereunder.
(j) New Patents, Copyrights and Trademarks. Promptly provide
the Agent with (i) a listing of all applications, if any, for new
Copyrights, Patents or Trademarks (together with a listing of the
issuance of registrations or letters on present applications), which
new applications and issued registrations or letters shall be subject
to the terms and conditions hereunder, and (ii) (A) with respect to
Copyrights, a duly executed Notice of Security Interest in Copyrights,
(B) with respect to Patents, a duly executed Notice of Security
Interest in Patents, (C) with respect to Trademarks, a duly executed
Notice of Security Interest in Trademarks or (D) such other duly
executed documents as the Agent may request in a form acceptable to
counsel for the Agent and suitable for recording to evidence the
security interest in the Copyright, Patent or Trademark which is the
subject of such new application.
(k) Other Additional Collateral. If, subsequent to the Closing
Date, a Credit Party shall acquire any securities, instruments, chattel
paper or other personal property required to be delivered to the Agent
as Collateral hereunder, the Credit Party shall immediately notify the
Agent of same and take such action (including, but not limited to, the
actions set forth in Section 7.13 of the Credit Agreement as requested
by the Agent and at its own expense (subject to the limitations set
forth in Section 7.13 of the Credit Agreement) to ensure that the Agent
has a first priority perfected Lien in all personal property of the
Credit Parties whether now owned or hereafter acquired, subject only to
Permitted Liens.
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(l) Certificate of Title. Upon the request of the Agent at any
time (or promptly upon the occurrence of an Event of Default), each
Credit Party (i) will deliver to the Agent original certificates of
title for any vehicle owned by such Credit Party along wit the
appropriate instruments or certificates of transfer and delivery, duly
completed and executed to evidence to the Agent's lien and (ii) will
take such other action as the Agent may deem necessary to perfect the
security interest in the vehicles created by this Security Agreement.
7. Advances by Lenders. On failure of any Credit Party to perform any
of the covenants and agreements contained herein, the Agent may, at its sole
option and in its sole discretion, perform the same and in so doing may expend
such sums as the Agent may reasonably deem advisable in the performance thereof,
including, without limitation, the payment of any insurance premiums, the
payment of any taxes, a payment to obtain a release of a Lien or potential Lien,
expenditures made in defending against any adverse claim and all other
expenditures which the Agent may make for the protection of the security hereof
or which may be compelled to make by operation of law. All such sums and amounts
so expended shall be repayable by the Credit Parties on a joint and several
basis (subject to Section 27 hereof) promptly upon notice thereof and demand
therefor, shall constitute additional Secured Obligations and shall bear
interest from the date said amounts are expended at the default rate provided in
Section 3.1(b) of the Credit Agreement for Revolving Loans that are Base Rate
Loans. No such performance of any covenant or agreement by the Agent on behalf
of any Credit Party, and no such advance or expenditure therefor, shall relieve
the Credit Parties of any default under the terms of this Security Agreement or
the other Credit Documents. The Agent may make any payment hereby authorized in
accordance with any bill, statement or estimate procured from the appropriate
public office or holder of the claim to be discharged without inquiry into the
accuracy of such bill, statement or estimate or into the validity of any tax
assessment, sale, forfeiture, tax lien, title or claim except to the extent the
Agent is aware that such payment is being contested in good faith by a Credit
Party in appropriate proceedings and against which adequate reserves are being
maintained in accordance with GAAP.
8. Events of Default.
The occurrence of an event which under the Credit Agreement would
constitute an Event of Default shall be an Event of Default hereunder (an "Event
of Default").
9. Remedies.
(a) General Remedies. Upon the occurrence of an Event of
Default, the Agent shall have, in addition to the rights and remedies
provided herein, in the Credit Documents or by law (including, but not
limited to, the rights and remedies set forth in the UCC or equivalent
legislation of the jurisdiction applicable to the affected Collateral),
the rights and remedies of a secured party under the UCC to the extent
permitted by law (regardless of whether the UCC is the law of the
jurisdiction where the rights and remedies are asserted and regardless
of whether the UCC applies to the affected Collateral), and further,
the Agent may, with or without judicial process or the aid and
assistance of others, (i) enter on any premises on which any of the
Collateral may be located and, without resistance or interference by
the Credit Parties, take possession of the Collateral, (ii) dispose of
any
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Collateral on any such premises, (iii) require the Credit Parties to
assemble and make available to the Agent at the expense of the Credit
Parties any Collateral at any place and time designated by the Agent
which is reasonably convenient to both parties, (iv) remove any
Collateral from any such premises for the purpose of effecting sale or
other disposition thereof, and/or (v) without demand and without
advertisement, notice, hearing or process of law, all of which each of
the Credit Parties hereby waives to the fullest extent permitted by
law, at any place and time or times, sell and deliver any or all
Collateral held by or for it at public or private sale, by one or more
contracts, in one or more parcels, for cash, upon credit or otherwise,
at such prices and upon such terms as the Agent deems advisable, in its
sole discretion (subject to any and all mandatory legal requirements).
Each of the Credit Parties acknowledges that any private sale
referenced above may be at prices and on terms less favorable to the
seller than the prices and other terms which might have been obtained
at a public sale and, notwithstanding the foregoing, agrees that such
private sale shall be deemed to have been made in a commercially
reasonable manner. In addition to all other sums due the Agent and the
Lenders with respect to the Secured Obligations, the Credit Parties
shall pay the Agent and each of the Lenders all reasonable costs and
expenses incurred by the Agent or any such Lender, including, but not
limited to, reasonable attorneys' fees and court costs, in obtaining or
liquidating the Collateral, in enforcing payment of the Secured
Obligations, or in the prosecution or defense of any action or
proceeding by or against the Agent or the Lenders or the Credit Parties
concerning any matter arising out of or connected with this Security
Agreement, any Collateral or the Secured Obligations, including,
without limitation, any of the foregoing arising in, arising under or
related to a case concerning a Credit Party under the Bankruptcy Code.
To the extent the rights of notice cannot be legally waived hereunder,
each Credit Party agrees that any requirement of reasonable notice
shall be met if such notice is personally served on or mailed, postage
prepaid, to the Borrower in accordance with the notice provisions of
Section 11.1 of the Credit Agreement at least 10 days before the time
of sale or other event giving rise to the requirement of such notice.
The Agent and the Lenders shall not be obligated to make any sale or
other disposition of the Collateral regardless of notice having been
given. To the extent permitted by law, any Lender may be a purchaser at
any such sale. To the extent permitted by applicable law, each of the
Credit Parties hereby waives all of its rights of redemption with
respect to any such sale. Subject to the provisions of applicable law,
the Agent and the Lenders may postpone or cause the postponement of the
sale of all or any portion of the Collateral by announcement at the
time and place of such sale, and such sale may, without further notice,
to the extent permitted by law, be made at the time and place to which
the sale was postponed, or the Agent and the Lenders may further
postpone such sale by announcement made at such time and place.
(b) Remedies relating to Receivables. Upon the occurrence of
an Event of Default, whether or not the Agent has exercised any or all
of its rights and remedies hereunder, (i) each Credit Party will
promptly upon request of the Agent instruct all account debtors to
remit all payments in respect of the receivables to a mailing location
selected by the Agent and (ii) the Agent or its designee (A) may notify
any Credit Party's customers and account debtors that the receivables
of such Credit Party have been assigned to the Agent or of the Agent's
security interest therein, and (B) may (either in its own name or in
the name
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of a Credit Party or both) demand, collect (including without
limitation by way of a lockbox arrangement), receive, take receipt for,
sell, sue for, compound, settle, compromise and give acquittance for
any and all amounts due or to become due on receivables, and, in the
Agent's discretion, file any claim or take any other action or
proceeding to protect and realize upon the security interest of the
Agent in the receivables. Each Credit Party acknowledges and agrees
that the proceeds of its receivables remitted to or on behalf of the
Agent in accordance with the provisions hereof shall be solely for the
Agent's own convenience and that such Credit Party shall not have any
right, title or interest in such accounts or in any such other amounts
except as expressly provided herein. The Agent and the Lenders shall
have no liability or responsibility to any Credit Party for acceptance
of a check, draft or other order for payment of money bearing the
legend "payment in full" or words of similar import or any other
restrictive legend or endorsement or be responsible for determining the
correctness of any remittance. Each Credit Party hereby agrees to
indemnify the Agent and the Lenders from and against all liabilities,
damages, losses, actions, claims, judgments, costs, expenses, charges
and reasonable attorneys' fees suffered or incurred by the Agent or the
Lenders because of the maintenance of the foregoing arrangements except
as relating to or arising out of the gross negligence or willful
misconduct of the Agent or a Lender or its officers, employees or
agents. The foregoing indemnity shall survive the repayment of the
Secured Obligations and the termination of the Commitments.
(c) Access. In addition to the rights and remedies hereunder,
upon the occurrence of an Event of Default, the Agent shall have the
right to enter and remain upon the various premises of the Credit
Parties without cost or charge to the Agent, and use the same, together
with materials, supplies, books and records of the Credit Parties for
the purpose of collecting and liquidating the Collateral, or for
preparing for sale and conducting the sale of the Collateral, whether
by foreclosure, auction or otherwise. In addition, the Agent may remove
Collateral, or any part thereof, from such premises and/or any records
with respect thereto, in order to effectively collect or liquidate such
Collateral.
(d) Nonexclusive Nature of Remedies. Failure by the Agent or
the Lenders to exercise any right, remedy or option under this Security
Agreement or any other Credit Document or as provided by law, or any
delay by the Agent or the Lenders in exercising the same, shall not
operate as a waiver of any such right, remedy or option. No waiver
hereunder shall be effective unless it is in writing, signed by the
party against whom such waiver is sought to be enforced and then only
to the extent specifically stated, which in the case of the Agent or
the Lenders shall only be granted as provided herein. To the extent
permitted by law, neither the Agent, the Lenders nor any party acting
as attorney for the Agent or the Lenders shall be liable hereunder for
any acts or omissions or for any error of judgment or mistake of fact
or law other than their gross negligence or willful misconduct
hereunder. The rights and remedies of the Agent and the Lenders under
this Security Agreement shall be cumulative and not exclusive of any
other right or remedy which the Agent or the Lenders may have.
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(e) Retention of Collateral. The Agent may, after providing
the notices required by Section 9-505(2) of the UCC and otherwise
complying with the requirements of applicable law of the relevant
jurisdiction, to the extent the Agent is in possession of any of the
Collateral, retain the Collateral in satisfaction of the Secured
Obligations. Unless and until the Agent shall have provided such
notices, however, the Agent shall not be deemed to have retained any
Collateral in satisfaction of any Secured Obligations for any reason.
(f) Deficiency. In the event that the proceeds of any sale,
collection or realization are insufficient to pay all amounts to which
the Agent or the Lenders are legally entitled, (subject to Section 27
hereof) the Credit Parties shall be jointly and severally liable for
the deficiency, together with interest thereon at the default rate
specified in Section 3.1(b) of the Credit Agreement for Revolving Loans
that are Base Rate Loans, together with the costs of collection and the
reasonable fees of any attorneys employed by the Agent to collect such
deficiency. Any surplus remaining after the full payment and
satisfaction of the Secured Obligations shall be returned to the Credit
Parties or to whomsoever a court of competent jurisdiction shall
determine to be entitled thereto.
10. Rights of the Agent.
(a) Power of Attorney. In addition to other powers of attorney
contained herein, each Credit Party hereby designates and appoints the
Agent, on behalf of the Lenders, and each of its designees or agents,
as attorney-in-fact of such Credit Party, irrevocably and with power of
substitution, with authority to take any or all of the following
actions upon the occurrence and during the continuance of an Event of
Default:
(i) to demand, collect, settle, compromise,
adjust and give discharges and releases concerning the
Collateral of such Credit Party, all as the Agent may
reasonably determine;
(ii) to commence and prosecute any actions
at any court for the purposes of collecting any Collateral of
such Credit Party and enforcing any other right in respect
thereof;
(iii) to defend, settle or compromise any
action brought and, in connection therewith, give such
discharge or release as the Agent may deem reasonably
appropriate;
(iv) to pay or discharge taxes, liens,
security interests, or other encumbrances levied or placed on
or threatened against the Collateral of such Credit Party;
(v) to direct any parties liable for any
payment under any of the Collateral to make payment of any and
all monies due and to become due thereunder directly to the
Agent or as the Agent shall direct;
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(vi) to receive payment of and receipt for
any and all monies, claims, and other amounts due and to
become due at any time in respect of or arising out of any
Collateral of such Credit Party;
(vii) to sign and endorse any drafts,
assignments, verifications, notices and other documents
relating to the Collateral of such Credit Party;
(viii) to settle, compromise or adjust any
suit, action or proceeding described above and, in connection
therewith, to give such discharges or releases as the Agent
may deem reasonably appropriate;
(ix) receive, open and dispose of mail
addressed to a Credit Party and endorse checks, notes, drafts,
acceptances, money orders, bills of lading, warehouse receipts
or other instruments or documents evidencing payment, shipment
or storage of the goods giving rise to the Collateral of such
Credit Party on behalf of and in the name of such Credit
Party, or securing, or relating to such Collateral;
(x) sell, assign, transfer, make any
agreement in respect of, or otherwise deal with or exercise
rights in respect of, any Collateral or the goods or services
which have given rise thereto, as fully and completely as
though the Agent were the absolute owner thereof for all
purposes;
(xi) adjust and settle claims under any
insurance policy relating thereto;
(xii) execute and deliver all assignments,
conveyances, statements, financing statements, renewal
financing statements, security agreements, affidavits, notices
and other agreements, instruments and documents that the Agent
may determine necessary in order to perfect and maintain the
security interests and liens granted in this Security
Agreement and in order to fully consummate all of the
transactions contemplated therein;
(xiii) institute any foreclosure proceedings
that the Agent may deem appropriate; and
(xiv) do and perform all such other acts and
things as the Agent may reasonably deem to be necessary,
proper or convenient in connection with the Collateral.
This power of attorney is a power coupled with an interest and shall be
irrevocable (A) for so long as any of the Secured Obligations remain
outstanding, any Credit Document or any Hedging Agreement is in effect
or any Loan or Letter of Credit shall remain outstanding and
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(B) until all of the Commitments shall have been terminated. The Agent
shall be under no duty to exercise or withhold the exercise of any of
the rights, powers, privileges and options expressly or implicitly
granted to the Agent in this Security Agreement, and shall not be
liable for any failure to do so or any delay in doing so. The Agent
shall not be liable for any act or omission or for any error of
judgment or any mistake of fact or law in its individual capacity or
its capacity as attorney-in-fact except acts or omissions resulting
from its gross negligence or willful misconduct. This power of attorney
is conferred on the Agent solely to protect, preserve and realize upon
its security interest in the Collateral.
(b) Performance by the Agent of Obligations. If any Credit
Party fails to perform any agreement or obligation contained herein,
the Agent itself may perform, or cause performance of, such agreement
or obligation, and the expenses of the Agent incurred in connection
therewith shall be payable by the Credit Parties on a joint and several
basis pursuant to Section 13 hereof.
(c) Assignment by the Agent. The Agent may from time to time
assign the Secured Obligations and any portion thereof and/or
Collateral and any portion thereof to a successor Agent, and the
assignee shall be entitled to all of the rights and remedies of the
Agent under this Security Agreement in relation thereto.
(d) The Agent's Duty of Care. Other than the exercise of
reasonable care to assure the safe custody of the Collateral while
being held by the Agent hereunder, the Agent shall have no duty or
liability to preserve rights pertaining thereto, it being understood
and agreed that the Credit Parties shall be responsible for
preservation of all rights in the Collateral, and the Agent shall be
relieved of all responsibility for the Collateral upon surrendering it
or tendering the surrender of it to the Credit Parties. The Agent shall
be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is
accorded treatment equal to that which the Agent accords its own
property, it being understood that the Agent shall not have
responsibility for taking any necessary steps to preserve rights
against any parties with respect to any of the Collateral.
11. Rights of Required Lenders. All rights of the Agent hereunder, if
not exercised by the Agent, may be exercised by the Required Lenders, and in
such event the Required Lenders shall be afforded the rights of the Agent
hereunder.
12. Application of Proceeds. Upon the occurrence of an Event of
Default, any payments in respect of the Secured Obligations and any proceeds of
the Collateral, when received by the Agent or any of the Lenders in cash or its
equivalent, will be applied in reduction of the Secured Obligations in the order
set forth in Section 9.3 of the Credit Agreement, and each Credit Party
irrevocably waives the right to direct the application of such payments and
proceeds and acknowledges and agrees that the Agent shall have the continuing
and exclusive right to apply and reapply any and all such payments and proceeds
in the Agent's sole discretion, notwithstanding any entry to the contrary upon
any of its books and records.
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13. Costs of Counsel. If at any time hereafter, whether upon the
occurrence of an Event of Default or not, the Agent employs counsel to prepare
or consider amendments, waivers or consents with respect to this Security
Agreement, or to take action or make a response in or with respect to any legal
or arbitral proceeding relating to this Security Agreement or relating to the
Collateral, or to protect the Collateral or exercise any rights or remedies
under this Security Agreement or with respect to the Collateral, then the Credit
Parties agree to promptly pay upon demand any and all such reasonable documented
costs and expenses of the Agent or the Lenders, all of which costs and expenses
shall constitute Secured Obligations hereunder.
14. Continuing Agreement.
(a) This Security Agreement shall be a continuing agreement in
every respect and shall remain in full force and effect so long as any
of the Secured Obligations remain outstanding or any Credit Document or
Hedging Agreement is in effect or any Loan or Letter of Credit shall
remain outstanding, and until all of the Commitments thereunder shall
have terminated (other than any obligations with respect to the
indemnities and the representations and warranties set forth in the
Credit Documents). Upon such payment and termination, this Security
Agreement shall be automatically terminated and the Agent, for the
benefit of the Lenders, shall, upon the request and at the expense of
the Credit Parties, forthwith release all of its liens and security
interests hereunder and shall execute and deliver all UCC termination
statements and/or other documents reasonably requested by the Credit
Parties evidencing such termination. Notwithstanding the foregoing all
releases and indemnities provided hereunder shall survive termination
of this Security Agreement.
(b) This Security Agreement shall continue to be effective or
be automatically reinstated, as the case may be, if at any time
payment, in whole or in part, of any of the Secured Obligations is
rescinded or must otherwise be restored or returned by the Agent or any
Lender as a preference, fraudulent conveyance or otherwise under any
bankruptcy, insolvency or similar law, all as though such payment had
not been made; provided that in the event payment of all or any part of
the Secured Obligations is rescinded or must be restored or returned,
all reasonable costs and expenses (including without limitation any
reasonable legal fees and disbursements) incurred by the Agent or any
Lender in defending and enforcing such reinstatement shall be deemed to
be included as a part of the Secured Obligations.
15. Amendments; Waivers; Modifications. This Security Agreement and the
provisions hereof may not be amended, waived, modified, changed, discharged or
terminated except as set forth in Section 11.6 of the Credit Agreement.
16. Successors in Interest. This Security Agreement shall create a
continuing security interest in the Collateral and shall be binding upon each
Credit Party, its successors and assigns and shall inure, together with the
rights and remedies of the Agent and the Lenders hereunder, to the benefit of
the Agent and the Lenders and their successors and assigns; provided, however,
that none of the Credit Parties may assign its rights or delegate its duties
hereunder without the prior written consent of each Lender or the Required
Lenders, as required by the Credit Agreement.
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17. No Liability to the Agent or Lenders. To the fullest extent
permitted by law, each Credit Party hereby releases the Agent in its individual
capacity or its capacity as attorney-in-fact, each Lender in its individual
capacity or its capacity as attorney-in-fact, their respective successors and
assigns and any party acting as attorney for the Agent or the Lenders, from any
liability for any act or omission or for any error of judgment or mistake of
fact or law relating to this Security Agreement or the Collateral, except for
any liability arising from the gross negligence or willful misconduct of the
Agent, or such Lender, or its officers, employees or agents.
18. Notices. All notices required or permitted to be given under this
Security Agreement shall be in conformance with Section 11.1 of the Credit
Agreement.
19. Counterparts. This Security Agreement may be executed in any number
of counterparts, each of which where so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Security Agreement to produce or
account for more than one such counterpart.
20. Headings. The headings of the sections and subsections hereof are
provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Security Agreement.
21. Governing Law; Submission to Jurisdiction; Venue.
(a) THIS SECURITY AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA. Any
legal action or proceeding with respect to this Security Agreement may
be brought in the courts of the State of Florida or of the United
States located in the State of Florida and, by execution and delivery
of this Security Agreement, each Credit Party hereby irrevocably
accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of such courts. Each Credit Party
further irrevocably consents to the service of process out of any of
the aforementioned courts in any such action or proceeding by the
mailing of copies thereof by registered or certified mail, postage
prepaid, to it at the address for notices pursuant to Section 11.1 of
the Credit Agreement, such service to become effective 30 days after
such mailing. Nothing herein shall affect the right of the Agent to
serve process in any other manner permitted by law or to commence legal
proceedings or to otherwise proceed against any Credit Party in any
other jurisdiction.
(b) Each Credit Party hereby irrevocably waives any objection
which it may now or hereafter have to the laying of venue of any of the
aforesaid actions or proceedings arising out of or in connection with
this Security Agreement brought in the courts referred to in subsection
(a) hereof and hereby further irrevocably waives and agrees not to
plead or claim in any such court that any such action or proceeding
brought in any such court has been brought in an inconvenient forum.
18
<PAGE>
22. WAIVER OF JURY TRIAL. EACH OF THE PARTIES TO THIS SECURITY
AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY.
23. Severability. If any provision of the Security Agreement is
determined to be illegal, invalid or unenforceable, such provision shall be
fully severable and the remaining provisions shall remain in full force and
effect and shall be construed without giving effect to the illegal, invalid or
unenforceable provisions.
24. Entirety. This Security Agreement, the other Credit Documents and
the Hedging Agreements represent the entire agreement of the parties hereto and
thereto, and supersede all prior agreements and understandings, oral or written,
if any, including any commitment letters or correspondence relating to the
Credit Documents, the Hedging Agreements or the transactions contemplated herein
and therein.
25. Survival. All representations and warranties of the Credit Parties
hereunder shall survive the execution and delivery of this Security Agreement
and the other Credit Documents and Hedging Agreements, the delivery of the Notes
and the making of the Loans and the issuance of the Letters of Credit under the
Credit Agreement.
26. Other Security. To the extent that any of the Secured Obligations
are now or hereafter secured by property other than the Collateral (including,
without limitation, real property and securities owned by a Credit Party), or by
a guarantee, endorsement or property of any other Person, then the Agent and the
Lenders shall have the right to proceed against such other property, guarantee
or endorsement upon the occurrence of any Event of Default, and the Agent and
the Lenders shall have the right, in their sole discretion, to determine which
rights, security, liens, security interests or remedies the Agent and the
Lenders shall at any time pursue, relinquish, subordinate, modify or take with
respect thereto, without in any way modifying or affecting any of them or any of
the Agent's and the Lenders' rights or the Secured Obligations under this
Security Agreement or under any other of the Credit Documents or under any
Hedging Agreement.
27. Joint and Several Obligations of Credit Parties.
(a) Subject to clause (c) of this Section 27, each of the
Credit Parties is accepting joint and several liability hereunder in
consideration of the financial accommodation to be provided by the
Lenders under the Credit Agreement, for the mutual benefit, directly
and indirectly, of each of the Credit Parties and in consideration of
the undertakings of each of the Credit Parties to accept joint and
several liability for the obligations of each of them.
(b) Subject to clause (c) of this Section 27, each of the
Credit Parties jointly and severally hereby irrevocably and
unconditionally accepts, not merely as a surety but also as
19
<PAGE>
a co-debtor, joint and several liability with the other Credit Parties
with respect to the payment and performance of all of the Secured
Obligations arising under this Security Agreement, the other Credit
Documents and the Hedging Agreements, it being the intention of the
parties hereto that all the Secured Obligations shall be the joint and
several obligations of each of the Credit Parties without preferences
or distinction among them.
(c) Notwithstanding any provision to the contrary contained
herein or in any other of the Credit Documents, to the extent the
obligations of a Guarantor shall be adjudicated to be invalid or
unenforceable for any reason (including, without limitation, because of
any applicable state, provincial or federal law relating to fraudulent
conveyances or transfers) then the obligations of each Guarantor
hereunder shall be limited to the maximum amount that is permissible
under applicable law (whether federal or state and including, without
limitation, the Bankruptcy Code).
[remainder of page intentionally left blank]
20
<PAGE>
Each of the parties hereto has caused a counterpart of this Security
Agreement to be duly executed and delivered as of the date first above written.
BORROWER: INTEGRATED LIVING COMMUNITIES
HOLDING, INC., a Delaware corporation
By:____________________________
Name: ________________________
Title: ________________________
GUARANTORS: INTEGRATED LIVING COMMUNITIES, INC.,
a Delaware corporation
By:____________________________
Name: ________________________
Title: ________________________
INTEGRATED LIVING COMMUNITIES OF
VIRGINIA BEACH, INC.,
a Delaware corporation
By:____________________________
Name: ________________________
Title: ________________________
INTEGRATED LIVING COMMUNITIES OF
REDGATE, INC., a Delaware corporation
By:____________________________
Name: ________________________
Title: ________________________
INTEGRATED LIVING COMMUNITIES OF
PORTSMOUTH, INC., a Delaware corporation
By:____________________________
Name: ________________________
Title: ________________________
[Signatures Continue]
21
<PAGE>
INTEGRATED LIVING COMMUNITIES OF
GLOUCESTER, INC., a Delaware corporation
By:____________________________
Name: ________________________
Title: ________________________
INTEGRATED LIVING COMMUNITIES OF
SARASOTA, INC., a Florida corporation
By:____________________________
Name: ________________________
Title: ________________________
INTEGRATED LIVING COMMUNITIES OF
WEST PALM BEACH, INC., a
Delaware corporation
By:____________________________
Name: ________________________
Title: ________________________
INTEGRATED LIVING COMMUNITIES AT
TERRACE GARDENS, INC.,
a Delaware corporation
By:____________________________
Name: ________________________
Title: ________________________
INTEGRATED MANAGEMENT-
CARRINGTON POINTE, INC.,
a Delaware corporation
By:____________________________
Name: ________________________
Title:________________________
22
<PAGE>
Accepted and agreed as of the date first above written.
NATIONSBANK, N.A. (SOUTH), as Agent
By:___________________________
Name:_________________________
Title:__________________________
23
<PAGE>
SCHEDULE 1(b)
to
Security Agreement
dated as of April 9, 1997
in favor of NationsBank, N.A. (South),
as Agent
INTELLECTUAL PROPERTY
24
<PAGE>
SCHEDULE 5(c)
to
Security Agreement
dated as of April 9, 1997
in favor of NationsBank, N.A. (South),
as Agent
MERGERS, CONSOLIDATIONS, CHANGE IN STRUCTURE
OR USE OF TRADENAMES
25
<PAGE>
SCHEDULE 5(f)(i)
to
Security Agreement
dated as of April 9, 1997
in favor of NationsBank, N.A. (South),
as Agent
NOTICE OF GRANT OF SECURITY INTEREST
IN COPYRIGHTS
United States Copyright Office
Ladies and Gentlemen:
Please be advised that pursuant to the Security Agreement dated as of
April ___, 1997 (as the same may be amended, modified, extended or restated from
time to time, the "Security Agreement") by and among the Credit Parties party
thereto (each a "Credit Party" and collectively, the "Credit Parties") and
NationsBank, N.A. (South), as Agent (the "Agent") for the lenders referenced
therein (the "Lenders"), the undersigned Credit Party has granted a continuing
security interest in and continuing lien upon, the copyrights and copyright
applications shown below to the Agent for the ratable benefit of the Lenders:
COPYRIGHTS
Date of
Copyright No. Description of Copyright Copyright
Copyright Applications
Copyright Description of Copyright Date of Copyright
Applications No. Applied For Applications
26
<PAGE>
The Credit Parties and the Agent, on behalf of the Lenders, hereby
acknowledge and agree that the security interest in the foregoing copyrights and
copyright applications (i) may only be terminated in accordance with the terms
of the Security Agreement and (ii) is not to be construed as an assignment of
any copyright or copyright application.
Very truly yours,
----------------------------------
[Credit Party]
By:______________________________
Name:____________________________
Title:___________________________
Acknowledged and Accepted:
NATIONSBANK, N.A. (South), as Agent
By:_____________________________
Name:___________________________
Title:__________________________
27
<PAGE>
STATE OF ___________________
COUNTY OF __________________
I, ______________________, a Notary Public of the County and State
aforesaid, certify that _____________, personally came before me this day and
acknowledged that (s)he is ___________ Secretary of
_____________________________, a ________________________ corporation, and that
by authority duly given and as the act of the corporation, the foregoing
instrument was signed in its name by its ___________ President.
Witness my hand and official stamp or seal, this ______ day of
_________________, 1997.
- -----------------------------------
Notary Public
My Commission Expires:
- -----------------------------------
(Notary Seal)
28
<PAGE>
STATE OF ________________
COUNTY OF _______________
I, ______________________, a Notary Public of the County and State
aforesaid, certify that _____________, personally came before me this day and
acknowledged that (s)he is ___________ of NationsBank, N.A. (South), a national
banking association, and that by authority duly given and as the act of the
corporation, the foregoing instrument was signed in its name by its ___________
President.
Witness my hand and official stamp or seal, this ______ day of
_________________, 1997.
- -----------------------------------
Notary Public
My Commission Expires:
- -----------------------------------
(Notary Seal)
29
<PAGE>
SCHEDULE 5(f)(ii)
to
Security Agreement
dated as of April 9, 1997
in favor of NationsBank, N.A. (South),
as Agent
NOTICE OF GRANT OF SECURITY INTEREST
IN PATENTS
United States Patent and Trademark Office
Ladies and Gentlemen:
Please be advised that pursuant to the Security Agreement dated as of
April ___, 1997 (the "Security Agreement") by and among the Credit Parties party
thereto (each a "Credit Party" and collectively, the "Credit Parties") and
NationsBank, N.A. (South), as Agent (the "Agent") for the lenders referenced
therein (the "Lenders"), the undersigned Credit Party has granted a continuing
security interest in and continuing lien upon, the patents and patent
applications shown below to the Agent for the ratable benefit of the Lenders:
PATENTS
Description of Patent Date of
Patent No. Item Patent
Patent Applications
Patent Description of Patent Date of Patent
Applications No. Applied For Applications
30
<PAGE>
The Credit Parties and the Agent, on behalf of the Lenders, hereby
acknowledge and agree that the security interest in the foregoing patents and
patent applications (i) may only be terminated in accordance with the terms of
the Security Agreement and (ii) is not to be construed as an assignment of any
patent or patent application.
Very truly yours,
----------------------------------
[Credit Party]
By:_____________________________
Name:___________________________
Title:__________________________
Acknowledged and Accepted:
NATIONSBANK, N.A. (South), as Agent
By:_____________________________
Name:___________________________
Title:__________________________
31
<PAGE>
STATE OF __________________
COUNTY OF _________________
I, ______________________, a Notary Public of the County and State
aforesaid, certify that _____________, personally came before me this day and
acknowledged that (s)he is ___________ Secretary of
_____________________________, a ________________________ corporation, and that
by authority duly given and as the act of the corporation, the foregoing
instrument was signed in its name by its ___________ President.
Witness my hand and official stamp or seal, this ______ day of
_________________, 1997.
- -----------------------------------
Notary Public
My Commission Expires:
- -----------------------------------
(Notary Seal)
32
<PAGE>
STATE OF _________________
COUNTY OF ________________
I, ______________________, a Notary Public of the County and State
aforesaid, certify that _____________, personally came before me this day and
acknowledged that (s)he is ___________ of NationsBank, N.A. (South), a national
banking association, and that by authority duly given and as the act of the
corporation, the foregoing instrument was signed in its name by its ___________
President.
Witness my hand and official stamp or seal, this ______ day of
_________________, 1997.
- -----------------------------------
Notary Public
My Commission Expires:
- -----------------------------------
(Notary Seal)
33
<PAGE>
SCHEDULE 5(f)(iii)
to
Security Agreement
dated as of April 9, 1997
in favor of NationsBank, N.A. (South),
as Agent
NOTICE OF GRANT OF SECURITY INTEREST
IN TRADEMARKS
United States Patent and Trademark Office
Ladies and Gentlemen:
Please be advised that pursuant to the Security Agreement dated as of
April ___, 1997 (the "Security Agreement") by and among the Credit Parties party
thereto (each a "Credit Party" and collectively, the "Credit Parties") and
NationsBank, N.A. (South), as Agent (the "Agent") for the lenders referenced
therein (the "Lenders"), the undersigned Credit Party has granted a continuing
security interest in and continuing lien upon, the trademarks and trademark
applications shown below to the Agent for the ratable benefit of the Lenders:
TRADEMARKS
Description of Trademark Date of
Trademark No. Item Trademark
Trademark Applications
Trademark Description of Trademark Date of Trademark
Applications No. Applied For Applications
34
<PAGE>
The Credit Parties and the Agent, on behalf of the Lenders, hereby
acknowledge and agree that the security interest in the foregoing trademarks and
trademark applications (i) may only be terminated in accordance with the terms
of the Security Agreement and (ii) is not to be construed as an assignment of
any trademark or trademark application.
Very truly yours,
----------------------------------
[Credit Party]
By:_____________________________
Name:___________________________
Title:__________________________
Acknowledged and Accepted:
NATIONSBANK, N.A. (South), as Agent
By:________________________
Name:______________________
Title:_____________________
35
<PAGE>
STATE OF ___________________
COUNTY OF _____________________
I, ______________________, a Notary Public of the County and State
aforesaid, certify that _____________, personally came before me this day and
acknowledged that (s)he is ___________ Secretary of
_____________________________, a ________________________ corporation, and that
by authority duly given and as the act of the corporation, the foregoing
instrument was signed in its name by its ___________ President.
Witness my hand and official stamp or seal, this ______ day of
_________________, 1997.
- -----------------------------------
Notary Public
My Commission Expires:
- -----------------------------------
(Notary Seal)
36
<PAGE>
STATE OF __________________
COUNTY OF _____________________
I, ______________________, a Notary Public of the County and State
aforesaid, certify that _____________, personally came before me this day and
acknowledged that (s)he is ___________ of NationsBank, N.A. (South), a national
banking association, and that by authority duly given and as the act of the
corporation, the foregoing instrument was signed in its name by its ___________
President.
Witness my hand and official stamp or seal, this ______ day of
_________________, 1997.
- -----------------------------------
Notary Public
My Commission Expires:
- -----------------------------------
(Notary Seal)
37
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (this "Agreement") dated as of April 9,
1997, is by and among NATIONSBANK, N.A. (SOUTH), as Agent for and on behalf of
the Lenders under and in connection with the Senior Bank Credit Agreement as
hereinafter referenced (such Lenders as holders of the Senior Debt hereinafter
defined, including their respective successors and assigns, may be hereinafter
referred to as the "Senior Creditors"); INTEGRATED HEALTH SERVICES, INC., a
Delaware corporation (hereinafter together with its successors and assigns, the
"Subordinated Creditor"); and INTEGRATED LIVING COMMUNITIES, INC., a Delaware
corporation (the "Company").
W I T N E S S E T H:
WHEREAS, NationsBank, N.A. (South) and various other banks and
financial institutions as may now or hereafter become a party thereto (such
banks and financial institutions, together with their successors and assigns,
may hereinafter be referred to collectively as the "Lenders" and individually as
a "Lender") have agreed to establish a credit facility in favor of Integrated
Living Communities Holding, Inc. (the "Borrower"), a Delaware corporation and a
wholly-owned subsidiary of the Company pursuant to the terms of that Credit
Agreement dated as of the date hereof among the Company, as a guarantor, the
Borrower, certain subsidiaries of the Company and the Borrower, as guarantors,
the Lenders and NationsBank, N.A. (South), as Agent (as amended, modified,
extended, renewed or replaced from time to time, the "Senior Bank Credit
Agreement") and as evidenced by those certain promissory notes issued from time
to time by the Borrower to the Lenders under and pursuant to the terms of the
Senior Bank Credit Agreement (hereinafter such promissory notes may be referred
to collectively as the "Senior Notes" or individually as a "Senior Note");
WHEREAS, the Subordinated Creditor has made a loan to the Company in
the original aggregate principal amount of $3,445,024 as evidenced by a
promissory note of the Company dated as of November 20, 1996 (as amended,
modified, extended, renewed or replaced from time to time with the consent of
the Required Lenders or the Agent acting with the consent of the Required
Lenders, the "Subordinated Note");
WHEREAS, the Lenders have required as a condition to the extension of
the credit facility pursuant to the Senior Bank Credit Agreement that the
Subordinated Debt (as hereinafter defined) be subordinated to the loans and
extensions of credit made pursuant to the terms of the Senior Bank Credit
Agreement and evidenced by the Senior Notes on terms acceptable to them;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
<PAGE>
SECTION 1 Definitions.
1.1 Definitions. Terms used but not otherwise defined herein shall
have the meanings provided in the Senior Bank Credit Agreement. As used herein:
"Agent" means NationsBank, N.A. (South), as agent for the Lenders under
the Senior Bank Credit Agreement and related Senior Bank Credit Documents, and
any successors and assigns in such capacity.
"Change of Control" shall have the meaning assigned to such term in the
Senior Bank Credit Agreement.
"Commitments" shall have the meaning assigned to such term in the
Senior Bank Credit Agreement.
"Guarantor" means the Company and any subsidiary or affiliate of the
Company or the Borrower which may guarantee the Senior Debt or any portion
thereof.
"Lender" or "Lenders" means the Lenders party to the Senior Bank Credit
Agreement, together with their successors and assigns as referenced in the
Recitals of this Agreement.
"Person" means any individual, corporation, company, limited liability
company, voluntary association, partnership, trust, unincorporated association
or government (or any agency, instrumentality or political subdivision thereof).
"Proceeding" shall have the meaning assigned in Section 2.2 of this
Agreement.
"Required Lenders" shall have the meaning assigned to such term in the
Senior Bank Credit Agreement.
"Senior Bank Credit Agreement" shall have the meaning assigned to such
term in the Recitals of this Agreement.
"Senior Bank Debt" means the principal of and interest on the loans and
obligations owing from time to time, and all other amounts (including without
limitation all fees, indemnities, charges, expenses and other monetary
obligations) from time to time owing by the Borrower, the Company or any other
Guarantor to any Lender or the Agent, under any of the Senior Bank Credit
Documents.
"Senior Bank Credit Documents" means the Senior Bank Credit Agreement,
the Senior Notes and all other promissory notes, agreements, assignments,
guarantees, mortgages, security agreements, pledge agreements and documents that
have been or may hereafter be given by the Borrower, the Company or any other
Guarantor in connection with the Senior Bank Credit Agreement and the Senior
Debt existing thereunder, and
2
<PAGE>
includes without limitation, the "Credit Documents" referred to in the Senior
Bank Credit Agreement.
"Senior Bank Refinancing Debt" means all obligations of the Borrower,
the Company and each of the other Guarantors outstanding from time to time in
respect of any refinancing, refunding, renewal or restructuring of all or any
part of the Senior Bank Debt.
"Senior Creditors" shall have the meaning assigned to such term in the
preamble of this Agreement and, unless the context otherwise requires, shall
include all holders of the Senior Debt from time to time.
"Senior Debt" means, collectively, (a) all Senior Bank Debt; (b) all
Senior Bank Refinancing Debt; and (c) without limiting the foregoing, any
interest on any of the foregoing Senior Debt accruing subsequent to the
commencement of a Proceeding with respect to the Borrower, the Company or any
other Guarantor, whether or not such interest is allowed as a claim under such
Proceeding.
"Senior Note" or "Senior Notes" shall have the meanings assigned to
such terms in the Recitals of this Agreement.
"Subordinated Creditor" shall have the meaning assigned to such term in
the preamble of this Agreement and, unless the context otherwise requires, shall
include all holders of the Subordinated Debt from time to time.
"Subordinated Debt" means all principal of and interest on, and all
other obligations and liabilities of the Company and the Guarantors owing in
respect of or arising under, the Subordinated Debt Documents, and including
without limitation, amounts advanced or accreted in respect of interest accruing
on the Subordinated Note.
"Subordinated Debt Documents" means the Subordinated Note, and any
other documents or agreements that have been or may hereafter be given by the
Company or a Guarantor to a Subordinated Creditor in connection with the
Subordinated Debt.
"Subordinated Note" shall have the meaning assigned to such term in the
Recitals of this Agreement.
SECTION 2 Subordination Provisions.
2.1 Subordination to Senior Debt. The Company covenants and agrees for
itself and its successors and assigns, and the Subordinated Creditor likewise
covenants and agrees, that the payment of the Subordinated Debt is hereby
expressly subordinated, to the extent that and in the manner hereinafter set
forth, in right and order of payment to the prior payment in full in cash or
cash equivalents of all Senior Debt. While any Senior Debt shall be outstanding,
the Company shall not make any payment on or in respect of, or transfer any
property or interest in property as collateral security for, the Subordinated
Debt and the Subordinated Creditor (including any
3
<PAGE>
subsequent holders of the Subordinated Debt) shall not demand or accept any such
payment or collateral security, or take any action with respect to the
Subordinated Debt inconsistent with the priority position of the Senior Debt
established by these subordination provisions, except as expressly permitted by
these subordination provisions. The provisions of this Section 2 shall
constitute a continuing offer to all Persons who, in reliance upon such
provisions, become holders of, or continue to hold, Senior Debt, and such
provisions are made for the benefit of the holders of Senior Debt, and each such
holder is hereby made an obligee hereunder the same as if their names were
written herein as such and is entitled to enforce the provisions of this Section
2, subject to provisions thereof, without any act or notice of acceptance hereof
or in reliance hereon.
To the extent any payment of Senior Debt (whether by or on behalf of the
Borrower, the Company or any other Guarantor, as proceeds of security or
enforcement of any right of set-off, or otherwise) is declared to be fraudulent
or preferential, set aside or required to be paid to a trustee, receiver or
similar party under any bankruptcy, insolvency, receivership, fraudulent
conveyance or similar law, then if such payment is recovered by, or paid over
to, such trustee, receiver or other similar party, the Senior Debt or part
thereof originally intended to be satisfied shall be deemed to be reinstated and
outstanding as if such payment had not occurred.
For purposes of this Section 2, the Senior Bank Debt shall not be considered to
be paid in full unless at the time of such payment or thereafter the commitments
relating thereto shall have expired or been terminated.
2.2 Payment of Proceeds Upon Dissolution, etc.
(a) Upon any payment or distribution of assets or securities
of the Borrower, the Company or any other Guarantor or upon any
dissolution, winding up, liquidation or reorganization of the Borrower,
the Company or any other Guarantor, whether voluntary or involuntary or
in bankruptcy, insolvency, reorganization, receivership, liquidation,
administrative supervision or similar proceedings or upon an assignment
for the benefit of creditors or any other marshalling of the assets and
liabilities of the Borrower, the Company or any other Guarantor (each,
a "Proceeding"), then and in any such event:
(i) the holders of all Senior Debt shall first be
entitled to receive indefeasible payment in full in cash or
cash equivalents of all amounts due thereon (including
interest accruing subsequent to the commencement of or filing
of a petition in any bankruptcy or insolvency proceeding at
the rate provided for under the terms of such Senior Debt),
before the holders of the Subordinated Debt are entitled to
receive any payment upon the Subordinated Debt or any
distribution of assets in respect of the Subordinated Debt;
(ii) any payment or distribution of assets of the
Borrower, the Company or any other Guarantor of any kind or
character, whether in cash, property or securities, to which
the holders of the Subordinated Debt would be entitled to
except for these subordination provisions shall be paid by the
liquidating trustee or agent or other person making such
payment or distribution, whether a trustee in bankruptcy, a
receiver or liquidating trustee or otherwise,
4
<PAGE>
directly to the holders of the Senior Debt or their
representative or representatives or to the trustee or trustees
under any indenture under which any instruments evidencing any
of such Senior Debt may have been issued, ratably according to
the aggregate amounts remaining unpaid on account of the Senior
Debt held or represented by each, to the extent necessary to
make payment in full of all Senior Debt remaining unpaid, or
adequate provision therefor, after giving effect to any
concurrent payment or distribution to the holders of such
Senior Debt; and
(iii) in the event that, notwithstanding the foregoing,
any payment or distribution of assets of the Borrower, the
Company or any other Guarantor of any kind or character,
whether in cash, property or securities, shall be received by
the holders of the Subordinated Debt after the commencement of
such marshalling of assets and before all Senior Debt is paid
in full, or adequate provision is made therefor, such payment
or distribution shall be paid over to the holders of such
Senior Debt or their representative or representatives or to
the trustee or trustees under any indenture under which any
instruments evidencing any such Senior Debt may have been
issued, ratably as aforesaid, for application to the payment
of all Senior Debt remaining unpaid until all such Senior Debt
shall have been paid in full, or adequate provision made
therefor, after giving effect to any concurrent payment or
distribution to the holders of such Senior Debt.
(b) If the holders of Subordinated Debt do not file a proper
claim or proof of claim or proof of debt or other document or amendment
thereof in the form required in any Proceeding prior to 30 days before
the expiration of the time to file such claim or proof or other
document or amendment thereof, then the Agent, on behalf of the holders
of the Senior Debt, has the right (but not the obligation) in such
Proceeding to, and is hereby irrevocably appointed the lawful attorney
of the holders of the Subordinated Debt for the purpose of enabling the
holders of Senior Debt to, demand, sue for, collect, receive and give
receipt for the payments and distributions in respect of Subordinated
Debt that are made in such Proceeding and that are required to be paid
or delivered to the holders of Senior Debt as provided in this
Agreement, and to file and prove all claims therefor and to execute and
deliver all documents in such Proceeding in the name of the holders of
Subordinated Debt or otherwise in respect of such claims, as the
Required Lenders may reasonably determine to be necessary or
appropriate for the enforcement of the provisions of this Agreement.
2.3 Payments on Subordinated Debt.
(a) Notwithstanding Section 2.1 hereof, prior to the occurrence of a
Senior Payment Default (as hereinafter defined) or a Payment Blockage Period (as
hereinafter defined) and written notice thereof by the Agent to the Subordinated
Creditor stating either that (i) such a Senior Payment Default exists or (ii)
the Agent is electing to initiate the Payment Blockage Period as a result of a
Change of Control, the Subordinated Creditor shall be entitled to receive all
regularly scheduled payments of principal and interest on the Subordinated Debt.
No direct or indirect payment in respect of any Subordinated Debt shall be made
by the Borrower, the
5
<PAGE>
Company or any other Guarantor after the occurrence and during the continuation
of any Senior Payment Default or any Payment Blockage Period.
(b) As used herein (i) "Senior Payment Default" means a Default or
Event of Default in the payment of all or any portion of principal of, premium,
if any, interest or any fees or expenses on or with respect to any Senior Debt,
whether by acceleration or otherwise where the Agent has given written notice
thereof to the Borrower and the Subordinated Creditor and such Senior Payment
Default shall not have been cured by the Borrower or waived by the Lenders and
(ii) "Payment Blockage Period" means the period which (A) begins on the date the
Agent gives written notice to the Borrower and the Subordinated Creditor as
described in Section 2.3(a) stating that the Agent is initiating the Payment
Blockage Period as a result of the occurrence of a Change of Control and (B)
which ends on the date that is 60 days after the occurrence of the Change of
Control referred to in subclause (A). Upon the expiration of the Payment
Blockage Period (without an acceleration of the Senior Debt which acceleration
will constitute a Senior Payment Default), the Subordinated Creditor shall have
the right to (1) again receive all regularly scheduled payments of principal and
interest on the Subordinated Debt, (2) recover all principal and interest
payments which otherwise would have been made to the Subordinated Creditor
during such Payment Blockage Period, and (3) if the Senior Debt has not been
accelerated as a result of the respective Change of Control, declare the
Subordinated Debt due and payable before its stated maturity (and the Company
hereby agrees that the Subordinated Note may be accelerated in such
circumstance) and receive payments on the Subordinated Debt as a result of such
acceleration.
(c) Any such payments made to the holders of the Subordinated Debt and
any amounts recovered by any such holder upon the exercise of such holder's
remedies and applicable to payments on the Subordinated Debt or otherwise in
contravention of these subordination provisions shall be held for, paid over to,
and be subject to claim and recovery by or on behalf of, the holders of Senior
Debt to be applied ratably to the Senior Debt then due (or otherwise among such
holders of Senior Debt as a court of competent jurisdiction may direct),
whereupon the rights of the holders of the Subordinated Debt against the Company
shall be the same as though the payments so paid over or recovered had never
been made by the Company.
2.4 Limitations on Rights of Action.
(a) Notwithstanding anything contained in the Subordinated
Debt Documents to the contrary, so long as the Company shall be
prohibited from making any payment of cash on or in respect of the
Subordinated Debt hereunder, the holders of the Subordinated Debt shall
not take any action to (i) collect, demand payment of or accelerate any
of the Subordinated Debt, (ii) foreclose or otherwise realize upon any
security for the Subordinated Debt, (iii) initiate any Proceeding or
(iv) exercise any of their other rights or remedies against the Company
under the Subordinated Debt Documents or otherwise in respect of the
Subordinated Debt, unless and until the maturity of the Senior Debt
shall have been accelerated, provided that in any event the
Subordinated Debt may be accelerated only after at least 10 days' prior
written notice shall have been given to the Agent for the Senior
Creditors of the intent of the holders of Subordinated Debt to effect
such an acceleration.
6
<PAGE>
(b) Subject to the limitations on the rights of the holders of
the Subordinated Debt to accelerate the maturity of the Subordinated
Debt set forth herein, the failure to make a payment on account of this
Section 2 shall not be construed as preventing the occurrence of a
default or event of default under or in respect of the Subordinated
Debt Documents.
2.5 Notices of Conditions under this Section 2. Notices by the holders
of the Senior Debt under Section 2.3 or by the holders of the Subordinated Debt
under Section 2.4, shall be deemed effective when given in writing to the Agent
on behalf of the holders of the Senior Debt or to the holders of the
Subordinated Debt, as appropriate, to the address set out in, and otherwise in
accordance with the terms of, Section 4.2.
2.6 Right to Join in Actions. Nothing contained herein shall prohibit
the holders of the Subordinated Debt from joining any bankruptcy, reorganization
or insolvency proceedings once commenced by other creditors of the Company;
provided, that in any such proceedings the holder of such Subordinated Debt
shall exercise such holder's rights with respect to the Subordinated Debt in a
manner consistent with these subordination provisions and the priority of the
Senior Debt herein established or any of the liens and security interests
relating thereto, and shall, to the extent permitted by law and consistent with
these subordination provisions, and as requested by the Agent on behalf of the
holders of the Senior Debt for such purpose, assign such rights (including the
right to file proofs of claim and to vote claims on any plan of reorganization
or arrangement) to the Agent on behalf of the holders of the Senior Debt, pro
rata in accordance with their claims or as they may otherwise agree among
themselves.
2.7 Subrogation. Subject to the indefeasible payment in full of all
Senior Debt in cash or cash equivalents, the holders of the Subordinated Debt,
ratably in accordance with the amounts due them, shall be subrogated to the
rights of the holders of the Senior Debt to receive payments or distributions of
cash, property or securities of the Company applicable to the Senior Debt until
the principal of and interest on the Subordinated Debt shall be paid in full and
no such payments or distributions to the holders of the Senior Debt of cash,
property or securities otherwise distributable to the holders of the
Subordinated Debt (but for these subordination provisions) shall, as between the
Company, its creditors other than the holders of the Senior Debt, and the
holders of the Subordinated Debt, be deemed to be a payment by the Company on
account of the Senior Debt. It is understood that these subordination provisions
are and are intended solely for the purpose of defining the relative rights of
the holders of the Subordinated Debt, on the one hand, and the holders of the
Senior Debt, on the other hand. Nothing contained herein is intended to or shall
impair, as between the Company, its creditors other than the holders of the
Senior Debt, and the holders of the Subordinated Debt, the obligation of the
Company, which is unconditional and absolute, to pay to the holders of the
Subordinated Debt, ratably in accordance with the respective amounts due them,
the principal of and interest on the Subordinated Debt as and when the same
shall become due and payable in accordance with their terms, or to affect the
relative rights of the holders of the Subordinated Debt and the creditors of the
Company other than the holders of the Senior Debt. No failure of the Company to
pay principal of or interest on the Subordinated Debt when due hereunder shall
be excluded from the definition of "Events of Default" herein solely because
such payment is prohibited by these subordination provisions.
7
<PAGE>
2.8 No Waiver of Subordination Provisions.
(a) No right of any present or future holder (or
representative thereof) of any Senior Debt to enforce subordination as
herein provided shall at any time in any way be prejudiced or impaired
by any act or failure to act on the part of the Company or by any act
or failure to act by any such holder, or by any non-compliance by the
Company with the terms provisions and covenants of the Subordinated
Debt Documents, regardless of any knowledge thereof any such holder (or
representative thereof) may have or be otherwise charged with.
(b) Without in any way limiting the generality of Section
2.08(a) hereof, the holders of Senior Debt (or their representative, if
applicable) may, at any time and from time to time and in their
absolute discretion, without incurring duties or other obligations to
any holders of Subordinated Debt and without impairing or releasing the
subordination and other benefits provided in this Agreement or the
obligations of the holders of the Subordinated Debt to the holders of
the Senior Debt, do any one or more of the following, all without
notice to or assent from the holders of the Subordinated Debt and even
if any right of reimbursement or subrogation or other right or remedy
of any such holder is affected, impaired or extinguished thereby:
(i) change the manner, place or terms of payment or
change or extend the time of payment of, or renew, exchange,
amend or alter, the terms of any Senior Debt, any security
therefor or guarantee thereof of any liability of the
Borrower, the Company or any other Guarantor to such holder,
or any liability incurred directly or indirectly in respect
thereof, or otherwise amend, renew, exchange, modify or
supplement in any manner Senior Debt or any instrument
evidencing or guaranteeing or securing the same or any
agreement under which Senior Debt is outstanding;
(ii) sell, exchange, release, surrender, realize
upon, enforce or otherwise deal with in any manner and any
order any property pledged, mortgaged or otherwise securing
Senior Debt or any liability of the Borrower, the Company or
any other Guarantor to such holder, or any liability incurred
directly or indirectly in respect thereof;
(iii) settle or compromise any Senior Debt or any
other liability of the Borrower, the Company or any other
Guarantor of the Senior Debt to such holder or any security
therefor or any liability incurred directly or indirectly in
respect thereof and apply any sums by whomsoever paid and
however realized to any liability (including, without
limitation, Senior Debt) in any manner or order; and
(iv) fail to take or to record or otherwise perfect,
for any reason or for no reason, any lien or security interest
securing Senior Debt by whomsoever granted, exercise or delay
in or refrain from exercising any right or remedy against the
Borrower, the Company or any other Guarantor or any collateral
or other
8
<PAGE>
security or any other Person, elect any remedy and otherwise
deal freely with the Borrower, the Company and any
collateral or other security.
SECTION 3 Other Agreements.
3.1 Amendments to Subordinated Debt Documents. Each of the Subordinated
Creditors agrees that it shall not, without the prior consent of the Required
Lenders or the Agent on behalf of the Required Lenders, agree or consent to any
amendment, waiver or other modification of any provision of any Subordinated
Debt Document.
3.2 Transfer of Subordinated Debt. The holders of the Subordinated Debt
shall not, without the prior written consent of the Required Lenders or the
Agent on behalf of the Required Lenders, which consent shall not be unreasonably
withheld, assign or otherwise transfer, in whole or in part, or encumber any of
its rights in respect of, the Subordinated Debt, provided that, in the case of
any such assignment, transfer or encumberance to which the Required Lenders
shall have consented, the transferee shall agree in writing, contemporaneously
therewith, to become a party hereto on the same terms as the Subordinated
Creditor.
3.3 Notices to Senior Creditors.
(a) Each Subordinated Creditor (or its representative) shall
notify the Senior Creditors (or their representatives) promptly upon
the happening of any of the following:
(i) the occurrence, and the Subordinated Creditors'
waiver, of any default under or in respect of the Subordinated
Debt Documents, but only if the existence of such default
would entitle the holders of the Subordinated Debt to
accelerate any Subordinated Debt;
(ii) acceleration of the maturity of any Subordinated
Debt held by it;
(iii) when proposed and if the same shall become
effective, any amendment, waiver or other modification of any
provision of any Subordinated Debt Document; and
(iv) the transfer of any Subordinated Debt,
specifying the name and address of the transferee and
enclosing an executed counterpart of the agreement required
under Section 3.2 hereof.
(b) Failure of any party to give notice required under this
Section 3.3 shall not relieve any other party of its obligations under
this Agreement.
3.4 Further Assurances. Each Subordinated Creditor agrees to promptly
execute and deliver such further documents and do such other acts and things as
any holder of Senior Debt may reasonably request from time to time in order to
more fully effect the purposes of this Agreement.
9
<PAGE>
SECTION 4 Miscellaneous.
4.1 No Waiver. No failure on the part of the Senior Creditors to
exercise and no delay in exercising, and no course of dealing with respect to,
any right, power or privilege under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege under this Agreement preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. The remedies provided
herein are cumulative and not exclusive of any remedies provided by law.
4.2 Notices. Except as otherwise expressly provided herein, all notices
and other communications shall have been duly given and shall be effective (i)
when personally delivered, (ii) when transmitted via telecopy (or other
facsimile device) to the number set out below, (iii) the day following the day
on which the same has been delivered prepaid to a reputable national overnight
air courier service, or (iv) the third Business Day following the day on which
the same is sent by certified or registered mail, postage prepaid, to the
address set out on the signature pages hereto, or at such other address as such
party may specify by written notice to the other parties. Any notice or other
communication required to be given or delivered hereunder to the Senior
Creditors shall be deemed given or delivered to the Senior Creditors upon
effective delivery hereunder of such notice or communication to the Agent.
4.3 Amendments; Waivers; Modifications. This Agreement and the
provisions hereof may not be amended, waived, modified, changed, discharged or
terminated except with the prior written consent of the Company, the Required
Lenders and the holders of the Subordinated Debt. Any such amendment,
modification or waiver shall be binding upon all holders of Senior Debt and
Subordinated Debt.
4.4 Counterparts. This Agreement may be executed in any number of
counterparts, each of which where so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Agreement to produce or account
for more than one such counterpart.
4.5 Headings. The headings of the sections and subsections hereof are
provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Agreement.
4.6 Governing Law; Submission to Jurisdiction; Venue.
(a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA. Any legal action or
proceeding with respect to this Agreement may be brought in the courts
of the State of Florida, or of the federal courts of the United States
located in Florida, and, by execution and delivery of this Agreement,
each party hereby irrevocably accepts for itself and in respect of its
property, generally and unconditionally, the jurisdiction of such
courts. Each party further irrevocably consents to the service of
process out of any of the aforementioned courts in any such action or
proceeding by the
10
<PAGE>
mailing of copies thereof by registered or certified mail, postage
prepaid, to such party at its address for notices pursuant to Section
4.2. Nothing herein shall affect the right of any party to serve
process in any other manner permitted by law.
(b) Each party hereby irrevocably waives any objection which
it may now or hereafter have to the laying of venue of any of the
aforesaid actions or proceedings arising out of or in connection with
this Agreement or any other Senior Bank Credit Document brought in the
courts referred to in subsection (a) hereof and hereby further
irrevocably waives and agrees not to plead or claim in any such court
that any such action or proceeding brought in any such court has been
brought in an inconvenient forum.
(c) EACH PARTY HEREBY IRREVOCABLY WAIVES, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED THEREBY.
4.7 Severability. If any provision of any of this Agreement is
determined to be illegal, invalid or unenforceable, such provision shall be
fully severable and the remaining
[remainder of page intentionally left blank]
11
<PAGE>
provisions shall remain in full force and effect and shall be construed without
giving effect to the illegal, invalid or unenforceable provisions.
4.8 Entirety. This Agreement together with the other Senior Bank Credit
Documents represent the entire agreement of the parties hereto and thereto, and
supersede all prior agreements and understandings, oral or written, if any,
including any commitment letters or correspondence relating to the Senior Bank
Credit Documents or the transactions contemplated herein and therein.
4.9 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Borrower, the Company, each other Guarantor, each
Senior Creditor and the Subordinated Creditor and each other present or future
holder of Subordinated Debt and their respective successors and assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
INTEGRATED LIVING COMMUNITIES, INC.
Address for Notice:
Integrated Living Communities, Inc. By:_________________________________
24850 Old 41 Road, Suite 10 Name:_______________________________
Bonita Springs, Florida 34135 Title:______________________________
Attention: Geralyn Kidera
NATIONSBANK, N.A. (SOUTH),
Address for Notice: as Agent for the Senior Creditors
NationsBank, N.A. (South)
Downtown Sarasota Banking Center By:_________________________________
1605 Main Street Name:_______________________________
Sarasota, Florida 34236 Title:______________________________
Attention: Mark A. McDonell
INTEGRATED HEALTH SERVICES, INC.
Address for Notice:
Integrated Health Services, Inc. By:_________________________________
10065 Red Run Boulevard Name:_______________________________
Owing Mills, Maryland 21117 Title:______________________________
Attention: Michael Tan
12
LEASE AGREEMENT
BETWEEN
THE HOMESTEAD OF MANHATTAN, L.C., AS LANDLORD,
AND
INTEGRATED LIVING COMMUNITIES OF MANHATTAN, INC., AS TENANT
AS OF AUGUST 20, 1996
EFFECTIVE AUGUST 29, 1996
<PAGE>
TABLE OF CONTENTS
ARTICLE / SECTION PAGE
ARTICLE I
DEMISED PREMISES ............................................. 1
1.1 Demise of Premises ........................................... 1
1.2 Other Assets ................................................. 2
1.3 Assumed Name ................................................. 3
1.4 Delivery of Possession ....................................... 3
ARTICLE II
TERM ......................................................... 3
2.1 Term ......................................................... 3
2.2 Renewal Term ................................................. 3
2.3 Lease Term ................................................... 3
2.4 Lease Year ................................................... 3
ARTICLE III
RENTAL ....................................................... 4
3.1 Annual Rent .................................................. 4
3.2 Certain Adjustments to the Annual Rent ....................... 5
3.3 Certain Adjustments to the Annual Rent; Transfer Taxes;
Prorated Items ............................................... 5
3.4 Other Prorations ............................................. 6
ARTICLE IV
TITLE AND POSSESSION ......................................... 6
4.1 Title and Authority .......................................... 6
4.2 Leased Equipment ............................................. 6
4.3 Surrender of Possession ...................................... 6
4.4 Holding Over ................................................. 7
ARTICLE V
TAXES, ASSESSMENTS AND UTILITIES ............................. 7
5.1 Real Estate Taxes 7
5.2 Personal Property Taxes ...................................... 9
5.3 Sewer Use Fees ............................................... 9
5.4 Utilities ................................................... 9
ARTICLE VI
USE OF DEMISED PREMISES ...................................... 9
6.1 Use by Tenant ................................................ 9
6.2 Compliance with Laws ......................................... 9
(i)
<PAGE>
6.3 Waste ........................................................ 10
6.4 License and Permits .......................................... 10
6.5 Landlord's Repairs ........................................... 10
6.6 Conflict with Insurance Policies ............................. 10
ARTICLE VII
EMINENT DOMAIN ............................................... 10
7.1 Permanent or Temporary Taking ................................ 10
7.2 Compensation ................................................. 10
7.3 Effect on this Lease of Permanent Taking ..................... 11
7.4 Effect on this Lease of Temporary Taking ..................... 11
7.5 Restoration .................................................. 12
ARTICLE VIII
ALTERATIONS, REPAIRS and TRADE FIXTURES ...................... 12
8.1 Repairs by Tenant Generally .................................. 12
8.2 Quality and Promptness of Repairs and Replacements;
Ownership of Replacements and Warranties ..................... 16
8.3 Liability of Landlord ........................................ 16
8.4 Removal of Personal Property ................................. 17
ARTICLE IX
SIGNS ........................................................ 17
ARTICLE X
ASSIGNMENT, SUBLETTING AND SUBORDINATION ..................... 17
10.1 Assignment or Subletting by Tenant 17
10.2 Leasehold Mortgages .......................................... 18
10.3 Subordination and Attornment ................................. 20
10.4 Sale by Landlord 22
10.5 Estoppel Certificates ........................................ 22
ARTICLE XI
DEFAULT ...................................................... 23
11.1 Default by Tenant23
11.2 Landlord's Rights and Remedies ............................... 23
11.3 Default by Landlord .......................................... 27
11.4 Delays ....................................................... 27
(ii)
<PAGE>
ARTICLE XII
DAMAGE TO DEMISED PREMISES.......................................... 28
12.1 Major Damage ................................................ 28
12.2 Nonmajor Damage ............................................. 28
ARTICLE XIII
LANDLORD'S REPRESENTATIONS AND WARRANTIES ........................... 29
13.1 Organization and Standing of Landlord ....................... 29
13.2 Authority ................................................... 29
13.3 Binding Effect .............................................. 30
13.4 Absence of Conflicting Agreements ........................... 30
13.5 Consents .................................................... 30
13.6 Contracts ................................................... 30
13.7 Financial Statements ........................................ 31
13.8 Material Changes ............................................ 31
13.9 Licenses; Permits ........................................... 31
13.10 Title, Condition of Personal Property ....................... 32
13.11 Title, Condition of the Demised Premises .................... 33
13.12 Legal Proceedings ........................................... 35
13.13 Employees ................................................... 35
13.14 Collective Bargaining, Labor Contracts, Employment
Practices, etc .............................................. 35
13.15 ERISA ....................................................... 35
13.16 Insurance ................................................... 35
13.17 Relationships ............................................... 36
13.18 Assets Comprising the Demised Premises ...................... 36
13.19 Absence of Certain Events ................................... 36
13.20 Compliance with Laws ........................................ 37
13.21 Environmental Compliance .................................... 37
13.22 Tax Returns ................................................. 38
13.23 Encumbrances Created by this Agreement ...................... 38
13.24 Residents ................................................... 38
13.25 Zoning ...................................................... 38
13.26 Leases ...................................................... 38
13.27 Care of Residents; Deficiencies; Licensed Bed
and Rate Schedule ........................................... 39
13.28 Books and Records ........................................... 39
13.29 Intellectual Property ....................................... 39
13.30 No Misstatements or Omissions ............................... 39
13.31 Bankruptcy .................................................. 40
(iii)
<PAGE>
ARTICLE XIV
TENANT'S REPRESENTATIONS, WARRANTIES AND COVENANTS .................. 40
14.1 Organization and Standing of Tenant .......................... 40
14.2 Authority .................................................... 40
14.3 Binding Effect ............................................... 41
14.4 Absence of Conflicting Agreements ............................ 41
14.5 Statement of Operations ...................................... 41
ARTICLE XV
INSURANCE, SUBROGATION AND INDEMNIFICATION .......................... 41
15.1 Comprehensive General Liability and
Professional Insurance to be Carried by Tenant ............... 41
15.2 Certificate of Insurance ..................................... 41
15.3 Other Coverage ............................................... 42
15.4 Indemnification of Landlord .................................. 42
15.5 Indemnification of Tenant .................................... 42
15.6 Fire, Extended Coverage and Additional Perils Insurance ...... 43
15.7 Waiver of Subrogation ........................................ 43
ARTICLE XVI
ARBITRATION ......................................................... 44
ARTICLE XVII
CERTAIN COVENANTS OF LANDLORD ....................................... 45
17.1 Covenant Not-To-Compete ...................................... 45
17.2 Pre-Commencement Date Financial Statements ................... 46
ARTICLE XVIII
MISCELLANEOUS PROVISIONS ............................................ 46
18.1 Notices ...................................................... 46
18.2 Understanding and Agreements ................................. 47
18.3 Amendment .................................................... 47
18.4 Construction ................................................. 47
18.5 Specific Performance ......................................... 47
18.6 Binding Effect on Successors ................................. 47
18.7 Lease (Short Form) ........................................... 47
18.8 Reading and Receipt of this Lease ............................ 48
18.9 Prohibition of Mechanics Liens ............................... 48
18.10 Brokerage or Agents Fees ..................................... 48
18.11 Captions and Indexes ......................................... 48
18.12 Pronouns ..................................................... 48
18.13 Drafting of this Lease ....................................... 48
18.14 Counterparts ................................................. 48
18.15 Quiet Enjoyment .............................................. 48
ARTICLE XIX
CONDITIONS PRECEDENT TO LEASE COMMENCEMENT .......................... 49
19.1 Representations and Warranties ............................... 49
19.2 Performance of Covenants; No Default ......................... 49
19.3 Delivery of Certificate ...................................... 49
19.4 Legal Matters ................................................ 49
19.5 Approvals .................................................... 49
19.6 Material Adverse Change ...................................... 50
19.7 Authorization Documents ...................................... 50
19.8 2 ............................................................ 50
19.9 Environmental Compliance ..................................... 50
19.10 Facility Purchase Option ..................................... 51
19.11 Non-Disturbance Agreement 51
ARTICLE XX
CERTAIN ADDITIONAL OBLIGATIONS OF LANDLORD .......................... 51
20.1 Discharge of Liabilities ..................................... 51
20.2 Accounts Receivable .......................................... 51
20.3 Employment of Existing Employees ............................. 51
20.4 Audited Financial Statements ................................. 51
20.5 Licenses ..................................................... 51
20.6 Collective Bargaining, Labor Contracts, etc .................. 51
20.7 Contracts and Personal Property Leases ....................... 51
20.8 Demised Premises ............................................. 51
20.9 Delivery of Notices .......................................... 51
ARTICLE XXI
EXTENSION OF COMMENCEMENT DATE AND TERMINATION ...................... 52
21.1 Termination .................................................. 52
21.2 Tenant's Remedies ............................................ 52
ARTICLE XXII
CONSTRUCTION AND DELIVERY OF POSSESSION ............................. 53
22.1 Construction, Delivery of Possession and
Commencement Date ............................................ 53
(v)
<PAGE>
ARTICLE XXIII
GLOSSARY AND ADDITIONAL DEFINED TERMS ................................ 55
SIGNATURE PAGE ......................................................... 59
ACKNOWLEDGMENTS ........................................................ 60
GUARANTY OF LEASE ...................................................... 61
ACKNOWLEDGMENTS ........................................................ 62
(vi)
<PAGE>
SCHEDULES
- ---------
195178-1
EXHIBITS/SCHEDULES
EXHIBIT A
DESCRIPTION OF THE LAND
EXHIBIT A-1
LOCATION OF LEASED IMPROVEMENTS
EXHIBIT B
LIST OF CERTAIN PERSONAL PROPERTY & FIXTURES
EXHIBIT C
LANDLORD'S CONSTRUCTION WORK
EXHIBIT D
OPTION AGREEMENT
EXHIBIT E
FORM OF SUBORDINATION, NON-DISTURBANCE
AND RECOGNITION AGREEMENT
SCHEDULE 13.4
SCHEDULE 13.5
SCHEDULE 13.6
SCHEDULE 13.8
SCHEDULE 13.9
SCHEDULE 13.10(a)
SCHEDULE 13.10(b)
SCHEDULE 13.11(a)
SCHEDULE 13.11(e)
SCHEDULE 13.11(j)
SCHEDULE 13.12
(vii)
<PAGE>
SCHEDULES
- ---------
SCHEDULE 13.13
SCHEDULE 13.16
SCHEDULE 13.17
SCHEDULE 13.19
SCHEDULE 13.21
SCHEDULE 13.25
SCHEDULE 13.26
SCHEDULE 13.27(b)
SCHEDULE 13.27(c)
SCHEDULE 13.29
SCHEDULE 14.4
(viii)
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT (this "Lease") is made and entered into as of the
20th day of August, 1996, effective August __, 1996, by and between THE
HOMESTEAD OF MANHATTAN, L.C., a Kansas limited liability company having an
address c/o The Homestead Company, L.C., 155 North Market, Suite 910, Wichita,
Kansas 67202, Attention: Mr. Jack West, as landlord ("Landlord"), and INTEGRATED
LIVING COMMUNITIES OF MANHATTAN, INC., a Delaware corporation having an office
at 10065 Red Run Boulevard, Owings Mills, Maryland 21117, as tenant ("Tenant").
W I T N E S S E T H:
WHEREAS, Landlord is the owner of the hereinafter described real
property on which Landlord intends to construct the improvements and personal
property constituting the 46-bed and 35-unit assisted living facility known as
"The Homestead of Manhattan" (said real property and all improvements that may
from time to time be situated thereon and all Personal Property (as hereinafter
defined), are hereinafter called the "Facility"), situated at Manhattan, Kansas;
and
WHEREAS, Tenant or affiliates of Tenant are engaged in the management,
leasing and ownership of similar facilities and are experienced in various
phases of management, leasing and ownership thereof; and
WHEREAS, Landlord desires to lease the Facility to Tenant for the term
hereinafter provided, and Tenant desires to accept such lease upon the terms and
subject to the conditions contained herein.
NOW, THEREFORE, in consideration of the rents, mutual covenants and
agreements set forth in this Lease, the parties agree as follows:
ARTICLE
DEMISED PREMISES
DEMISE OF PREMISES. Landlord hereby demises and leases to Tenant for
the term and upon the conditions provided in this Lease, and Tenant hereby
leases from Landlord, the following real and personal property (collectively,
the "Demised Premises"):
(a) the real property described in Exhibit A attached hereto and made a
part hereof (the "Land"), and
(b) all buildings, structures, fixtures and other improvements of every
kind, now or hereafter situated upon the Land, including, but not limited to,
the Facility, alleyways and connecting tunnels, sidewalks, utility pipes,
conduits and lines (on-site), and parking areas and
<PAGE>
roadways appurtenant to such buildings and structures, specifically excluding
utility pipes, conduits and lines owned by utility providers, if any, as to
which, however, all of Landlord's right, title and interest thereto is hereby
leased and included (collectively, the "Leased Improvements"), and
(c) all easements, licenses, rights, privileges and appurtenances now
or hereafter relating to the Land and/or the Leased Improvements (collectively,
the "Related Rights"), and
(d) all equipment, machinery, fixtures, and other items of real and/or
personal property, including all components thereof, now or hereafter located
in, on or used in connection with, and permanently affixed to or incorporated
into the Land or the Leased Improvements, including, without limitation, if any,
all furnaces, boilers, heaters, electrical equipment, heating, plumbing,
lighting, ventilation, refrigeration, incineration, air and water pollution
control, waste disposal, air-cooling and air-conditioning systems and apparatus,
sprinkler systems and fire and theft protection equipment, and built-in oxygen
and vacuum systems, all of which, to the greatest extent permitted by law, are
hereby deemed by the parties hereto to constitute real property, together with
all replacements, modifications, alterations and additions thereto, specifically
excluding utility pipes, conduits and lines owned by utility providers, if any,
as to which, however, all of Landlord's right, title and interest thereto is
hereby leased and included (collectively, the "Fixtures"), and
(e) all equipment, machinery, furniture, furnishings, movable walls or
partitions, computers, trade fixtures, office equipment, operating supplies, or
other tangible real or personal property now or hereafter located, installed,
stored, used or usable in connection with the operation of the Facility and
removable without causing material damage to the Land or the Leased
Improvements, including, without limitation, all items of furniture,
furnishings, equipment, appliances, apparatus, and vehicles, together with all
replacements, modifications, alterations and additions thereto, specifically
excluding utility pipes, conduits and lines owned by utility providers, if any,
as to which, however, all of Landlord's right, title and interest thereto is
hereby leased and included, and also specifically excluding any personal
property owned by patients or residents, as to which, however, all of Landlord's
right, title and interest thereto is hereby leased and included (collectively,
the "Personal Property").
1.2 OTHER ASSETS. Effective on the Commencement Date (as hereinafter
defined) Landlord hereby transfers, assigns and conveys to Tenant for the term
hereinafter set forth and upon the conditions provided in this Lease, all of the
following assets (collectively, hereinafter called the "Other Assets"):
(a) all intangible property, assets and rights appurtenant or relating
to the ownership and/or operation of the Facility, including but not limited to,
licenses, permits and other governmental approvals from the applicable licensing
and certification agencies, to the extent assignable (collectively, the
"Intangibles"), and
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(b) all patents, copyrights, trademarks, trade names, brand names,
service marks, logos, symbols, trade dress, designs or representations or
expressions of any thereof, or registrations or applications for registration
thereof, or any other inventions, trade secrets, technical information,
know-how, proprietary right or intellectual property appurtenant or relating to
the ownership and/or operation of the Facility (collectively, the "Trade
Rights").
1.3 ASSUMED NAME. Tenant shall have the exclusive right (but not the
obligation) to use and to register as the assumed business name for the Facility
the name "The Homestead of Manhattan" effective as of the Commencement Date of
this Lease and thereafter while this Lease is in effect.
1.4 DELIVERY OF POSSESSION . Landlord shall deliver exclusive
possession of the Demised Premises and the Other Assets to Tenant on the
Commencement Date. Notwithstanding anything to the contrary contained in this
Lease, Tenant shall have no obligations or liabilities under this Lease or as
tenant of the Demised Premises or with respect to the Other Assets, prior to
such delivery of possession and the Commencement Date.
ARTICLE II
TERM
2.1 TERM . Subject to Section 21.1 hereof, the term of this Lease shall
commence on the Commencement Date (as hereinafter defined), as such date may be
extended pursuant to the express provisions hereof. The term of this Lease shall
run from the Commencement Date and terminate at 12:00 midnight, on the last day
of the fifteen (15) Lease Year (as hereinafter defined) (the "Initial Term"),
unless extended as provided in Section 2.2 below.
2.2 RENEWAL TERM . If this Lease is still in effect and if no Event of
Default (as hereinafter defined) shall have occurred and be continuing Tenant
shall have the right to extend this Lease for three (3) additional consecutive
terms of five (5) years each (each a "Renewal Term"). A renewal option shall be
deemed exercised upon Tenant giving Landlord one hundred twenty (120) days
written notice prior to the expiration of the then current Lease Term. If Tenant
shall give notice of the exercise of an election in the manner and within the
time provided herein, the Lease Term shall be extended upon the giving of the
notice without the requirement of any action on the part of Landlord.
2.3 LEASE TERM . As used herein, "Lease Term" shall mean, prior to the
exercise by Tenant of any of its rights under Section 2.2 to extend the term of
this Lease, the Initial Term, and after the exercise by Tenant of any one or
more of such extension rights, "Lease Term" shall mean the Initial Term and each
Renewal Term as to which such right has been exercised. Except as otherwise
expressly provided in this Lease, all the agreements and conditions contained in
this Lease shall apply to each Renewal Term as to which such right has been
exercised.
2.4 LEASE YEAR . As used herein, "Lease Year" means any 12-month period
that commences on the Commencement Date, or any anniversary of the Commencement
Date, provided, however, if the Commencement Date occurs on a day other than the
first day of a month, then a
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Lease Year shall commence on the first day of the first month following the
Commencement Date except that the first Lease Year shall include the period from
the Commencement Date through the last day of the month in which the
Commencement Date occurs.
ARTICLE III
RENTAL
3.1 ANNUAL RENT . Beginning on the Commencement Date of this Lease,
Tenant agrees to pay to Landlord rent at the annual rates set forth below, in
each case in monthly installments of one-twelfth thereof. The monthly rent
payments provided for herein shall be paid by Tenant in advance, without notice
or demand, on the first day of each month, and the rent for the calendar month
during which rent shall begin to accrue and for the last calendar month of the
Lease Term, shall be apportioned, if necessary. All rental payments to be made
to Landlord under this Lease shall be made to Landlord at the address stated in
Section 18.1 hereof or to such other person, firm, corporation or other entity
or at such other address as Landlord may designate by notice in writing to
Tenant.
3.1.1 Annual rent ("Annual Rent") shall be payable as follows:
during the first Lease Year at the annual rate of Two
Hundred Fifty-eight Thousand Five Hundred ($258,500)
Dollars; and during each Lease Year thereafter at the annual
rate equal to the product resulting from multiplying the
Annual Rent for the first Lease Year by a fraction the
numerator of which is the Price Index (as defined in Article
VIII) published for the first calendar month of the Lease
Year with respect to which the adjustment is being made, and
the denominator of which is the Base Price Index (as defined
in Article VIII); provided that the Annual Rent for the
Lease Year in question shall not be lower than the Annual
Rent for the immediately preceding Lease Year.
3.1.2 Annual Rent shall be paid in equal monthly installments and
shall be payable in advance, without demand, on the first
day of each calendar month during any Lease Year. All
payments of Annual Rent and all other payments to be made by
Tenant to Landlord pursuant to this Lease shall be paid in
lawful money of the United States of America and, except as
otherwise provided in this Lease, without discount, setoff
or abatement.
3.1.3 The obligations to pay Annual Rent and all other items of
rent under this Lease are separate and independent of each
and every other covenant and agreement contained in this
Lease, except as otherwise provided in this Lease to the
contrary including (but not limited to) provisions relating
to Tenant's right to an abatement of, or setoff or reduction
against, any such items of rent.
3.1.4 In the event that any monthly installment of Annual Rent is
not paid within fifteen (15) days after the date due, then,
in addition to any other rights or remedies available to
Landlord, interest shall accrue on such overdue payment at a
rate per annum equal to the lesser of (a) the maximum rate
of interest
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permitted by law or (b) two percent (2%) above the "Prime Rate" of interest
quoted in The Wall Street Journal "Money Rates Column" from the date
originally due to the date of payment of the same.
3.2 CERTAIN ADJUSTMENTS TO THE ANNUAL RENT . Intentionally Deleted.
3.3 CERTAIN ADJUSTMENTS TO THE ANNUAL RENT; TRANSFER TAXES; PRORATED
ITEMS . On the Commencement Date, the following adjustments and prorations shall
be computed as of the Commencement Date with respect to the following items
(unless otherwise stated herein) and the initial monthly installments of Annual
Rent payable for the first Lease Year shall be adjusted, upward or downward as
appropriate, to reflect such prorations:
(a) TRANSFER TAXES. All state and local real estate transfer taxes and
fees payable in connection with this Lease or any of the transaction documents
(including, without limitation, the short form lease) relating hereto or the
recording thereof shall be borne by Landlord.
(b) REAL ESTATE TAXES, ETC. Real property taxes and all other ad
valorem public or governmental charges against the Demised Premises (including
charges for sewer, water, drainage or other services) assessed for a period in
which the Commencement Date occurs shall be adjusted and apportioned as of the
Commencement Date and paid thereafter by Tenant in accordance with Article V
hereof.
(c) PERSONAL PROPERTY TAXES. Personal property taxes attributable to
the value of the Personal Property and, if applicable, to the extent taxable,
the Other Assets for the period in which the Commencement Date occurs shall be
adjusted and apportioned as of the Commencement Date and paid thereafter by
Tenant in accordance with Article V hereof.
(d) LICENSES, SERVICE CONTRACTS AND PERSONAL PROPERTY LEASES. All
prepayments made or payments due under any continuing Licenses (as defined in
Section 13.9), Contracts (as defined in Section 13.6), and Personal Property
Leases (as defined in Section 13.26) affecting the Demised Premises or Other
Assets, including, without limitation, parking, garbage removal, laundry and
maintenance agreements, shall be adjusted and apportioned as of the Commencement
Date. Tenant shall assume all such obligations under such continuing Licenses,
Contracts and Personal Property Leases which arise (and relate to the period) on
and after the Commencement Date. Notwithstanding anything to the contrary
contained in this Lease, Landlord shall terminate any and all service contracts,
leases and/or other agreements affecting or related to the Demised Premises
which are with any person or entity that is affiliated with Landlord, including
without limitation, any and all Contracts and/or Personal Property Leases other
than those designated by Tenant pursuant to Article XX hereof and Tenant shall
have no obligations or liabilities with respect thereto.
(e) UTILITIES. All prepayments made or payments due with respect to
utilities servicing the Demised Premises, including, without limitation, water,
sewer, electric, gas and utility bills, shall be adjusted and apportioned as of
the Commencement Date. Landlord shall use its best efforts to have all utility
meters read on the Commencement Date so as to accurately determine the proration
of current utility bills.
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3.4 OTHER PRORATIONS . All other charges and fees customarily prorated
and adjusted in similar transactions in the locale in which the Demised Premises
are situated shall be prorated as of the Commencement Date in accordance with
such custom. However, nothing contained herein shall operate to subject Tenant
to any liability of Landlord, and Tenant does not assume any liability of
Landlord, except as specifically set forth in this Lease.
In the event that accurate prorations and other adjustments cannot be
made as of the Commencement Date because current bills or statements are not
obtainable (as, for example, utility bills), the parties shall prorate such
items upon receipt of the final bill or statement.
ARTICLE IV
TITLE AND POSSESSION
4.1 TITLE AND AUTHORITY . Landlord represents and warrants to Tenant
that Landlord owns the fee simple title to the Land, Leased Improvements,
Related Rights and Fixtures and Landlord owns marketable title to the Personal
Property and Other Assets, free and clear of all Liens (as defined in Section
13.10) other than as set forth on Schedules 13.10(a), 13.10(b) and 13.11(a), and
Landlord has the right and complete authority to enter into this Lease on the
terms and conditions and for the use and purposes herein stated. Said Schedules
13.10(a), 13.10(b), 13.11(a) and 13.11(b) shall each be updated to the extent
necessary on and as of the day preceding the Commencement Date.
4.2 LEASED EQUIPMENT . As of the Commencement Date, Landlord shall
furnish the Facility with the Personal Property and Fixtures (collectively, the
"Leased Equipment"), including, without limitation, those items of the Personal
Property and Fixtures set forth on Exhibit B hereto. Landlord shall have no
obligation to furnish the Facility with any Leased Equipment after the
Commencement Date. The Leased Equipment shall include all the personal property,
fixtures, equipment and furnishings necessary and appropriate for the operation
of the Facility by Tenant in accordance with the standards for operations
contemplated for the facility leased pursuant to that certain Lease Agreement,
dated as of June 18, 1996, between The Homestead of Garden City, L.C., as
landlord, and Integrated Living Communities at Garden City, Inc., as tenant; all
of such Leased Equipment being leased to Tenant pursuant to the terms of this
Lease. No additional rent, beyond Annual Rent provided for in Article III
hereof, shall be paid by Tenant for the Leased Equipment.
4.3 SURRENDER OF POSSESSION . At the end of the Lease Term, or upon the
earlier termination of this Lease, Tenant, at its sole cost and expense, shall
surrender the Demised Premises to Landlord in the same good condition and state
of repair as they were in at the Commencement Date, ordinary wear and tear and,
except as otherwise provided in this Lease, damage by fire or other casualty
excepted, and shall convey and transfer to Landlord such portion of the Other
Assets as shall not have been used, depleted or consumed in the ordinary course
of the operation of the Facility and, subject to Section 8.2 hereof, shall also
convey and transfer to Landlord any replacements and accessories thereto
acquired by Tenant during the Lease Term, to the extent the same continue in
existence at the end of the Lease Term.
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4.4 HOLDING OVER . If Tenant remains in possession of the Demised
Premises after the expiration of the Lease Term, except as otherwise provided in
the Option Agreement (as hereinafter defined), such possession shall be as a
tenant at sufferance. During such occupancy, rent shall be payable equal to 150%
times the monthly amount of Annual Rent payable during the last month of the
Lease Term, and the provisions of this Lease shall be applicable and continue in
full force and effect. However, Landlord's acceptance of any rent payments and
the terms of this Section 4.4 shall not constitute a renewal of this Lease or
give Tenant any right to continue to occupy the Land on a month-to-month basis
or otherwise. Notwithstanding the foregoing, if Tenant is unable to surrender
the Demised Premises because Landlord fails to provide a qualified and duly
licensed operator (a "Proper Successor") for the Facility at the end of the
Lease Term to take over the operation and management of the Facility, Tenant
shall have the right, but shall not be obligated to, remain in possession of the
Demised Premises and continue to operate and manage the same if Tenant would be
legally prohibited from abandoning the Demised Premises or in Tenant's judgment,
abandoning the Demised Premises without a Proper Successor in place to continue
the operations of the Facility would jeopardize its (or its affiliates')
reputation as a provider of residential congregant, nursing and/or assisted
living facility care or could otherwise subject it (or its affiliates) to
liability. In the event Tenant remains in possession of the Demised Premises
pursuant to the immediately preceding sentence, Tenant shall (a) pay to Landlord
as gross rent during such occupancy 90% the Annual Rent payable by Tenant in the
last Lease Year of the Lease Term and (b) surrender possession of the Demised
Premises within ten (10) days after Landlord provides a Proper Successor to take
over the operation and management of the Facility.
ARTICLE V
TAXES, ASSESSMENTS AND UTILITIES
5.1 REAL ESTATE TAXES . Tenant, at its sole cost and expense, shall pay
when due all ad valorem general real estate taxes, betterment or other
assessments and transit taxes (collectively, "Impositions") which are assessed
against, levied, imposed upon, become a lien or become due and payable with
respect to or upon the Demised Premises, and no other property, and which first
become due and payable, or any installments thereof which become due and
payable, on and after the Commencement Date and during the Lease Term. Tenant
shall provide Landlord with copies of all receipts received in connection with
the payment of such taxes and assessments within twenty (20) days after
Landlord's request prior to the date interest or penalties on such taxes and
assessments would be imposed. Tenant shall have the right, at its sole cost and
expense and in good faith, to contest the amount or validity of any such
Imposition payable by Tenant under the terms of this Lease, provided, however,
that if at any time payment of any such Imposition shall become necessary to
prevent the tax sale of the Demised Premises or any portion thereof because of
nonpayment, then Tenant shall pay the same in sufficient time to prevent such
sale. Landlord shall join, at Tenant's sole cost and expense, in any proceedings
referred to above, and hereby agrees that the same may be brought in its name,
if the provisions of any law, rule or regulations at the time, in effect shall
require that such proceedings be brought by and/or in the name of Landlord or
any owner of the Demised Premises. Tenant shall be entitled to any refund of any
Impositions, and all penalties or interest thereon, received by Landlord which
shall have been paid by Tenant, or which shall have been paid by Landlord but
previously reimbursed in full by Tenant. Provided that no Event of Default shall
have occurred and be continuing, Landlord shall not, without Tenant's prior
approval, make or
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agree to any settlement, compromise or other disposition of any such proceedings
or discontinue or withdraw any such proceedings or accept any refund or other
adjustment of or credit for any Imposition as a result of any such proceedings.
Landlord hereby appoints Tenant the attorney-in-fact of Landlord for the purpose
of making all payments to be made by Tenant pursuant to any of the provisions of
this Lease to persons or entities other than Landlord. Notwithstanding anything
to the contrary contained in this Lease, if, by not later than thirty (30) days
prior to the final date for contesting the validity or amount of any real estate
taxes and assessments with respect to the last Lease Year of the Lease Term,
Tenant shall not have advised Landlord that Tenant intends to conduct such
contest, Landlord will have the right (but not the obligation) to contest the
validity and/or amount of such Impositions for the last Lease Year of the Lease
Term without the consent of Tenant, but at Landlord's sole cost and expense.
5.1.1 If at any time during the Lease Term the methods of taxation
of Impositions prevailing at the commencement of the Initial
Term hereof shall be altered so that in lieu of, or as a
supplement to, or a substitute for, the whole or any part of
the Impositions then levied, assessed or imposed on the
Demised Premises, any of the following are levied, assessed
or imposed:
(a) a tax, assessment, levy, imposition or charge, wholly or
partially as a capital levy or otherwise, on the rents received
therefrom; or
(b) a tax, assessment, levy (including but not limited to
any municipal, state or federal levy), imposition or charge
measured by or based in whole or in part upon the Demised
Premises and imposed upon Landlord; or
(c) a license fee measured by the rent payable under this
Lease;
then, in such event, all such taxes, assessments, levies, impositions, and
charges, or the part thereof so measured or based, shall be deemed to be
included in the Impositions payable by Tenant pursuant to this Section 5.1, to
the extent that such taxes, assessments, levies, impositions and charges would
be payable if the Demised Premises were the only property of Landlord subject
thereto, and Tenant shall pay and discharge the same as herein provided in
respect of the payment of general real estate taxes and assessments.
5.1.2 Impositions shall not include any income, excess profit,
estate, inheritance, succession, transfer, franchise,
capital or other tax or assessment upon Landlord or (unless
in substitution, as herein provided) upon the rentals
payable under this Lease, all of which shall be the sole
obligation of Landlord. The real estate taxes on the Demised
Premises during any year shall mean such amounts as shall be
finally determined, after deducting abatements, discounts,
refunds or rebates, if any, to the Impositions payable with
respect to the Demised Premises during said year.
5.1.3 Any Impositions which become due for the year in which
possession is given to Tenant but which are payable with
respect to a period prior to the Commencement Date shall be
prorated for the calendar year between
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Landlord and Tenant as provided in Section 3.3 hereof and
such proration shall also occur at the end of the Lease Term
for the calendar year of termination.
5.1.4 If Landlord shall have the right to elect the period over
which any Impositions are payable, Landlord agrees to elect
and Tenant may make such payments over the longest period of
time available.
5.2 PERSONAL PROPERTY TAXES . Beginning on the Commencement Date,
Tenant, at its sole cost and expense, shall pay when due all personal property
taxes and assessments (if any) assessed against, levied, imposed upon, or which
would become a lien or become due and payable with respect to, or upon any of
Tenant's tangible or intangible personal property or the Leased Equipment or the
Other Assets, during the Lease Term. Tenant shall provide Landlord with copies
of all receipts received in connection with the payment of such taxes and
assessments not less than ten (10) days prior to the date interest or penalties
on such taxes and assessments would be imposed. Any personal property taxes and
assessments which become due for the year in which possession is given to Tenant
but which are payable with respect to a period prior to the Commencement Date
shall be prorated for the calendar year between Landlord and Tenant as provided
in Section 3.3 hereof and such proration shall also occur at the end of the
Lease Term for the calendar year of termination.
5.3 SEWER USE FEES . Beginning on the Commencement Date, Tenant, at its
sole cost and expense, shall pay when due all sewer use fees, rents, charges and
deposits assessed against, levied, imposed upon, or which would become a lien or
become due and payable with respect to, or upon the Demised Premises, during the
Lease Term. Tenant shall provide Landlord with copies of all receipts received
in connection with the payment of such fees, rents, charges and deposits not
less than ten (10) days prior to the date interest or penalties on such fees or
deposits would be imposed.
5.4 UTILITIES . Beginning on the Commencement Date, Tenant, at its sole
cost and expense, shall obtain in its name and pay when due all charges and
deposits for gas, water, electricity, cable television, trash, telephone,
communication services, and all other utilities used on or supplied to the
Demised Premises, during the Lease Term.
ARTICLE VI
USE OF DEMISED PREMISES
6.1 USE BY TENANT . Tenant shall use the Demised Premises for the
business purpose of a residential congregant, nursing care and/or assisted
living facility and all related and ancillary medical and therapeutic services,
and for no other purpose without Landlord's consent, which consent shall not be
unreasonably withheld or delayed.
6.2 COMPLIANCE WITH LAWS . Except as otherwise provided in this Section
6.2, and in Sections 8.1.4, 8.1.5, and 8.1.6, Tenant, in operating the Demised
Premises, at its sole cost and expense, shall comply with all applicable city,
county, state and federal building codes, ordinances, rules, regulations and
laws applicable to the Demised Premises, notices from the issuer
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of the Facility's fire hazard or casualty policy, and each covenant, condition
or restriction of record which is a Permitted Exception (as hereinafter
defined).
Without limiting the generality of the foregoing provisions of this
Section 6.2, except as otherwise provided in this Lease, Tenant, at its cost and
expense, shall comply with all Environmental Laws (as hereinafter defined) that
are applicable to its operation of the Demised Premises, including, but not
limited to, the use, handling, treatment, storage, transportation and disposal
of any hazardous, toxic or infectious waste, material or substance (including
Medical Waste) and petroleum products, material or waste. Landlord, at its cost
and expense, shall comply with all Environmental Laws in connection with the
previous, present and/or future use, handling, treatment, storage,
transportation and disposal of any such waste, material, substance and products
at or on the Demised Premises by anyone other than Tenant, or its employees,
agents, contractors, invitees, residents, patients or clients.
6.3 WASTE . Tenant shall neither commit, nor permit the commission of
waste upon or against the Demised Premises, ordinary wear and tear excepted.
6.4 LICENSE AND PERMITS . Tenant at its sole cost and expense, shall
acquire and maintain all licenses and permits needed to operate the Demised
Premises for the then applicable use permitted herein. Tenant, as a provider of
residential care services, shall comply with all applicable rules, regulations,
laws, statutes, orders, ordinances and requirements, and will maintain its
certifications for reimbursement and licensure, and its accreditation, if
compliance with accreditation standards is required to maintain the operations
of the Facility.
6.5 LANDLORD'S REPAIRS . Landlord shall have no obligation to make
improvements, alterations, replacements or repairs to the Demised Premises,
except as may be expressly provided herein.
6.6 CONFLICT WITH INSURANCE POLICIES. Tenant shall not permit any use
of the Demised Premises which would invalidate any policy of insurance or which
would increase the premiums for any insurance policy carried by or for the
benefit of Landlord unless Tenant pays any such increase in premiums.
ARTICLE VII
EMINENT DOMAIN
7.1 PERMANENT OR TEMPORARY TAKING . If after the execution of this
Lease all or any part of the Demised Premises is acquired on a permanent or
temporary basis by any federal, state or local governmental agency, by means of
condemnation or threat of condemnation, or by reason of mutual agreement between
Landlord, Tenant, and said governmental agency, this Article VII shall control.
7.2 COMPENSATION . All compensation awarded for any taking (including,
but not limited to, loss of leasehold) shall belong to and be the property of
Landlord; provided, however, that Tenant shall be entitled to any portion of the
award made to Tenant for its loss of business,
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depreciation to or for the cost of removal of stock, fixtures, equipment (other
than the Leased Equipment) or signs, moving expenses, relocation costs or any
other allowances to which Tenant may be legally entitled. This Lease shall not
preclude the right of Tenant to pursue an independent action for damages against
any governmental agency for said taking, provided, however that in no event
shall any resulting award to Tenant reduce the amount of the award to which
Landlord may be entitled. In any event, Landlord shall not be liable to Tenant
for any damages.
7.3 EFFECT ON THIS LEASE OF PERMANENT TAKING . In the event that the
whole of the Demised Premises is taken permanently by any method, then this
Lease shall terminate as of the date title to the Demised Premises vests in the
governmental agency. Such date of vesting shall operate as though it were the
date originally intended by the parties for expiration of this Lease and Tenant
shall pay Annual Rent and Landlord shall refund to Tenant any overpayments of
Annual Rent or other charges within five (5) days after the date of such vesting
and all other obligations hereunder accrued (prorated as appropriate) to the
date of such vesting.
In the event a substantial and material portion (as hereinafter
defined) of the Demised Premises are taken permanently, then Tenant shall have
the option to terminate this Lease by giving Landlord at least ninety (90) days'
written notice. If Tenant does not elect to terminate this Lease or if less than
a substantial and material portion of the Demised Premises are taken, then this
Lease shall terminate only as to the part of the Demised Premises taken and
Annual Rent shall be reduced for the remainder of the Lease Term by a just, fair
and equitable proportion of Annual Rent payable according to the size, nature
and extent of the property that is taken. Any adjustments or reductions in
Annual Rent, as contemplated by this Section shall take into account the
practical and economic effect of the taking in question on the operation of the
Demised Premises. In the event that a substantial and material part of the
Demised Premises is temporarily taken in excess of three hundred sixty-five
(365) consecutive days, then such taking shall be deemed a permanent taking for
purposes of this Lease. It shall be presumed that the taking is "substantial and
material" if (a) the Kansas Department of Health and Environment permanently
closes the Demised Premises whether in whole or in part because of such taking
for use as a nursing care and/or assisted living facility, or (b) if in Tenant's
reasonable business judgment the portion of the Demised Premises not so taken is
inadequate to continue to operate the Facility in a commercially profitable
manner as a nursing care and/or assisted living facility, as the case may be
according to the then actual use by Tenant.
In the event that the Demised Premises become landlocked by such taking
for a period in excess of three (3) consecutive days and reasonable alternative
access cannot be provided within five (5) days after such occurrence, then
Annual Rent shall abate until access or reasonable alternative access is
provided to the Demised Premises; provided that if such access or reasonable
alternative access cannot be provided within thirty (30) days after such
occurrence, then Tenant shall have the right to terminate this Lease by written
notice to Landlord, which shall terminate this Lease sixty (60) days after such
notice.
7.4 EFFECT ON THIS LEASE OF TEMPORARY TAKING . In the event that all or
part of the Demised Premises are taken for a temporary use, Annual Rent shall be
reduced and abated by a just, fair and equitable proportion of Annual Rent
payable according to the size, nature and extent of the property that is taken.
Any adjustments or reductions in Annual Rent, as contemplated by this
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Section shall take into account the practical and economic effect of the taking
in question on the operation of the Demised Premises. Tenant shall continue to
perform all other conditions of this Lease as though the taking or condemnation
had not occurred, except to the extent that Tenant shall be prevented from doing
so by reason of the taking or condemnation and except for the abatement of
Annual Rent as provided herein. Neither party to this Lease shall have any right
to terminate this Lease by reason of a temporary taking of all or part of the
Demised Premises, except as stated in Section 7.3 above.
7.5 RESTORATION. If any building or improvement on the Demised Premises
or any replacement thereof shall be damaged or partially destroyed by any such
taking of less than all or substantially all thereof and this Lease shall not be
terminated by reason thereof, Tenant shall be entitled to receive such portion
of any award to which Landlord may be entitled, as will be sufficient to pay for
the costs of restoring and rebuilding such building(s) and improvement(s) and
within ninety (90) days after receipt by Tenant of such sum, Tenant shall
proceed with reasonable diligence to conduct any necessary demolition and to
repair, replace or rebuild, any remaining part of said building(s) and
improvement(s), or of any replacement thereof not so taken, so as to constitute
such remaining part thereof a complete, useable building in substantially the
same condition and repair as the building(s) and improvements were in prior to
any such taking; and Tenant shall hold that portion of any award received by
Tenant pursuant to this Section in trust to apply the same to the cost and
expense of such demolition, repairing, replacing and rebuilding. If the cost of
any work necessary to repair, replace or rebuild (including any necessary
demolition work) any damage to or destruction of the building(s) and
improvement(s) or any replacement or replacements thereof shall equal or exceed
an aggregate cost of One Hundred Thousand ($100,000) Dollars, the same shall be
conducted under the supervision of an architect or engineer selected by Tenant
and approved in writing by Landlord, which approval Landlord agrees shall not be
unreasonably withheld or delayed. Whenever pursuant to this Section Tenant is
entitled to receive the proceeds of an award in excess of $100,000 in amount for
the purpose of applying the same to the cost of demolishing, repairing,
replacing or rebuilding, such proceeds shall be paid to the Insurance Trustee
provided for in Article XV, to be disposed of by such Insurance Trustee in the
manner provided in Article XII.
ARTICLE VIII
ALTERATIONS, REPAIRS AND TRADE FIXTURES
8.1 REPAIRS BY TENANT GENERALLY .
8.1.1 Except as otherwise expressly provided in this Lease,
including without limitation, in this Article VIII and in
Articles VII, XII and XXII, Tenant shall be responsible for
the performance, at its sole cost and expense, of all
necessary repairs, replacements, alterations and
improvements, whether or not in order to comply with all
applicable laws, regulations and municipal ordinances,
(collectively, "Repairs") to the Demised Premises. This
obligation to perform Repairs shall include, at its sole
cost and expense, inspecting, keeping, maintaining,
repairing and replacing the interior, exterior, structural
and nonstructural improvements, alterations and other
components on the Demised Premises so as to keep the
improvements and interior decorations in
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substantially the same condition as they were in on the
Commencement Date, subject to depreciation and ordinary wear
and tear, and in a safe condition, free from dirt, water,
snow, ice, refuse, trash and obstruction and shall also
include, but not be limited to, signs, glass, landscaping,
any air conditioning, heating, electrical, ventilating,
parking areas and driveways, plumbing systems, roof, walls
and all interior and exterior cleaning, painting, repairs
and replacements on or at the Demised Premises. Tenant shall
not voluntarily alter any structural part of the Leased
Improvements or demolish, remove, or materially and
permanently alter any permanent improvement in or on the
Land or make permanent additions thereto the cost of which,
in the case of any single alteration or addition, exceeds
$50,000 or, in the case of all such alterations or additions
in any Lease Year, exceeds in the aggregate $250,000,
without the prior written consent of Landlord, which consent
shall not be unreasonably withheld or delayed; provided,
however, that Landlord's consent shall not be required with
respect to any such Repairs which are required in order to
comply with applicable laws, regulations or municipal
ordinances or in the case of an emergency or any other
situation where bodily harm is threatened or Tenant is
exposed to liability if such Repairs are not made. In
addition, Tenant may perform any other non-structural
alterations and additions to the Demised Premises without
Landlord's consent so long as Tenant gives a copy of the
plans and specifications, if any, to Landlord within ten
(10) days prior to making such alterations and/or additions;
provided further that cosmetic modifications and decorations
that are substantially consistent with the quality of the
original materials and decorations that were used in the
Facility may be made by Tenant without any notification to
Landlord.
8.1.1.1 The dollar amounts set forth in this paragraph
8.1.1 shall be adjusted and increased each Lease Year by an
amount equal to the product resulting from multiplying each
of said dollar amounts by a fraction the numerator of which
is the Price Index published for the first calendar month of
the Lease Year with respect to which the adjustment is being
made, and the denominator of which is the Base Price Index.
8.1.1.2 As used in this Lease the following terms shall
have the following respective meanings:
(i) "Price Index" shall mean the "Revised Consumer
Price Index for All Urban Consumers (the CPI-U) published by
the Bureau of Labor Statistics of the United States
Department of Labor, for All Cities area, All Items,
(1982-84=100)"; and
(ii) "Base Price Index" shall mean the Price Index
published for the calendar month in which the Commencement
Date occurs or if not published for such month, then the
closest preceding month for which a Price Index is
available.
8.1.1.3 In the event the Price Index shall hereafter be
converted to a different standard reference base or
otherwise revised, the determination of the adjusted dollar
amounts
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hereunder shall be made with the use of such conversion
factor, formula or table for converting the Price Index as
may be published by the Bureau of Labor Statistics, or
Prentice Hall, Inc. or any other nationally recognized
publisher of similar statistical information. If at any time
during the Lease Term the Price Index shall no longer be
published by said Bureau, then any comparable index issued
by said Bureau or similar agency of the United States
issuing similar indices shall be used for the purposes of
making the adjustments under Article III and under this
Article VIII, the same, however, to be appropriately
adjusted in order to give effect to the intent of the
foregoing provisions of this Lease. In the event that the
U.S. Department of Labor, Bureau of Labor Statistics,
changes the publication frequency of the Price Index so that
a Price Index is not available to make a cost-of-living
adjustment as herein provided in Article III or this Article
VIII for the month specified, the cost-of-living adjustment
to be made thereunder shall be based on the percentage
difference between the Price Index for the closest preceding
month for which a Price Index is available and the Base
Price Index.
8.1.2 Tenant shall keep the Demised Premises free from any
mechanic's, materialman's, or similar liens and encumbrances
and any claims therefor in connection with any Repairs and
Tenant shall remove any such lien or encumbrance, by bond or
otherwise, within thirty (30) days after notice from
Landlord of the same. If Tenant fails to do so, Landlord may
pay the amount of such claim or take such other action as
Landlord deems reasonably necessary to remove such claim,
lien, or encumbrance after investigating the validity
thereof. The amount so paid and costs incurred by Landlord
shall be deemed additional rent under this Lease, payable on
demand, when accompanied by detailed information and
invoices regarding such amount. Nothing in this Lease shall
be deemed a consent by Landlord to the filing of any lien on
Landlord's interest in the Demised Premises and any such
liens shall attach solely to Tenant's interest in the
Demised Premises and shall in all respects be subordinate to
Landlord's interest in the Demised Premises. Tenant shall
not do anything or permit anything to be done upon the
Demised Premises which will materially and adversely affect
the safety or security of the Demised Premises, which will
increase the rate of fire or casualty insurance upon the
building or its contents, without Landlord's written
consent, which consent shall not be unreasonably withheld or
delayed, or which will cause structural damage to the
Demised Premises or any Leased Improvements. Except for
trade fixtures, any improvements made to the Demised
Premises shall become the property of Landlord, free of
charge, if affixed to the realty.
8.1.3 Tenant's obligation to perform Repairs shall also include
without limitation the repair and maintenance of Leased
Equipment and the replacement from time to time of obsolete,
damaged or unsightly Leased Equipment, so as to keep the
same in good operating condition consistent with a nursing
care or assisted living facility, whichever is being
operated at the Demised Premises at the time in question.
Notwithstanding anything to the contrary contained in this
Lease, any Leased Equipment which is leased or the subject
of a conditional sales agreement or other finance
arrangement at the
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commencement of the Initial Term and any replacement(s) of
such Leased Equipment may be encumbered similarly during the
Lease Term.
8.1.4 Notwithstanding anything to the contrary contained in this
Lease, if Tenant is required to make any expenditures for
Repairs (whether or not in order to comply with all
applicable laws, regulations and municipal ordinances) to
the Demised Premises during the last two Lease Years of the
Lease Term (excluding Repairs that are required to be made
as a result of Tenant's, or Tenant's agents', employees' or
contractors' negligence or wilful misconduct), which
expenditures according to generally accepted accounting
principles ("GAAP") should be capitalized (such expenditures
being hereinafter collectively called "Capital
Expenditures") and if any such Capital Expenditure is a
Major Capital Expenditure (as hereinafter defined), Tenant
shall send to Landlord a notice of such circumstance, which
notice shall specify the nature of the repair, replacement,
alteration or improvement for which the Major Capital
Expenditure is being incurred (hereinafter called a "Capital
Improvement") and the estimated cost of such Capital
Improvement. Tenant shall only be obligated to pay that
portion ("Tenant's Share") of the cost of such Capital
Improvement as shall be equitably apportioned to it taking
into consideration the reasonable useful life (according to
GAAP) of such Capital Improvement and the unexpired Lease
Term and the cost of such Capital Improvement in excess of
Tenant's Share (such excess cost being hereinafter called
"Landlord's Share") shall be borne by Landlord. Tenant shall
only be obligated to make the Capital Improvement if, within
ten (10) business days after Landlord receives Tenant's
above-described notice, Tenant and Landlord agree on the
determination of Tenant's Share and Landlord's Share of such
Major Capital Expenditure and the manner in which Landlord
will pay and/or reimburse Landlord's Share to Tenant. If the
parties cannot agree on an equitable sharing of any such
Major Capital Expenditure or the manner of payment and/or
reimbursement, Tenant may (i) seek to have the matter
resolved by arbitration as elsewhere provided in this Lease
prior to undertaking to perform any such Capital
Improvement, (ii) perform any such Capital Improvement and
during and/or after the performance thereof seek to have the
matter resolved by arbitration as elsewhere provided in this
Lease, in which case immediately upon resolution of such
matter Landlord shall pay to Tenant and/or reimburse Tenant
for Landlord's Share of the cost thereof, or (iii) terminate
this Lease upon not less than thirty (30) days prior written
notice to Landlord. In the event that after allocating
Landlord's and Tenant's respective Shares of the cost of a
Capital Improvement, Tenant exercises a renewal option,
Tenant shall reimburse Landlord for the unamortized amount
of Landlord's Share of any such cost theretofore paid by
Landlord with interest thereon at the rate per annum set
forth in Article III hereof.
As used herein, a "Major Capital Expenditure" means any Capital
Expenditure which is required to be made during the last two Lease Years of the
Lease Term and which exceeds $25,000
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individually, or which, when added to all other Capital Expenditures theretofore
incurred by Tenant during such period, exceeds $100,000.
8.1.5 Notwithstanding anything to the contrary contained in this
Lease, Tenant shall not be obligated to make or to pay for
any Repairs that are required as a result of the negligence
or wilful misconduct of Landlord, or any of its or its
affiliates' (which shall include an affiliate of The
Homestead Company, L.C. or of Jack West), employees, agents
or contractors or as provided in paragraph 8.1.6 below.
8.1.6 Landlord agrees that if at any time or times any
governmental authorities or insurance rating bureaus having
jurisdiction shall complain that the Demised Premises, or
any portion thereof, were not constructed in compliance with
any law, ordinance or regulation of any governmental
authority or insurance rating bureau having jurisdiction and
shall request compliance, then Landlord shall, upon receipt
of notice of such complaint, cause such repairs, alterations
or other work to be done so as to bring about the compliance
requested.
8.2 QUALITY AND PROMPTNESS OF REPAIRS AND REPLACEMENTS; OWNERSHIP OF
REPLACEMENTS AND WARRANTIES . All repairs and replacements made by Tenant shall
be made when reasonably necessary and within a reasonably prompt period of time;
shall be with new or like-new materials of at least equal or better value,
utility and condition to that which the same was in at the commencement of the
Initial Term, taking into consideration the quality of materials and workmanship
of the same, and shall be done in compliance with all applicable laws, codes,
ordinances, rules, regulations and statutes of the city, county, state and
federal governments.
Any such replaced Leased Equipment shall be and remain the property of
Landlord; provided, however, that if any item of Leased Equipment is replaced by
Tenant during the Lease Term at Tenant's sole cost and expense with an upgraded
item of Leased Equipment, then Tenant shall have the right prior to the end of
the Lease Term to either remove such upgraded item and replace the same with a
like item of Leased Equipment of equal or better quality, design and function as
existed on the Commencement Date.
Landlord agrees that it will give to Tenant the benefit of all
warranties and guarantees they may have received or be entitled to from any of
their contractors or materialmen with respect to the Demised Premises and that
Tenant may enforce the same either in Tenant's name or in Landlord's name.
8.3 LIABILITY OF LANDLORD . Except if caused by Landlord's breach of
this Lease or by the negligence or willful misconduct of Landlord or of any of
its affiliates' (which shall include an affiliate of The Homestead Company, L.C.
or of Jack West), employees, agents or contractors, all property belonging to
Tenant or any occupant of the Demised Premises shall be there at the risk of
Tenant or such other occupant only, and Landlord shall not be liable for theft
or misappropriation thereof, or loss or damage to any such property due to
vandalism, water, rain, snow, frost, fire, storm or accident, or by breakage,
stoppage or leakage of water, gas, heating or sewer pipes or plumbing, upon,
about or adjacent to the Demised Premises or by any other cause.
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8.4 REMOVAL OF PERSONAL PROPERTY . Provided that Tenant has not
accepted an offer to purchase the Demised Premises and Other Assets pursuant to
the Right of First Refusal Agreement, dated of even date herewith, between
Landlord and Tenant (the "Right of First Refusal"), or has not exercised its
option to purchase the Demised Premises and Other Assets pursuant to a separate
Purchase Option Agreement by and among the parties hereto, executed of even date
herewith (the "Option Agreement"), upon the expiration or termination of this
Lease, Tenant, at its sole cost and expense, shall remove from the Demised
Premises all of Tenant's personal property and equipment. If any disfigurement
or damage results from such removal, repairs shall be made by Tenant at its
expense to restore the Demised Premises to its original condition, ordinary wear
and tear excepted.
If upon surrender to Landlord of possession of the Demised Premises,
Tenant, at its sole cost and expense, does not within ten (10) days after
Landlord's demand remove Tenant's personal property and equipment, Landlord, at
Landlord's election, shall have the right to treat Tenant's property as having
been abandoned by Tenant to Landlord without any payment or offset.
ARTICLE IX
SIGNS
Tenant shall have the right to place upon the Demised Premises such
sign or signs as it may desire, at Tenant's sole cost and expense. All signs
shall comply with all applicable federal, state and local statutes, rules,
regulations and ordinances. Tenant shall maintain such signs in a good state of
repair and shall repair any damage to the Demised Premises caused by the
erection, maintenance or removal at the termination of this Lease of such signs.
Upon the termination of this Lease, all signs of Tenant shall be removed in
accordance with Section 8.4.
ARTICLE X
ASSIGNMENT, SUBLETTING AND SUBORDINATION
10.1 ASSIGNMENT OR SUBLETTING BY TENANT. Except as hereinafter
provided, Tenant shall not assign, transfer, pledge, hypothecate or encumber
this Lease or any interest herein, or sublet the Demised Premises or any part
thereof or any right or privilege appurtenant thereto, or allow any person other
than Tenant and its agents, managers, concessionaires, licensees, employees,
residents, patients and medical staff to occupy or use the Demised Premises or
any part thereof without Landlord's prior written consent, which consent shall
not be unreasonably withheld or delayed. Notwithstanding the foregoing,
Landlord's consent shall not be required for, and this Section 10.1 shall not
prohibit, (i) an assignment to a corporate parent, affiliate or subsidiary of
Tenant, or any joint venture, partnership or other entity, provided such
assignee is either Integrated Living Communities, Inc. ("ILCI") or is
"controlled" directly or indirectly by ILCI (the term "control" as used herein
shall be deemed to mean ownership of at least 50% of the outstanding voting
stock of a corporation, or other majority equity and voting interest if not a
corporation); (ii) an assignment in connection with the sale of ten percent
(10%) or more of ILCI's assets and (iii) an assignment in connection with a
merger or consolidation. Any unauthorized assignment or sublease shall be
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voidable and shall constitute a breach of this Lease at Landlord's option. No
assignment of this Lease shall be binding on Landlord until (a) a duplicate
original of such assignment, duly executed by the assignor shall be delivered to
Landlord, and (b) the assignee shall execute and deliver to Landlord an
instrument in and by which the assignee shall assume and agree to perform, from
and after the effective date of the assignment, all of the terms, covenants and
conditions of this Lease on Tenant's part to be performed. At least thirty (30)
days prior to the effectiveness of any assignment as to which Landlord's consent
is required, Tenant shall deliver to Landlord a package of relevant information
concerning the assignee. For purposes of this Lease, any sale or transfer of a
controlling interest in Tenant shall be deemed an assignment of this Lease. No
assignment, sale, transfer, pledge, hypothecation or encumbrance shall relieve
Tenant of any obligation contained in this Lease. Tenant shall pay all of
Landlord's reasonable costs and expenses (not in excess of $2,500), including
reasonable attorney's fees, incurred in connection with any assignment, sale,
transfer, pledge, hypothecation, encumbrance or sublease, for which Landlord's
consent is required.
10.2 LEASEHOLD MORTGAGES. Tenant shall have the right from time to time
to pledge, hypothecate, encumber or mortgage this Lease (each herein referred to
as a "leasehold mortgage"). Landlord hereby expressly agrees that the holder of
such leasehold mortgage shall be entitled to all of the rights, privileges and
powers afforded to the holder or holders of leasehold mortgages under this and
other Articles of this Lease.
10.2.1 Notwithstanding anything to the contrary contained in this
Lease, if so requested by the holder of any leasehold
mortgage, any notice from Landlord to Tenant shall be
simultaneously delivered to such leasehold mortgagee at his
or its address, and no notice of default or termination of
this Lease given by Landlord to Tenant shall be deemed
legally effective until and unless notice of such default
and notice of such termination shall have been given by
Landlord to such leasehold mortgagee. Such leasehold
mortgagee entitled to such notice shall have and be
subrogated to any and all rights of Tenant with respect to
any default hereunder by Tenant. Without impairing the
generality of the foregoing right of subrogation, it is
specifically agreed that any such leasehold mortgagee shall
have the right to appoint an arbitrator, in case Tenant
shall fail to make such appointment after written notice
from Landlord as provided in Article XVI hereof (a copy of
which notice shall have been simultaneously given to such
leasehold mortgagee), and, for this purpose, shall have an
additional period of fifteen (15) days to make such
appointment, and the arbitrator so appointed shall thereupon
be recognized in all respects as if he or she had been
appointed by Tenant.
10.2.2 Landlord will not accept any surrender, cancellation or
enter into any modification of this Lease without the prior
written consent thereto of the holder of any leasehold
mortgage who shall become entitled to notice as provided
above.
10.2.3 If, by reason of any default by Tenant, this Lease shall be
terminated at the election of Landlord prior to the stated
expiration thereof, Landlord will enter into a new lease of
the Demised Premises and the Other Assets with such
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leasehold mortgagee (i.e. the holder of a mortgage on this
Lease who shall become entitled to notice, as provided
above) or its nominee for the remainder of the term
effective as of the date of such termination, at the same
Annual Rent and upon the same terms, provisions, covenants
and agreements herein contained, subject, however, to the
rights, if any, of any parties then in possession of any
part of the Demised Premises, provided (a) said leasehold
mortgagee shall make written request upon Landlord for such
new lease within forty-five (45) days after the date of such
termination and such written request is accompanied by
payment to Landlord of all sums which would then be due to
Landlord under this Lease but for the termination thereof,
the amount of which Landlord agrees to advise such leasehold
mortgagee of in writing upon request; (b) said leasehold
mortgagee pays to Landlord, at the time of the execution and
delivery of said new lease, any and all sums and reasonable
expenses, including reasonable attorneys' fees, to which
Landlord shall have been subjected or paid by reason of such
default, the amount of which sums and expenses Landlord
agrees to advise such leasehold mortgagee of in writing upon
request, and (c) said leasehold mortgagee shall, on or
before execution and delivery of said new lease, perform and
observe all the other covenants and conditions herein
contained on Tenant's part to be performed and observed but
for such termination to the extent that Tenant shall have
failed to perform and observe the same, Landlord hereby
agreeing to advise such leasehold mortgagee in writing, upon
request, of the covenants and conditions which Tenant shall
have failed to perform and the extent of such failure. If
during such period of forty-five (45) days requests for such
new lease shall be made by more than one leasehold
mortgagee, then provided the provisions of this Section are
complied with, Landlord shall be required to execute and
deliver such new lease to that leasehold mortgagee (or the
nominee thereof) lowest in order of priority of lien who (i)
cures all defaults under all prior leasehold mortgages, (ii)
delivers to Landlord certificates or letters from the
holders of all prior leasehold mortgages which certify or
state that no default then exists under such prior leasehold
mortgages and (iii) executes and delivers, at the time of
the execution of such new lease, new mortgages to the
holders of all prior leasehold mortgages on this Lease
having the same terms and conditions, and securing the same
amounts, as such prior leasehold mortgages. Upon the
execution and delivery of such new lease, any subleases
which may have theretofore been assigned and transferred to
Landlord shall thereupon be assigned and transferred,
without recourse, by Landlord to the new tenant. Such new
lease shall have the same rights and priorities as this
Lease.
10.2.4 If Landlord shall elect to terminate this Lease by reason of
any default other than a default in the payment of money,
the then holder of any leasehold mortgage on this Lease who
shall have become entitled to notice, as provided in this
Article, shall not only have and be subrogated to any and
all rights of Tenant with respect to curing of any default
and have the right to obtain a new lease as above provided,
but shall also have the right to postpone and
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extend the specified date for the termination of this Lease,
as fixed by Landlord in a notice of termination, for a
period of not more than six (6) months (subject to extension
as provided below), provided such leasehold mortgagee shall
thereafter promptly cure all defaults which may be cured by
the payment of a sum of money and undertake to cure any
other then existing default of Tenant and shall forthwith
initiate steps to acquire Tenant's interest in this Lease by
foreclosure of its mortgage or otherwise. Such right shall
be exercised by such leasehold-mortgagee's giving Landlord
notice of the exercise of the same prior to the termination
date fixed in Landlord's notice of termination. If, before
the date specified for the termination of this Lease as
extended by such leasehold-mortgagee, Tenant shall be duly
removed from possession, and if an assumption of
performances and observance of the covenants and conditions
herein contained on Tenant's part to be performed or
observed shall be delivered to Landlord by the leasehold
mortgagee, or its nominee, then and in such event the
default under this Lease shall be deemed cured and removed;
and provided, further, that if at the end of said six (6)
month period such leasehold mortgagee shall be actively
engaged in steps to acquire Tenant's interest herein, the
time of such leasehold mortgagee to comply with the
provisions of this Article shall be extended for such
additional period or periods as shall be necessary to
complete such steps with diligence, provided that during
such extension no further default shall occur hereunder. Any
payment to be made or action to be taken by a leasehold
mortgagee under this Article as a prerequisite in obtaining
a new lease or keeping this Lease in effect shall be deemed
properly to have been made or taken by a leasehold mortgagee
if such payment is made or action taken by a nominee or
agent of such leasehold mortgagee.
10.3 SUBORDINATION AND ATTORNMENT . Landlord covenants, represents and
agrees that this Lease, as the same may be modified, amended or renewed, shall
not be subject or subordinate to any mortgage or mortgages now or hereafter
placed upon, or any other liens or encumbrances hereafter affecting, the fee
title of the Demised Premises except as otherwise expressly provided in this
Section 10.3, and that Landlord will promptly and fully pay when due all
indebtedness, and perform when required all obligations, secured by any such
mortgages or liens, and shall not commit or permit any default to occur
thereunder. In the event that for any reason whatsoever Landlord shall fail or
refuse to pay, satisfy and discharge any lien or mortgage encumbering the
Demised Premises not later than the date the same becomes due and payable,
Tenant shall have the right, but not the obligation, itself to pay, satisfy and
discharge the same, in which event (i) Tenant shall have the right to receive an
assignment of such mortgage (and the note secured thereby) and promptly
thereafter to institute foreclosure or other proceedings to enforce the same
(and the note secured thereby), it being agreed that if Tenant so acquires such
mortgage (and the note secured thereby) the same shall be deemed to be in
default by virtue of Landlord's failure to comply with the provisions of this
Section, which provisions shall be deemed for such purpose to be an agreement of
modification of such mortgage (and the note secured thereby); and (ii) any
amounts expended and expenses incurred by Tenant in paying, satisfying and
discharging such mortgage, and in bringing proceedings to foreclose or
otherwise, to enforce the same, including, without limitation, reasonable
attorneys' fees, to the extent not paid by Landlord to Tenant, together with
interest thereon at the rate per annum set
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forth in Section 3.1.4 hereof, shall be deductible by Tenant, together with
interest thereon at the rate aforesaid, from the installments of Annual Rent
thereafter falling due hereunder. The rights and remedies provided for in
subdivisions (i) and (ii) above shall be cumulative and not mutually exclusive.
Tenant agrees that upon request of Landlord in writing, it will subordinate the
lien of this Lease to the lien of any mortgage on the Demised Premises, and to
all renewals, modifications, amendments, consolidations, replacements and
extensions thereof, provided that Tenant shall be granted a subordination
non-disturbance and recognition agreement in substantially the form of Exhibit E
attached hereto (a "Subordination Agreement") from the holder(s) of such
mortgage. The receipt of a Subordination Agreement from the holder(s) of any
mortgage on the Demised Premises to which this Lease is subordinate is a
condition to the commencement of the Lease Term. Further, Tenant, as a part of
any Subordination Agreement, if requested, shall agree to attorn to the
holder(s) of such mortgage or to a purchaser at foreclosure or deed in lieu of
foreclosure, in a manner reasonably acceptable to the holder(s) of such mortgage
and Tenant. Landlord may not place any mortgage on the Demised Premises when the
aggregate annual debt service on such mortgage and all other mortgages on the
Demised Premises would exceed 90% of the Annual Rent which is then in effect or
will be in effect during the term of such mortgage, or when the aggregate
principal debt secured by said mortgage and all other mortgages on the Demised
Premises would exceed 80% of the fair market value of the Demised Premises.
Landlord shall give Tenant ten (10) days prior notice of the closing of any loan
to be secured by a mortgage on the Demised Premises.
10.3.1 If Tenant shall give Landlord any notice of a default or
breach by Landlord, Tenant agrees to give a similar written
notice to the holder(s) of record of any fee mortgage(s)
(provided Tenant has received written notice of said
mortgage(s), including the name(s) and address(es) of the
then holder(s) of such mortgage(s), in the manner provided
for in Article XVIII hereof for the giving of notices to
Tenant), by registered or certified mail, to such holders'
respective addresses specified in the aforementioned notice
to Tenant, or to any different address which they may
designate for the purpose by notice given to Tenant in the
aforesaid manner; and such holder(s) shall be permitted to
correct or remedy such breach or default within the same
time within which Landlord may do so, and with like effect
as if Landlord had done so. Tenant's failure to give to such
holder(s) the notice provided in this Section shall not be
deemed a default by Tenant under this Lease, but no notice
given by Tenant to Landlord of any default or breach by
Landlord shall be deemed legally effective until Tenant
shall have given such notice to the holder(s) of the first
fee mortgage at the time on the Demised Premises (provided
Tenant has received notice of said holder(s) as provided
above). In no event shall Tenant be required to give more
than one notice, to be sent to one address, in respect of
any one mortgage pursuant to this Section.
10.3.2 In the event that any fee mortgagee comes into possession or
ownership of the title to the Demised Premises, or acquires
the interest of Landlord by foreclosure of its mortgage) or
by proceedings on the bond or debt secured thereby, or
otherwise, Tenant agrees to attorn to such fee mortgagee as
its new landlord.
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10.4 SALE BY LANDLORD . Landlord covenants that it will not sell or
convey any right, title or interest in the Demised Premises prior to the first
anniversary of the Commencement Date, without Tenant's prior written consent. In
any event, any sale or conveyance of the Demised Premises or any part thereof,
shall be subject to the Option Agreement and the Right of First Refusal and
shall be made subject to this Lease.
10.4.1 In the event of a sale or transfer of the Demised Premises
by Landlord, with respect to either of which either Tenant's
consent has been obtained or is not required, the grantor or
transferor shall thereafter be entirely relieved of all
obligations thereafter to be performed by Landlord under
this Lease, provided that the purchaser or transferee on any
such sale or transfer has assumed and agreed pursuant to a
written instrument satisfactory to Tenant to perform,
observe and be bound by any and all covenants, conditions
and obligations of Landlord hereunder and under the Option
Agreement and the Right of First Refusal arising from and
after such sale or transfer and to be subject to all of the
rights of Tenant under this Lease and the Option Agreement
and the Right of First Refusal whether arising prior to or
after such sale or transfer, including without limitation
all setoff rights, and provided further that (i) any amount
then due and payable to Tenant or for which Landlord or the
then grantor or transferor would otherwise then be liable to
Tenant shall be paid to Tenant; (ii) the interest of the
grantor or transferor in any funds then in the hands of
Landlord or the then grantor or transferor in which Tenant
has an interest shall be turned over, subject to Tenant's
interest, to the then grantee or transferee; and (iii)
notice of such sale or transfer signed by Landlord or the
then grantor or transferor and by the then grantee or
transferee shall be delivered to Tenant together with a true
copy of the transfer document and a true copy of the written
assumption agreement.
10.5 ESTOPPEL CERTIFICATES . Tenant, upon request by Landlord or any
prospective or actual mortgagee or purchaser of the Facility, shall execute and
deliver to Landlord within ten (10) business days, after such request, an
estoppel certificate addressed to Landlord, and if requested by Landlord also to
such mortgagee or purchaser as is identified in Landlord's request, which
estoppel certificate shall state, to the extent true, the following facts: (a)
that a Lease, as attached to the estoppel certificate, is a true and correct
copy of this Lease and that this Lease has not been modified except as set forth
in such attachment or terminated; (b) that the Annual Rent in this Lease as so
modified has not been modified; (c) that there are no outside agreements that
would affect such mortgagee or purchaser or any of their rights under this Lease
or to the Demised Premises except as otherwise noted in the estoppel
certificate; (d) that to Tenant's knowledge there are no disputes existing as to
this Lease; (e) that to Tenant's knowledge Landlord has complied with the terms
of this Lease (as so amended) to the date of the estoppel certificate and is not
in default under any of its obligations contained in this Lease (as so amended)
(or if such is not the case, specifying the nature thereof) and Landlord has not
given Tenant notice of any default which remains uncured (or if such is not the
case, specifying the nature thereof); (f) that no Annual Rent has been paid more
than thirty (30) days in advance; (g) that Tenant has accepted possession of the
Demised Premises; (h) the dates through which Annual Rent has been paid; and (i)
any other terms reasonably acceptable to Tenant or reasonably required by any
actual or prospective mortgagee or purchaser. Notwithstanding the
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foregoing, Tenant shall not be obligated to furnish any such estoppel
certificate more often than two times during any Lease Year unless the request
for the same is being made in contemplation of the sale or mortgaging of the
Demised Premises and the prospective purchaser or mortgagee is requiring the
same.
ARTICLE XI
DEFAULT
11.1 DEFAULT BY TENANT . The occurrence of any one or more of the
following events shall constitute a "default" or "Event of Default" for the
purposes of this Lease:
(a) The failure of Tenant to pay any part of an Annual Rent payment due
under this Lease on or before its due date, which failure continues for ten (10)
days after the receipt of written notice from Landlord.
(b) Any assignment, transfer or sublease of this Lease or the Demised
Premises in violation of Article X hereof.
(c) The failure to occupy the Demised Premises on the Commencement Date
or the abandonment of the Demised Premises by Tenant.
(d) The failure of Tenant to perform any material covenant or
obligation contained herein other than the payment of Annual Rent, which failure
has not been corrected by Tenant within thirty (30) days following written
notice from Landlord specifying the covenant or obligation to be remedied, or if
the correction of same reasonably requires longer than thirty (30) days, if
Tenant shall not have commenced to correct the same within such thirty (30) day
period and thereafter proceed to cure the same in good faith, with diligence,
and within a reasonable period of time.
(e) If any representation or warranty made by Tenant under this Lease
shall prove to have been false in any material respect when made and the same
has not been corrected by Tenant within thirty (30) days following written
notice from Landlord specifying the representation or warranty in question, or
if the correction of same reasonably requires longer than thirty (30) days, if
Tenant shall not have commenced to correct the same within such thirty (30) day
period and thereafter be proceeding with reasonable diligence to correct the
same.
11.2 LANDLORD'S RIGHTS AND REMEDIES . Upon the happening of any Event
of Default and during the continuance thereof, Landlord, at its option, and
without further demand or notice, shall have the following rights and remedies
in addition to any rights provided by law, all of which shall be cumulative:
(a) Perform any covenant or obligation of Tenant and charge the
reasonable cost of the cure to the next installment or installments of Annual
Rent due.
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(b) Retake possession of the Demised Premises without terminating this
Lease and relet the Demised Premises or any part thereof to a third party. If
Landlord relets the Demised Premises (either for a term greater than, less than
or equal to the unexpired portion of the Lease Term) for an aggregate rent
during the portion of such new lease which is less than Annual Rent and other
charges which Tenant would pay hereunder for such period, Landlord may
immediately upon the making of such new lease, sue for and recover the
difference between the aggregate rental provided for in said new lease for the
balance of the term coextensive with the Lease Term, and the Annual Rent which
Tenant would pay hereunder for such period, together with any reasonable
expenses to which Landlord may be put for brokerage commissions, placing the
Demised Premises in tenantable condition, and other related charges or expenses
accrued prior to the new lease or otherwise. In the event Landlord does not
collect the entire amount of the aggregate rental provided for in such new
lease, Landlord may sue for and recover the difference between the amount of
such aggregate rental actually collected and the Annual Rent which Tenant would
pay hereunder. If such new lease or tenancy is made for a shorter term than the
balance of the Lease Term, or for a greater rental, any such action brought by
Landlord to collect the deficit for that period shall not bar Landlord from
thereafter suing for any loss accruing during the balance of the unexpired Lease
Term whether or not due to expiration or termination of the new lease.
(c) Give a thirty (30) day's notice of termination of this Lease
(regardless of whether Landlord prior to the giving of such notice shall have
accepted rent or any other payment, however designated, for the use and
occupancy of the Demised Premises from or on behalf of Tenant or from any other
person) to Tenant specifying such Event or Events of Default and stating that
this Lease and the Lease Term shall expire and terminate on the date specified
in such notice, which date shall be at least ten (10) days after the giving of
such notice. In the event such notice is given, this Lease and the Lease Term
and all rights of Tenant under this Lease shall expire and terminate upon the
date specified in such notice with the same effect as if the date specified in
such notice were the date originally set forth in this Lease for the expiration
of the term, but Tenant shall remain liable as provided below.
Upon any such expiration or termination of this Lease, Tenant shall
quit and peacefully surrender the Demised Premises to Landlord, and Landlord,
upon or at any time after any such expiration or termination, may, without
further notice, enter upon and re-enter the Demised Premises and possess and
repossess itself thereof, by summary proceedings, ejectment or otherwise, and
may dispossess Tenant and remove Tenant and all other persons and property from
the Demised Premises and may have, hold and enjoy the Demised Premises and the
right to receive all rental income of and from the same.
No such expiration or termination of this Lease, including the re-entry
of Landlord, shall relieve Tenant of its liability and obligations to pay the
Annual Rent theretofore accrued or thereafter accruing, as more particularly set
forth in paragraph (g) below, and such liability and obligations shall survive
any such expiration or termination.
(d) Tenant knowingly and voluntarily waives any and all rights of
redemption which Tenant may now have or hereafter acquire pursuant to statute or
court decision, except for notice as provided in this Article.
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(e) The rights and remedies given to Landlord in this Lease are
distinct, separate and cumulative, and no one of them, whether or not exercised
by Landlord, shall be deemed to be in exclusion of any of the others herein or
by law or in equity provided and the exercise by Landlord of any one or more of
the rights or remedies provided for in this Lease shall not preclude the
simultaneous or later exercise by Landlord of any or all other rights or
remedies.
(f) No receipt of monies by Landlord from Tenant, after the
cancellation or termination of this Lease in any lawful manner, shall reinstate,
continue or extend the Lease Term, or affect any notice theretofore given to
Tenant or operate as a waiver of the right of Landlord to enforce the payment of
Annual Rent then due or thereafter falling due, or operate as a waiver of the
right of Landlord to recover possession of the Demised Premises by proper suit,
action, proceeding or other remedy; it being agreed that, after the service of
notice to cancel or terminate as herein provided and the expiration of the time
therein specified, after the commencement of any suit, action, proceeding or
other remedy or after a final order or judgment for possession of the Demised
Premises, Landlord may demand, receive and collect any monies due, or thereafter
falling due, without in any manner affecting such notice, suit, action,
proceeding, order or judgment; and any and all such monies so collected shall be
deemed to be payments on account of the use and occupation of the Demised
Premises, or at the election of Landlord, on account of Tenant's liability
hereunder.
(g) In the event of the termination of this Lease as provided in this
Article or by operation of law or issuance of a dispossessory warrant or
otherwise, Tenant shall remain liable under this Lease for the payment of Annual
Rent and the observance and performance of all other covenants on its part to be
performed; and Landlord shall have the right to alter, change or remodel the
improvements on the Demised Premises and to lease or let the same, or portions
thereof, or not to lease or let the same, for such periods of time and at such
rentals and for such use and upon such covenants and conditions as Landlord may
elect, applying the net rentals or avails of such letting, if any, first to the
payment of Landlord's expenses in dispossessing Tenant and the costs or expenses
of making such improvements in the Demised Premises as may be necessary in order
to enable Landlord to relet the same, and then to the payment of any brokerage
commissions or other expenses of Landlord in connection with such reletting; and
the balance, if any, shall be applied by Landlord at least once a month, on
account of the payments due or payable by Tenant hereunder, if any, with the
right reserved to Landlord to bring such action(s) or proceeding(s) for the
recovery of any deficits remaining unpaid without being obliged to await the end
of the Lease Term for a final determination of Tenant's account, and the
commencement or maintenance of any one or more actions shall not bar Landlord
from bringing other or subsequent actions for further accruals pursuant to the
provisions of this Section. Any balance remaining, however, after full payment
and liquidation of Landlord's accounts for the remainder of the Lease Term as
aforesaid, shall be paid to Tenant with the right reserved to Landlord at any
time, if it has not theretofore terminated this Lease, to give notice to Tenant
of Landlord's election to cancel this Lease and discharge all the obligations
thereunder of either party to the other, and the giving of such notice and the
simultaneous payment by Landlord to Tenant of any credit balance in Tenant's
favor that may at such time be owing, shall constitute a final and effective
cancellation of this Lease and a discharge of the obligations thereof on the
part of either party to the other. Tenant agrees to pay, in addition to the rent
and other sums required to be paid hereunder, such additional sums as the court
may adjudge reasonable as attorneys' fees in any successful suit or action
instituted by Landlord to enforce the provisions of this Lease or the
collections of the amounts due Landlord hereunder. Should any rent collected by
Landlord be
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insufficient to fully pay to Landlord a sum equal to all Annual Rent reserved
herein and other charges payable hereunder for the remainder of the Lease Term
originally demised, the balance or deficiency shall be paid by Tenant on the
rent days herein specified, that is, upon each of such rent days Tenant shall
pay to Landlord the amount of the deficiency then existing; and Tenant shall be
and remain liable for any such deficiency, and the right of Landlord to recover
from Tenant the amount thereof, or a sum equal to all such Annual Rent and
Additional Rent and other charges payable hereunder, if there shall be no
reletting, shall survive the issuance of any dispossessory warrant or other
cancellation or termination hereof, and Landlord shall be entitled to retain any
surplus; and Tenant hereby expressly waives any defense that might be predicated
upon the issuance of such dispossessory warrant or other cancellation or
termination hereof.
(h) In any of the circumstances mentioned in paragraph (g) of this
Section in which Landlord shall have the right to hold Tenant liable upon the
several rent days as therein provided, Landlord shall have the right to
election, in place and instead of holding Tenant so liable, forthwith to recover
against Tenant as damages for loss of the bargain and not as a penalty, in
addition to any other damages becoming due, an aggregate sum which, at the time
of the termination of this Lease or of the recovery of possession of the Demised
Premises by Landlord, as the case may be, represents the then present worth of
the excess (computed by discounting such excess at the simple rate of six (6%)
percent per annum), if any, of the aggregate of Annual Rent and all other
charges payable by Tenant hereunder that would have accrued for the balance of
the Lease Term over the aggregate rental value of the Demised Premises (such
rental value to be computed on the basis of a tenant paying not only a rent to
Landlord for the use and occupation of the Demised Premises, but also such
additional rent and other charges as are required to be paid by Tenant under the
terms of this Lease) for the balance of such Lease Term.
(i) Suit or suits for the recovery of the deficiency or damages
referred to above in paragraphs (g) and (h) of this Section, or for any
installment or installments of Annual Rent hereunder, or for a sum equal to any
such installment or installments may be brought by Landlord, from time to time
at Landlord's election, and nothing in this Lease contained shall be deemed to
require Landlord to await the date whereon this Lease or the Lease Term would
have expired by limitation had there been no such default by Tenant or no such
cancellation or termination.
(j) Landlord's failure to insist on the strict performance of and
compliance with each condition in this Lease shall neither constitute nor be
construed as constituting a waiver by Landlord of Landlord's rights under this
Article or by law, nor constitute nor be construed as consisting of a waiver by
Landlord of a second or subsequent default by Tenant of the same condition. In
the event litigation is commenced, it shall not be necessary for Landlord to
notify Tenant of any additional occurrences of default prior to proceeding as
permitted.
(k) In the event of the termination or expiration of this Lease, Tenant
shall cooperate with Landlord in the transfer to the subsequent operator of the
Facility of all licenses and permits required to continue to operate the
Facility as an assisted living facility or a nursing care facility, whichever
was being operated at the Facility by Tenant at the time of such termination or
expiration.
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11.3 DEFAULT BY LANDLORD . If Landlord defaults in the observance or
performance of any covenant, condition or obligation in this Lease on its part
to be observed or performed, Landlord shall have thirty (30) days after
receiving written notice from Tenant stating the default complained of and
referring to the Article and Section in this Lease relied on by Tenant, to cure
or cause to be cured any such default, or if such default is not capable of
being cured within such thirty (30) days to commence to cure the same during
such thirty (30) days and thereafter proceed to cure the same in good faith,
with diligence, and within a reasonable period of time.
If Landlord fails to cure any such default or to diligently and in good
faith pursue the cure as provided for herein, or if any representation or
warranty made by or on behalf of Landlord in this Lease or in any document or
agreement delivered in connection with the transactions contemplated by this
Lease shall prove to have been false or incorrect or breached in any material
respect on the date as of which made, then Tenant may sue Landlord for its
damages, including, without limitation, such additional sums as the court may
adjudge reasonable as attorneys' fees in any successful suit or action
instituted by Tenant to enforce the provisions of this Lease, and may further
obtain injunctive relief if necessary to maintain operation of the Demised
Premises or comply with applicable legal requirements of any governmental
authority. In addition, Tenant may at its option, without waiving any claim for
damages for breach of agreement, at any time thereafter cure such default for
the account of Landlord, and any amount paid or any contractual liability
incurred by Tenant in so doing shall be deemed paid or incurred for the account
of Landlord, and Landlord agrees to reimburse Tenant therefor or save Tenant
harmless therefrom; provided that Tenant may cure any such default as aforesaid
prior to the expiration of said thirty (30) day period if reasonably necessary
to cure a default under any mortgage or encumbrance which is a lien on the
Demised Premises, or to protect the Demised Premises or Tenant's interest
therein, or to prevent injury or damage to persons or property, or to enable
Tenant to conduct its business in the Demised Premises. If Landlord shall fail
to reimburse Tenant upon demand for any amount paid for the account of Landlord
hereunder or for any other sum payable to Tenant pursuant to this Lease, said
amount plus interest thereon at the rate per annum set forth in Section 3.1.4
hereof from the date of demand upon Landlord for payment, may be deducted by
Tenant from the next or any succeeding payments of Annual Rent due hereunder.
11.4 DELAYS . Whenever this Lease requires any act (other than the
payment of a liquidated sum of money, E.G., rental payments, taxes, utilities,
or any obligation that may be satisfied by the payment of a liquidated sum of
money) by Landlord or Tenant within a certain period of time or by a certain
time, the time for the performance of such act shall be extended by the period
of any delay caused by war, strikes, lockouts, civil commotion, storms, weather,
electrical blackouts, unpreventable material shortages, casualties, acts of God
or other conditions or events beyond the reasonable control of the obligated
party; provided, however, that written notice of such delay and the cause and
circumstances thereof shall be given to the other party promptly after the
commencement of such delay and such delay becoming known by the obligated party.
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ARTICLE XII
DAMAGE TO DEMISED PREMISES
12.1 MAJOR DAMAGE . In the event that the Demised Premises are damaged
by fire or other casualty, and the damage or loss exceeds $50,000, then Tenant
shall promptly notify Landlord in writing of such an event. If the damage is to
an extent that there is Major Damage, as hereinafter defined, it shall be the
option of Tenant to cancel this Lease by written notice to Landlord within sixty
(60) days from the date of such Major Damage.
The term "Major Damage" shall mean any damage wherein: (a) the
estimated cost of fully repairing the damage exceeds fifty percent (50%) of the
then full replacement value or (b) 25% or more of the improvements are rendered
unsuitable for occupancy or (c) the damage is caused by an event which is not
covered by the insurance policy which Tenant is required to carry pursuant to
Article XV hereof, and the estimated cost of fully repairing the damage exceeds
the net amount of insurance proceeds received by Tenant with respect thereto by
$50,000 or more. Annual Rent shall abate in accordance with Section 12.2 if
Tenant is unable to use all or any part of the Demised Premises while repairs
are being made; provided, however, that any abatement so granted shall not
exceed the amount of the proceeds actually received by Landlord under any policy
of rent insurance carried for the benefit of Landlord.
If Tenant elects to terminate this Lease pursuant to this Section 12.1,
this Lease shall terminate fifteen (15) days after the date of notice, Tenant
shall surrender possession to Landlord, and all accrued rights under this Lease
shall survive termination.
12.2 NONMAJOR DAMAGE . Any other damage to the Facility from any
casualty or risk which does not qualify as Major Damage, shall be deemed to be
nonmajor. If Tenant does not elect to terminate this Lease under the Major
Damage provision in Section 12.1, or if the damage is nonmajor, then Tenant
shall, at its sole cost and expense, repair or rebuild the Facility to
substantially the same condition as existed immediately prior to the damage, in
accordance with applicable federal, state and local statutes, laws, ordinances
and codes and sufficient to meet licensure requirements of the State of Kansas
for assisted living facilities according to the actual use by Tenant. The
restoration shall be commenced within ninety (90) days after settlement shall
have been made with the insurance companies and the insurance monies shall have
been turned over to the Insurance Trustee (as hereinafter defined) or Tenant, as
the case may be, as provided in Article XV hereof and the necessary governmental
approvals shall have been obtained, and such work shall be completed as promptly
as reasonably possible. Tenant shall also restore any damaged Leased Equipment.
The Insurance Trustee shall, provided this Lease shall then be in full
force and effect, apply the net proceeds of any insurance to the payment of the
cost of such repairing or rebuilding as the same progresses, payments to be made
against properly certified vouchers of a competent architect in charge of the
work who is selected by Tenant and approved by Landlord, which approval shall
not be unreasonably withheld or delayed. The Insurance Trustee shall advance out
of such insurance proceeds toward each payment, to be made by or on behalf of
Tenant, an amount which shall bear the same proportion to such payment as the
whole amount received by the Insurance Trustee shall bear to the total estimated
cost of the repairing or rebuilding except, however, that the Insurance Trustee
shall withhold from each amount so to be paid by it ten percent (10%) thereof
until
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the work of repairing or rebuilding shall have been substantially completed, and
proof furnished that no lien has attached or will attach to the Demised Premises
in connection with such repairs or rebuilding. If the total estimated cost of
the repairs or rebuilding shall exceed the amount of the net proceeds of such
insurance received by the Insurance Trustee, the Insurance Trustee shall be
entitled to require of Tenant that, before such repairing or rebuilding be
commenced, the Insurance Trustee be secured by a surety bond or cash equal to
the amount of the excess of such estimated cost over the net insurance proceeds
as security for the due completion, within a reasonable time, of such repairs or
rebuilding; and if Tenant makes a cash deposit as aforesaid, such cash deposit
shall be deemed to be part of the net insurance proceeds for the purpose of this
paragraph. The contract price fixed in Tenant's contract with the contractor who
or which will perform such repairing or rebuilding shall be deemed to be the
total estimated cost of such repairs or rebuilding for the purposes of this
paragraph. If the insurance proceeds shall exceed the cost of such repairs or
rebuilding, the balance remaining after payment of the cost of such repairs or
rebuilding shall be paid over and belong to Tenant.
In the event Tenant is unable to use all or any part of the Facility
while Tenant repairs or rebuilds same, then the Annual Rent shall be reduced and
abated by a just, fair and equitable proportion of the Annual Rent payable
according to the size, nature and extent of the property that is damaged, taking
into account the practical and economic effect of the damage in question on the
operation of the Demised Premises; provided, however, that there shall be no
such abatement in the event Tenant has not maintained insurance in accordance
with the provisions of Section 15.3. The abatement of the Annual Rent shall
commence with the date of the damage and continue until the repairs are
substantially completed. Other obligations of Tenant under this Lease shall not
abate in any manner.
ARTICLE XIII
LANDLORD'S REPRESENTATIONS AND WARRANTIES
Landlord and Jack West each hereby represents and warrants to Tenant as
follows:
13.1 ORGANIZATION AND STANDING OF LANDLORD. Landlord is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Kansas. Copies of its articles of organization,
operating agreement and all amendments thereto to date (collectively, the
"Organizational Documents") have been delivered to Tenant, and are true,
complete and correct. Landlord has the power and authority to own the property
and assets now owned by it and to conduct the business presently being conducted
by it and as currently proposed to be conducted.
13.2 AUTHORITY . Landlord has the full, absolute and unrestricted
right, power and authority to make, execute, deliver and perform this Lease,
including all Schedules and Exhibits hereto, and the other instruments and
documents required or contemplated hereby and thereby ("Landlord's Transaction
Documents"). Such execution, delivery, performance and consummation have been
duly authorized by all necessary action (partnership, corporate, limited
liability company, trust or otherwise, as the case may be) on the part of
Landlord, its managing member (as hereinafter defined) and members, and all
consents of holders of indebtedness of Landlord have been obtained.
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13.3 BINDING EFFECT. This Lease constitutes the legal, valid and
binding obligation of Landlord, enforceable against Landlord in accordance with
its terms and each of Landlord's Transaction Documents executed by Landlord
constitute the legal, valid and binding obligation of Landlord, enforceable
against Landlord in accordance with their respective terms.
13.4 ABSENCE OF CONFLICTING AGREEMENTS. None of the execution or
delivery of this Lease or any of Landlord Transaction Documents, the performance
by Landlord of its obligations hereunder or thereunder or the consummation of
the transactions contemplated hereby or thereby, conflicts with, or constitutes
a breach of or a default under (i) Landlord's Organizational Documents; or (ii)
any applicable law, rule, judgment, order, writ, injunction, or decree of any
court currently in effect; or (iii) any applicable rule or regulation of any
administrative agency or other governmental authority currently in effect; or
(iv) except as set forth on Schedule 13.4, any written or oral agreement,
indenture, contract or instrument to which Landlord or any managing member
thereof is now a party or by which any of them or the Demised Premises or Other
Assets are bound. Said Schedule 13.4 shall be updated to the extent necessary on
and as of the day preceding the Commencement Date.
13.5 CONSENTS. Except as set forth on Schedule 13.5, no authorization,
consent, approval, license, exemption by filing or registration with any court
or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or any other Person is or will be
necessary in connection with Landlord's execution, delivery and performance of
this Lease or any of Landlord Transaction Documents, or for the consummation of
the transactions contemplated hereby or thereby. Said Schedule 13.5 shall be
updated to the extent necessary on and as of the day preceding the Commencement
Date.
13.6 CONTRACTS.
(a) Schedule 13.6 sets forth a complete and correct list of all
agreements, contracts and commitments, whether written or oral, relating to the
Facility, its operation or the Other Assets by which Landlord or the Demised
Premises is bound (the "Contracts"). Landlord is not in default under any
Contract, except any such default that, either individually or in the aggregate,
would not have a Material Adverse Effect (as hereinafter defined), and there has
not been asserted, either by or against Landlord under any Contract, any notice
of default, set-off or claim of default which has not been cured. To the best
knowledge of Landlord, after due inquiry, none of the other parties to the
Contracts are affiliated with Landlord or are in default of any of their
respective obligations under the Contracts, and there has not occurred any event
which with the passage of time or the giving of notice (or both) would
constitute a default or breach under any Contract. All amounts payable by
Landlord under the Contracts are, or will at the Commencement Date, be on a
current basis. Except as set forth on Schedule 13.6, the Contracts are
assignable to Tenant without the consent of the remaining parties thereto and
each of the Contracts can be terminated without penalty by Landlord upon sixty
(60) or less days notice. Said Schedule 13.6 shall be updated to the extent
necessary on and as of the day preceding the Commencement Date.
- ----------
* , and the name and address of each contractor, subcontractor and
materialman that has performed work and supplied materials in connection
with the construction of the Facility
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(b) Except as listed on Schedule 13.6, Landlord is not a party to or
liable in connection with and has not granted any written or express, oral or
implied:
(i) contract, agreement or commitment for the employment or retention
of, or collective bargaining, severance or termination agreement with, any
employee, consultant or agent or group of employees at the Demised
Premises; or
(ii) profit sharing, thrift, bonus, incentive, deferred compensation,
stock option, stock purchase, severance pay, pension, retirement,
hospitalization, insurance or other similar plan, agreement or arrangement
covering employees at the Demised Premises.
(iii) contract, agreement or commitment currently in effect for the
sale of any of Landlord's assets, properties or rights outside its ordinary
course of business (by sale of assets, sale of stock, merger or otherwise)
or any part of the Demised Premises;
(iv) contract, agreement or arrangement currently in effect which
contains any provisions requiring Landlord to indemnify or act for, or
guarantee the obligation of, any other person or entity;
(v) agreement restricting Landlord from conducting business anywhere
in the world;
(vi) partnership or joint venture agreement or similar arrangement or
agreement which is likely to involve a sharing of profits or future
payments with respect to Landlord's business at the Facility or any portion
thereof;
(vii) licensing, distributor, dealer, franchise, sales or
manufacturer's representative, agency or other similar contract, agreement,
arrangement or commitment for the Facility which involves consideration of
more than $10,000; or
(viii) agreement not made in the ordinary and normal course of
business of the Facility which involves consideration of more than $10,000.
13.7 FINANCIAL STATEMENTS . Intentionally Deleted.
13.8 MATERIAL CHANGES . Except as listed on Schedule 13.8, since the
date of the purchase of the Demised Premises by Landlord, there has not been any
material adverse change in the condition (financial or otherwise), of the
assets, properties or operations of the Demised Premises, or any damage or
destruction of the Demised Premises by fire or other casualty, whether or not
covered by insurance, and Landlord has operated the Demised Premises only in the
ordinary course of business. Landlord has identified and communicated to Tenant
all material information with respect to any fact or condition that might have a
Material Adverse Effect. Said Schedule 13.8 shall be updated to the extent
necessary on and as of the day preceding the Commencement Date.
13.9 LICENSES; PERMITS . Schedule 13.9 sets forth a description of each
license and all other governmental or other regulatory permits and approvals
relating to the operation of the
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Demised Premises heretofore obtained and which is presently in effect
(collectively, the "Licenses"). The Licenses constitute all of the licenses,
permits, easements, rights or other authorizations of any Governmental Body or
any other Person that are necessary for the current operation of the Demised
Premises. Each License is final (the effectiveness of each not being subject to
the satisfaction of any conditions precedent), not subject to lapse,
termination, revocation or expiration for failure to meet any conditions or
requirements or otherwise, including without limitation the delivery of an
unqualified certificate of need or similar certificate or document. Landlord has
delivered to Tenant copies of all of the Licenses. Landlord owns, possesses or
has the legal right to use the Licenses, free and clear of all liens, pledges,
claims or other encumbrances of any nature whatsoever. Except as disclosed on
Schedule 13.9, Landlord has not received any notice of any claim or default or
any other claim or proceeding relating to any such License which has not been
cured or any notice of any threatened termination, lapse or revocation of any
License. Landlord is not in default under any License except any such default
that, either individually or in the aggregate, would not have a Material Adverse
Effect. The Demised Premises are fully and completely licensed by all
appropriate authorities for Landlord to carry on the business presently
conducted at the Demised Premises. No managing member, member, employee or
former employee of Landlord, or immediate family member of any managing member
or member, of Landlord, or any other person, firm or corporation owns or has any
proprietary, financial or other interest, direct or indirect, in whole or in
part in any such License owned, possessed or used in the operation of the
Demised Premises as now operated. Said Schedule 13.9 shall be updated to the
extent necessary on and as of the day preceding the Commencement Date.
13.10 TITLE, CONDITION OF PERSONAL PROPERTY .
(a) Except for the security interests listed and described on Schedule
13.10(a), Landlord has good title to all of the Leased Equipment, subject to no
mortgage, security interest, pledge, lien, conditional sales agreement, lease,
claim, encumbrance, easement, title exception or charge, or restraint on
transfer whatsoever (collectively, "Lien"). No other person has any right to the
use or possession of any of the Leased Equipment and, except as set forth on
Schedule 13.10(a), no currently effective financing statement with respect to
the Leased Equipment has been filed in any jurisdiction, and Landlord has not
signed any such financing statement or any security agreement authorizing any
secured party thereunder to file any such financing statement. During the five
(5) year period preceding the date hereof, Landlord has conducted its business
activities only under the corporate and/or trade name "The Homestead of
Manhattan." All of the Leased Equipment is in good operating condition and
repair and is functioning in the manner and for the purpose for which it was
intended and, to the best knowledge of Landlord, after due inquiry, is in
compliance with (and the operation thereof is in compliance with) all applicable
federal, state and local laws, rules and regulations, and is sufficient and
suitable to enable Tenant to operate the Demised Premises in a normal and
efficient manner. Said Schedule 13.10(a) shall be updated to the extent
necessary on and as of the day preceding the Commencement Date.
(b) Except as set forth on Schedule 13.10(b), none of the property used
by Landlord in connection with the operation of the Demised Premises is subject
to a conditional sale, security interest or similar arrangement. Schedule
13.10(b) sets forth a complete and correct description of each of the Personal
Property Leases relating to the Demised Premises as to which Landlord is a party
(together with all modifications or amendments thereto), the annual rental and
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unexpired lease term thereby and all the information set forth thereon is
complete, correct and accurate. True, correct and complete copies of each of
said Personal Property Leases (together with all modifications or amendments
thereto) have been delivered to Tenant. All of said Personal Property Leases are
valid, binding and enforceable in accordance with their respective terms and are
in full force and effect. Landlord is not in default under any such lease, the
consequences of which, either in an individual case or in the aggregate, would
have a Material Adverse Effect, and there has not been asserted, either by or
against Landlord under any such lease, any notice of default, set-off, or claim
of default. The parties to such leases other than Landlord are not in default of
their respective obligations under any such lease, and there has not occurred
any event which with the passage of time or giving of notice (or both) would
constitute such a default or breach under any such lease. Except as otherwise
set forth on Schedule 13.10(b), each of said Personal Property Leases is
assignable to Tenant without the consent of the lessor of such property. Said
Schedule 13.10(b) shall be updated to the extent necessary on and as of the day
preceding the Commencement Date.
13.11 TITLE, CONDITION OF THE DEMISED PREMISES .
(a) Landlord has good and marketable title to the Demised Premises,
insurable by any reputable, licensed title company selected by Tenant at regular
rates, free and clear of all Liens of any kind whatsoever, other than those set
forth on Schedule 13.11(a) (the "Permitted Exceptions"). Said Schedule 13.11(a)
shall be updated to the extent necessary on and as of the day preceding the
Commencement Date.
(b) There are no leases or other agreements of Landlord, as lessor,
granting any third party the right to use or occupy any part of the Demised
Premises (except the rights of the residents and patients of the Demised
Premises) and no person, firm or entity other than Tenant has any ownership
interest or option or right of first refusal to acquire any ownership interest
in the Demised Premises or any building or improvements thereon.
(c) All buildings and other improvements comprising the Demised
Premises (including all roads, parking areas, curbs, sidewalks, sewers and other
utilities) have been completed and installed in accordance with applicable
requirements of all governmental authorities having jurisdiction thereof. Such
permanent certificates of occupancy and all other licenses, permits,
authorizations and approvals required by all governmental authorities having
jurisdiction and the requisite annual fire safety and life safety inspections as
were required to be issued or conducted for the buildings and other improvements
comprising the Demised Premises, have been issued, paid for and are in full
force and effect.
(d) The maintenance, operations and use of the buildings and other
improvements comprising the Demised Premises comply with and do not violate any
zoning, building or similar law, ordinance, order or regulation or any
certificate of occupancy issued for the Demised Premises; and no written notice
of any failure to comply with or violation of any federal, state, county or
municipal law, ordinance, order, regulation or requirement affecting the Demised
Premises shall have been issued by any governmental authority or agency. There
have been no changes to building, health or fire codes that would be applicable
to the Demised Premises; and there has been no change in the use of the Demised
Premises that would have caused any modifications to have been made to the
Demised Premises pursuant to any such building, health or fire codes.
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(e) There is no plan, study or effort by any governmental authority or
agency which in any way affects or would affect the present use or zoning of the
Demised Premises or any part thereof. There are no assessments, except as set
forth on Schedule 13.11(e), or, to the best of Landlord's knowledge, proposed or
contemplated assessments, and there is no existing, or, to the best of
Landlord's knowledge, proposed or contemplated plan to widen, modify or realign
any street or highway, and there is no or existing, or, to the best of
Landlord's knowledge, proposed or contemplated eminent domain proceedings that
would affect the Demised Premises in any way whatsoever. Said Schedule 13.11(e)
shall be updated to the extent necessary on and as of the day preceding the
Commencement Date. No subdivision plan or plans (preliminary or otherwise) have
been, or will be filed by Landlord, with respect to the Demised Premises. The
Demised Premises are not located in areas designated by the Secretary of Housing
and Urban Development or any other governmental authority or agency as having
special flood or mud slide hazards.
(f) The buildings and other improvements comprising the Demised
Premises and all of their systems, including without limitation, the heating,
ventilation and air condition systems, and the plumbing, electrical, mechanical
and drainage systems, and roof are in good operating condition, repair and
working order, and have passed all previous safety and/or licensing inspections,
and such systems are adequate and sufficient for use in connection with an
assisted living facility, ordinary wear and tear expected.
(g) There is no proceeding pending to which Landlord is a party
relating to the assessed valuation of any portion of the Demised Premises and,
except as set forth on Schedule 13.11(e), no assessment for public improvements
has been made against the Demised Premises that remains unpaid.
(h) All public utilities required for the operation of the Demised
Premises either enter the Demised Premises through adjoining public streets, or
if they pass through adjoining private land, do so in accordance with valid
recorded easements held by Landlord which run for the benefit of the Land. The
Demised Premises are adjacent to and have direct access to each abutting street
located or identified on that certain survey of the Land, dated July, 1996,
prepared by Schwab-Eaton, P.A. All streets adjoining or traversing the Demised
Premises have been dedicated to and accepted by the local municipal authorities.
(i) There are no easements traversing or contiguous to the Demised
Premises which are not disclosed on any schedule to this Lease or on any title
report delivered to Tenant, or which interfere with the intended use and
operation of the Demised Premises.
(j) All certificates of occupancy and other authorizations issued for
the Demised Premises have been set forth on Schedule 13.11(j). Landlord has not
received any notice of noncompliance from any governmental authority regarding
any of the improvements constructed at the Demised Premises or the use or
occupancy thereof. Said Schedule 13.11(j) shall be updated to the extent
necessary on and as of the day preceding the Commencement Date.
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13.12 LEGAL PROCEEDINGS. Other than as set forth on Schedule 13.12,
there are no disputes, claims, actions, suits or proceedings, arbitrations or
investigations, either administrative or judicial, pending, or, to the best
knowledge of Landlord, after due inquiry, threatened or contemplated, and, to
the best knowledge of Landlord, after due inquiry, there is no basis therefor,
against or affecting the Demised Premises or Landlord's rights therein or
ability to consummate the transactions contemplated hereby, at law or in equity
or otherwise, before or by any court or governmental agency or body, domestic or
foreign, or before an arbitrator of any kind. Landlord has not received any
requests for information with respect to the transactions contemplated hereby
from any governmental agency. Said Schedule 13.12 shall be updated to the extent
necessary on and as of the day preceding the Commencement Date.
13.13 EMPLOYEES. Schedule 13.13 contains a complete and correct list of
the name, position, current rate of compensation and any vacation or holiday
pay, sick pay, personal leave and any other compensation arrangements or fringe
benefits, of each current employee, consultant and agent of Landlord (together
with a description of any specific arrangements or rights concerning such
persons) which are not reflected in any agreement or document referred to in
Schedule 13.6. Except as disclosed in Schedule 13.13, Landlord currently has no,
and has never had any, pension, profit sharing, bonus, incentive, welfare
benefit, sick leave or sick pay or other plan applicable to any of the employees
of the Demised Premises. Except as disclosed in Schedule 13.13, no such
employee, consultant or commission agent has any vested or unvested retirement
benefits or other termination benefits. Said Schedule 13.13 shall be updated to
the extent necessary on and as of the day preceding the Commencement Date.
13.14 COLLECTIVE BARGAINING, LABOR CONTRACTS, EMPLOYMENT PRACTICES,
ETC.
Intentionally Deleted.
13.15 ERISA. Intentionally Deleted.
13.16 INSURANCE. Schedule 13.16 contains a true and correct list of:
(a) all policies of fire, liability and other forms of insurance held or owned
by Landlord or otherwise in force and providing coverage for the Demised
Premises (including but not limited to medical malpractice insurance, and any
state sponsored plan or program for worker's compensation); (b) all bonds,
indemnity agreements and other agreements of suretyship made for or held by
Landlord or otherwise in force and relating to the Demised Premises, including a
brief description of the character of the bond or agreement and the name of the
surety or indemnifying party. Schedule 13.16 sets forth for each such insurance
policy the name of the insurer, the amount of coverage, the type of insurance,
the policy number, the annual premium and a brief description of the nature of
insurance included under each such policy and of any claims made thereunder
during the past two years. Such policies are owned by and payable solely to
Landlord and such policies or renewals or replacements thereof will be
outstanding and in full force and effect at the Commencement Date. All insurance
policies listed on Schedule 13.16 are in full force and effect, all premiums due
on or before the Commencement Date have been or will be paid on or before the
Commencement Date, Landlord has not been advised by any of its insurance
carriers of an intention to terminate or modify any such policies, nor has
Landlord failed to comply with any of the material conditions contained in any
such
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policies. Said Schedule 13.16 shall be updated to the extent necessary on and as
of the day preceding the Commencement Date.
13.17 RELATIONSHIPS . Except as disclosed on Schedule 13.17, Landlord
has not and no managing member or member thereof or any member of such Person's
immediate family has, or at any time within the last two (2) years has had, a
material ownership interest or claim in any business, corporate or otherwise,
that is a party to, or in any property that is the subject of, business
relationships or arrangements of any kind relating to the operation of the
Demised Premises or the operation of the Facility, by which Tenant or the
Demised Premises will be bound after the Commencement Date. Said Schedule 13.17
shall be updated to the extent necessary on and as of the day preceding the
Commencement Date.
13.18 ASSETS COMPRISING THE DEMISED PREMISES . The Land, Leased
Equipment, Contracts, Licenses and Other Assets (collectively, the "Assets")
listed on the Schedules to this Lease as owned by Landlord, represent all of the
real and personal property, licenses, permits and authorizations, contracts,
leases and other agreements that are necessary and material to the use and
operation of the Demised Premises as now used or operated or the operation of
the Facility.
13.19 ABSENCE OF CERTAIN EVENTS . Except as set forth on Schedule
13.19, from the date of this Lease to the Commencement Date Landlord will not
have (except for transactions directly with Tenant):
(a) sold, assigned or transferred any of its assets or properties,
except in the ordinary course of business consistent with past practice;
(b) mortgaged, pledged or subjected to any lien, pledge, mortgage,
security interest, conditional sales contract or other encumbrance of any nature
whatsoever any of the Assets other than the liens, if any, of current taxes not
yet due and payable;
(c) made or suffered any amendment or termination of any contract,
commitment, instrument or agreement materially relating to the Demised Premises;
(d) Intentionally Deleted;
(e) discharged or satisfied any lien or encumbrance, or paid any
material liabilities, other than in the ordinary course of business consistent
with past practice, or failed to pay or discharge when due any liabilities, the
failure to pay or discharge which has caused or will cause any actual damage or
risk of loss to Landlord or the Demised Premises;
(f) Intentionally Deleted;
(g) made or suffered any amendment or termination of any material
contract, commitment or agreement to which it is a party or by which it is
bound, or cancelled, modified or waived any debts or claims held by it, other
than in the ordinary course of business consistent with past practice, or waived
any rights of substantial value, whether or not in the ordinary course of
business; or
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(h) entered into any material transaction other than in the ordinary
course of business consistent with past practice.
Said Schedule 13.19 shall be updated to the extent necessary on and as of the
day preceding the Commencement Date.
13.20 COMPLIANCE WITH LAWS . Landlord has not received any claim or
notice that the Demised Premises are not in compliance with any applicable
federal, state, local or other governmental laws or ordinances, or any
applicable order, rule or regulation of any federal, state, local or other
governmental agency.
13.21 ENVIRONMENTAL COMPLIANCE .
(a) At any time during Landlord's ownership of the Demised Premises
and, to the best of Landlord's knowledge, after due inquiry, prior to Landlord's
ownership thereof:
(i) the Demised Premises has not been used for the disposal of any
industrial refuse or waste, including but not limited to potentially
infectious waste, blood-contaminated materials, or other wastes generated
in the course of resident treatment (collectively, "Medical Waste"), or for
the processing, manufacture, storage, handling, treatment or disposal of
any hazardous or toxic substance, material or waste;
(ii) no asbestos-containing materials have been used or disposed of in
or on the Demised Premises or used in the construction of the Demised Premises;
(iii) no machinery, equipment or fixtures containing poly-chlorinated
biphenyls ("PCBs") have been located on the Demised Premises;
(iv) no storage tanks for gasoline, petroleum, or any other substance
have been located on the Demised Premises;
(v) no toxic or hazardous substances or materials have been located on
the Demised Premises, which substances or materials, if found in or on the
Demised Premises, would subject the owner or occupant of the Demised
Premises to damages, penalties, liabilities or an obligation to remove such
substances or materials under any applicable federal, state or local law,
regulation or ordinance; and
(vi) no written notice from any governmental body has ever been served
upon Landlord, or any of its agents or representatives, or upon any prior
owner of the Demised Premises, claiming any violation of any federal, state
or local law, regulation or ordinance concerning the generation, handling,
storage, or disposal of Medical Waste, or the environmental state,
condition, or quality of the Demised Premises, or requiring or calling
attention to the need for any work, repairs, or demolition, on or in
connection with the Demised Premises in order to comply with any law,
regulation or ordinance concerning the environmental or healthful state,
condition or quality of the Demised Premises.
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Schedule 13.21 lists all reports of healthcare and environmental
agencies received by Landlord during the last five (5) years from any
supervisory governmental authority with respect to the operations of the Demised
Premises. Said Schedule 13.21 shall be updated to the extent necessary on and as
of the day preceding the Commencement Date. Landlord has delivered copies of
each such report to Tenant.
(b) To the best knowledge of Landlord, after due inquiry, at all times
Landlord has complied, and is complying in all respects with all environmental
and related laws, ordinances and governmental rules and regulations applicable
to Landlord or to the Demised Premises, including, but not limited to, the
Resource Conservation and Recovery Act of 1976, as amended, the Comprehensive
Environmental Response Compensation and Liability Act of 1980, as amended, the
Federal Water Pollution Control Act, as amended by the Clean Water Act, and
subsequent amendments, the Federal Toxic Substances Control Act, as amended, and
all other federal, state and local laws, regulations and ordinances with respect
to the protection of the environment (collectively, "Environmental Laws"). The
foregoing representation and warranty applies to all aspects of the operation of
the Demised Premises, including, but not limited to, the use, handling,
treatment, storage, transportation and disposal of any hazardous, toxic or
infectious waste, material or substance (including Medical Waste) and petroleum
products, material or waste whether performed on any of Landlord's properties or
at any other location.
13.22 TAX RETURNS . Landlord has filed all federal, state, county and
local income, excise, real property and other tax returns and abandoned facility
reports (if any) to date that are due and required to be filed by it, and there
are no claims, liens, or judgments for taxes due from Landlord affecting the
Demised Premises or any of the Leased Equipment, and no basis for any such
claim, lien, or judgment exists.
13.23 ENCUMBRANCES CREATED BY THIS AGREEMENT . Neither the execution
and delivery of this Lease or the performance of any of the transaction
documents contemplated hereby, nor the consummation of the transactions
contemplated hereby or thereby, will create any Lien on any of the Leased
Equipment or Other Assets in favor of any Person.
13.24 RESIDENTS . Intentionally Deleted.
13.25 ZONING . Except as set forth in Schedule 13.25, there exists no
judicial, quasi-judicial, administrative or other proceeding which might
adversely affect the validity of the current zoning of the Land and Leased
Improvements, nor to the best of Landlord's knowledge, after due inquiry, is
there any threatened action or proceeding which could result in the modification
and termination of any such zoning. Said Schedule 13.25 shall be updated to the
extent necessary on and as of the day preceding the Commencement Date.
13.26 LEASES . Schedule 13.26 contains an (a) accurate and complete
list of each lease, and all Amendments thereto, of Personal Property
(collectively, the "Personal Property Leases") to which Landlord or the Demised
Premises is a party or by which Landlord or the Demised Premises is bound or
which were assigned or transferred to Landlord in connection with the Demised
Premises and (b) a list of all contracts providing for the installation or
maintenance of equipment
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purchased or leased by Landlord relating to the Demised Premises or the
operation of the Facility. Said Schedule 13.26 shall be updated to the extent
necessary on and as of the day preceding the Commencement Date.
13.27 CARE OF RESIDENTS; DEFICIENCIES; LICENSED BED AND RATE SCHEDULE .
(a) Intentionally Deleted.
(b) Schedule 13.27(b) sets forth a true and complete list of all
violations and deficiencies found or alleged by any governmental authority with
respect to the Facility or Landlord within the past three (3) years. All such
violations and deficiencies have been fully remedied by Landlord or withdrawn by
the applicable governmental authority. No violations or deficiencies found or
alleged by any governmental authority with respect to the Facility or Landlord
(whether or not listed in Schedule 13.27 (b)) will, individually or in the
aggregate, result in any Adverse Effect or adversely effect Tenant, or its
operation of the Demised Premises after the Commencement Date or any of the
transactions contemplated hereby (including, without limitation, any adverse
effect upon any application for Tenant's operation of the Demised Premises).
Said Schedule 13.27(b) shall be updated to the extent necessary on and as of the
day preceding the Commencement Date.
(c) Schedule 13.27(c) sets forth (i) the number of licensed assisted
living beds at the Demised Premises, (ii) the current rates charged by the
Demised Premises to its residents and (iii) the number of beds or units
presently occupied in, and the occupancy percentage at, the Demised Premises,
including the current rates charged by the Demised Premises for each such
occupied bed or unit, and the information set forth thereon is complete and
correct in all material respects. Said Schedule 13.27(c) shall be updated to the
extent necessary on and as of the day preceding the Commencement Date.
13.28 BOOKS AND RECORDS . The books and records of the Demised Premises
set forth in all material respects all transactions affecting the Demised
Premises, and such books and records have been properly kept and maintained in a
manner consistent with sound business practice and are complete and correct in
all material respects.
13.29 INTELLECTUAL PROPERTY . Schedule 13.29 sets forth a list of all
patents, copyrights, trademarks, software and computer programs, corporate names
and other intellectual property rights, including the name "The Homestead of
Manhattan" and all derivations and variations thereof and any other tradenames
used in connection with the operation of the Demised Premises (collectively, the
"Intellectual Property") used by Landlord in connection with the Demised
Premises. Said Schedule 13.29 shall be updated to the extent necessary on and as
of the day preceding the Commencement Date.
13.30 NO MISSTATEMENTS OR OMISSIONS . None of the documents,
certificates, instruments or information furnished or to be furnished by
Landlord to Tenant or any of Tenant's representatives is or will be false or
misleading as to any material fact or omits or will omit to state a material
fact necessary to make any of the statements contained therein not misleading.
Landlord has provided to Tenant all material information related to the Leased
Equipment, the Other Assets and the Demised Premises.
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13.31 BANKRUPTCY . No insolvency proceeding of any character,
including, without limitation, bankruptcy, receivership, reorganization,
composition or arrangement with creditors, voluntary or involuntary, affecting
Landlord (other than as a creditor) or the Demised Premises or any of the Leased
Equipment or Other Assets are pending or are being contemplated by Landlord, or
are, to the best knowledge of Landlord, after due inquiry, being threatened
against Landlord by any other person, and Landlord has not made any assignment
for the benefit of creditors or taken any action in contemplation of or which
would constitute the basis for the institution of such insolvency proceedings.
Tenant acknowledges that the Demised Premises are under construction as
of the date of this Lease and that the Demised Premises have not been operated
by Landlord as an assisted living facility. Tenant further acknowledges that
certain of the representations and warranties made by Landlord and Jack West
herein assume by their nature that the construction of the Demised Premises has
been completed (the "Completion Warranties") and/or that Landlord has operated
the Demised Premises as an assisted living facility (the "Operational
Warranties"). Tenant agrees that the Completion Warranties shall not be
effective until such time as construction of the Demised Premises has been
completed. Upon completion of construction of the Demised Premises, the
Completion Warranties shall automatically become effective except to the extent
of any matters disclosed in the Schedules to this Lease. Tenant further agrees
that the Operational Warranties shall not be deemed to be effective unless
Landlord operates the Demised Premises as an assisted living facility prior to
the Commencement Date, and in such event the Operational Warranties shall
automatically become effective as of the Commencement Date except to the extent
of any matters disclosed in the Schedules to this Lease.
ARTICLE XIV
TENANT'S REPRESENTATIONS, WARRANTIES AND COVENANTS
Tenant represents and warrants to Landlord, and covenants, as follows:
14.1 ORGANIZATION AND STANDING OF TENANT . Tenant is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Copies of its Articles of Incorporation and By-laws and all amendments
thereof to date, have been delivered to Landlord, and are complete and correct.
Tenant has the power and authority to own the property and assets now owned by
it and to conduct the business presently being conducted by it.
14.2 AUTHORITY . Tenant has the full, absolute and unrestricted right,
power and authority to make, execute, deliver and perform this Lease including
all Schedules and Exhibits hereto, and the other instruments and documents
required or contemplated hereby and thereby. Upon obtaining the consents and
approvals described in Section 19.5, such execution, delivery, performance and
consummation shall have been duly authorized by all necessary action, corporate
or otherwise, on the part of Tenant, its directors and shareholders and all
consents of holders of indebtedness of Tenant shall have been obtained.
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14.3 BINDING EFFECT . This Lease and all related transaction documents
executed by Tenant constitute the legal, valid and binding obligation of Tenant,
enforceable against Tenant in accordance with their respective terms.
14.4 ABSENCE OF CONFLICTING AGREEMENTS . Neither the execution or
delivery of this Lease or any of the transaction documents related hereto by
Tenant nor the performance by Tenant of the transactions contemplated hereby and
thereby, conflicts with, or constitutes a breach of or a default under (i)
Tenant's articles of incorporation or by-laws; or (ii) any applicable law, rule,
judgment, order, writ, injunction, or decree of any court, currently in effect;
or (iii) any applicable rule or regulation of any administrative agency or other
governmental authority currently in effect; or (iv) except as set forth on
Schedule 14.4, any written or oral agreement, indenture, contract or instrument
to which Tenant or any shareholder thereof is now a party. Said Schedule 14.4
shall be updated to the extent necessary on and as of the day preceding the
Commencement Date.
14.5 STATEMENT OF OPERATIONS . Tenant shall furnish to Landlord a
statement of operations for the Demised Premises within ninety (90) days after
the end of each fiscal year for the Demised Premises. The statement of
operations shall include occupancy statistics and a statement of income and
expenses for the Demised Premises for the period which it covers, and shall be
certified by an officer of Tenant.
ARTICLE XV
INSURANCE, SUBROGATION AND INDEMNIFICATION
15.1 COMPREHENSIVE GENERAL LIABILITY AND PROFESSIONAL INSURANCE TO BE
CARRIED BY TENANT . Tenant before occupying the Demised Premises, at its sole
cost and expense, shall cause to be issued and kept in force during the Lease
Term, a policy or policies of comprehensive general liability and professional
liability insurance, including general liability and property damage and
including contractual liability under Tenant's indemnification obligations in
this Article, by the terms of which Tenant shall be insured against claims for
bodily injury, death and property damage as a result of an occurrence on the
Demised Premises, with minimum combined single limits of One Million Dollars
($1,000,000) per occurrence and Three Million Dollars ($3,000,000) per property,
with a Two Million Dollar ($2,000,000) umbrella policy. Landlord shall be named
as an additional insured or a loss payee, as applicable, under such policy or
policies of insurance. Tenant shall remain liable to Landlord for any deficiency
should such insurance under this Section 15.1 be insufficient to satisfy the
liability of Tenant under Section 15.4.
15.2 CERTIFICATE OF INSURANCE . Tenant, at its sole cost and expense,
shall carry all insurance required by this Article XV with a financially sound
and reputable insurer qualified to do business in the State of Kansas, and
Tenant shall cause each policy of insurance procured by it and required by this
Article to be endorsed to provide that each insurer shall have the right to
change or cancel the policy only after giving every insured party thereunder
thirty (30) days prior written notice by certified mail, return receipt
requested, of the insurer's intention to cancel or change the policy. All
insurance required to be carried by Tenant pursuant to the terms of this Lease
shall be effected under valid and enforceable policies issued by insurers rated
in Best's Insurance Guide, or any
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successor thereto (or if there be none, an organization having a national
reputation) as having a general policyholder rating of not less than "B+".
At Landlord's request, Tenant, at its sole cost and expense, before
commencement of the Lease Term and upon each renewal of such insurance, shall
deliver to and deposit with Landlord certificates of insurance evidencing each
policy required by this Article. Upon request of Landlord, Tenant will furnish
or cause to be furnished to Landlord from time to time, a summary of the
insurance covering required by this Article XV in form and substance reasonably
acceptable to Landlord.
A party's obligation to carry the insurance provided herein may be
brought within the coverage of a so-called "blanket policy" or policies of the
insurance carrier maintained by such party or its affiliated business
organizations. However, the other party to this Lease must be named as an
additional insured thereunder as its interest may appear; and the requirements
set forth herein must be otherwise satisfied.
15.3 OTHER COVERAGE . Tenant, at its sole cost and expense, shall carry
and maintain throughout the Lease Term insurance for the benefit of Landlord and
Landlord's first fee mortgagee in such amount as shall be necessary to provide
coverage for loss of Annual Rent during the first twelve (12) months during
reconstruction following any damage or destruction of the Demised Premises.
Tenant, at its sole cost and expense, shall also carry and maintain throughout
the Lease Term insurance in a reasonable amount to provide coverage for loss or
damage to or from explosion of steam boilers, pressure vessels or similar
apparatus; and workers compensation and employer's liability insurance with a
limit of not less than the amount required by applicable state statute.
15.4 INDEMNIFICATION OF LANDLORD . Tenant assumes all risk and
responsibility for injury or death to persons and damage to property (damages to
the Demised Premises being waived to the extent of insurance proceeds paid to or
on behalf of Landlord) arising out of or in any way connected with or related to
Tenant's use and control of the Demised Premises (including matters relating to
Tenant's repair and/or alteration of the Demised Premises) and Tenant shall
defend, indemnify and hold harmless Landlord, its partners, officers, directors,
managing member, members and shareholders (collectively, the "Indemnified
Parties"), from and against any and all claims, losses, liabilities, actions,
proceedings and expenses (including reasonable attorneys' fees) imposed upon,
incurred by or asserted against any of the Indemnified Parties by reason of,
arising out of or in any way connected with Tenant's use or operation of the
Demised Premises or Other Assets, except to the extent such claims, losses,
liabilities, actions, proceedings and expenses (including attorneys' fees) arise
out of Landlord's negligence, willful misconduct or breach of this Lease. Tenant
shall at all times indemnify and hold harmless Landlord, its officers,
directors, managing member, members and shareholders, from and against any and
all claims, losses, liabilities, actions, proceedings and expenses (including
reasonable attorneys' fees) arising out of any inaccuracy in any representation
or breach of any warranty set forth in Article XIV hereof. The provisions of
this Section 15.4 shall survive the termination or expiration of this Lease.
15.5 INDEMNIFICATION OF TENANT . Landlord and Jack West shall at all
times jointly and severally defend, indemnify and hold harmless Tenant, its
officers, directors and shareholders (collectively, the "Tenant Indemnified
Parties"), from and against any and all claims, losses, liabilities,
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actions, proceedings and expenses (including reasonable attorneys' fees) imposed
upon, incurred by or asserted against any of the Tenant Indemnified Parties by
reason of, arising out of or in any way connected with Landlord's use, ownership
or operation of the Demised Premises prior to the Commencement Date, except to
the extent such claims, losses, liabilities, actions, proceedings and expenses
(including reasonable attorney's fees) arise out of Tenants' negligence, willful
misconduct or breach of this Lease. Landlord and Jack West shall at all times
jointly and severally defend, indemnify and hold harmless the Tenant Indemnified
Parties from and against any and all claims, losses, liabilities, actions,
proceedings and expenses (including reasonable attorneys' fees) arising out of
any inaccuracy in any representation or breach of any warranty set forth in
Article XIII hereof. The provisions of this Section 15.5 shall survive the
termination or expiration of this Lease.
15.6 FIRE, EXTENDED COVERAGE AND ADDITIONAL PERILS INSURANCE . Tenant,
at its sole cost and expense, shall cause to be issued and kept in force during
the Lease Term, a policy or policies of fire, extended coverage and all risks
insurance by which Landlord and Tenant shall be insured against loss and damage
by fire, lightning, windstorm, hail and sprinkler damage, resulting from damage
to or destruction of the improvements, including equipment, fixtures,
furnishings and other personal property used in connection with the Demised
Premises and the Leased Equipment, if any, for its full replacement value
(exclusive of Land), less cost of excavation, foundation and footings, by
policies containing an agreed amount endorsement, demolition coverage (XCU
coverage) and ordinance or law coverage, such policy or policies to be written
on a replacement cost basis. Notwithstanding anything to the contrary, Landlord
shall at all times be entitled to insurance in an amount sufficient to avoid
being a coinsurer. All such insurance shall be carried in favor of Landlord and
Landlord's first fee mortgagee as their interest(s) may appear. Such insurance
may also be carried in favor of Tenant and the holder(s) of any leasehold
mortgages on this Lease, as their interests may appear; provided, however, that
any such policy shall effectively provide, if such provision be obtainable, that
Landlord's interest therein shall not be subject to cancellation by reason of
any act or omission of Tenant or any leasehold mortgagee. Notwithstanding
anything in this Lease to the contrary, all such fire and extended coverage and
other insurance policies covering damage to or destruction of buildings and
improvements on the Demised Premises shall effectively provide that any loss
payable thereunder shall be adjusted solely by Tenant and the leasehold
mortgagee(s), and that the proceeds of such insurance shall be payable to
Tenant, however, if in excess of One Hundred Thousand Dollars ($100,000), shall
be paid to and deposited with Landlord's first fee mortgagee, provided such
mortgagee is a bank, savings bank or trust company whose deposits are insured by
the FDIC, or insurance company, pension fund, credit company or real estate
investment trust, and such mortgagee has resources in excess of $100,000,000 (an
"Institutional Lender"), and if not then said proceeds shall be paid to and
deposited with any Institutional Lender of Tenant's selection, as insurance
trustee (the "Insurance Trustee"), which shall hold, apply and make available
the proceeds of such insurance as hereinafter provided in this Lease.
15.7 WAIVER OF SUBROGATION . Each party to this Lease releases the
other party (which term as used in this Section includes the employees, agents,
officers, managing member, members and directors of the other party) from all
liability, whether for negligence or otherwise, in connection with loss covered
by any fire and/or extended coverage insurance policies, which the releasor
carries with respect to the Demised Premises, or any interest or property
therein or thereon (whether or not such insurance is required to be carried
under this Lease), but only to the extent that such loss is collected under said
fire and/or extended coverage insurance policies. Such release is also
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conditioned upon the inclusion in the policy or policies of a provision whereby
any such release shall not adversely affect said policies, or prejudice any
right of the releasor to recover thereunder. Each party agrees that its
insurance policies aforesaid will include such a provision so long as the same
shall be obtainable without extra cost, or if extra cost shall be charged
therefor, so long as the party for whose benefit the clause or endorsement is
obtained shall pay such extra cost. If extra cost shall be chargeable therefor,
each party shall advise the other of the amount of the extra cost, and the other
party at its election, may pay the same, but shall not be obligated to do so.
ARTICLE XVI
ARBITRATION
If any controversy should arise between the parties in the performance,
interpretation or application of this Lease involving any matter, either party
may serve upon the other a written notice stating that such party desires to
have the controversy resolved by an arbitrator. If the parties cannot agree
within fifteen (15) days from the service of such notice upon the selection of
such arbitrator, an arbitrator shall be selected or designated by the American
Arbitration Association upon written request of either party hereto. Arbitration
of such controversy, disagreement, or dispute shall be conducted in accordance
with the Commercial Arbitration Rules then in force of the American Arbitration
Association and the decision and award of the arbitrator so selected shall be
binding upon Landlord and Tenant. The arbitration will be held in Dallas, Texas.
As a condition precedent to the appointment of any arbitrator, in any
non-monetary dispute, both parties shall be required to make a good faith effort
to resolve the controversy, which effort shall continue for a period of thirty
(30) days prior to any demand for arbitration. The cost of any such arbitration
shall be shared equally by the parties. Each party shall pay its own costs
incurred as a result of its participation in any such arbitration.
If the issue to be arbitrated is Landlord's or Tenant's alleged breach
of this Lease and as a result thereof, Landlord or Tenant has the right to
terminate this Lease, Tenant shall continue to lease the Demised Premises
pending the outcome of such arbitration, provided Landlord or Tenant may elect
to proceed without arbitration under its other remedies in this Lease.
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ARTICLE XVII
CERTAIN COVENANTS OF LANDLORD
17.1 COVENANT NOT-TO-COMPETE .
(a) For a period of five (5) years from and after the Commencement Date
neither Landlord nor any corporation, partnership or other business entity or
person controlling, controlled by or under common control with Landlord
("Restricted Party"), shall, directly or indirectly, operate, manage, own,
control, finance or provide financing for, be a consultant for or enter into a
service contract with, any nursing home, hospital or licensed health care
facility or other person or entity of any type, licensed or unlicensed, existing
or to be constructed that provides assisted living care, nursing home care or
any other senior housing, or any entity existing or to be formed that competes
in any way with the Demised Premises (any such person or entity being herein
referred to as an "Operator"), that provides nursing home care, assisted living
care or senior housing, and which facility is located within twenty-five (25)
miles from the exterior boundaries of the Land.
(b) From and after the Commencement Date, no Restricted Party shall
disclose, directly or indirectly, to any person outside of Tenant's employ
without the express authorization of Tenant, any resident lists, pricing
strategies, resident files and records, proprietary data or trade secrets
relating to the Demised Premises or any financial or other information about the
Demised Premises not then in the public domain.
(c) For a period of five (5) years from and after the Commencement
Date, no Restricted Party shall solicit any of the physicians, customers,
vendors, suppliers, associates, employees, independent contractors, residents or
families of residents admitted to, or employed at the Demised Premises prior to
the Commencement Date, or by the Facility or by Tenant, to take any action or to
refrain from taking any action or inaction that would be disadvantageous to
Tenant or the Facility, including (but not limited to) the solicitation of their
respective physicians, suppliers, customers, vendors, associates, employees,
independent contractors, residents or families of residents to cease doing
business, or their association or employment with the Facility or Tenant.
(d) The Restricted Parties acknowledge that the restrictions contained
in this Section 17.1 are reasonable and necessary to protect the legitimate
business interests of Tenant and that any violation thereof by any of them would
result in irreparable harm to Tenant. Accordingly, the Restricted Parties agree
that upon the violation by any of them of any of the restrictions contained in
this Section 17.1, Tenant shall be entitled to obtain from any court of
competent jurisdiction a preliminary and permanent injunction as well as any
other relief provided at law, equity, under this Lease or otherwise. In the
event any of the foregoing restrictions are adjudged unreasonable in any
proceeding, then the parties agree that the period of time or the scope of such
restrictions (or both) shall be adjusted to such a manner or for such a time (or
both) as is adjudged to be reasonable.
Notwithstanding the foregoing, for purposes of this Section 17.1, any
advertisement prepared for and disseminated to the public in general, which
advertises the services of any facility of Landlord not otherwise in violation
of this Section 17.1 or advertises the need for
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services to be supplied to such a Demised Premises, shall not be deemed to be an
inducement or solicitation with respect to any such residents, physicians,
suppliers or independent contractors.
17.2 PRE-COMMENCEMENT DATE FINANCIAL STATEMENTS . Intentionally
Deleted.
ARTICLE XVIII
MISCELLANEOUS PROVISIONS
18.1 NOTICE S. All notices, requests, demand or other communications
required or permitted under this Lease shall be in writing and shall be either
personally delivered evidenced by a signed receipt, transmitted by United States
certified mail, return receipt requested, postage prepaid, or by a nationally
recognized overnight delivery service, addressed as follows:
IF TO LANDLORD: c/o The Homestead Company, L.C.
155 North Market, Suite 910
Wichita, Kansas 67202
Attention: Mr. Jack West
COPY TO: Foulston & Siefkin, L.L.P.
700 Fourth Financial Center
Wichita, Kansas 67202
Attention: Gary E. Knight, Esq.
IF TO TENANT: c/o Integrated Living Communities, Inc.
10065 Red Run Boulevard
Owings Mills, Maryland 21117
Attention: Mr. Ed Komp
COPIES TO: Integrated Living Communities, Inc.
10065 Red Run Boulevard
Owings Mills, Maryland 21117
Attention: Marshall A. Elkins, Esq.
and
Blass & Driggs
461 Fifth Avenue
New York, New York 10017
Attention: Michael S. Blass, Esq.
All notices, requests, demands and other communications shall be
effective (i) upon personal delivery evidenced by a signed receipt, (ii) upon
five (5) calendar days after being deposited in the United States mail or (iii)
on the next business day following timely deposit with a nationally recognized
overnight delivery service, whichever occurs first. The time period in which a
response to any such notice, request, demand or other communication must be
given, however, shall
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17.3 TITLE MATTERS. At its sole cost and expense, Landlord shall
deliver, or cause to be delivered, to Tenant: (i) promptly after the completion
of the construction of the Facility (a) final lien waivers from each contractor,
subcontractor and materialman that performed work or supplied materials in
connection with the construction of the Facility, (b) an "as built" survey of
the Demised Premises that shows a state of facts acceptable to Tenant and its
counsel prepared in accordance with ALTA standards by a surveyor licensed in the
State of Kansas, (c) an endorcesment to Tenant's leasehold owner's title
insurance policy reading in such "as built" survey, and (d) a bringdown of
Tenant's leasehold owner's title insurance policy showing only title exceptions
that are acceptable to Tenant and its counsel, and (ii) promptly after the
passage of four (4) months after the completion of the construction of the
Facility, a bringdown, of and endorsement to, Tenant's leasehold owner's title
insurance policy showing only title exceptions that are acceptable to Tenant and
its counsel.
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commence to run from (i) the date of personal delivery evidenced by a signed
receipt, (ii) the date of receipt on the return receipt of the notice, request,
demand or other communication; provided, however, that if a party refuses
delivery of any such notice, request, demand or other communication sent by
certified mail, or fails or neglects, without reasonable cause, to accept
delivery after three (3) attempts to so deliver by postal authorities, it shall
be deemed received on the date of its last being deposited in the United States
mail, or (iii) the date of delivery by a nationally recognized overnight
delivery service. The parties hereto shall have the right, at any time and from
time to time during the Lease Term to change their respective addresses for
notices by giving the other party hereto written notice thereof.
18.2 UNDERSTANDING AND AGREEMENTS . This Lease constitutes the entire
understanding and agreements of whatsoever nature or kind existing between the
parties with respect to Tenant's lease of the Demised Premises and Other Assets
from Landlord.
18.3 AMENDMENT . This Lease may be amended at any time and from time to
time; provided, however, that no amendment to this Lease shall be legally
enforceable against Landlord or Tenant unless it is in writing, executed and
acknowledged by both Landlord and Tenant.
18.4 CONSTRUCTION . This Lease shall be construed in accordance with
the laws of the State of Kansas.
18.5 SPECIFIC PERFORMANCE . Landlord and Tenant for themselves and for
each person, business organization, association and corporation claiming by,
under or through either Landlord or Tenant, stipulate that both Landlord and
Tenant shall have the remedy of specific performance against the other.
Landlord and Tenant, for themselves and for each person, business
organization, association and corporation claiming by, under or through either
Landlord or Tenant, knowingly and voluntarily waive their rights to allege or
assert in or in any and all claims or counts for specific performance arising
out of or in any way connected with this Lease the defense that the other party
has an adequate remedy at law.
18.6 BINDING EFFECT ON SUCCESSORS . Except as otherwise provided for
herein, Landlord and Tenant expressly agree that, subject to the terms of this
Lease, all terms and conditions of this Lease shall extend to and be binding
upon or inure to the benefit of the heirs, executors, administrators, personal
representative, assigns and successors in interest of both the respective
parties hereto.
18.7 LEASE (SHORT FORM) . Landlord and Tenant shall execute and deliver
to each other an instrument, recordable in form setting forth the term and such
other information (other than rent) as may be necessary to constitute a "short
form lease" for recording purposes immediately upon execution of this Lease. Any
party, at its expense, shall have the right to record such short form lease for
the purpose of giving notice of Tenant's interest in the Demised Premises. This
Lease shall not be recorded.
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18.8 READING AND RECEIPT OF THIS LEASE . Landlord and Tenant stipulate
that each has read and understands the conditions in this Lease and by their
respective signatures below acknowledge the receipt of an executed copy of this
Lease.
18.9 PROHIBITION OF MECHANICS LIENS . Nothing in this Lease shall be
deemed or construed in any way as constituting the consent or request of
Landlord, expressed or implied, by inference or otherwise, to any contractor,
subcontractor, laborer, or materialman for the performance of any labor or the
furnishing of any materials for any specific improvements, alteration to, or
repair of the Demised Premises or any part thereof, nor as giving Tenant any
right, power, or authority to contract for or permit the rendering of any
services or the furnishing of any materials that would give rise to the filing
of any lien against the Demised Premises or any part thereof.
18.10 BROKERAGE OR AGENTS FEES . Landlord and Tenant represent to each
other that it has dealt with no broker in connection with this Lease or the
transactions contemplated hereby other than Southwest Retirement Properties (the
"Broker"), and Tenant shall pay any compensation, commissions or fees earned by
the Broker. Except for the fees payable to the Broker in connection with this
transaction, which fees are the sole responsibility of Tenant, each party agrees
to indemnify and hold the other harmless, including reasonable attorney's fees,
from all claims or actions brought by any broker or agent claiming to represent
the indemnifying party in this transaction for fees or commissions.
18.11 CAPTIONS AND INDEXES . Article or Section titles, captions or
indexes, contained in this Lease are inserted only as a matter of convenience
and reference, and in no way define, limit, extend or describe the scope of this
Lease, or the intent of any provision hereof.
18.12 PRONOUNS . All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine, neuter, singular or plural as the
identity of the person or persons may require.
18.13 DRAFTING OF THIS LEASE . Landlord and Tenant have been
represented by attorneys in the negotiation and drafting of this Lease and all
of the parties to this Lease have influenced the language of this Lease.
Therefore, this Lease shall not be construed against any party to this Lease by
reason of drafting authorship.
18.14 COUNTERPARTS . This Lease may be executed in several
counterparts, each of which shall be deemed an original, and all of which shall
together constitute one and the same instrument.
18.15 QUIET ENJOYMENT . Landlord covenants that Tenant, paying the said
rental and performing the covenants and conditions in this Lease contained,
shall and may peaceably and quietly have, hold and enjoy the Demised Premises
and all rights of Tenant hereunder for the Lease Term, without any manner of
hindrance or molestation whatsoever from anyone claiming by, through or under
Landlord.
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ARTICLE XIX
CONDITIONS PRECEDENT TO LEASE COMMENCEMENT
Unless waived by Tenant in writing, neither the Lease Term nor Tenant's
obligations under this Lease shall commence unless and until each and every one
of the following conditions has been satisfied or fulfilled.
19.1 REPRESENTATIONS AND WARRANTIES .
Each of the representations and warranties contained in this Lease and
on any Schedule (as originally annexed to this Lease), list, certificate or
other document delivered pursuant to the provisions hereto or in any other
document or instrument delivered in connection herewith made by or on behalf of
Landlord and/or Jack West shall be true and correct in all material respects at
and as of the time made and on and as of the Commencement Date as though such
representations and warranties were made at and as of such time, except to the
extent affected by the transactions herein contemplated.
19.2 PERFORMANCE OF COVENANTS; NO DEFAULT .
Landlord shall have performed or complied in all material respects with
each of its agreements and covenants under this Lease (including, without
limitation, all of its obligations under Article XXII hereof) and under all
documents and instruments delivered in connection herewith required to be
performed or complied with by it prior to or at the Commencement Date of the
Lease Term. No default shall exist nor any condition or event that, constitutes
a "default" (as defined in Article XI of this Lease), or, with notice or lapse
of time or both, would constitute a default on the part of Landlord.
19.3 DELIVERY OF CERTIFICATE .
Landlord shall have executed and delivered to Tenant a certificate
signed by a duly authorized managing member of Landlord dated the Commencement
Date upon which Tenant may rely, certifying that the statements made in Sections
19.1 and 19.2, are true, correct and complete as of the Commencement Date.
19.4 LEGAL MATTERS . No suit, action, investigation, or legal or
administrative proceeding shall have been brought or shall have been threatened
by any person that questions the validity or legality of this Lease or the
transactions contemplated hereby.
19.5 APPROVALS .
(a) The consent or approval of all persons necessary for the
consummation of the transactions contemplated hereby including, without
limitation, all governmental, regulatory and other such agencies, shall have
been granted, including without limitation, the consents and approvals set forth
on Schedule 13.5 and any tax clearance or similar approval and all licenses,
certificates of need and other permits (including without limitation the
"Licenses") necessary for
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Tenant to lease and operate the Facility shall have been issued, in Tenant's
name, and the effectiveness of each of the same shall not be subject to the
satisfaction of any conditions precedent;
(b) The consent of the Board of Directors of Tenant; and
(c) None of the foregoing consents or approvals (i) shall have been
conditioned upon the modification, cancellation or termination of any material
lease, contract, commitment, agreement, license, easement, right or other
authorization with respect to the Facility, or (ii) shall impose on Tenant any
material condition or provision or requirement with respect to the Facility or
its operation that is more restrictive than or different from the conditions
imposed upon such operation prior to the commencement of this Lease.
19.6 MATERIAL ADVERSE CHANGE . Since the date of this Lease there shall
not have been any material adverse change to (a) the assets, business,
operations, properties, condition (financial or otherwise) or reasonably
foreseeable prospects of Landlord, (b) the ability of Landlord to perform all or
any part of its obligations under this Lease or any document or agreement
contemplated hereby, (c) the Demised Premises or Other Assets or (d) the
operation of the Facility.
19.7 AUTHORIZATION DOCUMENTS . Tenant shall have received appropriate
authorizing documents and the Organizational Documents with respect to Landlord,
certified in a manner reasonably acceptable to Tenant including without
limitation, a certificate of the "managing member" (as defined in the
Organizational Documents) of Landlord certifying the authorization of Landlord's
execution and full performance of each of this Lease and all documents and
agreements executed by Landlord in connection herewith, the Organizational
Documents of Landlord and the incumbency of the managing member of Landlord.
19.8 COBRA . Intentionally Deleted.
19.9 ENVIRONMENTAL COMPLIANCE . Tenant shall have received, at its own
expense, a written report in form and substance acceptable to Tenant, from a
qualified geotechnical or engineering firm of Tenant's choice, concerning the
presence of hazardous substances, asbestos or asbestos-containing products,
radon and/or ureaformaldehyde insulation on or in the Facility. Such report
shall disclose at a minimum: (1) the results of a review of prior uses of the
Land disclosed by local public records; (2) contacts with local officials to
determine whether any records exist with respect to the disposal of hazardous
substances at the Land; (3) if deemed necessary by such engineering or
geotechnical firm, or by Tenant, soil samples and groundwater samples consistent
with good engineering practice; and (4) evaluation of the surrounding areas for
sensitive environmental receptors, such as drinking water wells or aquifers,
hospitals and schools.
"Hazardous Substance" shall include (a) any material that may be
dangerous to health or the environment, either separately or in combination with
any other substance, when improperly stored, treated, disposed, or otherwise
managed, including without limitation "hazardous waste," "hazardous substances"
or "toxic substances," or any other contamination, emission, discharge, spill,
or release having an adverse effect on the environment (as such concepts or
terms are used and/or defined in any of the Environmental Laws); and (b) crude
or refined oil, including but not limited to waste oil.
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19.10 FACILITY PURCHASE OPTION. Landlord shall have executed and
delivered the Option Agreement in substantially the form of Exhibit D attached
hereto.
19.11 NON-DISTURBANCE AGREEMENT. Tenant shall be granted a
Subordination Agreement with respect to this Lease from the holder(s) of each
mortgage which is a lien on the Demised Premises on the date of this Lease.
ARTICLE XX
CERTAIN ADDITIONAL OBLIGATIONS OF LANDLORD
20.1 DISCHARGE OF LIABILITIES . Landlord shall pay all of its
liabilities and obligations which arise or accrue on or before the Commencement
Date with respect to the Facility, as and when the same shall become due and
payable.
20.2 ACCOUNTS RECEIVABLE . Intentionally Deleted.
20.3 EMPLOYMENT OF EXISTING EMPLOYEES . Intentionally Deleted.
20.4 AUDITED FINANCIAL STATEMENTS . Intentionally Deleted.
20.5 LICENSES. Landlord shall use its best efforts to deliver to Tenant
not later than ten (10) days from execution hereof copies of each of the
Licenses and of each of the applications therefor.
20.6 COLLECTIVE BARGAINING, LABOR CONTRACTS, ETC. Intentionally
Deleted.
20.7 CONTRACTS AND PERSONAL PROPERTY LEASES. Landlord shall deliver to
Tenant true, correct and complete copies of all of the Contracts and Personal
Property Leases no later than ten (10) days from execution hereof. Landlord
shall terminate as of the Commencement Date any and all of such Contracts and/or
Personal Property Leases, other than Contracts and/or Personal Property Lease,
if any, as shall be designated by Tenant in writing, as the Contracts and/or
Personal Property Leases which Tenant wants assigned to it as of the
Commencement Date.
20.8 DEMISED PREMISES. All public improvements ordered, commenced or
completed prior to the date of this Lease or prior to the Commencement Date
shall be paid for in full by Landlord prior to the Commencement Date; provided,
that if the same are payable in installments, Landlord shall pay all
installments that are due and payable prior to the Commencement Date and Tenant
shall pay all installments that are due and payable on or after the Commencement
Date.
20.9 DELIVERY OF NOTICES. Between the date hereof and the Commencement
Date, and during the Lease Term, Landlord shall, within five (5) days after its
receipt of any of the following, deliver to Tenant copies of (a) all notices of
any claim or default or any other claim or proceeding relating to any License
and all notices of any threatened termination, lapse or revocation of any
License, (b) all claims or notices that the Demised Premises, or any part
thereof, are not in compliance with any applicable federal, state, local or
other governmental laws or ordinances, or any applicable order, rule or
regulation of any federal, state, local or other governmental agency, and
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19.12 TITLE MATTERS. At its sole cost and expense, Landlord shall
deliver, or cause to be delivered, to Tenant: (i) final lien waivers from each
contractor, subcontractor and materialman that performed work or supplied
materials in connection with the construction of the Facility, (ii) an "as
built" survey of the Demised Premises that shows a state of facts acceptable to
Tenant and its counsel prepared in accordance with ALTA standards by a surveyor
licensed in the State of Kansas, (iii) an endorcesment to Tenant's leasehold
owner's title insurance policy reading in such "as built" survey, and (iv) a
bringdown of Tenant's leasehold owner's title insurance policy showing only
title exceptions that are acceptable to Tenant and its counsel.
51-A
<PAGE>
(c) all notices or claims of any violation of any federal, state or local law,
regulation or ordinance concerning the generation, handling, storage, or
disposal of Medical Waste, or the environmental state, condition, or quality of
the Demised Premises, or requiring or calling attention to the need for any
work, repairs, or demolition, on or in connection with the Demised Premises in
order to comply with any law, regulation or ordinance concerning the
environmental or healthful state, condition or quality of the Demised Premises.
ARTICLE XXI
EXTENSION OF COMMENCEMENT DATE AND TERMINATION
21.1 TERMINATION. Without limiting any of the rights of Tenant in this
Lease or as it may be otherwise lawfully entitled, it is agreed that the
commencement of the Lease Term is conditioned upon, and shall be subject to, the
satisfaction of all conditions precedent to Tenant's obligations hereunder,
including, without limitation, those conditions set forth in Article XIX hereof,
the verification by Tenant of the accuracy of all of Landlord's and Jack West's
warranties and representations made herein and the due compliance by Landlord of
all of its agreements set forth herein and elsewhere in this Lease which are to
be performed prior to the Commencement Date. If, on or before the Commencement
Date, Tenant, in its sole judgment, shall determine that any of said conditions
precedent have not been satisfied, or that Landlord's or any of Jack West's
representations or warranties are untrue or that Landlord has not complied with
any of said agreements, then the Tenant may elect to either (i) extend the
Commencement Date for a period or periods not in excess of ninety (90) days in
the aggregate, during which time Landlord shall use its best efforts to satisfy
the condition, complete its required performance and otherwise cure the defect
or non-compliance; or (ii) terminate this Lease, by notice to Landlord. If at
the end of any extended period or periods for the Commencement Date said defect
or non-compliance has not been cured to Tenant's reasonable satisfaction, Tenant
may terminate this Lease by notice to Landlord. If this Lease is terminated, as
aforesaid, Landlord shall cause any deposits, pre-payments or other sums
theretofore delivered or paid by Tenant hereunder to be refunded to Tenant, with
all interest earned thereon, and Landlord shall pay up to $15,000 of the cost of
any survey obtained, any title search made, any insurance commitment issued by
Tenant's title insurance company, and any other expenses, including but not
limited to legal fees, incurred by Tenant, in connection with this Lease.
21.2 TENANT'S REMEDIES. If Landlord fails to comply with any of the
provisions of this Lease then, in addition to all other legal remedies available
to Tenant by reason of Landlord's default, Tenant shall have the right to obtain
specific performance of Landlord's obligations hereunder. Each and every
covenant, representation and warranty of Landlord and Jack West made herein
shall survive and continue after the Commencement Date. Nothing contained herein
shall be deemed to restrict or limit Tenant in any way from offsetting against
or deducting from any Annual Rent or other payments to be made to Landlord
herein, the amount of any costs or damages incurred by Tenant as a result of or
arising out of the breach by Landlord of any covenant, agreement, representation
or warranty made by Landlord or Jack West in this Lease; provided that the
amount to be offset against or deducted from any particular payment shall not
exceed ten (10%) percent of such payment, with the balance of any such amount to
be offset against or deducted from subsequent payments subject to such cap and
carry forward provisions.
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ARTICLE XXII
CONSTRUCTION AND DELIVERY OF POSSESSION
22.1 CONSTRUCTION, DELIVERY OF POSSESSION AND COMMENCEMENT DATE .
(a) Landlord agrees to improve, construct and install upon the Demised
Premises in the location designated on Exhibit A-1 annexed hereto, the Leased
Improvements containing not less than 22,450 square feet of interior floor
space, and consisting of 35 units and 46 beds, which Leased Improvements shall
be part of the Demised Premises that shall be provided to Tenant by Landlord as
a "turnkey" operation, as hereinafter provided in this Lease. Landlord agrees
that the work described as "Landlord's Construction Work" in Exhibit C annexed
hereto will be completed at its own cost and expense.
(b) All work required to be performed by Landlord pursuant to this
Lease shall be performed in a good and workmanlike manner, with new materials of
good quality. The Demised Premises shall be left at the completion of such work
in a safe, clean and tenantable condition and in reasonably good order and
repair. Landlord shall perform all work provided for in this Lease in compliance
and conformity with all applicable construction and building codes and with
every applicable requirement of (i) any statute, law, ordinance, regulation or
order, now or hereafter made by any governmental authorities; (ii) any board of
fire underwriters, rating bureau or similar organizations having jurisdiction;
and (iii) all carriers of insurance on the Demised Premises and on the work
provided for in this Lease. For a period of fifteen (15) months following the
Commencement Date, Landlord, at its expense, shall remedy any defect or make any
repairs or replacements made necessary by its failure to perform the work
required to be performed by it pursuant to this Lease, including any failure to
perform such work in a good and workmanlike manner and with new materials of
good quality. During the eleventh (11th) month after the Commencement Date,
Landlord and Tenant shall create a written list of such defects, repairs or
replacements that Landlord can present to its contractors for remedial action
within the twelve (12) month warranty period provided by such contractors to
Landlord; provided that nothing in this sentence derogates the fifteen (15)
month warranty provided by Landlord to Tenant in the immediately preceding
sentence. Landlord shall obtain all necessary building permits so as to allow
Landlord to perform Landlord's Construction Work and ready the Demised Premises
for Tenant's use and occupancy.
(c) Landlord agrees that as part of Landlord's Construction Work the
Demised Premises shall be connected to the electric and gas lines serving the
municipality wherein the Demised Premises are located and to the water and sewer
system of said municipality.
(d) Landlord agrees that Landlord's Construction Work shall be
completed and possession of the Demised Premises shall be delivered to Tenant
(the term "delivery of possession of the Demises Premises" being hereinafter
defined) on or before February 28, 1997, subject to extension of not more than
one hundred eighty (180) days in the aggregate for periods of time that are
deemed excusable delays pursuant to Section 11.4 of this Lease (herein referred
to as "Excusable Delays").
(e) Further, should Landlord fail to diligently pursue such work and to
complete Landlord's Construction Work in accordance with the provisions of this
Article, Tenant
53
<PAGE>
may, without prejudice to the exercise of any other remedy, at its election,
either (i) extend further time to Landlord within which to properly complete
Landlord's Construction Work, or (ii) commence and/or complete Landlord's
Construction Work or correct such work, as the case may be, and deduct and
offset Tenant's entire cost of so doing, together with interest thereon from the
date of expenditure thereof at the annual rate set forth in Section 3.1.4
hereof, from any Annual Rent or other amounts payable under this Lease. At the
expiration of any extended period or periods granted by Tenant as aforesaid,
Tenant shall have the same rights of extension or self help.
Landlord and Jack West shall at all times jointly and severally defend,
indemnify and hold harmless the Tenant Indemnified Parties from and against all
actions, claims, demands, costs, damages, penalties and expense of any kind
which may be brought, made or incurred by reason of any work performed on or
about the Demised Premises by or on behalf of or at the direction of Landlord,
including, without limitation any loss of business or profits from the Demised
Premises or any costs and expenses incurred in the operation of Tenant's
business at the Demised Premises by reason of or resulting from interference
with Tenant's business operations by the performance of Landlord's Construction
Work. Landlord shall carry a policy of insurance, insuring Landlord and Tenant
against public liability on an occurrence basis with limits not less than Three
Million ($3,000,000) Dollars combined coverage for personal injury and against
property damage with a limit of at least Five Hundred Thousand ($500,000)
Dollars, which insurance shall be in effect at all times when any work is being
performed by or on behalf of Landlord on or about the Demised Premises;
provided, however, that Landlord may cause its contractor to carry such
insurance. On or before the date of this Lease with respect to Landlord's
Construction Work, and before commencing any such work at other times, Landlord
shall furnish Tenant with a certificate of insurance evidencing compliance with
the foregoing insurance requirements.
(f) Provided (x) Landlord's Construction Work has been completed and
all equipment and facilities required to be furnished by Landlord are in good
working order, and (y) all utilities and sewer facilities have been connected to
the Demised Premises and are operable, Landlord shall be deemed to have
"delivered possession of the Demised Premises" to Tenant on the fifth day
following Tenant's receipt of written notice from Landlord of the completion of
the items set forth in clauses (x) and (y) in this paragraph (f), provided that
said notice is accompanied by:
(i) a final, non-conditional Certificate of Occupancy, or its
equivalent, and all necessary licenses and permits, issued by the
appropriate governmental authorities, permitting Tenant's use and occupancy
of the Demised Premises for the purposes herein described, including,
without limitation, any necessary licenses or permits for the operation of
the Demised Premises as an assisted living facility; and
(ii) a board of fire underwriter's certificate with respect to the
electrical installations in the Demised Premises and such other
certificates as are customarily obtained for similar types of buildings and
improvements.
For purposes of this Lease, the "Commencement Date" shall be deemed to be the
date upon which Tenant officially opens the Demised Premises for business, or
five (5) days after Landlord's delivery of possession of the Demised Premises to
Tenant as aforesaid, whichever first occurs. Landlord and Tenant agree that
delivery of possession of the Demised Premises shall not be deemed to have
54
<PAGE>
occurred until exclusive possession of the Demised Premises shall have been
delivered to Tenant with the completion of Landlord's Construction Work (except
such non-substantial and non-material portions thereof as Landlord shall have by
reason of Excusable Delays been unable to complete, provided the failure to
complete said items does not interfere with Tenant's full use and enjoyment of
the Demised Premises and further provided that said incomplete items are
thereafter completed within thirty (30) days, said Demised Premises to be in
broom clean condition.
(g) Tenant's acceptance of possession of the Demised Premises shall not
be deemed a waiver by Tenant of any failure by Landlord to complete and perform
Landlord's Construction Work in compliance with the provisions of this Lease.
(h) If Tenant submits to Landlord a written list of items which
Landlord is obligated to complete or correct pursuant to the final plans and
specifications for Landlord's Construction Work, Landlord shall have a period of
thirty (30) days from the date of said notice to complete such work, failing
which Tenant shall have the right to complete such work at Landlord's cost and
expense, and Tenant may deduct and offset from any Annual Rent or other sums
thereafter due Landlord an amount equal to Tenant's cost and expense in
performing such work, together with interest thereon from the date of
expenditure at the annual rate set forth in Section 3.1.4 hereof, if Landlord
does not reimburse Tenant on demand therefor. It is expressly understood and
agreed, however, that Tenant's failure to submit such list to Landlord or its
failure to include any item of incomplete or incorrect work on any such list
shall not be deemed a waiver of any of Tenant's rights with respect to such
incomplete or incorrect work, Landlord hereby agreeing that it shall be
Landlord's obligation to complete or correct the same in any event. The
foregoing provisions of this subsection shall also be applicable to any
supplementary list submitted by Tenant to Landlord after the initial list, which
supplementary list may include, without limitation, latent or other defects not
readily ascertainable in the course of Tenant's initial inspection of the
Demised Premises. Tenant agrees to use its best efforts to furnish the initial
list to Landlord prior to the expiration of ninety (90) days after the opening
of the Demised Premises for the conduct of business.
ARTICLE XXIII
GLOSSARY AND ADDITIONAL DEFINED TERMS
Whenever used in this Lease the following terms shall have the
respective meanings ascribed to them below:
"Annual Rent" shall have the meaning set forth in Section 3.1.1.
"Assets" shall have the meaning set forth in Section 13.18.
"Broker" shall have the meaning set forth in Section 18.10.
"Capital Expenditures" shall have the meaning set forth in Section
8.1.4.
"Capital Improvement" shall have the meaning set forth in Section
8.1.4.
55
<PAGE>
"Commencement Date" shall have the meaning set forth in Section
22.1(f).
"Contracts" shall have the meaning set forth in Section 13.6.
"default" shall have the meaning set forth in Section 11.1.
"Demised Premises" shall have the meaning set forth in Section 1.1.
"Event of Default" shall have the meaning set forth in Section 11.1.
"Environmental Laws" shall have the meaning set forth in Section
13.21(b).
"Excusable Delays" shall have the meaning set forth in Section 22.1(d).
"Facility" - first page
"Fixtures" shall have the meaning set forth in Section 1.1(d).
"GAAP" shall have the meaning set forth in Section 8.1.4.
"ILCI" shall have the meaning set forth in Section 10.1.
"Impositions" shall have the meaning set forth in Section 5.1.
"Indemnified Parties" shall have the meaning set forth in Section 15.4.
"Initial Term" shall have the meaning set forth in Section 2.1.
"Institutional Lender" shall have the meaning set forth in Section
15.6.
"Insurance Trustee" shall have the meaning set forth in Section 15.6.
"Intangibles" shall have the meaning set forth in Section 1.2(a).
"Intellectual Property" shall have the meaning set forth in Section
13.29.
"Land" shall have the meaning set forth in Section 1.1(a).
"Landlord's Construction Work" shall have the meaning set forth in
Section 22.1(a).
"Landlord's Share" shall have the meaning set forth in Section 8.1.4.
"Landlord's Transaction Documents" shall have the meaning set forth in
Section 13.2.
"Leased Equipment" shall have the meaning set forth in Section 4.2.
56
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"Leased Improvements" shall have the meaning set forth in Section
1.1(b).
"Lease Term" shall have the meaning set forth in Section 2.3.
"Lease Year" shall have the meaning set forth in Section 2.4.
"leasehold mortgage" shall have the meaning set forth in Section 10.2.
"Licenses" shall have the meaning set forth in Section 13.9.
"Lien" shall have the meaning set forth in Section 13.10(a).
"Major Capital Expenditure" shall have the meaning set forth in
paragraph after Section 8.1.4.
"Major Damage" shall have the meaning set forth in paragraph after
Section 12.1.
"Material Adverse Effect" shall mean, with respect to any Person, any
material adverse effect upon, as the case may be, (a) the assets, business,
operations, properties, condition (financial or otherwise) or reasonably
foreseeable prospects of Landlord, (b) the ability of Landlord to perform all or
any part of its obligations under this Lease or any document or agreement
contemplated hereby, (c) the Demised Premises or Other Assets, or (d) the
operation of the Facility.
"Medical Waste" shall have the meaning set forth in Section 13.21(a)(i)
"Money Rates Column" shall have the meaning set forth in Section 3.1.4.
"Operator" shall have the meaning set forth in Section 17.1(a).
"Option Agreement" shall have the meaning set forth in Section 8.4.
"Other Assets" shall have the meaning set forth in Section 1.2.
"PCBs" shall have the meaning set forth in Section 13.21(a)(iii).
"Permitted Exceptions" shall have the meaning set forth in Section
13.11(a).
"Person" or "person" shall include (without limitation) any manner of
association, business trust, company, corporation, limited liability company,
estate, governmental or other authority, joint venture, natural person,
partnership, limited liability partnership, trust or other entity.
"Personal Property" shall have the meaning set forth in Section 1.1(e).
"Personal Property Leases" shall have the meaning set forth in Section
13.26.
"Price Index" shall have the meaning set forth in Section 8.1.1.2(i).
57
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"Prime Rate" shall have the meaning set forth in Section 3.1.4.
"Proper Successor" shall have the meaning set forth in Section 4.4.
"Related Rights" shall have the meaning set forth in Section 1.1(c).
"Renewal Term" shall have the meaning set forth in Section 2.2.
"Repairs" shall have the meaning set forth in Section 8.1.1.
"Restricted Party" shall have the meaning set forth in Section 17.1(a).
"Right of First Refusal" shall have the meaning set forth in Section
8.4.
"Subordination Agreement" shall have the meaning set forth in Section
10.3.
"Tenant Indemnified Parties" shall have the meaning set forth in
Section 15.5.
"Tenant's Share" shall have the meaning set forth in Section 8.1.4.
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"Trade Rights" shall have the meaning set forth in Section 1.2(b).
IN WITNESS WHEREOF, the parties hereto have caused this Lease to be
duly executed as a sealed instrument on the day and year first above written.
LANDLORD:
THE HOMESTEAD
OF MANHATTAN, L.C.
Attest: By: /s/ Jack West
-------------------------------- ----------------------------
Name: Name:
Title: Title:
TENANT:
INTEGRATED LIVING COMMUNITIES
OF MANHATTAN, INC.
Attest: /s/ Kayda Johnson By: /s/ Edward J. Komp
-------------------------------- -----------------------------
Name: Kayda Johnson Name: Edward J. Komp
Title: SUP/COO Title: President/CEO
AS TO SECTIONS AND PROVISIONS
SPECIFICALLY IDENTIFYING JACK WEST:
/s/ Jack West
- --------------------------
JACK WEST
<PAGE>
ACKNOWLEDGMENTS
STATE OF Kansas )
) SS:
COUNTY OF Sedgwick )
This Lease was acknowledged before me on August 21, 1996, by Jack West,
as Manager of THE HOMESTEAD OF MANHATTAN, L.C., a Kansas limited liability
company.
/s/ Kent G. Voth
[Notary seal] ----------------------------------
Notary Public
My appointment expires:
STATE OF Florida )
) SS:
COUNTY OF Cllier )
This Lease was acknowledged before me on August 29, 1996, by Edward J.
Komp, as President/CEO of INTEGRATED LIVING COMMUNITIES OF MANHATTAN, INC., a
Delaware corporation.
/s/ Judith Tamanini
[Notary seal] ----------------------------------
Notary Public
My appointment expires:
STATE OF Kansas )
) SS:
COUNTY OF Sedgwick )
This Lease was acknowledged before me on August 29, 1996, by
JACK WEST.
/s/ Kent G. Voth
[Notary seal] ----------------------------------
Notary Public
My appointment expires:
<PAGE>
GUARANTY OF LEASE
FOR VALUE RECEIVED, and in consideration for THE HOMESTEAD OF
MANHATTAN, L.C., a Kansas limited liability company having an address c/o The
Homestead Company, L.C., 155 North Market, Suite 910, Wichita, Kansas 67202,
Attention: Mr. Jack West ("Landlord") entering into the foregoing lease
agreement (the "Lease") with INTEGRATED LIVING COMMUNITIES OF MANHATTAN, INC., a
Delaware corporation having an office at 10065 Red Run Boulevard, Owings Mills,
Maryland 21117 ("Tenant"), the undersigned, INTEGRATED HEALTH SERVICES, INC.
("IHS") and INTEGRATED LIVING COMMUNITIES, INC. ("ILC"), each a Delaware
corporation having an office at 10065 Red Run Boulevard, Owings Mills, Maryland
21117 (jointly and severally "Guarantor"), jointly and severally guarantee to
Landlord, the payment in full of all Annual Rent and Impositions (as such
capitalized terms are defined in the Lease) which accrues under the Lease during
the Initial Term and/or the Renewal Term (each as defined in the Lease) and
remains due and owing after the giving of any requisite notice to Tenant and the
expiration of all applicable grace periods under the Lease. Notwithstanding the
foregoing, IHS shall have no further liability under this guaranty once ILC, the
sole shareholder of Tenant, has achieved a net worth of not less than Fifty-five
Million Dollars ($55,000,000), determined in accordance with generally accepted
accounting principles, as shown on ILC's most recent financial statement, which
shall be prepared and certified to by the chief financial officer of ILC.
Guarantor shall furnish to Landlord a copy of its Quarterly Report on
Form 10-Q within thirty (30) days after the end of each fiscal quarter of
Guarantor, and a copy of its Annual Report on Form 10-K within ninety (90) days
after the close of each fiscal year of Guarantor. The foregoing shall only apply
to ILC after IHS is released as a guarantor hereunder.
INTEGRATED HEALTH SERVICES, INC.
By:________________________________
Name:
Title:
INTEGRATED LIVING COMMUNITIES, INC.
By:________________________________
Name:
Title:
<PAGE>
ACKNOWLEDGMENTS
STATE OF MARYLAND )
) SS:
COUNTY OF_________)
This Guaranty of Lease was acknowledged before me on August __, 1996,
by __________________________________, as __________________________________ of
INTEGRATED HEALTH SERVICES, INC., a Delaware corporation.
----------------------------------
Notary Public
My appointment expires:
STATE OF MARYLAND )
) SS:
COUNTY OF ________)
This Guaranty of Lease was acknowledged before me on August __, 1996,
by ______________________________________, as __________________________________
of INTEGRATED LIVING COMMUNITIES, INC., a Delaware corporation.
----------------------------------
Notary Public
My appointment expires:
<PAGE>
EXHIBIT A
DESCRIPTION OF THE LAND
<PAGE>
EXHIBIT A-1
LOCATION OF LEASED IMPROVEMENTS
<PAGE>
EXHIBIT B
[LIST OF SELECTED PERSONAL
PROPERTY & FIXTURES]
<PAGE>
EXHIBIT C
(LANDLORD'S CONSTRUCTION WORK)
SEE REFERENCES IN ARTICLE XXII
The description of the final plans and specifications are annexed to this
Exhibit C.
All labor and materials necessary to complete the Leased Improvements and other
improvements to be constructed or being constructed on the Land in accordance
with said final plans and specifications and the provisions of this Lease, shall
be known as "Landlord's Construction Work".
Unless Tenant shall expressly agree in writing that any requirements of said
final plans and specifications shall be waived or altered, every requirement of
said final plans and specifications shall be complied with by Landlord. No
employee or agent of Tenant, other than an officer of Tenant, has any authority
to waive or alter any requirements of said final plans and specifications. If
there shall be any inconsistency or conflict among the requirements of the
within Lease, this Exhibit C and said final plans and specifications, Landlord
shall notify Tenant thereof as soon as Landlord shall discover such
inconsistency or conflict. In any event, unless Tenant shall notify Landlord in
writing to the contrary, the most stringent requirement shall control in the
case of any such inconsistency or conflict.
Landlord at all times assumes and accepts sole responsibility for the structural
and engineering design of the Demised Premises and all appurtenances thereto and
the quality and fitness of all materials or fixtures used therein. The review by
Tenant of said final plans and the specifications or the approval of any
suggestions with respect thereto shall not constitute an opinion or
representation by Tenant with respect to the sufficiency of the structural or
engineering design of the Demised Premises or the quality or fitness of any
materials or fixtures used therein or impose any present or future liability or
responsibility upon Tenant therefor.
Prior to the date of this Lease, Landlord shall furnish Tenant with a detailed
timetable setting forth Landlord's schedule therefor. Landlord agrees to furnish
Tenant with revisions of said timetable whenever reasonably required during the
course of construction.
<PAGE>
OFF-SITE IMPROVEMENTS BY LANDLORD
Landlord's Construction Work includes road improvements and the other off-site
improvements listed below. This is in addition to any off-site improvements
elsewhere referred to in the Lease and in said final plans and specifications.
<PAGE>
EXHIBIT D
OPTION AGREEMENT
<PAGE>
EXHIBIT E
FORM OF SUBORDINATION, NON-DISTURBANCE
AND RECOGNITION AGREEMENT
<PAGE>
SCHEDULE ____
[ATTACH SCHEDULES]
REVOLVING CREDIT NOTE
Date: April 30, 1997 Maturity Date: April 30, 1998
Amount: $5,000,000
Lender: Integrated Health Services, Inc.
10065 Red Run Boulevard
Owings Mills, MD 21117
Borrower: Integrated Living Communities, Inc.
24850 Old 41 Road, Suite 10
Bonita Springs, FL 34135-7022
- --------------------------------------------------------------------------------
FOR VALUE RECEIVED, the undersigned Borrower hereby unconditionally promises to
pay in immediately available funds to the order of Lender, its successors, and
assigns, at its offices indicated at the beginning of this Note, or at such
other place as may be designated by Lender from time to time, the principal
amount of $5,000,000.00 or so much thereof as may be outstanding from time to
time (the "Principal"), together with interest computed daily on the outstanding
Principal balance hereunder, at the annual interest rate, and in accordance with
the payment schedule indicated below.
1. Rate. This Note shall bear interest from its date until maturity on the
Principal outstanding from to time to time hereunder at a rate per annum equal
to twelve (12%) percent (the "Interest Rate").
Notwithstanding any provision of this Note, Lender does not intend to charge and
Borrower shall not be required to pay, any amount of interest or other charges
in excess of the maximum permitted by the applicable law of the State of
Florida. Any payment in excess of such maximum shall be refunded to Borrower or
credited against principal, at the Lender's option.
2. Accrual Method. Unless otherwise indicated, the Interest Rate set forth above
will be calculated by the actual/360-day method (a daily amount of interest is
computed for a hypothetical year of 360 days; that amount is multiplied by the
actual number of days for which any Principal is outstanding hereunder).
3. Payment Schedule. All Principal and other amounts outstanding under this Note
shall be due and payable on the first anniversary of the date of this Note. Six
(6) months following the date hereof, the maximum aggregate amount of Principal
permitted to be outstanding at any time shall be reduced to $4,500,000; and nine
months following the date hereof, the maximum
<PAGE>
aggregate amount of Principal permitted to be outstanding at any time shall be
further reduced to $4,000,000. Borrower shall make such payments of Principal as
shall be necessary to comply with the foregoing limits on the amount of
Principal outstanding. Interest due hereunder shall be payable on each date that
a payment of Principal is made hereunder, and monthly in arrears on the first
business day of each calendar month during the term of this Note. Any payment to
the Lender hereunder shall be applied first to the payment of all accrued
interest and the balance shall be applied to Principal. Borrower may prepay all
or any part of the remaining principal balance of this Note, including all
interest accrued thereon through the date of such prepayment, at any time prior
to the maturity date without penalty or premium. The Lender is authorized but
not required to record the date and amount of each loan made, the date and
amount of any payment, and the balance hereof on the Grid attached hereto and
made a part hereof, and any such recordation shall, in the absence of manifest
error, constitute prima facie evidence of the accuracy of the information so
recorded; provided however, that the Lender' failure to so record shall not
limit the obligations of the Borrower hereunder to pay the amount of all loans
hereunder.
4. Revolving Feature. Until the day preceding the first anniversary of the date
hereof, Borrower may borrow and reborrow hereunder at any time, up to a maximum
aggregate amount outstanding not to exceed at any time the amounts as set forth
in Paragraph 3, above, provided, that all of the conditions set forth below
shall have been satisfied as of the date of borrowing.
(i) Borrower shall have given Lender at least five (5) days prior written
notice (the "Notice") of Borrower's intent to borrow under this Note;
(ii) the Notice shall include the stated purpose for the proceeds borrowed
under this Note and shall include a certification that no Event of Default shall
have occurred and be continuing;
(iii) Borrower shall only be permitted to use the proceeds under this Note
(a) to assist Borrower in its working capital needs, or (b) to provide bridge
financing for acquisitions by Borrower approved by Lender, or (c) to make
payments due under the Unsecured Credit Note issued by Borrower to Lender, dated
as of November 20, 1996, in the original principal amount of $3,445,024.00, as
amended as of the date hereof (the "Initial Note");
(iv) no Event of Default shall have occurred and be continuing; and
(v) the minimum amount that may be borrowed at any one time under this Note
shall be $250,000 (the "Minimum Draw"). The Minimum Draw may be increased in
$50,000 increments only.
Lender shall incur no liability for its refusal to advance funds based upon
its determination that any conditions of such further advances have not been
met.
<PAGE>
5. Waivers, Consents and Covenants. Borrower, any endorser or guarantor hereof,
or any other party hereto (individually an "Obligor" and collectively
"Olbigors") and each of them jointly and severally: (a) waive presentment,
demand, protest, notice of demand, notice of intent to accelerate, notice of
acceleration of maturity, notice of protest, notice of nonpayment, notice of
dishonor, and any other notice required to be given under the law to any Obligor
in connection with the delivery, acceptance, performance, default or enforcement
of this Note, any endorsement or guaranty of this Note, or any other documents
executed in connection with this Note or any other note or other loan documents
now or hereafter executed in connection with any obligation to Borrower to
Lender (the "Loan Documents"); (b) consent to all delays, extensions, renewals
or other modifications of this Note or the Loan Documents, or waivers of any
term hereof or of the Loan Documents, or release or discharge by Lender of any
Obligors, or release, substitution or exchange of any security for the payment
hereof, or the failure to act on the part of the Lender, or any indulgence shown
by the Lender (without notice to or further assent from any of the Obligors),
and agree that no such action, failure to act or failure to exercise any right
or remedy by the Lender shall in any way affect or impair the obligations of any
Obligors or be construed as a waiver by the Lender, or otherwise affect, any of
Lender's rights under this Note, under any endorsement, or guaranty of this Note
or under any of the Loan Documents; and (c) agree to pay, on demand, all costs
and expenses of collection or defense of this Note or of any endorsement or
guaranty hereof and/or the enforcement or defense of Lender's rights with
respect to, or the administration, supervision, preservation, or protection of,
or realization upon, any property securing payment hereof, including with
limitation, reasonable attorney's and paralegal's fees and expenses, including
fees related to any suit, mediation or arbitration proceeding, out of court
payment agreement, trial, appeal, bankruptcy proceedings or other proceeding, in
such amount as may be determined reasonable by any arbitrator or court,
whichever is applicable.
6. Idemnifaction. Obligors agree to promptly pay, indemnify and hold Lender
harmless from all State and Federal taxes of any kind and other liabilities with
respect to or resulting from the execution and/or delivery of this Note or any
advances made pursuant to this Note. If this Note has a revolving feature and is
secured by a mortgage, Obligors expressly consent to the deduction of any
applicable taxes from each taxable advance extended by Lender.
7. Delinquency Charge. To the extent permitted by law, a delinquency charge may
be imposed in an amount not to exceed four (4%) percent of any payment that is
more than fifteen days late.
8. Events of Default. Upon the occurrence of any of the following, Lender may
declare an "Event of Default" to exist: (a) the failure to pay or perform any
obligation, liability or indebtedness of any Obligor to Lender, or to any
affiliate or subsidiary of Integrated Health Services, Inc., whether under this
Note or any Loan Documents or the Initial Note, as and when due (whether upon
demand, at maturity or by acceleration); (b) the failure to pay or perform any
other obligation, liability or indebtedness of any Obligor to any other party
when due (whether upon demand, at maturity or by acceleration); (c) the
commencement of a proceeding against any Obligor for dissolution or liquidation,
the voluntarily or involuntary termination or dissolution of
<PAGE>
any Obligor or the merger or consolidation of any Obligor with or into another
entity; (d) the insolvency of, the business failure of, the appointment of a
custodian, trustee, or receiver for or for any of the property of, the
assignment for the benefit of creditors by, or the filing of a petition under
bankruptcy, insolvency or debtor's relief law or the filing of a petition for
any adjustment or indebtedness, composition or extension by or against any
Obligor; (e) the determination by the Lender that any representation or warranty
made to the Lender by an Obligor in any Loan Documents or otherwise is or was,
when it was made, untrue or materially misleading; (f) the failure of any
Obligor timely deliver such financial statements, including tax returns, other
statements of condition or other information, as Lender shall request from time
to time; (g) the entry of a judgment against any Obligor or which Lender deems
to be a material nature, in Lender's sole discretion; (h) the seizure or
forfeiture of, or the issuance of any writ of possession, garnishment or
attachment, or any turnover order for any property of any Obligor; (i) the
determination by Lender that a material adverse change has occurred in the
financial condition of any Obligor; (j) the failure of Borrower's business to
comply with any law or regulation controlling its operation; or (k) a Change in
Control of the Borrower shall occur. For purposes hereof, a "Change in Control"
of the Borrower shall mean the occurrence of any of the following events; (i)
any party or two or more parties acting in concert shall have acquired
beneficial ownership, directly or indirectly, of, or shall have acquired by
contract or otherwise, or shall have entered into a contract or arrangement
that, upon consummation, will result in its or their acquisition of, control
over, Voting Stock of Borrower (or other securities convertible into such Voting
Stock) representing 25% or more of the combined voting power of all Voting Stock
of Borrower, (ii) Lender shall fail to own and have the right to vote at least
25% of the outstanding Voting Stock of Borrower determined on a fully diluted
basis after giving effect to the conversion and exercise of all outstanding
warrants, options and other securities of Borrower that are convertible into or
exercisable for Voting Stock of Borrower (whether or not such securities are
then currently convertible or exercisable), (iii) during any period of up to 24
consecutive months, commencing after the Closing Date, individuals who at the
beginning of uch 24-month period were directors of Borrower (together with any
new director whose election by Borrower's Board of Directors or whose nomination
for election by Borrower's shareholders was approved by a vote of at least
two-thirds 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) cease for any reason to constitute a majority of the
directors of Borrower then in office or (iv) Borrower shall fail to own and have
the right to vote 100% of the outstanding Voting Stock of the Borrower,
determined on a fully diluted basis after giving effect to the conversion and
exercise of all outstanding warrants, options and other securities of the
Borrower that are convertible into or exercisable for Voting Stock of the
Borrower. As used herein, "beneficial ownership" shall have the meaning provided
in Rule 13d-3 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934.
9. Remedies Upon Default. Whenever there is Event of Default under this Note (a)
the entire balance outstanding hereunder and all other obligations of any
Obligor to Lender (however acquired or evidenced) shall, at the option of the
Lender immediately due and payable and any obligation of Lender to permit
further borrowing under this Note shall immediately cease and
<PAGE>
terminate, and/or (b) to the extent permitted by law, the Interest Rate on the
unpaid Principal shall be increased at Lender's discretion up to the Interest
Rate plus five (5%) percent per annum, or the maximum rate allowed by law,
whichever is lower (the "Default Rate"). The provisions herein for a Default
Rate shall not be deemed to extend the time of any payment hereunder or to
constitute a "grace period" giving Obligors a right to cure any default. At
Lender's option, any accrued and unpaid interest, fees or charges may, for
purposes of computing and accruing interest on a daily basis after the due date
of the Note or any installment thereof, be deemed to be a part of the Principal
balance, and Interest shall accrue on a daily compounded basis after such date
at the Default Rate provided in this Note until the entire outstanding balance
of Principal and interest is paid in full, and all such interest thereon shall
thereafter be due on demand. Upon an Event of Default under this Note, Lender is
hereby authorized at any time, at its option and without notice of demand, to
set off and charge against any deposit accounts of any Obligor (as well as any
money, instruments, securities, documents, chattel paper, credits, claims,
demands, income and any other property, rights and interests of any Obligor),
which at any time shall come into the possession or custody or under the control
of Lender or any of its agents, affiliates or correspondents, any and all
obligations due hereunder. Additionally, Lender shall have all rights and
remedies available under each of the Loan Documents, as well as all rights and
remedies available law or in equity. Any judgment rendered on this Note shall
bear interest at the highest rate of interest permitted pursuant to Chapter 687
Florida Statutes.
10. Non-Waiver. The failure at any time of the Lender to exercise any of its
options or any other rights hereunder shall not constitute a waiver thereof, nor
shall it be a bar to the exercise of its options or rights at a later date. All
rights and remedies of the Lender shall be cumulative and may be pursued singly,
successively or together at the option of the Lender. The acceptance by Lender
of any partial payment shall not constitute a waiver of any default or of any of
Lender's rights under this Note. No waiver of any of its rights hereunder, and
no modification or amendment of this Note shall be deemed to be made by Lender
unless the same shall be in writing, duly signed on behalf of Lender; each such
waiver shall apply only with respect to the specific instance involved, and
shall in no way impair the rights of the Lender or the obligations of Obligors
to Lender in any respect at any other time.
11. Applicable Law, Venue and Jurisdiction. This Note and the rights and
obligations of Borrower and Lender shall be governed by and interpreted n
accordance with the law of the State of Florida.
12. Partial Invalidity. The enforceability or invalidity of any provision of
this Note shall not affect the enforceability or validity of any other provision
herein and the invalidity or unenforceability of any provision of this Note or
of the Loan Documents to any person or circumstances shall not affect the
enforceability o validity of such provision as it may apply to other persons or
circumstances.
<PAGE>
13. Binding Effect. This Note shall be binding upon and inure to the benefit of
Borrower, Obligors and Lender and the respective successors, assigns, heirs and
personal representatives, provided, however, that no obligations of Borrower or
Obligors hereunder can be assigned without the prior written consent of Lender.
14. Controlling Document. To the extent that this Note conflicts with or is in
any way incomparable wit any other document related specifically to the loans
evidenced by this Note, this Note shall control over any other such document,
and if the Note does not address an issue, then each other such document shall
control to the extent that it deals most specifically with an issue.
15. Notwithstanding any provisions to the contrary contained herein, this Note
and all renewals, extensions and modifications hereof, are and shall remain
subject to the terms of that certain Subordination Agreement, dated as of April
9, 1997 (the "Subordination Agreement") among NationsBank, N.A. (South), Lender
and Borrower, as amended. Each transferee of this Note, by acceptance of same,
absolutely agrees to be bound by all of the provisions of the Subordination
Agreement.
Borrower represents and warrants to the Lender that the proceeds of these loans
are to be used for business purposes only and are therefore commercial loans.
Borrower acknowledges having read and understood, and agrees to be bound by, all
terms and conditions of this Note and hereby executes this Note as of the date
here above-written.
This written promissory note 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 with respect to the subject matter
of this Note.
IN WITNESS WHEREOF, the undersigned has executed this Note on the date
first above written.
INTEGRATED LIVING
COMMUNITIES, INC.
By: _____________________________
Title: ____________________________
AMENDED UNSECURED CREDIT NOTE
Date: April 30, 1997 Maturity Date: November 20, 1998
Amount: $2,870,853.00
Lender: Integrated Health Services, Inc.
10065 Red Run Boulevard
Owings Mills, MD 21117
Borrower: Integrated Living Communities, Inc .
24850 Old 41 Road, Suite 10
Bonita Springs, FL 34135-7022
- --------------------------------------------------------------------------------
FOR VALUE RECEIVED, the undersigned Borrower hereby unconditionally promises to
pay in immediately available funds to the order of Lender, its successors and
assigns, at its offices indicated at the beginning of this Note, or at such
other place as may be designated by Lender from time to time, the principal
amount of $2,870,853.00 (the "Principal"), together with interest computed daily
on the outstanding Principal balance hereunder, at the annual interest rate, and
in accordance with the payment schedule indicated below.
1. Rate. This Note shall bear interest from its date until maturity on the
Principal outstanding from time to time hereunder at a rate per annum equal to
twelve (12%) percent (the "Interest Rate").
Notwithstanding any provision of this Note, Lender does not intend to charge and
Borrower shall not be required to pay, any amount of interest or other charges
in excess of the maximum permitted by the applicable law of the State of
Florida. Any payment in excess of such maximum shall be refunded to Borrower or
credited against principal, at the Lender's option.
2. Accrual Method. Unless otherwise indicated, the Interest Rate set forth above
will be calculated by the actual/360 day method (a daily amount of interest is
computed for a hypothetical year of 360 days; that amount is multiplied by the
actual number of days for which any Principal is outstanding hereunder).
3. Payment Schedule. Repayment of the Principal on this Note shall begin six (6)
months following the date hereof, in equal monthly installments together with
interest thereon, until paid in full on the Maturity Date. Interest due
hereunder shall also be payable on each date that a payment of Principal is made
hereunder, and monthly in arrears on the first business day of each calendar
month during the term of this Note. Any payment to the Lender hereunder shall be
applied first to the payment of all accrued interest and the balance shall be
applied to Principal. Borrower may prepay all or any part of the remaining
principal balance of this Note, including all interest accrued thereon through
the date of such prepayment, at any time prior to the maturity date without
penalty or premium.
<PAGE>
4. Waivers, Consents and Covenants. Borrower, any endorser or guarantor hereof,
or any other party hereto (individually an "Obligor" and collectively
"Obligors") and each of them jointly and severally: (a) waive presentment,
demand, protest, notice of demand, notice of intent to accelerate, notice of
acceleration of maturity, notice of protest, notice of nonpayment, notice of
dishonor, and any other notice required to be given under the law to any Obligor
in connection with the delivery, acceptance, performance, default or enforcement
of this Note, any endorsement or guaranty of this Note, or any other documents
executed in connection with this Note, or any other note or other loan documents
now or hereafter executed in connection with any obligation to Borrower to
Lender including, without limitation, the Revolving Credit Note, dated as of the
date hereof, issued by Borrower to the Lender in an aggregate principal amount
not to exceed $5,000,000 (the "Loan Documents"); (b) consent to all delays,
extensions, renewals or other modifications of this Note or the Loan Documents,
or waivers of any term hereof or of the Loan Documents, or release or discharge
by Lender of any Obligors, or release or discharge by Lender of any Obligors, or
release, substitution or exchange of any security for the payment hereof, or the
failure to act on the part of the Lender, or any indulgence shown by the Lender
(without notice to or further assent from any of the Obligors), and agree that
no such action, failure to act or failure to exercise any right or remedy by the
Lender shall in any way affect or impair the obligations of any Obligors or be
construed as a waiver by the Lender, or otherwise affect, any of Lender's rights
under this Note, under any endorsement or guaranty of this Note or under any of
the Loan Documents; and (c) agree to pay, on demand, all costs and expenses of
collection or defense of this Note or of any endorsement or guaranty hereof
and/or the enforcement or defense of Lender's rights with respect to, or the
administration, supervision, preservation, or protection of, or realization
upon, any property securing payment hereof, including, with limitation,
reasonable attorney's and paralegal's fees and expenses, including fees related
to any suit, mediation or arbitration proceeding, out of court payment
agreement, trial, appeal, bankruptcy proceeds, or other proceeding in such
amount as may be determined reasonable by any arbitrator or court, whichever is
applicable.
5. Indemnification. Obligors agree to promptly pay, indemnify and hold Lender
harmless from all State and Federal taxes of any kind and other liabilities with
respect to or resulting from the execution and/or delivery of this Note or any
advances made pursuant to this Note.
6. Delinquency Charge. To the extent permitted by law, a delinquency charge may
be imposed in an amount not to exceed four (4%) percent of any payment that is
more than fifteeen days late.
7. Events of Default: Upon the occurrence of any of the following, Lender may
declare an "Event of Default" to exist: (a) the failure to pay or perform any
obligation, liability or indebtedness of any Obligor to Lender, or to any
affiliate or subsidiary of Integrated Health Services, Inc., whether under this
Note or any Loan Documents, as and when due (whether upon demand, at maturity or
by acceleration); (b) the failure to pay or perform any other obligation,
liability or indebtedness of any Obligor to any other party when due (whether
upon demand, at maturity or by acceleration); (c) the commencement of a
proceeding against any Obligor for dissolution or liquidation, the voluntarily
or involuntary termination or dissolution of any Obligor or the merger or
consolidation of any Obligor with or into another entity; (d) the insolvency of,
the business failure of, the appointment
<PAGE>
of a custodian, trustee, or receiver for or for any of the property of, the
assignment for the benefit of creditors by, or the filing of a petition under
bankruptcy, insolvency or debtor's relief law or the filing of a petition for
any adjustment of indebtedness, composition or extension by or against any
Obligor ; (e) the determination by the Lender that any representation or
warranty made to the Lender by any Obligor in any Loan Documents or otherwise is
or was, when it was made, untrue or materially misleading; (f) the failure of
any Obligor to timely deliver such financial statements, including tax returns,
other statements of condition or other information, as Lender shall request from
time to time; (g) the entry of a judgment against any Obligor which Lender deems
to be a material nature, in Lender's sole discretion; (h) the seizure or
forfeiture of, or the issuance of any writ of possession, garnishment or
attachment, or any turnover order for any property of any Obligor; (i) the
determination by Lender that a material adverse change has occurred in the
financial condition of any Obligor; (j) the failure of Borrower's business to
comply with any law or regulation controlling its operation; or (k) a Change in
Control of the Borrower shall occur. For purposes hereof, a "Change in Control"
of the Borrower shall mean the occurrence of any of the following events: (i)
any party or two or more parties acting in concert shall have acquired
beneficial ownership, directly or indirectly, of, or shall have acquired by
contract or otherwise, or shall have entered into a contract or arrangement
that, upon consummation, will result in its or their acquisition of, control
over, Voting Stock of Borrower (or other securities convertible into such Voting
Stock) representing 25% or more of the combined voting power of all Voting Stock
of Borrower, (ii) Lender shall fail to own and have the right to vote at least
25% of the outstanding Voting Stock of Borrower determined on a fully diluted
basis after giving effect to the conversion and exercise of all outstanding
warrants, options and other securities of Borrower that are convertible into or
exercisable for Voting Stock of Borrower (whether or not such securities are
then currently convertible or exercisable), (iii) during any period of up to 24
consecutive months, commencing after the Closing Date, individuals who at the
beginning of such 24-month period were directors of Borrower (together with any
new director whose election by Borrower's Board of Directors or whose nomination
for election by Borrower's shareholders was approved by a vote of at least
two-thirds 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) cease for any reason to constitute a majority of the
directors of Borrower then in office or (iv) Borrower shall fail to own and have
the right to vote 100% of the outstanding Voting Stock of the Borrower,
determined on a fully diluted basis after giving effect to the conversion and
exercise of all outstanding warrants, options and other securities of the
Borrower that are convertible into or exercisable for Voting Stock of the
Borrower. As used herein, "beneficial ownership" shall have the meaning provided
in Rule 13d-3 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934.
8. Remedies Upon Default. Whenever there is Event of Default under this Note (a)
the entire balance outstanding hereunder and all other obligations of any
Obligor to Lender (however acquired or evidenced) shall, at the option of the
Lender become immediately due and payable and/or (b) to the extent permitted by
law, the Interest Rate on the unpaid Principal shall be increased at Lender's
discretion up to the Interest Rate plus five (5%) percent per annum, or the
maximum rate allowed by law, whichever is lower (the "Default Rate"). The
provisions herein for a Default Rate shall not be deemed to extend the time of
any payment hereunder or to constitute a "grace period" giving
<PAGE>
Obligors a right to cure any default. At Lender's option, any accrued and unpaid
interest, fees or charges may, for purposes of computing and accruing interest
on a daily basis after the due date of the Note or any installment thereof, be
deemed to be a part of the Principal balance, and Interest shall accrue on a
daily compounded basis after such date at the Default Rate provided in this Note
until the entire outstanding balance of Principal and interest is paid in full,
and all such interest thereon shall thereafter be due on demand. Upon an Event
of Default under this Note, Lender is hereby authorized at any time, at its
option and without notice of demand, to set off and charge against any deposit
accounts of any Obligor (as well as any money, instruments, securities,
documents, chattel paper, credits, claims, demands, income and any other
property, rights and interests of any Obligor), which at any time shall come
into the possession or custody or under the control of Lender or any of its
agents, affiliates or correspondents, any and all obligations due hereunder.
Additionally, Lender shall have all rights and remedies available under each of
the Loan Documents, as well as all rights and remedies available law or in
equity. Any judgment rendered on this Note shall bear interest at the highest
rate of interest permitted pursuant to Chapter 687, Florida Statutes.
9. Non-Waiver. The failure at any time of the Lender to exercise any of its
options or any other rights hereunder shall not constitute a waiver thereof, nor
shall it be a bar to the exercise of any of its options or rights at a later
date. All rights and remedies of the Lender shall be cumulative and may be
pursued singly, successively or together at the option of the Lender. The
acceptance by Lender of any partial payment shall not constitute a waiver of any
default or of any of Lender's rights under this Note. No waiver of any its
rights hereunder, and no modification or amendment of this Note shall be deemed
to be made by Lender unless the same shall be in writing, duly signed on behalf
of Lender; each such waiver shall apply only with respect to the specific
instance involved, and shall in no way impair the rights of the Lender or the
obligations of Obligors to Lender in any respect at any other time.
10. Applicable Law, Venue and Jurisdiction. This Note and the rights and
obligations of Borrower and Lender shall be governed by and interpreted in
accordance with the law of the State of Florida.
11. Partial Invalidity. The enforceability or invalidity of any provision of
this Note shall not affect the enforceability or validity of any other provision
herein and the invalidity or unenforceability of any provision of this Note or
of the Loan Documents to any person or circumstances shall not affect the
enforceability or validity of such provision as it may apply to other persons or
circumstances.
12. Binding Effect. This Note shall be binding upon and inure to the benefit of
Borrower, Obligors and Lender and the respective successors, assigns, heirs and
personal representatives, provided, however, that no obligations of Borrower or
Obligors hereunder can be assigned without the prior written consent of Lender.
<PAGE>
13. Controlling Document. To the extent that this Note conflicts with or is in
any way incomparable with any other document related specifically to the loan
evidenced by this Note, this Note shall control over any other such document,
and if the Note does not address an issue, then each other such document shall
control to the extent that it deals most specifically with an issue. This Note
replaces, amends and supersedes the Unsecured Credit Note, dated November 20,
1996, issued by Borrower to Lender in the original principal amount of
$3,445,024.00.
14. Notwithstanding any provisions to the contrary contained herein, this Note
and all renewals, extensions and modifications hereof, are and shall remain
subject to the terms of that certain Subordination Agreement, dated as of April
9, 1997 ( the "Subordination Agreement") among NationsBank, N.A. (South), Lender
and Borrower, as amended. Each transferee of this Note, by acceptance of same,
absolutely agrees to be bound by all of the provisions of the Subordination
Agreement.
Borrower represents and warrants to the Lender that the proceeds of this loan
are to be used for business purposes only and is therefore a commercial loan.
Borrower acknowledges having read and understood, and agrees to be bound by, all
terms and conditions of this Note and hereby executes this Note as of the date
here above-written.
This written promissory note 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 with respect to the subject matter
of this Note.
IN WITNESS WHEREOF, the undersigned has executed this Note on the date
first above written.
INTEGRATED LIVING
COMMUNITIES, INC.
By: ________________________________
Title: ______________________________
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF OPERATIONS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 3,855,596
<SECURITIES> 0
<RECEIVABLES> 750,347
<ALLOWANCES> (250,000)
<INVENTORY> 0
<CURRENT-ASSETS> 4,812,984
<PP&E> 87,016,181
<DEPRECIATION> 0
<TOTAL-ASSETS> 93,436,711
<CURRENT-LIABILITIES> 7,398,443
<BONDS> 0
0
0
<COMMON> 66,979
<OTHER-SE> 57,410,566
<TOTAL-LIABILITY-AND-EQUITY> 93,436,711
<SALES> 8,428,015
<TOTAL-REVENUES> 8,428,015
<CGS> 0
<TOTAL-COSTS> 8,673,924
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 242,766
<INCOME-PRETAX> (488,675)
<INCOME-TAX> 0
<INCOME-CONTINUING> (488,675)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (488,675)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
