SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 25, 1998
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BROOKDALE LIVING COMMUNITIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-22253 36-4103821
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(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification Number)
77 West Wacker Drive, Suite 4400, Chicago, Illinois 60601
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (312) 977-3700.
NOT APPLICABLE
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS
On June 25, 1998, Brookdale Living Communities, Inc. (the "Company")
and Nomura Asset Management Corporation ("NACC") entered into that certain
Master Financing Facility Agreement (the "Master Facility Agreement"), dated as
of June 17, 1998. Pursuant to the Master Facility Agreement, NACC agreed that,
upon the satisfaction of the conditions set forth in the Master Facility
Agreement, NACC will provide financing, in the aggregate principal amount of up
to $100,000,000, for the development and construction of senior living
facilities owned or developed and managed by the Company or an affiliate of the
Company.
A. DESCRIPTION OF MICHIGAN TRANSACTIONS:
On June 25, 1998, NACC agreed to make a loan (the "Michigan Mortgage
Loan") under the Master Facility Agreement, in the principal amount of up to
$26,625,000, to finance a portion of the cost of the development and
construction of a 219-unit senior independent and assisted living facility in
Southfield, Michigan (the "Michigan Facility"), to be developed and managed by
Brookdale Living Communities of Michigan, Inc., a wholly-owned subsidiary of the
Company ("BLC-Michigan"), on property owned by AH Michigan Owner Limited
Partnership (the "Michigan Borrower"), an Ohio limited partnership unrelated to
the Company. In connection with the Michigan Mortgage Loan, BLC-Michigan, NACC
and the Michigan Borrower entered into various loan documents and related
agreements (collectively, the "Michigan Mortgage Loan Documents") pursuant to
which NACC agreed to make the Michigan Mortgage Loan to the Michigan Borrower.
The Michigan Mortgage Loan Documents provide that the Michigan Mortgage Loan may
be converted from a construction loan to a permanent loan upon the satisfaction
of certain conditions. Various obligations of the Michigan Borrower under the
Michigan Mortgage Loan Documents are guaranteed by the Company and BLC-Michigan.
The remainder of the cost of the development and construction of the
Michigan Facility will be paid with funds contributed to the Michigan Borrower
by AH Michigan CPG, Inc. (the "Michigan General Partner"), the general partner
of the Michigan Borrower, or by AH Michigan Subordinated, LLC (the "Michigan
Subordinated Borrower"), the sole limited partner of the Michigan Borrower and
the owner of all of the stock of the Michigan General Partner. A portion of the
funds contributed to the Michigan Borrower represented proceeds of loans (the
"Michigan Equity Loan") made by Banc One Capital Partners IV, Ltd. ("BOCP") to
the Michigan Subordinated Borrower. Various of the Michigan Subordinated
Borrower's obligations under the documents executed in connection with the
Michigan Equity Loan are guaranteed by the Company.
In connection with the foregoing transactions, BLC-Michigan and the
Michigan Borrower entered into that certain Amended and Restated Development
Agreement (the "Michigan Development Agreement"), pursuant to which BLC-Michigan
agreed to continue to develop the Michigan Facility, and the Michigan Borrower
agreed to reimburse BLC-Michigan for all costs incurred by BLC-Michigan or the
Company in connection with such development and agreed to pay BLC-Michigan a
development fee in an amount equal to $2,000,000, which, in part, will be used
to pay overhead and administrative costs and capitalized interest expense
incurred by BLC-Michigan. The Michigan Development Agreement terminates upon the
completion of the Michigan Facility; at which time, BLC-Michigan will manage the
Michigan Facility pursuant to that certain Management Agreement (the "Michigan
Management Agreement") between BLC-Michigan and the Michigan Borrower. The
Michigan Management Agreement provides for the payment of monthly management
fees to BLC-Michigan in an amount equal to the greater of (i) 5% of the gross
revenues generated from the Michigan Facility or (ii) $10,000. The Michigan
Management Agreement expires upon the conversion of the Michigan Mortgage Loan
from a construction loan to a permanent loan.
The Company has the right to purchase all of the equity interests in the
Michigan Subordinated Borrower for a price equal to $1,050,000 plus an amount
required to produce a certain rate of return to the owners of the Michigan
Subordinated Borrower on their investment in the Michigan Facility, pursuant to
that certain Equity Option Agreement (the "Michigan Equity Option Agreement")
among the Company, the Michigan Borrower, the Michigan General Partner, the
Michigan Subordinated Borrower and the sole member of the Michigan Subordinated
Borrower. In addition, the Company also has the right to acquire the Michigan
Facility or all of the ownership interests in the Michigan Borrower for a price
equal to the greater of the fair market value of the Michigan Facility or the
amount necessary to repay a portion of the Michigan Equity Loan, pursuant to
that certain Property Option Agreement among the Company, the Michigan Borrower
and the Michigan Subordinated Borrower.
As consideration for assisting in the above-described transactions, (i)
the Company granted to BOCP and its affiliate, Banc One Capital Markets, Inc.
("BOCM"), warrants to purchase up to an aggregate amount of 25,000 shares of
common stock of the Company at a price equal to $30.40 per share pursuant to
certain Warrant Certificates, and (ii) the Company invested an amount equal to
$6,166,015 with Banc One Capital Funding Corporation, an affiliate of BOCP and
BOCM ("BOCF"), in accordance with that certain Conditional Investment Agreement
between the Company and BOCF. The amounts invested earn interest at an internal
rate of return of 17.11% per annum and may be withdrawn by the Company upon the
purchase of the equity interests in the Michigan Subordinated Borrower pursuant
to the Michigan Equity Option Agreement.
B. DESCRIPTION OF TEXAS TRANSACTIONS:
On June 25, 1998, NACC agreed to make a loan (the "Texas Mortgage
Loan") under the Master Facility Agreement, in the principal amount of up to
$24,250,000, to finance a portion of the cost of the development and
construction of a 209-unit senior independent and assisted living facility in
Austin, Texas (the "Texas Facility"), to be developed and managed by BLC of
Texas-II, L.P., a wholly-owned subsidiary of the Company ("BLC-Texas"), on
property owned by AH Texas Owner Limited Partnership (the "Texas Borrower"), an
Ohio limited partnership unrelated to the Company. In connection with the Texas
Mortgage Loan, BLC-Texas, NACC and the Texas Borrower entered into various loan
documents and related agreements (collectively, the "Texas Mortgage Loan
Documents") pursuant to which NACC agreed to make the Texas Mortgage Loan to the
Texas Borrower. The Texas Mortgage Loan Documents provide that the Texas
Mortgage Loan may be converted from a construction loan to a permanent loan upon
the satisfaction of certain conditions. Various of the Texas Borrower's
obligations under the Texas Mortgage Loan Documents are guaranteed by the
Company and BLC-Texas.
The remainder of the cost of the development and construction of the
Texas Facility will be paid with funds contributed to the Texas Borrower by AH
Texas CPG, Inc. (the "Texas General Partner"), the general partner of the Texas
Borrower, or by AH Texas Subordinated, LLC (the "Texas Subordinated Borrower"),
the sole limited partner of the Texas Borrower and the owner of all of the stock
of the Texas General Partner. A portion of the funds contributed to the Texas
Borrower represented proceeds of loans (the "Texas Equity Loan") made by BOCP to
Texas Subordinated Borrower. Various obligations of the Texas Subordinated
Borrower under the documents executed in connection with the Texas Equity Loan
are guaranteed by the Company.
In connection with the foregoing transactions, BLC-Texas and the Texas
Borrower entered into that certain Amended and Restated Development Agreement
(the "Texas Development Agreement"), pursuant to which BLC-Texas agreed to
continue to develop the Texas Facility, and the Texas Borrower agreed to
reimburse BLC-Texas for all costs incurred by BLC-Texas or the Company in
connection with such development and agreed to pay BLC-Texas a development fee
in an amount equal to $2,000,000, which, in part, will be used to pay overhead
and administrative costs and capitalized interest expense incurred by BLC-Texas.
The Texas Development Agreement terminates upon the completion of the Texas
Facility; at which time, BLC-Texas will manage the Texas Facility pursuant to
that certain Management Agreement (the "Texas Management Agreement") between
BLC-Texas and the Texas Borrower. The Texas Management Agreement provides for
the payment of monthly management fees to BLC-Texas in an amount equal to the
greater of (i) 5% of the gross revenues generated from the Texas Facility or
(ii) $10,000. The Texas Management Agreement expires upon the conversion of the
Texas Mortgage Loan from a construction loan to a permanent loan.
The Company has the right to purchase all of the equity interests in
the Texas Subordinated Borrower for a price equal to $900,000 plus an amount
required to produce a certain rate of return to the owners of the Texas
Subordinated Borrower on their investment in the Texas Facility, pursuant to
that certain Equity Option Agreement (the "Texas Equity Option Agreement") among
the Company, the Texas Borrower, the Texas General Partner, the Texas
Subordinated Borrower and the sole member of the Texas Subordinated Borrower. In
addition, the Company also has the right to acquire the Texas Facility or all of
the ownership interests in the Texas Borrower for a price equal to the greater
of the fair market value of the Texas Facility or the amount necessary to repay
a portion of the Texas Equity Loan, pursuant to that certain Property Option
Agreement among the Company, the Texas Borrower and the Texas Subordinated
Borrower.
As consideration for assisting in the above-described transactions, (i)
the Company granted to BOCP and BOCM warrants to purchase up to an aggregate
amount of 25,000 shares of common stock of the Company at a price equal to
$30.40 per share pursuant to certain Warrant Certificates, and (ii) the Company
invested an amount equal to $3,815,677 with BOCF in accordance with that certain
Conditional Investment Agreement between the Company and BOCF. The amounts
invested earn interest at an internal rate of return of 17.11% per annum and may
be withdrawn by the Company upon the purchase of the equity interests in the
Texas Subordinated Borrower pursuant to the Texas Equity Option Agreement.
This current report on Form 8-K contains "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. When
used in this report, the words "believes," "expects," "anticipates," "estimates"
and similar words and expressions are generally intended to identify
forward-looking statements. Statements that describe the Company's future
strategic plans, goals, objectives or expectations are also forward-looking
statements. Readers of this report are cautioned that any forward-looking
statements, including those regarding the intent, belief, or current
expectations of the Company or management, are not guarantees of future
performance, results or events and involve risks and uncertainties, such as the
ability to complete developments on schedule and on budget, and that actual
results and events may differ materially from those in the forward-looking
statements as a result of various factors, including, but not limited to (i)
general economic conditions in the markets in which the Company operates, (ii)
competitive pressures within the industry and/or the markets in which the
Company operates, (iii) the effect of future legislation or regulatory changes
on the Company's operations and (iv) other factors described from time to time
in the Company's filings with the Securities and Exchange Commission. The
forward-looking statements included in this report are made only as of the date
hereof. The Company undertakes no obligation to update such forward-looking
statements to reflect subsequent events or circumstances.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS
(c) Exhibits
Exhibit
Number Description
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10.1 Master Facility Agreement, dated as of June 17, 1998, by and
between Brookdale Living Communities, Inc. and Nomura Asset
Capital Corporation.
10.2 Loan Agreement, dated as of June 17, 1998, by and among Nomura
Asset Capital Corporation, AH Texas Owner Limited Partnership and
BLC of Texas-II, L.P.
10.3 Building Loan Agreement, dated as of June 17, 1998, by and among
Nomura Asset Capital Corporation, AH Texas Owner Limited
Partnership and BLC of Texas-II, L.P.
10.4 Guaranty of Payment of Note, Rate Lock Obligations, Carrying
Costs and Recourse Obligations, dated as of June 17, 1998, from
Brookdale Living Communities, Inc. in favor of Nomura Asset
Capital Corporation.
10.5 Guaranty of Completion, dated as of June 17, 1998, by Brookdale
Living Communities, Inc. in favor of Nomura Asset Capital
Corporation.
10.6 Environmental Indemnity Agreement, dated as of June 17, 1998,
from Brookdale Living Communities, Inc. in favor of Nomura Asset
Capital Corporation.
10.7 Loan Agreement, dated as of June 17, 1998, by and between Banc
One Capital Partners IV, Ltd. and AH Texas Subordinated, LLC.
10.8 Guaranty Agreement, dated as of June 17, 1998, from Brookdale
Living Communities, Inc. in favor of Banc One Capital Partners
IV, Ltd.
10.9 Guaranty of Completion, dated as of June 17, 1998, by Brookdale
Living Communities, Inc. in favor of Banc One Capital Partners
IV, Ltd.
10.10 Non-recourse Guaranty Agreement, dated as of June 17, 1998, from
Brookdale Living Communities, Inc. in favor of Banc One Capital
Partners IV, Ltd.
10.11 Environmental Indemnity Agreement, dated as of June 17, 1998,
from Brookdale Living Communities, Inc. in favor of Banc One
Capital Partners IV, Ltd.
10.12 Environmental Indemnity Agreement, dated as of June 17, 1998,
from Brookdale Living Communities, Inc. in favor of the
Indemnified Parties (as defined therein) and AH Texas Owner
Limited Partnership.
10.13 Conditional Investment Agreement, dated as of June 17, 1998, by
and between Brookdale Living Communities, Inc. and Banc One
Capital Funding Corporation.
10.14 Warrant Certificate, dated as of June 17, 1998, issued by
Brookdale Living Communities, Inc. in favor of Banc One Capital
Markets, Inc. for up to 5,000 shares of Common Stock of Brookdale
Living Communities, Inc.
10.15 Warrant Certificate, dated as of June 17, 1998, issued by
Brookdale Living Communities, Inc. in favor of Banc One Capital
Partners IV, Ltd. for up to 20,000 shares of Common Stock of
Brookdale Living Communities, Inc.
10.16 Amended and Restated Development Agreement, dated as of June 17,
1998, by and between BLC of Texas-II, L.P. and AH Texas Owner
Limited Partnership.
10.17 Management Agreement, dated as of June 17, 1998, by and between
BLC of Texas-II, L.P. and AH Texas Owner Limited Partnership.
10.18 Equity Option Agreement, dated as of June 17, 1998, by and among
Brookdale Living Communities, Inc., AH Texas Owner Limited
Partnership, AH Texas Subordinated, LLC, AH Texas CGP, Inc. and
AH Texas Investor, Inc.
10.19 Property Option Agreement, dated as of June 17, 1998, by and
among Brookdale Living Communities, Inc., AH Texas Owner Limited
Partnership and AH Texas Subordinated, LLC.
10.20 Loan Agreement, dated as of June 17, 1998, by and among Nomura
Asset Capital Corporation, AH Michigan Owner Limited Partnership
and Brookdale Living Communities of Michigan, Inc.
10.21 Building Loan Agreement, dated as of June 17, 1998, by and among
Nomura Asset Capital Corporation, AH Michigan Owner Limited
Partnership and Brookdale Living Communities of Michigan, Inc.
10.22 Guaranty of Payment of Note, Rate Lock Obligations, Carrying
Costs and Recourse Obligations, dated as of June 17, 1998, from
Brookdale Living Communities, Inc. in favor of Nomura Asset
Capital Corporation.
10.23 Guaranty of Completion, dated as of June 17, 1998, by Brookdale
Living Communities, Inc. in favor of Nomura Asset Capital
Corporation.
10.24 Environmental Indemnity Agreement, dated as of June 17, 1998,
from Brookdale Living Communities, Inc. in favor of Nomura Asset
Capital Corporation.
10.25 Loan Agreement, dated as of June 17, 1998, by and between Banc
One Capital Partners IV, Ltd. and AH Michigan Subordinated, LLC.
10.26 Guaranty Agreement, dated as of June 17, 1998, from Brookdale
Living Communities, Inc. in favor of Banc One Capital Partners
IV, Ltd.
10.27 Guaranty of Completion, dated as of June 17, 1998, by Brookdale
Living Communities, Inc. in favor of Banc One Capital Partners
IV, Ltd.
10.28 Non-recourse Guaranty Agreement, dated as of June 17, 1998, from
Brookdale Living Communities, Inc. in favor of Banc One Capital
Partners IV, Ltd.
10.29 Environmental Indemnity Agreement, dated as of June 17, 1998,
from Brookdale Living Communities, Inc. in favor of Banc One
Capital Partners IV, Ltd.
10.30 Environmental Indemnity Agreement, dated as of June 17, 1998,
from Brookdale Living Communities, Inc. in favor of the
Indemnified Parties (as defined therein) and AH Michigan Owner
Limited Partnership.
10.31 Conditional Investment Agreement, dated as of June 17, 1998, by
and between Brookdale Living Communities, Inc. and Banc One
Capital Funding Corporation.
10.32 Warrant Certificate, dated as of June 17, 1998, issued by
Brookdale Living Communities, Inc. in favor of Banc One Capital
Markets, Inc. for up to 5,000 shares of Common Stock of Brookdale
Living Communities, Inc.
10.33 Warrant Certificate, dated as of June 17, 1998, issued by
Brookdale Living Communities, Inc. in favor of Banc One Capital
Partners IV, Ltd. for up to 20,000 shares of Common Stock of
Brookdale Living Communities, Inc.
10.34 Amended and Restated Development Agreement, dated as of June 17,
1998, by and between Brookdale Living Communities of Michigan,
Inc. and AH Michigan Owner Limited Partnership.
10.35 Management Agreement, dated as of June 17, 1998, by and between
Brookdale Living Communities of Michigan, Inc. and AH Michigan
Owner Limited Partnership.
10.36 Equity Option Agreement, dated as of June 17, 1998, by and among
Brookdale Living Communities, Inc., AH Michigan Owner Limited
Partnership, AH Michigan Subordinated, LLC, AH Michigan CGP, Inc.
and AH Michigan Investor, Inc.
10.37 Property Option Agreement, dated as of June 17, 1998, by and
among Brookdale Living Communities, Inc., AH Michigan Owner
Limited Partnership and AH Michigan Subordinated, LLC.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BROOKDALE LIVING COMMUNITIES, INC.
Registrant
Dated: July 16, 1998 By: /s/ Robert J. Rudnik
Robert J. Rudnik
Executive Vice President/
General Counsel
MASTER FINANCING FACILITY AGREEMENT
between
BROOKDALE LIVING COMMUNITIES, INC.
and
NOMURA ASSET CAPITAL CORPORATION
Dated as of June 17 , 1998
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MASTER FINANCING FACILITY AGREEMENT (this "Agreement"), dated as of
June 17, 1998, between BROOKDALE LIVING COMMUNITIES, INC., a Delaware
corporation ("Sponsor"), and NOMURA ASSET CAPITAL CORPORATION, a Delaware
corporation (together with its assigns and successors, "Lender").
ARTICLE I
DEFINITIONS
1.1 Definitions. The following terms have the meanings assigned to them
in this Section, and include the plural as well as the singular:
"Action" means any action, suit, claim, arbitration, governmental
investigation or other proceeding pending in any court or before any
governmental authority.
"Appraisal" means an appraisal (i) dated not more than seventy-five
(75) days prior to the delivery thereof to Lender under this Agreement, (ii)
signed by a qualified MAI appraiser who has no interest, direct or indirect, in
any Loan or any Project and whose compensation is not affected by the amount of
the Loan for which the appraisal is made, (iii) addressed to Lender and its
successors and assigns, (iv) made in compliance with the requirements of the
Federal National Mortgage Association Company or Federal Home Loan Mortgage
Corporation, or any successor thereto, and Title XI of the Federal Institutions
Reform, Recover, and Enforcement Act of 1989 and the regulations promulgated
thereunder, and (v) otherwise satisfactory to Lender in all respects.
"Approval Package" has the meaning set forth in Section 2.3(a).
"Approval Package Delivery Period" has the meaning set forth in
Section 2.3(a).
"Approval Package Review Period" has the meaning set forth in
Section 2.3(d).
"Approved Project" means a Project that Lender has approved pursuant to
Section 2.3.
"Assignment of Agreements" means each assignment of agreements to be
executed and delivered by a Borrower and a Manager pursuant to this Agreement
substantially in the form of Exhibit A.
"Assignment of Leases " means each assignment of leases and rents to be
executed and delivered by a Borrower and a Manager pursuant to this Agreement
substantially in the form of Exhibit B.
"Borrower " means any Person acceptable to Lender which (i) is a
Special Purpose Bankruptcy Remote Entity and (ii) is either (A) a corporation
which is wholly owned by a Person
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acceptable to Lender, (B) a limited liability company that has as its sole
managing member a Special Purpose Bankruptcy Remote Entity wholly owned by a
Person acceptable to Lender, or (C) a limited partnership that has as its sole
general partner a Special Purpose Bankruptcy Remote Entity wholly owned by a
Person acceptable to Lender.
"Broker" means none.
"Building' Loan Agreement" means each building loan agreement to be
executed and delivered by a Borrower and a Manager pursuant to this Agreement,
substantially in the form of Exhibit C, with such changes thereto as may be
necessary to reflect local law requirements related to construction loans.
"Consent and Subordination of Manager" means each consent and
subordination executed and delivered by a Manager pursuant to this Agreement
substantially in the form of Exhibit D.
"Construction Commencement Date" means the date of commencement of
construction of an Approved Project in accordance with the applicable Building
Loan Agreement.
"Construction Period" means, with respect to each Approved Project, the
period from the Construction Commencement Date to the Substantial Completion
Date of such Project.
"Debt" means the "Debt" as defined in each Loan Agreement,
collectively.
"Default Rate" means a rate per annum equal to the lesser of (i) the
maximum rate permitted by applicable law or (ii) five percent (5%) above the
Interest Rate.
"Due Diligence Deposit" has the meaning set forth in Section 2.3(f).
"Due Diligence Materials" has the meaning set forth in Section 2.3(c).
"Eligible Area" means Austin, Texas; Southfield, Michigan; Glen Ellyn,
Illinois; Raleigh, North Carolina; and any other geographic area approved by
Lender in its reasonable discretion.
"Engineering Report" means, with respect to this Agreement, any and all
reports produced by an engineering firm hired by Lender ("Lender's Engineer") to
review all of Sponsor's or any Manager's site plans, structural and engineering
reports for any Project, and such other items required by Lender, each of which
items delivered by Sponsor or any Borrower or any Manager to Lender shall be
certified to Lender and its successors and assigns. Lender's Engineer shall
review all of the aforementioned to determine, (i) structural and engineering
viability of the proposed Project, (ii) that there are no material structural
defects in the proposed design or impediments to the building(s) to be included
in the Project, and (iii) an estimate of the cost to repair or remedy any
non-material structural defects or impediments that may exist.
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"Environmental Indemnity Agreement" means each environmental indemnity
agreement to be executed and delivered by Sponsor, as guarantor, pursuant to
this Agreement and the Loan Agreements.
"Environmental Report" means, with respect to a proposed Project, a
"Phase I" environmental report, and a "Phase II" environmental report if such
"Phase I" indicates that a "Phase II" environmental report is appropriate, each
of which reports shall be (i) certified to Lender and its successors and
assigns, (ii) prepared by a firm approved by Lender in its reasonable
discretion, (iii) based upon an inspection conducted not more than ninety (90)
days prior to the delivery thereof to Lender, (iv) in conformity with the
published standards of the Rating Agencies, and (v) otherwise in form and
content reasonably satisfactory to Lender.
"Exit Fee" has the meaning set forth in Section 2.1(c).
"Expenses" has the meaning set forth in Section 2.4(d).
"Event of Default" has the meaning set forth in Section 4.1.
"Facility Closing Date" means June __, 1998.
"Facility Structuring Fee" has the meaning set forth in Section 2.4(a).
"Facility Termination Date" means December __, 1999.
"Feasibility/Market Study" means, with respect to a Project, a report
dated not more than ninety (90) days prior to the date of delivery, in form and
substance and prepared by a firm reasonably satisfactory to Lender, which
provides, without limitation, information regarding demographics of the area,
existing supply and anticipated new supply of congregate care and assisted
living facilities, comparables on sales prices, rental rates and occupancy
rates, major demand sources and expected impact of the Project.
"Ground Lease(s)" means any ground or underlying lease of any Property,
as the same may be amended, modified, supplemented or replaced from time to time
in compliance with the Transaction Documents for such Property.
"Guarantees" mean the guarantees delivered to Lender pursuant to
clauses (6) through (8) of Section 3.1(n).
"Guarantor" means Sponsor.
"Indemnified Parties" has the meaning set forth in Section 6.1(a).
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"Loan Agreement" means each loan agreement to be executed and delivered
by a Borrower and a Manager pursuant to this Agreement, substantially in the
form of Exhibit E.
"Loan Closing Date" means, with respect to any Loan, the date on which
the Loan Agreement, the Building Loan Agreement, and the other Transaction
Documents relating to such Loan are executed and delivered by a Borrower, a
Manager, Lender and Guarantor (as applicable).
"Loans" means the loans made pursuant to this Agreement.
"Losses" has the meaning set forth in Section 6.1(a).
"Manager" means an Affiliate of Sponsor in which Sponsor holds,
directly or indirectly, 100% of the legal and beneficial interests, and which is
either (A) a corporation which is wholly owned by Sponsor, (B) a limited
liability company that has as its sole managing member an entity wholly owned by
Sponsor, or (C) a limited partnership that has as its sole general partner an
entity wholly owned by Sponsor.
"Maximum Advance Amount" means the maximum amount of a Loan as set
forth in Lender's approval of a Project, which amount, in Lender's sole
discretion, may be up to but shall not exceed eighty percent (80%) of the
approved Budget Costs of an Approved Project.
"Maximum Facility Amount" means One Hundred Million and 00/100 Dollars
($100,000,000.00).
"Mortgage" means each mortgage (or deed of trust or deed to secure
debt) to be executed and delivered by a Borrower pursuant to this Agreement.
"Multi-Property Borrower" has the meaning set forth in Section 7.1(c).
"New Borrower" has the meaning set forth in Section 7.1(c).
"Non-Recourse Guaranty" means each non-recourse guaranty to be executed
and delivered by a Borrower pursuant to this Agreement and the Loan Agreements.
"Non-Use Fee" has the meaning set forth in Section 2.4(b).
"Note" means each note to be executed and delivered by a Borrower
pursuant to this Agreement, substantially in the form of Exhibit F.
"Officer's Certificate" means a certificate signed by a senior
executive officer of Sponsor who is authorized to act hereunder on behalf of
Sponsor.
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"Permitted Prepayment" has the meaning set forth in Section 2.1(c).
"Pledged Property" means the Approved Projects and underlying
Properties, and the other collateral in which a security interest is being
granted pursuant to the Security Documents.
"Potential Event of Default" means an event which, with the giving of
any applicable notice and/or lapse of any applicable time period, would become
an Event of Default.
"Preliminary Budget Costs" means Hard Costs and/or Soft Costs for any
Loan estimated by Manager and submitted to Lender for review during the Approval
Package Review Period, which costs must be finalized by Manager and approved by
Lender in its sole and absolute discretion prior to closing on the particular
Loan.
"Preliminary Maximum Advance Amount" means Lender's estimate of the
maximum amount of a Loan, which amount, in Lender's sole discretion, may be up
to but shall not exceed eighty percent (80%) of the Preliminary Budget Costs of
a proposed Project and which estimate shall be finalized by Lender on or before
the applicable Loan Closing Date.
"Project" means the construction of a new congregate care and assisted
living facility in an Eligible Area.
"Property" means the land (in which the applicable Borrower owns either
a fee or leasehold estate) on which any Approved Project is to be located,
together with all improvements thereon, fixtures thereto, direct interests
therein, and personal property related thereto or included therein; provided,
however, that "Property" shall not include any property owned by tenants,
guests, licensees or concessionaires of such Property.
"Responsible Officer" means, with respect to any corporation, any
officer authorized to act as to a given matter under a duly adopted resolution.
"Security Documents" means (a) the Building Loan Agreements, (b) the
Mortgages, (c) all Uniform Commercial Code financing statements relating to the
Debt, (d) the Guaranties, (e) the Assignment of Leases, (f) the Assignment of
Agreements, and (g) any other documents securing the Debt.
"Segregated Pool" has the meaning set forth in Section 7.1.
"Segregated Pool Date" has the meaning set forth in Section 7.1.
"Segregated Pool Property" has the meaning set forth in Section 7.1.
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"Senior Mortgage" means a Mortgage that creates a first priority lien
on a Property, which shall secure the Debt relating to such Property, and shall
be substantially in the form of Exhibit G, with such modifications thereto as
may be necessary to reflect local law.
"Sponsor's Closing Certificate" has the meaning set forth in Section
3.1(k).
"Stabilization Period" means, with respect to an Approved Project, the
period from the Substantial Completion Date to the Conversion Date for such
Project.
"Subordinate Mortgage" means a Mortgage that creates a second priority
lien on a Property, subordinate in lien to a Senior Mortgage and which shall
secure the Debt other than the Debt relating to such Property and shall be
substantially in the form of Exhibit H, with such modifications thereto as may
be necessary to reflect local laws; provided that a Subordinate Mortgage which
encumbers a Property in a state having a mortgage recording tax may secure a
maximum principal amount less than the full principal amount of such other Debt,
in order to reasonably limit the mortgage recording taxes payable in connection
with such Subordinate Mortgage, if (i) Lender approves such maximum amount,
which approval shall not be unreasonably withheld if such limitation does not
adversely affect Lender or its rights under the Security Documents, and (ii)
such maximum amount is not less than (A) 125% of the value of the completed
Project as shown in the Appraisal minus (B) the principal amount secured by the
Senior Mortgage.
"Transaction Documents" means the Loan Agreements , the Building Loan
Agreements, and all documents defined as Loan Documents therein.
"Umbrella Entity" has the meaning set forth in Section 7.2.
1.2 General. Unless otherwise specified, (i) all references to sections
and schedules are to those in this Agreement, (ii) the words "hereof", "herein",
"hereto", and "hereunder" and words of similar import refer to this Agreement as
a whole and not to any particular provision, (iii) all definitions are equally
applicable to the singular and plural forms of the terms defined, (iv) the word
"including" means "including but not limited to," and (v) accounting terms not
specifically defined herein shall be construed in accordance with GAAP. All
references to any agreement or instrument shall be to such agreement or
instrument as in effect from time to time, including any amendments,
consolidations, replacements, restatements, modifications and supplements
thereto.
1.3 Terms defined in Loan Agreement. The following terms have the
meanings assigned to them in the form of Loan Agreement attached as Exhibit E
hereto (or, when applied to a specific Loan, the actual Loan Agreement relating
thereto): "Additional Loan", "Affiliate", "Banc One", "Borrower Representative",
"Borrower Sponsor", "Business Day", "Conversion Date", "GAAP", "Governmental
Authority", "Hazardous Substances", "Independent Director", "Legal
Requirements", "Lien", "Loan Closing Date", "Person", "Preferred Equity",
"Rating Agencies", "Securitization", "Special Purpose Bankruptcy Remote Entity",
and "Yield Maintenance Premium".
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1.4 Terms defined in Building Loan Agreement. The following terms have
the meanings assigned to them in the form of Building Loan Agreement attached as
Exhibit F hereto (or, when applied to a specific Loan, the actual Building Loan
Agreement relating thereto): "Advance", "Budget", "Budget Costs", "Construction
Schedule", "Initial Advance ", "Outside Completion Date", "Plans", "Substantial
Completion Date" and "Syndication."
ARTICLE II
THE LOANS
2.1 Loans to Borrowers.
(a) On the terms, and subject to the conditions, set forth
herein, Lender shall make and Sponsor shall cause the respective Borrowers to
borrow Loans, each pursuant to a Loan Agreement and a Building Loan Agreement to
be entered into prior to the earlier of (i) the Facility Termination Date or
(ii) the termination of the obligation of Lender to make Loans hereunder.
(b) The aggregate amount of the Loans (excluding any Additional
Loans) will not exceed One Hundred Million and 00/100 Dollars ($100,000,000.00).
Portions of any Loan that have been repaid or prepaid may not be reborrowed
except as otherwise permitted herein.
(c) Lender hereby agrees that prior to the Conversion Date for a
particular Loan, but in no case later than July 28, 1999 (the "Permitted
Prepayment Termination Date"), Sponsor or the Borrower which owns a specific
Project may refinance, without paying any Yield Maintenance Premium or
prepayment penalty, the lesser of either x) any two (2) Projects or y) Fifty
Million and 00/100 Dollars ($50,000,000.00) of the Maximum Facility Amount with
either (a) tax exempt bond financing, (b) taxable bond financing, or (c) Fannie
Mae financing ((a), (b), and (c) shall collectively hereinafter be referred to
as the "Permitted Prepayment"). ____ Sponsor understands that any Permitted
Prepayment must be a prepayment of the entire Loan being prepaid and no partial
prepayments of any Loan made pursuant to this Agreement shall be permitted.
Sponsor must notify Lender in writing of its intention to make a Permitted
Prepayment of a specific Loan as provided for herein no later than thirty (30)
days prior to any such refinancing. Such notice must include a copy of any
commitment letter or other evidence of such financing, which must include
evidence reasonably satisfactory to Lender of the bond financing. In connection
with any such refinancing, Sponsor shall pay an exit fee of two percent (2.0%)
of the outstanding principal amount of the particular Loan refinanced (the "Exit
Fee") simultaneously with the delivery of the notice provided for herein. Lender
hereby agrees that any such amount repaid by Sponsor or the individual Borrower
may be reborrowed by Sponsor in accordance with and subject to the provisions of
this Agreement. Notwithstanding anything to the contrary contained in any of the
Transaction Documents, prior to the Permitted Prepayment Termination Date, the
repayment rights granted pursuant to this Section 2.1(c) shall control.
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2.2 Use of Loan Proceeds.
(a) The proceeds of each Loan shall be used by the Borrower in
question to fund a portion of the Budget Costs for the acquisition, ownership,
development, operation, construction and stabilization of such Borrower's
Approved Project and to provide permanent long term financing for such Approved
Project, subject to and in accordance with the provisions of the Loan Agreement
and Building Loan Agreement for such Approved Project, including certain fees
and expenses of the transactions contemplated thereby.
(b) Lender is not making an Advance of any Loan on the date
hereof unless otherwise agreed to by Lender pursuant to the Transaction
Documents, and Sponsor acknowledges that the payment of fees and other
transaction costs related to this Agreement and the Loans on the date hereof
shall be paid by Sponsor from its own funds except as otherwise agreed to by
Lender.
2.3 Preliminary Approvals of Projects.
(a) Sponsor shall, with respect to any Project that it wishes to
finance pursuant to this Agreement, submit to Lender for its preliminary review
and approval a package (an "Approval Package") consisting of all documentation,
reports and other information required by Lender in accordance with Lender's due
diligence underwriting standards, including, without limitation, the following:
(1) A general description of the Project, including size,
location and number of rooms, and a site plan,
location maps, property description, and site
photographs;
(2) a Feasibility/Market Study for the Project, which may
be prepared by Sponsor provided that no previously
submitted Feasibility/Market Study has been rejected
by Lender as inadequate;
(3) preliminary construction cost estimates including a
projected monthly draw schedule through the
Stabilization Period;
(4) a statement of specific uses of funds;
(5) a monthly pro-forma operating statement for the first
twelve (12) months after the completion of
construction, and yearly pro-forma operating state
ments and capital expenditure budgets for the Project
for the five-year period commencing immediately after
the completion of construction.
(6) schematic plans and drawings;
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(7) the estimated Budget Costs and Maximum Advance Amount
for the Project; and
(8) an estimated time frame for the construction and
stabilization of the Project and evidence, reasonably
satisfactory to Lender, that if the Project is
approved it shall be completed on or before the last
day of the fourteenth (14th) full calendar month
after the applicable Loan Closing Date, subject to
extension for Unavoidable Delays (as defined in the
Building Loan Agreement).
Sponsor may deliver Approval Packages to Lender for its review
commencing on the date hereof and ending on November __, 1999, provided
construction of the last Approved Project is commenced in accordance with its
applicable Building Loan Agreement, but in no case later than the Facility
Termination Date (the "Approval Package Delivery Period").
(b) Lender shall notify Sponsor within ten (10) Business Days
after receipt of an Approval Package whether or not it preliminarily approves
the Project described therein in the exercise of its sole discretion. However,
such Project shall not be deemed to be an Approved Project unless and until
final approval is given by Lender pursuant to Section 2.3(d).
(c) If preliminary approval is given for a Project, Sponsor
shall promptly use reasonable efforts to satisfy all other conditions to the
consummation of a Loan for such Project as set forth herein, and to provide
Lender with the following additional information and documentation with respect
to such Project (collectively, the "Due Diligence Materials"):
(1) a survey, legal description, and title report with
respect to the applicable Property, dated not more
than ninety (90) days prior to the date of delivery;
(2) evidence of compliance in all material respects with
all applicable land use, zoning, building,
environmental, and all other applicable Legal
Requirements;
(3) an Environmental Report, dated no more than ninety
(90) days prior to the date of delivery thereof;
(4) an Engineering Report, dated no more than ninety (90)
days prior to the date of delivery thereof;
(5) evidence that all utility services required for the
Property for its intended use are or, when completed,
shall be available, which evidence may include
easements for customary utilities as disclosed by
surveys and title materials provided to Lender
hereunder;
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(6) evidence that the Project is or can be made, and will
be subject to, a separate tax assessment;
(7) evidence that the Property has or, when completed
shall have, adequate and reasonable parking which in
all events complies with all Legal Requirements;
(8) the Plans, the Budget and the Construction Schedule
as required under the Building Loan Agreement;
(9) evidence of the contribution or availability for
contribution by Borrower of an amount of equity equal
to the difference between 100% of the Preliminary
Budget Costs for the Property as approved by Lender
and the Preliminary Maximum Advance Amount for such
Property, and, in connection therewith, Lender may
require, in its reasonable discretion, a cash deposit
in such amount, an irrevocable letter of credit in
such amount for the benefit of Lender issued by a
bank acceptable to Lender, or other security
acceptable to Lender in its sole discretion;
(10) an Appraisal dated not more than seventy-five (75)
days prior to the date of delivery, evidencing an
appraised value for the Property after completion of
construction that provides for a loan to value ratio
no greater than 75% based on the Preliminary Maximum
Advance Amount, together with an updated Feasibility/
Market Study if the Feasibility/Market Study
delivered pursuant to Section 2.3(a) is more than
ninety (90) days old;
(11) if the interest of Borrower in the Property is to be
a leasehold estate, a complete copy of the applicable
ground lease and all amendments thereto, which must
be financeable, as determined by Lender in its sole
but reasonable discretion, and shall, without
limitation, (i) have a remaining term (including
renewal options which have been exercised or which
the ground lessor permits Lender to exercise on
behalf of Borrower) ending not earlier than ten (10)
years after the maturity date of the Loan, (ii)
provide Lender or its assignees notice of, and an
opportunity to cure, defaults of the ground lessee,
(iii) provide Lender and its assignees with a right
to a new ground lease or other adequate protections
if the ground lessee disaffirms the ground lease in
connection with a bankruptcy or the ground lease is
otherwise terminated, (iv) contains no material
adverse restrictions on the rights of the ground
lessee or Lender and its assignees to assign or
sublet the leasehold estate, (v) requires the
subordination of any fee mortgages to the ground
lease, (vi) allows for any insurance proceeds or
condemnation awards to be applied to either the
restoration or repair of the Project or repayment of
the Debt; and (vii) allows for foreclosure of the
Mortgages on the leasehold estate;
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(12) Intentionally deleted;
(13) the identity of the general contractor for the
Project, which general contractor must be reputable,
bonded by a nationally recognized surety company with
a Standard & Poor's Rating (or equivalent rating) of
at least "A" and otherwise acceptable to Lender in
its sole discretion; and
(14) such additional documentation, reports and
information as Lender may reasonably require in
accordance with its due diligence and underwriting
standards.
(d) Lender shall notify Sponsor within ten (10) Business Days
after receipt of all of the Due Diligence Materials (the "Approval Package
Review Period") whether it approves, in the exercise of its reasonable
discretion, the Project covered thereby (the "Approved Project"). If Lender does
not respond within such period, such approval will deemed to have been denied.
If such approval is given, such Project shall constitute an Approved Project,
and Lender shall state in its approval the Maximum Advance Amount of the Loan
for such Project; but Lender shall have no obligation to make such Loan unless
and until all of the conditions to such Loan set forth in this Agreement and the
applicable Loan Agreement and Building Loan Agreement have been satisfied.
(e) If Lender's approval is given with respect to a Project, and
either the Loan Closing Date or the Construction Commencement Date for such
Project has not occurred within ninety (90) days of such approval due to no
material unjustifiable delay of Lender or its counsel, then Lender shall have
the right in its sole but reasonable discretion (i) to require updated Due
Diligence Materials, (ii) to revoke its approval of the Project if any
conditions have adversely changed with respect to such Approved Project or (iii)
to adjust the Maximum Advance Amount of the Loan if any conditions have
adversely changed with respect to such Maximum Advance Amount of the Loan.
(f) Within two (2) Business Days after Lender notifies Sponsor
that it approves a Project after the first Approved Project, Sponsor shall pay
to Lender a Thirty-Five Thousand and 00/100 Dollars ($35,000.00) due diligence
deposit (the "Due Diligence Deposit") for such Project, which will be applied as
provided in Section 2.4(d).
(g) Construction of each Approved Project must be commenced by
the Construction Commencement Date, but in no case later than the Facility
Termination Date. Lender shall not be required to enter into any Loan Agreement,
any Building Loan Agreement, or any other Transaction Document after the
Facility Termination Date.
2.4 Fees.
(a) In addition to the fees provided for in each Loan Agreement
and each Building Loan Agreement, Sponsor shall, or shall cause one or more
Borrowers to, pay to Lender a facility
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structuring fee (the "Facility Structuring Fee") of Five Hundred Thousand and
00/100 Dollars ($500,000.00) as follows: (i) Two Hundred Fifty Thousand and
00/100 Dollars ($250,000.00) (which sum was delivered simultaneously with the
executed commitment letter) and (ii) Two Hundred Fifty Thousand and 00/100
Dollars ($250,000.00) on or prior to the Facility Closing Date.
(b) Unless the aggregate Maximum Advance Amount of the Loans for
which Loan Agreements have been entered into is equal to or greater than
ninety-five percent (95%) of the Maximum Facility Amount on the Facility
Termination Date, Sponsor shall, or shall cause one or more Borrowers to, pay to
Lender a non-use fee (the "Non-Use Fee") equal to one percent (1.0%) of the
amount by which the Maximum Facility Amount exceeds the aggregate Maximum
Advance Amount of the Loans for which Loan Agreements have been entered into
pursuant to this Agreement. If, however, the aggregate Maximum Advance Amount of
the Loans for which Loan Agreements have been entered into pursuant to this
Agreement are equal to or greater than ninety-five percent (95%) of the Maximum
Facility Amount, Sponsor shall not be required to pay the Non- Use Fee. Lender's
sole and exclusive remedy for Sponsor's failure to finance any Projects pursuant
to Section 2.1(a) shall be limited to payment of the Non-Use Fee.
(c) In connection with any Permitted Prepayment made in
accordance with the provisions of Section 2.1(c) herein, Sponsor shall pay, or
shall cause one or more Borrowers to pay, to Lender the Exit Fee.
(d) Sponsor shall be liable for the payment of fees under this
Section 2.4 and all costs and expenses incurred by Lender in connection with
each Loan through the date of the Initial Advance of each Loan, including,
without limitation, the reasonable and actual out of pocket expenses incurred by
Lender and the outside counsel and auditors retained by or on behalf of Lender
in connection with the matters and transactions contemplated hereby and the
applicable Loan Agreement and Building Loan Agreement, which fees and expenses
shall also include, but not be limited to, the reasonable and actual fees of all
third parties relating to the due diligence review to be undertaken by Lender
and its third party consultants, title insurance, recordation fees, insurance
review costs, the costs of reviewing operating statements, the costs of any
Appraisals, Environmental Reports, Engineering Reports, recordation costs and
all expenses associated with engaging a servicer and a trustee (each of which
shall be selected by Lender in its sole discretion), setting up and prefunding a
cash management account and structuring the Loan (collectively, the "Expenses").
If the actual Expenses with respect to a Loan shall be less than the amount of
the Due Diligence Deposit, then on the date of first advance of such Loan,
Lender shall remit such overpayment to Sponsor. If the actual Expenses with
respect to a Loan shall be more than the Due Diligence Deposit, then any such
deficiency shall be paid to Lender upon request therefor from Lender, but in all
events no later than the date of the Initial Advance of such Loan. Sponsor and
Borrower shall be obligated to pay for all Expenses relating to each Loan
whether or not such Loan closes or is funded. Simultaneously with the execution
hereof, Lender acknowledges receipt of two (2) Due Diligence Deposits from
Sponsor, which will be used for the first two (2) Approved Projects.
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ARTICLE III
CONDITIONS TO ENTERING INTO LOAN AGREEMENTS
3.1 Conditions. The obligation of Lender to enter into a Loan Agreement
and a Building Loan Agreement with a Borrower and a Manager with respect to a
Loan is subject to the satisfaction of the following conditions:
(a) Lender shall have approved the Project in question in
accordance with Section 2.3 hereof;
(b) The representations and warranties set forth in Article V of
this Agreement shall be true and correct in all material respects on and as of
the applicable Loan Closing Date with the same effect as though made on and as
of such date;
(c) Sponsor shall be in compliance in all material respects with
all of the terms and provisions set forth herein and with all Transaction
Documents to which it is a party;
(d) Borrower and Manager with respect to such Loan shall be in
compliance in all material respects with all of the terms and provisions set
forth in each of the Transaction Documents being executed and delivered by such
Borrower or Manager in connection with the closing of such Loan;
(e) Sponsor, Manager or Borrower shall have paid to Lender all
fees, costs and expenses due and payable to Lender by Sponsor, Manager or
Borrower under this Agreement and all Transaction Documents relating to the
Loan;
(f) If the applicable Property shall have been damaged and not
theretofore repaired, the failure to restore such damage shall not, in Lender's
reasonable judgment, adversely affect the Approved Project;
(g) No portion of the applicable Property shall have been taken
in condemnation or other similar proceeding, and no such proceeding shall be
pending which would adversely affect the Approved Project;
(h) There shall have been (i) no material change in the physical
or structural condition of the Approved Project which has not been approved by
Lender or (ii) no violation or breach of the financial covenants Sponsor, as
Guarantor, must maintain pursuant to any Guaranty of Payment since the date of
this Agreement;
(i) No Hazardous Substances shall have been discovered on the
Property other than as set forth in the applicable Environmental Report or which
are strictly in compliance with all applicable Legal Requirements;
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(j) Lender shall have received such documentation regarding the
organization, formation or existence of Sponsor as Lender may reasonably
request;
(k) Lender shall have received a certificate in the form annexed
hereto as Exhibit I (the "Sponsor's Closing Certificate"), dated the Loan
Closing Date and signed by a Responsible Officer of Sponsor, confirming
compliance with the conditions precedent set forth in Sections 3.1(b) and 3.1
(c);
(l) Except as otherwise permitted by Lender herein or in any
applicable Transaction Documents, Borrower shall have outstanding no
indebtedness other than the Loan (and the Debt secured by a Subordinate
Mortgage);
(m) The Maximum Advance Amount of the Approved Project shall
not, when added to the Maximum Advance Amounts of all other Approved Projects
(whether or not funded), exceed the Maximum Facility Amount unless otherwise
approved by Lender;
(n) The Property shall have been validly conveyed to Borrower on
or prior to the Loan Closing Date;
(o) All other requirements stated in the Building Loan Agreement
and the Loan Agreement shall have been satisfied or waived;
(p) Lender shall have received and approved all documentation,
reports and other information required by Lender in accordance with Lender's due
diligence and underwriting standards, all in form and substance satisfactory to
Lender in its reasonable discretion, including, without limitation the
following:
(1) A Note and a Senior Mortgage each in the amount of
the Maximum Advance Amount for the Approved Project,
executed and acknowledged by Borrower;
(2) A Loan Agreement executed by Borrower and Manager;
(3) A Building Loan Agreement executed (and if required
by Lender, acknowledged) by Borrower and Manager, and
all documentation and other items required thereunder
in order for Lender to make the Initial Advance
thereunder;
(4) An Assignment of Leases executed and acknowledged by
Borrower and Manager;
(5) An Assignment of Agreements executed and acknowledged
by Borrower and Manager;
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(6) An Environmental Indemnity Agreement, substantially
in the form of Exhibit J, executed by Guarantor;
(7) A guaranty of payment, substantially in the form of
Exhibit K executed by Guarantor;
(8) A guaranty of completion of the Project substantially
in the form of Exhibit L, executed by Guarantor ;
(9) A non-recourse guaranty, substantially in the form of
Exhibit M, executed by Borrower;
(10) Consent and Subordination of Manager executed and
acknowledged by Manager;
(11) A Subordinate Mortgage, executed and acknowledged by
Borrower;
(12) Non-Recourse Guarantees, each executed and
acknowledged by the applicable Other Borrower;
(13) Subordinate Mortgages, each executed and
acknowledged by the applicable Other Borrower;
(14) Favorable opinions of counsel for Borrower, Manager
and Guarantor acceptable to Lender, addressed to
Lender and the Rating Agencies, as to (i) the due
formation, valid existence, good standing, power and
authority of Borrower, Manager and Guarantor, (ii)
the due authorization, execution, delivery, validity,
binding effect, enforceability and non-contravention
of the Transaction Documents, (iii) the non-usurious
nature of the Loan, (iv) the absence of pending
material litigation, (v) substantive
non-consolidation of the Borrower with Borrower
Sponsor, and such other Persons as Lender may
reasonably request and (vi) such other matters as
Lender may reasonably request;
(15) An interest rate lock agreement with respect to the
Maximum Advance Amount in Lender's then standard
form, executed by Sponsor; and
(16) Such other information or documentation as may be
reasonably requested by Lender and in the Building
Loan Agreement and the Loan Agreement;
(q) The Facility Termination Date shall not yet have occurred;
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(r) Banc One has executed appropriate loan documents
substantially in the form of those loan documents that shall be executed in
connection with the first two Projects on or about the date hereof, to provide
similar mezzanine financing. Provided, however, if Lender has rescinded the
cross-collateralization and cross-default provisions as determined by Lender in
its sole and absolute discretion, Banc One shall not be required to provide any
such mezzanine financing; and
(s) No Event of Default has occurred and is continuing pursuant
to any Transaction Documents.
3.2 Documentation. Without limiting the requirements of Section 3.1 and
the Exhibits referred to therein, all materials and information required to be
delivered to Lender as set forth in this Agreement, any other opinions,
certificates and other instruments and surveys required by the Transaction
Documents and all proceedings in connection with the transactions contemplated
thereby, shall be subject to review by Lender and shall be reasonably
satisfactory in form and substance to Lender.
ARTICLE IV
DEFAULT; REMEDIES; ENFORCEMENT
4.1 Events of Default. Any of the following shall constitute an event of
default under this Agreement (an "Event of Default"):
(a) any representation, warranty, or covenant of Sponsor
contained in this Agreement shall have been untrue or incorrect in any material
respect when made; or
(b) failure by Sponsor or any Borrower to pay when due any sums
in accordance with any provision hereof and such failure has not been cured
within five (5) days after any such sum is due; or
(c) if Sponsor shall be in default under any of the other
obligations, agreements, undertakings, terms, covenants, provisions or
conditions of this Agreement, not otherwise referred to in this Section 4.1, for
thirty (30) days after written notice to Sponsor from Lender or its successors
or assigns, in the case of any other non-monetary default (unless otherwise
provided herein or in any other Transaction Document); provided, however, that
if such non-monetary default under this subparagraph is susceptible of cure but
cannot reasonably be cured within such thirty (30) day period and provided
further that Sponsor shall have commenced to cure such default within such
thirty (30) day period and thereafter diligently and expeditiously proceeds to
cure the same, such thirty (30) day period shall be extended for such time as is
reasonably necessary for Sponsor in the exercise of due diligence to cure such
default, but in no event shall such period exceed ninety (90) days after the
original notice from Lender; or
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(d) Intentionally deleted; or
(e) an order (that has not been vacated or stayed within sixty
(60) days from the entry thereof) is made for, or the stockholders or other
equity owners of Sponsor take any action with regard to, the winding up of
Sponsor, except a winding up for the purpose of a merger, restructuring or
contribution, the terms of which have previously been consented to by Lender,
which consent shall not be unreasonably withheld or delayed, provided same shall
have no effect on the financial covenants Sponsor, as Guarantor, must maintain
pursuant to any Guaranty of Payment; or
(f) Sponsor or any other guarantor of a Loan shall make an
assignment for the benefit of creditors, or shall generally not be paying its
debts as they become due; or
(g) a receiver, liquidator or trustee shall be appointed for
Sponsor, or any other guarantor of the Loan or Loans; or Sponsor, or any other
guarantor of the Loan or Loans shall be adjudicated a bankrupt or insolvent; or
any petition for bankruptcy, reorganization or arrangement pursuant to federal
bankruptcy law, or any similar federal or state law, shall be filed or against,
consented to, or acquiesced in by, Sponsor or any other guarantor of the Loan or
Loans; or any proceeding for the dissolution or liquidation of Sponsor shall be
instituted; provided, however, if such appointment, adjudication, petition or
proceeding was involuntary and not consented to by Sponsor or such other
guarantor of the Loan or Loans, only upon the same not being discharged, stayed
or dismissed within ninety (90) days; or
(h) if Sponsor fails at any time during the term of this
Agreement to maintain the financial covenants of Sponsor, as Guarantor, at a
level of at least fifty percent (50%) of the levels set forth in the form of
Guaranty of Payment attached hereto as Exhibit K; or
(i) Intentionally deleted.
4.2 Termination, Acceleration and Remedies. If an Event of Default occurs
and is continuing, Lender by notice to Sponsor may terminate this Agreement,
whereupon Lender shall have no obligation to make any further Loans or enter
into any further Transaction Documents, and Lender shall collect all fees and
expenses incurred hereunder, including the Non-Use Fee, as Lender's sole and
exclusive remedy hereunder; this shall, however, in no way limit Sponsor's
liability under any of the guarantees it executes as guarantor in connection
with any and all Loans. In any case, this Agreement (i) shall terminate on the
Facility Termination Date provided all fees and expenses are paid in full and
(ii) shall not be cross-defaulted with any Loan after the Facility Termination
Date unless all fees and expenses hereunder have not been paid in full as of
such date.
4.3 Remedies Cumulative; Delay or Omission Not a Waiver. To the extent
permitted by law, except as otherwise provided herein, every remedy given to
Lender in this Agreement shall not be exclusive of any other remedy or remedies,
and every such remedy shall be cumulative and in addition to every remedy
provided by statute, law, equity or otherwise. Lender may exercise all or any of
the powers, rights or remedies given to it under this Agreement or which may be
now or
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hereafter given by statute, law, equity or otherwise, in its absolute
discretion. No course of dealing between Sponsor and Lender or any delay or
omission of Lender to exercise any power, right or remedy accruing upon any
Event of Default shall impair any power, right or remedy or be construed to be a
waiver of any such Event of Default or acquiescence therein, and every power,
right and remedy given by this Agreement to Lender may, to the extent permitted
by law, be exercised from time to time and as often as may be deemed expedient
by Lender.
ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS
5.1 Representations and Warranties of Sponsor on the Closing Date.
Sponsor represents and warrants to Lender, that, as of the Facility Closing
Date:
(a) Sponsor is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and, to the extent
necessary, is qualified to do business and in good standing in each jurisdiction
where the nature of its business or location of its properties requires it to be
so qualified except where the failure to qualify will not materially adversely
affect the financial condition of Sponsor or the ability of Sponsor to perform
its obligations under this Agreement or any Transaction Document to which
Sponsor is a party.
(b) Sponsor has, and at all relevant times has had, the
requisite power and authority to own its assets and conduct its business, to
execute and deliver this Agreement and to carry out the transactions
contemplated hereby.
(c) The execution, delivery and performance by Sponsor of this
Agreement have been duly and validly authorized by all necessary action and
proceedings, and no further approvals or filings of any kind, including, without
limitation, any approval of or filing with any Governmental Authority, are
required as a condition thereto which have not been previously obtained or made.
(d) Neither the execution and delivery of this Agreement nor the
fulfillment of or compliance with the terms and conditions hereof (i) will
conflict with or result in any breach or violation of any law, rule or
regulation issued by any Governmental Authority, or any judgment or order
applicable to Sponsor or to which Sponsor is subject; or (ii) will conflict with
or result in any breach or violation of, or constitute a default under, any of
the provisions of the documents under which Sponsor was organized or any
agreement or instrument to which Sponsor is a party or to which Sponsor is
subject.
(e) ______ This Agreement has been duly executed and delivered by
Sponsor and constitutes the legal, valid and binding obligation of Sponsor,
enforceable against Sponsor in accordance with its terms, subject to the effects
of bankruptcy, insolvency, reorganization, moratorium and other similar
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laws relating to or affecting creditors' rights generally and general equitable
principles (whether considered in a proceeding in equity or at law).
(f) There is no Action pending to which either Sponsor is a
party and, to Sponsor's knowledge, no such Action is threatened or contemplated
by any Person in which an adverse decision is reasonably likely and would have
an adverse effect on the financial condition of Sponsor or the ability of
Sponsor to perform its obligations under this Agreement or the other Transaction
Documents to which Sponsor is a party, provided however, this covenant shall
apply only if such Action could in any material way impact Sponsor's ability to
transact business.
(g) There exists no Event of Default and, to the best knowledge
of Sponsor, no Potential Event of Default.
(h) Intentionally deleted.
(i) Sponsor did not negotiate or communicate with any broker or
finder in connection with this Agreement.
(j) Sponsor is not (i) an "investment company" or a company
"controlled" by an "investment company," within the meaning of the Investment
Company Act of 1940, as amended; (ii) a "holding company" or a "subsidiary
company" of a "holding company" or an "affiliate" of either a "holding company"
or a "subsidiary company" within the meaning of the Public Utility Holding
Company Act of 1935, as amended; or (iii) subject to any other federal or state
law or regulation which purports to restrict or regulate its ability to borrow
money.
(k) Sponsor has not entered into this Agreement or any
Transaction Documents with the actual intent to hinder, delay, or defraud any
creditor, and Sponsor has received reasonably equivalent value in exchange for
its obligations under the Transaction Documents to which it is a party. Giving
effect to the transactions contemplated by this Agreement and the Transaction
Documents, the fair saleable value of Sponsor's assets exceeds and will,
immediately following the execution and delivery of this Agreement and the
Transaction Documents to which it is a party, exceed Sponsor's total
liabilities, including subordinated, unliquidated, disputed or contingent
liabilities. The fair saleable value of Sponsor's assets is and will,
immediately following the execution and delivery of this Agreement and the
Transaction Documents to which it is a party, be greater than Sponsor's probable
liabilities, including the maximum amount of its contingent liabilities or its
debts as such debts become absolute and matured. Sponsor's assets do not and,
immediately following the execution and delivery of the Transaction Documents to
which it is a party will not, constitute unreasonably small capital to carry out
business as conducted or as proposed to be conducted. Sponsor does not intend
to, and does not believe that it will, incur debts and liabilities (including
contingent liabilities and other commitments) beyond its ability to pay such
debts as they mature (taking into account the timing and amounts to be payable
on or in respect of obligations of Sponsor).
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5.2 Reaffirmation and Expansion of Representations and
Warranties. Sponsor shall be deemed to have reaffirmed the representations and
warranties set forth in Section 5.1 on each Loan Closing Date except to the
extent such representations and warranties either (a) relate solely to an
earlier date, (b) are subsequently inapplicable, or (c) are modified as a result
of Sponsor's activities or changes in circumstances, in any case as permitted
hereunder or as disclosed to Lender in writing and consented to by Lender in
accordance with the provisions of this Agreement.
5.3 Affirmative Covenants. During the term of this Agreement,
Sponsor shall:
(a) do or cause to be done all things necessary to keep in full
force and effect its valid existence and to qualify to do business in each
jurisdiction in which such qualification is necessary to the conduct of its
business except where the failure to qualify will not materially adversely
affect the financial condition of Sponsor or the ability of Sponsor to perform
its obligations under this Agreement or any Transaction Document to which
Sponsor is a party.
(b) do all things necessary to enable it to comply in all
material respects with all Legal Requirements, and all fiscal and accounting
rules and regulations generally recognized as in accordance with GAAP;
(c) keep proper books of account and records in which full, true
and correct entries in accordance with GAAP shall be made of all dealings and
transactions in relation to its business and activities; allow Lender and any
Person appointed by it access to such books of account and records at all
reasonable times during normal business hours upon reasonable notice; and permit
Lender and any Person appointed by it to discuss the affairs, finances and
accounts of Sponsor with any of the management employees of Sponsor, provided
all such information shall be treated as, and kept, strictly confidential except
as otherwise provided in the sale, Securitization or Syndication of any Loan.
(d) furnish to Lender unaudited annual financial statements
within forty (40) days, and audited annual financial statements within ninety
(90) days, following the close of each fiscal year of Sponsor;
(e) Intentionally deleted;
(f) promptly inform Lender in writing of Sponsor becoming aware
of the commencement of any Action by or against Sponsor in any court of
competent jurisdiction or before any Governmental Authority, or before any
arbitration board, or the written threat of any such Action; or the receipt of
written notice from any Governmental Authority that (i) Sponsor is being placed
under regulatory supervision, (ii) any license, permit, charter, membership or
registration material to the conduct of Sponsor's business is to be suspended or
revoked or (iii) Sponsor is to cease and desist any practice, procedure or
policy employed by Sponsor in the conduct of its business;
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(g) generally pay its debts as they become due, unless Sponsor
is in good faith contesting Sponsor's obligation to pay such debt in a manner
reasonably satisfactory to Lender (which may include Lender's requirement that
Sponsor post security with respect to the contested debt).
(h) pay or discharge or cause to be paid or discharged, before
the same shall become delinquent, all taxes, assessments and governmental
charges levied or imposed upon Sponsor or upon the income, profits or property
of Sponsor except that Sponsor may at Sponsor's expense, after prior notice to
Lender, contest by appropriate legal, administrative or other proceedings
conducted in good faith and with due diligence, the amount or validity or
application, in whole or in part, of any such tax, assessment or lien therefor,
and may withhold payment of the same pending such proceedings if permitted by
law, as long as (i) in the case of any tax, assessment or lien therefor, such
proceedings shall suspend the collection thereof from the profits or property of
Sponsor, (ii) neither the profits or property of Sponsor nor any part thereof or
interest therein will be sold, forfeited or lost if the Sponsor pays the amount
or satisfies the condition being contested, and the Sponsor would have the
opportunity to do so, in the event of the Sponsor's failure to prevail in the
contest, (iii) the Lender would not, by virtue of such permitted contest, be
exposed to any risk of any civil liability for which the Sponsor has not
furnished additional security as provided in clause (iv) below, or to any risk
of criminal liability, and neither the profits or property of Sponsor nor any
interest therein would be subject to the imposition of any lien for which the
Sponsor has not furnished additional security as provided in clause (iv) below,
as a result of the failure to comply with such law or of such proceeding and
(iv) the Sponsor shall have furnished to the Lender additional security in
respect of the claim being contested or the loss or damage that may result from
the Sponsor's failure to prevail in such contest in such amount as may be
reasonably requested by the Lender, but in no event less than one hundred and
twenty-five percent (125%) of the amount of such claim or in such other method
acceptable to Lender in its sole but reasonable discretion;
(i) promptly provide copies to Lender of all marketing studies,
appraisals, engineering reports, property improvement plans, environmental
studies and ADA compliance studies relating to the Properties in Sponsor's
possession or under its control and all reports filed by Sponsor and/or its
Affiliates under the United States securities laws;
(j) give Lender prompt notice upon discovery of the occurrence
of any Potential Event of Default or Event of Default under this Agreement; and
(k) observe and perform each and every material term, provision,
covenant, and condition to be observed or performed by it pursuant to the terms
of any agreement affecting it, including this Agreement and any Transaction
Documents, the non-performance of which would have a material adverse effect on
the financial condition of Sponsor or on the ability of Sponsor to perform its
obligations under any agreement, including this Agreement or any other
Transaction Document.
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5.4 Negative Covenants. During the term of this Agreement, except as
expressly permitted herein (a) Sponsor shall not dissolve or liquidate without
Lender's prior written consent; (b) Sponsor shall not merge or consolidate with
any Person unless (i) Sponsor, as Guarantor, maintains the financial covenants
required pursuant to the Guaranty of Payment and (ii) none of the guarantees
executed by Sponsor, as guarantor, in connection with any of the Loans are
adversely affected; and (c) Sponsor shall not, without Lender's prior written
consent, take any action if such action is likely to interfere with the
enforcement of any rights of Lender under any of the Transaction Documents or
any other agreements or instruments relating to any of the Pledged Property.
5.5 Further Assurances. Sponsor shall execute and deliver or cause to be
executed and delivered, all such additional instruments, and do, or cause to be
done, all such additional acts as may be reasonably necessary or proper, to
carry out the purposes of this Agreement or as Lender may reasonably request.
ARTICLE VI
INDEMNIFICATION
6.1 Indemnification.
(a) Sponsor, for itself and all those claiming under or through
Sponsor, to the fullest extent permitted by law, hereby releases and shall
defend, hold harmless and indemnify Lender and its Affiliates and their
respective directors, officers, agents and employees (together the "Indemnified
Parties"), from and against any and all liabilities, claims, charges, losses,
expenses or damages of any kind or nature, including reasonable attorneys' fees
and disbursements (including, without limitation, the costs of any investigation
and preparation) (together, "Losses"), which may arise in connection with (i)
the non-performance by Sponsor of this Agreement or the consummation by Sponsor
of the transactions contemplated herein or (ii) any breach or failure by Sponsor
to comply with any representation, warranty or covenant made by Sponsor herein
except to the extent that the Losses result from the gross negligence, bad
faith, willful misconduct or material breach of this Agreement by any
Indemnified Party. Notwithstanding the foregoing, Sponsor's sole and exclusive
obligation to Lender with respect to this Section 6.1(a) shall be the payment of
the Non- Use Fee.
(b) Sponsor, for itself and all those claiming under or through
Sponsor, to the fullest extent permitted by law, hereby releases and shall
defend, hold harmless and indemnify the Indemnified Parties from and against any
and all Losses which may arise in connection with any claims made by any broker
against any Indemnified Party (other than any broker engaged by Lender or its
affiliates). Notwithstanding anything to the contrary in (a) above, Sponsor's
obligations in connection with this Section 6.1 (b) shall survive the Facility
Termination Date.
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(c) Any sums due under this Section 6.1 which are not paid
within thirty (30) days after written demand by the applicable Indemnified Party
(which demand shall be accompanied by appropriate invoices in reasonable detail
or other supporting documentation substantiating that such amounts are due and
owing) shall bear interest from the date of demand to the date of payment at the
Default Rate and shall be due and payable on demand.
(d) The obligations of Sponsor under this Section 6.1 shall
survive the termination of this Agreement but such obligations shall terminate
on the Facility Termination Date, except to the extent obligations have not been
paid or a claim has been made.
ARTICLE VII
SPECIAL PROVISIONS
7.1 Segregated Pool Properties. (a) Lender may, at any time, and from
time to time, by giving written notice to Sponsor and each Borrower that will be
affected thereby, divide the Loans made pursuant to this Agreement into two (2)
or more groupings of Loans (each a "Segregated Pool"), for the purpose of
facilitating a Securitization or other transfer with respect to one (1) or more
Segregated Pools. Loans in the same Segregated Pool will be cross-defaulted and
cross- collateralized only with one another. Lender's notice shall be given at
least sixty (60) days prior to the date selected by the Lender for the
Segregated Pools to be created (the "Segregated Pool Date") and shall specify
the Property or Properties to be included in each Segregated Pool (each a
"Segregated Pool Property").
(b) Intentionally deleted.
(c) If, on the date Lender gives a notice to create two (2) or
more Segregated Pools, any Borrower (a "Multi-Property Borrower") owns
Properties that will be in more than one (1) Segregated Pool, then:
(i) not less than thirty (30) days prior to the
Segregated Pool Date, Sponsor shall form one (1) or more new corporations,
limited liability companies or limited partnerships, each of which qualifies as
a Borrower under the definition herein (a "New Borrower") and deliver to Lender
the organizational documents thereof.
(ii) on or before the Segregated Pool Date, each
Multi-Property Borrower shall transfer one (1) or more of its Segregated Pool
Properties to one (1) or more New Borrowers so that no Borrower or New Borrower
owns Segregated Pool Properties in more than one Segregated Pool, and
(iii) on the Segregated Pool Date, each New Borrower will
execute and deliver to Lender (A) the documents that a Borrower must deliver to
Lender pursuant to clauses (i) and
23
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(n)(7) of Section 3.1, (B) an assignment and assumption of the Transaction
Documents relating to its Segregated Pool Property, and (c) such other documents
as shall be reasonably required by Lender, all of which shall be in form and
substance reasonably satisfactory to Lender.
7.2 Intentionally deleted.
7.3 Intentionally deleted.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.1 Notices. All notices, consents, approvals and requests required or
permitted hereunder (a "notice") shall be given in writing and shall be
effective for all purposes if hand delivered or sent (i) by certified or
registered United States mail, postage prepaid, or (ii) by (A) expedited prepaid
delivery service, either commercial or United States Postal Service, with proof
of attempted delivery, and (B) telecopier (with answer back acknowledged), in
any case addressed as follows (or to such other address or Person as a party
shall designate from time to time by notice to the other party): If to Lender:
Nomura Asset Capital Corporation, Two World Financial Center, Building B, New
York, New York 10281-1198, Attention: Sheryl McAfee, Telecopier (212) 667-1206,
with copies to : Nomura Asset Capital Corporation, Two World Financial Center,
Building B, New York, New York 10281-1198, Attention: Barry Funt, Telecopier
(212) 667-1567 and Dechert Price & Rhoads, 90 State House Square, Hartford,
Connecticut 06103-3702, Attention: Marc B. Friedman Telecopier: (860) 524-3930;
if to Sponsor: Brookdale Living Communities, 77 West Wacker Drive, Suite 4400,
Chicago, Illinois 60601, Attention: Mr. Darryl W. Copeland, Jr., Telecopier
(312) 977-3699, Brookdale Living Communities, 77 West Wacker Drive, Suite 4400,
Chicago, Illinois 60601, Attention: Mr. Robert J. Rudnik, Telecopier (312)
977-3769, with a copy to: Winston & Strawn, 35 West Wacker Drive, Chicago,
Illinois 60601, Attention: Wayne D. Boberg, Esq., Telecopier: (312) 558-5700. A
notice shall be deemed to have been given: in the case of hand delivery, at the
time of delivery; in the case of registered or certified mail, when delivered or
the first attempted delivery on a Business Day; or in the case of expedited
prepaid delivery and telecopy, upon the first attempted delivery on a Business
Day.
8.2 Benefit of Agreement. This Agreement shall be binding upon, inure to
the benefit of and be enforceable by the respective successors and assigns of
the parties hereto; provided, however, that Sponsor may not assign or transfer
any of its rights or obligations hereunder without the consent of Lender, which
may be withheld in the sole discretion of Lender. Any such assignment or
transfer shall not release Sponsor from any obligations or liabilities hereunder
without the prior written consent of Lender. Lender's interests under the
Transaction Documents shall be freely assignable and transferrable. No party
other than the parties hereto and their permitted assigns shall be deemed to
have any benefits or obligations under this Agreement.
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8.3 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REFERENCE TO THE CONFLICTS OF LAW PRINCIPLES THEREUNDER.
8.4 Counterparts. This 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 together constitute one and the same instrument.
8.5 Construction; Table of Contents; Descriptive Headings. In the
preparation of this Agreement and the Exhibits to this Agreement
indistinguishable contributions were made by representatives of both Lender and
Sponsor, and each of Lender and Sponsor waives any and all rights, either at law
or in equity, to have the provisions of this Agreement or any of the Exhibits to
this Agreement interpreted in favor of one over the other based on a claim that
representatives of one or the other were the principal draftsmen thereof. The
Table of Contents to this Agreement and the descriptive headings of the several
Sections and Articles of this Agreement are inserted for convenience only and
shall not in any way affect the meaning or construction of any provision of this
Agreement.
8.6 Amendment or Waiver; Integration. No provision of this Agreement may
be amended, changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of the
amendment, change, waiver, discharge or termination is sought. This Agreement
sets forth the entire agreement and understanding of the parties with respect to
the subject matter hereof, and supersedes any and all prior agreements and
understandings of the parties hereto with respect to the subject matter hereof,
which prior agreements and understandings are terminated in all respects.
8.7 Survival of Representations and Warranties; Reliance.
All representations and warranties contained in this
Agreement and the indemnification provisions hereof shall survive the execution
and delivery of this Agreement and, the making of the Loans and shall be
considered to have been relied upon by Lender regardless of any investigation
made by or on behalf of it. All representations and warranties, and covenants
contained in this Agreement and the indemnification provisions shall terminate
on the Facility Termination Date, except as expressly provided in Section 6.1 of
this Agreement; provided however, all representations, warranties, obligations,
and indemnification of Sponsor pursuant to all guarantees executed by Sponsor,
as guarantor, in connection with every Loan made pursuant to this Agreement
shall survive the termination of the Agreement and shall terminate only as set
forth in such guarantees.
8.8 Termination of Agreement. The Transaction Documents and the Liens
granted to Lender thereunder shall continue in full force and effect
notwithstanding any termination of this Agreement.
25
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8.9 JURISDICTION AND SERVICE; WAIVER OF JURY TRIAL.
SPONSOR HEREBY (A) IRREVOCABLY CONSENTS AND SUBMITS ITSELF AND
ACKNOWLEDGES AND RECOGNIZES THE JURISDICTION OF THE COURTS OF THE STATE OF NEW
YORK LOCATED IN NEW YORK COUNTY AND THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK FOR PURPOSES OF ANY ACTION ARISING OUT OF, UNDER,
OR IN CONNECTION WITH, RELATING TO, OR BASED UPON THIS AGREEMENT OR THE SUBJECT
MATTER HEREOF, (B) AGREES THAT SUCH COURTS SHALL BE THE SOLE AND EXCLUSIVE
COURTS AND FORUMS FOR THE PURPOSE OF ANY SUCH ACTION AND (C) WAIVES AND AGREES
NOT TO ASSERT, AS A DEFENSE OR OTHERWISE, IN ANY SUCH ACTION, ANY CLAIM THAT
SUCH COURTS DO NOT HAVE JURISDICTION OVER IT OR THAT SUCH ACTION IS BROUGHT IN
AN INCONVENIENT FORUM; PROVIDED, HOWEVER, THAT NOTHING CONTAINED HEREIN SHALL
LIMIT, IN ANY MANNER, THE RIGHT OF LENDER TO INSTITUTE OR TAKE ANY ACTION IN ANY
COURT IN ANY JURISDICTION FOR THE PURPOSE OF PROTECTING, PRESERVING OR REALIZING
UPON ANY COLLATERAL, IF ANY, SECURING THE DEBT OR ENFORCING ANY JUDGMENT
OBTAINED BY IT IN CONNECTION WITH ANY TRANSACTION DOCUMENT OR THE SUBJECT MATTER
THEREOF. SPONSOR AND LENDER HEREBY WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY
ACTION ARISING OUT OF, UNDER, OR IN CONNECTION WITH, RELATING TO, OR BASED UPON
THIS AGREEMENT OR THE SUBJECT MATTER HEREOF, AND AGREE THAT PROCESS IN ANY SUCH
ACTION, IN ADDITION TO ANY OTHER METHOD PERMITTED BY LAW, MAY BE SERVED UPON IT
BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO BORROWER
AT THE ADDRESS SET FORTH ABOVE OR TO SUCH OTHER ADDRESS AS SPONSOR MAY DESIGNATE
BY NOTICE GIVEN TO LENDER, AND SUCH SERVICE SHALL BE DEEMED EFFECTIVE AS IF
PERSONAL SERVICE HAD BEEN MADE UPON IT WITHIN NEW YORK COUNTY.
8.10 Enforceability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, Sponsor hereby waives any provision of law which renders any
provision hereof prohibited or unenforceable in any respect.
8.11 Conflicting Terms. In the event of any direct conflict between any
provision of this Agreement and any provision of any Transaction Document, the
provision of the Transaction Document shall govern.
8.12 Relationship of Parties. The relationship of Sponsor and Borrowers to
Lender is strictly and solely that of lender and borrower and mortgagor and
mortgagee, and nothing contained in this
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Agreement, the Mortgages or any other Transaction Document is intended to
create, or shall in any event or under any circumstance be construed as
creating, a partnership, joint venture, tenancy-in-common, joint tenancy or
other relationship of any nature whatsoever between Sponsor and Lender other
than as lender and borrower. Sponsor acknowledges that (a) Lender engages in the
business of real estate financings and other real estate transactions and
investments which may be viewed as adverse to or competitive with the business
of Sponsor or its Affiliates, (b) Sponsor is represented by competent counsel
and has consulted counsel before executing this Agreement and (c) it shall rely
solely on its own judgment and advisors in entering into the transactions
contemplated hereby without relying in any manner on any statements,
representations or recommendations of Lender or any Affiliate of Lender.
8.13 Confidentiality; Publicity. Except as otherwise required by
applicable Legal Requirements, neither Sponsor nor any Affiliate thereof shall
advertise or issue promotional materials describing Lender's participation in
the Loan or the inclusion of the Loan in any Securitization without the prior
consent of Lender. Lender may, without Sponsor's consent, issue press releases,
advertisements or other promotional materials describing Lender's participation
in the origination of the Loans or the inclusion of any or all of the Loans in
any Securitization effectuated or to be effectuated by Lender.
(Signature page follows)
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IN WITNESS WHEREOF, each of Sponsor and Lender has caused this
Agreement to be signed and delivered, all as of the day and year first above
written.
NOMURA ASSET CAPITAL CORPORATION
By:
Stuart Simon
Director
BROOKDALE LIVING COMMUNITIES, INC.
By:
Darryl W. Copeland, Jr.
Executive Vice President
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TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
1.1 Definitions............................................1
1.2 General................................................6
1.3 Terms defined in Loan Agreement........................6
1.4 Terms defined in Building Loan Agreement...............7
ARTICLE II
THE LOANS
2.1 Loans to Borrowers.....................................7
2.2 Use of Loan Proceeds...................................8
2.3 Preliminary Approvals of Projects......................8
2.4 Fees..................................................11
ARTICLE III
CONDITIONS TO ENTERING INTO LOAN AGREEMENTS
3.1 Conditions............................................13
3.2 Documentation.........................................16
ARTICLE IV
DEFAULT; REMEDIES; ENFORCEMENT
4.1 Events of Default.....................................16
4.2 Termination, Acceleration and Remedies................17
4.3 Remedies Cumulative; Delay or Omission Not a Waiver...17
ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS
5.1 Representations and Warranties of Sponsor
on the Closing Date..............................18
5.2 Reaffirmation and Expansion of Representations
and Warranties...................................20
5.3 Affirmative Covenants.................................20
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Page
5.4 Negative Covenants....................................22
5.5 Further Assurances....................................22
ARTICLE VI
INDEMNIFICATION
6.1 Indemnification.......................................22
ARTICLE VII
SPECIAL PROVISIONS
7.1 Segregated Pool Properties............................23
7.2 Intentionally deleted.................................24
7.3 Intentionally deleted.................................24
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.1 Notices...............................................24
8.2 Benefit of Agreement..................................24
8.3 GOVERNING LAW.........................................24
8.4 Counterparts..........................................25
8.5 Construction; Table of Contents; Descriptive Headings.25
8.6 Amendment or Waiver; Integration......................25
8.7 Survival of Representations and Warranties; Reliance..25
8.8 Termination of Agreement..............................25
8.9 JURISDICTION AND SERVICE; WAIVER OF JURY TRIAL........26
8.10 Enforceability........................................26
8.11 Conflicting Terms.....................................26
8.12 Relationship of Parties...............................26
8.13 Confidentiality; Publicity............................27
EXHIBITS
A - Form of Assignment of Agreements
B - Form of Assignment of Leases
C - Form of Building Loan Agreement
D - Form of Consent and Subordination of Manager
E - Form of Loan Agreement
F - Form of Note
G - Form of Senior Mortgage
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H - Form of Subordinate Mortgage
I - Form of Sponsor's Closing Certificate
J - Form of Environmental Indemnity Agreement
K - Form of Guaranty of Payment
L - Form Guaranty of Completion
M - Form of Non-Recourse Guaranty
N- Organizational Structure of Borrower Sponsor
iii
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- --------------------------------------------------------------------------------
LOAN AGREEMENT
Dated as of June 17, 1998
By and among
AH TEXAS OWNER LIMITED PARTNERSHIP,
as Borrower
BLC OF TEXAS-II, L.P.,
as Manager
AND
NOMURA ASSET CAPITAL CORPORATION,
as Lender
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
I DEFINITIONS; PRINCIPLES OF CONSTRUCTION.................................1
1.1 Specific Definitions...........................................1
1.2 Index of Other Definitions....................................23
1.3 Principles of Construction....................................26
II. GENERAL................................................................26
2.1 The Loan......................................................26
2.1.1 The Initial Loan.................................26
2.1.2 Conversion.......................................26
2.1.3 Additional Loan..................................28
2.1.4 Restated Documents...............................29
2.1.5 Separate Notes...................................30
2.1.6 Expected Conversion Date
Extension....................................30
2.2 Interest; Monthly Payments....................................31
2.2.1 Generally........................................31
2.2.2 Accrued Interest.................................31
2.2.3 Property Cash Flow Allocation....................32
2.2.4 Default Rate.....................................33
2.2.5 Rate Adjustment..................................33
2.3 Loan Repayment and Defeasance.................................34
2.3.1 Repayment........................................34
2.3.2 Mandatory Prepayments............................34
2.3.3 Voluntary Defeasance of the Note.................35
2.4 Release of Property...........................................38
2.4.1 Release on Defeasance............................38
2.4.2 Release on Payment in Full.......................38
2.5 Payments and Computations.....................................38
2.5.1 Making of Payments...............................38
2.5.2 Computations.....................................39
2.5.3 Late Payment Charge..............................39
2.6 Fees..........................................................39
2.6.1 Draw Fees........................................39
2.6.2 Servicing Fee....................................39
2.6.3 Structuring Fee Upon Conversion..................39
2.6.4 Advances.........................................39
2.7 Taxes.........................................................39
2.8 Breakage Indemnity............................................40
2.9 Security for the Loan.........................................41
2.10 Borrower's Note...............................................41
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III. CASH MANAGEMENT; ESCROWS AND RESERVES..................................41
3.1 Cash Management Arrangements..................................41
3.2 Tax and Insurance Escrow Fund.................................42
3.3 Capital Reserve Fund..........................................43
3.3.1 Capital Reserve Fund.............................43
3.3.2 Payment of Capital Expenses......................43
3.4 Operating Expenses............................................44
3.4.1 Payment of Approved Operating Expenses...........44
3.4.2 Extra Funds for Operating Expenses...............44
3.4.3 Reconciliation...................................45
3.5 Working Capital Subaccount.
On each Payment Date during a Cash Management.................45
3.6 Cash Collateral Subaccount....................................45
3.7 Security Deposits.............................................45
3.8 Grant of Security Interest; Application of Funds..............46
IV. REPRESENTATIONS AND WARRANTIES.........................................47
4.1 Borrower Representations......................................47
4.1.1 Organization; Special Purpose....................47
4.1.2 Proceedings; Enforceability......................47
4.1.3 No Conflicts.....................................48
4.1.4 Litigation.......................................48
4.1.5 Agreements.......................................48
4.1.6 Title............................................48
4.1.7 Intentionally deleted............................49
4.1.8 No Bankruptcy Filing.............................49
4.1.9 Full and Accurate Disclosure.....................49
4.1.10 No Plan Assets...................................49
4.1.11 Compliance.......................................49
4.1.12 Contracts........................................50
4.1.13 Financial Information............................50
4.1.14 Intentionally deleted............................50
4.1.15 Federal Reserve Regulations......................50
4.1.16 Intentionally deleted............................50
4.1.17 Not a Foreign Person.............................50
4.1.18 Separate Lots....................................50
4.1.19 Intentionally deleted............................51
4.1.20 Enforceability...................................51
4.1.21 Insurance........................................51
4.1.22 Intentionally deleted............................51
4.1.23 Intentionally deleted............................51
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4.1.24 Intentionally deleted............................51
4.1.25 Intentionally deleted............................51
4.1.26 Intentionally deleted............................51
4.1.27 Filing and Recording Taxes.......................51
4.1.28 Investment Company Act...........................51
4.1.29 Ownership of Borrower............................51
4.1.30 Management Agreement.............................52
4.1.31 Intentionally deleted............................52
4.1.32 Name; Principal Place of Business................52
4.1.33 Other Debt and Obligations.......................52
4.1.34 Fraudulent Transfer; Solvency....................52
4.1.35 No Defaults...................................................53
4.1.36 Labor Matters....................................53
4.1.37 No Prior Assignment..............................53
4.1.38 Intellectual Property............................53
4.1.39 Intentionally deleted............................53
4.1.40 Tax Fair Market Value............................53
4.1.41 Brokerage........................................53
4.1.42 Intentionally deleted............................53
4.1.43 Intentionally deleted............................54
4.1.44 Intentionally deleted............................54
4.1.45 Governmental Proceedings and Notices.............54
4.1.46 Intentionally deleted............................54
4.1.47 Intentionally deleted............................54
4.1.48 Intentionally deleted............................54
4.1.49 Intentionally deleted............................54
4.1.50 Pledges of Receivables...........................54
4.1.51 Intentionally deleted............................54
4.2 Manager Representations.......................................54
4.2.1 Organization; Special Purpose....................54
4.2.2 Proceedings; Enforceability......................54
4.2.3 No Conflicts.....................................55
4.2.4 Litigation.......................................55
4.2.5 Agreements.......................................55
4.2.6 Title............................................55
4.2.7 Survey...........................................56
4.2.8 No Bankruptcy Filing.............................56
4.2.9 Full and Accurate Disclosure.....................56
4.2.10 No Plan Assets...................................56
4.2.11 Compliance.......................................56
4.2.12 Contracts........................................57
4.2.13 Financial Information............................57
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4.2.14 Condemnation.....................................57
4.2.15 Federal Reserve Regulations......................57
4.2.16 Utilities and Public Access......................57
4.2.17 Not a Foreign Person.............................58
4.2.18 Separate Lots....................................58
4.2.19 Assessments......................................58
4.2.20 Enforceability...................................58
4.2.21 Insurance........................................58
4.2.22 Use of Property; Licenses........................58
4.2.23 Flood Zone.......................................59
4.2.24 Physical Condition...............................59
4.2.25 Encroachments....................................59
4.2.26 Leases...........................................59
4.2.27 Filing and Recording Taxes.......................59
4.2.28 Investment Company Act...........................60
4.2.29 Ownership of Manager.............................60
4.2.30 Management Agreement. ..........................60
4.2.31 Hazardous Substances.............................60
4.2.32 Name; Principal Place of Business................61
4.2.33 Other Debt and Obligations.......................61
4.2.34 Fraudulent Transfer; Solvency....................61
4.2.35 No Defaults......................................61
4.2.36 Labor Matters....................................62
4.2.37 No Prior Assignment..............................62
4.2.38 Intellectual Property............................62
4.2.39 Title Insurance..................................62
4.2.40 Tax Fair Market Value............................62
4.2.41 Brokerage........................................62
4.2.42 Ownership of Licenses............................62
4.2.43 Intentionally deleted............................63
4.2.44 Intentionally deleted............................63
4.2.45 Governmental Proceedings and Notices.............63
4.2.46 Physical Plant Standards.........................63
4.2.47 Past Violations..................................63
4.2.48 Intentionally Deleted............................63
4.2.49 Intentionally Deleted............................63
4.2.50 Pledges of Receivables...........................64
4.2.51 Resident Records.................................64
4.3 Survival of Representations...................................64
V. AFFIRMATIVE COVENANTS..................................................64
5.1 Borrower's Covenants..........................................64
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5.1.1 Existence........................................64
5.1.2 Taxes and Other Charges..........................65
5.1.3 Repairs; Maintenance and Compliance..............65
5.1.4 Litigation.......................................66
5.1.5 Performance of Other Agreements..................66
5.1.6 Notice of Default................................66
5.1.7 Cooperate in Legal Proceedings...................66
5.1.8 Further Assurances...............................66
5.1.9 Financial Reporting..............................67
5.1.10 Environmental Matters............................68
5.1.11 Title to the Property............................69
5.1.12 Estoppel Statement...............................69
5.1.13 Principal Place of Business......................69
5.1.14 Property Management..............................70
5.1.15 Special Purpose Bankruptcy Remote Entity.........70
5.1.16 Assumptions in Non-Consolidation Opinion.........72
5.1.17 Expenses.........................................72
5.1.18 Indemnity........................................73
5.1.19 Conduct of Business..............................74
5.1.20 ERISA............................................74
5.1.21 Trade Indebtedness...............................76
5.1.22 Intentionally deleted............................76
5.1.23 Insurance Benefits...............................76
5.1.24 Access to Property...............................76
5.1.25 Insurance........................................76
5.1.26 Use Specific Covenants...........................76
5.2 Manager's Covenants...........................................76
5.2.1 Existence........................................77
5.2.2 Taxes and Other Charges..........................77
5.2.3 Repairs; Maintenance and Compliance..............78
5.2.4 Litigation.......................................78
5.2.5 Performance of Other Agreements..................78
5.2.6 Notice of Default................................78
5.2.7 Cooperate in Legal Proceedings...................78
5.2.8 Further Assurances...............................78
5.2.9 Financial Reporting..............................79
5.2.10 Environmental Matters............................82
5.2.11 Title to the Property............................84
5.2.12 Estoppel Statement...............................84
5.2.13 Principal Place of Business......................84
5.2.14 Property Management..............................84
5.2.15 Special Purpose Bankruptcy Remote Entity.........85
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5.2.16 Assumptions in Non-Consolidation Opinion.........85
5.2.17 Expenses.........................................85
5.2.18 Indemnity........................................86
5.2.19 Conduct of Business..............................87
5.2.20 ERISA............................................87
5.2.21 Trade Indebtedness...............................88
5.2.22 Capital Improvements and
Environmental Remediation......................88
5.2.23 Insurance Benefits...............................88
5.2.24 Access to Property...............................89
5.2.25 Insurance........................................89
5.2.26 Use Specific Covenants...........................89
VI. NEGATIVE COVENANTS.....................................................89
6.1 Borrower's Covenants..........................................89
6.1.1 Management Agreement.............................89
6.1.2 Liens............................................90
6.1.3 Dissolution......................................90
6.1.4 Change in Business...............................90
6.1.5 Debt Cancellation................................90
6.1.6 Assets...........................................90
6.1.7 Transfers........................................90
6.1.8 Debt.............................................90
6.1.9 Assignment of Rights.............................90
6.1.10 Operation of the Property........................90
6.1.11 Use Specific Negative Covenants..................90
6.2 Manager's Covenants...........................................91
6.2.1 Management Agreement.............................91
6.2.2 Liens............................................92
6.2.3 Dissolution......................................92
6.2.4 Change in Business...............................92
6.2.5 Debt Cancellation................................92
6.2.6 Assets...........................................92
6.2.7 Transfers........................................92
6.2.8 Debt.............................................92
6.2.9 Assignment of Rights.............................92
6.2.10 Operation of the Property........................92
6.2.11 Use Specific Negative Covenants..................92
VII. NOMURA OPEN -- INSURANCE; CASUALTY; AND CONDEMNATION9..................93
7.1 Insurance.....................................................93
7.1.1 Coverage.........................................93
7.1.2 Policies.........................................95
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7.1.3 Proceeds.........................................96
7.2 Casualty......................................................96
7.2.1 Notice; Restoration..............................96
7.2.2 Settlement of Proceeds...........................97
7.3 Condemnation..................................................97
7.3.1 Notice; Restoration..............................97
7.3.2 Collection of Award..............................97
7.4 Application of Proceeds or Award..............................98
7.4.1 Application to Restoration; Procedure for
Application to Restoration.....................98
7.4.2 Application to Debt..............................99
7.4.3 Disbursement of Remaining Proceeds or Award.....100
7.4.4 Lender as Attorney-In-Fact......................100
7.4.5 Foreclosure.....................................100
7.4.6 Security in Proceeds or Award...................100
VIII. DEFAULTS..............................................................100
8.1 Events of Default............................................100
8.2 Remedies.....................................................104
8.2.1 Acceleration....................................104
8.2.2 Remedies Cumulative.............................104
8.2.3 Lender's Right to Perform.......................105
8.2.4 Severance.......................................105
8.2.5 Delay...........................................105
8.3 Manager's Limited Right to Cure..............................106
IX. SPECIAL PROVISIONS....................................................107
9.1 Sale of Note and Securitization..............................107
9.1.1 Cooperation.....................................107
9.1.2 Use of Information..............................108
9.1.3 Borrower and Manager Obligations
Regarding Disclosure Documents
...............................................109
9.1.4 Borrower Indemnity Regarding Filings............110
9.1.5 Indemnification Procedure.......................110
9.1.6 Contribution....................................111
9.1.7 Rating Surveillance.............................111
X. MISCELLANEOUS.........................................................112
10.1 Exculpation..................................................112
10.2 Notices......................................................114
10.3 Brokers and Financial Advisors...............................114
10.4 Retention of Servicer........................................114
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10.5 Survival.....................................................115
10.6 Lender's Discretion..........................................115
10.7 Governing Law................................................115
10.8 Modification, Waiver in Writing..............................116
10.9 Delay Not a Waiver...........................................117
10.10 Trial by Jury................................................117
10.11 Headings.....................................................117
10.12 Severability.................................................117
10.13 Preferences..................................................117
10.14 Waiver of Notice.............................................118
10.15 Remedies of Borrower.........................................118
10.16 Prior Agreements.............................................118
10.17 Offsets, Counterclaims and Defenses..........................118
10.18 Publicity....................................................118
10.19 No Usury.....................................................119
10.20 Conflict; Construction of Documents..........................119
10.21 No Third Party Beneficiaries.................................119
10.22 Assignment...................................................120
10.23 Exhibits Incorporated........................................120
10.24 No Joint Venture or Partnership..............................120
10.25 Waiver of Marshalling of Assets Defense......................120
10.26 Waiver of Counterclaim.......................................120
10.27 Counterparts.................................................120
10.28 Bankruptcy Waiver............................................120
10.29 Entire Agreement.............................................121
10.30 Borrower Acknowledgments.....................................121
10.31 Waiver of "One Action" Rule; Cross Collateralizations........121
10.32 Segregated Pool Properties...................................122
10.33 Synthetic Lease..............................................123
10.34 Termination of Manager's Obligations.........................124
10.35 Release of Subordinate Mortgage
and Other Subordinate Mortgages............................124
SCHEDULES
Schedule 1 - Location of Property
Schedule 2 - Terms of Preferred Equity
Schedule 3 - Matters Regarding Representations - Borrower
Schedule 4 - Rent Roll
Schedule 5 - Matters Regarding Representations - Manager
EXHIBITS
</TABLE>
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Exhibit A - Operating Expense Certificate
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LOAN AGREEMENT
LOAN AGREEMENT (the "AGREEMENT") dated as of June 17, 1998 by
and among AH TEXAS OWNER LIMITED PARTNERSHIP, an Ohio limited partnership
(together with its permitted successors and assigns, "BORROWER"), BLC OF
TEXAS-II, L.P., a Delaware limited partnership (together with its permitted
successors and assigns, "MANAGER"), and NOMURA ASSET CAPITAL CORPORATION, a
Delaware corporation (together with its successors and assigns, "LENDER").
RECITALS
WHEREAS, Borrower desires to obtain the Loan (as defined
herein) from Lender in the original principal amount of Twenty-Four Million Two
Hundred Fifty Thousand and 00/100 Dollars ($24,250,000.00);
WHEREAS, Lender is willing to make the Loan on the condition
that Borrower and Manager each joins in the execution and delivery of this
Agreement which shall establish the terms and conditions of the Loan; and
WHEREAS, Lender, Borrower and Manager contemplate that all or
any portion of Lender's interest in the Loan and to the Loan Documents (as
defined herein) may be assigned, in whole or in part, by Lender to another
Person (as defined herein), including, without limitation, to a trustee on
behalf of security holders in connection with a Securitization (as defined
herein).
NOW, THEREFORE, in consideration of the making of the Loan by
Lender and the covenants, agreements, representations and warranties set forth
in this Agreement, the parties hereby covenant, agree, represent and warrant as
follows:
I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION
1.1 SPECIFIC DEFINITIONS. The following terms have the
meanings set forth below:
"ACCEPTABLE APPRAISAL": an appraisal of the Property (i) dated
not more than seventy-five (75) days prior to the Conversion Date (unless
otherwise agreed to by Lender), (ii) signed by a qualified MAI appraiser with no
interest, direct or indirect, in the Loan or the Property, and whose
compensation is not affected by the Appraised Value, (iii) addressed to Lender
and its successors and assigns, (iv) made in compliance with the requirements of
the Federal National Mortgage Association Company or Federal Home Loan Mortgage
Corporation, or any successor thereto, and Title XI of the Federal Institutions
Reform, Recovery, and Enforcement Act of 1989 and the regulations promulgated
thereunder, and (v) otherwise satisfactory to Lender in all respects.
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"ADDITIONAL LOAN": a loan (if any) made by Lender to Borrower
pursuant to Section 2.1.3, which will be evidenced by the Additional Note.
"ADDITIONAL NOTE": the Note to be made by Borrower to Lender
in the form of Exhibit A in a principal amount equal to the principal amount of
the Additional Loan, as it may be restated, replaced, supplemented or otherwise
modified from time to time.
"ADVANCE": any portion of the Loan advanced by Lender.
"AFFILIATE": as to any Person, any other Person that, directly
or indirectly, is in Control of, is Controlled by or is under common Control
with such Person or is a director or officer of such Person or of an Affiliate
of such Person and, if such Person is an individual, any member of the immediate
family (including parents, spouse and children) of such individual and any trust
whose principal beneficiary is such individual or one or more members of such
immediate family and any Person who is controlled by any such member or trust.
"ALTERNATIVE AMORTIZATION SCHEDULE": an amortization schedule
of a number of months determined by Lender, but not more than three hundred
sixty (360) months.
"AMORTIZATION SCHEDULE": the Alternative Amortization Schedule
if the Rate Adjustment is made pursuant to Section 2.2.5; otherwise, an
amortization schedule of three hundred fifty (350) months, which schedule shall
be modified by Lender, if and to the extent the proportion of the congregate
care and assisted living components of the Property are altered by Borrower
and/or Manager subsequent to the Loan Closing Date.
"APPLICABLE PRE-CONVERSION TREASURY RATE": as of a given date,
the rate per annum for a term from such date to the Applicable Reference Date,
determined by Lender and calculated by linear interpolation (rounded to the
nearest one-thousandth of one percent (i.e., 0.001%)) of the yields of
noncallable United States Treasury obligations with terms (one longer and one
shorter) most nearly approximating the period from such date to the fifteenth
(15th) anniversary thereof, as determined by Lender on the basis of Federal
Reserve Statistical Release H.15-Selected Interest Rates under the heading U.S.
Governmental Security/Treasury Constant Maturities, or other recognized source
of financial market information selected by Lender.
"APPLICABLE REFERENCE DATE": with respect to a given date,
either (i) the Optional Prepayment Date if it has been determined, or (ii) one
hundred eighty (180) months from the Conversion Date, if it has not yet been
determined.
"APPRAISED VALUE": the fair market value of the Property
reflected in an Acceptable Appraisal.
"APPROVED CAPITAL EXPENSES": Capital Expenses incurred by
Borrower and/or Manager which (i) are included in the approved Capital Budget
for the Current Month, (ii) are not
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included in the approved Capital Budget for the Current Month, but do not cause
either (A) the relevant line item for the entire year covered by the approved
Capital Budget to be exceeded by more than five percent (5%) or (B) the total of
the approved Capital Budget for the Current Month and all prior months covered
by such approved Capital Budget (i.e., year to date) to be exceeded by more than
five percent (5%), or (iii) have been approved by Lender.
"APPROVED OPERATING EXPENSES": Operating Expenses incurred by
Borrower and/or Manager which (i) are included in the approved Operating Budget
for the Current Month, (ii) are for Taxes, electric, gas, oil, water, sewer or
other utility service (including telephone) to the Property, (iii) are not
included in the approved Operating Budget for the Current Month, but do not
cause either (A) the relevant line item for the entire year covered by the
approved Operating Budget to be exceeded by more than five percent (5%) or (B)
the total of such approved Operating Budget for the Current Month and all prior
months to be exceeded by more than five percent (5%) or (iv) have been approved
by Lender.
"APPROVED RESIDENCY AGREEMENT": the form of residency
agreement to be used by Borrower and/or Manager for residents at the Property,
which form shall be substantially in the form customarily used by Manager
Sponsor in connection with operating other similar properties and which
previously has been approved by Lender on or prior to the Loan Closing Date. The
parties hereto acknowledge that Manager is modifying such form to satisfy local
statutory requirements, which revisions shall be completed and submitted to
Lender for its review and reasonable approval prior to the Substantial
Completion Date. Upon receiving Lender's approval of such revisions, for
purposes of this Agreement and the other Loan Documents, that form shall become
the Approved Residency Agreement. Except as otherwise provided herein, neither
Borrower nor Manager shall materially modify or amend the Approved Residency
Agreement at any time while the Loan is outstanding without the prior written
consent of Lender, which consent shall not be unreasonably withheld or delayed.
"ASSIGNMENT OF AGREEMENTS": a first priority Assignment of
Agreements, Licenses, Permits and Contracts, in form and substance satisfactory
to Lender in Lender's discretion, dated as of the Loan Closing Date, from
Borrower and Manager, collectively as assignor, to Lender, as assignee,
assigning to Lender all of Borrower's and Manager's interest in and to all
Licenses, Permits and Contracts, as the same may thereafter from time to time be
supplemented, amended, modified or extended by one or more written agreements
supplemental thereto.
"ASSIGNMENT OF LEASES": a first priority Assignment of Leases
and Rents, in form and substance satisfactory to Lender in Lender's discretion,
dated as of the Loan Closing Date, from Borrower and Manager, collectively as
assignor, to Lender, as assignee, assigning to Lender all of Borrower's and
Manager's interest in and to the Leases and the Rents with respect to the
Property as security for the Loan, as the same may thereafter from time to time
be supplemented, amended, modified or extended by one or more written agreements
supplemental thereto.
"BANC ONE": Banc One Capital Partners IV, Ltd., an Ohio
limited liability company.
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"BASIC CARRYING COSTS": means the following costs with respect
to the Property (i) real property taxes, assessments and Impositions (including
without limitation any payments due under any ground lease and any ground rents)
applicable to the Property, and (ii) Insurance Premiums for Policies required or
permitted to be maintained by Borrower and/or Manager pursuant to this Agreement
or the other Loan Documents.
"BLA": the Building Loan Agreement by and among Borrower,
Manager and Lender dated the date hereof.
"BLA BUDGET": the "Budget as Adjusted", as such term is
defined in the BLA.
"BLA COSTS": the "Costs", as such term is defined in the BLA.
"BLENDED TREASURY RATE": as of a given date, a rate of
interest equal to the percentage determined by dividing (i) the sum of the
respective products obtained by multiplying each portion of the Principal
outstanding on such date (including, as of the Conversion Date, the Additional
Loan, if any) by the percentage applicable thereto, as hereinafter provided, by
(ii) the aggregate amount of such outstanding Principal. For purposes of clause
(i) of this definition, the percentage applicable to the different portions of
outstanding Principal shall be determined as follows: (x) the percentage
applicable to the Initial Locked Amount is five and eighty-eight hundredths
percent (5.88%), and (y) the percentage applicable to the rest of the
outstanding Principal above the Initial Locked Amount (the "UNLOCKED AMOUNT")
will be the Applicable Pre-Conversion Treasury Rate prior to the Conversion Date
as to the Unlocked Amount or the rate pursuant to a New Rate Lock Agreement
and/or a Modified Rate Lock Agreement as to such Unlocked Amount; provided,
however, if the Conversion Date is extended in accordance with this Agreement,
then all such rates shall be adjusted pursuant to a New Rate Lock Agreement
and/or a Modified Rate Lock Agreement as set forth in Section 2.1.6.
"BORROWER ": has the meaning provided in the first paragraph of this
Agreement, and Borrower is and shall be wholly owned and controlled by Borrower
Owner.
"BORROWER OWNER": with respect to Borrower, any current or
future general partner, managing member, controlling shareholder, or beneficiary
of Borrower.
"BORROWER REPRESENTATIVE": AH Texas CGP, Inc., an Ohio
corporation, or its permitted successor or assignee as general partner of
Borrower, as permitted by Lender pursuant to this Agreement.
"BORROWER SPONSOR ": AH Texas Subordinated, LLC, an Ohio
limited liability company.
"BREAKAGE FEES": any fees, costs or other expenses (including
Lender's Expenses) related to or incurred in connection with the termination,
extension or other modification to the Rate
4
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Lock Agreement or any other applicable hedge or derivative instruments required
by Lender in connection with the Loan.
"BUSINESS DAY": any day other than a Saturday, Sunday or any
other day on which Federally insured depository institutions in New York, New
York, Chicago, Illinois, or the State are not open for business.
"CAPITAL EXPENSES": expenses that are required under GAAP to
be capitalized.
"CLEARING ACCOUNT AGREEMENT": the Clearing Account Agreement
by and among Borrower, Lender, and LaSalle National Bank (or such other
financial institution acceptable to Lender), dated no later than thirty (30)
days after the Loan Closing Date.
"CODE": the Internal Revenue Code of 1986, as amended, any
successor statutes thereto, and applicable U.S. Department of Treasury
regulations issued pursuant thereto in temporary or final form.
"CONTEST PROCEDURES ": After prior notice to Lender, Borrower
or Manager, at its own expense, may contest by appropriate proceedings, promptly
initiated and conducted in good faith and with due diligence, the particular
issue, provided that (i) no other Default or Event of Default has occurred and
remains uncured, (ii) such proceeding shall suspend the collection of fees in
connection with the particular issues, (iii) such proceeding shall be permitted
under and be conducted in accordance with the provisions of any other instrument
to which Borrower or Manager is subject and shall not constitute a default
thereunder, (iv) no part of or interest in the Property will be in danger of
being sold, forfeited, terminated, canceled or lost, if the Borrower or Manager
pays the amount or satisfies the condition being contested, and the Borrower or
Manager would have the opportunity to do so, in the event of the Borrower's or
Manager's failure to prevail in the contest, (v) Lender would not, by virtue of
such permitted contest, be exposed to any risk of any civil liability for which
the Borrower or Manager has not furnished additional security as provided in
clause (vi) below, or to any risk of criminal liability, and neither the
Property nor any interest therein would be subject to the imposition of any lien
for which the Borrower or Manager has not furnished additional security as
provided in clause (vi) below, as a result of the failure to comply with such
law or of such proceeding, (vi) Borrower or Manager shall have furnished such
security as may be required in the proceeding, or as may be reasonably requested
by Lender, to insure the payment of any such fees, together with all interest
and penalties thereon, but in no amount less than one hundred and twenty-five
percent (125%) of the amount of such claims, and (vii) Borrower or Manager shall
promptly upon final determination thereof pay the amount of such fees determined
to be due and payable, together with all costs, interest and penalties. Lender
may pay over any such cash deposit or part thereof held by Lender to the
claimant entitled thereto at any time when, in the reasonable judgment of
Lender, the entitlement of such claimant is established.
"CONTROL": with respect to any Person, either (i) ownership
directly or through other entities of more than fifty percent (50%) of all
beneficial equity interest in such Person, or (ii) the
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<PAGE>
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, through the ownership
of voting securities, by contract or otherwise.
"CONVERSION": the conversion of the Loan from a construction loan to a
permanent loan pursuant to the provisions of this Agreement, which shall occur
on the Conversion Date pursuant to Section 2.1.2(c) provided no Default or Event
of Default has occurred after the Conversion Notice.
"CONVERSION DATE": shall be the date specified as the
Conversion Date by Lender in a Conversion Notice that has not been withdrawn,
revoked or superseded by a later Conversion Notice, which date shall not be
later than the Original Expected Conversion Date or the Extended Expected
Conversion Date, as applicable.
"CURRENT MONTH": as of any date of determination, the then current calendar
month.
"DEBT": the unpaid Principal, all interest accrued and unpaid thereon, any
Yield Maintenance Premium, Default Rate interest, Late Payment Charges, and all
other sums due and payable to Lender in respect of the Loan, or under any Loan
Document.
"DEBT SERVICE": with respect to any particular period, the
greater of (i) scheduled Principal and interest payments under the Note in such
period, plus any and all Default Rate Interest, Late Payment Charges, Yield
Maintenance Premium that accrue or are due and payable, and any and all other
sums due to Lender in respect of the Loan, and (ii) the product of (A) the
outstanding Principal as of the end of such period and (B) the Debt Service
Constant for such period.
"DEBT SERVICE CONSTANT": for any period, the greater of (i)
nine and two hundredths percent (9.02%) and (ii) an amount, expressed as a
percentage, computed by dividing by 100 the annual amount of principal and
interest which would be payable on a loan of $1,000 in order to fully amortize
such loan in equal monthly installments over the Amortization Schedule with
interest at a rate equal to the Interest Rate as of the end of such period.
"DEBT SERVICE COVERAGE RATIO": as of any date, the ratio of (i) the Net
Operating Income for the 12-month period ending with the most recently completed
calendar month to (ii) the Debt Service with respect to such period.
"DEFAULT": the occurrence of any event under any Loan Document which, but
for the giving of notice or passage of time, or both, would be an Event of
Default.
"DEFAULT RATE": a rate per annum equal to the lesser of (i) the Maximum
Rate permitted by applicable law, or (ii) five percent (5%) above the Interest
Rate or the Revised Interest
Rate, as applicable, compounded monthly.
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"DEFEASANCE DEPOSIT": an amount equal to the sum of (i) an
amount sufficient to purchase U.S. Obligations which provide payments that will
meet the Scheduled Defeasance Payments, (ii) any costs and expenses incurred or
to be incurred in the purchase of such U.S. Obligations and (iii) any revenue,
documentary stamp or intangible taxes or any other tax or charge due in
connection with the transfer of the Note, the creation of the Defeased Note and
the Undefeased Note, if applicable, any transfer of the Defeased Note or
otherwise required to accomplish the agreements of Sections 2.3 and 2.4.
"DEPOSIT ACCOUNT AGREEMENT": the Deposit Account Agreement by and among
Borrower, Lender, and LaSalle National Bank, dated two (2) months prior to the
date Borrower or Manager receives Rents.
"DEPOSIT BANK": the deposit bank under the Deposit Account Agreement or its
successors or assigns as permitted thereunder.
"DETERMINATION DATE": with respect to any Interest Period, the date which
is two (2) Eurodollar Business Days prior to the commencement of such Interest
Period.
"DOH ": the applicable state and local Department of Public Health or such
other applicable state agencies.
"EFFECTIVE BALLOON AMOUNT": the projected outstanding Principal on the
Optional Prepayment Date, derived by application of the Interest Rate and the
Monthly Debt Service Payment Amount.
"ELIGIBLE ACCOUNT": (i) an account maintained with a federal
or state chartered depository institution or trust company whose (x) commercial
paper, short-term debt obligations or other short-term deposits are rated at
least A-1 by the applicable Rating Agencies if the deposits in such account are
to be held in such account for thirty (30) days or less or (y) long-term
unsecured debt obligations are rated at least AA- by the applicable Rating
Agencies if the deposits in such account are to be held in such account for more
than thirty (30) days; or (ii) a segregated trust account maintained with the
trust department of a federal or state chartered depository institution or trust
company acting in its fiduciary capacity which institution or trust company is
subject to regulations regarding fiduciary funds on deposit substantially
similar to 12 C.F.R. ss. 9.10(b); or (iii) an account otherwise acceptable to
the applicable Rating Agencies, as confirmed in writing that such account would
not, in and of itself, result in a downgrade, qualification or withdrawal of the
then current ratings assigned to any Security.
"ENVIRONMENTAL GUARANTY": an Environmental Indemnity Agreement made by
Guarantor in favor of Lender in a form satisfactory to Lender.
"EQUITY INTERESTS": with respect to Manager or Borrower of the Property (a)
if Manager or Borrower, as applicable, is a limited partnership, limited
partnership interests in
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Manager or Borrower, as applicable; (b) if Manager or Borrower, as applicable,
is a limited liability company, membership interests in Manager or Borrower, as
applicable; (c) if Manager or Borrower, as applicable, is a corporation,
shareholder interest in Manager or Borrower, as applicable; provided, however,
that Equity Interests shall not include any direct or indirect legal or
beneficial ownership interest, or any other interest of any nature or kind
whatsoever, of the Borrower Representative or Manager Representative, as
applicable, in Borrower or Manager, as applicable.
"EQUITY OPTION AGREEMENT": that certain Equity Option Agreement by and
among AH Texas Investor, Inc., Borrower Sponsor, Borrower Representative,
Borrower, and Manager Sponsor, dated the date hereof.
"ERISA": the Employee Retirement Income Security Act of 1974
as amended from time to time, and the rules and regulations promulgated
thereunder. Section references to ERISA are to ERISA, as in effect at the date
of this Agreement and, as of the relevant date, any subsequent provisions of
ERISA, amendatory thereof, supplemental thereto or substituted therefor.
"ERISA AFFILIATE": with respect to Borrower or Manager, any
corporation or trade or business that is a member of any group of organizations
(i) described in Section 414(b) or (c) of the Code of which Borrower or Manager,
as applicable, is a member, and (ii) solely for purposes of potential liability
under Section 302(c)(11) of ERISA and Section 412(c)(11) of the Code and the
lien created under Section 302(f) of ERISA and Section 412(n) of the Code,
described in Section 414(m) or (o) of the Code of which Borrower or Manager, as
applicable, is a member.
"ERISA PLAN": an employee benefit or other plan established or
maintained by Borrower, Manager, or any ERISA Affiliate for employees of
Borrower, Manager or any ERISA Affiliate and that is covered by Title IV of
ERISA, other than a Multiemployer Plan.
"EURODOLLAR BUSINESS DAY": any day other than a Saturday, Sunday or other
day on which banks in the City of London, England are closed for interbank or
foreign exchange transactions.
"EXPECTED CONVERSION DATE ": shall be either the Original Expected
Conversion Date or the Extended Expected Conversion Date if approved in
accordance with Section 2.1.6, as applicable.
"EXTENDED EXPECTED CONVERSION DATE ": the date to which the
Original Expected Conversation Date is extended pursuant to Section 2.1.6,
which, at Lender's discretion, may be a Payment Date and in any case shall be no
later than ten (10) months following the Expected Conversion Date.
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<PAGE>
"EXTENSION CONFIRMATION DATE": the date of Lender's written notice to
Borrower and Manager of Lender's agreement to extend the Original Expected
Conversion Date to the Extended Expected Conversion Date.
"EXTENSION FEE": an amount equal to one half (1/2) point of the Initial
Loan, which fee Manager shall pay no later than five (5) Business Days after the
Extension Confirmation Date.
"EXTENSION NOTICE": a written notice by Manager to Lender received by
Lender no later than sixty (60) days prior to the Original Expected Conversion
Date, specifying the Extended Expected Conversion Date.
"FISCAL YEAR": each twelve (12) month period commencing on January 1 and
ending on December 31 during each year of the Term.
"FIXED RATE": either (i) the Initial Fixed Permanent Rate or (ii) if Lender
allows an Expected Conversion Date Extension, the Revised Initial Fixed
Permanent Rate.
"GAAP": generally accepted accounting principles in the United States of
America as of the date of the applicable financial report.
"GOVERNMENTAL AUTHORITY": any court, agency, authority, board
(including, any environmental protection, planning or zoning board), bureau,
commission, department, office or instrumentality of any nature whatsoever of
any governmental or quasi-governmental unit of the United States, the State, any
other state of the United States, the County, City, Town and other municipality
in which the Land is located, whether now or hereafter in existence, having or
claiming to have jurisdiction over any Borrower, the Property or any part
thereof, or any Person to whom a particular reference to Governmental
Authorities is applicable, or the construction, use, occupancy, management,
ownership or operation of the Property or any part thereof.
"GROSS REVENUES": the total dollar amount of all income and receipts
whatsoever received by Borrower and, without duplication, by Manager in the
ordinary course of their respective businesses with respect to the Property,
including all Rents and Money.
"GUARANTOR": Brookdale Living Communities, Inc., a Delaware corporation.
"GUARANTY": either the Guaranty of Payment or the Guaranty of Completion
and "Guaranties" means, collectively both the Guaranty of Payment and the
Guaranty of Collection.
"GUARANTY OF COMPLETION": that certain Guaranty of Completion from
Guarantor to Lender as the same may thereafter from time to time be
supplemented, amended, modified or extended by one or more written agreements
supplemental thereto, in form satisfactory to Lender.
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"GUARANTY OF PAYMENT": that certain guaranty of payment of
Note, Rate Lock Obligations, Carrying Costs and Recourse Obligations from
Guarantor to Lender as the same may thereafter from time to time be
supplemented, amended, modified or extended by one or more written agreements
supplemental thereto, in form satisfactory to Lender.
"IMPOSITIONS": all ground rents and all Taxes (including,
without limitation, all real estate, ad valorem or value added, sales (including
those imposed on lease rentals), use, single business, gross receipts, value
added, intangible transaction privilege, privilege, license or similar taxes),
assessments (including, without limitation, to the extent not discharged prior
to the Loan Closing Date, all assessments for public improvements or benefits,
whether or not commenced or completed within the term of this Agreement or any
other Loan Documents), water, sewer or other rents and charges, excises, levies,
fees (including, without limitation, license, permit, inspection, authorization
and similar fees), and all other governmental charges, in each case whether
general or special, ordinary or extraordinary, foreseen or unforeseen, of every
character in respect of the Property, (including all interest and penalties
thereon), which at any time prior to, during or in respect of the term hereof
may be assessed or imposed on or in respect of or be a Lien upon (i) Borrower or
Manager (including, without limitation, all income, franchise, single business
or other taxes imposed on Borrower or Manager for the privilege of doing
business in the jurisdiction in which the Property, or any other Collateral is
located), (ii) the Property, or any other Collateral or any part thereof, or
(iii) any occupancy, operation, use or possession of, or sales from, or activity
conducted on, or in connection with the Property or the leasing or use of the
Property or any part thereof, or the acquisition or financing of the acquisition
of the Property by Borrower or Manager.
"INDEPENDENT": when used with respect to any Person, a Person
who: (i) does not have any direct financial interest or any material indirect
financial interest in Borrower, Manager, or in any Affiliate of Borrower or
Manager (including, in any Borrower Representative or Manager Representative, as
applicable), (ii) is not connected with Borrower, Manager, or and any Affiliate
of Borrower or Manager (including any Borrower Representative or Manager
Representative, as applicable), as an officer, employee, promoter, underwriter,
trustee, partner, member, manager, creditor, director or person performing
similar functions, and (iii) is not a member of the immediate family of a Person
defined in (i) or (ii) above. Notwithstanding the foregoing, during such period
as Guarantor is a publicly listed company, any Person (other than an officer,
employee, promoter, underwriter, trustee, partner or director of Guarantor or
Person performing similar functions of Guarantor) owning less than two percent
(2%) of the issued and outstanding stock of Guarantor shall be deemed
Independent.
"INDEPENDENT DIRECTOR": an individual reasonably satisfactory
to Lender who shall not have been at the time of such individual's appointment
as a director of the relevant entity, at any time after the appointment, and may
not have been at any time during the preceding five years (i) a shareholder of,
or an officer or employee of, such entity or any of its shareholders,
subsidiaries or Affiliates, (ii) a customer of, or supplier to, such entity or
any of its shareholders, subsidiaries or Affiliates, (iii) a Person Controlling
any such shareholder, supplier or customer, or (iv) a member
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of the immediate family of any such shareholder, officer, employee, supplier or
customer or of any other director of such entity.
"INITIAL EQUITY INVESTMENT": with respect to Borrower, an amount calculated
as the difference between (x) 100% of the Budget Costs for the Property and (y)
the Loan Amount for the Property, which amount is to be funded by Borrower from
sources other than Advances or Obligations.
"INITIAL FIXED PERMANENT RATE": as of a given date, the sum of (i) the
Spread plus
(ii) the Blended Treasury Rate as of such date.
"INITIAL LOAN": the loan, in the maximum original principal amount of
Twenty-Four Million Two Hundred Fifty Thousand and 00/100 Dollars
($24,250,000.00), to be made by Lender to Borrower pursuant to the Master
Financing Facility Agreement and the BLA (and Section 2.1.1 hereof).
"INITIAL LOCKED AMOUNT":Twenty-Four Million Two Hundred Fifty
Thousand and 00/100 Dollars ($24,250,000.00), which is the sum of (i) the amount
rate locked pursuant to the Rate Lock Agreement dated January 14, 1998, which
sum is Twenty Million Two Hundred Fifty Thousand Seven Hundred Seventy-Nine and
00/100 Dollars ($20,250,779.00) and (ii) the amount rate locked pursuant to the
Rate Lock Agreement dated May 7, 1998, which sum is Three Million Nine Hundred
Ninety-Nine Thousand Two Hundred Twenty-One and 00/100 Dollars ($3,999,221.00).
"INITIAL NOTE": the Note dated the date hereof made by Borrower to Lender
in the maximum principal amount of the Initial Loan, as it may be restated,
replaced, supplemented or otherwise modified from time to time.
"INTERCREDITOR AGREEMENT": the Intercreditor Agreement dated
the date hereof made by Banc One Capital Partners IV, Ltd., Lender, Borrower,
Borrower Representative, Manager and Borrower Sponsor, as the same may
thereafter from time to time be supplemented, amended, modified or extended by
one or more written agreements supplemental thereto.
"INTEREST PERIOD": (i) the period from the date of the Initial
Advance through the first day thereafter that is an Interest Period Termination
Date and (ii) each period thereafter from an Interest Period Commencement Date
through an Interest Period Termination Date; except that the Interest Period, if
any, that would otherwise commence before and end after the Maturity Date shall
end on the Maturity Date. If the Loan Closing Date shall occur prior to the
tenth (10th) day of a calendar month, the first Interest Period shall commence
on and include the Loan Closing Date and end on and include the tenth (10th) day
of the calendar month in which the Loan Closing Date occurs. If the Loan Closing
Date shall occur after the tenth (10th) day of a calendar month, the first
Interest Period shall commence on the Loan Closing Date and end on and include
the tenth (10th) day of the calendar month following the month in which the Loan
Closing Date
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occurs. If the Loan Closing Date shall occur on the tenth (10th) day of a
calendar month, the first Interest Period shall consist of a one (1) day period
consisting of the Loan Closing Date.
"INTEREST PERIOD COMMENCEMENT DATE": the eleventh (11th) day
of each calendar month (or such different day of each calendar month that Lender
may designate in its reasonable discretion by notice to any Borrower given at
least fifteen (15) days before such change is to take effect).
"INTEREST PERIOD TERMINATION DATE": the tenth (10th) day of each calendar
month (notwithstanding that the succeeding Payment Date may not be an Interest
Period Commencement Date because the day after such Interest Period Termination
Date is not a Business Day).
"INTEREST RATE": (i) for each Interest Period ending prior to
or on the Conversion Date, LIBOR with respect to such Interest Period plus 175
basis points, (ii) for each Interest Period after the Conversion Date but prior
to the Optional Prepayment Date, the applicable of (A) if the Rate Adjustment is
not made, the Fixed Rate as of the Conversion Date, or (B) if the Rate
Adjustment is made, the applicable of (x) the Alternative Rate as of the
Conversion Date or (y) the Revised Alternative Rate as of the Conversion Date,
if Lender allows an Expected Conversion Date Extension, (iii) for each Interest
Period after the Optional Prepayment Date, the Revised Interest Rate, and (iv)
in any case, when applicable pursuant to this Agreement or any other Loan
Document, the Default Rate. In no event may any such rate at any time exceed the
Maximum Rate.
"INVENTORY": all of Borrower's and Manager's "inventory," as
such term is defined in the UCC, relating to the Property, and, to the extent
not included in such definition, all goods now owned or hereafter acquired by
Borrower or Manager intended for sale or lease, or to be furnished under
contracts of service by such Borrower or Manager in connection with the
Property, including without limitation, all inventories held by Borrower or
Manager for sale or use at or from the Property, and all other such goods,
wares, merchandise, and materials and supplies of every nature owned by Borrower
or Manager relating to the Property and all such other goods returned to or
repossessed by Borrower or Manager relating to the Property.
"LEGAL REQUIREMENTS": statutes, laws, rules, orders,
regulations, ordinances, judgments, decrees and injunctions of Governmental
Authorities, including, all Environmental Laws and the Americans with
Disabilities Act, as they may be amended from time to time, together with all
regulations promulgated pursuant thereto or in connection therewith, affecting
the Borrower, the Manager, the Loan Documents, or all or any part of the
Property or the construction, use, alteration or operation thereof, whether now
or hereafter enacted and in force, and all permits, licenses and authorizations
and regulations relating thereto, and all covenants, agreements, restrictions
and encumbrances contained in any instrument, either of record or known to
Borrower or Manager, at any time in force affecting the Borrower, the Manager,
the Loan Documents, or all or any part of the Property, enacted or entered and
in force as of the relevant date, and all Licenses and regulations relating
thereto, and all covenants, agreements, restrictions and encumbrances contained
in any instruments, either of record or known to Borrower or Manager, at any
time in
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force affecting the Property or any part thereof, including any that may (i)
require repairs, modifications or alterations in or to all or part of the
Property, or (ii) in any way limit the use and enjoyment thereof.
"LENDER": has the meaning provided in the first paragraph of this
Agreement.
"LENDER'S COUNSEL": such counsel as Lender may engage.
"LENDER'S COUNSEL FEES": the reasonable fees and disbursements
of Lender's Counsel for services heretofore or hereafter rendered and reasonable
costs incurred by such law firm and any other law firm(s) retained by Lender on
behalf of itself and/or Lender in connection with all aspects of Lender's making
and enforcing the Loan and, except as otherwise provided in this Agreement,
negotiating, drafting, entering into, modifying (with Borrower's and Manager's
consent) and enforcing Lender's rights and remedies under the Loan Documents.
"LENDER'S EXPENSES": as defined in the Rate Lock Agreement,
and shall include losses to Lender arising from the hedging transactions entered
into, or to be entered into, by Lender in relation to the Rate Lock Agreement
and all fees, commissions and other expenses (including reasonable attorneys'
fees and disbursements) incurred by Lender in connection with the closing out of
all or any portion of the Rate Lock (as defined in the Rate Lock Agreement).
"LIBOR": with respect to any Interest Period, the rate per
annum which is equal to the London Interbank Offered Rate reported from time to
time by Telerate News Service (page 3750), at which foreign branches of major
United States banks offer United States dollar deposits to other banks for a
one-month period in the London interbank market at approximately 11:00 a.m.,
London time, on the related Determination Date. If such interest rate shall
cease to be available from Telerate News Service, LIBOR shall be determined from
such financial reporting service as Lender shall reasonably determine and use
with respect to its other loan facilities on which interest is determined based
on LIBOR. If two or more such rates appear on Telerate page 3750 or associated
pages, the rate in respect of such Interest Period will be the arithmetic mean
of such offered rates, absent manifest error.
"LIEN": any mortgage, deed of trust, lien, pledge,
hypothecation, assignment, security interest or any other encumbrance, charge or
transfer of, on or affecting all or part of the Property or any interest
therein, or in Borrower or, after the Conversion Date, in Manager, including any
conditional sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, the filing of
any financing statement or similar instrument under the UCC or comparable law of
any other jurisdiction, domestic or foreign, and mechanic's, materialmen's and
other similar liens and encumbrances.
"LOAN": the Initial Loan and the Additional Loan (if any), collectively.
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"LOAN CLOSING": the execution and delivery of this Agreement by Borrower,
Manager, and Lender.
"LOAN CLOSING DATE": the date upon which this Agreement is executed and
delivered by Borrower, Manager, and Lender.
"LOAN DOCUMENTS": includes (i) this Agreement, (ii) the Note,
(iii) the BLA, (iv) the Mortgage, (v) the Subordinate Mortgage, (vi) the
Assignment of Leases, (vii) the Assignment of Agreements, (viii) the Guaranties,
(ix) the Environmental Guaranty, (x) the Clearing Account Agreement, (xi) the
Deposit Account Agreement, (xii) the Non-Recourse Guaranty, and (xiii) all other
documents and instruments evidencing or securing the Loan on or after the date
hereof excluding the Other Loan Documents; as each of the foregoing may be (and
each of the foregoing defined terms shall refer to such documents as they may
be) amended, restated, replaced, supplemented or otherwise modified from time to
time.
"MANAGEMENT AGREEMENT": the management agreement dated the
date hereof, between Borrower and Manager, in form satisfactory to Lender in
Lender's discretion, as modified by the Consent and Subordination of Manager,
executed by Manager in favor of Banc One, dated the date hereof, together with
any substitute management agreement entered into as permitted by the Loan
Documents, pursuant to which Manager is to develop and manage the Property.
"MANAGEMENT FEE": the fee payable to Manager under the Management
Agreement.
"MANAGER": has the meaning provided in the first paragraph of this
Agreement, and Manager is and shall be wholly owned and controlled by Manager
Owner.
"MANAGER OWNER": with respect to Manager, any current or future general
partner, managing member, or controlling shareholder of Manager.
"MANAGER REPRESENTATIVE": Brookdale Living Communities of Texas-II, Inc., a
Delaware corporation.
"MANAGER SPONSOR": Brookdale Living Communities, Inc., a Delaware
corporation.
"MANAGER'S CONSENT": with respect to the Property, the
Manager's Consent and Subordination of Management Agreement, in favor of Lender,
executed by Manager, Borrower, and Lender, as the same may from time to time be
supplemented, amended, modified, or extended, by one or more written agreements,
in form satisfactory to Lender.
"MASTER FINANCING FACILITY AGREEMENT": the Master Financing Facility
Agreement between Manager Sponsor and Lender, in the maximum aggregate principal
amount of One Hundred Million and 00/100 Dollars ($100,000,000.00), dated June
__, 1998.
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"MASTER FINANCING FACILITY CLOSING DATE": June __, 1998.
"MATERIAL LEASE": any Lease except for (i) a residential Lease executed on
the Approved Residency Agreement and (ii) any commercial lease for less than
2,500 square feet.
"MATURITY DATE": the earlier to occur of: (i) the Stated Maturity Date; and
(ii) the date on which the entire Debt shall be paid or be required to be paid
in full, whether at the Stated Maturity Date, by prepayment, declaration of
acceleration or otherwise in accordance with the terms of this Agreement or any
of the Loan Documents or by operation of law.
"MAXIMUM RATE": the maximum interest rate allowed by
applicable Legal Requirements in effect with respect to the Loan on the date for
which a determination of interest accrued hereunder is made, after taking into
account all fees, payments and other charges that are, under applicable law,
characterized as interest.
"MONEY": all of Borrower's and Manager's interest in all moneys, cash,
rights to deposit or savings accounts, credit card receipts, rents or other
items of legal tender obtained from or for the use in connection with the
ownership, development or operation of the Property.
"MORTGAGE": the Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, in form and substance satisfactory to
Lender in Lender's discretion, dated as of the Loan Closing Date, made by
Borrower to Sarah Ann Powers, Esq., as trustee in favor of Lender with respect
to the Property as security for the Loan, as the same may thereafter from time
to time be supplemented, amended, modified or extended by one or more written
agreements supplemental thereto.
"MULTIEMPLOYER PLAN": with respect to Borrower or Manager, a multiemployer
plan defined as such in Section 3(37) of ERISA to which contributions have been
made by Borrower, or Manager, as applicable, or any ERISA Affiliate and which is
covered by Title IV of ERISA.
"NACC": Nomura Asset Capital Corporation, a Delaware corporation.
"NET OPERATING INCOME": for any period, all Operating Income
during such period minus all Operating Expenses during such period; determined
by audit or in accordance with other agreed-upon procedures determined by
Lender; provided that, in determining Net Operating Income, adjustments shall be
made to reflect market and submarket occupancy and other factors determined to
be relevant by Lender, in Lender's reasonable discretion, and to comply with
Lender's underwriting standards then in effect, including the following
adjustments: (i) Operating Expenses shall be adjusted to reflect (A) a reserve
for capital expenditures equal to the greater of (x) $250 multiplied by the
number of apartment units at the Property or (y) such higher amount as is
recommended in a third-party engineering report, (B) an amount necessary to
reflect a minimum annual vacancy factor, pro rated for the applicable period,
equal to the greater of (x) the actual
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vacancy for the Property, (y) five percent (5%) of Gross Revenues, and (z) the
market vacancy rates, (C) a management fee equal to the greater of the
Management Fee or five percent (5%) of Rents, and (D) the cost of Insurance
Premiums adjusted to treat the Property as a separate and individual asset as
reasonably determined by Lender if the Property is being insured under a blanket
insurance policy, and (ii) Operating Income shall be adjusted (A) to exclude
Rents from temporary or month-to-month tenants or tenants operating under
bankruptcy protection and (B) to reflect any Rent adjustments or cancellation
options in any Leases; and provided further, that Net Operating Income shall not
include payments to be received in respect of U.S. Obligations purchased in
connection with a Defeasance. All adjustments to determine Net Operating Income
shall be subject to Lender's approval, in its reasonable discretion after due
diligence and all Operating Expenses may be adjusted as required or permitted by
applicable Rating Agency criteria.
"NON-RECOURSE GUARANTY": that certain guaranty from Borrower
to Lender, securing the obligations of Other Borrowers under their respective
Other Loan Agreements, as the same may be thereafter from time to time
supplemented, amended, modified or extended by one or more written agreements
supplemental thereto, in form satisfactory to Lender, which guaranty is secured
solely by Borrower's interest in the Property.
"NOTE": the Initial Note and (if executed and delivered) the Additional
Note,
collectively; or, after the execution and delivery thereof, the Restated Note.
"OBLIGATIONS": all present and future indebtedness,
obligations, and liabilities of Borrower to Lender arising under or in
connection with this Agreement or any of the other Loan Documents, regardless of
whether such indebtedness, obligations, and liabilities are direct, indirect,
fixed, contingent, joint, several or joint and several.
"OFFICERS' CERTIFICATE": a certificate delivered to Lender by Borrower or
Manager, as applicable, which is signed by a senior executive officer of
Borrower or Borrower Owner, or Manager or Manager Owner, as applicable.
"OPERATING EXPENSE CERTIFICATE ": a certificate delivered to Lender by
Borrower or Manager, as applicable, in the form attached hereto as Exhibit A.
"OPERATING EXPENSES": for any period, all fees and
expenditures by or on behalf of Borrower as and to the extent required to be
expensed or allowed to be expensed and in fact expensed under GAAP during such
period in connection with the ownership, operation, maintenance, repair or
leasing of the Property, including (i) Management Fees; Insurance Premiums; bank
charges; expenses for accounting, advertising, marketing, architectural
services, utilities, extermination, cleaning, trash removal, window washing,
landscaping and security; and reasonable and necessary legal expenses incurred
in connection with the operation of the Property; (ii) Taxes and Other Charges
(calculated on a grossed up basis to reflect the full assessment of the Property
after Substantial Completion and full lease up, but excluding fines, penalties,
interest or Taxes or Other Charges payable by reason of Borrower's failure to
pay an imposition on a timely basis);
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(iii) wages, benefits, payroll taxes, uniforms, insurance costs and all other
related expenses for employees of Borrower or its Affiliate engaged in the
repair, operation or maintenance of the Property; and (iv) the cost of tenant
improvements, routine interior and exterior maintenance, repairs and minor
alterations; provided that Operating Expenses will not include Debt Service,
Capital Expenses, non-cash items such as depreciation and amortization or any
extraordinary one-time expenditures not considered operating expenses under
GAAP.
"OPERATING INCOME": for any period, all regular on-going
revenues actually received by Borrower and, without duplication, by Manager from
the operation of the Property during such period, including (i) Rents, (ii)
business interruption proceeds, and (iii) all other amounts received which in
accordance with GAAP are required to be or are included in Borrower's or
Manager's annual financial statements as operating income of the Property;
provided, that Operating Income will not include (1) income from non-recurring
income sources, (2) advance Rents or other payments, (3) deposits or escrows,
(4) any income otherwise includable in Operating Income but paid to a Person
other than Borrower or Manager, (5) Proceeds of Casualty insurance or
Condemnation Awards, or (6) income from a sale, financing or other capital
transaction.
"OPTIONAL PREPAYMENT DATE": the one hundred eightieth (180th) Payment Date
after the Conversion Date.
"ORIGINAL EXPECTED CONVERSION DATE": May 11, 2001.
"OTHER BORROWER": any other party which is a Borrower pursuant to the
Master Financing Facility Agreement.
"OTHER BUILDING LOAN AGREEMENT": the building loan agreement
in form and substance satisfactory to Lender in Lender's discretion, made by any
Other Borrower to Lender, evidencing the Other Loan made by Lender to the
applicable Other Borrower pursuant to the Master Financing Facility Agreement,
secured by the Other Property owned by the applicable Other Borrower.
"OTHER CHARGES": all ground rents, maintenance charges,
impositions other than Taxes, and any other charges, including vault charges and
license fees for the use of vaults, chutes and similar areas adjoining the
Property, now or hereafter levied or assessed or imposed against the Property or
any part thereof.
"OTHER LOAN AGREEMENT ": the loan agreement in form and
substance satisfactory to Lender in Lender's discretion, made by any Other
Borrower to Lender, evidencing the Other Loan made by Lender to the applicable
Other Borrower pursuant to the Master Financing Facility Agreement, secured by
the Other Property owned by the applicable Other Borrower.
"OTHER LOAN DOCUMENTS": includes (i) the Other Loan Agreements, (ii) the
Other Building Loan Agreements, (iii) the Other Non-Recourse Guarantees, (iv)
the Other Properties
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Subordinate Mortgages, and (v) all other documents and instruments, in form and
substance satisfactory to Lender in Lender's discretion, made by any Other
Borrower to Lender, evidencing and securing any Other Loan made by Lender to any
Other Borrower pursuant to the Master Financing Facility Agreement, secured by
the Other Property owned by the applicable Other Borrower.
"OTHER MANAGER": any other party which is a Manager pursuant to the Master
Financing Facility Agreement or the Transaction Documents.
"OTHER NON-RECOURSE GUARANTY ": any guaranty in form and
substance satisfactory to Lender in Lender's discretion, made by any Other
Borrower to Lender as additional security for the Loan, as the same may
thereafter from time to time be supplemented, amended, modified or extended by
one or more written agreements, supplemental thereto.
"OTHER PROPERTIES SUBORDINATE MORTGAGE": any mortgage,
assignment of leases and rents, security agreement and fixture filing, in form
and substance satisfactory to Lender in Lender's discretion, made by any Other
Borrower to Lender or to a trustee in favor of Lender, with respect to such
Other Property owned by the applicable Other Borrower, as security for the Loan,
as the same may thereafter from time to time be supplemented, amended, modified
or extended by one or more written agreements supplemental thereto; provided
that if such mortgage encumbers a Property in a state having a mortgage
recording tax such mortgage may secure a maximum principal amount less than the
full principal amount of the Loan, in order to reasonably limit the mortgage
recording taxes payable in connection with such mortgage, if (i) Lender approves
such maximum amount, which approval shall not be unreasonably withheld if such
limitation does not adversely affect Lender or its rights under the Loan
Documents and (ii) such maximum amount is not less than (A) 110% of the value of
the completed Property as shown in the Appraisal minus (B) the principal amount
secured by the Mortgage.
"PAYMENT DATE": the eleventh (11th) day of each calendar
month, provided, however, that for purposes of making payments hereunder, but
not for purposes of calculating interest accrual periods, if in any month the
eleventh (11th) day is not a Business Day, then the Payment Date for such month
shall be the first Business Day thereafter.
"PBGC ": the Pension Benefit Guaranty Corporation established under ERISA
or any successor thereto.
"PERMITTED ENCUMBRANCES": (a) the Liens created by the Loan
Documents, (b) all Liens and other matters disclosed in the Title Insurance
Policy or the Survey, (c) Liens, if any, for Taxes or Other Charges not yet
payable or delinquent or being contested in good faith and by appropriate
proceedings in accordance with this Agreement, (d) without limiting the
foregoing, any and all governmental, public utility and private restrictions,
covenants, reservations, easements, licenses or other agreements which may be
granted by Borrower and/or Manager after the Loan Closing Date and which do not
materially and adversely affect (A) the ability of Borrower to pay
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any of its obligations to any Person as and when due, (B) the marketability of
title to the Property, (C) the fair market value of the Property, or (D) the use
or operation of the Property as of the Loan Closing Date and thereafter, and (e)
all other Liens to which Lender in its sole discretion has given its prior
written consent and, after a Securitization, with respect to which the Rating
Agencies have confirmed in writing that such Liens will not result in a
downgrade, withdrawal or qualification of the then-applicable ratings of any
securities issued in a Securitization.
"PERMITTED TRANSFERS": (i) Permitted Encumbrances, (ii) all
transfers of worn out or obsolete furnishings, fixtures or equipment that are
not reasonably necessary for the operation of the Property or, if necessary for
the operation of the Property, are replaced with equivalent property, (iii) all
Leases which are not Material Leases, (iv) all Material Leases which have been
approved by Lender in writing in Lender's reasonable discretion or which are
deemed approved in accordance with the Mortgage, (v) provided no Event of
Default has occurred and is continuing, a Special Transfer, (vi) transfers of
Equity Interests which in the aggregate during the term of the Loan (a) do not
exceed forty-nine percent (49%) of the total interests in the Borrower or
Manager, as applicable, and (b) do not cause any partner's, member's,
shareholder's, beneficial owner's or other Person's interest in the Borrower or
Manager, as applicable, to exceed forty-nine percent (49%) of the total
interests in Borrower or Manager, as applicable, (vii) provided no Event of
Default has occurred and is continuing, any transfer permitted pursuant to
either (a) the Equity Option Agreement or (b) the Property Option Agreement,
provided any such transfer is completed on or prior to the Exercise Date (as
defined in the Intercreditor Agreement), (viii) provided no Event of Default has
occurred and is continuing, any Synthetic Lease approved by Lender in accordance
with Section 10.33 below, (ix) provided no Event of Default has occurred and is
continuing, transfers of Equity Interests to wholly-owned Affiliates of Manager
Sponsor provided that, (a) after any Securitization, the Rating Agencies shall
have confirmed in writing that such transfer or transfers shall not result in a
downgrade, withdrawal or qualification of any Securities issued in connection
with such Securitization, (b) acceptable opinions relating to such transfer or
transfers shall have been delivered by Borrower or Manager, as applicable, to
Lender and the Rating Agencies (including without limitation tax and bankruptcy
opinions), and (c) Borrower or Manager pays all reasonable expenses incurred by
Lender in connection with such transfer or transfers, (x) provided no Event of
Default has occurred and is continuing, any other transfer of Equity Interests
provided that (a) prior to any Securitization, Lender shall have consented to
such transfer or transfers, (b) after any Securitization, Lender shall have
consented to such transfer or transfers and the Rating Agencies shall have
confirmed in writing that such transfer or transfers shall not result in a
downgrade, withdrawal or qualification of any Securities issued in connection
with such Securitization, (c) acceptable opinions relating to such transfer or
transfers shall have been delivered by Borrower or Manager, as applicable, to
Lender and the Rating Agencies (including without limitation tax and bankruptcy
opinions), (d) Borrower or Manager pays all reasonable expenses incurred by
Lender in connection with such transfer or transfers, (xi) provided no Event of
Default has occurred and is continuing, transfers of interests in the Property
which constitute Permitted Encumbrances, and (xii) any transfers done pursuant
to and in accordance with the Intercreditor Agreement.
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"PERMITTED USE": independent living facility with an assisted living
component, including such services ancillary thereto, including banking, beauty
shop, and convenience store, as long as such services are permitted pursuant to
applicable Legal Requirements.
"PERSON": any individual, corporation, partnership, joint venture, estate,
trust, unincorporated association, any federal, state, county or municipal
government or any bureau, department or agency thereof and any fiduciary acting
in such capacity on behalf of any of the foregoing.
"POOLING AND SERVICING AGREEMENT": the Servicing Agreement entered into
with the Servicer in connection with any Securitization.
"PRINCIPAL": the principal of the Loan or a specified portion thereof.
"PROPERTY": the parcel of real property and improvements now
or hereafter located thereon and all personal property now or hereafter
associated therewith, owned, leased and managed by Borrower and Manager and
encumbered by the Mortgage, the Subordinate Mortgage, the Assignment of Leases,
the Assignment of Agreements, or the other Loan Documents, together with all
rights pertaining to such property and improvements, as more particularly
described in the Granting Clauses of the Mortgage and referred to therein as the
"Mortgaged Property". The legal description of the Property is set forth in
Schedule 1.
"PROPERTY OPTION AGREEMENT": that certain Property Option Agreement by and
among Borrower Sponsor, Borrower, and Manager Sponsor dated the date hereof.
"RATE LOCK AGREEMENT": the agreement entered into between
Borrower and/or Guarantor, and Lender (or another party) dated on or before the
date hereof and guarantied by Guarantor under the Payment Guaranty, pursuant to
which Lender has "locked" the Applicable Pre-Conversion Treasury Rate that will
apply as of the Conversion Date with respect to all or part of the Principal.
"RATE LOCK EXPIRATION DATE": May 11, 2001.
"RATING AGENCY": each of Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc., Moody's Investors Service, Inc., Duff & Phelps
Credit Rating Co. and Fitch IBCA, Inc. or any other nationally-recognized
statistical rating agency which has been approved by Lender, to the extent that
any of the foregoing have been or will be engaged by Lender or its designee in
connection with a Securitization.
"RELEASE DATE": the earlier to occur of (i) two (2) years from the
"start-up day" (within the meaning of Section 860G(a)(9) of the Code) of the
REMIC Trust or (ii) three (3) years from the Conversion Date.
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"REMIC": a "real estate mortgage investment conduit" within the meaning of
Section 860D of the Code.
"REMIC TRUST": a REMIC that holds the Note.
"RE-SIZED AMOUNT": an amount determined by Lender equal to the
lesser of (i) the amount obtained by dividing (A) the Net Operating Income,
calculated using Operating Income for the 9-calendar month period ending on the
last day of the calendar month immediately prior to the Conversion Date and
Operating Expenses for the 9-calendar month period ending on the last day of the
calendar month immediately prior to the Conversion Date, which Operating
Expenses shall be annualized and seasonably adjusted, by (B) the Debt Service
Constant for the period ending on the Conversion Date, and by (C) 1.27x;
provided, however, such ratio may be modified by Lender, if and to the extent
the proportion of the congregate care and assisted living components of the
Property are altered by Borrower and/or Manager subsequent to the Loan Closing
Date, (ii) seventy-five percent (75%) of the Appraised Value as of the
Conversion Date, or (iii) one hundred twenty-five percent (125%) of the Budget
Costs..
"REVISED ALTERNATIVE RATE": if Lender allows the Expected
Conversion Date Extension, the Alternative Rate (i) adjusted by Lender to
reflect the interest rate locked pursuant to either a New Rate Lock Agreement or
a Modified Rate Lock Agreement and (ii) plus twelve (12) basis points.
"REVISED INITIAL FIXED PERMANENT RATE": if Lender allows the
Expected Conversion Date Extension, the Initial Fixed Permanent Rate (i)
adjusted by Lender to reflect the interest rate locked pursuant to either a New
Rate Lock Agreement or a Modified Rate Lock Agreement and (ii) plus twelve (12)
basis points.
"REVISED INTEREST RATE": the per annum rate of interest that
is the greater of (i) the Fixed Rate plus five percent (5%) and (ii) the
Treasury Rate on the Optional Prepayment Date plus six and 95/100 percent
(6.95%), such Revised Interest Rate not to exceed the Maximum Rate.
"S&P": Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc.
"SECURITY DEPOSIT ACCOUNT - CLEARING BANK": that certain account
established and maintained by Lender at the Clearing Bank for the purpose of
holding all security deposits of lessees under Leases prior to a Cash Management
Period.
"SECURITY DEPOSIT ACCOUNT - DEPOSIT BANK ": that certain account
established and maintained by Lender at the Deposit Bank for the purpose of
holding all security deposits of lessees under Leases during a Cash Management
Period.
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"SERVICER": the entity appointed by Lender to service the Loan or its
successor in interest, or if any successor servicer is appointed pursuant to the
Pooling and Servicing Agreement, such successor servicer.
"SPECIAL TRANSFER": the sale of the Property after the
Securitization by the original Borrower to a single purchaser not more than one
time during the term of the Loan and the assumption in writing by the purchaser
of all of the obligations of Borrower under the Loan Documents; provided no
Default or Event of Default shall exist, Lender shall have consented to such
sale, which consent shall not be unreasonably withheld or delayed, and Lender
shall have received (i) evidence in writing from the applicable Rating Agencies
to the effect that such a sale and assumption will not result in a
qualification, withdrawal or downgrading of the ratings in effect immediately
prior to such sale for the Securities then outstanding, (ii) acceptable opinions
relating to such transfer shall have been delivered by Borrower to Lender and to
the Rating Agencies (including without limitation tax and bankruptcy opinions),
(iii) the transferee assumes in writing all obligations of the transferor under
the Loan Documents and executes and delivers such other documentation as may be
required by Lender or the Rating Agencies and (iv) Borrower pays all reasonable
expenses incurred by Lender in connection with such transfer.
"SPREAD": one hundred ninety-five (195) basis points.
"STATE": the state or commonwealth in which the Property is located.
"STATED MATURITY DATE": the three hundred fiftieth (350th) Payment Date
after the Conversion Date.
"SUBORDINATE MORTGAGE": any mortgage, assignment of leases and
rents, security agreement and fixture filing, in form and substance satisfactory
to Lender in Lender's discretion, made by Borrower to Lender or to a trustee in
favor of Lender, with respect to the Property, as security for any Other Loan,
which mortgage shall be subordinate to the Mortgage, as the same may thereafter
from time to time be supplemented, amended, modified or extended by one or more
written agreements supplemental thereto; provided that if the State has a
mortgage recording tax such mortgage may secure a maximum principal amount less
than the full principal amount of any Other Loan, in order to reasonably limit
the mortgage recording taxes payable in connection with such mortgage, if (i)
Lender approves such maximum amount, which approval shall not be unreasonably
withheld if such limitation does not adversely affect Lender or its rights under
the Loan Documents, and (ii) such maximum amount is not less than (A) 110% of
the value of the Property with the Required Improvements completed as shown in
the Appraisal minus (B) the principal amount secured by the Mortgage on the
Property.
"TAX ADJUSTED ISSUE PRICE": the "adjusted issue price" within the meaning
of Code ss. 1272(a)(4).
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"TAXES": all real estate and personal property taxes, assessments or sewer
rents, now or hereafter levied or assessed or imposed against all or part of the
Property.
"TAX FAIR MARKET VALUE": the fair market value of the
Property, and (i) shall not include the value of any personal property or other
property that is not an "interest in real property" within the meaning of
Treasury Regulation ss.ss.1.860G-2 and 1.856-3(c), or is not "qualifying real
property" within the meaning of Treasury Regulation ss.1.593-11(b)(iv), and (ii)
shall be reduced by the Tax Adjusted Issue Price of any indebtedness, other than
the Loan, secured by a Lien affecting the Property, which Lien is prior to or on
a parity with the Lien created under the Mortgage.
"TEN-YEAR TREASURY RATE": as of a given date, the yield on the
bid price appearing on such date on Telerate page 500 for the second most
recently issued ten-year, non-callable U.S. Treasury security or, if there is no
such U.S. Treasury security, the then prevailing yield on the U.S. Treasury
security then being used by Lender to price ten-year fixed rate mortgage loans.
"TERM": the entire term of this Agreement, which shall expire upon
repayment in full of the Debt and full performance of each and every obligation
to be performed by Borrower or Manager, as applicable, pursuant to the Loan
Documents.
"THIRTY-YEAR TREASURY RATE": as of a given date, the yield on
the bid price appearing on such date on Telerate page 500 for the second most
recently issued 30-year, non-callable U.S. Treasury security or, if there is no
such U.S. Treasury security, the then prevailing yield on the U.S. Treasury
security then being used by Lender to price fixed rate mortgage loans in excess
of ten years.
"TITLE INSURANCE POLICY": the mortgagee title insurance
policy, in form acceptable to Lender, issued with respect to the Property,
insuring the lien of the Mortgage and described in Section 4.1.39 of this
Agreement, as such coverage is updated from time to time to Lender's reasonable
satisfaction as required by this Agreement or the Building Loan Agreement.
"TOTAL PROJECT COST": the aggregate amount of BLA Costs set forth in the
BLA Budget and actually incurred and paid by Manager.
"TRANSFER": any sale, conveyance, transfer, Lease (including
any amendment, extension, modification, waiver or renewal thereof), assignment,
mortgage, pledge, grant of a security interest or hypothecation, whether by law
or otherwise, of or in (i) all or part of the Property (including any legal or
beneficial direct or indirect interest therein), (ii) any direct or indirect
legal or beneficial interest in Borrower, (iii) any stock in the Borrower Owner,
(iv) any direct or indirect legal or beneficial interest in Manager, except any
transfers of any interests in Manager Sponsor, or (v) any stock in the Manager
Owner, except any transfers of any interests in Manager Sponsor.
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"TREASURY RATE": as of the Optional Prepayment Date, the
linear interpolation of the bond equivalent yields as reported in Federal
Reserve Statistical Release H.15-Selected Interest Rates under the heading "U.S.
Government Securities/Treasury Constant Maturities" for the week ending prior to
the Optional Prepayment Date of U.S. Treasury constant maturities with maturity
dates (one longer and one shorter) most nearly approximating the remaining term
of the Note as of the Optional Prepayment Date.
"UCC": the Uniform Commercial Code as in effect in the State.
"UNLOCKED AMOUNT": on the Conversion Date, the amount of the Loan
calculated as the difference, if any, between the Re-sized Amount on such date
and the Initial Locked Amount.
"U.S. OBLIGATION": obligations or securities not subject to prepayment,
call or early redemption which are direct obligations of, or obligations fully
guaranteed as to timely payment by, the United States of America or any agency
or instrumentality of the United States of America, the obligations of which are
backed by the full faith and credit of the United States of America.
"YIELD MAINTENANCE PREMIUM": the amount (if any) which, when
added to the unpaid Principal or the principal amount of the Defeased Note, as
applicable, will be sufficient to purchase U.S. Obligations providing the
required Scheduled Defeasance Payments; provided, however, that under no
circumstances shall the Yield Maintenance Premium be less than zero.
1.2 INDEX OF OTHER DEFINITIONS. The following terms are defined in the
sections or Loan Documents indicated below:
"Accrued Interest" - 2.2.2
"Additional Loan Structuring Fee" - 2.6.3
"Allowed Trade Payables" - 4.1.33 and 4.2.33
"Alternative Principal" - 2.2.5
"Alternative Rate" - 2.2.5
"Annual Budget" - 5.2.9(e)
"Applicable Taxes" - 2.7
"Award" - 7.3.2
"Budget Costs" - BLA
"Capital Budget" - 5.2.9(e)
"Capital Reserve Fund" - 3.3.1
"Capital Reserve Subaccount" - Deposit Account Agreement
"Cash Collateral Subaccount" - 3.6
"Cash Management Period" - 3.1
"Casualty" - 7.2.1
"Casualty/Condemnation Prepayment" - 2.3.2
"Casualty/Condemnation Subaccount" - Deposit Account Agreement
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"Clearing Accounts" - 3.1
"Clearing Banks" - 3.1
"COE" - 4.1.22
"Collateral" - Mortgage
"CON" - 4.1.22 "Condemnation" - 7.3.1
"Conversion Notice" - 2.1.2(c)
"Conversion Shortfall" - 2.3.2(b)
"Defeasance" - 2.3.3
"Defeasance Date" - 2.3.3
"Defeased Note" - 2.3.3
"Deposit Account" - 3.1
"Disclosure Document" - 9.1.2
"Draw Fees" - 2.6.1
"Engineering Reports" - BLA
"Environmental Laws" - 4.2.31
"Environmental Report" - BLA
"Equipment" - Mortgage
"Event of Default" - 8.1
"Exchange Act" - 9.1.2
"Expected Conversion Date Extension" - 2.1.6(a)
"Facility Structuring Fee" - MFFA
"Funds" - 3.8 "Hazardous Substances" - 4.2.31
"Hypothetical Principal" - 2.2.5
"Improvements" - Mortgage
"Initial Advance" - BLA
"Insurance Premiums" - 7.1.2
"Insured Casualty" - 7.2.2
"Intangibles" - Mortgage
"Inventory" - Mortgage
"Junior Preferred Equity" - 2.3.2(b)
"Land" - Mortgage
"Late Payment Charges" - 2.5.3
"Leases" - Mortgage
"Lender's Consultant" - 5.1.10(a)
"Liabilities" - 9.1.3
"Licenses" - 4.1.22
"Modified Rate Lock Agreement"- 2.1.6(b)
"Monthly Debt Service Payment Amount"- 2.2.1
"New Rate Lock Agreement"- 2.1.6(b)
"Nomura" - 9.1.3
"Nomura Group" - 9.1.3
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"Operating Budget" - 5.2.9(e)
"Operating Deficits - BLA
"Operating Permits" - BLA
"Other Loans" - 10.31
"Other Properties" - 10.31
"Other Taxes" - 2.7
"Permitted Investments" - Deposit Account Agreement
"Physical Plant Standards" - 4.2.46
"Policies" - 7.1.2
"Preferred Equity" - 2.3.2(b)
"Premium" - 2.2.5
"Principal" - 2.1
"Proceeds" - 7.2.2
"Provided Information" - 9.1
"Rate Adjustment" - 2.2.5
"Recourse Distributions" - 10.1
"Registration Statement" - 9.1.3
"Relevant Percentage" - 2.2.5
"Remedial Work" - 5.1.10(b) and 5.2.10(b)
"Rent Roll" - 4.1.26
"Rents" - Mortgage
"Required Improvements" - BLA
"Required Records" - 5.1.9(f) and 5.2.9(f)
"Restated Note" - 2.1.4
"Restoration" - 7.4.1
"Scheduled Defeasance Payments" - 2.3.3
"Securities" - 9.1
"Securities Act" - 9.1.2
"Securitization" - 9.1
"Securitization Expense Subaccount" - Deposit Account Agreement
"Security Agreement" - 2.3.3
"Senior Preferred Equity" - Schedule 2
"Servicing Fee" - 2.6.2
"Special Prepaid Principal" - 2.3.2
"Special Purpose Bankruptcy Remote Entity" - 5.1.15
"Subaccounts" - 3.1
"Substantial Completion" - BLA
"Substantial Completion Date" - BLA
"Successor Borrower" - 2.3.3
"Survey" - BLA
"Tax and Insurance Escrow Fund" - 3.2
"Tax and Insurance Escrow Subaccount" - Deposit Account Agreement
"Third Party Payor's Programs" - 4.3
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"Transaction Documents" - MFFA
"Undefeased Note" - 2.3.3
"Underwriter Group" - 9.1.3
"Warrants" - Schedule 2
"Working Capital Subaccount" - 3.5
1.3 PRINCIPLES OF CONSTRUCTION. Unless otherwise specified,
(i) all references to sections and schedules are to those in this Agreement,
(ii) the words "hereof," "herein" and "hereunder" and words of similar import
refer to this Agreement as a whole and not to any particular provision, (iii)
all definitions are equally applicable to the singular and plural forms of the
terms defined, (iv) the word "including" means "including but not limited to,"
and (v) accounting terms not specifically defined herein shall be construed in
accordance with GAAP.
II. GENERAL
2.1 THE LOAN. Lender shall make and Borrower shall borrow the
Loan on the terms and conditions set forth herein. No amount repaid in respect
of the Loan may be reborrowed except as otherwise permitted pursuant to Section
2.1(c) of the Master Financing Facility Agreement
2.1.1 THE INITIAL LOAN. Lender shall make Advances of the
Initial Loan from and after the date hereof and prior to the Conversion Date, in
accordance with, and subject to the terms and conditions of, the BLA. The
Initial Loan shall be used solely to pay BLA Costs in the BLA Budget and other
amounts as provided in the BLA.
2.1.2 CONVERSION. (a) At least sixty (60) days prior to the
Expected Conversion Date, but not before the expiration of twelve (12) months
following both Substantial Completion and the commencement of operation of the
Property, which at a minimum shall be evidenced by the residents taking
possession of their respective units at the Property and the commencement of
other related services in accordance with the Leases, Borrower and/or Manager
shall furnish to Lender:
(i) a statement of the Total Project Cost, together
with evidence of such costs satisfactory to Lender;
(ii) an Acceptable Appraisal;
(iii) operating statements for a 12-month period
ending not more than ninety (90) days prior
to the Expected Conversion Date in form and
substance reasonably satisfactory to Lender,
which statements indicate whether or not the
Re-sized Amount, as estimated from
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such financial information, will be an amount equal to or exceeding the
then outstanding Debt;
(iv) a structural engineering report acceptable
to Lender in its reasonable discretion from
a firm approved by Lender in its reasonable
discretion, identifying, among other things,
a schedule of anticipated capital
expenditures for the Property and the annual
cost thereof;
(v) if requested by Lender, an update of the
Environmental Report acceptable to Lender in
its reasonable discretion;
(vi) evidence of compliance by the Property with
all applicable Legal Requirements;
(vii) satisfaction of all requirements specified
under Section 5.6 of the BLA for a final
Advance or the waiver of any of such
requirements by Lender;
(viii) the current rent roll for the Property, in
form and substance acceptable to Lender in
its reasonable discretion;
(ix) copies of all Material Leases, material
contracts and Operating Permits (including a
permanent certificate of occupancy)
affecting the Property;
(x) if required by the title insurance company,
an update of the Survey, dated no earlier
than sixty (60) days before the Expected
Conversion Date, and acceptable to Lender in
its discretion;
(xi) a revised or updated title insurance policy
or endorsement with respect to the Lien of
the Mortgage and the Subordinate Mortgage,
reasonably acceptable to Lender in its
discretion; and
(xii) such other information and/or documentation
as Lender reasonably requires.
(b) With respect to Subsection (a)(xi) above, Lender agrees to
cooperate with Borrower and Manager in an effort to minimize the title costs
associated therewith so long as Lender's coverage is customary, reasonable and
similar to those in other transactions of Lender in Texas.
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(c) Unless Borrower or Manager indicates otherwise at the time
of submission in (a) above, such submission shall be deemed to be notice to
Lender of Manager's election to exercise its option rights under the Equity
Option Agreement.
(d) Within fifteen (15) Business Days after receipt of the
documentation required to be furnished under Section 2.1.2(a) (or at any earlier
date, if Lender so decides in its discretion), provided no Default or Event of
Default exists, Lender shall determine (i) the proposed Fixed Rate, (ii) the
proposed Re-sized Amount, (iii) the proposed Monthly Debt Service Payment Amount
and (iv) the proposed Conversion Date (which proposed Conversion Date shall be
the Expected Conversion Date or any earlier date selected by Lender and
Manager), and give notice thereof to Borrower and Manager (a "CONVERSION
NOTICE"). Lender may thereafter give Borrower and Manager one or more further
Conversion Notices changing the Conversion Date, provided that, except as
otherwise provided in Sections 2.1.2(d) and 2.1.6, the Conversion Date may not
be later than the Expected Conversion Date unless Borrower and Manager consent
to such later date. On the Conversion Date, (i) the Interest Rate of the Loan
shall become the Fixed Rate subject to the limitations set forth in the
definition of Interest Rate, if any, (ii) the Principal Amount of the Loan shall
be increased or decreased to the Re-sized Amount, and (iii) the Monthly Debt
Service Payment Amount shall be determined in accordance with this Agreement.
Without waiving any of its other rights and remedies hereunder, Lender may
withdraw or revoke a Conversion Notice by giving notice to Borrower and Manager
at any time prior to the Conversion Date specified therein only if an Event of
Default exists; in which case, Borrower and Manager shall be liable for all
Breakage Fees. If an Event of Default shall exist, Lender may, at its option
(but without any obligation to do so and without waiving any such Event of
Default) and without Borrower's or Manager's consent, give a Conversion Notice.
(e) If (i) Lender is not obligated, and does not elect, to
give a Conversion Notice prior to the Expected Conversion Date, or (ii) Lender
is entitled, and elects, to withdraw or revoke its most recent Conversion
Notice, then Lender shall have the right (but not the obligation), at any time
up to the ninetieth (90th) day following the Expected Conversion Date, (x) to
obtain its own appraisal of the Property at the expense of Borrower or Manager
and/or (y) to elect to give a Conversion Notice specifying as a Re-sized Amount
any amount determined by Lender that is not less than the outstanding Principal
of the Loan (except to the extent, if any, that Lender commits, in such
Conversion Notice, to provide Preferred Equity) and not greater than the maximum
amount of the Initial Loan. Any failure or delay by Lender in exercising any
rights or remedies prior to, during or after such 90-day period shall not be
deemed a waiver by Lender of any such rights or remedies. Notwithstanding
anything to the contrary contained in this Section 2.1.2(d) or elsewhere in this
Agreement, if either of the foregoing clauses (i) or (ii) is applicable, then it
shall be an Event of Default and Lender may exercise any and all of its remedies
under the Loan Documents.
2.1.3 ADDITIONAL LOAN. Lender shall disburse the Additional Loan as
directed by Manager on the Conversion Date, in the amount (if any) by which the
Re-sized Amount
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exceeds the then unpaid Principal of the Initial Loan; provided the following
conditions precedent are satisfied:
(a) Borrower shall execute and deliver to Lender (i)
the Additional Note and (ii) an amendment or supplement to, and/or
consolidation and modification of, the Mortgage, in form and substance
reasonably satisfactory to Lender and Manager, confirming that the
Mortgage secures the Loan (as increased by the Additional Loan);
(b) Borrower shall deliver to Lender an opinion of
Borrower's counsel, in form and substance satisfactory to Lender in its
discretion, with respect to the due authorization, execution, delivery
and enforceability of the Additional Note and such amendment or
supplement to, and/or consolidation and modification of, the Mortgage
and such other matters with respect thereto as are covered with respect
to the Initial Note and the Mortgage in the opinion of Borrower's
counsel being delivered on the date hereof;
(c) Both immediately prior to the making of the
Additional Loan and also after giving effect thereto, no Default shall
have occurred and be continuing;
(d) The representations and warranties made by
Borrower and Manager in this Agreement and in the other Loan Documents
shall be true and correct in all material respects on and as of the
date of the making of the Additional Loan with the same force and
effect as if made on and as of such date;
(e) Borrower and Manager shall deliver to Lender an
Officer's Certificate confirming the satisfaction of the conditions set
forth in the foregoing clauses (c) and (d) applicable to Borrower or
Manager, as the case may be;
(f) Lender shall have received (i) a notice of title
continuation showing that since the date of the then most recent title
continuation provided to Lender under the BLA, there has been no change
in the state of title to the Property, and no survey exceptions with
respect to the Property, not theretofore approved by Lender, together
with other evidence satisfactory to Lender that no mechanic's Liens or
other Liens have been filed and remain filed with respect to the
Property which have not been insured over to Lender's satisfaction and
which will not affect the priority of the Loan, any future Advances, or
the Additional Loan and (ii) an endorsement to the Title Insurance
Policy, which endorsement shall have the effect of (x) updating the
date of the Title Insurance Policy to the date of the making of the
Additional Loan and (y) increasing the coverage of the Title Insurance
Policy by an amount equal to the Additional Loan;
(g) All fees and expenses payable to Lender,
including the fees and expenses referred to in Sections 2.6 and 10.3,
to the extent then due and payable, shall
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have been (or contemporaneously are being) paid in full, and all title
premiums and other title and survey charges shall have been (or
contemporaneously are being) paid in full; and
(h) Lender shall have received such other documents
relating to the Additional Loan as Lender may reasonably request.
If any or all conditions precedent to making the Additional Loan have not been
satisfied on the Conversion Date, Lender may, at its option, waive so many of
such conditions precedent as it may elect (including the making of a request
therefor by Borrower or Manager, if Borrower or Manager has not provided Lender
the Extension Notice. To the extent Lender makes the Additional Loan, the making
of the Additional Loan shall constitute a waiver of such unsatisfied conditions,
unless otherwise set forth in a written notice from Lender to Borrower.
2.1.4 RESTATED DOCUMENTS. (a) Borrower shall, within seven (7)
days after request of Lender, execute and deliver to Lender a restated note,
which is intended to evidence the terms of the Loan from and after the
Conversion Date. The provisions of this section shall be self operative and
Lender shall not be required to obtain any further consent or authorization of
any kind. The restated note that Borrower hereafter executes and delivers, is
referred to herein as the "RESTATED NOTE". Within thirty (30) days of Lender's
receipt of the Restated Note, Lender shall return the originals of the Initial
Note, and, if executed and delivered, the Additional Note, or in lieu thereof,
an affidavit and indemnity from Lender in form and substance reasonably
acceptable to Borrower and Manager in their sole but reasonable discretion that
such Initial Note, and, if executed and delivered, Additional Note, have been
lost.
(b) At Lender's request, Borrower shall promptly execute and
deliver an agreement restating this Agreement, which will reflect the terms of
the Restated Note and the terms and provisions hereof that are applicable after
the Conversion Date, and may omit any terms and provisions hereof that will no
longer be applicable.
2.1.5 SEPARATE NOTES. Lender shall have the right, in its sole
discretion, at any time prior to the Conversion Date, to allocate the Loan into
two or more separate promissory notes, which may have different principal
amounts, different interest rates and different priorities with respect to
repayment; provided, however, that in all events (i) the aggregate principal
amount of such separate promissory notes shall be equal to the aggregate unpaid
Principal, (ii) the blended interest rate derived from such different interest
rates on such separate promissory notes shall reflect the same economic terms as
the economic terms of the Loan immediately preceding such allocation, and (iii)
such separate promissory notes shall have no adverse economic effect on Borrower
and Manager. Borrower shall execute and deliver to Lender, promptly after the
request of Lender, such separate promissory notes and such other documents as
Lender shall reasonably request to effect such allocation, in form reasonably
satisfactory to Lender.
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2.1.6 EXPECTED CONVERSION DATE EXTENSION. Notwithstanding
anything to the contrary contained herein, (a) Manager shall have the unilateral
right to extend the Original Expected Conversion Date to a date which is no
later than ten (10) months following the Original Expected Conversion Date (the
"EXPECTED CONVERSION DATE EXTENSION") by timely submitting the Extension Notice
to Lender. Lender shall approve or disapprove the Expected Conversion Date
Extension within ten (10) Business Days of receiving the Extension Notice and
all the required documentation. Lender shall allow the extension of the Original
Expected Conversion Date to the Extended Expected Conversion Date, provided that
as of the date of the Extension Notice (i) no Event of Default is outstanding,
(ii) the Debt Service Coverage Ratio of the Loan, based on an annualized,
seasonably adjusted, trailing six (6) months computation, is equal to or greater
than 1.2 to 1, (iii) the Loan then sizes to at least the original principal
amount of the Initial Loan, and (iv) Lender incurs no costs or fees in
connection with extending the Original Expected Conversion Date, including no
Breakage Fees. If Lender determines that the conditions specified in clauses
(i), (ii) or (iii) have not been satisfied or that Manager has not made adequate
provision to reimburse Lender for all costs specified in clause (iv), Lender
shall have no obligation to extend the Original Expected Conversion Date and
shall give notice of same to Borrower and Manager. If Lender permits the
Expected Conversion Date Extension, Manager must pay the Extension Fee to Lender
no later than five (5) Business Days after the Extension Confirmation Date. If
Manager fails to pay the Extension Fee as required, then Lender may revoke its
permission granting the extension and the Conversion Date shall revert back to
the Original Expected Conversion Date.
(b) If Lender allows the Expected Conversion Date Extension,
Lender may require that appropriate rate lock protection is provided for the
Loan with respect to the period extending from the Original Expected Conversion
Date until the Extended Expected Conversion Date. In such event, (i) Manager
shall have the election to either terminate the then existing Rate Lock
Agreement and enter into a new Rate Lock Agreement in Lender's then standard
form (the "NEW RATE LOCK AGREEMENT") or modify the existing Rate Lock Agreement
(the "MODIFIED RATE LOCK AGREEMENT"), all on such terms and conditions as are
satisfactory to Lender and subject to Manager's obligation to pay any Breakage
Fees or other transactional costs incurred in connection therewith, and (ii)
Manager shall cause Guarantor to execute and deliver to Lender a guaranty of
Manager's obligations under any New Rate Lock Agreement or Modified Rate Lock
Agreement, in Lender's then standard form.
2.2 INTEREST; MONTHLY PAYMENTS.
2.2.1 GENERALLY. (a) From the date hereof to but not including
the Optional Prepayment Date, Borrower shall pay interest on the unpaid
Principal and all other amounts due to Lender under the Loan Documents at the
Interest Rate. From and after the Optional Prepayment Date, interest on the
unpaid Principal and all other amounts due to Lender under the Loan Documents
shall accrue at the Revised Interest Rate and be payable as provided in Sections
2.2.2 and 2.2.3(b).
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(b) On July 11, 1998, and each Payment Date thereafter in the
period ending on the Conversion Date, if there are insufficient funds in the
Deposit Account for Lender to pay itself interest in accordance with this
Agreement or the BLA, Borrower shall pay interest on the unpaid Principal
accrued at the Interest Rate during the Interest Period immediately preceding
such Payment Date.
(c) On the first Payment Date after the Conversion Date and
each Payment Date thereafter through and including the Maturity Date, the
Principal and interest thereon at the Interest Rate shall be payable in equal
monthly installments each in the amount (the "MONTHLY DEBT SERVICE PAYMENT
AMOUNT"), determined by Lender in accordance with the provisions of this
Agreement, required to fully amortize the Principal by the Stated Maturity Date,
based on the Interest Rate and the Amortization Schedule. The Monthly Debt
Service Payment Amount due on any Payment Date shall first be applied to the
payment of interest accrued from the eleventh (11th) day of the month preceding
the Payment Date through the tenth (10th) day of the month in which the Payment
Date occurs, notwithstanding that the Payment Date may not have been the
eleventh (11th) day of such month because the eleventh (11th) day of such month
is not a Business Day. The remainder of such Monthly Debt Service Payment Amount
shall be applied to the reduction of the unpaid Principal.
2.2.2 ACCRUED INTEREST. From and after the Optional Prepayment
Date, all interest shall accrue in respect of the Debt at the Revised Interest
Rate ("ACCRUED INTEREST"). To the extent, for any period, that Accrued Interest
at the Revised Interest Rate exceeds interest required to be paid hereunder for
such period at the Interest Rate, Borrower shall only be required to pay such
Accrued Interest after the outstanding principal balance of the Note has been
paid in full. Unpaid Accrued Interest shall accrue interest at the Revised
Interest Rate.
All Accrued Interest shall be due and payable on the Maturity Date.
2.2.3 PROPERTY CASH FLOW ALLOCATION. (a) Commencing on the
Substantial Completion Date and continuing on each Payment Date thereafter
through and including the Conversion Date, except during the continuance of an
Event of Default, any Rents deposited into the Deposit Account or received by
Borrower or Manager during the immediately preceding Interest Period shall be
applied as follows in the following order of priority: (i) First, to pay any and
all ground rents, if any, (ii) Second, to make required payments (if any) to the
Tax and Insurance Escrow Fund; (iii) Third, to Lender to pay the interest due on
such Payment Date (including, if applicable, interest at the Default Rate); (iv)
Fourth, to make payments for Approved Operating Expenses; (v) Fifth, to make
required payments (if any) to the Capital Reserve Fund; and (vi) Lastly,
payments of any excess amounts to the Cash Collateral Subaccount.
(b) Commencing on the first Payment Date after the Conversion
Date and continuing on each Payment Date thereafter through and including the
Optional Prepayment Date, except during the continuance of an Event of Default,
any Rents received by Borrower or Manager (and, during a Cash Management Period,
Rents deposited into the Deposit Account)
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during the immediately preceding Interest Period shall be applied as follows in
the following order of priority: (i) First, to pay any and all ground rents, if
any; (ii) Second, to make required payments to the Tax and Insurance Escrow
Fund; (iii) Third, to Lender to pay the Monthly Debt Service Payment Amount
(plus, if applicable, interest at the Default Rate); (iv) Fourth, to make
required payments to the Capital Reserve Fund; (v) Fifth, during a Cash
Management Period, payments for Approved Operating Expenses; (vi) Sixth, during
a Cash Management Period, to make required payments for any working capital
reserves in accordance with the Annual Budget to the Working Capital Subaccount;
and (vii) Lastly, payments to Manager of any excess amounts.
(c) Commencing on the first Payment Date after the Optional
Prepayment Date and continuing on each Payment Date thereafter until the entire
Debt has been paid in full, except during the continuance of an Event of
Default, any Rents deposited into the Deposit Account (or otherwise received by
Borrower or Manager) during the immediately preceding Interest Period shall be
applied by Lender as follows in the following order of priority: (i) First, to
pay any and all ground rents, if any; (ii) Second, to make required payments to
the Tax and Insurance Escrow Fund; (iii) Third, to Lender to pay the Monthly
Debt Service Payment Amount (plus, if applicable, interest at the Default Rate);
(iv) Fourth, to make required payments to the Capital Reserve Fund; (v) Fifth,
payments for Approved Operating Expenses; (vi) Sixth, payments to Lender to
prepay the unpaid Principal until paid in full; (vii) Seventh, payments to
Lender to be applied against Accrued Interest and interest accrued thereon; and
(viii) Lastly, payments to Manager of any excess amounts.
(d) The failure of Borrower or Manager to make all of the
payments required under clauses (i) through (vi) of Section 2.2.3(a), or clauses
(i) through (v) of Section 2.2.3(b), or clause (i) through (v) of Section
2.2.3(c), in full on each Payment Date shall constitute a Default under this
Agreement. However, the failure of Borrower to prepay any unpaid Principal or to
pay any Accrued Interest under clause (vi) or (vii) of Section 2.2.3(c) on a
Payment Date as a result of insufficient Rents for such payment shall not
constitute a Default hereunder. All Accrued Interest, unpaid Principal, and all
other amounts due to Lender under the Loan Documents shall nonetheless be due
and payable on the Maturity Date.
(e) During the continuance of an Event of Default, Lender may,
in its discretion, permit the application of Rents in the order of priority set
forth in Section 2.2.3(b) or any other order, and to any portion or portions of
the Debt, as Lender shall determine.
2.2.4 DEFAULT RATE. Upon an Event of Default and during the
continuance thereof, the entire unpaid Principal shall bear interest at the
Default Rate, and shall be payable upon demand from time to time, to the extent
permitted by applicable law. Payment or acceptance of interest at the Default
Rate is not a permitted alternative to timely payment and shall not constitute a
waiver of any Default or Event of Default or an amendment to this Agreement or
any other Loan Document and shall not otherwise prejudice or limit any rights or
remedies of Lender.
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2.2.5 RATE ADJUSTMENT. At Lender's election, which may be made
at any time on or before the Conversion Date by notice to and reasonable consent
of Manager, which consent must be made within five (5) days of receipt of
Lender's notice by Manager, otherwise it shall have been deemed to have been
made, the Interest Rate for the period from and after the Conversion Date to but
not including the Optional Prepayment Date shall be changed to a rate per annum
(the "ALTERNATIVE RATE") determined by Lender in its reasonable discretion in
accordance with this Agreement. If Lender so elects to make such change in the
Interest Rate (the "RATE ADJUSTMENT"), and Manager consents to such election or
is deemed to have approved such election as set forth above, then, on the
Conversion Date (after giving effect to Sections 2.1.3 and 2.3.2(b)):
(i) Lender shall pay to Borrower a premium (the
"PREMIUM") in an amount equal to the amount by which
the unpaid Principal exceeds the Alternative
Principal (as defined below); and
(ii) Borrower shall apply the Premium, and hereby
irrevocably directs Lender to retain the Premium for
application, to the prepayment of Principal in the
amount of the Premium.
The "ALTERNATIVE PRINCIPAL" shall be the amount which, based on the Alternative
Amortization Schedule and the Alternative Rate, results in the same Monthly Debt
Service Payment Amount and Effective Balloon Amount that would have been
applicable without a Rate Adjustment. If, after a Rate Adjustment is made, the
Loan is prepaid in whole or in part prior to the Optional Prepayment Date in
circumstances where, pursuant to the applicable provisions of the Loan Documents
(such as, for example, Section 7.4.2 hereof in certain events) no Yield
Maintenance Premium is due, then Borrower shall nevertheless pay to Lender (in
addition to the prepaid Principal and accrued interest), as a refund of the
unearned portion of the Premium, an amount equal to the Relevant Percentage of
(A) the Hypothetical Principal minus (B) the unpaid Principal (before accounting
for such prepayment). For purposes of the foregoing, (x) the "RELEVANT
PERCENTAGE" shall mean the percentage of the unpaid Principal that is being so
prepaid, and (y) the "HYPOTHETICAL PRINCIPAL" shall mean the Principal balance
that would be outstanding on the date of such prepayment if the Rate Adjustment
had not been made (and Monthly Debt Service Payment Amounts were paid when due).
2.3 LOAN REPAYMENT AND DEFEASANCE.
2.3.1 REPAYMENT. Borrower shall repay any unpaid Principal in
full and all other sums due to Lender under the Loan Documents on the Maturity
Date, together with interest thereon to (but excluding) the date of repayment.
Other than as set forth in Sections 2.2.3, 2.3.2, 2.3.3, 3.6, 3.7, 7.2.1, and
7.4.2 of this Agreement, Section 2.1(c) of the Master Financing Facility
Agreement, and Sections 5 and 6 of the Mortgage, Borrower shall have no right to
prepay all or any portion of the Principal before the Optional Prepayment Date.
From
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and after the Optional Prepayment Date, the Principal may be prepaid in whole or
in part without penalty or premium. If Borrower prepays the entire Principal
within thirty (30) days of the Optional Prepayment Date, then all additional
sums paid by Borrower to Lender due to the fact the repayment was made after the
Optional Prepayment Date, including interest at the Revised Interest Rate, shall
be refunded by Lender to Borrower.
2.3.2 MANDATORY PREPAYMENTS. (a) The Loan is subject to
mandatory prepayment, without premium or penalty, in certain instances of
Insured Casualty or Condemnation (each a "CASUALTY/CONDEMNATION PREPAYMENT"), in
the manner and to the extent set forth in Section 7.4.2. Each
Casualty/Condemnation Prepayment shall be made on a Payment Date and include all
accrued and unpaid interest on the Principal prepaid up to but not including
such Payment Date.
(b) If, as of the Conversion Date (before giving effect to a
Rate Adjustment), the unpaid Principal exceeds the Re-sized Amount (the
"CONVERSION SHORTFALL"), then, on the Conversion Date, except to the extent
Borrower, at the direction of Manager, elects to have Lender provide Senior
Preferred Equity, Borrower shall (i) prepay a portion of the Principal equal to
such Conversion Shortfall (the "SPECIAL PREPAID PRINCIPAL") and (ii) pay to
Lender (A) interest accrued at the Interest Rate on the Special Prepaid
Principal to (but not including) the date of such payment and (B) Lender's
Expenses, if any. Except for Lender's Expenses, if any, such prepayment shall be
without any Yield Maintenance Premium or other prepayment consideration. If
Borrower, at the direction of Manager, elects to have Lender finance Senior
Preferred Equity, Lender shall make the Senior Preferred Equity investment in
Borrower in an amount as calculated in accordance with the terms of Schedule 2.
If Borrower, at the direction of Manager, elects to have Lender finance Senior
Preferred Equity, Lender shall have the right, in lieu of investing Senior
Preferred Equity solely in the Borrower under this Agreement, to invest Senior
Preferred Equity indirectly in Borrower and in more than one Other Borrower by
giving notice of such election to Borrower, Manager and each such Other
Borrower. If Borrower, at the direction of Manager, makes such an election,
Borrower shall, within twenty (20) days after such notice, (i) form a limited
liability company or limited partnership that is an Affiliate of Borrower and is
a Special Purpose Bankruptcy Remote Entity whose sole managing member or sole
general partner is a Special Purpose Bankruptcy Remote Entity wholly owned by
Borrower Owner (an "UMBRELLA ENTITY"), (ii) transfer or cause the transfer of
all equity interests in Borrower and each Other Borrower, other than interests
owned by the Borrower Owner thereof, to such Umbrella Entity, and (iii) Borrower
and each Other Borrower shall amend its partnership or operating agreement or
articles of incorporation to provide that all distributions of cash from
whatever source will be made to such Umbrella Entity so long as any Preferred
Equity in such Umbrella Entity is outstanding. If the Senior Preferred Equity,
when combined with the Re-sized Amount and the amount prepaid by Borrower, if
any, does not equal the unpaid Principal, any interest accrued at the Interest
Rate on the Special Prepaid Principal, plus Lender's Expenses, if any, and all
fees and costs payable by Borrower hereunder on the Conversion Date, Lender
shall have the right, at its option (but not the obligation), to make (or cause
its Affiliate to make) a junior preferred equity investment in Borrower (the
"JUNIOR
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PREFERRED EQUITY", collectively with the Senior Preferred Equity, the "PREFERRED
EQUITY") on the Conversion Date in an amount of up to (but not exceeding) the
sum of the remaining Conversion Shortfall, Lender's Expenses, if any, and all
fees and costs payable by Borrower hereunder on the Conversion Date (including
the Additional Loan Structuring Fee payable pursuant to Section 2.6.3 and legal
fees and other costs incurred in connection with the transactions hereunder on
the Conversion Date). The investment of the Preferred Equity shall be on the
terms set forth in Schedule 2. Borrower shall apply the proceeds of the
Preferred Equity to the prepayment of the Special Prepaid Principal, any
interest accrued at the Interest Rate on the Special Prepaid Interest, and the
payment of Lender's Expenses, if any, and such other fees and costs described
above. Borrower and the partners in Borrower shall execute and deliver such
documents (including an amendment to Borrower's partnership agreement) as Lender
shall reasonably require in order to evidence and confirm Lender's rights with
respect to the Preferred Equity. Borrower shall be obligated on the Conversion
Date to prepay the Special Prepaid Principal, and to pay any interest accrued at
the Interest Rate on the Special Prepaid Interest, Lender's Expenses, if any,
and the other fees and costs described above, whether or not Lender elects to
provide any Preferred Equity.
(c) On the Conversion Date, Borrower shall prepay a portion of
the Principal in an amount equal to the Premium, if Lender elects to make the
Rate Adjustment. Such prepayment shall be without any Yield Maintenance Premium
or other prepayment consideration.
2.3.3 VOLUNTARY DEFEASANCE OF THE NOTE. (a) Subject to the
terms and conditions set forth in this Section 2.3.3, Borrower may defease all
or any portion of the Principal (hereinafter, a "DEFEASANCE"); provided, that no
such Defeasance may occur after the Conversion Date and prior to the Release
Date and provided from time to time no Defeasance shall be required from and
after the Optional Prepayment Date. Each Defeasance shall be subject, in each
case, to the satisfaction of the following conditions precedent:
(i) Borrower shall provide not less than thirty (30)
days prior notice to Lender specifying a Payment Date (the "DEFEASANCE
DATE") on which the Defeasance is to occur. Such notice shall indicate
the Principal to be defeased.
(ii) Borrower shall pay to Lender (A) all accrued and
unpaid interest on the unpaid Principal to and including the Defeasance
Date, (B) all other sums, not including scheduled interest or Principal
payments, then due under the Loan Documents, (c) the required
Defeasance Deposit for such Defeasance, and (D) all reasonable costs
and expenses of Lender incurred in the Defeasance, including any costs
and expenses associated with a release of Lien as provided in Section
2.4 and reasonable attorney's fees and expenses. A voluntary Defeasance
of the Loan by Borrower is required to be made on a Payment Date. If
for any reason the Defeasance Date is not a Payment Date, Borrower
shall also pay interest that would have accrued on the Note to but not
including the next Payment Date.
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(iii) No Event of Default shall exist.
(iv) If only a portion of the unpaid Principal is the
subject of the Defeasance, Borrower shall execute and deliver all
necessary documents to amend and restate the Note and issue two
substitute notes: one having a principal balance equal to the defeased
portion of the original Note (the "DEFEASED NOTE") and the other having
a principal balance equal to the undefeased portion of the original
Note (the "UNDEFEASED NOTE"). The Defeased Note and Undefeased Note
shall have terms identical to the terms of the Note, except for the
principal balance. A Defeased Note cannot be the subject of any further
Defeasance.
(v) If a Subordinate Mortgage encumbers the Property
at the time Borrower elects to defease the Loan as provided in this
Section 2.3.3, the Defeasance Deposit that Borrower must provide shall
be equal to the Defeasance Deposit multiplied by 1.25. In addition, if
a Subordinate Mortgage encumbers the Property, the Defeasance will be
permitted only if all of the Other Properties have a Debt Service
Coverage Ratio of not less than the greater of (a) the Debt Service
Coverage Ratio on the Conversion Date or (b) the Debt Service Coverage
Ratio immediately before the Defeasance. The sum paid in excess of the
Defeasance Deposit shall be used to defease the Other Loans.
(vi) Borrower shall execute and deliver a security
agreement, in form and substance satisfactory to Lender, creating a
first priority lien on the Defeasance Deposit and the U.S. Obligations
purchased with the Defeasance Deposit in accordance with this Section
2.3.3 (the "SECURITY AGREEMENT").
(vii) Borrower shall deliver (A) an opinion of
counsel for Borrower in form satisfactory to Lender in its discretion
stating, among other things, that without qualification, (1) Lender has
a perfected first priority security interest in the Defeasance Deposit
and the U.S. Obligations delivered by Borrower and (2) such U.S.
Obligations have been validly assigned to the REMIC Trust, (B) if
required by the applicable Rating Agencies, a non-consolidation opinion
with respect to the Successor Borrower in form and substance
satisfactory to Lender and the applicable Rating Agencies, (C) an
Officer's Certificate certifying that the requirements set forth in
this Section 2.3.3(a) have been satisfied, (D) a certificate from an
Independent certified public accountant certifying that the amounts of
the U.S. Obligations comply with all of the requirements of this
Section 2.3.3 of this Agreement, and (E) such other certificates,
documents or instruments as Lender may reasonably request.
(viii) Lender shall receive evidence in writing from
the applicable Rating Agencies to the effect that such Defeasance will
not result in a qualification, withdrawal or downgrading of the ratings
in effect immediately prior to such Defeasance for the Securities then
outstanding.
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(b) In connection with each Defeasance, Borrower hereby
appoints Lender as its agent and attorney-in-fact for the purpose of using the
Defeasance Deposit to purchase U.S. Obligations (which purchases, if made by
Lender, shall be made by Lender on an arms-length basis at then prevailing
market rates) which provide payments on or prior to, but as close as possible
to, all successive Payment Dates after the Defeasance Date through and including
the Optional Prepayment Date, for the entire unpaid Principal in the case of a
total Defeasance, or for the principal amount of the Defeased Note, in the case
of a Defeasance for only a portion of the unpaid Principal (including, on the
Optional Prepayment Date, the unpaid Principal of either the Note or the
Defeased Note), and in amounts equal to the scheduled payments of Principal and
interest due on such dates under the Note, in the event of a total Defeasance,
or the Defeased Note in the event of a partial Defeasance, as applicable (the
"SCHEDULED DEFEASANCE PAYMENTS"). Borrower, pursuant to the Security Agreement
or other appropriate document, shall irrevocably authorize and direct that the
payments received from the U.S. Obligations be made directly to Lender and
applied to satisfy the obligations of Borrower under the Note or the Defeased
Note, as applicable. Any portion of the Defeasance Deposit in excess of the
amount necessary to purchase the U.S. Obligations required by this Section
2.3.3(b) and to satisfy Borrower's obligations under Section 2.3 shall be
remitted to Borrower. Any amounts received in respect of the U.S. Obligations in
excess of the amounts necessary to make monthly payments pursuant to Section 2.2
shall be retained by Lender until payment in full of the Debt. Semiannual
payments in respect of U.S. Obligations, if any, shall be applied to payments
under the Note or the Defeased Note, as applicable, as the same become due
thereunder.
(c) If requested by Borrower in connection with any Defeasance
under this Section 2.3.3, Lender shall establish or designate a successor entity
(the "SUCCESSOR BORROWER") and Borrower shall transfer and assign all
obligations, rights and duties under and to the Note or the Defeased Note, as
applicable, together with the pledged U.S. Obligations, to such Successor
Borrower. The obligation of Lender to establish or designate a Successor
Borrower shall be retained by Lender notwithstanding the sale or transfer of
this Agreement unless such obligation is specifically assumed by the transferee.
Such Successor Borrower shall assume the obligations under the Note or the
Defeased Note, as applicable, and the Security Agreement, and Borrower shall be
relieved of its obligations thereunder and Manager, Other Borrower, and
Guarantor shall be released from their obligations hereunder and any other Loan
Documents. Borrower shall pay $1,000 to any such Successor Borrower as
consideration for assuming the obligations under the Note or the Defeased Note,
as applicable, and the Security Agreement. Notwithstanding anything in this
Agreement to the contrary, no other assumption fee shall be payable upon a
transfer of the Note or the Defeased Note in accordance with this Section 2.3.3,
but Borrower shall pay all costs and expenses incurred by Lender, including
Lender's reasonable attorneys' fees and expenses, incurred in connection
therewith. Notwithstanding anything in this Agreement to the contrary, if the
Yield Maintenance Premium is due as a result of the acceleration of the
Indebtedness after the occurrence of an Event of Default, Lender shall have the
right to receive and collect the Yield Maintenance Premium but shall have no
obligation to purchase U.S. Obligations or otherwise comply with this Section
2.3.3.
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2.4 RELEASE OF PROPERTY. Except as set forth in this Section
2.4, no repayment, prepayment or defeasance of all or any portion of the Note
shall cause, give rise to a right to require, or otherwise result in, the
release of the Lien of the Mortgage, any Other Properties Subordinate Mortgage,
or the Subordinate Mortgage.
2.4.1 RELEASE ON DEFEASANCE. If Borrower has elected to
defease the Note in its entirety, and the requirements of Section 2.3.3 have
been satisfied, the Property, Borrower, Guarantor, Manager and Other Borrower
shall be released from the Lien of the Mortgage, the Subordinated Mortgage, and
the Other Properties Subordinate Mortgage (only to the extent it secures this
Loan), the Guaranties, the Non-Recourse Guaranty, and all other Loan Documents,
and the U.S. Obligations pledged pursuant to the Security Agreement shall be the
sole source of collateral securing the Debt. In connection with such release,
Borrower or Manager shall submit to Lender, not less than twenty (20) days prior
to the Defeasance Date, a form of release or releases for execution by Lender
appropriate in the State and satisfactory to Lender in its reasonable
discretion, and all other documentation Lender reasonably requires to be
delivered by Borrower or Manager, together with an Officer's Certificate
certifying that such documentation (i) is in compliance with all Legal
Requirements, and (ii) will effect such release in accordance with the terms of
this Agreement.
2.4.2 RELEASE ON PAYMENT IN FULL. Lender shall, upon the
written request and at the expense of Borrower or Manager, upon payment in full
of the Debt in accordance herewith, release the Lien of the Mortgage, the Other
Properties Subordinate Mortgage (only to the extent it secures this Loan), the
Subordinate Mortgage, and all other Loan Documents if not theretofore released
and, upon Borrower's or Manager's request, Lender will notify all banks
identified by Borrower or Manager that it no longer has any interest in the
accounts and will release all other collateral and funds of Borrower and/or
Manager.
2.5 PAYMENTS AND COMPUTATIONS.
2.5.1 MAKING OF PAYMENTS. Each payment by Borrower hereunder
or under the Note shall be made in funds settled through the New York Clearing
House Interbank Payments System or other funds immediately available to Lender
by 12:00 p.m., New York City time, on the date such payment is due, to Lender by
deposit to such account as Lender may designate by written notice to Borrower
and Manager. Whenever any payment hereunder or under the Note shall be stated to
be due on a day that is not a Business Day, such payment shall be made on the
first Business Day thereafter.
2.5.2 COMPUTATIONS. Interest payable hereunder or under the
Note shall be computed on the actual number of days elapsed in each year over a
360-day year, compounded monthly.
2.5.3 LATE PAYMENT CHARGE. If any Principal, interest, or other sum due
under any Loan Document is not paid by Borrower or Manager within the applicable
grace period
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(unless such payment is not made in connection with an acceleration of the Debt
by Lender), Borrower shall pay to Lender an amount equal to the lesser of five
percent (5%) of such unpaid Principal, interest, or other sum or the maximum
amount permitted by applicable law, in order to defray the expense incurred by
Lender in handling and processing such delinquent payment and to compensate
Lender for the loss of the use of such delinquent payment. Such amount shall be
secured by the Loan Documents.
2.6 FEES.
2.6.1 DRAW FEES. Simultaneously with each Advance of the
Initial Loan made by Lender, Borrower shall pay to Lender a draw fee (the "DRAW
FEE") of .50% of such Advance.
2.6.2 SERVICING FEE. Borrower and/or Manager shall pay to
Lender or, if so directed by Lender, to Servicer, a servicing and administration
fee (the "SERVICING FEE") from Loan proceeds in an amount equal to either (i)
prior to the Substantial Completion Date for the Property, Three Thousand and
00/100 Dollars ($3,000.00) for each Advance made with respect to the Property,
which shall be paid concurrently with such Advance, or (ii) upon and after the
Substantial Completion Date with respect to the Property, One Thousand Two
Hundred Fifty and 00/100 Dollars ($1,250.00), which payment shall be paid on
each Payment Date occurring on and after such Substantial Completion Date to and
including the Conversion Date.
2.6.3 STRUCTURING FEE UPON CONVERSION. On the Conversion Date,
Borrower and/or Manager shall pay to Lender an additional structuring fee (the
"ADDITIONAL LOAN STRUCTURING FEE") from Loan proceeds in an amount equal to one
percent (1.0%) of the greater of (i) the Re-sized Amount or (ii) the Initial
Loan (after giving effect to the prepayment of the Special Prepaid Principal, if
any).
2.6.4 ADVANCES. Borrower and Manager hereby irrevocably
authorize and direct Lender to pay itself each of the fees payable hereunder out
of the proceeds of Advances being made at or after the time such fee is due.
2.7 TAXES. Any and all payments by Borrower hereunder and
under the other Loan Documents shall be made free and clear of and without
deduction for any and all present or future taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto, excluding
taxes imposed on Lender's income, and franchise taxes imposed on Lender by the
law or regulation of any Governmental Authority (all such non-excluded taxes,
levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to in this Section 2.7 as "APPLICABLE TAXES"). If Borrower
shall be required by law to deduct any Applicable Taxes from or in respect of
any sum payable hereunder to Lender, (i) the sum payable shall be increased as
may be necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section 2.7), Lender
receives an amount equal to the sum it would have received had no such
deductions been made,
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(ii) Borrower shall make such deductions and (iii) Borrower shall pay the full
amount deducted to the relevant taxation authority or other authority in
accordance with applicable law. Borrower also agrees to pay any present or
future stamp or documentary taxes or any other excise or property taxes, charges
or similar levies which arise from any payment made hereunder or from the
execution, delivery or recordation of, or otherwise with respect to, this
Agreement or any other Loan Document ("OTHER TAXES"). Borrower shall indemnify
Lender for the full amount of Applicable Taxes or Other Taxes (including any
Applicable Taxes or Other Taxes imposed by any jurisdiction on amounts paid or
payable under this Section 2.7) paid by Lender and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto,
whether or not such Applicable Taxes or Other Taxes were correctly or legally
asserted. Payments pursuant to this Section 2.7 shall be made within fifteen
(15) days after the date Lender makes written demand therefor provided Borrower
and/or Manager shall have the right to contest same as provided in Sections
5.1.2 and 5.2.2. IT IS EXPRESSLY ACKNOWLEDGED AND AGREED BY BORROWER AND MANAGER
THAT THE INDEMNITY CONTAINED IN THIS SECTION PROTECTS LENDER AND DEED OF TRUST
TRUSTEE FROM THE CONSEQUENCES OF LENDER AND SUCH TRUSTEE'S ACTS OR OMISSIONS,
INCLUDING, WITHOUT LIMITATION, THE NEGLIGENT ACTS OR OMISSIONS OF LENDER AND/OR
SUCH TRUSTEE, TO THE EXTENT PROVIDED BY LAW; PROVIDED, HOWEVER, THAT NOTHING
CONTAINED HEREIN SHALL BE DEEMED TO RELIEVE LENDER OR SUCH TRUSTEE FROM
LIABILITY DUE TO ITS GROSS NEGLIGENCE.
2.8 BREAKAGE INDEMNITY. Borrower shall indemnify Lender
against any loss or expense which Lender may actually sustain or incur as a
consequence of (i) any payment or prepayment of the Loan or any portion thereof
made on a date other than a Payment Date, (ii) any default in payment or
prepayment of the Principal or any part thereof or interest accrued thereon, as
and when due and payable (at the date thereof or otherwise, and whether by
acceleration or otherwise), (iii) any delay in making a requested Advance by
reason of Borrower's act or failure to act or failure to satisfy a condition
precedent to the making of such Advance and (iv) the occurrence of any Event of
Default, in each case including any loss or expense actually sustained or
incurred or determined by Lender to be actually sustained or incurred in
liquidating or redeploying deposits from third parties acquired to effect or
maintain the Loan or any part thereof. Such loss or expense shall include any
Yield Maintenance Premium payable pursuant to the Note, as well as an amount
equal to the excess, if any, as determined by Lender of (A) its cost of
obtaining the funds for the Loan or portion thereof being paid or prepaid for
the period from the date of such payment or prepayment to the last day of the
then current Interest Period over (B) the amount of interest (as determined by
Lender) that would be realized by Lender in redeploying the funds so paid or
prepaid for the balance of such Interest Period. A certificate of Lender setting
forth any amount or amounts which it is entitled to receive pursuant to this
Section 2.8 shall be binding and conclusive absent manifest error. IT IS
EXPRESSLY ACKNOWLEDGED AND AGREED BY BORROWER AND MANAGER THAT THE INDEMNITY
CONTAINED IN THIS SECTION PROTECTS LENDER AND DEED OF TRUST TRUSTEE FROM THE
CONSEQUENCES OF
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LENDER AND SUCH TRUSTEE'S ACTS OR OMISSIONS, INCLUDING, WITHOUT LIMITATION, THE
NEGLIGENT ACTS OR OMISSIONS OF LENDER AND/OR SUCH TRUSTEE, TO THE EXTENT
PROVIDED BY LAW; PROVIDED, HOWEVER, THAT NOTHING CONTAINED HEREIN SHALL BE
DEEMED TO RELIEVE LENDER OR SUCH TRUSTEE FROM LIABILITY DUE TO ITS GROSS
NEGLIGENCE.
2.9 SECURITY FOR THE LOAN. The Note and Borrower's and
Manager's obligations hereunder and under the other Loan Documents shall be
secured by the Mortgage, the Other Properties Subordinate Mortgages, the
Guaranties, the Assignments of Leases, the Assignments of Agreements, the Other
Non-Recourse Guarantees, and the security interest and Liens granted in this
Agreement and in the other Loan Documents.
2.10 BORROWER'S NOTE. (a) Borrower's obligation to pay the
principal of and interest on the Loan (including Late Payment Charges, Default
Rate interest, and the Yield Maintenance Premium, if any), shall be evidenced by
this Agreement and by the Note, duly executed and delivered by Borrower. The
Note shall be payable as to principal, interest, Late Payment Charges, Default
Rate interest and Yield Maintenance Premium, if any, as specified in this
Agreement, with a final maturity on the Maturity Date. Borrower shall pay all
outstanding Debt on the Maturity Date.
(b) Lender is hereby authorized, at its sole option, to
endorse on a schedule attached to the Note (or on a continuation of such
schedule attached to the Note and made a part thereof) an appropriate notation
evidencing the date and amount of each payment of Principal, interest, Late
Payment Charges, Default Rate interest and Yield Maintenance Premium, if any, in
respect thereof, which Note and Schedule shall be made available to Borrower and
Manager, at Borrower's and/or Manager's sole cost and expense on reasonable
advance notice, for examination at Lender's offices.
III. CASH MANAGEMENT; ESCROWS AND RESERVES
3.1 CASH MANAGEMENT ARRANGEMENTS. All Rents shall be
transmitted directly by tenants of the Property into one or more accounts (the
"CLEARING ACCOUNTS") maintained by Borrower or Manager but controlled by Lender
at one or more banks selected by Manager (the "CLEARING BANKS") all in
accordance with the Clearing Account Agreement. If any tenants pay their Rents
directly to either the Borrower or the Manager, all Rents received by Borrower
or Manager shall be deposited into a Clearing Account within one (1) Business
Day of receipt. Except during a Cash Management Period, funds deposited into the
Clearing Accounts shall be swept by the Clearing Banks on a daily basis into
Manager's operating account at a Clearing Bank. During a Cash Management Period,
such funds shall be swept by the Clearing Banks on a daily basis into an account
at the Deposit Bank controlled by Lender (a "DEPOSIT ACCOUNT") and applied and
disbursed in accordance with this Agreement and the Deposit
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Account Agreement and, pending such application and disbursement, will be
invested in Permitted Investments selected by Manager, with any earnings thereon
accruing for the benefit of Borrower. If the Deposit Account Agreement is no
longer in effect when a Cash Management Period resumes, then, within fifteen
(15) days after Lender's request, Borrower and Manager shall enter into one or
more deposit account agreements among Borrower, Manager, Lender and the Deposit
Bank, in Lender's then current form revised in accordance with this Agreement,
providing for the receipt and disbursement of Rents by the Deposit Bank in
accordance herewith. The Deposit Account and all subaccounts thereof shall at
all times be Eligible Accounts (such subaccounts, and any other accounts or
subaccounts at the Deposit Bank, other than the Deposit Account, are referred to
herein as "SUBACCOUNTS"). The "CASH MANAGEMENT PERIOD" shall mean and consist of
(i) the period from the Loan Closing Date to the Conversion Date, (ii) the
period from the Optional Prepayment Date to the end of the Term, (iii) the
period from the occurrence of a monetary Event of Default to the date following
the first (1st) anniversary of the curing of such monetary Event of Default on
which the Debt Service Coverage Ratio is at least equal to 1.27x, (iv) the
period from the occurrence of a non-monetary Event of Default to the date such
non-monetary Event of Default is cured; provided, however, if more than two (2)
non-monetary Events of Default occur in any twelve (12) month period, then
commencing upon the occurrence of a third (3rd) non-monetary Event of Default to
the date following the first (1st) anniversary of the curing of such
non-monetary Event of Default on which the Debt Service Coverage Ratio is at
least equal to 1.27x, (v) if the audited financial statements provided to Lender
pursuant to Section 5.1.9 and 5.2.9 indicate that less than ninety percent (90%)
of the actual Rents from the Property have been deposited into the Clearing
Account, then the period from such determination to the date following the first
(1st) anniversary of such determination, and (vi) the period from the investment
of Preferred Equity until the payment in full of the Preferred Equity and the
Preferred Yield (as defined in Schedule 2) thereon. Lender hereby agrees to
deliver to the Clearing Bank and the Deposit Bank written notice that the
particular Cash Management Period has ended no later than fifteen (15) days
following the end of a Cash Management Period, together with instructions to
remit all sums remaining in Manager's Subaccount as directed, to Manager.
3.2 TAX AND INSURANCE ESCROW FUND. Borrower shall pay to
Lender on each Payment Date after Substantial Completion (i) one-twelfth of the
Taxes that Lender estimates, in its reasonable discretion, will be payable
during the next twelve (12) months in order to accumulate with Lender sufficient
funds to pay all such Taxes at least thirty (30) days prior to their respective
due dates, and (ii) one-twelfth (1/12th) of the Insurance Premiums that Lender
estimates will be payable for the renewal of the coverage afforded by the
Policies upon the expiration thereof in order to accumulate with Lender
sufficient funds to pay all such Insurance Premiums at least thirty (30) days
prior to the expiration of the Policies (the amounts paid under the foregoing
clauses (i) and (ii), less disbursements thereof pursuant hereto, being called
the "TAX AND INSURANCE ESCROW FUND"). Lender will apply the Tax and Insurance
Escrow Fund to payments of Taxes and Insurance Premiums required to be made
after Substantial Completion by Borrower and/or Manager pursuant to Sections
5.1.2, 5.2.2 and 7.1, or to reimburse Borrower and/or Manager for such amounts
upon presentation of evidence of payment and an Officer's
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Certificate in form and substance reasonably satisfactory to Lender; subject,
however, to Borrower's and/or Manager's right to contest Taxes in accordance
with Sections 5.1.2 and 5.2.2. In making any payment relating to the Tax and
Insurance Escrow Fund, Lender may do so, prior to an Event of Default, in
accordance with Manager's direction if there is a contest in progress (provided
Borrower and/or Manager is following the Contest Procedures), and subsequent to
an Event of Default according to any bill, statement or estimate procured from
the appropriate public office (with respect to Taxes) or insurer or agent (with
respect to Insurance Premiums), without inquiry into the accuracy of such bill,
statement or estimate or into the validity of any tax, assessment, sale,
forfeiture, tax lien or title or claim thereof. If the amount of the Tax and
Insurance Escrow Fund shall exceed the amounts next coming due for Taxes and
Insurance Premiums pursuant to Sections 5.1.2, 5.2.2 and 7.1, Lender shall, in
its discretion, return any excess as directed by Manager or credit such excess
against the next payment to be made to the Tax and Insurance Escrow Fund. If at
any time after Substantial Completion Lender determines that the Tax and
Insurance Escrow Fund is not or will not be sufficient to pay the Taxes or
Insurance Premiums next coming due, Lender shall notify Borrower and/or Manager
of such determination and Borrower shall increase its monthly payments to Lender
by the amount that Lender estimates, in Lender's reasonable discretion, is
sufficient to make up the deficiency at least thirty (30) days prior to
delinquency of the Taxes and/or expiration of the Policies, as the case may be.
Should the Taxes and Insurance Premiums for the then current Fiscal Year or
payment period not be ascertainable by Lender at the time a monthly deposit is
required to be made, the Tax and Insurance Escrow Fund monthly installment shall
be Lender's reasonable and good faith estimate based on one-twelfth (1/12th) of
the aggregate Tax and Insurance for the prior Fiscal Year or payment period,
with reasonable adjustments as reasonably determined by Lender. As soon as the
Taxes and Insurance Premiums are fixed for the then current Fiscal Year or
period, the next ensuing monthly installment of Taxes and Insurance Premiums
shall be adjusted to reflect any deficiency or surplus in prior Tax and
Insurance Escrow Fund monthly installments.
3.3 CAPITAL RESERVE FUND.
3.3.1 CAPITAL RESERVE FUND. Borrower shall pay to Lender on
each Payment Date after Substantial Completion (in addition to other payments
required hereunder) an amount equal to one-twelfth of the greater of (a) the
product obtained by multiplying $250 by the number of units in the Property or
(b) the amount indicated in the Engineering Report(s) as the annual amount
required to maintain the Property (such payments, less disbursements thereof
pursuant hereto, being called the "CAPITAL RESERVE FUND"). If the amount of the
Capital Reserve Fund shall exceed the amounts due for Approved Capital Expenses
pursuant to the terms hereof, Lender shall, in its discretion, return any excess
as directed by Manager or, if future Capital Reserve Fund payments are then
required, credit such excess against such future payments. Lender shall have the
right, from time to time, by at least thirty (30) days prior notice to Borrower
and Manager, to adjust the monthly amount required to be deposited into the
Capital Reserve Fund, based upon Lender's reasonable determination of
anticipated Capital Expenses.
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3.3.2 PAYMENT OF CAPITAL EXPENSES. From time to time (but not
more often than once per month, Lender shall disburse funds held in the Capital
Reserve Fund to Borrower or, as directed by Manager, within fifteen (15) days
after the delivery by Borrower or Manager, as applicable, to Lender of a request
therefor, in increments of at least $1,000 provided (i) no Event of Default
shall have occurred and be continuing; (ii) such disbursement is for an Approved
Capital Expense; (iii) Lender shall have (if it desires) verified (by an
inspection conducted at Borrower's expense) performance of the work associated
with such Approved Capital Expense; and (iv) the request for disbursement is
accompanied by (A) an Officer's Certificate certifying (v) the amount of funds
to be disbursed, (w) that such funds will be used to pay (or reimburse Borrower
or Manager, as applicable, for) Approved Capital Expenses and a description
thereof, (x) that all outstanding trade payables (other than those to be paid
from the requested disbursement or those otherwise permitted to be outstanding
under Section 6.1.8 and 6.2.8) have been paid in full, (y) that the same has not
been the subject of a previous dis bursement, and (z) that all previous
disbursements have been used to pay the previously identified Approved Capital
Expenses, and (B) reasonably detailed documentation as to the amount, necessity
and purpose therefor.
3.4 OPERATING EXPENSES.
3.4.1 PAYMENT OF APPROVED OPERATING EXPENSES. From time to
time during the Cash Management Period (but not more than once per month) Lender
shall disburse funds held in the Operating Expense Subaccount to Borrower or
Manager, as directed by Manager, provided (i) no Event of Default shall have
occurred and be continuing; (ii) such disbursement is for an Approved Operating
Expense; and (iii) such disbursement is requested by Borrower or Manager, as
applicable, in writing, accompanied by (A) an Operating Expense Certificate and
(B) reasonably detailed documentation as to the amount, necessity and purpose
therefor. Subject to satisfaction of the preceding conditions, if Lender
receives from Borrower or Manager a valid request for a disbursement for payment
of Approved Operating Expenses for the then Current Month at least five (5)
Business Days prior to the Payment Date occurring in such Current Month, then
the disbursement in respect of such Approved Operating Expenses shall be made as
directed by Manager on such Payment Date. If Borrower or Manager shall fail to
validly request a disbursement for payment of Approved Operating Expenses for
the then Current Month at least five (5) Business Days prior to the Payment Date
in such Current Month, then Lender shall retain in the Operating Expense
Subaccount an amount equal to the anticipated Operating Expenses for the then
Current Month as set forth in the approved Operating Budget for such month, and
Lender shall, subject to satisfaction of the preceding conditions, disburse the
same as directed by Manager five (5) Business Days after Lender receives a valid
request therefor.
3.4.2 EXTRA FUNDS FOR OPERATING EXPENSES. Subsequent to the
Conversion Date, during each of the following periods (i) any period in which
Lender or its designee is an equity owner in Manager and/or Borrower and (ii)
any Cash Management Period, not more frequently than once each Interest Period
and provided that no Event of Default has occurred and is continuing, if in a
given Interest Period the Manager requires amounts in excess of the
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Approved Operating Expenses ("Extra Funds"), Manager, at the time it delivers
the Operating Expense Certificate, may deliver a written request to Lender for a
disbursement of Extra Funds stating the amount of such Extra Funds and the
purpose for which such amount is intended with attachments of copies of bills
and other documentation as may be required by Lender to establish that such
Operating Expenses are reasonable and that such amounts are then due or expected
to become due in that month. If Lender approves of such costs (such approval not
to be unreasonably withheld), Lender shall release the funds to Manager or its
designee within ten (10) Business Days of Lender's receipt of Manager's written
request.
3.4.3 RECONCILIATION. Manager shall furnish Lender monthly, on
each Payment Date during a Cash Management Period, a budget variance report
reconciling the Operating Expenses shown on the Annual Budget with requested
disbursements for payment of Operating Expenses pursuant to Section 3.4.
3.5 WORKING CAPITAL SUBACCOUNT. On each Payment Date during a
Cash Management Period, funds in the Working Capital Subaccount may be
transferred, at Lender's option, to other Subaccounts to the extent that Rents
received in the immediately preceding Interest Period are insufficient to
allocate sufficient amounts to such Subaccounts to make all the payments
required under clauses (i) through (v) of Section 2.2.3(a) or 2.2.3(b) or
clauses (i) through (vii) of Section 2.2.3(c), as applicable, on such Payment
Date.
3.6 CASH COLLATERAL SUBACCOUNT. Lender may with Manager's
consent, from time to time on or before the Conversion Date, apply any or all
amounts in the Cash Collateral Subaccount to repay the outstanding Principal
and/or any other portion of the Debt then due and payable without any penalty or
premium. Upon the request of Manager, on or before the Conversion Date, Lender
shall apply any or all amounts in the Cash Collateral Subaccount to repay the
outstanding Principal and/or any other portion of the Debt then due and payable
without any penalty or premium. From and after the Substantial Completion Date
until the Conversion Date, Manager may request that all excess cash flow in the
Cash Collateral Subaccount be paid as directed by Manager, provided: i) no
Default or Event of Default has occurred and is then continuing, ii) Manager
makes a written request to Lender (no more than once per month) for the payment
thereof at least ten (10) days prior to Payment Date on which or after which
such funds are to be distributed as requested by Manager, and iii) Lender pays
over such amounts as directed by Manager subject to the letter of credit
conditions specified below. Lender may require, in its discretion, that Manager
deliver to Lender, as beneficiary, one or more clean, irrevocable letters of
credit, reasonably satisfactory to Lender in form and content and as to the bank
or trust company which is the issuer (which issuer must have an S&P rating of
"A" or better) equal in amount to the funds paid over to or as directed by
Manager (unless and to the extent such funds are used to reduce the outstanding
Principal as provided in this Section 3.6). Any such letter of credit shall have
an expiration date not earlier than thirty (30) days after the Expected
Conversion Date, provided that the expiration date may be one (1) year from its
issuance if the letter of credit provides for a drawing by Lender of the full
amount thereof at any time on or after the thirtieth (30th) day preceding its
stated expiration date. Any letter of credit
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shall be held by Lender and may be drawn at any time within thirty (30) days
prior to the expiration thereof, upon the occurrence and during the continuance
of an Event of Default, or within thirty (30) days prior to the Expected
Conversion Date, whereupon the proceeds of the letter of credit shall be
deposited in the Cash Collateral Subaccount. On the Conversion Date, provided no
Default or Event of Default exists (and all payments required to be made by
Borrower and/or Manager on the Conversion Date have been made), Lender shall
disburse to Manager, or as otherwise directed by Manager, the funds (if any)
remaining in the Cash Collateral Subaccount.
3.7 SECURITY DEPOSITS. Borrower or Manager, as applicable,
shall collect all security deposits under Leases and shall endorse all checks
and deposit all such funds and other receipts on account of security deposits
within two (2) Business Days after receipt thereof, directly into the Security
Deposit Account - Clearing Bank. Borrower and Manager shall also deposit into
the Security Deposit Account - Clearing Bank all amounts drawn down under any
letters of credit held by Borrower or Manager in lieu of cash security deposits.
Neither Borrower nor Manager shall have any right of withdrawal from the
Security Deposit Account Clearing Bank except that, prior to the occurrence of
an Event of Default which is continuing, if either Borrower or Manager desires
to receive funds from the Security Deposit Account Clearing Bank, Borrower or
Manager may do so only if each of the following conditions are satisfied: (i)
Borrower or Manager submits a written request to Lender, certified by an
authorized officer of Borrower or Lender, and (ii) such request states (a) that
Borrower or Manager is required by law or contract to return a tenant's security
deposit or to use such security deposit for repairs or payment of rent, in
accordance with such tenant's lease, (b) the amount of and use for the security
deposit to be returned, (c) the lease and the name of the tenant to which such
security deposit relates, and (d) that no Event of Default exists under the Loan
Documents. In the event that Borrower delivers a notice in accordance with the
foregoing, Lender shall instruct the Clearing Bank (i) in the case of any
security deposit to be utilized to pay rent, to transfer such funds from the
Security Deposit Account - Clearing Bank to Manager within ten (10) days of
receipt of Lender's written direction to the Clearing Bank and (ii) with respect
to all other uses of such security deposit accounts, to release funds so
requested to Manager, or as otherwise directed by Manager, within ten (10) days
of receipt of Lender's written direction to the Clearing Account Bank to release
such funds. Except as provided above, neither Borrower nor Manager shall have
any right to funds in the Security Deposit Account - Clearing Bank.
Notwithstanding anything set forth herein, Borrower or Manager may withdraw
funds from the Security Deposit Account - Clearing Bank to refund or apply
security deposits as required by applicable Legal Requirements upon providing
prior written notice to Lender, which notice shall include evidence reasonably
satisfactory to Lender that such release is required by all applicable Legal
Requirements. During a Cash Management Period, any funds in the Security Deposit
Account - Clearing Bank that are to be applied against rent arrearages under any
Lease shall be transferred by the Clearing Bank from the Security Deposit
Account - Clearing Bank to the Security Deposit Account - Deposit Bank and
applied in accordance with the Deposit Account Agreement. Neither Borrower nor
Manager shall have any right to funds in the Security Deposit Account - Deposit
Bank, except that Borrower or
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Manager may request and Lender shall release any security deposit directly to a
tenant if required by applicable law.
Any letter of credit or other instrument that Borrower or
Manager receives in lieu of a cash security deposit shall (i) be maintained in
full force and effect in the full amount unless replaced by a cash deposit as
hereinabove described, (ii) be issued by an institution reasonably satisfactory
to Lender, (iii) if permitted pursuant to the Lease or any Legal Requirements,
name Lender as payee or mortgagee or beneficiary thereunder (or at Lender's
option, be fully assignable to Lender) and (iv) in all respects, comply with any
applicable Legal Requirements and otherwise be reasonably satisfactory to
Lender. Borrower shall, upon request, provide Lender with evidence reasonably
satisfactory to Lender of Borrower's compliance with the foregoing.
3.8 GRANT OF SECURITY INTEREST; APPLICATION OF FUNDS. As
security for payment of the Debt and the performance by Borrower and Manager of
all other terms, conditions and provisions of the Loan Documents, Borrower and
Manager hereby pledge and assign to Lender, and grant to Lender a security
interest in, all Borrower's and Manager's (if any) right, title and interest in
and to the Deposit Account, all Subaccounts, the Tax and Insurance Escrow Fund,
the Capital Reserve Fund, and any other escrow or reserve funds or accounts
established in connection with this Loan (collectively, the "FUNDS"). Neither
Borrower nor Manager shall, without obtaining the prior written consent of
Lender, further pledge, assign or grant any security interest in the Deposit
Account, any Subaccount or any Fund, or permit any Lien to attach thereto, or
any levy to be made thereon, or any UCC-l Financing Statements, except those
naming Lender as the secured party, to be filed with respect thereto. This
Agreement is, among other things, intended by the parties to be a security
agreement for purposes of the UCC. Upon the occurrence and during the
continuance of an Event of Default, Lender may apply any sums in the Deposit
Account, any Subaccount or any Fund to the payment of the Debt and/or to the
payment of Taxes, Insurance Premiums, Capital Expenses and/or Operating
Expenses, in any order in its discretion. Neither the Deposit Account nor any
Subaccount or Fund shall constitute a trust fund and may be commingled with
other monies held by Lender. Sums in each Fund shall be held by Lender in a
Subaccount and invested in Permitted Investments. Earnings or interest, if any,
on each Fund shall become part of such Fund and shall be disbursed as provided
herein for such Fund. Borrower shall be responsible for and pay all income taxes
payable with respect to such earnings and interest, and shall execute and
deliver any IRS Form W-9 or other appropriate documentation Lender reasonably
requires in connection therewith. Lender shall not be liable for any loss
sustained on the investment of any funds constituting any Fund. Amounts
disbursed to Borrower or Manager under Sections 3.2 through 3.4 shall be used by
Borrower or Manager solely to pay the expenses for which such disbursement is
requested.
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IV. REPRESENTATIONS AND WARRANTIES
4.1 BORROWER REPRESENTATIONS. Borrower represents and warrants
as of the date hereof that, except to the extent (if any) disclosed on Schedule
3 (with reference to a specific subsection of this Section 4.1):
4.1.1 ORGANIZATION; SPECIAL PURPOSE. Borrower is duly
organized and is validly existing and in good standing under the laws of its
state of formation, with requisite power and authority, and to Borrower's actual
knowledge without having conducted any investigation, with all rights, licenses,
permits and authorizations, governmental or otherwise, necessary to own its
properties and to transact the business in which it is now engaged. Borrower is
duly qualified to do business and is in good standing in each jurisdiction where
it is required to be so qualified in connection with its properties, business
and operations, except where failure to be so qualified would not have a
material adverse effect on the Borrower. Borrower is a Special Purpose
Bankruptcy Remote Entity, and the sole business of Borrower is the ownership,
development, management and operation of the Property.
4.1.2 PROCEEDINGS; ENFORCEABILITY. Borrower has taken all
necessary action to authorize the execution, delivery and performance of the
Loan Documents to which Borrower is a party. The Loan Documents to which
Borrower is a party have been duly executed and delivered by Borrower and
constitute legal, valid and binding obligations of Borrower enforceable against
Borrower in accordance with their respective terms, subject to applicable
bankruptcy, insolvency and similar laws affecting rights of creditors generally,
and general principles of equity.
4.1.3 NO CONFLICTS. The execution, delivery and performance by
Borrower of the Loan Documents to which Borrower is a party will not conflict
with or result in a breach of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any Lien (other than
pursuant to the Loan Documents) upon any of the property of Borrower pursuant to
the terms of, any agreement or instrument to which Borrower is a party to which
its property is subject, nor will such action result in any violation of the
provisions of any statute or any order, rule or regulation of any Governmental
Authority having jurisdiction over Borrower or any of its properties. To
Borrower's actual knowledge without having conducted any investigation,
Borrower's rights under the Licenses and the Management Agreement will not be
adversely affected by the execution and delivery of the Loan Documents,
Borrower's performance thereunder, the recordation of the Mortgage, the Other
Properties Subordinate Mortgage or the exercise of any remedies by Lender. Any
consent, approval, authorization, order, registration or qualification of or
with any Governmental Authority required for the execution, delivery and
performance by Borrower of the Loan Documents has been obtained and is in full
force and effect.
4.1.4 LITIGATION. There are no actions, suits or proceedings
at law or in equity by or before any Governmental Authority or other agency now
pending or threatened against or
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affecting Borrower or, to Borrower's actual knowledge without having conducted
any investigation, the Property, which, if determined against Borrower or the
Property could reasonably likely have a material adverse affect on the condition
(financial or otherwise) or business of Borrower or the condition or ownership
of the Property.
4.1.5 AGREEMENTS. Borrower is not a party to any agreement or
instrument or subject to any restriction which might adversely affect Borrower
or the Property, or Borrower's business, properties, operations or condition,
financial or otherwise. To Borrower's actual knowledge without having conducted
any investigation, Borrower is not in default in any material respect in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any Permitted Encumbrance or any other agreement or
instrument to which it is a party or by which it or the Property is bound.
4.1.6 TITLE. To Borrower's actual knowledge without having
conducted any investigation, Borrower has good, indefeasible, marketable, and
insurable title in fee to the real property comprising part of the Property, and
good title to the balance of the Property, free and clear of all Liens except
the Permitted Encumbrances. Borrower has granted none and to Borrower's actual
knowledge without having conducted any investigation there are no options to
purchase or rights of first refusal affecting Borrower's interest in the
Property except for those provided for in the Property Option Agreement. The
Mortgage, when properly recorded in the appropriate records, together with any
UCC financing statements required to be filed in connection therewith, will
create (i) a valid, perfected first priority lien on such real Property and (ii)
perfected security interests in and to, and perfected collateral assignments of,
all personalty included in the Property (including the Leases), all in
accordance with the terms thereof, in each case subject only to any applicable
Permitted Encumbrances. To Borrower's actual knowledge without having conducted
any investigation, the Permitted Encumbrances do not and will not materially
adversely affect the value or use of the Property, or Borrower's ability to
repay the Loan. To Borrower's actual knowledge without having conducted any
investigation, there are no claims for payment for work, labor or materials
affecting the Property which are or may become a Lien prior to, or of equal
priority with, the Liens created by the Loan Documents except to the extent of
the Permitted Exceptions and any inchoate liens for which Lender is receiving
title insurance coverage.
4.1.7 Intentionally deleted.
4.1.8 NO BANKRUPTCY FILING. Borrower is not contemplating
either the filing of a petition by it under any state or federal bankruptcy or
insolvency law or the liquidation of all or a major portion of its assets or
property, and Borrower has no knowledge of any Person contemplating the filing
of any such petition against it.
4.1.9 FULL AND ACCURATE DISCLOSURE. No statement of fact made
by Borrower in any Loan Documents or in any other document or certificate
delivered to Lender by Borrower in connection with the Loan contains any untrue
statement of a material fact or omits to state any
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material fact necessary to make statements contained therein not misleading.
There is no material fact presently known to Borrower that has not been
disclosed to Lender which materially adversely affects, or, as far as Borrower
can foresee, would reasonably materially adversely affect, the Property or the
business, operations or condition (financial or otherwise) of Borrower.
4.1.10 NO PLAN ASSETS. Either (i) Borrower is not an "employee
benefit plan," as defined in Section 3(3) of ERISA, subject to Title I of ERISA,
and none of the assets of Borrower constitutes or will constitute "plan assets"
of one or more such plans within the meaning of 29 C.F.R. Section 2510.3-101 or
(ii) each Plan and, to the knowledge of Borrower, each Multiemployer Plan, is in
compliance in all material respects with, and has been administered in all
material respects in compliance with, its terms and the applicable provisions of
ERISA, the Code and any other federal or state law, and no event or condition
has occurred as to which Borrower would be under an obligation to furnish a
report to Lender under Section 5.1.20.
4.1.11 COMPLIANCE. To Borrower's actual knowledge without
having conducted any investigation, Borrower and the Property and the use (and
contemplated future use) thereof comply, or will comply upon Substantial
Completion, in all material respects with all applicable Legal Requirements,
quality and safety standards, accreditation and certification standards and
requirements of the DOH and all other Governmental Authorities, including
building and zoning ordinances and codes and all other Governmental Authorities
relating to the operation of the Property in accordance with or as required by
its Permitted Use. Borrower is not in default or violation of any order, writ,
injunction, decree or demand of any Governmental Authority, the violation of
which reasonably might materially adversely affect the condition (financial or
otherwise) or business of Borrower. There has not been and shall never be
committed by Borrower or any other Person in occupancy of or involved with the
operation or use of the Property any act or omission affording any Governmental
Authority the right of forfeiture as against the Property or any part thereof or
any monies paid in performance of Borrower's obligations under any Loan
Document.
4.1.12 CONTRACTS. Except for the Construction Documents (as
defined in the BLA), the Development Agreement, or the Management Agreement,
Borrower has not entered into any service, maintenance or repair contracts
affecting the Property that are not terminable on one (1) month's notice or less
without cause and without penalty or premium, and all such service, maintenance
or repair contracts affecting the Property have been entered into at arms-length
in the ordinary course of Borrower's business and provide for the payment of
fees in amounts and upon terms comparable to existing market rates.
4.1.13 FINANCIAL INFORMATION. All financial data, including
the statements of cash flow and income and operating expense, if any, that have
been delivered by Borrower or at the direction of Borrower to Lender in respect
of the Borrower (i) are true, complete and correct in all material respects,
(ii) accurately represent the financial condition of the Borrower, as of the
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date of such reports, and (iii) to the extent prepared by an independent
certified public accounting firm, have been prepared in accordance with GAAP
consistently applied throughout the periods covered, except as disclosed
therein. Borrower has no contingent liabilities, liabilities for taxes, unusual
forward or long-term commitments or unrealized or anticipated losses from any
unfavorable commitments that are known to Borrower and reasonably likely to have
a materially adverse effect on the Property or the operation thereof, except as
referred to or reflected in such financial statements. Since the date of the
last financial statements delivered by Borrower to Lender, there has been no
materially adverse change in the financial condition, operations or business of
Borrower from that set forth in said financial statements except as disclosed
therein.
4.1.14 Intentionally deleted.
4.1.15 FEDERAL RESERVE REGULATIONS. No part of the proceeds of
the Loan will be used for the purpose of purchasing or acquiring any "margin
stock" within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System or for any other purpose that would be inconsistent with
such Regulation U or any other Regulation of such Board of Governors, or for any
purpose prohibited by Legal Requirements or any Loan Document.
4.1.16 Intentionally deleted.
4.1.17 NOT A FOREIGN PERSON. Borrower is not a "foreign
person" within the meaning of ss. 1445(f)(3) of the Code.
4.1.18 SEPARATE LOTS. Borrower has not permitted or initiated
the joint assessment of the Property (i) with any other real property
constituting a separate tax lot, and (ii) with any portion of the Property which
may be deemed to constitute personal property, or has not permitted or initiated
any other procedure whereby the lien of any taxes which may be levied against
such personal property shall be assessed or levied or charged to the Property as
a single lien.
4.1.19 Intentionally deleted.
4.1.20 ENFORCEABILITY. The Loan Documents executed by Borrower
are not subject to, and Borrower has not asserted, any right of recision,
set-off, counterclaim or defense, including the defense of usury. No exercise of
any of the terms of the Loan Documents executed by Borrower, or any right
thereunder, will render any Loan Documents unenforceable.
4.1.21 INSURANCE. Borrower has obtained and has delivered or
shall cause to be obtained and delivered to Lender insurance policies reflecting
the insurance coverages, amounts and other requirements set forth in the Loan
Documents.
4.1.22 Intentionally deleted.
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4.1.23 Intentionally deleted.
4.1.24 Intentionally deleted.
4.1.25 Intentionally deleted.
4.1.26 Intentionally deleted.
4.1.27 FILING AND RECORDING TAXES. To Borrower's actual
knowledge without having conducted any investigation, all transfer taxes, deed
stamps, intangible taxes or other amounts in the nature of transfer taxes
required to be paid by any Person under applicable Legal Requirements in
connection with the transfer of the Property to Borrower have been paid. To
Borrower's actual knowledge without having conducted any investigation, all
mortgage, mortgage recording, stamp, intangible or other similar taxes required
to be paid by any Person under applicable Legal Requirements in connection with
the execution, delivery, recordation, filing, registration, perfection or
enforcement of any of the Loan Documents have been paid or will be paid when due
and payable.
4.1.28 INVESTMENT COMPANY ACT. Borrower is not (i) an
"investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended; (ii) a
"holding company" or a "subsidiary company" of a "holding company" or an
"affiliate" of either a "holding company" or a "subsidiary company" within the
meaning of the Public Utility Holding Company Act of 1935, as amended; or (iii)
subject to any other federal or state law or regulation which purports to
restrict or regulate its ability to borrow money.
4.1.29 OWNERSHIP OF BORROWER. The sole general partner of
Borrower is the Borrower Representative. Borrower Sponsor is the owner of all of
the issued and outstanding capital stock of the Borrower Representative, all of
which capital stock has been validly issued and fully paid and is nonassessable.
The only limited partner of Borrower is Borrower Sponsor. Except as set forth in
the Property Option Agreement, the stock of the Borrower Representative and the
limited partnership interests in Borrower are owned free and clear of all Liens,
warrants, options and rights to purchase. Borrower has no obligation to any
Person to purchase, repurchase or issue any ownership interest in it.
4.1.30 MANAGEMENT AGREEMENT. The Management Agreement existing
on the Loan Closing Date with respect to the Property is in full force and
effect and is not in default by any party thereto. The term of the Management
Agreement does not extend beyond the Optional Prepayment Date. In the event the
Management Agreement is terminated or in the event of foreclosure or other
acquisition of the Property by Lender, under applicable Legal Requirements, to
Borrower's actual knowledge without having conducted any investigation, none of
Borrower, Lender, Manager, or any subsequent purchaser is required to obtain a
CON (or similar certificate, license, or approval issued by the DOH for the
requisite number of
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units, and approval provider status in any approved provider payment program)
prior to applying for and receiving a license to operate the Property as the
Property is operated prior to any such termination, foreclosure.
4.1.31 Intentionally deleted.
4.1.32 NAME; PRINCIPAL PLACE OF BUSINESS. Borrower does not
use and will not use any trade name and has not done and will not do business
under any name other than its actual name set forth herein unless Borrower
provides Lender with thirty (30) days prior written notice; provided, however,
that the Property is operated under the name "The Heritage at Gaines Ranch". The
principal place of business of Borrower is 320 King of Prussia Road, Suite 160,
Radnor, Pennsylvania 19087.
4.1.33 OTHER DEBT AND OBLIGATIONS. Borrower has no financial
obligation under any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which Borrower is a party, except in connection with
this Agreement, or by which Borrower or the Property is bound, other than (i)
the Management Agreement and the Development Agreement, or (ii) unsecured trade
payables incurred in the ordinary course of business relating to the ownership
and operation of the Property and financing of Equipment or vehicles used in the
ordinary course of business relating to the ownership and operation of the
Property which do not exceed, at any time, a maximum amount of one percent (1%)
of the Loan and are paid within ninety (90) days of the date incurred, and other
than obligations under the Mortgage and the other Loan Documents. Borrower has
not borrowed or received other debt financing that has not been heretofore
repaid in full and Borrower has no known material contingent liabilities.
4.1.34 FRAUDULENT TRANSFER; SOLVENCY. Borrower (i) has not
entered into this Loan Agreement or any Loan Document with the actual intent to
hinder, delay, or defraud any creditor, and (ii) has received reasonably
equivalent value in exchange for its obligations under the Loan Documents.
Giving effect to the transactions contemplated hereby, to Borrower's actual
knowledge without having conducted any investigation, the fair saleable value of
Borrower's assets exceeds and will, immediately following the execution and
delivery of this Agreement, exceed Borrower's total liabilities, including,
subordinated, unliquidated, or disputed liabilities or Obligations. To
Borrower's actual knowledge without having conducted any investigation, the fair
saleable value of Borrower's assets (based on completed construction of the
Improvements) is and will, immediately following the execution and delivery of
this Agreement, be greater than Borrower's probable liabilities, including the
maximum amount of its Obligations or its debts as such debts become absolute and
matured. To Borrower's actual knowledge without having conducted any
investigation, Borrower's assets do not and, immediately following the execution
and delivery of this Agreement, will not, constitute unreasonably small capital
to carry out its business as conducted or as proposed to be conducted. Borrower
does not intend to, and does not believe that it will, incur debts and
liabilities (including, Obligations and other commitments) beyond its ability to
pay such debts
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as they mature (taking into account the timing and amounts to be payable on or
in respect of obligations of Borrower).
4.1.35 NO DEFAULTS. To Borrower's knowledge, no Default or
Event of Default of Borrower exists under or with respect to any Loan Document.
4.1.36 LABOR MATTERS. Borrower is not a party to any
collective bargaining agreements.
4.1.37 NO PRIOR ASSIGNMENT. As of the Loan Closing Date, (i)
Lender is the assignee of Borrower's interest under the Leases, and (ii) there
are no prior assignments of such Leases or any portion of the Rent due and
payable with respect to such Leases or to become due and payable which are
presently outstanding.
4.1.38 INTELLECTUAL PROPERTY. All trademarks, trade names and
service marks that Borrower owns or has pending, or under which it is licensed,
are in good standing and uncontested. There is no trademark, trade name or
service mark necessary to the business of Borrower as presently conducted or as
Borrower contemplates conducting its business. To Borrower's knowledge, Borrower
has not infringed, is not infringing, and has not received notice of
infringement with respect to asserted trademarks, trade names and service marks
of others. To Borrower's knowledge, there is no infringement by others of
trademarks, trade names and service marks of Borrower.
4.1.39 Intentionally deleted.
4.1.40 TAX FAIR MARKET VALUE. If a Note with respect to the
Property is significantly modified prior to the closing date of a Securitization
so as to result in a taxable exchange under Code Section 1001, Borrower will, if
requested by Lender, represent that the amount of such Note does not exceed the
Tax Fair Market Value of the Property as of the date of such significant
modification.
4.1.41 BROKERAGE. Borrower has dealt with no brokers or
"finders" in connection with the Loan, and no brokerage or "finders" fees or
commissions are payable by or to any Person, in connection with this Agreement
or the Loan to be disbursed hereunder by reason of any action of Borrower.
4.1.42 Intentionally deleted.
4.1.43 Intentionally deleted.
4.1.44 Intentionally deleted.
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4.1.45 GOVERNMENTAL PROCEEDINGS AND NOTICES. Borrower is not
currently the subject of any proceeding by any Governmental Authority, and no
notice of any violation has been received from a Governmental Authority that
would, to Borrower's actual knowledge without having conducted any
investigation, directly or indirectly, or with the passage of time: (i) affect
Borrower's ability to accept and/or retain patients or result in the imposition
of a fine, a sanction, a lower rate certification or a lower reimbursement rate
for services rendered to eligible patients; (ii) modify, limit or annul or
result in the transfer, suspension, revocation or imposition of probationary use
on any License; (iii) Intentionally deleted.
4.1.46 Intentionally deleted.
4.1.47 Intentionally deleted.
4.1.48 Intentionally deleted.
4.1.49 Intentionally deleted.
4.1.50 PLEDGES OF RECEIVABLES. Borrower has not pledged its
receivables as collateral security for any other loan or indebtedness.
4.1.51 Intentionally deleted.
4.2 MANAGER REPRESENTATIONS. Manager represents and warrants
as of the date hereof that, except to the extent (if any) disclosed on Schedule
5 (with reference to a specific subsection of this Section 4.2):
4.2.1 ORGANIZATION; SPECIAL PURPOSE. Manager is duly organized
and is validly existing and in good standing under the laws of its state of
formation, with requisite power and authority, and Manager and Borrower have all
rights, licenses, permits and authorizations, governmental or otherwise,
necessary to own its properties and to transact the business in which it is now
engaged. Manager is duly qualified to do business and is in good standing in
each jurisdiction where it is required to be so qualified in connection with its
properties, business and operations. Manager is a Special Purpose Bankruptcy
Remote Entity, and the sole business of Manager is the development, management
and operation of the Property.
4.2.2 PROCEEDINGS; ENFORCEABILITY. Manager has taken all
necessary action to authorize the execution, delivery and performance of the
Loan Documents to which it is a party. The Loan Documents to which Manager is a
party have been duly executed and delivered by Manager and constitute legal,
valid and binding obligations of Manager enforceable against Manager in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency and similar laws affecting rights of creditors generally, and general
principles of equity.
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4.2.3 NO CONFLICTS. The execution, delivery and performance by
Manager of the Loan Documents to which Manager is a party will not conflict with
or result in a breach of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any Lien (other than
pursuant to the Loan Documents) upon any of the property of Borrower or Manager
pursuant to the terms of, any agreement or instrument to which Manager is a
party to which its property is subject, nor will such action result in any
violation of the provisions of any statute or any order, rule or regulation of
any Governmental Authority having jurisdiction over Manager or any of its
properties. Manager's rights under the Licenses and the Management Agreement
will not be materially, adversely affected by the execution and delivery of the
Loan Documents, Manager's performance thereunder, the recordation of the
Mortgage and the Other Properties Subordinate Mortgage, or the exercise of any
remedies by Lender. Any consent, approval, authorization, order, registration or
qualification of or with any Governmental Authority required for the execution,
delivery and performance by Manager of the Loan Documents has been obtained and
is in full force and effect or will be obtained and be in full force and effect
when required.
4.2.4 LITIGATION. There are no actions, suits or proceedings
at law or in equity by or before any Governmental Authority or other agency now
pending or threatened against or affecting Manager or the Property, which, if
determined against Manager or the Property could reasonably likely have a
material adverse affect on the condition (financial or otherwise) or business of
Manager or the condition or ownership of the Property.
4.2.5 AGREEMENTS. Manager is not a party to any agreement or
instrument or subject to any restriction which might materially, adversely
affect Manager or the Property, or Manager's business, properties, operations or
condition, financial or otherwise. Neither Borrower nor Manager is in default in
any material respect in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any Permitted Encumbrance or
any other agreement or instrument to which it is a party or by which it or the
Property is bound, which default would materially, adversely affect Manager or
the Property.
4.2.6 TITLE. Borrower has good, indefeasible, marketable, and
insurable title in fee to the real property comprising part of the Property, and
good title to the balance of the Property, free and clear of all Liens except
the Permitted Encumbrances. There are no options to purchase or rights of first
refusal affecting Borrower's interest in the Property except for those provided
for in the Property Option Agreement. The Mortgage, when properly recorded in
the appropriate records, together with any UCC financing statements required to
be filed in connection therewith, will create (i) a valid, perfected first
priority lien on such real Property and (ii) perfected security interests in and
to, and perfected collateral assignments of, all personalty included in the
Property (including the Leases), all in accordance with the terms thereof, in
each case subject only to any applicable Permitted Encumbrances. The Permitted
Encumbrances do not and will not materially adversely affect the value or use of
the Property, or Borrower's ability to repay the Loan. There are no claims for
payment for work, labor or materials affecting the Property which are or may
become a Lien prior to, or of equal priority with, the Liens created by
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the Loan Documents except to the extent of the Permitted Exceptions and any
inchoate liens for which Lender is receiving title insurance coverage.
4.2.7 SURVEY. The Survey delivered to Lender does not fail to
reflect any material matter affecting the Property or the title thereto.
4.2.8 NO BANKRUPTCY FILING. Manager is not contemplating
either the filing of a petition by it under any state or federal bankruptcy or
insolvency law or the liquidation of all or a major portion of its assets or
property, and Manager has no knowledge of any Person contemplating the filing of
any such petition against it.
4.2.9 FULL AND ACCURATE DISCLOSURE. No statement of fact made
by or on behalf of Manager in any Loan Documents or in any other document or
certificate delivered to Lender by Manager in connection with the Loan contains
any untrue statement of a material fact or omits to state any material fact
necessary to make statements contained therein not misleading. There is no
material fact presently known to Manager that has not been disclosed to Lender
which materially adversely affects, or, as far as Manager can foresee, would
reasonably materially adversely affect, the Property or the business, operations
or condition (financial or otherwise) of Manager.
4.2.10 NO PLAN ASSETS. Either (i) Manager is not an "employee
benefit plan," as defined in Section 3(3) of ERISA, subject to Title I of ERISA,
and none of the assets of Manager constitutes or will constitute "plan assets"
of one or more such plans within the meaning of 29 C.F.R. Section 2510.3-101 or
(ii) each ERISA Plan and, to the knowledge of Manager, each Multiemployer Plan,
is in compliance in all material respects with and has been administered in all
material respects in compliance with its terms and the applicable provisions of
ERISA, the Code and any other federal or state law, and no event or condition
has occurred as to which Manager would be under an obligation to furnish a
report to Lender under Section 5.2.20.
4.2.11 COMPLIANCE. Manager, Borrower, and the Property and the
use (and contemplated future use) thereof comply, or will comply upon
Substantial Completion, in all material respects with all applicable Legal
Requirements, quality and safety standards, accreditation and certification
standards and requirements of the DOH and all other Governmental Authorities,
including building and zoning ordinances and codes and all other Governmental
Authorities relating to the operation of the Property in accordance with or as
required by its Permitted Use. Manager is not in default or violation of any
order, writ, injunction, decree or demand of any Governmental Authority, the
violation of which reasonably might materially adversely affect the condition
(financial or otherwise) or business of Manager. There has not been and shall
never be committed by Manager or any other Person in occupancy of or involved
with the operation or use of the Property any act or omission affording any
Governmental Authority the right of forfeiture as against the Property or any
part thereof or any monies paid in performance of Manager's obligations under
any Loan Document.
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4.2.12 CONTRACTS. Except for the Construction Documents (as
defined in the BLA), the Development Agreement, or the Management Agreement,
Manager has not entered into any service, maintenance or repair contracts
affecting the Property that are not terminable on one (1) month's notice or less
without cause and without penalty or premium, and all such service, maintenance
or repair contracts affecting the Property have been entered into at arms-length
in the ordinary course of Manager's business and provide for the payment of fees
in amounts and upon terms comparable to existing market rates.
4.2.13 FINANCIAL INFORMATION. All financial data, including
the statements of cash flow and income and operating expense, that have been
delivered by Manager or at the direction of Manager to Lender in respect of the
Manager and/or the Property (i) are true, complete and correct in all material
respects, (ii) accurately represent the financial condition of the Manager or
the Property, as applicable, as of the date of such reports, and (iii) to the
extent prepared by an independent certified public accounting firm, have been
prepared in accordance with GAAP consistently applied throughout the periods
covered, except as disclosed therein. Manager has no contingent liabilities,
liabilities for taxes, unusual forward or long-term commitments or unrealized or
anticipated losses from any unfavorable commitments that are known to Manager
and reasonably likely to have a materially adverse effect on the Property or the
operation thereof, except as referred to or reflected in such financial
statements. Since the date of the last financial statements delivered by Manager
to Lender, there has been no materially adverse change in the financial
condition, operations or business of Manager from that set forth in said
financial statements except as disclosed therein.
4.2.14 CONDEMNATION. No Condemnation or other proceeding has
been commenced or, to Manager's best knowledge, is contemplated with respect to
all or part of the Property or for the relocation of roadways providing access
to the Property except as contemplated in the Construction Documents and Plans.
4.2.15 FEDERAL RESERVE REGULATIONS. No part of the proceeds of
the Loan will be used for the purpose of purchasing or acquiring any "margin
stock" within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System or for any other purpose that would be inconsistent with
such Regulation U or any other Regulation of such Board of Governors, or for any
purpose prohibited by Legal Requirements or any Loan Document.
4.2.16 UTILITIES AND PUBLIC ACCESS. The Property has rights of
access to public ways and is served or, upon Substantial Completion will be
served, by electrical, water, sewer, sanitary sewer and storm drain (or other
drainage) facilities adequate to service it for its intended uses. All public
utilities necessary or convenient to the construction of the Required
Improvements and, upon completion thereof, the full use and enjoyment of the
Property are located in the public right-of-way abutting the Property, and all
such utilities are connected (or available for connection) so as to serve the
Property without passing over other property, unless same pass over other
property pursuant to a fully executed easement with the owner (or predecessor
owner) of such property. All roads necessary for the use of the Property for its
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current purpose have been or, upon Substantial Completion will be, completed and
dedicated to public use and accepted by all Governmental Authorities or exist
perpetually on valid easements.
4.2.17 NOT A FOREIGN PERSON. Manager is not a "foreign person"
within the meaning of ss. 1445(f)(3) of the Code.
4.2.18 SEPARATE LOTS. Each parcel comprising the Property is
or prior to the Substantial Completion Date will be a separate tax lot and is
not (or prior to the Substantial Completion Date will not be) a portion of any
other tax lot that is not a part of the Property. Manager has not permitted or
initiated the joint assessment of the Property (i) with any other real property
constituting a separate tax lot, and (ii) with any portion of the Property which
may be deemed to constitute personal property, or will not permit or initiate
any other procedure whereby the lien of any taxes which may be levied against
such personal property shall be assessed or levied or charged to the Property as
a single lien.
4.2.19 ASSESSMENTS. There are no pending or, to Manager's
knowledge, proposed special or other assessments for public improvements or
otherwise affecting the Property, or any contemplated improvements to the
Property that may result in such special or other assessments other than
Permitted Encumbrances, if any.
4.2.20 ENFORCEABILITY. The Loan Documents executed by Manager
are not subject to, and Manager has not asserted, any right of recision,
set-off, counterclaim or defense, including the defense of usury. No exercise of
any of the terms of the Loan Documents executed by Manager, or any right
thereunder, will render any Loan Documents executed by Manager unenforceable.
4.2.21 INSURANCE. Manager has obtained and has delivered to
Lender insurance policies (or such other evidence thereof acceptable to Lender)
reflecting the insurance coverages, amounts and other requirements set forth in
the Loan Documents.
4.2.22 USE OF PROPERTY; LICENSES. The Property is or is
intended to be used exclusively as and in accordance with its Permitted Use. All
certifications, permits, licenses and approvals required for the legal use,
occupancy and operation of the Property as intended are held, or prior to
Substantial Completion (or as soon thereafter as is practical in light of DOH
practice) will be obtained, by the Borrower and/or Manager, as applicable, and
in any event are held, or prior to Substantial Completion will be obtained, by
the Person(s) required under all applicable Legal Requirements and are (or will
be upon Substantial Completion) in full force and effect, including, to the
extent applicable and required based on the intended use of the Property (a)
valid CONs or COEs or similar certificates, licenses to operate, permits, or
approvals issued by the DOH for the requisite number of units; (b) a valid
license to provide assisted living services; (c) a valid registration of the
Property with the DOH or other appropriate Governmental Authority for its
Permitted Use; and (d) approved provider status in any approved provider payment
program (collectively, the "LICENSES"), have been (or will be
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upon Substantial Completion) obtained and are in full force and effect, except
for Licenses that cannot yet be obtained because the Required Improvements have
not been completed. The use (if any) being made of the Property is in conformity
with the certificate of occupancy (if any) issued or to be issued for the
Property.
4.2.23 FLOOD ZONE. Except as indicated on the Survey, none of
the Improvements is or will be located in an area as identified by the Federal
Emergency Management Agency as an area having special flood hazards.
4.2.24 PHYSICAL CONDITION. The Property is in good condition,
order and repair in all material respects; there exists no structural or other
material defect or damage to the Property, whether latent or otherwise. Manager
has not received notice from any insurance company or bonding company of any
defect or inadequacy in the Property, or any part thereof, which would adversely
affect its insurability or cause the imposition of extraordinary premiums or
charges thereon or any termination of any policy of insurance or bond.
4.2.25 ENCROACHMENTS. Except as indicated in the Survey, the
Improvements (if any) existing on the date hereof lie wholly within the
boundaries and building restriction lines of the Property, and no improvement on
an adjoining property encroaches upon the Property, and no easement or other
encumbrance upon the Property encroaches or will encroach upon any of the
Improvements, so as to adversely affect the value or marketability of the
Property, except those insured against by the Title Insurance Policy.
4.2.26 LEASES. Attached hereto as Schedule 4 is a true,
correct and complete rent roll for the Property (the "RENT ROLL"), which
includes all Leases affecting the Property. Each residential Lease for the
Property has been entered into on the Approved Residency Agreement. Except as
disclosed in the Rent Roll: (i) each Lease is in full force and effect; (ii)
there are no offsets, claims or defenses to the enforcement thereof; (iii) all
rents due and payable under the Leases have been paid and no portion thereof has
been paid for any period more than thirty (30) days in advance except for
security deposits; (iv) the rent payable under each Lease is the amount of fixed
rent set forth in the Rent Roll, and there is no claim or basis for a claim by
the tenant thereunder for an adjustment to the rent; (v) no tenant has made any
claim against the landlord under the Leases which remains outstanding, there are
no material defaults on the part of the landlord under any Lease, and no event
has occurred which, with the giving of notice or passage of time, or both, would
constitute such a material default; (vi) to Manager's best knowledge, there is
no present material default by the tenant under any Lease; and (vii) Manager
does not hold any other security deposits under the Leases. None of the Leases
contains any option to purchase or right of first refusal to purchase the
Property or any part thereof. Neither the Leases nor the Rents have been
assigned or pledged except to Lender, and no other Person has any interest
therein except the tenants thereunder.
4.2.27 FILING AND RECORDING TAXES. All transfer taxes, deed
stamps, intangible taxes or other amounts in the nature of transfer taxes
required to be paid by any Person under
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applicable Legal Requirements in connection with the transfer of the Property to
Borrower have been paid. All mortgage, mortgage recording, stamp, intangible or
other similar taxes required to be paid by any Person under applicable Legal
Requirements in connection with the execution, delivery, recordation, filing,
registration, perfection or enforcement of any of the Loan Documents have been
paid or will be paid when due and payable.
4.2.28 INVESTMENT COMPANY ACT. Manager is not (i) an
"investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended; (ii) a
"holding company" or a "subsidiary company" of a "holding company" or an
"affiliate" of either a "holding company" or a "subsidiary company" within the
meaning of the Public Utility Holding Company Act of 1935, as amended; or (iii)
subject to any other federal or state law or regulation which purports to
restrict or regulate its ability to borrow money.
4.2.29 OWNERSHIP OF MANAGER. The sole general partner of
Manager is the Manager Representative. Manager Sponsor is the owner of all of
the issued and outstanding capital stock of the Manager Representative, all of
which capital stock has been validly issued and fully paid and is nonassessable.
The only limited partner of Manager is Manager Sponsor. The stock of the Manager
Representative and the limited partnership interests in Manager are owned free
and clear of all Liens, warrants, options and rights to purchase. Manager has no
obligation to any Person to purchase, repurchase or issue any ownership interest
in it.
4.2.30 MANAGEMENT AGREEMENT. The Management Agreement existing
on the Loan Closing Date with respect to the Property is in full force and
effect and is not in default by any party thereto. The term of the Management
Agreement does not extend beyond the Optional Prepayment Date. In the event the
Management Agreement is terminated or in the event of foreclosure or other
acquisition of the Property by Lender, under applicable Legal Requirements none
of Borrower, Lender, Manager, or any subsequent purchaser is required to obtain
a CON (or similar certificate, license, or approval issued by the DOH for the
requisite number of units, and approval provider status in any approved provider
payment program) prior to applying for and receiving a license to operate the
Property as the Property is operated prior to any such termination, foreclosure
or acquisition.
4.2.31 HAZARDOUS SUBSTANCES. To the best of Manager's
knowledge after due investigation except as disclosed in the Environmental
Reports, (i) the Property is not in violation of any Legal Requirement
pertaining to or imposing liability or standards of conduct concerning
environmental regulation, contamination or clean-up, including the Comprehensive
Environmental Response, Compensation and Liability Act, the Resource
Conservation and Recovery Act, the Emergency Planning and Community
Right-to-Know Act of 1986, the Hazardous Substances Transportation Act, the
Solid Waste Disposal Act, the Clean Water Act, the Clean Air Act, the Toxic
Substance Control Act, the Safe Drinking Water Act, the Occupational Safety and
Health Act, any state super-lien and environmental clean-up statutes and all
amendments to and regulations in respect of the foregoing laws (collectively,
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"ENVIRONMENTAL LAWS"); (ii) the Property is not subject to any private or
governmental Lien or judicial or administrative notice or action or inquiry,
investigation or claim relating to hazardous, toxic, dangerous and/or regulated
substances, wastes, materials, raw materials which include hazardous
constituents, pollutants or contaminants, including asbestos, asbestos
containing materials, petroleum, tremolite, anthlophylite, actinolite,
polychlorinated biphenyls and any other substances or materials which are
included under or regulated by Environmental Laws or which are considered by
scientific opinion to be otherwise dangerous in terms of the health, safety and
welfare of humans (collectively, "HAZARDOUS SUBSTANCES"); (iii) no Hazardous
Substances are or have been (including the period prior to Borrower's
acquisition of the Property), discharged, generated, treated, disposed of or
stored on, incorporated in, or removed or transported from the Property other
than in compliance with all Environmental Laws; (iv) no Hazardous Substances are
present in, on or under any nearby real property which could migrate to or
otherwise affect the Property; and (v) no underground storage tanks exist on the
Property.
4.2.32 NAME; PRINCIPAL PLACE OF BUSINESS. Manager does not use
and will not use any trade name and has not done and will not do business under
any name other than its actual name set forth herein unless Manager provides
Lender with thirty (30) days prior written notice; provided, however, that the
Property is operated under the name "The Heritage at Gaines Ranch". The
principal place of business of Manager is c/o Brookdale Living Communities,
Inc., 77 West Wacker Drive, Suite 4400, Chicago, Illinois 60601.
4.2.33 OTHER DEBT AND OBLIGATIONS. Manager has no financial
obligation under any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which Manager is a party, except in connection with
this Agreement, or by which Manager or the Property is bound, other than (i)
Construction Documents, (ii) the Management Agreement and the Development
Agreement, (iii) unsecured trade payables incurred in the ordinary course of
business relating to the ownership and operation of the Property and financing
of Equipment or vehicles used in the ordinary course of business relating to the
ownership and operation of the Property which do not exceed, at any time, a
maximum amount of one percent (1%) of the Loan and are paid within ninety (90)
days of the date incurred, and other than obligations under the Mortgage and the
other Loan Documents. Manager has not borrowed or received other debt financing
that has not been heretofore repaid in full and Manager has no known material
contingent liabilities.
4.2.34 FRAUDULENT TRANSFER; SOLVENCY. Manager (i) has not
entered into this Loan Agreement or any Loan Document with the actual intent to
hinder, delay, or defraud any creditor, and (ii) to Manager's knowledge has
received reasonably equivalent value in exchange for its obligations under the
Loan Documents. Manager's assets do not and, immediately following the execution
and delivery of this Agreement, will not, constitute unreasonably small capital
to carry out its business as conducted or as proposed to be conducted. Manager
does not intend to, and does not believe that it will, incur debts and
liabilities (including, Obligations and other commitments) beyond its ability to
pay such debts
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as they mature (taking into account the timing and amounts to be payable on or
in respect of obligations of Manager). Giving effect to the transactions
contemplated hereby, the fair saleable value of Borrower's assets exceeds and
will, immediately following the execution and delivery of this Agreement, exceed
Borrower's total liabilities, including, subordinated, unliquidated, or disputed
liabilities or Obligations. The fair saleable value of Borrower's assets (based
on completed construction of the Improvements) is and will, immediately
following the execution and delivery of this Agreement, be greater than
Borrower's probable liabilities, including the maximum amount of its Obligations
or its debts as such debts become absolute and matured.
4.2.35 NO DEFAULTS. No Default or Event of Default exists
under or with respect to any Loan Document.
4.2.36 LABOR MATTERS. Manager is not a party to any
collective bargaining agreements.
4.2.37 NO PRIOR ASSIGNMENT. As of the Loan Closing Date, (i)
Lender is the assignee of Manager's interest under the Leases, and (ii) there
are no prior assignments of such Leases or any portion of the Rent due and
payable with respect to such Leases or to become due and payable which are
presently outstanding.
4.2.38 INTELLECTUAL PROPERTY. All trademarks, trade names and
service marks that Manager owns or has pending, or under which it is licensed,
are in good standing and uncontested. There is no trademark, trade name or
service mark necessary to the business of Manager as presently conducted or as
Manager contemplates conducting its business. To Manager's knowledge, Manager
has not infringed, is not infringing, and has not received notice of
infringement with respect to asserted trademarks, trade names and service marks
of others. To Manager's knowledge, there is no infringement by others of
trademarks, trade names and service marks of Manager.
4.2.39 TITLE INSURANCE. The Property is covered by either an
American Land Title Association (ALTA) mortgagee's title insurance policy or its
State equivalent, or a commitment to issue such a title insurance policy or its
State equivalent, insuring the valid first lien of the Mortgage on the Property,
which is in full force and effect and is freely assignable to and will inure to
the benefit of Lender and any successor or assignee of Lender, including but not
limited to the trustee in a Securitization, subject only to the Permitted
Encumbrances and either an American Land Title Association (ALTA) mortgagee's
title insurance policy, or a commitment to issue such a title insurance policy,
insuring the valid second lien of the Subordinate Mortgage on the Property,
which is in full force and effect and is freely assignable to and will inure to
the benefit of Lender and any successor or assignee of Lender, including but not
limited to the trustee in a Securitization, subject only to the Permitted
Encumbrances and the Lien of the Mortgage.
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4.2.40 TAX FAIR MARKET VALUE. The Loan with respect to the
Property does not exceed the Tax Fair Market Value of the Property. If a Note
with respect to the Property is significantly modified prior to the closing date
of a Securitization so as to result in a taxable exchange under Code Section
1001, Borrower will, if requested by Lender, represent that the amount of such
Note does not exceed the Tax Fair Market Value of the Property as of the date of
such significant modification.
4.2.41 BROKERAGE. Manager has dealt with no brokers or
"finders" in connection with the Loan, and no brokerage or "finders" fees or
commissions are payable by or to any Person, in connection with this Agreement
or the Loan to be disbursed hereunder.
4.2.42 OWNERSHIP OF LICENSES. The Licenses in existence as of
the date hereof (and in any case, all Licenses must be in existence no later
than the Substantial Completion Date), including without limitation, each, if
any, CON or COE:
(i) may not be, and have not been, trans- ferred to any location other than
the Property for which such Licenses were originally issued;
(ii) have not been pledged as collateral security for any other loan or
indebtedness;
(iii) are held free from restrictions or known conflicts which would
materially impair the use or operation of the Property as intended, and are not
provisional, probationary or restricted in any way or, if any are provisional,
probationary or restricted in any way, Manager (and Borrower, if necessary)
shall do all things necessary and required to satisfy such provisions,
probations or restrictions; and
(iv) have at all applicable times been, and are, in full force and effect.
4.2.43 Intentionally deleted.
4.2.44 Intentionally deleted.
4.2.45 GOVERNMENTAL PROCEEDINGS AND NOTICES. Neither Manager
nor the Property, nor to Manager's knowledge, Borrower, is currently the subject
of any proceeding by any Governmental Authority, and no notice of any violation
has been received from a Governmental Authority that would, directly or
indirectly, or with the passage of time: (i) affect Borrower's or Manager's
ability to accept and/or retain residents or result in the imposition of a fine,
a sanction, a lower rate certification or a lower reimbursement rate for
services rendered to eligible residents; (ii) modify, limit or annul or result
in the transfer, suspension, revocation or imposition of probationary use on any
License; (iii) Intentionally deleted.
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4.2.46 PHYSICAL PLANT STANDARDS. The Property and the use
thereof comply in all respects with all applicable Legal Requirements, local,
state and federal building codes, fire codes, health care, and other similar
regulatory requirements (the "Physical Plant Standards") and no waivers of
Physical Plant Standards exist at the Property.
4.2.47 PAST VIOLATIONS. There is no pending uncured "Level A"
(or equivalent) violation at the Property. The Property is in, or upon
Substantial Completion shall be in, material compliance with all local, federal
and state laws and regulations relating to, as applicable, congregate care and
assisted living facilities and no statement of charges or deficiencies has been
made or penalty enforcement action has been undertaken against the Property,
Manager, or any partner, member, officer, director or stockholder of Manager, or
to Manager's knowledge to Borrower or any partner, member, officer, director or
stockholder of Borrower, by any Governmental Authority.
4.2.48 Intentionally Deleted.
4.2.49 Intentionally Deleted.
4.2.50 PLEDGES OF RECEIVABLES. Manager has not pledged its
receivables as collateral security for any other loan or indebtedness.
4.2.51 RESIDENT RECORDS. To the best of Manager's knowledge,
all resident records at the Property are true, complete and correct in all
material respects. From and after the date hereof, all resident records at the
Property shall be maintained in accordance with all applicable Legal
Requirements, including with respect to retention and confidentiality.
4.3 SURVIVAL OF REPRESENTATIONS. Each of Borrower and Manager
agrees that all of the representations and warranties in Section 4.1 and Section
4.2 and elsewhere in the Loan Documents (i) are made as of the Loan Closing
Date, (ii) shall survive the delivery of the Note and continue for so long as
any portion of the Debt remains owing to Lender, provided, however, that the
representations, warranties and covenants set forth in Section 4.2.31, and
Section 5.2.10 , shall survive in perpetuity and shall not be subject to the
exculpation provisions of Section 10.1, and (iii) shall be deemed to have been
relied upon by Lender notwithstanding any investigation heretofore or hereafter
made by Lender or on its behalf. Notwithstanding anything set forth in this
Agreement to the contrary, if at anytime during the term of this Loan any
applicable federal, state or local agency enacts any laws or regulations or
permits the accreditation and certification of the Permitted Use, such that
Borrower or Manager elects to enter into a participation or provider agreement
with any third party payor programs (including Medicare, Medicaid, Blue Cross
and/or Blue Shield or any other private commercial insurance managed care and
employee assistant program) (such programs the "THIRD PARTY PAYORS PROGRAMS") to
permit the Permitted Use to participate in their programs, Borrower and Manager
agree to execute amendments of this Agreement and the other Loan Documents as
are consistent with the requirements of loans extended by Lender the source of
payment of which
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includes payments from Third Party Payers' Programs, Medicare or Medicaid and
shall include such standard representations, consents and warranties as are
consistent with the foregoing.
V. AFFIRMATIVE COVENANTS
5.1 BORROWER'S COVENANTS. Until the end of the Term or the
Defeasance of the entire unpaid Principal, Borrower hereby covenants and agrees
with Lender that:
5.1.1 EXISTENCE. Borrower shall (i) do or cause to be done all
things necessary to preserve, renew and keep in full force and effect its
existence, rights, and franchises, (ii) continue to engage in the business
presently conducted by it, (iii) obtain and maintain all Licenses, and (iv)
qualify to do business and remain in good standing under the laws of each
jurisdiction, in each case as and to the extent required for the ownership,
development, maintenance, management and operation of the Property. Borrower
shall notify Lender promptly of any written notice or order that Borrower
receives from any Governmental Authority relating to Borrower's failure to
comply with any applicable Legal Requirements relating to the Property and
promptly take any and all actions necessary to bring itself and its operations
at the Property into compliance in all material respects with such applicable
Legal Requirements (and shall comply in all material respects with the
requirements of such Legal Requirements that at any time are applicable to its
operations at the Property). Borrower shall have the right to contest same
provided it complies with the Contest Procedures.
5.1.2 TAXES AND OTHER CHARGES. Borrower shall pay or cause to
be paid all Taxes and Other Charges as the same become due and payable, and
deliver to Lender receipts for payment or other evidence satisfactory to Lender
that the Taxes and Other Charges have been so paid no later than thirty (30)
days before they would be delinquent if not paid (provided, however, that
Borrower need not furnish such receipts for payment of Taxes paid by Lender
pursuant to Section 3.2). Borrower shall not suffer and shall promptly cause to
be paid and discharged any Lien against the Property, and shall promptly pay for
all utility services provided to the Property. After prior notice to Lender,
Borrower, at its own expense, may contest by appropriate legal proceeding,
promptly initiated and conducted in good faith and with due diligence, the
amount or validity or application of any Taxes or Other Charges, provided that
(i) no Default or Event of Default has occurred and remains uncured, (ii) such
proceeding shall suspend the collection of the Taxes or Other Charges, (iii)
such proceeding shall be permitted under and be conducted in accordance with the
provisions of any other instrument to which Borrower is subject and shall not
constitute a default thereunder, (iv) no part of or interest in the Property
will be in danger of being sold, forfeited, terminated, canceled or lost, if the
Borrower pays the amount or satisfies the condition being contested, and the
Borrower would have the opportunity to do so, in the event of the Borrower's
failure to prevail in the contest, (v) Lender would not, by virtue of such
permitted contest, be exposed to any risk of any civil liability for which the
Borrower has not furnished additional security as provided in clause (vi) below,
or to any risk of criminal liability, and neither the Property nor any interest
therein would be subject
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to the imposition of any lien for which the Borrower has not furnished
additional security as provided in clause (vi) below, as a result of the failure
to comply with such law or of such proceeding, (vi) Borrower shall have
furnished such security as may be required in the proceeding, or as may be
reasonably requested by Lender, to insure the payment of any such Taxes or Other
Charges, together with all interest and penalties thereon, but in no amount less
than one hundred and twenty-five percent (125%) of the amount of such claims,
and (vii) Borrower shall promptly upon final determination thereof pay the
amount of Taxes or Other Charges determined to be due and payable, together with
all costs, interest and penalties. Lender may pay over any such cash deposit or
part thereof held by Lender to the claimant entitled thereto at any time when,
in the reasonable judgment of Lender, the entitlement of such claimant is
established.
5.1.3 REPAIRS; MAINTENANCE AND COMPLIANCE. Borrower shall
cause the Property to be maintained in a good and safe condition and repair and
shall not remove, demolish or materially alter the Improvements or Equipment
(except for the construction of the Required Improvements in accordance with the
BLA and normal replacement of the Equipment or restoration pursuant to Section
7.2 herein). Borrower shall promptly comply with all Legal Requirements and
commence and diligently continue to cure properly any violation of a Legal
Requirement which materially and adversely affects the financial condition of
the Property or the ability of Borrower to conduct its business, within thirty
(30) days after Borrower receives notice of such violation, provided that
Borrower shall have the right to contest same if it complies with the Contest
Procedures. Borrower shall, in a good and workmanlike manner using materials of
a quality at least equal to that originally installed at the Property, promptly
repair, replace or rebuild any part of the Property that becomes damaged
(subject to Section 7.2 herein), worn or dilapidated and shall complete and pay
for any Improvements at any time in the process of construction or repair.
Borrower may perform alterations without obtaining Lender's consent for
alterations which (i) are required under the BLA, (ii) do not alter the
footprint of the Property, (iii) do not change the number of units, (iv) are
contemplated in the Annual Budget approved by Lender, or (v) which do not
otherwise constitute material renovations.
5.1.4 LITIGATION. Borrower shall give prompt written notice to
Lender of any litigation or governmental proceedings pending or threatened
against Borrower which might reasonably likely materially adversely affect
Borrower's condition (financial or otherwise) or business or the Property.
5.1.5 PERFORMANCE OF OTHER AGREEMENTS. Borrower shall observe
and perform each and every term, provision, covenant and condition to be
observed or performed by it pursuant to the terms of any material agreement or
recorded instrument affecting or pertaining to the Property.
5.1.6 NOTICE OF DEFAULT. Borrower shall promptly advise Lender
of any material adverse change in Borrower's condition, financial or otherwise,
or of the occurrence of any Default or Event of Default of which Borrower has
knowledge.
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5.1.7 COOPERATE IN LEGAL PROCEEDINGS. Borrower shall cooperate
fully with Lender with respect to, and permit Lender, at its option, to
participate in, any proceedings before any Governmental Authority which may in
any way affect the rights of Lender under any Loan Document and, in connection
therewith, not prohibit Lender, at its election, from participating in any such
proceedings.
5.1.8 FURTHER ASSURANCES. Borrower shall, at Borrower's sole
cost and expense (except in connection with the transfer of the Loan or the
interest therein by Lender pursuant to a Securitization, the cost of which shall
be provided for as set forth in Section 9 herein or a Syndication pursuant to
the BLA), (i) furnish to Lender, provided Lender reasonably determines that the
Property or any of its other collateral will be materially adversely affected,
all instruments, documents, boundary surveys, footing or foundation surveys,
certificates, plans and specifications, appraisals, title and other insurance
reports and agreements, and each and every other document, certificate,
agreement, and instrument reasonably requested by Lender pursuant to the terms
of the Loan Documents; (ii) execute and deliver to Lender such documents,
instruments, certificates, assignments and other writings, and do such other
acts necessary or desirable, to evidence, preserve and/or protect the collateral
at any time securing or intended to secure the Debt, as Lender may reasonably
require pursuant to the terms of the Loan Documents; (iii) do and execute all
and such further lawful and reasonable acts, conveyances and assurances for the
better and more effective carrying out of the intents and purposes of the Loan
Documents, as Lender shall reasonably require from time to time, (iv) after the
occurrence and during the continuance of an Event of Default, furnish reports of
UCC, federal tax lien, state tax lien, judgment and pending litigation searches
with respect to Borrower as Lender shall reasonably require and (v) after the
occurrence and during the continuance of an Event of Default, furnish searches
of title to the Property, designated by Lender in each of the locations
reasonably designated by Lender.
5.1.9 FINANCIAL REPORTING.
(a) BOOKKEEPING. Borrower shall keep and maintain or shall
cause to be kept and maintained on a Fiscal Year basis, in accordance with GAAP,
books, records and accounts reflecting in reasonable detail all of the financial
affairs of Borrower and all items of income and expense in connection with the
development and ownership of the Property. Lender, at Lender's cost and expense,
shall have the right from time to time and at all times during normal business
hours upon reasonable prior written notice to Borrower to examine such books,
records and accounts at the office of Borrower, Manager or such other Person
maintaining such books, records and accounts and to make such copies or extracts
thereof as Lender shall desire. After the occurrence of an Event of Default with
respect to the Property, Borrower shall pay any costs and expenses incurred by
Lender during the continuance of such Event of Default to examine any and all of
Borrower's, the Manager's or any other Person's books, records and accounts as
Lender shall determine in Lender's reasonable discretion to be necessary or
appropriate in the protection of Lender's interest.
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(b) ANNUAL REPORTS. From and after the Substantial Completion
Date, Borrower shall furnish or shall cause to be furnished to Lender annually
within forty (40) days following the end of each Fiscal Year, true, complete and
correct copies of Borrower's statement of operations (profit and loss),
statement of cash flows, a calculation of Net Operating Income, and such other
information or reports as shall be reasonably requested by Lender or any
applicable Rating Agency which shall (a) be in form and substance acceptable to
Lender in Lender's reasonable discretion, (b) be prepared in accordance with
GAAP, and (c) be accompanied by an Officer's Certificate from a senior executive
of the Borrower Representative on behalf of Borrower or from a senior executive
of Manager certifying as of the date thereof that to such executive's knowledge
based entirely on information received from or prepared by Manager (x) that such
statement is true, correct, complete and accurate and fairly reflects the
results of operations and financial condition of Borrower for the relevant
period, and (y) notice of whether to the knowledge of Borrower or Manager, as
the case may be, there exists an Event of Default, and if such Event of Default
exists, the nature thereof, the period of time it has existed and the action
then being taken to remedy same.
(c) OTHER REPORTS. (i) Borrower shall, concurrently with
Borrower's delivery to Lender, provide or shall be provided by Manager a copy of
the items required to be delivered to Lender under this Section 5.1.9 to the
Rating Agencies and any servicer and/or special servicer that may be retained in
conjunction with the Loan, any Securitization or any Syndication. Borrower shall
furnish to Lender written notice, within ten (10) Business Days after receipt by
Borrower, of any Rents, Money or other items of Gross Revenue that Borrower is
not required by this Agreement to deposit in the Clearing Account or is
permitted to retain, the Deposit Account or the Security Deposit Accounts,
together with such other documents and materials relating to such Rents, Money
or other items of Gross Revenue as Lender requests in Lender's reasonable
discretion.
(ii) Borrower shall furnish to Lender such other
financial information with respect to Borrower as Lender may reasonably
request (including, without limitation, in the case of a defeasance
pursuant to Section 2.3.3, a review by a third party acceptable to
Lender, of the calculations required to be made pursuant to Section
2.3.3).
(d) Intentionally deleted.
5.1.10 ENVIRONMENTAL MATTERS.
(a) HAZARDOUS SUBSTANCES. So long as Borrower owns or is in
possession of the Property, except as disclosed in the Environmental Reports,
Borrower (i) shall keep the Property free from Hazardous Substances (except for
nominal amounts of any such substances commonly incorporated in or used in the
operation of properties similar to the Property, in either case in compliance
with all Environmental Laws) and in compliance with all Environmental Laws, (ii)
shall promptly notify Lender if Borrower shall become aware that (A) any
Hazardous
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Substance is on or near the Property, (B) the Property is in direct or indirect
violation of any Environmental Laws or (C) any condition relating to Hazardous
Substances on or near the Property shall pose a threat to the health, safety or
welfare of humans, (iii) shall remove or cause the removal of such Hazardous
Substances and/or cure such violations and/or remove such threats, as
applicable, as required by law (or as shall be required by Lender in the case of
removal which is not required by law, but in response to the opinion of an
independent licensed hydrogeologist, licensed environmental engineer or other
qualified environmental consultant engaged by Lender ("LENDER'S CONSULTANT")),
promptly after Borrower becomes aware of same, at Borrower's sole expense and
(iv) shall comply with all of the recommendations contained in the Environmental
Report delivered to Lender in connection with the origination of the Loan.
Nothing herein shall prevent Borrower from recovering such expenses from any
other party that may be liable for such removal or cure.
(b) ENVIRONMENTAL MONITORING. Borrower shall give prompt
written notice to Lender of (i) any proceeding or inquiry by any party with
respect to the presence of any Hazardous Substance on, under, from or about the
Property, (ii) all claims made or threatened by any third party against Borrower
or the Property relating to any loss or injury resulting from any Hazardous
Substance, and (iii) Borrower's discovery of any occurrence or condition on any
real property adjoining or in the vicinity of the Property that could reasonably
be expected to cause the Property to be subject to any investigation or cleanup
pursuant to any Environmental Law. Borrower shall permit Lender to join and
participate in, as a party if it so elects, any legal proceedings or actions
initiated with respect to the Property in connection with any Environmental Law
or Hazardous Substance, and Borrower shall pay all reasonable attorneys' fees
and disbursements incurred by Lender in connection therewith. Upon Lender's
reasonable request, at any time and from time to time when Lender has reason to
believe that Hazardous Substances are present on or under the Property in
violation of Environmental Laws, Borrower shall provide an inspection or audit
of the Property prepared by a licensed hydrogeologist, licensed environmental
engineer or qualified environmental consulting firm reasonably approved by
Lender indicating the presence or absence of Hazardous Substances on, in or near
the Property. The cost and expense of such audit or inspection shall be paid by
Borrower not more frequently than once every five (5) calendar years after the
occurrence of a Securitization, unless Lender, in its good faith judgment,
determines that reasonable cause exists for the performance of an environmental
inspection or audit of the Property, in which case such inspections or audits
shall be at Borrower's sole expense. If Borrower fails to provide any such
inspection or audit within thirty (30) days after such request, Lender may order
same, and Borrower hereby grants to Lender and its employees and agents access
to the Property and a license to undertake such inspection or audit. The cost of
such inspection or audit may be added to the Debt and shall bear interest
thereafter at the Default Rate until paid. If any environmental site assessment
report prepared in connection with such inspection or audit recommends that an
operations and maintenance plan be implemented for any Hazardous Substance,
Borrower shall cause such operations and maintenance plan to be prepared and
implemented at its expense upon request of Lender. In the event that any
investigation, site monitoring, containment, cleanup, removal, restoration or
other work of any kind is reasonably necessary or required under an applicable
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Environmental Law ("REMEDIAL WORK"), Borrower shall commence and thereafter
diligently prosecute to completion all such Remedial Work within thirty (30)
days after written demand by Lender for performance thereof (or such shorter
period of time as may be required under applicable law). All Remedial Work shall
be performed by contractors reasonably approved in advance by Lender, and under
the supervision of a consulting engineer reasonably approved by Lender. All
costs of such Remedial Work shall be paid by Borrower, including Lender's
reasonable attorneys' fees and disbursements incurred in connection with the
monitoring or review of such Remedial Work. Borrower will not install or permit
to be installed on the Property any underground storage tank.
5.1.11 TITLE TO THE PROPERTY. Borrower will warrant and defend
the title to the Property, and the validity and priority of the Lien of the
Mortgage and the Subordinate Mortgage, subject only to Permitted Encumbrances,
against the claims of all Persons except Lender.
5.1.12 ESTOPPEL STATEMENT. After request by either Borrower or
Lender, the other party shall within fifteen (15) Business Days furnish the
requesting party with a statement, subject to the exculpation provisions
contained in Section 10.1 hereof, duly acknowledged and certified, setting forth
(i) the unpaid Principal, (ii) the Interest Rate, (iii) the date installments of
interest and/or Principal were last paid, (iv) any offsets or defenses to the
payment of the Debt, and (v) that the Loan Documents are valid, legal and
binding obligations and have not been modified or if modified, giving
particulars of such modification. After request by Lender (but no more
frequently than twice in any year), Borrower shall furnish to Lender within ten
(10) days, a certificate, subject to the exculpation provisions contained in
Section 10.1 hereof, reaffirming all representations and warranties of Borrower
set forth in the Loan Documents as of the date requested by Lender or, to the
extent of any changes to any such representations and warranties, so stating
such changes.
5.1.13 PRINCIPAL PLACE OF BUSINESS. Borrower shall not change
its principal place of business without first giving Lender thirty (30) days
prior notice.
5.1.14 PROPERTY MANAGEMENT.
(a) MANAGEMENT AGREEMENT. Borrower shall (i) cause the
Property to be operated pursuant to the Management Agreement; (ii) promptly
perform and observe all of the covenants required to be performed and observed
by it under the Management Agreement and do all things necessary to preserve and
to keep unimpaired its material rights thereunder; (iii) promptly notify Lender
of any default under the Management Agreement of which it is aware; (iv)
promptly deliver to Lender a copy of each financial statement, business plan,
capital expenditure plan, and property improvement plan and any other notice,
report and estimate received by Borrower under the Management Agreement; and (v)
promptly enforce the performance and observance of all of the material covenants
required to be performed and observed by Manager under the Management Agreement.
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(b) TERMINATION OF MANAGER. After the Conversion Date,
Borrower shall achieve, and, within thirty (30) days after the end of each
calendar month provide evidence to Lender of the achievement of (a) a Debt
Service Coverage Ratio of not less than 1.10x and (b) Net Operating Income on a
trailing twelve (12) month basis of not less than eighty-five percent (85%) of
the Net Operating Income as of the Conversion Date. If either of the
aforementioned is not maintained, Lender shall have the right to terminate the
Management Agreement unless Borrower shall defease a portion of the unpaid
Principal to a level such that the Debt Service Coverage Ratio on the undefeased
portion of the unpaid Principal is restored to a level of not less than 1.20x.
All calculations of Debt Service Coverage Ratio for purposes of this Section
5.1.14 shall be subject to verification by Lender. If Borrower fails to comply
with this Sec tion 5.1.14, or if an Event of Default shall be continuing,
Borrower shall, at the request of Lender, terminate the Management Agreement and
replace the Manager with a manager reasonably approved by Lender on terms and
conditions reasonably satisfactory to Lender.
5.1.15 SPECIAL PURPOSE BANKRUPTCY REMOTE ENTITY. Borrower
shall continue to be a Special Purpose Bankruptcy Remote Entity. A "SPECIAL
PURPOSE BANKRUPTCY REMOTE ENTITY" means a corporation, limited partnership or
limited liability company which at all times since its formation and at all
times thereafter (i) was and will be organized solely for the purpose of (x)
owning, operating, or managing the Property or (y) acting as the managing member
of the limited liability company which owns, operates or manages the Property or
(z) acting as the general partner of a limited partnership which owns, operates,
or manages the Property, (ii) has not and will not engage in any business
unrelated to (x) the ownership, operation, or management of the Property or (y)
acting as a member of a limited liability company which owns, operates, or
manages the Property or (z) acting as a general partner of a limited partnership
which owns, operates, or manages the Property, (iii) has not and will not have
any assets other than (x) those related to the Property or (y) its member
interest in the limited liability company which owns, operates, or manages the
Property or (z) its general partnership interest in the limited partnership
which owns, operates, or manages the Property as applicable, (iv) has not and
will not engage in, seek or consent to any dissolution, winding up, liquidation,
consolidation or merger, and, except as otherwise expressly permitted by this
Agreement, has not and will not engage in, seek or consent to any asset sale,
transfer of partnership or membership or shareholder interests, or amendment of
its limited partnership agreement, articles of incorporation, articles of
organization, certificate of formation or operating agreement (as applicable),
(v) if such entity is a limited partnership, has and will have as its only
general partners, general partners which are and will be Special Purpose
Bankruptcy Remote Entities which are corporations, (vi) if such entity is a
corporation, at all relevant times, has and will have at least one Independent
Director, (vii) the board of directors of such entity has not taken and will not
take any action requiring the unanimous affirmative vote of 100% of the members
of the board of directors unless all of the directors, including without
limitation all Independent Directors, shall have participated in such vote,
(viii) has not and will not fail to correct any known misunderstanding regarding
the separate identity of such entity, (ix) if such entity is a limited liability
company, has and will have at least one member that is and will be a Special
Purpose Bankruptcy Remote Entity which is and will be a corporation, and such
corporation is
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and will be the managing member of such limited liability company, (x) without
the unanimous consent of all of the partners, directors (including without
limitation all Independent Directors) or members, as applicable, has not and
will not with respect to itself or to any other entity in which it has a direct
or indirect legal or beneficial ownership interest (a) file a bankruptcy,
insolvency or reorganization petition or otherwise institute insolvency
proceedings or otherwise seek any relief under any laws relating to the relief
from debts or the protection of debtors generally; (b) seek or consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator,
custodian or any similar official for such entity or all or any portion of such
entity's properties; (c) make any assignment for the benefit of such entity's
creditors; or (d) take any action that might cause such entity to become
insolvent, (xi) has maintained and will maintain its accounts, books and records
separate from any other person or entity, (xii) has maintained and will maintain
its books, records, resolutions and agreements as official records, (xiii) has
not commingled and will not commingle its funds or assets with those of any
other entity, (xiv) has held and will hold its assets in its own name, (xv) has
conducted and will conduct its business in its name; (xvi) has maintained and
will maintain its financial statements, accounting records and other entity
documents separate from any other person or entity, (xvii) has paid and will pay
its own liabilities out of its own funds and assets, (xviii) has observed and
will observe all partnership, corporate or limited liability company formalities
as applicable, (xix) has maintained and will maintain an arms-length
relationship with its affiliates, (xx) (a) if such entity owns the Property has
and will have no indebtedness other than the Debt, amounts owing under the
Development Agreement, and the Management Agreement, and unsecured trade
payables in the ordinary course of business relating to the ownership and
operation of the Property which (1) do not exceed, at any time, a maximum amount
of one percent (1%) of the Loan and (2) are paid within ninety (90) days of the
date incurred, or (b) if such entity acts as the general partner of a limited
partnership which owns the Property, has and will have no indebtedness other
than unsecured trade payables in the ordinary course of business relating to
acting as general partner of the limited partnership which owns the Property
which (1) do not exceed, at any time, $10,000 and (2) are paid within ninety
(90) days of the date incurred, or (c) if such entity acts as a member of a
limited liability company which owns the Property has and will have no
indebtedness other than unsecured trade payables in the ordinary course of
business relating to acting as a member of the limited liability company which
owns the Property which (1) do not exceed, at any time, $10,000 and (2) are paid
within ninety (90) days of the date incurred, (xxi) has not and will not assume
or guarantee or become obligated for the debts of any other entity or hold out
its credit as being available to satisfy the obligations of any other entity
except for the Indebtedness and any Other Loan made pursuant to the Master
Financing Facility Agreement, (xxii) has not acquired and will not acquire
obligations or securities of its partners, members or shareholders, (xxiii) has
allocated and will allocate fairly and reasonably shared expenses, including,
shared office space and uses separate stationary, invoices and checks, (xxiv)
except pursuant hereto, has not and will not pledge its assets for the benefit
of any other person or entity, (xxv) has held and identified itself and will
hold itself out and identify itself as a separate and distinct entity under its
own name and not as a division or part of any other person or entity, (xxvi) has
not made and will not make loans to any person or entity, (xxvii) has not and
will not identify its partners, members or shareholders, or any affiliates of
any of them as a
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division or part of it, (xxviii) if such entity is a limited liability company,
such entity shall dissolve only upon the bankruptcy of the managing member, and
such entity's articles of organization, certificate of formation and/or
operating agreement, as applicable, shall contain such provision, (xxix) has not
entered and will not enter into or be a party to, any transaction with its
partners, members, shareholders or its affiliates except in the ordinary course
of its business and on terms which are intrinsically fair and are no less
favorable to it than would be obtained in a comparable arms-length transaction
with an unrelated third party, (xxx) has paid and will pay the salaries of its
own employees from its own funds, (xxxi) has maintained and will maintain
adequate capital in light of its contemplated business operations and (xxxii) if
such entity is a limited liability company or limited partnership, and such
entity has one or more managing members or general partners, as applicable, then
such entity shall continue (and not dissolve) for so long as a solvent managing
member or general partner, as applicable, exists and such entity's
organizational documents shall contain such provision.
5.1.16 ASSUMPTIONS IN NON-CONSOLIDATION OPINION. Borrower and
the Borrower Representative shall conduct their business so that the assumptions
made in that certain substantive non-consolidation opinion letter dated as of
the date hereof, delivered by Borrower's counsel in connection with the Loan,
shall be true and correct in all respects.
5.1.17 EXPENSES. Borrower shall reimburse Lender upon receipt
of notice for all reasonable out-of-pocket costs and expenses (including
reasonable attorneys' fees and disbursements) incurred by Lender in connection
with the Loan subject to any limitations set forth herein, including (i) the
preparation, negotiation, execution and delivery of the Loan Documents and the
consummation of the transactions contemplated thereby and all the costs of
furnishing all opinions by counsel for Borrower; (ii) Borrower's and Lender's
ongoing performance under and compliance with the Loan Documents, including
confirming compliance with environmental and insurance requirements, in excess
of the Servicing Fee; (iii) the negotiation, preparation, execution, delivery
and administration of any consents, amendments, waivers or other modifications
of or under any Loan Document and any other documents or matters requested by
Borrower or Manager; (iv) filing and recording of any Loan Documents; (v) title
insurance, surveys, inspections and appraisals; (vi) enforcing or preserving any
rights, in response to third party claims or the prosecuting or defending of any
action or proceeding or other litigation, in each case against, under or
affecting Borrower, the Loan Documents, the Property, or any other security
given for the Loan; and (vii) enforcing any obligations of or collecting any
payments due from Borrower under any Loan Document or with respect to the
Property or in connection with any refinancing or restructuring of the Loan in
the nature of a "work-out", or any insolvency or bankruptcy proceedings. Any
costs and expenses due and payable to Lender hereunder which are not paid by
Borrower within ten (10) days after demand may be paid from any amounts in the
Deposit Account, with notice thereof to Borrower. Subject to the limitations
contained in Section 10.1 herein, the obligations and liabilities of Borrower
under this Section 5.1.17 shall survive the Term and the exercise by Lender of
any of its rights or remedies under the Loan Documents, including the
acquisition of the Property by foreclosure or a conveyance in lieu of
foreclosure.
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5.1.18 INDEMNITY. Borrower shall indemnify and hold harmless
Lender and its directors, officers, participants and employees (each, an
"INDEMNIFIED PARTY") from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, claims, costs, expenses
and disbursements of any kind or nature whatsoever (including the reasonable
fees and disbursements of counsel for an Indemnified Party in connection with
any investigative, administrative or judicial proceeding commenced or
threatened, whether or not Lender shall be designated a party thereto), that may
be imposed on, incurred by, or asserted against any Indemnified Party
(collectively, the "INDEMNIFIED LIABILITIES") in any manner, relating to or
arising out of or by reason of any of the following: (i) any breach by Borrower
of its obligations under, or any material misrepresentation by Borrower
contained in, any Loan Document; (ii) the use or intended use of the proceeds of
the Loan; (iii) any false or incorrect information provided by or on behalf of
Borrower, or contained in any documentation approved by Borrower; (iv) ownership
of the Mortgage, the Property or any interest therein, or receipt of any Rents;
(v) any accident, injury to or death of persons or loss of or damage to property
occurring in, on or about the Property or on the adjoining sidewalks, curbs,
adjacent property or adjacent parking areas, streets or ways; (vi) any use,
nonuse or condition in, on or about the Property or on adjoining sidewalks,
curbs, adjacent property or adjacent parking areas, streets or ways; (vii) the
construction of the Required Improvements or the performance of any other labor
or services or the furnishing of any materials or other property in respect of
the Property; (viii) the presence, disposal, escape, seepage, leakage, spillage,
discharge, emission, release, or threatened release of any Hazardous Substance
on, from or affecting the Property; (ix) any personal injury (including wrongful
death) or property damage (real or personal) arising out of or related to such
Hazardous Substance; (x) any lawsuit brought or threatened, settlement reached,
or government order relating to such Hazardous Substance; (xi) any violation of
the Environmental Laws, which is based upon or in any way related to such
Hazardous Substance, including, the costs and expenses of any Remedial Work,
reasonable attorney and consultant fees and disbursements, investigation and
laboratory fees, court costs, and reasonable litigation expenses; (xii) any
failure of the Property to comply with any Legal Requirement; (xiii) any claim
by brokers, finders or similar persons claiming to be entitled to a commission
in connection with any Lease or other transaction involving the Property or any
part thereof under any Legal Requirement, or any liability asserted against
Lender with respect thereto; and (xiv) the claims of any lessee of any portion
of the Property or any person acting through or under any lessee or otherwise
arising under or as a consequence of any Lease; provided, however, that Borrower
shall not have any obligation to any Indemnified Party hereunder to the extent
that it is finally judicially determined that such Indemnified Liabilities (i)
arise from the gross negligence, illegal acts, fraud or willful misconduct of
such Indemnified Party, (ii) which are attributable to acts or events which
occur after the total payment or Defeasance in full of the Debt (except to the
extent fairly attributable to acts or events or Indemnified Liabilities
occurring or accruing prior thereto and except as may be provided in any other
Loan Document), (iii) solely by reason of the act of a transfer by Lender of all
or any part of its interest in this Agreement, the Note or the other Loan
Documents, whether pursuant to a Securitization or otherwise, other than any
such transfer made while an Event of Default shall have occurred and be
continuing or (iv) for any Indemnified Party's income and net revenue taxes. IT
IS EXPRESSLY ACKNOWLEDGED AND AGREED BY
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BORROWER AND MANAGER THAT THE INDEMNITY CONTAINED IN THIS SECTION PROTECTS
LENDER AND DEED OF TRUST TRUSTEE FROM THE CONSEQUENCES OF LENDER AND SUCH
TRUSTEE'S ACTS OR OMISSIONS, INCLUDING, WITHOUT LIMITATION, THE NEGLIGENT ACTS
OR OMISSIONS OF LENDER AND/OR SUCH TRUSTEE, TO THE EXTENT PROVIDED BY LAW;
PROVIDED, HOWEVER, THAT NOTHING CONTAINED HEREIN SHALL BE DEEMED TO RELIEVE
LENDER OR SUCH TRUSTEE FROM LIABILITY DUE TO
ITS GROSS NEGLIGENCE. To the extent that the undertaking to indemnify and hold
harmless set forth in the preceding sentence may be unenforceable because it
violates any law or public policy, Borrower shall contribute the maximum portion
that it is permitted to pay and satisfy under applicable law to the payment and
satisfaction of all Indemnified Liabilities incurred by any Indemnified Party.
Lender shall credit against any payments due under this Section 5.1.18 any
Proceeds actually received, retained, and applied by Lender in respect of the
related claim under or from the Policies. Any amounts payable to any Indemnified
Party by reason of the application of this paragraph shall become immediately
due and payable upon notice to Borrower and shall bear interest at the Default
Rate from the date such notice is delivered to Borrower until paid. Subject to
the limitations contained in Section 10.1 herein, the obligations and
liabilities of Borrower under this Section 5.1.18 shall survive the Term and the
exercise by Lender of any of its rights or remedies under the Loan Documents,
including the acquisition of the Property by foreclosure or a conveyance in lieu
of foreclosure.
5.1.19 CONDUCT OF BUSINESS. Borrower shall operate the
Property, or shall cause the operation of the Property to be conducted at all
times, in a manner consistent with at least the level of operation of the
Property as of the Loan Closing Date, including, the following:
(i) upon Substantial Completion, maintain or cause to
be maintained the standard of operations at the Property at all times
at a level necessary to insure a level of quality for the Property
consistent with similar facilities in the same competitive market;
(ii) operate or cause to be operated the Property in
a prudent manner in compliance in all material respects with applicable
Legal Requirements and insurance requirements of any Policies relating
thereto and cause all Licenses and permits, and any other agreements
necessary for the continued use and operation of the Property to remain
in effect; and
(iii) maintain or cause to be maintained sufficient
Inventory and Equipment of types and quantities at the Property to
enable Borrower to operate the Property.
5.1.20 ERISA. Borrower shall deliver to Lender as soon as
possible, and in any event within ten (10) days after Borrower knows or has
reason to believe that any of the
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events or conditions specified below with respect to any ERISA Plan or
Multiemployer Plan has occurred or exists, a statement signed by a senior
financial officer of Borrower setting forth details respecting such event or
condition and the action, if any, that Borrower or its ERISA Affiliate proposes
to take with respect thereto (and a copy of any report or notice required to be
filed with or given to PBGC by Borrower or an ERISA Affiliate with respect to
such event or condition):
(i) any reportable event, as defined in Section
4043(b) of ERISA and the regulations issued thereunder, with respect to
an ERISA Plan, as to which PBGC has not by regulation waived the
requirement of Section 4043(a) of ERISA that it be notified within
thirty (30) days of the occurrence of such event (provided that a
failure to meet the minimum funding standard of Section 412 of the Code
or Section 302 of ERISA, including, the failure to make on or before
its due date a required installment under Section 412(m) of the Code or
Section 302(e) of ERISA, shall be a reportable event regardless of the
issuance of any waivers in accordance with Section 412(d) of the Code);
and any request for a waiver under Section 412(d) of the Code for any
ERISA Plan;
(ii) the distribution under Section 4041 of ERISA of
a notice of intent to terminate any ERISA Plan or any action taken by
Borrower or an ERISA Affiliate to terminate any ERISA Plan;
(iii) the institution by PBGC of proceedings under
Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any ERISA Plan, or the receipt by Borrower or
any ERISA Affiliate of a notice from a Multiemployer Plan that such
action has been taken by PBGC with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal from a
Multiemployer Plan by Borrower or any ERISA Affiliate that results in
liability under Section 4201 or 4204 of ERISA (including the obligation
to satisfy secondary liability as a result of a purchaser default) or
the receipt by Borrower or any ERISA Affiliate of notice from a
Multiemployer Plan that it is in reorganization or insolvency pursuant
to Section 4241 or 4245 of ERISA or that it intends to terminate or has
terminated under Section 4041A of ERISA;
(v) the institution of a proceeding by a fiduciary of
any Multiemployer Plan against Borrower or any ERISA Affiliate to
enforce Section 515 of ERISA, which proceeding is not dismissed within
thirty (30) days;
(vi) the adoption of an amendment to any ERISA Plan
that, pursuant to Section 401(a)(29) of the Code or Section 307 of
ERISA, would result in the loss of tax-exempt status of the trust of
which such ERISA Plan is a part if Borrower or an
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ERISA Affiliate fails to timely provide security to the ERISA Plan in
accordance with the provisions of said Sections; and
(vii) the imposition of a lien or a security interest
on the assets of Borrower or any ERISA Affiliate in connection with an
ERISA Plan.
5.1.21 TRADE INDEBTEDNESS. Borrower will pay its trade
payables within ninety (90) days of the date incurred, unless Borrower is in
good faith contesting Borrower's obligation to pay such trade payables in a
manner reasonably satisfactory to Lender (which may include Lender's requirement
that Borrower, as the case may be, post security with respect to the contested
trade payable).
5.1.22 Intentionally deleted.
5.1.23 INSURANCE BENEFITS. Borrower shall cooperate with
Lender in obtaining for Lender the benefits of any Proceeds lawfully or
equitably payable to Lender in connection with the Property, and Lender shall be
reimbursed for any reasonable expenses incurred in connection therewith
(including reasonable attorneys' fees and disbursements) and the payment by
Borrower of the expense of an appraisal on behalf of Lender in case of a fire or
other casualty affecting the Property or any part thereof out of such Proceeds.
5.1.24 ACCESS TO PROPERTY. Borrower shall permit agents,
representatives and employees of Lender to inspect the Property or any part
thereof at such reasonable times as may be requested by Lender upon two (2)
Business Days prior written notice and subject to the rights of tenants under
Leases; provided, such written notice shall not be required upon the occurrence
and continuation of a Default or Event of Default.
5.1.25 INSURANCE. Borrower shall provide and maintain at all
times insurance in such forms and covering such risks and hazards and in such
amounts and with such companies as may be required by Lender in accordance with
Section 7.1 of this Agreement.
5.1.26 USE SPECIFIC COVENANTS. Borrower shall:
(1) operate the Property or cause the Property to be operated in material
compliance with the Legal Requirements and other requirements referred to
herein;
(2) operate the Borrower's Property or cause the Property to be operated
in a manner such that the Licenses shall remain in full force and effect and
such that any new or additional License that may, at any time or from time to
time, be required pursuant to any Legal Requirements are timely obtained and
maintained in full force and effect;
(3) Intentionally deleted; and
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(4) cooperate with all governmental agencies, such cooperation shall
include, but not be limited to, timely and completely responding to all requests
for records, as well as developing and implementing an appropriate and
acceptable plan to correct any deficiency in the operation of the Property.
5.2 MANAGER'S COVENANTS. Until the end of the Term or the
Defeasance of the entire unpaid Principal, Manager hereby covenants and agrees
with Lender that:
5.2.1 EXISTENCE. Manager shall (i) do or cause to be done all
things necessary to preserve, renew and keep in full force and effect its
existence, rights, and franchises, (ii) continue to engage in the business
presently conducted by it, (iii) obtain and maintain all Licenses, and (iv)
qualify to do business and remain in good standing under the laws of each
jurisdiction, in each case as and to the extent required for the ownership,
development, maintenance, management and operation of the Property. Manager
shall notify Lender promptly of any written notice or order that Manager
receives from any Governmental Authority relating to Manager's failure to comply
with any applicable Legal Requirements relating to the Property and promptly
take any and all actions necessary to bring itself and its operations at the
Property into compliance in all material respects with such applicable Legal
Requirements (and shall comply in all material respects with the requirements of
such Legal Requirements that at any time are applicable to its operations at the
Property). Manager shall have the right to contest same provided it complies
with the Contest Procedures.
5.2.2 TAXES AND OTHER CHARGES. Manager shall pay, or cause to
be paid, all Taxes and Other Charges as the same become due and payable, and
deliver to Lender receipts for payment or other evidence satisfactory to Lender
that the Taxes and Other Charges have been so paid no later than thirty (30)
days before they would be delinquent if not paid (provided, however, that
Manager need not furnish such receipts for payment of Taxes paid by Lender
pursuant to Section 3.2). Manager shall not suffer and shall promptly cause to
be paid and discharged any Lien against the Property, and shall promptly pay
for, or cause to be paid, all utility services provided to the Property. After
prior notice to Lender, Manager, at its own or Borrower's expense, may contest
by appropriate legal proceeding, promptly initiated and conducted in good faith
and with due diligence, the amount or validity or application of any Taxes or
Other Charges, provided that (i) no Default or Event of Default has occurred and
remains uncured, (ii) such proceeding shall suspend the collection of the Taxes
or Other Charges, (iii) such proceeding shall be permitted under and be
conducted in accordance with the provisions of any other instrument to which
Manager is subject and shall not constitute a default thereunder, (iv) no part
of or interest in the Property will be in danger of being sold, forfeited,
terminated, canceled or lost, if the Manager pays the amount or satisfies the
condition being contested, and the Manager would have the opportunity to do so,
in the event of the Manager's failure to prevail in the contest, (v) Lender
would not, by virtue of such permitted contest, be exposed to any risk of any
civil liability for which the Manager and/or Borrower has not furnished
additional security as provided in clause (vi) below, or to any risk of criminal
liability, and neither the Property nor any interest therein would be subject to
the imposition of any lien
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for which the Manager and/or Borrower has not furnished additional security as
provided in clause (vi) below, as a result of the failure to comply with such
law or of such proceeding, (vi) Manager and/or Borrower shall have furnished
such security as may be required in the proceeding, or as may be reasonably
requested by Lender, to insure the payment of any such Taxes or Other Charges,
together with all interest and penalties thereon, but in no amount less than one
hundred and twenty-five percent (125%) of the amount of such claims, and (vii)
Manager shall promptly upon final determination thereof pay the amount of Taxes
or Other Charges determined to be due and payable, together with all costs,
interest and penalties. Lender may pay over any such cash deposit or part
thereof held by Lender to the claimant entitled thereto at any time when, in the
reasonable judgment of Lender, the entitlement of such claimant is established.
5.2.3 REPAIRS; MAINTENANCE AND COMPLIANCE. Manager shall cause
the Property to be maintained in a good and safe condition and repair and shall
not remove, demolish or materially alter the Improvements or Equipment (except
for the construction of the Required Improvements in accordance with the BLA and
normal replacement of the Equipment or restoration pursuant to Section 7.2
herein). Manager shall promptly comply with all Legal Requirements and commence
and diligently continue to cure properly any violation of a Legal Requirement,
which materially and adversely affects the financial condition of the Property
or the ability of Borrower to conduct its business, within thirty (30) days
after Manager receives notice of such violation, provided that Manager shall
have the right to contest same if it complies with the Contest Procedures.
Manager shall, in a good and workmanlike manner using materials of a quality at
least equal to that originally installed at the Property, promptly repair,
replace or rebuild any part of the Property that becomes damaged (subject to
Section 7.2 herein), worn or dilapidated and shall complete and pay for any
Improvements at any time in the process of construction or repair. Manager may
perform alterations without obtaining Lender's consent for alterations which (i)
are required under the BLA, (ii) do not alter the footprint of the Property,
(iii) do not change the number of units, (iv) are contemplated in the Annual
Budget approved by Lender, or (v) which do not otherwise constitute material
renovations.
5.2.4 LITIGATION. Manager shall give prompt written notice to
Lender of any litigation or governmental proceedings pending or threatened
against Manager which might reasonably likely materially adversely affect
Manager's condition (financial or otherwise) or business or the Property.
5.2.5 PERFORMANCE OF OTHER AGREEMENTS. Manager shall observe
and perform each and every term, provision, covenant and condition to be
observed or performed by it pursuant to the terms of any material agreement or
recorded instrument affecting or pertaining to the Property.
5.2.6 NOTICE OF DEFAULT. Manager shall promptly advise Lender
of any material adverse change in Manager's condition, financial or otherwise,
or of the occurrence of any Default or Event of Default of which Manager has
knowledge.
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5.2.7 COOPERATE IN LEGAL PROCEEDINGS. Manager shall cooperate
fully with Lender with respect to, and permit Lender, at its option, to
participate in, any proceedings before any Governmental Authority which may in
any way affect the rights of Lender under any Loan Document and, in connection
therewith, not prohibit Lender, at its election, from participating in any such
proceedings.
5.2.8 FURTHER ASSURANCES. Manager shall, at Manager's sole
cost and expense (except in connection with the transfer of the Loan or the
interest therein by Lender pursuant to a Securitization, the cost of which shall
be provided for as set forth in Section 9 herein or a Syndication pursuant to
the BLA), (i) furnish to Lender, provided Lender reasonably determines that the
Property or any of its other collateral will be materially adversely affected,
all instruments, documents, boundary surveys, footing or foundation surveys,
certificates, plans and specifications, appraisals, title and other insurance
reports and agreements, and each and every other document, certificate,
agreement, and instrument reasonably requested by Lender pursuant to the terms
of the Loan Documents; (ii) execute and deliver to Lender such documents,
instruments, certificates, assignments and other writings, and do such other
acts necessary or desirable, to evidence, preserve and/or protect the collateral
at any time securing or intended to secure the Debt, as Lender may reasonably
require pursuant to the terms of the Loan Documents; (iii) do and execute all
and such further lawful and reasonable acts, conveyances and assurances for the
better and more effective carrying out of the intents and purposes of the Loan
Documents, as Lender shall reasonably require from time to time, (iv) after the
occurrence and during the continuance of an Event of Default, furnish reports of
UCC, federal tax lien, state tax lien, judgment and pending litigation searches
with respect to Manager as Lender shall reasonably require and (v) after the
occurrence and during the continuance of an Event of Default, furnish searches
of title to the Property, designated by Lender in each of the locations
reasonably designated by Lender.
5.2.9 FINANCIAL REPORTING.
(a) BOOKKEEPING. Manager shall keep and maintain or shall
cause to be kept and maintained on a Fiscal Year basis, in accordance with GAAP,
books, records and accounts reflecting in reasonable detail all of the financial
affairs of Manager and all items of income and expense in connection with the
operation of the Property and in connection with any services, equipment,
materials, or furnishings provided in connection with the development or
operation of the Property whether such income or expense is realized by Borrower
or Manager. Lender, at Lender's cost and expense, shall have the right from time
to time and at all times during normal business hours upon reasonable prior
written notice to Manager to examine such books, records and accounts at the
office of Manager and to make such copies or extracts thereof as Lender shall
desire. After the occurrence of an Event of Default with respect to the
Property, Manager shall pay, within ten (10) calendar days of written demand
therefore, any costs and expenses incurred by Lender during the continuance of
such Event of Default to examine any and all of the Manager's books, records and
accounts as Lender shall
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determine in Lender's reasonable discretion to be necessary or appropriate
in the protection of Lender's interest.
(b) ANNUAL REPORTS. (i) From and after the Substantial
Completion Date, Manager shall furnish to Lender annually within ninety (90)
days following the end of each Fiscal Year, true, complete and correct copies of
Manager's financial statements audited by a "big six" accounting firm or other
independent certified public accounting firm acceptable to Lender in Lender's
reasonable discretion which shall (a) be in form and substance acceptable to
Lender in Lender's reasonable discretion, (b) be prepared in accordance with
GAAP, (c) include, without limitation, a statement of operations (profit and
loss), a statement of cash flows, a calculation of Net Operating Income, a
consolidated balance sheet, if applicable, an aged accounts receivable report
and such other information or reports as shall be reasonably requested by Lender
or any applicable Rating Agency, (d) be accompanied by an Officer's Certificate
from a senior executive of Manager certifying as of the date thereof (x) that
such statement is true, correct, complete and accurate and fairly reflects the
results of operations and financial condition of Manager for the relevant
period, and (y) notice of whether to the knowledge of Manager, there exists an
Event of Default, and if such Event of Default exists, the nature thereof, the
period of time it has existed and the action then being taken to remedy same and
(e) be accompanied by an opinion from an Independent certified public accountant
acceptable to Lender in Lender's reasonable discretion.
(ii) From and after the Substantial Completion Date,
Manager shall furnish to Lender annually within forty (40) days
following the end of each Fiscal Year, true, complete and correct
copies of Manager's unaudited financial statements which shall (a) be
in form and substance acceptable to Lender in Lender's reasonable
discretion, (b) be prepared in accordance with GAAP, (c) include,
without limitation, a statement of operations (profit and loss), a
statement of cash flows, a calculation of Net Operating Income, a
consolidated balance sheet, if applicable, an aged accounts receivable
report and such other information or reports as shall be reasonably
requested by Lender or any applicable Rating Agency and (d) be
accompanied by an Officer's Certificate from a senior executive of
Manager certifying, to the best of Manager's knowledge, as of the date
thereof (x) that such statement is true, correct, complete and accurate
and fairly reflects the results of operations and financial condition
of Manager for the relevant period, and (y) notice of whether to the
knowledge of Manager, there exists an Event of Default, and if such
Event of Default exists, the nature thereof, the period of time it has
existed and the action then being taken to remedy same.
(c) MONTHLY REPORTS. (i) From and after the Substantial
Completion Date, Manager shall furnish to Lender within thirty (30) days
following the end of each calendar month, true, correct and complete monthly
unaudited financial statements for Manager which shall (a) be in form and
substance acceptable to Lender in Lender's reasonable discretion, (b) be
prepared in accordance with GAAP, (c) include, without limitation, a statement
of operations (profit and loss), a statement of cash flows, a calculation of Net
Operating Income,
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a consolidated balance sheet, if applicable, an aged accounts receivable report
and such other information or reports as shall be reasonably requested by Lender
or any applicable Rating Agency and (d) be accompanied by an Officer's
Certificate from a senior executive of Manager certifying, to the best of
Manager's knowledge, as of the date thereof (x) that such statement is true,
correct, complete and accurate and fairly reflects the results of operations and
financial condition of Manager for the relevant period, and (y) notice of
whether, to the knowledge of Manager, there exists an Event of Default, and if
such Event of Default exists, the nature thereof, the period of time it has
existed and the action then being taken to remedy same.
(ii) From and after the Substantial Completion Date,
Manager shall furnish to Lender, within thirty (30) days following the
end of each calendar month, a true, complete and correct rent roll and
occupancy report and such other occupancy statistics as Lender shall
request in Lender's reasonable discretion. Each such document shall (a)
be in form and substance acceptable to Lender in Lender's reasonable
discretion, and (b) be accompanied by an Officer's Certificate from a
senior executive of Manager certifying, to the best of Manager's
knowledge, as of the date thereof (x) that such statement is true,
correct, complete and accurate and (y) notice of whether, to the
knowledge of Manager, there exists an Event of Default, and if such
Event of Default exists, the nature thereof, the period of time it has
existed and the action then being taken to remedy same.
(d) OTHER REPORTS. (i) Manager shall furnish to Lender, within
fifteen (15) Business Days after request, such further information with respect
to the operation of the Property and the financial affairs of Manager as may be
reasonably requested by Lender, including without limitation all business plans
prepared for Manager.
(ii) Manager shall furnish to Lender, within fifteen
(15) Business Days after request, such further information regarding
any Plan or Multiemployer Plan and any reports or other information
required to be filed under ERISA as may be reasonably requested by
Lender.
(iii) Manager shall, concurrently with Manager's
delivery to Lender, provide a copy of the items required to be
delivered to Lender under this Section 5.2.9 to the Rating Agencies and
any servicer and/or special servicer that may be retained in
conjunction with the Loan or any Securitization. Manager shall furnish
to Lender written notice, within two (2) Business Days after receipt by
Manager, of any Rents, Money or other items of Gross Revenue that
Manager is not required by this Agreement to deposit in the Clearing
Account, Deposit Account or the Security Deposit Accounts, together
with such other documents and materials relating to such Rents, Money
or other items of Gross Revenue as Lender requests in Lender's
reasonable discretion.
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(iv) From and after the Substantial Completion Date,
Manager shall provide Lender with updated information (satisfactory to
Lender in Lender's reasonable discretion) concerning the Basic Carrying
Costs for the next succeeding Fiscal Year prior to the termination of
each Fiscal Year.
(v) Manager shall furnish to Lender such other
financial information with respect to Manager as Lender may reasonably
request (including, without limitation, in the case of a defeasance
pursuant to Section 2.3.3, a review by a third party acceptable to
Lender, of the calculations required to be made pursuant to Section
2.3.3).
(vi) Manager shall furnish or shall cause to be
furnished to Lender, within fifteen (15) days of the receipt by
Borrower and/or Manager any and all notices (regardless of form) from
any licensing and/or certifying agency that any License relating to the
Property or Manager is being downgraded to a substandard category,
revoked, or suspended, or that action is pending or being considered to
downgrade to a substandard category, revoke, or suspend any License or
certification;
(vii) Intentionally deleted; and
(viii) Manager shall furnish to Lender, within
fifteen (15) Business Days of receipt, a copy of any licensing agency
survey or report and any statement of deficiencies, and within the time
period required by the particular agency for furnishing a plan of
correction also shall furnish or cause to be furnished to Lender a copy
of the plan of correction generated from such survey or report for the
Property, and correct or cause to be corrected any deficiency, the
curing of which is a condition of continued licensure by the date
required for cure by such agency (plus extensions granted by such
agency).
(e) ANNUAL BUDGET. Manager shall prepare and submit to Lender
(i) by November 15 of each year during the Term in which the succeeding Fiscal
Year is expected to include a Cash Management Period (except for the Initial
Budget) and (ii) within thirty (30) days after the commencement of any new Cash
Management Period after the Conversion Date, a proposed pro forma budget for the
Property (the "ANNUAL BUDGET") for the succeeding (in the case of the foregoing
clause (i)) or then current (in the case of the foregoing clause (ii)) Fiscal
Year. The parties hereto acknowledge that Manager has submitted an initial
Budget (the "INITIAL BUDGET") covering the thirty-eight (38) month period
commencing with the Loan Closing Date. If either (a) the expenses increase on an
annualized basis by more than ten percent (10%) from the projected expenses in
the Initial Budget or (b) the income decreases on an annualized basis by more
than ten percent (10%) from the projected income in the Initial Budget, then
Manager shall be required to promptly submit a new Budget to Lender, which must
be satisfactory to Lender in its sole but reasonable discretion. Promptly after
the preparation of any proposed revisions to an Annual Budget, Manager shall
submit them to Lender. Each such Annual
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Budget, and any revisions thereto, shall be subject to Lender's approval, which
will not be unreasonably withheld or delayed. Lender's failure to approve or
disapprove any Annual Budget within thirty (30) days after Lender's receipt
thereof shall be deemed to constitute Lender's approval thereof. The Annual
Budget shall consist of (A) an operating expense budget (the "OPERATING BUDGET")
showing, on a month-by-month basis, in reasonable detail, each line item of the
Manager's anticipated Operating Income and Operating Expenses (on a cash and
accrual basis), including amounts required to establish, maintain and/or
increase reserves (including a working capital reserve), and (B) a Capital
Expense budget (the "CAPITAL BUDGET") showing, on a month-by-month basis, in
reasonable detail, each line item of anticipated Capital Expenses. The approved
Annual Budget for the period commencing on the date hereof and ending on the
Conversion Date is the Initial Budget, which has been submitted to and approved
by Lender.
(f) BREACH. If either Borrower or Manager fails to provide to
Lender or its designee those statements, books, records, accounts or other items
required in Sections 5.1.9(b), 5.1.9(c), 5.2.9(b), and 5.2.9(c) of this
Agreement (the "REQUIRED RECORDS") within thirty (30) days after the date upon
which such Required Record is due, Manager shall pay to Lender, at Lender's
option and in its discretion, an amount equal to $10,000 for each Required
Record that is not delivered; provided Lender has given Manager at least fifteen
(15) days prior notice of such failure.
5.2.10 ENVIRONMENTAL MATTERS.
(a) HAZARDOUS SUBSTANCES. So long as Manager operates, manages
or is in possession of the Property, except as disclosed in the Environmental
Reports, Manager (i) shall keep the Property free from Hazardous Substances
(except for nominal amounts of any such substances commonly incorporated in or
used in the operation of properties similar to the Property, in either case in
compliance with all Environmental Laws) and in compliance with all Environmental
Laws, (ii) shall promptly notify Lender if Manager shall become aware that (A)
any Hazardous Substance is on or near the Property, (B) the Property is in
direct or indirect violation of any Environmental Laws or (C) any condition
relating to Hazardous Substances on or near the Property shall pose a threat to
the health, safety or welfare of humans, (iii) shall remove such Hazardous
Substances and/or cure such violations and/or remove such threats, as
applicable, as required by law (or as shall be required by Lender in the case of
removal which is not required by law, but in response to the opinion of Lender's
Consultant, promptly after Manager becomes aware of same, at Manager's sole
expense and (iv) shall comply with all of the recommendations contained in the
Environmental Report delivered to Lender in connection with the origination of
the Loan. Nothing herein shall prevent Manager from recovering such expenses
from any other party that may be liable for such removal or cure.
(b) ENVIRONMENTAL MONITORING. Manager shall give prompt
written notice to Lender of (i) any proceeding or inquiry by any party with
respect to the presence of any Hazardous Substance on, under, from or about the
Property, (ii) all claims made or threatened by any third party against Manager,
Borrower, or the Property relating to any loss or injury
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resulting from any Hazardous Substance, and (iii) Manager's discovery of any
occurrence or condition on any real property adjoining or in the vicinity of the
Property that could reasonably be expected to cause the Property to be subject
to any investigation or cleanup pursuant to any Environmental Law. Manager shall
permit Lender to join and participate in, as a party if it so elects, any legal
proceedings or actions initiated with respect to the Property in connection with
any Environmental Law or Hazardous Substance, and Manager shall pay all
reasonable attorneys' fees and disbursements incurred by Lender in connection
therewith. Upon Lender's reasonable request, at any time and from time to time
when Lender has reason to believe that Hazardous Substances are present on or
under the Property in violation of Environmental Laws, Manager shall provide an
inspection or audit of the Property prepared by a licensed hydrogeologist,
licensed environmental engineer or qualified environmental consulting firm
reasonably approved by Lender indicating the presence or absence of Hazardous
Substances on, in or near the Property. The cost and expense of such audit or
inspection shall be paid by Manager not more frequently than once every five (5)
calendar years after the occurrence of a Securitization, unless Lender, in its
good faith judgment, determines that reasonable cause exists for the performance
of an environmental inspection or audit of the Property, in which case such
inspections or audits shall be at Manager's sole expense. If Manager fails to
provide any such inspection or audit within thirty (30) days after such request,
Lender may order same, and Manager hereby grants to Lender and its employees and
agents access to the Property and a license to undertake such inspection or
audit. The cost of such inspection or audit may be added to the Debt and shall
bear interest thereafter at the Default Rate until paid. If any environmental
site assessment report prepared in connection with such inspection or audit
recommends that an operations and maintenance plan be implemented for any
Hazardous Substance, Manager shall cause such operations and maintenance plan to
be prepared and implemented at its expense upon request of Lender. In the event
that any Remedial Work is required under an applicable Environmental Law,
Manager shall commence and thereafter diligently prosecute to completion all
such Remedial Work within thirty (30) days after written demand by Lender for
performance thereof (or such shorter period of time as may be required under
applicable law). All Remedial Work shall be performed by contractors reasonably
approved in advance by Lender, and under the supervision of a consulting
engineer reasonably approved by Lender. All costs of such Remedial Work shall be
paid by Manager, including Lender's reasonable attorneys' fees and disbursements
incurred in connection with the monitoring or review of such Remedial Work.
Manager will not install or permit to be installed on the Property any
underground storage tank.
5.2.11 TITLE TO THE PROPERTY. If and to the extent necessary
to preserve Lender's interest therein, Manager will warrant and defend the title
to the Property, and the validity and priority of the Lien of the Mortgage and
the Subordinate Mortgage, subject only to Permitted Encumbrances, against the
claims of all Persons except Lender.
5.2.12 ESTOPPEL STATEMENT. After request by either Manager or
Lender, the other party shall within fifteen (15) Business Days furnish the
requesting party with a statement, subject to the exculpation provisions
contained in Section 10.1 hereof, duly acknowledged and certified, setting forth
(i) the unpaid Principal, (ii) the Interest Rate, (iii) the date installments of
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interest and/or Principal were last paid, (iv) any offsets or defenses to the
payment of the Debt, and (v) that the Loan Documents are valid, legal and
binding obligations and have not been modified or if modified, giving
particulars of such modification. After request by Lender (but no more
frequently than twice in any year), Manager shall furnish to Lender (x) within
ten (10) days, a certificate, subject to the exculpation provisions contained in
Section 10.1 hereof, reaffirming all representations and warranties of Manager
set forth in the Loan Documents as of the date requested by Lender or, to the
extent of any changes to any such representations and warranties, so stating
such changes, and (y) within thirty (30) days, tenant estoppel certificates from
each tenant at the Property in form and substance reasonably satisfactory to
Lender.
5.2.13 PRINCIPAL PLACE OF BUSINESS. Manager shall not change
its principal place of business without first giving Lender thirty (30) days
prior notice.
5.2.14 PROPERTY MANAGEMENT.
(a) MANAGEMENT AGREEMENT. Manager shall (i) cause the Property
to be operated pursuant to the Management Agreement; (ii) promptly perform and
observe all of the covenants required to be performed and observed by it under
the Management Agreement and do all things necessary to preserve and to keep
unimpaired its material rights thereunder; (iii) promptly notify Lender of any
default under the Management Agreement of which it is aware; (iv) promptly
deliver to Lender a copy of each financial statement, business plan, capital
expenditure plan, and property improvement plan and any other notice, report and
estimate received by Manager under the Management Agreement; and (v) promptly
enforce the performance and observance of all of the material covenants required
to be performed and observed by Borrower under the Management Agreement.
(b) TERMINATION OF MANAGER. After the Conversion Date,
Borrower shall achieve, and, within thirty (30) days after the end of each
calendar month provide evidence to Lender of the achievement of, a Debt Service
Coverage Ratio of not less than 1.10X and (b) Net Operating Income on a trailing
twelve (12) month basis of not less than eighty-five percent (85%) of the Net
Operating Income as of the Conversion Date. If either of the aforementioned is
not maintained, Lender shall have the right to terminate the Management
Agreement unless Borrower shall defease a portion of the unpaid Principal to a
level such that the Debt Service Coverage Ratio on the undefeased portion of the
unpaid Principal is restored to a level of not less than 1.20x. All calculations
of Debt Service Coverage Ratio for purposes of this Section 5.2.14 shall be
subject to verification by Lender. If Borrower fails to comply with this Sec
tion 5.2.14, or if an Event of Default shall be continuing, Borrower shall, at
the request of Lender, terminate the Management Agreement and replace the
Manager with a manager reasonably approved by Lender on terms and conditions
reasonably satisfactory to Lender.
5.2.15 SPECIAL PURPOSE BANKRUPTCY REMOTE ENTITY. Commencing on the
Conversion Date and continuing for so long as the Loan is outstanding, Manager
shall become
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and continue to be a Special Purpose Bankruptcy Remote Entity (as such term is
defined in Section 5.1.15 herein) with such modification appropriate for
Manager, if any.
5.2.16 ASSUMPTIONS IN NON-CONSOLIDATION OPINION. Commencing on
the Conversion Date, Manager and the Manager Representative shall conduct their
business so that the assumptions made in that certain substantive
non-consolidation opinion letter delivered on the Conversion Date by Manager's
counsel in connection with the Loan, shall be true and correct in all respects.
5.2.17 EXPENSES. Manager shall reimburse Lender upon receipt
of notice for all reasonable costs and expenses (including reasonable attorneys'
fees and disbursements) incurred by Lender in connection with the Loan subject
to any limitations set forth herein, including (i) the preparation, negotiation,
execution and delivery of the Loan Documents and the consummation of the
transactions contemplated thereby and all the costs of furnishing all opinions
by counsel for Manager; (ii) Manager's and Lender's ongoing performance under
and compliance with the Loan Documents, including confirming compliance with
environmental and insurance requirements, in excess of the Servicing Fee; (iii)
the negotiation, preparation, execution, delivery and administration of any
consents, amendments, waivers or other modifications of or under any Loan
Document and any other documents or matters requested by Borrower or Manager;
(iv) filing and recording of any Loan Documents; (v) title insurance, surveys,
inspections and appraisals; (vi) enforcing or preserving any rights, in response
to third party claims or the prosecuting or defending of any action or
proceeding or other litigation, in each case against, under or affecting
Manager, the Loan Documents, the Property, or any other security given for the
Loan; and (vii) enforcing any obligations of or collecting any payments due from
Manager under any Loan Document or with respect to the Property or in connection
with any refinancing or restructuring of the Loan in the nature of a "work-out",
or any insolvency or bankruptcy proceedings. Any costs and expenses due and
payable to Lender hereunder which are not paid by Manager within ten (10) days
after demand may be paid from any amounts in the Deposit Account, with notice
thereof to Manager. Subject to the limitations contained in Section 10.1 herein,
the obligations and liabilities of Manager under this Sec tion 5.2.17 shall
survive the Term and the exercise by Lender of any of its rights or remedies
under the Loan Documents, including the acquisition of the Property by
foreclosure or a conveyance in lieu of foreclosure.
5.2.18 INDEMNITY. Manager shall indemnify and hold harmless
each Indemnified Party from and against any and all Indemnified Liabilities in
any manner, relating to or arising out of or by reason of any of the following:
(i) any breach by Manager of its obligations under, or any material
misrepresentation by Manager contained in, any Loan Document; (ii) the use or
intended use of the proceeds of the Loan; (iii) any false or incorrect
information provided by or on behalf of Manager, or contained in any
documentation approved by Manager; (iv) ownership of the Mortgage, the Property
or any interest therein, or receipt of any Rents; (v) any accident, injury to or
death of persons or loss of or damage to property occurring in, on or about the
Property or on the adjoining sidewalks, curbs, adjacent property or
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adjacent parking areas, streets or ways; (vi) any use, nonuse or condition in,
on or about the Property or on adjoining sidewalks, curbs, adjacent property or
adjacent parking areas, streets or ways; (vii) the construction of the Required
Improvements or the performance of any other labor or services or the furnishing
of any materials or other property in respect of the Property; (viii) the
presence, disposal, escape, seepage, leakage, spillage, discharge, emission,
release, or threatened release of any Hazardous Substance on, from or affecting
the Property; (ix) any personal injury (including wrongful death) or property
damage (real or personal) arising out of or related to such Hazardous Substance;
(x) any lawsuit brought or threatened, settlement reached, or government order
relating to such Hazardous Substance; (xi) any violation of the Environmental
Laws, which is based upon or in any way related to such Hazardous Substance,
including, the costs and expenses of any Remedial Work, reasonable attorney and
consultant fees and disbursements, investigation and laboratory fees, court
costs, and reasonable litigation expenses; (xii) any failure of the Property to
comply with any Legal Requirement; (xiii) any claim by brokers, finders or
similar persons claiming to be entitled to a commission in connection with any
Lease or other transaction involving the Property or any part thereof under any
Legal Requirement, or any liability asserted against Lender with respect
thereto; and (xiv) the claims of any lessee of any portion of the Property or
any person acting through or under any lessee or otherwise arising under or as a
consequence of any Lease; provided, however, that Manager shall not have any
obligation to any Indemnified Party hereunder to the extent that it is finally
judicially determined that such Indemnified Liabilities (i) arise from the gross
negligence, illegal acts, fraud or willful misconduct of such Indemnified Party,
(ii) which are attributable to acts or events which occur after the total
payment or Defeasance in full of the Debt (except to the extent fairly
attributable to acts or events or Indemnified Liabilities occurring or accruing
prior thereto and except as may be provided in any other Loan Document), (iii)
solely by reason of the act of a transfer by Lender of all or any part of its
interest in this Agreement, the Note or the other Loan Documents, whether
pursuant to a Securitization or otherwise, other than any such transfer made
while an Event of Default shall have occurred and be continuing or (iv) for any
Indemnified Party's income and net revenue taxes. IT IS EXPRESSLY ACKNOWLEDGED
AND AGREED BY BORROWER AND MANAGER THAT THE INDEMNITY CONTAINED IN THIS SECTION
PROTECTS LENDER AND DEED OF TRUST TRUSTEE FROM THE CONSEQUENCES OF LENDER AND
SUCH TRUSTEE'S ACTS OR OMISSIONS, INCLUDING, WITHOUT LIMITATION, THE NEGLIGENT
ACTS OR OMISSIONS OF LENDER AND/OR SUCH TRUSTEE, TO THE EXTENT PROVIDED BY LAW;
PROVIDED, HOWEVER, THAT NOTHING CONTAINED HEREIN SHALL BE DEEMED TO RELIEVE
LENDER OR SUCH TRUSTEE FROM LIABILITY DUE TO ITS GROSS NEGLIGENCE. To the extent
that the undertaking to indemnify and hold harmless set forth in the preceding
sentence may be unenforceable because it violates any law or public policy,
Manager shall contribute the maximum portion that it is permitted to pay and
satisfy under applicable law to the payment and satisfaction of all Indemnified
Liabilities incurred by any Indemnified Party. Lender shall credit against any
payments due under this Section 5.2.18 any Proceeds actually received, retained,
and applied by Lender in respect of the related claim under or from the
Policies. Any amounts payable to any Indemnified Party by reason of the
application of this paragraph shall become
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immediately due and payable upon notice to Manager and shall bear interest at
the Default Rate from the date such notice is delivered to Manager until paid.
Subject to the limitations contained in Section 10.1 herein, the obligations and
liabilities of Manager under this Section 5.2.18 shall survive the Term and the
exercise by Lender of any of its rights or remedies under the Loan Documents,
including the acquisition of the Property by foreclosure or a conveyance in lieu
of foreclosure.
5.2.19 CONDUCT OF BUSINESS. Manager shall operate the
Property, or shall cause the operation of the Property to be conducted at all
times, in a manner consistent with at least the level of operation of the
Property as of the Loan Closing Date, including, the following:
(i) upon Substantial Completion, maintain or cause to
be maintained the standard of operations at the Property at all times
at a level necessary to insure a level of quality for the Property
consistent with similar facilities in the same competitive market;
(ii) operate or cause to be operated the Property in
a prudent manner in compliance in all material respects with applicable
Legal Requirements and insurance requirements of any Policies relating
thereto and cause all Licenses and permits, and any other agreements
necessary for the continued use and operation of the Property to remain
in effect; and
(iii) maintain or cause to be maintained sufficient
Inventory and Equipment of types and quantities at the Property to
enable Borrower to operate the Property.
5.2.20 ERISA. Manager shall deliver to Lender as soon as
possible, and in any event within ten (10) days after Manager knows or has
reason to believe that any of the events or conditions specified below with
respect to any ERISA Plan or Multiemployer Plan has occurred or exists, a
statement signed by a senior financial officer of Manager setting forth details
respecting such event or condition and the action, if any, that Manager or its
ERISA Affiliate proposes to take with respect thereto (and a copy of any report
or notice required to be filed with or given to PBGC by Manager or an ERISA
Affiliate with respect to such event or condition):
(i) any reportable event, as defined in Section
4043(b) of ERISA and the regulations issued thereunder, with respect to
an ERISA Plan, as to which PBGC has not by regulation waived the
requirement of Section 4043(a) of ERISA that it be notified within
thirty (30) days of the occurrence of such event (provided that a
failure to meet the minimum funding standard of Section 412 of the Code
or Section 302 of ERISA, including, the failure to make on or before
its due date a required installment under Section 412(m) of the Code or
Section 302(e) of ERISA, shall be a reportable
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event regardless of the issuance of any waivers in accordance with
Section 412(d) of the Code); and any request for a waiver under Section
412(d) of the Code for any ERISA Plan;
(ii) the distribution under Section 4041 of ERISA of
a notice of intent to terminate any ERISA Plan or any action taken by
Manager or an ERISA Affiliate to terminate any ERISA Plan;
(iii) the institution by PBGC of proceedings under
Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any ERISA Plan, or the receipt by Manager or any
ERISA Affiliate of a notice from a Multiemployer Plan that such action
has been taken by PBGC with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal from a
Multiemployer Plan by Manager or any ERISA Affiliate that results in
liability under Section 4201 or 4204 of ERISA (including the obligation
to satisfy secondary liability as a result of a purchaser default) or
the receipt by Manager or any ERISA Affiliate of notice from a
Multiemployer Plan that it is in reorganization or insolvency pursuant
to Section 4241 or 4245 of ERISA or that it intends to terminate or has
terminated under Section 4041A of ERISA;
(v) the institution of a proceeding by a fiduciary of
any Multiemployer Plan against Manager or any ERISA Affiliate to
enforce Section 515 of ERISA, which proceeding is not dismissed within
thirty (30) days;
(vi) the adoption of an amendment to any ERISA Plan
that, pursuant to Section 401(a)(29) of the Code or Section 307 of
ERISA, would result in the loss of tax-exempt status of the trust of
which such ERISA Plan is a part if Manager or an ERISA Affiliate fails
to timely provide security to the ERISA Plan in accordance with the
provisions of said Sections; and
(vii) the imposition of a lien or a security interest
on the assets of Manager or any ERISA Affiliate in connection with an
ERISA Plan.
5.2.21 TRADE INDEBTEDNESS. Manager will pay its trade payables
within ninety (90) days of the date incurred, unless Manager is in good faith
contesting Manager's obligation to pay such trade payables in a manner
reasonably satisfactory to Lender (which may include Lender's requirement that
Manager, as the case may be, post security with respect to the contested trade
payable).
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5.2.22 CAPITAL IMPROVEMENTS AND ENVIRONMENTAL REMEDIATION.
Manager shall, within twelve (12) months of the Conversion Date, perform the
repairs and environmental remediation to the Property itemized on Exhibit C
hereto.
5.2.23 INSURANCE BENEFITS. Manager shall cooperate with Lender
in obtaining for Lender the benefits of any Proceeds lawfully or equitably
payable to Lender in connection with the Property, and Lender shall be
reimbursed for any reasonable expenses incurred in connection therewith
(including reasonable attorneys' fees and disbursements) and the payment by
Manager of the expense of an appraisal on behalf of Lender in case of a fire or
other casualty affecting the Property or any part thereof out of such Proceeds.
5.2.24 ACCESS TO PROPERTY. Manager shall permit agents,
representatives and employees of Lender to inspect the Property or any part
thereof at such reasonable times as may be requested by Lender upon two (2)
Business Days prior written notice and subject to the rights of tenants under
Leases; provided, such written notice shall not be required upon the occurrence
and continuation of a Default or Event of Default.
5.2.25 INSURANCE. Manager shall provide and maintain at all
times insurance in such forms and covering such risks and hazards and in such
amounts and with such companies as may be required by Lender in accordance with
Section 7.1 of this Agreement.
5.2.26 USE SPECIFIC COVENANTS. Manager shall:
(1) operate the Property or cause the Property to be operated in material
compliance with the Legal Requirements and other requirements referred to
herein;
(2) operate the Property or cause the Property to be operated in a manner
such that the Licenses shall remain in full force and effect and such that any
new or additional License that may, at any time or from time to time, be
required pursuant to any Legal Requirements are timely obtained and maintained
in full force and effect;
(3) Intentionally deleted; and
(4) cooperate with all governmental agencies, such cooperation shall
include, but not be limited to, timely and completely responding to all requests
for records, as well as developing and implementing an appropriate and
acceptable plan to correct any deficiency in the operation of the Property.
VI. NEGATIVE COVENANTS
6.1 BORROWER'S COVENANTS. Until the end of the Term or the
Defeasance of the entire unpaid Principal, Borrower covenants and agrees with
Lender that it will not, without Lender's prior written consent, directly or
indirectly:
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6.1.1 MANAGEMENT AGREEMENT. Without Lender's prior written
consent: (i) surrender, terminate or cancel the Management Agreement or
otherwise replace the Manager or enter into any other management agreement
(except pursuant to Sections 5.1.14 and 5.2.14); (ii) except for Permitted
Transfers, suffer or permit the ownership, management or control of the Manager
to be transferred to a Person other than an Affiliate of Guarantor; (iii) reduce
or consent to the reduction of the term of the Management Agreement; (iv)
increase or consent to the increase of the amount of any charges under the
Management Agreement; or (v) otherwise modify, change, supplement, alter or
amend in any material respect, or waive or release any of its material rights
and remedies under, the Management Agreement; or (vi) suffer or permit the
occurrence and continuance of a default beyond any applicable cure period under
the Management Agreement (or any successor management agreement) if such default
permits the Manager to terminate the Management Agreement (or such successor
management agreement);
6.1.2 LIENS. Without Lender's prior consent, create, incur,
assume, permit or suffer to exist any mechanic's, materialmen's or other Lien on
any portion of the Property or legal or beneficial ownership interest in
Borrower, except Permitted Encumbrances, unless such Lien is bonded, insured or
discharged within thirty (30) days after Borrower first receives notice of such
Lien;
6.1.3 DISSOLUTION. Dissolve, terminate, liquidate, merge
with or consolidate into another Person;
6.1.4 CHANGE IN BUSINESS. Enter into any line of business
other than the ownership, development and operation of the Property, or make any
material change in the scope or nature of its business objectives, purposes or
operations, or undertake or participate in activities other than the continuance
of its present business;
6.1.5 DEBT CANCELLATION. Cancel or otherwise forgive or
release any material claim or debt owed to Borrower by any Person, except for
adequate consideration and in the ordinary course of Borrower's business in its
reasonable judgment;
6.1.6 ASSETS. Purchase or own any property other than the Property;
6.1.7 TRANSFERS. Make, suffer or permit the occurence of any Transfer other
than a Permitted Transfer;
6.1.8 DEBT. Create, incur or assume any indebtedness other
than the Debt and unsecured trade debt incurred in the ordinary course of
business and not past due as permitted pursuant to Sections 4.1.33 and 5.1.21;
6.1.9 ASSIGNMENT OF RIGHTS. Without Lender's prior consent,
attempt to assign Borrower's rights or interest under any Loan Document in
contravention of any Loan Document; or
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6.1.10 OPERATION OF THE PROPERTY. Cease to operate the
Property or allow the Property to cease to be operated as its Permitted Use or
terminate such business for any reason whatsoever (other than temporary
cessation in connection with renovations to the Property).
6.1.11 USE SPECIFIC NEGATIVE COVENANTS. Without Lender's prior
written consent, Borrower shall not and shall not allow the Manager who manages
the Property to:
(i) transfer any License to any location other than the Property for which
such License was originally issued nor pledge any License as collateral security
for any other loan or indebtedness;
(ii) rescind, withdraw, revoke, amend, modify,
supplement, or
otherwise alter the nature, tenor or scope of any License for the Property which
rescission, withdrawal, revocation, amendment, modification, supplement or other
alteration would have a material adverse effect on the Property;
(iii) amend or otherwise change the Property's
authorized unit capacity
and/or the number of units approved by the DOH which amendment or other change
would have a material adverse effect on the Property;
(iv) Intentionally deleted.
(v) Intentionally deleted;
(vi) pledge any receivables as collateral security
for any other loan or
indebtedness;
(vii) enter into any resident agreements with residents or with any other
persons which deviate in any material respect from the Approved Residency
Agreement used at the Property;
(viii) Intentionally deleted;
(ix) fail to satisfy all material requirements
established by law,
regulation or administrative instruction for the operation of the Property; or
(x) fail to operate the Property in a manner that is
consistent with all
relevant standards of care and service in the community for similar projects.
6.2 MANAGER'S COVENANTS. Until the end of the Term or the
Defeasance of the entire unpaid Principal, Manager covenants and agrees with
Lender that it will not, without Lender's prior written consent, directly or
indirectly:
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6.2.1 MANAGEMENT AGREEMENT. Without Lender's prior written
consent: (i) surrender, terminate or cancel the Management Agreement or
otherwise enter into any other management agreement (except pursuant to Sections
5.1.14 and 5.2.14); (ii) except for Permitted Transfers, suffer or permit the
ownership, management or control of the Manager to be transferred to a Person
other than an Affiliate of Manager; (iii) reduce or consent to the reduction of
the term of the Management Agreement; (iv) increase or consent to the increase
of the amount of any charges under the Management Agreement; or (v) otherwise
modify, change, supplement, alter or amend in any material respect, or waive or
release any of its material rights and remedies under, the Management Agreement;
or (vi) suffer or permit the occurrence and continuance of a default beyond any
applicable cure period under the Management Agreement (or any successor
management agreement) if such default permits the Borrower to terminate the
Management Agreement (or such successor management agreement);
6.2.2 LIENS. Without Lender's prior written consent, create,
incur, assume, permit or suffer to exist any mechanic's, materialmen's or other
Lien on any portion of the Property or legal or beneficial ownership interest in
Manager, except Permitted Encumbrances, unless such Lien is bonded, insured or
discharged within thirty (30) days after Manager first receives notice of such
Lien;
6.2.3 DISSOLUTION. Dissolve, terminate, liquidate, merge with or
consolidate into another Person;
6.2.4 CHANGE IN BUSINESS. Enter into any line of business
other than the development, management, and operation of the Property, or make
any material change in the scope or nature of its business objectives, purposes
or operations, or undertake or participate in activities other than the
continuance of its present business;
6.2.5 DEBT CANCELLATION. Cancel or otherwise forgive or
release any material claim or debt owed to Manager by any Person, except for
adequate consideration and in the ordinary course of Manager's business in its
reasonable judgment;
6.2.6 ASSETS. Purchase or own any property other than property relating to
the operation of the Property;
6.2.7 TRANSFERS. Make, suffer or permit the occurrence of any Transfer
other than a Permitted Transfer;
6.2.8 DEBT. Create, incur or assume any indebtedness other
than related to the Debt and unsecured trade debt incurred in the ordinary
course of business and not past due as permitted pursuant to Sections 4.2.33 and
5.2.21;
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6.2.9 ASSIGNMENT OF RIGHTS. Without Lender's prior consent,
attempt to assign Manager's rights or interest under any Loan Document in
contravention of any Loan Document; or
6.2.10 OPERATION OF THE PROPERTY. Cease to operate the
Property as its Permitted Use or terminate such business for any reason
whatsoever (other than temporary cessation in connection with renovations to the
Property).
6.2.11 USE SPECIFIC NEGATIVE COVENANTS. Without Lender's prior
written consent, Manager shall not and shall not allow the Borrower to:
(i) transfer any License to any location other than the Property for which
such License was originally issued nor pledge any License as collateral security
for any other loan or indebtedness;
(ii) rescind, withdraw, revoke, amend, modify, supplement, or otherwise
alter the nature, tenor or scope of any License for the Property which
rescission, withdrawal, revocation, amendment, modification, supplement or other
alteration would have a material adverse effect on the Property;
(iii) amend or otherwise change the Property's authorized unit capacity
and/or the number of units approved by the DOH which amendment or other change
would have a material adverse effect on the Property;
(iv) Intentionally deleted;
(v) Intentionally deleted;
(vi) pledge any receivables as collateral security for any other loan or
indebtedness;
(vii) enter into any resident agreements with residents or with any other
persons which deviate in any material respect from the Approved Residency
Agreement used at the Property;
(viii) Intentionally deleted;
(ix) fail to satisfy all material requirements established by law,
regulation or administrative instruction for the operation of the Property; or
(x) fail to operate the Property in a manner that is consistent with all
relevant standards of care and service in the community.
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VII. NOMURA OPEN -- INSURANCE; CASUALTY; AND CONDEMNATION
7.1 INSURANCE.
7.1.1 COVERAGE. At all times while the Borrower is indebted to
Lender, either the Borrower or Manager shall maintain the following insurance:
(a) During any period of construction, repair or restoration,
builder's "all risk" insurance in an amount equal to not less than the
full insurable value of the Property and Equipment against such risks
(including, without limitation, fire and extended coverage and collapse
of the Improvements to agreed limits) as Lender may reasonably request,
in form and substance reasonably acceptable to Lender.
(b) Insurance with respect to the Improvements, Equipment and
Inventory against any peril included within the classification "All
Risks of Physical Loss" with extended coverage in amounts at all times
sufficient to prevent the Borrower and/or Manager from becoming a
co-insurer within the terms of the applicable policies, but in any
event such insurance shall be maintained in an amount equal to the full
insurable value of the Improvements, Equipment and Inventory located on
the Property, the term "full insurable value" to mean the actual
replacement cost of the Improvements, Equipment and Inventory (without
taking into account any depreciation), determined annually by an
insurer or by the Borrower or Manager or, at the request of Lender, by
an independent insurance broker (subject to Lender's reasonable
approval) including an endorsement covering acts of municipal
authorities including increased cost of construction and demolition;
(c) Comprehensive general liability insurance, including
contractual injury, bodily injury, broad form death and property damage
liability, and umbrella liability insurance against any and all claims,
including all legal liability to the extent insurable imposed upon
either Borrower or Manager and all court costs and attorneys' fees and
expenses, arising out of or connected with the possession, use,
leasing, operation, maintenance or condition of the Property in such
amounts as are generally required by institutional lenders for
properties comparable to the Property but in no event with limits for
the Property of less than $1,000,000 per occurrence with combined
single limit coverage for bodily injury or property damage and excess
(umbrella) liability coverage for the Property of no less than
$25,000,000;
(d) Statutory workers' compensation insurance (to the extent
the risks to be covered thereby are not already covered by other
policies of insurance maintained by Borrower or Manager, with respect
to any work on or about the Property);
(e) Business interruption and/or loss of "rental value"
insurance for the Property in an amount equal to not less than eighteen
(18) months estimated Gross Revenue
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attributable to the Property and based on the Gross Revenue for the
immediately preceding year and otherwise sufficient to avoid any co-insurance
penalty;
(f) If all or any portion of the Property, or any portion of
the Land is located within a federally designated flood hazard zone,
flood insurance in an amount equal to the lesser of the full insurable
value of the Property or the maximum amount available;
(g) Insurance against loss or damage from (A) leakage of
sprinkler systems and (B) explosion of steam boilers, air conditioning
equipment, pressure vessels or similar apparatus now or hereafter
installed at the Property, in such amounts as Lender may from time to
time reasonably require and which are customarily required by
institutional lenders with respect to similar properties similarly
situated; and
(h) Such other insurance with respect to the Improvements,
Equipment and Inventory located on the Property against loss or damage
as is reasonably requested by Lender (including without limitation
liquor/dram insurance and earthquake insurance) provided such insurance
is of the kind from time to time customarily insured against and in
such amounts as are generally required by institutional lenders for
properties comparable to the Property or which Lender may deem
necessary in its reasonable discretion.
7.1.2 POLICIES. The Borrower or Manager will maintain the
insurance coverage described in Section 7.1.1 with companies reasonably
acceptable to Lender and with a claims paying ability of not less than "AA" by
S&P and AA or its equivalent by any one of the other Rating Agencies. All
insurers providing insurance required by this Agreement shall be authorized and
licensed, if necessary, to issue insurance in the state where the Property is
located.
The insurance coverage required under Section 7.1.1 may be
effected under a blanket policy or policies covering the Property and other
property and assets not constituting a part of the Property; provided that any
such blanket policy shall specify, except in the case of public liability
insurance, the portion of the total coverage of such policy that is allocated to
the Property and Equipment and Inventory located thereon, and any sublimits in
such blanket policy applicable to the Property, which amounts shall not be less
than the amounts required pursuant to Section 7.1.1 and which shall in any case
comply in all other respects with the requirements of this Section 7.
All insurance policies (the "POLICIES") shall be in such form
and with such endorsements and in such amounts as shall be reasonably
satisfactory to Lender (and Lender shall be entitled to approve amounts, form,
risk coverage, deductibles, loss payees and insureds). The policy referred to in
Section 7.1.1(b) shall contain a replacement cost endorsement and a waiver of
depreciation. Certificates of insurance evidencing that all of the
above-mentioned Policies are in effect have been delivered to and shall be held
by Lender. All such Policies shall
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name Lender as an additional insured/loss payee, shall provide that all Proceeds
be payable to Lender as set forth in Section 7.1.3, and shall contain: (i) "Non
Contributory Standard Lender Clause" and a Lender's Loss Payable Endorsement
(Form 438 BFUNS) or their equivalents naming Lender as the person to which all
payments shall be paid and a provision that payment of Proceeds in excess of
$100,000 shall be made by a check payable only to Lender; (ii) a waiver of
subrogation endorsement as to Lender and its assigns providing that no policy
shall be impaired or invalidated by virtue of any act, failure to act,
negligence of, or violation of declarations, warranties or conditions contained
in such policy by Borrower, Manager, Lender or any other named insured,
additional insured or loss payee, except for the willful misconduct of Lender
knowingly in violation of the conditions of such policy; (iii) an endorsement
indicating that neither Lender nor the Borrower or Manager shall be or be deemed
to be a co-insurer with respect to any risk insured by such Policies and shall
provide for an aggregate deductible per loss for all policies of an amount not
more than that which is customarily maintained by prudent owners of property of
the same type and quality as the Property, but in no event in excess of the
greater of (i) $25,000 per occurrence or (ii) five percent (5%) of Net Operating
Income; (iv) a provision that such Policies shall not be canceled or amended,
including, without limitation, any amendment reducing the scope or limits of
coverage, without at least thirty (30) days prior written notice to Lender in
each instance; and (v) include effective waivers by the insurer of all claims
for Insurance Premiums against any loss payees, additional insureds and named
insureds (other than the Borrower or Manager). Certificates of insurance with
respect to all renewal and replacement policies shall be delivered to Lender not
less than ten (10) days prior to the expiration date of any of the Policies
required to be maintained hereunder which certificates shall bear notations
evidencing payment of applicable premiums and certified copies or evidence of
the required coverage under blanket policies of such Policies shall be delivered
to Lender promptly after Borrower's and Manager's receipt thereof. Borrower or
Manager shall pay the premiums for such Policies (the "INSURANCE PREMIUMS") as
the same become due and payable and furnish to Lender evidence of the renewal of
each of the Policies together with (unless such Insurance Premiums have been
paid by Lender pursuant to Section 3.2) receipts for or other evidence of the
payment of the Insurance Premiums reasonably satisfactory to Lender. If either
Borrower or Manager fails to maintain the insurance required hereunder and
deliver to Lender the certificates of insurance required by this Agreement,
Lender may, at its option, after written notice to both Borrower and Manager,
procure such insurance, and either Borrower or Manager shall reimburse Lender
for the amount of all premiums paid by Lender thereon within ten (10) days after
receipt of written notice of, and demand for, such amount, by Lender, with
interest thereon at the Default Rate from the date paid by Lender to the date of
repayment, and such sum shall be a part of the Debt secured by the Mortgage.
Lender shall not by the fact of approving, disapproving, accepting,
preventing, obtaining or failing to obtain any insurance, incur any liability
for or with respect to the amount of insurance carried, the form or legal
sufficiency of insurance contracts, solvency of insurance companies, or the
carriers' or the Borrower's or Manager's payment or defense of lawsuits, and the
Borrower and Manager hereby expressly assume full responsibility therefor and
all liability, if any, with respect thereto.
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7.1.3 PROCEEDS. Subject to the provisions of Section 7.4,
Lender shall be entitled to receive and collect all Insurance Proceeds (as
hereinafter defined) and Awards (as hereinafter defined) and all of the
Insurance Proceeds and Awards are hereby assigned to Lender. Borrower and
Manager shall execute such further assignments of the Insurance Proceeds and
Awards as Lender may from time to time reasonably require. Without limiting the
generality of the foregoing, but subject to the provisions of Section 7.4,
following the occurrence of any casualty or damage involving the Property or any
part thereof, Borrower and/or Manager shall give prompt notice thereof to Lender
and shall cause all Proceeds and Awards payable as a result of such casualty or
damage to be paid to Lender as additional collateral security hereunder subject
to the Lien of the Mortgage and Subordinate Mortgage, to be applied by Lender to
reduce the Debt.
7.2 CASUALTY.
7.2.1 NOTICE; RESTORATION. If the Property is damaged or
destroyed, in whole or in part, by fire or other casualty (a "CASUALTY"),
Borrower or Manager shall give prompt notice thereof to Lender and cause all
Proceeds to be paid to Lender, which shall, subject to the provisions of Section
7.4 herein, apply such Proceeds to reduce the Debt. Following the occurrence of
a Casualty, Borrower and/or Manager, regardless of whether insurance proceeds
are available, shall promptly proceed to restore, repair, replace or rebuild the
Property in accordance with Legal Requirements to be of at least equal value and
of substantially the same character as prior to such damage or destruction.
7.2.2 SETTLEMENT OF PROCEEDS. In the event of a Casualty
covered by any of the Policies (an "INSURED CASUALTY") where the loss does not
exceed One Hundred Thousand and 00/100 Dollars ($100,000.00), Borrower or
Manager may settle and adjust any claim without the consent of Lender; provided
such adjustment is carried out in a competent and timely manner; and Borrower or
Manager is hereby authorized to collect and receipt for the insurance proceeds
(the "PROCEEDS"). Lender shall be entitled at its option to participate in any
compromise, adjustment or settlement in connection with any claims for loss,
damage or destruction under any policy or policies of insurance, in excess of
$100,000, and the Borrower and Manager shall within ten (10) Business Days after
request therefor reimburse the Lender for all reasonable out-of-pocket expenses
(including reasonable attorneys' fees and disbursements) incurred by the Lender
in connection with such participation. The Borrower and Manager shall not make
any compromise, adjustment or settlement in connection with any such claim in
excess of $100,000, without the prior written approval of the Lender, which
approval shall not be unreasonably withheld. The Proceeds shall be due and
payable solely to Lender and held by Lender in the Casualty/Condemnation
Subaccount and disbursed in accordance with the terms of Section 7 of this
Agreement.
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7.3 CONDEMNATION.
7.3.1 NOTICE; RESTORATION. Borrower or Manager shall promptly
give Lender notice of the actual or threatened commencement of any condemnation
or eminent domain proceeding affecting the Property (a "CONDEMNATION") and shall
deliver to Lender copies of any and all papers served in connection with such
Condemnation. Following the occurrence of a Condemnation, Borrower and/or
Manager, regardless of whether an Award is available, shall promptly proceed to
restore, repair, replace or rebuild the Property in accordance with Legal
Requirements to the extent practicable to be of at least equal value and of
substantially the same character as prior to such Condemnation.
7.3.2 COLLECTION OF AWARD. Subject to Section 7.4, Lender is
hereby irrevocably appointed as Borrower's and Manager's attorney-in-fact,
coupled with an interest, with exclusive power to collect, receive and retain
any award or payment in respect of a Condemnation (an "AWARD") and to make any
compromise or settlement in connection with such Condemnation. Notwithstanding
any Condemnation (or any transfer made in lieu of or in anticipation of such a
Condemnation), Borrower shall continue to pay the Debt at the time and in the
manner provided for in the Loan Documents, and the Debt shall not be reduced
unless and until any Award shall have been actually received and applied by
Lender to expenses of collecting the Award and to discharge of the Debt. Lender
shall not be limited to the interest paid on the Award by the condemning
authority but shall be entitled to receive out of the Award interest at the rate
or rates provided in the Note. Subject to Section 7.4, Borrower and Manager
shall cause any Award that is payable to Borrower or Manager to be paid directly
to Lender. Lender shall hold such Award in the Casualty/Condemnation Subaccount
and disburse such Award in accordance with the terms hereof.
7.4 APPLICATION OF PROCEEDS OR AWARD.
7.4.1 APPLICATION TO RESTORATION; PROCEDURE FOR APPLICATION TO
RESTORATION. Notwithstanding anything to the contrary set forth in Sections 7.2
and 7.3, Lender agrees that Lender shall make the Proceeds or the Award (other
than business interruption insurance proceeds, which shall be held and disbursed
in accordance with this Agreement), as applicable, available to Manager or
Borrower for repair, restoration and replacement of the Improvements, Equipment
and Inventory damaged or taken on the following terms and subject to Manager's
or Borrower's satisfaction of the following conditions:
(a) At the time of such loss, damage or taking and at all
times thereafter while Lender is holding any portion of such Proceeds
or such Award, as applicable, there shall exist no Default or Event of
Default;
(b) The Improvements, Equipment and Inventory for which loss
or damage has resulted shall be capable of being restored substantially
(including replacements) to their pre-existing condition and utility as
existed immediately prior to the occurrence of the
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loss or damage then in question in all material respects with a value
equal to or greater than prior to such loss or damage and shall be
capable of being substantially completed no less than six (6) months
prior to the Stated Maturity Date and prior to the expiration of
business interruption insurance;
(c) The Borrower and/or Manager shall demonstrate to Lender's
reasonable satisfaction Borrower's and/or Manager's ability to pay the
Debt relating to the Property coming due and payable during such
restoration period;
(d) Within thirty (30) days from the date of such loss, damage
or taking, Borrower and/or Manager shall have given Lender a written
notice electing to have the Proceeds or the Award, as applicable,
applied for such purpose;
(e) Within sixty (60) days following the date of notice under
the preceding subparagraph (d) and prior to any Proceeds or any of the
Award, as applicable, being disbursed as directed by Manager, Borrower
and/or Manager shall have provided to Lender all of the following:
(1) if loss, damage or taking exceeds $100,000,
complete plans and specifications for restoration, repair and
replacement of the Improvements, Equipment and Inventory
damaged to the condition, utility and value required by the
preceding subparagraph (b),
(2) if loss, damage or taking exceeds $100,000,
fixed-price or guaranteed maximum cost construction contracts
for completion of the repair and restoration work in
accordance with such plans and specifications with respect to
repairs to the Improvements and firm quotes for Equipment and
Inventory to be repaired or replaced,
(3) if loss, damage or taking exceeds $100,000,
builder's risk insurance for the full cost of construction
with Lender named under a standard lender loss-payable clause,
(4) such additional funds (if any) as in Lender's
reasonable opinion are necessary, in addition to the Proceeds
or the Award, as applicable, to complete the repair,
restoration and replacement, and
(5) if loss, damage or taking exceeds $100,000,
copies of all permits and licenses necessary to complete the
work in accordance with the plans and specifications;
(f) If loss, damage or taking exceeds $100,000, Lender may, at
Borrower's and/or Manager's expense to the extent such expenses and
fees are reasonable, retain an
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independent inspector to review and approve plans and specifications
and completed construction and to approve all requests for
disbursement, which approvals shall be conditions precedent to release
of the Proceeds or the Award, as applicable, as work progresses;
(g) Manager or Borrower shall commence such work within one
hundred twenty (120) days after such loss or damage and shall
diligently pursue such work to completion;
(h) If loss, damage or taking exceeds $100,000, each
disbursement by Lender of the Proceeds or the Award, as applicable,
shall be funded subject to conditions and in accordance with
disbursement procedures which a commercial construction lender would
typically establish in the exercise of sound banking practices and
shall be made only upon receipt of disbursement requests on an AIA
G702/703 form (or similar form reasonably approved by Lender) signed
and certified by Manager or Borrower and its architect and general
contractor with appropriate invoices, lien waivers and any other
documents, instruments or items which may be reasonably required by
Lender; and
(i) Lender shall have a first lien and security interest in
all of Borrower's and Manager's interest in all building materials and
completed repair and restoration work and in all fixtures and equipment
acquired with such Proceeds or Award, as applicable, and Borrower
and/or Manager shall execute and deliver such mortgages, deeds of
trust, security agreements, financing statements and other instruments
as Lender shall reasonably request to create, evidence, or perfect such
lien and security interest.
7.4.2 APPLICATION TO DEBT. Subject to the Borrower's and
Manager's rights under Section 7.4.3, in the event and to the extent such
Proceeds or Award, as applicable, are not required to be made available to
Manager and/or Borrower to be used for the repair, restoration and replacement
of the Improvements, Equipment and Inventory for which a loss or damage has
occurred, or in the event the Manager and/or Borrower fails to timely make such
election or having made such election fails to timely comply with or is
otherwise unable to satisfy the terms and conditions set forth herein, upon five
(5) Business Days prior notice to the Borrower and Manager, Lender shall be
entitled to the payment of Proceeds or Award, as applicable, to pay and, without
consent from either Borrower or Manager to apply such Proceeds or Award, as
applicable, or the balance thereof, at Lender's option either (x) to the full or
partial payment or prepayment of the Debt in accordance with this Agreement or
(y) to the repair, restoration and/or replacement of all or any part of such
Improvements, Equipment and Inventory for which a loss or damage has occurred.
7.4.3 DISBURSEMENT OF REMAINING PROCEEDS OR AWARD. Provided no
Event of Default has occurred and is continuing and the replacement, restoration
or repair has been completed in accordance with this Agreement, any Proceeds or
Award, as applicable, available to Borrower or Manager for replacement,
restoration or repair, to the extent not used by
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Borrower or Manager in connection with, or to the extent they exceed the cost of
such replacement, restoration or repair shall be paid as directed by Manager.
7.4.4 LENDER AS ATTORNEY-IN-FACT. The Borrower and Manager
appoint Lender to act, after the occurrence and during the continuation of an
Event of Default, as the Borrower's and/or Manager's attorney-in-fact, coupled
with an interest, to cause the issuance of or an endorsement of any policy to
bring the Borrower and Manager into compliance herewith and, as limited above,
at Lender's sole option, to make any claim for, receive payment for, and execute
and endorse any documents, checks or other instruments in payment for loss,
theft, or damage covered under any such insurance policy; however, in no event
will Lender be liable for failure to collect any amounts payable under any
insurance policy.
7.4.5 FORECLOSURE. In the event of foreclosure of the Lien of
the Mortgage or other transfer of title or assignment of the Property in
extinguishment, in whole or in part, of the Obligations, all right, title, and
interest of Borrower and Manager in and to all Policies covering all or any part
of the Property and the Award shall inure to the benefit of and pass to the
successors in interest to Lender or the purchaser or grantee of the Property or
any part thereof.
7.4.6 SECURITY IN PROCEEDS OR AWARD. Lender shall have a first
lien and security interest in all building materials and completed repair and
restoration work and in all fixtures and equipment acquired with such Proceeds
or Award, and Borrower and Manager shall execute and deliver such mortgages,
deeds of trust, security agreements, financing statements and other instruments
as Lender shall reasonably request to create, evidence, or perfect such lien and
security interest.
VIII. DEFAULTS
8.1 EVENTS OF DEFAULT. Each of the following events shall
constitute an "EVENT OF DEFAULT":
(a) if on any Payment Date any portion of the Debt is not paid or the funds
in the Monthly Debt Service Subaccount are insufficient to pay the required Debt
payment on such Payment Date; provided, however, that if a Cash Management
Period has not occurred, such failure shall not constitute an Event of Default
if Borrower shall cure such failure within five (5) days after such Payment
Date;
(b) Borrower shall fail to pay when due any deposit into any Fund;
provided, however, that if a Cash Management Period has not occurred, such
failure shall not constitute an Event of Default if Borrower shall cure such
failure within five (5) days thereafter;
(c) Borrower shall fail to pay the outstanding Debt on the Maturity Date;
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(d) any of the Taxes or Other Charges are not paid when due by Borrower
and/or Manager, subject to Borrower's or Manager's right to contest Taxes in
accordance with Section 5.1.2 and 5.2.2 and such failure continues for five (5)
days thereafter;
(e) the Policies are not kept in full force and effect, or are not
delivered to Lender within five (5) days of request therefor;
(f) a Transfer other than a Permitted Transfer occurs, unless the prior
written consent of Lender is obtained (which consent may be withheld with or
without cause in Lender's discretion);
(g) any representation or warranty made by Borrower, Manager, or Guarantor
in any Loan Document, or in any report, certificate, financial statement or
other instrument, agreement or document furnished by Borrower, Manager or
Guarantor in connection with any Loan Document, shall be false or misleading in
any material respect as of the date the representation or warranty was made or
remade;
(h) Borrower, Manager or Guarantor shall make an assignment for the benefit
of creditors, or shall generally not be paying its debts as they become due or
otherwise in accordance with applicable provisions of this Agreement;
(i) a receiver, liquidator or trustee shall be appointed for Borrower,
Manager or Guarantor; or Borrower, Manager or Guarantor shall be adjudicated a
bankrupt or insolvent; or any petition for bankruptcy, reorganization or
arrangement pursuant to federal bankruptcy law, or any similar federal or state
law, shall be filed by or against, consented to, or acquiesced in by, Borrower,
Manager or Guarantor; or any proceeding for the dissolution or liquidation of
Borrower, Manager or Guarantor shall be instituted; provided, however, if such
appointment, adjudication, petition or proceeding was involuntary and not
consented to by Borrower, Manager or Guarantor, only upon the same not being
discharged, stayed or dismissed within ninety (90) days;
(j) Borrower or Manager breaches any negative covenant contained in Section
6 or any covenant contained in Sections 5.1.15 or 5.2.15;
(k) Borrower shall be in default under any other mortgage or security
agreement covering any part of the Property whether it be superior or junior in
Lien to the Mortgage;
(l) except as permitted under the Loan Documents, the actual alteration,
improvement, demolition or removal of any of the Improvements without the prior
consent of Lender;
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(m) an Event of Default as defined or described in any Loan Document
occurs; or any other event shall occur or condition shall exist, if the effect
of such event or condition is to accelerate or to permit Lender to accelerate
the maturity of any portion of the Debt;
(n) Borrower, Manager or Guarantor shall be in default under any term,
covenant or provision set forth herein or in any Loan Document which
specifically contains a notice requirement or grace period and such notice has
been given and such grace period has expired;
(o) if Borrower, Manager or Guarantor attempts to delegate or assign its
rights under any or all of the Loan Documents or any interest therein;
(p) any of the assumptions contained in any substantive non-consolidation
opinion, delivered to Lender by Borrower's counsel in connection with the Loan
or otherwise hereunder, were not true and correct as of the date of such opinion
or thereafter became untrue or incorrect, or any representation or warranty by
Borrower, Borrower Representative, Borrower Sponsor, Manager, Manager
Representative, Manager Sponsor, or Guarantor in any certificate furnished by
any of the aforementioned and which certificate is made a part of such opinion,
shall be false or misleading in any material respect as of the date the
representation or warranty was made;
(q) for any period in which the Borrower's Obligations hereunder are
cross-defaulted with any Other Loans pursuant to Section 10.31, the occurrence
of an "Event of Default" as defined in any Other Loan Document evidencing such
Other Loans with which the Loan is so cross-collateralized and/or
cross-defaulted;
(r) except as permitted under this Agreement, if any provision of any
organizational document of Borrower is amended or modified in any respect which
conflicts with the Special Purpose Bankruptcy Remote Entity Requirements
contained in Section 5.1.15 of this Agreement or as otherwise set forth in its
corporate documents, or if Borrower, or Borrower's Owner or Representative or
any of their respective partners, members, beneficial owners, trustees or
shareholders as applicable, fails to perform or enforce the provisions of such
organizational documents or attempts to dissolve Borrower; or if Borrower or any
of its respective partners, members, beneficial owners, trustees or
shareholders, as applicable, breaches any of the covenants set forth in Sections
5.1.15 and 6.1.4; or
(s) except as permitted under this Agreement, if, after the Conversion
Date, any provision of any organizational document of Manager is amended or
modified in any respect which conflicts with the Special Purpose Bankruptcy
Remote Entity Requirements contained in Section 5.2.15 of this Agreement or as
otherwise set forth in its corporate documents, or if Manager, or Manager's
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Owner or Representative or any of their respective partners, members,
beneficial owners, trustees or shareholders as applicable, fails to perform or
enforce the provisions of such organizational documents or attempts to dissolve
Manager; or if Manager or any of its respective partners, members, beneficial
owners, trustees or shareholders, as applicable, breaches any of the covenants
set forth in Sections 5.2.15 and 6.2.4;
(t) if the Management Agreement shall at any time cease to be in full force
and effect for any reason and a new Management Agreement, acceptable to Lender
in form and substance shall not have been entered into in its place within
twenty (20) days after the Management Agreement, ceases to be effective;
(u) if any Event of Default occurs (as to any party) under the Management
Agreement (subject to any applicable notice and cure periods required under the
Management Agreement);
(v) to the extent any License is required to operate the Property as its
Permitted Use and such License or Licenses cannot be obtained until the Property
has been substantially completed, if Borrower and/or Manager fails to do
whatever is necessary to obtain such Licenses upon Substantial Completion or as
required by applicable Legal Requirements;
(w) if Borrower or Manager shall fail to correct, within the time deadlines
set by any health, licensing or similar agency, any deficiency that justifies
either of the following actions by such agency with respect to the Property and
such agency commences either of the following actions: (i) a termination of any
License; (ii) a ban on new admissions of residents generally;
(x) if an event or condition specified in Sections 5.1.20 or 5.2.20 shall
occur or exist with respect to any Plan or Multiemployer Plan and, as a result
of such event or condition, together with all other such events or conditions,
Borrower or any ERISA Affiliate shall incur or in the opinion of Lender shall be
reasonably likely to incur a liability to a Plan, a Multiemployer Plan or PBGC
(or any combination of the foregoing) which would constitute, in the reasonable
determination of Lender, a material adverse effect;
(y) if the Property is assessed material fines or penalties (as
distinguished from establishment of standard settlement accounts) by any state
or any health, licensing or similar agency having jurisdiction over the
Borrower, the Manager or the Property;
(z) if Borrower and/or Manager fails to execute the Clearing Account
Agreement on or prior to the thirtieth (30th) day after the Loan Closing Date;
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(aa) if Borrower and/or Manager fails to execute the Deposit Account
Agreement in accordance with this Agreement;
(bb) Borrower, Manager or Guarantor shall continue to be in Default under
any of the other terms, covenants or conditions of this Agreement or any other
Loan Document not specified in subsections (a) through (aa) above, for ten (10)
days after notice to Borrower and Manager from Lender, in the case of any
Default which can be cured by the payment of a sum of money, or for thirty (30)
Business Days after notice from Lender in the case of any other Default (unless
otherwise provided for herein); provided, however, that if such non-monetary
Default is susceptible of cure but cannot reasonably be cured within such 30
Business Day period, and Borrower or Manager shall have commenced to cure such
Default within such 30 Business Day period and thereafter diligently and
expeditiously proceeds to cure the same, such 30 Business Day period shall be
extended for an additional period of time as is reasonably necessary for
Borrower and/or Manager in the exercise of due diligence to cure such Default,
such additional period not to exceed one hundred twenty (120) days; provided,
further, if Borrower or Manager provides to Lender a certificate certifying and
demonstrating that Borrower or Manager is diligently attempting to cure such
default as determined by Lender in its reasonable discretion and such
non-monetary default still is capable of being cured as determined by Lender in
its reasonable discretion and if Borrower or Manager, as applicable, is
diligently attempting to cure such default, as determined by Lender in its
reasonable discretion, such period shall be extended by Lender in its reasonable
discretion for an additional period of time not to exceed sixty (60) days.
8.2 REMEDIES.
8.2.1 ACCELERATION. Upon the occurrence of an Event of Default
and during the continuance thereof (other than an Event of Default described in
paragraph (h) or (i) of Section 8.1), in addition to any other rights or
remedies available to it pursuant to the Loan Documents or at law or in equity,
and without limitation, Lender may take such action, without notice or demand,
that Lender deems advisable to protect and enforce its rights against Borrower
and Manager and in and to the Property, including declaring the Debt to be
immediately due and payable; and upon any Event of Default described in
paragraph (h) or (i) of Section 8.1, the Debt shall immediately and
automatically become due and payable, without notice or demand, and Borrower and
Manager hereby expressly waives any such notice or demand, anything contained in
any Loan Document to the contrary notwithstanding.
8.2.2 REMEDIES CUMULATIVE. Upon the occurrence of an Event of
Default and during the continuance thereof , all or any one or more of the
rights, powers, privileges and other remedies available to Lender against
Borrower and Manager under the Loan Documents or at law or in equity may be
exercised by Lender at any time and from time to time, whether or not all or any
of the Debt shall be declared due and payable, and whether or not Lender shall
have
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commenced any foreclosure proceeding or other action for the enforcement of its
rights and remedies under any of the Loan Documents. Any such actions taken by
Lender shall be cumulative and concurrent and may be pursued independently,
singly, successively, together or otherwise, at such time and in such order as
Lender may determine in its discretion, to the fullest extent permitted by law,
without impairing or otherwise affecting the other rights and remedies of Lender
permitted by law, equity or contract or as set forth in the Loan Documents.
Without limiting the generality of the foregoing, Borrower and Manager agree
that if an Event of Default is continuing, (i) to the extent permitted by
applicable law, Lender is not subject to any "one action" or "election of
remedies" law or rule, and (ii) all liens and other rights, remedies or
privileges provided to Lender shall remain in full force and effect until Lender
has exhausted all of its remedies against the Property, the Mortgage has been
foreclosed, the Property has been sold and/or otherwise realized upon in
satisfaction of the Debt or the Debt has been paid in full. To the extent
permitted by applicable law, nothing contained in any Loan Document shall be
construed as requiring Lender to resort to any portion of the Property for the
satisfaction of any of the Debt in preference or priority to any other portion,
and Lender may seek satisfaction out of the entire Property or any part thereof,
in its discretion.
8.2.3 LENDER'S RIGHT TO PERFORM. If Borrower or Manager fails
to perform any covenant or obligation contained herein and such failure shall
continue beyond any applicable grace period and thereafter continue for a period
of five (5) Business Days after Borrower's or Manager's, as applicable, receipt
of written notice thereof from Lender, without in any way limiting Sections 8.1
and 8.3 hereof, Lender may, but shall have no obligation to, itself perform, or
cause performance of, such covenant or obligation, and the expenses of Lender
incurred in connection therewith shall be payable by Borrower and Manager to
Lender within ten (10) calendar days after written demand therefor.
Notwithstanding the foregoing, Lender shall have no obligation to send notice to
Borrower or Manager of any such failure.
8.2.4 SEVERANCE. Lender shall have the right from time to time
to sever the Note and the other Loan Documents into one or more separate notes,
mortgages and other security documents in such denominations as Lender shall
determine in its discretion for purposes of evidencing and enforcing its rights
and remedies, provided such action has no adverse economic effect on Borrower or
Manager. Borrower shall, at Lender's expense, execute and deliver to Lender from
time to time, promptly after the request of Lender, a severance agreement and
such other documents as Lender shall request in order to effect the severance
described in the preceding sentence, all in form and substance reasonably
satisfactory to Lender. Borrower hereby absolutely and irrevocably appoints
Lender as its true and lawful attorney, coupled with an interest, in its name
and stead to make and execute all documents necessary or desirable to effect
such severance, Borrower ratifying all that such attorney shall do by virtue
thereof.
8.2.5 DELAY. No delay or omission to exercise any remedy,
right or power accruing upon an Event of Default shall impair any such remedy,
right or power or be construed as a waiver thereof, but any such remedy, right
or power may be exercised from time to time and
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as often as may be deemed expedient. A waiver of one Default or Event of Default
shall not be construed to be a waiver of any subsequent Default or Event of
Default or to impair any remedy, right or power consequent thereon.
8.3 MANAGER'S LIMITED RIGHT TO CURE. Notwithstanding anything
in this Agreement or the Loan Documents to the contrary, if a non-monetary Event
of Default occurs and is continuing with respect to Borrower, Lender shall,
prior to exercising its rights under this Article VIII, allow Manager to cure
such Event of Default pursuant to provisions contained in subsections (a)
through (c) below, provided that such Event of Default is not caused directly or
indirectly by Manager and no other Event of Default exists with respect to
Manager. For purposes of this Section 8.3, a "non-monetary" Event of Default
means any Event of Default which cannot be cured solely by the payment of money
to Lender. Lender's forbearance obligations and Manager's cure rights under such
circumstances shall be as follows:
(a) Notwithstanding anything to the contrary
contained in Subsection 8.3(b) below, Lender shall give Manager written
notice of such Event of Default and of Lender's intent to exercise its
rights and remedies under this Article VIII and Lender shall initially
forbear from exercising its rights and remedies under this Article VIII
until the earlier to occur of (i) (x) prior to the date on which the
Property achieves a Debt Service Coverage Ratio of 1.0x for a
continuous period of six (6) months, the date which is twenty-five (25)
days after delivery of such written notice and (y) after the date on
which the Property achieves a Debt Service Coverage Ratio of 1.0x for a
continuous period of six (6) months, the date which is forty-five (45)
days after delivery of such written notice, (ii) the occurrence of an
Event of Default with respect to Manager and (iii) the occurrence of an
Event of Default, other than a non-monetary Event of Default.
(b) Notwithstanding anything to the contrary
contained in Subsection 8.3(a) above, Lender shall not exercise its
rights under this Article VIII in connection with the applicable
non-monetary Event of Default, if prior to the date specified in
subsection (a)(i) above, the following applicable events and conditions
shall have occurred or been satisfied; (i) the Manager or its nominee
or assignee (provided same have been previously approved by Lender) has
acquired fee simple title to the Property, assumed all of the
obligations of the Borrower under the Loan Documents and has executed
and delivered such other documentation as may be required by Lender
and, if the Loan has been transferred in a Securitization, the Rating
Agencies, (ii) if the Loan has been transferred in a Securitization,
the Rating Agencies shall have confirmed in writing that such transfer
shall not result in a downgrade, withdrawal or qualification of any
securities issued in connection with such Securitization, (iii)
satisfactory opinions relating to such transfer shall have been
delivered by Manager to Lender and, if the Loan has been transferred in
a Securitization, to the Rating Agencies (including without limitation
tax and bankruptcy opinions), (iv) to the extent curable, Manager shall
have
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cured such non-monetary Event of Default, (v) Manager pays all
reasonable expenses incurred by Lender in connection with such
transfer, (vi) Manager shall have delivered to Lender an updated Title
Insurance Policy showing fee simple title to the Property in Manager
and insuring that Lender has a valid first lien on the Manager's fee
simple interest in the Property together with such modifications,
amendments or supplements to the Loan Documents as Lender may
reasonably request. Upon consummation of the transfer of fee simple
title in the Property to Manager or its nominee or assignee (provided
same have been previously approved by Lender) and the assignment by
Borrower and assumption by the Manager or its nominee or assignee
(provided same have been previously approved by Lender) of the
Borrower's obligations under the Loan Documents executed by Borrower,
Manager shall be considered the "Borrower" under the Loan Documents as
well as the "Manager" under the Loan Documents and shall have all of
the obligations of "Borrower" under the Loan Documents as well as the
obligations of "Manager" under the Loan Documents.
(c) If the conditions required for Lender's
forbearance contained in Section 8.3 are not satisfied, then Lender
shall be entitled to exercise all of its rights and remedies pursuant
to this Article VIII without providing any forbearance or cure rights
pursuant to this Section 8.3.
IX. SPECIAL PROVISIONS
9.1 SALE OF NOTE AND SECURITIZATION.
9.1.1 COOPERATION. At Lender's request (to the extent not
already required to be provided by Borrower and Manager under this Agreement),
Borrower and Manager shall use reasonable efforts to satisfy the market
standards to which Lender customarily adheres or which may be reasonably
required in the marketplace or by the Rating Agencies in connection with the
sale of the Note or participation therein or the first successful securitization
(such sale and/or securitization, the "SECURITIZATION") of rated single or
multi-class securities (the "SECURITIES") secured by or evidencing ownership
interests in the Note and the Mortgage. Without limiting the generality of the
foregoing, Borrower and Manager shall:
(a) (i) provide such financial and other information
with respect to the Property, Borrower and its Affiliates, Manager and
its Affiliates and any tenants of the Property, (ii) provide business
plans and budgets relating to the Property and (iii) perform or permit
or cause to be performed or permitted such site inspection, appraisals,
market studies, environmental reviews and reports (Phase I's and, if
appropriate, Phase II's), engineering reports and other due diligence
investigations of the Property, as may be reasonably requested by
Lender or the Rating Agencies or as may be necessary or appropriate in
connection with the Securitization (the items provided to Lender
pursuant to this paragraph (a) being called the "PROVIDED
INFORMATION"), together, if customary, with appropriate verification of
and/or consents to the Provided
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Information through letters of auditors or opinions of counsel of
independent attorneys acceptable to Lender and the Rating Agencies;
(b) at Borrower's or Manager's expense, as the case
may be, cause counsel to render opinions as to non-consolidation,
fraudulent conveyance, true sale and true contribution and any other
opinion customary in securitization transactions with respect to the
Property, Borrower and its Affiliates, Manager and its Affiliates,
which counsel and opinions shall be reasonably satisfactory to Lender
and the Rating Agencies;
(c) make such representations and warranties as of
the closing date of the Securitization with respect to the Property,
Borrower, Manager and the Loan Documents as are customarily provided in
securitization transactions and as may be reasonably requested by
Lender or the Rating Agencies and consistent with the facts covered by
such representations and warranties as they exist on the date thereof,
including the representations and warranties made in the Loan
Documents;
(d) provide current certificates of good standing and
qualification with respect to Borrower from appropriate Governmental
Authorities; and
(e) execute such amendments to the Loan Documents,
Borrower's organizational documents, Manager's organizational documents
and enter into a lock-box or similar arrangement with respect to the
Rents and establish and fund such reserve funds (including reserve
funds for deferred maintenance and capital improvements) as may be
requested by Lender or the Rating Agencies or otherwise to effect the
Securitization, provided that nothing contained in this subsection (e)
shall result in an economic change in the overall transaction.
Notwithstanding anything to the contrary contained herein or in any other Loan
Documents, Borrower and/or Manager shall be required to reimburse Lender for the
pro rata portion of all reasonable third party costs and expenses incurred by
Lender in connection with a Securitization (or any attempt to securitize the
Loan) which are attributable to Borrower and/or Manager complying with requests
made under this Section 9.1, up to a maximum aggregate amount equal to 37.5
basis points of the original Principal, which Borrower shall deposit with Lender
in the Securitization Expense Subaccount of the Deposit Account on the
Conversion Date. If Lender fails to use all the funds in the Securitization
Expense Subaccount, provided no Event of Default has occurred and is continuing,
Lender (or Servicer) shall refund such remaining funds as directed by Manager
with interest earned thereon, if any.
9.1.2 USE OF INFORMATION. Borrower and Manager understand that
certain of the Provided Information and the Required Records may be included in
disclosure documents in connection with the Securitization, including a
prospectus or private placement memorandum (each, a "DISCLOSURE DOCUMENT") and
may also be included in filings with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended (the "SECURITIES
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ACT"), or the Securities and Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), or provided or made available to investors or prospective investors in
the Securities, the Rating Agencies, and service providers relating to the
Securitization. In the event that the Disclosure Document is required to be
revised prior to the sale of all Securities, Borrower and Manager shall
cooperate with Lender in updating the Provided Information or Required Records
for inclusion or summary in the Disclosure Document by providing all current
information pertaining to Borrower, Manager and the Property necessary to keep
the Disclosure Document accurate and complete in all material respects with
respect to such matters.
9.1.3 BORROWER AND MANAGER OBLIGATIONS REGARDING DISCLOSURE
DOCUMENTS. In connection with a preliminary and a final private placement or
prospectus, as applicable, Borrower and Manager agree:
(a) if requested by Lender, subject to Section 10.1
herein, to certify in writing that Borrower or Manager, as the case may
be, has carefully examined those portions of such memorandum or
prospectus, as applicable, pertaining to Borrower or Manager, as the
case may be, the Property and the Loan, including applicable portions
of the sections entitled "Special Considerations", "Description of the
Mortgages", "Description of the Mortgage Loans and Mortgaged Property",
"The Manager", "The Borrower" and "Certain Legal Aspects of the
Mortgage Loan", and such sections (and any other sections reasonably
requested and pertaining to Borrower or Manager, as the case may be,
the Property or the Loan) do not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements made, in the light of the circumstances under which
they were made, not misleading, provided, however, that neither
Borrower nor Manager shall be required to indemnify Lender for any
losses relating to untrue statements or omissions which Borrower or
Manager identified to Lender in writing at the time of Borrower's or
Manager's examination of such memorandum or prospectus, as applicable.
IT IS EXPRESSLY ACKNOWLEDGED AND AGREED BY BORROWER AND MANAGER THAT
THE INDEMNITY CONTAINED IN THIS SECTION PROTECTS LENDER AND DEED OF
TRUST TRUSTEE FROM THE CONSEQUENCES OF LENDER AND SUCH TRUSTEE'S ACTS
OR OMISSIONS, INCLUDING, WITHOUT LIMITATION, THE NEGLIGENT ACTS OR
OMISSIONS OF LENDER AND/OR SUCH TRUSTEE, TO THE EXTENT PROVIDED BY LAW;
PROVIDED, HOWEVER, THAT NOTHING CONTAINED HEREIN SHALL BE DEEMED TO
RELIEVE LENDER OR SUCH TRUSTEE FROM LIABILITY DUE TO ITS GROSS
NEGLIGENCE;
(b) to indemnify Lender and the Affiliates of Nomura
Securities International, Inc. ("NOMURA"), that have filed the
registration statement relating to the Securitization (the
"REGISTRATION STATEMENT"), each of its directors, each of its officers
who have signed the Registration Statement and each person or entity
who controls Nomura within the meaning of Section 15 of the Securities
Act or Section 30 of the
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Exchange Act of 1933, as amended (collectively, the "NOMURA GROUP"),
and Nomura, each of its directors and each person who controls Nomura,
within the meaning of Sec tion 15 of the Securities Act and Section 20
of the Exchange Act (collectively, the "UNDERWRITER GROUP") for any
losses, claims, damages or liabilities, other than those relating to
untrue statements or omissions which Borrower or Manager identified to
Lender in writing at the time of Borrower's or Manager's examination of
such memorandum or prospectus as applicable (collectively, the
"LIABILITIES") to which Lender, the Nomura Group or the Underwriter
Group may become subject insofar as the Liabilities arise out of or are
based upon any untrue statement or alleged untrue statement of any
material fact contained in the applicable portions of such sections
applicable to Borrower or Manager, as the case may be, the Property or
the Loan, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated in the
applicable portions of such sections or necessary in order to make the
statements in the applicable portions of such sections or in light of
the circumstances under which they were made, not misleading, provided,
however, that Manager shall have had an opportunity to review and
comment upon the relevant portions of such documents and Manager's
comments thereon have been incorporated therein or otherwise been
addressed to Manager's reasonable satisfaction; and
(c) to reimburse Lender and Nomura for any legal or
other expenses reasonably incurred by Lender and Nomura in connection
with investigating or defending the Liabilities.
Borrower's and Manager's Liability, as the case may be, under clause (a) or (b)
above shall be limited to Liabilities arising out of or based upon any such
untrue statement or omission made therein in reliance upon and in conformity
with information furnished to Lender by or on behalf of Borrower or Manager, as
the case may be, in connection with the preparation of those portions of the
Disclosure Document pertaining to Borrower or Manager, as the case may be, the
Property or the Loan or in connection with the underwriting of the debt,
including financial statements of Borrower or Manager, as the case may be,
operating statements, rent rolls, environmental site assessment reports and
property condition reports with respect to the Property. The foregoing indemnity
will be in addition to any liability which Borrower may otherwise have.
9.1.4 BORROWER INDEMNITY REGARDING FILINGS. In connection with
filings under the Exchange Act, Borrower agrees to (i) indemnify Lender, the
Nomura Group and the Underwriter Group for any Liabilities to which Lender, the
Nomura Group or the Underwriter Group may become subject insofar as the
Liabilities arise out of or are based upon the omission or alleged omission to
state in the Provided Information or Required Records a material fact required
to be stated in the Provided Information or Required Records in order to make
the statements in the Provided Information or Required Records, in light of the
circumstances under which they were made not misleading and (ii) reimburse
Lender or Nomura for any reasonable legal or other expenses reasonably incurred
by Lender and Nomura in connection with defending
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or investigating the Liabilities. IT IS EXPRESSLY ACKNOWLEDGED AND AGREED BY
BORROWER AND MANAGER THAT THE INDEMNITY CONTAINED IN THIS SECTION PROTECTS
LENDER AND DEED OF TRUST TRUSTEE FROM THE CONSEQUENCES OF LENDER AND SUCH
TRUSTEE'S ACTS OR OMISSIONS, INCLUDING, WITHOUT LIMITATION, THE NEGLIGENT ACTS
OR OMISSIONS OF LENDER AND/OR SUCH TRUSTEE, TO THE EXTENT PROVIDED BY LAW;
PROVIDED, HOWEVER, THAT NOTHING CONTAINED HEREIN SHALL BE DEEMED TO RELIEVE
LENDER OR SUCH TRUSTEE FROM LIABILITY DUE TO ITS GROSS NEGLIGENCE.
9.1.5 INDEMNIFICATION PROCEDURE. Promptly after receipt by an
indemnified party under Section 9.1.3 or 9.1.4 of notice of the commencement of
any action for which a claim for indemnification is to be made against Borrower,
such indemnified party shall notify Borrower or Manager, as applicable, in
writing of such commencement, but the omission to so notify the Borrower or
Manager, as applicable, will not relieve Borrower or Manager, as applicable,
from any liability that it may have to any indemnified party hereunder except to
the extent that failure to notify causes prejudice to Borrower or Manager, as
applicable. In the event that any action is brought against any indemnified
party, and it notifies Borrower or Manager, as applicable, of the commencement
thereof, Borrower or Manager, as applicable, will be entitled, jointly with any
other indemnifying party, to participate therein and, to the extent that it (or
they) may elect by written notice delivered to the indemnified party promptly
after receiving the aforesaid notice of commencement, to assume the defense
thereof with counsel satisfactory to such indemnified party. After notice from
Borrower or Manager, as applicable, to such indemnified party under this Section
9.1.5, Borrower or Manager, as applicable, shall not be responsible for any
legal or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation; provided, however, if the defendants in any such action include
both Borrower or Manager, as applicable, and an indemnified party, and any
indemnified party shall have reasonably concluded that there are any legal
defenses available to it and/or other indemnified parties that are different
from or additional to those available to Borrower or Manager, as applicable,
then the indemnified party or parties shall have the right to select separate
counsel to assert such legal defenses and to otherwise participate in the
defense of such action on behalf of such indemnified party or parties. Borrower
or Manager, as applicable, shall not be liable for the expenses of more than one
separate counsel unless there are legal defenses available to it that are
different from or additional to those available to another indemnified party.
9.1.6 CONTRIBUTION. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for in
Section 9.1.3 or 9.1.4 is for any reason held to be unenforceable by an
indemnified party in respect of any Liabilities (or action in respect thereof)
referred to therein which would otherwise be indemnifiable under Sec tion 9.1.3
or 9.1.4, Borrower and/or Manager shall contribute to the amount paid or payable
by the indemnified party as a result of such Liabilities (or action in respect
thereof); provided, however, that no Person guilty of fraudulent
misrepresentation (within the meaning of Sec tion 11(f) of the Securities Act)
shall be entitled to contribution from any Person not guilty of such fraudulent
misrepresentation. In determining the amount of contribution to which the
respective parties are entitled, the following factors shall be considered: (i)
the Nomura Group's, Borrower's, and Manager's relative knowledge and access to
information concerning the matter with respect to which the claim was asserted;
(ii) the opportunity to correct and prevent any statement or omission; and (iii)
any other equitable considerations appropriate in the circumstances. Lender,
Borrower and Manager hereby agree that it may not be equitable if the amount of
such contribution were determined by pro rata or per capita allocation.
9.1.7 RATING SURVEILLANCE. Lender will retain the Rating
Agencies to provide rating surveillance services on Securities. Subject to the
limitation contained in the last paragraph of Section 9.1.1, the pro rata share
of such rating surveillance will be at the expense of Borrower.
X. MISCELLANEOUS
10.1 EXCULPATION. Except as otherwise set forth in this
Agreement to the contrary, Lender shall not enforce the liability and obligation
of Borrower or Manager to perform and observe the obligations contained in this
Agreement, the Note, the Mortgage or any of the other Loan Documents executed
and delivered by Borrower and/or Manager except that Lender may pursue any power
of sale, bring a foreclosure action, action for specific performance, action for
money judgment, or other appropriate action or proceeding (including, without
limitation, to obtain a deficiency judgment) against Borrower or Manager or any
other Person solely for the purpose of enabling Lender to realize upon (a) the
Collateral, and (b) the Rents and Accounts arising from the Property to the
extent (x) (i) received by Borrower (or any of its affiliates), after the
occurrence of an Event of Default or (ii) received by Manager (or any of their
affiliates), after the occurrence of an Event of Default or (y) distributed to
(i) Borrower or its shareholders, partners, members or beneficial owners, as
applicable, or affiliates during or with respect to any period for which Lender
did not receive the full amounts it was entitled to receive as repayments of the
Loan pursuant to Section II or (ii) Manager, or its shareholders, partners,
members or beneficial owners, as applicable, or affiliates during or with
respect to any period for which Lender did not receive the full amounts it was
entitled to receive as repayments of the Loan pursuant to Section II (all Rents
and Accounts covered by clauses (x) and (y) being hereinafter referred to as the
"Recourse Distributions") and (c) any other collateral given to Lender under the
Loan Documents or those Other Loan Documents which are the subject of
cross-collateralization and cross-default pursuant to Section 10.31, if any,
((a), (b), and (c) collectively, the "Default Collateral"); provided, however,
that any judgment in any such action or proceeding shall be enforceable only to
the extent of any such Default Collateral.
The provisions of this Section 10.1 shall not, however, (a) impair the validity
of the Debt (as defined herein and in any Other Loan Agreement which evidences
any Other Loan which is cross-collateralized and cross-defaulted with the Loan
pursuant to Section 10.31, if any) evidenced by the Loan Documents or those
Other Loan Documents which evidence any Other
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Loan which is cross-collateralized and cross-defaulted with the Loan pursuant
Section 10.31, if any or in any way affect or impair the Liens (as defined
herein and in any Other Loan Agreement which evidences any Other Loan which is
cross-collateralized and cross-defaulted with the Loan pursuant to Section
10.31, if any) of the Mortgage or any of the other Loan Documents or those Other
Loan Documents which evidence an Other Loan which is cross-collateralized and
cross-defaulted with the Loan pursuant to Section 10.31, if any, or the right of
Lender to foreclose the Mortgage (as defined herein and in any Other Loan
Agreement which evidences any Other Loan which is cross-collateralized and
cross-defaulted with the Loan pursuant to Section 10.31, if any) following an
Event of Default (as defined herein and in any Loan Agreement which evidences
any Other Loan which is cross-collateralized and cross-defaulted with the Loan
pursuant to Section 10.31, if any); (b) impair the right of Lender to name any
Person as a party defendant in any action or suit for judicial foreclosure and
sale under the Mortgage (as defined herein and in any Other Loan Agreement which
evidences any Other Loan which is cross-collateralized and cross-defaulted with
the Loan pursuant to Section 10.31, if any); (c) affect the validity or
enforceability of the Note, the Mortgage or the other Loan Documents or those
Other Loan Documents which is cross-collateralized and cross-defaulted pursuant
to Section 10.31, if any; (d) impair the right of Lender to obtain the
appointment of a receiver; (e) impair the right of Lender to bring suit for any
damages, losses, expenses, liabilities or costs resulting from fraud,
intentional misrepresentation, intentional physical waste of all or any portion
of the Property, or wrongful removal or disposal of all or any portion of the
Property by any Person in connection with this Agreement, the Note, the
Mortgage, the Guarantees, or the other Loan Documents; (f) impair the right of
Lender to obtain the Recourse Distributions received by any Person; (g)
intentionally omitted; (h) impair the right of Lender to obtain Proceeds or
Award due to Lender pursuant to this Agreement; (i) impair the right of Lender
to enforce (against the parties liable therefore other than the Borrower) the
provisions of Sections 4.1.31, 4.2.31, 5.1.10, 5.2.10, clauses (viii) through
(xi) of Sections 5.1.18 and 5.2.18, of this Agreement, or the Environmental
Guaranty even after repayment in full by Borrower of the Debt; (j) prevent or in
any way hinder Lender from exercising, or constitute a defense, or counterclaim,
or other basis for relief in respect of the exercise of, any other remedy
against any or all of the Collateral (as defined herein and in any Other Loan
Agreement which evidences an Other Loan which is cross-collateralized and
cross-defaulted with the Loan pursuant to Section 10.31, if any) securing the
Note as provided in the Loan Documents; (k) impair the right of Lender to bring
suit with respect to any intentional misapplication of any funds including
without limitation any intentional misappropriation of security deposits, Rents
collected more then one month in advance any Proceeds, and an Award; (l) impair
the right of Lender to sue for, seek or demand a deficiency judgment against any
Person solely for the purpose of foreclosing the Property (as defined in the
Loan Documents and the Other Loan Documents which evidence an Other Loan which
is cross-collateralized and cross-defaulted with the Loan pursuant to Section
10.31, if any) or any part thereof, or realizing upon the Default Collateral;
provided, however, that any such deficiency judgment referred to in this clause
(l) shall be enforceable only to the extent of any of the Default Collateral; or
(m) impair the right of Lender to realize upon Manager's indemnification of
Lender set forth in Sections 9.1.3 and 9.1.4.
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Notwithstanding anything to the contrary in this Agreement or any of the Loan
Documents, except as otherwise set forth in the following paragraph, (A) Lender
shall not be deemed to have waived any right which Lender may have under Section
506(a), 506(b), 1111(b) or any other provisions of the U.S. Bankruptcy Code to
file a claim for the full amount of the Debt or to require that all collateral
shall continue to secure all of the Debt in accordance with the Loan Documents,
and (B) the Debt shall be fully recourse to Borrower in the event that Borrower,
Manager, or any Person owning an interest (directly or indirectly) in Borrower
or Manager commences any action, suit, claim, arbitration, governmental
investigation or other proceeding (x) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors seeking to have an order for relief entered
with respect to Borrower or Manager, or seeking to adjudicate Borrower or
Manager a bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or other relief
with respect to Borrower or Manager or Borrower's or Manager's debts, or (y)
seeking appointment of a receiver, trustee, custodian or other similar official
for Borrower or Manager or for all or substantially all of Borrower's or
Manager's assets.
Notwithstanding any provision in this Agreement (including the preceding
paragraph) or in any of the other Loan Documents to the contrary, in no event
shall any officer, director, member, partner, manager, shareholder, incorporator
or agent of Borrower be personally liable to Lender for any of the obligations
of Borrower under this Agreement or under any of the other Loan Documents
including without limitation the obligation to pay any amount due on the Note.
10.2 NOTICES. All notices, consents, approvals and requests
required or permitted hereunder or under any other Loan Document (a "NOTICE")
shall be given in writing and shall be effective for all purposes if hand
delivered or sent (i) by certified or registered United States mail, postage
prepaid, or (ii) by (A) expedited prepaid delivery service, either commercial or
United States Postal Service, with proof of attempted delivery, and (B)
telecopier (with answer back acknowledged), in any case addressed as follows (or
to such other address or Person as a party shall designate from time to time by
notice to the other party): If to Lender: Nomura Asset Capital Corporation, Two
World Financial Center, Building B, New York, New York 10281-1198, Attention:
Sheryl McAfee, Telecopier (212) 667-1206, with copies to : Nomura Asset Capital
Corporation, Two World Financial Center, Building B, New York, New York 10281,
Attention: Barry Funt, Telecopier (212) 667-1567 and Dechert Price & Rhoads, 90
State House Square, Hartford, CT 06103-3702, Attention: Marc B. Friedman,
Telecopier: (860) 524-3930; if to Manager: c/o Brookdale Living Communities,
Inc., 77 West Wacker Drive, Suite 4400, Chicago, Illinois 60601, Attention: Mr.
Darryl W. Copeland, Jr., Telecopier (312) 977-3699, c/o Brookdale Living
Communities, Inc., 77 West Wacker Drive, Suite 4400, Chicago, Illinois 60601,
Attention: Mr. Robert J. Rudnik, Telecopier (312) 977-3769; with a copy to:
Winston & Strawn, 35 West Wacker Drive, Chicago, Illinois 60601, Attention:
Wayne D. Boberg, Esq., Telecopier: (312) 558-5700; if to Borrower: 320 King of
Prussia Road, Suite 160, Radnor, Pennsylvania 19087, Attention: David B.
Fenkell, Telecopier (610) 902-0777; with a copy to Squire, Sanders & Dempsey,
L.L.P., 1300 Huntington Center, 41 South High Street,
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Columbus, Ohio 43215, Attention: Scott B. West, Telecopier (614) 365-2499. A
notice shall be deemed to have been given: in the case of hand delivery, at the
time of delivery; in the case of registered or certified mail, when delivered or
the first attempted delivery on a Business Day; or in the case of expedited
prepaid delivery and telecopy, upon the first attempted delivery on a Business
Day.
10.3 BROKERS AND FINANCIAL ADVISORS. Borrower and Manager
hereby represent that they have dealt with no financial advisors, brokers,
underwriters, placement agents, agents or finders in connection with the Loan.
Borrower, Manager, and Lender hereby agree to indemnify and hold each other
harmless from and against any and all claims, liabilities, costs and expenses of
any kind in any way relating to or arising from a claim by any Person that such
Person acted on behalf of the indemnifying party in connection with the
transactions contemplated herein. The provisions of this Section 10.3 shall
survive the expiration and termination of this Agreement and the repayment of
the Debt.
10.4 RETENTION OF SERVICER. Lender reserves the right to
retain the Servicer to act as its agent hereunder with such powers as are
specifically delegated to the Servicer by Lender, whether pursuant to the terms
of this Agreement, the Pooling and Servicing Agreement, the Deposit Account
Agreement or otherwise, together with such other powers as are reasonably
incidental thereto. Borrower or Manager shall pay any reasonable fees and
expenses of the Servicer in connection with a Defeasance, release of the
Property, assumption or modification of the Loan or enforcement of the Loan
Documents.
10.5 SURVIVAL. This Agreement and all covenants, agreements,
representations and warranties made herein and in the certificates delivered
pursuant hereto shall survive the making by Lender of the Loan and the execution
and delivery to Lender of the Note, and shall continue in full force and effect
so long as all or any of the Debt is unpaid. All Borrower's and Manager's
covenants and agreements in this Agreement shall inure to the benefit of the
respective legal representatives, successors and assigns of Lender. The
provisions of the BLA shall survive the completion of the Required Improvements;
provided, however, upon the occurrence of the Conversion Date all of the terms
and provisions of the BLA shall be of no further force and effect (except to the
extent that certain definitions contained herein and incorporated by reference
in any other Loan Documents continue to be operative in such other Loan
Documents), the BLA shall terminate and this Agreement shall constitute and
operate as the sole loan agreement governing the operation and administration of
the Loan.
10.6 LENDER'S DISCRETION. Whenever pursuant to this Agreement
or any other Loan Document, Lender exercises any right of election, consent, or
any right given to it to make such election, give such consent, approve or
disapprove, or any arrangement or term is to be satisfactory to Lender, the
decision of Lender to approve or disapprove or to decide whether arrangements or
terms are satisfactory or not satisfactory shall (except as is otherwise
specifically herein provided) be in the discretion of Lender and shall be final
and conclusive.
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10.7 GOVERNING LAW. (a) THIS AGREEMENT WAS PARTIALLY
NEGOTIATED IN THE STATE OF NEW YORK, AND MADE BY LENDER IN THE STATE OF NEW
YORK, AND THE PROCEEDS OF THE NOTE DELIVERED PURSUANT HERETO WERE DISBURSED FROM
THE STATE OF NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL
RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY,
AND IN ALL RESPECTS, INCLUDING, MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE. THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS (WITHOUT REGARD
TO CONFLICTS OF LAWS PROVISIONS) OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND PERFORMED IN SUCH STATE AND ANY APPLICABLE LAW OF THE UNITED
STATES OF AMERICA, EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE CREATION,
PERFECTION, AND ENFORCEMENT OF THE LIENS CREATED PURSUANT TO THE LOAN DOCUMENTS
SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE STATE IN WHICH
THE APPLICABLE PROPERTY IS LOCATED, IT BEING UNDERSTOOD THAT, TO THE FULLEST
EXTENT PERMITTED BY THE LAW OF SUCH STATE, THE LAW OF THE STATE OF NEW YORK
SHALL GOVERN THE VALIDITY AND THE ENFORCEABILITY OF ALL LOAN DOCUMENTS AND THE
DEBT. TO THE FULLEST EXTENT PERMITTED BY LAW, BORROWER AND MANAGER HEREBY
UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY
OTHER JURISDICTION GOVERNS THIS AGREEMENT AND THE NOTE, AND THIS AGREEMENT AND
THE NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK PURSUANT TO ss. 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS
LAW.
(b) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER,
BORROWER OR MANAGER ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE
INSTITUTED IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, PURSUANT TO ss.
5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW, AND BORROWER AND MANAGER WAIVE
ANY OBJECTION WHICH THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY
SUCH SUIT, ACTION OR PROCEEDING, AND BORROWER AND MANAGER HEREBY IRREVOCABLY
SUBMIT TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING.
BORROWER AND MANAGER DO HEREBY DESIGNATE AND APPOINT CT CORPORATION SYSTEMS, AT
1633 BROADWAY, NEW YORK, NEW YORK 10016 AS THEIR AUTHORIZED AGENT TO ACCEPT AND
ACKNOWLEDGE ON THEIR BEHALF SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED
IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY FEDERAL OR STATE COURT IN NEW
YORK, NEW YORK, AND AGREE THAT SERVICE OF PROCESS UPON SAID AGENT AT SAID
ADDRESS AND WRITTEN NOTICE OF SAID SERVICE OF BORROWER OR MANAGER MAILED OR
DELIVERED TO BORROWER
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OR MANAGER, AS APPLICABLE, IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN
EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON BORROWER OR MANAGER, IN ANY SUCH
SUIT, ACTION OR PROCEEDING IN THE STATE OF NEW YORK. A COPY OF SERVICE OF
PROCESS WITH RESPECT TO BORROWER SHALL BE DELIVERED TO MANAGER AND A COPY OF
SERVICE OF PROCESS WITH RESPECT TO MANAGER SHALL BE DELIVERED TO BORROWER;
PROVIDED, HOWEVER, FAILURE TO RECEIVE SUCH COPIES SHALL NOT AFFECT ANY OF
LENDER'S RIGHTS HEREUNDER. EACH BORROWER AND MANAGER (i) SHALL GIVE PROMPT
NOTICE TO LENDER OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II)
MAY AT ANY TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT
WITH AN OFFICE IN NEW YORK, NEW YORK (WHICH OFFICE SHALL BE DESIGNATED AS THE
ADDRESS FOR SERVICE OF PROCESS), AND (III) SHALL PROMPTLY DESIGNATE SUCH A
SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN OFFICE IN NEW YORK, NEW
YORK OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.
10.8 MODIFICATION, WAIVER IN WRITING. No modification,
amendment, extension, discharge, termination or waiver of any provision of this
Agreement or of any other Loan Document, nor consent to any departure by
Borrower or Manager therefrom, shall in any event be effective unless the same
shall be in a writing signed by each of Borrower, Manager, and Lender, and then
such waiver or consent shall be effective only in the specific instance, and for
the purpose, for which given. Except as otherwise expressly provided herein, no
notice to or demand on Borrower or Manager shall entitle Borrower or Manager to
any other or future notice or demand in the same, similar or other
circumstances.
10.9 DELAY NOT A WAIVER. Neither any failure nor any delay on
the part of Lender in insisting upon strict performance of any term, condition,
covenant or agreement, or exercising any right, power, remedy or privilege
hereunder, or under any other Loan Document, shall operate as or constitute a
waiver thereof, nor shall a single or partial exercise thereof preclude any
other future exercise, or the exercise of any other right, power, remedy or
privilege. In particular, and not by way of limitation, by accepting payment
after the due date of any amount payable under any Loan Document, Lender shall
not be deemed to have waived any right either to require prompt payment when due
of all other amounts due under the Loan Documents, or to declare a Default for
failure to effect prompt payment of any such other amount.
10.10 TRIAL BY JURY. BORROWER, MANAGER AND LENDER HEREBY AGREE
NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVE
ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR
HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR
OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY
JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY BORROWER, MANAGER AND
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LENDER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE
AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. EACH PARTY IS
HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS
CONCLUSIVE EVIDENCE OF THIS WAIVER BY THE OTHER.
10.11 HEADINGS. The Section headings and Table of Contents in
this Agreement are included herein for convenience of reference only and shall
not constitute a part of this Agreement for any other purpose.
10.12 SEVERABILITY. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
10.13 PREFERENCES. Lender shall have no obligation to marshal
any assets in favor of Borrower or Manager or any other party or against or in
payment of any or all Obligations of Borrower or Manager pursuant to this
Agreement, the Note, or any other Loan Document. Lender shall have the
continuing and exclusive right to apply or reverse and reapply any and all
payments by Borrower to any portion of Borrower's or Manager's Obligations
hereunder, including the Debt. To the extent Borrower makes a payment to Lender,
or Lender receives proceeds of any collateral, which is in whole or part
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then, to
the extent of such payment or proceeds received, the Debt or part thereof
intended to be satisfied shall be revived and continue in full force and effect,
as if such payment or proceeds had not been received by Lender.
10.14 WAIVER OF NOTICE. Neither Borrower nor Manager shall be
entitled to any notices of any nature whatsoever from Lender except with respect
to matters for which this Agreement or any other Loan Document specifically and
expressly provides for the giving of notice by Lender to Borrower or Manager, as
the case may be, and except with respect to matters for which Borrower or
Manager is not, pursuant to applicable Legal Requirements, permitted to waive
the giving of notice. To the maximum extent permitted by Legal Requirements,
Borrower and Manager hereby expressly waive the right to receive any notice from
Lender with respect to any matter for which no Loan Document specifically and
expressly provides for the giving of notice by Lender to Borrower or Manager, as
the case may be.
10.15 REMEDIES OF BORROWER. If a claim or adjudication is made
that Lender or its agent, including Servicer, has acted unreasonably or
unreasonably delayed acting in any case where by law or under any Loan Document,
Lender or such agent, as the case may be, has an obligation to act reasonably or
promptly, Borrower agrees that neither Lender nor its agents,
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including Servicer, shall be liable for any monetary damages (except for
Lender's obligations to fund all Advances pursuant to the BLA), and Borrower's
sole remedy shall be to commence an action seeking (i) injunctive relief,
declaratory judgment or specific performance or (ii) to enforce its rights under
the Loan Documents (including the BLA). Any action or proceeding to determine
whether Lender has acted reasonably shall be determined by an action (i) seeking
declaratory judgment or (ii) to enforce its rights under the Loan Documents
(including the BLA). Lender may proceed directly against any general partner of
Borrower or Manager, as the case may be, without first exhausting its remedies
against Borrower or Manager, as applicable. In connection herewith, Lender,
Borrower, and Manager hereby agree that Lender is not required to comply with
Section 3.05(d) of the Texas Revised Partnership Act (VACS Art. 6132b-1.01 et.
seq.). Lender, Borrower, and Manager agree that this paragraph is intended to
comply with the provisions of Section 3.05(e)(2) of the Texas Revised
Partnership Act.
10.16 PRIOR AGREEMENTS. This Agreement, the other Loan
Documents, and Section 2.1 of the Master Financing Facility Agreement contain
the entire agreement of the parties hereto and thereto in respect of the
transactions contemplated hereby and thereby, and all prior agreements among or
between such parties, whether oral or written, are superseded by the terms of
this Agreement and the other Loan Documents.
10.17 OFFSETS, COUNTERCLAIMS AND DEFENSES. Any assignee of
Lender's interest in and to the Loan Documents shall take the same free and
clear of all offsets, counterclaims or defenses that are unrelated to the Loan
Documents which Borrower may otherwise have against any assignor of such
documents, and no such unrelated offset, counterclaim or defense shall be
interposed or asserted by Borrower in any action or proceeding brought by any
such assignee upon such documents, and any such right to interpose or assert any
such unrelated offset, counterclaim or defense in any such action or proceeding
is hereby expressly waived by Borrower.
10.18 PUBLICITY. Except as otherwise required by applicable
Legal Requirements, Borrower may not advertise or issue promotional materials
describing Lender's participation in the Loan or the inclusion of the Loan in
any Securitization without the prior consent of Lender. Lender may, without
Borrower's consent, issue press releases, advertisements or other promotional
materials describing Lender's participation in the origination of the Loan or
the Loan's inclusion in any Securitization effectuated or to be effectuated by
Lender.
10.19 NO USURY. Borrower and Lender intend at all times to
comply with applicable state law or applicable United States federal law (to the
extent that it permits Lender to contract for, charge, take, reserve or receive
a greater amount of interest than under state law) and that this Section 10.19
shall control every other agreement in the Loan Documents. If the applicable law
(state or federal) would render usurious any amount called for under the Note or
any other Loan Document, or contracted for, charged, taken, reserved or received
with respect to the Debt, or if Lender's exercise of the option to accelerate
the maturity of the Loan or any
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prepayment by Borrower results in Borrower having paid any interest in excess of
that permitted by applicable law, then it is Borrower's and Lender's express
intent that all excess amounts theretofore collected by Lender shall be credited
against the unpaid Principal and all other Debt (or, if the Debt has been or
would thereby be paid in full, refunded to Borrower), and the provisions of the
Loan Documents immediately be deemed reformed and the amounts thereafter
collectible thereunder reduced, without the necessity of the execution of any
new document, so as to comply with the applicable law, but so as to permit the
recovery of the fullest amount otherwise called for thereunder. All sums paid or
agreed to be paid to Lender for the use, forbearance or detention of the Loan
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated, and spread throughout the full stated term of the Loan until payment
in full so that the rate or amount of interest on account of the Debt does not
exceed the maximum lawful rate from time to time in effect and applicable to the
Debt for so loan as the Debt is outstanding. Notwithstanding anything to the
contrary contained in any Loan Document, it is not the intention of Lender to
accelerate the maturity of any interest that has not accrued at the time of such
acceleration or to collect unearned interest at the time of such acceleration.
10.20 CONFLICT; CONSTRUCTION OF DOCUMENTS. Borrower and
Manager agree that the Note, the Mortgage and the other Loan Documents shall be
made subject to all the terms, covenants, conditions, obligations, stipulations
and agreements contained in this Agreement to the same extent and effect as if
fully set forth in and made a part of the Initial Note, the Mortgage and the
other Loan Documents. If there is a conflict between the terms of this Agreement
and other Loan Documents, then the terms, covenants and conditions of this
Agreement shall prevail. The information set forth on the cover, and recitals
hereof and the Exhibits attached hereto are hereby incorporated herein as a part
of this Agreement with the same effect as set forth in the body hereof. The
parties hereto acknowledge that they were represented by counsel in connection
with the negotiation and drafting of the Loan Documents and that the Loan
Documents shall not be subject to the principle of construing their meaning
against the party that drafted them.
10.21 NO THIRD PARTY BENEFICIARIES. The Loan Documents are
solely for the benefit of Lender, the Borrower and the Manager and nothing
contained in any Loan Document shall be deemed to confer upon anyone other than
Lender, the Borrower and the Manager any right to insist upon or to enforce the
performance or observance of any of the obligations contained therein.
10.22 ASSIGNMENT. Lender shall have the right to assign in
whole or in part this Agreement and/or any of the other Loan Documents and the
obligations hereunder or thereunder to any Person and to participate all or any
portion of the Loan evidenced hereby, including without limitation, any servicer
or trustee in connection with a Securitization; provided, however, that no such
assignment shall increase, decrease or otherwise affect either Lender's,
Borrower's or Manager's obligations under this Agreement or any of the other
Loan Documents. Lender shall provide Borrower with written notice of any such
assignment; provided, however, that such notice shall not be a condition of
Lender's right to assign this
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Agreement and/or any of the Loan Documents and the failure to deliver such
notice shall not constitute a default under this Loan Agreement.
10.23 EXHIBITS INCORPORATED. The information set forth on the
cover, heading and recitals hereof, and the Exhibits attached hereto, are hereby
incorporated herein as a part of this Agreement with the same effect as if set
forth in the body hereof.
10.24 NO JOINT VENTURE OR PARTNERSHIP. Borrower and Lender
intend that the relationship created hereunder be solely that of borrower and
lender. Manager and Lender intend that the relationship created hereunder be
solely that of manager and lender. Nothing herein is intended to create a joint
venture, partnership, tenancy-in-common, or joint tenancy relationship between
Borrower and Lender, between Manager and Lender, or between Guarantor and Lender
nor to grant Lender any interest in the Property other than that of mortgagee or
lender.
10.25 WAIVER OF MARSHALLING OF ASSETS DEFENSE. To the fullest
extent that Borrower may legally do so, Borrower waives all rights to a
marshalling of the assets of Borrower, and others with interests in Borrower,
and of the Property, or to a sale in inverse order of alienation in the event of
foreclosure of the interests hereby created, and agrees not to assert any right
under any laws pertaining to the marshalling of assets, the sale in inverse
order of alienation, homestead exemption, the administration of estates of
decedents, or any other matters whatsoever to defeat, reduce or affect the right
of Lender under the Loan Documents to a sale of the Property for the collection
of the Debt without any prior or different resort for collection, or the right
of Lender to the payment of the Debt in preference to every other claimant
whatsoever.
10.26 WAIVER OF COUNTERCLAIM. Borrower and Manager hereby
waive the right to assert a counterclaim, other than compulsory counterclaim, in
any action or proceeding brought against Borrower or Manager, as applicable, by
Lender or Lender's agents.
10.27 COUNTERPARTS. This 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 together constitute one and the same
instrument.
10.28 BANKRUPTCY WAIVER. Borrower and Manager hereby agree
that, in consideration of the recitals and mutual covenants contained herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, in the event Borrower or Manager shall (i) file
with any bankruptcy court of competent jurisdiction or be the subject of any
petition under Title 11 of the U.S. Code, as amended, (ii) be the subject of any
order for relief issued under Title 11 of the U.S. Code, as amended, (iii) file
or be the subject of any petition seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
present or law relating to bankruptcy, insolvency or other relief of debtors,
(iv) have sought or consented to or
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acquiesced in the appointment of any trustee, receiver, conservator or
liquidator or (v) be the subject of any order, judgement or decree entered by
any court of competent jurisdiction approving a petition filed against such
party for any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future federal
or state act or law relating to bankruptcy, insolvency or other relief for
debtors, the automatic stay provided by the Federal Bankruptcy Code shall be
modified and annulled as to Lender, so as to permit Lender to exercise any and
all of its remedies, upon request of Lender made on notice to Borrower and/or
Manager, as the case may be, and any other party in interest but without the
need of further proof or hearing. Borrower, Manager and any of their Affiliates
shall not contest the enforceability of this Section.
10.29 ENTIRE AGREEMENT. This Agreement, together with the
Exhibits hereto and the other Loan Documents constitutes the entire agreement
among the parties hereto with respect to the subject matter contained in this
Agreement, the Exhibits hereto and the other Loan Documents and supersedes all
prior agreements, understandings and negotiations between the parties. THE
WRITTEN LOAN DOCUMENTS TO WHICH THIS LOAN AGREEMENT RELATES REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
10.30 BORROWER ACKNOWLEDGMENTS. Lender, Borrower and Manager
hereby acknowledge and agree that (i) the scope of Lender's, Borrower's and
Manager's respective business is wide and includes, but is not limited to,
financing, real estate financing, investment in real estate and other real
estate transactions which may be viewed as adverse to or competitive with the
respective business of Lender, Borrower, Manager or their Affiliates and (ii)
Lender, Borrower and Manager have been represented by competent legal counsel
and has consulted with such counsel prior to executing this Loan Agreement and
any of the other Loan Documents.
10.31 WAIVER OF "ONE ACTION" RULE; CROSS COLLATERALIZATIONS.
(a) The Loan has been made by Lender pursuant to the Master Financing Facility
Agreement. The Master Financing Facility Agreement contemplates that one (1) or
more other loans (the "OTHER LOANS") made to Other Borrowers pursuant to the
Master Financing Facility Agreement will, at Lender's election, be cross
collateralized and cross defaulted with the Loan and with each other, subject to
Section (b) below. In such event, such Other Loans will be secured by the
Property and the Collateral, and the Loan will be secured by the other
properties and other collateral serving as primary security for such Other Loans
(the "OTHER PROPERTIES"), subject to Section (b) below.
(b) Borrower hereby agrees that (x) with respect to the obligations of any
Other Borrower under any Other Loan made pursuant to the Master Financing
Facility
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Agreement, such Other Borrower's obligations shall be cross-collateralized and
cross-defaulted with the Loan until the earlier of (i) the date on which any
such Other Loan or the Loan has been converted pursuant to the terms of the
relevant Other Loan Agreement or this Agreement, as applicable, and transferred
in a Securitization for loans which have stabilized of which the Loan or
applicable Other Loans are not a part (i.e., the Loan and any Other Loans are in
different Securitization Pools) and (ii) Lender's election to release the
cross-default and the cross-collateralization and (y) the Loan shall be
cross-defaulted and cross-collateralized with any Other Loan which is included
in the same Securitization (as defined in this Agreement and in the relevant
Other Loan Agreement) as the Loan. During the term of any cross-default and
cross-collateralization and with respect to those Other Loans which are the
subject of such cross-default and cross-collateralization, without limitation to
any other right or remedy provided to Lender in this Agreement, the BLA, the
Master Financing Facility Agreement, or any of the other Loan Documents,
Borrower acknowledges and agrees that, to the full extent permitted under
applicable law, upon the occurrence of an Event of Default (i) Lender shall have
the right to pursue all of its rights and remedies in one proceeding, or
separately and independently in separate proceedings which it, as Lender, in its
discretion, shall determine form time to time, (ii) Lender is not required to
either marshall assets, sell the Property or any Other Property in any inverse
order of alienation, or be subjected to any "one action" or "election of
remedies" law or rule, (iii) the exercise by Lender of any remedies against the
Property or any Other Property, will not impede Lender from subsequently or
simultaneously exercising remedies against any other Property, (iv) all Liens
and other rights, remedies and privileges provided to Lender in this Agreement,
and in the other Loan Documents (except to the extent such documents have
terminated or expired pursuant to their terms) or otherwise shall remain in full
force and effect until Lender has exhausted all of its remedies against the
Property and all Other Properties have been foreclosed, sold and/or otherwise
realized upon and (v) the Property and all the Other Properties under the Master
Financing Facility Agreement shall be security for the performance of all of
Borrower's Obligations hereunder.
10.32 SEGREGATED POOL PROPERTIES. (a) Lender may, at any time,
and from time to time, by giving written notice to Borrower Sponsor, Borrower
Representative, Manager, Guarantor, Borrower, and/or any Other Borrower that
will be affected thereby, divide the Loans made pursuant to the Master Financing
Facility Agreement into two (2) or more groupings (each a "SEGREGATED POOL"),
for the purpose of facilitating a Securitization or other transfer with respect
to one (1) or more Segregated Pools. Loans in the same Segregated Pool will be
cross-defaulted and cross-collateralized only with one another. Lender's notice
shall be given at least sixty (60) days prior to the date selected by Lender for
the Segregated Pools to be created (the "SEGREGATED POOL DATE") and shall
specify the Property or Properties to be included in each Segregated Pool (each
a "SEGREGATED POOL PROPERTY").
(b) On the Segregated Pool Date, Borrower Sponsor shall cause Borrower,
and/or any Other Borrower that owns a Segregated Pool Property to enter into
such documents as Lender shall reasonably require in order to create the
Segregated Pools and have each Loan cross-defaulted and cross-collateralized
only with other Loans in the same Segregated Pool as
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the Loan in question, including, with respect to each Loan amending the
applicable Loan Agreement to exclude as an "Event of Default" thereunder an
"Event of Default" relating to any Loan that is not part of the same Segregated
Pool as the Loan in question.
(c) If, on the date Lender gives a notice to create two (2) or more
Segregated Pools, Borrower or any Other Borrower (a "MULTI-PROPERTY BORROWER")
owns Properties that will be in more than one (1) Segregated Pool, then:
(i) not less than thirty (30) days prior to the Segregated
Pool Date, Borrower Sponsor shall form one or more new limited liability
companies or limited partnerships, each of which qualifies as a Borrower under
the definition set forth in the Master Financing Facility Agreement (a "NEW
BORROWER") and deliver to Lender the organizational documents thereof.
(ii) on or before the Segregated Pool Date, each Multi-Property
Borrower shall transfer one (1) or more of its Segregated Pool Properties to one
(1) or more New Borrowers so that no Borrower or New Borrower owns Segregated
Pool Properties in more than one Segregated Pool, and
(iii) on the Segregated Pool Date, each New Borrower will
execute and deliver to Lender (a) the documents that a Borrower must deliver to
Lender pursuant to clauses (i) and (n)(7) of Section 3.1 of the Master Financing
Facility Agreement, (b) an assignment and assumption of the Transaction
Documents relating to its Segregated Pool Property, and (c) such other documents
as shall be reasonably required by Lender, all of which shall be in form and
substance satisfactory to Lender.
10.33 SYNTHETIC LEASE. Lender acknowledges that at or prior to
the Securitization of this Loan, Manager may wish to enter into a synthetic
lease financing transaction with another Person with respect to the Property.
Manager must provide Lender with a written request that it wishes to enter into
a synthetic lease financing transaction during the period commencing no sooner
than twelve (12) months prior to the Conversion Date and ending no later than
four (4) months prior to the Conversion Date. Along with such request, Manager
must provide Lender in a timely fashion with any and all information that Lender
reasonably requests in connection with its review and approval of such
transaction. Upon receiving such request, Lender shall notify Manager of
Lender's estimate of all third party costs which Lender reasonably determines it
will incur in connection with such request. Manager will promptly deposit such
estimated amount with Lender and shall be liable for reimbursing Lender for all
actual out of pocket expenses reasonably incurred by Lender in excess of such
deposit with respect to such request. Upon receiving such deposit, Lender will
review and determine, in its discretion, whether the synthetic lease
transaction, as proposed at that time, is acceptable to Lender. Factors which
Lender may consider in its determination shall include the identity of the
proposed synthetic lessor, the proposed synthetic lessor's financial
capabilities, the form of synthetic lease, the proposed lease terms, the
proposed loan terms, the effect such synthetic lease may have on the Loan, the
Property, the priority of Lender's security, Securitization or other
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similar transaction or any other information Lender may require (including the
affect on the pricing, timing or any other affect of such transaction). Lender
shall act in good faith but Lender shall have as much time as it reasonably
deems necessary to review and comment on any and all materials and documents
presented to it in connection with any such proposed synthetic lease. Lender is
under absolutely no obligation to agree to or accept any synthetic lease
structure, any of the proposed terms, or any proposed institutional lender,
which it determines will in any material way adversely affect this Agreement,
this transaction, the Loan, the Property, the priority of Lender's security
interest, or any Securitization of this Loan (including the pricing or timing of
any such Securitization or other similar transaction). If Lender approves such
synthetic lease structure and Borrower is required to convey fee title to the
Property to a third party in connection therewith, Lender will allow such sale
without the payment of any additional transfer fees.
10.34 TERMINATION OF MANAGER'S OBLIGATIONS. Notwithstanding
anything to the contrary contained herein or in any other Loan Documents,
Manager's obligations to either Lender or Borrower under this Agreement or any
other Loan Documents (except as otherwise expressly provided for herein or
therein) shall terminate upon the termination of the Management Agreement or the
exercise of the Special Management Agreement Amendment Right (as defined in the
Intercreditor Agreement) by Banc One in accordance with Section 4(c) of the
Intercreditor Agreement and Borrower shall succeed to all of Manager's rights,
duties and obligations under this Agreement. Subject to Section 10.1 of this
Agreement, the foregoing obligations of Manager which have accrued but remain
unsatisfied prior to the termination of the Management Agreement, shall remain
in full force and effect and this Section shall not relieve Manager of such
obligations. Further, if Manager enters into a Synthetic Lease pursuant to
Section 10.33 or exercises any of its rights under the Equity Option Agreement
or the Property Option Agreement, then Manager's obligations shall not terminate
but rather shall remain in full force and effect. If either the Management
Agreement or the Development Agreement terminates prior to Manager entering into
a Synthetic Lease Transaction pursuant to Section 10.33 above, all of the
rights, obligations and duties of Manager under this Loan Agreement and all
other Loan Documents shall belong solely to and be the responsibility of
Borrower.
10.35 RELEASE OF SUBORDINATE MORTGAGE AND OTHER SUBORDINATE
MORTGAGES. Upon the payment of the Loan in full, Lender will release all Other
Subordinate Mortgages on Other Properties with respect to this Loan and the
Subordinate Mortgage.
130
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Loan
Agreement to be duly executed by their duly authorized representatives, all as
of the day and year first above written.
BORROWER:
AH TEXAS OWNER LIMITED PARTNERSHIP, an
Ohio limited partnership
By: AH Texas CGP, Inc., an Ohio corporation, its sole
general partner
By: _________________________________
David B. Fenkell
President
131
<PAGE>
LENDER:
NOMURA ASSET CAPITAL CORPORATION
By:_______________________________________
Stuart Simon
Director
132
<PAGE>
MANAGER:
BLC OF TEXAS-II, L.P., a Delaware limited partnership
By: Brookdale Living Communities of Texas-II, Inc., a
Delaware corporation, its sole general partner
By:____________________________________
Darryl W. Copeland, Jr.
Vice President
133
<PAGE>
SCHEDULE 1
Location of Property
1-1
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 2
Terms of Preferred Equity
<S> <C>
Senior and Junior Tranches: If the amount of the Preferred Equity is more than the Maximum
Senior Amount (as hereinafter defined), then the portion of the
Preferred Equity equal to the Maximum Senior Amount shall be
"SENIOR PREFERRED EQUITY" and the balance of the Preferred Equity
shall be "JUNIOR PREFERRED EQUITY". If the amount of the Preferred
Equity is not more than the Maximum Senior Amount, then all of the
Preferred Equity shall, for purposes of this Schedule, be "Senior
Preferred Equity" (and there will be no "Junior Preferred Equity").
The "MAXIMUM SENIOR AMOUNT" shall be the maximum amount of
Preferred Equity, as determined by Lender (based upon Net
Operating Income for the most recently ended 12-month period prior
to the Conversion Date), that can be repaid, together with the Senior
Preferred Yield (as hereinafter defined), in 60 consecutive constant
monthly payments beginning on the first Payment Date after the
Conversion Date, from 75% of Excess Cash Flow (as hereinafter
defined).
Preferred Yield: The yield on the Senior Preferred Equity (" Senior Preferred Yield")
will accrue and be payable monthly, in arrears, at the annual rate of
LIBOR, reset two (2) Business Days prior to each Payment Date,
plus 500 basis points. The yield on the Junior Preferred Equity ("
Junior Preferred Yield") will accrue and be payable monthly, in
arrears, at the annual rate of LIBOR, reset two (2) Business Days
prior to each Payment Date, plus 700 basis points. Preferred Yield
will be calculated on an actual/360 day basis.
Monthly Payments/
Cash Management: All cash flow after payments and reserves required under the Loan
Documents will be swept into a Subaccount. On each Payment Date,
cash from such Subaccount shall be applied as follows: (i) if there
is Senior Preferred Equity outstanding, to pay all accrued but unpaid
Preferred Yield on such Senior Preferred Equity; (ii) if there is
Senior Preferred Equity outstanding, to redeem the principal balance
outstanding on the Senior Preferred Equity in an amount equal to the
greater of (A) 75% of cash available after payments required by
clause (i) or (B) the Minimum Redemption Amount (as defined
below); (iii) if there is Junior Preferred Equity outstanding, to pay all
accrued but unpaid Preferred Yield on such Junior Preferred Equity;
(iv) if there is Junior Preferred Equity outstanding, all available cash
2-1
<PAGE>
after the payments required by clauses (i)
through (iii) will be applied to redeem the
principal balance outstanding on the Junior
Preferred Equity; and (v) all available cash
after payments required by the foregoing
clauses will be distributed to Borrower.
The "MINIMUM REDEMPTION AMOUNT" is an amount
which will be sufficient to amortize the
then outstanding amount of Senior Preferred
Equity over a straight-line 5-year
amortization schedule, rounded to the
nearest $1,000 per annum.
Prepayment: The Preferred Equity may be prepaid, at the election of the Borrower
or Manager, at any time, in whole or in part, without premium,
provided, however that the holder of Preferred Equity must receive
(after applicable payments to the holder of the Loan) the balance of
the Preferred Equity from (i) the proceeds of any sale of the Property,
(ii) any proceeds resulting from a refinancing of the Loan and (iii)
any proceeds from a liquidation of the Loan and (iv) proceeds from
any other source (so long as not secured by the Property). So long as
the Preferred Equity is outstanding, the holder of the Preferred
Equity shall have the right to approve any of the events described in
clauses (i)-(iii) above. The retirement or prepayment of the Senior
Preferred Equity and/or the Junior Preferred Equity shall not affect
Lender's ownership of or title to the Warrants (as defined below).
Fees: A structuring fee equal to two percent (2.0%) of the amount of the
Preferred Equity shall be paid to Lender on the Conversion Date.
Default in Monthly
Payments: If Borrower or Manager fails to pay the Preferred Yield or the
required Minimum Redemption Amount in full on any Payment
Date, then for each succeeding Payment Date, 100% of the Excess
Cash Flow will be applied first to any unpaid Preferred Yield until all
Preferred Yield payments (including accrued and unpaid interest
thereon) have been made current and the remainder to repayment of
the amount of the Preferred Equity. 100% of the Excess Cash Flow
will be applied in this manner until the entire amount of the Preferred
Equity has been paid.
"EXCESS CASH FLOW" means actual Net Operating Income available
after payment of Debt Service and the Preferred Yield.
The Preferred Yield, to the extent not paid
in full when due, will accrue and compound
monthly at the default rate in effect from
time
2-2
<PAGE>
to time. The "default rate" will be the
non-default Senior Preferred Yield or Junior
Preferred Yield, as applicable, plus 200
basis points.
The Preferred Equity will not have an
acceleration right, and will not be
forecloseable. However, in the event of a
default, in addition to the remedies
described above, the holder of the Preferred
Equity will have the option, but not the
obligation, to cause the removal of the
existing Property manager and to designate a
replacement manager.
Security: The Preferred Equity will be secured by an assignment of Excess
Cash Flow, subordinate to any similar assignment to the holder of the
Loan.
Other Terms: The organizational documents of Borrower will be required to
include, among other things, provisions that prohibit the incurrence
of any debt other than the Loan as permitted under the Loan
Documents as well as other affirmative and negative covenants, and
such representations and warranties as Lender may require in its
discretion. The holder of the Preferred Equity will have veto rights
with respect to modifications of the organizational documents and
major decisions relating to Borrower, particularly with respect to
refinancings and Property transfers prior to the retirement in full of
the Preferred Equity. The holder of the Preferred Equity will be
allocated taxable income equal to the amount of Preferred Yield
actually distributed in cash to such holder, in any taxable year; no
other taxable income or loss shall be allocated to the holder of the
Preferred Equity. The Preferred Equity will be freely transferable.
Warrants: The holder of the Junior Preferred Equity will receive warrants (the
"WARRANTS") exercisable into a percentage interest of Borrower's
equity in the Property. The equity percentage represented by the
Warrants shall equal the lesser of (i) 80% and (ii) the percentage
derived by dividing the original amount of the Junior Preferred
Equity by the sum of the value of Borrower's equity in the Property
plus the original amount of Junior Preferred Equity and multiplying
the result by 80%; provided, however, that in no event will the equity
percentage be less than 35%. The Borrower's equity in the Property
will be derived by dividing the Net Operating Income (as determined
by Lender) by 10%, and subtracting the sum of the Re-sized Amount
and the total original amount of the Preferred Equity. These
Warrants once issued will remain in effect with or without
prepayment of the Junior Preferred Equity, and may or may not be
exercised; and the equity interest issued upon exercise shall continue
2-3
<PAGE>
notwithstanding the retirement or prepayment of Junior Preferred
Equity.
</TABLE>
2-4
<PAGE>
SCHEDULE 3
Matters Regarding Representations
3-1
<PAGE>
SCHEDULE 4
Rent Roll
(See Attached)
4-1
<PAGE>
EXHIBIT A
Operating Expense Certificate
Nomura Asset Capital Corporation
Two World Financial Center, Building B
New York, New York 10281-1198
Attention: Raymond Anthony
Re: Loan Agreement (the "Loan Agreement") dated as of June __, 1998,
among AH Texas Owner Limited Partnership ("Borrower"), BLC of
Texas-II, L.P. ("Manager") and Nomura Asset Capital Corporation
(together with its successors and assigns "Lender")
Ladies and Gentlemen:
This certificate is delivered in accordance with Section 3.4.1
of the Loan Agreement. All capitalized terms not defined herein shall have the
meanings ascribed to them in the Loan Agreement.
Manager hereby certifies that (i) the Operating Expenses for
the Interest Period from ______________, ____ to ______________, ____ are
______________________ Dollars ($_________), (ii) that such Operating Expenses
are equal to or less than the Operating Expenses for such period set forth on
the Annual Budget and are now due and owing (or will be coming due within 30
days) and (iii) all Operating Expenses incurred prior to ___________, ____ have
been paid in full.
BLC OF TEXAS-II, L.P., a Delaware limited partnership
By: Brookdale Living Communities of Texas-II, Inc.,
a Delaware corporation, its sole general partner
By: _______________________________
Name:
Title:
4-0
<PAGE>
BUILDING LOAN AGREEMENT
Dated as of June 17, 1998
between
AH TEXAS OWNER LIMITED PARTNERSHIP,
as Borrower,
BLC OF TEXAS - II, L.P.,
as Manager,
and
NOMURA ASSET CAPITAL CORPORATION,
as Lender
1
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS............................................................2
SECTION 1.1 Certain Defined Terms................................2
ARTICLE II
THE LOAN..............................................................12
SECTION 2.1 Maximum Principal Amount............................12
SECTION 2.2 Payment of Budget Costs; Advances...................12
ARTICLE III
ADVANCES FOR CONSTRUCTION.............................................14
SECTION 3.1 Requests for Advance under the Loan.................14
SECTION 3.2 Frequency of Advances...............................16
SECTION 3.3 Partial Advances....................................16
SECTION 3.4 Use of Advances.....................................16
SECTION 3.5 Advances for Materials and Deposits.................16
SECTION 3.6 Reallocation........................................17
SECTION 3.7 Loan Balancing......................................18
SECTION 3.8 Direct Advances.....................................19
SECTION 3.9 Advances for Obligations............................20
ARTICLE IV
CONDITIONS PRECEDENT TO MAKING THE INITIAL ADVANCE....................23
SECTION 4.1 Representations and Warranties......................23
SECTION 4.2 Receipt of Items and Documents by Lender............23
SECTION 4.3 No Default..........................................28
SECTION 4.4 No Change...........................................28
SECTION 4.5 Borrower Equity.....................................28
SECTION 4.6 Lender's Determination..............................28
SECTION 4.7 Accounting..........................................29
SECTION 4.8 Intentionally Omitted...............................29
ARTICLE V
CONDITIONS PRECEDENT TO ADVANCES AFTER
THE INITIAL ADVANCE...................................................29
i
<PAGE>
Page
SECTION 5.1 Article IV..........................................29
SECTION 5.2 Representations and Warranties......................30
SECTION 5.3 Receipt of Items and Documents by Lender............30
SECTION 5.4 No Default..........................................31
SECTION 5.5 Lender's Approval...................................31
SECTION 5.6 Substantial Completion Advance......................31
SECTION 5.7 Post-Substantial Completion Advances................32
ARTICLE VI
REPRESENTATIONS AND WARRANTIES........................................32
SECTION 6.1 Plans...............................................32
SECTION 6.2 No Liens............................................33
SECTION 6.3 Compliance with Building Codes, Zoning Laws, Etc....33
SECTION 6.4 Certain Agreements..................................33
SECTION 6.5 Budget..............................................33
SECTION 6.6 Adjacent Land.......................................33
SECTION 6.7 Flood Zone..........................................33
SECTION 6.8 No Prior Work.......................................34
ARTICLE VII
COVENANTS.............................................................34
SECTION 7.1 Construction........................................34
SECTION 7.2 Construction Schedule...............................35
SECTION 7.3 Budget Changes......................................35
SECTION 7.4 Inspection of Premises and Books and Records........35
SECTION 7.5 Required Notices....................................35
SECTION 7.6 Change Orders.......................................36
SECTION 7.7 Correction of Work..................................36
SECTION 7.8 No Encroachments....................................36
SECTION 7.9 Compliance with Documents...........................37
SECTION 7.10 Changes in Agreements...............................37
SECTION 7.11 Contracts...........................................37
SECTION 7.12 Bonds...............................................37
SECTION 7.13 Final Survey........................................37
SECTION 7.14 Competition.........................................37
SECTION 7.15 Protection Against Liens............................38
ARTICLE VIII
EVENTS OF DEFAULT.....................................................38
SECTION 8.1 Events of Default...................................38
ii
<PAGE>
Page
SECTION 8.2 Acceleration of Loan................................40
SECTION 8.3 Lender's Right to Stop Disbursing Funds.............40
SECTION 8.4 Lender's Right to Complete; Sums Advanced...........41
SECTION 8.5 Loan Accounts.......................................42
SECTION 8.6 No Liability of Lender..............................42
ARTICLE IX
GENERAL CONDITIONS....................................................42
SECTION 9.1 No Waivers..........................................42
SECTION 9.2 Lender's Review.....................................43
SECTION 9.3 Submission of Evidence..............................43
SECTION 9.4 Lender Sole Beneficiary.............................43
SECTION 9.5 Contractors.........................................43
SECTION 9.6 Entire Agreement....................................43
SECTION 9.7 Amendments, Etc.....................................44
SECTION 9.8 Notices.............................................44
SECTION 9.9 Binding Effect......................................44
SECTION 9.10 Severability of Provisions..........................44
SECTION 9.11 Headings, Etc.......................................44
SECTION 9.12 Governing Law.......................................44
SECTION 9.13 No Joint Venture....................................44
SECTION 9.14 Assignment by Lender................................45
SECTION 9.15 Retention of Servicer...............................47
SECTION 9.16 Consent of Lender...................................47
SECTION 9.17 JURY TRIAL WAIVER...................................47
SECTION 9.18 Incorporation by Reference..........................48
SECTION 9.19 Counterparts........................................48
SECTION 9.20 Product of Joint Drafting...........................48
SECTION 9.21 Intentionally Omitted...............................48
SECTION 9.22 Sign................................................48
SECTION 9.23 Survival............................................48
SECTION 9.24 Time of the Essence.................................48
SECTION 9.25 Lender Reliance.....................................48
SECTION 9.26 Limitation of Liability.............................49
SECTION 9.27 Termination of Manager's Obligations................49
SECTION 9.28 Waiver of "One Action" Rule; Cross
Collateralizations..............................49
EXHIBITS
Exhibit A Land
Exhibit B Budget
Exhibit C Form of Request for Advance
iii
<PAGE>
Exhibit D Architect's Consent and Agreement
Exhibit E General Contractor Consent and Agreement
Exhibit F Manager's Consent and Agreement
Exhibit G Engineer's Consent and Agreement
Exhibit H Manager's Affidavit
Exhibit I Pending Disbursements Clause
Exhibit J Existing Trade Contracts
Exhibit K Disbursement Account Agreement
iv
<PAGE>
BUILDING LOAN AGREEMENT
This BUILDING LOAN AGREEMENT (this "AGREEMENT") dated as of June
17, 1998, among NOMURA ASSET CAPITAL CORPORATION, a Delaware corporation, having
its principal place of business at Two World Financial Center, Building B, New
York, New York 10281-1198 (together with its successors and assigns, "LENDER"),
AH TEXAS Owner Limited Partnership, an Ohio limited partnership having an office
at Suite 160, 320 King of Prussia Road, Radnor, PA 19807 (together with its
successors and assigns "BORROWER") and BLC OF TEXAS - II, L.P., a Delaware
limited partnership having an office at 77 West Wacker Drive, Suite 4400,
Chicago, Illinois 60601 (together with its successors and assigns, "MANAGER").
RECITALS:
A. Borrower is the owner of the land described on Exhibit A (the "LAND"),
which is located in Austin, Texas.
B. Manager pursuant to the Development Agreement between Borrower
and Manager dated as of the date hereof (as amended, restated, replaced,
supplemented or otherwise modified from time to time, the "DEVELOPMENT
AGREEMENT") has been delegated all responsibility to administer the construction
of the senior housing facilities on the Land including all of Borrower's
obligations to Lender under this Agreement. All references to Manager under this
Agreement shall generally refer to Manager's performance of its duties on behalf
of Borrower pursuant to the Development Agreement and Lender may rely on Manager
pursuant to the provisions of Section 9.25.
C. Borrower, Lender and Manager are parties to that certain Loan
Agreement dated as of the date hereof (as amended, restated, replaced,
supplemented or otherwise modified from time to time, the "LOAN AGREEMENT"),
pursuant to which Lender agreed, subject to the terms of the Loan Agreement, to
make a loan in an aggregate principal amount not greater than Twenty-Four
Million Two Hundred Fifty Thousand and 00/100 Dollars ($24,250,000) to fund a
portion of the costs of acquiring, developing and constructing certain senior
housing facilities on the Land.
D. Borrower, Manager and Lender are entering into this Agreement
to provide for the terms and conditions upon which Borrower and/or Manager will
construct such facilities and
Lender will advance such loan.
E. Such loan may at Lender's election be cross collateralized and
cross defaulted with one or more other loans made pursuant to a certain Master
Financing Facility Agreement entered into between Lender and Brookdale Living
Communities, Inc. (The "MASTER FINANCING
FACILITY AGREEMENT").
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.1 CERTAIN DEFINED TERMS. As used in this Agreement and unless
otherwise expressly indicated, or unless the context clearly requires otherwise:
(a) All of the agreements or instruments defined in this
Agreement mean such agreements or instruments as the same may, from time to
time, be supplemented or amended or the terms thereof waived or modified to the
extent permitted by, and in accordance with, the terms and conditions thereof
and of this Agreement and the other Loan Documents.
(b) The following capitalized terms have the meanings specified
therefor in the Loan Agreement: " ADDITIONAL LOAN STRUCTURING FEE", "AFFILIATE",
"APPROVED OPERATING EXPENSES", "ASSIGNMENT OF AGREEMENTS", "ASSIGNMENT OF
LEASE", "BORROWER OWNER", "BORROWER REPRESENTATIVE", "BUSINESS DAY", "CAPITAL
RESERVE FUND", "CASH COLLATERAL SUB-ACCOUNT", "DEFAULT", "DEFAULT RATE", "
DEVELOPMENT AGREEMENT", "DRAW FEE", "ENVIRONMENTAL GUARANTY", "EQUITY OPTION
AGREEMENT", "EURODOLLAR BUSINESS DAY", "EXPECTED CONVERSION DATE", "GOVERNMENTAL
AUTHORITY", "GUARANTOR", "HAZARDOUS SUBSTANCES", "IMPROVEMENTS", "INDEPENDENT",
"INITIAL EQUITY INVESTMENT", "INITIAL NOTE", "LEGAL REQUIREMENTS", "LENDER'S
COUNSEL", "LENDER'S COUNSEL FEES", "LIEN", "LOAN DOCUMENTS", "MANAGEMENT
AGREEMENT", "MANAGER", "MORTGAGE", "NOTE", "OBLIGATIONS", "OPERATING DEFICIT
SUBACCOUNT", "OTHER LOAN AGREEMENT", "OTHER PROPERTIES SUBORDINATE MORTGAGE",
"PAYMENT DATE", "PERMITTED ENCUMBRANCES", "PERSON", "POLICIES", "PROPERTY",
"PROPERTY OPTION AGREEMENT", "RATING AGENCY", "REMIC", "SECURITIZATION",
"SECURITIZATION POOLS", "SERVICER", "SERVICING FEE", "STATE", "SYNTHETIC LEASE",
"TAX AND INSURANCE ESCROW SUBACCOUNT", "TAXES", "TITLE CONTINUATION", "TITLE
INSURER" AND "UCC".
(c) The following terms are defined in the Sections indicated
below:
"AGENT" - 9.14(b)
"ASSIGNEE" - 9.14(a)
"CONTINGENCY LINE ITEM" - 3.6(b) "COST SAVINGS" - 3.6(a)
"DEFICIENCY ACCOUNT" - 3.7(b) "DEFICIENCY CASH COLLATERAL" -
3.7(a)(iii) "DEFICIENCY LETTER OF CREDIT" - 3.7(a)(iii) "EVENT OF
DEFAULT" - 8.1 "LEAD LENDER" - 9.14(b)(i) "LOAN" - 2.1 "LINE ITEM
COMPONENT" - 3.6(a)(i) "OTHER LOANS" - 9.29
2
<PAGE>
"OTHER PROPERTIES" - 9.29 "SOFT COST SUPPORTING DOCUMENTATION" -
3.1(c) "TITLE INSURANCE POLICY" - 4.2 "UCC SEARCHES" - 4.2
(d) The term "INCLUDING" means including, without limitation.
(e) The following terms shall have the respective meanings set
forth below (such meanings to be equally applicable to the singular and plural
forms of the terms defined, as the
context may require):
"ADVANCE" means any portion of the Loan advanced by Lender pursuant to this
Agreement.
"ADVANCE TERMINATION DATE" means with respect to all Advances
other than Advances with respect to Punchlist Items and Retainage and Operating
Deficits Advances, the earlier of (i) fourteen (14) months after the Loan
Closing Date (subject to an Unavoidable Delay) or (ii) the Substantial
Completion Date.
"APPLICABLE MONTH" means the calendar month following the month
in which the Operating Deficits Funding Request is made.
"ARCHITECT" means the architect that is a party to the Architect's
Agreement.
"ARCHITECT'S AGREEMENT" means that certain Agreement for
Architectural Services dated April 20, 1998, between Borrower or Manager and
Lucien LaGrange and Associates, Ltd., or any agreement for architectural
services, including the preparation of the Plans, which Borrower or Manager may
enter into with any successor Independent Architect in accordance with the
requirements of Section 7.11.
"ARCHITECT'S CERTIFICATE" means a certificate executed by the
Architect certifying to Lender that the Premises, the Plans and the Construction
and/or renovation of the Improvements comply (or once constructed will comply)
with all Legal Requirements and that all Construction Permits required for the
Construction and/or renovation of the Improvements (given the stage of
completion thereof) have been obtained as of the relevant date from all
appropriate Governmental Authorities and have been validly and irrevocably
obtained without qualification, appeal or existence of unexpired appeal periods
which certificate shall be in form and substance satisfactory to Lender in its
discretion.
"ARCHITECT CONSENT AND AGREEMENT" means an Architect's Initial
Certification, Consent and Agreement in the form of Exhibit D.
"ARCHITECT'S UPDATE LETTER" means a letter from Architect stating
that to the best of Architect's knowledge, no event has occurred or failed to
occur which would cause the
3
<PAGE>
representations contained in Paragraphs A., B., C., D., and E. of the
Architect's Consent and Agreement, or any subsequent Architect's Certificate to
be materially incorrect as of the date thereof.
"BOND" means, with respect to the General Contractor, a payment
bond and a performance bond in the form of AIA Document A312, with dual obligee
riders, or in such other form as may be reasonably acceptable to Lender.
"BORROWER ENTITY AGREEMENT" means that certain Amended and Restated
Agreement of Limited Partnership Agreement of Borrower.
"BUDGET" means the budget for the acquisition of the Land and
existing Improvements and construction of the Required Improvements, and
operation of the Property prior to the Original Expected Conversion Date
prepared by Manager and approved by Lender in Lender's reasonable discretion,
setting forth Manager's estimates for budgeted construction categories of all
items of costs and expenses (specifying any such item that constitutes a Soft
Cost) required for the construction of the Required Improvements in accordance
with this Agreement. The Budget is attached as Exhibit B.
"BUDGET AS ADJUSTED" means, at any given date, the Budget, as it
shall have been adjusted through such date by changes and reallocations made in
accordance with Sections 3.6 or
7.3.
"BUDGET COSTS" means Hard Costs and/or Soft Costs set forth in
the Budget as Adjusted.
"CHANGE ORDER" means any change order, amendment or modification
to the Construction Agreement and any revision, addendum, modification to or
amendment of the Plans, including, minor departures from the Plans pursuant to
field orders.
"CLOSING" means the execution and delivery of this Agreement and other
applicable Loan Documents by Borrower, Manager and Lender.
"CLOSING DATE" means the date upon which this Agreement and other
applicable Loan Documents are executed and delivered by Borrower, Manager and
Lender.
"COLLATERAL" means the Premises and all other property, real or
personal, tangible or intangible, and all rights thereto, now or hereafter
pledged, mortgaged, made subject to a Lien or
hypothecated pursuant to the Loan Documents.
"COMPLETION GUARANTY" means that certain Guaranty of Completion
made by Guarantor in favor of Lender, dated as of the date hereof the same may
thereafter from time to time be supplemented, amended, modified or extended.
4
<PAGE>
"COMPLETED WORK" means work which has been properly performed
and/or installed pursuant to the Construction Agreement, the payment for which
has been approved by Manager,
Lender and Lender's Construction Consultant.
"CONSTRUCTION AGREEMENT" means that certain guaranteed maximum
price general construction contract dated as of December 15, 1997, between
Borrower or Manager and the General Contractor providing for the construction of
the Required Improvements, consistent with the Plans, or any agreement with an
Independent general contractor which Borrower or Manager may enter into in
accordance with the requirements of Section 7.11, together with any Change
Orders executed prior to the date hereof which have either been approved by
Lender or which do not require Lender's approval.
"CONSTRUCTION COMMENCEMENT DATE" means the date on which
construction of the Required Improvements commences, which date shall be no
later than thirty (30) days after the
Closing Date.
"CONSTRUCTION DOCUMENTS" means, collectively, the Construction
Agreement, the Development Agreement, the Architect's Agreement, the Engineer's
Agreement, and all other agreements to which Borrower, Manager or any Affiliate
of Borrower or Manager is a party in each case pertaining to the construction of
the Required Improvements.
"CONSTRUCTION PERMITS" means, collectively, all authorizations,
consents and approvals given by, and licenses, permits and certificates issued
by, Governmental Authorities (including building permits, demolition permits,
excavation permits), and all other permits, licenses and certificates which are
required for the construction, renovation, restoration or rehabilitation of the
Required Improvements in accordance with all Legal Requirements and the Plans,
and for the performance and observance of all agreements, provisions and
conditions of Borrower or Manager contained herein or in the other Loan
Documents pertaining to the construction of the Required Improvements.
"CONSTRUCTION SCHEDULE" means a construction schedule prepared by
the General Contractor showing a trade-by-trade breakdown of the estimated
periods of time for construction of the Required Improvements beginning with the
commencement of preliminary sitework footings and foundations and ending with
completion of construction of the Required Improvements in accordance with the
Plans.
"COSTS" means all Budget Costs and any other expenses incurred or
required for the construction of the Required Improvements in accordance with
this Agreement (whether or not set
forth in the Budget as Adjusted).
"DEFICIENCY" means, at any given time, the amount by which the
balance of the Loan yet to be advanced by Lender pursuant to this Agreement is
less than the actual sum, as reasonably estimated by Lender or Lender's
Construction Consultant, which will be required to complete the
5
<PAGE>
construction of the Required Improvements in accordance with the Plans, all
Legal Requirements and this Agreement, and to pay all unpaid Costs in connection
therewith.
"DEFICIENCY COLLATERAL" means Deficiency Cash Collateral and Deficiency
Letter of Credit.
"DEPOSITS" means, collectively, all sums then on deposit in any
Loan Accounts, together with any interest accrued thereon.
"ENGINEER" means any engineer engaged by Borrower or Manager with
the prior written consent of Lender as such consent is required pursuant to
Section 7.11.
"ENGINEERING REPORT" means the structural engineering reports
with respect to the Premises, prepared by an Engineer and delivered to Lender in
connection with the Loan and any
amendments or supplements thereto delivered to Lender.
"ENGINEER'S AGREEMENT" means any agreement which relates to the
design of the Required Improvements and provides for engineering services in
connection with the construction of the Required Improvements which Borrower or
Manager may enter into with any Engineer in
accordance with the requirements of Section 7.11.
"ENGINEER'S CONSENT AND AGREEMENT" means that certain Engineer's
Initial Certification Consent and Agreement in the form of Exhibit G.
"ENVIRONMENTAL REPORT" means the Environmental Assessment Report
dated April 1998, and prepared by Maxim Technologies, Inc., or such other
Environmental Report with respect to the Premises, addressed to Lender, which
Environmental Report shall be (i) prepared by and Independent firm approved by
Lender in Lender's reasonable discretion, (ii) prepared based on a scope of work
determined by Lender, (iii) in form and content acceptable to Lender, such
Environmental Report to be conducted by an Independent environmental engineer.
"EQUITY PAYMENTS" means payments by Borrower to pay Costs, made
from the Initial Equity Investment or funds otherwise received by Borrower from
sources other than Advances or
other Obligations.
"EXISTING CONSTRUCTION DOCUMENTS" means, collectively, the
Construction Documents in effect on the Closing Date.
"EXISTING TRADE CONTRACTS" means the Trade Contracts in effect on
the Closing Date, as more particularly described on Exhibit J.
"FUTURE CONSTRUCTION DOCUMENTS" means, collectively, the Construction
Documents entered into after the date hereof.
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"GENERAL CONTRACTOR" means Constructors & Associates, Inc., or
any successor engaged by Borrower or Manager with the prior written consent of
Lender as such consent is required pursuant to Section 7.11.
"GENERAL CONTRACTOR CONSENT AND AGREEMENT" means that certain
General Contractor Consent and Agreement in the form of Exhibit E.
"GUARANTIES" means the Completion Guaranty, the Payment Guaranty
and any other guaranty entered into by Guarantor in favor of Lender in
connection with the Loan.
"HARD COSTS" means, collectively, all costs and expenses set
forth in the Budget other than those which are denominated in the Budget as
"Soft Costs" or "SC."
INITIAL ADVANCE" means the first Advance made hereunder.
"INTERESTED PARTY" means any subsequent grantor of the Premises,
any other creditor of Borrower or Manager, any purchaser or tenant of the
Premises or any other Person with any interest in or any connection with
Borrower, Manager, the Premises or the Loan.
"LENDER'S CONSTRUCTION CONSULTANT" means EMG or such other Person
as may be designated and engaged by Lender as a replacement to consult with,
advise and render reports to Lender concerning the status of the construction of
the Required Improvements and to otherwise consult with respect to the
construction of the Required Improvements.
"LENDER'S CONSTRUCTION CONSULTANT REPORT" means a report by
Lender's Construction Consultant, based on Lender's Construction Consultant's
review and observation of the Premises, the construction of the Required
Improvements and the documentation related to the Premises and the construction
of the Required Improvements, stating whether:
(i) the work performed in connection with the construction of the
Required Improvements has been completed in a good and workmanlike
manner, reasonably satisfactory to Lender's Construction Consultant, in
accordance with the Plans and all Legal
Requirements;
(ii) the work which is the basis of the applicable Request for
Advance has been completed in accordance with the Plans and all Legal
Requirements to the reasonable satisfaction of Lender's Construction
Consultant, and whether the cost of such work is
within the applicable Line Item or Line Items;
(iii) the undisbursed amount of the Loan allocable to the
construction of such Required Improvements is sufficient to complete the
construction of such Required Improvements in accordance with the Plans;
(iv) there exists any Deficiency and, if so, the amount and nature thereof;
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(v) the cost to complete the component of the construction of the
Required Improvements which is the subject of a Line Item is (a) less
than the amount set forth in that Line Item thereby permitting such
excess to be reallocated in accordance with Section 3.6(a), or (b) is
greater than the amount set forth in the Line Item, in either case
setting forth the amount of such excess or deficiency;
(vi) the progress of construction of the Required Improvements is
in accordance with the Construction Schedule and whether, in Lender's
Construction Consultant's reasonable judgment, Substantial Completion
will occur on or before the Outside Completion Date; and
(vii) the value of the work completed and the percentage of
completion of the Required Improvements.
"LENDER'S REPRESENTATIVES" means collectively the Lender's
Construction Consultant, the Servicer, or any of their respective designated
representatives.
"LINE ITEM" means a line item of cost or expense set forth in the Budget as
Adjusted (in compliance with Section 3.6).
"LOAN ACCOUNTS" means, collectively, the Deficiency Account,
Manager's Disbursement Account and all other accounts now or hereafter pledged
to Lender pursuant to this Agreement or any of the other Loan Documents
(including pursuant to any documents hereafter executed and delivered by
Borrower or Manager in connection with the Loan).
"MAJOR TRADE CONTRACT" means any Trade Contract that has a
contract or purchase price, as the case may be, whether initially or thereafter
by virtue of any Change Order or Change Orders, equal to or in excess of ten
percent (10%) of approved Hard Costs; for purposes of this definition of Major
Trade Contract, multiple Trade Contracts with a single contractor or supplier,
as the case may be, shall be deemed to be one Trade Contract.
"MAJOR TRADE CONTRACTOR" means any contractor or supplier, as the
case may be, under a Major Trade Contract.
"MANAGER'S AFFIDAVIT" means an affidavit in the form of Exhibit H.
"MANAGER'S CONSENT AND AGREEMENT" means that certain Manager's
Consent and Agreement in the form of Exhibit F.
"MANAGER'S DISBURSEMENT ACCOUNT" means the account of Manager in
LaSalle National Bank into which the proceeds of the Loan are to be disbursed as
referred to in Section 2.2(a) or such other account as Borrower or Manager and
Lender shall reasonably agree to be the
account into which such proceeds are to be disbursed.
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"MATERIAL CHANGE ORDER" means any Change Order (i) which will (A)
impair the value of the Collateral in any material respect, (B) materially
change the gross square feet or the number of rentable rooms to be contained in
the Improvements, or the basic layout of the Improvements, or the number of
parking spaces to be located on the Premises after completion of the Required
Improvements, or (C) involve the use of materials, furniture, fixtures or
equipment which, when viewed as a whole, will not be at least equal in quality,
in all material respects, to the materials, furniture, fixtures and equipment
originally specified in or required by the Plans, or (ii) which changes the
scope of the work as set forth in the Plans, or (iii) which results in an
increase or decrease in any Line Item by more than $50,000, or (iv) which
results, when considered together with all previous Change Orders not requiring
Lender's approval under Section 7.6, in an increase or decrease in the aggregate
Costs of more than $150,000, or (v) which occurs at any time a Deficiency exists
or (vi) which results, when considered with all previous Change Orders, in an
increase in the aggregate Costs in excess of $500,000. After the $150,000
threshold specified in clause (iv) is exceeded and Lender approves the Material
Change Order(s) that exceeded this threshold, the amount specified in clauses
above shall be reduced to an amount equal to $20,000 and the restriction
contained in clause (iv) shall be deleted. Notwithstanding the foregoing, Change
Orders entered into prior to the Loan Closing Date shall not be deemed Material
Change Order(s) and shall not be counted in calculating any of the
aforementioned thresholds if (x) such Change Orders are funded other than by
Advances or (y) if such Change Orders are funded by Advances, the Budget has
been revised to take into account such Change Order(s), to the extent necessary,
and Lender has had an opportunity to review such Change Order(s) prior to the
Loan Closing Date.
"OPERATING DEFICITS FUNDING REQUESTS" means a request made after
Substantial Completion by Borrower or Manager to Lender for the payment of
Operating Deficits anticipated to be incurred in the following Applicable Month,
increased or decreased by any Operating Deficits
Reconciliation Amounts.
"OPERATING DEFICITS RECONCILIATION AMOUNTS" means the excess or
shortfall between the estimate provided in an Operating Deficits Funding Request
with respect to an Applicable Month and the actual Operating Deficits
experienced in such Applicable Month.
"OPERATING DEFICITS" means the excess of Approved Operating
Expenses over Operating Income during any applicable period.
"OPERATING DEFICITS ADVANCE TERMINATION DATE" means three (3)
months after the date through which Operating Deficits are projected under the
Budget to be funded by Lender
Advances.
"OPERATING PERMIT" or "OPERATING PERMITS" means, collectively,
all authorizations, consents and approvals given by and licenses, permits and
certificates issued by Governmental Authorities, including certificates of
occupancy, business licenses, state health department licenses, food service
licenses, liquor licenses, licenses to conduct business, and all other permits,
licenses and certificates which are required for the ownership, use, operation
and occupancy of the Premises in accordance with all Legal Requirements, and for
the performance and observance of all
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agreements, provisions and conditions of Borrower and Manager contained herein
and in the other Loan Documents, and pertaining to the ownership, use, operation
and occupancy of the
Premises.
"OUTSIDE COMPLETION DATE" means the date which is on the last day
of the fourteenth (14th) month after the Closing Date, which Lender shall extend
if Lender determines in its reasonable discretion that construction was delayed
due to Unavoidable Delay.
"PAYMENT GUARANTY" means that certain Guaranty of Payment of
Note, Rate Lock Obligations, Carrying Costs and Recourse Obligations dated as of
the date hereof, made by Guarantor in favor of Lender, as the same may
thereafter from time to time be supplemented, amended, modified or extended.
"PLANS" means, collectively, the final plans, drawings and
specifications for the construction of the Required Improvements prepared by the
Architect (and other applicable design professionals, including any structural
and mechanical engineers) as required under this
Agreement,
and in compliance (and certified by the applicable design professional to be in
compliance) with all Legal Requirements and approved by each appropriate
Governmental Authority including, (i) the architectural, structural, foundation
and elevator plans and specifications prepared or to be prepared, and certified
as correct and complete, by the Architect, (ii) the mechanical, electrical,
plumbing and fire protection plans and specifications prepared or to be
prepared, and certified as correct and complete, by the engineer retained or to
be retained by the General Contractor or the Architect or any other Engineer and
(iii) other plans and specifications prepared or to be prepared by Borrower or
Manager and Borrower's or Manager's other architects, engineers and contractors,
in each case, as reasonably approved in writing by Lender and Lender's
Construction Consultant, together with all Change Orders applicable thereto,
provided that if such Change Order constitutes a Material Change Order, such
Material Change Orders have been approved in writing by Lender in accordance
with Section 7.6, which Plans shall include a description of the materials,
equipment and fixtures necessary for the construction of the Required
Improvements.
"PREMISES" means the Land and all Improvements now or hereafter existing
thereon.
"PUNCHLIST ITEMS" means, collectively, minor or insubstantial
details of construction, decoration, mechanical adjustment or installation, the
non-performance of which does not prevent
the use and occupancy of the Premises for its intended purposes.
"REQUEST FOR ADVANCE" means a request by Borrower or Manager to
Lender in the form of Exhibit C fully completed and certified by a duly
authorized representative of Borrower or
Manager.
"REQUIRED IMPROVEMENTS" means the Improvements, consisting of a
senior housing and/or assisted living facility and related facilities and
amenities, to be constructed on the Land in
accordance with the Plans and all Legal Requirements.
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"RETAINAGE" means with respect to the Construction Agreement an
amount equal to the greater of (i) an amount equal to ten percent (10%) of the
total payments on account of Hard Costs incurred pursuant to the Construction
Agreement with respect to the construction of the Required Improvements as of
the date of the requested Advance until payments have been made in an amount
equal to fifty percent (50%) of the payments required to be made (inclusive of
any Retainage amount) with respect to the Construction Agreement, and thereafter
no amount shall be retained, or (ii) the aggregate amount permitted to be
withheld or, if greater, actually withheld, under the Construction Agreement as
of such date, subject, however, to adjustment in the case of Punchlist Items as
provided in Section 2.2(b).
"SECURITY DOCUMENTS" means, collectively, this Agreement, the
Mortgage, the Assignment of Leases, the Assignment of Agreements and all other
Loan Documents which grant Lender a security interest or other Lien or
encumbrance in any Collateral or any other
property.
"SOFT COSTS" means, collectively, all costs and expenses set
forth in the Budget which are denominated in the Budget as "Soft Costs" or "SC."
"SUBSTANTIAL COMPLETION" means (i) the substantial completion,
free of Liens (other than Permitted Encumbrances), of the construction of the
Required Improvements (other than the completion of Punchlist Items) in
compliance with all Legal Requirements and the Plans (as certified by the
Architect on standard AIA forms), such compliance and absence of Liens to be
evidenced to the reasonable satisfaction of Lender upon the advice of the
Lender's Construction Consultant; and (ii) the issuance of a final and
unappealable permanent certificate of occupancy and all other Operating Permits
which are in full force and effect for the Required Improvements; and (iii) all
Costs and other costs and expenses incurred in connection with the Required
Improvements have been paid in full or are available from the undisbursed Loan
proceeds or Deficiency Collateral.
"SUBSTANTIAL COMPLETION DATE" means the day which is five (5)
Business Days after the date on which Borrower or Manager shall have delivered
to Lender evidence reasonably
satisfactory to Lender that Substantial Completion has occurred.
"SURVEY" means a current as-built survey of the Premises prepared
by an Independent surveyor licensed by the State and certified to Lender and the
Title Insurer, in form and substance satisfactory to Lender, and prepared in
accordance with the Minimum Standard Detail Requirements for ALTA/ACSM Land
Title Surveys meeting the Accuracy Standards of an Urban Survey, with accuracy
and precision requirements modified to meet current angular and linear tolerance
requirements of the State, showing the legal (and if applicable, the metes and
bounds) description and street address of the Premises; all visible or recorded
easements, building lines, curb cuts, and party walls; all parking, sewage,
water, electricity, gas and other utility facilities, together with recording
information concerning the documents creating any such easements and building
lines; stating the net, after deduction of land dedicated or used or subject to
easements for roads, highways, fire lanes, utilities, storm drains or any other
public purpose, and gross area of the Land; and including the following Table A
items: 1, 2, 3, 4, 6, 7(a), 7(b)(1), 8, 10, 11 and 13.
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"TITLE CONTINUATION" means an endorsement to the Title Policy
indicating that, since the last preceding Advance, there has been no change in
the state of title to the Premises and no Liens or survey exceptions other than
Permitted Encumbrances approved by Lender, which endorsement shall affirmatively
insure that no mechanic's or supplier's Liens have attached, all of which shall
have the effect of continuing the Title Policy, and insuring the continued
priority of the Lien of the Mortgage, to the date of such Advance and increasing
the coverage of the Title Policy by an amount equal to the Advance then being
made if the Title Policy does not by its terms provide for such an increase. If
available, such Title Continuation shall contain affirmative insurance that
neither public nor private conditions, covenants or restrictions, if any,
affecting the Premises have been violated and that all Taxes are current.
"TITLE INSURER" means Chicago Title Insurance Company, First
American Title Insurance Company and any reinsurer reasonably required by Lender
and/or any other national recognized title insurance company acceptable to
Lender in Lender's discretion; provided, however, that the reinsurer of any
Title Insurance Policy may include, in amounts reasonably acceptable to Lender,
and Chicago Title Insurance Company, First American Title Insurance Company, and
Commonwealth Land Title Insurance Company.
"TRADE CONTRACT" means any contract or purchase order between
either Borrower or Manager or an Affiliate of Borrower or Manager, or the
General Contractor, and any other Person pursuant to which such Person agrees to
provide labor, materials, equipment or services in connection with the
construction of the Required Improvements excluding, however, from this
definition of Trade Contract, the Architect's Agreement, the Engineer's
Agreement, the Construction Agreement, the Development Agreement, Management
Agreement and any other agreements pertaining solely to testing and engineering
and other professional services.
"TRADE CONTRACTOR" means any contractor or supplier, as the case may be,
under a Trade Contract.
"UNAVOIDABLE DELAY" means any delay or number of delays, not
exceeding ninety (90) days in the aggregate, due to conditions beyond the
control of Borrower or Manager, including, strikes, labor disputes not specific
to the work at the Premises, acts of God, the elements, enemy action, civil
commotion, fire, casualty, accidents, shortages of, or inability to obtain,
labor, utilities or material; provided, however, that any lack of funds shall
not be deemed to be a condition beyond the control of Borrower or Manager. Such
delay shall not automatically result in a day for day extension of any time
limits provided in this Agreement. Rather, after the occurrence of any such
delay Borrower or Manager shall use its best efforts to make up such delay to
the extent possible. Any such delay shall only be allowed for the lesser of
ninety (90) days, or such shorter period that Lender reasonably determines would
have resulted had such efforts been made.
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ARTICLE II
THE LOAN
SECTION 2.1 MAXIMUM PRINCIPAL AMOUNT. Subject to the conditions
and upon the terms herein provided, Lender agrees to lend to Borrower and
Borrower agrees to borrow from Lender, in installments, a maximum aggregate
principal amount of Twenty-Four Million Two Hundred Fifty Thousand and 00/100
Dollars ($24,250,000) or such lesser amount as shall be available pursuant to
the terms of this Agreement (the "LOAN"). The Loan is the "Initial Loan"
referred to in the Loan Agreement. The Loan shall be repaid with interest, costs
and charges as more particularly set forth in the Loan Agreement, the Note and
the other Loan Documents.
SECTION 2.2 PAYMENT OF BUDGET COSTS; ADVANCES.
(a) GENERALLY.
(i) Budget Costs shall be paid by Borrower (A) first, from
the Initial Equity Investment until the Initial Equity Investment has
been fully expended to pay Budget Costs; and (B) next, subject to the
provisions of Sections 2.2(b) and 3.7, from Advances made by Lender.
(ii) Subject to the other terms and conditions of this
Agreement, Advances shall be made (A) in accordance with Requests for
Advance submitted by Borrower or Manager upon satisfaction of the
conditions precedent set forth in Articles IV and V of this Agreement
and (B) on the basis of (x) the Line Items specified in the Budget and
(y) the documented cost of work in place and performed and services
provided, or to the extent provided in Section 3.5, materials stored on
the Premises or deposits made, in each case as such cost is determined
by Lender in its reasonable discretion as provided in this Agreement;
provided, that Lender shall at no time be obligated to disburse (1) any
proceeds of the Loan for work performed, materials furnished or services
provided under Construction Documents that are not fully executed and
delivered or (2) an amount which, when added to all previous Advances,
would exceed the product of the then percentage of completion (as
determined by Lender's Consultant) of the Required Improvements
multiplied by the maximum amount of the Loan. The calculation of any
Advance shall account for Retainage as provided for in Section 2.2(b).
(iii) The proceeds of the Loan shall be advanced from time to
time on Eurodollar Business Days by transfer of such funds by Lender to
Manager's Disbursement Account or in such other manner as Lender and
Borrower or Manager may agree. Specifically, at Borrower's or Manager's
request, Lender shall make Advances directly to the Title Insurer
pursuant to an escrow agreement between Lender, Title Company and
Manager and/or Borrower, approved by Lender and providing for either (A)
the return of the Advance to Lender (which Lender will deposit in the
Cash Collateral Subaccount) if the Title Continuation cannot be issued
or (B) the disbursement of the Advance to the
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Manager's Disbursement Account simultaneously with the delivery to
Lender of the Title Continuation. Neither Borrower nor Manager shall
deposit any other funds into Manager's Disbursement Account other than
sums sufficient to pay the administrative costs of such account.
Advances shall be made, in the case of the Initial Advance, upon
satisfaction of the conditions precedent set forth in Article IV and in
the case of any Advance made after the Initial Advance, upon
satisfaction of the conditions set forth in Article V, except to the
extent that Lender may elect to waive any of such conditions precedent.
(iv) Notwithstanding anything to the contrary contained in
this Agreement or in the other Loan Documents, in no event shall Lender
be obligated to make any Advance (other than Advances relating to
Punchlist Items and Retainage) after (A) as applicable, the Advance
Termination Date or the Operating Deficits Advance Termination Date or
(B) the occurrence of a Default or Event of Default (unless waived by
Lender in writing).
(b) RETAINAGE. The amount of Loan proceeds on account of any
Advance or portion thereof allocable to any Hard Costs shall be reduced by the
Retainage applicable to such Hard Costs. The portion of the Retainage being held
by Lender with respect to work or materials supplied by the General Contractor
will not be disbursed prior to a determination by Lender that (i) the General
Contractor has substantially completed all of the work and/or supplied all of
the materials in compliance with the General Contractor's contract and in
conformity with the Plans and this Agreement, (ii) the General Contractor will
be paid in full upon the disbursement of the portion of the Retainage being held
with respect to the General Contractor, (iii) the General Contractor or such
Trade Contractor, as applicable, executes and delivers all Lien waivers which
may be reasonably requested or required by Lender or by the Title Insurer to
induce the Title Insurer to insure the Lien of the Mortgage against any
mechanic's or materials supplier's Lien which may be filed by the General
Contractor or such Trade Contractor, as applicable, and (iv) if required by
Lender, such disbursement of such portion of the Retainage shall be approved by
any surety company which has issued a payment or performance bond with respect
to the General Contractor. The Release of any such Retainage shall be further
subject to the continued retention of Retainage for applicable Punchlist Items
in an amount equal to 200% of Lender's reasonable estimate of the cost of
completion of such Punchlist Items. Retainage with respect to any such Punchlist
Items shall be disbursed by Lender from time to time, upon completion of such
Punchlist Items to the reasonable satisfaction of Lender. Notwithstanding any
other provision contained herein, in no event will Lender be required to
disburse any funds on account of Retainage prior to the earlier to occur of (A)
the time such sums are payable pursuant to the Construction Agreement, or (B)
within thirty (30) days after the work to be performed under the Construction
Agreement is completed to Lender's satisfaction.
(c) ADVANCE UPON C/O. Upon the issuance of a permanent
certificate of occupancy for the Required Improvements, Lender may (but shall
have no obligation to) make an Advance in an amount equal to the then unadvanced
amount of the Loan (subject to Retainage in respect of Punchlist Items as
provided in subsection (b) above and Operating Deficits to be advanced pursuant
to Section 3.11).
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ARTICLE III
ADVANCES FOR CONSTRUCTION
SECTION 3.1 REQUESTS FOR ADVANCE UNDER THE LOAN.
(a) GENERALLY. Each Request for Advance (together with the
materials required to be submitted therewith pursuant to Sections 3.1(b),
3.1(c), 3.5 and 5.3) shall be submitted to Lender and Lender's Representatives
not less than ten (10) Business Days prior to the date proposed for such Advance
in the Request for Advance. Each Request for Advance shall specify (i) the Hard
Costs and Soft Costs to be paid from the proceeds of the requested Advance and
(ii) the amount of any Retainage previously withheld and which has then become
payable pursuant to Section 2.2(b). The Request for Advance shall also include a
request for any disbursements from the Deficiency Account, with supporting
documentation describing in reasonable detail the basis for any such
disbursements. The Initial Advance shall be accompanied by the Architect's
Consent and Agreement and subsequent Advances shall be accompanied by the
Architect's Update Letter. Provided, however, if there is a Default or Lender
otherwise reasonably determines that there has been a change in the condition,
progress or other status of the construction which requires an Architect's
Certificate, Lender may request that such Architect's Certificate be provided as
a condition to a subsequent Advance.
(b) ADVANCE FOR HARD COSTS. Each Request for Advance which
requests payment for Hard Costs shall be accompanied by the following:
(i) the General Contractor's requisitions for a
disbursement which shall be on AIA Forms G702 and G703 or in another
form approved by Lender, each of which shall be certified as true and
complete by Borrower or Manager, the General Contractor and Architect
and shall be verified by Lender's Construction Consultant;
(ii) evidence reasonably satisfactory to Lender that the
full amount of the portion of the proceeds of the previous Advance made
pursuant to this Section 3.1(b) has been paid by Borrower or Manager or
the General Contractor to the Persons specified on the previous Request
for Advance in accordance with this Agreement, which evidence shall
include (A) detailed receipts for payment itemized by Line Item and (B)
an absolute, unconditional waiver of Lien with respect to the previous
Advance from the General Contractor and all Trade Contractors, all
subcontractors and all other Persons who were paid from the proceeds of
such Advance, dated on or about the date of the current Request for
Advance, covering all work done and all sums received through the date
of Borrower's or Manager's previous Request for Advance and noting that
the only amounts due and owing (other than any Retainage) are the
amounts to be paid to such Persons out of the Advance being requested
pursuant to the current Request for Advance, each of which shall be
certified as true and complete by Borrower or Manager and the General
Contractor and shall be verified by Lender's Construction Consultant;
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<PAGE>
(iii) a list of all Trade Contracts executed since the date
of the previous Request for Advance, together with a statement by
Borrower or Manager and the General Contractor that copies of the
current Trade Contracts have been submitted to Lender's Construction
Consultant prior to the date of such Request for Advance;
(iv) a list of all executed Change Orders entered into or
requested by Borrower or Manager, a statement by Borrower or Manager
that copies of the same have been submitted to and approved by Lender's
Construction Consultant, if required pursuant to Section 7.6, prior to
the date of the current Request for Advance, and a list of all
contemplated Material Change Orders; and
(v) evidence reasonably satisfactory to Lender that
Borrower has funded and applied the Initial Equity Investment, all other
prior Equity Payments and all prior
Advances in accordance with this Agreement.
(c) ADVANCES FOR SOFT COSTS. Any Request for Advance to pay any
Soft Cost, other than an Operating Deficits Funding Request, shall be
accompanied by such additional supporting evidence (the "SOFT COST SUPPORTING
DOCUMENTATION") as Lender shall reasonably request to demonstrate that (i) such
costs have been properly incurred, are due and payable and are within budgeted
amounts, (ii) the full amount of the portion of the proceeds of the previous
Advance made pursuant to this Section 3.1(c) has been paid out by Borrower, or
Manager or the General Contractor to the Persons specified on the previous
Request for Advance in accordance with this Agreement and (iii) Borrower or
Manager has funded and applied the Initial Equity Investment, all other prior
Equity Payments and all prior Advances in accordance with this Agreement.
SECTION 3.2 FREQUENCY OF ADVANCES. Advances shall be made no more
frequently than one Advance per calendar month; provided, however, Lender may
waive any and all conditions precedent to the making of an Advance and, after
the occurrence, and during the continuance, of an Event of Default, may make an
Advance in order to pay interest or other sums due to Lender pursuant to the
Loan Documents or for the purpose of making payments of the nature referred to
in Section 3.8 or otherwise pursuant to Lender's exercise of its remedies under
the Loan Documents.
SECTION 3.3 PARTIAL ADVANCES. If any or all conditions precedent
to making an Advance have not been satisfied on the date requested for such
Advance, Lender may, at its option, (a) waive so many of such conditions
precedent as Lender may elect, and/or (b) disburse only that portion of the
requested Advance for which all of the conditions precedent have
been satisfied.
SECTION 3.4 USE OF ADVANCES. Each Advance made to Borrower or
Manager shall be received, held and used by Borrower or Manager to pay for Hard
Costs and Soft Costs, as the case may be, which were specified on the related
Request for Advance.
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SECTION 3.5 ADVANCES FOR MATERIALS AND DEPOSITS.
(a) STORED MATERIALS. Advances for materials stored at the Premises shall
be made, in the amount of the documented cost to Borrower or Manager of such
materials, strictly in accordance with the following terms and conditions:
(i) Borrower or Manager shall deliver to Lender bills of
sale or other evidence reasonably satisfactory to Lender of the cost of,
and Borrower's title in and to, such materials;
(ii) Borrower or Manager shall deliver to Lender evidence
reasonably satisfactory to Lender that (A) security measures have been
taken to protect such materials from theft, casualty or deterioration,
(B) such materials are finished products that are ready to be
incorporated into the Premises and (C) such materials are then intact
and undamaged;
(iii) Borrower or Manager shall provide proof satisfactory to
Lender that such materials are insured against all risk of loss for
their full replacement cost and that such insurance contains a standard
mortgagee loss payable endorsement; and
(iv) The aggregate cost of materials stored on the Premises
and not affixed thereto at any one time shall not exceed $750,000,
exclusive of HVAC chillers.
If any such materials are stolen, lost or in any other manner misplaced,
destroyed or rendered unusable prior to the making of an Advance with respect
thereto, Lender shall not be obligated to make any Advance with respect thereto
or on account of the cost of replacement thereof.
(b) DEPOSITS. Advances may be made for deposits placed with
suppliers or for materials in fabrication, or for materials stored off site, in
Lender's discretion and if so, subject to
such terms and conditions as Lender may reasonably determine.
SECTION 3.6 REALLOCATION.
(a) COST SAVINGS. Borrower or Manager, by notice to Lender, may
reallocate to any Line Item all or any portion of any Cost Savings then not
previously reallocated; provided, however, that in no event may Borrower or
Manager allocate any Cost Savings with respect to a Line Item of Hard Costs to a
Line Item of Soft Costs, unless Lender has approved such reallocation in
writing, which approval shall not be unreasonably withheld or delayed, and such
reallocation will not adversely affect the priority of the Lien of the Mortgage
(and, in requesting any such approval, Borrower or Manager shall so certify to
Lender). Upon any such reallocation of all or any portion of any such Cost
Savings to any Line Item, the amount of such Cost Savings shall no longer be
deemed "Cost Savings" hereunder, but shall be deemed to be part of the Line Item
to which such amount was reallocated. As used in this Loan Agreement, "COST
SAVINGS" shall mean and be determined as follows:
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(i) If Lender determines, in Lender's reasonable
discretion, that the component of the construction of the Required
Improvements which is the subject of a Line Item (a "LINE ITEM
COMPONENT") has been completed without the expenditure of the entire
amount allocated in the Budget to such Line Item, and the General
Contractor and all Trade Contractors, subcontractors and other Persons
have been paid in full for work performed and materials provided with
respect to such Line Item Component, the difference between the amount
of such Line Item in the Budget and the amount so expended for such Line
Item shall be deemed to be a "COST SAVING"; or
(ii) If prior to the completion of the Line Item Component
(other than the Line Item for interest or the Contingency Line Item),
Borrower or Manager shall demonstrate to Lender's reasonable
satisfaction that, upon completion of such Line Item Component, a Cost
Saving will be realized pursuant to clause (i) above with respect to
such Line Item Component, the amount of such Cost Saving which is
demonstrated to Lender's satisfaction shall be deemed to be a "COST
SAVING".
(b) CONTINGENCY. Borrower or Manager, after notice to and
approval by Lender, which shall not be unreasonably withheld or delayed, may
reallocate to any Line Item the amount of any portion of the Contingency Line
Item which has not previously been reallocated to any other Line Item. In giving
or withholding such approval, Lender may take into account the then current
state of completion of the Required Improvements, any existing Cost overruns and
any potential Cost overruns as may then be foreseen or anticipated by Lender.
Lender shall not unreasonably withhold such approval for the reallocation of (i)
up to the first fifty percent (50%) of the Contingency Line Item, or (ii) any
amounts of the Contingency Line Item which will not cause the percentage of the
Contingency Line Item utilized through such date to exceed the percentage of the
Budget expended through such date, but may withhold such approval in its
discretion for any other reallocation. To the extent that the Contingency Line
Item is not reallocated pursuant to this Section 3.6(b), it shall be used solely
for Hard Costs of a type not included in any Line Item in the Budget and not
contemplated by the original Plans. The "CONTINGENCY LINE ITEM" shall mean the
Line Item in the Budget identified as "Contingency", which is intended to cover
the eventuality of unforeseen Costs or cost overruns.
(c) NEW LINE ITEMS. New Line Items may not be created without
Lender's prior written consent, which shall not be unreasonably withheld; and,
if created with Lender's consent, the Contingency Line Item may not be
reallocated to any such new Line Item, except as provided in Section 3.6(b). To
the extent not paid for by Cost Savings or by so reallocating the Contingency
Line Item, new Line Items must be paid for from Equity Payments other than the
Initial Equity Investment.
SECTION 3.7 LOAN BALANCING.
(a) DEFICIENCY. Lender will not be required to make Advances in
excess of the amount of any Line Item in the Budget unless Cost Savings from
other Line Items or portions of the Contingency Line Item have previously been
reallocated in accordance with Section 3.6, or
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Equity Payments have been contributed by Borrower or Manager with respect, to
such Line Item, in amounts equal to or greater than such excess over the Budget.
If Lender determines, in its reasonable discretion, that any Deficiency exists,
then Lender will not be obligated to make any Advances after Lender provides
Borrower and Manager notice of such determination, unless and
until Borrower or Manager does any one or more of the following:
(i) establishes to Lender's reasonable satisfaction that,
contrary to Lender's prior determination, there exists no Deficiency;
(ii) reallocates Cost Savings and/or the Contingency Line
Item pursuant to Section 3.6 to eliminate the Deficiency;
(iii) deposits cash ("DEFICIENCY CASH COLLATERAL") with
Lender or Lender's designee as provided in Section 3.7(b) or delivers to
Lender, as beneficiary, one or more clean, irrevocable letters of
credit, reasonably satisfactory to Lender in form and content and as to
the bank or trust company which is the issuer (which issuer must have an
S&P credit rating of "A" or better) (a "DEFICIENCY LETTER OF CREDIT"),
in either case, or in the aggregate, in the amount of the Deficiency.
Any Deficiency Letter of Credit shall have an expiration date not
earlier than 30 days after the Expected Conversion Date, provided that
the expiration date may be one year from its issuance if the letter of
credit provides for a drawing by Lender of the full amount thereof at
any time on or after the thirtieth (30th) day preceding its stated
expiration date; or
(iv) makes one or more payments on account of Hard Costs
and/or Soft Costs (other than from the proceeds of the Initial Equity
Investment or the Loan), until the Deficiency has been eliminated;
(b) DEPOSITS REGARDING DEFICIENCY.
(i) If Borrower or Manager deposits Deficiency Cash
Collateral with Lender, Lender shall deposit same in an interest bearing
account in the name of Lender at an institution selected by Lender (the
"DEFICIENCY ACCOUNT").
(ii) Until all Obligations have been repaid in full,
Borrower and Manager shall have no right to any Deficiency Cash
Collateral on deposit in the Deficiency Account except, so long as no
Event of Default exists, (A) to fund a Deficiency pursuant to this
Section 3.7 or (B) to make a disbursement pursuant to Section
3.7(b)(iii). Until expended or applied as provided herein, any amounts
in the Deficiency Account, together with any interest thereon, shall
constitute additional security for the Obligations. At any time
following the occurrence, and during the continuance, of an Event of
Default, Lender may apply any funds on deposit in the Deficiency Account
as set forth in Section 8.5. Any Deficiency Letter of Credit shall be
held by Lender and may be drawn at any time within thirty (30) days
prior to the expiration thereof or upon the occurrence and during the
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continuance of an Event of Default, whereupon the proceeds of the
Deficiency Letter of Credit shall be treated as Deficiency Cash
Collateral for all purposes.
(iii) If after the deposit of any Deficiency Cash Collateral,
but prior to disbursement thereof, or after the delivery of a Deficiency
Letter of Credit, but prior to the draw of all proceeds thereof,
Borrower or Manager shall establish to Lender's reasonable satisfaction
that, due to a change in circumstances, the amount of the Deficiency
Cash Collateral or the Deficiency Letter of Credit exceeds the
Deficiency, then, promptly following the request of Borrower or Manager
and provided no Default or Event of Default shall then exist, such
Deficiency Cash Collateral, up to the amount of such excess, shall be
disbursed to Borrower or Manager or the amount of any Deficiency Letter
of Credit, up to the amount of such excess, may be reduced.
(iv) Any disbursement from the Deficiency Account or any
drawdown of any Deficiency Letter of Credit by Lender shall be deemed to
constitute Equity Payments
by Borrower.
SECTION 3.8 DIRECT ADVANCES. Upon Borrower's or Manager's
request, or upon the occurrence of a Default, Lender shall have the right (but
no obligation) to make any or all Advances directly to the General Contractor,
the Trade Contractors or any other Person to whom payment is due. Such direct
Advances may be made by deposit in a bank account to be designated by Lender
which may be controlled by the General Contractor, by a Trade Contractor or by
such other Person, in each case individually or jointly with Lender, as Lender
may elect. Such direct Advances also may be made by check payable to the Person
to whom an Advance is to be made. The execution of this Agreement by Borrower
and Manager shall, and hereby does, constitute an irrevocable direction and
authorization to so disburse the Loan proceeds. No further direction or
authorization from Borrower or Manager shall be necessary or required for such
direct Advances and all such Advances shall satisfy pro tanto the obligations of
Lender hereunder and shall be secured by the applicable Loan Documents as fully
as if made directly to Borrower, regardless of the disposition thereof by the
General Contractor, any Trade Contractor or any other Person.
SECTION 3.9 ADVANCES FOR OBLIGATIONS. Proceeds of the Loan may be
used to pay interest and any other sums due and payable with respect to the Loan
or pursuant to any Loan Documents, subject to the terms and conditions of this
Agreement, including, the availability in the Budget of Loan proceeds.
Notwithstanding anything in this Agreement which may be to the contrary, Lender
shall at all times have the right (but not the obligation), by its own action,
to make Advances for the purpose of paying fees and any other sums then due and
payable to Lender with respect to the Loan or pursuant to the Loan Documents.
Lender shall provide Borrower and Manager with invoices indicating those
Advances made to or on behalf of Lender, but Lender's failure to provide such
invoices shall not prevent or impair Lender's ability to make such Advance.
SECTION 3.10 INTEREST ADVANCES. During the period during when the
Property is contemplated to experience Operating Deficits, Lender shall make
Advances to pay interest on the Loan in the amounts and at such times as
required pursuant to the terms of the Loan
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Agreement. Lender shall provide Borrower and Manager with an invoice indicating
the amounts advanced from the interest reserve on account of such interest
payments, but Lender's failure to provide such invoices shall not prevent or
otherwise impair Lender's ability to make such
Advance.
Subject to the satisfaction of the conditions for Advances provided in this
Agreement, Advances for interest will be advanced automatically by Lender to
itself on each Payment Date in each month prior to the calendar month in which
Substantial Completion occurs and Lender shall apply such Advances to the
payment of interest then due under the Note. The failure by Lender to make any
such Advance shall not affect the obligations of Borrower under the Note and the
other Loan Documents other than the obligation to pay interest. Lender shall
have no obligation to make any Advances with respect to interest after the
occurrence of and during the uncured continuance of an Event of Default and
Borrower shall be obligated to make out-of-pocket payments of interest to Lender
at such time. Notwithstanding anything to the contrary contained in this
Agreement, the total cumulative aggregate amount of all Advances to pay interest
shall in no event exceed the amount provided in the Budget (unless there is a
reallocation under Section 3.6(b)) and Borrower or Manager shall be required to
contribute Equity Payments to fund any excess interest over such amount. To the
extent such amount has not been exceeded, Lender may, in its discretion, make
additional Advances on account of interest payments after Substantial Completion
but prior to the Conversion Date.
SECTION 3.11 OPERATING DEFICITS ADVANCES.
(a) REQUISITION PROCEDURE. During the period when the Property is
contemplated under the Budget to experience Operating Deficits, Borrower or
Manager may submit to Lender, not more frequently than monthly, Operating
Deficits Funding Requests for Advances to fund such Operating Deficits
anticipated for the Applicable Month, accompanied by all other information and
items required to satisfy all of the conditions precedent to such Advance and
other terms and conditions of this Agreement relating to such Advance. Lender
shall either approve or deny the Operating Deficits Funding Request within ten
(10) Business Days after receipt of a complete Operating Deficits Funding
Request, together with all other accompanying information and items required
therewith. Lender must approve any such Operating Deficits Funding Request
unless Lender determines (A) an Event of Default has occurred and is continuing,
(B) the Operating Deficits Funding Request violates the Loan balancing
provisions of Section 3.7, (C) the Operating Deficits Funding Request does not
relate to Approved Operating Expenses, or (D) Lender is not issued a Title
Continuation in the form required under Section 5.3(g). Subject to all of the
other terms and conditions of this Agreement, an Advance with respect to such
Operating Deficits shall be made on the later to occur of the first day of the
Applicable Month or the date of Lender's approval, which will not be
unreasonably withheld or delayed. All Advances with respect to Operating
Deficits will be made by Lender at Manager's election to one of the (a) the
Manager's Disbursement Account, or (b) if applicable, the Title Insurer pursuant
to an escrow agreement approved by Lender and providing for either (i) the
return of the Advance to Lender if the Title Continuation cannot be issued
(which Lender will deposit in the Cash Collateral Subaccount), or (ii) the
disbursement of the Advance to the Manager's Disbursement Account simultaneously
with the delivery to Lender of the Title Continuation. Borrower or Manager
shall, in connection with the Operating Deficits Funding Request submitted for
the second month following the Applicable
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Month, prepare and submit to Lender a reconciliation certifying the amount by
which the actual Operating Deficits for the Applicable Month differed from the
Advance made by Lender on account of Operating Deficits for such Applicable
Month. The reconciliation shall be subject to review by Lender to confirm the
accuracy of the calculation therein and to confirm (through such verification as
Lender may reasonably require including review of bank account statements and
invoices) that Borrower or Manager have actually made such expenditures with
respect to Operating Deficits in the Applicable Month. Lender, upon approving
such reconciliation, shall adjust the amount of the Advance on account of
Operating Deficits to made with respect to the next occurring Applicable Month.
The total cumulative amount of all Advances made with respect to Operating
Deficits shall in no event exceed the amount specified in the Budget (unless
there is a reallocation under Section 3.6(b)) and Borrower or Manager shall be
required to fund any excess over such amount. Operating Deficits Advances with
respect to any Applicable Month shall not exceed ten percent (10%) of the amount
of Operating Deficits projected in the Budget for such Applicable Month.
Lender's obligation to make Advances with respect to Operating Deficits shall
terminate on the Operating Deficits Advance Termination Date.
(b) REALLOCATION. Notwithstanding the provisions of Section
3.6(a), Borrower or Manager in making an Operating Deficits Funding Request may
reallocate any amounts between
Line Items without limitation, except:
(i) All Advances must be with respect to Approved Operating Expenses;
(ii) No such reallocation will be allowed if Lender
reasonably determines that such reallocation would have a materially
adverse effect on the business operations at,
or the value of, the Premises;
(iii) No such reallocation will be allowed if it results
in a distribution to an Affiliate or a Person which is not Independent
except as contemplated in the Budget;
(iv) No reallocation will be allowed that would affect the
funding of the Tax and Insurance Escrow Subaccount or the Capital
Reserve Fund; and
SECTION 3.12 NO LIABILITY OF LENDER. All conditions and
requirements of this Agreement relating to the obligations of Lender to make
Advances are for the sole benefit of the parties hereto and no Interested Party
shall have the right to rely on the satisfaction of such conditions and
requirements by Borrower or Manager as a condition precedent to Lender making
any Advance.
SECTION 3.13 ADDITIONAL DOCUMENTS. In connection with each
Advance and as a condition precedent to each Advance, Borrower and/or Manager
shall execute and/or deliver to Lender additions, amendments, modifications and
supplements to the items set forth in Article IV and Article V, or otherwise as
reasonably required by Lender, including any or all of the Loan Documents, and
shall provide Lender with the full benefit of the security intended to be
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provided under the Loan Documents; provided same will not expand Borrower's or
Manager's liability.
SECTION 3.14 DEEMED REPRESENTATIONS. The making of any Advance
shall constitute, without the necessity of specifically containing a written
statement to such effect, confirmation, representation and warranty by Borrower,
to the extent of Borrower's actual knowledge, without having conducted any
investigation, and by Manager, to Lender that all of the applicable conditions
to be satisfied in connection with the making of such Advance had been satisfied
and that all of the respective representations and warranties of Borrower and
Manager set forth in the Loan Documents are true and correct in all material
respects as of the date of such Advance, except as otherwise disclosed to Lender
in writing prior thereto. The deemed representations under this Section 3.14
shall be deemed made by Borrower only as to Borrower's representations under the
Loan Documents and by Manager only as to Manager's representations under the
Loan Documents.
SECTION 3.15 LENDER'S USE OF INDEPENDENT CONSULTANT; SERVICER.
Borrower and Manager shall permit Lender and Lender's Representatives, on
reasonable notice and at such times as reasonably requested by Lender (a) to
observe the Premises and (b) to observe and review, to the extent not then in
Lender's or Lender's Representatives possession, (i) all of the Change Orders,
(ii) all of the Trade Contracts, other contracts, Plans, notes and other
documents and, to the extent that the same are in Borrower's or Manager's
possession or accessible to Borrower or Manager, subcontracts relating to the
construction of the Required Improvements, and (iii) such other information as
Lender or Lender's Representatives shall reasonably request. All documents
required to be submitted to Lender and Lender's Representatives as a condition
of each Advance shall be furnished to Lender and Lender's Representatives, as
the case may be, at their respective addresses referred to in Section 9.8, or to
such other addresses or the attention of such other Persons as shall be
designated by Lender in a notice to Borrower and Manager. Any request for
documentation which Lender has the right to make under this Agreement may also
be made by the Servicer.
ARTICLE IV
CONDITIONS PRECEDENT TO MAKING THE INITIAL ADVANCE
Lender shall not be obligated to make the Initial Advance
hereunder unless, in addition to the conditions set forth in Article III, (which
have not been waived in writing by Lender) the following conditions shall have
been satisfied in Lender's reasonable discretion, except to the extent that
Lender may elect in writing to waive any such conditions:
SECTION 4.1 REPRESENTATIONS AND WARRANTIES. The representations
and warranties made by Borrower and Manager in Article VI of this Agreement,
Article IV of the Loan Agreement and in any other Loan Documents shall be true
and correct, in all material respects, on and as of the date of the Initial
Advance with the same effect as if made on such date.
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SECTION 4.2 RECEIPT OF ITEMS AND DOCUMENTS BY LENDER. Lender
shall have received and approved the following items and documents, duly
executed and in recordable form where applicable, in each case in form and
substance reasonably satisfactory to Lender and where applicable, Lender's
Construction Consultant and Lender's Counsel:
(a) the Loan Agreement;
(b) the Initial Note;
(c) the Mortgage;
(d) the Guaranties;
(e) the Assignment of Leases and the Assignment of Agreements;
(f) the Environmental Guaranty;
(g) such UCC-1 Financing Statements as Lender shall deem necessary
to perfect
Lender's security interests in the Collateral;
(h) a paid title insurance policy from the Title Insurer (the
"TITLE INSURANCE POLICY") marked paid in full, in the maximum principal
amount of the Loan, insuring Lender that the Mortgage provides Lender
with a valid first priority Lien on the Premises, and which Title Policy
shall contain (i) no exception for mechanics' or materialmen's liens
except the standard Texas form language for construction loans, but
confirming that no such liens have been filed; (ii) no survey exceptions
other than those approved by Lender; (iii) no exceptions to coverage
other than Permitted Encumbrances, (iv) a pending disbursements clause,
in the form of Exhibit I; (v) such coinsurance and/or reinsurance
agreements in amounts and with companies as Lender reasonably may
require; (vi) an ALTA 9 or similar comprehensive endorsement (if
available in the State); (vii) such other endorsements or affirmative
insurance as Lender may reasonably require; (viii) a fully executed copy
of a customary title instruction letter from the Title Insurer and (ix)
coverage with respect to the Subordinate Mortgage for an amount equal to
(A) the amount of the Other Loans secured by the Subordinate Mortgage,
if an appropriate tie-in endorsement is available between or among the
policies insuring the Subordinate Mortgage and the first mortgages on
Other Properties securing the related Other Loans, or (B) if no such
tie-in endorsement is available in the State, such insurance as
reasonably satisfactory to Lender in its discretion.
.
(i) Lender shall have received satisfactory UCC reports (the "UCC
Searches"), federal tax lien, bankruptcy, state tax lien, judgment and
pending litigation searches conducted by a search firm reasonably
acceptable to Lender. Such searches shall have been received in relation
to Borrower and each owner of an equity interest in Borrower and any
affiliate of Borrower. Such searches shall have been conducted in each
of the locations designated by Lender in Lender's reasonable discretion
and shall have been dated not more
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than fifteen (15) days prior to the Closing Date. Such searches shall
indicate that there are no conditional sales contracts, chattel
mortgages, leases of personalty, financing statements, judgments or
other litigation filed and/or recorded against Borrower, the Premises or
any other Collateral, other than Permitted Encumbrances;
(j) an original Survey of the Premises dated as of a date within
thirty (30) days
prior to the Closing Date;
(k) copies of (i) a transaction authorization executed by the
Borrower Owners authorizing Borrower's execution of this Agreement and
the other Loan Documents to which Borrower is party and Borrower's
performance of all of its obligations thereunder, (ii) the Borrower
Entity Agreement and all amendments thereto, (iii) the limited
partnership agreement of Borrower, and Borrower's certificate of limited
partnership, as filed in the appropriate governmental office(s), and
(iv) a certificate of existence for Borrower issued by the Secretary of
State of the state of Borrower's formation, all of which shall be
certified as true, correct and complete by the Borrower Representative;
(l) copies of (i) resolutions of the Board of Directors and
shareholders of the Borrower Representative authorizing the execution by
the Borrower Representative of this Agreement and the other Loan
Documents to which Borrower is a party, certified as true, correct and
complete by the Secretary of the Borrower Representative, (ii)
incumbency certificates of the officers of the Borrower Representative,
(iii) the certificate of incorporation of the Borrower Representative,
which shall be certified as being true, correct and complete by the
Secretary of State of the state of the Borrower Representative's
formation and the Secretary of the Borrower Representative, (iv) the
by-laws of the Borrower Representative, which shall be certified as
true, correct and complete by the Secretary of the Borrower
Representative, and (v) a good standing certificate and a certificate of
good standing for the Borrower Representative issued by the Secretary of
State of the state of the Borrower Representative's formation;
(m) copies of (i) resolutions of the Board of Directors of the
Guarantor authorizing the execution by the Guarantor of the Guaranties
and any other Loan Documents to which the Guarantor is party, certified
as true, correct and complete by the Secretary of the Guarantor, (ii)
incumbency certificates of the officers of the Guarantor, (iii) the
certificate of incorporation of the Guarantor, which shall be certified
as being true, correct and complete by the Secretary of State of the
state of its formation and the Secretary of the Guarantor, (iv) the
by-laws of the Guarantor, which shall be certified as true, correct and
complete by the Secretary of the Guarantor, and (v) a good standing
certificate for the Guarantor issued by the Secretary of State of the
state of the Guarantor's formation;
(n) copies of (i) authorization by the general partner of Manager
authorizing the execution by the Manager of this Agreement, the
Development Agreement, the Management Agreement and any other Loan
Documents to which the Manager is party, certified as true, correct and
complete by the general partner, secretary or other applicable officer
of Manager, (ii) incumbency certificates of the general partner of
Manager, (iii) the certificate
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of limited partnership of Manager which shall be certified as being
true, correct and complete by the Secretary of State of the state of its
formation, (iv) the partnership agreement of Manager, which shall be
certified as true, correct and complete by the general partner of
Manager, (v) a good standing certificate for Manager and the general
partner of Manager issued by the Secretary of State of the state of
Manager's formation, and (vi) a certificate of qualification to do
business in the State for Manager and the general partner of Manager
issued by the Secretary of State of the State;
(o) opinions of counsel for Borrower and Guarantor, including a
bankruptcy non -consolidation opinion as to Borrower only. All such
legal opinions will be addressed
and delivered to both Lender and the Rating Agencies;
(p) payment of Lender's Counsel Fees, the fees of Lender's
Construction Consultant relating to the Loan, and all other
out-of-pocket expenses of Lender relating to the Loan to the extent the
foregoing are then due and payable;
(q) payment in full of the Structuring Fee payable at Closing pursuant to
the Loan Agreement;
(r) payment of the Draw Fee due with respect to the Initial
Advance pursuant to the Loan Agreement;
(s) the financial statements of the Guarantor referred to in the
Guaranties;
(t) the Environmental Report;
(u) the Policies then required to be in effect and delivered
pursuant to the Loan Agreement, together with evidence that (i) all such
Policies then have a term of at least one year from the date issued;
(ii) the premiums for such unexpired term have been paid in full; and
(iii) such Policies are in full force and effect;
(v) evidence of errors and omissions insurance carried by the
Architect, the Engineer, if any, and all engineers retained by the
General Contractor or the Architect to provide engineering services in
connection with the construction of the Required Improvements, or any
portion thereof, evidence of the maintenance of the insurance required
to be maintained by each General Contractor under the Construction
Agreement and a draft binder of the insurance to be maintained by the
General Contractor under the Construction Agreement;
(w) a letter or report of Lender's insurance consultant concerning
Borrower's compliance with the requirements of the Mortgage as to
insurance and such other matters
pertaining to insurance as Lender may request;
(x) evidence that all utilities (including, electric, gas, water,
drainage and sewage systems) which are necessary and required during the
construction of the Required
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Improvements have been or will be completed and available in such a
manner as to assure Lender that construction of the Required
Improvements will be completed on or before the
Outside Completion Date;
(y) evidence that Borrower or Manager has paid all real estate
Taxes on, and assessments of, the Premises which are due and payable
and, if delinquent, all penalties and interest thereon;
(z) the Plans;
(aa) copies of all ground leases, space leases, licenses, easements
or other agreements or instruments pertaining to the Premises and all
other documents listed as exceptions to title in the Title Policy;
(bb) a copy of the Management Agreement, certified as true, correct and
complete by Borrower and Manager;
(cc) a copy of the Development Agreement, certified as true, correct and
complete by Borrower and Manager;
(dd) copies of the Property Option Agreement and the Equity Option
Agreement, certified as true, correct and complete by Borrower and Guarantor;
(ee) copies of the Construction Agreement, the Architect's Agreement and
the Engineer's Agreement, if any, each certified by Borrower and/or Manager to
be true and complete;
(ff) the General Contractor Consent and Agreement;
(gg) the Architect Consent and Agreement;
(hh) the Engineer's Consent and Agreement, if Borrower or Manager engages
an Engineer;
(ii) a copy of each Trade Contract in effect on the Closing Date,
and all other contracts to which Borrower, Manager or the General
Contractor then is a party (either directly or through an Affiliate)
relating to the construction of the Required Improvements or the
furnishing of labor, materials, furniture, furnishings, equipment or
services for the construction of the Required Improvements, each
certified by Borrower, Manager or the General Contractor to be true and
complete;
(jj) intentionally omitted;
(kk) intentionally omitted;
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(ll) Bonds with respect to the General Contractor;
(mm) a copy of the Construction Schedule;
(nn) copies of all Construction Permits in existence and other
evidence that other governmental approvals necessary for the
construction of the Required Improvements are obtainable by
non-discretionary administrative procedures without the need for any
variance or waiver, whether through public hearing or otherwise, of
applicable zoning ordinances, land use regulations, building codes or
similar governmental laws and regulations;
(oo) a copy of each agreement with any Governmental Authority
pertaining to the Premises and the Required Improvements; provided that
if no such agreements exist and none are required, Borrower or Manager
shall so certify to Lender;
(pp) a certificate from and Independent licensed surveyor or an
insurance broker that the Premises are not located in a flood hazard
plain, Zone A, as indicated on the Maps of the Federal Emergency
Management Agency (or the area of the Premises that is located in a
flood hazard plain docs not impact the Improvements);
(qq) intentionally omitted;
(rr) a Request for Advance with respect to the Initial Advance
together with the related documentation required to be delivered
pursuant to Sections 3.1 (and 3.5 and 5.3, if applicable);
(ss) a Manager's Affidavit;
(tt) intentionally omitted;
(uu) Subject to Section 4.12, Lender's Construction Consultant Report with
respect to the Initial Advance ;
(vv) an update of the appraisal submitted pursuant to the Master Financing
Facility
Agreement, if reasonably requested by Lender;
(ww) a copy of the Budget;
(xx) an agreement with the bank in which the Manager's Disbursement Account
is located, in form and content satisfactory to Lender;
(yy) agreements executed by Manager under the Development Agreement
and the Management Agreement, respectively, pursuant to which Manager
agrees that (i) Lender may terminate the Management Agreement and/or
Development Agreement at any time during the continuation of an Event of
Default, (ii) Manager will at Lender's option
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following a foreclosure or transfer by deed-in-lieu of foreclosure,
recognize and attorn to Lender or its designee as the successor owner
under the Management Agreement and/or Development Agreement, but without
any liability on the part of Lender or such designee for acts or
omissions of Borrower prior to the date of such foreclosure or transfer
and (iii) Manager's rights under the Management Agreement and under the
Development Agreement are subject and subordinate to the Loan Documents;
(zz) such other documents, instruments, opinions and approvals
(including estoppel certificates) and such reports, certificates,
affidavits and other information, as Lender, or Lender's Representatives
reasonably may require to evidence compliance by Borrower or Manager
with all provisions of this Building Loan Agreement, the Loan Agreement
and all other Loan Documents, and Lender's completion of its customary
due diligence with respect thereto and every other aspect of the
contemplated Loan transaction; and
(aaa) the Premises shall comply in all respects with any and all
Legal Requirements, and no condemnation or casualty shall have occurred
with respect to the Premises.
SECTION 4.3 NO DEFAULT. On the date of the Initial Advance and
after giving effect thereto, no Default or Event of Default shall have occurred
and be continuing.
SECTION 4.4 NO CHANGE. No material part of the Premises shall
have been condemned, or threatened with condemnation or been damaged by any fire
or other casualty, and no other change shall have occurred with respect to the
Premises or the Loan which Lender
determines to be material and relevant.
SECTION 4.5 BORROWER EQUITY. Lender shall have received evidence
that the Initial Equity Investment has been fully expended to pay Budget Costs.
SECTION 4.6 LENDER'S DETERMINATION. On the date of the Initial
Advance, Lender shall have determined the applicable Retainage and that (i) the
work that is the basis for the request for the Initial Advance has been
completed in accordance herewith (ii) there is no Deficiency and (iii)
construction is capable of proceeding in accordance with the schedule set forth
in the Budget and Substantial Completion will occur by the Outside Completion
Date.
SECTION 4.7 ACCOUNTING. Lender shall have received and approved an
accounting of all expenditures for costs shown on the Budget as having been
incurred prior to the Closing Date.
SECTION 4.8 INTENTIONALLY OMITTED.
SECTION 4.9 NO INJUNCTION. No law or regulation shall have been
adopted, no order, judgment or decree of any Governmental Authority shall have
been issued, and no
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litigation shall be pending or threatened, which in the good faith judgment of
Lender would enjoin, prohibit or restrain, or impose or result in material
adverse effect upon the making or repayment of the Loan or the consummation of
the transactions anticipated and effected by the Loan Documents.
SECTION 4.10 SUBDIVISION. Lender receives satisfactory evidence
(including title endorsements if available) that the Land (a) constitutes a
separate lot for conveyance and real estate tax assessment purposes or (b) will
constitute such separate lot at the time of Substantial Completion, in which
case appropriate escrows will be established and Lender shall be provided with
additional due diligence and/or opinion letters demonstrating that such separate
lot status will be obtained by Substantial Completion.
SECTION 4.11 TRANSACTION COSTS. Borrower or Manager shall have
paid or caused to be paid all fees due the Lender, Lender's Counsel fees and all
other costs and expenses associated with the Closing which have been invoiced to
Borrower and/or Manager and which are then due and payable.
SECTION 4.12 LENDER'S CONSTRUCTION CONSULTANT REPORT. Lender,
rather than Borrower or Manager, shall be responsible for obtaining the Lender's
Construction Consultant Report; provided that Borrower or Manager shall be
responsible to timely provide the Lender's Construction Consultant, at
Borrower's sole cost, with all information and such access to the Premises as is
required for producing same concurrently with the Initial Advance or any
Subsequent Advance.
ARTICLE V
CONDITIONS PRECEDENT TO ADVANCES AFTER
THE INITIAL ADVANCE
Lender shall not be obligated to make any Advance subsequent to the Initial
Advance, unless in addition to the conditions set forth in Article III (which
have not been waived in writing by Lender), the following conditions are
satisfied in the reasonable discretion of Lender, except to the extent that
Lender may elect in writing to waive any such conditions:
SECTION 5.1 ARTICLE IV. All conditions set forth in Article IV
which are applicable to a subsequent Advance shall have been satisfied or waived
in writing by Lender with respect to such subsequent Advance at the time of such
subsequent Advance.
SECTION 5.2 REPRESENTATIONS AND WARRANTIES. On the date of each
such subsequent Advance, the representations and warranties made by Borrower and
Manager in Article VI of this Agreement, Article IV of the Loan Agreement and in
any other Loan Documents shall be true and correct in all material respects on
and as of the date of such subsequent Advance with the same effect as if made on
such date.
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SECTION 5.3 RECEIPT OF ITEMS AND DOCUMENTS BY LENDER. Lender
shall have received at least ten (10) Business Days prior to the date of the
requested Advance (unless otherwise specified below), the following items and
documents, duly executed and in each case in form and substance reasonably
satisfactory to Lender, and where applicable, Lender's Construction Consultant
and Lender's Counsel:
(a) a Request for Advance, together with the related supporting
documentation required to be delivered pursuant to Section 3.1;
(b) a Manager's Affidavit with appropriate insertions and
attachments, dated the date of the Request for Advance;
(c) either (i) the Architect's Update Letter, or (ii) the
Architect's Certificate, as selected by Lender pursuant to Section
3.1(a), dated the date of the Request for
Advance;
(d) subject to Section 4.12, a Lender's Construction Consultant
Report, dated on or about the date of the Request for Advance;
(e) copies of any Trade Contracts and any other Construction
Documents entered into since the date of the previous Request for
Advance received by Manager;
(f) copies of all amendments to any Trade Contract or any other
Construction Documents entered into since the date of the previous
Request for Advance received by Manager;
(g) a draft of the Title Continuation, which shall be
supplemented after the Advance with an executed Title Continuation,
dated through, the date of the related Advance;
(h) in the case of the Request for Advance next succeeding (i)
the date on which the foundation of the Improvements shall be
substantially complete, (ii) the Substantial Completion Date or (iii)
any date on which Lender gives Manager notice that it has reason to
believe that a survey inspection and update is necessary, a survey
inspection and update of the Survey dated after each such date and with
respect to clause (ii), prepared and submitted pursuant to Section 7.13;
(i) a reconciliation by Borrower or Manager of the progress and
cost of the construction of the Required Improvements through the date
of the Request for Advance with the Construction Schedule and the
Budget, together with a projection of such progress and cost through to
completion of the construction of the Required Improvements;
(j) evidence of Borrower's or Manager's compliance with all
recommendations (if any) set forth in the Environmental Report with
respect to the testing for and removal and disposal of Hazardous
Materials;
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(k) payment on or before the Advance date of the Draw Fee for
such Advance and the Servicing Fee (if any) then due and payable under
the Loan Agreement, the estimated Lender's Counsel Fees, the estimated
fees of Lender's Construction Consultant relating to the Loan, and all
other reasonable out-of-pocket expenses of Lender relating to the Loan
to the extent then due and payable (and to the extent of Lender's
estimates thereof, if the amounts thereof have not been finally
determined); and
(l) all documents, reports, certificates, affidavits and other
information, as Lender, the Lender's Counsel or Lender's Representatives
reasonably may require to evidence compliance by Borrower and Manager
with all of the provisions of this Loan
Agreement.
SECTION 5.4 NO DEFAULT. On the date of each such subsequent
Advance, no Default or Event of Default shall have occurred and be continuing.
SECTION 5.5 LENDER'S APPROVAL. On the date of each subsequent
Advance, Lender shall have approved all Material Change Orders and material
changes to any other items delivered in connection with or at all related to the
construction at the Premises.
SECTION 5.6 SUBSTANTIAL COMPLETION ADVANCE. In addition to all of
the other conditions specified in this Article V, Lender shall have received at
least ten (10) Business Days prior to the date of the Substantial Completion
Advance (unless otherwise specified below), the following items and documents,
duly executed and in each case in form and substance reasonably satisfactory to
Lender, and where applicable, Lender's Construction Consultant and Lender's
Counsel:
(a) all Operating Permits, including a permanent unconditional
certificate of occupancy or its equivalent issued by the appropriate
Governmental Authority confirming
Substantial Completion;
(b) a certificate from the Architect stating that Substantial
Completion has been achieved;
(c) evidence that all utility services (including electric, gas,
water and sewage systems), parking and pedestrian and vehicular access
required for the operation, use and
maintenance of the Premises are available;
(d) the final Survey required pursuant to Section 7.13; and
(e) submission of evidence that all conditions required for
release of the Retainage as set forth in the definition of "Retainage"
have been met except for Punchlist
Items.
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SECTION 5.7 POST-SUBSTANTIAL COMPLETION ADVANCES. Pursuant to the
Budget, Lender anticipates that subsequent to Substantial Completion, but prior
to Conversion, the business operations at the Premises will generate Operating
Deficits that will require Advances under the Loan with respect to the payment
of interest under the Loan and other Approved Operating Expenses. Additionally,
Advances with respect to completed Punchlist Items and Retainage are
contemplated subsequent to Substantial Completion. Provided that on the date of
each such subsequent Advance(s), no Default or Event of Default shall have
occurred and be continuing, Lender shall make Advances (a) from Retainage for
Punchlist Items pursuant to Section 2.2 (b), (b) with respect to interest on the
Loan pursuant to Section 3.10, and (c) with respect to Operating Deficits
pursuant to Section 3.11. If any portion of the Loan or Deficiency Cash
Collateral remain unadvanced at such time as the business operations at the
Premises are no longer generating Operating Deficits, Lender shall at Manager's
request either (i) Advance the unexpended portion of the Loan to the Cash
Collateral Subaccount for application in accordance with the provisions of
Section 3.6 of the Loan Agreement, or (ii) pay over such amounts as directed by
Manager subject to the letter of credit conditions specified below. Lender may
require, in its discretion, that Borrower or Manager deliver to Lender, as
beneficiary, one or more clean, irrevocable letters of credit, reasonably
satisfactory to Lender in form and content and as to the bank or trust company
which is the issuer (which issuer must have and S&P rating of "A" or better)
equal in amount to the funds paid over to Borrower or Manager. Any such letter
of credit shall have an expiration date not earlier than 30 days after the
Expected Conversion Date, provided that the expiration date may be one year from
its issuance if the letter of credit provides for a drawing by Lender of the
full amount thereof at any time on or after the thirtieth (30th) day preceding
its stated expiration date. Any letter of credit shall be held by Lender and may
be drawn at any time within thirty (30) days prior to the expiration thereof,
upon the occurrence and during the continuance of an Event of Default, or within
thirty (30) days prior to the Expected Conversion Date, whereupon the proceeds
of the letter of credit shall be deposited in the Cash Collateral Subaccount.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
To induce Lender to make the Loan and enter into this Agreement
and perform Lender's obligations hereunder, Manager, hereby represents, warrants
and covenants to Lender that, as of the Closing Date and in the case of any
Advance made subsequent to the Closing Date, if any, as of the date of such
other Advance (which representations, warranties and covenants shall survive the
execution and delivery of this Agreement and the other Loan Documents, and shall
be deemed to have been relied upon by Lender regardless of any investigation
made by Lender or on its behalf):
SECTION 6.1 PLANS. The Plans have been approved, to the extent
required by applicable Legal Requirements, restrictive covenants, the Management
Agreement, and the Development Agreement, by all Governmental Authorities, the
beneficiaries of such covenants, and
the other parties to such agreements, respectively.
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SECTION 6.2 NO LIENS. Neither Manager nor Borrower has made,
assumed or been assigned any contract or arrangement of any kind, the
performance of which by the other party thereto would give rise to a Lien
against all or any portion of the Collateral, except for (a) Permitted
Encumbrances and (b) the Architect's Agreement, the Engineer's Agreement, the
Development Agreement, the Management Agreement, the Construction Agreement, the
Trade Contracts, the Construction Documents, to the extent Lien rights are
created under any of such agreements.
SECTION 6.3 COMPLIANCE WITH BUILDING CODES, ZONING LAWS, ETC. The
current zoning law and declarations covering the Premises permit the
construction of the Required Improvements to be completed in accordance with the
Plans and, upon completion of construction in accordance with the Plans, the
Required Improvements to be operated and used as contemplated by this Agreement
and the other Loan Documents. The Premises currently and, upon completion of
construction in accordance with the Plans, the use thereof will be in all
respects in material compliance with all Construction Permits and Operating
Permits and all other Legal Requirements, and such compliance is not dependent
on any land, improvements or facilities not a part of the Premises. There are no
pending, or to Borrower's or Manager's knowledge, threatened actions, suits or
proceedings to revoke, attach, invalidate, rescind or modify the zoning
applicable to the Premises or any part thereof, any of the Construction Permits
or any of the Operating Permits, as currently existing and as contemplated to
exist upon completion of construction in accordance with the Plans, which would
have a material adverse effect on the construction or operation of the Required
Improvements.
SECTION 6.4 CERTAIN AGREEMENTS. The Management Agreement, the
Development Agreement, the Construction Agreement, the Architect's Agreement,
the Engineer's Agreement, if any, the Trade Contracts and the other Existing
Construction Documents to the extent previously executed by, or assigned to and
assumed by Manager are in full force and effect, not having been amended,
modified, terminated, assigned or otherwise changed, or the provisions thereof
waived, except as permitted hereunder, and true and complete copies of each
thereof have been furnished to Lender.
SECTION 6.5 BUDGET. The Budget contains all costs and expenses reasonably
anticipated to be incurred in connection with the acquisition of the Land and
existing Improvements and the construction of the Required Improvements.
SECTION 6.6 ADJACENT LAND. Borrower does not own any land adjacent to the
Land.
SECTION 6.7 FLOOD ZONE. Except as shown on the Survey, the
Improvements are not, and will not when constructed, be located in a flood
hazard area, Zone A, as designated by the Federal Emergency Management Agency.
SECTION 6.8 NO PRIOR WORK. Either (a) no work or construction has
been commenced on the Land and no materials have been delivered to the Land
which could, in either case, result in the imposition of a mechanic's or
materialmen's Lien on the Property prior to or on
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parity with the Lien and security interest created by the Mortgage, or (b) the
Title Insurance Policy will insure the first priority status of the Mortgage
over such Liens without exception, except for the standard Texas form language
for construction loans, but confirming that no such liens have been filed.
ARTICLE VII
COVENANTS
SECTION 7.1 CONSTRUCTION.
(a) Borrower and Manager shall not cause or permit the
commencement of construction of any Improvements or delivery of material to the
Land until after recording of the Mortgage with the county clerk of the county
where the Land is located (unless (i) Borrower or Manager obtains a payment bond
and delivers same to the General Contractor in a fashion which would eliminate
the possibility of any mechanic's lien, filed now or in the future, obtaining
priority over the Lien of the Mortgage and/or (ii) Borrower or Manager obtains a
Title Policy acceptable to Lender in its discretion insuring over any such Lien
without exception except for the standard Texas form language for construction
loans, but confirming that no such liens have been filed, and after obtaining
all permits and approvals from all Governmental Authorities required to commence
construction. Borrower or Manager, in order to demonstrate that construction has
not commenced; shall furnish Lender with evidence required by Lender, which may
include but may not be limited to photographic evidence and/or an affidavit
executed by the Lender's Construction Consultant or by such other person as may
be approved by Lender, that at the time of and immediately after the recordation
of the Mortgage there was no commencement of construction of Improvements on the
Land or delivery of materials to the Land.
(b) Borrower or Manager shall cause the construction of the
Required Improvements to be prosecuted with diligence and continuity, in a good
and workmanlike manner, and in accordance with this Agreement in order to cause
Substantial Completion to occur on or prior
to the Outside Completion Date.
(c) Borrower or Manager shall cause the cost of each component of
the construction of the Required Improvements to be in accordance with the
Budget as Adjusted.
(d) Borrower or Manager shall cause the Required Improvements to
be constructed and completed in accordance with the Plans and all Legal
Requirements, free and clear of Liens or claims for materials supplied or for
labor or services performed in connection with the
construction of the Required Improvements or otherwise.
(e) Borrower or Manager shall cause the Construction Agreement to
provide for the work thereunder to be performed for a fixed price or guaranteed
maximum price.
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SECTION 7.2 CONSTRUCTION SCHEDULE. Each month during the
construction of the Required Improvements, Manager shall deliver to Lender,
Lender's Construction Consultant and the Servicer a copy of the then-current
Construction Schedule.
SECTION 7.3 BUDGET CHANGES. Borrower and Manager shall not make any changes
in the Budget without Lender's prior written consent except to the extent
expressly permitted hereunder.
SECTION 7.4 INSPECTION OF PREMISES AND BOOKS AND RECORDS.
Borrower and Manager shall permit Lender or Lender's Representatives to enter
upon the Premises, at any reasonable times during business hours on reasonable
notice, with free access to inspect or examine or, to the extent not located on
the Premises, to otherwise make available in New York City to Lender, Lender's
Construction Consultant and the Servicer (i) all materials and shop drawings
pertaining to the construction of the Required Improvements; (ii) any contracts,
bills of sale, state ments, receipts or vouchers pertaining to the construction
of the Required Improvements; (iii) all work done, labor performed or materials
furnished in and about the Premises, including, in connection with the
construction of the Required Improvements; (iv) all books and records of
Borrower and Manager pertaining to the construction of the Required
Improvements; and (v) any other documents which are related to the construction
of the Required Improvements. Borrower and Manager shall promptly provide Lender
and Lender's Representatives with copies of any of the foregoing as Lender and
Lender's Representatives may from time to time reasonably request. Borrower and
Manager shall make its representatives available to meet with Lender and
Lender's Representatives upon reasonable notice at the Premises or in New York
City, to discuss Borrower's and Manager's affairs, finances and accounts
relating to the construction of the Required Improvements, and Borrower and
Manager shall cooperate, and take all reasonable steps to cause the General
Contractor, the Architect, the Engineer, if any, and the Trade Contractors to
cooperate with Lender and Lender's Representatives to enable each such Person to
perform its functions under this Agreement.
SECTION 7.5 REQUIRED NOTICES. Borrower or Manager shall give notice to
Lender promptly upon the occurrence of:
(i) any cessation of construction of the Required
Improvements for a period in excess of ten (10) consecutive calendar
days, regardless of whether or not such
cessation is due to an Unavoidable Delay;
(ii) any breach of a party's obligation, default, or event
of default under or in connection with any material contractual
obligation of Borrower or Manager;
(iii) Borrower or Manager obtaining knowledge of any actual
or threatened litigation, investigation or proceeding materially
affecting Borrower, Manager, the Borrower Representative, the Premises
or, while any Guaranty is in effect, the Guarantor;
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(iv) any notice given pursuant to any Construction Document
alleging that there has occurred a default or other failure by Borrower
or Manager in the fulfillment of
Borrower's or Manager's obligations thereunder;
(v) any condition which results in any delay, including any
Unavoidable Delay, which could result in Substantial Completion
occurring after the date therefor set forth in the Construction Schedule
or after the Outside Completion Date, or in any further delay beyond any
delays of which Lender has been previously notified;
(vi) any Default or Event of Default; and
(vii) any other notices reasonably requested by Lender.
Each notice pursuant to this Section 7.5 shall be accompanied by a statement of
Borrower or Manager setting forth details of the occurrence referred to therein
and stating what action Borrower
or Manager proposes to take with respect thereto.
SECTION 7.6 CHANGE ORDERS. Borrower and Manager shall not
request, initiate, agree to, accept, cause or suffer any Material Change Order,
without Lender's prior written consent, which shall not be unreasonably withheld
or delayed. Approval by Lender of any Change Order (i) shall not obligate Lender
to increase the amount of the Loan, and (ii) shall not obligate Lender to make
any Advance to the extent Lender would not otherwise be obligated pursuant to
this Agreement to make such Advance. Borrower or Manager shall submit to Lender
and Lender's Construction Consultant copies of each proposed Material Change
Order, prior to, and all other Change Orders, simultaneously with entering into
such Change Order. Such submission shall identify whether the submitted Change
Order is a Material Change Order and shall include documentation satisfactory to
Lender and Lender's Construction Consultant, setting forth all additions and
subtractions previously made to or from the scope of the Required Improvements.
Change Orders not identified by Borrower as Material Change Orders will
initially be reviewed by Lender solely for the purpose of determining whether
such Change Order constitutes a Material Change Order. Lender shall promptly
(not more than five (5) Business Days after receipt) review, and approve or
disapprove, all submitted Change Orders either identified by Borrower or
Manager, or determined by Lender, to be Material Change Orders.
SECTION 7.7 CORRECTION OF WORK. Borrower or Manager shall,
promptly after notice from Lender, correct any defect in the Required
Improvements or any departure from the Plans. Borrower and Manager agree that
the making of any Advance shall not constitute a waiver of Lender's right to
require compliance with this Section 7.7 with respect to any such defects or
departures from the Plans. Borrower and Manager agree that Lender's failure to
deliver such a notice shall not constitute a waiver by Lender of any of the
Obligations.
SECTION 7.8 NO ENCROACHMENTS. Borrower or Manager shall cause the Required
Improvements to be constructed entirely within the perimeter of the Land and so
as not
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to encroach upon or overhang any easement or right-of-way or any land of others,
and when erected shall be wholly within any applicable building restriction
lines, however established.
SECTION 7.9 COMPLIANCE WITH DOCUMENTS. Borrower and Manager shall
abide by, perform and comply with all of Borrower's and Manager's obligations,
if any, under the Architect's Agreement, the Engineer's Agreement, if any, the
Construction Agreement, the Trade Contracts, the Development Agreement, and the
other Construction Documents, and Borrower and Manager, at their sole cost and
expense, shall use all their best commercially reasonable efforts to secure or
enforce the performance of each and every material obligation, covenant,
condition and agreement to be performed by the other parties under any such
documents.
SECTION 7.10 CHANGES IN AGREEMENTS. Except with respect to Change
Orders which do not constitute Material Change Orders, neither Borrower nor
Manager shall surrender, terminate, cancel, modify, amend in any material
respect, and shall not enter into any agreement in substitution for, or consent
to the assignment of, the Architect's Agreement, the Engineer's Agreement, the
Construction Agreement, or the Development Agreement to the extent Borrower or
Manager is a party thereto, without Lender's prior written consent, which
consent shall not be unreasonably withheld. Borrower or Manager promptly will
give notice to Lender of the surrender, termination, cancellation, modification,
amendment, substitution or assignment of the other Construction Documents,
whether or not Lender consented thereto pursuant to the immediately preceding
sentence.
SECTION 7.11 CONTRACTS. Borrower shall not, without Lender's
prior written consent, which consent shall not be unreasonably withheld or
delayed, allow the assignment or amendment of any existing, or enter into any
new, Architect's Agreement, Construction
Agreement,
or Engineer's Agreement. Such consent shall not be required with respect to any
amendment constituting a Change Order which is not a Material Change Order, or
which amendment does not cause such Change Order to become a Material Change
Order. Additionally, such consent shall be based upon Lender's approval of the
terms and conditions of such assignment, amendment or new agreement and the
identity, where applicable, of the assignee or the Person executing any new
agreement, which Person shall in all cases be an Independent and properly
licensed professional.
SECTION 7.12 BONDS. The General Contractor shall be bonded
pursuant to a Bond issued by a surety satisfactory to Lender. Borrower and/or
Manager will cause Lender to be named as a co-obligee (as its interest may
appear) with Borrower and/or Manager on all Bonds obtained by Borrower or
Manager from the General Contractor.
SECTION 7.13 FINAL SURVEY. Within 60 days after Substantial
Completion has occurred, Borrower or Manager will deliver to Lender an updated
"as-built" Survey, dated no earlier than the Substantial Completion Date, with a
certification that no encroachments exist by the Improvements on land other than
the Land.
SECTION 7.14 COMPETITION. Borrower and Manager shall not, and shall not
cause or permit any of their respective Affiliates to, pursue any opportunity
for the development,
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management or acquisition of, or investment in, any property within a five
(5)-mile radius of the Property if such other property would be in competition
with the Property, or would otherwise adversely affect the development, leasing
or operation of the Property or Borrower's or Manager's
ability to perform its obligations under the Loan Documents.
SECTION 7.15 PROTECTION AGAINST LIENS. Borrower and Manager shall
pay and discharge or bond all claims for labor, materials and services furnished
in connection with construction of the Required Improvements, diligently file a
valid notice of completion upon completion of the Required Improvements,
diligently file a valid notice of cessation in the event of a cessation of labor
for a period of 30 days or more, and take all actions reasonably required to
prevent the assertion of claims of Liens against the Property. Borrower and
Manager irrevocably appoint, designate and authorize Lender as their agent (such
agency being coupled with an interest) with the authority (but no obligation) to
file any notice of completion or cessation of labor or any other notice relating
to claims of Liens that Lender deems advisable to protect its interests under
the Loan Documents. If any stop notice or claim is asserted against Lender by
any Person furnishing labor, services, equipment or materials to the Required
Improvements, upon demand by Lender, Borrower or Manager shall take such action
as Lender may reasonably require to release Lender from any obligation or
liability with respect to such stop notice or claim, including (i) if the claim
is being contested in good faith by appropriate proceedings, obtaining a bond or
other security, in form, substance and amount reasonably satisfactory to Lender,
or (ii) payment of such claim. If either Borrower or Manager fails to take such
action, Lender may, in its discretion, file an interpleader action requiring all
claimants to interplead and litigate their respective claims, and in any such
action Lender shall be released and discharged from all obligations with respect
to any funds deposited in court.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.1 EVENTS OF DEFAULT. The following shall each
constitute an "EVENT OF DEFAULT" hereunder:
(a) If construction of the Required Improvements shall not be
commenced in accordance with the Construction Schedule in effect on the
Closing Date and shall not at any time be carried on with diligence and
continuity or there is any cessation of construction of the Required
Improvements for a period in excess of ten (10) consecutive calendar
days, unless the commencement of construction has been delayed, or the
cessation of construction shall have been caused by Unavoidable Delay of
which notice has been given to Lender pursuant to Section 7.5;
(b) If Borrower or Manager fails to satisfy the conditions for an
Advance for more than thirty (30) days after having made a request for
such Advance;
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(c) If Borrower or Manager fails to permit Lender or Lender's
Representatives, at all reasonable times after reasonable notice, to
immediately enter upon the Premises for the purposes set forth in
Section 7.4 or Borrower or Manager fails to furnish to Lender or
Lender's Representatives, within a reasonable time after request
therefor and in no event more than five (5) Business Days, the materials
which Borrower or Manager is obligated to provide to Lender or Lender's
Representatives, pursuant to Section 7.4, to the extent such materials
are readily available, and any of the foregoing failures shall continue
for two (2) Business Days after such five (5) days notice thereof;
(d) If as of the close of business on the Outside Completion
Date, the Substantial Completion Date shall not have occurred except for
Unavoidable Delay, provided such Unavoidable Delay shall not excuse any
other performance by Manager or Borrower under
this Agreement or the other Loan Documents;
(e) If Lender reasonably determines during the course of
construction of the Required Improvements that the Required Improvements
cannot be completed Lien free by the Outside Completion Date in
accordance with the Plans and all Legal Requirements;
(f) If any material default by Borrower or Manager shall occur and shall
continue beyond any applicable grace period provided for therein, under the
Management Agreement, the Development Agreement, the Architect's Agreement, the
Engineer's Agreement, the Construction Agreement, any Major Trade Contract or
any other material Construction Document or Loan Document;
(g) If within thirty (30) days of Borrower's or Manager's receipt
of a notice from Lender that any Deficiency exists, Borrower or Manager
does not take any one or more of the measures referred to in Section 3.7
to eliminate such Deficiency;
(h) If Borrower or Manager does not disclose to Lender, within
ten (10) Business Days after demand, the names of all Persons with whom
Borrower or Manager has contracted with respect to the construction of
the Required Improvements, or the furnishing of labor or materials
therefor, or fails to make available for review and observation by
Lender and Lender's Construction Consultant copies of all such
contracts;
(i) If any Construction Document is amended, modified or
terminated without the prior written consent or approval of Lender to
the extent such written consent or
approval is required pursuant to this Agreement;
(j) If the Development Agreement or the Management Agreement
shall at any time cease to be in full force and effect for any reason
and a new Development Agreement, or Management Agreement as the case may
be, reasonably acceptable to Lender in form and substance shall not have
been entered into in its place within twenty (20) days after the
Development Agreement or Management Agreement, as the case may be,
ceases to be effective;
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(k) Borrower's or Manager's failure to perform or observe any
covenant, agreement or term contained in this Agreement (other than one
described in one of the other clauses of this Section 8.1), and the
continuance of such failure for thirty (30) days after notice thereof
shall have been given to Borrower or Manager by Lender; provided,
however, that if such failure is of a nature such that it cannot be
cured by the payment of money and if such failure requires work to be
performed, acts to be done or conditions to be removed which cannot by
their nature, with reasonable diligence, be performed, done or removed,
as the case may be, within such thirty (30)-day period and Borrower or
Manager shall have commenced to cure such failure within such thirty
(30)-day period and thereafter diligently continues to prosecute such
cure, such period shall be deemed extended for so long as shall be
required by Borrower or Manager in the exercise of reasonable diligence
to cure such failure, but in no event shall such thirty (30)-day period
be so extended to be a period in excess of one hundred and twenty (120)
days;
(l) Guarantor's failure to perform or observe any covenant,
agreement or term contained in any Guaranty; provided, however, that if
such failure is of a nature such that it cannot be cured by the payment
of money, then such failure shall not constitute an Event of Default
unless it continues for thirty (30) days; provided, further, however,
that if such failure cannot be cured by the payment of money and
requires work to be performed, acts to be done or conditions to be
removed which cannot by their nature, with reasonable diligence, be
performed, done or removed, as the case may be, within such thirty
(30)-day period and Guarantor shall have commenced to cure such failure
within such thirty (30)-day period and thereafter diligently continues
to prosecute such cure, such period shall be deemed extended for so long
as shall be required by Guarantor in the exercise of reasonable
diligence to cure such failure, but in no event shall such thirty
(30)-day period be so extended to be a period in excess of one hundred
and twenty (120) days; or
(m) If any representation or warranty made in this Agreement, or
any report, certificate, financial statement or other instrument,
agreements or documents by Borrower or Manager in connection with this
Agreement, the Note or any other Loan Documents executed and delivered
by Borrower or Manager shall be false in any material respect as of the
date such representation or warranty was made or deemed to have been
made;
(n) If any Survey required or requested by Lender pursuant to the
provisions of this Agreement shows any material condition not
contemplated by the Plans, and such material condition is not removed
within thirty (30) days after notice thereof by Lender to
Borrower and Manager;
(o) If there shall occur an "EVENT OF DEFAULT" as such term is
defined in the Loan
Agreement.
SECTION 8.2 ACCELERATION OF LOAN. In addition to any other rights
and remedies which Lender may have under this Agreement and the other Loan
Documents or pursuant to law or equity, and without limitation thereof, upon and
at any time after the occurrence of any
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Event of Default, Lender may declare the indebtedness evidenced by the Note,
together with all other sums payable thereunder and under the other Loan
Documents, immediately due and payable and may exercise Lender's rights and
remedies pursuant to any one or more of the Security
Documents.
SECTION 8.3 LENDER'S RIGHT TO STOP DISBURSING FUNDS. In addition
to any other rights and remedies which Lender may have pursuant to this
Agreement and the other Loan Documents or pursuant to law or equity, and without
limitation thereof, (a) if any Default shall occur and be continuing or any
Event of Default shall occur and be continuing, then Lender may decline to make
all or any portion of such further Advances as Lender may elect and/or (b) if
any Event of Default shall occur, any or all obligations of Lender under this
Agreement, at the option of Lender, shall cease and terminate; provided,
however, Lender may make all or any portion of any Advance so long as any such
Default or Event of Default shall exist without thereby becoming obligated to
make all or a portion of any other or further Advance or waiving Lender's right
to exercise any of Lender's rights and remedies pursuant to any one or more of
the Loan Documents or as may be available at law or equity.
SECTION 8.4 LENDER'S RIGHT TO COMPLETE; SUMS ADVANCED.
(a) LENDER'S RIGHT TO COMPLETE. In addition to any other rights
and remedies which Lender may have under this Agreement and the other Loan
Documents or pursuant to law or equity, and without limitation thereof, after
the occurrence and during the continuance of any Event of Default, Lender may
enter upon the Premises and into possession of the Premises and any other
Property (and exclude Borrower, Manager and any other persons therefrom) and
complete the construction of the Required Improvements substantially in
accordance with the Plans, with such changes therein as Lender may from time to
time deem appropriate, all at the sole risk, cost and expense of Borrower and
Manager. Lender shall have the right, at any and all times, in its discretion to
discontinue any work commenced by Lender with respect to the construction of the
Required Improvements or to change any course of action undertaken by it and
shall not be bound by any limitations or requirements of time whether set forth
herein or otherwise after the occurrence and during the continuance of any Event
of Default. Lender shall have the right and power (but shall not be obligated)
to assume all or any portion of the obligations of Borrower or Manager under any
or all Construction Documents as Lender may elect and to take over and use all
or any part or parts of the labor, materials, supplies and equipment contracted
for by or on behalf of Borrower or Manager, whether or not previously
incorporated into the Premises. In connection with any portion of the
construction of the Required Improvements undertaken by Lender pursuant to the
provisions of this Section 8.4, Lender may elect to do any or all of the
following:
(i) engage builders, general contractors, trade
contractors, suppliers, architects, engineers, inspectors and others for
the purpose of furnishing labor, materials, equipment and fixtures in
connection with the construction of the Required Improvements;
(ii) amend, modify or terminate any then existing contracts
between Borrower or Manager and any of the persons described in the
preceding clause (i);
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(iii) pay, settle or compromise all bills or claims which may
become Liens against the Premises, or which have been or may be incurred
in any manner (A) in connection with the construction of the Required
Improvements or (B) for the discharge of Liens, encumbrances or defects
in the title of the Premises; and
(iv) take such other action (including the employment of
watchmen and the taking of other measures to protect the Property) or
refrain from acting under this
Agreement as Lender may from time to time determine.
(b) SUMS ADVANCED. Borrower and Manager shall be liable to Lender
for all sums paid or incurred for the construction of the Required Improvements
whether the same shall be paid or incurred pursuant to the provisions of this
Section 8.4 or otherwise, and all other payments made or liabilities incurred by
Lender under this Agreement of any kind whatsoever, all of which shall be paid
by Borrower or Manager to Lender upon demand with interest at the Default Rate
to the date of payment to Lender, and all of the foregoing sums, including such
interest at the Default Rate, shall be deemed and shall constitute Advances
under this Agreement and be evidenced by the Note and secured by the Security
Documents.
SECTION 8.5 LOAN ACCOUNTS. Borrower, and to the extent
applicable, Manager, each hereby irrevocably pledges to Lender, and grants
Lender a first priority security interest in, each of the Loan Accounts now or
hereafter existing, as additional security for the Obligations. Borrower or
Manager shall, immediately upon establishing any Loan Account that is in
Borrower's name, and Manager shall, immediately upon establishing any Loan
Account that is in Manager's name, cause the institution in which such account
is located to enter into an agreement with Lender reasonably satisfactory to
Lender in form and substance pursuant to which such institution (i) recognizes
Lender's first priority security interest in such account, (ii) waives such
institution's rights of setoff with respect to the account and (iii) agrees to
follow any written instructions received by Lender with respect to such account.
After the occurrence and during the continuance of an Event of Default, in
addition to all other rights and remedies available to Lender by statute or rule
of law or equity, and whether or not the Loan shall then be due and payable,
Lender may notify any such institution that Borrower or Manager, as applicable,
no longer has a right to withdraw any funds from any such Loan Accounts or to
give any instructions with regard thereto, and Lender may cause all funds in any
and all Loan Accounts to be paid to Lender for application to any Obligations
then due and payable, in such order as Lender may elect. Lender shall also have
all rights and remedies with respect to the Loan Accounts as are available at
law or equity, including under the applicable UCC. Any Loan Accounts held in the
name of Lender shall not constitute a trust fund and may be commingled with
other monies held by Lender.
SECTION 8.6 NO LIABILITY OF LENDER. Whether or not Lender elects
to employ any or all of the remedies available to it upon the occurrence of a
Default or an Event of Default, Lender shall not be liable to Borrower, Manager
or any Interested Party for the quality of construction, or the failure to
construct or complete the Required Improvements or to protect the Premises or
for payment of any expense incurred in connection with the exercise of any
remedy
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available to Lender or for the performance or non-performance of any other
obligation of Borrower or Manager.
ARTICLE IX
GENERAL CONDITIONS
SECTION 9.1 NO WAIVERS. The making of any Advance hereunder shall
not constitute an approval or acceptance by Lender or Lender's Construction
Consultant of the work theretofore done in connection with the construction of
the Required Improvements or a waiver of any of the conditions precedent to
Lender's obligation to make further Advances (absent a statement by or the
intention of Lender that such Advance shall constitute a waiver), nor, in the
event that Borrower or Manager is unable to satisfy any such conditions
precedent, shall any such failure to insist upon Borrower's or Manager's
compliance with any obligation hereunder have the effect of precluding Lender
from thereafter declaring such inability to be a Default or an Event of Default
as herein provided. Any Advance made by Lender in the absence of strict
compliance with any or all of the conditions precedent to Lender's obligation to
make such Advance or in conjunction with a waiver by Lender of Borrower's or
Manager's compliance with any of such conditions precedent shall be deemed to
have been made pursuant to this Agreement and not in modification of the terms
hereof.
SECTION 9.2 LENDER'S REVIEW. Observation, inspection and
approvals by Lender of the Plans, the construction of the Required Improvements
and the workmanship and materials used therein shall impose no responsibility or
liability of any nature whatsoever on Lender or Lender's Construction Consultant
and Borrower, Manager nor any Interested Party, under any circumstances, shall
not be entitled to rely upon such inspections and approvals by Lender or
Lender's Construction Consultant for any reason. Approvals granted by Lender for
any matters covered under this Agreement shall be narrowly construed to cover
only the parties and facts identified in any such approval. Lender's
Construction Consultant has been or will be retained by Lender solely as a
consultant and has no authority to bind or otherwise act for or on behalf of
Lender.
SECTION 9.3 SUBMISSION OF EVIDENCE. Any condition of this
Agreement which requires the submission of evidence of the existence or
non-existence of a specified fact or facts implies as a condition the existence
or non-existence, as the case may be, of such fact or facts and Lender shall, at
all times, be free to independently establish to its reasonable satisfaction
such existence or non-existence.
SECTION 9.4 LENDER SOLE BENEFICIARY. All terms, provisions,
covenants and other conditions of the obligations of Lender to make Advances
hereunder are imposed and all funds held in any Loan Account and other
Collateral are held solely and exclusively for the benefit of Borrower, Manager
and Lender as their rights may appear. Neither Borrower, Manager nor any
Interested Party shall have standing to require satisfaction of such terms,
provisions, covenants and
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other conditions in accordance with their terms, be entitled to assume that
Lender will refuse to make Advances in the absence of strict compliance with any
or all of such terms, covenants and other conditions or be entitled to require
any particular application of such funds. No Person, other than Lender, under
any circumstances, shall be deemed to be beneficiary of such terms, provisions,
covenants and other conditions, any or all of which may be freely waived, in
whole or in part, by Lender at any time if, in Lender's discretion, Lender deems
it advisable or desirable to do so.
SECTION 9.5 CONTRACTORS. Except as provided by law, no Trade
Contractors or any other Person dealing with Borrower or Manager, including the
Architect, the Engineer, if any, and the General Contractor, shall be, nor shall
any of them be deemed to be, third party beneficiaries of this Agreement.
SECTION 9.6 ENTIRE AGREEMENT. This Agreement, the Loan Agreement
and the other Loan Documents embody the entire agreement and understanding
between the parties with respect to the Loan and supersede and cancel all prior
loan applications, expressions of interest, commitments, agreements and
understandings, whether oral or written, relating to the subject matter hereof,
except as specifically agreed to the contrary. If and to the extent that there
is any conflict or inconsistency between the Loan Documents and the commitment
letter issued by Lender and accepted by Borrower (or its Affiliate) prior to the
date hereof with respect to the Loan, the Loan Documents shall prevail.
SECTION 9.7 AMENDMENTS, ETC. No amendment, modification,
termination, or waiver of any provision of this Agreement shall be effective
unless in writing and signed by Borrower, Manager and Lender. No consent to any
departure by Borrower or Manager from any provision of this Agreement shall in
any event be effective unless the same shall be in writing and signed by Lender,
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given. No notice to or demand on Borrower
or Manager in any case shall entitle Borrower or Manager to any other or further
notice or demand in similar or other circumstances.
SECTION 9.8 NOTICES. All notices, certificates, demands,
requests, approvals, consents and other communications provided for herein shall
be in writing and given in the manner provided in the Loan Agreement. The
address of Lender's Construction Consultant for such purpose is EMG Corporate
Center, 1011 McCormick Road, Baltimore, MD 21031 (or such other address as
Lender shall notify Borrower and Manager in writing). All such notices,
certificates, demands and other communications shall be effective when received
or refused at the address to which it is required to be sent.
SECTION 9.9 BINDING EFFECT. This Agreement shall be binding upon and inure
to the benefit of Lender and its successors and assigns and shall be binding
upon Borrower, Manager and their respective permitted successors and assigns.
SECTION 9.10 SEVERABILITY OF PROVISIONS. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall be, as to such
jurisdiction, ineffective
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to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or enforceability of such
provisions in any other
jurisdiction.
SECTION 9.11 HEADINGS, ETC. The headings and captions of various
Sections of this Agreement have been inserted for convenience only and are not
to be construed as defining, modifying, limiting or amplifying, in any way, the
scope or intent of the provisions hereof.
SECTION 9.12 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the substantive laws of the State.
SECTION 9.13 NO JOINT VENTURE. Neither Borrower nor Manager is
and shall be deemed to be a joint venturer, partner, tenant in common or joint
tenant with Lender for any purpose. Lender shall not be deemed to be in privity
of contract with the General Contractor, the Architect, the Engineer, if any,
any Trade Contractor or any other Person providing services with respect to the
site development or the Land or the construction of the Improvements unless and
until, and except to the extent that, Lender shall affirmatively act to
establish any such privity pursuant to Section 8.3 or 8.4, or in the exercise of
Lender's remedies pursuant to the Mortgage or the Assignment of Agreements.
SECTION 9.14 ASSIGNMENT BY LENDER.
(a) ASSIGNMENT. Lender shall have the right, without the consent
of Borrower or Manager, to assign, transfer, sell, negotiate, pledge, grant
participations in or otherwise hypothecate its rights in and to the Loan, this
Agreement, the Note, the Mortgage and the other Loan Documents, to any other
party (an "ASSIGNEE"), provided, however, that no such assignment shall
increase, decrease or otherwise affect either Borrower's or Manager's
obligations under this Agreement or the other Loan Documents. Any Assignee
(including a pledgee) may exercise any of Lender's rights hereunder.
(b) CO-LENDING/PARTICIPATION. Lender shall have the right to
syndicate the Loan to other financial institutions through direct assignments of
interests to co-lenders or through participations to participating lenders,
either prior to the Closing Date or thereafter provided, however, that no such
assignment or participation shall increase, decrease or otherwise affect
Borrower's or Manager's obligations under this Agreement or the other Loan
Documents. In such event the following provisions shall apply:
(I) Those institutions who become co-lenders with Lender
after the Closing Date will, by virtue of assignments of the Loan from
Lender become "co-lenders" under the Loan Documents. Those institutions
who become participants of Lender after the Closing Date will, by virtue
of assignments of participation interests from Lender become
"participating lenders" pursuant to the terms of a participation
agreement with Lender. It is anticipated that Lender shall act as
administrative agent for such co-lenders (and in such role will be
referred to as "AGENT") or lead lender under such participation
agreement (and in such role will be referred to as "LEAD LENDER") or
Lender may assign the role of Agent
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or Lead Lender to another institutional lender. The contractual
obligation of each such co-lender or participating lender to Borrower to
fund such party's respective share or participation of the Loan shall be
several and the failure of one co-lender or participating lender to fund
its pro rata share of any Advance to Borrower shall in no event obligate
any other co-lender or participating lender to increase its pro rata
share of the Loan or it pro-rata participation of any individual
Advance. Provided, however, if a co-lender or participating lender fails
to meet its funding obligations because it becomes insolvent or is
placed into receivership under any applicable federal or state laws,
regulations or orders, Lender shall either (a) purchase back such
co-lender's share of the Loan or such participating lender's Loan
participation, in which case Lender shall make such delinquent Advance,
or (b) Lender shall obtain a replacement co-lender or participating
lender which shall be obligated to make such delinquent Advance.
Provided, further, if the Agent or Lead Lender makes any Advance with
respect to a Request for Advance, which is not funded by a co-lender or
participating lender, and if such Agent or Lead Lender either fails to
(1) make an additional Advance in the amount due from such
non-performing co-lender or participating lender or (2) enforce the
remedies against such non-performing co-lender or participating lender
under the applicable co-lending or participation agreement; then to the
extent Borrower and\or Manager funds the shortfall, Borrower and\or
Manager shall be subrogated to the rights of the Agent or Lead Lender
against the non-performing co-lender or participating lender.
(ii) If Lender enters into such co-lending arrangements,
this Agreement shall be amended and restated to contain provisions
governing the relationships between and among co-lenders, Agent,
Borrower and Manager. If Lender enters into such participation
arrangements, Lender will enter into a separate participation agreement
with such participating lenders. Borrower and Manager agree to cooperate
with Lender in connection with the syndication or participation of the
Loan by, for example, assisting in the preparation of offering
materials, allowing site visits and making documents and personnel
available to prospective Assignees, co-lenders and participating
lenders.
(iii) If required by any Assignee, co-lender or
participating lender, Borrower and Manager shall enter into such
tri-party, intercreditor (or similar) agreements, each in form and
substance reasonably satisfactory to Lender. Lender and such Assignee,
co-lender and participating lender, will diligently and in good faith
use all commercially reasonable efforts to timely achieve the execution
of such agreements.
(iv) If requested by Lender, any Assignee, co-lender,
participating lender, Borrower and Manger agree to make such amendments
to the Loan Documents as may be required to (A) divide the Loan into
separate loans with different characteristics regarding interest rates,
pay rates, priority of Lien in the Premises and the Collateral and
similar matters or (B) divide the Loan into different tranches
containing such differentiated attributes. Provided, however, that in no
event shall Borrower or Manager be required to consent to any such
amendments which change or adversely affect the overall financial terms
of the Loan with respect to Borrower or Manager.
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(v) Borrower and Manager recognize that, in connection
with assignments and participations with respect to the Loan, any or all
documentation, financial statements, appraisals and other data or copies
thereof, relevant to Borrower, Manager, any Guarantor or the Loan may be
exhibited to and retained by any participant or Assignee, co-lender,
participating lender, or prospective participant or Assignee of such
parties.
(c) REMIC/FASIT SALES. Lender may in its discretion subsequent to
the Substantial Completion of the Required Improvements, but prior to the
Conversion Date, sell the Loan to a REMIC/FASIT or otherwise elect to treat such
Loan as being included within a REMIC/FASIT. In connection with such sale or
election, Borrower and Manager shall cooperate in all respects with Lender
including providing such financial information to third parties, making such
non-material changes to the Loan Documents and indemnifying Lender in connection
therewith in accordance with provisions of Section 9.1 of the Loan Agreement.
Provided, however, that in no event shall Borrower or Manager be required to
consent to any such changes which adversely affect the overall financial terms
of the Loan with respect to Borrower or Manager. For purposes of this Section
9.14, such REMIC/FASIT shall be considered to be a "Assignee".
(d) AVAILABILITY OF RECORDS; FURTHER ASSURANCES. Borrower and
Manager acknowledge and agree that Lender may provide to any Assignee, originals
or copies of this Agreement, the Note, the Mortgage, any other Loan Documents
and any other documents, instruments, certificates, opinions, insurance
policies, letters of credit, reports, requisitions and other materials and
information at any time submitted by or on behalf of Borrower, Manager, any
Borrower Owner or Guarantor, or received by Lender in connection with the Loan.
In order to facilitate transactions with Assignees, Borrower and Manager shall
execute such further documents, instruments or agreements as Lender may
reasonably require. In addition, Borrower and Manager agree to cooperate in all
reasonable respects with Lender in the exercise of Lender's rights pursuant to
this Section 9.14, including providing such information and documentation
regarding Borrower, Manager, Borrower Owners and Guarantor and their businesses
and finances as Lender or any potential Assignee may reasonably request and to
meet with potential Assignees upon reasonable notice.
(e) EXPENSES. Lender and Borrower shall be responsible for their
respective expenses incurred in connection with any assignment under this
Section 9.14.
SECTION 9.15 RETENTION OF SERVICER. Lender reserves the right to
retain the Servicer to act as its agent hereunder with such powers as are
specifically delegated to the Servicer by Lender, whether pursuant to the terms
of this Agreement or otherwise, together with such other powers as are
reasonably incidental thereto. Prior to the occurrence of an Event of Default,
Borrower or Manager shall not be required to pay any fees or expenses incurred
by the Servicer on behalf of Lender in connection with a prepayment of the Note,
release of the Premises, assumption or modification of the Loan or enforcement
of the Loan Documents other than the Servicing Fee.
SECTION 9.16 CONSENT OF LENDER. Unless otherwise expressly stated to the
contrary, any determination or judgment made or any consent, election, approval
or waiver given,
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by Lender pursuant to this Agreement, the Initial Note, the Mortgage or any
other Loan Document shall be made or given, as the case may be, in Lender's
discretion.
SECTION 9.17 JURY TRIAL WAIVER. EACH OF BORROWER, MANAGER, AND LENDER
HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY
JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH
RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY
CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER
OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY BORROWER,
MANAGER AND LENDER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND
EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE.
LENDER IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING
AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY BORROWER AND MANAGER.
SECTION 9.18 INCORPORATION BY REFERENCE. Borrower and Manager
agree that the Note, the Mortgage and the other Loan Documents shall be made
subject to all the terms, covenants, conditions, obligations, stipulations and
agreements contained in this Agreement to the same extent and effect as if fully
set forth in and made a part of the Initial Note, the Mortgage and the other
Loan Documents. If there is a conflict between the terms of this Agreement and
the terms of the Loan Agreement, then the terms, covenants and conditions of the
Loan Agreement shall control. If there is a conflict between the terms of this
Agreement and any other Loan Documents, then the terms, covenants and conditions
of this Agreement shall prevail. The information set forth on the cover, and
recitals hereof and the Exhibits attached hereto are hereby incorporated herein
as a part of this Agreement with the same effect as set forth in the body
hereof.
SECTION 9.19 COUNTERPARTS. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, and it shall not be necessary in making proof of this Agreement to
produce or account for more than one such
counterpart.
SECTION 9.20 PRODUCT OF JOINT DRAFTING. This Agreement is, and shall be
deemed to be, the product of joint drafting by the parties hereto and shall not
be construed against any of them as the drafter hereof.
SECTION 9.21 INTENTIONALLY OMITTED.
SECTION 9.22 SIGN. At the request of Lender, Borrower or Manager
shall, subject to applicable ordinances pertaining to the Premises, and subject
to the Approval of Borrower or Manager, not to be unreasonably withheld,
conditioned or delayed, place a sign upon the Premises reciting, among other
things, the source of rehabilitation or construction financing for the
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Premises, which sign shall be provided at the expense of Borrower or
Manager and shall remain in place until the completion of construction.
SECTION 9.23 SURVIVAL. The provisions of this Agreement shall
survive the completion of the Required Improvements; provided, however, upon the
occurrence of the Conversion Date all of the terms and provisions of this
Agreement shall be of no further force and effect (except to the extent that
certain definitions contained herein and incorporated by reference in any other
Loan Documents continue to be operative in such other Loan Documents), this
Agreement shall terminate and the Loan Agreement shall constitute and operate as
the sole loan agreement governing the operation and administration of the Loan.
SECTION 9.24 TIME OF THE ESSENCE. Time is of the essence with respect to
each and every covenant, agreement and obligation of Borrower and Manager under
this Agreement.
SECTION 9.25 LENDER RELIANCE. Except as otherwise specifically
provided in this Agreement, Lender in administering the Loan and the
disbursement of the Advances under this Agreement and the other applicable Loan
Documents, may rely exclusively upon, and deal exclusively with, Manager and
shall have no obligation to confirm with Borrower the truth, accuracy or
applicability of any instruction, representation or any other communication
received from Manager, and Lender shall have no liability to Borrower for any
action taken in such reliance.
SECTION 9.26 LIMITATION OF LIABILITY. Notwithstanding any
provision of this Agreement to the contrary, the liability of Borrower, the
Manager, and their respective agents, employees, officers, directors, partners,
etc. hereunder is limited pursuant to Section 10.1 of the Loan Agreement.
SECTION 9.27 TERMINATION OF MANAGER'S OBLIGATIONS.
Notwithstanding anything to the contrary contained herein or in any other Loan
Documents, Manager's obligations to either Lender or Borrower under this
Agreement or any other Loan Documents (except as otherwise expressly provided
for herein or therein) shall terminate upon the termination of the Development
Agreement, in which case Borrower shall succeed to all of Manager's rights,
duties and obligations under this Agreement. Subject to Section 10.1 of the Loan
Agreement, the foregoing obligations of Manager which have accrued but remain
unsatisfied prior to the termination of the Development Agreement, shall remain
in full force and effect and this Section shall not relieve Manager of such
Obligations. Further, if Manager enters into a Synthetic Lease pursuant to
Section 10.33 of the Loan Agreement or exercises any of its rights under the
Equity Option Agreement or the Property Option Agreement, then Manager's
obligations shall not terminate but rather shall remain in full force and
effect.
SECTION 9.28 WAIVER OF "ONE ACTION" RULE; CROSS COLLATERALIZATIONS.
(a) The Loan has been made by Lender pursuant to the Master
Financing Facility Agreement. The Master Financing Facility Agreement
contemplates that one (1) or more other loans (the "OTHER LOANS") made to Other
Borrowers pursuant to the Master Financing Facility
50
<PAGE>
Agreement will, at Lender's election, be cross collateralized and cross
defaulted with the Loan and with each other, subject to Section (b) below. In
such event, such Other Loans will be secured by the Property and the Collateral,
and the Loan will be secured by the other properties and other collateral
serving as primary security for such Other Loans (the "OTHER PROPERTIES"),
subject to Section (b) below.
(b) Borrower hereby agrees that (x) with respect to the
obligations of any Other Borrower under any Other Loan made pursuant to the
Master Financing Facility Agreement, such Other Borrower's obligations shall be
cross-collateralized and cross-defaulted with the Loan until the earlier of (i)
the date on which any such Other Loan or the Loan has been converted pursuant to
the terms of the relevant Other Loan Agreement or this Agreement, as applicable,
and transferred in a Securitization for loans which have stabilized of which the
Loan or applicable Other Loans are not a part (i.e., the Loan and any Other
Loans are indifferent Securitization Pools) and (ii) Lender's election to
release the cross-default and the cross-collateralization and (y) the Loan shall
be cross-defaulted and cross-collateralized with any Other Loan which is
included in the same Securitization (as defined in this Agreement and in the
relevant Other Loan Agreement) as the Loan. During the term of any cross-default
and cross-collateralization and with respect to those Other Loans which are the
subject of such cross-default and cross-collateralization, without limitation to
any other right or remedy provided to Lender in this Agreement, the Loan
Agreement, the Master Financing Facility Agreement, or any of the other Loan
Documents, Borrower acknowledges and agrees that, to the full extent permitted
under applicable law, upon the occurrence of an Event of Default (i) Lender
shall have the right to pursue all of its rights and remedies in one proceeding,
or separately and independently in separate proceedings which it, as Lender, in
its discretion, shall determine form time to time, (ii) Lender is not required
to either marshall assets, sell the Property or any Other Properties in any
inverse order of alienation, or be subjected to any "one action" or "election of
remedies" law or rule, (iii) the exercise by Lender of any remedies against any
Property or Other Properties will not impede Lender from subsequently or
simultaneously exercising remedies against any Property or Other Properties,
(iv) all Liens and other rights, remedies and privileges provided to Lender in
this Agreement, the Master Financing Facility Agreement (except as earlier
terminated pursuant to the terms thereof), and in the other Loan Documents
(except as earlier terminated pursuant to the terms thereof) or otherwise shall
remain in full force and effect until Lender has exhausted all of its remedies
against the Property and all Other Properties has been foreclosed, sold and/or
otherwise realized upon and (v) the Property and all the Other Properties under
the Master Financing Facility Agreement shall be security for the performance of
all of Borrower's Obligations.
51
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective duly authorized officers as of
the day and year first above written.
BORROWER:
AH Texas Owner Limited Partnership,
an Ohio limited partnership
By: AH Texas CGP, Inc., an Ohio corporation,
its sole general partner
By: __________________________________
David B. Fenkell
President
MANAGER:
BLC of Texas-II, L.P.,
a Delaware limited partnership
By: Brookdale Living Communities of Texas-II, Inc.,
a Delaware corporation, its general partner
By: __________________________________
Darryl W. Copeland, Jr.
Vice President
52
<PAGE>
LENDER:
NOMURA ASSET CAPITAL CORPORATION,
a Delaware corporation
By:
Stuart Simon
Director
53
<PAGE>
EXHIBIT A
LAND
A-1
<PAGE>
EXHIBIT B
BUDGET
B-1
<PAGE>
EXHIBIT C
[FORM OF REQUEST FOR ADVANCE]
____________, 1998
Nomura Asset Capital Corporation
Two World Financial Center
Building B
New York, New York 10281
Attn: Sheryl McAfee
Re: REQUEST FOR ADVANCE NO. ____
Property Address:
Ladies and Gentlemen:
This Request for Advance No. ____, in the amount of $________ of
Hard Costs and the estimated amount of $ of Soft Costs, is made pursuant to the
Building Loan Agreement dated as of ____________, 1998 (the "BLA") between the
undersigned, as manager, borrower, and you, as lender. All capitalized terms
used and not defined herein shall have the respective meanings given such terms
in the BLA.
A. Manager hereby certifies to you as follows:
1. Exhibit A hereto sets forth, with respect to each Line Item, the amount
thereof incurred through and including the prior Request for Advance, the amount
thereof paid with Equity Payments, the amount thereof paid from Loan proceeds,
the amount of Retainage, if any, currently held by Lender in respect thereof and
the amount of Retainage previously released by Lender for such Line Item.
C-1
<PAGE>
2. The following are Manger's estimates of Soft Costs for which this
Request for Advance is made, to the extent such Soft Costs are owed to Lender or
Lender's Construction Consultant:
Interest: $
Draw Fee: $
Servicing Fee: $
Lender's Construction Consultant's fee: $
Lender's Counsel Fees: $
Title and Closing Costs $___________
Management\Development fee: $___________
Manager acknowledges that Lender will determine the exact amount of such Soft
Costs, and the amount of the Advance made pursuant to this Request for Advance
(i) will be made to Borrower or Manager net of Soft Costs owing to Lender and
(ii) may be in an amount different from the amount requested herein, to the
extent actual Soft Costs vary from Manager's estimates.
3. Exhibit B hereto sets forth, by Line Item, the Hard Costs and other Soft
Costs for which this Request for Advance is made, the amount of each such Cost
to be paid from the requested Advance, the amount of each such Cost to be paid
with Equity Payments, and the amount of Retainage, if any, the release of which
is being requested.
4. Enclosed herewith are true, complete and correct copies of all items
required to be submitted under clauses (b) (c), (e), (f), (g), (h), (i), and (j)
of Section 5.3 of the BLA.
5. Enclosed herewith are copies of lien waivers covering all work paid for
from the most recent Advance.
6. Enclosed herewith is evidence of payment of the entire amount of the
most recent Advance to the persons to whom such Advance was paid.
7. Enclosed herewith is evidence that Manager has incurred all of the Soft
Costs for which this Request for Advance is made, to the extent that such Soft
Costs are not owed to Lender or Lender's Construction Consultant.
B. Manager hereby represents and warrants to Lender that except
as for the following items: ________, all of the conditions set forth in Article
V of the BLA have been satisfied by Borrower as of the date hereof (other than
the conditions set forth in Sections 5.3(d) and
5.3(l) of the BLA).
C. Manager hereby represents and warrants that except for the
following items __________, (i) there is not now existing and the making of the
Advance requested hereby will not
C-2
<PAGE>
result in any Deficiency, (ii) the actual construction of the Improvements
accomplished to date conforms to that contemplated by the Construction Schedule.
D. Manager also requests that Lender disburse $__________ from
the Deficiency Account to pay for the Hard Costs and Soft Costs set forth by
Line Item on Exhibit C hereto.
E. Manager also requests that Lender reallocate Cost Savings
among the Line Items specified on Exhibit D hereto.
Assuming that this Request for Advance and the enclosures meet
with your approval, the following are the wire instructions for the requested
Advance:
ACCOUNT AMOUNT
Should you require any further documentation or have any questions, please
contact
- -----------------------------.
Very truly yours,
BLC of Texas - II, L.P.,
a Delaware limited partnership
By: Brookdale Living Communities of Texas - II,
Inc.,
a Delaware corporation, its general partner
By: ______________________________
Darryl W. Copeland, Jr.
Vice President
By: ,
By:
Name:
Title:
C-3
<PAGE>
EXHIBIT D
ARCHITECT'S INITIAL CERTIFICATION,
CONSENT AND AGREEMENT
(Architect's Letterhead)
___________, 199_
Nomura Asset Capital Corporation
Two World Financial Center, Building B
New York, New York 10281-1198
Attn: Sheryl McAfee
Premises: [Describe Premises]
Improvements: [Insert description of improvement]
Borrower: [Insert name of Borrower]
Manager: [Insert name of Manager]
Ladies and Gentlemen:
The undersigned, an architect duly registered and licensed in the State
of ________, (i) has been retained by Borrower Manager as Architect pursuant
to an Architect's Agreement dated _______, 199_ with Borrower Manager (as the
same may be amended or supplemented from time to time, as permitted hereby, the
"ARCHITECT'S AGREEMENT") and (ii) has prepared for Borrower Manager final
plans, the detailed working drawings, and specifications (and addenda), dated
________, 199_, and last redated and revised on _______, 199_, and identified as
set forth on Schedule "A" annexed hereto (collectively the "PLANS") in
connection with the proposed construction of the Improvements on the Premises.
The undersigned has been advised by Borrower that Borrower has requested
that Nomura Asset Capital Corporation (herein referred to, together with its
successors and assigns, as "LENDER"), make a loan to the Borrower in a maximum
principal amount of $__________ to fund a portion of the costs of constructing
the Improvements (the "BUILDING LOAN"). A complete and accurate copy of the
Architect's Agreement, with all amendments to date, is attached hereto.
The undersigned has also been advised by Borrower that the Building Loan
is to be made in accordance with the provisions of that certain building loan
agreement between Borrower, Manager and Lender to be dated on or about
_________, 199_ (the "BUILDING LOAN Agreement").
D-1
<PAGE>
Accordingly, at Borrower's Manager request and in order to assist
Borrower Manager with providing information and representations to Lender
which Lender may rely upon in order to make an informed decision with regard to
making the Building Loan, the undersigned hereby states that:
A. The Plans comply with and conform in all respects to the requirements
of law, having been duly filed with and having been approved by [insert name of
relevant state or local authorities], and all other governmental and municipal
authorities whose approval is required, and further that the Plans are in full
compliance with all requirements and restrictions pursuant to all applicable
zoning, environmental, building, fire, health, and other governmental statutes,
ordinances, rules and regulations, as well as the requirements of the
appropriate board of fire underwriters or other such similar body acting for and
in the locality in which the Premises is located;
B. To extent obtainable at this stage of construction, all requisite
building permits, licenses, and approvals have been obtained in connection with
the construction of the Improvements and all such items shall be obtained prior
to Substantial Completion;
C. In the opinion of the undersigned, upon completion of the
construction of the Improvements substantially in accordance with the Plans, all
of the preconditions will have been met justifying the issuance of (i) a
permanent certificate or certificates of occupancy for the Improvements and (ii)
such other necessary approvals, certificates, permits and licenses that may be
required from [insert names of relevant state and local authorities], the board
of fire underwriters, or other similar body, or local or municipal fire, health,
policy, buildings, housing, environmental, zoning and planning boards, agencies,
authorities or departments and any such other governmental authorities having
jurisdiction thereover;
D. Upon completion of the construction of the Improvements substantially
in accordance with the Plans, the Improvements will be in compliance with all
zoning, environmental, and other applicable laws, statutes, ordinances, rules
and regulations, restrictions, requirements and easements then in effect, and
all existing building and other municipal or state violations filed or noted
against the Premises or the Improvements will be corrected upon or before the
completion of construction substantially in accordance with the Plans; and
E. All necessary gas, electric, water and sewage and other utilities
will be made available to the Improvements and the Premises upon completion of
the Improvements.
Additionally, at Borrower's Manager's request, the undersigned hereby
consents to the assignment of the Architect's Agreement by the Borrower
Manager to Lender in connection with the Building Loan (and to any further
assignment by Lender). The undersigned acknowledges and agrees that it will not
amend or modify or terminate or otherwise alter the Architect's Agreement
without the prior written approval of Lender and that Lender may enforce the
obligations of the Architect's Agreement with the same force and effect as if
enforced by Borrower Manager.
D-2
<PAGE>
The undersigned warrants that (i) it has no notice of any prior
assignment of the Architect's Agreement, (ii) the Architect's Agreement is a
valid, enforceable agreement, (iii) neither party is in default of its
obligations thereunder, and (iv) all covenants, conditions, and agreements have
been performed as required therein, except those not due to be performed until
after the date hereof.
Additionally, in consideration of Lender's making of the Building Loan,
the undersigned agrees that in the event of a default by Borrower or Manager
under any of the documents now or hereafter executed and delivered in connection
with the Building Loan (collectively the "LOAN DOCUMENTS"), the undersigned
shall, at Lender's request, continue performance under the Architect's Agreement
in accordance with the terms thereof, without regard to any modifications
thereto not approved in writing by Lender, provided the undersigned is
reimbursed in accordance with the Architect's Agreement for all services
rendered to the Lender. Furthermore, in the event of any such default by
Borrower or Manager under any of Loan Documents, the undersigned agrees to make
available to Lender the "as-built" plans, if any, the detailed specifications
and working drawings (and addenda) for work performed at that time. Herewith we
are delivering a copy of our errors and omissions policy.
The undersigned further agrees that if it at any time gives a notice of
default to Borrower Manager under the Architect's Agreement, the undersigned
shall provide a copy of such notice
simultaneously to Lender.
The undersigned further agrees that if at any time Lender shall become
owner of the Premises, or otherwise required the use of the Plans, the Lender
shall have the right to use the same, together with any and all changes,
modifications, amendments, additions, enlargements, or extensions thereof,
without any cost or expense and without any payment of any additional fees or
charges to the undersigned.
Dated: __________, 199_
[ARCHITECT]
By: ____________________________
Name:
Title:
D-3
<PAGE>
Schedule "A"
[to Exhibit D]
Schedule for Final Plans, Detailed
Specifications and Working Drawings
(and Addenda)
-------------------------------
Drawing No. Title Date & Revised Date
===============================================================================
D-4
<PAGE>
EXHIBIT E - SUBSTITUTE WITH T:\DOCS\314730\82499\GENCONT.DOC
E-1
<PAGE>
EXHIBIT F
MANAGER'S CONSENT AND AGREEMENT
F-1
<PAGE>
EXHIBIT G
ENGINEER'S INITIAL CERTIFICATION,
CONSENT AND AGREEMENT
(Engineer's Letterhead)
___________, 199_
Nomura Asset Capital Corporation
Two World Financial Center, Building B
New York, New York 10281-1198
Premises: [Describe Premises]
Improvements: [Insert more specific description of
improvement]
Borrower: [Insert name of Borrower]
Manager: [Insert name of Manager]
Ladies and Gentlemen:
The undersigned, an engineer duly registered and licensed in the State
of ________, (i) has been retained by Manager as Engineer pursuant to an
Engineer's Agreement dated _______,
199_
with Borrower (as the same may be amended or supplemented from time to time, as
permitted hereby, the "ENGINEER'S AGREEMENT") and (ii) has prepared for Manager
final plans, the detailed working drawings, and specifications (and addenda),
dated ________, 199_, and last redated and revised on _______, 199_, and
identified as set forth on Schedule "A" annexed hereto (collectively the
"PLANS") in connection with the proposed construction of the Improvements on the
Premises.
The undersigned has been advised by Manager that Borrower has requested
that Nomura Asset Capital Corporation (herein referred to, together with its
successors and assigns, as "LENDER"), make a loan to the Borrower in a maximum
principal amount of $__________ to fund a portion of the costs of constructing
the Improvements (the "BUILDING LOAN").
The undersigned has also been advised by Manager that the Building Loan
is to be made in accordance with the provisions of that certain building loan
agreement between Borrower, Manager and Lender to be dated on or about
_________, 199_ (the "BUILDING LOAN AGREEMENT").
Accordingly, at Manager's request and in order to assist Manager with
providing information and representations to Lender which Lender may rely upon
in order to make an informed decision
G-1
<PAGE>
with regard to making the Building Loan, the undersigned hereby states that the
Plans comply with and conform in all respects to the requirements of law, having
been duly filed with and having been approved by [insert name of relevant state
or local authorities], and all other governmental and municipal authorities
whose approval is required, and further that the Plans are in full compliance
with all requirements and restrictions pursuant to all applicable zoning,
environmental, building, fire, health, and other governmental statutes,
ordinances, rules and regulations, as well as the requirements of the
appropriate board of fire underwriters or other such similar body acting for and
in the locality in which the Premises is located.
Additionally, at Manager's request, the undersigned hereby consents to
the assignment of the Engineer's Agreement by the Manager to Lender in
connection with the Building Loan (and to any further assignment by Lender). The
undersigned acknowledges and agrees that it will not amend or modify or
terminate or otherwise alter the Engineer's Agreement without the prior written
approval of Lender and that Lender may enforce the obligations of the Engineer's
Agreement with the same force and effect as if enforced by Manager.
The undersigned warrants that (i) it has no notice of any prior
assignment of the Engineer's Agreement, (ii) the Engineer's Agreement is a
valid, enforceable agreement, (iii) neither party is in default of its
obligations thereunder, and (iv) all covenants, conditions, and agreements have
been performed as required therein, except those not due to be performed until
after the date hereof.
The undersigned further agrees that if it at any time gives a notice of
default to Manager under the Engineer's Agreement, the undersigned shall provide
a copy of such notice simultaneously
to Lender.
Additionally, in consideration of Lender's making of the Building Loan,
the undersigned agrees that in the event of a default by Borrower or Manager
under any of the documents now or hereafter executed and delivered in connection
with the Building Loan (collectively the "LOAN DOCUMENTS"), the undersigned
shall, at Lender's request, continue performance under the Engineer's Agreement
in accordance with the terms thereof, without regard to any modifications
thereto not approved in writing by Lender, provided the undersigned is paid in
accordance with the Engineer's Agreement for all services rendered to the
Lender. Furthermore, in the event of any such default by Borrower or Manager
under any of Loan Documents, the undersigned agrees to make available to Lender
the "as-built" plans, if any, the detailed specifications and working drawings
(and addenda) for work performed at that time. Herewith we are delivering a copy
of our errors and omissions policy.
The undersigned further agrees that if at any time Lender shall become
owner of the Premises, or otherwise required the use of the Plans, the Lender
shall have the right to use the same, together with any and all changes,
modifications, amendments, additions, enlargements, or
G-2
<PAGE>
extensions thereof, without any cost or expense and without any payment of any
additional fees or charges to the undersigned.
Dated: __________, 199_
[ENGINEER]
By: ____________________________
Name:
Title:
G-3
<PAGE>
Schedule "A"
[to Exhibit G]
Schedule for Final Plans, Detailed
Specifications and Working Drawings
(and Addenda)
-------------------------------
Drawing No. Title Date & Revised Date
================================================================================
G-4
<PAGE>
EXHIBIT H
MANAGER'S AFFIDAVIT
(to be furnished with each Request for Advance)
STATE OF ILLINOIS )
: ss.:
COUNTY OF COOK )
____________________, being duly sworn, deposes and says:
That affiant is the _________________ of Brookdale Living
Communities of Texas -II, Inc., the general partner of BLC of Texas - II, L.P.,
a Delaware limited partnership (the "MANAGER"), has made due investigation as to
matters hereinafter set forth, and does hereby certify the following to induce
Nomura Asset Capital Corporation (together with its successors and assigns, the
"LENDER") to make and advance the sum of ________________ Dollars ($_______) to
the Manager and to AH Texas Owner Limited Partnership, an Ohio limited
partnership (the "Borrower") pursuant to the terms of that certain Building Loan
Agreement, dated as of June __, 1998, between the Lender, Borrower and Manager
(the "BUILDING LOAN AGREEMENT"), and Request for Advance No. _____, dated
_______, 199_, which Request for Advance is being submitted to the Lender
herewith:
1. All representations and warranties contained in the Building Loan
Agreement are true and correct in all material respects as of the date hereof.
2. No Default (such term and other capitalized terms used but not
otherwise defined herein having the respective meanings provided in Building
Loan Agreement) or Event of Default exists, and no event or condition has
occurred and is continuing or existing or would result from the Advance about to
be made which, with the giving of notice or the passage of time, or both, would
constitute a Default or Event of Default.
3. Construction of the Required Improvements has been carried on with
dispatch and has not been discontinued at any time for Unavoidable Delay or for
reasons within the control of the Manager in excess of that allowed under the
Building Loan Agreement except: _______________________, or in excess of that
requiring a notice to the Lender under
Section 7.4
of the Building Loan Agreement; the Required Improvements have not been damaged
by fire or other casualty, and no part of the Property has been taken by eminent
domain and no proceedings
or negotiations therefor are pending or threatened.
4. Construction of the Required Improvements is progressing in such
manner so as to assure the Substantial Completion thereof in accordance with
Building Loan Agreement.
H-1
<PAGE>
5. All funds previously received from the Lender as Advances under
Building Loan Agreement have been expended for the sole purpose of paying Hard
Costs and Soft Costs (collectively, COSTS) previously certified to the Lender in
Requests for Advance as Costs to be paid from Loan proceeds, and no part of said
funds have been used, and the funds to be received pursuant to the Request for
Advance submitted herewith shall not be used, for any other purpose. No item of
Costs previously certified to the Lender in a Request for Advance remains unpaid
as of the date of this Affidavit.
6. All of the statements and information set forth in the Request for
Advance being submitted to the Lender herewith are true and correct in every
material respect as at the date hereof, and all Costs certified to the Lender in
said Request for Advance accurately reflect the precise amounts (or estimated
amounts, in the case of estimated Soft Costs) due. All of the funds to be
received pursuant to said Request for Advance shall be used solely for the
purpose of paying the items of cost specified therein to be paid therefrom or
for reimbursing the Manager for such items previously paid by the Manager.
7. Except as previously disclosed in writing to Lender, nothing has
occurred subsequent to the date of the Building Loan Agreement which has or may
result in the creation of any lien, charge or encumbrance upon the Property, or
any part thereof, or anything affixed thereto or used in connection therewith,
or which has or may substantially and adversely impair the ability of Borrower
or the Manager to make when due all payments of principal and interest required
under the Loan Documents or the ability of Borrower or the Manager to meet its
obligations under the Building Loan Agreement.
8. None of the labor, materials, overhead or other items of expense
specified in the Request for Advance submitted herewith have previously been
made the basis of any Request for Advance by the Manager which has been approved
by Lender.
H-2
<PAGE>
9. All conditions, other than those exclusively within Lender's
control, to the advance referred to above and to be made in accordance with the
Request for Advance submitted herewith have been met in accordance with the
terms of the Building Loan Agreement.
BLC of Texas-II, L.P.,
a Delaware limited partnership
By: Brookdale Living Communities of Texas - II, Inc.,
a Delaware corporation, its sole general partner
By: ___________________________
Darryl W. Copeland, Jr.
Vice President
Sworn to before this ___ day of _______, 19__.
- -------------------------
Notary Public
H-3
<PAGE>
EXHIBIT I
PENDING DISBURSEMENTS CLAUSE
Pending disbursement of the full proceeds of the loan secured by the
Deed of Trust this policy insures only to the extent of the amount actually
disbursed, but increases as each disbursement is made in good faith and without
knowledge of any defects in or objections to, the title up to the face amount of
the policy. Nothing contained in this paragraph shall be construed as limiting
any exception under Schedule "B", or any printed provision of this policy.
I-1
<PAGE>
EXHIBIT J
EXISTING TRADE CONTRACTS
J-1
<PAGE>
EXHIBIT K
K-1
<PAGE>
GUARANTY OF PAYMENT OF NOTE,
RATE LOCK OBLIGATIONS, CARRYING
COSTS AND RECOURSE OBLIGATIONS
made by
BROOKDALE LIVING COMMUNITIES, INC.,
as guarantor,
in favor of
NOMURA ASSET CAPITAL CORPORATION
Dated as of June __, 1998
<PAGE>
GUARANTY OF PAYMENT OF NOTE,
RATE LOCK OBLIGATIONS, CARRYING
COSTS AND RECOURSE OBLIGATIONS
This GUARANTY (this "Guaranty"), dated as of June __, 1998, made by
BROOKDALE LIVING COMMUNITIES, INC., a Delaware corporation, having an office at
77 West Wacker Drive, Suite 4400, Chicago, Illinois 60601 ("Guarantor"), in
favor of NOMURA ASSET CAPITAL CORPORATION, a Delaware corporation, having an
office at Two World Financial Center, Building B, New York, New York 10281-1198
(together with its successors and assigns, "Lender").
R E C I T A L S:
A. Pursuant to that certain Loan Agreement dated as of the date
hereof (as the same may be amended, modified, supplemented or replaced from time
to time, the "Loan Agreement") by and among AH Texas Owner Limited Partnership
("Borrower"), BLC of Texas-II, L.P., ("Manager"), and Lender, and also pursuant
to that certain Building Loan Agreement dated as of the date hereof between
Borrower, Manager and Lender (as the same may be amended, modified, supplemented
or replaced from time to time, the "Building Loan Agreement", and collectively
with the Loan Agreement, sometimes hereinafter referred to as the "Loan
Agreements"), Lender has agreed to make a loan (the "Loan") to Borrower in an
aggregate principal amount of Twenty-Four Million Two Hundred Fifty Thousand and
00/100 Dollars ($24,250,000), subject to the terms and conditions of the Loan
Agreements;
B. Borrower has executed a note in the principal amount of
Twenty-Four Million Two Hundred Fifty Thousand and 00/100 Dollars ($24,250,000)
(as
the same may be amended,
modified, restated, severed, consolidated, renewed, replaced, or supplemented
from time to time, the "Note"). The Note is secured by, inter alia, that certain
deed of trust, assignment of leases and rents, security agreement and fixture
filing (as amended from time to time, the "Mortgage") on the Property;
C. As a condition to Lender's making the Loan, Lender is requiring
that Guarantor execute and deliver to Lender this Guaranty; and
D. Guarantor hereby acknowledges that Guarantor will
materially benefit from
Lender's agreeing to make the Loan;
NOW, THEREFORE, in consideration of the premises set forth herein and
as an inducement for and in consideration of the agreement of Lender to make the
Loan pursuant to the
1
<PAGE>
Loan Agreements, Guarantor hereby agrees, covenants, represents and warrants to
Lender as follows:
1. Definitions.
(a) All capitalized terms used and not defined herein shall have
the respective meanings given such terms in the Loan Agreements.
(b) The term "Payment Obligations" means Borrower's obligations
under the Loan Documents to pay when due in accordance therewith the Principal
from time to time outstanding, all interest accrued thereon (including interest
at the Default Rate when applicable), the Yield Maintenance Premium, and all
other fees, expenses and other charges payable by Borrower to Lender under the
Loan Documents.
(c) The term "Rate Lock Obligations" means the obligations of
Borrower and/or Manager to pay when due all Lender's Expenses in accordance with
the Rate Lock
Agreement.
(d) The term "Carry Obligations" means Borrower's obligations to
pay when due all Operating Expenses and Debt Service (whether or not Operating
Income is sufficient
to pay them).
(e) The term "Recourse Obligations" means Borrower's liabilities
and obligations under the Loan Documents that may, even after the Payment
Obligations Termination Date, be enforced by actions or proceedings in which a
money judgment or a deficiency judgment is sought by Lender against Borrower,
and which is enforceable against Borrower and any or all of its assets (without
recourse being limited to the collateral securing the Debt). The Recourse
Obligations are those arising out of or in connection with the actions, events
and other matters described in clauses (e) through (h), (k), and (m) of the
second paragraph of Section 10.1 of the Loan Agreement.
(f) The term "Payment Obligations Termination Date" means the
earlier of (i) the Conversion Date or (ii) the earliest date after the first
(1st) anniversary of Substantial Completion on which the Debt Service Coverage
Ratio is at least 1.27.
(g) Intentionally deleted.
2. Guaranty.
(a) Guarantor hereby irrevocably, absolutely and unconditionally
guarantees to Lender the full, prompt and complete payment when due (and whether
by reason of acceleration of maturity or otherwise) the Payment Obligations, the
Rate Lock Obligations, the Carry Obligations and the Recourse Obligations
(collectively, the "Guarantied Obligations").
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(b) Notwithstanding anything to the contrary contained in this
Guaranty, including, without limitation, Section 2(a) hereof, the Guarantied
Obligations and Guarantor's maximum aggregate liability under this Guaranty
shall be subject
to reduction as follows:
(i) Provided no Default or Event of Default then exists and
that no default on the part of Guarantor then exists under this Guaranty,
upon Substantial Completion, the aggregate maximum liability of Guarantor
under this Guaranty with respect to the Payment Obligations shall be
reduced to (A) an amount equal to 50% of the sum of (w) the Principal then
outstanding, (x) any Advances made upon (or after) Substantial Completion,
(y) interest accrued and thereafter accruing on the amounts described in
(w) and (x) above and (z) all other fees, expenses and other charges
(including the Yield Maintenance Premium) payable by Borrower to Lender
under the Loan Documents plus (B) any sums then or thereafter payable by
Guarantor pursuant to Section 16 of this Guaranty;
(ii) Provided no Default or Event of Default then exists and
that no default on the part of Guarantor then exists under this Guaranty,
upon the Property achieving a Debt Service Coverage Ratio (as defined in
the Loan Agreement, but using a six (6) month rather than a 12-month,
period) after Substantial Completion of at least 1.0 to 1, the aggregate
maximum liability of Guarantor under this Guaranty with respect to the
Payment Obligations shall be reduced to (A) an amount equal to twenty-five
percent (25%) of the sum of (w) the Principal then outstanding, (x) any
Advances made upon (or after) Substantial Completion, (y) interest accrued
and thereafter accruing on the amounts described in (w) and (x) above and
(z) all other fees, expenses and other charges (including the Yield
Maintenance Premium) payable by Borrower to Lender under the Loan
Documents plus (B) any sums then or thereafter payable by Guarantor
pursuant to Section 16 of this Guaranty; and
(iii) Provided no Default or Event of Default then exists and
that no default on the part of Guarantor then exists under this Guaranty,
this Guaranty shall terminate with respect to the Payment Obligations, the
Rate Lock Obligations, and the Carry Obligations (except with respect to
Guarantor's liability for any sums due and payable under this Guaranty as
of the date of such termination and any sums thereafter becoming payable
pursuant to Section 16 of this Guaranty) on the Payment Obligations
Termination Date.
(iv) This Guaranty and the Guarantied Obligations hereunder,
including the Recourse Obligations, shall terminate on the Payment
Obligations Termination Date, except to the extent any such obligations
exist and are unpaid, or not performed in full, on such date.
(c) All sums payable to Lender under this Guaranty shall be
payable on demand and without reduction for any offset, claim, counterclaim or
defense.
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(d) Guarantor hereby agrees to indemnify, defend and save
harmless Lender from and against any and all costs, losses, liabilities, claims,
causes of action, expenses and damages, including, without limitation,
reasonable attorneys' fees and disbursements, which Lender may suffer or which
otherwise may arise by reason of Borrower's failure to pay any of the Guarantied
Obligations when due, irrespective of whether such costs, losses, liabilities,
claims, causes of action, expenses or damages are incurred by Lender prior or
subsequent to (i) Lender's declaring the Principal, interest and other sums
evidenced or secured by the Loan Documents to be due and payable, (ii) the
commencement or completion of a judicial or non-judicial foreclosure of the
Mortgage or (iii) the conveyance of all or any portion of the Property by
deed-in-lieu of foreclosure.
(e) Subject to Section 2(b)(i) and (ii) above, Guarantor agrees
that no portion of any sums applied (other than sums received from Guarantor in
full or partial satisfaction of its obligations hereunder), from time to time,
in reduction of the Debt shall be deemed to have been applied in reduction of
the Guarantied Obligations until such time as the Debt has been paid in full, or
Guarantor shall have made the full payment required hereunder, it being the
intention hereof that the Guarantied Obligations shall be the last portion of
the Debt to be deemed satisfied. Subject to Section 2(b)(i) and (ii) above, any
amounts paid in reduction of the Debt by Guarantor during the First Period shall
not reduce the Guarantied Obligations during the Second Period. Subject to
Section 2(b)(i) and (ii) above, any amounts paid in reduction of the Debt by
Guarantor during the Second Period shall not reduce the Guarantied Obligations
during the Third Period. For purposes of this paragraph (e), (i) the "First
Period" shall mean the period from the date hereof to Substantial Completion,
(ii) the Second Period shall mean the period from Substantial Completion to the
reduction of the Payment Obligations pursuant to Section 2(b)(iii), and (iii)
the Third Period shall mean the period from the end of the Second Period to the
Payment Obligations Termination Date.
3. Representations and Warranties. Guarantor hereby represents and
warrants to Lender as follows (which representations and warranties shall be
given as of the date hereof and shall survive the execution and delivery of this
Guaranty):
(a) Organization, Authority and Execution. Guarantor is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and has all necessary power and authority to own its
properties and to conduct its business as presently conducted or proposed to be
conducted and to enter into and perform this Guaranty and all other agreements
and instruments to be executed by it in connection herewith. This Guaranty has
been duly executed and delivered by Guarantor.
(b) Enforceability. This Guaranty constitutes a legal, valid and
binding obligation of Guarantor, enforceable against Guarantor in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally.
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<PAGE>
(c) No Violation. The execution, delivery and performance by
Guarantor of its obligations under this Guaranty have been duly authorized by
all necessary action, and do not and will not violate any law, regulation,
order, writ, injunction or decree of any court or governmental body, agency or
other instrumentality applicable to Guarantor, or result in a breach of any of
the terms, conditions or provisions of, or constitute a default under, or result
in the creation or imposition of any mortgage, lien, charge or encumbrance of
any nature whatsoever upon any of the assets of Guarantor pursuant to the terms
of Guarantor's certificate of incorporation or by-laws, or any mortgage,
indenture, agreement or instrument to which Guarantor is a party or by which it
or any of its properties is bound. Guarantor is not in default under any other
guaranty which it has provided to Lender.
(d) No Litigation. There are no actions, suits or proceedings at
law or at equity, pending or, to Guarantor's best knowledge, threatened against
or affecting Guarantor or which involve the validity or enforceability of this
Guaranty or with respect to which an adverse decision is reasonably likely which
would materially adversely affect the financial condition of Guarantor or the
ability of Guarantor to perform any of its obligations under this Guaranty.
Guarantor is not in default beyond any applicable grace or cure period with
respect to any order, writ, injunction, decree or demand of any Governmental
Authority which would materially adversely affect the financial condition of
Guarantor or the ability of Guarantor to perform any of its obligations under
this Guaranty.
(e) Consents. All consents, approvals, orders or authorizations
of, or registrations, declarations or filings with, all Governmental Authorities
(collectively, the "Consents") that are required in connection with the valid
execution, delivery and performance by Guarantor of this Guaranty have been
obtained or will be obtained when required.
(f) Financial Statements and Other Information. All financial
statements of Guarantor heretofore delivered to Lender are true and correct in
all material respects and fairly present the financial condition of Guarantor as
of the respective dates thereof, and no materially adverse change has occurred
in the financial conditions reflected therein since the respective dates
thereof. None of the aforesaid financial statements or any certificate or
statement furnished to Lender by or on behalf of Guarantor in connection with
the transactions contemplated hereby, and none of the representations and
warranties in this Guaranty 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 in any material respect. Guarantor is
not insolvent within the meaning of the United States Bankruptcy Code or any
other applicable law, code or regulation, and the execution, delivery and
performance of this Guaranty will not render Guarantor insolvent.
(g) Consideration. Guarantor is receiving fair consideration in
return for giving this Guaranty.
4. Financial Statements. Guarantor shall deliver to Lender, (a)
within one hundred twenty (120) days after the end of each fiscal year of
Guarantor, a complete copy of Guarantor's annual financial statements audited by
a "big six" accounting firm or another
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<PAGE>
independent certified public accountant reasonably acceptable to Lender, (b)
within forty-five (45) days after the end of each fiscal quarter of Guarantor,
financial statements (including a balance sheet as of the end of such fiscal
quarter and a statement of income and expense for such fiscal quarter) certified
by the Chief Financial Officer or President of Guarantor and in form, content,
level of detail and scope reasonably satisfactory to Lender, and (c) thirty (30)
days after request by Lender, such other financial information with respect to
Guarantor as Lender may reasonably request.
5. Unconditional Character of Obligations of Guarantor.
(a) The obligations of Guarantor hereunder shall be irrevocable,
absolute and unconditional, irrespective of the validity, regularity or
enforceability, in whole or in part, of the other Loan Documents or any
provision thereof, or the absence of any action to enforce the same, any waiver
or consent with respect to any provision thereof, the recovery of any judgment
against Borrower, Guarantor or any other Person or any action to enforce the
same, any failure or delay in the enforcement of the obligations of Borrower
under the other Loan Documents or Guarantor under this Guaranty, or any setoff,
counterclaim, and irrespective of any other circumstances which might otherwise
limit recourse against Guarantor by Lender or constitute a legal or equitable
discharge or defense of a guarantor or surety. Lender may enforce the
obligations of Guarantor under this Guaranty by a proceeding at law, in equity
or otherwise, independent of any loan foreclosure or similar proceeding or any
deficiency action against Borrower or any other Person at any time, either
before or after an action against the Property or any part thereof, Borrower or
any other Person. This Guaranty is a guaranty of payment and performance and not
merely a guaranty of collection. Except as otherwise provided herein or in any
of the other Loan Documents and to the extent permitted by law, Guarantor waives
diligence, notice of acceptance of this Guaranty, filing of claims with any
court, any proceeding to enforce any provision of any other Loan Document,
against Guarantor, Borrower or any other Person, any right to require a
proceeding first against Borrower or any other Person, or to exhaust any
security (including, without limitation, the Property) for the performance of
the Guaranteed Obligations or any other obligations of Borrower, any
Non-Recourse Guarantor or any other Person, or any protest, presentment, notice
of default or other notice or demand whatsoever (except to the extent expressly
provided to the contrary in this Guaranty), and Guarantor hereby covenants and
agrees that Guarantor shall not be discharged of its obligations hereunder
except as set forth in Section 2(b) above.
(b) The obligations of Guarantor under this Guaranty, and the
rights of Lender to enforce the same by proceedings, whether by action at law,
suit in equity or otherwise, shall not be in any way affected by any of the
following:
(i) any insolvency, bankruptcy, liquidation,
reorganization, readjustment, composition, dissolution, receivership,
conservatorship, winding up or other similar proceeding involving or
affecting Borrower, the Property or any part thereof, Guarantor or any
other Person;
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<PAGE>
(ii) any failure by Lender or any other Person, whether or
not without fault on its part, to perform or comply with any of the terms
of the Loan Agreement, or any other Loan Documents, or any document or
instrument relating thereto;
(iii) the sale, transfer or conveyance of the Property or any
interest therein to any Person, whether now or hereafter having or
acquiring an interest in the Property or any interest therein and whether
or not pursuant to any foreclosure, trustee sale or similar proceeding
against Borrower or the Property or any interest therein;
(iv) the conveyance to Lender, any Affiliate of Lender or
Lender's nominee of the Property or any interest therein by a
deed-in-lieu of foreclosure;
(v) the release of Borrower or any other Person from the
performance or observance of any of the agreements, covenants, terms or
conditions contained in any of the Loan Documents by operation of law or
otherwise; or
(vi) the release in whole or in part of any collateral for
any or all Guaranteed Obligations, the Property, the Loan, or any portion
thereof.
(c) Except as otherwise specifically provided in this Guaranty,
Guarantor hereby expressly and irrevocably waives all defenses in an action
brought by Lender to enforce this Guaranty based on claims of waiver, release,
surrender, alteration
or compromise and all setoffs,
reductions, or impairments, whether arising hereunder or otherwise.
(d) Subject to the Intercreditor Agreement, Lender may deal with
Borrower and Affiliates of Borrower in the same manner and as freely as if this
Guaranty did not exist and shall be entitled, among other things, to grant
Borrower or any other Person such extension or extensions of time to perform any
act or acts as may be deemed advisable by Lender, at any time and from time to
time, without terminating, affecting or impairing the validity of this Guaranty
or the Guarantied Obligations hereunder.
(e) No compromise, alteration, amendment, modification,
extension, renewal, release or other change of, or waiver, consent, delay,
omission, failure to act or other action with respect to, any liability or
obligation under or with respect to, or of any of the terms, covenants or
conditions of, the Loan Documents or any amendment, modification or other change
of the Plans or any legal requirement shall in any way alter, impair or affect
any of the Guarantied Obligations or Lender's rights hereunder, and Guarantor
agrees that if any Loan Document are modified with Lender's consent, the
Guaranteed Obligations shall, to the extent applicable, automatically be deemed
modified to include such modifications.
(f) Lender may proceed to protect and enforce any or all of its
rights under this Guaranty by suit in equity or action at law, whether for the
specific performance of any covenants or agreements contained in this Guaranty
or otherwise, or to take any action authorized or permitted under applicable
law, and shall be entitled to require and enforce the performance of
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<PAGE>
all acts and things required to be performed hereunder by Guarantor. Each and
every remedy of Lender shall, to the extent permitted by law, be cumulative and
shall be in addition to any other remedy given hereunder or now or hereafter
existing at law or in equity.
(g) No waiver shall be deemed to have been made by Lender of any
rights hereunder unless the same shall be in writing and signed by Lender, and
any such waiver shall be a waiver only with respect to the specific matter
involved and shall in no way impair the rights of Lender or the obligations of
Guarantor to Lender in any other respect or at any other time.
(h) At the option of Lender, Guarantor may be joined in any
action or proceeding commenced by Lender against Borrower or any other Person in
connection with or based upon any other Loan Documents and recovery may be had
against Guarantor in such action or proceeding or in any independent action or
proceeding against Guarantor to the extent of Guarantor's liability hereunder,
without any requirement that Lender first assert, prosecute or exhaust any
remedy or claim against Borrower or any other Person, or any security for the
obligations of Borrower or any other Person.
(i) Guarantor agrees that this Guaranty shall continue to be
effective or shall be reinstated, as the case may be, if at any time any payment
is made by Borrower or Guarantor to Lender and such payment is rescinded or must
otherwise be returned by Lender (as determined by Lender in its sole and
absolute discretion) upon insolvency, bankruptcy, liquidation, reorganization,
readjustment, composition, dissolution, receivership, conservatorship, winding
up or other similar proceeding involving or affecting Borrower or Guarantor, all
as though such payment had not been made.
(j) In the event that Guarantor shall advance or become
obligated to pay any sums under this Guaranty or in connection with the
Guarantied Obligations or in the event that for any reason whatsoever Borrower
or any subsequent owner of the Property or any part thereof is now, or shall
hereafter become, indebted to Guarantor, Guarantor agrees that (i) the amount of
such sums and of such indebtedness and all interest thereon shall at all times
be subordinate as to lien, the time of payment and in all other respects to all
sums, including principal and interest and other amounts, at any time owed to
Lender under the Loan Documents, and (ii) Guarantor shall not be entitled to
enforce or receive payment thereof until all principal, Interest and other sums
due pursuant to the Loan Documents have been paid in full. Nothing herein
contained is intended or shall be construed to give Guarantor any right of
subrogation in or under the Loan Documents or any right to participate in any
way therein, or in the right, title or interest of Lender in or to any
collateral for the Loan, notwithstanding any payments made by Guarantor under
this Guaranty, until the actual and irrevocable receipt by Lender of payment in
full of all Principal, Interest and other sums due with respect to the Loan or
otherwise payable under the Loan Documents. For as long as the Loan is
outstanding, Guarantor hereby expressly waives any and all of said rights of
subrogation, reimbursement, indemnity and recourse. Guarantor shall not be
deemed a "creditor" of the Borrower with respect to the Guarantied Obligations
as said term "creditor" is defined in the United States Bankruptcy Code, as
amended. If any amount shall be paid to Guarantor on account of such subrogation
rights at any time when any such sums due and owing to Lender shall not have
been
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fully paid, such amount shall be paid by Guarantor to Lender for credit and
application against such sums due and owing to Lender. Notwithstanding the
foregoing, Guarantor shall have the right to be reimbursed by Borrower for any
of Guarantor's out-of-pocket costs due Guarantor or fees pursuant to the
Management Agreement or the Development Agreement provided there is no Event of
Default under any of the Loan Documents.
(k) Guarantor's obligations hereunder shall survive a
foreclosure, deed-in-lieu of foreclosure or similar proceeding involving the
Property and the exercise by Lender of any of all of its remedies pursuant to
the Loan Documents.
6. Covenant.
(a) As used in this Section 6, the following terms shall have
the respective meanings set forth below:
(i) "Consolidated Subsidiaries" shall mean each Subsidiary
of Guarantor, the financial statements of which shall be (or should have
been) consolidated with the financial statements of Guarantor in
accordance with GAAP.
(ii) "GAAP" shall mean generally accepted accounting
principles, consistently applied.
(iii) "EBITDAR" means, on any quarterly measurement date, on a
trailing 3-month basis, the aggregate of total revenues less property
operating expenses and general administration expenses, all as shown on
Guarantor's income statements prepared in accordance with GAPP and
calculated as shown on Exhibit A attached hereto and made a part hereof.
(iv) "Guarantor's Net Cash Flow" shall mean, for a given
period, the net cash provided by operating activities of Guarantor and its
Consolidated Subsidiaries for such period, as shown in the statement of
cash flow included in Guarantor's then most recent consolidated financial
statements, determined in accordance with GAAP.
(v) "Net Worth" shall mean, as of a given date, the value
obtained by multiplying the per share value of Guarantor's common stock,
which stock trades on the NASDAQ under the symbol "BLCI" by the number of
common shares outstanding.
(vi) "Subsidiary" shall mean any Affiliate of Guarantor that
is
controlled by Guarantor.
(vii) "Liquid Assets" shall mean assets in the form of cash,
cash equivalents, obligations of (or fully guarantied as to principal and
interest by) the United States or any agency or instrumentality thereof
(provided the full faith and credit of the United States supports such
obligation or guarantee), certificates of deposit issued by a
9
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commercial bank having net assets of not less than $500 million,
securities listed and traded on a recognized stock exchange or traded over
the counter and listed in the National Association of Securities Dealers
Automatic Quotations, liquid debt instruments that have a readily
ascertainable value and are regularly traded in a recognized financial
market, or any unused portion of any credit line maintained with a bank
which must have an S&P rating of "A" or better. If at any time the credit
line should be terminated or otherwise no longer be available for
Guarantor to draw down from, then Lender shall no longer include the value
of the unused portion of the credit line to calculate Guarantor's Liquid
Assets and Lender may immediately recalculate Guarantor's Liquid Assets to
determine if Guarantor satisfies the covenant in (b) below.
(b) Until all of the Guarantied Obligations have been paid in
full or terminated, Guarantor (i) shall maintain (A) a Net Worth in excess of
$110,000,000, (B) an EBITDAR in excess of $5,000,000 determined quarterly on a
trailing 3-month basis, and (C) Liquid Assets having a market value of at least
$5,000,000, which shall be tested on a quarterly basis, (ii) shall not sell,
pledge, mortgage or otherwise transfer any of its assets, or any interest
therein, on terms materially less favorable than would be obtained in an
arms-length transaction and (iii) shall deliver to Lender, concurrently with the
delivery of each quarterly or annual financial statement required to be
delivered by Guarantor hereunder, a certificate of the chief financial officer
of Guarantor setting forth in reasonable detail Guarantor's Net Worth, EBITDAR
and Liquid Assets, based on such financial statement.
(c) Guarantor shall not, at any time while a default in the
payment of the Guarantied Obligations has occurred and is continuing, without
the prior written consent of Lender, which consent may granted or withheld in
Lender's sole and absolute discretion, enter into or effectuate any transaction
with any Affiliate which would reduce the Net Worth of Guarantor below the Net
Worth set forth in Section 6(b).
7. Entire Agreement/Amendments. This instrument represents the entire
agreement between the parties with respect to the subject matter hereof. The
terms of this Guaranty shall not be waived, altered, modified, amended,
supplemented or terminated in any manner whatsoever except by written instrument
signed by Lender and Guarantor.
8. Successors and Assigns. This Guaranty shall be binding upon
Guarantor, and Guarantor's successors and assigns, may not be assigned or
delegated by Guarantor and shall inure to the benefit of Lender and its
successors and assigns.
9. Applicable Law and Consent to Jurisdiction. This Guaranty was
partially negotiated in the State of New York, and accepted by Lender in the
State of New York, which State the parties agree has a substantial relationship
to the parties and the underlying transaction embodied hereby, and in all
respects, this Guaranty shall be governed by, and construed in accordance with,
the substantive laws of the State of New York. Guarantor irrevocably (a) agrees
that any suit, action or other legal proceeding arising out of or relating to
this Guaranty may be brought in a court of record in the City and County of New
York or in the Courts of the United States of America located
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in the Southern District of New York, (b) consents to the jurisdiction of each
such court in any such suit, action or proceeding and (c) waives any objection
which it may have to the laying of venue of any such suit, action or proceeding
in any of such courts and any claim that any such suit, action or proceeding has
been brought in an inconvenient forum. Guarantor irrevocably consents to the
service of any and all process in any such suit, action or proceeding by service
of copies of such process to Guarantor at its address provided in Section 14
hereof.
Nothing in this Section 9,
however, shall affect the right of Lender to serve legal process in any other
manner permitted by law or affect the right of Lender to bring any suit, action
or proceeding against Guarantor or its property in the courts of any other
jurisdictions.
10. Section Headings. The headings of the sections and paragraphs of
this Guaranty have been inserted for convenience of reference only and shall in
no way define, modify, limit or amplify any of the terms or provisions hereof.
11. Severability. Any provision of this Guaranty which may be
determined by any competent authority to be prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, Guarantor hereby
waives any provision of law which renders any provision hereof prohibited or
unenforceable in any respect.
12. WAIVER OF TRIAL BY JURY. GUARANTOR AND LENDER
HEREBY
AGREE NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT
BY JURY,
AND WAIVE ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT
SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THIS GUARANTY, OR ANY CLAIM,
COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF
RIGHT TO TRIAL BY JURY IS GIVEN
KNOWINGLY
AND VOLUNTARILY BY GUARANTOR AND LENDER, AND IS INTENDED TO
ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE
RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. EACH PARTY IS
HEREBY
AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE
EVIDENCE OF THIS WAIVER BY THE OTHER.
13. Other Guaranties. The obligations of Guarantor hereunder are
separate and distinct from, and in addition to, the obligations of Guarantor now
or hereafter arising under one or more other Guaranties, pursuant to which
Guarantor has guaranteed payment and performance of certain other obligations of
Borrower described therein.
14. Notices. All notices, demands, requests, consents, approvals or
other communications (collectively called "Notices") required or permitted to be
given hereunder to Lender or Guarantor or which are given to Lender or Guarantor
with respect to this Guaranty shall be in writing and shall be (a) sent by
United States registered or certified mail, return receipt requested, postage
prepaid, addressed as set forth below, (b) sent by national overnight courier or
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delivery service, or (c) personally delivered with receipt acknowledged to such
address, or in either case, to such other address(es) as the party in question
shall have specified most recently by like Notice.
If to Lender, to:
Nomura Asset Capital Corporation
2 World Financial Center, Building B
New York, New York 10281-1198
Attn: Barry Funt and Sheryl McAfee
with a copy to:
Dechert Price & Rhoads
90 State House Square
Hartford, Connecticut 06103-3702
Attn: Marc B. Friedman, Esq.
If to Guarantor, to:
Brookdale Living Communities, Inc.
77 West Wacker Drive, Suite 4400
Chicago, Illinois 60601
Attn: Mr. Darryl W. Copeland, Jr.
with a copy to:
Brookdale Living Communities, Inc.
77 West Wacker Drive, Suite 4400
Chicago, Illinois 60601
Attn: Robert J. Rudnik, Esq.
with a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, IL 60602
Attention: Wayne Boberg, Esq.
Notices which are given in the manner aforesaid shall be deemed to have been
given or served for all purposes hereunder (i) on the date on which such notice
shall have been personally delivered as aforesaid, (ii) on the date of delivery
by mail as evidenced by the return receipt therefor, or (iii) on
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the date of failure to deliver by reason of refusal to accept delivery or
changed address of which no Notice was given.
15. Guarantor's Receipt of Loan Documents. Guarantor by its execution
hereof acknowledges receipt of true copies of all of the Loan Documents and
further acknowledges that it is familiar with said Loan Documents and has no
objections to any of the provisions therein.
16. Interest; Expenses.
(a) If Guarantor fails to pay all or any sums due hereunder upon
demand by Lender, the amount of such sums payable by Guarantor to Lender shall
bear interest from the date of demand until paid at the Default Rate in effect
from time to time.
(b) Guarantor hereby agrees to pay all costs, charges and
expenses, including, without limitation, reasonable attorneys' fees and
disbursements, that may be incurred by Lender in enforcing the covenants,
agreements, obligations and liabilities of Guarantor under this Guaranty.
17. Intentionally deleted.
18. Waiver of One Action Rule; Cross Collateralization.
(a) The Loan has been made by Lender pursuant to the Master
Financing Facility Agreement. The Master Financing Facility Agreement
contemplates that one or more Other Loans made to Other Borrowers pursuant to
the Master Financing Facility Agreement will, at Lender's election, be cross
collateralized and cross defaulted with the Loan and with each other, subject to
Section (b) below. In such event, such Other Loans will be secured by the
Property and the Collateral, and the Loan will be secured by the Other
Properties and Other Collateral serving as primary security for such Other
Loans, subject to Section (b) below.
(b) Without limitation to any other right or remedy provided to
Lender in the Loan Agreements or this Guaranty or any of the other Loan
Documents, Guarantor covenants and agrees that upon the occurrence of an Event
of Default (i)
Lender shall have the right to pursue
all of its rights and remedies with respect to the Loan or the Other Loans in
one proceeding, or separately and independently in separate proceedings which
it, as Lender, in its discretion, shall determine from time to time, (ii) Lender
is not required to either marshall assets, sell the Property, the Collateral, or
any Other Property, or enforce or realize upon any Other Non-Recourse Guaranty,
in any inverse order of alienation, or be subjected to any "one action" or
"election of remedies" law or rule, and (iii) the exercise by Lender of any
remedies against the Property, the Collateral, any Other Property, or any Other
Non-Recourse Guaranty will not impede Lender from subsequently or simultaneously
exercising remedies against the Property, the Collateral, any other Property, or
any Other Non-Recourse Guaranty.
(c) Intentionally deleted.
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(d) It is understood and agreed by the parties hereto that upon
the satisfaction or termination of the Guarantied Obligations no subsequent
default under the Other Loans shall operate to revive or otherwise reinstate
this Guaranty, other than as specifically set forth in Section 5(i) herein.
19. No Usury. Guarantor and Lender intend at all times to comply with
applicable state law or applicable United States federal law (to the extent that
it permits Lender to contract for, charge, take, reserve or receive a greater
amount of interest than under state law). If the applicable law (state or
federal) is ever judicially interpreted so as to render usurious any amount
called for under this Guaranty, or contracted for, charged, taken, reserved or
received with respect to the Guarantied Obligations, or if Lender's exercise of
the option to accelerate the maturity of the Guarantied Obligations or any
prepayment by Guarantor results in Guarantor having paid any interest in excess
of that permitted by applicable law, then it is Guarantor's and Lender's express
intent that all excess amounts theretofore collected by Lender shall be credited
against the unpaid Guarantied Obligations (or, if the Guarantied Obligations
have been or would thereby be paid in full, refunded to Guarantor), and the
provisions of the Guaranty immediately be deemed reformed and the amounts
thereafter collectible thereunder reduced, without the necessity of the
execution of any new document, so as to comply with the applicable law, but so
as to permit the recovery of the fullest amount otherwise called for thereunder.
All sums paid or agreed to be paid to Lender for the use, forbearance or
detention of the Guaranty shall, to the extent permitted by applicable law, be
amortized, prorated, allocated, and spread throughout the full stated term of
the Guaranty until payment in full so that the rate or amount of interest on
account of the Guarantied Obligations does not exceed the maximum lawful rate
from time to time in effect and applicable to the Guarantied Obligations for so
long as the Guarantied Obligations are outstanding. Notwithstanding anything to
the contrary contained in this Guaranty, it is not the intention of Lender to
accelerate the maturity of any interest that has not accrued at the time of such
acceleration or to collect unearned interest at the time of such acceleration.
[Remainder of page intentionally left blank; signature page
follows]
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IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the
date first above written.
BROOKDALE LIVING COMMUNITIES,
INC.,
A Delaware corporation.
By:
Darryl W. Copeland, Jr.
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AGREED AND ACKNOWLEDGED
ONLY FOR SECTION 12
NOMURA ASSET CAPITAL CORPORATION
By: ______________________________________
Stuart Simon
Director
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GUARANTY OF COMPLETION
made by
BROOKDALE LIVING COMMUNITIES, INC.
as guarantor,
in favor of
NOMURA ASSET CAPITAL CORPORATION
Dated as of June __, 1998
<PAGE>
GUARANTY OF COMPLETION
This GUARANTY OF COMPLETION (this "Guaranty"), dated as of June __,
1998, made by BROOKDALE LIVING COMMUNITIES, INC. , a Delaware corporation,
having an office at 77 West Wacker Drive, Suite 4400, Chicago, Illinois 60621
("Guarantor"), in favor of NOMURA ASSET CAPITAL CORPORATION, a Delaware
corporation, having an office at Two World Financial Center, Building B, New
York, New York 10281 (together with its successors and assigns, "Lender").
R E C I T A L S:
A. Pursuant to that certain Loan Agreement dated as of the date
hereof (as the same may be amended, modified, supplemented or replaced from time
to time, the "Loan Agreement") by and among AH Texas Owner Limited Partnership,
an Ohio limited partnership ("Borrower"), BLC of Texas-II, L.P., a Delaware
limited partnership ("Manager"), and Lender, and also pursuant to that certain
Building Loan Agreement dated as of the date hereof between Borrower, Manager
and Lender (as the same may be amended, modified, supplemented or replaced from
time to time, the "Building Loan Agreement", and collectively with the Loan
Agreement, sometimes hereinafter referred to as the "Loan Agreements"), Lender
has agreed to make a loan (the "Loan") to Borrower in a maximum aggregate
principal amount of $24,250,000, subject to the terms and conditions of the Loan
Agreements;
B. As a condition to Lender's making the Loan, Lender is requiring
that Guarantor execute and deliver to Lender this Guaranty; and
C. Guarantor hereby acknowledges that Guarantor will
materially benefit from
Lender's agreeing to make the Loan;
NOW, THEREFORE, in consideration of the premises set forth herein and
as an inducement for and in consideration of the agreement of Lender to make the
Loan pursuant to the Loan Agreements, Guarantor hereby agrees, covenants,
represents and warrants to Lender as follows:
1. Definitions.
(a) All capitalized terms used and not defined herein shall have
the respective meanings given such terms in the Loan Agreements.
(b) The term "including" means including without limitation.
(c) "Guaranty Termination Date" means the date on which
Substantial Completion has occurred and all costs, expenses and liabilities
incurred in connection therewith (including, without limitation, for labor,
materials and services)
have been paid in full (except to
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the extent to be paid for from Retainage or other sums are then held or reserved
by Lender but not yet disbursed in accordance with the Building Loan Agreement).
2. Guaranty.
(a) Subject to Section 3 below, Guarantor hereby irrevocably,
absolutely and unconditionally guarantees to Lender the prompt and complete
observance, fulfillment and performance of all of the obligations of Borrower
and Manager under or pursuant to the Building Loan Agreement solely with respect
to (i) the construction of the Required Improvements, including, the obligations
of Borrower to construct, equip and complete the Required Improvements in
accordance with Section 7.1 of the Building Loan Agreement; and (ii) the payment
when due of all Costs in accordance with the Building Loan Agreement. The
obligations which are the subject of the guaranty referred to in this Section
2(a) are hereinafter collectively referred to as the "Guarantied Obligations".
(b) Subject to Section 3 below, without limiting the generality
of the provisions of Section 2(a), Guarantor hereby irrevocably, absolutely and
unconditionally guarantees to Lender that Borrower and Manager shall, in
accordance with the terms of the Building Loan Agreement, fully and punctually
pay and discharge (i) any and all costs, expenses and liabilities for or
incurred in connection with the Guarantied Obligations; (ii) all claims and
demands for labor, materials and services used or incurred in connection with
the Guarantied Obligations which are or may become due and payable, or, if
unpaid, are or may become Liens on the Property or any part thereof; and (iii)
any Liens in favor of any and all Persons furnishing materials, labor or
services for or in connection with the Guarantied Obligations such that the
Property shall be and remain free and clear of any and all liens other than
Permitted Encumbrances, subject, however, to Borrower's and Manager's rights, if
any, set forth in the Building Loan Agreement with regard to the contesting of
Liens.
(c) If either Borrower or Manager does not perform the
Guarantied Obligations as provided in paragraphs (a) and (b) of this Section 2,
then upon receipt of demand
from Lender:
(i) subject to Section 3 hereof, Guarantor shall, if
requested by Lender (which request Lender may make or not make in its sole
discretion), perform and complete the Guarantied Obligations or cause the
Guarantied Obligations to be performed and completed, in accordance with
the requirements of the Building Loan Agreement; and
(ii) if Guarantor fails to perform the Guarantied Obligations
in accordance with this Guaranty (whether or not requested to do so
pursuant to subsection (c)(i) above) then, to the extent that Lender shall
(A) cause any Guarantied Obligations to be performed, (B) pay any costs,
expenses or liabilities in connection with the Guarantied Obligations, or
(c) cause any Lien, claim or demand to be released or paid or bonded,
Guarantor shall, upon demand by Lender, reimburse Lender for all sums paid
and all costs, expenses or liabilities incurred by Lender in connection
therewith. All such sums shall be
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<PAGE>
payable by Guarantor to Lender on demand and without
reduction for any offset, claim,
counterclaim or defense.
(d) Guarantor hereby agrees to indemnify, defend and save
harmless Lender from and against any and all costs, losses, liabilities, claims,
causes of action, expenses and damages, including, without limitation,
reasonable attorneys' fees and disbursements, which Lender may suffer or which
otherwise may arise by reason of Borrower's or Manager's failure to fulfill its
obligations under the Building Loan Agreement with respect to the Guarantied
Obligations, irrespective of whether such costs, losses, liabilities, claims,
causes of action, expenses or damages are incurred by Lender prior or subsequent
to (i) Lender's declaring the principal, Interest and other sums evidenced or
secured by the Loan Documents to be due and payable, (ii) the commencement or
completion of a judicial or non-judicial foreclosure of the Mortgage or (iii)
the conveyance of all or any portion of the Property by deed-in-lieu of
foreclosure.
(e) Guarantor hereby agrees that, notwithstanding any provisions
to the contrary in any Loan Document limiting the recourse of Lender to property
encumbered by the Security Documents, or limiting the rights of Lender to obtain
a deficiency judgment against Borrower, any Borrower Owner, Manager, or any
Manager Owner, Guarantor shall be fully and personally liable with respect to
the covenants, representations, warranties, guaranties, agreements and
indemnities of Guarantor under this Guaranty.
(f) Notwithstanding anything to the contrary contained herein or
in any other Loan Documents, and subject to the provisions of Section 6(i), all
of Guarantor's obligations under this Guaranty (including the Guarantied
Obligations hereunder) shall terminate on the Guaranty Termination Date,
provided that Guarantor's obligations under clauses (ii) and (iii) of Section
2(b) above relating to labor, materials and services provided, furnished or
performed at or to the Property shall continue with respect to any claims,
demands and Liens referred to therein, whether asserted before or after the
Guaranty Termination Date.
3. Guarantor's Use of Loan Proceeds. If Lender requires Guarantor to
complete or cause the completion of the Guarantied Obligations as provided in
clause (i) of Section 2(c) hereof, provided Guarantor is proceeding in good
faith and with due diligence to so complete the Guarantied Obligations, and
provided that no Default beyond any applicable grace period shall have occurred
and be continuing under this Guaranty, Lender shall advance the proceeds of the
Initial Loan in accordance with, and upon Guarantor's compliance with the terms
of, the Building Loan Agreement, as such terms apply to the Guaranteed
Obligations, in the same manner as though Guarantor were Borrower or Manager
thereunder, but subject to the prior right of any applicable bonding company to
such proceeds.
4. Representations and Warranties. Guarantor hereby represents and
warrants to Lender as follows (which representations and warranties shall be
given as of the date hereof and shall survive the execution and delivery of this
Guaranty):
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(a) Organization, Authority and Execution. Guarantor is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and has all necessary power and authority to own its
properties and to conduct its business as presently conducted or proposed to be
conducted and to enter into and perform this Guaranty and all other agreements
and instruments to be executed by it in connection herewith. This Guaranty has
been duly executed and delivered by Guarantor.
(b) Enforceability. This Guaranty constitutes a legal, valid and
binding obligation of Guarantor, enforceable against Guarantor in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally.
(c) No Violation. The execution, delivery and performance by
Guarantor of the Guarantied Obligations has been duly authorized by all
necessary action, and do not and will not violate any law, regulation, order,
writ, injunction or decree of any court or governmental body, agency or other
instrumentality applicable to Guarantor in effect on the date hereof, or result
in a breach of any of the terms, conditions or provisions of, or constitute a
default under, or result in the creation or imposition of any mortgage, Lien,
charge or encumbrance of any nature whatsoever upon any of the assets of
Guarantor pursuant to the terms of Guarantor's certificate of incorporation or
by-laws, or any mortgage, indenture, agreement or instrument to which Guarantor
is a party or by which it or any of its properties is bound. Guarantor is not in
default under any other guaranty which it has provided to Lender.
(d) No Litigation. There are no actions, suits or proceedings at
law or at equity, pending or, to Guarantor's best knowledge, threatened against
or affecting Guarantor or which involve the validity or enforceability of this
Guaranty or with respect to which an adverse decision would materially adversely
affect the financial condition of Guarantor or the ability of Guarantor to
perform any of the Guarantied Obligations. Guarantor is not in default beyond
any applicable grace or cure period with respect to any order, writ, injunction,
decree or demand of any Governmental Authority which would materially adversely
affect the financial condition of Guarantor or the ability of Guarantor to
perform any of its obligations under this Guaranty.
(e) Consents. All consents, approvals, orders or authorizations
of, or registrations, declarations or filings with, all Governmental Authorities
(collectively, the "Consents") that are required in connection with the valid
execution, delivery and performance by Guarantor of this Guaranty have been
obtained or will be obtained when required.
(f) Financial Statements and Other Information. All financial
statements of Guarantor heretofore delivered to Lender are true and correct in
all material respects and fairly present the financial condition of Guarantor as
of the respective dates thereof, and no materially adverse change has occurred
in the financial conditions reflected therein since the respective dates
thereof. None of the aforesaid financial statements or any certificate or
statement furnished to Lender by or on behalf of Guarantor in connection with
the transactions contemplated hereby, and none of the representations and
warranties in this Guaranty contains any untrue statement of a
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<PAGE>
material fact or omits to state a material fact necessary in order to make the
statements contained therein or herein not misleading. Guarantor is not
insolvent within the meaning of the United States Bankruptcy Code or any other
in any material respect applicable law, code or regulation, and the execution,
delivery and performance of this Guaranty will not render Guarantor insolvent.
(g) Consideration. Guarantor is receiving fair consideration in
return for giving this Guaranty.
5. Financial Statements. Guarantor shall deliver to Lender, (a)
within one hundred twenty (120) days after the end of each fiscal year of
Guarantor, a complete copy of Guarantor's annual financial statements audited by
a "big six" accounting firm or another independent certified public accountant
reasonably acceptable to Lender, (b) within forty-five (45) days after the end
of each fiscal quarter of Guarantor, financial statements (including a balance
sheet as of the end of such fiscal quarter and a statement of income and expense
for such fiscal quarter) certified by the Chief Financial Officer or President
of Guarantor and in form, content, level of detail and scope reasonably
satisfactory to Lender, and (c) thirty (30) days after request by Lender, such
other financial information with respect to Guarantor as Lender may reasonably
request. Guarantor's obligation to deliver this information to Lender shall
terminate on the Guaranty Termination Date.
6. Unconditional Character of Obligations of Guarantor.
(a) Subject to Section 3 above, the obligations of Guarantor
hereunder shall be irrevocable, absolute and unconditional, irrespective of the
validity, regularity or enforceability, in whole or in part, of the other Loan
Documents or any provision thereof, or the absence of any action to enforce the
same, any waiver or consent with respect to any provision thereof, the recovery
of any judgment against Borrower, Manager, Guarantor or any other Person or any
action to enforce the same, any failure or delay in the enforcement of the
obligations of Borrower or Manager under the other Loan Documents or Guarantor
under this Guaranty, or any setoff, counterclaim, and irrespective of any other
circumstances which might otherwise limit recourse against Guarantor by Lender
or constitute a legal or equitable discharge or defense of a guarantor or
surety. Lender may enforce the obligations of Guarantor under this Guaranty by a
proceeding at law, in equity or otherwise, independent of any foreclosure or
similar proceeding or any deficiency action against Borrower, Manager, or any
other Person at any time, either before or after an action against the Property
or any part thereof, Borrower, Manager, or any other Person. This Guaranty is a
guaranty of payment and performance and not a guaranty of collection. Except as
otherwise provided herein or in any of the other Loan Documents or the
Intercreditor Agreement, and to the extent permitted by law, Guarantor waives
diligence, notice of acceptance of this Guaranty, filing of claims with any
court, any proceeding to enforce any provision of any other Loan Document,
against Guarantor, Borrower, Manager, or any other Person, any right to require
a proceeding first against Borrower, Manager or any other Person, or to exhaust
any security (including, without limitation, the Property) for the performance
of the Guarantied Obligations or any other obligations of Borrower, Manager or
any other Person, or any protest, presentment, notice of default or other notice
or demand whatsoever (except to the extent expressly provided to the
5
<PAGE>
contrary in this Guaranty or elsewhere in the Loan Documents), and Guarantor
hereby covenants and agrees that Guarantor shall not be discharged of its
obligations hereunder except as set forth in
Section 2(f) above.
(b) The Guarantied Obligations, and the rights of Lender to
enforce the same by proceedings, whether by action at law, suit in equity or
otherwise, shall not be in any way affected by any of the following:
(i) any insolvency, bankruptcy, liquidation,
reorganization, readjustment, composition, dissolution, receivership,
conservatorship, winding up or other similar proceeding involving or
affecting Borrower, Manager, the Property or any part thereof, Guarantor
or any other Person;
(ii) any failure by Lender (except, however, a failure by
Lender to fund advances in accordance with Section 3 hereof) or any other
Person, whether or not without fault on its part, to perform or comply
with any of the terms of either Loan Agreement, or any other Loan
Documents, or any document or instrument relating thereto;
(iii) the sale, transfer or conveyance of the Property or any
interest therein to any Person, whether now or hereafter having or
acquiring an interest in the Property or any interest therein and whether
or not pursuant to any foreclosure, trustee sale or similar proceeding
against Borrower, Manager, or the Property or any interest therein;
(iv) the conveyance to Lender, any Affiliate of Lender or
Lender's nominee of the Property or any interest therein by a
deed-in-lieu of foreclosure;
(v) the release of Borrower, Manager, or any other Person
from the performance or observance of any of the agreements, covenants,
terms or conditions contained in any of the Loan Documents by operation of
law or otherwise; or
(vi) the release in whole or in part of any security for the
Guarantied Obligations or the Loan, including the Property and the
Collateral.
(c) Except as otherwise specifically provided in this Guaranty,
Guarantor hereby expressly and irrevocably waives all defenses in an action
brought by Lender to enforce this Guaranty based on claims of waiver, release,
surrender, alteration, compromise or equitable discharge and all setoffs,
reductions, or impairments, whether arising hereunder or otherwise.
(d) Subject to the Intercreditor Agreement, Lender may deal with
Borrower, Manager, and Affiliates of Borrower or Manager in the same manner and
as freely as if this Guaranty did not exist and shall be entitled, among other
things, to grant Borrower, Manager or any other Person such extension or
extensions of time to perform any act or acts as may be deemed advisable by
Lender, at any time and from time to time, without terminating, affecting or
impairing the validity of this Guaranty or the Guarantied Obligations.
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(e) No compromise, alteration, amendment, modification,
extension, indulgence, renewal, release or other change of, or waiver,
suspension, consent, compromise, delay, omission, failure to act, forbearance or
other action with respect to, any liability or obligation under or with respect
to, or of any of the terms, covenants or conditions of, the Loan Documents or
any amendment, modification or other change of the Plans or any legal
requirement shall in any way alter, impair or affect any of the Guarantied
Obligations or Lender's rights hereunder, and Guarantor agrees that if any Loan
Document or the Plans are modified with Lender's consent, the Guarantied
Obligations shall automatically be deemed modified to include such modifications
without the necessity of notice to Guarantor except as may otherwise be required
under the Loan Agreement.
(f) Lender may proceed to protect and enforce any or all of its
rights under this Guaranty by suit in equity or action at law, whether for the
specific performance of any covenants or agreements contained in this Guaranty
or otherwise, or to take any action authorized or permitted under applicable
law, and shall be entitled to require and enforce the performance of all acts
and things required to be performed hereunder by Guarantor. Each and every
remedy of Lender shall, to the extent permitted by law, be cumulative and shall
be in addition to any other remedy given hereunder or now or hereafter existing
at law or in equity. No single exercise of Lender's power to bring any action or
institute any proceeding shall be deemed to exhaust such power, but such power
shall continue undiminished and may be exercised from time to time as often as
Lender may elect until the earlier of the Guaranty Termination Date or the date
that all the Guarantied Obligations have been satisfied. Lender shall be under
no obligation to take any action and shall not be liable for any action taken or
any failure to take action or any delay in taking action against Guarantor,
Borrower, Manager, or any other Person or otherwise with respect to the
Guarantied Obligations.
(g) No waiver shall be deemed to have been made by Lender of any
rights hereunder unless the same shall be in writing and signed by Lender, and
any such waiver shall be a waiver only with respect to the specific matter
involved and shall in no way impair the rights of Lender or the obligations of
Guarantor to Lender in any other respect or at any other time.
(h) At the option of Lender, Guarantor may be joined in any
action or proceeding commenced by Lender against Borrower or Manager in
connection with or based upon any other Loan Documents and recovery may be had
against Guarantor in such action or proceeding or in any independent action or
proceeding against Guarantor only to the extent of Guarantor's liability
hereunder, without any requirement that Lender first assert, prosecute or
exhaust any remedy or claim against Borrower, Manager or any other Person, or
any security for the obligations of Borrower, Manager, or any other Person.
(i) Guarantor agrees that this Guaranty shall continue to be
effective or shall be reinstated, as the case may be, if at any time any payment
is made by Borrower, Manager or Guarantor to Lender and such payment is
rescinded or must otherwise be returned by Lender (as determined by Lender in
its sole and absolute discretion) upon insolvency, bankruptcy, liquidation,
reorganization, readjustment, composition, dissolution, receivership,
conservatorship, winding up
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or other similar proceeding involving or affecting Borrower, Manager, or
Guarantor, all as though such payment had not been made.
(j) In the event that Guarantor shall advance or become
obligated to pay any sums under this Guaranty or in connection with the
Guarantied Obligations or if Borrower, Manager, or any subsequent owner of the
Property or any part thereof is now, or shall hereafter become, indebted to
Guarantor, Guarantor agrees that (i) the amount of such sums and of such
indebtedness and all interest thereon shall at all times be subordinate as to
lien, the time of payment and in all other respects to all sums, including
principal and interest and other amounts, at any time owed to Lender under the
Loan Documents, and (ii) Guarantor shall not be entitled to enforce or receive
payment thereof until all principal, Interest and other sums due pursuant to the
Loan Documents have been paid in full. Nothing herein contained is intended or
shall be construed to give Guarantor any right of subrogation in or under the
Loan Documents or any right to participate in any way therein, or in the right,
title or interest of Lender in or to any collateral for the Loan,
notwithstanding any payments made by Guarantor under this Guaranty, until the
actual and irrevocable receipt by Lender of payment in full of all Principal,
Interest and other sums due with respect to the Loan or otherwise payable under
the Loan Documents.
For so long as the Loan is outstanding, Guarantor hereby expressly waives
any and all of said rights of subrogation, reimbursement, indemnity and
recourse. Guarantor shall not be deemed a "creditor" of the Borrower with
respect to the Guarantied Obligations as said term "creditor" is defined in the
United States Bankruptcy Code, as amended. If any amount shall be paid to
Guarantor on account of such subrogation rights at any time when any such sums
due and owing to Lender shall not have been fully paid, such amount shall be
paid by Guarantor to Lender for credit and application against such sums due and
owing to Lender. Notwithstanding the foregoing, Guarantor shall have the right
to be reimbursed by Borrower for any of Guarantor's out-of-pocket costs or fees
pursuant to the Management Agreement or the Development Agreement provided there
is no Event of Default.
(k) Subject to Section 2(f) hereof, the Guarantied Obligations shall
survive a foreclosure, deed-in-lieu of foreclosure or similar proceeding
involving the Property and the exercise by Lender of any of all of its remedies
pursuant to the Loan Documents.
7. Covenant. Guarantor shall perform and observe the financial
covenants, terms and provisions of Section 6 of the Guaranty of Payment from
Guarantor to Lender dated the date hereof, which Section 6 is hereby
incorporated by reference
herein.
8. Entire Agreement/Amendments. This instrument represents the entire
agreement between the parties with respect to the subject matter hereof. The
terms of this Guaranty shall not be waived, altered, modified, amended,
supplemented or terminated in any manner whatsoever except by written instrument
signed by Lender and Guarantor.
9. Successors and Assigns. This Guaranty shall be binding upon
Guarantor, and Guarantor's successors and assigns, may not be assigned or
delegated by Guarantor and shall inure to the benefit of Lender and its
successors and assigns.
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10. Applicable Law and Consent to Jurisdiction. This Guaranty was
partially negotiated in the State of New York, and accepted by Lender in the
State of New York, which State the parties agree has a substantial relationship
to the parties and to the underlying transaction embodied hereby, and in all
respects, this Guaranty shall be governed by, and construed in accordance with,
the substantive laws of the State of New York. Guarantor irrevocably (a) agrees
that any suit, action or other legal proceeding arising out of or relating to
this Guaranty may be brought in a court of record in the City and County of New
York or in the Courts of the United States of America located in the Southern
District of New York, (b) consents to the jurisdiction of each such court in any
such suit, action or proceeding and (c) waives any objection which it may have
to the laying of venue of any such suit, action or proceeding in any of such
courts and any claim that any such suit, action or proceeding has been brought
in an inconvenient forum. Guarantor irrevocably consents to the service of any
and all process in any such suit, action or proceeding by service of copies of
such process to Guarantor at its address provided in Section 15 hereof. Nothing
in this Section 10, however, shall affect the right of Lender to serve legal
process in any other manner permitted by law or affect the right of Lender to
bring any suit, action or proceeding against Guarantor or its property in the
courts of any other jurisdictions.
11. Section Headings. The headings of the sections and paragraphs of
this Guaranty have been inserted for convenience of reference only and shall in
no way define, modify, limit or amplify any of the terms or provisions hereof.
12. Severability. Any provision of this Guaranty which may be
determined by any competent authority to be prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, Guarantor hereby
waives any provision of law which renders any provision hereof prohibited or
unenforceable in any respect.
13. WAIVER OF TRIAL BY JURY. GUARANTOR AND LENDER HEREBY AGREE NOT TO ELECT
A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVE ANY RIGHT TO
TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER
EXIST WITH REGARD TO THIS GUARANTY, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION
ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN
KNOWINGLY AND VOLUNTARILY BY GUARANTOR AND LENDER, AND IS INTENDED TO ENCOMPASS
INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY
JURY WOULD OTHERWISE ACCRUE. EACH PARTY IS HEREBY AUTHORIZED TO FILE A COPY OF
THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY THE
OTHER.
14. Other Guaranties. The obligations of Guarantor hereunder are separate
and distinct from, and in addition to, the obligations of Guarantor now or
hereafter arising under one or
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more other guaranties, pursuant to which Guarantor has guaranteed the payment
and performance of certain other obligations of Borrower described therein.
15. Notices. All notices, demands, requests, consents, approvals or
other communications (collectively called "Notices") required or permitted to be
given hereunder to Lender or Guarantor or which are given to Lender or Guarantor
with respect to this Guaranty shall be in writing and shall be (a) sent by
United States registered or certified mail, return receipt requested, postage
prepaid, addressed as set forth below, (b) sent by a national overnight courier
or delivery service or (c) personally delivered with receipt acknowledged to
such address, or in either case, to such other address(es) as the party in
question shall have specified most recently by like Notice.
If to Lender, to:
Nomura Asset Capital Corporation
2 World Financial Center, Building B
New York, New York 10281
Attn: Barry Funt and Sheryl McAfee
with a copy to:
Dechert Price & Rhoads
90 State House Square, 12th Floor
Hartford, Connecticut 06103-3702
Attn: Marc B. Friedman, Esq.
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If to Guarantor, to:
Brookdale Living Communities, Inc.
77 West Wacker Drive, Suite 4400
Chicago, IL 60601
Attention: Darryl W. Copeland, Jr.
with a copy to:
Brookdale Living Communities, Inc.
77 West Wacker Drive, Suite 4400
Chicago, IL 60601
Attention: Robert J. Rudnick, Esq.
with a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, IL 60602
Attention: Wayne Boberg, Esq.
Notices which are given in the manner aforesaid shall be deemed to have been
given or served for all purposes hereunder (i) on the date on which such notice
shall have been personally delivered as aforesaid, (ii) on the date of delivery
by overnight carrier or mail as evidenced by the return receipt therefor, or
(iii) on the date of failure to deliver by reason of refusal to accept delivery
or changed address of which no Notice was given.
16. Guarantor's Receipt of Loan Documents. Guarantor by its execution
hereof acknowledges receipt of true copies of all of the Loan Documents.
17. Interest; Expenses.
(a) If Guarantor fails to pay all or any sums due hereunder upon
demand by Lender, the amount of such sums payable by Guarantor to Lender shall
bear interest from the date of demand until paid at the Default Rate in effect
from time to time.
(b) Guarantor hereby agrees to pay all costs, charges and
expenses, including, without limitation, reasonable attorneys' fees and
disbursements, that may be incurred by Lender in enforcing the covenants,
agreements, obligations and liabilities of Guarantor under this Guaranty.
18. Intentionally deleted.
19. Intentionally deleted.
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20. Incorporation by Reference. Unless specifically provided otherwise
herein, the rules of construction and other applicable provisions of Article X
of the Loan Agreement and Article IX of the Building Loan Agreement shall be
incorporated by reference into this Guaranty.
21. Waiver of One Action Rule; Cross Collateralization. (a) The Loan
has been made by Lender pursuant to the Master Financing Facility Agreement. The
Master Financing Facility Agreement contemplates that one or more Other Loans
made to Other Borrowers pursuant to the Master Financing Facility Agreement
will, at Lender's election, be cross collateralized and cross defaulted with the
Loan and with each other subject to the limitations set forth in (b) below. In
such event, such Other Loans will be secured by the Property and the Collateral,
and the Loan will be secured by the Other Properties and Other Collateral
serving as primary security for such Other Loans, subject to the limitations set
forth in (b) below.
(b) Without limitation to any other right or remedy provided to
Lender in the Loan Agreements or this Guaranty or any of the other Loan
Documents, Guarantor covenants and agrees that upon the occurrence of an Event
of Default and during the continuance thereof (i) Lender shall have the right to
pursue all of its rights and remedies with respect to the Loan or the Other
Loans in one proceeding, or separately and independently in separate proceedings
which it, as Lender, in its discretion, shall determine from time to time, (ii)
Lender is not required to either marshall assets, sell the Property, the
Collateral, or any Other Property, or to enforce or realize upon any Other
Non-Recourse Guaranty, in any inverse order of alienation, or be subjected to
any "one action" or "election of remedies" law or rule, and (iii) the exercise
by Lender of any remedies against the Property, the Collateral, any Other
Property, or any Other Non-Recourse Guaranty will not impede Lender from
subsequently or simultaneously exercising remedies against the Property, the
Collateral, any Other Property, or any Other Non-Recourse Guaranty
(c) Intentionally deleted.
(d) It is understood and agreed by the parties hereto that upon
the satisfaction, termination, or expiration of the Guarantied Obligations, no
subsequent default under the Other Loans shall operate to revive or otherwise
reinstate the Guaranty, other than as specifically set forth in Section 6(i)
herein.
22. No Usury. Guarantor and Lender intend at all times to comply with
applicable state law or applicable United States federal law (to the extent that
it permits Lender to contract for, charge, take, reserve or receive a greater
amount of interest than under state law). If the applicable law (state or
federal) is ever judicially interpreted so as to render usurious any amount
called for under this Guaranty, or contracted for, charged, taken, reserved or
received with respect to the Guarantied Obligations, or if Lender's exercise of
the option to accelerate the maturity of the Guarantied Obligations or any
prepayment by Guarantor results in Guarantor having paid any interest in excess
of that permitted by applicable law, then it is Guarantor's and Lender's express
intent that all excess amounts theretofore collected by Lender shall be credited
against the unpaid Guarantied Obligations (or, if the Guarantied Obligations
have been or would thereby be paid in full, refunded to Guarantor), and the
provisions of the Guaranty immediately be deemed reformed
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and the amounts thereafter collectible thereunder reduced, without the necessity
of the execution of any new document, so as to comply with the applicable law,
but so as to permit the recovery of the fullest amount otherwise called for
thereunder. All sums paid or agreed to be paid to Lender for the use,
forbearance or detention of the Guaranty shall, to the extent permitted by
applicable law, be amortized, prorated, allocated, and spread throughout the
full stated term of the Guaranty until payment in full so that the rate or
amount of interest on account of the Guarantied Obligations does not exceed the
maximum lawful rate from time to time in effect and applicable to the Guarantied
Obligations for so long as the Guarantied Obligations are outstanding.
Notwithstanding anything to the contrary contained in this Guaranty, it is not
the intention of Lender to accelerate the maturity of any interest that has not
accrued at the time of such acceleration or to collect unearned interest at the
time of such acceleration.
[Remainder of page intentionally left blank; signature page
follows.]
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IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the
date first above written.
BROOKDALE LIVING COMMUNITIES,
INC.,
a Delaware Corporation
By:
Darryl W. Copeland, Jr.
Executive Vice President
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AGREED AND ACKNOWLEDGED
ONLY FOR SECTION 13
NOMURA ASSET CAPITAL CORPORATION
By: ______________________________________
Stuart Simon
Director
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ENVIRONMENTAL INDEMNITY AGREEMENT
THIS ENVIRONMENTAL INDEMNITY AGREEMENT (this "Agreement"),
made as of June __, 1998, from BROOKDALE LIVING COMMUNITIES, INC., a Delaware
corporation. having an office at 77 West Wacker Drive, Suite 4400, Chicago,
Illinois 60601, Attention: Darryl W. Copeland, Telefax Number (312) 977-3699
(the "Guarantor") to NOMURA ASSET CAPITAL CORPORATION, a Delaware corporation,
having an address 2 World Financial Center, Building B, New York, New York,
Attention: Raymond M. Anthony, Telefax Number: (212) 667-1666 (together with its
successors and assigns, "Lender").
RECITALS
WHEREAS, pursuant to a Loan Agreement dated as of the date
hereof between AH Texas Owner Limited Partnership, an Ohio limited partnership
("Borrower"), BLC of Texas-II, L.P., a Delaware limited partnership ("Manager"),
and Lender (as modified and supplemented and in effect from time to time, the
"Loan Agreement"), and a Building Loan Agreement between Borrower, Manager and
Lender (as modified and supplemented and in effect from time to time, the
"Building Loan Agreement," collectively with the Loan Agreement hereinafter
referred to as the "Loan Agreements") at the request of Borrower and Guarantor,
Lender has agreed to make a loan (the "Loan") to Borrower;
WHEREAS, Borrower and Manager are entering into a certain
management agreement dated the date herewith and a certain development agreement
dated the date herewith (collectively the "Management Agreement"), pursuant to
which Manager shall manage, operate and develop the Property;
WHEREAS, Lender is unwilling to make the Loan unless Guarantor
indemnifies Lender against certain liabilities arising under Environmental Laws
(as herein defined), relating to the property being financed in connection with
the Loan, which property consists of the fee simple interest in the land more
particularly described in the Mortgage and all buildings, structures and other
improvements now or hereafter situated on such land (the "Property"); and
WHEREAS, Borrower and Lender contemplate that Lender's
interest in and to the Loan or a portion thereof may be assigned by Lender in
connection with one or more Securitizations.
NOW, THEREFORE, in consideration of the making of the Loan by
Lender and the covenants, agreements, representations and warranties set forth
in this Agreement, the parties hereby covenant, agree, represent and warrant as
follows:
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1. Defined Terms. Unless the context otherwise requires,
capitalized terms used but not otherwise defined herein but defined in the Loan
Agreements shall have the meanings provided therefore in the Loan Agreements,
and the following terms shall have the following meanings:
"Borrower" has the meaning provided in the Recitals to this Agreement.
"Environmental Claim" means any written request for
information by a Governmental Authority, or any written notice, notification,
claim, administrative, regulatory or judicial action, suit, judgment, demand or
other written communication by any Person or Governmental Authority requiring,
alleging or asserting liability with respect to Borrower, Manager or the
Property, whether for damages, contribution, indemnification, cost recovery,
compensation, injunctive relief, investigatory, response, remedial or cleanup
costs, damages to natural resources, personal injuries, fines or penalties
arising out of, based on or resulting from (i) the presence, Use, Release or
threatened Release into the environment of any Hazardous Substance in violation
of any Environmental Law originating at or from, or otherwise affecting, the
Property, (ii) any fact, circumstance, condition or occurrence forming the basis
of any violation, or alleged violation, of any Environmental Law by Borrower,
Manager or otherwise affecting the Property or (iii) any alleged injury or
threat of injury to health, safety or the environment by Borrower, Manager or
otherwise affecting the Property arising from actions which are in violation of
Environmental Laws.
"Environmental Laws" means any and all applicable federal,
state, local and foreign laws, rules, regulations or municipal ordinances each
as amended from time to time, and any Permits, approvals, licenses,
registrations, filings and authorizations, in each case as in effect as of the
relevant date, relating to the environment, health or safety, and pertaining to
or imposing liability or standards of conduct concerning environmental
regulation, contamination or clean-up, including the Comprehensive Environmental
Response, Compensation and Liability Act, the Resource Conservation and Recovery
Act, the Emergency Planning and Community Right-to-Know Act of 1986, the
Hazardous Substances Transportation Act, the Solid Waste Disposal Act, the Clean
Water Act, the Clean Air Act, the Toxic Substance Control Act, the Safe Drinking
Water Act, the Occupational Safety and Health Act, any state super-lien and
environmental clean-up statutes and all amendments to and regulations in respect
of the foregoing laws.
"Environmental Reports" means the environmental audit reports,
with respect to the Property, delivered to Lender prior to the date hereof and
in connection with the Loan, and any amendments or supplements thereto delivered
to Lender prior to the date hereof.
"Guarantor" has the meaning provided in the first paragraph of this
Agreement.
"Hazardous Substance" means, collectively, (i) any petroleum
or petroleum products or waste oils, explosives, radioactive materials,
asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls ("PCBs"),
lead in drinking water, and lead based paint, the
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presence, generation, use, transportation, storage or disposal of or exposure to
which (x) is regulated or could lead to liability under any Environmental Law or
(y) is subject to notice or reporting requirements under any Environmental Law,
(ii) any chemicals or other materials or substances which are now or hereafter
become defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous wastes,"
"restricted hazardous wastes," "toxic substances," "toxic pollutants,"
"contaminants," "pollutants" or words of similar import under any Environmental
Law and (iii) any other chemical or any other material or substance, exposure to
which is now or hereafter prohibited, limited or regulated under any
Environmental Law.
"Lender" has the meaning provided in the first paragraph of this Agreement.
"Loan" has the meaning provided in the Recitals to this Agreement.
"Loan Agreement" has the meaning provided in the Recitals to this
Agreement.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, estate, trust, unincorporated association,
or any other entity, any federal, state, county or municipal government or any
bureau, department or agency thereof and any fiduciary acting in such capacity
on behalf of any of the foregoing.
"Release" means, with respect to any Hazardous Substances, any
release, threatened release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the indoor
or outdoor environment, including, without limitation, the movement of Hazardous
Substances through ambient air, soil, surface water, ground water, wetlands,
land or subsurface strata.
"Remedial Work" means any investigation, site monitoring,
containment, cleanup, removal, restoration or other work of any kind reasonably
necessary or required under an applicable Environmental Law.
"Use" means, with respect to any Hazardous Substance, the
generation, manufacture, processing, distribution, handling, use, treatment,
recycling or storage of such Hazardous Substance in violation of Environmental
Laws or transportation to or from the property of such Person of such Hazardous
Substance in violation of Environmental Laws.
2. Indemnification.
(a) Subject to the limitations set forth in Sections 14 and 17
hereof, Guarantor agrees to indemnify, reimburse, defend (with counsel
satisfactory to Lender in Lender's sole discretion), and hold harmless Lender
for, from and against all demands, claims, actions or causes of action,
assessments, losses, damages, liabilities, costs and expenses, including,
without limitation, interest, penalties, consequential damages, reasonable
attorneys' fees, reasonable
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disbursements and expenses, and reasonable consultants' fees, disbursements and
expenses, including costs of Remedial Work (collectively "Losses"), asserted
against, resulting to, imposed on, or incurred by Lender, directly or indirectly
in connection with any of the following:
i) events, circumstances, or conditions which are alleged to, or do, form
the basis for an Environmental Claim;
ii) the presence, Use or Release of Hazardous Substances at,
on, in, under or from the Property, which presence, use or release
requires or could reasonably require Remedial Work;
iii) any Environmental Claim against any Person whose
liability for such Environmental Claim Guarantor has or may have
assumed or retained either contractually or by operation of law;
iv) the breach of any representation, warranty or covenant set
forth in Section 4.1.31, Section 4.2.31, Section 5.1.10, Section 5.2.10, and
clauses (viii) through (xi) of Section 5.18, of the Loan Agreement; or
v) any failure of Guarantor to fulfill each and every
obligation undertaken pursuant to this Agreement.
(b) The indemnity provided in this Agreement shall not be
included in any exculpation of Guarantor, Manager, or Borrower from personal
liability provided in the Loan Agreement or in any of the other Loan Documents.
Nothing in this Agreement shall be deemed to deprive Lender of any rights or
remedies provided to it elsewhere in this Agreement or in the other Loan
Documents or otherwise available to it under law. GUARANTOR WAIVES AND RELEASES
LENDER FROM ANY RIGHTS OR DEFENSES GUARANTOR MAY HAVE UNDER COMMON LAW OR
ENVIRONMENTAL LAWS FOR LIABILITY ARISING FROM OR RESULTING FROM THE PRESENCE,
USE OR RELEASE OF HAZARDOUS SUBSTANCES EXCEPT TO THE EXTENT DIRECTLY CAUSED BY
THE GROSS NEGLIGENCE, FRAUD OR WILLFUL MISCONDUCT OF LENDER. IT IS EXPRESSLY
ACKNOWLEDGED AND AGREED BY THE GUARANTOR THAT THE INDEMNITY CONTAINED IN THIS
SECTION PROTECTS LENDER FROM THE CONSEQUENCES OF LENDER'S ACTS OR OMISSIONS,
INCLUDING, WITHOUT LIMITATION, THE NEGLIGENT ACTS OR OMISSIONS OF LENDER, TO THE
EXTENT PROVIDED BY LAW; PROVIDED, HOWEVER, THAT NOTHING CONTAINED HEREIN SHALL
BE DEEMED TO RELIEVE LENDER FROM LIABILITY DUE TO ITS GROSS NEGLIGENCE.
(c) With respect to those matters for which Guarantor has
agreed to indemnify Lender hereunder, and to the maximum extent permitted by
applicable law, Guarantor waives and releases Lender from any rights or defenses
Guarantor may have under common law or Environmental Laws for liability arising
from or resulting from the presence, Use or Release of
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Hazardous Substances except to the extent directly caused by the fraud, gross
negligence or willful misconduct of Lender.
3. Payment. All payments due to Lender under this Agreement
shall be payable to Lender within ten (10) days after written demand therefor,
and shall bear interest at the Default Rate from the date such payment is due
until the date of payment.
4. Governing Law.
(a) The parties agree that the State of Texas has a
substantial relationship to the parties and to the underlying transaction
embodied hereby, and in all respects, including, without limitation, matters of
construction, validity and performance, this Agreement and the obligations
arising hereunder shall be governed by, and construed in accordance with, the
laws of the State of Texas applicable to contracts made and performed in such
State and any applicable law of the United States of America. To the fullest
extent permitted by law, Guarantor hereby unconditionally and irrevocably waives
any claim to assert that the law of any other jurisdiction governs this
Agreement, and this Agreement shall be governed by and construed in accordance
with the laws of the State of Texas.
(b) Any legal suit, action or proceeding against Lender or
Guarantor arising out of or relating to this Agreement shall be instituted in
any federal or state court in New York, New York, pursuant to ss. 5-1402 of the
New York General Obligations Law, and Guarantor waives any objection which it
may now or hereafter have to the laying of venue of any such suit, action or
proceeding, and Guarantor hereby irrevocably submits to the jurisdiction of any
such court in any suit, action or proceeding. Guarantor does hereby designate
and appoint CT Corporation Systems, 1633 Broadway, New York, New York 10016, as
its authorized agent to accept and acknowledge on its behalf service of any and
all process which may be served in any such suit, action or proceeding in any
federal or state court in New York, New York, and agrees that service of process
upon said agent at said address (or at such other office in New York, New York
as such agent shall designate in writing in accordance with the terms hereof)
with a copy of same to Guarantor in the manner hereinafter described and written
notice of said service of Guarantor mailed or delivered to Guarantor in the
manner provided herein shall be deemed in every respect effective service of
process upon Guarantor in any such suit, action or proceeding in the State of
New York. Guarantor (i) shall give prompt notice to Lender of any changed
address of its authorized agent hereunder, (ii) may at any time and from time to
time designate a substitute authorized agent with an office in New York, New
York (which office shall be designated as the address for service of process),
and (iii) shall promptly designate such a substitute if its authorized agent
ceases to have an office in New York, New York or is dissolved without leaving a
successor.
5. Modification, Waiver in Writing. No modification,
amendment, extension, discharge, termination or waiver of any provision of this
Agreement or consent to any departure by Guarantor therefrom, shall in any event
be effective unless the same shall be in a writing
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signed by the party against whom enforcement is sought, and then such waiver or
consent shall be effective only in the specific instance, and for the purpose,
for which given. Except as otherwise expressly provided herein, no notice to or
demand on Guarantor shall entitle Guarantor to any other or future notice or
demand in the same, similar or other circumstances.
6. Delay Not a Waiver. Neither any failure nor any delay on
the part of Lender in insisting upon strict performance of any term, condition,
covenant or agreement or exercising any right, power, remedy or privilege
hereunder, shall operate as or constitute a waiver thereof, nor shall a single
or partial exercise thereof preclude any other future exercise, or the exercise
of any other right, power, remedy or privilege. In particular, and not by way of
limitation, by accepting payment after the due date of any amount payable under
this Agreement, Lender shall not be deemed to have waived any right either to
require prompt payment when due of all other amounts due under this Agreement,
or to declare a default for failure to effect prompt payment of any such other
amount.
7. Notices. All notices, consents, approvals and requests
required or permitted hereunder shall be given in writing and shall be effective
for all purposes if hand delivered or sent by (a) hand delivery, with proof of
attempted delivery, (b) certified or registered United States mail, postage
prepaid, (c) expedited prepaid delivery service, either commercial or United
States Postal Service, with proof of attempted delivery, or (d) by telecopier
(with answerback acknowledged) provided that such telecopied notice must also be
delivered by one of the means set forth in (a), (b) or (c) above, addressed if
to Lender at its address set forth on the first page hereof, and if to Guarantor
at its designated address set forth on the first page hereof, or at such other
address and Person as shall be designated from time to time by any party hereto,
as the case may be, in a written notice to the other parties hereto in the
manner provided for in this Section 7. A copy of all notices, consents,
approvals and requests directed to Lender shall be delivered concurrently to
each of the following: Marc B. Friedman, Esquire, Dechert Price & Rhoads, 90
State House Square, 12th Floor, Hartford, Connecticut 06103-3702, Telefax Number
860/524- 3930; Nomura Asset Capital Corporation, Two World Financial Center,
Building B, New York, New York 10281-1198, Attention: Raymond M. Anthony,
Telefax Number (212) 667-1666; Nomura Asset Capital Corporation, Two World
Financial Center, Building B, New York, NY 10281-1198, Attention Sheryl McAfee,
Telefax Number (212) 667-1022; and Nomura Asset Capital Corporation, Two World
Financial Center, Building B, New York, NY 10281-1198, Attention: Barry Funt,
Telefax Number (212) 667-1022. A copy of all notices, consents, approvals and
requests directed to Guarantor shall be delivered concurrently to each of the
following: Brookdale Living Communities, Inc., 77 West Wacker Drive, Suite 4400,
Chicago, Illinois 60601, Attention: Darryl W. Copeland, Jr., Telefax Number
(312) 977-3699; Brookdale Living Communities, Inc., 77 West Wacker Drive, Suite
4400, Chicago, Illinois 60601, Attention: Robert J. Rudnik, Esquire, Telefax
Number (312) 977-3769; Brookdale Living Communities, Inc., 77 West Wacker Drive,
Suite 4400, Chicago, Illinois 60601, Attention: Scott E. Jordan, Esquire,
Telefax Number (312) 977-3769; and Wayne D. Boberg, Esq., Winston & Strawn, 35
West Wacker Drive, Chicago, Illinois 60602, Telefax Number (312) 558-5700. A
notice shall be deemed to have been given: (a) in the case of hand delivery, at
the time of
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delivery; (b) in the case of registered or certified mail, when delivered or the
first attempted delivery on a Business Day; (c) in the case of expedited prepaid
delivery upon the first attempted delivery on a Business Day; or (d) in the case
of telecopier, upon receipt of answerback confirmation received prior to 5:00
p.m. local time on a Business Day or if confirmation received thereafter on the
next succeeding Business Day, provided that such telecopied notice was also
delivered as required in this Section 7. A party receiving a notice which does
not comply with the technical requirements for notice under this Section 7 may
elect to waive any deficiencies and treat the notice as having been properly
given.
8. Trial by Jury. EACH OF GUARANTOR AND LENDER, TO THE FULLEST
EXTENT THAT IT MAY LAWFULLY DO SO, WAIVES TRIAL BY JURY IN ANY ACTION OR
PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY TORT ACTION, BROUGHT BY ANY PARTY
HERETO WITH RESPECT TO THIS AGREEMENT.
9. Assignment. Lender shall have the right to assign this
Agreement and the obligations hereunder to any Person who is from time to time
the owner of the Loan, but not otherwise. The parties hereto acknowledge that
following the execution and delivery of this Agreement, Lender expects to sell,
transfer and assign this Agreement, the Loan Agreements, the Note, the Mortgage
and the other Loan Documents to a trustee and a servicer in connection with one
or more Securitizations. All references to "Lender" hereunder shall be deemed to
include the successors and assigns of Lender, including any trustee or servicer.
10. Severability. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
11. Heading and Recitals. The information set forth in the
heading and recitals hereof are hereby incorporated herein as a part of this
Agreement with the same effect as if set forth in the body hereof.
12. Counterparts. This 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 together constitute one and the same
instrument.
13. Estoppel Certificates. Guarantor and Lender each hereby
agree at any time and from time to time upon not less than fifteen (15) days
prior written notice by Guarantor or Lender to execute, acknowledge and deliver
to the party specified in such notice, a statement, in writing, certifying that
this Agreement is unmodified and in full force and effect (or if there have been
modifications, that the same, as modified, is in full force and effect and
stating the modifications hereto), and stating whether or not, to the best
knowledge of such certifying party, there exists any matter giving rise to a
claim under Section 2, and, if so, specifying each such matter;
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provided, however, that it shall be a condition precedent to Lender's obligation
to deliver the statement pursuant to this Section 13, that Lender shall have
received, together with Guarantor's request for such statement, an officer's
certificate signed by an authorized officer of Guarantor stating that to the
best of Guarantor's knowledge, no matter which could give rise to a claim under
Section 2 exists as of the date of such certificate (or specifying each such
matter).
14. Survival. Subject to Sections 17 and 18 hereof, this
Agreement shall survive (in perpetuity) the closing and disbursement of the
funds evidenced by the Note, payment of the Note, payment and performance of the
Loan Obligations (as such term is defined in the Mortgage), any release,
reconveyance, discharge or foreclosure of the Mortgage, conveyance by deed in
lieu of foreclosure, transfer, and any subsequent conveyance of the Property.
Notwithstanding the foregoing, Guarantor shall not indemnify Lender with respect
to any Losses incurred in connection with, or as a direct result of, any or all
of the matters described above in Section 2(a)(i) through 2(a)(iv) to the extent
that Guarantor can establish directly and solely that such Losses result from
Hazardous Substances being placed on, above or under the Property (a) by the
affirmative act or gross negligence of Lender or any employees, agents or
bailees of Lender; or (b) subsequent to (i) Lender taking fee title to the
Property pursuant to the Mortgage; or (ii) a foreclosure by Lender; or (iii)
acceptance by Lender or any designee of a deed-in-lieu of foreclosure with
respect to the Property. Guarantor agrees that this Guaranty shall continue to
be effective or shall be reinstated, as the case may be, if at any time any
payment is made by Borrower or Guarantor to Lender and such payment is rescinded
or must otherwise be returned by Lender (as determined by Lender in its sole and
absolute discretion) upon insolvency, bankruptcy, liquidation, reorganization,
readjustment, composition, dissolution, receivership, conservatorship, winding
up or other similar proceeding involving or affecting Borrower or Guarantor, all
as though such payment had not been made.
15. Time of the Essence. Time is of the essence with respect
to each and every covenant, agreement and obligation of Guarantor under this
Agreement.
16. Liability. The liability of Guarantor under this Agreement
shall in no way be limited or impaired by (a) any amendment or modification of
the Loan Documents made in accordance therewith, (b) any extensions of time for
performance required by any of the Loan Documents, or (c) the release or
substitution in whole or in part, of any security for the Note or other evidence
of debt issued pursuant to the Loan Documents; and in any of such cases, whether
with or without notice to Guarantor and with or without consideration.
17. Waiver of One Action Rule; Cross-Collateralization.
(a) The Loan has been made by Lender pursuant to the Master
Financing Facility Agreement. The Master Financing Facility Agreement
contemplates that one or more Other Loans made to Other Borrowers pursuant to
the Master Financing Facility Agreement will, at Lender's election, be cross
collateralized and cross defaulted with the Loan and with each other, subject to
8
<PAGE>
Section (b) below. In such event, such Other Loans will be secured by the
Property and the Collateral, and the Loan will be secured by the Other
Properties and Other Collateral serving as primary security for such Other
Loans, subject to Section (b) below.
(b) Without limitation to any other right or remedy provided
to Lender in the Loan Agreements or this Guaranty or any of the other Loan
Documents, Guarantor covenants and agrees that upon the occurrence of an Event
of Default and during the continuance thereof (i) Lender shall have the right to
pursue all of its rights and remedies with respect to the Loan or the Other
Loans in one proceeding, or separately and independently in separate proceedings
which it, as Lender, in its discretion, shall determine from time to time, (ii)
Lender is not required to either marshall assets, sell the Property, the
Collateral, or any Other Property, or to enforce or realize upon any Other
Non-Recourse Guaranty, in any inverse order of alienation, or be subjected to
any "one action" or "election of remedies" or "anti-deficiency" law or rule
which may prevent Lender from bringing any claim, including any claim for
deficiency, against Guarantor, before or after Lender's commencement or
completion of any foreclosure action either judicially or by power of sale, and
(iii) the exercise by Lender of any remedies against the Property, the
Collateral, any Other Property, or any Other Non-Recourse Guaranty will not
impede Lender from subsequently or simultaneously exercising remedies against
the Property, the Collateral, any Other Property, or any Other Non-Recourse
Guaranty.
(c) Intentionally deleted.
(d) It is understood and agreed by the parties hereto that
upon the satisfaction, termination, or expiration of the indemnification
provided in this Guaranty, no subsequent default under the Other Loans shall
operate to revive or otherwise reinstate the Guaranty, other than as
specifically set forth in Section 14 herein.
18. Notwithstanding anything to the contrary contained herein,
upon the sale of the Property by Borrower to an unrelated third party purchaser,
this Guaranty and the indemnity obligations provided hereunder shall terminate,
except to the extent any such obligations exist and remain unpaid or otherwise
unsatisfied; provided, however, that if subsequent to any such sale, Losses are
incurred as set forth in Section 2(a) and it is proven that such Losses occurred
as a result of actions or omissions of Borrower, Manager, or Guarantor, then the
indemnification provided herein shall continue to be effective or shall be
reinstated, as the case may be.
19. Except as otherwise provided herein and to the extent
permitted by law, Guarantor waives diligence, notice of acceptance of this
Guaranty, filing of claims with any court, any proceeding to enforce any
provision of any other Loan Document, against Guarantor, Borrower or any other
Person, any right to require a proceeding first against Borrower, Guarantor, or
any other Person, or to exhaust any security (including, without limitation, the
Property) for the performance of any obligations of Borrower or any other
Person, or any protest, presentment, notice of default or other notice or demand
whatsoever, including but not limited to any and all suretyship defenses and
defenses in the nature thereof such as the benefits of the provisions of
Vernon's Texas Codes
9
<PAGE>
Annotated, Civil Practices and Remedies, ss. 17.001, Vernon's Texas Codes
Annotated Business & Commerce Code ss. 34.02 and Texas Rules of Civil Procedure,
Rule 31, (except to the extent expressly provided to the contrary in this
Guaranty or elsewhere in the Loan Documents), and Guarantor hereby covenants and
agrees that Guarantor shall not be discharged of its obligations hereunder
except as set forth in Section 18 above.
20. No Usury. Guarantor and Lender intend at all times to
comply with applicable state law or applicable United States federal law (to the
extent that it permits Lender to contract for, charge, take, reserve or receive
a greater amount of interest than under state law). If the applicable law (state
or federal) would render usurious any amount called for under this Agreement, or
contracted for, charged, taken, reserved or received with respect to the
indemnification hereunder, or if Lender's exercise of the option to accelerate
the maturity of the indemnification hereunder, or any prepayment by Guarantor
results in Guarantor having paid any interest in excess of that permitted by
applicable law, then it is Guarantor's and Lender's express intent that all
excess amounts theretofore collected by Lender shall be credited against the
unpaid obligations (or, if the obligations have been or would thereby be paid in
full, refunded to Guarantor), and the provisions of this Agreement immediately
be deemed reformed and the amounts thereafter collectible thereunder reduced,
without the necessity of the execution of any new document, so as to comply with
the applicable law, but so as to permit the recovery of the fullest amount
otherwise called for thereunder. All sums paid or agreed to be paid to Lender
for the use, forbearance or detention of this Agreement shall, to the extent
permitted by applicable law, be amortized, prorated, allocated, and spread
throughout the full stated term of this Agreement until payment in full so that
the rate or amount of interest on account of the obligations does not exceed the
maximum lawful rate from time to time in effect and applicable to the
obligations for so loan as the obligations are outstanding. Notwithstanding
anything to the contrary contained in this Agreement, it is not the intention of
Lender to accelerate the maturity of any interest that has not accrued at the
time of such acceleration or to collect unearned interest at the time of such
acceleration.
[Signature on the following page]
10
<PAGE>
IN WITNESS WHEREOF, the Guarantor has caused this
Environmental Guaranty Indemnity Agreement to be duly executed by its duly
authorized representative, all as of the day and year first above written.
GUARANTOR:
BROOKDALE LIVING COMMUNITIES, INC.,
a Delaware corporation
By: ________________________________
Darryl W. Copeland, Jr.
Executive Vice President
11
<PAGE>
AGREED AND ACKNOWLEDGED
ONLY FOR SECTION 8
NOMURA ASSET CAPITAL CORPORATION
By: ______________________________________
Stuart Simon
Director
12
LOAN AGREEMENT
between
AH TEXAS SUBORDINATED, LLC
as Borrower
and
BANC ONE CAPITAL PARTNERS IV, LTD.
as Lender
Dated
June 17, 1998
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1. DEFINITIONS......................................................2
1.1 Definitions......................................................2
1.2 Cross-References.................................................6
ARTICLE 2. LOAN............................................................6
2.1 Loan............................................................6
2.2 Timing of Disbursement of Loan...................................7
(a) Priority Loan..............................................7
b) Subordinate Loan...........................................7
2.3 Notes............................................................7
-----
(a) Term.......................................................7
----
(b) Interest Rate..............................................8
-------------
(i) Required Pay Rate of Interest........................8
(ii) Mandatory Lookback Interest..........................8
(iii) Default Interest Rate................................8
(c) Intentionally Omitted......................................8
---------------------
(d) No Principal Amortization..................................8
-------------------------
(e) Optional Prepayments.......................................8
--------------------
(f) Events of Default..........................................9
-----------------
(g) Priority of Payments.......................................9
--------------------
2.4 Use of Loan Proceeds.............................................9
--------------------
2.5 Acknowledgment of Full Payment of the Loan.......................9
------------------------------------------
2.6 Right to Make Additional Advances................................9
----------------------------------
ARTICLE 3. PAYMENTS, SECURITY..............................................10
3.1 Payments........................................................10
3.2 Security........................................................10
ARTICLE 4. CONDITIONS OF BORROWING.........................................11
4.1 Conditions Precedent to the Initial Disbursement................11
ARTICLE 5. REPRESENTATIONS AND WARRANTIES..................................13
5.1 Organization and Authority of Borrower..........................13
--------------------------------------
5.2 Organization and Authority of the Owner.........................14
---------------------------------------
5.3 Organization and Authority of the General Partner...............14
-------------------------------------------------
5.4 Title to Property; Liens........................................14
------------------------
5.5 Litigation......................................................14
----------
5.6 Compliance with Law and Other Instruments.......................15
-----------------------------------------
5.7 Adverse Contracts; Defaults.....................................15
---------------------------
5.8 Environmental Laws..............................................15
------------------
5.9 Disclosure......................................................15
----------
i
<PAGE>
5.10 Tax Reports; Filings............................................16
5.11 Default.............................................16
-------
5.12 Business of Borrower and Owner..................................16
------------------------------
5.13 Liabilities.....................................................16
-----------
ARTICLE 6. AFFIRMATIVE COVENANTS...........................................16
6.1 Covenants Relating to the Property or the Manager...............16
(a) Financial Statements and Reports..........................16
--------------------------------
(b) Periodic Reports..........................................17
----------------
(c) Preparation of Tax Returns................................17
--------------------------
(d) Inspection................................................17
----------
(e) Insurance.................................................17
---------
(f) Payment of Taxes and Claims...............................18
---------------------------
(g) Maintenance of Property...................................18
-----------------------
(h) Maintenance of Tangible Assets............................18
------------------------------
(i) Records and Books of Account..............................18
----------------------------
(j) Use of Proceeds...........................................18
---------------
(k) Construction Plan.........................................18
-----------------
6.2 Covenants Relating to the Borrower, the Owner and the General
-----------------------------------------------------------------
Partner.........................................................19
-------
(a) Compliance with Laws......................................19
--------------------
(b) Preservation of Existence.................................19
-------------------------
(c) Notices of Certain Events.................................19
-------------------------
(d) Performance of Contracts..................................20
------------------------
(e) Notice of Material Litigation.............................20
-----------------------------
(f) Bankruptcy................................................20
----------
(g) Compliance with Certain Agreements........................20
----------------------------------
ARTICLE 7. NEGATIVE COVENANTS..............................................21
7.1 Liens and Other Encumbrances....................................21
7.2 Amendments to Operating Agreement, Management Agreement,
Development Agreement, and Senior Loan Documents................21
------------------------------------------------
7.3 Transactions with Affiliates....................................21
----------------------------
7.4 Admission of New Members........................................22
------------------------
7.5 Refinancing of Senior Loan: Additional Debt.....................22
-------------------------------------------
7.6 Sale of the Property............................................22
--------------------
7.7 Limitations of Business.........................................22
-----------------------
7.8 Budgets.........................................................22
-------
7.9 Capital Expenditures............................................22
--------------------
7.10 No Challenge to Exercise of Rights under Assignment.............23
---------------------------------------------------
7.11 Limitation on Change of Ownership...............................23
---------------------------------
ARTICLE 8. EVENTS OF DEFAULT...............................................23
8.1 Event of Default................................................23
8.2 Consequences of Event of Default................................25
ii
<PAGE>
ARTICLE 9. INDEMNIFICATION.................................................26
9.1 No Reliance; Indemnification....................................26
ARTICLE 10. MISCELLANEOUS..................................................26
10.1 Notices.........................................................26
10.2 Term of Agreement; Termination; Successors and Assigns..........28
10.3 No Implied Rights or Waivers....................................29
10.4 Applicable Law..................................................29
10.5 Modifications, Amendments or Waivers............................29
10.6 Counterparts....................................................29
10.7 Headings........................................................29
10.8 Expenses........................................................29
10.9 Accounting......................................................29
10.10 Severability....................................................30
10.11 Waiver of Jury Trial; Consent to Venue..........................30
10.12 Entire Agreement................................................30
Exhibit A-1 Guaranty Agreement
A-2 Guaranty of Completion
A-3 Non-Recourse Guaranty
Exhibit B-1 Priority Note
Exhibit B-2 Subordinate Note
Exhibit C Security Agreement - Pledge and Assignment of Membership Interests
Exhibit D Warrant Certificate
Exhibit E-1 Methodology of Calculation of Internal Rate of Return (Priority
Note)
Exhibit E-2 Methodology of Calculation of Internal Rate of Return
(Subordinate Note)
iii
<PAGE>
LOAN AGREEMENT
This Loan Agreement (this "Agreement") is entered into as of June 17,
1998, by and between AH TEXAS SUBORDINATED, LLC, an Ohio limited liability
company (the "Borrower"), and BANC ONE CAPITAL PARTNERS IV, LTD., an Ohio
limited liability company (the "
Lender").
RECITALS:
WHEREAS, AH Texas Owner Limited Partnership is an Ohio limited partnership
(the "Owner"), the sole partners of which are the Borrower and AH Texas CGP,
Inc., an Ohio corporation (the "General Partner"), which acts as the sole
general partner of the Owner;
WHEREAS, the Borrower is the sole shareholder of the General Partner;
WHEREAS, the Owner intends to develop a congregate housing facility with
an assisted living component for the elderly in Austin, Texas, which is
currently referred to as "The Heritage
at Gaines Ranch" (the "Project");
WHEREAS, the Borrower estimates that the total cost of acquisition,
development and construction of the Project will be $31,097,670 (the "Estimated
Project Cost");
WHEREAS, the Borrower, on behalf of the Owner, has obtained a loan from
Nomura Asset Capital Corporation (the "Senior Lender") for the acquisition,
development and construction of the Project, in the amount of up to $24,250,000
(the "Senior Loan");
WHEREAS, the Lender has agreed to make a loan to the Borrower (as further
defined in Section 2.1 below, the " Loan") to be used as an equity contribution
to the Owner, the proceeds of which will fund a portion of the Estimated Project
Cost which will not be funded by the Senior Loan, upon the terms and conditions
herein below set forth; and
WHEREAS, in order to collateralize the Loan and induce the Lender to make
the Loan (i) AH Texas Investor, Inc., which owns one hundred percent (100%) of
the membership interests in the Borrower (the "Membership Interests") and will
derive material benefits from the Loan, has agreed to pledge and assign the
Membership Interests to the Lender and (ii) Brookdale Living Communities, Inc.,
a Delaware corporation ("Brookdale") and an Affiliate of BLC of Texas-II, L.P.,
a Delaware limited partnership and the developer and manager of the Project (the
"Manager"), which will derive material benefits from the Loan, has agreed to
guaranty certain obligations of the Borrower, to the extent described in the
Guaranties (as hereinafter defined).
NOW THEREFORE, for and in consideration of one dollar ($1.00) in hand paid
by the Borrower to the Lender and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1
<PAGE>
ARTICLE 1. DEFINITIONS
1.1 Definitions. The following terms shall have the meanings set forth
below:
"Affiliate" of a Person shall mean any other Person directly or
indirectly controlling, under common control with, or controlled by such Person.
For purposes of the definition of Affiliate, "control" when used with respect to
any specific 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 relative to the foregoing.
"Agreement" is defined in the preamble.
"Bankruptcy Act" shall mean Title 11 of the United States Code
entitled "Bankruptcy" as now and hereafter in effect, or any successor statute.
"Borrower" is defined in the preamble.
"Brookdale" is defined in the Recitals on Page 1 of this
Agreement.
"Brookdale Option Agreement" shall mean that certain Property Option
Agreement among Brookdale, the Borrower and the Owner of even date herewith.
"Budget" shall have the meaning set forth in the Senior Loan
Documents.
"Business Day" shall mean any day other than Saturdays, Sundays and
other legal holidays or days on which the principal office of the Lender is
closed or banks in Chicago, Illinois
are closed.
"Call Option" shall mean the option in favor of Brookdale to
purchase (i) the Property from the Owner or (ii) all of the equity interests in
the Owner and the General Partner from the Borrower, as more particularly
described in the Brookdale Option
Agreement.
"Capital Contribution" is defined in Section 4.1(r) of this
Agreement.
"Completion Guaranty" shall mean the Guaranty of Completion executed
by Brookdale in favor of Lender of even date herewith, a copy of which is
attached hereto as Exhibit A-2.
"Consent and Subordination of Manager" shall mean that certain
Consent and Subordination of Manager of even date herewith executed by the
Manager, in its capacity as property manager and as developer, in favor of
Lender.
"Construction Plan" shall be Manager's narrative description of its
plan, inclusive of time lines and budgets, for completion of construction of the
Project.
2
<PAGE>
"Default" shall mean the occurrence of an event which with the
giving of notice, passage of time, or both would become an Event of Default.
"Default Rate of Interest" is defined in Section 2.3(b)(iii) of
this Agreement.
"Development Agreement" shall mean that certain Amended and Restated
Development Agreement between the Owner and Manager dated June 17, 1998.
"Environmental Indemnity Agreement" shall mean that certain
Environmental Indemnity Agreement of even date herewith executed by Brookdale in
favor of
the Lender.
"Environmental Site Assessment" is defined in Section 5.8 of this
Agreement.
"Equity Option Agreement" shall mean that certain Equity Option
Agreement among
AH Texas Investor, Inc., the Owner, the Borrower, the General Partner and
Brookdale of even date
herewith.
"Equity Option" shall mean the option in favor of Brookdale to
purchase the equity interests of AH Texas Investor, Inc. in Borrower as more
particularly described in the Equity Option Agreement.
"Estimated Project Cost" is defined in the Recitals on page 1 of
this Agreement.
"Event of Default" is defined in Section 8.1 of this Agreement.
"Fair Market Value" shall mean the fair market value of the Property
as of the date in question as determined in accordance with the Brookdale Option
Agreement.
"First Mortgage" shall mean the mortgage in favor of Senior
Lender.
"General Partner" is defined in the Recitals on Page 1 of this
Agreement.
"Guaranties" shall mean the Non-Recourse Guaranty, the Completion
Guaranty, the
Guaranty of Recourse Obligations and the Environmental Indemnity Agreement.
"Guaranty of Recourse Obligations" shall mean the Guaranty Agreement
executed by Brookdale in favor of Lender, a copy of which is attached hereto as
Exhibit A-1.
"Initial Disbursement" is defined in Section 2.2(b) of this
Agreement.
"Intercreditor Agreement" shall mean that certain Intercreditor
Agreement among Lender, Senior Lender, Owner, Borrower, General Partner, AH
Texas Investor, Inc., Brookdale and Manager of even date herewith as the same
may be hereafter supplemented, amended, modified or renewed.
"Lender" is defined in the preamble of this Agreement.
3
<PAGE>
"Loan" shall mean, collectively, the Priority Loan and the
Subordinate Loan.
"Loan Closing" shall be the date that the Initial Disbursement is
funded.
"Loan Documents" shall mean and include this Agreement, the Notes,
the Security Agreement and Assignment, the Guaranties, the Warrant, the Pledge
of Investment Agreement, the Consent and Subordination of Manager and other
documents and agreements evidencing and collateralizing the Loan or the
Guaranties.
"Management Agreement" shall mean the Management Agreement between
the Owner and Manager dated June 17, 1998 relating to the management of the
Property.
"Manager" is defined in the Recitals on Page 1 of this Agreement.
"Mandatory Lookback Interest" is defined in Section 2.3(b)(ii) of
this Agreement.
"Mandatory Priority Note Lookback Interest" is defined in Section
2.3(b)(ii) of this
Agreement.
"Mandatory Subordinate Note Lookback Interest" is defined in
Section 2.3(b)(ii) of
this Agreement.
"Maturity Date" is defined in Section 2.3(a) of this Agreement.
"Membership Interests" is defined in the Recitals on Page 1 of
this Agreement.
"Michigan Loan" shall mean that certain loan by the Lender to AH
Michigan Subordinated, LLC pursuant to the Michigan Loan Agreement.
"Michigan Loan Agreement" shall mean that certain Loan Agreement
between AH Michigan Subordinated, LLC and the Lender of even date herewith.
"Non-Recourse Guaranty" shall mean the Non-Recourse Guaranty
executed by Brookdale in favor of Lender of even date herewith, a copy of which
is attached hereto as Exhibit A-4.
"Notes" shall mean, together, the Priority Note and the
Subordinate Note.
"Operating Agreement" shall mean the Amended and Restated
Operating Agreement of the Borrower dated June 17, 1998.
"Owner" is defined in the Recitals on Page 1 of this Agreement.
"Person" shall mean a limited liability company, an association, a
corporation, a partnership, an organization, a business, an individual, a
government or political subdivision thereof or a governmental agency.
4
<PAGE>
"Pledge of Investment Agreement" shall mean that certain Security
Agreement Pledge and Assignment of Investment Agreement of even date herewith
between Brookdale and
Lender.
"Priority Loan" is defined in Section 2.1 of this Agreement.
"Priority Note" is defined in Section 2.3 of this Agreement and a
copy of which is attached hereto as Exhibit B-1.
"Project" is defined in the Recitals on Page 1 of this Agreement.
"Project Completion" is the circumstance evidenced by the Project
Architect's
Certificate of Substantial Completion and the issuance of all licenses and
permits required for the
full use and occupancy of the Project.
"Property" shall mean the real property described in the First
Mortgage and the Project and all other improvements, buildings and structures
and appurtenances relating thereto acquired by the Owner or owned by the Owner
and located in Austin, Travis
County, Texas.
"Recourse Guaranties" shall mean the Completion Guaranty, the
Guaranty of
Recourse Obligations and the Environmental Indemnity Agreement.
"Required Pay Rate of Interest on the Priority Note" is defined in
Section 2.3(b)(i) of this Agreement.
"Required Pay Rate of Interest on the Subordinate Note" is
defined in Section
2.3(b)(i) of this Agreement.
"Scheduled Debt Service" shall mean the monthly payments of interest
at the Default Rate of Interest or the Required Pay Rate of Interest on the
Priority Note, as applicable, as required by Section 2.3(b)(i) and Section
2.3(b)(iii) of this Agreement.
"Security Agreement and Assignment" shall mean the Security
Agreement - Pledge and Assignment of Membership Interests from AH Texas
Investor, Inc. to the Lender dated the date of the Loan Closing, a copy of which
is attached hereto as Exhibit C.
"Senior Lender" is defined in the Recitals on Page 1 of this
Agreement.
"Senior Loan" is defined in the Recitals on Page 1 of this
Agreement.
"Senior Loan Documents" shall mean the loan documents evidencing or
securing the Senior Loan.
"Special Management Interest" shall mean that certain right to
replace the manager of the Borrower granted to the Lender pursuant to Section
5.5 of the Operating Agreement.
5
<PAGE>
"Structuring Fee" means the fee of $152,230 payable by the Borrower
to Banc One Capital Markets, Inc., an Affiliate of the Lender, as follows: (a)
50% of the Structuring Fee shall be due and payable upon the earlier of (i) the
Loan Closing or (ii) the 30th day after the date on which the commitment to make
the Loan was issued by the Lender to the Borrower, and (b) the remaining 50% of
the Structuring Fee shall be due and payable at the time of the Loan Closing. A
deposit of $5,000 has been previously paid to the Lender on behalf of the
Borrower and said deposit shall be credited against the Structuring Fee at the
Loan Closing.
"Subordinate Loan" is defined in Section 2.1 of this Agreement.
"Subordinate Note" is defined in Section 2.3 of this Agreement and a
copy of which is attached hereto as Exhibit B-2.
"Title Insurance Commitment" is defined in Section 4.1(f) of this
Agreement.
"Warrant" shall mean that certain Warrant Certificate issued by
Brookdale in favor of the Lender, a copy of which is attached hereto as Exhibit
D.
"Unavoidable Delay" shall have the meaning set forth in the
Senior Loan Documents.
"15.60% IRR" shall mean an internal rate of return of 15.60% per
annum, compounded monthly, and computed using the methodology described in
Exhibit E-1 attached hereto. Upon any Event of Default, the internal rate of
return of 15.60% per annum shall be increased to 19.60% per annum from and after
the expiration of any applicable cure period following such Event of Default
until the earlier of the payment in full of the Notes or the date when such
Event of Default is cured.
"17.11% IRR" shall mean an internal rate of return of 17.11% per
annum, compounded monthly, and computed using the methodology described in
Exhibit E-2 attached hereto. Upon any Event of Default, the internal rate of
return of 17.11% per annum shall be increased to 21.11% per annum from and after
the expiration of any applicable cure period following such Event of Default
until the earlier of the payment in full of the Notes or the date when such
Event of Default is cured.
1.2 Cross-References. Anything herein to the contrary notwithstanding, any
cross-reference in the Loan Documents to a term defined in the Senior Loan
Documents shall refer to such term as defined in the Senior Loan Documents as in
effect on the date hereof.
ARTICLE 2. LOAN
2.1 Loan. The Lender, upon the terms and subject to the conditions of this
Agreement, shall lend to the Borrower (a) the principal amount of $4,466,981
($3,081,742 of which shall be disbursed to the Borrower and up to $1,385,239 of
which shall be allocated monthly to capitalized interest to be used as a source
of payment of the Scheduled Debt Service certain legal and due diligence
expenses payable at the Loan Closing, and the unpaid portion of the Structuring
Fee);
6
<PAGE>
and (b) the principal amount of $2,915,677. The loan proceeds referred to in
(a), above, (subject to increase as set forth in Section 2.6) are sometimes
hereinafter referred to as the "Priority Loan". The loan proceeds referred to in
(b), above, are sometimes hereinafter referred to as the "Subordinate Loan". The
Priority Loan and the Subordinate Loan are sometimes hereinafter referred to
together as the "Loan".
2.2 Timing of Disbursement of Loan. The Loan shall be funded and disbursed
as follows:
(a) Priority Loan. Subject to the satisfaction of the conditions
precedent described in Section 4.1 hereof, the sum of $3,081,742 of the Priority
Loan shall be disbursed by the Lender to the Borrower on the date of the Loan
Closing. In addition, up to $1,385,239 of the principal of the Priority Loan
shall be deemed advanced and applied to pay the unpaid portion of the
Structuring Fee and certain legal and due diligence expenses payable at the Loan
Closing and the Scheduled Debt Service as it comes due. The Borrower
acknowledges that the $1,181,027 of the principal of the Priority Loan will be
insufficient to pay all Scheduled Debt Service in the event the Maturity Date is
extended as provided in Section 2.3(a), below. Brookdale has agreed to guaranty
the payment of Scheduled Debt Service during any such extension period pursuant
to its Guaranty of Recourse Obligations.
(b) Subordinate Loan. Subject to the satisfaction of the conditions
precedent described in Section 4.1 hereof, the Subordinate Loan shall be fully
funded and disbursed to the Borrower on the date of the Loan Closing. The
disbursement of the Subordinate Loan at the Loan Closing together with the
initial disbursement of the Priority Loan at the Loan Closing, (as described in
Section 2.2(a)), is sometimes hereinafter referred to as the "Initial
Disbursement".
2.3 Notes. The Priority Loan shall be evidenced by a promissory note (the
"Priority Note") in the form of Exhibit B-1 attached hereto, which shall be
executed and delivered to the Lender by the Borrower. The Subordinate Loan shall
be evidenced by a promissory note (the "Subordinate Note" and together with the
Priority Note, the "Notes") in the form of Exhibit B-2 attached hereto, which
shall be executed and delivered to the Lender by the Borrower. The Notes shall
contain the following principal terms and provisions:
(a) Term. Each Note shall be dated the date of the Loan Closing and
shall be due and payable in full on the earlier of the Conversion Date (as such
term is defined in the Senior Loan Documents) or May 11, 2001, subject to the
Lender's right to accelerate that date upon the occurrence of an Event of
Default as set forth in Section 8.2 of this Agreement and subject to Borrower's
right to extend such date as hereinafter provided (the "Maturity Date").
Borrower may extend the Maturity Date to the earlier of the Conversion Date or
the Extended Expected Conversion Date (as such term is defined in the Senior
Loan Documents) provided that (i) Borrower has provided to Lender written notice
of its election to so extend the Maturity Date at least 30 days prior to the
Original Expected Conversion Date (as such term is defined in the Senior Loan
Documents), (ii) as of the date of such notice there exists no Event of Default
or event which with notice or passage of time would constitute an Event of
Default; (iii) Borrower pays to Lender an extension fee equal to one percent
(1%) of the then outstanding principal amount of the Priority Note; and (iv) the
Original Expected Conversion Date has been extended to the Extended Expected
Conversion
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Date (as such term is defined in the Senior Loan Documents) in accordance with
the provisions of the Senior Loan Documents.
(b) Interest Rate.
(i) Required Pay Rate of Interest. Except as expressly
provided in Section 2.3(b)(iii), interest shall accrue on the unpaid principal
balance of the Priority Note at the rate ten percent (10%) per annum (the
"Required Pay Rate of Interest on the Priority Note"). The Required Pay Rate of
Interest on the Priority Note shall (A) be applied to so much of the principal
of the Priority Loan as shall be outstanding; (B) be calculated on the basis of
a 365 day year, for the actual number of days outstanding and (C) accrue and be
payable in arrears on the first business day of each month. Except as expressly
provided in Section 2.3(b)(iii), interest shall accrue on the unpaid principal
balance of the Subordinate Note at the rate of nine percent (9%) per annum,
simple interest (the "Required Pay Rate of Interest on the Subordinate Note").
The Required Pay Rate of Interest on the Subordinate Note shall (x) be applied
to so much of the principal of the Subordinate Loan as shall be outstanding; (y)
be calculated on the basis of a 365-day year, for the actual number of days
outstanding and (z) accrue and be payable on the Maturity Date.
(ii) Mandatory Lookback Interest. Upon the payment of the
outstanding principal balance of the Loan, whether at the Maturity Date or upon
earlier acceleration or permitted prepayment, the Borrower shall pay to the
Lender as additional interest on the Loan an aggregate amount equal to (A) the
amount necessary to produce a 15.60% IRR on the Priority Note after taking into
account all interest previously paid to the Lender (the "Mandatory Priority Note
Lookback Interest") plus (B) the amount necessary to produce a 17.11% IRR on the
Subordinate Note after taking into account all interest previously paid to the
Lender (the "Mandatory Subordinate Note Lookback Interest"). The Mandatory
Priority Note Lookback Interest and the Mandatory Subordinate Note Lookback
Interest are sometimes hereinafter collectively referred to as the "Mandatory
Lookback Interest".
(iii) Default Interest Rate. Upon any Event of Default, a
default rate of interest (the "Default Rate of Interest"), calculated at four
percent (4%) per annum in excess of the Required Pay Rate of Interest on the
Priority Note and the Required Pay Rate of Interest on the Subordinate Note, as
applicable, shall apply to the Loan from and after the expiration of any
applicable cure period following an Event of Default until the earlier of the
payment in full of the Notes or the date when such Event of Default is cured.
(c) Intentionally Omitted.
(d) No Principal Amortization. The outstanding principal balance of
each of the Notes is due and payable at the Maturity Date and there is no
amortization of such principal prior to the Maturity Date.
(e) Optional Prepayments. The Loan shall be closed to prepayment
except as otherwise expressly provided herein. The Loan may be prepaid in whole,
but not in part, on or after June 1, 2000, provided that: (i) the Borrower (or
Brookdale) shall provide the Lender with five (5) days prior written notice of
any such prepayment in full; (ii) Brookdale has exercised the Equity Option; and
(iii)
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<PAGE>
any prepayment shall be accompanied by the payment of the Mandatory Lookback
Interest as required by Section 2.3(b)(ii). The Loan may also be prepaid in
whole, but not in part, at any time (whether before or after June 1, 2000) in
the event of an "Investor Default" (as such term is defined in the Equity Option
Agreement) provided that (i) Brookdale has exercised the Equity Option and (ii)
any prepayment shall be accompanied by the payment of the Mandatory Lookback
Interest as required by Section 2.3(b)(ii).
(f) Events of Default. Any Event of Default under this Agreement
shall be an event of default under the Notes.
(g) Priority of Payments. Anything herein to the contrary
notwithstanding, the payment of all amounts owing to the Lender by the Borrower
with respect to the Priority Loan (including, without limitation, all principal
under the Priority Loan, any reasonable costs of collection with respect to the
Priority Note, all Scheduled Debt Service and all Mandatory Priority Note
Lookback Interest) shall, in all events, take priority over each and every
payment by the Borrower under or with respect to the Subordinate Loan. The
subordination of the right to payment of any amounts under the Subordinate Loan
to the payment of all amounts under the Priority Loan shall be reflected on the
face of each Note.
2.4 Use of Loan Proceeds. The proceeds of the Loan shall be
disbursed as follows:
(a) All closing costs shall be paid, including, but not limited to,
reasonable legal fees and expenses, the Structuring Fee and all other reasonable
costs incurred by (i) the Lender, including the reasonable fees and expenses of
the Lender's attorneys, appraisers, accountants, environmental consultants and
other professionals, as provided for in Section 10.8 of this Agreement, and (ii)
the Borrower (if incurred by the Borrower and approved by the Lender and the
Manager) which are directly related to the closing of the Loan.
(b) The remaining proceeds of the principal amount of the
Subordinate Loan shall be used by the Borrower as a capital contribution to the
Owner to acquire, develop or construct the Property and to pay the Owner's costs
and expenses incurred in connection therewith. The remaining proceeds of the
principal amount of the Priority Loan shall be used (i) for the purposes
described in the immediately preceding sentence, (ii) to pay Scheduled Debt
Service as described in Section 2.2(a) of this Agreement, and (iii) for such
other purposes as the Lender and Manager may agree in writing.
2.5 Acknowledgment of Full Payment of the Loan. Upon payment in full of
the Loan in accordance with this Agreement, the Lender shall promptly provide to
Borrower (with a copy to Brookdale) a written acknowledgment of such payment in
full.
2.6 Right to Make Additional Advances.
(a) Anything herein to the contrary notwithstanding, the Lender
shall have the right, but not the obligation, subject to the approval of the
Manager (which shall not be unreasonably withheld), to make additional advances
to fund the payment of the income taxes resulting from the generation of any
operating income to the Owner. For all purposes of this
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Agreement, such advances shall constitute a portion of the Priority Loan (and
thereby increase its principal balance); provided, however that the Required Pay
Rate of Interest with respect to such advances shall accrue and be payable on
the Maturity Date. Anything herein to the contrary notwithstanding, any such
advances by the Lender shall in no event create any obligation on the part of
the Owner to the Lender.
(b) Anything herein to the contrary notwithstanding, in the event
Manager or its Affiliate fails to pay to the Senior Lender the Conversion
Shortfall in accordance with the terms of the Senior Loan Documents and, as a
result, Lender makes a Subordinate Lender Conversion Shortfall Advance (as such
term is defined in the Intercreditor Agreement), such advance, at the option of
the Lender, shall constitute a portion of the Priority Loan (and thereby
increase its principal balance); provided, however, that the Required Pay Rate
of Interest with respect to such advance shall accrue and be payable on the
Maturity Date. Anything herein to the contrary notwithstanding, any such
advances by the Lender shall in no event create any obligation on the part of
the Owner to the Lender.
ARTICLE 3. PAYMENTS, SECURITY, LIABILITY FOR
THE MICHIGAN LOAN
3.1 Payments. All payments by the Borrower of all amounts due on the Notes
shall be made to the Lender in United States funds on the date they are due.
Whenever any payment to be made thereunder shall be due other than on a Business
Day, such payment shall be deemed to be due on the next succeeding Business Day
and, in such event, such extension of time shall be included in the computation
of interest thereunder.
3.2 Security. As security for payment of the Notes and for the performance
of and compliance with all of the terms, covenants, conditions, stipulations and
agreements contained in the Loan Documents (including, without limitation, the
agreement contained in Section 3.3), AH Texas Investor, Inc. shall pledge and
assign to the Lender its Membership Interests in the Borrower pursuant to the
Security Agreement and Assignment. Upon the exercise of its rights under the
Security Agreement and Assignment, the Lender or its assignee or designee, at
its election, may become a substitute member of the Borrower subject only to the
terms and conditions of the Intercreditor Agreement and the Equity Option. Upon
an Event of Default and acceleration of the Loan, the Lender or its assignee or
designee, at its election, may exercise its rights under the Special Management
Interest. In addition, Brookdale shall execute and deliver to the Lender the
Guaranties.
3.3 Liability for the Michigan Loan. In consideration for the making of
the Loan, the Borrower acknowledges and agrees that it shall be jointly and
severally liable for the obligations of AH Michigan Subordinated, LLC under the
Michigan Loan Agreement and consents to and agrees to the terms and conditions
of the Michigan Loan Agreement and the Loan Documents (as such term is defined
in the Michigan Loan Agreement).
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ARTICLE 4. CONDITIONS OF BORROWING
The obligation of the Lender to disburse the principal amount of the Loan
to the Borrower provided for hereunder shall, in addition to any other
requirements set forth herein, be subject to the
following conditions.
4.1 Conditions Precedent to the Initial Disbursement. Prior to the Initial
Disbursement (i) all the representations and warranties made in Article 5 below
shall remain true and correct in all material respects, and (ii) there shall be
no event of default under any of the Senior Loan Documents. In addition, the
Borrower shall furnish, or cause to be furnished, to the Lender the following,
in form and substance reasonably satisfactory to the Lender and counsel for the
Lender:
(a) The duly executed Loan Documents;
(b) Certified copies of the resolutions of the Borrower authorizing
the execution, delivery and performance of the Borrower's obligations under the
Loan Documents to which it is a party;
(c) Evidence that the Owner or the Manager has in effect insurance
and endorsements of the character and amount described in Section 6.1(e);
(d) Evidence that the Borrower has paid or shall cause to be paid
from proceeds of the Loan all required third party fees and expenses, including
the Structuring Fee;
(e) An opinion or opinions of counsel(s) to AH Texas Investor, Inc.,
the Borrower, Manager and Brookdale, addressed to the Lender and, as to clauses
(iii), (viii) and (ix) to Brookdale, opining: (i) that the Loan Documents have
been duly authorized, executed and delivered by the Borrower, the Manager and
Brookdale, as the case may be, and are the legal, valid, and binding obligations
of the Borrower, Brookdale and the Manager, as applicable; (ii) that the Loan
Documents are in full force and effect and are in compliance with all
requirements of the Senior Lender, State law and Federal law; (iii) that the
Borrower and the Owner are duly organized and validly existing entities under
the laws of the State(s) under which they are formed, and the Owner has full
power to acquire, hold, encumber, develop, operate, sell and convey and dispose
of real property and interests therein; (iv) that the Membership Interests have
been effectively pledged and assigned to the Lender pursuant to the Security
Agreement and Assignment and that the Lender, upon proper filing, will have a
perfected security interest in the Membership Interests; (v) the Guaranties and
the Security Agreement and Assignment have been duly executed and delivered and
are the legal, valid and binding obligation of the signatories thereto; (vi)
that (A) the execution and performance by the Borrower of this Agreement, the
Notes, and the other Loan Documents to which it is a party do not conflict with
the Borrower's or the Owner's organizational documents or any other agreements
of the Borrower or the Owner known to counsel and (B) to the knowledge of
counsel, there are no administrative orders, notices, claims, litigation,
proceedings or investigations pending against the Borrower, the Owner or the
Property with respect to which an adverse decision is reasonably likely which
would materially adversely affect the Borrower's performance under the Loan
Documents to which it is a party; (vii) the Special Management Interest is a
legal, valid and binding obligation of the Borrower; (viii) the Equity Option
Agreement has been duly authorized,
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executed and delivered by AH Texas Investor, Inc., the Borrower, the General
Partner and the Owner and is the legal, valid and binding obligation of AH Texas
Investor, Inc., the Borrower, the General Partner and the Owner; (ix) the
Brookdale Option Agreement has been duly authorized, executed and delivered by
the Borrower and the Owner and is the legal, valid and binding obligation of the
Borrower and the Owner; and (x) such other matters which the Lender or its
counsel may reasonably require (including, without limitation, choice of law and
usury). Such opinion or opinions of counsel shall be in form and substance
reasonably acceptable to the Lender and its counsel;
(f) A copy of the TLTA owner's and lender's commitments of title
insurance issued to the Owner and the Senior Lender (together, the "Title
Insurance Commitment"), and the Lender shall have the opportunity to review and
approve the same. Such Title Insurance Commitment shall be reasonably acceptable
to the Lender in all respects;
(g) The existing survey of the Property prepared by a surveyor
registered in the State of Texas. The survey shall be reasonably acceptable to
the Lender in all respects;
(h) No part of the improvements of the Property shall have been
damaged or destroyed, in whole or in material part by fire or other casualty and
no material eminent domain proceedings affecting the improvements to the
Property shall have been threatened or pending;
(i) All questions concerning the Owner's rights, title and interest
in and to the Property, the Borrower's authority to enter into the transaction
contemplated by this Agreement and the security of the pledge and assignment of
the Membership Interests to be created in connection with the Loan shall be
resolved to the reasonable satisfaction of the Lender;
(j) The Lender shall have approved the Management Agreement and the
Development Agreement, and the Lender shall receive evidence that the Management
Agreement and the Development Agreement have been fully executed by the parties
thereto;
(k) The Environmental Site Assessment addressed to the Lender, which
shall be reasonably acceptable to the Lender in all respects;
(l) A soil report for the Property, which shall be in form and
content reasonably acceptable to the Lender;
(m) Financial projections for the Property which shall be reasonably
acceptable to the Lender;
(n) An appraisal of the Property by an M.A.I. appraiser evidencing
an appraisal value of the Property of not less than $32,000,000 and otherwise
reasonably satisfactory to the Lender;
(o) The Operating Agreement, all amendments and attachments thereto,
which shall be certified by the Borrower to be true and complete and which shall
be reasonably acceptable to the Lender. The Borrower shall also provide the
Lender with any certificates filed or required
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<PAGE>
to be filed for the Borrower to be duly organized in the state of its formation
and any consents by other parties required for the borrowing contemplated
hereby. Additionally, the Borrower shall provide the Lender with a good standing
certificate for the Owner from the Owner's state of organization, its
certificate of limited partnership certified to be true and correct by the
Secretary of State of the state of its organization, and its agreement of
limited partnership (and all amendments and attachments thereto) certified to be
true and complete;
(p) The Lender shall have approved the terms of the Senior Loan and
be fully satisfied, in its sole and absolute judgment, that (i) the Loan is
fully authorized under the Senior Loan Documents; (ii) the Senior Lender has
full knowledge of the Loan and all of its terms and conditions; and (iii) the
Lender will be able to enforce all of its rights under the documents evidencing
the Loan, including but not limited to, the right to receive timely payment from
the Borrower (and the Property) of all amounts due under the Notes, the right to
exercise its rights under the Special Management Interest and the right to
foreclose on the Membership Interests pursuant to the Security Agreement and
Assignment, without causing an event of default under any of the Senior Loan
Documents subject, in all cases, to the provisions of the Intercreditor
Agreement;
(q) The Construction Plan for the Property and a statement of
sources and uses of funds, which shall be reasonably satisfactory to the Lender;
(r) Evidence satisfactory to the Lender that the sole member of the
Borrower has made a contribution to the capital of the Borrower of not less than
$900,000 (the "Capital
Contribution");
(s) A market study in form and content reasonably satisfactory to
Lender;
(t) A copy of the Brookdale Option Agreement and the Equity Option
Agreement, each of which shall be in a form reasonably acceptable to the Lender,
and
(u) Such other opinions, certificates, affidavits, documents and
filings as the Lender may deem reasonably necessary or appropriate.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lender, which representations
and warranties shall survive the execution and delivery of this Agreement, the
Notes and the other Loan
Documents, as follows:
5.1 Organization and Authority of Borrower. The Borrower is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Ohio and has all requisite power and authority to own
and operate its property and to carry on its business as now conducted. The
Borrower is duly qualified to do business in each jurisdiction where the nature
of its operations and applicable laws require such qualification except where
the failure to be so qualified would not have a material adverse effect on the
Borrower. The execution, delivery and performance of the Loan Documents to which
the Borrower is a party, have been duly
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authorized by all necessary organizational action. There is no prohibition in
the Operating Agreement, or in any document, instrument or agreement, or in any
law or any order, writ, injunction or decree of any court or arbitrator
presently in effect having applicability to the Borrower which in any way
prohibits or would be violated by the execution and performance of the Loan
Documents in any respect except where such violation would not have any material
adverse effect on the Borrower. The Loan Documents to which the Borrower is a
party are valid, binding and enforceable obligations of the Borrower, except as
enforcement may be limited by bankruptcy, insolvency or the laws or equitable
principles affecting the enforcement of creditors' rights generally. The
Borrower is a single purpose entity whose sole assets are the limited
partnership interests in the Owner and the stock of the General Partner.
5.2 Organization and Authority of the Owner. The Owner is a limited
partnership duly organized, validly existing and in good standing under the laws
of the State of Ohio and has all requisite power and authority to own and
operate the Property and to carry on its business as now conducted. The Owner is
duly qualified to do business in each jurisdiction where the nature of its
operations and applicable laws require such qualification except where the
failure to be so qualified would not have a material adverse effect on the
Owner. There is no prohibition in the Owner's limited partnership agreement, or
in any document, instrument, or agreement, or in any law or any order, writ,
injunction or decree of any court or arbitrator presently in effect having
applicability to the Owner which in any way prohibits or would be violated by
the execution and performance of the Loan Documents in any respect except where
such violation would not have any material adverse effect on the Owner or the
Borrower. The Owner is a single purpose entity whose sole asset is the Property.
5.3 Organization and Authority of the General Partner. The General Partner
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Ohio and has all requisite power and authority to own and
operate its property and to carry on its business as now conducted and has the
requisite authority to act as the general partner of the Owner. The General
Partner is duly qualified to do business in each jurisdiction where the nature
of its operations require such qualification except where the failure to be so
qualified would not have a material adverse effect on the General Partner or the
Owner. There is no prohibition in the General Partner's Articles of
Incorporation, or in any document, instrument, or agreement, or in any law or
any order, writ, injunction or decree of any court or arbitrator presently in
effect having applicability to the General Partner which in any way prohibits or
would be violated by the execution and performance of the Loan Documents in any
respect except where such violation would not have any material adverse effect
on the General Partner or the Borrower. The General Partner is a single purpose
entity whose sole purpose is to act as the general partner of the Owner and
whose sole asset is the general partnership interest in the Owner.
5.4 Title to Property; Liens. To Borrower's actual knowledge, the Owner
has good and marketable title to the Property, free and clear of mortgages,
pledges, liens, charges or other encumbrances except such as are not prohibited
by Section 7.1 and the Brookdale Option Agreement.
5.5 Litigation. To Borrower's actual knowledge, (a) there is no court
action, other proceeding or investigation pending, or to the knowledge of the
Borrower, threatened which
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<PAGE>
questions the validity of or enforceability of the Loan Documents, or any action
taken pursuant thereto, and (b) there is no court action, other proceeding or
investigation pending or, to the knowledge of the Borrower, threatened with
respect to which an adverse decision is reasonably likely and which would
result, either separately or in the aggregate, in any materially adverse change
in the business, operations, affairs or condition of the Borrower or the Owner
or which would materially and adversely affect the Property or the Owner's
ownership thereof.
5.6 Compliance with Law and Other Instruments. Neither the Borrower, the
General Partner nor the Owner is in violation of, and the execution, delivery
and performance of the Loan Documents do not and will not result in a violation
of, conflict with or cause a default under, any agreement, instrument, judgment,
decree, order, statute or governmental rule or regulation applicable to the
Borrower, the General Partner or the Owner, or by which Borrower, the General
Partner or the Owner may be bound, which now or in the future may materially
adversely affect the business, operations, affairs or condition of the Borrower,
the General Partner or the Owner.
5.7 Adverse Contracts; Defaults. The Borrower is not a party to any
agreement or instrument other than the Loan Documents, the Intercreditor
Agreement, the Limited Partnership Agreement of the Owner, the Brookdale Option
Agreement, the Equity Option Agreement and all documents executed in connection
with the interim closing effective March 31, 1998. The Owner is not a party to
any agreement or instrument other than the Senior Loan Documents, the Management
Agreement, the Development Agreement, the Intercreditor Agreement, the Equity
Option Agreement, the Brookdale Option Agreement and all the documents executed
in connection with the interim closing, effective March 31, 1998 or executed
directly in connection with its status as owner of the Property. Neither the
Borrower nor the Owner is in default in any respect in the performance,
observance or fulfillment of any of the material obligations, covenants or
conditions contained in any agreement or instrument to which it is a party,
which default would materially and adversely affect the ability of Borrower to
perform its obligations under this Agreement.
5.8 Environmental Laws. Except as disclosed in the Environmental Site
Assessment prepared by Maxim Technologies, Inc., dated February 20, 1997 (the
"Environmental Site Assessment"), to Borrower's actual knowledge, no release,
emission, or discharge into the environment of hazardous substances, as defined
under the Comprehensive Environmental Response, Compensation and Liability Act,
as amended, or hazardous waste as defined under the Solid Waste Disposal Act, as
amended, or air pollutants as defined under the Clean Air Act, or toxic
pollutants as defined under the Clean Air Act, or the Toxic Substances Control
Act, has occurred or is presently occurring on or with respect to the Property,
in excess of federally permitted releases or reportable quantities, or other
concentrations, standards of limitations under the foregoing laws or under any
other federal, state or local laws or regulations. To Borrower's actual
knowledge, there are no past or existing violations of any environmental laws,
ordinances or regulations issued by any federal, state or local governmental
authority with respect to the Property and, no underground storage tanks exist
on the Property.
5.9 Disclosure. To the best of Borrower's knowledge, no information,
exhibit or report furnished by the Borrower to the Lender in connection with the
negotiation of this Agreement contained any material misstatement of fact or
omitted to state a material fact necessary to make the statements contained
therein not materially misleading.
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<PAGE>
5.10 Tax Reports; Filings. All of the Borrower's and the Owner's federal,
state and other tax returns and reports, including reports to any governmental
authority, for the proper maintenance and operation of its or their property,
assets and business, as may be required by law to be filed or paid, have been
(or will be) filed, and all federal, state and other taxes, assessments, fees
and other governmental charges (other than those presently payable, without
penalty) imposed upon them or their property or assets, which are due and
payable, have been fully paid unless the same are being contested by the
Borrower or the Owner, as appropriate, in the ordinary course of business for
which it has provided adequate reserves.
5.11 Default. To Borrower's actual knowledge, there does not exist
any Event of Default
or Default hereunder.
5.12 Business of Borrower and Owner. The Borrower is engaged, and since
its formation has engaged, in no business other than owning the limited
partnership interests in the Owner and the stock of the General Partner. The
General Partner is engaged, and since its formation has engaged, in no business
other than acting as general partner of the Owner.
The Owner is engaged,
and since its formation has engaged, in no business other than owning,
constructing and operating the Property.
5.13 Liabilities. The Borrower has no liabilities other than the Loan
except for unsecured liabilities related to the closing of the Loan and the
continuing administration of its business in the ordinary course and liabilities
incurred in connection with the Intercreditor Agreement, the Brookdale Option
Agreement and the Equity Option Agreement. The Owner has no liabilities other
than liabilities incurred in connection with (i) the Senior Loan Documents, (ii)
the Management Agreement, (iii) the Development Agreement, (iv) the Brookdale
Option Agreement , (v) the Equity Option Agreement, (vi) liabilities relating to
the construction of the Project, (vii) the Permitted Encumbrances (as defined in
the Senior Loan Documents), and (viii) the ordinary course of owning,
constructing and operating the Property. The General Partner has no liabilities
other than liabilities incurred in the ordinary course of acting as the general
partner of the Owner.
ARTICLE 6. AFFIRMATIVE COVENANTS
Until payment in full of the Notes and performance of all other
obligations of the Borrower hereunder:
6.1 Covenants Relating to the Property or the Manager.
(a) Financial Statements and Reports. Not later than one hundred
twenty (120) days following the end of each fiscal year, the Borrower shall
cause the Owner or the Manager, as the case may be, to provide, to the Lender
the following items in form and substance reasonably satisfactory to the Lender:
(i) An income and cash flow statement and balance sheet of
the Owner as of the end of such fiscal year;
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(ii) A rent roll for the Property or other occupancy report
as may be reasonably required by the Lender;
(iii) Such other financial information and reports as may be
reasonably requested by the Lender; and
(iv) To the extent reasonably requested by the Lender, the
Borrower shall cause the Owner to provide the Lender
with audited reports confirming any of the foregoing
financial statements and presentations.
(b) Periodic Reports. The Borrower shall cause the Owner or the
Manager, as the case may be, to provide, the following items in form and
substance reasonably satisfactory to
the Lender:
(i) Unaudited income and cash flow statements and balance
sheets of the Owner for the period and fiscal year to
date;
(ii) A rent roll for the Property or other occupancy report
as may be reasonably required by the Lender; and
(iii) Such other financial information and records as may be
reasonably requested by the Lender including without
limitation, construction progress reports (i.e., Senior
Lender draw requests).
The foregoing information shall be provided not later than forty
five (45) days following the end of each fiscal quarter except for rent rolls
and construction progress reports which, at the request of Lender, shall be
provided on a monthly basis.
(c) Preparation of Tax Returns. The Borrower shall cause the Manager
to prepare the necessary tax returns for the Owner, at the Project's expense, to
the extent permitted by the
Senior Loan Documents.
(d) Inspection. Upon the reasonable request of the Lender , subject
to the rights of any tenants or residents, the Borrower shall cause the Owner or
the Manager, as the case may be, to make available for inspection to
representatives of the Lender the Project itself, as well as, at the offices of
the Manager, any of the books and records relating to the Project and shall
furnish to the Lender information regarding the business affairs and financial
condition of the Project within a reasonable time after receipt of written
request therefor.
(e) Insurance. The Borrower shall cause the Owner or the Manager, as
the case may be, to maintain "extended coverage" insurance against loss by fire,
not less than six (6) months of business interruption, public liability, theft
and other casualty on its insurable real and personal property in such amounts
and otherwise in form and substance and with such companies as are required by
Senior Lender under the Senior Loan Documents and against liability on account
of
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damage to persons or property and as required under all applicable Workers'
Compensation Laws.
Copies of all insurance policies or certificates evidencing the same shall be
furnished to the Lender.
(f) Payment of Taxes and Claims. The Borrower shall cause the Owner
or the Manager, as the case may be, to pay all taxes, assessments and other
governmental charges imposed upon the Property or assets of the Owner or in
respect of any of the franchises, business, income or profits of the Owner
before any penalty or interest accrues thereon, and all claims (including,
without limitation, claims for labor, services, materials and supplies) for sums
which have become due and payable and which by law have become a lien or charge
upon any of the Property or assets of Owner provided that no such tax,
assessment, charge or claim need be paid if the amount, applicability or
validity thereof is currently being contested in accordance with the provisions
of the Senior Loan Documents.
(g) Maintenance of Property. The Borrower shall cause the Owner or
the Manager, as the case may be, to operate and manage the Property in a
commercially reasonable manner. The Borrower shall cause all amounts paid by the
Borrower, the Owner or any of their respective Affiliates to Brookdale, the
Manager or any of their respective Affiliates, to be commercially reasonable and
to not exceed the prevailing market rate for such services except as otherwise
described in the Budget. All such payments shall be identified in the financial
reports required by Section 6.1(a) and (b) of this Agreement. The Borrower shall
cause the Owner or the Manager, as the case may be, to notify the Lender, in
writing, as to the existence of any such contracts with, or any services or
materials being provided by, an Affiliate of Brookdale or the Manager, which are
not otherwise disclosed in the Budget.
(h) Maintenance of Tangible Assets. The Borrower shall cause the
Owner or the Manager, as the case may be, to maintain, keep and preserve its
buildings and property and every part thereof in good repair, working order, and
condition.
(i) Records and Books of Account. The Borrower shall cause the Owner
and the Manager to keep adequate records and books of account in a manner
appropriate to permit the preparation of the financial statements required by
Sections 6.1(a) of this
Agreement.
(j) Use of Proceeds. The Borrower shall cause the Owner and the
Manager to use all proceeds of the Loan disbursed pursuant to this Agreement for
legal and proper purposes and as described in Section 2.4 of this Agreement, and
such uses shall be consistent with all applicable laws and the provisions of
this Agreement.
(k) Construction Plan. The Borrower shall cause the Owner and the
Manager, as the case may be, to diligently commence and pursue to completion the
construction contemplated by the Construction Plan. Subject to Unavoidable
Delay, the Project Completion shall be achieved not later than fourteen (14)
months from the date of the closing of the Senior Loan.
(l) Compliance with Laws. The Borrower shall cause the Owner and the
Manager, as the case may be, to comply in all respects with all applicable
statutes, laws, ordinances and governmental rules, regulations and orders which
are applicable to the construction, development, management or operation of the
Project if noncompliance therewith would have a
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material adverse affect on the Project, the Owner or the Borrower including, but
not limited to, all applicable federal, state, regional, county or local laws,
statutes, rules, regulations or ordinances concerning public health, safety or
the environment; provided that the Owner or the Manager, as the case may be,
need not so comply if any such statute, law, ordinance, or governmental rule,
regulation or order is currently being contested in accordance with the Senior
Loan Documents.
(m) Operating Expenses and Debt Service under Senior Loan Documents.
The Borrower shall cause the Owner to pay (unless Guarantor or other party shall
have paid) when due all Operating Expenses and Debt Service (whether or not
Operating Income is sufficient to pay them). For purposes of this Section
6.1(m), the terms "Operating Expenses," "Debt Service" and "Operating Income"
shall have the meanings ascribed to them in the Senior Loan Documents.
(n) Completion. The Borrower shall cause the Owner to observe,
fulfill and perform (unless Guarantor or other party shall have observed,
fulfilled or performed) all obligations of the Owner and the Manager under or
pursuant to the Building Loan Agreement solely with respect to (i) the
construction of the Required Improvements, including, the obligations of Owner
to construct, equip and complete the Required Improvements in accordance with
Section 7.1 of the Building Loan Agreement, and (ii) the payment when due of all
Costs in accordance with the Building Loan Agreement. For purposes of this
Section 6.1(n), the terms "Required Improvements," "Building Loan Agreement" and
"Costs" shall have the meanings ascribed to them in the Senior Loan Documents.
6.2 Covenants Relating to the Borrower, the Owner and the General Partner.
(a) Compliance with Laws. The Borrower shall, and shall cause the
Owner and the General Partner to, comply in all respects with all applicable
statutes, laws, ordinances and governmental rules, regulations and orders which
are applicable to its business, property and assets if noncompliance therewith
would have a material adverse affect on such business, including, but not
limited to, all applicable federal, state, regional, county or local laws,
statutes, rules, regulations or ordinances concerning public health, safety or
the environment; provided that the Borrower, the Owner and the General Partner
need not so comply if any such statute, law, ordinance, or governmental rule,
regulation or order is currently being contested in accordance with the Senior
Loan Documents.
(b) Preservation of Existence. The Borrower shall, and shall cause
the Owner and the General Partner to, preserve and maintain their respective
legal existence, rights, franchises and privileges in the jurisdiction of its
formation, or in any other jurisdiction it shall select, and qualify and remain
qualified in each jurisdiction in which such qualification is necessary or
desirable in view of their business and operations or the ownership of its
property.
(c) Notices of Certain Events. The Borrower shall promptly
give notice to the
Lender of:
(i) Any Default or Event of Default known to Borrower;
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(ii) Any notice of any "default" or "Event of Default"
received by the Owner from the Senior Lender under the
Senior Loan Documents;
(iii) Any notice of default or event of default received under
any other contract, agreement or undertaking of the
Borrower, the Owner or the General Partner, where the
total value of the contract, agreement or undertaking is
in excess of One Hundred Thousand Dollars ($100,000.00);
or
(iv) A materially adverse change in the business, operations,
affairs or condition (financial or otherwise) of the
Borrower or
the Owner.
(d) Performance of Contracts. The Borrower shall, and shall cause
the Owner and the General Partner to, perform and comply with each and every
material contract, agreement or instrument now or hereafter binding upon it,
except to the extent that it shall contest the provisions thereof in good faith
and by proper proceedings.
(e) Notice of Material Litigation. The Borrower shall promptly
notify the Lender in writing of any litigation, arbitration proceeding or
administrative investigation, inquiry or other proceeding to which the Borrower,
the Owner or the General Partner may hereafter become a party with respect to
which an adverse decision is reasonably likely and which would involve a
material risk of judgment or liability not fully covered by insurance or which
would otherwise result in a material adverse change of the business, operations,
affairs or condition (financial or otherwise) of the Borrower, the Owner or the
General Partner or which would materially impair the ability of the Borrower to
perform its obligations under the Loan Documents or any other agreement or
instrument contemplated hereby or thereby.
(f) Bankruptcy. The Borrower shall not, and shall not permit the
General Partner or the Owner to, file a voluntary petition in bankruptcy without
the
consent of the Lender.
The Borrower shall, and shall cause the Owner and the General Partner to, use
its best efforts to contest any involuntary petition filed against it.
(g) Compliance with Certain Agreements. The Borrower shall comply,
and, as applicable, shall cause the General Partner and the Owner to comply,
with all of the terms, conditions and obligations of the Borrower, the Owner and
the General Partner under the Management Agreement, the Development Agreement,
the Equity Option Agreement, the Brookdale Option Agreement, the Senior Loan
Documents and the Intercreditor Agreement.
(h) Tax Returns. Not later than thirty (30) days following the
applicable filing date (including any extensions authorized by the applicable
taxing authority), the Borrower shall provide to the Lender a copy of the
Borrower's and the Owner's federal income tax returns.
(i) Payment of Taxes and Claims. The Borrower shall pay all taxes,
assessments and other governmental charges imposed upon its property or assets
or in respect of any of its franchises, business, income or profits before any
penalty or interest accrues thereon, and all claims (including, without
limitation, claims for labor, services, materials and supplies) for sums which
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have become due and payable and which by law have become a lien or charge upon
any of its property or assets, provided that no such tax, assessment, charge or
claim need be paid if the amount, applicability or validity thereof is currently
being contested in good faith and if an appropriate reserve or cash escrow shall
have been made therefor.
ARTICLE 7. NEGATIVE COVENANTS
Until payment in full of the Notes and the performance of all other
obligations of the Borrower under the Loan Documents, the Borrower may not take
the following actions without the prior written approval of the Lender:
7.1 Liens and Other Encumbrances. The Borrower shall not, and shall not
permit the Owner to, create, incur, assume or suffer to exist any security
interest, mortgage, pledge, lien or other encumbrance of any nature whatsoever
on the Property, except (i) encumbrances meeting the description in items (a)
through (d) of the definition of "Permitted Encumbrances" in the Senior Loan
Documents (ii) the Brookdale Option Agreement and (iii) all other liens and
encumbrances to which Lender has given its prior written consent.
7.2 Amendments to Operating Agreement, Management Agreement, Development
Agreement, and Senior Loan Documents. The Borrower shall not (i) amend the
Operating Agreement or any of its organizational documents, (ii) amend any of
the organizational documents of the Owner or the General Partner, (iii) permit
the General Partner to amend any of the organizational documents of the Owner,
or (iv) permit the Owner to amend or waive any provision of the Management
Agreement, the Development Agreement, the Brookdale Option Agreement, the Equity
Option Agreement, the Budget (other than changes for which Manager funds the
additional amounts owed or those changes resulting in a decrease in the Budget)
or the Senior Loan Documents (other than those modifications, if any, which do
not require the consent of Senior Lender, the Owner or the Manager) in any
respect, or to terminate the Management Agreement or the Development Agreement.
7.3 Transactions with Affiliates. Except for the Brookdale Option
Agreement, the Equity Option Agreement, the Development Agreement and the
Management Agreement, or except as expressly contemplated by the Budget, the
Borrower shall not permit the Owner to: (i) enter into any transaction,
including without limitation, the purchase, sale or exchange of any part of the
Property or the rendering of any services with respect to the Property, with the
Manager, Brookdale or any of their respective Affiliates or any manager, officer
or director thereof, (ii) enter into, assume or suffer to exist any employment
or consulting contract with the Manager, Brookdale or any of their respective
Affiliates or any manager, officer or director thereof unless such agreement,
transaction or contract is in the ordinary course of its business and is upon
fair and reasonable terms no less favorable to it than it would obtain in a
comparable arm's length transaction with a Person not an Affiliate; or (iii) pay
any fees or expenses to, or reimburse or assume any obligation for the
reimbursement of any expenses incurred by, the Manager, Brookdale or any of
their respective Affiliates or any manager, officer or director thereof except
as may be permitted in accordance with the preceding clause of this Section.
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7.4 Admission of New Members. The Borrower shall not issue any additional
membership interests in the Borrower on or after the date hereof. The Borrower
shall not permit the Owner to issue any additional partnership interests in
Owner on or after the date hereof. The Borrower shall not permit the General
Partner to issue any additional stock of the General Partner on or after the
date hereof.
7.5 Refinancing of Senior Loan: Additional Debt. Except to the extent
provided for by the Senior Loan Documents, the Borrower shall not permit the
Owner to refinance the Senior Loan prior to its maturity or increase the amount
of the Senior Loan. The Borrower shall not permit the Owner to incur any
additional debt (other than in the ordinary course of the Owner's business and
then in an amount not in excess of $100,000 in the aggregate and amounts owing
under the Development Agreement and the Management Agreement). The Borrower
shall not incur any debt other than the Loan.
7.6 Sale of the Property. The Borrower shall not consent to, or otherwise
permit, a sale of all or any material part of the Property except in connection
with a prepayment in accordance with the requirements of Section 2.3(e) of this
Agreement.
7.7 Limitations of Business. The Borrower shall not (i) invest in,
organize or participate in the organization of or in the creation of any
business entity other than the Owner and the General Partner and the Borrower
shall not merge, transfer, acquire or consolidate with or into any other entity,
change ownership, dissolve and/or transfer or sell any assets except as
contemplated by the Brookdale Option Agreement or (ii) permit the Owner to
invest in, organize or participate in the organization of or the creation of any
business entity other than the Project, and the Borrower shall not permit the
Owner to merge, transfer, acquire or consolidate with or into any other entity,
change ownership, dissolve and/or transfer or sell any assets outside of the
ordinary course of business except in accordance with Section 7.6 of this
Agreement and except as contemplated by the Brookdale Option Agreement or (iii)
permit the General Partner to invest in, organize or participate in the
organization of or the creation of any business entity other than the Owner, and
the Borrower shall not permit the General Partner to merge, transfer, acquire or
consolidate with or into any other entity, change ownership, dissolve and/or
transfer or sell any assets outside the ordinary course of business except in
accordance with Section 7.6 of this Agreement and except as contemplated by the
Brookdale Option Agreement..
7.8 Budgets. The Borrower shall cause the Manager to (i) submit the
operating and capital budgets proposed by the Manager under the Management
Agreement in advance to the Lender, (ii) meet with the Lender at least annually,
if so requested by the Lender, to discuss the Lender's recommendations with
respect to such proposed budgets, and (iii) duly consider, in good faith, the
implementation of any such recommendations.
7.9 Capital Expenditures. Except for capital expenditures provided for in
the Construction Plan, the Budget or as otherwise permitted under the Senior
Loan Documents (provided that, if such expenditures are in excess of $100,000 in
the aggregate and are not expressly contemplated by the Construction Plan or the
Budget, the consent of Lender has been obtained), the Borrower shall not permit
the Owner to make any capital expenditures.
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7.10 No Challenge to Exercise of Rights under Assignment. As an inducement
to the Lender to make the Loan, the Borrower has assured the Lender that, upon
the occurrence of an Event of Default and the acceleration of the Loan as
provided in Section 8.2(a) or (b), one of the remedies available to the Lender,
at its election, will be to foreclose its security interest in, or at Lender's
option to retain as undisputed, absolute owner, the Membership Interests under
the Security Agreement and Assignment in satisfaction of the obligations under
the Notes and the Loan Documents or, at the Lender's option, to exercise its
rights under the Special Management Interest. Accordingly, the Borrower hereby
acknowledges that any such election to foreclose its security interest in,
and/or retain as undisputed, absolute owner, the Membership Interests is
reasonable under the circumstances and the Borrower hereby waives and releases
any right it may have to demand a sale of the Membership Interests or to
otherwise oppose or challenge the foreclosure or retention of the Membership
Interests by the Lender or the exercise of its rights under the Special
Management Interest if an Event of Default and acceleration of the Loan has
occurred and if it makes such an election following such Event of Default and
acceleration. Anything herein or in the Loan Documents to the contrary
notwithstanding and without limiting the generality of the foregoing, the
Borrower covenants and agrees to fully cooperate to the fullest extent permitted
under applicable law in any measures taken by the Lender to implement such an
election of remedies and, if an Event of Default and acceleration of the Loan
has occurred, not to challenge the Lender's exercise of the rights granted
hereunder.
7.11 Limitation on Change of Ownership. Except as contemplated under the
Brookdale Option Agreement or the Equity Option Agreement, the Borrower shall
not permit any transfer of (i) the Membership Interests, (ii) any of the stock
of the General Partner or (iii) the partnership interests in the Owner.
ARTICLE 8. EVENTS OF DEFAULT
8.1 Event of Default. Event of Default shall mean the occurrence of one or
more of the following described events following the expiration of any cure
period relating thereto:
(a) The Borrower fails to pay any amount required under this
Agreement when due and such failure continues for a period of five (5) Business
Days after written notice to Borrower (other than payments due on the Maturity
Date for which no notice of late payment shall be required), unless such failure
is caused by the Lender's failure to advance up to $1,385,239 of the principal
of the Priority Loan to pay the Structuring Fee, certain legal and due diligence
expenses or the Scheduled Debt Service as it comes due as contemplated by
Section 2.2(a) of this Agreement;
(b) The Borrower defaults in the performance or observation of any
covenant, condition or agreement made or required to be observed or performed by
the Borrower under any of the Loan Documents, and such default shall continue
without cure for thirty (30) days after the date upon which written notice
thereof shall have been given to the Borrower,
by the Lender,
provided that if any such default shall take more than thirty (30) days to cure,
such thirty (30) day period shall be extended by the time necessary to cure
same, not to exceed an additional ninety (90)
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days, provided further that Borrower has promptly commenced efforts to cure the
default and continues to diligently pursue such efforts;
(c) The Owner refinances the Senior Loan prior to its maturity or
increases the amount of the Senior Loan;
(d) A material breach of the representations and warranties
contained in Article 5 hereof on the date as of which made which breach has a
materially adverse effect on the business, affairs or condition of the Borrower,
the Owner, the General Partner or the Property and which breach is not cured
within thirty (30) days after the date upon which written notice thereof is
provided to the Borrower;
(e) Any representation or warranty made by the Borrower, the Manager
or Brookdale in any of the other Loan Documents or in any report, certificate or
writing furnished in connection with or pursuant to this Agreement shall be
false or inaccurate in any material respect on the date as of which made;
provided that, in the case of any false or materially inaccurate representation
by the Borrower, such falsehood or inaccuracy has a materially adverse effect on
the business affairs or condition of the Borrower, the Owner, the General
Partner or the Property and is not cured within thirty (30) days after the date
upon which written notice thereof is provided to Borrower;
(f) Any of the Borrower, the General Partner, the Owner, the Manager
or Brookdale makes an assignment for the benefit of creditors;
(g) Any of the Borrower, the General Partner, the Owner, the Manager
or Brookdale petitions or applies to any tribunal for the appointment of a
trustee or receiver for itself,
or of any substantial part of its assets or any of the Borrower, the General
Partner, the Owner, the Manager or Brookdale commences any proceeding relating
to it under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation under the laws of any
jurisdiction whether now or hereafter in effect;
(h) Any petitions or applications are filed, or any proceedings are
commenced against any of the Borrower, the General Partner, the Owner, the
Manager or Brookdale seeking the adjudication of it as bankrupt and the Borrower
, the General Partner, the Owner, the Manager or Brookdale as applicable, by any
act indicates its admission or consent thereto, or acquiescence therein, or any
order is entered appointing a trustee or receiver, or adjudicating any of the
Borrower, the General Partner, the Owner, the Manager or Brookdale, bankrupt or
insolvent, or approving the petition in any such proceedings and such order
remains unstayed or undischarged for more than ninety (90) days;
(i) Any order is entered in any proceeding against any of the
Borrower, the General Partner, the Owner, the Manager or Brookdale decreeing the
dissolution of the Borrower, the General Partner, the Owner, the Manager or
Brookdale and such order remains unstayed or undischarged for more than ninety
(90) days;
(j) A final non-appealable judgment or judgments for the payment of
money in excess of an aggregate of $100,000 shall be rendered against the
Borrower, the General Partner or
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the Owner and such judgment or judgments shall remain undischarged for a period
of sixty (60) consecutive days during which the execution shall not be
effectively stayed (unless a reserve of available funds is made therefor);
(k) An Event of Default occurs under the Senior Loan Documents which
remains uncured beyond any applicable grace or cure period or beyond the period
during which the Senior Lender has agreed to refrain from the exercise of its
rights and remedies under Article VIII of the Loan Agreement of even date
herewith among the Owner, the Manager and the Senior Lender pursuant to Section
8.3 thereof;
(l) A default beyond any applicable grace or cure period under the
Security Agreement and Assignment, the Guaranties or any of the other Loan
Documents;
(m) The withdrawal of the General Partner, or the General Partner's
failure to serve as the sole general partner of the Owner, without the prior
written approval of the Lender;
(n) An event of default by the Manager under the Management
Agreement or the Development Agreement, which remains uncured beyond any
applicable grace or cure period;
(o) Subject to Unavoidable Delay, the Borrower's failure to cause
the Owner to achieve Project Completion by the "Outside Completion Date" (as
such term is defined in the Senior Loan Documents).
(p) A breach by Brookdale of any of its obligations under the
Warrant which remains uncured beyond any applicable grace or cure period;
(q) Any change in the chief executive officer of Brookdale unless
within thirty (30) days thereafter Brookdale has provided to the Lender a
management succession plan acceptable to the Lender in its reasonable
discretion;
(r) A breach by Brookdale or Manager of any of its obligations to
Lender under the Intercreditor Agreement or the Consent and Subordination of
Manager and which remains
uncured beyond any applicable grace or cure period;
(s) An Event of Default under the Michigan Loan Agreement;
(t) Brookdale's failure to maintain a Net Worth (as such term is
defined in the Senior Loan Documents) in excess of $110,000,000;
(u) Brookdale's failure to maintain an EBITDAR (as such term is
defined in the Senior Loan Documents) in excess of $5,000,000, which shall be
tested on a quarterly basis; or
(v) Brookdale's failure to maintain Liquid Assets (as such term is
defined in the Senior Loan Documents) having a market value of at least
$5,000,000, which shall be tested on a quarterly basis.
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8.2 Consequences of Event of Default.
(a) If any Event of Default specified under subsections (a), (b),
(d), (e) or (j) through (v) of Section 8.1 above shall occur and be continuing,
the Lender may, by written notice to the Borrower, declare the unpaid balance of
all principal and interest accrued on the Notes and all other obligations of the
Borrower hereunder, or under any of the other Loan Documents, to be immediately
due and payable, without presentment, demand, protest, notice of default (except
as expressly required in the Loan Documents), notice of intent to accelerate or
other notice of any kind, all of which are hereby expressly waived.
(b) If any Event of Default specified under subsections (f) through
(i) of Section 8.1 above shall occur, the unpaid balance of all principal and
interest accrued on the Notes and all other obligations of the Borrower
hereunder, or under any of the other Loan Documents shall be immediately and
automatically due and payable, without presentment, demand, protest, notice of
default, notice of intent to accelerate or other notice of any kind, all of
which are hereby expressly waived.
(c) Upon an Event of Default and the acceleration of the Loan in
accordance with Sections 8.2(a) or (b), the Lender shall have the right to
enforce its remedies under the Security Agreement and Assignment, the Guaranties
and the Special Management Interest, and to pursue any other remedy available to
it under law or equity.
ARTICLE 9. INDEMNIFICATION
9.1 No Reliance; Indemnification. The Borrower acknowledges that it has
independently investigated the legal, economic, tax, accounting and other
consequences of the Loan and the transactions contemplated by the Loan Documents
and has not received or relied in any way on any advice of the Lender or any of
its Affiliates as to such consequences. To the fullest extent permitted by law,
Borrower agrees to protect, indemnify, defend and save harmless the Lender and
its Affiliates, its members, officers, agents and employees for, from and
against any and all liability, expense or damage of any kind or nature and for,
from and against any suits, claims or demands, including reasonable legal fees
and expenses, arising out of this Agreement or in any way related to the Loan
except to the extent of any such liability, expense or damage arising from the
action of or a failure to act of Lender. Upon receiving knowledge of any suit,
claim or demand asserted by a third party that Lender believes is covered by
this indemnity, Lender shall give Borrower notice of the matter and an
opportunity to defend it, at Borrower's sole cost and expense, with legal
counsel reasonably satisfactory to Lender. Lender may also require Borrower to
so defend the matter. The obligations on the part of Borrower under this Article
9 shall survive the Loan Closing and the repayment of the Loan.
ARTICLE 10. MISCELLANEOUS
10.1 Notices. All notices, requests and demands to or upon the parties
hereto to be effective shall be in writing or by facsimile transmissions and,
unless otherwise expressly provided herein, shall be deemed to have been duly
given or made when delivered by hand or one Business
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Day following delivery to an overnight delivery service guaranteeing next
business day delivery, delivery charge prepaid, or, in the case of facsimile
transmission, when sent (only if sent on a Business Day), receipt by addressee
acknowledged, addressed as follows in the case of the Borrower and the Lender or
to such other address as may be hereafter notified by the parties hereto:
The Borrower: AH Texas Subordinated, LLC
320 King of Prussia Road
Suite 160
Radnor, Pennsylvania
Attention: David B. Fenkell
Fax No.: (610) 902-0777
With a copy to:
Squire, Sanders & Dempsey, L.L.P.
41 South High Street
Suite 1300
Columbus, OH 43215
Attention: Scott B. West, Esq.
Fax No.: (614) 365-2499
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With a copy to:
Brookdale Living Communities, Inc.
77 West Wacker Drive, Suite 4400
Chicago, IL 60601
Attention: Darryl W. Copeland, Jr.
Robert J. Rudnik, Esq.
Fax No. 312-977-3769
with a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, IL 60601-9703
Attention: Wayne Boberg, Esq.
Fax No. 312-558-5700
The Lender: BANC ONE CAPITAL PARTNERS IV, LTD.
150 East Gay Street, 24th Floor
Columbus, Ohio 43215
Attention: John W. Adams
Fax No.: (614) 217-0222
with a copy to:
BANC ONE CAPITAL MARKETS, INC.
150 East Gay Street, 24th Floor
Columbus, Ohio 43215
Attention: Legal Department
Fax No.: (614) 217-1217
10.2 Term of Agreement; Termination; Successors and Assigns. This
Agreement and all covenants, agreements, representations and warranties made
herein and in the reports, certificates and other writings delivered pursuant
hereto shall survive the execution and delivery of this Agreement, the making by
the Lender of the Loan and the execution and delivery to the Lender of the Loan
Documents and shall continue in full force and effect until terminated. This
Agreement shall terminate at such time as the Lender has received payment in
full of all amounts owing to the Lender hereunder and under the Loan Documents.
In this Agreement whenever any of the parties hereto is referred to, such
reference shall be deemed to include the successors and assigns of such parties;
and all terms and provisions of this Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns, whether so expressed or not; provided, however, that the Borrower may
not assign or transfer its rights or duties under this Agreement to any Person
without the prior written consent of the Lender. The Lender may assign,
negotiate, pledge or otherwise hypothecate all or any portion of the Loan or
grant participations therein, or in any of its rights and security hereunder and
under the other Loan Documents, and the
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Borrower shall accord full recognition thereto. The Lender may deliver copies to
any potential participant or assignee or transferee of financial statements and
other information from time to time furnished to Lender pursuant hereto or in
connection therewith.
10.3 No Implied Rights or Waivers. No notice to or demand on the Borrower
in any case shall entitle the Borrower to any other or further notice or demand
in the same, similar and other circumstances. Neither any failure nor any delay
on the part of the Lender in exercising any right, power or privilege hereunder
or under the Loan Documents shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or further exercise of the
same or the exercise of any other right, power or privilege.
10.4 Applicable Law. This Agreement was negotiated in the State of Ohio,
accepted by the Lender in the State of Ohio, and the proceeds of the Loan
evidenced hereby were or are to be disbursed by Lender from the State of Ohio.
The Borrower and Lender agree that the State of Ohio has a substantial
relationship to the transaction evidenced hereby and agree that this Agreement
and the rights and obligations of the parties hereunder shall be governed by and
construed in accordance with the laws of the State of Ohio (without giving
effect to principles of conflicts of law).
10.5 Modifications, Amendments or Waivers.
(a) The Lender and the Borrower may from time to time enter into
written agreements amending or changing any provision of this Agreement or the
rights of the Lender or the Borrower hereunder or give waivers or consents to a
departure from the due performance of the obligations of the Borrower hereunder
or under the other Loan Documents.
(b) In the case of any such waiver or consent relating to any
provision hereof or thereof, the parties shall be restored to their former
positions and rights thereunder, and any Default or Event of Default so waived
or consented to shall be deemed to be cured and not continuing; but no such
waiver or consent shall extend to any subsequent or other Default or Event of
Default or impair any right consequent thereon.
10.6 Counterparts. This Agreement may be signed in any number of
counterparts with the same effect as if the signature thereto were upon the same
instrument.
10.7 Headings. The headings of the Articles and Sections of this Agreement
are inserted for convenience only and shall not be deemed to constitute a part
hereof.
10.8 Expenses. The Borrower shall pay or cause to be paid and save the
Lender harmless against liability for the payment of all reasonable
out-of-pocket expenses, including counsel fees and disbursements, incurred or
paid by the Lender in connection with (i) the negotiation, preparation (if
requested by Brookdale), and execution of the Loan Documents; (ii) any
amendments, waivers or consents (if requested by Brookdale) pursuant to the
provisions hereof and thereof; and (iii) the enforcement of the Loan Documents
including such expenses as may be incurred by the Lender in collection of the
Notes and the enforcement of all obligations of the Borrower hereunder.
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10.9 Accounting. All financial reports required under this Agreement shall
be prepared in accordance with Project budgets previously submitted to Lender.
10.10 Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or effecting the validity or enforceability of such
provisions in any other jurisdiction.
10.11 Waiver of Jury Trial; Consent to Venue. The Borrower and the Lender,
after consulting or having had the opportunity to consult with counsel,
knowingly, voluntarily and intentionally waive any right any of them may have to
a trial by jury in any litigation based upon or arising out of this Agreement,
the other Loan Documents, or any of the transactions contemplated by this
Agreement, or any course of conduct, dealing, statements (whether oral or
written) or actions of any of them. Neither the Borrower nor the Lender shall
seek to consolidate, by counterclaim or otherwise, any action in which a jury
trial has been waived with any other action in which a jury trial cannot be or
has not been waived unless failure to so consolidate would result in a mandatory
loss of such claim. In the event of a dispute under this Agreement, the parties
hereby agree that exclusive jurisdiction and venue lies in a court of competent
jurisdiction in Franklin County, Ohio. These provisions shall not be deemed to
have been modified in any respect or relinquished by either of the Borrower or
the Lender except by a written instrument executed by all of them.
10.12 Entire Agreement. This Agreement, the Exhibits hereto and the Loan
Documents reflect the entire understanding of the parties with respect to their
respective subject matters and supersede all prior agreements or understandings
with respect thereto in
their entirety.
10.13 Intercreditor Agreement. THE LOAN, THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER, ALL RIGHTS AND REMEDIES OF LENDER WITH
RESPECT
TO THE LOAN AND ANY AND ALL COLLATERAL THEREFOR ARE EACH AND ALL SUBJECT TO THE
TERMS AND CONDITIONS OF THE INTERCREDITOR AGREEMENT.
10.14.Limited Recourse. Notwithstanding any provision in this Agreement or
in any of the other Loan Documents to the contrary, in no event shall any
officer, director, incorporator, member, manager, shareholder or agent of
Borrower be personally liable to Lender for any of the obligations of the
Borrower under this Agreement or under any of the other Loan Documents including
without limitation the obligation to pay any amount due on the Notes.
30
<PAGE>
IN WITNESS WHEREOF, the Borrower and the Lender have caused this
Agreement to be duly executed by their duly authorized representatives, all as
of the day and year first above written.
AH TEXAS SUBORDINATED, LLC, an Ohio
limited liability company
By: AH Texas Investor, Inc., an Ohio
corporation, its Manager
By:
Name: David B. Fenkell
Title: President
BANC ONE CAPITAL PARTNER IV, LTD., an
Ohio limited liability company
By: BOCP Holdings Corporation, its
Manager
By:
Name: Michael S. Wood
Title: Authorized Signer
31
<PAGE>
EXHIBIT A-1
Guaranty Agreement
<PAGE>
EXHIBIT A-2
Guaranty of Completion
<PAGE>
EXHIBIT A-3
Non-Recourse Guaranty
<PAGE>
EXHIBIT B-1
Priority Note
<PAGE>
EXHIBIT B-2
Subordinate Note
<PAGE>
EXHIBIT C
Security Agreement - Pledge and Assignment of Membership Interests
<PAGE>
EXHIBIT D
Warrant Certificate
<PAGE>
EXHIBIT E
Methodology of Calculation of Internal Rate of Return
<PAGE>
GUARANTY AGREEMENT
This Guaranty Agreement (the "Guaranty") is made, given and delivered as of
June 17, 1998, by BROOKDALE LIVING COMMUNITIES, INC., a Delaware corporation
(the "Guarantor") to BANC ONE CAPITAL PARTNERS IV, LTD., an Ohio limited
liability company (the "Lender").
Background
The following is a mutual statement by the parties of certain factual
matters that form the basis of this Guaranty.
A. Loan Agreement. AH Texas Subordinated, LLC, an Ohio limited liability
company (the "Borrower"), and the Lender have entered into a certain Loan
Agreement concurrently with the execution of this Guaranty (the "Loan
Agreement"), pursuant to which the Lender has agreed to lend to the Borrower up
to the sum of $7,382,658, subject to additional advances as described in the
Loan Agreement (the "Loan"). The Borrower has also executed certain Promissory
Notes of even date herewith, in favor of the Lender, further evidencing the Loan
(the "Notes"). All terms not otherwise defined herein shall have the meanings
ascribed to them in the Loan Agreement.
B. Owner. AH Texas Owner Limited Partnership (the "Owner"), the sole
partners of which are the Borrower and AH Texas CGP, Inc., an Ohio corporation
(the "General Partner") which acts as the sole general partner of the Owner. The
Borrower is the sole shareholder of the General Partner.
C. Project. The Owner intends to develop a congregate housing facility with
an assisted living component for the elderly in Austin, Texas, which is to be
known as "The Heritage at Gaines Ranch" (the "Project"). The Lender has agreed
to make the Loan to the Borrower to be used as a an equity contribution to the
Owner, the proceeds of which will fund a portion of the Project costs.
D. Guarantor. BLC of Texas-II, L.P. (the "Manager") is the manager and
developer of the Project pursuant to a certain Amended and Restated Development
Agreement with the Owner of even date herewith (the "Development Agreement") and
a certain Management Agreement with the Owner of even date herewith (the
"Management Agreement"). The Guarantor is an Affiliate of the Manager and will
derive material benefits from the Loan.
NOW, THEREFORE, for and in consideration of the promises, in order to
induce the Lender to make the Loan and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Guarantor does hereby guarantee and the parties do hereby agree, as follows:
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<PAGE>
Statement of Agreement
SECTION 1. Payment Guaranty.
A. The Guarantor, absolutely and unconditionally, hereby guarantees to the
Lender the full, prompt and complete repayment of all of the Borrower's
obligations under the Notes, in any of the following circumstances:
(a) The Manager files a voluntary petition in bankruptcy or engages in any
other voluntary act of insolvency;
(b) Any material, intentional misrepresentations of fact to the Owner, the
Borrower or the Lender by the Guarantor or the Manager, or any of their
respective authorized agents or representatives contained in any Loan Document
or in any other written document delivered in connection with the Loan;
(c) Fraud or misappropriation of funds on the part of the Guarantor or the
Manager with respect to the Project;
(d) The Guarantor, the Manager or any of their respective Affiliates
contests, impairs or otherwise challenges the Lender's right or ability to
foreclose on its security interest, or at Lender's option, to become the
undisputed, absolute owner of all or any portion of the Membership Interests
(subject to Brookdale's Equity Option) or to exercise its rights pursuant to its
Special Management Interest; or
(e) The breach of the Guarantor's obligations under Section 1(C), below.
B. The Guarantor, absolutely and unconditionally, hereby guarantees to the
Lender the full, prompt and complete reimbursement of all costs, losses,
expenses and damages (including reasonable attorneys' fees), exclusive of
consequential damages, sustained or incurred by the Lender, as a result of: (a)
any material physical waste at the Project or of the Property by the Guarantor,
the Manager or any of their respective authorized agents or representatives; (b)
the failure to apply insurance or condemnation proceeds by the Guarantor, the
Manager or any of their respective authorized agents or representatives in
accordance with the requirements of the Senior Loan Documents; (c) any shortfall
between (i) the sum of the Re-sized Amount and the Preferred Equity available
from the Senior Lender and (ii) the unpaid Principal, (as such terms are defined
in the Senior Loan Documents), but only to the extent the Lender pays or causes
to be paid such shortfall to the Senior Lender and Brookdale would otherwise be
liable to the Senior Lender for the payment of such amount pursuant to its
Guaranty of Payment (as such term is defined in the Senior Loan Documents); or
(d) the failure of the Borrower to pay Scheduled Debt Service on the Priority
Note for the monthly periods, if any, after the Original Expected Conversion
Date (as such term is defined in the Senior Loan Documents) through and
including the Maturity Date.
C. Without the prior written consent of the Lender exercised in its sole
discretion, the Guarantor shall not (i) permit any financing pursuant to the
Master Financing Facility Agreement (as such term is defined in the Senior Loan
Documents) other than the Senior Loan and the loan by Senior Lender of even date
herewith to AH Michigan Owner Limited Partnership (the
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<PAGE>
"Michigan Senior Loan") or (ii) otherwise permit the Senior Loan to be
cross-defaulted and/or cross- collateralized with any loan other than the
Michigan Senior Loan.
D. The Guarantor, absolutely and unconditionally, hereby guarantees to the
Lender the full, prompt and complete payment and performance of the obligations
of the Borrower pursuant to Section 6.1(m) of the Loan Agreement; provided,
however, that so long as no Event of Default then exists, the guaranty pursuant
to this Section1(D) (except with respect to Guarantor's liability for any sums
due and payable under this Guaranty as of the date of such termination and any
sums thereafter becoming payable pursuant to Section5 of this Guaranty) shall
terminate on the Payment Obligations Termination Date (as such term is defined
in the Senior Loan Documents).
Section2. Unconditional Obligations. The obligations of the Guarantor under
this Guaranty (the "Obligations") are absolute and unconditional, and shall not
be impaired by any action or omission to act, with or without notice to the
Guarantor (except for such notices as expressly required by the Loan Documents
or the Intercreditor Agreement), of the Lender or any other holder or
beneficiary of any of the Obligations, or by reason of any other circumstance
which might otherwise constitute a discharge or defense of the Guarantor. Except
as expressly contained herein in the Intercreditor Agreement or the other Loan
Documents, the Guarantor hereby expressly waives diligence, presentment,
protest, notice of dishonor, demand for payment or performance, extension of
time of payment or performance, notice of acceptance of this Guaranty, and
indulgences and notices of every kind under the Loan Agreement, the Notes or any
of the other Loan Documents and consent to any and all forbearances and
extensions of time thereunder and to any and all changes in the terms, covenants
and conditions thereof, and agree that they shall not be released hereunder by
any matter or things whatsoever whereby it as Guarantor and surety otherwise
would or might be released, other than a written release delivered by the Lender
or by payment or performance of the Obligations or by payment in full of the
Notes and all other obligations of the Borrower under the Loan Agreement.
Section 3. Costs and Expenses. The Guarantor agrees to pay all the
reasonable costs, expenses and fees, including all reasonable attorneys' fees,
which may be incurred by the Lender in enforcing or attempting to enforce this
Guaranty following any default on the part of the Guarantor hereunder, whether
the same shall be enforced by suit or otherwise. If any such fees and expenses
are not so reimbursed, the amount thereof shall, to the extent permitted by law,
constitute indebtedness due hereunder.
Section 4. Financial Statements and Compliance Certificate. The Guarantor
agrees to provide to the Lender, not later than one hundred twenty (120) days
following the end of each fiscal year, an audited income and cash flow statement
and balance sheet as of the end of such fiscal year. The Guarantor agrees to
provide, or cause to be provided, to the Borrower the reports contemplated by
Sections 6.1 (a) and (b) of the Loan Agreement for delivery by the Borrower to
the Lender as contemplated therein. In connection with the delivery of the
financial statements contemplated by this Section4, the Guarantor shall cause to
be delivered to the Lender a certificate substantially in the form of Exhibit A
attached hereto.
Section 5. Rescission or Return of Payments. The Guarantor agrees that, if
at any time all or any part of any payment theretofore applied by the Lender to
any of the Obligations is or must be rescinded or returned by the Lender for any
reason whatsoever (including without limitation the insolvency, bankruptcy or
reorganization of the Borrower), such Obligations shall, for the purposes
\
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<PAGE>
of this Guaranty, to the extent that such payment is or must be rescinded
or returned, be deemed to have continued in existence, notwithstanding such
application by the Lender, and this Guaranty shall continue to be effective or
reinstated, as the case may be, as to such Obligations, all as though such
application by the Lender had not been made.
Section 6. Assignment or Transfer of Liabilities. The Lender may, from time
to time, without notice to the Guarantor, assign or transfer any or all of the
Obligations or any interest therein; and, notwithstanding any such assignment or
transfer or any subsequent assignment or transfer thereof, such Obligations
shall be and remain Obligations for the purposes of this Guaranty, and each and
every immediate and successive assignee or transferee of any of the Obligations
or of any such interest therein shall, to the extent of the interest of such
assignee or transferee in the Obligations, be entitled to the benefits of this
Guaranty to the same extent as if such assignee or transferee were the
transferor.
Section 7. Enforcement. The Obligations hereunder are joint and several and
are independent of the obligations of the Borrower, and a separate action or
actions may be brought and prosecuted against the Guarantor regardless of
whether any action is brought against the Borrower or whether the Borrower be
joined in any such action(s). The Guarantor hereby acknowledges and agree that
it shall not be a condition precedent to the enforcement of this Guaranty by the
Lender against the Guarantor that the Lender first seek recourse against the
Borrower by reason of a breach or default by the Borrower.
Section 8. Cumulative Remedies, Delays. No delay on the part of the Lender
in the exercise of any right or remedy shall operate as a waiver thereof, and no
single or partial exercise by the Lender of any right or remedy shall preclude
other or further exercise thereof or the exercise of any other right or remedy.
No action of the Lender permitted hereunder shall in any way affect or impair
the rights of the Lender and the Obligations of the Guarantor under this
Guaranty. For the purpose of this Guaranty, Obligations shall include all
obligations of the Guarantor hereunder, notwithstanding any right or power of
the Borrower or anyone else to assert any claim or defense as to the invalidity
or unenforceability of any such Obligations, and no such claim or defense shall
affect or impair the obligations of the Guarantor hereunder.
Section 9. Subordination. The Guarantor hereby subordinates any and all
claims which it now has, or in the future may acquire, as a creditor of the
Borrower or the Owner, to the prior payment and satisfaction in full of this
Guaranty. If, prior to the payment and satisfaction, or termination, of this
Guaranty, the Guarantor would, without reference to the provisions of this
Section9, be entitled to receive any payment on account of any claim of the
Guarantor against the Borrower or the Owner, all such payments shall be made
instead to the Lender until the Obligations have been paid and satisfied in
full, and the Guarantor hereby so direct. If the Guarantor receives any payment
on account of any claim of the Guarantor against the Borrower or the Owner, the
Guarantor shall immediately pay the same over to the Lender to be applied to the
payment or satisfaction of the Obligations, if any. Anything in this Section9 to
the contrary notwithstanding, Manager and the Guarantor may receive and retain
payments (i) subject to the restrictions set forth in the Consent and
Subordination of Manager (as hereinafter defined) under the Management Agreement
and the Development Agreement and (ii) under the Amended and Restated Property
Management Agreement, if any, entered into between the Owner and the Manager as
described in the Consent and Subordination of Manager. For purposes hereof, the
"Consent and Subordination of Manager" shall mean that certain Consent and
Subordination of Manager of even date herewith executed by
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<PAGE>
the Manager in favor of the Lender. Anything herein to the contrary
notwithstanding, the provisions of this Section9 do not create any obligation on
the part of the Owner to the Lender.
Section 10.Amendments, Modifications, Etc. No amendment, modification,
termination, or waiver of any provision of this Guaranty nor consent to any
departure by the Guarantor therefrom, shall in any event be effective unless the
same shall be in writing and signed by the Lender, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given. No notice or demand on the Guarantor in any case shall
entitle the Guarantor to any other or further notice or demand in similar or
other circumstances. In addition, the Guarantor agrees not to amend the Equity
Option Agreement or the Brookdale Option Agreement without the prior written
consent of the Lender.
Section 11.No Reliance. The Guarantor acknowledges that it has
independently investigated the legal, economic, tax, accounting and other
consequences of the Loan and the transactions contemplated by the Loan Documents
and have not received or relied in any way on any advice of the Lender or any of
its Affiliates as to such consequences.
Section 12.Governing Law. This Guaranty was negotiated in the State of
Ohio, accepted by the Lender in the State of Ohio, and the proceeds of the Loan
guaranteed hereby were or are to be disbursed by Lender from the State of Ohio.
The Guarantor and the Lender agree that the State of Ohio has a substantial
relationship to the transaction evidenced hereby and agree that this Guaranty
and the rights and obligations of the parties hereunder shall be governed by and
construed in accordance with the laws of the State of Ohio (without giving
effect to principles of conflicts of law).
Section 13.Severability. In the event any one or more of the provisions
contained in this Guaranty shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such provision shall be deemed replaced by the
valid and enforceable provision that is substantially most similar to such
invalid or unenforceable provision, but the remaining provisions shall not be
affected thereby.
Section 14.Waiver of Jury Trial; Consent to Venue. THE GUARANTOR AND THE
LENDER, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL,
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT THEY MAY HAVE TO A
TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS GUARANTY OR
ANY RELATED INSTRUMENT OR AGREEMENT, OR ANY OF THE TRANSACTIONS CONTEMPLATED BY
THIS GUARANTY, OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR
WRITTEN) OR ACTIONS OF THE GUARANTOR OR THE LENDER. THE GUARANTOR AND THE LENDER
SHALL NOT SEEK TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY ACTION IN WHICH
A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT
BE OR HAS NOT BEEN WAIVED. IN THE EVENT OF A DISPUTE UNDER THIS GUARANTY, THE
GUARANTOR AND THE LENDER HEREBY AGREE THAT EXCLUSIVE JURISDICTION AND VENUE LIES
IN A COURT OF COMPETENT JURISDICTION IN FRANKLIN COUNTY, OHIO. THESE PROVISIONS
SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY THE
GUARANTOR OR THE LENDER EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY SAME.
\
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<PAGE>
Section 15.Gender and Number. Terms that imply gender and number shall be
construed to imply the relevant gender and number.
Section 16.Multiple Counterparts. This Guaranty may be signed in multiple
counterparts with the same effect as if the signatures thereto were upon the
same instrument.
Section 17.Termination of Guaranty. Subject to the provisions of Section 5,
this Guaranty shall terminate upon the irrevocable payment in full of the Notes
and all other obligations of the Borrower under the Loan Agreement.
Section 18.Intercreditor Agreement. THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER, AND ALL RIGHTS AND REMEDIES OF LENDER WITH RESPECT TO THE
LOAN AND THE OBLIGATIONS OR ANY COLLATERAL FOR THE LOAN OR ANY OF THE
OBLIGATIONS ARE EACH AND ALL SUBJECT TO THE TERMS AND CONDITIONS OF THE
INTERCREDITOR AGREEMENT.
This Guaranty has been executed by the Guarantor effective as of the date
first written above.
GUARANTOR:
BROOKDALE LIVING COMMUNITIES, INC.,
a Delaware corporation
By:
______________________________________
Name: Darryl W. Copeland, Jr.
Title: Executive Vice
President
LENDER:
BANC ONE CAPITAL PARTNERSHIP IV,
LTD.,
an Ohio limited liability company
By: BOCP Holdings Corporation, an
Ohio
corporation, its Manager
By:
Name: Michael S. Wood
Title: Authorized Signer
-6-
GUARANTY OF COMPLETION
made by
BROOKDALE LIVING COMMUNITIES, INC.
as guarantor,
in favor of
BANC ONE CAPITAL PARTNERS IV, LTD.
Dated as of June 17, 1998
<PAGE>
GUARANTY OF COMPLETION
This GUARANTY OF COMPLETION (this "Guaranty"), dated as of June 17,
1998, made by BROOKDALE LIVING COMMUNITIES, INC. , a Delaware corporation,
having an office at 77 West Wacker Drive, Suite 4400, Chicago, Illinois 60621
("Guarantor"), in favor of BANC ONE CAPITAL PARTNERS IV, LTD., an Ohio limited
liability company, having an address at 150 East Gay Street, Columbus, Ohio
43215, Attention: John W. Adams (together with its successors and assigns,
"Lender").
R E C I T A L S:
A. Pursuant to that certain Loan Agreement dated as of the date
hereof (as the same may be amended, modified, supplemented or replaced from time
to time, the "Loan Agreement") by and between AH Michigan Subordinated, LLC, an
Ohio limited liability company ("Borrower") and Lender, Lender has agreed to
make a loan (the "Loan") to Borrower in the original principal amount of
$11,000,776, subject to the terms and conditions of the Loan Agreement;
B. As a condition to Lender's making the Loan, Lender is requiring
that Guarantor execute and deliver to Lender this Guaranty; and
C. Guarantor hereby acknowledges that Guarantor will
materially benefit from
Lender's agreeing to make the Loan;
NOW, THEREFORE, in consideration of the premises set forth herein and
as an inducement for and in consideration of the agreement of Lender to make the
Loan pursuant to the Loan Agreement, Guarantor hereby agrees, covenants,
represents and warrants to Lender as follows:
1. Definitions.
(a) All capitalized terms used and not defined herein shall have
the respective meanings given such terms in the Loan Agreement.
(b) The term "including" means including without limitation.
(c) "Building Loan Agreement" has the meaning set forth in the
Senior Loan Documents.
(d) "Governmental Authorities" has the meaning set forth in the
Senior Loan Documents.
(e) "Guaranty Termination Date" means the date on which
Substantial Completion has occurred and all costs, expenses and liabilities
incurred in connection therewith (including, without limitation, for labor,
materials and services)
have been paid in full (except to the
1
<PAGE>
extent to be paid for from Retainage or other sums are then held or reserved by
Senior Lender but not yet disbursed in accordance with the Building Loan
Agreement).
(f) "Liens" has the meaning set forth in the Senior Loan
Documents.
(g) "Owner" means AH Michigan Owner Limited
Partnership, an Ohio
limited partnership.
(h) "Permitted Encumbrances" has the meaning set forth in the
Senior Loan Documents.
(i) "Person" has the meaning set forth in the Senior Loan
Documents.
(j) "Plans" has the meaning set forth in the Senior Loan
Documents.
(k) "Property" has the meaning set forth in the Senior Loan
Documents.
(l) "Retainage" has the meaning set forth in the Senior Loan
Documents.
(m) "Senior Lender" means Nomura Asset Capital
Corporation, and its
successors and assigns.
(n) "Senior Loan" shall mean the loan from Senior Lender to
Owner for the acquisition, development and construction of the Project, in
an amount of up to $26,625,000.
(o) "Senior Loan Documents" shall mean the loan documents
evidencing or securing the Senior Loan.
(p) "Substantial Completion" has the meaning set forth in the
Senior Loan Documents.
2. Guaranty.
(a) Subject to Section 3 below, Guarantor hereby irrevocably,
absolutely and unconditionally guarantees to Lender the prompt and complete
observance, fulfillment and performance of all of the obligations of the
Borrower pursuant to Section 6.1(n) of the Loan Agreement. The obligations which
are the subject of the guaranty referred to in this Section 2(a) are hereinafter
collectively referred to as the "Guarantied Obligations".
(b) Subject to Section 3 below, without limiting the generality
of the provisions of Section 2(a), Guarantor hereby irrevocably, absolutely and
unconditionally guarantees to Lender that Borrower shall cause Owner and
Manager, in accordance with the terms of the Building Loan Agreement, to fully
and punctually pay and discharge (i) any and all costs, expenses and liabilities
for or incurred in connection with the Guarantied Obligations; (ii) all claims
and
2
<PAGE>
demands for labor, materials and services used or incurred in connection with
the Guarantied Obligations which are or may become due and payable, or, if
unpaid, are or may become Liens on the Property or any part thereof; and (iii)
any Liens in favor of any and all Persons furnishing materials, labor or
services for or in connection with the Guarantied Obligations such that the
Property shall be and remain free and clear of any and all liens other than
Permitted Encumbrances, subject, however, to Owner's and Manager's rights, if
any, set forth in the Building Loan Agreement with regard to the contesting of
Liens.
(c) If Borrower does not perform the Guarantied Obligations as
provided in paragraphs (a) and (b) of this Section 2, then upon receipt of
demand from Lender:
(i) subject to Section 3 hereof, Guarantor shall, if
requested by Lender (which request Lender may make or not make in its sole
discretion), perform and complete the Guarantied Obligations or cause the
Guarantied Obligations to be performed and completed, in accordance with
the requirements of the Building Loan Agreement; and
(ii) if Guarantor fails to perform the Guarantied Obligations
in accordance with this Guaranty (whether or not requested to do so
pursuant to subsection (c)(i) above) then, to the extent that Lender shall
(A) cause any Guarantied Obligations to be performed, (B) pay any costs,
expenses or liabilities in connection with the Guarantied Obligations, or
(c) cause any Lien, claim or demand to be released or paid or bonded,
Guarantor shall, upon demand by Lender, reimburse Lender for all sums paid
and all costs, expenses or liabilities incurred by Lender in connection
therewith. All such sums shall be payable by Guarantor to Lender on demand
and without reduction for any offset, claim, counterclaim or defense.
(d) Guarantor hereby agrees to indemnify, defend and save
harmless Lender from and against any and all costs, losses, liabilities, claims,
causes of action, expenses and damages, including, without limitation,
reasonable attorneys' fees and disbursements, which Lender may suffer or which
otherwise may arise by reason of the Borrower's failure to fulfill its
obligations under the Loan Agreement with respect to the Guarantied Obligations,
irrespective of whether such costs, losses, liabilities, claims, causes of
action, expenses or damages are incurred by Lender prior or subsequent to
Lender's declaring the principal, interest and other sums evidenced or secured
by the Loan Documents to be due and payable.
(e) Guarantor hereby agrees that, notwithstanding any provisions
to the contrary in any Loan Document limiting the recourse of Lender to
collateral encumbered by the Loan Documents, or limiting the rights of Lender to
obtain a deficiency judgment against Borrower, Guarantor shall be fully and
personally liable with respect to the covenants, representations, warranties,
guaranties, agreements and indemnities of Guarantor under this Guaranty.
(f) Notwithstanding anything to the contrary contained herein or
in any other Loan Documents, and subject to the provisions of Section 6(i), all
of Guarantor's obligations under this Guaranty (including the Guarantied
Obligations) shall terminate on the Guaranty
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<PAGE>
Termination Date, provided that Guarantor's obligations under clauses (ii) and
(iii) of Section 2(b) above relating to labor, materials and services provided,
furnished or performed at or to the Property shall continue with respect to any
claims, demands and Liens referred to therein, whether asserted before or after
the Guaranty Termination Date.
3. Intentionally Omitted.
4. Representations and Warranties. Guarantor hereby represents and
warrants to Lender as follows (which representations and warranties shall be
given as of the date hereof and shall survive the execution and delivery of this
Guaranty):
(a) Organization, Authority and Execution. Guarantor is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and has all necessary power and authority to own its
properties and to conduct its business as presently conducted or proposed to be
conducted and to enter into and perform this Guaranty and all other agreements
and instruments to be executed by it in connection herewith. This Guaranty has
been duly executed and delivered by Guarantor.
(b) Enforceability. This Guaranty constitutes a legal, valid and
binding obligation of Guarantor, enforceable against Guarantor in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally.
(c) No Violation. The execution, delivery and
performance by Guarantor
of the Guarantied Obligations has been duly authorized by all
necessary action, and do not and will
not violate any law, regulation, order, writ, injunction or decree of any court
or governmental body, agency or other instrumentality applicable to Guarantor in
effect on the date hereof, or result in a breach of any of the terms, conditions
or provisions of, or constitute a default under, or result in the creation or
imposition of any mortgage, Lien, charge or encumbrance of any nature whatsoever
upon any of the assets of Guarantor pursuant to the terms of Guarantor's
certificate of incorporation or by-laws, or any mortgage, indenture, agreement
or instrument to which Guarantor is a party or by which it or any of its
properties is bound. Guarantor is not in default under any other guaranty which
it has provided to Lender.
(d) No Litigation. There are no actions, suits or proceedings at
law or at equity, pending or, to Guarantor's best knowledge, threatened against
or affecting Guarantor or which involve the validity or enforceability of this
Guaranty or with respect to which an adverse decision would materially adversely
affect the financial condition of Guarantor or the ability of Guarantor to
perform any of the Guarantied Obligations. Guarantor is not in default beyond
any applicable grace or cure period with respect to any order, writ, injunction,
decree or demand of any Governmental Authority which would materially adversely
affect the financial condition of Guarantor or the ability of Guarantor to
perform any of its obligations under this Guaranty.
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(e) Consents. All consents, approvals, orders or authorizations
of, or registrations, declarations or filings with, all Governmental Authorities
(collectively, the "Consents") that are required in connection with the valid
execution, delivery and performance by Guarantor of this Guaranty have been
obtained or will be obtained when required.
(f) Financial Statements and Other Information. All financial
statements of Guarantor heretofore delivered to Lender are true and correct in
all material respects and fairly present the financial condition of Guarantor as
of the respective dates thereof, and no materially adverse change has occurred
in the financial conditions reflected therein since the respective dates
thereof. None of the aforesaid financial statements or any certificate or
statement furnished to Lender by or on behalf of Guarantor in connection with
the transactions contemplated hereby, and none of the representations and
warranties in this Guaranty 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. Guarantor is not insolvent within
the meaning of the United States Bankruptcy Code or any other in any material
respect applicable law, code or regulation, and the execution, delivery and
performance of this Guaranty will not render Guarantor insolvent.
(g) Consideration. Guarantor is receiving fair consideration in
return for giving this Guaranty.
5. Financial Statements. Guarantor shall deliver to Lender, (a)
within one hundred twenty (120) days after the end of each fiscal year of
Guarantor, a complete copy of Guarantor's annual financial statements audited by
a "big six" accounting firm or another independent certified public accountant
reasonably acceptable to Lender, (b) within forty-five (45) days after the end
of each fiscal quarter of Guarantor, financial statements (including a balance
sheet as of the end of such fiscal quarter and a statement of income and expense
for such fiscal quarter) certified by the Chief Financial Officer or President
of Guarantor and in form, content, level of detail and scope reasonably
satisfactory to Lender, and (c) thirty (30) days after request by Lender, such
other financial information with respect to Guarantor as Lender may reasonably
request. Guarantor's obligation to deliver this information to Lender shall
terminate on the Guaranty Termination Date.
6. Unconditional Character of Obligations of
Guarantor.
(a) Subject to Section 3 above, the obligations of Guarantor
hereunder shall be irrevocable, absolute and unconditional, irrespective of the
validity, regularity or enforceability, in whole or in part, of the other Loan
Documents or any provision thereof, or the absence of any action to enforce the
same, any waiver or consent with respect to any provision thereof, the recovery
of any judgment against Borrower, Guarantor, or any other Person or any action
to enforce the same, any failure or delay in the enforcement of the obligations
of Borrower under the other Loan Documents or Guarantor under this Guaranty, or
any setoff, counterclaim, and irrespective of any other circumstances which
might otherwise limit recourse against Guarantor by Lender or constitute a legal
or equitable discharge or defense of a guarantor or surety. Lender may enforce
the obligations of Guarantor under this Guaranty by a proceeding at law, in
equity or otherwise, independent of any foreclosure or similar proceeding or any
deficiency action against Borrower, or any other Person at any time. This
Guaranty is a guaranty of payment and performance and not a guaranty of
collection. Except as otherwise provided herein or in any of the other Loan
Documents or the Intercreditor Agreement, and to the extent permitted by law,
Guarantor waives
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diligence, notice of acceptance of this Guaranty, filing of claims with any
court, any proceeding to enforce any provision of any other Loan Document,
against Guarantor, Borrower, or any other Person, any right to require a
proceeding first against Borrower,
or any other Person, or to exhaust
any security for the performance of the Guarantied Obligations or any other
obligations of Borrower, or any other Person, or any protest, presentment,
notice of default or other notice or demand whatsoever (except to the extent
expressly provided to the contrary in this Guaranty or elsewhere in the Loan
Documents), and Guarantor hereby covenants and agrees that Guarantor shall not
be discharged of its obligations hereunder except as set forth in Section 2(f)
above.
(b) The Guarantied Obligations, and the rights of Lender to
enforce the same by proceedings, whether by action at law, suit in equity or
otherwise, shall not be in any way affected by any of the following:
(i) any insolvency, bankruptcy, liquidation,
reorganization, readjustment, composition, dissolution, receivership,
conservatorship, winding up or other similar proceeding involving or
affecting Borrower, Guarantor or any other Person;
(ii) any failure by Lender or any other Person, whether or
not without fault on its part, to perform or comply with any of the terms
of the Loan Agreement, or any other Loan Documents, or any document or
instrument relating thereto;
(iii) the sale, transfer or conveyance of the Property or any
interest therein to any Person, whether now or hereafter having or
acquiring an interest in the Property or any interest therein and whether
or not pursuant to any foreclosure, trustee sale or similar proceeding
against Owner, Manager, or the Property or any interest therein;
(iv) the conveyance to Senior Lender, any Affiliate of Senior
Lender or Senior Lender's nominee of the Property or any
interest therein by a deed-in-lieu
of foreclosure;
(v) the release of Borrower, or any other Person from the
performance or observance of any of the agreements, covenants, terms or
conditions contained in any of the Loan Documents by operation of law or
otherwise; or
(vi) the release in whole or in part of any security for the
Guarantied Obligations or the Loan.
(c) Except as otherwise specifically provided in this Guaranty,
Guarantor hereby expressly and irrevocably waives all defenses in an action
brought by Lender to enforce this Guaranty based on claims of waiver, release,
surrender, alteration, compromise or equitable discharge and all setoffs,
reductions, or impairments, whether arising hereunder or otherwise.
(d) Lender may deal with Borrower in the same manner and as
freely as if this Guaranty did not exist and shall be entitled, among other
things, to grant Borrower, or any other Person such extension or extensions of
time to perform any act or acts as may be deemed
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advisable by Lender, at any time and from time to time, without terminating,
affecting or impairing the validity of this Guaranty or the Guarantied
Obligations.
(e) No compromise, alteration, amendment, modification,
extension, indulgence, renewal, release or other change of, or waiver,
suspension, consent, compromise, delay, omission, failure to act, forbearance or
other action with respect to, any liability or obligation under or with respect
to, or of any of the terms, covenants or conditions of, the Loan Documents or
any amendment, modification or other change of the Plans or any legal
requirement shall in any way alter, impair or affect any of the Guarantied
Obligations or Lender's rights hereunder, and Guarantor agrees that if any Loan
Document or the Plans are modified with Lender's consent, the Guarantied
Obligations shall automatically be deemed modified to include such modifications
without the necessity of notice to Guarantor except as may otherwise be required
under the Loan Agreement.
(f) Lender may proceed to protect and enforce any or all of its
rights under this Guaranty by suit in equity or action at law, whether for the
specific performance of any covenants or agreements contained in this Guaranty
or otherwise, or to take any action authorized or permitted under applicable
law, and shall be entitled to require and enforce the performance of all acts
and things required to be performed hereunder by Guarantor. Each and every
remedy of Lender shall, to the extent permitted by law, be cumulative and shall
be in addition to any other remedy given hereunder or now or hereafter existing
at law or in equity. No single exercise of Lender's power to bring any action or
institute any proceeding shall be deemed to exhaust such power, but such power
shall continue undiminished and may be exercised from time to time as often as
Lender may elect until the earlier of the Guaranty Termination Date or the date
that all the Guarantied Obligations have been satisfied. Lender shall be under
no obligation to take any action and shall not be liable for any action taken or
any failure to take action or any delay in taking action against Guarantor,
Borrower or any other Person or otherwise with respect to the Guarantied
Obligations.
(g) No waiver shall be deemed to have been made by Lender of any
rights hereunder unless the same shall be in writing and signed by Lender, and
any such waiver shall be a waiver only with respect to the specific matter
involved and shall in no way impair the rights of Lender or the obligations of
Guarantor to Lender in any other respect or at any other time.
(h) At the option of Lender, Guarantor may be joined in any
action or proceeding commenced by Lender against Borrower in connection with or
based upon any other Loan Documents and recovery may be had against Guarantor in
such action or proceeding or in any independent action or proceeding against
Guarantor only to the extent of Guarantor's liability hereunder, without any
requirement that Lender first assert, prosecute or exhaust any remedy or claim
against Borrower, or any other Person, or any security for the obligations of
Borrower, or any other Person.
(i) Guarantor agrees that this Guaranty shall continue to be
effective or shall be reinstated, as the case may be, if at any time any payment
is made by Borrower, or Guarantor to Lender and such payment is rescinded or
must otherwise be returned by Lender (as determined by Lender in its sole and
absolute discretion) upon insolvency, bankruptcy, liquidation, reorganization,
readjustment, composition, dissolution, receivership, conservatorship, winding
up or other similar
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proceeding involving or affecting Borrower or Guarantor, all as though such
payment had not been made.
(j) For so long as the Loan is outstanding, Guarantor hereby
expressly waives any and all of its rights of subrogation, reimbursement,
indemnity and recourse against Borrower and/or Owner. Guarantor shall not be
deemed a "creditor" of the Borrower with respect to the Guarantied Obligations
as said term "creditor" is defined in the United States Bankruptcy Code, as
amended. If any amount shall be paid to Guarantor on account of such subrogation
rights at any time when any such sums due and owing to Lender shall not have
been fully paid, such amount shall be paid by Guarantor to Lender for credit and
application against such sums due and owing to Lender. Notwithstanding the
foregoing, the Guarantor and its affiliates shall have the right to be
reimbursed by Owner in accordance with the terms and conditions of the
Management Agreement and the Development Agreement for their out-of-pocket costs
or fees pursuant thereto unless at the time of such payment there exists an
Event of Default under the Loan Agreement. Anything herein to the contrary,
notwithstanding, the provisions of this Section 6(j) do not create any
obligation on the part of the Owner to the Lender.
(k) Subject to Section 2(f) hereof, the Guarantied Obligations
shall survive a foreclosure, deed-in-lieu of foreclosure or similar proceeding
involving the Property and the exercise by Senior Lender of any of all of its
remedies pursuant
to the Senior Loan Documents.
7. Intentionally Omitted.
8. Entire Agreement/Amendments. This instrument represents the entire
agreement between the parties with respect to the subject matter hereof. The
terms of this Guaranty shall not be waived, altered, modified, amended,
supplemented or terminated in any manner whatsoever except by written instrument
signed by Lender and Guarantor.
9. Successors and Assigns. This Guaranty shall be binding upon
Guarantor, and Guarantor's successors and assigns, may not be assigned or
delegated by Guarantor and shall inure to the benefit of Lender and its
successors and assigns.
10. Applicable Law, Waiver of Jury Trial, Consent to
Venue.
(a) This Guaranty was partially negotiated in the State of
Ohio, and accepted by Lender in the State of Ohio, which State the parties agree
has a substantial relationship to the parties and to the underlying transaction
embodied hereby, and in all respects, this Guaranty shall be governed by, and
construed in accordance with, the substantive laws of the State of Ohio.
(b) THE GUARANTOR AND THE LENDER, AFTER CONSULTING OR HAVING
HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION
BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY RELATED INSTRUMENT OR
AGREEMENT, OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, OR ANY
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COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF
THE GUARANTOR OR THE LENDER. THE GUARANTOR AND THE LENDER SHALL NOT SEEK TO
CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY ACTION IN WHICH A JURY TRIAL HAS
BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT
BEEN WAIVED UNLESS FAILURE TO SO CONSOLIDATE WOULD RESULT IN A MANDATORY LOSS OF
SUCH CLAIM. IN THE EVENT OF A DISPUTE UNDER THIS AGREEMENT, THE GUARANTOR AND
THE LENDER HEREBY AGREE THAT EXCLUSIVE JURISDICTION AND VENUE LIES IN A COURT OF
COMPETENT JURISDICTION IN FRANKLIN COUNTY, OHIO. THESE PROVISIONS SHALL NOT BE
DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY THE GUARANTOR OR
THE LENDER EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY SAME.
11. Section Headings. The headings of the sections and paragraphs of
this Guaranty have been inserted for convenience of reference only and shall in
no way define, modify, limit or amplify any of the terms or provisions hereof.
12. Severability. Any provision of this Guaranty which may be
determined by any competent authority to be prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, Guarantor hereby
waives any provision of law which renders any provision hereof prohibited or
unenforceable in any respect.
13. Intentionally Omitted.
14. Other Guaranties. The obligations of Guarantor hereunder are
separate and distinct from, and in addition to, the obligations of Guarantor now
or hereafter arising under one or more other guaranties, pursuant to which
Guarantor has guaranteed the payment and performance of certain other
obligations of Borrower described therein.
15. Notices. All notices, demands, requests, consents, approvals or
other communications (collectively called "Notices") required or permitted to be
given hereunder to Lender or Guarantor or which are given to Lender or Guarantor
with respect to this Guaranty shall be in writing and shall be (a) sent by
United States registered or certified mail, return receipt requested, postage
prepaid, addressed as set forth below, (b) sent by a national overnight courier
or delivery service or (c) personally delivered with receipt acknowledged to
such address, or in either case, to such other address(es) as the party in
question shall have specified most recently by like Notice.
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If to Lender, to:
Banc One Capital Partners IV, Ltd.
150 East Gay Street
24th Floor
Columbus, Ohio 43215
Attention: John W. Adams
with a copy to:
Banc One Capital Markets, Inc.
150 East Gay Street
24th Floor
Columbus, Ohio 43215
Attention: Legal Department
If to Guarantor, to:
Brookdale Living Communities, Inc.
77 West Wacker Drive, Suite 4400
Chicago, IL 60601
Attention: Darryl W. Copeland, Jr.
with a copy to:
Brookdale Living Communities, Inc.
77 West Wacker Drive, Suite 4400
Chicago, IL 60601
Attention: Robert J. Rudnick, Esq.
with a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, IL 60602
Attention: Wayne Boberg, Esq.
Notices which are given in the manner aforesaid shall be deemed to have been
given or served for all purposes hereunder (i) on the date on which such notice
shall have been personally delivered as aforesaid, (ii) on the date of delivery
by overnight carrier or mail as evidenced by the return receipt therefor, or
(iii) on the date of failure to deliver by reason of refusal to accept delivery
or changed address of which no Notice was given.
16. Guarantor's Receipt of Loan Documents. Guarantor by its execution
hereof acknowledges receipt of true copies of all of the Loan Documents.
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17. Interest; Expenses.
(a) If Guarantor fails to pay all or any sums due hereunder upon
demand by Lender, the amount of such sums payable by Guarantor to Lender shall
bear interest from the date of demand until paid at the Default Rate in effect
from time to time.
(b) Guarantor hereby agrees to pay all costs, charges and
expenses, including, without limitation, reasonable attorneys' fees and
disbursements, that may be incurred by Lender in enforcing the covenants,
agreements, obligations and liabilities of Guarantor under this Guaranty.
18. Intentionally Omitted.
19. Intentionally Omitted.
20. Intentionally Omitted.
21. Intercreditor Agreement.
THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
AND
ALL RIGHTS AND REMEDIES OF LENDER WITH RESPECT TO THE LOAN, THE
GUARANTIED OBLIGATIONS OR ANY COLLATERAL THEREFOR ARE EACH
AND
ALL SUBJECT TO THE TERMS AND CONDITIONS OF THE INTERCREDITOR
AGREEMENT.
[Remainder of page intentionally left blank; signature page
follows.]
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IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the
date first above written.
BROOKDALE LIVING COMMUNITIES,
INC., a Delaware corporation
By:
Name: Darryl W.
Copeland, Jr.
Title: Executive Vice
President
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AGREED AND ACKNOWLEDGED
ONLY FOR SECTION 10(b)
BANC ONE CAPITAL PARTNERS IV, LTD.
By: BOCP Holdings Corporation, its Manager
By: ______________________________________
Name: Michael S. Wood
Title: Authorized Signer
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NON-RECOURSE GUARANTY AGREEMENT
This Non-Recourse Guaranty Agreement (the "Guaranty") is made,
given and delivered as of June 17, 1998, by BROOKDALE LIVING
COMMUNITIES, INC., a Delaware corporation ("Guarantor") to BANC ONE
CAPITAL PARTNERS IV, LTD., an Ohio limited liability company (the
"Lender").
Background
The following is a mutual statement by the parties of certain
factual matters that form the basis of this Guaranty.
A. Loan Agreement. AH Texas Subordinated, LLC, an Ohio
limited liability company (the "Borrower"), and the Lender have
entered into a certain Loan Agreement concurrently with the
execution of this Guaranty (the "Loan Agreement"), pursuant to
which the Lender has agreed to lend to the Borrower up to the sum
of $7,382,658 (the "Loan"). The Borrower has also executed certain
Promissory Notes of even date herewith, in favor of the Lender,
further evidencing the Loan (the "Notes"). All terms not otherwise
defined herein shall have the meanings ascribed to them in the Loan
Agreement.
B. Owner. AH Texas Owner Limited Partnership is an Ohio
limited partnership (the "Owner"), the sole partners of which are
the Borrower and AH Texas CGP, Inc., an Ohio corporation (the
"General Partner") which acts as the sole general partner of the
Owner. The Borrower is the sole shareholder of the General
Partner.
C. Project. The Owner intends to develop a congregate
housing facility with an assisted living component for the elderly
in Austin, Texas, which is currently referred to as "The Heritage
at Gaines Ranch" (the "Project"). The Lender has agreed to make
the Loan to the Borrower to be used as a capital contribution to
the Owner, the proceeds of which will fund a portion of the Project
costs.
D. Guarantor. An affiliate of the Guarantor will be the
manager and developer of the Project and the Guarantor will derive
material benefits from the Loan. The Guarantor has entered into a
certain Conditional Investment Agreement dated June 17, 1998, with
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Banc One Capital Funding Corporation ("BOCFC") in order to induce
Lender to make the Loan (the "Conditional Investment Agreement").
E. Pledge of Conditional Investment Agreement. In order to
collateralize the Borrower's payment and performance obligations
under the Loan Documents, as well as to collateralize the
Guarantor's obligations under this Guaranty, the Guarantor has also
entered into a certain Security Agreement-Pledge and Assignment of
Investment Agreement (the "Security Agreement") of even date
herewith, pursuant to which the Guarantor has pledged and assigned
all of its interests in the Conditional Investment Agreement to the
Lender.
NOW, THEREFORE, for and in consideration of the promises, in
order to induce the Lender to make the Loan and for other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Guarantor does hereby guarantee and the
parties do hereby agree, as follows:
Statement of Agreement
SECTION 1. Guaranty. The Guarantor, absolutely and
unconditionally, hereby guarantees to the Lender the full, prompt
and complete payment of the Borrower's obligations under the Loan
Documents and the payment to AH Texas Investor, Inc. of funds from
the exercise of the Equity Option equal to its capital contribution
to the Borrower of $900,000 plus an amount necessary to produce a
17.11% IRR on such capital contribution.
SECTION 2. Unconditional Obligations. Subject to the
provisions of SECTION3 below, the obligations of the Guarantor
under this Guaranty (the "Obligations") are absolute and
unconditional, and shall not be impaired by any action or omission
to act, with or without notice to the Guarantor, of the Lender or
any other holder or beneficiary of any of the Obligations, or by
reason of any other circumstance which might otherwise constitute
a discharge or defense of the Guarantor. The Guarantor hereby
expressly waives diligence, presentment, protest, notice of
dishonor, demand for payment or performance, extension of time of
payment or performance, notice of acceptance of this Guaranty, and
indulgences and notices of every kind under the Loan Agreement, the
Notes or any of the other Loan Documents and consents to any and
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all forbearances and extensions of time thereunder and to any and
all changes in the terms, covenants and conditions thereof, and
agrees that it shall not be released hereunder by any matter or
things whatsoever whereby it as Guarantor and surety otherwise
would or might be released, other than a written release delivered
by the Lender or by payment or performance of the Obligations.
SECTION3. Limitations on Liability. Any provision in this
Guaranty (or in any other Loan Document) to the contrary
notwithstanding, the Guarantor shall not have any personal
liability and no deficiency judgment shall be brought or entered
into and no judgments shall be enforceable against the Guarantor or
any officer, director or shareholder of the Guarantor or any of its
successors, assigns, administrators or personal representatives, or
affiliates of Guarantor (including, without limitation, the
Manager) to pay any of the obligations evidenced by this Guaranty
or the Security Agreement. The Lender agrees that in the event of
an actual or alleged failure, breach or default hereunder by the
Guarantor, the Lender's sole and exclusive remedy against the
Guarantor shall be against the Conditional Investment Agreement
pursuant to the Security Agreement, and no judgment pursuant to
this Guaranty shall be subject to execution upon, or a lien against
any property of, the Guarantor other than the Investment Agreement.
Nothing in this SECTION3 or otherwise contained in this Guaranty
shall be deemed to limit, modify or impair the obligations of the
Guarantor to the Lender pursuant to the Recourse Guaranties (as
such term is defined in the Loan Agreement).
SECTION 4. Costs and Expenses. The Guarantor agrees to
pay all the reasonable costs, expenses and fees, including all
reasonable attorneys' fees, which may be incurred by the Lender in
enforcing or attempting to enforce this Guaranty following any
default on the part of the Guarantor hereunder, whether the same
shall be enforced by suit or otherwise. If any such fees and
expenses are not so reimbursed, the amount thereof shall, to the
extent permitted by law, constitute indebtedness due hereunder.
SECTION 5. Rescission or Return of Payments. The
Guarantor agrees that, if at any time all or any part of any
payment theretofore applied by the Lender to any of the Obligations
is or must be rescinded or returned by the Lender for any reason
whatsoever (including without limitation the insolvency, bankruptcy
or reorganization of the Borrower), such Obligations shall, for the
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purposes of this Guaranty, to the extent that such payment is or
must be rescinded or returned, be deemed to have continued in
existence, notwithstanding such application by the Lender, and this
Guaranty shall continue to be effective or reinstated, as the case
may be, as to such Obligations, all as though such application by
the Lender had not been made.
SECTION 6. Assignment or Transfer of Liabilities. The
Lender may, from time to time, without notice to the Guarantor,
assign or transfer any or all of the Obligations or any interest
therein; and, notwithstanding any such assignment or transfer or
any subsequent assignment or transfer thereof, such Obligations
shall be and remain Obligations for the purposes of this Guaranty,
and each and every immediate and successive assignee or transferee
of any of the Obligations or of any such interest therein shall, to
the extent of the interest of such assignee or transferee in the
Obligations, be entitled to the benefits of this Guaranty to the
same extent as if such assignee or transferee were the transferor.
SECTION 7. Enforcement. The Obligations hereunder are
joint and several and are independent of the obligations of the
Borrower, and a separate action or actions may be brought and
prosecuted against the Guarantor regardless of whether any action
is brought against the Borrower or whether the Borrower be joined
in any such action(s). The Guarantor hereby acknowledges and
agrees that it shall not be a condition precedent to the
enforcement of this Guaranty by the Lender against the Guarantor
that the Lender first seek recourse against the Borrower by reason
of a breach or default by the Borrower.
SECTION 8. Cumulative Remedies, Delays. No delay on the
part of the Lender in the exercise of any right or remedy shall
operate as a waiver thereof, and no single or partial exercise by
the Lender of any right or remedy shall preclude other or further
exercise thereof or the exercise of any other right or remedy. No
action of the Lender permitted hereunder shall in any way affect or
impair the rights of the Lender and the Obligations of the
Guarantor under this Guaranty. For the purpose of this Guaranty,
Obligations shall include all Obligations, notwithstanding any
right or power of the Borrower or anyone else to assert any claim
or defense as to the invalidity or unenforceability of any such
Obligations, and no such claim or defense shall affect or impair
the obligations of the Guarantor hereunder.
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SECTION 9. Subordination. The Guarantor hereby
subordinates any and all claims which it now has, or in the future
may acquire, as a creditor of the Borrower, to the prior payment
and satisfaction in full of this Guaranty. If, prior to the
payment and satisfaction of this Guaranty, the Guarantor would,
without reference to the provisions of this SECTION9, be entitled
to receive any payment on account of any claim of the Guarantor
against the Borrower, all such payments shall be made instead to
the Lender until the Obligations have been paid and satisfied in
full, and the Guarantor hereby so direct. If the Guarantor
receives any payment on account of any claim of the Guarantor
against the Borrower, the Guarantor shall immediately pay the same
over to the Lender to be applied to the payment or satisfaction of
the Obligations, if any.
SECTION 10. Amendments, Modifications, Etc. No amendment,
modification, termination, or waiver of any provision of this
Guaranty nor consent to any departure by the Guarantor therefrom,
shall in any event be effective unless the same shall be in writing
and signed by the Lender, and then such waiver or consent shall be
effective only in the specific instance and for the specific
purpose for which given. No notice or demand on the Guarantor in
any case shall entitle the Guarantor to any other or further notice
or demand in similar or other circumstances.
SECTION 11. No Reliance. The Guarantor acknowledges that
it has independently investigated the legal, economic, tax,
accounting and other consequences of the Loan and the transactions
contemplated by the Loan Documents and have not received or relied
in any way on any advice of the Lender or any of its Affiliates as
to such consequences.
SECTION 12. Governing Law. This Guaranty was negotiated in
the State of Ohio, accepted by the Lender in the State of Ohio, and
the proceeds of the Loan guaranteed hereby were or are to be
disbursed by Lender from the State of Ohio. The Guarantor and the
Lender agree that the State of Ohio has a substantial relationship
to the transaction evidenced hereby and agree that this Guaranty
and the rights and obligations of the parties hereunder shall be
governed by and construed in accordance with the laws of the State
of Ohio (without giving effect to principles of conflicts of law).
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SECTION 13. Severability. In the event any one or more of
the provisions contained in this Guaranty shall for any reason be
held to be invalid, illegal or unenforceable in any respect, such
provision shall be deemed replaced by the valid and enforceable
provision that is substantially most similar to such invalid or
unenforceable provision, but the remaining provisions shall not be
affected thereby.
SECTION 14. Waiver of Jury Trial; Consent to Venue. THE
GUARANTOR AND THE LENDER, AFTER CONSULTING OR HAVING HAD THE
OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN
ANY LITIGATION BASED UPON OR ARISING OUT OF THIS GUARANTY OR ANY
RELATED INSTRUMENT OR AGREEMENT, OR ANY OF THE TRANSACTIONS
CONTEMPLATED BY THIS GUARANTY, OR ANY COURSE OF CONDUCT, DEALING,
STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE GUARANTOR OR
THE LENDER. THE GUARANTOR AND THE LENDER SHALL NOT SEEK TO
CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY ACTION IN WHICH A
JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY
TRIAL CANNOT BE OR HAS NOT BEEN WAIVED UNLESS FAILURE TO SO
CONSOLIDATE WOULD RESULT IN A MANDATORY LOSS OF SUCH CLAIM. IN THE
EVENT OF A DISPUTE UNDER THIS GUARANTY, THE GUARANTOR AND THE
LENDER HEREBY AGREE THAT EXCLUSIVE JURISDICTION AND VENUE LIES IN
A COURT OF COMPETENT JURISDICTION IN FRANKLIN COUNTY, OHIO. THESE
PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT
OR RELINQUISHED BY THE GUARANTOR OR THE LENDER EXCEPT BY A WRITTEN
INSTRUMENT EXECUTED BY SAME.
SECTION 15. Gender and Number. Terms that imply gender and
number shall be construed to imply the relevant gender and number.
SECTION 16. Multiple Counterparts. This Guaranty may be
signed in multiple counterparts with the same effect as if the
signatures thereto were upon the same instrument.
SECTION 17. Intercreditor Agreement.
THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND ALL
RIGHTS AND REMEDIES OF LENDER WITH RESPECT TO THE LOAN, THE
OBLIGATIONS OR ANY COLLATERAL THEREFOR ARE EACH AND ALL SUBJECT TO
THE TERMS AND CONDITIONS OF THE INTERCREDITOR AGREEMENT.
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This Guaranty has been executed by the Guarantor effective as
of the date first written above.
GUARANTOR:
BROOKDALE LIVING COMMUNITIES, INC.,
a Delaware corporation
By:
Name: Darryl W. Copeland, Jr.
Title:Executive Vice President
LENDER:
BANC ONE CAPITAL PARTNERSHIP IV,
LTD., an Ohio limited liability
company
By: BOCP Holdings Corporation, an
Ohio corporation, its Manager
By:
Name: Michael S. Wood
Title:Authorized Signer
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ENVIRONMENTAL INDEMNITY AGREEMENT
THIS ENVIRONMENTAL INDEMNITY AGREEMENT (this "Agreement"), made as of
June 17, 1998, from BROOKDALE LIVING COMMUNITIES, INC., a Delaware corporation.
having an office at 77 West Wacker Drive, Suite 4400, Chicago, Illinois 60601,
Attention: Darryl W. Copeland, Telefax Number (312) 977-3699 (the "Guarantor")
to Banc One Capital Partners IV, Ltd., an Ohio limited liability company, having
an address at 150 East Gay Street, Columbus, Ohio 43215, Attention: John W.
Adams, Telefax Number (614) 217-0222 (together with its successors and assigns,
"Lender").
RECITALS
WHEREAS, pursuant to a Loan Agreement dated as of the date hereof
between AH Texas Subordinated, LLC, an Ohio limited liability company
("Borrower"), and Lender (as modified and supplemented and in effect from time
to time, the "Loan Agreement"), at the request of Borrower and Guarantor, Lender
has agreed to make a loan (the "Loan") to Borrower;
WHEREAS, AH Texas Owner Limited Partnership is an Ohio limited
partnership (the "Owner"), the sole partners of which are the Borrower and AH
Texas CGP, Inc., an Ohio corporation (the "General Partner"), which acts as the
sole general partner of the Owner;
WHEREAS, the Borrower is the sole shareholder of the General Partner;
WHEREAS, the Owner intends to develop a congregate housing facility
with an assisted living component for the elderly in Austin, Texas, which is
currently referred to as "The Heritage at Gaines Ranch" (the "Project");
WHEREAS, the Borrower estimates that the total cost of acquisition,
development and construction of the Project will be $31,097,670 (the "Estimated
Project Cost");
WHEREAS, the Borrower, on behalf of the Owner, has obtained a loan
from Nomura Asset Capital Corporation (the "Senior Lender") for the acquisition,
development and construction of the Project, in the amount of up to $24,250,000
(the "Senior Loan");
WHEREAS, the Lender has agreed to make the Loan to the Borrower to be
used as an equity contribution to the Owner, the proceeds of which will fund a
portion of the Estimated Project Cost which will not be funded by the Senior
Loan, upon the terms and conditions set forth in the Loan Agreement;
WHEREAS, Owner and BLC of Texas - II, L.P., a Delaware limited
partnership (the "Manager"), are entering into a certain management agreement
dated the date herewith and a certain development agreement dated the date
herewith (collectively the "Management Agreement"), pursuant to which Manager
shall manage, operate and develop the Property; and
WHEREAS, Lender is unwilling to make the Loan unless Guarantor
indemnifies Lender against certain liabilities arising under Environmental Laws
(as herein defined), relating to the property being financed in connection with
the Senior Loan, which property consists of the
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<PAGE>
fee simple interest in the land more particularly described in the documents
evidencing the Senior Loan and all buildings, structures and other improvements
now or hereafter situated on such land (the "Property").
NOW, THEREFORE, in consideration of the making of the Loan by Lender
and the covenants, agreements, representations and warranties set forth in this
Agreement, the parties hereby covenant, agree, represent and warrant as follows:
1. Defined Terms. Unless the context otherwise requires, capitalized
terms used but not otherwise defined herein but defined in the Loan Agreement
shall have the meanings provided therefore in the Loan Agreement, and the
following terms shall have the following meanings:
"Borrower" has the meaning provided in the Recitals to this Agreement.
"Environmental Claim" means any written request for information by a
Governmental Authority, or any written notice, notification, claim,
administrative, regulatory or judicial action, suit, judgment, demand or other
written communication by any Person or Governmental Authority requiring,
alleging or asserting liability with respect to Owner, Borrower, Manager or the
Property, whether for damages, contribution, indemnification, cost recovery,
compensation, injunctive relief, investigatory, response, remedial or cleanup
costs, damages to natural resources, personal injuries, fines or penalties
arising out of, based on or resulting from (i) the presence, Use, Release or
threatened Release into the environment of any Hazardous Substance in violation
of any Environmental Law originating at or from, or otherwise affecting, the
Property, (ii) any fact, circumstance, condition or occurrence forming the basis
of any violation, or alleged violation, of any Environmental Law by Owner,
Borrower, Manager or otherwise affecting the Property or (iii) any alleged
injury or threat of injury to health, safety or the environment by Owner,
Borrower, Manager or otherwise affecting the Property arising from actions which
are in violation of Environmental Laws.
"Environmental Laws" means any and all applicable federal, state,
local and foreign laws, rules, regulations or municipal ordinances each as
amended from time to time, and any Permits, approvals, licenses, registrations,
filings and authorizations, in each case as in effect as of the relevant date,
relating to the environment, health or safety, and pertaining to or imposing
liability or standards of conduct concerning environmental regulation,
contamination or clean-up, including the Comprehensive Environmental Response,
Compensation and Liability Act, the Resource Conservation and Recovery Act, the
Emergency Planning and Community Right-to-Know Act of 1986, the Hazardous
Substances Transportation Act, the Solid Waste Disposal Act, the Clean Water
Act, the Clean Air Act, the Toxic Substance Control Act, the Safe Drinking Water
Act, the Occupational Safety and Health Act, any state super-lien and
environmental clean-up statutes and all amendments to and regulations in respect
of the foregoing laws.
"Environmental Reports" means the environmental audit reports, with
respect to the Property, delivered to Lender prior to the date hereof and in
connection with the Loan, and any amendments or supplements thereto delivered to
Lender prior to the date hereof.
"Guarantor" has the meaning provided in the first paragraph of this
Agreement.
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<PAGE>
"Hazardous Substance" means, collectively, (i) any petroleum or
petroleum products or waste oils, explosives, radioactive materials, asbestos,
urea formaldehyde foam insulation, polychlorinated biphenyls ("PCBs"), lead in
drinking water, and lead based paint, the presence, generation, use,
transportation, storage or disposal of or exposure to which (x) is regulated or
could lead to liability under any Environmental Law or (y) is subject to notice
or reporting requirements under any Environmental Law, (ii) any chemicals or
other materials or substances which are now or hereafter become defined as or
included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous wastes," "restricted hazardous
wastes," "toxic substances," "toxic pollutants," "contaminants," "pollutants" or
words of similar import under any Environmental Law and (iii) any other chemical
or any other material or substance, exposure to which is now or hereafter
prohibited, limited or regulated under any Environmental Law.
"Lender" has the meaning provided in the first paragraph of this Agreement.
"Loan" has the meaning provided in the Recitals to this Agreement.
"Loan Agreement" has the meaning provided in the Recitals to this
Agreement.
"Owner" has the meaning provided in the Recitals to this Agreement.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, estate, trust, unincorporated association,
or any other entity, any federal, state, county or municipal government or any
bureau, department or agency thereof and any fiduciary acting in such capacity
on behalf of any of the foregoing.
"Release" means, with respect to any Hazardous Substances, any
release, threatened release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the indoor
or outdoor environment, including, without limitation, the movement of Hazardous
Substances through ambient air, soil, surface water, ground water, wetlands,
land or subsurface strata.
"Remedial Work" means any investigation, site monitoring,
containment, cleanup, removal, restoration or other work of any kind reasonably
necessary or required under an applicable Environmental Law.
"Use" means, with respect to any Hazardous Substance, the generation,
manufacture, processing, distribution, handling, use, treatment, recycling or
storage of such Hazardous Substance in violation of Environmental Laws or
transportation to or from the property of such Person of such Hazardous
Substance in violation of Environmental Laws.
2. Indemnification.
(a) Subject to the limitations set forth in Section 16 hereof,
Guarantor agrees to indemnify, reimburse, defend (with counsel satisfactory to
Lender in Lender's sole discretion), and hold harmless Lender for, from and
against all demands, claims, actions or causes of action, assessments, losses,
damages, liabilities, costs and expenses, including, without limitation,
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<PAGE>
interest, penalties, consequential damages, reasonable attorneys' fees,
reasonable disbursements and expenses, and reasonable consultants' fees,
disbursements and expenses, including costs of Remedial Work (collectively
"Losses"), asserted against, resulting to, imposed on, or incurred by Lender,
directly or indirectly in connection with any of the following:
i) events, circumstances, or conditions which are alleged to, or do, form
the basis for an Environmental Claim;
ii) the presence, Use or Release of Hazardous Substances at, on, in,
under or from the Property, which presence, use or release requires or
could reasonably require Remedial Work;
iii) any Environmental Claim against any Person whose liability for
such Environmental Claim Guarantor has or may have assumed or retained
either contractually or by operation of law; or
iv) any failure of Guarantor to fulfill each and every obligation
undertaken pursuant to this Agreement.
(b) The indemnity provided in this Agreement shall not be included in
any exculpation of Guarantor, Manager or Borrower from personal liability
provided in the Loan Agreement or in any of the other Loan Documents. Nothing in
this Agreement shall be deemed to deprive Lender of any rights or remedies
provided to it elsewhere in this Agreement or in the other Loan Documents or
otherwise available to it under law. Guarantor waives and releases Lender from
any rights or defenses Guarantor may have under common law or Environmental Laws
for liability arising from or resulting from the presence, Use or Release of
Hazardous Substances except to the extent directly caused by the gross
negligence, fraud or willful misconduct of Lender.
(c) With respect to those matters for which Guarantor has agreed to
indemnify Lender hereunder, and to the maximum extent permitted by applicable
law, Guarantor waives and releases Lender from any rights or defenses Guarantor
may have under common law or Environmental Laws for liability arising from or
resulting from the presence, Use or Release of Hazardous Substances except to
the extent directly caused by the fraud, gross negligence or willful misconduct
of Lender.
3. Payment. All payments due to Lender under this Agreement shall be
payable to Lender within ten (10) days after written demand therefor, and shall
bear interest at the Default Rate from the date such payment is due until the
date of payment.
4. Governing Law; Waiver of Jury Trial; Consent to Venue.
(a) The parties agree that the State of Ohio has a substantial
relationship to the parties and to the underlying transaction embodied hereby,
and in all respects, including, without limitation, matters of construction,
validity and performance, this Agreement and the obligations arising hereunder
shall be governed by, and construed in accordance with, the laws of the State of
Ohio applicable to contracts made and performed in such State and any applicable
law of the
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<PAGE>
United States of America; subject, however, as to performance, to the
Environmental Laws governing the Project. To the fullest extent permitted by
law, Guarantor hereby unconditionally and irrevocably waives any claim to assert
that the law of any other jurisdiction governs this Agreement, and this
Agreement shall be governed by and construed in accordance with the laws of the
State of Ohio; subject, however, as to performance, to the Environmental Laws
governing the Project.
(b) THE GUARANTOR AND THE LENDER, AFTER CONSULTING OR HAVING HAD THE
OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY RELATED INSTRUMENT OR AGREEMENT, OR ANY OF
THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, OR ANY COURSE OF CONDUCT,
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE GUARANTOR OR THE
LENDER. THE GUARANTOR AND THE LENDER SHALL NOT SEEK TO CONSOLIDATE, BY
COUNTERCLAIM OR OTHERWISE, ANY ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH
ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED UNLESS
THE FAILURE TO SO CONSOLIDATE WOULD RESULT IN A MANDATORY LOSS OF SUCH CLAIM. IN
THE EVENT OF A DISPUTE UNDER THIS AGREEMENT, THE GUARANTOR AND THE LENDER HEREBY
AGREE THAT EXCLUSIVE JURISDICTION AND VENUE LIES IN A COURT OF COMPETENT
JURISDICTION IN FRANKLIN COUNTY OHIO. THESE PROVISIONS SHALL NOT BE DEEMED TO
HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY THE GUARANTOR OR THE LENDER
EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY SAME.
5. Modification, Waiver in Writing. No modification, amendment,
extension, discharge, termination or waiver of any provision of this Agreement
or consent to any departure by Guarantor therefrom, shall in any event be
effective unless the same shall be in a writing signed by the party against whom
enforcement is sought, and then such waiver or consent shall be effective only
in the specific instance, and for the purpose, for which given. Except as
otherwise expressly provided herein, no notice to or demand on Guarantor shall
entitle Guarantor to any other or future notice or demand in the same, similar
or other circumstances.
6. Delay Not a Waiver. Neither any failure nor any delay on the part
of Lender in insisting upon strict performance of any term, condition, covenant
or agreement or exercising any right, power, remedy or privilege hereunder,
shall operate as or constitute a waiver thereof, nor shall a single or partial
exercise thereof preclude any other future exercise, or the exercise of any
other right, power, remedy or privilege. In particular, and not by way of
limitation, by accepting payment after the due date of any amount payable under
this Agreement, Lender shall not be deemed to have waived any right either to
require prompt payment when due of all other amounts due under this Agreement,
or to declare a default for failure to effect prompt payment of any such other
amount.
7. Notices. All notices, consents, approvals and requests required or
permitted hereunder shall be given in writing and shall be effective for all
purposes if hand delivered or sent by (a) hand delivery, with proof of attempted
delivery, (b) certified or registered United States
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<PAGE>
mail, postage prepaid, (c) expedited prepaid delivery service, either commercial
or United States Postal Service, with proof of attempted delivery, or (d) by
telecopier (with answerback acknowledged) provided that such telecopied notice
must also be delivered by one of the means set forth in (a), (b) or (c) above,
addressed if to Lender at its address set forth on the first page hereof, and if
to Guarantor at its designated address set forth on the first page hereof, or at
such other address and Person as shall be designated from time to time by any
party hereto, as the case may be, in a written notice to the other parties
hereto in the manner provided for in this Section 7. A copy of all notices,
consents, approvals and requests directed to Lender shall be delivered
concurrently to each of the following: Banc One Capital Markets, Inc., 150 East
Gay Street, 24th Floor, Columbus, Ohio 43215, Attention: Legal Department,
Telefax Number (614) 217-1217. A copy of all notices, consents, approvals and
requests directed to Guarantor shall be delivered concurrently to each of the
following: Brookdale Living Communities, Inc., 77 West Wacker Drive, Suite 4400,
Chicago, Illinois 60601, Attention: Darryl W. Copeland, Jr., Telefax Number
(312) 977-3699; Brookdale Living Communities, Inc., 77 West Wacker Drive, Suite
4400, Chicago, Illinois 60601, Attention: Robert J. Rudnik, Esquire, Telefax
Number (312) 977-3769; Brookdale Living Communities, Inc., 77 West Wacker Drive,
Suite 4400, Chicago, Illinois 60601, Attention: Scott E. Jordan, Esquire,
Telefax Number (312) 977-3769; and Wayne D. Boberg, Esq., Winston & Strawn, 35
West Wacker Drive, Chicago, Illinois 60602, Telefax Number (312) 558-5700. A
notice shall be deemed to have been given: (a) in the case of hand delivery, at
the time of delivery; (b) in the case of registered or certified mail, when
delivered or the first attempted delivery on a Business Day; (c) in the case of
expedited prepaid delivery upon the first attempted delivery on a Business Day;
or (d) in the case of telecopier, upon receipt of answerback confirmation
received prior to 5:00 p.m. local time on a Business Day or if confirmation
received thereafter on the next succeeding Business Day, provided that such
telecopied notice was also delivered as required in this Section 7. A party
receiving a notice which does not comply with the technical requirements for
notice under this Section 7 may elect to waive any deficiencies and treat the
notice as having been properly given.
8. Assignment. Lender shall have the right to assign this Agreement
and the obligations hereunder to any Person who is from time to time the owner
of the Loan, but not otherwise. All references to "Lender" hereunder shall be
deemed to include the successors and assigns of Lender.
9. Severability. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
10. Heading and Recitals. The information set forth in the heading
and recitals hereof are hereby incorporated herein as a part of this Agreement
with the same effect as if set forth in the body hereof.
11. Counterparts. This 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 together constitute one and the same instrument.
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<PAGE>
12. Estoppel Certificates. Guarantor and Lender each hereby agree at
any time and from time to time upon not less than fifteen (15) days prior
written notice by Guarantor or Lender to execute, acknowledge and deliver to the
party specified in such notice, a statement, in writing, certifying that this
Agreement is unmodified and in full force and effect (or if there have been
modifications, that the same, as modified, is in full force and effect and
stating the modifications hereto), and stating whether or not, to the best
knowledge of such certifying party, there exists any matter giving rise to a
claim under Section 2, and, if so, specifying each such matter; provided,
however, that it shall be a condition precedent to Lender's obligation to
deliver the statement pursuant to this Section 12, that Lender shall have
received, together with Guarantor's request for such statement, an officer's
certificate signed by an authorized officer of Guarantor stating that to the
best of Guarantor's knowledge, no matter which could give rise to a claim under
Section 2 exists as of the date of such certificate (or specifying each such
matter).
13. Survival. Subject to Section 16 hereof, this Agreement shall
survive (in perpetuity) the closing and disbursement of the funds evidenced by
the Note, payment of the Note, and any foreclosure on, or retention of, the
Membership Interests. Notwithstanding the foregoing, Guarantor shall not
indemnify Lender with respect to any Losses incurred in connection with, or as a
direct result of, any or all of the matters described above in Section 2(a)(i)
through 2(a)(iii) to the extent that Guarantor can establish directly and solely
that such Losses result from Hazardous Substances being placed on, above or
under the Property (a) by the affirmative act or gross negligence of Lender or
any employees, agents or bailees of Lender; or (b) subsequent to Lender
foreclosing on, or taking ownership of, the Membership Interests. Guarantor
agrees that this Guaranty shall continue to be effective or shall be reinstated
as the case may be, if at any time any payment is made by Borrower or Guarantor
to Lender and such payment is rescinded or must otherwise be returned by Lender
(as determined by Lender in its sole and absolute discretion) upon insolvency,
bankruptcy, liquidation, reorganization, readjustment, composition, dissolution,
receivership, conservatorship, winding up or other similar proceeding involving
or affecting Borrower or Guarantor, all as though such payment had not been
made.
14. Time of the Essence. Time is of the essence with respect to each
and every covenant, agreement and obligation of Guarantor under this Agreement.
15. Liability. The liability of Guarantor under this Agreement shall
in no way be limited or impaired by (a) any amendment or modification of the
Loan Documents made in accordance therewith, (b) any extensions of time for
performance required by any of the Loan Documents, or (c) the release or
substitution in whole or in part, of any security for the Notes or other
evidence of debt issued pursuant to the Loan Documents; and in any of such
cases, whether with or without notice to Guarantor and with or without
consideration.
16. Termination. Notwithstanding anything to the contrary contained
herein, upon the sale of the Property by Owner to an unrelated third party
purchaser, this Guaranty and the indemnity obligations provided hereunder shall
terminate, except to the extent any such obligations exist and remain unpaid or
otherwise unsatisfied; provided, however, that if subsequent to any such sale,
Losses are incurred as set forth in Section 2(a) and it is proven that such
Losses occurred as a result of actions or omissions of Owner, Borrower, Manager,
or Guarantor, then the indemnification provided herein shall continue to be
effective or shall be reinstated, as the case may be.
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<PAGE>
17. INTERCREDITOR AGREEMENT. THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER AND ALL RIGHTS AND REMEDIES OF LENDER WITH RESPECT TO THE LOAN
ARE EACH AND ALL SUBJECT TO THE TERMS AND CONDITIONS OF THE INTERCREDITOR
AGREEMENT.
[Signatures on the following page]
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<PAGE>
IN WITNESS WHEREOF, the Guarantor has caused this Environmental
Guaranty Indemnity Agreement to be duly executed by its duly authorized
representative, all as of the day and year first above written.
GUARANTOR:
BROOKDALE LIVING COMMUNITIES, INC.,
a Delaware corporation
By: ________________________________
Name: Darryl W. Copeland, Jr.
Title: Executive Vice President
AGREED AND ACKNOWLEDGED
ONLY FOR SECTION 4(b)
BANC ONE CAPITAL PARTNERS IV, LTD.
By: BOCP Holdings Corporation, its Manager
By: ______________________________________
Name: Michael S. Wood
Title: Authorized Signer
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<PAGE>
ENVIRONMENTAL INDEMNITY AGREEMENT
THIS ENVIRONMENTAL INDEMNITY AGREEMENT (this "Agreement"),
made as of June ____, 1998, from BROOKDALE LIVING COMMUNITIES, INC., a Delaware
corporation having an office at 77 West Wacker Drive, Suite 4400, Chicago,
Illinois 60601, Attention: Darryl W. Copeland, Telefax Number (312) 977-3699
(the "Guarantor") to the Indemnified Parties (as hereinafter defined) including
AH Texas Owner Limited Partnership, an Ohio limited partnership having an
address at 320 King of Prussia Road, Suite 160, Radnor, Pennsylvania 19087,
Attention: David B. Fenkell, Telefax Number (610) 902-0777 (together with its
successors and assigns, "Owner").
RECITALS
WHEREAS, the sole partners of Owner are AH Texas Subordinated,
LLC, an Ohio limited liability company which itself is the sole limited partner
of Owner (the "Limited Partner"), and AH Texas CGP, Inc., an Ohio corporation
(the "General Partner"), which acts as the sole general partner of Owner;
WHEREAS, the Limited Partner is the sole shareholder of the General
Partner;
WHEREAS, Owner intends to develop a congregate housing
facility with an assisted living component for the elderly in Austin, Texas,
which is currently referred to as "The Heritage at Gaines Ranch" (the
"Project");
WHEREAS, Owner has obtained a loan from Nomura Asset Capital
Corporation (the "Senior Lender") for the acquisition, development and
construction of the Project, in the amount of up to $24,250,000 (the "Senior
Loan");
WHEREAS, Owner and BLC of Texas-IL, L.P., a Delaware limited
partnership and an affiliate of Guarantor (the "Manager"), are entering into a
certain management agreement dated the date herewith and a certain development
agreement dated the date herewith (collectively the "Management Agreement"),
pursuant to which Manager shall manage, operate and develop the Property;
WHEREAS, Owner purchased the Project from the Manager; and
WHEREAS, Owner is unwilling to enter into the Management
Agreement unless Guarantor indemnifies Owner against certain liabilities arising
under Environmental Laws (as herein defined), relating to the property where the
Project is located, which property consists of the fee simple interest in the
land (being more particularly described in the documents evidencing the Senior
Loan) and all buildings, structures and other improvements now or hereafter
situated on such land (the "Property").
NOW, THEREFORE, in consideration of entering into the
Management Agreement and the covenants, agreements, representations and
warranties set forth in this Agreement, the parties hereby covenant, agree,
represent and warrant as follows:
1. Defined Terms. Unless the context otherwise requires,
capitalized terms used but not otherwise defined herein but defined in the Loan
Agreement dated as of the date hereof among Owner, Manager and Senior Lender
(the "Loan Agreement") shall have the meanings provided therefore in the Loan
Agreement, and the following terms shall have the following meanings:
"Environmental Claim" means any written request for
information by a Governmental Authority, or any written notice, notification,
claim, administrative, regulatory or judicial action, suit, judgment, demand or
other written communication by any Person or Governmental Authority requiring,
alleging or asserting liability with respect to any of the Indemnified Parties
or the Property, whether for damages, contribution, indemnification, cost
recovery, compensation, injunctive relief, investigatory, response, remedial or
cleanup costs, damages to natural resources, personal injuries, fines or
penalties arising out of, based on or resulting from (i) the presence, Use,
Release or threatened Release into the environment of any Hazardous Substance in
violation of any Environmental Law originating at or from, or otherwise
affecting the Property, (ii) any fact, circumstance, condition or occurrence
forming the basis of any violation, or alleged violation, of any Environmental
Law by any of the Indemnified Parties or otherwise affecting the Property or
(iii) any alleged injury or threat of injury to health, safety or the
environment by any of the Indemnified Parties or otherwise affecting the
Property arising from actions which are in violation of Environmental Laws.
"Environmental Laws" means any and all applicable federal,
state, local and foreign laws, rules, regulations or municipal ordinances each
as amended from time to time, and any Permits, approvals, licenses,
registrations, filings and authorizations, in each case as in effect as of the
relevant date, relating to the environment, health or safety, and pertaining to
or imposing liability or standards of conduct concerning environmental
regulation, contamination or clean-up, including the Comprehensive Environmental
Response, Compensation and Liability Act, the Resource Conservation and Recovery
Act, the Emergency Planning and Community Right-to-Know Act of 1986, the
Hazardous Substances Transportation Act, the Solid Waste Disposal Act, the Clean
Water Act, the Clean Air Act, the Toxic Substance Control Act, the Safe Drinking
Water Act, the Occupational Safety and Health Act, any state super-lien and
environmental clean-up statutes and all amendments to and regulations in respect
of the foregoing laws.
"General Partner" has the meaning provided in the Recitals to this
Agreement.
"Guarantor" has the meaning provided in the first paragraph of this
Agreement.
"Hazardous Substance" means, collectively, (i) any petroleum
or petroleum products or waste oils, explosives, radioactive materials,
asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls ("PCBs"),
lead in drinking water, and lead based paint, the presence, generation, use,
transportation, storage or disposal of or exposure to which (x) is regulated or
could lead to liability under any Environmental Law or (y) is subject to notice
or reporting requirements under any Environmental Law, (ii) any chemicals or
other materials or substances which are now or hereafter become defined as or
included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous wastes," "restricted hazardous
wastes," "toxic substances," "toxic pollutants," "contaminants," "pollutants" or
words of similar import under any Environmental Law and (iii) any other chemical
or any other material or substance, exposure to which is now or hereafter
prohibited, limited or regulated under any Environmental Law.
"Indemnified Parties" is defined in Section 2(a) of this Agreement.
"Owner" has the meaning provided in the Recitals to this Agreement.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, estate, trust, unincorporated association,
or any other entity, any federal, state, county or municipal government or any
bureau, department or agency thereof and any fiduciary acting in such capacity
on behalf of any of the foregoing.
"Release" means, with respect to any Hazardous Substances,
any release, threatened release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the indoor
or outdoor environment, including, without limitation, the movement of Hazardous
Substances through ambient air, soil, surface water, ground water, wetlands,
land or subsurface strata.
"Remedial Work" means any investigation, site monitoring,
containment, cleanup, removal, restoration or other work of any kind reasonably
necessary or required under an applicable Environmental Law,
"Use" means, with respect to any Hazardous Substance, the
generation, manufacture, processing, distribution, handling, use, treatment,
recycling or storage of such Hazardous Substance in violation of Environmental
Laws or transportation to or from the property of such Person of such Hazardous
Substance in violation of Environmental Laws.
2. Indemnification.
(a) Guarantor agrees to indemnify, reimburse, defend and hold
harmless Owner, Limited Partner, General Partner and their directors, officers,
employees, partners, members, managers, shareholders and agents (individually,
an "Indemnified Party" and collectively, the "Indemnified Parties") for, from
and against all demands, claims, actions or causes of action, assessments,
losses, damages, liabilities, costs and expenses, including, without limitation,
interest, penalties, consequential damages, reasonable attorneys' fees,
reasonable disbursements and expenses, and reasonable consultants' fees,
disbursements and expenses, including costs of Remedial Work (collectively
"Losses"), asserted against, resulting to, imposed on, or incurred by any of
them, directly or indirectly, in connection with any of the following:
i) events, circumstances, or conditions which are alleged to, or do, form
the basis for an Environmental Claim;
ii) the presence, Use or Release of Hazardous Substances at,
on, in, under or from the Property, which presence, use or release
requires or could reasonably require Remedial Work;
iii) any Environmental Claim against any Person whose
liability for such Environmental Claim Guarantor has or may have
assumed or retained either contractually or by operation of law; or
iv) any failure of Guarantor to fulfill each and every
obligation undertaken pursuant to this Agreement.
It is specifically acknowledged and agreed that David B. Fenkell is an
Indemnified Party.
(b) Nothing in this Agreement shall be deemed to deprive an
Indemnified Party of any rights or remedies provided to such Indemnified Party
elsewhere in this Agreement or otherwise available to such Indemnified Party
under law. Guarantor waives and releases each Indemnified Party from any rights
or defenses Guarantor may have under common law or Environmental Laws for
liability arising from or resulting from the presence, Use or Release of
Hazardous Substances except to the extent directly caused by the gross
negligence, fraud or willful misconduct of such Indemnified Party.
3. Payment. All payments due to an Indemnified Party under
this Agreement shall be payable to such Indemnified Party within ten (10) days
after written demand therefor, and shall bear interest at ten percent (10%) per
annum from the date such payment is due until the date of payment.
4. Governing Law; Waiver of Jury Trial; Consent to Venue.
(a) The parties agree that the State of Ohio has a substantial
relationship to the parties and to the underlying transaction embodied hereby,
and in all respects, including, without limitation, matters of construction,
validity and performance, this Agreement and the obligations arising hereunder
shall be governed by, and construed in accordance with, the laws of the State of
Ohio applicable to contracts made and performed in such State and any applicable
law of the United States of America subject, however, as to performance, to the
Environmental Laws governing the Project. To the fullest extent permitted by
law, Guarantor hereby unconditionally and irrevocably waives any claim to assert
that the law of any other jurisdiction governs this Agreement, and this
Agreement shall be governed by and construed in accordance with the laws of the
State of Ohio subject, however, as to performance, to the Environmental Laws
governing the Project.
(b) THE GUARANTOR, AFTER CONSULTING OR HAVING HAD THE
OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY RELATED INSTRUMENT OR AGREEMENT, OR ANY OF
THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, OR ANY COURSE OF CONDUCT,
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE GUARANTOR. THE
GUARANTOR SHALL NOT SEEK TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY
ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A
JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED UNLESS THE FAILURE TO SO CONSOLIDATE
WOULD RESULT IN A MANDATORY LOSS OF SUCH CLAIM. IN THE EVENT OF A DISPUTE UNDER
THIS AGREEMENT, THE GUARANTOR HEREBY AGREES THAT EXCLUSIVE JURISDICTION AND
VENUE LIES IN A COURT OF COMPETENT JURISDICTION IN FRANKLIN COUNTY OHIO.
5. Modification, Waiver in Writing. No modification,
amendment, extension. discharge, termination or waiver of any provision of this
Agreement or consent to any departure by Guarantor therefrom, shall in any event
be effective unless the same shall be in a writing signed by the party against
whom enforcement is sought, and then such waiver or consent shall be effective
only in the specific instance, and for the purpose, for which given. Except as
otherwise expressly provided herein, no notice to or demand on Guarantor shall
entitle Guarantor to any other or future notice or demand in the same, similar
or other circumstances.
6. Delay Not a Waiver. Neither any failure nor any delay on
the part of any Indemnified Party in insisting upon strict performance of any
term, condition, covenant or agreement or exercising any right, power, remedy or
privilege hereunder, shall operate as or constitute a waiver thereof, nor shall
a single or partial exercise thereof preclude any other future exercise, or the
exercise of any other right, power, remedy or privilege. In particular, and not
by way of limitation, by accepting payment after the due date of any amount
payable under this Agreement, an Indemnified Party shall not be deemed to have
waived any right either to require prompt payment when due of all other amounts
due under this Agreement, or to declare a default for failure to effect prompt
payment of any such other amount.
7. Notices. All notices, consents, approvals and requests
required or permitted hereunder shall be given in writing and shall be effective
for all purposes if hand delivered or sent by (a) hand delivery, with proof of
attempted delivery, (b) certified or registered United States mail, postage
prepaid, (c) expedited prepaid delivery service, either commercial or United
States Postal Service, with proof of attempted delivery, or (d) by telecopier
(with answerback acknowledged) provided that such telecopied notice must also be
delivered by one of the means set forth in (a), (b) or (c) above, addressed if
to any Indemnified Party at the address of Owner set forth on the first page
hereof, and if to Guarantor at its designated address set forth on the first
page hereof, or at such other address and Person as shall be designated from
time to time by any party hereto, as the case may be, in a written notice to the
other parties hereto in the manner provided for in this Section 7. A copy of all
notices, consents, approvals and requests directed to Owner shall be delivered
concurrently to the following: Squire, Sanders & Dempsey L.L.P., 41 South High
Street, Suite 1300, Columbus, Ohio 43215, Attention: Scott B. West, Esq.,
Telefax Number (614) 365-2499. A copy of all notices, consents, approvals and
requests directed to Guarantor shall be delivered concurrently to each of the
following: Brookdale Living Communities, Inc., 77 West Wacker Drive, Suite 4400,
Chicago, Illinois 60601, Attention: Darryl W. Copeland, Jr., Telefax Number
(312) 977-3699; Brookdale Living Communities, Inc., 77 West Wacker Drive, Suite
4400, Chicago, Illinois 60601, Attention: Robert J. Rudnik, Esquire, Telefax
Number (312) 977-3769; Brookdale Living Communities, Inc., 77 West Wacker Drive,
Suite 4400, Chicago, Illinois 60601, Attention: Scott E. Jordan, Esquire,
Telefax Number (312) 977-3769; and Wayne D. Boberg, Esq., Winston & Strawn, 35
West Wacker Drive, Chicago, Illinois 60602, Telefax Number (312) 558-5700. A
notice shall be deemed to have been given: (a) in the case of hand delivery, at
the time of delivery; (b) in the case of registered or certified mail, when
delivered or the first attempted delivery on a Business Day; (c) in the case of
expedited prepaid delivery upon the first attempted delivery on a Business Day;
or (d) in the case of telecopier, upon receipt of answerback confirmation
received prior to 5:00 p.m. local time on a Business Day or if confirmation
received thereafter on the next succeeding Business Day, provided that such
telecopied notice was also delivered as required in this Section 7. A party
receiving a notice which does not comply with the technical requirements for
notice under this Section 7 may elect to waive any deficiencies and treat the
notice as having been properly given.
8. Assignment. Guarantor shall not shall have the right to
assign this Agreement and the obligations hereunder to any Person without the
consent of David B. Fenkell. All references to "Indemnified Parties" hereunder
shall be deemed to include the heirs, successors and assigns of the Indemnified
Parties.
9. Severability. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
10. Heading and Recitals. The information set forth in the
heading and recitals hereof are hereby incorporated herein as a part of this
Agreement with the same effect as if set forth in the body hereof.
11. Counterparts. This 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 together constitute one and the same
instrument.
12. Intentionally Omitted.
13. Survival. This Agreement shall survive in perpetuity.
Notwithstanding the foregoing, Guarantor shall not indemnify any Indemnified
Party with respect to any Losses incurred in connection with, or as a direct
result of, any or all of the matters described above in Section 2(a)(i) through
2(a)(iii) to the extent that Guarantor can establish directly and solely that
such Losses result from Hazardous Substances being placed on, above or under the
Property by the affirmative act or gross negligence of such Indemnified Party.
Guarantor agrees that this Guaranty shall continue to be effective or shall be
reinstated as the case may be, if at any time any payment is made by Guarantor
to any Indemnified Party and such payment is rescinded or must otherwise be
returned by such Indemnified Party upon insolvency, bankruptcy, liquidation,
reorganization, readjustment, composition, dissolution, receivership,
conservatorship, winding up or other similar proceeding involving or affecting
Guarantor, all as though such payment had not been made.
14. Time of the Essence. Time is of the essence with respect
to each and every covenant, agreement and obligation of Guarantor under this
Agreement.
15. Termination. Notwithstanding anything to the contrary
contained herein, this Guaranty and the indemnity obligations provided hereunder
shall terminate on the date upon which Manager or Guarantor (or their
affiliates) no longer has an interest in the Property, whether as manager,
developer, lessee, lessor, owner or otherwise; provided, however, that the
indemnification provided herein shall continue to be effective or shall be
reinstated, as the case may be, to the extent that (a) any such obligations
exist and remain unpaid or otherwise unsatisfied, (b) such Losses are incurred
by David B. Fenkell, Alliance Holdings, Inc. or any of its directors, officers,
employees, shareholders and agents, or (c) if subsequent to any such date,
Losses are incurred as set forth in Section 2(a) and such Losses were the result
of events, circumstances or conditions which occurred prior to or during the
period when Manager (or its affiliates) had an interest in the Property.
16. Intentionally Omitted.
17. INTERCREDITOR AGREEMENT. THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER ARE ALL SUBJECT TO THE TERMS AND CONDITIONS OF THE
INTERCREDITOR AGREEMENT.
IN WITNESS WHEREOF, the Guarantor has caused this
Environmental Indemnity Agreement to be duly executed by its duly authorized
representative, all as of the day and year first above written.
GUARANTOR:
BROOKDALE LIVING COMMUNITIES, INC.,
a Delaware corporation
By:
Name: Darryl W. Copeland, Jr.
Title: Executive Vice President
CONDITIONAL INVESTMENT AGREEMENT
This CONDITIONAL INVESTMENT AGREEMENT (this "Agreement") is entered into
effective as of June 17, 1998 by and between BROOKDALE LIVING COMMUNITIES, INC.,
a Delaware corporation ("Brookdale") and BANC ONE CAPITAL FUNDING CORPORATION,
an Ohio corporation ("BOCFC").
STATEMENT OF AGREEMENT
In consideration of the premises and of the mutual covenants contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. DEFINITIONS
As used herein, the following terms have the following meanings:
"Business Day" means any day which is not a Saturday or Sunday or a day on
which the principal office of BOCFC is authorized or required by law to close or
a day on which banks in Chicago, Illinois are authorized or required by law to
close. Any payment due hereunder on a day that is not a Business Day shall be
due and payable on the next succeeding Business Day.
"Effective Date" means June 17, 1998 which is the date on which the
Initial Invested Moneys are transferred to BOCFC's account as provided in
Section 2.1 hereof.
"Initial Invested Moneys" means $3,815,677.
"Invested Moneys" means the Initial Invested Moneys delivered to BOCFC by
Brookdale pursuant to Section 2.1 less any amounts returned to Brookdale by
BOCFC hereunder.
"Redemption Date" means the date of a redemption of this Agreement and the
withdrawal by Brookdale of the Invested Moneys in accordance with the
requirements of Section 2.3.
"Stated Rate of Earnings" equals 9% per annum on the basis of a 365 or 366
day year, as the case may be.
"17.11% IRR" shall mean an internal rate of return of 17.11% per annum
compounded monthly, and computed using the methodology described in Schedule 1
attached hereto and incorporated herein by reference.
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2. INVESTMENT OF FUNDS.
2.1 Delivery of Funds.
(a) On the Effective Date, Brookdale shall deliver the Initial
Invested Moneys to BOCFC for the credit of Brookdale's account, and BOCFC shall
accept the Initial Invested Moneys from Bookdale.
(b) Unless otherwise agreed by BOCFC, all amounts delivered to BOCFC
for investment hereunder shall be delivered by wire transfer of same day funds
to an account specified by BOCFC.
2.2. Interest. Interest on the outstanding balance of the Invested Moneys
shall accrue at the Stated Rate of Earnings from and including the Effective
Date to but excluding the Redemption Date. No interest will accrue on or after
the Redemption Date. Accrued interest shall be payable to Brookdale in
accordance with, and subject to the conditions of, Section 2.3 hereof.
2.3. Redemption. Brookdale may redeem this Agreement and withdraw all, but
not less than all, Invested Moneys subject to the conditions set forth on
Exhibit 2.3 attached hereto and incorporated herein by this reference. Brookdale
shall deliver written notice to BOCFC at least one Business Day prior to the
proposed Redemption Date, specifying the Redemption Date and certifying that the
conditions set forth on Exhibit 2.3 have been satisfied. Upon the satisfaction
of the foregoing conditions, BOCFC shall pay to Brookdale an amount equal to the
aggregate of (i) the Invested Moneys, (ii) interest at the Stated Rate of
Earnings on the outstanding balance of the Invested Moneys in accordance with
the requirements of Section 2.2 hereof and (iii) such additional amount of
interest as may be necessary to produce a 17.11% IRR on the Initial Investment
Moneys. Upon redemption as hereinabove described, this Agreement, and all of the
obligations of the parties hereunder, shall terminate. In addition, this
Agreement, and all of the obligations of the parties hereunder, shall terminate
if Brookdale has not redeemed this Agreement and withdrawn the Invested Moneys
in accordance with the conditions of this Section 2.3 (including, without
limitation, Exhibit 2.3) on or before the date which is one hundred eighty (180)
days after the Option Termination Date, as such term is defined in that certain
Equity Option Agreement of even date herewith (the "Equity Option Agreement")
among AH Texas Investor, Inc. ("Corporate Investor"), AH Texas Subordinated, LLC
("Subordinated Borrower"), AH Texas CGP., Inc. ("General Partner"), AH Texas
Owner Limited Partnership ("Owner") and Brookdale.
3. DEFAULT
3.1 Events of Default. The following events shall constitute events of
default under this Agreement (each an "Event of Default"):
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(a) BOCFC fails to make the payments required by Section 2.3 hereof
when due pursuant to the provisions of this Agreement and such failure continues
for one Business Day thereafter.
(b) BOCFC commences a case in bankruptcy relating to it, is
adjudicated an insolvent or bankrupt, petitions or applies for the appointment
of any receiver or trustee for itself or any substantial part of its property or
initiates any proceeding relating to it seeking a court order for
reorganization, arrangement, conservation, liquidation or dissolution under
applicable bankruptcy or similar applicable laws; or, any such proceeding is
initiated against BOCFC and BOCFC indicates in writing its consent thereto or
such proceeding is not dismissed within 90 days, or such an order is entered
against BOCFC.
(c) Any representation or warranty of BOCFC under this Agreement is
determined to have been false or misleading when made.
3.2 Rights and Remedies upon an Event of Default. Upon the occurrence and
continuation of any Event of Default specified in Section 3.1 hereof, Brookdale
may:
(i) declare all Invested Moneys and accrued but unpaid interest
thereon to be due and payable immediately; and
(ii) exercise such rights for the enforcement of obligations
hereunder as are expressly provided in this Agreement or
are otherwise available under applicable law.
4. REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of BOCFC. BOCFC represents and warrants
to Brookdale that:
(a) it is duly authorized by its organizational documents and
applicable laws to enter into this Agreement and the transactions contemplated
hereby;
(b) this Agreement constitutes an unconditional general obligation of
BOCFC (except for the conditions to payment expressly set forth herein) which is
not subordinated to any other obligation of BOCFC and constitutes a legal, valid
and binding obligation of BOCFC enforceable against it in accordance with its
terms, subject to bankruptcy, insolvency and similar laws affecting creditors'
rights generally and subject, as to enforceability, to general principles of
equity; and
(c) the execution, delivery and performance of this Agreement by
BOCFC does not and will not conflict with any provision of the certificate of
incorporation or the by-laws of BOCFC nor result in a breach of, or constitute a
default under, any material agreement
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or other instrument to which BOCFC is a party or by which any of its property is
bound nor violate any judgment, order or decree applicable to BOCFC of any
governmental or regulatory body, administrative agency, court or arbitrator
having jurisdiction over BOCFC.
4.2 Representations and Warranties of Brookdale. Brookdale represents and
warrants to BOCFC that:
(a) it is duly authorized by its organizational documents and
applicable laws to enter into this Agreement and the transactions contemplated
hereby;
(b) this Agreement constitutes a legal, valid and binding obligation
of Brookdale enforceable against it in accordance with its terms, subject to
bankruptcy, insolvency and similar laws affecting creditors' rights generally
and subject, as to enforceability, to general principles of equity; and
(c) the execution, delivery and performance of this Agreement by
Brookdale does not and will not conflict with any provision of the certificate
of incorporation or the by-laws of Brookdale nor result in a breach of, or
constitute a default under, any material agreement or other instrument to which
Brookdale is a party or by which any of its property is bound nor violate any
judgment, order or decree applicable to Brookdale of any governmental or
regulatory body, administrative agency, court or arbitrator having jurisdiction
over Brookdale.
5. ROLE OF BOCFC
(a) It is expressly understood and agreed that for all purposes of
this Agreement and the transactions contemplated hereby, BOCFC has acted solely
as independent contractor and has not acted as a financial or investment
adviser, fiduciary or agent of or to Brookdale or any other person.
(b) Brookdale acknowledges that it has consulted with its own legal,
tax and investment advisors regarding its decision to enter into this Agreement.
6. MISCELLANEOUS
6.1. Amendment. None of the terms or provisions of this Agreement may be
modified or amended, except in writing duly signed by BOCFC and Brookdale.
6.2 Survival. All warranties and representations made by Brookdale or
BOCFC in this Agreement or in any of the instruments or documents delivered
pursuant to this Agreement regardless of any investigation made shall be
considered to have been relied upon by the other party hereto and shall survive
the delivery of any instruments or documents.
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6.3. Successors and Assigns. This Agreement and all obligations and rights
arising hereunder shall inure to the benefit of and be binding upon the parties
hereto and their respective successors, assigns and beneficiaries.
Notwithstanding the foregoing, this Agreement, and the obligations and rights
arising out of this Agreement or any part hereof or interest herein, shall not
be sold, pledged or assigned or otherwise transferred by Brookdale or BOCFC
without the prior written consent of the other party hereto and any such
attempted sale, pledge, assignment or transfer shall be void ab initio;
provided, however, that BOCFC may transfer this Agreement or any of its interest
or obligations hereunder to any subsidiary or affiliate of BOCFC if from and
after such transfer the obligations of the transferee hereunder shall be
guaranteed by BOCFC. Anything herein to the contrary notwithstanding, the
parties acknowledge and agree that Brookdale may pledge its interest in this
Agreement to Banc One Capital Partners IV, Ltd. ("BOCP IV") pursuant to a
certain Security Agreement - Pledge and Assignment of Investment Agreement of
even date herewith.
6.4 Severability of Provisions. If any one or more of the provisions
contained in this Agreement is declared invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby.
6.5 Counterparts. This Agreement may be executed in several counterparts
and, as so executed, shall constitute one agreement binding upon the parties
hereto.
6.6. Integration of Terms. This Agreement contains the entire agreement
between the parties relating to the subject matter hereof and supersedes all
oral statements and prior writings with respect thereto.
6.7 Interpretation. The headings of the articles and sections hereof are
for convenience of reference only and shall not affect the meaning or
construction of any provision hereof.
6.8. Notices. All notices, requests and demands to or upon the parties
hereto to be effective shall be in writing or by facsimile transmissions and,
unless otherwise expressly provided herein, shall be deemed to have been duly
given or made when delivered by hand or one Business Day following delivery to
an overnight delivery service guaranteeing next business day delivery, delivery
charge prepaid or, in the case of facsimile transmission, when sent (only if
sent on a Business Day) receipt by addressee acknowledged, addressed as follows
in the case of BOCFC and Brookdale or to such other address as may be hereafter
notified by the parties hereto:
Brookdale: Brookdale Living Communities, Inc.
77 West Wacker Drive, Suite 4800
Chicago, Illinois 60601
Attn:Darryl W. Copeland, Jr.
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Robert J. Rudnik, Esq.
Fax No. (312) 977-3699
with a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attention: Wayne D. Boberg, Esq.
Fax No. (312) 558-5700
BOCFC: Banc One Capital Funding Corporation
150 East Gay Street, 24th Floor
Columbus, Ohio 43215
Attention: John W. Adams
Fax No. (614) 217-0222
with a copy to:
Banc One Capital Markets, Inc.
150 East Gay Street, 24th Floor
Columbus, Ohio 43215
Attention: Legal Department
Fax No. (614) 217-1217
6.9 Applicable Law. BOCFC and Brookdale agree that the State of Ohio has a
substantial relationship to the transaction evidenced hereby and agree that this
Agreement and the rights and obligations of the parties hereunder shall be
governed by and construed in accordance with the laws of the State of Ohio
(without giving effect to the principles of conflicts of law).
6.10 Waiver of Jury Trial; Consent to Venue. BOCFC and Brookdale, after
consulting or having had the opportunity to consult with counsel, knowingly,
voluntarily and intentionally waive any right any of them may have to a trial by
jury in any litigation based upon or arising out of this Agreement, or any of
the transactions contemplated by this Agreement, or any course of conduct,
dealing, statements (whether oral or written) or actions of either of them in
connection with this Agreement. Neither BOCFC nor Brookdale shall seek to
consolidate, by counterclaim or otherwise, any action in which a jury trial has
been waived with any other action in which a jury trial cannot be or has not
been waived unless failure to so consolidate would result in a loss of such
claim. In the event of a dispute under this Agreement, the parties hereby agree
that jurisdiction and venue lies in a court of competent jurisdiction in
Franklin County, Ohio. These provisions shall not be deemed to have been
modified in any respect or
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relinquished by either BOCFC or Brookdale except by a written instrument
executed by each of them.
6.11 Payment in Full of Interim Conditional Investment Agreement. BOCFC
and Brookdale are parties to a certain Interim Conditional Investment Agreement
(the "Interim Agreement"). BOCFC and Brookdale acknowledge and agree that all
amounts owing by BOCFC to Brookdale pursuant to the Interim Agreement have been
paid in full and the Interim Agreement has been terminated effective as of the
Effective Date.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of June ___, 1998.
BROOKDALE LIVING COMMUNITIES, INC.,
a Delaware corporation
By:______________________________________
Darryl W. Copeland, Jr.
Title: Executive Vice President
BANC ONE CAPITAL FUNDING
CORPORATION,
an Ohio corporation
By:______________________________________
John W. Adams
Title: Director
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Exhibit 2.3
Conditions to Redemption
The obligation of BOCFC to make any payments to Brookdale pursuant to
Section 2.3 of the Agreement shall, in addition to any other requirements set
forth in Section 2.3, be subject to the following conditions:
(1) Brookdale, or its designee, shall have exercised the Equity Option
Agreement in accordance with the terms, conditions and requirements
of (a) the Equity Option Agreement and (b) that certain Intercreditor
Agreement of even date herewith (the "Intercreditor Agreement") among
Corporate Investor, Subordinated Borrower, General Partner, Owner,
Brookdale, BOCP IV, BLC of Texas - II,
L.P., and Nomura Asset Capital Corporation.
(2) The proceeds from the exercise of the Equity Option Agreement and, if
applicable, the Property Option Agreement (as such term is defined in
the Equity Option Agreement) and any capital contribution to
Subordinate Borrower made by or on behalf of Brookdale to satisfy its
obligations pursuant to the Equity Option Agreement or the Property
Option Agreement, shall meet the requirements of "Subordinate Lender
Option Related Proceeds," as such term is defined in the
Intercreditor Agreement, and shall be permitted to be paid to, and
retained by, BOCP IV in accordance with the Intercreditor Agreement.
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THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY
NOT BE DISTRIBUTED, SOLD, TRANSFERRED, ASSIGNED, HYPOTHECATED OR OFFERED UNLESS
THERE IS IN EFFECT A REGISTRATION STATEMENT UNDER SUCH ACT AND LAWS COVERING
SUCH SECURITIES OR THE ISSUER RECEIVES AN OPINION OF COUNSEL OR A NO-ACTION
LETTER FROM THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION STATING THAT
SUCH DISTRIBUTION, SALE, TRANSFER, ASSIGNMENT, HYPOTHECATION OR OFFER IS EXEMPT
FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT AND LAWS.
-----------------------------------------------------
Brookdale Living Communities, Inc.
Warrant Certificate
Issued to
Banc One Capital Markets, Inc.
in the
Purchase of Common Stock
of
Brookdale Living Communities, Inc.
--------------------------------------------------------
Dated as of June 17, 1998
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TABLE OF CONTENTS
Page
Section 1 Definitions............................................1
Section 2 Duration and Exercise of Warrant.......................5
2.1 Number of Shares of Common Stock. .........5
2.2 Warrant Exercise Period. ...................5
2.3 Manner of Exercise. .......................5
2.4 When Exercise Effective. ..................6
2.5 Delivery of Stock Certificates,
New Warrant Certificate, etc.............6
Section 3 Anti-dilution Adjustment...........................6
3.1 Adjustment Event. ..........................6
3.2 Reorganization Event. ......................6
3.3 Other Event. ...............................6
3.4 Rights Offering. ...........................7
3.5 Preemptive Rights. .........................7
Section 4 Restrictions on Transfer...........................8
4.1 Restrictive Legends..........................8
4.2 Notice of Proposed Transfer;
Opinion of Counsel..................8
Section 5 Availability of Information........................9
Section 6 Reservation of Stock, Etc.........................9
Section 7 Capitalization....................................10
Section 8 Ownership; Registration of Transfer; Exchange
and Substitution of Warrant........10
8.1 Ownership of Warrant. .....................10
8.2 Registration of Transfers. ................10
8.3 Replacement of Warrant Certificate. ......10
8.4 Expenses....................................10
Section 9 No Rights as Stockholder..........................11
Section 10 Demand Registration Rights........................11
10.1 Demand for Registration.....................11
10.2 Registration Statement Form. ..............11
10.3 Effective Registration Statement. .........11
10.4 Expenses. .................................11
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10.5 Underwritten Offerings. ....................12
10.6 Priority in Requested Registrations. .....12
Section 11 "Piggyback" Registration Rights...................12
11.1 Participation in Registration...............12
11.2 Expenses. ................................13
11.3 Underwritten Offerings......................13
11.4 Priority in Registrations. ................13
Section 12 Registration Procedures. .........................14
Section 13 Indemnification...................................16
13.1 Indemnification by the Company. ..........16
13.2 Indemnification by the Holder. ...........16
13.3 Procedures for Claims.......................17
Section 14 Rule 144..........................................17
Section 15 Termination of Registration Rights. .............17
Section 16 Miscellaneous.....................................18
16.1 Amendment. ................................18
16.2 Choice of Law. ............................18
16.3 Headings. .................................18
Form of Warrant Certificate.....................................A-1
Form of Assignment of Warrant...................................B-1
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Warrant Certificate
Dated as of June 17, 1998
This Warrant Certificate ("Warrant Certificate") certifies that, for value
received, Banc One Capital Markets, Inc., an Ohio corporation (the "Holder"), is
entitled to purchase from Brookdale Living Communities, Inc., a Delaware
corporation (the "Company"), up to 5,000 shares of the Common Stock of the
Company as hereinafter provided, in the manner and subject to the terms and
conditions set forth herein.
The Warrant evidenced by this Warrant Certificate is being issued by the
Company to the Holder as consideration for its assistance in connection with
certain loan transactions entered into between AH Texas Subordinated, LLC, an
Ohio limited liability company (the "Borrower") and Banc One Capital Partners
IV, Ltd., an Ohio limited liability company ("Lender"), an Affiliate of the
Holder, as lender, effective the date hereof, wherein Lender is making loans to
the Borrower in the aggregate principal amount of $7,382,658 (collectively, the
"Loan"). The Company has issued a limited recourse guarantee in connection with
the Loan and will derive significant benefits from the Loan.
Section 1.Definitions.
1.1 "Affiliate" of any specified Person means any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such specified Person. A Person shall be deemed to control
a corporation if such Person possesses, directly or indirectly, of the power to
vote 10% or more of the Voting Power of a Person, or the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
1.2 "Applicable Law" means, with respect to any Person, any and all
federal, national, state, regional, local, municipal or foreign laws, statutes,
rules, regulations, guidelines, ordinances, licenses, permits, judicial or
administrative decisions of any country, or any political subdivision, agency,
commission, official or court thereof having jurisdiction over such Person or
its business.
1.3 "Adjustment Event" means any of the following events:
(i) the Company declares a dividend or makes a distribution
with respect to outstanding shares of its Capital Stock,
which dividend or distribution is paid entirely or in part
in shares of Common Stock or Convertible Securities; or
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(ii) the Company subdivides, combines or reclassifies
outstanding shares of its Common Stock or Convertible
Securities.
In no event shall an offering described in Section 3.5 also constitute an
Adjustment Event.
1.4 "Business Day" means any day other than a Saturday, Sunday or day
on which banking institutions are authorized or required by law or executive
order to be closed in the City of Columbus, Ohio or in the City of Chicago,
Illinois.
1.5 "Capital Stock" of any Person means any and all shares,
interests, participations or other equivalents (however designated) of corporate
stock (including each class of common stock and preferred stock) or partnership
or membership interests of such Person.
1.6 "Charter Documents" mean a Person's formation or other governing
documents, including but not limited to, as applicable, its certificate or
articles of incorporation, by-laws, code of regulations, articles of
organization, operating agreement, certificate of limited partnership and
partnership agreement.
1.7 "Commission" means the United States Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
1.8 "Common Shares" or "Common Stock" means the shares of common
stock, $0.01 par value per share, of the Company, treated as a single class of
stock, at any time outstanding.
1.9 "Company" means Brookdale Living Communities, Inc., a Delaware
corporation, and includes any Person which shall succeed to or assume the
obligations of the Company, through restructuring or otherwise.
1.10 "Convertible Securities" means evidences of indebtedness, shares
of stock or other securities that are convertible into or exchangeable for, with
or without payment of additional consideration in cash or property, or options,
warrants or other rights that are exercisable for, Common Shares, whether or not
the right to convert, exchange or exercise is at the time exercisable.
1.11 "Formation Registration Rights Agreement" means that certain
Registration Rights Agreement, dated as of May 7, 1997, by and among the
Company, The Prime Group, Inc., Prime Group Limited Partnership, and Prime Group
VI, L.P., as amended.
1.12 "Formation Holders" means the "Holders" as defined in the
Formation Registration Rights Agreement.
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1.13 "Holder" means Banc One Capital Markets, Inc., an Ohio
corporation, together with its successors and permitted assigns.
1.14 "Loan" has the definition set forth in the second grammatical
paragraph of this Warrant Certificate.
1.15 "Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint stock company, trust,
unincorporated organization, governmental authority or any other form of entity.
1.16 "Preemption Offering" means any offering of Common Shares,
Convertible Securities or other shares of Capital Stock of the Company by or on
behalf of the Company other than:
(i) any Rights Offering;
(ii) the issuance of the Warrant Shares subject to this Warrant
Certificate;
(iii) the issuance or sale of Common Shares pursuant to any employee,
officer or director stock option plan approved by the board of directors of the
Company; provided, that (a) options are granted only with respect to Common
Shares, (b) the minimum exercise price per Common Share for such shares is not
less than the market determined value per share on the date such options were
granted, as determined in accordance with the Company's stock incentive plans,
and (c) no options are granted to Persons other than officers, directors and
employees of the Company or any Subsidiary; and
(iv) the sale and issuance of Common Shares, Convertible
Securities or other Capital Stock pursuant to any Qualified
Public Offering.
1.16 "Qualified Public Offering" means the first offer and sale to
the public by the Company or any holders of shares of any class of its Capital
Stock, after the dated hereof, pursuant to a registration statement that has
been declared effective by the Commission.
1.17 "Reorganization Event" means:
(i) any capital reorganization or reclassification or
recapitalization of any shares of Capital Stock of the
Company (other than an event described in Section 1.3);
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(ii) any merger or consolidation of the Company with or into any
other Person in which the Company is not the surviving
entity, or which effects a reclassification or
recapitalization of any shares of Capital Stock of the
Company; or
(iii) the sale, exchange or transfer of all or substantially all
of the property of the Company to any other Person.
1.18 "Restricted Securities" means (a) any Warrant bearing the
applicable legend set forth in the Warrant, (b) any Warrant Shares which are
evidenced by a certificate or certificates bearing such legend, and (c) unless
the context otherwise requires, any Common Shares which are at the time issuable
upon the exercise of any Warrant and which, when so issued, will be evidenced by
a certificate or certificates bearing such legend.
1.19 "Rights Offering" means any offering of Capital Stock or
Convertible Securities of the Company or any distribution of rights to purchase
Capital Stock or Convertible Securities of the Company that is made
substantially on a pro rata basis among the holders of Capital Stock of the
Company.
1.20 "Securities" means collectively, the Warrant and the Warrant
Shares.
1.21 "Securities Act" means the Securities Act of 1933, as amended,
or any similar federal statute, and the rules and regulations of the Commission
thereunder, all as of the same shall be in effect at the time. References to a
particular section of the Securities Act of 1933 shall include a reference to
the comparable section, if any, of any such similar successor federal statute.
1.22 "Securities Exchange Act" means the Securities Exchange Act of
1934, as amended, or any similar federal statute, and the rules and regulations
of the Commission thereunder, all as of the same shall be in effect at the time.
Reference to a particular section of the Securities Exchange Act of 1934 shall
include a reference to the comparable section, if any, of any similar successor
federal statute.
1.23 "Subsidiary" means any entity of which more than 50% of the
Voting Power is owned or controlled by the Company at any date of determination,
either directly or through Subsidiaries.
1.24 "Tax(es)" means any federal, state, local or foreign income,
gross receipts, license, franchise, payroll, employment, excise, unemployment,
personal property, severance, disability, real property, sales, use, transfer,
value added, alternative, estimated or other tax of any kind whatsoever,
including any interest, penalty or addition thereto, whether disputed or not.
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1.25 "Transfer", "Transferred" means, with respect to any item, the
sale, exchange, pledge, conveyance, lease, transfer or other disposition of such
item or any interest therein.
1.26 "Voting Power" means with respect to any entity, the power to
vote for or designate members of the board of directors or similar group,
whether exercised by virtue of the record ownership of securities, under a close
corporation or similar agreement or under an irrevocable proxy.
1.27 "Warrant" means the warrant issued by the Company to the Holder
evidenced by this Warrant Certificate.
1.28 "Warrant Certificate" means this warrant certificate or any
replacement warrant certificate issued to the Holder.
1.29 "Warrant Exercise Price" means $30.40 per Warrant Share, which
is equal to 120% of the average of the daily per share closing prices of the
Common Stock on NASDAQ for the ten (10) consecutive trading days prior to the
date hereof.
1.30 "Warrant Expiration Date" means the fourth anniversary of the
date hereof.
1.31 "Warrant Shares" means the Common Shares issuable upon exercise
of the Warrant.
Section 2.Duration and Exercise of Warrant.
2.1 Number of Shares of Common Stock. Subject to the terms and
conditions set forth in this Warrant Certificate, Holder may purchase up to
5,000 shares of Common Stock of Company. The number of Warrant Shares that may
be purchased by the Holder pursuant to this Section 2.1 in consideration of the
payment of the Warrant Exercise Price is subject to adjustment as provided for
in Section 3.
2.2 Warrant Exercise Period. The Warrant shall be exercisable in a
single or partial exercise at any time after the date hereof but on or before
the Warrant Expiration Date.
2.3 Manner of Exercise. The Warrant may be exercised by the Holder in
a single exercise upon surrender of this Warrant Certificate and the delivery of
the Notice of Exercise attached hereto duly completed and executed on behalf of
the Holder, at the principal office of the Company (or at such other office or
agency of the Company as it may designate by notice to the Holder at the address
of the Holder appearing on the books of the Company), upon payment of an amount
equal to the Warrant Exercise Price multiplied by the number of Warrant Shares
to be
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purchased pursuant to such exercise by wire transfer or delivery of a certified
or cashier's check to the Company. Any exercise of a Warrant pursuant to this
Warrant Certificate shall be for only full Warrant Shares and shall not be for
partial Warrant Shares.
2.4 When Exercise Effective. The exercise of the Warrant shall be
deemed to have been effected immediately prior to the close of business on the
Business Day on which (a) the Notice of Exercise shall have been delivered to
the Company, (b) this Warrant Certificate shall have been surrendered to the
Company, and (c) the Company shall have received payment of the Warrant Exercise
Price for the Warrant Shares to be purchased in connection with such exercise as
provided in Section 2.3, and immediately prior to the close of business on such
Business Day the Holder shall be deemed to have become the holder of record of
the Warrant Shares.
2.5 Delivery of Stock Certificates, New Warrant Certificate, etc. As
soon as practicable after the effective exercise of the Warrant, the Company at
its expense (including any applicable issue taxes) will cause to be issued in
the name of and delivered to the Holder a certificate or certificates for the
number of Warrant Shares to which the Holder shall be entitled upon such
exercise.
Section 3.Anti-dilution Adjustment.
3.1 Adjustment Event. Upon the occurrence of any Adjustment Event,
the number of Warrant Shares shall be adjusted immediately after the applicable
record date with respect to such Adjustment Event as follows. The adjusted
number of Warrant Shares shall be a number equal to the number of Warrant Shares
issuable upon exercise of the Warrant immediately prior to such record date
multiplied by a fraction (i) the numerator of which is the number of outstanding
Common Shares immediately after such Adjustment Event, and (ii) the denominator
of which is the number of outstanding Common Shares immediately prior to the
record date. Any such adjustment shall be calculated to the nearest whole
Warrant Share. Notwithstanding any other provision of this Section 3.1, no
adjustment shall be made with respect to the issuance of Common Shares,
Convertible Securities or other Capital Stock after the date hereof when such
issuance constitutes a Preemption Offering.
3.2 Reorganization Event. Upon the occurrence of a Reorganization
Event, there shall thereafter be issuable upon the exercise of the Warrant (in
lieu of the Warrant Shares), as appropriate, the number of shares of stock,
other securities or property to which the Holder would have been entitled had
the Holder exercised the Warrant and received the Warrant Shares immediately
prior to the record date for such Reorganization Event.
Prior to and as a condition of the consummation of any Reorganization
Event, the Company shall cause effective provisions to be made to effect the
purposes of this Section 3.2, including, if appropriate, an agreement among the
Company, any successor to the Company and the Holder.
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3.3 Other Event. In case any event shall occur as to which the other
provisions of this Section 3 are not strictly applicable but the failure to make
any adjustment would not fairly protect the purchase rights represented by the
Warrant in accordance with the essential intent and principles hereof, then the
Holder may request in writing within one hundred twenty (120) days after the
occurrence of such event that the Company examine the propriety of an adjustment
to the number of Warrant Shares issuable upon exercise of the Warrant. Unless
the Company and the Holder shall have mutually agreed upon an adjustment, or
that no adjustment is required, within thirty (30) days after the receipt of
such request, the Company shall appoint a firm of independent certified public
accountants of recognized national standing (which may be the regularly engaged
accountants of the Company), to give an opinion upon the adjustment, if any, on
a basis consistent with the essential intent and principles established in this
Section 3, necessary to preserve the purchase rights represented by the Warrant.
Upon receipt of such opinion, the Company will promptly mail a copy thereof to
the Holder and shall make the adjustments, if any, described therein. If such
opinion states that no such adjustment is necessary, the Holder shall reimburse
the Company for the cost and expense of such opinion, and if an adjustment is
necessary, the Company shall pay the cost and expense of such opinion.
Notwithstanding any other provision of this Section 3.3, no adjustment shall be
made with respect to the issuance of Common Shares, Convertible Securities or
other Capital Stock after the date hereof when such issuance constitutes a
Preemption Offering.
3.4 Rights Offering. In the event the Company shall effect a Rights
Offering, the Holder shall be entitled, at its option, to elect to participate
in each and every such offering as if the Warrant had been exercised and the
Holder was, at the time of any such rights offering, then a holder of that
number of Common Shares to which the Holder is then entitled on the exercise of
the Warrant.
3.5 Preemptive Rights. In the event of any Preemption Offering, (i)
the Company shall notify the Holder in writing of the number of Common Shares,
Convertible Securities or other Capital Stock subject to such Preemption
Offering and the cash or cash equivalent purchase price (determined by the
Company in good faith) thereof, and (ii) the Holder shall have the right for a
period of thirty (30) days following such notice to purchase prior to the
exercise of the Warrant up to that number of Common Shares, Convertible
Securities or other Capital Stock that is sufficient to permit the Holder to
maintain the percentage of outstanding Common Shares which the Holder owns or
would be entitled to purchase upon exercise of the Warrant, after giving effect
to the Holder's purchase under this Section 3.5 and the sale of the Common
Shares subject to such Preemption Offering.
The Holder shall have the right, during the period specified herein, to
purchase any or all of the new Common Shares or Convertible Securities that it
is entitled to purchase under this provision at the purchase price and on the
terms stated in the Preemption Offering. Notice by the Holder of
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its participation, in whole or in part, in the Preemption Offering shall be in
writing and signed by the Holder and shall be delivered to the Company prior to
the end of the period specified herein, setting forth the number of new Common
Shares or Convertible Securities the Holder elects to purchase. With respect to
any of the new Common Shares or Convertible Securities not purchased by the
Holder hereunder, the Company may during the period one hundred and eighty (180)
days following the date of expiration of the Preemption Offering sell to any
other Person or Persons all or any part of such Common Shares or Convertible
Securities, but only on terms and conditions that are no more favorable to such
Person or Persons or less favorable to the Company than those set forth in the
Preemption Offering.
Section 4.Restrictions on Transfer.
4.1 Restrictive Legends. Except as otherwise permitted by this
Section 4, the Warrant, each Warrant issued in exchange or substitution for any
Warrant, each Warrant issued upon the registration of Transfer of any Warrant,
each certificate representing the Warrant Shares and each certificate issued
upon the registration of Transfer of any Warrant Shares, shall be stamped or
otherwise imprinted with a legend in substantially the following form:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF
ANY STATE, AND MAY NOT BE DISTRIBUTED, SOLD, TRANSFERRED, ASSIGNED,
HYPOTHECATED OR OFFERED UNLESS THERE IS IN EFFECT A REGISTRATION STATEMENT
UNDER SUCH ACT AND LAWS COVERING SUCH SECURITIES OR THE ISSUER RECEIVES AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER OR A NO-ACTION
LETTER FROM THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION STATING
THAT SUCH DISTRIBUTION, SALE, TRANSFER, ASSIGNMENT, HYPOTHECATION OR OFFER
IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF
SUCH ACT AND LAWS."
4.2 Notice of Proposed Transfer; Opinion of Counsel. Prior to any
Transfer of any Restricted Securities, the Holder will give notice ("Notice") to
the Company of the Holder's intention to effect such Transfer. Each such Notice
of a proposed Transfer (a) shall describe the manner and circumstances of the
proposed Transfer in sufficient detail to enable counsel to render the opinion
referred to below, and (b) shall designate counsel for the Holder. The Holder
will submit a copy of such Notice to the counsel designated in such Notice and
the Company will promptly submit a copy of the Notice to its counsel. The
following provisions shall then apply:
(i) If in the opinion of counsel to the Company the proposed
Transfer may be effected without registration of such
Restricted Securities
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under the Securities Act, the Company will promptly notify
the Holder and the Holder shall thereupon be entitled to
Transfer such Restricted Securities in accordance with the
terms of the Notice delivered by the Holder to the Company.
Each Warrant or certificate for Warrant Shares, if any,
issued upon or in connection with such Transfer shall bear
the applicable restrictive legend set forth in Section 4.1,
unless in the opinion of such counsel, such legend,
requires modification or is no longer required to ensure
compliance with the Securities Act. If for any reason,
counsel for the Company (after having been furnished with
the information required by this Section 4.2) shall fail to
deliver an opinion to the Company, or the Company shall
fail to notify the Holder as aforesaid, within sixty (60)
days after receipt of Notice of the Holder's intention to
effect a Transfer, then for all purposes of the Warrant,
the opinion of counsel for the Holder shall be sufficient
to authorize the proposed Transfer, provided the opinion is
issued by counsel recognized as experts in security law
matters and the opinion of counsel for the Company shall
not be required in connection with such proposed Transfer;
or
(ii) If, in the opinion of counsel to the Company, the proposed
Transfer may not be effected without registration of such
Restricted Securities under the Securities Act, the Company
will promptly so notify the Holder and the Holder shall not
be entitled to Transfer such Restricted Securities until
receipt of a further Notice from the Company under clause
(i) above or until registration of such Restricted
Securities under the Securities Act has become effective.
Section 5.Availability of Information.
To the extent they are applicable to the Company, the Company will comply
with the reporting requirements of Sections 13 and 15(d) of the Securities
Exchange Act and all other public information reporting requirements of the
Commission (including the requirements of Rule 144 promulgated by the Commission
under the Securities Act) from time to time in effect. The Company will
cooperate with the Holder at the Holder's expense to complete and file any
information reporting forms presently or hereafter required by the Commission as
a condition to the availability of an exemption from the Securities Act for the
Transfer of any Restricted Securities or the Transfer of Restricted Securities
by affiliates of the Company.
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Section 6.Reservation of Stock, Etc.
The Company will at all times prior to the Warrant Expiration Date reserve
and keep available, solely for issuance and delivery upon the exercise of the
Warrant and free from preemptive rights, a sufficient number of shares of Common
Stock to cover the Warrant Shares issuable or exchangeable upon the exercise of
the Warrant. All such shares shall be duly authorized and, when issued upon such
exercise against payment therefor as provided for in Section 2.3, shall be
validly issued, fully paid and non-assessable.
Section 7.Capitalization.
The Company represents and warrants that its authorized Capital Stock as
of the date hereof consists solely of (i) 75,000,000 shares of Common Stock, of
which 9,484,582 shares are issued and outstanding and zero (0) shares are
reserved for issuance upon the exercise or conversion of outstanding Convertible
Securities, and 1,070,418 shares are reserved for issuance upon the exercise of
options under the Company's Stock Incentive Plans, and (ii) 20,000,000 shares of
preferred stock of which zero (0) shares are issued and outstanding and that it
has no other Capital Stock authorized, issued or outstanding.
Section 8.Ownership; Registration of Transfer; Exchange and Substitution of
Warrant.
8.1 Ownership of Warrant. Until due presentment for Transfer, the
Company may treat the Person in whose name the Warrant is registered on the
register kept at the Company's principal office as the owner and holder hereof
for all purposes, notwithstanding any notice to the contrary, provided that when
the Warrant has been properly Transferred, the Company shall treat such
transferee as the owner of the Warrant for all purposes, notwithstanding any
Notice to the contrary. Subject to the foregoing provisions and to Section 4,
the Warrant, if properly Transferred, may be exercised by the transferee without
first having a new Warrant Certificate issued.
8.2 Registration of Transfers. Subject to Section 4 hereof, the
Company shall register the Transfer of the Warrant permitted under the terms
hereof upon records to be maintained by the Company for that purpose upon
surrender of this Warrant Certificate to the Company at the Company's principal
office, together with the Form of Assignment attached hereto duly completed and
executed. Upon any such registration of Transfer, a new Warrant Certificate in
substantially the form of this Warrant Certificate, shall be issued to the
transferee.
8.3 Replacement of Warrant Certificate. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant Certificate and of an indemnification reasonably
satisfactory to the Company, or, in the case of any such mutilation, upon
surrender of this Warrant Certificate for cancellation at the Company's
principal
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office, the Company at the Holder's expense will promptly execute and deliver,
in lieu thereof, a new Warrant Certificate of like tenor.
8.4 Expenses. Except as otherwise provided for herein, the Company
will pay all expenses, Taxes (other than transfer and income Taxes) and other
charges in connection with the preparation, issuance and delivery from time to
time of this Warrant Certificate or the Warrant Shares.
Section 9.No Rights as Stockholder.
Nothing contained in this Warrant Certificate shall be construed as
conferring upon the Holder any rights as a stockholder of the Company prior to
the exercise hereof or as imposing any obligation on the Holder to purchase any
Capital Stock of the Company.
Section 10Demand Registration Rights.
10.1 Demand for Registration. At anytime after the exercise of the
Warrant, and subject to the conditions set forth below, if the Company shall
receive a written request from the Holder requesting that the Company effect the
registration under the Securities Act of all of the Holder's and its Affiliate's
Warrant Shares, the Company shall use its reasonable best efforts to effect such
registration as soon as practicable. Subject to the provisions of Section 10.6,
the Company may register for sale in such registration other securities which
the Company has been requested or otherwise desires to register by the holders
thereof (which may include Common Shares held by the Formation Holders and/or
their permitted assigns); provided, however, that no securities other than
Warrant Shares shall be included in such registration if the managing
underwriter advises the Holder that the inclusion of such other securities would
adversely affect such offering unless the Holder shall have consented in writing
to the inclusion of such other securities. The Company shall not be required to
effect more than one registration pursuant to requests made pursuant to this
Section 10, and shall not be required to effect any registration pursuant to
this Section 10 unless any registration can be made on Form S-3.
10.2 Registration Statement Form. Registrations under this Section 10
shall be on such appropriate registration forms as shall be selected by the
Company, provided that such forms permit the disposition of the Warrant Shares
in accordance with the Holder's intended method or methods of disposition as
specified in its request for such registration. The Company shall include in any
such registration statement all information which the Holder shall reasonably
request.
10.3 Effective Registration Statement. A registration requested
pursuant to this Section 10 shall not be deemed to have been effected (i) unless
a registration statement with respect thereto has become effective under the
Securities Act, (ii) if such registration is not kept continuously effective in
accordance with Section 12, (iii) if such registration becomes the subject
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of any stop order, injunction or other order or requirement of the Commission or
other governmental agency or court for any reason other than an act or omission
of the Holder and the effectiveness or such registration statement is not
re-instituted within ninety (90) days, or (iv) if any conditions to closing
specified in the purchase agreement or underwriting agreement entered into in
connection with such registration are not satisfied for any reason other than an
act or omission of the Holder.
10.4 Expenses. The Company shall pay all registration expenses in
connection with any registration requested pursuant to this Section 10. The
Holder shall pay all underwriting discounts and commissions and transfer taxes,
if any, relating to the sale or other disposition of its Warrant Shares.
10.5 Underwritten Offerings. Only if a registration pursuant to this
Section 10 involves any Capital Stock of the Company or any other securities
other than the Warrant Shares held by the Holder and its Affiliates, may the
Holder at its option, request an underwritten offering. The underwriter or
underwriters thereof shall be selected by the Company. To the extent customary
for transactions similar to the transactions contemplated hereby, the Holder
may, at its option, require that any or all of the representations and
warranties by, and the other agreements on the part of, the Company to and for
the benefit of such underwriters shall also be made to and for the benefit of
the Holder. Holder shall not be required to make any representations and
warranties to or agreements with the Company or the underwriters other than
representations, warranties or agreements regarding the Holder, the Holder's
intended method of distribution, any other information provided by the Holder
for inclusion in the registration statement or prospectus and any other
representation required by law or by customary practice of underwritten
secondary offerings.
10.6 Priority in Requested Registrations. If a requested registration
pursuant to this Section 10 involves an underwritten offering, and if the
managing underwriter shall advise the Company in writing that, in its opinion,
the number of securities of any class requested to be included in such
registration exceeds the number which can be sold in (or during the time of)
such offering without delaying or jeopardizing the success of the offering, then
the Company will include in such registration (i) first, all of the Holder's
Warrant Shares that the Company is so advised can be sold in such offering, (ii)
second, to the extent permitted by the managing underwriter, securities to be
registered by the Company for its own account and/or by other holders of
securities (which may include the Formation Holders and/or their permitted
assigns) in such manner and amounts required by the Formation Registration
Rights Agreement, if applicable, or as the Company shall determine.
Section 11"Piggyback" Registration Rights.
11.1 Participation in Registration. If the Company at any time
proposes to register any securities under the Securities Act (other than by a
registration on Form S-4 or Form S-8 or any successor or similar form and other
than pursuant to Section 10), whether or not for sale for its own
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account, it will each such time, promptly give Notice to the Holder. Upon the
written request of the Holder made within thirty (30) days after the receipt of
any such Notice (which request shall specify the Warrant Shares intended to be
disposed of and the intended method of disposition), the Holder shall have the
right, subject to the prior registration rights of the Formation Holders, to
participate in such registration on the terms and conditions thereof. If, at any
time after giving written notice of its intention to register any securities and
prior to the effective date of the registration statement filed in connection
with such registration, the Company shall determine for any reason not to
register or to delay registration of such securities, the Company may, at its
election, give written notice of such determination to the Holder and,
thereupon, (i) in the case of a determination not to register, the Company shall
be relieved of its obligation to register any Warrant Shares in connection with
such registration (but not from its obligation to pay any registration expenses
in connection therewith), without prejudice, however, to the rights of the
Holder to request that such registration be effected as a registration under
Section 10, and (ii) in the case of a determination to delay registration, the
Company shall be permitted to delay registering any Warrant Shares for the same
period as the delay in registering such other securities. No registration
effected under this Section 11 shall relieve the Company of its obligation to
effect any registration under Section 10.
11.2 Expenses. The Company will pay all registration expenses in
connection with each registration of Warrant Shares requested pursuant to this
Section 11. The Holder shall pay all underwriting discounts and commissions and
transfer taxes, if any, relating to the sale or other disposition of its Warrant
Shares.
11.3 Underwritten Offerings. If a registration pursuant to this
Section 11 involves an underwritten offering, the Company shall, if requested by
the Holder, and subject to the prior registration rights of the Formation
Holders, arrange for such underwriters to include the Holder's Warrant Shares
among the securities to be distributed by such underwriters. In such case, the
Holder shall be a party to the underwriting agreement and may, at its option,
require that any or all of the representations and warranties by, and the other
agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of the Holder. Holder
shall not be required to make any representations and warranties to or
agreements with the Company or the underwriters other than representations,
warranties or agreements regarding the Holder, the Holder's intended method of
distribution, any other information provided by the Holder for inclusion in the
registration statement or prospectus and any other representation required by
law or by customary practices for such transactions.
11.4 Priority in Registrations. If a registration pursuant to this
Section 11 involves an underwritten offering, and if the managing underwriter
shall advise the Company in writing that, in its opinion, the number of
securities of any class requested to be included in such registration exceeds
the number which can be sold in (or during the time of) such offering without
delaying, jeopardizing or otherwise adversely affecting the success of the
offering, then the Company will include in such registration, to the extent to
which the Company is advised can be sold in such
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offering, first, all securities proposed by the Company to be sold for its own
account, and second, such Common Shares held by the Formation Holders and/or
their permitted assigns requested by the Formation Holders and/or their
permitted assigns to be included in such registration pursuant to the Formation
Registration Rights Agreement, and third, such Warrant Shares requested to be
included in such registration and all other securities proposed to be sold by
other holders shall be included in such registration pro rata on the basis of
the number of shares so proposed to be sold.
Section 12Registration Procedures.
If the Company is required to effect the registration of any Warrant
Shares as provided herein (subject to the minimum number of Warrant Shares to be
registered pursuant to Section 10.1), the Company shall proceed in the following
manner:
(i) prepare and as expeditiously as possible file (and in any
event within one hundred and twenty (120) days of receipt
of Holder's request under Section 10) with the Commission
the registration statement to effect such registration and
use its reasonable best efforts to cause such Registration
Statement to become effective;
(ii) prepare and file with the Commission such amendments and supplements
to such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective and to comply
with the provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement until such time as all Warrant
Shares have been disposed of in accordance with the intended methods of
disposition by the Holder;
(iii) furnish to Holder such number of prospectuses (including
preliminary prospectuses) and copies of each amendment and
supplement thereto and such other documents as Holder may
reasonably request in order to facilitate the disposition
of the Warrant Shares;
(iv) use its reasonable best efforts to register or qualify all
Warrant Shares covered by such registration statement under
the securities or blue sky laws of such jurisdictions as
the Holder shall reasonably request, to keep such
registration or qualification in effect for so long as such
registration statement remains in effect, and take any
other action which may be reasonably necessary or desirable
to enable the Holder to consummate the disposition of its
Warrant Shares in such
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<PAGE>
jurisdictions in accordance with the intended method of
disposition, provided, however, that the Company shall not
be required to qualify to do business, to consent to
general service of process, or to register as a broker or
dealer in any such jurisdiction;
(v) enter into and perform its obligations under any
underwriting or placement agreement, and take all
reasonable actions in connection therewith in order to
expedite or facilitate the disposition of the Warrant
Shares;
(vi) notify the Holder in writing of (i) any stop order or the
commencement of any proceedings for that purpose, (ii) any
suspension of the qualification of the Warrant Shares for
sale in any jurisdiction or the commencement of any
proceedings for that purpose, or (iii) any notification
received by the Company regarding the necessity or
desirability of filing any supplement or amendment to the
registration statement;
(vii) in any underwritten offering, furnish to the Holder (a) an opinion of
counsel for the Company, dated the effective date of such registration
statement, in form and substance as is customarily given to underwriters, and
(b) a comfort letter, dated the effective date of such registration statement,
signed by the Company's independent public accountants in form and substance as
is customarily given to underwriters, in each case addressed to the underwriters
and the Holder;
(viii) notify Holder upon discovery of the happening of any event as a
result of which the prospectus included in such registration statement includes
an untrue statement of any material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing, or any other event
that would cause the registration statement to no longer be current as required
by the Securities Act, and at the request of the Holder promptly prepare, file
and furnish to Holder a reasonable number of copies of a supplement or an
amendment to such prospectus which may be required on account of such event and
use its reasonable best efforts to cause such supplement or amendment to become
effective;
15
<PAGE>
(ix) cause to be maintained a transfer agent for its securities
from and after a date not later than the effective date of
such registration statement;
(x) use its reasonable best efforts to list all Warrant Shares
covered by such registration statement on any securities
exchange on which any of the Common Shares is then listed;
and
(xi) enter into such agreements and take such other actions as
the Holder shall reasonably request in order to expedite or
facilitate the disposition of such Warrant Shares.
The Holder shall furnish to the Company such information regarding the
Holder and the distribution of the Warrant Shares as the Company may from time
to time reasonably request in writing.
Upon receipt of any Notice from the Company of the happening of any
circumstance or event of the kind described in subdivision (viii) of this
Section 12, the Holder shall forthwith discontinue the disposition of Warrant
Shares pursuant to the registration statement until it receives copies of the
supplemented or amended prospectus or other notification that such disposition
may be resumed, and, if so directed by the Company, will destroy all copies,
other than permanent file copies, then in Holder's possession of the prospectus
relating to such Warrant Shares. The Company will use its reasonable best
efforts to effect such amendment or supplement as promptly as possible.
Section 13Indemnification.
13.1 Indemnification by the Company. In the event of any registration
pursuant to Section 11 or 12, the Company will, and hereby does, indemnify and
hold harmless the Holder, its directors, partners, members and officers, any
underwriter acting on behalf of the Holder and each other Person, if any, who
controls any such Person within the meaning of the Securities Act (individually,
an "Indemnified Party", and, collectively the "Indemnified Parties"), against
any losses, claims, damages, expenses (including legal fees and expenses) or
liabilities, joint or several, to which any one of them may become subject under
the Securities Act or otherwise; provided, however, that the Company shall not
be so liable (i) to the extent that any such loss, claim, damage, liability or
expense arises out of or is based upon the Company's reliance upon written
information furnished to the Company by any Indemnified Party expressly stating
that it is for use in the registration statement, (ii) to the extent that any
such loss, claim, damage, liability or expense arise out of such Indemnified
Party's failure to provide a copy of the final prospectus, as the same may be
then supplemented or amended, to the purchaser at or prior to the written
confirmation of the sale of Warrant Shares and (iii) to the extent that any such
loss, claim, damage, liability or expense arise
16
<PAGE>
from an act or omission in a violation of the Securities Act by Holder or such
Indemnified Party or from the gross negligence or willful misconduct of the
Holder or such Indemnified Party. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Holder or
other Person and shall survive the transfer of the Warrant Shares by the Holder.
13.2 Indemnification by the Holder. As a condition to the Company's
obligation to include any Warrant Shares in any registration statement filed
pursuant to Section 11 or 12, the Holder shall indemnify and hold harmless (in
the same manner and to the same extent as set forth in Section 13.1) the
Company, each director and officer of the Company and any underwriter acting on
behalf of the Company and each other Person, if any, who controls any such
Person within the meaning of the Securities Act, against any losses, claims,
damages, expenses (including legal fees and expenses) or liabilities, joint or
several, to which any one of them may become subject under the Securities Act or
otherwise, to the extent that any such loss, claim, damage, liability or expense
arises out of or is based upon the Company's reliance upon written information
furnished to the Company by such Person expressly stating that it is for use in
the registration statement; provided, however, that the Holder shall not be so
liable to the extent that any such loss, claim, damage, liability or expense
arise out of such Person's (other than the Holder's or any Indemnified Party's)
failure to provide a copy of the final prospectus, as the same may be then
supplemented or amended, to the purchaser at or prior to the written
confirmation of the sale of any securities. Such indemnity shall remain in full
force and effect, regardless of any investigation made by or on behalf of the
Company or any such Person and shall survive the transfer of such Registrable
Securities by the Holder.
13.3 Procedures for Claims. Promptly after receipt of notice of the
commencement of any action or proceeding involving a claim referred to in this
Section 13, an indemnified party will, if a claim in respect thereof is to be
made against an indemnifying party, give Notice to the indemnifying party of the
commencement of such action. Failure to give prompt Notice shall not relieve the
indemnifying party of its obligation under this Section 13, except to the extent
that the indemnifying party is actually prejudiced by such failure. The
indemnifying party shall be entitled to participate in and to assume the defense
of such action at its expense, jointly with any other indemnifying party, with
counsel reasonably satisfactory to the indemnified party; provided, however,
that an indemnified party shall have the right to retain its own counsel, with
fees and expenses thereof to be paid by the indemnifying party, if in such
indemnified party's reasonable judgment an actual or potential conflict of
interest between such indemnified and indemnifying party may exist in respect of
such claim. No indemnifying party shall, without the consent of the indemnified
party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof a release from all liability by the
plaintiff to the indemnified party. The amount paid or payable by an
indemnifying party shall include any legal or other expenses reasonably incurred
by the indemnified party in connection with the investigation or defense of any
such action or claim.
17
<PAGE>
Section 14Rule 144.
If the Company shall have filed a registration statement, the Company will
file the reports required to be filed by it under the Securities Act and the
Securities Exchange Act and the rules and regulations adopted by the Commission
thereunder. The Company shall, upon the reasonable request of the Holder,
provide the Holder and any institutional investor designated by such Holder such
financial and other information as the Holder may reasonably determine to be
necessary in order to permit the Holder's compliance with Rule 144A under the
Securities Act in connection with the resale of any Warrant Shares, except at
such time as the Company is subject to the reporting requirements of Section 13
or 15(d) of the Securities Exchange Act.
Section 15Termination of Registration Rights.
The registration rights granted herein shall terminate on the date that
neither the Holder nor any Affiliate of the Holder owns any Warrant Shares.
Section 16Miscellaneous.
16.1 Amendment. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought.
16.2 Choice of Law. This Warrant Certificate and the Warrant
evidenced thereby shall be governed by the laws of the State of Delaware without
regard to conflicts of laws principles.
16.3 Headings. The Headings in this Warrant Certificate are inserted
for convenience only and shall not be deemed to constitute a part hereof.
BROOKDALE LIVING COMMUNITIES,
INC.
By:__________________________________
Name: ______________________________
Its:__________________________________
18
<PAGE>
FORM OF
NOTICE OF EXERCISE OF WARRANT
The undersigned is the holder of, and hereby elects to exercise, the
Warrant evidenced by that certain Warrant Certificate, dated as of June __, 1998
issued to Banc One Capital Markets, Inc. by Brookdale Living Communities, Inc. (
the "Warrant Certificate"), and to purchase the Warrant Shares issuable pursuant
to the Warrant Certificate and herewith makes payment in full therefor by
delivery of a certified check payable to the order of the Company in the amount
of the Warrant Exercise Price or by wire transfer of immediately available funds
in the amount of the Warrant Exercise Price and requests that certificate(s) for
such Warrant Shares be issued in the name of and delivered to
_______________________________________________, or in such denominations as
requested by the undersigned in writing to the Company concurrently herewith.
Capitalized terms used herein which are not defined herein, but which are
defined in the Warrant Certificate, shall have the meanings given such terms in
the Warrant Certificate.
Name of
Holder (Print):___________________________
Dated:_________________________________
By:__________________________________
Title:_________________________________
19
<PAGE>
FORM OF ASSIGNMENT OF WARRANT
FOR VALUED RECEIVED, __________________ hereby sells, assigns and
transfers to ___________________ all of the rights of the undersigned in and to
this Warrant and in and to that certain Warrant Certificate dated June __, 1998,
issued by Brookdale Living Communities, Inc. to Banc One Capital Markets, Inc.
Name of
Holder (Print):___________________________
Dated:_________________________________
By:__________________________________
Title:_________________________________
20
<PAGE>
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY
NOT BE DISTRIBUTED, SOLD, TRANSFERRED, ASSIGNED, HYPOTHECATED OR OFFERED UNLESS
THERE IS IN EFFECT A REGISTRATION STATEMENT UNDER SUCH ACT AND LAWS COVERING
SUCH SECURITIES OR THE ISSUER RECEIVES AN OPINION OF COUNSEL OR A NO-ACTION
LETTER FROM THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION STATING THAT
SUCH DISTRIBUTION, SALE, TRANSFER, ASSIGNMENT, HYPOTHECATION OR OFFER IS EXEMPT
FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT AND LAWS.
-----------------------------------------------------
Brookdale Living Communities, Inc.
Warrant Certificate
Issued to
Banc One Capital Partners IV, Ltd.
in the
Purchase of Common Stock
of
Brookdale Living Communities, Inc.
--------------------------------------------------------
Dated as of June 17, 1998
1
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C> <C>
Section 1. Definitions.....................................................................................1
Section 2. Duration and Exercise of Warrant................................................................5
2.1 Number of Shares of Common Stock. ..........................................5
2.2 Warrant Exercise Period. ....................................................5
2.3 Manner of Exercise. ........................................................5
2.4 When Exercise Effective. ...................................................5
2.5 Delivery of Stock Certificates, New Warrant Certificate, etc. ...............6
Section 3. Anti-dilution Adjustment........................................................................6
3.1 Adjustment Event. ...........................................................6
3.2 Reorganization Event. .......................................................6
3.3 Other Event. ................................................................6
3.4 Rights Offering. ............................................................7
3.5 Preemptive Rights. ..........................................................7
Section 4. Restrictions on Transfer........................................................................8
4.1 Restrictive Legends...........................................................8
4.2 Notice of Proposed Transfer; Opinion of Counsel...............................8
Section 5. Availability of Information.....................................................................9
Section 6. Reservation of Stock, Etc.......................................................................9
Section 7. Capitalization.................................................................................10
Section 8. Ownership; Registration of Transfer; Exchange and Substitution of Warrant......................10
8.1 Ownership of Warrant. ......................................................10
8.2 Registration of Transfers. .................................................10
8.3 Replacement of Warrant Certificate. .......................................10
8.4 Expenses.....................................................................10
Section 9. No Rights as Stockholder.......................................................................11
Section 10. Demand Registration Rights.....................................................................11
10.1 Demand for Registration. ...................................................11
10.2 Registration Statement Form. ...............................................11
10.3 Effective Registration Statement. ..........................................11
10.4 Expenses. ..................................................................11
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<PAGE>
10.5 Underwritten Offerings. ....................................................12
10.6 Priority in Requested Registrations. ......................................12
Section 11. "Piggyback" Registration Rights................................................................12
11.1 Participation in Registration................................................12
11.2 Expenses. .................................................................13
11.3 Underwritten Offerings.......................................................13
11.4 Priority in Registrations. .................................................13
Section 12. Registration Procedures. ......................................................................14
Section 13. Indemnification................................................................................16
13.1 Indemnification by the Company. ...........................................16
13.2 Indemnification by the Holder. ............................................16
13.3 Procedures for Claims........................................................17
Section 14. Rule 144.......................................................................................17
Section 15. Termination of Registration Rights. ..........................................................17
Section 16. Miscellaneous..................................................................................18
16.1 Amendment. .................................................................18
16.2 Choice of Law. .............................................................18
16.3 Headings. ..................................................................18
Form of Warrant Certificate.....................................................................................A-1
Form of Assignment of Warrant...................................................................................B-1
</TABLE>
ii
<PAGE>
Warrant Certificate
Dated as of June 17, 1998
This Warrant Certificate ("Warrant Certificate") certifies that, for
value received, Banc One Capital Partners IV, Ltd., an Ohio limited liability
company (the "Holder"), is entitled to purchase from Brookdale Living
Communities, Inc., a Delaware corporation (the "Company"), up to 20,000 shares
of the Common Stock of the Company as hereinafter provided, in the manner and
subject to the terms and conditions set forth herein.
The Warrant evidenced by this Warrant Certificate is being issued by
the Company to the Holder as additional consideration with respect to a certain
loan transaction entered into between AH Texas Subordinated, LLC, an Ohio
limited liability company (the "Borrower"), as borrower, and Holder, as lender,
effective the date hereof, wherein Holder is making loans to the Borrower in the
aggregate principal amount of $7,382,658 (collectively, the "Loan"). The Company
has issued a limited recourse guarantee in connection with the Loan and will
derive significant benefits from the Loan.
Section 1. Definitions.
1.1 "Affiliate" of any specified Person means any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such specified Person. A Person shall be deemed to control
a corporation if such Person possesses, directly or indirectly, of the power to
vote 10% or more of the Voting Power of a Person, or the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
1.2 "Applicable Law" means, with respect to any Person, any
and all federal, national, state, regional, local, municipal or foreign laws,
statutes, rules, regulations, guidelines, ordinances, licenses, permits,
judicial or administrative decisions of any country, or any political
subdivision, agency, commission, official or court thereof having jurisdiction
over such Person or its business.
1.3 "Adjustment Event" means any of the following events:
(i) the Company declares a dividend or makes a
distribution with respect to outstanding
shares of its Capital Stock, which dividend
or distribution is paid entirely or in part
in shares of Common Stock or Convertible
Securities; or
(ii) the Company subdivides, combines or
reclassifies outstanding shares of its
Common Stock or Convertible Securities.
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In no event shall an offering described in Section 3.5 also constitute
an Adjustment Event.
1.4 "Business Day" means any day other than a Saturday, Sunday
or day on which banking institutions are authorized or required by law or
executive order to be closed in the City of Columbus, Ohio or in the City of
Chicago, Illinois.
1.5 "Capital Stock" of any Person means any and all shares,
interests, participations or other equivalents (however designated) of corporate
stock (including each class of common stock and preferred stock) or partnership
or membership interests of such Person.
1.6 "Charter Documents" mean a Person's formation or other
governing documents, including but not limited to, as applicable, its
certificate or articles of incorporation, by-laws, code of regulations, articles
of organization, operating agreement, certificate of limited partnership and
partnership agreement.
1.7 "Commission" means the United States Securities and
Exchange Commission or any other federal agency at the time administering the
Securities Act.
1.8 "Common Shares" or "Common Stock" means the shares of
common stock, $0.01 par value per share, of the Company, treated as a single
class of stock, at any time outstanding.
1.9 "Company" means Brookdale Living Communities, Inc., a
Delaware corporation, and includes any Person which shall succeed to or assume
the obligations of the Company, through restructuring or otherwise.
1.10 "Convertible Securities" means evidences of indebtedness,
shares of stock or other securities that are convertible into or exchangeable
for, with or without payment of additional consideration in cash or property, or
options, warrants or other rights that are exercisable for, Common Shares,
whether or not the right to convert, exchange or exercise is at the time
exercisable.
1.11 "Formation Registration Rights Agreement" means that
certain Registration Rights Agreement, dated as of May 7, 1997, by and among the
Company, The Prime Group, Inc., Prime Group Limited Partnership, and Prime Group
VI, L.P., as amended.
1.12 "Formation Holders" means the "Holders" as defined in the
Formation Registration Rights Agreement.
1.13 "Holder" means Banc One Capital Partners IV, Ltd., an
Ohio limited liability company, together with its successors and permitted
assigns.
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<PAGE>
1.14 "Loan" has the definition set forth in the second
grammatical paragraph of this Warrant Certificate.
1.15 "Person" means any individual, corporation, limited
liability company, partnership, joint venture, association, joint stock company,
trust, unincorporated organization, governmental authority or any other form of
entity.
1.16 "Preemption Offering" means any offering of Common
Shares, Convertible Securities or other shares of Capital Stock of the Company
by or on behalf of the Company other than:
(i) any Rights Offering;
(ii) the issuance of the Warrant Shares subject to this Warrant
Certificate;
(iii) the issuance or sale of Common Shares pursuant to any employee,
officer or director stock option plan approved by the board of directors of the
Company; provided, that (a) options are granted only with respect to Common
Shares, (b) the minimum exercise price per Common Share for such shares is not
less than the market determined value per share on the date such options were
granted, as determined in accordance with the Company's stock incentive plans,
and (c) no options are granted to Persons other than officers, directors and
employees of the Company or any Subsidiary; and
(iv) the sale and issuance of Common Shares, Convertible Securities or
other Capital Stock pursuant to any Qualified Public Offering.
1.16 "Qualified Public Offering" means the first offer and
sale to the public by the Company or any holders of shares of any class of its
Capital Stock, after the dated hereof, pursuant to a registration statement that
has been declared effective by the Commission.
1.17 "Reorganization Event" means:
(i) any capital reorganization or reclassification or recapitalization of
any shares of Capital Stock of the Company (other than an event described in
Section 1.3);
(ii) any merger or consolidation of the Company with or into any other
Person in which the Company is not the surviving entity, or which
3
<PAGE>
effects a reclassification or recapitalization of any shares of Capital
Stock of the Company; or
(iii) the sale, exchange or transfer of all or substantially all of the
property of the Company to any other Person.
1.18 "Restricted Securities" means (a) any Warrant bearing the
applicable legend set forth in the Warrant, (b) any Warrant Shares which are
evidenced by a certificate or certificates bearing such legend, and (c) unless
the context otherwise requires, any Common Shares which are at the time issuable
upon the exercise of any Warrant and which, when so issued, will be evidenced by
a certificate or certificates bearing such legend.
1.19 "Rights Offering" means any offering of Capital Stock or
Convertible Securities of the Company or any distribution of rights to purchase
Capital Stock or Convertible Securities of the Company that is made
substantially on a pro rata basis among the holders of Capital Stock of the
Company.
1.20 "Securities" means collectively, the Warrant and the
Warrant Shares.
1.21 "Securities Act" means the Securities Act of 1933, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as of the same shall be in effect at the time.
References to a particular section of the Securities Act of 1933 shall include a
reference to the comparable section, if any, of any such similar successor
federal statute.
1.22 "Securities Exchange Act" means the Securities Exchange
Act of 1934, as amended, or any similar federal statute, and the rules and
regulations of the Commission thereunder, all as of the same shall be in effect
at the time. Reference to a particular section of the Securities Exchange Act of
1934 shall include a reference to the comparable section, if any, of any similar
successor federal statute.
1.23 "Subsidiary" means any entity of which more than 50% of
the Voting Power is owned or controlled by the Company at any date of
determination, either directly or through Subsidiaries.
1.24 "Tax(es)" means any federal, state, local or foreign
income, gross receipts, license, franchise, payroll, employment, excise,
unemployment, personal property, severance, disability, real property, sales,
use, transfer, value added, alternative, estimated or other tax of any kind
whatsoever, including any interest, penalty or addition thereto, whether
disputed or not.
4
<PAGE>
1.25 "Transfer", "Transferred" means, with respect to any
item, the sale, exchange, pledge, conveyance, lease, transfer or other
disposition of such item or any interest therein.
1.26 "Voting Power" means with respect to any entity, the
power to vote for or designate members of the board of directors or similar
group, whether exercised by virtue of the record ownership of securities, under
a close corporation or similar agreement or under an irrevocable proxy.
1.27 "Warrant" means the warrant issued by the Company to the
Holder evidenced by this Warrant Certificate.
1.28 "Warrant Certificate" means this warrant certificate or
any replacement warrant certificate issued to the Holder.
1.29 "Warrant Exercise Price" means $30.40 per Warrant Share,
which is equal to 120% of the average of the daily per share closing prices of
the Common Stock on NASDAQ for the ten (10) consecutive trading days prior to
the date hereof.
1.30 "Warrant Expiration Date" means the fourth anniversary of
the date hereof.
1.31 "Warrant Shares" means the Common Shares issuable
upon exercise of the Warrant.
Section 2. Duration and Exercise of Warrant.
2.1 Number of Shares of Common Stock. Subject to the terms and conditions
set forth in this Warrant Certificate, Holder may purchase up to 20,000 shares
of Common Stock of Company. The number of Warrant Shares that may be purchased
by the Holder pursuant to this Section 2.1 in consideration of the payment of
the Warrant Exercise Price is subject to adjustment as provided for in Section
3.
2.2 Warrant Exercise Period. The Warrant shall be exercisable
in a single or partial exercise at any time after the date hereof but on or
before the Warrant Expiration Date.
2.3 Manner of Exercise. The Warrant may be exercised by the
Holder in a single exercise upon surrender of this Warrant Certificate and the
delivery of the Notice of Exercise attached hereto duly completed and executed
on behalf of the Holder, at the principal office of the Company (or at such
other office or agency of the Company as it may designate by notice to the
Holder at the address of the Holder appearing on the books of the Company), upon
payment of an amount equal to the Warrant Exercise Price multiplied by the
number of Warrant Shares to be purchased pursuant to such exercise by wire
transfer or delivery of a certified or cashier's check to
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the Company. Any exercise of a Warrant pursuant to this Warrant Certificate
shall be for only full Warrant Shares and shall not be for partial Warrant
Shares.
2.4 When Exercise Effective. The exercise of the Warrant shall
be deemed to have been effected immediately prior to the close of business on
the Business Day on which (a) the Notice of Exercise shall have been delivered
to the Company, (b) this Warrant Certificate shall have been surrendered to the
Company, and (c) the Company shall have received payment of the Warrant Exercise
Price for the Warrant Shares to be purchased in connection with such exercise as
provided in Section 2.3, and immediately prior to the close of business on such
Business Day the Holder shall be deemed to have become the holder of record of
the Warrant Shares.
2.5 Delivery of Stock Certificates, New Warrant Certificate,
etc. As soon as practicable after the effective exercise of the Warrant, the
Company at its expense (including any applicable issue taxes) will cause to be
issued in the name of and delivered to the Holder a certificate or certificates
for the number of Warrant Shares to which the Holder shall be entitled upon such
exercise.
Section 3. Anti-dilution Adjustment.
3.1 Adjustment Event. Upon the occurrence of any Adjustment
Event, the number of Warrant Shares shall be adjusted immediately after the
applicable record date with respect to such Adjustment Event as follows. The
adjusted number of Warrant Shares shall be a number equal to the number of
Warrant Shares issuable upon exercise of the Warrant immediately prior to such
record date multiplied by a fraction (i) the numerator of which is the number of
outstanding Common Shares immediately after such Adjustment Event, and (ii) the
denominator of which is the number of outstanding Common Shares immediately
prior to the record date. Any such adjustment shall be calculated to the nearest
whole Warrant Share. Notwithstanding any other provision of this Section 3.1, no
adjustment shall be made with respect to the issuance of Common Shares,
Convertible Securities or other Capital Stock after the date hereof when such
issuance constitutes a Preemption Offering.
3.2 Reorganization Event. Upon the occurrence of a
Reorganization Event, there shall thereafter be issuable upon the exercise of
the Warrant (in lieu of the Warrant Shares), as appropriate, the number of
shares of stock, other securities or property to which the Holder would have
been entitled had the Holder exercised the Warrant and received the Warrant
Shares immediately prior to the record date for such Reorganization Event.
Prior to and as a condition of the consummation of any Reorganization
Event, the Company shall cause effective provisions to be made to effect the
purposes of this Section 3.2, including, if appropriate, an agreement among the
Company, any successor to the Company and the Holder.
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3.3 Other Event. In case any event shall occur as to which the
other provisions of this Section 3 are not strictly applicable but the failure
to make any adjustment would not fairly protect the purchase rights represented
by the Warrant in accordance with the essential intent and principles hereof,
then the Holder may request in writing within one hundred twenty (120) days
after the occurrence of such event that the Company examine the propriety of an
adjustment to the number of Warrant Shares issuable upon exercise of the
Warrant. Unless the Company and the Holder shall have mutually agreed upon an
adjustment, or that no adjustment is required, within thirty (30) days after the
receipt of such request, the Company shall appoint a firm of independent
certified public accountants of recognized national standing (which may be the
regularly engaged accountants of the Company), to give an opinion upon the
adjustment, if any, on a basis consistent with the essential intent and
principles established in this Section 3, necessary to preserve the purchase
rights represented by the Warrant. Upon receipt of such opinion, the Company
will promptly mail a copy thereof to the Holder and shall make the adjustments,
if any, described therein. If such opinion states that no such adjustment is
necessary, the Holder shall reimburse the Company for the cost and expense of
such opinion, and if an adjustment is necessary, the Company shall pay the cost
and expense of such opinion. Notwithstanding any other provision of this Section
3.3, no adjustment shall be made with respect to the issuance of Common Shares,
Convertible Securities or other Capital Stock after the date hereof when such
issuance constitutes a Preemption Offering.
3.4 Rights Offering. In the event the Company shall effect a
Rights Offering, the Holder shall be entitled, at its option, to elect to
participate in each and every such offering as if the Warrant had been exercised
and the Holder was, at the time of any such rights offering, then a holder of
that number of Common Shares to which the Holder is then entitled on the
exercise of the Warrant.
3.5 Preemptive Rights. In the event of any Preemption
Offering, (i) the Company shall notify the Holder in writing of the number of
Common Shares, Convertible Securities or other Capital Stock subject to such
Preemption Offering and the cash or cash equivalent purchase price (determined
by the Company in good faith) thereof, and (ii) the Holder shall have the right
for a period of thirty (30) days following such notice to purchase prior to the
exercise of the Warrant up to that number of Common Shares, Convertible
Securities or other Capital Stock that is sufficient to permit the Holder to
maintain the percentage of outstanding Common Shares which the Holder owns or
would be entitled to purchase upon exercise of the Warrant, after giving effect
to the Holder's purchase under this Section 3.5 and the sale of the Common
Shares subject to such Preemption Offering.
The Holder shall have the right, during the period specified herein, to
purchase any or all of the new Common Shares or Convertible Securities that it
is entitled to purchase under this provision at the purchase price and on the
terms stated in the Preemption Offering. Notice by the Holder of its
participation, in whole or in part, in the Preemption Offering shall be in
writing and signed by
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the Holder and shall be delivered to the Company prior to the end of the period
specified herein, setting forth the number of new Common Shares or Convertible
Securities the Holder elects to purchase. With respect to any of the new Common
Shares or Convertible Securities not purchased by the Holder hereunder, the
Company may during the period one hundred and eighty (180) days following the
date of expiration of the Preemption Offering sell to any other Person or
Persons all or any part of such Common Shares or Convertible Securities, but
only on terms and conditions that are no more favorable to such Person or
Persons or less favorable to the Company than those set forth in the Preemption
Offering.
Section 4. Restrictions on Transfer.
4.1 Restrictive Legends. Except as otherwise permitted by this
Section 4, the Warrant, each Warrant issued in exchange or substitution for any
Warrant, each Warrant issued upon the registration of Transfer of any Warrant,
each certificate representing the Warrant Shares and each certificate issued
upon the registration of Transfer of any Warrant Shares, shall be stamped or
otherwise imprinted with a legend in substantially the following form:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF
ANY STATE, AND MAY NOT BE DISTRIBUTED, SOLD, TRANSFERRED, ASSIGNED,
HYPOTHECATED OR OFFERED UNLESS THERE IS IN EFFECT A REGISTRATION
STATEMENT UNDER SUCH ACT AND LAWS COVERING SUCH SECURITIES OR THE
ISSUER RECEIVES AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
ISSUER OR A NO-ACTION LETTER FROM THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION STATING THAT SUCH DISTRIBUTION, SALE, TRANSFER,
ASSIGNMENT, HYPOTHECATION OR OFFER IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT AND LAWS."
4.2 Notice of Proposed Transfer; Opinion of Counsel. Prior to
any Transfer of any Restricted Securities, the Holder will give notice
("Notice") to the Company of the Holder's intention to effect such Transfer.
Each such Notice of a proposed Transfer (a) shall describe the manner and
circumstances of the proposed Transfer in sufficient detail to enable counsel to
render the opinion referred to below, and (b) shall designate counsel for the
Holder. The Holder will submit a copy of such Notice to the counsel designated
in such Notice and the Company will promptly submit a copy of the Notice to its
counsel. The following provisions shall then apply:
(i) If in the opinion of counsel to the Company
the proposed Transfer may be effected
without registration of such Restricted
Securities under the Securities Act, the
Company will promptly notify the
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Holder and the Holder shall thereupon be
entitled to Transfer such Restricted
Securities in accordance with the terms of
the Notice delivered by the Holder to the
Company. Each Warrant or certificate for
Warrant Shares, if any, issued upon or in
connection with such Transfer shall bear the
applicable restrictive legend set forth in
Section 4.1, unless in the opinion of such
counsel, such legend, requires modification
or is no longer required to ensure
compliance with the Securities Act. If for
any reason, counsel for the Company (after
having been furnished with the information
required by this Section 4.2) shall fail to
deliver an opinion to the Company, or the
Company shall fail to notify the Holder as
aforesaid, within sixty (60) days after
receipt of Notice of the Holder's intention
to effect a Transfer, then for all purposes
of the Warrant, the opinion of counsel for
the Holder shall be sufficient to authorize
the proposed Transfer, provided the opinion
is issued by counsel recognized as experts
in security law matters and the opinion of
counsel for the Company shall not be
required in connection with such proposed
Transfer; or
(ii) If, in the opinion of counsel to the
Company, the proposed Transfer may not be
effected without registration of such
Restricted Securities under the Securities
Act, the Company will promptly so notify the
Holder and the Holder shall not be entitled
to Transfer such Restricted Securities until
receipt of a further Notice from the Company
under clause (i) above or until registration
of such Restricted Securities under the
Securities Act has become effective.
Section 5. Availability of Information.
To the extent they are applicable to the Company, the Company will
comply with the reporting requirements of Sections 13 and 15(d) of the
Securities Exchange Act and all other public information reporting requirements
of the Commission (including the requirements of Rule 144 promulgated by the
Commission under the Securities Act) from time to time in effect. The Company
will cooperate with the Holder at the Holder's expense to complete and file any
information reporting forms presently or hereafter required by the Commission as
a condition to the availability of an exemption from the Securities Act for the
Transfer of any Restricted Securities or the Transfer of Restricted Securities
by affiliates of the Company.
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Section 6. Reservation of Stock, Etc.
The Company will at all times prior to the Warrant Expiration Date
reserve and keep available, solely for issuance and delivery upon the exercise
of the Warrant and free from preemptive rights, a sufficient number of shares of
Common Stock to cover the Warrant Shares issuable or exchangeable upon the
exercise of the Warrant. All such shares shall be duly authorized and, when
issued upon such exercise against payment therefor as provided for in Section
2.3, shall be validly issued, fully paid and non-assessable.
Section 7. Capitalization.
The Company represents and warrants that its authorized Capital Stock
as of the date hereof consists solely of (i) 75,000,000 shares of Common Stock,
of which 9,484,582 shares are issued and outstanding and zero (0) shares are
reserved for issuance upon the exercise or conversion of outstanding Convertible
Securities, and 1,070,418 shares are reserved for issuance upon the exercise of
options under the Company's Stock Incentive Plans, and (ii) 20,000,000 shares of
preferred stock of which zero (0) shares are issued and outstanding and that it
has no other Capital Stock authorized, issued or outstanding.
Section 8. Ownership; Registration of Transfer; Exchange and Substitution
of Warrant.
8.1 Ownership of Warrant. Until due presentment for Transfer,
the Company may treat the Person in whose name the Warrant is registered on the
register kept at the Company's principal office as the owner and holder hereof
for all purposes, notwithstanding any notice to the contrary, provided that when
the Warrant has been properly Transferred, the Company shall treat such
transferee as the owner of the Warrant for all purposes, notwithstanding any
Notice to the contrary. Subject to the foregoing provisions and to Section 4,
the Warrant, if properly Transferred, may be exercised by the transferee without
first having a new Warrant Certificate issued.
8.2 Registration of Transfers. Subject to Section 4 hereof,
the Company shall register the Transfer of the Warrant permitted under the terms
hereof upon records to be maintained by the Company for that purpose upon
surrender of this Warrant Certificate to the Company at the Company's principal
office, together with the Form of Assignment attached hereto duly completed and
executed. Upon any such registration of Transfer, a new Warrant Certificate in
substantially the form of this Warrant Certificate, shall be issued to the
transferee.
8.3 Replacement of Warrant Certificate. Upon receipt of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of this Warrant Certificate and of an indemnification reasonably
satisfactory to the Company, or, in the case of any such mutilation, upon
surrender of this Warrant Certificate for cancellation at the Company's
principal
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office, the Company at the Holder's expense will promptly execute and deliver,
in lieu thereof, a new Warrant Certificate of like tenor.
8.4 Expenses. Except as otherwise provided for herein, the
Company will pay all expenses, Taxes (other than transfer and income Taxes) and
other charges in connection with the preparation, issuance and delivery from
time to time of this Warrant Certificate or the Warrant Shares.
Section 9. No Rights as Stockholder.
Nothing contained in this Warrant Certificate shall be construed as
conferring upon the Holder any rights as a stockholder of the Company prior to
the exercise hereof or as imposing any obligation on the Holder to purchase any
Capital Stock of the Company.
Section 10. Demand Registration Rights.
10.1 Demand for Registration. At anytime after the exercise of
the Warrant, and subject to the conditions set forth below, if the Company shall
receive a written request from the Holder requesting that the Company effect the
registration under the Securities Act of all of the Holder's and its Affiliate's
Warrant Shares, the Company shall use its reasonable best efforts to effect such
registration as soon as practicable. Subject to the provisions of Section 10.6,
the Company may register for sale in such registration other securities which
the Company has been requested or otherwise desires to register by the holders
thereof (which may include Common Shares held by the Formation Holders and/or
their permitted assigns); provided, however, that no securities other than
Warrant Shares shall be included in such registration if the managing
underwriter advises the Holder that the inclusion of such other securities would
adversely affect such offering unless the Holder shall have consented in writing
to the inclusion of such other securities. The Company shall not be required to
effect more than one registration pursuant to requests made pursuant to this
Section 10, and shall not be required to effect any registration pursuant to
this Section 10 unless any registration can be made on Form S-3.
10.2 Registration Statement Form. Registrations under this
Section 10 shall be on such appropriate registration forms as shall be selected
by the Company, provided that such forms permit the disposition of the Warrant
Shares in accordance with the Holder's intended method or methods of disposition
as specified in its request for such registration. The Company shall include in
any such registration statement all information which the Holder shall
reasonably request.
10.3 Effective Registration Statement. A registration
requested pursuant to this Section 10 shall not be deemed to have been effected
(i) unless a registration statement with respect thereto has become effective
under the Securities Act, (ii) if such registration is not kept continuously
effective in accordance with Section 12, (iii) if such registration becomes the
subject
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of any stop order, injunction or other order or requirement of the Commission or
other governmental agency or court for any reason other than an act or omission
of the Holder and the effectiveness or such registration statement is not
re-instituted within ninety (90) days, or (iv) if any conditions to closing
specified in the purchase agreement or underwriting agreement entered into in
connection with such registration are not satisfied for any reason other than an
act or omission of the Holder.
10.4 Expenses. The Company shall pay all registration expenses
in connection with any registration requested pursuant to this Section 10. The
Holder shall pay all underwriting discounts and commissions and transfer taxes,
if any, relating to the sale or other disposition of its Warrant Shares.
10.5 Underwritten Offerings. Only if a registration pursuant
to this Section 10 involves any Capital Stock of the Company or any other
securities other than the Warrant Shares held by the Holder and its Affiliates,
may the Holder at its option, request an underwritten offering. The underwriter
or underwriters thereof shall be selected by the Company. To the extent
customary for transactions similar to the transactions contemplated hereby, the
Holder may, at its option, require that any or all of the representations and
warranties by, and the other agreements on the part of, the Company to and for
the benefit of such underwriters shall also be made to and for the benefit of
the Holder. Holder shall not be required to make any representations and
warranties to or agreements with the Company or the underwriters other than
representations, warranties or agreements regarding the Holder, the Holder's
intended method of distribution, any other information provided by the Holder
for inclusion in the registration statement or prospectus and any other
representation required by law or by customary practice of underwritten
secondary offerings.
10.6 Priority in Requested Registrations. If a requested
registration pursuant to this Section 10 involves an underwritten offering, and
if the managing underwriter shall advise the Company in writing that, in its
opinion, the number of securities of any class requested to be included in such
registration exceeds the number which can be sold in (or during the time of)
such offering without delaying or jeopardizing the success of the offering, then
the Company will include in such registration (i) first, all of the Holder's
Warrant Shares that the Company is so advised can be sold in such offering, (ii)
second, to the extent permitted by the managing underwriter, securities to be
registered by the Company for its own account and/or by other holders of
securities (which may include the Formation Holders and/or their permitted
assigns) in such manner and amounts required by the Formation Registration
Rights Agreement, if applicable, or as the Company shall determine.
Section 11. "Piggyback" Registration Rights.
11.1 Participation in Registration. If the Company at any time
proposes to register any securities under the Securities Act (other than by a
registration on Form S-4 or Form S-8 or any successor or similar form and other
than pursuant to Section 10), whether or not for sale for its own
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<PAGE>
account, it will each such time, promptly give Notice to the Holder. Upon the
written request of the Holder made within thirty (30) days after the receipt of
any such Notice (which request shall specify the Warrant Shares intended to be
disposed of and the intended method of disposition), the Holder shall have the
right, subject to the prior registration rights of the Formation Holders, to
participate in such registration on the terms and conditions thereof. If, at any
time after giving written notice of its intention to register any securities and
prior to the effective date of the registration statement filed in connection
with such registration, the Company shall determine for any reason not to
register or to delay registration of such securities, the Company may, at its
election, give written notice of such determination to the Holder and,
thereupon, (i) in the case of a determination not to register, the Company shall
be relieved of its obligation to register any Warrant Shares in connection with
such registration (but not from its obligation to pay any registration expenses
in connection therewith), without prejudice, however, to the rights of the
Holder to request that such registration be effected as a registration under
Section 10, and (ii) in the case of a determination to delay registration, the
Company shall be permitted to delay registering any Warrant Shares for the same
period as the delay in registering such other securities. No registration
effected under this Section 11 shall relieve the Company of its obligation to
effect any registration under Section 10.
11.2 Expenses. The Company will pay all registration expenses
in connection with each registration of Warrant Shares requested pursuant to
this Section 11. The Holder shall pay all underwriting discounts and commissions
and transfer taxes, if any, relating to the sale or other disposition of its
Warrant Shares.
11.3 Underwritten Offerings. If a registration pursuant to
this Section 11 involves an underwritten offering, the Company shall, if
requested by the Holder, and subject to the prior registration rights of the
Formation Holders, arrange for such underwriters to include the Holder's Warrant
Shares among the securities to be distributed by such underwriters. In such
case, the Holder shall be a party to the underwriting agreement and may, at its
option, require that any or all of the representations and warranties by, and
the other agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of the Holder. Holder
shall not be required to make any representations and warranties to or
agreements with the Company or the underwriters other than representations,
warranties or agreements regarding the Holder, the Holder's intended method of
distribution, any other information provided by the Holder for inclusion in the
registration statement or prospectus and any other representation required by
law or by customary practices for such transactions.
11.4 Priority in Registrations. If a registration pursuant to
this Section 11 involves an underwritten offering, and if the managing
underwriter shall advise the Company in writing that, in its opinion, the number
of securities of any class requested to be included in such registration exceeds
the number which can be sold in (or during the time of) such offering without
delaying, jeopardizing or otherwise adversely affecting the success of the
offering, then the Company will include in such registration, to the extent to
which the Company is advised can be sold in such
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<PAGE>
offering, first, all securities proposed by the Company to be sold for its own
account, and second, such Common Shares held by the Formation Holders and/or
their permitted assigns requested by the Formation Holders and/or their
permitted assigns to be included in such registration pursuant to the Formation
Registration Rights Agreement, and third, such Warrant Shares requested to be
included in such registration and all other securities proposed to be sold by
other holders shall be included in such registration pro rata on the basis of
the number of shares so proposed to be sold.
Section 12. Registration Procedures.
If the Company is required to effect the registration of any Warrant
Shares as provided herein (subject to the minimum number of Warrant Shares to be
registered pursuant to Section 10.1), the Company shall proceed in the following
manner:
(i) prepare and as expeditiously as possible file (and in any event within
one hundred and twenty (120) days of receipt of Holder's request under Section
10) with the Commission the registration statement to effect such registration
and use its reasonable best efforts to cause such Registration Statement to
become effective;
(ii) prepare and file with the Commission such amendments and supplements
to such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective and to comply
with the provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement until such time as all Warrant
Shares have been disposed of in accordance with the intended methods of
disposition by the Holder;
(iii) furnish to Holder such number of prospectuses (including preliminary
prospectuses) and copies of each amendment and supplement thereto and such other
documents as Holder may reasonably request in order to facilitate the
disposition of the Warrant Shares;
(iv) use its reasonable best efforts to register or qualify all Warrant
Shares covered by such registration statement under the securities or blue sky
laws of such jurisdictions as the Holder shall reasonably request, to keep such
registration or qualification in effect for so long as such registration
statement remains in effect, and take any other action which may be reasonably
necessary or desirable to enable the Holder to consummate the disposition of its
Warrant Shares in such
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<PAGE>
jurisdictions in accordance with the intended method of disposition,
provided, however, that the Company shall not be required to qualify to do
business, to consent to general service of process, or to register as a broker
or dealer in any such jurisdiction;
(v) enter into and perform its obligations under any underwriting or
placement agreement, and take all reasonable actions in connection therewith in
order to expedite or facilitate the disposition of the Warrant Shares;
(vi) notify the Holder in writing of (i) any stop order or the commencement
of any proceedings for that purpose, (ii) any suspension of the qualification of
the Warrant Shares for sale in any jurisdiction or the commencement of any
proceedings for that purpose, or (iii) any notification received by the Company
regarding the necessity or desirability of filing any supplement or amendment to
the registration statement;
(vii) in any underwritten offering, furnish to the Holder (a) an opinion of
counsel for the Company, dated the effective date of such registration
statement, in form and substance as is customarily given to underwriters, and
(b) a comfort letter, dated the effective date of such registration statement,
signed by the Company's independent public accountants in form and substance as
is customarily given to underwriters, in each case addressed to the underwriters
and the Holder;
(viii) notify Holder upon discovery of the happening of any event as a
result of which the prospectus included in such registration statement includes
an untrue statement of any material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing, or any other event
that would cause the registration statement to no longer be current as required
by the Securities Act, and at the request of the Holder promptly prepare, file
and furnish to Holder a reasonable number of copies of a supplement or an
amendment to such prospectus which may be required on account of such event and
use its reasonable best efforts to cause such supplement or amendment to become
effective;
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<PAGE>
(ix) cause to be maintained a transfer agent for its securities from and
after a date not later than the effective date of such registration statement;
(x) use its reasonable best efforts to list all Warrant Shares covered by
such registration statement on any securities exchange on which any of the
Common Shares is then listed; and
(xi) enter into such agreements and take such other actions as the Holder
shall reasonably request in order to expedite or facilitate the disposition of
such Warrant Shares.
The Holder shall furnish to the Company such information regarding the
Holder and the distribution of the Warrant Shares as the Company may from time
to time reasonably request in writing.
Upon receipt of any Notice from the Company of the happening of any
circumstance or event of the kind described in subdivision (viii) of this
Section 12, the Holder shall forthwith discontinue the disposition of Warrant
Shares pursuant to the registration statement until it receives copies of the
supplemented or amended prospectus or other notification that such disposition
may be resumed, and, if so directed by the Company, will destroy all copies,
other than permanent file copies, then in Holder's possession of the prospectus
relating to such Warrant Shares. The Company will use its reasonable best
efforts to effect such amendment or supplement as promptly as possible.
Section 13. Indemnification.
13.1 Indemnification by the Company. In the event of any
registration pursuant to Section 11 or 12, the Company will, and hereby does,
indemnify and hold harmless the Holder, its directors, partners, members and
officers, any underwriter acting on behalf of the Holder and each other Person,
if any, who controls any such Person within the meaning of the Securities Act
(individually, an "Indemnified Party", and, collectively the "Indemnified
Parties"), against any losses, claims, damages, expenses (including legal fees
and expenses) or liabilities, joint or several, to which any one of them may
become subject under the Securities Act or otherwise; provided, however, that
the Company shall not be so liable (i) to the extent that any such loss, claim,
damage, liability or expense arises out of or is based upon the Company's
reliance upon written information furnished to the Company by any Indemnified
Party expressly stating that it is for use in the registration statement, (ii)
to the extent that any such loss, claim, damage, liability or expense arise out
of such Indemnified Party's failure to provide a copy of the final prospectus,
as the same may be then supplemented or amended, to the purchaser at or prior to
the written confirmation of the sale of Warrant Shares and (iii) to the extent
that any such loss, claim, damage, liability or expense arise
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<PAGE>
from an act or omission in a violation of the Securities Act by Holder or such
Indemnified Party or from the gross negligence or willful misconduct of the
Holder or such Indemnified Party. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Holder or
other Person and shall survive the transfer of the Warrant Shares by the Holder.
13.2 Indemnification by the Holder. As a condition to the
Company's obligation to include any Warrant Shares in any registration statement
filed pursuant to Section 11 or 12, the Holder shall indemnify and hold harmless
(in the same manner and to the same extent as set forth in Section 13.1) the
Company, each director and officer of the Company and any underwriter acting on
behalf of the Company and each other Person, if any, who controls any such
Person within the meaning of the Securities Act, against any losses, claims,
damages, expenses (including legal fees and expenses) or liabilities, joint or
several, to which any one of them may become subject under the Securities Act or
otherwise, to the extent that any such loss, claim, damage, liability or expense
arises out of or is based upon the Company's reliance upon written information
furnished to the Company by such Person expressly stating that it is for use in
the registration statement; provided, however, that the Holder shall not be so
liable to the extent that any such loss, claim, damage, liability or expense
arise out of such Person's (other than the Holder's or any Indemnified Party's)
failure to provide a copy of the final prospectus, as the same may be then
supplemented or amended, to the purchaser at or prior to the written
confirmation of the sale of any securities. Such indemnity shall remain in full
force and effect, regardless of any investigation made by or on behalf of the
Company or any such Person and shall survive the transfer of such Registrable
Securities by the Holder.
13.3 Procedures for Claims. Promptly after receipt of notice
of the commencement of any action or proceeding involving a claim referred to in
this Section 13, an indemnified party will, if a claim in respect thereof is to
be made against an indemnifying party, give Notice to the indemnifying party of
the commencement of such action. Failure to give prompt Notice shall not relieve
the indemnifying party of its obligation under this Section 13, except to the
extent that the indemnifying party is actually prejudiced by such failure. The
indemnifying party shall be entitled to participate in and to assume the defense
of such action at its expense, jointly with any other indemnifying party, with
counsel reasonably satisfactory to the indemnified party; provided, however,
that an indemnified party shall have the right to retain its own counsel, with
fees and expenses thereof to be paid by the indemnifying party, if in such
indemnified party's reasonable judgment an actual or potential conflict of
interest between such indemnified and indemnifying party may exist in respect of
such claim. No indemnifying party shall, without the consent of the indemnified
party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof a release from all liability by the
plaintiff to the indemnified party. The amount paid or payable by an
indemnifying party shall include any legal or other expenses reasonably incurred
by the indemnified party in connection with the investigation or defense of any
such action or claim.
17
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Section 14. Rule 144.
If the Company shall have filed a registration statement, the Company
will file the reports required to be filed by it under the Securities Act and
the Securities Exchange Act and the rules and regulations adopted by the
Commission thereunder. The Company shall, upon the reasonable request of the
Holder, provide the Holder and any institutional investor designated by such
Holder such financial and other information as the Holder may reasonably
determine to be necessary in order to permit the Holder's compliance with Rule
144A under the Securities Act in connection with the resale of any Warrant
Shares, except at such time as the Company is subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act.
Section 15. Termination of Registration Rights.
The registration rights granted herein shall terminate on the date that
neither the Holder nor any Affiliate of the Holder owns any Warrant Shares.
Section 16. Miscellaneous.
16.1 Amendment. This Warrant and any term hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of such change, waiver, discharge
or termination is sought.
16.2 Choice of Law. This Warrant Certificate and the Warrant
evidenced thereby shall be governed by the laws of the State of Delaware without
regard to conflicts of laws principles.
16.3 Headings. The Headings in this Warrant Certificate are
inserted for convenience only and shall not be deemed to constitute a part
hereof.
BROOKDALE LIVING COMMUNITIES, INC.
By:_________________________________
Name: ______________________________
Its:________________________________
18
<PAGE>
FORM OF
NOTICE OF EXERCISE OF WARRANT
The undersigned is the holder of, and hereby elects to exercise, the
Warrant evidenced by that certain Warrant Certificate, dated as of June __, 1998
issued to Banc One Capital Partners IV, Ltd. by Brookdale Living Communities,
Inc. ( the "Warrant Certificate"), and to purchase the Warrant Shares issuable
pursuant to the Warrant Certificate and herewith makes payment in full therefor
by delivery of a certified check payable to the order of the Company in the
amount of the Warrant Exercise Price or by wire transfer of immediately
available funds in the amount of the Warrant Exercise Price and requests that
certificate(s) for such Warrant Shares be issued in the name of and delivered to
_______________________________________________, or in such denominations as
requested by the undersigned in writing to the Company concurrently herewith.
Capitalized terms used herein which are not defined herein, but which are
defined in the Warrant Certificate, shall have the meanings given such terms in
the Warrant Certificate.
Name of Holder (Print):___________________________
Dated:_________________________________
By:__________________________________
Title:_________________________________
19
<PAGE>
FORM OF ASSIGNMENT OF WARRANT
FOR VALUED RECEIVED, __________________ hereby sells, assigns and
transfers to ___________________ all of the rights of the undersigned in and to
this Warrant and in and to that certain Warrant Certificate dated June __, 1998,
issued by Brookdale Living Communities, Inc. to Banc One Capital Partners IV,
Ltd.
Name of
Holder (Print):___________________________
Dated:_________________________________
By:__________________________________
Title:_________________________________
20
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AMENDED AND RESTATED DEVELOPMENT AGREEMENT
This AMENDED AND RESTATED DEVELOPMENT AGREEMENT (this "Agreement"),
dated as of June ___, 1998, is made and entered into by and between AH TEXAS
OWNER LIMITED PARTNERSHIP, an Ohio limited partnership ("Owner"), and BLC OF
TEXAS-II, L.P., a Delaware limited partnership ("Developer").
RECITALS
WHEREAS, Owner owns certain real property and desires to develop it for
use as a senior independent and assisted living facility in Austin, Texas, which
is currently referred to as The Heritage at Gaines Ranch (the "Project");
WHEREAS, Owner has retained Developer to perform development services
in connection with the construction of the Project on the terms and subject to
the conditions set forth in that certain Development Agreement dated as of March
31, 1998 (the "Prior Development Agreement"); and
WHEREAS, Owner and Developer have agreed to terminate the Prior
Development Agreement pursuant to Section 21 hereof, and have agreed to enter
into this Agreement, in each case effective as of the date hereof.
AGREEMENTS
NOW, THEREFORE, in consideration of the recitals and the mutual
promises and covenants herein contained and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. Responsibilities of Developer.
(a) Owner hereby engages Developer to perform the services in
connection with the development and construction of the Project normally and
customarily performed by a developer of a commercial real estate project and as
further described herein, and Developer hereby accepts such engagement and,
subject to the conditions set forth in this Agreement, agrees to provide such
services, at Owner's expense. During the term of this Agreement, Developer shall
have full authority to construct the Project or cause the Project to be
constructed as a senior independent and
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assisted living facility, and shall have full and complete control and reign
over, and use of, the entire Project, including its common areas. Without
limiting the generality of the foregoing, Developer shall, at Owner's expense,
have full authority as follows:
(i) Regulatory Compliance. Developer shall use
reasonable efforts to obtain and maintain all licenses, permits, qualifications
and approvals from any applicable governmental or regulatory authority required
for the construction of the Project. In addition, Developer shall supervise and
coordinate the preparation and filing of (and, where required to do so under
applicable law or regulations, file) all reports or other information required
by all state or other governmental agencies having jurisdiction over the Project
and shall deliver copies of all such reports and information to Owner
simultaneously with such filings. Developer shall cooperate with governmental
inspection and enforcement activities.
(ii) Equipment and Improvements. Developer shall, on behalf of Owner,
acquire or effect the acquisition of equipment and improvements which are needed
to operate the Project or its services.
(iii) Reports. Developer shall supervise and
coordinate the preparation of any construction information if and to the extent
needed to comply with any reporting obligations imposed on the Owner by any
Lender (as hereinafter defined), mortgagees or lessors of the Project except for
those reporting obligations which relate to matters which are within the
exclusive control of the Owner or its affiliates. Developer shall prepare or
cause to be prepared, at Owner's expense, the tax returns of Owner (but not
Owner's partners or affiliates) for Owner's signature. All originals of the
books, forms and records generated by Developer in connection with the
construction of the Project shall be Developer's property.
(iv) Construction Contracts. Developer shall have
the right and authority, at the Owner's expense, to enter into, perform, and
modify its obligations and duties under the construction contract, architectural
contract and all other contracts now or hereafter in force relating to the
development and construction of the Project (the "Construction Contracts") and
to deal with, and enforce the obligations of, all parties thereto.
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(v) Legal Proceedings. Developer shall have the
right and authority, on its own behalf or through legal counsel designated by
Developer, to direct all legal matters and proceedings that are within the scope
of Developer's authority pursuant to this Agreement. Without limiting the
generality of the foregoing, Developer is authorized (without the prior written
consent of Owner) to (a) settle, in the name and on behalf of Owner and on such
terms and conditions as Developer may deem to be in the best interests of the
Project, any and all claims or demands arising out of, or in connection with,
the operation of the Project, whether or not legal action has been instituted
and (b) enter into such agreements with any governmental agencies having
jurisdiction over the Project deemed necessary or desirable by Developer in its
sole and absolute judgment. All such amounts paid in respect of any such
settlements and agreements shall be expenses of the Project and be paid by
Owner. Developer will give notice promptly to Owner of all demands and claims
and all settlements and legal actions, but the failure to give such notice shall
not affect the preceding provisions of this paragraph.
(vi) Other Matters. Developer shall, on its own
behalf and/or on Owner's behalf, be permitted to enter into such other
agreements, contracts, easements and to perform such other acts as are necessary
or desirable, in Developer's sole and absolute discretion, for the completion
and operation of the Project.
(vii) Loan Documents. Developer shall, on its own
behalf and/or on Owner's behalf, be permitted to deal with the providers of
financing for the Project including, without limitation, (A) the first mortgage
loan made by Nomura Asset Capital Corporation with respect to the Project and
other projects (the "Nomura Loan") and (B) the subordinated loan made by Banc
One Capital Partners IV, Ltd. (the "Banc One Loan"). Each provider of financing
for the Project is referred to herein as a "Lender" and the loan documents
evidencing and/or securing financing for the Project are referred to herein as
"Loan Documents". The Loan Documents which evidence and/or secure the Nomura
Loan are referred to herein as "Nomura Loan Documents". Developer shall be
responsible for complying with the terms of the Loan Documents, at Owner's sole
cost and expense, with the exception of those provisions (i) which are within
the exclusive control of Owner and its affiliates, e.g. filing of income tax
returns and certificates and notices relating to Owner's (and its affiliates')
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organizational documents, etc., and (ii) which relate to the repayment of the
debt evidenced and secured by the Loan Documents. Owner (and its affiliates)
shall not amend or waive any provision of any of the Loan Documents without the
prior written consent of Developer.
2. Responsibilities of Owner. Owner shall not interfere with Developer
in connection with the development and construction of the Project in accordance
with the terms of this Agreement. Owner acknowledges and agrees that the
development and construction of the Project is within the exclusive control of
Developer, and Owner hereby grants Developer sole and exclusive possession and
control over the Project. Owner hereby assumes and agrees to pay as and when due
(i) all costs, expenses and obligations incurred by Developer through and
including the date of this Agreement in connection with the development and
construction of the Project which have not been paid as of the date of this
Agreement, which costs, expenses and obligations include, but are not
necessarily limited to retainage held back from the general contractor of the
Project ($_______ as of _________ ___, 1998) and accrued developer's fees
payable by Developer to Brookdale Living Communities, Inc. ($___________ as of
_________ ___, 1998) and (ii) all costs, expenses and obligations incurred by
Developer from and after the date of this Agreement in connection with the
development and construction of the Project.
3. Exclusive Representative/Attorney-in-Fact. It is understood and
agreed that, during the term of this Agreement, Developer shall be the exclusive
representative of Owner for purposes described in this Agreement, including,
without limitation, all acts, functions and activities which would normally and
customarily be performed by a developer of real estate in connection with the
construction of a major commercial project. Any communications with any Lender,
regulatory authorities, governmental agencies, contractors, materialmen
suppliers, employees of the Project shall be directed through Developer. Any and
all notices received by Owner relating to the Project, the Loan Documents, the
Owner or the direct or indirect owners of interests in Owner shall immediately
be forwarded by Owner to Developer. Owner hereby appoints Developer the
attorney-in-fact of Owner, during the term of this Agreement, to take any action
and execute any instruments that Owner is obligated under, or that Owner has
covenanted and agreed hereunder or under the Loan Documents to take
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<PAGE>
or execute, which appointment as attorney-in-fact is irrevocable
and coupled with an interest.
4. Insurance. Developer shall, at Owner's expense, arrange for and
maintain all necessary and proper hazard insurance covering the Project,
including the furniture, fixtures and equipment situated thereon, and as
otherwise required pursuant to the Nomura Loan Documents, all necessary and
proper public liability insurance for the protection of Developer, Owner and, to
the extent required under the Loan Documents, any Lender. Developer shall, at
Owner's expense, also arrange for and maintain all employee health and worker's
compensation insurance for the Project's personnel. Developer shall maintain, at
Owner's expense, such other insurance as required pursuant to the Nomura Loan
Documents. Any insurance provided pursuant to this paragraph shall be an expense
of the Project payable by Owner.
5. Proprietary Interest. The systems, methods, procedures and controls
employed by Developer and any written materials or brochures developed by
Developer to document the same are to remain the property of Developer and are
not, at any time during or after the term of this Agreement, to be utilized,
distributed, copied or otherwise employed or acquired by Owner, except as
authorized by Developer.
6. Term of Agreement. Unless this Agreement is sooner terminated as
hereinafter expressly provided in Section 7 or as otherwise agreed in writing by
both parties, the term of this Agreement shall commence on the date hereof and
shall end on the completion of the Project, except with respect to the Owner's
obligation to pay the Fees (as hereinafter defined) and all other costs and
expenses which are due and payable to Developer under this Agreement, including
without limitation, Section 2 hereof, which shall survive until the discharge in
full of such obligation.
7. Events of Default and Remedies.
(a) Event of Default. At the option of the non-defaulting
party, each of the following shall constitute an "Event of Default" hereunder:
(i) if Owner shall fail to pay or allow payment of any
installment of the Fees due to Developer in accordance with Section 10 hereof
for a period of five (5) days after written notice of
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<PAGE>
such failure from Developer to Owner;
(ii) if Owner fails to perform in any material respect any
term, provision, or covenant of this Agreement (other than as set forth in
Section 7(a)(i)) and (A) such failure continues for ten (10) days after written
notice from Developer to Owner specifying such failure to perform (unless such
failure cannot be cured by the payment of money and cannot reasonably be cured
within such 10-day period, in which event, Owner shall have an additional
period, not to exceed an additional thirty (30) days, in which to cure the
default) or (B) Owner fails to endeavor diligently and continuously to cure such
default as promptly as is practicable;
(iii) if Developer fails to perform in any material respect
any term, provision, or covenant of this Agreement and (A) subject to Section 8
below, such failure continues for thirty (30) days after written notice from
Owner specifying such failure to perform (unless such failure cannot reasonably
be cured within such 30-day period, in which event, Developer shall have an
additional period as is necessary to cure the default) or (B) Developer fails to
endeavor diligently and continuously to cure such default as promptly as is
practicable;
(iv) if either Owner, on the one hand, or Developer, on the
other, is dissolved or liquidated, applies for or consents to the appointment of
a receiver, trustee or liquidator of all or a substantial part of its assets,
files a voluntary petition in bankruptcy or is the subject of an involuntary
bankruptcy filing, makes a general assignment for the benefit of creditors, or
files a petition or an answer seeking reorganization or arrangement with
creditors or to take advantage of any insolvency law, or if an order, judgment
or decree shall be entered by any court of competent jurisdiction, on the
application of a creditor, adjudicating Owner or Developer bankrupt or insolvent
or approving a petition seeking reorganization of Owner or Developer or
appointing a receiver, trustee or liquidator for such party of all or a
substantial part of its assets, and such order, judgment or decree shall
continue unstayed and in effect for any period of sixty (60) consecutive days;
or
(v) if Owner or any affiliate of Owner is in breach or default
of any of its obligations under that certain Equity Option Agreement of even
date herewith with Brookdale Living Communities, Inc. ("Brookdale") or under
that certain Project Option Agreement
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of even date herewith with Brookdale.
(b) Remedies. At any time after the occurrence and during the
continuance of any Event of Default caused by Owner, Developer may, at its
option, do one or more of the following: (i) terminate this Agreement by giving
written notice to Owner and/or (ii) exercise all rights and remedies available
under law or equity. At any time after the occurrence and during the continuance
of an Event of Default caused by Developer, Owner may, as its sole option,
terminate this Agreement in accordance with the terms hereof and Developer shall
have no other liability to Owner hereunder.
8. Force Majeure. The parties will not be deemed to be in violation or
breach of this Agreement if they are prevented from performing any of their
respective obligations hereunder for any reason beyond their control, including,
without limitation, strikes, shortages, war, acts of God, or any applicable
statute, regulation or rule of federal, state or local government or agency
thereof having jurisdiction over the Project or the operations thereof.
9. Withdrawal of Funds by Developer. Owner and Developer acknowledge
and agree that the efficient operation of the Project requires that Developer
have ready access to the funds required therefor. Accordingly, Owner (i)
irrevocably grants Developer the authority, during the term of this Agreement,
to make draw requests in accordance with the Loan Documents, (ii) irrevocably
authorizes each Lender to disburse its loan proceeds directly to Developer in
accordance with such draw requests and the Loan Documents and (iii) Owner shall
not be entitled to any portion of the loan proceeds under the Loan Documents.
Concurrently with the execution of this Agreement, Owner shall remit to
Developer an amount equal to $________, representing an advance payment on a
portion of Developer's expected construction costs.
10. Fees. During the term of this Agreement, in addition to all other
sums owed by Owner to Developer under this Agreement, Developer shall be
entitled to receive development fees equal to the aggregate of Two Million
Dollars ($2,000,000) (collectively, the "Fees"), which shall be payable by Owner
as follows:
(a) reimbursement to Developer of all corporate overhead
and administration costs, capitalized interest costs and all other
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costs incurred by Developer (or its parent corporation, Brookdale Living
Communities, Inc.) in connection with performing the services under this
Agreement up to an aggregate amount of One Million Dollars ($1,000,000), which
shall be due and payable by Owner to Developer from time to time within ten (10)
days following invoice by Developer to Owner; Developer acknowledges receipt of
$________ on account of the Fees owed pursuant to this Section 10(a);
(b) an equal amount as described in Section 10(a) above, which
amount shall be deemed earned on the same date(s) that Developer submitted its
invoice to Owner under Section 10(a) above, but shall be due and payable by
Owner to Developer upon the "Conversion Date," as such term is defined in the
Nomura Loan Documents; and
(c) an additional amount equal to Two Million Dollars
($2,000,000) less the aggregate amount of all sums paid and/or owed under
Sections 10(a) and (b) above, which amount shall be deemed earned on the date
Developer presents its last invoice to Owner under Section 10(a) above, but
shall be due and payable by Owner to Developer upon the "Conversion Date."
In addition to the Fees, Owner agrees to reimburse Developer and
Brookdale Living Communities, Inc.("Brookdale") for any and all costs and/or
expenses paid, or incurred, by Developer or Brookdale in connection with any of
the Loan Documents, including, without limitation, Interest, the Draw Fees,
Servicing Fees, Facility Structuring Fee, non-use fee, Additional Loan
Structuring Fees and Extension Fees (as such terms are defined in the Nomura
Loan Documents) or any other fees or expenses under any of the Loan Documents.
11. Assignment. This Agreement shall not be assigned (including by
operation of law, whether by merger or consolidation (excluding a merger
effected solely for the purpose of changing Owner's jurisdiction of
incorporation that does not affect the ownership interests of Owner in any
material respect) or otherwise) by Owner, on the one hand, or by Developer, on
the other, without the prior written consent of the other party; provided,
however, that to the extent permitted by applicable law and regulations, and
subject to the receipt of all required licenses, permits, approvals and
authorizations of applicable governmental agencies, this Agreement may be
assigned by Developer to one or more corporations
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<PAGE>
or other legal entities all the shares (and, in the case of legal entities other
than corporations, all the equity ownership and voting control) of which are
owned, directly or indirectly, by Developer or by Brookdale Living Communities,
Inc.
12. Notices. Any notices required or permitted to be sent hereunder
shall be delivered personally or by facsimile (with answer back acknowledged) or
mailed, certified mail, return receipt requested, or delivered by overnight
courier service to the following addresses, or such other addresses as shall be
given by notice delivered hereunder, and shall be deemed to have been given upon
delivery, if delivered personally, upon receipt with answer back acknowledged,
if delivered by facsimile, three (3) business days after mailing, if mailed, or
one business day after delivery to the courier, if delivery by overnight courier
service:
If to Owner, to:
AH Texas Owner Limited Partnership
320 King of Prussia Road
Suite 160
Radnor, Pennsylvania 19087
Attn: David B. Fenkell
Facsimile: (610) 902-0777
If to Developer, to:
c/o Brookdale Living Communities, Inc.
77 West Wacker Drive
Suite 4400
Chicago, Illinois 60601
Attn: Darryl W. Copeland, Jr.
Facsimile: (312) 977-3699
With a copy to:
c/o Brookdale Living Communities, Inc.
77 West Wacker Drive
Suite 4400
Chicago, Illinois 60601
Attn: Robert J. Rudnik
Facsimile: (312) 977-3701
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and to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attn: Wayne D. Boberg, Esq.
Facsimile: (312) 558-5700
13. Relationship of the Parties. The relationship of Developer to Owner
in connection with this Agreement shall be that of an independent contractor,
and all acts performed by Developer during the term hereof shall be deemed to be
performed in Developer's capacity as an independent contractor. Nothing
contained in this Agreement is intended to or shall be construed to give rise to
or create a partnership or joint venture or lease between Owner, its successors
and assigns, on the one hand, and Developer, its successors and assigns, on the
other hand.
14. Entire Agreement. This Agreement and any documents executed in
connection herewith contain the entire agreement among the parties with respect
to the subject matter hereof and, subject to the restrictions contained in
Section 11 above, shall be binding upon their respective successors and assigns,
and shall be construed in accordance with the laws of the state where the
Project is located. This Agreement may not be modified or amended except by
written instrument signed by the parties hereto.
15. Contract Modifications for Certain Legal Events. In the event any
state or federal laws or regulations, whether now existing or enacted or
promulgated after the effective date of this Agreement, are interpreted by
judicial decision, a regulatory agency or legal counsel of both parties in such
a manner as to indicate that the structure of this Agreement may be in violation
of such laws or regulations, Owner and Developer agree to cooperate in
restructuring their relationship and this Agreement to eliminate such violation
or to reduce the risk thereof to the extent such restructuring can be
accomplished upon commercially reasonable terms; provided, that any such
restructuring shall, to the maximum extent possible, preserve the underlying
economic and financial arrangements between Owner and Developer. The parties
agree that such amendment may require either or both parties to obtain
appropriate regulatory licenses and approvals.
16. Captions. The captions used herein are for convenience
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of reference only and shall not be construed in any manner to limit
or modify any of the terms hereof.
17. Severability. In the event one or more of the provisions contained
in this Agreement is deemed to be invalid, illegal or unenforceable in any
respect under applicable law, the validity, legality and enforceability of the
remaining provisions hereof shall not in any way be impaired thereby.
18. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, and each such counterpart
shall together constitute but one and the same Agreement.
19. Limitation of Personal Liability of Owner. Notwithstanding any
other provision of this Agreement to the contrary, in no event shall any
officer, director, member, partner, manager, shareholder, incorporator or agent
of Owner or of Owner's affiliates be personally liable to Developer for any of
Owner's obligations under this Agreement.
20. Limitation of Personal Liability of Developer. Notwithstanding any
other provision of this Agreement to the contrary, in no event shall any
officer, director, member, partner, manager, shareholder, incorporator or agent
of Developer or of Developer's affiliates be personally liable to Owner for any
of Developer's obligations under this Agreement.
21. Termination of Prior Development Agreement. Effective as
of the date hereof, the Prior Development Agreement is hereby
terminated.
[signature page follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Development
Agreement to be executed and delivered in their names and on their behalf as of
the date first set forth above.
OWNER:
AH TEXAS OWNER LIMITED PARTNERSHIP,
an Ohio limited partnership
By: AH Texas CGP, Inc.,
its general partner
By:________________________________
Name: David B. Fenkell
Title: President
DEVELOPER:
BLC OF TEXAS-II, L.P.,
a Delaware limited partnership
By: Brookdale Living Communities
of Texas-II, Inc., its general
partner
By:________________________________
Name:______________________________
Title:_____________________________
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MANAGEMENT AGREEMENT
This MANAGEMENT AGREEMENT (this "Agreement"), dated as of June ___,
1998, is made and entered into by and between AH TEXAS OWNER LIMITED
PARTNERSHIP, an Ohio limited partnership ("Owner"), and BLC OF TEXAS-II, L.P., a
Delaware limited partnership ("Manager").
RECITALS
WHEREAS, Owner owns certain real property which is being developed for
use as a senior independent and assisted living facility in Austin, Texas, which
is currently referred to as The Heritage at Gaines Ranch (the "Facility");
WHEREAS, Manager is qualified in the business of operating senior
independent and assisted living facilities such as the Facility, and Owner
desires to engage Manager to operate the Facility; and
WHEREAS, Manager is willing to operate the Facility on the terms and
subject to the conditions set forth in this Agreement.
AGREEMENTS
NOW, THEREFORE, in consideration of the recitals and the mutual
promises and covenants herein contained and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. Responsibilities of Manager.
(a) Owner hereby engages Manager to operate the Facility, and
Manager hereby accepts such engagement and, subject to the conditions set forth
in this Agreement, agrees to operate the Facility, at Owner's expense, in
accordance with the terms set forth in this Agreement. During the term of this
Agreement, Manager shall have full authority to operate and manage the Facility
as a senior independent and assisted living facility in accordance with the
terms and conditions hereof, and shall have full and complete control and reign
over, and use of, the entire Facility, including its common areas. Without
limiting the generality of the foregoing, Manager shall, at Owner's expense,
have full authority as follows:
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(i) Operational Policies and Forms. Subject to the
applicable Annual Budget (as defined in Section 1(a)(xii)), Manager shall
establish and implement such operational policies and procedures, and develop
such new policies and procedures, as Manager may deem necessary to cause or to
ensure the establishment and maintenance of operational standards appropriate
for the nature of the Facility.
(ii) Charges. Manager shall establish the schedules of charges for
residents of the Facility, including appropriate charges for any and all special
services rendered for residents at the Facility.
(iii) Information. Manager shall develop any informational material, mass
media releases, and other related publicity materials, that it deems necessary
for the operation of the Facility.
(iv) Regulatory Compliance. Manager shall use reasonable efforts to
maintain all licenses, permits, qualifications and approvals from any applicable
governmental or regulatory authority required for the operation of the Facility.
In addition, Manager shall supervise and coordinate the preparation and filing
of (and, where required to do so under applicable law or regulations, file) all
reports or other information required by all state or other governmental
agencies having jurisdiction over the Facility and shall deliver copies of all
such reports and information to Owner simultaneously with such filings. Manager
shall cooperate with governmental inspection and enforcement activities.
(v) Equipment and Improvements. Subject to the applicable Annual Budget and
the Nomura Loan Documents (as hereinafter defined), Manager shall, on behalf of
Owner, acquire or effect the acquisition of equipment and improvements which are
needed to maintain or upgrade the quality of the Facility or its services, to
replace obsolete or run-down equipment, or to correct any other deficiencies
which may be identified by Manager during the term of this Agreement, and shall
make, or engage third parties to make, all such repairs, replacements and
maintenance and shall cause to be acquired all necessary equipment, including
replacement equipment.
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<PAGE>
(vi) Accounting. Manager shall supervise and coordinate accounting support
to, and prepare and maintain records for, the Facility. All accounting
procedures and systems utilized in providing said support shall be in accordance
with the operating capital and cash programs developed by Manager, which
programs shall conform to generally accepted accounting principles. Nothing
herein shall preclude Manager from engaging a third party (including related or
affiliated parties) to assist it in the performance of the accounting duties
provided for herein.
(vii) Reports. Manager shall supervise and coordinate the preparation of
any operational information if and to the extent needed to comply with any
reporting obligations imposed on the Owner by any Lenders (as hereinafter
defined) or lessors of the Facility except for those reporting obligations which
relate to matters which are within the exclusive control of the Owner or its
affiliates. Manager shall prepare, or cause to be prepared, at Owner's expense,
the tax returns of Owner (but not Owner's partners or affiliates) for Owner's
signature. All originals of the books, forms and records generated by Manager in
connection with the operation of the Facility shall be Manager's property.
(viii) Bank Accounts. Pursuant to the Nomura Loan Documents, Manager shall
establish an account or accounts and shall deposit therein all money received by
Manager on Owner's behalf from the operation of the Facility. Withdrawals and
payments from this account shall be made only on checks signed by one or more
person or persons designated by Manager. Manager shall give Owner written notice
as to the identity of such authorized signatories on such account.
(ix) Personnel. Manager shall have full power and authority to recruit,
hire, train, promote, direct, discipline and fire all Facility personnel,
including the Executive Director of the Facility; establish salary levels,
personnel policies and employee benefits; and establish employee performance
standards, all as Manager determines to be necessary or desirable during the
term of this Agreement to ensure the efficient and satisfactory operation of all
departments within, and all services offered by, the Facility. All of the
foregoing obligations shall be undertaken in accordance with the Annual Budgets
and applicable law and regulations. All of the Facility personnel shall be the
employees of Manager, unless otherwise agreed by Owner and Manager, and all
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salary, bonuses, fringe benefits, payroll taxes and related expenses payable to
or in respect of the Facility's on-site personnel holding the position of
Executive Director of the Facility and all positions subordinate thereto shall
be expenses of the Facility.
(x) Supplies and Equipment. Manager shall purchase, on behalf of Owner,
supplies and non-capital equipment needed to operate the Facility within the
budgetary limits set forth in the Annual Budgets.
(xi) Legal Proceedings. Manager shall have the right and authority, on its
own behalf or through legal counsel designated by Manager, to direct all legal
matters and proceedings that are within the scope of Manager's authority
pursuant to this Agreement, including without limitation, instituting any
necessary legal actions or proceedings to collect obligations owing to the
Facility, canceling or terminating any contract or agreement relating to the
Facility for breach thereof or default thereunder, and otherwise enforce the
obligations of the residents, sponsors, licensees, customers and any other users
of the Facility. Without limiting the generality of the foregoing, Manager is
authorized (without the prior written consent of Owner) to (a) settle, in the
name and on behalf of Owner and on such terms and conditions as Manager may deem
to be in the best interests of the Facility, any and all claims or demands
arising out of, or in connection with, the operation of the Facility, whether or
not legal action has been instituted and (b) enter into such agreements with any
governmental agencies having jurisdiction over the Facility deemed necessary or
desirable by Manager in its sole and absolute judgment. All such amounts paid in
respect of any such settlements shall be expenses of the Facility and be paid by
Owner. Manager will give notice promptly to Owner of all demands and claims and
all settlements and legal actions, but the failure to give such notice shall not
affect the preceding provisions of this paragraph.
(xii) Annual Budgets.
(A) Preparation and Submission. At least forty- five (45) days prior to
each calendar year that commences during the Term (as hereinafter defined) of
this Agreement, Manager shall submit to Owner a proposed annual budget for the
Facility projecting the revenues available and funds required during such
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fiscal year in order to operate the Facility and to make capital improvements
necessary or desirable in order to keep the Facility's physical plant in good
condition and repair. The proposed annual budget shall be based upon data and
information then available to Manager and shall include, without limitation,
estimated salaries and fringe benefits for all personnel groups, projected
staffing patterns for the Facility, estimates of required capital expenditures
and purchases of equipment, supplies, inventory, food and similar items, and an
estimate of the level of rates and charges to residents of the Facility
sufficient to generate revenue necessary to operate the Facility and make the
capital improvements projected in such budget. The proposed annual budget shall
be an estimate of revenues and costs, and Owner and Manager acknowledge that (1)
projected revenue may not be actually received and (2) projected costs may be
exceeded by actual expenses and capital expenditures incurred in connection with
the operation and maintenance of the Facility. By submitting such a projected
budget, Manager will not be deemed to be providing a guarantee or warranty as to
the projected revenue, expenses or capital expenditures of the Facility.
(B) Adoption. Each annual budget proposed by Manager pursuant to
subparagraph (A) above and, to the extent any Lender has approval rights with
respect thereto, as finally approved by such Lender or Lenders, shall constitute
an "Annual Budget" for all purposes under this Agreement.
(C) Efforts to Operate within Annual Budget. Manager agrees to use
reasonable efforts to operate the Facility in accordance with the Annual
Budgets. Subject to the foregoing limitation, Owner shall be responsible on a
periodic basis, as and when needed, for all expenses and capital expenditures
incurred in connection with the operation and maintenance of the Facility,
including, without limitation, Fees and cost overruns which exceed the
projections in the then current Annual Budget. Notwithstanding anything in this
Agreement, if Manager determines in good faith that the incurrence of any
expenditure is required in order to comply with applicable law or regulations or
to provide services in accordance with the senior independent and assisted
living industry's then-prevailing standards in the area in which the Facility is
located, then Manager shall be entitled to make such expenditures, and all such
expenditures shall be deemed, for all
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purposes of this Agreement, to be in accordance with the then current
Annual Budget.
(xiii) Collection of Accounts. Manager shall issue bills and collect
accounts and monies owed for goods and services furnished by the Facility,
including, but not limited to, enforcing the rights of Owner and the Facility as
creditor under any contract or in connection with the rendering of any services.
(xiv) Contracts. Consistent with or as otherwise contemplated by the Annual
Budget, Manager shall negotiate, enter into, secure, cancel and/or terminate
such agreements and contracts which Manager may deem necessary or advisable for
the operation of the Facility, including, without limitation, the furnishing of
concessions, supplies, utilities, extermination, refuse removal and other
services. Where lawful, said agreements and contracts may be entered into in the
name of and on behalf of Owner.
(xv) Residency Agreements. Manager shall have the right and authority to
negotiate, enter into, amend, cancel and/or terminate residency agreements with
residents of the Facility. Where lawful, said residency agreements may be
entered into in the name of and on behalf of Owner.
(xvi) Other Matters. Manager shall, on its own behalf and/or on Owner's
behalf, be permitted to enter into such other agreements, contracts, easements
and to perform such other acts as are necessary or desirable, in Manager's sole
and absolute discretion, for the operation of the Facility.
(xvii) Loan Documents. Manager shall, on its own behalf and/or on Owner's
behalf, be permitted to deal with the providers of financing for the Facility
including, without limitation, (A) the first mortgage loan made by Nomura Asset
Capital Corporation with respect to the Facility and other facilities (the
"Nomura Loan") and (B) the subordinated loan made by Banc One Capital Partners
IV, Ltd (the "Banc One Loan"). Each provider of financing for the Facility is
referred to herein as a "Lender" and the loan documents evidencing and/or
securing financing for the Facility are referred to herein as "Loan Documents".
The Loan Documents which evidence and/or secure the Nomura Loan are referred to
herein as "Nomura Loan Documents".
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Manager shall be responsible for complying with the terms of the Loan Documents,
at Owner's sole cost and expense, with the exception of those provisions (i)
which are within the exclusive control of Owner and its affiliates, e.g. filing
of income tax returns and certificates and notices relating to Owner's (and its
affiliates') organizational documents, etc., and (ii) which relate to the
repayment of the debt evidenced and secured by the Loan Documents. Owner (and
its affiliates) shall not amend or waive any provision of any of the Loan
Documents without the prior written consent of Manager.
2. Responsibilities of Owner. Owner shall not interfere with Manager in
connection with the management of the Facility in accordance with the terms of
this Agreement. Owner acknowledges that the management of the Facility is within
the exclusive control of Manager and Owner hereby grants Manager sole and
exclusive possession and control over the Facility.
3. Exclusive Representative/Attorney-in-Fact. It is understood and
agreed that, during the term of this Agreement, Manager shall be the exclusive
representative of Owner for purposes described in this Agreement. Any
communications with any Lender, regulatory authorities, governmental agencies,
contractors, suppliers, residents, sponsors, licensees, customers and guests of
the Facility shall be directed through Manager. Any and all notices received by
Owner relating to the Facility, the Loan Documents, the Owner or the direct or
indirect owners of interests in Owner shall immediately be forwarded by Owner to
Manager. Owner hereby appoints Manager the attorney-in-fact, during the term of
this Agreement, of Owner to take any action and execute any instruments that
Owner is obligated under, or that Owner has covenanted and agreed hereunder or
under the Loan Documents to take or execute, which appointment as
attorney-in-fact is irrevocable and coupled with an interest.
4. Insurance. Subject to and in accordance with the Nomura Loan
Documents, Manager shall, at Owner's expense, arrange for and maintain all
necessary and proper hazard insurance covering the Facility, including the
furniture, fixtures and equipment situated thereon, all necessary and proper
public liability insurance for the protection of Manager, Owner and, to the
extent required under the Loan Documents, any Lender. Manager shall, at Owner's
expense, also arrange for and maintain all employee health and worker's
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compensation insurance for the Facility's personnel. Manager shall, at Owner's
expense, also maintain such other insurance as required pursuant to the Nomura
Loan Documents. Any insurance provided pursuant to this paragraph shall be an
expense of the Facility payable by Owner.
5. Proprietary Interest. The systems, methods, procedures and controls
employed by Manager and any written materials or brochures developed by Manager
to document the same are to remain the property of Manager and are not, at any
time during or after the term of this Agreement, to be utilized, distributed,
copied or otherwise employed or acquired by Owner, except as authorized by
Manager.
6. Term of Agreement. Unless this Agreement is sooner terminated as
hereinafter expressly provided in Section 7 or as otherwise agreed in writing by
both parties, the initial term (the "Term") of this Agreement shall commence on
the date the Facility is substantially completed and shall end on the
"Conversion Date", as such term is defined in the Nomura Loan Documents. Upon
any termination of this Agreement pursuant to the immediately preceding
sentence, the parties hereto shall have no further obligations or liabilities
other than the right of Manager to receive Fees through the Termination Date,
and during any such period for which Manager provides services or assists in the
operation of the Facility in connection therewith it shall be entitled to
receive an appropriate fee therefor. In addition, upon any termination of this
Agreement, all right, title and interest of the Manager in and to any licenses,
permits, qualifications, approvals, leases, residency agreements, trade
contracts and/or other agreements that are necessary for the operation of the
Facility shall, at the option of Owner, be assigned to Owner, except in
connection with a synthetic lease transaction, in which case such items shall be
assigned to the lessee thereunder.
7. Events of Default and Remedies.
(a) Event of Default. At the option of the non-defaulting
party, each of the following shall constitute an "Event of Default" hereunder:
(i) if Owner shall fail to pay or allow payment of any
installment of the Fees due to Manager in accordance with Section
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10 hereof for a period of five (5) days after written notice of such failure
from Manager to Owner;
(ii) if Owner fails to perform in any material respect any
term, provision, or covenant of this Agreement (other than as set forth in
Section 7(a)(i)) and (A) such failure continues for ten (10) days after written
notice from Manager to Owner specifying such failure (unless such failure cannot
be cured by the payment of money and cannot reasonably be cured within such
10-day period, in which event, Owner shall have an additional period, not to
exceed an additional thirty (30) days, in which to cure the default) or (B)
Owner fails to endeavor diligently and continuously to cure such default as
promptly as is practicable;
(iii) if Manager fails to perform in any material respect any
term, provision, or covenant of this Agreement and (A) subject to Section 8
below, such failure continues for thirty (30) days after written notice from
Owner specifying such failure to perform (unless such failure cannot reasonably
be cured within such 30-day period, in which event, Manager shall have an
additional period as is necessary to cure the default) or (B) Manager fails to
endeavor diligently and continuously to cure such default as promptly as is
practicable; or
(iv) if either Owner, on the one hand, or Manager, on the
other, is dissolved or liquidated, applies for or consents to the appointment of
a receiver, trustee or liquidator of all or a substantial part of its assets,
files a voluntary petition in bankruptcy or is the subject of an involuntary
bankruptcy filing, makes a general assignment for the benefit of creditors, or
files a petition or an answer seeking reorganization or arrangement with
creditors or to take advantage of any insolvency law, or if an order, judgment
or decree shall be entered by any court of competent jurisdiction, on the
application of a creditor, adjudicating Owner or Manager bankrupt or insolvent
or approving a petition seeking reorganization of Owner or Manager or appointing
a receiver, trustee or liquidator for such party of all or a substantial part of
its assets, and such order, judgment or decree shall continue unstayed and in
effect for any period of sixty (60) consecutive days; or
(v) if Owner or any affiliate of Owner is in breach or default
of any of its obligations under that certain Equity Option
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Agreement of even date herewith with Brookdale Living Communities, Inc.
("Brookdale") or under that certain Project Option Agreement of even date
herewith with Brookdale.
(b) Remedies. At any time after the occurrence and during the
continuance of any Event of Default caused by Owner, Manager may, at its option,
do one or more of the following: (I) terminate this Agreement by giving written
notice to Owner and/or (ii) exercise all rights and remedies available under law
or equity. At any time after the occurrence and during the continuance of an
Event of Default caused by Manager, Owner may, as its sole option, terminate
this Agreement in accordance with the terms hereof and Manager shall have no
other liability to Owner hereunder.
8. Facility Operations.
(a) No Guarantee of Profitability. Manager does not
guarantee that operation of the Facility will be profitable.
(b) Force Majeure. The parties will not be deemed to be in
violation or breach of this Agreement if they are prevented from performing any
of their respective obligations hereunder for any reason beyond their control,
including, without limitation, strikes, shortages, war, acts of God, or any
applicable statute, regulation or rule of federal, state or local government or
agency thereof having jurisdiction over the Facility or the operations thereof.
9. Withdrawal of Funds by Manager. Owner and Manager acknowledge and
agree that the efficient operation of the Facility requires that Manager have
ready access to the funds required therefor. Accordingly, Owner agrees not to
withdraw any funds from the Facility's bank account(s) without the prior written
consent of Manager.
10. Fees. During the term of this Agreement, Manager shall be entitled
to receive management fees (the "Fees") equal to the greater of (i) five percent
(5%) of the gross revenues of the Facility during each month or portion thereof
occurring during such term or (ii) $10,000 per month. Fees shall be paid on a
monthly basis simultaneously with the delivery by Manager to Owner of the
monthly statements provided for in Section 1(a)(vii).
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In addition to the Fees, Owner agrees to reimburse Developer and
Brookdale Living Communities, Inc.("Brookdale") for any and all costs and/or
expenses paid, or incurred, by Manager or Brookdale in connection with any of
the Loan Documents, including, without limitation, Interest, the Draw Fees,
Servicing Fees, Facility Structuring Fee, non-use fee, Additional Loan
Structuring Fees and Extension Fees (as such terms are defined in the Nomura
Loan Documents) or any other fees or expenses under any of the Loan Documents.
11. Assignment. This Agreement shall not be assigned (including by
operation of law, whether by merger or consolidation (excluding a merger
effected solely for the purpose of changing Owner's jurisdiction of
incorporation that does not affect the ownership interests of Owner in any
material respect) or otherwise) by Owner, on the one hand, or by Manager, on the
other, without the prior written consent of the other party; provided, however,
that to the extent permitted by applicable law and regulations, and subject to
the receipt of all required licenses, permits, approvals and authorizations of
applicable governmental agencies, this Agreement may be assigned by Manager to
one or more corporations or other legal entities all the shares (and, in the
case of legal entities other than corporations, all the equity ownership and
voting control) of which are owned, directly or indirectly, by Manager or by
Brookdale Living Communities, Inc.
12. Notices. Any notices required or permitted to be sent hereunder
shall be delivered personally or by facsimile (with answer back acknowledged) or
mailed, certified mail, return receipt requested, or delivered by overnight
courier service to the following addresses, or such other addresses as shall be
given by notice delivered hereunder, and shall be deemed to have been given upon
delivery, if delivered personally, upon receipt with answer back acknowledged,
if delivered by facsimile three (3) business days after mailing, if mailed, or
one business day after delivery to the courier, if delivery by overnight courier
service:
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If to Owner, to:
AH Texas Owner Limited Partnership
320 King of Prussia Road
Suite 160
Radnor, Pennsylvania 19087
Attn: David B. Fenkell
Facsimile: (610) 902-0777
If to Manager, to:
c/o Brookdale Living Communities, Inc.
77 West Wacker Drive
Suite 4400
Chicago, Illinois 60601
Attn: Darryl W. Copeland, Jr.
Facsimile: (312) 977-3699
With a copy to:
c/o Brookdale Living Communities, Inc.
77 West Wacker Drive
Suite 4400
Chicago, Illinois 60601
Attn: Robert J. Rudnik
Facsimile: (312) 977-3701
and
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attn: Wayne D. Boberg
Facsimile: (312) 558-5700
13. Relationship of the Parties. The relationship of Manager to Owner
in connection with this Agreement shall be that of an independent contractor,
and all acts performed by Manager during the term hereof shall be deemed to be
performed in Manager's capacity as an independent contractor. Nothing contained
in this Agreement is intended to or shall be construed to give rise to or create
a partnership or joint venture or lease between Owner, its
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successors and assigns, on the one hand, and Manager, its
successors and assigns, on the other hand.
14. Entire Agreement. This Agreement and any documents executed in
connection herewith contain the entire agreement among the parties with respect
to the subject matter hereof and, subject to the restrictions contained in
Section 11 above, shall be binding upon their respective successors and assigns,
and shall be construed in accordance with the laws of the state where the
Facility is located. Subject to any restrictions in the Nomura Loan Documents,
this Agreement may not be modified or amended except by written instrument
signed by the parties hereto.
15. Contract Modifications for Certain Legal Events. In the event any
state or federal laws or regulations, whether now existing or enacted or
promulgated after the effective date of this Agreement, are interpreted by
judicial decision, a regulatory agency or legal counsel of both parties in such
a manner as to indicate that the structure of this Agreement may be in violation
of such laws or regulations, Owner and Manager agree to cooperate in
restructuring their relationship and this Agreement to eliminate such violation
or to reduce the risk thereof to the extent such restructuring can be
accomplished upon commercially reasonable terms; provided, that any such
restructuring shall, to the maximum extent possible, preserve the underlying
economic and financial arrangements between Owner and Manager. The parties agree
that such amendment may require either or both parties to obtain appropriate
regulatory licenses and approvals.
16. Captions. The captions used herein are for convenience
of reference only and shall not be construed in any manner to limit
or modify any of the terms hereof.
17. Severability. In the event one or more of the provisions contained
in this Agreement is deemed to be invalid, illegal or unenforceable in any
respect under applicable law, the validity, legality and enforceability of the
remaining provisions hereof shall not in any way be impaired thereby.
18. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, and each such counterpart
shall together constitute but one and the same Agreement.
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19. Limitation of Personal Liability of Owner. Notwithstanding any
other provision of this Agreement to the contrary, in no event shall any
officer, director, member, partner, manager, shareholder, incorporator or agent
of Owner or of Owner's affiliates be personally liable to Manager for any of
Owner's obligations under this Agreement.
20. Limitation of Personal Liability of Manager. Notwithstanding any
other provision of this Agreement to the contrary, in no event shall any
officer, director, member, partner, manager, shareholder, incorporator or agent
of Manager or of Manager's affiliates be personally liable to Owner for any of
Manager's obligations under this Agreement.
[signature page follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Management
Agreement to be executed and delivered in their names and on their behalf as of
the date first set forth above.
OWNER:
AH TEXAS OWNER LIMITED PARTNERSHIP,
an Ohio limited partnership
By: AH Texas CGP, Inc., its general
partner
By:___________________________
Name: David B. Fenkell
Title: President
MANAGER:
BLC OF TEXAS-II, L.P.,
a Delaware limited partnership
By: Brookdale Living Communities
of Texas-II, Inc., its general
partner
By:___________________________
Name:_________________________
Title:________________________
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Equity Option Agreement
This Equity Option Agreement (this "Agreement"), dated as of
June 17, 1998, is made and entered into by and among AH Texas Investor, Inc., an
Ohio corporation (the "Investor"), AH Texas Subordinated, LLC, an Ohio limited
liability company (the "Company"), AH Texas CGP, Inc., an Ohio corporation (the
"General Partner"), AH Texas Owner Limited Partnership, an Ohio limited
partnership (the "Owner" and together with the Investor, the Company and the
General Partner shall be individually referred to as an "Owner Related Entity"
and shall be collectively referred to as the "Owner Related Entities"), and
Brookdale Living Communities, Inc., a Delaware corporation ("Brookdale").
RECITALS
WHEREAS, the Company was formed as of March 27,1998 by the
filing and recording of the Company's Articles of Organization in the Office of
the Secretary of State of the State of Ohio, pursuant to an Operating Agreement
dated as of March 27, 1998 and amended and restated pursuant to an Amended and
Restated Operating Agreement dated as of June 17, 1998 (as so amended and
restated, and as it may be further amended from time to time with the consent of
Brookdale, the "Operating Agreement");
WHEREAS, the Investor is the sole member of, and owns one
hundred percent (100%) of the membership interests (the "Membership Interests")
in, the Company;
WHEREAS, the Company is the sole limited partner of, and owns
ninety-nine percent (99%) of the partnership interests (the "Limited Partnership
Interests") in, the Owner, for which a Certificate of Limited Partnership was
filed with the Secretary of State of the State of Ohio on March 27, 1998 and
which was organized under an Agreement of Limited Partnership, effective as of
March 27, 1998 and amended and restated pursuant to an Amended and Restated
Agreement of Limited Partnership dated as of June 17, 1998 (as so amended and
restated, and as it may be further amended from time to time with the consent of
Brookdale, the "Partnership Agreement");
WHEREAS, the Company is the sole shareholder in, and owns one
hundred percent (100%) of the issued and outstanding shares of capital stock
(the "Capital Stock") of, the General Partner;
WHEREAS, the General Partner is the sole general partner of,
and owns one percent (1%) of the partnership interests (the "General Partnership
Interest") in, the Owner;
WHEREAS, the Owner intends to develop a congregate housing
facility with an assisted living component for the elderly in Austin, Texas
which is currently referred to as "The Heritage at Gaines Ranch" (the
"Project");
WHEREAS, Nomura Asset Capital Corporation, a Delaware
corporation (the "Senior Lender"), has agreed to make a loan to the Owner up to
the sum of $24,250,000 to fund a portion of the costs of the Project pursuant to
a Building Loan Agreement of even date herewith (as it may be amended from time
to time with the consent of Brookdale, the "Building Loan Agreement") among the
Owner, BLC (as hereinafter defined) and the Senior Lender and a Loan Agreement
of
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even date herewith (as it may be amended from time to time with the consent of
Brookdale, the "Senior Loan Agreement" and, together with the Building Loan
Agreement, the "Senior Loan Agreements") among the Owner, BLC and the Senior
Lender;
WHEREAS, Banc One Capital Partners IV, Ltd., an Ohio limited
liability company (the "Subordinate Lender"), has agreed to loan to the Company
up to the sum of $_______________, pursuant to the terms of a certain Loan
Agreement of even date herewith (as it may be amended from time to time with the
consent of Brookdale, the "Subordinate Loan Agreement") between the Subordinate
Lender and the Company and as further evidenced by two certain promissory notes
of even date herewith (as amended or extended from time to time, and together
with any notes taken in substitution therefor, the "Subordinate Notes"), payable
by the Company to the Subordinate Lender, which the Company will contribute as
equity to the Owner to fund a portion of the costs of the Project;
WHEREAS, BLC of Texas-II, L.P., a Delaware limited partnership
("BLC") and affiliate of Brookdale will be the developer of the Project pursuant
to an Amended and Restated Development Agreement of even date herewith (as it
may be amended from time to time, the "Development Agreement") between the Owner
and BLC and will be the manager of the Project pursuant to a Management
Agreement of even date herewith (as it may be amended from time to time, the
"Management Agreement") between the Owner and BLC;
WHEREAS, the Investor has made a capital contribution in the
amount of $900,000 to the Company, which the Company has in turn contributed as
capital to the Owner to fund a portion of the costs of the Project; and
WHEREAS, the Investor is willing to grant an option to
Brookdale to purchase the Membership Interests upon the terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of the mutual agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Owner Related Entities and
Brookdale hereby agree as follows:
1. The Option. The Investor hereby grants an irrevocable
option (the "Option") to Brookdale to purchase the Membership Interests at the
Purchase Price (as defined in Section 3 hereof) in accordance with the terms of
this Agreement. The Option shall terminate and expire on the date (the "Option
Termination Date") that is the earliest of (a) ten (10) days after the principal
amount of the Subordinate Notes is due and payable, on the stated maturity date
thereof, as it may be extended pursuant to subsection 2.3(a) of the Subordinate
Loan Agreement, (b) thirty (30) days after the date specified by the Subordinate
Lender in a prior or contemporaneous notice to Brookdale as the date on which
the unpaid balance of all principal and interest accrued on the Subordinate
Notes has been declared by the Subordinate Lender to be, or shall have become
automatically, due and payable pursuant to Section 8.2 of the Subordinate Loan
Agreement, and (c) the Exercise Date, as defined in the Intercreditor and
Subordination Agreement of even date
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<PAGE>
herewith (as it may be amended from time to time, the "Intercreditor Agreement")
among the Senior Lender, the Subordinate Lender, the Owner, the Company, the
Investor, the General Partner, BLC and Brookdale. In no event shall the Option
Termination Date be later than July 31, 2002.
2. Triggering Events. The Option is exercisable by Brookdale
on or after the earliest to occur of the following events or dates (each a
"Triggering Event"):
(a) An election by the Company to prepay the
Subordinate Notes in accordance with subsection 2.3(e) of the
Subordinate Loan Agreement.
(b) Five days prior to the date on which the
principal amount of the Subordinate Notes is due and payable, whether
on the stated maturity date thereof, as it may be extended pursuant to
subsection 2.3(a) of the Subordinated Loan Agreement, or upon the
earlier acceleration thereof.
(c) An Investor Default (as defined in Section 15
hereof) has occurred.
3. Purchase Price. The "Purchase Price" for the Membership
Interests shall be an amount equal to $900,000, plus the amount required to
produce a 17.11% internal rate of return thereon, computed using the methodology
described in Schedule I attached hereto, minus the aggregate amount of any
distributions made by the Company to the Investor (excluding distributions
permitted by paragraph (h) of Section 11).
4. Exercise of the Option. (a) Brookdale may exercise the
Option by giving the Investor and the Escrow Agent (as defined in Section 17
hereof) at least five (5) days' prior written notice (the "Option Notice"), and
if it is exercising the Option upon the occurrence of a Triggering Event
described in paragraph (a) of Section 2 hereof, by giving the Subordinate Lender
on behalf of the Company notice of an optional prepayment in accordance with
subsection 2.3(e) of the Subordinate Loan Agreement. The Option Notice shall
specify the date (the "Closing Date") of the exercise of the Option, which shall
be the date of the repayment in full of the Subordinated Notes, and in any case
shall not be later than the Option Termination Date. If Brookdale exercises the
Option prior to the Option Termination Date but fails to close prior to the
Exercise Date, then the Option shall terminate and Brookdale's rights shall
cease and be null and void. The Company hereby appoints Brookdale as its true
and lawful attorney-in-fact for purposes of giving notice of optional prepayment
in accordance with subsection 2.3(e) of the Subordinate Loan Agreement, which
appointment as attorney-in-fact is irrevocable and is coupled with an interest.
Anything herein to the contrary notwithstanding, the exercise of the Option
shall be conditioned upon the repayment in full of the Subordinate Notes in
accordance with the Subordinate Loan Agreement.
(b) In the event that at the time of the exercise of
the Option by Brookdale, it has not exercised the option (the "Michigan
Equity Option") granted to it pursuant to the Equity Option Agreement
of even date herewith among AH Michigan Investor, Inc., AH Michigan
Subordinated, LLC (the "Michigan LLC"), AH Michigan CGP,
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Inc., AH Michigan Owner Limited Partnership and Brookdale to purchase
one hundred percent (100%) of the membership interests in the Michigan
LLC, it shall be obligated to exercise such option, and to satisfy or
cause to be satisfied the conditions to such exercise (including,
without limitation, the repayment in full of the subordinate notes
issued by the Michigan LLC to the Subordinate Lender), prior to the
termination thereof.
(c) In the event that Brookdale exercises the
Michigan Equity Option prior to its exercise of the Option, it shall be
obligated to exercise the Option, and to satisfy or cause to be
satisfied the conditions to such exercise (including, without
limitation, the repayment in full of the Subordinate Notes), prior to
the Option Termination Date.
5. Closing. (a) Upon receipt of the Option Notice, the
Investor and Brookdale shall schedule a closing (the "Closing") to occur on the
Closing Date at the Chicago, Illinois offices of counsel to Brookdale. The
Investor and Brookdale shall each be solely responsible for its own costs
incurred in connection with the Closing; provided, however, that Brookdale shall
pay, or reimburse the Investor for, all reasonable legal fees and expenses of
the Investor incurred in connection with the Closing in an amount not to exceed
$2,500 when aggregated with all other legal fees and expenses paid or reimbursed
by Brookdale pursuant to clause (ii) of paragraph 6(c) and clause (ii) of
paragraph 7(c) of the Property Option Agreement of even date herewith ( as it
may be amended from time to time, the "Property Option Agreement") among the
Company, the Owner and Brookdale.
(b) Contemporaneously with the execution and delivery
of this Agreement, the Investor is delivering to the Escrow Agent an
Assignment and Acceptance Agreement in the form of Exhibit A attached
hereto (the "Assignment" and together with any other documents and
instruments delivered pursuant to clause (v) of paragraph (c) below,
the "Assignment Documents"), undated, but otherwise duly executed by
the Investor.
(c) At the Closing, the Escrow Agent shall, in
accordance with the escrow instructions set forth in Section 17 hereof,
deliver the Purchase Price to the Investor, and the Assignment to
Brookdale or its nominee, and the Investor shall deliver to Brookdale
or its nominee the following items:
(i) the stock certificate(s) representing the Capital Stock;
(ii) original executed copies (or if unavailable, photocopies) of the
Company's Articles of Organization, the Operating Agreement, the Owner's
Certificate of Limited Partnership, the Partnership Agreement and the General
Partner's Articles of Incorporation and Regulations, all certified by an
appropriate officer of the relevant Owner Related Entity as of the Closing Date,
as being true, correct, complete and unamended (or if amended with the consent
of Brookdale, certified to such effect) and in full force and effect as of such
date;
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(iii) a certificate of an appropriate officer of each Owner Related Entity,
dated the Closing Date, certifying that the representations and warranties of
such Owner Related Entity set forth in the applicable Section of this Agreement
are true and correct as of the Closing Date as though made by such Owner Related
Entity on the Closing Date;
(iv) the books and records of each Owner Related Entity; and
(v) such other documents and instruments of transfer as are necessary to
complete the transfer of the Membership Interests.
(d) The representations and warranties made by the Owner Related Entities
as of the Closing Date shall survive the Closing.
(e) Prior to the Closing, Brookdale shall conduct Uniform Commercial Code,
tax lien, pending suit and judgment and any other appropriate searches against
each of the Owner Related Entities.
6. Grant of Security Interest. (a) To secure the performance by the Owner
Related Entities of their respective obligations hereunder and the repayment of
any and all indebtedness and other liabilities arising from any breach by any of
the Owner Related Entities of its obligations hereunder, the Investor hereby
grants to Brookdale a continuing security interest in the Membership Interests
and all proceeds thereof, including, without limitation, the right to receive
any and all payments or distributions of any and every kind whatsoever, whether
in cash, property or otherwise, at any time made, owing or payable with respect
to the Membership Interests, together with all applicable rights, powers and
privileges of the Investor as the sole member and manager of the Company
pursuant to the Operating Agreement (all of the foregoing being hereinafter
collectively referred to as the "Collateral"). The security interest in the
Collateral granted pursuant to the preceding sentence shall be subordinate to
the security interest of the Subordinate Lender in the Membership Interests and
the proceeds thereof (the "Subordinate Lender Security Interest") granted by the
Investor to the Subordinate Lender pursuant to the Security Agreement - Pledge
and Assignment of Membership Interests dated as of the date hereof (the
"Subordinate Lender Security Agreement") between the Investor and the
Subordinate Lender.
(b) Subject to the rights of the Subordinate Lender under the
Subordinate Lender Security Agreement, the Investor does hereby irrevocably
constitute and appoint Brookdale its true and lawful attorney-in-fact, with full
power of substitution, for the Investor and in its name, place and stead, to
ask, demand, collect, receive, receipt for, sue for, compound and give
acquittance for any and all sums or properties which may be or become due,
payable or distributable with respect to the Collateral, with full power to
settle, adjust or compromise any claim thereunder as fully as the Investor could
do, and to endorse or sign the name of the Investor on all items, instruments
and commercial paper given in payment or in part payment thereof, and all
documents of satisfaction, discharge or receipt required or requested in
connection therewith, and, in its discretion, to file any
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<PAGE>
claim or take any other action or proceeding, either in its own name or in the
name of the Investor, or otherwise, which Brookdale may deem necessary or
appropriate to perfect Brookdale's security interest in or collect or otherwise
realize upon any and all of the Collateral, or effect a transfer thereof
pursuant to the Operating Agreement and this Agreement, or which may be
necessary or appropriate to protect and preserve the right, title and interest
of Brookdale in and to the Collateral and the security intended to be afforded
hereby.
(c) Without limiting the foregoing, the Investor agrees that
it will, upon request of Brookdale, execute and deliver such further documents
and instruments (including, without limitation, Uniform Commercial Code
Financing Statements) and do and perform such other acts and things (including,
without limitation, obtaining such consents hereto, and giving such notices
hereof, as Brookdale may reasonably request from time to time) as Brookdale may
deem necessary or appropriate to more effectively vest in and secure to
Brookdale the Collateral or other rights or interests due or hereafter to become
due.
(d) Upon the occurrence and continuance of an Investor
Default, in addition to the rights and remedies Brookdale may have hereunder, it
shall have all the rights and remedies of a secured party under applicable law
with respect to the Collateral. All costs and expenses of any kind whatsoever,
of collection and enforcement of the obligations secured hereby or any rights or
remedies hereunder (including without limitation, all costs of disposing of the
Collateral, together with court costs and reasonable attorneys' fees), or
incurred in realizing upon the Collateral or in enforcing this Agreement, shall
be deemed to be additional obligations secured hereby, and may be deducted and
retained by Brookdale from the proceeds of disposition of the Collateral and
applied to the payment and satisfaction of such costs and expenses.
(e) The security interest of Brookdale in the Collateral shall
terminate upon the earlier of the Closing or the Option Termination Date, and
upon such termination, Brookdale shall promptly deliver to the Investor the
appropriate Uniform Commercial Code termination statements.
7. Investor Representations. The Investor represents and
warrants to Brookdale as of the date hereof and as of the Closing Date as
follows:
(a) The Investor is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Ohio and has all requisite power and authority to execute, deliver and
perform its obligations under this Agreement and the Assignment
Documents and to own and operate its property and to carry on its
business as now conducted. The Investor is duly qualified to do
business in each jurisdiction where the nature of its operations and
applicable laws require such qualification, except where the failure to
be so qualified would not have a material adverse effect on the
Investor.
(b) The execution, delivery and performance of this
Agreement by the Investor have been, and as of the Closing Date, the
execution, delivery and performance of the Assignment Documents by the
Investor will have been, duly authorized by all necessary
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<PAGE>
corporate action, and this Agreement is, and when executed and
delivered, the Assignment Documents will be, the legal, valid and
binding obligation of the Investor, enforceable in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency
or the laws or equitable principles affecting the enforcement of
creditors' rights generally.
(c) The execution, delivery and performance by the
Investor of this Agreement do not, and the execution, delivery and
performance by the Investor of the Assignment Documents will not,
contravene the terms of the Investor's Articles of Incorporation or
Regulations, true, correct and complete copies of which have been
delivered to Brookdale, conflict with or result in any breach or
contravention of, or the creation of any lien under, any agreements or
instruments to which it is a party or by which it or any of its
property is bound or violate any state or federal law and all required
approvals therefor, if any, have been, or will have been as of the
Closing Date, duly obtained.
(d) The Membership Interests constitute all of the
membership interests in the Company, and the Investor owns the
Membership Interests, free of any liens, claims or encumbrances, other
than, as of the date hereof, the Subordinate Lender Security Interest
and the Special Management Interests (as defined in the Intercreditor
Agreement).
(e) There is no litigation or other proceeding
pending against the Investor which could have a material adverse effect
on the Investor's ability to consummate the transactions contemplated
by this Agreement and the Assignment Documents.
(f) The Investor's sole place of business is its
address set forth for notices in paragraph (c) of Section 18 hereof.
8. Company Representations. The Company represents and
warrants to Brookdale as follows as of the date hereof and as of the Closing
Date:
(a) The Company is a limited liability company duly
organized, validly existing and in good standing under the laws of the
State of Ohio and has all requisite power and authority to execute,
deliver and perform its obligations under this Agreement and to own and
operate its property and to carry on its business as now conducted. The
Company is duly qualified to do business in each jurisdiction where the
nature of its operations and applicable laws require such
qualification, except where the failure to be so qualified would not
have a material adverse effect on the Company.
(b) The execution, delivery and performance of this
Agreement by the Company have been duly authorized by all necessary
organizational action, and this Agreement is the legal, valid and
binding obligation of the Company, enforceable in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency
or the laws or equitable principles affecting the enforcement of
creditors' rights generally.
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(c) The execution, delivery and performance by the
Company of this Agreement do not contravene the terms of the Company's
Articles of Organization or the Operating Agreement, true, correct and
complete copies of which have been delivered to Brookdale, conflict
with or result in any breach or contravention of, or the creation of
any lien under, any agreements or instruments to which it is a party or
by which it or any of its property is bound or violate any state or
federal law and all required approvals therefor, if any, have been duly
obtained.
(d) The Company is the sole limited partner of the
Owner, and the Limited Partnership Interests constitute ninety-nine
(99%) of the partnership interests in, the Owner.
(e) Subject to the Senior Lender's rights with
respect to and any rights that it may acquire upon the acquisition of
the Preferred Equity and the Warrants (as such terms are defined in the
Senior Loan Agreement), the Company owns the Limited Partnership
Interests free of any liens, claims or encumbrances.
(f) The Membership Interests are not represented by
any certificates and/or similar instruments, and the Operating
Agreement contains a description of the rights of Brookdale pursuant to
this Agreement.
(g) There is no litigation or other proceeding
pending against the Company which could have a material adverse effect
on the Company's ability to consummate the transactions contemplated by
the Property Option Agreement and as of the Closing Date, if
applicable, the Assignment (as defined therein).
(h) All of the representations and warranties of the
Company set forth in Article V of the Subordinate Loan Agreement are
true and correct as though such representations and warranties were set
forth herein for Brookdale's benefit.
(i) All of the representations and warranties of the
Company set forth in Section 8 of the Property Option Agreement are
true and correct.
(j) The Company has no outstanding liabilities,
contingent or otherwise, other than, as of the date hereof, (i) the
indebtedness evidenced by the Subordinated Notes and (ii) liabilities
for which Brookdale or the Subordinate Lender (or any one or more of
their affiliates) is liable to the Company.
9. General Partner Representations. The General Partner
represents and warrants to Brookdale as follows as of the date hereof and as of
the Closing Date:
(a) The General Partner is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Ohio and has all requisite power and
8
<PAGE>
authority to execute, deliver and perform its obligations under this
Agreement and to own and operate its property and to carry on its
business as now conducted. The Company is duly qualified to do business
in each jurisdiction where the nature of its operations and applicable
laws require such qualification, except where the failure to be so
qualified would not have a material adverse effect on the General
Partner.
(b) The execution, delivery and performance of this
Agreement by the Company have been duly authorized by all necessary
corporate action, and this Agreement is the legal, valid and binding
obligation of the Company, enforceable in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency, or the
laws or equitable principles affecting the enforcement of creditors'
rights generally.
(c) The execution, delivery and performance by the
General Partner of this Agreement do not contravene the terms of the
General Partners's Articles of Incorporation or Regulations, true,
correct and complete copies of which have been delivered to Brookdale,
conflict with or result in any breach or contravention of, or the
creation of any lien under, any agreements or instruments to which it
is a party or by which it or any of its property is bound or violate
any state or federal law and all required approvals therefor, if any,
have been duly obtained.
(d) The General Partner is the sole general partner
of the Owner, and the General Partnership Interest constitutes one
percent (1%) of the partnership interests in, the Owner.
(e) Subject to the Senior Lender's rights with
respect to and any rights that it may acquire upon the acquisition of
the Preferred Equity and the Warrants (as such terms are defined in the
Senior Loan Agreement), the General Partner owns the General
Partnership Interest free of any liens, claims or encumbrances.
(f) All of the representations and warranties made on
behalf of the General Partner set forth in Article V of the Subordinate
Loan Agreement are true and correct as though such representations and
warranties were set forth herein for Brookdale's benefit.
(g) The General Partner has no outstanding
liabilities, contingent or otherwise, other than (i) those of Owner
referred to in paragraph (g) of Section 10 hereof for which it is
liable by virtue of being general partner of Owner and (ii) liabilities
for which Brookdale or the Subordinate Lender (or one or more of their
affiliates) is liable to the General Partner.
10. Owner Representations. The Owner represents and warrants
to Brookdale as follows as of the date hereof and as of the Closing Date:
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<PAGE>
(a) The Owner is a limited partnership duly
organized, validly existing and in good standing under the laws of the
State of Ohio and has all requisite power and authority to execute and
deliver this Agreement, to perform its obligations under Section 14
hereof and to own and operate its property and to carry on its business
as now conducted. The Owner is duly qualified to do business in each
jurisdiction where the nature of its operations and applicable laws
require such qualification, except where the failure to be so qualified
would not have a material adverse effect on the Owner.
(b) The execution and delivery of this Agreement and
the performance by the Owner of its obligations under Section 14 hereof
have been duly authorized by all necessary partnership action, and this
Agreement is the legal, valid and binding obligation of the Owner,
enforceable in accordance with its terms, except as enforcement may be
limited by bankruptcy, insolvency or the laws or equitable principles
affecting the enforcement of creditors' rights generally.
(c) The execution and delivery of this Agreement and
the performance by the Owner of its obligations under Section 14 hereof
do not contravene the terms of the Partnership Agreement, a true,
correct and complete copy of which has been delivered to Brookdale,
conflict with or result in any breach or contravention of, or the
creation of any lien under, any agreements or instruments to which it
is a party or by which it or any of its property is bound or violate
any state or federal law and all required approvals therefor, if any,
have been duly obtained
(d) There is no litigation or other proceeding
pending against the Owner which could have a material adverse effect on
the Owner's ability to consummate the transactions contemplated by the
Property Option Agreement and as of the Closing Date, if applicable,
the Property Conveyance Documents (as defined therein).
(e) All of the representations and warranties made on
behalf of the Owner set forth in Article V of the Subordinate Loan
Agreement and Article IV of the Senior Loan Agreement are true and
correct as though such representations and warranties were set forth
herein for Brookdale's benefit.
(f) All of the representations and warranties of the
Owner set forth in Section 9 of the Property Option Agreement are true
and correct.
(g) The Owner has no outstanding liabilities,
contingent or otherwise, other than those incurred under or permitted
by the Senior Loan Agreements, any of the Loan Documents (as defined
therein), the Management Agreement and, as of the date hereof, the
Development Agreement.
11. Investor Covenants. Until the earlier of the Closing or
the Option Termination Date, unless Brookdale otherwise consents in writing, the
Investor:
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(a) Shall preserve and maintain its legal existence,
rights, franchises and privileges in the State of Ohio, and shall
qualify and remain qualified in each jurisdiction in which such
qualification is necessary or desirable in view of its business and
operations or the ownership of its property.
(b) Shall at all times observe and comply with the
provisions of Articles Fifth, Sixth and Tenth of its Articles of
Incorporation as in effect on the date hereof.
(c) Shall not amend the Company's Articles of
Organization or the Operating Agreement and shall at all times observe
and comply with the provisions thereof.
(d) Shall not cause or permit the dissolution of the
Company.
(e) Shall not permit the issuance of any member's
interests (or any other interests) in the Company in addition to the
Membership Interests.
(f) Shall continue to own the Membership Interests
(which shall continue to constitute 100% of the membership interests in
the Company), free of any liens, claims or encumbrances, other than the
Subordinate Lender Security Interest and the security interest created
by this Agreement.
(g) Shall not file a voluntary petition in bankruptcy
and shall use its best efforts to contest any involuntary petition
filed against it.
(h) Shall not permit or accept any distributions by
the Company, other than distributions to be applied to the payment of
income taxes and funded by advances to the Company made by the
Subordinate Lender pursuant to subsection 2.6(a) of the Subordinate
Loan Agreement.
(i) Shall give Brookdale at least thirty (30) days'
prior written notice of any change in its place of business.
(j) Shall not take any actions that might adversely
affect Brookdale's rights under, or be inconsistent with the terms of,
this Agreement.
12. Company Covenants. Until the earlier of the Closing or the
Option Termination Date, unless Brookdale otherwise consents in writing, the
Company:
(a) Shall not amend the Articles of Incorporation or
the Regulations of the General Partner or amend or consent to the
amendment of the Partnership Agreement, and shall at all times observe
and comply with the provisions thereof.
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(b) Shall continue to own the Limited Partnership
Interests (which shall continue to constitute 99% of the partnership
interests in the Owner), free of any liens, claims or encumbrances.
(c) Shall continue to own the Capital Stock (which
shall continue to constitute one hundred percent (100%) of the issued
and outstanding capital stock of the General Partner), free of any
liens, claims or encumbrances.
(d) Shall not amend, or request any waiver of any
provision of, the Subordinate Loan Agreement or any of the Loan
Documents (as defined therein) to which it is a party.
(e) Shall comply with all of the covenants applicable
to it set forth in Articles 6 and 7 of the Subordinate Loan Agreement,
and shall promptly deliver to Brookdale copies of all financial
statements, reports, notices, certificates or other writings delivered
to the Subordinate Lender pursuant thereto.
(f) Shall not permit or accept any distributions by
the Owner or any dividends by the General Partner.
(g) Shall not incur any liabilities or obligations,
contingent or otherwise, except expenses incurred in the ordinary
course of administering its business or those that are incurred under
or are necessary to comply with the provisions of the Subordinate Loan
Agreement, and shall not enter into any agreement or contract, whether
oral or written, except this Agreement, the Property Option Agreement,
the Intercreditor Agreement, the Subordinate Loan Agreement and the
Loan Documents (as defined therein) to which it is a party, and
agreements entered into in the ordinary course of administering its
business.
(h) Shall give Brookdale at least thirty (30) days'
prior written notice of any change in its place of business.
(i) Shall not take any actions that might adversely
affect Brookdale's rights under, or be inconsistent with the terms of,
this Agreement.
13. General Partner Covenants. Until the earlier of the
Closing or the Option Termination Date, unless Brookdale otherwise consents in
writing, the General Partner:
(a) Shall not amend or consent to the amendment of
the Partnership Agreement, and shall at all times observe and comply
with the provisions thereof.
(b) Shall not cause or permit the dissolution or
winding up of the Owner.
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(c) Shall not permit the issuance of any interest in
the Owner in addition to the Limited Partnership Interests and the
General Partnership Interest.
(d) Shall continue to own the General Partnership
Interest (which shall continue to constitute the only general
partnership interest in, and one percent (1%) of the partnership
interests) in, the Owner, free of any liens, claims or encumbrances.
(e) Shall comply with all of the covenants applicable
to it set forth in Articles 6 and 7 of the Subordinate Loan Agreement.
(f) Shall not permit or accept any partnership
distributions by the Owner or the payment to itself of any compensation
as general partner of the Owner.
(g) Shall not declare or pay any dividends with
respect to, or purchase or redeem, or issue any options or other rights
with respect to, any shares of the Capital Stock.
(h) Shall not incur any liabilities or obligations,
contingent or otherwise, except expenses incurred in the ordinary
course of administering its business, or enter into any agreement or
contract, whether oral or written, except this Agreement and, on behalf
of the Owner as its general partner, agreements or contracts into which
the Owner is permitted to enter pursuant to paragraph (d) of Section 14
hereof.
(i) Shall not take any actions that might adversely
affect Brookdale's rights under, or be inconsistent with the terms of,
this Agreement.
14. Owner Covenants. Until the earlier of the Closing or the
Option Termination Date, unless Brookdale otherwise consents in writing, the
Owner:
(a) Shall comply with all of the covenants applicable
to it set forth in Articles V, VI and VII of the Senior Loan Agreement
and shall promptly deliver to Brookdale copies of all financial
statements, reports, notices, certificates or other writings delivered
to the Senior Lender pursuant thereto.
.
(b) Shall not incur any liabilities or obligations,
contingent or otherwise, except expenses incurred in the ordinary
course of administering its business or those that are incurred under
or are necessary to comply or are permitted by with the provisions of
the Senior Loan Agreements, and shall not enter into any agreement or
contract, whether oral or written, except this Agreement, the Property
Option Agreement, the Intercreditor Agreement, the Senior Loan
Agreement, the Loan Documents (as defined therein) to which it is a
party, the Development Agreement and the Management Agreement, and
agreements entered into in the ordinary course of administering its
business.
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(c) Shall continue to own the Property (as defined in
the Property Option Agreement), free of any liens, claims or
encumbrances, other than Permitted Exceptions (as so defined).
(d) Shall not take any actions that might adversely
affect Brookdale's rights under, or be inconsistent with the terms of,
this Agreement other than as may be required by the Senior Loan
Agreements or the Loan Documents (as defined therein).
15. Investor Defaults. An "Investor Default" shall mean the
occurrence of one or more of the following described events:
(a) A material breach by any Owner Related Entity of
any of the representations and warranties contained (or contained by
reference) in Section 7, 8, 9 or 10 hereof on the date as of which
made.
(b) Any Owner Related Entity defaults in the
performance or observation of any covenant of such Owner Related Entity
contained in this Agreement and such default shall continue without
cure for fifteen (15) days after notice thereof by Brookdale to such
Owner Related Entity and the Subordinate Lender.
(c) An "Event of Default", as defined in the
Subordinate Loan Agreement, occurs, which "Event of Default" has not
been caused, directly or indirectly, by the Manager or Brookdale.
(d) An "Event of Default", as defined in either of
the Senior Loan Agreements, occurs, which "Event of Default" has not
been caused, directly or indirectly, by the Manager or Brookdale.
(e) An "Event of Default", as defined in the
Development Agreement, by the Owner occurs.
(f) An "Event of Default", as defined in the
Management Agreement, by the Owner occurs.
(g) The Investor makes an assignment for the benefit
of creditors.
(h) The Investor petitions or applies to any tribunal
for the appointment of a trustee or receiver for itself or any
substantial part of its assets or the Investor commences any proceeding
relating to it under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation law of any
jurisdiction whether now or hereafter in effect.
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(i) Any petitions or applications are filed, or any
proceedings are commenced, against the Investor seeking the
adjudication of it as bankrupt and the Investor by any act indicates
its admission or consent thereto, or acquiescence therein, or any order
is entered appointing a trustee or receiver, or adjudicating the
Investor bankrupt or insolvent, or approving the petition in any such
proceedings and such order remains unstayed or undischarged for more
than sixty (60) days.
(j) Any order is entered in any proceeding against
the Investor decreeing the dissolution of the Investor and such order
remains unstayed or undischarged for more than sixty (60) days.
(k) Any judgment or order is entered in any
proceedings which affects the Membership Interests, the Limited
Partnership Interests, the Capital Stock or the General Partnership
Interest, or any lien, claim or other encumbrance encumbers any
thereof, other than, in the case of the Membership Interests, the
Subordinate Lender Security Interest and the Special Management
Interests.
16. Notice of Certain Events. Owner and each other Owner
Related Entity agrees to promptly give notice to Brookdale of:
(a) Any Investor Default known to Owner or such other Owner Related Entity;
(b) Any notice of any default or "Event of Default"
or any other notice received from the Senior Lender under the Senior
Loan Agreements (unless a copy of such notice is required to be
delivered to BLC and/or Brookdale pursuant thereto);
(c) Any notice of any default or "Event of Default"
or any other notice received from the Subordinate Lender under the
Subordinate Loan Agreement (unless a copy of such notice is required to
be delivered to BLC and/or Brookdale pursuant thereto); and
(d) Any notice given by Owner or any other Owner
Related Entity to the Senior Lender or the Subordinate Lender.
Each notice pursuant to this Section 16 shall be accompanied by a statement of
the chief executive officer of the relevant Owner Related Entity setting forth
the details of the occurrence referred to therein and, if applicable, stating
what action such Owner Related Entity proposes to take with respect thereto.
17. Appointment of Escrow Agent And Establishment of Escrow.
(a) Brookdale and the Investor agree to appoint
Squire, Sanders & Dempsey as Escrow Agent (in such capacity, together
with any successor thereto, the
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"Escrow Agent") pursuant to the terms of the Escrow Agent Appointment
Agreement attached hereto as Exhibit B (the "Escrow Agent Appointment
Agreement").
(b) Brookdale and the Investor hereby establish an
escrow to hold the Assignment and to facilitate the Closing.
(c) The Escrow Agent agrees to act in accordance with
the Escrow Agent Appointment Agreement and this Section 17.
(d) On the Closing Date, Brookdale shall deliver to
the Escrow Agent, (i) the Purchase Price by wire transfer of
immediately available funds to an account designated by the Escrow
Agent, (ii) a certificate (the "Purchase Price Certificate") of a
Treasurer or an Assistant Treasurer of Brookdale, dated the Closing
Date or a date within the preceding five (5) days, stating that (A) a
Triggering Event has occurred, (B) the Option Termination Date has not
occurred, (C) in the event that Brookdale desires the Assignment to be
delivered to a nominee, the name of such nominee, (D) the Purchase
Price has been accurately calculated in accordance with Section 3
hereof and Schedule I attached hereto, and showing such calculation,
and (iii) a letter from the Subordinate Lender confirming the receipt
of repayment in full of the Subordinate Notes in accordance with the
Subordinate Loan Agreement.
(e) On the Closing Date, upon receipt of the Purchase
Price and the Purchase Price Certificate, the Escrow Agent shall take
the following actions:
(i) Date the Assignment the Closing
Date, insert the name of the
"Assignee" in the preamble thereto
and deliver the Assignment to
Brookdale or its nominee; and
(ii) Deliver the Purchase Price to the
Investor by wire transfer of
immediately available funds to an
account designated by the Investor.
(f) In the event that Brookdale assigns its rights
under this Agreement pursuant to paragraph (e) of Section 18 hereof, it
shall so notify the Escrow Agent.
18. Miscellaneous.
(a) Each Owner Related Entity and Brookdale agree that money damages or
other remedy at law would not alone be sufficient or adequate remedy for any
breach or violation of, or a default under, this Agreement by such Owner Related
Entity and that, in addition to all other remedies available to Brookdale,
Brookdale shall be entitled to an injunction restraining such breach, violation
or default or threatened breach, violation or
16
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default and to any other equitable relief, including, without limitation,
specific performance, without bond or other security being required.
(b) The Owner Related Entities acknowledge and agree that (i) they are not
intended to be beneficiaries of the limitations set forth in the Intercreditor
Agreement on the rights of Brookdale to take Enforcement Actions (as defined
therein) and to enforce any representations, covenants, warranties or
obligations of the Owner under or pursuant to this Agreement, and (ii) they may
not seek to enforce such limitations.
(c) Notices. Any notices required or permitted to be sent hereunder shall
be delivered personally or by telecopier (with answer back acknowledged) or
mailed, certified mail, return receipt requested, or delivered by overnight
courier service to the following addresses, or such other addresses as shall be
given by notice delivered hereunder, and shall be deemed to have been given upon
delivery, if delivered personally, upon receipt with answer back acknowledged,
if delivered by telecopier, three (3) business days after mailing, if mailed, or
one business day after delivery to the courier, if delivery by overnight courier
service:
If to the
Investor: AH Texas Investor, Inc.
320 King of Prussia Road
Suite 160
Radnor, Pennsylvania 19087
Attn: David B. Fenkell
Fax: (610) 902-0777
with a copy to:
Squire, Sanders & Dempsey
41 South High Street
Columbus, Ohio 43215
Attn: Scott B. West
Fax: (614) 365-2499
If to the
Company: AH Texas Subordinated, LLC
320 King of Prussia Road
Suite 160
Radnor, Pennsylvania 19087
Attn: David B. Fenkell
Fax: (610) 902-0777
with a copy to:
Squire, Sanders & Dempsey
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41 South High Street
Columbus, Ohio 43215
Attn: Scott B. West
Fax: (614) 365-2499
If to the
General Partner: AH Texas CGP, Inc.
320 King of Prussia Road
Suite 160
Radnor, Pennsylvania 19087
Attn: David B. Fenkell
Fax: (610) 902-0777
with a copy to:
Squire, Sanders & Dempsey
41 South High Street
Columbus, Ohio 43215
Attn: Scott B. West
Fax: (614) 365-2499
If to the
Owner: AH Texas Owner Limited Partnership
320 King of Prussia Road
Suite 160
Radnor, Pennsylvania 19087
Attn: David B. Fenkell
Fax: (610) 902-0777
with a copy to:
Squire, Sanders & Dempsey
41 South High Street
Columbus, Ohio 43215
Attn: Scott B. West
Fax: (614) 365-2499
If to Brookdale: Brookdale Living
Communities, Inc.
77 West Wacker Drive
Suite 4400
Chicago, Illinois 60601
Attn: Darryl W. Copeland, Jr.
Fax: (312) 977-3699
Attn: Robert J. Rudnik
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Fax: (312) 977-3769
with a copy to: Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attn: Wayne D. Boberg
Fax: (312) 558-5700
A copy of any notice sent hereunder shall be sent to (i) the Senior Lender
at Nomura Asset Capital Corporation, Two World Financial Center, Building B, New
York, New York 10281-1198, Attention: Sheryl McAfee, Telecopier: (212) 667-1206,
with copies to: Nomura Asset Capital Corporation, Two World financial Center,
Building B, New York, New York 10281, Attention: Barry Funt, Telecopier: (212)
667-1567 and Dechert Price & Rhoads, 90 State House Square, 12th floor,
Hartford, Connecticut 06103-3702, Attention: Marc B. Friedman, Fax: (860)
524-3930 (or such other address as shall be given by notice delivered
hereunder), and (ii) the Escrow Agent at Squire, Sanders & Dempsey, 41 South
High Street, Columbus, Ohio 43215, Attention: Scott B. West, Fax: (614) 365-2499
(or such other address as shall be given by notice delivered hereunder).
(d) Entire Agreement. This Agreement (including the schedule and exhibits
hereto) constitutes the entire agreement among the parties hereto with respect
to the subject matter hereof and supersedes all prior agreements and
understandings, oral and written, among the parties hereto with respect to the
subject matter hereof.
(e) Binding Effect; Benefit. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
assigns. Brookdale may assign its rights under this Agreement without the
consent of any Owner Related Entities. In the event that Brookdale assigns its
rights under this Agreement, it shall so notify the other parties hereto, and
references herein, including, without limitation, in Section 17 hereof, and in
the Escrow Agent Appointment Agreement, to Brookdale shall be deemed to be
references to the assignee to whom such rights have been assigned upon the
execution and delivery by Brookdale and such assignee of an assignment and
assumption agreement with respect to the Escrow Appointment Agreement and this
Agreement and delivery of a copy thereof to each of the other parties hereto and
the Escrow Agent.
(f) No Third Party Beneficiaries. This Agreement is not intended to and
does not benefit or confer rights upon, and is not intended to be and is not
enforceable by, any persons or entities not party to this Agreement, including,
without limitation, the Senior Lender and the Subordinate Lender.
(g) Amendment; Waiver. No provision of this Agreement may be amended,
waived or otherwise modified without the prior written consent of the parties
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hereto and the Subordinate Lender, and, in the case of any amendment
to, or waiver or modification of, the provisions of Section 17 hereof,
the acknowledgment and agreement of the Escrow Agent.
(h) Section Headings. The section headings contained
in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
(i) Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be deemed to be an
original and all of which together shall be deemed to be one and the
same instrument.
(j) Applicable Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of Illinois
(without giving effect to principles of conflicts of law).
(k) Waiver of Jury Trial. Each party hereto, after
consulting or having had the opportunity to consult with counsel,
knowingly, voluntarily and intentionally waives any right any of them
may have to a trial by jury in any litigation based upon or arising out
of this Agreement, or any of the transactions contemplated by this
Agreement, or any course of conduct, dealing, statements (whether oral
or written) or actions of any of them. No such party shall seek to
consolidate, by counterclaim or otherwise, any action in which a jury
trial has been waived with any other action in which a jury trial
cannot be or has not been waived unless failure to so consolidate would
result in a loss of such claim.
(l) Limitation of Personal Liability. Notwithstanding
any other provision of this Agreement to the contrary, (i) in no event
shall any officer, director, member, partner, manager, shareholder,
incorporator or agent of any Owner Related Entity be personally liable
to Brookdale for any of such Owner Related Entity's obligations under
this Agreement, and (ii) if the Owner defaults in connection with any
representation or covenant of the Owner set forth in this Agreement, it
will not create any personal liability against the Owner or any lien
rights against the Property.
(m) Intercreditor Agreement. The parties hereto
acknowledge the existence of the Intercreditor Agreement.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have executed and
delivered this Agreement as of the date first above written.
AH TEXAS INVESTOR, INC.
By:___________________________
Name: David B. Fenkell
Its: President
AH TEXAS SUBORDINATED, LLC
By: AH Texas Investor, Inc., its manager
By: ___________________________
Name: David B. Fenkell
Its: President
AH TEXAS CGP, INC.
By:___________________________
Name: David B. Fenkell
Its: President
AH TEXAS OWNER LIMITED PARTNERSHIP
By: AH Texas CGP, Inc., its general partner
By:___________________________
Name: David B. Fenkell
Its: President
BROOKDALE LIVING COMMUNITIES, INC.
By:___________________________
Name:_________________________
Its:____________________________
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<PAGE>
JOINDER
The undersigned hereby joins in the execution and delivery of the
foregoing Agreement for the sole purpose of acknowledging and agreeing to the
provisions of Section 17 thereof.
SQUIRE, SANDERS & DEMPSEY
---------------------------------
By:______________________________
Name:____________________________
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<PAGE>
EXHIBIT A
ASSIGNMENT AND ACCEPTANCE AGREEMENT
THIS AGREEMENT made as of ___________________, by and between AH TEXAS
INVESTOR, INC., an Ohio corporation ("Assignor"), and
_______________________________ ("Assignee").
WITNESSETH:
1. For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Assignor does hereby transfer, assign and convey
to Assignee a one hundred percent (100%) interest (the "Interest") as Member in
AH TEXAS SUBORDINATED, LLC, an Ohio limited liability company (the "LLC").
2. Assignor does hereby warrant and represent that it is the sole and
lawful owner of the Interest herein transferred, free of any liens, claims or
encumbrances and that it has full power and authority to make such transfer.
3. Assignee does hereby accept the foregoing assignment and agrees to
become a Member of the LLC.
ASSIGNOR:
AH TEXAS INVESTOR, INC.
By:___________________________
Title:_________________________
ASSIGNEE:
By:___________________________
Title:_________________________
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<PAGE>
EXHIBIT B
ESCROW AGENT APPOINTMENT AGREEMENT
This Escrow Agent Appointment Agreement (this "Agreement"),
dated as of June __, 1998, is made and entered into by and among AH Texas
Investor, Inc., an Ohio corporation (the "Investor"), Brookdale Living
Communities, Inc., a Delaware corporation ("Brookdale"), and Squire, Sanders &
Dempsey, as escrow agent hereunder (in such capacity, together with any
successor thereto, the "Escrow Agent").
RECITALS
WHEREAS, the Investor, AH Texas Subordinated, LLC, an Ohio
limited liability company (the "Company"), AH Texas CGP, Inc., an Ohio
corporation (the "General Partner"), AH Texas Owner Limited Partnership, an Ohio
limited partnership, and Brookdale have entered into an Equity Option Agreement
of even date herewith (as it may be amended from time to time, the "Equity
Option Agreement");
WHEREAS, pursuant to the Equity Option Agreement, the Investor
has granted an option to Brookdale to purchase the membership interests (the
"Membership Interests") that it owns in the Company; and
WHEREAS, the Investor and Brookdale have requested the Escrow
Agent to act in the capacity of escrow agent for the purpose of holding in
escrow the Assignment and Acceptance Agreement pursuant to which the Membership
Interests are to be conveyed, and the Escrow Agent, subject to the terms and
conditions hereof, has agreed to do so.
NOW, THEREFORE, in consideration of the mutual agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Investor, Brookdale and the
Escrow Agent hereby agree as follows:
1. Definitions. Unless otherwise defined herein, capitalized terms used
herein shall have the meanings ascribed to them in the Equity Option Agreement.
2. Appointment of Escrow Agent. The Investor and Brookdale hereby designate
the Escrow Agent to act as escrow agent for the purposes of performing the
duties set forth in Section 17 of the Equity Option Agreement, and the Escrow
Agent accepts such appointment, all upon the terms and conditions set forth in
this Agreement.
3. Administration. It is agreed that the Escrow Agent shall have no duties
or responsibilities whatsoever under the Equity Option Agreement or this
Agreement except as specifically provided herein; that in the absence of its own
negligence the Escrow Agent shall be
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<PAGE>
fully protected and incur no liability to anyone in acting upon any notice,
written request, consent, certificate, document, or other paper reasonably
believed by it to be genuine and to be signed or sent by the proper persons;
that the Escrow Agent shall be responsible only for the performance of its own
obligations under the Equity Option Agreement and this Agreement; and that the
Escrow Agent shall be under no obligation to commence, continue or defend any
suit or proceeding in connection with the Equity Option Agreement or this
Agreement unless requested to do so by the parties hereto and indemnified to its
satisfaction.
4. Expense of Escrow Agent. The Escrow Agent shall not be paid a fee for
acting as Escrow Agent under the Equity Option Agreement and this Agreement. The
Escrow Agent shall not be liable for any claims, suits, actions, costs, damages,
liabilities or expenses (collectively, the "Liabilities") in connection with the
performance of its duties under the Equity Option Agreement or this Agreement
other than Liabilities caused by the negligence or willful misconduct of the
Escrow Agent, and Brookdale hereby agrees to indemnify and hold harmless the
Escrow Agent from and against any and all Liabilities arising from or in
connection with any acts or omissions taken by the Escrow Agent in connection
with the Equity Option Agreement or this Agreement, other than those Liabilities
caused by the negligence or willful misconduct of the Escrow Agent.
5. Termination of Agreement. This Agreement shall terminate upon the
earlier to occur of (a) the performance of the duties of the Escrow Agent under
the Equity Option Agreement, and (b) the Option Termination Date. If the Closing
shall not have occurred on or prior to the Option Termination Date, the Escrow
Agent shall redeliver the Assignment to the Investor.
6. Replacement of Escrow Agent. The Escrow Agent may resign, or the
Investor and Brookdale may agree to discharge the Escrow Agent, from its
obligations under the Equity Option Agreement and this Agreement at any time,
but in no event shall the Escrow Agent be released of its obligations under the
Equity Option Agreement and this Agreement unless and until a substitute escrow
agent has been designated and assumed its obligations.
7. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois (without giving effect to
principles of conflicts of law).
8. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
9. Notices. Any notices required or permitted to be sent hereunder shall be
delivered personally or by telecopier (with answer back acknowledged) or mailed,
certified mail, return receipt requested, or delivered by overnight courier
service to the following addresses, or such other addresses as shall be given by
notice delivered hereunder, and shall be deemed to have been given upon
delivery, if delivered personally, upon receipt with answer back acknowledged,
if
2
<PAGE>
delivered by telecopier, three (3) business days after mailing, if maiLed,
or one business day after delivery to the courier, if delivery by overnight
courier service:
If to the
Investor: AH Texas Investor, Inc.
320 King of Prussia Road
Suite 160
Radnor, Pennsylvania 19087
Attn: David B. Fenkell
Fax: (610) 902-0777
If to Brookdale: Brookdale Living
Communities, Inc.
77 West Wacker Drive
Suite 4400
Chicago, Illinois 60601
Attn: Darryl W. Copeland, Jr.
Fax: (312) 977-3699
Attn: Robert J. Rudnik
Fax: (312) 977-3769
with a copy to: Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attn: Wayne D. Boberg
Fax: (312) 558-5700
If to the Escrow Agent: Squire, Sanders & Dempsey
41 South High Street
Columbus, Ohio 43215
Attn: Scott B. West
Fax: (614) 365-2499
10. Brookdale may assign its rights hereunder in connection with an
assignment of its rights under the Equity Option Agreement in accordance with
the provisions of paragraph (e) of Section 18 thereof.
11. Amendment. This Agreement may be amended only by a written instrument
executed by all parties hereto.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have executed and
delivered this Agreement as of the date first above written.
AH TEXAS INVESTOR, INC.
By:___________________________
Name: David B. Fenkell
Its: President
BROOKDALE LIVING COMMUNITIES, INC.
By:___________________________
Name:_________________________
Its:____________________________
SQUIRE, SANDERS & DEMPSEY
By:______________________________
Name:____________________________
Its:_______________________________
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<PAGE>
Property Option Agreement
This Option Agreement (this "Agreement"), dated as of June __,
1998, is made and entered into by and among AH Texas Subordinated, LLC, an Ohio
limited liability company (the "Company"), AH Texas Owner Limited Partnership,
an Ohio limited partnership (the "Owner" and together with the Company, shall be
individually referred to as a "Grantor" and shall be together referred to as the
"Grantors"), and Brookdale Living Communities, Inc., a Delaware corporation
("Brookdale").
RECITALS
WHEREAS, Banc One Capital Partners IV, Ltd., an Ohio limited
liability company (the "Subordinate Lender"), has agreed to loan to the Company
up to the sum of $6,483,627 (the "Subordinate Loan"), pursuant to the terms of a
certain Loan Agreement of even date herewith (as it may be amended from time to
time, the "Subordinate Loan Agreement") between the Lender and the Company and
as further evidenced by two certain Promissory Notes of even date herewith (as
amended or extended from time to time, and together with any notes taken in
substitution therefor, the "Subordinate Notes") payable by the Company to the
Lender;
WHEREAS, the Company was formed as of March 27,1998 by the
filing and recording of the Company's Articles of Organization in the Office of
the Secretary of State of the State of Ohio, pursuant to an Operating Agreement
dated as of March 27, 1998 and amended and restated pursuant to an Amended and
Restated Operating Agreement dated as of June ___, 1998 (as so amended and
restated, and as it may be further amended from time to time, the "Operating
Agreement");
WHEREAS, the Company is the sole shareholder in, and owns one
hundred percent (100%) of the issued and outstanding shares of capital stock
(the "Capital Stock") of, AH Texas CGP, Inc., an Ohio corporation (the "General
Partner"), which is the sole general partner of, and owns one percent (1%) of
the partnership interests (the "General Partnership Interest") in, the Owner;
WHEREAS, the Company is the sole limited partner of, and owns
ninety-nine percent (99%) of the partnership interests (the "Limited Partnership
Interests" and, together with the Capital Stock, the "Shares") in, the Owner,
for which a Certificate of Limited Partnership was filed with the Secretary of
State of the State of Ohio on March 27, 1998 and which was organized under an
Agreement of Limited Partnership, effective as of March 27, 1998 and amended and
restated pursuant to an Amended and Restated Agreement of Limited Partnership
dated as of June ___, 1998 (as so amended and restated, and as it may be further
amended from time to time, the "Partnership Agreement");
WHEREAS, the Owner owns that certain land located west and
south of Gaines Ranch Loop and north of MoPac Expressway (Loop 1) in Travis
County, Texas consisting of
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approximately four (4) acres and legally described on Schedule I attached
hereto, together with all improvements thereon (such land and improvements shall
together be referred to as the "Land");
WHEREAS, the Owner intends to develop a congregate housing
facility with an assisted living component for the elderly in Austin, Texas
which is currently referred to as "The Heritage at Gaines Ranch" (the "Project")
on the Land;
WHEREAS, BLC of Texas-II, L.P., a Delaware limited partnership
("BLC") and an affiliate of Brookdale will be the developer of the Project
pursuant to an Amended and Restated Development Agreement of even date herewith
(as it may be amended from time to time, the "Development Agreement") between
the Owner and BLC and will be the manager of the Project pursuant to a
Management Agreement of even date herewith (as it may be amended from time to
time, the "Management Agreement") between the Owner and BLC; and
WHEREAS, the Company will use the proceeds of the Subordinate
Loan to make an equity contribution to the Owner to fund a portion of the costs
of the Project.
NOW, THEREFORE, in consideration of the mutual agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Grantors and Brookdale hereby
agree as follows:
1. The Option.
(a) The Owner hereby grants an irrevocable option
(the "Property Option") to Brookdale to purchase the Property (as
hereinafter defined) for the Purchase Price (as hereinafter defined).
(b) The Company hereby grants an irrevocable option
(the "Share Option" and, together with the "Property Option" shall be
together referred to the "Option") to Brookdale to purchase the Shares
for the Purchase Price.
(c) The Option shall terminate and expire on the date
(the "Option Termination Date") that is the earliest of (a) ten (10)
days after the principal amount of the Subordinate Notes is due and
payable, on the stated maturity date thereof, as it may be extended
pursuant to subsection 2.3(a) of the Subordinate Loan Agreement, (b)
thirty (30) days after the date specified by the Subordinate Lender in
a prior or contemporaneous notice to Brookdale as the date on which the
unpaid balance of all principal and interest accrued on the Subordinate
Notes has been declared by the Subordinate Lender to be, or shall have
become automatically, due and payable pursuant to Section 8.2 of the
Subordinate Loan Agreement, and (c) the Exercise Date (as defined in
the Intercreditor and Subordination Agreement of even date herewith
among the Senior Lender (as hereinafter defined), the Subordinate
Lender, the Owner, the Company, AH Texas Investor, Inc., the General
Partner,
2
<PAGE>
BLC and Brookdale). In no event shall the Option Termination Date be
later than July 31, 2002.
2. The Property. For purposes of this Agreement, the term
"Property" shall mean any and all interests of the Owner in the following items:
(a) the Land, (b) all personal property and other tangible property now or
hereinafter located on the Land or used in connection with the construction,
development, operation or maintenance of the Land, including, but not limited
to, fixtures and equipment, and (c) all intangible property now or hereafter
used in connection with the operation or maintenance of the Land, including, but
not limited to, contracts, agreements, guaranties, plans and specifications,
licenses, books and records and all other items and instruments pertaining to
the Land.
3. Purchase Price. The "Purchase Price" for the Property or
the Shares, as applicable, shall be the greater of (a) the fair market value of
the Property as reflected in an appraisal of the Property, dated not more than
six (6) months before the Closing Date (as defined in Section 4 hereof), by a
qualified MAI appraiser, less the then outstanding amount of the Debt, as
defined in the Loan Agreement of even date herewith (as it may be amended from
time to time, the "Senior Loan Agreement") among the Owner, BLC and Nomura Asset
Capital Corporation (the "Senior Lender"), and (b) the amount necessary to
produce an internal rate of return on the Priority Note (as defined in the
Subordinate Loan Agreement ) of 15.60%, compounded monthly and computed using
the methodology described in Exhibit E-1 attached to the Subordinate Loan
Agreement.
4. Exercise of the Option. Brookdale may exercise the Option
by giving the Company and the Owner at least five (5) days' prior written notice
(the "Option Notice"), and if it is exercising the Option in connection with a
prepayment of the Subordinate Notes in accordance subsection 2.3(e) of the
Subordinate Loan Agreement, by causing the Company to give the Subordinate
Lender notice of an optional prepayment in accordance with such paragraph. The
Option Notice shall specify (a) whether Brookdale is exercising the Property
Option or the Share Option, and (b) the date (the "Closing Date") of the
exercise of the Option, which shall be the date of repayment of the Subordinate
Notes and shall not be later than the Option Termination Date. If Brookdale
exercises the Option prior to the Option Termination Date but fails to close
prior to the Exercise Date, then the Option shall terminate and Brookdale's
right shall cease and be null and void. The Company hereby appoints Brookdale as
its true and lawful attorney-in-fact for purposes of giving notice of optional
prepayment in accordance with subsection 2.3(e) of the Subordinate Loan
Agreement, which appointment as attorney-in-fact is irrevocable and is coupled
with an interest. Anything herein to the contrary notwithstanding, the exercise
of the Option shall be conditioned upon (i) the repayment in full of the
Subordinate Notes in accordance with the Subordinate Loan Agreement, (ii) the
occurrence of a Triggering Event, as such term is defined in the Equity Option
Agreement of even date herewith (as it may be amended from time to time, the
"Equity Option Agreement") among AH Texas Investor, Inc., the Company, the
General Partner, the Owner and Brookdale, and (iii) the exercise by Brookdale
immediately thereafter of the option granted to it pursuant to the Equity Option
Agreement
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<PAGE>
5. Closing. Upon receipt of the Option Notice, the parties
will schedule a closing (the "Closing") to occur on the Closing Date at the
Chicago, Illinois offices of counsel to Brookdale. If Brookdale exercises the
Share Option, the Closing shall occur in accordance with the provisions of
Section 6 hereof. If Brookdale exercises the Property Option, the Closing shall
occur in accordance with the provisions of Section 7 hereof.
6. Closing of Purchase of Shares (a) At the Closing of the
purchase of the Shares, the Purchase Price shall be paid to the Company by wire
transfer of immediately available funds to an account designated by the Company.
(b) At the Closing of the purchase of the Shares, the
Company shall deliver to Brookdale or its nominee the following items:
(i) a duly executed Assignment and Acceptance Agreement in the form of
Exhibit A attached hereto (together with any other documents or instruments
delivered pursuant to clause (vi) below, the "Assignment");
(ii) the stock certificate(s) representing the Capital Stock endorsed in
blank;
(iii) original executed copies (or if unavailable, photocopies) of the
Owner's Certificate of Limited Partnership, the Partnership Agreement and the
General Partner's Articles of Incorporation and Regulations, all certified by an
appropriate officer of the Company as of the Closing Date, as being true,
correct, complete and unamended (or if amended with the consent of Brookdale,
certified to such effect) and in full force and effect as of such date;
(iv) a certificate of an appropriate officer of each Grantor, dated the
Closing Date, certifying that the representations and warranties of such Grantor
set forth in the applicable Section of this Agreement are true and correct as of
the Closing Date as though made by such Grantor on the Closing Date;
(v) the books and records of the General Partner and the Owner; and
(vi) such other documents and instruments of transfer as are necessary to
complete the transfer of the Shares.
(c) The Company and Brookdale shall each be solely
responsible for its own costs incurred in connection with the Closing
of the purchase of the Shares; provided, however, that Brookdale shall
(i) pay all costs in connection with the transfer of the Shares,
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<PAGE>
including transfer and conveyance taxes, if any, and (ii) pay, or
reimburse the Company for, all reasonable legal fees and expenses of
the Company incurred in connection with such Closing in an amount not
to exceed $2,500 when aggregated with all other legal fees and expenses
paid or reimbursed by Brookdale pursuant to clause (ii) of paragraph
(c) of Section 7 hereof and paragraph (a) of Section 5 of the Equity
Option Agreement.
7. Closing of Purchase of Property. (a) At the Closing of the
purchase of the Property, the Purchase Price shall be paid to the Owner by wire
transfer of immediately available funds to an account designated by the Owner.
(b) At the Closing of the purchase of the Property,
the Owner shall deliver to Brookdale or its nominee the following
items:
(i) Bill of Sale. A bill of sale (the "Bill
of Sale") conveying, transferring and otherwise
assigning to Brookdale or its nominee any and all of
the Property, other than the real estate.
(ii) Special Warranty Deed. A Special
Warranty Deed (the "Deed" and, together with the Bill
of Sale and any other documents or instruments
delivered pursuant to clause (iii) below, the
"Property Conveyance Documents") conveying to
Brookdale or its nominee the Land, subject only to
the encumbrances or other exceptions (collectively,
the "Permitted Exceptions") (A) that existed on the
Land on the date of the conveyance of the Land to the
Owner, (B) created by the lien of the Deed of Trust,
Assignment of Leases and Rents, Security Agreement
and Fixture Filing of even date herewith (the "Deed
of Trust") by the Owner in favor of Sarah Ann Powers,
as deed trustee for the Senior Lender, and all other
Loan Documents (as defined in the Senior Loan
Agreement), (C) created by BLC in connection with
actions taken by it under the Development Agreement
or the Management Agreement, and (D) Permitted
Encumbrances (as defined in the Senior Loan
Agreement) that are consented to in writing by
Brookdale.
(iii) Other Documents. Such other documents
or instruments which are necessary to complete and
perfect the conveyance of Property to Brookdale or
its nominee as contemplated by this Agreement,
including, without limitation, any transfer
declarations, owner's affidavits and undertakings
required by the title company and similar items
required by local law or the title company.
(c) The Owner and Brookdale shall each be solely
responsible for its own costs incurred in connection with the Closing;
provided, however, that Brookdale shall (i) pay all costs in connection
with the transfer of the Property, including transfer and conveyance
taxes, if any, and (ii) pay, or reimburse the Owner for, all reasonable
legal fees
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and expenses of the Owner incurred in connection with such Closing in
an amount not to exceed $2,500 when aggregated with all other legal
fees and expenses paid or reimbursed by Brookdale pursuant to clause
(ii) of paragraph (c) of Section 6 hereof and paragraph (a) Section 5
of the Equity Option Agreement.
8. Company Representations. The Company represents and
warrants to Brookdale as follows as of the date hereof and as of the Closing
Date:
(a) The Company is a limited liability company duly
organized, validly existing and in good standing under the laws of the
State of Ohio and has all requisite power and authority to execute,
deliver and perform its obligations under this Agreement and the
Assignment. The General Partner is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Ohio. The Company and the General Partner are each duly qualified to do
business in each jurisdiction where the nature of their operations and
applicable laws require such qualification, except where the failure to
be so qualified would not have a material adverse effect on the Company
or the General Partner, as applicable.
(b) The execution, delivery and performance of this
Agreement by the Company have been, and, if applicable, as of the
Closing Date, the execution, delivery and performance of the Assignment
by the Company will have been, duly authorized by all necessary
organizational action, and this Agreement is, and when executed and
delivered, the Assignment will be, the legal, valid and binding
obligation of the Company, enforceable in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency or the
laws or equitable principles affecting the enforcement of creditors'
rights generally.
(c) The execution, delivery and performance by the
Company of this Agreement do not and, if applicable, the execution,
delivery and performance by the Company of the Assignment will not,
contravene the terms of the Company's Articles of Organization or the
Operating Agreement, conflict with or result in any breach or
contravention of, or the creation of any lien under, any agreements or
instruments to which it is a party or by which it or any of its
property is bound or violate any state or federal law and all required
approvals therefor, if any, have been or, if applicable, will have been
as of the Closing Date, duly obtained.
(d) The Company is the sole limited partner of the
Owner; the Limited Partnership Interests constitute ninety-nine (99%)
of the partnership interests in the Owner; the Capital Stock
constitutes one hundred percent (100%) of the issued and outstanding
shares of capital stock of the General Partner; and the General Partner
is the sole general partner of, and the General Partnership Interest
constitutes a one percent (1%) partnership interest in, the Owner.
6
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(e) The Company owns the Shares, and the General
Partner owns the General Partnership Interest, in each case free of any
liens, claims or encumbrances.
(f) The Company's sole place of business is its
address set forth for notices in paragraph (b) of Section 11 hereof.
(g) There is no litigation or other proceeding
pending against the Company which could have a material adverse effect
on the Company's ability to consummate the transactions contemplated by
this Agreement and the Assignment.
9. Owner Representations. The Owner represents and warrants to
Brookdale as follows as of the date hereof and as of the Closing Date:
(a) The Owner is a limited partnership duly
organized, validly existing and in good standing under the laws of the
State of Ohio and has all requisite power and authority to execute,
deliver and perform its obligations under this Agreement and the
Property Conveyance Documents and to own and operate its property and
to carry on its business as now conducted. The Owner is duly qualified
to do business in each jurisdiction where the nature of its operations
and applicable laws require such qualification, except where the
failure to be so qualified would not have a material adverse effect on
the Owner.
(b) The execution, delivery and performance of this
Agreement by the Owner have been, and, if applicable, as of the Closing
Date, the execution, delivery and performance of the Property
Conveyance Documents by the Owner will have been, duly authorized by
all necessary partnership action, and this Agreement is, and when
executed and delivered, each of the Property Conveyance Documents will
be, the legal, valid and binding obligation of the Owner, enforceable
in accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency or the laws or equitable principles affecting
the enforcement of creditors' rights generally.
(c) The execution, delivery and performance by the
Owner of this Agreement do not, and, if applicable, the execution,
delivery and performance by the Owner of the Property Conveyance
Documents will not, contravene the terms of the Partnership Agreement,
conflict with or result in any breach or contravention of, or the
creation of any lien under, any agreements or instruments to which it
is a party or by which it or any of its property is bound or violate
any state or federal law and all required approvals therefor, if any,
have been of, if applicable, will have been as of the Closing Date,
duly obtained.
(d) The Owner is the owner of the Property, subject
to the Permitted Exceptions and has full power and authority to sell,
convey, assign and transfer to Brookdale the Property, free and clear
of all liens and encumbrances except the Permitted Exceptions.
7
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(e) There is no litigation or other proceeding
pending against the Owner which could have a material adverse effect on
the Owner's ability to consummate the transactions contemplated by this
Agreement and the Property Conveyance Documents.
10. Covenants. Until the earlier of the Closing or the Option
Termination Date, unless Brookdale otherwise consents in writing:
(a) The Company shall continue to own the Shares, and the General Partner
shall continue to own the General Partnership Interest, in each case free of any
liens, claims or encumbrances.
(b) The Owner shall continue to own the Property, free of any liens, claims
or encumbrances, other than Permitted Exceptions.
11. Miscellaneous.
(a) Each Grantor and Brookdale agree that money damages or other remedy at
law would not alone be sufficient or adequate remedy for any breach or violation
of, or a default under, this Agreement by such Grantor and that, in addition to
all other remedies available to Brookdale, Brookdale shall be entitled to an
injunction restraining such breach, violation or default or threatened breach,
violation or default and to any other equitable relief, including, without
limitation, specific performance, without bond or other security being required.
(b) Notices. Any notices required or permitted to be sent hereunder shall
be delivered personally or by telecopier (with answer back acknowledged) or
mailed, certified mail, return receipt requested, or delivered by overnight
courier service to the following addresses, or such other addresses as shall be
given by notice delivered hereunder, and shall be deemed to have been given upon
delivery, if delivered personally, upon receipt with answer back acknowledged,
if delivered by telecopier, three (3) business days after mailing, if mailed, or
one business day after delivery to the courier, if delivery by overnight courier
service:
If to the Company:
AH Texas Subordinated, LLC
320 King of Prussia Road
Suite 160
Radnor, Pennsylvania 19087
Attn: David B. Fenkell
Fax: (610) 902-0777
with a copy to:
Squire, Sanders & Dempsey
8
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41 South High Street
Columbus, Ohio 43215
Attn: Scott B. West
Fax: (614) 365-2499
If to Owner:
AH Texas Owner Limited Partnership
320 King of Prussia Road
Suite 160
Radnor, Pennsylvania 19087
Attn: David B. Fenkell
Fax: (610) 902-0777
with a copy to:
Squire, Sanders & Dempsey
41 South High Street
Columbus, Ohio 43215
Attn: Scott B. West
Fax: (614) 365-2499
If to Brookdale:
Brookdale Living Communities, Inc.
77 West Wacker Drive
Suite 4400
Chicago, Illinois 60601
Attn: Darryl W. Copeland, Jr.
Fax: (312) 977-3699
Attn: Robert J. Rudnik
Fax: (312) 977-3769
with a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attn: Wayne D. Boberg
Fax: (312) 558-5700
A copy of any notice sent hereunder shall be sent to the Senior Lender at
Nomura Asset Capital Corporation, Two World Financial Center, Building B, New
York, New York 10281-1198, Attention: Sheryl McAfee, Telecopier: (212) 667-1206,
with copies to: Nomura Asset Capital Corporation, Two World financial Center,
Building B, New York, New York 10281, Attention: Barry Funt, Telecopier: (212)
667-1567 and Dechert Price &
9
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Rhoads, 90 State House Square, 12th Floor, Hartford, Connecticut
06103-3702, Attention: Marc B. Friedman Fax: (860) 524-3930 (or such other
address as shall be given by notice delivered hereunder).
(c) Entire Agreement. This Agreement (including the schedule hereto)
constitutes the entire agreement among the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and understandings,
oral and written, among the parties hereto with respect to the subject matter
hereof.
(d) Binding Effect; Benefit. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
assigns. Brookdale may assign its rights under this Agreement without the
consent of either Grantor. In the event that Brookdale assigns its rights under
this Agreement, it shall so notify the other parties hereto, and references
herein to Brookdale shall be deemed to be references to the assignee to whom
such rights have been assigned upon the execution and delivery by Brookdale and
such assignee of an assignment and assumption agreement with respect to this
Agreement and delivery of a copy thereof to each of the other parties hereto.
(e) Amendment; Waiver. No provision of this Agreement may be amended,
waived or otherwise modified without the prior written consent of the parties
hereto.
(f) Section Headings. The section headings contained in this Agreement are
for reference purposes only and shall not affect the meaning or interpretation
of this Agreement.
(g) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
(h) Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois (without giving effect to
principles of conflicts of law).
(i) Waiver of Jury Trial. Each party hereto (or joining in the execution
hereof), after consulting or having had the opportunity to consult with counsel,
knowingly, voluntarily and intentionally waives any right any of them may have
to a trial by jury in any litigation based upon or arising out of this
Agreement, or any of the transactions contemplated by this Agreement, or any
course of conduct, dealing, statements (whether oral or written) or actions of
any of them. No such party shall seek to consolidate, by counterclaim or
otherwise, any action in which a jury trial has been waived with any other
action in which a jury trial cannot be or has not been waived unless failure to
so consolidate would result in a loss of such claim.
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(j) Deed of Trust. The parties hereto acknowledge and agree that (i) the
Property Option is subject and subordinate to the lien of the Deed of Trust, and
(ii) upon the entry of a final decree of foreclosure with respect to the
Property, or the conveyance thereof pursuant to a power of sale, if applicable,
or conveyance deed in lieu of foreclosure, the Option shall be extinguished
notwithstanding that the Option Termination Date may not yet have occurred.
(k) Limitation of Personal Liability. Notwithstanding any other provision
of this Agreement to the contrary, (i) in no event shall any officer, director,
member, partner, manager, shareholder, incorporator or agent of either Grantor
be personally liable to Brookdale for any of such Grantor's obligations under
this Agreement, and (ii) if the Owner defaults in connection with any
representation or covenant of the Owner set forth in this Agreement, it will not
create any personal liability against the Owner or any lien rights against the
Property.
(l) The Grantors acknowledge and agree that (i) they are not intended to be
beneficiaries of the limitations set forth in the Intercreditor Agreement on the
rights of Brookdale to take Enforcement Actions (as defined therein) and to
enforce any representations, covenants, warranties or obligations of the Owner
under or pursuant to this Agreement, and (ii) they may not seek to enforce such
limitations.
(m) Intercreditor Agreement. The parties hereto acknowledge the existence
of the Intercreditor Agreement.
11
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IN WITNESS WHEREOF, the undersigned have executed and
delivered this Agreement as of the date first above written.
AH TEXAS SUBORDINATED, LLC
By: AH Texas Investor, Inc.,
its manager
By:
Name: David B. Fenkell
Its: President
AH TEXAS OWNER LIMITED PARTNERSHIP
By: AH Texas CGP, Inc.,
its general partner
By:
Name: David B. Fenkell
Its: President
BROOKDALE LIVING COMMUNITIES, INC.
By:
Name:
Its:
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SCHEDULE I
LEGAL DESCRIPTION
Lot Two (2), Block "A", RESUBDIVISION OF LOT 1, BLOCK A, GAINES RANCH PUD,
SECTION ONE, a subdivision in Travis County, Texas, according to the map or plat
thereof, recorded in Volume 99, Pages(s) 175-176 of the Plat Records of Travis
County, Texas.
<PAGE>
EXHIBIT A
ASSIGNMENT AND ACCEPTANCE AGREEMENT
THIS AGREEMENT made as of ___________________, by and between AH TEXAS
SUBORDINATED, LLC, an limited liability company ("Assignor"), and
_______________________ ("Assignee").
WITNESSETH:
1. For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Assignor does hereby transfer, assign and convey
to Assignee a ninety-nine percent (99%) interest (the "Interest") as Limited
Partner in AH TEXAS OWNER LIMITED PARTNERSHIP, an Ohio limited partnership (the
"Partnership"), established under the provisions of an Agreement of Limited
Partnership, effective as of March 27, 1998 and amended and restated pursuant to
an Amended and Restated Agreement of Limited Partnership dated as of June ,
1998.
2. Assignor does hereby warrant and represent that it is the sole and
lawful owner of the Interest herein transferred and that it has full power and
authority to make such transfer free of any liens, encumbrances and
restrictions.
3. Assignee does hereby accept the foregoing assignment and agrees to
become a Limited Partner of the Partnership.
ASSIGNOR:
AH TEXAS SUBORDINATED, LLC
By: AH Texas Investor, Inc.,
its manager
By:___________________________
Name:_________________________
Title:_________________________
ASSIGNEE:
By:___________________________
Name:_________________________
Title:_________________________
<PAGE>
- --------------------------------------------------------------------------------
LOAN AGREEMENT
Dated as of June __, 1998
By and among
AH MICHIGAN OWNER LIMITED PARTNERSHIP,
as Borrower
BROOKDALE LIVING COMMUNITIES OF MICHIGAN, INC.,
as Manager
AND
NOMURA ASSET CAPITAL CORPORATION,
as Lender
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- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION..................................1
1.1 Specific Definitions............................................1
1.2 Index of Other Definitions.....................................23
1.3 Principles of Construction.....................................25
II. GENERAL.................................................................26
2.1 The Loan.......................................................26
2.1.1 The Initial Loan..................................26
2.1.2 Conversion........................................26
2.1.3 Additional Loan...................................28
2.1.4 Restated Documents................................29
2.1.5 Separate Notes....................................29
2.1.6 Expected Conversion Date Extension................30
2.2 Interest; Monthly Payments.....................................30
2.2.1 Generally.........................................30
2.2.2 Accrued Interest..................................31
2.2.3 Property Cash Flow Allocation.....................31
2.2.4 Default Rate......................................32
2.2.5 Rate Adjustment...................................33
2.3 Loan Repayment and Defeasance..................................33
2.3.1 Repayment.........................................33
2.3.2 Mandatory Prepayments.............................34
2.3.3 Voluntary Defeasance of the Note..................35
2.4 Release of Property............................................37
2.4.1 Release on Defeasance.............................37
2.4.2 Release on Payment in Full........................38
2.5 Payments and Computations......................................38
2.5.1 Making of Payments................................38
2.5.2 Computations......................................38
2.5.3 Late Payment Charge...............................38
2.6 Fees...........................................................38
2.6.1 Draw Fees.........................................38
2.6.2 Servicing Fee.....................................39
2.6.3 Structuring Fee Upon Conversion...................39
2.6.4 Advances..........................................39
2.7 Taxes..........................................................39
2.8 Breakage Indemnity.............................................40
2.9 Security for the Loan..........................................40
2.10 Borrower's Note................................................40
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Page
III. CASH MANAGEMENT; ESCROWS AND RESERVES...................................41
3.1 Cash Management Arrangements...................................41
3.2 Tax and Insurance Escrow Fund..................................41
3.3 Capital Reserve Fund...........................................42
3.3.1 Capital Reserve Fund..............................42
3.3.2 Payment of Capital Expenses.......................43
3.4 Operating Expenses.............................................43
3.4.1 Payment of Approved Operating Expenses............43
3.4.2 Extra Funds for Operating Expenses................44
3.4.3 Reconciliation....................................44
3.5 Working Capital Subaccount.....................................44
3.6 Cash Collateral Subaccount.....................................44
3.7 Security Deposits..............................................45
3.8 Grant of Security Interest; Application of Funds...............46
IV. REPRESENTATIONS AND WARRANTIES..........................................46
4.1 Borrower Representations.......................................46
4.1.1 Organization; Special Purpose.....................47
4.1.2 Proceedings; Enforceability.......................47
4.1.3 No Conflicts......................................47
4.1.4 Litigation........................................47
4.1.5 Agreements........................................47
4.1.6 Title.............................................48
4.1.7 Intentionally deleted.............................48
4.1.8 No Bankruptcy Filing..............................48
4.1.9 Full and Accurate Disclosure......................48
4.1.10 No Plan Assets....................................48
4.1.11 Compliance........................................49
4.1.12 Contracts.........................................49
4.1.13 Financial Information.............................49
4.1.14 Intentionally deleted.............................49
4.1.15 Federal Reserve Regulations.......................49
4.1.16 Intentionally deleted.............................50
4.1.17 Not a Foreign Person..............................50
4.1.18 Separate Lots.....................................50
4.1.19 Intentionally deleted.............................50
4.1.20 Enforceability....................................50
4.1.21 Insurance.........................................50
4.1.22 Intentionally deleted.............................50
4.1.23 Intentionally deleted.............................50
4.1.24 Intentionally deleted.............................50
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Page
4.1.25 Intentionally deleted.............................50
4.1.26 Intentionally deleted.............................50
4.1.27 Filing and Recording Taxes........................50
4.1.28 Investment Company Act............................51
4.1.29 Ownership of Borrower.............................51
4.1.30 Management Agreement..............................51
4.1.31 Intentionally deleted.............................51
4.1.32 Name; Principal Place of Business.................51
4.1.33 Other Debt and Obligations........................51
4.1.34 Fraudulent Transfer; Solvency.....................52
4.1.35 No Defaults.......................................52
4.1.36 Labor Matters.....................................52
4.1.37 No Prior Assignment...............................52
4.1.38 Intellectual Property.............................52
4.1.39 Intentionally deleted.............................53
4.1.40 Tax Fair Market Value.............................53
4.1.41 Brokerage.........................................53
4.1.42 Intentionally deleted.............................53
4.1.43 Intentionally deleted.............................53
4.1.44 Intentionally deleted............................53
4.1.45 Governmental Proceedings and Notices..............53
4.1.46 Intentionally deleted.............................53
4.1.47 Intentionally deleted.............................53
4.1.48 Intentionally deleted.............................53
4.1.49 Intentionally deleted.............................53
4.1.50 Pledges of Receivables............................53
4.1.51 Intentionally deleted.............................53
4.2 Manager Representations........................................54
4.2.1 Organization; Special Purpose.....................54
4.2.2 Proceedings; Enforceability.......................54
4.2.3 No Conflicts......................................54
4.2.4 Litigation........................................54
4.2.5 Agreements........................................54
4.2.6 Title.............................................55
4.2.7 Survey............................................55
4.2.8 No Bankruptcy Filing..............................55
4.2.9 Full and Accurate Disclosure......................55
4.2.10 No Plan Assets....................................55
4.2.11 Compliance........................................56
4.2.12 Contracts.........................................56
4.2.13 Financial Information.............................56
4.2.14 Condemnation......................................56
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Page
4.2.15 Federal Reserve Regulations.......................57
4.2.16 Utilities and Public Access.......................57
4.2.17 Not a Foreign Person..............................57
4.2.18 Separate Lots.....................................57
4.2.19 Assessments.......................................57
4.2.20 Enforceability....................................57
4.2.21 Insurance.........................................57
4.2.22 Use of Property; Licenses.........................58
4.2.23 Flood Zone........................................58
4.2.24 Physical Condition................................58
4.2.25 Encroachments.....................................58
4.2.26 Leases............................................58
4.2.27 Filing and Recording Taxes........................59
4.2.28 Investment Company Act............................59
4.2.29 Ownership of Manager..............................59
4.2.30 Management Agreement. ...........................59
4.2.31 Hazardous Substances..............................59
4.2.32 Name; Principal Place of Business.................60
4.2.33 Other Debt and Obligations........................60
4.2.34 Fraudulent Transfer; Solvency.....................60
4.2.35 No Defaults.......................................61
4.2.36 Labor Matters.....................................61
4.2.37 No Prior Assignment...............................61
4.2.38 Intellectual Property.............................61
4.2.39 Title Insurance...................................61
4.2.40 Tax Fair Market Value.............................62
4.2.41 Brokerage.........................................62
4.2.42 Ownership of Licenses.............................62
4.2.43 Intentionally deleted.............................62
4.2.44 Intentionally deleted.............................62
4.2.45 Governmental Proceedings and Notices..............62
4.2.46 Physical Plant Standards..........................63
4.2.47 Past Violations...................................63
4.2.48 Intentionally Deleted.............................63
4.2.49 Intentionally Deleted.............................63
4.2.50 Pledges of Receivables............................63
4.2.51 Resident Records..................................63
4.3 Survival of Representations....................................63
V. AFFIRMATIVE COVENANTS...................................................64
5.1 Borrower's Covenants...........................................64
5.1.1 Existence.........................................64
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Page
5.1.2 Taxes and Other Charges...........................64
5.1.3 Repairs; Maintenance and Compliance...............65
5.1.4 Litigation........................................65
5.1.5 Performance of Other Agreements...................65
5.1.6 Notice of Default.................................65
5.1.7 Cooperate in Legal Proceedings....................65
5.1.8 Further Assurances................................65
5.1.9 Financial Reporting...............................66
5.1.10 Environmental Matters.............................67
5.1.11 Title to the Property.............................68
5.1.12 Estoppel Statement................................69
5.1.13 Principal Place of Business.......................69
5.1.14 Property Management...............................69
5.1.15 Special Purpose Bankruptcy Remote Entity..........69
5.1.16 Assumptions in Non-Consolidation Opinion..........71
5.1.17 Expenses..........................................71
5.1.18 Indemnity.........................................72
5.1.19 Conduct of Business...............................73
5.1.20 ERISA.............................................74
5.1.21 Trade Indebtedness................................75
5.1.22 Intentionally deleted.............................75
5.1.23 Insurance Benefits................................75
5.1.24 Access to Property................................75
5.1.25 Insurance.........................................75
5.1.26 Use Specific Covenants............................75
5.2 Manager's Covenants............................................76
5.2.1 Existence.........................................76
5.2.2 Taxes and Other Charges...........................76
5.2.3 Repairs; Maintenance and Compliance...............77
5.2.4 Litigation........................................77
5.2.5 Performance of Other Agreements...................77
5.2.6 Notice of Default.................................77
5.2.7 Cooperate in Legal Proceedings....................77
5.2.8 Further Assurances................................78
5.2.9 Financial Reporting...............................78
5.2.10 Environmental Matters.............................82
5.2.11 Title to the Property.............................83
5.2.12 Estoppel Statement................................83
5.2.13 Principal Place of Business.......................83
5.2.14 Property Management...............................83
5.2.15 Special Purpose Bankruptcy Remote Entity..........84
5.2.16 Assumptions in Non-Consolidation Opinion..........84
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Page
5.2.17 Expenses..........................................84
5.2.18 Indemnity.........................................85
5.2.19 Conduct of Business...............................86
5.2.20 ERISA.............................................86
5.2.21 Trade Indebtedness................................87
5.2.22 Capital Improvements and
Environmental Remediation........................87
5.2.23 Insurance Benefits................................87
5.2.24 Access to Property................................88
5.2.25 Insurance.........................................88
5.2.27 Use Specific Covenants............................88
VI. NEGATIVE COVENANTS......................................................88
6.1 Borrower's Covenants...........................................88
6.1.1 Management Agreement..............................88
6.1.2 Liens.............................................89
6.1.3 Dissolution.......................................89
6.1.4 Change in Business................................89
6.1.5 Debt Cancellation.................................89
6.1.6 Assets............................................89
6.1.7 Transfers.........................................89
6.1.8 Debt..............................................89
6.1.9 Assignment of Rights..............................89
6.1.10 Operation of the Property.........................89
6.1.11 Use Specific Negative Covenants...................89
6.2 Manager's Covenants............................................90
6.2.1 Management Agreement..............................90
6.2.2 Liens.............................................91
6.2.3 Dissolution.......................................91
6.2.4 Change in Business................................91
6.2.5 Debt Cancellation.................................91
6.2.6 Assets............................................91
6.2.7 Transfers.........................................91
6.2.8 Debt..............................................91
6.2.9 Assignment of Rights..............................91
6.2.10 Operation of the Property.........................91
6.2.11 Use Specific Negative Covenants...................91
VII. INSURANCE; CASUALTY; AND CONDEMNATION...................................92
7.1 Insurance......................................................92
7.1.1 Coverage..........................................92
7.1.2 Policies..........................................94
7.1.3 Proceeds..........................................95
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Page
7.2 Casualty.......................................................95
7.2.1 Notice; Restoration...............................95
7.2.2 Settlement of Proceeds............................96
7.3 Condemnation...................................................96
7.3.1 Notice; Restoration...............................96
7.3.2 Collection of Award...............................96
7.4 Application of Proceeds or Award...............................97
7.4.1 Application to Restoration; Procedure for
Application to Restoration.......................97
7.4.2 Application to Debt...............................98
7.4.3 Disbursement of Remaining Proceeds or Award.......99
7.4.4 Lender as Attorney-In-Fact........................99
7.4.5 Foreclosure.......................................99
7.4.6 Security in Proceeds or Award.....................99
VIII. DEFAULTS................................................................99
8.1 Events of Default..............................................99
8.2 Remedies......................................................103
8.2.1 Acceleration.....................................103
8.2.2 Remedies Cumulative..............................103
8.2.3 Lender's Right to Perform........................104
8.2.4 Severance........................................104
8.2.5 Delay............................................104
8.3 Manager's Limited Right to Cure...............................105
IX. SPECIAL PROVISIONS.....................................................106
9.1 Sale of Note and Securitization...............................106
9.1.1 Cooperation......................................106
9.1.2 Use of Information...............................107
9.1.3 Borrower and Manager Obligations Regarding
Disclosure Documents ...........................108
9.1.4 Borrower Indemnity Regarding Filings.............109
9.1.5 Indemnification Procedure........................109
9.1.6 Contribution.....................................110
9.1.7 Rating Surveillance..............................110
X. MISCELLANEOUS..........................................................110
10.1 Exculpation...................................................110
10.2 Notices.......................................................112
10.3 Brokers and Financial Advisors................................113
10.4 Retention of Servicer.........................................113
10.5 Survival......................................................113
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Page
10.6 Lender's Discretion...........................................113
10.7 Governing Law.................................................114
10.8 Modification, Waiver in Writing...............................115
10.9 Delay Not a Waiver............................................115
10.10 Trial by Jury.................................................115
10.11 Headings......................................................116
10.12 Severability..................................................116
10.13 Preferences...................................................116
10.14 Waiver of Notice..............................................116
10.15 Remedies of Borrower..........................................116
10.16 Prior Agreements..............................................117
10.17 Offsets, Counterclaims and Defenses...........................117
10.18 Publicity.....................................................117
10.19 No Usury......................................................117
10.20 Conflict; Construction of Documents...........................118
10.21 No Third Party Beneficiaries..................................118
10.22 Assignment....................................................118
10.23 Exhibits Incorporated.........................................118
10.24 No Joint Venture or Partnership...............................118
10.25 Waiver of Marshalling of Assets Defense.......................118
10.26 Waiver of Counterclaim........................................119
10.27 Counterparts..................................................119
10.28 Bankruptcy Waiver.............................................119
10.29 Entire Agreement..............................................119
10.30 Borrower Acknowledgments......................................119
10.31 Waiver of "One Action" Rule; Cross Collateralizations.........120
10.32 Segregated Pool Properties....................................121
10.33 Synthetic Lease...............................................121
10.34 Termination of Manager's Obligations..........................122
10.35 Release of Subordinate Mortgage and
Other Subordinate Mortgages...............................123
SCHEDULES
Schedule 1 - Location of Property
Schedule 2 - Terms of Preferred Equity
Schedule 3 - Matters Regarding Representations - Borrower
Schedule 4 - Rent Roll
Schedule 5 - Matters Regarding Representations - Manager
EXHIBITS
Exhibit A - Operating Expense Certificate
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<PAGE>
LOAN AGREEMENT
LOAN AGREEMENT (the "Agreement") dated as of June 17, 199 by
and among AH MICHIGAN OWNER LIMITED PARTNERSHIP, an Ohio limited partnership
(together with its permitted successors and assigns, "Borrower"), BROOKDALE
LIVING COMMUNITIES OF MICHIGAN, INC., a Delaware corporation (together with its
permitted successors and assigns, "Manager"), and NOMURA ASSET CAPITAL
CORPORATION, a Delaware corporation (together with its successors and assigns,
"Lender").
RECITALS
WHEREAS, Borrower desires to obtain the Loan (as defined
herein) from Lender in the original principal amount of Twenty-Six Million Six
Hundred Twenty-Five Thousand and 00/100 Dollars ($26,625,000.00);
WHEREAS, Lender is willing to make the Loan on the condition
that Borrower and Manager each joins in the execution and delivery of this
Agreement which shall establish the terms and conditions of the Loan; and
WHEREAS, Lender, Borrower and Manager contemplate that all or
any portion of Lender's interest in the Loan and to the Loan Documents (as
defined herein) may be assigned, in whole or in part, by Lender to another
Person (as defined herein), including, without limitation, to a trustee on
behalf of security holders in connection with a Securitization (as defined
herein).
NOW, THEREFORE, in consideration of the making of the Loan by
Lender and the covenants, agreements, representations and warranties set forth
in this Agreement, the parties hereby covenant, agree, represent and warrant as
follows:
I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION
1.1 Specific Definitions. The following terms have the meanings set forth
below:
"Acceptable Appraisal": an appraisal of the Property (i) dated
not more than seventy-five (75) days prior to the Conversion Date (unless
otherwise agreed to by Lender), (ii) signed by a qualified MAI appraiser with no
interest, direct or indirect, in the Loan or the Property, and whose
compensation is not affected by the Appraised Value, (iii) addressed to Lender
and its successors and assigns, (iv) made in compliance with the requirements of
the Federal National Mortgage Association Company or Federal Home Loan Mortgage
Corporation, or any successor thereto, and Title XI of the Federal Institutions
Reform, Recovery, and Enforcement Act of 1989 and the regulations promulgated
thereunder, and (v) otherwise satisfactory to Lender in all respects.
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"Additional Loan": a loan (if any) made by Lender to Borrower pursuant to
Section 2.1.3, which will be evidenced by the Additional Note.
"Additional Note": the Note to be made by Borrower to Lender in the form of
Exhibit A in a principal amount equal to the principal amount of the Additional
Loan, as it may be restated, replaced, supplemented or otherwise modified from
time to time.
"Advance": any portion of the Loan advanced by Lender.
"Affiliate": as to any Person, any other Person that, directly
or indirectly, is in Control of, is Controlled by or is under common Control
with such Person or is a director or officer of such Person or of an Affiliate
of such Person and, if such Person is an individual, any member of the immediate
family (including parents, spouse and children) of such individual and any trust
whose principal beneficiary is such individual or one or more members of such
immediate family and any Person who is controlled by any such member or trust.
"Alternative Amortization Schedule": an amortization schedule of a number
of months determined by Lender, but not more than three hundred sixty (360)
months.
"Amortization Schedule": the Alternative Amortization Schedule
if the Rate Adjustment is made pursuant to Section 2.2.5; otherwise, an
amortization schedule of three hundred fifty (350) months, which schedule shall
be modified by Lender, if and to the extent the proportion of the congregate
care and assisted living components of the Property are altered by Borrower
and/or Manager subsequent to the Loan Closing Date.
"Applicable Pre-Conversion Treasury Rate": as of a given date,
the rate per annum for a term from such date to the Applicable Reference Date,
determined by Lender and calculated by linear interpolation (rounded to the
nearest one-thousandth of one percent (i.e., 0.001%)) of the yields of
noncallable United States Treasury obligations with terms (one longer and one
shorter) most nearly approximating the period from such date to the fifteenth
(15th) anniversary thereof, as determined by Lender on the basis of Federal
Reserve Statistical Release H.15-Selected Interest Rates under the heading U.S.
Governmental Security/Treasury Constant Maturities, or other recognized source
of financial market information selected by Lender.
"Applicable Reference Date": with respect to a given date, either (i) the
Optional Prepayment Date if it has been determined, or (ii) one hundred eighty
(180) months from the Conversion Date, if it has not yet been determined.
"Appraised Value": the fair market value of the Property reflected in an
Acceptable Appraisal.
"Approved Capital Expenses": Capital Expenses incurred by Borrower and/or
Manager which (i) are included in the approved Capital Budget for the Current
Month, (ii) are not included in the approved Capital Budget for the Current
Month, but do not cause either (A) the
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relevant line item for the entire year covered by the approved Capital Budget to
be exceeded by more than five percent (5%) or (B) the total of the approved
Capital Budget for the Current Month and all prior months covered by such
approved Capital Budget (i.e., year to date) to be exceeded by more than five
percent (5%), or (iii) have been approved by Lender.
"Approved Operating Expenses": Operating Expenses incurred by
Borrower and/or Manager which (i) are included in the approved Operating Budget
for the Current Month, (ii) are for Taxes, electric, gas, oil, water, sewer or
other utility service (including telephone) to the Property, (iii) are not
included in the approved Operating Budget for the Current Month, but do not
cause either (A) the relevant line item for the entire year covered by the
approved Operating Budget to be exceeded by more than five percent (5%) or (B)
the total of such approved Operating Budget for the Current Month and all prior
months to be exceeded by more than five percent (5%) or (iv) have been approved
by Lender.
"Approved Residency Agreement": the form of residency
agreement to be used by Borrower and/or Manager for residents at the Property,
which form shall be substantially in the form customarily used by Manager
Sponsor in connection with operating other similar properties and which
previously has been approved by Lender on or prior to the Loan Closing Date. The
parties hereto acknowledge that Manager is modifying such form to satisfy local
statutory requirements, which revisions shall be completed and submitted to
Lender for its review and reasonable approval prior to the Substantial
Completion Date. Upon receiving Lender's approval of such revisions, for
purposes of this Agreement and the other Loan Documents, that form shall become
the Approved Residency Agreement. Except as otherwise provided herein, neither
Borrower nor Manager shall materially modify or amend the Approved Residency
Agreement at any time while the Loan is outstanding without the prior written
consent of Lender, which consent shall not be unreasonably withheld or delayed.
"Assignment of Agreements": a first priority Assignment of
Agreements, Licenses, Permits and Contracts, in form and substance satisfactory
to Lender in Lender's discretion, dated as of the Loan Closing Date, from
Borrower and Manager, collectively as assignor, to Lender, as assignee,
assigning to Lender all of Borrower's and Manager's interest in and to all
Licenses, Permits and Contracts, as the same may thereafter from time to time be
supplemented, amended, modified or extended by one or more written agreements
supplemental thereto.
"Assignment of Leases": a first priority Assignment of Leases
and Rents, in form and substance satisfactory to Lender in Lender's discretion,
dated as of the Loan Closing Date, from Borrower and Manager, collectively as
assignor, to Lender, as assignee, assigning to Lender all of Borrower's and
Manager's interest in and to the Leases and the Rents with respect to the
Property as security for the Loan, as the same may thereafter from time to time
be supplemented, amended, modified or extended by one or more written agreements
supplemental thereto.
"Banc One": Banc One Capital Partners IV, Ltd., an Ohio limited liability
company.
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"Basic Carrying Costs": means the following costs with respect
to the Property (i) real property taxes, assessments and Impositions (including
without limitation any payments due under any ground lease and any ground rents)
applicable to the Property, and (ii) Insurance Premiums for Policies required or
permitted to be maintained by Borrower and/or Manager pursuant to this Agreement
or the other Loan Documents.
"BLA": the Building Loan Agreement by and among Borrower, Manager and
Lender dated the date hereof.
"BLA Budget": the "Budget as Adjusted", as such term is defined in the BLA.
"BLA Costs": the "Costs", as such term is defined in the BLA.
"Blended Treasury Rate": as of a given date, a rate of
interest equal to the percentage determined by dividing (i) the sum of the
respective products obtained by multiplying each portion of the Principal
outstanding on such date (including, as of the Conversion Date, the Additional
Loan, if any) by the percentage applicable thereto, as hereinafter provided, by
(ii) the aggregate amount of such outstanding Principal. For purposes of clause
(i) of this definition, the percentage applicable to the different portions of
outstanding Principal shall be determined as follows: (x) the percentage
applicable to the Initial Locked Amount is five and eighty-nine hundredths
percent (5.89%), and (y) the percentage applicable to the rest of the
outstanding Principal above the Initial Locked Amount (the ""Unlocked Amount")
will be the Applicable Pre-Conversion Treasury Rate prior to the Conversion Date
as to the Unlocked Amount or the rate pursuant to a New Rate Lock Agreement
and/or a Modified Rate Lock Agreement as to such Unlocked Amount; provided,
however, if the Conversion Date is extended in accordance with this Agreement,
then all such rates shall be adjusted pursuant to a New Rate Lock Agreement
and/or a Modified Rate Lock Agreement as set forth in Section 2.1.6.
"Borrower ": has the meaning provided in the first paragraph of this
Agreement, and Borrower is and shall be wholly owned and controlled by Borrower
Owner.
"Borrower Owner": with respect to Borrower, any current or future general
partner, managing member, controlling shareholder, or beneficiary of Borrower.
"Borrower Representative": AH Michigan CGP, Inc., an Ohio corporation, or
its permitted successor or assignee as general partner of Borrower, as permitted
by Lender pursuant to this Agreement.
"Borrower Sponsor ": AH Michigan Subordinated, LLC, an Ohio limited
liability company. "Breakage Fees": any fees, costs or other expenses (including
Lender's Expenses) related to or incurred in connection with the termination,
extension or other modification to the Rate Lock Agreement or any other
applicable hedge or derivative instruments required by Lender in connection with
the Loan.
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"Business Day": any day other than a Saturday, Sunday or any other day on
which Federally insured depository institutions in New York, New York, Chicago,
Illinois, or the State are not open for business.
"Capital Expenses": expenses that are required under GAAP to be
capitalized.
"Clearing Account Agreement": the Clearing Account Agreement by and among
Borrower, Lender, and LaSalle National Bank (or such other financial institution
acceptable to Lender), dated no later than thirty (30) days after the Loan
Closing Date.
"Code": the Internal Revenue Code of 1986, as amended, any successor
statutes thereto, and applicable U.S. Department of Treasury regulations issued
pursuant thereto in temporary or final form.
"Contest Procedures ": After prior notice to Lender, Borrower
or Manager, at its own expense, may contest by appropriate proceedings, promptly
initiated and conducted in good faith and with due diligence, the particular
issue, provided that (i) no other Default or Event of Default has occurred and
remains uncured, (ii) such proceeding shall suspend the collection of fees in
connection with the particular issues, (iii) such proceeding shall be permitted
under and be conducted in accordance with the provisions of any other instrument
to which Borrower or Manager is subject and shall not constitute a default
thereunder, (iv) no part of or interest in the Property will be in danger of
being sold, forfeited, terminated, canceled or lost, if the Borrower or Manager
pays the amount or satisfies the condition being contested, and the Borrower or
Manager would have the opportunity to do so, in the event of the Borrower's or
Manager's failure to prevail in the contest, (v) Lender would not, by virtue of
such permitted contest, be exposed to any risk of any civil liability for which
the Borrower or Manager has not furnished additional security as provided in
clause (vi) below, or to any risk of criminal liability, and neither the
Property nor any interest therein would be subject to the imposition of any lien
for which the Borrower or Manager has not furnished additional security as
provided in clause (vi) below, as a result of the failure to comply with such
law or of such proceeding, (vi) Borrower or Manager shall have furnished such
security as may be required in the proceeding, or as may be reasonably requested
by Lender, to insure the payment of any such fees, together with all interest
and penalties thereon, but in no amount less than one hundred and twenty-five
percent (125%) of the amount of such claims, and (vii) Borrower or Manager shall
promptly upon final determination thereof pay the amount of such fees determined
to be due and payable, together with all costs, interest and penalties. Lender
may pay over any such cash deposit or part thereof held by Lender to the
claimant entitled thereto at any time when, in the reasonable judgment of
Lender, the entitlement of such claimant is established.
"Control": with respect to any Person, either (i) ownership
directly or through other entities of more than fifty percent (50%) of all
beneficial equity interest in such Person, or (ii) the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person, through the ownership of voting securities, by contract
or otherwise.
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"Conversion": the conversion of the Loan from a construction loan to a
permanent loan pursuant to the provisions of this Agreement, which shall occur
on the Conversion Date pursuant to Section 2.1.2(c) provided no Default or Event
of Default has occurred after the Conversion Notice.
"Conversion Date": shall be the date specified as the
Conversion Date by Lender in a Conversion Notice that has not been withdrawn,
revoked or superseded by a later Conversion Notice, which date shall not be
later than the Original Expected Conversion Date or the Extended Expected
Conversion Date, as applicable.
"Current Month": as of any date of determination, the then current calendar
month.
"Debt": the unpaid Principal, all interest accrued and unpaid thereon, any
Yield Maintenance Premium, Default Rate interest, Late Payment Charges, and all
other sums due and payable to Lender in respect of the Loan, or under any Loan
Document.
"Debt Service": with respect to any particular period, the
greater of (i) scheduled Principal and interest payments under the Note in such
period, plus any and all Default Rate Interest, Late Payment Charges, Yield
Maintenance Premium that accrue or are due and payable, and any and all other
sums due to Lender in respect of the Loan, and (ii) the product of (A) the
outstanding Principal as of the end of such period and (B) the Debt Service
Constant for such period.
"Debt Service Constant": for any period, the greater of (i)
nine and one hundredths percent (9.01%) and (ii) an amount, expressed as a
percentage, computed by dividing by 100 the annual amount of principal and
interest which would be payable on a loan of $1,000 in order to fully amortize
such loan in equal monthly installments over the Amortization Schedule with
interest at a rate equal to the Interest Rate as of the end of such period.
"Debt Service Coverage Ratio": as of any date, the ratio of (i) the Net
Operating Income for the 12-month period ending with the most recently completed
calendar month to (ii) the Debt Service with respect to such period.
"Default": the occurrence of any event under any Loan Document which, but
for the giving of notice or passage of time, or both, would be an Event of
Default.
"Default Rate": a rate per annum equal to the lesser of (i) the Maximum
Rate permitted by applicable law, or (ii) five percent (5%) above the Interest
Rate or the Revised Interest Rate, as applicable, compounded monthly.
"Defeasance Deposit": an amount equal to the sum of (i) an amount
sufficient to purchase U.S. Obligations which provide payments that will meet
the Scheduled Defeasance Payments, (ii) any costs and expenses incurred or to be
incurred in the purchase of such U.S. Obligations and (iii) any revenue,
documentary stamp or intangible taxes or any other tax or charge due in
connection with the transfer of the Note, the creation of the Defeased Note and
the
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Undefeased Note, if applicable, any transfer of the Defeased Note or otherwise
required to accomplish the agreements of Sections 2.3 and 2.4.
"Deposit Account Agreement": the Deposit Account Agreement by and among
Borrower, Lender, and LaSalle National Bank, dated two (2) months prior to the
date Borrower or Manager receives Rents.
"Deposit Bank": the deposit bank under the Deposit Account Agreement or its
successors or assigns as permitted thereunder.
"Determination Date": with respect to any Interest Period, the date which
is two (2) Eurodollar Business Days prior to the commencement of such Interest
Period.
"DOH ": the applicable state and local Department of Public Health and such
other applicable state agencies.
"Effective Balloon Amount": the projected outstanding Principal on the
Optional Prepayment Date, derived by application of the Interest Rate and the
Monthly Debt Service Payment Amount.
"Eligible Account": (i) an account maintained with a federal
or state chartered depository institution or trust company whose (x) commercial
paper, short-term debt obligations or other short-term deposits are rated at
least A-1 by the applicable Rating Agencies if the deposits in such account are
to be held in such account for thirty (30) days or less or (y) long-term
unsecured debt obligations are rated at least AA- by the applicable Rating
Agencies if the deposits in such account are to be held in such account for more
than thirty (30) days; or (ii) a segregated trust account maintained with the
trust department of a federal or state chartered depository institution or trust
company acting in its fiduciary capacity which institution or trust company is
subject to regulations regarding fiduciary funds on deposit substantially
similar to 12 C.F.R. ss. 9.10(b); or (iii) an account otherwise acceptable to
the applicable Rating Agencies, as confirmed in writing that such account would
not, in and of itself, result in a downgrade, qualification or withdrawal of the
then current ratings assigned to any Security.
"Environmental Guaranty": an Environmental Indemnity Agreement made by
Guarantor in favor of Lender in a form satisfactory to Lender.
"Equity Interests": with respect to Manager or Borrower of the
Property (a) if Manager or Borrower, as applicable, is a limited partnership,
limited partnership interests in Manager or Borrower, as applicable; (b) if
Manager or Borrower, as applicable, is a limited liability company, membership
interests in Manager or Borrower, as applicable; (c) if Manager or Borrower, as
applicable, is a corporation, shareholder interest in Manager or Borrower, as
applicable; provided, however, that Equity Interests shall not include any
direct or indirect legal or beneficial ownership interest, or any other interest
of any nature or kind whatsoever, of the
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Borrower Representative or Manager Representative, as applicable, in Borrower or
Manager, as applicable.
"Equity Option Agreement": that certain Equity Option Agreement by and
among AH Michigan Investor, Inc., Borrower Sponsor, Borrower Representative,
Borrower, and Manager Sponsor, dated the date hereof.
"ERISA": the Employee Retirement Income Security Act of 1974
as amended from time to time, and the rules and regulations promulgated
thereunder. Section references to ERISA are to ERISA, as in effect at the date
of this Agreement and, as of the relevant date, any subsequent provisions of
ERISA, amendatory thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate": with respect to Borrower or Manager, any
corporation or trade or business that is a member of any group of organizations
(i) described in Section 414(b) or (c) of the Code of which Borrower or Manager,
as applicable, is a member, and (ii) solely for purposes of potential liability
under Section 302(c)(11) of ERISA and Section 412(c)(11) of the Code and the
lien created under Section 302(f) of ERISA and Section 412(n) of the Code,
described in Section 414(m) or (o) of the Code of which Borrower or Manager, as
applicable, is a member.
"ERISA Plan": an employee benefit or other plan established or
maintained by Borrower, Manager, or any ERISA Affiliate for employees of
Borrower, Manager or any ERISA Affiliate and that is covered by Title IV of
ERISA, other than a Multiemployer Plan.
"Eurodollar Business Day": any day other than a Saturday, Sunday or other
day on which banks in the City of London, England are closed for interbank or
foreign exchange transactions.
"Expected Conversion Date ": shall be either the Original Expected
Conversion Date or the Extended Expected Conversion Date if approved in
accordance with Section 2.1.6, as applicable.
"Extended Expected Conversion Date ": the date to which the
Original Expected Conversation Date is extended pursuant to Section 2.1.6,
which, at Lender's discretion, may be a Payment Date and in any case shall be no
later than ten (10) months following the Expected Conversion Date.
"Extension Confirmation Date": the date of Lender's written notice to
Borrower and Manager of Lender's agreement to extend the Original Expected
Conversion Date to the Extended Expected Conversion Date.
"Extension Fee": an amount equal to one half (1/2) point of the Initial
Loan, which fee Manager shall pay no later than five (5) Business Days after the
Extension Confirmation Date.
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"Extension Notice": a written notice by Manager to Lender received by
Lender no later than sixty (60) days prior to the Original Expected Conversion
Date, specifying the Extended Expected Conversion Date.
"Fiscal Year": each twelve (12) month period commencing on January 1 and
ending on December 31 during each year of the Term.
"Fixed Rate": either (i) the Initial Fixed Permanent Rate or (ii) if Lender
allows an Expected Conversion Date Extension, the Revised Initial Fixed
Permanent Rate.
"GAAP": generally accepted accounting principles in the United States of
America as of the date of the applicable financial report.
"Governmental Authority": any court, agency, authority, board
(including, any environmental protection, planning or zoning board), bureau,
commission, department, office or instrumentality of any nature whatsoever of
any governmental or quasi-governmental unit of the United States, the State, any
other state of the United States, the County, City, Town and other municipality
in which the Land is located, whether now or hereafter in existence, having or
claiming to have jurisdiction over any Borrower, the Property or any part
thereof, or any Person to whom a particular reference to Governmental
Authorities is applicable, or the construction, use, occupancy, management,
ownership or operation of the Property or any part thereof.
"Gross Revenues": the total dollar amount of all income and receipts
whatsoever received by Borrower and, without duplication, by Manager in the
ordinary course of their respective businesses with respect to the Property,
including all Rents and Money.
"Guarantor": Brookdale Living Communities, Inc., a Delaware corporation.
"Guaranty": either the Guaranty of Payment or the Guaranty of Completion
and "Guaranties" means, collectively both the Guaranty of Payment and the
Guaranty of Collection.
"Guaranty of Completion": that certain Guaranty of Completion from
Guarantor to Lender as the same may thereafter from time to time be
supplemented, amended, modified or extended by one or more written agreements
supplemental thereto, in form satisfactory to Lender.
"Guaranty of Payment": that certain guaranty of payment of
Note, Rate Lock Obligations, Carrying Costs and Recourse Obligations from
Guarantor to Lender as the same may thereafter from time to time be
supplemented, amended, modified or extended by one or more written agreements
supplemental thereto, in form satisfactory to Lender.
"Impositions": all ground rents and all Taxes (including,
without limitation, all real estate, ad valorem or value added, sales (including
those imposed on lease rentals), use, single business, gross receipts, value
added, intangible transaction privilege, privilege, license or similar taxes),
assessments (including, without limitation, to the extent not discharged prior
to the Loan
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Closing Date, all assessments for public improvements or benefits, whether or
not commenced or completed within the term of this Agreement or any other Loan
Documents), water, sewer or other rents and charges, excises, levies, fees
(including, without limitation, license, permit, inspection, authorization and
similar fees), and all other governmental charges, in each case whether general
or special, ordinary or extraordinary, foreseen or unforeseen, of every
character in respect of the Property, (including all interest and penalties
thereon), which at any time prior to, during or in respect of the term hereof
may be assessed or imposed on or in respect of or be a Lien upon (i) Borrower or
Manager (including, without limitation, all income, franchise, single business
or other taxes imposed on Borrower or Manager for the privilege of doing
business in the jurisdiction in which the Property, or any other Collateral is
located), (ii) the Property, or any other Collateral or any part thereof, or
(iii) any occupancy, operation, use or possession of, or sales from, or activity
conducted on, or in connection with the Property or the leasing or use of the
Property or any part thereof, or the acquisition or financing of the acquisition
of the Property by Borrower or Manager.
"Independent": when used with respect to any Person, a Person
who: (i) does not have any direct financial interest or any material indirect
financial interest in Borrower, Manager, or in any Affiliate of Borrower or
Manager (including, in any Borrower Representative or Manager Representative, as
applicable), (ii) is not connected with Borrower, Manager, or and any Affiliate
of Borrower or Manager (including any Borrower Representative or Manager
Representative, as applicable), as an officer, employee, promoter, underwriter,
trustee, partner, member, manager, creditor, director or person performing
similar functions, and (iii) is not a member of the immediate family of a Person
defined in (i) or (ii) above. Notwithstanding the foregoing, during such period
as Guarantor is a publicly listed company, any Person (other than an officer,
employee, promoter, underwriter, trustee, partner or director of Guarantor or
Person performing similar functions of Guarantor) owning less than two percent
(2%) of the issued and outstanding stock of Guarantor shall be deemed
Independent.
"Independent Director": an individual reasonably satisfactory
to Lender who shall not have been at the time of such individual's appointment
as a director of the relevant entity, at any time after the appointment, and may
not have been at any time during the preceding five years (i) a shareholder of,
or an officer or employee of, such entity or any of its shareholders,
subsidiaries or Affiliates, (ii) a customer of, or supplier to, such entity or
any of its shareholders, subsidiaries or Affiliates, (iii) a Person Controlling
any such shareholder, supplier or customer, or (iv) a member of the immediate
family of any such shareholder, officer, employee, supplier or customer or of
any other director of such entity.
"Initial Equity Investment": with respect to Borrower, an amount calculated
as the difference between (x) 100% of the Budget Costs for the Property and (y)
the Loan Amount for the Property, which amount is to be funded by Borrower from
sources other than Advances or Obligations.
"Initial Fixed Permanent Rate": as of a given date, the sum of (i) the
Spread plus (ii) the Blended Treasury Rate as of such date.
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"Initial Loan": the loan, in the maximum original principal amount of
Twenty-Six Million Six Hundred Twenty-Five Thousand and 00/100 Dollars
($26,625,000.00), to be made by Lender to Borrower pursuant to the Master
Financing Facility Agreement and the BLA (and Section 2.1.1 hereof).
"Initial Locked Amount": Twenty-Six Million Six Hundred
Twenty-Five Thousand and 00/100 Dollars ($26,625,000.00), which is the sum of
(i) the amount rate locked pursuant to the Rate Lock Agreement dated January 14,
1998, which amount is Twenty-One Million Seven Hundred Forty-Nine Thousand Two
Hundred Twenty-One and 00/100 Dollars ($21,749,221.00) and (ii) the amount rate
locked pursuant to the Rate Lock Agreement dated May 7, 1998, which amount is
Four Million Eight Hundred Seventy-Five Thousand Seven Hundred Seventy-Nine and
00/100 Dollars ($4,875,779.00) .
"Initial Note": the Note dated the date hereof made by Borrower to Lender
in the maximum principal amount of the Initial Loan, as it may be restated,
replaced, supplemented or otherwise modified from time to time.
"Intercreditor Agreement": the Intercreditor Agreement dated
the date hereof made by Banc One Capital Partners IV, Ltd., Lender, Borrower,
Borrower Representative, Manager and Borrower Sponsor, as the same may
thereafter from time to time be supplemented, amended, modified or extended by
one or more written agreements supplemental thereto.
"Interest Period": (i) the period from the date of the Initial
Advance through the first day thereafter that is an Interest Period Termination
Date and (ii) each period thereafter from an Interest Period Commencement Date
through an Interest Period Termination Date; except that the Interest Period, if
any, that would otherwise commence before and end after the Maturity Date shall
end on the Maturity Date. If the Loan Closing Date shall occur prior to the
tenth (10th) day of a calendar month, the first Interest Period shall commence
on and include the Loan Closing Date and end on and include the tenth (10th) day
of the calendar month in which the Loan Closing Date occurs. If the Loan Closing
Date shall occur after the tenth (10th) day of a calendar month, the first
Interest Period shall commence on the Loan Closing Date and end on and include
the tenth (10th) day of the calendar month following the month in which the Loan
Closing Date occurs. If the Loan Closing Date shall occur on the tenth (10th)
day of a calendar month, the first Interest Period shall consist of a one (1)
day period consisting of the Loan Closing Date.
"Interest Period Commencement Date": the eleventh (11th) day
of each calendar month (or such different day of each calendar month that Lender
may designate in its reasonable discretion by notice to any Borrower given at
least fifteen (15) days before such change is to take effect).
"Interest Period Termination Date": the tenth (10th) day of each calendar
month (notwithstanding that the succeeding Payment Date may not be an Interest
Period Commencement Date because the day after such Interest Period Termination
Date is not a Business Day).
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"Interest Rate": (i) for each Interest Period ending prior to
or on the Conversion Date, LIBOR with respect to such Interest Period plus 175
basis points, (ii) for each Interest Period after the Conversion Date but prior
to the Optional Prepayment Date, the applicable of (A) if the Rate Adjustment is
not made, the Fixed Rate as of the Conversion Date, or (B) if the Rate
Adjustment is made, the applicable of (x) the Alternative Rate as of the
Conversion Date or (y) the Revised Alternative Rate as of the Conversion Date,
if Lender allows an Expected Conversion Date Extension, (iii) for each Interest
Period after the Optional Prepayment Date, the Revised Interest Rate, and (iv)
in any case, when applicable pursuant to this Agreement or any other Loan
Document, the Default Rate. In no event may any such rate at any time exceed the
Maximum Rate.
"Inventory": all of Borrower's and Manager's "inventory," as
such term is defined in the UCC, relating to the Property, and, to the extent
not included in such definition, all goods now owned or hereafter acquired by
Borrower or Manager intended for sale or lease, or to be furnished under
contracts of service by such Borrower or Manager in connection with the
Property, including without limitation, all inventories held by Borrower or
Manager for sale or use at or from the Property, and all other such goods,
wares, merchandise, and materials and supplies of every nature owned by Borrower
or Manager relating to the Property and all such other goods returned to or
repossessed by Borrower or Manager relating to the Property.
"Legal Requirements": statutes, laws, rules, orders,
regulations, ordinances, judgments, decrees and injunctions of Governmental
Authorities, including, all Environmental Laws and the Americans with
Disabilities Act, as they may be amended from time to time, together with all
regulations promulgated pursuant thereto or in connection therewith, affecting
the Borrower, the Manager, the Loan Documents, or all or any part of the
Property or the construction, use, alteration or operation thereof, whether now
or hereafter enacted and in force, and all permits, licenses and authorizations
and regulations relating thereto, and all covenants, agreements, restrictions
and encumbrances contained in any instrument, either of record or known to
Borrower or Manager, at any time in force affecting the Borrower, the Manager,
the Loan Documents, or all or any part of the Property, enacted or entered and
in force as of the relevant date, and all Licenses and regulations relating
thereto, and all covenants, agreements, restrictions and encumbrances contained
in any instruments, either of record or known to Borrower or Manager, at any
time in force affecting the Property or any part thereof, including any that may
(i) require repairs, modifications or alterations in or to all or part of the
Property, or (ii) in any way limit the use and enjoyment thereof.
"Lender": has the meaning provided in the first paragraph of this
Agreement.
"Lender's Counsel": such counsel as Lender may engage.
"Lender's Counsel Fees": the reasonable fees and disbursements
of Lender's Counsel for services heretofore or hereafter rendered and reasonable
costs incurred by such law firm and any other law firm(s) retained by Lender on
behalf of itself and/or Lender in connection with all aspects of Lender's making
and enforcing the Loan and, except as otherwise provided in
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this Agreement, negotiating, drafting, entering into, modifying (with Borrower's
and Manager's consent) and enforcing Lender's rights and remedies under the Loan
Documents.
"Lender's Expenses": as defined in the Rate Lock Agreement,
and shall include losses to Lender arising from the hedging transactions entered
into, or to be entered into, by Lender in relation to the Rate Lock Agreement
and all fees, commissions and other expenses (including reasonable attorneys'
fees and disbursements) incurred by Lender in connection with the closing out of
all or any portion of the Rate Lock (as defined in the Rate Lock Agreement).
"LIBOR": with respect to any Interest Period, the rate per
annum which is equal to the London Interbank Offered Rate reported from time to
time by Telerate News Service (page 3750), at which foreign branches of major
United States banks offer United States dollar deposits to other banks for a
one-month period in the London interbank market at approximately 11:00 a.m.,
London time, on the related Determination Date. If such interest rate shall
cease to be available from Telerate News Service, LIBOR shall be determined from
such financial reporting service as Lender shall reasonably determine and use
with respect to its other loan facilities on which interest is determined based
on LIBOR. If two or more such rates appear on Telerate page 3750 or associated
pages, the rate in respect of such Interest Period will be the arithmetic mean
of such offered rates, absent manifest error.
"Lien": any mortgage, deed of trust, lien, pledge,
hypothecation, assignment, security interest or any other encumbrance, charge or
transfer of, on or affecting all or part of the Property or any interest
therein, or in Borrower or, after the Conversion Date, in Manager, including any
conditional sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, the filing of
any financing statement or similar instrument under the UCC or comparable law of
any other jurisdiction, domestic or foreign, and mechanic's, materialmen's and
other similar liens and encumbrances.
"Loan": the Initial Loan and the Additional Loan (if any), collectively.
"Loan Closing": the execution and delivery of this Agreement by Borrower,
Manager, and Lender.
"Loan Closing Date": the date upon which this Agreement is executed and
delivered by Borrower, Manager, and Lender.
"Loan Documents": includes (i) this Agreement, (ii) the Note,
(iii) the BLA, (iv) the Mortgage, (v) the Subordinate Mortgage, (vi) the
Assignment of Leases, (vii) the Assignment of Agreements, (viii) the Guaranties,
(ix) the Environmental Guaranty, (x) the Clearing Account Agreement, (xi) the
Deposit Account Agreement, (xii) the Non-Recourse Guaranty, and (xiii) all other
documents and instruments evidencing or securing the Loan on or after the date
hereof excluding the Other Loan Documents; as each of the foregoing may be (and
each of the foregoing defined terms shall refer to such documents as they may
be) amended, restated, replaced, supplemented or otherwise modified from time to
time.
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"Management Agreement": the management agreement, dated the
date hereof, between Borrower and Manager, in form satisfactory to Lender in
Lender's discretion, as modified by the Consent and Subordination of Manager,
executed by Manager in favor of Banc One, dated the date hereof, together with
any substitute management agreement entered into as permitted by the Loan
Documents, pursuant to which Manager is to develop and manage the Property.
"Management Fee": the fee payable to Manager under the Management
Agreement.
"Manager": has the meaning provided in the first paragraph of this
Agreement, and Manager is and shall be wholly owned and controlled by Manager
Owner.
"Manager Owner": with respect to Manager, any current or future general
partner, managing member, or controlling shareholder of Manager.
"Manager Representative": None.
"Manager Sponsor": Brookdale Living Communities, Inc., a Delaware
corporation.
"Manager's Consent": with respect to the Property, the
Manager's Consent and Subordination of Management Agreement, in favor of Lender,
executed by Manager, Borrower, and Lender, as the same may from time to time be
supplemented, amended, modified, or extended, by one or more written agreements,
in form satisfactory to Lender.
"Master Financing Facility Agreement": the Master Financing Facility
Agreement between Manager Sponsor and Lender, in the maximum aggregate principal
amount of One Hundred Million and 00/100 Dollars ($100,000,000.00), dated June
17, 1998.
"Master Financing Facility Closing Date": June 17, 1998.
"Material Lease": any Lease except for (i) a residential Lease executed on
the Approved Residency Agreement and (ii) any commercial lease for less than
2,500 square feet.
"Maturity Date": the earlier to occur of: (i) the Stated Maturity Date; and
(ii) the date on which the entire Debt shall be paid or be required to be paid
in full, whether at the Stated Maturity Date, by prepayment, declaration of
acceleration or otherwise in accordance with the terms of this Agreement or any
of the Loan Documents or by operation of law.
"Maximum Rate": the maximum interest rate allowed by
applicable Legal Requirements in effect with respect to the Loan on the date for
which a determination of interest accrued hereunder is made, after taking into
account all fees, payments and other charges that are, under applicable law,
characterized as interest.
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"Money": all of Borrower's and Manager's interest in all moneys, cash,
rights to deposit or savings accounts, credit card receipts, rents or other
items of legal tender obtained from or for the use in connection with the
ownership, development or operation of the Property.
"Mortgage": the Mortgage, in form and substance satisfactory
to Lender in Lender's discretion, dated as of the Loan Closing Date, made by
Borrower to Lender with respect to the Property as security for the Loan, as the
same may thereafter from time to time be supplemented, amended, modified or
extended by one or more written agreements supplemental thereto.
"Multiemployer Plan": with respect to Borrower or Manager, a multiemployer
plan defined as such in Section 3(37) of ERISA to which contributions have been
made by Borrower, or Manager, as applicable, or any ERISA Affiliate and which is
covered by Title IV of ERISA.
"NACC": Nomura Asset Capital Corporation, a Delaware corporation.
"Net Operating Income": for any period, all Operating Income
during such period minus all Operating Expenses during such period; determined
by audit or in accordance with other agreed-upon procedures determined by
Lender; provided that, in determining Net Operating Income, adjustments shall be
made to reflect market and submarket occupancy and other factors determined to
be relevant by Lender, in Lender's reasonable discretion, and to comply with
Lender's underwriting standards then in effect, including the following
adjustments: (i) Operating Expenses shall be adjusted to reflect (A) a reserve
for capital expenditures equal to the greater of (x) $250 multiplied by the
number of apartment units at the Property or (y) such higher amount as is
recommended in a third-party engineering report, (B) an amount necessary to
reflect a minimum annual vacancy factor, pro rated for the applicable period,
equal to the greater of (x) the actual vacancy for the Property, (y) five
percent (5%) of Gross Revenues, and (z) the market vacancy rates, (C) a
management fee equal to the greater of the Management Fee or five percent (5%)
of Rents, and (D) the cost of Insurance Premiums adjusted to treat the Property
as a separate and individual asset as reasonably determined by Lender if the
Property is being insured under a blanket insurance policy, and (ii) Operating
Income shall be adjusted (A) to exclude Rents from temporary or month-to-month
tenants or tenants operating under bankruptcy protection and (B) to reflect any
Rent adjustments or cancellation options in any Leases; and provided further,
that Net Operating Income shall not include payments to be received in respect
of U.S. Obligations purchased in connection with a Defeasance. All adjustments
to determine Net Operating Income shall be subject to Lender's approval, in its
reasonable discretion after due diligence and all Operating Expenses may be
adjusted as required or permitted by applicable Rating Agency criteria.
"Non-Recourse Guaranty": that certain guaranty from Borrower
to Lender, securing the obligations of Other Borrowers under their respective
Other Loan Agreements, as the same may be thereafter from time to time
supplemented, amended, modified or extended by one or more written agreements
supplemental thereto, in form satisfactory to Lender, which guaranty is secured
solely by Borrower's interest in the Property.
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"Note": the Initial Note and (if executed and delivered) the Additional
Note, collectively; or, after the execution and delivery thereof, the Restated
Note.
"Obligations": all present and future indebtedness,
obligations, and liabilities of Borrower to Lender arising under or in
connection with this Agreement or any of the other Loan Documents, regardless of
whether such indebtedness, obligations, and liabilities are direct, indirect,
fixed, contingent, joint, several or joint and several.
"Officers' Certificate": a certificate delivered to Lender by Borrower or
Manager, as applicable, which is signed by a senior executive officer of
Borrower or Borrower Owner, or Manager or Manager Owner, as applicable.
"Operating Expense Certificate ": a certificate delivered to Lender by
Borrower or Manager, as applicable, in the form attached hereto as Exhibit A.
"Operating Expenses": for any period, all fees and
expenditures by or on behalf of Borrower as and to the extent required to be
expensed or allowed to be expensed and in fact expensed under GAAP during such
period in connection with the ownership, operation, maintenance, repair or
leasing of the Property, including (i) Management Fees; Insurance Premiums; bank
charges; expenses for accounting, advertising, marketing, architectural
services, utilities, extermination, cleaning, trash removal, window washing,
landscaping and security; and reasonable and necessary legal expenses incurred
in connection with the operation of the Property; (ii) Taxes and Other Charges
(calculated on a grossed up basis to reflect the full assessment of the Property
after Substantial Completion and full lease up, but excluding fines, penalties,
interest or Taxes or Other Charges payable by reason of Borrower's failure to
pay an imposition on a timely basis); (iii) wages, benefits, payroll taxes,
uniforms, insurance costs and all other related expenses for employees of
Borrower or its Affiliate engaged in the repair, operation or maintenance of the
Property; and (iv) the cost of tenant improvements, routine interior and
exterior maintenance, repairs and minor alterations; provided that Operating
Expenses will not include Debt Service, Capital Expenses, non-cash items such as
depreciation and amortization or any extraordinary one-time expenditures not
considered operating expenses under GAAP.
"Operating Income": for any period, all regular on-going
revenues actually received by Borrower and, without duplication, by Manager from
the operation of the Property during such period, including (i) Rents, (ii)
business interruption proceeds, and (iii) all other amounts received which in
accordance with GAAP are required to be or are included in Borrower's or
Manager's annual financial statements as operating income of the Property;
provided, that Operating Income will not include (1) income from non-recurring
income sources, (2) advance Rents or other payments, (3) deposits or escrows,
(4) any income otherwise includable in Operating Income but paid to a Person
other than Borrower or Manager, (5) Proceeds of Casualty insurance or
Condemnation Awards, or (6) income from a sale, financing or other capital
transaction.
"Optional Prepayment Date": the one hundred eightieth (180th) Payment Date
after the Conversion Date.
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"Original Expected Conversion Date": May 11, 2001.
"Other Borrower": any other party which is a Borrower pursuant to the
Master Financing Facility Agreement.
"Other Building Loan Agreement": the building loan agreement
in form and substance satisfactory to Lender in Lender's discretion, made by any
Other Borrower to Lender, evidencing the Other Loan made by Lender to the
applicable Other Borrower pursuant to the Master Financing Facility Agreement,
secured by the Other Property owned by the applicable Other Borrower.
"Other Charges": all ground rents, maintenance charges,
impositions other than Taxes, and any other charges, including vault charges and
license fees for the use of vaults, chutes and similar areas adjoining the
Property, now or hereafter levied or assessed or imposed against the Property or
any part thereof.
"Other Loan Agreement ": the loan agreement in form and
substance satisfactory to Lender in Lender's discretion, made by any Other
Borrower to Lender, evidencing the Other Loan made by Lender to the applicable
Other Borrower pursuant to the Master Financing Facility Agreement, secured by
the Other Property owned by the applicable Other Borrower.
"Other Loan Documents": includes (i) the Other Loan
Agreements, (ii) the Other Building Loan Agreements, (iii) the Other
Non-Recourse Guarantees, (iv) the Other Properties Subordinate Mortgages, and
(v) all other documents and instruments, in form and substance satisfactory to
Lender in Lender's discretion, made by any Other Borrower to Lender, evidencing
and securing any Other Loan made by Lender to any Other Borrower pursuant to the
Master Financing Facility Agreement, secured by the Other Property owned by the
applicable Other Borrower.
"Other Manager": any other party which is a Manager pursuant to the Master
Financing Facility Agreement or the Transaction Documents.
"Other Non-Recourse Guaranty ": any guaranty in form and
substance satisfactory to Lender in Lender's discretion, made by any Other
Borrower to Lender as additional security for the Loan, as the same may
thereafter from time to time be supplemented, amended, modified or extended by
one or more written agreements, supplemental thereto.
"Other Properties Subordinate Mortgage": any mortgage,
assignment of leases and rents, security agreement and fixture filing, in form
and substance satisfactory to Lender in Lender's discretion, made by any Other
Borrower to Lender or to a trustee in favor of Lender, with respect to such
Other Property owned by the applicable Other Borrower, as security for the Loan,
as the same may thereafter from time to time be supplemented, amended, modified
or extended by one or more written agreements supplemental thereto; provided
that if such mortgage encumbers a Property in a state having a mortgage
recording tax such mortgage may secure a maximum principal amount
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less than the full principal amount of the Loan, in order to reasonably limit
the mortgage recording taxes payable in connection with such mortgage, if (i)
Lender approves such maximum amount, which approval shall not be unreasonably
withheld if such limitation does not adversely affect Lender or its rights under
the Loan Documents and (ii) such maximum amount is not less than (A) 110% of the
value of the completed Property as shown in the Appraisal minus (B) the
principal amount secured by the Mortgage.
"Payment Date": the eleventh (11th) day of each calendar
month, provided, however, that for purposes of making payments hereunder, but
not for purposes of calculating interest accrual periods, if in any month the
eleventh (11th) day is not a Business Day, then the Payment Date for such month
shall be the first Business Day thereafter.
"PBGC ": the Pension Benefit Guaranty Corporation established under ERISA
or any successor thereto.
"Permitted Encumbrances": (a) the Liens created by the Loan
Documents, (b) all Liens and other matters disclosed in the Title Insurance
Policy or the Survey, (c) Liens, if any, for Taxes or Other Charges not yet
payable or delinquent or being contested in good faith and by appropriate
proceedings in accordance with this Agreement, (d) without limiting the
foregoing, any and all governmental, public utility and private restrictions,
covenants, reservations, easements, licenses or other agreements which may be
granted by Borrower and/or Manager after the Loan Closing Date and which do not
materially and adversely affect (A) the ability of Borrower to pay any of its
obligations to any Person as and when due, (B) the marketability of title to the
Property, (C) the fair market value of the Property, or (D) the use or operation
of the Property as of the Loan Closing Date and thereafter, and (e) all other
Liens to which Lender in its sole discretion has given its prior written consent
and, after a Securitization, with respect to which the Rating Agencies have
confirmed in writing that such Liens will not result in a downgrade, withdrawal
or qualification of the then-applicable ratings of any securities issued in a
Securitization.
"Permitted Transfers": (i) Permitted Encumbrances, (ii) all
transfers of worn out or obsolete furnishings, fixtures or equipment that are
not reasonably necessary for the operation of the Property or, if necessary for
the operation of the Property, are replaced with equivalent property, (iii) all
Leases which are not Material Leases, (iv) all Material Leases which have been
approved by Lender in writing in Lender's reasonable discretion or which are
deemed approved in accordance with the Mortgage, (v) provided no Event of
Default has occurred and is continuing, a Special Transfer, (vi) transfers of
Equity Interests which in the aggregate during the term of the Loan (a) do not
exceed forty-nine percent (49%) of the total interests in the Borrower or
Manager, as applicable, and (b) do not cause any partner's, member's,
shareholder's, beneficial owner's or other Person's interest in the Borrower or
Manager, as applicable, to exceed forty-nine percent (49%) of the total
interests in Borrower or Manager, as applicable, (vii) provided no Event of
Default has occurred and is continuing, any transfer permitted pursuant to
either (a) the Equity Option Agreement or (b) the Property Option Agreement,
provided any such transfer is completed on or prior to the Exercise Date (as
defined in the Intercreditor Agreement), (viii) provided no Event of Default has
occurred and is continuing, any Synthetic Lease approved by Lender in
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accordance with Section 10.33 below, (ix) provided no Event of Default has
occurred and is continuing, transfers of Equity Interests to wholly-owned
Affiliates of Manager Sponsor provided that, (a) after any Securitization, the
Rating Agencies shall have confirmed in writing that such transfer or transfers
shall not result in a downgrade, withdrawal or qualification of any Securities
issued in connection with such Securitization, (b) acceptable opinions relating
to such transfer or transfers shall have been delivered by Borrower or Manager,
as applicable, to Lender and the Rating Agencies (including without limitation
tax and bankruptcy opinions), and (c) Borrower or Manager pays all reasonable
expenses incurred by Lender in connection with such transfer or transfers, (x)
provided no Event of Default has occurred and is continuing, any other transfer
of Equity Interests provided that (a) prior to any Securitization, Lender shall
have consented to such transfer or transfers, (b) after any Securitization,
Lender shall have consented to such transfer or transfers and the Rating
Agencies shall have confirmed in writing that such transfer or transfers shall
not result in a downgrade, withdrawal or qualification of any Securities issued
in connection with such Securitization, (c) acceptable opinions relating to such
transfer or transfers shall have been delivered by Borrower or Manager, as
applicable, to Lender and the Rating Agencies (including without limitation tax
and bankruptcy opinions), (d) Borrower or Manager pays all reasonable expenses
incurred by Lender in connection with such transfer or transfers, (xi) provided
no Event of Default has occurred and is continuing, transfers of interests in
the Property which constitute Permitted Encumbrances, and (xii) any transfers
done pursuant to and in accordance with the Intercreditor Agreement.
"Permitted Use": congregate care facility with an assisted living
component, including such services ancillary thereto, including banking, beauty
shop, and convenience store, as long as such services are permitted pursuant to
applicable Legal Requirements.
"Person": any individual, corporation, partnership, joint venture, estate,
trust, unincorporated association, any federal, state, county or municipal
government or any bureau, department or agency thereof and any fiduciary acting
in such capacity on behalf of any of the foregoing.
"Pooling and Servicing Agreement": the Servicing Agreement entered into
with the Servicer in connection with any Securitization.
"Principal": the principal of the Loan or a specified portion thereof.
"Property": the parcel of real property and improvements now
or hereafter located thereon and all personal property now or hereafter
associated therewith, owned, leased and managed by Borrower and Manager and
encumbered by the Mortgage, the Subordinate Mortgage, the Assignment of Leases,
the Assignment of Agreements, or the other Loan Documents, together with all
rights pertaining to such property and improvements, as more particularly
described in the Granting Clauses of the Mortgage and referred to therein as the
"Mortgaged Property". The legal description of the Property is set forth in
Schedule 1.
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"Property Option Agreement": that certain Property Option Agreement by and
among Borrower Sponsor, Borrower, and Manager Sponsor dated the date hereof.
"Rate Lock Agreement": the agreement entered into between
Borrower and/or Guarantor, and Lender (or another party) dated on or before the
date hereof and guarantied by Guarantor under the Payment Guaranty, pursuant to
which Lender has "locked" the Applicable Pre-Conversion Treasury Rate that will
apply as of the Conversion Date with respect to all or part of the Principal.
"Rate Lock Expiration Date": May 11, 2001.
"Rating Agency": each of Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc., Moody's Investors Service, Inc., Duff & Phelps
Credit Rating Co. and Fitch IBCA, Inc. or any other nationally-recognized
statistical rating agency which has been approved by Lender, to the extent that
any of the foregoing have been or will be engaged by Lender or its designee in
connection with a Securitization.
"Release Date": the earlier to occur of (i) two (2) years from the
"start-up day" (within the meaning of Section 860G(a)(9) of the Code) of the
REMIC Trust or (ii) three (3) years from the Conversion Date.
"REMIC": a "real estate mortgage investment conduit" within the meaning of
Section 860D of the Code.
"REMIC Trust": a REMIC that holds the Note.
"Re-sized Amount": an amount determined by Lender equal to the
lesser of (i) the amount obtained by dividing (A) the Net Operating Income,
calculated using Operating Income for the 9-calendar month period ending on the
last day of the calendar month immediately prior to the Conversion Date and
Operating Expenses for the 9-calendar month period ending on the last day of the
calendar month immediately prior to the Conversion Date, which Operating
Expenses shall be annualized and seasonably adjusted, by (B) the Debt Service
Constant for the period ending on the Conversion Date, and by (C) 1.27x;
provided, however, such ratio may be modified by Lender, if and to the extent
the proportion of the congregate care and assisted living components of the
Property are altered by Borrower and/or Manager subsequent to the Loan Closing
Date, (ii) seventy-five percent (75%) of the Appraised Value as of the
Conversion Date, or (iii) one hundred twenty-five percent (125%) of the Budget
Costs..
"Revised Alternative Rate": if Lender allows the Expected
Conversion Date Extension, the Alternative Rate (i) adjusted by Lender to
reflect the interest rate locked pursuant to either a New Rate Lock Agreement or
a Modified Rate Lock Agreement and (ii) plus twelve (12) basis points.
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"Revised Initial Fixed Permanent Rate": if Lender allows the
Expected Conversion Date Extension, the Initial Fixed Permanent Rate (i)
adjusted by Lender to reflect the interest rate locked pursuant to either a New
Rate Lock Agreement or a Modified Rate Lock Agreement and (ii) plus twelve (12)
basis points.
"Revised Interest Rate": the per annum rate of interest that
is the greater of (i) the Fixed Rate plus five percent (5%) and (ii) the
Treasury Rate on the Optional Prepayment Date plus six and 95/100 percent
(6.95%), such Revised Interest Rate not to exceed the Maximum Rate.
"S&P": Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc.
"Security Deposit Account - Clearing Bank": that certain account
established and maintained by Lender at the Clearing Bank for the purpose of
holding all security deposits of lessees under Leases prior to a Cash Management
Period.
"Security Deposit Account - Deposit Bank ": that certain account
established and maintained by Lender at the Deposit Bank for the purpose of
holding all security deposits of lessees under Leases during a Cash Management
Period.
"Servicer": the entity appointed by Lender to service the Loan or its
successor in interest, or if any successor servicer is appointed pursuant to the
Pooling and Servicing Agreement, such successor servicer.
"Special Transfer": the sale of the Property after the
Securitization by the original Borrower to a single purchaser not more than one
time during the term of the Loan and the assumption in writing by the purchaser
of all of the obligations of Borrower under the Loan Documents; provided no
Default or Event of Default shall exist, Lender shall have consented to such
sale, which consent shall not be unreasonably withheld or delayed, and Lender
shall have received (i) evidence in writing from the applicable Rating Agencies
to the effect that such a sale and assumption will not result in a
qualification, withdrawal or downgrading of the ratings in effect immediately
prior to such sale for the Securities then outstanding, (ii) acceptable opinions
relating to such transfer shall have been delivered by Borrower to Lender and to
the Rating Agencies (including without limitation tax and bankruptcy opinions),
(iii) the transferee assumes in writing all obligations of the transferor under
the Loan Documents and executes and delivers such other documentation as may be
required by Lender or the Rating Agencies and (iv) Borrower pays all reasonable
expenses incurred by Lender in connection with such transfer.
"Spread": one hundred ninety-five (195) basis points.
"State": the state or commonwealth in which the Property is located.
"Stated Maturity Date": the three hundred fiftieth (350th) Payment Date
after the Conversion Date.
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"Subordinate Mortgage": any mortgage, assignment of leases and
rents, security agreement and fixture filing, in form and substance satisfactory
to Lender in Lender's discretion, made by Borrower to Lender or to a trustee in
favor of Lender, with respect to the Property, as security for any Other Loan,
which mortgage shall be subordinate to the Mortgage, as the same may thereafter
from time to time be supplemented, amended, modified or extended by one or more
written agreements supplemental thereto; provided that if the State has a
mortgage recording tax such mortgage may secure a maximum principal amount less
than the full principal amount of any Other Loan, in order to reasonably limit
the mortgage recording taxes payable in connection with such mortgage, if (i)
Lender approves such maximum amount, which approval shall not be unreasonably
withheld if such limitation does not adversely affect Lender or its rights under
the Loan Documents, and (ii) such maximum amount is not less than (A) 110% of
the value of the Property with the Required Improvements completed as shown in
the Appraisal minus (B) the principal amount secured by the Mortgage on the
Property.
"Tax Adjusted Issue Price": the "adjusted issue price" within the meaning
of Code ss. 1272(a)(4).
"Taxes": all real estate and personal property taxes, assessments or sewer
rents, now or hereafter levied or assessed or imposed against all or part of the
Property.
"Tax Fair Market Value": the fair market value of the
Property, and (i) shall not include the value of any personal property or other
property that is not an "interest in real property" within the meaning of
Treasury Regulation ss.ss.1.860G-2 and 1.856-3(c), or is not "qualifying real
property" within the meaning of Treasury Regulation ss.1.593-11(b)(iv), and (ii)
shall be reduced by the Tax Adjusted Issue Price of any indebtedness, other than
the Loan, secured by a Lien affecting the Property, which Lien is prior to or on
a parity with the Lien created under the Mortgage.
"Ten-year Treasury Rate": as of a given date, the yield on the
bid price appearing on such date on Telerate page 500 for the second most
recently issued ten-year, non-callable U.S. Treasury security or, if there is no
such U.S. Treasury security, the then prevailing yield on the U.S. Treasury
security then being used by Lender to price ten-year fixed rate mortgage loans.
"Term": the entire term of this Agreement, which shall expire upon
repayment in full of the Debt and full performance of each and every obligation
to be performed by Borrower or Manager, as applicable, pursuant to the Loan
Documents.
"Thirty-year Treasury Rate": as of a given date, the yield on
the bid price appearing on such date on Telerate page 500 for the second most
recently issued 30-year, non-callable U.S. Treasury security or, if there is no
such U.S. Treasury security, the then prevailing yield on the U.S. Treasury
security then being used by Lender to price fixed rate mortgage loans in excess
of ten years.
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"Title Insurance Policy": the mortgagee title insurance
policy, in form acceptable to Lender, issued with respect to the Property,
insuring the lien of the Mortgage and described in Section 4.1.39 of this
Agreement, as such coverage is updated from time to time to Lender's reasonable
satisfaction as required by this Agreement or the Building Loan Agreement.
"Total Project Cost": the aggregate amount of BLA Costs set forth in the
BLA Budget and actually incurred and paid by Manager.
"Transfer": any sale, conveyance, transfer, Lease (including
any amendment, extension, modification, waiver or renewal thereof), assignment,
mortgage, pledge, grant of a security interest or hypothecation, whether by law
or otherwise, of or in (i) all or part of the Property (including any legal or
beneficial direct or indirect interest therein), (ii) any direct or indirect
legal or beneficial interest in Borrower, (iii) any stock in the Borrower Owner,
(iv) any direct or indirect legal or beneficial interest in Manager, except any
transfers of any interests in Manager Sponsor, or (v) any stock in the Manager
Owner, except any transfers of any interests in Manager Sponsor.
"Treasury Rate": as of the Optional Prepayment Date, the
linear interpolation of the bond equivalent yields as reported in Federal
Reserve Statistical Release H.15-Selected Interest Rates under the heading "U.S.
Government Securities/Treasury Constant Maturities" for the week ending prior to
the Optional Prepayment Date of U.S. Treasury constant maturities with maturity
dates (one longer and one shorter) most nearly approximating the remaining term
of the Note as of the Optional Prepayment Date.
"UCC": the Uniform Commercial Code as in effect in the State.
"Unlocked Amount": on the Conversion Date, the amount of the Loan
calculated as the difference, if any, between the Re-sized Amount on such date
and the Initial Locked Amount.
"U.S. Obligation": obligations or securities not subject to prepayment,
call or early redemption which are direct obligations of, or obligations fully
guaranteed as to timely payment by, the United States of America or any agency
or instrumentality of the United States of America, the obligations of which are
backed by the full faith and credit of the United States of America.
"Yield Maintenance Premium": the amount (if any) which, when
added to the unpaid Principal or the principal amount of the Defeased Note, as
applicable, will be sufficient to purchase U.S. Obligations providing the
required Scheduled Defeasance Payments; provided, however, that under no
circumstances shall the Yield Maintenance Premium be less than zero.
1.2 Index of Other Definitions. The following terms are defined in the
sections or Loan Documents indicated below:
"Accrued Interest" - 2.2.2
"Additional Loan Structuring Fee" - 2.6.3
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"Allowed Trade Payables" - 4.1.33 and 4.2.33
"Alternative Principal" - 2.2.5
"Alternative Rate" - 2.2.5
"Annual Budget" - 5.2.9(e)
"Applicable Taxes" - 2.7
"Award" - 7.3.2
"Budget Costs" - BLA
"Capital Budget" - 5.2.9(e)
"Capital Reserve Fund" - 3.3.1
"Capital Reserve Subaccount" - Deposit Account Agreement
"Cash Collateral Subaccount" - 3.6
"Cash Management Period" - 3.1
"Casualty" - 7.2.1
"Casualty/Condemnation Prepayment" - 2.3.2
"Casualty/Condemnation Subaccount" -
Deposit Account Agreement
"Clearing Accounts" - 3.1
"Clearing Banks" - 3.1
"COE" - 4.1.22
"Collateral" - Mortgage
"CON" - 4.1.22
"Condemnation" - 7.3.1
"Conversion Notice" - 2.1.2(c)
"Conversion Shortfall" - 2.3.2(b)
"Defeasance" - 2.3.3
"Defeasance Date" - 2.3.3
"Defeased Note" - 2.3.3
"Deposit Account" - 3.1
"Disclosure Document" - 9.1.2
"Draw Fees" - 2.6.1
"Engineering Reports" - BLA
"Environmental Laws" - 4.2.31
"Environmental Report" - BLA
"Equipment" - Mortgage
"Event of Default" - 8.1
"Exchange Act" - 9.1.2
"Expected Conversion Date Extension" - 2.1.6(a)
"Facility Structuring Fee" - MFFA
"Funds" - 3.8
"Hazardous Substances" - 4.2.31
"Hypothetical Principal" - 2.2.5
"Improvements" - Mortgage
"Initial Advance" - BLA
"Insurance Premiums" - 7.1.2
"Insured Casualty" - 7.2.2
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"Intangibles" - Mortgage
"Inventory" - Mortgage
"Junior Preferred Equity" - 2.3.2(b)
"Land" - Mortgage
"Late Payment Charges" - 2.5.3
"Leases" - Mortgage
"Lender's Consultant" - 5.1.10(a)
"Liabilities" - 9.1.3 "Licenses" - 4.1.22
"Modified Rate Lock Agreement"- 2.1.6(b)
"Monthly Debt Service Payment Amount"- 2.2.1
"New Rate Lock Agreement"- 2.1.6(b)
"Nomura" - 9.1.3
"Nomura Group" - 9.1.3
"Operating Budget" - 5.2.9(e)
"Operating Deficits - BLA
"Operating Permits" - BLA
"Other Loans" - 10.31
"Other Properties" - 10.31
"Other Taxes" - 2.7
"Permitted Investments" - Deposit Account Agreement
"Physical Plant Standards" - 4.2.46
"Policies" - 7.1.2
"Preferred Equity" - 2.3.2(b)
"Premium" - 2.2.5
"Principal" - 2.1
"Proceeds" - 7.2.2
"Provided Information" - 9.1
"Rate Adjustment" - 2.2.5
"Recourse Distributions" - 10.1
"Registration Statement" - 9.1.3
"Relevant Percentage" - 2.2.5
"Remedial Work" - 5.1.10(b) and 5.2.10(b)
"Rent Roll" - 4.1.26
"Rents" - Mortgage
"Required Improvements" - BLA
"Required Records" - 5.1.9(f) and 5.2.9(f)
"Restated Note" - 2.1.4
"Restoration" - 7.4.1
"Scheduled Defeasance Payments" - 2.3.3
"Securities" - 9.1
"Securities Act" - 9.1.2
"Securitization" - 9.1
"Securitization Expense Subaccount" - Deposit Account Agreement
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"Security Agreement" - 2.3.3
"Senior Preferred Equity" - Schedule 2
"Servicing Fee" - 2.6.2
"Special Prepaid Principal"- 2.3.2
"Special Purpose Bankruptcy Remote Entity" - 5.1.15
"Subaccounts" - 3.1
"Substantial Completion" - BLA
"Substantial Completion Date" - BLA
"Successor Borrower" - 2.3.3
"Survey" - BLA "Tax and Insurance Escrow Fund" - 3.2
"Tax and Insurance Escrow Subaccount" -
Deposit Account Agreement
"Third Party Payor's Programs" - 4.3
"Transaction Documents" - MFFA
"Undefeased Note" - 2.3.3
"Underwriter Group" - 9.1.3
"Warrants" - Schedule 2
"Working Capital Subaccount" - 3.5
1.3 Principles of Construction. Unless otherwise specified,
(i) all references to sections and schedules are to those in this Agreement,
(ii) the words "hereof," "herein" and "hereunder" and words of similar import
refer to this Agreement as a whole and not to any particular provision, (iii)
all definitions are equally applicable to the singular and plural forms of the
terms defined, (iv) the word "including" means "including but not limited to,"
and (v) accounting terms not specifically defined herein shall be construed in
accordance with GAAP.
II. GENERAL
2.1 The Loan. Lender shall make and Borrower shall borrow the
Loan on the terms and conditions set forth herein. No amount repaid in respect
of the Loan may be reborrowed except as otherwise permitted pursuant to Section
2.1(c) of the Master Financing Facility Agreement
2.1.1 The Initial Loan. Lender shall make Advances of the
Initial Loan from and after the date hereof and prior to the Conversion Date, in
accordance with, and subject to the terms and conditions of, the BLA. The
Initial Loan shall be used solely to pay BLA Costs in the BLA Budget and other
amounts as provided in the BLA.
2.1.2 Conversion. (a) At least sixty (60) days prior to the
Expected Conversion Date, but not before the expiration of twelve (12) months
following both Substantial Completion and the commencement of operation of the
Property, which at a minimum shall be evidenced by the residents taking
possession of their respective units at the
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Property and the commencement of other related services in accordance with the
Leases, Borrower and/or Manager shall furnish to Lender:
(i) a statement of the Total Project Cost, together with evidence of such
costs satisfactory to Lender;
(ii) an Acceptable Appraisal;
(iii) operating statements for a 12-month period ending not more than
ninety (90) days prior to the Expected Conversion Date in form and substance
reasonably satisfactory to Lender, which statements indicate whether or not the
Re-sized Amount, as estimated from such financial information, will be an amount
equal to or exceeding the then outstanding Debt;
(iv) a structural engineering report acceptable to Lender in its reasonable
discretion from a firm approved by Lender in its reasonable discretion,
identifying, among other things, a schedule of anticipated capital expenditures
for the Property and the annual cost thereof;
(v) if requested by Lender, an update of the Environmental Report
acceptable to Lender in its reasonable discretion;
(vi) evidence of compliance by the Property with all applicable Legal
Requirements;
(vii) satisfaction of all requirements specified under Section 5.6 of the
BLA for a final Advance or the waiver of any of such requirements by Lender;
(viii) the current rent roll for the Property, in form and substance
acceptable to Lender in its reasonable discretion;
(ix) copies of all Material Leases, material contracts and Operating
Permits (including a permanent certificate of occupancy) affecting the Property;
(x) if required by the title insurance company, an update of the Survey,
dated no earlier than sixty (60) days before the Expected Conversion Date, and
acceptable to Lender in its discretion; and
(xi) such other information and/or documentation as Lender reasonably
requires.
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(b) Unless Borrower or Manager indicates otherwise at the time
of submission in (a) above, such submission shall be deemed to be notice to
Lender of Manager's election to exercise its option rights under the Equity
Option Agreement.
(c) Within fifteen (15) Business Days after receipt of the
documentation required to be furnished under Section 2.1.2(a) (or at any earlier
date, if Lender so decides in its discretion), provided no Default or Event of
Default exists, Lender shall determine (i) the proposed Fixed Rate, (ii) the
proposed Re-sized Amount, (iii) the proposed Monthly Debt Service Payment Amount
and (iv) the proposed Conversion Date (which proposed Conversion Date shall be
the Expected Conversion Date or any earlier date selected by Lender and
Manager), and give notice thereof to Borrower and Manager (a "Conversion
Notice"). Lender may thereafter give Borrower and Manager one or more further
Conversion Notices changing the Conversion Date, provided that, except as
otherwise provided in Sections 2.1.2(d) and 2.1.6, the Conversion Date may not
be later than the Expected Conversion Date unless Borrower and Manager consent
to such later date. On the Conversion Date, (i) the Interest Rate of the Loan
shall become the Fixed Rate, (ii) the Principal Amount of the Loan shall be
increased or decreased to the Re-sized Amount, and (iii) the Monthly Debt
Service Payment Amount shall be determined in accordance with this Agreement.
Without waiving any of its other rights and remedies hereunder, Lender may
withdraw or revoke a Conversion Notice by giving notice to Borrower and Manager
at any time prior to the Conversion Date specified therein only if an Event of
Default exists; in which case, Borrower and Manager shall be liable for all
Breakage Fees. If an Event of Default shall exist, Lender may, at its option
(but without any obligation to do so and without waiving any such Event of
Default) and without Borrower's or Manager's consent, give a Conversion Notice.
(d) If (i) Lender is not obligated, and does not elect, to
give a Conversion Notice prior to the Expected Conversion Date, or (ii) Lender
is entitled, and elects, to withdraw or revoke its most recent Conversion
Notice, then Lender shall have the right (but not the obligation), at any time
up to the ninetieth (90th) day following the Expected Conversion Date, (x) to
obtain its own appraisal of the Property at the expense of Borrower or Manager
and/or (y) to elect to give a Conversion Notice specifying as a Re-sized Amount
any amount determined by Lender that is not less than the outstanding Principal
of the Loan (except to the extent, if any, that Lender commits, in such
Conversion Notice, to provide Preferred Equity) and not greater than the maximum
amount of the Initial Loan. Any failure or delay by Lender in exercising any
rights or remedies prior to, during or after such 90-day period shall not be
deemed a waiver by Lender of any such rights or remedies. Notwithstanding
anything to the contrary contained in this Section 2.1.2(d) or elsewhere in this
Agreement, if either of the foregoing clauses (i) or (ii) is applicable, then it
shall be an Event of Default and Lender may exercise any and all of its remedies
under the Loan Documents.
2.1.3 Additional Loan. Lender shall disburse the Additional
Loan as directed by Manager on the Conversion Date, in the amount (if any) by
which the Re-sized Amount exceeds the then unpaid Principal of the Initial Loan;
provided the following conditions precedent are satisfied:
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(a) Borrower shall execute and deliver to Lender (i)
the Additional Note and (ii) an amendment or supplement to, and/or
consolidation and modification of, the Mortgage, in form and substance
reasonably satisfactory to Lender and Manager, confirming that the
Mortgage secures the Loan (as increased by the Additional Loan);
(b) Borrower shall deliver to Lender an opinion of
Borrower's counsel, in form and substance satisfactory to Lender in its
discretion, with respect to the due authorization, execution, delivery
and enforceability of the Additional Note and such amendment or
supplement to, and/or consolidation and modification of, the Mortgage
and such other matters with respect thereto as are covered with respect
to the Initial Note and the Mortgage in the opinion of Borrower's
counsel being delivered on the date hereof;
(c) Both immediately prior to the making of the
Additional Loan and also after giving effect thereto, no Default shall
have occurred and be continuing;
(d) The representations and warranties made by
Borrower and Manager in this Agreement and in the other Loan Documents
shall be true and correct in all material respects on and as of the
date of the making of the Additional Loan with the same force and
effect as if made on and as of such date;
(e) Borrower and Manager shall deliver to Lender an
Officer's Certificate confirming the satisfaction of the conditions set
forth in the foregoing clauses (c) and (d) applicable to Borrower or
Manager, as the case may be;
(f) Lender shall have received (i) a notice of title
continuation showing that since the date of the then most recent title
continuation provided to Lender under the BLA, there has been no change
in the state of title to the Property, and no survey exceptions with
respect to the Property, not theretofore approved by Lender, together
with other evidence satisfactory to Lender that no mechanic's Liens or
other Liens have been filed and remain filed with respect to the
Property which have not been insured over to Lender's satisfaction and
which will not affect the priority of the Loan, any future Advances, or
the Additional Loan and (ii) an endorsement to the Title Insurance
Policy, which endorsement shall have the effect of (x) updating the
date of the Title Insurance Policy to the date of the making of the
Additional Loan and (y) increasing the coverage of the Title Insurance
Policy by an amount equal to the Additional Loan;
(g) All fees and expenses payable to Lender,
including the fees and expenses referred to in Sections 2.6 and 10.3,
to the extent then due and payable, shall have been (or
contemporaneously are being) paid in full, and all title premiums and
other title and survey charges shall have been (or contemporaneously
are being) paid in full; and
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(h) Lender shall have received such other documents
relating to the Additional Loan as Lender may reasonably request.
If any or all conditions precedent to making the Additional Loan have not been
satisfied on the Conversion Date, Lender may, at its option, waive so many of
such conditions precedent as it may elect (including the making of a request
therefor by Borrower or Manager, if Borrower or Manager has not provided Lender
the Extension Notice. To the extent Lender makes the Additional Loan, the making
of the Additional Loan shall constitute a waiver of such unsatisfied conditions,
unless otherwise set forth in a written notice from Lender to Borrower.
2.1.4 Restated Documents. (a) Borrower shall, within seven (7)
days after request of Lender, execute and deliver to Lender a restated note,
which is intended to evidence the terms of the Loan from and after the
Conversion Date. The provisions of this section shall be self operative and
Lender shall not be required to obtain any further consent or authorization of
any kind. The restated note that Borrower hereafter executes and delivers, is
referred to herein as the "Restated Note". Within thirty (30) days of Lender's
receipt of the Restated Note, Lender shall return the originals of the Initial
Note, and, if executed and delivered, the Additional Note, or in lieu thereof,
an affidavit and indemnity from Lender in form and substance reasonably
acceptable to Borrower and Manager in their sole but reasonable discretion that
such Initial Note, and, if executed and delivered, Additional Note, have been
lost.
(b) At Lender's request, Borrower shall promptly execute and
deliver an agreement restating this Agreement, which will reflect the terms of
the Restated Note and the terms and provisions hereof that are applicable after
the Conversion Date, and may omit any terms and provisions hereof that will no
longer be applicable.
2.1.5 Separate Notes. Lender shall have the right, in its sole
discretion, at any time prior to the Conversion Date, to allocate the Loan into
two or more separate promissory notes, which may have different principal
amounts, different interest rates and different priorities with respect to
repayment; provided, however, that in all events (i) the aggregate principal
amount of such separate promissory notes shall be equal to the aggregate unpaid
Principal, (ii) the blended interest rate derived from such different interest
rates on such separate promissory notes shall reflect the same economic terms as
the economic terms of the Loan immediately preceding such allocation, and (iii)
such separate promissory notes shall have no adverse economic effect on Borrower
and Manager. Borrower shall execute and deliver to Lender, promptly after the
request of Lender, such separate promissory notes and such other documents as
Lender shall reasonably request to effect such allocation, in form reasonably
satisfactory to Lender.
2.1.6 Expected Conversion Date Extension. Notwithstanding
anything to the contrary contained herein, (a) Manager shall have the unilateral
right to extend the Original Expected Conversion Date to a date which is no
later than ten (10) months following the Original Expected Conversion Date (the
"Expected Conversion Date Extension") by timely
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submitting the Extension Notice to Lender. Lender shall approve or disapprove
the Expected Conversion Date Extension within ten (10) Business Days of
receiving the Extension Notice and all the required documentation. Lender shall
allow the extension of the Original Expected Conversion Date to the Extended
Expected Conversion Date, provided that as of the date of the Extension Notice
(i) no Event of Default is outstanding, (ii) the Debt Service Coverage Ratio of
the Loan, based on an annualized, seasonably adjusted, trailing six (6) months
computation, is equal to or greater than 1.2 to 1, (iii) the Loan then sizes to
at least the original principal amount of the Initial Loan, and (iv) Lender
incurs no costs or fees in connection with extending the Original Expected
Conversion Date, including no Breakage Fees. If Lender determines that the
conditions specified in clauses (i), (ii) or (iii) have not been satisfied or
that Manager has not made adequate provision to reimburse Lender for all costs
specified in clause (iv), Lender shall have no obligation to extend the Original
Expected Conversion Date and shall give notice of same to Borrower and Manager.
If Lender permits the Expected Conversion Date Extension, Manager must pay the
Extension Fee to Lender no later than five (5) Business Days after the Extension
Confirmation Date. If Manager fails to pay the Extension Fee as required, then
Lender may revoke its permission granting the extension and the Conversion Date
shall revert back to the Original Expected Conversion Date.
(b) If Lender allows the Expected Conversion Date Extension,
Lender may require that appropriate rate lock protection is provided for the
Loan with respect to the period extending from the Original Expected Conversion
Date until the Extended Expected Conversion Date. In such event, (i) Manager
shall have the election to either terminate the then existing Rate Lock
Agreement and enter into a new Rate Lock Agreement in Lender's then standard
form (the "New Rate Lock Agreement") or modify the existing Rate Lock Agreement
(the "Modified Rate Lock Agreement"), all on such terms and conditions as are
satisfactory to Lender and subject to Manager's obligation to pay any Breakage
Fees or other transactional costs incurred in connection therewith, and (ii)
Manager shall cause Guarantor to execute and deliver to Lender a guaranty of
Manager's obligations under any New Rate Lock Agreement or Modified Rate Lock
Agreement, in Lender's then standard form.
2.2 Interest; Monthly Payments.
2.2.1 Generally. (a) From the date hereof to but not including
the Optional Prepayment Date, Borrower shall pay interest on the unpaid
Principal and all other amounts due to Lender under the Loan Documents at the
Interest Rate. From and after the Optional Prepayment Date, interest on the
unpaid Principal and all other amounts due to Lender under the Loan Documents
shall accrue at the Revised Interest Rate and be payable as provided in Sections
2.2.2 and 2.2.3(b).
(b) On July 11, 1998 and each Payment Date thereafter in the
period ending on the Conversion Date, if there are insufficient funds in the
Deposit Account for Lender to pay itself interest in accordance with this
Agreement or the BLA, Borrower shall pay interest on the unpaid Principal
accrued at the Interest Rate during the Interest Period immediately preceding
such Payment Date.
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(c) On the first Payment Date after the Conversion Date and
each Payment Date thereafter through and including the Maturity Date, the
Principal and interest thereon at the Interest Rate shall be payable in equal
monthly installments each in the amount (the "Monthly Debt Service Payment
Amount"), determined by Lender in accordance with the provisions of this
Agreement, required to fully amortize the Principal by the Stated Maturity Date,
based on the Interest Rate and the Amortization Schedule. The Monthly Debt
Service Payment Amount due on any Payment Date shall first be applied to the
payment of interest accrued from the eleventh (11th) day of the month preceding
the Payment Date through the tenth (10th) day of the month in which the Payment
Date occurs, notwithstanding that the Payment Date may not have been the
eleventh (11th) day of such month because the eleventh (11th) day of such month
is not a Business Day. The remainder of such Monthly Debt Service Payment Amount
shall be applied to the reduction of the unpaid Principal.
2.2.2 Accrued Interest. From and after the Optional Prepayment
Date, all interest shall accrue in respect of the Debt at the Revised Interest
Rate ("Accrued Interest"). To the extent, for any period, that Accrued Interest
at the Revised Interest Rate exceeds interest required to be paid hereunder for
such period at the Interest Rate, Borrower shall only be required to pay such
Accrued Interest after the outstanding principal balance of the Note has been
paid in full. Unpaid Accrued Interest shall accrue interest at the Revised
Interest Rate.
All Accrued Interest shall be due and payable on the Maturity Date.
2.2.3 Property Cash Flow Allocation. (a) Commencing on the
Substantial Completion Date and continuing on each Payment Date thereafter
through and including the Conversion Date, except during the continuance of an
Event of Default, any Rents deposited into the Deposit Account or received by
Borrower or Manager during the immediately preceding Interest Period shall be
applied as follows in the following order of priority: (i) First, to pay any and
all ground rents, if any, (ii) Second, to make required payments (if any) to the
Tax and Insurance Escrow Fund; (iii) Third, to Lender to pay the interest due on
such Payment Date (including, if applicable, interest at the Default Rate); (iv)
Fourth, to make payments for Approved Operating Expenses; (v) Fifth, to make
required payments (if any) to the Capital Reserve Fund; and (vi) Lastly,
payments of any excess amounts to the Cash Collateral Subaccount.
(b) Commencing on the first Payment Date after the Conversion
Date and continuing on each Payment Date thereafter through and including the
Optional Prepayment Date, except during the continuance of an Event of Default,
any Rents received by Borrower or Manager (and, during a Cash Management Period,
Rents deposited into the Deposit Account) during the immediately preceding
Interest Period shall be applied as follows in the following order of priority:
(i) First, to pay any and all ground rents, if any; (ii) Second, to make
required payments to the Tax and Insurance Escrow Fund; (iii) Third, to Lender
to pay the Monthly Debt Service Payment Amount (plus, if applicable, interest at
the Default Rate); (iv) Fourth, to make required payments to the Capital Reserve
Fund; (v) Fifth, during a Cash Management Period, payments for Approved
Operating Expenses; (vi) Sixth, during a Cash Management Period, to make
required payments for any working capital reserves in accordance with the Annual
Budget
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to the Working Capital Subaccount; and (vii) Lastly, payments to Manager of
any excess amounts.
(c) Commencing on the first Payment Date after the Optional
Prepayment Date and continuing on each Payment Date thereafter until the entire
Debt has been paid in full, except during the continuance of an Event of
Default, any Rents deposited into the Deposit Account (or otherwise received by
Borrower or Manager) during the immediately preceding Interest Period shall be
applied by Lender as follows in the following order of priority: (i) First, to
pay any and all ground rents, if any; (ii) Second, to make required payments to
the Tax and Insurance Escrow Fund; (iii) Third, to Lender to pay the Monthly
Debt Service Payment Amount (plus, if applicable, interest at the Default Rate);
(iv) Fourth, to make required payments to the Capital Reserve Fund; (v) Fifth,
payments for Approved Operating Expenses; (vi) Sixth, payments to Lender to
prepay the unpaid Principal until paid in full; (vii) Seventh, payments to
Lender to be applied against Accrued Interest and interest accrued thereon; and
(viii) Lastly, payments to Manager of any excess amounts.
(d) The failure of Borrower or Manager to make all of the
payments required under clauses (i) through (vi) of Section 2.2.3(a), or clauses
(i) through (v) of Section 2.2.3(b), or clause (i) through (v) of Section
2.2.3(c), in full on each Payment Date shall constitute a Default under this
Agreement. However, the failure of Borrower to prepay any unpaid Principal or to
pay any Accrued Interest under clause (vi) or (vii) of Section 2.2.3(c) on a
Payment Date as a result of insufficient Rents for such payment shall not
constitute a Default hereunder. All Accrued Interest, unpaid Principal, and all
other amounts due to Lender under the Loan Documents shall nonetheless be due
and payable on the Maturity Date.
(e) During the continuance of an Event of Default, Lender may,
in its discretion, permit the application of Rents in the order of priority set
forth in Section 2.2.3(b) or any other order, and to any portion or portions of
the Debt, as Lender shall determine.
2.2.4 Default Rate. Upon an Event of Default and during the
continuance thereof, the entire unpaid Principal shall bear interest at the
Default Rate, and shall be payable upon demand from time to time, to the extent
permitted by applicable law. Payment or acceptance of interest at the Default
Rate is not a permitted alternative to timely payment and shall not constitute a
waiver of any Default or Event of Default or an amendment to this Agreement or
any other Loan Document and shall not otherwise prejudice or limit any rights or
remedies of Lender.
2.2.5 Rate Adjustment. At Lender's election, which may be made
at any time on or before the Conversion Date by notice to and reasonable consent
of Manager, which consent must be made within five (5) days of receipt of
Lender's notice by Manager, otherwise it shall have been deemed to have been
made, the Interest Rate for the period from and after the Conversion Date to but
not including the Optional Prepayment Date shall be changed to a rate per annum
(the "Alternative Rate") determined by Lender in its reasonable discretion in
accordance with this Agreement. If Lender so elects to make such change in the
Interest Rate
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(the "Rate Adjustment"), and Manager consents to such election or is deemed to
have approved such election as set forth above, then, on the Conversion Date
(after giving effect to Sections 2.1.3 and 2.3.2(b)):
(i) Lender shall pay to Borrower a premium (the
"Premium") in an amount equal to the amount by which
the unpaid Principal exceeds the Alternative
Principal (as defined below); and
(ii) Borrower shall apply the Premium, and hereby
irrevocably directs Lender to retain the Premium for
application, to the prepayment of Principal in the
amount of the Premium.
The "Alternative Principal" shall be the amount which, based on the Alternative
Amortization Schedule and the Alternative Rate, results in the same Monthly Debt
Service Payment Amount and Effective Balloon Amount that would have been
applicable without a Rate Adjustment. If, after a Rate Adjustment is made, the
Loan is prepaid in whole or in part prior to the Optional Prepayment Date in
circumstances where, pursuant to the applicable provisions of the Loan Documents
(such as, for example, Section 7.4.2 hereof in certain events) no Yield
Maintenance Premium is due, then Borrower shall nevertheless pay to Lender (in
addition to the prepaid Principal and accrued interest), as a refund of the
unearned portion of the Premium, an amount equal to the Relevant Percentage of
(A) the Hypothetical Principal minus (B) the unpaid Principal (before accounting
for such prepayment). For purposes of the foregoing, (x) the "Relevant
Percentage" shall mean the percentage of the unpaid Principal that is being so
prepaid, and (y) the "Hypothetical Principal" shall mean the Principal balance
that would be outstanding on the date of such prepayment if the Rate Adjustment
had not been made (and Monthly Debt Service Payment Amounts were paid when due).
2.3 Loan Repayment and Defeasance.
2.3.1 Repayment. Borrower shall repay any unpaid Principal in
full and all other sums due to Lender under the Loan Documents on the Maturity
Date, together with interest thereon to (but excluding) the date of repayment.
Other than as set forth in Sections 2.2.3, 2.3.2, 2.3.3, 3.6, 3.7, 7.2.1, and
7.4.2 of this Agreement, Section 2.1(c) of the Master Financing Facility
Agreement, and Sections 5 and 6 of the Mortgage, Borrower shall have no right to
prepay all or any portion of the Principal before the Optional Prepayment Date.
From and after the Optional Prepayment Date, the Principal may be prepaid in
whole or in part without penalty or premium. If Borrower prepays the entire
Principal within thirty (30) days of the Optional Prepayment Date, then all
additional sums paid by Borrower to Lender due to the fact the repayment was
made after the Optional Prepayment Date, including interest at the Revised
Interest Rate, shall be refunded by Lender to Borrower.
2.3.2 Mandatory Prepayments. (a) The Loan is subject to mandatory
prepayment, without premium or penalty, in certain instances of Insured Casualty
or
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Condemnation (each a "Casualty/Condemnation Prepayment"), in the manner and to
the extent set forth in Section 7.4.2. Each Casualty/Condemnation Prepayment
shall be made on a Payment Date and include all accrued and unpaid interest on
the Principal prepaid up to but not including such Payment Date.
(b) If, as of the Conversion Date (before giving effect to a
Rate Adjustment), the unpaid Principal exceeds the Re-sized Amount (the
"Conversion Shortfall"), then, on the Conversion Date, except to the extent
Borrower, at the direction of Manager, elects to have Lender provide Senior
Preferred Equity, Borrower shall (i) prepay a portion of the Principal equal to
such Conversion Shortfall (the "Special Prepaid Principal") and (ii) pay to
Lender (A) interest accrued at the Interest Rate on the Special Prepaid
Principal to (but not including) the date of such payment and (B) Lender's
Expenses, if any. Except for Lender's Expenses, if any, such prepayment shall be
without any Yield Maintenance Premium or other prepayment consideration. If
Borrower, at the direction of Manager, elects to have Lender finance Senior
Preferred Equity, Lender shall make the Senior Preferred Equity investment in
Borrower in an amount as calculated in accordance with the terms of Schedule 2.
If Borrower, at the direction of Manager, elects to have Lender finance Senior
Preferred Equity, Lender shall have the right, in lieu of investing Senior
Preferred Equity solely in the Borrower under this Agreement, to invest Senior
Preferred Equity indirectly in Borrower and in more than one Other Borrower by
giving notice of such election to Borrower, Manager and each such Other
Borrower. If Borrower, at the direction of Manager, makes such an election,
Borrower shall, within twenty (20) days after such notice, (i) form a limited
liability company or limited partnership that is an Affiliate of Borrower and is
a Special Purpose Bankruptcy Remote Entity whose sole managing member or sole
general partner is a Special Purpose Bankruptcy Remote Entity wholly owned by
Borrower Owner (an "Umbrella Entity"), (ii) transfer or cause the transfer of
all equity interests in Borrower and each Other Borrower, other than interests
owned by the Borrower Owner thereof, to such Umbrella Entity, and (iii) Borrower
and each Other Borrower shall amend its partnership or operating agreement or
articles of incorporation to provide that all distributions of cash from
whatever source will be made to such Umbrella Entity so long as any Preferred
Equity in such Umbrella Entity is outstanding. If the Senior Preferred Equity,
when combined with the Re-sized Amount and the amount prepaid by Borrower, if
any, does not equal the unpaid Principal, any interest accrued at the Interest
Rate on the Special Prepaid Principal, plus Lender's Expenses, if any, and all
fees and costs payable by Borrower hereunder on the Conversion Date, Lender
shall have the right, at its option (but not the obligation), to make (or cause
its Affiliate to make) a junior preferred equity investment in Borrower (the
"Junior Preferred Equity", collectively with the Senior Preferred Equity, the
"Preferred Equity") on the Conversion Date in an amount of up to (but not
exceeding) the sum of the remaining Conversion Shortfall, Lender's Expenses, if
any, and all fees and costs payable by Borrower hereunder on the Conversion Date
(including the Additional Loan Structuring Fee payable pursuant to Section 2.6.3
and legal fees and other costs incurred in connection with the transactions
hereunder on the Conversion Date). The investment of the Preferred Equity shall
be on the terms set forth in Schedule 2. Borrower shall apply the proceeds of
the Preferred Equity to the prepayment of the Special Prepaid Principal, any
interest accrued at the Interest Rate on the Special Prepaid Interest, and the
payment of Lender's Expenses, if any, and such other fees
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and costs described above. Borrower and the partners in Borrower shall execute
and deliver such documents (including an amendment to Borrower's partnership
agreement) as Lender shall reasonably require in order to evidence and confirm
Lender's rights with respect to the Preferred Equity. Borrower shall be
obligated on the Conversion Date to prepay the Special Prepaid Principal, and to
pay any interest accrued at the Interest Rate on the Special Prepaid Interest,
Lender's Expenses, if any, and the other fees and costs described above, whether
or not Lender elects to provide any Preferred Equity.
(c) On the Conversion Date, Borrower shall prepay a portion of
the Principal in an amount equal to the Premium, if Lender elects to make the
Rate Adjustment. Such prepayment shall be without any Yield Maintenance Premium
or other prepayment consideration.
2.3.3 Voluntary Defeasance of the Note. (a) Subject to the
terms and conditions set forth in this Section 2.3.3, Borrower may defease all
or any portion of the Principal (hereinafter, a "Defeasance"); provided, that no
such Defeasance may occur after the Conversion Date and prior to the Release
Date and provided from time to time no Defeasance shall be required from and
after the Optional Prepayment Date. Each Defeasance shall be subject, in each
case, to the satisfaction of the following conditions precedent:
(i) Borrower shall provide not less than thirty (30)
days prior notice to Lender specifying a Payment Date (the "Defeasance
Date") on which the Defeasance is to occur. Such notice shall indicate
the Principal to be defeased.
(ii) Borrower shall pay to Lender (A) all accrued and
unpaid interest on the unpaid Principal to and including the Defeasance
Date, (B) all other sums, not including scheduled interest or Principal
payments, then due under the Loan Documents, (c) the required
Defeasance Deposit for such Defeasance, and (D) all reasonable costs
and expenses of Lender incurred in the Defeasance, including any costs
and expenses associated with a release of Lien as provided in Section
2.4 and reasonable attorney's fees and expenses. A voluntary Defeasance
of the Loan by Borrower is required to be made on a Payment Date. If
for any reason the Defeasance Date is not a Payment Date, Borrower
shall also pay interest that would have accrued on the Note to but not
including the next Payment Date.
(iii) No Event of Default shall exist.
(iv) If only a portion of the unpaid Principal is the
subject of the Defeasance, Borrower shall execute and deliver all
necessary documents to amend and restate the Note and issue two
substitute notes: one having a principal balance equal to the defeased
portion of the original Note (the "Defeased Note") and the other having
a principal balance equal to the undefeased portion of the original
Note (the "Undefeased Note"). The Defeased Note and Undefeased Note
shall have terms identical to the terms
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of the Note, except for the principal balance. A Defeased Note cannot be
the subject of any further Defeasance.
(v) If a Subordinate Mortgage encumbers the Property
at the time Borrower elects to defease the Loan as provided in this
Section 2.3.3, the Defeasance Deposit that Borrower must provide shall
be equal to the Defeasance Deposit multiplied by 1.25. In addition, if
a Subordinate Mortgage encumbers the Property, the Defeasance will be
permitted only if all of the Other Properties have a Debt Service
Coverage Ratio of not less than the greater of (a) the Debt Service
Coverage Ratio on the Conversion Date or (b) the Debt Service Coverage
Ratio immediately before the Defeasance. The sum paid in excess of the
Defeasance Deposit shall be used to defease the Other Loans.
(vi) Borrower shall execute and deliver a security
agreement, in form and substance satisfactory to Lender, creating a
first priority lien on the Defeasance Deposit and the U.S. Obligations
purchased with the Defeasance Deposit in accordance with this Section
2.3.3 (the "Security Agreement").
(vii) Borrower shall deliver (A) an opinion of
counsel for Borrower in form satisfactory to Lender in its discretion
stating, among other things, that without qualification, (1) Lender has
a perfected first priority security interest in the Defeasance Deposit
and the U.S. Obligations delivered by Borrower and (2) such U.S.
Obligations have been validly assigned to the REMIC Trust, (B) if
required by the applicable Rating Agencies, a non-consolidation opinion
with respect to the Successor Borrower in form and substance
satisfactory to Lender and the applicable Rating Agencies, (C) an
Officer's Certificate certifying that the requirements set forth in
this Section 2.3.3(a) have been satisfied, (D) a certificate from an
Independent certified public accountant certifying that the amounts of
the U.S. Obligations comply with all of the requirements of this
Section 2.3.3 of this Agreement, and (E) such other certificates,
documents or instruments as Lender may reasonably request.
(viii) Lender shall receive evidence in writing from
the applicable Rating Agencies to the effect that such Defeasance will
not result in a qualification, withdrawal or downgrading of the ratings
in effect immediately prior to such Defeasance for the Securities then
outstanding.
(b) In connection with each Defeasance, Borrower hereby
appoints Lender as its agent and attorney-in-fact for the purpose of using the
Defeasance Deposit to purchase U.S. Obligations (which purchases, if made by
Lender, shall be made by Lender on an arms-length basis at then prevailing
market rates) which provide payments on or prior to, but as close as possible
to, all successive Payment Dates after the Defeasance Date through and including
the Optional Prepayment Date, for the entire unpaid Principal in the case of a
total Defeasance, or for the principal amount of the Defeased Note, in the case
of a Defeasance for only a portion of the unpaid Principal (including, on the
Optional Prepayment Date, the unpaid Principal of either the Note or the
Defeased Note), and in amounts equal to the scheduled payments of Principal
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and interest due on such dates under the Note, in the event of a total
Defeasance, or the Defeased Note in the event of a partial Defeasance, as
applicable (the "Scheduled Defeasance Payments"). Borrower, pursuant to the
Security Agreement or other appropriate document, shall irrevocably authorize
and direct that the payments received from the U.S. Obligations be made directly
to Lender and applied to satisfy the obligations of Borrower under the Note or
the Defeased Note, as applicable. Any portion of the Defeasance Deposit in
excess of the amount necessary to purchase the U.S. Obligations required by this
Section 2.3.3(b) and to satisfy Borrower's obligations under Section 2.3 shall
be remitted to Borrower. Any amounts received in respect of the U.S. Obligations
in excess of the amounts necessary to make monthly payments pursuant to Section
2.2 shall be retained by Lender until payment in full of the Debt. Semiannual
payments in respect of U.S. Obligations, if any, shall be applied to payments
under the Note or the Defeased Note, as applicable, as the same become due
thereunder.
(c) If requested by Borrower in connection with any Defeasance
under this Section 2.3.3, Lender shall establish or designate a successor entity
(the "Successor Borrower") and Borrower shall transfer and assign all
obligations, rights and duties under and to the Note or the Defeased Note, as
applicable, together with the pledged U.S. Obligations, to such Successor
Borrower. The obligation of Lender to establish or designate a Successor
Borrower shall be retained by Lender notwithstanding the sale or transfer of
this Agreement unless such obligation is specifically assumed by the transferee.
Such Successor Borrower shall assume the obligations under the Note or the
Defeased Note, as applicable, and the Security Agreement, and Borrower shall be
relieved of its obligations thereunder and Manager, Other Borrower, and
Guarantor shall be released from their obligations hereunder and any other Loan
Documents. Borrower shall pay $1,000 to any such Successor Borrower as
consideration for assuming the obligations under the Note or the Defeased Note,
as applicable, and the Security Agreement. Notwithstanding anything in this
Agreement to the contrary, no other assumption fee shall be payable upon a
transfer of the Note or the Defeased Note in accordance with this Section 2.3.3,
but Borrower shall pay all costs and expenses incurred by Lender, including
Lender's reasonable attorneys' fees and expenses, incurred in connection
therewith. Notwithstanding anything in this Agreement to the contrary, if the
Yield Maintenance Premium is due as a result of the acceleration of the
Indebtedness after the occurrence of an Event of Default, Lender shall have the
right to receive and collect the Yield Maintenance Premium but shall have no
obligation to purchase U.S. Obligations or otherwise comply with this Section
2.3.3.
2.4 Release of Property. Except as set forth in this Section
2.4, no repayment, prepayment or defeasance of all or any portion of the Note
shall cause, give rise to a right to require, or otherwise result in, the
release of the Lien of the Mortgage, any Other Properties Subordinate Mortgage,
or the Subordinate Mortgage.
2.4.1 Release on Defeasance. If Borrower has elected to
defease the Note in its entirety, and the requirements of Section 2.3.3 have
been satisfied, the Property, Borrower, Guarantor, Manager and Other Borrower
shall be released from the Lien of the Mortgage, the Subordinated Mortgage, and
the Other Properties Subordinate Mortgage (only to the extent it secures this
Loan), the Guaranties, the Non-Recourse Guaranty, and all other Loan Documents,
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and the U.S. Obligations pledged pursuant to the Security Agreement shall be the
sole source of collateral securing the Debt. In connection with such release,
Borrower or Manager shall submit to Lender, not less than twenty (20) days prior
to the Defeasance Date, a form of release or releases for execution by Lender
appropriate in the State and satisfactory to Lender in its reasonable
discretion, and all other documentation Lender reasonably requires to be
delivered by Borrower or Manager, together with an Officer's Certificate
certifying that such documentation (i) is in compliance with all Legal
Requirements, and (ii) will effect such release in accordance with the terms of
this Agreement.
2.4.2 Release on Payment in Full. Lender shall, upon the
written request and at the expense of Borrower or Manager, upon payment in full
of the Debt in accordance herewith, release the Lien of the Mortgage, the Other
Properties Subordinate Mortgage (only to the extent it secures this Loan), the
Subordinate Mortgage, and all other Loan Documents if not theretofore released
and, upon Borrower's or Manager's request, Lender will notify all banks
identified by Borrower or Manager that it no longer has any interest in the
accounts and will release all other collateral and funds of Borrower and/or
Manager.
2.5 Payments and Computations.
2.5.1 Making of Payments. Each payment by Borrower hereunder
or under the Note shall be made in funds settled through the New York Clearing
House Interbank Payments System or other funds immediately available to Lender
by 12:00 p.m., New York City time, on the date such payment is due, to Lender by
deposit to such account as Lender may designate by written notice to Borrower
and Manager. Whenever any payment hereunder or under the Note shall be stated to
be due on a day that is not a Business Day, such payment shall be made on the
first Business Day thereafter.
2.5.2 Computations. Interest payable hereunder or under the
Note shall be computed on the actual number of days elapsed in each year over a
360-day year, compounded monthly.
2.5.3 Late Payment Charge. If any Principal, interest, or
other sum due under any Loan Document is not paid by Borrower or Manager within
the applicable grace period (unless such payment is not made in connection with
an acceleration of the Debt by Lender), Borrower shall pay to Lender an amount
equal to the lesser of five percent (5%) of such unpaid Principal, interest, or
other sum or the maximum amount permitted by applicable law, in order to defray
the expense incurred by Lender in handling and processing such delinquent
payment and to compensate Lender for the loss of the use of such delinquent
payment. Such amount shall be secured by the Loan Documents.
2.6 Fees.
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2.6.1 Draw Fees. Simultaneously with each Advance of the
Initial Loan made by Lender, Borrower shall pay to Lender a draw fee (the "Draw
Fee") of .50% of such Advance.
2.6.2 Servicing Fee. Borrower and/or Manager shall pay to
Lender or, if so directed by Lender, to Servicer, a servicing and administration
fee (the "Servicing Fee") from Loan proceeds in an amount equal to either (i)
prior to the Substantial Completion Date for the Property, Three Thousand and
00/100 Dollars ($3,000.00) for each Advance made with respect to the Property,
which shall be paid concurrently with such Advance, or (ii) upon and after the
Substantial Completion Date with respect to the Property, One Thousand Two
Hundred Fifty and 00/100 Dollars ($1,250.00), which payment shall be paid on
each Payment Date occurring on and after such Substantial Completion Date to and
including the Conversion Date.
2.6.3 Structuring Fee Upon Conversion. On the Conversion Date,
Borrower and/or Manager shall pay to Lender an additional structuring fee (the
"Additional Loan Structuring Fee") from Loan proceeds in an amount equal to one
percent (1.0%) of the greater of (i) the Re-sized Amount or (ii) the Initial
Loan (after giving effect to the prepayment of the Special Prepaid Principal, if
any).
2.6.4 Advances. Borrower and Manager hereby irrevocably
authorize and direct Lender to pay itself each of the fees payable hereunder out
of the proceeds of Advances being made at or after the time such fee is due.
2.7 Taxes. Any and all payments by Borrower hereunder and
under the other Loan Documents shall be made free and clear of and without
deduction for any and all present or future taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto, excluding
taxes imposed on Lender's income, and franchise taxes imposed on Lender by the
law or regulation of any Governmental Authority (all such non-excluded taxes,
levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to in this Section 2.7 as "Applicable Taxes"). If Borrower
shall be required by law to deduct any Applicable Taxes from or in respect of
any sum payable hereunder to Lender, (i) the sum payable shall be increased as
may be necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section 2.7), Lender
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) Borrower shall make such deductions and (iii)
Borrower shall pay the full amount deducted to the relevant taxation authority
or other authority in accordance with applicable law. Borrower also agrees to
pay any present or future stamp or documentary taxes or any other excise or
property taxes, charges or similar levies which arise from any payment made
hereunder or from the execution, delivery or recordation of, or otherwise with
respect to, this Agreement or any other Loan Document ("Other Taxes"). Borrower
shall indemnify Lender for the full amount of Applicable Taxes or Other Taxes
(including any Applicable Taxes or Other Taxes imposed by any jurisdiction on
amounts paid or payable under this Section 2.7) paid by Lender and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such Applicable Taxes or Other Taxes were correctly or
legally asserted.
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Payments pursuant to this Section 2.7 shall be made within fifteen (15) days
after the date Lender makes written demand therefor provided Borrower and/or
Manager shall have the right to contest same as provided in Sections 5.1.2 and
5.2.2.
2.8 Breakage Indemnity. Borrower shall indemnify Lender
against any loss or expense which Lender may actually sustain or incur as a
consequence of (i) any payment or prepayment of the Loan or any portion thereof
made on a date other than a Payment Date, (ii) any default in payment or
prepayment of the Principal or any part thereof or interest accrued thereon, as
and when due and payable (at the date thereof or otherwise, and whether by
acceleration or otherwise), (iii) any delay in making a requested Advance by
reason of Borrower's act or failure to act or failure to satisfy a condition
precedent to the making of such Advance and (iv) the occurrence of any Event of
Default, in each case including any loss or expense actually sustained or
incurred or determined by Lender to be actually sustained or incurred in
liquidating or redeploying deposits from third parties acquired to effect or
maintain the Loan or any part thereof. Such loss or expense shall include any
Yield Maintenance Premium payable pursuant to the Note, as well as an amount
equal to the excess, if any, as determined by Lender of (A) its cost of
obtaining the funds for the Loan or portion thereof being paid or prepaid for
the period from the date of such payment or prepayment to the last day of the
then current Interest Period over (B) the amount of interest (as determined by
Lender) that would be realized by Lender in redeploying the funds so paid or
prepaid for the balance of such Interest Period. A certificate of Lender setting
forth any amount or amounts which it is entitled to receive pursuant to this
Section 2.8 shall be binding and conclusive absent manifest error.
2.9 Security for the Loan. The Note and Borrower's and
Manager's obligations hereunder and under the other Loan Documents shall be
secured by the Mortgage, the Other Properties Subordinate Mortgages, the
Guaranties, the Assignments of Leases, the Assignments of Agreements, the Other
Non-Recourse Guarantees, and the security interest and Liens granted in this
Agreement and in the other Loan Documents.
2.10 Borrower's Note. (a) Borrower's obligation to pay the
principal of and interest on the Loan (including Late Payment Charges, Default
Rate interest, and the Yield Maintenance Premium, if any), shall be evidenced by
this Agreement and by the Note, duly executed and delivered by Borrower. The
Note shall be payable as to principal, interest, Late Payment Charges, Default
Rate interest and Yield Maintenance Premium, if any, as specified in this
Agreement, with a final maturity on the Maturity Date. Borrower shall pay all
outstanding Debt on the Maturity Date.
(b) Lender is hereby authorized, at its sole option, to
endorse on a schedule attached to the Note (or on a continuation of such
schedule attached to the Note and made a part thereof) an appropriate notation
evidencing the date and amount of each payment of Principal, interest, Late
Payment Charges, Default Rate interest and Yield Maintenance Premium, if any, in
respect thereof, which Note and Schedule shall be made available to Borrower and
Manager, at Borrower's and/or Manager's sole cost and expense on reasonable
advance notice, for examination at Lender's offices.
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III. CASH MANAGEMENT; ESCROWS AND RESERVES
3.1 Cash Management Arrangements. All Rents shall be
transmitted directly by tenants of the Property into one or more accounts (the
"Clearing Accounts") maintained by Borrower or Manager but controlled by Lender
at one or more banks selected by Manager (the "Clearing Banks") all in
accordance with the Clearing Account Agreement. If any tenants pay their Rents
directly to either the Borrower or the Manager, all Rents received by Borrower
or Manager shall be deposited into a Clearing Account within one (1) Business
Day of receipt. Except during a Cash Management Period, funds deposited into the
Clearing Accounts shall be swept by the Clearing Banks on a daily basis into
Manager's operating account at a Clearing Bank. During a Cash Management Period,
such funds shall be swept by the Clearing Banks on a daily basis into an account
at the Deposit Bank controlled by Lender (a "Deposit Account") and applied and
disbursed in accordance with this Agreement and the Deposit Account Agreement
and, pending such application and disbursement, will be invested in Permitted
Investments selected by Manager, with any earnings thereon accruing for the
benefit of Borrower. If the Deposit Account Agreement is no longer in effect
when a Cash Management Period resumes, then, within fifteen (15) days after
Lender's request, Borrower and Manager shall enter into one or more deposit
account agreements among Borrower, Manager, Lender and the Deposit Bank, in
Lender's then current form revised in accordance with this Agreement, providing
for the receipt and disbursement of Rents by the Deposit Bank in accordance
herewith. The Deposit Account and all subaccounts thereof shall at all times be
Eligible Accounts (such subaccounts, and any other accounts or subaccounts at
the Deposit Bank, other than the Deposit Account, are referred to herein as
"Subaccounts"). The "Cash Management Period" shall mean and consist of (i) the
period from the Loan Closing Date to the Conversion Date, (ii) the period from
the Optional Prepayment Date to the end of the Term, (iii) the period from the
occurrence of a monetary Event of Default to the date following the first (1st)
anniversary of the curing of such monetary Event of Default on which the Debt
Service Coverage Ratio is at least equal to 1.27x, (iv) the period from the
occurrence of a non-monetary Event of Default to the date such non-monetary
Event of Default is cured; provided, however, if more than two (2) non-monetary
Events of Default occur in any twelve (12) month period, then commencing upon
the occurrence of a third (3rd) non-monetary Event of Default to the date
following the first (1st) anniversary of the curing of such non-monetary Event
of Default on which the Debt Service Coverage Ratio is at least equal to 1.27x,
(v) if the audited financial statements provided to Lender pursuant to Section
5.1.9 and 5.2.9 indicate that less than ninety percent (90%) of the actual Rents
from the Property have been deposited into the Clearing Account, then the period
from such determination to the date following the first (1st) anniversary of
such determination, and (vi) the period from the investment of Preferred Equity
until the payment in full of the Preferred Equity and the Preferred Yield (as
defined in Schedule 2) thereon. Lender hereby agrees to deliver to the Clearing
Bank and the Deposit Bank written notice that the particular Cash Management
Period has ended no later than fifteen (15) days following the end of a Cash
Management Period, together with instructions to remit all sums remaining in
Manager's Subaccount as directed, to Manager.
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3.2 Tax and Insurance Escrow Fund. Borrower shall pay to
Lender on each Payment Date after Substantial Completion (i) one-twelfth of the
Taxes that Lender estimates, in its reasonable discretion, will be payable
during the next twelve (12) months in order to accumulate with Lender sufficient
funds to pay all such Taxes at least thirty (30) days prior to their respective
due dates, and (ii) one-twelfth (1/12th) of the Insurance Premiums that Lender
estimates will be payable for the renewal of the coverage afforded by the
Policies upon the expiration thereof in order to accumulate with Lender
sufficient funds to pay all such Insurance Premiums at least thirty (30) days
prior to the expiration of the Policies (the amounts paid under the foregoing
clauses (i) and (ii), less disbursements thereof pursuant hereto, being called
the "Tax and Insurance Escrow Fund"). Lender will apply the Tax and Insurance
Escrow Fund to payments of Taxes and Insurance Premiums required to be made
after Substantial Completion by Borrower and/or Manager pursuant to Sections
5.1.2, 5.2.2 and 7.1, or to reimburse Borrower and/or Manager for such amounts
upon presentation of evidence of payment and an Officer's Certificate in form
and substance reasonably satisfactory to Lender; subject, however, to Borrower's
and/or Manager's right to contest Taxes in accordance with Sections 5.1.2 and
5.2.2. In making any payment relating to the Tax and Insurance Escrow Fund,
Lender may do so, prior to an Event of Default, in accordance with Manager's
direction if there is a contest in progress (provided Borrower and/or Manager is
following the Contest Procedures), and subsequent to an Event of Default
according to any bill, statement or estimate procured from the appropriate
public office (with respect to Taxes) or insurer or agent (with respect to
Insurance Premiums), without inquiry into the accuracy of such bill, statement
or estimate or into the validity of any tax, assessment, sale, forfeiture, tax
lien or title or claim thereof. If the amount of the Tax and Insurance Escrow
Fund shall exceed the amounts next coming due for Taxes and Insurance Premiums
pursuant to Sections 5.1.2, 5.2.2 and 7.1, Lender shall, in its discretion,
return any excess as directed by Manager or credit such excess against the next
payment to be made to the Tax and Insurance Escrow Fund. If at any time after
Substantial Completion Lender determines that the Tax and Insurance Escrow Fund
is not or will not be sufficient to pay the Taxes or Insurance Premiums next
coming due, Lender shall notify Borrower and/or Manager of such determination
and Borrower shall increase its monthly payments to Lender by the amount that
Lender estimates, in Lender's reasonable discretion, is sufficient to make up
the deficiency at least thirty (30) days prior to delinquency of the Taxes
and/or expiration of the Policies, as the case may be. Should the Taxes and
Insurance Premiums for the then current Fiscal Year or payment period not be
ascertainable by Lender at the time a monthly deposit is required to be made,
the Tax and Insurance Escrow Fund monthly installment shall be Lender's
reasonable and good faith estimate based on one-twelfth (1/12th) of the
aggregate Tax and Insurance for the prior Fiscal Year or payment period, with
reasonable adjustments as reasonably determined by Lender. As soon as the Taxes
and Insurance Premiums are fixed for the then current Fiscal Year or period, the
next ensuing monthly installment of Taxes and Insurance Premiums shall be
adjusted to reflect any deficiency or surplus in prior Tax and Insurance Escrow
Fund monthly installments.
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3.3 Capital Reserve Fund.
3.3.1 Capital Reserve Fund. Borrower shall pay to Lender on
each Payment Date after Substantial Completion (in addition to other payments
required hereunder) an amount equal to one-twelfth of the greater of (a) the
product obtained by multiplying $250 by the number of units in the Property or
(b) the amount indicated in the Engineering Report(s) as the annual amount
required to maintain the Property (such payments, less disbursements thereof
pursuant hereto, being called the "Capital Reserve Fund"). If the amount of the
Capital Reserve Fund shall exceed the amounts due for Approved Capital Expenses
pursuant to the terms hereof, Lender shall, in its discretion, return any excess
as directed by Manager or, if future Capital Reserve Fund payments are then
required, credit such excess against such future payments. Lender shall have the
right, from time to time, by at least thirty (30) days prior notice to Borrower
and Manager, to adjust the monthly amount required to be deposited into the
Capital Reserve Fund, based upon Lender's reasonable determination of
anticipated Capital Expenses.
3.3.2 Payment of Capital Expenses. From time to time (but not
more often than once per month, Lender shall disburse funds held in the Capital
Reserve Fund to Borrower or, as directed by Manager, within fifteen (15) days
after the delivery by Borrower or Manager, as applicable, to Lender of a request
therefor, in increments of at least $1,000 provided (i) no Event of Default
shall have occurred and be continuing; (ii) such disbursement is for an Approved
Capital Expense; (iii) Lender shall have (if it desires) verified (by an
inspection conducted at Borrower's expense) performance of the work associated
with such Approved Capital Expense; and (iv) the request for disbursement is
accompanied by (A) an Officer's Certificate certifying (v) the amount of funds
to be disbursed, (w) that such funds will be used to pay (or reimburse Borrower
or Manager, as applicable, for) Approved Capital Expenses and a description
thereof, (x) that all outstanding trade payables (other than those to be paid
from the requested disbursement or those otherwise permitted to be outstanding
under Section 6.1.8 and 6.2.8) have been paid in full, (y) that the same has not
been the subject of a previous dis bursement, and (z) that all previous
disbursements have been used to pay the previously identified Approved Capital
Expenses, and (B) reasonably detailed documentation as to the amount, necessity
and purpose therefor.
3.4 Operating Expenses.
3.4.1 Payment of Approved Operating Expenses. From time to
time during the Cash Management Period (but not more than once per month) Lender
shall disburse funds held in the Operating Expense Subaccount to Borrower or
Manager, as directed by Manager, provided (i) no Event of Default shall have
occurred and be continuing; (ii) such disbursement is for an Approved Operating
Expense; and (iii) such disbursement is requested by Borrower or Manager, as
applicable, in writing, accompanied by (A) an Operating Expense Certificate and
(B) reasonably detailed documentation as to the amount, necessity and purpose
therefor. Subject to satisfaction of the preceding conditions, if Lender
receives from Borrower or Manager a valid request for a disbursement for payment
of Approved Operating Expenses for the then Current
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Month at least five (5) Business Days prior to the Payment Date occurring in
such Current Month, then the disbursement in respect of such Approved Operating
Expenses shall be made as directed by Manager on such Payment Date. If Borrower
or Manager shall fail to validly request a disbursement for payment of Approved
Operating Expenses for the then Current Month at least five (5) Business Days
prior to the Payment Date in such Current Month, then Lender shall retain in the
Operating Expense Subaccount an amount equal to the anticipated Operating
Expenses for the then Current Month as set forth in the approved Operating
Budget for such month, and Lender shall, subject to satisfaction of the
preceding conditions, disburse the same as directed by Manager five (5) Business
Days after Lender receives a valid request therefor.
3.4.2 Extra Funds for Operating Expenses. Subsequent to the
Conversion Date, during each of the following periods (i) any period in which
Lender or its designee is an equity owner in Manager and/or Borrower and (ii)
any Cash Management Period, not more frequently than once each Interest Period
and provided that no Event of Default has occurred and is continuing, if in a
given Interest Period the Manager requires amounts in excess of the Approved
Operating Expenses ("Extra Funds"), Manager, at the time it delivers the
Operating Expense Certificate, may deliver a written request to Lender for a
disbursement of Extra Funds stating the amount of such Extra Funds and the
purpose for which such amount is intended with attachments of copies of bills
and other documentation as may be required by Lender to establish that such
Operating Expenses are reasonable and that such amounts are then due or expected
to become due in that month. If Lender approves of such costs (such approval not
to be unreasonably withheld), Lender shall release the funds to Manager or its
designee within ten (10) Business Days of Lender's receipt of Manager's written
request.
3.4.3 Reconciliation. Manager shall furnish Lender monthly, on
each Payment Date during a Cash Management Period, a budget variance report
reconciling the Operating Expenses shown on the Annual Budget with requested
disbursements for payment of Operating Expenses pursuant to Section 3.4.
3.5 Working Capital Subaccount. On each Payment Date during a
Cash Management Period, funds in the Working Capital Subaccount may be
transferred, at Lender's option, to other Subaccounts to the extent that Rents
received in the immediately preceding Interest Period are insufficient to
allocate sufficient amounts to such Subaccounts to make all the payments
required under clauses (i) through (v) of Section 2.2.3(a) or 2.2.3(b) or
clauses (i) through (vii) of Section 2.2.3(c), as applicable, on such Payment
Date.
3.6 Cash Collateral Subaccount. Lender may with Manager's
consent, from time to time on or before the Conversion Date, apply any or all
amounts in the Cash Collateral Subaccount to repay the outstanding Principal
and/or any other portion of the Debt then due and payable without any penalty or
premium. Upon the request of Manager, on or before the Conversion Date, Lender
shall apply any or all amounts in the Cash Collateral Subaccount to repay the
outstanding Principal and/or any other portion of the Debt then due and payable
without any penalty or premium. From and after the Substantial Completion Date
until the Conversion Date, Manager may request that all excess cash flow in the
Cash Collateral
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Subaccount be paid as directed by Manager, provided: i) no Default or Event of
Default has occurred and is then continuing, ii) Manager makes a written request
to Lender (no more than once per month) for the payment thereof at least ten
(10) days prior to Payment Date on which or after which such funds are to be
distributed as requested by Manager, and iii) pay over such amounts as directed
by Manager subject to the letter of credit conditions specified below. Lender
may require, in its discretion, that Manager deliver to Lender, as beneficiary,
one or more clean, irrevocable letters of credit, reasonably satisfactory to
Lender in form and content and as to the bank or trust company which is the
issuer (which issuer must have an S&P rating of "A" or better) equal in amount
to the funds paid over to or as directed by Manager (unless and to the extent
such funds are used to reduce the outstanding Principal as provided in this
Section 3.6). Any such letter of credit shall have an expiration date not
earlier than thirty (30) days after the Expected Conversion Date, provided that
the expiration date may be one (1) year from its issuance if the letter of
credit provides for a drawing by Lender of the full amount thereof at any time
on or after the thirtieth (30th) day preceding its stated expiration date. Any
letter of credit shall be held by Lender and may be drawn at any time within
thirty (30) days prior to the expiration thereof, upon the occurrence and during
the continuance of an Event of Default, or within thirty (30) days prior to the
Expected Conversion Date, whereupon the proceeds of the letter of credit shall
be deposited in the Cash Collateral Subaccount. On the Conversion Date, provided
no Default or Event of Default exists (and all payments required to be made by
Borrower and/or Manager on the Conversion Date have been made), Lender shall
disburse to Manager, or as otherwise directed by Manager, the funds (if any)
remaining in the Cash Collateral Subaccount.
3.7 Security Deposits. Borrower or Manager, as applicable,
shall collect all security deposits under Leases and shall endorse all checks
and deposit all such funds and other receipts on account of security deposits
within two (2) Business Days after receipt thereof, directly into the Security
Deposit Account - Clearing Bank. Borrower and Manager shall also deposit into
the Security Deposit Account - Clearing Bank all amounts drawn down under any
letters of credit held by Borrower or Manager in lieu of cash security deposits.
Neither Borrower nor Manager shall have any right of withdrawal from the
Security Deposit Account Clearing Bank except that, prior to the occurrence of
an Event of Default which is continuing, if either Borrower or Manager desires
to receive funds from the Security Deposit Account Clearing Bank, Borrower or
Manager may do so only if each of the following conditions are satisfied: (i)
Borrower or Manager submits a written request to Lender, certified by an
authorized officer of Borrower or Lender, and (ii) such request states (a) that
Borrower or Manager is required by law or contract to return a tenant's security
deposit or to use such security deposit for repairs or payment of rent, in
accordance with such tenant's lease, (b) the amount of and use for the security
deposit to be returned, (c) the lease and the name of the tenant to which such
security deposit relates, and (d) that no Event of Default exists under the Loan
Documents. In the event that Borrower delivers a notice in accordance with the
foregoing, Lender shall instruct the Clearing Bank (i) in the case of any
security deposit to be utilized to pay rent, to transfer such funds from the
Security Deposit Account - Clearing Bank to Manager within ten (10) days of
receipt of Lender's written direction to the Clearing Bank and (ii) with respect
to all other uses of such security deposit accounts, to release funds so
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requested to Manager, or as otherwise directed by Manager, within ten (10) days
of receipt of Lender's written direction to the Clearing Account Bank to release
such funds. Except as provided above, neither Borrower nor Manager shall have
any right to funds in the Security Deposit Account - Clearing Bank.
Notwithstanding anything set forth herein, Borrower or Manager may withdraw
funds from the Security Deposit Account - Clearing Bank to refund or apply
security deposits as required by applicable Legal Requirements upon providing
prior written notice to Lender, which notice shall include evidence reasonably
satisfactory to Lender that such release is required by all applicable Legal
Requirements. During a Cash Management Period, any funds in the Security Deposit
Account - Clearing Bank that are to be applied against rent arrearages under any
Lease shall be transferred by the Clearing Bank from the Security Deposit
Account - Clearing Bank to the Security Deposit Account - Deposit Bank and
applied in accordance with the Deposit Account Agreement. Neither Borrower nor
Manager shall have any right to funds in the Security Deposit Account - Deposit
Bank, except that Borrower or Manager may request and Lender shall release any
security deposit directly to a tenant if required by applicable law.
Any letter of credit or other instrument that Borrower or
Manager receives in lieu of a cash security deposit shall (i) be maintained in
full force and effect in the full amount unless replaced by a cash deposit as
hereinabove described, (ii) be issued by an institution reasonably satisfactory
to Lender, (iii) if permitted pursuant to the Lease or any Legal Requirements,
name Lender as payee or mortgagee thereunder (or at Lender's option, be fully
assignable to Lender) and (iv) in all respects, comply with any applicable Legal
Requirements and otherwise be reasonably satisfactory to Lender. Borrower shall,
upon request, provide Lender with evidence reasonably satisfactory to Lender of
Borrower's compliance with the foregoing.
3.8 Grant of Security Interest; Application of Funds. As
security for payment of the Debt and the performance by Borrower and Manager of
all other terms, conditions and provisions of the Loan Documents, Borrower and
Manager hereby pledge and assign to Lender, and grant to Lender a security
interest in, all Borrower's and Manager's (if any) right, title and interest in
and to the Deposit Account, all Subaccounts, the Tax and Insurance Escrow Fund,
the Capital Reserve Fund, and any other escrow or reserve funds or accounts
established in connection with this Loan (collectively, the "Funds"). Neither
Borrower nor Manager shall, without obtaining the prior written consent of
Lender, further pledge, assign or grant any security interest in the Deposit
Account, any Subaccount or any Fund, or permit any Lien to attach thereto, or
any levy to be made thereon, or any UCC-l Financing Statements, except those
naming Lender as the secured party, to be filed with respect thereto. This
Agreement is, among other things, intended by the parties to be a security
agreement for purposes of the UCC. Upon the occurrence and during the
continuance of an Event of Default, Lender may apply any sums in the Deposit
Account, any Subaccount or any Fund to the payment of the Debt and/or to the
payment of Taxes, Insurance Premiums, Capital Expenses and/or Operating
Expenses, in any order in its discretion. Neither the Deposit Account nor any
Subaccount or Fund shall constitute a trust fund and may be commingled with
other monies held by Lender. Sums in each Fund shall be held by Lender in a
Subaccount and invested in Permitted Investments. Earnings or interest, if any,
on each Fund shall become part of such
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Fund and shall be disbursed as provided herein for such Fund. Borrower shall be
responsible for and pay all income taxes payable with respect to such earnings
and interest, and shall execute and deliver any IRS Form W-9 or other
appropriate documentation Lender reasonably requires in connection therewith.
Lender shall not be liable for any loss sustained on the investment of any funds
constituting any Fund. Amounts disbursed to Borrower or Manager under Sections
3.2 through 3.4 shall be used by Borrower or Manager solely to pay the expenses
for which such disbursement is requested.
IV. REPRESENTATIONS AND WARRANTIES
4.1 Borrower Representations. Borrower represents and warrants
as of the date hereof that, except to the extent (if any) disclosed on Schedule
3 (with reference to a specific subsection of this Section 4.1):
4.1.1 Organization; Special Purpose. Borrower is duly
organized and is validly existing and in good standing under the laws of its
state of formation, with requisite power and authority, and to Borrower's actual
knowledge without having conducted any investigation, with all rights, licenses,
permits and authorizations, governmental or otherwise, necessary to own its
properties and to transact the business in which it is now engaged. Borrower is
duly qualified to do business and is in good standing in each jurisdiction where
it is required to be so qualified in connection with its properties, business
and operations, except where failure to be so qualified would not have a
material adverse effect on the Borrower. Borrower is a Special Purpose
Bankruptcy Remote Entity, and the sole business of Borrower is the ownership,
development, management and operation of the Property.
4.1.2 Proceedings; Enforceability. Borrower has taken all
necessary action to authorize the execution, delivery and performance of the
Loan Documents to which Borrower is a party. The Loan Documents to which
Borrower is a party have been duly executed and delivered by Borrower and
constitute legal, valid and binding obligations of Borrower enforceable against
Borrower in accordance with their respective terms, subject to applicable
bankruptcy, insolvency and similar laws affecting rights of creditors generally,
and general principles of equity.
4.1.3 No Conflicts. The execution, delivery and performance by
Borrower of the Loan Documents to which Borrower is a party will not conflict
with or result in a breach of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any Lien (other than
pursuant to the Loan Documents) upon any of the property of Borrower pursuant to
the terms of, any agreement or instrument to which Borrower is a party to which
its property is subject, nor will such action result in any violation of the
provisions of any statute or any order, rule or regulation of any Governmental
Authority having jurisdiction over Borrower or any of its properties. To
Borrower's actual knowledge without having conducted any investigation,
Borrower's rights under the Licenses and the Management Agreement will not be
adversely affected by the execution and delivery of the Loan Documents,
Borrower's performance thereunder, the recordation of the Mortgage, the Other
Properties Subordinate
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Mortgage or the exercise of any remedies by Lender. Any consent, approval,
authorization, order, registration or qualification of or with any Governmental
Authority required for the execution, delivery and performance by Borrower of
the Loan Documents has been obtained and is in full force and effect.
4.1.4 Litigation. There are no actions, suits or proceedings
at law or in equity by or before any Governmental Authority or other agency now
pending or threatened against or affecting Borrower or, to Borrower's actual
knowledge without having conducted any investigation, the Property, which, if
determined against Borrower or the Property could reasonably likely have a
material adverse affect on the condition (financial or otherwise) or business of
Borrower or the condition or ownership of the Property.
4.1.5 Agreements. Borrower is not a party to any agreement or
instrument or subject to any restriction which might adversely affect Borrower
or the Property, or Borrower's business, properties, operations or condition,
financial or otherwise. To Borrower's actual knowledge without having conducted
any investigation, Borrower is not in default in any material respect in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any Permitted Encumbrance or any other agreement or
instrument to which it is a party or by which it or the Property is bound.
4.1.6 Title. To Borrower's actual knowledge without having
conducted any investigation, Borrower has good, indefeasible, marketable, and
insurable title in fee to the real property comprising part of the Property, and
good title to the balance of the Property, free and clear of all Liens except
the Permitted Encumbrances. Borrower has granted none and to Borrower's actual
knowledge without having conducted any investigation there are no options to
purchase or rights of first refusal affecting Borrower's interest in the
Property except for those provided for in the Property Option Agreement. The
Mortgage, when properly recorded in the appropriate records, together with any
UCC financing statements required to be filed in connection therewith, will
create (i) a valid, perfected first priority lien on such real Property and (ii)
perfected security interests in and to, and perfected collateral assignments of,
all personalty included in the Property (including the Leases), all in
accordance with the terms thereof, in each case subject only to any applicable
Permitted Encumbrances. To Borrower's actual knowledge without having conducted
any investigation, the Permitted Encumbrances do not and will not materially
adversely affect the value or use of the Property, or Borrower's ability to
repay the Loan. To Borrower's actual knowledge without having conducted any
investigation, there are no claims for payment for work, labor or materials
affecting the Property which are or may become a Lien prior to, or of equal
priority with, the Liens created by the Loan Documents except to the extent of
the Permitted Exceptions and any inchoate liens for which Lender is receiving
title insurance coverage.
4.1.7 Intentionally deleted.
4.1.8 No Bankruptcy Filing. Borrower is not contemplating either the filing
of a petition by it under any state or federal bankruptcy or insolvency law or
the liquidation of all
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or a major portion of its assets or property, and Borrower has no knowledge of
any Person contemplating the filing of any such petition against it.
4.1.9 Full and Accurate Disclosure. No statement of fact made
by Borrower in any Loan Documents or in any other document or certificate
delivered to Lender by Borrower in connection with the Loan contains any untrue
statement of a material fact or omits to state any material fact necessary to
make statements contained therein not misleading. There is no material fact
presently known to Borrower that has not been disclosed to Lender which
materially adversely affects, or, as far as Borrower can foresee, would
reasonably materially adversely affect, the Property or the business, operations
or condition (financial or otherwise) of Borrower.
4.1.10 No Plan Assets. Either (i) Borrower is not an "employee
benefit plan," as defined in Section 3(3) of ERISA, subject to Title I of ERISA,
and none of the assets of Borrower constitutes or will constitute "plan assets"
of one or more such plans within the meaning of 29 C.F.R. Section 2510.3-101 or
(ii) each Plan and, to the knowledge of Borrower, each Multiemployer Plan, is in
compliance in all material respects with, and has been administered in all
material respects in compliance with, its terms and the applicable provisions of
ERISA, the Code and any other federal or state law, and no event or condition
has occurred as to which Borrower would be under an obligation to furnish a
report to Lender under Section 5.1.20.
4.1.11 Compliance. To Borrower's actual knowledge without
having conducted any investigation, Borrower and the Property and the use (and
contemplated future use) thereof comply, or will comply upon Substantial
Completion, in all material respects with all applicable Legal Requirements,
quality and safety standards, accreditation and certification standards and
requirements of the DOH and all other Governmental Authorities, including
building and zoning ordinances and codes and all other Governmental Authorities
relating to the operation of the Property in accordance with or as required by
its Permitted Use. Borrower is not in default or violation of any order, writ,
injunction, decree or demand of any Governmental Authority, the violation of
which reasonably might materially adversely affect the condition (financial or
otherwise) or business of Borrower. There has not been and shall never be
committed by Borrower or any other Person in occupancy of or involved with the
operation or use of the Property any act or omission affording any Governmental
Authority the right of forfeiture as against the Property or any part thereof or
any monies paid in performance of Borrower's obligations under any Loan
Document.
4.1.12 Contracts. Except for the Construction Documents (as
defined in the BLA), the Development Agreement, or the Management Agreement,
Borrower has not entered into any service, maintenance or repair contracts
affecting the Property that are not terminable on one (1) month's notice or less
without cause and without penalty or premium, and all such service, maintenance
or repair contracts affecting the Property have been entered into at arms-length
in the ordinary course of Borrower's business and provide for the payment of
fees in amounts and upon terms comparable to existing market rates.
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4.1.13 Financial Information. All financial data, including
the statements of cash flow and income and operating expense, if any, that have
been delivered by Borrower or at the direction of Borrower to Lender in respect
of the Borrower (i) are true, complete and correct in all material respects,
(ii) accurately represent the financial condition of the Borrower, as of the
date of such reports, and (iii) to the extent prepared by an independent
certified public accounting firm, have been prepared in accordance with GAAP
consistently applied throughout the periods covered, except as disclosed
therein. Borrower has no contingent liabilities, liabilities for taxes, unusual
forward or long-term commitments or unrealized or anticipated losses from any
unfavorable commitments that are known to Borrower and reasonably likely to have
a materially adverse effect on the Property or the operation thereof, except as
referred to or reflected in such financial statements. Since the date of the
last financial statements delivered by Borrower to Lender, there has been no
materially adverse change in the financial condition, operations or business of
Borrower from that set forth in said financial statements except as disclosed
therein.
4.1.14 Intentionally deleted.
4.1.15 Federal Reserve Regulations. No part of the proceeds of
the Loan will be used for the purpose of purchasing or acquiring any "margin
stock" within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System or for any other purpose that would be inconsistent with
such Regulation U or any other Regulation of such Board of Governors, or for any
purpose prohibited by Legal Requirements or any Loan Document.
4.1.16 Intentionally deleted.
4.1.17 Not a Foreign Person. Borrower is not a "foreign
person" within the meaning of ss. 1445(f)(3) of the Code.
4.1.18 Separate Lots. Borrower has not permitted or initiated
the joint assessment of the Property (i) with any other real property
constituting a separate tax lot, and (ii) with any portion of the Property which
may be deemed to constitute personal property, or has not permitted or initiated
any other procedure whereby the lien of any taxes which may be levied against
such personal property shall be assessed or levied or charged to the Property as
a single lien.
4.1.19 Intentionally deleted.
4.1.20 Enforceability. The Loan Documents executed by Borrower
are not subject to, and Borrower has not asserted, any right of recision,
set-off, counterclaim or defense, including the defense of usury. No exercise of
any of the terms of the Loan Documents executed by Borrower, or any right
thereunder, will render any Loan Documents unenforceable.
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4.1.21 Insurance. Borrower has obtained and has delivered or
shall cause to be obtained and delivered to Lender insurance policies reflecting
the insurance coverages, amounts and other requirements set forth in the Loan
Documents.
4.1.22 Intentionally deleted.
4.1.23 Intentionally deleted.
4.1.24 Intentionally deleted.
4.1.25 Intentionally deleted.
4.1.26 Intentionally deleted.
4.1.27 Filing and Recording Taxes. To Borrower's actual
knowledge without having conducted any investigation, all transfer taxes, deed
stamps, intangible taxes or other amounts in the nature of transfer taxes
required to be paid by any Person under applicable Legal Requirements in
connection with the transfer of the Property to Borrower have been paid. To
Borrower's actual knowledge without having conducted any investigation, all
mortgage, mortgage recording, stamp, intangible or other similar taxes required
to be paid by any Person under applicable Legal Requirements in connection with
the execution, delivery, recordation, filing, registration, perfection or
enforcement of any of the Loan Documents have been paid or will be paid when due
and payable.
4.1.28 Investment Company Act. Borrower is not (i) an
"investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended; (ii) a
"holding company" or a "subsidiary company" of a "holding company" or an
"affiliate" of either a "holding company" or a "subsidiary company" within the
meaning of the Public Utility Holding Company Act of 1935, as amended; or (iii)
subject to any other federal or state law or regulation which purports to
restrict or regulate its ability to borrow money.
4.1.29 Ownership of Borrower. The sole general partner of
Borrower is the Borrower Representative. Borrower Sponsor is the owner of all of
the issued and outstanding capital stock of the Borrower Representative, all of
which capital stock has been validly issued and fully paid and is nonassessable.
The only limited partner of Borrower is Borrower Sponsor. Except as set forth in
the Property Option Agreement, the stock of the Borrower Representative and the
limited partnership interests in Borrower are owned free and clear of all Liens,
warrants, options and rights to purchase. Borrower has no obligation to any
Person to purchase, repurchase or issue any ownership interest in it.
4.1.30 Management Agreement. The Management Agreement existing
on the Loan Closing Date with respect to the Property is in full force and
effect and is not in default by any party thereto. The term of the Management
Agreement does not extend beyond the
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Optional Prepayment Date. In the event the Management Agreement is terminated or
in the event of foreclosure or other acquisition of the Property by Lender,
under applicable Legal Requirements, to Borrower's actual knowledge without
having conducted any investigation, none of Borrower, Lender, Manager, or any
subsequent purchaser is required to obtain a CON (or similar certificate,
license, or approval issued by the DOH for the requisite number of units, and
approval provider status in any approved provider payment program) prior to
applying for and receiving a license to operate the Property as the Property is
operated prior to any such termination, foreclosure.
4.1.31 Intentionally deleted.
4.1.32 Name; Principal Place of Business. Borrower does not
use and will not use any trade name and has not done and will not do business
under any name other than its actual name set forth herein unless Borrower
provides Lender with thirty (30) days prior written notice; provided, however,
that the Property is operated under the name "The Heritage". The principal place
of business of Borrower is 320 King of Prussia Road, Suite 160, Radnor,
Pennsylvania 19087.
4.1.33 Other Debt and Obligations. Borrower has no financial
obligation under any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which Borrower is a party, except in connection with
this Agreement, or by which Borrower or the Property is bound, other than (i)
the Management Agreement and the Development Agreement, or (ii) unsecured trade
payables incurred in the ordinary course of business relating to the ownership
and operation of the Property and financing of Equipment or vehicles used in the
ordinary course of business relating to the ownership and operation of the
Property which do not exceed, at any time, a maximum amount of one percent (1%)
of the Loan and are paid within ninety (90) days of the date incurred, and other
than obligations under the Mortgage and the other Loan Documents. Borrower has
not borrowed or received other debt financing that has not been heretofore
repaid in full and Borrower has no known material contingent liabilities.
4.1.34 Fraudulent Transfer; Solvency. Borrower (i) has not
entered into this Loan Agreement or any Loan Document with the actual intent to
hinder, delay, or defraud any creditor, and (ii) has received reasonably
equivalent value in exchange for its obligations under the Loan Documents.
Giving effect to the transactions contemplated hereby, to Borrower's actual
knowledge without having conducted any investigation, the fair saleable value of
Borrower's assets exceeds and will, immediately following the execution and
delivery of this Agreement, exceed Borrower's total liabilities, including,
subordinated, unliquidated, or disputed liabilities or Obligations. To
Borrower's actual knowledge without having conducted any investigation, the fair
saleable value of Borrower's assets (based on completed construction of the
Improvements) is and will, immediately following the execution and delivery of
this Agreement, be greater than Borrower's probable liabilities, including the
maximum amount of its Obligations or its debts as such debts become absolute and
matured. To Borrower's actual knowledge without having conducted any
investigation, Borrower's assets do not and,
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immediately following the execution and delivery of this Agreement, will not,
constitute unreasonably small capital to carry out its business as conducted or
as proposed to be conducted. Borrower does not intend to, and does not believe
that it will, incur debts and liabilities (including, Obligations and other
commitments) beyond its ability to pay such debts as they mature (taking into
account the timing and amounts to be payable on or in respect of obligations of
Borrower).
4.1.35 No Defaults. To Borrower's knowledge, no Default or
Event of Default of Borrower exists under or with respect to any Loan Document.
4.1.36 Labor Matters. Borrower is not a party to any collective bargaining
agreements.
4.1.37 No Prior Assignment. As of the Loan Closing Date, (i)
Lender is the assignee of Borrower's interest under the Leases, and (ii) there
are no prior assignments of such Leases or any portion of the Rent due and
payable with respect to such Leases or to become due and payable which are
presently outstanding.
4.1.38 Intellectual Property. All trademarks, trade names and
service marks that Borrower owns or has pending, or under which it is licensed,
are in good standing and uncontested. There is no trademark, trade name or
service mark necessary to the business of Borrower as presently conducted or as
Borrower contemplates conducting its business. To Borrower's knowledge, Borrower
has not infringed, is not infringing, and has not received notice of
infringement with respect to asserted trademarks, trade names and service marks
of others. To Borrower's knowledge, there is no infringement by others of
trademarks, trade names and service marks of Borrower.
4.1.39 Intentionally deleted.
4.1.40 Tax Fair Market Value. If a Note with respect to the
Property is significantly modified prior to the closing date of a Securitization
so as to result in a taxable exchange under Code Section 1001, Borrower will, if
requested by Lender, represent that the amount of such Note does not exceed the
Tax Fair Market Value of the Property as of the date of such significant
modification.
4.1.41 Brokerage. Borrower has dealt with no brokers or
"finders" in connection with the Loan, and no brokerage or "finders" fees or
commissions are payable by or to any Person, in connection with this Agreement
or the Loan to be disbursed hereunder by reason of any action of Borrower.
4.1.42 Intentionally deleted.
4.1.43 Intentionally deleted.
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4.1.44 Intentionally deleted.
4.1.45 Governmental Proceedings and Notices. Borrower is not
currently the subject of any proceeding by any Governmental Authority, and no
notice of any violation has been received from a Governmental Authority that
would, to Borrower's actual knowledge without having conducted any
investigation, directly or indirectly, or with the passage of time: (i) affect
Borrower's ability to accept and/or retain patients or result in the imposition
of a fine, a sanction, a lower rate certification or a lower reimbursement rate
for services rendered to eligible patients; (ii) modify, limit or annul or
result in the transfer, suspension, revocation or imposition of probationary use
on any License; (iii) Intentionally deleted.
4.1.46 Intentionally deleted.
4.1.47 Intentionally deleted.
4.1.48 Intentionally deleted.
4.1.49 Intentionally deleted.
4.1.50 Pledges of Receivables. Borrower has not pledged its
receivables as collateral security for any other loan or indebtedness.
4.1.51 Intentionally deleted.
4.2 Manager Representations. Manager represents and warrants
as of the date hereof that, except to the extent (if any) disclosed on Schedule
5 (with reference to a specific subsection of this Section 4.2):
4.2.1 Organization; Special Purpose. Manager is duly organized
and is validly existing and in good standing under the laws of its state of
formation, with requisite power and authority, and Manager and Borrower have all
rights, licenses, permits and authorizations, governmental or otherwise,
necessary to own its properties and to transact the business in which it is now
engaged. Manager is duly qualified to do business and is in good standing in
each jurisdiction where it is required to be so qualified in connection with its
properties, business and operations. Manager is a Special Purpose Bankruptcy
Remote Entity, and the sole business of Manager is the development, management
and operation of the Property.
4.2.2 Proceedings; Enforceability. Manager has taken all
necessary action to authorize the execution, delivery and performance of the
Loan Documents to which it is a party. The Loan Documents to which Manager is a
party have been duly executed and delivered by Manager and constitute legal,
valid and binding obligations of Manager enforceable against Manager in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency and similar laws affecting rights of creditors generally, and general
principles of equity.
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4.2.3 No Conflicts. The execution, delivery and performance by
Manager of the Loan Documents to which Manager is a party will not conflict with
or result in a breach of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any Lien (other than
pursuant to the Loan Documents) upon any of the property of Borrower or Manager
pursuant to the terms of, any agreement or instrument to which Manager is a
party to which its property is subject, nor will such action result in any
violation of the provisions of any statute or any order, rule or regulation of
any Governmental Authority having jurisdiction over Manager or any of its
properties. Manager's rights under the Licenses and the Management Agreement
will not be materially, adversely affected by the execution and delivery of the
Loan Documents, Manager's performance thereunder, the recordation of the
Mortgage and the Other Properties Subordinate Mortgage, or the exercise of any
remedies by Lender. Any consent, approval, authorization, order, registration or
qualification of or with any Governmental Authority required for the execution,
delivery and performance by Manager of the Loan Documents has been obtained and
is in full force and effect or will be obtained and be in full force and effect
when required.
4.2.4 Litigation. There are no actions, suits or proceedings
at law or in equity by or before any Governmental Authority or other agency now
pending or threatened against or affecting Manager or the Property, which, if
determined against Manager or the Property could reasonably likely have a
material adverse affect on the condition (financial or otherwise) or business of
Manager or the condition or ownership of the Property.
4.2.5 Agreements. Manager is not a party to any agreement or
instrument or subject to any restriction which might materially, adversely
affect Manager or the Property, or Manager's business, properties, operations or
condition, financial or otherwise. Neither Borrower nor Manager is in default in
any material respect in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any Permitted Encumbrance or
any other agreement or instrument to which it is a party or by which it or the
Property is bound, which default would materially, adversely affect Manager or
the Property.
4.2.6 Title. Borrower has good, indefeasible, marketable, and
insurable title in fee to the real property comprising part of the Property, and
good title to the balance of the Property, free and clear of all Liens except
the Permitted Encumbrances. There are no options to purchase or rights of first
refusal affecting Borrower's interest in the Property except for those provided
for in the Property Option Agreement. The Mortgage, when properly recorded in
the appropriate records, together with any UCC financing statements required to
be filed in connection therewith, will create (i) a valid, perfected first
priority lien on such real Property and (ii) perfected security interests in and
to, and perfected collateral assignments of, all personalty included in the
Property (including the Leases), all in accordance with the terms thereof, in
each case subject only to any applicable Permitted Encumbrances. The Permitted
Encumbrances do not and will not materially adversely affect the value or use of
the Property, or Borrower's ability to repay the Loan. There are no claims for
payment for work, labor or materials affecting the Property which are or may
become a Lien prior to, or of equal priority with, the Liens created by
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the Loan Documents except to the extent of the Permitted Exceptions and any
inchoate liens for which Lender is receiving title insurance coverage.
4.2.7 Survey. The Survey delivered to Lender does not fail to
reflect any material matter affecting the Property or the title thereto.
4.2.8 No Bankruptcy Filing. Manager is not contemplating
either the filing of a petition by it under any state or federal bankruptcy or
insolvency law or the liquidation of all or a major portion of its assets or
property, and Manager has no knowledge of any Person contemplating the filing of
any such petition against it.
4.2.9 Full and Accurate Disclosure. No statement of fact made
by or on behalf of Manager in any Loan Documents or in any other document or
certificate delivered to Lender by Manager in connection with the Loan contains
any untrue statement of a material fact or omits to state any material fact
necessary to make statements contained therein not misleading. There is no
material fact presently known to Manager that has not been disclosed to Lender
which materially adversely affects, or, as far as Manager can foresee, would
reasonably materially adversely affect, the Property or the business, operations
or condition (financial or otherwise) of Manager.
4.2.10 No Plan Assets. Either (i) Manager is not an "employee
benefit plan," as defined in Section 3(3) of ERISA, subject to Title I of ERISA,
and none of the assets of Manager constitutes or will constitute "plan assets"
of one or more such plans within the meaning of 29 C.F.R. Section 2510.3-101 or
(ii) each ERISA Plan and, to the knowledge of Manager, each Multiemployer Plan,
is in compliance in all material respects with and has been administered in all
material respects in compliance with its terms and the applicable provisions of
ERISA, the Code and any other federal or state law, and no event or condition
has occurred as to which Manager would be under an obligation to furnish a
report to Lender under Section 5.2.20.
4.2.11 Compliance. Manager, Borrower, and the Property and the
use (and contemplated future use) thereof comply, or will comply upon
Substantial Completion, in all material respects with all applicable Legal
Requirements, quality and safety standards, accreditation and certification
standards and requirements of the DOH and all other Governmental Authorities,
including building and zoning ordinances and codes and all other Governmental
Authorities relating to the operation of the Property in accordance with or as
required by its Permitted Use. Manager is not in default or violation of any
order, writ, injunction, decree or demand of any Governmental Authority, the
violation of which reasonably might materially adversely affect the condition
(financial or otherwise) or business of Manager. There has not been and shall
never be committed by Manager or any other Person in occupancy of or involved
with the operation or use of the Property any act or omission affording any
Governmental Authority the right of forfeiture as against the Property or any
part thereof or any monies paid in performance of Manager's obligations under
any Loan Document.
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4.2.12 Contracts. Except for the Construction Documents (as
defined in the BLA), the Development Agreement, or the Management Agreement,
Manager has not entered into any service, maintenance or repair contracts
affecting the Property that are not terminable on one (1) month's notice or less
without cause and without penalty or premium, and all such service, maintenance
or repair contracts affecting the Property have been entered into at arms-length
in the ordinary course of Manager's business and provide for the payment of fees
in amounts and upon terms comparable to existing market rates.
4.2.13 Financial Information. All financial data, including
the statements of cash flow and income and operating expense, that have been
delivered by Manager or at the direction of Manager to Lender in respect of the
Manager and/or the Property (i) are true, complete and correct in all material
respects, (ii) accurately represent the financial condition of the Manager or
the Property, as applicable, as of the date of such reports, and (iii) to the
extent prepared by an independent certified public accounting firm, have been
prepared in accordance with GAAP consistently applied throughout the periods
covered, except as disclosed therein. Manager has no contingent liabilities,
liabilities for taxes, unusual forward or long-term commitments or unrealized or
anticipated losses from any unfavorable commitments that are known to Manager
and reasonably likely to have a materially adverse effect on the Property or the
operation thereof, except as referred to or reflected in such financial
statements. Since the date of the last financial statements delivered by Manager
to Lender, there has been no materially adverse change in the financial
condition, operations or business of Manager from that set forth in said
financial statements except as disclosed therein.
4.2.14 Condemnation. No Condemnation or other proceeding has
been commenced or, to Manager's best knowledge, is contemplated with respect to
all or part of the Property or for the relocation of roadways providing access
to the Property except as contemplated in the Construction Documents and Plans.
4.2.15 Federal Reserve Regulations. No part of the proceeds of
the Loan will be used for the purpose of purchasing or acquiring any "margin
stock" within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System or for any other purpose that would be inconsistent with
such Regulation U or any other Regulation of such Board of Governors, or for any
purpose prohibited by Legal Requirements or any Loan Document.
4.2.16 Utilities and Public Access. The Property has rights of
access to public ways and is served or, upon Substantial Completion will be
served, by electrical, water, sewer, sanitary sewer and storm drain (or other
drainage) facilities adequate to service it for its intended uses. All public
utilities necessary or convenient to the construction of the Required
Improvements and, upon completion thereof, the full use and enjoyment of the
Property are located in the public right-of-way abutting the Property, and all
such utilities are connected (or available for connection) so as to serve the
Property without passing over other property, unless same pass over other
property pursuant to a fully executed easement with the owner (or predecessor
owner) of such property. All roads necessary for the use of the Property for its
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current purpose have been or, upon Substantial Completion will be, completed and
dedicated to public use and accepted by all Governmental Authorities or exist
perpetually on valid easements.
4.2.17 Not a Foreign Person. Manager is not a "foreign person"
within the meaning of ss. 1445(f)(3) of the Code.
4.2.18 Separate Lots. Each parcel comprising the Property is
or prior to the Substantial Completion Date will be a separate tax lot and is
not (or prior to the Substantial Completion Date will not be) a portion of any
other tax lot that is not a part of the Property. Manager has not permitted or
initiated the joint assessment of the Property (i) with any other real property
constituting a separate tax lot, and (ii) with any portion of the Property which
may be deemed to constitute personal property, or will not permit or initiate
any other procedure whereby the lien of any taxes which may be levied against
such personal property shall be assessed or levied or charged to the Property as
a single lien.
4.2.19 Assessments. There are no pending or, to Manager's
knowledge, proposed special or other assessments for public improvements or
otherwise affecting the Property, or any contemplated improvements to the
Property that may result in such special or other assessments other than
Permitted Encumbrances, if any.
4.2.20 Enforceability. The Loan Documents executed by Manager
are not subject to, and Manager has not asserted, any right of recision,
set-off, counterclaim or defense, including the defense of usury. No exercise of
any of the terms of the Loan Documents executed by Manager, or any right
thereunder, will render any Loan Documents executed by Manager unenforceable.
4.2.21 Insurance. Manager has obtained and has delivered to
Lender insurance policies (or such other evidence thereof acceptable to Lender)
reflecting the insurance coverages, amounts and other requirements set forth in
the Loan Documents.
4.2.22 Use of Property; Licenses. The Property is or is
intended to be used exclusively as and in accordance with its Permitted Use. All
certifications, permits, licenses and approvals required for the legal use,
occupancy and operation of the Property as intended are held, or prior to
Substantial Completion (or as soon thereafter as is practical in light of DOH
practice) will be obtained, by the Borrower and/or Manager, as applicable, and
in any event are held, or prior to Substantial Completion will be obtained, by
the Person(s) required under all applicable Legal Requirements and are (or will
be upon Substantial Completion) in full force and effect, including, to the
extent applicable and required based on the intended use of the Property (a)
valid CONs or COEs or similar certificates, licenses to operate, permits, or
approvals issued by the DOH for the requisite number of units; (b) a valid
license to provide assisted living services; (c) a valid registration of the
Property with the DOH or other appropriate Governmental Authority for its
Permitted Use; and (d) approved provider status in any approved provider payment
program (collectively, the "Licenses"), have been (or will be upon Substantial
Completion) obtained and are in full force and effect, except for Licenses that
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cannot yet be obtained because the Required Improvements have not been
completed. The use (if any) being made of the Property is in conformity with the
certificate of occupancy (if any) issued or to be issued for the Property.
4.2.23 Flood Zone. Except as indicated on the Survey, none of
the Improvements is or will be located in an area as identified by the Federal
Emergency Management Agency as an area having special flood hazards.
4.2.24 Physical Condition. The Property is in good condition,
order and repair in all material respects; there exists no structural or other
material defect or damage to the Property, whether latent or otherwise. Manager
has not received notice from any insurance company or bonding company of any
defect or inadequacy in the Property, or any part thereof, which would adversely
affect its insurability or cause the imposition of extraordinary premiums or
charges thereon or any termination of any policy of insurance or bond.
4.2.25 Encroachments. Except as indicated in the Survey, the
Improvements (if any) existing on the date hereof lie wholly within the
boundaries and building restriction lines of the Property, and no improvement on
an adjoining property encroaches upon the Property, and no easement or other
encumbrance upon the Property encroaches or will encroach upon any of the
Improvements, so as to adversely affect the value or marketability of the
Property, except those insured against by the Title Insurance Policy.
4.2.26 Leases. Attached hereto as Schedule 4 is a true,
correct and complete rent roll for the Property (the "Rent Roll"), which
includes all Leases affecting the Property. Each residential Lease for the
Property has been entered into on the Approved Residency Agreement. Except as
disclosed in the Rent Roll: (i) each Lease is in full force and effect; (ii)
there are no offsets, claims or defenses to the enforcement thereof; (iii) all
rents due and payable under the Leases have been paid and no portion thereof has
been paid for any period more than thirty (30) days in advance except for
security deposits; (iv) the rent payable under each Lease is the amount of fixed
rent set forth in the Rent Roll, and there is no claim or basis for a claim by
the tenant thereunder for an adjustment to the rent; (v) no tenant has made any
claim against the landlord under the Leases which remains outstanding, there are
no material defaults on the part of the landlord under any Lease, and no event
has occurred which, with the giving of notice or passage of time, or both, would
constitute such a material default; (vi) to Manager's best knowledge, there is
no present material default by the tenant under any Lease; and (vii) Manager
does not hold any other security deposits under the Leases. None of the Leases
contains any option to purchase or right of first refusal to purchase the
Property or any part thereof. Neither the Leases nor the Rents have been
assigned or pledged except to Lender, and no other Person has any interest
therein except the tenants thereunder.
4.2.27 Filing and Recording Taxes. All transfer taxes, deed
stamps, intangible taxes or other amounts in the nature of transfer taxes
required to be paid by any Person under applicable Legal Requirements in
connection with the transfer of the Property to Borrower have been paid. All
mortgage, mortgage recording, stamp, intangible or other similar taxes required
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to be paid by any Person under applicable Legal Requirements in connection with
the execution, delivery, recordation, filing, registration, perfection or
enforcement of any of the Loan Documents have been paid or will be paid when due
and payable.
4.2.28 Investment Company Act. Manager is not (i) an
"investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended; (ii) a
"holding company" or a "subsidiary company" of a "holding company" or an
"affiliate" of either a "holding company" or a "subsidiary company" within the
meaning of the Public Utility Holding Company Act of 1935, as amended; or (iii)
subject to any other federal or state law or regulation which purports to
restrict or regulate its ability to borrow money.
4.2.29 Ownership of Manager. Manager Sponsor is the owner of
all of the issued and outstanding capital stock of the Manager, all of which
capital stock has been validly issued and fully paid and is nonassessable. The
stock of the Manager and the ownership interests in Manager are owned free and
clear of all Liens, warrants, options and rights to purchase. Manager has no
obligation to any Person to purchase, repurchase or issue any ownership interest
in it.
4.2.30 Management Agreement. The Management Agreement existing
on the Loan Closing Date with respect to the Property is in full force and
effect and is not in default by any party thereto. The term of the Management
Agreement does not extend beyond the Optional Prepayment Date. In the event the
Management Agreement is terminated or in the event of foreclosure or other
acquisition of the Property by Lender, under applicable Legal Requirements none
of Borrower, Lender, Manager, or any subsequent purchaser is required to obtain
a CON (or similar certificate, license, or approval issued by the DOH for the
requisite number of units, and approval provider status in any approved provider
payment program) prior to applying for and receiving a license to operate the
Property as the Property is operated prior to any such termination, foreclosure
or acquisition.
4.2.31 Hazardous Substances. To the best of Manager's
knowledge after due investigation except as disclosed in the Environmental
Reports, (i) the Property is not in violation of any Legal Requirement
pertaining to or imposing liability or standards of conduct concerning
environmental regulation, contamination or clean-up, including the Comprehensive
Environmental Response, Compensation and Liability Act, the Resource
Conservation and Recovery Act, the Emergency Planning and Community
Right-to-Know Act of 1986, the Hazardous Substances Transportation Act, the
Solid Waste Disposal Act, the Clean Water Act, the Clean Air Act, the Toxic
Substance Control Act, the Safe Drinking Water Act, the Occupational Safety and
Health Act, any state super-lien and environmental clean-up statutes and all
amendments to and regulations in respect of the foregoing laws (collectively,
"Environmental Laws"); (ii) the Property is not subject to any private or
governmental Lien or judicial or administrative notice or action or inquiry,
investigation or claim relating to hazardous, toxic, dangerous and/or regulated
substances, wastes, materials, raw materials which include hazardous
constituents, pollutants or contaminants, including asbestos, asbestos
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containing materials, petroleum, tremolite, anthlophylite, actinolite,
polychlorinated biphenyls and any other substances or materials which are
included under or regulated by Environmental Laws or which are considered by
scientific opinion to be otherwise dangerous in terms of the health, safety and
welfare of humans (collectively, "Hazardous Substances"); (iii) no Hazardous
Substances are or have been (including the period prior to Borrower's
acquisition of the Property), discharged, generated, treated, disposed of or
stored on, incorporated in, or removed or transported from the Property other
than in compliance with all Environmental Laws; (iv) no Hazardous Substances are
present in, on or under any nearby real property which could migrate to or
otherwise affect the Property; and (v) no underground storage tanks exist on the
Property.
4.2.32 Name; Principal Place of Business. Manager does not use
and will not use any trade name and has not done and will not do business under
any name other than its actual name set forth herein unless Manager provides
Lender with thirty (30) days prior written notice; provided, however, that the
Property is operated under the name "The Heritage". The principal place of
business of Manager is c/o Brookdale Living Communities, Inc., 77 West Wacker
Drive, Suite 4400, Chicago, Illinois 60601.
4.2.33 Other Debt and Obligations. Manager has no financial
obligation under any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which Manager is a party, except in connection with
this Agreement, or by which Manager or the Property is bound, other than (i)
Construction Documents, (ii) the Management Agreement and the Development
Agreement, (iii) unsecured trade payables incurred in the ordinary course of
business relating to the ownership and operation of the Property and financing
of Equipment or vehicles used in the ordinary course of business relating to the
ownership and operation of the Property which do not exceed, at any time, a
maximum amount of one percent (1%) of the Loan and are paid within ninety (90)
days of the date incurred, and other than obligations under the Mortgage and the
other Loan Documents. Manager has not borrowed or received other debt financing
that has not been heretofore repaid in full and Manager has no known material
contingent liabilities.
4.2.34 Fraudulent Transfer; Solvency. Manager (i) has not
entered into this Loan Agreement or any Loan Document with the actual intent to
hinder, delay, or defraud any creditor, and (ii) to Manager's knowledge has
received reasonably equivalent value in exchange for its obligations under the
Loan Documents. Manager's assets do not and, immediately following the execution
and delivery of this Agreement, will not, constitute unreasonably small capital
to carry out its business as conducted or as proposed to be conducted. Manager
does not intend to, and does not believe that it will, incur debts and
liabilities (including, Obligations and other commitments) beyond its ability to
pay such debts as they mature (taking into account the timing and amounts to be
payable on or in respect of obligations of Manager). Giving effect to the
transactions contemplated hereby, the fair saleable value of Borrower's assets
exceeds and will, immediately following the execution and delivery of this
Agreement, exceed Borrower's total liabilities, including, subordinated,
unliquidated, or disputed liabilities or Obligations. The fair saleable value of
Borrower's
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assets (based on completed construction of the Improvements) is and will,
immediately following the execution and delivery of this Agreement, be greater
than Borrower's probable liabilities, including the maximum amount of its
Obligations or its debts as such debts become absolute and matured.
4.2.35 No Defaults. No Default or Event of Default exists
under or with respect to any Loan Document.
4.2.36 Labor Matters. Manager is not a party to any collective bargaining
agreements.
4.2.37 No Prior Assignment. As of the Loan Closing Date, (i)
Lender is the assignee of Manager's interest under the Leases, and (ii) there
are no prior assignments of such Leases or any portion of the Rent due and
payable with respect to such Leases or to become due and payable which are
presently outstanding.
4.2.38 Intellectual Property. All trademarks, trade names and
service marks that Manager owns or has pending, or under which it is licensed,
are in good standing and uncontested. There is no trademark, trade name or
service mark necessary to the business of Manager as presently conducted or as
Manager contemplates conducting its business. To Manager's knowledge, Manager
has not infringed, is not infringing, and has not received notice of
infringement with respect to asserted trademarks, trade names and service marks
of others. To Manager's knowledge, there is no infringement by others of
trademarks, trade names and service marks of Manager.
4.2.39 Title Insurance. The Property is covered by either an
American Land Title Association (ALTA) mortgagee's title insurance policy, or a
commitment to issue such a title insurance policy, insuring the valid first lien
of the Mortgage on the Property, which is in full force and effect and is freely
assignable to and will inure to the benefit of Lender and any successor or
assignee of Lender, including but not limited to the trustee in a
Securitization, subject only to the Permitted Encumbrances and either an
American Land Title Association (ALTA) mortgagee's title insurance policy, or a
commitment to issue such a title insurance policy, insuring the valid second
lien of the Subordinate Mortgage on the Property, which is in full force and
effect and is freely assignable to and will inure to the benefit of Lender and
any successor or assignee of Lender, including but not limited to the trustee in
a Securitization, subject only to the Permitted Encumbrances and the Lien of the
Mortgage.
4.2.40 Tax Fair Market Value. The Loan with respect to the
Property does not exceed the Tax Fair Market Value of the Property. If a Note
with respect to the Property is significantly modified prior to the closing date
of a Securitization so as to result in a taxable exchange under Code Section
1001, Borrower will, if requested by Lender, represent that the amount of such
Note does not exceed the Tax Fair Market Value of the Property as of the date of
such significant modification.
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4.2.41 Brokerage. Manager has dealt with no brokers or
"finders" in connection with the Loan, and no brokerage or "finders" fees or
commissions are payable by or to any Person, in connection with this Agreement
or the Loan to be disbursed hereunder.
4.2.42 Ownership of Licenses. The Licenses in existence as of
the date hereof (and in any case, all Licenses must be in existence no later
than the Substantial Completion Date), including without limitation, each, if
any, CON or COE:
(i) may not be, and have not been, transferred to any location other than
the Property for which such Licenses were originally issued;
(ii) have not been pledged as collateral security for any other loan or
indebtedness;
(iii) are held free from restrictions or known conflicts which would
materially impair the use or operation of the Property as intended, and are not
provisional, probationary or restricted in any way or, if any are provisional,
probationary or restricted in any way, Manager (and Borrower, if necessary)
shall do all things necessary and required to satisfy such provisions,
probations or restrictions; and
(iv) have at all applicable times been, and are, in full force and effect.
4.2.43 Intentionally deleted.
4.2.44 Intentionally deleted.
4.2.45 Governmental Proceedings and Notices. Neither Manager
nor the Property, nor to Manager's knowledge, Borrower, is currently the subject
of any proceeding by any Governmental Authority, and no notice of any violation
has been received from a Governmental Authority that would, directly or
indirectly, or with the passage of time: (i) affect Borrower's or Manager's
ability to accept and/or retain residents or result in the imposition of a fine,
a sanction, a lower rate certification or a lower reimbursement rate for
services rendered to eligible residents; (ii) modify, limit or annul or result
in the transfer, suspension, revocation or imposition of probationary use on any
License; (iii) Intentionally deleted.
4.2.46 Physical Plant Standards. The Property and the use
thereof comply in all respects with all applicable Legal Requirements, local,
state and federal building codes, fire codes, health care, and other similar
regulatory requirements (the "Physical Plant Standards") and no waivers of
Physical Plant Standards exist at the Property.
4.2.47 Past Violations. There is no pending uncured "Level A" (or
equivalent) violation at the Property. The Property is in, or upon Substantial
Completion shall be in,
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material compliance with all local, federal and state laws and regulations
relating to, as applicable, congregate care and assisted living facilities and
no statement of charges or deficiencies has been made or penalty enforcement
action has been undertaken against the Property, Manager, or any partner,
member, officer, director or stockholder of Manager, or to Manager's knowledge
to Borrower or any partner, member, officer, director or stockholder of
Borrower, by any Governmental Authority.
4.2.48 Intentionally Deleted.
4.2.49 Intentionally Deleted.
4.2.50 Pledges of Receivables. Manager has not pledged its
receivables as collateral security for any other loan or indebtedness.
4.2.51 Resident Records. To the best of Manager's knowledge,
all resident records at the Property are true, complete and correct in all
material respects. From and after the date hereof, all resident records at the
Property shall be maintained in accordance with all applicable Legal
Requirements, including with respect to retention and confidentiality.
4.3 Survival of Representations. Each of Borrower and Manager
agrees that all of the representations and warranties in Section 4.1 and Section
4.2 and elsewhere in the Loan Documents (i) are made as of the Loan Closing
Date, (ii) shall survive the delivery of the Note and continue for so long as
any portion of the Debt remains owing to Lender, provided, however, that the
representations, warranties and covenants set forth in Section 4.2.31, and
Section 5.2.10 , shall survive in perpetuity and shall not be subject to the
exculpation provisions of Section 10.1, and (iii) shall be deemed to have been
relied upon by Lender notwithstanding any investigation heretofore or hereafter
made by Lender or on its behalf. Notwithstanding anything set forth in this
Agreement to the contrary, if at anytime during the term of this Loan any
applicable federal, state or local agency enacts any laws or regulations or
permits the accreditation and certification of the Permitted Use, such that
Borrower or Manager elects to enter into a participation or provider agreement
with any third party payor programs (including Medicare, Medicaid, Blue Cross
and/or Blue Shield or any other private commercial insurance managed care and
employee assistant program) (such programs the "Third Party Payors Programs") to
permit the Permitted Use to participate in their programs, Borrower and Manager
agree to execute amendments of this Agreement and the other Loan Documents as
are consistent with the requirements of loans extended by Lender the source of
payment of which includes payments from Third Party Payers' Programs, Medicare
or Medicaid and shall include such standard representations, consents and
warranties as are consistent with the foregoing.
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V. AFFIRMATIVE COVENANTS
5.1 Borrower's Covenants. Until the end of the Term or the
Defeasance of the entire unpaid Principal, Borrower hereby covenants and agrees
with Lender that:
5.1.1 Existence. Borrower shall (i) do or cause to be done all
things necessary to preserve, renew and keep in full force and effect its
existence, rights, and franchises, (ii) continue to engage in the business
presently conducted by it, (iii) obtain and maintain all Licenses, and (iv)
qualify to do business and remain in good standing under the laws of each
jurisdiction, in each case as and to the extent required for the ownership,
development, maintenance, management and operation of the Property. Borrower
shall notify Lender promptly of any written notice or order that Borrower
receives from any Governmental Authority relating to Borrower's failure to
comply with any applicable Legal Requirements relating to the Property and
promptly take any and all actions necessary to bring itself and its operations
at the Property into compliance in all material respects with such applicable
Legal Requirements (and shall comply in all material respects with the
requirements of such Legal Requirements that at any time are applicable to its
operations at the Property). Borrower shall have the right to contest same
provided it complies with the Contest Procedures.
5.1.2 Taxes and Other Charges. Borrower shall pay or cause to
be paid all Taxes and Other Charges as the same become due and payable, and
deliver to Lender receipts for payment or other evidence satisfactory to Lender
that the Taxes and Other Charges have been so paid no later than thirty (30)
days before they would be delinquent if not paid (provided, however, that
Borrower need not furnish such receipts for payment of Taxes paid by Lender
pursuant to Section 3.2). Borrower shall not suffer and shall promptly cause to
be paid and discharged any Lien against the Property, and shall promptly pay for
all utility services provided to the Property. After prior notice to Lender,
Borrower, at its own expense, may contest by appropriate legal proceeding,
promptly initiated and conducted in good faith and with due diligence, the
amount or validity or application of any Taxes or Other Charges, provided that
(i) no Default or Event of Default has occurred and remains uncured, (ii) such
proceeding shall suspend the collection of the Taxes or Other Charges, (iii)
such proceeding shall be permitted under and be conducted in accordance with the
provisions of any other instrument to which Borrower is subject and shall not
constitute a default thereunder, (iv) no part of or interest in the Property
will be in danger of being sold, forfeited, terminated, canceled or lost, if the
Borrower pays the amount or satisfies the condition being contested, and the
Borrower would have the opportunity to do so, in the event of the Borrower's
failure to prevail in the contest, (v) Lender would not, by virtue of such
permitted contest, be exposed to any risk of any civil liability for which the
Borrower has not furnished additional security as provided in clause (vi) below,
or to any risk of criminal liability, and neither the Property nor any interest
therein would be subject to the imposition of any lien for which the Borrower
has not furnished additional security as provided in clause (vi) below, as a
result of the failure to comply with such law or of such proceeding, (vi)
Borrower shall have furnished such security as may be required in the
proceeding, or as may be reasonably requested by Lender, to insure the payment
of any such Taxes or Other Charges, together with all interest and penalties
thereon, but in no amount less
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than one hundred and twenty-five percent (125%) of the amount of such claims,
and (vii) Borrower shall promptly upon final determination thereof pay the
amount of Taxes or Other Charges determined to be due and payable, together with
all costs, interest and penalties. Lender may pay over any such cash deposit or
part thereof held by Lender to the claimant entitled thereto at any time when,
in the reasonable judgment of Lender, the entitlement of such claimant is
established.
5.1.3 Repairs; Maintenance and Compliance. Borrower shall
cause the Property to be maintained in a good and safe condition and repair and
shall not remove, demolish or materially alter the Improvements or Equipment
(except for the construction of the Required Improvements in accordance with the
BLA and normal replacement of the Equipment or restoration pursuant to Section
7.2 herein). Borrower shall promptly comply with all Legal Requirements and
commence and diligently continue to cure properly any violation of a Legal
Requirement which materially and adversely affects the financial condition of
the Property or the ability of Borrower to conduct its business, within thirty
(30) days after Borrower receives notice of such violation, provided that
Borrower shall have the right to contest same if it complies with the Contest
Procedures. Borrower shall, in a good and workmanlike manner using materials of
a quality at least equal to that originally installed at the Property, promptly
repair, replace or rebuild any part of the Property that becomes damaged
(subject to Section 7.2 herein), worn or dilapidated and shall complete and pay
for any Improvements at any time in the process of construction or repair.
Borrower may perform alterations without obtaining Lender's consent for
alterations which (i) are required under the BLA, (ii) do not alter the
footprint of the Property, (iii) do not change the number of units, (iv) are
contemplated in the Annual Budget approved by Lender, or (v) which do not
otherwise constitute material renovations.
5.1.4 Litigation. Borrower shall give prompt written notice to
Lender of any litigation or governmental proceedings pending or threatened
against Borrower which might reasonably likely materially adversely affect
Borrower's condition (financial or otherwise) or business or the Property.
5.1.5 Performance of Other Agreements. Borrower shall observe
and perform each and every term, provision, covenant and condition to be
observed or performed by it pursuant to the terms of any material agreement or
recorded instrument affecting or pertaining to the Property.
5.1.6 Notice of Default. Borrower shall promptly advise Lender
of any material adverse change in Borrower's condition, financial or otherwise,
or of the occurrence of any Default or Event of Default of which Borrower has
knowledge.
5.1.7 Cooperate in Legal Proceedings. Borrower shall cooperate
fully with Lender with respect to, and permit Lender, at its option, to
participate in, any proceedings before any Governmental Authority which may in
any way affect the rights of Lender under any Loan Document and, in connection
therewith, not prohibit Lender, at its election, from participating in any such
proceedings.
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5.1.8 Further Assurances. Borrower shall, at Borrower's sole
cost and expense (except in connection with the transfer of the Loan or the
interest therein by Lender pursuant to a Securitization, the cost of which shall
be provided for as set forth in Section 9 herein or a Syndication pursuant to
the BLA), (i) furnish to Lender, provided Lender reasonably determines that the
Property or any of its other collateral will be materially adversely affected,
all instruments, documents, boundary surveys, footing or foundation surveys,
certificates, plans and specifications, appraisals, title and other insurance
reports and agreements, and each and every other document, certificate,
agreement, and instrument reasonably requested by Lender pursuant to the terms
of the Loan Documents; (ii) execute and deliver to Lender such documents,
instruments, certificates, assignments and other writings, and do such other
acts necessary or desirable, to evidence, preserve and/or protect the collateral
at any time securing or intended to secure the Debt, as Lender may reasonably
require pursuant to the terms of the Loan Documents; (iii) do and execute all
and such further lawful and reasonable acts, conveyances and assurances for the
better and more effective carrying out of the intents and purposes of the Loan
Documents, as Lender shall reasonably require from time to time, (iv) after the
occurrence and during the continuance of an Event of Default, furnish reports of
UCC, federal tax lien, state tax lien, judgment and pending litigation searches
with respect to Borrower as Lender shall reasonably require and (v) after the
occurrence and during the continuance of an Event of Default, furnish searches
of title to the Property, designated by Lender in each of the locations
reasonably designated by Lender.
5.1.9 Financial Reporting.
(a) Bookkeeping. Borrower shall keep and maintain or shall
cause to be kept and maintained on a Fiscal Year basis, in accordance with GAAP,
books, records and accounts reflecting in reasonable detail all of the financial
affairs of Borrower and all items of income and expense in connection with the
development and ownership of the Property. Lender, at Lender's cost and expense,
shall have the right from time to time and at all times during normal business
hours upon reasonable prior written notice to Borrower to examine such books,
records and accounts at the office of Borrower, Manager or such other Person
maintaining such books, records and accounts and to make such copies or extracts
thereof as Lender shall desire. After the occurrence of an Event of Default with
respect to the Property, Borrower shall pay any costs and expenses incurred by
Lender during the continuance of such Event of Default to examine any and all of
Borrower's, the Manager's or any other Person's books, records and accounts as
Lender shall determine in Lender's reasonable discretion to be necessary or
appropriate in the protection of Lender's interest.
(b) Annual Reports. From and after the Substantial Completion
Date, Borrower shall furnish or shall cause to be furnished to Lender annually
within forty (40) days following the end of each Fiscal Year, true, complete and
correct copies of Borrower's statement of operations (profit and loss),
statement of cash flows, a calculation of Net Operating Income, and such other
information or reports as shall be reasonably requested by Lender or any
applicable Rating Agency which shall (a) be in form and substance acceptable to
Lender in Lender's reasonable discretion, (b) be prepared in accordance with
GAAP, and
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(c) be accompanied by an Officer's Certificate from a senior executive of the
Borrower Representative on behalf of Borrower or from a senior executive of
Manager certifying as of the date thereof that to such executive's knowledge
based entirely on information received from or prepared by Manager (x) that such
statement is true, correct, complete and accurate and fairly reflects the
results of operations and financial condition of Borrower for the relevant
period, and (y) notice of whether to the knowledge of Borrower or Manager, as
the case may be, there exists an Event of Default, and if such Event of Default
exists, the nature thereof, the period of time it has existed and the action
then being taken to remedy same.
(c) Other Reports. (i) Borrower shall, concurrently with
Borrower's delivery to Lender, provide or shall be provided by Manager a copy of
the items required to be delivered to Lender under this Section 5.1.9 to the
Rating Agencies and any servicer and/or special servicer that may be retained in
conjunction with the Loan, any Securitization or any Syndication. Borrower shall
furnish to Lender written notice, within ten (10) Business Days after receipt by
Borrower, of any Rents, Money or other items of Gross Revenue that Borrower is
not required by this Agreement to deposit in the Clearing Account or is
permitted to retain, the Deposit Account or the Security Deposit Accounts,
together with such other documents and materials relating to such Rents, Money
or other items of Gross Revenue as Lender requests in Lender's reasonable
discretion.
(ii) Borrower shall furnish to Lender such other
financial information with respect to Borrower as Lender may reasonably
request (including, without limitation, in the case of a defeasance
pursuant to Section 2.3.3, a review by a third party acceptable to
Lender, of the calculations required to be made pursuant to Section
2.3.3).
(d) Intentionally deleted.
5.1.10 Environmental Matters.
(a) Hazardous Substances. So long as Borrower owns or is in
possession of the Property, except as disclosed in the Environmental Reports,
Borrower (i) shall keep the Property free from Hazardous Substances (except for
nominal amounts of any such substances commonly incorporated in or used in the
operation of properties similar to the Property, in either case in compliance
with all Environmental Laws) and in compliance with all Environmental Laws, (ii)
shall promptly notify Lender if Borrower shall become aware that (A) any
Hazardous Substance is on or near the Property, (B) the Property is in direct or
indirect violation of any Environmental Laws or (C) any condition relating to
Hazardous Substances on or near the Property shall pose a threat to the health,
safety or welfare of humans, (iii) shall remove or cause the removal of such
Hazardous Substances and/or cure such violations and/or remove such threats, as
applicable, as required by law (or as shall be required by Lender in the case of
removal which is not required by law, but in response to the opinion of an
independent licensed hydrogeologist, licensed environmental engineer or other
qualified environmental consultant engaged by Lender ("Lender's Consultant")),
promptly after Borrower becomes aware of same,
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at Borrower's sole expense and (iv) shall comply with all of the recommendations
contained in the Environmental Report delivered to Lender in connection with the
origination of the Loan. Nothing herein shall prevent Borrower from recovering
such expenses from any other party that may be liable for such removal or cure.
(b) Environmental Monitoring. Borrower shall give prompt
written notice to Lender of (i) any proceeding or inquiry by any party with
respect to the presence of any Hazardous Substance on, under, from or about the
Property, (ii) all claims made or threatened by any third party against Borrower
or the Property relating to any loss or injury resulting from any Hazardous
Substance, and (iii) Borrower's discovery of any occurrence or condition on any
real property adjoining or in the vicinity of the Property that could reasonably
be expected to cause the Property to be subject to any investigation or cleanup
pursuant to any Environmental Law. Borrower shall permit Lender to join and
participate in, as a party if it so elects, any legal proceedings or actions
initiated with respect to the Property in connection with any Environmental Law
or Hazardous Substance, and Borrower shall pay all reasonable attorneys' fees
and disbursements incurred by Lender in connection therewith. Upon Lender's
reasonable request, at any time and from time to time when Lender has reason to
believe that Hazardous Substances are present on or under the Property in
violation of Environmental Laws, Borrower shall provide an inspection or audit
of the Property prepared by a licensed hydrogeologist, licensed environmental
engineer or qualified environmental consulting firm reasonably approved by
Lender indicating the presence or absence of Hazardous Substances on, in or near
the Property. The cost and expense of such audit or inspection shall be paid by
Borrower not more frequently than once every five (5) calendar years after the
occurrence of a Securitization, unless Lender, in its good faith judgment,
determines that reasonable cause exists for the performance of an environmental
inspection or audit of the Property, in which case such inspections or audits
shall be at Borrower's sole expense. If Borrower fails to provide any such
inspection or audit within thirty (30) days after such request, Lender may order
same, and Borrower hereby grants to Lender and its employees and agents access
to the Property and a license to undertake such inspection or audit. The cost of
such inspection or audit may be added to the Debt and shall bear interest
thereafter at the Default Rate until paid. If any environmental site assessment
report prepared in connection with such inspection or audit recommends that an
operations and maintenance plan be implemented for any Hazardous Substance,
Borrower shall cause such operations and maintenance plan to be prepared and
implemented at its expense upon request of Lender. In the event that any
investigation, site monitoring, containment, cleanup, removal, restoration or
other work of any kind is reasonably necessary or required under an applicable
Environmental Law ("Remedial Work"), Borrower shall commence and thereafter
diligently prosecute to completion all such Remedial Work within thirty (30)
days after written demand by Lender for performance thereof (or such shorter
period of time as may be required under applicable law). All Remedial Work shall
be performed by contractors reasonably approved in advance by Lender, and under
the supervision of a consulting engineer reasonably approved by Lender. All
costs of such Remedial Work shall be paid by Borrower, including Lender's
reasonable attorneys' fees and disbursements incurred in connection with the
monitoring or review of such Remedial Work. Borrower will not install or permit
to be installed on the Property any underground storage tank.
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5.1.11 Title to the Property. Borrower will warrant and defend
the title to the Property, and the validity and priority of the Lien of the
Mortgage and the Subordinate Mortgage, subject only to Permitted Encumbrances,
against the claims of all Persons except Lender.
5.1.12 Estoppel Statement. After request by either Borrower or
Lender, the other party shall within fifteen (15) Business Days furnish the
requesting party with a statement, subject to the exculpation provisions
contained in Section 10.1 hereof, duly acknowledged and certified, setting forth
(i) the unpaid Principal, (ii) the Interest Rate, (iii) the date installments of
interest and/or Principal were last paid, (iv) any offsets or defenses to the
payment of the Debt, and (v) that the Loan Documents are valid, legal and
binding obligations and have not been modified or if modified, giving
particulars of such modification. After request by Lender (but no more
frequently than twice in any year), Borrower shall furnish to Lender within ten
(10) days, a certificate, subject to the exculpation provisions contained in
Section 10.1 hereof, reaffirming all representations and warranties of Borrower
set forth in the Loan Documents as of the date requested by Lender or, to the
extent of any changes to any such representations and warranties, so stating
such changes.
5.1.13 Principal Place of Business. Borrower shall not change
its principal place of business without first giving Lender thirty (30) days
prior notice.
5.1.14 Property Management.
(a) Management Agreement. Borrower shall (i) cause the
Property to be operated pursuant to the Management Agreement; (ii) promptly
perform and observe all of the covenants required to be performed and observed
by it under the Management Agreement and do all things necessary to preserve and
to keep unimpaired its material rights thereunder; (iii) promptly notify Lender
of any default under the Management Agreement of which it is aware; (iv)
promptly deliver to Lender a copy of each financial statement, business plan,
capital expenditure plan, and property improvement plan and any other notice,
report and estimate received by Borrower under the Management Agreement; and (v)
promptly enforce the performance and observance of all of the material covenants
required to be performed and observed by Manager under the Management Agreement.
(b) Termination of Manager. After the Conversion Date,
Borrower shall achieve, and, within thirty (30) days after the end of each
calendar month provide evidence to Lender of the achievement of (a) a Debt
Service Coverage Ratio of not less than 1.10x and (b) Net Operating Income on a
trailing twelve (12) month basis of not less than eighty-five percent (85%) of
the Net Operating Income as of the Conversion Date. If either of the
aforementioned is not maintained, Lender shall have the right to terminate the
Management Agreement unless Borrower shall defease a portion of the unpaid
Principal to a level such that the Debt Service Coverage Ratio on the undefeased
portion of the unpaid Principal is restored to a level of not less than 1.20x.
All calculations of Debt Service Coverage Ratio for purposes of this Section
5.1.14 shall be subject to verification by Lender. If Borrower fails to comply
with this Sec tion 5.1.14, or if an Event of Default shall be continuing,
Borrower shall, at the request of Lender, terminate the Management Agreement and
replace the Manager with a manager reasonably approved by Lender on terms and
conditions reasonably satisfactory to Lender.
5.1.15 Special Purpose Bankruptcy Remote Entity. Borrower
shall continue to be a Special Purpose Bankruptcy Remote Entity. A "Special
Purpose Bankruptcy Remote Entity" means a corporation, limited partnership or
limited liability company which at all times since its formation and at all
times thereafter (i) was and will be organized solely for the purpose of (x)
owning, operating, or managing the Property or (y) acting as the managing member
of the limited liability company which owns, operates or manages the Property or
(z) acting as the general partner of a limited partnership which owns, operates,
or manages the Property, (ii) has not and will not engage in any business
unrelated to (x) the ownership, operation, or management of the Property or (y)
acting as a member of a limited liability company which owns, operates, or
manages the Property or (z) acting as a general partner of a limited partnership
which owns, operates, or manages the Property, (iii) has not and will not have
any assets other than (x) those related to the Property or (y) its member
interest in the limited liability company which owns, operates, or manages the
Property or (z) its general partnership interest in the limited partnership
which owns, operates, or manages the Property as applicable, (iv) has not and
will not engage in, seek or consent to any dissolution, winding up, liquidation,
consolidation or merger, and, except as otherwise expressly permitted by this
Agreement, has not and will not engage in, seek or consent to any asset sale,
transfer of partnership or membership or shareholder interests, or amendment of
its limited partnership agreement, articles of incorporation, articles of
organization, certificate of formation or operating agreement (as applicable),
(v) if such entity is a limited partnership, has and will have as its only
general partners, general partners which are and will be Special Purpose
Bankruptcy Remote Entities which are corporations, (vi) if such entity is a
corporation, at all relevant times, has and will have at least one Independent
Director, (vii) the board of directors of such entity has not taken and will not
take any action requiring the unanimous affirmative vote of 100% of the members
of the board of directors unless all of the directors, including without
limitation all Independent Directors, shall have participated in such vote,
(viii) has not and will not fail to correct any known misunderstanding regarding
the separate identity of such entity, (ix) if such entity is a limited liability
company, has and will have at least one member that is and will be a Special
Purpose Bankruptcy Remote Entity which is and will be a corporation, and such
corporation is and will be the managing member of such limited liability
company, (x) without the unanimous consent of all of the partners, directors
(including without limitation all Independent Directors) or members, as
applicable, has not and will not with respect to itself or to any other entity
in which it has a direct or indirect legal or beneficial ownership interest (a)
file a bankruptcy, insolvency or reorganization petition or otherwise institute
insolvency proceedings or otherwise seek any relief under any laws relating to
the relief from debts or the protection of debtors generally; (b) seek or
consent to the appointment of a receiver, liquidator, assignee, trustee,
sequestrator, custodian or any similar official for such entity or all or any
portion of such entity's properties; (c) make any assignment for the benefit of
such entity's creditors; or (d) take any action that might cause such entity to
become insolvent, (xi) has maintained and will maintain its accounts, books and
records separate from any other person or entity, (xii) has maintained and
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will maintain its books, records, resolutions and agreements as official
records, (xiii) has not commingled and will not commingle its funds or assets
with those of any other entity, (xiv) has held and will hold its assets in its
own name, (xv) has conducted and will conduct its business in its name; (xvi)
has maintained and will maintain its financial statements, accounting records
and other entity documents separate from any other person or entity, (xvii) has
paid and will pay its own liabilities out of its own funds and assets, (xviii)
has observed and will observe all partnership, corporate or limited liability
company formalities as applicable, (xix) has maintained and will maintain an
arms-length relationship with its affiliates, (xx) (a) if such entity owns the
Property has and will have no indebtedness other than the Debt, amounts owing
under the Development Agreement, and the Management Agreement, and unsecured
trade payables in the ordinary course of business relating to the ownership and
operation of the Property which (1) do not exceed, at any time, a maximum amount
of one percent (1%) of the Loan and (2) are paid within ninety (90) days of the
date incurred, or (b) if such entity acts as the general partner of a limited
partnership which owns the Property, has and will have no indebtedness other
than unsecured trade payables in the ordinary course of business relating to
acting as general partner of the limited partnership which owns the Property
which (1) do not exceed, at any time, $10,000 and (2) are paid within ninety
(90) days of the date incurred, or (c) if such entity acts as a member of a
limited liability company which owns the Property has and will have no
indebtedness other than unsecured trade payables in the ordinary course of
business relating to acting as a member of the limited liability company which
owns the Property which (1) do not exceed, at any time, $10,000 and (2) are paid
within ninety (90) days of the date incurred, (xxi) has not and will not assume
or guarantee or become obligated for the debts of any other entity or hold out
its credit as being available to satisfy the obligations of any other entity
except for the Indebtedness and any Other Loan made pursuant to the Master
Financing Facility Agreement, (xxii) has not acquired and will not acquire
obligations or securities of its partners, members or shareholders, (xxiii) has
allocated and will allocate fairly and reasonably shared expenses, including,
shared office space and uses separate stationary, invoices and checks, (xxiv)
except pursuant hereto, has not and will not pledge its assets for the benefit
of any other person or entity, (xxv) has held and identified itself and will
hold itself out and identify itself as a separate and distinct entity under its
own name and not as a division or part of any other person or entity, (xxvi) has
not made and will not make loans to any person or entity, (xxvii) has not and
will not identify its partners, members or shareholders, or any affiliates of
any of them as a division or part of it, (xxviii) if such entity is a limited
liability company, such entity shall dissolve only upon the bankruptcy of the
managing member, and such entity's articles of organization, certificate of
formation and/or operating agreement, as applicable, shall contain such
provision, (xxix) has not entered and will not enter into or be a party to, any
transaction with its partners, members, shareholders or its affiliates except in
the ordinary course of its business and on terms which are intrinsically fair
and are no less favorable to it than would be obtained in a comparable
arms-length transaction with an unrelated third party, (xxx) has paid and will
pay the salaries of its own employees from its own funds, (xxxi) has maintained
and will maintain adequate capital in light of its contemplated business
operations and (xxxii) if such entity is a limited liability company or limited
partnership, and such entity has one or more managing members or general
partners, as applicable, then such entity shall continue (and not
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dissolve) for so long as a solvent managing member or general partner, as
applicable, exists and such entity's organizational documents shall contain such
provision.
5.1.16 Assumptions in Non-Consolidation Opinion. Borrower and
the Borrower Representative shall conduct their business so that the assumptions
made in that certain substantive non-consolidation opinion letter dated as of
the date hereof, delivered by Borrower's counsel in connection with the Loan,
shall be true and correct in all respects.
5.1.17 Expenses. Borrower shall reimburse Lender upon receipt
of notice for all reasonable out-of-pocket costs and expenses (including
reasonable attorneys' fees and disbursements) incurred by Lender in connection
with the Loan subject to any limitations set forth herein, including (i) the
preparation, negotiation, execution and delivery of the Loan Documents and the
consummation of the transactions contemplated thereby and all the costs of
furnishing all opinions by counsel for Borrower; (ii) Borrower's and Lender's
ongoing performance under and compliance with the Loan Documents, including
confirming compliance with environmental and insurance requirements, in excess
of the Servicing Fee; (iii) the negotiation, preparation, execution, delivery
and administration of any consents, amendments, waivers or other modifications
of or under any Loan Document and any other documents or matters requested by
Borrower or Manager; (iv) filing and recording of any Loan Documents; (v) title
insurance, surveys, inspections and appraisals; (vi) enforcing or preserving any
rights, in response to third party claims or the prosecuting or defending of any
action or proceeding or other litigation, in each case against, under or
affecting Borrower, the Loan Documents, the Property, or any other security
given for the Loan; and (vii) enforcing any obligations of or collecting any
payments due from Borrower under any Loan Document or with respect to the
Property or in connection with any refinancing or restructuring of the Loan in
the nature of a "work-out", or any insolvency or bankruptcy proceedings. Any
costs and expenses due and payable to Lender hereunder which are not paid by
Borrower within ten (10) days after demand may be paid from any amounts in the
Deposit Account, with notice thereof to Borrower. Subject to the limitations
contained in Section 10.1 herein, the obligations and liabilities of Borrower
under this Section 5.1.17 shall survive the Term and the exercise by Lender of
any of its rights or remedies under the Loan Documents, including the
acquisition of the Property by foreclosure or a conveyance in lieu of
foreclosure.
5.1.18 Indemnity. Borrower shall indemnify and hold harmless
Lender and its directors, officers, participants and employees (each, an
"Indemnified Party") from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, claims, costs, expenses
and disbursements of any kind or nature whatsoever (including the reasonable
fees and disbursements of counsel for an Indemnified Party in connection with
any investigative, administrative or judicial proceeding commenced or
threatened, whether or not Lender shall be designated a party thereto), that may
be imposed on, incurred by, or asserted against any Indemnified Party
(collectively, the "Indemnified Liabilities") in any manner, relating to or
arising out of or by reason of any of the following: (i) any breach by Borrower
of its obligations under, or any material misrepresentation by Borrower
contained in, any Loan Document; (ii) the use or intended use of the proceeds of
the Loan; (iii) any false or incorrect information provided
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by or on behalf of Borrower, or contained in any documentation approved by
Borrower; (iv) ownership of the Mortgage, the Property or any interest therein,
or receipt of any Rents; (v) any accident, injury to or death of persons or loss
of or damage to property occurring in, on or about the Property or on the
adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets
or ways; (vi) any use, nonuse or condition in, on or about the Property or on
adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets
or ways; (vii) the construction of the Required Improvements or the performance
of any other labor or services or the furnishing of any materials or other
property in respect of the Property; (viii) the presence, disposal, escape,
seepage, leakage, spillage, discharge, emission, release, or threatened release
of any Hazardous Substance on, from or affecting the Property; (ix) any personal
injury (including wrongful death) or property damage (real or personal) arising
out of or related to such Hazardous Substance; (x) any lawsuit brought or
threatened, settlement reached, or government order relating to such Hazardous
Substance; (xi) any violation of the Environmental Laws, which is based upon or
in any way related to such Hazardous Substance, including, the costs and
expenses of any Remedial Work, reasonable attorney and consultant fees and
disbursements, investigation and laboratory fees, court costs, and reasonable
litigation expenses; (xii) any failure of the Property to comply with any Legal
Requirement; (xiii) any claim by brokers, finders or similar persons claiming to
be entitled to a commission in connection with any Lease or other transaction
involving the Property or any part thereof under any Legal Requirement, or any
liability asserted against Lender with respect thereto; and (xiv) the claims of
any lessee of any portion of the Property or any person acting through or under
any lessee or otherwise arising under or as a consequence of any Lease;
provided, however, that Borrower shall not have any obligation to any
Indemnified Party hereunder to the extent that it is finally judicially
determined that such Indemnified Liabilities (i) arise from the gross
negligence, illegal acts, fraud or willful misconduct of such Indemnified Party,
(ii) which are attributable to acts or events which occur after the total
payment or Defeasance in full of the Debt (except to the extent fairly
attributable to acts or events or Indemnified Liabilities occurring or accruing
prior thereto and except as may be provided in any other Loan Document), (iii)
solely by reason of the act of a transfer by Lender of all or any part of its
interest in this Agreement, the Note or the other Loan Documents, whether
pursuant to a Securitization or otherwise, other than any such transfer made
while an Event of Default shall have occurred and be continuing or (iv) for any
Indemnified Party's income and net revenue taxes. To the extent that the
undertaking to indemnify and hold harmless set forth in the preceding sentence
may be unenforceable because it violates any law or public policy, Borrower
shall contribute the maximum portion that it is permitted to pay and satisfy
under applicable law to the payment and satisfaction of all Indemnified
Liabilities incurred by any Indemnified Party. Lender shall credit against any
payments due under this Section 5.1.18 any Proceeds actually received, retained,
and applied by Lender in respect of the related claim under or from the
Policies. Any amounts payable to any Indemnified Party by reason of the
application of this paragraph shall become immediately due and payable upon
notice to Borrower and shall bear interest at the Default Rate from the date
such notice is delivered to Borrower until paid. Subject to the limitations
contained in Section 10.1 herein, the obligations and liabilities of Borrower
under this Section 5.1.18 shall survive the Term and the exercise by Lender of
any of its rights or remedies under the Loan Documents, including the
acquisition of the Property by foreclosure or a conveyance in lieu of
foreclosure.
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5.1.19 Conduct of Business. Borrower shall operate the
Property, or shall cause the operation of the Property to be conducted at all
times, in a manner consistent with at least the level of operation of the
Property as of the Loan Closing Date, including, the following:
(i) upon Substantial Completion, maintain or cause to
be maintained the standard of operations at the Property at all times
at a level necessary to insure a level of quality for the Property
consistent with similar facilities in the same competitive market;
(ii) operate or cause to be operated the Property in
a prudent manner in compliance in all material respects with applicable
Legal Requirements and insurance requirements of any Policies relating
thereto and cause all Licenses and permits, and any other agreements
necessary for the continued use and operation of the Property to remain
in effect; and
(iii) maintain or cause to be maintained sufficient
Inventory and Equipment of types and quantities at the Property to
enable Borrower to operate the Property.
5.1.20 ERISA. Borrower shall deliver to Lender as soon as
possible, and in any event within ten (10) days after Borrower knows or has
reason to believe that any of the events or conditions specified below with
respect to any ERISA Plan or Multiemployer Plan has occurred or exists, a
statement signed by a senior financial officer of Borrower setting forth details
respecting such event or condition and the action, if any, that Borrower or its
ERISA Affiliate proposes to take with respect thereto (and a copy of any report
or notice required to be filed with or given to PBGC by Borrower or an ERISA
Affiliate with respect to such event or condition):
(i) any reportable event, as defined in Section
4043(b) of ERISA and the regulations issued thereunder, with respect to
an ERISA Plan, as to which PBGC has not by regulation waived the
requirement of Section 4043(a) of ERISA that it be notified within
thirty (30) days of the occurrence of such event (provided that a
failure to meet the minimum funding standard of Section 412 of the Code
or Section 302 of ERISA, including, the failure to make on or before
its due date a required installment under Section 412(m) of the Code or
Section 302(e) of ERISA, shall be a reportable event regardless of the
issuance of any waivers in accordance with Section 412(d) of the Code);
and any request for a waiver under Section 412(d) of the Code for any
ERISA Plan;
(ii) the distribution under Section 4041 of ERISA of
a notice of intent to terminate any ERISA Plan or any action taken by
Borrower or an ERISA Affiliate to terminate any ERISA Plan;
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(iii) the institution by PBGC of proceedings under
Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any ERISA Plan, or the receipt by Borrower or
any ERISA Affiliate of a notice from a Multiemployer Plan that such
action has been taken by PBGC with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal from a
Multiemployer Plan by Borrower or any ERISA Affiliate that results in
liability under Section 4201 or 4204 of ERISA (including the obligation
to satisfy secondary liability as a result of a purchaser default) or
the receipt by Borrower or any ERISA Affiliate of notice from a
Multiemployer Plan that it is in reorganization or insolvency pursuant
to Section 4241 or 4245 of ERISA or that it intends to terminate or has
terminated under Section 4041A of ERISA;
(v) the institution of a proceeding by a fiduciary of
any Multiemployer Plan against Borrower or any ERISA Affiliate to
enforce Section 515 of ERISA, which proceeding is not dismissed within
thirty (30) days;
(vi) the adoption of an amendment to any ERISA Plan
that, pursuant to Section 401(a)(29) of the Code or Section 307 of
ERISA, would result in the loss of tax-exempt status of the trust of
which such ERISA Plan is a part if Borrower or an ERISA Affiliate fails
to timely provide security to the ERISA Plan in accordance with the
provisions of said Sections; and
(vii) the imposition of a lien or a security interest
on the assets of Borrower or any ERISA Affiliate in connection with an
ERISA Plan.
5.1.21 Trade Indebtedness. Borrower will pay its trade
payables within ninety (90) days of the date incurred, unless Borrower is in
good faith contesting Borrower's obligation to pay such trade payables in a
manner reasonably satisfactory to Lender (which may include Lender's requirement
that Borrower, as the case may be, post security with respect to the contested
trade payable).
5.1.22 Intentionally deleted.
5.1.23 Insurance Benefits. Borrower shall cooperate with
Lender in obtaining for Lender the benefits of any Proceeds lawfully or
equitably payable to Lender in connection with the Property, and Lender shall be
reimbursed for any reasonable expenses incurred in connection therewith
(including reasonable attorneys' fees and disbursements) and the payment by
Borrower of the expense of an appraisal on behalf of Lender in case of a fire or
other casualty affecting the Property or any part thereof out of such Proceeds.
5.1.24 Access to Property. Borrower shall permit agents,
representatives and employees of Lender to inspect the Property or any part
thereof at such reasonable times as
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may be requested by Lender upon two (2) Business Days prior written notice and
subject to the rights of tenants under Leases; provided, such written notice
shall not be required upon the occurrence and continuation of a Default or Event
of Default.
5.1.25 Insurance. Borrower shall provide and maintain at all
times insurance in such forms and covering such risks and hazards and in such
amounts and with such companies as may be required by Lender in accordance with
Section 7.1 of this Agreement.
5.1.26 Use Specific Covenants. Borrower shall:
(1) operate the Property or cause the Property to be operated in material
compliance with the Legal Requirements and other requirements referred to
herein;
(2) operate the Borrower's Property or cause the Property to be operated in
a manner such that the Licenses shall remain in full force and effect and such
that any new or additional License that may, at any time or from time to time,
be required pursuant to any Legal Requirements are timely obtained and
maintained in full force and effect;
(3) Intentionally deleted; and
(4) cooperate with all governmental agencies, such cooperation shall
include, but not be limited to, timely and completely responding to all requests
for records, as well as developing and implementing an appropriate and
acceptable plan to correct any deficiency in the operation of the Property.
5.2 Manager's Covenants. Until the end of the Term or the
Defeasance of the entire unpaid Principal, Manager hereby covenants and agrees
with Lender that:
5.2.1 Existence. Manager shall (i) do or cause to be done all
things necessary to preserve, renew and keep in full force and effect its
existence, rights, and franchises, (ii) continue to engage in the business
presently conducted by it, (iii) obtain and maintain all Licenses, and (iv)
qualify to do business and remain in good standing under the laws of each
jurisdiction, in each case as and to the extent required for the ownership,
development, maintenance, management and operation of the Property. Manager
shall notify Lender promptly of any written notice or order that Manager
receives from any Governmental Authority relating to Manager's failure to comply
with any applicable Legal Requirements relating to the Property and promptly
take any and all actions necessary to bring itself and its operations at the
Property into compliance in all material respects with such applicable Legal
Requirements (and shall comply in all material respects with the requirements of
such Legal Requirements that at any time are applicable to its operations at the
Property). Manager shall have the right to contest same provided it complies
with the Contest Procedures.
5.2.2 Taxes and Other Charges. Manager shall pay, or cause to be paid, all
Taxes and Other Charges as the same become due and payable, and deliver to
Lender receipts
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for payment or other evidence satisfactory to Lender that the Taxes and Other
Charges have been so paid no later than thirty (30) days before they would be
delinquent if not paid (provided, however, that Manager need not furnish such
receipts for payment of Taxes paid by Lender pursuant to Section 3.2). Manager
shall not suffer and shall promptly cause to be paid and discharged any Lien
against the Property, and shall promptly pay for, or cause to be paid, all
utility services provided to the Property. After prior notice to Lender,
Manager, at its own or Borrower's expense, may contest by appropriate legal
proceeding, promptly initiated and conducted in good faith and with due
diligence, the amount or validity or application of any Taxes or Other Charges,
provided that (i) no Default or Event of Default has occurred and remains
uncured, (ii) such proceeding shall suspend the collection of the Taxes or Other
Charges, (iii) such proceeding shall be permitted under and be conducted in
accordance with the provisions of any other instrument to which Manager is
subject and shall not constitute a default thereunder, (iv) no part of or
interest in the Property will be in danger of being sold, forfeited, terminated,
canceled or lost, if the Manager pays the amount or satisfies the condition
being contested, and the Manager would have the opportunity to do so, in the
event of the Manager's failure to prevail in the contest, (v) Lender would not,
by virtue of such permitted contest, be exposed to any risk of any civil
liability for which the Manager and/or Borrower has not furnished additional
security as provided in clause (vi) below, or to any risk of criminal liability,
and neither the Property nor any interest therein would be subject to the
imposition of any lien for which the Manager and/or Borrower has not furnished
additional security as provided in clause (vi) below, as a result of the failure
to comply with such law or of such proceeding, (vi) Manager and/or Borrower
shall have furnished such security as may be required in the proceeding, or as
may be reasonably requested by Lender, to insure the payment of any such Taxes
or Other Charges, together with all interest and penalties thereon, but in no
amount less than one hundred and twenty-five percent (125%) of the amount of
such claims, and (vii) Manager shall promptly upon final determination thereof
pay the amount of Taxes or Other Charges determined to be due and payable,
together with all costs, interest and penalties. Lender may pay over any such
cash deposit or part thereof held by Lender to the claimant entitled thereto at
any time when, in the reasonable judgment of Lender, the entitlement of such
claimant is established.
5.2.3 Repairs; Maintenance and Compliance. Manager shall cause
the Property to be maintained in a good and safe condition and repair and shall
not remove, demolish or materially alter the Improvements or Equipment (except
for the construction of the Required Improvements in accordance with the BLA and
normal replacement of the Equipment or restoration pursuant to Section 7.2
herein). Manager shall promptly comply with all Legal Requirements and commence
and diligently continue to cure properly any violation of a Legal Requirement,
which materially and adversely affects the financial condition of the Property
or the ability of Borrower to conduct its business, within thirty (30) days
after Manager receives notice of such violation, provided that Manager shall
have the right to contest same if it complies with the Contest Procedures.
Manager shall, in a good and workmanlike manner using materials of a quality at
least equal to that originally installed at the Property, promptly repair,
replace or rebuild any part of the Property that becomes damaged (subject to
Section 7.2 herein), worn or dilapidated and shall complete and pay for any
Improvements at any time in the process of
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construction or repair. Manager may perform alterations without obtaining
Lender's consent for alterations which (i) are required under the BLA, (ii) do
not alter the footprint of the Property, (iii) do not change the number of
units, (iv) are contemplated in the Annual Budget approved by Lender, or (v)
which do not otherwise constitute material renovations.
5.2.4 Litigation. Manager shall give prompt written notice to
Lender of any litigation or governmental proceedings pending or threatened
against Manager which might reasonably likely materially adversely affect
Manager's condition (financial or otherwise) or business or the Property.
5.2.5 Performance of Other Agreements. Manager shall observe
and perform each and every term, provision, covenant and condition to be
observed or performed by it pursuant to the terms of any material agreement or
recorded instrument affecting or pertaining to the Property.
5.2.6 Notice of Default. Manager shall promptly advise Lender
of any material adverse change in Manager's condition, financial or otherwise,
or of the occurrence of any Default or Event of Default of which Manager has
knowledge.
5.2.7 Cooperate in Legal Proceedings. Manager shall cooperate
fully with Lender with respect to, and permit Lender, at its option, to
participate in, any proceedings before any Governmental Authority which may in
any way affect the rights of Lender under any Loan Document and, in connection
therewith, not prohibit Lender, at its election, from participating in any such
proceedings.
5.2.8 Further Assurances. Manager shall, at Manager's sole
cost and expense (except in connection with the transfer of the Loan or the
interest therein by Lender pursuant to a Securitization, the cost of which shall
be provided for as set forth in Section 9 herein or a Syndication pursuant to
the BLA), (i) furnish to Lender, provided Lender reasonably determines that the
Property or any of its other collateral will be materially adversely affected,
all instruments, documents, boundary surveys, footing or foundation surveys,
certificates, plans and specifications, appraisals, title and other insurance
reports and agreements, and each and every other document, certificate,
agreement, and instrument reasonably requested by Lender pursuant to the terms
of the Loan Documents; (ii) execute and deliver to Lender such documents,
instruments, certificates, assignments and other writings, and do such other
acts necessary or desirable, to evidence, preserve and/or protect the collateral
at any time securing or intended to secure the Debt, as Lender may reasonably
require pursuant to the terms of the Loan Documents; (iii) do and execute all
and such further lawful and reasonable acts, conveyances and assurances for the
better and more effective carrying out of the intents and purposes of the Loan
Documents, as Lender shall reasonably require from time to time, (iv) after the
occurrence and during the continuance of an Event of Default, furnish reports of
UCC, federal tax lien, state tax lien, judgment and pending litigation searches
with respect to Manager as Lender shall reasonably require and (v) after the
occurrence and during the continuance of an Event of
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Default, furnish searches of title to the Property, designated by Lender in each
of the locations reasonably designated by Lender.
5.2.9 Financial Reporting.
(a) Bookkeeping. Manager shall keep and maintain or shall
cause to be kept and maintained on a Fiscal Year basis, in accordance with GAAP,
books, records and accounts reflecting in reasonable detail all of the financial
affairs of Manager and all items of income and expense in connection with the
operation of the Property and in connection with any services, equipment,
materials, or furnishings provided in connection with the development or
operation of the Property whether such income or expense is realized by Borrower
or Manager. Lender, at Lender's cost and expense, shall have the right from time
to time and at all times during normal business hours upon reasonable prior
written notice to Manager to examine such books, records and accounts at the
office of Manager and to make such copies or extracts thereof as Lender shall
desire. After the occurrence of an Event of Default with respect to the
Property, Manager shall pay, within ten (10) calendar days of written demand
therefore, any costs and expenses incurred by Lender during the continuance of
such Event of Default to examine any and all of the Manager's books, records and
accounts as Lender shall determine in Lender's reasonable discretion to be
necessary or appropriate in the protection of Lender's interest.
(b) Annual Reports. (i) From and after the Substantial
Completion Date, Manager shall furnish to Lender annually within ninety (90)
days following the end of each Fiscal Year, true, complete and correct copies of
Manager's financial statements audited by a "big six" accounting firm or other
independent certified public accounting firm acceptable to Lender in Lender's
reasonable discretion which shall (a) be in form and substance acceptable to
Lender in Lender's reasonable discretion, (b) be prepared in accordance with
GAAP, (c) include, without limitation, a statement of operations (profit and
loss), a statement of cash flows, a calculation of Net Operating Income, a
consolidated balance sheet, if applicable, an aged accounts receivable report
and such other information or reports as shall be reasonably requested by Lender
or any applicable Rating Agency, (d) be accompanied by an Officer's Certificate
from a senior executive of Manager certifying as of the date thereof (x) that
such statement is true, correct, complete and accurate and fairly reflects the
results of operations and financial condition of Manager for the relevant
period, and (y) notice of whether to the knowledge of Manager, there exists an
Event of Default, and if such Event of Default exists, the nature thereof, the
period of time it has existed and the action then being taken to remedy same and
(e) be accompanied by an opinion from an Independent certified public accountant
acceptable to Lender in Lender's reasonable discretion.
(ii) From and after the Substantial Completion Date,
Manager shall furnish to Lender annually within forty (40) days
following the end of each Fiscal Year, true, complete and correct
copies of Manager's unaudited financial statements which shall (a) be
in form and substance acceptable to Lender in Lender's reasonable
discretion, (b) be prepared in accordance with GAAP, (c) include,
without limitation, a
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statement of operations (profit and loss), a statement of cash flows, a
calculation of Net Operating Income, a consolidated balance sheet, if
applicable, an aged accounts receivable report and such other
information or reports as shall be reasonably requested by Lender or
any applicable Rating Agency and (d) be accompanied by an Officer's
Certificate from a senior executive of Manager certifying, to the best
of Manager's knowledge, as of the date thereof (x) that such statement
is true, correct, complete and accurate and fairly reflects the results
of operations and financial condition of Manager for the relevant
period, and (y) notice of whether to the knowledge of Manager, there
exists an Event of Default, and if such Event of Default exists, the
nature thereof, the period of time it has existed and the action then
being taken to remedy same.
(c) Monthly Reports. (i) From and after the Substantial
Completion Date, Manager shall furnish to Lender within thirty (30) days
following the end of each calendar month, true, correct and complete monthly
unaudited financial statements for Manager which shall (a) be in form and
substance acceptable to Lender in Lender's reasonable discretion, (b) be
prepared in accordance with GAAP, (c) include, without limitation, a statement
of operations (profit and loss), a statement of cash flows, a calculation of Net
Operating Income, a consolidated balance sheet, if applicable, an aged accounts
receivable report and such other information or reports as shall be reasonably
requested by Lender or any applicable Rating Agency and (d) be accompanied by an
Officer's Certificate from a senior executive of Manager, to the best of
Manager's knowledge, certifying as of the date thereof (x) that such statement
is true, correct, complete and accurate and fairly reflects the results of
operations and financial condition of Manager for the relevant period, and (y)
notice of whether, to the knowledge of Manager, there exists an Event of
Default, and if such Event of Default exists, the nature thereof, the period of
time it has existed and the action then being taken to remedy same.
(ii) From and after the Substantial Completion Date,
Manager shall furnish to Lender, within thirty (30) days following the
end of each calendar month, a true, complete and correct rent roll and
occupancy report and such other occupancy statistics as Lender shall
request in Lender's reasonable discretion. Each such document shall (a)
be in form and substance acceptable to Lender in Lender's reasonable
discretion, and (b) be accompanied by an Officer's Certificate from a
senior executive of Manager certifying, to the best of Manager's
knowledge, as of the date thereof (x) that such statement is true,
correct, complete and accurate and (y) notice of whether, to the
knowledge of Manager, there exists an Event of Default, and if such
Event of Default exists, the nature thereof, the period of time it has
existed and the action then being taken to remedy same.
(d) Other Reports. (i) Manager shall furnish to Lender, within
fifteen (15) Business Days after request, such further information with respect
to the operation of the Property and the financial affairs of Manager as may be
reasonably requested by Lender, including without limitation all business plans
prepared for Manager.
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(ii) Manager shall furnish to Lender, within fifteen
(15) Business Days after request, such further information regarding
any Plan or Multiemployer Plan and any reports or other information
required to be filed under ERISA as may be reasonably requested by
Lender.
(iii) Manager shall, concurrently with Manager's
delivery to Lender, provide a copy of the items required to be
delivered to Lender under this Section 5.2.9 to the Rating Agencies and
any servicer and/or special servicer that may be retained in
conjunction with the Loan or any Securitization. Manager shall furnish
to Lender written notice, within two (2) Business Days after receipt by
Manager, of any Rents, Money or other items of Gross Revenue that
Manager is not required by this Agreement to deposit in the Clearing
Account, Deposit Account or the Security Deposit Accounts, together
with such other documents and materials relating to such Rents, Money
or other items of Gross Revenue as Lender requests in Lender's
reasonable discretion.
(iv) From and after the Substantial Completion Date,
Manager shall provide Lender with updated information (satisfactory to
Lender in Lender's reasonable discretion) concerning the Basic Carrying
Costs for the next succeeding Fiscal Year prior to the termination of
each Fiscal Year.
(v) Manager shall furnish to Lender such other
financial information with respect to Manager as Lender may reasonably
request (including, without limitation, in the case of a defeasance
pursuant to Section 2.3.3, a review by a third party acceptable to
Lender, of the calculations required to be made pursuant to Section
2.3.3).
(vi) Manager shall furnish or shall cause to be
furnished to Lender, within fifteen (15) days of the receipt by
Borrower and/or Manager any and all notices (regardless of form) from
any licensing and/or certifying agency that any License relating to the
Property or Manager is being downgraded to a substandard category,
revoked, or suspended, or that action is pending or being considered to
downgrade to a substandard category, revoke, or suspend any License or
certification;
(vii) Intentionally deleted; and
(viii) Manager shall furnish to Lender, within
fifteen (15) Business Days of receipt, a copy of any licensing agency
survey or report and any statement of deficiencies, and within the time
period required by the particular agency for furnishing a plan of
correction also shall furnish or cause to be furnished to Lender a copy
of the plan of correction generated from such survey or report for the
Property, and correct or cause to be corrected any deficiency, the
curing of which is a condition of continued licensure by the date
required for cure by such agency (plus extensions granted by such
agency).
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(e) Annual Budget. Manager shall prepare and submit to Lender
(i) by November 15 of each year during the Term in which the succeeding Fiscal
Year is expected to include a Cash Management Period (except for the Initial
Budget) and (ii) within thirty (30) days after the commencement of any new Cash
Management Period after the Conversion Date, a proposed pro forma budget for the
Property (the "Annual Budget") for the succeeding (in the case of the foregoing
clause (i)) or then current (in the case of the foregoing clause (ii)) Fiscal
Year. The parties hereto acknowledge that Manager has submitted an initial
Budget (the "Initial Budget") covering the thirty-eight (38) month period
commencing with the Loan Closing Date. If either (a) the expenses increase on an
annualized basis by more than ten percent (10%) from the projected expenses in
the Initial Budget or (b) the income decreases on an annualized basis by more
than ten percent (10%) from the projected income in the Initial Budget, then
Manager shall be required to promptly submit a new Budget to Lender, which must
be satisfactory to Lender in its sole but reasonable discretion. Promptly after
the preparation of any proposed revisions to an Annual Budget, Manager shall
submit them to Lender. Each such Annual Budget, and any revisions thereto, shall
be subject to Lender's approval, which will not be unreasonably withheld or
delayed. Lender's failure to approve or disapprove any Annual Budget within
thirty (30) days after Lender's receipt thereof shall be deemed to constitute
Lender's approval thereof. The Annual Budget shall consist of (A) an operating
expense budget (the "Operating Budget") showing, on a month-by-month basis, in
reasonable detail, each line item of the Manager's anticipated Operating Income
and Operating Expenses (on a cash and accrual basis), including amounts required
to establish, maintain and/or increase reserves (including a working capital
reserve), and (B) a Capital Expense budget (the "Capital Budget") showing, on a
month-by-month basis, in reasonable detail, each line item of anticipated
Capital Expenses. The approved Annual Budget for the period commencing on the
date hereof and ending on the Conversion Date is the Initial Budget, which has
been submitted to and approved by Lender.
(f) Breach. If either Borrower or Manager fails to provide to
Lender or its designee those statements, books, records, accounts or other items
required in Sections 5.1.9(b), 5.1.9(c), 5.2.9(b), and 5.2.9(c) of this
Agreement (the "Required Records") within thirty (30) days after the date upon
which such Required Record is due, Manager shall pay to Lender, at Lender's
option and in its discretion, an amount equal to $10,000 for each Required
Record that is not delivered; provided Lender has given Manager at least fifteen
(15) days prior notice of such failure.
5.2.10 Environmental Matters.
(a) Hazardous Substances. So long as Manager operates, manages
or is in possession of the Property, except as disclosed in the Environmental
Reports, Manager (i) shall keep the Property free from Hazardous Substances
(except for nominal amounts of any such substances commonly incorporated in or
used in the operation of properties similar to the Property, in either case in
compliance with all Environmental Laws) and in compliance with all Environmental
Laws, (ii) shall promptly notify Lender if Manager shall become aware that (A)
any Hazardous Substance is on or near the Property, (B) the Property is in
direct or indirect violation of any Environmental Laws or (C) any condition
relating to Hazardous Substances on
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or near the Property shall pose a threat to the health, safety or welfare of
humans, (iii) shall remove such Hazardous Substances and/or cure such violations
and/or remove such threats, as applicable, as required by law (or as shall be
required by Lender in the case of removal which is not required by law, but in
response to the opinion of Lender's Consultant, promptly after Manager becomes
aware of same, at Manager's sole expense and (iv) shall comply with all of the
recommendations contained in the Environmental Report delivered to Lender in
connection with the origination of the Loan. Nothing herein shall prevent
Manager from recovering such expenses from any other party that may be liable
for such removal or cure.
(b) Environmental Monitoring. Manager shall give prompt
written notice to Lender of (i) any proceeding or inquiry by any party with
respect to the presence of any Hazardous Substance on, under, from or about the
Property, (ii) all claims made or threatened by any third party against Manager,
Borrower, or the Property relating to any loss or injury resulting from any
Hazardous Substance, and (iii) Manager's discovery of any occurrence or
condition on any real property adjoining or in the vicinity of the Property that
could reasonably be expected to cause the Property to be subject to any
investigation or cleanup pursuant to any Environmental Law. Manager shall permit
Lender to join and participate in, as a party if it so elects, any legal
proceedings or actions initiated with respect to the Property in connection with
any Environmental Law or Hazardous Substance, and Manager shall pay all
reasonable attorneys' fees and disbursements incurred by Lender in connection
therewith. Upon Lender's reasonable request, at any time and from time to time
when Lender has reason to believe that Hazardous Substances are present on or
under the Property in violation of Environmental Laws, Manager shall provide an
inspection or audit of the Property prepared by a licensed hydrogeologist,
licensed environmental engineer or qualified environmental consulting firm
reasonably approved by Lender indicating the presence or absence of Hazardous
Substances on, in or near the Property. The cost and expense of such audit or
inspection shall be paid by Manager not more frequently than once every five (5)
calendar years after the occurrence of a Securitization, unless Lender, in its
good faith judgment, determines that reasonable cause exists for the performance
of an environmental inspection or audit of the Property, in which case such
inspections or audits shall be at Manager's sole expense. If Manager fails to
provide any such inspection or audit within thirty (30) days after such request,
Lender may order same, and Manager hereby grants to Lender and its employees and
agents access to the Property and a license to undertake such inspection or
audit. The cost of such inspection or audit may be added to the Debt and shall
bear interest thereafter at the Default Rate until paid. If any environmental
site assessment report prepared in connection with such inspection or audit
recommends that an operations and maintenance plan be implemented for any
Hazardous Substance, Manager shall cause such operations and maintenance plan to
be prepared and implemented at its expense upon request of Lender. In the event
that any Remedial Work is required under an applicable Environmental Law,
Manager shall commence and thereafter diligently prosecute to completion all
such Remedial Work within thirty (30) days after written demand by Lender for
performance thereof (or such shorter period of time as may be required under
applicable law). All Remedial Work shall be performed by contractors reasonably
approved in advance by Lender, and under the supervision of a consulting
engineer reasonably approved by Lender. All costs of such Remedial Work shall be
paid by Manager, including Lender's reasonable attorneys' fees and
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disbursements incurred in connection with the monitoring or review of such
Remedial Work. Manager will not install or permit to be installed on the
Property any underground storage tank.
5.2.11 Title to the Property. If and to the extent necessary
to preserve Lender's interest therein, Manager will warrant and defend the title
to the Property, and the validity and priority of the Lien of the Mortgage and
the Subordinate Mortgage, subject only to Permitted Encumbrances, against the
claims of all Persons except Lender.
5.2.12 Estoppel Statement. After request by either Manager or
Lender, the other party shall within fifteen (15) Business Days furnish the
requesting party with a statement, subject to the exculpation provisions
contained in Section 10.1 hereof, duly acknowledged and certified, setting forth
(i) the unpaid Principal, (ii) the Interest Rate, (iii) the date installments of
interest and/or Principal were last paid, (iv) any offsets or defenses to the
payment of the Debt, and (v) that the Loan Documents are valid, legal and
binding obligations and have not been modified or if modified, giving
particulars of such modification. After request by Lender (but no more
frequently than twice in any year), Manager shall furnish to Lender (x) within
ten (10) days, a certificate, subject to the exculpation provisions contained in
Section 10.1 hereof, reaffirming all representations and warranties of Manager
set forth in the Loan Documents as of the date requested by Lender or, to the
extent of any changes to any such representations and warranties, so stating
such changes, and (y) within thirty (30) days, tenant estoppel certificates from
each tenant at the Property in form and substance reasonably satisfactory to
Lender.
5.2.13 Principal Place of Business. Manager shall not change
its principal place of business without first giving Lender thirty (30) days
prior notice.
5.2.14 Property Management.
(a) Management Agreement. Manager shall (i) cause the Property
to be operated pursuant to the Management Agreement; (ii) promptly perform and
observe all of the covenants required to be performed and observed by it under
the Management Agreement and do all things necessary to preserve and to keep
unimpaired its material rights thereunder; (iii) promptly notify Lender of any
default under the Management Agreement of which it is aware; (iv) promptly
deliver to Lender a copy of each financial statement, business plan, capital
expenditure plan, and property improvement plan and any other notice, report and
estimate received by Manager under the Management Agreement; and (v) promptly
enforce the performance and observance of all of the material covenants required
to be performed and observed by Borrower under the Management Agreement.
(b) Termination of Manager. After the Conversion Date,
Borrower shall achieve, and, within thirty (30) days after the end of each
calendar month provide evidence to Lender of the achievement of, a Debt Service
Coverage Ratio of not less than 1.10x and (b) Net Operating Income on a trailing
twelve (12) month basis of not less than eighty-five percent (85%) of the Net
Operating Income as of the Conversion Date. If either of the aforementioned is
not maintained, Lender shall have the right to terminate the Management
Agreement unless
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Borrower shall defease a portion of the unpaid Principal to a level such that
the Debt Service Coverage Ratio on the undefeased portion of the unpaid
Principal is restored to a level of not less than 1.20x. All calculations of
Debt Service Coverage Ratio for purposes of this Section 5.2.14 shall be subject
to verification by Lender. If Borrower fails to comply with this Sec tion
5.2.14, or if an Event of Default shall be continuing, Borrower shall, at the
request of Lender, terminate the Management Agreement and replace the Manager
with a manager reasonably approved by Lender on terms and conditions reasonably
satisfactory to Lender.
5.2.15 Special Purpose Bankruptcy Remote Entity. Commencing on
the Conversion Date and continuing for so long as the Loan is outstanding,
Manager shall become and continue to be a Special Purpose Bankruptcy Remote
Entity (as such term is defined in Section 5.1.15 herein) with such modification
appropriate for Manager, if any.
5.2.16 Assumptions in Non-Consolidation Opinion. Commencing on
the Conversion Date, Manager shall conduct its business so that the assumptions
made in that certain substantive non-consolidation opinion letter delivered on
the Conversion Date by Manager's counsel in connection with the Loan, shall be
true and correct in all respects.
5.2.17 Expenses. Manager shall reimburse Lender upon receipt
of notice for all reasonable costs and expenses (including reasonable attorneys'
fees and disbursements) incurred by Lender in connection with the Loan subject
to any limitations set forth herein, including (i) the preparation, negotiation,
execution and delivery of the Loan Documents and the consummation of the
transactions contemplated thereby and all the costs of furnishing all opinions
by counsel for Manager; (ii) Manager's and Lender's ongoing performance under
and compliance with the Loan Documents, including confirming compliance with
environmental and insurance requirements, in excess of the Servicing Fee; (iii)
the negotiation, preparation, execution, delivery and administration of any
consents, amendments, waivers or other modifications of or under any Loan
Document and any other documents or matters requested by Borrower or Manager;
(iv) filing and recording of any Loan Documents; (v) title insurance, surveys,
inspections and appraisals; (vi) enforcing or preserving any rights, in response
to third party claims or the prosecuting or defending of any action or
proceeding or other litigation, in each case against, under or affecting
Manager, the Loan Documents, the Property, or any other security given for the
Loan; and (vii) enforcing any obligations of or collecting any payments due from
Manager under any Loan Document or with respect to the Property or in connection
with any refinancing or restructuring of the Loan in the nature of a "work-out",
or any insolvency or bankruptcy proceedings. Any costs and expenses due and
payable to Lender hereunder which are not paid by Manager within ten (10) days
after demand may be paid from any amounts in the Deposit Account, with notice
thereof to Manager. Subject to the limitations contained in Section 10.1 herein,
the obligations and liabilities of Manager under this Sec tion 5.2.17 shall
survive the Term and the exercise by Lender of any of its rights or remedies
under the Loan Documents, including the acquisition of the Property by
foreclosure or a conveyance in lieu of foreclosure.
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5.2.18 Indemnity. Manager shall indemnify and hold harmless
each Indemnified Party from and against any and all Indemnified Liabilities in
any manner, relating to or arising out of or by reason of any of the following:
(i) any breach by Manager of its obligations under, or any material
misrepresentation by Manager contained in, any Loan Document; (ii) the use or
intended use of the proceeds of the Loan; (iii) any false or incorrect
information provided by or on behalf of Manager, or contained in any
documentation approved by Manager; (iv) ownership of the Mortgage, the Property
or any interest therein, or receipt of any Rents; (v) any accident, injury to or
death of persons or loss of or damage to property occurring in, on or about the
Property or on the adjoining sidewalks, curbs, adjacent property or adjacent
parking areas, streets or ways; (vi) any use, nonuse or condition in, on or
about the Property or on adjoining sidewalks, curbs, adjacent property or
adjacent parking areas, streets or ways; (vii) the construction of the Required
Improvements or the performance of any other labor or services or the furnishing
of any materials or other property in respect of the Property; (viii) the
presence, disposal, escape, seepage, leakage, spillage, discharge, emission,
release, or threatened release of any Hazardous Substance on, from or affecting
the Property; (ix) any personal injury (including wrongful death) or property
damage (real or personal) arising out of or related to such Hazardous Substance;
(x) any lawsuit brought or threatened, settlement reached, or government order
relating to such Hazardous Substance; (xi) any violation of the Environmental
Laws, which is based upon or in any way related to such Hazardous Substance,
including, the costs and expenses of any Remedial Work, reasonable attorney and
consultant fees and disbursements, investigation and laboratory fees, court
costs, and reasonable litigation expenses; (xii) any failure of the Property to
comply with any Legal Requirement; (xiii) any claim by brokers, finders or
similar persons claiming to be entitled to a commission in connection with any
Lease or other transaction involving the Property or any part thereof under any
Legal Requirement, or any liability asserted against Lender with respect
thereto; and (xiv) the claims of any lessee of any portion of the Property or
any person acting through or under any lessee or otherwise arising under or as a
consequence of any Lease; provided, however, that Manager shall not have any
obligation to any Indemnified Party hereunder to the extent that it is finally
judicially determined that such Indemnified Liabilities (i) arise from the gross
negligence, illegal acts, fraud or willful misconduct of such Indemnified Party,
(ii) which are attributable to acts or events which occur after the total
payment or Defeasance in full of the Debt (except to the extent fairly
attributable to acts or events or Indemnified Liabilities occurring or accruing
prior thereto and except as may be provided in any other Loan Document), (iii)
solely by reason of the act of a transfer by Lender of all or any part of its
interest in this Agreement, the Note or the other Loan Documents, whether
pursuant to a Securitization or otherwise, other than any such transfer made
while an Event of Default shall have occurred and be continuing or (iv) for any
Indemnified Party's income and net revenue taxes. To the extent that the
undertaking to indemnify and hold harmless set forth in the preceding sentence
may be unenforceable because it violates any law or public policy, Manager shall
contribute the maximum portion that it is permitted to pay and satisfy under
applicable law to the payment and satisfaction of all Indemnified Liabilities
incurred by any Indemnified Party. Lender shall credit against any payments due
under this Section 5.2.18 any Proceeds actually received, retained, and applied
by Lender in respect of the related claim under or from the Policies. Any
amounts payable to any Indemnified Party by reason of the application of this
paragraph shall become
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immediately due and payable upon notice to Manager and shall bear interest at
the Default Rate from the date such notice is delivered to Manager until paid.
Subject to the limitations contained in Section 10.1 herein, the obligations and
liabilities of Manager under this Section 5.2.18 shall survive the Term and the
exercise by Lender of any of its rights or remedies under the Loan Documents,
including the acquisition of the Property by foreclosure or a conveyance in lieu
of foreclosure.
5.2.19 Conduct of Business. Manager shall operate the
Property, or shall cause the operation of the Property to be conducted at all
times, in a manner consistent with at least the level of operation of the
Property as of the Loan Closing Date, including, the following:
(i) upon Substantial Completion, maintain or cause to
be maintained the standard of operations at the Property at all times
at a level necessary to insure a level of quality for the Property
consistent with similar facilities in the same competitive market;
(ii) operate or cause to be operated the Property in
a prudent manner in compliance in all material respects with applicable
Legal Requirements and insurance requirements of any Policies relating
thereto and cause all Licenses and permits, and any other agreements
necessary for the continued use and operation of the Property to remain
in effect; and
(iii) maintain or cause to be maintained sufficient
Inventory and Equipment of types and quantities at the Property to
enable Borrower to operate the Property.
5.2.20 ERISA. Manager shall deliver to Lender as soon as
possible, and in any event within ten (10) days after Manager knows or has
reason to believe that any of the events or conditions specified below with
respect to any ERISA Plan or Multiemployer Plan has occurred or exists, a
statement signed by a senior financial officer of Manager setting forth details
respecting such event or condition and the action, if any, that Manager or its
ERISA Affiliate proposes to take with respect thereto (and a copy of any report
or notice required to be filed with or given to PBGC by Manager or an ERISA
Affiliate with respect to such event or condition):
(i) any reportable event, as defined in Section
4043(b) of ERISA and the regulations issued thereunder, with respect to
an ERISA Plan, as to which PBGC has not by regulation waived the
requirement of Section 4043(a) of ERISA that it be notified within
thirty (30) days of the occurrence of such event (provided that a
failure to meet the minimum funding standard of Section 412 of the Code
or Section 302 of ERISA, including, the failure to make on or before
its due date a required installment under Section 412(m) of the Code or
Section 302(e) of ERISA, shall be a reportable event regardless of the
issuance of any waivers in accordance with Section 412(d) of
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the Code); and any request for a waiver under Section 412(d) of the Code
for any ERISA Plan;
(ii) the distribution under Section 4041 of ERISA of
a notice of intent to terminate any ERISA Plan or any action taken by
Manager or an ERISA Affiliate to terminate any ERISA Plan;
(iii) the institution by PBGC of proceedings under
Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any ERISA Plan, or the receipt by Manager or any
ERISA Affiliate of a notice from a Multiemployer Plan that such action
has been taken by PBGC with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal from a
Multiemployer Plan by Manager or any ERISA Affiliate that results in
liability under Section 4201 or 4204 of ERISA (including the obligation
to satisfy secondary liability as a result of a purchaser default) or
the receipt by Manager or any ERISA Affiliate of notice from a
Multiemployer Plan that it is in reorganization or insolvency pursuant
to Section 4241 or 4245 of ERISA or that it intends to terminate or has
terminated under Section 4041A of ERISA;
(v) the institution of a proceeding by a fiduciary of
any Multiemployer Plan against Manager or any ERISA Affiliate to
enforce Section 515 of ERISA, which proceeding is not dismissed within
thirty (30) days;
(vi) the adoption of an amendment to any ERISA Plan
that, pursuant to Section 401(a)(29) of the Code or Section 307 of
ERISA, would result in the loss of tax-exempt status of the trust of
which such ERISA Plan is a part if Manager or an ERISA Affiliate fails
to timely provide security to the ERISA Plan in accordance with the
provisions of said Sections; and
(vii) the imposition of a lien or a security interest
on the assets of Manager or any ERISA Affiliate in connection with an
ERISA Plan.
5.2.21 Trade Indebtedness. Manager will pay its trade payables
within ninety (90) days of the date incurred, unless Manager is in good faith
contesting Manager's obligation to pay such trade payables in a manner
reasonably satisfactory to Lender (which may include Lender's requirement that
Manager, as the case may be, post security with respect to the contested trade
payable).
5.2.22 Capital Improvements and Environmental Remediation.
Manager shall, within twelve (12) months of the Conversion Date, perform the
repairs and environmental remediation to the Property itemized on Exhibit C
hereto.
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5.2.23 Insurance Benefits. Manager shall cooperate with Lender
in obtaining for Lender the benefits of any Proceeds lawfully or equitably
payable to Lender in connection with the Property, and Lender shall be
reimbursed for any reasonable expenses incurred in connection therewith
(including reasonable attorneys' fees and disbursements) and the payment by
Manager of the expense of an appraisal on behalf of Lender in case of a fire or
other casualty affecting the Property or any part thereof out of such Proceeds.
5.2.24 Access to Property. Manager shall permit agents,
representatives and employees of Lender to inspect the Property or any part
thereof at such reasonable times as may be requested by Lender upon two (2)
Business Days prior written notice and subject to the rights of tenants under
Leases; provided, such written notice shall not be required upon the occurrence
and continuation of a Default or Event of Default.
5.2.25 Insurance. Manager shall provide and maintain at all
times insurance in such forms and covering such risks and hazards and in such
amounts and with such companies as may be required by Lender in accordance with
Section 7.1 of this Agreement.
5.2.26 Proof of Equity Contribution. Manager acknowledges that
as of the Loan Closing Date it has not provided, nor has Lender required, all
checks, bills, and other proof of Manager's entire equity contribution to the
project. If and to the extent Lender requires that Manager provide Lender with
all other evidence showing Manager's entire equity contribution, Manager shall
promptly provide Lender with same to Lender's satisfaction.
5.2.27 Use Specific Covenants. Manager shall:
(1) operate the Property or cause the Property to be operated in material
compliance with the Legal Requirements and other requirements referred to
herein;
(2) operate the Property or cause the Property to be operated in a manner
such that the Licenses shall remain in full force and effect and such that any
new or additional License that may, at any time or from time to time, be
required pursuant to any Legal Requirements are timely obtained and maintained
in full force and effect;
(3) Intentionally deleted; and
(4) cooperate with all governmental agencies, such cooperation shall
include, but not be limited to, timely and completely responding to all requests
for records, as well as developing and implementing an appropriate and
acceptable plan to correct any deficiency in the operation of the Property.
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VI. NEGATIVE COVENANTS
6.1 Borrower's Covenants. Until the end of the Term or the
Defeasance of the entire unpaid Principal, Borrower covenants and agrees with
Lender that it will not, without Lender's prior written consent, directly or
indirectly:
6.1.1 Management Agreement. Without Lender's prior written
consent: (i) surrender, terminate or cancel the Management Agreement or
otherwise replace the Manager or enter into any other management agreement
(except pursuant to Sections 5.1.14 and 5.2.14); (ii) except for Permitted
Transfers, suffer or permit the ownership, management or control of the Manager
to be transferred to a Person other than an Affiliate of Guarantor; (iii) reduce
or consent to the reduction of the term of the Management Agreement; (iv)
increase or consent to the increase of the amount of any charges under the
Management Agreement; or (v) otherwise modify, change, supplement, alter or
amend in any material respect, or waive or release any of its material rights
and remedies under, the Management Agreement; or (vi) suffer or permit the
occurrence and continuance of a default beyond any applicable cure period under
the Management Agreement (or any successor management agreement) if such default
permits the Manager to terminate the Management Agreement (or such successor
management agreement);
6.1.2 Liens. Without Lender's prior consent, create, incur,
assume, permit or suffer to exist any mechanic's, materialmen's or other Lien on
any portion of the Property or legal or beneficial ownership interest in
Borrower, except Permitted Encumbrances, unless such Lien is bonded, insured or
discharged within thirty (30) days after Borrower first receives notice of such
Lien;
6.1.3 Dissolution. Dissolve, terminate, liquidate, merge with or
consolidate into another Person;
6.1.4 Change in Business. Enter into any line of business
other than the ownership, development and operation of the Property, or make any
material change in the scope or nature of its business objectives, purposes or
operations, or undertake or participate in activities other than the continuance
of its present business;
6.1.5 Debt Cancellation. Cancel or otherwise forgive or
release any material claim or debt owed to Borrower by any Person, except for
adequate consideration and in the ordinary course of Borrower's business in its
reasonable judgment;
6.1.6 Assets. Purchase or own any property other than the Property;
6.1.7 Transfers. Make, suffer or permit the occurrence of any Transfer
other than a Permitted Transfer;
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6.1.8 Debt. Create, incur or assume any indebtedness other
than the Debt and unsecured trade debt incurred in the ordinary course of
business and not past due as permitted pursuant to Sections 4.1.33 and 5.1.21;
6.1.9 Assignment of Rights. Without Lender's prior consent,
attempt to assign Borrower's rights or interest under any Loan Document in
contravention of any Loan Document; or
6.1.10 Operation of the Property. Cease to operate the
Property or allow the Property to cease to be operated as its Permitted Use or
terminate such business for any reason whatsoever (other than temporary
cessation in connection with renovations to the Property).
6.1.11 Use Specific Negative Covenants. Without Lender's prior
written consent, Borrower shall not and shall not allow the Manager who manages
the Property to:
(i) transfer any License to any location other than the Property for which
such License was originally issued nor pledge any License as collateral security
for any other loan or indebtedness;
(ii) rescind, withdraw, revoke, amend, modify, supplement, or otherwise
alter the nature, tenor or scope of any License for the Property which
rescission, withdrawal, revocation, amendment, modification, supplement or other
alteration would have a material adverse effect on the Property;
(iii) amend or otherwise change the Property's authorized unit capacity
and/or the number of units approved by the DOH which amendment or other change
would have a material adverse effect on the Property;
(iv) Intentionally deleted.
(v) Intentionally deleted;
(vi) pledge any receivables as collateral security for any other loan or
indebtedness;
(vii) enter into any resident agreements with residents or with any other
persons which deviate in any material respect from the Approved Residency
Agreement used at the Property;
(viii) Intentionally deleted;
(ix) fail to satisfy all material requirements established by law,
regulation or administrative instruction for the operation of the Property; or
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(x) fail to operate the Property in a manner that is consistent with all
relevant standards of care and service in the community for similar projects.
6.2 Manager's Covenants. Until the end of the Term or the
Defeasance of the entire unpaid Principal, Manager covenants and agrees with
Lender that it will not, without Lender's prior written consent, directly or
indirectly:
6.2.1 Management Agreement. Without Lender's prior written
consent: (i) surrender, terminate or cancel the Management Agreement or
otherwise enter into any other management agreement (except pursuant to Sections
5.1.14 and 5.2.14); (ii) except for Permitted Transfers, suffer or permit the
ownership, management or control of the Manager to be transferred to a Person
other than an Affiliate of Manager; (iii) reduce or consent to the reduction of
the term of the Management Agreement; (iv) increase or consent to the increase
of the amount of any charges under the Management Agreement; or (v) otherwise
modify, change, supplement, alter or amend in any material respect, or waive or
release any of its material rights and remedies under, the Management Agreement;
or (vi) suffer or permit the occurrence and continuance of a default beyond any
applicable cure period under the Management Agreement (or any successor
management agreement) if such default permits the Borrower to terminate the
Management Agreement (or such successor management agreement);
6.2.2 Liens. Without Lender's prior written consent, create,
incur, assume, permit or suffer to exist any mechanic's, materialmen's or other
Lien on any portion of the Property or legal or beneficial ownership interest in
Manager, except Permitted Encumbrances, unless such Lien is bonded, insured or
discharged within thirty (30) days after Manager first receives notice of such
Lien;
6.2.3 Dissolution. Dissolve, terminate, liquidate, merge with or
consolidate into another Person;
6.2.4 Change in Business. Enter into any line of business
other than the development, management, and operation of the Property, or make
any material change in the scope or nature of its business objectives, purposes
or operations, or undertake or participate in activities other than the
continuance of its present business;
6.2.5 Debt Cancellation. Cancel or otherwise forgive or
release any material claim or debt owed to Manager by any Person, except for
adequate consideration and in the ordinary course of Manager's business in its
reasonable judgment;
6.2.6 Assets. Purchase or own any property other than property relating to
the operation of the Property;
6.2.7 Transfers. Make, suffer or permit the occurrence of any Transfer
other than a Permitted Transfer;
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6.2.8 Debt. Create, incur or assume any indebtedness other
than related to the Debt and unsecured trade debt incurred in the ordinary
course of business and not past due as permitted pursuant to Sections 4.2.33 and
5.2.21;
6.2.9 Assignment of Rights. Without Lender's prior consent,
attempt to assign Manager's rights or interest under any Loan Document in
contravention of any Loan Document; or
6.2.10 Operation of the Property. Cease to operate the
Property as its Permitted Use or terminate such business for any reason
whatsoever (other than temporary cessation in connection with renovations to the
Property).
6.2.11 Use Specific Negative Covenants. Without Lender's prior
written consent, Manager shall not and shall not allow the Borrower to:
(i) transfer any License to any location other than the Property for which
such License was originally issued nor pledge any License as collateral security
for any other loan or indebtedness;
(ii) rescind, withdraw, revoke, amend, modify, supplement, or otherwise
alter the nature, tenor or scope of any License for the Property which
rescission, withdrawal, revocation, amendment, modification, supplement or other
alteration would have a material adverse effect on the Property;
(iii) amend or otherwise change the Property's authorized unit capacity
and/or the number of units approved by the DOH which amendment or other change
would have a material adverse effect on the Property;
(iv) Intentionally deleted;
(v) Intentionally deleted;
(vi) pledge any receivables as collateral security for any other loan or
indebtedness;
(vii) enter into any resident agreements with residents or with any other
persons which deviate in any material respect from the Approved Residency
Agreement used at the Property;
(viii) Intentionally deleted;
(ix) fail to satisfy all material requirements established by law,
regulation or administrative instruction for the operation of the Property; or
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(x) fail to operate the Property in a manner that is consistent with all
relevant standards of care and service in the community.
VII. INSURANCE; CASUALTY; AND CONDEMNATION
7.1 Insurance.
7.1.1 Coverage. At all times while the Borrower is indebted to
Lender, either the Borrower or Manager shall maintain the following insurance:
(a) During any period of construction, repair or restoration,
builder's "all risk" insurance in an amount equal to not less than the
full insurable value of the Property and Equipment against such risks
(including, without limitation, fire and extended coverage and collapse
of the Improvements to agreed limits) as Lender may reasonably request,
in form and substance reasonably acceptable to Lender.
(b) Insurance with respect to the Improvements, Equipment and
Inventory against any peril included within the classification "All
Risks of Physical Loss" with extended coverage in amounts at all times
sufficient to prevent the Borrower and/or Manager from becoming a
co-insurer within the terms of the applicable policies, but in any
event such insurance shall be maintained in an amount equal to the full
insurable value of the Improvements, Equipment and Inventory located on
the Property, the term "full insurable value" to mean the actual
replacement cost of the Improvements, Equipment and Inventory (without
taking into account any depreciation), determined annually by an
insurer or by the Borrower or Manager or, at the request of Lender, by
an independent insurance broker (subject to Lender's reasonable
approval) including an endorsement covering acts of municipal
authorities including increased cost of construction and demolition;
(c) Comprehensive general liability insurance, including
contractual injury, bodily injury, broad form death and property damage
liability, and umbrella liability insurance against any and all claims,
including all legal liability to the extent insurable imposed upon
either Borrower or Manager and all court costs and attorneys' fees and
expenses, arising out of or connected with the possession, use,
leasing, operation, maintenance or condition of the Property in such
amounts as are generally required by institutional lenders for
properties comparable to the Property but in no event with limits for
the Property of less than $1,000,000 per occurrence with combined
single limit coverage for bodily injury or property damage and excess
(umbrella) liability coverage for the Property of no less than
$25,000,000;
(d) Statutory workers' compensation insurance (to the extent
the risks to be covered thereby are not already covered by other
policies of insurance maintained by Borrower or Manager, with respect
to any work on or about the Property);
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(e) Business interruption and/or loss of "rental value"
insurance for the Property in an amount equal to not less than eighteen
(18) months estimated Gross Revenue attributable to the Property and
based on the Gross Revenue for the immediately preceding year and
otherwise sufficient to avoid any co-insurance penalty;
(f) If all or any portion of the Property, or any portion of
the Land is located within a federally designated flood hazard zone,
flood insurance in an amount equal to the lesser of the full insurable
value of the Property or the maximum amount available;
(g) Insurance against loss or damage from (A) leakage of
sprinkler systems and (B) explosion of steam boilers, air conditioning
equipment, pressure vessels or similar apparatus now or hereafter
installed at the Property, in such amounts as Lender may from time to
time reasonably require and which are customarily required by
institutional lenders with respect to similar properties similarly
situated; and
(h) Such other insurance with respect to the Improvements,
Equipment and Inventory located on the Property against loss or damage
as is reasonably requested by Lender (including without limitation
liquor/dram insurance and earthquake insurance) provided such insurance
is of the kind from time to time customarily insured against and in
such amounts as are generally required by institutional lenders for
properties comparable to the Property or which Lender may deem
necessary in its reasonable discretion.
7.1.2 Policies. The Borrower or Manager will maintain the
insurance coverage described in Section 7.1.1 with companies reasonably
acceptable to Lender and with a claims paying ability of not less than "AA" by
S&P and AA or its equivalent by any one of the other Rating Agencies. All
insurers providing insurance required by this Agreement shall be authorized and
licensed, if necessary, to issue insurance in the state where the Property is
located.
The insurance coverage required under Section 7.1.1 may be
effected under a blanket policy or policies covering the Property and other
property and assets not constituting a part of the Property; provided that any
such blanket policy shall specify, except in the case of public liability
insurance, the portion of the total coverage of such policy that is allocated to
the Property and Equipment and Inventory located thereon, and any sublimits in
such blanket policy applicable to the Property, which amounts shall not be less
than the amounts required pursuant to Section 7.1.1 and which shall in any case
comply in all other respects with the requirements of this Section 7.
All insurance policies (the "Policies") shall be in such form
and with such endorsements and in such amounts as shall be reasonably
satisfactory to Lender (and Lender shall be entitled to approve amounts, form,
risk coverage, deductibles, loss payees and insureds). The policy referred to in
Section 7.1.1(b) shall contain a replacement cost endorsement and a waiver of
depreciation. Certificates of insurance evidencing that all of the
above-mentioned
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Policies are in effect have been delivered to and shall be held by Lender. All
such Policies shall name Lender as an additional insured/loss payee, shall
provide that all Proceeds be payable to Lender as set forth in Section 7.1.3,
and shall contain: (i) "Non Contributory Standard Lender Clause" and a Lender's
Loss Payable Endorsement (Form 438 BFUNS) or their equivalents naming Lender as
the person to which all payments shall be paid and a provision that payment of
Proceeds in excess of $100,000 shall be made by a check payable only to Lender;
(ii) a waiver of subrogation endorsement as to Lender and its assigns providing
that no policy shall be impaired or invalidated by virtue of any act, failure to
act, negligence of, or violation of declarations, warranties or conditions
contained in such policy by Borrower, Manager, Lender or any other named
insured, additional insured or loss payee, except for the willful misconduct of
Lender knowingly in violation of the conditions of such policy; (iii) an
endorsement indicating that neither Lender nor the Borrower or Manager shall be
or be deemed to be a co-insurer with respect to any risk insured by such
Policies and shall provide for an aggregate deductible per loss for all policies
of an amount not more than that which is customarily maintained by prudent
owners of property of the same type and quality as the Property, but in no event
in excess of the greater of (i) $25,000 per occurrence or (ii) five percent (5%)
of Net Operating Income; (iv) a provision that such Policies shall not be
canceled or amended, including, without limitation, any amendment reducing the
scope or limits of coverage, without at least thirty (30) days prior written
notice to Lender in each instance; and (v) include effective waivers by the
insurer of all claims for Insurance Premiums against any loss payees, additional
insureds and named insureds (other than the Borrower or Manager). Certificates
of insurance with respect to all renewal and replacement policies shall be
delivered to Lender not less than ten (10) days prior to the expiration date of
any of the Policies required to be maintained hereunder which certificates shall
bear notations evidencing payment of applicable premiums and certified copies or
evidence of the required coverage under blanket policies of such Policies shall
be delivered to Lender promptly after Borrower's and Manager's receipt thereof.
Borrower or Manager shall pay the premiums for such Policies (the "Insurance
Premiums") as the same become due and payable and furnish to Lender evidence of
the renewal of each of the Policies together with (unless such Insurance
Premiums have been paid by Lender pursuant to Section 3.2) receipts for or other
evidence of the payment of the Insurance Premiums reasonably satisfactory to
Lender. If either Borrower or Manager fails to maintain the insurance required
hereunder and deliver to Lender the certificates of insurance required by this
Agreement, Lender may, at its option, after written notice to both Borrower and
Manager, procure such insurance, and either Borrower or Manager shall reimburse
Lender for the amount of all premiums paid by Lender thereon within ten (10)
days after receipt of written notice of, and demand for, such amount, by Lender,
with interest thereon at the Default Rate from the date paid by Lender to the
date of repayment, and such sum shall be a part of the Debt secured by the
Mortgage.
Lender shall not by the fact of approving, disapproving, accepting,
preventing, obtaining or failing to obtain any insurance, incur any liability
for or with respect to the amount of insurance carried, the form or legal
sufficiency of insurance contracts, solvency of insurance companies, or the
carriers' or the Borrower's or Manager's payment or defense of lawsuits, and the
Borrower and Manager hereby expressly assume full responsibility therefor and
all liability, if any, with respect thereto.
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7.1.3 Proceeds. Subject to the provisions of Section 7.4,
Lender shall be entitled to receive and collect all Insurance Proceeds (as
hereinafter defined) and Awards (as hereinafter defined) and all of the
Insurance Proceeds and Awards are hereby assigned to Lender. Borrower and
Manager shall execute such further assignments of the Insurance Proceeds and
Awards as Lender may from time to time reasonably require. Without limiting the
generality of the foregoing, but subject to the provisions of Section 7.4,
following the occurrence of any casualty or damage involving the Property or any
part thereof, Borrower and/or Manager shall give prompt notice thereof to Lender
and shall cause all Proceeds and Awards payable as a result of such casualty or
damage to be paid to Lender as additional collateral security hereunder subject
to the Lien of the Mortgage and Subordinate Mortgage, to be applied by Lender to
reduce the Debt.
7.2 Casualty.
7.2.1 Notice; Restoration. If the Property is damaged or
destroyed, in whole or in part, by fire or other casualty (a "Casualty"),
Borrower or Manager shall give prompt notice thereof to Lender and cause all
Proceeds to be paid to Lender, which shall, subject to the provisions of Section
7.4 herein, apply such Proceeds to reduce the Debt. Following the occurrence of
a Casualty, Borrower and/or Manager, regardless of whether insurance proceeds
are available, shall promptly proceed to restore, repair, replace or rebuild the
Property in accordance with Legal Requirements to be of at least equal value and
of substantially the same character as prior to such damage or destruction.
7.2.2 Settlement of Proceeds. In the event of a Casualty
covered by any of the Policies (an "Insured Casualty") where the loss does not
exceed One Hundred Thousand and 00/100 Dollars ($100,000.00), Borrower or
Manager may settle and adjust any claim without the consent of Lender; provided
such adjustment is carried out in a competent and timely manner; and Borrower or
Manager is hereby authorized to collect and receipt for the insurance proceeds
(the "Proceeds"). Lender shall be entitled at its option to participate in any
compromise, adjustment or settlement in connection with any claims for loss,
damage or destruction under any policy or policies of insurance, in excess of
$100,000, and the Borrower and Manager shall within ten (10) Business Days after
request therefor reimburse the Lender for all reasonable out-of-pocket expenses
(including reasonable attorneys' fees and disbursements) incurred by the Lender
in connection with such participation. The Borrower and Manager shall not make
any compromise, adjustment or settlement in connection with any such claim in
excess of $100,000, without the prior written approval of the Lender, which
approval shall not be unreasonably withheld. The Proceeds shall be due and
payable solely to Lender and held by Lender in the Casualty/Condemnation
Subaccount and disbursed in accordance with the terms of Section 7 of this
Agreement.
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7.3 Condemnation.
7.3.1 Notice; Restoration. Borrower or Manager shall promptly
give Lender notice of the actual or threatened commencement of any condemnation
or eminent domain proceeding affecting the Property (a "Condemnation") and shall
deliver to Lender copies of any and all papers served in connection with such
Condemnation. Following the occurrence of a Condemnation, Borrower and/or
Manager, regardless of whether an Award is available, shall promptly proceed to
restore, repair, replace or rebuild the Property in accordance with Legal
Requirements to the extent practicable to be of at least equal value and of
substantially the same character as prior to such Condemnation.
7.3.2 Collection of Award. Subject to Section 7.4, Lender is
hereby irrevocably appointed as Borrower's and Manager's attorney-in-fact,
coupled with an interest, with exclusive power to collect, receive and retain
any award or payment in respect of a Condemnation (an "Award") and to make any
compromise or settlement in connection with such Condemnation. Notwithstanding
any Condemnation (or any transfer made in lieu of or in anticipation of such a
Condemnation), Borrower shall continue to pay the Debt at the time and in the
manner provided for in the Loan Documents, and the Debt shall not be reduced
unless and until any Award shall have been actually received and applied by
Lender to expenses of collecting the Award and to discharge of the Debt. Lender
shall not be limited to the interest paid on the Award by the condemning
authority but shall be entitled to receive out of the Award interest at the rate
or rates provided in the Note. Subject to Section 7.4, Borrower and Manager
shall cause any Award that is payable to Borrower or Manager to be paid directly
to Lender. Lender shall hold such Award in the Casualty/Condemnation Subaccount
and disburse such Award in accordance with the terms hereof.
7.4 Application of Proceeds or Award.
7.4.1 Application to Restoration; Procedure for Application to
Restoration. Notwithstanding anything to the contrary set forth in Sections 7.2
and 7.3, Lender agrees that Lender shall make the Proceeds or the Award (other
than business interruption insurance proceeds, which shall be held and disbursed
in accordance with this Agreement), as applicable, available to Manager or
Borrower for repair, restoration and replacement of the Improvements, Equipment
and Inventory damaged or taken on the following terms and subject to Manager's
or Borrower's satisfaction of the following conditions:
(a) At the time of such loss, damage or taking and at all times thereafter
while Lender is holding any portion of such Proceeds or such Award, as
applicable, there shall exist no Default or Event of Default;
(b) The Improvements, Equipment and Inventory for which loss or damage has
resulted shall be capable of being restored substantially (including
replacements) to their pre-existing condition and utility as existed immediately
prior to the occurrence of the loss or damage then in question in all material
respects with a value equal to or greater
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than prior to such loss or damage and shall be capable of being
substantially completed no less than six (6) months prior to the Stated Maturity
Date and prior to the expiration of business interruption insurance;
(c) The Borrower and/or Manager shall demonstrate to Lender's reasonable
satisfaction Borrower's and/or Manager's ability to pay the Debt relating to the
Property coming due and payable during such restoration period;
(d) Within thirty (30) days from the date of such loss, damage or taking,
Borrower and/or Manager shall have given Lender a written notice electing to
have the Proceeds or the Award, as applicable, applied for such purpose;
(e) Within sixty (60) days following the date of notice under the preceding
subparagraph (d) and prior to any Proceeds or any of the Award, as applicable,
being disbursed as directed by Manager, Borrower and/or Manager shall have
provided to Lender all of the following:
(1) if loss, damage or taking exceeds $100,000,
complete plans and specifications for restoration, repair and
replacement of the Improvements, Equipment and Inventory
damaged to the condition, utility and value required by the
preceding subparagraph (b),
(2) if loss, damage or taking exceeds $100,000,
fixed-price or guaranteed maximum cost construction contracts
for completion of the repair and restoration work in
accordance with such plans and specifications with respect to
repairs to the Improvements and firm quotes for Equipment and
Inventory to be repaired or replaced,
(3) if loss, damage or taking exceeds $100,000,
builder's risk insurance for the full cost of construction
with Lender named under a standard lender loss-payable clause,
(4) such additional funds (if any) as in Lender's
reasonable opinion are necessary, in addition to the Proceeds
or the Award, as applicable, to complete the repair,
restoration and replacement, and
(5) if loss, damage or taking exceeds $100,000,
copies of all permits and licenses necessary to complete the
work in accordance with the plans and specifications;
(f) If loss, damage or taking exceeds $100,000, Lender may, at Borrower's
and/or Manager's expense to the extent such expenses and fees are reasonable,
retain an independent inspector to review and approve plans and specifications
and completed construction and to approve all requests for disbursement, which
approvals shall be
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conditions precedent to release of the Proceeds or the Award, as
applicable, as work progresses;
(g) Manager or Borrower shall commence such work within one hundred twenty
(120) days after such loss or damage and shall diligently pursue such work to
completion;
(h) If loss, damage or taking exceeds $100,000, each disbursement by Lender
of the Proceeds or the Award, as applicable, shall be funded subject to
conditions and in accordance with disbursement procedures which a commercial
construction lender would typically establish in the exercise of sound banking
practices and shall be made only upon receipt of disbursement requests on an AIA
G702/703 form (or similar form reasonably approved by Lender) signed and
certified by Manager or Borrower and its architect and general contractor with
appropriate invoices, lien waivers and any other documents, instruments or items
which may be reasonably required by Lender; and
(i) Lender shall have a first lien and security interest in all of
Borrower's and Manager's interest in all building materials and completed repair
and restoration work and in all fixtures and equipment acquired with such
Proceeds or Award, as applicable, and Borrower and/or Manager shall execute and
deliver such mortgages, deeds of trust, security agreements, financing
statements and other instruments as Lender shall reasonably request to create,
evidence, or perfect such lien and security interest.
7.4.2 Application to Debt. Subject to the Borrower's and
Manager's rights under Section 7.4.3, in the event and to the extent such
Proceeds or Award, as applicable, are not required to be made available to
Manager and/or Borrower to be used for the repair, restoration and replacement
of the Improvements, Equipment and Inventory for which a loss or damage has
occurred, or in the event the Manager and/or Borrower fails to timely make such
election or having made such election fails to timely comply with or is
otherwise unable to satisfy the terms and conditions set forth herein, upon five
(5) Business Days prior notice to the Borrower and Manager, Lender shall be
entitled to the payment of Proceeds or Award, as applicable, to pay and, without
consent from either Borrower or Manager to apply such Proceeds or Award, as
applicable, or the balance thereof, at Lender's option either (x) to the full or
partial payment or prepayment of the Debt in accordance with this Agreement or
(y) to the repair, restoration and/or replacement of all or any part of such
Improvements, Equipment and Inventory for which a loss or damage has occurred.
7.4.3 Disbursement of Remaining Proceeds or Award. Provided no
Event of Default has occurred and is continuing and the replacement, restoration
or repair has been completed in accordance with this Agreement, any Proceeds or
Award, as applicable, available to Borrower or Manager for replacement,
restoration or repair, to the extent not used by Borrower or Manager in
connection with, or to the extent they exceed the cost of such replacement,
restoration or repair shall be paid as directed by Manager.
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7.4.4 Lender as Attorney-In-Fact. The Borrower and Manager
appoint Lender to act, after the occurrence and during the continuation of an
Event of Default, as the Borrower's and/or Manager's attorney-in-fact, coupled
with an interest, to cause the issuance of or an endorsement of any policy to
bring the Borrower and Manager into compliance herewith and, as limited above,
at Lender's sole option, to make any claim for, receive payment for, and execute
and endorse any documents, checks or other instruments in payment for loss,
theft, or damage covered under any such insurance policy; however, in no event
will Lender be liable for failure to collect any amounts payable under any
insurance policy.
7.4.5 Foreclosure. In the event of foreclosure of the Lien of
the Mortgage or other transfer of title or assignment of the Property in
extinguishment, in whole or in part, of the Obligations, all right, title, and
interest of Borrower and Manager in and to all Policies covering all or any part
of the Property and the Award shall inure to the benefit of and pass to the
successors in interest to Lender or the purchaser or grantee of the Property or
any part thereof.
7.4.6 Security in Proceeds or Award. Lender shall have a first
lien and security interest in all building materials and completed repair and
restoration work and in all fixtures and equipment acquired with such Proceeds
or Award, and Borrower and Manager shall execute and deliver such mortgages,
deeds of trust, security agreements, financing statements and other instruments
as Lender shall reasonably request to create, evidence, or perfect such lien and
security interest.
VIII. DEFAULTS
8.1 Events of Default. Each of the following events shall
constitute an "Event of Default":
(a) if on any Payment Date any portion of the Debt is not paid or the funds
in the Monthly Debt Service Subaccount are insufficient to pay the required Debt
payment on such Payment Date; provided, however, that if a Cash Management
Period has not occurred, such failure shall not constitute an Event of Default
if Borrower shall cure such failure within five (5) days after such Payment
Date;
(b) Borrower shall fail to pay when due any deposit into any Fund;
provided, however, that if a Cash Management Period has not occurred, such
failure shall not constitute an Event of Default if Borrower shall cure such
failure within five (5) days thereafter;
(c) Borrower shall fail to pay the outstanding Debt on the Maturity Date;
(d) any of the Taxes or Other Charges are not paid when due by Borrower
and/or Manager, subject to Borrower's or Manager's right to contest Taxes in
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accordance with Section 5.1.2 and 5.2.2 and such failure continues for five
(5) days thereafter;
(e) the Policies are not kept in full force and effect, or are not
delivered to Lender within five (5) days of request therefor;
(f) a Transfer other than a Permitted Transfer occurs, unless the prior
written consent of Lender is obtained (which consent may be withheld with or
without cause in Lender's discretion);
(g) any representation or warranty made by Borrower, Manager, or Guarantor
in any Loan Document, or in any report, certificate, financial statement or
other instrument, agreement or document furnished by Borrower, Manager or
Guarantor in connection with any Loan Document, shall be false or misleading in
any material respect as of the date the representation or warranty was made or
remade;
(h) Borrower, Manager or Guarantor shall make an assignment for the benefit
of creditors, or shall generally not be paying its debts as they become due or
otherwise in accordance with applicable provisions of this Agreement;
(i) a receiver, liquidator or trustee shall be appointed for Borrower,
Manager or Guarantor; or Borrower, Manager or Guarantor shall be adjudicated a
bankrupt or insolvent; or any petition for bankruptcy, reorganization or
arrangement pursuant to federal bankruptcy law, or any similar federal or state
law, shall be filed by or against, consented to, or acquiesced in by, Borrower,
Manager or Guarantor; or any proceeding for the dissolution or liquidation of
Borrower, Manager or Guarantor shall be instituted; provided, however, if such
appointment, adjudication, petition or proceeding was involuntary and not
consented to by Borrower, Manager or Guarantor, only upon the same not being
discharged, stayed or dismissed within ninety (90) days;
(j) Borrower or Manager breaches any negative covenant contained in Section
6 or any covenant contained in Sections 5.1.15 or 5.2.15;
(k) Borrower shall be in default under any other mortgage or security
agreement covering any part of the Property whether it be superior or junior in
Lien to the Mortgage;
(l) except as permitted under the Loan Documents, the actual alteration,
improvement, demolition or removal of any of the Improvements without the prior
consent of Lender;
(m) an Event of Default as defined or described in any Loan Document
occurs; or any other event shall occur or condition shall exist, if the effect
of such event
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or condition is to accelerate or to permit Lender to accelerate the
maturity of any portion of the Debt;
(n) Borrower, Manager or Guarantor shall be in default under any term,
covenant or provision set forth herein or in any Loan Document which
specifically contains a notice requirement or grace period and such notice has
been given and such grace period has expired;
(o) if Borrower, Manager or Guarantor attempts to delegate or assign its
rights under any or all of the Loan Documents or any interest therein;
(p) any of the assumptions contained in any substantive non-consolidation
opinion, delivered to Lender by Borrower's counsel in connection with the Loan
or otherwise hereunder, were not true and correct as of the date of such opinion
or thereafter became untrue or incorrect, or any representation or warranty by
Borrower, Borrower Representative, Borrower Sponsor, Manager, Manager
Representative, Manager Sponsor, or Guarantor in any certificate furnished by
any of the aforementioned and which certificate is made a part of such opinion,
shall be false or misleading in any material respect as of the date the
representation or warranty was made;
(q) for any period in which the Borrower's Obligations hereunder are
cross-defaulted with any Other Loans pursuant to Section 10.31, the occurrence
of an "Event of Default" as defined in any Other Loan Document evidencing such
Other Loans with which the Loan is so cross-collateralized and/or
cross-defaulted;
(r) except as permitted under this Agreement, if any provision of any
organizational document of Borrower is amended or modified in any respect which
conflicts with the Special Purpose Bankruptcy Remote Entity Requirements
contained in Section 5.1.15 of this Agreement or as otherwise set forth in its
corporate documents, or if Borrower, or Borrower's Owner or Representative or
any of their respective partners, members, beneficial owners, trustees or
shareholders as applicable, fails to perform or enforce the provisions of such
organizational documents or attempts to dissolve Borrower; or if Borrower or any
of its respective partners, members, beneficial owners, trustees or
shareholders, as applicable, breaches any of the covenants set forth in Sections
5.1.15 and 6.1.4; or
(s) except as permitted under this Agreement, if, after the Conversion
Date, any provision of any organizational document of Manager is amended or
modified in any respect which conflicts with the Special Purpose Bankruptcy
Remote Entity Requirements contained in Section 5.2.15 of this Agreement or as
otherwise set forth in its corporate documents, or if Manager, or Manager's
Owner or Representative or any of their respective partners, members, beneficial
owners, trustees or shareholders as applicable, fails to perform or enforce the
provisions of such organizational documents or attempts to dissolve Manager; or
if
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Manager or any of its respective partners, members, beneficial owners,
trustees or shareholders, as applicable, breaches any of the covenants set forth
in Sections 5.2.15 and 6.2.4;
(t) if the Management Agreement shall at any time cease to be in full force
and effect for any reason and a new Management Agreement, acceptable to Lender
in form and substance shall not have been entered into in its place within
twenty (20) days after the Management Agreement, ceases to be effective;
(u) if any Event of Default occurs (as to any party) under the Management
Agreement (subject to any applicable notice and cure periods required under the
Management Agreement);
(v) to the extent any License is required to operate the Property as its
Permitted Use and such License or Licenses cannot be obtained until the Property
has been substantially completed, if Borrower and/or Manager fails to do
whatever is necessary to obtain such Licenses upon Substantial Completion or as
required by applicable Legal Requirements;
(w) if Borrower or Manager shall fail to correct, within the time deadlines
set by any health, licensing or similar agency, any deficiency that justifies
either of the following actions by such agency with respect to the Property and
such agency commences either of the following actions: (i) a termination of any
License; (ii) a ban on new admissions of residents generally;
(x) if an event or condition specified in Sections 5.1.20 or 5.2.20 shall
occur or exist with respect to any Plan or Multiemployer Plan and, as a result
of such event or condition, together with all other such events or conditions,
Borrower or any ERISA Affiliate shall incur or in the opinion of Lender shall be
reasonably likely to incur a liability to a Plan, a Multiemployer Plan or PBGC
(or any combination of the foregoing) which would constitute, in the reasonable
determination of Lender, a material adverse effect;
(y) if the Property is assessed material fines or penalties (as
distinguished from establishment of standard settlement accounts) by any state
or any health, licensing or similar agency having jurisdiction over the
Borrower, the Manager or the Property;
(z) if Borrower and/or Manager fails to execute the Clearing Account
Agreement on or prior to the thirtieth (30th) day after the Loan Closing Date;
(aa) if Borrower and/or Manager fails to execute the Deposit Account
Agreement in accordance with this Agreement;
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(bb) Borrower, Manager or Guarantor shall continue to be in Default
under any of the other terms, covenants or conditions of this Agreement or
any other Loan Document not specified in subsections (a) through (aa)
above, for ten (10) days after notice to Borrower and Manager from Lender,
in the case of any Default which can be cured by the payment of a sum of
money, or for thirty (30) Business Days after notice from Lender in the
case of any other Default (unless otherwise provided for herein); provided,
however, that if such non-monetary Default is susceptible of cure but
cannot reasonably be cured within such 30 Business Day period, and Borrower
or Manager shall have commenced to cure such Default within such 30
Business Day period and thereafter diligently and expeditiously proceeds to
cure the same, such 30 Business Day period shall be extended for an
additional period of time as is reasonably necessary for Borrower and/or
Manager in the exercise of due diligence to cure such Default, such
additional period not to exceed one hundred twenty (120) days; provided,
further, if Borrower or Manager provides to Lender a certificate certifying
and demonstrating that Borrower or Manager is diligently attempting to cure
such default as determined by Lender in its reasonable discretion and such
non-monetary default still is capable of being cured as determined by
Lender in its reasonable discretion and if Borrower or Manager, as
applicable, is diligently attempting to cure such default, as determined by
Lender in its reasonable discretion, such period shall be extended by
Lender in its reasonable discretion for an additional period of time not to
exceed sixty (60) days.
8.2 Remedies.
8.2.1 Acceleration. Upon the occurrence of an Event of Default
and during the continuance thereof (other than an Event of Default described in
paragraph (h) or (i) of Section 8.1), in addition to any other rights or
remedies available to it pursuant to the Loan Documents or at law or in equity,
and without limitation, Lender may take such action, without notice or demand,
that Lender deems advisable to protect and enforce its rights against Borrower
and Manager and in and to the Property, including declaring the Debt to be
immediately due and payable; and upon any Event of Default described in
paragraph (h) or (i) of Section 8.1, the Debt shall immediately and
automatically become due and payable, without notice or demand, and Borrower and
Manager hereby expressly waives any such notice or demand, anything contained in
any Loan Document to the contrary notwithstanding.
8.2.2 Remedies Cumulative. Upon the occurrence of an Event of
Default and during the continuance thereof , all or any one or more of the
rights, powers, privileges and other remedies available to Lender against
Borrower and Manager under the Loan Documents or at law or in equity may be
exercised by Lender at any time and from time to time, whether or not all or any
of the Debt shall be declared due and payable, and whether or not Lender shall
have commenced any foreclosure proceeding or other action for the enforcement of
its rights and remedies under any of the Loan Documents. Any such actions taken
by Lender shall be cumulative and concurrent and may be pursued independently,
singly, successively, together or otherwise, at such time and in such order as
Lender may determine in its discretion, to the fullest extent permitted by law,
without impairing or otherwise affecting the other rights and remedies
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of Lender permitted by law, equity or contract or as set forth in the Loan
Documents. Without limiting the generality of the foregoing, Borrower and
Manager agree that if an Event of Default is continuing, (i) to the extent
permitted by applicable law, Lender is not subject to any "one action" or
"election of remedies" law or rule, and (ii) all liens and other rights,
remedies or privileges provided to Lender shall remain in full force and effect
until Lender has exhausted all of its remedies against the Property, the
Mortgage has been foreclosed, the Property has been sold and/or otherwise
realized upon in satisfaction of the Debt or the Debt has been paid in full. To
the extent permitted by applicable law, nothing contained in any Loan Document
shall be construed as requiring Lender to resort to any portion of the Property
for the satisfaction of any of the Debt in preference or priority to any other
portion, and Lender may seek satisfaction out of the entire Property or any part
thereof, in its discretion.
8.2.3 Lender's Right to Perform. If Borrower or Manager fails
to perform any covenant or obligation contained herein and such failure shall
continue beyond any applicable grace period and thereafter continue for a period
of five (5) Business Days after Borrower's or Manager's, as applicable, receipt
of written notice thereof from Lender, without in any way limiting Sections 8.1
and 8.3 hereof, Lender may, but shall have no obligation to, itself perform, or
cause performance of, such covenant or obligation, and the expenses of Lender
incurred in connection therewith shall be payable by Borrower and Manager to
Lender within ten (10) calendar days after written demand therefor.
Notwithstanding the foregoing, Lender shall have no obligation to send notice to
Borrower or Manager of any such failure.
8.2.4 Severance. Lender shall have the right from time to time
to sever the Note and the other Loan Documents into one or more separate notes,
mortgages and other security documents in such denominations as Lender shall
determine in its discretion for purposes of evidencing and enforcing its rights
and remedies, provided such action has no adverse economic effect on Borrower or
Manager. Borrower shall, at Lender's expense, execute and deliver to Lender from
time to time, promptly after the request of Lender, a severance agreement and
such other documents as Lender shall request in order to effect the severance
described in the preceding sentence, all in form and substance reasonably
satisfactory to Lender. Borrower hereby absolutely and irrevocably appoints
Lender as its true and lawful attorney, coupled with an interest, in its name
and stead to make and execute all documents necessary or desirable to effect
such severance, Borrower ratifying all that such attorney shall do by virtue
thereof.
8.2.5 Delay. No delay or omission to exercise any remedy,
right or power accruing upon an Event of Default shall impair any such remedy,
right or power or be construed as a waiver thereof, but any such remedy, right
or power may be exercised from time to time and as often as may be deemed
expedient. A waiver of one Default or Event of Default shall not be construed to
be a waiver of any subsequent Default or Event of Default or to impair any
remedy, right or power consequent thereon.
8.3 Manager's Limited Right to Cure. Notwithstanding anything in this
Agreement or the Loan Documents to the contrary, if a non-monetary Event of
Default occurs
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and is continuing with respect to Borrower, Lender shall, prior to exercising
its rights under this Article VIII, allow Manager to cure such Event of Default
pursuant to provisions contained in subsections (a) through (c) below, provided
that such Event of Default is not caused directly or indirectly by Manager and
no other Event of Default exists with respect to Manager. For purposes of this
Section 8.3, a "non-monetary" Event of Default means any Event of Default which
cannot be cured solely by the payment of money to Lender. Lender's forbearance
obligations and Manager's cure rights under such circumstances shall be as
follows:
(a) Notwithstanding anything to the contrary contained in Subsection 8.3(b)
below, Lender shall give Manager written notice of such Event of Default and of
Lender's intent to exercise its rights and remedies under this Article VIII and
Lender shall initially forbear from exercising its rights and remedies under
this Article VIII until the earlier to occur of (i) (x) prior to the date on
which the Property achieves a Debt Service Coverage Ratio of 1.0x for a
continuous period of six (6) months, the date which is twenty-five (25) days
after delivery of such written notice and (y) after the date on which the
Property achieves a Debt Service Coverage Ratio of 1.0x for a continuous period
of six (6) months, the date which is forty-five (45) days after delivery of such
written notice, (ii) the occurrence of an Event of Default with respect to
Manager and (iii) the occurrence of an Event of Default, other than a
non-monetary Event of Default.
(b) Notwithstanding anything to the contrary contained in Subsection 8.3(a)
above, Lender shall not exercise its rights under this Article VIII in
connection with the applicable non-monetary Event of Default, if prior to the
date specified in subsection (a)(i) above, the following applicable events and
conditions shall have occurred or been satisfied; (i) the Manager or its nominee
or assignee (provided same have been previously approved by Lender) has acquired
fee simple title to the Property, assumed all of the obligations of the Borrower
under the Loan Documents and has executed and delivered such other documentation
as may be required by Lender and, if the Loan has been transferred in a
Securitization, the Rating Agencies, (ii) if the Loan has been transferred in a
Securitization, the Rating Agencies shall have confirmed in writing that such
transfer shall not result in a downgrade, withdrawal or qualification of any
securities issued in connection with such Securitization, (iii) satisfactory
opinions relating to such transfer shall have been delivered by Manager to
Lender and, if the Loan has been transferred in a Securitization, to the Rating
Agencies (including without limitation tax and bankruptcy opinions), (iv) to the
extent curable, Manager shall have cured such non-monetary Event of Default, (v)
Manager pays all reasonable expenses incurred by Lender in connection with such
transfer, (vi) Manager shall have delivered to Lender an updated Title Insurance
Policy showing fee simple title to the Property in Manager and insuring that
Lender has a valid first lien on the Manager's fee simple interest in the
Property together with such modifications, amendments or supplements to the Loan
Documents as Lender may reasonably request. Upon consummation of the transfer of
fee simple title in the Property to Manager or its nominee or assignee
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(provided same have been previously approved by Lender) and the assignment
by Borrower and assumption by the Manager or its nominee or assignee (provided
same have been previously approved by Lender) of the Borrower's obligations
under the Loan Documents executed by Borrower, Manager shall be considered the
"Borrower" under the Loan Documents as well as the "Manager" under the Loan
Documents and shall have all of the obligations of "Borrower" under the Loan
Documents as well as the obligations of "Manager" under the Loan Documents.
(c) If the conditions required for Lender's forbearance contained in
Section 8.3 are not satisfied, then Lender shall be entitled to exercise all of
its rights and remedies pursuant to this Article VIII without providing any
forbearance or cure rights pursuant to this Section 8.3.
IX. SPECIAL PROVISIONS
9.1 Sale of Note and Securitization.
9.1.1 Cooperation. At Lender's request (to the extent not
already required to be provided by Borrower and Manager under this Agreement),
Borrower and Manager shall use reasonable efforts to satisfy the market
standards to which Lender customarily adheres or which may be reasonably
required in the marketplace or by the Rating Agencies in connection with the
sale of the Note or participation therein or the first successful securitization
(such sale and/or securitization, the "Securitization") of rated single or
multi-class securities (the "Securities") secured by or evidencing ownership
interests in the Note and the Mortgage. Without limiting the generality of the
foregoing, Borrower and Manager shall:
(a) (i) provide such financial and other information with respect to the
Property, Borrower and its Affiliates, Manager and its Affiliates and any
tenants of the Property, (ii) provide business plans and budgets relating to the
Property and (iii) perform or permit or cause to be performed or permitted such
site inspection, appraisals, market studies, environmental reviews and reports
(Phase I's and, if appropriate, Phase II's), engineering reports and other due
diligence investigations of the Property, as may be reasonably requested by
Lender or the Rating Agencies or as may be necessary or appropriate in
connection with the Securitization (the items provided to Lender pursuant to
this paragraph (a) being called the "Provided Information"), together, if
customary, with appropriate verification of and/or consents to the Provided
Information through letters of auditors or opinions of counsel of independent
attorneys acceptable to Lender and the Rating Agencies;
(b) at Borrower's or Manager's expense, as the case may be, cause counsel
to render opinions as to non-consolidation, fraudulent conveyance, true sale and
true contribution and any other opinion customary in securitization transactions
with respect to the Property, Borrower and its Affiliates, Manager and its
Affiliates, which counsel and opinions shall be reasonably satisfactory to
Lender and the Rating Agencies;
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(c) make such representations and warranties as of the closing date of the
Securitization with respect to the Property, Borrower, Manager and the Loan
Documents as are customarily provided in securitization transactions and as may
be reasonably requested by Lender or the Rating Agencies and consistent with the
facts covered by such representations and warranties as they exist on the date
thereof, including the representations and warranties made in the Loan
Documents;
(d) provide current certificates of good standing and qualification with
respect to Borrower from appropriate Governmental Authorities; and
(e) execute such amendments to the Loan Documents, Borrower's
organizational documents, Manager's organizational documents and enter into a
lock-box or similar arrangement with respect to the Rents and establish and fund
such reserve funds (including reserve funds for deferred maintenance and capital
improvements) as may be requested by Lender or the Rating Agencies or otherwise
to effect the Securitization, provided that nothing contained in this subsection
(e) shall result in an economic change in the overall transaction.
Notwithstanding anything to the contrary contained herein or in any other Loan
Documents, Borrower and/or Manager shall be required to reimburse Lender for the
pro rata portion of all reasonable third party costs and expenses incurred by
Lender in connection with a Securitization (or any attempt to securitize the
Loan) which are attributable to Borrower and/or Manager complying with requests
made under this Section 9.1, up to a maximum aggregate amount equal to 37.5
basis points of the original Principal, which Borrower shall deposit with Lender
in the Securitization Expense Subaccount of the Deposit Account on the
Conversion Date. If Lender fails to use all the funds in the Securitization
Expense Subaccount, provided no Event of Default has occurred and is continuing,
Lender (or Servicer) shall refund such remaining funds as directed by Manager
with interest earned thereon, if any.
9.1.2 Use of Information. Borrower and Manager understand that
certain of the Provided Information and the Required Records may be included in
disclosure documents in connection with the Securitization, including a
prospectus or private placement memorandum (each, a "Disclosure Document") and
may also be included in filings with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended (the "Securities Act"), or
the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), or
provided or made available to investors or prospective investors in the
Securities, the Rating Agencies, and service providers relating to the
Securitization. In the event that the Disclosure Document is required to be
revised prior to the sale of all Securities, Borrower and Manager shall
cooperate with Lender in updating the Provided Information or Required Records
for inclusion or summary in the Disclosure Document by providing all current
information pertaining to Borrower, Manager and the Property necessary to keep
the Disclosure Document accurate and complete in all material respects with
respect to such matters.
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9.1.3 Borrower and Manager Obligations Regarding Disclosure
Documents. In connection with a preliminary and a final private placement or
prospectus, as applicable, Borrower and Manager agree:
(a) if requested by Lender, subject to Section 10.1 herein, to certify in
writing that Borrower or Manager, as the case may be, has carefully examined
those portions of such memorandum or prospectus, as applicable, pertaining to
Borrower or Manager, as the case may be, the Property and the Loan, including
applicable portions of the sections entitled "Special Considerations",
"Description of the Mortgages", "Description of the Mortgage Loans and Mortgaged
Property", "The Manager", "The Borrower" and "Certain Legal Aspects of the
Mortgage Loan", and such sections (and any other sections reasonably requested
and pertaining to Borrower or Manager, as the case may be, the Property or the
Loan) do not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements made, in the light of
the circumstances under which they were made, not misleading, provided, however,
that neither Borrower nor Manager shall be required to indemnify Lender for any
losses relating to untrue statements or omissions which Borrower or Manager
identified to Lender in writing at the time of Borrower's or Manager's
examination of such memorandum or prospectus, as applicable;
(b) to indemnify Lender and the Affiliates of Nomura Securities
International, Inc. ("Nomura"), that have filed the registration statement
relating to the Securitization (the "Registration Statement"), each of its
directors, each of its officers who have signed the Registration Statement and
each person or entity who controls Nomura within the meaning of Section 15 of
the Securities Act or Section 30 of the Exchange Act of 1933, as amended
(collectively, the "Nomura Group"), and Nomura, each of its directors and each
person who controls Nomura, within the meaning of Sec tion 15 of the Securities
Act and Section 20 of the Exchange Act (collectively, the "Underwriter Group")
for any losses, claims, damages or liabilities, other than those relating to
untrue statements or omissions which Borrower or Manager identified to Lender in
writing at the time of Borrower's or Manager's examination of such memorandum or
prospectus as applicable (collectively, the "Liabilities") to which Lender, the
Nomura Group or the Underwriter Group may become subject insofar as the
Liabilities arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the applicable portions of
such sections applicable to Borrower or Manager, as the case may be, the
Property or the Loan, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated in the
applicable portions of such sections or necessary in order to make the
statements in the applicable portions of such sections or in light of the
circumstances under which they were made, not misleading, provided, however,
that Manager shall have had an opportunity to review and comment upon the
relevant portions of such documents and Manager's comments thereon have been
incorporated therein or otherwise been addressed to Manager's reasonable
satisfaction; and
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(c) to reimburse Lender and Nomura for any legal or other expenses
reasonably incurred by Lender and Nomura in connection with investigating or
defending the Liabilities.
Borrower's and Manager's Liability, as the case may be, under clause (a) or (b)
above shall be limited to Liabilities arising out of or based upon any such
untrue statement or omission made therein in reliance upon and in conformity
with information furnished to Lender by or on behalf of Borrower or Manager, as
the case may be, in connection with the preparation of those portions of the
Disclosure Document pertaining to Borrower or Manager, as the case may be, the
Property or the Loan or in connection with the underwriting of the debt,
including financial statements of Borrower or Manager, as the case may be,
operating statements, rent rolls, environmental site assessment reports and
property condition reports with respect to the Property. The foregoing indemnity
will be in addition to any liability which Borrower may otherwise have.
9.1.4 Borrower Indemnity Regarding Filings. In connection with
filings under the Exchange Act, Borrower agrees to (i) indemnify Lender, the
Nomura Group and the Underwriter Group for any Liabilities to which Lender, the
Nomura Group or the Underwriter Group may become subject insofar as the
Liabilities arise out of or are based upon the omission or alleged omission to
state in the Provided Information or Required Records a material fact required
to be stated in the Provided Information or Required Records in order to make
the statements in the Provided Information or Required Records, in light of the
circumstances under which they were made not misleading and (ii) reimburse
Lender or Nomura for any reasonable legal or other expenses reasonably incurred
by Lender and Nomura in connection with defending or investigating the
Liabilities.
9.1.5 Indemnification Procedure. Promptly after receipt by an
indemnified party under Section 9.1.3 or 9.1.4 of notice of the commencement of
any action for which a claim for indemnification is to be made against Borrower,
such indemnified party shall notify Borrower or Manager, as applicable, in
writing of such commencement, but the omission to so notify the Borrower or
Manager, as applicable, will not relieve Borrower or Manager, as applicable,
from any liability that it may have to any indemnified party hereunder except to
the extent that failure to notify causes prejudice to Borrower or Manager, as
applicable. In the event that any action is brought against any indemnified
party, and it notifies Borrower or Manager, as applicable, of the commencement
thereof, Borrower or Manager, as applicable, will be entitled, jointly with any
other indemnifying party, to participate therein and, to the extent that it (or
they) may elect by written notice delivered to the indemnified party promptly
after receiving the aforesaid notice of commencement, to assume the defense
thereof with counsel satisfactory to such indemnified party. After notice from
Borrower or Manager, as applicable, to such indemnified party under this Section
9.1.5, Borrower or Manager, as applicable, shall not be responsible for any
legal or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation; provided, however, if the defendants in any such action include
both Borrower or Manager, as applicable, and an indemnified party, and any
indemnified party shall have reasonably concluded that there
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are any legal defenses available to it and/or other indemnified parties that are
different from or additional to those available to Borrower or Manager, as
applicable, then the indemnified party or parties shall have the right to select
separate counsel to assert such legal defenses and to otherwise participate in
the defense of such action on behalf of such indemnified party or parties.
Borrower or Manager, as applicable, shall not be liable for the expenses of more
than one separate counsel unless there are legal defenses available to it that
are different from or additional to those available to another indemnified
party.
9.1.6 Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for in
Section 9.1.3 or 9.1.4 is for any reason held to be unenforceable by an
indemnified party in respect of any Liabilities (or action in respect thereof)
referred to therein which would otherwise be indemnifiable under Sec tion 9.1.3
or 9.1.4, Borrower and/or Manager shall contribute to the amount paid or payable
by the indemnified party as a result of such Liabilities (or action in respect
thereof); provided, however, that no Person guilty of fraudulent
misrepresentation (within the meaning of Sec tion 11(f) of the Securities Act)
shall be entitled to contribution from any Person not guilty of such fraudulent
misrepresentation. In determining the amount of contribution to which the
respective parties are entitled, the following factors shall be considered: (i)
the Nomura Group's, Borrower's, and Manager's relative knowledge and access to
information concerning the matter with respect to which the claim was asserted;
(ii) the opportunity to correct and prevent any statement or omission; and (iii)
any other equitable considerations appropriate in the circumstances. Lender,
Borrower and Manager hereby agree that it may not be equitable if the amount of
such contribution were determined by pro rata or per capita allocation.
9.1.7 Rating Surveillance. Lender will retain the Rating
Agencies to provide rating surveillance services on Securities. Subject to the
limitation contained in the last paragraph of Section 9.1.1, the pro rata share
of such rating surveillance will be at the expense of Borrower.
X. MISCELLANEOUS
10.1 Exculpation. Except as otherwise set forth in this
Agreement to the contrary, Lender shall not enforce the liability and obligation
of Borrower or Manager to perform and observe the obligations contained in this
Agreement, the Note, the Mortgage or any of the other Loan Documents executed
and delivered by Borrower and/or Manager except that Lender may pursue any power
of sale, bring a foreclosure action, action for specific performance, action for
money judgment, or other appropriate action or proceeding (including, without
limitation, to obtain a deficiency judgment) against Borrower or Manager or any
other Person solely for the purpose of enabling Lender to realize upon (a) the
Collateral, and (b) the Rents and Accounts arising from the Property to the
extent (x) (i) received by Borrower (or any of its affiliates), after the
occurrence of an Event of Default or (ii) received by Manager (or any of their
affiliates), after the occurrence of an Event of Default or (y) distributed to
(i) Borrower or its shareholders, partners, members or beneficial owners, as
applicable, or affiliates during or with respect to any period for which Lender
did not receive the full amounts it was entitled to
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receive as repayments of the Loan pursuant to Section II or (ii) Manager, or its
shareholders, partners, members or beneficial owners, as applicable, or
affiliates during or with respect to any period for which Lender did not receive
the full amounts it was entitled to receive as repayments of the Loan pursuant
to Section II (all Rents and Accounts covered by clauses (x) and (y) being
hereinafter referred to as the "Recourse Distributions") and (c) any other
collateral given to Lender under the Loan Documents or those Other Loan
Documents which are the subject of cross-collateralization and cross-default
pursuant to Section 10.31, if any, ((a), (b), and (c) collectively, the "Default
Collateral"); provided, however, that any judgment in any such action or
proceeding shall be enforceable only to the extent of any such Default
Collateral.
The provisions of this Section 10.1 shall not, however, (a) impair the validity
of the Debt (as defined herein and in any Other Loan Agreement which evidences
any Other Loan which is cross-collateralized and cross-defaulted with the Loan
pursuant to Section 10.31, if any) evidenced by the Loan Documents or those
Other Loan Documents which evidence any Other Loan which is cross-collateralized
and cross-defaulted with the Loan pursuant Section 10.31, if any or in any way
affect or impair the Liens (as defined herein and in any Other Loan Agreement
which evidences any Other Loan which is cross-collateralized and cross-defaulted
with the Loan pursuant to Section 10.31, if any) of the Mortgage or any of the
other Loan Documents or those Other Loan Documents which evidence an Other Loan
which is cross-collateralized and cross-defaulted with the Loan pursuant to
Section 10.31, if any, or the right of Lender to foreclose the Mortgage (as
defined herein and in any Other Loan Agreement which evidences any Other Loan
which is cross-collateralized and cross-defaulted with the Loan pursuant to
Section 10.31, if any) following an Event of Default (as defined herein and in
any Loan Agreement which evidences any Other Loan which is cross-collateralized
and cross-defaulted with the Loan pursuant to Section 10.31, if any); (b) impair
the right of Lender to name any Person as a party defendant in any action or
suit for judicial foreclosure and sale under the Mortgage (as defined herein and
in any Other Loan Agreement which evidences any Other Loan which is
cross-collateralized and cross-defaulted with the Loan pursuant to Section
10.31, if any); (c) affect the validity or enforceability of the Note, the
Mortgage or the other Loan Documents or those Other Loan Documents which is
cross-collateralized and cross-defaulted pursuant to Section 10.31, if any; (d)
impair the right of Lender to obtain the appointment of a receiver; (e) impair
the right of Lender to bring suit for any damages, losses, expenses, liabilities
or costs resulting from fraud, intentional misrepresentation, intentional
physical waste of all or any portion of the Property, or wrongful removal or
disposal of all or any portion of the Property by any Person in connection with
this Agreement, the Note, the Mortgage, the Guarantees, or the other Loan
Documents; (f) impair the right of Lender to obtain the Recourse Distributions
received by any Person; (g) intentionally omitted; (h) impair the right of
Lender to obtain Proceeds or Award due to Lender pursuant to this Agreement; (i)
impair the right of Lender to enforce (against the parties liable therefore
other than the Borrower) the provisions of Sections 4.1.31, 4.2.31, 5.1.10,
5.2.10, clauses (viii) through (xi) of Sections 5.1.18 and 5.2.18, of this
Agreement, or the Environmental Guaranty even after repayment in full by
Borrower of the Debt; (j) prevent or in any way hinder Lender from exercising,
or constitute a defense, or counterclaim, or other basis for relief in respect
of the exercise of, any other remedy against any or all of the Collateral (as
defined herein and in any Other Loan Agreement which evidences an
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Other Loan which is cross-collateralized and cross-defaulted with the Loan
pursuant to Section 10.31, if any) securing the Note as provided in the Loan
Documents; (k) impair the right of Lender to bring suit with respect to any
intentional misapplication of any funds including without limitation any
intentional misappropriation of security deposits, Rents collected more then one
month in advance any Proceeds, and an Award; (l) impair the right of Lender to
sue for, seek or demand a deficiency judgment against any Person solely for the
purpose of foreclosing the Property (as defined in the Loan Documents and the
Other Loan Documents which evidence an Other Loan which is cross-collateralized
and cross-defaulted with the Loan pursuant to Section 10.31, if any) or any part
thereof, or realizing upon the Default Collateral; provided, however, that any
such deficiency judgment referred to in this clause (l) shall be enforceable
only to the extent of any of the Default Collateral; or (m) impair the right of
Lender to realize upon Manager's indemnification of Lender set forth in Sections
9.1.3 and 9.1.4.
Notwithstanding anything to the contrary in this Agreement or any of the Loan
Documents, except as otherwise set forth in the following paragraph, (A) Lender
shall not be deemed to have waived any right which Lender may have under Section
506(a), 506(b), 1111(b) or any other provisions of the U.S. Bankruptcy Code to
file a claim for the full amount of the Debt or to require that all collateral
shall continue to secure all of the Debt in accordance with the Loan Documents,
and (B) the Debt shall be fully recourse to Borrower in the event that Borrower,
Manager, or any Person owning an interest (directly or indirectly) in Borrower
or Manager commences any action, suit, claim, arbitration, governmental
investigation or other proceeding (x) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors seeking to have an order for relief entered
with respect to Borrower or Manager, or seeking to adjudicate Borrower or
Manager a bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or other relief
with respect to Borrower or Manager or Borrower's or Manager's debts, or (y)
seeking appointment of a receiver, trustee, custodian or other similar official
for Borrower or Manager or for all or substantially all of Borrower's or
Manager's assets.
Notwithstanding any provision in this Agreement (including the preceding
paragraph) or in any of the other Loan Documents to the contrary, in no event
shall any officer, director, member, partner, manager, shareholder, incorporator
or agent of Borrower be personally liable to Lender for any of the obligations
of Borrower under this Agreement or under any of the other Loan Documents
including without limitation the obligation to pay any amount due on the Note.
10.2 Notices. All notices, consents, approvals and requests
required or permitted hereunder or under any other Loan Document (a "notice")
shall be given in writing and shall be effective for all purposes if hand
delivered or sent (i) by certified or registered United States mail, postage
prepaid, or (ii) by (A) expedited prepaid delivery service, either commercial or
United States Postal Service, with proof of attempted delivery, and (B)
telecopier (with answer back acknowledged), in any case addressed as follows (or
to such other address or Person as a party shall designate from time to time by
notice to the other party): If to Lender: Nomura Asset Capital Corporation, Two
World Financial Center, Building B, New York, New
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York 10281-1198, Attention: Sheryl McAfee, Telecopier (212) 667-1206, with
copies to : Nomura Asset Capital Corporation, Two World Financial Center,
Building B, New York, New York 10281, Attention: Barry Funt, Telecopier (212)
667-1567 and Dechert Price & Rhoads, 90 State House Square, Hartford, CT
06103-3702, Attention: Marc B. Friedman, Telecopier: (860) 524-3930; if to
Manager: c/o Brookdale Living Communities, Inc., 77 West Wacker Drive, Suite
4400, Chicago, Illinois 60601, Attention: Mr. Darryl W. Copeland, Jr.,
Telecopier (312) 977-3699, c/o Brookdale Living Communities, Inc., 77 West
Wacker Drive, Suite 4400, Chicago, Illinois 60601, Attention: Mr. Robert J.
Rudnik, Telecopier (312) 977-3769; with a copy to: Winston & Strawn, 35 West
Wacker Drive, Chicago, Illinois 60601, Attention: Wayne D. Boberg, Esq.,
Telecopier: (312) 558-5700; if to Borrower: 320 King of Prussia Road, Suite 160,
Radnor, Pennsylvania 19087, Attention: David B. Fenkell, Telecopier (610)
902-0777; with a copy to Squire, Sanders & Dempsey, L.L.P., 1300 Huntington
Center, 41 South High Street, Columbus, Ohio 43215, Attention: Scott B. West,
Telecopier (614) 365-2499. A notice shall be deemed to have been given: in the
case of hand delivery, at the time of delivery; in the case of registered or
certified mail, when delivered or the first attempted delivery on a Business
Day; or in the case of expedited prepaid delivery and telecopy, upon the first
attempted delivery on a Business Day.
10.3 Brokers and Financial Advisors. Borrower and Manager
hereby represent that they have dealt with no financial advisors, brokers,
underwriters, placement agents, agents or finders in connection with the Loan.
Borrower, Manager, and Lender hereby agree to indemnify and hold each other
harmless from and against any and all claims, liabilities, costs and expenses of
any kind in any way relating to or arising from a claim by any Person that such
Person acted on behalf of the indemnifying party in connection with the
transactions contemplated herein. The provisions of this Section 10.3 shall
survive the expiration and termination of this Agreement and the repayment of
the Debt.
10.4 Retention of Servicer. Lender reserves the right to
retain the Servicer to act as its agent hereunder with such powers as are
specifically delegated to the Servicer by Lender, whether pursuant to the terms
of this Agreement, the Pooling and Servicing Agreement, the Deposit Account
Agreement or otherwise, together with such other powers as are reasonably
incidental thereto. Borrower or Manager shall pay any reasonable fees and
expenses of the Servicer in connection with a Defeasance, release of the
Property, assumption or modification of the Loan or enforcement of the Loan
Documents.
10.5 Survival. This Agreement and all covenants, agreements,
representations and warranties made herein and in the certificates delivered
pursuant hereto shall survive the making by Lender of the Loan and the execution
and delivery to Lender of the Note, and shall continue in full force and effect
so long as all or any of the Debt is unpaid. All Borrower's and Manager's
covenants and agreements in this Agreement shall inure to the benefit of the
respective legal representatives, successors and assigns of Lender. The
provisions of the BLA shall survive the completion of the Required Improvements;
provided, however, upon the occurrence of the Conversion Date all of the terms
and provisions of the BLA shall be of no further force and effect (except to the
extent that certain definitions contained herein and
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incorporated by reference in any other Loan Documents continue to be operative
in such other Loan Documents), the BLA shall terminate and this Agreement shall
constitute and operate as the sole loan agreement governing the operation and
administration of the Loan.
10.6 Lender's Discretion. Whenever pursuant to this Agreement
or any other Loan Document, Lender exercises any right of election, consent, or
any right given to it to make such election, give such consent, approve or
disapprove, or any arrangement or term is to be satisfactory to Lender, the
decision of Lender to approve or disapprove or to decide whether arrangements or
terms are satisfactory or not satisfactory shall (except as is otherwise
specifically herein provided) be in the discretion of Lender and shall be final
and conclusive.
10.7 Governing Law. (a) THIS AGREEMENT WAS PARTIALLY
NEGOTIATED IN THE STATE OF NEW YORK, AND MADE BY LENDER IN THE STATE OF NEW
YORK, AND THE PROCEEDS OF THE NOTE DELIVERED PURSUANT HERETO WERE DISBURSED FROM
THE STATE OF NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL
RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY,
AND IN ALL RESPECTS, INCLUDING, MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE. THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS (WITHOUT REGARD
TO CONFLICTS OF LAWS PROVISIONS) OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND PERFORMED IN SUCH STATE AND ANY APPLICABLE LAW OF THE UNITED
STATES OF AMERICA, EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE CREATION,
PERFECTION, AND ENFORCEMENT OF THE LIENS CREATED PURSUANT TO THE LOAN DOCUMENTS
SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE STATE IN WHICH
THE APPLICABLE PROPERTY IS LOCATED, IT BEING UNDERSTOOD THAT, TO THE FULLEST
EXTENT PERMITTED BY THE LAW OF SUCH STATE, THE LAW OF THE STATE OF NEW YORK
SHALL GOVERN THE VALIDITY AND THE ENFORCEABILITY OF ALL LOAN DOCUMENTS AND THE
DEBT. TO THE FULLEST EXTENT PERMITTED BY LAW, BORROWER AND MANAGER HEREBY
UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY
OTHER JURISDICTION GOVERNS THIS AGREEMENT AND THE NOTE, AND THIS AGREEMENT AND
THE NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK PURSUANT TO ss. 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS
LAW.
(b) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER,
BORROWER OR MANAGER ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE
INSTITUTED IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, PURSUANT TO ss.
5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW, AND BORROWER AND MANAGER WAIVE
ANY OBJECTION WHICH THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY
SUCH SUIT,
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ACTION OR PROCEEDING, AND BORROWER AND MANAGER HEREBY IRREVOCABLY SUBMIT TO THE
JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. BORROWER AND
MANAGER DO HEREBY DESIGNATE AND APPOINT CT CORPORATION SYSTEMS, AT 1633
BROADWAY, NEW YORK, NEW YORK 10016 AS THEIR AUTHORIZED AGENT TO ACCEPT AND
ACKNOWLEDGE ON THEIR BEHALF SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED
IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY FEDERAL OR STATE COURT IN NEW
YORK, NEW YORK, AND AGREE THAT SERVICE OF PROCESS UPON SAID AGENT AT SAID
ADDRESS AND WRITTEN NOTICE OF SAID SERVICE OF BORROWER OR MANAGER MAILED OR
DELIVERED TO BORROWER OR MANAGER, AS APPLICABLE, IN THE MANNER PROVIDED HEREIN
SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON BORROWER OR
MANAGER, IN ANY SUCH SUIT, ACTION OR PROCEEDING IN THE STATE OF NEW YORK. A COPY
OF SERVICE OF PROCESS WITH RESPECT TO BORROWER SHALL BE DELIVERED TO MANAGER AND
A COPY OF SERVICE OF PROCESS WITH RESPECT TO MANAGER SHALL BE DELIVERED TO
BORROWER; PROVIDED, HOWEVER, FAILURE TO RECEIVE SUCH COPIES SHALL NOT AFFECT ANY
OF LENDER'S RIGHTS HEREUNDER. EACH BORROWER AND MANAGER (i) SHALL GIVE PROMPT
NOTICE TO LENDER OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II)
MAY AT ANY TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT
WITH AN OFFICE IN NEW YORK, NEW YORK (WHICH OFFICE SHALL BE DESIGNATED AS THE
ADDRESS FOR SERVICE OF PROCESS), AND (III) SHALL PROMPTLY DESIGNATE SUCH A
SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN OFFICE IN NEW YORK, NEW
YORK OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.
10.8 Modification, Waiver in Writing. No modification,
amendment, extension, discharge, termination or waiver of any provision of this
Agreement or of any other Loan Document, nor consent to any departure by
Borrower or Manager therefrom, shall in any event be effective unless the same
shall be in a writing signed by each of Borrower, Manager, and Lender, and then
such waiver or consent shall be effective only in the specific instance, and for
the purpose, for which given. Except as otherwise expressly provided herein, no
notice to or demand on Borrower or Manager shall entitle Borrower or Manager to
any other or future notice or demand in the same, similar or other
circumstances.
10.9 Delay Not a Waiver. Neither any failure nor any delay on
the part of Lender in insisting upon strict performance of any term, condition,
covenant or agreement, or exercising any right, power, remedy or privilege
hereunder, or under any other Loan Document, shall operate as or constitute a
waiver thereof, nor shall a single or partial exercise thereof preclude any
other future exercise, or the exercise of any other right, power, remedy or
privilege. In particular, and not by way of limitation, by accepting payment
after the due date of any amount payable under any Loan Document, Lender shall
not be deemed to have waived any right either to require prompt payment when due
of all other amounts due under the Loan
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Documents, or to declare a Default for failure to effect prompt payment of any
such other amount.
10.10 Trial by Jury. BORROWER, MANAGER AND LENDER HEREBY AGREE
NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVE
ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR
HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR
OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY
JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY BORROWER, MANAGER AND LENDER, AND IS
INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE
RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. EACH PARTY IS HEREBY AUTHORIZED
TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF
THIS WAIVER BY THE OTHER.
10.11 Headings. The Section headings and Table of Contents in
this Agreement are included herein for convenience of reference only and shall
not constitute a part of this Agreement for any other purpose.
10.12 Severability. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
10.13 Preferences. Lender shall have no obligation to marshal
any assets in favor of Borrower or Manager or any other party or against or in
payment of any or all Obligations of Borrower or Manager pursuant to this
Agreement, the Note, or any other Loan Document. Lender shall have the
continuing and exclusive right to apply or reverse and reapply any and all
payments by Borrower to any portion of Borrower's or Manager's Obligations
hereunder, including the Debt. To the extent Borrower makes a payment to Lender,
or Lender receives proceeds of any collateral, which is in whole or part
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then, to
the extent of such payment or proceeds received, the Debt or part thereof
intended to be satisfied shall be revived and continue in full force and effect,
as if such payment or proceeds had not been received by Lender.
10.14 Waiver of Notice. Neither Borrower nor Manager shall be
entitled to any notices of any nature whatsoever from Lender except with respect
to matters for which this Agreement or any other Loan Document specifically and
expressly provides for the giving of notice by Lender to Borrower or Manager, as
the case may be, and except with respect to matters for which Borrower or
Manager is not, pursuant to applicable Legal Requirements, permitted to
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waive the giving of notice. To the maximum extent permitted by Legal
Requirements, Borrower and Manager hereby expressly waive the right to receive
any notice from Lender with respect to any matter for which no Loan Document
specifically and expressly provides for the giving of notice by Lender to
Borrower or Manager, as the case may be.
10.15 Remedies of Borrower. If a claim or adjudication is made
that Lender or its agent, including Servicer, has acted unreasonably or
unreasonably delayed acting in any case where by law or under any Loan Document,
Lender or such agent, as the case may be, has an obligation to act reasonably or
promptly, Borrower agrees that neither Lender nor its agents, including
Servicer, shall be liable for any monetary damages (except for Lender's
obligations to fund all Advances pursuant to the BLA), and Borrower's sole
remedy shall be to commence an action seeking (i) injunctive relief, declaratory
judgment or specific performance or (ii) to enforce its rights under the Loan
Documents (including the BLA). Any action or proceeding to determine whether
Lender has acted reasonably shall be determined by an action (i) seeking
declaratory judgment or (ii) to enforce its rights under the Loan Documents
(including the BLA).
10.16 Prior Agreements. This Agreement, the other Loan
Documents, and Section 2.1 of the Master Financing Facility Agreement contain
the entire agreement of the parties hereto and thereto in respect of the
transactions contemplated hereby and thereby, and all prior agreements among or
between such parties, whether oral or written, are superseded by the terms of
this Agreement and the other Loan Documents.
10.17 Offsets, Counterclaims and Defenses. Any assignee of
Lender's interest in and to the Loan Documents shall take the same free and
clear of all offsets, counterclaims or defenses that are unrelated to the Loan
Documents which Borrower may otherwise have against any assignor of such
documents, and no such unrelated offset, counterclaim or defense shall be
interposed or asserted by Borrower in any action or proceeding brought by any
such assignee upon such documents, and any such right to interpose or assert any
such unrelated offset, counterclaim or defense in any such action or proceeding
is hereby expressly waived by Borrower.
10.18 Publicity. Except as otherwise required by applicable
Legal Requirements, Borrower may not advertise or issue promotional materials
describing Lender's participation in the Loan or the inclusion of the Loan in
any Securitization without the prior consent of Lender. Lender may, without
Borrower's consent, issue press releases, advertisements or other promotional
materials describing Lender's participation in the origination of the Loan or
the Loan's inclusion in any Securitization effectuated or to be effectuated by
Lender.
10.19 No Usury. Borrower and Lender intend at all times to
comply with applicable state law or applicable United States federal law (to the
extent that it permits Lender to contract for, charge, take, reserve or receive
a greater amount of interest than under state law) and that this Section 10.19
shall control every other agreement in the Loan Documents. If the
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applicable law (state or federal) is ever judicially interpreted so as to render
usurious any amount called for under the Note or any other Loan Document, or
contracted for, charged, taken, reserved or received with respect to the Debt,
or if Lender's exercise of the option to accelerate the maturity of the Loan or
any prepayment by Borrower results in Borrower having paid any interest in
excess of that permitted by applicable law, then it is Borrower's and Lender's
express intent that all excess amounts theretofore collected by Lender shall be
credited against the unpaid Principal and all other Debt (or, if the Debt has
been or would thereby be paid in full, refunded to Borrower), and the provisions
of the Loan Documents immediately be deemed reformed and the amounts thereafter
collectible thereunder reduced, without the necessity of the execution of any
new document, so as to comply with the applicable law, but so as to permit the
recovery of the fullest amount otherwise called for thereunder. All sums paid or
agreed to be paid to Lender for the use, forbearance or detention of the Loan
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated, and spread throughout the full stated term of the Loan until payment
in full so that the rate or amount of interest on account of the Debt does not
exceed the maximum lawful rate from time to time in effect and applicable to the
Debt for so loan as the Debt is outstanding. Notwithstanding anything to the
contrary contained in any Loan Document, it is not the intention of Lender to
accelerate the maturity of any interest that has not accrued at the time of such
acceleration or to collect unearned interest at the time of such acceleration.
10.20 Conflict; Construction of Documents. Borrower and
Manager agree that the Note, the Mortgage and the other Loan Documents shall be
made subject to all the terms, covenants, conditions, obligations, stipulations
and agreements contained in this Agreement to the same extent and effect as if
fully set forth in and made a part of the Initial Note, the Mortgage and the
other Loan Documents. If there is a conflict between the terms of this Agreement
and other Loan Documents, then the terms, covenants and conditions of this
Agreement shall prevail. The information set forth on the cover, and recitals
hereof and the Exhibits attached hereto are hereby incorporated herein as a part
of this Agreement with the same effect as set forth in the body hereof. The
parties hereto acknowledge that they were represented by counsel in connection
with the negotiation and drafting of the Loan Documents and that the Loan
Documents shall not be subject to the principle of construing their meaning
against the party that drafted them.
10.21 No Third Party Beneficiaries. The Loan Documents are
solely for the benefit of Lender, the Borrower and the Manager and nothing
contained in any Loan Document shall be deemed to confer upon anyone other than
Lender, the Borrower and the Manager any right to insist upon or to enforce the
performance or observance of any of the obligations contained therein.
10.22 Assignment. Lender shall have the right to assign in
whole or in part this Agreement and/or any of the other Loan Documents and the
obligations hereunder or thereunder to any Person and to participate all or any
portion of the Loan evidenced hereby, including without limitation, any servicer
or trustee in connection with a Securitization; provided, however, that no such
assignment shall increase, decrease or otherwise affect either
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Lender's, Borrower's or Manager's obligations under this Agreement or any of the
other Loan Documents. Lender shall provide Borrower with written notice of any
such assignment; provided, however, that such notice shall not be a condition of
Lender's right to assign this Agreement and/or any of the Loan Documents and the
failure to deliver such notice shall not constitute a default under this Loan
Agreement.
10.23 Exhibits Incorporated. The information set forth on the
cover, heading and recitals hereof, and the Exhibits attached hereto, are hereby
incorporated herein as a part of this Agreement with the same effect as if set
forth in the body hereof.
10.24 No Joint Venture or Partnership. Borrower and Lender
intend that the relationship created hereunder be solely that of borrower and
lender. Manager and Lender intend that the relationship created hereunder be
solely that of manager and lender. Nothing herein is intended to create a joint
venture, partnership, tenancy-in-common, or joint tenancy relationship between
Borrower and Lender, between Manager and Lender, or between Guarantor and Lender
nor to grant Lender any interest in the Property other than that of mortgagee or
lender.
10.25 Waiver of Marshalling of Assets Defense. To the fullest
extent that Borrower may legally do so, Borrower waives all rights to a
marshalling of the assets of Borrower, and others with interests in Borrower,
and of the Property, or to a sale in inverse order of alienation in the event of
foreclosure of the interests hereby created, and agrees not to assert any right
under any laws pertaining to the marshalling of assets, the sale in inverse
order of alienation, homestead exemption, the administration of estates of
decedents, or any other matters whatsoever to defeat, reduce or affect the right
of Lender under the Loan Documents to a sale of the Property for the collection
of the Debt without any prior or different resort for collection, or the right
of Lender to the payment of the Debt in preference to every other claimant
whatsoever.
10.26 Waiver of Counterclaim. Borrower and Manager hereby
waive the right to assert a counterclaim, other than compulsory counterclaim, in
any action or proceeding brought against Borrower or Manager, as applicable, by
Lender or Lender's agents.
10.27 Counterparts. This 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 together constitute one and the same
instrument.
10.28 Bankruptcy Waiver. Borrower and Manager hereby agree
that, in consideration of the recitals and mutual covenants contained herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, in the event Borrower or Manager shall (i) file
with any bankruptcy court of competent jurisdiction or be the subject of any
petition under Title 11 of the U.S. Code, as amended, (ii) be the subject of any
order for relief issued under Title 11 of the U.S. Code, as amended, (iii) file
or be the subject of any petition seeking any reorganization, arrangement,
composition,
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readjustment, liquidation, dissolution or similar relief under any present or
law relating to bankruptcy, insolvency or other relief of debtors, (iv) have
sought or consented to or acquiesced in the appointment of any trustee,
receiver, conservator or liquidator or (v) be the subject of any order,
judgement or decree entered by any court of competent jurisdiction approving a
petition filed against such party for any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
present or future federal or state act or law relating to bankruptcy, insolvency
or other relief for debtors, the automatic stay provided by the Federal
Bankruptcy Code shall be modified and annulled as to Lender, so as to permit
Lender to exercise any and all of its remedies, upon request of Lender made on
notice to Borrower and/or Manager, as the case may be, and any other party in
interest but without the need of further proof or hearing. Borrower, Manager and
any of their Affiliates shall not contest the enforceability of this Section.
10.29 Entire Agreement. This Agreement, together with the
Exhibits hereto and the other Loan Documents constitutes the entire agreement
among the parties hereto with respect to the subject matter contained in this
Agreement, the Exhibits hereto and the other Loan Documents and supersedes all
prior agreements, understandings and negotiations between the parties.
10.30 Borrower Acknowledgments. Lender, Borrower and Manager
hereby acknowledge and agree that (i) the scope of Lender's, Borrower's and
Manager's respective business is wide and includes, but is not limited to,
financing, real estate financing, investment in real estate and other real
estate transactions which may be viewed as adverse to or competitive with the
respective business of Lender, Borrower, Manager or their Affiliates and (ii)
Lender, Borrower and Manager have been represented by competent legal counsel
and has consulted with such counsel prior to executing this Loan Agreement and
any of the other Loan Documents.
10.31 Waiver of "One Action" Rule; Cross Collateralizations.
(a) The Loan has been made by Lender pursuant to the Master Financing
Facility Agreement. The Master Financing Facility Agreement contemplates that
one (1) or more other loans (the "Other Loans") made to Other Borrowers pursuant
to the Master Financing Facility Agreement will, at Lender's election, be cross
collateralized and cross defaulted with the Loan and with each other, subject to
Section (b) below. In such event, such Other Loans will be secured by the
Property and the Collateral, and the Loan will be secured by the other
properties and other collateral serving as primary security for such Other Loans
(the "Other Properties"), subject to Section (b) below.
(b) Borrower hereby agrees that (x) with respect to the obligations of any
Other Borrower under any Other Loan made pursuant to the Master Financing
Facility Agreement, such Other Borrower's obligations shall be
cross-collateralized and cross-defaulted with the Loan until the earlier of (i)
the date on which any such Other Loan or the Loan has been converted pursuant to
the terms of the relevant Other Loan Agreement or this Agreement, as applicable,
and transferred in a Securitization for loans which have stabilized of which the
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Loan or applicable Other Loans are not a part (i.e., the Loan and any Other
Loans are in different Securitization Pools) and (ii) Lender's election to
release the cross-default and the cross-collateralization and (y) the Loan shall
be cross-defaulted and cross-collateralized with any Other Loan which is
included in the same Securitization (as defined in this Agreement and in the
relevant Other Loan Agreement) as the Loan. During the term of any cross-default
and cross-collateralization and with respect to those Other Loans which are the
subject of such cross-default and cross-collateralization, without limitation to
any other right or remedy provided to Lender in this Agreement, the BLA, the
Master Financing Facility Agreement, or any of the other Loan Documents,
Borrower acknowledges and agrees that, to the full extent permitted under
applicable law, upon the occurrence of an Event of Default (i) Lender shall have
the right to pursue all of its rights and remedies in one proceeding, or
separately and independently in separate proceedings which it, as Lender, in its
discretion, shall determine form time to time, (ii) Lender is not required to
either marshall assets, sell the Property or any Other Property in any inverse
order of alienation, or be subjected to any "one action" or "election of
remedies" law or rule, (iii) the exercise by Lender of any remedies against the
Property or any Other Property, will not impede Lender from subsequently or
simultaneously exercising remedies against any other Property, (iv) all Liens
and other rights, remedies and privileges provided to Lender in this Agreement,
and in the other Loan Documents (except to the extent such documents have
terminated or expired pursuant to their terms) or otherwise shall remain in full
force and effect until Lender has exhausted all of its remedies against the
Property and all Other Properties have been foreclosed, sold and/or otherwise
realized upon and (v) the Property and all the Other Properties under the Master
Financing Facility Agreement shall be security for the performance of all of
Borrower's Obligations hereunder.
10.32 Segregated Pool Properties. (a) Lender may, at any time,
and from time to time, by giving written notice to Borrower Sponsor, Borrower
Representative, Manager, Guarantor, Borrower, and/or any Other Borrower that
will be affected thereby, divide the Loans made pursuant to the Master Financing
Facility Agreement into two (2) or more groupings (each a "Segregated Pool"),
for the purpose of facilitating a Securitization or other transfer with respect
to one (1) or more Segregated Pools. Loans in the same Segregated Pool will be
cross-defaulted and cross-collateralized only with one another. Lender's notice
shall be given at least sixty (60) days prior to the date selected by Lender for
the Segregated Pools to be created (the "Segregated Pool Date") and shall
specify the Property or Properties to be included in each Segregated Pool (each
a "Segregated Pool Property").
(b) On the Segregated Pool Date, Borrower Sponsor shall cause Borrower,
and/or any Other Borrower that owns a Segregated Pool Property to enter into
such documents as Lender shall reasonably require in order to create the
Segregated Pools and have each Loan cross-defaulted and cross-collateralized
only with other Loans in the same Segregated Pool as the Loan in question,
including, with respect to each Loan amending the applicable Loan Agreement to
exclude as an "Event of Default" thereunder an "Event of Default" relating to
any Loan that is not part of the same Segregated Pool as the Loan in question.
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(c) If, on the date Lender gives a notice to create two (2) or more
Segregated Pools, Borrower or any Other Borrower (a "Multi-Property Borrower")
owns Properties that will be in more than one (1) Segregated Pool, then:
(i) not less than thirty (30) days prior to the Segregated
Pool Date, Borrower Sponsor shall form one or more new limited liability
companies or limited partnerships, each of which qualifies as a Borrower under
the definition set forth in the Master Financing Facility Agreement (a "New
Borrower") and deliver to Lender the organizational documents thereof.
(ii) on or before the Segregated Pool Date, each Multi-Property
Borrower shall transfer one (1) or more of its Segregated Pool Properties to one
(1) or more New Borrowers so that no Borrower or New Borrower owns Segregated
Pool Properties in more than one Segregated Pool, and
(iii) on the Segregated Pool Date, each New Borrower will
execute and deliver to Lender (a) the documents that a Borrower must deliver to
Lender pursuant to clauses (i) and (n)(7) of Section 3.1 of the Master Financing
Facility Agreement, (b) an assignment and assumption of the Transaction
Documents relating to its Segregated Pool Property, and (c) such other documents
as shall be reasonably required by Lender, all of which shall be in form and
substance satisfactory to Lender.
10.33 Synthetic Lease. Lender acknowledges that at or prior to
the Securitization of this Loan, Manager may wish to enter into a synthetic
lease financing transaction with another Person with respect to the Property.
Manager must provide Lender with a written request that it wishes to enter into
a synthetic lease financing transaction during the period commencing no sooner
than twelve (12) months prior to the Conversion Date and ending no later than
four (4) months prior to the Conversion Date. Along with such request, Manager
must provide Lender in a timely fashion with any and all information that Lender
reasonably requests in connection with its review and approval of such
transaction. Upon receiving such request, Lender shall notify Manager of
Lender's estimate of all third party costs which Lender reasonably determines it
will incur in connection with such request. Manager will promptly deposit such
estimated amount with Lender and shall be liable for reimbursing Lender for all
actual out of pocket expenses reasonably incurred by Lender in excess of such
deposit with respect to such request. Upon receiving such deposit, Lender will
review and determine, in its discretion, whether the synthetic lease
transaction, as proposed at that time, is acceptable to Lender. Factors which
Lender may consider in its determination shall include the identity of the
proposed synthetic lessor, the proposed synthetic lessor's financial
capabilities, the form of synthetic lease, the proposed lease terms, the
proposed loan terms, the effect such synthetic lease may have on the Loan, the
Property, the priority of Lender's security, Securitization or other similar
transaction or any other information Lender may require (including the affect on
the pricing, timing or any other affect of such transaction). Lender shall act
in good faith but Lender shall have as much time as it reasonably deems
necessary to review and comment on any and all materials and documents presented
to it in connection with any such proposed synthetic lease. Lender is under
absolutely no obligation to agree to or accept any synthetic lease
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structure, any of the proposed terms, or any proposed institutional lender,
which it determines will in any material way adversely affect this Agreement,
this transaction, the Loan, the Property, the priority of Lender's security
interest, or any Securitization of this Loan (including the pricing or timing of
any such Securitization or other similar transaction). If Lender approves such
synthetic lease structure and Borrower is required to convey fee title to the
Property to a third party in connection therewith, Lender will allow such sale
without the payment of any additional transfer fees.
10.34 Termination of Manager's Obligations. Notwithstanding
anything to the contrary contained herein or in any other Loan Documents,
Manager's obligations to either Lender or Borrower under this Agreement or any
other Loan Documents (except as otherwise expressly provided for herein or
therein) shall terminate upon the termination of the Management Agreement or the
exercise of the Special Management Agreement Amendment Right (as defined in the
Intercreditor Agreement) by Banc One in accordance with Section 4(c) of the
Intercreditor Agreement and Borrower shall succeed to all of Manager's rights,
duties and obligations under this Agreement. Subject to Section 10.1 of this
Agreement, the foregoing obligations of Manager which have accrued but remain
unsatisfied prior to the termination of the Management Agreement, shall remain
in full force and effect and this Section shall not relieve Manager of such
obligations. Further, if Manager enters into a Synthetic Lease pursuant to
Section 10.33 or exercises any of its rights under the Equity Option Agreement
or the Property Option Agreement, then Manager's obligations shall not terminate
but rather shall remain in full force and effect. If either the Management
Agreement or the Development Agreement terminates prior to Manager entering into
a Synthetic Lease Transaction pursuant to Section 10.33 above, all of the
rights, obligations and duties of Manager under this Loan Agreement and all
other Loan Documents shall belong solely to and be the responsibility of
Borrower.
10.35 Release of Subordinate Mortgage and Other Subordinate
Mortgages. Upon the payment of the Loan in full, Lender will release all Other
Subordinate Mortgages on Other Properties with respect to this Loan and the
Subordinate Mortgage.
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IN WITNESS WHEREOF, the parties hereto have caused this Loan
Agreement to be duly executed by their duly authorized representatives, all as
of the day and year first above written.
BORROWER:
AH MICHIGAN OWNER LIMITED PARTNERSHIP],
an Ohio limited partnership
By: AH Michigan CGP, Inc.,
an Ohio corporation, its
sole general partner
By:____________________________________
David B. Fenkell
President
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LENDER:
NOMURA ASSET CAPITAL CORPORATION
By:_______________________________________
Stuart Simon
Director
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<PAGE>
MANAGER:
BROOKDALE LIVING COMMUNITIES OF
MICHIGAN, INC., a Delaware corporation
By: ____________________________________
Darryl W. Copeland, Jr.
Vice President
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SCHEDULE 1
Location of Property
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<TABLE>
<CAPTION>
SCHEDULE 2
Terms of Preferred Equity
<S> <C>
Senior and Junior Tranches: If the amount of the Preferred Equity is more than the Maximum
Senior Amount (as hereinafter defined), then the portion of the
Preferred Equity equal to the Maximum Senior Amount shall be
"Senior Preferred Equity" and the balance of the Preferred Equity
shall be "Junior Preferred Equity". If the amount of the Preferred
Equity is not more than the Maximum Senior Amount, then all of the
Preferred Equity shall, for purposes of this Schedule, be "Senior
Preferred Equity" (and there will be no "Junior Preferred Equity").
The "Maximum Senior Amount" shall be the maximum amount of
Preferred Equity, as determined by Lender (based upon Net
Operating Income for the most recently ended 12-month period prior
to the Conversion Date), that can be repaid, together with the Senior
Preferred Yield (as hereinafter defined), in 60 consecutive constant
monthly payments beginning on the first Payment Date after the
Conversion Date, from 75% of Excess Cash Flow (as hereinafter
defined).
Preferred Yield: The yield on the Senior Preferred Equity (" Senior Preferred Yield")
will accrue and be payable monthly, in arrears, at the annual rate of
LIBOR, reset two (2) Business Days prior to each Payment Date,
plus 500 basis points. The yield on the Junior Preferred Equity ("
Junior Preferred Yield") will accrue and be payable monthly, in
arrears, at the annual rate of LIBOR, reset two (2) Business Days
prior to each Payment Date, plus 700 basis points. Preferred Yield
will be calculated on an actual/360 day basis.
Monthly Payments/
Cash Management: All cash flow after payments and reserves required under the Loan
Documents will be swept into a Subaccount. On each Payment Date,
cash from such Subaccount shall be applied as follows: (i) if there
is Senior Preferred Equity outstanding, to pay all accrued but unpaid
Preferred Yield on such Senior Preferred Equity; (ii) if there is
Senior Preferred Equity outstanding, to redeem the principal balance
outstanding on the Senior Preferred Equity in an amount equal to the
greater of (A) 75% of cash available after payments required by
clause (i) or (B) the Minimum Redemption Amount (as defined
below); (iii) if there is Junior Preferred Equity outstanding, to pay all
accrued but unpaid Preferred Yield on such Junior Preferred Equity;
(iv) if there is Junior Preferred Equity outstanding, all available cash
after the payments required by clauses (i) through (iii) will be applied
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to redeem the principal balance outstanding
on the Junior Preferred Equity; and (v) all
available cash after payments required by
the foregoing clauses will be distributed to
Borrower.
The "Minimum Redemption Amount" is an amount
which will be sufficient to amortize the
then outstanding amount of Senior Preferred
Equity over a straight-line 5-year
amortization schedule, rounded to the
nearest $1,000 per annum.
Prepayment: The Preferred Equity may be prepaid, at the election of the Borrower
or Manager, at any time, in whole or in part, without premium,
provided, however that the holder of Preferred Equity must receive
(after applicable payments to the holder of the Loan) the balance of
the Preferred Equity from (i) the proceeds of any sale of the Property,
(ii) any proceeds resulting from a refinancing of the Loan and (iii)
any proceeds from a liquidation of the Loan and (iv) proceeds from
any other source (so long as not secured by the Property). So long as
the Preferred Equity is outstanding, the holder of the Preferred
Equity shall have the right to approve any of the events described in
clauses (i)-(iii) above. The retirement or prepayment of the Senior
Preferred Equity and/or the Junior Preferred Equity shall not affect
Lender's ownership of or title to the Warrants (as defined below).
Fees: A structuring fee equal to two percent (2.0%) of the amount of the
Preferred Equity shall be paid to Lender on the Conversion Date.
Default in Monthly
Payments: If Borrower or Manager fails to pay the Preferred Yield or the
required Minimum Redemption Amount in full on any Payment
Date, then for each succeeding Payment Date, 100% of the Excess
Cash Flow will be applied first to any unpaid Preferred Yield until all
Preferred Yield payments (including accrued and unpaid interest
thereon) have been made current and the remainder to repayment of
the amount of the Preferred Equity. 100% of the Excess Cash Flow
will be applied in this manner until the entire amount of the Preferred
Equity has been paid.
"Excess Cash Flow" means actual Net Operating Income available
after payment of Debt Service and the Preferred Yield.
The Preferred Yield, to the extent not paid
in full when due, will accrue and compound
monthly at the default rate in effect from
time to time. The "default rate" will be the
non-default Senior Preferred Yield or Junior
Preferred Yield, as applicable, plus 200
basis points.
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The Preferred Equity will not have an
acceleration right, and will not be
forecloseable. However, in the event of a
default, in addition to the remedies
described above, the holder of the Preferred
Equity will have the option, but not the
obligation, to cause the removal of the
existing Property manager and to designate a
replacement manager.
Security: The Preferred Equity will be secured by an assignment of Excess
Cash Flow, subordinate to any similar assignment to the holder of the
Loan.
Other Terms: The organizational documents of Borrower will be required to
include, among other things, provisions that prohibit the incurrence
of any debt other than the Loan as permitted under the Loan
Documents as well as other affirmative and negative covenants, and
such representations and warranties as Lender may require in its
discretion. The holder of the Preferred Equity will have veto rights
with respect to modifications of the organizational documents and
major decisions relating to Borrower, particularly with respect to
refinancings and Property transfers prior to the retirement in full of
the Preferred Equity. The holder of the Preferred Equity will be
allocated taxable income equal to the amount of Preferred Yield
actually distributed in cash to such holder, in any taxable year; no
other taxable income or loss shall be allocated to the holder of the
Preferred Equity. The Preferred Equity will be freely transferable.
Warrants: The holder of the Junior Preferred Equity will receive warrants (the
"Warrants") exercisable into a percentage interest of Borrower's
equity in the Property. The equity percentage represented by the
Warrants shall equal the lesser of (i) 80% and (ii) the percentage
derived by dividing the original amount of the Junior Preferred
Equity by the sum of the value of Borrower's equity in the Property
plus the original amount of Junior Preferred Equity and multiplying
the result by 80%; provided, however, that in no event will the equity
percentage be less than 35%. The Borrower's equity in the Property
will be derived by dividing the Net Operating Income (as determined
by Lender) by 10%, and subtracting the sum of the Re-sized Amount
and the total original amount of the Preferred Equity. These
Warrants once issued will remain in effect with or without
prepayment of the Junior Preferred Equity, and may or may not be
exercised; and the equity interest issued upon exercise shall continue
notwithstanding the retirement or prepayment of Junior Preferred
Equity.
</TABLE>
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SCHEDULE 3
Matters Regarding Representations
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SCHEDULE 4
Rent Roll
None
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<PAGE>
EXHIBIT A
Operating Expense Certificate
Nomura Asset Capital Corporation
Two World Financial Center, Building B
New York, New York 10281-1198
Attention: Raymond Anthony
Re: Loan Agreement (the "Loan Agreement") dated as of June 17, 1998
among AH Michigan Owner Limited Partnership ("Borrower"),
Brookdale Living Communities of Michigan, Inc. ("Manager") and
Nomura Asset Capital Corporation (together with its successors and
assigns "Lender")
Ladies and Gentlemen:
This certificate is delivered in accordance with Section 3.4.1
of the Loan Agreement. All capitalized terms not defined herein shall have the
meanings ascribed to them in the Loan Agreement.
Manager hereby certifies that (i) the Operating Expenses for
the Interest Period from ______________, ____ to ______________, ____ are
______________________ Dollars ($_________), (ii) that such Operating Expenses
are equal to or less than the Operating Expenses for such period set forth on
the Annual Budget and are now due and owing (or will be coming due within 30
days) and (iii) all Operating Expenses incurred prior to ___________, ____ have
been paid in full.
BROOKDALE LIVING COMMUNITIES OF
MICHIGAN, INC., a Delaware corporation
By: _______________________________,
Name:
Title:
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<PAGE>
BUILDING LOAN AGREEMENT
Dated as of June __, 1998
between
AH Michigan Owner Limited Partnership,
as Borrower,
Brookdale Living Communities of Michigan, Inc.
as Manager,
and
NOMURA ASSET CAPITAL CORPORATION,
as Lender
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Page
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS............................................................2
SECTION 1.1 Certain Defined Terms...................................2
ARTICLE II
THE LOAN..............................................................12
SECTION 2.1 Maximum Principal Amount...............................12
SECTION 2.2 Payment of Budget Costs; Advances......................12
ARTICLE III
ADVANCES FOR CONSTRUCTION.............................................14
SECTION 3.1 Requests for Advance under the Loan....................14
SECTION 3.2 Frequency of Advances..................................15
SECTION 3.3 Partial Advances.......................................15
SECTION 3.4 Use of Advances........................................15
SECTION 3.5 Advances for Materials and Deposits....................16
SECTION 3.6 Reallocation...........................................16
SECTION 3.7 Loan Balancing.........................................17
SECTION 3.8 Direct Advances........................................19
SECTION 3.9 Advances for Obligations...............................19
ARTICLE IV
CONDITIONS PRECEDENT TO MAKING THE INITIAL ADVANCE....................21
SECTION 4.1 Representations and Warranties.........................21
SECTION 4.2 Receipt of Items and Documents by Lender...............21
SECTION 4.3 No Default.............................................27
SECTION 4.4 No Change..............................................27
SECTION 4.5 Borrower Equity........................................27
SECTION 4.6 Lender's Determination.................................27
SECTION 4.7 Accounting.............................................27
SECTION 4.8 Intentionally Omitted..................................27
ARTICLE V
CONDITIONS PRECEDENT TO ADVANCES AFTER
THE INITIAL ADVANCE...................................................28
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Page
SECTION 5.1 Article IV.............................................28
SECTION 5.2 Representations and Warranties.........................28
SECTION 5.3 Receipt of Items and Documents by Lender...............28
SECTION 5.4 No Default.............................................29
SECTION 5.5 Lender's Approval......................................29
SECTION 5.6 Substantial Completion Advance.........................30
SECTION 5.7 Post-Substantial Completion Advances...................30
ARTICLE VI
REPRESENTATIONS AND WARRANTIES........................................31
SECTION 6.1 Plans..................................................31
SECTION 6.2 No Liens...............................................31
SECTION 6.3 Compliance with Building Codes, Zoning Laws, Etc.......31
SECTION 6.4 Certain Agreements.....................................31
SECTION 6.5 Budget.................................................32
SECTION 6.6 Adjacent Land..........................................32
SECTION 6.7 Flood Zone.............................................32
SECTION 6.8 No Prior Work..........................................32
ARTICLE VII
COVENANTS.............................................................32
SECTION 7.1 Construction...........................................32
SECTION 7.2 Construction Schedule..................................33
SECTION 7.3 Budget Changes.........................................33
SECTION 7.4 Inspection of Premises and Books and Records...........33
SECTION 7.5 Required Notices.......................................34
SECTION 7.6 Change Orders..........................................34
SECTION 7.7 Correction of Work.....................................35
SECTION 7.8 No Encroachments.......................................35
SECTION 7.9 Compliance with Documents..............................35
SECTION 7.10 Changes in Agreements..................................35
SECTION 7.11 Contracts..............................................35
SECTION 7.12 Bonds..................................................35
SECTION 7.13 Final Survey...........................................35
SECTION 7.14 Competition............................................36
SECTION 7.15 Protection Against Liens...............................36
ARTICLE VIII
EVENTS OF DEFAULT.....................................................36
SECTION 8.1 Events of Default......................................36
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Page
SECTION 8.2 Acceleration of Loan...................................39
SECTION 8.3 Lender's Right to Stop Disbursing Funds................39
SECTION 8.4 Lender's Right to Complete; Sums Advanced..............39
SECTION 8.5 Loan Accounts..........................................40
SECTION 8.6 No Liability of Lender.................................40
ARTICLE IX
GENERAL CONDITIONS ..............................................41
SECTION 9.1 No Waivers.............................................41
SECTION 9.2 Lender's Review........................................41
SECTION 9.3 Submission of Evidence.................................41
SECTION 9.4 Lender Sole Beneficiary................................41
SECTION 9.5 Contractors............................................42
SECTION 9.6 Entire Agreement.......................................42
SECTION 9.7 Amendments, Etc........................................42
SECTION 9.8 Notices................................................42
SECTION 9.9 Binding Effect.........................................43
SECTION 9.10 Severability of Provisions.............................43
SECTION 9.11 Headings, Etc..........................................43
SECTION 9.12 Governing Law..........................................43
SECTION 9.13 No Joint Venture.......................................43
SECTION 9.14 Assignment by Lender...................................43
SECTION 9.15 Retention of Servicer..................................45
SECTION 9.16 Consent of Lender......................................45
SECTION 9.17 JURY TRIAL WAIVER......................................45
SECTION 9.18 Incorporation by Reference.............................46
SECTION 9.19 Counterparts...........................................46
SECTION 9.20 Product of Joint Drafting..............................46
SECTION 9.21 Intentionally Omitted..................................46
SECTION 9.22 Sign...................................................46
SECTION 9.23 Survival...............................................46
SECTION 9.24 Time of the Essence....................................47
SECTION 9.25 Lender Reliance........................................47
SECTION 9.26 Limitation of Liability................................47
SECTION 9.27 Termination of Manager's Obligations...................47
SECTION 9.28 Waiver of "One Action Rule"; Cross Collateralizations..47
EXHIBITS
Exhibit A Land
Exhibit B Budget
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Page
Exhibit C Form of Request for Advance
Exhibit D Architect's Consent and Agreement
Exhibit E General Contractor Consent and Agreement
Exhibit F Manager's Consent and Agreement
Exhibit G Engineer's Consent and Agreement
Exhibit H Manager's Affidavit
Exhibit I Pending Disbursements Clause
Exhibit J Existing Trade Contracts
Exhibit K Management Disbursement Account
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BUILDING LOAN AGREEMENT
This BUILDING LOAN AGREEMENT (this "Agreement") dated as of June 17,
1998, among NOMURA ASSET CAPITAL CORPORATION, a Delaware corporation, having its
principal place of business at Two World Financial Center, Building B, New York,
New York 10281-1198 (together with its successors and assigns, "Lender"), AH
Michigan Owner Limited Partnership, an Ohio limited partnership having an office
at Suite 160, 320 King of Prussia Road, Radnor, PA 19807 (together with its
successors and assigns "Borrower") and Brookdale Living Communities of Michigan,
Inc., a Delaware corporation having an office at 77 West Wacker Drive, Suite
4400, Chicago, Illinois 60601 (together with its successors and assigns,
"Manager").
RECITALS:
A. Borrower is the owner of the land described on Exhibit A (the
"Land"), which is located in Southfield, Michigan.
B. Manager pursuant to the Development Agreement between Borrower
and Manager dated as of the date hereof (as amended, restated, replaced,
supplemented or otherwise modified from time to time, the "Development
Agreement") has been delegated all responsibility to administer the construction
of the senior housing facilities on the Land including all of Borrower's
obligations to Lender under this Agreement. All references to Manager under this
Agreement shall generally refer to Manager's performance of its duties on behalf
of Borrower pursuant to the Development Agreement and Lender may rely on Manager
pursuant to the provisions of Section 9.25.
C. Borrower, Lender and Manager are parties to that certain Loan
Agreement dated as of the date hereof (as amended, restated, replaced,
supplemented or otherwise modified from time to time, the "Loan Agreement"),
pursuant to which Lender agreed, subject to the terms of the Loan Agreement, to
make a loan in an aggregate principal amount not greater than Twenty-Six Million
Six Hundred Twenty-Five Thousand and 00/100 Dollars ($26,625,000) to fund a
portion of the costs of acquiring, developing and constructing certain senior
housing facilities on the Land.
D. Borrower, Manager and Lender are entering into this Agreement to
provide for the terms and conditions upon which Borrower and/or Manager will
construct such facilities and Lender will advance such loan.
E. Such loan may at Lender's election be cross collateralized and
cross defaulted with one or more other loans made pursuant to a certain Master
Financing Facility Agreement entered into between Lender and Brookdale Living
Communities, Inc. (The "Master Financing Facility Agreement").
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.1 Certain Defined Terms. As used in this Agreement and unless
otherwise expressly indicated, or unless the context clearly requires otherwise:
(a) All of the agreements or instruments defined in this Agreement
mean such agreements or instruments as the same may, from time to time, be
supplemented or amended or the terms thereof waived or modified to the extent
permitted by, and in accordance with, the terms and conditions thereof and of
this Agreement and the other Loan Documents.
(b) The following capitalized terms have the meanings specified
therefor in the Loan Agreement: " Additional Loan Structuring Fee", "Affiliate",
"Approved Operating Expenses", "Assignment of Agreements", "Assignment of
Lease", "Borrower Owner", "Borrower Representative", "Business Day", "Capital
Reserve Fund", "Cash Collateral Sub-Account", "Default", "Default Rate", "
Development Agreement", "Draw Fee", "Environmental Guaranty", "Equity Option
Agreement", "Eurodollar Business Day", "Expected Conversion Date", "Governmental
Authority", "Guarantor", "Hazardous Substances", "Improvements", "Independent",
"Initial Equity Investment", "Initial Note", "Legal Requirements", "Lender's
Counsel", "Lender's Counsel Fees", "Lien", "Loan Documents", "Management
Agreement", "Manager", "Mortgage", "Note", "Obligations", "Operating Deficit
Subaccount", "Other Loan Agreement", "Other Properties Subordinate Mortgage",
"Payment Date", "Permitted Encumbrances", "Person", "Policies", "Property",
"Property Option Agreement", "Rating Agency", "REMIC", "Securitization",
"Securitization Pools", "Servicer", "Servicing Fee", "State", "Synthetic Lease",
"Tax and Insurance Escrow Subaccount", "Taxes", "Title Continuation", "Title
Insurer" and "UCC".
(c) The following terms are defined in the Sections indicated below:
"Agent" - 9.14(b)
"Assignee" - 9.14(a)
"Contingency Line Item" - 3.6(b)
"Cost Savings" - 3.6(a)
"Deficiency Account" - 3.7(b)
"Deficiency Cash Collateral" - 3.7(a)(iii) "Deficiency Letter of Credit" -
3.7(a)(iii) "Event of Default" - 8.1 "Lead Lender" - 9.14(b)(i) "Loan" - 2.1
"Line Item Component" - 3.6(a)(i) "Other Loans" - 9.29
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"Other Properties" - 9.29 "Soft Cost Supporting Documentation" - 3.1(c) "Title
Insurance Policy" - 4.2 "UCC Searches" - 4.2
(d) The term "including" means including, without limitation.
(e) The following terms shall have the respective meanings set forth
below (such meanings to be equally applicable to the singular and plural forms
of the terms defined, as the context may require):
"Advance" means any portion of the Loan advanced by Lender pursuant
to this Agreement.
"Advance Termination Date" means with respect to all Advances other
than Advances with respect to Punchlist Items and Retainage and Operating
Deficits Advances, the earlier of (i) fourteen (14) months after the Loan
Closing Date (subject to an Unavoidable Delay) or (ii) the Substantial
Completion Date.
"Applicable Month" means the calendar month following the month in
which the Operating Deficits Funding Request is made.
"Architect" means the architect that is a party to the Architect's
Agreement.
"Architect's Agreement" means that certain Agreement for
Architectural Services dated April 20, 1998 between Borrower or Manager and
Lucien LaGrange and Associates, Ltd., or any agreement for architectural
services, including the preparation of the Plans, which Borrower or Manager may
enter into with any successor Independent Architect in accordance with the
requirements of Section 7.11.
"Architect's Certificate" means a certificate executed by the
Architect certifying to Lender that the Premises, the Plans and the Construction
and/or renovation of the Improvements comply (or once constructed will comply)
with all Legal Requirements and that all Construction Permits required for the
Construction and/or renovation of the Improvements (given the stage of
completion thereof) have been obtained as of the relevant date from all
appropriate Governmental Authorities and have been validly and irrevocably
obtained without qualification, appeal or existence of unexpired appeal periods
which certificate shall be in form and substance satisfactory to Lender in its
discretion.
"Architect Consent and Agreement" means an Architect's Initial
Certification, Consent and Agreement in the form of Exhibit D.
"Architect's Update Letter" means a letter from Architect stating
that to the best of Architect's knowledge, no event has occurred or failed to
occur which would cause the
3
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representations contained in Paragraphs A., B., C., D., and E. of
the Architect's Consent and Agreement, or any subsequent Architect's Certificate
to be materially incorrect as of the date thereof.
"Bond" means, with respect to the General Contractor, a payment bond
and a performance bond in the form of AIA Document A312, with dual obligee
riders, or in such other form as may be reasonably acceptable to Lender.
"Borrower Entity Agreement" means that certain Amended and Restated
Agreement of Limited Partnership Agreement of Borrower.
"Budget" means the budget for the acquisition of the Land and
existing Improvements and construction of the Required Improvements, and
operation of the Property prior to the Original Expected Conversion Date
prepared by Manager and approved by Lender in Lender's reasonable discretion,
setting forth Manager's estimates for budgeted construction categories of all
items of costs and expenses (specifying any such item that constitutes a Soft
Cost) required for the construction of the Required Improvements in accordance
with this Agreement.
The Budget is attached as Exhibit B.
"Budget as Adjusted" means, at any given date, the Budget, as it
shall have been adjusted through such date by changes and reallocations made in
accordance with Sections 3.6 or 7.3.
"Budget Costs" means Hard Costs and/or Soft Costs set forth in the
Budget as Adjusted.
"Change Order" means any change order, amendment or modification to
the Construction Agreement and any revision, addendum, modification to or
amendment of the Plans, including, minor departures from the Plans pursuant to
field orders.
"Closing" means the execution and delivery of this Agreement and
other applicable Loan Documents by Borrower, Manager and Lender.
"Closing Date" means the date upon which this Agreement and other
applicable Loan Documents are executed and delivered by Borrower, Manager and
Lender.
"Collateral" means the Premises and all other property, real or
personal, tangible or intangible, and all rights thereto, now or hereafter
pledged, mortgaged, made subject to a Lien or hypothecated pursuant to the Loan
Documents.
"Completion Guaranty" means that certain Guaranty of Completion made
by Guarantor in favor of Lender, dated as of the date hereof the same may
thereafter from time to time be supplemented, amended, modified or extended.
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"Completed Work" means work which has been properly performed and/or
installed pursuant to the Construction Agreement, the payment for which has been
approved by Manager, Lender and Lender's Construction Consultant.
"Construction Agreement" means that certain guaranteed maximum price
general construction contract dated as of December 22, 1997 between Borrower or
Manager and the General Contractor providing for the construction of the
Required Improvements, consistent with the Plans, or any agreement with an
Independent general contractor which Borrower or Manager may enter into in
accordance with the requirements of Section 7.11, together with any Change
Orders executed prior to the date hereof which have either been approved by
Lender or which do not require Lender's approval.
"Construction Commencement Date" means the date on which
construction of the Required Improvements commences, which date shall be no
later than thirty (30) days after the Closing Date.
"Construction Documents" means, collectively, the Construction
Agreement, the Development Agreement, the Architect's Agreement, the Engineer's
Agreement, and all other agreements to which Borrower, Manager or any Affiliate
of Borrower or Manager is a party in each case pertaining to the construction of
the Required Improvements.
"Construction Permits" means, collectively, all authorizations,
consents and approvals given by, and licenses, permits and certificates issued
by, Governmental Authorities (including building permits, demolition permits,
excavation permits), and all other permits, licenses and certificates which are
required for the construction, renovation, restoration or rehabilitation of the
Required Improvements in accordance with all Legal Requirements and the Plans,
and for the performance and observance of all agreements, provisions and
conditions of Borrower or Manager contained herein or in the other Loan
Documents pertaining to the construction of the Required Improvements.
"Construction Schedule" means a construction schedule prepared by
the General Contractor showing a trade-by-trade breakdown of the estimated
periods of time for construction of the Required Improvements beginning with the
commencement of preliminary sitework footings and foundations and ending with
completion of construction of the Required Improvements in accordance with the
Plans.
"Costs" means all Budget Costs and any other expenses incurred or
required for the construction of the Required Improvements in accordance with
this Agreement (whether or not set forth in the Budget as Adjusted).
"Deficiency" means, at any given time, the amount by which the
balance of the Loan yet to be advanced by Lender pursuant to this Agreement is
less than the actual sum, as reasonably estimated by Lender or Lender's
Construction Consultant, which will be required to complete the
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construction of the Required Improvements in accordance with the Plans, all
Legal Requirements and this Agreement, and to pay all unpaid Costs in connection
therewith.
"Deficiency Collateral" means Deficiency Cash Collateral and
Deficiency Letter of
Credit.
"Deposits" means, collectively, all sums then on deposit in any Loan
Accounts, together with any interest accrued thereon.
"Engineer" means any engineer engaged by Borrower or Manager with
the prior written consent of Lender as such consent is required pursuant to
Section 7.11.
"Engineering Report" means the structural engineering reports with
respect to the Premises, prepared by an Engineer and delivered to Lender in
connection with the Loan and any amendments or supplements thereto delivered to
Lender.
"Engineer's Agreement" means any agreement which relates to the
design of the Required Improvements and provides for engineering services in
connection with the construction of the Required Improvements which Borrower or
Manager may enter into with any Engineer in accordance with the requirements of
Section 7.11.
"Engineer's Consent and Agreement" means that certain Engineer's
Initial Certification Consent and Agreement in the form of Exhibit G.
"Environmental Report" means the Environmental Assessment Report
dated April 17, 1998 and Addendum letter dated May 8, 1998, prepared by
Engineering & Testing Services, Inc., or such other Environmental Report with
respect to the Premises, addressed to Lender, which Environmental Report shall
be (i) prepared by and Independent firm approved by Lender in Lender's
reasonable discretion, (ii) prepared based on a scope of work determined by
Lender, (iii) in form and content acceptable to Lender, such Environmental
Report to be conducted by an Independent environmental engineer.
"Equity Payments" means payments by Borrower to pay Costs, made from
the Initial Equity Investment or funds otherwise received by Borrower from
sources other than Advances or other Obligations.
"Existing Construction Documents" means, collectively, the
Construction Documents in effect on the Closing Date.
"Existing Trade Contracts" means the Trade Contracts in effect on
the Closing Date, as more particularly described on Exhibit J.
"Future Construction Documents" means, collectively, the
Construction Documents entered into after the date hereof.
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"General Contractor" means Walsh Construction Company , or any
successor engaged by Borrower or Manager with the prior written consent of
Lender as such consent is required pursuant to Section 7.11.
"General Contractor Consent and Agreement" means that certain
General Contractor Consent and Agreement in the form of Exhibit E.
"Guaranties" means the Completion Guaranty, the Payment Guaranty and
any other guaranty entered into by Guarantor in favor of Lender in connection
with the Loan.
"Hard Costs" means, collectively, all costs and expenses set forth
in the Budget other than those which are denominated in the Budget as "Soft
Costs" or "SC."
Initial Advance" means the first Advance made hereunder.
"Interested Party" means any subsequent mortgagor of the Premises,
any other creditor of Borrower or Manager, any purchaser or tenant of the
Premises or any other Person with any interest in or any connection with
Borrower, Manager, the Premises or the Loan.
"Lender's Construction Consultant" means EMG or such other Person as
may be designated and engaged by Lender as a replacement to consult with, advise
and render reports to Lender concerning the status of the construction of the
Required Improvements and to otherwise consult with respect to the construction
of the Required Improvements.
"Lender's Construction Consultant Report" means a report by Lender's
Construction Consultant, based on Lender's Construction Consultant's review and
observation of the Premises, the construction of the Required Improvements and
the documentation related to the Premises and the construction of the Required
Improvements, stating whether:
(i) the work performed in connection with the construction of the
Required Improvements has been completed in a good and workmanlike manner,
reasonably satisfactory to Lender's Construction Consultant, in accordance
with the Plans and all Legal Requirements;
(ii) the work which is the basis of the applicable Request for Advance
has been completed in accordance with the Plans and all Legal Requirements
to the reasonable satisfaction of Lender's Construction Consultant, and
whether the cost of such work is within the applicable Line Item or Line
Items;
(iii) the undisbursed amount of the Loan allocable to the construction
of such Required Improvements is sufficient to complete the construction
of such Required Improvements in accordance with the Plans;
(iv) there exists any Deficiency and, if so, the amount and nature
thereof;
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(v) the cost to complete the component of the construction of the
Required Improvements which is the subject of a Line Item is (a) less than
the amount set forth in that Line Item thereby permitting such excess to
be reallocated in accordance with Section 3.6(a), or (b) is greater than
the amount set forth in the Line Item, in either case setting forth the
amount of such excess or deficiency;
(vi) the progress of construction of the Required Improvements is in
accordance with the Construction Schedule and whether, in Lender's
Construction Consultant's reasonable judgment, Substantial Completion will
occur on or before the Outside Completion Date; and
(vii) the value of the work completed and the percentage of completion
of the Required Improvements.
"Lender's Representatives" means collectively the Lender's
Construction Consultant, the Servicer, or any of their respective designated
representatives.
"Line Item" means a line item of cost or expense set forth in the
Budget as Adjusted (in compliance with Section 3.6).
"Loan Accounts" means, collectively, the Deficiency Account,
Manager's Disbursement Account and all other accounts now or hereafter pledged
to Lender pursuant to this Agreement or any of the other Loan Documents
(including pursuant to any documents hereafter executed and delivered by
Borrower or Manager in connection with the Loan).
"Major Trade Contract" means any Trade Contract that has a contract
or purchase price, as the case may be, whether initially or thereafter by virtue
of any Change Order or Change Orders, equal to or in excess of ten percent (10%)
of approved Hard Costs; for purposes of this definition of Major Trade Contract,
multiple Trade Contracts with a single contractor or supplier, as the case may
be, shall be deemed to be one Trade Contract.
"Major Trade Contractor" means any contractor or supplier, as the
case may be, under a Major Trade Contract.
"Manager's Affidavit" means an affidavit in the form of Exhibit H.
"Manager's Consent and Agreement" means that certain Manager's
Consent and Agreement in the form of Exhibit F.
"Manager's Disbursement Account" means the account of Manager in
LaSalle National Bank into which the proceeds of the Loan are to be disbursed as
referred to in Section 2.2(a) or such other account as Borrower or Manager and
Lender shall reasonably agree to be the account into which such proceeds are to
be disbursed.
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"Material Change Order" means any Change Order (i) which will (A)
impair the value of the Collateral in any material respect, (B) materially
change the gross square feet or the number of rentable rooms to be contained in
the Improvements, or the basic layout of the Improvements, or the number of
parking spaces to be located on the Premises after completion of the Required
Improvements, or (C) involve the use of materials, furniture, fixtures or
equipment which, when viewed as a whole, will not be at least equal in quality,
in all material respects, to the materials, furniture, fixtures and equipment
originally specified in or required by the Plans, or (ii) which changes the
scope of the work as set forth in the Plans, or (iii) which results in an
increase or decrease in any Line Item by more than $50,000, or (iv) which
results, when considered together with all previous Change Orders not requiring
Lender's approval under Section 7.6, in an increase or decrease in the aggregate
Costs of more than $150,000, or (v) which occurs at any time a Deficiency exists
or (vi) which results, when considered with all previous Change Orders, in an
increase in the aggregate Costs in excess of $500,000. After the $150,000
threshold specified in clause (iv) is exceeded and Lender approves the Material
Change Order(s) that exceeded this threshold, the amount specified in clauses
above shall be reduced to an amount equal to $20,000 and the restriction
contained in clause (iv) shall be deleted. Notwithstanding the foregoing, Change
Orders entered into prior to the Loan Closing Date shall not be deemed Material
Change Order(s) and shall not be counted in calculating any of the
aforementioned thresholds if (x) such Change Orders are funded other than by
Advances or (y) if such Change Orders are funded by Advances, the Budget has
been revised to take into account such Change Order(s), to the extent necessary,
and Lender has had an opportunity to review such Change Order(s) prior to the
Loan Closing Date.
"Operating Deficits Funding Requests" means a request made after
Substantial Completion by Borrower or Manager to Lender for the payment of
Operating Deficits anticipated to be incurred in the following Applicable Month,
increased or decreased by any Operating Deficits Reconciliation Amounts.
"Operating Deficits Reconciliation Amounts" means the excess or
shortfall between the estimate provided in an Operating Deficits Funding Request
with respect to an Applicable Month and the actual Operating Deficits
experienced in such Applicable Month.
"Operating Deficits" means the excess of Approved Operating Expenses
over Operating Income during any applicable period.
"Operating Deficits Advance Termination Date" means three (3) months
after the date through which Operating Deficits are projected under the Budget
to be funded by Lender Advances.
"Operating Permit" or "Operating Permits" means, collectively, all
authorizations, consents and approvals given by and licenses, permits and
certificates issued by Governmental Authorities, including certificates of
occupancy, business licenses, state health department licenses, food service
licenses, liquor licenses, licenses to conduct business, and all other permits,
licenses and certificates which are required for the ownership, use, operation
and occupancy of the Premises in accordance with all Legal Requirements, and for
the performance and observance of all
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agreements, provisions and conditions of Borrower and Manager contained herein
and in the other Loan Documents, and pertaining to the ownership, use, operation
and occupancy of the Premises.
"Outside Completion Date" means the date which is on the last day of
the fourteenth (14th) month after the Closing Date, which Lender shall extend if
Lender determines in its reasonable discretion that construction was delayed due
to Unavoidable Delay.
"Payment Guaranty" means that certain Guaranty of Payment of Note,
Rate Lock Obligations, Carrying Costs and Recourse Obligations dated as of the
date hereof, made by Guarantor in favor of Lender, as the same may thereafter
from time to time be supplemented, amended, modified or extended.
"Plans" means, collectively, the final plans, drawings and
specifications for the construction of the Required Improvements prepared by the
Architect (and other applicable design professionals, including any structural
and mechanical engineers) as required under this Agreement, and in compliance
(and certified by the applicable design professional to be in compliance) with
all Legal Requirements and approved by each appropriate Governmental Authority
including, (i) the architectural, structural, foundation and elevator plans and
specifications prepared or to be prepared, and certified as correct and
complete, by the Architect, (ii) the mechanical, electrical, plumbing and fire
protection plans and specifications prepared or to be prepared, and certified as
correct and complete, by the engineer retained or to be retained by the General
Contractor or the Architect or any other Engineer and (iii) other plans and
specifications prepared or to be prepared by Borrower or Manager and Borrower's
or Manager's other architects, engineers and contractors, in each case, as
reasonably approved in writing by Lender and Lender's Construction Consultant,
together with all Change Orders applicable thereto, provided that if such Change
Order constitutes a Material Change Order, such Material Change Orders have been
approved in writing by Lender in accordance with Section 7.6, which Plans shall
include a description of the materials, equipment and fixtures necessary for the
construction of the Required Improvements.
"Premises" means the Land and all Improvements now or hereafter
existing thereon.
"Punchlist Items" means, collectively, minor or insubstantial
details of construction, decoration, mechanical adjustment or installation, the
non-performance of which does not prevent the use and occupancy of the Premises
for its intended purposes.
"Request for Advance" means a request by Borrower or Manager to
Lender in the form of Exhibit C fully completed and certified by a duly
authorized representative of Borrower or Manager.
"Required Improvements" means the Improvements, consisting of a
senior housing and/or assisted living facility and related facilities and
amenities, to be constructed on the Land in accordance with the Plans and all
Legal Requirements.
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"Retainage" means with respect to the Construction Agreement an
amount equal to the greater of (i) an amount equal to ten percent (10%) of the
total payments on account of Hard Costs incurred pursuant to the Construction
Agreement with respect to the construction of the Required Improvements as of
the date of the requested Advance until payments have been made in an amount
equal to fifty percent (50%) of the payments required to be made (inclusive of
any Retainage amount) with respect to the Construction Agreement, and thereafter
no amount shall be retained, or (ii) the aggregate amount permitted to be
withheld or, if greater, actually withheld, under the Construction Agreement as
of such date, subject, however, to adjustment in the case of Punchlist Items as
provided in Section 2.2(b).
"Security Documents" means, collectively, this Agreement, the
Mortgage, the Assignment of Leases, the Assignment of Agreements and all other
Loan Documents which grant Lender a security interest or other Lien or
encumbrance in any Collateral or any other property.
"Soft Costs" means, collectively, all costs and expenses set forth
in the Budget which are denominated in the Budget as "Soft Costs" or "SC."
"Substantial Completion" means (i) the substantial completion, free
of Liens (other than Permitted Encumbrances), of the construction of the
Required Improvements (other than the completion of Punchlist Items) in
compliance with all Legal Requirements and the Plans (as certified by the
Architect on standard AIA forms), such compliance and absence of Liens to be
evidenced to the reasonable satisfaction of Lender upon the advice of the
Lender's Construction Consultant; and (ii) the issuance of a final and
unappealable permanent certificate of occupancy and all other Operating Permits
which are in full force and effect for the Required Improvements; and (iii) all
Costs and other costs and expenses incurred in connection with the Required
Improvements have been paid in full or are available from the undisbursed Loan
proceeds or Deficiency Collateral.
"Substantial Completion Date" means the day which is five (5)
Business Days after the date on which Borrower or Manager shall have delivered
to Lender evidence reasonably satisfactory to Lender that Substantial Completion
has occurred.
"Survey" means a current as-built survey of the Premises prepared by
an Independent surveyor licensed by the State and certified to Lender and the
Title Insurer, in form and substance satisfactory to Lender, and prepared in
accordance with the Minimum Standard Detail Requirements for ALTA/ACSM Land
Title Surveys meeting the Accuracy Standards of an Urban Survey, with accuracy
and precision requirements modified to meet current angular and linear tolerance
requirements of the State, showing the legal (and if applicable, the metes and
bounds) description and street address of the Premises; all visible or recorded
easements, building lines, curb cuts, and party walls; all parking, sewage,
water, electricity, gas and other utility facilities, together with recording
information concerning the documents creating any such easements and building
lines; stating the net, after deduction of land dedicated or used or subject to
easements for roads, highways, fire lanes, utilities, storm drains or any other
public purpose, and gross area of the Land; and including the following Table A
items: 1, 2, 3, 4, 6, 7(a), 7(b)(1), 8, 10, 11 and 13.
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"Title Continuation" means an endorsement to the Title Policy
indicating that, since the last preceding Advance, there has been no change in
the state of title to the Premises and no Liens or survey exceptions other than
Permitted Encumbrances approved by Lender, which endorsement shall affirmatively
insure that no mechanic's or supplier's Liens have attached, all of which shall
have the effect of continuing the Title Policy, and insuring the continued
priority of the Lien of the Mortgage, to the date of such Advance and increasing
the coverage of the Title Policy by an amount equal to the Advance then being
made if the Title Policy does not by its terms provide for such an increase. If
available, such Title Continuation shall contain affirmative insurance that
neither public nor private conditions, covenants or restrictions, if any,
affecting the Premises have been violated and that all Taxes are current.
"Title Insurer" means Chicago Title Insurance Company, First
American Title Insurance Company and any reinsurer reasonably required by Lender
and/or any other national recognized title insurance company acceptable to
Lender in Lender's discretion; provided, however, that the reinsurer of any
Title Insurance Policy may include, in amounts reasonably acceptable to Lender,
and Chicago Title Insurance Company, First American Title Insurance Company, and
Commonwealth Land Title Insurance Company.
"Trade Contract" means any contract or purchase order between either
Borrower or Manager or an Affiliate of Borrower or Manager, or the General
Contractor, and any other Person pursuant to which such Person agrees to provide
labor, materials, equipment or services in connection with the construction of
the Required Improvements excluding, however, from this definition of Trade
Contract, the Architect's Agreement, the Engineer's Agreement, the Construction
Agreement, the Development Agreement, Management Agreement and any other
agreements pertaining solely to testing and engineering and other professional
services.
"Trade Contractor" means any contractor or supplier, as the case may
be, under a Trade Contract.
"Unavoidable Delay" means any delay or number of delays, not
exceeding ninety (90) days in the aggregate, due to conditions beyond the
control of Borrower or Manager, including, strikes, labor disputes not specific
to the work at the Premises, acts of God, the elements, enemy action, civil
commotion, fire, casualty, accidents, shortages of, or inability to obtain,
labor, utilities or material; provided, however, that any lack of funds shall
not be deemed to be a condition beyond the control of Borrower or Manager. Such
delay shall not automatically result in a day for day extension of any time
limits provided in this Agreement. Rather, after the occurrence of any such
delay Borrower or Manager shall use its best efforts to make up such delay to
the extent possible. Any such delay shall only be allowed for the lesser of
ninety (90) days, or such shorter period that Lender reasonably determines would
have resulted had such efforts been made.
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ARTICLE II
THE LOAN
SECTION 2.1 Maximum Principal Amount. Subject to the conditions and
upon the terms herein provided, Lender agrees to lend to Borrower and Borrower
agrees to borrow from Lender, in installments, a maximum aggregate principal
amount of Twenty-Six Million Six Hundred Twenty-Five Thousand and 00/100 Dollars
($26,625,000) or such lesser amount as shall be available pursuant to the terms
of this Agreement (the "Loan"). The Loan is the "Initial Loan" referred to in
the Loan Agreement. The Loan shall be repaid with interest, costs and charges as
more particularly set forth in the Loan Agreement, the Note and the other Loan
Documents.
SECTION 2.2 Payment of Budget Costs; Advances.
(a) Generally.
(i) Budget Costs shall be paid by Borrower (A) first, from the
Initial Equity Investment until the Initial Equity Investment has been
fully expended to pay Budget Costs; and (B) next, subject to the
provisions of Sections 2.2(b) and 3.7, from Advances made by Lender.
(ii) Subject to the other terms and conditions of this
Agreement, Advances shall be made (A) in accordance with Requests for
Advance submitted by Borrower or Manager upon satisfaction of the
conditions precedent set forth in Articles IV and V of this Agreement and
(B) on the basis of (x) the Line Items specified in the Budget and (y) the
documented cost of work in place and performed and services provided, or
to the extent provided in Section 3.5, materials stored on the Premises or
deposits made, in each case as such cost is determined by Lender in its
reasonable discretion as provided in this Agreement; provided, that Lender
shall at no time be obligated to disburse (1) any proceeds of the Loan for
work performed, materials furnished or services provided under
Construction Documents that are not fully executed and delivered or (2) an
amount which, when added to all previous Advances, would exceed the
product of the then percentage of completion (as determined by Lender's
Consultant) of the Required Improvements multiplied by the maximum amount
of the Loan. The calculation of any Advance shall account for Retainage as
provided for in Section 2.2(b).
(iii) The proceeds of the Loan shall be advanced from time to
time on Eurodollar Business Days by transfer of such funds by Lender to
Manager's Disbursement Account or in such other manner as Lender and
Borrower or Manager may agree. Specifically, at Borrower's or Manager's
request, Lender shall make Advances directly to the Title Insurer pursuant
to an escrow agreement between Lender, Title Company and Manager and/or
Borrower, approved by Lender and providing for either (A) the return of
the Advance to Lender (which Lender will deposit in the Cash Collateral
Subaccount) if the Title Continuation cannot be issued or (B) the
disbursement of the Advance to the
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Manager's Disbursement Account simultaneously with the delivery to Lender
of the Title Continuation. Neither Borrower nor Manager shall deposit any
other funds into Manager's Disbursement Account other than sums sufficient
to pay the administrative costs of such account. Advances shall be made,
in the case of the Initial Advance, upon satisfaction of the conditions
precedent set forth in Article IV and in the case of any Advance made
after the Initial Advance, upon satisfaction of the conditions set forth
in Article V, except to the extent that Lender may elect to waive any of
such conditions precedent.
(iv) Notwithstanding anything to the contrary contained in this
Agreement or in the other Loan Documents, in no event shall Lender be
obligated to make any Advance (other than Advances relating to Punchlist
Items and Retainage) after (A) as applicable, the Advance Termination Date
or the Operating Deficits Advance Termination Date or (B) the occurrence
of a Default or Event of Default (unless waived by Lender in writing).
(b) Retainage. The amount of Loan proceeds on account of any Advance
or portion thereof allocable to any Hard Costs shall be reduced by the Retainage
applicable to such Hard Costs. The portion of the Retainage being held by Lender
with respect to work or materials supplied by the General Contractor will not be
disbursed prior to a determination by Lender that (i) the General Contractor has
substantially completed all of the work and/or supplied all of the materials in
compliance with the General Contractor's contract and in conformity with the
Plans and this Agreement, (ii) the General Contractor will be paid in full upon
the disbursement of the portion of the Retainage being held with respect to the
General Contractor, (iii) the General Contractor or such Trade Contractor, as
applicable, executes and delivers all Lien waivers which may be reasonably
requested or required by Lender or by the Title Insurer to induce the Title
Insurer to insure the Lien of the Mortgage against any mechanic's or materials
supplier's Lien which may be filed by the General Contractor or such Trade
Contractor, as applicable, and (iv) if required by Lender, such disbursement of
such portion of the Retainage shall be approved by any surety company which has
issued a payment or performance bond with respect to the General Contractor. The
Release of any such Retainage shall be further subject to the continued
retention of Retainage for applicable Punchlist Items in an amount equal to 200%
of Lender's reasonable estimate of the cost of completion of such Punchlist
Items. Retainage with respect to any such Punchlist Items shall be disbursed by
Lender from time to time, upon completion of such Punchlist Items to the
reasonable satisfaction of Lender. Notwithstanding any other provision contained
herein, in no event will Lender be required to disburse any funds on account of
Retainage prior to the earlier to occur of (A) the time such sums are payable
pursuant to the Construction Agreement, or (B) within thirty (30) days after the
work to be performed under the Construction Agreement is completed to Lender's
satisfaction.
(c) Advance Upon C/O. Upon the issuance of a permanent certificate
of occupancy for the Required Improvements, Lender may (but shall have no
obligation to) make an Advance in an amount equal to the then unadvanced amount
of the Loan (subject to Retainage in respect of Punchlist Items as provided in
subsection (b) above and Operating Deficits to be advanced pursuant to Section
3.11).
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ARTICLE III
ADVANCES FOR CONSTRUCTION
SECTION 3.1 Requests for Advance under the Loan.
(a) Generally. Each Request for Advance (together with the materials
required to be submitted therewith pursuant to Sections 3.1(b), 3.1(c), 3.5 and
5.3) shall be submitted to Lender and Lender's Representatives not less than ten
(10) Business Days prior to the date proposed for such Advance in the Request
for Advance. Each Request for Advance shall specify (i) the Hard Costs and Soft
Costs to be paid from the proceeds of the requested Advance and (ii) the amount
of any Retainage previously withheld and which has then become payable pursuant
to Section 2.2(b). The Request for Advance shall also include a request for any
disbursements from the Deficiency Account, with supporting documentation
describing in reasonable detail the basis for any such disbursements. The
Initial Advance shall be accompanied by the Architect's Consent and Agreement
and subsequent Advances shall be accompanied by the Architect's Update Letter.
Provided, however, if there is a Default or Lender otherwise reasonably
determines that there has been a change in the condition, progress or other
status of the construction which requires an Architect's Certificate, Lender may
request that such Architect's Certificate be provided as a condition to a
subsequent Advance.
(b) Advance for Hard Costs. Each Request for Advance which requests
payment for Hard Costs shall be accompanied by the following:
(i) the General Contractor's requisitions for a disbursement
which shall be on AIA Forms G702 and G703 or in another form approved by
Lender, each of which shall be certified as true and complete by Borrower
or Manager, the General Contractor and Architect and shall be verified by
Lender's Construction Consultant;
(ii) evidence reasonably satisfactory to Lender that the full
amount of the portion of the proceeds of the previous Advance made
pursuant to this Section 3.1(b) has been paid by Borrower or Manager or
the General Contractor to the Persons specified on the previous Request
for Advance in accordance with this Agreement, which evidence shall
include (A) detailed receipts for payment itemized by Line Item and (B) an
absolute, unconditional waiver of Lien with respect to the previous
Advance from the General Contractor and all Trade Contractors, all
subcontractors and all other Persons who were paid from the proceeds of
such Advance, dated on or about the date of the current Request for
Advance, covering all work done and all sums received through the date of
Borrower's or Manager's previous Request for Advance and noting that the
only amounts due and owing (other than any Retainage) are the amounts to
be paid to such Persons out of the Advance being requested pursuant to the
current Request for Advance, each of which shall be certified as true and
complete by Borrower or Manager and the General Contractor and shall be
verified by Lender's Construction Consultant;
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(iii) a list of all Trade Contracts executed since the date of
the previous Request for Advance, together with a statement by Borrower or
Manager and the General Contractor that copies of the current Trade
Contracts have been submitted to Lender's Construction Consultant prior to
the date of such Request for Advance;
(iv) a list of all executed Change Orders entered into or
requested by Borrower or Manager, a statement by Borrower or Manager that
copies of the same have been submitted to and approved by Lender's
Construction Consultant, if required pursuant to Section 7.6, prior to the
date of the current Request for Advance, and a list of all contemplated
Material Change Orders; and
(v) evidence reasonably satisfactory to Lender that Borrower
has funded and applied the Initial Equity Investment, all other prior
Equity Payments and all prior Advances in accordance with this Agreement.
(c) Advances for Soft Costs. Any Request for Advance to pay any Soft
Cost, other than an Operating Deficits Funding Request, shall be accompanied by
such additional supporting evidence (the "Soft Cost Supporting Documentation")
as Lender shall reasonably request to demonstrate that (i) such costs have been
properly incurred, are due and payable and are within budgeted amounts, (ii) the
full amount of the portion of the proceeds of the previous Advance made pursuant
to this Section 3.1(c) has been paid out by Borrower, or Manager or the General
Contractor to the Persons specified on the previous Request for Advance in
accordance with this Agreement and (iii) Borrower or Manager has funded and
applied the Initial Equity Investment, all other prior Equity Payments and all
prior Advances in accordance with this Agreement.
SECTION 3.2 Frequency of Advances. Advances shall be made no more
frequently than one Advance per calendar month; provided, however, Lender may
waive any and all conditions precedent to the making of an Advance and, after
the occurrence, and during the continuance, of an Event of Default, may make an
Advance in order to pay interest or other sums due to Lender pursuant to the
Loan Documents or for the purpose of making payments of the nature referred to
in Section 3.8 or otherwise pursuant to Lender's exercise of its remedies under
the Loan Documents.
SECTION 3.3 Partial Advances. If any or all conditions precedent to
making an Advance have not been satisfied on the date requested for such
Advance, Lender may, at its option, (a) waive so many of such conditions
precedent as Lender may elect, and/or (b) disburse only that portion of the
requested Advance for which all of the conditions precedent have been satisfied.
SECTION 3.4 Use of Advances. Each Advance made to Borrower or
Manager shall be received, held and used by Borrower or Manager to pay for Hard
Costs and Soft Costs, as the case may be, which were specified on the related
Request for Advance.
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SECTION 3.5 Advances for Materials and Deposits.
(a) Stored Materials. Advances for materials stored at the Premises
shall be made, in the amount of the documented cost to Borrower or Manager of
such materials, strictly in accordance with the following terms and conditions:
(i) Borrower or Manager shall deliver to Lender bills of sale
or other evidence reasonably satisfactory to Lender of the cost of, and
Borrower's title in and to, such materials;
(ii) Borrower or Manager shall deliver to Lender evidence
reasonably satisfactory to Lender that (A) security measures have been
taken to protect such materials from theft, casualty or deterioration, (B)
such materials are finished products that are ready to be incorporated
into the Premises and (C) such materials are then intact and undamaged;
(iii) Borrower or Manager shall provide proof satisfactory to
Lender that such materials are insured against all risk of loss for their
full replacement cost and that such insurance contains a standard
mortgagee loss payable endorsement; and
(iv) The aggregate cost of materials stored on the Premises and
not affixed thereto at any one time shall not exceed $750,000, exclusive
of HVAC chillers.
If any such materials are stolen, lost or in any other manner misplaced,
destroyed or rendered unusable prior to the making of an Advance with respect
thereto, Lender shall not be obligated to make any Advance with respect thereto
or on account of the cost of replacement thereof.
(b) Deposits. Advances may be made for deposits placed with
suppliers or for materials in fabrication, or for materials stored off site, in
Lender's discretion and if so, subject to such terms and conditions as Lender
may reasonably determine.
SECTION 3.6 Reallocation.
(a) Cost Savings. Borrower or Manager, by notice to Lender, may
reallocate to any Line Item all or any portion of any Cost Savings then not
previously reallocated; provided, however, that in no event may Borrower or
Manager allocate any Cost Savings with respect to a Line Item of Hard Costs to a
Line Item of Soft Costs, unless Lender has approved such reallocation in
writing, which approval shall not be unreasonably withheld or delayed, and such
reallocation will not adversely affect the priority of the Lien of the Mortgage
(and, in requesting any such approval, Borrower or Manager shall so certify to
Lender). Upon any such reallocation of all or any portion of any such Cost
Savings to any Line Item, the amount of such Cost Savings shall no longer be
deemed "Cost Savings" hereunder, but shall be deemed to be part of the Line Item
to which such amount was reallocated. As used in this Loan Agreement, "Cost
Savings" shall mean and be determined as follows:
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(i) If Lender determines, in Lender's reasonable discretion,
that the component of the construction of the Required Improvements which
is the subject of a Line Item (a "Line Item Component") has been completed
without the expenditure of the entire amount allocated in the Budget to
such Line Item, and the General Contractor and all Trade Contractors,
subcontractors and other Persons have been paid in full for work performed
and materials provided with respect to such Line Item Component, the
difference between the amount of such Line Item in the Budget and the
amount so expended for such Line Item shall be deemed to be a "Cost
Saving"; or
(ii) If prior to the completion of the Line Item Component
(other than the Line Item for interest or the Contingency Line Item),
Borrower or Manager shall demonstrate to Lender's reasonable satisfaction
that, upon completion of such Line Item Component, a Cost Saving will be
realized pursuant to clause (i) above with respect to such Line Item
Component, the amount of such Cost Saving which is demonstrated to
Lender's satisfaction shall be deemed to be a "Cost Saving".
(b) Contingency. Borrower or Manager, after notice to and approval
by Lender, which shall not be unreasonably withheld or delayed, may reallocate
to any Line Item the amount of any portion of the Contingency Line Item which
has not previously been reallocated to any other Line Item. In giving or
withholding such approval, Lender may take into account the then current state
of completion of the Required Improvements, any existing Cost overruns and any
potential Cost overruns as may then be foreseen or anticipated by Lender. Lender
shall not unreasonably withhold such approval for the reallocation of (i) up to
the first fifty percent (50%) of the Contingency Line Item, or (ii) any amounts
of the Contingency Line Item which will not cause the percentage of the
Contingency Line Item utilized through such date to exceed the percentage of the
Budget expended through such date, but may withhold such approval in its
discretion for any other reallocation. To the extent that the Contingency Line
Item is not reallocated pursuant to this Section 3.6(b), it shall be used solely
for Hard Costs of a type not included in any Line Item in the Budget and not
contemplated by the original Plans. The "Contingency Line Item" shall mean the
Line Item in the Budget identified as "Contingency", which is intended to cover
the eventuality of unforeseen Costs or cost overruns.
(c) New Line Items. New Line Items may not be created without
Lender's prior written consent, which shall not be unreasonably withheld; and,
if created with Lender's consent, the Contingency Line Item may not be
reallocated to any such new Line Item, except as provided in Section 3.6(b). To
the extent not paid for by Cost Savings or by so reallocating the Contingency
Line Item, new Line Items must be paid for from Equity Payments other than the
Initial Equity Investment.
SECTION 3.7 Loan Balancing.
(a) Deficiency. Lender will not be required to make Advances in
excess of the amount of any Line Item in the Budget unless Cost Savings from
other Line Items or portions of the Contingency Line Item have previously been
reallocated in accordance with Section 3.6, or
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Equity Payments have been contributed by Borrower or Manager with respect, to
such Line Item, in amounts equal to or greater than such excess over the Budget.
If Lender determines, in its reasonable discretion, that any Deficiency exists,
then Lender will not be obligated to make any Advances after Lender provides
Borrower and Manager notice of such determination, unless and until Borrower or
Manager does any one or more of the following:
(i) establishes to Lender's reasonable satisfaction that,
contrary to Lender's prior determination, there exists no Deficiency;
(ii) reallocates Cost Savings and/or the Contingency Line Item
pursuant to Section 3.6 to eliminate the Deficiency;
(iii) deposits cash ("Deficiency Cash Collateral") with Lender
or Lender's designee as provided in Section 3.7(b) or delivers to Lender,
as beneficiary, one or more clean, irrevocable letters of credit,
reasonably satisfactory to Lender in form and content and as to the bank
or trust company which is the issuer (which issuer must have an S&P credit
rating of "A" or better) (a "Deficiency Letter of Credit"), in either
case, or in the aggregate, in the amount of the Deficiency. Any Deficiency
Letter of Credit shall have an expiration date not earlier than 30 days
after the Expected Conversion Date, provided that the expiration date may
be one year from its issuance if the letter of credit provides for a
drawing by Lender of the full amount thereof at any time on or after the
thirtieth (30th) day preceding its stated expiration date; or
(iv) makes one or more payments on account of Hard Costs
and/or Soft Costs (other than from the proceeds of the Initial Equity
Investment or the Loan), until the Deficiency has been eliminated;
(b) Deposits Regarding Deficiency.
(i) If Borrower or Manager deposits Deficiency Cash Collateral
with Lender, Lender shall deposit same in an interest bearing account in
the name of Lender at an institution selected by Lender (the "Deficiency
Account").
(ii) Until all Obligations have been repaid in full, Borrower
and Manager shall have no right to any Deficiency Cash Collateral on
deposit in the Deficiency Account except, so long as no Event of Default
exists, (A) to fund a Deficiency pursuant to this Section 3.7 or (B) to
make a disbursement pursuant to Section 3.7(b)(iii). Until expended or
applied as provided herein, any amounts in the Deficiency Account,
together with any interest thereon, shall constitute additional security
for the Obligations. At any time following the occurrence, and during the
continuance, of an Event of Default, Lender may apply any funds on deposit
in the Deficiency Account as set forth in Section 8.5. Any Deficiency
Letter of Credit shall be held by Lender and may be drawn at any time
within thirty (30) days prior to the expiration thereof or upon the
occurrence and during the
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continuance of an Event of Default, whereupon the proceeds of the
Deficiency Letter of Credit shall be treated as Deficiency Cash Collateral
for all purposes.
(iii) If after the deposit of any Deficiency Cash Collateral, but
prior to disbursement thereof, or after the delivery of a Deficiency
Letter of Credit, but prior to the draw of all proceeds thereof, Borrower
or Manager shall establish to Lender's reasonable satisfaction that, due
to a change in circumstances, the amount of the Deficiency Cash Collateral
or the Deficiency Letter of Credit exceeds the Deficiency, then, promptly
following the request of Borrower or Manager and provided no Default or
Event of Default shall then exist, such Deficiency Cash Collateral, up to
the amount of such excess, shall be disbursed to Borrower or Manager or
the amount of any Deficiency Letter of Credit, up to the amount of such
excess, may be reduced.
(iv) Any disbursement from the Deficiency Account or any
drawdown of any Deficiency Letter of Credit by Lender shall be deemed to
constitute Equity Payments by Borrower.
SECTION 3.8 Direct Advances. Upon Borrower's or Manager's request,
or upon the occurrence of a Default, Lender shall have the right (but no
obligation) to make any or all Advances directly to the General Contractor, the
Trade Contractors or any other Person to whom payment is due. Such direct
Advances may be made by deposit in a bank account to be designated by Lender
which may be controlled by the General Contractor, by a Trade Contractor or by
such other Person, in each case individually or jointly with Lender, as Lender
may elect. Such direct Advances also may be made by check payable to the Person
to whom an Advance is to be made. The execution of this Agreement by Borrower
and Manager shall, and hereby does, constitute an irrevocable direction and
authorization to so disburse the Loan proceeds. No further direction or
authorization from Borrower or Manager shall be necessary or required for such
direct Advances and all such Advances shall satisfy pro tanto the obligations of
Lender hereunder and shall be secured by the applicable Loan Documents as fully
as if made directly to Borrower, regardless of the disposition thereof by the
General Contractor, any Trade Contractor or any other Person.
SECTION 3.9 Advances for Obligations. Proceeds of the Loan may be
used to pay interest and any other sums due and payable with respect to the Loan
or pursuant to any Loan Documents, subject to the terms and conditions of this
Agreement, including, the availability in the Budget of Loan proceeds.
Notwithstanding anything in this Agreement which may be to the contrary, Lender
shall at all times have the right (but not the obligation), by its own action,
to make Advances for the purpose of paying fees and any other sums then due and
payable to Lender with respect to the Loan or pursuant to the Loan Documents.
Lender shall provide Borrower and Manager with invoices indicating those
Advances made to or on behalf of Lender, but Lender's failure to provide such
invoices shall not prevent or impair Lender's ability to make such Advance.
SECTION 3.10 Interest Advances. During the period during when the
Property is contemplated to experience Operating Deficits, Lender shall make
Advances to pay interest on the Loan in the amounts and at such times as
required pursuant to the terms of the Loan
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Agreement. Lender shall provide Borrower and Manager with an invoice indicating
the amounts advanced from the interest reserve on account of such interest
payments, but Lender's failure to provide such invoices shall not prevent or
otherwise impair Lender's ability to make such Advance. Subject to the
satisfaction of the conditions for Advances provided in this Agreement, Advances
for interest will be advanced automatically by Lender to itself on each Payment
Date in each month prior to the calendar month in which Substantial Completion
occurs and Lender shall apply such Advances to the payment of interest then due
under the Note. The failure by Lender to make any such Advance shall not affect
the obligations of Borrower under the Note and the other Loan Documents other
than the obligation to pay interest. Lender shall have no obligation to make any
Advances with respect to interest after the occurrence of and during the uncured
continuance of an Event of Default and Borrower shall be obligated to make
out-of-pocket payments of interest to Lender at such time. Notwithstanding
anything to the contrary contained in this Agreement, the total cumulative
aggregate amount of all Advances to pay interest shall in no event exceed the
amount provided in the Budget (unless there is a reallocation under Section
3.6(b)) and Borrower or Manager shall be required to contribute Equity Payments
to fund any excess interest over such amount. To the extent such amount has not
been exceeded, Lender may, in its discretion, make additional Advances on
account of interest payments after Substantial Completion but prior to the
Conversion Date.
SECTION 3.11 Operating Deficits Advances.
(a) Requisition Procedure. During the period when the Property is
contemplated under the Budget to experience Operating Deficits, Borrower or
Manager may submit to Lender, not more frequently than monthly, Operating
Deficits Funding Requests for Advances to fund such Operating Deficits
anticipated for the Applicable Month, accompanied by all other information and
items required to satisfy all of the conditions precedent to such Advance and
other terms and conditions of this Agreement relating to such Advance. Lender
shall either approve or deny the Operating Deficits Funding Request within ten
(10) Business Days after receipt of a complete Operating Deficits Funding
Request, together with all other accompanying information and items required
therewith. Lender must approve any such Operating Deficits Funding Request
unless Lender determines (A) an Event of Default has occurred and is continuing,
(B) the Operating Deficits Funding Request violates the Loan balancing
provisions of Section 3.7, (C) the Operating Deficits Funding Request does not
relate to Approved Operating Expenses, or (D) Lender is not issued a Title
Continuation in the form required under Section 5.3(g). Subject to all of the
other terms and conditions of this Agreement, an Advance with respect to such
Operating Deficits shall be made on the later to occur of the first day of the
Applicable Month or the date of Lender's approval, which will not be
unreasonably withheld or delayed. All Advances with respect to Operating
Deficits will be made by Lender at Manager's election to one of the (a) the
Manager's Disbursement Account, or (b) if applicable, the Title Insurer pursuant
to an escrow agreement approved by Lender and providing for either (i) the
return of the Advance to Lender if the Title Continuation cannot be issued
(which Lender will deposit in the Cash Collateral Subaccount), or (ii) the
disbursement of the Advance to the Manager's Disbursement Account simultaneously
with the delivery to Lender of the Title Continuation. Borrower or Manager
shall, in connection with the Operating Deficits Funding Request submitted for
the second month following the Applicable
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Month, prepare and submit to Lender a reconciliation certifying the amount by
which the actual Operating Deficits for the Applicable Month differed from the
Advance made by Lender on account of Operating Deficits for such Applicable
Month. The reconciliation shall be subject to review by Lender to confirm the
accuracy of the calculation therein and to confirm (through such verification as
Lender may reasonably require including review of bank account statements and
invoices) that Borrower or Manager have actually made such expenditures with
respect to Operating Deficits in the Applicable Month. Lender, upon approving
such reconciliation, shall adjust the amount of the Advance on account of
Operating Deficits to made with respect to the next occurring Applicable Month.
The total cumulative amount of all Advances made with respect to Operating
Deficits shall in no event exceed the amount specified in the Budget (unless
there is a reallocation under Section 3.6(b)) and Borrower or Manager shall be
required to fund any excess over such amount. Operating Deficits Advances with
respect to any Applicable Month shall not exceed ten percent (10%) of the amount
of Operating Deficits projected in the Budget for such Applicable Month.
Lender's obligation to make Advances with respect to Operating Deficits shall
terminate on the Operating Deficits Advance Termination Date.
(b) Reallocation. Notwithstanding the provisions of Section 3.6(a),
Borrower or Manager in making an Operating Deficits Funding Request may
reallocate any amounts between Line Items without limitation, except:
(i) All Advances must be with respect to Approved Operating
Expenses;
(ii) No such reallocation will be allowed if Lender reasonably
determines that such reallocation would have a materially adverse effect
on the business operations at, or the value of, the Premises;
(iii) No such reallocation will be allowed if it results in a
distribution to an Affiliate or a Person which is not Independent except
as contemplated in the Budget;
(iv) No reallocation will be allowed that would affect the
funding of the Tax and Insurance Escrow Subaccount or the Capital Reserve
Fund; and
SECTION 3.12 No Liability of Lender. All conditions and requirements
of this Agreement relating to the obligations of Lender to make Advances are for
the sole benefit of the parties hereto and no Interested Party shall have the
right to rely on the satisfaction of such conditions and requirements by
Borrower or Manager as a condition precedent to Lender making any Advance.
SECTION 3.13 Additional Documents. In connection with each Advance
and as a condition precedent to each Advance, Borrower and/or Manager shall
execute and/or deliver to Lender additions, amendments, modifications and
supplements to the items set forth in Article IV and Article V, or otherwise as
reasonably required by Lender, including any or all of the Loan Documents, and
shall provide Lender with the full benefit of the security intended to be
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provided under the Loan Documents; provided same will not expand Borrower's or
Manager's liability.
SECTION 3.14 Deemed Representations. The making of any Advance shall
constitute, without the necessity of specifically containing a written statement
to such effect, confirmation, representation and warranty by Borrower, to the
extent of Borrower's actual knowledge, without having conducted any
investigation, and by Manager, to Lender that all of the applicable conditions
to be satisfied in connection with the making of such Advance had been satisfied
and that all of the respective representations and warranties of Borrower and
Manager set forth in the Loan Documents are true and correct in all material
respects as of the date of such Advance, except as otherwise disclosed to Lender
in writing prior thereto. The deemed representations under this Section 3.14
shall be deemed made by Borrower only as to Borrower's representations under the
Loan Documents and by Manager only as to Manager's representations under the
Loan Documents.
SECTION 3.15 Lender's Use of Independent Consultant; Servicer.
Borrower and Manager shall permit Lender and Lender's Representatives, on
reasonable notice and at such times as reasonably requested by Lender (a) to
observe the Premises and (b) to observe and review, to the extent not then in
Lender's or Lender's Representatives possession, (i) all of the Change Orders,
(ii) all of the Trade Contracts, other contracts, Plans, notes and other
documents and, to the extent that the same are in Borrower's or Manager's
possession or accessible to Borrower or Manager, subcontracts relating to the
construction of the Required Improvements, and (iii) such other information as
Lender or Lender's Representatives shall reasonably request. All documents
required to be submitted to Lender and Lender's Representatives as a condition
of each Advance shall be furnished to Lender and Lender's Representatives, as
the case may be, at their respective addresses referred to in Section 9.8, or to
such other addresses or the attention of such other Persons as shall be
designated by Lender in a notice to Borrower and Manager. Any request for
documentation which Lender has the right to make under this Agreement may also
be made by the Servicer.
ARTICLE IV
CONDITIONS PRECEDENT TO MAKING THE INITIAL ADVANCE
Lender shall not be obligated to make the Initial Advance hereunder
unless, in addition to the conditions set forth in Article III, (which have not
been waived in writing by Lender) the following conditions shall have been
satisfied in Lender's reasonable discretion, except to the extent that Lender
may elect in writing to waive any such conditions:
SECTION 4.1 Representations and Warranties. The representations and
warranties made by Borrower and Manager in Article VI of this Agreement, Article
IV of the Loan Agreement and in any other Loan Documents shall be true and
correct, in all material respects, on and as of the date of the Initial Advance
with the same effect as if made on such date.
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SECTION 4.2 Receipt of Items and Documents by Lender. Lender shall
have received and approved the following items and documents, duly executed and
in recordable form where applicable, in each case in form and substance
reasonably satisfactory to Lender and where applicable, Lender's Construction
Consultant and Lender's Counsel:
(a) the Loan Agreement;
(b) the Initial Note;
(c) the Mortgage;
(d) the Guaranties;
(e) the Assignment of Leases and the Assignment of Agreements;
(f) the Environmental Guaranty;
(g) such UCC-1 Financing Statements as Lender shall deem necessary
to perfect Lender's security interests in the Collateral;
(h) a paid title insurance policy from the Title Insurer (the "Title
Insurance Policy") marked paid in full, in the maximum principal amount of
the Loan, insuring Lender that the Mortgage provides Lender with a valid
first priority Lien on the Premises, and which Title Policy shall contain
(i) no exception for mechanics' or materialmen's liens; (ii) no survey
exceptions other than those approved by Lender; (iii) no exceptions to
coverage other than Permitted Encumbrances, (iv) a pending disbursements
clause, in the form of Exhibit I; (v) such coinsurance and/or reinsurance
agreements in amounts and with companies as Lender reasonably may require;
(vi) an ALTA 9 or similar comprehensive endorsement (if available in the
State); (vii) such other endorsements or affirmative insurance as Lender
may reasonably require; (viii) a fully executed copy of a customary title
instruction letter from the Title Insurer and (ix) coverage with respect
to the Subordinate Mortgage for an amount equal to (A) the amount of the
Other Loans secured by the Subordinate Mortgage, if an appropriate tie-in
endorsement is available between or among the policies insuring the
Subordinate Mortgage and the first mortgages on Other Properties securing
the related Other Loans, or (B) if no such tie-in endorsement is available
in the State, such insurance as reasonably satisfactory to Lender in its
discretion.
.
(i) Lender shall have received satisfactory UCC reports (the "UCC
Searches"), federal tax lien, bankruptcy, state tax lien, judgment and
pending litigation searches conducted by a search firm reasonably
acceptable to Lender. Such searches shall have been received in relation
to Borrower and each owner of an equity interest in Borrower and any
affiliate of Borrower. Such searches shall have been conducted in each of
the locations designated by Lender in Lender's reasonable discretion and
shall have been dated not more than fifteen (15) days prior to the Closing
Date. Such searches shall indicate that there are
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no conditional sales contracts, chattel mortgages, leases of personalty,
financing statements, judgments or other litigation filed and/or recorded
against Borrower, the Premises or any other Collateral, other than
Permitted Encumbrances;
(j) an original Survey of the Premises dated as of a date within
thirty (30) days prior to the Closing Date;
(k) copies of (i) a transaction authorization executed by the
Borrower Owners authorizing Borrower's execution of this Agreement and the
other Loan Documents to which Borrower is party and Borrower's performance
of all of its obligations thereunder, (ii) the Borrower Entity Agreement
and all amendments thereto, (iii) the limited partnership agreement of
Borrower, and Borrower's certificate of limited partnership, as filed in
the appropriate governmental office(s), and (iv) a certificate of
existence for Borrower issued by the Secretary of State of the state of
Borrower's formation, all of which shall be certified as true, correct and
complete by the Borrower Representative;
(l) copies of (i) resolutions of the Board of Directors and
shareholders of the Borrower Representative authorizing the execution by
the Borrower Representative of this Agreement and the other Loan Documents
to which Borrower is a party, certified as true, correct and complete by
the Secretary of the Borrower Representative, (ii) incumbency certificates
of the officers of the Borrower Representative, (iii) the certificate of
incorporation of the Borrower Representative, which shall be certified as
being true, correct and complete by the Secretary of State of the state of
the Borrower Representative's formation and the Secretary of the Borrower
Representative, (iv) the by-laws of the Borrower Representative, which
shall be certified as true, correct and complete by the Secretary of the
Borrower Representative, and (v) a good standing certificate and a
certificate of good standing for the Borrower Representative issued by the
Secretary of State of the state of the Borrower Representative's
formation;
(m) copies of (i) resolutions of the Board of Directors of the
Guarantor authorizing the execution by the Guarantor of the Guaranties and
any other Loan Documents to which the Guarantor is party, certified as
true, correct and complete by the Secretary of the Guarantor, (ii)
incumbency certificates of the officers of the Guarantor, (iii) the
certificate of incorporation of the Guarantor, which shall be certified as
being true, correct and complete by the Secretary of State of the state of
its formation and the Secretary of the Guarantor, (iv) the by-laws of the
Guarantor, which shall be certified as true, correct and complete by the
Secretary of the Guarantor, and (v) a good standing certificate for the
Guarantor issued by the Secretary of State of the state of the Guarantor's
formation;
(n) copies of (i) authorization by the general partner of Manager
authorizing the execution by the Manager of this Agreement, the
Development Agreement, the Management Agreement and any other Loan
Documents to which the Manager is party, certified as true, correct and
complete by the general partner, secretary or other applicable officer of
Manager, (ii) incumbency certificates of the general partner of Manager,
(iii) the certificate
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of limited partnership of Manager which shall be certified as being true,
correct and complete by the Secretary of State of the state of its
formation, (iv) the partnership agreement of Manager, which shall be
certified as true, correct and complete by the general partner of Manager,
(v) a good standing certificate for Manager issued by the Secretary of
State of the state of Manager's formation, and (vi) a certificate of
qualification to do business in the State for Manager issued by the
Secretary of State of the State;
(o) opinions of counsel for Borrower and Guarantor, including a
bankruptcy non -consolidation opinion as to Borrower only. All such legal
opinions will be addressed and delivered to both Lender and the Rating
Agencies;
(p) payment of Lender's Counsel Fees, the fees of Lender's
Construction Consultant relating to the Loan, and all other out-of-pocket
expenses of Lender relating to the Loan to the extent the foregoing are
then due and payable;
(q) payment in full of the Structuring Fee payable at Closing
pursuant to the Loan Agreement;
(r) payment of the Draw Fee due with respect to the Initial Advance
pursuant to the Loan Agreement;
(s) the financial statements of the Guarantor referred to in the
Guaranties;
(t) the Environmental Report;
(u) the Policies then required to be in effect and delivered
pursuant to the Loan Agreement, together with evidence that (i) all such
Policies then have a term of at least one year from the date issued; (ii)
the premiums for such unexpired term have been paid in full; and (iii)
such Policies are in full force and effect;
(v) evidence of errors and omissions insurance carried by the
Architect, the Engineer, if any, and all engineers retained by the General
Contractor or the Architect to provide engineering services in connection
with the construction of the Required Improvements, or any portion
thereof, evidence of the maintenance of the insurance required to be
maintained by each General Contractor under the Construction Agreement and
a draft binder of the insurance to be maintained by the General Contractor
under the Construction Agreement;
(w) a letter or report of Lender's insurance consultant concerning
Borrower's compliance with the requirements of the Mortgage as to
insurance and such other matters pertaining to insurance as Lender may
request;
(x) evidence that all utilities (including, electric, gas, water,
drainage and sewage systems) which are necessary and required during the
construction of the Required
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Improvements have been or will be completed and available in such a manner
as to assure Lender that construction of the Required Improvements will be
completed on or before the Outside Completion Date;
(y) evidence that Borrower or Manager has paid all real estate Taxes
on, and assessments of, the Premises which are due and payable and, if
delinquent, all penalties and interest thereon;
(z) the Plans;
(aa) copies of all ground leases, space leases, licenses, easements
or other agreements or instruments pertaining to the Premises and all
other documents listed as exceptions to title in the Title Policy;
(bb) a copy of the Management Agreement, certified as true, correct
and complete by Borrower and Manager;
(cc) a copy of the Development Agreement, certified as true, correct
and complete by Borrower and Manager;
(dd) copies of the Property Option Agreement and the Equity Option
Agreement, certified as true, correct and complete by Borrower and
Guarantor;
(ee) copies of the Construction Agreement, the Architect's Agreement
and the Engineer's Agreement, if any, each certified by Borrower and/or
Manager to be true and complete;
(ff) the General Contractor Consent and Agreement;
(gg) the Architect Consent and Agreement;
(hh) the Engineer's Consent and Agreement, if Borrower or Manager
engages an Engineer;
(ii) a copy of each Trade Contract in effect on the Closing Date, and
all other contracts to which Borrower, Manager or the General Contractor
then is a party (either directly or through an Affiliate) relating to the
construction of the Required Improvements or the furnishing of labor,
materials, furniture, furnishings, equipment or services for the
construction of the Required Improvements, each certified by Borrower,
Manager or the General Contractor to be true and complete;
(jj) intentionally omitted;
(kk) intentionally omitted;
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(ll) Bonds with respect to the General Contractor;
(mm) a copy of the Construction Schedule;
(nn) copies of all Construction Permits in existence and other
evidence that other governmental approvals necessary for the construction
of the Required Improvements are obtainable by non-discretionary
administrative procedures without the need for any variance or waiver,
whether through public hearing or otherwise, of applicable zoning
ordinances, land use regulations, building codes or similar governmental
laws and regulations;
(oo) a copy of each agreement with any Governmental Authority
pertaining to the Premises and the Required Improvements; provided that if
no such agreements exist and none are required, Borrower or Manager shall
so certify to Lender;
(pp) a certificate from and Independent licensed surveyor or an
insurance broker that the Premises are not located in a flood hazard
plain, Zone A, as indicated on the Maps of the Federal Emergency
Management Agency (or the area of the Premises that is located in a flood
hazard plain docs not impact the Improvements);
(qq) intentionally omitted;
(rr) a Request for Advance with respect to the Initial Advance
together with the related documentation required to be delivered pursuant
to Sections 3.1 (and 3.5 and 5.3, if applicable);
(ss) a Manager's Affidavit;
(tt) intentionally omitted;
(uu) Subject to Section 4.12, Lender's Construction Consultant
Report with respect to the Initial Advance ;
(vv) an update of the appraisal submitted pursuant to the Master
Financing Facility Agreement, if reasonably requested by Lender;
(ww) a copy of the Budget;
(xx) an agreement with the bank in which the Manager's Disbursement
Account is located, in form and content satisfactory to Lender;
(yy) agreements executed by Manager under the Development Agreement
and the Management Agreement, respectively, pursuant to which Manager
agrees that (i) Lender may terminate the Management Agreement and/or
Development Agreement at any time during the continuation of an Event of
Default, (ii) Manager will at Lender's option
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following a foreclosure or transfer by deed-in-lieu of foreclosure,
recognize and attorn to Lender or its designee as the successor owner
under the Management Agreement and/or Development Agreement, but without
any liability on the part of Lender or such designee for acts or omissions
of Borrower prior to the date of such foreclosure or transfer and (iii)
Manager's rights under the Management Agreement and under the Development
Agreement are subject and subordinate to the Loan Documents;
(zz) such other documents, instruments, opinions and approvals
(including estoppel certificates) and such reports, certificates,
affidavits and other information, as Lender, or Lender's Representatives
reasonably may require to evidence compliance by Borrower or Manager with
all provisions of this Building Loan Agreement, the Loan Agreement and all
other Loan Documents, and Lender's completion of its customary due
diligence with respect thereto and every other aspect of the contemplated
Loan transaction; and
(aaa) the Premises shall comply in all respects with any and all Legal
Requirements, and no condemnation or casualty shall have occurred with
respect to the Premises.
SECTION 4.3 No Default. On the date of the Initial Advance and after
giving effect thereto, no Default or Event of Default shall have occurred and be
continuing.
SECTION 4.4 No Change. No material part of the Premises shall have
been condemned, or threatened with condemnation or been damaged by any fire or
other casualty, and no other change shall have occurred with respect to the
Premises or the Loan which Lender determines to be material and relevant.
SECTION 4.5 Borrower Equity. Lender shall have received evidence
that the Initial Equity Investment has been fully expended to pay Budget Costs.
SECTION 4.6 Lender's Determination. On the date of the Initial
Advance, Lender shall have determined the applicable Retainage and that (i) the
work that is the basis for the request for the Initial Advance has been
completed in accordance herewith (ii) there is no Deficiency and (iii)
construction is capable of proceeding in accordance with the schedule set forth
in the Budget and Substantial Completion will occur by the Outside Completion
Date.
SECTION 4.7 Accounting. Lender shall have received and approved an
accounting of all expenditures for costs shown on the Budget as having been
incurred prior to the Closing Date.
SECTION 4.8 Intentionally Omitted.
SECTION 4.9 No Injunction. No law or regulation shall have been
adopted, no order, judgment or decree of any Governmental Authority shall have
been issued, and no
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litigation shall be pending or threatened, which in the good faith judgment of
Lender would enjoin, prohibit or restrain, or impose or result in material
adverse effect upon the making or repayment of the Loan or the consummation of
the transactions anticipated and effected by the Loan Documents.
SECTION 4.10 Subdivision. Lender receives satisfactory evidence
(including title endorsements if available) that the Land (a) constitutes a
separate lot for conveyance and real estate tax assessment purposes or (b) will
constitute such separate lot at the time of Substantial Completion, in which
case appropriate escrows will be established and Lender shall be provided with
additional due diligence and/or opinion letters demonstrating that such separate
lot status will be obtained by Substantial Completion.
SECTION 4.11 Transaction Costs. Borrower or Manager shall have paid
or caused to be paid all fees due the Lender, Lender's Counsel fees and all
other costs and expenses associated with the Closing which have been invoiced to
Borrower and/or Manager and which are then due and payable.
SECTION 4.12 Lender's Construction Consultant Report. Lender, rather
than Borrower or Manager, shall be responsible for obtaining the Lender's
Construction Consultant Report; provided that Borrower or Manager shall be
responsible to timely provide the Lender's Construction Consultant, at
Borrower's sole cost, with all information and such access to the Premises as is
required for producing same concurrently with the Initial Advance or any
Subsequent Advance.
ARTICLE V
CONDITIONS PRECEDENT TO ADVANCES AFTER
THE INITIAL ADVANCE
Lender shall not be obligated to make any Advance subsequent to the
Initial Advance, unless in addition to the conditions set forth in Article III
(which have not been waived in writing by Lender), the following conditions are
satisfied in the reasonable discretion of Lender, except to the extent that
Lender may elect in writing to waive any such conditions:
SECTION 5.1 Article IV. All conditions set forth in Article IV which
are applicable to a subsequent Advance shall have been satisfied or waived in
writing by Lender with respect to such subsequent Advance at the time of such
subsequent Advance.
SECTION 5.2 Representations and Warranties. On the date of each such
subsequent Advance, the representations and warranties made by Borrower and
Manager in Article VI of this Agreement, Article IV of the Loan Agreement and in
any other Loan Documents shall be true and correct in all material respects on
and as of the date of such subsequent Advance with the same effect as if made on
such date.
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SECTION 5.3 Receipt of Items and Documents by Lender. Lender shall
have received at least ten (10) Business Days prior to the date of the requested
Advance (unless otherwise specified below), the following items and documents,
duly executed and in each case in form and substance reasonably satisfactory to
Lender, and where applicable, Lender's Construction Consultant and Lender's
Counsel:
(a) a Request for Advance, together with the related supporting
documentation required to be delivered pursuant to Section 3.1;
(b) a Manager's Affidavit with appropriate insertions and
attachments, dated the date of the Request for Advance;
(c) either (i) the Architect's Update Letter, or (ii) the
Architect's Certificate, as selected by Lender pursuant to Section 3.1(a),
dated the date of the Request for Advance;
(d) subject to Section 4.12, a Lender's Construction Consultant
Report, dated on or about the date of the Request for Advance;
(e) copies of any Trade Contracts and any other Construction
Documents entered into since the date of the previous Request for Advance
received by Manager;
(f) copies of all amendments to any Trade Contract or any other
Construction Documents entered into since the date of the previous Request
for Advance received by Manager;
(g) a draft of the Title Continuation, which shall be supplemented
with an executed Title Continuation, presented on and dated through, the
date of the related Advance;
(h) in the case of the Request for Advance next succeeding (i) the
date on which the foundation of the Improvements shall be substantially
complete, (ii) the Substantial Completion Date or (iii) any date on which
Lender gives Manager notice that it has reason to believe that a survey
inspection and update is necessary, a survey inspection and update of the
Survey dated after each such date and with respect to clause (ii),
prepared and submitted pursuant to Section 7.13;
(i) a reconciliation by Borrower or Manager of the progress and cost
of the construction of the Required Improvements through the date of the
Request for Advance with the Construction Schedule and the Budget,
together with a projection of such progress and cost through to completion
of the construction of the Required Improvements;
(j) evidence of Borrower's or Manager's compliance with all
recommendations (if any) set forth in the Environmental Report with
respect to the testing for and removal and disposal of Hazardous
Materials;
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(k) payment on or before the Advance date of the Draw Fee for such
Advance and the Servicing Fee (if any) then due and payable under the Loan
Agreement, the estimated Lender's Counsel Fees, the estimated fees of
Lender's Construction Consultant relating to the Loan, and all other
reasonable out-of-pocket expenses of Lender relating to the Loan to the
extent then due and payable (and to the extent of Lender's estimates
thereof, if the amounts thereof have not been finally determined); and
(l) all documents, reports, certificates, affidavits and other
information, as Lender, the Lender's Counsel or Lender's Representatives
reasonably may require to evidence compliance by Borrower and Manager with
all of the provisions of this Loan Agreement.
SECTION 5.4 No Default. On the date of each such subsequent Advance,
no Default or Event of Default shall have occurred and be continuing.
SECTION 5.5 Lender's Approval. On the date of each subsequent
Advance, Lender shall have approved all Material Change Orders and material
changes to any other items delivered in connection with or at all related to the
construction at the Premises.
SECTION 5.6 Substantial Completion Advance. In addition to all of
the other conditions specified in this Article V, Lender shall have received at
least ten (10) Business Days prior to the date of the Substantial Completion
Advance (unless otherwise specified below), the following items and documents,
duly executed and in each case in form and substance reasonably satisfactory to
Lender, and where applicable, Lender's Construction Consultant and Lender's
Counsel:
(a) all Operating Permits, including a permanent unconditional
certificate of occupancy or its equivalent issued by the appropriate
Governmental Authority confirming Substantial Completion;
(b) a certificate from the Architect stating that Substantial
Completion has been achieved;
(c) evidence that all utility services (including electric, gas,
water and sewage systems), parking and pedestrian and vehicular access
required for the operation, use and maintenance of the Premises are
available;
(d) the final Survey required pursuant to Section 7.13; and
(e) submission of evidence that all conditions required for release
of the Retainage as set forth in the definition of "Retainage" have been
met except for Punchlist Items.
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SECTION 5.7 Post-Substantial Completion Advances. Pursuant to the
Budget, Lender anticipates that subsequent to Substantial Completion, but prior
to Conversion, the business operations at the Premises will generate Operating
Deficits that will require Advances under the Loan with respect to the payment
of interest under the Loan and other Approved Operating Expenses. Additionally,
Advances with respect to completed Punchlist Items and Retainage are
contemplated subsequent to Substantial Completion. Provided that on the date of
each such subsequent Advance(s), no Default or Event of Default shall have
occurred and be continuing, Lender shall make Advances (a) from Retainage for
Punchlist Items pursuant to Section 2.2 (b), (b) with respect to interest on the
Loan pursuant to Section 3.10, and (c) with respect to Operating Deficits
pursuant to Section 3.11. If any portion of the Loan or Deficiency Cash
Collateral remain unadvanced at such time as the business operations at the
Premises are no longer generating Operating Deficits, Lender shall at Manager's
request either (i) Advance the unexpended portion of the Loan to the Cash
Collateral Subaccount for application in accordance with the provisions of
Section 3.6 of the Loan Agreement, or (ii) pay over such amounts as directed by
Manager subject to the letter of credit conditions specified below. Lender may
require, in its discretion, that Borrower or Manager deliver to Lender, as
beneficiary, one or more clean, irrevocable letters of credit, reasonably
satisfactory to Lender in form and content and as to the bank or trust company
which is the issuer (which issuer must have and S&P rating of "A" or better)
equal in amount to the funds paid over to Borrower or Manager. Any such letter
of credit shall have an expiration date not earlier than 30 days after the
Expected Conversion Date, provided that the expiration date may be one year from
its issuance if the letter of credit provides for a drawing by Lender of the
full amount thereof at any time on or after the thirtieth (30th) day preceding
its stated expiration date. Any letter of credit shall be held by Lender and may
be drawn at any time within thirty (30) days prior to the expiration thereof,
upon the occurrence and during the continuance of an Event of Default, or within
thirty (30) days prior to the Expected Conversion Date, whereupon the proceeds
of the letter of credit shall be deposited in the Cash Collateral Subaccount.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
To induce Lender to make the Loan and enter into this Agreement and
perform Lender's obligations hereunder, Manager, hereby represents, warrants and
covenants to Lender that, as of the Closing Date and in the case of any Advance
made subsequent to the Closing Date, if any, as of the date of such other
Advance (which representations, warranties and covenants shall survive the
execution and delivery of this Agreement and the other Loan Documents, and shall
be deemed to have been relied upon by Lender regardless of any investigation
made by Lender or on its behalf):
SECTION 6.1 Plans. The Plans have been approved, to the extent
required by applicable Legal Requirements, restrictive covenants, the Management
Agreement, and the Development Agreement, by all Governmental Authorities, the
beneficiaries of such covenants, and the other parties to such agreements,
respectively.
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SECTION 6.2 No Liens. Neither Manager nor Borrower has made, assumed
or been assigned any contract or arrangement of any kind, the performance of
which by the other party thereto would give rise to a Lien against all or any
portion of the Collateral, except for (a) Permitted Encumbrances and (b) the
Architect's Agreement, the Engineer's Agreement, the Development Agreement, the
Management Agreement, the Construction Agreement, the Trade Contracts, the
Construction Documents, to the extent Lien rights are created under any of such
agreements.
SECTION 6.3 Compliance with Building Codes, Zoning Laws, Etc. The
current zoning law and declarations covering the Premises permit the
construction of the Required Improvements to be completed in accordance with the
Plans and, upon completion of construction in accordance with the Plans, the
Required Improvements to be operated and used as contemplated by this Agreement
and the other Loan Documents. The Premises currently and, upon completion of
construction in accordance with the Plans, the use thereof will be in all
respects in material compliance with all Construction Permits and Operating
Permits and all other Legal Requirements, and such compliance is not dependent
on any land, improvements or facilities not a part of the Premises. There are no
pending, or to Borrower's or Manager's knowledge, threatened actions, suits or
proceedings to revoke, attach, invalidate, rescind or modify the zoning
applicable to the Premises or any part thereof, any of the Construction Permits
or any of the Operating Permits, as currently existing and as contemplated to
exist upon completion of construction in accordance with the Plans, which would
have a material adverse effect on the construction or operation of the Required
Improvements.
SECTION 6.4 Certain Agreements. The Management Agreement, the
Development Agreement, the Construction Agreement, the Architect's Agreement,
the Engineer's Agreement, if any, the Trade Contracts and the other Existing
Construction Documents to the extent previously executed by, or assigned to and
assumed by Manager are in full force and effect, not having been amended,
modified, terminated, assigned or otherwise changed, or the provisions thereof
waived, except as permitted hereunder, and true and complete copies of each
thereof have been furnished to Lender.
SECTION 6.5 Budget. The Budget contains all costs and expenses
reasonably anticipated to be incurred in connection with the acquisition of the
Land and existing Improvements and the construction of the Required
Improvements.
SECTION 6.6 Adjacent Land. Borrower does not own any land adjacent
to the Land.
SECTION 6.7 Flood Zone. Except as shown on the Survey, the
Improvements are not, and will not when constructed, be located in a flood
hazard area, Zone A, as designated by the Federal Emergency Management Agency.
SECTION 6.8 No Prior Work. Either (a) no work or construction has
been commenced on the Land and no materials have been delivered to the Land
which could, in either
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case, result in the imposition of a mechanic's or materialmen's Lien on the
Property prior to or on parity with the Lien and security interest created by
the Mortgage, or (b) the Title Insurance Policy will insure the first priority
status of the Mortgage over such Liens without exception.
ARTICLE VII
COVENANTS
SECTION 7.1 Construction.
(a) Borrower and Manager shall not cause or permit the commencement
of construction of any Improvements or delivery of material to the Land until
after recording of the Mortgage with the county clerk of the county where the
Land is located (unless (i) Borrower or Manager obtains a payment bond and
delivers same to the General Contractor in a fashion which would eliminate the
possibility of any mechanic's lien, filed now or in the future, obtaining
priority over the Lien of the Mortgage and/or (ii) Borrower or Manager obtains a
Title Policy acceptable to Lender in its discretion insuring over any such Lien
and after obtaining all permits and approvals from all Governmental Authorities
required to commence construction. Borrower or Manager, in order to demonstrate
that construction has not commenced; shall furnish Lender with evidence required
by Lender, which may include but may not be limited to photographic evidence
and/or an affidavit executed by the Lender's Construction Consultant or by such
other person as may be approved by Lender, that at the time of and immediately
after the recordation of the Mortgage there was no commencement of construction
of Improvements on the Land or delivery of materials to the Land.
(b) Borrower or Manager shall cause the construction of the Required
Improvements to be prosecuted with diligence and continuity, in a good and
workmanlike manner, and in accordance with this Agreement in order to cause
Substantial Completion to occur on or prior to the Outside Completion Date.
(c) Borrower or Manager shall cause the cost of each component of
the construction of the Required Improvements to be in accordance with the
Budget as Adjusted.
(d) Borrower or Manager shall cause the Required Improvements to be
constructed and completed in accordance with the Plans and all Legal
Requirements, free and clear of Liens or claims for materials supplied or for
labor or services performed in connection with the construction of the Required
Improvements or otherwise.
(e) Borrower or Manager shall cause the Construction Agreement to
provide for the work thereunder to be performed for a fixed price or guaranteed
maximum price.
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SECTION 7.2 Construction Schedule. Each month during the
construction of the Required Improvements, Manager shall deliver to Lender,
Lender's Construction Consultant and the Servicer a copy of the then-current
Construction Schedule.
SECTION 7.3 Budget Changes. Borrower and Manager shall not make any
changes in the Budget without Lender's prior written consent except to the
extent expressly permitted hereunder.
SECTION 7.4 Inspection of Premises and Books and Records. Borrower
and Manager shall permit Lender or Lender's Representatives to enter upon the
Premises, at any reasonable times during business hours on reasonable notice,
with free access to inspect or examine or, to the extent not located on the
Premises, to otherwise make available in New York City to Lender, Lender's
Construction Consultant and the Servicer (i) all materials and shop drawings
pertaining to the construction of the Required Improvements; (ii) any contracts,
bills of sale, state ments, receipts or vouchers pertaining to the construction
of the Required Improvements; (iii) all work done, labor performed or materials
furnished in and about the Premises, including, in connection with the
construction of the Required Improvements; (iv) all books and records of
Borrower and Manager pertaining to the construction of the Required
Improvements; and (v) any other documents which are related to the construction
of the Required Improvements. Borrower and Manager shall promptly provide Lender
and Lender's Representatives with copies of any of the foregoing as Lender and
Lender's Representatives may from time to time reasonably request. Borrower and
Manager shall make its representatives available to meet with Lender and
Lender's Representatives upon reasonable notice at the Premises or in New York
City, to discuss Borrower's and Manager's affairs, finances and accounts
relating to the construction of the Required Improvements, and Borrower and
Manager shall cooperate, and take all reasonable steps to cause the General
Contractor, the Architect, the Engineer, if any, and the Trade Contractors to
cooperate with Lender and Lender's Representatives to enable each such Person to
perform its functions under this Agreement.
SECTION 7.5 Required Notices. Borrower or Manager shall give notice
to Lender promptly upon the occurrence of:
(i) any cessation of construction of the Required Improvements
for a period in excess of ten (10) consecutive calendar days, regardless
of whether or not such cessation is due to an Unavoidable Delay;
(ii) any breach of a party's obligation, default, or event of
default under or in connection with any material contractual obligation of
Borrower or Manager;
(iii) Borrower or Manager obtaining knowledge of any actual or
threatened litigation, investigation or proceeding materially affecting
Borrower, Manager, the Borrower Representative, the Premises or, while any
Guaranty is in effect, the Guarantor;
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(iv) any notice given pursuant to any Construction Document
alleging that there has occurred a default or other failure by Borrower or
Manager in the fulfillment of Borrower's or Manager's obligations
thereunder;
(v) any condition which results in any delay, including any
Unavoidable Delay, which could result in Substantial Completion occurring
after the date therefor set forth in the Construction Schedule or after
the Outside Completion Date, or in any further delay beyond any delays of
which Lender has been previously notified;
(vi) any Default or Event of Default; and
(vii) any other notices reasonably requested by Lender.
Each notice pursuant to this Section 7.5 shall be accompanied by a statement of
Borrower or Manager setting forth details of the occurrence referred to therein
and stating what action Borrower or Manager proposes to take with respect
thereto.
SECTION 7.6 Change Orders. Borrower and Manager shall not request,
initiate, agree to, accept, cause or suffer any Material Change Order, without
Lender's prior written consent, which shall not be unreasonably withheld or
delayed. Approval by Lender of any Change Order (i) shall not obligate Lender to
increase the amount of the Loan, and (ii) shall not obligate Lender to make any
Advance to the extent Lender would not otherwise be obligated pursuant to this
Agreement to make such Advance. Borrower or Manager shall submit to Lender and
Lender's Construction Consultant copies of each proposed Material Change Order,
prior to, and all other Change Orders, simultaneously with entering into such
Change Order. Such submission shall identify whether the submitted Change Order
is a Material Change Order and shall include documentation satisfactory to
Lender and Lender's Construction Consultant, setting forth all additions and
subtractions previously made to or from the scope of the Required Improvements.
Change Orders not identified by Borrower as Material Change Orders will
initially be reviewed by Lender solely for the purpose of determining whether
such Change Order constitutes a Material Change Order. Lender shall promptly
(not more than five (5) Business Days after receipt) review, and approve or
disapprove, all submitted Change Orders either identified by Borrower or
Manager, or determined by Lender, to be Material Change Orders.
SECTION 7.7 Correction of Work. Borrower or Manager shall, promptly
after notice from Lender, correct any defect in the Required Improvements or any
departure from the Plans. Borrower and Manager agree that the making of any
Advance shall not constitute a waiver of Lender's right to require compliance
with this Section 7.7 with respect to any such defects or departures from the
Plans. Borrower and Manager agree that Lender's failure to deliver such a notice
shall not constitute a waiver by Lender of any of the Obligations.
SECTION 7.8 No Encroachments. Borrower or Manager shall cause the
Required Improvements to be constructed entirely within the perimeter of the
Land and so as not
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to encroach upon or overhang any easement or right-of-way or any land of others,
and when erected shall be wholly within any applicable building restriction
lines, however established.
SECTION 7.9 Compliance with Documents. Borrower and Manager shall
abide by, perform and comply with all of Borrower's and Manager's obligations,
if any, under the Architect's Agreement, the Engineer's Agreement, if any, the
Construction Agreement, the Trade Contracts, the Development Agreement, and the
other Construction Documents, and Borrower and Manager, at their sole cost and
expense, shall use all their best commercially reasonable efforts to secure or
enforce the performance of each and every material obligation, covenant,
condition and agreement to be performed by the other parties under any such
documents.
SECTION 7.10 Changes in Agreements. Except with respect to Change
Orders which do not constitute Material Change Orders, neither Borrower nor
Manager shall surrender, terminate, cancel, modify, amend in any material
respect, and shall not enter into any agreement in substitution for, or consent
to the assignment of, the Architect's Agreement, the Engineer's Agreement, the
Construction Agreement, or the Development Agreement to the extent Borrower or
Manager is a party thereto, without Lender's prior written consent, which
consent shall not be unreasonably withheld. Borrower or Manager promptly will
give notice to Lender of the surrender, termination, cancellation, modification,
amendment, substitution or assignment of the other Construction Documents,
whether or not Lender consented thereto pursuant to the immediately preceding
sentence.
SECTION 7.11 Contracts. Borrower shall not, without Lender's prior
written consent, which consent shall not be unreasonably withheld or delayed,
allow the assignment or amendment of any existing, or enter into any new,
Architect's Agreement, Construction Agreement, or Engineer's Agreement. Such
consent shall not be required with respect to any amendment constituting a
Change Order which is not a Material Change Order, or which amendment does not
cause such Change Order to become a Material Change Order. Additionally, such
consent shall be based upon Lender's approval of the terms and conditions of
such assignment, amendment or new agreement and the identity, where applicable,
of the assignee or the Person executing any new agreement, which Person shall in
all cases be an Independent and properly licensed professional.
SECTION 7.12 Bonds. The General Contractor shall be bonded pursuant
to a Bond issued by a surety satisfactory to Lender. Borrower and/or Manager
will cause Lender to be named as a co-obligee (as its interest may appear) with
Borrower and/or Manager on all Bonds obtained by Borrower or Manager from the
General Contractor.
SECTION 7.13 Final Survey. Within 60 days after Substantial
Completion has occurred, Borrower or Manager will deliver to Lender an updated
"as-built" Survey, dated no earlier than the Substantial Completion Date, with a
certification that no encroachments exist by the Improvements on land other than
the Land.
SECTION 7.14 Competition.Borrower and Manager shall not, and shall
not cause or permit any of their respective Affiliates to, pursue any
opportunity for the development,
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management or acquisition of, or investment in, any property within a five
(5)-mile radius of the Property if such other property would be in competition
with the Property, or would otherwise adversely affect the development, leasing
or operation of the Property or Borrower's or Manager's ability to perform its
obligations under the Loan Documents.
SECTION 7.15 Protection Against Liens. Borrower and Manager shall
pay and discharge or bond all claims for labor, materials and services furnished
in connection with construction of the Required Improvements, diligently file a
valid notice of completion upon completion of the Required Improvements,
diligently file a valid notice of cessation in the event of a cessation of labor
for a period of 30 days or more, and take all actions reasonably required to
prevent the assertion of claims of Liens against the Property. Borrower and
Manager irrevocably appoint, designate and authorize Lender as their agent (such
agency being coupled with an interest) with the authority (but no obligation) to
file any notice of completion or cessation of labor or any other notice relating
to claims of Liens that Lender deems advisable to protect its interests under
the Loan Documents. If any stop notice or claim is asserted against Lender by
any Person furnishing labor, services, equipment or materials to the Required
Improvements, upon demand by Lender, Borrower or Manager shall take such action
as Lender may reasonably require to release Lender from any obligation or
liability with respect to such stop notice or claim, including (i) if the claim
is being contested in good faith by appropriate proceedings, obtaining a bond or
other security, in form, substance and amount reasonably satisfactory to Lender,
or (ii) payment of such claim. If either Borrower or Manager fails to take such
action, Lender may, in its discretion, file an interpleader action requiring all
claimants to interplead and litigate their respective claims, and in any such
action Lender shall be released and discharged from all obligations with respect
to any funds deposited in court.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.1 Events of Default. The following shall each constitute
an "Event of Default" hereunder:
(a) If construction of the Required Improvements shall not be
commenced in accordance with the Construction Schedule in effect on the
Closing Date and shall not at any time be carried on with diligence and
continuity or there is any cessation of construction of the Required
Improvements for a period in excess of ten (10) consecutive calendar days,
unless the commencement of construction has been delayed, or the cessation
of construction shall have been caused by Unavoidable Delay of which
notice has been given to Lender pursuant to Section 7.5;
(b) If Borrower or Manager fails to satisfy the conditions for an
Advance for more than thirty (30) days after having made a request for
such Advance;
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(c) If Borrower or Manager fails to permit Lender or Lender's
Representatives, at all reasonable times after reasonable notice, to
immediately enter upon the Premises for the purposes set forth in Section
7.4 or Borrower or Manager fails to furnish to Lender or Lender's
Representatives, within a reasonable time after request therefor and in no
event more than five (5) Business Days, the materials which Borrower or
Manager is obligated to provide to Lender or Lender's Representatives,
pursuant to Section 7.4, to the extent such materials are readily
available, and any of the foregoing failures shall continue for two (2)
Business Days after such five (5) days notice thereof;
(d) If as of the close of business on the Outside Completion Date,
the Substantial Completion Date shall not have occurred except for
Unavoidable Delay, provided such Unavoidable Delay shall not excuse any
other performance by Manager or Borrower under this Agreement or the other
Loan Documents;
(e) If Lender reasonably determines during the course of
construction of the Required Improvements that the Required Improvements
cannot be completed Lien free by the Outside Completion Date in accordance
with the Plans and all Legal Requirements;
(f) If any material default by Borrower or Manager shall occur and
shall continue beyond any applicable grace period provided for therein,
under the Management Agreement, the Development Agreement, the Architect's
Agreement, the Engineer's Agreement, the Construction Agreement, any Major
Trade Contract or any other material Construction Document or Loan
Document;
(g) If within thirty (30) days of Borrower's or Manager's receipt of
a notice from Lender that any Deficiency exists, Borrower or Manager does
not take any one or more of the measures referred to in Section 3.7 to
eliminate such Deficiency;
(h) If Borrower or Manager does not disclose to Lender, within ten
(10) Business Days after demand, the names of all Persons with whom
Borrower or Manager has contracted with respect to the construction of the
Required Improvements, or the furnishing of labor or materials therefor,
or fails to make available for review and observation by Lender and
Lender's Construction Consultant copies of all such contracts;
(i) If any Construction Document is amended, modified or terminated
without the prior written consent or approval of Lender to the extent such
written consent or approval is required pursuant to this Agreement;
(j) If the Development Agreement or the Management Agreement shall
at any time cease to be in full force and effect for any reason and a new
Development Agreement, or Management Agreement as the case may be,
reasonably acceptable to Lender in form and substance shall not have been
entered into in its place within twenty (20) days after the Development
Agreement or Management Agreement, as the case may be, ceases to be
effective;
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(k) Borrower's or Manager's failure to perform or observe any
covenant, agreement or term contained in this Agreement (other than one
described in one of the other clauses of this Section 8.1), and the
continuance of such failure for thirty (30) days after notice thereof
shall have been given to Borrower or Manager by Lender; provided, however,
that if such failure is of a nature such that it cannot be cured by the
payment of money and if such failure requires work to be performed, acts
to be done or conditions to be removed which cannot by their nature, with
reasonable diligence, be performed, done or removed, as the case may be,
within such thirty (30)-day period and Borrower or Manager shall have
commenced to cure such failure within such thirty (30)-day period and
thereafter diligently continues to prosecute such cure, such period shall
be deemed extended for so long as shall be required by Borrower or Manager
in the exercise of reasonable diligence to cure such failure, but in no
event shall such thirty (30)-day period be so extended to be a period in
excess of one hundred and twenty (120) days;
(l) Guarantor's failure to perform or observe any covenant,
agreement or term contained in any Guaranty; provided, however, that if
such failure is of a nature such that it cannot be cured by the payment of
money, then such failure shall not constitute an Event of Default unless
it continues for thirty (30) days; provided, further, however, that if
such failure cannot be cured by the payment of money and requires work to
be performed, acts to be done or conditions to be removed which cannot by
their nature, with reasonable diligence, be performed, done or removed, as
the case may be, within such thirty (30)-day period and Guarantor shall
have commenced to cure such failure within such thirty (30)-day period and
thereafter diligently continues to prosecute such cure, such period shall
be deemed extended for so long as shall be required by Guarantor in the
exercise of reasonable diligence to cure such failure, but in no event
shall such thirty (30)-day period be so extended to be a period in excess
of one hundred and twenty (120) days; or
(m) If any representation or warranty made in this Agreement, or any
report, certificate, financial statement or other instrument, agreements
or documents by Borrower or Manager in connection with this Agreement, the
Note or any other Loan Documents executed and delivered by Borrower or
Manager shall be false in any material respect as of the date such
representation or warranty was made or deemed to have been made;
(n) If any Survey required or requested by Lender pursuant to the
provisions of this Agreement shows any material condition not contemplated
by the Plans, and such material condition is not removed within thirty
(30) days after notice thereof by Lender to Borrower and Manager;
(o) If there shall occur an "Event of Default" as such term is
defined in the Loan Agreement.
SECTION 8.2 Acceleration of Loan. In addition to any other rights
and remedies which Lender may have under this Agreement and the other Loan
Documents or pursuant to law or equity, and without limitation thereof, upon and
at any time after the occurrence of any
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Event of Default, Lender may declare the indebtedness evidenced by the Note,
together with all other sums payable thereunder and under the other Loan
Documents, immediately due and payable and may exercise Lender's rights and
remedies pursuant to any one or more of the Security Documents.
SECTION 8.3 Lender's Right to Stop Disbursing Funds. In addition to
any other rights and remedies which Lender may have pursuant to this Agreement
and the other Loan Documents or pursuant to law or equity, and without
limitation thereof, (a) if any Default shall occur and be continuing or any
Event of Default shall occur and be continuing, then Lender may decline to make
all or any portion of such further Advances as Lender may elect and/or (b) if
any Event of Default shall occur, any or all obligations of Lender under this
Agreement, at the option of Lender, shall cease and terminate; provided,
however, Lender may make all or any portion of any Advance so long as any such
Default or Event of Default shall exist without thereby becoming obligated to
make all or a portion of any other or further Advance or waiving Lender's right
to exercise any of Lender's rights and remedies pursuant to any one or more of
the Loan Documents or as may be available at law or equity.
SECTION 8.4 Lender's Right to Complete; Sums Advanced.
(a) Lender's Right to Complete. In addition to any other rights and
remedies which Lender may have under this Agreement and the other Loan Documents
or pursuant to law or equity, and without limitation thereof, after the
occurrence and during the continuance of any Event of Default, Lender may enter
upon the Premises and into possession of the Premises and any other Property
(and exclude Borrower, Manager and any other persons therefrom) and complete the
construction of the Required Improvements substantially in accordance with the
Plans, with such changes therein as Lender may from time to time deem
appropriate, all at the sole risk, cost and expense of Borrower and Manager.
Lender shall have the right, at any and all times, in its discretion to
discontinue any work commenced by Lender with respect to the construction of the
Required Improvements or to change any course of action undertaken by it and
shall not be bound by any limitations or requirements of time whether set forth
herein or otherwise after the occurrence and during the continuance of any Event
of Default. Lender shall have the right and power (but shall not be obligated)
to assume all or any portion of the obligations of Borrower or Manager under any
or all Construction Documents as Lender may elect and to take over and use all
or any part or parts of the labor, materials, supplies and equipment contracted
for by or on behalf of Borrower or Manager, whether or not previously
incorporated into the Premises. In connection with any portion of the
construction of the Required Improvements undertaken by Lender pursuant to the
provisions of this Section 8.4, Lender may elect to do any or all of the
following:
(i) engage builders, general contractors, trade contractors,
suppliers, architects, engineers, inspectors and others for the purpose of
furnishing labor, materials, equipment and fixtures in connection with the
construction of the Required Improvements;
(ii) amend, modify or terminate any then existing contracts
between Borrower or Manager and any of the persons described in the
preceding clause (i);
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(iii) pay, settle or compromise all bills or claims which may
become Liens against the Premises, or which have been or may be incurred
in any manner (A) in connection with the construction of the Required
Improvements or (B) for the discharge of Liens, encumbrances or defects in
the title of the Premises; and
(iv) take such other action (including the employment of
watchmen and the taking of other measures to protect the Property) or
refrain from acting under this Agreement as Lender may from time to time
determine.
(b) Sums Advanced. Borrower and Manager shall be liable to Lender
for all sums paid or incurred for the construction of the Required Improvements
whether the same shall be paid or incurred pursuant to the provisions of this
Section 8.4 or otherwise, and all other payments made or liabilities incurred by
Lender under this Agreement of any kind whatsoever, all of which shall be paid
by Borrower or Manager to Lender upon demand with interest at the Default Rate
to the date of payment to Lender, and all of the foregoing sums, including such
interest at the Default Rate, shall be deemed and shall constitute Advances
under this Agreement and be evidenced by the Note and secured by the Security
Documents.
SECTION 8.5 Loan Accounts. Borrower, and to the extent applicable,
Manager, each hereby irrevocably pledges to Lender, and grants Lender a first
priority security interest in, each of the Loan Accounts now or hereafter
existing, as additional security for the Obligations. Borrower or Manager shall,
immediately upon establishing any Loan Account that is in Borrower's name, and
Manager shall, immediately upon establishing any Loan Account that is in
Manager's name, cause the institution in which such account is located to enter
into an agreement with Lender reasonably satisfactory to Lender in form and
substance pursuant to which such institution (i) recognizes Lender's first
priority security interest in such account, (ii) waives such institution's
rights of setoff with respect to the account and (iii) agrees to follow any
written instructions received by Lender with respect to such account. After the
occurrence and during the continuance of an Event of Default, in addition to all
other rights and remedies available to Lender by statute or rule of law or
equity, and whether or not the Loan shall then be due and payable, Lender may
notify any such institution that Borrower or Manager, as applicable, no longer
has a right to withdraw any funds from any such Loan Accounts or to give any
instructions with regard thereto, and Lender may cause all funds in any and all
Loan Accounts to be paid to Lender for application to any Obligations then due
and payable, in such order as Lender may elect. Lender shall also have all
rights and remedies with respect to the Loan Accounts as are available at law or
equity, including under the applicable UCC. Any Loan Accounts held in the name
of Lender shall not constitute a trust fund and may be commingled with other
monies held by Lender.
SECTION 8.6 No Liability of Lender. Whether or not Lender elects to
employ any or all of the remedies available to it upon the occurrence of a
Default or an Event of Default, Lender shall not be liable to Borrower, Manager
or any Interested Party for the quality of construction, or the failure to
construct or complete the Required Improvements or to protect the Premises or
for payment of any expense incurred in connection with the exercise of any
remedy
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available to Lender or for the performance or non-performance of any
other obligation of Borrower or Manager.
ARTICLE IX
GENERAL CONDITIONS
SECTION 9.1 No Waivers. The making of any Advance hereunder shall
not constitute an approval or acceptance by Lender or Lender's Construction
Consultant of the work theretofore done in connection with the construction of
the Required Improvements or a waiver of any of the conditions precedent to
Lender's obligation to make further Advances (absent a statement by or the
intention of Lender that such Advance shall constitute a waiver), nor, in the
event that Borrower or Manager is unable to satisfy any such conditions
precedent, shall any such failure to insist upon Borrower's or Manager's
compliance with any obligation hereunder have the effect of precluding Lender
from thereafter declaring such inability to be a Default or an Event of Default
as herein provided. Any Advance made by Lender in the absence of strict
compliance with any or all of the conditions precedent to Lender's obligation to
make such Advance or in conjunction with a waiver by Lender of Borrower's or
Manager's compliance with any of such conditions precedent shall be deemed to
have been made pursuant to this Agreement and not in modification of the terms
hereof.
SECTION 9.2 Lender's Review. Observation, inspection and approvals
by Lender of the Plans, the construction of the Required Improvements and the
workmanship and materials used therein shall impose no responsibility or
liability of any nature whatsoever on Lender or Lender's Construction Consultant
and Borrower, Manager nor any Interested Party, under any circumstances, shall
not be entitled to rely upon such inspections and approvals by Lender or
Lender's Construction Consultant for any reason. Approvals granted by Lender for
any matters covered under this Agreement shall be narrowly construed to cover
only the parties and facts identified in any such approval. Lender's
Construction Consultant has been or will be retained by Lender solely as a
consultant and has no authority to bind or otherwise act for or on behalf of
Lender.
SECTION 9.3 Submission of Evidence. Any condition of this Agreement
which requires the submission of evidence of the existence or non-existence of a
specified fact or facts implies as a condition the existence or non-existence,
as the case may be, of such fact or facts and Lender shall, at all times, be
free to independently establish to its reasonable satisfaction such existence or
non-existence.
SECTION 9.4 Lender Sole Beneficiary. All terms, provisions,
covenants and other conditions of the obligations of Lender to make Advances
hereunder are imposed and all funds held in any Loan Account and other
Collateral are held solely and exclusively for the benefit of Borrower, Manager
and Lender as their rights may appear. Neither Borrower, Manager nor any
Interested Party shall have standing to require satisfaction of such terms,
provisions, covenants and
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other conditions in accordance with their terms, be entitled to assume that
Lender will refuse to make Advances in the absence of strict compliance with any
or all of such terms, covenants and other conditions or be entitled to require
any particular application of such funds. No Person, other than Lender, under
any circumstances, shall be deemed to be beneficiary of such terms, provisions,
covenants and other conditions, any or all of which may be freely waived, in
whole or in part, by Lender at any time if, in Lender's discretion, Lender deems
it advisable or desirable to do so.
SECTION 9.5 Contractors. Except as provided by law, no Trade
Contractors or any other Person dealing with Borrower or Manager, including the
Architect, the Engineer, if any, and the General Contractor, shall be, nor shall
any of them be deemed to be, third party beneficiaries of this Agreement.
SECTION 9.6 Entire Agreement. This Agreement, the Loan Agreement and
the other Loan Documents embody the entire agreement and understanding between
the parties with respect to the Loan and supersede and cancel all prior loan
applications, expressions of interest, commitments, agreements and
understandings, whether oral or written, relating to the subject matter hereof,
except as specifically agreed to the contrary. If and to the extent that there
is any conflict or inconsistency between the Loan Documents and the commitment
letter issued by Lender and accepted by Borrower (or its Affiliate) prior to the
date hereof with respect to the Loan, the Loan Documents shall prevail.
SECTION 9.7 Amendments, Etc. No amendment, modification,
termination, or waiver of any provision of this Agreement shall be effective
unless in writing and signed by Borrower, Manager and Lender. No consent to any
departure by Borrower or Manager from any provision of this Agreement shall in
any event be effective unless the same shall be in writing and signed by Lender,
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given. No notice to or demand on Borrower
or Manager in any case shall entitle Borrower or Manager to any other or further
notice or demand in similar or other circumstances.
SECTION 9.8 Notices. All notices, certificates, demands, requests,
approvals, consents and other communications provided for herein shall be in
writing and given in the manner provided in the Loan Agreement. The address of
Lender's Construction Consultant for such purpose is EMG Corporate Center, 1011
McCormick Road, Baltimore, MD 21031 (or such other address as Lender shall
notify Borrower and Manager in writing). All such notices, certificates, demands
and other communications shall be effective when received or refused at the
address to which it is required to be sent.
SECTION 9.9 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of Lender and its successors and assigns and shall be
binding upon Borrower, Manager and their respective permitted successors and
assigns.
SECTION 9.10 Severability of Provisions. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall be, as
to such jurisdiction, ineffective
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to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or enforceability of such
provisions in any other jurisdiction.
SECTION 9.11 Headings, Etc. The headings and captions of various
Sections of this Agreement have been inserted for convenience only and are not
to be construed as defining, modifying, limiting or amplifying, in any way, the
scope or intent of the provisions hereof.
SECTION 9.12 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the substantive laws of the State.
SECTION 9.13 No Joint Venture. Neither Borrower nor Manager is and
shall be deemed to be a joint venturer, partner, tenant in common or joint
tenant with Lender for any purpose. Lender shall not be deemed to be in privity
of contract with the General Contractor, the Architect, the Engineer, if any,
any Trade Contractor or any other Person providing services with respect to the
site development or the Land or the construction of the Improvements unless and
until, and except to the extent that, Lender shall affirmatively act to
establish any such privity pursuant to Section 8.3 or 8.4, or in the exercise of
Lender's remedies pursuant to the Mortgage or the Assignment of Agreements.
SECTION 9.14 Assignment by Lender.
(a) Assignment. Lender shall have the right, without the consent of
Borrower or Manager, to assign, transfer, sell, negotiate, pledge, grant
participations in or otherwise hypothecate its rights in and to the Loan, this
Agreement, the Note, the Mortgage and the other Loan Documents, to any other
party (an "Assignee"), provided, however, that no such assignment shall
increase, decrease or otherwise affect either Borrower's or Manager's
obligations under this Agreement or the other Loan Documents. Any Assignee
(including a pledgee) may exercise any of Lender's rights hereunder.
(b) Co-Lending/Participation. Lender shall have the right to
syndicate the Loan to other financial institutions through direct assignments of
interests to co-lenders or through participations to participating lenders,
either prior to the Closing Date or thereafter provided, however, that no such
assignment or participation shall increase, decrease or otherwise affect
Borrower's or Manager's obligations under this Agreement or the other Loan
Documents. In such event the following provisions shall apply:
(I) Those institutions who become co-lenders with Lender after
the Closing Date will, by virtue of assignments of the Loan from Lender
become "co-lenders" under the Loan Documents. Those institutions who
become participants of Lender after the Closing Date will, by virtue of
assignments of participation interests from Lender become "participating
lenders" pursuant to the terms of a participation agreement with Lender.
It is anticipated that Lender shall act as administrative agent for such
co-lenders (and in such role will be referred to as "Agent") or lead
lender under such participation agreement (and in such role will be
referred to as "Lead Lender") or Lender may assign the role of Agent
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or Lead Lender to another institutional lender. The contractual obligation
of each such co-lender or participating lender to Borrower to fund such
party's respective share or participation of the Loan shall be several and
the failure of one co-lender or participating lender to fund its pro rata
share of any Advance to Borrower shall in no event obligate any other
co-lender or participating lender to increase its pro rata share of the
Loan or it pro-rata participation of any individual Advance. Provided,
however, if a co-lender or participating lender fails to meet its funding
obligations because it becomes insolvent or is placed into receivership
under any applicable federal or state laws, regulations or orders, Lender
shall either (a) purchase back such co-lender's share of the Loan or such
participating lender's Loan participation, in which case Lender shall make
such delinquent Advance, or (b) Lender shall obtain a replacement
co-lender or participating lender which shall be obligated to make such
delinquent Advance. Provided, further, if the Agent or Lead Lender makes
any Advance with respect to a Request for Advance, which is not funded by
a co-lender or participating lender, and if such Agent or Lead Lender
either fails to (1) make an additional Advance in the amount due from such
non-performing co-lender or participating lender or (2) enforce the
remedies against such non-performing co-lender or participating lender
under the applicable co-lending or participation agreement; then to the
extent Borrower and\or Manager funds the shortfall, Borrower and\or
Manager shall be subrogated to the rights of the Agent or Lead Lender
against the non-performing co-lender or participating lender.
(ii) If Lender enters into such co-lending arrangements, this
Agreement shall be amended and restated to contain provisions governing
the relationships between and among co-lenders, Agent, Borrower and
Manager. If Lender enters into such participation arrangements, Lender
will enter into a separate participation agreement with such participating
lenders. Borrower and Manager agree to cooperate with Lender in connection
with the syndication or participation of the Loan by, for example,
assisting in the preparation of offering materials, allowing site visits
and making documents and personnel available to prospective Assignees,
co-lenders and participating lenders.
(iii) If required by any Assignee, co-lender or participating
lender, Borrower and Manager shall enter into such tri-party,
intercreditor (or similar) agreements, each in form and substance
reasonably satisfactory to Lender. Lender and such Assignee, co-lender and
participating lender, will diligently and in good faith use all
commercially reasonable efforts to timely achieve the execution of such
agreements.
(iv) If requested by Lender, any Assignee, co-lender,
participating lender, Borrower and Manger agree to make such amendments to
the Loan Documents as may be required to (A) divide the Loan into separate
loans with different characteristics regarding interest rates, pay rates,
priority of Lien in the Premises and the Collateral and similar matters or
(B) divide the Loan into different tranches containing such differentiated
attributes. Provided, however, that in no event shall Borrower or Manager
be required to consent to any such amendments which change or adversely
affect the overall financial terms of the Loan with respect to Borrower or
Manager.
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(v) Borrower and Manager recognize that, in connection with
assignments and participations with respect to the Loan, any or all
documentation, financial statements, appraisals and other data or copies
thereof, relevant to Borrower, Manager, any Guarantor or the Loan may be
exhibited to and retained by any participant or Assignee, co-lender,
participating lender, or prospective participant or Assignee of such
parties.
(c) REMIC/FASIT Sales. Lender may in its discretion subsequent to
the Substantial Completion of the Required Improvements, but prior to the
Conversion Date, sell the Loan to a REMIC/FASIT or otherwise elect to treat such
Loan as being included within a REMIC/FASIT. In connection with such sale or
election, Borrower and Manager shall cooperate in all respects with Lender
including providing such financial information to third parties, making such
non-material changes to the Loan Documents and indemnifying Lender in connection
therewith in accordance with provisions of Section 9.1 of the Loan Agreement.
Provided, however, that in no event shall Borrower or Manager be required to
consent to any such changes which adversely affect the overall financial terms
of the Loan with respect to Borrower or Manager. For purposes of this Section
9.14, such REMIC/FASIT shall be considered to be a "Assignee".
(d) Availability of Records; Further Assurances. Borrower and
Manager acknowledge and agree that Lender may provide to any Assignee, originals
or copies of this Agreement, the Note, the Mortgage, any other Loan Documents
and any other documents, instruments, certificates, opinions, insurance
policies, letters of credit, reports, requisitions and other materials and
information at any time submitted by or on behalf of Borrower, Manager, any
Borrower Owner or Guarantor, or received by Lender in connection with the Loan.
In order to facilitate transactions with Assignees, Borrower and Manager shall
execute such further documents, instruments or agreements as Lender may
reasonably require. In addition, Borrower and Manager agree to cooperate in all
reasonable respects with Lender in the exercise of Lender's rights pursuant to
this Section 9.14, including providing such information and documentation
regarding Borrower, Manager, Borrower Owners and Guarantor and their businesses
and finances as Lender or any potential Assignee may reasonably request and to
meet with potential Assignees upon reasonable notice.
(e) Expenses. Lender and Borrower shall be responsible for their
respective expenses incurred in connection with any assignment under this
Section 9.14.
SECTION 9.15 Retention of Servicer. Lender reserves the right to
retain the Servicer to act as its agent hereunder with such powers as are
specifically delegated to the Servicer by Lender, whether pursuant to the terms
of this Agreement or otherwise, together with such other powers as are
reasonably incidental thereto. Prior to the occurrence of an Event of Default,
Borrower or Manager shall not be required to pay any fees or expenses incurred
by the Servicer on behalf of Lender in connection with a prepayment of the Note,
release of the Premises, assumption or modification of the Loan or enforcement
of the Loan Documents other than the Servicing Fee.
SECTION 9.16 Consent of Lender. Unless otherwise expressly stated to
the contrary, any determination or judgment made or any consent, election,
approval or waiver given,
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by Lender pursuant to this Agreement, the Initial Note, the Mortgage or any
other Loan Document shall be made or given, as the case may be, in Lender's
discretion.
SECTION 9.17 JURY TRIAL WAIVER. EACH OF BORROWER, MANAGER, AND
LENDER HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT
BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH
RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY
CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER
OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY BORROWER,
MANAGER AND LENDER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND
EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE.
LENDER IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING
AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY BORROWER AND MANAGER.
SECTION 9.18 Incorporation by Reference. Borrower and Manager agree
that the Note, the Mortgage and the other Loan Documents shall be made subject
to all the terms, covenants, conditions, obligations, stipulations and
agreements contained in this Agreement to the same extent and effect as if fully
set forth in and made a part of the Initial Note, the Mortgage and the other
Loan Documents. If there is a conflict between the terms of this Agreement and
the terms of the Loan Agreement, then the terms, covenants and conditions of the
Loan Agreement shall control. If there is a conflict between the terms of this
Agreement and any other Loan Documents, then the terms, covenants and conditions
of this Agreement shall prevail. The information set forth on the cover, and
recitals hereof and the Exhibits attached hereto are hereby incorporated herein
as a part of this Agreement with the same effect as set forth in the body
hereof.
SECTION 9.19 Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, and it shall not be necessary in making proof of this Agreement to
produce or account for more than one such counterpart.
SECTION 9.20 Product of Joint Drafting. This Agreement is, and shall
be deemed to be, the product of joint drafting by the parties hereto and shall
not be construed against any of them as the drafter hereof.
SECTION 9.21 Intentionally Omitted.
SECTION 9.22 Sign. At the request of Lender, Borrower or Manager
shall, subject to applicable ordinances pertaining to the Premises, and subject
to the Approval of Borrower or Manager, not to be unreasonably withheld,
conditioned or delayed, place a sign upon the Premises reciting, among other
things, the source of rehabilitation or construction financing for the
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Premises, which sign shall be provided at the expense of Borrower or Manager and
shall remain in place until the completion of construction.
SECTION 9.23 Survival. The provisions of this Agreement shall
survive the completion of the Required Improvements; provided, however, upon the
occurrence of the Conversion Date all of the terms and provisions of this
Agreement shall be of no further force and effect (except to the extent that
certain definitions contained herein and incorporated by reference in any other
Loan Documents continue to be operative in such other Loan Documents), this
Agreement shall terminate and the Loan Agreement shall constitute and operate as
the sole loan agreement governing the operation and administration of the Loan.
SECTION 9.24 Time of the Essence. Time is of the essence with
respect to each and every covenant, agreement and obligation of Borrower and
Manager under this Agreement.
SECTION 9.25 Lender Reliance. Except as otherwise specifically
provided in this Agreement, Lender in administering the Loan and the
disbursement of the Advances under this Agreement and the other applicable Loan
Documents, may rely exclusively upon, and deal exclusively with, Manager and
shall have no obligation to confirm with Borrower the truth, accuracy or
applicability of any instruction, representation or any other communication
received from Manager, and Lender shall have no liability to Borrower for any
action taken in such reliance.
SECTION 9.26 Limitation of Liability. Notwithstanding any provision
of this Agreement to the contrary, the liability of Borrower, the Manager, and
their respective agents, employees, officers, directors, partners, etc.
hereunder is limited pursuant to Section 10.1 of the Loan Agreement.
SECTION 9.27 Termination of Manager's Obligations. Notwithstanding
anything to the contrary contained herein or in any other Loan Documents,
Manager's obligations to either Lender or Borrower under this Agreement or any
other Loan Documents (except as otherwise expressly provided for herein or
therein) shall terminate upon the termination of the Development Agreement, in
which case Borrower shall succeed to all of Manager's rights, duties and
obligations under this Agreement. Subject to Section 10.1 of the Loan Agreement,
the foregoing obligations of Manager which have accrued but remain unsatisfied
prior to the termination of the Development Agreement, shall remain in full
force and effect and this Section shall not relieve Manager of such Obligations.
Further, if Manager enters into a Synthetic Lease pursuant to Section 10.33 of
the Loan Agreement or exercises any of its rights under the Equity Option
Agreement or the Property Option Agreement, then Manager's obligations shall not
terminate but rather shall remain in full force and effect.
SECTION 9.28 Waiver of "One Action" Rule; Cross Collateralizations.
(a) The Loan has been made by Lender pursuant to the Master
Financing Facility Agreement. The Master Financing Facility Agreement
contemplates that one (1) or more other loans (the "Other Loans") made to Other
Borrowers pursuant to the Master Financing Facility
50
<PAGE>
Agreement will, at Lender's election, be cross collateralized and cross
defaulted with the Loan and with each other, subject to Section (b) below. In
such event, such Other Loans will be secured by the Property and the Collateral,
and the Loan will be secured by the other properties and other collateral
serving as primary security for such Other Loans (the "Other Properties"),
subject to Section (b) below.
(b) Borrower hereby agrees that (x) with respect to the obligations
of any Other Borrower under any Other Loan made pursuant to the Master Financing
Facility Agreement, such Other Borrower's obligations shall be
cross-collateralized and cross-defaulted with the Loan until the earlier of (i)
the date on which any such Other Loan or the Loan has been converted pursuant to
the terms of the relevant Other Loan Agreement or this Agreement, as applicable,
and transferred in a Securitization for loans which have stabilized of which the
Loan or applicable Other Loans are not a part (i.e., the Loan and any Other
Loans are indifferent Securitization Pools) and (ii) Lender's election to
release the cross-default and the cross-collateralization and (y) the Loan shall
be cross-defaulted and cross-collateralized with any Other Loan which is
included in the same Securitization (as defined in this Agreement and in the
relevant Other Loan Agreement) as the Loan. During the term of any cross-default
and cross-collateralization and with respect to those Other Loans which are the
subject of such cross-default and cross-collateralization, without limitation to
any other right or remedy provided to Lender in this Agreement, the Loan
Agreement, the Master Financing Facility Agreement, or any of the other Loan
Documents, Borrower acknowledges and agrees that, to the full extent permitted
under applicable law, upon the occurrence of an Event of Default (i) Lender
shall have the right to pursue all of its rights and remedies in one proceeding,
or separately and independently in separate proceedings which it, as Lender, in
its discretion, shall determine form time to time, (ii) Lender is not required
to either marshall assets, sell the Property or any Other Properties in any
inverse order of alienation, or be subjected to any "one action" or "election of
remedies" law or rule, (iii) the exercise by Lender of any remedies against any
Property or Other Properties will not impede Lender from subsequently or
simultaneously exercising remedies against any Property or Other Properties,
(iv) all Liens and other rights, remedies and privileges provided to Lender in
this Agreement, the Master Financing Facility Agreement (except as earlier
terminated pursuant to the terms thereof), and in the other Loan Documents
(except as earlier terminated pursuant to the terms thereof) or otherwise shall
remain in full force and effect until Lender has exhausted all of its remedies
against the Property and all Other Properties has been foreclosed, sold and/or
otherwise realized upon and (v) the Property and all the Other Properties under
the Master Financing Facility Agreement shall be security for the performance of
all of Borrower's Obligations.
51
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective duly authorized officers as of
the day and year first above written.
BORROWER:
AH Michigan Owner Limited Partnership,
an Ohio limited partnership
By: AH CGP, Inc., an Ohio corporation,
its sole general partner
By: ________________________________________
David B. Fenkell
President
52
<PAGE>
MANAGER:
Brookdale Living Communities of Michigan, Inc.,
a Delaware corporation
By: ________________________________
Name: Darryl W. Copeland, Jr.
Title: Vice President
53
<PAGE>
LENDER:
NOMURA ASSET CAPITAL CORPORATION,
a Delaware corporation
By:
Stuart Simon
Director
54
<PAGE>
EXHIBIT A
LAND
A-1
<PAGE>
EXHIBIT B
BUDGET
B-1
<PAGE>
EXHIBIT C
[FORM OF REQUEST FOR ADVANCE]
____________, 1998
Nomura Asset Capital Corporation
Two World Financial Center
Building B
New York, New York 10281
Attn: Sheryl McAfee
Re: REQUEST FOR ADVANCE NO. ____
Property Address:
Ladies and Gentlemen:
This Request for Advance No. ____, in the amount of $________ of
Hard Costs and the estimated amount of $ of Soft Costs, is made pursuant to the
Building Loan Agreement dated as of ____________, 1998 (the "BLA") between the
undersigned, as manager, borrower, and you, as lender. All capitalized terms
used and not defined herein shall have the respective meanings given such terms
in the BLA.
A. Manager hereby certifies to you as follows:
1. Exhibit A hereto sets forth, with respect to each Line
Item, the amount thereof incurred through and including the prior Request for
Advance, the amount thereof paid with Equity Payments, the amount thereof paid
from Loan proceeds, the amount of Retainage, if any, currently held by Lender in
respect thereof and the amount of Retainage previously released by Lender for
such Line Item.
C-1
<PAGE>
2. The following are Manger's estimates of Soft Costs for
which this Request for Advance is made, to the extent such Soft Costs are owed
to Lender or Lender's Construction Consultant:
Interest: $
Draw Fee: $
Servicing Fee: $
Lender's Construction Consultant's f$e:
Lender's Counsel Fees: $
Title and Closing Costs $___________
Management\Development fee: $___________
Manager acknowledges that Lender will determine the exact amount of such Soft
Costs, and the amount of the Advance made pursuant to this Request for Advance
(i) will be made to Borrower or Manager net of Soft Costs owing to Lender and
(ii) may be in an amount different from the amount requested herein, to the
extent actual Soft Costs vary from Manager's estimates.
3. Exhibit B hereto sets forth, by Line Item, the Hard Costs
and other Soft Costs for which this Request for Advance is made, the amount of
each such Cost to be paid from the requested Advance, the amount of each such
Cost to be paid with Equity Payments, and the amount of Retainage, if any, the
release of which is being requested.
4. Enclosed herewith are true, complete and correct copies of
all items required to be submitted under clauses (b) (c), (e), (f), (g), (h),
(i), and (j) of Section 5.3 of the BLA.
5. Enclosed herewith are copies of lien waivers covering all
work paid for from the most recent Advance.
6. Enclosed herewith is evidence of payment of the entire
amount of the most recent Advance to the persons to whom such Advance was paid.
7. Enclosed herewith is evidence that Manager has incurred all
of the Soft Costs for which this Request for Advance is made, to the extent that
such Soft Costs are not owed to Lender or Lender's Construction Consultant.
B. Manager hereby represents and warrants to Lender that except as
for the following items: ________, all of the conditions set forth in Article V
of the BLA have been satisfied by Borrower as of the date hereof (other than the
conditions set forth in Sections 5.3(d) and 5.3(l) of the BLA).
C. Manager hereby represents and warrants that except for the
following items __________, (i) there is not now existing and the making of the
Advance requested hereby will not
C-2
<PAGE>
result in any Deficiency, (ii) the actual construction of the Improvements
accomplished to date conforms to that contemplated by the Construction Schedule.
D. Manager also requests that Lender disburse $__________ from the
Deficiency Account to pay for the Hard Costs and Soft Costs set forth by Line
Item on Exhibit C hereto.
E. Manager also requests that Lender reallocate Cost Savings among
the Line Items specified on Exhibit D hereto.
Assuming that this Request for Advance and the enclosures meet with
your approval, the following are the wire instructions for the requested
Advance:
ACCOUNT AMOUNT
Should you require any further documentation or have any questions,
please contact .
Very truly yours,
Brookdale Living Communities of Michigan, Inc.,
a Delaware corporation
By: ,
Name: Darryl W. Copeland, Jr.
Title: Vice President
C-3
<PAGE>
EXHIBIT D
ARCHITECT'S INITIAL CERTIFICATION,
CONSENT AND AGREEMENT
(Architect's Letterhead)
___________, 199_
Nomura Asset Capital Corporation
Two World Financial Center, Building B
New York, New York 10281-1198
Attn: Sheryl McAfee
Premises: [Describe Premises]
Improvements: [Insert description of improvement]
Borrower: [Insert name of Borrower]
Manager: [Insert name of Manager]
Ladies and Gentlemen:
The undersigned, an architect duly registered and licensed in the State of
________, (i) has been retained by Borrower MANAGER as Architect pursuant to
an Architect's Agreement dated _______, 199_ with Borrower MANAGER (as the
same may be amended or supplemented from time to time, as permitted hereby, the
"Architect's Agreement") and (ii) has prepared for Borrower MANAGER final
plans, the detailed working drawings, and specifications (and addenda), dated
________, 199_, and last redated and revised on _______, 199_, and identified as
set forth on Schedule "A" annexed hereto (collectively the "Plans") in
connection with the proposed construction of the Improvements on the Premises.
The undersigned has been advised by Borrower that Borrower has requested
that Nomura Asset Capital Corporation (herein referred to, together with its
successors and assigns, as "Lender"), make a loan to the Borrower in a maximum
principal amount of $__________ to fund a portion of the costs of constructing
the Improvements (the "Building Loan"). A complete and accurate copy of the
Architect's Agreement, with all amendments to date, is attached hereto.
The undersigned has also been advised by Borrower that the Building Loan
is to be made in accordance with the provisions of that certain building loan
agreement between Borrower, Manager and Lender to be dated on or about
_________, 199_ (the "Building Loan Agreement").
D-1
<PAGE>
Accordingly, at Borrower's MANAGER request and in order to assist
Borrower MANAGER with providing information and representations to Lender
which Lender may rely upon in order to make an informed decision with regard to
making the Building Loan, the undersigned hereby states that:
A. The Plans comply with and conform in all respects to the requirements
of law, having been duly filed with and having been approved by [insert name of
relevant state or local authorities], and all other governmental and municipal
authorities whose approval is required, and further that the Plans are in full
compliance with all requirements and restrictions pursuant to all applicable
zoning, environmental, building, fire, health, and other governmental statutes,
ordinances, rules and regulations, as well as the requirements of the
appropriate board of fire underwriters or other such similar body acting for and
in the locality in which the Premises is located;
B. To extent obtainable at this stage of construction, all requisite
building permits, licenses, and approvals have been obtained in connection with
the construction of the Improvements and all such items shall be obtained prior
to Substantial Completion;
C. In the opinion of the undersigned, upon completion of the construction
of the Improvements substantially in accordance with the Plans, all of the
preconditions will have been met justifying the issuance of (i) a permanent
certificate or certificates of occupancy for the Improvements and (ii) such
other necessary approvals, certificates, permits and licenses that may be
required from [insert names of relevant state and local authorities], the board
of fire underwriters, or other similar body, or local or municipal fire, health,
policy, buildings, housing, environmental, zoning and planning boards, agencies,
authorities or departments and any such other governmental authorities having
jurisdiction thereover;
D. Upon completion of the construction of the Improvements substantially
in accordance with the Plans, the Improvements will be in compliance with all
zoning, environmental, and other applicable laws, statutes, ordinances, rules
and regulations, restrictions, requirements and easements then in effect, and
all existing building and other municipal or state violations filed or noted
against the Premises or the Improvements will be corrected upon or before the
completion of construction substantially in accordance with the Plans; and
E. All necessary gas, electric, water and sewage and other utilities will
be made available to the Improvements and the Premises upon completion of the
Improvements.
Additionally, at Borrower's Manager's request, the undersigned hereby
consents to the assignment of the Architect's Agreement by the Borrower
MANAGER to Lender in connection with the Building Loan (and to any further
assignment by Lender). The undersigned acknowledges and agrees that it will not
amend or modify or terminate or otherwise alter the Architect's Agreement
without the prior written approval of Lender and that Lender may enforce the
obligations of the Architect's Agreement with the same force and effect as if
enforced by Borrower MANAGER.
D-2
<PAGE>
The undersigned warrants that (i) it has no notice of any prior assignment
of the Architect's Agreement, (ii) the Architect's Agreement is a valid,
enforceable agreement, (iii) neither party is in default of its obligations
thereunder, and (iv) all covenants, conditions, and agreements have been
performed as required therein, except those not due to be performed until after
the date hereof.
Additionally, in consideration of Lender's making of the Building Loan,
the undersigned agrees that in the event of a default by Borrower or Manager
under any of the documents now or hereafter executed and delivered in connection
with the Building Loan (collectively the "Loan Documents"), the undersigned
shall, at Lender's request, continue performance under the Architect's Agreement
in accordance with the terms thereof, without regard to any modifications
thereto not approved in writing by Lender, provided the undersigned is
reimbursed in accordance with the Architect's Agreement for all services
rendered to the Lender. Furthermore, in the event of any such default by
Borrower or Manager under any of Loan Documents, the undersigned agrees to make
available to Lender the "as-built" plans, if any, the detailed specifications
and working drawings (and addenda) for work performed at that time. Herewith we
are delivering a copy of our errors and omissions policy.
The undersigned further agrees that if it at any time gives a notice of
default to Borrower MANAGER under the Architect's Agreement, the undersigned
shall provide a copy of such notice simultaneously to Lender.
The undersigned further agrees that if at any time Lender shall become
owner of the Premises, or otherwise required the use of the Plans, the Lender
shall have the right to use the same, together with any and all changes,
modifications, amendments, additions, enlargements, or extensions thereof,
without any cost or expense and without any payment of any additional fees or
charges to the undersigned.
Dated: __________, 199_
[ARCHITECT]
By: ____________________________
Name:
Title:
D-3
<PAGE>
Schedule "A"
[to Exhibit D]
Schedule for Final Plans, Detailed
Specifications and Working Drawings
(and Addenda)
-------------------------------
Drawing No. Title Date & Revised Date
===============================================================
===========================
D-4
<PAGE>
EXHIBIT E - SUBSTITUTE WITH T:\DOCS\314730\82499\GENCONT.DOC
E-1
<PAGE>
EXHIBIT F
MANAGER'S CONSENT AND AGREEMENT
F-1
<PAGE>
EXHIBIT G
ENGINEER'S INITIAL CERTIFICATION,
CONSENT AND AGREEMENT
(Engineer's Letterhead)
___________, 199_
Nomura Asset Capital Corporation
Two World Financial Center, Building B
New York, New York 10281-1198
Premises: [Describe Premises]
Improvements: [Insert more specific description of
improvement]
Borrower: [Insert name of Borrower]
Manager: [Insert name of Manager]
Ladies and Gentlemen:
The undersigned, an engineer duly registered and licensed in the State of
________, (i) has been retained by Manager as Engineer pursuant to an Engineer's
Agreement dated _______, 199_ with Borrower (as the same may be amended or
supplemented from time to time, as permitted hereby, the "Engineer's Agreement")
and (ii) has prepared for Manager final plans, the detailed working drawings,
and specifications (and addenda), dated ________, 199_, and last redated and
revised on _______, 199_, and identified as set forth on Schedule "A" annexed
hereto (collectively the "Plans") in connection with the proposed construction
of the Improvements on the Premises.
The undersigned has been advised by Manager that Borrower has requested
that Nomura Asset Capital Corporation (herein referred to, together with its
successors and assigns, as "Lender"), make a loan to the Borrower in a maximum
principal amount of $__________ to fund a portion of the costs of constructing
the Improvements (the "Building Loan").
The undersigned has also been advised by Manager that the Building Loan is
to be made in accordance with the provisions of that certain building loan
agreement between Borrower, Manager and Lender to be dated on or about June 17,
1998 (the "Building Loan Agreement").
Accordingly, at Manager's request and in order to assist Manager with
providing information and representations to Lender which Lender may rely upon
in order to make an informed decision
G-1
<PAGE>
with regard to making the Building Loan, the undersigned hereby states that the
Plans comply with and conform in all respects to the requirements of law, having
been duly filed with and having been approved by [insert name of relevant state
or local authorities], and all other governmental and municipal authorities
whose approval is required, and further that the Plans are in full compliance
with all requirements and restrictions pursuant to all applicable zoning,
environmental, building, fire, health, and other governmental statutes,
ordinances, rules and regulations, as well as the requirements of the
appropriate board of fire underwriters or other such similar body acting for and
in the locality in which the Premises is located.
Additionally, at Manager's request, the undersigned hereby consents to the
assignment of the Engineer's Agreement by the Manager to Lender in connection
with the Building Loan (and to any further assignment by Lender). The
undersigned acknowledges and agrees that it will not amend or modify or
terminate or otherwise alter the Engineer's Agreement without the prior written
approval of Lender and that Lender may enforce the obligations of the Engineer's
Agreement with the same force and effect as if enforced by Manager.
The undersigned warrants that (i) it has no notice of any prior assignment
of the Engineer's Agreement, (ii) the Engineer's Agreement is a valid,
enforceable agreement, (iii) neither party is in default of its obligations
thereunder, and (iv) all covenants, conditions, and agreements have been
performed as required therein, except those not due to be performed until after
the date hereof.
The undersigned further agrees that if it at any time gives a notice of
default to Manager under the Engineer's Agreement, the undersigned shall provide
a copy of such notice simultaneously to Lender.
Additionally, in consideration of Lender's making of the Building Loan,
the undersigned agrees that in the event of a default by Borrower or Manager
under any of the documents now or hereafter executed and delivered in connection
with the Building Loan (collectively the "Loan Documents"), the undersigned
shall, at Lender's request, continue performance under the Engineer's Agreement
in accordance with the terms thereof, without regard to any modifications
thereto not approved in writing by Lender, provided the undersigned is paid in
accordance with the Engineer's Agreement for all services rendered to the
Lender. Furthermore, in the event of any such default by Borrower or Manager
under any of Loan Documents, the undersigned agrees to make available to Lender
the "as-built" plans, if any, the detailed specifications and working drawings
(and addenda) for work performed at that time. Herewith we are delivering a copy
of our errors and omissions policy.
The undersigned further agrees that if at any time Lender shall become
owner of the Premises, or otherwise required the use of the Plans, the Lender
shall have the right to use the same, together with any and all changes,
modifications, amendments, additions, enlargements, or
G-2
<PAGE>
extensions thereof, without any cost or expense and without any payment of any
additional fees or charges to the undersigned.
Dated: __________, 199_
[ENGINEER]
By: ____________________________
Name:
Title:
G-3
<PAGE>
Schedule "A"
[to Exhibit G]
Schedule for Final Plans, Detailed
Specifications and Working Drawings
(and Addenda)
-------------------------------
Drawing No. Title Date & Revised Date
===============================================================
===========================
G-4
<PAGE>
EXHIBIT H
MANAGER'S AFFIDAVIT
(to be furnished with each Request for Advance)
STATE OF ILLINOIS )
: ss.:
COUNTY OF COOK )
____________________, being duly sworn, deposes and says:
That affiant is the _________________ of Brookdale Licing
Communities of Michigan, Inc., a Delaware corporation (the "Manager"), has made
due investigation as to matters hereinafter set forth, and does hereby certify
the following to induce Nomura Asset Capital Corporation (together with its
successors and assigns, the "Lender") to make and advance the sum of
________________ Dollars ($_______) to the Manager and to AH Michigan Owner
Limited Partnership, an Ohio limited partnership (the "Borrower") pursuant to
the terms of that certain Building Loan Agreement, dated as of June 17, 1998,
between the Lender, Borrower and Manager (the "Building Loan Agreement"), and
Request for Advance No. _____, dated _______, 199_, which Request for Advance is
being submitted to the Lender herewith:
1. All representations and warranties contained in the Building Loan
Agreement are true and correct in all material respects as of the date hereof.
2. No Default (such term and other capitalized terms used but not
otherwise defined herein having the respective meanings provided in Building
Loan Agreement) or Event of Default exists, and no event or condition has
occurred and is continuing or existing or would result from the Advance about to
be made which, with the giving of notice or the passage of time, or both, would
constitute a Default or Event of Default.
3. Construction of the Required Improvements has been carried on with
dispatch and has not been discontinued at any time for Unavoidable Delay or for
reasons within the control of the Manager in excess of that allowed under the
Building Loan Agreement except: _______________________, or in excess of that
requiring a notice to the Lender under Section 7.4 of the Building Loan
Agreement; the Required Improvements have not been damaged by fire or other
casualty, and no part of the Property has been taken by eminent domain and no
proceedings or negotiations therefor are pending or threatened.
4. Construction of the Required Improvements is progressing in such
manner so as to assure the Substantial Completion thereof in accordance with
Building Loan Agreement.
H-1
<PAGE>
5. All funds previously received from the Lender as Advances under
Building Loan Agreement have been expended for the sole purpose of paying Hard
Costs and Soft Costs (collectively, Costs) previously certified to the Lender in
Requests for Advance as Costs to be paid from Loan proceeds, and no part of said
funds have been used, and the funds to be received pursuant to the Request for
Advance submitted herewith shall not be used, for any other purpose. No item of
Costs previously certified to the Lender in a Request for Advance remains unpaid
as of the date of this Affidavit.
6. All of the statements and information set forth in the Request for
Advance being submitted to the Lender herewith are true and correct in every
material respect as at the date hereof, and all Costs certified to the Lender in
said Request for Advance accurately reflect the precise amounts (or estimated
amounts, in the case of estimated Soft Costs) due. All of the funds to be
received pursuant to said Request for Advance shall be used solely for the
purpose of paying the items of cost specified therein to be paid therefrom or
for reimbursing the Manager for such items previously paid by the Manager.
7. Except as previously disclosed in writing to Lender, nothing has
occurred subsequent to the date of the Building Loan Agreement which has or may
result in the creation of any lien, charge or encumbrance upon the Property, or
any part thereof, or anything affixed thereto or used in connection therewith,
or which has or may substantially and adversely impair the ability of Borrower
or the Manager to make when due all payments of principal and interest required
under the Loan Documents or the ability of Borrower or the Manager to meet its
obligations under the Building Loan Agreement.
8. None of the labor, materials, overhead or other items of expense
specified in the Request for Advance submitted herewith have previously been
made the basis of any Request for Advance by the Manager which has been approved
by Lender.
H-2
<PAGE>
9. All conditions, other than those exclusively within Lender's
control, to the advance referred to above and to be made in accordance with the
Request for Advance submitted herewith have been met in accordance with the
terms of the Building Loan Agreement.
Brookdale Living Communities of Michigan, Inc.,
a Delaware corporation
By: ,
Name: Darryl W. Copeland, Jr.
Title: Vice President
Sworn to before this ___ day of _______, 19__.
- -------------------------
Notary Public
H-3
<PAGE>
EXHIBIT I
PENDING DISBURSEMENTS CLAUSE
Any statutory lien for labor or material, except to the extent that such
lien is attributable to retainage held by the Insured, which now has gained or
hereafter may gain priority over the lien of the insured mortgage, and which
lien arises from labor performed or material furnished prior to
- -----------------------.
Notwithstanding the Amount of Insurance in Schedule A, the Amount of Insurance
at Date of Policy is limited to $________________, being the aggregate of the
mortgage proceeds actually disbursed at Date of Policy under the mortgage set
forth in Schedule A-4 of this Policy, and this Amount of Insurance may only be
increased by a Disbursement Endorsement which:
1. Extends the Date of Policy.
2. Increases the Amount of Insurance to the aggregate of the mortgage proceeds
actually disbursed at the date of the Endorsement.
3. Extends the date of coverage against loss or damage by reason of statutory
lien for labor or materials.
4. Amends Schedule B to disclose exceptions first appearing of public record or
if not of public record first known to the Company after Date of Policy, as same
may have been last extended. The Disbursement Endorsement shall, however, insure
the Insured against loss or damage arising from any recorded statutory lien for
labor or material to the extent that the lien arises from labor performed or
material furnished prior to a date through which the insurance has been provided
by this Policy, as previously endorsed.
I-1
<PAGE>
EXHIBIT J
EXISTING TRADE CONTRACTS
J-1
<PAGE>
EXHIBIT K
K-1
<PAGE>
GUARANTY OF PAYMENT OF NOTE,
RATE LOCK OBLIGATIONS, CARRYING
COSTS AND RECOURSE OBLIGATIONS
made by
BROOKDALE LIVING COMMUNITIES, INC.,
as guarantor,
in favor of
NOMURA ASSET CAPITAL CORPORATION
Dated as of June __, 1998
<PAGE>
GUARANTY OF PAYMENT OF NOTE,
RATE LOCK OBLIGATIONS, CARRYING
COSTS AND RECOURSE OBLIGATIONS
This GUARANTY (this "Guaranty"), dated as of June __, 1998, made by
BROOKDALE LIVING COMMUNITIES, INC., a Delaware corporation, having an office at
77 West Wacker Drive, Suite 4400, Chicago, Illinois 60601 ("Guarantor"), in
favor of NOMURA ASSET CAPITAL CORPORATION, a Delaware corporation, having an
office at Two World Financial Center, Building B, New York, New York 10281-1198
(together with its successors and assigns, "Lender").
R E C I T A L S:
A. Pursuant to that certain Loan Agreement dated as of the date
hereof (as the same may be amended, modified, supplemented or replaced from time
to time, the "Loan Agreement") by and among AH Michigan Owner Limited
Partnership ("Borrower"), Brookdale Living Communities of Michigan, Inc.
("Manager"), and Lender, and also pursuant to that certain Building Loan
Agreement dated as of the date hereof between Borrower, Manager and Lender (as
the same may be amended, modified, supplemented or replaced from time to time,
the "Building Loan Agreement", and collectively with the Loan Agreement,
sometimes hereinafter referred to as the "Loan Agreements"), Lender has agreed
to make a loan (the "Loan") to Borrower in an aggregate principal amount of
Twenty-Six Million Six Hundred and Twenty-Five Thousand and 00/100 Dollars
($26,625,000), subject to the terms and conditions of the Loan Agreements;
B. Borrower has executed a note in the principal amount of
Twenty-Six Million Six Hundred and Twenty-Five Thousand and 00/100 Dollars
($26,625,000) (as the same may be amended, modified, restated, severed,
consolidated, renewed, replaced, or supplemented from time to time, the "Note").
The Note is secured by, inter alia, that certain mortgage (as amended from time
to time, the "Mortgage") on the Property;
C. As a condition to Lender's making the Loan, Lender is requiring
that Guarantor execute and deliver to Lender this Guaranty; and
D. Guarantor hereby acknowledges that Guarantor will materially
benefit from Lender's agreeing to make the Loan;
NOW, THEREFORE, in consideration of the premises set forth herein
and as an inducement for and in consideration of the agreement of Lender to make
the Loan pursuant to the
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Loan Agreements, Guarantor hereby agrees, covenants, represents and warrants to
Lender as follows:
1. Definitions.
(a) All capitalized terms used and not defined herein shall
have the respective meanings given such terms in the Loan Agreements.
(b) The term "Payment Obligations" means Borrower's
obligations under the Loan Documents to pay when due in accordance therewith the
Principal from time to time outstanding, all interest accrued thereon (including
interest at the Default Rate when applicable), the Yield Maintenance Premium,
and all other fees, expenses and other charges payable by Borrower to Lender
under the Loan Documents.
(c) The term "Rate Lock Obligations" means the obligations of
Borrower and/or Manager to pay when due all Lender's Expenses in accordance with
the Rate Lock Agreement.
(d) The term "Carry Obligations" means Borrower's obligations
to pay when due all Operating Expenses and Debt Service (whether or not
Operating Income is sufficient to pay them).
(e) The term "Recourse Obligations" means Borrower's
liabilities and obligations under the Loan Documents that may, even after the
Payment Obligations Termination Date, be enforced by actions or proceedings in
which a money judgment or a deficiency judgment is sought by Lender against
Borrower, and which is enforceable against Borrower and any or all of its assets
(without recourse being limited to the collateral securing the Debt). The
Recourse Obligations are those arising out of or in connection with the actions,
events and other matters described in clauses (e) through (h), (k), and (m) of
the second paragraph of Section 10.1 of the Loan Agreement.
(f) The term "Payment Obligations Termination Date" means the
earlier of (i) the Conversion Date or (ii) the earliest date after the first
(1st) anniversary of Substantial Completion on which the Debt Service Coverage
Ratio is at least 1.27.
(g) Intentionally deleted.
2. Guaranty.
(a) Guarantor hereby irrevocably, absolutely and
unconditionally guarantees to Lender the full, prompt and complete payment when
due (and whether by reason of acceleration of maturity or otherwise) the Payment
Obligations, the Rate Lock Obligations, the Carry Obligations and the Recourse
Obligations (collectively, the "Guarantied Obligations").
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(b) Notwithstanding anything to the contrary contained in this
Guaranty, including, without limitation, Section 2(a) hereof, the Guarantied
Obligations and Guarantor's maximum aggregate liability under this Guaranty
shall be subject to reduction as follows:
(i) Provided no Default or Event of Default then exists
and that no default on the part of Guarantor then exists under this
Guaranty, upon Substantial Completion, the aggregate maximum liability of
Guarantor under this Guaranty with respect to the Payment Obligations
shall be reduced to (A) an amount equal to 50% of the sum of (w) the
Principal then outstanding, (x) any Advances made upon (or after)
Substantial Completion, (y) interest accrued and thereafter accruing on
the amounts described in (w) and (x) above and (z) all other fees,
expenses and other charges (including the Yield Maintenance Premium)
payable by Borrower to Lender under the Loan Documents plus (B) any sums
then or thereafter payable by Guarantor pursuant to Section 16 of this
Guaranty;
(ii) Provided no Default or Event of Default then exists
and that no default on the part of Guarantor then exists under this
Guaranty, upon the Property achieving a Debt Service Coverage Ratio (as
defined in the Loan Agreement, but using a six (6) month rather than a
12-month, period) after Substantial Completion of at least 1.0 to 1, the
aggregate maximum liability of Guarantor under this Guaranty with respect
to the Payment Obligations shall be reduced to (A) an amount equal to
twenty-five percent (25%) of the sum of (w) the Principal then
outstanding, (x) any Advances made upon (or after) Substantial Completion,
(y) interest accrued and thereafter accruing on the amounts described in
(w) and (x) above and (z) all other fees, expenses and other charges
(including the Yield Maintenance Premium) payable by Borrower to Lender
under the Loan Documents plus (B) any sums then or thereafter payable by
Guarantor pursuant to Section 16 of this Guaranty; and
(iii) Provided no Default or Event of Default then exists
and that no default on the part of Guarantor then exists under this
Guaranty, this Guaranty shall terminate with respect to the Payment
Obligations, the Rate Lock Obligations, and the Carry Obligations (except
with respect to Guarantor's liability for any sums due and payable under
this Guaranty as of the date of such termination and any sums thereafter
becoming payable pursuant to Section 16 of this Guaranty) on the Payment
Obligations Termination Date.
(iv) This Guaranty and the Guarantied Obligations
hereunder, including the Recourse Obligations, shall terminate on the
Payment Obligations Termination Date, except to the extent any such
obligations exist and are unpaid, or not performed in full, on such date.
(c) All sums payable to Lender under this Guaranty shall be
payable on demand and without reduction for any offset, claim, counterclaim or
defense.
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(d) Guarantor hereby agrees to indemnify, defend and save
harmless Lender from and against any and all costs, losses, liabilities, claims,
causes of action, expenses and damages, including, without limitation,
reasonable attorneys' fees and disbursements, which Lender may suffer or which
otherwise may arise by reason of Borrower's failure to pay any of the Guarantied
Obligations when due, irrespective of whether such costs, losses, liabilities,
claims, causes of action, expenses or damages are incurred by Lender prior or
subsequent to (i) Lender's declaring the Principal, interest and other sums
evidenced or secured by the Loan Documents to be due and payable, (ii) the
commencement or completion of a judicial or non-judicial foreclosure of the
Mortgage or (iii) the conveyance of all or any portion of the Property by
deed-in-lieu of foreclosure.
(e) Subject to Section 2(b)(i) and (ii) above, Guarantor
agrees that no portion of any sums applied (other than sums received from
Guarantor in full or partial satisfaction of its obligations hereunder), from
time to time, in reduction of the Debt shall be deemed to have been applied in
reduction of the Guarantied Obligations until such time as the Debt has been
paid in full, or Guarantor shall have made the full payment required hereunder,
it being the intention hereof that the Guarantied Obligations shall be the last
portion of the Debt to be deemed satisfied. Subject to Section 2(b)(i) and (ii)
above, any amounts paid in reduction of the Debt by Guarantor during the First
Period shall not reduce the Guarantied Obligations during the Second Period.
Subject to Section 2(b)(i) and (ii) above, any amounts paid in reduction of the
Debt by Guarantor during the Second Period shall not reduce the Guarantied
Obligations during the Third Period. For purposes of this paragraph (e), (i) the
"First Period" shall mean the period from the date hereof to Substantial
Completion, (ii) the Second Period shall mean the period from Substantial
Completion to the reduction of the Payment Obligations pursuant to Section
2(b)(iii), and (iii) the Third Period shall mean the period from the end of the
Second Period to the Payment Obligations Termination Date.
3. Representations and Warranties. Guarantor hereby represents and
warrants to Lender as follows (which representations and warranties shall be
given as of the date hereof and shall survive the execution and delivery of this
Guaranty):
(a) Organization, Authority and Execution. Guarantor is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and has all necessary power and authority to own its
properties and to conduct its business as presently conducted or proposed to be
conducted and to enter into and perform this Guaranty and all other agreements
and instruments to be executed by it in connection herewith. This Guaranty has
been duly executed and delivered by Guarantor.
(b) Enforceability. This Guaranty constitutes a legal, valid
and binding obligation of Guarantor, enforceable against Guarantor in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally.
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(c) No Violation. The execution, delivery and performance by
Guarantor of its obligations under this Guaranty have been duly authorized by
all necessary action, and do not and will not violate any law, regulation,
order, writ, injunction or decree of any court or governmental body, agency or
other instrumentality applicable to Guarantor, or result in a breach of any of
the terms, conditions or provisions of, or constitute a default under, or result
in the creation or imposition of any mortgage, lien, charge or encumbrance of
any nature whatsoever upon any of the assets of Guarantor pursuant to the terms
of Guarantor's certificate of incorporation or by-laws, or any mortgage,
indenture, agreement or instrument to which Guarantor is a party or by which it
or any of its properties is bound. Guarantor is not in default under any other
guaranty which it has provided to Lender.
(d) No Litigation. There are no actions, suits or proceedings
at law or at equity, pending or, to Guarantor's best knowledge, threatened
against or affecting Guarantor or which involve the validity or enforceability
of this Guaranty or with respect to which an adverse decision is reasonably
likely which would materially adversely affect the financial condition of
Guarantor or the ability of Guarantor to perform any of its obligations under
this Guaranty. Guarantor is not in default beyond any applicable grace or cure
period with respect to any order, writ, injunction, decree or demand of any
Governmental Authority which would materially adversely affect the financial
condition of Guarantor or the ability of Guarantor to perform any of its
obligations under this Guaranty.
(e) Consents. All consents, approvals, orders or
authorizations of, or registrations, declarations or filings with, all
Governmental Authorities (collectively, the "Consents") that are required in
connection with the valid execution, delivery and performance by Guarantor of
this Guaranty have been obtained or will be obtained when required.
(f) Financial Statements and Other Information. All financial
statements of Guarantor heretofore delivered to Lender are true and correct in
all material respects and fairly present the financial condition of Guarantor as
of the respective dates thereof, and no materially adverse change has occurred
in the financial conditions reflected therein since the respective dates
thereof. None of the aforesaid financial statements or any certificate or
statement furnished to Lender by or on behalf of Guarantor in connection with
the transactions contemplated hereby, and none of the representations and
warranties in this Guaranty 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 in any material respect. Guarantor is
not insolvent within the meaning of the United States Bankruptcy Code or any
other applicable law, code or regulation, and the execution, delivery and
performance of this Guaranty will not render Guarantor insolvent.
(g) Consideration. Guarantor is receiving fair consideration
in return for giving this Guaranty.
4. Financial Statements. Guarantor shall deliver to Lender, (a)
within one hundred twenty (120) days after the end of each fiscal year of
Guarantor, a complete copy of
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Guarantor's annual financial statements audited by a "big six" accounting firm
or another independent certified public accountant reasonably acceptable to
Lender, (b) within forty-five (45) days after the end of each fiscal quarter of
Guarantor, financial statements (including a balance sheet as of the end of such
fiscal quarter and a statement of income and expense for such fiscal quarter)
certified by the Chief Financial Officer or President of Guarantor and in form,
content, level of detail and scope reasonably satisfactory to Lender, and (c)
thirty (30) days after request by Lender, such other financial information with
respect to Guarantor as Lender may reasonably request.
5. Unconditional Character of Obligations of Guarantor.
(a) The obligations of Guarantor hereunder shall be
irrevocable, absolute and unconditional, irrespective of the validity,
regularity or enforceability, in whole or in part, of the other Loan Documents
or any provision thereof, or the absence of any action to enforce the same, any
waiver or consent with respect to any provision thereof, the recovery of any
judgment against Borrower, Guarantor or any other Person or any action to
enforce the same, any failure or delay in the enforcement of the obligations of
Borrower under the other Loan Documents or Guarantor under this Guaranty, or any
setoff, counterclaim, and irrespective of any other circumstances which might
otherwise limit recourse against Guarantor by Lender or constitute a legal or
equitable discharge or defense of a guarantor or surety. Lender may enforce the
obligations of Guarantor under this Guaranty by a proceeding at law, in equity
or otherwise, independent of any loan foreclosure or similar proceeding or any
deficiency action against Borrower or any other Person at any time, either
before or after an action against the Property or any part thereof, Borrower or
any other Person. This Guaranty is a guaranty of payment and performance and not
merely a guaranty of collection. Except as otherwise provided herein or in any
of the other Loan Documents and to the extent permitted by law, Guarantor waives
diligence, notice of acceptance of this Guaranty, filing of claims with any
court, any proceeding to enforce any provision of any other Loan Document,
against Guarantor, Borrower or any other Person, any right to require a
proceeding first against Borrower or any other Person, or to exhaust any
security (including, without limitation, the Property) for the performance of
the Guaranteed Obligations or any other obligations of Borrower, any
Non-Recourse Guarantor or any other Person, or any protest, presentment, notice
of default or other notice or demand whatsoever (except to the extent expressly
provided to the contrary in this Guaranty), and Guarantor hereby covenants and
agrees that Guarantor shall not be discharged of its obligations hereunder
except as set forth in Section 2(b) above.
(b) The obligations of Guarantor under this Guaranty, and the
rights of Lender to enforce the same by proceedings, whether by action at law,
suit in equity or otherwise, shall not be in any way affected by any of the
following:
(i) any insolvency, bankruptcy, liquidation,
reorganization, readjustment, composition, dissolution, receivership,
conservatorship, winding up or other similar proceeding involving or
affecting Borrower, the Property or any part thereof, Guarantor or any
other Person;
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(ii) any failure by Lender or any other Person, whether
or not without fault on its part, to perform or comply with any of the
terms of the Loan Agreement, or any other Loan Documents, or any document
or instrument relating thereto;
(iii) the sale, transfer or conveyance of the Property or
any interest therein to any Person, whether now or hereafter having or
acquiring an interest in the Property or any interest therein and whether
or not pursuant to any foreclosure, trustee sale or similar proceeding
against Borrower or the Property or any interest therein;
(iv) the conveyance to Lender, any Affiliate of Lender or
Lender's nominee of the Property or any interest therein by a deed-in-lieu
of foreclosure;
(v) the release of Borrower or any other Person from the
performance or observance of any of the agreements, covenants, terms or
conditions contained in any of the Loan Documents by operation of law or
otherwise; or
(vi) the release in whole or in part of any collateral
for any or all Guaranteed Obligations, the Property, the Loan, or any
portion thereof.
(c) Except as otherwise specifically provided in this
Guaranty, Guarantor hereby expressly and irrevocably waives all defenses in an
action brought by Lender to enforce this Guaranty based on claims of waiver,
release, surrender, alteration or compromise and all setoffs, reductions, or
impairments, whether arising hereunder or otherwise.
(d) Subject to the Intercreditor Agreement, Lender may deal
with Borrower and Affiliates of Borrower in the same manner and as freely as if
this Guaranty did not exist and shall be entitled, among other things, to grant
Borrower or any other Person such extension or extensions of time to perform any
act or acts as may be deemed advisable by Lender, at any time and from time to
time, without terminating, affecting or impairing the validity of this Guaranty
or the Guarantied Obligations hereunder.
(e) No compromise, alteration, amendment, modification,
extension, renewal, release or other change of, or waiver, consent, delay,
omission, failure to act or other action with respect to, any liability or
obligation under or with respect to, or of any of the terms, covenants or
conditions of, the Loan Documents or any amendment, modification or other change
of the Plans or any legal requirement shall in any way alter, impair or affect
any of the Guarantied Obligations or Lender's rights hereunder, and Guarantor
agrees that if any Loan Document are modified with Lender's consent, the
Guaranteed Obligations shall, to the extent applicable, automatically be deemed
modified to include such modifications.
(f) Lender may proceed to protect and enforce any or all of
its rights under this Guaranty by suit in equity or action at law, whether for
the specific performance of any covenants or agreements contained in this
Guaranty or otherwise, or to take any action authorized or permitted under
applicable law, and shall be entitled to require and enforce the performance of
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all acts and things required to be performed hereunder by Guarantor. Each and
every remedy of Lender shall, to the extent permitted by law, be cumulative and
shall be in addition to any other remedy given hereunder or now or hereafter
existing at law or in equity.
(g) No waiver shall be deemed to have been made by Lender of
any rights hereunder unless the same shall be in writing and signed by Lender,
and any such waiver shall be a waiver only with respect to the specific matter
involved and shall in no way impair the rights of Lender or the obligations of
Guarantor to Lender in any other respect or at any other time.
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(h) At the option of Lender, Guarantor may be joined in any
action or proceeding commenced by Lender against Borrower or any other Person in
connection with or based upon any other Loan Documents and recovery may be had
against Guarantor in such action or proceeding or in any independent action or
proceeding against Guarantor to the extent of Guarantor's liability hereunder,
without any requirement that Lender first assert, prosecute or exhaust any
remedy or claim against Borrower or any other Person, or any security for the
obligations of Borrower or any other Person.
(i) Guarantor agrees that this Guaranty shall continue to be
effective or shall be reinstated, as the case may be, if at any time any payment
is made by Borrower or Guarantor to Lender and such payment is rescinded or must
otherwise be returned by Lender (as determined by Lender in its sole and
absolute discretion) upon insolvency, bankruptcy, liquidation, reorganization,
readjustment, composition, dissolution, receivership, conservatorship, winding
up or other similar proceeding involving or affecting Borrower or Guarantor, all
as though such payment had not been made.
(j) In the event that Guarantor shall advance or become
obligated to pay any sums under this Guaranty or in connection with the
Guarantied Obligations or in the event that for any reason whatsoever Borrower
or any subsequent owner of the Property or any part thereof is now, or shall
hereafter become, indebted to Guarantor, Guarantor agrees that (i) the amount of
such sums and of such indebtedness and all interest thereon shall at all times
be subordinate as to lien, the time of payment and in all other respects to all
sums, including principal and interest and other amounts, at any time owed to
Lender under the Loan Documents, and (ii) Guarantor shall not be entitled to
enforce or receive payment thereof until all principal, Interest and other sums
due pursuant to the Loan Documents have been paid in full. Nothing herein
contained is intended or shall be construed to give Guarantor any right of
subrogation in or under the Loan Documents or any right to participate in any
way therein, or in the right, title or interest of Lender in or to any
collateral for the Loan, notwithstanding any payments made by Guarantor under
this Guaranty, until the actual and irrevocable receipt by Lender of payment in
full of all Principal, Interest and other sums due with respect to the Loan or
otherwise payable under the Loan Documents. For as long as the Loan is
outstanding, Guarantor hereby expressly waives any and all of said rights of
subrogation, reimbursement, indemnity and recourse. Guarantor shall not be
deemed a "creditor" of the Borrower with respect to the Guarantied Obligations
as said term "creditor" is defined in the United States Bankruptcy Code, as
amended. If any amount shall be paid to Guarantor on account of such subrogation
rights at any time when any such sums due and owing to Lender shall not have
been fully paid, such amount shall be paid by Guarantor to Lender for credit and
application against such sums due and owing to Lender. Notwithstanding the
foregoing, Guarantor shall have the right to be reimbursed by Borrower for any
of Guarantor's out-of-pocket costs due Guarantor or fees pursuant to the
Management Agreement or the Development Agreement provided there is no Event of
Default under any of the Loan Documents.
(k) Guarantor's obligations hereunder shall survive a
foreclosure, deed-in-lieu of foreclosure or similar proceeding involving the
Property and the exercise by Lender of any of all of its remedies pursuant to
the Loan Documents.
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6. Covenant.
(a) As used in this Section 6, the following terms shall have
the respective meanings set forth below:
(i) "Consolidated Subsidiaries" shall mean each
Subsidiary of Guarantor, the financial statements of which shall be (or
should have been) consolidated with the financial statements of Guarantor
in accordance with GAAP.
(ii) "GAAP" shall mean generally accepted accounting
principles, consistently applied.
(iii) "EBITDAR" means, on any quarterly measurement date,
on a trailing 3-month basis, the aggregate of total revenues less property
operating expenses and general administration expenses, all as shown on
Guarantor's income statements prepared in accordance with GAPP and
calculated as shown on Exhibit A attached hereto and made a part hereof.
(iv) "Guarantor's Net Cash Flow" shall mean, for a given
period, the net cash provided by operating activities of Guarantor and its
Consolidated Subsidiaries for such period, as shown in the statement of
cash flow included in Guarantor's then most recent consolidated financial
statements, determined in accordance with GAAP.
(v) "Net Worth" shall mean, as of a given date, the
value obtained by multiplying the per share value of Guarantor's common
stock, which stock trades on the NASDAQ under the symbol "BLCI" by the
number of common shares outstanding.
(vi) "Subsidiary" shall mean any Affiliate of Guarantor
that is controlled by Guarantor.
(vii) "Liquid Assets" shall mean assets in the form of
cash, cash equivalents, obligations of (or fully guarantied as to
principal and interest by) the United States or any agency or
instrumentality thereof (provided the full faith and credit of the United
States supports such obligation or guarantee), certificates of deposit
issued by a commercial bank having net assets of not less than $500
million, securities listed and traded on a recognized stock exchange or
traded over the counter and listed in the National Association of
Securities Dealers Automatic Quotations, liquid debt instruments that have
a readily ascertainable value and are regularly traded in a recognized
financial market, or any unused portion of any credit line maintained with
a bank which must have an S&P rating of "A" or better. If at any time the
credit line should be terminated or otherwise no longer be available for
Guarantor to draw down from, then Lender shall no longer include the value
of the unused portion of the credit line to calculate Guarantor's Liquid
Assets and Lender may immediately recalculate Guarantor's Liquid Assets to
determine if Guarantor satisfies the covenant in (b) below.
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(b) Until all of the Guarantied Obligations have been paid in
full or terminated, Guarantor (i) shall maintain (A) a Net Worth in excess of
$110,000,000, (B) an EBITDAR in excess of $5,000,000 determined quarterly on a
trailing 3-month basis, and (C) Liquid Assets having a market value of at least
$5,000,000, which shall be tested on a quarterly basis, (ii) shall not sell,
pledge, mortgage or otherwise transfer any of its assets, or any interest
therein, on terms materially less favorable than would be obtained in an
arms-length transaction and (iii) shall deliver to Lender, concurrently with the
delivery of each quarterly or annual financial statement required to be
delivered by Guarantor hereunder, a certificate of the chief financial officer
of Guarantor setting forth in reasonable detail Guarantor's Net Worth, EBITDAR
and Liquid Assets, based on such financial statement.
(c) Guarantor shall not, at any time while a default in the
payment of the Guarantied Obligations has occurred and is continuing, without
the prior written consent of Lender, which consent may granted or withheld in
Lender's sole and absolute discretion, enter into or effectuate any transaction
with any Affiliate which would reduce the Net Worth of Guarantor below the Net
Worth set forth in Section 6(b).
7. Entire Agreement/Amendments. This instrument represents the
entire agreement between the parties with respect to the subject matter hereof.
The terms of this Guaranty shall not be waived, altered, modified, amended,
supplemented or terminated in any manner whatsoever except by written instrument
signed by Lender and Guarantor.
8. Successors and Assigns. This Guaranty shall be binding upon
Guarantor, and Guarantor's successors and assigns, may not be assigned or
delegated by Guarantor and shall inure to the benefit of Lender and its
successors and assigns.
9. Applicable Law and Consent to Jurisdiction. This Guaranty was
partially negotiated in the State of New York, and accepted by Lender in the
State of New York, which State the parties agree has a substantial relationship
to the parties and the underlying transaction embodied hereby, and in all
respects, this Guaranty shall be governed by, and construed in accordance with,
the substantive laws of the State of New York. Guarantor irrevocably (a) agrees
that any suit, action or other legal proceeding arising out of or relating to
this Guaranty may be brought in a court of record in the City and County of New
York or in the Courts of the United States of America located in the Southern
District of New York, (b) consents to the jurisdiction of each such court in any
such suit, action or proceeding and (c) waives any objection which it may have
to the laying of venue of any such suit, action or proceeding in any of such
courts and any claim that any such suit, action or proceeding has been brought
in an inconvenient forum. Guarantor irrevocably consents to the service of any
and all process in any such suit, action or proceeding by service of copies of
such process to Guarantor at its address provided in Section 14 hereof. Nothing
in this Section 9, however, shall affect the right of Lender to serve legal
process in any other manner permitted by law or affect the right of Lender to
bring any suit, action or proceeding against Guarantor or its property in the
courts of any other jurisdictions.
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10. Section Headings. The headings of the sections and paragraphs of
this Guaranty have been inserted for convenience of reference only and shall in
no way define, modify, limit or amplify any of the terms or provisions hereof.
11. Severability. Any provision of this Guaranty which may be
determined by any competent authority to be prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, Guarantor hereby
waives any provision of law which renders any provision hereof prohibited or
unenforceable in any respect.
12. WAIVER OF TRIAL BY JURY. GUARANTOR AND LENDER HEREBY AGREE NOT
TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVE ANY
RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR
HEREAFTER EXIST WITH REGARD TO THIS GUARANTY, OR ANY CLAIM, COUNTERCLAIM OR
OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY
JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY GUARANTOR AND LENDER, AND IS INTENDED
TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO
A TRIAL BY JURY WOULD OTHERWISE ACCRUE. EACH PARTY IS HEREBY AUTHORIZED TO FILE
A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER
BY THE OTHER.
13. Other Guaranties. The obligations of Guarantor hereunder are
separate and distinct from, and in addition to, the obligations of Guarantor now
or hereafter arising under one or more other Guaranties, pursuant to which
Guarantor has guaranteed payment and performance of certain other obligations of
Borrower described therein.
14. Notices. All notices, demands, requests, consents, approvals or
other communications (collectively called "Notices") required or permitted to be
given hereunder to Lender or Guarantor or which are given to Lender or Guarantor
with respect to this Guaranty shall be in writing and shall be (a) sent by
United States registered or certified mail, return receipt requested, postage
prepaid, addressed as set forth below, (b) sent by national overnight courier or
delivery service, or (c) personally delivered with receipt acknowledged to such
address, or in either case, to such other address(es) as the party in question
shall have specified most recently by like Notice.
If to Lender, to:
Nomura Asset Capital Corporation
2 World Financial Center, Building B
New York, New York 10281-1198
Attn: Barry Funt and Sheryl McAfee
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with a copy to:
Dechert Price & Rhoads
90 State House Square
Hartford, Connecticut 06103-3702
Attn: Marc B. Friedman, Esq.
If to Guarantor, to:
Brookdale Living Communities, Inc.
77 West Wacker Drive, Suite 4400
Chicago, Illinois 60601
Attn: Mr. Darryl W. Copeland, Jr.
with a copy to:
Brookdale Living Communities, Inc.
77 West Wacker Drive, Suite 4400
Chicago, Illinois 60601
Attn: Robert J. Rudnik, Esq.
with a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, IL 60602
Attention: Wayne Boberg, Esq.
Notices which are given in the manner aforesaid shall be deemed to have been
given or served for all purposes hereunder (i) on the date on which such notice
shall have been personally delivered as aforesaid, (ii) on the date of delivery
by mail as evidenced by the return receipt therefor, or (iii) on the date of
failure to deliver by reason of refusal to accept delivery or changed address of
which no Notice was given.
15. Guarantor's Receipt of Loan Documents. Guarantor by its
execution hereof acknowledges receipt of true copies of all of the Loan
Documents and further acknowledges that it is familiar with said Loan Documents
and has no objections to any of the provisions therein.
16. Interest; Expenses.
(a) If Guarantor fails to pay all or any sums due hereunder
upon demand by Lender, the amount of such sums payable by Guarantor to Lender
shall bear interest from the date of demand until paid at the Default Rate in
effect from time to time.
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(b) Guarantor hereby agrees to pay all costs, charges and
expenses, including, without limitation, reasonable attorneys' fees and
disbursements, that may be incurred by Lender in enforcing the covenants,
agreements, obligations and liabilities of Guarantor under this Guaranty.
17. Intentionally deleted.
18. Waiver of One Action Rule; Cross Collateralization.
(a) The Loan has been made by Lender pursuant to the Master
Financing Facility Agreement. The Master Financing Facility Agreement
contemplates that one or more Other Loans made to Other Borrowers pursuant to
the Master Financing Facility Agreement will, at Lender's election, be cross
collateralized and cross defaulted with the Loan and with each other, subject to
Section (b) below. In such event, such Other Loans will be secured by the
Property and the Collateral, and the Loan will be secured by the Other
Properties and Other Collateral serving as primary security for such Other
Loans, subject to Section (b) below.
(b) Without limitation to any other right or remedy provided
to Lender in the Loan Agreements or this Guaranty or any of the other Loan
Documents, Guarantor covenants and agrees that upon the occurrence of an Event
of Default (i) Lender shall have the right to pursue all of its rights and
remedies with respect to the Loan or the Other Loans in one proceeding, or
separately and independently in separate proceedings which it, as Lender, in its
discretion, shall determine from time to time, (ii) Lender is not required to
either marshall assets, sell the Property, the Collateral, or any Other
Property, or enforce or realize upon any Other Non-Recourse Guaranty, in any
inverse order of alienation, or be subjected to any "one action" or "election of
remedies" law or rule, and (iii) the exercise by Lender of any remedies against
the Property, the Collateral, any Other Property, or any Other Non-Recourse
Guaranty will not impede Lender from subsequently or simultaneously exercising
remedies against the Property, the Collateral, any other Property, or any Other
Non-Recourse Guaranty.
(c) Intentionally deleted.
(d) It is understood and agreed by the parties hereto that
upon the satisfaction or termination of the Guarantied Obligations no subsequent
default under the Other Loans shall operate to revive or otherwise reinstate
this Guaranty, other than as specifically set forth in Section 5(i) herein.
19. No Usury. Guarantor and Lender intend at all times to comply
with applicable state law or applicable United States federal law (to the extent
that it permits Lender to contract for, charge, take, reserve or receive a
greater amount of interest than under state law). If the applicable law (state
or federal) is ever judicially interpreted so as to render usurious any amount
called for under this Guaranty, or contracted for, charged, taken, reserved or
received with respect to the Guarantied Obligations, or if Lender's exercise of
the option to accelerate the maturity of the Guarantied Obligations or any
prepayment by Guarantor results in Guarantor having paid any interest in excess
of that permitted by applicable law, then it is Guarantor's and Lender's express
intent that
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all excess amounts theretofore collected by Lender shall be credited against the
unpaid Guarantied Obligations (or, if the Guarantied Obligations have been or
would thereby be paid in full, refunded to Guarantor), and the provisions of the
Guaranty immediately be deemed reformed and the amounts thereafter collectible
thereunder reduced, without the necessity of the execution of any new document,
so as to comply with the applicable law, but so as to permit the recovery of the
fullest amount otherwise called for thereunder. All sums paid or agreed to be
paid to Lender for the use, forbearance or detention of the Guaranty shall, to
the extent permitted by applicable law, be amortized, prorated, allocated, and
spread throughout the full stated term of the Guaranty until payment in full so
that the rate or amount of interest on account of the Guarantied Obligations
does not exceed the maximum lawful rate from time to time in effect and
applicable to the Guarantied Obligations for so long as the Guarantied
Obligations are outstanding. Notwithstanding anything to the contrary contained
in this Guaranty, it is not the intention of Lender to accelerate the maturity
of any interest that has not accrued at the time of such acceleration or to
collect unearned interest at the time of such acceleration.
[Remainder of page intentionally left blank; signature page follows]
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IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the
date first above written.
BROOKDALE LIVING COMMUNITIES, INC.,
A Delaware corporation.
By:
Darryl W. Copeland, Jr.
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AGREED AND ACKNOWLEDGED
ONLY FOR SECTION 12
NOMURA ASSET CAPITAL CORPORATION
By: ______________________________________
Stuart Simon
Director
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GUARANTY OF COMPLETION
made by
BROOKDALE LIVING COMMUNITIES, INC.
as guarantor,
in favor of
BANC ONE CAPITAL PARTNERS IV, LTD.
Dated as of June 17, 1998
<PAGE>
GUARANTY OF COMPLETION
This GUARANTY OF COMPLETION (this "Guaranty"), dated as of June
17, 1998, made by BROOKDALE LIVING COMMUNITIES, INC. , a Delaware corporation,
having an office at 77 West Wacker Drive, Suite 4400, Chicago, Illinois 60621
("Guarantor"), in favor of BANC ONE CAPITAL PARTNERS IV, LTD., an Ohio limited
liability company, having an address at 150 East Gay Street, Columbus, Ohio
43215, Attention: John W. Adams (together with its successors and assigns,
"Lender").
R E C I T A L S:
A. Pursuant to that certain Loan Agreement dated as of the date
hereof (as the same may be amended, modified, supplemented or replaced from time
to time, the "Loan Agreement") by and between AH Michigan Subordinated, LLC, an
Ohio limited liability company ("Borrower") and Lender, Lender has agreed to
make a loan (the "Loan") to Borrower in the original principal amount of
$11,000,776, subject to the terms and conditions of the Loan Agreement;
B. As a condition to Lender's making the Loan, Lender is
requiring that Guarantor execute and deliver to Lender this Guaranty; and
C. Guarantor hereby acknowledges that Guarantor will materially
benefit from Lender's agreeing to make the Loan;
NOW, THEREFORE, in consideration of the premises set forth herein
and as an inducement for and in consideration of the agreement of Lender to make
the Loan pursuant to the Loan Agreement, Guarantor hereby agrees, covenants,
represents and warrants to Lender as follows:
1. Definitions.
(a) All capitalized terms used and not defined herein shall have the
respective meanings given such terms in the Loan Agreement.
(b) The term "including" means including without limitation.
(c) "Building Loan Agreement" has the meaning set forth in the Senior Loan
Documents.
(d) "Governmental Authorities" has the meaning set forth in the Senior Loan
Documents.
(e) "Guaranty Termination Date" means the date on which Substantial
Completion has occurred and all costs, expenses and liabilities incurred in
connection therewith (including, without limitation, for labor, materials and
services) have been paid in full (except to the
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extent to be paid for from Retainage or other sums are then held or reserved by
Senior Lender but not yet disbursed in accordance with the Building Loan
Agreement).
(f) "Liens" has the meaning set forth in the Senior Loan Documents.
(g) "Owner" means AH Michigan Owner Limited Partnership, an Ohio limited
partnership.
(h) "Permitted Encumbrances" has the meaning set forth in the Senior Loan
Documents.
(i) "Person" has the meaning set forth in the Senior Loan Documents.
(j) "Plans" has the meaning set forth in the Senior Loan Documents.
(k) "Property" has the meaning set forth in the Senior Loan Documents.
(l) "Retainage" has the meaning set forth in the Senior Loan Documents.
(m) "Senior Lender" means Nomura Asset Capital Corporation, and its
successors and assigns.
(n) "Senior Loan" shall mean the loan from Senior Lender to Owner for the
acquisition, development and construction of the Project, in an amount of up to
$26,625,000.
(o) "Senior Loan Documents" shall mean the loan documents evidencing or
securing the Senior Loan.
(p) "Substantial Completion" has the meaning set forth in the Senior Loan
Documents.
2. Guaranty.
(a) Subject to Section 3 below, Guarantor hereby irrevocably, absolutely
and unconditionally guarantees to Lender the prompt and complete observance,
fulfillment and performance of all of the obligations of the Borrower pursuant
to Section 6.1(n) of the Loan Agreement. The obligations which are the subject
of the guaranty referred to in this Section 2(a) are hereinafter collectively
referred to as the "Guarantied Obligations".
(b) Subject to Section 3 below, without limiting the generality of the
provisions of Section 2(a), Guarantor hereby irrevocably, absolutely and
unconditionally guarantees to Lender that Borrower shall cause Owner and
Manager, in accordance with the terms of the Building Loan Agreement, to fully
and punctually pay and discharge (i) any and all costs, expenses and liabilities
for or incurred in connection with the Guarantied Obligations; (ii) all claims
and
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demands for labor, materials and services used or incurred in connection with
the Guarantied Obligations which are or may become due and payable, or, if
unpaid, are or may become Liens on the Property or any part thereof; and (iii)
any Liens in favor of any and all Persons furnishing materials, labor or
services for or in connection with the Guarantied Obligations such that the
Property shall be and remain free and clear of any and all liens other than
Permitted Encumbrances, subject, however, to Owner's and Manager's rights, if
any, set forth in the Building Loan Agreement with regard to the contesting of
Liens.
(c) If Borrower does not perform the Guarantied Obligations as provided in
paragraphs (a) and (b) of this Section 2, then upon receipt of demand from
Lender:
(i) subject to Section 3 hereof, Guarantor shall, if requested by
Lender (which request Lender may make or not make in its sole discretion),
perform and complete the Guarantied Obligations or cause the Guarantied
Obligations to be performed and completed, in accordance with the
requirements of the Building Loan Agreement; and
(ii) if Guarantor fails to perform the Guarantied Obligations in
accordance with this Guaranty (whether or not requested to do so pursuant
to subsection (c)(i) above) then, to the extent that Lender shall (A) cause
any Guarantied Obligations to be performed, (B) pay any costs, expenses or
liabilities in connection with the Guarantied Obligations, or (c) cause any
Lien, claim or demand to be released or paid or bonded, Guarantor shall,
upon demand by Lender, reimburse Lender for all sums paid and all costs,
expenses or liabilities incurred by Lender in connection therewith. All
such sums shall be payable by Guarantor to Lender on demand and without
reduction for any offset, claim, counterclaim or defense.
(d) Guarantor hereby agrees to indemnify, defend and save harmless Lender
from and against any and all costs, losses, liabilities, claims, causes of
action, expenses and damages, including, without limitation, reasonable
attorneys' fees and disbursements, which Lender may suffer or which otherwise
may arise by reason of the Borrower's failure to fulfill its obligations under
the Loan Agreement with respect to the Guarantied Obligations, irrespective of
whether such costs, losses, liabilities, claims, causes of action, expenses or
damages are incurred by Lender prior or subsequent to Lender's declaring the
principal, interest and other sums evidenced or secured by the Loan Documents to
be due and payable.
(e) Guarantor hereby agrees that, notwithstanding any provisions to the
contrary in any Loan Document limiting the recourse of Lender to collateral
encumbered by the Loan Documents, or limiting the rights of Lender to obtain a
deficiency judgment against Borrower, Guarantor shall be fully and personally
liable with respect to the covenants, representations, warranties, guaranties,
agreements and indemnities of Guarantor under this Guaranty.
(f) Notwithstanding anything to the contrary contained herein or in any
other Loan Documents, and subject to the provisions of Section 6(i), all of
Guarantor's obligations under this Guaranty (including the Guarantied
Obligations) shall terminate on the Guaranty
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Termination Date, provided that Guarantor's obligations under clauses (ii) and
(iii) of Section 2(b) above relating to labor, materials and services provided,
furnished or performed at or to the Property shall continue with respect to any
claims, demands and Liens referred to therein, whether asserted before or after
the Guaranty Termination Date.
3. Intentionally Omitted.
4. Representations and Warranties. Guarantor hereby represents and warrants
to Lender as follows (which representations and warranties shall be given as of
the date hereof and shall survive the execution and delivery of this Guaranty):
(a) Organization, Authority and Execution. Guarantor is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has all necessary power and authority to own its properties and to
conduct its business as presently conducted or proposed to be conducted and to
enter into and perform this Guaranty and all other agreements and instruments to
be executed by it in connection herewith. This Guaranty has been duly executed
and delivered by Guarantor.
(b) Enforceability. This Guaranty constitutes a legal, valid and binding
obligation of Guarantor, enforceable against Guarantor in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally.
(c) No Violation. The execution, delivery and performance by Guarantor of
the Guarantied Obligations has been duly authorized by all necessary action, and
do not and will not violate any law, regulation, order, writ, injunction or
decree of any court or governmental body, agency or other instrumentality
applicable to Guarantor in effect on the date hereof, or result in a breach of
any of the terms, conditions or provisions of, or constitute a default under, or
result in the creation or imposition of any mortgage, Lien, charge or
encumbrance of any nature whatsoever upon any of the assets of Guarantor
pursuant to the terms of Guarantor's certificate of incorporation or by-laws, or
any mortgage, indenture, agreement or instrument to which Guarantor is a party
or by which it or any of its properties is bound. Guarantor is not in default
under any other guaranty which it has provided to Lender.
(d) No Litigation. There are no actions, suits or proceedings at law or at
equity, pending or, to Guarantor's best knowledge, threatened against or
affecting Guarantor or which involve the validity or enforceability of this
Guaranty or with respect to which an adverse decision would materially adversely
affect the financial condition of Guarantor or the ability of Guarantor to
perform any of the Guarantied Obligations. Guarantor is not in default beyond
any applicable grace or cure period with respect to any order, writ, injunction,
decree or demand of any Governmental Authority which would materially adversely
affect the financial condition of Guarantor or the ability of Guarantor to
perform any of its obligations under this Guaranty.
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(e) Consents. All consents, approvals, orders or authorizations of, or
registrations, declarations or filings with, all Governmental Authorities
(collectively, the "Consents") that are required in connection with the valid
execution, delivery and performance by Guarantor of this Guaranty have been
obtained or will be obtained when required.
(f) Financial Statements and Other Information. All financial statements of
Guarantor heretofore delivered to Lender are true and correct in all material
respects and fairly present the financial condition of Guarantor as of the
respective dates thereof, and no materially adverse change has occurred in the
financial conditions reflected therein since the respective dates thereof. None
of the aforesaid financial statements or any certificate or statement furnished
to Lender by or on behalf of Guarantor in connection with the transactions
contemplated hereby, and none of the representations and warranties in this
Guaranty 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. Guarantor is not insolvent within the meaning of the
United States Bankruptcy Code or any other in any material respect applicable
law, code or regulation, and the execution, delivery and performance of this
Guaranty will not render Guarantor insolvent.
(g) Consideration. Guarantor is receiving fair consideration in return for
giving this Guaranty.
5. Financial Statements. Guarantor shall deliver to Lender, (a) within one
hundred twenty (120) days after the end of each fiscal year of Guarantor, a
complete copy of Guarantor's annual financial statements audited by a "big six"
accounting firm or another independent certified public accountant reasonably
acceptable to Lender, (b) within forty-five (45) days after the end of each
fiscal quarter of Guarantor, financial statements (including a balance sheet as
of the end of such fiscal quarter and a statement of income and expense for such
fiscal quarter) certified by the Chief Financial Officer or President of
Guarantor and in form, content, level of detail and scope reasonably
satisfactory to Lender, and (c) thirty (30) days after request by Lender, such
other financial information with respect to Guarantor as Lender may reasonably
request. Guarantor's obligation to deliver this information to Lender shall
terminate on the Guaranty Termination Date.
6. Unconditional Character of Obligations of Guarantor.
(a) Subject to Section 3 above, the obligations of Guarantor hereunder
shall be irrevocable, absolute and unconditional, irrespective of the validity,
regularity or enforceability, in whole or in part, of the other Loan Documents
or any provision thereof, or the absence of any action to enforce the same, any
waiver or consent with respect to any provision thereof, the recovery of any
judgment against Borrower, Guarantor, or any other Person or any action to
enforce the same, any failure or delay in the enforcement of the obligations of
Borrower under the other Loan Documents or Guarantor under this Guaranty, or any
setoff, counterclaim, and irrespective of any other circumstances which might
otherwise limit recourse against Guarantor by Lender or constitute a legal or
equitable discharge or defense of a guarantor or surety. Lender may enforce the
obligations of Guarantor under this Guaranty by a proceeding at law, in equity
or otherwise, independent of any foreclosure or similar proceeding or any
deficiency action against Borrower, or any other Person at any time. This
Guaranty is a guaranty of payment and performance and not a guaranty of
collection. Except as otherwise provided herein or in any of the other Loan
Documents or the Intercreditor Agreement, and to the extent permitted by law,
Guarantor waives
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diligence, notice of acceptance of this Guaranty, filing of claims with any
court, any proceeding to enforce any provision of any other Loan Document,
against Guarantor, Borrower, or any other Person, any right to require a
proceeding first against Borrower, or any other Person, or to exhaust any
security for the performance of the Guarantied Obligations or any other
obligations of Borrower, or any other Person, or any protest, presentment,
notice of default or other notice or demand whatsoever (except to the extent
expressly provided to the contrary in this Guaranty or elsewhere in the Loan
Documents), and Guarantor hereby covenants and agrees that Guarantor shall not
be discharged of its obligations hereunder except as set forth in Section 2(f)
above.
(b) The Guarantied Obligations, and the rights of Lender to enforce the
same by proceedings, whether by action at law, suit in equity or otherwise,
shall not be in any way affected by any of the following:
(i) any insolvency, bankruptcy, liquidation, reorganization,
readjustment, composition, dissolution, receivership, conservatorship,
winding up or other similar proceeding involving or affecting Borrower,
Guarantor or any other Person;
(ii) any failure by Lender or any other Person, whether or not without
fault on its part, to perform or comply with any of the terms of the Loan
Agreement, or any other Loan Documents, or any document or instrument
relating thereto;
(iii) the sale, transfer or conveyance of the Property or any interest
therein to any Person, whether now or hereafter having or acquiring an
interest in the Property or any interest therein and whether or not
pursuant to any foreclosure, trustee sale or similar proceeding against
Owner, Manager, or the Property or any interest therein;
(iv) the conveyance to Senior Lender, any Affiliate of Senior Lender
or Senior Lender's nominee of the Property or any interest therein by a
deed-in-lieu of foreclosure;
(v) the release of Borrower, or any other Person from the performance
or observance of any of the agreements, covenants, terms or conditions
contained in any of the Loan Documents by operation of law or otherwise; or
(vi) the release in whole or in part of any security for the
Guarantied Obligations or the Loan.
(c) Except as otherwise specifically provided in this Guaranty, Guarantor
hereby expressly and irrevocably waives all defenses in an action brought by
Lender to enforce this Guaranty based on claims of waiver, release, surrender,
alteration, compromise or equitable discharge and all setoffs, reductions, or
impairments, whether arising hereunder or otherwise.
(d) Lender may deal with Borrower in the same manner and as freely as if
this Guaranty did not exist and shall be entitled, among other things, to grant
Borrower, or any other Person such extension or extensions of time to perform
any act or acts as may be deemed
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advisable by Lender, at any time and from time to time, without terminating,
affecting or impairing the validity of this Guaranty or the Guarantied
Obligations.
(e) No compromise, alteration, amendment, modification, extension,
indulgence, renewal, release or other change of, or waiver, suspension, consent,
compromise, delay, omission, failure to act, forbearance or other action with
respect to, any liability or obligation under or with respect to, or of any of
the terms, covenants or conditions of, the Loan Documents or any amendment,
modification or other change of the Plans or any legal requirement shall in any
way alter, impair or affect any of the Guarantied Obligations or Lender's rights
hereunder, and Guarantor agrees that if any Loan Document or the Plans are
modified with Lender's consent, the Guarantied Obligations shall automatically
be deemed modified to include such modifications without the necessity of notice
to Guarantor except as may otherwise be required under the Loan Agreement.
(f) Lender may proceed to protect and enforce any or all of its rights
under this Guaranty by suit in equity or action at law, whether for the specific
performance of any covenants or agreements contained in this Guaranty or
otherwise, or to take any action authorized or permitted under applicable law,
and shall be entitled to require and enforce the performance of all acts and
things required to be performed hereunder by Guarantor. Each and every remedy of
Lender shall, to the extent permitted by law, be cumulative and shall be in
addition to any other remedy given hereunder or now or hereafter existing at law
or in equity. No single exercise of Lender's power to bring any action or
institute any proceeding shall be deemed to exhaust such power, but such power
shall continue undiminished and may be exercised from time to time as often as
Lender may elect until the earlier of the Guaranty Termination Date or the date
that all the Guarantied Obligations have been satisfied. Lender shall be under
no obligation to take any action and shall not be liable for any action taken or
any failure to take action or any delay in taking action against Guarantor,
Borrower or any other Person or otherwise with respect to the Guarantied
Obligations.
(g) No waiver shall be deemed to have been made by Lender of any rights
hereunder unless the same shall be in writing and signed by Lender, and any such
waiver shall be a waiver only with respect to the specific matter involved and
shall in no way impair the rights of Lender or the obligations of Guarantor to
Lender in any other respect or at any other time.
(h) At the option of Lender, Guarantor may be joined in any action or
proceeding commenced by Lender against Borrower in connection with or based upon
any other Loan Documents and recovery may be had against Guarantor in such
action or proceeding or in any independent action or proceeding against
Guarantor only to the extent of Guarantor's liability hereunder, without any
requirement that Lender first assert, prosecute or exhaust any remedy or claim
against Borrower, or any other Person, or any security for the obligations of
Borrower, or any other Person.
(i) Guarantor agrees that this Guaranty shall continue to be effective or
shall be reinstated, as the case may be, if at any time any payment is made by
Borrower, or Guarantor to Lender and such payment is rescinded or must otherwise
be returned by Lender (as determined by Lender in its sole and absolute
discretion) upon insolvency, bankruptcy, liquidation, reorganization,
readjustment, composition, dissolution, receivership, conservatorship, winding
up or other similar
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proceeding involving or affecting Borrower or Guarantor, all as though such
payment had not been made.
(j) For so long as the Loan is outstanding, Guarantor hereby expressly
waives any and all of its rights of subrogation, reimbursement, indemnity and
recourse against Borrower and/or Owner. Guarantor shall not be deemed a
"creditor" of the Borrower with respect to the Guarantied Obligations as said
term "creditor" is defined in the United States Bankruptcy Code, as amended. If
any amount shall be paid to Guarantor on account of such subrogation rights at
any time when any such sums due and owing to Lender shall not have been fully
paid, such amount shall be paid by Guarantor to Lender for credit and
application against such sums due and owing to Lender. Notwithstanding the
foregoing, the Guarantor and its affiliates shall have the right to be
reimbursed by Owner in accordance with the terms and conditions of the
Management Agreement and the Development Agreement for their out-of-pocket costs
or fees pursuant thereto unless at the time of such payment there exists an
Event of Default under the Loan Agreement. Anything herein to the contrary,
notwithstanding, the provisions of this Section 6(j) do not create any
obligation on the part of the Owner to the Lender.
(k) Subject to Section 2(f) hereof, the Guarantied Obligations shall
survive a foreclosure, deed-in-lieu of foreclosure or similar proceeding
involving the Property and the exercise by Senior Lender of any of all of its
remedies pursuant to the Senior Loan Documents.
7. Intentionally Omitted.
8. Entire Agreement/Amendments. This instrument represents the entire
agreement between the parties with respect to the subject matter hereof. The
terms of this Guaranty shall not be waived, altered, modified, amended,
supplemented or terminated in any manner whatsoever except by written instrument
signed by Lender and Guarantor.
9. Successors and Assigns. This Guaranty shall be binding upon Guarantor,
and Guarantor's successors and assigns, may not be assigned or delegated by
Guarantor and shall inure to the benefit of Lender and its successors and
assigns.
10. Applicable Law, Waiver of Jury Trial, Consent to Venue.
(a) This Guaranty was partially negotiated in the State of Ohio, and
accepted by Lender in the State of Ohio, which State the parties agree has a
substantial relationship to the parties and to the underlying transaction
embodied hereby, and in all respects, this Guaranty shall be governed by, and
construed in accordance with, the substantive laws of the State of Ohio.
(b) THE GUARANTOR AND THE LENDER, AFTER CONSULTING OR HAVING HAD THE
OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY RELATED INSTRUMENT OR AGREEMENT, OR ANY OF
THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, OR ANY
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COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF
THE GUARANTOR OR THE LENDER. THE GUARANTOR AND THE LENDER SHALL NOT SEEK TO
CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY ACTION IN WHICH A JURY TRIAL HAS
BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT
BEEN WAIVED UNLESS FAILURE TO SO CONSOLIDATE WOULD RESULT IN A MANDATORY LOSS OF
SUCH CLAIM. IN THE EVENT OF A DISPUTE UNDER THIS AGREEMENT, THE GUARANTOR AND
THE LENDER HEREBY AGREE THAT EXCLUSIVE JURISDICTION AND VENUE LIES IN A COURT OF
COMPETENT JURISDICTION IN FRANKLIN COUNTY, OHIO. THESE PROVISIONS SHALL NOT BE
DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY THE GUARANTOR OR
THE LENDER EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY SAME.
11. Section Headings. The headings of the sections and paragraphs of this
Guaranty have been inserted for convenience of reference only and shall in no
way define, modify, limit or amplify any of the terms or provisions hereof.
12. Severability. Any provision of this Guaranty which may be determined by
any competent authority to be prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction. To
the extent permitted by applicable law, Guarantor hereby waives any provision of
law which renders any provision hereof prohibited or unenforceable in any
respect.
13. Intentionally Omitted.
14. Other Guaranties. The obligations of Guarantor hereunder are separate
and distinct from, and in addition to, the obligations of Guarantor now or
hereafter arising under one or more other guaranties, pursuant to which
Guarantor has guaranteed the payment and performance of certain other
obligations of Borrower described therein.
15. Notices. All notices, demands, requests, consents, approvals or other
communications (collectively called "Notices") required or permitted to be given
hereunder to Lender or Guarantor or which are given to Lender or Guarantor with
respect to this Guaranty shall be in writing and shall be (a) sent by United
States registered or certified mail, return receipt requested, postage prepaid,
addressed as set forth below, (b) sent by a national overnight courier or
delivery service or (c) personally delivered with receipt acknowledged to such
address, or in either case, to such other address(es) as the party in question
shall have specified most recently by like Notice.
9
<PAGE>
If to Lender, to:
Banc One Capital Partners IV, Ltd.
150 East Gay Street
24th Floor
Columbus, Ohio 43215
Attention: John W. Adams
with a copy to:
Banc One Capital Markets, Inc.
150 East Gay Street
24th Floor
Columbus, Ohio 43215
Attention: Legal Department
If to Guarantor, to:
Brookdale Living Communities, Inc.
77 West Wacker Drive, Suite 4400
Chicago, IL 60601
Attention: Darryl W. Copeland, Jr.
with a copy to:
Brookdale Living Communities, Inc.
77 West Wacker Drive, Suite 4400
Chicago, IL 60601
Attention: Robert J. Rudnick, Esq.
with a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, IL 60602
Attention: Wayne Boberg, Esq.
Notices which are given in the manner aforesaid shall be deemed to have been
given or served for all purposes hereunder (i) on the date on which such notice
shall have been personally delivered as aforesaid, (ii) on the date of delivery
by overnight carrier or mail as evidenced by the return receipt therefor, or
(iii) on the date of failure to deliver by reason of refusal to accept delivery
or changed address of which no Notice was given.
16. Guarantor's Receipt of Loan Documents. Guarantor by its execution
hereof acknowledges receipt of true copies of all of the Loan Documents.
10
<PAGE>
17. Interest; Expenses.
(a) If Guarantor fails to pay all or any sums due hereunder upon
demand by Lender, the amount of such sums payable by Guarantor to Lender
shall bear interest from the date of demand until paid at the Default Rate
in effect from time to time.
(b) Guarantor hereby agrees to pay all costs, charges and expenses,
including, without limitation, reasonable attorneys' fees and
disbursements, that may be incurred by Lender in enforcing the covenants,
agreements, obligations and liabilities of Guarantor under this Guaranty.
18. Intentionally Omitted.
19. Intentionally Omitted.
20. Intentionally Omitted.
21. Intercreditor Agreement.
THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND ALL RIGHTS AND
REMEDIES OF LENDER WITH RESPECT TO THE LOAN, THE GUARANTIED OBLIGATIONS OR ANY
COLLATERAL THEREFOR ARE EACH AND ALL SUBJECT TO THE TERMS AND CONDITIONS OF THE
INTERCREDITOR AGREEMENT.
[Remainder of page intentionally left blank; signature page follows.]
11
<PAGE>
IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the date
first above written.
BROOKDALE LIVING COMMUNITIES,
INC., a Delaware corporation
By:
Name: Darryl W. Copeland, Jr.
Title: Executive Vice President
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<PAGE>
AGREED AND ACKNOWLEDGED
ONLY FOR SECTION 10(b)
BANC ONE CAPITAL PARTNERS IV, LTD.
By: BOCP Holdings Corporation, its Manager
By: ______________________________________
Name: Michael S. Wood
Title: Authorized Signer
13
ENVIRONMENTAL INDEMNITY AGREEMENT
THIS ENVIRONMENTAL INDEMNITY AGREEMENT (this "Agreement"), made as
of June 17, 1998, from BROOKDALE LIVING COMMUNITIES, INC., a Delaware
corporation. having an office at 77 West Wacker Drive, Suite 4400, Chicago,
Illinois 60601, Attention: Darryl W. Copeland, Telefax Number (312) 977-3699
(the "Guarantor") to Banc One Capital Partners IV, Ltd., an Ohio limited
liability company, having an address at 150 East Gay Street, Columbus, Ohio
43215, Attention: John W. Adams, Telefax Number (614) 217-0222 (together with
its successors and assigns, "Lender").
RECITALS
WHEREAS, pursuant to a Loan Agreement dated as of the date hereof
between AH Michigan Subordinated, LLC, an Ohio limited liability company
("Borrower"), and Lender (as modified and supplemented and in effect from time
to time, the "Loan Agreement"), at the request of Borrower and Guarantor, Lender
has agreed to make a loan (the "Loan") to Borrower;
WHEREAS, AH Michigan Owner Limited Partnership is an Ohio limited
partnership (the "Owner"), the sole partners of which are the Borrower and AH
Michigan CGP, Inc., an Ohio corporation (the "General Partner"), which acts as
the sole general partner of the Owner;
WHEREAS, the Borrower is the sole shareholder of the General
Partner;
WHEREAS, the Owner intends to develop an independent living facility
with a non-licensed assisted living component for the elderly in Southfield,
Michigan, which is currently referred to as "The Heritage at Southfield" (the
"Project");
WHEREAS, the Borrower estimates that the total cost of acquisition,
development and construction of the Project will be $36,840,749 (the "Estimated
Project Cost");
WHEREAS, the Borrower, on behalf of the Owner, has obtained a loan
from Nomura Asset Capital Corporation (the "Senior Lender") for the acquisition,
development and construction of the Project, in the amount of up to $26,625,000
(the "Senior Loan");
WHEREAS, the Lender has agreed to make the Loan to the Borrower to
be used as an equity contribution to the Owner, the proceeds of which will fund
a portion of the Estimated Project Cost which will not be funded by the Senior
Loan, upon the terms and conditions set forth in the Loan Agreement;
WHEREAS, Owner and Brookdale Living Communities of Michigan, Inc., a
Delaware corporation (the "Manager"), are entering into a certain management
agreement dated the date herewith and a certain development agreement dated the
date herewith (collectively the "Management Agreement"), pursuant to which
Manager shall manage, operate and develop the Property; and
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WHEREAS, Lender is unwilling to make the Loan unless Guarantor
indemnifies Lender against certain liabilities arising under Environmental Laws
(as herein defined), relating to the property being financed in connection with
the Senior Loan, which property consists of the fee simple interest in the land
more particularly described in the documents evidencing the Senior Loan and all
buildings, structures and other improvements now or hereafter situated on such
land (the "Property").
NOW, THEREFORE, in consideration of the making of the Loan by Lender
and the covenants, agreements, representations and warranties set forth in this
Agreement, the parties hereby covenant, agree, represent and warrant as follows:
1. Defined Terms. Unless the context otherwise requires, capitalized
terms used but not otherwise defined herein but defined in the Loan Agreement
shall have the meanings provided therefore in the Loan Agreement, and the
following terms shall have the following meanings:
"Borrower" has the meaning provided in the Recitals to this
Agreement.
"Environmental Claim" means any written request for information by a
Governmental Authority, or any written notice, notification, claim,
administrative, regulatory or judicial action, suit, judgment, demand or other
written communication by any Person or Governmental Authority requiring,
alleging or asserting liability with respect to Owner, Borrower, Manager or the
Property, whether for damages, contribution, indemnification, cost recovery,
compensation, injunctive relief, investigatory, response, remedial or cleanup
costs, damages to natural resources, personal injuries, fines or penalties
arising out of, based on or resulting from (i) the presence, Use, Release or
threatened Release into the environment of any Hazardous Substance in violation
of any Environmental Law originating at or from, or otherwise affecting, the
Property, (ii) any fact, circumstance, condition or occurrence forming the basis
of any violation, or alleged violation, of any Environmental Law by Owner,
Borrower, Manager or otherwise affecting the Property or (iii) any alleged
injury or threat of injury to health, safety or the environment by Owner,
Borrower, Manager or otherwise affecting the Property arising from actions which
are in violation of Environmental Laws.
"Environmental Laws" means any and all applicable federal, state,
local and foreign laws, rules, regulations or municipal ordinances each as
amended from time to time, and any Permits, approvals, licenses, registrations,
filings and authorizations, in each case as in effect as of the relevant date,
relating to the environment, health or safety, and pertaining to or imposing
liability or standards of conduct concerning environmental regulation,
contamination or clean-up, including the Comprehensive Environmental Response,
Compensation and Liability Act, the Resource Conservation and Recovery Act, the
Emergency Planning and Community Right-to-Know Act of 1986, the Hazardous
Substances Transportation Act, the Solid Waste Disposal Act, the Clean Water
Act, the Clean Air Act, the Toxic Substance Control Act, the Safe Drinking Water
Act, the Occupational Safety and Health Act, any state super-lien and
environmental clean-up statutes and all amendments to and regulations in respect
of the foregoing laws.
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<PAGE>
"Environmental Reports" means the environmental audit reports, with
respect to the Property, delivered to Lender prior to the date hereof and in
connection with the Loan, and any amendments or supplements thereto delivered to
Lender prior to the date hereof.
"Guarantor" has the meaning provided in the first paragraph of this
Agreement.
"Hazardous Substance" means, collectively, (i) any petroleum or
petroleum products or waste oils, explosives, radioactive materials, asbestos,
urea formaldehyde foam insulation, polychlorinated biphenyls ("PCBs"), lead in
drinking water, and lead based paint, the presence, generation, use,
transportation, storage or disposal of or exposure to which (x) is regulated or
could lead to liability under any Environmental Law or (y) is subject to notice
or reporting requirements under any Environmental Law, (ii) any chemicals or
other materials or substances which are now or hereafter become defined as or
included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous wastes," "restricted hazardous
wastes," "toxic substances," "toxic pollutants," "contaminants," "pollutants" or
words of similar import under any Environmental Law and (iii) any other chemical
or any other material or substance, exposure to which is now or hereafter
prohibited, limited or regulated under any Environmental Law.
"Lender" has the meaning provided in the first paragraph of this
Agreement.
"Loan" has the meaning provided in the Recitals to this Agreement.
"Loan Agreement" has the meaning provided in the Recitals to this
Agreement.
"Owner" has the meaning provided in the Recitals to this Agreement.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, estate, trust, unincorporated association,
or any other entity, any federal, state, county or municipal government or any
bureau, department or agency thereof and any fiduciary acting in such capacity
on behalf of any of the foregoing.
"Release" means, with respect to any Hazardous Substances, any
release, threatened release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the indoor
or outdoor environment, including, without limitation, the movement of Hazardous
Substances through ambient air, soil, surface water, ground water, wetlands,
land or subsurface strata.
"Remedial Work" means any investigation, site monitoring,
containment, cleanup, removal, restoration or other work of any kind reasonably
necessary or required under an applicable Environmental Law.
"Use" means, with respect to any Hazardous Substance, the
generation, manufacture, processing, distribution, handling, use, treatment,
recycling or storage of such Hazardous Substance in violation of Environmental
Laws or transportation to or from the property of such Person of such Hazardous
Substance in violation of Environmental Laws.
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2. Indemnification.
(a) Subject to the limitations set forth in Section 16 hereof,
Guarantor agrees to indemnify, reimburse, defend (with counsel satisfactory to
Lender in Lender's sole discretion), and hold harmless Lender for, from and
against all demands, claims, actions or causes of action, assessments, losses,
damages, liabilities, costs and expenses, including, without limitation,
interest, penalties, consequential damages, reasonable attorneys' fees,
reasonable disbursements and expenses, and reasonable consultants' fees,
disbursements and expenses, including costs of Remedial Work (collectively
"Losses"), asserted against, resulting to, imposed on, or incurred by Lender,
directly or indirectly in connection with any of the following:
i) events, circumstances, or conditions which are alleged to, or do,
form the basis for an Environmental Claim;
ii) the presence, Use or Release of Hazardous Substances at, on, in,
under or from the Property, which presence, use or release requires or
could reasonably require Remedial Work;
iii) any Environmental Claim against any Person whose liability for
such Environmental Claim Guarantor has or may have assumed or retained
either contractually or by operation of law; or
iv) any failure of Guarantor to fulfill each and every obligation
undertaken pursuant to this Agreement.
(b) The indemnity provided in this Agreement shall not be included
in any exculpation of Guarantor, Manager or Borrower from personal liability
provided in the Loan Agreement or in any of the other Loan Documents. Nothing in
this Agreement shall be deemed to deprive Lender of any rights or remedies
provided to it elsewhere in this Agreement or in the other Loan Documents or
otherwise available to it under law. Guarantor waives and releases Lender from
any rights or defenses Guarantor may have under common law or Environmental Laws
for liability arising from or resulting from the presence, Use or Release of
Hazardous Substances except to the extent directly caused by the gross
negligence, fraud or willful misconduct of Lender.
(c) With respect to those matters for which Guarantor has agreed to
indemnify Lender hereunder, and to the maximum extent permitted by applicable
law, Guarantor waives and releases Lender from any rights or defenses Guarantor
may have under common law or Environmental Laws for liability arising from or
resulting from the presence,
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<PAGE>
Use or Release of Hazardous Substances except to the extent directly caused by
the fraud, gross negligence or willful misconduct of Lender.
3. Payment. All payments due to Lender under this Agreement shall
be payable to Lender within ten (10) days after written demand therefor, and
shall bear interest at the Default Rate from the date such payment is due until
the date of payment.
4. Governing Law; Waiver of Jury Trial; Consent to Venue.
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<PAGE>
(a) The parties agree that the State of Ohio has a substantial
relationship to the parties and to the underlying transaction embodied hereby,
and in all respects, including, without limitation, matters of construction,
validity and performance, this Agreement and the obligations arising hereunder
shall be governed by, and construed in accordance with, the laws of the State of
Ohio applicable to contracts made and performed in such State and any applicable
law of the United States of America; subject, however, as to performance, to the
Environmental Laws governing the Project. To the fullest extent permitted by
law, Guarantor hereby unconditionally and irrevocably waives any claim to assert
that the law of any other jurisdiction governs this Agreement, and this
Agreement shall be governed by and construed in accordance with the laws of the
State of Ohio; subject, however, as to performance, to the Environmental Laws
governing the Project.
(b) THE GUARANTOR AND THE LENDER, AFTER CONSULTING OR HAVING HAD THE
OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY RELATED INSTRUMENT OR AGREEMENT, OR ANY OF
THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, OR ANY COURSE OF CONDUCT,
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE GUARANTOR OR THE
LENDER. THE GUARANTOR AND THE LENDER SHALL NOT SEEK TO CONSOLIDATE, BY
COUNTERCLAIM OR OTHERWISE, ANY ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH
ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED UNLESS
THE FAILURE TO SO CONSOLIDATE WOULD RESULT IN A MANDATORY LOSS OF SUCH CLAIM. IN
THE EVENT OF A DISPUTE UNDER THIS AGREEMENT, THE GUARANTOR AND THE LENDER HEREBY
AGREE THAT EXCLUSIVE JURISDICTION AND VENUE LIES IN A COURT OF COMPETENT
JURISDICTION IN FRANKLIN COUNTY OHIO. THESE PROVISIONS SHALL NOT BE DEEMED TO
HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY THE GUARANTOR OR THE LENDER
EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY SAME.
5. Modification, Waiver in Writing. No modification, amendment,
extension, discharge, termination or waiver of any provision of this Agreement
or consent to any departure by Guarantor therefrom, shall in any event be
effective unless the same shall be in a writing signed by the party against whom
enforcement is sought, and then such waiver or consent shall be effective only
in the specific instance, and for the purpose, for which given. Except as
otherwise expressly provided herein, no notice to or demand on Guarantor shall
entitle Guarantor to any other or future notice or demand in the same, similar
or other circumstances.
6. Delay Not a Waiver. Neither any failure nor any delay on the part
of Lender in insisting upon strict performance of any term, condition, covenant
or agreement or exercising any right, power, remedy or privilege hereunder,
shall operate as or constitute a waiver thereof, nor shall a single or partial
exercise thereof preclude any other future exercise, or the exercise of any
other right, power, remedy or privilege. In particular, and not by way of
limitation, by accepting payment after the due date of any amount payable under
this Agreement, Lender shall not be deemed to have waived any right either to
require prompt payment when due of all other
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<PAGE>
amounts due under this Agreement, or to declare a default for failure to effect
prompt payment of any such other amount.
7. Notices. All notices, consents, approvals and requests required
or permitted hereunder shall be given in writing and shall be effective for all
purposes if hand delivered or sent by (a) hand delivery, with proof of attempted
delivery, (b) certified or registered United States mail, postage prepaid, (c)
expedited prepaid delivery service, either commercial or United States Postal
Service, with proof of attempted delivery, or (d) by telecopier (with answerback
acknowledged) provided that such telecopied notice must also be delivered by one
of the means set forth in (a), (b) or (c) above, addressed if to Lender at its
address set forth on the first page hereof, and if to Guarantor at its
designated address set forth on the first page hereof, or at such other address
and Person as shall be designated from time to time by any party hereto, as the
case may be, in a written notice to the other parties hereto in the manner
provided for in this Section 7. A copy of all notices, consents, approvals and
requests directed to Lender shall be delivered concurrently to each of the
following: Banc One Capital Markets, Inc., 150 East Gay Street, 24th Floor,
Columbus, Ohio 43215, Attention: Legal Department, Telefax Number (614)
217-1217. A copy of all notices, consents, approvals and requests directed to
Guarantor shall be delivered concurrently to each of the following: Brookdale
Living Communities, Inc., 77 West Wacker Drive, Suite 4400, Chicago, Illinois
60601, Attention: Darryl W. Copeland, Jr., Telefax Number (312) 977-3699;
Brookdale Living Communities, Inc., 77 West Wacker Drive, Suite 4400, Chicago,
Illinois 60601, Attention: Robert J. Rudnik, Esquire, Telefax Number (312) 977-
3769; Brookdale Living Communities, Inc., 77 West Wacker Drive, Suite 4400,
Chicago, Illinois 60601, Attention: Scott E. Jordan, Esquire, Telefax Number
(312) 977-3769; and Wayne D. Boberg, Esq., Winston & Strawn, 35 West Wacker
Drive, Chicago, Illinois 60602, Telefax Number (312) 558-5700. A notice shall be
deemed to have been given: (a) in the case of hand delivery, at the time of
delivery; (b) in the case of registered or certified mail, when delivered or the
first attempted delivery on a Business Day; (c) in the case of expedited prepaid
delivery upon the first attempted delivery on a Business Day; or (d) in the case
of telecopier, upon receipt of answerback confirmation received prior to 5:00
p.m. local time on a Business Day or if confirmation received thereafter on the
next succeeding Business Day, provided that such telecopied notice was also
delivered as required in this Section 7. A party receiving a notice which does
not comply with the technical requirements for notice under this Section 7 may
elect to waive any deficiencies and treat the notice as having been properly
given.
8. Assignment. Lender shall have the right to assign this Agreement
and the obligations hereunder to any Person who is from time to time the owner
of the Loan, but not otherwise. All references to "Lender" hereunder shall be
deemed to include the successors and assigns of Lender.
9. Severability. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
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10. Heading and Recitals. The information set forth in the heading
and recitals hereof are hereby incorporated herein as a part of this Agreement
with the same effect as if set forth in the body hereof.
11. Counterparts. This 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 together constitute one and the same instrument.
12. Estoppel Certificates. Guarantor and Lender each hereby agree at
any time and from time to time upon not less than fifteen (15) days prior
written notice by Guarantor or Lender to execute, acknowledge and deliver to the
party specified in such notice, a statement, in writing, certifying that this
Agreement is unmodified and in full force and effect (or if there have been
modifications, that the same, as modified, is in full force and effect and
stating the modifications hereto), and stating whether or not, to the best
knowledge of such certifying party, there exists any matter giving rise to a
claim under Section 2, and, if so, specifying each such matter; provided,
however, that it shall be a condition precedent to Lender's obligation to
deliver the statement pursuant to this Section 12, that Lender shall have
received, together with Guarantor's request for such statement, an officer's
certificate signed by an authorized officer of Guarantor stating that to the
best of Guarantor's knowledge, no matter which could give rise to a claim under
Section 2 exists as of the date of such certificate (or specifying each such
matter).
13. Survival. Subject to Section 16 hereof, this Agreement shall
survive (in perpetuity) the closing and disbursement of the funds evidenced by
the Note, payment of the Note, and any foreclosure on, or retention of, the
Membership Interests. Notwithstanding the foregoing, Guarantor shall not
indemnify Lender with respect to any Losses incurred in connection with, or as a
direct result of, any or all of the matters described above in Section 2(a)(i)
through 2(a)(iii) to the extent that Guarantor can establish directly and solely
that such Losses result from Hazardous Substances being placed on, above or
under the Property (a) by the affirmative act or gross negligence of Lender or
any employees, agents or bailees of Lender; or (b) subsequent to Lender
foreclosing on, or taking ownership of, the Membership Interests. Guarantor
agrees that this Guaranty shall continue to be effective or shall be reinstated
as the case may be, if at any time any payment is made by Borrower or Guarantor
to Lender and such payment is rescinded or must otherwise be returned by Lender
(as determined by Lender in its sole and absolute discretion) upon insolvency,
bankruptcy, liquidation, reorganization, readjustment, composition, dissolution,
receivership, conservatorship, winding up or other similar proceeding involving
or affecting Borrower or Guarantor, all as though such payment had not been
made.
14. Time of the Essence. Time is of the essence with respect to each
and every covenant, agreement and obligation of Guarantor under this Agreement.
15. Liability. The liability of Guarantor under this Agreement shall
in no way be limited or impaired by (a) any amendment or modification of the
Loan Documents made in accordance therewith, (b) any extensions of time for
performance required by any of the Loan Documents, or (c) the release or
substitution in whole or in part, of any security for the Notes or other
evidence of debt issued pursuant to the Loan Documents; and in any of such
cases, whether with or without notice to Guarantor and with or without
consideration.
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16. Termination. Notwithstanding anything to the contrary contained
herein, upon the sale of the Property by Owner to an unrelated third party
purchaser, this Guaranty and the indemnity obligations provided hereunder shall
terminate, except to the extent any such obligations exist and remain unpaid or
otherwise unsatisfied; provided, however, that if subsequent to any such sale,
Losses are incurred as set forth in Section 2(a) and it is proven that such
Losses occurred as a result of actions or omissions of Owner, Borrower, Manager,
or Guarantor, then the indemnification provided herein shall continue to be
effective or shall be reinstated, as the case may be.
17. INTERCREDITOR AGREEMENT. THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER AND ALL RIGHTS AND REMEDIES OF LENDER WITH RESPECT TO THE LOAN
ARE EACH AND ALL SUBJECT TO THE TERMS AND CONDITIONS OF THE INTERCREDITOR
AGREEMENT.
[Signatures on the following page]
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IN WITNESS WHEREOF, the Guarantor has caused this Environmental
Guaranty Indemnity Agreement to be duly executed by its duly authorized
representative, all as of the day and year first above written.
GUARANTOR:
BROOKDALE LIVING COMMUNITIES, INC., a
Delaware corporation
By: ________________________________
Name: Darryl W. Copeland, Jr.
Title: Executive Vice President
AGREED AND ACKNOWLEDGED
ONLY FOR SECTION 4(b)
BANC ONE CAPITAL PARTNERS IV, LTD.
By: BOCP Holdings Corporation, its Manager
By: ______________________________________
Name: Michael S. Wood
Title: Authorized Signer
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<PAGE>
LOAN AGREEMENT
between
AH MICHIGAN SUBORDINATED, LLC
as Borrower
and
BANC ONE CAPITAL PARTNERS IV, LTD.
as Lender
Dated
June 17, 1998
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1. DEFINITIONS......................................................2
1.1 Definitions......................................................2
1.2 Cross-References.................................................6
ARTICLE 2. LOAN............................................................6
2.1 Loan............................................................7
2.2 Timing of Disbursement of Loan...................................7
(a) Priority Loan..............................................7
(b) Subordinate Loan...........................................7
2.3 Notes............................................................7
(a) Term.......................................................7
(b) Interest Rate..............................................8
(i) Required Pay Rate of Interest........................8
(ii) Mandatory Lookback Interest..........................8
(iii) Default Interest Rate................................8
(c) Intentionally Omitted......................................8
(d) No Principal Amortization..................................9
(e) Optional Prepayments.......................................9
(f) Events of Default..........................................9
(g) Priority of Payments.......................................9
2.4 Use of Loan Proceeds.............................................9
2.5 Acknowledgment of Full Payment of the Loan......................10
2.6 Right to Make Additional Advances...............................10
ARTICLE 3. PAYMENTS, SECURITY..............................................10
3.1 Payments........................................................10
3.2 Security........................................................10
ARTICLE 4. CONDITIONS OF BORROWING.........................................11
4.1 Conditions Precedent to the Initial Disbursement................11
ARTICLE 5. REPRESENTATIONS AND WARRANTIES..................................13
5.1 Organization and Authority of Borrower..........................14
5.2 Organization and Authority of the Owner.........................14
5.3 Organization and Authority of the General Partner...............14
5.4 Title to Property; Liens........................................15
5.5 Litigation......................................................15
5.6 Compliance with Law and Other Instruments.......................15
5.7 Adverse Contracts; Defaults.....................................15
i
<PAGE>
5.8 Environmental Laws..............................................15
5.9 Disclosure......................................................16
5.10 Tax Reports; Filings............................................16
5.11 Default.........................................................16
5.12 Business of Borrower and Owner..................................16
5.13 Liabilities.....................................................16
ARTICLE 6. AFFIRMATIVE COVENANTS...........................................16
6.1 Covenants Relating to the Property or the Manager...............16
(a) Financial Statements and Reports..........................17
(b) Periodic Reports..........................................17
(c) Preparation of Tax Returns................................17
(d) Inspection................................................17
(e) Insurance.................................................18
(f) Payment of Taxes and Claims...............................18
(g) Maintenance of Property...................................18
(h) Maintenance of Tangible Assets............................18
(i) Records and Books of Account..............................18
(j) Use of Proceeds...........................................18
(k) Construction Plan.........................................19
6.2 Covenants Relating to the Borrower, the Owner
and the General Partner19
(a) Compliance with Laws......................................19
(b) Preservation of Existence.................................19
(c) Notices of Certain Events.................................20
(d) Performance of Contracts..................................20
(e) Notice of Material Litigation.............................20
(f) Bankruptcy................................................20
(g) Compliance with Certain Agreements........................20
ARTICLE 7. NEGATIVE COVENANTS..............................................21
7.1 Liens and Other Encumbrances....................................21
7.2 Amendments to Operating Agreement, Management Agreement,
Development Agreement, and Senior Loan Documents................21
7.3 Transactions with Affiliates....................................21
7.4 Admission of New Members........................................22
7.5 Refinancing of Senior Loan: Additional Debt.....................22
7.6 Sale of the Property............................................22
7.7 Limitations of Business.........................................22
7.8 Budgets.........................................................23
7.9 Capital Expenditures............................................23
7.10 No Challenge to Exercise of Rights under Assignment.............23
7.11 Limitation on Change of Ownership...............................23
ARTICLE 8. EVENTS OF DEFAULT...............................................23
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8.1 Event of Default................................................23
8.2 Consequences of Event of Default................................26
ARTICLE 9. INDEMNIFICATION.................................................26
9.1 No Reliance; Indemnification....................................26
ARTICLE 10. MISCELLANEOUS..................................................27
10.1 Notices.........................................................27
10.2 Term of Agreement; Termination; Successors and Assigns..........28
10.3 No Implied Rights or Waivers....................................28
10.4 Applicable Law..................................................28
10.5 Modifications, Amendments or Waivers............................28
10.6 Counterparts....................................................29
10.7 Headings........................................................29
10.8 Expenses........................................................29
10.9 Accounting......................................................29
10.10 Severability....................................................29
10.11 Waiver of Jury Trial; Consent to Venue..........................29
10.12 Entire Agreement................................................29
Exhibit A-1 Guaranty Agreement
A-2 Guaranty of Completion
A-3 Non-Recourse Guaranty
Exhibit B-1 Priority Note
Exhibit B-2 Subordinate Note
Exhibit C Security Agreement - Pledge and Assignment of Membership Interests
Exhibit D Warrant Certificate
Exhibit E-1 Methodology of Calculation of Internal Rate of Return
(Priority Note)
Exhibit E-2 Methodology of Calculation of Internal Rate of Return
(Subordinate Note)
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LOAN AGREEMENT
This Loan Agreement (this "Agreement") is entered into as of June 17,
1998, by and between AH MICHIGAN SUBORDINATED, LLC, an Ohio limited liability
company (the "Borrower"), and BANC ONE CAPITAL PARTNERS IV, LTD., an Ohio
limited liability company (the " Lender").
RECITALS:
WHEREAS, AH Michigan Owner Limited Partnership is an Ohio limited
partnership (the "Owner"), the sole partners of which are the Borrower and AH
Michigan CGP, Inc., an Ohio corporation (the "General Partner"), which acts as
the sole general partner of the Owner;
WHEREAS, the Borrower is the sole shareholder of the General Partner;
WHEREAS, the Owner intends to develop an independent living facility with
a non-licensed assisted living component for the elderly in Southfield,
Michigan, which is currently referred to as "The Heritage at Southfield" (the
"Project");
WHEREAS, the Borrower estimates that the total cost of acquisition,
development and construction of the Project will be $36,840,749 (the "Estimated
Project Cost");
WHEREAS, the Borrower, on behalf of the Owner, has obtained a loan from
Nomura Asset Capital Corporation (the "Senior Lender") for the acquisition,
development and construction of the Project, in the amount of up to $26,625,000
(the "Senior Loan");
WHEREAS, the Lender has agreed to make a loan to the Borrower (as further
defined in Section 2.1 below, the " Loan") to be used as an equity contribution
to the Owner, the proceeds of which will fund a portion of the Estimated Project
Cost which will not be funded by the Senior Loan, upon the terms and conditions
herein below set forth; and
WHEREAS, in order to collateralize the Loan and induce the Lender to make
the Loan (i) AH Michigan Investor, Inc., which owns one hundred percent (100%)
of the membership interests in the Borrower (the "Membership Interests") and
will derive material benefits from the Loan, has agreed to pledge and assign the
Membership Interests to the Lender and (ii) Brookdale Living Communities, Inc.,
a Delaware corporation ("Brookdale") and an Affiliate of Brookdale Living
Communities of Michigan, Inc., a Delaware corporation and the developer and
manager of the Project (the "Manager"), which will derive material benefits from
the Loan, has agreed to guaranty certain obligations of the Borrower, to the
extent described in the Guaranties (as hereinafter defined).
NOW THEREFORE, for and in consideration of one dollar ($1.00) in hand paid
by the Borrower to the Lender and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
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ARTICLE 1. DEFINITIONS
1.1 Definitions. The following terms shall have the meanings set forth
below:
"Affiliate" of a Person shall mean any other Person directly or
indirectly controlling, under common control with, or controlled by such Person.
For purposes of the definition of Affiliate, "control" when used with respect to
any specific 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 relative to the foregoing.
"Agreement" is defined in the preamble.
"Bankruptcy Act" shall mean Title 11 of the United States Code
entitled "Bankruptcy" as now and hereafter in effect, or any successor statute.
"Borrower" is defined in the preamble.
"Brookdale" is defined in the Recitals on Page 1 of this Agreement.
"Brookdale Option Agreement" shall mean that certain Property Option
Agreement among Brookdale, the Borrower and the Owner of even date herewith.
"Budget" shall have the meaning set forth in the Senior Loan
Documents.
"Business Day" shall mean any day other than Saturdays, Sundays and
other legal holidays or days on which the principal office of the Lender is
closed or banks in Chicago, Illinois are closed.
"Call Option" shall mean the option in favor of Brookdale to
purchase (i) the Property from the Owner or (ii) all of the equity interests in
the Owner and the General Partner from the Borrower, as more particularly
described in the Brookdale Option Agreement.
"Capital Contribution" is defined in Section 4.1(r) of this
Agreement.
"Completion Guaranty" shall mean the Guaranty of Completion executed
by Brookdale in favor of Lender of even date herewith, a copy of which is
attached hereto as Exhibit A-2.
"Consent and Subordination of Manager" shall mean that certain
Consent and Subordination of Manager of even date herewith executed by the
Manager, in its capacity as property manager and as developer, in favor of
Lender.
"Construction Plan" shall be Manager's narrative description of its
plan, inclusive of time lines and budgets, for completion of construction of the
Project.
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"Default" shall mean the occurrence of an event which with the
giving of notice, passage of time, or both would become an Event of Default.
"Default Rate of Interest" is defined in Section 2.3(b)(iii) of this
Agreement.
"Development Agreement" shall mean that certain Amended and Restated
Development Agreement between the Owner and Manager dated June 17, 1998.
"Environmental Indemnity Agreement" shall mean that certain
Environmental Indemnity Agreement of even date herewith executed by Brookdale in
favor of the Lender.
"Environmental Site Assessment" is defined in Section 5.8 of this
Agreement.
"Equity Option Agreement" shall mean that certain Equity Option
Agreement among AH Michigan Investor, Inc., the Owner, the Borrower, the General
Partner and Brookdale of even date herewith.
"Equity Option" shall mean the option in favor of Brookdale to
purchase the equity interests of AH Michigan Investor, Inc. in Borrower as more
particularly described in the Equity Option Agreement.
"Estimated Project Cost" is defined in the Recitals on page 1 of
this Agreement.
"Event of Default" is defined in Section 8.1 of this Agreement.
"Fair Market Value" shall mean the fair market value of the Property
as of the date in question as determined in accordance with the Brookdale Option
Agreement.
"First Mortgage" shall mean the mortgage in favor of Senior Lender.
"General Partner" is defined in the Recitals on Page 1 of this
Agreement.
"Guaranties" shall mean the Non-Recourse Guaranty, the Completion
Guaranty, the Guaranty of Recourse Obligations and the Environmental Indemnity
Agreement.
"Guaranty of Recourse Obligations" shall mean the Guaranty Agreement
executed by Brookdale in favor of Lender, a copy of which is attached hereto as
Exhibit A-1.
"Initial Disbursement" is defined in Section 2.2(b) of this
Agreement.
"Intercreditor Agreement" shall mean that certain Intercreditor
Agreement among Lender, Senior Lender, Owner, Borrower, General Partner, AH
Michigan Investor, Inc., Brookdale and Manager of even date herewith as the same
may be hereafter supplemented, amended, modified or renewed.
"Lender" is defined in the preamble of this Agreement.
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"Loan" shall mean, collectively, the Priority Loan and the
Subordinate Loan.
"Loan Closing" shall be the date that the Initial Disbursement is
funded.
"Loan Documents" shall mean and include this Agreement, the Notes,
the Security Agreement and Assignment, the Guaranties, the Warrant, the Pledge
of Investment Agreement, the Consent and Subordination of Manager and other
documents and agreements evidencing and collateralizing the Loan or the
Guaranties.
"Management Agreement" shall mean the Management Agreement between
the Owner and Manager dated June 17, 1998 relating to the management of the
Property.
"Manager" is defined in the Recitals on Page 1 of this Agreement.
"Mandatory Lookback Interest" is defined in Section 2.3(b)(ii) of
this Agreement.
"Mandatory Priority Note Lookback Interest" is defined in Section
2.3(b)(ii) of this Agreement.
"Mandatory Subordinate Note Lookback Interest" is defined in Section
2.3(b)(ii) of
this Agreement.
"Maturity Date" is defined in Section 2.3(a) of this Agreement.
"Membership Interests" is defined in the Recitals on Page 1 of this
Agreement.
"Non-Recourse Guaranty" shall mean the Non-Recourse Guaranty
executed by Brookdale in favor of Lender of even date herewith, a copy of which
is attached hereto as Exhibit A-4.
"Notes" shall mean, together, the Priority Note and the Subordinate
Note.
"Operating Agreement" shall mean the Amended and Restated Operating
Agreement of the Borrower dated June 17, 1998.
"Owner" is defined in the Recitals on Page 1 of this Agreement.
"Person" shall mean a limited liability company, an association, a
corporation, a partnership, an organization, a business, an individual, a
government or political subdivision thereof or a governmental agency.
"Pledge of Investment Agreement" shall mean that certain Security
Agreement Pledge and Assignment of Investment Agreement of even date herewith
between Brookdale and Lender.
"Priority Loan" is defined in Section 2.1 of this Agreement.
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<PAGE>
"Priority Note" is defined in Section 2.3 of this Agreement and a
copy of which is attached hereto as Exhibit B-1.
"Project" is defined in the Recitals on Page 1 of this Agreement.
"Project Completion" is the circumstance evidenced by the Project
Architect's Certificate of Substantial Completion and the issuance of all
licenses and permits required for the full use and occupancy of the Project.
"Property" shall mean the real property described in the First
Mortgage and the Project and all other improvements, buildings and structures
and appurtenances relating thereto acquired by the Owner or owned by the Owner
and located in Southfield, Michigan.
"Recourse Guaranties" shall mean the Completion Guaranty, the
Guaranty of Recourse Obligations and the Environmental Indemnity Agreement.
"Required Pay Rate of Interest on the Priority Note" is defined in
Section 2.3(b)(i) of this Agreement.
"Required Pay Rate of Interest on the Subordinate Note" is defined
in Section 2.3(b)(i) of this Agreement.
"Scheduled Debt Service" shall mean the monthly payments of interest
at the Default Rate of Interest or the Required Pay Rate of Interest on the
Priority Note, as applicable, as required by Section 2.3(b)(i) and Section
2.3(b)(iii) of this Agreement.
"Security Agreement and Assignment" shall mean the Security
Agreement - Pledge and Assignment of Membership Interests from AH Michigan
Investor, Inc. to the Lender dated the date of the Loan Closing, a copy of which
is attached hereto as Exhibit C.
"Senior Lender" is defined in the Recitals on Page 1 of this
Agreement.
"Senior Loan" is defined in the Recitals on Page 1 of this
Agreement.
"Senior Loan Documents" shall mean the loan documents evidencing or
securing the Senior Loan.
"Special Management Interest" shall mean that certain right to
replace the manager of the Borrower granted to the Lender pursuant to Section
5.5 of the Operating Agreement.
"Structuring Fee" means the fee of $204,600 payable by the Borrower
to Banc One Capital Markets, Inc., an Affiliate of the Lender, as follows: (a)
50% of the Structuring Fee shall be due and payable upon the earlier of (i) the
Loan Closing or (ii) the 30th day after the date on which the commitment to make
the Loan was issued by the Lender to the Borrower, and (b) the remaining 50% of
the Structuring Fee shall be due and payable at the time of the Loan Closing.
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<PAGE>
A deposit of $5,000 has been previously paid to the Lender on behalf of the
Borrower and said deposit shall be credited against the Structuring Fee at the
Loan Closing.
"Subordinate Loan" is defined in Section 2.1 of this Agreement.
"Subordinate Note" is defined in Section 2.3 of this Agreement and a
copy of which is attached hereto as Exhibit B-2.
"Texas Loan Agreement" shall mean that certain Loan Agreement
between AH Texas Subordinated, LLC and the Lender of even date herewith.
"Texas Loan" shall mean that certain loan by the Lender to AH Texas
Subordinated, LLC pursuant to the Texas Loan Agreement.
"Title Insurance Commitment" is defined in Section 4.1(f) of this
Agreement.
"Warrant" shall mean that certain Warrant Certificate issued by
Brookdale in favor of the Lender, a copy of which is attached hereto as Exhibit
D.
"Unavoidable Delay" shall have the meaning set forth in the Senior
Loan Documents.
"15.60% IRR" shall mean an internal rate of return of 15.60% per
annum, compounded monthly, and computed using the methodology described in
Exhibit E-1 attached hereto. Upon any Event of Default, the internal rate of
return of 15.60% per annum shall be increased to 19.60% per annum from and after
the expiration of any applicable cure period following such Event of Default
until the earlier of the payment in full of the Notes or the date when such
Event of Default is cured.
"17.11% IRR" shall mean an internal rate of return of 17.11% per
annum, compounded monthly, and computed using the methodology described in
Exhibit E-2 attached hereto. Upon any Event of Default, the internal rate of
return of 17.11% per annum shall be increased to 21.11% per annum from and after
the expiration of any applicable cure period following such Event of Default
until the earlier of the payment in full of the Notes or the date when such
Event of Default is cured.
1.2 Cross-References. Anything herein to the contrary notwithstanding, any
cross-reference in the Loan Documents to a term defined in the Senior Loan
Documents shall refer to such term as defined in the Senior Loan Documents as in
effect on the date hereof.
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ARTICLE 2. LOAN
2.1 Loan. The Lender, upon the terms and subject to the conditions of this
Agreement, shall lend to the Borrower (a) the principal amount of $5,884,761
($4,075,012 of which shall be disbursed to the Borrower and up to $1,809,749 of
which shall be allocated monthly to capitalized interest to be used as a source
of payment of the Scheduled Debt Service and the unpaid portion of the
Structuring Fee and certain legal and due diligence expenses payable at Loan
Closing); and (b) the principal amount of $5,116,015. The loan proceeds referred
to in (a), above, (subject to increase as set forth in Section 2.6) are
sometimes hereinafter referred to as the "Priority Loan". The loan proceeds
referred to in (b), above, are sometimes hereinafter referred to as the
"Subordinate Loan". The Priority Loan and the Subordinate Loan are sometimes
hereinafter referred to together as the "Loan".
2.2 Timing of Disbursement of Loan. The Loan shall be funded and disbursed
as follows:
(a) Priority Loan. Subject to the satisfaction of the conditions
precedent described in Section 4.1 hereof, the sum of $4,075,012 of the Priority
Loan shall be disbursed by the Lender to the Borrower on the date of the Loan
Closing. In addition, up to $1,809,749 of the principal of the Priority Loan
shall be deemed advanced and applied to pay the unpaid portion of the
Structuring Fee and certain legal and due diligence expenses payable at the Loan
Closing and the Scheduled Debt Service as it comes due. The Borrower
acknowledges that the $1,555,874 of the principal of the Priority Loan will be
insufficient to pay all Scheduled Debt Service in the event the Maturity Date is
extended as provided in Section 2.3(a), below. Brookdale has agreed to guaranty
the payment of Scheduled Debt Service during any such extension period pursuant
to its Guaranty of Recourse Obligations.
(b) Subordinate Loan. Subject to the satisfaction of the conditions
precedent described in Section 4.1 hereof, the Subordinate Loan shall be fully
funded and disbursed to the Borrower on the date of the Loan Closing. The
disbursement of the Subordinate Loan at the Loan Closing together with the
initial disbursement of the Priority Loan at the Loan Closing, (as described in
Section 2.2(a)), is sometimes hereinafter referred to as the "Initial
Disbursement".
2.3 Notes. The Priority Loan shall be evidenced by a promissory note (the
"Priority Note") in the form of Exhibit B-1 attached hereto, which shall be
executed and delivered to the Lender by the Borrower. The Subordinate Loan shall
be evidenced by a promissory note (the "Subordinate Note" and together with the
Priority Note, the "Notes") in the form of Exhibit B-2 attached hereto, which
shall be executed and delivered to the Lender by the Borrower. The Notes shall
contain the following principal terms and provisions:
(a) Term. Each Note shall be dated the date of the Loan Closing and
shall be due and payable in full on the earlier of the Conversion Date (as such
term is defined in the Senior Loan Documents) or May 11, 2001, subject to the
Lender's right to accelerate that date upon the occurrence of an Event of
Default as set forth in Section 8.2 of this Agreement and subject to Borrower's
right to extend such date as hereinafter provided (the "Maturity Date").
Borrower may
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extend the Maturity Date to the earlier of the Conversion Date or the Extended
Expected Conversion Date (as such term is defined in the Senior Loan Documents)
provided that (i) Borrower has provided to Lender written notice of its election
to so extend the Maturity Date at least 30 days prior to the Original Expected
Conversion Date (as such term is defined in the Senior Loan Documents), (ii) as
of the date of such notice there exists no Event of Default or event which with
notice or passage of time would constitute an Event of Default; (iii) Borrower
pays to Lender an extension fee equal to one percent (1%) of the then
outstanding principal amount of the Priority Note; and (iv) the Original
Expected Conversion Date has been extended to the Extended Expected Conversion
Date (as such term is defined in the Senior Loan Documents) in accordance with
the provisions of the Senior Loan Documents.
(b) Interest Rate.
(i) Required Pay Rate of Interest. Except as expressly
provided in Section 2.3(b)(iii), interest shall accrue on the unpaid principal
balance of the Priority Note at the rate ten percent (10%) per annum (the
"Required Pay Rate of Interest on the Priority Note"). The Required Pay Rate of
Interest on the Priority Note shall (A) be applied to so much of the principal
of the Priority Loan as shall be outstanding; (B) be calculated on the basis of
a 365 day year, for the actual number of days outstanding and (C) accrue and be
payable in arrears on the first business day of each month. Except as expressly
provided in Section 2.3(b)(iii), interest shall accrue on the unpaid principal
balance of the Subordinate Note at the rate of nine percent (9%) per annum,
simple interest (the "Required Pay Rate of Interest on the Subordinate Note").
The Required Pay Rate of Interest on the Subordinate Note shall (x) be applied
to so much of the principal of the Subordinate Loan as shall be outstanding; (y)
be calculated on the basis of a 365-day year, for the actual number of days
outstanding and (z) accrue and be payable on the Maturity Date.
(ii) Mandatory Lookback Interest. Upon the payment of the
outstanding principal balance of the Loan, whether at the Maturity Date or upon
earlier acceleration or permitted prepayment, the Borrower shall pay to the
Lender as additional interest on the Loan an aggregate amount equal to (A) the
amount necessary to produce a 15.60% IRR on the Priority Note after taking into
account all interest previously paid to the Lender (the "Mandatory Priority Note
Lookback Interest") plus (B) the amount necessary to produce a 17.11% IRR on the
Subordinate Note after taking into account all interest previously paid to the
Lender (the "Mandatory Subordinate Note Lookback Interest"). The Mandatory
Priority Note Lookback Interest and the Mandatory Subordinate Note Lookback
Interest are sometimes hereinafter collectively referred to as the "Mandatory
Lookback Interest".
(iii) Default Interest Rate. Upon any Event of Default, a
default rate of interest (the "Default Rate of Interest"), calculated at four
percent (4%) per annum in excess of the Required Pay Rate of Interest on the
Priority Note and the Required Pay Rate of Interest on the Subordinate Note, as
applicable, shall apply to the Loan from and after the expiration of any
applicable cure period following an Event of Default until the earlier of the
payment in full of the Notes or the date when such Event of Default is cured.
(c) Intentionally Omitted.
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(d) No Principal Amortization. The outstanding principal balance of
each of the Notes is due and payable at the Maturity Date and there is no
amortization of such principal prior to the Maturity Date.
(e) Optional Prepayments. The Loan shall be closed to prepayment
except as otherwise expressly provided herein. The Loan may be prepaid in whole,
but not in part, on or after June 1, 2000, provided that: (i) the Borrower (or
Brookdale) shall provide the Lender with five (5) days prior written notice of
any such prepayment in full; (ii) Brookdale has exercised the Equity Option; and
(iii) any prepayment shall be accompanied by the payment of the Mandatory
Lookback Interest as required by Section 2.3(b)(ii). The Loan may also be
prepaid in whole, but not in part, at any time (whether before or after June 1,
2000) in the event of an "Investor Default" (as such term is defined in the
Equity Option Agreement) provided that (i) Brookdale has exercised the Equity
Option and (ii) any prepayment shall be accompanied by the payment of the
Mandatory Lookback Interest as required by Section 2.3(b)(ii).
(f) Events of Default. Any Event of Default under this Agreement
shall be an event of default under the Notes.
(g) Priority of Payments. Anything herein to the contrary
notwithstanding, the payment of all amounts owing to the Lender by the Borrower
with respect to the Priority Loan (including, without limitation, all principal
under the Priority Loan, any reasonable costs of collection with respect to the
Priority Note, all Scheduled Debt Service and all Mandatory Priority Note
Lookback Interest) shall, in all events, take priority over each and every
payment by the Borrower under or with respect to the Subordinate Loan. The
subordination of the right to payment of any amounts under the Subordinate Loan
to the payment of all amounts under the Priority Loan shall be reflected on the
face of each Note.
2.4 Use of Loan Proceeds. The proceeds of the Loan shall be
disbursed as follows:
(a) All closing costs shall be paid, including, but not limited to,
reasonable legal fees and expenses, the Structuring Fee and all other reasonable
costs incurred by (i) the Lender, including the reasonable fees and expenses of
the Lender's attorneys, appraisers, accountants, environmental consultants and
other professionals, as provided for in Section 10.8 of this Agreement, and (ii)
the Borrower (if incurred by the Borrower and approved by the Lender and the
Manager) which are directly related to the closing of the Loan.
(b) The remaining proceeds of the principal amount of the
Subordinate Loan shall be used by the Borrower as a capital contribution to the
Owner to acquire, develop or construct the Property and to pay the Owner's costs
and expenses incurred in connection therewith. The remaining proceeds of the
principal amount of the Priority Loan shall be used (i) for the purposes
described in the immediately preceding sentence, (ii) to pay Scheduled Debt
Service as described in Section 2.2(a) of this Agreement, and (iii) for such
other purposes as the Lender and Manager may agree in writing.
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2.5 Acknowledgment of Full Payment of the Loan. Upon payment in full of
the Loan in accordance with this Agreement, the Lender shall promptly provide to
Borrower (with a copy to Brookdale) a written acknowledgment of such payment in
full.
2.6 Right to Make Additional Advances.
(a) Anything herein to the contrary notwithstanding, the Lender
shall have the right, but not the obligation, subject to the approval of the
Manager (which shall not be unreasonably withheld), to make additional advances
to fund the payment of the income taxes resulting from the generation of any
operating income to the Owner. For all purposes of this Agreement, such advances
shall constitute a portion of the Priority Loan (and thereby increase its
principal balance); provided, however that the Required Pay Rate of Interest
with respect to such advances shall accrue and be payable on the Maturity Date.
Anything herein to the contrary notwithstanding, any such advances by the Lender
shall in no event create any obligation on the part of the Owner to the Lender.
(b) Anything herein to the contrary notwithstanding, in the event
Manager or its Affiliate fails to pay to the Senior Lender the Conversion
Shortfall in accordance with the terms of the Senior Loan Documents and, as a
result, Lender makes a Subordinate Lender Conversion Shortfall Advance (as such
term is defined in the Intercreditor Agreement), such advance, at the option of
the Lender, shall constitute a portion of the Priority Loan (and thereby
increase its principal balance); provided, however, that the Required Pay Rate
of Interest with respect to such advance shall accrue and be payable on the
Maturity Date. Anything herein to the contrary notwithstanding, any such
advances by the Lender shall in no event create any obligation on the part of
the Owner to the Lender.
ARTICLE 3. PAYMENTS, SECURITY, LIABILITY FOR
THE TEXAS LOAN
3.1 Payments. All payments by the Borrower of all amounts due on the Notes
shall be made to the Lender in United States funds on the date they are due.
Whenever any payment to be made thereunder shall be due other than on a Business
Day, such payment shall be deemed to be due on the next succeeding Business Day
and, in such event, such extension of time shall be included in the computation
of interest thereunder.
3.2 Security. As security for payment of the Notes and for the performance
of and compliance with all of the terms, covenants, conditions, stipulations and
agreements contained in the Loan Documents (including, without limitation, the
agreement contained in Section 3.3), AH Michigan Investor, Inc. shall pledge and
assign to the Lender its Membership Interests in the Borrower pursuant to the
Security Agreement and Assignment. Upon the exercise of its rights under the
Security Agreement and Assignment, the Lender or its assignee or designee, at
its election, may become a substitute member of the Borrower subject only to the
terms and conditions of the Intercreditor Agreement and the Equity Option. Upon
an Event of Default and acceleration of the Loan, the Lender or its assignee or
designee, at its election, may exercise its rights under the Special Management
Interest. In addition, Brookdale shall execute and deliver to the Lender the
Guaranties.
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3.3 Liability for the Texas Loan. In consideration for the making of the
Loan, the Borrower acknowledges and agrees that it shall be jointly and
severally liable for the obligations of AH Texas Subordinated, LLC under the
Texas Loan Agreement and consents to and agrees to the terms and conditions of
the Texas Loan Agreement and the Loan Documents (as such term is defined in the
Texas Loan Agreement).
ARTICLE 4. CONDITIONS OF BORROWING
The obligation of the Lender to disburse the principal amount of the Loan
to the Borrower provided for hereunder shall, in addition to any other
requirements set forth herein, be subject to the following conditions.
4.1 Conditions Precedent to the Initial Disbursement. Prior to the Initial
Disbursement (i) all the representations and warranties made in Article 5 below
shall remain true and correct in all material respects, and (ii) there shall be
no event of default under any of the Senior Loan Documents. In addition, the
Borrower shall furnish, or cause to be furnished, to the Lender the following,
in form and substance reasonably satisfactory to the Lender and counsel for the
Lender:
(a) The duly executed Loan Documents;
(b) Certified copies of the resolutions of the Borrower authorizing
the execution, delivery and performance of the Borrower's obligations under the
Loan Documents to which it is a party;
(c) Evidence that the Owner or the Manager has in effect insurance
and endorsements of the character and amount described in Section 6.1(e);
(d) Evidence that the Borrower has paid or shall cause to be paid
from proceeds of the Loan all required third party fees and expenses, including
the Structuring Fee;
(e) An opinion or opinions of counsel(s) to AH Michigan Investor,
Inc., the Borrower, Manager and Brookdale, addressed to the Lender and, as to
clauses (iii), (viii) and (ix) to Brookdale, opining: (i) that the Loan
Documents have been duly authorized, executed and delivered by the Borrower, the
Manager and Brookdale, as the case may be, and are the legal, valid, and binding
obligations of the Borrower, Brookdale and the Manager, as applicable; (ii) that
the Loan Documents are in full force and effect and are in compliance with all
requirements of the Senior Lender, State law and Federal law; (iii) that the
Borrower and the Owner are duly organized and validly existing entities under
the laws of the State(s) under which they are formed, and the Owner has full
power to acquire, hold, encumber, develop, operate, sell and convey and dispose
of real property and interests therein; (iv) that the Membership Interests have
been effectively pledged and assigned to the Lender pursuant to the Security
Agreement and Assignment and that the Lender, upon proper filing, will have a
perfected security interest in the Membership Interests; (v) the Guaranties and
the Security Agreement and Assignment have been duly executed and delivered and
are the legal, valid and binding obligation of the signatories thereto; (vi)
that (A) the execution
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and performance by the Borrower of this Agreement, the Notes, and the other Loan
Documents to which it is a party do not conflict with the Borrower's or the
Owner's organizational documents or any other agreements of the Borrower or the
Owner known to counsel and (B) to the knowledge of counsel, there are no
administrative orders, notices, claims, litigation, proceedings or
investigations pending against the Borrower, the Owner or the Property with
respect to which an adverse decision is reasonably likely which would materially
adversely affect the Borrower's performance under the Loan Documents to which it
is a party; (vii) the Special Management Interest is a legal, valid and binding
obligation of the Borrower; (viii) the Equity Option Agreement has been duly
authorized, executed and delivered by AH Michigan Investor, Inc., the Borrower,
the General Partner and the Owner and is the legal, valid and binding obligation
of AH Michigan Investor, Inc., the Borrower, the General Partner and the Owner;
(ix) the Brookdale Option Agreement has been duly authorized, executed and
delivered by the Borrower and the Owner and is the legal, valid and binding
obligation of the Borrower and the Owner; and (x) such other matters which the
Lender or its counsel may reasonably require (including, without limitation,
choice of law and usury). Such opinion or opinions of counsel shall be in form
and substance reasonably acceptable to the Lender and its counsel;
(f) A copy of the ALTA owner's and lender's commitments of title
insurance issued to the Owner and the Senior Lender (together, the "Title
Insurance Commitment"), and the Lender shall have the opportunity to review and
approve the same. Such Title Insurance Commitment shall be reasonably acceptable
to the Lender in all respects;
(g) The existing survey of the Property prepared by a surveyor
registered in the State of Michigan. The survey shall be reasonably acceptable
to the Lender in all respects;
(h) No part of the improvements of the Property shall have been
damaged or destroyed, in whole or in material part by fire or other casualty and
no material eminent domain proceedings affecting the improvements to the
Property shall have been threatened or pending;
(i) All questions concerning the Owner's rights, title and interest
in and to the Property, the Borrower's authority to enter into the transaction
contemplated by this Agreement and the security of the pledge and assignment of
the Membership Interests to be created in connection with the Loan shall be
resolved to the reasonable satisfaction of the Lender;
(j) The Lender shall have approved the Management Agreement and the
Development Agreement, and the Lender shall receive evidence that the Management
Agreement and the Development Agreement have been fully executed by the parties
thereto;
(k) The Environmental Site Assessment addressed to the Lender, which
shall be reasonably acceptable to the Lender in all respects;
(l) A soil report for the Property, which shall be in form and
content reasonably acceptable to the Lender;
(m) Financial projections for the Property which shall be reasonably
acceptable to the Lender;
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(n) An appraisal of the Property by an M.A.I. appraiser evidencing
an appraisal value of the Property of not less than $35,500,000 and otherwise
reasonably satisfactory to the Lender;
(o) The Operating Agreement, all amendments and attachments thereto,
which shall be certified by the Borrower to be true and complete and which shall
be reasonably acceptable to the Lender. The Borrower shall also provide the
Lender with any certificates filed or required to be filed for the Borrower to
be duly organized in the state of its formation and any consents by other
parties required for the borrowing contemplated hereby. Additionally, the
Borrower shall provide the Lender with a good standing certificate for the Owner
from the Owner's state of organization, its certificate of limited partnership
certified to be true and correct by the Secretary of State of the state of its
organization, and its agreement of limited partnership (and all amendments and
attachments thereto) certified to be true and complete;
(p) The Lender shall have approved the terms of the Senior Loan and
be fully satisfied, in its sole and absolute judgment, that (i) the Loan is
fully authorized under the Senior Loan Documents; (ii) the Senior Lender has
full knowledge of the Loan and all of its terms and conditions; and (iii) the
Lender will be able to enforce all of its rights under the documents evidencing
the Loan, including but not limited to, the right to receive timely payment from
the Borrower (and the Property) of all amounts due under the Notes, the right to
exercise its rights under the Special Management Interest and the right to
foreclose on the Membership Interests pursuant to the Security Agreement and
Assignment, without causing an event of default under any of the Senior Loan
Documents subject, in all cases, to the provisions of the Intercreditor
Agreement;
(q) The Construction Plan for the Property and a statement of
sources and uses of funds, which shall be reasonably satisfactory to the Lender;
(r) Evidence satisfactory to the Lender that the sole member of the
Borrower has made a contribution to the capital of the Borrower of not less than
$1,050,000 (the "Capital Contribution");
(s) A market study in form and content reasonably satisfactory to
Lender;
(t) A copy of the Brookdale Option Agreement and the Equity Option
Agreement, each of which shall be in a form reasonably acceptable to the Lender,
and
(u) Such other opinions, certificates, affidavits, documents and
filings as the Lender may deem reasonably necessary or appropriate.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lender, which representations
and warranties shall survive the execution and delivery of this Agreement, the
Notes and the other Loan Documents, as follows:
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5.1 Organization and Authority of Borrower. The Borrower is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Ohio and has all requisite power and authority to own
and operate its property and to carry on its business as now conducted. The
Borrower is duly qualified to do business in each jurisdiction where the nature
of its operations and applicable laws require such qualification except where
the failure to be so qualified would not have a material adverse effect on the
Borrower. The execution, delivery and performance of the Loan Documents to which
the Borrower is a party, have been duly authorized by all necessary
organizational action. There is no prohibition in the Operating Agreement, or in
any document, instrument or agreement, or in any law or any order, writ,
injunction or decree of any court or arbitrator presently in effect having
applicability to the Borrower which in any way prohibits or would be violated by
the execution and performance of the Loan Documents in any respect except where
such violation would not have any material adverse effect on the Borrower. The
Loan Documents to which the Borrower is a party are valid, binding and
enforceable obligations of the Borrower, except as enforcement may be limited by
bankruptcy, insolvency or the laws or equitable principles affecting the
enforcement of creditors' rights generally. The Borrower is a single purpose
entity whose sole assets are the limited partnership interests in the Owner and
the stock of the General Partner.
5.2 Organization and Authority of the Owner. The Owner is a limited
partnership duly organized, validly existing and in good standing under the laws
of the State of Ohio and has all requisite power and authority to own and
operate the Property and to carry on its business as now conducted. The Owner is
duly qualified to do business in each jurisdiction where the nature of its
operations and applicable laws require such qualification except where the
failure to be so qualified would not have a material adverse effect on the
Owner. There is no prohibition in the Owner's limited partnership agreement, or
in any document, instrument, or agreement, or in any law or any order, writ,
injunction or decree of any court or arbitrator presently in effect having
applicability to the Owner which in any way prohibits or would be violated by
the execution and performance of the Loan Documents in any respect except where
such violation would not have any material adverse effect on the Owner or the
Borrower. The Owner is a single purpose entity whose sole asset is the Property.
5.3 Organization and Authority of the General Partner. The General Partner
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Ohio and has all requisite power and authority to own and
operate its property and to carry on its business as now conducted and has the
requisite authority to act as the general partner of the Owner. The General
Partner is duly qualified to do business in each jurisdiction where the nature
of its operations require such qualification except where the failure to be so
qualified would not have a material adverse effect on the General Partner or the
Owner. There is no prohibition in the General Partner's Articles of
Incorporation, or in any document, instrument, or agreement, or in any law or
any order, writ, injunction or decree of any court or arbitrator presently in
effect having applicability to the General Partner which in any way prohibits or
would be violated by the execution and performance of the Loan Documents in any
respect except where such violation would not have any material adverse effect
on the General Partner or the Borrower. The General Partner is a single purpose
entity whose sole purpose is to act as the general partner of the Owner and
whose sole asset is the general partnership interest in the Owner.
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5.4 Title to Property; Liens. To Borrower's actual knowledge, the Owner
has good and marketable title to the Property, free and clear of mortgages,
pledges, liens, charges or other encumbrances except such as are not prohibited
by Section 7.1 and the Brookdale Option Agreement.
5.5 Litigation. To Borrower's actual knowledge, (a) there is no court
action, other proceeding or investigation pending, or to the knowledge of the
Borrower, threatened which questions the validity of or enforceability of the
Loan Documents, or any action taken pursuant thereto, and (b) there is no court
action, other proceeding or investigation pending or, to the knowledge of the
Borrower, threatened with respect to which an adverse decision is reasonably
likely and which would result, either separately or in the aggregate, in any
materially adverse change in the business, operations, affairs or condition of
the Borrower or the Owner or which would materially and adversely affect the
Property or the Owner's ownership thereof.
5.6 Compliance with Law and Other Instruments. Neither the Borrower, the
General Partner nor the Owner is in violation of, and the execution, delivery
and performance of the Loan Documents do not and will not result in a violation
of, conflict with or cause a default under, any agreement, instrument, judgment,
decree, order, statute or governmental rule or regulation applicable to the
Borrower, the General Partner or the Owner, or by which Borrower, the General
Partner or the Owner may be bound, which now or in the future may materially
adversely affect the business, operations, affairs or condition of the Borrower,
the General Partner or the Owner.
5.7 Adverse Contracts; Defaults. The Borrower is not a party to any
agreement or instrument other than the Loan Documents, the Intercreditor
Agreement, the Limited Partnership Agreement of the Owner, the Brookdale Option
Agreement, the Equity Option Agreement and all documents executed in connection
with the interim closing effective March 31, 1998. The Owner is not a party to
any agreement or instrument other than the Senior Loan Documents, the Management
Agreement, the Development Agreement, the Intercreditor Agreement, the Equity
Option Agreement, the Brookdale Option Agreement and all the documents executed
in connection with the interim closing, effective March 31, 1998 or executed
directly in connection with its status as owner of the Property. Neither the
Borrower nor the Owner is in default in any respect in the performance,
observance or fulfillment of any of the material obligations, covenants or
conditions contained in any agreement or instrument to which it is a party,
which default would materially and adversely affect the ability of Borrower to
perform its obligations under this Agreement.
5.8 Environmental Laws. Except as disclosed in the Environmental Site
Assessment prepared by Maxim Technologies, Inc., dated February 20, 1997 (the
"Environmental Site Assessment"), to Borrower's actual knowledge, no release,
emission, or discharge into the environment of hazardous substances, as defined
under the Comprehensive Environmental Response, Compensation and Liability Act,
as amended, or hazardous waste as defined under the Solid Waste Disposal Act, as
amended, or air pollutants as defined under the Clean Air Act, or toxic
pollutants as defined under the Clean Air Act, or the Toxic Substances Control
Act, has occurred or is presently occurring on or with respect to the Property,
in excess of federally permitted releases or reportable quantities, or other
concentrations, standards of limitations under the foregoing laws or under any
other federal, state or local laws or regulations. To Borrower's actual
knowledge, there are no past or existing violations of any environmental laws,
ordinances or regulations issued
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by any federal, state or local governmental authority with respect to the
Property and, no underground storage tanks exist on the Property.
5.9 Disclosure. To the best of Borrower's knowledge, no information,
exhibit or report furnished by the Borrower to the Lender in connection with the
negotiation of this Agreement contained any material misstatement of fact or
omitted to state a material fact necessary to make the statements contained
therein not materially misleading.
5.10 Tax Reports; Filings. All of the Borrower's and the Owner's federal,
state and other tax returns and reports, including reports to any governmental
authority, for the proper maintenance and operation of its or their property,
assets and business, as may be required by law to be filed or paid, have been
(or will be) filed, and all federal, state and other taxes, assessments, fees
and other governmental charges (other than those presently payable, without
penalty) imposed upon them or their property or assets, which are due and
payable, have been fully paid unless the same are being contested by the
Borrower or the Owner, as appropriate, in the ordinary course of business for
which it has provided adequate reserves.
5.11 Default. To Borrower's actual knowledge, there does not exist any
Event of Default or Default hereunder.
5.12 Business of Borrower and Owner. The Borrower is engaged, and since
its formation has engaged, in no business other than owning the limited
partnership interests in the Owner and the stock of the General Partner. The
General Partner is engaged, and since its formation has engaged, in no business
other than acting as general partner of the Owner. The Owner is engaged, and
since its formation has engaged, in no business other than owning, constructing
and operating the Property.
5.13 Liabilities. The Borrower has no liabilities other than the Loan
except for unsecured liabilities related to the closing of the Loan and the
continuing administration of its business in the ordinary course and liabilities
incurred in connection with the Intercreditor Agreement, the Brookdale Option
Agreement and the Equity Option Agreement. The Owner has no liabilities other
than liabilities incurred in connection with (i) the Senior Loan Documents, (ii)
the Management Agreement, (iii) the Development Agreement, (iv) the Brookdale
Option Agreement , (v) the Equity Option Agreement, (vi) liabilities relating to
the construction of the Project, (vii) the Permitted Encumbrances (as defined in
the Senior Loan Documents), and (viii) the ordinary course of owning,
constructing and operating the Property. The General Partner has no liabilities
other than liabilities incurred in the ordinary course of acting as the general
partner of the Owner.
ARTICLE 6. AFFIRMATIVE COVENANTS
Until payment in full of the Notes and performance of all other
obligations of the Borrower hereunder:
6.1 Covenants Relating to the Property or the Manager.
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(a) Financial Statements and Reports. Not later than one hundred
twenty (120) days following the end of each fiscal year, the Borrower shall
cause the Owner or the Manager, as the case may be, to provide, to the Lender
the following items in form and substance reasonably satisfactory to the Lender:
(i) An income and cash flow statement and balance sheet of
the Owner as of the end of such fiscal year;
(ii) A rent roll for the Property or other occupancy report
as may be reasonably required by the Lender;
(iii) Such other financial information and reports as may be
reasonably requested by the Lender; and
(iv) To the extent reasonably requested by the Lender, the
Borrower shall cause the Owner to provide the Lender
with audited reports confirming any of the foregoing
financial statements and presentations.
(b) Periodic Reports. The Borrower shall cause the Owner or the
Manager, as the case may be, to provide, the following items in form and
substance reasonably satisfactory to the Lender:
(i) Unaudited income and cash flow statements and balance
sheets of the Owner for the period and fiscal year to
date;
(ii) A rent roll for the Property or other occupancy report
as may be reasonably required by the Lender; and
(iii) Such other financial information and records as may be
reasonably requested by the Lender including without
limitation, construction progress reports (i.e., Senior
Lender draw requests).
The foregoing information shall be provided not later than forty
five (45) days following the end of each fiscal quarter except for rent rolls
and construction progress reports which, at the request of Lender, shall be
provided on a monthly basis.
(c) Preparation of Tax Returns. The Borrower shall cause the Manager
to prepare the necessary tax returns for the Owner, at the Project's expense, to
the extent permitted by the Senior Loan Documents.
(d) Inspection. Upon the reasonable request of the Lender , subject
to the rights of any tenants or residents, the Borrower shall cause the Owner or
the Manager, as the case may be, to make available for inspection to
representatives of the Lender the Project itself, as well as, at the offices of
the Manager, any of the books and records relating to the Project and shall
furnish
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to the Lender information regarding the business affairs and financial condition
of the Project within a reasonable time after receipt of written request
therefor.
(e) Insurance. The Borrower shall cause the Owner or the Manager, as
the case may be, to maintain "extended coverage" insurance against loss by fire,
not less than six (6) months of business interruption, public liability, theft
and other casualty on its insurable real and personal property in such amounts
and otherwise in form and substance and with such companies as are required by
Senior Lender under the Senior Loan Documents and against liability on account
of damage to persons or property and as required under all applicable Workers'
Compensation Laws.
Copies of all insurance policies or certificates evidencing the same shall be
furnished to the Lender.
(f) Payment of Taxes and Claims. The Borrower shall cause the Owner
or the Manager, as the case may be, to pay all taxes, assessments and other
governmental charges imposed upon the Property or assets of the Owner or in
respect of any of the franchises, business, income or profits of the Owner
before any penalty or interest accrues thereon, and all claims (including,
without limitation, claims for labor, services, materials and supplies) for sums
which have become due and payable and which by law have become a lien or charge
upon any of the Property or assets of Owner provided that no such tax,
assessment, charge or claim need be paid if the amount, applicability or
validity thereof is currently being contested in accordance with the provisions
of the Senior Loan Documents.
(g) Maintenance of Property. The Borrower shall cause the Owner or
the Manager, as the case may be, to operate and manage the Property in a
commercially reasonable manner. The Borrower shall cause all amounts paid by the
Borrower, the Owner or any of their respective Affiliates to Brookdale, the
Manager or any of their respective Affiliates, to be commercially reasonable and
to not exceed the prevailing market rate for such services except as otherwise
described in the Budget. All such payments shall be identified in the financial
reports required by Section 6.1(a) and (b) of this Agreement. The Borrower shall
cause the Owner or the Manager, as the case may be, to notify the Lender, in
writing, as to the existence of any such contracts with, or any services or
materials being provided by, an Affiliate of Brookdale or the Manager, which are
not otherwise disclosed in the Budget.
(h) Maintenance of Tangible Assets. The Borrower shall cause the
Owner or the Manager, as the case may be, to maintain, keep and preserve its
buildings and property and every part thereof in good repair, working order, and
condition.
(i) Records and Books of Account. The Borrower shall cause the Owner
and the Manager to keep adequate records and books of account in a manner
appropriate to permit the preparation of the financial statements required by
Sections 6.1(a) of this Agreement.
(j) Use of Proceeds. The Borrower shall cause the Owner and the
Manager to use all proceeds of the Loan disbursed pursuant to this Agreement for
legal and proper purposes and as described in Section 2.4 of this Agreement, and
such uses shall be consistent with all applicable laws and the provisions of
this Agreement.
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(k) Construction Plan. The Borrower shall cause the Owner and the
Manager, as the case may be, to diligently commence and pursue to completion the
construction contemplated by the Construction Plan. Subject to Unavoidable
Delay, the Project Completion shall be achieved not later than fourteen (14)
months from the date of the closing of the Senior Loan.
(l) Compliance with Laws. The Borrower shall cause the Owner and the
Manager, as the case may be, to comply in all respects with all applicable
statutes, laws, ordinances and governmental rules, regulations and orders which
are applicable to the construction, development, management or operation of the
Project if noncompliance therewith would have a material adverse affect on the
Project, the Owner or the Borrower including, but not limited to, all applicable
federal, state, regional, county or local laws, statutes, rules, regulations or
ordinances concerning public health, safety or the environment; provided that
the Owner or the Manager, as the case may be, need not so comply if any such
statute, law, ordinance, or governmental rule, regulation or order is currently
being contested in accordance with the Senior Loan Documents.
(m) Operating Expenses and Debt Service under Senior Loan Documents.
The Borrower shall cause the Owner to pay (unless Guarantor or other party shall
have paid) when due all Operating Expenses and Debt Service (whether or not
Operating Income is sufficient to pay them). For purposes of this Section
6.1(m), the terms "Operating Expenses," "Debt Service" and "Operating Income"
shall have the meanings ascribed to them in the Senior Loan Documents.
(n) Completion. The Borrower shall cause the Owner to observe,
fulfill and perform (unless Guarantor or other party shall have observed,
fulfilled or performed) all obligations of the Owner and the Manager under or
pursuant to the Building Loan Agreement solely with respect to (i) the
construction of the Required Improvements, including, the obligations of Owner
to construct, equip and complete the Required Improvements in accordance with
Section 7.1 of the Building Loan Agreement, and (ii) the payment when due of all
Costs in accordance with the Building Loan Agreement. For purposes of this
Section 6.1(n), the terms "Required Improvements," "Building Loan Agreement" and
"Costs" shall have the meanings ascribed to them in the Senior Loan Documents.
6.2 Covenants Relating to the Borrower, the Owner and the General Partner.
(a) Compliance with Laws. The Borrower shall, and shall cause the
Owner and the General Partner to, comply in all respects with all applicable
statutes, laws, ordinances and governmental rules, regulations and orders which
are applicable to its business, property and assets if noncompliance therewith
would have a material adverse affect on such business, including, but not
limited to, all applicable federal, state, regional, county or local laws,
statutes, rules, regulations or ordinances concerning public health, safety or
the environment; provided that the Borrower, the Owner and the General Partner
need not so comply if any such statute, law, ordinance, or governmental rule,
regulation or order is currently being contested in accordance with the Senior
Loan Documents.
(b) Preservation of Existence. The Borrower shall, and shall cause
the Owner and the General Partner to, preserve and maintain their respective
legal existence, rights, franchises and privileges in the jurisdiction of its
formation, or in any other jurisdiction it shall select, and
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qualify and remain qualified in each jurisdiction in which such qualification is
necessary or desirable in view of their business and operations or the ownership
of its property.
(c) Notices of Certain Events. The Borrower shall promptly give
notice to the Lender of:
(i) Any Default or Event of Default known to Borrower;
(ii) Any notice of any "default" or "Event of Default"
received by the Owner from the Senior Lender under the
Senior Loan Documents;
(iii) Any notice of default or event of default received under
any other contract, agreement or undertaking of the
Borrower, the Owner or the General Partner, where the
total value of the contract, agreement or undertaking is
in excess of One Hundred Thousand Dollars ($100,000.00);
or
(iv) A materially adverse change in the business, operations,
affairs or condition (financial or otherwise) of the
Borrower or the Owner.
(d) Performance of Contracts. The Borrower shall, and shall cause
the Owner and the General Partner to, perform and comply with each and every
material contract, agreement or instrument now or hereafter binding upon it,
except to the extent that it shall contest the provisions thereof in good faith
and by proper proceedings.
(e) Notice of Material Litigation. The Borrower shall promptly
notify the Lender in writing of any litigation, arbitration proceeding or
administrative investigation, inquiry or other proceeding to which the Borrower,
the Owner or the General Partner may hereafter become a party with respect to
which an adverse decision is reasonably likely and which would involve a
material risk of judgment or liability not fully covered by insurance or which
would otherwise result in a material adverse change of the business, operations,
affairs or condition (financial or otherwise) of the Borrower, the Owner or the
General Partner or which would materially impair the ability of the Borrower to
perform its obligations under the Loan Documents or any other agreement or
instrument contemplated hereby or thereby.
(f) Bankruptcy. The Borrower shall not, and shall not permit the
General Partner or the Owner to, file a voluntary petition in bankruptcy without
the consent of the Lender. The Borrower shall, and shall cause the Owner and the
General Partner to, use its best efforts to contest any involuntary petition
filed against it.
(g) Compliance with Certain Agreements. The Borrower shall comply,
and, as applicable, shall cause the General Partner and the Owner to comply,
with all of the terms, conditions and obligations of the Borrower, the Owner and
the General Partner under the Management Agreement, the Development Agreement,
the Equity Option Agreement, the Brookdale Option Agreement, the Senior Loan
Documents and the Intercreditor Agreement.
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(h) Tax Returns. Not later than thirty (30) days following the
applicable filing date (including any extensions authorized by the applicable
taxing authority), the Borrower shall provide to the Lender a copy of the
Borrower's and the Owner's federal income tax returns.
(i) Payment of Taxes and Claims. The Borrower shall pay all taxes,
assessments and other governmental charges imposed upon its property or assets
or in respect of any of its franchises, business, income or profits before any
penalty or interest accrues thereon, and all claims (including, without
limitation, claims for labor, services, materials and supplies) for sums which
have become due and payable and which by law have become a lien or charge upon
any of its property or assets, provided that no such tax, assessment, charge or
claim need be paid if the amount, applicability or validity thereof is currently
being contested in good faith and if an appropriate reserve or cash escrow shall
have been made therefor.
ARTICLE 7. NEGATIVE COVENANTS
Until payment in full of the Notes and the performance of all other
obligations of the Borrower under the Loan Documents, the Borrower may not take
the following actions without the prior written approval of the Lender:
7.1 Liens and Other Encumbrances. The Borrower shall not, and shall not
permit the Owner to, create, incur, assume or suffer to exist any security
interest, mortgage, pledge, lien or other encumbrance of any nature whatsoever
on the Property, except (i) encumbrances meeting the description in items (a)
through (d) of the definition of "Permitted Encumbrances" in the Senior Loan
Documents (ii) the Brookdale Option Agreement and (iii) all other liens and
encumbrances to which Lender has given its prior written consent.
7.2 Amendments to Operating Agreement, Management Agreement, Development
Agreement, and Senior Loan Documents. The Borrower shall not (i) amend the
Operating Agreement or any of its organizational documents, (ii) amend any of
the organizational documents of the Owner or the General Partner, (iii) permit
the General Partner to amend any of the organizational documents of the Owner,
or (iv) permit the Owner to amend or waive any provision of the Management
Agreement, the Development Agreement, the Brookdale Option Agreement, the Equity
Option Agreement, the Budget (other than changes for which Manager funds the
additional amounts owed or those changes resulting in a decrease in the Budget)
or the Senior Loan Documents (other than those modifications, if any, which do
not require the consent of Senior Lender, the Owner or the Manager) in any
respect, or to terminate the Management Agreement or the Development Agreement.
7.3 Transactions with Affiliates. Except for the Brookdale Option
Agreement, the Equity Option Agreement, the Development Agreement and the
Management Agreement, or except as expressly contemplated by the Budget, the
Borrower shall not permit the Owner to: (i) enter into any transaction,
including without limitation, the purchase, sale or exchange of any part of the
Property or the rendering of any services with respect to the Property, with the
Manager, Brookdale or any of their respective Affiliates or any manager, officer
or director thereof, (ii) enter into, assume or suffer to exist any employment
or consulting contract with the Manager, Brookdale or
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any of their respective Affiliates or any manager, officer or director thereof
unless such agreement, transaction or contract is in the ordinary course of its
business and is upon fair and reasonable terms no less favorable to it than it
would obtain in a comparable arm's length transaction with a Person not an
Affiliate; or (iii) pay any fees or expenses to, or reimburse or assume any
obligation for the reimbursement of any expenses incurred by, the Manager,
Brookdale or any of their respective Affiliates or any manager, officer or
director thereof except as may be permitted in accordance with the preceding
clause of this Section.
7.4 Admission of New Members. The Borrower shall not issue any additional
membership interests in the Borrower on or after the date hereof. The Borrower
shall not permit the Owner to issue any additional partnership interests in
Owner on or after the date hereof. The Borrower shall not permit the General
Partner to issue any additional stock of the General Partner on or after the
date hereof.
7.5 Refinancing of Senior Loan: Additional Debt. Except to the extent
provided for by the Senior Loan Documents, the Borrower shall not permit the
Owner to refinance the Senior Loan prior to its maturity or increase the amount
of the Senior Loan. The Borrower shall not permit the Owner to incur any
additional debt (other than in the ordinary course of the Owner's business and
then in an amount not in excess of $100,000 in the aggregate and amounts owing
under the Development Agreement and the Management Agreement). The Borrower
shall not incur any debt other than the Loan.
7.6 Sale of the Property. The Borrower shall not consent to, or otherwise
permit, a sale of all or any material part of the Property except in connection
with a prepayment in accordance with the requirements of Section 2.3(e) of this
Agreement.
7.7 Limitations of Business. The Borrower shall not (i) invest in,
organize or participate in the organization of or in the creation of any
business entity other than the Owner and the General Partner and the Borrower
shall not merge, transfer, acquire or consolidate with or into any other entity,
change ownership, dissolve and/or transfer or sell any assets except as
contemplated by the Brookdale Option Agreement or (ii) permit the Owner to
invest in, organize or participate in the organization of or the creation of any
business entity other than the Project, and the Borrower shall not permit the
Owner to merge, transfer, acquire or consolidate with or into any other entity,
change ownership, dissolve and/or transfer or sell any assets outside of the
ordinary course of business except in accordance with Section 7.6 of this
Agreement and except as contemplated by the Brookdale Option Agreement or (iii)
permit the General Partner to invest in, organize or participate in the
organization of or the creation of any business entity other than the Owner, and
the Borrower shall not permit the General Partner to merge, transfer, acquire or
consolidate with or into any other entity, change ownership, dissolve and/or
transfer or sell any assets outside the ordinary course of business except in
accordance with Section 7.6 of this Agreement and except as contemplated by the
Brookdale Option Agreement..
7.8 Budgets. The Borrower shall cause the Manager to (i) submit the
operating and capital budgets proposed by the Manager under the Management
Agreement in advance to the Lender, (ii) meet with the Lender at least annually,
if so requested by the Lender, to discuss the
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Lender's recommendations with respect to such proposed budgets, and (iii) duly
consider, in good faith, the implementation of any such recommendations.
7.9 Capital Expenditures. Except for capital expenditures provided for in
the Construction Plan, the Budget or as otherwise permitted under the Senior
Loan Documents (provided that, if such expenditures are in excess of $100,000 in
the aggregate and are not expressly contemplated by the Construction Plan or the
Budget, the consent of Lender has been obtained), the Borrower shall not permit
the Owner to make any capital expenditures.
7.10 No Challenge to Exercise of Rights under Assignment. As an inducement
to the Lender to make the Loan, the Borrower has assured the Lender that, upon
the occurrence of an Event of Default and the acceleration of the Loan as
provided in Section 8.2(a) or (b), one of the remedies available to the Lender,
at its election, will be to foreclose its security interest in, or at Lender's
option to retain as undisputed, absolute owner, the Membership Interests under
the Security Agreement and Assignment in satisfaction of the obligations under
the Notes and the Loan Documents or, at the Lender's option, to exercise its
rights under the Special Management Interest. Accordingly, the Borrower hereby
acknowledges that any such election to foreclose its security interest in,
and/or retain as undisputed, absolute owner, the Membership Interests is
reasonable under the circumstances and the Borrower hereby waives and releases
any right it may have to demand a sale of the Membership Interests or to
otherwise oppose or challenge the foreclosure or retention of the Membership
Interests by the Lender or the exercise of its rights under the Special
Management Interest if an Event of Default and acceleration of the Loan has
occurred and if it makes such an election following such Event of Default and
acceleration. Anything herein or in the Loan Documents to the contrary
notwithstanding and without limiting the generality of the foregoing, the
Borrower covenants and agrees to fully cooperate to the fullest extent permitted
under applicable law in any measures taken by the Lender to implement such an
election of remedies and, if an Event of Default and acceleration of the Loan
has occurred, not to challenge the Lender's exercise of the rights granted
hereunder.
7.11 Limitation on Change of Ownership. Except as contemplated under the
Brookdale Option Agreement or the Equity Option Agreement, the Borrower shall
not permit any transfer of (i) the Membership Interests, (ii) any of the stock
of the General Partner or (iii) the partnership interests in the Owner.
ARTICLE 8. EVENTS OF DEFAULT
8.1 Event of Default. Event of Default shall mean the occurrence of one or
more of the following described events following the expiration of any cure
period relating thereto:
(a) The Borrower fails to pay any amount required under this
Agreement when due and such failure continues for a period of five (5) Business
Days after written notice to Borrower (other than payments due on the Maturity
Date for which no notice of late payment shall be required),
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unless such failure is caused by the Lender's failure to advance up to
$1,809,749 of the principal of the Priority Loan to pay the Structuring Fee,
certain legal and due diligence expenses or the Scheduled Debt Service as it
comes due as contemplated by Section 2.2(a) of this Agreement;
(b) The Borrower defaults in the performance or observation of any
covenant, condition or agreement made or required to be observed or performed by
the Borrower under any of the Loan Documents, and such default shall continue
without cure for thirty (30) days after the date upon which written notice
thereof shall have been given to the Borrower, by the Lender, provided that if
any such default shall take more than thirty (30) days to cure, such thirty (30)
day period shall be extended by the time necessary to cure same, not to exceed
an additional ninety (90) days, provided further that Borrower has promptly
commenced efforts to cure the default and continues to diligently pursue such
efforts;
(c) The Owner refinances the Senior Loan prior to its maturity or
increases the amount of the Senior Loan;
(d) A material breach of the representations and warranties
contained in Article 5 hereof on the date as of which made which breach has a
materially adverse effect on the business, affairs or condition of the Borrower,
the Owner, the General Partner or the Property and which breach is not cured
within thirty (30) days after the date upon which written notice thereof is
provided to the Borrower;
(e) Any representation or warranty made by the Borrower, the Manager
or Brookdale in any of the other Loan Documents or in any report, certificate or
writing furnished in connection with or pursuant to this Agreement shall be
false or inaccurate in any material respect on the date as of which made;
provided that, in the case of any false or materially inaccurate representation
by the Borrower, such falsehood or inaccuracy has a materially adverse effect on
the business affairs or condition of the Borrower, the Owner, the General
Partner or the Property and is not cured within thirty (30) days after the date
upon which written notice thereof is provided to Borrower;
(f) Any of the Borrower, the General Partner, the Owner, the Manager
or Brookdale makes an assignment for the benefit of creditors;
(g) Any of the Borrower, the General Partner, the Owner, the Manager
or Brookdale petitions or applies to any tribunal for the appointment of a
trustee or receiver for itself, or of any substantial part of its assets or any
of the Borrower, the General Partner, the Owner, the Manager or Brookdale
commences any proceeding relating to it under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or liquidation under
the laws of any jurisdiction whether now or hereafter in effect;
(h) Any petitions or applications are filed, or any proceedings are
commenced against any of the Borrower, the General Partner, the Owner, the
Manager or Brookdale seeking the adjudication of it as bankrupt and the Borrower
, the General Partner, the Owner, the Manager or Brookdale as applicable, by any
act indicates its admission or consent thereto, or acquiescence therein, or any
order is entered appointing a trustee or receiver, or adjudicating any of the
Borrower,
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<PAGE>
the General Partner, the Owner, the Manager or Brookdale, bankrupt or insolvent,
or approving the petition in any such proceedings and such order remains
unstayed or undischarged for more than ninety (90) days;
(i) Any order is entered in any proceeding against any of the
Borrower, the General Partner, the Owner, the Manager or Brookdale decreeing the
dissolution of the Borrower, the General Partner, the Owner, the Manager or
Brookdale and such order remains unstayed or undischarged for more than ninety
(90) days;
(j) A final non-appealable judgment or judgments for the payment of
money in excess of an aggregate of $100,000 shall be rendered against the
Borrower, the General Partner or the Owner and such judgment or judgments shall
remain undischarged for a period of sixty (60) consecutive days during which the
execution shall not be effectively stayed (unless a reserve of available funds
is made therefor);
(k) An Event of Default occurs under the Senior Loan Documents which
remains uncured beyond any applicable grace or cure period or beyond the period
during which the Senior Lender has agreed to refrain from the exercise of its
rights and remedies under Article VIII of the Loan Agreement of even date
herewith among the Owner, the Manager and the Senior Lender pursuant to Section
8.3 thereof;
(l) A default beyond any applicable grace or cure period under the
Security Agreement and Assignment, the Guaranties or any of the other Loan
Documents;
(m) The withdrawal of the General Partner, or the General Partner's
failure to serve as the sole general partner of the Owner, without the prior
written approval of the Lender;
(n) An event of default by the Manager under the Management
Agreement or the Development Agreement, which remains uncured beyond any
applicable grace or cure period;
(o) Subject to Unavoidable Delay, the Borrower's failure to cause
the Owner to achieve Project Completion by the "Outside Completion Date" (as
such term is defined in the Senior Loan Documents).
(p) A breach by Brookdale of any of its obligations under the
Warrant which remains uncured beyond any applicable grace or cure period;
(q) Any change in the chief executive officer of Brookdale unless
within thirty (30) days thereafter Brookdale has provided to the Lender a
management succession plan acceptable to the Lender in its reasonable
discretion;
(r) A breach by Brookdale or Manager of any of its obligations to
Lender under the Intercreditor Agreement or the Consent and Subordination of
Manager and which remains uncured beyond any applicable grace or cure period;
(s) An Event of Default under the Texas Loan Agreement;
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<PAGE>
(t) Brookdale's failure to maintain a Net Worth (as such term is
defined in the Senior Loan Documents) in excess of $110,000,000;
(u) Brookdale's failure to maintain an EBITDAR (as such term is
defined in the Senior Loan Documents) in excess of$5,000,000, which shall be
tested on a quarterly basis; or
(v) Brookdale's failure to maintain Liquid Assets (as such term is
defined in the Senior Loan Documents) having a market value of at least
$5,000,000, which shall be tested on a quarterly basis.
8.2 Consequences of Event of Default.
(a) If any Event of Default specified under subsections (a), (b),
(d), (e) or (j) through (v) of Section 8.1 above shall occur and be continuing,
the Lender may, by written notice to the Borrower, declare the unpaid balance of
all principal and interest accrued on the Notes and all other obligations of the
Borrower hereunder, or under any of the other Loan Documents, to be immediately
due and payable, without presentment, demand, protest, notice of default (except
as expressly required in the Loan Documents), notice of intent to accelerate or
other notice of any kind, all of which are hereby expressly waived.
(b) If any Event of Default specified under subsections (f) through
(i) of Section 8.1 above shall occur, the unpaid balance of all principal and
interest accrued on the Notes and all other obligations of the Borrower
hereunder, or under any of the other Loan Documents shall be immediately and
automatically due and payable, without presentment, demand, protest, notice of
default, notice of intent to accelerate or other notice of any kind, all of
which are hereby expressly waived.
(c) Upon an Event of Default and the acceleration of the Loan in
accordance with Sections 8.2(a) or (b), the Lender shall have the right to
enforce its remedies under the Security Agreement and Assignment, the Guaranties
and the Special Management Interest, and to pursue any other remedy available to
it under law or equity.
ARTICLE 9. INDEMNIFICATION
9.1 No Reliance; Indemnification. The Borrower acknowledges that it has
independently investigated the legal, economic, tax, accounting and other
consequences of the Loan and the transactions contemplated by the Loan Documents
and has not received or relied in any way on any advice of the Lender or any of
its Affiliates as to such consequences. To the fullest extent permitted by law,
Borrower agrees to protect, indemnify, defend and save harmless the Lender and
its Affiliates, its members, officers, agents and employees for, from and
against any and all liability, expense or damage of any kind or nature and for,
from and against any suits, claims or demands, including reasonable legal fees
and expenses, arising out of this Agreement or in any way related to the Loan
except to the extent of any such liability, expense or damage arising from the
action of or a failure to act of Lender. Upon receiving knowledge of any suit,
claim or demand asserted by a third party that Lender believes is covered by
this indemnity, Lender shall give Borrower notice
26
<PAGE>
of the matter and an opportunity to defend it, at Borrower's sole cost and
expense, with legal counsel reasonably satisfactory to Lender. Lender may also
require Borrower to so defend the matter. The obligations on the part of
Borrower under this Article 9 shall survive the Loan Closing and the repayment
of the Loan.
ARTICLE 10. MISCELLANEOUS
10.1 Notices. All notices, requests and demands to or upon the parties
hereto to be effective shall be in writing or by facsimile transmissions and,
unless otherwise expressly provided herein, shall be deemed to have been duly
given or made when delivered by hand or one Business Day following delivery to
an overnight delivery service guaranteeing next business day delivery, delivery
charge prepaid, or, in the case of facsimile transmission, when sent (only if
sent on a Business Day), receipt by addressee acknowledged, addressed as follows
in the case of the Borrower and the Lender or to such other address as may be
hereafter notified by the parties hereto:
The Borrower: AH Michigan Subordinated, LLC
320 King of Prussia Road
Suite 160
Radnor, Pennsylvania
Attention: David B. Fenkell
Fax No.: (610) 902-0777
With a copy to:
Squire, Sanders & Dempsey, L.L.P.
41 South High Street
Suite 1300
Columbus, OH 43215
Attention: Scott B. West, Esq.
Fax No.: (614) 365-2499
With a copy to:
Brookdale Living Communities, Inc.
77 West Wacker Drive, Suite 4400
Chicago, IL 60601
Attention: Darryl W. Copeland, Jr.
Robert J. Rudnik, Esq.
Fax No. 312-977-3769
with a copy to:
Winston & Strawn
35 West Wacker Drive
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<PAGE>
Chicago, IL 60601-9703
Attention: Wayne Boberg, Esq.
Fax No. 312-558-5700
The Lender: BANC ONE CAPITAL PARTNERS IV, LTD.
150 East Gay Street, 24th Floor
Columbus, Ohio 43215
Attention: John W. Adams
Fax No.: (614) 217-0222
with a copy to:
BANC ONE CAPITAL MARKETS, INC.
150 East Gay Street, 24th Floor
Columbus, Ohio 43215
Attention: Legal Department
Fax No.: (614) 217-1217
10.2 Term of Agreement; Termination; Successors and Assigns. This
Agreement and all covenants, agreements, representations and warranties made
herein and in the reports, certificates and other writings delivered pursuant
hereto shall survive the execution and delivery of this Agreement, the making by
the Lender of the Loan and the execution and delivery to the Lender of the Loan
Documents and shall continue in full force and effect until terminated. This
Agreement shall terminate at such time as the Lender has received payment in
full of all amounts owing to the Lender hereunder and under the Loan Documents.
In this Agreement whenever any of the parties hereto is referred to, such
reference shall be deemed to include the successors and assigns of such parties;
and all terms and provisions of this Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns, whether so expressed or not; provided, however, that the Borrower may
not assign or transfer its rights or duties under this Agreement to any Person
without the prior written consent of the Lender. The Lender may assign,
negotiate, pledge or otherwise hypothecate all or any portion of the Loan or
grant participations therein, or in any of its rights and security hereunder and
under the other Loan Documents, and the Borrower shall accord full recognition
thereto. The Lender may deliver copies to any potential participant or assignee
or transferee of financial statements and other information from time to time
furnished to Lender pursuant hereto or in connection therewith.
10.3 No Implied Rights or Waivers. No notice to or demand on the Borrower
in any case shall entitle the Borrower to any other or further notice or demand
in the same, similar and other circumstances. Neither any failure nor any delay
on the part of the Lender in exercising any right, power or privilege hereunder
or under the Loan Documents shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or further exercise of the
same or the exercise of any other right, power or privilege.
10.4 Applicable Law. This Agreement was negotiated in the State of
Ohio, accepted by the Lender in the State of Ohio, and the proceeds of the Loan
evidenced hereby were or are to be
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<PAGE>
disbursed by Lender from the State of Ohio. The Borrower and Lender agree that
the State of Ohio has a substantial relationship to the transaction evidenced
hereby and agree that this Agreement and the rights and obligations of the
parties hereunder shall be governed by and construed in accordance with the laws
of the State of Ohio (without giving effect to principles of conflicts of law).
10.5 Modifications, Amendments or Waivers.
(a) The Lender and the Borrower may from time to time enter into
written agreements amending or changing any provision of this Agreement or the
rights of the Lender or the Borrower hereunder or give waivers or consents to a
departure from the due performance of the obligations of the Borrower hereunder
or under the other Loan Documents.
(b) In the case of any such waiver or consent relating to any
provision hereof or thereof, the parties shall be restored to their former
positions and rights thereunder, and any Default or Event of Default so waived
or consented to shall be deemed to be cured and not continuing; but no such
waiver or consent shall extend to any subsequent or other Default or Event of
Default or impair any right consequent thereon.
10.6 Counterparts. This Agreement may be signed in any number of
counterparts with the same effect as if the signature thereto were upon the same
instrument.
10.7 Headings. The headings of the Articles and Sections of this Agreement
are inserted for convenience only and shall not be deemed to constitute a part
hereof.
10.8 Expenses. The Borrower shall pay or cause to be paid and save the
Lender harmless against liability for the payment of all reasonable
out-of-pocket expenses, including counsel fees and disbursements, incurred or
paid by the Lender in connection with (i) the negotiation, preparation (if
requested by Brookdale), and execution of the Loan Documents; (ii) any
amendments, waivers or consents (if requested by Brookdale) pursuant to the
provisions hereof and thereof; and (iii) the enforcement of the Loan Documents
including such expenses as may be incurred by the Lender in collection of the
Notes and the enforcement of all obligations of the Borrower hereunder.
10.9 Accounting. All financial reports required under this Agreement shall
be prepared in accordance with Project budgets previously submitted to Lender.
10.10 Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or effecting the validity or enforceability of such
provisions in any other jurisdiction.
10.11 Waiver of Jury Trial; Consent to Venue. The Borrower and the Lender,
after consulting or having had the opportunity to consult with counsel,
knowingly, voluntarily and intentionally waive any right any of them may have to
a trial by jury in any litigation based upon or arising out of this Agreement,
the other Loan Documents, or any of the transactions contemplated by this
Agreement, or any course of conduct, dealing, statements (whether oral or
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<PAGE>
written) or actions of any of them. Neither the Borrower nor the Lender shall
seek to consolidate, by counterclaim or otherwise, any action in which a jury
trial has been waived with any other action in which a jury trial cannot be or
has not been waived unless failure to so consolidate would result in a mandatory
loss of such claim. In the event of a dispute under this Agreement, the parties
hereby agree that exclusive jurisdiction and venue lies in a court of competent
jurisdiction in Franklin County, Ohio. These provisions shall not be deemed to
have been modified in any respect or relinquished by either of the Borrower or
the Lender except by a written instrument executed by all of them.
10.12 Entire Agreement. This Agreement, the Exhibits hereto and the Loan
Documents reflect the entire understanding of the parties with respect to their
respective subject matters and supersede all prior agreements or understandings
with respect thereto in their entirety.
10.13 Intercreditor Agreement. THE LOAN, THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER, ALL RIGHTS AND REMEDIES OF LENDER WITH RESPECT TO THE LOAN
AND ANY AND ALL COLLATERAL THEREFOR ARE EACH AND ALL SUBJECT TO THE TERMS AND
CONDITIONS OF THE INTERCREDITOR AGREEMENT.
10.14.Limited Recourse. Notwithstanding any provision in this Agreement or
in any of the other Loan Documents to the contrary, in no event shall any
officer, director, incorporator, member, manager, shareholder or agent of
Borrower be personally liable to Lender for any of the obligations of the
Borrower under this Agreement or under any of the other Loan Documents including
without limitation the obligation to pay any amount due on the Notes.
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IN WITNESS WHEREOF, the Borrower and the Lender have caused this
Agreement to be duly executed by their duly authorized representatives, all as
of the day and year first above written.
AH MICHIGAN SUBORDINATED, LLC, an
Ohio limited liability company
By: AH Michigan Investor, Inc., an Ohio
corporation, its Manager
By:
Name: David B. Fenkell
Title: President
BANC ONE CAPITAL PARTNER IV, LTD., an
Ohio limited liability company
By: BOCP Holdings Corporation, its Manager
By:
Name: Michael S. Wood
Title: Authorized Signer
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EXHIBIT A-1
Guaranty Agreement
<PAGE>
EXHIBIT A-2
Guaranty of Completion
<PAGE>
EXHIBIT A-3
Non-Recourse Guaranty
<PAGE>
EXHIBIT B-1
Priority Note
<PAGE>
EXHIBIT B-2
Subordinate Note
<PAGE>
EXHIBIT C
Security Agreement - Pledge and Assignment of Membership Interests
<PAGE>
EXHIBIT D
Warrant Certificate
<PAGE>
EXHIBIT E
Methodology of Calculation of Internal Rate of Return
<PAGE>
GUARANTY AGREEMENT
This Guaranty Agreement (the "Guaranty") is made, given and delivered as
of June 17, 1998, by BROOKDALE LIVING COMMUNITIES, INC., a Delaware corporation
(the "Guarantor") to BANC ONE CAPITAL PARTNERS IV, LTD., an Ohio limited
liability company (the "Lender").
Background
The following is a mutual statement by the parties of certain factual
matters that form the basis of this Guaranty.
A. Loan Agreement. AH Michigan Subordinated, LLC, an Ohio limited
liability company (the "Borrower"), and the Lender have entered into a certain
Loan Agreement concurrently with the execution of this Guaranty (the "Loan
Agreement"), pursuant to which the Lender has agreed to lend to the Borrower up
to the sum of $11,000,776, subject to additional advances as described in the
Loan Agreement (the "Loan"). The Borrower has also executed certain Promissory
Notes of even date herewith, in favor of the Lender, further evidencing the Loan
(the "Notes"). All terms not otherwise defined herein shall have the meanings
ascribed to them in the Loan Agreement.
B. Owner. AH Michigan Owner Limited Partnership (the "Owner"), the sole
partners of which are the Borrower and AH Michigan CGP, Inc., an Ohio
corporation (the "General Partner") which acts as the sole general partner of
the Owner. The Borrower is the sole shareholder of the General Partner.
C. Project. The Owner intends to develop a an independent living facility
with a non-licensed assisted living component for the elderly in Southfield,
Michigan, which is to be known as "The Heritage at Southfield" (the "Project").
The Lender has agreed to make the Loan to the Borrower to be used as a an equity
contribution to the Owner, the proceeds of which will fund a portion of the
Project costs.
D. Guarantor. Brookdale Living Communities of Michigan, Inc. (the
"Manager") is the manager and developer of the Project pursuant to a certain
Amended and Restated Development Agreement with the Owner of even date herewith
(the "Development Agreement") and a certain Management Agreement with the Owner
of even date herewith (the "Management Agreement"). The Guarantor is an
Affiliate of the Manager and will derive material benefits from the Loan.
NOW, THEREFORE, for and in consideration of the promises, in order to induce the
Lender to make the Loan and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Guarantor does
hereby guarantee and the parties do hereby agree, as follows:
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<PAGE>
Statement of Agreement
Section 1. Payment Guaranty.
A. The Guarantor, absolutely and unconditionally, hereby guarantees to the
Lender the full, prompt and complete repayment of all of the Borrower's
obligations under the Notes, in any of the following circumstances:
(a) The Manager files a voluntary petition in bankruptcy or engages
in any other voluntary act of insolvency;
(b) Any material, intentional misrepresentations of fact to the
Owner, the Borrower or the Lender by the Guarantor or the Manager, or any
of their respective authorized agents or representatives contained in any
Loan Document or in any other written document delivered in connection
with the Loan;
(c) Fraud or misappropriation of funds on the part of the Guarantor
or the Manager with respect to the Project;
(d) The Guarantor, the Manager or any of their respective Affiliates
contests, impairs or otherwise challenges the Lender's right or ability to
foreclose on its security interest, or at Lender's option, to become the
undisputed, absolute owner of all or any portion of the Membership Interests
(subject to Brookdale's Equity Option) or to exercise its rights pursuant to its
Special Management Interest; or
(e) The breach of the Guarantor's obligations under Section 1(C),
below.
B. The Guarantor, absolutely and unconditionally, hereby guarantees
to the Lender the full, prompt and complete reimbursement of all costs, losses,
expenses and damages (including reasonable attorneys' fees), exclusive of
consequential damages, sustained or incurred by the Lender, as a result of: (a)
any material physical waste at the Project or of the Property by the Guarantor,
the Manager or any of their respective authorized agents or representatives; (b)
the failure to apply insurance or condemnation proceeds by the Guarantor, the
Manager or any of their respective authorized agents or representatives in
accordance with the requirements of the Senior Loan Documents; (c) any shortfall
between (i) the sum of the Re-sized Amount and the Preferred Equity available
from the Senior Lender and (ii) the unpaid Principal, (as such terms are defined
in the Senior Loan Documents), but only to the extent the Lender pays or causes
to be paid such shortfall to the Senior Lender and Brookdale would otherwise be
liable to the Senior Lender for the payment of such amount pursuant to its
Guaranty of Payment (as such term is defined in the Senior Loan Documents); or
(d) the failure of the Borrower to pay Scheduled Debt Service on the Priority
Note for the monthly periods, if any, after the Original Expected Conversion
Date (as such term is defined in the Senior Loan Documents) through and
including the Maturity Date.
C. Without the prior written consent of the Lender exercised in its
sole discretion, the Guarantor shall not (i) permit any financing pursuant to
the Master Financing Facility
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<PAGE>
Agreement (as such term is defined in the Senior Loan Documents) other than the
Senior Loan and the loan by Senior Lender of even date herewith to AH Texas
Owner Limited Partnership (the "Texas Senior Loan") or (ii) otherwise permit the
Senior Loan to be cross-defaulted and/or cross-collateralized with
any loan other than the Texas Senior Loan.
D. The Guarantor, absolutely and unconditionally, hereby guarantees
to the Lender the full, prompt and complete payment and performance of the
obligations of the Borrower pursuant to Section 6.1(m) of the Loan Agreement;
provided, however, that so long as no Event of Default then exists, the guaranty
pursuant to this Section 1(D) (except with respect to Guarantor's liability for
any sums due and payable under this Guaranty as of the date of such termination
and any sums thereafter becoming payable pursuant to Section 5 of this Guaranty)
shall terminate on the Payment Obligations Termination Date (as such term is
defined in the Senior Loan Documents).
Section 2. Unconditional Obligations. The obligations of the
Guarantor under this Guaranty (the "Obligations") are absolute and
unconditional, and shall not be impaired by any action or omission to act, with
or without notice to the Guarantor (except for such notices as expressly
required by the Loan Documents or the Intercreditor Agreement), of the Lender or
any other holder or beneficiary of any of the Obligations, or by reason of any
other circumstance which might otherwise constitute a discharge or defense of
the Guarantor. Except as expressly contained herein in the Intercreditor
Agreement or the other Loan Documents, the Guarantor hereby expressly waives
diligence, presentment, protest, notice of dishonor, demand for payment or
performance, extension of time of payment or performance, notice of acceptance
of this Guaranty, and indulgences and notices of every kind under the Loan
Agreement, the Notes or any of the other Loan Documents and consent to any and
all forbearances and extensions of time thereunder and to any and all changes in
the terms, covenants and conditions thereof, and agree that they shall not be
released hereunder by any matter or things whatsoever whereby it as Guarantor
and surety otherwise would or might be released, other than a written release
delivered by the Lender or by payment or performance of the Obligations or by
payment in full of the Notes and all other obligations of the Borrower under the
Loan Agreement.
Section 3. Costs and Expenses. The Guarantor agrees to pay all the
reasonable costs, expenses and fees, including all reasonable attorneys' fees,
which may be incurred by the Lender in enforcing or attempting to enforce this
Guaranty following any default on the part of the Guarantor hereunder, whether
the same shall be enforced by suit or otherwise. If any such fees and expenses
are not so reimbursed, the amount thereof shall, to the extent permitted by law,
constitute indebtedness due hereunder.
Section 4. Financial Statements and Compliance Certificate. The
Guarantor agrees to provide to the Lender, not later than one hundred twenty
(120) days following the end of each fiscal year, an audited income and cash
flow statement and balance sheet as of the end of such fiscal year. The
Guarantor agrees to provide, or cause to be provided, to the Borrower the
reports contemplated by Sections 6.1 (a) and (b) of the Loan Agreement for
delivery by the Borrower to the Lender as contemplated therein. In connection
with the delivery of the financial statements contemplated by this Section 4,
the Guarantor shall cause to be delivered to the Lender a certificate
substantially in the form of Exhibit A attached hereto.
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Secton 5. Rescission or Return of Payments. The Guarantor agrees
that, if at any time all or any part of any payment theretofore applied by the
Lender to any of the Obligations is or must be rescinded or returned by the
Lender for any reason whatsoever (including without limitation the insolvency,
bankruptcy or reorganization of the Borrower), such Obligations shall, for the
purposes of this Guaranty, to the extent that such payment is or must be
rescinded or returned, be deemed to have continued in existence, notwithstanding
such application by the Lender, and this Guaranty shall continue to be effective
or reinstated, as the case may be, as to such Obligations, all as though such
application by the Lender had not been made.
Section 6. Assignment or Transfer of Liabilities. The Lender may,
from time to time, without notice to the Guarantor, assign or transfer any or
all of the Obligations or any interest therein; and, notwithstanding any such
assignment or transfer or any subsequent assignment or transfer thereof, such
Obligations shall be and remain Obligations for the purposes of this Guaranty,
and each and every immediate and successive assignee or transferee of any of the
Obligations or of any such interest therein shall, to the extent of the interest
of such assignee or transferee in the Obligations, be entitled to the benefits
of this Guaranty to the same extent as if such assignee or transferee were the
transferor.
Section 7. Enforcement. The Obligations hereunder are joint and
several and are independent of the obligations of the Borrower, and a separate
action or actions may be brought and prosecuted against the Guarantor regardless
of whether any action is brought against the Borrower or whether the Borrower be
joined in any such action(s). The Guarantor hereby acknowledges and agree that
it shall not be a condition precedent to the enforcement of this Guaranty by the
Lender against the Guarantor that the Lender first seek recourse against the
Borrower by reason of a breach or default by the Borrower.
Section 8. Cumulative Remedies, Delays. No delay on the part of the
Lender in the exercise of any right or remedy shall operate as a waiver thereof,
and no single or partial exercise by the Lender of any right or remedy shall
preclude other or further exercise thereof or the exercise of any other right or
remedy. No action of the Lender permitted hereunder shall in any way affect or
impair the rights of the Lender and the Obligations of the Guarantor under this
Guaranty. For the purpose of this Guaranty, Obligations shall include all
obligations of the Guarantor hereunder, notwithstanding any right or power of
the Borrower or anyone else to assert any claim or defense as to the invalidity
or unenforceability of any such Obligations, and no such claim or defense shall
affect or impair the obligations of the Guarantor hereunder.
Section 9. Subordination. The Guarantor hereby subordinates any and
all claims which it now has, or in the future may acquire, as a creditor of the
Borrower or the Owner, to the prior payment and satisfaction in full of this
Guaranty. If, prior to the payment and satisfaction, or termination, of this
Guaranty, the Guarantor would, without reference to the provisions of this
Section 9, be entitled to receive any payment on account of any claim of the
Guarantor against the Borrower or the Owner, all such payments shall be made
instead to the Lender until the Obligations have been paid and satisfied in
full, and the Guarantor hereby so direct. If the Guarantor receives any payment
on account of any claim of the Guarantor against the Borrower or the Owner, the
Guarantor shall immediately pay the same over to the Lender to be applied to the
payment or satisfaction of the
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<PAGE>
Obligations, if any. Anything in this ss.9 to the contrary notwithstanding,
Manager and the Guarantor may receive and retain payments (i) subject to the
restrictions set forth in the Consent and Subordination of Manager (as
hereinafter defined) under the Management Agreement and the
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<PAGE>
Development Agreement and (ii) under the Amended and Restated Property
Management Agreement, if any, entered into between the Owner and the Manager as
described in the Consent and Subordination of Manager. For purposes hereof, the
"Consent and Subordination of Manager" shall mean that certain Consent and
Subordination of Manager of even date herewith executed by the Manager in favor
of the Lender. Anything herein to the contrary notwithstanding, the provisions
of this ss.9 do not create any obligation on the part of the Owner to the
Lender.
ss. 10. Amendments, Modifications, Etc. No amendment, modification,
termination, or waiver of any provision of this Guaranty nor consent to any
departure by the Guarantor therefrom, shall in any event be effective unless the
same shall be in writing and signed by the Lender, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given. No notice or demand on the Guarantor in any case shall
entitle the Guarantor to any other or further notice or demand in similar or
other circumstances. In addition, the Guarantor agrees not to amend the Equity
Option Agreement or the Brookdale Option Agreement without the prior written
consent of the Lender.
ss. 11. No Reliance. The Guarantor acknowledges that it has independently
investigated the legal, economic, tax, accounting and other consequences of the
Loan and the transactions contemplated by the Loan Documents and have not
received or relied in any way on any advice of the Lender or any of its
Affiliates as to such consequences.
ss. 12. Governing Law. This Guaranty was negotiated in the State of Ohio,
accepted by the Lender in the State of Ohio, and the proceeds of the Loan
guaranteed hereby were or are to be disbursed by Lender from the State of Ohio.
The Guarantor and the Lender agree that the State of Ohio has a substantial
relationship to the transaction evidenced hereby and agree that this Guaranty
and the rights and obligations of the parties hereunder shall be governed by and
construed in accordance with the laws of the State of Ohio (without giving
effect to principles of conflicts of law).
ss. 13. Severability. In the event any one or more of the provisions
contained in this Guaranty shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such provision shall be deemed replaced by the
valid and enforceable provision that is substantially most similar to such
invalid or unenforceable provision, but the remaining provisions shall not be
affected thereby.
ss. 14. Waiver of Jury Trial; Consent to Venue. THE GUARANTOR AND THE
LENDER, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL,
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT THEY MAY HAVE TO A
TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS GUARANTY OR
ANY RELATED INSTRUMENT OR AGREEMENT, OR ANY OF THE TRANSACTIONS CONTEMPLATED BY
THIS GUARANTY, OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR
WRITTEN) OR ACTIONS OF THE GUARANTOR OR THE LENDER. THE GUARANTOR AND THE LENDER
SHALL NOT SEEK TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY ACTION IN WHICH
A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT
BE OR HAS NOT BEEN WAIVED. IN THE EVENT OF A DISPUTE UNDER THIS GUARANTY, THE
GUARANTOR AND THE LENDER HEREBY
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<PAGE>
AGREE THAT EXCLUSIVE JURISDICTION AND VENUE LIES IN A COURT OF COMPETENT
JURISDICTION IN FRANKLIN COUNTY, OHIO. THESE PROVISIONS SHALL NOT BE DEEMED TO
HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY THE GUARANTOR OR THE LENDER
EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY SAME.
ss. 15. Gender and Number. Terms that imply gender and number shall
be construed to imply the relevant gender and number.
ss. 16. Multiple Counterparts. This Guaranty may be signed in
multiple counterparts with the same effect as if the signatures thereto were
upon the same instrument.
ss. 17. Termination of Guaranty. Subject to the provisions of
Section 5, this Guaranty shall terminate upon the irrevocable payment in full of
the Notes and all other obligations of the Borrower under the Loan Agreement.
ss. 18. Intercreditor Agreement. THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER, AND ALL RIGHTS AND REMEDIES OF LENDER WITH RESPECT TO THE LOAN AND
THE OBLIGATIONS OR ANY COLLATERAL FOR THE LOAN OR ANY OF THE OBLIGATIONS ARE
EACH AND ALL SUBJECT TO THE TERMS AND CONDITIONS OF THE INTERCREDITOR AGREEMENT.
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<PAGE>
This Guaranty has been executed by the Guarantor effective as of the date
first written above.
GUARANTOR:
BROOKDALE LIVING COMMUNITIES, INC.,
a Delaware corporation
By: ______________________________________
Name: Darryl W. Copeland, Jr.
Title: Executive Vice President
LENDER:
BANC ONE CAPITAL PARTNERSHIP IV,
LTD., an Ohio limited liability company
By: BOCP Holdings Corporation, an Ohio
corporation, its Manager
By:
Name: Michael S. Wood
Title: Authorized Signer
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Exhibit A
COMPLIANCE CERTIFICATE
[INSERT DATE]
The undersigned Guarantor is a party to a certain Guaranty Agreement dated
June 17, 1998 (the "Guaranty") in favor of Banc One Capital Partners IV, Ltd.
(the "Lender"). The Guarantor is executing and delivering this Certificate to
the Lender pursuant to ss.4 of the Guaranty. Any defined term used in this
Certificate and not otherwise defined in this Certificate shall have the meaning
ascribed to it in the Guaranty. The Guarantor hereby certifies to the Lender as
follows:
1. Attached hereto and made part hereof are the financial statements
required by ss.4 of the Guaranty, which financial statements conform
in all material respects with the requirements of such Section.
2. As of the date hereof, the Guarantor has no knowledge of any
condition, event or act which with notice or lapse of time or both
would constitute an Event of Default pursuant to Sections 8.1(t),
8.1(u) or 8.1(v) of the Loan Agreement.
3. The status of the Guarantor's Net Worth, EBITDAR and Liquid Assets
(as such terms are defined in the Loan Agreement) as of the date of
the attached financial statements does not constitute an Event of
Default under the aforementioned Sections of the Loan Agreement and
is set forth below:
Net Worth:
Actual Required
$110,000,000
EBITDAR:
Actual Required
$ 5,000,000
Liquid Assets:
Actual Required
$ 5,000,000
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<PAGE>
IN WITNESS WHEREOF, the Guarantor has caused this Certificate to be
executed and delivered by its duly authorized representative as of the date
first set forth above.
GUARANTOR:
Brookdale Living Communities, Inc.
By: ______________________________________
Its: ______________________________________
Date: ____________________________________
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<PAGE>
GUARANTY OF COMPLETION
made by
BROOKDALE LIVING COMMUNITIES, INC.
as guarantor,
in favor of
BANC ONE CAPITAL PARTNERS IV, LTD.
Dated as of June 17, 1998
<PAGE>
GUARANTY OF COMPLETION
This GUARANTY OF COMPLETION (this "Guaranty"), dated as of June 17,
1998, made by BROOKDALE LIVING COMMUNITIES, INC. , a Delaware corporation,
having an office at 77 West Wacker Drive, Suite 4400, Chicago, Illinois 60621
("Guarantor"), in favor of BANC ONE CAPITAL PARTNERS IV, LTD., an Ohio limited
liability company, having an address at 150 East Gay Street, Columbus, Ohio
43215, Attention: John W. Adams (together with its successors and assigns,
"Lender").
R E C I T A L S:
A. Pursuant to that certain Loan Agreement dated as of the date
hereof (as the same may be amended, modified, supplemented or replaced from time
to time, the "Loan Agreement") by and between AH Michigan Subordinated, LLC, an
Ohio limited liability company ("Borrower") and Lender, Lender has agreed to
make a loan (the "Loan") to Borrower in the original principal amount of
$11,000,776, subject to the terms and conditions of the Loan Agreement;
B. As a condition to Lender's making the Loan, Lender is requiring
that Guarantor execute and deliver to Lender this Guaranty; and
C. Guarantor hereby acknowledges that Guarantor will materially
benefit from Lender's agreeing to make the Loan;
NOW, THEREFORE, in consideration of the premises set forth herein
and as an inducement for and in consideration of the agreement of Lender to make
the Loan pursuant to the Loan Agreement, Guarantor hereby agrees, covenants,
represents and warrants to Lender as follows:
1. Definitions.
(a) All capitalized terms used and not defined herein shall
have the respective meanings given such terms in the Loan Agreement.
(b) The term "including" means including without limitation.
(c) "Building Loan Agreement" has the meaning set forth in the
Senior Loan Documents.
(d) "Governmental Authorities" has the meaning set forth in
the Senior Loan Documents.
(e) "Guaranty Termination Date" means the date on which
Substantial Completion has occurred and all costs, expenses and liabilities
incurred in connection therewith (including, without limitation, for labor,
materials and services) have been paid in full (except to
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the extent to be paid for from Retainage or other sums are then held or reserved
by Senior Lender but not yet disbursed in accordance with the Building Loan
Agreement).
(f) "Liens" has the meaning set forth in the Senior Loan
Documents.
(g) "Owner" means AH Michigan Owner Limited Partnership, an
Ohio limited partnership.
(h) "Permitted Encumbrances" has the meaning set forth in the
Senior Loan Documents.
(i) "Person" has the meaning set forth in the Senior Loan
Documents.
(j) "Plans" has the meaning set forth in the Senior Loan
Documents.
(k) "Property" has the meaning set forth in the Senior Loan
Documents.
(l) "Retainage" has the meaning set forth in the Senior Loan
Documents.
(m) "Senior Lender" means Nomura Asset Capital Corporation,
and its successors and assigns.
(n) "Senior Loan" shall mean the loan from Senior Lender to
Owner for the acquisition, development and construction of the Project, in an
amount of up to $26,625,000.
(o) "Senior Loan Documents" shall mean the loan documents
evidencing or securing the Senior Loan.
(p) "Substantial Completion" has the meaning set forth in the
Senior Loan Documents.
2. Guaranty.
(a) Subject to Section 3 below, Guarantor hereby irrevocably,
absolutely and unconditionally guarantees to Lender the prompt and complete
observance, fulfillment and performance of all of the obligations of the
Borrower pursuant to Section 6.1(n) of the Loan Agreement. The obligations which
are the subject of the guaranty referred to in this Section 2(a) are hereinafter
collectively referred to as the "Guarantied Obligations".
(b) Subject to Section 3 below, without limiting the
generality of the provisions of Section 2(a), Guarantor hereby irrevocably,
absolutely and unconditionally guarantees to Lender that Borrower shall cause
Owner and Manager, in accordance with the terms of the Building Loan Agreement,
to fully and punctually pay and discharge (i) any and all costs, expenses and
liabilities for or incurred in connection with the Guarantied Obligations; (ii)
all claims and
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<PAGE>
demands for labor, materials and services used or incurred in connection with
the Guarantied Obligations which are or may become due and payable, or, if
unpaid, are or may become Liens on the Property or any part thereof; and (iii)
any Liens in favor of any and all Persons furnishing materials, labor or
services for or in connection with the Guarantied Obligations such that the
Property shall be and remain free and clear of any and all liens other than
Permitted Encumbrances, subject, however, to Owner's and Manager's rights, if
any, set forth in the Building Loan Agreement with regard to the contesting of
Liens.
(c) If Borrower does not perform the Guarantied Obligations as
provided in paragraphs (a) and (b) of this Section 2, then upon receipt of
demand from Lender:
(i) subject to Section 3 hereof, Guarantor shall, if
requested by Lender (which request Lender may make or not make in its sole
discretion), perform and complete the Guarantied Obligations or cause the
Guarantied Obligations to be performed and completed, in accordance with
the requirements of the Building Loan Agreement; and
(ii) if Guarantor fails to perform the Guarantied
Obligations in accordance with this Guaranty (whether or not requested to
do so pursuant to subsection (c)(i) above) then, to the extent that Lender
shall (A) cause any Guarantied Obligations to be performed, (B) pay any
costs, expenses or liabilities in connection with the Guarantied
Obligations, or (c) cause any Lien, claim or demand to be released or paid
or bonded, Guarantor shall, upon demand by Lender, reimburse Lender for
all sums paid and all costs, expenses or liabilities incurred by Lender in
connection therewith. All such sums shall be payable by Guarantor to
Lender on demand and without reduction for any offset, claim, counterclaim
or defense.
(d) Guarantor hereby agrees to indemnify, defend and save
harmless Lender from and against any and all costs, losses, liabilities, claims,
causes of action, expenses and damages, including, without limitation,
reasonable attorneys' fees and disbursements, which Lender may suffer or which
otherwise may arise by reason of the Borrower's failure to fulfill its
obligations under the Loan Agreement with respect to the Guarantied Obligations,
irrespective of whether such costs, losses, liabilities, claims, causes of
action, expenses or damages are incurred by Lender prior or subsequent to
Lender's declaring the principal, interest and other sums evidenced or secured
by the Loan Documents to be due and payable.
(e) Guarantor hereby agrees that, notwithstanding any
provisions to the contrary in any Loan Document limiting the recourse of Lender
to collateral encumbered by the Loan Documents, or limiting the rights of Lender
to obtain a deficiency judgment against Borrower, Guarantor shall be fully and
personally liable with respect to the covenants, representations, warranties,
guaranties, agreements and indemnities of Guarantor under this Guaranty.
(f) Notwithstanding anything to the contrary contained herein
or in any other Loan Documents, and subject to the provisions of Section 6(i),
all of Guarantor's obligations under this Guaranty (including the Guarantied
Obligations) shall terminate on the Guaranty
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<PAGE>
Termination Date, provided that Guarantor's obligations under clauses (ii) and
(iii) of Section 2(b) above relating to labor, materials and services provided,
furnished or performed at or to the Property shall continue with respect to any
claims, demands and Liens referred to therein, whether asserted before or after
the Guaranty Termination Date.
3. Intentionally Omitted.
4. Representations and Warranties. Guarantor hereby represents and
warrants to Lender as follows (which representations and warranties shall be
given as of the date hereof and shall survive the execution and delivery of this
Guaranty):
(a) Organization, Authority and Execution. Guarantor is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and has all necessary power and authority to own its
properties and to conduct its business as presently conducted or proposed to be
conducted and to enter into and perform this Guaranty and all other agreements
and instruments to be executed by it in connection herewith. This Guaranty has
been duly executed and delivered by Guarantor.
(b) Enforceability. This Guaranty constitutes a legal, valid
and binding obligation of Guarantor, enforceable against Guarantor in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally.
(c) No Violation. The execution, delivery and performance by
Guarantor of the Guarantied Obligations has been duly authorized by all
necessary action, and do not and will not violate any law, regulation, order,
writ, injunction or decree of any court or governmental body, agency or other
instrumentality applicable to Guarantor in effect on the date hereof, or result
in a breach of any of the terms, conditions or provisions of, or constitute a
default under, or result in the creation or imposition of any mortgage, Lien,
charge or encumbrance of any nature whatsoever upon any of the assets of
Guarantor pursuant to the terms of Guarantor's certificate of incorporation or
by-laws, or any mortgage, indenture, agreement or instrument to which Guarantor
is a party or by which it or any of its properties is bound. Guarantor is not in
default under any other guaranty which it has provided to Lender.
(d) No Litigation. There are no actions, suits or proceedings
at law or at equity, pending or, to Guarantor's best knowledge, threatened
against or affecting Guarantor or which involve the validity or enforceability
of this Guaranty or with respect to which an adverse decision would materially
adversely affect the financial condition of Guarantor or the ability of
Guarantor to perform any of the Guarantied Obligations. Guarantor is not in
default beyond any applicable grace or cure period with respect to any order,
writ, injunction, decree or demand of any Governmental Authority which would
materially adversely affect the financial condition of Guarantor or the ability
of Guarantor to perform any of its obligations under this Guaranty.
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<PAGE>
(e) Consents. All consents, approvals, orders or
authorizations of, or registrations, declarations or filings with, all
Governmental Authorities (collectively, the "Consents") that are required in
connection with the valid execution, delivery and performance by Guarantor of
this Guaranty have been obtained or will be obtained when required.
(f) Financial Statements and Other Information. All financial
statements of Guarantor heretofore delivered to Lender are true and correct in
all material respects and fairly present the financial condition of Guarantor as
of the respective dates thereof, and no materially adverse change has occurred
in the financial conditions reflected therein since the respective dates
thereof. None of the aforesaid financial statements or any certificate or
statement furnished to Lender by or on behalf of Guarantor in connection with
the transactions contemplated hereby, and none of the representations and
warranties in this Guaranty 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. Guarantor is not insolvent within
the meaning of the United States Bankruptcy Code or any other in any material
respect applicable law, code or regulation, and the execution, delivery and
performance of this Guaranty will not render Guarantor insolvent.
(g) Consideration. Guarantor is receiving fair consideration
in return for giving this Guaranty.
5. Financial Statements. Guarantor shall deliver to Lender, (a)
within one hundred twenty (120) days after the end of each fiscal year of
Guarantor, a complete copy of Guarantor's annual financial statements audited by
a "big six" accounting firm or another independent certified public accountant
reasonably acceptable to Lender, (b) within forty-five (45) days after the end
of each fiscal quarter of Guarantor, financial statements (including a balance
sheet as of the end of such fiscal quarter and a statement of income and expense
for such fiscal quarter) certified by the Chief Financial Officer or President
of Guarantor and in form, content, level of detail and scope reasonably
satisfactory to Lender, and (c) thirty (30) days after request by Lender, such
other financial information with respect to Guarantor as Lender may reasonably
request. Guarantor's obligation to deliver this information to Lender shall
terminate on the Guaranty Termination Date.
6. Unconditional Character of Obligations of Guarantor.
(a) Subject to Section 3 above, the obligations of Guarantor
hereunder shall be irrevocable, absolute and unconditional, irrespective of the
validity, regularity or enforceability, in whole or in part, of the other Loan
Documents or any provision thereof, or the absence of any action to enforce the
same, any waiver or consent with respect to any provision thereof, the recovery
of any judgment against Borrower, Guarantor, or any other Person or any action
to enforce the same, any failure or delay in the enforcement of the obligations
of Borrower under the other Loan Documents or Guarantor under this Guaranty, or
any setoff, counterclaim, and irrespective of any other circumstances which
might otherwise limit recourse against Guarantor by Lender or constitute a legal
or equitable discharge or defense of a guarantor or surety. Lender may
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<PAGE>
enforce the obligations of Guarantor under this Guaranty by a proceeding at law,
in equity or otherwise, independent of any foreclosure or similar proceeding or
any deficiency action against Borrower, or any other Person at any time. This
Guaranty is a guaranty of payment and performance and not a guaranty of
collection. Except as otherwise provided herein or in any of the other Loan
Documents or the Intercreditor Agreement, and to the extent permitted by law,
Guarantor waives diligence, notice of acceptance of this Guaranty, filing of
claims with any court, any proceeding to enforce any provision of any other Loan
Document, against Guarantor, Borrower, or any other Person, any right to require
a proceeding first against Borrower, or any other Person, or to exhaust any
security for the performance of the Guarantied Obligations or any other
obligations of Borrower, or any other Person, or any protest, presentment,
notice of default or other notice or demand whatsoever (except to the extent
expressly provided to the contrary in this Guaranty or elsewhere in the Loan
Documents), and Guarantor hereby covenants and agrees that Guarantor shall not
be discharged of its obligations hereunder except as set forth in Section 2(f)
above.
(b) The Guarantied Obligations, and the rights of Lender to
enforce the same by proceedings, whether by action at law, suit in equity or
otherwise, shall not be in any way affected by any of the following:
(i) any insolvency, bankruptcy, liquidation,
reorganization, readjustment, composition, dissolution, receivership,
conservatorship, winding up or other similar proceeding involving or
affecting Borrower, Guarantor or any other Person;
(ii) any failure by Lender or any other Person, whether
or not without fault on its part, to perform or comply with any of the
terms of the Loan Agreement, or any other Loan Documents, or any document
or instrument relating thereto;
(iii) the sale, transfer or conveyance of the Property or
any interest therein to any Person, whether now or hereafter having or
acquiring an interest in the Property or any interest therein and whether
or not pursuant to any foreclosure, trustee sale or similar proceeding
against Owner, Manager, or the Property or any interest therein;
(iv) the conveyance to Senior Lender, any Affiliate of
Senior Lender or Senior Lender's nominee of the Property or any interest
therein by a deed-in-lieu of foreclosure;
(v) the release of Borrower, or any other Person from
the performance or observance of any of the agreements, covenants, terms
or conditions contained in any of the Loan Documents by operation of law
or otherwise; or
(vi) the release in whole or in part of any security for
the Guarantied Obligations or the Loan.
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(c) Except as otherwise specifically provided in this
Guaranty, Guarantor hereby expressly and irrevocably waives all defenses in an
action brought by Lender to enforce this Guaranty based on claims of waiver,
release, surrender, alteration, compromise or equitable discharge and all
setoffs, reductions, or impairments, whether arising hereunder or otherwise.
(d) Lender may deal with Borrower in the same manner and as
freely as if this Guaranty did not exist and shall be entitled, among other
things, to grant Borrower, or any other Person such extension or extensions of
time to perform any act or acts as may be deemed advisable by Lender, at any
time and from time to time, without terminating, affecting or impairing the
validity of this Guaranty or the Guarantied Obligations.
(e) No compromise, alteration, amendment, modification,
extension, indulgence, renewal, release or other change of, or waiver,
suspension, consent, compromise, delay, omission, failure to act, forbearance or
other action with respect to, any liability or obligation under or with respect
to, or of any of the terms, covenants or conditions of, the Loan Documents or
any amendment, modification or other change of the Plans or any legal
requirement shall in any way alter, impair or affect any of the Guarantied
Obligations or Lender's rights hereunder, and Guarantor agrees that if any Loan
Document or the Plans are modified with Lender's consent, the Guarantied
Obligations shall automatically be deemed modified to include such modifications
without the necessity of notice to Guarantor except as may otherwise be required
under the Loan Agreement.
(f) Lender may proceed to protect and enforce any or all of
its rights under this Guaranty by suit in equity or action at law, whether for
the specific performance of any covenants or agreements contained in this
Guaranty or otherwise, or to take any action authorized or permitted under
applicable law, and shall be entitled to require and enforce the performance of
all acts and things required to be performed hereunder by Guarantor. Each and
every remedy of Lender shall, to the extent permitted by law, be cumulative and
shall be in addition to any other remedy given hereunder or now or hereafter
existing at law or in equity. No single exercise of Lender's power to bring any
action or institute any proceeding shall be deemed to exhaust such power, but
such power shall continue undiminished and may be exercised from time to time as
often as Lender may elect until the earlier of the Guaranty Termination Date or
the date that all the Guarantied Obligations have been satisfied. Lender shall
be under no obligation to take any action and shall not be liable for any action
taken or any failure to take action or any delay in taking action against
Guarantor, Borrower or any other Person or otherwise with respect to the
Guarantied Obligations.
(g) No waiver shall be deemed to have been made by Lender of
any rights hereunder unless the same shall be in writing and signed by Lender,
and any such waiver shall be a waiver only with respect to the specific matter
involved and shall in no way impair the rights of Lender or the obligations of
Guarantor to Lender in any other respect or at any other time.
(h) At the option of Lender, Guarantor may be joined in any
action or proceeding commenced by Lender against Borrower in connection with or
based upon any other Loan Documents and recovery may be had against Guarantor in
such action or proceeding or in any
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independent action or proceeding against Guarantor only to the extent of
Guarantor's liability hereunder, without any requirement that Lender first
assert, prosecute or exhaust any remedy or claim against Borrower, or any other
Person, or any security for the obligations of Borrower, or any other Person.
(i) Guarantor agrees that this Guaranty shall continue to be
effective or shall be reinstated, as the case may be, if at any time any payment
is made by Borrower, or Guarantor to Lender and such payment is rescinded or
must otherwise be returned by Lender (as determined by Lender in its sole and
absolute discretion) upon insolvency, bankruptcy, liquidation, reorganization,
readjustment, composition, dissolution, receivership, conservatorship, winding
up or other similar proceeding involving or affecting Borrower or Guarantor, all
as though such payment had not been made.
(j) For so long as the Loan is outstanding, Guarantor hereby
expressly waives any and all of its rights of subrogation, reimbursement,
indemnity and recourse against Borrower and/or Owner. Guarantor shall not be
deemed a "creditor" of the Borrower with respect to the Guarantied Obligations
as said term "creditor" is defined in the United States Bankruptcy Code, as
amended. If any amount shall be paid to Guarantor on account of such subrogation
rights at any time when any such sums due and owing to Lender shall not have
been fully paid, such amount shall be paid by Guarantor to Lender for credit and
application against such sums due and owing to Lender. Notwithstanding the
foregoing, the Guarantor and its affiliates shall have the right to be
reimbursed by Owner in accordance with the terms and conditions of the
Management Agreement and the Development Agreement for their out-of-pocket costs
or fees pursuant thereto unless at the time of such payment there exists an
Event of Default under the Loan Agreement. Anything herein to the contrary,
notwithstanding, the provisions of this Section 6(j) do not create any
obligation on the part of the Owner to the Lender.
(k) Subject to Section 2(f) hereof, the Guarantied Obligations
shall survive a foreclosure, deed-in-lieu of foreclosure or similar proceeding
involving the Property and the exercise by Senior Lender of any of all of its
remedies pursuant to the Senior Loan Documents.
7. Intentionally Omitted.
8. Entire Agreement/Amendments. This instrument represents the
entire agreement between the parties with respect to the subject matter hereof.
The terms of this Guaranty shall not be waived, altered, modified, amended,
supplemented or terminated in any manner whatsoever except by written instrument
signed by Lender and Guarantor.
9. Successors and Assigns. This Guaranty shall be binding upon
Guarantor, and Guarantor's successors and assigns, may not be assigned or
delegated by Guarantor and shall inure to the benefit of Lender and its
successors and assigns.
10. Applicable Law, Waiver of Jury Trial, Consent to Venue.
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(a) This Guaranty was partially negotiated in the State of
Ohio, and accepted by Lender in the State of Ohio, which State the parties agree
has a substantial relationship to the parties and to the underlying transaction
embodied hereby, and in all respects, this Guaranty shall be governed by, and
construed in accordance with, the substantive laws of the State of Ohio.
(b) THE GUARANTOR AND THE LENDER, AFTER CONSULTING OR HAVING
HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION
BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY RELATED INSTRUMENT OR
AGREEMENT, OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, OR ANY
COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF
THE GUARANTOR OR THE LENDER. THE GUARANTOR AND THE LENDER SHALL NOT SEEK TO
CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY ACTION IN WHICH A JURY TRIAL HAS
BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT
BEEN WAIVED UNLESS FAILURE TO SO CONSOLIDATE WOULD RESULT IN A MANDATORY LOSS OF
SUCH CLAIM. IN THE EVENT OF A DISPUTE UNDER THIS AGREEMENT, THE GUARANTOR AND
THE LENDER HEREBY AGREE THAT EXCLUSIVE JURISDICTION AND VENUE LIES IN A COURT OF
COMPETENT JURISDICTION IN FRANKLIN COUNTY, OHIO. THESE PROVISIONS SHALL NOT BE
DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY THE GUARANTOR OR
THE LENDER EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY SAME.
11. Section Headings. The headings of the sections and paragraphs of
this Guaranty have been inserted for convenience of reference only and shall in
no way define, modify, limit or amplify any of the terms or provisions hereof.
12. Severability. Any provision of this Guaranty which may be
determined by any competent authority to be prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, Guarantor hereby
waives any provision of law which renders any provision hereof prohibited or
unenforceable in any respect.
13. Intentionally Omitted.
14. Other Guaranties. The obligations of Guarantor hereunder are
separate and distinct from, and in addition to, the obligations of Guarantor now
or hereafter arising under one or more other guaranties, pursuant to which
Guarantor has guaranteed the payment and performance of certain other
obligations of Borrower described therein.
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15. Notices. All notices, demands, requests, consents, approvals or
other communications (collectively called "Notices") required or permitted to be
given hereunder to Lender or Guarantor or which are given to Lender or Guarantor
with respect to this Guaranty shall be in writing and shall be (a) sent by
United States registered or certified mail, return receipt requested, postage
prepaid, addressed as set forth below, (b) sent by a national overnight courier
or delivery service or (c) personally delivered with receipt acknowledged to
such address, or in either case, to such other address(es) as the party in
question shall have specified most recently by like Notice.
If to Lender, to:
Banc One Capital Partners IV, Ltd.
150 East Gay Street
24th Floor
Columbus, Ohio 43215
Attention: John W. Adams
with a copy to:
Banc One Capital Markets, Inc.
150 East Gay Street
24th Floor
Columbus, Ohio 43215
Attention: Legal Department
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If to Guarantor, to:
Brookdale Living Communities, Inc.
77 West Wacker Drive, Suite 4400
Chicago, IL 60601
Attention: Darryl W. Copeland, Jr.
with a copy to:
Brookdale Living Communities, Inc.
77 West Wacker Drive, Suite 4400
Chicago, IL 60601
Attention: Robert J. Rudnick, Esq.
with a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, IL 60602
Attention: Wayne Boberg, Esq.
Notices which are given in the manner aforesaid shall be deemed to have been
given or served for all purposes hereunder (i) on the date on which such notice
shall have been personally delivered as aforesaid, (ii) on the date of delivery
by overnight carrier or mail as evidenced by the return receipt therefor, or
(iii) on the date of failure to deliver by reason of refusal to accept delivery
or changed address of which no Notice was given.
16. Guarantor's Receipt of Loan Documents. Guarantor by its
execution hereof acknowledges receipt of true copies of all of the Loan
Documents.
17. Interest; Expenses.
(a) If Guarantor fails to pay all or any sums due hereunder
upon demand by Lender, the amount of such sums payable by Guarantor to Lender
shall bear interest from the date of demand until paid at the Default Rate in
effect from time to time.
(b) Guarantor hereby agrees to pay all costs, charges and
expenses, including, without limitation, reasonable attorneys' fees and
disbursements, that may be incurred by Lender in enforcing the covenants,
agreements, obligations and liabilities of Guarantor under this Guaranty.
18. Intentionally Omitted.
19. Intentionally Omitted.
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20. Intentionally Omitted.
21. Intercreditor Agreement.
THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND ALL RIGHTS
AND REMEDIES OF LENDER WITH RESPECT TO THE LOAN, THE GUARANTIED OBLIGATIONS OR
ANY COLLATERAL THEREFOR ARE EACH AND ALL SUBJECT TO THE TERMS AND CONDITIONS OF
THE INTERCREDITOR AGREEMENT.
[Remainder of page intentionally left blank; signature page follows.]
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IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the
date first above written.
BROOKDALE LIVING COMMUNITIES,
INC., a Delaware corporation
By:
Name: Darryl W. Copeland, Jr.
Title: Executive Vice President
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AGREED AND ACKNOWLEDGED
ONLY FOR SECTION 10(b)
BANC ONE CAPITAL PARTNERS IV, LTD.
By: BOCP Holdings Corporation, its Manager
By: ______________________________________
Name: Michael S. Wood
Title: Authorized Signer
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NON-RECOURSE GUARANTY AGREEMENT
This Non-Recourse Guaranty Agreement (the "Guaranty") is made, given and
delivered as of June 17, 1998, by BROOKDALE LIVING COMMUNITIES, INC., a Delaware
corporation ("Guarantor") to BANC ONE CAPITAL PARTNERS IV, LTD., an Ohio limited
liability company (the "Lender").
Background
The following is a mutual statement by the parties of certain factual
matters that form the basis of this Guaranty.
A. Loan Agreement. AH Michigan Subordinated, LLC, an Ohio limited
liability company (the "Borrower"), and the Lender have entered into a certain
Loan Agreement concurrently with the execution of this Guaranty (the "Loan
Agreement"), pursuant to which the Lender has agreed to lend to the Borrower up
to the sum of $11,000,776 (the "Loan"). The Borrower has also executed certain
Promissory Notes of even date herewith, in favor of the Lender, further
evidencing the Loan (the "Notes"). All terms not otherwise defined herein shall
have the meanings ascribed to them in the Loan Agreement.
B. Owner. AH Michigan Owner Limited Partnership is an Ohio limited
partnership (the "Owner"), the sole partners of which are the Borrower and AH
Michigan CGP, Inc., an Ohio corporation (the "General Partner") which acts as
the sole general partner of the Owner. The Borrower is the sole shareholder of
the General Partner.
C. Project. The Owner intends to develop an independent living facility
with a non-licensed assisted living component for the elderly in Southfield,
Michigan, which is currently referred to as "The Heritage at Southfield" (the
"Project"). The Lender has agreed to make the Loan to the Borrower to be used as
a capital contribution to the Owner, the proceeds of which will fund a portion
of the Project costs.
D. Guarantor. An affiliate of the Guarantor will be the manager and
developer of the Project and the Guarantor will derive material benefits from
the Loan. The Guarantor has entered into a certain Conditional Investment
Agreement dated June 17, 1998, with Banc One Capital Funding Corporation
("BOCFC") in order to induce Lender to make the Loan (the "Conditional
Investment Agreement").
E. Pledge of Conditional Investment Agreement. In order to collateralize
the Borrower's payment and performance obligations under the Loan Documents, as
well as to collateralize the Guarantor's obligations under this Guaranty, the
Guarantor has also entered into a certain Security Agreement-Pledge and
Assignment of Investment Agreement (the "Security Agreement") of even date
herewith, pursuant to which the Guarantor has pledged and assigned all of its
interests in the Conditional Investment Agreement to the Lender.
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<PAGE>
NOW, THEREFORE, for and in consideration of the promises, in order to
induce the Lender to make the Loan and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Guarantor does hereby guarantee and the parties do hereby agree, as follows:
Statement of Agreement
ss. 1. Guaranty. The Guarantor, absolutely and unconditionally, hereby
guarantees to the Lender the full, prompt and complete payment of the Borrower's
obligations under the Loan Documents and the payment to AH Michigan Investor,
Inc. of funds from the exercise of the Equity Option equal to its capital
contribution to the Borrower of $1,050,000 plus an amount necessary to produce a
17.11% IRR on such capital contribution.
ss. 2. Unconditional Obligations. Subject to the provisions of ss.3 below,
the obligations of the Guarantor under this Guaranty (the "Obligations") are
absolute and unconditional, and shall not be impaired by any action or omission
to act, with or without notice to the Guarantor, of the Lender or any other
holder or beneficiary of any of the Obligations, or by reason of any other
circumstance which might otherwise constitute a discharge or defense of the
Guarantor. The Guarantor hereby expressly waives diligence, presentment,
protest, notice of dishonor, demand for payment or performance, extension of
time of payment or performance, notice of acceptance of this Guaranty, and
indulgences and notices of every kind under the Loan Agreement, the Notes or any
of the other Loan Documents and consents to any and all forbearances and
extensions of time thereunder and to any and all changes in the terms, covenants
and conditions thereof, and agrees that it shall not be released hereunder by
any matter or things whatsoever whereby it as Guarantor and surety otherwise
would or might be released, other than a written release delivered by the Lender
or by payment or performance of the Obligations.
ss.3. Limitations on Liability. Any provision in this Guaranty (or in any
other Loan Document) to the contrary notwithstanding, the Guarantor shall not
have any personal liability and no deficiency judgment shall be brought or
entered into and no judgments shall be enforceable against the Guarantor or any
officer, director or shareholder of the Guarantor or any of its successors,
assigns, administrators or personal representatives, or affiliates of Guarantor
(including, without limitation, the Manager) to pay any of the obligations
evidenced by this Guaranty or the Security Agreement. The Lender agrees that in
the event of an actual or alleged failure, breach or default hereunder by the
Guarantor, the Lender's sole and exclusive remedy against the Guarantor shall be
against the Conditional Investment Agreement pursuant to the Security Agreement,
and no judgment pursuant to this Guaranty shall be subject to execution upon, or
a lien against any property of, the Guarantor other than the Investment
Agreement. Nothing in this ss.3 or otherwise contained in this Guaranty shall be
deemed to limit, modify or impair the obligations of the Guarantor to the Lender
pursuant to the Recourse Guaranties (as such term is defined in the Loan
Agreement).
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<PAGE>
ss. 4. Costs and Expenses. The Guarantor agrees to pay all the reasonable
costs, expenses and fees, including all reasonable attorneys' fees, which may be
incurred by the Lender in enforcing or attempting to enforce this Guaranty
following any default on the part of the Guarantor hereunder, whether the same
shall be enforced by suit or otherwise. If any such fees and expenses are not so
reimbursed, the amount thereof shall, to the extent permitted by law, constitute
indebtedness due hereunder.
SECTION 5. Rescission or Return of Payments. The Guarantor agrees that, if
at any time all or any part of any payment theretofore applied by the Lender to
any of the Obligations is or must be rescinded or returned by the Lender for any
reason whatsoever (including without limitation the insolvency, bankruptcy or
reorganization of the Borrower), such Obligations shall, for the purposes of
this Guaranty, to the extent that such payment is or must be rescinded or
returned, be deemed to have continued in existence, notwithstanding such
application by the Lender, and this Guaranty shall continue to be effective or
reinstated, as the case may be, as to such Obligations, all as though such
application by the Lender had not been made.
SECTION 6. Assignment or Transfer of Liabilities. The Lender may, from
time to time, without notice to the Guarantor, assign or transfer any or all of
the Obligations or any interest therein; and, notwithstanding any such
assignment or transfer or any subsequent assignment or transfer thereof, such
Obligations shall be and remain Obligations for the purposes of this Guaranty,
and each and every immediate and successive assignee or transferee of any of the
Obligations or of any such interest therein shall, to the extent of the interest
of such assignee or transferee in the Obligations, be entitled to the benefits
of this Guaranty to the same extent as if such assignee or transferee were the
transferor.
SECTION 7. Enforcement. The Obligations hereunder are joint and several
and are independent of the obligations of the Borrower, and a separate action or
actions may be brought and prosecuted against the Guarantor regardless of
whether any action is brought against the Borrower or whether the Borrower be
joined in any such action(s). The Guarantor hereby acknowledges and agrees that
it shall not be a condition precedent to the enforcement of this Guaranty by the
Lender against the Guarantor that the Lender first seek recourse against the
Borrower by reason of a breach or default by the Borrower.
SECTION 8. Cumulative Remedies, Delays. No delay on the part of the Lender
in the exercise of any right or remedy shall operate as a waiver thereof, and no
single or partial exercise by the Lender of any right or remedy shall preclude
other or further exercise thereof or the exercise of any other right or remedy.
No action of the Lender permitted hereunder shall in any way affect or impair
the rights of the Lender and the Obligations of the Guarantor under this
Guaranty. For the purpose of this Guaranty, Obligations shall include all
Obligations, notwithstanding any right or power of the Borrower or anyone else
to assert any claim or defense as to the invalidity or unenforceability of any
such Obligations, and no such claim or defense shall affect or impair the
obligations of the Guarantor hereunder.
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<PAGE>
SECTION 9. Subordination. The Guarantor hereby subordinates any and all
claims which it now has, or in the future may acquire, as a creditor of the
Borrower, to the prior payment and satisfaction in full of this Guaranty. If,
prior to the payment and satisfaction of this Guaranty, the Guarantor would,
without reference to the provisions of this ss.9, be entitled to receive any
payment on account of any claim of the Guarantor against the Borrower, all such
payments shall be made instead to the Lender until the Obligations have been
paid and satisfied in full, and the Guarantor hereby so direct. If the Guarantor
receives any payment on account of any claim of the Guarantor against the
Borrower, the Guarantor shall immediately pay the same over to the Lender to be
applied to the payment or satisfaction of the Obligations, if any.
SECTION 10. Amendments, Modifications, Etc. No amendment, modification,
termination, or waiver of any provision of this Guaranty nor consent to any
departure by the Guarantor therefrom, shall in any event be effective unless the
same shall be in writing and signed by the Lender, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given. No notice or demand on the Guarantor in any case shall
entitle the Guarantor to any other or further notice or demand in similar or
other circumstances.
SECTION 11. No Reliance. The Guarantor acknowledges that it has
independently investigated the legal, economic, tax, accounting and other
consequences of the Loan and the transactions contemplated by the Loan Documents
and have not received or relied in any way on any advice of the Lender or any of
its Affiliates as to such consequences.
SECTION 12. Governing Law. This Guaranty was negotiated in the State of
Ohio, accepted by the Lender in the State of Ohio, and the proceeds of the Loan
guaranteed hereby were or are to be disbursed by Lender from the State of Ohio.
The Guarantor and the Lender agree that the State of Ohio has a substantial
relationship to the transaction evidenced hereby and agree that this Guaranty
and the rights and obligations of the parties hereunder shall be governed by and
construed in accordance with the laws of the State of Ohio (without giving
effect to principles of conflicts of law).
SECTION 13. Severability. In the event any one or more of the provisions
contained in this Guaranty shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such provision shall be deemed replaced by the
valid and enforceable provision that is substantially most similar to such
invalid or unenforceable provision, but the remaining provisions shall not be
affected thereby.
SECTION 14. Waiver of Jury Trial; Consent to Venue. THE GUARANTOR AND THE
LENDER, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL,
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT THEY MAY HAVE TO A
TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS GUARANTY OR
ANY RELATED INSTRUMENT OR AGREEMENT, OR ANY OF THE TRANSACTIONS CONTEMPLATED BY
THIS GUARANTY, OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER
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ORAL OR WRITTEN) OR ACTIONS OF THE GUARANTOR OR THE LENDER. THE GUARANTOR AND
THE LENDER SHALL NOT SEEK TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY
ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A
JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED UNLESS FAILURE TO SO CONSOLIDATE
WOULD RESULT IN A MANDATORY LOSS OF SUCH CLAIM. IN THE EVENT OF A DISPUTE UNDER
THIS GUARANTY, THE GUARANTOR AND THE LENDER HEREBY AGREE THAT EXCLUSIVE
JURISDICTION AND VENUE LIES IN A COURT OF COMPETENT JURISDICTION IN FRANKLIN
COUNTY, OHIO. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY
RESPECT OR RELINQUISHED BY THE GUARANTOR OR THE LENDER EXCEPT BY A WRITTEN
INSTRUMENT EXECUTED BY SAME.
SECTION 15. Gender and Number. Terms that imply gender and number shall
be construed to imply the relevant gender and number.
SECTION 16. Multiple Counterparts. This Guaranty may be signed in
multiple counterparts with the same effect as if the signatures thereto were
upon the same instrument.
SECTION 17. Intercreditor Agreement.
THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND ALL RIGHTS AND
REMEDIES OF LENDER WITH RESPECT TO THE LOAN, THE OBLIGATIONS OR ANY COLLATERAL
THEREFOR ARE EACH AND ALL SUBJECT TO THE TERMS AND CONDITIONS OF THE
INTERCREDITOR AGREEMENT.
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This Guaranty has been executed by the Guarantor effective as of the date
first written above.
GUARANTOR:
BROOKDALE LIVING COMMUNITIES, INC.,
a Delaware corporation
By: ______________________________________
Name: Darryl W. Copeland, Jr.
Title:Executive Vice President
LENDER:
BANC ONE CAPITAL PARTNERSHIP IV,
LTD., an Ohio limited liability company
By: BOCP Holdings Corporation, an Ohio
corporation, its Manager
By:
Name: Michael S. Wood
Title:Authorized Signer
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ENVIRONMENTAL INDEMNITY AGREEMENT
THIS ENVIRONMENTAL INDEMNITY AGREEMENT (this "Agreement"), made as
of June 17, 1998, from BROOKDALE LIVING COMMUNITIES, INC., a Delaware
corporation. having an office at 77 West Wacker Drive, Suite 4400, Chicago,
Illinois 60601, Attention: Darryl W. Copeland, Telefax Number (312) 977-3699
(the "Guarantor") to Banc One Capital Partners IV, Ltd., an Ohio limited
liability company, having an address at 150 East Gay Street, Columbus, Ohio
43215, Attention: John W. Adams, Telefax Number (614) 217-0222 (together with
its successors and assigns, "Lender").
RECITALS
WHEREAS, pursuant to a Loan Agreement dated as of the date hereof
between AH Michigan Subordinated, LLC, an Ohio limited liability company
("Borrower"), and Lender (as modified and supplemented and in effect from time
to time, the "Loan Agreement"), at the request of Borrower and Guarantor, Lender
has agreed to make a loan (the "Loan") to Borrower;
WHEREAS, AH Michigan Owner Limited Partnership is an Ohio limited
partnership (the "Owner"), the sole partners of which are the Borrower and AH
Michigan CGP, Inc., an Ohio corporation (the "General Partner"), which acts as
the sole general partner of the Owner;
WHEREAS, the Borrower is the sole shareholder of the General
Partner;
WHEREAS, the Owner intends to develop an independent living facility
with a non-licensed assisted living component for the elderly in Southfield,
Michigan, which is currently referred to as "The Heritage at Southfield" (the
"Project");
WHEREAS, the Borrower estimates that the total cost of acquisition,
development and construction of the Project will be $36,840,749 (the "Estimated
Project Cost");
WHEREAS, the Borrower, on behalf of the Owner, has obtained a loan
from Nomura Asset Capital Corporation (the "Senior Lender") for the acquisition,
development and construction of the Project, in the amount of up to $26,625,000
(the "Senior Loan");
WHEREAS, the Lender has agreed to make the Loan to the Borrower to
be used as an equity contribution to the Owner, the proceeds of which will fund
a portion of the Estimated Project Cost which will not be funded by the Senior
Loan, upon the terms and conditions set forth in the Loan Agreement;
WHEREAS, Owner and Brookdale Living Communities of Michigan, Inc., a
Delaware corporation (the "Manager"), are entering into a certain management
agreement dated the date herewith and a certain development agreement dated the
date herewith (collectively the "Management Agreement"), pursuant to which
Manager shall manage, operate and develop the Property; and
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WHEREAS, Lender is unwilling to make the Loan unless Guarantor
indemnifies Lender against certain liabilities arising under Environmental Laws
(as herein defined), relating to the property being financed in connection with
the Senior Loan, which property consists of the fee simple interest in the land
more particularly described in the documents evidencing the Senior Loan and all
buildings, structures and other improvements now or hereafter situated on such
land (the "Property").
NOW, THEREFORE, in consideration of the making of the Loan by Lender
and the covenants, agreements, representations and warranties set forth in this
Agreement, the parties hereby covenant, agree, represent and warrant as follows:
1. Defined Terms. Unless the context otherwise requires, capitalized
terms used but not otherwise defined herein but defined in the Loan Agreement
shall have the meanings provided therefore in the Loan Agreement, and the
following terms shall have the following meanings:
"Borrower" has the meaning provided in the Recitals to this
Agreement.
"Environmental Claim" means any written request for information by a
Governmental Authority, or any written notice, notification, claim,
administrative, regulatory or judicial action, suit, judgment, demand or other
written communication by any Person or Governmental Authority requiring,
alleging or asserting liability with respect to Owner, Borrower, Manager or the
Property, whether for damages, contribution, indemnification, cost recovery,
compensation, injunctive relief, investigatory, response, remedial or cleanup
costs, damages to natural resources, personal injuries, fines or penalties
arising out of, based on or resulting from (i) the presence, Use, Release or
threatened Release into the environment of any Hazardous Substance in violation
of any Environmental Law originating at or from, or otherwise affecting, the
Property, (ii) any fact, circumstance, condition or occurrence forming the basis
of any violation, or alleged violation, of any Environmental Law by Owner,
Borrower, Manager or otherwise affecting the Property or (iii) any alleged
injury or threat of injury to health, safety or the environment by Owner,
Borrower, Manager or otherwise affecting the Property arising from actions which
are in violation of Environmental Laws.
"Environmental Laws" means any and all applicable federal, state,
local and foreign laws, rules, regulations or municipal ordinances each as
amended from time to time, and any Permits, approvals, licenses, registrations,
filings and authorizations, in each case as in effect as of the relevant date,
relating to the environment, health or safety, and pertaining to or imposing
liability or standards of conduct concerning environmental regulation,
contamination or clean-up, including the Comprehensive Environmental Response,
Compensation and Liability Act, the Resource Conservation and Recovery Act, the
Emergency Planning and Community Right-to-Know Act of 1986, the Hazardous
Substances Transportation Act, the Solid Waste Disposal Act, the Clean Water
Act, the Clean Air Act, the Toxic Substance Control Act, the Safe Drinking Water
Act, the Occupational Safety and Health Act, any state super-lien and
environmental clean-up statutes and all amendments to and regulations in respect
of the foregoing laws.
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"Environmental Reports" means the environmental audit reports, with
respect to the Property, delivered to Lender prior to the date hereof and in
connection with the Loan, and any amendments or supplements thereto delivered to
Lender prior to the date hereof.
"Guarantor" has the meaning provided in the first paragraph of this
Agreement.
"Hazardous Substance" means, collectively, (i) any petroleum or
petroleum products or waste oils, explosives, radioactive materials, asbestos,
urea formaldehyde foam insulation, polychlorinated biphenyls ("PCBs"), lead in
drinking water, and lead based paint, the presence, generation, use,
transportation, storage or disposal of or exposure to which (x) is regulated or
could lead to liability under any Environmental Law or (y) is subject to notice
or reporting requirements under any Environmental Law, (ii) any chemicals or
other materials or substances which are now or hereafter become defined as or
included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous wastes," "restricted hazardous
wastes," "toxic substances," "toxic pollutants," "contaminants," "pollutants" or
words of similar import under any Environmental Law and (iii) any other chemical
or any other material or substance, exposure to which is now or hereafter
prohibited, limited or regulated under any Environmental Law.
"Lender" has the meaning provided in the first paragraph of this
Agreement.
"Loan" has the meaning provided in the Recitals to this Agreement.
"Loan Agreement" has the meaning provided in the Recitals to this
Agreement.
"Owner" has the meaning provided in the Recitals to this Agreement.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, estate, trust, unincorporated association,
or any other entity, any federal, state, county or municipal government or any
bureau, department or agency thereof and any fiduciary acting in such capacity
on behalf of any of the foregoing.
"Release" means, with respect to any Hazardous Substances, any
release, threatened release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the indoor
or outdoor environment, including, without limitation, the movement of Hazardous
Substances through ambient air, soil, surface water, ground water, wetlands,
land or subsurface strata.
"Remedial Work" means any investigation, site monitoring,
containment, cleanup, removal, restoration or other work of any kind reasonably
necessary or required under an applicable Environmental Law.
"Use" means, with respect to any Hazardous Substance, the
generation, manufacture, processing, distribution, handling, use, treatment,
recycling or storage of such Hazardous Substance in violation of Environmental
Laws or transportation to or from the property of such Person of such Hazardous
Substance in violation of Environmental Laws.
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<PAGE>
2. Indemnification.
(a) Subject to the limitations set forth in Section 16 hereof,
Guarantor agrees to indemnify, reimburse, defend (with counsel satisfactory to
Lender in Lender's sole discretion), and hold harmless Lender for, from and
against all demands, claims, actions or causes of action, assessments, losses,
damages, liabilities, costs and expenses, including, without limitation,
interest, penalties, consequential damages, reasonable attorneys' fees,
reasonable disbursements and expenses, and reasonable consultants' fees,
disbursements and expenses, including costs of Remedial Work (collectively
"Losses"), asserted against, resulting to, imposed on, or incurred by Lender,
directly or indirectly in connection with any of the following:
i) events, circumstances, or conditions which are alleged to, or do,
form the basis for an Environmental Claim;
ii) the presence, Use or Release of Hazardous Substances at, on, in,
under or from the Property, which presence, use or release requires or
could reasonably require Remedial Work;
iii) any Environmental Claim against any Person whose liability for
such Environmental Claim Guarantor has or may have assumed or retained
either contractually or by operation of law; or
iv) any failure of Guarantor to fulfill each and every obligation
undertaken pursuant to this Agreement.
(b) The indemnity provided in this Agreement shall not be included
in any exculpation of Guarantor, Manager or Borrower from personal liability
provided in the Loan Agreement or in any of the other Loan Documents. Nothing in
this Agreement shall be deemed to deprive Lender of any rights or remedies
provided to it elsewhere in this Agreement or in the other Loan Documents or
otherwise available to it under law. Guarantor waives and releases Lender from
any rights or defenses Guarantor may have under common law or Environmental Laws
for liability arising from or resulting from the presence, Use or Release of
Hazardous Substances except to the extent directly caused by the gross
negligence, fraud or willful misconduct of Lender.
(c) With respect to those matters for which Guarantor has agreed to
indemnify Lender hereunder, and to the maximum extent permitted by applicable
law, Guarantor waives and releases Lender from any rights or defenses Guarantor
may have under common law or Environmental Laws for liability arising from or
resulting from the presence,
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<PAGE>
Use or Release of Hazardous Substances except to the extent directly caused by
the fraud, gross negligence or willful misconduct of Lender.
3. Payment. All payments due to Lender under this Agreement shall
be payable to Lender within ten (10) days after written demand therefor, and
shall bear interest at the Default Rate from the date such payment is due until
the date of payment.
4. Governing Law; Waiver of Jury Trial; Consent to Venue.
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<PAGE>
(a) The parties agree that the State of Ohio has a substantial
relationship to the parties and to the underlying transaction embodied hereby,
and in all respects, including, without limitation, matters of construction,
validity and performance, this Agreement and the obligations arising hereunder
shall be governed by, and construed in accordance with, the laws of the State of
Ohio applicable to contracts made and performed in such State and any applicable
law of the United States of America; subject, however, as to performance, to the
Environmental Laws governing the Project. To the fullest extent permitted by
law, Guarantor hereby unconditionally and irrevocably waives any claim to assert
that the law of any other jurisdiction governs this Agreement, and this
Agreement shall be governed by and construed in accordance with the laws of the
State of Ohio; subject, however, as to performance, to the Environmental Laws
governing the Project.
(b) THE GUARANTOR AND THE LENDER, AFTER CONSULTING OR HAVING HAD THE
OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY RELATED INSTRUMENT OR AGREEMENT, OR ANY OF
THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, OR ANY COURSE OF CONDUCT,
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE GUARANTOR OR THE
LENDER. THE GUARANTOR AND THE LENDER SHALL NOT SEEK TO CONSOLIDATE, BY
COUNTERCLAIM OR OTHERWISE, ANY ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH
ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED UNLESS
THE FAILURE TO SO CONSOLIDATE WOULD RESULT IN A MANDATORY LOSS OF SUCH CLAIM. IN
THE EVENT OF A DISPUTE UNDER THIS AGREEMENT, THE GUARANTOR AND THE LENDER HEREBY
AGREE THAT EXCLUSIVE JURISDICTION AND VENUE LIES IN A COURT OF COMPETENT
JURISDICTION IN FRANKLIN COUNTY OHIO. THESE PROVISIONS SHALL NOT BE DEEMED TO
HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY THE GUARANTOR OR THE LENDER
EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY SAME.
5. Modification, Waiver in Writing. No modification, amendment,
extension, discharge, termination or waiver of any provision of this Agreement
or consent to any departure by Guarantor therefrom, shall in any event be
effective unless the same shall be in a writing signed by the party against whom
enforcement is sought, and then such waiver or consent shall be effective only
in the specific instance, and for the purpose, for which given. Except as
otherwise expressly provided herein, no notice to or demand on Guarantor shall
entitle Guarantor to any other or future notice or demand in the same, similar
or other circumstances.
6. Delay Not a Waiver. Neither any failure nor any delay on the part
of Lender in insisting upon strict performance of any term, condition, covenant
or agreement or exercising any right, power, remedy or privilege hereunder,
shall operate as or constitute a waiver thereof, nor shall a single or partial
exercise thereof preclude any other future exercise, or the exercise of any
other right, power, remedy or privilege. In particular, and not by way of
limitation, by accepting payment after the due date of any amount payable under
this Agreement, Lender shall not be deemed to have waived any right either to
require prompt payment when due of all other
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<PAGE>
amounts due under this Agreement, or to declare a default for failure to effect
prompt payment of any such other amount.
7. Notices. All notices, consents, approvals and requests required
or permitted hereunder shall be given in writing and shall be effective for all
purposes if hand delivered or sent by (a) hand delivery, with proof of attempted
delivery, (b) certified or registered United States mail, postage prepaid, (c)
expedited prepaid delivery service, either commercial or United States Postal
Service, with proof of attempted delivery, or (d) by telecopier (with answerback
acknowledged) provided that such telecopied notice must also be delivered by one
of the means set forth in (a), (b) or (c) above, addressed if to Lender at its
address set forth on the first page hereof, and if to Guarantor at its
designated address set forth on the first page hereof, or at such other address
and Person as shall be designated from time to time by any party hereto, as the
case may be, in a written notice to the other parties hereto in the manner
provided for in this Section 7. A copy of all notices, consents, approvals and
requests directed to Lender shall be delivered concurrently to each of the
following: Banc One Capital Markets, Inc., 150 East Gay Street, 24th Floor,
Columbus, Ohio 43215, Attention: Legal Department, Telefax Number (614)
217-1217. A copy of all notices, consents, approvals and requests directed to
Guarantor shall be delivered concurrently to each of the following: Brookdale
Living Communities, Inc., 77 West Wacker Drive, Suite 4400, Chicago, Illinois
60601, Attention: Darryl W. Copeland, Jr., Telefax Number (312) 977-3699;
Brookdale Living Communities, Inc., 77 West Wacker Drive, Suite 4400, Chicago,
Illinois 60601, Attention: Robert J. Rudnik, Esquire, Telefax Number (312) 977-
3769; Brookdale Living Communities, Inc., 77 West Wacker Drive, Suite 4400,
Chicago, Illinois 60601, Attention: Scott E. Jordan, Esquire, Telefax Number
(312) 977-3769; and Wayne D. Boberg, Esq., Winston & Strawn, 35 West Wacker
Drive, Chicago, Illinois 60602, Telefax Number (312) 558-5700. A notice shall be
deemed to have been given: (a) in the case of hand delivery, at the time of
delivery; (b) in the case of registered or certified mail, when delivered or the
first attempted delivery on a Business Day; (c) in the case of expedited prepaid
delivery upon the first attempted delivery on a Business Day; or (d) in the case
of telecopier, upon receipt of answerback confirmation received prior to 5:00
p.m. local time on a Business Day or if confirmation received thereafter on the
next succeeding Business Day, provided that such telecopied notice was also
delivered as required in this Section 7. A party receiving a notice which does
not comply with the technical requirements for notice under this Section 7 may
elect to waive any deficiencies and treat the notice as having been properly
given.
8. Assignment. Lender shall have the right to assign this Agreement
and the obligations hereunder to any Person who is from time to time the owner
of the Loan, but not otherwise. All references to "Lender" hereunder shall be
deemed to include the successors and assigns of Lender.
9. Severability. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
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<PAGE>
10. Heading and Recitals. The information set forth in the heading
and recitals hereof are hereby incorporated herein as a part of this Agreement
with the same effect as if set forth in the body hereof.
11. Counterparts. This 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 together constitute one and the same instrument.
12. Estoppel Certificates. Guarantor and Lender each hereby agree at
any time and from time to time upon not less than fifteen (15) days prior
written notice by Guarantor or Lender to execute, acknowledge and deliver to the
party specified in such notice, a statement, in writing, certifying that this
Agreement is unmodified and in full force and effect (or if there have been
modifications, that the same, as modified, is in full force and effect and
stating the modifications hereto), and stating whether or not, to the best
knowledge of such certifying party, there exists any matter giving rise to a
claim under Section 2, and, if so, specifying each such matter; provided,
however, that it shall be a condition precedent to Lender's obligation to
deliver the statement pursuant to this Section 12, that Lender shall have
received, together with Guarantor's request for such statement, an officer's
certificate signed by an authorized officer of Guarantor stating that to the
best of Guarantor's knowledge, no matter which could give rise to a claim under
Section 2 exists as of the date of such certificate (or specifying each such
matter).
13. Survival. Subject to Section 16 hereof, this Agreement shall
survive (in perpetuity) the closing and disbursement of the funds evidenced by
the Note, payment of the Note, and any foreclosure on, or retention of, the
Membership Interests. Notwithstanding the foregoing, Guarantor shall not
indemnify Lender with respect to any Losses incurred in connection with, or as a
direct result of, any or all of the matters described above in Section 2(a)(i)
through 2(a)(iii) to the extent that Guarantor can establish directly and solely
that such Losses result from Hazardous Substances being placed on, above or
under the Property (a) by the affirmative act or gross negligence of Lender or
any employees, agents or bailees of Lender; or (b) subsequent to Lender
foreclosing on, or taking ownership of, the Membership Interests. Guarantor
agrees that this Guaranty shall continue to be effective or shall be reinstated
as the case may be, if at any time any payment is made by Borrower or Guarantor
to Lender and such payment is rescinded or must otherwise be returned by Lender
(as determined by Lender in its sole and absolute discretion) upon insolvency,
bankruptcy, liquidation, reorganization, readjustment, composition, dissolution,
receivership, conservatorship, winding up or other similar proceeding involving
or affecting Borrower or Guarantor, all as though such payment had not been
made.
14. Time of the Essence. Time is of the essence with respect to each
and every covenant, agreement and obligation of Guarantor under this Agreement.
15. Liability. The liability of Guarantor under this Agreement shall
in no way be limited or impaired by (a) any amendment or modification of the
Loan Documents made in accordance therewith, (b) any extensions of time for
performance required by any of the Loan Documents, or (c) the release or
substitution in whole or in part, of any security for the Notes or other
evidence of debt issued pursuant to the Loan Documents; and in any of such
cases, whether with or without notice to Guarantor and with or without
consideration.
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<PAGE>
16. Termination. Notwithstanding anything to the contrary contained
herein, upon the sale of the Property by Owner to an unrelated third party
purchaser, this Guaranty and the indemnity obligations provided hereunder shall
terminate, except to the extent any such obligations exist and remain unpaid or
otherwise unsatisfied; provided, however, that if subsequent to any such sale,
Losses are incurred as set forth in Section 2(a) and it is proven that such
Losses occurred as a result of actions or omissions of Owner, Borrower, Manager,
or Guarantor, then the indemnification provided herein shall continue to be
effective or shall be reinstated, as the case may be.
17. INTERCREDITOR AGREEMENT. THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER AND ALL RIGHTS AND REMEDIES OF LENDER WITH RESPECT TO THE LOAN
ARE EACH AND ALL SUBJECT TO THE TERMS AND CONDITIONS OF THE INTERCREDITOR
AGREEMENT.
[Signatures on the following page]
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<PAGE>
IN WITNESS WHEREOF, the Guarantor has caused this Environmental
Guaranty Indemnity Agreement to be duly executed by its duly authorized
representative, all as of the day and year first above written.
GUARANTOR:
BROOKDALE LIVING COMMUNITIES, INC., a
Delaware corporation
By: ________________________________
Name: Darryl W. Copeland, Jr.
Title: Executive Vice President
AGREED AND ACKNOWLEDGED
ONLY FOR SECTION 4(b)
BANC ONE CAPITAL PARTNERS IV, LTD.
By: BOCP Holdings Corporation, its Manager
By: ______________________________________
Name: Michael S. Wood
Title: Authorized Signer
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<PAGE>
ENVIRONMENTAL INDEMNITY AGREEMENT
THIS ENVIRONMENTAL INDEMNITY AGREEMENT (this "Agreement"), made as of June
___, 1998, from BROOKDALE LIVING COMMUNITIES, INC., a Delaware corporation
having an office at 77 West Wacker Drive, Suite 4400, Chicago, Illinois 60601,
Attention: Darryl W. Copeland, Telefax Number (312) 977-3699 (the "Guarantor")
to the Indemnified Parties (as hereinafter defined) including AH Michigan Owner
Limited Partnership, an Ohio limited partnership having an address at 320 King
of Prussia Road, Suite 160, Radnor, Pennsylvania 19087, Attention: David B.
Fenkell, Telefax Number (610) 902-0777 (together with its successors and
assigns, "Owner").
RECITALS
WHEREAS, the sole partners of Owner are AH Michigan Subordinated, LLC, an
Ohio limited liability company which itself is the sole limited partner of Owner
(the "Limited Partner"), and AH Michigan CGP, Inc., an Ohio corporation (the
"General Partner"), which acts as the sole general partner of Owner;
WHEREAS, the Limited Partner is the sole shareholder of the General
Partner;
WHEREAS, Owner intends to develop an independent living facility with a
non-licensed assisted living component for the elderly in Southfield, Michigan,
which is currently referred to as "The Heritage at Southfield" (the "Project");
WHEREAS, Owner has obtained a loan from Nomura Asset Capital Corporation
(the "Senior Lender") for the acquisition, development and construction of the
Project, in the amount of up to $26,625,000 (the "Senior Loan");
WHEREAS, Owner and Brookdale Living Communities of Michigan, Inc., a
Delaware corporation and an affiliate of Guarantor (the "Manager"), are entering
into a certain management agreement dated the date herewith and a certain
development agreement dated the date herewith (collectively the "Management
Agreement"), pursuant to which Manager shall manage, operate and develop the
Property,
WHEREAS, Owner purchased the Project from the Manager; and
WHEREAS, Owner is unwilling to enter into the Management Agreement unless
Guarantor indemnifies Owner against certain liabilities arising under
Environmental Laws (as herein defined), relating to the property where the
Project is located, which property consists of the fee simple interest in the
land (being more particularly described in the documents evidencing the Senior
Loan) and all buildings, structures and other .improvements now or hereafter
situated on such land (the "Property").
<PAGE>
NOW, THEREFORE, in consideration of entering into the Management Agreement
and the covenants, agreements, representations and warranties set forth in this
Agreement, the parties hereby covenant, agree, represent and warrant as follows:
1. Defined Terms. Unless the context otherwise requires, capitalized terms
used but not otherwise defined herein but defined in the Loan Agreement dated as
of the date hereof among Owner, Manager and Senior Lender (the "Loan Agreement")
shall have the meanings provided therefore in the Loan Agreement, and the
following terms shall have the following meanings:
"Environmental Claim" means any written request for information by a
Governmental Authority, or any written notice, notification, claim,
administrative, regulatory or judicial action, suit, judgment, demand or other
written communication by any Person or Governmental Authority requiring,
alleging or asserting liability with respect to any of the Indemnified Parties
or the Property, whether for damages, contribution, indemnification, cost
recovery, compensation, injunctive relief, investigatory, response, remedial or
cleanup costs, damages to natural resources, personal injuries, fines or
penalties arising out of, based on or resulting from (i) the presence, Use,
Release or threatened Release into the environment of any Hazardous Substance in
violation of any Environmental Law originating at or from, or otherwise
affecting, the Property, (ii) any fact, circumstance, condition or occurrence
forming the basis of any violation, or alleged violation, of any Environmental
Law by any of the Indemnified Parties or otherwise affecting the Property or
(iii) any alleged injury or threat of injury to health, safety or the
environment by any of the Indemnified Parties or otherwise affecting the
Property arising from actions which are in violation of Environmental Laws.
"Environmental Laws" means any and all applicable federal, state, local
and foreign laws, rules, regulations or municipal ordinances each as amended
from time to time, and any Permits, approvals, licenses, registrations, filings
and authorizations, in each case as in effect as of the relevant date, relating
to the environment, health or safety, and pertaining to or imposing liability or
standards of conduct concerning environmental regulation, contamination or
clean-up, including the Comprehensive Environmental Response, Compensation and
Liability Act, the Resource Conservation and Recovery Act, the Emergency
Planning and Community Right-to-Know Act of 1986, the Hazardous Substances
Transportation Act, the Solid Waste Disposal Act, the Clean Water Act, the Clean
Air Act, the Toxic Substance Control Act, the Safe Drinking Water Act, the
Occupational Safety and Health Act, any state super-lien and environmental
clean-up statutes and all amendments to and regulations in respect of the
foregoing laws.
"General Partner" has the meaning provided in the Recitals to this
Agreement.
"Guarantor" has the meaning provided in the first paragraph of this
Agreement.
"Hazardous Substance" means, collectively, (i) any petroleum or petroleum
products or waste oils, explosives, radioactive materials, asbestos, urea
formaldehyde foam insulation, polychlorinated biphenyls ("PCBs"), lead in
drinking water, and lead based paint, the presence,
#25846v1 - 2 -
<PAGE>
generation, use, transportation, storage or disposal of or exposure to which (x)
is regulated or could lead to liability under any Environmental Law or (y) is
subject to notice or reporting
requirements under any Environmental Law, (ii) any chemicals or other materials
or substances which are now or hereafter become defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants," "contaminants," "pollutants" or words of similar import
under any Environmental Law and (iii) any other chemical or any other material
or substance, exposure to which is now or hereafter prohibited, limited or
regulated under any Environmental Law.
"Indemnified Parties" is defined in Section 2(a) of this Agreement.
"Owner" has the meaning provided in the Recitals to this Agreement.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, estate, trust, unincorporated association, or any
other entity, any federal, state, county or municipal government or any bureau,
department or agency thereof and any fiduciary acting in such capacity on behalf
of any of the foregoing.
"Release" means, with respect to any Hazardous Substances, any release,
threatened release, spill, emission, leaking, pumping, injection, deposit,
disposal, discharge, dispersal, leaching or migration into the indoor or outdoor
environment, including, without limitation, the movement of Hazardous Substances
through ambient air, soil, surface water, ground water, wetlands, land or
subsurface strata.
"Remedial Work" means any investigation, site monitoring, containment,
cleanup, removal, restoration or other work of any kind reasonably necessary or
required under an applicable Environmental Law.
"Use" means, with respect to any Hazardous Substance, the generation,
manufacture, processing, distribution, handling, use, treatment, recycling or
storage of such Hazardous Substance in violation of Environmental Laws or
transportation to or from the property of such Person of such Hazardous
Substance in violation of Environmental Laws.
2. Indemnification.
(a) Guarantor agrees to indemnify, reimburse, defend and hold harmless
Owner, Limited Partner, General Partner and their directors, officers,
employees, partners, members, managers, shareholders and agents (individually,
an "Indemnified Party" and collectively, the "Indemnified Parties") for, from
and against all demands, claims, actions or causes of action, assessments,
losses, damages, liabilities, costs and expenses, including, without limitation,
interest, penalties, consequential damages, reasonable attorneys' fees,
reasonable disbursements and expenses, and reasonable consultants' fees,
disbursements and expenses, including costs of Remedial Work (collectively
"Losses"), asserted against, resulting to, imposed on, or incurred by any of
them, directly or indirectly, in connection with any of the following:
i) events, circumstances, or conditions which we alleged to, or do,
form the basis for an Environmental Claim;
ii) the presence, Use or Release of Hazardous Substances at, on, in,
under or from the Property, which presence, use or release requires or could
reasonably require Remedial Work;
iii) any Environmental Claim against any Person whose liability for
such Environmental Claim Guarantor has or may have assumed or retained either
contractually or by operation of law; or
iv) any failure of Guarantor to fulfill each and every obligation
undertaken pursuant to this Agreement.
It is specifically acknowledged and agreed that David B. Fenkell is
an Indemnified Party.
(b) Nothing in this Agreement shall be deemed to deprive an Indemnified
Party of any rights or remedies provided to such Indemnified Party elsewhere in
this Agreement or otherwise available to such Indemnified Party under law.
Guarantor waives and releases each Indemnified Party from any rights or defenses
Guarantor may have under common law or Environmental Laws for liability arising
from or resulting from the presence, Use or Release of Hazardous Substances
except to the extent directly caused b the gross negligence, fraud or willful
misconduct of such Indemnified Party.
3. Payment. All payments due to an Indemnified Party under this
Agreement shall be payable to such Indemnified Party within ten (10) days after
written demand therefor, and shall bear interest at ten percent (10%) per annum
from the date such payment is due until the dale of payment.
4. Governing Law; Waiver of Jury Trial; Consent to Venue.
(a) The parties agree that the State of Ohio has a substantial
relationship to the parties and to the underlying transaction embodied hereby,
and in all respects, including, without limitation, matters of construction,
validity and performance, this Agreement and the obligations arising hereunder
shall be governed by, and construed in accordance with, the laws of the State of
Ohio applicable to contracts made and performed in such State and any applicable
law of the United States of America subject, however, as to performance, to the
Environmental Laws governing the Project. To the fullest extent permitted by
law, Guarantor hereby unconditionally and irrevocably waives any claim to assert
that the law of any other jurisdiction governs this Agreement, and this
Agreement shall be governed by and construed in accordance with the laws of the
State of Ohio subject, however, as to performance, to the Environmental Laws
governing the Project.
(b) THE GUARANTOR, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO
CONSULT WITH COUNSEL, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF
THIS AGREEMENT OR ANY RELATED INSTRUMENT OR AGREEMENT, OR ANY OF THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, OR ANY COURSE OF CONDUCT, DEALING,
STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE GUARANTOR. THE GUARANTOR
SHALL NOT SEEK TO CONSOLIDATE, BY COUNTERCLAI OR OTHERWISE, ANY ACTION IN WHICH
A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT
BE OR HAS NOT BEEN WAIVED UNLESS THE FAILURE TO SO CONSOLIDATE WOULD RESULT IN A
MANDATORY LOSS OF SUCH CLAIM. IN THE EVENT OF A DISPUTE UNDER THIS AGREEMENT,
THE GUARANTOR HEREBY AGREES THAT EXCLUSIVE JURISDICTION AND VENUE LIES IN A
COURT OF COMPETENT JURISDICTION IN FRANKLIN COUNTY OHIO.
5. Modification, Waiver in Writing. No modification, amendment, extension,
discharge, termination or waiver of any provision of this Agreement or consent
to any departure by Guarantor therefrom, shall in any event be effective unless
the same shall be in a writing signed by the party against whom enforcement is
sought, and then such waiver or consent shall be effective only in the specific
instance, and for the purpose, for which given. Except as otherwise expressly
provided herein, no notice to or demand on Guarantor shall entitle Guarantor to
any other or future notice or demand in the same, similar or other
circumstances.
6. Delay Not a Waiver. Neither any failure nor any delay on the part
of any Indemnified Party in insisting upon strict performance of any term,
condition, covenant or agreement or exercising any right, power, remedy or
privilege hereunder, shall operate as or constitute a waiver thereof, nor shall
a single or partial exercise thereof preclude any other future exercise, or the
exercise of any other right, power, remedy or privilege. In particular, and not
by way of limitation, by accepting payment after the due date of any amount
payable under this Agreement, an Indemnified Party shall not be deemed to have
waived any right either to require prompt payment when due of all other amounts
due under this Agreement, or to declare a default for failure to effect prompt
payment of any such other amount.
7. Notices. All notices, consents, approvals and requests required or
permitted hereunder shall be given in writing and shall be effective for all
purposes if hand delivered or sent by (a) hand delivery, with proof of attempted
delivery, (b) certified or registered United States mail, postage prepaid, (c)
expedited prepaid delivery service, either commercial or United States Postal
Service, with proof of attempted delivery, or (d) by telecopier (with answerback
acknowledged) provided that such telecopied notice must also be delivered by one
of the means set forth in (a), (b) or (c) above, addressed if to any Indemnified
Party at the address of Owner set forth on the first page hereof, and if to
Guarantor at its designated address set forth on the first page hereof, or at
such other address and Person as shall be designated from time to time by any
party hereto, as the case may be, in a written notice to the other parties
hereto in the manner provided for in this Section 7. A copy of all notices
consents, approvals and requests directed to Owner shall be delivered
concurrently to the following: Squire, Sanders & Dempsey L.L.P., 41 South High
Street, Suite 1300, Columbus, Ohio 43215, Attention: Scott B. West, Esq.,
Telefax Number (614) 365-2499. A copy of all notices, consents, approvals and
requests directed to Guarantor shall be delivered concurrently to each of the
following: Brookdale Living Communities, Inc., 77 West Wacker Drive, Suite 4400,
Chicago, Illinois 60601, Attention: Darryl W. Copeland, Jr., Telefax Number
(312) 977-3699; Brookdale Living Communities, Inc., 77 West Wacker Drive, Suite
4400, Chicago, Illinois 60601, Attention: Robert J. Rudnik, Esquire, Telefax
Number (312) 977-3769; Brookdale Living Communities, Inc., 77 West Wacker Drive,
Suite 4400, Chicago, Illinois 60601, Attention: Scott E. Jordan, Esquire,
Telefax Number (312) 977-3769; and Wayne D. Boberg, Esq., Winston & Strawn, 35
West Wacker Drive, Chicago, Illinois 60602, Telefax Number (312) 558-5700. A
notice shall be deemed to have been given: (a) in the case of hand delivery, at
the time of delivery; (b) in the case of registered or certified mail, when
delivered or the first attempted delivery on a Business Day; (c) in the case of
expedited prepaid delivery upon the first attempted delivery on a Business Day;
or (d) in the case of telecopier, upon receipt of answerback confirmation
received prior to 5:00 p.m. local time on a Business Day or if confirmation
received thereafter on the next succeeding Business Day, provided that such
telecopied notice was also delivered as required in this Section 7. A party
receiving a notice which does not comply with the technical requirements for
notice under this Section 7 may elect to waive any deficiencies and treat the
notice as having been properly given.
8. Assignment. Guarantor shall not shall have the right to assign
this Agreement and the obligations hereunder to any Person without the consent
of David B. Fenkell. All references to "Indemnified Parties" hereunder shall be
deemed to include the heirs, successors and assigns of the Indemnified Parties.
----------
9. Severability. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement. ------------
10. Heading and Recitals. The information set forth in the heading
and recitals hereof are hereby incorporated herein as a part of this Agreement
with the same effect as if set forth in the body hereof. --------------------
11. Counterparts. This 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 together constitute one and the same instrument.
- ------------
12. Intentionally Omitted.
13. Survival. This Agreement shall survive in perpetuity. Notwithstanding
the foregoing, Guarantor shall not indemnify any Indemnified Party with respect
to any Losses incurred in connection with, or as a direct result of, any or all
of the matters described above in Section 2(a)(i) through 2(a)(iii) to the
extent that Guarantor can establish directly and solely that such Losses result
from Hazardous Substances being placed on, above or under the Property by the
affirmative act or gross negligenc of such Indemnified Party. Guarantor agrees
that this Guaranty shall continue to be effective or shall be reinstated as the
case may be, if at any time any payment is made by Guarantor to any Indemnified
Party and such payment is rescinded or must otherwise be returned by such
Indemnified Party upon insolvency, bankruptcy, liquidation, reorganization,
readjustment, composition, dissolution, receivership, conservatorship, winding
up or other similar proceeding involving or affecting Guarantor, all as thoug
such payment had not been made.
14. Time of the Essence. Time is of the essence with respect to each
and every covenant, agreement and obligation of Guarantor under this Agreement.
-------------------
15. Termination. Notwithstanding anything to the contrary contained
herein, this Guaranty and the indemnity obligations provided hereunder shall
terminate on the date upon which Manager or Guarantor (or their affiliates) no
longer has an interest in the Property, whether as manager, developer, lessee,
lessor, owner or otherwise; provided, however, that the indemnification provided
herein shall continue to be effective or shall be reinstated, as the case may
be, to the extent that (a) any such obligations exist and remain unpaid or
otherwise unsatisfied, (b) such Losses are incurred by David B. Fenkell,
Alliance Holdings,. Inc. or any of its directors, officers, employees,
shareholders and agents, or (c) if subsequent to any such date, Losses arc
incurred as set forth in Section 2(a) and such Losses were the result of events,
circumstances or conditions which occurred prior to or during the period when
Manager (or its affiliates) had an interest in the Property.
16. Intentionally Omitted.
17. INTERCREDITOR AGREEMENT. THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER ARE ALL SUBJECT TO THE TERMS AND CONDITIONS OF THE INTERCREDITOR
AGREEMENT.
IN WITNESS WHEREOF, the Guarantor has caused this Environmental Indemnity
Agreement to be duly executed by its duly authorized representative, all as of
the day and year first above written.
GUARANTOR
BROOKDALE LIVING COMMUNITIES, INC., a
Delaware corporation
By:
Name: Darryl W. Copeland, Jr.
Title:Executive Vice President
#25846v1 - 3 -
<PAGE>
CONDITIONAL INVESTMENT AGREEMENT
This CONDITIONAL INVESTMENT AGREEMENT (this "Agreement") is entered into
effective as of June 17, 1998 by and between BROOKDALE LIVING COMMUNITIES, INC.,
a Delaware corporation ("Brookdale") and BANC ONE CAPITAL FUNDING CORPORATION,
an Ohio corporation ("BOCFC").
STATEMENT OF AGREEMENT
In consideration of the premises and of the mutual covenants contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. DEFINITIONS
As used herein, the following terms have the following meanings:
"Business Day" means any day which is not a Saturday or Sunday or a day on
which the principal office of BOCFC is authorized or required by law to close or
a day on which banks in Chicago, Illinois are authorized or required by law to
close. Any payment due hereunder on a day that is not a Business Day shall be
due and payable on the next succeeding Business Day.
"Effective Date" means June 17, 1998 which is the date on which the
Initial Invested Moneys are transferred to BOCFC's account as provided in
Section 2.1 hereof.
"Initial Invested Moneys" means $6,166,015.
"Invested Moneys" means the Initial Invested Moneys delivered to BOCFC by
Brookdale pursuant to Section 2.1 less any amounts returned to Brookdale by
BOCFC hereunder.
"Redemption Date" means the date of a redemption of this Agreement and the
withdrawal by Brookdale of the Invested Moneys in accordance with the
requirements of Section 2.3.
"Stated Rate of Earnings" equals 9% per annum on the basis of a 365
or 366 day year, as the case may be.
"17.11% IRR" shall mean an internal rate of return of 17.11% per annum
compounded monthly, and computed using the methodology described in Schedule 1
attached hereto and incorporated herein by reference.
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2. INVESTMENT OF FUNDS.
2.1 Delivery of Funds.
(a) On the Effective Date, Brookdale shall deliver the Initial
Invested Moneys to BOCFC for the credit of Brookdale's account, and BOCFC shall
accept the Initial Invested Moneys from Bookdale.
(b) Unless otherwise agreed by BOCFC, all amounts delivered to BOCFC
for investment hereunder shall be delivered by wire transfer of same day funds
to an account specified by BOCFC.
2.2. Interest. Interest on the outstanding balance of the Invested Moneys
shall accrue at the Stated Rate of Earnings from and including the Effective
Date to but excluding the Redemption Date. No interest will accrue on or after
the Redemption Date. Accrued interest shall be payable to Brookdale in
accordance with, and subject to the conditions of, Section 2.3 hereof.
2.3. Redemption. Brookdale may redeem this Agreement and withdraw all, but
not less than all, Invested Moneys subject to the conditions set forth on
Exhibit 2.3 attached hereto and incorporated herein by this reference. Brookdale
shall deliver written notice to BOCFC at least one Business Day prior to the
proposed Redemption Date, specifying the Redemption Date and certifying that the
conditions set forth on Exhibit 2.3 have been satisfied. Upon the satisfaction
of the foregoing conditions, BOCFC shall pay to Brookdale an amount equal to the
aggregate of (i) the Invested Moneys, (ii) interest at the Stated Rate of
Earnings on the outstanding balance of the Invested Moneys in accordance with
the requirements of Section 2.2 hereof and (iii) such additional amount of
interest as may be necessary to produce a 17.11% IRR on the Initial Investment
Moneys. Upon redemption as hereinabove described, this Agreement, and all of the
obligations of the parties hereunder, shall terminate. In addition, this
Agreement, and all of the obligations of the parties hereunder, shall terminate
if Brookdale has not redeemed this Agreement and withdrawn the Invested Moneys
in accordance with the conditions of this Section 2.3 (including, without
limitation, Exhibit 2.3) on or before the date which is 180 days after the
Option Termination Date, as such term is defined in that certain Equity Option
Agreement of even date herewith (the "Equity Option Agreement") among AH
Michigan Investor, Inc. ("Corporate Investor"), AH Michigan Subordinated, LLC
("Subordinated Borrower"), AH Michigan CGP., Inc. ("General Partner"), AH
Michigan Owner Limited Partnership ("Owner") and Brookdale.
3. DEFAULT
3.1 Events of Default. The following events shall constitute events of
default under this Agreement (each an "Event of Default"):
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(a) BOCFC fails to make the payments required by Section 2.3 hereof
when due pursuant to the provisions of this Agreement and such failure continues
for one Business Day thereafter.
(b) BOCFC commences a case in bankruptcy relating to it, is
adjudicated an insolvent or bankrupt, petitions or applies for the appointment
of any receiver or trustee for itself or any substantial part of its property or
initiates any proceeding relating to it seeking a court order for
reorganization, arrangement, conservation, liquidation or dissolution under
applicable bankruptcy or similar applicable laws; or, any such proceeding is
initiated against BOCFC and BOCFC indicates in writing its consent thereto or
such proceeding is not dismissed within 90 days, or such an order is entered
against BOCFC.
(c) Any representation or warranty of BOCFC under this Agreement is
determined to have been false or misleading when made.
3.2 Rights and Remedies upon an Event of Default. Upon the occurrence and
continuation of any Event of Default specified in Section 3.1 hereof, Brookdale
may:
(i) declare all Invested Moneys and accrued but unpaid interest
thereon to be due and payable immediately; and
(ii) exercise such rights for the enforcement of obligations
hereunder as are expressly provided in this Agreement or are
otherwise available under applicable law.
4. REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of BOCFC. BOCFC represents and warrants
to Brookdale that:
(a) it is duly authorized by its organizational documents and
applicable laws to enter into this Agreement and the transactions contemplated
hereby;
(b) this Agreement constitutes an unconditional general obligation
of BOCFC (except for the conditions to payment expressly set forth herein) which
is not subordinated to any other obligation of BOCFC and constitutes a legal,
valid and binding obligation of BOCFC enforceable against it in accordance with
its terms, subject to bankruptcy, insolvency and similar laws affecting
creditors' rights generally and subject, as to enforceability, to general
principles of equity; and
(c) the execution, delivery and performance of this Agreement by
BOCFC does not and will not conflict with any provision of the certificate of
incorporation or the by-laws of BOCFC nor result in a breach of, or constitute a
default under, any material agreement or
3
<PAGE>
other instrument to which BOCFC is a party or by which any of its property is
bound nor violate any judgment, order or decree applicable to BOCFC of any
governmental or regulatory body, administrative agency, court or arbitrator
having jurisdiction over BOCFC.
4.2 Representations and Warranties of Brookdale. Brookdale represents and
warrants to BOCFC that:
(a) it is duly authorized by its organizational documents and
applicable laws to enter into this Agreement and the transactions contemplated
hereby;
(b) this Agreement constitutes a legal, valid and binding obligation
of Brookdale enforceable against it in accordance with its terms, subject to
bankruptcy, insolvency and similar laws affecting creditors' rights generally
and subject, as to enforceability, to general principles of equity; and
(c) the execution, delivery and performance of this Agreement by
Brookdale does not and will not conflict with any provision of the certificate
of incorporation or the by-laws of Brookdale nor result in a breach of, or
constitute a default under, any material agreement or other instrument to which
Brookdale is a party or by which any of its property is bound nor violate any
judgment, order or decree applicable to Brookdale of any governmental or
regulatory body, administrative agency, court or arbitrator having jurisdiction
over Brookdale.
5. ROLE OF BOCFC
(a) It is expressly understood and agreed that for all purposes of
this Agreement and the transactions contemplated hereby, BOCFC has acted solely
as independent contractor and has not acted as a financial or investment
adviser, fiduciary or agent of or to Brookdale or any other person.
(b) Brookdale acknowledges that it has consulted with its own legal,
tax and investment advisors regarding its decision to enter into this Agreement.
6. MISCELLANEOUS
6.1. Amendment. None of the terms or provisions of this Agreement
may be modified or amended, except in writing duly signed by BOCFC and
Brookdale.
6.2 Survival. All warranties and representations made by Brookdale or
BOCFC in this Agreement or in any of the instruments or documents delivered
pursuant to this Agreement regardless of any investigation made shall be
considered to have been relied upon by the other party hereto and shall survive
the delivery of any instruments or documents.
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<PAGE>
6.3. Successors and Assigns. This Agreement and all obligations and rights
arising hereunder shall inure to the benefit of and be binding upon the parties
hereto and their respective successors, assigns and beneficiaries.
Notwithstanding the foregoing, this Agreement, and the obligations and rights
arising out of this Agreement or any part hereof or interest herein, shall not
be sold, pledged or assigned or otherwise transferred by Brookdale or BOCFC
without the prior written consent of the other party hereto and any such
attempted sale, pledge, assignment or transfer shall be void ab initio;
provided, however, that BOCFC may transfer this Agreement or any of its interest
or obligations hereunder to any subsidiary or affiliate of BOCFC if from and
after such transfer the obligations of the transferee hereunder shall be
guaranteed by BOCFC. Anything herein to the contrary notwithstanding, the
parties acknowledge and agree that Brookdale may pledge its interest in this
Agreement to Banc One Capital Partners IV, Ltd. ("BOCP IV") pursuant to a
certain Security Agreement - Pledge and Assignment of Investment Agreement of
even date herewith.
6.4 Severability of Provisions. If any one or more of the provisions
contained in this Agreement is declared invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby.
6.5 Counterparts. This Agreement may be executed in several counterparts
and, as so executed, shall constitute one agreement binding upon the parties
hereto.
6.6. Integration of Terms. This Agreement contains the entire agreement
between the parties relating to the subject matter hereof and supersedes all
oral statements and prior writings with respect thereto.
6.7 Interpretation. The headings of the articles and sections hereof are
for convenience of reference only and shall not affect the meaning or
construction of any provision hereof.
6.8. Notices. All notices, requests and demands to or upon the parties
hereto to be effective shall be in writing or by facsimile transmissions and,
unless otherwise expressly provided herein, shall be deemed to have been duly
given or made when delivered by hand or one Business Day following delivery to
an overnight delivery service guaranteeing next business day delivery, delivery
charge prepaid or, in the case of facsimile transmission, when sent (only if
sent on a Business Day) receipt by addressee acknowledged, addressed as follows
in the case of BOCFC and Brookdale or to such other address as may be hereafter
notified by the parties hereto:
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<PAGE>
Brookdale: Brookdale Living Communities, Inc.
77 West Wacker Drive, Suite 4800
Chicago, Illinois 60601
Attn: Darryl W. Copeland, Jr.
Robert J. Rudnik, Esq.
Fax No. (312) 977-3699
with a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attention: Wayne D. Boberg, Esq.
Fax No. (312) 558-5700
BOCFC: Banc One Capital Funding Corporation
150 East Gay Street, 24th Floor
Columbus, Ohio 43215
Attention: John W. Adams
Fax No. (614) 217-0222
with a copy to:
Banc One Capital Markets, Inc.
150 East Gay Street, 24th Floor
Columbus, Ohio 43215
Attention: Legal Department
Fax No. (614) 217-1217
6.9 Applicable Law. BOCFC and Brookdale agree that the State of Ohio has a
substantial relationship to the transaction evidenced hereby and agree that this
Agreement and the rights and obligations of the parties hereunder shall be
governed by and construed in accordance with the laws of the State of Ohio
(without giving effect to the principles of conflicts of law).
6.10 Waiver of Jury Trial; Consent to Venue. BOCFC and Brookdale, after
consulting or having had the opportunity to consult with counsel, knowingly,
voluntarily and intentionally waive any right any of them may have to a trial by
jury in any litigation based upon or arising out of this Agreement, or any of
the transactions contemplated by this Agreement, or any course of conduct,
dealing, statements (whether oral or written) or actions of either of them in
connection with this Agreement. Neither BOCFC nor Brookdale shall seek to
consolidate, by counterclaim or otherwise, any action in which a jury trial has
been waived with any other action in which a
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<PAGE>
jury trial cannot be or has not been waived unless failure to so consolidate
would result in a loss of such claim. In the event of a dispute under this
Agreement, the parties hereby agree that jurisdiction and venue lies in a court
of competent jurisdiction in Franklin County, Ohio. These provisions shall not
be deemed to have been modified in any respect or relinquished by either BOCFC
or Brookdale except by a written instrument executed by each of them.
6.11 Payment in Full of Interim Conditional Investment Agreement. BOCFC
and Brookdale are parties to a certain Interim Conditional Investment Agreement
(the "Interim Agreement") pursuant to which Brookdale invested the sum of
$1,000,000. BOCFC and Brookdale acknowledge and agree that all amounts owing by
BOCFC to Brookdale pursuant to the Interim Agreement have been paid in full and
the Interim Agreement has been terminated effective as of the Effective Date.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of June ___, 1998.
BROOKDALE LIVING COMMUNITIES, INC.,
a Delaware corporation
By:______________________________________
Darryl W. Copeland, Jr.
Title:Executive Vice President
BANC ONE CAPITAL FUNDING
CORPORATION,
an Ohio corporation
By:______________________________________
John W. Adams
Title:Director
8
<PAGE>
Exhibit 2.3
Conditions to Redemption
The obligation of BOCFC to make any payments to Brookdale pursuant to
Section 2.3 of the Agreement shall, in addition to any other requirements set
forth in Section 2.3, be subject to the following conditions:
(1) Brookdale, or its designee, shall have exercised the Equity Option
Agreement in accordance with the terms, conditions and requirements
of (a) the Equity Option Agreement and (b) that certain
Intercreditor Agreement of even date herewith (the "Intercreditor
Agreement") among Corporate Investor, Subordinated Borrower, General
Partner, Owner, Brookdale, BOCP IV, Brookdale Living Communities of
Michigan, Inc., and Nomura Asset Capital Corporation.
(2) The proceeds from the exercise of the Equity Option Agreement and,
if applicable, the Property Option Agreement (as such term is
defined in the Equity Option Agreement) and any capital contribution
to Subordinate Borrower made by or on behalf of Brookdale to satisfy
its obligations pursuant to the Equity Option Agreement or the
Property Option Agreement, shall meet the requirements of
"Subordinate Lender Option Related Proceeds," as such term is
defined in the Intercreditor Agreement, and shall be permitted to be
paid to, and retained by, BOCP IV in accordance with the
Intercreditor Agreement.
9
<PAGE>
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY
NOT BE DISTRIBUTED, SOLD, TRANSFERRED, ASSIGNED, HYPOTHECATED OR OFFERED UNLESS
THERE IS IN EFFECT A REGISTRATION STATEMENT UNDER SUCH ACT AND LAWS COVERING
SUCH SECURITIES OR THE ISSUER RECEIVES AN OPINION OF COUNSEL OR A NO-ACTION
LETTER FROM THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION STATING THAT
SUCH DISTRIBUTION, SALE, TRANSFER, ASSIGNMENT, HYPOTHECATION OR OFFER IS EXEMPT
FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT AND LAWS.
-----------------------------------------------------
Brookdale Living Communities, Inc.
Warrant Certificate
Issued to
Banc One Capital Markets, Inc.
in the
Purchase of Common Stock
of
Brookdale Living Communities, Inc.
--------------------------------------------------------
Dated as of June 17, 1998
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TABLE OF CONTENTS
Page
Section 1. Definitions................................................1
Section 2. Duration and Exercise of Warrant...........................5
2.1 Number of Shares of Common Stock. .................5
2.2 Warrant Exercise Period. ...........................5
2.3 Manner of Exercise. ...............................5
2.4 When Exercise Effective. ..........................6
2.5 Delivery of Stock Certificates, New Warrant
Certificate, etc. 6
Section 3. Anti-dilution Adjustment...................................6
3.1 Adjustment Event. ..................................6
3.2 Reorganization Event. ..............................6
3.3 Other Event. .......................................6
3.4 Rights Offering. ...................................7
3.5 Preemptive Rights. .................................7
Section 4. Restrictions on Transfer...................................8
4.1 Restrictive Legends..................................8
4.2 Notice of Proposed Transfer; Opinion of Counsel......8
Section 5. Availability of Information................................9
Section 6. Reservation of Stock, Etc..................................9
Section 7. Capitalization............................................10
Section 8. Ownership; Registration of Transfer; Exchange and
Substitution of Warrant..................................10
8.1 Ownership of Warrant. .............................10
8.2 Registration of Transfers. ........................10
8.3 Replacement of Warrant Certificate. ..............10
8.4 Expenses............................................10
Section 9. No Rights as Stockholder..................................11
Section 10. Demand Registration Rights................................11
10.1 Demand for Registration.............................11
10.2 Registration Statement Form. ......................11
10.3 Effective Registration Statement. .................11
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10.4 Expenses. .........................................11
10.5 Underwritten Offerings. ............................12
10.6 Priority in Requested Registrations. .............12
Section 11. "Piggyback" Registration Rights...........................12
11.1 Participation in Registration.......................12
11.2 Expenses. ........................................13
11.3 Underwritten Offerings..............................13
11.4 Priority in Registrations. ........................13
Section 12. Registration Procedures. .................................14
Section 13. Indemnification...........................................16
13.1 Indemnification by the Company. ..................16
13.2 Indemnification by the Holder. ...................16
13.3 Procedures for Claims...............................17
Section 14. Rule 144..................................................17
Section 15. Termination of Registration Rights. .....................17
Section 16. Miscellaneous.............................................18
16.1 Amendment. ........................................18
16.2 Choice of Law. ....................................18
16.3 Headings. .........................................18
Form of Warrant Certificate................................................A-1
Form of Assignment of Warrant..............................................B-1
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<PAGE>
Warrant Certificate
Dated as of June 17, 1998
This Warrant Certificate ("Warrant Certificate") certifies that, for value
received, Banc One Capital Markets, Inc., an Ohio corporation (the "Holder"), is
entitled to purchase from Brookdale Living Communities, Inc., a Delaware
corporation (the "Company"), up to 5,000 shares of the Common Stock of the
Company as hereinafter provided, in the manner and subject to the terms and
conditions set forth herein.
The Warrant evidenced by this Warrant Certificate is being issued by the
Company to the Holder as consideration for its assistance in connection with
certain loan transactions entered into between AH Michigan Subordinated, LLC, an
Ohio limited liability company (the "Borrower") and Banc One Capital Partners
IV, Ltd., an Ohio limited liability company ("Lender"), an Affiliate of the
Holder, as lender, effective the date hereof, wherein Lender is making loans to
the Borrower in the aggregate principal amount of $11,000,776 (collectively, the
"Loan"). The Company has issued a limited recourse guarantee in connection with
the Loan and will derive significant benefits from the Loan.
Section 1. Definitions.
1.1 "Affiliate" of any specified Person means any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such specified Person. A Person shall be deemed to control
a corporation if such Person possesses, directly or indirectly, of the power to
vote 10% or more of the Voting Power of a Person, or the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
1.2 "Applicable Law" means, with respect to any Person, any and all
federal, national, state, regional, local, municipal or foreign laws, statutes,
rules, regulations, guidelines, ordinances, licenses, permits, judicial or
administrative decisions of any country, or any political subdivision, agency,
commission, official or court thereof having jurisdiction over such Person or
its business.
1.3 "Adjustment Event" means any of the following events:
(i) the Company declares a dividend or makes a distribution
with respect to outstanding shares of its Capital Stock,
which dividend or distribution is paid entirely or in
part in shares of Common Stock or Convertible
Securities; or
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(ii) the Company subdivides, combines or reclassifies
outstanding shares of its Common Stock or Convertible
Securities.
In no event shall an offering described in Section 3.5 also constitute an
Adjustment Event.
1.4 "Business Day" means any day other than a Saturday, Sunday or
day on which banking institutions are authorized or required by law or executive
order to be closed in the City of Columbus, Ohio or in the City of Chicago,
Illinois.
1.5 "Capital Stock" of any Person means any and all shares,
interests, participations or other equivalents (however designated) of corporate
stock (including each class of common stock and preferred stock) or partnership
or membership interests of such Person.
1.6 "Charter Documents" mean a Person's formation or other governing
documents, including but not limited to, as applicable, its certificate or
articles of incorporation, by-laws, code of regulations, articles of
organization, operating agreement, certificate of limited partnership and
partnership agreement.
1.7 "Commission" means the United States Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
1.8 "Common Shares" or "Common Stock" means the shares of common
stock, $0.01 par value per share, of the Company, treated as a single class of
stock, at any time outstanding.
1.9 "Company" means Brookdale Living Communities, Inc., a Delaware
corporation, and includes any Person which shall succeed to or assume the
obligations of the Company, through restructuring or otherwise.
1.10 "Convertible Securities" means evidences of indebtedness,
shares of stock or other securities that are convertible into or exchangeable
for, with or without payment of additional consideration in cash or property, or
options, warrants or other rights that are exercisable for, Common Shares,
whether or not the right to convert, exchange or exercise is at the time
exercisable.
1.11 "Formation Registration Rights Agreement" means that certain
Registration Rights Agreement, dated as of May 7, 1997, by and among the
Company, The Prime Group, Inc., Prime Group Limited Partnership, and Prime Group
VI, L.P., as amended.
1.12 "Formation Holders" means the "Holders" as defined in the
Formation Registration Rights Agreement.
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1.13 "Holder" means Banc One Capital Markets, Inc., an Ohio
corporation, together with its successors and permitted assigns.
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<PAGE>
1.14 "Loan" has the definition set forth in the second grammatical
paragraph of this Warrant Certificate.
1.15 "Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint stock company, trust,
unincorporated organization, governmental authority or any other form of entity.
1.16 "Preemption Offering" means any offering of Common Shares,
Convertible Securities or other shares of Capital Stock of the Company by or on
behalf of the Company other than:
(i) any Rights Offering;
(ii) the issuance of the Warrant Shares subject to this Warrant
Certificate;
(iii) the issuance or sale of Common Shares pursuant to any
employee, officer or director stock option plan approved by
the board of directors of the Company; provided, that (a)
options are granted only with respect to Common Shares, (b)
the minimum exercise price per Common Share for such shares
is not less than the market determined value per share on
the date such options were granted, as determined in
accordance with the Company's stock incentive plans, and (c)
no options are granted to Persons other than officers,
directors and employees of the Company or any Subsidiary;
and
(iv) the sale and issuance of Common Shares, Convertible
Securities or other Capital Stock pursuant to any Qualified
Public Offering.
1.16 "Qualified Public Offering" means the first offer and sale to
the public by the Company or any holders of shares of any class of its Capital
Stock, after the dated hereof, pursuant to a registration statement that has
been declared effective by the Commission.
1.17 "Reorganization Event" means:
(i) any capital reorganization or reclassification or
recapitalization of any shares of Capital Stock of the
Company (other than an event described in Section 1.3);
(ii) any merger or consolidation of the Company with or into any
other Person in which the Company is not the surviving
entity, or which
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<PAGE>
effects a reclassification or recapitalization of any shares
of Capital Stock of the Company; or
(iii) the sale, exchange or transfer of all or substantially all
of the property of the Company to any other Person.
1.18 "Restricted Securities" means (a) any Warrant bearing the
applicable legend set forth in the Warrant, (b) any Warrant Shares which are
evidenced by a certificate or certificates bearing such legend, and (c) unless
the context otherwise requires, any Common Shares which are at the time issuable
upon the exercise of any Warrant and which, when so issued, will be evidenced by
a certificate or certificates bearing such legend.
1.19 "Rights Offering" means any offering of Capital Stock or
Convertible Securities of the Company or any distribution of rights to purchase
Capital Stock or Convertible Securities of the Company that is made
substantially on a pro rata basis among the holders of Capital Stock of the
Company.
1.20 "Securities" means collectively, the Warrant and the Warrant
Shares.
1.21 "Securities Act" means the Securities Act of 1933, as amended,
or any similar federal statute, and the rules and regulations of the Commission
thereunder, all as of the same shall be in effect at the time. References to a
particular section of the Securities Act of 1933 shall include a reference to
the comparable section, if any, of any such similar successor federal statute.
1.22 "Securities Exchange Act" means the Securities Exchange Act of
1934, as amended, or any similar federal statute, and the rules and regulations
of the Commission thereunder, all as of the same shall be in effect at the time.
Reference to a particular section of the Securities Exchange Act of 1934 shall
include a reference to the comparable section, if any, of any similar successor
federal statute.
1.23 "Subsidiary" means any entity of which more than 50% of the
Voting Power is owned or controlled by the Company at any date of determination,
either directly or through Subsidiaries.
1.24 "Tax(es)" means any federal, state, local or foreign income,
gross receipts, license, franchise, payroll, employment, excise, unemployment,
personal property, severance, disability, real property, sales, use, transfer,
value added, alternative, estimated or other tax of any kind whatsoever,
including any interest, penalty or addition thereto, whether disputed or not.
1.25 "Transfer", "Transferred" means, with respect to any item, the
sale, exchange, pledge, conveyance, lease, transfer or other disposition of such
item or any interest therein.
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1.26 "Voting Power" means with respect to any entity, the power to
vote for or designate members of the board of directors or similar group,
whether exercised by virtue of the record ownership of securities, under a close
corporation or similar agreement or under an irrevocable proxy.
1.27 "Warrant" means the warrant issued by the Company to the Holder
evidenced by this Warrant Certificate.
1.28 "Warrant Certificate" means this warrant certificate or any
replacement warrant certificate issued to the Holder.
1.29 "Warrant Exercise Price" means $30.40 per Warrant Share, which
is equal to 120% of the average of the daily per share closing prices of the
Common Stock on NASDAQ for the ten (10) consecutive trading days prior to the
date hereof.
1.30 "Warrant Expiration Date" means the fourth anniversary of the
date hereof.
1.31 "Warrant Shares" means the Common Shares issuable upon exercise
of the Warrant.
Section 2. Duration and Exercise of Warrant.
2.1 Number of Shares of Common Stock. Subject to the terms and
conditions set forth in this Warrant Certificate, Holder may purchase up to
5,000 shares of Common Stock of Company. The number of Warrant Shares that may
be purchased by the Holder pursuant to this Section 2.1 in consideration of the
payment of the Warrant Exercise Price is subject to adjustment as provided for
in Section 3.
2.2 Warrant Exercise Period. The Warrant shall be exercisable in a
single or partial exercise at any time after the date hereof but on or before
the Warrant Expiration Date.
2.3 Manner of Exercise. The Warrant may be exercised by the Holder
in a single exercise upon surrender of this Warrant Certificate and the delivery
of the Notice of Exercise attached hereto duly completed and executed on behalf
of the Holder, at the principal office of the Company (or at such other office
or agency of the Company as it may designate by notice to the Holder at the
address of the Holder appearing on the books of the Company), upon payment of an
amount equal to the Warrant Exercise Price multiplied by the number of Warrant
Shares to be purchased pursuant to such exercise by wire transfer or delivery of
a certified or cashier's check to the Company. Any exercise of a Warrant
pursuant to this Warrant Certificate shall be for only full Warrant Shares and
shall not be for partial Warrant Shares.
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2.4 When Exercise Effective. The exercise of the Warrant shall be
deemed to have been effected immediately prior to the close of business on the
Business Day on which (a) the Notice of Exercise shall have been delivered to
the Company, (b) this Warrant Certificate shall have been surrendered to the
Company, and (c) the Company shall have received payment of the Warrant Exercise
Price for the Warrant Shares to be purchased in connection with such exercise as
provided in Section 2.3, and immediately prior to the close of business on such
Business Day the Holder shall be deemed to have become the holder of record of
the Warrant Shares.
2.5 Delivery of Stock Certificates, New Warrant Certificate, etc. As
soon as practicable after the effective exercise of the Warrant, the Company at
its expense (including any applicable issue taxes) will cause to be issued in
the name of and delivered to the Holder a certificate or certificates for the
number of Warrant Shares to which the Holder shall be entitled upon such
exercise.
Section 3. Anti-dilution Adjustment.
3.1 Adjustment Event. Upon the occurrence of any Adjustment Event,
the number of Warrant Shares shall be adjusted immediately after the applicable
record date with respect to such Adjustment Event as follows. The adjusted
number of Warrant Shares shall be a number equal to the number of Warrant Shares
issuable upon exercise of the Warrant immediately prior to such record date
multiplied by a fraction (i) the numerator of which is the number of outstanding
Common Shares immediately after such Adjustment Event, and (ii) the denominator
of which is the number of outstanding Common Shares immediately prior to the
record date. Any such adjustment shall be calculated to the nearest whole
Warrant Share. Notwithstanding any other provision of this Section 3.1, no
adjustment shall be made with respect to the issuance of Common Shares,
Convertible Securities or other Capital Stock after the date hereof when such
issuance constitutes a Preemption Offering.
3.2 Reorganization Event. Upon the occurrence of a Reorganization
Event, there shall thereafter be issuable upon the exercise of the Warrant (in
lieu of the Warrant Shares), as appropriate, the number of shares of stock,
other securities or property to which the Holder would have been entitled had
the Holder exercised the Warrant and received the Warrant Shares immediately
prior to the record date for such Reorganization Event.
Prior to and as a condition of the consummation of any Reorganization
Event, the Company shall cause effective provisions to be made to effect the
purposes of this Section 3.2, including, if appropriate, an agreement among the
Company, any successor to the Company and the Holder.
3.3 Other Event. In case any event shall occur as to which the other
provisions of this Section 3 are not strictly applicable but the failure to make
any adjustment would not fairly
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protect the purchase rights represented by the Warrant in accordance with the
essential intent and principles hereof, then the Holder may request in writing
within one hundred twenty (120) days after the occurrence of such event that the
Company examine the propriety of an adjustment to the number of Warrant Shares
issuable upon exercise of the Warrant. Unless the Company and the Holder shall
have mutually agreed upon an adjustment, or that no adjustment is required,
within thirty (30) days after the receipt of such request, the Company shall
appoint a firm of independent certified public accountants of recognized
national standing (which may be the regularly engaged accountants of the
Company), to give an opinion upon the adjustment, if any, on a basis consistent
with the essential intent and principles established in this Section 3,
necessary to preserve the purchase rights represented by the Warrant. Upon
receipt of such opinion, the Company will promptly mail a copy thereof to the
Holder and shall make the adjustments, if any, described therein. If such
opinion states that no such adjustment is necessary, the Holder shall reimburse
the Company for the cost and expense of such opinion, and if an adjustment is
necessary, the Company shall pay the cost and expense of such opinion.
Notwithstanding any other provision of this Section 3.3, no adjustment shall be
made with respect to the issuance of Common Shares, Convertible Securities or
other Capital Stock after the date hereof when such issuance constitutes a
Preemption Offering.
3.4 Rights Offering. In the event the Company shall effect a Rights
Offering, the Holder shall be entitled, at its option, to elect to participate
in each and every such offering as if the Warrant had been exercised and the
Holder was, at the time of any such rights offering, then a holder of that
number of Common Shares to which the Holder is then entitled on the exercise of
the Warrant.
3.5 Preemptive Rights. In the event of any Preemption Offering, (i)
the Company shall notify the Holder in writing of the number of Common Shares,
Convertible Securities or other Capital Stock subject to such Preemption
Offering and the cash or cash equivalent purchase price (determined by the
Company in good faith) thereof, and (ii) the Holder shall have the right for a
period of thirty (30) days following such notice to purchase prior to the
exercise of the Warrant up to that number of Common Shares, Convertible
Securities or other Capital Stock that is sufficient to permit the Holder to
maintain the percentage of outstanding Common Shares which the Holder owns or
would be entitled to purchase upon exercise of the Warrant, after giving effect
to the Holder's purchase under this Section 3.5 and the sale of the Common
Shares subject to such Preemption Offering.
The Holder shall have the right, during the period specified herein, to
purchase any or all of the new Common Shares or Convertible Securities that it
is entitled to purchase under this provision at the purchase price and on the
terms stated in the Preemption Offering. Notice by the Holder of its
participation, in whole or in part, in the Preemption Offering shall be in
writing and signed by the Holder and shall be delivered to the Company prior to
the end of the period specified herein, setting forth the number of new Common
Shares or Convertible Securities the Holder elects to purchase. With respect to
any of the new Common Shares or Convertible Securities not purchased by the
Holder hereunder, the Company may during the period one hundred and eighty (180)
days following the date of expiration of the Preemption Offering sell to any
other Person or Persons all or any part
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of such Common Shares or Convertible Securities, but only on terms and
conditions that are no more favorable to such Person or Persons or less
favorable to the Company than those set forth in the Preemption Offering.
Section 4. Restrictions on Transfer.
4.1 Restrictive Legends. Except as otherwise permitted by this
Section 4, the Warrant, each Warrant issued in exchange or substitution for any
Warrant, each Warrant issued upon the registration of Transfer of any Warrant,
each certificate representing the Warrant Shares and each certificate issued
upon the registration of Transfer of any Warrant Shares, shall be stamped or
otherwise imprinted with a legend in substantially the following form:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF
ANY STATE, AND MAY NOT BE DISTRIBUTED, SOLD, TRANSFERRED, ASSIGNED,
HYPOTHECATED OR OFFERED UNLESS THERE IS IN EFFECT A REGISTRATION STATEMENT
UNDER SUCH ACT AND LAWS COVERING SUCH SECURITIES OR THE ISSUER RECEIVES AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER OR A NO-ACTION
LETTER FROM THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION STATING
THAT SUCH DISTRIBUTION, SALE, TRANSFER, ASSIGNMENT, HYPOTHECATION OR OFFER
IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF
SUCH ACT AND LAWS."
4.2 Notice of Proposed Transfer; Opinion of Counsel. Prior to any
Transfer of any Restricted Securities, the Holder will give notice ("Notice") to
the Company of the Holder's intention to effect such Transfer. Each such Notice
of a proposed Transfer (a) shall describe the manner and circumstances of the
proposed Transfer in sufficient detail to enable counsel to render the opinion
referred to below, and (b) shall designate counsel for the Holder. The Holder
will submit a copy of such Notice to the counsel designated in such Notice and
the Company will promptly submit a copy of the Notice to its counsel. The
following provisions shall then apply:
(i) If in the opinion of counsel to the Company the proposed
Transfer may be effected without registration of such
Restricted Securities under the Securities Act, the Company
will promptly notify the Holder and the Holder shall
thereupon be entitled to Transfer such Restricted Securities
in accordance with the terms of the Notice delivered by the
Holder to the Company. Each Warrant or certificate for
Warrant Shares, if any, issued upon or in connection with
such Transfer shall bear the applicable restrictive legend
set forth in Section 4.1, unless in ----------- the opinion
of such counsel, such legend, requires modification or is
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no longer required to ensure compliance with the Securities
Act. If for any reason, counsel for the Company (after
having been furnished with the information required by this
Section 4.2) shall fail to deliver an opinion to the
Company, or the Company shall fail to notify the Holder as
aforesaid, within sixty (60) days after receipt of Notice of
the Holder's intention to effect a Transfer, then for all
purposes of the Warrant, the opinion of counsel for the
Holder shall be sufficient to authorize the proposed
Transfer, provided the opinion is issued by counsel
recognized as experts in security law matters and the
opinion of counsel for the Company shall not be required in
connection with such proposed Transfer; or
(ii) If, in the opinion of counsel to the Company, the proposed
Transfer may not be effected without registration of such
Restricted Securities under the Securities Act, the Company
will promptly so notify the Holder and the Holder shall not
be entitled to Transfer such Restricted Securities until
receipt of a further Notice from the Company under clause
(i) above or until registration of such Restricted
Securities under the Securities Act has become effective.
Section 5. Availability of Information.
To the extent they are applicable to the Company, the Company will comply
with the reporting requirements of Sections 13 and 15(d) of the Securities
Exchange Act and all other public information reporting requirements of the
Commission (including the requirements of Rule 144 promulgated by the Commission
under the Securities Act) from time to time in effect. The Company will
cooperate with the Holder at the Holder's expense to complete and file any
information reporting forms presently or hereafter required by the Commission as
a condition to the availability of an exemption from the Securities Act for the
Transfer of any Restricted Securities or the Transfer of Restricted Securities
by affiliates of the Company.
Section 6. Reservation of Stock, Etc.
The Company will at all times prior to the Warrant Expiration Date reserve
and keep available, solely for issuance and delivery upon the exercise of the
Warrant and free from preemptive rights, a sufficient number of shares of Common
Stock to cover the Warrant Shares issuable or exchangeable upon the exercise of
the Warrant. All such shares shall be duly authorized and, when issued upon such
exercise against payment therefor as provided for in Section 2.3, shall be
validly issued, fully paid and non-assessable.
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Section 7. Capitalization.
The Company represents and warrants that its authorized Capital Stock as
of the date hereof consists solely of (i) 75,000,000 shares of Common Stock, of
which 9,484,582 shares are issued and outstanding and zero (0) shares are
reserved for issuance upon the exercise or conversion of outstanding Convertible
Securities, and 1,070,418 shares are reserved for issuance upon the exercise of
options under the Company's Stock Incentive Plans, and (ii) 20,000,000 shares of
preferred stock of which zero (0) shares are issued and outstanding and that it
has no other Capital Stock authorized, issued or outstanding.
Section 8. Ownership; Registration of Transfer; Exchange and
Substitution of Warrant.
8.1 Ownership of Warrant. Until due presentment for Transfer, the
Company may treat the Person in whose name the Warrant is registered on the
register kept at the Company's principal office as the owner and holder hereof
for all purposes, notwithstanding any notice to the contrary, provided that when
the Warrant has been properly Transferred, the Company shall treat such
transferee as the owner of the Warrant for all purposes, notwithstanding any
Notice to the contrary. Subject to the foregoing provisions and to Section 4,
the Warrant, if properly Transferred, may be exercised by the transferee without
first having a new Warrant Certificate issued.
8.2 Registration of Transfers. Subject to Section 4 hereof, the
Company shall register the Transfer of the Warrant permitted under the terms
hereof upon records to be maintained by the Company for that purpose upon
surrender of this Warrant Certificate to the Company at the Company's principal
office, together with the Form of Assignment attached hereto duly completed and
executed. Upon any such registration of Transfer, a new Warrant Certificate in
substantially the form of this Warrant Certificate, shall be issued to the
transferee.
8.3 Replacement of Warrant Certificate. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant Certificate and of an indemnification reasonably
satisfactory to the Company, or, in the case of any such mutilation, upon
surrender of this Warrant Certificate for cancellation at the Company's
principal office, the Company at the Holder's expense will promptly execute and
deliver, in lieu thereof, a new Warrant Certificate of like tenor.
8.4 Expenses. Except as otherwise provided for herein, the Company
will pay all expenses, Taxes (other than transfer and income Taxes) and other
charges in connection with the preparation, issuance and delivery from time to
time of this Warrant Certificate or the Warrant Shares.
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Section 9. No Rights as Stockholder.
Nothing contained in this Warrant Certificate shall be construed as
conferring upon the Holder any rights as a stockholder of the Company prior to
the exercise hereof or as imposing any obligation on the Holder to purchase any
Capital Stock of the Company.
Section 10. Demand Registration Rights.
10.1 Demand for Registration. At anytime after the exercise of the
Warrant, and subject to the conditions set forth below, if the Company shall
receive a written request from the Holder requesting that the Company effect the
registration under the Securities Act of all of the Holder's and its Affiliate's
Warrant Shares, the Company shall use its reasonable best efforts to effect such
registration as soon as practicable. Subject to the provisions of Section 10.6,
the Company may register for sale in such registration other securities which
the Company has been requested or otherwise desires to register by the holders
thereof (which may include Common Shares held by the Formation Holders and/or
their permitted assigns); provided, however, that no securities other than
Warrant Shares shall be included in such registration if the managing
underwriter advises the Holder that the inclusion of such other securities would
adversely affect such offering unless the Holder shall have consented in writing
to the inclusion of such other securities. The Company shall not be required to
effect more than one registration pursuant to requests made pursuant to this
Section 10, and shall not be required to effect any registration pursuant to
this Section 10 unless any registration can be made on Form S-3.
10.2 Registration Statement Form. Registrations under this Section
10 shall be on such appropriate registration forms as shall be selected by the
Company, provided that such forms permit the disposition of the Warrant Shares
in accordance with the Holder's intended method or methods of disposition as
specified in its request for such registration. The Company shall include in any
such registration statement all information which the Holder shall reasonably
request.
10.3 Effective Registration Statement. A registration requested
pursuant to this Section 10 shall not be deemed to have been effected (i) unless
a registration statement with respect thereto has become effective under the
Securities Act, (ii) if such registration is not kept continuously effective in
accordance with Section 12, (iii) if such registration becomes the subject of
any stop order, injunction or other order or requirement of the Commission or
other governmental agency or court for any reason other than an act or omission
of the Holder and the effectiveness or such registration statement is not
re-instituted within ninety (90) days, or (iv) if any conditions to closing
specified in the purchase agreement or underwriting agreement entered into in
connection with such registration are not satisfied for any reason other than an
act or omission of the Holder.
10.4 Expenses. The Company shall pay all registration expenses in
connection with any registration requested pursuant to this Section 10. The
Holder shall pay all underwriting
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discounts and commissions and transfer taxes, if any, relating to the sale or
other disposition of its Warrant Shares.
10.5 Underwritten Offerings. Only if a registration pursuant to this
Section 10 involves any Capital Stock of the Company or any other securities
other than the Warrant Shares held by the Holder and its Affiliates, may the
Holder at its option, request an underwritten offering. The underwriter or
underwriters thereof shall be selected by the Company. To the extent customary
for transactions similar to the transactions contemplated hereby, the Holder
may, at its option, require that any or all of the representations and
warranties by, and the other agreements on the part of, the Company to and for
the benefit of such underwriters shall also be made to and for the benefit of
the Holder. Holder shall not be required to make any representations and
warranties to or agreements with the Company or the underwriters other than
representations, warranties or agreements regarding the Holder, the Holder's
intended method of distribution, any other information provided by the Holder
for inclusion in the registration statement or prospectus and any other
representation required by law or by customary practice of underwritten
secondary offerings.
10.6 Priority in Requested Registrations. If a requested
registration pursuant to this Section 10 involves an underwritten offering, and
if the managing underwriter shall advise the Company in writing that, in its
opinion, the number of securities of any class requested to be included in such
registration exceeds the number which can be sold in (or during the time of)
such offering without delaying or jeopardizing the success of the offering, then
the Company will include in such registration (i) first, all of the Holder's
Warrant Shares that the Company is so advised can be sold in such offering, (ii)
second, to the extent permitted by the managing underwriter, securities to be
registered by the Company for its own account and/or by other holders of
securities (which may include the Formation Holders and/or their permitted
assigns) in such manner and amounts required by the Formation Registration
Rights Agreement, if applicable, or as the Company shall determine.
Section 11. "Piggyback" Registration Rights.
11.1 Participation in Registration. If the Company at any time
proposes to register any securities under the Securities Act (other than by a
registration on Form S-4 or Form S-8 or any successor or similar form and other
than pursuant to Section 10), whether or not for sale for its own account, it
will each such time, promptly give Notice to the Holder. Upon the written
request of the Holder made within thirty (30) days after the receipt of any such
Notice (which request shall specify the Warrant Shares intended to be disposed
of and the intended method of disposition), the Holder shall have the right,
subject to the prior registration rights of the Formation Holders, to
participate in such registration on the terms and conditions thereof. If, at any
time after giving written notice of its intention to register any securities and
prior to the effective date of the registration statement filed in connection
with such registration, the Company shall determine for any reason not to
register or to delay registration of such securities, the Company may, at its
election, give written notice of such determination to the Holder and,
thereupon, (i) in the case of a determination not to register, the Company shall
be relieved of its obligation to register any Warrant Shares in connection
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with such registration (but not from its obligation to pay any registration
expenses in connection therewith), without prejudice, however, to the rights of
the Holder to request that such registration be effected as a registration under
Section 10, and (ii) in the case of a determination to delay registration, the
Company shall be permitted to delay registering any Warrant Shares for the same
period as the delay in registering such other securities. No registration
effected under this Section 11 shall relieve the Company of its obligation to
effect any registration under Section 10.
11.2 Expenses. The Company will pay all registration expenses in
connection with each registration of Warrant Shares requested pursuant to this
Section 11. The Holder shall pay all underwriting discounts and commissions and
transfer taxes, if any, relating to the sale or other disposition of its Warrant
Shares.
11.3 Underwritten Offerings. If a registration pursuant to this
Section 11 involves an underwritten offering, the Company shall, if requested by
the Holder, and subject to the prior registration rights of the Formation
Holders, arrange for such underwriters to include the Holder's Warrant Shares
among the securities to be distributed by such underwriters. In such case, the
Holder shall be a party to the underwriting agreement and may, at its option,
require that any or all of the representations and warranties by, and the other
agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of the Holder. Holder
shall not be required to make any representations and warranties to or
agreements with the Company or the underwriters other than representations,
warranties or agreements regarding the Holder, the Holder's intended method of
distribution, any other information provided by the Holder for inclusion in the
registration statement or prospectus and any other representation required by
law or by customary practices for such transactions.
11.4 Priority in Registrations. If a registration pursuant to this
Section 11 involves an underwritten offering, and if the managing underwriter
shall advise the Company in writing that, in its opinion, the number of
securities of any class requested to be included in such registration exceeds
the number which can be sold in (or during the time of) such offering without
delaying, jeopardizing or otherwise adversely affecting the success of the
offering, then the Company will include in such registration, to the extent to
which the Company is advised can be sold in such offering, first, all securities
proposed by the Company to be sold for its own account, and second, such Common
Shares held by the Formation Holders and/or their permitted assigns requested by
the Formation Holders and/or their permitted assigns to be included in such
registration pursuant to the Formation Registration Rights Agreement, and third,
such Warrant Shares requested to be included in such registration and all other
securities proposed to be sold by other holders shall be included in such
registration pro rata on the basis of the number of shares so proposed to be
sold.
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Section 12. Registration Procedures.
If the Company is required to effect the registration of any Warrant
Shares as provided herein (subject to the minimum number of Warrant Shares to be
registered pursuant to Section 10.1), the Company shall proceed in the following
manner:
(i) prepare and as expeditiously as possible file (and in any
event within one hundred and twenty (120) days of receipt of
Holder's request under Section 10) with the Commission the
registration statement to effect such registration and use
its reasonable best efforts to cause such Registration
Statement to become effective;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the
prospectus used in connection therewith as may be necessary
to keep such registration statement effective and to comply
with the provisions of the Securities Act with respect to
the disposition of all securities covered by such
registration statement until such time as all Warrant Shares
have been disposed of in accordance with the intended
methods of disposition by the Holder;
(iii) furnish to Holder such number of prospectuses (including
preliminary prospectuses) and copies of each amendment and
supplement thereto and such other documents as Holder may
reasonably request in order to facilitate the disposition of
the Warrant Shares;
(iv) use its reasonable best efforts to register or qualify all
Warrant Shares covered by such registration statement under
the securities or blue sky laws of such jurisdictions as the
Holder shall reasonably request, to keep such registration
or qualification in effect for so long as such registration
statement remains in effect, and take any other action which
may be reasonably necessary or desirable to enable the
Holder to consummate the disposition of its Warrant Shares
in such jurisdictions in accordance with the intended method
of disposition, provided, however, that the Company shall
not be required to qualify to do business, to consent to
general service of process, or to register as a broker or
dealer in any such jurisdiction;
(v) enter into and perform its obligations under any
underwriting or placement agreement, and take all reasonable
actions in connection therewith in order to expedite or
facilitate the disposition of the Warrant Shares;
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(vi) notify the Holder in writing of (i) any stop order or the
commencement of any proceedings for that purpose, (ii) any
suspension of the qualification of the Warrant Shares for
sale in any jurisdiction or the commencement of any
proceedings for that purpose, or (iii) any notification
received by the Company regarding the necessity or
desirability of filing any supplement or amendment to the
registration statement;
(vii) in any underwritten offering, furnish to the Holder (a) an
opinion of counsel for the Company, dated the effective date
of such registration statement, in form and substance as is
customarily given to underwriters, and (b) a comfort letter,
dated the effective date of such registration statement,
signed by the Company's independent public accountants in
form and substance as is customarily given to underwriters,
in each case addressed to the underwriters and the Holder;
(viii) notify Holder upon discovery of the happening of any event
as a result of which the prospectus included in such
registration statement includes an untrue statement of any
material fact or omits to state any material fact required
to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances
then existing, or any other event that would cause the
registration statement to no longer be current as required
by the Securities Act, and at the request of the Holder
promptly prepare, file and furnish to Holder a reasonable
number of copies of a supplement or an amendment to such
prospectus which may be required on account of such event
and use its reasonable best efforts to cause such supplement
or amendment to become effective;
(ix) cause to be maintained a transfer agent for its securities
from and after a date not later than the effective date of
such registration statement;
(x) use its reasonable best efforts to list all Warrant Shares
covered by such registration statement on any securities
exchange on which any of the Common Shares is then listed;
and
(xi) enter into such agreements and take such other actions as
the Holder shall reasonably request in order to expedite or
facilitate the disposition of such Warrant Shares.
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The Holder shall furnish to the Company such information regarding the
Holder and the distribution of the Warrant Shares as the Company may from time
to time reasonably request in writing.
Upon receipt of any Notice from the Company of the happening of any
circumstance or event of the kind described in subdivision (viii) of this
Section 12, the Holder shall forthwith discontinue the disposition of Warrant
Shares pursuant to the registration statement until it receives copies of the
supplemented or amended prospectus or other notification that such disposition
may be resumed, and, if so directed by the Company, will destroy all copies,
other than permanent file copies, then in Holder's possession of the prospectus
relating to such Warrant Shares. The Company will use its reasonable best
efforts to effect such amendment or supplement as promptly as possible.
Section 13. Indemnification.
13.1 Indemnification by the Company. In the event of any
registration pursuant to Section 11 or 12, the Company will, and hereby does,
indemnify and hold harmless the Holder, its directors, partners, members and
officers, any underwriter acting on behalf of the Holder and each other Person,
if any, who controls any such Person within the meaning of the Securities Act
(individually, an "Indemnified Party", and, collectively the "Indemnified
Parties"), against any losses, claims, damages, expenses (including legal fees
and expenses) or liabilities, joint or several, to which any one of them may
become subject under the Securities Act or otherwise; provided, however, that
the Company shall not be so liable (i) to the extent that any such loss, claim,
damage, liability or expense arises out of or is based upon the Company's
reliance upon written information furnished to the Company by any Indemnified
Party expressly stating that it is for use in the registration statement, (ii)
to the extent that any such loss, claim, damage, liability or expense arise out
of such Indemnified Party's failure to provide a copy of the final prospectus,
as the same may be then supplemented or amended, to the purchaser at or prior to
the written confirmation of the sale of Warrant Shares and (iii) to the extent
that any such loss, claim, damage, liability or expense arise from an act or
omission in a violation of the Securities Act by Holder or such Indemnified
Party or from the gross negligence or willful misconduct of the Holder or such
Indemnified Party. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Holder or other
Person and shall survive the transfer of the Warrant Shares by the Holder.
13.2 Indemnification by the Holder. As a condition to the Company's
obligation to include any Warrant Shares in any registration statement filed
pursuant to Section 11 or 12, the Holder shall indemnify and hold harmless (in
the same manner and to the same extent as set forth in Section 13.1) the
Company, each director and officer of the Company and any underwriter acting on
behalf of the Company and each other Person, if any, who controls any such
Person within the meaning of the Securities Act, against any losses, claims,
damages, expenses (including legal fees and expenses) or liabilities, joint or
several, to which any one of them may become subject under the Securities Act or
otherwise, to the extent that any such loss, claim, damage, liability or expense
arises out of or is based upon the Company's reliance upon written information
furnished to the Company
17
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by such Person expressly stating that it is for use in the registration
statement; provided, however, that the Holder shall not be so liable to the
extent that any such loss, claim, damage, liability or expense arise out of such
Person's (other than the Holder's or any Indemnified Party's) failure to provide
a copy of the final prospectus, as the same may be then supplemented or amended,
to the purchaser at or prior to the written confirmation of the sale of any
securities. Such indemnity shall remain in full force and effect, regardless of
any investigation made by or on behalf of the Company or any such Person and
shall survive the transfer of such Registrable Securities by the Holder.
13.3 Procedures for Claims. Promptly after receipt of notice of the
commencement of any action or proceeding involving a claim referred to in this
Section 13, an indemnified party will, if a claim in respect thereof is to be
made against an indemnifying party, give Notice to the indemnifying party of the
commencement of such action. Failure to give prompt Notice shall not relieve the
indemnifying party of its obligation under this Section 13, except to the extent
that the indemnifying party is actually prejudiced by such failure. The
indemnifying party shall be entitled to participate in and to assume the defense
of such action at its expense, jointly with any other indemnifying party, with
counsel reasonably satisfactory to the indemnified party; provided, however,
that an indemnified party shall have the right to retain its own counsel, with
fees and expenses thereof to be paid by the indemnifying party, if in such
indemnified party's reasonable judgment an actual or potential conflict of
interest between such indemnified and indemnifying party may exist in respect of
such claim. No indemnifying party shall, without the consent of the indemnified
party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof a release from all liability by the
plaintiff to the indemnified party. The amount paid or payable by an
indemnifying party shall include any legal or other expenses reasonably incurred
by the indemnified party in connection with the investigation or defense of any
such action or claim.
Section 14. Rule 144.
If the Company shall have filed a registration statement, the Company will
file the reports required to be filed by it under the Securities Act and the
Securities Exchange Act and the rules and regulations adopted by the Commission
thereunder. The Company shall, upon the reasonable request of the Holder,
provide the Holder and any institutional investor designated by such Holder such
financial and other information as the Holder may reasonably determine to be
necessary in order to permit the Holder's compliance with Rule 144A under the
Securities Act in connection with the resale of any Warrant Shares, except at
such time as the Company is subject to the reporting requirements of Section 13
or 15(d) of the Securities Exchange Act.
Section 15. Termination of Registration Rights.
The registration rights granted herein shall terminate on the date that
neither the Holder nor any Affiliate of the Holder owns any Warrant Shares.
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Section 16. Miscellaneous.
16.1 Amendment. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought.
16.2 Choice of Law. This Warrant Certificate and the Warrant
evidenced thereby shall be governed by the laws of the State of Delaware without
regard to conflicts of laws principles.
16.3 Headings. The Headings in this Warrant Certificate are inserted
for convenience only and shall not be deemed to constitute a part hereof.
BROOKDALE LIVING COMMUNITIES,
INC.
By:__________________________________
Name: ______________________________
Its:__________________________________
19
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FORM OF
NOTICE OF EXERCISE OF WARRANT
The undersigned is the holder of, and hereby elects to exercise, the
Warrant evidenced by that certain Warrant Certificate, dated as of June __, 1998
issued to Banc One Capital Markets, Inc. by Brookdale Living Communities, Inc. (
the "Warrant Certificate"), and to purchase the Warrant Shares issuable pursuant
to the Warrant Certificate and herewith makes payment in full therefor by
delivery of a certified check payable to the order of the Company in the amount
of the Warrant Exercise Price or by wire transfer of immediately available funds
in the amount of the Warrant Exercise Price and requests that certificate(s) for
such Warrant Shares be issued in the name of and delivered to
_______________________________________________, or in such denominations as
requested by the undersigned in writing to the Company concurrently herewith.
Capitalized terms used herein which are not defined herein, but which are
defined in the Warrant Certificate, shall have the meanings given such terms in
the Warrant Certificate.
Name of
Holder (Print):___________________________
Dated:_________________________________
By:__________________________________
Title:_________________________________
20
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FORM OF ASSIGNMENT OF WARRANT
FOR VALUED RECEIVED, __________________ hereby sells, assigns and
transfers to ___________________ all of the rights of the undersigned in and to
this Warrant and in and to that certain Warrant Certificate dated June __, 1998,
issued by Brookdale Living Communities, Inc. to Banc One Capital Markets, Inc.
Name of
Holder (Print):___________________________
Dated:_________________________________
By:__________________________________
Title:_________________________________
21
<PAGE>
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY
NOT BE DISTRIBUTED, SOLD, TRANSFERRED, ASSIGNED, HYPOTHECATED OR OFFERED UNLESS
THERE IS IN EFFECT A REGISTRATION STATEMENT UNDER SUCH ACT AND LAWS COVERING
SUCH SECURITIES OR THE ISSUER RECEIVES AN OPINION OF COUNSEL OR A NO-ACTION
LETTER FROM THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION STATING THAT
SUCH DISTRIBUTION, SALE, TRANSFER, ASSIGNMENT, HYPOTHECATION OR OFFER IS EXEMPT
FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT AND LAWS.
-----------------------------------------------------
Brookdale Living Communities, Inc.
Warrant Certificate
Issued to
Banc One Capital Partners IV, Ltd.
in the
Purchase of Common Stock
of
Brookdale Living Communities, Inc.
--------------------------------------------------------
Dated as of June 17, 1998
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TABLE OF CONTENTS
Page
Section 1. Definitions................................................1
Section 2. Duration and Exercise of Warrant...........................5
2.1 Number of Shares of Common Stock. .................5
2.2 Warrant Exercise Period. ...........................5
2.3 Manner of Exercise. ...............................5
2.4 When Exercise Effective. ..........................5
2.5 Delivery of Stock Certificates, New Warrant
Certificate, etc. 6
Section 3. Anti-dilution Adjustment...................................6
3.1 Adjustment Event. ..................................6
3.2 Reorganization Event. ..............................6
3.3 Other Event. .......................................6
3.4 Rights Offering. ...................................7
3.5 Preemptive Rights. .................................7
Section 4. Restrictions on Transfer...................................8
4.1 Restrictive Legends..................................8
4.2 Notice of Proposed Transfer; Opinion of Counsel......8
Section 5. Availability of Information................................9
Section 6. Reservation of Stock, Etc..................................9
Section 7. Capitalization............................................10
Section 8. Ownership; Registration of Transfer; Exchange and
Substitution of Warrant...................................10
8.1 Ownership of Warrant. .............................10
8.2 Registration of Transfers. ........................10
8.3 Replacement of Warrant Certificate. ..............10
8.4 Expenses............................................10
Section 9. No Rights as Stockholder..................................11
Section 10. Demand Registration Rights................................11
10.1 Demand for Registration.............................11
10.2 Registration Statement Form. ......................11
10.3 Effective Registration Statement. .................11
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10.4 Expenses. .........................................11
10.5 Underwritten Offerings. ............................12
10.6 Priority in Requested Registrations. .............12
Section 11. "Piggyback" Registration Rights...........................12
11.1 Participation in Registration.......................12
11.2 Expenses. ........................................13
11.3 Underwritten Offerings..............................13
11.4 Priority in Registrations. ........................13
Section 12. Registration Procedures. .................................14
Section 13. Indemnification...........................................16
13.1 Indemnification by the Company. ..................16
13.2 Indemnification by the Holder. ...................16
13.3 Procedures for Claims...............................17
Section 14. Rule 144..................................................17
Section 15. Termination of Registration Rights. .....................17
Section 16. Miscellaneous.............................................18
16.1 Amendment. ........................................18
16.2 Choice of Law. ....................................18
16.3 Headings. .........................................18
Form of Warrant Certificate................................................A-1
Form of Assignment of Warrant..............................................B-1
ii
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Warrant Certificate
Dated as of June 17, 1998
This Warrant Certificate ("Warrant Certificate") certifies that, for value
received, Banc One Capital Partners IV, Ltd., an Ohio limited liability company
(the "Holder"), is entitled to purchase from Brookdale Living Communities, Inc.,
a Delaware corporation (the "Company"), up to 20,000 shares of the Common Stock
of the Company as hereinafter provided, in the manner and subject to the terms
and conditions set forth herein.
The Warrant evidenced by this Warrant Certificate is being issued by the
Company to the Holder as additional consideration with respect to a certain loan
transaction entered into between AH Michigan Subordinated, LLC, an Ohio limited
liability company (the "Borrower"), as borrower, and Holder, as lender,
effective the date hereof, wherein Holder is making loans to the Borrower in the
aggregate principal amount of $11,000,776 (collectively, the "Loan"). The
Company has issued a limited recourse guarantee in connection with the Loan and
will derive significant benefits from the Loan.
Section 1. Definitions.
1.1 "Affiliate" of any specified Person means any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such specified Person. A Person shall be deemed to control
a corporation if such Person possesses, directly or indirectly, of the power to
vote 10% or more of the Voting Power of a Person, or the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
1.2 "Applicable Law" means, with respect to any Person, any and all
federal, national, state, regional, local, municipal or foreign laws, statutes,
rules, regulations, guidelines, ordinances, licenses, permits, judicial or
administrative decisions of any country, or any political subdivision, agency,
commission, official or court thereof having jurisdiction over such Person or
its business.
1.3 "Adjustment Event" means any of the following events:
(i) the Company declares a dividend or makes a distribution
with respect to outstanding shares of its Capital Stock,
which dividend or distribution is paid entirely or in
part in shares of Common Stock or Convertible
Securities; or
(ii) the Company subdivides, combines or reclassifies
outstanding shares of its Common Stock or Convertible
Securities.
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In no event shall an offering described in Section 3.5 also constitute an
Adjustment Event.
1.4 "Business Day" means any day other than a Saturday, Sunday or
day on which banking institutions are authorized or required by law or executive
order to be closed in the City of Columbus, Ohio or in the City of Chicago,
Illinois.
1.5 "Capital Stock" of any Person means any and all shares,
interests, participations or other equivalents (however designated) of corporate
stock (including each class of common stock and preferred stock) or partnership
or membership interests of such Person.
1.6 "Charter Documents" mean a Person's formation or other governing
documents, including but not limited to, as applicable, its certificate or
articles of incorporation, by-laws, code of regulations, articles of
organization, operating agreement, certificate of limited partnership and
partnership agreement.
1.7 "Commission" means the United States Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
1.8 "Common Shares" or "Common Stock" means the shares of common
stock, $0.01 par value per share, of the Company, treated as a single class of
stock, at any time outstanding.
1.9 "Company" means Brookdale Living Communities, Inc., a Delaware
corporation, and includes any Person which shall succeed to or assume the
obligations of the Company, through restructuring or otherwise.
1.10 "Convertible Securities" means evidences of indebtedness,
shares of stock or other securities that are convertible into or exchangeable
for, with or without payment of additional consideration in cash or property, or
options, warrants or other rights that are exercisable for, Common Shares,
whether or not the right to convert, exchange or exercise is at the time
exercisable.
1.11 "Formation Registration Rights Agreement" means that certain
Registration Rights Agreement, dated as of May 7, 1997, by and among the
Company, The Prime Group, Inc., Prime Group Limited Partnership, and Prime Group
VI, L.P., as amended.
1.12 "Formation Holders" means the "Holders" as defined in the
Formation Registration Rights Agreement.
1.13 "Holder" means Banc One Capital Partners IV, Ltd., an Ohio
limited liability company, together with its successors and permitted assigns.
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1.14 "Loan" has the definition set forth in the second grammatical
paragraph of this Warrant Certificate.
1.15 "Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint stock company, trust,
unincorporated organization, governmental authority or any other form of entity.
1.16 "Preemption Offering" means any offering of Common Shares,
Convertible Securities or other shares of Capital Stock of the Company by or on
behalf of the Company other than:
(i) any Rights Offering;
(ii) the issuance of the Warrant Shares subject to this Warrant
Certificate;
(iii) the issuance or sale of Common Shares pursuant to any
employee, officer or director stock option plan approved by the board of
directors of the Company; provided, that (a) options are granted only with
respect to Common Shares, (b) the minimum exercise price per Common Share for
such shares is not less than the market determined value per share on the date
such options were granted, as determined in accordance with the Company's stock
incentive plans, and (c) no options are granted to Persons other than officers,
directors and employees of the Company or any Subsidiary; and
(iv) the sale and issuance of Common Shares, Convertible Securities
or other Capital Stock pursuant to any Qualified Public Offering.
1.16 "Qualified Public Offering" means the first offer and sale to
the public by the Company or any holders of shares of any class of its Capital
Stock, after the dated hereof, pursuant to a registration statement that has
been declared effective by the Commission.
1.17 "Reorganization Event" means:
(i) any capital reorganization or reclassification or
recapitalization of any shares of Capital Stock of the Company (other than an
event described in Section 1.3);
(ii) any merger or consolidation of the Company with or into any
other Person in which the Company is not the surviving entity, or which
3
<PAGE>
effects a reclassification or recapitalization of any shares of
Capital Stock of the Company; or
(iii) the sale, exchange or transfer of all or substantially all of
the property of the Company to any other Person.
1.18 "Restricted Securities" means (a) any Warrant bearing the
applicable legend set forth in the Warrant, (b) any Warrant Shares which are
evidenced by a certificate or certificates bearing such legend, and (c) unless
the context otherwise requires, any Common Shares which are at the time issuable
upon the exercise of any Warrant and which, when so issued, will be evidenced by
a certificate or certificates bearing such legend.
1.19 "Rights Offering" means any offering of Capital Stock or
Convertible Securities of the Company or any distribution of rights to purchase
Capital Stock or Convertible Securities of the Company that is made
substantially on a pro rata basis among the holders of Capital Stock of the
Company.
1.20 "Securities" means collectively, the Warrant and the Warrant
Shares.
1.21 "Securities Act" means the Securities Act of 1933, as amended,
or any similar federal statute, and the rules and regulations of the Commission
thereunder, all as of the same shall be in effect at the time. References to a
particular section of the Securities Act of 1933 shall include a reference to
the comparable section, if any, of any such similar successor federal statute.
1.22 "Securities Exchange Act" means the Securities Exchange Act of
1934, as amended, or any similar federal statute, and the rules and regulations
of the Commission thereunder, all as of the same shall be in effect at the time.
Reference to a particular section of the Securities Exchange Act of 1934 shall
include a reference to the comparable section, if any, of any similar successor
federal statute.
1.23 "Subsidiary" means any entity of which more than 50% of the
Voting Power is owned or controlled by the Company at any date of determination,
either directly or through Subsidiaries.
1.24 "Tax(es)" means any federal, state, local or foreign income,
gross receipts, license, franchise, payroll, employment, excise, unemployment,
personal property, severance, disability, real property, sales, use, transfer,
value added, alternative, estimated or other tax of any kind whatsoever,
including any interest, penalty or addition thereto, whether disputed or not.
4
<PAGE>
1.25 "Transfer", "Transferred" means, with respect to any item, the
sale, exchange, pledge, conveyance, lease, transfer or other disposition of such
item or any interest therein.
1.26 "Voting Power" means with respect to any entity, the power to
vote for or designate members of the board of directors or similar group,
whether exercised by virtue of the record ownership of securities, under a close
corporation or similar agreement or under an irrevocable proxy.
1.27 "Warrant" means the warrant issued by the Company to the Holder
evidenced by this Warrant Certificate.
1.28 "Warrant Certificate" means this warrant certificate or any
replacement warrant certificate issued to the Holder.
1.29 "Warrant Exercise Price" means $30.40 per Warrant Share, which
is equal to 120% of the average of the daily per share closing prices of the
Common Stock on NASDAQ for the ten (10) consecutive trading days prior to the
date hereof.
1.30 "Warrant Expiration Date" means the fourth anniversary of the
date hereof.
1.31 "Warrant Shares" means the Common Shares issuable upon exercise
of the Warrant.
Section 2. Duration and Exercise of Warrant.
2.1 Number of Shares of Common Stock. Subject to the terms and
conditions set forth in this Warrant Certificate, Holder may purchase up to
20,000 shares of Common Stock of Company. The number of Warrant Shares that may
be purchased by the Holder pursuant to this Section 2.1 in consideration of the
payment of the Warrant Exercise Price is subject to adjustment as provided for
in Section 3.
2.2 Warrant Exercise Period. The Warrant shall be exercisable in a
single or partial exercise at any time after the date hereof but on or before
the Warrant Expiration Date.
2.3 Manner of Exercise. The Warrant may be exercised by the Holder
in a single exercise upon surrender of this Warrant Certificate and the delivery
of the Notice of Exercise attached hereto duly completed and executed on behalf
of the Holder, at the principal office of the Company (or at such other office
or agency of the Company as it may designate by notice to the Holder at the
address of the Holder appearing on the books of the Company), upon payment of an
amount equal to the Warrant Exercise Price multiplied by the number of Warrant
Shares to be
5
<PAGE>
purchased pursuant to such exercise by wire transfer or delivery of a certified
or cashier's check to the Company. Any exercise of a Warrant pursuant to this
Warrant Certificate shall be for only full Warrant Shares and shall not be for
partial Warrant Shares.
2.4 When Exercise Effective. The exercise of the Warrant shall be
deemed to have been effected immediately prior to the close of business on the
Business Day on which (a) the Notice of Exercise shall have been delivered to
the Company, (b) this Warrant Certificate shall have been surrendered to the
Company, and (c) the Company shall have received payment of the Warrant Exercise
Price for the Warrant Shares to be purchased in connection with such exercise as
provided in Section 2.3, and immediately prior to the close of business on such
Business Day the Holder shall be deemed to have become the holder of record of
the Warrant Shares.
2.5 Delivery of Stock Certificates, New Warrant Certificate, etc. As
soon as practicable after the effective exercise of the Warrant, the Company at
its expense (including any applicable issue taxes) will cause to be issued in
the name of and delivered to the Holder a certificate or certificates for the
number of Warrant Shares to which the Holder shall be entitled upon such
exercise.
Section 3. Anti-dilution Adjustment.
3.1 Adjustment Event. Upon the occurrence of any Adjustment Event,
the number of Warrant Shares shall be adjusted immediately after the applicable
record date with respect to such Adjustment Event as follows. The adjusted
number of Warrant Shares shall be a number equal to the number of Warrant Shares
issuable upon exercise of the Warrant immediately prior to such record date
multiplied by a fraction (i) the numerator of which is the number of outstanding
Common Shares immediately after such Adjustment Event, and (ii) the denominator
of which is the number of outstanding Common Shares immediately prior to the
record date. Any such adjustment shall be calculated to the nearest whole
Warrant Share. Notwithstanding any other provision of this Section 3.1, no
adjustment shall be made with respect to the issuance of Common Shares,
Convertible Securities or other Capital Stock after the date hereof when such
issuance constitutes a Preemption Offering.
3.2 Reorganization Event. Upon the occurrence of a Reorganization
Event, there shall thereafter be issuable upon the exercise of the Warrant (in
lieu of the Warrant Shares), as appropriate, the number of shares of stock,
other securities or property to which the Holder would have been entitled had
the Holder exercised the Warrant and received the Warrant Shares immediately
prior to the record date for such Reorganization Event.
Prior to and as a condition of the consummation of any Reorganization
Event, the Company shall cause effective provisions to be made to effect the
purposes of this Section 3.2, including, if appropriate, an agreement among the
Company, any successor to the Company and the Holder.
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3.3 Other Event. In case any event shall occur as to which the other
provisions of this Section 3 are not strictly applicable but the failure to make
any adjustment would not fairly protect the purchase rights represented by the
Warrant in accordance with the essential intent and principles hereof, then the
Holder may request in writing within one hundred twenty (120) days after the
occurrence of such event that the Company examine the propriety of an adjustment
to the number of Warrant Shares issuable upon exercise of the Warrant. Unless
the Company and the Holder shall have mutually agreed upon an adjustment, or
that no adjustment is required, within thirty (30) days after the receipt of
such request, the Company shall appoint a firm of independent certified public
accountants of recognized national standing (which may be the regularly engaged
accountants of the Company), to give an opinion upon the adjustment, if any, on
a basis consistent with the essential intent and principles established in this
Section 3, necessary to preserve the purchase rights represented by the Warrant.
Upon receipt of such opinion, the Company will promptly mail a copy thereof to
the Holder and shall make the adjustments, if any, described therein. If such
opinion states that no such adjustment is necessary, the Holder shall reimburse
the Company for the cost and expense of such opinion, and if an adjustment is
necessary, the Company shall pay the cost and expense of such opinion.
Notwithstanding any other provision of this Section 3.3, no adjustment shall be
made with respect to the issuance of Common Shares, Convertible Securities or
other Capital Stock after the date hereof when such issuance constitutes a
Preemption Offering.
3.4 Rights Offering. In the event the Company shall effect a Rights
Offering, the Holder shall be entitled, at its option, to elect to participate
in each and every such offering as if the Warrant had been exercised and the
Holder was, at the time of any such rights offering, then a holder of that
number of Common Shares to which the Holder is then entitled on the exercise of
the Warrant.
3.5 Preemptive Rights. In the event of any Preemption Offering, (i)
the Company shall notify the Holder in writing of the number of Common Shares,
Convertible Securities or other Capital Stock subject to such Preemption
Offering and the cash or cash equivalent purchase price (determined by the
Company in good faith) thereof, and (ii) the Holder shall have the right for a
period of thirty (30) days following such notice to purchase prior to the
exercise of the Warrant up to that number of Common Shares, Convertible
Securities or other Capital Stock that is sufficient to permit the Holder to
maintain the percentage of outstanding Common Shares which the Holder owns or
would be entitled to purchase upon exercise of the Warrant, after giving effect
to the Holder's purchase under this Section 3.5 and the sale of the Common
Shares subject to such Preemption Offering.
The Holder shall have the right, during the period specified herein, to
purchase any or all of the new Common Shares or Convertible Securities that it
is entitled to purchase under this provision at the purchase price and on the
terms stated in the Preemption Offering. Notice by the Holder of
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its participation, in whole or in part, in the Preemption Offering shall be in
writing and signed by the Holder and shall be delivered to the Company prior to
the end of the period specified herein, setting forth the number of new Common
Shares or Convertible Securities the Holder elects to purchase. With respect to
any of the new Common Shares or Convertible Securities not purchased by the
Holder hereunder, the Company may during the period one hundred and eighty (180)
days following the date of expiration of the Preemption Offering sell to any
other Person or Persons all or any part of such Common Shares or Convertible
Securities, but only on terms and conditions that are no more favorable to such
Person or Persons or less favorable to the Company than those set forth in the
Preemption Offering.
Section 4. Restrictions on Transfer.
4.1 Restrictive Legends. Except as otherwise permitted by this
Section 4, the Warrant, each Warrant issued in exchange or substitution for any
Warrant, each Warrant issued upon the registration of Transfer of any Warrant,
each certificate representing the Warrant Shares and each certificate issued
upon the registration of Transfer of any Warrant Shares, shall be stamped or
otherwise imprinted with a legend in substantially the following form:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF
ANY STATE, AND MAY NOT BE DISTRIBUTED, SOLD, TRANSFERRED, ASSIGNED,
HYPOTHECATED OR OFFERED UNLESS THERE IS IN EFFECT A REGISTRATION STATEMENT
UNDER SUCH ACT AND LAWS COVERING SUCH SECURITIES OR THE ISSUER RECEIVES AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER OR A NO-ACTION
LETTER FROM THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION STATING
THAT SUCH DISTRIBUTION, SALE, TRANSFER, ASSIGNMENT, HYPOTHECATION OR OFFER
IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF
SUCH ACT AND LAWS."
4.2 Notice of Proposed Transfer; Opinion of Counsel. Prior to any
Transfer of any Restricted Securities, the Holder will give notice ("Notice") to
the Company of the Holder's intention to effect such Transfer. Each such Notice
of a proposed Transfer (a) shall describe the manner and circumstances of the
proposed Transfer in sufficient detail to enable counsel to render the opinion
referred to below, and (b) shall designate counsel for the Holder. The Holder
will submit a copy of such Notice to the counsel designated in such Notice and
the Company will promptly submit a copy of the Notice to its counsel. The
following provisions shall then apply:
(i) If in the opinion of counsel to the Company the proposed
Transfer may be effected without registration of such
Restricted Securities
8
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under the Securities Act, the Company will promptly
notify the Holder and the Holder shall thereupon be
entitled to Transfer such Restricted Securities in
accordance with the terms of the Notice delivered by the
Holder to the Company. Each Warrant or certificate for
Warrant Shares, if any, issued upon or in connection
with such Transfer shall bear the applicable restrictive
legend set forth in Section 4.1, unless in the opinion
of such counsel, such legend, requires modification or
is no longer required to ensure compliance with the
Securities Act. If for any reason, counsel for the
Company (after having been furnished with the
information required by this Section 4.2) shall fail to
deliver an opinion to the Company, or the Company shall
fail to notify the Holder as aforesaid, within sixty
(60) days after receipt of Notice of the Holder's
intention to effect a Transfer, then for all purposes of
the Warrant, the opinion of counsel for the Holder shall
be sufficient to authorize the proposed Transfer,
provided the opinion is issued by counsel recognized as
experts in security law matters, and the opinion of
counsel for the Company shall not be required in
connection with such proposed Transfer; or
(ii) If, in the opinion of counsel to the Company, the
proposed Transfer may not be effected without
registration of such Restricted Securities under the
Securities Act, the Company will promptly so notify the
Holder and the Holder shall not be entitled to Transfer
such Restricted Securities until receipt of a further
Notice from the Company under clause (i) above or until
registration of such Restricted Securities under the
Securities Act has become effective.
Section 5. Availability of Information.
To the extent they are applicable to the Company, the Company will comply
with the reporting requirements of Sections 13 and 15(d) of the Securities
Exchange Act and all other public information reporting requirements of the
Commission (including the requirements of Rule 144 promulgated by the Commission
under the Securities Act) from time to time in effect. The Company will
cooperate with the Holder at the Holder's expense to complete and file any
information reporting forms presently or hereafter required by the Commission as
a condition to the availability of an exemption from the Securities Act for the
Transfer of any Restricted Securities or the Transfer of Restricted Securities
by affiliates of the Company.
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Section 6. Reservation of Stock, Etc.
The Company will at all times prior to the Warrant Expiration Date reserve
and keep available, solely for issuance and delivery upon the exercise of the
Warrant and free from preemptive rights, a sufficient number of shares of Common
Stock to cover the Warrant Shares issuable or exchangeable upon the exercise of
the Warrant. All such shares shall be duly authorized and, when issued upon such
exercise against payment therefor as provided for in Section 2.3, shall be
validly issued, fully paid and non-assessable.
Section 7. Capitalization.
The Company represents and warrants that its authorized Capital Stock as
of the date hereof consists solely of (i) 75,000,000 shares of Common Stock, of
which 9,484,582 shares are issued and outstanding and zero (0) shares are
reserved for issuance upon the exercise or conversion of outstanding Convertible
Securities, and 1,070,418 shares are reserved for issuance upon the exercise of
options under the Company's Stock Incentive Plans, and (ii) 20,000,000 shares of
preferred stock of which zero (0) shares are issued and outstanding and that it
has no other Capital Stock authorized, issued or outstanding.
Section 8. Ownership; Registration of Transfer; Exchange and
Substitution of Warrant.
8.1 Ownership of Warrant. Until due presentment for Transfer, the
Company may treat the Person in whose name the Warrant is registered on the
register kept at the Company's principal office as the owner and holder hereof
for all purposes, notwithstanding any notice to the contrary, provided that when
the Warrant has been properly Transferred, the Company shall treat such
transferee as the owner of the Warrant for all purposes, notwithstanding any
Notice to the contrary. Subject to the foregoing provisions and to Section 4,
the Warrant, if properly Transferred, may be exercised by the transferee without
first having a new Warrant Certificate issued.
8.2 Registration of Transfers. Subject to Section 4 hereof, the
Company shall register the Transfer of the Warrant permitted under the terms
hereof upon records to be maintained by the Company for that purpose upon
surrender of this Warrant Certificate to the Company at the Company's principal
office, together with the Form of Assignment attached hereto duly completed and
executed. Upon any such registration of Transfer, a new Warrant Certificate in
substantially the form of this Warrant Certificate, shall be issued to the
transferee.
8.3 Replacement of Warrant Certificate. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant Certificate and of an indemnification reasonably
satisfactory to the Company, or, in the case of any such mutilation, upon
surrender of this Warrant Certificate for cancellation at the Company's
principal
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office, the Company at the Holder's expense will promptly execute and deliver,
in lieu thereof, a new Warrant Certificate of like tenor.
8.4 Expenses. Except as otherwise provided for herein, the Company
will pay all expenses, Taxes (other than transfer and income Taxes) and other
charges in connection with the preparation, issuance and delivery from time to
time of this Warrant Certificate or the Warrant Shares.
Section 9. No Rights as Stockholder.
Nothing contained in this Warrant Certificate shall be construed as
conferring upon the Holder any rights as a stockholder of the Company prior to
the exercise hereof or as imposing any obligation on the Holder to purchase any
Capital Stock of the Company.
Section 10. Demand Registration Rights.
10.1 Demand for Registration. At anytime after the exercise of the
Warrant, and subject to the conditions set forth below, if the Company shall
receive a written request from the Holder requesting that the Company effect the
registration under the Securities Act of all of the Holder's and its Affiliate's
Warrant Shares, the Company shall use its reasonable best efforts to effect such
registration as soon as practicable. Subject to the provisions of Section 10.6,
the Company may register for sale in such registration other securities which
the Company has been requested or otherwise desires to register by the holders
thereof (which may include Common Shares held by the Formation Holders and/or
their permitted assigns); provided, however, that no securities other than
Warrant Shares shall be included in such registration if the managing
underwriter advises the Holder that the inclusion of such other securities would
adversely affect such offering unless the Holder shall have consented in writing
to the inclusion of such other securities. The Company shall not be required to
effect more than one registration pursuant to requests made pursuant to this
Section 10, and shall not be required to effect any registration pursuant to
this Section 10 unless any registration can be made on Form S-3.
10.2 Registration Statement Form. Registrations under this Section
10 shall be on such appropriate registration forms as shall be selected by the
Company, provided that such forms permit the disposition of the Warrant Shares
in accordance with the Holder's intended method or methods of disposition as
specified in its request for such registration. The Company shall include in any
such registration statement all information which the Holder shall reasonably
request.
10.3 Effective Registration Statement. A registration requested
pursuant to this Section 10 shall not be deemed to have been effected (i) unless
a registration statement with respect thereto has become effective under the
Securities Act, (ii) if such registration is not kept continuously effective in
accordance with Section 12, (iii) if such registration becomes the subject
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of any stop order, injunction or other order or requirement of the Commission or
other governmental agency or court for any reason other than an act or omission
of the Holder and the effectiveness or such registration statement is not
re-instituted within ninety (90) days, or (iv) if any conditions to closing
specified in the purchase agreement or underwriting agreement entered into in
connection with such registration are not satisfied for any reason other than an
act or omission of the Holder.
10.4 Expenses. The Company shall pay all registration expenses in
connection with any registration requested pursuant to this Section 10. The
Holder shall pay all underwriting discounts and commissions and transfer taxes,
if any, relating to the sale or other disposition of its Warrant Shares.
10.5 Underwritten Offerings. Only if a registration pursuant to this
Section 10 involves any Capital Stock of the Company or any other securities
other than the Warrant Shares held by the Holder and its Affiliates, may the
Holder at its option, request an underwritten offering. The underwriter or
underwriters thereof shall be selected by the Company. To the extent customary
for transactions similar to the transactions contemplated hereby, the Holder
may, at its option, require that any or all of the representations and
warranties by, and the other agreements on the part of, the Company to and for
the benefit of such underwriters shall also be made to and for the benefit of
the Holder. Holder shall not be required to make any representations and
warranties to or agreements with the Company or the underwriters other than
representations, warranties or agreements regarding the Holder, the Holder's
intended method of distribution, any other information provided by the Holder
for inclusion in the registration statement or prospectus and any other
representation required by law or by customary practice of underwritten
secondary offerings.
10.6 Priority in Requested Registrations. If a requested
registration pursuant to this Section 10 involves an underwritten offering, and
if the managing underwriter shall advise the Company in writing that, in its
opinion, the number of securities of any class requested to be included in such
registration exceeds the number which can be sold in (or during the time of)
such offering without delaying or jeopardizing the success of the offering, then
the Company will include in such registration (i) first, all of the Holder's
Warrant Shares that the Company is so advised can be sold in such offering, (ii)
second, to the extent permitted by the managing underwriter, securities to be
registered by the Company for its own account and/or by other holders of
securities (which may include the Formation Holders and/or their permitted
assigns) in such manner and amounts required by the Formation Registration
Rights Agreement, if applicable, or as the Company shall determine.
Section 11. "Piggyback" Registration Rights.
11.1 Participation in Registration. If the Company at any time
proposes to register any securities under the Securities Act (other than by a
registration on Form S-4 or Form S-8 or any successor or similar form and other
than pursuant to Section 10), whether or not for sale
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for its own account, it will each such time, promptly give Notice to the Holder.
Upon the written request of the Holder made within thirty (30) days after the
receipt of any such Notice (which request shall specify the Warrant Shares
intended to be disposed of and the intended method of disposition), the Holder
shall have the right, subject to the prior registration rights of the Formation
Holders, to participate in such registration on the terms and conditions
thereof. If, at any time after giving written notice of its intention to
register any securities and prior to the effective date of the registration
statement filed in connection with such registration, the Company shall
determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to the Holder and, thereupon, (i) in the case of a determination
not to register, the Company shall be relieved of its obligation to register any
Warrant Shares in connection with such registration (but not from its obligation
to pay any registration expenses in connection therewith), without prejudice,
however, to the rights of the Holder to request that such registration be
effected as a registration under Section 10, and (ii) in the case of a
determination to delay registration, the Company shall be permitted to delay
registering any Warrant Shares for the same period as the delay in registering
such other securities. No registration effected under this Section 11 shall
relieve the Company of its obligation to effect any registration under Section
10.
11.2 Expenses. The Company will pay all registration expenses in
connection with each registration of Warrant Shares requested pursuant to this
Section 11. The Holder shall pay all underwriting discounts and commissions and
transfer taxes, if any, relating to the sale or other disposition of its Warrant
Shares.
11.3 Underwritten Offerings. If a registration pursuant to this
Section 11 involves an underwritten offering, the Company shall, if requested by
the Holder, and subject to the prior registration rights of the Formation
Holders, arrange for such underwriters to include the Holder's Warrant Shares
among the securities to be distributed by such underwriters. In such case, the
Holder shall be a party to the underwriting agreement and may, at its option,
require that any or all of the representations and warranties by, and the other
agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of the Holder. Holder
shall not be required to make any representations and warranties to or
agreements with the Company or the underwriters other than representations,
warranties or agreements regarding the Holder, the Holder's intended method of
distribution, any other information provided by the Holder for inclusion in the
registration statement or prospectus and any other representation required by
law or by customary practices for such transactions.
11.4 Priority in Registrations. If a registration pursuant to this
Section 11 involves an underwritten offering, and if the managing underwriter
shall advise the Company in writing that, in its opinion, the number of
securities of any class requested to be included in such registration exceeds
the number which can be sold in (or during the time of) such offering without
delaying, jeopardizing or otherwise adversely affecting the success of the
offering, then the
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Company will include in such registration, to the extent to which the Company is
advised can be sold in such offering, first, all securities proposed by the
Company to be sold for its own account, and second, such Common Shares held by
the Formation Holders and/or their permitted assigns requested by the Formation
Holders and/or their permitted assigns to be included in such registration
pursuant to the Formation Registration Rights Agreement, and third, such Warrant
Shares requested to be included in such registration and all other securities
proposed to be sold by other holders shall be included in such registration pro
rata on the basis of the number of shares so proposed to be sold.
Section 12. Registration Procedures.
If the Company is required to effect the registration of any Warrant
Shares as provided herein (subject to the minimum number of Warrant Shares to be
registered pursuant to Section 10.1), the Company shall proceed in the following
manner:
(i) prepare and as expeditiously as possible file (and in any
event within one hundred and twenty (120) days of receipt of
Holder's request under Section 10) with the Commission the
registration statement to effect such registration and use
its reasonable best efforts to cause such Registration
Statement to become effective;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the
prospectus used in connection therewith as may be necessary
to keep such registration statement effective and to comply
with the provisions of the Securities Act with respect to
the disposition of all securities covered by such
registration statement until such time as all Warrant Shares
have been disposed of in accordance with the intended
methods of disposition by the Holder;
(iii) furnish to Holder such number of prospectuses (including
preliminary prospectuses) and copies of each amendment and
supplement thereto and such other documents as Holder may
reasonably request in order to facilitate the disposition of
the Warrant Shares;
(iv) use its reasonable best efforts to register or qualify all
Warrant Shares covered by such registration statement under
the securities or blue sky laws of such jurisdictions as the
Holder shall reasonably request, to keep such registration
or qualification in effect for so long as such registration
statement remains in effect, and take any other action which
may be reasonably necessary or desirable to enable the
Holder
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<PAGE>
to consummate the disposition of its Warrant Shares in
such jurisdictions in accordance with the intended
method of disposition, provided, however, that the
Company shall not be required to qualify to do business,
to consent to general service of process, or to register
as a broker or dealer in any such jurisdiction;
(v) enter into and perform its obligations under any
underwriting or placement agreement, and take all reasonable
actions in connection therewith in order to expedite or
facilitate the disposition of the Warrant Shares;
(vi) notify the Holder in writing of (i) any stop order or the
commencement of any proceedings for that purpose, (ii) any
suspension of the qualification of the Warrant Shares for
sale in any jurisdiction or the commencement of any
proceedings for that purpose, or (iii) any notification
received by the Company regarding the necessity or
desirability of filing any supplement or amendment to the
registration statement;
(vii) in any underwritten offering, furnish to the Holder (a) an
opinion of counsel for the Company, dated the effective date
of such registration statement, in form and substance as is
customarily given to underwriters, and (b) a comfort letter,
dated the effective date of such registration statement,
signed by the Company's independent public accountants in
form and substance as is customarily given to underwriters,
in each case addressed to the underwriters and the Holder;
(viii) notify Holder upon discovery of the happening of any event
as a result of which the prospectus included in such
registration statement includes an untrue statement of any
material fact or omits to state any material fact required
to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances
then existing, or any other event that would cause the
registration statement to no longer be current as required
by the Securities Act, and at the request of the Holder
promptly prepare, file and furnish to Holder a reasonable
number of copies of a supplement or an amendment to such
prospectus which may be required on account of such event
and use its reasonable best efforts to cause such supplement
or amendment to become effective;
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<PAGE>
(ix) cause to be maintained a transfer agent for its securities
from and after a date not later than the effective date of
such registration statement;
(x) use its reasonable best efforts to list all Warrant Shares
covered by such registration statement on any securities
exchange on which any of the Common Shares is then listed;
and
(xi) enter into such agreements and take such other actions as
the Holder shall reasonably request in order to expedite or
facilitate the disposition of such Warrant Shares.
The Holder shall furnish to the Company such information regarding the
Holder and the distribution of the Warrant Shares as the Company may from time
to time reasonably request in writing.
Upon receipt of any Notice from the Company of the happening of any
circumstance or event of the kind described in subdivision (viii) of this
Section 12, the Holder shall forthwith discontinue the disposition of Warrant
Shares pursuant to the registration statement until it receives copies of the
supplemented or amended prospectus or other notification that such disposition
may be resumed, and, if so directed by the Company, will destroy all copies,
other than permanent file copies, then in Holder's possession of the prospectus
relating to such Warrant Shares. The Company will use its reasonable best
efforts to effect such amendment or supplement as promptly as possible.
Section 13. Indemnification.
13.1 Indemnification by the Company. In the event of any
registration pursuant to Section 11 or 12, the Company will, and hereby does,
indemnify and hold harmless the Holder, its directors, partners, members and
officers, any underwriter acting on behalf of the Holder and each other Person,
if any, who controls any such Person within the meaning of the Securities Act
(individually, an "Indemnified Party", and, collectively the "Indemnified
Parties"), against any losses, claims, damages, expenses (including legal fees
and expenses) or liabilities, joint or several, to which any one of them may
become subject under the Securities Act or otherwise; provided, however, that
the Company shall not be so liable (i) to the extent that any such loss, claim,
damage, liability or expense arises out of or is based upon the Company's
reliance upon written information furnished to the Company by any Indemnified
Party expressly stating that it is for use in the registration statement, (ii)
to the extent that any such loss, claim, damage, liability or expense arise out
of such Indemnified Party's failure to provide a copy of the final prospectus,
as the same may be then supplemented or amended, to the purchaser at or prior to
the written confirmation of the sale of Warrant Shares and (iii) to the extent
that any such loss, claim, damage, liability or expense arise
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<PAGE>
from an act or omission in a violation of the Securities Act by Holder or such
Indemnified Party or from the gross negligence or willful misconduct of the
Holder or such Indemnified Party. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Holder or
other Person and shall survive the transfer of the Warrant Shares by the Holder.
13.2 Indemnification by the Holder. As a condition to the Company's
obligation to include any Warrant Shares in any registration statement filed
pursuant to Section 11 or 12, the Holder shall indemnify and hold harmless (in
the same manner and to the same extent as set forth in Section 13.1) the
Company, each director and officer of the Company and any underwriter acting on
behalf of the Company and each other Person, if any, who controls any such
Person within the meaning of the Securities Act, against any losses, claims,
damages, expenses (including legal fees and expenses) or liabilities, joint or
several, to which any one of them may become subject under the Securities Act or
otherwise, to the extent that any such loss, claim, damage, liability or expense
arises out of or is based upon the Company's reliance upon written information
furnished to the Company by such Person expressly stating that it is for use in
the registration statement; provided, however, that the Holder shall not be so
liable to the extent that any such loss, claim, damage, liability or expense
arise out of such Person's (other than the Holder's or any Indemnified Party's)
failure to provide a copy of the final prospectus, as the same may be then
supplemented or amended, to the purchaser at or prior to the written
confirmation of the sale of any securities. Such indemnity shall remain in full
force and effect, regardless of any investigation made by or on behalf of the
Company or any such Person and shall survive the transfer of such Registrable
Securities by the Holder.
13.3 Procedures for Claims. Promptly after receipt of notice of the
commencement of any action or proceeding involving a claim referred to in this
Section 13, an indemnified party will, if a claim in respect thereof is to be
made against an indemnifying party, give Notice to the indemnifying party of the
commencement of such action. Failure to give prompt Notice shall not relieve the
indemnifying party of its obligation under this Section 13, except to the extent
that the indemnifying party is actually prejudiced by such failure. The
indemnifying party shall be entitled to participate in and to assume the defense
of such action at its expense, jointly with any other indemnifying party, with
counsel reasonably satisfactory to the indemnified party; provided, however,
that an indemnified party shall have the right to retain its own counsel, with
fees and expenses thereof to be paid by the indemnifying party, if in such
indemnified party's reasonable judgment an actual or potential conflict of
interest between such indemnified and indemnifying party may exist in respect of
such claim. No indemnifying party shall, without the consent of the indemnified
party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof a release from all liability by the
plaintiff to the indemnified party. The amount paid or payable by an
indemnifying party shall include any legal or other expenses reasonably incurred
by the indemnified party in connection with the investigation or defense of any
such action or claim.
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Section 14. Rule 144.
If the Company shall have filed a registration statement, the Company will
file the reports required to be filed by it under the Securities Act and the
Securities Exchange Act and the rules and regulations adopted by the Commission
thereunder. The Company shall, upon the reasonable request of the Holder,
provide the Holder and any institutional investor designated by such Holder such
financial and other information as the Holder may reasonably determine to be
necessary in order to permit the Holder's compliance with Rule 144A under the
Securities Act in connection with the resale of any Warrant Shares, except at
such time as the Company is subject to the reporting requirements of Section 13
or 15(d) of the Securities Exchange Act.
Section 15. Termination of Registration Rights.
The registration rights granted herein shall terminate on the date that
neither the Holder nor any Affiliate of the Holder owns any Warrant Shares.
Section 16. Miscellaneous.
16.1 Amendment. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought.
16.2 Choice of Law. This Warrant Certificate and the Warrant
evidenced thereby shall be governed by the laws of the State of Delaware without
regard to conflicts of laws principles.
16.3 Headings. The Headings in this Warrant Certificate are inserted
for convenience only and shall not be deemed to constitute a part hereof.
BROOKDALE LIVING COMMUNITIES,
INC.
By:__________________________________
Name: ______________________________
Its:__________________________________
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FORM OF
NOTICE OF EXERCISE OF WARRANT
The undersigned is the holder of, and hereby elects to exercise, the
Warrant evidenced by that certain Warrant Certificate, dated as of June __, 1998
issued to Banc One Capital Partners IV, Ltd. by Brookdale Living Communities,
Inc. ( the "Warrant Certificate"), and to purchase the Warrant Shares issuable
pursuant to the Warrant Certificate and herewith makes payment in full therefor
by delivery of a certified check payable to the order of the Company in the
amount of the Warrant Exercise Price or by wire transfer of immediately
available funds in the amount of the Warrant Exercise Price and requests that
certificate(s) for such Warrant Shares be issued in the name of and delivered to
_______________________________________________, or in such denominations as
requested by the undersigned in writing to the Company concurrently herewith.
Capitalized terms used herein which are not defined herein, but which are
defined in the Warrant Certificate, shall have the meanings given such terms in
the Warrant Certificate.
Name of
Holder (Print):___________________________
Dated:_________________________________
By:__________________________________
Title:_________________________________
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<PAGE>
FORM OF ASSIGNMENT OF WARRANT
FOR VALUED RECEIVED, __________________ hereby sells, assigns and
transfers to ___________________ all of the rights of the undersigned in and to
this Warrant and in and to that certain Warrant Certificate dated June __, 1998,
issued by Brookdale Living Communities, Inc. to Banc One Capital Partners IV,
Ltd.
Name of
Holder (Print):___________________________
Dated:_________________________________
By:__________________________________
Title:_________________________________
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<PAGE>
AMENDED AND RESTATED DEVELOPMENT AGREEMENT
This AMENDED AND RESTATED DEVELOPMENT AGREEMENT (this "Agreement"),
dated as of June ___, 1998, is made and entered into by and between AH MICHIGAN
OWNER LIMITED PARTNERSHIP, an Ohio limited partnership ("Owner"), and BROOKDALE
LIVING COMMUNITIES OF MICHIGAN, INC., a Delaware corporation ("Manager").
RECITALS
WHEREAS, Owner owns certain real property and desires to develop it for
use as a senior independent and assisted living facility in Southfield,
Michigan, which is currently referred to as The Heritage (the "Project");
WHEREAS, Owner has retained Developer to perform development services in
connection with the construction of the Project on the terms and subject to the
conditions set forth in that certain Development Agreement dated as of March 31,
1998 (the "Prior Development Agreement"); and
WHEREAS, Owner and Developer have agreed to terminate the Prior
Development Agreement pursuant to Section 21 hereof, and have agreed to enter
into this Agreement, in each case effective as of the date hereof.
AGREEMENTS
NOW, THEREFORE, in consideration of the recitals and the mutual promises
and covenants herein contained and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Responsibilities of Developer.
(a) Owner hereby engages Developer to perform the services in
connection with the development and construction of the Project normally and
customarily performed by a developer of a commercial real estate project and as
further described herein, and Developer hereby accepts such engagement and,
subject to the conditions set forth in this Agreement, agrees to provide such
services, at Owner's expense. During the term of this Agreement, Developer shall
have full authority to construct the Project or cause the Project to be
constructed as a senior independent and
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<PAGE>
assisted living facility, and shall have full and complete control and reign
over, and use of, the entire Project, including its common areas. Without
limiting the generality of the foregoing, Developer shall, at Owner's expense,
have full authority as follows:
(i) Regulatory Compliance. Developer shall use
reasonable efforts to obtain and maintain all licenses, permits, qualifications
and approvals from any applicable governmental or regulatory authority required
for the construction of the Project. In addition, Developer shall supervise and
coordinate the preparation and filing of (and, where required to do so under
applicable law or regulations, file) all reports or other information required
by all state or other governmental agencies having jurisdiction over the Project
and shall deliver copies of all such reports and information to Owner
simultaneously with such filings. Developer shall cooperate with governmental
inspection and enforcement activities.
(ii) Equipment and Improvements. Developer shall,
on behalf of Owner, acquire or effect the acquisition of equipment and
improvements which are needed to operate the Project or its services.
(iii) Reports. Developer shall supervise and
coordinate the preparation of any construction information if and to the extent
needed to comply with any reporting obligations imposed on the Owner by any
Lender (as hereinafter defined), mortgagees or lessors of the Project except for
those reporting obligations which relate to matters which are within the
exclusive control of the Owner or its affiliates. Developer shall prepare or
cause to be prepared, at Owner's expense, the tax returns of Owner (but not
Owner's partners or affiliates) for Owner's signature. All originals of the
books, forms and records generated by Developer in connection with the
construction of the Project shall be Developer's property.
(iv) Construction Contracts. Developer shall have
the right and authority, at the Owner's expense, to enter into, perform, and
modify its obligations and duties under the construction contract, architectural
contract and all other contracts now or hereafter in force relating to the
development and construction of the Project (the "Construction Contracts") and
to deal with, and enforce the obligations of, all parties thereto.
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<PAGE>
(v) Legal Proceedings. Developer shall have the
right and authority, on its own behalf or through legal counsel designated by
Developer, to direct all legal matters and proceedings that are within the scope
of Developer's authority pursuant to this Agreement. Without limiting the
generality of the foregoing, Developer is authorized (without the prior written
consent of Owner) to (a) settle, in the name and on behalf of Owner and on such
terms and conditions as Developer may deem to be in the best interests of the
Project, any and all claims or demands arising out of, or in connection with,
the operation of the Project, whether or not legal action has been instituted
and (b) enter into such agreements with any governmental agencies having
jurisdiction over the Project deemed necessary or desirable by Developer in its
sole and absolute judgment. All such amounts paid in respect of any such
settlements and agreements shall be expenses of the Project and be paid by
Owner. Developer will give notice promptly to Owner of all demands and claims
and all settlements and legal actions, but the failure to give such notice shall
not affect the preceding provisions of this paragraph.
(vi) Other Matters. Developer shall, on its own
behalf and/or on Owner's behalf, be permitted to enter into such other
agreements, contracts, easements and to perform such other acts as are necessary
or desirable, in Developer's sole and absolute discretion, for the completion
and operation of the Project.
(vii) Loan Documents. Developer shall, on its own
behalf and/or on Owner's behalf, be permitted to deal with the providers of
financing for the Project including, without limitation, (A) the first mortgage
loan made by Nomura Asset Capital Corporation with respect to the Project and
other projects (the "Nomura Loan") and (B) the subordinated loan made by Banc
One Capital Partners IV, Ltd. (the "Banc One Loan"). Each provider of financing
for the Project is referred to herein as a "Lender" and the loan documents
evidencing and/or securing financing for the Project are referred to herein as
"Loan Documents". The Loan Documents which evidence and/or secure the Nomura
Loan are referred to herein as "Nomura Loan Documents". Developer shall be
responsible for complying with the terms of the Loan Documents, at Owner's sole
cost and expense, with the exception of those provisions (i) which are within
the exclusive control of Owner and its affiliates, e.g. filing of income tax
returns and certificates and notices relating to Owner's (and its affiliates')
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<PAGE>
organizational documents, etc., and (ii) which relate to the repayment of the
debt evidenced and secured by the Loan Documents. Owner (and its affiliates)
shall not amend or waive any provision of any of the Loan Documents without the
prior written consent of Developer.
2. Responsibilities of Owner. Owner shall not interfere with Developer
in connection with the development and construction of the Project in accordance
with the terms of this Agreement. Owner acknowledges and agrees that the
development and construction of the Project is within the exclusive control of
Developer, and Owner hereby grants Developer sole and exclusive possession and
control over the Project. Owner hereby assumes and agrees to pay as and when due
(i) all costs, expenses and obligations incurred by Developer through and
including the date of this Agreement in connection with the development and
construction of the Project which have not been paid as of the date of this
Agreement, which costs, expenses and obligations include, but are not
necessarily limited to retainage held back from the general contractor of the
Project ($_______ as of _________ ___, 1998) and accrued developer's fees
payable by Developer to Brookdale Living Communities, Inc. ($___________ as of
_________ ___, 1998) and (ii) all costs, expenses and obligations incurred by
Developer from and after the date of this Agreement in connection with the
development and construction of the Project.
3. Exclusive Representative/Attorney-in-Fact. It is understood and
agreed that, during the term of this Agreement, Developer shall be the exclusive
representative of Owner for purposes described in this Agreement, including,
without limitation, all acts, functions and activities which would normally and
customarily be performed by a developer of real estate in connection with the
construction of a major commercial project. Any communications with any Lender,
regulatory authorities, governmental agencies, contractors, materialmen
suppliers, employees of the Project shall be directed through Developer. Any and
all notices received by Owner relating to the Project, the Loan Documents, the
Owner or the direct or indirect owners of interests in Owner shall immediately
be forwarded by Owner to Developer. Owner hereby appoints Developer the
attorney-in-fact of Owner, during the term of this Agreement, to take any action
and execute any instruments that Owner is obligated under, or that Owner has
covenanted and agreed hereunder or under the Loan Documents to take
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or execute, which appointment as attorney-in-fact is irrevocable
and coupled with an interest.
4. Insurance. Developer shall, at Owner's expense, arrange for and
maintain all necessary and proper hazard insurance covering the Project,
including the furniture, fixtures and equipment situated thereon, and as
otherwise required pursuant to the Nomura Loan Documents, all necessary and
proper public liability insurance for the protection of Developer, Owner and, to
the extent required under the Loan Documents, any Lender. Developer shall, at
Owner's expense, also arrange for and maintain all employee health and worker's
compensation insurance for the Project's personnel. Developer shall maintain, at
Owner's expense, such other insurance as required pursuant to the Nomura Loan
Documents. Any insurance provided pursuant to this paragraph shall be an expense
of the Project payable by Owner.
5. Proprietary Interest. The systems, methods, procedures and controls
employed by Developer and any written materials or brochures developed by
Developer to document the same are to remain the property of Developer and are
not, at any time during or after the term of this Agreement, to be utilized,
distributed, copied or otherwise employed or acquired by Owner, except as
authorized by Developer.
6. Term of Agreement. Unless this Agreement is sooner terminated as
hereinafter expressly provided in Section 7 or as otherwise agreed in writing by
both parties, the term of this Agreement shall commence on the date hereof and
shall end on the completion of the Project, except with respect to the Owner's
obligation to pay the Fees (as hereinafter defined) and all other costs and
expenses which are due and payable to Developer under this Agreement, including
without limitation, Section 2 hereof, which shall survive until the discharge in
full of such obligation.
7. Events of Default and Remedies.
(a) Event of Default. At the option of the non-defaulting party,
each of the following shall constitute an "Event of Default" hereunder:
(i) if Owner shall fail to pay or allow payment of any
installment of the Fees due to Developer in accordance with Section 10 hereof
for a period of five (5) days after written notice of
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such failure from Developer to Owner;
(ii) if Owner fails to perform in any material respect any term,
provision, or covenant of this Agreement (other than as set forth in Section
7(a)(i)) and (A) such failure continues for ten (10) days after written notice
from Developer to Owner specifying such failure to perform (unless such failure
cannot be cured by the payment of money and cannot reasonably be cured within
such 10-day period, in which event, Owner shall have an additional period, not
to exceed an additional thirty (30) days, in which to cure the default) or (B)
Owner fails to endeavor diligently and continuously to cure such default as
promptly as is practicable;
(iii) if Developer fails to perform in any material respect any
term, provision, or covenant of this Agreement and (A) subject to Section 8
below, such failure continues for thirty (30) days after written notice from
Owner specifying such failure to perform (unless such failure cannot reasonably
be cured within such 30-day period, in which event, Developer shall have an
additional period as is necessary to cure the default) or (B) Developer fails to
endeavor diligently and continuously to cure such default as promptly as is
practicable;
(iv) if either Owner, on the one hand, or Developer, on the
other, is dissolved or liquidated, applies for or consents to the appointment of
a receiver, trustee or liquidator of all or a substantial part of its assets,
files a voluntary petition in bankruptcy or is the subject of an involuntary
bankruptcy filing, makes a general assignment for the benefit of creditors, or
files a petition or an answer seeking reorganization or arrangement with
creditors or to take advantage of any insolvency law, or if an order, judgment
or decree shall be entered by any court of competent jurisdiction, on the
application of a creditor, adjudicating Owner or Developer bankrupt or insolvent
or approving a petition seeking reorganization of Owner or Developer or
appointing a receiver, trustee or liquidator for such party of all or a
substantial part of its assets, and such order, judgment or decree shall
continue unstayed and in effect for any period of sixty (60) consecutive days;
or
(v) if Owner or any affiliate of Owner is in breach or default of
any of its obligations under that certain Equity Option Agreement of even date
herewith with Brookdale Living Communities, Inc. ("Brookdale") or under that
certain Project Option Agreement
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of even date herewith with Brookdale.
(b) Remedies. At any time after the occurrence and during the
continuance of any Event of Default caused by Owner, Developer may, at its
option, do one or more of the following: (i) terminate this Agreement by giving
written notice to Owner and/or (ii) exercise all rights and remedies available
under law or equity. At any time after the occurrence and during the continuance
of an Event of Default caused by Developer, Owner may, as its sole option,
terminate this Agreement in accordance with the terms hereof and Developer shall
have no other liability to Owner hereunder.
8. Force Majeure. The parties will not be deemed to be in violation or
breach of this Agreement if they are prevented from performing any of their
respective obligations hereunder for any reason beyond their control, including,
without limitation, strikes, shortages, war, acts of God, or any applicable
statute, regulation or rule of federal, state or local government or agency
thereof having jurisdiction over the Project or the operations thereof.
9. Withdrawal of Funds by Developer. Owner and Developer acknowledge and
agree that the efficient operation of the Project requires that Developer have
ready access to the funds required therefor. Accordingly, Owner (i) irrevocably
grants Developer the authority, during the term of this Agreement, to make draw
requests in accordance with the Loan Documents, (ii) irrevocably authorizes each
Lender to disburse its loan proceeds directly to Developer in accordance with
such draw requests and the Loan Documents and (iii) Owner shall not be entitled
to any portion of the loan proceeds under the Loan Documents. Concurrently with
the execution of this Agreement, Owner shall remit to Developer an amount equal
to $________, representing an advance payment on a portion of Developer's
expected construction costs.
10. Fees. During the term of this Agreement, in addition to all other
sums owed by Owner to Developer under this Agreement, Developer shall be
entitled to receive development fees equal to the aggregate of Two Million
Dollars ($2,000,000) (collectively, the "Fees"), which shall be payable by Owner
as follows:
(a) reimbursement to Developer of all corporate overhead and
administration costs, capitalized interest costs and all other
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costs incurred by Developer (or its parent corporation, Brookdale Living
Communities, Inc.) in connection with performing the services under this
Agreement up to an aggregate amount of One Million Dollars ($1,000,000), which
shall be due and payable by Owner to Developer from time to time within ten (10)
days following invoice by Developer to Owner; Developer acknowledges receipt of
$________ on account of the Fees owed pursuant to this Section 10(a);
(b) an equal amount as described in Section 10(a) above, which
amount shall be deemed earned on the same date(s) that Developer submitted its
invoice to Owner under Section 10(a) above, but shall be due and payable by
Owner to Developer upon the "Conversion Date," as such term is defined in the
Nomura Loan Documents; and
(c) an additional amount equal to Two Million Dollars
($2,000,000) less the aggregate amount of all sums paid and/or owed under
Sections 10(a) and (b) above, which amount shall be deemed earned on the date
Developer presents its last invoice to Owner under Section 10(a) above, but
shall be due and payable by Owner to Developer upon the "Conversion Date."
In addition to the Fees, Owner agrees to reimburse Developer and
Brookdale Living Communities, Inc.("Brookdale") for any and all costs and/or
expenses paid, or incurred, by Developer or Brookdale in connection with any of
the Loan Documents, including, without limitation, Interest, the Draw Fees,
Servicing Fees, Facility Structuring Fee, non-use fee, Additional Loan
Structuring Fees and Extension Fees (as such terms are defined in the Nomura
Loan Documents) or any other fees or expenses under any of the Loan Documents.
11. Assignment. This Agreement shall not be assigned (including by
operation of law, whether by merger or consolidation (excluding a merger
effected solely for the purpose of changing Owner's jurisdiction of
incorporation that does not affect the ownership interests of Owner in any
material respect) or otherwise) by Owner, on the one hand, or by Developer, on
the other, without the prior written consent of the other party; provided,
however, that to the extent permitted by applicable law and regulations, and
subject to the receipt of all required licenses, permits, approvals and
authorizations of applicable governmental agencies, this Agreement may be
assigned by Developer to one or more corporations
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or other legal entities all the shares (and, in the case of legal entities other
than corporations, all the equity ownership and voting control) of which are
owned, directly or indirectly, by Developer or by Brookdale Living Communities,
Inc.
12. Notices. Any notices required or permitted to be sent hereunder
shall be delivered personally or by facsimile (with answer back acknowledged) or
mailed, certified mail, return receipt requested, or delivered by overnight
courier service to the following addresses, or such other addresses as shall be
given by notice delivered hereunder, and shall be deemed to have been given upon
delivery, if delivered personally, upon receipt with answer back acknowledged,
if delivered by facsimile, three (3) business days after mailing, if mailed, or
one business day after delivery to the courier, if delivery by overnight courier
service:
If to Owner, to:
AH Michigan Owner Limited Partnership
320 King of Prussia Road
Suite 160
Radnor, Pennsylvania 19087
Attn: David B. Fenkell
Facsimile: (610) 902-0777
If to Developer, to:
c/o Brookdale Living Communities, Inc.
77 West Wacker Drive
Suite 4400
Chicago, Illinois 60601
Attn: Darryl W. Copeland, Jr.
Facsimile: (312) 977-3699
With a copy to:
c/o Brookdale Living Communities, Inc.
77 West Wacker Drive
Suite 4400
Chicago, Illinois 60601
Attn: Robert J. Rudnik
Facsimile: (312) 977-3701
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and to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attn: Wayne D. Boberg, Esq.
Facsimile: (312) 558-5700
13. Relationship of the Parties. The relationship of Developer to Owner
in connection with this Agreement shall be that of an independent contractor,
and all acts performed by Developer during the term hereof shall be deemed to be
performed in Developer's capacity as an independent contractor. Nothing
contained in this Agreement is intended to or shall be construed to give rise to
or create a partnership or joint venture or lease between Owner, its successors
and assigns, on the one hand, and Developer, its successors and assigns, on the
other hand.
14. Entire Agreement. This Agreement and any documents executed in
connection herewith contain the entire agreement among the parties with respect
to the subject matter hereof and, subject to the restrictions contained in
Section 11 above, shall be binding upon their respective successors and assigns,
and shall be construed in accordance with the laws of the state where the
Project is located. This Agreement may not be modified or amended except by
written instrument signed by the parties hereto.
15. Contract Modifications for Certain Legal Events. In the event any
state or federal laws or regulations, whether now existing or enacted or
promulgated after the effective date of this Agreement, are interpreted by
judicial decision, a regulatory agency or legal counsel of both parties in such
a manner as to indicate that the structure of this Agreement may be in violation
of such laws or regulations, Owner and Developer agree to cooperate in
restructuring their relationship and this Agreement to eliminate such violation
or to reduce the risk thereof to the extent such restructuring can be
accomplished upon commercially reasonable terms; provided, that any such
restructuring shall, to the maximum extent possible, preserve the underlying
economic and financial arrangements between Owner and Developer. The parties
agree that such amendment may require either or both parties to obtain
appropriate regulatory licenses and approvals.
16. Captions. The captions used herein are for convenience
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of reference only and shall not be construed in any manner to limit
or modify any of the terms hereof.
17. Severability. In the event one or more of the provisions contained
in this Agreement is deemed to be invalid, illegal or unenforceable in any
respect under applicable law, the validity, legality and enforceability of the
remaining provisions hereof shall not in any way be impaired thereby.
18. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, and each such counterpart
shall together constitute but one and the same Agreement.
19. Limitation of Personal Liability of Owner. Notwithstanding any other
provision of this Agreement to the contrary, in no event shall any officer,
director, member, partner, manager, shareholder, incorporator or agent of Owner
or of Owner's affiliates be personally liable to Developer for any of Owner's
obligations under this Agreement.
20. Limitation of Personal Liability of Developer. Notwithstanding any
other provision of this Agreement to the contrary, in no event shall any
officer, director, member, partner, manager, shareholder, incorporator or agent
of Developer or of Developer's affiliates be personally liable to Owner for any
of Developer's obligations under this Agreement.
21. Termination of Prior Development Agreement. Effective as
of the date hereof, the Prior Development Agreement is hereby
terminated.
[signature page follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Development
Agreement to be executed and delivered in their names and on their behalf as of
the date first set forth above.
OWNER:
AH MICHIGAN OWNER LIMITED PARTNERSHIP,
an Ohio limited partnership
By: AH Michigan CGP, Inc.,
its general partner
By:________________________________
Name: David B. Fenkell
Title: President
DEVELOPER:
BROOKDALE LIVING COMMUNITIES OF
MICHIGAN, INC.,
a Delaware corporaton
By:
Name:
Title:
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MANAGEMENT AGREEMENT
This MANAGEMENT AGREEMENT (this "Agreement"), dated as of June ___, 1998,
is made and entered into by and between AH MICHIGAN OWNER LIMITED PARTNERSHIP,
an Ohio limited partnership ("Owner"), and BROOKDALE LIVING COMMUNITIES OF
MICHIGAN, INC., a Delaware corporation ("Manager").
RECITALS
WHEREAS, Owner owns certain real property which is being developed for use
as a senior independent and assisted living facility in Southfield, Michigan,
which is currently referred to as The Heritage (the "Facility");
WHEREAS, Manager is qualified in the business of operating senior
independent and assisted living facilities such as the Facility, and Owner
desires to engage Manager to operate the Facility; and
WHEREAS, Manager is willing to operate the Facility on the terms and
subject to the conditions set forth in this Agreement.
AGREEMENTS
NOW, THEREFORE, in consideration of the recitals and the mutual promises
and covenants herein contained and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Responsibilities of Manager.
(a) Owner hereby engages Manager to operate the Facility, and
Manager hereby accepts such engagement and, subject to the conditions set forth
in this Agreement, agrees to operate the Facility, at Owner's expense, in
accordance with the terms set forth in this Agreement. During the term of this
Agreement, Manager shall have full authority to operate and manage the Facility
as a senior independent and assisted living facility in accordance with the
terms and conditions hereof, and shall have full and complete control and reign
over, and use of, the entire Facility, including its common areas. Without
limiting the generality of the foregoing, Manager shall, at Owner's expense,
have full authority as follows:
(i) Operational Policies and Forms. Subject to the
applicable Annual Budget (as defined in Section 1(a)(xii)), Manager
shall establish and implement such operational policies and
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procedures, and develop such new policies and procedures, as Manager may deem
necessary to cause or to ensure the establishment and maintenance of operational
standards appropriate for the nature of the Facility.
(ii) Charges. Manager shall establish the schedules of charges
for residents of the Facility, including appropriate charges for any and all
special services rendered for residents at the Facility.
(iii) Information. Manager shall develop any informational
material, mass media releases, and other related publicity materials, that it
deems necessary for the operation of the Facility.
(iv) Regulatory Compliance. Manager shall use reasonable
efforts to maintain all licenses, permits, qualifications and approvals from any
applicable governmental or regulatory authority required for the operation of
the Facility. In addition, Manager shall supervise and coordinate the
preparation and filing of (and, where required to do so under applicable law or
regulations, file) all reports or other information required by all state or
other governmental agencies having jurisdiction over the Facility and shall
deliver copies of all such reports and information to Owner simultaneously with
such filings. Manager shall cooperate with governmental inspection and
enforcement activities.
(v) Equipment and Improvements. Subject to the applicable
Annual Budget and the Nomura Loan Documents (as hereinafter defined), Manager
shall, on behalf of Owner, acquire or effect the acquisition of equipment and
improvements which are needed to maintain or upgrade the quality of the Facility
or its services, to replace obsolete or run-down equipment, or to correct any
other deficiencies which may be identified by Manager during the term of this
Agreement, and shall make, or engage third parties to make, all such repairs,
replacements and maintenance and shall cause to be acquired all necessary
equipment, including replacement equipment.
(vi) Accounting. Manager shall supervise and coordinate
accounting support to, and prepare and maintain records for, the Facility. All
accounting procedures and systems utilized in providing said support shall be in
accordance with the operating capital and cash programs developed by Manager,
which programs shall conform to generally accepted accounting principles.
Nothing herein shall preclude Manager from engaging a third party
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(including related or affiliated parties) to assist it in the performance of the
accounting duties provided for herein.
(vii) Reports. Manager shall supervise and coordinate the
preparation of any operational information if and to the extent needed to comply
with any reporting obligations imposed on the Owner by any Lenders (as
hereinafter defined) or lessors of the Facility except for those reporting
obligations which relate to matters which are within the exclusive control of
the Owner or its affiliates. Manager shall prepare, or cause to be prepared, at
Owner's expense, the tax returns of Owner (but not Owner's partners or
affiliates) for Owner's signature. All originals of the books, forms and records
generated by Manager in connection with the operation of the Facility shall be
Manager's property.
(viii) Bank Accounts. Pursuant to the Nomura Loan Documents,
Manager shall establish an account or accounts and shall deposit therein all
money received by Manager on Owner's behalf from the operation of the Facility.
Withdrawals and payments from this account shall be made only on checks signed
by one or more person or persons designated by Manager. Manager shall give Owner
written notice as to the identity of such authorized signatories on such
account.
(ix) Personnel. Manager shall have full power and authority to
recruit, hire, train, promote, direct, discipline and fire all Facility
personnel, including the Executive Director of the Facility; establish salary
levels, personnel policies and employee benefits; and establish employee
performance standards, all as Manager determines to be necessary or desirable
during the term of this Agreement to ensure the efficient and satisfactory
operation of all departments within, and all services offered by, the Facility.
All of the foregoing obligations shall be undertaken in accordance with the
Annual Budgets and applicable law and regulations. All of the Facility personnel
shall be the employees of Manager, unless otherwise agreed by Owner and Manager,
and all salary, bonuses, fringe benefits, payroll taxes and related expenses
payable to or in respect of the Facility's on-site personnel holding the
position of Executive Director of the Facility and all positions subordinate
thereto shall be expenses of the Facility.
(x) Supplies and Equipment. Manager shall purchase, on behalf
of Owner, supplies and non-capital equipment needed to operate the Facility
within the budgetary limits set forth in the Annual Budgets.
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(xi) Legal Proceedings. Manager shall have the right and
authority, on its own behalf or through legal counsel designated by Manager, to
direct all legal matters and proceedings that are within the scope of Manager's
authority pursuant to this Agreement, including without limitation, instituting
any necessary legal actions or proceedings to collect obligations owing to the
Facility, canceling or terminating any contract or agreement relating to the
Facility for breach thereof or default thereunder, and otherwise enforce the
obligations of the residents, sponsors, licensees, customers and any other users
of the Facility. Without limiting the generality of the foregoing, Manager is
authorized (without the prior written consent of Owner) to (a) settle, in the
name and on behalf of Owner and on such terms and conditions as Manager may deem
to be in the best interests of the Facility, any and all claims or demands
arising out of, or in connection with, the operation of the Facility, whether or
not legal action has been instituted and (b) enter into such agreements with any
governmental agencies having jurisdiction over the Facility deemed necessary or
desirable by Manager in its sole and absolute judgment. All such amounts paid in
respect of any such settlements shall be expenses of the Facility and be paid by
Owner. Manager will give notice promptly to Owner of all demands and claims and
all settlements and legal actions, but the failure to give such notice shall not
affect the preceding provisions of this paragraph.
(xii) Annual Budgets.
(A) Preparation and Submission. At least forty-five (45) days
prior to each calendar year that commences during the Term (as hereinafter
defined) of this Agreement, Manager shall submit to Owner a proposed annual
budget for the Facility projecting the revenues available and funds required
during such fiscal year in order to operate the Facility and to make capital
improvements necessary or desirable in order to keep the Facility's physical
plant in good condition and repair. The proposed annual budget shall be based
upon data and information then available to Manager and shall include, without
limitation, estimated salaries and fringe benefits for all personnel groups,
projected staffing patterns for the Facility, estimates of required capital
expenditures and purchases of equipment, supplies, inventory, food and similar
items, and an estimate of the level of rates and charges to residents of the
Facility sufficient to generate revenue necessary to operate the Facility and
make the capital improvements projected in such budget. The proposed annual
budget shall be an estimate of revenues and costs, and Owner and Manager
acknowledge that (1) projected revenue may not be actually received and (2)
projected costs may be exceeded by actual expenses and capital expenditures
incurred in connection with the operation and
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maintenance of the Facility. By submitting such a projected budget, Manager will
not be deemed to be providing a guarantee or warranty as to the projected
revenue, expenses or capital expenditures of the Facility.
(B) Adoption. Each annual budget proposed by Manager pursuant
to subparagraph (A) above and, to the extent any Lender has approval rights with
respect thereto, as finally approved by such Lender or Lenders, shall constitute
an "Annual Budget" for all purposes under this Agreement.
(C) Efforts to Operate within Annual Budget. Manager agrees to
use reasonable efforts to operate the Facility in accordance with the Annual
Budgets. Subject to the foregoing limitation, Owner shall be responsible on a
periodic basis, as and when needed, for all expenses and capital expenditures
incurred in connection with the operation and maintenance of the Facility,
including, without limitation, Fees and cost overruns which exceed the
projections in the then current Annual Budget. Notwithstanding anything in this
Agreement, if Manager determines in good faith that the incurrence of any
expenditure is required in order to comply with applicable law or regulations or
to provide services in accordance with the senior independent and assisted
living industry's then-prevailing standards in the area in which the Facility is
located, then Manager shall be entitled to make such expenditures, and all such
expenditures shall be deemed, for all purposes of this Agreement, to be in
accordance with the then current Annual Budget.
(xiii) Collection of Accounts. Manager shall issue bills and
collect accounts and monies owed for goods and services furnished by the
Facility, including, but not limited to, enforcing the rights of Owner and the
Facility as creditor under any contract or in connection with the rendering of
any services.
(xiv) Contracts. Consistent with or as otherwise contemplated
by the Annual Budget, Manager shall negotiate, enter into, secure, cancel and/or
terminate such agreements and contracts which Manager may deem necessary or
advisable for the operation of the Facility, including, without limitation, the
furnishing of concessions, supplies, utilities, extermination, refuse removal
and other services. Where lawful, said agreements and contracts may be entered
into in the name of and on behalf of Owner.
(xv) Residency Agreements. Manager shall have the right and
authority to negotiate, enter into, amend, cancel and/or terminate residency
agreements with residents of the Facility.
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Where lawful, said residency agreements may be entered into in the name of and
on behalf of Owner.
(xvi) Other Matters. Manager shall, on its own behalf and/or
on Owner's behalf, be permitted to enter into such other agreements, contracts,
easements and to perform such other acts as are necessary or desirable, in
Manager's sole and absolute discretion, for the operation of the Facility.
(xvii) Loan Documents. Manager shall, on its own behalf and/or
on Owner's behalf, be permitted to deal with the providers of financing for the
Facility including, without limitation, (A) the first mortgage loan made by
Nomura Asset Capital Corporation with respect to the Facility and other
facilities (the "Nomura Loan") and (B) the subordinated loan made by Banc One
Capital Partners IV, Ltd (the "Banc One Loan"). Each provider of financing for
the Facility is referred to herein as a "Lender" and the loan documents
evidencing and/or securing financing for the Facility are referred to herein as
"Loan Documents". The Loan Documents which evidence and/or secure the Nomura
Loan are referred to herein as "Nomura Loan Documents". Manager shall be
responsible for complying with the terms of the Loan Documents, at Owner's sole
cost and expense, with the exception of those provisions (i) which are within
the exclusive control of Owner and its affiliates, e.g. filing of income tax
returns and certificates and notices relating to Owner's (and its affiliates')
organizational documents, etc., and (ii) which relate to the repayment of the
debt evidenced and secured by the Loan Documents. Owner (and its affiliates)
shall not amend or waive any provision of any of the Loan Documents without the
prior written consent of Manager.
2. Responsibilities of Owner. Owner shall not interfere with Manager in
connection with the management of the Facility in accordance with the terms of
this Agreement. Owner acknowledges that the management of the Facility is within
the exclusive control of Manager and Owner hereby grants Manager sole and
exclusive possession and control over the Facility.
3. Exclusive Representative/Attorney-in-Fact. It is understood and agreed
that, during the term of this Agreement, Manager shall be the exclusive
representative of Owner for purposes described in this Agreement. Any
communications with any Lender, regulatory authorities, governmental agencies,
contractors, suppliers, residents, sponsors, licensees, customers and guests of
the Facility shall be directed through Manager. Any and all notices received by
Owner relating to the Facility, the Loan Documents, the Owner or the direct or
indirect owners of interests
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in Owner shall immediately be forwarded by Owner to Manager. Owner hereby
appoints Manager the attorney-in-fact, during the term of this Agreement, of
Owner to take any action and execute any instruments that Owner is obligated
under, or that Owner has covenanted and agreed hereunder or under the Loan
Documents to take or execute, which appointment as attorney-in-fact is
irrevocable and coupled with an interest.
4. Insurance. Subject to and in accordance with the Nomura Loan Documents,
Manager shall, at Owner's expense, arrange for and maintain all necessary and
proper hazard insurance covering the Facility, including the furniture, fixtures
and equipment situated thereon, all necessary and proper public liability
insurance for the protection of Manager, Owner and, to the extent required under
the Loan Documents, any Lender. Manager shall, at Owner's expense, also arrange
for and maintain all employee health and worker's compensation insurance for the
Facility's personnel. Manager shall, at Owner's expense, also maintain such
other insurance as required pursuant to the Nomura Loan Documents. Any insurance
provided pursuant to this paragraph shall be an expense of the Facility payable
by Owner.
5. Proprietary Interest. The systems, methods, procedures and controls
employed by Manager and any written materials or brochures developed by Manager
to document the same are to remain the property of Manager and are not, at any
time during or after the term of this Agreement, to be utilized, distributed,
copied or otherwise employed or acquired by Owner, except as authorized by
Manager.
6. Term of Agreement. Unless this Agreement is sooner terminated as
hereinafter expressly provided in Section 7 or as otherwise agreed in writing by
both parties, the initial term (the "Term") of this Agreement shall commence on
the date the Facility is substantially completed and shall end on the
"Conversion Date", as such term is defined in the Nomura Loan Documents. Upon
any termination of this Agreement pursuant to the immediately preceding
sentence, the parties hereto shall have no further obligations or liabilities
other than the right of Manager to receive Fees through the Termination Date,
and during any such period for which Manager provides services or assists in the
operation of the Facility in connection therewith it shall be entitled to
receive an appropriate fee therefor. In addition, upon any termination of this
Agreement, all right, title and interest of the Manager in and to any licenses,
permits, qualifications, approvals, leases, residency agreements, trade
contracts and/or other agreements that are necessary for the operation of the
Facility shall, at the option of Owner, be assigned to Owner, except in
connection with a synthetic
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lease transaction, in which case such items shall be assigned to the lessee
thereunder.
7. Events of Default and Remedies.
(a) Event of Default. At the option of the non-defaulting party,
each of the following shall constitute an "Event of Default" hereunder:
(i) if Owner shall fail to pay or allow payment of any installment
of the Fees due to Manager in accordance with Section 10 hereof for a period of
five (5) days after written notice of such failure from Manager to Owner;
(ii) if Owner fails to perform in any material respect any term,
provision, or covenant of this Agreement (other than as set forth in Section
7(a)(i)) and (A) such failure continues for ten (10) days after written notice
from Manager to Owner specifying such failure (unless such failure cannot be
cured by the payment of money and cannot reasonably be cured within such 10-day
period, in which event, Owner shall have an additional period, not to exceed an
additional thirty (30) days, in which to cure the default) or (B) Owner fails to
endeavor diligently and continuously to cure such default as promptly as is
practicable;
(iii) if Manager fails to perform in any material respect any term,
provision, or covenant of this Agreement and (A) subject to Section 8 below,
such failure continues for thirty (30) days after written notice from Owner
specifying such failure to perform (unless such failure cannot reasonably be
cured within such 30-day period, in which event, Manager shall have an
additional period as is necessary to cure the default) or (B) Manager fails to
endeavor diligently and continuously to cure such default as promptly as is
practicable; or
(iv) if either Owner, on the one hand, or Manager, on the other, is
dissolved or liquidated, applies for or consents to the appointment of a
receiver, trustee or liquidator of all or a substantial part of its assets,
files a voluntary petition in bankruptcy or is the subject of an involuntary
bankruptcy filing, makes a general assignment for the benefit of creditors, or
files a petition or an answer seeking reorganization or arrangement with
creditors or to take advantage of any insolvency law, or if an order, judgment
or decree shall be entered by any court of competent jurisdiction, on the
application of a creditor, adjudicating Owner or Manager bankrupt or insolvent
or approving a petition seeking reorganization of Owner or Manager or appointing
a receiver, trustee or liquidator for such party of all or a
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substantial part of its assets, and such order, judgment or decree shall
continue unstayed and in effect for any period of sixty (60) consecutive days;
or
(v) if Owner or any affiliate of Owner is in breach or default of
any of its obligations under that certain Equity Option Agreement of even date
herewith with Brookdale Living Communities, Inc. ("Brookdale") or under that
certain Project Option Agreement of even date herewith with Brookdale.
(b) Remedies. At any time after the occurrence and during the
continuance of any Event of Default caused by Owner, Manager may, at its option,
do one or more of the following: (I) terminate this Agreement by giving written
notice to Owner and/or (ii) exercise all rights and remedies available under law
or equity. At any time after the occurrence and during the continuance of an
Event of Default caused by Manager, Owner may, as its sole option, terminate
this Agreement in accordance with the terms hereof and Manager shall have no
other liability to Owner hereunder.
8. Facility Operations.
(a) No Guarantee of Profitability. Manager does not
guarantee that operation of the Facility will be profitable.
(b) Force Majeure. The parties will not be deemed to be in violation
or breach of this Agreement if they are prevented from performing any of their
respective obligations hereunder for any reason beyond their control, including,
without limitation, strikes, shortages, war, acts of God, or any applicable
statute, regulation or rule of federal, state or local government or agency
thereof having jurisdiction over the Facility or the operations thereof.
9. Withdrawal of Funds by Manager. Owner and Manager acknowledge and agree
that the efficient operation of the Facility requires that Manager have ready
access to the funds required therefor. Accordingly, Owner agrees not to withdraw
any funds from the Facility's bank account(s) without the prior written consent
of Manager.
10. Fees. During the term of this Agreement, Manager shall be entitled to
receive management fees (the "Fees") equal to the greater of (i) five percent
(5%) of the gross revenues of the Facility during each month or portion thereof
occurring during such term or (ii) $10,000 per month. Fees shall be paid on a
monthly
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basis simultaneously with the delivery by Manager to Owner of the monthly
statements provided for in Section 1(a)(vii).
In addition to the Fees, Owner agrees to reimburse Developer and Brookdale
Living Communities, Inc.("Brookdale") for any and all costs and/or expenses
paid, or incurred, by Manager or Brookdale in connection with any of the Loan
Documents, including, without limitation, Interest, the Draw Fees, Servicing
Fees, Facility Structuring Fee, non-use fee, Additional Loan Structuring Fees
and Extension Fees (as such terms are defined in the Nomura Loan Documents) or
any other fees or expenses under any of the Loan Documents.
11. Assignment. This Agreement shall not be assigned (including by
operation of law, whether by merger or consolidation (excluding a merger
effected solely for the purpose of changing Owner's jurisdiction of
incorporation that does not affect the ownership interests of Owner in any
material respect) or otherwise) by Owner, on the one hand, or by Manager, on the
other, without the prior written consent of the other party; provided, however,
that to the extent permitted by applicable law and regulations, and subject to
the receipt of all required licenses, permits, approvals and authorizations of
applicable governmental agencies, this Agreement may be assigned by Manager to
one or more corporations or other legal entities all the shares (and, in the
case of legal entities other than corporations, all the equity ownership and
voting control) of which are owned, directly or indirectly, by Manager or by
Brookdale Living Communities, Inc.
12. Notices. Any notices required or permitted to be sent hereunder shall
be delivered personally or by facsimile (with answer back acknowledged) or
mailed, certified mail, return receipt requested, or delivered by overnight
courier service to the following addresses, or such other addresses as shall be
given by notice delivered hereunder, and shall be deemed to have been given upon
delivery, if delivered personally, upon receipt with answer back acknowledged,
if delivered by facsimile three (3) business days after mailing, if mailed, or
one business day after delivery to the courier, if delivery by overnight courier
service:
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If to Owner, to:
AH Michigan Owner Limited Partnership
320 King of Prussia Road
Suite 160
Radnor, Pennsylvania 19087
Attn: David B. Fenkell
Facsimile: (610) 902-0777
If to Manager, to:
c/o Brookdale Living Communities, Inc.
77 West Wacker Drive
Suite 4400
Chicago, Illinois 60601
Attn: Darryl W. Copeland, Jr.
Facsimile: (312) 977-3699
With a copy to:
c/o Brookdale Living Communities, Inc.
77 West Wacker Drive
Suite 4400
Chicago, Illinois 60601
Attn: Robert J. Rudnik
Facsimile: (312) 977-3701
and
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attn: Wayne D. Boberg
Facsimile: (312) 558-5700
13. Relationship of the Parties. The relationship of Manager to Owner in
connection with this Agreement shall be that of an independent contractor, and
all acts performed by Manager during the term hereof shall be deemed to be
performed in Manager's capacity as an independent contractor. Nothing contained
in this Agreement is intended to or shall be construed to give rise to or create
a partnership or joint venture or lease between Owner, its successors and
assigns, on the one hand, and Manager, its successors and assigns, on the other
hand.
14. Entire Agreement. This Agreement and any documents executed in
connection herewith contain the entire agreement among the parties with respect
to the subject matter hereof and, subject
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to the restrictions contained in Section 11 above, shall be binding upon their
respective successors and assigns, and shall be construed in accordance with the
laws of the state where the Facility is located. Subject to any restrictions in
the Nomura Loan Documents, this Agreement may not be modified or amended except
by written instrument signed by the parties hereto.
15. Contract Modifications for Certain Legal Events. In the event any
state or federal laws or regulations, whether now existing or enacted or
promulgated after the effective date of this Agreement, are interpreted by
judicial decision, a regulatory agency or legal counsel of both parties in such
a manner as to indicate that the structure of this Agreement may be in violation
of such laws or regulations, Owner and Manager agree to cooperate in
restructuring their relationship and this Agreement to eliminate such violation
or to reduce the risk thereof to the extent such restructuring can be
accomplished upon commercially reasonable terms; provided, that any such
restructuring shall, to the maximum extent possible, preserve the underlying
economic and financial arrangements between Owner and Manager. The parties agree
that such amendment may require either or both parties to obtain appropriate
regulatory licenses and approvals.
16. Captions. The captions used herein are for convenience of reference
only and shall not be construed in any manner to limit or modify any of the
terms hereof.
17. Severability. In the event one or more of the provisions contained in
this Agreement is deemed to be invalid, illegal or unenforceable in any respect
under applicable law, the validity, legality and enforceability of the remaining
provisions hereof shall not in any way be impaired thereby.
18. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, and each such counterpart
shall together constitute but one and the same Agreement.
19. Limitation of Personal Liability of Owner. Notwithstanding any other
provision of this Agreement to the contrary, in no event shall any officer,
director, member, partner, manager, shareholder, incorporator or agent of Owner
or of Owner's affiliates be personally liable to Manager for any of Owner's
obligations under this Agreement.
20. Limitation of Personal Liability of Manager. Notwithstanding any other
provision of this Agreement to the contrary, in no event shall any officer,
director, member, partner,
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manager, shareholder, incorporator or agent of Manager or of Manager's
affiliates be personally liable to Owner for any of Manager's obligations under
this Agreement.
[signature page follows]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Management
Agreement to be executed and delivered in their names and on their behalf as of
the date first set forth above.
OWNER:
AH MICHIGAN OWNER LIMITED
PARTNERSHIP,
an Ohio limited partnership
By: AH Michigan CGP, Inc., its
general partner
By:___________________________
Name: David B. Fenkell
Title: President
MANAGER:
BROOKDALE LIVING COMMUNITIES OF
MICHIGAN, INC.,
a Delaware corporaton
By:
Name:
Title:
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Equity Option Agreement
This Equity Option Agreement (this "Agreement"), dated as of June
17, 1998, is made and entered into by and among AH Michigan Investor, Inc., an
Ohio corporation (the "Investor"), AH Michigan Subordinated, LLC, an Ohio
limited liability company (the "Company"), AH Michigan CGP, Inc., an Ohio
corporation (the "General Partner"), AH Michigan Owner Limited Partnership, an
Ohio limited partnership (the "Owner" and together with the Investor, the
Company and the General Partner shall be individually referred to as an "Owner
Related Entity" and shall be collectively referred to as the "Owner Related
Entities"), and Brookdale Living Communities, Inc., a Delaware corporation
("Brookdale").
RECITALS
WHEREAS, the Company was formed as of March 27,1998 by the filing
and recording of the Company's Articles of Organization in the Office of the
Secretary of State of the State of Ohio, pursuant to an Operating Agreement
dated as of March 27, 1998 and amended and restated pursuant to an Amended and
Restated Operating Agreement dated as of June 17, 1998 (as so amended and
restated, and as it may be further amended from time to time with the consent of
Brookdale, the "Operating Agreement");
WHEREAS, the Investor is the sole member of, and owns one hundred
percent (100%) of the membership interests (the "Membership Interests") in, the
Company;
WHEREAS, the Company is the sole limited partner of, and owns
ninety-nine percent (99%) of the partnership interests (the "Limited Partnership
Interests") in, the Owner, for which a Certificate of Limited Partnership was
filed with the Secretary of State of the State of Ohio on March 27, 1998 and
which was organized under an Agreement of Limited Partnership, effective as of
March 27, 1998 and amended and restated pursuant to an Amended and Restated
Agreement of Limited Partnership dated as of June 17, 1998 (as so amended and
restated, and as it may be further amended from time to time with the consent of
Brookdale, the "Partnership Agreement");
WHEREAS, the Company is the sole shareholder in, and owns one
hundred percent (100%) of the issued and outstanding shares of capital stock
(the "Capital Stock") of, the General Partner;
WHEREAS, the General Partner is the sole general partner of, and
owns one percent (1%) of the partnership interests (the "General Partnership
Interest") in, the Owner;
WHEREAS, the Owner intends to develop a congregate housing facility
with an assisted living component for the elderly in Southfield, Michigan which
is currently referred to as "The Heritage" (the "Project");
WHEREAS, Nomura Asset Capital Corporation, a Delaware corporation
(the "Senior Lender"), has agreed to make a loan to the Owner up to the sum of
$26,625,000 to fund a portion of the costs of the Project pursuant to a Building
Loan Agreement of even date herewith (as it may
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be amended from time to time with the consent of Brookdale, the "Building Loan
Agreement") among the Owner, BLC (as hereinafter defined) and the Senior Lender
and a Loan Agreement of even date herewith (as it may be amended from time to
time with the consent of Brookdale, the "Senior Loan Agreement" and, together
with the Building Loan Agreement, the "Senior Loan Agreements") among the Owner,
BLC and the Senior Lender;
WHEREAS, Banc One Capital Partners IV, Ltd., an Ohio limited
liability company (the "Subordinate Lender"), has agreed to loan to the Company
up to the sum of $__________, pursuant to the terms of a certain Loan Agreement
of even date herewith (as it may be amended from time to time with the consent
of Brookdale, the "Subordinate Loan Agreement") between the Subordinate Lender
and the Company and as further evidenced by two certain promissory notes of even
date herewith (as amended or extended from time to time, and together with any
notes taken in substitution therefor, the "Subordinate Notes"), payable by the
Company to the Subordinate Lender, which the Company will contribute as equity
to the Owner to fund a portion of the costs of the Project;
WHEREAS, Brookdale Living Communities of Michigan, Inc., a Delaware
corporation ("BLC") and affiliate of Brookdale will be the developer of the
Project pursuant to an Amended and Restated Development Agreement of even date
herewith (as it may be amended from time to time, the "Development Agreement")
between the Owner and BLC and will be the manager of the Project pursuant to a
Management Agreement of even date herewith (as it may be amended from time to
time, the "Management Agreement") between the Owner and BLC;
WHEREAS, the Investor has made a capital contribution in the amount
of $1,050,000 to the Company, which the Company has in turn contributed as
capital to the Owner to fund a portion of the costs of the Project; and
WHEREAS, the Investor is willing to grant an option to Brookdale to
purchase the Membership Interests upon the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the mutual agreements contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Owner Related Entities and
Brookdale hereby agree as follows:
1. The Option. The Investor hereby grants an irrevocable option (the
"Option") to Brookdale to purchase the Membership Interests at the Purchase
Price (as defined in Section 3 hereof) in accordance with the terms of this
Agreement. The Option shall terminate and expire on the date (the "Option
Termination Date") that is the earliest of (a) ten (10) days after the principal
amount of the Subordinate Notes is due and payable, on the stated maturity date
thereof, as it may be extended pursuant to subsection 2.3(a) of the Subordinate
Loan Agreement, (b) thirty (30) days after the date specified by the Subordinate
Lender in a prior or contemporaneous notice to Brookdale as the date on which
the unpaid balance of all principal and interest accrued on the Subordinate
Notes has been declared by the Subordinate Lender to be, or shall have become
automatically, due and payable pursuant to Section 8.2 of the Subordinate Loan
Agreement, and (c) the Exercise Date, as
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<PAGE>
defined in the Intercreditor and Subordination Agreement of even date herewith
(as it may be amended from time to time, the "Intercreditor Agreement") among
the Senior Lender, the Subordinate Lender, the Owner, the Company, the Investor,
the General Partner, BLC and Brookdale. In no event shall the Option Termination
Date be later than July 31, 2002.
2. Triggering Events. The Option is exercisable by Brookdale on or
after the earliest to occur of the following events or dates (each a "Triggering
Event"):
(a) An election by the Company to prepay the Subordinate Notes
in accordance with subsection 2.3(e) of the Subordinate Loan Agreement.
(b) Five days prior to the date on which the principal amount
of the Subordinate Notes is due and payable, whether on the stated
maturity date thereof, as it may be extended pursuant to subsection 2.3(a)
of the Subordinated Loan Agreement, or upon the earlier acceleration
thereof.
(c) An Investor Default (as defined in Section 15 hereof) has
occurred.
3. Purchase Price. The "Purchase Price" for the Membership Interests
shall be an amount equal to $1,050,000, plus the amount required to produce a
17.11% internal rate of return thereon, computed using the methodology described
in Schedule I attached hereto, minus the aggregate amount of any distributions
made by the Company to the Investor (excluding distributions permitted by
paragraph (h) of Section 11).
4. Exercise of the Option. (a) Brookdale may exercise the Option by
giving the Investor and the Escrow Agent (as defined in Section 17 hereof) at
least five (5) days' prior written notice (the "Option Notice"), and if it is
exercising the Option upon the occurrence of a Triggering Event described in
paragraph (a) of Section 2 hereof, by giving the Subordinate Lender on behalf of
the Company notice of an optional prepayment in accordance with subsection
2.3(e) of the Subordinate Loan Agreement. The Option Notice shall specify the
date (the "Closing Date") of the exercise of the Option, which shall be the date
of the repayment in full of the Subordinated Notes, and in any case shall not be
later than the Option Termination Date. If Brookdale exercises the Option prior
to the Option Termination Date but fails to close prior to the Exercise Date,
then the Option shall terminate and Brookdale's rights shall cease and be null
and void. The Company hereby appoints Brookdale as its true and lawful
attorney-in-fact for purposes of giving notice of optional prepayment in
accordance with subsection 2.3(e) of the Subordinate Loan Agreement, which
appointment as attorney-in-fact is irrevocable and is coupled with an interest.
Anything herein to the contrary notwithstanding, the exercise of the Option
shall be conditioned upon the repayment in full of the Subordinate Notes in
accordance with the Subordinate Loan Agreement.
(b) In the event that at the time of the exercise of the
Option by Brookdale, it has not exercised the option (the "Texas Equity
Option") granted to it pursuant to the Equity Option Agreement of even
date herewith among AH Texas Investor, Inc., AH Texas Subordinated, LLC
(the "Texas LLC"), AH Texas CGP, Inc., AH Texas Owner
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Limited Partnership and Brookdale to purchase one hundred percent (100%)
of the membership interests in the Texas LLC, it shall be obligated to
exercise such option, and to satisfy or cause to be satisfied the
conditions to such exercise (including, without limitation, the repayment
in full of the subordinate notes issued by the Texas LLC to the
Subordinate Lender), prior to the termination thereof.
(c) In the event that Brookdale exercises the Texas Equity
Option prior to its exercise of the Option, it shall be obligated to
exercise the Option, and to satisfy or cause to be satisfied the
conditions to such exercise (including, without limitation, the repayment
in full of the Subordinate Notes), prior to the Option Termination Date.
5. Closing. (a) Upon receipt of the Option Notice, the Investor and
Brookdale shall schedule a closing (the "Closing") to occur on the Closing Date
at the Chicago, Illinois offices of counsel to Brookdale. The Investor and
Brookdale shall each be solely responsible for its own costs incurred in
connection with the Closing; provided, however, that Brookdale shall pay, or
reimburse the Investor for, all reasonable legal fees and expenses of the
Investor incurred in connection with the Closing in an amount not to exceed
$2,500 when aggregated with all other legal fees and expenses paid or reimbursed
by Brookdale pursuant to clause (ii) of paragraph 6(c) and clause (ii) of
paragraph 7(c) of the Property Option Agreement of even date herewith ( as it
may be amended from time to time, the "Property Option Agreement") among the
Company, the Owner and Brookdale.
(b) Contemporaneously with the execution and delivery of this
Agreement, the Investor is delivering to the Escrow Agent an Assignment
and Acceptance Agreement in the form of Exhibit A attached hereto (the
"Assignment" and together with any other documents and instruments
delivered pursuant to clause (v) of paragraph (c) below, the "Assignment
Documents"), undated, but otherwise duly executed by the Investor.
(c) At the Closing, the Escrow Agent shall, in accordance with
the escrow instructions set forth in Section 17 hereof, deliver the
Purchase Price to the Investor, and the Assignment to Brookdale or its
nominee, and the Investor shall deliver to Brookdale or its nominee the
following items:
(i) the stock certificate(s) representing the Capital Stock;
(ii) original executed copies (or if unavailable,
photocopies) of the Company's Articles of Organization, the Operating
Agreement, the Owner's Certificate of Limited Partnership, the
Partnership Agreement and the General Partner's Articles of
Incorporation and Regulations, all certified by an appropriate officer
of the relevant Owner Related Entity as of the Closing Date, as being
true, correct, complete and unamended (or if amended with the consent
of Brookdale, certified to such effect) and in full force and effect
as of such date;
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(iii) a certificate of an appropriate officer of each Owner
Related Entity, dated the Closing Date, certifying that the
representations and warranties of such Owner Related Entity set forth
in the applicable Section of this Agreement are true and correct as of
the Closing Date as though made by such Owner Related Entity on the
Closing Date;
(iv) the books and records of each Owner Related Entity; and
(v) such other documents and instruments of transfer as are
necessary to complete the transfer of the Membership Interests.
(d) The representations and warranties made by the Owner
Related Entities as of the Closing Date shall survive the Closing.
(e) Prior to the Closing, Brookdale shall conduct Uniform
Commercial Code, tax lien, pending suit and judgment and any other
appropriate searches against each of the Owner Related Entities.
6. Grant of Security Interest. (a) To secure the performance by the
Owner Related Entities of their respective obligations hereunder and the
repayment of any and all indebtedness and other liabilities arising from any
breach by any of the Owner Related Entities of its obligations hereunder, the
Investor hereby grants to Brookdale a continuing security interest in the
Membership Interests and all proceeds thereof, including, without limitation,
the right to receive any and all payments or distributions of any and every kind
whatsoever, whether in cash, property or otherwise, at any time made, owing or
payable with respect to the Membership Interests, together with all applicable
rights, powers and privileges of the Investor as the sole member and manager of
the Company pursuant to the Operating Agreement (all of the foregoing being
hereinafter collectively referred to as the "Collateral"). The security interest
in the Collateral granted pursuant to the preceding sentence shall be
subordinate to the security interest of the Subordinate Lender in the Membership
Interests and the proceeds thereof (the "Subordinate Lender Security Interest")
granted by the Investor to the Subordinate Lender pursuant to the Security
Agreement - Pledge and Assignment of Membership Interests dated as of the date
hereof (the "Subordinate Lender Security Agreement") between the Investor and
the Subordinate Lender.
(b) Subject to the rights of the Subordinate Lender under the
Subordinate Lender Security Agreement, the Investor does hereby irrevocably
constitute and appoint Brookdale its true and lawful attorney-in-fact, with full
power of substitution, for the Investor and in its name, place and stead, to
ask, demand, collect, receive, receipt for, sue for, compound and give
acquittance for any and all sums or properties which may be or become due,
payable or distributable with respect to the Collateral, with full power to
settle, adjust or compromise any claim thereunder as fully as the Investor could
do, and to endorse or sign the name of the Investor on all items, instruments
and commercial paper given in payment or in part payment thereof, and all
documents of satisfaction, discharge or receipt required or requested in
connection therewith, and, in its discretion, to file any claim or take any
other action or proceeding, either in its own name or in the name of the
Investor,
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or otherwise, which Brookdale may deem necessary or appropriate to perfect
Brookdale's security interest in or collect or otherwise realize upon any and
all of the Collateral, or effect a transfer thereof pursuant to the Operating
Agreement and this Agreement, or which may be necessary or appropriate to
protect and preserve the right, title and interest of Brookdale in and to the
Collateral and the security intended to be afforded hereby.
(c) Without limiting the foregoing, the Investor agrees that it
will, upon request of Brookdale, execute and deliver such further documents and
instruments (including, without limitation, Uniform Commercial Code Financing
Statements) and do and perform such other acts and things (including, without
limitation, obtaining such consents hereto, and giving such notices hereof, as
Brookdale may reasonably request from time to time) as Brookdale may deem
necessary or appropriate to more effectively vest in and secure to Brookdale the
Collateral or other rights or interests due or hereafter to become due.
(d) Upon the occurrence and continuance of an Investor Default, in
addition to the rights and remedies Brookdale may have hereunder, it shall have
all the rights and remedies of a secured party under applicable law with respect
to the Collateral. All costs and expenses of any kind whatsoever, of collection
and enforcement of the obligations secured hereby or any rights or remedies
hereunder (including without limitation, all costs of disposing of the
Collateral, together with court costs and reasonable attorneys' fees), or
incurred in realizing upon the Collateral or in enforcing this Agreement, shall
be deemed to be additional obligations secured hereby, and may be deducted and
retained by Brookdale from the proceeds of disposition of the Collateral and
applied to the payment and satisfaction of such costs and expenses.
(e) The security interest of Brookdale in the Collateral shall
terminate upon the earlier of the Closing or the Option Termination Date, and
upon such termination, Brookdale shall promptly deliver to the Investor the
appropriate Uniform Commercial Code termination statements.
7. Investor Representations. The Investor represents and warrants to
Brookdale as of the date hereof and as of the Closing Date as follows:
(a) The Investor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Ohio and has
all requisite power and authority to execute, deliver and perform its
obligations under this Agreement and the Assignment Documents and to own
and operate its property and to carry on its business as now conducted.
The Investor is duly qualified to do business in each jurisdiction where
the nature of its operations and applicable laws require such
qualification, except where the failure to be so qualified would not have
a material adverse effect on the Investor.
(b) The execution, delivery and performance of this Agreement
by the Investor have been, and as of the Closing Date, the execution,
delivery and performance of the Assignment Documents by the Investor will
have been, duly authorized by all necessary corporate action, and this
Agreement is, and when executed and delivered, the Assignment Documents
will be, the legal, valid and binding obligation of the Investor,
enforceable in
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accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency or the laws or equitable principles affecting the
enforcement of creditors' rights generally.
(c) The execution, delivery and performance by the Investor of
this Agreement do not, and the execution, delivery and performance by the
Investor of the Assignment Documents will not, contravene the terms of the
Investor's Articles of Incorporation or Regulations, true, correct and
complete copies of which have been delivered to Brookdale, conflict with
or result in any breach or contravention of, or the creation of any lien
under, any agreements or instruments to which it is a party or by which it
or any of its property is bound or violate any state or federal law and
all required approvals therefor, if any, have been, or will have been as
of the Closing Date, duly obtained.
(d) The Membership Interests constitute all of the membership
interests in the Company, and the Investor owns the Membership Interests,
free of any liens, claims or encumbrances, other than, as of the date
hereof, the Subordinate Lender Security Interest and the Special
Management Interests (as defined in the Intercreditor Agreement).
(e) There is no litigation or other proceeding pending against
the Investor which could have a material adverse effect on the Investor's
ability to consummate the transactions contemplated by this Agreement and
the Assignment Documents.
(f) The Investor's sole place of business is its address set
forth for notices in paragraph (c) of Section 18 hereof.
8. Company Representations.The Company represents and warrants to
Brookdale as follows as of the date hereof and as of the Closing Date:
(a) The Company is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of Ohio
and has all requisite power and authority to execute, deliver and perform
its obligations under this Agreement and to own and operate its property
and to carry on its business as now conducted. The Company is duly
qualified to do business in each jurisdiction where the nature of its
operations and applicable laws require such qualification, except where
the failure to be so qualified would not have a material adverse effect on
the Company.
(b) The execution, delivery and performance of this Agreement
by the Company have been duly authorized by all necessary organizational
action, and this Agreement is the legal, valid and binding obligation of
the Company, enforceable in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency or the laws or
equitable principles affecting the enforcement of creditors' rights
generally.
(c) The execution, delivery and performance by the Company of
this Agreement do not contravene the terms of the Company's Articles of
Organization or the Operating Agreement, true, correct and complete copies
of which have been delivered to
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Brookdale, conflict with or result in any breach or contravention of, or
the creation of any lien under, any agreements or instruments to which it
is a party or by which it or any of its property is bound or violate any
state or federal law and all required approvals therefor, if any, have
been duly obtained.
(d) The Company is the sole limited partner of the Owner, and
the Limited Partnership Interests constitute ninety-nine (99%) of the
partnership interests in, the Owner.
(e) Subject to the Senior Lender's rights with respect to and
any rights that it may acquire upon the acquisition of the Preferred
Equity and the Warrants (as such terms are defined in the Senior Loan
Agreement), the Company owns the Limited Partnership Interests free of any
liens, claims or encumbrances.
(f) The Membership Interests are not represented by any
certificates and/or similar instruments, and the Operating Agreement
contains a description of the rights of Brookdale pursuant to this
Agreement.
(g) There is no litigation or other proceeding pending against
the Company which could have a material adverse effect on the Company's
ability to consummate the transactions contemplated by the Property Option
Agreement and as of the Closing Date, if applicable, the Assignment (as
defined therein).
(h) All of the representations and warranties of the Company
set forth in Article V of the Subordinate Loan Agreement are true and
correct as though such representations and warranties were set forth
herein for Brookdale's benefit.
(i) All of the representations and warranties of the Company
set forth in Section 8 of the Property Option Agreement are true and
correct.
(j) The Company has no outstanding liabilities, contingent or
otherwise, other than, as of the date hereof, (i) the indebtedness
evidenced by the Subordinated Notes and (ii) liabilities for which
Brookdale or the Subordinate Lender (or any one or more of their
affiliates) is liable to the Company.
9. General Partner Representations. The General Partner represents
and warrants to Brookdale as follows as of the date hereof and as of the Closing
Date:
(a) The General Partner is a corporation duly organized,
validly existing and in good standing under the laws of the State of Ohio
and has all requisite power and authority to execute, deliver and perform
its obligations under this Agreement and to own and operate its property
and to carry on its business as now conducted. The Company is duly
qualified to do business in each jurisdiction where the nature of its
operations and
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<PAGE>
applicable laws require such qualification, except where the failure to be
so qualified would not have a material adverse effect on the General
Partner.
(b) The execution, delivery and performance of this Agreement
by the Company have been duly authorized by all necessary corporate
action, and this Agreement is the legal, valid and binding obligation of
the Company, enforceable in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, or the laws or
equitable principles affecting the enforcement of creditors' rights
generally.
(c) The execution, delivery and performance by the General
Partner of this Agreement do not contravene the terms of the General
Partners's Articles of Incorporation or Regulations, true, correct and
complete copies of which have been delivered to Brookdale, conflict with
or result in any breach or contravention of, or the creation of any lien
under, any agreements or instruments to which it is a party or by which it
or any of its property is bound or violate any state or federal law and
all required approvals therefor, if any, have been duly obtained.
(d) The General Partner is the sole general partner of the
Owner, and the General Partnership Interest constitutes one percent (1%)
of the partnership interests in, the Owner.
(e) Subject to the Senior Lender's rights with respect to and
any rights that it may acquire upon the acquisition of the Preferred
Equity and the Warrants (as such terms are defined in the Senior Loan
Agreement), the General Partner owns the General Partnership Interest free
of any liens, claims or encumbrances.
(f) All of the representations and warranties made on behalf
of the General Partner set forth in Article V of the Subordinate Loan
Agreement are true and correct as though such representations and
warranties were set forth herein for Brookdale's benefit.
(g) The General Partner has no outstanding liabilities,
contingent or otherwise, other than (i) those of Owner referred to in
paragraph (g) of Section 10 hereof for which it is liable by virtue of
being general partner of Owner and (ii) liabilities for which Brookdale or
the Subordinate Lender (or one or more of their affiliates) is liable to
the General Partner.
10. Owner Representations. The Owner represents and warrants to
Brookdale as follows as of the date hereof and as of the Closing Date:
(a) The Owner is a limited partnership duly organized, validly
existing and in good standing under the laws of the State of Ohio and has
all requisite power and authority to execute and deliver this Agreement,
to perform its obligations under Section 14 hereof and to own and operate
its property and to carry on its business as now conducted.
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<PAGE>
The Owner is duly qualified to do business in each jurisdiction where the
nature of its operations and applicable laws require such qualification,
except where the failure to be so qualified would not have a material
adverse effect on the Owner.
(b) The execution and delivery of this Agreement and the
performance by the Owner of its obligations under Section 14 hereof have
been duly authorized by all necessary partnership action, and this
Agreement is the legal, valid and binding obligation of the Owner,
enforceable in accordance with its terms, except as enforcement may be
limited by bankruptcy, insolvency or the laws or equitable principles
affecting the enforcement of creditors' rights generally.
(c) The execution and delivery of this Agreement and the
performance by the Owner of its obligations under Section 14 hereof do not
contravene the terms of the Partnership Agreement, a true, correct and
complete copy of which has been delivered to Brookdale, conflict with or
result in any breach or contravention of, or the creation of any lien
under, any agreements or instruments to which it is a party or by which it
or any of its property is bound or violate any state or federal law and
all required approvals therefor, if any, have been duly obtained
(d) There is no litigation or other proceeding pending against
the Owner which could have a material adverse effect on the Owner's
ability to consummate the transactions contemplated by the Property Option
Agreement and as of the Closing Date, if applicable, the Property
Conveyance Documents (as defined therein).
(e) All of the representations and warranties made on behalf
of the Owner set forth in Article V of the Subordinate Loan Agreement and
Article IV of the Senior Loan Agreement are true and correct as though
such representations and warranties were set forth herein for Brookdale's
benefit.
(f) All of the representations and warranties of the Owner set
forth in Section 9 of the Property Option Agreement are true and correct.
(g) The Owner has no outstanding liabilities, contingent or
otherwise, other than those incurred under or permitted by the Senior Loan
Agreements, any of the Loan Documents (as defined therein), the Management
Agreement and, as of the date hereof, the Development Agreement.
11. Investor Covenants. Until the earlier of the Closing or the
Option Termination Date, unless Brookdale otherwise consents in writing, the
Investor:
(a) Shall preserve and maintain its legal existence, rights,
franchises and privileges in the State of Ohio, and shall qualify and
remain qualified in each jurisdiction in which such qualification is
necessary or desirable in view of its business and operations or the
ownership of its property.
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<PAGE>
(b) Shall at all times observe and comply with the provisions
of Articles Fifth, Sixth and Tenth of its Articles of Incorporation as in
effect on the date hereof.
(c) Shall not amend the Company's Articles of Organization or
the Operating Agreement and shall at all times observe and comply with the
provisions thereof.
(d) Shall not cause or permit the dissolution of the Company.
(e) Shall not permit the issuance of any member's interests
(or any other interests) in the Company in addition to the Membership
Interests.
(f) Shall continue to own the Membership Interests (which
shall continue to constitute 100% of the membership interests in the
Company), free of any liens, claims or encumbrances, other than the
Subordinate Lender Security Interest and the security interest created by
this Agreement.
(g) Shall not file a voluntary petition in bankruptcy and
shall use its best efforts to contest any involuntary petition filed
against it.
(h) Shall not permit or accept any distributions by the
Company, other than distributions to be applied to the payment of income
taxes and funded by advances to the Company made by the Subordinate Lender
pursuant to subsection 2.6(a) of the Subordinate Loan Agreement.
(i) Shall give Brookdale at least thirty (30) days' prior
written notice of any change in its place of business.
(j) Shall not take any actions that might adversely affect
Brookdale's rights under, or be inconsistent with the terms of, this
Agreement.
12. Company Covenants. Until the earlier of the Closing or the
Option Termination Date, unless Brookdale otherwise consents in writing, the
Company:
(a) Shall not amend the Articles of Incorporation or the
Regulations of the General Partner or amend or consent to the amendment of
the Partnership Agreement, and shall at all times observe and comply with
the provisions thereof.
(b) Shall continue to own the Limited Partnership Interests
(which shall continue to constitute 99% of the partnership interests in
the Owner), free of any liens, claims or encumbrances.
(c) Shall continue to own the Capital Stock (which shall
continue to constitute one hundred percent (100%) of the issued and
outstanding capital stock of the General Partner), free of any liens,
claims or encumbrances.
11
<PAGE>
(d) Shall not amend, or request any waiver of any provision
of, the Subordinate Loan Agreement or any of the Loan Documents (as
defined therein) to which it is a party.
(e) Shall comply with all of the covenants applicable to it
set forth in Articles 6 and 7 of the Subordinate Loan Agreement, and shall
promptly deliver to Brookdale copies of all financial statements, reports,
notices, certificates or other writings delivered to the Subordinate
Lender pursuant thereto.
(f) Shall not permit or accept any distributions by the Owner
or any dividends by the General Partner.
(g) Shall not incur any liabilities or obligations, contingent
or otherwise, except expenses incurred in the ordinary course of
administering its business or those that are incurred under or are
necessary to comply with the provisions of the Subordinate Loan Agreement,
and shall not enter into any agreement or contract, whether oral or
written, except this Agreement, the Property Option Agreement, the
Intercreditor Agreement, the Subordinate Loan Agreement and the Loan
Documents (as defined therein) to which it is a party, and agreements
entered into in the ordinary course of administering its business.
(h) Shall give Brookdale at least thirty (30) days' prior
written notice of any change in its place of business.
(i) Shall not take any actions that might adversely affect
Brookdale's rights under, or be inconsistent with the terms of, this
Agreement.
13. General Partner Covenants. Until the earlier of the Closing or
the Option Termination Date, unless Brookdale otherwise consents in writing, the
General Partner:
(a) Shall not amend or consent to the amendment of the
Partnership Agreement, and shall at all times observe and comply with the
provisions thereof.
(b) Shall not cause or permit the dissolution or winding up of
the Owner.
(c) Shall not permit the issuance of any interest in the Owner
in addition to the Limited Partnership Interests and the General
Partnership Interest.
(d) Shall continue to own the General Partnership Interest
(which shall continue to constitute the only general partnership interest
in, and one percent (1%) of the partnership interests) in, the Owner, free
of any liens, claims or encumbrances.
(e) Shall comply with all of the covenants applicable to it
set forth in Articles 6 and 7 of the Subordinate Loan Agreement.
12
<PAGE>
(f) Shall not permit or accept any partnership distributions
by the Owner or the payment to itself of any compensation as general
partner of the Owner.
(g) Shall not declare or pay any dividends with respect to, or
purchase or redeem, or issue any options or other rights with respect to,
any shares of the Capital Stock.
(h) Shall not incur any liabilities or obligations, contingent
or otherwise, except expenses incurred in the ordinary course of
administering its business, or enter into any agreement or contract,
whether oral or written, except this Agreement and, on behalf of the Owner
as its general partner, agreements or contracts into which the Owner is
permitted to enter pursuant to paragraph (d) of Section 14 hereof.
(i) Shall not take any actions that might adversely affect
Brookdale's rights under, or be inconsistent with the terms of, this
Agreement.
14. Owner Covenants. Until the earlier of the Closing or the Option
Termination Date, unless Brookdale otherwise consents in writing, the Owner:
(a) Shall comply with all of the covenants applicable to it
set forth in Articles V, VI and VII of the Senior Loan Agreement and shall
promptly deliver to Brookdale copies of all financial statements, reports,
notices, certificates or other writings delivered to the Senior Lender
pursuant thereto.
.
(b) Shall not incur any liabilities or obligations, contingent
or otherwise, except expenses incurred in the ordinary course of
administering its business or those that are incurred under or are
necessary to comply or are permitted by with the provisions of the Senior
Loan Agreements, and shall not enter into any agreement or contract,
whether oral or written, except this Agreement, the Property Option
Agreement, the Intercreditor Agreement, the Senior Loan Agreement, the
Loan Documents (as defined therein) to which it is a party, the
Development Agreement and the Management Agreement, and agreements entered
into in the ordinary course of administering its business.
(c) Shall continue to own the Property (as defined in the
Property Option Agreement), free of any liens, claims or encumbrances,
other than Permitted Exceptions (as so defined).
(d) Shall not take any actions that might adversely affect
Brookdale's rights under, or be inconsistent with the terms of, this
Agreement other than as may be required by the Senior Loan Agreements or
the Loan Documents (as defined therein).
15. Investor Defaults. An "Investor Default" shall mean the
occurrence of one or more of the following described events:
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<PAGE>
(a) A material breach by any Owner Related Entity of any of
the representations and warranties contained (or contained by reference)
in Section 7, 8, 9 or 10 hereof on the date as of which made.
(b) Any Owner Related Entity defaults in the performance or
observation of any covenant of such Owner Related Entity contained in this
Agreement and such default shall continue without cure for fifteen (15)
days after notice thereof by Brookdale to such Owner Related Entity and
the Subordinate Lender.
(c) An "Event of Default", as defined in the Subordinate Loan
Agreement, occurs, which "Event of Default" has not been caused, directly
or indirectly, by the Manager or Brookdale.
(d) An "Event of Default", as defined in either of the Senior
Loan Agreements, occurs, which "Event of Default" has not been caused,
directly or indirectly, by the Manager or Brookdale.
(e) An "Event of Default", as defined in the Development
Agreement, by the Owner occurs.
(f) An "Event of Default", as defined in the Management
Agreement, by the Owner occurs.
(g) The Investor makes an assignment for the benefit of
creditors.
(h) The Investor petitions or applies to any tribunal for the
appointment of a trustee or receiver for itself or any substantial part of
its assets or the Investor commences any proceeding relating to it under
any bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation law of any jurisdiction whether now or
hereafter in effect.
(i) Any petitions or applications are filed, or any
proceedings are commenced, against the Investor seeking the adjudication
of it as bankrupt and the Investor by any act indicates its admission or
consent thereto, or acquiescence therein, or any order is entered
appointing a trustee or receiver, or adjudicating the Investor bankrupt or
insolvent, or approving the petition in any such proceedings and such
order remains unstayed or undischarged for more than sixty (60) days.
(j) Any order is entered in any proceeding against the
Investor decreeing the dissolution of the Investor and such order remains
unstayed or undischarged for more than sixty (60) days.
(k) Any judgment or order is entered in any proceedings which
affects the Membership Interests, the Limited Partnership Interests, the
Capital Stock or the General
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<PAGE>
Partnership Interest, or any lien, claim or other encumbrance encumbers
any thereof, other than, in the case of the Membership Interests, the
Subordinate Lender Security Interest and the Special Management Interests.
16. Notice of Certain Events. Owner and each other Owner Related
Entity agrees to promptly give notice to Brookdale of:
(a) Any Investor Default known to Owner or such other Owner
Related Entity;
(b) Any notice of any default or "Event of Default" or any
other notice received from the Senior Lender under the Senior Loan
Agreements (unless a copy of such notice is required to be delivered
to BLC and/or Brookdale pursuant thereto);
(c) Any notice of any default or "Event of Default" or any
other notice received from the Subordinate Lender under the
Subordinate Loan Agreement (unless a copy of such notice is required
to be delivered to BLC and/or Brookdale pursuant thereto); and
(d) Any notice given by Owner or any other Owner Related
Entity to the Senior Lender or the Subordinate Lender.
Each notice pursuant to this Section 16 shall be accompanied by a statement of
the chief executive officer of the relevant Owner Related Entity setting forth
the details of the occurrence referred to therein and, if applicable, stating
what action such Owner Related Entity proposes to take with respect thereto.
17. Appointment of Escrow Agent And Establishment of Escrow.
(a) Brookdale and the Investor agree to appoint Squire,
Sanders & Dempsey as Escrow Agent (in such capacity, together with any
successor thereto, the "Escrow Agent") pursuant to the terms of the Escrow
Agent Appointment Agreement attached hereto as Exhibit B (the "Escrow
Agent Appointment Agreement").
(b) Brookdale and the Investor hereby establish an escrow to
hold the Assignment and to facilitate the Closing.
(c) The Escrow Agent agrees to act in accordance with the
Escrow Agent Appointment Agreement and this Section 17.
(d) On the Closing Date, Brookdale shall deliver to the Escrow
Agent, (i) the Purchase Price by wire transfer of immediately available
funds to an account designated by the Escrow Agent, (ii) a certificate
(the "Purchase Price Certificate") of a Treasurer or an Assistant
Treasurer of Brookdale, dated the Closing Date or a date within the
preceding five (5) days, stating that (A) a Triggering Event has occurred,
(B) the Option Termination Date
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<PAGE>
has not occurred, (C) in the event that Brookdale desires the Assignment
to be delivered to a nominee, the name of such nominee, (D) the Purchase
Price has been accurately calculated in accordance with Section 3 hereof
and Schedule I attached hereto, and showing such calculation, and (iii) a
letter from the Subordinate Lender confirming the receipt of repayment in
full of the Subordinate Notes in accordance with the Subordinate Loan
Agreement.
(e) On the Closing Date, upon receipt of the Purchase Price
and the Purchase Price Certificate, the Escrow Agent shall take the
following actions:
(i) Date the Assignment the Closing Date, insert the
name of the "Assignee" in the preamble thereto and
deliver the Assignment to Brookdale or its
nominee; and
(ii) Deliver the Purchase Price to the Investor by wire
transfer of immediately available funds to an
account designated by the Investor.
(f) In the event that Brookdale assigns its rights under this
Agreement pursuant to paragraph (e) of Section 18 hereof, it shall so
notify the Escrow Agent.
18. Miscellaneous.
(a) Each Owner Related Entity and Brookdale agree that money
damages or other remedy at law would not alone be sufficient or adequate
remedy for any breach or violation of, or a default under, this Agreement
by such Owner Related Entity and that, in addition to all other remedies
available to Brookdale, Brookdale shall be entitled to an injunction
restraining such breach, violation or default or threatened breach,
violation or default and to any other equitable relief, including, without
limitation, specific performance, without bond or other security being
required.
(b) The Owner Related Entities acknowledge and agree that (i)
they are not intended to be beneficiaries of the limitations set forth in
the Intercreditor Agreement on the rights of Brookdale to take Enforcement
Actions (as defined therein) and to enforce any representations,
covenants, warranties or obligations of the Owner under or pursuant to
this Agreement, and (ii) they may not seek to enforce such limitations.
(c) Notices. Any notices required or permitted to be sent
hereunder shall be delivered personally or by telecopier (with answer back
acknowledged) or mailed, certified mail, return receipt requested, or
delivered by overnight courier service to the following addresses, or such
other addresses as shall be given by notice delivered hereunder, and shall
be deemed to have been given upon delivery, if delivered personally, upon
receipt with answer back acknowledged, if delivered by telecopier, three
(3) business days after
16
<PAGE>
mailing, if mailed, or one business day after delivery to the courier, if
delivery by overnight courier service:
If to the
Investor: AH Michigan Investor, Inc.
320 King of Prussia Road
Suite 160
Radnor, Pennsylvania 19087
Attn: David B. Fenkell
Fax: (610) 902-0777
with a copy to:
Squire, Sanders & Dempsey
41 South High Street
Columbus, Ohio 43215
Attn: Scott B. West
Fax: (614) 365-2499
If to the
Company: AH Michigan Subordinated, LLC
320 King of Prussia Road
Suite 160
Radnor, Pennsylvania 19087
Attn: David B. Fenkell
Fax: (610) 902-0777
with a copy to:
Squire, Sanders & Dempsey
41 South High Street
Columbus, Ohio 43215
Attn: Scott B. West
Fax: (614) 365-2499
If to the
General Partner: AH Michigan CGP, Inc.
320 King of Prussia Road
Suite 160
Radnor, Pennsylvania 19087
Attn: David B. Fenkell
Fax: (610) 902-0777
with a copy to:
Squire, Sanders & Dempsey
41 South High Street
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<PAGE>
Columbus, Ohio 43215
Attn: Scott B. West
Fax: (614) 365-2499
If to the
Owner: AH Michigan Owner Limited Partnership
320 King of Prussia Road
Suite 160
Radnor, Pennsylvania 19087
Attn: David B. Fenkell
Fax: (610) 902-0777
with a copy to:
Squire, Sanders & Dempsey
41 South High Street
Columbus, Ohio 43215
Attn: Scott B. West
Fax: (614) 365-2499
If to Brookdale: Brookdale Living
Communities, Inc.
77 West Wacker Drive
Suite 4400
Chicago, Illinois 60601
Attn: Darryl W. Copeland, Jr.
Fax: (312) 977-3699
Attn: Robert J. Rudnik
Fax: (312) 977-3769
with a copy to: Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attn: Wayne D. Boberg
Fax: (312) 558-5700
A copy of any notice sent hereunder shall be sent to (i) the
Senior Lender at Nomura Asset Capital Corporation, Two World Financial
Center, Building B, New York, New York 10281-1198, Attention: Sheryl
McAfee, Telecopier: (212) 667-1206, with copies to: Nomura Asset Capital
Corporation, Two World financial Center, Building B, New York, New York
10281, Attention: Barry Funt, Telecopier: (212) 667-1567 and Dechert Price
& Rhoads, 90 State House Square, 12th floor, Hartford, Connecticut
06103-3702, Attention: Marc B. Friedman, Fax: (860) 524-3930 (or such
other address as shall be given by notice delivered hereunder), and (ii)
the Escrow Agent at Squire, Sanders & Dempsey, 41 South
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<PAGE>
High Street, Columbus, Ohio 43215, Attention: Scott B. West, Fax: (614) 365-2499
(or such other address as shall be given by notice delivered hereunder).
(d) Entire Agreement. This Agreement (including the schedule
and exhibits hereto) constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof and supersedes all prior
agreements and understandings, oral and written, among the parties hereto
with respect to the subject matter hereof.
(e) Binding Effect; Benefit. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns. Brookdale may assign its rights under this
Agreement without the consent of any Owner Related Entities. In the event
that Brookdale assigns its rights under this Agreement, it shall so notify
the other parties hereto, and references herein, including, without
limitation, in Section 17 hereof, and in the Escrow Agent Appointment
Agreement, to Brookdale shall be deemed to be references to the assignee
to whom such rights have been assigned upon the execution and delivery by
Brookdale and such assignee of an assignment and assumption agreement with
respect to the Escrow Appointment Agreement and this Agreement and
delivery of a copy thereof to each of the other parties hereto and the
Escrow Agent.
(f) No Third Party Beneficiaries. This Agreement is not
intended to and does not benefit or confer rights upon, and is not
intended to be and is not enforceable by, any persons or entities not
party to this Agreement, including, without limitation, the Senior Lender
and the Subordinate Lender.
(g) Amendment; Waiver. No provision of this Agreement may be
amended, waived or otherwise modified without the prior written consent of
the parties hereto and the Subordinate Lender, and, in the case of any
amendment to, or waiver or modification of, the provisions of Section 17
hereof, the acknowledgment and agreement of the Escrow Agent.
(h) Section Headings. The section headings contained in this
Agreement are for reference purposes only and shall not affect the meaning
or interpretation of this Agreement.
(i) Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original and all
of which together shall be deemed to be one and the same instrument.
(j) Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois (without
giving effect to principles of conflicts of law).
(k) Waiver of Jury Trial. Each party hereto, after consulting
or having had the opportunity to consult with counsel, knowingly,
voluntarily and intentionally waives
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<PAGE>
any right any of them may have to a trial by jury in any litigation based
upon or arising out of this Agreement, or any of the transactions
contemplated by this Agreement, or any course of conduct, dealing,
statements (whether oral or written) or actions of any of them. No such
party shall seek to consolidate, by counterclaim or otherwise, any action
in which a jury trial has been waived with any other action in which a
jury trial cannot be or has not been waived unless failure to so
consolidate would result in a loss of such claim.
(l) Limitation of Personal Liability. Notwithstanding any
other provision of this Agreement to the contrary, (i) in no event shall
any officer, director, member, partner, manager, shareholder, incorporator
or agent of any Owner Related Entity be personally liable to Brookdale for
any of such Owner Related Entity's obligations under this Agreement, and
(ii) if the Owner defaults in connection with any representation or
covenant of the Owner set forth in this Agreement, it will not create any
personal liability against the Owner or any lien rights against the
Property.
(m) Intercreditor Agreement. The parties hereto acknowledge
the existence of the Intercreditor Agreement.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have executed and delivered this
Agreement as of the date first above written.
AH MICHIGAN INVESTOR, INC.
By:___________________________
Name: David B. Fenkell
Its: President
AH MICHIGAN SUBORDINATED, LLC
By: AH Michigan Investor, Inc., its manager
By: ___________________________
Name: David B. Fenkell
Its: President
AH MICHIGAN CGP, INC.
By:___________________________
Name: David B. Fenkell
Its: President
AH MICHIGAN OWNER LIMITED PARTNERSHIP
By: AH Michigan CGP, Inc., its general partner
By:___________________________
Name: David B. Fenkell
Its: President
BROOKDALE LIVING COMMUNITIES, INC.
By:___________________________
Name:_________________________
Its:____________________________
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<PAGE>
JOINDER
The undersigned hereby joins in the execution and delivery of the
foregoing Agreement for the sole purpose of acknowledging and agreeing to the
provisions of Section 17 thereof.
SQUIRE, SANDERS & DEMPSEY
---------------------------------
By:______________________________
Name:____________________________
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EXHIBIT A
ASSIGNMENT AND ACCEPTANCE AGREEMENT
THIS AGREEMENT made as of ___________________, by and between AH MICHIGAN
INVESTOR, INC., an Ohio corporation ("Assignor"), and
_______________________________ ("Assignee").
WITNESSETH:
1. For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Assignor does hereby transfer, assign and convey
to Assignee a one hundred percent (100%) interest (the "Interest") as Member in
AH MICHIGAN SUBORDINATED, LLC, an Ohio limited liability company (the "LLC").
2. Assignor does hereby warrant and represent that it is the sole and
lawful owner of the Interest herein transferred, free of any liens, claims or
encumbrances and that it has full power and authority to make such transfer.
3. Assignee does hereby accept the foregoing assignment and agrees to
become a Member of the LLC.
ASSIGNOR:
AH MICHIGAN INVESTOR, INC.
By:___________________________
Title:_________________________
ASSIGNEE:
By:___________________________
Title:_________________________
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EXHIBIT B
ESCROW AGENT APPOINTMENT AGREEMENT
This Escrow Agent Appointment Agreement (this "Agreement"), dated as
of June __, 1998, is made and entered into by and among AH Michigan Investor,
Inc., an Ohio corporation (the "Investor"), Brookdale Living Communities, Inc.,
a Delaware corporation ("Brookdale"), and Squire, Sanders & Dempsey, as escrow
agent hereunder (in such capacity, together with any successor thereto, the
"Escrow Agent").
RECITALS
WHEREAS, the Investor, AH Michigan Subordinated, LLC, an Ohio
limited liability company (the "Company"), AH Michigan CGP, Inc., an Ohio
corporation (the "General Partner"), AH Michigan Owner Limited Partnership, an
Ohio limited partnership, and Brookdale have entered into an Equity Option
Agreement of even date herewith (as it may be amended from time to time, the
"Equity Option Agreement");
WHEREAS, pursuant to the Equity Option Agreement, the Investor has
granted an option to Brookdale to purchase the membership interests (the
"Membership Interests") that it owns in the Company; and
WHEREAS, the Investor and Brookdale have requested the Escrow Agent
to act in the capacity of escrow agent for the purpose of holding in escrow the
Assignment and Acceptance Agreement pursuant to which the Membership Interests
are to be conveyed, and the Escrow Agent, subject to the terms and conditions
hereof, has agreed to do so.
NOW, THEREFORE, in consideration of the mutual agreements contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Investor, Brookdale and the
Escrow Agent hereby agree as follows:
1. Definitions.Unless otherwise defined herein, capitalized terms
used herein shall have the meanings ascribed to them in the Equity Option
Agreement.
2. Appointment of Escrow Agent. The Investor and Brookdale hereby
designate the Escrow Agent to act as escrow agent for the purposes of performing
the duties set forth in Section 17 of the Equity Option Agreement, and the
Escrow Agent accepts such appointment, all upon the terms and conditions set
forth in this Agreement.
3. Administration. It is agreed that the Escrow Agent shall have no
duties or responsibilities whatsoever under the Equity Option Agreement or this
Agreement except as specifically provided herein; that in the absence of its own
negligence the Escrow Agent shall be fully protected and incur no liability to
anyone in acting upon any notice, written request, consent,
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certificate, document, or other paper reasonably believed by it to be genuine
and to be signed or sent by the proper persons; that the Escrow Agent shall be
responsible only for the performance of its own obligations under the Equity
Option Agreement and this Agreement; and that the Escrow Agent shall be under no
obligation to commence, continue or defend any suit or proceeding in connection
with the Equity Option Agreement or this Agreement unless requested to do so by
the parties hereto and indemnified to its satisfaction.
4. Expense of Escrow Agent. The Escrow Agent shall not be paid a fee
for acting as Escrow Agent under the Equity Option Agreement and this Agreement.
The Escrow Agent shall not be liable for any claims, suits, actions, costs,
damages, liabilities or expenses (collectively, the "Liabilities") in connection
with the performance of its duties under the Equity Option Agreement or this
Agreement other than Liabilities caused by the negligence or willful misconduct
of the Escrow Agent, and Brookdale hereby agrees to indemnify and hold harmless
the Escrow Agent from and against any and all Liabilities arising from or in
connection with any acts or omissions taken by the Escrow Agent in connection
with the Equity Option Agreement or this Agreement, other than those Liabilities
caused by the negligence or willful misconduct of the Escrow Agent.
5. Termination of Agreement. This Agreement shall terminate upon the
earlier to occur of (a) the performance of the duties of the Escrow Agent under
the Equity Option Agreement, and (b) the Option Termination Date. If the Closing
shall not have occurred on or prior to the Option Termination Date, the Escrow
Agent shall redeliver the Assignment to the Investor.
6. Replacement of Escrow Agent. The Escrow Agent may resign, or the
Investor and Brookdale may agree to discharge the Escrow Agent, from its
obligations under the Equity Option Agreement and this Agreement at any time,
but in no event shall the Escrow Agent be released of its obligations under the
Equity Option Agreement and this Agreement unless and until a substitute escrow
agent has been designated and assumed its obligations.
7. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Illinois (without giving effect to
principles of conflicts of law).
8. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
9. Notices. Any notices required or permitted to be sent hereunder
shall be delivered personally or by telecopier (with answer back acknowledged)
or mailed, certified mail, return receipt requested, or delivered by overnight
courier service to the following addresses, or such other addresses as shall be
given by notice delivered hereunder, and shall be deemed to have been given upon
delivery, if delivered personally, upon receipt with answer back acknowledged,
if delivered by telecopier, three (3) business days after mailing, if mailed, or
one business day after delivery to the courier, if delivery by overnight courier
service:
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If to the
Investor: AH Michigan Investor, Inc.
320 King of Prussia Road
Suite 160
Radnor, Pennsylvania 19087
Attn: David B. Fenkell
Fax: (610) 902-0777
If to Brookdale: Brookdale Living
Communities, Inc.
77 West Wacker Drive
Suite 4400
Chicago, Illinois 60601
Attn: Darryl W. Copeland, Jr.
Fax: (312) 977-3699
Attn: Robert J. Rudnik
Fax: (312) 977-3769
with a copy to: Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attn: Wayne D. Boberg
Fax: (312) 558-5700
If to the Escrow Agent: Squire, Sanders & Dempsey
41 South High Street
Columbus, Ohio 43215
Attn: Scott B. West
Fax: (614) 365-2499
10. Brookdale may assign its rights hereunder in connection with an
assignment of its rights under the Equity Option Agreement in accordance with
the provisions of paragraph (e) of Section 18 thereof.
11. Amendment. This Agreement may be amended only by a written
instrument executed by all parties hereto.
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IN WITNESS WHEREOF, the undersigned have executed and delivered this
Agreement as of the date first above written.
AH MICHIGAN INVESTOR, INC.
By:___________________________
Name: David B. Fenkell
Its: President
BROOKDALE LIVING COMMUNITIES, INC.
By:___________________________
Name:_________________________
Its:____________________________
SQUIRE, SANDERS & DEMPSEY
By:______________________________
Name:____________________________
Its:_______________________________
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Property Option Agreement
This Option Agreement (this "Agreement"), dated as of June __,
1998, is made and entered into by and among AH Michigan Subordinated, LLC, an
Ohio limited liability company (the "Company"), AH Michigan Owner Limited
Partnership, an Ohio limited partnership (the "Owner" and together with the
Company, shall be individually referred to as a "Grantor" and shall be together
referred to as the "Grantors"), and Brookdale Living Communities, Inc., a
Delaware corporation ("Brookdale").
RECITALS
WHEREAS, Banc One Capital Partners IV, Ltd., an Ohio limited
liability company (the "Subordinate Lender"), has agreed to loan to the Company
up to the sum of $6,483,627 (the "Subordinate Loan"), pursuant to the terms of a
certain Loan Agreement of even date herewith (as it may be amended from time to
time, the "Subordinate Loan Agreement") between the Lender and the Company and
as further evidenced by two certain Promissory Notes of even date herewith (as
amended or extended from time to time, and together with any notes taken in
substitution therefor, the "Subordinate Notes") payable by the Company to the
Lender;
WHEREAS, the Company was formed as of March 27,1998 by the filing
and recording of the Company's Articles of Organization in the Office of the
Secretary of State of the State of Ohio, pursuant to an Operating Agreement
dated as of March 27, 1998 and amended and restated pursuant to an Amended and
Restated Operating Agreement dated as of June ___, 1998 (as so amended and
restated, and as it may be further amended from time to time, the "Operating
Agreement");
WHEREAS, the Company is the sole shareholder in, and owns one
hundred percent (100%) of the issued and outstanding shares of capital stock
(the "Capital Stock") of, AH Michigan CGP, Inc., an Ohio corporation (the
"General Partner"), which is the sole general partner of, and owns one percent
(1%) of the partnership interests (the "General Partnership Interest") in, the
Owner;
WHEREAS, the Company is the sole limited partner of, and owns
ninety-nine percent (99%) of the partnership interests (the "Limited Partnership
Interests" and, together with the Capital Stock, the "Shares") in, the Owner,
for which a Certificate of Limited Partnership was filed with the Secretary of
State of the State of Ohio on March 27, 1998 and which was organized under an
Agreement of Limited Partnership, effective as of March 27, 1998 and amended and
restated pursuant to an Amended and Restated Agreement of Limited Partnership
dated as of June ___, 1998 (as so amended and restated, and as it may be further
amended from time to time, the "Partnership Agreement");
WHEREAS, the Owner owns that certain land legally described on
Schedule I attached hereto, together with all improvements thereon (such land
and improvements shall together be referred to as the "Land");
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WHEREAS, the Owner intends to develop a congregate housing
facility with an assisted living component for the elderly in Southfield,
Michigan which is currently referred to as "The Heritage" (the "Project") on the
Land;
WHEREAS, Brookdale Living Communities of Michigan, Inc., a
Delaware corporation ("BLC") and an affiliate of Brookdale will be the developer
of the Project pursuant to an Amended and Restated Development Agreement of even
date herewith (as it may be amended from time to time, the "Development
Agreement") between the Owner and BLC and will be the manager of the Project
pursuant to a Management Agreement of even date herewith (as it may be amended
from time to time, the "Management Agreement") between the Owner and BLC; and
WHEREAS, the Company will use the proceeds of the Subordinate
Loan to make an equity contribution to the Owner to fund a portion of the costs
of the Project.
NOW, THEREFORE, in consideration of the mutual agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Grantors and Brookdale hereby
agree as follows:
1. The Option.
(a) The Owner hereby grants an irrevocable option (the
"Property Option") to Brookdale to purchase the Property (as hereinafter
defined) for the Purchase Price (as hereinafter defined).
(b) The Company hereby grants an irrevocable option (the
"Share Option" and, together with the "Property Option" shall be
together referred to the "Option") to Brookdale to purchase the Shares
for the Purchase Price.
(c) The Option shall terminate and expire on the date (the
"Option Termination Date") that is the earliest of (a) ten (10) days
after the principal amount of the Subordinate Notes is due and payable,
on the stated maturity date thereof, as it may be extended pursuant to
subsection 2.3(a) of the Subordinate Loan Agreement, (b) thirty (30)
days after the date specified by the Subordinate Lender in a prior or
contemporaneous notice to Brookdale as the date on which the unpaid
balance of all principal and interest accrued on the Subordinate Notes
has been declared by the Subordinate Lender to be, or shall have become
automatically, due and payable pursuant to Section 8.2 of the
Subordinate Loan Agreement, and (c) the Exercise Date (as defined in the
Intercreditor and Subordination Agreement of even date herewith among
the Senior Lender (as hereinafter defined), the Subordinate Lender, the
Owner, the Company, AH Michigan Investor, Inc., the General Partner, BLC
and Brookdale). In no event shall the Option Termination Date be later
than July 31, 2002.
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2. The Property. For purposes of this Agreement, the term
"Property" shall mean any and all interests of the Owner in the following items:
(a) the Land, (b) all personal property and other tangible property now or
hereinafter located on the Land or used in connection with the construction,
development, operation or maintenance of the Land, including, but not limited
to, fixtures and equipment, and (c) all intangible property now or hereafter
used in connection with the operation or maintenance of the Land, including, but
not limited to, contracts, agreements, guaranties, plans and specifications,
licenses, books and records and all other items and instruments pertaining to
the Land.
3. Purchase PriceThe "Purchase Price" for the Property or the
Shares, as applicable, shall be the greater of (a) the fair market value of the
Property as reflected in an appraisal of the Property, dated not more than six
(6) months before the Closing Date (as defined in Section 4 hereof), by a
qualified MAI appraiser, less the then outstanding amount of the Debt, as
defined in the Loan Agreement of even date herewith (as it may be amended from
time to time, the "Senior Loan Agreement") among the Owner, BLC and Nomura Asset
Capital Corporation (the "Senior Lender"), and (b) the amount necessary to
produce an internal rate of return on the Priority Note (as defined in the
Subordinate Loan Agreement ) of 15.60%, compounded monthly and computed using
the methodology described in Exhibit E-1 attached to the Subordinate Loan
Agreement.
4. Exercise of the Option Brookdale may exercise the Option by
giving the Company and the Owner at least five (5) days' prior written notice
(the "Option Notice"), and if it is exercising the Option in connection with a
prepayment of the Subordinate Notes in accordance subsection 2.3(e) of the
Subordinate Loan Agreement, by causing the Company to give the Subordinate
Lender notice of an optional prepayment in accordance with such paragraph. The
Option Notice shall specify (a) whether Brookdale is exercising the Property
Option or the Share Option, and (b) the date (the "Closing Date") of the
exercise of the Option, which shall be the date of repayment of the Subordinate
Notes and shall not be later than the Option Termination Date. If Brookdale
exercises the Option prior to the Option Termination Date but fails to close
prior to the Exercise Date, then the Option shall terminate and Brookdale's
right shall cease and be null and void. The Company hereby appoints Brookdale as
its true and lawful attorney-in-fact for purposes of giving notice of optional
prepayment in accordance with subsection 2.3(e) of the Subordinate Loan
Agreement, which appointment as attorney-in-fact is irrevocable and is coupled
with an interest. Anything herein to the contrary notwithstanding, the exercise
of the Option shall be conditioned upon (i) the repayment in full of the
Subordinate Notes in accordance with the Subordinate Loan Agreement, (ii) the
occurrence of a Triggering Event, as such term is defined in the Equity Option
Agreement of even date herewith (as it may be amended from time to time, the
"Equity Option Agreement") among AH Michigan Investor, Inc., the Company, the
General Partner, the Owner and Brookdale, and (iii) the exercise by Brookdale
immediately thereafter of the option granted to it pursuant to the Equity Option
Agreement
5. Closing. Upon receipt of the Option Notice, the parties will
schedule a closing (the "Closing") to occur on the Closing Date at the Chicago,
Illinois offices of counsel to
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Brookdale. If Brookdale exercises the Share Option, the Closing shall occur in
accordance with the provisions of Section 6 hereof. If Brookdale exercises the
Property Option, the Closing shall occur in accordance with the provisions of
Section 7 hereof.
6. Closing of Purchase of Shares (a) At the Closing of the
purchase of the Shares, the Purchase Price shall be paid to the Company by wire
transfer of immediately available funds to an account designated by the Company.
(b) At the Closing of the purchase of the Shares, the
Company shall deliver to Brookdale or its nominee the following items:
(i) a duly executed Assignment and Acceptance Agreement
in the form of Exhibit A attached hereto (together with any
other documents or instruments delivered pursuant to clause
(vi) below, the "Assignment");
(ii) the stock certificate(s) representing the Capital
Stock endorsed in blank;
(iii) original executed copies (or if unavailable,
photocopies) of the Owner's Certificate of Limited
Partnership, the Partnership Agreement and the General
Partner's Articles of Incorporation and Regulations, all
certified by an appropriate officer of the Company as of the
Closing Date, as being true, correct, complete and unamended
(or if amended with the consent of Brookdale, certified to
such effect) and in full force and effect as of such date;
(iv) a certificate of an appropriate officer of each
Grantor, dated the Closing Date, certifying that the
representations and warranties of such Grantor set forth in
the applicable Section of this Agreement are true and
correct as of the Closing Date as though made by such
Grantor on the Closing Date;
(v) the books and records of the General Partner and
the Owner; and
(vi) such other documents and instruments of transfer
as are necessary to complete the transfer of the Shares.
(c) The Company and Brookdale shall each be solely
responsible for its own costs incurred in connection with the Closing of
the purchase of the Shares; provided, however, that Brookdale shall (i)
pay all costs in connection with the transfer of the Shares, including
transfer and conveyance taxes, if any, and (ii) pay, or reimburse the
Company for, all reasonable legal fees and expenses of the Company
incurred in connection with such
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Closing in an amount not to exceed $2,500 when aggregated with all other
legal fees and expenses paid or reimbursed by Brookdale pursuant to
clause (ii) of paragraph (c) of Section 7 hereof and paragraph (a) of
Section 5 of the Equity Option Agreement.
7. Closing of Purchase of Property. (a) At the Closing of the
purchase of the Property, the Purchase Price shall be paid to the Owner by wire
transfer of immediately available funds to an account designated by the Owner.
(b) At the Closing of the purchase of the Property, the
Owner shall deliver to Brookdale or its nominee the following items:
(i) Bill of Sale. A bill of sale (the "Bill of
Sale") conveying, transferring and otherwise assigning to
Brookdale or its nominee any and all of the Property,
other than the real estate.
(ii) Special Warranty Deed. A Special Warranty Deed
(the "Deed" and, together with the Bill of Sale and any
other documents or instruments delivered pursuant to
clause (iii) below, the "Property Conveyance Documents")
conveying to Brookdale or its nominee the Land, subject
only to the encumbrances or other exceptions
(collectively, the "Permitted Exceptions") (A) that
existed on the Land on the date of the conveyance of the
Land to the Owner, (B) created by the lien of the
Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing of even date herewith (the
"Mortgage") by the Owner in favor of the Senior Lender,
and all other Loan Documents (as defined in the Senior
Loan Agreement), (C) created by BLC in connection with
actions taken by it under the Development Agreement or the
Management Agreement, and (D) Permitted Encumbrances (as
defined in the Senior Loan Agreement) that are consented
to in writing by Brookdale.
(iii) Other Documents. Such other documents or
instruments which are necessary to complete and perfect
the conveyance of Property to Brookdale or its nominee as
contemplated by this Agreement, including, without
limitation, any transfer declarations, owner's affidavits
and undertakings required by the title company and similar
items required by local law or the title company.
(c) The Owner and Brookdale shall each be solely
responsible for its own costs incurred in connection with the Closing;
provided, however, that Brookdale shall (i) pay all costs in connection
with the transfer of the Property, including transfer and conveyance
taxes, if any, and (ii) pay, or reimburse the Owner for, all reasonable
legal fees and expenses of the Owner incurred in connection with such
Closing in an amount not to exceed $2,500 when aggregated with all other
legal fees and expenses paid or reimbursed by
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Brookdale pursuant to clause (ii) of paragraph (c) of Section 6 hereof
and paragraph (a) Section 5 of the Equity Option Agreement.
8. Company Representations. The Company represents and warrants
to Brookdale as follows as of the date hereof and as of the Closing Date:
(a) The Company is a limited liability company duly
organized, validly existing and in good standing under the laws of the
State of Ohio and has all requisite power and authority to execute,
deliver and perform its obligations under this Agreement and the
Assignment. The General Partner is a corporation duly organized, validly
existing and in good standing under the laws of the State of Ohio. The
Company and the General Partner are each duly qualified to do business
in each jurisdiction where the nature of their operations and applicable
laws require such qualification, except where the failure to be so
qualified would not have a material adverse effect on the Company or the
General Partner, as applicable.
(b) The execution, delivery and performance of this
Agreement by the Company have been, and, if applicable, as of the
Closing Date, the execution, delivery and performance of the Assignment
by the Company will have been, duly authorized by all necessary
organizational action, and this Agreement is, and when executed and
delivered, the Assignment will be, the legal, valid and binding
obligation of the Company, enforceable in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency or the
laws or equitable principles affecting the enforcement of creditors'
rights generally.
(c) The execution, delivery and performance by the Company
of this Agreement do not and, if applicable, the execution, delivery and
performance by the Company of the Assignment will not, contravene the
terms of the Company's Articles of Organization or the Operating
Agreement, conflict with or result in any breach or contravention of, or
the creation of any lien under, any agreements or instruments to which
it is a party or by which it or any of its property is bound or violate
any state or federal law and all required approvals therefor, if any,
have been or, if applicable, will have been as of the Closing Date, duly
obtained.
(d) The Company is the sole limited partner of the Owner;
the Limited Partnership Interests constitute ninety-nine (99%) of the
partnership interests in the Owner; the Capital Stock constitutes one
hundred percent (100%) of the issued and outstanding shares of capital
stock of the General Partner; and the General Partner is the sole
general partner of, and the General Partnership Interest constitutes a
one percent (1%) partnership interest in, the Owner.
(e) The Company owns the Shares, and the General Partner
owns the General Partnership Interest, in each case free of any liens,
claims or encumbrances.
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(f) The Company's sole place of business is its address
set forth for notices in paragraph (b) of Section 11 hereof.
(g) There is no litigation or other proceeding pending
against the Company which could have a material adverse effect on the
Company's ability to consummate the transactions contemplated by this
Agreement and the Assignment.
9. Owner Representations.The Owner represents and warrants to
Brookdale as follows as of the date hereof and as of the Closing Date:
(a) The Owner is a limited partnership duly organized,
validly existing and in good standing under the laws of the State of
Ohio and has all requisite power and authority to execute, deliver and
perform its obligations under this Agreement and the Property Conveyance
Documents and to own and operate its property and to carry on its
business as now conducted. The Owner is duly qualified to do business in
each jurisdiction where the nature of its operations and applicable laws
require such qualification, except where the failure to be so qualified
would not have a material adverse effect on the Owner.
(b) The execution, delivery and performance of this
Agreement by the Owner have been, and, if applicable, as of the Closing
Date, the execution, delivery and performance of the Property Conveyance
Documents by the Owner will have been, duly authorized by all necessary
partnership action, and this Agreement is, and when executed and
delivered, each of the Property Conveyance Documents will be, the legal,
valid and binding obligation of the Owner, enforceable in accordance
with its terms, except as enforcement may be limited by bankruptcy,
insolvency or the laws or equitable principles affecting the enforcement
of creditors' rights generally.
(c) The execution, delivery and performance by the Owner
of this Agreement do not, and, if applicable, the execution, delivery
and performance by the Owner of the Property Conveyance Documents will
not, contravene the terms of the Partnership Agreement, conflict with or
result in any breach or contravention of, or the creation of any lien
under, any agreements or instruments to which it is a party or by which
it or any of its property is bound or violate any state or federal law
and all required approvals therefor, if any, have been of, if
applicable, will have been as of the Closing Date, duly obtained.
(d) The Owner is the owner of the Property, subject to the
Permitted Exceptions and has full power and authority to sell, convey,
assign and transfer to Brookdale the Property, free and clear of all
liens and encumbrances except the Permitted Exceptions.
(e) There is no litigation or other proceeding pending
against the Owner which could have a material adverse effect on the
Owner's ability to consummate the transactions contemplated by this
Agreement and the Property Conveyance Documents.
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10. Covenants. Until the earlier of the Closing or the Option
Termination Date, unless Brookdale otherwise consents in writing:
(a) The Company shall continue to own the Shares, and the
General Partner shall continue to own the General Partnership Interest,
in each case free of any liens, claims or encumbrances.
(b) The Owner shall continue to own the Property, free of
any liens, claims or encumbrances, other than Permitted Exceptions.
11. Miscellaneous.
(a) Each Grantor and Brookdale agree that money damages or
other remedy at law would not alone be sufficient or adequate remedy for
any breach or violation of, or a default under, this Agreement by such
Grantor and that, in addition to all other remedies available to
Brookdale, Brookdale shall be entitled to an injunction restraining such
breach, violation or default or threatened breach, violation or default
and to any other equitable relief, including, without limitation,
specific performance, without bond or other security being required.
(b) Notices. Any notices required or permitted to be sent
hereunder shall be delivered personally or by telecopier (with answer
back acknowledged) or mailed, certified mail, return receipt requested,
or delivered by overnight courier service to the following addresses, or
such other addresses as shall be given by notice delivered hereunder,
and shall be deemed to have been given upon delivery, if delivered
personally, upon receipt with answer back acknowledged, if delivered by
telecopier, three (3) business days after mailing, if mailed, or one
business day after delivery to the courier, if delivery by overnight
courier service:
If to the Company:
AH Michigan Subordinated, LLC
320 King of Prussia Road
Suite 160
Radnor, Pennsylvania 19087
Attn: David B. Fenkell
Fax: (610) 902-0777
with a copy to:
Squire, Sanders & Dempsey
41 South High Street
Columbus, Ohio 43215
Attn: Scott B. West
Fax: (614) 365-2499
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If to Owner:
AH Michigan Owner Limited Partnership
320 King of Prussia Road
Suite 160
Radnor, Pennsylvania 19087
Attn: David B. Fenkell
Fax: (610) 902-0777
with a copy to:
Squire, Sanders & Dempsey
41 South High Street
Columbus, Ohio 43215
Attn: Scott B. West
Fax: (614) 365-2499
If to Brookdale:
Brookdale Living Communities, Inc.
77 West Wacker Drive
Suite 4400
Chicago, Illinois 60601
Attn: Darryl W. Copeland, Jr.
Fax: (312) 977-3699
Attn: Robert J. Rudnik
Fax: (312) 977-3769
with a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attn: Wayne D. Boberg
Fax: (312) 558-5700
A copy of any notice sent hereunder shall be sent to the
Senior Lender at Nomura Asset Capital Corporation, Two World Financial
Center, Building B, New York, New York 10281-1198, Attention: Sheryl
McAfee, Telecopier: (212) 667-1206, with copies to: Nomura Asset Capital
Corporation, Two World financial Center, Building B, New York, New York
10281, Attention: Barry Funt, Telecopier: (212) 667-1567 and Dechert
Price & Rhoads, 90 State House Square, 12th Floor, Hartford, Connecticut
06103-3702, Attention: Marc B. Friedman Fax: (860) 524-3930 (or such
other address as shall be given by notice delivered hereunder).
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(c) Entire Agreement. This Agreement (including the
schedule hereto) constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings, oral and written, among the parties
hereto with respect to the subject matter hereof.
(d) Binding Effect; BenefiThis Agreement shall inure to
the benefit of and be binding upon the parties hereto and their
respective successors and assigns. Brookdale may assign its rights under
this Agreement without the consent of either Grantor. In the event that
Brookdale assigns its rights under this Agreement, it shall so notify
the other parties hereto, and references herein to Brookdale shall be
deemed to be references to the assignee to whom such rights have been
assigned upon the execution and delivery by Brookdale and such assignee
of an assignment and assumption agreement with respect to this Agreement
and delivery of a copy thereof to each of the other parties hereto.
(e) Amendment; Waiver. No provision of this Agreement may
be amended, waived or otherwise modified without the prior written
consent of the parties hereto.
(f) Section Headings. The section headings contained in
this Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
(g) Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original
and all of which together shall be deemed to be one and the same
instrument.
(h) Applicable Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Illinois
(without giving effect to principles of conflicts of law).
(i) Waiver of Jury Trial. Each party hereto (or joining in
the execution hereof), after consulting or having had the opportunity to
consult with counsel, knowingly, voluntarily and intentionally waives
any right any of them may have to a trial by jury in any litigation
based upon or arising out of this Agreement, or any of the transactions
contemplated by this Agreement, or any course of conduct, dealing,
statements (whether oral or written) or actions of any of them. No such
party shall seek to consolidate, by counterclaim or otherwise, any
action in which a jury trial has been waived with any other action in
which a jury trial cannot be or has not been waived unless failure to so
consolidate would result in a loss of such claim.
(j) Mortgage. The parties hereto acknowledge and agree
that (i) the Property Option is subject and subordinate to the lien of
the Mortgage, and (ii) upon the entry of a final decree of foreclosure
with respect to the Property, or the conveyance thereof
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pursuant to a power of sale, if applicable, or conveyance deed in lieu
of foreclosure, the Option shall be extinguished notwithstanding that
the Option Termination Date may not yet have occurred.
(k) Limitation of Personal Liability. Notwithstanding any
other provision of this Agreement to the contrary, (i) in no event shall
any officer, director, member, partner, manager, shareholder,
incorporator or agent of either Grantor be personally liable to
Brookdale for any of such Grantor's obligations under this Agreement,
and (ii) if the Owner defaults in connection with any representation or
covenant of the Owner set forth in this Agreement, it will not create
any personal liability against the Owner or any lien rights against the
Property.
(l) The Grantors acknowledge and agree that (i) they are
not intended to be beneficiaries of the limitations set forth in the
Intercreditor Agreement on the rights of Brookdale to take Enforcement
Actions (as defined therein) and to enforce any representations,
covenants, warranties or obligations of the Owner under or pursuant to
this Agreement, and (ii) they may not seek to enforce such limitations.
(m) Intercreditor Agreement. The parties hereto
acknowledge the existence of the Intercreditor Agreement.
11
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed and delivered
this Agreement as of the date first above written.
AH MICHIGAN SUBORDINATED, LLC
By: AH Michigan Investor, Inc.,
its manager
By:
Name: David B. Fenkell
Its: President
AH MICHIGAN OWNER LIMITED
PARTNERSHIP
By: AH Michigan CGP, Inc.,
its general partner
By:
Name: David B. Fenkell
Its: President
BROOKDALE LIVING COMMUNITIES, INC.
By:
Name:
Its:
12
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SCHEDULE I
LEGAL DESCRIPTION
Land in the Southwest 1/4 of Section 17 and the Southeast 1/4 of Section 18,
Town 1 North, Range 10 East, City of Southfield, Oakland County, Michigan,
described as commencing at the Southeast corner of Section 18; thence North 00
degrees 02 minutes 03 seconds West 60.00 feet to the North right of way line of
Eleven Mile Road; thence along said right of way line North 89 degrees 55
minutes 53 seconds East 154.07 feet to the point of beginning; thence due North
225.97 feet; thence due West 130.00 feet; thence North 40 degrees 56 minutes 58
seconds West 419.76 feet; thence North 49 degrees 03 minutes 02 seconds East,
506.23 feet; thence South 40 degrees 56 minutes 58 seconds East 507.01 feet;
thence South 47 degrees 07 minutes 16 seconds West 340.52 feet; thence due South
260.07 feet; thence South 89 degrees 55 minutes 53 seconds West 60.00 feet to
the point of beginning. Together with the Easements granted to Brookdale Living
Communities of Michigan, Inc., a Delaware corporation, as disclosed in a certain
Reciprocal Easement Agreement dated October 1, 1997, and recorded October 13,
1997, in Liber 17678, page 370, Oakland County Records.
Tax Item No. 24-17-351-016
<PAGE>
EXHIBIT A
ASSIGNMENT AND ACCEPTANCE AGREEMENT
THIS AGREEMENT made as of ___________________, by and between AH
MICHIGAN SUBORDINATED, LLC, an limited liability company ("Assignor"), and
_______________________ ("Assignee").
WITNESSETH:
1. For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Assignor does hereby transfer, assign and convey
to Assignee a ninety-nine percent (99%) interest (the "Interest") as Limited
Partner in AH MICHIGAN OWNER LIMITED PARTNERSHIP, an Ohio limited partnership
(the "Partnership"), established under the provisions of an Agreement of Limited
Partnership, effective as of March 27, 1998 and amended and restated pursuant to
an Amended and Restated Agreement of Limited Partnership dated as of June ,
1998.
2. Assignor does hereby warrant and represent that it is the sole and
lawful owner of the Interest herein transferred and that it has full power and
authority to make such transfer free of any liens, encumbrances and
restrictions.
3. Assignee does hereby accept the foregoing assignment and agrees to
become a Limited Partner of the Partnership.
ASSIGNOR:
AH MICHIGAN SUBORDINATED, LLC
By: AH Michigan Investor, Inc.,
its manager
By:___________________________
Name:_________________________
Title:_________________________
ASSIGNEE:
By:___________________________
Name:_________________________
Title:_________________________
