<PAGE>
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): March 6, 1998
BROOKDALE LIVING COMMUNITIES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-22253 36-4103821
- ------------------------------- ---------------------- ----------------------
(State or other jurisdiction of Commission File Number (I.R.S. Employer
incorporation or organization) Identification Number)
77 West Wacker Drive, Suite 4800, Chicago, Illinois 60601
- --------------------------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (312) 977-3700.
NOT APPLICABLE
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
ITEM 5. OTHER EVENTS
On March 6, 1998, Brookdale Living Communities of Illinois-H.V., Inc.
("BLC-Illinois-H.V."), a subsidiary of Brookdale Living Communities, Inc.,
entered into an operating lease (the "Harbor Village Lease") with The Harbor
Village Business Trust, an unaffiliated third party (the "Harbor Village
Lessor"), pursuant to which BLC-Illinois-H.V. leases a 272-unit senior and
assisted living facility located in Chicago, Illinois, known as Harbor Village
(the "Harbor Village Facility"). The initial term of the Harbor Village Lease
commenced on March 6, 1998 and expires on March 11, 2003. BLC-Illinois-H.V. has
the option to renew the Harbor Village Lease for up to seven (7) one-year
periods through March 11, 2010. Under the Harbor Village Lease, BLC-Illinois-
H.V. is obligated to make monthly rent payments in the amount of $115,327 and
variable quarterly rent payments, the amount of which varies based on LIBOR and
is estimated to be approximately $20,000. During the term of the Harbor Village
Lease, BLC-Illinois-H.V. is responsible for the payment of all operating
expenses related to the Harbor Village Facility. BLC-Illinois-H.V.'s
obligations under the Lease are secured by a pledge of securities currently
valued at approximately $5.75 million. The Harbor Village Lease grants BLC-
Illinois-H.V. the option to purchase the Harbor Village Facility from the Harbor
Village Lessor. The Harbor Village Lessor financed its purchase of the Harbor
Village Facility, in part, with the proceeds of a first mortgage loan (the
"First Mortgage Loan") and a mezzanine loan (the "Mezzanine Loan") made to the
Harbor Village Lessor by Nomura Asset Capital Corporation in the respective
principal amounts of $15 million and $1.75 million. Repayment of the First
Mortgage Loan and Mezzanine Loan is secured by mortgages on the Harbor Village
Facility and is guaranteed by BLC-Illinois-HV, which guaranty is secured solely
by BLC-Illinois-H.V.'s leasehold interest in the Harbor Village Facility.
ITEM 7. EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
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<C> <S>
10.1 Lease dated as of March 6, 1998 by and between Brookdale Living
Communities of Illinois-H.V., Inc., as lessee, and The Harbor
Village Business Trust, as lessor
10.2 Loan Agreement dated as of March 6, 1998 by and among The Harbor
Village Business Trust, Brookdale Living Communities of Illinois-
H.V., Inc. and Nomura Asset Capital Corporation
10.3 Certificate Pledge Agreement dated as of March 6, 1998 by
Brookdale Living Communities of Illinois-H.V., Inc. in favor of
The Harbor Village Business Trust
10.4 Securities Pledge Agreement dated as of March 6, 1998 by
Brookdale Living Communities of Illinois-H.V., Inc. in favor of
The Harbor Village Business Trust and Wilmington Trust Company
</TABLE>
<PAGE>
<TABLE>
<C> <S>
10.5 Indemnity Agreement dated as of March 6, 1998 from Brookdale
Living Communities, Inc. in favor of Wilmington Trust Company and
FBTC Leasing Corp.
10.6 Guaranty and Suretyship Agreement dated as of March 6, 1998 from
Brookdale Living Communities of Illinois-H.V., Inc. in favor of
Nomura Asset Capital Corporation
10.7 Environmental Indemnity Agreement dated as of March 6, 1998 from
Brookdale Living Communities, Inc. in favor of Nomura Asset
Capital Corporation
10.8 Mezzanine Loan Agreement dated as of March 6 1998 by and among The
Harbor Village Business Trust, Brookdale Living Communities of
Illinois-H.V., Inc. and Nomura Asset Capital Corporation
10.9 Mezzanine Guaranty and Suretyship Agreement dated as of March 6,
1998 from Brookdale Living Communities of Illinois-H.V., Inc. in
favor of Nomura Asset Capital Corporation
10.10 Mezzanine Environmental Indemnity Agreement dated as of March 6,
1998 from Brookdale Living Communities, Inc. in favor of Nomura
Asset Capital Corporation
</TABLE>
<PAGE>
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: April 14, 1998 By: /s/ Craig G. Walczyk
---------------------
Craig G. Walczyk
Vice President - Chief Financial Officer
<PAGE>
[EXECUTION COPY]
Exhibit 10.1
================================================================================
LEASE
Dated as of March 6, 1998
between
BROOKDALE LIVING COMMUNITIES OF ILLINOIS-HV, INC.
as the Lessee
and
THE HARBOR VILLAGE BUSINESS TRUST
as the Lessor
================================================================================
Acquisition of Independent Living Facility with Assisted Living Services
in Chicago, Illinois
================================================================================
This Lease has been executed in several counterparts. To the extent, if any,
that this Lease constitutes chattel paper (as such term is defined in the
Uniform Commercial Code as in effect in any applicable jurisdiction), no lien on
this Lease may be created through the transfer or possession of any counterpart
other than the original counterpart containing the receipt therefor executed by
Nomura Asset Capital Corporation and its successors and assigns, as Lender.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
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ARTICLE I
DEFINITIONS; INTERPRETATION
<C> <S> <C>
1.1. Definitions; Interpretation............................................. 1
ARTICLE II
PURCHASE AND LEASE
2.1. Acceptance and Lease of Property........................................ 1
2.2. Acceptance Procedure.................................................... 1
2.3. Lease Term.............................................................. 2
2.4. Title................................................................... 2
ARTICLE III
FUNDING OF THE ADVANCE
3.1. Lessor Commitment....................................................... 2
3.2. Procedures for Advance.................................................. 2
ARTICLE IV
CONDITIONS PRECEDENT
4.1. Documentation Date...................................................... 2
4.2. Acquisition Date........................................................ 3
4.3. Conditions Precedent to the Acquisition Date and the Advance............ 3
ARTICLE V
[INTENTIONALLY OMITTED]
ARTICLE VI
REPRESENTATIONS
6.1. Representations of the Lessor........................................... 6
6.2. Representations of Lessee............................................... 7
6.3. Representations of the Lessee with Respect to the Advance............... 9
ARTICLE VII
PAYMENT OF RENT
7.1. Rent.................................................................... 10
7.2. Payment of Rent......................................................... 11
7.3. Supplemental Rent....................................................... 11
7.4. Method of Payment....................................................... 11
</TABLE>
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ARTICLE VIII
QUIET ENJOYMENT; RIGHT TO INSPECT
<TABLE>
<CAPTION>
<C> <S> <C>
8.1. Quiet Enjoyment........................................................ 11
8.2. Right to Inspect....................................................... 12
ARTICLE IX
NET LEASE, ETC.
9.1. Net Lease.............................................................. 12
9.2. No Termination or Abatement............................................ 13
ARTICLE X
SUBLEASES
10.1. Subletting............................................................. 13
ARTICLE XI
LESSEE ACKNOWLEDGMENTS
11.1. Condition of the Property.............................................. 13
11.2. Risk of Loss........................................................... 14
ARTICLE XII
POSSESSION AND USE OF THE PROPERTY, ETC.
12.1. Utility Charges........................................................ 14
12.2. Possession and Use of the Property..................................... 14
12.3. Compliance with Requirements of Law and Insurance Requirements......... 14
12.4. Assignment by Lessee................................................... 14
ARTICLE XIII
MAINTENANCE AND REPAIR; RETURN
13.1. Maintenance and Repair; Return......................................... 15
ARTICLE XIV
MODIFICATIONS, ETC.
14.1. Modifications, Substitutions and Replacements.......................... 15
</TABLE>
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ARTICLE XV
WARRANT OF TITLE; EASEMENTS
<TABLE>
<C> <S> <C>
15.1. Warrant of Title.................................................... 16
15.2. Grants and Releases of Easements; Lessor's Waivers.................. 16
ARTICLE XVI
PERMITTED CONTESTS
16.1. Permitted Contests in Respect of Applicable Law..................... 17
ARTICLE XVII
INSURANCE
17.1. Public Liability and Workers' Compensation Insurance................ 18
17.2. Hazard and Other Insurance.......................................... 18
17.3. Insurance Coverage.................................................. 18
17.4. Insurance Proceeds.................................................. 19
17.5. Insurance Requirements in Loan Documents............................ 19
ARTICLE XVIII
CASUALTY AND CONDEMNATION;
ENVIRONMENTAL MATTERS
18.1. Casualty and Condemnation........................................... 19
18.2. Environmental Matters............................................... 20
18.3. Notice of Environmental Matters..................................... 21
18.4. Environmental Obligations of the Lessor Pursuant to the Nomura Loan
Agreement........................................................... 21
ARTICLE XIX
TERMINATION OF LEASE
19.1. Termination upon Certain Events..................................... 21
19.2. Termination Procedures.............................................. 22
ARTICLE XX
EVENTS OF DEFAULT
20.1. Events of Default................................................... 22
20.2. Remedies............................................................ 24
20.3. Waiver of Certain Rights............................................ 27
</TABLE>
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ARTICLE XXI
LESSOR ASSIGNMENT
<TABLE>
<C> <S> <C>
21.1. Assignment.......................................................... 27
ARTICLE XXII
PURCHASE PROVISIONS
22.1. Purchase Option..................................................... 27
ARTICLE XXIII
RENEWAL PROCEDURES
23.1. Renewal............................................................. 28
ARTICLE XXIV
REMARKETING OPTION
24.1. Option to Remarket.................................................. 28
24.2. Certain Obligations Continue........................................ 32
ARTICLE XXV
PROCEDURES RELATING TO PURCHASE OR REMARKETING
25.1. Provisions Relating to the Exercise of Purchase Option and
Conveyance Upon Remarketing and Conveyance Upon Certain
Other Events........................................................ 32
ARTICLE XXVI
INDEMNIFICATION
26.1. General Indemnification............................................. 32
26.2. End of Term Indemnity............................................... 34
26.3. Environmental Indemnity............................................. 35
26.4. Proceedings in Respect of Claims.................................... 36
26.5. General Tax Indemnity............................................... 37
26.6. Funding Losses...................................................... 41
26.7. Regulation D Compensation........................................... 42
26.8. Deposits Unavailable................................................ 42
26.9. Illegality.......................................................... 42
26.10. Increased Cost and Reduced Return................................... 43
ARTICLE XXVII
ESTOPPEL CERTIFICATES
27.1. Estoppel Certificates............................................... 44
</TABLE>
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<PAGE>
ARTICLE XXVIII
ACCEPTANCE OF SURRENDER
<TABLE>
<C> <S> <C>
28.1. Acceptance of Surrender............................................. 45
ARTICLE XXIX
NO MERGER OF TITLE
29.1. No Merger of Title.................................................. 45
ARTICLE XXX
INTENT OF THE PARTIES
30.1. Ownership of the Property........................................... 45
ARTICLE XXXI
PAYMENT OF CERTAIN EXPENSES
31.1. Transaction Expenses................................................ 46
31.2. Brokers' Fees and Stamp Taxes....................................... 46
ARTICLE XXXII
OTHER COVENANTS AND AGREEMENTS OF LESSEE
32.1. Covenants........................................................... 46
ARTICLE XXXIII
MISCELLANEOUS
33.1. Survival; Severability; Etc......................................... 48
33.2. Amendments and Modifications........................................ 49
33.3. No Waiver........................................................... 49
33.4. Notices............................................................. 49
33.5. Successors and Assigns.............................................. 49
33.6. Headings and Table of Contents...................................... 49
33.7. Counterparts........................................................ 49
33.8. GOVERNING LAW....................................................... 49
33.9. Original Lease...................................................... 49
33.10. Waiver of Jury Trial................................................ 49
33.11. Compliance with Loan Documents...................................... 50
33.12. Payment of Equity Balance; Transfer of Beneficial Interest in
Lessor.............................................................. 50
33.13. Concerning the Lessor............................................... 50
33.14. Owner's Insurance Policy Proceeds................................... 50
</TABLE>
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<PAGE>
Schedules
SCHEDULE I Notice Information
Exhibits
EXHIBIT A Funding Request
EXHIBIT B Lease Supplement
EXHIBIT C Responsible Employee's Certificate
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<PAGE>
LEASE
THIS LEASE (together with the Lease Supplement (as defined in Appendix 1
hereto), this "Lease"), dated as of March 6, 1998, between THE HARBOR VILLAGE
BUSINESS TRUST, a Delaware business trust, having its principal office at
Wilmington Trust Company, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-0001, and BROOKDALE LIVING COMMUNITIES OF ILLINOIS-
HV, INC., a Delaware corporation, having its principal office at c/o Brookdale
Living Communities, Inc., 77 West Wacker Drive, Suite 4800, Chicago, Illinois
60601.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Lessor desires to lease to the Lessee, and the Lessee desires
to lease from the Lessor, the Property; and
NOW, THEREFORE, in consideration of the foregoing, and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS; INTERPRETATION
1.1. Definitions; Interpretation. Capitalized terms used but not
otherwise defined in this Lease have the respective meanings specified in
Appendix 1 to this Lease; and the rules of interpretation set forth in Appendix
1 to this Lease shall apply to this Lease; provided, however, that capitalized
terms used but not otherwise defined in this Lease and Appendix 1 to this Lease
shall have the respective meanings specified in the Nomura Loan Agreement.
ARTICLE II
PURCHASE AND LEASE
2.1. Acceptance and Lease of Property. Subject to the terms and
conditions of this Lease, on the Acquisition Date (i) the Seller shall convey to
the Lessor, and the Lessor shall accept delivery of, the Property pursuant to
the terms hereof (and subject to the conditions set forth herein) and (ii) the
Lessor shall demise and lease to the Lessee hereunder for the Term the Lessor's
interest in the Property, subject to the Loan Documents and Mezzanine Loan
Documents and the Lessee hereby agrees, expressly for the direct benefit of the
Lessor, to lease from the Lessor for the Term, the Lessor's interest in the
Property.
2.2. Acceptance Procedure. The Lessee hereby agrees that the execution
and delivery by the Lessee on the Acquisition Date of an appropriately completed
Lease Supplement in the form of Exhibit B hereto covering the Property thereon
shall, without further act, constitute the irrevocable acceptance by the Lessee
of the Property for all purposes of this Lease and the other Operative Documents
on the terms set forth therein and herein, and that the Property, shall be
deemed to be included in the leasehold estate of this Lease and shall be subject
to the terms and conditions of this Lease as of the Acquisition Date.
<PAGE>
2.3. Lease Term. The term of this Lease (the "Term") shall commence on
(and include) the Acquisition Date and end on (but exclude) the Expiration Date,
as such Expiration Date may be extended from time to time in accordance with
Article XXIII.
2.4. Title. The Property is leased to the Lessee without any
representation or warranty, express or implied, by the Lessor and subject to the
rights of parties in possession, the existing state of title (including, without
limitation, Permitted Liens other than Lessor Liens) and all applicable
Requirements of Law. The Lessee shall in no event have any recourse against the
Lessor for any defect in or exception to title to the Property other than to the
extent resulting from Lessor Liens.
ARTICLE III
FUNDING OF THE ADVANCE
3.1. Lessor Commitment; Earn-Out Advance. Subject to the conditions and
terms hereof, the Lessor shall, upon the written request of the Lessee, make the
Advance on the Acquisition Date up to the amount of the Commitment for the
purpose of financing the acquisition of the Property. The parties hereto agree
that (a) the Lessee's election on behalf of the Lessor, as Borrower under the
Nomura Loan Agreement, to have the Lessor borrow the Earn-Out Advance pursuant
to Section 8.32 of the Nomura Loan Agreement is subject to the consent of the
Lessor (which may be withheld in its sole and absolute discretion) and (b) to
the extent the Lessee and the Lessor agree to have the Lessor borrow the Earn-
Out Advance, this Lease and other Operative Documents shall be amended, modified
or supplemented as necessary to reflect such borrowing and an advance by the
Lessor to the Lessee of such borrowed amount.
3.2. Procedures for Advance.
----------------------
(a) The Lessee shall give the Lessor prior written notice not
later than 9:00 a.m., New York City time, five (5) Business Days prior to
the Acquisition Date, pursuant to a Funding Request substantially in the
form of Exhibit A (the "Funding Request"), specifying the proposed
Acquisition Date and the amount of Advance requested. Except as the parties
may otherwise agree in writing, the Advance shall be made solely to provide
the Lessee with funds with which to pay or reimburse itself for amounts
paid or payable to third parties as Property Cost and Transaction Expenses
paid or payable by the Lessee in connection with the preparation, execution
and delivery of the Operative Documents, and all fees paid or payable by
the Lessee to the Lessor in connection with the Operative Documents and any
amounts paid or payable by Lessee pursuant to Section 31.2 hereof.
(b) The Advance shall be made on the Acquisition Date in
immediately available federal funds by wire transfer to the account
designated by the Lessee, except that a portion of the Advance shall be
made (in accordance with instructions to be included in the Funding
Request) by wire transfer directly to an account designated by Lessee to
pay the Seller and/or to reimburse the Lessee for Transaction Expenses.
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<PAGE>
ARTICLE IV
CONDITIONS PRECEDENT
4.1. Documentation Date. The Documentation Date (the "Documentation
Date") shall occur on the earliest date on which the following conditions
precedent shall have been satisfied:
(a) Lease. This Lease shall have been duly authorized, executed
and delivered by the parties thereto.
(b) SELCO Loan Agreement. The SELCO Loan Agreement shall have
been duly authorized, executed and delivered by the parties thereto.
(c) Lessee's Resolutions and Incumbency Certificate. The Lessee
shall have delivered to the Lessor a certificate of its Secretary or an
Assistant Secretary attaching and certifying as to the incumbency and
signature of persons authorized to execute and deliver on its behalf the
Operative Documents to which it is a party.
(d) Opinion of Counsel to the Lessee. On or prior to the
Documentation Date, the Lessor shall have received an opinion of internal
counsel for the Lessee in form and substance satisfactory to the Lessor.
(e) Certain Transaction Expenses. Counsel for the Lessor shall
have received, to the extent then invoiced, payment in full in cash of all
Transaction Expenses payable to such counsel pursuant to Section 31.1(a).
(f) SELCO Indemnity. The SELCO Indemnity shall have been duly
authorized, executed and delivered by the Parent.
(g) Opinion of Counsel to Lessor. On or prior to the
Documentation Date, the Lessee shall have received an opinion of counsel to
the Lessor in form and substance reasonably satisfactory to the Lessee.
4.2. Acquisition Date. The closing date with respect to the acquisition
of Land (and the Improvements, if any, existing thereon) (the "Acquisition
Date") shall occur on the earliest date after the Documentation Date, on which
all the conditions precedent thereto set forth in Section 4.3 with respect to
such acquisition of the Property shall have been satisfied or waived by the
applicable parties as set forth therein. The Acquisition Date for the Property
shall be the date the Advance is made.
4.3. Conditions Precedent to the Acquisition Date and the Advance. The
occurrence of the Acquisition Date and the obligation of the Lessor to make the
Advance are subject to the satisfaction or waiver of the following conditions
precedent:
(a) Operative Documents; No Default. Each of the Operative
Documents shall have been duly authorized, executed and delivered by the
parties thereto, in form and substance satisfactory to the parties hereto,
and shall be in full force and effect. No Default or Event of Default shall
exist under any of the Operative Documents (either before or after giving
effect to the transactions contemplated by the Operative Documents), and
the Lessor shall have received a fully executed copy of each of such
Operative Documents (other than this Lease, of which the
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<PAGE>
Lessor shall receive the original). The Operative Documents (or memoranda
thereof), any supplements thereto and any financing statements in
connection therewith required under the Uniform Commercial Code shall have
been recorded, registered and filed, if necessary, in such manner as to
enable counsel to render the opinions referred to in clause (c) below and
to enable the title company to issue the title insurance policies referred
to in clause (j) below.
(b) Taxes. All taxes, fees and other charges in connection with
the execution, delivery, recording, filing and registration of the
Operative Documents shall have been paid or provisions for such payment
shall have been made to the satisfaction of the Lessor.
(c) Opinions of Counsel. Counsel to the Lessee (i) in the
jurisdiction in which the Property is located shall have issued to the
Lessor their opinions, all in form and substance satisfactory to the Lessor
and (ii) shall have issued to the Lessor their opinions to the effect that
upon delivery to the Custodian of the Pledged Securities pursuant to the
Securities Pledge Agreement, a valid first priority security interest in
the Pledged Securities shall have been created and granted to the Custodian
in the Pledged Securities.
(d) Governmental Approvals. All necessary (or, in the
reasonable opinion of the Lessor, advisable) Governmental Actions, in each
case required by any Requirement of Law, shall have been obtained or made
and be in full force and effect.
(e) Litigation. No action or proceeding shall have been
instituted, nor shall any action or proceeding be threatened, before any
Governmental Authority, nor shall any order, judgment or decree have been
issued or proposed to be issued by any Governmental Authority (i) to set
aside, restrain, enjoin or prevent the full performance of this Lease, any
other Operative Document or any transaction contemplated hereby or thereby
or (ii) which is reasonably likely to materially and adversely affect the
Lessee.
(f) Requirements of Law. The transactions contemplated by the
Operative Documents do not and will not violate any Material Requirement of
Law and do not and will not subject the Lessor to any Material adverse
regulatory prohibitions or constraints.
(g) Responsible Employee's Certificates. The Lessor shall have
received a Responsible Employee's Certificate of the Lessee, in
substantially the form of Exhibit C, dated as of the Acquisition Date,
stating that for the Lessee (i) each and every representation and warranty
of the Lessee contained in each Operative Document to which it is a party
is true and correct in all Material respects on and as of the Acquisition
Date; (ii) no Default or Event of Default has occurred and is continuing
under any Operative Document with respect to the Lessee; (iii) each
Operative Document to which the Lessee is a party is in full force and
effect with respect to it; and (iv) the Lessee has duly performed and
complied in all Material respects with all covenants, agreements and
conditions contained herein or in any Operative Document required to be
performed or complied with by it on or prior to the Acquisition Date.
(h) Environmental Audit. The Lessor shall have received an
Environmental Audit for the Property in form and substance acceptable to
the Lessor, provided, Lessor shall not deem an Environmental Audit
unacceptable solely because a Phase Two environmental site assessment is
called for.
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<PAGE>
(i) Appraisal. The Lessor shall have received an Appraisal of
the Property.
(j) Survey and Title Insurance. The Lessee shall have delivered
to the Lessor an ALTA/1992 (Urban) Survey of the Property (other than the
Equipment located therein) prepared by a licensed surveyor and meeting the
Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys as
adopted by the American Land Title Association/American Society and
American Congress on Surveying and Mapping in 1992 certified to the Lessor
and the title company and otherwise in form reasonably acceptable to the
Lessor and an ALTA owner's insurance policy covering the Property (other
than any Equipment) in favor of the Lessor, and, at the option of Lessee, a
leasehold policy in favor of the Lessee evidencing the Lessee's equitable
ownership in the Property, each such policy to be dated as of the
Acquisition Date and in an amount not less than the Property Cost and to be
reasonably satisfactory to the Lessor with, to the extent available,
comprehensive, zoning and mechanics liens' endorsements and such other
endorsements reasonably requested by the Lessor.
(k) Recordation. The Lessor shall have received evidence
reasonably satisfactory to it that each of the Deed and the Lease
Supplement shall have been delivered to the title company in escrow for
recordation with the appropriate Governmental Authorities (and the issuance
of the title insurance policies in clause (j) above shall be satisfactory
evidence of the foregoing).
(l) Evidence of Property Insurance. The Lessor shall have
received evidence of insurance with respect to the Property required to be
maintained pursuant to this Lease, setting forth the respective coverages,
limits of liability, carrier, policy number and period of coverage, and
otherwise satisfying the requirements set forth in Article XVII.
(m) Lease Supplement. On or prior to the Acquisition Date, the
Lessee shall have delivered to the Lessor the Lease Supplement executed by
the Lessee.
(n) Nomura Loan Agreement Conditions Precedent. The conditions
precedent set forth in Section 3.1 of the Nomura Loan Agreement shall have
been satisfied or waived; provided, however, that the conditions precedent
set forth in Sections 3.1(a)(A)(ix), 3.1(a)(A)(xi), 3.1(a) (D)-(J) (but
with respect to Section 3.1(a)(J) only to the extent same is made by the
Lessee), (K), (M)-(T) and (V)-(W) of the Nomura Loan Agreement shall have
been satisfied by the Lessee or waived.
(o) Funding Request. The Lessor shall have received no later
than five (5) Business Days prior to the Acquisition Date a fully executed
counterpart of the applicable Funding Request, executed by the Lessee.
(p) Delivery of Pledged Securities and Certificate A. The
Lessee shall have delivered the Pledged Securities and the Certificate A to
the Custodian and the Lessor, respectively, in accordance with the
Securities Pledge Agreement and Certificate Pledge Agreement, respectively.
(q) Mezzanine Loan Agreement Conditions Precedent. The
conditions precedent set forth in Section 3.1 of the Mezzanine Loan
Agreement shall have been satisfied or waived; provided, however, that the
conditions precedent set forth in Sections 3.1(a)(A)(ix), 3.1(a)(A)(xi),
3.1(a) (D), (F) and (H)-(J) (but with respect to Section 3.1(a)(J) only to
the extent same is made
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<PAGE>
by the Lessee), of the Mezzanine Loan Agreement shall have been satisfied
by the Lessee or waived.
All documents and instruments required to be delivered on the Acquisition Date
shall be delivered at the offices of Mayer, Brown & Platt, 1675 Broadway, New
York, New York 10019, or at such other location as may be determined by the
Lessor and the Lessee.
ARTICLE V
[INTENTIONALLY OMITTED]
ARTICLE VI
REPRESENTATIONS
6.1. Representations of the Lessor. The Lessor represents and warrants to
the Lessee that:
(a) ERISA. The Lessor is not and will not be funding the
Advance hereunder, and is not performing its obligations under the
Operative Documents, with the assets of an "employee benefit plan" (as
defined in Section 3(3) of ERISA) which is subject to Title I of ERISA, or
"plan" (as defined in Section 4975(e)(1) of the Code).
(b) Status. The Lessor is a duly organized and validly existing
Delaware business trust and has all requisite power and authority to own
its property and to conduct the business in which it is currently engaged.
(c) Corporate Power and Authority. The Lessor has the requisite
power and authority to execute, deliver and carry out the terms and
provisions of the Operative Documents to which it is or will be a party and
has taken all necessary action to authorize the execution, delivery and
performance of the Operative Documents to which it is a party and has duly
executed and delivered each Operative Document required to be executed and
delivered by it and, assuming the due authorization, execution and delivery
thereof on the part of each other party thereto, each such Operative
Document constitutes a legal, valid and binding obligation enforceable
against it in accordance with its terms, except as the same may be limited
by insolvency, bankruptcy, reorganization or other laws relating to or
affecting the enforcement of creditors' rights generally and by equitable
principles whether enforcement is sought by proceedings in equity or at law
and except as the same may be limited by certain circumstances under law or
court decisions in respect of provisions providing for indemnification of a
party with respect to liability where such indemnification is contrary to
public policy.
(d) No Legal Bar. Neither the execution, delivery and
performance by the Lessor of the Operative Documents to which it is or will
be a party nor compliance with the terms and provisions thereof, nor the
consummation by the Lessor of the transactions contemplated therein (i)
will result in a violation by the Lessor of any provision of any Applicable
Law that would Materially adversely affect (x) the validity or
enforceability of the Operative Documents to which the Lessor is a party,
or the title to, or value or condition of, the Property, or (y) the
financial position, business or results of operations of the Lessor or the
ability of the Lessor to perform its obligations under the Operative
Documents (ii) will conflict with or result in any breach which
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would constitute a default under, or (other than pursuant to the Operative
Documents) result in the creation or imposition of (or the obligation to
create or impose) any Lien upon any of the property or assets of the Lessor
pursuant to the terms of any indenture, loan agreement or other agreement
for borrowed money to which the Lessor is a party or by which it or any of
its property or assets is bound or to which it may be subject (other than
Permitted Liens), or (iii) will violate any provision of the Trust
Agreement.
(e) Litigation. There are no actions, suits or proceedings pending or,
to the knowledge of the Lessor, threatened (i) against the Property, (ii)
that are reasonably likely to have a Materially adverse effect on the
ability of the Lessor to perform its obligations under the Operative
Documents or (iii) that question the validity of the Operative Documents or
the rights or remedies of the Lessor with respect to the Lessor or the
Property under the Operative Documents.
(f) Governmental Approvals. No Governmental Action by any Governmental
Authority having jurisdiction over the Lessor which has not been taken on
or prior to the Acquisition Date is required to authorize or is required in
connection with (i) the execution, delivery and performance by the Lessor
of any Operative Document to which it is a party, or (ii) the legality,
validity, binding effect or enforceability against the Lessor of any
Operative Document to which it is a party.
(g) Investment Company Act. The Lessor is not an "investment company"
or a company "controlled" by an "investment company," within the meaning of
the Investment Company Act.
(h) Public Utility Holding Company Act. The Lessor is not a "holding
company" or a "subsidiary company," or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company," within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
6.2. Representations of Lessee. The Lessee represents and warrants to
the Lessor that:
(a) Corporate Status. The Lessee (i) is a duly organized and validly
existing corporation in good standing under the laws of the State of
Delaware and (ii) has the corporate power and authority to own its
properties and to conduct the business in which it is currently engaged.
(b) Corporate Power and Authority. The Lessee has the corporate power
and authority to execute, deliver and carry out the terms and provisions of
the Operative Documents to which it is or will be a party and has taken all
necessary corporate action to authorize the execution, delivery and
performance of the Operative Documents to which it is a party and has duly
executed and delivered each Operative Document required to be executed and
delivered by it and, assuming the due authorization, execution and delivery
thereof on the part of each other party thereto, each such Operative
Document constitutes a legal, valid and binding obligation enforceable
against it in accordance with its terms, except as the same may be limited
by insolvency, bankruptcy, reorganization or other laws relating to or
affecting the enforcement of creditors' rights generally and by equitable
principles whether enforcement is sought by proceedings in equity or at law
and except as the same may be limited by certain circumstances under law or
court decisions in respect of provisions providing for indemnification of a
party with respect to liability where such indemnification is contrary to
public policy.
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(c) No Legal Bar. Neither the execution, delivery and performance by
the Lessee of the Operative Documents to which it is or will be a party nor
compliance with the terms and provisions thereof, nor the consummation by
the Lessee of the transactions contemplated therein (i) will result in a
violation by the Lessee of any provision of any Applicable Law that would
Materially adversely affect (x) the validity or enforceability of the
Operative Documents to which the Lessee is a party, or the title to, or
value or condition of, the Property, or (y) the consolidated financial
position, business or consolidated results of operations of the Lessee or
the ability of the Lessee to perform its obligations under the Operative
Documents, (ii) will conflict with or result in any breach which would
constitute a default under, or (other than pursuant to the Operative
Documents) result in the creation or imposition of (or the obligation to
create or impose) any Lien upon any of the property or assets of the Lessee
pursuant to the terms of any indenture, loan agreement or other agreement
for borrowed money to which the Lessee is a party or by which it or any of
its property or assets is bound or to which it may be subject (other than
Permitted Liens), or (iii) will violate any provision of the certificate of
incorporation or by-laws of the Lessee.
(d) Litigation. There are no actions, suits or proceedings pending or,
to the knowledge of the Lessee, threatened (i) against the Property, (ii)
that are reasonably likely to have a Materially adverse effect on the
ability of the Lessee to perform its obligations under the Operative
Documents or (iii) that question the validity of the Operative Documents or
the rights or remedies of the Lessor with respect to the Lessee or the
Property under the Operative Documents.
(e) Governmental Approvals. No Governmental Action by any Governmental
Authority having jurisdiction over the Lessee or the Property which has not
been taken on or prior to the Acquisition Date is required to authorize or
is required in connection with (i) the execution, delivery and performance
by the Lessee of any Operative Document to which it is a party, or (ii) the
legality, validity, binding effect or enforceability against the Lessee of
any Operative Document to which it is a party.
(f) Investment Company Act. The Lessee is not an "investment company"
or a company "controlled" by an "investment company," within the meaning of
the Investment Company Act.
(g) Public Utility Holding Company Act. The Lessee is not a "holding
company" or a "subsidiary company", or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company", within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
(h) Offer of Securities, etc. Neither the Lessee nor any Person
authorized to act on the Lessee's behalf has, directly or indirectly,
offered any interest in the Property or any other interest similar thereto
(the sale or offer of which would be integrated with the sale or offer of
such interest in the Property), for sale to, or solicited any offer to
acquire any of the same from, any Person other than the Lessor and other
"accredited investors" (as defined in Regulation D of the Securities and
Exchange Commission).
(i) Solvency. The Lessee's representations and warranties set forth in
Section 4.1 (c)(I) of each of the Nomura Loan Agreement and Mezzanine Loan
Agreement are true and correct.
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(j) Use of Property. The Property and the contemplated use thereof by
the Lessee and its agents, assignees, employees, lessees, licensees and
tenants will comply with all Material Requirements of Law (including,
without limitation, all zoning and land use laws and Environmental Laws)
and Material Insurance Requirements, except for such Requirements of Law as
the Lessee shall be contesting in good faith by appropriate proceedings.
There is no action, suit or proceeding (including any proceeding in
condemnation or eminent domain or under any Environmental Law) pending or,
to the best of the Lessee's knowledge, threatened with respect to the
Lessee, its Affiliates or the Property which adversely Materially affects
the title to, or the use, operation or value of, the Property.
(k) Condition of Property. The Property has all utilities required to
adequately service it for its intended use pursuant to adequate permits
(including any that may be required under applicable Environmental Laws).
No fire or other casualty with respect to the Property has occurred which
fire or other casualty has had a Material adverse effect on the Property.
The Property has available all Material services of public facilities and
other utilities necessary for use and operation of the Property as an
independent living facility with assisted living services, including
required public utilities and means of access between the Property and
public highways for pedestrians and motor vehicles. All utilities proposed
to serve the Property are located in, and vehicular access to the Property
is provided by, either public rights-of-way abutting the Property or
Appurtenant Rights.
(l) Title. The Deed will be in form and substance sufficient to convey
good and marketable title to the Property in fee simple, subject only to
Permitted Liens. The Lessor will at all times during the Term have good
title to all Equipment located on the Property and in any Improvements,
subject only to Permitted Liens and Lessor Liens, if any.
(m) Insurance. The Lessee has obtained insurance coverage covering the
Property or self insures in a manner which satisfies the terms of this
Lease, and any such coverage is in full force and effect. The Lessee
carries insurance with reputable insurers in respect of its Material
Assets, in such manner, in such amounts and against such risks as is
customarily maintained by other Persons of similar size engaged in similar
business.
(n) Flood Hazard Areas. Except as otherwise identified on the survey
delivered pursuant to Section 4.3(j), no portion of the Property is located
in an area identified as a special flood hazard area by the Federal
Emergency Management Agency or other applicable agency. With respect to any
portion of the Property located in an area identified as a special flood
hazard area by the Federal Emergency Management Agency or other applicable
agency, the Lessee is self-insured with respect to all risks related
thereto to the same extent as the Lessee self-insures its other assets
similarly situated, and otherwise in accordance with Section 17.2 and in
accordance with the National Flood Insurance Act of 1968, as amended, or
has provided adequate flood hazard insurance as required under the Nomura
Loan Agreement and the Mezzanine Loan Agreement.
(o) Defaults. No Event of Default or similar event which with the
lapse of time or notice or both would constitute an "Event of Default" or
similar event has occurred and is continuing hereunder or under any
Material bond, debenture, note or other evidence of indebtedness or
Material mortgage, deed of trust, indenture or loan agreement or other
instrument to which the Lessee is a party or is subject to or bound.
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(p) Use of Advance. No part of the Advance will be used directly or
indirectly for the purpose of purchasing or carrying, or for payment in
full or in part of Debt that was incurred for the purposes of purchasing or
carrying, any margin security as such term is defined in Section 207.2 of
Regulation G of the Board of Governors of the Federal Reserve System (12
C.F.R., Chapter II, Part 207).
6.3. Representations of the Lessee with Respect to the Advance. The
Lessee represents and warrants to the Lessor as of the Acquisition Date as
follows:
(a) Representations. The representations and warranties of the Lessee
set forth in the Operative Documents (including the representations and
warranties set forth in Section 6.2) are true and correct in all Material
respects on and as of the Acquisition Date, except to the extent such
representations or warranties relate solely to an earlier date, in which
case such representations and warranties shall have been true and correct
in all Material respects on and as of such earlier date. The Lessee is in
compliance in all Material respects with its respective obligations under
the Operative Documents and there exists no Default or Event of Default
under this Lease or any other Operative Document to which the Lessee is a
party. No Default or Event of Default under this Lease or any other
Operative Document to which the Lessee is a party will occur as a result
of, or by giving effect to, the Advance requested by the Funding Request on
such date.
(b) Liens. The Lessee has not permitted Liens to be placed against the
Property other than Permitted Liens.
(c) Advance. The Advance requested represents amounts owed by, or
previously paid by, the Lessee to third parties in respect of Property
Cost. The conditions precedent to the Advance set forth in Article IV have
been satisfied.
ARTICLE VII
PAYMENT OF RENT
7.1. Rent.
(a) The Lessee shall pay SELCO Basic Rent and Lessor Basic Rent on the
Acquisition Date. Thereafter the Lessee shall pay Basic Rent (to the extent
such Basic Rent (or any component thereof) is then due and owing) on (x)
each Payment Date during the Term, (y) the date required under Section
24.1(i) in connection with the Lessee's exercise of the Remarketing Option,
and (z) any date on which this Lease shall terminate.
(b) Rent shall be due and payable in lawful money of the United States
and, after the occurrence and during the continuance of a Cash Management
Event, shall be paid by wire transfer of immediately available funds on the
due date therefor from the relevant Sub-Accounts of the Cash Collateral
Account, to the extent funds exist therein. With the exception of the first
payment on the Acquisition Date of SELCO Basic Rent and Lessor Basic Rent,
for which at least two (2) Business Days prior written notice from the
Lessor shall be provided, the Lessor shall provide written notice of the
amount of Basic Rent due at least two (2) Business Days prior to each due
date therefor; provided, however, that the failure of the Lessor to provide
such notice
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shall not affect Lessee's obligations hereunder or impose liability on
Lessor. Lessee shall deposit all security deposits received by it with
respect to the Property into the Security Deposit Account and shall cause
all relevant checks to be made payable to the name of the Security Deposit
Account.
(c) So long as a Cash Management Event is not continuing, Rent shall
be payable by wire transfer of immediately available funds on the due date
therefor as follows: (i) Lessor Basic Rent and SELCO Basic Rent and
Supplemental Rent to which the Lessor is entitled shall be payable to the
Lessor at the place of payment designated in writing by the Lessor and (ii)
the remainder of Basic Rent and Supplemental Rent to which the Lender is
entitled shall be payable to the Lender or Lender's designee or to an
account identified by Lender or Lender's designee as set forth in Section
2.12 (b) of the Nomura Loan Agreement.
(d) Neither the Lessee's inability or failure to take possession of
all or any portion of the Property when delivered by the Lessor, whether or
not attributable to any act or omission of the Lessee, or for any other
reason whatsoever, shall delay or otherwise affect the Lessee's obligation
to pay Rent for the Property in accordance with the terms of this Lease.
7.2. Payment of Rent. Rent shall be paid absolutely net to the Lessor, so
that this Lease shall yield to the Lessor the full amount thereof, without
setoff, deduction or reduction.
7.3. Supplemental Rent. The Lessee shall pay promptly as Supplemental Rent
shall become due and payable (a) after the occurrence and during the continuance
of a Cash Management Event, to the Collection Account and (b) so long as that a
Cash Management Event is not continuing, any and all Supplemental Rent payable
pursuant to the Nomura Loan Agreement and the Mezzanine Loan Agreement, to the
Lender, Lender's designee or to such parties as set forth in the Nomura Loan
Agreement and the Mezzanine Loan Agreement, and all other Supplemental Rent to
the Lessor. If the Lessee fails to pay any Supplemental Rent, the Lessor shall
have all rights, powers and remedies provided for herein or by law or equity or
otherwise in the case of nonpayment of Basic Rent. The Lessee shall pay as
Supplemental Rent, among other things, within ten (10) days following demand (or
such shorter period that such payment is required to be made under the Loan
Documents and the Mezzanine Loan Documents) to the extent permitted by
applicable Requirements of Law, interest at the applicable Overdue Rate on any
installment of Basic Rent not paid when due for the period for which the same
shall be overdue and on any payment of Supplemental Rent not paid when due or
demanded by the Lessor for the period from the due date or the date of any such
demand, as the case may be, until the same shall be paid. The expiration or
other termination of the Lessee's obligations to pay Basic Rent hereunder shall
not limit or modify the obligations of the Lessee with respect to Supplemental
Rent. Unless expressly provided otherwise in this Lease, in the event of any
failure on the part of the Lessee to pay and discharge any Supplemental Rent as
and when due, the Lessee shall also promptly pay and discharge any fine,
penalty, interest or cost which may be assessed or added under any agreement
with a third party for nonpayment or late payment of such Supplemental Rent, all
of which shall also constitute Supplemental Rent.
7.4. Method of Payment. Except as otherwise set forth in the Nomura Loan
Agreement and the Mezzanine Loan Agreement, each payment of Rent or any other
amount due hereunder shall be made by the Lessee to the applicable party prior
to 12:00 noon., New York City time at the place of payment designated in writing
by the Lessor or such applicable party in funds consisting of lawful currency of
the United States of America which shall be in federal or other immediately
available funds to an account
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specified by Lender (with respect to payments to Lender) and, with respect to
all other payees, to such accounts as specified by such payees. If any payment
is due on a date which is not a Business Day, such payment shall be made on the
next succeeding Business Day. Payments received after 12:00 noon, New York City
time on the date due shall for all purposes hereof be deemed to have been paid
on the next succeeding Business Day.
ARTICLE VIII
QUIET ENJOYMENT; RIGHT TO INSPECT
8.1. Quiet Enjoyment. Subject to Sections 2.4 and 8.2, and subject to the
rights of the Lessor contained herein and the other terms of the Operative
Documents to which the Lessee is a party, the Lessee shall peaceably and quietly
have, hold and enjoy the Property for the Term, free of any claim or other
action by the Lessor or anyone claiming by, through or under the Lessor (other
than the Lessee) with respect to any matters arising from and after the
Acquisition Date. Such right of quiet enjoyment is independent of, and shall not
affect the Lessor's rights otherwise to initiate legal action to enforce, the
obligations of the Lessee under this Lease.
8.2. Right to Inspect. During the Term, the Lessee shall, upon reasonable
prior written notice from the Lessor (except that no notice shall be required if
an Event of Default under this Lease has occurred and is continuing), and
subject to the rights of permitted sublessees permit the Lessor and its
authorized representatives to inspect the Property during normal business hours,
provided that such inspections shall not unreasonably interfere with the
Lessee's business operations at the Property.
ARTICLE IX
NET LEASE, ETC.
9.1. Net Lease. This Lease shall constitute a net lease. Any present or
future law to the contrary notwithstanding, this Lease shall not terminate, nor
shall the Lessee be entitled to any abatement, suspension, deferment, reduction,
setoff, counterclaim, or defense with respect to the Rent, nor shall the
obligations of the Lessee hereunder be affected (except as expressly herein
permitted and by performance of the obligations in connection therewith) by
reason of: (i) any defect in the condition, merchantability, design,
construction, quality or fitness for use of the Property or any part thereof, or
the failure of the Property to comply with all Requirements of Law, including
any inability to occupy or use the Property by reason of such non-compliance;
(ii) any damage to, removal, abandonment, salvage, loss, contamination of or
Release from, scrapping or destruction of or any requisition or taking of the
Property or any part thereof; (iii) any restriction, prevention or curtailment
of or interference with any use of the Property or any part thereof including
eviction; (iv) any defect in title to or rights to the Property or any Lien on
such title or rights or on the Property (other than Lessor Liens); (v) any
change, waiver, extension, indulgence or other action or omission or breach in
respect of any obligation or liability of or by the Lessor; (vi) any bankruptcy,
insolvency, reorganization, composition, adjustment, dissolution, liquidation or
other like proceedings relating to the Lessee or any other Person, or any action
taken with respect to this Lease by any trustee or receiver of the Lessee or any
other Person, or by any court, in any such proceeding; (vii) any claim that the
Lessee has or might have against any Person, including without limitation the
Lessor and any vendor, manufacturer, contractor of or for any portion of the
Property; (viii) any failure on the part of the Lessor to perform or comply with
any of the terms of this Lease (other than performance by Lessor of its
obligations set forth in Section 2.1 hereof), of any other Operative
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Document or of any other agreement; (ix) any invalidity or unenforceability or
illegality or disaffirmance of this Lease against or by the Lessee or any
provision hereof or any of the other Operative Documents or any provision of any
thereof; (x) the impossibility or illegality of performance by the Lessee, the
Lessor or both; (xi) any action by any court, administrative agency or other
Governmental Authority; (xii) any restriction, prevention or curtailment of or
interference with the construction on or any use of the Property or any part
thereof; or (xiii) any other cause or circumstances, whether or not the Lessee
shall have notice or knowledge of any of the foregoing. The parties intend that
the obligations of the Lessee hereunder shall be covenants and agreements that
are separate and independent from any obligations of the Lessor hereunder or
under any other Operative Documents and the obligations of the Lessee shall
continue unaffected unless such obligations shall have been modified or
terminated in accordance with an express provision of this Lease. Nothing
contained herein is intended to obviate or otherwise diminish any right the
Lessee may have to bring an action, either at law or in equity, to remedy any
breach by the Lessor of the Lessor's obligations hereunder.
9.2. No Termination or Abatement. The Lessee shall remain obligated under
this Lease in accordance with its terms and shall not take any action to
terminate, rescind or avoid this Lease, notwithstanding any action for
bankruptcy, insolvency, reorganization, liquidation, dissolution, or other
proceeding affecting the Lessor, or any action with respect to this Lease which
may be taken by any trustee, receiver or liquidator of the Lessor or by any
court with respect to the Lessor. The Lessee hereby waives all right (i) to
terminate or surrender this Lease (except as provided herein) or (ii) to avail
itself of any abatement, suspension, deferment, reduction, setoff, counterclaim
or defense with respect to any Rent. The Lessee shall remain obligated under
this Lease in accordance with its terms and the Lessee hereby waives any and all
rights now or hereafter conferred by statute or otherwise to modify or to avoid
strict compliance with its obligations under this Lease. Notwithstanding any
such statute or otherwise, the Lessee shall be bound by all of the terms and
conditions contained in this Lease. Notwithstanding anything contained in this
Article IX, this Lease may be terminated by Lessor pursuant to, inter alia,
Sections 19.1 and 20.2 hereof.
ARTICLE X
SUBLEASES
10.1. Subletting. The Lessee may, without the consent of the Lessor,
sublease the Property or any portion thereof to any Person. No sublease or other
relinquishment of possession of the Property shall in any way discharge or
diminish any of the Lessee's obligations to the Lessor hereunder, and the Lessee
shall remain directly and primarily liable under this Lease, even if assigned,
and as to the Property or portion thereof so sublet. Any sublease of the
Property shall have a term of not longer than one year or if such sublease has a
term of more than one year, such term shall not extend beyond the Term or any
Renewal Period. The Lessor hereby expressly agrees that any obligations or
covenants under this Lease may be performed by any permitted sublessee directly,
and the Lessor agrees that any such performance will be accepted in satisfaction
of the obligations or covenants in this Lease.
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ARTICLE XI
LESSEE ACKNOWLEDGMENTS
11.1. Condition of the Property. THE LESSEE ACKNOWLEDGES AND AGREES
THAT IT IS LEASING THE PROPERTY "AS IS" WITHOUT REPRESENTATION, WARRANTY OR
COVENANT (EXPRESS OR IMPLIED) BY THE LESSOR AND SUBJECT TO (A) THE EXISTING
STATE OF TITLE, (B) THE RIGHTS OF ANY PARTIES IN POSSESSION THEREOF, (C) ANY
STATE OF FACTS WHICH AN ACCURATE SURVEY OR PHYSICAL INSPECTION MIGHT SHOW, AND
(D) VIOLATIONS OF REQUIREMENTS OF LAW WHICH MAY EXIST ON THE DATE HEREOF OR ON
THE ACQUISITION DATE. THE LESSOR HAS NOT MADE AND SHALL NOT BE DEEMED TO HAVE
MADE ANY REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR IMPLIED) AND SHALL NOT
BE DEEMED TO HAVE ANY LIABILITY WHATSOEVER AS TO THE TITLE (OTHER THAN FOR
LESSOR LIENS), VALUE, HABITABILITY, USE, CONDITION, DESIGN, OPERATION, OR
FITNESS FOR USE OF THE PROPERTY (OR ANY PART THEREOF), OR ANY OTHER
REPRESENTATION, WARRANTY OR COVENANT WHATSOEVER, EXPRESS OR IMPLIED, WITH
RESPECT TO THE PROPERTY (OR ANY PART THEREOF) AND THE LESSOR SHALL NOT BE LIABLE
FOR ANY LATENT, HIDDEN, OR PATENT DEFECT THEREIN (OTHER THAN FOR LESSOR LIENS)
OR THE FAILURE OF THE PROPERTY, OR ANY PART THEREOF, TO COMPLY WITH ANY
REQUIREMENT OF LAW.
11.2. Risk of Loss. During the Term the risk of loss of or decrease in
the enjoyment and beneficial use of the Property as a result of the damage or
destruction thereof by fire, the elements, casualties, thefts, riots, wars or
otherwise is assumed by the Lessee, and the Lessor shall in no event be
answerable or accountable therefor.
ARTICLE XII
POSSESSION AND USE OF THE PROPERTY, ETC.
12.1. Utility Charges. The Lessee shall pay or cause to be paid all
charges for electricity, power, gas, oil, water, telephone, sanitary sewer
service and all other rents and utilities used in or on the Property during the
Term. The Lessee shall be entitled to receive any credit or refund with respect
to any utility charge paid by the Lessee and the amount of any credit or refund
received by the Lessor on account of any utility charges paid by the Lessee, net
of the costs and expenses reasonably incurred by the Lessor in obtaining such
credit or refund, shall be promptly paid over to the Lessee.
12.2. Possession and Use of the Property. The Property shall be used
as an independent living facility with assisted living services in a manner
consistent with the standards applicable to properties of a similar nature in
the geographic area in which the Property is located and in any event not less
than the standards applied by Affiliates of the Lessee for other comparable
properties of the Lessee or such Affiliates in such geographic area. The Lessee
shall pay, or cause to be paid, all charges and costs required in connection
with the use of the Property as contemplated by this Lease. The Lessee shall not
intentionally commit or permit any waste of the Property or any part thereof.
12.3. Compliance with Requirements of Law and Insurance Requirements.
Subject to the terms hereof relating to permitted contests, the Lessee, at its
sole cost and expense, shall (a) comply in all Material respects with all
Requirements of Law (including all Environmental Laws) and Insurance
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Requirements relating to the Property, including the use, construction,
operation, maintenance, repair and restoration thereof and the remarketing
thereof pursuant to Article XXIV, whether or not compliance therewith shall
require structural or extraordinary changes in the applicable Improvements or
interfere with the use and enjoyment of the Property, and (b) procure, maintain
and comply with all Material licenses, permits, orders, approvals, consents and
other authorizations required for the construction, use, maintenance and
operation of the Property and for the use, operation, maintenance, repair and
restoration of the applicable Improvements.
12.4. Assignment by Lessee. Subject to the terms of the Nomura Loan
Agreement and the Mezzanine Loan Agreement, the Lessee may, with the consent of
the Lessor, assign its rights hereunder, including the Purchase Option, to any
other Person so long as the Lessee remains fully liable for all of the
obligations of the "Lessee" hereunder and under the other Operative Documents.
ARTICLE XIII
MAINTENANCE AND REPAIR; RETURN
13.1. Maintenance and Repair; Return.
(a) The Lessee, at its sole cost and expense, shall maintain the
Property in good condition (ordinary wear and tear excepted) and make
all necessary repairs thereto, of every kind and nature whatsoever,
whether interior or exterior, ordinary or extraordinary, structural or
nonstructural or foreseen or unforeseen, in each case as required by
all Requirements of Law and Insurance Requirements and on a basis
consistent with the operation and maintenance by the Lessee or its
Affiliates of properties of a similar nature owned or leased by the
Lessee or any of its Affiliates in the geographic area where the
Property is located.
(b) The Lessor shall under no circumstances be required to build
any improvements on the Property, make any repairs, replacements,
alterations or renewals of any nature or description to the Property,
make any expenditure whatsoever in connection with this Lease or
maintain the Property in any way. The Lessor shall not be required to
maintain, repair or rebuild all or any part of the Property, and the
Lessee waives any right to (i) require the Lessor to maintain, repair,
or rebuild all or any part of the Property, or (ii) make repairs at
the expense of the Lessor pursuant to any Requirement of Law,
Insurance Requirement, contract, agreement, or covenant, condition or
restriction in effect at any time during the Term.
(c) The Lessee shall, upon the expiration or earlier termination
of this Lease, vacate and surrender the Property to the Lessor in its
then-current, "AS IS" condition, subject to the Lessee's obligations
under Sections 12.3, 13.1(a), 14.1, 15.1, 18.1(e), 18.2 and 24.1,
unless the Lessee has purchased the Property from the Lessor as
provided herein.
ARTICLE XIV
MODIFICATIONS, ETC.
14.1. Modifications, Substitutions and Replacements. The Lessee, at
its sole cost and expense, may at any time and from time to time make
alterations, renovations, improvements and additions to the Property or any part
thereof and substitutions and replacements therefor (collectively,
"Modifications");
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provided, however, that: (i) except for any Modification required to be made
pursuant to a Requirement of Law (a "Required Modification"), no Modification
shall impair the value, utility or useful life of the Property or any part
thereof from that which existed immediately prior to such Modification; (ii) the
Modification shall be done expeditiously and in a good and workmanlike manner;
(iii) the Lessee shall comply with all Requirements of Law (including all
Environmental Laws) and Insurance Requirements applicable to the Modification,
including the obtaining of all permits and certificates of occupancy, and the
structural integrity of the Property shall not be materially adversely affected;
(iv) subject to the terms of Article XVI relating to permitted contests, the
Lessee shall pay all costs and expenses and shall discharge (or cause to be
insured or bonded over) within sixty (60) days after the same shall be filed (or
otherwise become effective) any Liens arising with respect to the Modification;
and (v) such Modifications shall comply with Sections 12.3 and 13.1(a). All
Modifications shall remain part of the realty and shall be subject to this Lease
and title thereto shall immediately vest in the Lessor; provided, however, that
with the exception of Modifications permitted pursuant to Section 2.12(f)(iv) of
the Nomura Loan Agreement, Modifications that meet each of the following
conditions shall not be subject to this Lease: (x) such Modifications are not
Required Modifications, (y) such Modifications were not financed by the Lessor
and (z) such Modifications are readily removable without impairing the value,
utility or remaining useful life of the Property. The Lessee may place upon the
Property any trade fixtures, machinery, equipment or other property belonging to
the Lessee or third parties and may remove the same at any time during the Term,
subject, however, to the terms of Section 13.1(a), and Lessor hereby waives any
liens, to which it may be entitled pursuant to any statutory or common law, in
such trade fixtures, machinery, equipment or other property; provided that such
trade fixtures, machinery, equipment or other property do not Materially impair
the value, utility or remaining useful life of the Property; provided, further,
that the Lessee shall keep and maintain at the Property and shall not, without
the Lessor's prior consent, remove from the Property any Equipment financed or
otherwise paid for (directly or indirectly) by the Lessor pursuant to this
Lease. Notwithstanding the forgoing, the Lessee shall comply with all provisions
of the Loan Documents and the Mezzanine Loan Documents with respect to
Modifications as if the Lessee were the Borrower thereunder, and to the extent
the provisions hereof are inconsistent with same, the provisions of the Loan
Documents and the Mezzanine Loan Documents shall control.
ARTICLE XV
WARRANT OF TITLE; EASEMENTS
15.1. Warrant of Title.
(a) The Lessee agrees that except as otherwise provided herein
and subject to the terms of Article XVI relating to permitted
contests, the Lessee shall not directly or indirectly create or allow
to remain, and shall promptly discharge at its sole cost and expense,
any Lien, defect, attachment, levy, title retention agreement or claim
upon the Property or any Modifications or any Lien, attachment, levy
or claim with respect to the Rent, other than Permitted Liens and
Liens on machinery, equipment, general intangibles and other personal
property not financed by the Advance.
(b) Nothing contained in this Lease shall be construed as
constituting the consent or request of the Lessor, expressed or
implied, to or for the performance by any contractor, mechanic,
laborer, materialman, supplier or vendor of any labor or services or
for the furnishing of any materials for any construction, alteration,
addition, repair or demolition of or to the
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Property or any part thereof. NOTICE IS HEREBY GIVEN THAT THE LESSOR
IS NOT AND SHALL NOT BE LIABLE FOR ANY LABOR, SERVICES OR MATERIALS
FURNISHED OR TO BE FURNISHED TO THE LESSEE, OR TO ANYONE HOLDING THE
PROPERTY OR ANY PART THEREOF THROUGH OR UNDER THE LESSEE, AND THAT NO
MECHANIC'S OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS
SHALL ATTACH TO OR AFFECT THE INTEREST OF THE LESSOR, IN AND TO THE
PROPERTY.
15.2. Grants and Releases of Easements; Lessor's Waivers. (x) Provided
that no Event of Default shall have occurred and be continuing, (y) subject to
the rights of the Lessee under the provisions of Articles XII, XIII and XIV and
(z) provided that the following is consistent with the terms of the Loan
Documents and the Mezzanine Loan Documents, the Lessor hereby consents in each
instance to the following actions by the Lessee, in the name and stead of the
Lessor, but at the Lessee's sole cost and expense: (a) the granting of
easements, licenses, rights-of-way and other rights and privileges in the nature
of easements reasonably necessary or desirable for the use, repair, or
maintenance of the Property as herein provided; (b) the release of existing
easements or other rights in the nature of easements which are for the benefit
of the Property; (c) if required by applicable Governmental Authority for any
purpose, including, but not limited to, the dedication or transfer of unimproved
portions of the Property for road, highway or other public purposes; and (d) the
execution of amendments to any covenants and restrictions affecting the
Property; provided, however, that in each case (i) such grant, release,
dedication, transfer or amendment does not Materially impair the value, utility
or remaining useful life of the Property, (ii) such grant, release, dedication,
transfer or amendment is reasonably necessary in connection with the use,
maintenance, alteration or improvement of the Property, (iii) such grant,
release, dedication, transfer or amendment will not cause the Property or any
portion thereof to fail to comply in any Material respect with the provisions of
this Lease or any other Operative Documents and all Requirements of Law
(including, without limitation, all applicable zoning, planning, building and
subdivision ordinances, all applicable restrictive covenants and all applicable
architectural approval requirements); (iv) all governmental consents or
approvals required prior to such grant, release, dedication, transfer or
amendment have been obtained, and all filings required prior to such action have
been made; (v) such grant, release, dedication, transfer or amendment will not
result in any down-zoning of the Property or any portion thereof or a material
reduction in the maximum density or development rights available to the Property
under all Requirements of Law; (vi) the Lessee shall remain obligated under this
Lease and under any instrument executed by the Lessee consenting to the
assignment of the Lessor's interest in this Lease as security for indebtedness,
in each such case in accordance with their terms, as though such grant, release,
dedication, transfer or amendment had not been effected and (vii) the Lessee
shall pay and perform any obligations of the Lessor under such grant, release,
dedication, transfer or amendment. The Lessor acknowledges the Lessee's right to
finance and to secure under the Uniform Commercial Code, inventory, furnishings,
furniture, equipment, machinery, leasehold improvements and other personal
property located at the Property other than Equipment which has been purchased
with funds provided by the Lessor, and Lessor hereby disclaims and waives any
interest therein and right thereto and the Lessor shall, upon the request of the
Lessee, and at the Lessee's sole cost and expense, execute and deliver any
instruments necessary or appropriate to confirm any such grant, release,
dedication, transfer, annexation, amendment, disclaimer or waiver to any Person
permitted under this Section 15.2 including landlord waivers with respect to any
of the foregoing.
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ARTICLE XVI
PERMITTED CONTESTS
16.1. Permitted Contests in Respect of Applicable Law. Subject to the
terms of the Loan Documents and Mezzanine Loan Documents, if, to the extent and
for so long as (a) a test, challenge, appeal or proceeding for review of any
Applicable Law relating to the Property shall be prosecuted diligently and in
good faith in appropriate proceedings by the Lessee or (b) compliance with such
Applicable Law shall have been excused or exempted by a valid nonconforming use,
variance, permit, waiver, extension or forbearance, the Lessee shall not be
required to comply with such Applicable Law but only if and so long as any such
test, challenge, appeal, proceeding, waiver, extension, forbearance or
noncompliance shall not, in the reasonable opinion of the Lessor, involve (A)
any risk of criminal liability being imposed on the Lessor or the Property, or
(B) any risk of (1) foreclosure, forfeiture or loss of the Property, or any
Material part thereof, or (2) the nonpayment of Rent or (C) any substantial
danger of (1) the sale of, or the creation of any Lien (other than a Permitted
Lien) on, any part of the Property, (2) civil liability being imposed on the
Lessor, or the Property, or (3) enjoinment of, or interference with, the use,
possession or disposition of the Property in any Material respect.
The Lessor will not be required to join in any proceedings pursuant to
this Section 16.1 unless a provision of any Applicable Law requires that such
proceedings be brought by or in the name of the Lessor; and in that event the
Lessor will join in the proceedings or permit them or any part thereof to be
brought in its name if and so long as (i) no Default has occurred and is
continuing and (ii) the Lessee pays all related expenses and indemnifies the
Lessor to its reasonable satisfaction.
ARTICLE XVII
INSURANCE
17.1. Public Liability and Workers' Compensation Insurance.
(a) During the Term the Lessee shall procure and carry, at the
Lessee's sole cost and expense, commercial general liability insurance
for claims for bodily injury or death sustained by persons or damage
to property while on the Property and such other public liability
coverages as are ordinarily procured by the Lessee or its Affiliates
who own or operate similar properties. Such insurance shall be on
terms and in amounts that are in accordance with normal industry
practice. The policy shall be endorsed to name the Lessor, the Trust
Company and the Lender as additional insured. The policy shall also
specifically provide that the policy shall be considered primary
insurance which shall apply to any loss or claim before any
contribution by any insurance which the Lessor may have in force.
(b) The Lessee shall, in the construction of any Improvements
(including in connection with any Modifications thereof) and the
operation of the Property, comply with, or cause the applicable
contractor to comply with, all applicable workers' compensation laws.
17.2. Hazard and Other Insurance. During the Term the Lessee shall
keep, or cause to be kept, the Property insured against loss or damage by fire,
flood and other risks on terms and in amounts that are no less favorable than
insurance covering other similar properties owned by the Lessee or its
Affiliates and that are in accordance with normal industry practice and as
required in the Loan Documents and the
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Mezzanine Loan Documents. During the construction of any Improvements the Lessee
shall also maintain or cause to be maintained builders' risk insurance.
17.3. Insurance Coverage.
(a) The Lessee shall furnish the Lessor with certificates
showing the insurance required under Sections 17.1 and 17.2 to be in
effect and naming the Lessor as additional insured with respect to
liability coverage (excluding worker's compensation insurance), and
naming the Lessor as loss payee with respect to property coverage and
showing the mortgagee endorsement required by Section 17.3(c) with
respect to such coverage. All such insurance shall be at the cost and
expense of the Lessee. Such certificates shall include a provision for
no less than thirty (30) days' advance written notice by the insurer
to the Lessor in the event of cancellation or reduction of such
insurance.
(b) The Lessee agrees that the insurance policy or policies
required by Section 17.2 shall include an appropriate clause pursuant
to which such policy shall provide that it will not be invalidated
should the Lessee waive, in writing, prior to a loss, any or all
rights of recovery against any party for losses covered by such
policy, and that the insurance in favor of the Lessor and its rights
under and interests in said policies shall not be invalidated or
reduced by any act or omission or negligence of the Lessee or any
other Person having any interest in the Property. The Lessee hereby
waives any and all such rights against the Lessor to the extent of
payments made under such policies.
(c) All such insurance shall be written by reputable insurance
companies that are financially sound and solvent and otherwise
reasonably appropriate considering the amount and type of insurance
being provided by such companies. Any insurance company selected by
the Lessee which is rated in Best's Insurance Guide or any successor
thereto (or if there be none, an organization having a similar
national reputation) shall have a general policyholder rating of "A"
and a financial rating of at least "12" or be otherwise acceptable to
the Lessor. All insurance policies required by Section 17.2 shall
include a standard form mortgagee endorsement in favor of the Lender.
(d) The Lessor may carry separate liability insurance so long as
(i) the Lessee's insurance is designated as primary and in no event
excess or contributory to any insurance the Lessor may have in force
which would apply to a loss covered under the Lessee's policy and (ii)
each such insurance policy will not cause the Lessee's insurance
required under this Article XVII to be subject to a coinsurance
exception of any kind.
(e) The Lessee shall pay as they become due all premiums for the
insurance required by Section 17.1 and Section 17.2, and shall renew
or replace each policy prior to the expiration date thereof.
Throughout the Term, at the time each of the Lessee's insurance
policies is renewed (but in no event less frequently than once each
year), the Lessee shall deliver to the Lessor certificates of
insurance evidencing that all insurance required by this Article XVII
is being maintained by the Lessee and is in effect.
17.4. Insurance Proceeds. All insurance proceeds in respect of any
loss or occurrence shall, to the extent permitted under the Loan Documents and
the Mezzanine Loan Documents, be paid to the Lender and, upon compliance with
the terms of the Loan Documents and the Mezzanine Loan
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Documents, the Lender shall pay same to the Lessee for application toward the
reconstruction, repair or refurbishment of the Property to the extent permitted
under the Loan Documents and the Mezzanine Loan Documents.
17.5. Insurance Requirements in Loan Documents and the Mezzanine Loan
Documents. Notwithstanding the provisions of Section 17.1, 17.2, 17.3 and 17.4,
the Lessee shall comply with all Insurance Requirements (as defined in the
Nomura Loan Agreement and the Mezzanine Loan Agreement) and to the extent the
provisions hereof are inconsistent with same, the provisions of the Loan
Documents and the Mezzanine Loan Documents shall control. The Lessor
acknowledges that the Insurance Requirements are acceptable to it; provided,
however, that notwithstanding the foregoing, the Lessee must at all times during
the Term have liability insurance complying with Section 17.1.
ARTICLE XVIII
CASUALTY AND CONDEMNATION;
ENVIRONMENTAL MATTERS
18.1. Casualty and Condemnation.
(a) Subject to the provisions of this Article XVIII, if all or a
portion of the Property is damaged or destroyed in whole or in part by
a Casualty or if the use, access, occupancy, easement rights or title
to the Property or any part thereof, is the subject of a Condemnation,
then the Lessee shall (i) reconstruct, refurbish and repair the
Property upon submission to the Lessor of an architect's certificate
as to the cost of such restoration and to the effect that the Property
can be fully restored to the condition required under the Operative
Documents and as to the cost of such restoration or (ii) pay the Lease
Balance.
(b) The Lessee may appear in any proceeding or action to
negotiate, prosecute, adjust or appeal any claim for any award,
compensation or insurance payment on account of any such Casualty or
Condemnation and shall pay all expenses thereof. At the Lessee's
reasonable request, and at the Lessee's sole cost and expense, the
Lessor shall participate in any such proceeding, action, negotiation,
prosecution or adjustment. The Lessor and the Lessee agree that this
Lease shall control the rights of the Lessor and the Lessee in and to
any such award, compensation or insurance payment.
(c) If the Lessor or the Lessee shall receive notice of a
Casualty or of an actual, pending or threatened Condemnation of the
Property or any interest therein, the Lessor or the Lessee, as the
case may be, shall give notice thereof to the other and the Lender
promptly after the receipt of such notice.
(d) If pursuant to this Section 18.1 and Section 19.1 this Lease
shall continue in full force and effect following a Casualty or
Condemnation with respect to the Property, the Lessee shall, at its
sole cost and expense (and, without limitation, if any award,
compensation or insurance payment is not sufficient to restore the
Property in accordance with this paragraph, the Lessee shall pay the
shortfall), promptly and diligently repair any damage to the Property
caused by such Casualty or Condemnation in conformity with the
requirements of Sections 13.1 and 14.1 using the as-built plans and
specifications for the Property (as modified to give effect to any
subsequent Modifications, any Condemnation affecting the Property and
all applicable
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Requirements of Law) so as to restore the Property as near as possible
to the condition, operation, function and value as existed immediately
prior to such Casualty or Condemnation with such Modification as the
Lessee may elect in accordance with Section 14.1. In such event, title
to the Property shall remain with the Lessor. Upon completion of such
restoration, the Lessee shall furnish the Lessor an architect's
certificate of substantial completion and a Responsible Employee's
Certificate confirming that such restoration has been completed
pursuant to this Lease.
(e) In no event shall a Casualty or Condemnation affect the
Lessee's obligations to pay Rent pursuant to Section 7.1 or to perform
its obligations and pay any amounts due on the Expiration Date or
pursuant to Articles XXII and XXV.
(f) Any Excess Proceeds received by the Lessor in respect of a
Casualty or Condemnation shall be turned over to the Lessee.
(g) Notwithstanding the provisions of this Section 18.1, the
Lessee shall comply with and be entitled to the benefit of all
provisions in the Loan Documents and Mezzanine Loan Documents
regarding Casualty and Condemnation and to the extent the provisions
hereof are inconsistent with same, the provisions of the Loan
Documents and Mezzanine Loan Documents shall control.
18.2. Environmental Matters. Promptly upon the Lessee's knowledge of
the existence of an Environmental Violation, the Lessee shall notify the Lessor
in writing of such Environmental Violation. If the Lessor elects not to
terminate this Lease pursuant to Section 19.1, at the Lessee's sole cost and
expense, the Lessee shall promptly and diligently commence any response, clean
up, remedial or other action necessary to remove, clean up or remediate the
Environmental Violation in accordance with the terms of Section 12.3. If the
Lessor does not deliver a Termination Notice pursuant to Section 19.1, the
Lessee shall, upon completion of remedial action by the Lessee, cause to be
prepared by an environmental consultant reasonably acceptable to the Lessor a
report describing the Environmental Violation and the actions taken by the
Lessee (or its agents) in response to such Environmental Violation, and a
statement by the consultant that the Environmental Violation has been remedied
in compliance in all material respects with applicable Environmental Law. Each
such Environmental Violation shall be remedied prior to the Expiration Date.
Nothing in this Article XVIII shall reduce or limit the Lessee's obligations
under the indemnity provisions hereof.
18.3. Notice of Environmental Matters. Promptly, but in any event
within sixty (60) Business Days from the date the Lessee has actual knowledge
thereof, the Lessee shall provide to the Lessor written notice of any pending or
threatened claim, action or proceeding involving any Environmental Violation on
or in connection with the Property. All such notices shall describe in
reasonable detail the nature of the claim, action or proceeding and the Lessee's
proposed response thereto. In addition, the Lessee shall provide to the Lessor,
within sixty (60) Business Days of receipt, copies of all written communications
with any Governmental Authority relating to any Environmental Law or any Release
in connection with the Property. The Lessee shall also promptly provide such
detailed reports of any such environmental claims as may reasonably be requested
by the Lessor. In the event that the Lessor receives written notice of any
pending or threatened claim, action or proceeding involving any Environmental
Violation on or in connection with the Property, the Lessor shall promptly give
notice thereof to the Lessee.
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18.4. Environmental Obligations of the Lessor Pursuant to the Nomura
Loan Agreement and the Mezzanine Loan Agreement. The representations, warranties
and covenants set forth in Section 4.1(d)(U) and Section 5.1(b)(D) through
Section 5.1(b)(I) of the Nomura Loan Agreement and the Mezzanine Loan Agreement
imposed upon Lessee pursuant thereto shall survive in perpetuity.
ARTICLE XIX
TERMINATION OF LEASE
19.1. Termination upon Certain Events. With respect to the Property,
if either:
(i) a Significant Condemnation occurs; or
(ii) an Environmental Violation occurs which (x) either causes
the Lender to accelerate the Principal Indebtedness or (y) is not
being addressed by the Lessee or the Parent as required hereby or by
the SELCO Environmental Guaranty;
and the Lessor or the Lessee shall have given written notice to the other party
that this Lease is to be terminated as a consequence of the occurrence of such
an event (a "Termination Notice"), then, the Lessee shall be obligated to
purchase all or a portion of the Lessor's interest in the Property on a Payment
Date prior to the date occurring one hundred eighty (180) days after the date of
the notice of termination (or if such Payment Date arises prior to the second
anniversary of the Start-Up Day, on the next Payment Date after such anniversary
that is 180 days after the date of the notice of termination) by paying the
Lessor on such Payment Date an amount equal to (a) the Equity Balance, in which
case this Lease shall not terminate but the Lease Balance shall be reduced by
the amount of such payment of Equity Balance or (b) the Lease Balance.
19.2. Termination Procedures. On the date of the payment by the Lessee
of the Lease Balance in accordance with the Termination Notice or in accordance
with Section 19.1 (such date, the "Termination Date"), this Lease shall
terminate and, concurrent with the Lessor's receipt of such payment,
(a) the Lessor shall execute and deliver to the Lessee (or to
the Lessee's designee) at the Lessee's cost and expense a quitclaim
deed with respect to the Property, a quitclaim bill of sale with
respect to the applicable Equipment and an assignment of the Lessor's
entire interest in the Property (which shall include an assignment of
all of the Lessor's right, title and interest in and to any Net
Proceeds not previously received by the Lessor and existing subleases
and security deposits thereunder), in each case in recordable form and
otherwise in conformity with local custom and free and clear of any
Lessor Liens attributable to the Lessor;
(b) the Property shall be conveyed to such Person "AS IS" and in
its then present physical condition;
(c) in the case of a termination pursuant to clause (i) or (ii)
of Section 19.1, the Lessor shall convey to the Lessee any Net
Proceeds with respect to the Condemnation giving rise to the partial
termination of this Lease theretofore received by the Lessor or at the
request of the Lessee, such amounts shall be applied against sums due
hereunder; and
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(d) the Lessor shall execute and deliver to Lessee and the
Lessee's title insurance company an affidavit as to the absence of any
Lessor Liens and shall execute and deliver to the Lessee a statement
of termination of this Lease to the extent relating to the Property.
ARTICLE XX
EVENTS OF DEFAULT
20.1. Events of Default. The occurrence of any one or more of the
following events (whether such event shall be voluntary or involuntary or come
about or be effected by operation of law or pursuant to or in compliance with
any judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body) shall constitute an "Event of Default":
(a) the Lessee shall fail to make payment of any Basic Rent,
including amounts due pursuant to Section 19.1 or 22.1 or Article
XXIV, Equity Balance or Lease Balance when due; provided, however,
that if a Cash Management Event has not occurred, the failure to pay
those portions of Basic Rent consisting of SELCO Basic Rent, Lessor
Basic Rent, the Required Debt Service Payment due on such date, the
Basic Carrying Costs Monthly Installment due on such date or the
Capital Reserve Monthly Installment due on the due date therefor shall
not constitute an Event of Default if Lessee shall cure such failure
within five (5) days after the due date therefor;
(b) the Lessee shall fail to make payment of any Supplemental
Rent (i) required to be made pursuant to the Nomura Loan Agreement or
the Mezzanine Loan Agreement on the due date therefor and such failure
is not remedied within any applicable grace period set forth in the
Loan Documents or the Mezzanine Loan Documents, and (ii) any other
component of Supplement Rent due and payable within five (5) Business
Days after receipt of notice thereof;
(c) the Lessee shall fail to maintain insurance as required by
Article XVII of this Lease;
(d) the Lessee shall fail in any Material respect to observe or
perform any term, covenant or condition of the Lessee under this Lease
or the Operative Documents to which it is party other than those
described in Section 20.1(a), (b), or (c) hereof, and such failure
shall have continued for thirty (30) days after the earlier of (i)
delivery to the Lessee of written notice thereof from the Lessor or
(ii) a Responsible Employee of the Lessee shall have knowledge of such
failure; provided, however, that if such failure is capable of cure
but cannot be cured by payment of money or cannot be cured by diligent
efforts within such thirty (30) day period but such diligent efforts
shall be properly commenced within the cure period and the Lessee is
diligently pursuing, and shall continue to pursue diligently, remedy
of such failure, the cure period shall be extended for an additional
period of time as may be necessary to cure, not to exceed an
additional one hundred twenty (120) days or to extend beyond the
Expiration Date; provided further, that failure by the Lessee to fully
comply with the requirements of Section 24.1 hereof shall not be
subject to any cure period;
(e) to the extent the same causes an Event of Default under the
Nomura Loan Agreement or the Mezzanine Loan Agreement, any
representation or warranty made by the Lessee in any of the Operative
Documents to which it is a party shall prove to have been inaccurate
in any Material respect at the time made, and if such inaccuracy can
be cured, it shall not have been
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cured within forty-five (45) days after the earlier of (i) delivery to
the Lessee of written notice thereof from the Lessor or (ii) a
Responsible Employee of the Lessee shall have knowledge of such
inaccuracy;
(f) an "Event of Default" under the Nomura Loan Agreement or,
while the Mezzanine Loan is outstanding, the Mezzanine Loan Agreement,
shall have occurred and be continuing;
(g) the Lessee or the Parent shall (i) admit in writing its
inability to pay its debts generally as they become due, (ii) file a
petition under the United States bankruptcy laws or any other
applicable insolvency law or statute of the United States of America
or any State or Commonwealth thereof, (iii) make a general assignment
for the benefit of its creditors, (iv) consent to the appointment of a
receiver of itself or the whole or any substantial part of its
property, (v) fail to cause the discharge of any custodian, trustee or
receiver appointed for the Lessee or the Parent, as applicable, or the
whole or a substantial part of the Lessee's or the Parent's property
within ninety (90) days after such appointment, (vi) file a petition
or answer seeking or consenting to reorganization under the United
States bankruptcy laws or any other applicable insolvency law or
statute of the United States of America or any State or Commonwealth
thereof; or (vii) be adjudicated as bankrupt or insolvent;
(h) dissolution, liquidation or insolvency proceedings or a
petition under the United States bankruptcy laws or any other
applicable insolvency law or statute of the United States of America
or any State or Commonwealth thereof shall be filed against, consented
to or acquiesced by the Lessee or the Parent and not dismissed within
ninety (90) days from the date of its filing, or a court of competent
jurisdiction shall enter an order or decree appointing, without the
consent of the Lessee or the Parent, as applicable, a receiver,
liquidator or trustee of the Lessee or the Parent or the whole or a
substantial part of any of the Lessee's or the Parent's property and
such order or decree shall not be vacated or set aside within ninety
(90) days from the date of the entry thereof;
(i) an event of default, as defined in any agreement, mortgage,
indenture or instrument under which there may be issued, or by which
there may be secured or evidenced, any indebtedness of the Lessee in a
principal amount in excess of $5,000,000, whether such indebtedness
now exists or shall hereafter be created, shall happen, if the effect
of such default is to accelerate the maturity of such indebtedness,
unless the Lessee is diligently and in good faith contesting such
default in appropriate proceedings;
(j) any Lien granted by the Lessee under any Operative Document
shall, in whole or in part, terminate, cease to be effective against,
or cease to be the legal, valid, binding and enforceable obligation
of, the Lessee;
(k) the Lessee shall directly or indirectly contest the validity
of any Operative Document in any manner in any court of competent
jurisdiction or any lien granted by the Lessee under any Operative
Document;
(l) the Lessee shall fail to satisfy any of its obligations
under the Securities Pledge Agreement or Certificate Pledge Agreement,
including, without limitation, satisfying the Collateral Requirement
(as defined in the Securities Pledge Agreement) within the applicable
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grace period provided therefor, for which the exclusive remedy for
such Event of Default is provided in Section 20.2(k); or
(m) the Lessor shall not have received all SELCO Basic Rent and
Lessor Basic Rent within five (5) days after any SELCO Payment Date.
20.2. Remedies. Upon the occurrence of any Event of Default and at any
time thereafter, the Lessor may, so long as such Event of Default is continuing,
do one or more of the following as the Lessor in its sole discretion shall
determine, without limiting any other right or remedy the Lessor may have on
account of such Event of Default:
(a) The Lessor may, by notice to the Lessee, rescind or
terminate this Lease as of the date specified in such notice; however,
(i) no reletting, reentry or taking of possession of the Property (or
any portion thereof) by the Lessor will be construed as an election on
the Lessor's part to terminate this Lease unless a written notice of
such intention is given to the Lessee, (ii) notwithstanding any
reletting, reentry or taking of possession, the Lessor may at any time
thereafter elect to terminate this Lease for a continuing Event of
Default and (iii) no act or thing done by the Lessor or any of its
agents, representatives or employees and no agreement accepting a
surrender of the Property shall be valid unless the same be made in
writing and executed by the Lessor.
(b) The Lessor may (i) demand that the Lessee, and the Lessee
shall upon the written demand of the Lessor, return the Property
promptly to the Lessor in the manner and condition required by, and
otherwise in accordance with all of the provisions of, Articles XI and
XIII and Section 12.3 hereof as if the Property were being returned at
the end of the Term, and the Lessor shall not be liable for the
reimbursement of the Lessee for any costs and expenses incurred by the
Lessee in connection therewith and (ii) without prejudice to any other
remedy which the Lessor may have for possession of the Property, and
to the extent and in the manner permitted by Applicable Law, enter
upon the Property and take immediate possession of (to the exclusion
of the Lessee) the Property or any part thereof and expel or remove
the Lessee and any other Person who may be occupying the Property, by
summary proceedings or otherwise, all without liability to the Lessee
for or by reason of such entry or taking of possession, whether for
the restoration of damage to property caused by such taking or
otherwise and, in addition to the Lessor's other damages, the Lessee
shall be responsible for all costs and expenses incurred by the Lessor
in connection with any reletting, including, without limitation,
reasonable brokers' fees and all costs of any alterations or repairs
made by the Lessor.
(c) The Lessor may (i) sell all or any part of the Property at
public sale free and clear of any rights of the Lessee and without any
duty to account to the Lessee with respect to such action or inaction
or any proceeds (except that Excess Proceeds shall be paid by the
Lessor to the Lender to be applied in accordance with the Nomura Loan
Agreement and the Mezzanine Loan Agreement) with respect thereto
(except to the extent required by clause (ii) below if the Lessor
shall elect to exercise its rights thereunder) in which event the
Lessee's obligation to pay Basic Rent hereunder for periods commencing
after the date of such sale shall be terminated or proportionately
reduced, as the case may be; and (ii) if the Lessor shall so elect,
demand that the Lessee pay to the Lessor, and the Lessee shall pay to
the Lessor, on the date of such sale, as liquidated damages for loss
of a bargain and not as a penalty (the parties agreeing that the
Lessor's actual damages would be difficult to predict, but the
aforementioned liquidated damages
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represent a reasonable approximation of such amount) (in lieu of Basic Rent
due for periods commencing on or after the Payment Date coinciding with
such date of sale (or, if the sale date is not a Payment Date, the Payment
Date next preceding the date of such sale)), an amount equal to (A) the
excess, if any, of (1) the Lease Balance calculated as of such Payment Date
(including all Rent due and unpaid to and including such Payment Date and),
over (2) the net proceeds of such sale (that is, after deducting all costs
and expenses incurred by the Lessor incident to such conveyance, including,
without limitation, repossession costs, brokerage commissions, prorations,
transfer taxes, fees and expenses for counsel, title insurance fees, survey
costs, recording fees, and any repair costs); plus (B) interest at the
Overdue Rate on the foregoing amount from such Payment Date until the date
of payment.
(d) The Lessor may, at its option, elect not to terminate this
Lease and continue to collect all Basic Rent, Supplemental Rent, and all
other amounts due the Lessor (together with all costs of collection) and
enforce the Lessee's obligations under this Lease as and when the same
become due, or are to be performed, and at the option of the Lessor, upon
any abandonment of the Property by the Lessee or re-entry of same by the
Lessor, the Lessor may, in its sole and absolute discretion, elect not to
terminate this Lease and may make the necessary repairs in order to relet
the Property, and relet the Property or any part thereof for such term or
terms (which may be for a long term extending beyond the Term of this
Lease) and at such rental or rentals and upon such other terms and
conditions as the Lessor in its reasonable discretion may deem advisable;
and upon each such reletting all rentals actually received by the Lessor
from such reletting shall be applied to the Lessee's obligations hereunder
and the other Operative Documents in such order, proportion and priority as
the Lessor may elect in the Lessor's sole and absolute discretion. If such
rentals received from such reletting during any period are less than the
Rent with respect to the Property to be paid during that period by the
Lessee hereunder, the Lessee shall pay any deficiency, as calculated by the
Lessor, to the Lessor on the next Payment Date.
(e) Unless the Property has been sold in its entirety, the
Lessor may, whether or not the Lessor shall have exercised or shall
thereafter at any time exercise any of its rights under paragraph (b), (c)
or (d) of this Section 20.2 with respect to the Property or portion
thereof, demand, by written notice to the Lessee specifying a date (a
"Termination Date") not earlier than 10 days after the date of such notice,
that the Lessee purchase, on such Termination Date, the Property (or the
remaining portion thereof) in accordance with the provisions of Article
XXII; provided, however, that no such written notice shall be required upon
the occurrence of any Event of Default in clause (g) or (h) of Section
20.1.
(f) The Lessor may exercise any other right or remedy that may
be available to it under Applicable Law, or proceed by appropriate court
action (legal or equitable) to enforce the terms hereof or to recover
damages for the breach hereof. Separate suits may be brought to collect any
such damages for any period(s), and such suits shall not in any manner
prejudice the Lessor's right to collect any such damages for any subsequent
period(s), or the Lessor may defer any such suit until after the expiration
of the Term, in which event such suit shall be deemed not to have accrued
until the expiration of the Term.
(g) The Lessor may retain and apply against the Lessor's damages
all sums which the Lessor would, absent such Event of Default, be required
to pay to, or turn over to, the Lessee pursuant to the terms of this Lease.
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(h) If an Event of Default shall have occurred and so long as
same is continuing, the Lessor, as a matter of right and without notice to
the Lessee, and without regard to the value of the Property or the solvency
of the Lessee, shall have the right to apply to any court having
jurisdiction to appoint a receiver or receivers of the Property, and the
Lessee hereby irrevocably consents to any such appointment. Any such
receiver(s) shall have all of the usual powers and duties of receivers in
like or similar cases and all of the powers and duties of the Lessor in
case of entry, and shall continue as such and exercise such powers until
the date of confirmation of the sale of the Property unless such
receivership is sooner terminated.
(i) To the maximum extent permitted by law, the Lessee hereby
waives the benefit of any appraisement, valuation, stay, extension,
reinstatement and redemption laws now or hereafter in force and all rights
of marshaling in the event of any sale of any or all of the Property or any
interest therein.
(j) The Lessor shall be entitled to enforce payment of the
indebtedness and performance of the obligations secured hereby and to
exercise all rights and powers under this instrument or under any of the
other Operative Documents or other agreement or any laws now or hereafter
in force, notwithstanding some or all of the obligations secured hereby may
now or hereafter be otherwise secured, whether by mortgage, security
agreement, pledge, lien, assignment or otherwise. Neither the acceptance of
this instrument nor its enforcement, shall prejudice or in any manner
affect the Lessor's right to realize upon or enforce any other security now
or hereafter held by the Lessor, it being agreed that the Lessor shall be
entitled to enforce this instrument and any other security now or hereafter
held by the Lessor in such order and manner as the Lessor may determine in
its absolute discretion. No remedy herein conferred upon or reserved to the
Lessor is intended to be exclusive of any other remedy herein or by law
provided or permitted, but each shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter existing
at law or in equity or by statute. Every power or remedy given by any of
the Operative Documents to the Lessor or to which it may otherwise be
entitled, may be exercised, concurrently or independently, from time to
time and as often as may be deemed expedient by the Lessor.
(k) The Lessor may exercise any and all rights under (a) the
Certificate Pledge Agreement against Certificate A and/or (b) the
Securities Pledge Agreement against the Pledged Securities, and the
collateral represented thereby.
In no event shall the Lessor, in the exercise of the remedies provided in this
instrument (including, without limitation, in connection with the assignment of
rents to Lessor, or the appointment of a receiver and the entry of such receiver
on to all or any part of the Property), be deemed a "mortgagee in possession,"
and the Lessor shall not in any way be made liable for any act, either of
commission or omission, in connection with the exercise of such remedies.
If, pursuant to the exercise by the Lessor of its remedies pursuant to this
Section 20.2, the Lease Balance, all other amounts due and owing from the Lessee
under this Lease and the other Operative Documents have been paid in full, then
the Lessor shall remit to the Lessee any excess amounts received by the Lessor.
20.3. Waiver of Certain Rights. If this Lease shall be terminated
pursuant to Section 20.2, the Lessee waives, to the fullest extent permitted by
law, (a) any notice of re-entry or the institution of legal
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proceedings to obtain re-entry or possession; (b) any right of redemption, re-
entry or repossession; (c) the benefit of any laws now or hereafter in force
exempting property from liability for rent or for debt or limiting the Lessor
with respect to the election of remedies; and (d) any other rights which might
otherwise limit or modify any of the Lessor's rights or remedies under this
Article XX.
ARTICLE XXI
LESSOR ASSIGNMENT
21.1. Assignment. The Lessee hereby consents to the Lessor's assignment
of this Lease to the Lender and the Lender and the Lessee acknowledge that the
Lender is a third party beneficiary of this Lease. Lessor hereby assigns to
Lessee all Lessor's right, title and interest in and to the Excess Proceeds
described in clause (iii) of the definition thereof and agrees that if Lessor
receives any of such Excess Proceeds it shall remit such Excess Proceeds to
Lender.
ARTICLE XXII
PURCHASE PROVISIONS
22.1. Purchase Option. Provided that the Lessee shall not have given
notice of its intention to exercise the Remarketing Option, the Lessee shall
have the option on any Payment Date (a) after the second anniversary of the
Start-Up Day (exercisable by giving the Lessor irrevocable written notice (the
"Purchase Notice") of the Lessee's election to exercise such option) to purchase
all, and not less than all, of the Property on the date specified in such
Purchase Notice at a price equal to the Lease Balance theretofore accruing or
(b) to pay the Lessor the Equity Balance and reduce the amount of the Lease
Balance by the amount paid. The Lessee shall deliver the Purchase Notice to the
Lessor not less than thirty (30) days prior to such purchase or payment of the
Equity Balance. If the Lessee exercises its option to purchase the Property
pursuant to Section 22.1(a) (the "Purchase Option"), the Lessor shall transfer
to the Lessee or its designee all of the Lessor's right, title and interest in
and to the Property as of the date specified in the Purchase Notice upon receipt
of the Lease Balance in accordance with Section 25.1. Subject to Section 12.4
and with the consent of the Lessor the Lessee may assign the Purchase Option to
any Person. The Lessee may designate, in a notice given to the Lessor not less
than five (5) Business Days prior to the closing of such purchase (time being of
the essence), the transferee or transferees to whom the conveyance shall be made
(if other than to the Lessee), in which case such conveyance shall (subject to
the terms and conditions set forth herein) be made to such designee; provided,
however, that such designation of a transferee or transferees shall not cause
the Lessee to be released, fully or partially, from any of its obligations under
this Lease, including, without limitation, the obligation to pay the Lessor the
Lease Balance on the Expiration Date.
ARTICLE XXIII
RENEWAL PROCEDURES
23.1. Renewal. Subject to the conditions set forth herein, the Lessee and
the Lessor may agree to renew the Base Lease Term for the Property for up to
seven one-year terms (each, a "Renewal Term"), with each such Renewal Term to
commence on the first day following the Expiration Date then in effect. The
effective extension of the Base Lease Term for the Property shall be subject to
the satisfaction of each of the following conditions:
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(a) each renewal shall be automatic unless on or before one
hundred eighty (180) days prior to the Expiration Date the Lessee shall
have delivered written notice to the Lessor of the Lessee's determination
not to extend the Base Lease Term for the Property;
(b) on the Expiration Date then in effect prior to any renewal,
no Event of Default shall have occurred and be continuing; and
(c) the Lessee shall not have given notice of its intention to
exercise the Remarketing Option.
ARTICLE XXIV
REMARKETING OPTION
24.1. Option to Remarket. Subject to the fulfillment of each of the
conditions set forth in this Section 24.1, the Lessee shall have the option
beginning on the second anniversary of the Start-Up Day (the "Remarketing
Option") to market and complete the sale of the Property for the Lessor.
The Lessee's effective exercise and consummation of the Remarketing Option
shall be subject to the due and timely fulfillment of each of the following
provisions as to the Property as of the dates set forth below.
(a) Not later than one hundred eighty (180) days prior to the
Expiration Date, the Lessee shall give to the Lessor written notice of the
Lessee's exercise of the Remarketing Option, which exercise shall be
irrevocable. If Lessee does not deliver a notice of its intention not to
renew this Lease as provided in Section 23.1 and fails to timely provide
the Remarketing Notice, then this Lease shall be renewed for a Renewal Term
as provided in Section 23.1. If Lessee delivers the notice of its intention
not to renew this Lease as provided in Section 23.1 and fails to timely
provide the Remarketing Notice, then Lessee shall be deemed to have elected
to exercise its Purchase Option under Section 22.1(i).
(b) Not later than one hundred twenty (120) days prior to the
Expiration Date, the Lessee shall deliver to the Lessor an Environmental
Audit for the Property. Such Environmental Audit shall be prepared by an
environmental consultant selected by the Lessor in the Lessor's reasonable
discretion and shall contain conclusions reasonably satisfactory to the
Lessor as to the environmental status of the Property. If any such
Environmental Audit indicates any exceptions with respect to which a Phase
Two environment assessment is recommended, the Lessee shall also deliver
(i) a Phase Two environmental assessment by such environmental consultant
within thirty (30) days prior to the Expiration Date and (ii) a certificate
of such environmental consultant prior to the Expiration Date showing the
completion of all remedial action in compliance with Applicable Law.
(c) On the date of the Lessee's notice to the Lessor of the
Lessee's exercise of the Remarketing Option, and on the Expiration Date, no
Event of Default shall exist.
(d) The Lessee shall have completed in all Material respects all
Modifications, restoration and rebuilding of the Property pursuant to
Sections 14.1 and 18.1 (as the case may be) and shall have fulfilled in all
Material respects all of the conditions and requirements in
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connection therewith pursuant to said Sections, in each case by the date on
which the Lessor receives the Lessee's notice of the Lessee's exercise of
the Remarketing Option (time being of the essence), regardless of whether
the same shall be within the Lessee's control. The Lessee shall have also
paid the cost of all Modifications commenced prior to the Expiration Date.
The Lessee shall not have been excused pursuant to Section 16.1 from
complying with any Applicable Law that involved the extension of the
ultimate imposition of such Applicable Law beyond the last day of the Term.
Any Permitted Liens (other than Lessor Liens) on the Property that were
contested by the Lessee shall have been removed.
(e) During the Marketing Period, the Lessee shall, as
nonexclusive agent for the Lessor, use best efforts to sell the Lessor's
interest in the Property and will attempt to obtain the highest purchase
price therefor and for not less than the Fair Market Sales Value of the
Property. The Lessee will be responsible for hiring brokers and making the
Property available for inspection by prospective purchasers. The Lessee
shall promptly upon request permit inspection of the Property and any
maintenance records relating to the Property by the Lessor and any
potential purchasers, and shall otherwise do all things reasonably
necessary to sell and deliver possession of the Property to any purchaser.
All such marketing of the Property shall be at the Lessee's sole expense.
The Lessee shall allow the Lessor and any potential qualified purchaser
reasonable access to the Property for the purpose of inspecting the same.
(f) The Lessee shall submit all bids to the Lessor, and the
Lessor will have the right to submit any one or more bids. The Lessee shall
deliver to the Lessor, not less than thirty (30) days prior to the
Expiration Date, binding written unconditional (except as set forth below),
irrevocable offer or offers by such purchaser or purchasers offering the
highest bid to purchase the Property. No such purchaser shall be the Lessee
or an Affiliate of the Lessee. The written offer must specify the
Expiration Date as the closing date unless the Lessor shall otherwise agree
in its reasonable discretion. Any sale by the Lessee shall be for the
highest cash bid submitted to the Lessor. The determination of the highest
bid shall be made by the Lessor prior to the end of the Marketing Period,
but in any event, the Lessor shall have no obligation to approve any bid
unless the aggregate amount of the highest bids for the Property equals or
exceeds an amount equal to the Lease Balance minus the Contingent Rental
Adjustment determined as of the Expiration Date. All bids shall be on an
all-cash basis unless the Lessor shall otherwise agree in its sole
discretion.
(g) In connection with any such sale of the Property, the Lessee
will provide to each Purchaser all customary "seller's" indemnities,
representations and warranties regarding absence of Liens (other than
Lessor Liens) and the condition of the Property. The Lessee shall have
obtained, at its cost and expense, all required governmental and regulatory
consents and approvals and shall have made all filings as required by
Applicable Law in order to carry out and complete the transfer of the
Property. As to the Lessor, any such sale shall be made on an "as is, with
all faults" basis without representation or warranty by the Lessor other
than the absence of Lessor Liens. Any agreement as to such sale shall be
made subject to the Lessor's rights hereunder.
(h) The Lessee shall pay directly, and not from the sale
proceeds, all prorations, credits, costs and expenses of the sale of the
Property, whether incurred by the Lessor or the Lessee, including without
limitation, the cost of all title insurance, surveys, environmental
reports, appraisals, transfer taxes, the Lessor's reasonable attorneys'
fees, the Lessee's attorneys' fees,
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commissions, escrow fees, recording fees, and all applicable documentary
and other transfer taxes.
(i) The Lessee shall pay to the Lessor on or prior to the
Expiration Date (or to such other Person as the Lessor shall notify the
Lessee in writing) an amount equal to the Contingent Rental Adjustment for
the Property plus all Basic Rent and all other amounts hereunder which have
accrued or will accrue prior to or as of the Expiration Date or such other
closing date approved by the parties, in the type of funds specified in
Section 7.4 hereof.
(j) The Lessee shall pay to the Lessor on or prior to the
Expiration Date the amounts, if any, required to be paid pursuant to
Section 26.2 hereof.
(k) If the Lessor approves any bid for the Property, the
purchase of the Property shall be consummated on or before the Expiration
Date and the gross proceeds (the "Gross Proceeds") of the sale of the
Property, less the documented expenses incurred by the Lessee under clause
(h) shall be paid directly to the Lessor; provided, however, that if the
sum of (x) the remaining Gross Proceeds from such sale or sales plus (y)
the Contingent Rental Adjustment received by the Lessor pursuant to clause
(i) plus (z) amounts received by the Lessor pursuant to Section 26.2 hereof
exceeds the Lease Balance as of such date, then the excess shall be paid to
Lender to be applied in accordance with the Nomura Loan Agreement and the
Mezzanine Loan Agreement on the Expiration Date or such other closing date
approved by the parties.
(l) All reconstruction, refurbishment and repair to the Property
resulting from a Casualty or Condemnation shall have been completed prior
to the end of the Marketing Period.
If one or more of the foregoing provisions shall not be fulfilled as of the
date set forth above with respect to the Property, then the Lessor shall declare
by written notice to the Lessee the Remarketing Option to be null and void
(whether or not it has been theretofore exercised by the Lessee), in which event
all of the Lessee's rights under this Section 24.1 shall immediately terminate
and the Lessee shall be obligated to purchase the Property pursuant to Section
22.1 on the Expiration Date. Notwithstanding anything in this Lease to the
contrary, in the event that the second anniversary of the Start-Up Day has not
occurred prior to the Expiration Date, the Lessee shall pay the Equity Balance
to the Lessor on the Expiration Date.
If the Lessee effectively elects the Remarketing Option and no sale of the
Property is consummated prior to the end of the Marketing Period, the Lessee
shall, in addition to making the payment required pursuant to Section 24.1(i)
above, return the Property to the Lessor (or to any other Person specified by
the Lessor). In connection with any such return of the Property, the Lessee
shall, at its own cost and expense, do each of the following:
(i) the Lessee shall, on or prior to the Expiration Date,
execute and deliver to the Lessor (or to the Lessor's designee) (A) a deed
with respect to the Property containing representations and warranties of
grantor to the Lessor (or such other Person) regarding the absence of Liens
(other than Permitted Liens of the type described in clauses (i) and (iii)
of the definition thereof), (B) a bill of sale with respect to any
Equipment then located on the Property and (C) an assignment of the
Lessee's entire interest in the Property (which shall include an assignment
of all of the Lessee's right, title and interest in and to any Net Proceeds
with respect to the Property not previously received by the Lessee and an
assignment of leases of the Property), in each case
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in recordable form and otherwise in conformity with local custom and free
and clear of any Liens attributable to the Lessee;
(ii) the Lessee shall execute and deliver to Lessor and the
Lessor's title insurance company an affidavit as to the absence of any
Liens (other than Permitted Liens of the type described in clauses (i) and
(iii) of the definition thereof) and shall execute and deliver to the
Lessor a statement of termination of this Lease to the extent relating to
the Property;
(iii) the Lessee shall, on the Expiration Date, transfer
possession of the Property to the Lessor or any Person designated by the
Lessor, by surrendering the same into the possession of the Lessor or such
Person, as the case may be, in the condition required by this Section 24.1
and in compliance with Applicable Law;
(iv) the Lessee shall, for a period of up to one year after the
Expiration Date, cooperate reasonably with the Lessor and/or any Person
designated by the Lessor to receive the Property, which cooperation shall
include reasonable efforts with respect to the following, all of which the
Lessee shall do on or before the Expiration Date or as soon thereafter as
is reasonably practicable: providing copies of all books and records
regarding the maintenance and ownership of the Property and all know-how,
data and technical information relating thereto, granting or assigning all
licenses necessary for the operation and maintenance of the Property and
cooperating reasonably in seeking and obtaining all necessary Governmental
Action. The obligations of the Lessee under this paragraph shall survive
the expiration or termination of this Lease; and
(v) no subleases with respect to the Property or any portion
thereof shall be in effect on the Expiration Date.
Except as expressly set forth herein, the Lessee shall have no right, power
or authority to bind the Lessor in connection with any proposed sale or sales of
the Property.
24.2. Certain Obligations Continue. During the Marketing Period, the
obligation of the Lessee to pay Rent shall continue undiminished until payment
in full to the Lessor of the Contingent Rental Adjustment and all other amounts
due to the Lessor by Lessee under the Operative Documents to which the Lessee is
a party. The Lessor shall have the right, but shall be under no duty, to solicit
bids, to inquire into the efforts of the Lessee to obtain bids or otherwise to
take action in connection with any such sale, other than as expressly provided
in this Article XXIV.
ARTICLE XXV
PROCEDURES RELATING TO PURCHASE OR REMARKETING
25.1. Provisions Relating to the Exercise of Purchase Option and
Conveyance Upon Remarketing and Conveyance Upon Certain Other Events. In
connection with the Lessee's exercise of its Purchase Option, upon the
Expiration Date or the purchase of the Property under Article XIX or Section
20.2(e) or 24.1 hereof and upon tender by the Lessee of the amounts set forth in
Article XIX, Section 20.2(e) or 22.1(a) or 24.1 hereof, as applicable:
(i) the Lessor shall execute and deliver to the Lessee (or to
the Lessee's designee) at the Lessee's cost and expense a limited warranty
deed (with covenants against grantor acts) with
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respect to the Property, a limited warranty bill of sale (with covenants
against grantor acts) with respect to any Equipment and an assignment of
the Lessor's entire interest in the Property (which shall include an
assignment of all of the Lessor's right, title and interest in and to any
Net Proceeds not previously received by the Lessor, and an assignment of
leases of the Property and any security deposits collected by the Lessor),
in each case in recordable form and otherwise in conformity with local
custom and free and clear of any Lessor Liens attributable to the Lessor;
(ii) the Property shall be conveyed to the Lessee "AS IS" and in its
then present physical condition;
(iii) the Lessor shall execute and deliver to Lessee and the Lessee's
title insurance company an affidavit as to the Lessor's title and the
absence of Lessor Liens; and
(iv) the Lessor shall execute such other documents reasonably
requested by the Lessee, or otherwise required under local law, to effect a
transfer of the Property and title thereto and any owner's title insurance
policy issued in the name of the Lessor.
ARTICLE XXVI
INDEMNIFICATION
26.1. General Indemnification. The Lessee agrees, whether or not any of
the transactions contemplated hereby shall be consummated, to assume liability
for, and to indemnify, protect, defend, save and keep harmless each Indemnitee,
on an After Tax Basis, from and against, any and all Claims that may be imposed
on, incurred by or asserted against such Indemnitee (whether because of action
or omission by such Indemnitee or otherwise), whether or not such Indemnitee
shall also be indemnified as to any such Claim by any other Person and whether
or not such Claim arises or accrues prior to the Documentation Date or after the
Expiration Date, in any way relating to or arising out of:
(a) any of the Operative Documents or any of the transactions
contemplated thereby, and any amendment, modification or waiver in respect
thereof;
(b) the Property or any part thereof or interest therein;
(c) the purchase, design, construction, preparation, installation,
inspection, delivery, non-delivery, acceptance, rejection, ownership,
management, possession, operation, rental, lease, sublease, repossession,
maintenance, repair, alteration, modification, addition or substitution,
storage, transfer of title, redelivery, use, financing, refinancing,
disposition, operation, condition, sale (including, without limitation, any
sale pursuant to any provision hereof), return or other disposition of all
or any part or any interest in the Property or the imposition of any Lien
other than a Lessor Lien (or incurring of any liability to refund or pay
over any amount as a result of any Lien other than a Lessor Lien) thereon,
including, without limitation: (1) Claims or penalties arising from any
violation of law or in tort (strict liability or otherwise), (2) latent or
other defects, whether or not discoverable, (3) any Claim based upon a
violation or alleged violation of the terms of any restriction, easement,
condition or covenant or other matter affecting title to the Property, (4)
the making of any Modifications in violation of any standards imposed by
any insurance policies required to be maintained by the Lessee pursuant to
this Lease which are in effect at any time with respect to the Property or
any part thereof, (5) any Claim for patent,
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trademark or copyright infringement, and (6) Claims arising from any public
improvements with respect to the Property resulting in any change or
special assessments being levied against the Property or any plans to
widen, modify or realign any street or highway adjacent to the Property, or
any Claim for utility "tap-in" fees;
(d) the breach by the Lessee of any covenant, representation or
warranty made by it or deemed made by it in any Operative Document or any
certificate required to be delivered by any Operative Document;
(e) the retaining or employment of any broker, finder or financial
advisor by the Lessee to act on its behalf in connection with the
transactions contemplated hereby;
(f) the existence of any Lien on or with respect to the Property, any
Improvements, or Basic Rent or Supplemental Rent, title thereto, or any
interest therein including any Liens which arise out of the possession,
use, occupancy, construction, repair or rebuilding of the Property or by
reason of labor or materials furnished or claimed to have been furnished to
the Lessee, or any of its contractors or agents or by reason of the
financing of any personalty or equipment purchased or leased by the Lessee
or Modifications constructed by the Lessee, except with respect to any of
the foregoing Lessor Liens and Liens in favor of the Lessor; or
(g) subject to the accuracy of Lessor's representation set forth in
Section 6.1(a), the transactions contemplated by this Lease or by any other
Operative Document, in respect of the application of Parts 4 and 5 of
Subtitle B of Title I of ERISA and any prohibited transaction described in
Section 4975(c) of the Code;
provided, however, the Lessee shall not be required to indemnify any Indemnitee
under this Section 26.1 for any of the following: (1) any Claim to the extent
resulting from the willful misconduct or gross negligence of such Indemnitee (it
being understood that the Lessee shall be required to indemnify an Indemnitee
even if the ordinary (but not gross) negligence of such Indemnitee caused or
contributed to such Claim) or the breach of any representation, warranty or
covenant of such Indemnitee set forth in any Operative Document, (2) any Claim
resulting from Lessor Liens which the Lessor is responsible for discharging
under the Operative Documents, (3) any Claim to the extent attributable to acts
or events occurring after the expiration of the Term or the return or
remarketing of the Property so long as the Lessor is not exercising remedies
against the Lessee in respect of the Operative Documents, and (4) any Claim
arising from a breach or alleged breach by the Lessor of any agreement entered
into in connection with the assignment or participation of Rent. It is
expressly understood and agreed that the indemnity provided for herein shall
survive the expiration or termination of and shall be separate and independent
from any remedy under this Lease or any other Operative Document. Without
limiting the express rights of any Indemnitee under this Section 26.1, this
Section 26.1 shall be construed as an indemnity only and not a guaranty of
residual value of the Property.
26.2. End of Term Indemnity.
(a) If the Lessee elects the Remarketing Option and there would,
after giving effect, to the proposed remarketing transactions, be a
Shortfall Amount, then prior to the Expiration Date and as a condition to
the Lessee's right to complete the remarketing of the Property pursuant to
Section 24.1, the Lessee shall cause to be delivered to the Lessor at least
thirty (30) days prior to the Expiration Date, at the Lessee's sole cost
and expense, a report from an appraiser selected by
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the Lessor and reasonably satisfactory to the Lessee in form and substance
satisfactory to the Lessor (the "End of the Term Report") which shall state
the appraiser's conclusions as to the reason for any decline in the Fair
Market Sales Value of the Property from that anticipated for such date in
the Appraisal delivered on the Acquisition Date.
(b) If the Lessee elects the Remarketing Option, then on or prior to
the Expiration Date, the Lessee shall pay to the Lessor an amount (not to
exceed the Shortfall Amount) equal to the portion of the Shortfall Amount
that the End of the Term Report demonstrates was the result of a decline in
the Fair Market Sales Value of the Property due to
(i) extraordinary use, failure to maintain, to repair, to
restore, to rebuild or to replace, failure to comply with all
applicable laws, failure to use, workmanship, method of installation
or removal or maintenance, repair, rebuilding or replacement,
(excepting in each case ordinary wear and tear), or
(ii) with respect to the Property, any Modification made to, or
any rebuilding of, the Property or any part thereof by the Lessee, or
(iii) the existence of any Environmental Violations, or
(iv) any restoration or rebuilding carried out by the Lessee,
or
(v) any use of the Property or any part thereof by the Lessee
other than as permitted under this Lease, or
(vi) any grant, release, dedication, transfer or amendment made
pursuant to Section 15.2, or
(vii) the failure of the Lessor to have title to the Property
free and clear of all Liens (excluding Permitted Liens).
26.3. Environmental Indemnity. Without limitation of the other
provisions of this Article XXVI, the Lessee hereby agrees to indemnify, hold
harmless and defend each Indemnitee from and against any and all claims
(including without limitation third party claims for personal injury or real or
personal property damage), losses (including but not limited to, to the extent
the Lease Balance has not been fully paid, any loss of value of the Property),
damages, liabilities, fines, penalties, charges, administrative and judicial
proceedings (including informal proceedings) and orders, judgments, remedial
action, requirements, enforcement actions of any kind, and all reasonable and
documented costs and expenses incurred in connection therewith (including but
not limited to reasonable and documented attorneys' and/or paralegals' fees and
expenses), including, but not limited to, all costs incurred in connection with
any investigation or monitoring of site conditions or any clean-up, remedial,
removal or restoration work by any federal, state or local government agency,
arising in whole or in part, out of
(a) the presence on or under the Property of any Hazardous Substance
in violation of Environmental Law, or any releases or discharges of any
Hazardous Substance on, under, from or onto the Property in violation of
Environmental Law,
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(b) any activity, including, without limitation, construction,
carried on or undertaken on or off the Property, and whether by the Lessee
or any predecessor in title or any employees, agents, contractors or
subcontractors of the Lessee or any predecessor in title, or any other
Persons (including such Indemnitee), in connection with the handling,
treatment, removal, storage, decontamination, clean-up, transport or
disposal of any Hazardous Substances in violation of Environmental Law that
at any time are located or present on or under or that at any time migrate,
flow, percolate, diffuse or in any way move onto or under the Property,
(c) loss of or damage to any property or the environment (including,
without limitation, clean-up costs, response costs, remediation and removal
costs, cost of corrective action, costs of financial assurance, fines and
penalties and natural resource damages), or death or injury to any Person,
and all expenses associated with the protection of wildlife, aquatic
species, vegetation, flora and fauna, and any mitigative action required by
or under Environmental Laws,
(d) any claim concerning lack of compliance with Environmental Laws,
or any act or omission causing an environmental condition that requires
remediation or would allow any Governmental Authority to record a Lien on
the land records, or
(e) any residual contamination on or under the Land, or affecting any
natural resources, and to any contamination of any property or natural
resources arising in connection with the generation, use, handling,
storage, transport or disposal of any such Hazardous Substances, and
irrespective of whether any of such activities were or will be undertaken
in accordance with applicable laws, regulations, codes and ordinances;
provided, however, the Lessee shall not be required to indemnify any Indemnitee
under this Section 26.3 for (1) any Claim to the extent resulting from the
willful misconduct or gross negligence of such Indemnitee (it being understood
that, unless the applicable Indemnitee was in possession of the Property and
caused the Claim, the Lessee shall be required to indemnify an Indemnitee even
if the ordinary (but not gross) negligence of such Indemnitee caused or
contributed to such Claim) or (2) any Claim to the extent attributable to acts
or events occurring after the expiration of the Term or the return or
remarketing of the Property so long as the Lessor is not exercising remedies
against the Lessee in respect of the Operative Documents. It is expressly
understood and agreed that the indemnity provided for herein shall survive the
expiration or termination of and shall be separate and independent from any
remedy under this Lease or any other Operative Document.
26.4. Proceedings in Respect of Claims. With respect to any amount that
the Lessee is requested by an Indemnitee to pay by reason of Section 26.1 or
26.3, such Indemnitee shall, if so requested by the Lessee and prior to any
payment, submit such additional information to the Lessee as the Lessee may
reasonably request and which is in the possession of such Indemnitee to
substantiate properly the requested payment.
In case any action, suit or proceeding shall be brought against any
Indemnitee, such Indemnitee shall promptly notify the Lessee of the commencement
thereof, and the Lessee shall be entitled, at its expense, to participate in,
and, to the extent that the Lessee desires to, assume and control the defense
thereof; provided, however, that the Lessee shall not have any increased
liability as a direct result of an Indemnitee's failure to provide such notice
promptly; provided, further, that the Lessee shall have acknowledged in writing
its obligation to fully indemnify such Indemnitee in respect of such action,
suit or proceeding, and, the Lessee shall keep such Indemnitee fully apprised of
the status of such action, suit
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or proceeding and shall provide such Indemnitee with all information with
respect to such action, suit or proceeding as such Indemnitee shall reasonably
request, and provided, further, that the Lessee shall not be entitled to assume
and control the defense of any such action, suit or proceeding if and to the
extent that, (A) in the reasonable opinion of such Indemnitee, (x) such action,
suit or proceeding involves any risk of imposition of criminal liability or any
risk of imposition of material civil liability on such Indemnitee or will
involve a material risk of the sale, forfeiture or loss of, or the creation of
any Lien (other than a Permitted Lien or Lessor Lien) on the Property or any
part thereof unless, in the case of civil liability, the Lessee shall have
posted a bond or other security reasonably satisfactory to the relevant
Indemnitees in respect to such risk or (y) the control of such action, suit or
proceeding would involve an actual or potential conflict of interest, (B) such
proceeding involves Claims not fully indemnified by the Lessee which the Lessee
and the Indemnitee have been unable to sever from the indemnified claim(s), or
(C) an Event of Default has occurred and is continuing. The Indemnitee may
participate in a reasonable manner at its own expense and with its own counsel
in any proceeding conducted by the Lessee in accordance with the foregoing. The
Lessee shall not enter into any settlement or other compromise with respect to
any Claim which is entitled to be indemnified under Section 26.1 or 26.3 without
the prior written consent of the Indemnitee which consent shall not be
unreasonably withheld in the case of a money settlement not involving an
admission of liability of such Indemnitee; provided, however, that in the event
that such Indemnitee withholds consent to any settlement or other compromise,
the Lessee shall not be required to indemnify such Indemnitee under Section 26.1
or 26.3 to the extent that the applicable Claim (x) is for legal fees and
expenses incurred after the date of the proposed settlement or (y) results in a
judgment in excess of such offered money settlement.
Each Indemnitee shall at the expense of the Lessee supply the Lessee with
such information and documents reasonably requested by the Lessee as are
necessary or advisable for the Lessee to participate in any action, suit or
proceeding to the extent permitted by Section 26.1 or 26.3. Unless an Event of
Default shall have occurred and be continuing, no Indemnitee shall enter into
any settlement or other compromise with respect to any Claim which is entitled
to be indemnified under Section 26.1 or 26.3 without the prior written consent
of the Lessee, which consent shall not be unreasonably withheld, unless such
Indemnitee waives its right to be indemnified under Section 26.1 or 26.3 with
respect to such Claim.
Upon payment in full of any Claim by the Lessee pursuant to Section 26.1 or
26.3 to or on behalf of an Indemnitee, the Lessee, without any further action,
shall be subrogated to any and all claims that such Indemnitee may have relating
thereto (other than claims in respect of insurance policies maintained by such
Indemnitee at its own expense), and such Indemnitee shall execute such
instruments of assignment and conveyance, evidence of claims and payment and
such other documents, instruments and agreements as may be necessary to preserve
any such claims and otherwise cooperate with the Lessee and give such further
assurances as are necessary or advisable to enable the Lessee vigorously to
pursue such claims.
Any amount payable to an Indemnitee pursuant to Section 26.1 or 26.3 shall
be paid to such Indemnitee within ten (10) Business Days after receipt of a
written demand therefor from such Indemnitee, accompanied by a written statement
describing in reasonable detail the basis for such indemnity and the computation
of the amount so payable and, if requested by the Lessee, such determination
shall be verified by a nationally recognized independent accounting firm
mutually acceptable to the Lessee and the Indemnitee at the expense of the
Lessee; provided, however, that if the Lessee has assumed the defense of the
related Claim or is paying the costs of the Indemnitee's defense of the related
claim on an ongoing basis, the Lessee shall not be required to pay such amount
to the applicable Indemnitee until such time as a judgment is entered with
respect to such Claim, the
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enforcement of which is not stayed or which judgment is not bonded over, or the
Claim is otherwise settled or lost. To the extent the Lessee suffers any losses
or damages as a result of an Indemnitee's failure to provide the Lessee with
prompt notice of the commencement of any action, suit or proceeding against any
Indemnitee in accordance with the first sentence of the second paragraph of this
Section 26.4, the amounts of such losses or damages may be offset against the
Lessee's indemnification obligation to such Indemnitee.
26.5. General Tax Indemnity.
(a) Indemnification. The Lessee shall pay and assume liability for,
and does hereby agree to indemnify, protect and defend the Property and all
Tax Indemnitees, and hold them harmless against, all Impositions on an
After Tax Basis.
(b) Contests. If any claim shall be made against any Tax Indemnitee
or if any proceeding shall be commenced against any Tax Indemnitee
(including a written notice of such proceeding) for any Imposition as to
which the Lessee may have an indemnity obligation pursuant to this Section
26.5, or if any Tax Indemnitee shall determine that any Imposition to which
the Lessee may have an indemnity obligation pursuant to this Section 26.5
may be payable, such Tax Indemnitee shall promptly (and in any event,
within 30 days) notify the Lessee in writing (provided that failure to so
notify the Lessee within 30 days shall not alter such Tax Indemnitee's
rights under this Section 26.5 except to the extent such failure precludes
or materially adversely affects the ability to conduct a contest of any
indemnified Taxes) and shall not take any action with respect to such
claim, proceeding or Imposition without the written consent of the Lessee
(such consent not to be unreasonably withheld or unreasonably delayed) for
30 days after the receipt of such notice by the Lessee; provided, however,
that in the case of any such claim or proceeding, if such Tax Indemnitee
shall be required by law or regulation to take action prior to the end of
such 30-day period, such Tax Indemnitee shall in such notice to the Lessee,
so inform the Lessee, and such Tax Indemnitee shall not take any action
with respect to such claim, proceeding or Imposition without the consent of
the Lessee (such consent not to be unreasonably withheld or unreasonably
delayed) for 10 days after the receipt of such notice by the Lessee unless
the Tax Indemnitee shall be required by law or regulation to take action
prior to the end of such 10-day period.
The Lessee shall be entitled for a period of 30 days from receipt of
such notice from the Tax Indemnitee (or such shorter period as the Tax
Indemnitee has notified the Lessee is required by law or regulation for the
Tax Indemnitee to commence such contest), to request in writing that such
Tax Indemnitee contest the imposition of such Tax, at the Lessee's expense.
If (x) such contest can be pursued in the name of the Lessee and
independently from any other proceeding involving a Tax liability of such
Tax Indemnitee for which the Lessee has not agreed to indemnify such Tax
Indemnitee, (y) such contest must be pursued in the name of the Tax
Indemnitee, but can be pursued independently from any other proceeding
involving a Tax liability of such Tax Indemnitee for which the Lessee has
not agreed to indemnify such Tax Indemnitee or (z) the Tax Indemnitee so
requests, then the Lessee shall be permitted to control the contest of such
claim, provided that in the case of a contest described in clause (y), if
the Tax Indemnitee determines in good faith that such contest by the Lessee
could have a material adverse impact on the business or operations of the
Tax Indemnitee and provides a written explanation to the Lessee of such
determination, the Tax Indemnitee may elect to control or reassert control
of the contest, and provided, that by taking control of the contest, Lessee
acknowledges that it is
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responsible for the Imposition ultimately determined to be due by reason of
such claim, and provided, further, that in determining the application of
clauses (x) and (y) of the preceding sentence, each Tax Indemnitee shall
take any and all reasonable steps to segregate claims for any Taxes for
which the Lessee indemnifies hereunder from Taxes for which the Lessee is
not obligated to indemnify hereunder, so that the Lessee can control the
contest of the former. In all other claims requested to be contested by the
Lessee, the Tax Indemnitee shall control the contest of such claim, acting
through counsel reasonably acceptable to the Lessee. In no event shall the
Lessee be permitted to contest (or the Tax Indemnitee required to contest)
any claim, (A) if such Tax Indemnitee provides the Lessee with a legal
opinion of counsel reasonably acceptable to the Lessee that such action,
suit or proceeding involves a risk of imposition of criminal liability or
will involve a material risk of the sale, forfeiture or loss of, or the
creation of any Lien (other than a Permitted Lien or Lessor Lien) on the
Property or any part of any thereof unless the Lessee shall have posted and
maintained a bond or other security reasonably satisfactory to the relevant
Tax Indemnitee in respect to such risk, (B) if an Event of Default has
occurred and is continuing unless the Lessee shall have posted and
maintained a bond or other security reasonably satisfactory to the relevant
Tax Indemnitee in respect of the Taxes subject to such claim and any and
all expenses for which the Lessee is responsible hereunder reasonably
foreseeable in connection with the contest of such claim, (C) unless the
Lessee shall have agreed to pay and shall pay, to such Tax Indemnitee
within ten (10) Business Days after demand all reasonable out-of-pocket
costs, losses and expenses that such Tax Indemnitee may incur in connection
with contesting such Imposition including all reasonable legal, accounting
and investigatory fees and disbursements, or (D) if such contest shall
involve the payment of the Tax prior to the contest, unless the Lessee
shall provide to the Tax Indemnitee an interest-free advance in an amount
equal to the Imposition that the Indemnitee is required to pay (with no
additional net after-tax costs to such Tax Indemnitee). In addition for Tax
Indemnitee controlled contests and claims contested in the name of the Tax
Indemnitee in a public forum, no contest shall be required: (A) unless the
amount of the potential indemnity (taking into account all similar or
logically related claims that have been or could be raised in any audit
involving such Tax Indemnitee for which the Lessee may be liable to pay an
indemnity under this Section 26.5(b)) exceeds $500,000 and (B) unless, if
requested by the Tax Indemnitee, the Lessee shall have provided to the Tax
Indemnitee an opinion of counsel selected by the Lessee (which may be in-
house counsel) (except, in the case of income taxes indemnified hereunder
which shall be an opinion of independent tax counsel selected by the Tax
Indemnitee and reasonably acceptable to the Lessee) that a reasonable basis
exists to contest such claim. In no event shall a Tax Indemnitee be
required to appeal an adverse judicial determination to the United States
Supreme Court.
The party conducting the contest shall consult in good faith with the
other party and its counsel with respect to the contest of such claim for
Taxes (or claim for refund) but the decisions regarding what actions to be
taken shall be made by the controlling party in its sole judgement,
provided, however, that if the Tax Indemnitee is the controlling party and
the Lessee recommends the acceptance of a settlement offer made by the
relevant Governmental Authority and such Tax Indemnitee rejects such
settlement offer then the amount for which the Lessee will be required to
indemnify such Tax Indemnitee with respect to the Taxes subject to such
offer shall not exceed the amount which it would have owed if such
settlement offer had been accepted. In addition, the controlling party
shall keep the noncontrolling party reasonably informed as to the progress
of the contest, and shall provide the noncontrolling party with a copy of
(or appropriate excerpts from) any reports or claims issued by the relevant
auditing agents or taxing authority to the controlling party thereof, in
connection with such claim or the contest thereof.
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Each Tax Indemnitee shall at the Lessee's expense supply the Lessee
with such information and documents reasonably requested by the Lessee as
are necessary or advisable for the Lessee to participate in any action,
suit or proceeding to the extent permitted by this Section 26.5(b). No Tax
Indemnitee shall enter into any settlement or other compromise or fail to
appeal an adverse ruling with respect to any claim which is entitled to be
indemnified under this Section 26.5 (and with respect to which contest is
required under this Section 26.5(b)) without the prior written consent of
the Lessee, unless such Tax Indemnitee waives its right to be indemnified
under this Section 26.5 with respect to such claim.
Notwithstanding anything contained herein to the contrary, a Tax
Indemnitee will not be required to contest (and the Lessee shall not be
permitted to contest) a claim with respect to the imposition of any Tax if
such Tax Indemnitee shall waive its right to indemnification under this
Section 26.5 with respect to such claim (and any claim with respect to such
year or any other taxable year the contest of which is materially adversely
affected as a result of such waiver).
(c) Reimbursement for Tax Savings. If (x) a Tax Indemnitee or any
Affiliate thereof realizes a deduction, offset, credit or refund of any
Taxes or any other savings or benefit as a result of any indemnity paid by
the Lessee pursuant to this Section 26.5 or (y) by reason of the incurrence
or imposition of any Tax (or the circumstances or event giving rise
thereto) for which a Tax Indemnitee is indemnified hereunder or any payment
made to or for the account of such Tax Indemnitee by the Lessee pursuant to
this Section 26.5 or any payment made by a Tax Indemnitee to the Lessee by
reason of this Section 26.5(c), such Tax Indemnitee at any time actually
realizes a reduction in any Taxes for which the Lessee is not required to
indemnify such Tax Indemnitee pursuant to this Section 26.5 which reduction
in Taxes was not taken into account in computing such payment by the Lessee
to or for the account of such Tax Indemnitee or by the Tax Indemnitee to
the Lessee, then such Tax Indemnitee shall promptly pay to the Lessee (xx)
the amount of such deduction, offset, credit, refund, or other savings or
benefit together with the amount of any interest received by such Tax
Indemnitee on account of such deduction, offset, credit, refund or other
savings or benefit or (yy) an amount equal to such reduction in Taxes, as
the case may be, in either case together with an amount equal to any
reduced Taxes payable by such Tax Indemnitee as a result of such payment;
provided that no such payment shall be made so long as a Default or Event
of Default shall have occurred and be continuing but shall be paid promptly
after cure of such Default or Event of Default. Each Tax Indemnitee agrees
to take such actions as the Lessee may reasonably request (provided in the
good faith judgment of the Tax Indemnitee, such actions would not result in
a material adverse effect on the Tax Indemnitee for which the Tax
Indemnitee is not entitled to indemnification from the Lessee) and to
otherwise act in good faith to claim such refunds and other available Tax
benefits, and take such other actions as may be reasonable to minimize any
payment due from the Lessee pursuant to this Section 26.5 and to maximize
the amount of any Tax savings available to it. The disallowance or
reduction of any credit, refund or other tax savings with respect to which
a Tax Indemnitee has made a payment to the Lessee under this Section
26.5(c) shall be treated as a Tax for which the Lessee is obligated to
indemnify such Tax Indemnitee hereunder without regard to the exclusions
set forth in the definition of Impositions except the exclusions set forth
in (iv), (v), (vi), (vii), (ix), (x), (xi), (xiv) and (xvi) of such
definition.
(d) Payments. Any Imposition indemnifiable under this Section 26.5
shall be paid directly when due to the applicable taxing authority if
direct payment is practicable and permitted. If direct payment to the
applicable taxing authority is not permitted or is otherwise not
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made, any amount payable to a Tax Indemnitee pursuant to Section 26.5 shall
be paid within thirty (30) days after receipt of a written demand therefor
from such Tax Indemnitee accompanied by a written statement describing in
reasonable detail the amount so payable, but not before two Business Days
prior to the date that the relevant Taxes are due. Any payments made
pursuant to this Section 26.5 shall be made directly to the Tax Indemnitee
entitled thereto or the Lessee, as the case may be, in immediately
available funds at such bank or to such account as specified by the payee
in written directions to the payor, or, if no such direction shall have
been given, by check of the payor payable to the order of the payee by
certified mail, postage prepaid at its address as set forth in Schedule I
hereto. Upon the request of any Tax Indemnitee with respect to a Tax that
the Lessee is required to pay, the Lessee shall furnish to such Tax
Indemnitee the original or a certified copy of a receipt for the Lessee's
payment of such Tax or such other evidence of payment as is reasonably
acceptable to such Tax Indemnitee.
(e) Reports. In the case of any report, return or statement required
to be filed with respect to any Taxes that are subject to indemnification
under this Section 26.5 and of which the Lessee has knowledge, the Lessee
shall promptly notify the Tax Indemnitee of such requirement and, at the
Lessee's expense (i) if the Lessee is permitted (unless otherwise requested
by the Tax Indemnitee) by Applicable Law, timely file such report, return
or statement in its own name or (ii) if such report, return or statement is
required to be in the name of or filed by such Tax Indemnitee or the Tax
Indemnitee otherwise requests that such report, return or statement for
filing by such Tax Indemnitee in such manner as shall be reasonably
satisfactory to such Tax Indemnitee and send the same to the Tax Indemnitee
for filing no later than 15 days prior to the due date therefor. In any
case in which the Tax Indemnitee will file any such report, return or
statement, the Lessee shall, upon written request of such Tax Indemnitee,
provide such Tax Indemnitee with such information as is reasonably
necessary to allow the Tax Indemnitee to file such report, return or
statement.
(f) Verification. At the Lessee's request, the amount of any
indemnity payment by the Lessee or any payment by a Tax Indemnitee to the
Lessee pursuant to this Section 26.5 shall be verified and certified by an
independent public accounting firm mutually acceptable to the Lessee and
the Tax Indemnitee. The costs of such verification shall be borne by the
Lessee unless such verification shall result in an adjustment in the
Lessee's favor of the lesser of (i) $10,000, and (ii) five (5%) percent of
the payment as computed by the Tax Indemnitee, in which case such fee shall
be paid by the Tax Indemnitee. In no event shall the Lessee have the right
to review the Tax Indemnitee's tax returns or receive any other
confidential information from the Tax Indemnitee in connection with such
verification. Any information provided to such accountants by any Person
shall be and remain the exclusive property of such Person and shall be
deemed by the parties to be (and the accountants will confirm in writing
that they will treat such information as) the private, proprietary and
confidential property of such Person, and no Person other than such Person
and the accountants shall be entitled thereto and all such materials shall
be returned to such Person. Such accounting firm shall be requested to
make its determination within 30 days of the Lessee's request for
verifications and the computations of the accounting firm shall be final,
binding and conclusive upon the Lessee and the Tax Indemnitee. The parties
agree that the sole responsibility of the independent public accounting
firm shall be to verify the amount of a payment pursuant to this Lease and
that matters of interpretation of this Lease are not within the scope of
the independent accounting firm's responsibilities.
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(g) Tax Ownership. The Lessor represents and warrants that it will
not, prior to the termination of this Lease, claim ownership of (or any tax
benefits, including depreciation, with respect to) the Property for any
income tax purposes, it being understood that the Lessee is and will remain
the owner of the Property for such income tax purposes until the
termination of this Lease. If, notwithstanding the income tax intentions
of the parties as set forth herein, the Lessor actually receives any income
tax deductions, reductions in income tax or other income tax benefit as a
result of any claim for, or recharacterization requiring such party to
take, any tax benefits attributable to ownership of the Property for income
tax purposes, the Lessor shall pay to the Lessee, together with an amount
equal to any reduced Taxes payable by such Tax Indemnitee as a result of
such payment, the amount of such income tax savings actually realized by
the Lessor (less the amount of any anticipated increase in income tax which
the Lessor determines is currently payable as a result of such claim or
recharacterization), provided that the Lessee shall agree to reimburse the
Lessor for any subsequent increase in the Lessor's income taxes resulting
from such claim or recharacterization not taken into account in the payment
made to the Lessee, up to the amount paid to the Lessee by the Lessor. The
parties agree that this Section 26.5(g) is intended to require a payment to
the Lessee if and only if the Lessor shall have actually received an
unanticipated tax savings with respect to the Property that would not have
been received if the Lessor had advanced funds to the Lessee in the form of
a loan secured by the Property in an amount equal to the Lease Balance.
Nothing in this Section 26.5(g) shall be construed to require the Lessor to
take any affirmative action to realize any tax savings if in its good faith
judgment such action may have a material adverse affect on the Lessor.
26.6. Funding Losses. If any payment of Rent or the Lease Balance,
including pursuant to the Lessee's exercise of the Purchase Option under Section
22.1, is made on any day other than the last day of an Interest Period
applicable thereto, the Lessee shall reimburse the Lessor within fifteen (15)
days after demand for any actual resulting loss or expense incurred by it,
including any loss incurred in obtaining, liquidating or employing deposits from
third parties, swaps, hedges or similar transactions entered into in connection
with or in contemplation of transactions relating to the Property, but excluding
loss of margin for the period after any such payment or conversion or failure to
borrow or prepay, provided that the Lessor shall have delivered to the Lessee a
certificate signed by an officer of the Lessor as to the amount of such loss or
expense, which certificate shall be conclusive in the absence of manifest error,
and provided, further, that such loss shall in no event exceed the then
effective Lease Rate which would have been payable for the balance of such
Interest Period. The Lessor will, at the request of the Lessee, furnish such
additional information concerning the determination of such loss as the Lessee
may reasonably request.
26.7. Regulation D Compensation. During the Term, for so long as the
Lessor (or Key Corporate Capital Inc. or SELCO) is required to maintain reserves
against "Eurocurrency Liabilities" (or any other category of liabilities which
include deposits by reference to which the Lease Rate is determined or any
category of extensions of credit or other assets which includes loans by a non-
United States office of the Lessor to United States residents), and, as a
result, the cost to the Lessor (or its Funding Office) of making or maintaining
its Advances is increased, then the Lessor may require the Lessee to pay,
contemporaneously with each payment of Rent, an additional amount at a rate per
annum up to but not exceeding the excess of (i) (A) the applicable Eurodollar
Rate divided by (B) one minus the Eurocurrency Reserve Requirements and (ii) the
applicable Eurodollar Rate. In the event that the Lessor wishes to require
payment of such additional amount, the Lessor (x) shall so notify the Lessee, in
which case such additional Rent shall be payable to the Lessor at the place
indicated in such notice with respect to each Interest Period commencing at
least three Business Days after the giving of such notice and (y) shall
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furnish to the Lessee at least five Business Days prior to each date on which
Rent is payable a certificate setting forth the amount to which it is then
entitled under this Section (which shall be consistent with its good faith
estimate of the level at which the related reserves are maintained by it). Each
such certificate shall be accompanied by such information as the Lessee may
reasonably request as to the computation set forth therein.
26.8. Deposits Unavailable. If the Eurodollar Rate is unavailable on
or prior to the day that the Eurodollar Rate is established, the Lessor shall
forthwith give notice thereof to the Lessee, whereupon until the Lessor notifies
the Lessee that the circumstances giving rise to such suspension no longer
exist, the portion of the Advance subject to the Eurodollar Rate shall begin to
bear interest at the Alternate Base Rate on the first day of the subsequent
Interest Period applicable thereto. The Lessor shall provide to the Lessee a
statement in writing of the Alternate Base Rate as calculated hereunder.
26.9. Illegality. If, on or after the date hereof, the adoption of any
applicable law, rule or regulation, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by the Lessor (or its Funding Office) with any request or
directive (whether or not having the force of law) of any such authority,
central bank or comparable agency shall make it unlawful or impossible for the
Lessor (or its Funding Office) to make, maintain or fund the Advance, and the
Lessor shall so notify the Lessee, whereupon until the Lessor notifies the
Lessee that the circumstances giving rise to such suspension no longer exist,
the obligation to make the Advance shall be suspended. The Lessor, with the
consent of the Lessee (which consent shall not unreasonably be withheld), will
designate a different Funding Office if such designation will avoid the need for
giving such notice and will not, in the judgment of the Lessor, be otherwise
disadvantageous to the Lessor. If such notice is given (i) the Lessee shall be
entitled upon its request to a reasonable explanation of the factors underlying
such notice and (ii) the Advance shall begin to bear interest at the Alternate
Base Rate either (a) on the last day of the then current Interest Period
applicable thereto, if the Lessor may lawfully continue to maintain and fund the
Advance to such day or (b) immediately, if the Lessor shall determine that it
may not lawfully continue to maintain and fund the Advance to such day. The
Lessor shall provide to the Lessee a statement in writing of the Alternate Base
Rate as calculated hereunder.
26.10. Increased Cost and Reduced Return.
(a) In the event that the adoption of any applicable law, rule
or regulation, or any change therein or in the interpretation or
application thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration
thereof or compliance by the Lessor with any request or directive
after the date hereof (whether or not having the force of law) of any
such authority, central bank or comparable agency:
(i) does or shall subject the Lessor to any additional tax
of any kind whatsoever with respect to the Operative Documents
or the Advance made by it, or change the basis or the applicable
rate of taxation of payments to the Lessor of principal,
interest or any other amount payable hereunder (except for the
imposition of or change in any tax on or measured by the overall
net income of the Lessor (other than any such tax imposed by
means of withholding));
(ii) does or shall impose, modify or hold applicable any
reserve, special deposit, insurance assessment, compulsory loan
or similar requirement against assets held by, or
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deposits or other liabilities in or for the account of, advances
or loans by, or other credit extended by, or any other
acquisition of funds by, any office of the Lessor which are not
otherwise included in determination of the rate of interest on
the Advance; or
(iii) does or shall impose on the Lessor any other
condition; and the result of any of the foregoing is to increase
the cost to the Lessor of making or maintaining the Advance or
to reduce any amount receivable hereunder;
then in any such case, the Lessee shall promptly pay to the
Lessor, upon demand, any additional amounts necessary to
compensate the Lessor for such increased cost or reduced amount
receivable which the Lessor deems to be material as determined
by the Lessor with respect to the Advance.
(b) If the Lessor shall have determined that, after the date
hereof, the adoption of any applicable law, rule or regulation
regarding capital adequacy, or any change therein, or any change in
the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the
interpretation or administration thereof, or any request or directive
regarding capital adequacy (whether or not having the force of law) of
any such authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on capital of the
Lessor (or any entity directly or indirectly controlling the Lessor)
as a consequence of the Lessor's obligations under the Operative
Documents to a level below that which the Lessor (or any entity
directly or indirectly controlling the Lessor) could have achieved but
for such adoption, change, request or directive (taking into
consideration its policies with respect to capital adequacy) by an
amount deemed by the Lessor to be material, then from time to time,
within fifteen (15) days after demand by the Lessor, the Lessee shall
pay to the Lessor such additional amount or amounts as will compensate
the Lessor for such reduction.
(c) The Lessor will promptly notify the Lessee of any event of
which it has knowledge, occurring after the date hereof, which will
entitle the Lessor to compensation pursuant to this Section and will,
if practicable, with the consent of the Lessee (which consent shall
not unreasonably be withheld), designate a different Funding Office or
take any other reasonable action if such designation or action will
avoid the need for, or reduce the amount of, such compensation and
will not, in the judgment of the Lessor, be otherwise disadvantageous
to the Lessor. A certificate signed by an officer of the Lessor
claiming compensation under this Section and setting forth in
reasonable detail its computation of the additional amount or amounts
to be paid to it hereunder shall be conclusive in the absence of
manifest error. In determining such amount, the Lessor may use any
reasonable averaging and attribution methods.
(d) Notwithstanding the foregoing clauses (a) and (b) of this
Section 26.10, the Lessee shall only be obligated to compensate the
Lessor for any amount arising or accruing both:
(i) during (A) any time or period commencing (x) in the
case of subsection (a), not earlier than the first day of any
Interest Period in effect on the date which, and (y) in the case
of subsection (b), not earlier than the date on which the Lessor
notifies the Lessee that it proposes to demand such compensation
and identifies to the Lessee the statute, regulation or other
basis upon which the claimed compensation is or will be based
and (B) any time or period during which, because of the
retroactive application of such
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statute, regulation or other basis, the Lessor did not know that
such amount would arise or accrue; and
(ii) within six months prior to any demand therefor,
accompanied by a certificate of the Lessor claiming compensation
and setting forth in reasonable detail its computation of the
additional amount or amounts to be paid to it hereunder.
ARTICLE XXVII
ESTOPPEL CERTIFICATES
27.1. Estoppel Certificates. At any time and from time to time upon
not less than fifteen (15) days' prior request by the Lessor or the Lessee (the
"Requesting Party"), the other party (whichever party shall have received such
request, the "Certifying Party") shall furnish to the Requesting Party (but in
the case of the Lessor, as Certifying Party, not more than four times per year
unless required to satisfy the requirements of any subleases and only to the
extent that the required information has been provided to the Lessor by the
Lessee) a certificate signed by an individual having the office of vice
president or higher in the Certifying Party certifying that this Lease is in
full force and effect (or that this Lease is in full force and effect as
modified and setting forth the modifications); the dates to which the Basic Rent
and Supplemental Rent have been paid; to the best knowledge of the signer of
such certificate, whether or not the Requesting Party is in default under any of
its obligations hereunder (and, if so, the nature of such alleged default); and
such other matters under this Lease as the Requesting Party may reasonably
request. Any such certificate furnished pursuant to this Article XXVII may be
relied upon by the Requesting Party, and any existing or prospective mortgagee,
purchaser or lender, and any accountant or auditor, of, from or to the
Requesting Party (or any Affiliate thereof).
ARTICLE XXVIII
ACCEPTANCE OF SURRENDER
28.1. Acceptance of Surrender. No surrender to the Lessor of this
Lease or of all or any portion of the Property or of any interest therein shall
be valid or effective unless agreed to and accepted in writing by the Lessor,
and no act by the Lessor or any representative or agent of the Lessor, other
than a written acceptance, shall constitute an acceptance of any such surrender.
ARTICLE XXIX
NO MERGER OF TITLE
29.1. No Merger of Title. There shall be no merger of this Lease or of
the leasehold estate created hereby by reason of the fact that the same Person
may acquire, own or hold, directly or indirectly, in whole or in part, (a) this
Lease or the leasehold estate created hereby or any interest in this Lease or
such leasehold estate, (b) the fee or groundleasehold estate in the Property,
except as may expressly be stated in a written instrument duly executed and
delivered by the appropriate Person or (c) a beneficial interest in the Lessor.
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ARTICLE XXX
INTENT OF THE PARTIES
30.1. Ownership of the Property.
(a) It is the intent of the parties hereto that for financial
accounting purposes the Lease constitutes an "operating lease"
pursuant to Statement of Financial Accounting Standards No. 13, as
amended, and for purposes of commercial, real estate, bankruptcy and
federal, state and local income tax law, the transaction contemplated
hereby is a financing arrangement. The parties further intend that
Lessee shall be treated as owner of the Property for income tax
purposes and shall be entitled to all deductions for depreciation
thereof. Lessor shall take no action inconsistent with such treatment.
(b) It is the intent of the parties hereto that the obligations
of the Lessee under this Lease to pay Basic Rent and Supplemental Rent
or Lease Balance in connection with any purchase of the Property
pursuant to this Lease shall be treated as payments of interest on and
principal of, respectively, loans from the Lessor to the Lessee.
(c) Specifically, without limiting the generality of subsection
(b) of this Section 30.1, the Lessor and the Lessee intend and agree
that with respect to the nature of the transactions evidenced by this
Lease in the context of the exercise of remedies under the Operative
Documents, including, without limitation, in the case of any
insolvency or receivership proceedings or a petition under the United
States bankruptcy laws or any other applicable insolvency laws or
statute of the United States of America or any State or Commonwealth
thereof affecting the Lessee and the Lessor, or any enforcement or
collection actions, the transactions evidenced by this Lease are loans
made by the Lessor as unrelated third party lender to the Lessee.
ARTICLE XXXI
PAYMENT OF CERTAIN EXPENSES
31.1. Transaction Expenses.
(a) The Lessee shall pay, or cause to be paid, from time to time
all Transaction Expenses in respect of the transactions taking place
on the Documentation Date and on Acquisition Date on such respected
date; provided, however, that, if the Lessee has not received written
invoices therefor prior to such date, such Transaction Expenses shall
be paid within ten (10) Business Days after the Lessee has received
written invoices therefor.
(b) The Lessee shall pay or cause to be paid (i) all Transaction
Expenses incurred by the Lessor in entering into any future amendments
or supplements with respect to any of the Operative Documents, whether
or not such amendments or supplements are ultimately entered into, or
giving or withholding of waivers of consents hereto or thereto, in
each case which have been requested by or approved by the Lessee, (ii)
all Transaction Expenses incurred by the Lessor in connection with any
purchase of the Property by the Lessee or other Person pursuant to
this Lease and (iii) all Transaction Expenses incurred by the Lessor
in respect of enforcement of any of its rights or remedies against the
Lessee in respect of the Operative Documents.
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31.2. Brokers' Fees and Stamp Taxes. The Lessee shall pay or cause to
be paid any brokers' fees and any and all stamp, transfer and other similar
taxes, fees and excises, if any, including any interest and penalties, which are
payable in connection with the transactions contemplated by this Lease and the
other Operative Documents.
ARTICLE XXXII
OTHER COVENANTS AND AGREEMENTS OF LESSEE
32.1. Covenants. The Lessee hereby agrees that so long as this Lease
is in effect:
(a) Information. The Lessee will deliver to the Lessor:
(i) promptly upon the request of the Lessor, the publicly
available consolidated and consolidating statements of financial
position of the Lessee and its consolidated subsidiaries as of
the end of each of the Lessee's fiscal years and the related
consolidated and consolidating statements of income and cash
flows for such fiscal year, setting forth in each case in
comparative form the figures for the previous fiscal year, with
such consolidated financial statements reported on by Ernst &
Young or other independent public accountants of nationally
recognized standing reasonably acceptable to the Lessor; and
with respect to each of the first three quarters of each fiscal
year of the Lessee, the publicly available unaudited
consolidated statement of financial position of the Lessee as of
the end of such quarter and the related unaudited consolidated
statements of income and cash flows for such quarter and for the
portion of the Lessee's fiscal year ended at the end of such
quarter;
(ii) as soon as possible and in any event within ten (10)
days after a Responsible Employee of the Lessee obtains
knowledge of the occurrence of each Event of Default or each
event that, with the giving of notice or time elapse, or both,
would constitute an Event of Default continuing on the date of
such statement, a statement of the authorized officer setting
forth details of such Event of Default or event and the action
that the Lessee proposes to take with respect thereto; provided
that the Lessee shall not be obligated to give notice of any
Event of Default which is remedied within ten (10) days after
such Responsible Employee first obtains knowledge;
(iii) promptly upon becoming aware thereof, written notice
of the commencement or existence of any proceeding against the
Lessee or any Affiliate of the Lessee by or before any court or
governmental agency that might, in the reasonable judgment of
the Lessee, result in a Material adverse effect on the business,
operations or financial conditions of the Lessee or the ability
of the Lessee to perform its obligations under the Operative
Documents;
(iv) as soon as possible and in any event within ten (10)
days after a Responsible Employee of the Lessee obtains
knowledge of the occurrence of any violation or alleged
violation of an Environmental Law by Lessee, a statement of an
authorized officer setting forth the details of such violation
and the action which the Lessee proposes to take with respect
thereto; and
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(v) from time to time such additional information
regarding the business, properties, condition or operations,
financial or otherwise, of the Lessee, or regarding the Property
or the status of any construction thereon, if any, as the Lessor
may reasonably request in connection with the Property.
(b) Obligations under Loan Documents and Mezzanine Loan
Documents. Absent prior written notice from the Lessor to the
contrary, the Lessee shall comply with (i) all requirements in the
Nomura Loan Agreement and the Mezzanine Loan Agreement that the
Lessor, as Borrower, furnish the Lender with notices, documents,
reports, budgets, data and all other information relating to the
Property, including, without limitation, the requirements in
connection with a defeasance of the loan pursuant to Section 2.11 of
the Nomura Loan Agreement and (ii) all requirements and obligations of
Operator set forth in the Mortgage and the Mezzanine Mortgage.
(c) Compliance with Laws. The Lessee will comply in all Material
respects with all applicable laws, ordinances, rules, regulations, and
requirements of governmental authorities (including, without
limitation, Environmental Laws and ERISA and the rules and regulations
thereunder) with respect to its Material Assets, including the
Property, except where the necessity of compliance therewith is
contested in good faith by appropriate proceedings.
(d) Further Assurances. The Lessee shall take or cause to be
taken from time to time all action necessary to assure that the intent
of the parties pursuant to the Operative Documents is given effect as
contemplated by this Lease. The Lessee shall execute and deliver, or
cause to be executed and delivered, to the Lessor from time to time,
promptly upon request therefor, any and all other and further
instruments that may be reasonably requested by the Lessor to cure any
deficiency in the execution and delivery of this Lease or any
Operative Document to which it is a party.
(e) Preservation of Existence, Etc. The Lessee will preserve and
maintain its existence and all rights, privileges and franchises
necessary and desirable in the normal conduct of its business and the
performance of its obligations hereunder and under the Operative
Documents; provided that the Lessee may consolidate with or merge with
or into any other corporation or convey or transfer its properties and
assets substantially as an entirety to any Person, if either the
Lessee shall be the continuing corporation, or the corporation (if
other than the Lessee) formed by such consolidation or into which the
Lessee is merged or the Person which acquires by conveyance or
transfer the properties and assets of the Lessee substantially as an
entirety shall expressly assume, by an assumption agreement executed
and delivered to the Lessor, the performance of the Lessee's
obligations under each of the Operative Documents.
(f) Nonpetition Covenants. Lessee shall not during the Term of
the Lease acquiesce, petition or otherwise invoke or cause the Lessor
to invoke the process of any court or government authority for the
purpose of commencing or sustaining a case against the Lessor under
any federal or state bankruptcy, insolvency or similar law or
appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Lessor or any
substantial part of its property, or ordering the winding up or
liquidation of the affairs of the Lessor. Lessor shall not during the
Term of the Lease acquiesce, petition or otherwise invoke or cause the
Lessee to invoke the process of any court or government authority for
the purpose of commencing or sustaining a case against the Lessee
under any federal or state bankruptcy, insolvency or similar law or
appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar
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official of the Lessee or any substantial part of its property, or
ordering the winding up or liquidation of the affairs of the Lessee.
ARTICLE XXXIII
MISCELLANEOUS
33.1. Survival; Severability; Etc. Anything contained in this Lease to
the contrary notwithstanding, all claims against and liabilities of the Lessee
or the Lessor arising from events commencing prior to the expiration or earlier
termination of this Lease shall survive such expiration or earlier termination
for a period of one year except as to indemnification which shall continue to
survive. If any term or provision of this Lease or any application thereof shall
be declared invalid or unenforceable, the remainder of this Lease and any other
application of such term or provision shall not be affected thereby. If any
right or option of the Lessee provided in this Lease would, in the absence of
the limitation imposed by this sentence, be invalid or unenforceable as being in
violation of the rule against perpetuities or any other rule of law relating to
the vesting of an interest in or the suspension of the power of alienation of
property, then such right or option shall be exercisable only during the period
which shall end twenty-one (21) years after the date of death of the last
survivor of the descendants of Franklin D. Roosevelt, the former President of
the United States, Henry Ford, the deceased automobile manufacturer, and John D.
Rockefeller, the founder of the Standard Oil Company, known to be alive on the
date of the execution, acknowledgment and delivery of this Lease.
33.2. Amendments and Modifications. Neither this Lease nor any
provision hereof may be amended, waived, discharged or terminated except by an
instrument in writing in recordable form signed by the Lessor and the Lessee.
33.3. No Waiver. No failure by the Lessor or the Lessee to insist upon
the strict performance of any term hereof or to exercise any right, power or
remedy upon a default hereunder, and no acceptance of full or partial payment of
Rent during the continuance of any such default, shall constitute a waiver of
any such default or of any such term. To the fullest extent permitted by law, no
waiver of any default shall affect or alter this Lease, and this Lease shall
continue in full force and effect with respect to any other then existing or
subsequent default.
33.4. Notices. All notices, demands, requests, consents, approvals and
other communications hereunder shall be in writing (including by facsimile), and
directed to the address of the appropriate party as set forth in Schedule I
hereto.
33.5. Successors and Assigns. All the terms and provisions of this
Lease shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
33.6. Headings and Table of Contents. The headings and table of
contents in this Lease are for convenience of reference only and shall not limit
or otherwise affect the meaning hereof.
33.7. Counterparts. This Lease may be executed in any number of
counterparts, each of which shall be an original, but all of which shall
together constitute one and the same instrument.
33.8. GOVERNING LAW. THIS LEASE SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS.
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WITHOUT LIMITING THE FOREGOING, IN THE EVENT THAT THIS LEASE IS DEEMED TO
CONSTITUTE A FINANCING, WHICH IS THE INTENTION OF THE PARTIES, THE LAWS OF THE
STATE OF ILLINOIS, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES, SHALL GOVERN
THE CREATION, TERMS AND PROVISIONS OF THE INDEBTEDNESS EVIDENCED HEREBY.
33.9. Original Lease. The single executed original of this Lease
marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART" on the signature
page thereof and containing the receipt of the Lessor therefor on or following
the signature page thereof shall be the Original Executed Counterpart of this
Lease (the "Original Executed Counterpart"). To the extent that this Lease
constitutes chattel paper, as such term is defined in the Uniform Commercial
Code as in effect in any applicable jurisdiction, no security interest in this
Lease may be created through the transfer or possession of any counterpart other
than the Original Executed Counterpart.
33.10. Waiver of Jury Trial. THE PARTIES HERETO HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS LEASE AND/OR ANY OF THE OTHER OPERATIVE DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED THEREBY, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF SUCH PARTIES. THE PARTIES
HERETO ACKNOWLEDGE AND AGREE THAT THEY HAVE RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE PARTIES ENTERING INTO THE LEASE AND EACH SUCH OTHER OPERATIVE
DOCUMENT.
33.11. Compliance with Loan Documents. Lessor covenants and agrees
with Lessee that Lessor shall (a) not without the express written consent of the
Lessee, which consent shall not be unreasonably withheld, enter into any
amendments or modifications of the SELCO Loan Agreement, the Lessor Pledge
Agreement or any of the Loan Documents and Mezzanine Loan Documents to which it
is a party and (b) comply with the terms of the SELCO Loan Agreement, the Lessor
Pledge Agreement and the Loan Documents and Mezzanine Loan Documents to which it
is a party.
33.12. Payment of Equity Balance; Transfer of Beneficial Interest in
Lessor. In the event the Lessee exercises its right or is obligated to pay the
Equity Balance to the Lessor as set forth in this Lease, the Lessee shall not
pay such Equity Balance without complying with the provisions of the Nomura Loan
Agreement. The parties further agree that as soon as possible (time being of the
essence) after the payment by the Lessee to the Lessor of the Equity Balance or
upon the Lessor's exercise of all its rights under the Securities Pledge
Agreement and the Certificate Pledge Agreement, including, without limitation,
its rights to possess the Pledged Securities and the Certificate A, the Lessee
shall accept a transfer requested of it by the beneficial owner of the Lessor of
its equity interest in the Lessor. The Lessee and Lessor agree to execute all
documents reasonably necessary to effectuate such transfer. The acquisition by
the Lessee of the equity interest in the Lessor shall comply with the provisions
of the Nomura Loan Agreement.
33.13. Concerning the Lessor. This Lease has been executed by
Wilmington Trust Company solely in its capacity as Trustee under the Trust
Agreement and not in its individual capacity and in no case shall the Trust
Company (or any entity acting as successor or additional Trustee under the Trust
Agreement) be personally liable for or on account of any of the statements,
representations, warranties,
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covenants or obligations of the Trust, the Trustee or the Lessor hereunder, any
such liabilities being hereby waived by the other parties hereto provided, that
Wilmington Trust Company accepts the benefits running to it hereunder and agrees
that it shall be liable in its individual capacity for its own gross negligence
or willful misconduct. If a successor Trustee is appointed in accordance with
the terms of the Trust Agreement, such successor Trustee shall, without any
further act, succeed to all the rights, duties, immunities and obligations of
the Lessor hereunder and the predecessor Trustee shall be released from all
further duties and obligations hereunder arising after such successor Trustee
will have been appointed.
33.14. Owner's Insurance Policy Proceeds. After such time as the
Lessor is paid the Equity Balance, the Lessor agrees to promptly provide the
Lessee with any proceeds of the Lessor's owner's insurance policy covering the
Property which the Lessor has received.
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IN WITNESS WHEREOF, the parties have caused this Lease be duly
executed and delivered as of the date first above written.
BROOKDALE LIVING COMMUNITIES OF ILLINOIS-HV, INC.,
By /s/ Darryl W. Copeland, Jr.
------------------------------------
Name: Darryl W. Copeland, Jr.
Title: Vice President
S-1
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Commitment: THE HARBOR VILLAGE BUSINESS TRUST
By Wilmington Trust Company, not in its
individual capacity but solely as trustee under
the Trust Agreement
$22,500,000
By /s/ James P. Lawler
------------------------------------
Name: JAMES P. LAWLER
Title: Vice President
S-2
<PAGE>
THIS COUNTERPART IS NOT THE ORIGINAL EXECUTED COUNTERPART.
Receipt of this original counterpart of the foregoing Lease is hereby
acknowledged as of the date hereof.
NOMURA ASSET CAPITAL CORPORATION
By /s/ Raymond Anthony
----------------------------
Raymond Anthony
Managing Director
S-3
<PAGE>
SCHEDULE I
Notice Information
Lessee
- ------
Brookdale Living Communities of Illinois-HV, Inc.
c/o Brookdale Living Communities, Inc.
77 West Wacker Drive
Suite 4800
Chicago, Illinois 60601
Attention: Mark J. Schulte
Telephone No.: (312) 977-3690
Facsimile No.: (312) 977-3699
with copies delivered concurrently to:
Brookdale Living Communities of Illinois-HV, Inc.
c/o Brookdale Living Communities, Inc.
77 West Wacker Drive
Suite 4800
Chicago, Illinois 60601
Attention: Darryl W. Copeland, Jr.
Telephone No.: (312) 977-3692
Facsimile No.: (312) 977-3699
Brookdale Living Communities of Illinois-HV, Inc.
c/o Brookdale Living Communities, Inc.
77 West Wacker Drive
Suite 4800
Chicago, Illinois 60601
Attention: Robert J. Rudnik, Esquire
Telephone No.: (312) 977-3760
Facsimile No.: (312) 977-3701
Burke, Warren, MacKay & Serritella
330 North Wabash Avenue
22nd Floor, IBM Plaza
Chicago, Illinois 60611-3607
Attention: Douglas E. Wambach, Esquire
Telephone No.: (312) 840-7019
Facsimile No.: (312) 840-7900
<PAGE>
Lessor
- ------
THE HARBOR VILLAGE BUSINESS TRUST
c/o Wilmington Trust Company
1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Administration
Telephone No.: 302-651-8882
Facsimile No.: 302-651-1000
<PAGE>
EXHIBIT A
---------
FORM OF FUNDING REQUEST
TO: THE HARBOR VILLAGE BUSINESS TRUST
_______________________
_______________________
Reference is hereby made to the Lease dated as of March __, 1998, as it may
be amended from time to time (the "Lease"), between Brookdale Living Communities
of Illinois-HV, Inc. (the "Company") and THE HARBOR VILLAGE BUSINESS TRUST.
Capitalized terms not otherwise defined herein are used herein as defined in
Appendix 1 to the Lease.
The Company hereby requests the making of an Advance in the amount of
$____________ on _____________, 199_ (the "Requested Funding Date").
In connection with such requested Advance, the Company hereby represents
and warrants to you as follows:
(a) The Advance will be allocated as follows:
(i) $___________ of the Advance shall be used solely to provide
the Company with funds with which to pay or reimburse itself for
Property Cost.
(ii) $___________ of the Advance shall be used to pay or
reimburse the Company for Transaction Expenses paid or payable by the
Company in connection with the Operative Documents and fees paid or
payable by the Company to the Lessor in connection with the Operative
Documents and any amounts paid or payable by the Company pursuant to
Section 31.1 of the Lease, and
(b) On and as of the Requested Funding Date the representations and
warranties of the Company contained in the Lease and in each of the other
Operative Documents are true and correct in all material respects as though
made on and as of such date, except to the extent such representations or
warranties relate solely to an earlier date, in which case such
representations and warranties were true and correct in all material
aspects on and as of such earlier date;
(c) On and as of the Requested Funding Date there are no actions,
suits or proceedings pending or, to the knowledge of the Company,
threatened (i) that are reasonably likely to have a Material adverse effect
on the Property or (ii) that question the validity of the Operative
Documents or the rights or remedies of the Lessor with respect to the
Company or the Property under the Operative Documents;
<PAGE>
(d) To the knowledge of the Company, there have been no Liens against
the Property since the recordation of the Deed other than Permitted Liens;
(e) On and as of the Requested Funding Date no Default or Event or
Default under the Lease has occurred and is continuing, and no Default or
Event of Default under the Lease will have occurred after giving effect to
the making of the Advance requested hereby; and
(f) All of the applicable conditions precedent to this Advance under
Article IV of the Lease have been satisfied.
Please wire transfer the proceeds of the Advance requested hereby (other
than proceeds described in paragraph (a)(iv) of this Funding Request)
to ____________.
The Company has caused this Funding Request to be executed and delivered by
its duly authorized Responsible Employee this *_______ day of __________,
199_.
BROOKDALE LIVING COMMUNITIES OF
ILLINOIS-HV, INC.,
By
--------------------------
Name:
Title:
- -------------------
* Funding Request must be delivered not later than 9:00 A.M., New York City
time, five (5) Business Days prior to the Requested Funding Date.
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<PAGE>
EXHIBIT C
---------
BROOKDALE LIVING COMMUNITIES OF [ILLINOIS], INC.,
Responsible Employee's Certificate
Pursuant to Section 4.3(g) of the Lease
-----------------------
The undersigned certifies that he is the duly appointed and acting
[________] of BROOKDALE LIVING COMMUNITIES OF ILLINOIS-HV, INC., (the
"Company"), and is familiar with the terms and provisions of the Lease, dated as
of March __, 1998 (the "Lease"), among the Company, as the Lessee, THE HARBOR
VILLAGE BUSINESS TRUST, as the Lessor, and the transactions and documents
contemplated thereby. Capitalized terms used herein but not defined shall have
the meanings ascribed to them in Appendix 1 to the Lease.
Pursuant to Section 4.3(g) of the Lease, the undersigned, as [_______] of
the Company, further certifies that: (i) each and every representation and
warranty of the Company contained in each Operative Document to which is a party
is true and correct in all Material respects on and as of the Acquisition Date;
(ii) to the best of the undersigned's knowledge, no Default or Event of Default
has occurred and is continuing under any Operative Document to which the Company
is a party with respect to the Company; (iii) each Operative Document to which
the Company is a party is in full force and effect with respect to the Company;
and (iv) the Company has duly performed and complied in all Material respects
with all covenants, agreements and conditions contained in the Lease or in any
other Operative Document required to be performed or complied with by it on or
prior to such Acquisition Closing Date.
IN WITNESS WHEREOF, the undersigned has executed this Certificate as of
this ____ day of __________, 199__.
BROOKDALE LIVING COMMUNITIES OF
ILLINOIS-HV, INC.,
_____________________________
Name:
Title:
<PAGE>
APPENDIX 1
to
Lease
-----
DEFINITIONS AND INTERPRETATION
A. Interpretation. In each Operative Document, unless a clear contrary
intention appears:
(i) the singular number includes the plural number and vice versa;
(ii) reference to any Person includes such Person's successors and
assigns but, if applicable, only if such successors and assigns are
permitted by the Operative Documents, and reference to a Person in a
particular capacity excludes such Person in any other capacity or
individually;
(iii) reference to any gender includes each other gender;
(iv) reference to any agreement (including any Operative Document),
document or instrument means such agreement, document or instrument as
amended or modified and in effect from time to time in accordance with the
terms thereof and, if applicable, the terms of the other Operative
Documents and reference to any promissory note includes any promissory note
which is an extension or renewal thereof or a substitute or replacement
therefor;
(v) reference to any Applicable Law means such Applicable Law as
amended, modified, codified, replaced or reenacted, in whole or in part,
and in effect from time to time, including rules and regulations
promulgated thereunder and reference to any section or other provision of
any Applicable Law means that provision of such Applicable Law from time to
time in effect and constituting the substantive amendment, modification,
codification, replacement or reenactment of such section or other
provision;
(vi) reference in any Operative Document to any Article, Section,
Appendix, Schedule or Exhibit means such Article or Section thereof or
Appendix, Schedule or Exhibit thereto;
<PAGE>
(vii) "hereunder", "hereof", "hereto" and words of similar import
shall be deemed references to an Operative Document as a whole and not to
any particular Article, Section or other provision thereof;
(viii) "including" (and with correlative meaning "include") means
including without limiting the generality of any description preceding such
term;
(ix) relative to the determination of any period of time, "from"
means "from and including" and "to" means "to but excluding";
(x) terms used herein or in the Lease but not otherwise defined
therein shall have the meanings specified therefor in the Nomura Loan Agreement.
B. Accounting Terms. In each Operative Document, unless expressly
otherwise provided, accounting terms shall be construed and interpreted, and
accounting determinations and computations shall be made, in accordance with
GAAP.
C. Conflict in Operative Documents. If there is any conflict between any
Operative Documents, such Operative Document shall be interpreted and construed,
if possible, so as to avoid or minimize such conflict but, to the extent (and
only to the extent) of such conflict, the Nomura Loan Agreement and, as
applicable, the Mezzanine Loan Agreement shall prevail and control.
D. Legal Representation of the Parties. The Operative Documents were
negotiated by the parties with the benefit of legal representation and any rule
of construction or interpretation otherwise requiring the Operative Document to
be construed or interpreted against any party shall not apply to any
construction or interpretation hereof or thereof.
E. Defined Terms. Unless a clear contrary intention appears, terms
defined herein have the respective indicated meanings when used in each
Operative Document. Terms used herein and in the Lease but not defined herein or
in the Lease shall have the meanings ascribed to them in the Nomura Loan
Agreement.
"Acquisition Date" is defined in Section 4.2 of the Lease.
"Advance" means the advance of funds by the Lessor pursuant to Article III
of the Lease.
"After Tax Basis" means, with respect to any payment to be received, the
amount of such payment increased so that, after deduction of the amount of all
taxes required to be paid by the recipient (less any tax savings realized and
the present value of any tax savings projected to be realized by the recipient
as a result of the payment of the indemnified amount) with respect to the
receipt by the recipient of such amounts, such increased payment (as so reduced)
is equal to the payment otherwise required to be made.
<PAGE>
Harbor Village Appendix 1
"Alternate Base Rate" means, for any period, an interest rate per annum
equal to the Prime Rate. If the aforesaid rate changes from time to time after
the date of the Lease, the Alternate Base Rate shall be automatically increased
or decreased, if appropriate and as the case may be, without notice to the
Lessee as of the effective time of each change. The Alternative Base Rate shall
be calculated on the basis of a 365- (or 366-, as the case may be) day year for
the actual days from a SELCO Payment Date to the subsequent SELCO Payment Date.
"Applicable Law" means all existing and future applicable laws, rules,
regulations (including Environmental Laws) statutes, treaties, codes,
ordinances, permits, certificates, orders and licenses of and interpretations
by, any Governmental Authority, and applicable judgments, decrees, injunctions,
writs, orders or like action of any court, arbitrator or other administrative,
judicial or quasi-judicial tribunal or agency of competent jurisdiction
(including those pertaining to health, safety or the environment (including,
without limitation, wetlands) and those pertaining to the construction, use or
occupancy of the Property) and any restrictive covenant or deed restriction or
easement of record affecting the Property or any other Material Assets.
"Applicable Margin" means at any time .70%.
"Appraisal" means an appraisal of the Property, which Appraisal complies in
all material respects (as determined by the reasonable judgment of counsel for
the Lessor) with the requirements of the Financial Institutions Reform, Recovery
and Enforcement Act of 1989, as amended, the rules and regulations adopted
pursuant thereto, and all other applicable Requirements of law, and will
appraise the Fair Market Sales Value of such Property, in form and substance
reasonably satisfactory to the Lessor, prepared by American Appraisal Associates
or another reputable appraiser selected by the Lessor.
"Appurtenant Rights" means (i) all agreements, easements, rights of way or
use, rights of ingress or egress, privileges, appurtenances, tenements,
hereditaments and other rights and benefits at any time belonging or pertaining
to the Land or the Improvements, including, without limitation, the use of any
streets, ways, alleys, vaults or strips of land adjoining, abutting, adjacent or
contiguous to the Land and (ii) all permits, licenses and rights, whether or not
of record, appurtenant to the Land.
"Architect" means, with respect to the Property, the architect acting in
such capacity. Any requirement in any Operative Document that a certificate of
the Architect be delivered shall be satisfied by delivery of certificate(s) from
one or more of the foregoing so long as such certificates collectively satisfy
the requirements set forth in such Operative Documents.
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<PAGE>
Harbor Village Appendix 1
"B Loan" means the loan made by KCCI, as Lender, to the Lessor, as
Borrower, pursuant to the SELCO Loan Agreement.
"Basic Rent" means Debt Service under and as defined in the Mezzanine Loan
Agreement and required to be paid thereunder, Debt Service under and as defined
in the Nomura Loan Agreement, Basic Carrying Costs Monthly Installments,
Operating Expense Monthly Installments and Capital Reserve Monthly Installments,
each to the extent required to be paid under the Nomura Loan Agreement and SELCO
Basic Rent and Lessor Basic Rent.
"Break Costs" means an amount equal to the amount, if any, required to
compensate the Lessor for any additional losses (including, any loss, cost or
expense incurred by reason of the liquidation or reemployment of deposits or
funds acquired by the Lessor to fund its obligations hereunder, swaps, hedges or
similar transactions entered into in connection with or in contemplation of
transactions relating to the Property) it may reasonably incur as a result of
(x) the Lessee's payment of Rent or Lease Balance other than on a Payment Date,
(y) the Advance not being made on the date specified therefore in the Funding
Request (other than as a result of a breach by the Lessor if its obligation
under Section 3.1 of the Lease to make the Advance), or (z) as a result of any
conversion of the Eurodollar Rate in accordance with Section 26.8 or 26.9 of the
Lease. A statement as to the amount of such loss, cost of expense, prepared in
good faith and in reasonable detail and submitted by the Lessor to the Lessee,
shall be conclusive and binding for all purposes absent manifest error.
"Board" means the Board of Governors of the Federal Reserve System of the
United States (or any successor).
"Capitalized Interest" is defined in Section 2.5 of the SELCO Loan
Agreement.
"CERCLA" means the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, 42 U.S.C. (S)(S) 9601 et seq., as amended by the
Superfund Amendments and Reauthorization Act of 1986.
"Casualty" means any damage or destruction of all or any portion of the
Property as a result of a fire or other casualty.
"Certificate A" means the compounding investment certificate, in the
original principal amount of $5,075,000 issued by Fleet National Bank and
pledged to the Lessee pursuant to the Certificate Pledge Agreement and the
replacement certificate therefor.
"Certificate Pledge Agreement" means the Certificate Pledge Agreement,
dated as of March 6, 1998, among the Lessee, Lessor and Wilmington Trust
Company, as Custodian, pursuant to which the Lessee pledged Certificate A to the
Lessor.
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<PAGE>
Harbor Village Appendix 1
"Certifying Party" is defined in Section 27.1 of the Lease.
"Claims" means any and all obligations, liabilities, losses, actions,
suits, judgments, penalties, fines, claims, demands, settlements, costs and
expenses (including, without limitation, reasonable legal fees and expenses) of
any nature whatsoever.
"Commitment" means the obligation of the Lessor to make the Advance to the
Lessee in an aggregate principal amount not to exceed the amount set forth
opposite the Lessor's name on its signature page to the Lease.
"Condemnation" means any condemnation, requisition, confiscation, seizure
or other taking or sale of the use, access, occupancy, easement rights or title
to the Property or any part thereof, wholly or partially (temporarily or
permanently), by or on account of any actual or threatened eminent domain
proceeding or other taking of action by any Person having the power of eminent
domain, including an action by a Governmental Authority to change the grade of,
or widen the streets adjacent to, the Property or alter the pedestrian or
vehicular traffic flow to the Property so as to result in change in access to
the Property, or by or on account of an eviction by paramount title or any
transfer made in lieu of any such proceeding or action. A "Condemnation" shall
be deemed to have occurred on the earliest of the dates that use, occupancy or
title vests in the condemning authority.
"Contingent Rental Adjustment" means the sum of (a) the maximum amount
(calculated as a percentage of the Fair Market Sales Value of the Property as
set forth in the Appraisal) that when present valued with the minimum Basic Rent
payments to be made during the Term permits the Lease to be characterized as an
"operating lease" in accordance with the Statement of Financial Accounting
Standards No. 13 as in effect on the Acquisition Date and permits recourse to
the Lessee , which in no event shall be less than all amounts due and owing
under the Nomura Loan Agreement and the Mezzanine Loan Agreement and (b) any
additional amount required to prepay the Loan or Mezzanine Loan or defease the
Loan in whole or in part pursuant to the Nomura Loan Agreement and Mezzanine
Loan Agreement, respectively, including, but not limited to, the Defeasance
Deposit or the Yield Maintenance Premium, as applicable, and all costs and fees
payable in connection therewith.
"Control" means (including the correlative meanings of the terms
"controlled by" and "under common control with"), as used with respect to any
Person, the possession directly or indirectly, of the power to direct or cause
the direction of the management policies of such Person, whether through the
ownership of voting securities or other beneficial interests or by contract or
otherwise.
"Custodian" means Wilmington Trust company, as custodian under the
Securities Pledge Agreement.
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<PAGE>
Harbor Village Appendix 1
"Debt" means, for any Person, (i) all indebtedness of such Person for
borrowed money or for the deferred purchase price of property or services, (ii)
all obligations of such Person under any conditional sale or other title
retention agreement relating to property purchased by such Person, (iii) all
indebtedness for borrowed money or for the deferred purchase price of property
or services secured by (or for which the holder of such indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien on any
property owned by such Person, whether or not such indebtedness has been
assumed, and (iv) all obligations of such Person as lessee under leases that
have been or should be, in accordance with generally accepted accounting
principles, recorded as capital leases.
"Deed" means a limited warranty deed with respect to the real property
comprising the Property, in conformity with Applicable Law and appropriate for
recording with the applicable Governmental Authorities, conveying fee simple
title to such real property to the Lessor, subject only to Permitted Liens.
"Default" means any event or condition which, with the lapse of time or the
giving of notice, or both, would constitute an Event of Default.
"Documentation Date" is defined in Section 4.1 of the Lease.
"Dollars" and "$" mean dollars in lawful currency of the United States of
America.
"End of the Term Report" is defined in Section 26.2(a) of the Lease.
"Environmental Audit" means a Phase One environmental site assessment (the
scope and performance of which meets or exceeds ASTM Standard Practice E1527-93
Standard Practice for Environmental Site Assessments: Phase One Environmental
Site Assessment Process) of the Property, and, if called for by the Phase One
assessment, a Phase Two environmental site assessment.
"Environmental Law" means, whenever enacted or promulgated, any applicable
Federal, state, county or local law, statute, ordinance, rule, regulation,
license, permit, authorization, approval, covenant, criteria, administrative or
court order, judgment, decree, injunction, code or requirement or any agreement
with a Governmental Authority:
(x) relating to pollution (or the cleanup, removal, remediation or
encapsulation thereof, or any other response thereto), or the regulation or
protection of human health, safety or the environment, including air,
water, vapor, surface water, groundwater, drinking water, land (including
surface or subsurface), plant, aquatic and animal life, or
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<PAGE>
Harbor Village Appendix 1
(y) concerning exposure to, or the use, containment, storage,
recycling, treatment, generation, discharge, emission, Release or
threatened Release, transportation, processing, handling, labeling,
containment, production, disposal or remediation of any Hazardous
Substance,
in each case as amended and as now or hereafter in effect. Applicable laws
include, but are not limited to, CERCLA; the Resource Conservation and Recovery
Act of 1976, 42 U.S.C. (S) 6901 et seq.; the Federal Water Pollution Control
Act, 33 U.S.C. (S) 1251 et seq.; the Clean Air Act, 42 U.S.C. (S)(S) 7401 et
seq.; the National Environmental Policy Act, 42 U.S.C. (S) 4321; the Refuse Act,
33 U.S.C. (S)(S) 401 et seq.; the Hazardous Materials Transportation Act of
1975, 49 U.S.C. (S)(S) 1801-1812; the Toxic Substances Control Act, 15 U.S.C.
(S)(S) 2601 et seq.; the Federal Insecticide, Fungicide, and Rodenticide Act, 7
U.S.C. (S)(S) 136 et seq.; the Safe Drinking Water Act, 42 U.S.C. (S)(S) 300f et
seq., each as amended and as now or hereafter in effect, and their state and
local counterparts or equivalents, including any regulations promulgated
thereunder.
"Environmental Violation" means any activity, occurrence or condition
that violates or results in non-compliance with any Environmental Law in any
Material respect.
"Equipment" means all of Lessee's "equipment," as such term is defined
in the UCC, and, to the extent not included in such definition, all fixtures,
appliances, machinery, furniture, furnishings, decorations, tools and supplies,
now owned or hereafter acquired by Lessee using the proceeds of the Advance or
other funds from the Lessor, including but not limited to, all beds, linens,
radios, televisions, carpeting, telephones, cash registers, computers, lamps,
glassware, restaurant and kitchen equipment, all medical, dental,
rehabilitation, therapeutic and paramedic equipment and supplies, any building
equipment, including but not limited to, all heating, lighting, incinerating,
waste removal and power equipment, engines, pipes, tanks, motors, conduits,
switchboards, security and alarm systems, plumbing, lifting, cleaning, fire
prevention, fire extinguishing, refrigeration, washing machines, dryers, stoves,
refrigerators, ventilating, and communications apparatus, air cooling and air
conditioning apparatus, escalators, elevators, ducts, and compressors, materials
and supplies, and all other machinery, apparatus, equipment, fixtures and
fittings now owned or hereafter acquired by Lessee using proceeds of the Advance
or other funds from the Lessor, wherever located, any portion thereof or any
appurtenances thereto, together with all additions, replacements, parts,
fittings, accessions, attachments, accessories, modifications and alterations of
any of the foregoing.
"Equity Balance" means an amount equal to the sum of (a) the aggregate
amount of the balance (inclusive of principal and Capitalized Interest) of the
loan made pursuant to the SELCO Loan Agreement, (b) $675,000, and (c) all due
and unpaid SELCO Basic Rent, Lessor Basic Rent and Supplemental Rent to which
the Lessor is entitled.
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<PAGE>
Harbor Village Appendix 1
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time or any successor Federal statute.
"Eurocurrency Reserve Requirements" means, for any day as applied to a
payment of Rent, the aggregate (without duplication) of the rates (expressed as
a decimal fraction) of reserve requirements in effect on such day (including,
without limitation, basic, supplemental, marginal and emergency reserves under
any regulations of the Board or other Governmental Authority having jurisdiction
with respect thereto) dealing with reserve requirements prescribed for
eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in
Regulation D of the Board) maintained by a member bank of the Federal Reserve
System.
"Eurodollar Lease Rate" means, during any Interest Period, the rate
per annum equal to the sum of the Eurodollar Rate for such Interest Period plus
the Applicable Margin.
"Eurodollar Rate", subject to Section 26.8 of the Lease, means the
rate per annum at which deposits in Dollars appear with respect to a ninety (90)
day period on the Telerate Page 3750 (or any successor page), in each case as of
11:00 a.m. (London time) two Business Days prior to the beginning of such
Interest Period, or if such rate is not available, then the average (rounded
upward, if necessary, to the nearest multiple of one-sixteenth of one percent)
of the rates offered for Dollar deposits to the prime banks by leading banks in
the London interbank market at or about 11:00 a.m. (London time) two Business
Days prior to the beginning of such Interest Period in the interbank eurodollar
market for delivery on the first day of such Interest Period for a ninety (90)
day period in an amount comparable to the amount of the Advance to be
outstanding during such period. The Eurodollar Rate shall be calculated on the
basis of a 360-day year for the actual number of days from a SELCO Payment Date
to the subsequent SELCO Payment Date.
"Event of Default" is defined in Section 20.1 of the Lease.
"Excess Proceeds" means (i) the excess, if any, of the aggregate of
all awards, compensation or insurance proceeds payable in connection with a
Casualty or Condemnation over the sum of the Lease Balance paid by the Lessee
pursuant to Articles XVII and XIX of the Lease with respect to such Casualty or
Condemnation; (ii) the excess proceeds over the Lease Balance, if any, received
by the Lessor in connection with any sale of the Property pursuant to the
Lessor's exercise of remedies under Section 20.2 of the Lease or the Lessee's
exercise of the Remarketing Option under Article XXIV of the Lease and (iii)
Excess Proceeds as defined in the Nomura Loan Agreement.
"Expiration Date" means, unless the Lease shall have been earlier
terminated in accordance with the provisions of the Lease or the other Operative
Documents, March 11, 2003, or if the Term has been extended in accordance with
Article XXIII of the Lease, the last day of
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<PAGE>
Harbor Village Appendix 1
the most recent Renewal Term, provided, however, the Expiration Date for the
final potential Renewal Term under the Lease shall be March 11, 2010.
"Fair Market Sales Value" means the amounts, which in any event shall
not be less than zero, that would be paid in cash in an arm's-length transaction
between an informed and willing purchaser and an informed and willing seller,
neither of whom is under any compulsion to purchase or sell, respectively, for
the ownership of all of the Property. The Fair Market Sales Value of the
Property shall be determined based on the assumption that, except for purposes
of Article XX of the Lease and Section 26.2 of the Lease, the Property is in the
condition and state of repair required under Section 13.1 of the Lease and the
Lessee is in compliance with the other requirements of the Operative Documents.
"Fixtures" means all fixtures relating to the Improvements, including
all components thereof, located in or on the Improvements, together with all
replacements, modifications, alterations and additions thereto.
"Funding Office" means the office of the Lessor, if any, identified on
its signature page to the Lease as its Funding Office.
"Funding Request" is defined in Section 3.2(a) of the Lease.
"GAAP" means United States generally accepted accounting principles in
effect from time to time.
"Governmental Action" means all permits, authorizations,
registrations, consents, approvals, waivers, exceptions, variances, orders,
judgments, written interpretations, decrees, licenses, exemptions, publications,
filings, notices to and declarations of or with, or required by, any
Governmental Authority, or required by any Applicable Law, and shall include,
without limitation, all environmental and operating permits and licenses that
are required for the full use, occupancy, zoning and operation of the Property.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Gross Proceeds" is defined in Section 24.1(k) of the Lease.
"Impositions" means any and all liabilities, losses, expenses and
costs of any kind whatsoever for fees, taxes, levies, imposts, duties, charges,
assessments or withholdings of any nature whatsoever ("Taxes"), including,
without limitation, (i) real and personal property taxes, including personal
property taxes on the Property covered by the Lease that is classified by
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Harbor Village Appendix 1
Governmental Authorities as personal property, and real estate or ad valorem
taxes in the nature of property taxes; (ii) sales taxes, use taxes and other
similar taxes (including rent taxes and intangibles taxes); (iii) any excise
taxes; (iv) real estate transfer taxes, conveyance taxes, mortgage taxes,
intangible taxes, stamp taxes and documentary recording taxes and fees; (v)
taxes that are or are in the nature of franchise, income, value added, gross
receipts, privilege and doing business taxes, license and registration fees; and
(vi) assessments on the Property, including all assessments for public
improvements or benefits, whether or not such improvements are commenced or
completed within the Term, and in each case all interest, additions to tax and
penalties thereon, which at any time may be levied, assessed or imposed by any
Federal, state or local authority upon or with respect to (a) any Tax
Indemnitee, the Property or any part thereof or interest therein, or the Lessee
or any sublessee or user of the Property; (b) the financing, refinancing,
demolition, construction, substitution, subleasing, assignment, control,
condition, occupancy, servicing, maintenance, repair, ownership, possession,
purchase, rental, lease, activity conducted on, delivery, insuring, use,
operation, improvement, transfer, return or other disposition of the Property or
any part thereof or interest therein; (c) the rentals, receipts or earnings
arising from the Property or any part thereof or interest therein; (d) the
Operative Documents or any payment made or accrued pursuant thereto; (e) the
income or other proceeds received with respect to the Property or any part
thereof or interest therein upon the sale or disposition thereof; (f) any
contract relating to the construction, acquisition or delivery of the
Improvements or any part thereof or interest therein; or (g) otherwise in
connection with the transactions contemplated by the Operative Documents.
Notwithstanding anything in the first paragraph of this definition
(except as provided in the final paragraph of this definition) the term
"Imposition" shall not mean or include:
(i) Taxes and impositions (other than Taxes that are, or are in
the nature of, sales, use, rental, transfer or property taxes) that
are imposed by any Governmental Authority and that are based upon or
measured by the gross or net income or gross or net receipts
(including any minimum taxes, withholding taxes or taxes on, measured
by or in the nature of capital, net worth, excess profits, items of
tax preference, capital stock, franchise, business privilege or doing
business taxes); provided that this clause (i) shall not be
interpreted to prevent a payment from being made on an After Tax Basis
if such payment is otherwise required to be so made;
(ii) any Tax or imposition to the extent, but only to such
extent, it relates to any act, event or omission that occurs, or
relates to a period, after the termination of the Lease (but not any
Tax or imposition that relates to any period prior to the termination
of the Lease);
(iii) any Tax or imposition for so long as, but only for so long
as, it is being contested in accordance with the provisions of Section
26.5(b) of the Lease, provided that
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Harbor Village Appendix 1
the foregoing shall not limit the Lessee's obligation under Section
26.5(b) of the Lease to advance to such Tax Indemnitee amounts with
respect to Taxes that are being contested in accordance with Section
26.5(b) of the Lease or any expenses incurred by such Tax Indemnitee
in connection with such contest;
(iv) any interest or penalties imposed on a Tax Indemnitee as a
result of a breach by such Tax Indemnitee of its obligations under
Section 26.5(e) of the Lease or otherwise as a result of a Tax
Indemnitee's failure to file any return or other documents timely and
as prescribed by applicable law; provided that this clause (iv) shall
not apply (x) if such interest or penalties arise as a result of a
position taken (or requested to be taken) by the Lessee in a contest
controlled by the Lessee under Section 26.5(b) of the Lease or (y) if
such failure is attributable to a failure by the Lessee to fulfill its
obligations under the Lease with respect to any such return;
(v) any Taxes or impositions imposed upon a Tax Indemnitee with
respect to any voluntary transfer, sale, financing or other voluntary
disposition of any interest in the Property or any part thereof, or
any interest therein or any interest or obligation under the Operative
Documents, or from any sale, assignment, transfer or other disposition
of any interest in a Tax Indemnitee or any Affiliate thereof, (other
than any transfer in connection with (1) the exercise by the Lessee of
its Purchase Option or any termination option or other purchase of the
Property by the Lessee, (2) the occurrence of an Event of Default, (3)
a Casualty or Condemnation affecting the Property, or (4) any
sublease, modification or addition to the Property by the Lessee);
(vi) any Taxes or impositions imposed on a Tax Indemnitee, to
the extent such Tax Indemnitee actually receives a credit (or
otherwise has a reduction in a liability for Taxes) in respect thereof
against Taxes that are not indemnified under the Lease (but only to
the extent such credit is not taken into account in calculating the
indemnity payment on an After Tax Basis);
(vii) Taxes imposed on or with respect to or payable by any Tax
Indemnitee based on, measured by or imposed with respect to any fees
received by such Tax Indemnitee;
(viii) any Taxes imposed against or payable by a Tax Indemnitee
resulting from, or that would not have been imposed but for, the gross
negligence or willful misconduct of such Tax Indemnitee;
(ix) Taxes imposed on or payable by a Tax Indemnitee to the
extent such Taxes would not have been imposed but for a breach by the
Tax Indemnitee or any Affiliate thereof of any representations,
warranties or covenants set forth in the Operative
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Harbor Village Appendix 1
Documents (unless such breach is caused by the Lessee's breach of its
representations, warranties or covenants set forth in the Operative
Documents);
(x) Taxes to the extent resulting from such Tax Indemnitee's failure
to comply with the provisions of Section 26.5(b) of the Lease, which
failure precludes or materially adversely affects the ability to conduct a
contest pursuant to Section 26.5(b) of the Lease (unless such failure is
caused by the Lessee's breach of its obligations);
(xi) Taxes which are included in Property Cost if and to the extent
actually paid;
(xii) Taxes that would have been imposed in the absence of the
transactions contemplated by the Operative Documents and Taxes imposed on
or with respect to or payable as a result of activities of a Tax Indemnitee
or Affiliate thereof unrelated to the transactions contemplated by the
Operative Documents;
(xiii) Taxes imposed on or with respect to or payable by a Tax
Indemnitee resulting from, or that would not have been imposed but for the
existence of, any Lessor Lien created by or through such Tax Indemnitee or
an Affiliate thereof and not caused by acts or omissions of the Lessee,
unless required to be removed by the Lessee;
(xiv) Any Tax imposed against or payable by a Tax Indemnitee to the
extent that the amount of such Tax exceeds the amount of such Tax that
would have been imposed against or payable by such Tax Indemnitee (or, if
less, that would have been subject to indemnification under Section 26.5 of
the Lease) if such Tax Indemnitee were not a direct or indirect successor,
transferee or assign of one of the original Tax Indemnitees; provided,
however, that this exclusion (xiv) shall not apply if such direct or
indirect successor, transferee or assign acquired its interest as a result
of a transfer while an Event of Default shall have occurred and is
continuing;
(xv) Taxes imposed on or with respect to or payable by a Tax
Indemnitee that would not have been imposed but for an amendment,
supplement, modification, consent or waiver to any Operative Document not
initiated, requested or consented to by the Lessee unless such amendment,
supplement, modification, consent or waiver (A) arises due to, or in
connection with there having occurred, an Event of Default or (B) is
required by the terms of the Operative Documents or is executed in
connection with any amendment to the Operative Documents required by law;
(xvi) Taxes in the nature of intangibles, stamp, documentary or
similar Taxes;
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Harbor Village Appendix 1
(xvii) Taxes imposed on or with respect to or payable by a Tax
Indemnitee or any Affiliate because such Tax Indemnitee or any Affiliate
thereof is not a United States person within the meaning of Section
7701(a)(30) of the Code;
(xviii) Any tax imposed by its express terms in lieu of or in
substitution for a Tax not subject to indemnity pursuant to the provisions
of Section 26.5 of the Lease.
Notwithstanding the foregoing, the exclusions from the definition of Impositions
set forth in clauses (i), (ii), (v), (vii), (xii), (xvi) and (xviii) (to the
extent that any such tax is imposed by its express terms in lieu of or in
substitution for a Tax set forth in clauses (i), (ii), (v), (vii), (xii) and
(xvi)) above shall not apply (but the other exclusions shall apply) to any Taxes
or any increase in Taxes imposed on a Tax Indemnitee net of any decrease in
taxes realized by such Tax Indemnitee, to the extent that such tax increase or
decrease would not have occurred if on the Funding Date the Lessor had advanced
funds to the Lessee in the form of a loan secured by the Property in an amount
equal to the Property Cost funded on the Funding Date, with debt service for
such loan equal to the Basic Rent payable on each Payment Date and a principal
balance at the maturity of such loan in an amount equal to the then outstanding
amount of the Advance at the end of the term of the Lease.
"Improvements" means, with respect to the Property, all buildings,
structures, Fixtures, Equipment, and other improvements of every kind existing
at any time and from time to time (including those purchased with amounts
advanced by the Lessor pursuant to the Lease) on or under the Land, together
with any and all appurtenances to such buildings, structures or improvements,
including sidewalks, utility pipes, conduits and lines, parking areas and
roadways, and including all Modifications and other additions to or changes in
the Improvements at any time and including all gas and electric fixtures,
radiators, heaters, washing machines, dryers, refrigerators, ovens, engines and
machinery, boilers, ranges, elevators and motors, plumbing and heating fixtures,
antennas, carpeting and other floor coverings, water heaters, awnings and storm
sashes, and cleaning apparatus which are or shall be attached to the Land or
said buildings, structures or improvements.
"Indemnitee" means the Lessor, the Trust Company, KCCI and SELCO, and their
successors, permitted assigns, directors, shareholders, partners, officers,
employees and agents.
"Institutional Lender" means an insurance company, bank, savings and loan
association, trust company, commercial credit corporation, pension plan, pension
fund or pension fund advisory firm, mutual fund or other investment company, or
an institution substantially similar to any of the foregoing, in each case
having at least $250 million in capital/statutory surplus or shareholders'
equity and at least $1 billion in total assets, or any entity wholly owned by
any of the institutions meeting the foregoing criteria.
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Harbor Village Appendix 1
"Insurance Requirements" means all terms and conditions of any insurance
policy either required by the Lease to be maintained by the Lessee, or required
by the Lender to be maintained pursuant to the Nomura Loan Agreement and the
Mezzanine Loan Agreement, and all reasonable and appropriate requirements of the
issuer of any such policy.
"Interest Period" shall have the meaning set forth in the Nomura Loan
Agreement for "Interest Accrual Period".
"Investment Company Act" means the Investment Company Act of 1940, as
amended, together with the rules and regulations promulgated thereunder.
"KCCI" means Key Corporate Capital Inc., a Michigan corporation, its
successors and assigns.
"Land" means the parcel of real property described on Annex 1 to the Lease
Supplement and all Appurtenant Rights attached thereto.
"Lease" means the Lease, dated as of the Documentation Date, between the
Lessor and the Lessee.
"Lease Balance" means, as of any date of determination, the sum of (a) the
Equity Balance (if same has not been paid as of such date) (b) all other amounts
owing to the Lessor and by the Lessor and Lessee under the Operative Documents
(including all due and unpaid Basic Rent and Supplemental Rent) and (c) all
amounts (but not duplicative of those described in clause (b) above) due and
owing or otherwise payable pursuant to the terms of the Nomura Loan Agreement
and the Mezzanine Loan Agreement, including, without limitation, any additional
amount required to prepay the Loan and the Mezzanine Loan or defease the Loan in
whole or in part in accordance with the terms thereof, including, without
limitation, the Defeasance Deposit or Yield Maintenance Premium, as applicable,
and all costs and fees payable in connection therewith.
"Lease Supplement" means the Memorandum of Lease substantially in the form
of Exhibit B to the Lease, executed and delivered by the Lessee and dated as of
the Acquisition Date for the Property.
"Lender" means Nomura Asset Capital Corporation, together with its
successor and assigns.
"Lessee" means Brookdale Living Communities of Illinois-HV, Inc., as
lessee, and its successors and assigns expressly permitted under the Operative
Documents.
"Lessor" means The Harbor Village Business Trust, a Delaware business
trust.
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Harbor Village Appendix 1
"Lessor Basic Rent" means an amount payable quarterly in advance beginning
on the Acquisition Date in the amount of $11,617.27 and on each third Payment
Date and the Expiration Date in an amount equal to the product of the Eurodollar
Lease Rate and $675,000, calculated for the number days then elapsed since the
previous payment of Lessor Basic Rent over a year of 360 days.
"Lessor Lien" means any Lien, true lease or sublease or disposition of
title arising as a result of (a) any claim against the Lessor not resulting from
the transactions contemplated by the Operative Documents (all Liens created or
existing under the Loan Documents and Mezzanine Loan Documents are expressly
made part of the transactions contemplated by the Operative Documents), (b) any
act or omission of the Lessor which is not required by the Operative Documents
or is in violation of any of the terms of the Operative Documents, (c) any claim
against the Lessor with respect to Taxes or Transaction Expenses against which
Lessee is not required to indemnify Lessor pursuant to the Lease or (d) any
claim against the Lessor arising out of any transfer by the Lessor of all or any
portion of the interest of the Lessor in the Property or the Operative Documents
other than the transfer of title to or possession of the Property by the Lessor
pursuant to and in accordance with the Lease or pursuant to the exercise of the
remedies set forth in Article XX of the Lease.
"Lessor Pledge Agreement" means the Pledge Agreement, dated as of the
Documentation Date, between the Lessor and KCCI, pursuant to which the Lessor
pledged to KCCI the Certificate A.
"Lien" means any mortgage, deed of trust, pledge, security interest,
encumbrance, lien, easement, servitude or charge of any kind, including, without
limitation, any irrevocable license, conditional sale or other title retention
agreement, any lease in the nature thereof, or any other right of or arrangement
with any creditor to have its claim satisfied out of any specified property or
asset with the proceeds therefrom prior to the satisfaction of the claims of the
general creditors of the owner thereof, whether or not filed or recorded, or the
filing of, or agreement to execute as "debtor", any financing or continuation
statement under the Uniform Commercial Code of any jurisdiction or any federal,
state or local lien imposed pursuant to any Environmental Law.
"Loan Documents" has the meaning specified therefor in the Nomura Loan
Agreement.
"Marketing Period" means the period commencing upon the Lessee's election
to exercise the Remarketing Option pursuant to Section 24.1(a) of the Lease and
ending on the Expiration Date.
"Material" and "Materially" mean material to (i) as to any Person, the
consolidated financial position, business or consolidated results of operations
of such Person, (ii) as to any
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Harbor Village Appendix 1
Person, the ability of such Person to perform in any material respect its
respective obligations under the Operative Documents to which it is a party, or
(iii) the value or condition of the Property.
"Material Assets" means with respect to any Person all Material interests
in any kind of property or asset, whether real, personal or mixed, or tangible
or intangible.
"Mezzanine Loan" has the meaning set forth in the Mezzanine Loan Agreement.
"Mezzanine Loan Agreement" means the Mezzanine Loan Agreement dated on or
about March 6, 1998 by and among the Lessor, as Borrower, Nomura Asset Capital
Corporation, as Lender, and the Lessee, as Guarantor and Operator, together with
all amendments, modifications and supplements thereto.
"Mezzanine Loan Documents" has the meaning set forth in the Mezzanine Loan
Agreement.
"Modifications" is defined in Section 14.1(a) of the Lease.
"Net Proceeds" means all amounts paid in connection with any Casualty or
Condemnation or any sale of the Property pursuant to Lessor's exercise of
remedies under Section 20.2 of the Lease or the Lessee's exercise of the
Remarketing Option under Article XXIV of the Lease, and all interest earned
thereon, less the expense of claiming and collecting such amounts, including all
costs and expenses in connection therewith for which the Lessor is entitled to
be reimbursed pursuant to the Lease.
"Nomura Loan Agreement" means the Loan Agreement, dated on or about March
6, 1998, by and among the Lessor, as Borrower, Nomura Asset Capital Corporation,
as Lender, and the Lessee, as Guarantor and Operator, together with all
amendments, modifications and supplements thereto.
"Operative Documents" means the following:
(a) the Lease;
(b) the Deed;
(c) the Lease Supplement;
(d) the SELCO Loan Agreement (Loan Agreement, dated as of March 6,
1998, between the Trust, as borrower and KCCI, as lender) and the
note related thereto;
(e) the Loan Documents;
(f) the Certificate Pledge Agreement;
(g) the Securities Pledge Agreement;
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(h) the Lessor Pledge Agreement;
(i) the SELCO Indemnity;
(j) the Trust Agreement; and
(k) the Mezzanine Loan Documents.
"Overdue Rate" shall have the meaning set forth in the Nomura Loan
Agreement and, while the Mezzanine Loan Agreement is outstanding, the Mezzanine
Loan Agreement, for "Default Rate."
"Parent" means Brookdale Living Communities, Inc.
"Payment Date" has the meaning set forth in the Nomura Loan Agreement and,
while the Mezzanine Loan is outstanding, the Mezzanine Loan Agreement.
"Permitted Liens" shall have the meaning set forth in the Nomura Loan
Agreement and, while the Mezzanine Loan Agreement is outstanding, the Mezzanine
Loan Agreement, for "Permitted Encumbrances", and including Lessor Liens.
"Pledge Agreements" means the Securities Pledge Agreement, the Certificate
Pledge Agreement and the Lessor Pledge Agreement.
"Pledged Securities" means the securities pledged to the Lessor by the
Lessee pursuant to the Securities Pledge Agreement and the proceeds thereof.
"Prime Rate" means the interest rate establish by KeyBank, N.A. as it's
prime rate, whether or not such rate is publicly announced and such rate may not
be the lowest interest rate charged by KeyBank, N.A. for commercial or other
extensions of credit.
"Property" means (a) a fee interest in the Land and (b) all of the
Improvements at any time located on or under the Land.
"Property Cost" means the amount of the Advance funded to the Lessee for
the purpose of acquiring the Property and paying Transaction Expenses relating
to such funding and acquisition, as such amount is set forth in the Funding
Request relating to the acquisition of the Property.
"Purchase Notice" is defined in Section 22.1 of the Lease.
"Purchase Option" is defined in Section 22.1 of the Lease.
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"Release" means any release, pumping, pouring, emptying, injecting,
escaping, leaching, dumping, seepage, spill, leak, flow, discharge, disposal or
emission of a Hazardous Substance in violation of Environmental Law.
"Remarketing Option" is defined in Section 24.1 of the Lease.
"Renewal Term" is defined in Section 23.1 of the Lease.
"Rent" means, collectively, Basic Rent and Supplemental Rent, in each case
payable under the Lease.
"Requesting Party" is defined in Section 27.1 of the Lease.
"Required Modification" is defined in Section 14.1(a) of the Lease.
"Requirement of Law" means all Federal, state, county, municipal and other
governmental statutes, laws, rules, orders, regulations, ordinances, judgments,
decrees and injunctions affecting the Property, the Improvements or the
demolition, construction, use or alteration thereof, whether now or hereafter
enacted and in force, including any that require repairs, modifications or
alterations in or to the Property or in any way limit the use and enjoyment
thereof (including all building, zoning and fire codes and the Americans with
Disabilities Act of 1990, 42 U.S.C. (S)(S) 1201 et seq. and any other similar
Federal, state or local laws or ordinances and the regulations promulgated
thereunder) and any that may relate to environmental requirements (including all
Environmental Laws), and all permits, certificates of occupancy, licenses,
authorizations and regulations relating thereto, and all covenants, agreements,
restrictions and encumbrances contained in any instruments which are either of
record or known to the Lessee affecting the Property, the Appurtenant Rights and
any easements, licenses or other agreements entered into pursuant to Section
15.2 of the Lease.
"Responsible Employee" means, with respect to the Lessee, its Chairman,
President, any of its corporate Vice Presidents, its corporate Controller, its
corporate Treasurer, its corporate Assistant Treasurers or others duly
authorized by such Person to execute documents pursuant to Section 4.3(g) of the
Lease.
"Responsible Employee's Certificate" means a certificate signed by any
Responsible Employee, which certificate shall certify as true and correct the
subject matter being certified to in such certificate.
"Securities Pledge Agreement" means the Securities Pledge Agreement, dated
as of March 6, 1998, between the Lessee and the Lessor pursuant to which the
Lessee pledged the Pledged Securities to the Lessor.
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Harbor Village Appendix 1
"SELCO" means SELCO Service Corporation, an Ohio corporation and its
successors and assigns.
"SELCO Basic Rent" means an amount payable quarterly in advance beginning
on the Acquisition Date in the amount of $6,990.46 and on each third Payment
Date and the Expiration Date in an amount, if any, that (a) the product of the
Eurodollar Lease Rate and the then outstanding balance (including principal and
Capitalized Interest) of the B Loan, calculated for the number of days to elapse
from the current SELCO Payment Date to the subsequent SELCO Payment Date over a
year of 360 days, exceeds (b) interest accreted/compounded on the Certificate A
from the current SELCO Payment Date to the subsequent SELCO Payment Date;
provided, however, that to the extent that on a SELCO Payment Date, the amount
of the B Loan (inclusive of principal and Capitalized Interest) is less than the
amount of the Certificate A (inclusive of principal and accreted/compounded
interest) (such differential being referred to herein as the "Deficiency") SELCO
Basic Rent shall be payable in the amount, if any, that SELCO Basic Rent
otherwise payable exceeds the Deficiency, if at all.
"SELCO Indemnity" means the Indemnity Agreement dated as of March 6, 1998
from the Parent to the Borrower's Trustee, KCCI and SELCO.
"SELCO Loan Agreement" means the Loan Agreement, dated as of March 6, 1998,
between The Harbor Village Business Trust, as Borrower, and KCCI, as lender.
"SELCO Payment Date" means the Acquisition Date, each third Payment Date
thereafter and the Expiration Date.
"Seller" means the Person selling the Land to the Lessor.
"Shortfall Amount" means, as of the Expiration Date, an amount equal to (i)
the Lease Balance, minus (ii) the Contingent Rental Adjustment received by the
Lessor from the Lessee pursuant to Section 24.1(i) of the Lease, minus (iii) the
amount of the highest binding, written, unconditional, irrevocable offer to
purchase the Property obtained by the Lessee pursuant to Section 24.1(f) of the
Lease; provided, however, that if the sale of the Property to the Person
submitting such offer is not consummated on or prior to the Expiration Date,
then the term "Shortfall Amount" shall mean an amount equal to (i) the Lease
Balance, minus (ii) the Contingent Rental Adjustment received by the Lessor from
the Lessee pursuant to Section 24.1(i) of the Lease.
"Significant Condemnation" means a Condemnation which causes the Lender to
accelerate the Principal Indebtedness under the Nomura Loan Agreement or the
Principal
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Harbor Village Appendix 1
Indebtedness (as defined in the Mezzanine Loan Agreement) under the Mezzanine
Loan Agreement.
"Subsidiary" of any Person means a corporation or other entity of which
securities or other ownership interests having ordinary voting power (other than
securities or other ownership interests having such power by reason of the
happening of a contingency) to elect the majority of the board of directors or
other persons performing similar functions are at the time directly or
indirectly owned by such Person, by such Person and one or more of its
Subsidiaries or by one or more of such Person's Subsidiaries.
"Supplemental Rent" means all amounts, liabilities and obligations (other
than Basic Rent) which Lessee assumes or agrees to pay to Lessor or any other
Person under the Lease or under any of the other Operative Documents, and all
amounts, liabilities and obligations (other than as described in the definition
of Basic Rent) payable by Lessor, as Borrower, under the Nomura Loan Agreement
or under any other Loan Document, the Mezzanine Loan Agreement, the Mezzanine
Loan Documents, including, without limitation, Break Costs, payments of Excess
Cash Flow, Initial Basic Carrying Costs Amount, Defeasance Deposit, Impositions,
the Initial Capital Reserve Amount and the Initial Securitization Expense
Amount, the Initial Construction Amount, the Initial Trustee Amount, fees
thereunder and any Yield Maintenance Premium and prepayment make whole amounts.
"Tax Indemnitee" means the Lessor, the Trust Company, KCCI and SELCO and
their successors, permitted assigns, directors, shareholders, partners,
officers, employees and agents.
"Taxes" is defined in the definition of Impositions.
"Term" means the period commencing on the Acquisition Date and ending on
the Expiration Date.
"Termination Date" is defined in Section 19.2 and 20.2(e) of the Lease.
"Termination Notice" is defined in Section 19.1 of the Lease.
"Transaction Expenses" means all costs and expenses incurred in connection
with the preparation, execution and delivery of the Operative Documents and the
transactions contemplated by the Operative Documents including without
limitation:
(a) the reasonable fees, out-of-pocket expenses and disbursements of
counsel for each of the Lessor and the Lessee in negotiating the terms of
the Operative Documents and the other transaction documents, preparing for
the closing under, and rendering opinions in connection with, such
transactions and in rendering other services
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Harbor Village Appendix 1
customary for counsel representing parties to transactions of the types
involved in the transactions contemplated by the Operative Documents;
(b) the reasonable fees, out-of-pocket expenses and disbursements of
any law firm or other external counsel of the Lessor in connection with (1)
any amendment, supplement, waiver or consent with respect to any Operative
Documents requested or approved by the Lessee and (2) any enforcement of
any rights or remedies against the Lessee in respect of the Operative
Documents;
(c) any other reasonable fees, out-of-pocket expenses, disbursements
or cost of the Lessor to the Operative Documents or any of the other
transaction documents;
(d) any and all Taxes and fees incurred in recording, registering or
filing any Operative Document or any other transaction document, any deed,
declaration, mortgage, security agreement, notice or financing statement
with any public office, registry or governmental agency in connection with
the transactions contemplated by the Operative Documents;
(e) any title fees, premiums and escrow costs and other expenses
relating to title insurance and the closings contemplated by the Operative
Documents;
(f) all expenses relating to all Environmental Audits and other due
diligence and other costs and expenses incurred in connection with the
negotiation of the purchase of the Property and in connection with the
investigation and purchase of the Property;
(g) all Transaction Costs described in Section 8.24 of the Nomura
Loan Agreement and Section 8.24 of the Mezzanine Loan Agreement; and
(h) all reasonable fees, out-of-pocket expenses, disbursements or
costs (including counsel fees and expenses) of the Trustee and the
Custodian incurred in connection with the Operative Document.
"Trust Agreement" means the Trust Agreement, dated March 5, 1998, between
the Lessor and SELCO.
"Trust Company" means Wilmington Trust Company in its individual capacity.
"Uniform Commercial Code" and "UCC" mean the Uniform Commercial Code as in
effect in any applicable jurisdiction.
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"Yield Maintenance Premium" has the meaning set forth in the Nomura Loan
Agreement, and while the Mezzanine Loan is outstanding, the Mezzanine Loan
Agreement.
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EXHIBIT 10.2
LOAN AGREEMENT
Dated as of March __, 1998
by and among
THE HARBOR VILLAGE BUSINESS TRUST
(as Borrower)
BROOKDALE LIVING COMMUNITIES OF ILLINOIS-HV, INC.
(as Operator and Guarantor)
and
NOMURA ASSET CAPITAL CORPORATION
(as Lender)
<PAGE>
TABLE OF CONTENTS
<TABLE>
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ARTICLE I CERTAIN DEFINITIONS................................................................... 2
Section 1.1. Definitions.......................................................................... 2
ARTICLE II GENERAL TERMS......................................................................... 46
Section 2.1. Amount of the Loan; Advances....................................................... 46
Section 2.2. Use of Proceeds.................................................................... 46
Section 2.3. Security for the Loan.............................................................. 46
Section 2.4. Borrower's Note.................................................................... 47
Section 2.5. Principal and Interest Payments.................................................... 47
Section 2.6. Voluntary Defeasance............................................................... 49
Section 2.7. Prepayment......................................................................... 50
Section 2.8. Application of Payments............................................................ 50
Section 2.9. Payment of Debt Service, Method and Place of Payment............................... 51
Section 2.10. Taxes.............................................................................. 51
Section 2.11. Defeasance Requirements............................................................ 52
Section 2.12. Central Cash Management............................................................ 53
Section 2.13. Security Agreement................................................................. 66
Section 2.14. Securitization..................................................................... 68
Section 2.15. Supplemental Mortgage Affidavits................................................... 71
ARTICLE III CONDITIONS PRECEDENT.................................................................. 71
Section 3.1. Conditions Precedent to the Closing Date Advance................................... 71
Section 3.2. Conditions Precedent to the Earn-Out Advance....................................... 78
Section 3.3. Form of Loan Documents and Related Matters......................................... 80
ARTICLE IV REPRESENTATIONS AND WARRANTIES........................................................ 80
Section 4.1. Representations and Warranties of Borrower and Operator............................ 80
Section 4.2. Survival of Representations and Warranties......................................... 101
ARTICLE V AFFIRMATIVE COVENANTS................................................................. 101
Section 5.1. Borrower and Operator Covenants.................................................... 101
ARTICLE VI NEGATIVE COVENANTS.................................................................... 126
Section 6.1. Borrower and Operator Negative Covenants........................................... 126
ARTICLE VII DEFAULTS.............................................................................. 131
</TABLE>
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<TABLE>
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<S> <C>
Section 7.1. Event of Default............................................................... 131
Section 7.2. Remedies....................................................................... 136
Section 7.3. Remedies Cumulative............................................................ 137
Section 7.4. Lender's Right to Perform...................................................... 137
Section 7.5. Operator's Limited Right to Cure............................................... 138
ARTICLE VIII MISCELLANEOUS......................................................................... 139
Section 8.1. Survival....................................................................... 139
Section 8.2. Lender's Discretion............................................................ 139
Section 8.3. Governing Law.................................................................. 139
Section 8.4. Modification, Waiver in Writing................................................ 141
Section 8.5. Delay Not a Waiver............................................................. 141
Section 8.6. Notices........................................................................ 141
SECTION 8.7. TRIAL BY JURY.................................................................. 143
Section 8.8. Headings....................................................................... 143
Section 8.9. Assignment..................................................................... 143
Section 8.10. Severability................................................................... 143
Section 8.11. Preferences.................................................................... 143
Section 8.12. Waiver of Notice............................................................... 144
Section 8.13. Intentionally Omitted.......................................................... 144
Section 8.14. Exculpation.................................................................... 144
Section 8.15. Exhibits Incorporated.......................................................... 146
Section 8.16. Offsets, Counterclaims and Defenses............................................ 146
Section 8.17. No Joint Venture or Partnership................................................ 147
Section 8.18. Waiver of Marshalling of Assets Defense........................................ 147
Section 8.19. Waiver of Counterclaim......................................................... 147
Section 8.20. Conflict; Construction of Documents............................................ 147
Section 8.21. Brokers and Financial Advisors................................................. 148
Section 8.22. Counterparts................................................................... 148
Section 8.23. Estoppel Certificates.......................................................... 148
Section 8.24. Payment of Expenses............................................................ 148
Section 8.25. Bankruptcy Waiver.............................................................. 149
Section 8.26. Entire Agreement............................................................... 149
Section 8.27. Dissemination of Information................................................... 150
Section 8.28. Limitation of Interest......................................................... 150
Section 8.29. Indemnification................................................................ 151
Section 8.30. Borrower and Operator Acknowledgments.......................................... 151
Section 8.31. Publicity...................................................................... 152
Section 8.32. Recalculation of Loan Amount................................................... 152
Section 8.33. Transfer of Fee Simple Interest in the Facility to Operator on the
Optional Prepayment Date....................................................... 156
Section 8.34. Amendments to Operator Lease................................................... 157
Section 8.35. Subordination and Standstill................................................... 158
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 8.36. Limitation of Liability................................................... 159
Section 8.37. Intentionally deleted..................................................... 160
Section 8.38. Buy-Up.................................................................... 160
Section 8.39. Cross-Default and Cross-Collateralization................................. 161
</TABLE>
<PAGE>
EXHIBITS
Exhibit A - Operating Expense Certificate
Exhibit B - Additional Definitions
Exhibit C-1 - Description of Construction Project
Exhibit C-2 - Description of Environmental Remediation
Exhibit D - Terms of Class B Equity
Exhibit E - Terms of Class C Equity
Exhibit F - Preferred Cash Management Terms
Exhibit G - Underwriting NOI Criteria
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT, made as of March ___, 1998, is by and among
NOMURA ASSET CAPITAL CORPORATION, a Delaware corporation, having an address at 2
World Financial Center, Building B, New York, New York 10281-1198, Attention:
Raymond M. Anthony, Telefax Number (212) 667-1666 (together, with its successors
and assigns, "Lender"), THE HARBOR VILLAGE BUSINESS TRUST, a Delaware business
------
trust with an address of c/o Wilmington Trust Company, as Trustee, Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention:
Corporate Trust Administration, Telefax Number (302) 651-8882 (the "Borrower")
--------
and BROOKDALE LIVING COMMUNITIES OF ILLINOIS-HV, INC., a Delaware corporation,
having an address of c/o Brookdale Living Communities, Inc., 77 West Wacker
Drive, Suite 4800, Chicago, Illinois 60601, Attention: Darryl W. Copeland, Jr.,
Telecopier Number 312/997-3699 (the "Operator").
--------
RECITALS
WHEREAS, Borrower desires to obtain a loan (the "Loan") from Lender in
----
an aggregate principal amount of $15,000,000 (such amount together with the
amount of the Earn-Out Advance, if any, the "Loan Amount");
-----------
WHEREAS, Lender is willing to make the Loan on the condition that
Borrower and Operator 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 Operator contemplate that all or any
portion of Lender's interest in the Loan and to the Loan Documents may be
assigned, in whole or in part, by Lender to another Person, including, without
limitation, to a trustee on behalf of security holders in connection with a
Securitization.
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:
<PAGE>
2
ARTICLE I
CERTAIN DEFINITIONS
-------------------
Section 1.1. Definitions. For all purposes of this Agreement:
-----------
(a) the capitalized terms defined in this Article I have the meanings
---------
assigned to them in this Article I, and include the plural as well as the
singular;
(b) all accounting terms have the meanings assigned to them in
accordance with GAAP;
(c) the words "herein", "hereof", and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section, or other subdivision; and
(d) the following terms have the following meanings:
"1940 Act" has the meaning set forth within the definition of
--------
"Eligible Trustee."
"Account Collateral" has the meaning provided in Section 2.13(a).
------------------ ------- -------
"Accounts" means the "Accounts" as defined and described in each of
--------
the Mortgages.
"Accrued Interest" has the meaning provided in Section 2.5(e).
---------------- ------- ------
"Actual Construction Costs" means all of the costs and expenses
-------------------------
actually incurred by Borrower to bona fide third parties in connection with the
actual renovation of the Facility in accordance with the Construction Project.
Any costs or expenses for materials and supplies that are not incorporated into
the improvements at the Facility or that are stored on, at, or off of the
Facility shall not be deemed part of the Actual Construction Costs unless Lender
decides in its reasonable discretion to deem such costs or expenses as part of
the Actual Construction Costs. Any costs or expenses that are not related to the
Facility shall not be deemed part of the Actual Construction Costs unless Lender
decides in its reasonable discretion to deem such costs or expenses as part of
the Actual Construction Costs.
"Actual Prepayment Amount" has the meaning provided in Section
------------------------ -------
8.32(c).
- -------
<PAGE>
3
"Adjusted Net Operating Income" means, for any period, the Net
-----------------------------
Operating Income for such period reduced by (i) a capital expenditure reserve
amount, pro rated for the applicable period, equal to the greater of (a) $250
multiplied by the number of apartment units in the Facility per annum and (b)
the amount indicated in the Engineering Report(s) as the annual amount required
to maintain the Facility, (ii) annual base management fees, pro rated for the
applicable period, equal to the greater of (y) actual management fees or (z)
five percent (5%) of Gross Revenues, and (iii) an amount necessary to reflect a
minimum annual vacancy factor, pro rated for the applicable period, equal to the
greatest of (a) the actual vacancy for the Facility, (b) five percent (5%) of
Gross Revenues and (c) the market vacancy rate. Notwithstanding the foregoing
part of this definition of "Adjusted Net Operating Income" to the contrary, if
-----------------------------
the period for which Adjusted Net Operating Income is being calculated includes
periods prior to the Closing Date, Adjusted Net Operating Income shall be
calculated for such period based on the applicable pro rata portion of Base
Adjusted NOI.
"Advance" means each of the Closing Date Advance and the Earn-Out
-------
Advance.
"Advance Closing Date" means, with respect to any Advance, the date
--------------------
on which Lender makes such Advance.
"Advisor" means Nomura Securities International, Inc.
-------
"Affiliate" of any specified Person means any other Person
---------
controlling, controlled by or under common control with such specified Person.
For the purposes of this Agreement, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities or other beneficial interests, by contract or otherwise; and the
terms "controls", "controlling" and "controlled" have the meanings correlative
to the foregoing.
"Aggregate Principal Indebtedness" means the Principal Indebtedness
--------------------------------
plus the Principal Indebtedness (as defined in the Mezzanine Loan Agreement).
"Agreement and Loan Agreement" each means this Loan Agreement, as the
----------------------------
same may from time to time hereafter be modified, supplemented or amended.
"Amortizable Amount" has the meaning provided in Section 8.32(c)(i).
------------------ ------- -----------
"Annual Operating Budget" means an annual budget for the operations of
-----------------------
the Facility (broken down on a month-by-month basis) prepared, and submitted by
Operator to
<PAGE>
4
Lender for the period from the Closing Date until December 31, 1998. Thereafter,
Operator shall only be required to submit such a budget to Lender (i) on the
date on which the Preferred Equity Holder acquires equity interests in the
Borrower and/or Operator and (ii) on the Optional Prepayment Date, and after
each such date on each December 1 (provided in the case of clause (i) such
obligation shall only be during the time in which the Preferred Equity Holder
holds equity interests in the Borrower and/or Operator) for each succeeding
calendar year, all in form and substance reasonably satisfactory to Lender and
as reasonably approved by Lender, as the same shall be amended by Operator from
time to time, with Lender's written consent which shall not be unreasonably
withheld. Lender's approval shall be deemed given if Lender does not respond to
Operator's proposed budget or amendment thereto within thirty (30) days of
Lender's receipt thereof.
"Appraisals" means the appraisals, if any, with respect to the
----------
Facility delivered to Lender in connection with the Loan and any more recent
appraisal of the Facility delivered to Lender or Lender's servicer, as
applicable, each made by an Appraiser at the request of Operator or Lender, as
any of the same may be updated by recertification from time to time (and
pursuant to the terms of this Agreement) by the Appraiser performing such
Appraisal.
"Appraiser" means any Independent appraiser selected by Operator (and
---------
reasonably satisfactory to Lender) who is (i) a member of the Appraisal
Institute with a national practice and who has at least ten years experience
with real estate of the same type and in the geographic area of the Facility to
be appraised or (ii) otherwise reasonably acceptable to Lender.
"Appurtenant Rights" has the meaning set forth in the Mortgages.
------------------
"Assignments of Agreements" means, collectively, the Assignment of
-------------------------
Agreements - Borrower and the Assignment of Agreements - Operator.
"Assignment of Agreements - Borrower" means, with respect to the
-----------------------------------
Facility, a first priority Assignment of Agreements Affecting Real Estate, in
form and substance satisfactory to Lender in Lender's reasonable discretion,
dated as of the Closing Date, from Borrower, as assignor, to Lender, as
assignee, 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 Agreements - Operator" means, with respect to the
-----------------------------------
Facility, a first priority Assignment of Agreements Affecting Real Estate, in
form and substance satisfactory to Lender in its reasonable discretion, dated as
of the Closing Date from the Operator, as assignor, to Lender, as assignee, as
the same may thereafter from time to time be supplemented, amended, modified or
extended by one or more written agreements supplemental
<PAGE>
5
thereto.
"Assignment of Leases - Borrower" means, with respect to the Facility,
-------------------------------
a first priority Assignment of Leases and Rents, in form and substance
satisfactory to Lender in Lender's reasonable discretion, dated as of the
Closing Date from Borrower, as assignor, to Lender, as assignee, assigning to
Lender Borrower's interest in and to the Leases (as defined in the Mortgage) and
the Rents (as defined in the Mortgage) with respect to the Facility 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.
"Assignment of Leases - Operator" means, with respect to the Facility,
-------------------------------
a first priority Assignment of Leases and Rents, in form and substance
satisfactory to Lender in Lender's reasonable discretion, dated as of the
Closing Date from Operator, as assignor, to Lender, as assignee, assigning to
Lender Operator's interest in and to the Leases (as defined in the Leasehold
Mortgage) and the Rents (as defined in the Leasehold Mortgage) with respect to
the Facility 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.
"Assignments of Leases" means the Assignment of Leases - Borrower and
---------------------
Assignment of Leases - Operator, collectively.
"Base Adjusted NOI" means the amount shown on Exhibit B.
----------------- ---------
"Base Payment" has the meaning provided in Section 2.5(c).
------------ ------- ------
"Basic Carrying Costs" means the following costs with respect to the
--------------------
Facility (i) real property taxes, assessments and Impositions (including without
limitation any payments due under any ground lease and any ground rents)
applicable to the Facility, and (ii) insurance premiums for policies of
insurance required or permitted to be maintained by Borrower and/or Operator
pursuant to this Agreement, the Operator Lease or the other Loan Documents.
"Basic Carrying Costs Monthly Installment" means, with respect to the
----------------------------------------
Facility, Lender's reasonable and good faith estimate of one-twelfth (1/12th) of
the annual amount of the Basic Carrying Costs (provided, that Lender may
calculate reasonably and in good faith the monthly amount to assure that funds
are reserved in sufficient amounts to enable the payment of all Impositions,
including, without limitation, taxes and insurance premiums thirty (30) days
prior to their respective due dates). Should the Basic Carrying Costs 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 Basic Carrying Costs Monthly
Installment shall be Lender's
<PAGE>
6
reasonable and good faith estimate based on one-twelfth (1/12th) of the
aggregate Basic Carrying Costs for the prior Fiscal Year or payment period, with
reasonable adjustments as reasonably determined by Lender. As soon as the Basic
Carrying Costs are fixed for the then current Fiscal Year or period, the next
ensuing Basic Carrying Costs Monthly Installment shall be adjusted to reflect
any deficiency or surplus in prior Basic Carrying Costs Monthly Installments.
"Basic Carrying Costs Sub-Account" means the Sub-Account of the Cash
--------------------------------
Collateral Account established and maintained pursuant to Section 2.12 relating
------- ----
to the payment of Basic Carrying Costs.
"Beneficial Owner" means SELCO Service Corporation, an Ohio
----------------
corporation.
"Beneficial Owner's Certificate" means the Beneficial Owner's
------------------------------
Certificate in form and substance satisfactory to Lender in Lender's reasonable
discretion dated as of the Closing Date.
"Borrower" has the meaning provided in the first paragraph of this
--------
Agreement.
"Borrower's Trustee" means Wilmington Trust Company, a Delaware
------------------
banking association, not in its individual capacity but solely as trustee under
the Trust Agreement (as defined in the Operator Loan).
"Business Day" means any day other than (i) a Saturday or a Sunday,
------------
and (ii) a day on which federally insured depository institutions in New York,
New York, Chicago, Illinois, Wilmington, Delaware or any jurisdiction in which
the Facility, Cash Collateral Account or Collection Account is located are
authorized or obligated by law, regulation, governmental decree or executive
order to be closed.
"Capital Improvement Costs" means costs incurred by Borrower and/or
-------------------------
Operator in connection with capital improvements to the Facility, exclusive of
Actual Construction Costs.
"Capital Reserve Amount" means with respect to the Facility, an amount
----------------------
equal to the greater of (i) $250 multiplied by the number of apartment units in
the Facility per annum and (ii) the amount indicated in the Engineering
Report(s) as the annual amount required to maintain the Facility.
"Capital Reserve Monthly Installment" means, with respect to the
-----------------------------------
Facility, an amount equal to one-twelfth (1/12th) of the Capital Reserve Amount.
<PAGE>
7
"Capital Reserve Sub-Account" means the Sub-Account of the Cash
---------------------------
Collateral Account established and maintained pursuant to Section 2.12 relating
------- ----
to the payment of Capital Improvement Costs.
"Cash Collateral Account Bank" means the bank chosen by Lender to hold
----------------------------
the Cash Collateral Account, or any successor bank hereafter selected by Lender
in accordance with the terms hereof.
"Cash Management Event" shall mean any one or more of the following:
---------------------
(i) the occurrence of a Late Payment three (3) times in a twelve (12) month
consecutive period; (ii) a Default (other than as described in clause (i)) or an
----------
Event of Default; (iii) Borrower's or Operator's failure to comply with the
third or fourth sentences of Section 2.12(a)(ii); (iv) Borrower's or Operator's
-------------------
failure to comply with the second or third sentence of Section 2.12(a)(iii); (v)
--------------------
if the audited financial reports delivered to Lender pursuant to Section
-------
5.1(b)(Q) indicates that less than ninety percent (90%) of Rents, Money and
- ---------
Gross Revenue has been deposited in the Collection Account; (vi) the Optional
Prepayment Date; or (vii) the ownership by the Preferred Equity Holder of any
equity interests in the Operator and/or the Borrower pursuant to Section 8.32
------------
hereof.
"Class B Amount" has the meaning provided in Section 8.32(c)(i).
-------------- ------- ----------
"Class B Equity Interests" has the meaning set forth in Exhibit D.
------------------------ ---------
"Class C Amount" has the meaning provided in Section 8.32(c)(ii).
-------------- ------- -----------
"Class C Equity Interests" has the meaning set forth on Exhibit E
------------------------ ---------
hereto.
"Closing Date" means the date of this Agreement.
------------
"Closing Date Advance" means the Advance made by Lender to Borrower
--------------------
on the Closing Date in the amount of $15,000,000.
"Code" means the Internal Revenue Code of 1986, as amended, and as it
----
may be further amended from time to time, any successor statutes thereto, and
applicable U.S. Department of Treasury regulations issued pursuant thereto in
temporary or final form.
"Collateral" means, collectively, the Land, Appurtenant Rights,
----------
Improvements, Equipment, Rents, Leases, Accounts, Account Collateral, General
Intangibles, goods, Instruments, Inventory, Money, Permitted Investments and (to
the full extent assignable)
<PAGE>
8
Permits, investment properties, and proceeds of written letters of credit and
all Proceeds and products of the foregoing, all whether now owned or hereafter
acquired and all other property which is or hereafter may become subject to a
Lien in favor of Lender as security for the Loan; provided, however, the
"Collateral" shall not include the Excepted Property.
"Collateral Security Instrument" means any right, document or
------------------------------
instrument, other than the Mortgages, given as security for the Loan (including,
without limitation, the Assignments of Leases and the Assignments of
Agreements), as the same may hereafter from time to time be supplemented,
amended, extended or modified.
"Collection Account" has the meaning provided in Section 2.12(a)(i).
------------------ ------- ----------
"Collection Account Agreement" has the meaning set forth in Section
---------------------------- -------
2.12(b).
- -------
"Collection Account Bank" means, with respect to the Facility, the
-----------------------
applicable collection bank for the Facility and any successor bank hereafter
selected by Operator and reasonably approved by Lender.
"Completion of Construction" means the date on which all of the
--------------------------
following conditions have been satisfied (as reasonably determined by Lender in
its discretion and all of which shall be in form and substance reasonably
acceptable to Lender in its discretion):
(i) The renovation of the Improvements have been substantially
completed in accordance with the description of the Construction
Project set forth on Exhibit C-2, as certified by Operator;
-----------
(ii) All Permits required for the use and occupancy of the Land
and the Improvements (including, but not limited to, a temporary (if
reasonably acceptable to Lender) or permanent unconditional
certificate of occupancy for each building comprising any part of the
Improvements and each other improvement requiring any such Permit
under applicable laws) for the purposes intended have been issued by
the appropriate Governmental Authority and are final and unappealable
and in full force and effect, confirming completion of construction
and renovation of the Improvements sufficient to permit use and
occupancy of the space by Borrower, Operator, tenants or guests as the
case may be; and all utilities services necessary for the full
operation of the Facility are installed, permitted, hooked-up and
operational;
(iii) The Improvements have been equipped with all material
fixtures,
<PAGE>
9
furnishings, and equipment required for the intended use and operation
of the Improvements as a congregate care facility with related
amenities or which may be required by applicable Legal Requirements;
and
(iv) All Actual Construction Costs and other costs and expenses
incurred in connection with the Construction Project (including any
and all non-construction and "soft" costs and expenses in connection
with the Facility and all Transaction Costs) shall have been paid in
full or are available from undisbursed funds in the Construction Sub-
Account or Operator equity (as demonstrated by Operator to Lender to
Lender's reasonable satisfaction) for such purpose.
"CON" has the meaning set forth in Section 4.1(d)(AK)(ii).
--- ------- --------------
"Condemnation Proceeds" has the meaning provided in Section 2.12(h).
--------------------- ------- -------
"Construction Budget" means a detailed business plan and construction
-------------------
budget which shall be in form and substance satisfactory to Lender in its
reasonable discretion and which shall include, without limitation, all in form
and substance reasonably acceptable to Lender, (i) a detailed time schedule for
performance of the Construction Project, (ii) the estimated Construction
Completion Date, (iii) a detailed breakdown of Estimated Construction Costs and
other costs and expenses required to achieve Completion of Construction through
and including the Construction Completion Date, (iv) a detailed breakdown of
when the Estimated Construction Costs and other costs and expenses in clause
------
(iii) are expected to be incurred and (v) a contingency reserve, which budget
- -----
may be amended not more frequently than twice with Lender's prior written
consent (which consent may be withheld in Lender's reasonable discretion).
"Construction Completion Date" means the date specified in the
----------------------------
Construction Budget on which Operator projects the Construction Project to be
completed, which date shall not be later than eighteen (18) months after the
Closing Date.
"Construction Project" means the construction and renovation project
--------------------
for the Facility as described on Exhibit C-1 attached hereto.
-----------
"Construction Sub-Account" means the Sub-Account established and
------------------------
maintained pursuant to Section 2.12 relating to the payment of Actual
------- ----
Construction Costs.
"Contingent Obligation" means, with respect to Borrower or Operator,
---------------------
as applicable, any obligation of Borrower or Operator, as applicable,
guaranteeing any
<PAGE>
10
indebtedness, leases, dividends or other obligations ("primary obligations") of
-------------------
any other Person (the "primary obligor") in any manner, whether directly or
---------------
indirectly, including, without limitation, any obligation of Borrower or
Operator, as applicable, whether or not contingent, (i) to purchase any such
primary obligation or any property constituting direct or indirect security
therefor, (ii) to advance or supply funds (x) for the purchase or payment of any
such primary obligation or (y) to maintain working capital or equity capital of
the primary obligor, (iii) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary obligation
of the ability of the primary obligor to make payment of such primary obligation
or (iv) otherwise to assure or hold harmless the owner of such primary
obligation against loss in respect thereof. The amount of any Contingent
Obligation shall be deemed to be an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Contingent Obligation
is made (taking into account the non-recourse or limited recourse nature of such
Contingent Obligation, if applicable) or, if not stated or determinable, the
maximum anticipated liability in respect thereof (assuming that Borrower, or
Operator, as applicable, is required to perform thereunder) as determined by
Lender in good faith (taking into account the non-recourse or limited recourse
nature of such Contingent Obligation, if applicable).
"Current Interest Accrual Period" has the meaning provided in Section
------------------------------- -------
2.12(g).
- -------
"Cut-Off Date" means March 11, 2000.
------------
"Debt Service" means, for any period, the principal, interest
------------
payments, Default Rate interest, Late Charges and Yield Maintenance Premium that
accrue or are due and payable in accordance with the Loan Documents during such
period.
"Debt Service Coverage Ratio" means, for any period, the quotient
---------------------------
obtained by dividing Adjusted Net Operating Income for the specified period by
the aggregate amount of the Base Payments due for such period.
"Debt Service Payment Sub-Account" means the Sub-Account of the Cash
--------------------------------
Collateral Account established and maintained pursuant to Section 2.12 relating
------- ----
to the payment of Debt Service.
"Default" means the occurrence of any event which, but for the giving
-------
of notice or the passage of time, or both, would be an Event of Default.
"Default Collateral" has the meaning provided in Section 8.14.
------------------ ------- ----
"Default Rate" means the per annum interest rate equal to the lesser
------------
of (i) the Maximum Amount or (ii) the Interest Rate plus five percent (5%).
<PAGE>
11
"Defeasance Deposit" means the following in each of the following
------------------
circumstances:
(i) in the case of a total defeasance of the Loan and Facility
pursuant to Section 2.11, "Defeasance Deposit" means the amount that
will be sufficient to purchase U.S. Obligations (A) having maturity
dates on or prior to, but as close as possible to, successive
scheduled Payment Dates (after the Defeasance Release Date) upon which
Payment Dates interest and principal payments would be required under
the Note as though the Maturity Date of the Note was the Optional
Prepayment Date and (B) in amounts sufficient to pay all scheduled
principal and interest payments on the Note as if the Maturity Date of
the Note was the Optional Prepayment Date (but without any adjustment
of the monthly amortization schedule); and
(ii) in the case of a partial defeasance of the Loan pursuant to
Section 5.1(b)(P), "Defeasance Deposit" means the amount that will be
sufficient to purchase U.S. Obligations (A) having maturity dates on
or prior to, but as close as possible to, the successive scheduled
Payment Dates (after the date of such voluntary defeasance) upon which
Payment Dates interest and principal payments would be required under
the Note as though the Maturity Date of the Note was the Optional
Prepayment Date and (B) in amounts sufficient to pay all scheduled
principal and interest payments on the Note (1) as if the Maturity
Date of the Note was the Optional Prepayment Date (but without any
adjustment of the monthly amortization schedule) and (2) as if the
outstanding principal indebtedness due under the Note was an amount
equal to the amount required to be defeased pursuant to Section
5.1(b)(P) in connection with such partial defeasance.
"Defeasance Release Date" has the meaning provided in Section
----------------------- -------
2.11(a).
- -------
"Difference" has the meaning provided in Section 8.32(c).
---------- ------- -------
"DOH" has the meaning set forth in Section 4.1(d)(AK)(i).
--- ------- -------------
"Earn-Out Advance" means the Advance (if any) made by Lender to
----------------
Borrower pursuant to Section 8.32(b).
---------------
"Eligible Account" means (i) an account maintained with a federal or
----------------
state chartered depository institution or trust company whose (x) commercial
paper, short-term debt
<PAGE>
12
obligations or other short-term deposits are rated at least A-1 by each Rating
Agency 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 each Rating Agency 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. (S) 9.10(b); or (iii) an account otherwise
acceptable to each Rating Agency, 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 issued in connection with a
Securitization.
"Eligible Trustee" shall mean a bank (within the meaning of Section
----------------
2(a)(5) of the Investment Company Act of 1940 (the "1940 Act")) that meets the
--------
requirements of Section 26(a)(1) of the 1940 Act, is not an Affiliate of the
Beneficial Owner, the Borrower or the Operator, or an Affiliate of any Person
involved in the organization or operation of the Beneficial Owner, the Borrower
or the Operator, is organized and doing business under the laws of any state or
the United States of America, is authorized under such laws to exercise
corporate trust powers and to accept the trust conferred under the Trust
Agreement, has a combined capital and surplus and undivided profits of at least
$100,000,000 and is subject to supervision or examination by federal or state
authority. If such bank publishes reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then for the purposes of this definition the combined capital surplus
and undivided profits of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published.
"Engineer" means any reputable Independent engineer, properly licensed
--------
in the relevant jurisdiction and approved by Lender in Lender's reasonable
discretion.
"Engineering Reports" means the structural engineering reports with
-------------------
respect to the Facility prepared by an Engineer and delivered to Lender in
connection with the Loan and any amendments or supplements thereto delivered to
Lender.
"Entity" means with respect to the Borrower or Operator, as
------
applicable, (a) corporation, if Borrower or Operator, as applicable, is listed
as a corporation in the first paragraph of this Agreement, (b) limited
partnership, if Borrower or Operator, as applicable, is listed as a limited
partnership in the first paragraph of this Agreement, (c) limited liability
company, if Borrower or Operator, as applicable, is listed as a limited
liability company in the first paragraph of this Agreement or (d) a business
trust, if Borrower or Operator, as applicable, is listed as a business trust in
the first paragraph of this Agreement.
<PAGE>
13
"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, Operator, or the
Facility, 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
Facility, (ii) any fact, circumstance, condition, or occurrence forming the
basis of any violation, or alleged violation, of any Environmental Law by
Borrower, Operator or otherwise affecting the Facility or (iii) any alleged
injury or threat of injury to health, safety or the environment in violation of
any Environmental Law by Borrower, Operator or otherwise affecting the Facility.
"Environmental Guaranty" means the Environmental Indemnity Agreement
----------------------
in form and substance satisfactory to Lender in Lender's reasonable discretion
dated as of the Closing Date from the Parent to Lender, as the same may
thereafter be from time to time supplemented, amended, modified or extended by
one or more agreements supplemental thereto.
"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, any judicial or administrative orders, decrees,
settlement agreements or judgments thereunder, 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, or the
Release or threatened Release of Hazardous Substances into the indoor or outdoor
environment including, without limitation, ambient air, soil, surface water,
ground water, wetlands, land or subsurface strata, or otherwise relating to the
presence or Use of Hazardous Substances.
"Environmental Reports" means, with respect to the Facility, the
---------------------
environmental audit reports delivered to Lender in connection with the Loan and
any amendments or supplements thereto delivered to Lender.
"Equipment" means the "Equipment" defined and described in the
---------
Mortgages.
"Equity Interests" means with respect to the Borrower or Operator (a)
----------------
if the Borrower or Operator, as applicable, is a limited partnership, limited
partnership interests in Borrower or Operator, as applicable; (b) if the
Borrower or Operator, as applicable, is a limited liability company, membership
interests in the Borrower or Operator, as applicable; (c) if the Borrower or
Operator, as applicable, is a corporation, shareholder interests in the Borrower
or
<PAGE>
14
Operator, as applicable; or (d) if Borrower or Operator, as applicable, is a
business trust, beneficial interests in the Borrower or Operator, as applicable;
provided, however, that Equity Interests shall not include any equity interests
of the Preferred Equity Holder in the Borrower or Operator.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, and the 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" means, with respect to Operator or Borrower, 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
Operator, 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
Operator, as applicable, is a member.
"Estimated Construction Costs" means Operator's good-faith, reasonable
----------------------------
and detailed estimates of all of the costs and expenses that Operator will incur
in connection with the Construction Project.
"Event of Default" has the meaning set forth in Section 7.1.
---------------- ------- ---
"Excepted Operating Income" means (i) SELCO Basic Rent (as defined in
-------------------------
the Operator Lease) and Lessor Basic Rent (as defined in the Operator Lease)
actually paid to Borrower; (ii) all indemnity payments paid to Borrower under
the Operator Lease or the Pledge Agreements (as defined in the Operator Lease);
(iii) to the extent not included in the foregoing, any amounts actually paid to
Borrower to reimburse Borrower or it Affiliates for performing or complying with
any of the obligations of Operator under the Loan Documents or the Operator
Lease; (iv) Transaction Expenses (as defined in the Lease) paid to the Borrower;
and (v) any payments of interest actually paid to Borrower with respect to any
of the foregoing.
"Excepted Property" means (i) SELCO Basic Rent (as defined in the
-----------------
Operator Lease), Lessor Basic Rent (as defined in the Operator Lease), the Break
Costs (as defined in the Operator Lease) and the right to receive any of the
foregoing; (ii) any and all rights of the Borrower under the Pledge Agreements
(as defined in the Operator Lease); and (iii) any and all rights to declare a
default under the Operator Lease and exercise the remedies under Section 20.2(k)
of the Operator Lease (provided, however, "Excepted Property" shall not include
all
<PAGE>
15
other rights to declare a default under the Operator Lease).
"Excess Cash Flow" has the meaning set forth in Section
---------------- -------
2.12(g)(viii).
- -------------
"Excess Proceeds" has the meaning set forth in Section 8.39(b).
--------------- ------- -------
"Extra Funds" has the meaning set forth in Section 2.12(f)(vi).
----------- ------- -----------
"Facility" means the Collateral relating to Borrower and Operator
--------
encumbered by the Mortgages, Assignments of Leases, Assignments of Agreements
and other Loan Documents.
"Fiscal Year" means the 12-month period ending on December 31 of each
-----------
year or such other fiscal year of Borrower as Borrower may select from time to
time with the prior written consent of Lender not to be unreasonably withheld or
delayed.
"GAAP" means generally accepted accounting principles consistently
----
applied in the United States of America as of the date of the applicable
financial report.
"General Intangibles" means the "General Intangibles" defined and
-------------------
described in the Mortgages.
"Governmental Authority" means any national or federal government, any
----------------------
state, regional, local or other political subdivision thereof with jurisdiction
and any Person with jurisdiction exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.
"Gross Revenue" means, with respect to the Facility, the total dollar
-------------
amount of all income and receipts (excluding each SELCO Required Quarterly
Payment to the extent paid to Borrower) whatsoever received by Borrower and
Operator in the ordinary course of its respective business with respect to the
Facility, including, without limitation, all Rents (but excluding security
deposits) and Money.
"Guaranty" means a Guaranty and Suretyship Agreement in form and
--------
substance satisfactory to Lender in Lender's reasonable discretion dated as of
the Closing Date from the Operator 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.
<PAGE>
16
"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.
"Impositions" means the "Impositions" defined and described in the
-----------
Mortgages.
"Improvements" means the "Improvements" as defined and described in
------------
the Mortgages.
"Indebtedness" means, at any given time, the Principal Indebtedness,
------------
together with all accrued and unpaid interest thereon and all other obligations
and liabilities due or to become due to Lender pursuant hereto, under the Note
or in accordance with any of the other Loan Documents, and all other amounts,
sums and expenses paid by or payable to Lender hereunder or pursuant to the Note
or any of the other Loan Documents.
"Indemnified Party" shall have the meaning set forth in Section
----------------- -------
8.29.
- ----
"Independent" means, 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, Operator or in any Affiliate of Borrower or
Operator, and (ii) is not connected with Borrower, Operator or any Affiliate of
Borrower or Operator as an officer, employee, promoter, underwriter, trustee,
partner, member, manager, creditor, director or person performing similar
functions.
"Independent Director" means a duly appointed member of the board of
--------------------
directors of the relevant entity who shall not have been, at the time of such
appointment or at any time in the preceding five (5) years, (a) a direct or
indirect legal or beneficial owner in such entity or any of its affiliates, (b)
a creditor, supplier, employee, officer, director, manager or contractor of such
entity or any of its affiliates, (c) a person who controls such entity or any of
its affiliates, or (d) a member of the immediate family of a person defined in
(a), (b) or (c) above.
- --- --- ---
<PAGE>
17
"Initial Basic Carrying Costs Amount" means an amount that, when added
-----------------------------------
with the Basic Carrying Costs Monthly Installments to be made from and after the
Stabilization Date through the date(s) on which the Basic Carrying Costs are
next due and payable, will be sufficient to pay such Basic Carrying Costs, as
reasonably determined by Lender.
"Initial Capital Reserve Amount" means the amount shown on Exhibit
------------------------------ -------
B.
- --
"Initial Construction Amount" means the amount shown on Exhibit B.
--------------------------- ---------
"Initial Interest Rate" means the lesser of the (a) Maximum Amount and
---------------------
(b) (i) with respect to the Closing Date Advance, 7.46% per annum until the
earlier of the Optional Prepayment Date and the date on which the Earn-Out
Advance is made, if any, and (ii) if the Earn-Out Advance is made, a per annum
rate calculated at the time of the Earn-Out Advance equal to the quotient
(expressed as a percentage) obtained by dividing (i) the sum of (A) the product
of the Closing Date Advance multiplied by 7.46% plus (B) the product of amount
of the Earn-Out Advance multiplied by the then prevailing interest rate equaling
the yield on the then prevailing U.S. treasury rate with a term commencing on
the date of the Earn-Out Advance to but not including the Optional Prepayment
Date, as determined by Lender in Lender's sole discretion at the time of such
Advance plus 1.80%, by (ii) the sum of the Closing Date Advance and the Earn-Out
Advance, if any.
"Initial Securitization Expense Amount" means the amount shown on
-------------------------------------
Exhibit B.
- ---------
"Initial Trustee Expense Amount" means the amount shown on Exhibit B.
------------------------------ ---------
"Instruments" means all of the "Instruments" defined and described in
-----------
the Mortgages.
"Insurance Proceeds" means all of the "Insurance Proceeds" defined
------------------
and described in the Mortgages.
"Insurance Requirements" means all material terms of any insurance
----------------------
policy required pursuant to the Loan Documents and all material regulations and
then current standards applicable to or affecting the Facility or any part
thereof or any use or condition thereof, which may, at any time, be recommended
by the Board of Fire Underwriters, if any, having jurisdiction over the
Facility, or such other body exercising similar functions.
"Interest Accrual Period" means each period of time running from and
-----------------------
<PAGE>
18
including the eleventh (11th) day of a calendar month to and including the tenth
(10th) day of the following calendar month during the term of the Loan. If the
Closing Date shall occur prior to the tenth (10th) day of a calendar month, the
first Interest Accrual Period shall commence on and include the Closing Date and
end on and include the tenth (10th) day of the calendar month in which the
Closing Date occurs. If the Closing Date shall occur after the tenth (10th) day
of a calendar month, the first Interest Accrual Period shall commence on the
Closing Date and end on and include the tenth (10th) day of the calendar month
following the month in which the Closing Date occurs. If the Closing Date shall
occur on the tenth (10th) day of a calendar month, the first Interest Accrual
Period shall consist of a one (1) day period consisting of the Closing Date.
"Interest Rate" means, (i) during the period commencing on (and
-------------
including) the Closing Date to the Optional Prepayment Date, provided that no
Event of Default has occurred, the Initial Interest Rate, and (ii) commencing on
(and including) the Optional Prepayment Date, provided no Event of Default has
occurred, the Revised Interest Rate.
"Inventory" means all of the "Inventory" defined and described in
---------
the Mortgages.
"Investor" has the meaning provided in Section 8.27.
-------- ------- ----
"Issuer" means any issuer of securities issued in connection with a
------
Securitization.
"Key" means Key Corporate Capital, Inc., a Michigan corporation.
---
"Land" has the meaning provided in the Mortgages.
----
"Late Charge" means the lesser of (i) five percent (5%) of any amount
-----------
which was due and payable but which was not paid within the applicable grace
period and (ii) the maximum late charge permitted to be charged under the laws
of the State of New York.
"Late Payment" means Borrower's failure to pay any amount hereunder
------------
when due, without giving effect to any cure period, if any.
"Leasehold Mortgage" means, with respect to the Facility, a first
------------------
priority Leasehold Mortgage, Assignment of Rents, Security Agreement and Fixture
Filing, in form and substance satisfactory to Lender in Lender's reasonable
discretion, dated as of the Closing Date, granted by Operator to Lender with
respect to the Facility as security for the Guaranty, as the same may thereafter
from time to time be supplemented, amended, modified or extended by one or more
written agreements supplemental thereto.
<PAGE>
19
"Leases" means all of the "Leases" defined and described in the
------
Mortgages.
"Legal Requirements" means all statutes, laws, rules, orders,
------------------
regulations, ordinances, judgments, decrees and injunctions of Governmental
Authorities affecting Borrower, Operator, the Loan Documents, the Facility or
any part thereof, or the ownership, construction, use, alteration or operation
thereof, or any part thereof, enacted and in force as of the relevant date, and
all Permits, Licenses and regulations relating thereto, and all covenants,
agreements, restrictions and encumbrances contained in any instruments, either
of record or known to Borrower or Operator, at any time in force affecting the
Facility or any part thereof, including, without limitation, any which (i) may
require repairs, modifications, or alterations in or to the Facility or any part
thereof, or (ii) in any way limit the use and enjoyment thereof.
"Lender" has the meaning provided in the first paragraph of this
------
Agreement.
"Liabilities" has the meaning set forth in Section 2.14.
----------- ------- ----
"Licenses" has the meaning set forth in Section 4.1(d)(AK)(ii).
-------- ------- --------------
"Lien" means any mortgage, deed of trust, deed to secure debt, lien
----
(statutory or other), pledge, easement, restrictive covenant, hypothecation,
assignment, preference, priority, security interest, or any other encumbrance or
charge on or affecting the Facility or any portion thereof or any Collateral, or
Operator or any interest therein, including, without limitation, 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" has the meaning provided in the Recitals hereto.
----
"Loan Amount" has the meaning provided in the Recitals hereto.
-----------
"Loan Documents" means, collectively, this Agreement, the Note, the
--------------
Mortgages, the Assignments of Leases, the Assignments of Agreements, the
Environmental Guaranty, the Guaranty, the Collection Account Agreement and all
other agreements, instruments, certificates and documents executed or delivered
by or on behalf of Borrower, Operator or any Affiliate to evidence or secure the
Loan or otherwise in satisfaction of the requirements of this Agreement, the
Mortgages or the other documents listed above.
"Losses" has the meaning provided in Section 5.1(b)(I).
------ -----------------
<PAGE>
20
"Management Agreement" means, with respect to the Facility, any
---------------------
management agreement entered into after the Closing Date pertaining to the
management of the Facility, which agreement or agreements shall be in form and
substance satisfactory to Lender in its reasonable discretion.
"Management Appointment DSCR" means (i) 1.15, if the Debt Service
---------------------------
Coverage Ratio, computed for the twelve (12) month period ending on the
Stabilization Date is 1.30 or greater or (ii) 1.10, if the Debt Service Coverage
Ratio, computed for the twelve (12) month period ending on the Stabilization
Date is less than 1.30.
"Material Adverse Effect" means a material adverse effect upon (i) the
-----------------------
business or the financial position or results of operation of Borrower or
Operator, as applicable, (ii) the ability of Borrower or Operator, as
applicable, to perform, or of Lender to enforce, any of the Loan Documents or
(iii) the value of (x) the Collateral taken as a whole or (y) the Facility.
"Material Lease" has the meaning set forth in the Mortgages.
--------------
"Maturity Date" means the first (1st) Business Day after the day which
-------------
is the last day in the Number of Interest Accrual Periods in Amortization
Schedule, assuming the amortization schedule commences on the Stabilization Date
Payment Date.
"Maximum Advance Amount" means the Closing Date Advance plus the
----------------------
Maximum Earn-Out Advance.
"Maximum Amount" means the maximum rate of interest designated by
--------------
applicable laws relating to payment of interest and usury.
"Maximum Earn-Out Advance" means $3,000,000.
------------------------
"Mezzanine Debt Service" means the "Debt Service" as defined in the
----------------------
Mezzanine Loan Agreement.
"Mezzanine Debt Service Payment Sub-Account" means the Sub-Account of
------------------------------------------
the Cash Collateral Account established and maintained pursuant to Section 2.12
------------
relating to the payment of the Mezzanine Debt Service.
"Mezzanine Lender" means Nomura Asset Capital Corporation, a
----------------
Delaware corporation, and its successors and assigns.
"Mezzanine Loan" means the mezzanine loan in the original principal
--------------
amount
<PAGE>
21
of $1,750,000 made by Nomura Asset Capital Corporation to Borrower of even date
herewith.
"Mezzanine Loan Agreement" means that certain mezzanine loan
------------------------
agreement of even date herewith evidencing the Mezzanine Loan among Borrower,
Operator and Mezzanine Lender.
"Mezzanine Loan Documents" means the Mezzanine Loan Agreement and all
------------------------
other agreements, instruments, certificates and documents delivered by or on
behalf of Borrower, Operator, any Affiliate or any of them to evidence or secure
the Mezzanine Loan.
"Mezzanine Required Base Debt Service Payment" means, on any Payment
--------------------------------------------
Date, the Mezzanine Debt Service then due and payable by Borrower.
"Money" means all moneys, cash, rights to deposit or savings accounts,
-----
credit card receipts, rents or other items of legal tender obtained from or for
use in connection with the ownership or operation of the Facility.
"Mortgage" means, with respect to the Facility, a first priority
--------
Mortgage, Assignment of Rents, Security Agreement and Fixture Filing, in form
and substance satisfactory to Lender in Lender's reasonable discretion, dated as
of the Closing Date, granted by Borrower to Lender with respect to the Facility
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 and "Mortgages" means, collectively, the Mortgage and the
---------
Leasehold Mortgage.
"Mortgaged Property" means, at any time, the Facility encumbered by
------------------
the Mortgages.
"Multiemployer Plan" means, with respect to Borrower or Operator, a
-------------------
multiemployer plan defined as such in Section 3(37) of ERISA to which
contributions have been made by Borrower or Operator, as applicable, or any
ERISA Affiliate and which is covered by Title IV of ERISA.
<PAGE>
22
"Net Operating Income" means for any period the excess, if any, of
--------------------
Operating Income for such period over Operating Expenses for such period.
"Note" means and refers to the promissory note, in form and substance
----
satisfactory to Lender in Lender's reasonable discretion, dated the Closing
Date, made by Borrower to Lender pursuant to this Agreement as such note may be
modified, amended, supplemented, extended or consolidated in writing, and any
note(s) issued in exchange therefor or in replacement thereof.
"Number of Interest Accrual Periods in Amortization Schedule" means a
-----------------------------------------------------------
number (rounded down to the nearest whole number) equal to a quotient (i) the
numerator of which is the sum of (x) the product of the Gross Revenue not
attributable to the provision of assisted living service to occupants of the
Facility for the twelve (12) month period ending on the Stabilization Date
multiplied by 360 plus (y) the product of the Gross Revenue attributable to the
provision of assisted living services to occupants of the Facility for the
twelve (12) month period ending on the Stabilization Date multiplied by 300 and
(ii) the denominator of which is the total Gross Revenue for the twelve (12)
month period ending on the Stabilization Date.
"Officer's Certificate" means, with respect to Operator or Beneficial
---------------------
Owner, a certificate of the Operator or Beneficial Owner, as applicable, which
is signed by an authorized officer of the Borrower or Beneficial Owner, as
applicable.
"Operating Expense Certificate" means a certificate of the Operator in
-----------------------------
the form attached hereto as Exhibit A.
---------
"Operating Expense Monthly Installment" means, with respect to a given
-------------------------------------
Interest Accrual Period, the amount shown on the Annual Operating Budget for
such period.
"Operating Expense Sub-Account" means the Sub-Account of the Cash
-----------------------------
Collateral Account established and maintained pursuant to Section 2.12 relating
------- ----
to the payment of operating expenses, as reasonably approved by Lender.
"Operating Expenses" means, for any period, for Borrower and Operator,
------------------
(a) all expenditures by Borrower and, without duplication (b) all expenditures
by Operator, as and to the extent required to be expensed under GAAP during such
period in connection with the ownership, operation, maintenance, repair or
leasing of the Facility, including, without limitation or duplication:
(i) expenses in connection with cleaning, repair, replacement,
painting
<PAGE>
23
and maintenance;
(ii) wages, benefits, payroll taxes, uniforms, insurance costs
and all other related expenses for employees of Borrower, Operator or
any Affiliate engaged in repair, operation, maintenance of the
Facility or service to tenants or patrons in and of the Facility;
(iii) any management fees and expenses;
(iv) the cost of all electricity, oil, gas, water, steam,
heat, ventilation, air conditioning and any other energy, utility or
similar item and overtime services;
(v) the cost of cleaning supplies;
(vi) Impositions;
(vii) business interruption, liability, casualty and fidelity
insurance premiums;
(viii) legal, accounting and other professional fees and
expenses incurred in connection with the ownership, leasing or
operation of the Facility, including, without limitation, collection
costs and expenses;
(ix) costs and expenses of security and security systems;
(x) trash removal and exterminating costs and expenses;
(xi) advertising and marketing costs;
(xii) costs of environmental audits and monitoring,
environmental investigation, remediation or other response actions or
any other expenses incurred with respect to compliance with
Environmental Laws;
(xiii) all other ongoing expenses which in accordance with GAAP
are required to be or are included in Borrower's or Operator's annual
financial statements as operating expenses of the Facility; and
(xiv) with respect to Operator only, the SELCO Required
Quarterly Payment.
<PAGE>
24
Notwithstanding the foregoing, Operating Expenses shall not include (x) any
taxes imposed on Borrower's net income, (y) depreciation or amortization of
intangibles or (z) Debt Service (as defined herein and in the Mezzanine Loan
Agreement) and other payments in connection with the Indebtedness (as defined
herein and in the Mezzanine Loan Agreement). Operating Expenses shall be
calculated in accordance with GAAP.
"Operating Income" means, for any period, for Borrower and Operator,
----------------
(a) all regular ongoing income of Operator during such period from the operation
of the Facility and, without duplication, (b) all regular ongoing income of
Borrower during such period from the operation of the Facility from any source
other than Operator, including, without limitation:
(i) all amounts payable as Rents (other than security
deposits) and all other amounts payable under Leases or other third
party agreements relating to the ownership and operation of the
Facility;
(ii) business interruption proceeds; and
(iii) all other amounts which in accordance with GAAP are
required to be or are included in Borrower's or Operator's annual
financial statements as operating income of the Facility, except that,
in the case of the Borrower, such other amounts shall only be included
if from a source other than Operator;
provided, however, with respect to Borrower only, Operating Income shall not
- -------- -------
include the Excepted Operating Income.
"Operator" has the meaning set forth in the first paragraph of this
--------
Agreement.
"Operator Lease" means that certain Lease dated on or about the
--------------
Closing Date between the Borrower and the Operator for the lease of all of the
Facility, together with any guarantees, supplements, amendments, modifications,
extensions and renewals of the same, and all additional remainders, reversions,
and other rights and estates appurtenant thereto.
"Optional Prepayment Date" means the tenth (10th) anniversary of the
------------------------
Stabilization Date Payment Date.
"Other Borrower" means any borrower to which Lender makes a loan and
--------------
which borrower leases the property securing such loan to an Other Operator and
"Other Borrowers" shall mean all such borrowers, collectively.
----------------
<PAGE>
25
"Other Borrowings" means, with respect to Operator or Borrower, as
----------------
applicable, without duplication (but not including the Indebtedness, the
Mezzanine Loan or any Transaction Costs payable in connection with the
Transactions), (i) all indebtedness of Borrower or Operator, as applicable, for
borrowed money or for the deferred purchase price of property or services, (ii)
all indebtedness of Borrower or Operator, as applicable, evidenced by a note,
bond, debenture or similar instrument, (iii) the face amount of all letters of
credit issued for the account of Borrower or Operator, as applicable, and,
without duplication, all unreimbursed amounts drawn thereunder, (iv) all
indebtedness of Borrower or Operator, as applicable, secured by a Lien on any
property owned by Borrower or Operator, as applicable, whether or not such
indebtedness has been assumed, (v) all Contingent Obligations of Borrower or
Operator, as applicable, and (vi) all payment obligations of Borrower or
Operator, as applicable, under any interest rate protection agreement
(including, without limitation, any interest rate swaps, caps, floors, collars
or similar agreements) and similar agreements.
"Other Loan" means any loan to an Other Borrower and "Other Loans"
---------- -----------
means all such loans collectively.
"Other Loan Agreement" shall mean each loan agreement executed by an
--------------------
Other Borrower and "Other Loan Agreements" mean all such loan agreements
---------------------
collectively.
"Other Loan Documents" means all of the Loan Documents (as defined in
--------------------
any Other Loan Agreement).
"Other Operator" shall mean any affiliate of the Operator which
--------------
affiliate guaranties an Other Loan and "Other Operators" means all such
---------------
Operators collectively.
"Parent" means Brookdale Living Communities, Inc., a Delaware
------
corporation.
"Payment Date" means the eleventh (11th) day of each calendar month
------------
during the term of the Loan, provided, however, that for purposes of making
payments hereunder, but not for purposes of calculating interest accrual
periods, if the eleventh (11th) day of a given month shall not be a Business
Day, then the Payment Date for such month shall be the next succeeding Business
Day.
"PBGC" means the Pension Benefit Guaranty Corporation established
----
under ERISA, or any successor thereto.
"PCBs" has the meaning provided in the definition of "Hazardous
---- ---------
Substance."
- ---------
"Permits" means, all the "Permits" defined and described in the
-------
Mortgages.
<PAGE>
26
"Permitted Encumbrances" means, with respect to the Facility,
-----------------------
collectively, (i) the Liens created by the Mortgages, the other Loan Documents
of record, and the Mezzanine Loan Documents of record, (ii) all Liens and other
matters disclosed in the Title Insurance Policy concerning the Facility, or any
part thereof, (iii) Liens, if any, for Impositions imposed by any Governmental
Authority not yet due or delinquent or being contested in good faith and by
appropriate proceedings in accordance with the Mortgages, (iv) 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 after the 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
Facility, (C) the fair market value of the Facility or the fair market value of
the Facility as of the date of Completion of Construction, or (D) the
renovation, use or operation of the Facility as of the Closing Date and
thereafter, and (v) 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 Investments" means any one or more of the following
---------------------
obligations or securities payable on demand or having a scheduled maturity on or
before the Business Day immediately preceding the date upon which the funds in
the Cash Collateral Account are required to be drawn, and having at all times
the required ratings, if any, provided for in this definition, unless each
Rating Agency shall have confirmed in writing to Lender that a lower rating
would not, in and of itself, result in a downgrade, qualification or withdrawal
of the then current ratings assigned to any security issued in connection with a
Securitization:
(i) obligations of, or obligations fully guaranteed as to payment of
principal and interest by, the United States or any agency or
instrumentality thereof provided such obligations are backed by
the full faith and credit of the United States of America
including, without limitation, obligations of: the U.S. Treasury
(all direct or fully guaranteed obligations), the Farmers Home
Administration (certificates of beneficial ownership), the
General Services Administration (participation certificates), the
U.S. Maritime Administration (guaranteed Title XI financing), the
Small Business Administration (guaranteed participation
certificates and guaranteed pool certificates), the U.S.
Department of Housing and Urban Development (local authority
bonds) and the Washington Metropolitan Area Transit Authority
(guaranteed transit bonds); provided, however, that the
-------- -------
investments described in this clause must (A) have a
predetermined
<PAGE>
27
fixed dollar amount of principal due at maturity that cannot
vary or change, (B) if rated by S&P, must not have an "r"
highlighter affixed to their rating, (C) if such investments
have a variable rate of interest, such interest rate must be
tied to a single interest rate index plus a fixed spread (if
any) and must move proportionately with that index, and (D)
such investments must not be subject to liquidation prior to
their maturity;
(ii) Federal Housing Administration debentures;
(iii) obligations of the following United States government sponsored
agencies: Federal Home Loan Mortgage Corp. (debt obligations),
the Farm Credit System (consolidated systemwide bonds and
notes), the Federal Home Loan Banks (consolidated debt
obligations), the Federal National Mortgage Association (debt
obligations), the Student Loan Marketing Association (debt
obligations), the Financing Corp. (debt obligations), and the
Resolution Funding Corp. (debt obligations); provided, however,
-------- -------
that the investments described in this clause must (A) have a
predetermined fixed dollar amount of principal due at maturity
that cannot vary or change, (B) if rated by S&P, must not have
an "r" highlighter affixed to their rating, (C) if such
investments have a variable rate of interest, such interest
rate must be tied to a single interest rate index plus a fixed
spread (if any) and must move proportionately with that index,
and (D) such investments must not be subject to liquidation
prior to their maturity;
(iv) federal funds, unsecured certificates of deposit, time
deposits, bankers' acceptances and repurchase agreements with
maturities of not more than 365 days of any bank, the short
term obligations of which are rated in the highest short term
rating category by each Rating Agency (or otherwise acceptable
to each Rating Agency, as confirmed in writing that such
investment would not, in and of itself, result in a downgrade,
qualification or withdrawal of the then current ratings
assigned to any security issued in connection with a
Securitization), provided, however, that the investments
-------- -------
described in this clause must (A) have a predetermined fixed
dollar amount of principal due at maturity that cannot vary or
change, (B) if rated by S&P, must not have an "r" highlighter
affixed to their rating, (C) if such investments have a
variable rate of interest, such interest rate must be tied to a
single interest rate index plus a fixed spread (if any) and
must move proportionately
<PAGE>
28
with that index, and (D) such investments must not be subject
to liquidation prior to their maturity;
(v) fully Federal Deposit Insurance Corporation-insured demand and
time deposits in, or certificates of deposit of, or bankers'
acceptances issued by, any bank or trust company, savings and
loan association or savings bank, the short term obligations of
which are rated in the highest short term rating category by
each Rating Agency (or otherwise acceptable to each Rating
Agency, as confirmed in writing that such investment would not,
in and of itself, result in a downgrade, qualification or
withdrawal of the then current ratings assigned to any security
issued in connection with a Securitization), provided, however,
-------- -------
that the investments described in this clause must (A) have a
predetermined fixed dollar amount of principal due at maturity
that cannot vary or change, (B) if rated by S&P, must not have
an "r" highlighter affixed to their rating, (C) if such
investments have a variable rate of interest, such interest
rate must be tied to a single interest rate index plus a fixed
spread (if any) and must move proportionately with that index,
and (D) such investments must not be subject to liquidation
prior to their maturity;
(vi) debt obligations with maturities of not more than 365 days and
rated by each Rating Agency (or otherwise acceptable to each
Rating Agency, as confirmed in writing that such investment
would not, in and of itself, result in a downgrade,
qualification or withdrawal of the then current ratings
assigned to any security issued in connection with a
Securitization), in its highest long-term unsecured rating
category; provided, however, that the investments described in
-------- -------
this clause must (A) have a predetermined fixed dollar amount
of principal due at maturity that cannot vary or change, (B) if
rated by S&P, must not have an "r" highlighter affixed to their
rating, (C) if such investments have a variable rate of
interest, such interest rate must be tied to a single interest
rate index plus a fixed spread (if any) and must move
proportionately with that index, and (D) such investments must
not be subject to liquidation prior to their maturity;
(vii) commercial paper (including both non-interest-bearing discount
obligations and interest-bearing obligations payable on demand
or on a specified date not more than one year after the date of
issuance thereof) with maturities of not more than 365 days and
that is rated by each Rating Agency (or otherwise acceptable to
each Rating Agency, as
<PAGE>
29
confirmed in writing that such investment would not, in and of
itself, result in a downgrade, qualification or withdrawal of
the then current ratings assigned to any security issued in
connection with a Securitization), in its highest short-term
unsecured debt rating; provided, however, that the investments
-------- -------
described in this clause must (A) have a predetermined fixed
dollar amount of principal due at maturity that cannot vary or
change, (B) if rated by S&P, must not have an "r" highlighter
affixed to their rating, (C) if such investments have a
variable rate of interest, such interest rate must be tied to a
single interest rate index plus a fixed spread (if any) and
must move proportionately with that index, and (D) such
investments must not be subject to liquidation prior to their
maturity;
(viii) the Federated Prime Obligation Money Market Fund (the "Fund")
so long as the Fund is rated "AAAm" or "AAAm-G" by S&P, or the
equivalent by each other Rating Agency (or otherwise acceptable
to each Rating Agency, as confirmed in writing that such
investment would not, in and of itself, result in a downgrade,
qualification or withdrawal of the then current ratings
assigned to any security issued in connection with a
Securitization);
(ix) any other demand, money market or time deposit, demand
obligation or any other obligation, security or investment,
provided that each Rating Agency has confirmed in writing to
Lender, that such investment would not, in and of itself,
result in a downgrade, qualification or withdrawal of the then
current ratings assigned to any security issued in connection
with a Securitization; and
(x) such other obligations as are acceptable as Permitted
Investments to each Rating Agency, as confirmed in writing to
Lender, that such obligations would not, in and of itself,
result in a downgrade, qualification or withdrawal of the then
current ratings assigned to any security issued in connection
with a Securitization;
provided, however, that, in the judgment of Lender, such instrument continues to
- -------- -------
qualify as a "cash flow investment" pursuant to Code Section 860G(a)(6) earning
a passive return in the nature of interest and provided further that no
-------- ------- ----
instrument or security shall be a Permitted Investment if (i) such instrument or
security evidences a right to receive only interest payments, (ii) the right to
receive principal and interest payments derived from the underlying investment
provides a yield to maturity in excess of one hundred twenty percent (120%) of
the yield to
<PAGE>
30
maturity at par of such underlying investment or (iii) such investments have a
maturity in excess of one year.
"Permitted Transfers" shall mean, provided that no Event of Default
-------------------
has occurred, (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 Facility or, if necessary for the operation of the
Facility, 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 discretion; (v) transfers of Equity Interests which in the
aggregate during the term of the Loan (a) do not exceed 49% of the total
interests in the Borrower or Operator, as applicable, and (b) do not result in
any partner's, member's, shareholder's, beneficial owner's or other Person's
interest in the Borrower or Operator (other than the Persons who own interests
in the Borrower or Operator on the Closing Date), as applicable, exceeding 49%
of the total interests in the Borrower or Operator, as applicable; (vi) 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 Operator, as applicable, to Lender and the Rating
Agencies (including without limitation tax and bankruptcy opinions), and (d)
Borrower or Operator, as applicable, pays all reasonable expenses incurred by
Lender in connection with such transfer or transfers; (vii) a transfer of the
Facility to a single purchaser including, but not limited to, a transfer of the
Facility by Borrower to the Operator (pursuant to the Operator Lease or Section
-------
8.33 or otherwise), not more than one time during the term of the Loan,
- ----
provided that prior to such transfer (a) prior to a Securitization, Lender
shall have consented to such transfer, (b) after a Securitization, (i) Lender
shall have consented to such transfer and (ii) 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
shall have been delivered by Borrower to Lender and to the Rating Agencies
(including without limitation tax and bankruptcy opinions), (d) 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 (e) Borrower or Operator pays all reasonable expenses
incurred by Lender in connection with such transfer; and (viii) transfers of the
Preferred Equity Holder's equity interests in Borrower and/or Operator provided
that prior to such transfer or transfers, if the transfer or transfers by the
Preferred Equity Holder occurs after a Securitization and is to someone other
than an Affiliate of the Preferred Equity Holder, the Rating Agencies then
rating any securities issued in connection with a Securitization shall have
confirmed in writing that such transfer or transfers shall not result in a
downgrade, withdrawal or qualification of any
<PAGE>
31
securities issued in connection with such Securitization.
"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.
"Physical Plant Standards" has the meaning provided in Section
------------------------ -------
4.1(d)(AK)(vii).
- ---------------
"Plan" means an employee benefit or other plan established or
----
maintained by Borrower or any ERISA Affiliate and that is covered by Title IV of
ERISA, other than a Multiemployer Plan.
"Preferred Beneficial Owner" has the meaning set forth in Section
-------------------------- -------
8.32(c).
- -------
"Preferred Cash Collateral Account" means that certain bank account
---------------------------------
established pursuant to that certain Preferred Cash Management Agreement.
"Preferred Cash Collateral Account Bank" means the bank chosen by the
--------------------------------------
Preferred Equity Holder to hold the Preferred Cash Collateral Account, or any
successor bank hereafter selected by Lender in accordance with the terms hereof.
"Preferred Cash Management Agreement" means that certain cash
-----------------------------------
management agreement to be executed among Preferred Equity Holder, Borrower,
Operator, the other holders of equity interests in Borrower and/or Operator and
the Preferred Cash Collateral Account Bank (the terms of which are summarized on
Exhibit F hereof) as the same may from time to time be supplemented, amended,
- ---------
modified or extended and in effect from time to time.
"Preferred Equity Holder" means Nomura Asset Capital Corporation, a
-----------------------
Delaware corporation, and its successors and assigns or an affiliate of Lender
designated by Lender in Lender's discretion and such affiliate's successors and
assigns.
"Preferred Shareholder" has the meaning set forth in Section
--------------------- -------
8.32(c).
- -------
"Principal Indebtedness" means the principal amount of the entire Loan
----------------------
outstanding as the same may be increased, by additional Advances or otherwise,
or decreased, as a result of prepayment or otherwise, from time to time.
"Proceeds" means all of the "Proceeds" defined and described in the
--------
<PAGE>
32
Mortgages.
"Rating Agencies" means Fitch Investors Service, Inc., Moody's
---------------
Investors Service, Inc., Duff & Phelps Credit Rating Co. and S&P or any
successor thereto, and any other nationally recognized statistical rating
organization to the extent that any of the foregoing have been or will be
engaged by Lender or its designees in connection with a Securitization (each,
individually a "Rating Agency").
-------------
"Recalculated Loan Amount" has the meaning provided in Section
------------------------ -------
8.32(a).
- -------
"Recourse Distributions" has the meaning provided in Section 8.14.
---------------------- ------- ----
"Release" means 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" has the meaning provided in Section 5.1(b)(D)(i).
------------- ------- ------------
"REMIC" means a real estate mortgage investment conduit as defined
-----
under Section 860 D(a) of the Code.
"Rents" means all of the "Rents" defined and described in the
-----
Mortgages.
"Request for Advance" shall have meaning provided in Section 3.2(D).
------------------- ------- ------
"Request for Draw" means a request by Operator to Lender for a
----------------
disbursement from the Construction Sub-Account in writing and signed by a duly
authorized representative of Operator which (i) contains the amount of the
requested draw and all back up documentation therefor and (ii) is in form and
substance reasonably satisfactory to Lender in its discretion.
"Required Base Debt Service Payment" means all of the Required Debt
----------------------------------
Service Payment except for that portion of the Required Debt Service Payment
which consists of payments of Excess Cash Flow which may be due and payable on
and after the Optional Prepayment Date.
"Required Debt Service Payment" means, on any Payment Date, the Debt
-----------------------------
Service then due and payable by Borrower.
"Resizing DSCR" means a number equal to a quotient (i) the numerator
-------------
of
<PAGE>
33
which is the sum of (x) the product of the Gross Revenue not attributable to the
provision of assisted living services to occupants of the Facility for the
twelve (12) month period ending on the Stabilization Date multiplied by 1.20
plus (y) the product of the Gross Revenue attributable to the provision of
assisted living services to occupants of the Facility for the twelve (12) month
period ending on the Stabilization Date multiplied by 1.35 and (ii) the
denominator of which is the total Gross Revenue for the twelve (12) month period
ending on the Stabilization Date.
"Revised Interest Rate" means the greater of (x) the sum of five
---------------------
hundred (500) basis points plus the Initial Interest Rate and (y) as of the
Optional Prepayment Date, the sum of the Treasury Rate plus six hundred eighty
(680) basis points, such Revised Interest Rate not to exceed the Maximum Amount.
"S&P" means Standard & Poor's Ratings Services, a division of The
---
McGraw Hill Companies, Inc.
"Secretary's Certificate" means, with respect to Operator, the
-----------------------
certificate in form and substance satisfactory to Lender in Lender's reasonable
discretion dated as of the Closing Date and each Advance Closing Date, as
applicable.
"Securitization" shall have the meaning provided in Section 2.14.
-------------- ------- ----
"Securitization Closing Date" means the date on which a
---------------------------
Securitization is effected.
"Securitization Costs" shall have the meaning set forth in Section
-------------------- -------
2.14.
- ----
"Securitization Expense Sub-Account" means the Sub-Account of the Cash
----------------------------------
Collateral Account established and maintained pursuant to Section 2.12.
"Security Agreement" has the meaning provided in Section 2.11(a).
------------------ ------- -------
"Security Deposit Account" has the meaning set forth in Section
------------------------ -------
2.12(a)(i).
- ----------
"SELCO" means SELCO Service Corporation, an Ohio corporation,
-----
together with its permitted successors and assigns.
"SELCO Debt" means debt of Borrower to Key subordinate in all respects
----------
to the Indebtedness in the principal amount of $5,075,000 evidenced by that
certain Loan Agreement dated as of the Closing Date (the "SELCO Loan Agreement")
--------------------
and secured only by Certificate A (as defined in the SELCO Loan Agreement) and
the other cash collateral pledge
<PAGE>
34
pursuant to the Certificate Pledge Agreement (as defined in the SELCO Loan
Agreement), which debt shall be evidenced by the SELCO Loan Agreement the form
and substance of which shall be satisfactory to Lender in its reasonable
discretion.
"SELCO Loan Agreement" has the meaning set forth in the definition
--------------------
of the term "SELCO Debt".
"SELCO Payment Date" means every third (3rd) Payment Date. For
------------------
example, if the Closing Date is prior to March 11, 1998, the first SELCO Payment
Date is May 11, 1998, the second SELCO Payment Date is August 11, 1998 and so
on.
"SELCO Payment Sub-Account" means the Sub-Account of the Cash
-------------------------
Collateral Account established and maintained pursuant to Section 2.12 relating
------- ----
to the payment of the SELCO Required Quarterly Payment.
"SELCO Required Quarterly Payment" means with respect to a SELCO
--------------------------------
Payment Date, the sum of the SELCO Basic Rent (as defined in the Operator
Lease), the Lessor Basic Rent (as defined in the Operator Lease) and the Break
Costs (as defined in the Operator Lease) due and payable on such SELCO Payment
Date, in each case, due and payable to Borrower pursuant to the Operator Lease.
"Single-Purpose Entity" means a corporation, limited partnership,
---------------------
limited liability company or business trust which, at all times since its
formation and thereafter a. was and will be organized solely for the purpose of
owning and/or operating the Facility, b. has not and will not engage in any
business unrelated to the ownership and/or operation of the Facility, c. has not
and will not have any assets other than those related to the Facility, d. 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, membership, shareholder or beneficial
interests, or (A) as to The Harbor Village Business Trust, amend its trust
agreement or trust certificate, and (B) as to any other entity which owns or
operates the Facility, amend its limited partnership agreement, articles of
incorporation, articles of organization, certificate of formation or operating
agreement (as applicable), with respect to those portions of such documents
relating to its compliance with the definition of "Single-Purpose Entity",
without the prior written consent of Lender, which consent shall not be
unreasonably withheld, and, after a Securitization, written confirmation by the
Rating Agencies that a proposed amendment will not result in a downgrade,
withdrawal or qualification of the then applicable ratings assigned to the
securities issued in a Securitization, e. if such entity is a limited
partnership, has and will have as its only general partners, general partners
which are and will be Single-Purpose Entities which are corporations, f. if such
entity is a business trust, has and will have, as its trustee, an
<PAGE>
35
Independent Eligible Trustee, g. if such entity is a corporation, at all
relevant times, has and will have at least one Independent Director, h. 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, i. has not failed
and will not fail to correct any known misunderstanding regarding the separate
identity of such entity, j. if such entity is a limited liability company, has
and will have at least one member that is and will be a Single-Purpose Entity
which is and will be a corporation, and such corporation is and will be the
managing member of such limited liability company, k. without the unanimous
consent of all of the partners, directors (including without limitation all
Independent Directors), members, beneficial owners or trustees, 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, k. has maintained and will maintain its accounts, books and
records separate from any other person or entity, m. has maintained and will
maintain its books, records, resolutions and agreements as official records, n.
has not commingled and will not commingle its funds or assets with those of any
other entity, o. has held and will hold its assets in its own name, p. has
conducted and will conduct its business in its name, q. has maintained and will
maintain its financial statements, accounting records and other entity documents
separate from any other person or entity, r. has paid and will pay its own
liabilities out of its own funds and assets, s. has observed and will observe
all partnership, corporate, limited liability company or business trust
formalities as applicable, t. has maintained and will maintain an arms-length
relationship with its affiliates, u. (a) if such entity owns the Facility, has
and will have no indebtedness other than the Indebtedness, the Mezzanine Loan,
the SELCO Debt and unsecured trade payables in the ordinary course of business
relating to the ownership and operation of the Facility which (1) do not exceed,
at any time, a maximum amount of Ten Thousand Dollars ($10,000) and (2) are paid
within ninety (90) days of the date incurred, or (b) if such entity operates the
Facility, has and will have no indebtedness other than as permitted under this
Loan Agreement and unsecured trade payables in the ordinary course of business
relating to the ownership and/or operation of the Facility which (1) do not
exceed, at any time, one percent (1%) of the aggregate of the Loan Amount and
the Mezzanine Loan Amount (as defined in the Mezzanine Loan Agreement) and (2)
are paid within ninety (90) days of the date incurred, v. 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, w. has not acquired and will not acquire
obligations or securities of its partners, members, beneficial owners, trustees
or shareholders, x. has allocated
<PAGE>
36
and will allocate fairly and reasonably shared expenses, including, without
limitation, shared office space and uses separate stationery, invoices and
checks, y. except pursuant hereto, has not and will not pledge its assets for
the benefit of any other person or entity (other than, with respect to Operator,
the pledge by the Operator of Certificate A (as defined in the SELCO Loan
Agreement)), z. 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, aa. has not made and will not
make loans to any person or entity, bb. has not and will not identify its
partners, members beneficial owners, trustees or shareholders, or any affiliates
of any of them as a division or part of it, cc. 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, cc. has not entered and will not enter into or be a party to, any
transaction with its partners, members, beneficial owners, trustees,
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, ee. has paid and will pay the salaries of its own employees from its own
funds, ff. has maintained and will maintain adequate capital in light of its
contemplated business operations and gg. if such entity is a limited liability
company, limited partnership or trust, and such entity has one or more managing
members, general partners or trustees, as applicable, then such entity shall
continue (and not dissolve) for so long as a solvent managing member, general
partner or trustee, as applicable, exists and such entity's organizational
documents shall contain such provision.
"Stabilization Date" means the earlier to occur of (i) the date on
------------------
which Borrower (A) has requested that Lender recalculate the Aggregate Principal
Indebtedness outstanding on such date, (B) provided to Lender all information
required pursuant to Section 8.32, and (C) has established, to Lender's
------- ----
satisfaction, that the Recalculated Loan Amount (calculated based upon the
Underwriting NOI Criteria and in accordance with the methodology and debt
service coverage ratio tests set forth in Section 8.32(a)), will be an amount
----------------
equal to or exceeding the then outstanding Indebtedness, and (ii) the Cut-Off
Date.
"Stabilization Date Loan Amount" means the outstanding Aggregate
------------------------------
Principal Indebtedness on the Stabilization Date (and before giving effect to
any recalculation of the Loan Amount (as defined hereunder and under the
Mezzanine Loan Agreement) on the Stabilization Date).
"Stabilization Date Payment Date" means the second Payment Date
-------------------------------
after the Stabilization Date.
"Stabilization Debt Service Constant" means a number (expressed as a
-----------------------------------
<PAGE>
37
percentage) equal to a quotient (i) the numerator of which is the sum of (x) the
product of the Gross Revenue not attributable to the provision of assisted
living services to occupants of the Facility for the twelve (12) month period
ending on the Stabilization Date multiplied by 8.81% plus (y) the product of the
Gross Revenue attributable to the provision of assisted living services to
occupants of the Facility for the twelve (12) month period ending on the
Stabilization Date which are assisted living multiplied by 9.65% and (ii) the
denominator of which is the total Gross Revenue for the twelve (12) month period
ending on the Stabilization Date.
"Start-Up Day" means the "start-up day," within the meaning of Section
------------
860G(a)(9) of the Code, of any "real estate mortgage investment conduit," within
the meaning of Section 860D of the Code, that holds the Note.
"Sub-Account" shall have the meaning provided in Section 2.12(c).
----------- ------- -------
"Successor Obligor" shall have the meaning provided in Section
----------------- -------
2.11(b).
- -------
"Survey" means, with respect to the Facility, a survey of the Facility
------
satisfactory to Lender, prepared by a registered Independent surveyor reasonably
satisfactory to Lender and Title Insurer, together with a metes and bounds legal
description of the land corresponding with the survey and containing the
Surveyor's Certification.
"Surveyor's Certification" means a surveyor's certification in form
------------------------
and substance satisfactory to Lender in Lender's reasonable discretion.
"Taking" means a taking or voluntary conveyance during the term hereof
------
of all or part of the Facility, or any interest therein or right accruing
thereto or use thereof, as the result of, or in settlement of, any condemnation
or other eminent domain proceeding by any Governmental Authority affecting the
Facility or any portion thereof.
"Tax Fair Market Value" means, with respect to the Facility, the fair
---------------------
market value of the Facility, and (x) 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 (S)(S)1.860G-2 and 1.856-3(c), or is
not "qualifying real property" within the meaning of Treasury Regulation
(S)1.593-11(b)(iv), and (y) shall be reduced by the "adjusted issue price"
(within the meaning of Code (S) 1272(a)(4)) (the "Tax Adjusted Issue Price") of
------------------------
any indebtedness, other than the Loan, secured by a Lien affecting the Facility,
which Lien is prior to or on a parity with the Lien created under the Mortgage.
"Title Instruction Letter" means an instruction letter in form and
------------------------
substance satisfactory to Lender in Lender's sole discretion.
<PAGE>
38
"Title Insurance Policy" means, with respect to the Facility, the loan
----------------------
policy of title insurance for the Facility issued by Title Insurer with respect
to the Facility in an amount acceptable to Lender and insuring the first
priority lien in favor of Lender created by the Mortgage and, as to the
Leasehold Estate, the Leasehold Mortgage and acceptable to Lender in Lender's
reasonable discretion.
"Title Insurer" means Lawyer's Title Insurance Corporation and any
-------------
reinsurer reasonably required by Lender and/or any other nationally recognized
title insurance company acceptable to Lender in Lender's reasonable discretion,
provided, however, that the reinsurer of any Title Insurance Policy may include,
in amounts reasonably acceptable to Lender, Chicago Title Insurance Company,
First American Title Insurance Company or Stewart Title Insurance Company.
"Transaction Costs" means all fees, costs, expenses and disbursements
-----------------
paid or payable by Borrower relating to the Transactions, including, without
limitation, all appraisal fees, legal fees, accounting fees and the costs and
expenses described in Section 8.24.
------- ----
"Transactions" means each of the transactions contemplated by the Loan
------------
Documents, including, without limitation, (i) the satisfaction of the conditions
precedent to the making of each and every Advance, (ii) the making of each and
every Advance and (iii) the transactions contemplated by Section 8.32 and
------------
Section 8.38.
- ------------
"Transfer" means any conveyance, transfer (including, without
--------
limitation, any transfer of any direct or indirect legal or beneficial interest
(including, without limitation, any profit interest) in Borrower or the
Operator), sale, Lease (including, without limitation, any amendment, extension,
modification, waiver or renewal thereof), or Lien, whether by law or otherwise,
of, on or affecting any Collateral, Borrower or the Operator, other than a
Permitted Transfer.
"Treasury Rate" means the yield, calculated by linear interpolation
-------------
(rounded to three decimal places) of the yields of United States Treasury
Constant Maturities with terms (one longer and one shorter) most nearly
approximating that of noncallable United States Treasury obligations having
maturities as close as possible to the Maturity Date, 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 for
the week prior to the Optional Prepayment Date.
"Trust Agreement" means that certain Trust Agreement between the
---------------
Beneficial
<PAGE>
39
Owner and Borrower's Trustee dated on or about the Closing Date as amended,
modified and in effect from time to time.
"Trust Company" means Wilmington Trust Company in its individual
-------------
capacity.
"Trustee Expense Monthly Installment" means one-twelfth (1/12/th)
-----------------------------------
of the Trustee's Annual Fee.
"Trustee Expense Sub-Account" means the Sub-Account of the Cash
---------------------------
Collateral Account established and maintained pursuant to Section 2.12 related
to the payment of amount due Borrower's Trustee under the Declaration of Trust.
"Trustee's Annual Fee" means $2,500.00.
--------------------
"Trustee's Certificate" means a Trustee's Certificate in form and
---------------------
substance satisfactory to Lender in Lender's reasonable discretion dated as of
the Closing Date.
"UCC" means, with respect to any Collateral, the Uniform Commercial
---
Code in effect in the jurisdiction in which the relevant Collateral is located.
"UCC Searches" has the meaning specified in Section 3.1(a)(E).
------------ ------- ---------
"Undisbursed Construction Amount" means, at any point in time with
-------------------------------
respect to any time, the excess of (i) the Initial Construction Amount over (ii)
the amount of funds at such time on deposit in the Construction Sub-Account.
"U.S. Obligations" means 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.
"Underwriting NOI Criteria" is set forth in Exhibit G.
------------------------- ---------
"Unpaid Excess Loan Amount" has the meaning provided in Section
------------------------- -------
8.32(c)(i).
- ----------
"Use" means, with respect to any Hazardous Substance, the generation,
---
manufacture, processing, distribution, handling, use, treatment, recycling or
storage of such Hazardous Substance or transportation to or from the property by
any Person of any Hazardous
<PAGE>
40
Substance.
"Warrants" has the meaning set forth in Exhibit E hereto.
-------- ---------
"Yield Maintenance Premium" means if all or any portion of the Note is
-------------------------
accelerated, the amount that, when added to the amount otherwise due as a result
of such acceleration, would be sufficient to purchase U.S. Obligations (A)
having maturity dates on or prior to, but as close as possible to, successive
scheduled Payment Dates (after the date of such acceleration of the Note) upon
which Payment Dates interest and principal payments would be required under the
Note as though the Maturity Date of the Note was the Optional Prepayment Date
and (B) in amounts sufficient to pay all scheduled principal and interest
payments on the Note as if the Maturity Date of the Note was the Optional
Prepayment Date (but without any adjustment of the monthly amortization
schedule).
ARTICLE II
GENERAL TERMS
-------------
Section 2.1. Amount of the Loan; Advances.
----------------------------
(a) Amount of the Loan. Subject to the terms and conditions of
------------------
this Agreement, Lender shall lend Borrower the Closing Date Advance and may lend
Borrower the Earn-Out Advance for a Loan Amount of up to the Maximum Advance
Amount.
(b) Closing Date Advance. On the Closing Date, the Lender shall
--------------------
fund the Closing Date Advance.
(c) Earn-Out Advance. On the Stabilization Date Payment Date,
----------------
Lender shall fund the Earn-Out Advance, if any, pursuant to and in accordance
with Section 8.32 and all other terms and conditions of this Agreement.
------------
Section 2.2. Use of Proceeds. Proceeds of the Loan shall be used
---------------
only for the following purposes: (i) to pay the acquisition costs for the
Facility, (ii) to fund any upfront reserves or escrow amounts required
hereunder, (iii) to pay Transaction Costs in connection with the closing of the
Loan and (iv) to pay for Actual Construction Costs. Any excess will be available
to Borrower to advance to Operator and may be used in connection with the
renovation at the Facility.
Section 2.3. Security for the Loan. The Note and Borrower's
---------------------
obligations hereunder and under the other Loan Documents shall be secured by the
Mortgages, the Guaranty,
<PAGE>
41
the Assignments of Leases, the Assignments of Agreements, and the security
interests and Liens granted in this Agreement and in the other Loan Documents
and, to the extent the Loan is cross-collateralized with the Other Loans
pursuant to Section 8.39, the Other Loan Documents.
------------
Section 2.4. Borrower's Note. (a) Borrower's obligation to pay the
---------------
principal of and interest on the Loan (including Late 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 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
Indebtedness 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 Charges,
Default Rate interest and Yield Maintenance Premium, if any, in respect thereof,
which books and records shall be made available to Borrower, at Borrower's sole
cost and expense on reasonable advance notice, for examination at Lender's
offices.
Section 2.5. Principal and Interest Payments.
-------------------------------
(a) Accrual of Interest before the Optional Prepayment Date.
-------------------------------------------------------
Prior to the Optional Prepayment Date, interest shall accrue on the outstanding
principal balance of the Note and all other amounts due to Lender under the Loan
Documents from (and including) the Closing Date to the Optional Prepayment Date
at the Initial Interest Rate.
(b) Accrual of Interest on or after the Optional Prepayment
-------------------------------------------------------
Date. On and after the Optional Prepayment Date, interest shall accrue on the
- ----
outstanding principal balance of the Note and all other amounts due to Lender
under the Loan Documents at the Revised Interest Rate.
(c) Monthly Base Payments of Principal and Interest.
-----------------------------------------------
Commencing on the first Payment Date after the Closing Date, and continuing on
each Payment Date thereafter through and including the Stabilization Date
Payment Date, Borrower shall pay to Lender monthly payments of accrued interest
only on the Principal Indebtedness. On each Payment Date commencing on the
Payment Date immediately following the Stabilization Date Payment Date, Borrower
shall pay to Lender a monthly constant payment of principal and interest, which
payment shall be based on the Initial Interest Rate and an amortization schedule
equal to the number of months from the Stabilization Date to the Maturity Date
(calculated on the basis of a calendar year consisting of twelve thirty day
months). Each payment required to be made by
<PAGE>
42
Borrower pursuant to this Section 2.5(c) is hereinafter sometimes referred to
------- ------
as a "Base Payment."
------------
(d) Payments of Excess Cash Flow. On and after the earlier to
----------------------------
occur of (i) the Optional Prepayment Date or (ii) at Lender's sole election,
upon the occurrence of an Event of Default hereunder, any date on or after the
occurrence of such Event of Default, in addition to the Base Payment, Borrower
shall pay to Lender all Excess Cash Flow to be applied as described in Section
-------
2.8.
- ---
(e) Payments of Excess of Revised Interest Rate Over Initial
--------------------------------------------------------
Interest Rate. 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 Initial Interest Rate (such amount, the "Accrued Interest"),
----------------
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 and shall be
computed based on the actual number of days elapsed in each year over a 360-day
year.
(f) Payment Dates. All payments required to be made pursuant to
-------------
paragraphs (a) through (e) above shall be made beginning on the first Payment
- ----------
Date immediately after the end of the second Interest Accrual Period; provided,
however, that Borrower shall pay interest for the first Interest Accrual Period
on the Closing Date.
(g) Calculation of Interest. Interest shall accrue on the
-----------------------
outstanding principal balance of the Loan and all other amounts due to Lender
under the Loan Documents commencing upon the Closing Date. Interest shall accrue
on Accrued Interest commencing on the first Payment Date following the Optional
Prepayment Date. Interest shall be computed on the actual number of days elapsed
in each year over a 360-day year.
(h) Default Rate Interest. Upon the earlier to occur of a Late
---------------------
Payment or an Event of Default, if any, the entire unpaid amount outstanding
hereunder and under the Note will bear interest at the Default Rate.
(i) Late Charge. If Borrower fails to make any payment of any
-----------
sums due under the Loan Documents after the same is due, and the same remains
unpaid after the expiration of any applicable cure period, if any, Borrower
shall pay a Late Charge.
(j) Maturity Date. On the Maturity Date Borrower shall pay to
-------------
Lender all amounts owing under the Loan Documents, including without limitation,
interest, principal, Late Charges, Default Rate interest, Accrued Interest and
any Yield Maintenance Premium. The Yield Maintenance Premium shall only be due
and payable on the date of acceleration of the
<PAGE>
43
Note.
(k) Cash Management Fees. After the occurrence of a Cash
--------------------
Management Event, a fee shall accrue on the outstanding principal balance of the
Note and all other amounts due to Lender under the Loan Documents at a rate of
.015% per annum which fee shall be paid, by Borrower to Lender, on each Payment
Date, for the Interest Accrual Period immediately preceding such Payment Date.
Section 2.6. Voluntary Defeasance.
--------------------
(a) Provided that no Event of Default has occurred and is then
continuing, on and after the date which is two years after the Start-Up Day (but
only before the Optional Prepayment Date), Borrower may voluntarily defease (A)
all of the Loan or (B) a portion of the Loan, but only pursuant to Section
-------
5.1(b)(P); provided, that, for any defeasance, Borrower must comply with Section
- --------- -------- -------
2.11.
- ----
(b) In the event of any such voluntary defeasance Borrower shall give
Lender written notice of its intent to defease, which notice shall be given at
least ten (10) days, in the case of a defeasance pursuant to Section 5.1(b)(P),
------- ---------
and at least thirty (30) days, in all other cases, prior to the date upon which
defeasance is to be made and shall specify the Payment Date and the amount of
such defeasance. If any such notice of defeasance is given, Borrower shall be
required to defease the Loan or a portion thereof pursuant to Section 5.1(b)(P)
------- ---------
on the specified Payment Date (unless such notice is revoked by Borrower prior
to the Payment Date specified therein in which event Borrower shall immediately
reimburse Lender within ten (10) calendar days after demand for any reasonable
costs incurred by Lender in connection with Borrower's giving of such notice and
revocation).
(c) Any voluntary defeasance of the Loan by Borrower is required to
be made on a Payment Date.
(d) Borrower shall not be permitted at any time to defease all or any
part of the Loan except as expressly provided in this Section 2.6.
-----------
Section 2.7. Prepayment. (a) On and after the earlier to occur of
----------
(i) the Optional Prepayment Date or (ii) at Lender's sole election, upon the
occurrence and during the continuance of an Event of Default hereunder, any date
on or after such Event of Default, in addition to all other payments required
hereunder, Borrower shall pay and use all Excess Cash Flow to prepay the Loan on
each Payment Date in accordance with Section 2.12(g) and Section 2.8 and, after
--------------- -----------
payment in full of the Principal Indebtedness (but not Accrued Interest or
interest thereon) to pay Accrued Interest and interest thereon and all other
amounts then owing.
<PAGE>
44
(b) If Borrower is required by Lender under the provisions of the
Mortgage to prepay the Loan or any portion thereof in the event of damage to or
destruction of or a Taking of all or any portion of the Facility, Borrower shall
prepay the Loan to the full extent of the Insurance Proceeds or the Condemnation
Proceeds, as applicable and there shall be no Yield Maintenance Premium or
penalty assessed against Borrower by reason of such prepayment.
(c) On and after the Optional Prepayment Date, Borrower may
voluntarily prepay the Loan in whole or, if no Event of Default has occurred and
is continuing, in part, and there shall be no Yield Maintenance Premium or
penalty assessed against Borrower by reason thereof.
(d) All prepayments made pursuant to this Section 2.7 shall be
------- ---
applied in accordance with the provisions of Section 2.8.
------- ---
(e) Any prepayment of the Loan by Borrower is required to be made
on a Payment Date.
(f) Borrower shall not be permitted at any time to prepay all or any
part of the Loan except as expressly provided in this Section 2.7.
------- ---
Section 2.8. Application of Payments. Prior to the occurrence and
-----------------------
continuance of an Event of Default, all proceeds of any repayment, including
prepayments, of the Loan shall be applied to pay: first, any costs and expenses
-----
of Lender, including, without limitation, the Lender's reasonable attorney's
fees and disbursements actually arising as a result of such repayment or
reasonably expended by Lender to protect the Collateral; second, accrued and
------
unpaid interest at, the Initial Interest Rate; third, to the Principal
-----
Indebtedness (but not to Accrued Interest or interest thereon); fourth, to
------
Accrued Interest and interest accrued thereon; and fifth, any other amounts then
-----
due and owing under the Loan Documents. After the occurrence and during the
continuance of an Event of Default, all proceeds of repayment, including any
payment or recovery on the Collateral shall, unless otherwise provided in the
Mortgages, be applied to amounts which Borrower is obligated to pay under the
Loan Documents in such order and in such manner as Lender shall elect in its
sole discretion.
Section 2.9. Payment of Debt Service, Method and Place of Payment.
----------------------------------------------------
(a) Except as otherwise specifically provided herein, all payments and
prepayments under this Agreement and the Note shall be made to Lender not later
than 12:00 noon, New York City time, on the date when due and shall be made in
lawful money of the United States of America in federal or other immediately
available funds to an account specified to Borrower by Lender in writing, and
any funds received by Lender after such time, for all purposes hereof, shall be
<PAGE>
45
deemed to have been paid on the next succeeding Business Day.
(b) All payments made by Borrower hereunder or by Borrower under the
other Loan Documents, shall be made irrespective of, and without any deduction
for, any set-offs or counterclaims.
(c) Unless a Cash Management Event has occurred and is continuing,
Borrower shall pay to the Lender or its designee, on or prior to each Payment
Date, the Required Debt Service Payment for such Payment Date, the Basic
Carrying Costs Monthly Installment for the Interest Accrual Period immediately
preceding such Payment Date (but only on and after the Stabilization Date) and
the Capital Reserve Monthly Installment for the Interest Accrual Period
immediately preceding such Payment Date (but only on and after the Stabilization
Date). If a Cash Management Event has occurred and is continuing, the
Collection Account Bank, shall transfer to Lender all amounts due under the Loan
Documents (and all other amounts in the Collection Account pursuant to the
Collection Account Agreement and Section 2.12 hereof).
------------
Section 2.10. Taxes. All payments made by Borrower under this
-----
Agreement and under the other Loan Documents shall be made free and clear of,
and without deduction or withholding for or on account of, any present or future
income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions
or withholdings, now or hereafter imposed, levied, collected, withheld or
assessed by any Governmental Authority (other than taxes imposed on the income
of Lender).
Section 2.11. Defeasance Requirements. (a) Subject to Section 2.6,
----------------------- ------- ---
the Loan may be defeased (A) in whole, or (B) in part, but only pursuant to
Section 5.1(b)(P); provided that Operator: (i) provides, in the case of a
- ------- ---------
defeasance pursuant to Section 5.1(b)(P), not less than ten (10) days', and, in
------- ---------
all other cases, not less than thirty (30) days prior written notice to the
Lender specifying a Payment Date (the "Defeasance Release Date") on which the
---------- ------- ----
payments provided in clauses (ii) and (iii) below are to be made and the deposit
provided in clause (iv) below is to be made, (ii) pays all interest accrued and
unpaid on the Principal Indebtedness to and including the Defeasance Release
Date, (iii) pays all other sums then due and payable under the Loan Documents,
(iv) deposits with the Lender an amount equal to the Defeasance Deposit, (v)
intentionally omitted, (vi) intentionally omitted, and (vii) delivers to the
Lender (A) a security agreement, in form and substance reasonably satisfactory
to Lender, creating a first priority perfected Lien on the deposits required
pursuant to this Section and the U.S. Obligations purchased on behalf of
Borrower in accordance with this Section (the "Security Agreement"), (B) for
-------- ---------
execution by the Lender, a release of the Mortgaged Property from the liens of
the Mortgages and the Assignments of Leases and the other Loan Documents
(including, without limitation, liens on fixtures) in a form appropriate for the
jurisdiction in which the Mortgaged Property is located, (C) an Officer's
Certificate of Operator certifying that the requirements set forth in this
<PAGE>
46
Section have been satisfied, (D) an opinion of counsel from Borrower's or
Operator's counsel in form and substance reasonably satisfactory to the Lender
stating, among other things, (x) that, without qualification, the U.S.
Obligations have been duly and validly assigned and delivered to Lender and
Lender has a first priority perfected security interest on the deposits required
pursuant to this Section and a first priority perfected lien on the U.S.
Obligations and the proceeds thereof purchased hereunder and (y) that the
defeasance will not adversely affect the status of any REMIC formed in
connection with a Securitization, and (E) such other certificates, documents or
instruments as the Lender may reasonably request including, without limitation,
(x) written confirmation from the relevant Rating Agencies that such defeasance
will not cause any Rating Agency to withdraw, qualify or downgrade the then-
applicable rating on any security issued in connection with any Securitization
and (y) 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 Loan Agreement. The U.S. Obligations shall mature on or be redeemable, or
provide for payment thereon, on or prior to the Business Day preceding the date
on which payments under the Note are due and payable and the proceeds thereof
shall be payable directly to the Cash Collateral Account. In connection with the
foregoing, Borrower and Operator each appoints the Lender as its agent for the
purpose of applying the amounts delivered pursuant to clause (iv) above to
purchase U.S. Obligations. Notwithstanding anything in this Agreement to the
contrary, in the event 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 2.11. Upon a complete defeasance of the Loan in accordance
------- ----
with this Section and subject to Section 2.11(c), Lender's recourse shall be
------- -------- -------
limited to the U.S. Obligations purchased with the Defeasance Deposit and the
proceeds thereof.
(b) Upon compliance with the requirements of this Section 2.11 in the
------- ----
event of a total defeasance of the Loan, the Mortgaged Property as to which the
defeasance has been consummated shall be released from the liens of the
Mortgages and all other Collateral which has been pledged as security for the
Loan shall be released from all the other Loan Documents. In connection with a
defeasance of the Loan, Borrower may be required by Lender to assign its
obligations under the Note, the other Loan Documents and the Security Agreements
together with the pledged U.S. Obligations to such other entity or entities
established or designated by Lender (the "Successor Obligor"). Such Successor
--------- -------
Obligor shall assume the obligations under the Note, the other Loan Documents
and the Security Agreements and, upon such assignment Borrower and Operator
shall be relieved of their respective obligations thereunder.
(c) Nothing in this Section 2.11 shall release Operator from any
------- ----
liability or obligation relating to any environmental matters arising under
Sections 4.1(d)(U) or 5.1(b)(D)-(I), inclusive, hereof.
- -------- --------- -------------
<PAGE>
47
Section 2.12. Central Cash Management. (a) Collection Account and
----------------------- ----------------------
Security Deposit Account.
- ------------------------
(i) Borrower and Operator shall open and maintain at the
Collection Account Bank two (2) trust accounts (the "Collection Account"
------------------
and the "Security Deposit Account", respectively).
------------------------
(ii) The Collection Account shall be assigned an identification
number by the Collection Account Bank and shall be opened and maintained in
the name "Brookdale Living Communities of Illinois-HV, Inc., d/b/a Harbor
Village as Mortgagor of Nomura Asset Capital Corporation/Collection
Account." Borrower and Operator shall not have any right of withdrawal
from the Collection Account. Operator shall direct all tenants and
subtenants of the Facility to deposit all lease payments, Rents, Moneys and
other items of Gross Revenue (other than security deposits) directly into
the Collection Account and shall cause all relevant checks to be made
payable to the name of the Collection Account. Without in any way limiting
Borrower's or Operator's obligations pursuant to the preceding two (2)
sentences, Borrower and Operator shall deposit directly into the Collection
Account all Rents, Moneys or other items of Gross Revenue (other than
security deposits and, prior to a Cash Management Event, the SELCO Basic
Rent and Lessor Basic Rent (each as defined in the Operator Lease))
received by Borrower or Operator in violation or contradiction of the
preceding two (2) sentences within one (1) Business Day after receipt
thereof.
(iii) The Security Deposit Account shall be assigned an
identification number by the Collection Account Bank and shall be opened
and maintained in the name "Brookdale Living Communities of Illinois-HV,
Inc., d/b/a Harbor Village as Mortgagor of Nomura Asset Capital
Corporation/Security Deposit Account." Borrower will direct the Operator
to, and the Operator shall, deposit all security deposits with respect to
the Facility directly into the Security Deposit Account and shall cause all
relevant checks to be made payable to the name of the Security Deposit
Account. Without in any way limiting the obligations of Borrower or
Operator pursuant to the preceding sentence, Borrower and Operator shall
deposit directly into the Security Deposit Account all security deposits
received by Borrower or Operator in violation or contradiction of the
preceding sentence, within one (1) Business Day after receipt thereof.
Borrower and Operator shall not have any right of withdrawal from the
Security Deposit Account except that, prior to the occurrence of an Event
of Default, Operator may withdraw funds from the Security Deposit Account
in accordance with the Collection Account Agreement. Operator may
designate a new financial institution to serve as a Collection Account Bank
if approved by Lender in Lender's reasonable discretion. If any Collection
Account Bank resigns pursuant to the terms of any Collection Account
Agreement,
<PAGE>
48
Operator shall replace such Collection Account Bank with a bank and
documentation acceptable to Lender prior to the date that such resignation
becomes effective pursuant to such Collection Account Agreement.
(iv) Any breach of this Section by Borrower or Operator shall be
an Event of Default
(b) Payments. Prior to the occurrence of a Cash Management
--------
Event, Borrower shall pay to Lender or Lender's designee or to an account
identified by Lender or Lender's designee on or prior to each Payment Date, the
Required Debt Service Payment for such Payment Date, the Basic Carrying Costs
Monthly Installment for the Interest Accrual Period immediately preceding such
Payment Date (but only on and after the Stabilization Date) and the Capital
Reserve Monthly Installment for the Interest Accrual Period immediately
preceding such Payment Date (but only on and after the Stabilization Date).
After the occurrence of a Cash Management Event, pursuant to the Collection
Account Agreement between the Collection Account Bank, Borrower and Lender (the
"Collection Account Agreement"), Borrower and Operator will authorize and direct
----------------------------
the Collection Account Bank to transfer on a daily basis all funds deposited in
the Collection Account for the Facility to Lender or Lender's designee to be
held in an Eligible Account established by Lender or Lender's designee (the
"Cash Collateral Account"). Notwithstanding the foregoing, in the event funds
-----------------------
in the Collection Account are being transferred to the Cash Collateral Account
as described in the foregoing sentence due to the occurrence of a Cash
Management Event described in clauses (i) through (iv) of the definition of the
term "Cash Management Event", on the date which is twelve (12) months after the
occurrence of such Cash Management Event and provided no Cash Management Event
exists on such date, the funds shall not be transferred to Lender or Lender's
designee for deposit into the Cash Collateral Account but shall be transferred
to an account designated by Borrower until a Cash Management Event occurs in
which event the funds in the Collection Account shall be transferred to the Cash
Collateral Account pursuant to the foregoing sentence. The Cash Collateral
Account shall be under the sole dominion and control of Lender. Neither
Borrower nor Operator shall have any right of withdrawal in respect to the Cash
Collateral Account.
(c) Establishment of Sub-Accounts. The Cash Collateral
-----------------------------
Account shall contain a Debt Service Payment Sub-Account, a Basic Carrying Costs
Sub-Account, a Capital Reserve Sub-Account, a Mezzanine Debt Service Payment
Sub-Account, a Securitization Expense Sub-Account, an Operating Expense Sub-
Account, a Trustee Expense Sub-Account, a Construction Sub-Account and a SELCO
Payment Sub-Account each of which accounts (individually, a "Sub-Account" and
-----------
collectively, the "Sub-Accounts") shall be an Eligible Account to which certain
------------
funds shall be allocated and from which disbursements shall be made pursuant to
the terms of this Loan Agreement.
<PAGE>
49
(d) Permitted Investments. Upon the written request of
---------------------
Operator, which request may be made once per Interest Accrual Period, Lender
shall direct (x) the Cash Collateral Account Bank to invest and reinvest any
balance in the Cash Collateral Account from time to time in Permitted
Investments as instructed by Operator and (y) the Collection Account Bank to
invest and reinvest any balance in the Security Deposit Account from time to
time in Permitted Investments as instructed by Operator; provided, however, that
-------- -------
(i) if Operator fails to so instruct Lender, or if an Event of Default shall and
the Collection Account Bank, as applicable, to invest and reinvest such balance
in Permitted Investments as Lender shall determine in Lender's sole discretion,
(ii) the maturities of any Permitted Investment on deposit in the Cash
Collateral Account shall, to the extent such dates are ascertainable, be
selected and coordinated to become due not later than the day before any
disbursements from the Sub-Accounts must be made, (iii) all such Permitted
Investments shall be held in the name and be under the sole dominion and control
of Lender; (iv) no Permitted Investment shall be made unless Lender shall retain
a perfected first priority Lien in such Permitted Investment securing the
Indebtedness and all filings and other actions necessary to ensure the validity,
perfection, and priority of such Lien have been taken; (v) Lender shall only be
required to follow the investment instructions which were most recently received
by Lender and Borrower and Operator shall be bound by such last received
investment instructions; and (vi) any written request from Operator containing
investment instructions shall contain an Officer's Certificate from Operator
(which may be conclusively relied upon by Lender and its agents) that any such
investments constitute Permitted Investments. It is the intention of the parties
hereto that all amounts deposited in the Cash Collateral Account and the
Security Deposit Account shall at all times be invested in Permitted
Investments. All funds in the Security Deposit Account and the Cash Collateral
Account that are invested in a Permitted Investment are deemed to be held in
such accounts for all purposes of this Agreement and the other Loan Documents.
Lender shall have no liability for any loss in investments of funds in the
Security Deposit Account or the Cash Collateral Account that are invested in
Permitted Investments (unless invested contrary to Operator's request other than
after the occurrence of an Event of Default) and no such loss shall affect
Borrower's obligation to fund, or liability for funding, the Cash Collateral
Account and each Sub-Account, as the case may be. Borrower, Operator and Lender
agree that Operator shall include all such earnings and losses (other than those
for Lender's account in accordance with the immediately preceding sentence) on
the Cash Collateral Account as income of Operator for federal and applicable
state tax purposes. Borrower shall be responsible for any and all fees, costs
and expenses with respect to Permitted Investments.
(e) Interest on Accounts. All interest paid or other earnings
--------------------
on the Permitted Investments made hereunder shall be deposited into the Security
Deposit Account or the Cash Collateral Account, as applicable, and shall be
subject to allocation and distribution like any other monies deposited therein.
<PAGE>
50
(f) Payment of Basic Carrying Costs, Debt Service, Capital
------------------------------------------------------
Improvement Costs, Mezzanine Debt Service, Securitization Expenses, Operating
- -----------------------------------------------------------------------------
Expenses, Trustee Fees, Actual Construction Costs and SELCO Required Quarterly
- ------------------------------------------------------------------------------
Payment.
- -------
(i) Payment of Basic Carrying Costs. At least five (5) Business Days
-------------------------------
prior to the due date of any Basic Carrying Cost, and not more frequently
than once each Interest Accrual Period, Operator shall notify Lender in
writing and request that Lender pay such Basic Carrying Cost on behalf of
Borrower and Operator on or prior to the due date thereof. Together with
each such request, Operator shall furnish Lender with copies of bills and
other documentation as may be reasonably required by Lender to establish
that such Basic Carrying Cost is then due. Lender shall make such payments
out of the Basic Carrying Cost Sub-Account before the same shall be
delinquent to the extent that there are funds available in the Basic
Carrying Cost Sub-Account and Lender has received appropriate documentation
to establish the amount(s) due and the due date(s) as and when provided
above.
(ii) Payment of Debt Service. At or before 12:00 noon, New York City
-----------------------
time, on each Payment Date during the term of the Loan, Lender shall
transfer to Lender's own account from the Debt Service Payment Sub-Account
an amount equal to the Required Debt Service Payment for the applicable
Payment Date. Borrower shall be deemed to have timely made the Required
Debt Service Payment pursuant to Section 2.9 regardless of the time Lender
------- ---
makes such transfer as long as sufficient funds are on deposit in the Debt
Service Payment Sub-Account at 12:00 noon, New York City time on the
applicable Payment Date.
(iii) Payment of Capital Improvement Costs. Not more frequently than
------------------------------------
once each Interest Accrual Period and provided that no Event of Default has
occurred and is continuing, Operator may notify Lender in writing and
request that Lender release to Operator or its designee funds out of the
Capital Reserve Sub-Account to the extent funds are available therein for
payment of Capital Improvement Costs (other than those Capital Improvement
Costs which are Actual Construction Costs which may be advanced from the
Construction Sub-Account pursuant to clause (iv)). Together with each such
------ ----
request, Operator shall furnish Lender with copies of bills and other
documentation as may be reasonably required by Lender to establish that
such Capital Improvement Costs are reasonable, that the work relating
thereto has been completed and that such amounts are then due or have been
paid. If Lender approves of such Capital Improvement Costs, Lender shall
release the funds to Operator or its designee within ten (10) Business Days
of Lender's receipt of Operator's written request. Upon completion of the
environmental remediation to the Facility itemized on Exhibit C-2 hereto,
-----------
Operator may provide Lender with the documentation described in this
paragraph sufficient to indicate that the
<PAGE>
51
remediation has been completed in accordance with the description set forth
on Exhibit C-2 and subject to the terms set forth in this paragraph, Lender
-----------
shall release the remainder of the Initial Capital Reserve Amount, to the
extent such funds have not been released to Operator.
(iv) Payment of Actual Construction Costs. Not more frequently than
------------------------------------
twice each Interest Accrual Period and provided that no Event of Default
has occurred and is continuing, Operator may delivery a Request for Draw to
Lender requesting that Lender release to Operator or its designee funds
out of the Construction Sub-Account to the extent funds are available
therein for payment of Actual Construction Costs. Together with each such
request, Operator shall furnish Lender with (A) copies of bills and other
documentation as may be reasonably required by Lender to establish that
such Actual Construction Costs are reasonable and in accordance with the
Construction Budget, that the work relating thereto has been completed and
that such amounts are then due or have been paid and (B) evidence
reasonably acceptable to Lender that demonstrates that immediately
following disbursement of such draw, the Undisbursed Construction Amount,
plus any sums deposited in the Construction Sub-Account by Operator shall
be sufficient to complete the Construction Project. Notwithstanding
anything to the contrary in this clause (iv), prior to Operator's being
------ ----
entitled to receive any funds from the Construction Sub-Account, Operator
shall have delivered to Lender a copy of the Construction Budget, and such
budget shall be in form and substance reasonably satisfactory to Lender
(including, without limitation, a determination by Lender that such budget
in no way underestimates any Actual Construction Costs). Provided the
foregoing terms have been satisfied, Lender shall release the funds to
Operator or its designee within ten (10) Business Days of Lender's receipt
of such Request for Draw. Upon Completion of Construction, Operator may
delivery a Request for Draw and, provided that no Event of Default has
occurred and is continuing, Lender shall release to Operator the remainder
of the Initial Construction Amount on deposit in the Construction Sub-
Account, to the extent such funds have not been released to Operator.
(v) Payment of Securitization Expenses. To the extent funds are
----------------------------------
available therein to pay the amounts for which Operator or Borrower is
responsible pursuant to Section 2.14, Lender may release funds out of the
------------
Securitization Expense Sub-Account to (a) pay such amounts or, (b) after
Lender has paid all of the amounts for which Borrower is responsible
pursuant to Section 2.14, provided no Event of Default has occurred and is
------------
then continuing, to remit to Operator all amounts remaining in the
Securitization Expense Sub-Account.
(vi) Payment of Operating Expenses. During each of the following
-----------------------------
<PAGE>
52
periods (i) any period in which the Preferred Equity Holder is an equity
owner in Operator and/or Borrower and (ii) on and after the Optional
Prepayment Date, not more frequently than once each Interest Accrual Period
and provided that no Event of Default has occurred and is then continuing,
Lender shall direct the Cash Collateral Account Bank to, within five (5)
Business Days of Lender's receipt of an Operating Expense Certificate from
Operator, such Operating Expense Certificate to be delivered by Operator
not more frequently than once each Interest Accrual Period, transfer funds
to Operator or its designee out of the Operating Expense Sub-Account to the
extent that there are funds available therein in an amount not to exceed
the amount stated in the Operating Expense Certificate up to the Operating
Expense Monthly Installment. Together with each such Operating Expense
Certificate, Operator shall furnish Lender with an Officer's Certificate
stating that all operating expenses from the second previous Interest
Accrual Period and all Interest Accrual Periods prior thereto have been
paid in full and that such amounts are then due or have been paid.
(vii) Extra Funds for Operating Expenses. During each of the
----------------------------------
following periods (i) any period in which the Preferred Equity Holder is an
equity owner in Operator and/or Borrower and (ii) on and after the Optional
Prepayment Date, not more frequently than once each Interest Accrual Period
and provided that no Event of Default has occurred and is continuing if in
a given Interest Accrual Period, the Operator requires amounts in excess of
the Operating Expense Monthly Installment ("Extra Funds"), Operator, 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 Operator or its designee
within ten (10) Business Days of Lender's receipt of Operator's written
request.
(viii) Reconciliation. Operator shall furnish Lender monthly, on each
--------------
Payment Date on and after the Optional Prepayment Date, a budget variance
report reconciling the Operating Expenses shown on the Annual Operating
Budget with requested disbursements for payment of Operating Expenses
pursuant to Section 2.12(f).
---------------
(ix) Payment of Trustee Expenses. Borrower or Borrower's Trustee
---------------------------
may notify Lender in writing and request Lender to pay to Borrower's
Trustee funds out of the Trustee Expense Sub-Account for the payment of
amounts due to Borrower's Trustee under the Trust Agreement. Lender shall
release such funds to Borrower's Trustee within five (5) Business Days of
the written request for such amounts (which written request
<PAGE>
53
shall be accompanied by such documentation as Lender may reasonably
request).
(x) Payment of SELCO Required Quarterly Payment. Provided that no
-------------------------------------------
Event of Default has occurred and is continuing, on each SELCO Payment Date
during the term of the Operator Lease, Lender shall transfer to Borrower by
wire transfer pursuant to instructions given to Lender by Borrower from the
SELCO Payment Sub-Account an amount equal to the SELCO Required Quarterly
Payment for such SELCO Payment Date plus any SELCO Required Quarterly
Payment that was due and owing on any previous SELCO Payment Date which was
not paid (and any interest payable thereon pursuant to the Operator Lease)
to SELCO to the extent that there are funds available in the SELCO Payment
Sub-Account.
(xi) Payment of Mezzanine Debt Service. At or before 12:00 noon,
---------------------------------
New York City time, on each Payment Date during the term of the Mezzanine
Loan, Lender shall transfer to Mezzanine Lender from the Mezzanine Debt
Service Payment Sub-Account an amount equal to the Mezzanine Required Debt
Service Payment for the applicable Payment Date. Borrower shall be deemed
to have timely made the Mezzanine Required Debt Service Payment pursuant to
the Mezzanine Loan Agreement regardless of the time Lender makes such
transfer as long as sufficient funds are on deposit in the Mezzanine Debt
Service Payment Sub-Account at 12:00 noon, New York City time on the
applicable Payment Date.
(g) Monthly Funding of Sub-Accounts. During each Interest Accrual
-------------------------------
Period and except as provided below, during the term of the Loan commencing with
the Interest Accrual Period in which the Closing Date occurs (each, the "Current
-------
Interest Accrual Period"), Lender shall allocate all funds then on deposit
- -----------------------
(irrespective of whether such funds were transferred by the Collection Account
Bank to the Cash Collateral Account Bank or by Borrower to the Lender pursuant
to Section 2.9(c)) in the Cash Collateral Account among the Sub-Accounts as
------- ------
follows and in the following priority:
(i) first, during each of the following periods (i) on and after
-----
the occurrence of an Event of Default and during the continuance thereof
and (ii) on and after the Stabilization Date, to the Basic Carrying Costs
Sub-Account, until an amount equal to the Basic Carrying Costs Monthly
Installment for the Current Interest Accrual Period has been allocated to
the Basic Carrying Costs Sub-Account;
(ii) second, to the Debt Service Payment Sub-Account, until an amount
------
equal to the Required Base Debt Service Payment for the Payment Date
immediately after the Current Interest Accrual Period has been allocated to
the Debt Service Payment Sub-Account;
<PAGE>
54
(iii) third, during each of the following periods (i) on and after
-----
the occurrence of an Event of Default and during the continuance thereof
and (ii) on and after the Stabilization Date, to the Capital Reserve Sub-
Account, until an amount equal to the Capital Reserve Monthly Installment
for the Current Interest Accrual Period has been allocated to the Capital
Reserve Sub-Account;
(iv) fourth, to the Securitization Expense Sub-Account, provided,
------
however, that only the Initial Securitization Expense Amount shall be
allocated to the Securitization Sub-Account;
(v) fifth, to the Trustee Expense Sub-Account until an amount equal
-----
to the Trustee Expense Monthly Installment has been allocated to the
Trustee Expense Sub-Account;
(vi) sixth, during each of the following periods (i) any period in
-----
which the Preferred Equity Holder is an equity owner in Operator and/or
Borrower and (ii) on and after the Optional Prepayment Date, or at Lender's
sole election, upon the occurrence of an Event of Default, any date on or
after the occurrence of such Event of Default and during the continuance
thereof, to the Operating Expense Sub-Account, until an amount equal to the
Operating Expense Monthly Installment for the Current Interest Accrual
Period has been allocated to the Operating Expense Sub-Account;
(vii) seventh, during any period in which the Mezzanine Loan is
-------
outstanding, to the Mezzanine Debt Service Payment Sub-Account until an
amount, equal to the Mezzanine Required Base Debt Service Payment for the
Payment Date immediately after the Current Interest Annual Period has been
allocated to the Mezzanine Debt Service Payment Sub-Account;
(viii) eighth, provided that no Event of Default has occurred and is
------
continuing, Lender agrees that in each Current Interest Accrual Period any
amounts deposited into or remaining in the Cash Collateral Account
(excluding all sums in the Construction Sub-Account) after (A) the minimum
amounts set forth in clauses (i), (ii), (iii), (iv), (v), (vi) and (vii)
----------- ---- ----- ---- --- ---- -----
above have been satisfied with respect to the Current Interest Accrual
Period and any periods prior thereto and (B) the funding of additional
reserves at levels determined by Operator to be prudent for working
capital, Capital Improvement Costs and other Borrower or Operator costs,
which levels shall be reasonably satisfactory to Lender, in Lender's
reasonable discretion, prior to the Optional Prepayment Date, to the SELCO
Payment Sub-Account, until an amount equal to the SELCO Required Quarterly
Payment for the next SELCO Payment Date plus any SELCO Required
<PAGE>
55
Quarterly Payment that was due and owing on any previous SELCO Payment Date
(plus interest payable thereon pursuant to the Operator Lease) which was
not paid to SELCO has been allocated to the SELCO Payment Sub-Account; and
(ix) ninth, provided that (i) no Event of Default has occurred and is
-----
continuing and (ii) Lender has received all financial information described
in Sections 5.1(a)(Q) and 5.1(b)(Q) for the most recent periods for which
-------- --------- ---------
the same are due, Lender agrees that in each Current Interest Accrual
Period any amounts deposited into or remaining in the Cash Collateral
Account (other than the Construction Sub-Account) after the minimum amounts
set forth in clauses (i), (ii), (iii), (iv), (v), (vi), (vii) and (viii)
----------- ---- ----- ---- --- ---- ----- ------
above have been satisfied with respect to the Current Interest Accrual
Period and any periods prior thereto, shall be disbursed by Lender on the
first Payment Date after the end of the then Current Interest Accrual
Period, at Borrower's expense, to the Preferred Cash Collateral Account (if
the Preferred Equity Holder is an equity owner in Operator and/or Borrower
or (if the Preferred Equity Holder does not own an equity interest in the
Operator and/or the Borrower) such account that Operator may request in
writing. Lender and its agents shall not be responsible for monitoring
Operator's use of any funds disbursed from the Cash Collateral Account or
any of the Sub-Accounts. Notwithstanding anything in this Agreement to the
contrary, on and after the Optional Prepayment Date, any amounts deposited
into or remaining in the Cash Collateral Account (other than the
Construction Sub-Account) after (A) the minimum amounts set forth in
clauses (i), (ii), (iii), (iv), (v), (vi), (vii), and (viii) above have
----------- ---- ----- ---- --- ---- ----- ------
been satisfied with respect to the Current Interest Accrual Period and any
periods prior thereto and (B) the funding of additional reserves at levels
determined by Operator to be prudent for working capital, Capital
Improvement Costs and other Borrower or Operator costs, which levels shall
be reasonably satisfactory to Lender, in Lender's reasonable discretion
(the "Excess Cash Flow"), shall be allocated to the Debt Service Sub-
----------------
Account and be applied by Lender on each Payment Date in accordance with
Section 2.8 and shall not be disbursed to Borrower or Operator; and further
------- ---
provided, however, that if an Event of Default has occurred and is
continuing any amounts deposited into or remaining in the Cash Collateral
Account shall be for the account of Lender and may be withdrawn by Lender
to be applied to amounts payable by Borrower and/or Operator under the Loan
Documents in any manner as Lender may elect in Lender's sole discretion.
If an Event of Default has occurred and is continuing or if on any
Payment Date the balance in any Sub-Account (other than the Construction Sub-
Account) is insufficient to make the required payment due from such Sub-Account,
Lender may, in its sole discretion, in addition to any other rights and remedies
available hereunder, withdraw funds from any other Sub-Account to pay such
deficiency. In the event that Lender elects to apply funds of any such Sub-
Account to pay any Required Base Debt Service Payment, Borrower shall, upon
demand,
<PAGE>
56
repay to Lender the amount of such withdrawn funds to replenish such Sub-
Account, and if Borrower shall fail to repay such amounts within two (2)
Business Days after notice of such withdrawal, an Event of Default shall exist
hereunder. Notwithstanding anything contained herein to the contrary, Borrower
shall deposit (i) on the Stabilization Date, the Initial Basic Carrying Costs
Amount into the Basic Carrying Costs Sub-Account, (ii) on the Closing Date, the
Initial Securitization Expense Amount into the Securitization Expense Sub-
Account, (iii) on the Stabilization Date, the Initial Capital Reserve Amount in
the Capital Reserve Sub-Account and (iv) on the Closing Date, the Initial
Construction Amount into the Construction Sub-Account.
(h) Condemnation Proceeds and Insurance Proceeds. In the event of a
--------------------------------------------
Taking with respect to the Facility, Borrower and Operator shall cause all the
proceeds in respect of any Taking ("Condemnation Proceeds") to be paid to the
---------------------
Lender who shall, except as otherwise provided in the second succeeding sentence
or in Section 2.12(c) of the Mortgage or the Leasehold Mortgage, apply such
Condemnation Proceeds to reduce the Indebtedness in accordance with Section 2.7
------- ---
and Section 2.8. In the event of a casualty with respect to the Facility,
------- ---
except as otherwise provided in the next sentence or in Section 2.5 of the
Mortgage or the Leasehold Mortgage, Borrower and Operator, as applicable, shall
cause all Proceeds of any insurance policy maintained by either Borrower or
Operator, as applicable ("Insurance Proceeds") to be paid to the Lender who
------------------
shall apply such Insurance Proceeds to reduce the Indebtedness in accordance
with Section 2.7 and Section 2.8. All Insurance Proceeds received by Borrower,
------- --- ------- ---
Operator or Lender in respect of business interruption coverage and all
Condemnation Proceeds received in respect of a temporary Taking shall be
maintained in the Cash Collateral Account, to be applied by Lender in the same
manner as Rents (other than security deposits) received from Borrower and/or
Operator with respect to the ownership and/or operation of the Facility;
provided, further, that in the event that the Insurance Proceeds of any such
- -------- -------
business interruption insurance policy or Condemnation Proceeds of such
temporary Taking are paid in a lump sum in advance, Lender shall hold such
Insurance Proceeds or Condemnation Proceeds in a segregated interest-bearing
escrow account at the Cash Collateral Account Bank, and Lender shall estimate
the number of months required for Operator to restore the damage caused by the
casualty to the Facility or that the Facility will be affected by such temporary
Taking, as the case may be, shall divide the aggregate business interruption
Insurance Proceeds or Condemnation Proceeds in connection with such casualty or
temporary Taking by such number of months, and shall disburse from such escrow
account into the Cash Collateral Account each month during the performance of
such restoration or pendency of such temporary Taking such monthly installment
of said Insurance Proceeds or Condemnation Proceeds. Any Insurance Proceeds or
Condemnation Proceeds made available to Operator for restoration or repair in
accordance herewith and with the Mortgage or Leasehold Mortgage, to the extent
not used by Operator in connection with, or to the extent they exceed the cost
of, such restoration, shall be paid to Operator.
<PAGE>
57
(i) Payment of Basic Carrying Costs. Except to the extent that
-------------------------------
Lender is obligated to pay Basic Carrying Costs from the Basic Carrying Costs
Sub-Account pursuant to the terms of Section 2.12(f), Borrower and Operator
------- -------
shall pay all Basic Carrying Costs with respect to themselves and the Facility
in accordance with the provisions of the Mortgages, subject, however, to
Borrower's and Operator's rights to contest payment of same in accordance with
the Mortgages. The obligation of Borrower and Operator to pay (or cause Lender
to pay) Basic Carrying Costs pursuant to this Agreement shall include, to the
extent permitted by applicable law, Impositions resulting from future changes in
law which impose upon Lender an obligation in connection with the Loan to pay
any property taxes or other Impositions or which otherwise adversely affect
Lender's interests. (In the event such a change in law prohibits Borrower from
assuming liability for payment of any such Imposition, the outstanding
Indebtedness shall, at the sole option of Lender, become due and payable on the
date that is 120 days after such change in law without payment of a Yield
Maintenance Premium and failure to pay such amounts on the date due shall be an
Event of Default. Should an Event of Default have occurred and be continuing,
the proceeds on deposit in the Basic Carrying Costs Sub-Account may be applied
by Lender to amounts Borrower and/or Operator is obligated to pay under the Loan
Documents in any manner as Lender in its sole discretion may determine.
Section 2.13. Security Agreement. (a) Pledge of Accounts. To
------------------ ------------------
secure the full and punctual payment and performance of all of the Indebtedness,
each of Borrower and Operator hereby sells, assigns, conveys, pledges and
transfers to Lender and grants to Lender a first and continuing security
interest in and to, the following property, whether now owned or existing or
hereafter acquired or arising and regardless of where located (collectively, the
"Account Collateral"):
------------------
(i) all of the right, title and interest of Borrower and Operator
in the Cash Collateral Account (including all Sub-Accounts) and all Money
(except to the extent funds therein constitute any SELCO Required Quarterly
Payment) and Permitted Investments, if any, from time to time deposited or
held in the Cash Collateral Account;
(ii) all of the right, title and interest of Borrower and Operator
in the Collection Account and Security Deposit Account and all Money, if
any, from time to time deposited or held in the Collection Account and
Security Deposit Account;
(iii) all interest, dividends, Money, Instruments and other property
from time to time received, receivable or otherwise payable in respect of,
or in exchange for, any of the foregoing; and
(iv) to the extent not covered by clauses (i), (ii), or (iii) above,
----------- ---- -----
all Proceeds and
<PAGE>
58
products of any or all of the foregoing.
(b) Covenants. (A) Borrower covenants that (i) all Rents (as defined
---------
in the Mortgage) and Money received by Borrower, shall be deposited by Borrower
directly into the Collection Account or the Security Deposit Account, as
applicable, in accordance with Section 2.12(a) (provided, however, Lessor Basic
------- -------
Rent, SELCO Basic Rent and any Supplemental Rent (as each such term is defined
in the Operator Lease) to which Borrower is entitled shall not be deposited in
the Collection Account) and (ii) so long as any portion of the Indebtedness is
outstanding, Borrower shall not open (nor permit Operator or any Person to open)
any other account for the collection of Rents (as defined in the Mortgage),
Money or other items of Gross Revenue, other than a replacement Collection
Account or Security Deposit Account approved by Lender in Lender's reasonable
discretion.
(B) Operator covenants that (i) all Rents (as defined in the
Leasehold Mortgage) and Money received by Operator shall be deposited by
Operator directly into the Collection Account or the Security Deposit Account,
as applicable, in accordance with Section 2.12(a) and (ii) so long as any
---------------
portion of the Indebtedness is outstanding, Operator shall not open any other
account for the collection of Rents (as defined in the Leasehold Mortgage),
Money or other items of Gross Revenue, other than a replacement Collection
Account or Security Deposit Account approved by Lender in Lender's reasonable
discretion.
(c) Instructions and Agreements. On or before the Closing Date,
---------------------------
Borrower and Operator will submit to the Collection Account Bank for the
Facility a Collection Account Agreement to be executed by the Collection Account
Bank.
(d) Financing Statements; Further Assurances. Borrower and Operator
----------------------------------------
will execute and deliver to Lender for filing financing statements in connection
with the Account Collateral in the form required to properly perfect Lender's
security interest in the Account Collateral to the extent that it may be
perfected by such a filing. Each of Operator and Borrower agrees that at any
time and from time to time, at the expense of Borrower and/or Operator, Borrower
and Operator shall promptly execute and deliver all further instruments, and
take all further action, that Lender may request, in order to perfect and
protect the pledge and security interest granted or purported to be granted
hereby, or to enable Lender to exercise and enforce Lender's rights and remedies
hereunder with respect to, the Account Collateral.
(e) Transfers and Other Liens. Each of Borrower and Operator agrees
-------------------------
that it will not sell or otherwise dispose of any of the Account Collateral
other than pursuant to the terms hereof and of the other Loan Documents, or
create or permit to exist any Lien upon or with respect to all or any of the
Account Collateral, except for the Lien granted to Lender under this Agreement.
<PAGE>
59
(f) Lender's Reasonable Care. Beyond the exercise of reasonable care
------------------------
in the custody thereof, Lender shall not have any duty as to any Account
Collateral or any income thereon in its possession or control or in the
possession or control of any agents for, or of Lender, or the preservation of
rights against any Person or otherwise with respect thereto other than the gross
negligence or willful misconduct of Lender or its agents, employees or bailees.
Lender shall be deemed to have exercised reasonable care in the custody of the
Account Collateral in its possession if the Account Collateral is accorded
treatment substantially equal to that which Lender accords its own property, it
being understood that Lender shall not be liable or responsible for (i) any loss
or damage to any of the Account Collateral, or for any diminution in value
thereof from a loss of, or delay in Lender's acknowledging receipt of, any wire
transfer from the Collection Account Bank or (ii) any loss, damage or diminution
in value by reason of the act or omission of Lender, or Lender's agents,
employees or bailees other than for gross negligence or willful misconduct of
Lender or its agents, employees or bailees.
(g) Lender Appointed Attorney-In-Fact. Each of Borrower and
---------------------------------
Operator, respectively, hereby irrevocably constitutes and appoints Lender as
Borrower's and Operator's true and lawful attorney-in-fact, with full power of
substitution, at any time after the occurrence and during the continuance of an
Event of Default to execute, acknowledge and deliver any instruments and to
exercise and enforce every right, power, remedy, option and privilege of
Borrower and Operator with respect to the Account Collateral, and do in the
name, place and stead of Borrower and Operator, all such acts, things and deeds
for and on behalf of and in the name of Borrower and Operator with respect to
the Account Collateral, which Borrower and Operator could or might do or which
Lender may deem necessary or desirable to more fully vest in Lender the rights
and remedies provided for herein with respect to the Account Collateral and to
accomplish the purposes of this Agreement. The foregoing powers of attorney are
irrevocable and coupled with an interest.
(h) Continuing Security Interest; Termination. This Section 2.13
----------------------------------------- ------- ----
shall create a continuing pledge of and security interest in the Account
Collateral and shall remain in full force and effect until payment in full of
the Indebtedness or a total defeasance of the Loan in accordance with Section
-------
2.11. Upon payment in full of the Indebtedness or total defeasance of the Loan
- ----
in accordance with Section 2.11, each of Borrower and Operator shall be entitled
------- ----
to the return, upon their request and at their expense, of such of the Account
Collateral as shall not have been sold or otherwise applied pursuant to the
terms hereof, and Lender shall execute such instruments and documents as may be
reasonably requested by Borrower or Operator to evidence such termination and
the release of the pledge and Lien hereof, provided, however, that Borrower
-------- -------
shall pay within ten (10) calendar days following written demand all of Lender's
expenses in connection therewith.
<PAGE>
60
Section 2.14. Securitization. Each of Operator and Borrower hereby
--------------
acknowledges that Lender, its successors or assigns, may sell or securitize the
Loan or portions thereof in one or more transactions through the issuance of
securities, which may be rated by the Rating Agencies (each, a "Securitization";
--------------
collectively, the "Securitizations"). Each of Operator and Borrower,
---------------
respectively, agrees that it shall reasonably cooperate with Lender and use its
best efforts to facilitate the consummation of each Securitization including,
but not limited to, by (a) amending or causing the amendment of this Agreement,
the documents evidencing the Class B Equity Interests and, if any, the Class C
Equity Interests, the Mezzanine Loan Documents and the other Loan Documents, and
executing such additional documents including amendments to Borrower's or
Operator's organizational documents (provided such additional documents and
amendments do not materially expand Borrower's or Operator's economic
obligations hereunder) and preparing financial statements as requested by the
Rating Agencies to conform the terms of the Loan to the terms of similar loans
underlying completed or pending securitized transactions having or seeking
ratings the same as those then being sought in connection with the relevant
Securitization and; (b) promptly and reasonably providing such information as
may be reasonably requested in connection with the preparation of a private
placement memorandum or a registration statement required to privately place or
publicly distribute the securities in a manner which does not conflict with
federal or state securities laws. Operator, additionally agrees that it shall
further reasonably cooperate with Lender by (a) providing in connection with
each of (i) a preliminary and a private placement memorandum or (ii) a
preliminary and final prospectus, as applicable, an indemnification certificate
(x) certifying that Operator has carefully examined sections of the memorandum
or prospectus, as applicable, including, without limitation, the sections
entitled "Special Considerations," "Description of the Mortgage Loan" and "The
Underlying Mortgaged Property," "The Operator," "Borrower" and "Certain Legal
Aspects of the Mortgage Loan," and such sections (and any other sections
reasonably requested) insofar as they relate to Borrower or Operator, their
respective Affiliates, the Loan or the Facility 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 Operator shall not be
required to indemnify Lender for any losses relating to untrue statements or
omissions which Operator identified to Lender in writing at the time of
Operator's examination of such memorandum or prospectus as applicable, and (y)
indemnifying Lender (and its officers, directors, partners, employees,
affiliates and agents and each other person, if any, controlling Lender or any
of its affiliates within the meaning of either Section 15 of the Securities Act
of 1933, as amended, or Section 20 of the Securities Exchange Act of 1934, as
amended), the Issuer and the Advisor for any losses, claims, damages, costs,
expenses or liabilities (including, without limitation, all liabilities under
all applicable federal and state securities laws) (other than those relating to
untrue statements or omissions which Operator identified to Lender in writing at
the time of Operator's examination of the relevant portions of such prospectus
or memorandum) (the foregoing liabilities for which Operator is responsible as
described in this clause (y), collectively, the "Liabilities") to which
------ --- -----------
<PAGE>
61
any of them may become subject (i) insofar as the Liabilities arise directly out
of or are based directly upon any untrue statement or alleged untrue statement
of any material fact relating to Operator, Borrower, their respective
Affiliates, the Loan, the Facility, the Mezzanine Loan or any aspect of the
subject financing or the parties directly involved therein contained in such
sections or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated in such sections or
necessary in order to make the statements in such sections, in light of the
circumstances under which they were made, not misleading or (ii) as a result of
any untrue statement of material fact in any of the financial statements of
Operator or Borrower incorporated into any placement memorandum, prospectus,
registration statement or other document connected with the issuance of
securities or the failure to include in such financial statements or in any
placement memorandum, prospectus, registration statement or other document
connected with the issuance of securities any material fact relating to
Borrower, Operator, their respective Affiliates, the Facility, the Mezzanine
Loan, the Loan, and any aspect of the subject financing necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading; provided that Operator shall have had an opportunity to
review and comment upon the relevant portions of such documents and Operator's
comments thereon have been incorporated therein or otherwise addressed to
Operator's reasonable satisfaction; and (z) agreeing to reimburse Lender, the
Issuer and the Advisor for any legal or other expenses reasonably incurred by
Lender, the Issuer and the Advisor in connection with investigating or defending
the Liabilities; (b) causing to be rendered such customary opinion letters as
shall be reasonably requested by the Rating Agencies for other securitizations
having or seeking ratings comparable to that then being sought for the relevant
Securitization; (c) making such representations, warranties and covenants, as
may be reasonably requested by the Rating Agencies and comparable to those
required in other securitized transactions having or seeking the same rating as
is then being sought for the Securitization; (d) providing such information
regarding the Collateral as may be reasonably requested by the Rating Agencies
or otherwise required in connection with the formation of a REMIC; and (e)
providing any other information and materials required in the Securitization
process. Subject to Lender's application of funds in the Securitization Expense
Sub-Account, Operator agrees to pay on the Securitization Closing Date and, if
earlier, within thirty (30) days after the incurrence thereof, within ten (10)
calendar days following demand, all of Operator's pro rata share of reasonable
out-of-pocket costs of Lender (and not previously reimbursed by Borrower or
Operator) in connection with the Securitization (or any attempt to securitize
the Loan), including, without limitation, the cost of preparing a private
placement memorandum or prospectus, Rating Agency fees and expenses (including
ongoing surveillance fees), legal fees and disbursements (including without
limitation, in connection with the rendering of legal opinions), third party due
diligence expenses, including appraisals, engineering reports and environmental
reports, the fees and expenses of any trustee, servicer or special servicer,
including any ongoing servicing or special servicing fees, and the cost of
market studies and SEC filing fees (collectively, "Securitization Costs"),
provided, however, that Operator's liability for Securitization Costs shall
<PAGE>
62
not exceed the Initial Securitization Expense Amount. Each of Borrower and
Operator acknowledges and agrees that the Lender may, at any time on or after
the Closing Date, assign its duties, rights or obligations hereunder or under
any Loan Document in whole, or in part, to a servicer and/or a trustee in
Lender's discretion. Nothing herein shall in any way limit Lender's right to
sell all or a portion of the Loan in a transaction which is not a
Securitization.
Section 2.15. Supplemental Mortgage Affidavits. The Liens to be
--------------------------------
created by the Mortgages are intended to encumber the Facility described therein
to the full extent of Borrower's obligations under the Loan Documents. As of
the Closing Date, Borrower shall have paid all state, county and municipal
recording and all other taxes imposed upon the execution and recordation of the
Mortgages.
ARTICLE III
CONDITIONS PRECEDENT
--------------------
Section 3.1. Conditions Precedent to the Closing Date Advance. (a)
------------------------------------------------
As a condition precedent to the making of the Closing Date Advance, Borrower
shall have satisfied the following conditions (unless waived by Lender in
accordance with Section 8.4) with respect to the Facility on or before the
------- ---
Closing Date:
(A) Loan Documents.
--------------
(i) Loan Agreement. Borrower shall have executed and delivered
--------------
this Agreement to Lender.
(ii) Note. Borrower shall have executed and delivered to
----
Lender the Note.
(iii) Mortgages. Borrower shall have executed and delivered to
---------
Lender the Mortgage and Operator shall have executed and delivered to
Lender the Leasehold Mortgage and such Mortgages shall have been filed of
record in the appropriate filing offices in the jurisdiction in which the
Facility is located or irrevocably delivered to a title agent for such
recordation.
(iv) Assignments of Leases. Borrower shall have executed and
---------------------
delivered to Lender the Assignment of Leases - Borrower and Operator shall
have executed and delivered to Lender the Assignment of Leases - Operator
and the Assignments of Leases shall have been filed of record in the
appropriate filing offices in the jurisdiction in which the Facility is
located or irrevocably delivered to a title agent for
<PAGE>
63
such recordation.
(v) Assignments of Agreements. Borrower shall have executed
-------------------------
and delivered to Lender the Assignment of Agreements - Borrower and
Operator shall have executed and delivered to Lender the Assignment of
Agreements -Operator and the Assignments of Agreements shall, to the extent
prudent pursuant to local practice, have been filed of record in the
appropriate filing offices in the jurisdiction in which the Facility is
located or irrevocably delivered to a title agent for such recordation.
(vi) Financing Statements. Borrower and Operator shall have
--------------------
executed and delivered to Lender all financing statements required by
Lender and such financing statements shall have been filed of record in the
appropriate filing offices in each of the appropriate jurisdictions or
irrevocably delivered to a title agent for such recordation.
(vii) Intentionally deleted.
(viii) Intentionally deleted.
(ix) Environmental Guaranty. The Parent shall have executed
----------------------
and delivered to Lender the Environmental Guaranty.
(x) Intentionally deleted.
(xi) Guaranty. Operator shall have executed and delivered the
--------
Guaranty and executed copies of such agreement shall have been delivered to
Lender.
(xii) Collection Account Agreement. Borrower, Operator and the
----------------------------
Collection Account Bank shall have executed and delivered the Collection
Account Agreement and shall have delivered an executed copy of such
agreement to Lender.
(xiii) Mezzanine Loan Documents. Borrower and Operator shall
------------------------
have executed the Mezzanine Loan Agreement and the other Mezzanine Loan
Documents and Borrower and Operator shall have delivered executed copies of
all such documents to Lender.
(B) Opinions of Counsel. Lender shall have received from counsel
-------------------
reasonably satisfactory to Lender, legal opinions in form and substance
satisfactory to Lender in Lender's reasonable discretion (including without
limitation, bankruptcy opinions regarding Borrower and Operator). All such
legal opinions will be addressed to Lender and the Rating Agencies, dated
as of the Closing Date, and in form and substance
<PAGE>
64
reasonably satisfactory to Lender, the Rating Agencies and their counsel.
Each of Borrower and Operator hereby instructs any of the foregoing
counsel, to the extent that such counsel represents Borrower or Operator,
to deliver to Lender such opinions addressed to Lender and the Rating
Agencies.
(C) Secretary's, Trustee's and Beneficial Owner's Certificates.
----------------------------------------------------------
Lender shall have received a Beneficial Owner's Certificate with respect to
Beneficial Owner, a Secretary's Certificate with respect to Operator and a
Trustee's Certificate from Borrower's Trustee.
(D) Insurance. Lender shall have received certificates of insurance
---------
demonstrating insurance coverage in respect of the Facility of types, in
amounts, with insurers and otherwise in compliance with the terms,
provisions and conditions set forth in the Mortgages. Such certificates
shall indicate that Lender is an additional insured as its interests may
appear and, to the extent required by the Mortgages, shall contain a loss
payee endorsement in favor of Lender with respect to the property policies
required to be maintained under the Mortgages and the other policies
required to be maintained hereunder. All insurance policies required to be
maintained hereunder shall be maintained from the Closing Date throughout
the term of this Agreement in the types and amounts required hereunder and
under the Mortgages.
(E) Lien Search Reports. Lender shall have received satisfactory
-------------------
reports of UCC (collectively, 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 the owner of the Facility
immediately prior to the Borrower's acquisition of the Facility, Borrower,
Operator and each equity owner in Borrower and Operator as well as under
any "doing business as" or "also known as" names of such entities. 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.
(F) Title Insurance Policy. Lender shall have received (i) a Title
----------------------
Insurance Policy or a marked up commitment (in form and substance
reasonably satisfactory to Lender in Lender's reasonable discretion) from
Title Insurer to issue the Title Insurance Policy and (ii) a fully executed
copy of the Title Instruction Letter from the Title Insurer.
(G) Environmental Matters. Lender shall have received an
---------------------
Environmental Report with respect to the Facility, addressed to Lender,
which Environmental Report shall be (i) prepared by a firm approved by
Lender in Lender's reasonable discretion, (ii) prepared based on a scope of
work determined by Lender in Lender's reasonable
<PAGE>
65
discretion and (iii) in form and content reasonably acceptable to Lender,
such Environmental Report to be conducted by an Independent environmental
Engineer.
(H) Consents, Licenses, Approvals. Lender shall have received copies
------------------------------
of all consents, licenses and approvals, if any, required in connection
with the execution, delivery and performance by Borrower under, and the
validity and enforceability of, the Loan Documents, and such consents,
licenses and approvals shall be in full force and effect.
(I) Additional Matters. Lender shall have received such other
------------------
Permits, certificates (including certificates of occupancy reflecting the
use of the Facility as of the Closing Date), opinions, documents and
instruments (including without limitation, written proof from the
appropriate Governmental Authority regarding the zoning of the Facility in
form and substance reasonably satisfactory to Lender in Lender's reasonable
discretion) relating to the Loan as may have been reasonably requested by
Lender and all other documents and all legal matters in connection with the
Loan shall be satisfactory in form and substance to Lender. Borrower shall
provide Lender with information reasonably satisfactory to Lender regarding
the Basic Carrying Costs on or before the Closing Date.
(J) Representations and Warranties. The representations and
------------------------------
warranties herein and in the other Loan Documents shall be true and correct
in all material respects.
(K) Accounting and Regulatory Review. Lender shall have received an
--------------------------------
accounting and regulatory review reasonably satisfactory to Lender showing
no anticipated decrease in cash flow. Such review shall be (i) prepared by
a firm approved by Lender in Lender's reasonable discretion, (ii) prepared
based on a scope of work determined by Lender in Lender's reasonable
discretion and (iii) in form and content acceptable to Lender in Lender's
reasonable discretion.
(L) 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 litigation shall be pending or threatened, which in the good
faith judgment of Lender would enjoin, prohibit or restrain, or impose or
result in a Material Adverse Effect upon the making or repayment of the
Loan or the consummation of the Transactions.
(M) Survey. Lender shall have received a Survey with respect to the
------
Facility which Survey shall be (i) prepared by a firm approved by Lender in
Lender's reasonable discretion, (ii) prepared based on a scope of work
determined by Lender in Lender's reasonable discretion and (iii) in form
and content acceptable to Lender in Lender's reasonable discretion.
(N) Engineering Report. Lender shall have received an Engineering
------------------
Report
<PAGE>
66
with respect to the Facility prepared by an Engineer (addressed to Lender)
and which reports shall be (i) prepared by a firm approved by Lender in
Lender's reasonable discretion, (ii) prepared based on a scope of work
determined by Lender in Lender's reasonable discretion and (iii) in form
and content acceptable to Lender in Lender's reasonable discretion.
(O) Appraisal. Lender shall have received an Appraisal satisfactory
---------
to Lender with respect to the Facility which shall be (i) prepared by a
firm approved by Lender in Lender's reasonable discretion, (ii) prepared
based on a scope of work determined by Lender in Lender's reasonable
discretion and (iii) in form and content acceptable to Lender in Lender's
reasonable discretion.
(P) Security Deposits. All security deposits with respect to the
-----------------
Facility on the Closing Date shall have been transferred to the Security
Deposit Account, and Borrower shall be in compliance in all material
respects with all applicable Legal Requirements relating to such security
deposits.
(Q) Service Contracts and Permits. Borrower shall have delivered to
-----------------------------
Lender a copy of all material contracts and Permits relating to the
Facility.
(R) Site Inspection. Unless waived by Lender in accordance with
---------------
Section 8.4, Lender shall have performed, or caused to be performed on its
------- ---
behalf, an on-site due diligence review of the Facility to be acquired or
refinanced with the Loan satisfactory to Lender in Lender's reasonable
discretion.
(S) Use. The Facility shall be operating only as a congregate care or
---
independent living facility with assisted living services.
(T) Financial Information. Lender shall have received all financial
---------------------
information (which financial information shall be satisfactory to Lender in
Lender's reasonable discretion) relating to the Facility including, without
limitation, audited financial statements of Parent and other financial
reports requested by Lender in Lender's reasonable discretion. Such
financial information shall be (i) prepared by a firm approved by Lender in
Lender's reasonable discretion, (ii) prepared based on a scope of work
determined by Lender in Lender's reasonable discretion and (iii) in form
and content acceptable to Lender in Lender's reasonable discretion.
(U) Intentionally Omitted.
---------------------
(V) Leases; Operator Estoppel and Subordination Agreement. With
-----------------------------------------------------
respect to
<PAGE>
67
the Facility, Operator shall have delivered a true, complete and correct
rent roll and a copy of each of the Leases identified in such rent roll,
and each Lease shall be satisfactory to Lender in Lender's reasonable
discretion. Operator shall deliver evidence that each of Leases is
subordinate to the Mortgages. Operator shall deliver an estoppel and
subordination agreement in form reasonably satisfactory to Lender.
(W) Subdivision. Evidence reasonably satisfactory to Lender
-----------
(including title endorsements) that the Land with respect to the Facility
constitutes a separate lot for conveyance and real estate tax assessment
purposes.
(X) Transaction Costs. Borrower shall have paid or caused to be paid
-----------------
all Transaction Costs.
(b) Lender shall not make the Loan unless and until each of the
applicable conditions precedent set forth in Section 3.1(a) is satisfied and
------- ------
until Borrower and Operator each provides any other information reasonably
required by Lender.
(c) In connection with the Loan, Borrower and Operator shall execute
and/or deliver to Lender all additions, amendments, modifications and
supplements to the items set forth in this Section 3.1(a), including without
--------------
limitation, amendments, modifications and supplements to the Note, Mortgages,
Assignments of Leases and Assignments of Agreements, if reasonably requested by
Lender to effectuate the provisions hereof, and to provide Lender with the full
benefit of the security intended to be provided under the Loan Documents.
Without in any way limiting the foregoing, such additions, modifications and
supplements shall include those deemed reasonably desirable by Lender's counsel
in the jurisdiction in which the Facility is located.
(d) The making of the Loan shall constitute, without the necessity of
specifically containing a written statement to such effect, a confirmation,
representation and warranty by Borrower and Operator to Lender that all of the
applicable conditions to be satisfied in connection with the making of the Loan
have been satisfied (unless waived by Lender in accordance with Section 8.4,)
------- ---
and that all of the representations and warranties of Borrower set forth in the
Loan Documents are true and correct in all material respects as of the date of
the making of the Loan.
Section 3.2. Conditions Precedent to the Earn-Out Advance. As a
--------------------------------------------
condition precedent to the making of the Earn-Out Advance, Borrower and Operator
shall have satisfied (as determined by Lender in its reasonable discretion) the
following conditions (unless waived by Lender in accordance with Section 8.4) on
-----------
or before the date upon which the Earn-Out Advance
<PAGE>
68
is to be made:
(A) Prior Conditions. All of the conditions precedent to the making
----------------
of the Loan set forth in Section 3.1 shall have been satisfied as to the Earn-
-----------
Out Advance.
(B) Damage or Injury. The existing Improvements relating to the
----------------
Facility shall not have been materially injured or damaged by fire or other
casualty unless previously remediated by Operator in a manner satisfactory to
Lender in Lender's discretion.
(C) Title Requirements. Title Insurer shall have issued prior to the
------------------
date of the Earn-Out Advance (1) a continuation of title showing title to all
Land and Improvements to be vested in Borrower, with no subordinate items and
with no exceptions to the title of the Land and Improvements other than
Permitted Encumbrances, and (2) an endorsement to the Title Insurance Policy
issued by the Title Insurer insuring the continued priority of the lien of the
Mortgage, subject only to Permitted Encumbrances, for the full amount of the
Earn-Out Advance and the Closing Date Advance. Such continuation of title shall
contain affirmative insurance that no mechanic's or supplier's liens have
attached and, if available and applicable, that neither public nor private
conditions, covenants or restrictions, if any, affecting the Land have been
violated.
(D) Request for Advance. Operator and Borrower shall submit to Lender
-------------------
thirty (30) days prior to the Stabilization Date a written request for the Earn-
Out Advance signed by a duly authorized representative of Operator and Borrower
and all back-up documentation therefor all in form and substance satisfactory to
Lender in Lender's reasonable discretion ("Request for Advance").
-------------------
(E) Change. No material adverse change with respect to the Facility,
------
Operator or Borrower shall have occurred.
(F) Information. Operator shall have provided all financial
-----------
information Operator is required to provide pursuant to Section 5.1(b)(Q) when
------- --------
due and any other information requested by Lender in connection with the Earn-
Out Advance.
(G) Audit. Operator shall have provided Lender with the results of a
-----
financial audit, at least thirty (30) days prior to the Stabilization Date,
reasonably satisfactory to Lender in Lender's discretion and prepared by an
auditor reasonably satisfactory to Lender in Lender's discretion.
(H) Transaction Costs. Borrower and/or Operator shall have paid (or
-----------------
agreed to pay at closing from the proceeds of the Earn-Out Advance) all
Transaction
<PAGE>
69
Costs then due and payable which have not been previously paid (including,
without limitation, any and all reasonable costs and expenses of Lender in
connection with the Earn-Out Advance).
(I) Financial Statements. At least thirty (30) days prior to the
--------------------
Stabilization Date, Operator shall have provided Lender with respect to the
Facility, (i) two (2) years historical operating statements of the Facility (or
such lesser time dating from the Closing Date to the end of the fiscal quarter
immediately preceding the Request for Advance), (ii) a statement of property
operations for the preceding twelve (12) months, and (iii) operating and capital
budgets for the year ending December 31, 2000, all audited by an Independent
accounting firm acceptable to Lender in Lender's discretion.
(J) Additional Information. Borrower and Operator shall have
----------------------
delivered to Lender any and all additional information requested by Lender in
Lender's reasonable discretion.
(K) No Default. No Default or Event of Default shall have
----------
occurred and be continuing.
(L) Customary Due Diligence. Lender shall have completed Lender's
-----------------------
customarily required due diligence with results satisfactory to Lender in
Lender's discretion.
(M) Amendments. Borrower and Operator shall have executed and
----------
delivered amendments to any or all of the Loan Documents as reasonably requested
by Lender (including, without limitation, amendments to reflect changes to loan
amounts, interest rates and amortization schedules) and in form and substance
satisfactory to Lender in Lender's discretion.
(N) Additional Reserves. Lender shall have established and Operator
-------------------
shall have funded such additional reserves as are established by Lender in
Lender's discretion, including, without limitation, reserves to fund all
deferred maintenance items set forth on the updated Engineering Report.
(O) Third Party Reports. Operator shall deliver all third party
-------------------
reports requested by Lender in Lender's discretion.
(P) Maximum Earn-Out Advance Amount. The amount of the Earn-Out
-------------------------------
Advance shall not exceed the Maximum Earn Out Advance Amount.
Section 3.3. Form of Loan Documents and Related Matters. The Loan
------------------------------------------
<PAGE>
70
Documents and all of the certificates, agreements, legal opinions and other
documents and papers referred to in this Article III, unless otherwise
-----------
specified, shall be delivered to Lender, and shall be reasonably satisfactory in
form and substance to Lender.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
------------------------------
Section 4.1. Representations and Warranties of Borrower and Operator.
-------------------------------------------------------
(a) Closing Date Representations and Warranties of Borrower. Borrower
-------------------------------------------------------
represents and warrants that, as of the Closing Date and in the case of any
Advance other than the Closing Date Advance, if any, as of the date of each such
other Advance:
(A) Organization. Borrower (i) is a duly organized and validly
------------
existing Entity in good standing under the laws of the State of its
formation, (ii) is duly qualified as a foreign Entity in each jurisdiction
in which the nature of its business, the Facility or any of the Collateral
makes such qualification necessary or desirable, (iii) has the requisite
Entity power and authority to carry on its business as now being conducted,
and (iv) has the requisite Entity power to execute and deliver, and perform
its obligations under, the Loan Documents executed by Borrower.
(B) Authorization. The execution and delivery by Borrower of the Loan
-------------
Documents to which it is a party, Borrower's performance of its obligations
thereunder and the creation of the security interests and Liens provided
for by Borrower in the Loan Documents (i) have been duly authorized by all
requisite Entity action on the part of Borrower, (ii) will not violate any
provision of any applicable Legal Requirements, any order of any court or
other Governmental Authority, any organizational document of Borrower or
any indenture or agreement or other instrument to which Borrower is a party
or by which Borrower is bound, (iii) will not be in conflict with, result
in a breach of, or constitute (with due notice or lapse of time or both) a
default under, or result in the creation or imposition of any Lien of any
nature whatsoever upon any of the property or assets of Borrower pursuant
to, any such indenture or agreement or instrument except as permitted under
any of the Loan Documents and (iv) have been duly executed and delivered by
Borrower. Except for the Mortgage, the Assignment of Rents-Borrower,
Assignment of Agreements-Borrower, and a memorandum of the Operator Lease,
all of which must be recorded in the Office of the Recorder of Deeds of
Cook County, Illinois and the Financing Statements, which must be recorded
in the Office of the Recorder of Deeds of Cook County, Illinois and filed
in the offices of the Secretary of the and the Secretary of the State of
Delaware and those consents, approvals and authorizations
<PAGE>
71
obtained or filed on or prior to the Closing Date, Borrower is not required
to obtain any consent, approval or authorization from, or to file any
declaration or statement with, any Governmental Authority or other agency
in connection with or as a condition to the execution, delivery or
performance of the Loan Documents. The Loan Documents to which Borrower is
a party have been duly authorized, executed and delivered by Borrower.
(C) Single-Purpose Entity.
---------------------
(i) Borrower has been, and will continue to be, a duly formed
and existing Entity, and a Single-Purpose Entity.
(ii) Borrower at all times since its formation has complied, and
will continue to comply, with the provisions of all of its organizational
documents, and the laws of the state in which Borrower was formed relating
to the Entity.
(iii) All customary formalities regarding the Entity existence
of Borrower have been observed at all times since its formation and will
continue to be observed.
(iv) Borrower has been at all times since its formation and will
continue to be adequately capitalized in light of the nature of its
business.
(b) Additional Closing Date Borrower Representations and Warranties.
---------------------------------------------------------------
Borrower represents and warrants that, as of the Closing Date and in the case of
the Earn-Out Advance the date of the Earn-Out Advance:
(A) Litigation. There are no actions, suits or proceedings at law or
----------
in equity by or before any Governmental Authority or other agency now
pending and served or, to the knowledge of Borrower, threatened against
Borrower or the Facility where a judgment adverse to Borrower would be
reasonably likely to individually or in the aggregate result in a Material
Adverse Effect.
(B) Agreements. Borrower is not a party to any agreement or
----------
instrument or subject to any restriction which is likely to have a Material
Adverse Effect. 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 agreement or instrument to which it is a
party or by which Borrower is bound would be reasonably likely result in a
Material Adverse Effect.
<PAGE>
72
(C) No Bankruptcy Filing. Borrower is not contemplating either the
--------------------
filing of a petition by it under any state or federal bankruptcy or
insolvency laws or the liquidation of all or a major portion of Borrower's
assets or property, and Borrower has no knowledge of any Person
contemplating the filing of any such petition against it.
(D) Full and Accurate Disclosure. No statement of fact made by or on
----------------------------
behalf of Borrower in the Loan Documents or in any other document or
certificate delivered to Lender by Borrower contains any untrue statement
of a material fact or omits to state any material fact necessary to make
statements contained herein or therein not misleading. There is no fact
presently known to Borrower which has not been disclosed to Lender which
would have a Material Adverse Effect nor, as far as Borrower can foresee,
would have a Material Adverse Effect.
(E) Location of Chief Executive Offices. The location of Borrower's
-----------------------------------
principal place of business and the location of Borrower's chief executive
office is c/o Wilmington Trust Company, 1100 North Market Street,
Wilmington, Delaware 19890-0001.
(F) Compliance. Borrower and, to the best of Borrower's knowledge,
----------
Borrower's ownership of the Facility comply in all material respects with
all applicable Legal Requirements, including without limitation, building
and zoning ordinances and codes. Borrower is not in default or violation
of any order, writ, injunction, decree or demand of any Governmental
Authority, the violation of which is reasonably likely to have a Material
Adverse Effect.
(G) 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, or by which Borrower
is bound, other than the SELCO Debt, the Mezzanine Debt and unsecured trade
payables incurred in the ordinary course of business relating to the
ownership of the Facility which do not exceed, at any time, a maximum
amount of Ten Thousand Dollars ($10,000) and are paid within ninety (90)
days of the date incurred, and other than obligations under the Mortgage
and the other Loan Documents. Except for the SELCO Debt, 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.
(H) ERISA. 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
<PAGE>
73
report to Lender under Section 5.1(a)(T).
------- ---------
(I) 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, 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, without
limitation, subordinated, unliquidated, or disputed liabilities or
Contingent Obligations. The fair saleable value of Borrower's assets 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 Contingent Obligations or its debts as such debts
become absolute and matured. 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,
without limitation, Contingent 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).
(J) Not Foreign Person. Borrower is not a "foreign person" within the
------------------
meaning of (S) 1445(f)(3) of the Code.
(K) Intentionally Omitted.
(L) Investment Company Act; Public Utility Holding 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.
(M) No Defaults. No Default or Event of Default exists under or with
-----------
respect to any Loan Document.
(N) Labor Matters. Borrower is not a party to any collective
-------------
bargaining agreements.
<PAGE>
74
(O) Title to the Mortgaged Property. Borrower owns good,
-------------------------------
indefeasible, marketable and insurable fee simple title to the Facility,
free and clear of all Liens, other than the Permitted Encumbrances
applicable to the Facility. Except as set forth in the Operator Lease,
Borrower has not granted any options to purchase or rights of first refusal
with respect to the Facility.
(P) Use of Proceeds; Margin Regulations. Borrower will use the
-----------------------------------
proceeds of the Loan for the purposes described in Section 2.2. 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
which would be inconsistent with such Regulation U or any other Regulations
of such Board of Governors, or for any purposes prohibited by applicable
Legal Requirements.
(Q) Intentionally deleted.
(R) Intentionally deleted.
(S) Intentionally deleted.
(T) Intentionally deleted.
(U) Environmental Matters. Borrower represents, warrants and
---------------------
covenants as to itself and the Facility:
(i) There is no Environmental Claim pending or, to Borrower's
knowledge, threatened, and no penalties arising under Environmental Laws
have been assessed against Borrower.
(ii) There have been no environmental investigations, studies, audits,
reviews or other analyses conducted by or on behalf of Borrower that are in the
possession or control of Borrower in relation to the Facility which have not
been provided to Lender.
(V) Intentionally deleted.
(W) Intentionally deleted.
(X) Mortgages and Other Liens. The Mortgage creates a valid and
-------------------------
enforceable first mortgage Lien on the Borrower's fee simple title to the
Facility as security for the repayment of the Indebtedness subject only to
the Permitted Encumbrances applicable to
<PAGE>
75
the Facility. Each Collateral Security Instrument executed by Borrower
establishes and creates a valid, subsisting and enforceable Lien on and a
security interest in, or claim to, the rights and property described
therein. All property covered by such Collateral Security Instrument which
is subject to the UCC is subject to a UCC financing statement filed and/or
recorded, as appropriate, (or irrevocably delivered to an agent for such
recordation or filing) in all places necessary to perfect a valid first
priority Lien with respect to the rights and property that are the subject
of such Collateral Security Instrument to the extent governed by the UCC.
(Y) Enforceability. The Loan Documents executed by Borrower in
--------------
connection with the Loan, including, without limitation, any Collateral
Security Instrument executed by Borrower, are the legal, valid and binding
obligations of Borrower, enforceable against Borrower in accordance with
their terms, subject to bankruptcy, insolvency and other limitations on
creditors' rights generally and to equitable principles. Such Loan
Documents are, as of the Closing Date, not subject to any right of
rescission, set-off, counterclaim or defense by Borrower, including the
defense of usury, nor will the operation of any of the terms of the Note,
the Mortgage, or such other Loan Documents executed by Borrower, or the
exercise of any right thereunder, render the Mortgage unenforceable against
Borrower, in whole or in part, or subject to any right of rescission, set-
off, counterclaim or defense by Borrower, including the defense of usury,
and Borrower has not asserted any right of rescission, set-off,
counterclaim or defense with respect thereto.
(Z) No Liabilities. Borrower has no liabilities or obligations
--------------
including without limitation Contingent Obligations (and including, without
limitation, liabilities or obligations in tort, in contract, at law, in
equity, pursuant to a statute or regulation, or otherwise) other than those
liabilities and obligations expressly permitted by this Agreement.
(AA) No Prior Assignment. As of the Closing Date, (i) Lender is the
-------------------
assignee of Borrower's interest under the Operator Lease, and (ii) there
are no prior assignments, pledges or hypothecations by Borrower of the
Operator Lease or any portion of the Rent due and payable thereunder or to
become due and payable thereunder which are presently outstanding.
(BB) Intentionally deleted.
(CC) Intentionally deleted.
(DD) Intentionally deleted.
<PAGE>
76
(EE) 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. 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.
(FF) Intentionally deleted.
(GG) Conduct of Business. Borrower does not conduct its business
-------------------
"also known as," "doing business as" or under any other name provided,
however, that the Facility is operated under the name "Harbor Village."
(HH) Intentionally deleted.
(II) Intentionally deleted.
(JJ) Leases. (a) Borrower is the sole owner of the entire lessor's
------
interest in the Operator Lease; (b) the Operator Lease is valid and
enforceable obligation of Borrower; (c) none of the Rents under the
Operator Lease have been collected for more than one (1) month in advance;
(d) the Operator is the sole tenant of the Lessor; (e) to the knowledge of
Borrower after due inquiry, there exist no offsets or defenses to the
payment of any portion of the Rents under the Operator Lease; (f) except as
set forth in the Operator Lease, the Borrower has not granted the Operator
any option to purchase, right of first refusal to purchase, or any other
similar provision; (g) except for Permitted Encumbrances, Lessor has not
granted any Person any possessory interest in, or right to occupy, the
Facility except under and pursuant to the Operator Lease; and (h) the
Operator Lease is subordinate to the Loan Documents, pursuant to its terms.
(c) Closing Date Representation and Warranties of Operator. Operator
------------------------------------------------------
represents and warrants that, as of the Closing Date and in the case of any
Advance other than the Closing Date Advance, if any, as of the date of such
other Advance:
(A) Organization. Operator (i) is a duly organized and validly
------------
existing Entity in good standing under the laws of the State of its
formation, (ii) is duly qualified as a foreign Entity in each jurisdiction
in which the nature of its business, the Facility or any of the Collateral
makes such qualification necessary or desirable, (iii) has the requisite
<PAGE>
77
Entity power and authority to carry on its business as now being conducted, and
(iv) has the requisite Entity power to execute and deliver, and perform its
obligations under, the Loan Documents executed by Operator.
(B) Authorization. The execution and delivery by Operator of the
-------------
Loan Documents to which it is a party, Operator's performance of its
obligations thereunder and the creation of the security interests and Liens
provided for by Operator in the Loan Documents (i) have been duly
authorized by all requisite Entity action on the part of Operator, (ii)
will not violate any provision of any applicable Legal Requirements, any
order of any court or other Governmental Authority, any organizational
document of Operator or any indenture or agreement or other instrument to
which Operator is a party or by which Operator is bound, (iii) will not be
in conflict with, result in a breach of, or constitute (with due notice or
lapse of time or both) a default under, or result in the creation or
imposition of any Lien of any nature whatsoever upon any of the property or
assets of Operator pursuant to, any such indenture or agreement or
instrument except as permitted under any of the Loan Documents and (iv)
have been duly executed and delivered by Operator. Except for the Leasehold
Mortgage, the Assignment of Rents-Operator, Assignment of Agreements-
Operator, and a memorandum of the Operator Lease, all of which must be
recorded in the Office of the Recorder of Deeds of Cook County, Illinois
and the Financing Statements, which must be recorded in the Office of the
Recorder of Deeds of Cook County, Illinois and filed in the offices of the
Secretary of the State of Illinois and the Secretary of the State of
Delaware and those consents, approvals and authorizations obtained or filed
on or prior to the Closing Date Operator is not required to obtain any
consent, approval or authorization from, or to file any declaration or
statement with, any Governmental Authority or other agency in connection
with or as a condition to the execution, delivery or performance of the
Loan Documents. The Loan Documents to which Operator is a party have been
duly authorized, executed and delivered by Operator.
(C) Single-Purpose Entity.
---------------------
(i) Operator has been, and will continue to be, a duly formed
and existing Entity, and a Single-Purpose Entity.
(ii) Operator at all times since its formation has complied,
and will continue to comply, with the provisions of all of its
organizational documents, and the laws of the state in which Operator was
formed relating to the Entity.
(iii) All customary formalities regarding the Entity existence
of Operator have been observed at all times since its formation and will
continue to be
<PAGE>
78
observed.
(iv) Operator has been at all times since its formation and will
continue to be adequately capitalized in light of the nature of its
business.
(d) Additional Closing Date Operator Representations and Warranties.
---------------------------------------------------------------
Operator represents and warrants that, as of the Closing Date and in the case of
the Earn-Out Advance as of the date of the Earn-Out Advance:
(A) Litigation. There are no actions, suits or proceedings at law or
----------
in equity by or before any Governmental Authority or other agency now
pending and served or, to the knowledge of Operator, threatened against
Operator or the Facility where a judgment adverse to Operator or the
Facility would be reasonably likely to individually or in the aggregate
result in a Material Adverse Effect.
(B) Agreements. Operator is not a party to any agreement or
----------
instrument or subject to any restriction which is likely to have a Material
Adverse Effect. Operator 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 agreement or instrument to which it is a
party or by which Operator or the Facility is bound which would be
reasonably likely result in a Material Adverse Effect.
(C) No Bankruptcy Filing. Operator is not contemplating either the
--------------------
filing of a petition by it under any state or federal bankruptcy or
insolvency laws or the liquidation of all or a major portion of Operator's
assets or property, and Operator has no knowledge of any Person
contemplating the filing of any such petition against it.
(D) Full and Accurate Disclosure. No statement of fact made by or on
----------------------------
behalf of Operator in the Loan Documents or in any other document or
certificate delivered to Lender by Operator contains any untrue statement
of a material fact or omits to state any material fact necessary to make
statements contained herein or therein not misleading in any material
respect. There is no fact presently known to Operator which has not been
disclosed to Lender which would have a Material Adverse Effect, nor, as far
as Operator can foresee, would have a Material Adverse Effect.
(E) Location of Chief Executive Offices. The location of Operator's
-----------------------------------
principal place of business and the location of Operator's chief executive
office is 77 West Wacker Drive, Chicago, Illinois 60601.
(F) Compliance. Operator, the Facility and Operator's use thereof
----------
and
<PAGE>
79
operations thereat comply in all material respects with all applicable
Legal Requirements, including without limitation, building and zoning
ordinances and codes. Operator is not in default or violation of any order,
writ, injunction, decree or demand of any Governmental Authority, the
violation of which is reasonably likely to have a Material Adverse Effect.
(G) Other Debt and Obligations. Operator has no financial obligation
--------------------------
under any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which Operator is a party, or by which Operator
or the Facility is bound, other than unsecured trade payables incurred in
the ordinary course of business relating to the ownership and operation of
the Facility which do not exceed, at any time, a maximum amount of one
percent (1%) of the Loan Amount and are paid within ninety (90) days of the
date incurred, and other than obligations under the Leasehold Mortgage, the
other Loan Documents, the Mezzanine Loan Documents, the Operator Lease and
those Pledge Agreements (as defined in the Operator Lease) executed by
Operator. Operator has not borrowed or received other debt financing that
has not been heretofore repaid in full and Operator has no known material
contingent liabilities.
(H) ERISA. Each Plan and, to the knowledge of Operator, 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 Operator
would be under an obligation to furnish a report to Lender under Section
---------
5.1(b)(T).
-------
(I) Solvency. Operator (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, the fair saleable value of Operator's
assets exceeds and will, immediately following the execution and delivery
of this Agreement, exceed Operator's total liabilities, including, without
limitation, subordinated, unliquidated, or disputed liabilities or
Contingent Obligations. The fair saleable value of Operator's assets is and
will, immediately following the execution and delivery of this Agreement,
be greater than Operator's probable liabilities, including the maximum
amount of its Contingent Obligations or its debts as such debts become
absolute and matured. Operator'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. Operator does not intend to, and does not believe
that it will, incur debts and liabilities (including, without limitation,
Contingent Obligations and other commitments) beyond its ability to pay
such
<PAGE>
80
debts as they mature (taking into account the timing and amounts to be
payable on or in respect of obligations of Operator).
(J) Not Foreign Person. Operator is not a "foreign person" within
------------------
the meaning of (S) 1445(f)(3) of the Code.
(K) Intentionally Omitted.
(L) Investment Company Act; Public Utility Holding Company Act.
----------------------------------------------------------
Operator 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.
(M) No Defaults. No Default or Event of Default exists under or with
-----------
respect to any Loan Document.
(N) Labor Matters. Operator is not a party to any collective
-------------
bargaining agreements.
(O) Title to the Mortgaged Property. Operator owns good,
-------------------------------
indefeasible, marketable and insurable leasehold title to the Facility,
free and clear of all Liens, other than the Permitted Encumbrances
applicable to the Facility. Except as set forth in the Operator Lease,
there are no options to purchase or rights of first refusal affecting
Operator's interest in the Facility or, to Operator's knowledge, there are
no outstanding options to purchase or rights of first refusal affecting
Borrower's interest in the Facility. The Permitted Encumbrances do not and
will not materially and adversely affect (i) the ability of Operator to pay
in full all sums due under the Guaranty, or any of its other obligations in
a timely manner or (ii) the use of the Facility for the use currently being
made thereof, the operation of the Facility as currently being operated or
the value of the Facility.
(P) Intentionally deleted.
(Q) Financial Information. All historical financial data concerning
---------------------
Operator and, to the knowledge of Operator, the Facility that has been
delivered by Operator to Lender is true, complete and correct in all
material respects. Since the delivery of such data,
<PAGE>
81
except as otherwise disclosed in writing to Lender, there has been no
material adverse change in the financial position of Operator or, to the
knowledge of Operator, the Facility, or in the results of operations of
Operator. Operator has not incurred any obligation or liability, contingent
or otherwise, not reflected in such financial data which might materially
adversely affect its business operations or the Facility.
(R) Condemnation. No Taking has been commenced or, to Operator's
------------
knowledge, is contemplated with respect to all or any portion of the
Facility or for the relocation of roadways providing access to the
Facility.
(S) Intentionally Omitted.
(T) Utilities and Public Access. The Facility has adequate rights of
---------------------------
access to public ways and is served by adequate water, sewer, sanitary
sewer and storm drain facilities as are adequate for full utilization of
the Facility for its current purpose. Except as otherwise disclosed by the
Surveys, all public utilities necessary to the continued use and enjoyment
of the Facility as presently used and enjoyed are located in the public
right-of-way abutting the premises, and all such utilities are connected so
as to serve the Facility either (i) without passing over other property or,
(ii) if such utilities pass over other property, pursuant to valid
easements. All roads necessary for the full utilization of the Facility for
its current purpose have been completed and dedicated to public use and
accepted by all Governmental Authorities or are the subject of access
easements for the benefit of the Facility.
(U) Environmental Compliance. Operator represents, warrants and
------------------------
covenants, as to itself and the Facility:
(i) Except as shown on the Environmental Reports delivered
to Lender prior to the Closing Date, Operator and the Facility are in
compliance in all material respects with all applicable Environmental Laws
in effect as of the date hereof, which compliance includes, but is not
limited to, the possession by Borrower or the Operator, as applicable, of
and compliance with all environmental, health and safety Permits, licenses
and other governmental authorizations required in connection with the
ownership and operation of the Facility under all Environmental Laws,
except where the failure to comply with such laws is not reasonably likely
to result in a Material Adverse Effect.
(ii) Except as shown on the Environmental Reports delivered
to Lender prior to the Closing Date, there is no Environmental Claim
pending or, to Operator's knowledge, threatened, and no penalties arising
under Environmental Laws
<PAGE>
82
have been assessed against Operator or, to Operator's knowledge, the
Borrower or the Facility or against any Person whose liability for any
Environmental Claim Operator has or may have retained or assumed either
contractually or by operation of law, and no investigation or review is
pending or, to the knowledge of Operator, threatened by any Governmental
Authority, citizens group, employee or other Person with respect to any
alleged failure by Borrower, Operator, or the Facility to have any
environmental, health or safety permit, license or other authorization
required under, or to otherwise comply with, any Environmental Law in
effect as of the date hereof or with respect to any alleged liability of
Borrower or Operator for any Use or Release of any Hazardous Substances in
violation of any Environmental Law in effect as of the Closing Date or the
presence, Use, or Release of any Hazardous Substances at, on, in, under, or
from any Facility in violation of any Environmental Law in effect as of the
Closing Date.
(iii) To the knowledge of Operator, except as may be
disclosed on the Environmental Reports delivered to Lender prior to the
Closing Date, there have been and are no past or present Releases or
threats of Release of any Hazardous Substance that are likely to form the
basis of any Environmental Claim against Borrower, Operator, the Facility
or, to Operator's knowledge, against any Person whose liability for any
Environmental Claim Operator has or may have retained or assumed either
contractually or by operation of law.
(iv) To the knowledge of Operator and except as disclosed in
the Environmental Reports, without limiting the generality of the
foregoing, there is not present at, on, in or under the Facility, PCB-
containing equipment, asbestos or asbestos containing materials,
underground or aboveground storage tanks or surface impoundments for
Hazardous Substances, lead in drinking water (except in concentrations that
comply with all Environmental Laws), or lead-based paint (nor have there
been any underground storage tanks present at, on, in, or under the
Facility) in violation of any Environmental Laws in effect as of the
Closing Date.
(v) No Liens are presently recorded with the appropriate
land records under or pursuant to any Environmental Law with respect to the
Facility and, to Operator's knowledge, no Governmental Authority has been
taking or is in the process of taking any action that could subject the
Facility to Liens under any Environmental Law.
(vi) There have been no environmental investigations,
studies, audits, reviews or other analyses conducted by or on behalf of
Borrower or Operator that are in the possession or control of Operator in
relation to the Facility which have not been provided to Lender.
<PAGE>
83
(vii) Except as disclosed in the Environmental Report, no
conditions exist on the Facility which would require Borrower or Operator
under any Environmental Laws in effect as of the Closing Date to place a
notice on any deed to the Facility with respect to the presence, Use or
Release of Hazardous Substances at, on, in, under or from the Facility and
the Facility has no such notice in its deed.
(V) No Joint Assessment; Separate Lots. Operator has not permitted
----------------------------------
or initiated the joint assessment of the Facility (i) with any other real
property constituting a separate tax lot, and (ii) with any portion of the
Facility which may be deemed to constitute personal property, or 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 Facility as
a single lien. The Facility is comprised of one or more parcels, each of
which constitutes a separate tax lot and none of which constitutes a
portion of any other tax lot.
(W) Assessments. Except as disclosed in the Title Insurance Policy,
-----------
there are no pending or, to the knowledge of Operator, proposed special or
other assessments for public improvements or otherwise affecting the
Facility, nor, to the knowledge of Operator, are there any contemplated
improvements to the Facility that may result in such special or other
assessments.
(X) Mortgages and Other Liens. The Leasehold Mortgage creates a
-------------------------
valid and enforceable first mortgage Lien on the Operator's leasehold title
to the Facility as security for the repayment of the Indebtedness, subject
only to the Permitted Encumbrances applicable to the Facility. Each
Collateral Security Instrument executed by Operator establishes and creates
a valid, subsisting and enforceable Lien on and a security interest in, or
claim to, the rights and property described therein. All property covered
by such Collateral Security Instrument which is subject to the UCC is
subject to a UCC financing statement filed and/or recorded, as appropriate,
(or irrevocably delivered to an agent for such recordation or filing) in
all places necessary to perfect a valid first priority Lien with respect to
the rights and property that are the subject of such Collateral Security
Instrument to the extent governed by the UCC.
(Y) Enforceability. The Loan Documents executed by Operator in
--------------
connection with the Loan, including, without limitation, any Collateral
Security Instrument executed by Operator, are the legal, valid and binding
obligations of Operator, enforceable against Operator in accordance with
their terms, subject to bankruptcy, insolvency and other limitations on
creditors' rights generally and to equitable principles. Such Loan
Documents are, as of the Closing Date, not subject to any right of
rescission, set-off, counterclaim or defense by Operator, including the
defense of usury, nor will the operation of any of the terms of the Note,
the Mortgages, or such other Loan Documents,
<PAGE>
84
or the exercise of any right therender the Leasehold Mortgage unenforceable
against Operator, in whole or in part, or subject to any right of
rescission, set-off, counterclaim or defense by Operator, including the
defense of usury, and Operator has not asserted any right of rescission,
set-off, counterclaim or defense with respect thereto.
(Z) No Liabilities. Operator has no liabilities or obligations
--------------
including without limitation Contingent Obligations (and including, without
limitation, liabilities or obligations in tort, in contract, at law, in
equity, pursuant to a statute or regulation, or otherwise) other than those
liabilities and obligations expressly permitted by this Agreement.
(AA) No Prior Assignment. As of the Closing Date, (i) Lender is the
-------------------
assignee of Operator's interest under the Leases (as defined in the
Leasehold Mortgage), 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.
(BB) Certificate of Occupancy. Operator has obtained (in its own name
------------------------
and/or in the Borrower's name, as applicable and in any event, in the name
of the Person(s) as required under all applicable Legal Requirements) all
Permits necessary to use and operate the Facility for the use described in
Section 3.1(S), and all such Permits are in full force and effect. The use
------- ------
being made of the Facility is in conformity in all respects with the
certificate of occupancy and/or Permits for the Facility and any other
restrictions, covenants or conditions affecting the Facility. Each
Facility contains all Equipment necessary to use and operate such Facility
as described in Section 3.1(S) in a manner consistent with the standards
--------------
applicable to properties of a similar nature in the geographic area in
which the Facility is located and in any event not less than the standards
applied by Affiliates of Operator for other comparable properties owned or
leased by such Affiliates in such geographic area.
(CC) Flood Zone. Except as shown on the Survey, the Facility is not
----------
located in a special flood hazard area as defined by the Federal Insurance
Administration.
(DD) Physical Condition. Except as disclosed in the Engineering
------------------
Reports, the Facility is free of material structural defects and all
building systems contained therein are in good working order in all
material respects subject to ordinary wear and tear.
(EE) Intellectual Property. All trademarks, trade names and service
---------------------
marks that Operator 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
<PAGE>
85
of Operator as presently conducted or as Operator contemplates conducting
its business. Operator 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 Operator's knowledge, there is no
infringement by others of trademarks, trade names and service marks of
Operator.
(FF) Security Deposits. All security deposits with respect to the
-----------------
Facility on the Closing Date have been transferred to the Security Deposit
Account on or prior to the Closing Date, and Operator is in compliance with
all applicable Legal Requirements relating to such security deposits.
(GG) Conduct of Business. Operator does not conduct its business
-------------------
"also known as," "doing business as" or under any other name provided,
however, that the Facility is operated under the name "Harbor Village."
(HH) Title Insurance. The Facility 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 a valid first
lien on the Facility, 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.
(II) Tax Fair Market Value. The Closing Date Advance does not exceed
---------------------
the Tax Fair Market Value of the Facility. If a Note with respect to the
Facility is significantly modified prior to the closing date of a
Securitization so as to result in a taxable exchange under Code Section
1001, Operator will, if requested by Lender, represent that the amount of
such Note does not exceed the Tax Fair Market Value of the Facility as of
the date of such significant modification.
(JJ) Leases. (a) Subject to Borrower's reversionary interest under
------
the Operator Lease, Operator is the sole owner of the entire lessor's
interest in the Leases (as defined in the Leasehold Mortgage); (b) such
Leases are valid and enforceable; (c) the terms of all alterations,
modifications and amendments to such Leases are reflected in the certified
rent roll statement delivered to and approved by Lender; (d) none of the
Rents reserved in such Leases have been assigned or otherwise pledged or
hypothecated; (e) none of such Rents have been collected for more than one
(1) month in advance (provided, however, Borrower may accept SELCO Basic
Rent (as defined in the Operator Lease) and the Lessor Basic Rent (as
defined in the Operator Lease) in advance for a period of three (3)
months); (f) the premises demised under such Leases have been completed and
the tenants under such Leases have accepted the same and have taken
possession of the same
<PAGE>
86
on a rent-paying basis; (g) to the knowledge of Operator, there exist no
offsets or defenses to the payment of any portion of such Rents; (h) no
such Lease contains an option to purchase, right of first refusal to
purchase, or any other similar provision; (i) except for Permitted
Encumbrances, no Person has any possessory interest in, or right to occupy,
the Facility except under and pursuant to a Lease (as defined in the
Leasehold Mortgage); and (j) each such Lease is subordinate to the Loan
Documents, pursuant to its terms.
(AK) Use-Specific Representations.
----------------------------
(i) Compliance with Laws. Borrower, Operator and the Facility
--------------------
comply in all material respects with all applicable federal, state and
local laws, regulations, quality and safety standards, accreditation and
certification standards and requirements of the applicable state and local
Department of Public Health (each a "DOH") and all other Governmental
---
Authorities relating to the operation of a managed residential community
with assisted living services.
(ii) Licenses. All material governmental licenses, permits,
--------
regulatory agreements or other approvals or agreements necessary or
desirable for the use, establishment or operation of the Facility as
intended are held by the Borrower and/or the Operator, as applicable, and
in any event are held by the Person(s) required under all applicable Legal
Requirements and are in full force and effect, including, without
limitation, (a) a valid certificate of need for the provision of assisted
living services ("CON") to the extent required by
---
applicable Legal Requirements; (b) a valid license to provide assisted
living services to the extent required by applicable Legal Requirements to
the extent required by applicable Legal Requirements; and (c) a valid
registration of the Facility with DOH as a managed residential community
with assisted living services to the extent required by applicable Legal
Requirements (collectively, the "Licenses").
--------
(iii) Ownership of Licenses. The Licenses, including without
---------------------
limitation, each, if any, CON:
(a) may not be, and have not been, transferred to any
location other than the Facility;
(b) have not been pledged as collateral security for any
other loan or indebtedness;
(c) are held free from restrictions or known conflicts
which would materially impair the use or operation of the Facility as
intended, and are not
<PAGE>
87
provisional, probationary or restricted in any way; and
(d) have at all applicable times been, and are, in full
force and effect.
(iv) Intentionally deleted.
(v) Intentionally deleted.
(vi) Governmental Proceedings and Notices. None of Operator or
------------------------------------
the Facility, or, to the knowledge of Operator, the 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:
(a) affect Operator's ability to accept and/or retain
tenants or result in the imposition of a fine, a sanction, a lower rate
certification or a lower reimbursement rate for services rendered to
eligible tenants; or
(b) modify, limit or annul or result in the transfer,
suspension, revocation or imposition of probationary use on any License.
(vii) Physical Plant Standards. The Facility and the use
------------------------
thereof complies in all material respects with all 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 such Facility.
(viii) Past Violations. The Facility is in material compliance
---------------
with all local, federal and state laws and regulations relating to
independent living or congregate living facilities with assisted living
services and no statement of charges or deficiencies has been made or
penalty enforcement action has been undertaken against the Facility or
against Operator, or any partner, member, officer, director or stockholder
of Operator or, to the knowledge of Operator, against Borrower or any
beneficial owner of Borrower, by any Governmental Authority.
(ix) Intentionally deleted.
(x) Pledges of Receivables. Operator has not pledged its
----------------------
receivables as collateral security for any other loan or indebtedness.
<PAGE>
88
(xi) Intentionally deleted.
(xii) Resident Records. To the best of Operator's knowledge,
----------------
all resident records at the Facility are true, complete and correct in all
material respects. From and after the date hereof, all resident records at
the Facility shall be maintained in accordance with all applicable Legal
Requirements, including, without limitation, with respect to retention and
confidentiality.
Section 4.2. Survival of Representations and Warranties. Each of the
------------------------------------------
Operator and the Borrower agrees that (i) all of the representations and
warranties of Borrower and Operator set forth in this Agreement and in the other
Loan Documents delivered on the Closing Date are made as of the Closing Date
(except as expressly otherwise provided), (ii) all of the representations and
warranties of Borrower and Operator set forth in Section 4.1 and elsewhere in
------- ---
this Agreement and in the other Loan Documents are made and shall be deemed
remade and reaffirmed as of each Advance Closing Date and on the date of any
draw on the Construction Sub-Account and (iii) all representations and
warranties made by Borrower and Operator shall survive the delivery of the Note
and continue for so long as any amount remains owing to Lender under this
Agreement, the Note or any of the other Loan Documents; provided, however, that
-------- ------- ----
the representations, warranties and covenants of the Operator set forth in
Section 4.1(d)(U) and Sections 5.1(b)(D) through 5.1(b)(I), inclusive shall
- ----------------- -------- --------- ---------
survive in perpetuity and shall not be subject to the exculpation provisions of
Section 8.14. All representations, warranties, covenants and agreements made in
- ------------
this Agreement or in the other Loan Documents shall be deemed to have been
relied upon by Lender notwithstanding any investigation heretofore or hereafter
made by Lender or on its behalf.
ARTICLE V
AFFIRMATIVE COVENANTS
---------------------
Section 5.1. Borrower and Operator Covenants. (a) Borrower covenants
-------------------------------
and agrees that, from the date hereof and until payment in full of the
Indebtedness:
i. Existence; Compliance with Legal Requirements; Insurance.
--------------------------------------------------------
Borrower shall do or cause to be done all things necessary to preserve,
renew and keep in full force and effect its Entity existence, rights,
licenses, Permits and franchises necessary for the conduct of its business
and comply in all material respects with all applicable Legal Requirements
applicable to it. Borrower shall notify Lender promptly of any written
notice or order that Borrower receives from any Governmental Authority
relating to Borrower's or the Facility's failure to comply with such
applicable Legal Requirements and promptly take any and all actions
necessary to bring itself into compliance in all
<PAGE>
89
material respects with applicable Legal Requirements (and shall comply in
all materials respects with the requirements of such Legal Requirements
that at any time are applicable to its ownership of the Facility) provided,
that Borrower at its expense may, after prior notice to the Lender, contest
by appropriate legal, administrative or other proceedings conducted in good
faith and with due diligence, the validity or application, in whole or in
part, of any such applicable Legal Requirements as long as (i) neither the
applicable Collateral nor any part thereof or any interest therein, will be
sold, forfeited or lost if Borrower pays the amount or satisfies the
condition being contested, and Borrower would have the opportunity to do
so, in the event of Borrower's failure to prevail in the contest, (ii)
Lender would not, by virtue of such permitted contest, be exposed to any
risk of any civil liability for which Borrower has not furnished additional
security as provided in clause (iii) below, or to any
------------
risk of criminal liability, and neither the applicable Collateral nor any
interest therein would be subject to the imposition of any Lien as a result
of the failure to comply with such Legal Requirement or of such proceeding
and (iii) Borrower shall have furnished to the Lender additional security
in respect of the claim being contested or the loss or damage that may
result from Borrower's failure to prevail in such contest in such amount as
may be reasonably requested by Lender but in no event less than one hundred
and twenty five percent (125%) of the amount of such claim. Borrower shall
at all times maintain, preserve and protect all franchises and trade names
and preserve all the remainder of its property necessary for the continued
ownership of the Facility.
(B) Impositions and Other Claims. Borrower shall pay and discharge
----------------------------
or cause to be paid and discharged all Impositions, as well as all lawful
claims for labor, materials and supplies or otherwise, which could become a
Lien, all as more fully provided in, and subject to any rights to contest
contained in, the Mortgages.
(C) Litigation. Borrower shall give prompt written notice to Lender
----------
of any litigation or governmental proceedings pending or threatened against
Borrower which is reasonably likely to have a Material Adverse Effect.
<PAGE>
90
(D) Environmental Remediation. Unless otherwise required by law,
-------------------------
Environmental Laws or any Governmental Authority and except as contemplated
in Exhibit C-2 to this Agreement, Borrower shall not undertake any Remedial
-----------
Work, nor enter into any settlement agreement, consent decree or other
compromise relating to any Hazardous Substances or Environmental Laws which
is reasonably likely to have a Material Adverse Effect. Notwithstanding the
foregoing, if the presence or threatened presence or Release of Hazardous
Substances at, on, in, under, from or about the Facility poses an immediate
threat to the health, safety or welfare of any Person or the environment,
or is of such a nature that an immediate response is necessary, Borrower
may complete all necessary Remedial Work. In such events, Borrower shall
notify Lender as soon as practicable and, in any event, within three
Business Days, of any action taken.
(E) Environmental Matters; Inspection.
---------------------------------
(i) Borrower shall not cause or authorize a Hazardous Substance
to be present at, on, in, under or to emanate from the Facility, or migrate
from adjoining property controlled by Borrower onto or into the Facility in
violation of any Environmental Law, except under conditions permitted by
applicable Environmental Laws and, in the event that such Hazardous
Substances are present at, on, in, under or emanate from the Facility, or
migrate onto or into the Facility, Borrower shall cause the performance of
Remedial Work, removal or remediation of such Hazardous Substances, in
accordance with this Agreement and Environmental Laws.
(ii) Lender shall have the right at all reasonable times after
ten (10) calendar days' prior written notice to Borrower and subject to the
rights of tenants therein to enter upon and inspect all or any portion of
the Facility. If Lender has reason to believe that Remedial Work may be
required, Lender may select or may require Operator to select a consulting
environmental Engineer reasonably satisfactory to Lender to conduct and
prepare environmental reports assessing the environmental condition of the
Facility. Lender shall be given a reasonable opportunity to review any
reports, data and other documents or materials reviewed or prepared by the
environmental Engineer. The inspection rights granted to Lender in this
Section 5.1(a)(E) shall be in addition to, and not in limitation of, any
-----------------
other inspection rights granted to Lender in the Loan Documents, and shall
expressly include the right (if Lender has reason to suspect that Remedial
Work may be required) to conduct or require Operator to conduct soil
borings, establish ground water monitoring wells and conduct other
customary environmental tests, assessments and audits.
<PAGE>
91
(F) Environmental Notices. Borrower shall promptly provide notice to
---------------------
Lender of:
(i) any Environmental Claim asserted or threatened (in
writing) by any Governmental Authority or other Person with respect to any
Hazardous Substance at, on, in, under or emanating from the Facility, to
which Borrower has knowledge which could reasonably be expected to impair
the value of Lender's security interests hereunder or have a Material
Adverse Effect;
(ii) any Environmental Claim or proceeding, investigation or
inquiry commenced or threatened in writing by any Person or Governmental
Authority, against Borrower, with respect to the presence, suspected
presence, Release or threatened Release of Hazardous Substances from or
onto, in or under any property not owned by Borrower, including, without
limitation, proceedings under the Comprehensive Environmental Response,
Compensation, and Liability Act, as amended, 42 U.S.C. (S) 9601, et seq.,
-- ---
which could reasonably be expected to impair the value of Lender's security
interests hereunder or have a Material Adverse Effect;
(iii) all Environmental Claims asserted or threatened against
Borrower, against any other party occupying the Facility or any portion
thereof or against the Facility which become known to Borrower, which could
reasonably be expected to impair the value of Lender's security interests
hereunder or have a Material Adverse Effect;
(iv) the discovery by Borrower of any occurrence or condition
on the Facility or on any real property adjoining or in the vicinity of the
Facility which could reasonably be expected to lead to an Environmental
Claim against Borrower or Lender which such Environmental Claim is
reasonably likely to have a Material Adverse Effect; and
(v) the commencement or completion of any Remedial Work by
Borrower.
(G) Copies of Notices. Borrower shall immediately transmit to Lender
-----------------
copies of any citations, orders, notices or other written communications
received from any Person or any Governmental Authority and any notices,
reports or other written communications submitted to any Governmental
Authority with respect to the matters described in Section 5.1(a)(F).
------- ---------
(H) Environmental Claims. Lender may join and participate in, as a
--------------------
party if
<PAGE>
92
Lender so determines, any legal or administrative proceeding or action
concerning the Facility or any portion thereof under any Environmental Law,
if, in Lender's reasonable judgment, the interests of Lender will not be
adequately protected by Borrower or Operator.
(I) Environmental Waiver. Borrower waives and releases Lender from
--------------------
any rights or defenses Borrower may have against Lender 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.
(J) Access to Facility. Subject to the terms of Section 8.2 of the
------------------
Operator Lease, Borrower shall permit agents, representatives and employees
of Lender to inspect the Facility or any part thereof at such reasonable
times as may be requested by Lender upon advance notice.
(K) 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 of which the Borrower has knowledge or
Event of Default of which Borrower has knowledge.
(L) Cooperate in Legal Proceedings. Except with respect to any claim
------------------------------
by Borrower against Lender, Borrower shall cooperate with Lender with
respect to any proceedings before any Governmental Authority which may in
any way affect the rights of Lender hereunder or any rights obtained by
Lender under any of the Loan Documents and, in connection therewith, not
prohibit Lender, at its election, from participating in any such
proceedings.
(M) Perform Loan Documents. Borrower shall observe, perform and
----------------------
satisfy all the terms, provisions, covenants and conditions required to be
observed, performed or satisfied by it, and shall pay when due all costs,
fees and expenses required to be paid by it, under the Loan Documents
executed and delivered by Borrower.
(N) Insurance Benefits. Borrower shall cooperate with Lender in
------------------
obtaining for Lender the benefits of any Insurance Proceeds lawfully or
equitably payable to Lender in connection with the Facility, 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 Facility or any part thereof
out of such Insurance Proceeds, all as more specifically provided in the
Mortgage.
<PAGE>
93
(O) Further Assurances. Borrower shall, at Borrower's sole cost and
------------------
expense:
(i) execute and deliver to Lender such documents, instruments,
certificates, assignments and other writings, and do such other acts
necessary, to evidence, preserve and/or protect the Collateral at any time
securing or intended to secure the Note, as Lender may require in Lender's
reasonable discretion; and
(ii) do and execute all and such further lawful acts, conveyances
and assurances for the better and more effective carrying out of the
intents and purposes of this Agreement and the other Loan Documents, as
Lender shall require from time to time in its reasonable discretion.
(P) Intentionally deleted.
(Q) Financial Reporting.
-------------------
(i) Borrower shall keep and maintain or shall cause to be kept
and maintained on a Fiscal Year basis on an accrual tax basis, 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 ownership of the Facility. 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 or 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 Facility, 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 Operator'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.
(ii) Intentionally deleted.
(iii) Borrower shall furnish to Lender annually within forty (40)
days following the end of each Fiscal Year, true, complete and correct
copies of Borrower's a 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 on
an accrual tax basis and (c) be accompanied by an Officer's Certificate
from a senior executive of the
<PAGE>
94
Trustee 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 Borrower for the relevant period, and
(y) notice of whether to the knowledge of Borrower 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.
(iv) Intentionally deleted.
(v) Borrower shall, concurrently with Borrower's delivery to
Lender, provide a copy of the items required to be delivered to Lender
under this Section 5.1(a)(Q) to the Rating Agencies, the trustee,
-----------------
and any servicer and/or special servicer that may be retained in
conjunction with the Loan or any Securitization. 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 Collection Account or
is permitted to retain, Cash Collateral Account or the Security Deposit
Account, 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.
(vi) 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 2.11, a review by a third party acceptable to Lender, of the
------------
calculations required to be made pursuant to Section 2.11).
------------
(R) Intentionally deleted.
(S) Intentionally Omitted.
(T) Certain Matters Relating to ERISA. Borrower hereby represents,
---------------------------------
warrants and covenants that, at all times on and before the date upon which
Lender makes the Loan and at all times after the date upon which Lender
makes the Loan, neither Borrower nor any ERISA Affiliate of Borrower (i)
maintains, contributes to or is obligated to contribute to, or has
maintained, contributed to or been obligated to contribute to, or will
maintain, contribute to or be obligated to contribute to any Plan
(including, without limitation, any benefit plan or other plan subject to
minimum funding requirements of ERISA Section 302 or Code Section 412) or
Multiemployer Plan and (ii) has been, is or will become subject to any
liability or obligation under or in connection with ERISA. Any violation
of this Section 5.1(a)(T) by Borrower shall constitute an Event of Default.
-----------------
<PAGE>
95
(U) Single Purpose Entity. Borrower shall at all times be a Single
---------------------
Purpose Entity.
(V) 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).
(W) SELCO Debt. Borrower (i) shall pay all amounts due with respect
----------
to the SELCO Debt when due, subject to applicable grace periods, (ii) shall
not permit a default with respect to the SELCO Debt to exist which default
is not cured within applicable grace periods and (iii) without Lender's
prior written consent, which shall not be unreasonably withheld and, after
a Securitization, written confirmation by the Rating Agencies that a
proposed amendment, modification or supplement to the loan documents
evidencing the SELCO Debt would not result in a downgrade, withdrawal or
qualification of the then applicable ratings of the securities issued in a
Securitization, shall not amend, modify or supplement the loan documents
evidencing the SELCO Debt.
(X) Mezzanine Loan. Borrower will pay all amounts required to be paid
--------------
by Borrower pursuant to the Mezzanine Loan when such amounts are due
(subject to cure rights set forth in the Mezzanine Loan Agreement).
(b) Operator covenants and agrees that, from the date hereof and until
payment in full of the Indebtedness:
(A) Existence; Compliance with Legal Requirements; Insurance.
--------------------------------------------------------
Operator shall do or cause to be done all things necessary to preserve,
renew and keep in full force and effect its Entity existence, rights,
Licenses, Permits and franchises necessary for the conduct of its business
and comply in all material respects with all applicable Legal Requirements
and Insurance Requirements applicable to it and the Facility. Operator
shall notify Lender promptly of any written notice or order that Operator
receives from any Governmental Authority relating to Operator's failure to
comply with such applicable Legal Requirements relating to the Facility and
promptly take any and all actions necessary to bring itself and its
operations at the Facility 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 Facility) provided, that Operator
at its expense may, after prior notice to the Lender, contest by
appropriate legal, administrative or other proceedings conducted in good
faith and with due diligence, the validity or application, in whole or in
<PAGE>
96
part, of any such applicable Legal Requirements as long as (i) neither the
applicable Collateral nor any part thereof or any interest therein, will be
sold, forfeited or lost if Operator pays the amount or satisfies the
condition being contested, and Operator would have the opportunity to do
so, in the event of Operator's failure to prevail in the contest, (ii)
Lender would not, by virtue of such permitted contest, be exposed to any
risk of any civil liability for which Operator has not furnished additional
security as provided in clause (iii) below, or to any risk of criminal
------------
liability, and neither the applicable Collateral nor any interest therein
would be subject to the imposition of any Lien as a result of the failure
to comply with such Legal Requirement or of such proceeding and (iii)
Operator shall have furnished to the Lender additional security in respect
of the claim being contested or the loss or damage that may result from
Operator's failure to prevail in such contest in such amount as may be
reasonably requested by Lender but in no event less than one hundred and
twenty five percent (125%) of the amount of such claim. Operator shall at
all times maintain, preserve and protect all franchises and trade names and
preserve all the remainder of its property necessary for the continued
conduct of its business and keep the Facility in good repair, working order
and condition, except for reasonable wear and use, and from time to time
make, or cause to be made, all necessary repairs, renewals, replacements,
betterments and improvements thereto, all as more fully provided in the
Mortgages. Operator shall keep the Facility insured at all times, by
financially sound and reputable insurers, to such extent and against such
risks, and maintain liability and such other insurance, as is more fully
provided herein and in the Mortgages.
(B) Impositions and Other Claims. Operator shall pay and discharge or
----------------------------
cause to be paid and discharged all Impositions, as well as all lawful
claims for labor, materials and supplies or otherwise, which could become a
Lien, all as more fully provided in, and subject to any rights to contest
contained in, the Mortgages.
(C) Litigation. Operator shall give prompt written notice to Lender
----------
of any litigation or governmental proceedings pending or threatened against
Operator which is reasonably likely to have a Material Adverse Effect.
<PAGE>
97
(D) Environmental Remediation.
-------------------------
(i) If any investigation, site monitoring, cleanup, removal,
abatement, restoration remedial work or other response action of any kind
or nature is required pursuant to an order or directive of any Governmental
Authority or under any applicable Environmental Law (collectively, the
"Remedial Work"), because of or in connection with the (x) past, present or
-------------
future presence, suspected presence, Release or threatened Release of a
Hazardous Substance at, on, in, under or from the Facility or any portion
thereof or (y) violation of or compliance with applicable Environmental
Laws, Operator shall promptly commence and diligently prosecute to
completion all such Remedial Work. Subject to the provisions of Exhibit C-
---------
2, in all events, such Remedial Work shall be commenced within the time
-
period ordered or directed by such Governmental Authority or such shorter
period as may be required under any applicable Environmental Law; provided,
--------
however, that Operator shall not be required to commence such Remedial Work
------- ----
within the above specified time periods: (x) if prevented from doing so by
any Governmental Authority, (y) if commencing such Remedial Work within
such time periods would result in Operator or such Remedial Work violating
any Environmental Law or (z) if Operator, at its expense and after prior
notice to Lender, is contesting by appropriate legal, administrative or
other proceedings, conducted in good faith and with due diligence, the need
to perform Remedial Work, as long as (1) Operator is permitted by the
applicable Environmental Laws to delay performance of the Remedial Work
pending such proceedings, (2) neither the Facility nor any part thereof or
interest therein will be sold, forfeited or lost if Operator performs the
Remedial Work being contested, and Operator would have the opportunity to
do so, in the event of Operator's failure to prevail in the contest, (3)
Lender would not, by virtue of such permitted contest, be exposed to any
risk of any civil liability for which Operator has not furnished additional
security as provided in clause (4) below, or to any risk of criminal
----------
liability, and neither the Facility nor any interest therein would be
subject to the imposition of any Lien for which Operator has not furnished
additional security as provided in clause (4) below, as a result of the
----------
failure to perform such Remedial Work and (4) Operator shall have furnished
to Lender additional security in respect of the Remedial Work being
contested and the loss or damage that may result from Operator's failure to
prevail in such contest in such amount as may be reasonably requested by
Lender but in no event less than 125% of the cost of such Remedial Work and
any loss or damage that may result from Operator's failure to prevail in
such contest.
(ii) All Remedial Work under clause (i) above shall be performed
----------
by contractors, and under the supervision of a consulting environmental
Engineer, each approved in advance by Lender which approval will not be
unreasonably withheld or
<PAGE>
98
delayed. All costs and expenses incurred in connection with such Remedial
Work shall be paid by Operator; provided, however, Operator shall be
entitled to disbursement of funds from the Capital Reserve Sub-Account to
pay for the Remedial Work described on Exhibit C-2 and provided, further,
-----------
that the terms of Section 2.12(f)(iii) have been satisfied to Lender's
------- ------------
discretion. If Operator does not timely commence and diligently prosecute
to completion the Remedial Work, Lender may (but shall not be obligated
to), upon sixty (60) days prior written notice to Operator of its intention
to do so, cause such Remedial Work to be performed. Operator shall pay or
reimburse Lender within ten (10) calendar days following written demand for
all Advances (as defined in the Mortgages) and expenses (including
reasonable attorneys' fees and disbursements) relating to or incurred by
Lender in connection with monitoring, reviewing or performing any Remedial
Work in accordance herewith.
(iii) Unless otherwise required by law, Environmental Laws or
any Governmental Authority, Operator shall not commence any Remedial Work
under clause (i) above, nor enter into any settlement agreement, consent
----------
decree or other compromise relating to any Hazardous Substances or
Environmental Laws which is reasonably likely to have a Material Adverse
Effect. Notwithstanding the foregoing, if the presence or threatened
presence or Release of Hazardous Substances at, on, in, under, from or
about the Facility poses an immediate threat to the health, safety or
welfare of any Person or the environment, or is of such a nature that an
immediate response is necessary, Operator may complete all necessary
Remedial Work. In such events, Operator shall notify Lender as soon as
practicable and, in any event, within three (3) Business Days, of any
action taken.
(E) Environmental Matters; Inspection.
---------------------------------
(i) Operator shall not cause, allow or authorize a Hazardous
Substance to be present at, on, in, under or to emanate from the Facility,
or migrate from adjoining property controlled by Operator onto or into the
Facility in violation of any Environmental Law, except under conditions
permitted by applicable Environmental Laws and, in the event that such
Hazardous Substances are present at, on, in, under or emanate from the
Facility, or migrate onto or into the Facility, Operator shall cause the
performance of Remedial Work, removal or remediation of such Hazardous
Substances, in accordance with this Agreement and Environmental Laws.
Operator shall use reasonable efforts to prevent, and to seek the
remediation of, any migration of Hazardous Substances onto or into the
Facility from any adjoining property in violation of any Environmental Law.
(ii) Lender shall have the right at all reasonable times after
ten (10)
<PAGE>
99
calendar days' prior written notice to Operator and subject to the rights
of tenants therein to enter upon and inspect all or any portion of the
Facility. If Lender has reason to believe that Remedial Work may be
required, Lender may select or may require Operator to select a consulting
environmental Engineer reasonably satisfactory to Lender to conduct and
prepare environmental reports assessing the environmental condition of the
Facility. Lender shall be given a reasonable opportunity to review any
reports, data and other documents or materials reviewed or prepared by the
environmental Engineer. The inspection rights granted to Lender in this
Section 5.1(b)(E) shall be in addition to, and not in limitation of, any
------- ---------
other inspection rights granted to Lender in the Loan Documents, and shall
expressly include the right (if Lender has reason to suspect that Remedial
Work may be required) to conduct or require Operator to conduct soil
borings, establish ground water monitoring wells and conduct other
customary environmental tests, assessments and audits.
(iii) Operator agrees to bear and shall pay or reimburse Lender
within ten (10) calendar days following written demand for all sums
advanced and expenses incurred (including reasonable attorneys' fees and
disbursements, but excluding internal overhead, administrative and similar
costs of Lender) relating to, or incurred by Lender in connection with, the
inspections and reports described in this Section 5.1(b)(E) in the
------- ---------
following situations:
(x) If Lender has reasonable grounds to believe, at the time
any such inspection is ordered, that there exists an occurrence or
condition that could lead to an Environmental Claim;
(y) If any such inspection reveals an occurrence or condition
that could lead to an Environmental Claim;
(z) If an Event of Default with respect to the Facility exists
at the time any such inspection is ordered, and such Event of Default
relates to any representation, covenant or other obligation pertaining
to Hazardous Substances, Environmental Laws or any other environmental
matter.
(F) Environmental Notices. Operator shall promptly provide notice to
---------------------
Lender of:
(i) any Environmental Claim asserted or threatened (in
writing) by any Governmental Authority or other Person with respect to any
Hazardous Substance at, on, in, under or emanating from the Facility, which
could reasonably be expected to impair the value of Lender's security
interests hereunder or have a Material Adverse
<PAGE>
100
Effect;
(ii) any Environmental Claim or proceeding, investigation or
inquiry commenced or threatened in writing by any Person or Governmental
Authority, against Operator, with respect to the presence, suspected
presence, Release or threatened Release of Hazardous Substances from or
onto, in or under any property not owned by Operator, including, without
limitation, proceedings under the Comprehensive Environmental Response,
Compensation, and Liability Act, as amended, 42 U.S.C. (S) 9601, et seq.,
-- ----
which could reasonably be expected to impair the value of Lender's security
interests hereunder or have a Material Adverse Effect;
(iii) all Environmental Claims asserted or threatened against
Operator, against any other party occupying the Facility or any portion
thereof or against the Facility which become known to Operator, which could
reasonably be expected to impair the value of Lender's security interests
hereunder or have a Material Adverse Effect;
(iv) the discovery by Operator of any occurrence or condition
on the Facility or on any real property adjoining or in the vicinity of the
Facility which could reasonably be expected to lead to an Environmental
Claim against Operator or Lender which such Environmental Claim is
reasonably likely to have a Material Adverse Effect; and
(v) the commencement or completion of any Remedial Work.
(G) Copies of Notices. Operator shall immediately transmit to Lender
-----------------
copies of any citations, orders, notices or other written communications
received from any Person or any Governmental Authority and any notices,
reports or other written communications submitted to any Governmental
Authority with respect to the matters described in Section 5.1(b)(F).
------- ---------
(H) Environmental Claims. Lender may join and participate in, as a
--------------------
party if Lender so determines, any legal or administrative proceeding or
action concerning the Facility or any portion thereof under any
Environmental Law, if, in Lender's reasonable judgment, the interests of
Lender will not be adequately protected by Operator. Operator agrees to
bear and shall pay or reimburse Lender within ten (10) calendar days
following written demand for all reasonable sums advanced and reasonable
expenses (including reasonable attorneys' fees and disbursements), incurred
by Lender in connection with any such action or proceeding.
(I) Indemnification. Operator agrees to indemnify, reimburse, defend
---------------
(with
<PAGE>
101
counsel reasonably satisfactory to Lender) 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, attorneys'
fees, disbursements and expenses, and 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 Facility, which presence, Use or Release requires
or would reasonably likely require Remedial Work;
(iii) any Environmental Claim against Operator, Lender, or any
Person whose liability for such Environmental Claim Operator has or may
have assumed or retained either contractually or by operation of law; or
(iv) the breach of any representation, warranty or covenant set
forth in Section 4.1(b)(U), 4.1(d)(U) and Sections 5.1(a)(D) through
------- --------- --------- -------- ---------
5.1(a)(I) and 5.1(b)(D) through 5.1(b)(I), inclusive.
--------- --------- ---------
The indemnity provided in this Loan Agreement shall not be included in
any exculpation of Operator from personal liability provided in this Loan
Agreement or in any of the other Loan Documents. Nothing in this Section
-------
5.1(b)(I) shall be deemed to deprive Lender of any rights or remedies
---------
provided to it elsewhere in this Agreement or the other Loan Documents or
otherwise available to it under law. Operator waives and releases Lender
from any rights or defenses Operator 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. Notwithstanding the foregoing, Operator 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 clauses (i) through
------- ---
(iv) to the extent that Operator can establish directly and solely that
----
such Losses result from Hazardous Substances being placed on, above or
under the Facility (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 title to the Facility; or (ii) a foreclosure by Lender; or
(iii) acceptance by Lender or its designees of a deed-in-lieu of
foreclosure with respect to the Facility.
<PAGE>
102
(J) Access to Facility. Operator shall permit agents, representatives
------------------
and employees of Lender to inspect the Facility 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 (as
defined in the Leasehold Mortgage); provided, such written notice shall not
be required upon the occurrence and continuation of a Default or Event of
Default.
(K) Notice of Default. Operator shall promptly advise Lender of any
-----------------
material adverse change in Operator's condition, financial or otherwise, or
of the occurrence of any Default of which Operator has knowledge or Event
of Default of which Operator has knowledge.
(L) Cooperate in Legal Proceedings. Except with respect to any claim
------------------------------
by Operator against Lender, Operator shall cooperate with Lender with
respect to any proceedings before any Governmental Authority which may in
any way affect the rights of Lender hereunder or any rights obtained by
Lender under any of the Loan Documents and, in connection therewith, not
prohibit Lender, at its election, from participating in any such
proceedings.
(M) Perform Loan Documents. Operator shall observe, perform and
----------------------
satisfy all the terms, provisions, covenants and conditions required to be
observed, performed or satisfied by it, and shall pay when due all costs,
fees and expenses required to be paid by it, under the Loan Documents
executed and delivered by Operator.
(N) Insurance Benefits; Condemnation Claims. Borrower and Operator
---------------------------------------
shall cooperate with Lender in settling any insurance or condemnation claim
and/or obtaining for Lender the benefits of any Insurance Proceeds and/or
Condemnation Proceeds lawfully or equitably payable to Lender in connection
with the Facility, and Lender shall be reimbursed for any reasonable
expenses incurred in connection therewith (including reasonable attorneys'
fees and disbursements) and the payment by Operator of the expense of an
Appraisal on behalf of Lender in case of a fire or other casualty affecting
the Facility or any part thereof out of such Insurance Proceeds and/or
Condemnation Proceeds, all as more specifically provided in the Leasehold
Mortgage.
(O) Further Assurances. Operator shall, at Operator's sole cost and
------------------
expense:
(i) upon Lender's reasonable request therefor given from time to
time after the occurrence and during the continuance of any Event of
Default pay for (a) reports of UCC, federal tax lien, state tax lien,
judgment and pending litigation searches
<PAGE>
103
with respect to Operator and (b) searches of title to the Facility, each
such search to be conducted by search firms reasonably designated by Lender
in each of the locations reasonably designated by Lender.
(ii) furnish to Lender, upon Lender's reasonable request
therefor, 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 required to be furnished
pursuant to the terms of the Loan Documents;
(iii) execute and deliver to Lender such documents, instruments,
certificates, assignments and other writings, and do such other acts
necessary, to evidence, preserve and/or protect the Collateral at any time
securing or intended to secure the Note, as Lender may require in Lender's
reasonable discretion; and
(iv) do and execute all and such further lawful acts,
conveyances and assurances for the better and more effective carrying out
of the intents and purposes of this Agreement and the other Loan Documents,
as Lender shall require from time to time in its reasonable discretion.
<PAGE>
104
(P) Management of Mortgaged Property. Without the prior written
--------------------------------
consent of the Lender, the Borrower will not execute a Management Agreement
or retain a manager to manage the Facility. Upon thirty (30) days written
request from Lender to Operator, Operator will enter into a Management
Agreement with a manager identified by Lender, (i) upon the occurrence of
an Event of Default or (ii) after the first anniversary of the
Stabilization Date, in the event that, as of the last day of a calendar
quarter, the Debt Service Coverage Ratio for the Facility, computed on the
basis of the prior twelve (12) calendar months, is less than the applicable
Management Appointment DSCR. In the case described in clause (ii), Lender
-----------
shall not have the right to require Operator to retain a manager to manage
the Facility, if on the first Payment Date after Lender has made the
determination pursuant to clause (ii) above, Borrower defeases the Loan in
accordance with the terms of Sections 2.6 and 2.11 in an amount sufficient
-------- --- ----
to cause the Debt Service Coverage Ratio (calculated as if such amount
was actually applied to reduce the Principal Indebtedness upon which Debt
Service was paid and calculated as if the Principal Indebtedness was
reamortized on a straight-line basis (as if the reduction had occurred)
over the remaining number of months until the Maturity Date) for the
Facility, computed on the basis of the prior twelve (12) calendar months,
to be at least equal to 1.20 (in the case of a Management Appointment DSCR
described in clause (ii) of the definition of such term) or 1.25 (in the
------ ----
case of a Management Appointment DSCR described in clause (i) of the
------ ---
definition of such term). In the event that Borrower fails to defease as
provided in the previous sentence and Lender requires Operator to retain a
manager, any such manager shall (i) be a reputable management company
having at least seven years' experience in the management of commercial
properties with similar uses as the Facility and in the jurisdiction in
which the Facility is located, (ii) shall not be paid management fees in
excess of fees which are market fees for comparable managers of comparable
properties in the same geographic area and (iii) shall not result in a
downgrade, withdrawal or qualification of the then applicable ratings
assigned by the Rating Agencies to any securities issued in a
Securitization.
<PAGE>
105
(Q) Financial Reporting.
-------------------
(i) Operator 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 Operator and all items of income and expense in connection with
the operation of the Facility and in connection with any services,
equipment or furnishings provided in connection with the operation of the
Facility. 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 Operator to examine such books, records and
accounts at the office of Operator or 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 Facility, Operator 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
Operator'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.
(ii) Operator shall furnish to Lender annually within ninety
(90) days following the end of each Fiscal Year, true, complete and correct
copies of Operator's financial statements audited by a Big Six Accounting
Firm or other 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 Operator 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 Operator for the relevant period, and (y) notice of whether to
the knowledge of Operator, 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.
(iii) Operator shall furnish to Lender annually within forty
(40) days following the end of each Fiscal Year, true, complete and correct
copies of Operator'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)
<PAGE>
106
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 Operator 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 Operator for the relevant period, and (y) notice of whether to
the knowledge of Operator, 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.
(iv) Operator shall furnish to Lender within thirty (30) days
following the end of each calendar month, true, correct and complete
monthly unaudited financial statements for Operator 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 Operator 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 Operator for the
relevant period, and (y) notice of whether, to the knowledge of Operator,
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.
(v) Operator 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 Operator certifying as of the date thereof (x) that
such statement is true, correct, complete and accurate and (y) notice of
whether, to the knowledge of Operator, 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.
(vi) Operator shall furnish to Lender, within fifteen (15)
Business Days after request, such further information with respect to the
operation of the Facility and the financial affairs of Operator as may be
reasonably requested by Lender, including without limitation all business
plans prepared for Operator.
<PAGE>
107
(vii) Operator 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.
(viii) Operator shall, concurrently with Operator's delivery to
Lender, provide a copy of the items required to be delivered to Lender
under this Section 5.1(b)(Q) to the Rating Agencies, the trustee, and any
-----------------
servicer and/or special servicer that may be retained in conjunction with
the Loan or any Securitization. Operator shall furnish to Lender written
notice, within two (2) Business Days after receipt by Operator, of any
Rents, Money or other items of Gross Revenue that Operator is not required
by this Agreement to deposit in the Collection Account, Cash Collateral
Account or the Security Deposit Account, 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.
(ix) Operator 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.
(x) Operator shall furnish to Lender such other financial
information with respect to Operator as Lender may reasonably request
(including, without limitation, in the case of a defeasance pursuant to
Section 2.11, a review by a third party acceptable to Lender, of the
------------
calculations required to be made pursuant to Section 2.11).
------------
(xi) Operator shall furnish or shall cause to be furnished to
Lender, within fifteen (15) days of the receipt by Operator any and all
notices (regardless of form) from any licensing and/or certifying agency
that any License relating to the Facility or Operator 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;
(xii) Intentionally deleted; and
(xiii) Operator 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 Facility, and correct or cause
to
<PAGE>
108
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).
(R) Conduct of Business. Operator shall cause the operation of the
-------------------
Facility to be conducted at all times in a manner consistent with at least
the level of operation of the Facility as of the Closing Date, including,
without limitation, the following:
(i) to maintain or cause to be maintained the standard of
operations at the Facility at all times at a level necessary to insure a
level of quality for the Facility consistent with similar facilities in the
same competitive market;
(ii) to operate or cause to be operated the Facility in a
prudent manner in compliance in all material respects with applicable Legal
Requirements and Insurance Requirements relating thereto and cause all
Licenses, Permits, and any other agreements necessary for the continued use
and operation of the Facility to remain in effect; and
(iii) to maintain or cause to be maintained sufficient Inventory
and Equipment of types and quantities at the Facility to enable the
Operator to operate the Facility.
(S) Intentionally Omitted.
(T) ERISA. Operator shall deliver to Lender as soon as possible, and
-----
in any event within ten days after Operator knows or has reason to believe
that any of the events or conditions specified below with respect to any
Plan or Multiemployer Plan has occurred or exists, a statement signed by a
senior financial officer of Operator setting forth details respecting such
event or condition and the action, if any, that Operator 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 Operator 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 a Plan, as to which
PBGC has not by regulation waived the requirement of Section 4043(a) of
ERISA that it be notified within 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, without limitation, 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 Plan;
<PAGE>
109
(ii) the distribution under Section 4041 of ERISA of a notice
of intent to terminate any Plan or any action taken by Operator or an ERISA
Affiliate to terminate any 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 Plan, or the receipt by Operator 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 Operator 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
Operator 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 Operator or any ERISA Affiliate to enforce
Section 515 of ERISA, which proceeding is not dismissed within 30 days;
(vi) the adoption of an amendment to any 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 Plan is a part if
Operator or an ERISA Affiliate fails to timely provide security to the Plan
in accordance with the provisions of said Sections; and
(vii) the imposition of a lien or a security interest in
connection with a Plan.
(U) Single Purpose Entity. Operator shall at all times be a Single
---------------------
Purpose Entity.
(V) Trade Indebtedness. Operator will pay its trade payables within
------------------
ninety (90) days of the date incurred, unless Operator is in good faith
contesting Operator's obligation to pay such trade payables in a manner
reasonably satisfactory to Lender (which may include Lender's requirement
that Operator, as the case may be, post security with respect to the
contested trade payable).
<PAGE>
110
(W) Construction Project. Operator shall complete the Construction
--------------------
Project on or before the Construction Completion Date.
(X) Annual Operating Budgets. Operator shall submit to Lender Annual
------------------------
Operating Budgets at those times and in such form and substance as set
forth in the definition of "Annual Operating Budget" in this Agreement.
(Y) Use Specific Covenants. Operator shall:
----------------------
(1) operate the Facility or cause the Facility to be operated in
full compliance with the laws and requirements referred to in Section
-------
4.1(d)(AK)(i); and
-------------
(2) operate the Facility or cause the Facility 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; and
(3) 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 Facility to the extent required pursuant to any Legal
Requirements and Operators right to contest in accordance with the
Leasehold Mortgage.
(Z) Mezzanine Loan. Operator will pay all amounts required to be
--------------
paid by Operator pursuant to the Mezzanine Loan when such amounts are due
(subject to cure rights set forth in the Mezzanine Loan Agreement).
ARTICLE VI
NEGATIVE COVENANTS
------------------
Section 6.1. Borrower and Operator Negative Covenants. (a) Borrower
----------------------------------------
covenants and agrees that, until payment in full of the Indebtedness, it will
not do, directly or indirectly, any of the following unless Lender consents
thereto in writing:
(A) Liens on the Mortgaged Property. Incur, create, assume, become
-------------------------------
or be
<PAGE>
111
liable in any manner with respect to, or permit to exist, any Lien with
respect to the Facility, except: (i) Liens in favor of Lender, and (ii) the
Permitted Encumbrances.
(B) Transfer. Except as expressly permitted by or pursuant to this
--------
Agreement or the Mortgages, allow any Transfer to occur, or enter into a
Management Agreement with respect to the Facility.
(C) Other Borrowings. Incur, except for the SELCO Debt, the Mezzanine
----------------
Loan and unsecured trade payables incurred in the ordinary course of
business relating to the ownership and operation of the Facility which do
not exceed, at any time, a maximum amount of Ten Thousand Dollars ($10,000)
and are paid within ninety (90) days of the date incurred, create, assume,
become or be liable in any manner with respect to Other Borrowings.
Notwithstanding the foregoing, Borrower may in good faith contest
Borrower's obligation to pay such trade payables in a manner satisfactory
to Lender (which may include Lender's requirement that Borrower post
security with respect to the contested trade payable (such security not to
exceed one hundred and twenty-five percent (125%) of the amount of the
claim being contested)).
(D) Intentionally Omitted.
---------------------
(E) Change In Business. Cease to be a Single-Purpose Entity or make
------------------
any material change in the scope or nature of its business objectives,
purposes or operations, or undertake or participate in activities other
than the continuance of its present business.
(F) Debt Cancellation. Except as permitted in the Operator Lease,
-----------------
cancel or otherwise forgive or release any material claim or debt owed to
Borrower by any Person, except for adequate consideration or in the
ordinary course of Borrower's business.
(G) Affiliate Transactions. Enter into, or be a party to, any
----------------------
transaction with an Affiliate of Borrower, except in the ordinary course of
business and on terms which are no less favorable to Borrower or such
Affiliate than would be obtained in a comparable arm's length transaction
with an unrelated third party, and, if the amount to be paid to the
Affiliate pursuant to the transaction or series of related transactions is
greater than $50,000 (determined annually on an aggregate basis) fully
disclosed to Lender in advance.
(H) Creation of Easements. Create, or permit the Facility or any part
---------------------
thereof to become subject to, any easement, license or restrictive
covenant, other than a Permitted Encumbrance.
<PAGE>
112
(I) Misapplication of Funds. Distribute any Rents or Money received
-----------------------
from Accounts in violation of the provisions of Section 2.12.
------- ----
(J) Certain Restrictions. Enter into any agreement other than the
--------------------
Operator Lease which expressly restricts the ability of Borrower to enter
into amendments, modifications or waivers of any of the Loan Documents.
(K) Issuance of Equity Interests. Issue or allow to be created any
----------------------------
stocks or shares or shareholder, partnership, membership or beneficial
ownership interests, as applicable, or other ownership interests other than
the stocks, shares, shareholder, partnership, membership, or beneficial
ownership interests and other ownership interests which are outstanding or
exist on the Closing Date or any security or other instrument which by its
terms is convertible into or exercisable or exchangeable for stock, shares,
shareholder, partnership, membership or beneficial ownership interests or
other ownership interests in Borrower, except as contemplated by this
Agreement.
(L) Assignment of Licenses and Permits. Consent to the assignment or
----------------------------------
transfer any of any interest in any Permits pertaining to the Facility, or
assign, transfer or remove or permit any other Person to assign, transfer
or remove any records pertaining to the Facility without Lender's prior
written consent which consent may be granted or refused in Lender's
reasonable discretion.
(M) Place of Business. Change its chief executive office or its
-----------------
principal place of business or place where its books and records are kept
without giving Lender at least thirty (30) days' prior written notice
thereof and promptly providing Lender such information as Lender may
reasonably request in connection therewith.
(b) Operator covenants and agrees that, until payment in full of the
Indebtedness, it will not do, directly or indirectly, any of the following
unless Lender consents thereto in writing:
(A) Liens on the Mortgaged Property. Incur, create, assume, become or
-------------------------------
be liable in any manner with respect to, or permit to exist, any Lien with
respect to the Facility, except: (i) Liens in favor of Lender, and (ii)
the Permitted Encumbrances.
(B) Transfer; Joint Assessment. Except as expressly permitted by or
--------------------------
pursuant to this Agreement or the Mortgages, allow any Transfer to occur or
enter into a management agreement with respect to the Facility. Operator
shall not suffer, permit or initiate the joint assessment of the Facility
(i) with any other real property constituting a separate tax lot, and (ii)
with any portion of the Facility which may be deemed to constitute personal
property, or 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
<PAGE>
113
Facility as a single lien.
(C) Other Borrowings. Incur, except for its obligations under the
----------------
Mezzanine Loan and unsecured trade payables incurred in the ordinary course
of business relating to the ownership and operation of the Facility which
do not exceed, at any time, a maximum amount of one percent (1%) of the
Loan Amount and are paid within ninety (90) days of the date incurred,
create, assume, become or be liable in any manner with respect to Other
Borrowings. Notwithstanding the foregoing, Operator may in good faith
contest Operator's obligation to pay such trade payables in a manner
satisfactory to Lender (which may include Lender's requirement that
Operator post security with respect to the contested trade payable (such
security not to exceed one hundred and twenty-five percent (125%) of the
amount of the claim being contested)).
(D) Intentionally Omitted.
---------------------
(E) Change In Business. Cease to be a Single-Purpose Entity or make
------------------
any material change in the scope or nature of its business objectives,
purposes or operations, or undertake or participate in activities other
than the continuance of its present business.
(F) Debt Cancellation. Cancel or otherwise forgive or release any
-----------------
material claim or debt owed to Operator by any Person, except for adequate
consideration or in the ordinary course of Operator's business.
(G) Affiliate Transactions. Enter into, or be a party to, any
----------------------
transaction with an Affiliate of Operator, except in the ordinary course of
business and on terms which are no less favorable to Operator or such
Affiliate than would be obtained in a comparable arm's length transaction
with an unrelated third party, and, if the amount to be paid to the
Affiliate pursuant to the transaction or series of related transactions is
greater than $50,000 (determined annually on an aggregate basis) except as
(i) set forth in an Annual Operating Budget which is approved by Lender
pursuant to this Agreement or (ii) otherwise fully disclosed to Lender in
advance. Notwithstanding the foregoing, Operator may in good faith contest
Operator's obligation to pay such trade payables in a manner satisfactory
to Lender (which may include Lender's requirement that Operator post
security with respect to the contested trade payable (such security not to
exceed one hundred and twenty-five percent (125%) of the amount of the
claim being contested); provided, however, the Operator may take the action
described in Section 8.29 to cross-collateralize the Loan as described
------------
therein.
(H) Creation of Easements. Create, or permit the Facility or any part
---------------------
thereof to become subject to, any easement, license or restrictive
covenant, other than a Permitted
<PAGE>
114
Encumbrance.
(I) Misapplication of Funds. Distribute any Rents or Money received
-----------------------
from Accounts in violation of the provisions of Section 2.12.
------- ----
(J) Certain Restrictions. Enter into any agreement other than the
--------------------
Operator Lease which expressly restricts the ability of Operator to enter
into amendments, modifications or waivers of any of the Loan Documents.
(K) Issuance of Equity Interests. Issue or allow to be created any
----------------------------
stocks or shares or shareholder, partnership, membership or beneficial
ownership interests, as applicable, or other ownership interests other than
the stocks, shares, shareholder, partnership, membership, or beneficial
ownership interests and other ownership interests which are outstanding or
exist on the Closing Date or any security or other instrument which by its
terms is convertible into or exercisable or exchangeable for stock, shares,
shareholder, partnership, membership or beneficial ownership interests or
other ownership interests in Operator, except as contemplated by this
Agreement.
(L) Assignment of Licenses and Permits. Assign or transfer any of its
----------------------------------
interest in any Permits pertaining to the Facility, or assign, transfer or
remove or permit any other Person to assign, transfer or remove any records
pertaining to the Facility without Lender's prior written consent which
consent may be granted or refused in Lender's reasonable discretion.
(M) Place of Business. Change its chief executive office or its
-----------------
principal place of business or place where its books and records are kept
without giving Lender at least thirty (30) days' prior written notice
thereof and promptly providing Lender such information as Lender may
reasonably request in connection therewith.
(N) Use Specific Negative Covenants: Operator shall not do any of the
-------------------------------
following unless Lender consents thereto in writing:
a. transfer any License to any location other than the Facility
nor pledge any License as collateral security for any other loan or
indebtedness;
(2) rescind, withdraw, revoke, amend, modify, supplement, or
otherwise alter the nature, tenor or scope of any License for the
Facility which rescission, withdrawal, revocation, amendment,
modification, supplement or other alteration would have a Material
Adverse Effect; or
<PAGE>
115
(3) enter into any resident care agreements with residents or
with any other persons which deviate in any material respect from the
standard form customarily used at the Facility; or
(4) fail to satisfy all requirements established by law,
regulation or administrative instruction for the operation of the
Facility; or
(5) fail to operate the Facility in a manner that is consistent
with all relevant standards of care and service in the community.
ARTICLE VII
DEFAULTS
--------
Section 7.1. Event of Default. The occurrence of one or more of the
----------------
following events shall be an "Event of Default" hereunder:
----------------
(i) if on any Payment Date the funds in the Debt Service
Payment Sub-Account are insufficient to pay the Required Debt Service
Payment due on such Payment Date; provided, however, that if a Cash
Management Event 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;
(ii) if on any Payment Date Borrower fails to pay the Required
Debt Service Payment due on such Payment Date; provided, however, that if a
Cash Management Event 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;
(iii) if Borrower fails to pay the outstanding Indebtedness on
the Maturity Date;
(iv) if on any Payment Date on which Borrower is required under
this Agreement to pay a Basic Carrying Costs Monthly Installment, Borrower
and/or Operator fails to pay the Basic Carrying Costs Monthly Installment
or the Capital Reserve Monthly Installment due on such Payment Date;
provided, however, that if a Cash Management Event has not occurred, such
failure shall not constitute an Event of Default if Borrower and/or
Operator shall cure such failure within five (5) days after such Payment
Date;
(v) if on the date any payment of a Basic Carrying Cost would
become
<PAGE>
116
delinquent, unless such Basic Carrying Cost was already paid, the funds in
the Basic Carrying Costs Sub-Account are insufficient to make such payment;
(vi) the occurrence of the events identified elsewhere in the
Loan Documents as constituting an "Event of Default" hereunder or
thereunder;
(vii) a Transfer, unless the prior written consent of Lender is
obtained (which consent may be withheld with or without cause in Lender's
discretion);
(viii) if Borrower or Operator fails to pay any other amount
payable pursuant to this Agreement or any other Loan Document when due and
payable in accordance with the provisions hereof or thereof, as the case
may be, and such failure is not remedied within any applicable grace
periods;
(ix) if any representation or warranty made herein or in any
other Loan Document, or in any report, certificate, financial statement or
other Instrument, agreement or document furnished by Borrower or Operator
in connection with this Agreement, the Note or any other Loan Document
executed and delivered by Borrower or Operator, shall be false in any
material respect as of the date such representation or warranty was made or
remade;
(x) if Borrower or Operator makes an assignment for the
benefit of creditors;
(xi) if a receiver, liquidator or trustee shall be appointed
for Borrower or Operator or if Borrower or Operator shall be adjudicated as
bankrupt or insolvent, or if 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 or Operator or if any proceeding for the dissolution or
liquidation of Borrower or Operator shall be instituted; provided, however,
-------- -------
that if such appointment, adjudication, petition or proceeding was
----
involuntary and not consented to by Borrower or Operator as the case may
be, upon the same not being discharged, stayed or dismissed within 90 days;
or if Borrower or Operator shall generally not be paying its debts as they
become due;
(xii) if either Borrower or Operator attempts to delegate its
obligations or assign its rights under this Agreement, any of the other
Loan Documents or any interest herein or therein, except as permitted by
this Agreement;
(xiii) except as permitted under this Agreement, if any
provision of any
<PAGE>
117
organizational document of Borrower is amended or modified in any respect,
or if Borrower, Operator or Borrower's Trustee 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 Operator; or
if Borrower or Operator or any of their respective partners, members,
beneficial owners, trustees or shareholders, as applicable, breaches any of
the covenants set forth in Sections 5.1(a)(U), 5.1(b)(U), 6.1(a)(E) or
-------- --------- --------- ---------
6.1(b)(E);
---------
(xiv) if Borrower or Operator fails to (A) notify Lender of the
occurrence of a Default under any of the Loan Documents within ten (10)
Business Days of the day on which Borrower or Operator first has knowledge
of such Default or (B) give any notice due to any Person under any Loan
Document (a) within five (5) Business Days after such notice was due or (b)
in accordance with the applicable procedural requirements set forth in the
Loan Documents;
(xv) if Borrower or Operator shall be in default under any of
the other obligations, agreements, undertakings, terms, covenants,
provisions or conditions of this Agreement, the Note, the Mortgages or the
other Loan Documents, not otherwise referred to in this Section 7.1, for
------- ---
ten (10) Business Days after written notice to Borrower or Operator, as
applicable, from Lender or its successors or assigns, 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 written notice to Borrower or Operator, as
applicable, from Lender or its successors or assigns, in the case of any
other default (unless otherwise provided herein or in such other Loan
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) Business Day period and provided further that Borrower
shall have commenced to cure such default within such thirty (30) Business
Day period and thereafter diligently and expeditiously proceeds to cure the
same, such thirty (30) Business Day period shall be extended for such time
as is reasonably necessary for Borrower in the exercise of due diligence to
cure such default, but in no event shall such period exceed one hundred
twenty (120) days after the original notice from Lender; provided, further,
-------- -------
if Borrower or Operator provides to Lender a certificate certifying and
demonstrating that Borrower or Operator 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 Operator, 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;
<PAGE>
118
(xvi) if an event or condition specified in Sections 5.1(a)(T)
-------- ---------
or 5.1(b)(T) 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;
(xvii) if without Lender's prior written consent (A) any
management agreement (other than the Management Agreement) is entered into
for the Facility or (B) after the execution of a Management Agreement
pursuant to Section 5.1(b)(P) there is any change in or termination of such
------- ---------
Management Agreement for the Facility;
(xviii) if any Event of Default occurs (as to any party) under
the Operating Lease (subject to any applicable notice and cure periods
required under the Operating Lease);
(xix) if Borrower 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 Facility and such agency commences a termination of any License;
(xx) if the Facility is assessed material fines or penalties
(as distinguished from establishment of standard settlement accounts) by
any state or health, licensing or similar agency having jurisdiction over
Borrower, Operator or the Facility;
(xxi) if (A) Borrower shall fail to pay any amount due with
respect to the SELCO Debt when due and such failure shall continue beyond
any applicable grace period or (B) a default or event of default shall
occur with respect to the SELCO Debt which shall continue beyond any
applicable grace period or (C) if any of the loan documents evidencing the
SELCO Loan is amended without the Lender's prior written consent;
(xxii) if Operator fails to provide Lender with the written
notice (together with the required deliveries) set forth in Section 8.33
------- ----
which failure is not remedied within five (5) days of the date such written
notice and deliveries were due;
(xxiii) if Lender determines in its discretion that the Operator
has not achieved Completion of Construction at the Facility as of the
Construction Completion Date;
<PAGE>
119
(xxiv) for any period in which the Borrower's obligations
hereunder are cross-defaulted with any Other Loans pursuant to Section
-------
8.39(a) and/or the Operator's obligations hereunder are cross-defaulted and
-------
cross-collateralized with any Other Operator's obligations under any Other
Loans pursuant to Section 8.39(b), 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; and
(xxv) if an "Event of Default" (as defined in the Mezzanine
Loan Agreement) occurs under any of the Mezzanine Loan Documents.
Section 7.2. Remedies. (a) Upon the occurrence of an Event of
--------
Default and during the continuance thereof, all or any one or more of the
rights, powers and other remedies available to Lender against Borrower and
Operator under this Agreement, the Note, the Mortgage, the Leasehold Mortgage or
any of the other Loan Documents, or at law or in equity may be exercised by
Lender at any time and from time to time (including, without limitation, the
right to accelerate and declare the outstanding principal amount, unpaid
interest, Default Rate interest, Late Charges, Yield Maintenance Premium and any
other amounts owing by Borrower to be immediately due and payable), without
notice or demand, whether or not all or any portion of the Indebtedness 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 with respect to the Facility or all or
any portion of the Collateral. 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 sole 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 herein or in the other Loan
Documents. Notwithstanding anything contained to the contrary herein, the
outstanding principal amount, unpaid interest, Default Rate interest, Late
Charges, Yield Maintenance Premium and any other amounts owing by Borrower shall
be accelerated and immediately due and payable, without any election by Lender
upon the occurrence of an Event of Default described in Section 7.1(x) or
--------------
Section 7.1 (xi). Notwithstanding that this Agreement may refer to a continuing
- ----------------
Event of Default, and without limiting Borrower's or Operator's right to cure a
Default which may, with the passage of time, become an Event of Default, neither
Borrower nor Operator shall have any right pursuant to this Agreement to cure
any Event of Default unless this Agreement is amended by Borrower, Operator and
Lender in writing.
<PAGE>
120
Section 7.3. Remedies Cumulative. The rights, powers and remedies of
-------------------
Lender under this Agreement shall be cumulative and not exclusive of any other
right, power or remedy which Lender may have against Borrower or Operator
pursuant to this Agreement or the other Loan Documents executed by or with
respect to Borrower or Operator, or existing at law or in equity or otherwise.
Lender's rights, powers and remedies may be pursued singly, concurrently or
otherwise, at such time and in such order as Lender may determine in Lender's
sole discretion. 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 shall 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 any 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. Any and all of Lender's rights with respect to the
Collateral shall continue unimpaired, and Borrower and Operator shall be and
remain obligated in accordance with the terms hereof, notwithstanding (i) the
release or substitution of Collateral at any time, or of any rights or interest
therein or (ii) any delay, extension of time, renewal, compromise or other
indulgence granted by Lender in the event of any Default or Event of Default
with respect to the Collateral or otherwise hereunder. Notwithstanding any
other provision of this Agreement, Lender reserves the right to seek a
deficiency judgment or preserve a deficiency claim, in connection with the
foreclosure of the Mortgage or Leasehold Mortgage on the Facility, to the extent
necessary to foreclose on other parts of the Mortgaged Property.
Section 7.4. Lender's Right to Perform. If Borrower or Operator
-------------------------
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 Business Days after Borrower's or Operator's, as applicable,
receipt of written notice thereof, without in any way limiting Section 7.1
-----------
hereof, from Lender, 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
Operator 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 Operator of any such failure.
Section 7.5. Operator'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
which Event of Default was not caused directly or indirectly by Operator and
Lender desires to exercise its rights under this Article VII, provided no Event
of Default exists with respect to Operator, Lender shall give Operator written
notice of such Event of Default and of Lender's intent to exercise its rights
and remedies under this Article VII and Lender shall abstain from exercising its
rights and remedies under this Article VII until the earlier to occur of (a) the
date which is forty-five (45) days after delivery of such written notice, (b)
the occurrence of an Event of Default with respect to Operator and (c) the
occurrence
<PAGE>
121
of a monetary Event of Default with respect to Borrower. Lender shall not
exercise its rights under this Article VII in connection with the Event of
Default with respect to Borrower identified in the written notice delivered to
Operator if prior to the dates or events described in clauses (a) through (c) of
the foregoing sentence, the following events and conditions shall have occurred
or been satisfied, as applicable, (i) the Operator has acquired fee simple title
to the Facility or acquired the beneficial interest of SELCO in Borrower, has
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 Operator 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, Operator
shall have cured such non-monetary Event of Default, (v) Operator pays all
reasonable expenses incurred by Lender in connection with such transfer, (vi)
Operator shall have delivered to Lender an updated Title Insurance Policy
showing fee simple title to the Facility in Operator and insuring that Lender
has a valid first lien on the Operator's fee simple interest in the Facility
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 Facility to the Operator and the assignment by the
Borrower and assumption by the Operator of the Borrower's obligations under the
Loan Documents executed by the Borrower, Operator shall be considered the
"Borrower" under the Loan Documents as well as the "Operator" under the Loan
Documents and shall have all of the obligations of "Borrower" under the Loan
Documents as well as the obligations of "Operator" under the Loan Documents. If
the events described in clauses (a) through (c) of the first sentence of this
------- --- ---
Section occur or the events or conditions described in the second sentence of
- -------
this Section do not occur or are not satisfied prior to the occurrence of the
-------
events described in clauses (a) through (c) of the first sentence of this
------- --- ---
Section, Lender shall be entitled to exercise all of its rights and remedies
- -------
pursuant to this Article VII.
<PAGE>
122
ARTICLE VIII
MISCELLANEOUS
-------------
Section 8.1. Survival. Subject to Section 4.2, this Agreement and
-------- ------- ---
all covenants, agreements, representations and warranties made herein and in the
certificates delivered pursuant hereto shall survive the execution and delivery
of this Agreement and the execution and delivery by Borrower to Lender of the
Note and the Operator of the Guaranty, and shall continue in full force and
effect so long as any portion of the Indebtedness is outstanding and unpaid.
Whenever in this Agreement any of the parties hereto is referred to, such
reference shall be deemed to include the successors and assigns of such party.
All covenants, promises and agreements in this Agreement contained, by or on
behalf of Borrower or Operator, shall inure to the benefit of the respective
successors and assigns of Lender. Nothing in this Agreement or in any other
Loan Document, express or implied, shall give to any Person other than the
parties and the holder(s) of the Note, the Mortgage and the other Loan
Documents, and their legal representatives, successors and assigns, any benefit
or any legal or equitable right, remedy or claim hereunder.
Section 8.2. Lender's Discretion. Whenever pursuant to this
-------------------
Agreement, Lender exercises any right given to it to 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 sole discretion of Lender.
Section 8.3. Governing Law. (a) The proceeds of the Note delivered
-------------
pursuant hereto were disbursed from 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, 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 New York 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, Borrower and Operator each 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 (S) 5-1401 of the New York General Obligations Law.
(b) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST BORROWER OR OPERATOR
ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE INSTITUTED IN ANY FEDERAL
OR STATE COURT IN NEW YORK, NEW YORK, PURSUANT TO (S) 5-1402 OF THE NEW YORK
GENERAL OBLIGATIONS LAW OR IN ANY FEDERAL OR STATE COURT IN THE JURISDICTION IN
WHICH THE
<PAGE>
123
COLLATERAL IS LOCATED AND EACH OF OPERATOR AND BORROWER WAIVES ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT,
ACTION OR PROCEEDING, AND EACH OF OPERATOR AND BORROWER HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING.
EACH OF OPERATOR AND BORROWER 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 AND
AGREES THAT SERVICE OF PROCESS UPON SAID AGENT AT SAID ADDRESS (OR AT SUCH OTHER
OFFICE AS MAY BE DESIGNATED BY BORROWER OR OPERATOR FROM TIME TO TIME IN
ACCORDANCE WITH THE TERMS HEREOF) WITH A COPY TO BORROWER AND OPERATOR, AS
APPLICABLE, AT ITS PRINCIPAL EXECUTIVE OFFICES, ATTENTION: GENERAL COUNSEL AND
WRITTEN NOTICE OF SAID SERVICE OF BORROWER OR OPERATOR, AS APPLICABLE, MAILED OR
DELIVERED TO BORROWER OR OPERATOR, AS APPLICABLE, IN THE MANNER PROVIDED HEREIN
SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON BORROWER OR
OPERATOR, AS APPLICABLE, IN ANY SUCH SUIT, ACTION OR PROCEEDING. A COPY OF
SERVICE OF PROCESS WITH RESPECT TO BORROWER SHALL BE DELIVERED TO OPERATOR AND
COPY OF SERVICE OF PROCESS WITH RESPECT TO OPERATOR SHALL BE DELIVERED TO
BORROWER; PROVIDED, HOWEVER, FAILURE TO RECEIVE SUCH COPIES SHALL NOT AFFECT ANY
OF LENDER'S RIGHTS HEREUNDER. EACH OPERATOR AND BORROWER (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
(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 OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.
Section 8.4. Modification, Waiver in Writing. No modification,
-------------------------------
amendment, extension, discharge, termination or waiver of any provision of this
Agreement, the Note or any other Loan Document, or consent to any departure by
Borrower or Operator therefrom, shall in any event be effective unless the same
shall be in a writing signed by each of Borrower, Operator, 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 Operator or Borrower shall entitle Borrower or Operator
to any other or future notice or demand in the same, similar or other
circumstances.
<PAGE>
124
Section 8.5. 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 the Note, or of any other Loan Document, or any
other instrument given as security therefor, 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, the Note or any
other 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 this
Agreement, the Note or the other Loan Documents, or to declare a default for
failure to effect prompt payment of any such other amount.
Section 8.6. Notices. All notices, consents, approvals and requests
-------
required or permitted hereunder or under any other Loan Document 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 (I) if to Lender at its address set forth on the
first page hereof, (II) if to Borrower at its designated address set forth on
the first page hereof, and (III) if to Operator at its address set forth on the
first page hereof, or, in each such case, at such other address and to such
other 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 8.6. A copy of all notices, consents, approvals and
------- ---
requests directed to Lender shall be delivered concurrently to each of the
following: Joseph B. Heil, Esquire, Dechert Price & Rhoads, 1717 Arch Street,
4000 Bell Atlantic Tower, Philadelphia, PA 19103, Telefax Number 215/994-2222;
Two World Financial Center, Building B, New York, NY 10281-1198, Attention:
Raymond Anthony, Telefax Number (212) 667-1666; Two World Financial Center,
Building B, New York, NY 10281-1198, Attention: Sheryl McAfee, Telefax Number
(212) 667-1022; and Two World Financial Center, Building B, New York, NY 10281-
1198, Attention: Legal Counsel, Telefax Number (212) 667-1022. A copy of all
notices, consents and approvals and requests addressed to Borrower or to
Operator shall be delivered concurrently to each of the following: Brookdale
Living Communities, Inc., 77 West Wacker Drive, Chicago, Illinois 60601,
Attention: Darryl W. Copeland, Jr., Telefax Number: (312) 977-3699; Brookdale
Living Communities, Inc., 77 West Wacker Drive, Chicago, Illinois 60601,
Attention: Robert J. Rudnik, Esq. Telefax Number: (312) 977-3699; and Douglas E.
Wambach, Esq., Burke, Warren, McKay & Serritella, 330 North Wabash Avenue, 22nd
Floor, IBM Plaza, Chicago, Illinois 60611-3607, Telefax Number (312) 840-7900;
and Wilmington Trust Company, 1100 North Market Street, Wilmington, Delaware
19890-0001, Attn: Corporate Trust Administration. A notice shall be deemed to
have been
<PAGE>
125
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 4:00 p.m.
local time on a Business Day or if such confirmation is received after 4:00 p.m.
local time, the next succeeding Business Day, provided that such telecopied
notice was also delivered as required in this Section 8.6. A party receiving a
------- ---
notice which does not comply with the technical requirements for notice under
this Section 8.6 may elect to waive any deficiencies and treat the notice as
------- ---
having been properly given.
SECTION 8.7. TRIAL BY JURY. BORROWER, OPERATOR AND LENDER, TO THE
-------------
FULLEST EXTENT THAT THEY MAY LAWFULLY DO SO, HEREBY WAIVE TRIAL BY JURY IN ANY
ACTION OR PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY TORT ACTION, BROUGHT BY
ANY PARTY HERETO WITH RESPECT TO THIS AGREEMENT, THE NOTE OR THE OTHER LOAN
DOCUMENTS.
Section 8.8. Headings. The Article and Section headings in this
--------
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
Section 8.9. 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. Lender shall provide Borrower
and Operator 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.
Section 8.10. 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.
Section 8.11. Preferences. Lender shall have no obligation to
-----------
marshal any assets in favor of Borrower or Operator or any other party or
against or in payment of any or all of the obligations of Borrower or Operator
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 or Operator to any portion of the obligations of
Borrower or
<PAGE>
126
Operator hereunder. To the extent Borrower or Operator makes a payment or
payments to Lender for Borrower's or Operator's benefit, which payment or
proceeds or any part thereof are 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 obligations hereunder 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.
Section 8.12. Waiver of Notice. Borrower and Operator shall not be
----------------
entitled to any notices of any nature whatsoever from Lender except with respect
to matters for which this Agreement or the other Loan Documents specifically and
expressly provide for the giving of notice by Lender to Borrower or Operator and
except with respect to matters for which Borrower or Operator is not, pursuant
to applicable Legal Requirements, permitted to waive the giving of notice. To
the maximum extent permitted by applicable Legal Requirements, Borrower and
Operator each hereby expressly waives the right to receive any notice from
Lender with respect to any matter for which this Agreement or the other Loan
Documents does not specifically and expressly provide for the giving of notice
by Lender to Borrower.
Section 8.13. Intentionally Omitted.
---------------------
Section 8.14. Exculpation. Except as otherwise set forth in this
-----------
Section 8.14 and Section 4.2 to the contrary, Lender shall not enforce the
- ------- ---- ------- ---
liability and obligation of Borrower or Operator to perform and observe the
obligations contained in this Agreement, the Note, the Mortgages, the Guaranty
or any of the other Loan Documents executed and delivered by Borrower or
Operator 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 Operator 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 Facility 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 Operator (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 prepayments of the Loan pursuant
to Section 2.7 or (ii) Operator, 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 prepayments of the Loan pursuant to Section 2.7 (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
-------
<PAGE>
127
8.39, 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 8.14 shall not, however, (a) impair the validity of the
------- ----
Indebtedness (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 8.39, if any) evidenced by the Loan Documents or those Other
------- ----
Loan Documents which evidence an Other Loan which is cross-collateralized and
cross-defaulted with the Loan pursuant Section 8.39, if any or in any way affect
------- ----
or impair the Liens (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 8.39, 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
8.39, if any, or the right of Lender to foreclose the Mortgage (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 8.39,
------- ----
if any) or Leasehold Mortgage (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 8.39, if any) following an Event of Default
------- ----
(as defined herein and in any Loan Agreement which evidences an Other Loan which
is cross-collateralized and cross-defaulted with the Loan pursuant to Section
8.39, 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 an
Other Loan which is cross-collateralized and cross-defaulted with the Loan
pursuant to Section 8.39, if any) or Leasehold Mortgage (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 8.39, 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 8.39, 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 Facility, or wrongful removal or disposal of all or any
portion of the Facility by any Person in connection with this Agreement, the
Note, the Mortgage 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 Insurance Proceeds or
Condemnation Proceeds due to Lender pursuant to the Mortgage or Leasehold
Mortgage; (i) impair the right of Lender to enforce (against the parties liable
therefore other than the Borrower) the provisions of Sections 4.1(b)(U),
-------- ---------
4.1(d)(U) or 5.1(b)(D)-(I) of this Agreement, Section 2.8 of the Mortgage or the
- -------- ------------- ------- ---
Leasehold Mortgage or the Environmental Guaranty even after repayment in full by
Borrower of the Indebtedness; (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
<PAGE>
128
Agreement which evidences an Other Loan which is cross-collateralized and cross-
defaulted with the Loan pursuant to Section 8.39, 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 or Rents
collected more then one month in advance; or (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 Mortgaged 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 8.39, 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.
Section 8.15. 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.
Section 8.16. Offsets, Counterclaims and Defenses. Any assignee of
-----------------------------------
Lender's interest in and to this Agreement, the Note, the Mortgages and the
other Loan Documents shall take the same free and clear of all offsets,
counterclaims or defenses which are unrelated to the Loan, this Agreement, the
Note, the Mortgages and the other Loan Documents which Borrower or Operator may
otherwise have against any assignor, and no such unrelated counterclaim or
defense shall be interposed or asserted by Borrower or Operator in any action or
proceeding brought by any such assignee upon this Agreement, the Note, the
Mortgages and other Loan 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 and Operator.
Section 8.17. No Joint Venture or Partnership. Borrower and Lender
-------------------------------
intend that the relationship created hereunder be solely that of borrower and
lender. Operator and Lender intend that the relationship created hereunder be
solely that of guarantor and lender. Nothing herein is intended to create a
joint venture, partnership, tenancy-in-common, or joint tenancy relationship
between Borrower and Lender or between Operator and Lender nor to grant Lender
any interest in the Mortgaged Property other than that of mortgagee or lender.
Section 8.18. Waiver of Marshalling of Assets Defense. To the
---------------------------------------
fullest extent that Borrower and Operator may legally do so, each of Borrower
and Operator waives all rights to a marshalling of the assets of Borrower or
Operator, and others with interests in Borrower or Operator, and of the
Mortgaged 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,
<PAGE>
129
reduce or affect the right of Lender under the Loan Documents to a sale of the
Facility for the collection of the Indebtedness without any prior or different
resort for collection, or the right of Lender to the payment of the Indebtedness
in preference to every other claimant whatsoever.
Section 8.19. Waiver of Counterclaim. Borrower and Operator each
----------------------
hereby waives the right to assert a counterclaim, other than compulsory
counterclaim, in any action or proceeding brought against Borrower or Operator,
as applicable by Lender or Lender's agents.
Section 8.20. Conflict; Construction of Documents. In the event of
-----------------------------------
any conflict between the provisions of this Agreement and the provisions of the
Note, the Mortgage or any of the other Loan Documents, the provisions of this
Agreement shall prevail. 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 which drafted same.
Section 8.21. Brokers and Financial Advisors. Borrower, Operator and
------------------------------
Lender hereby represent that they have dealt with no financial advisors,
brokers, underwriters, placement agents, agents or finders in connection with
the transactions contemplated by this Agreement except Advisor. Borrower and
Operator each hereby agrees to indemnify and hold Lender 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 (other than Advisor), that
such Person acted on behalf of Borrower or Operator in connection with the
transactions contemplated herein. The provisions of this Section shall survive
-------
the expiration and termination of this Agreement and the repayment of the
Indebtedness.
Section 8.22. 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.
Section 8.23. Estoppel Certificates. Borrower, Operator and Lender
---------------------
each hereby agree at any time and from time to time upon not less than fifteen
(15) Business Days prior written notice by Borrower, Operator 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 knowledge of such certifying party, any Default
or Event of Default has occurred, and, if so, specifying each such Default or
Event of Default; provided, however, that it shall be a condition precedent to
-------- ------- ----
Lender's obligation to deliver the statement pursuant to this Section, that
-------
Lender shall have received, together with Borrower's or Operator's request for
such statement, an Officer's Certificate stating that no Default or Event of
Default exists as of the date of such
<PAGE>
130
certificate (or specifying such Default or Event of Default).
Section 8.24. Payment of Expenses. Borrower shall, whether or not
-------------------
the Transactions are consummated, pay all Transaction Costs, which shall
include, without limitation, reasonable out-of-pocket fees, costs, expenses, and
disbursements of Lender and its attorneys, local counsel, accountants and other
contractors in connection with (i) the negotiation, preparation, execution and
delivery of the Loan Documents and the documents and instruments referred to
therein, (ii) the creation, perfection or protection of Lender's Liens in the
Collateral (including, without limitation, fees and expenses for title and lien
searches and filing and recording fees, intangibles taxes, personal property
taxes, mortgage recording taxes, due diligence expenses, travel expenses,
accounting firm fees, costs of the Appraisals, Environmental Reports (and an
environmental consultant), Surveys and the Engineering Reports), (iii) the
negotiation, preparation, execution and delivery of any amendment, waiver or
consent relating to any of the Loan Documents, and (iv) the preservation of
rights under and enforcement of the Loan Documents and the documents and
instruments referred to therein, including any restructuring or rescheduling of
the Indebtedness and (v) the making of each and every Advance hereunder and draw
under from the Construction Sub-Account.
Section 8.25. Bankruptcy Waiver. Borrower and Operator each hereby
-----------------
agrees 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 Operator
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 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 any other party in interest but
without the need of further proof or hearing. Borrower, Operator and any of
their respective Affiliates shall not contest the enforceability of this
Section.
- -------
Section 8.26. 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
<PAGE>
131
Loan Documents and supersedes all prior agreements, understandings and
negotiations between the parties.
Section 8.27. Dissemination of Information. If Lender determines at
----------------------------
any time to sell, transfer or assign the Note, this Loan Agreement and any other
Loan Document and any or all servicing rights with respect thereto, or to grant
participations therein or issue mortgage pass-through certificates or other
securities evidencing a beneficial interest in a rated or unrated public
offering or private placement, Lender may forward to each purchaser, transferee,
assignee, servicer, participant or investor in such securities (collectively,
the "Investor") or any Rating Agency rating such securities and each prospective
--------
Investor, all documents and information which Lender now has or may hereafter
acquire relating to the Loan, Borrower, Operator, any guarantor, any indemnitor
and the Facility, which shall have been furnished by Borrower, Operator, any
guarantor, any indemnitor, or any party to any Loan Document, or otherwise
furnished in connection with the Loan, as Lender in its sole discretion
determines necessary or desirable.
Section 8.28. Limitation of Interest. It is the intention of
----------------------
Borrower, Operator and Lender to conform strictly to applicable usury laws.
Accordingly, if the transactions contemplated hereby would be usurious under
applicable law, then, in that event, notwithstanding anything to the contrary in
any Loan Document, it is agreed as follows: (i) the aggregate of all
consideration which constitutes interest under applicable law that is taken,
reserved, contracted for, charged or received under any Loan Document or
otherwise in connection with the Loan shall under no circumstances exceed the
maximum amount of interest allowed by applicable law, and any excess shall be
credited to principal by Lender (or if the Loan shall have been paid in full,
refunded to Borrower); and (ii) in the event that maturity of the Loan is
accelerated by reason of an election by Lender resulting from any default
hereunder or otherwise, or in the event of any required or permitted prepayment,
then such consideration that constitutes interest may never include more than
the maximum amount of interest allowed by applicable law, and any interest in
excess of the maximum amount of interest allowed by applicable law, if any,
provided for in the Loan Documents or otherwise shall be cancelled automatically
as of the date of such acceleration or prepayment and, if theretofore prepaid,
shall be credited to principal (or if the principal portion of the Loan and any
other amounts not constituting interest shall have been paid in full, refunded
to Borrower).
In determining whether or not the interest paid or payable under any
specific contingency exceeds the maximum amount allowed by applicable law,
Lender shall, to the maximum extent permitted under applicable law (a) exclude
voluntary prepayments and the effects thereof, and (b) amortize, prorate,
allocate and spread, in equal parts, the total amount of interest throughout the
entire contemplated term of the Loan so that the interest rate is uniform
throughout the entire term of the Loan; provided, that if the Loan is paid and
performed in full
<PAGE>
132
prior to the end of the full contemplated term hereof, and if the interest
received for the actual period of existence thereof exceeds the maximum amount
allowed by applicable law, Lender shall refund to Borrower the amount of such
excess, and in such event, Lender shall not be subject to any penalties provided
by any laws for contracting for, charging or receiving interest in excess of the
maximum amount allowed by applicable law.
Section 8.29. Indemnification. Operator shall indemnify and hold
---------------
each of the Borrower, the Trust Company, Lender and each of its affiliates
(including its officers, directors, partners, employees and agents and each
other person, if any, controlling Lender or any of its affiliates within the
meaning of either Section 15 of the Securities Act of 1933, as amended, or
Section 20 of the Securities Exchange Act of 1934, as amended) (each, including
the Borrower, the Trust Company, and the Lender, an "Indemnified Party")
-----------------
harmless against any and all losses, claims, damages, costs, expenses (including
the reasonable fees and disbursements of outside counsel retained by any such
person) or liabilities in connection with, arising out of or as a result of the
transactions and matters referred to or contemplated by this Agreement (provided
that the indemnity provided in Section 2.14 shall apply to the matters to which
------------
it relates), except to the extent that it is finally judicially determined that
any such loss, claim, damage, cost, expense or liability resulted directly and
solely from the gross negligence, fraud or willful misconduct of such
Indemnified Party. In the event that any Indemnified Party becomes involved in
any action, proceeding or investigation in connection with any transaction or
matter referred to or contemplated in this Agreement, Operator shall
periodically reimburse any Indemnified Party upon demand therefor in an amount
equal to its reasonable legal and other expenses (including the costs of any
investigation and preparation) incurred in connection therewith to the extent
such legal or other expenses are the subject of indemnification hereunder.
Section 8.30. Borrower and Operator Acknowledgments. Each of
-------------------------------------
Operator and Borrower hereby acknowledges to and agrees with Lender that (i) the
scope of Lender's 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
business of Borrower or Operator or their respective Affiliates and (ii)
Borrower and Operator each has 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.
Section 8.31. Publicity. Lender shall have the right to issue press
---------
releases, advertisements and 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.
Section 8.32. Recalculation of Loan Amount.
----------------------------
<PAGE>
133
(a) On the Stabilization Date, Lender shall calculate a new aggregate
loan amount for the Aggregate Principal Indebtedness then outstanding (the
"Recalculated Loan Amount") utilizing an underwriting cash flow methodology
------------------------
(calculated by Lender in Lender's reasonable discretion) based upon the
Underwriting NOI Criteria and a debt service constant equal to the greater of
the actual constant and the Stabilization Debt Service Constant and a minimum
Debt Service Coverage Ratio (calculated based upon the debt service payable with
respect to the Aggregate Principal Indebtedness) equal to the Resizing DSCR;
provided, however, if a Default or an Event of Default has occurred and be
- -------- -------
continuing, Lender shall have the right but not the obligation to calculate a
new loan amount; and provided, further, Lender's obligation to calculate a new
-------- -------
loan amount is subject to completion of Lender's due diligence with respect to
the Facility including receipt of due diligence items identified in Section 3.2
------- ---
hereof as of the Stabilization Date. The parties hereto intend that the
Mezzanine Loan shall be rolled up into the Loan on the Stabilization Date
Payment Date, the Loan Documents amended to reflect such rollup and the recorded
Mezzanine Loan Documents released such that there is one loan to the Borrower in
the amount of the Aggregate Principal Indebtedness, as reduced or increased
pursuant to the terms of this Section.
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(b) If the Recalculated Loan Amount is greater than the Stabilization
Date Loan Amount, then, provided that (i) no Event of Default has occurred and
is continuing; (ii) Lender determines in its reasonable discretion that Borrower
has as of the Stabilization Date (or the Stabilization Date Payment Date, as
applicable), satisfied all of the other conditions precedent to the payment of
the Earn-Out Advance set forth in Section 3.2 and all other terms and conditions
------- ---
of this Agreement; and (iii) Borrower, or Operator on behalf of Borrower, has
elected, in its sole and absolute discretion, to borrow the Earn-Out Advance as
evidenced by delivery of the Request for Advance specified in Section 3.4, then
-----------
Lender shall make the Earn-Out Advance in an amount equal to the excess of (A)
the Recalculated Loan Amount over (B) the Stabilization Date Loan Amount.
(c) If the Recalculated Loan Amount is less than the Stabilization
Date Loan Amount (the excess of the Stabilization Date Loan Amount over the
Recalculated Loan Amount, the "Difference"), then Operator shall, within five
----------
(5) Business Days after the Stabilization Date, notify Lender of the amount
which Borrower shall prepay on the Stabilization Date Payment Date, which
amount (the "Actual Prepayment Amount") shall not exceed the Difference. If
------------------------
Operator fails to provide such notice to Lender, the Actual Prepayment Amount
shall be deemed to equal zero. If the Borrower prepays the Actual Prepayment
Amount on the Stabilization Date Payment Date, Borrower shall also pay to Lender
on the Stabilization Date Payment Date any applicable hedging or interest rate
management breakage costs incurred by Lender (but not a Yield Maintenance
Premium). Any failure by Borrower to pay Lender the Actual Prepayment Amount
and any applicable hedging or interest rate management breakage costs incurred
by Lender on the Stabilization Date Payment Date shall constitute an immediate
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134
Event of Default.
(i) If the Actual Prepayment Amount is zero or is less than the
Difference, and the Unpaid Excess Loan Amount (as hereinafter defined) does
not exceed the Amortizable Amount (as hereinafter defined), then Lender
shall convert into Class B Equity Interests a portion of the principal
amount of the Loan in an amount (the "Class B Amount") equal to the Unpaid
--------------
Excess Loan Amount. As used herein, the "Amortizable Amount" shall mean
------------------
that amount which Lender determines can be fully amortized within a five
(5) year period, as calculated by Lender in Lender's sole discretion, and
using among other things, a minimum debt service coverage ratio as
determined by Lender (which ratio shall be computed by (A) determining the
product of seventy-five percent (75%) and Lender's projection of Excess
Cash Flow for a period of time determined by Lender, and (B) dividing that
product by Lender's projection of the payments that would be due for such
period of time in respect of the Class B Amount). As used herein, the
"Unpaid Excess Loan Amount" shall mean the excess of the Difference over
-------------------------
the Actual Prepayment Amount. Lender shall receive Class B Equity
Interests in the amount of the Class B Amount pursuant to documentation
satisfactory to Lender in Lender's sole discretion, some of the material
terms of which are described on Exhibit D, and upon such conversion
Lender shall be the "Preferred Shareholder" in the Operator and the
"Preferred Beneficial Owner" in the Borrower. In addition to all other
amounts due Lender, Borrower shall pay to Lender, in addition to any
amounts set forth in the first paragraph of Section 8.32(c) above, on the
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Stabilization Date Payment Date, (x) an amount equal to any applicable
hedging or interest rate management breakage costs incurred by Lender, and
(y) a fee equal to two percent (2%) of the Class B Amount. Any failure by
Borrower to pay to Lender any applicable hedging or interest rate
management breakage costs incurred by Lender and fee in connection with any
prepayment or conversion pursuant to this Section on the Stabilization Date
-------
Payment Date shall constitute an immediate Event of Default.
(ii) If the Unpaid Excess Loan Amount exceeds the Amortizable
Amount, Lender may, at Lender's option exercisable by Lender in Lender's
discretion and exercisable at any time, convert a portion of the Loan as
set forth in Section 8.32(c)(i) above, and in addition convert a portion of
------- ----------
the principal amount of the Advance (in an amount (the "Class C Amount"),
--------------
not to exceed the excess of the Unpaid Excess Loan Amount over the
Amortizable Amount, into Class C Equity Interests pursuant to documentation
satisfactory to Lender in Lender's sole discretion, the material terms of
which are described on Exhibit E. If Lender does not elect to exercise the
---------
option described in this subparagraph, then Borrower shall be required to
prepay the Loan on the Stabilization Date Payment Date in an amount equal
to the Difference less the Class B Amount determined pursuant to Section
-------
8.32(c)(i), if any. If Lender exercises the option
----------
<PAGE>
135
set forth herein, in addition to the Class B Equity Interests which Lender
receives pursuant to clause (i) above, Lender shall receive Class C Equity
------ ---
Interests in an amount equal to the Class C Amount, and Warrants in
Operator and the Borrower in an amount calculated in accordance with the
formula described in Exhibit E. If Lender exercises the option described
---------
in this Subparagraph, Borrower shall pay to Lender, in addition to any
------------
amounts set forth in Section 8.32(c)(i), on the Stabilization Date Payment
------- ----------
Date, (x) an amount equal to any applicable hedging or interest rate
two percent (2%) of management breakage costs incurred by Lender, and (y)
a fee equal to the Class C Amount. Any failure by Borrower to pay to
Lender the Difference less the Class B Amount determined pursuant to
Section 8.32(c)(i), as required hereunder and any applicable hedging or
------- ----------
interest rate management breakage costs incurred by Lender and fee in
connection with any prepayment or conversion pursuant to this Section on
-------
the Stabilization Date Payment Date shall constitute an immediate Event of
Default.
(d) All prepayments made pursuant to this Section shall be
-------
applied in accordance with the provisions of Section 2.7.
------- ---
(e) Notwithstanding anything in this Section to the contrary, if
-------
an Event of Default has occurred and is continuing, and without in any way
limiting any other right Lender may have under any Loan Document, Lender shall,
in Lender's discretion, have the right in connection with the recalculation of
the Loan Amount pursuant to this Section to require the Borrower to (i) prepay
-------
the Loan in full, or (ii) convert a portion of the Loan into Class B Equity
Interests (to the extent the Borrower does not pay the Difference) or (iii)
convert a portion of the Loan into Class C Equity Interests and Warrants or (iv)
do any combination of (i), (ii) or (iii) above, in Lender's sole discretion.
--- ---- -----
(f) Any failure by Borrower or Operator to provide all annual
financial information that Borrower or Operator is required to provide pursuant
to Sections 5.1(a)(Q) and 5.1(b)(Q) when due shall constitute an immediate Event
-------- --------- ---------
of Default. Any failure by Borrower or Operator to provide any other
information requested by Lender in connection with the recalculation of the Loan
amount pursuant to this Section within five (5) Business Days after request
-------
therefor (provided that Borrower could reasonably provide such information
within such period) shall constitute an immediate Event of Default.
(g) If Lender exercises any option or right to acquire equity in
Borrower pursuant to this Section, Borrower agrees (i) that the form and
-------
substance of any such equity arrangements shall be documented, at Borrower's
expense, with documents, including, without limitation, the terms described in
Exhibit D, Exhibit E and Exhibit F, in form and substance satisfactory to Lender
- --------- --------- ---------
in Lender's reasonable discretion, (ii) all such documents shall be executed
within ten (10) days of receipt thereof from Lender and in no event later than
the
<PAGE>
136
Stabilization Date Payment Date, (iii) Lender shall be admitted as the
Preferred Shareholder in Operator and the Preferred Beneficial Owner in Borrower
on or before the Stabilization Date Payment Date, and (iv) any breach of (i),
---
(ii) or (iii) shall constitute an immediate Event of Default. In addition, in
- ---- -----
connection with any such equity arrangements Borrower shall and Borrower shall
cause its affiliates to, provide to Lender any additional collateral to Lender
to secure such arrangements, including without limitation, equity pledges and
guaranties, as Lender may require in Lender's sole discretion.
(h) Notwithstanding anything contained herein to the contrary (i) on
the Stabilization Date Payment Date, Operator shall fund such reserves and
additional reserves as are established by Lender in Lender's reasonable
discretion; and (ii) Operator and Borrower shall have satisfied all of the
requirements set forth in Section 3.4, including, without limitation, the
------- ---
payment of all Transaction Costs in connection with this Section 8.32 even if no
------------
Earn-Out Advance is actually made.
Section 8.33. Transfer of Fee Simple Interest in the Facility to
--------------------------------------------------
Operator on the Optional Prepayment Date. Notwithstanding anything in the
- ----------------------------------------
Operator Lease or the Loan Documents to the contrary, on the Optional Prepayment
Date, if the Loan is not prepaid in full pursuant to Section 2.7 of this
------- ---
Agreement as a result of the Operator's failure to meet its obligations pursuant
to the Lease or otherwise, (i) Borrower shall transfer its fee simple title in
the Facility to Operator in consideration for Operator's assumption of
Borrower's obligations under the Loan Documents executed by Borrower, (ii)
Operator shall accept fee simple title in the Facility and shall assume
Borrower's obligations under the Loan Documents executed by the Borrower
pursuant to such documents as Lender shall reasonably request, (iii) Operator
shall deliver to Lender an updated Title Insurance Policy showing fee simple
title to the Facility in Operator and insuring that Lender has a valid first
lien on the Operator's fee simple interest in the Facility together with such
modification, amendments or supplements to the Loan Documents and legal opinions
as Lender may reasonably request and (iv) Operator shall pay all of Lender's
fees, costs and expenses incurred in connection with such transfer (including,
reasonable attorneys' fees and costs) and all recording costs, fees and taxes
associated with the transfer. Operator shall provide Lender with written notice
sixty (60) days prior to the Optional Prepayment Date indicating whether
Operator anticipates (a) that the Loan be prepaid in full on the Optional
Prepayment Date together with information regarding the sources of the funds for
such prepayment or (b)(i) that Operator will acquire the Borrower's fee simple
interest in the Facility together with the proposed documents effectuating the
transfer of the Facility and the assumption of the Loan and a copy of a
commitment for the Title Policy referenced above in clause (iii) or (ii) that
SELCO will be transferring its beneficial interests in Borrower to Operator
pursuant to the penultimate sentence of this Section 8.33 together with copies
------- ----
of the proposed documents effectuating such transfer and the proposed amendment
to the Operator Lease referenced in clause (iv) of the penultimate sentence of
this Section 8.33. Upon consummation
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<PAGE>
137
of the transfer of fee simple title in the Facility to the Operator and the
assignment by the Borrower and assumption by the Operator of the Borrower's
obligations under the Loan Documents executed by the Borrower, Operator shall be
considered the "Borrower" under the Loan Documents as well as the "Operator"
under the Loan Documents and shall have all of the obligations of "Borrower"
under the Loan Documents as well as the obligations of "Operator" under the Loan
Documents. As an alternative to transferring fee simple title to the Facility to
Operator if the Loan is not prepaid in full pursuant to Section 2.7 of this
------- ---
Agreement, on the Optional Prepayment Date, (i) Operator shall acquire all of
SELCO's beneficial ownership interests in the Borrower, (ii) the Operator shall
deliver such modifications, amendments or supplements to the Loan Documents and
legal opinions as Lender may reasonably request, (iii) Operator shall deliver
the various items sets forth in clause (v) of the definition of "Permitted
------ ---
Transfers" and (iv) Operator shall execute an amendment to the Operator Lease
extending the Operator Lease to the Maturity Date and such other amendments as
are consistent with the fact that the SELCO Debt will be eliminated all as
Lender may reasonably request and as will not result in a downgrade, withdrawal
or qualification of the ratings assigned to any of the securities issued in a
Securitization as confirmed in writing by the Rating Agencies. Failure of
Borrower or Operator to comply with the terms of this Section shall constitute
-------
an Event of Default.
Section 8.34 Amendments to Operator Lease. Borrower hereby agrees
----------------------------
that it will not amend, modify or terminate the Operator Lease without the prior
written consent of the Lender not to be unreasonably withheld. Lender hereby
agrees that it will not amend, modify or waive without the prior written consent
of Borrower, not to be unreasonably withheld (a) any provision of the Operator
Lease regarding the determination of or obligation to pay SELCO Basic Rent (as
defined in the Operator Lease) or Lessor Basic Rent (as defined in the Operator
Lease) to the extent any waiver, modification or amendment relates to SELCO
Basic Rent or Lessor Basic Rent which is due and payable to Borrower, (b) any
provision of the Operator Lease regarding indemnities in favor of Borrower or
any of its Affiliates, agents, officers, directors or employees to the extent
any waiver, modification or amendment relates to the period prior to acquisition
of title to the Mortgaged Property by Lender or its designee by foreclosure or
deed-in-lieu of foreclosure, (c) until after acquisition of title to the
Mortgaged Property by Lender or its designee by foreclosure or deed-in-lieu of
foreclosure, Sections 19.1(ii), 22.1, 24.1, 24.2 and 25.1 of the Operator Lease;
and (d) Section 20.2(k) of the Operator Lease.
Section 8.35 Subordination and Standstill.
----------------------------
(a) Borrower hereby agrees that all of the indebtedness, liabilities
and obligations of Operator evidenced by the Operator Lease and those Pledge
Agreements (as defined in the Operator Lease) executed by Operator
(collectively, the "Subordinate Obligations") and the lien of any judgment
-----------------------
entered on behalf of Borrower in connection with the Subordinate Obligations,
whether in breach of the terms hereof or otherwise, is and shall be
<PAGE>
138
subject, subordinate and rendered junior to the prior indefeasible payment in
full of the Indebtedness. Except as specifically provided in the following
sentence, no payment shall be made by Operator for or on account of the
Subordinate Obligations, and the Borrower shall not take or receive from
Operator in cash or other property or by setoff or in any other manner,
including , without limitation, from or by way of collateral, payment of all or
any of the Subordinate Obligations, unless and until the Indebtedness shall have
been indefeasibly paid in full. Notwithstanding the foregoing sentence, Borrower
may receive payments with respect to the related Subordinate Obligations (i)(x)
prior to a Cash Management Event, from Operator (but only after payment of the
amounts set forth in the first sentence of Section 2.12(b), and (y) after a Cash
------- -------
Management Event, from the SELCO Payment Sub-Account and from Excess Cash Flow
and (ii) from realization on the collateral pledged to Borrower pursuant to
those Pledge Agreements (as defined in the Operator Lease) executed by Operator.
If any payments are made to the Borrower on account of the Subordinate
Obligations contrary to the terms of this Agreement or in excess of what the
Borrower is entitled to receive under this Agreement, Borrower shall hold the
same in trust as trustee for Lender, and shall promptly deliver to Lender in the
form received, endorsed or assigned, as may be appropriate for application on
account of, or as security for the Indebtedness.
(b) Until the Indebtedness is paid in full, Borrower shall not
institute any Enforcement Action (including, but not limited to, filing an
Insolvency Proceeding against Operator or acquiescing to the filing of an
Insolvency Proceeding by the Operator) against the Operator. Without limiting
the foregoing, in the event of an Insolvency Action with respect to the
Operator, (i) the Borrower hereby agrees that it shall not object to or oppose
any efforts by Lender to obtain relief in the Operator's bankruptcy from the
automatic stay under Section 362 of the United States Bankruptcy Code or to seek
to cause the Operator's bankruptcy estate to abandon the Facility or any part
thereof and (ii) so long as the beneficial interests of Borrower are owned by
SELCO, it shall not object to or oppose any efforts by Borrower to obtain relief
in the Operator's bankruptcy from the automatic stay under Section 362 of the
United States Bankruptcy Code or to seek to cause the Operator's estate to
abandon the Facilities or any part thereof. Notwithstanding the foregoing, in
the event Operator fails to pay to Borrower any SELCO Required Quarterly
Payment, Borrower shall be entitled to exercise its rights and remedies with
respect to the collateral pledged to Borrower pursuant to those Pledge
Agreements (as defined in the Operator Lease) executed by Operator.
Notwithstanding anything in this Agreement to the contrary, Borrower hereby
agrees it shall not sue for or make any claim with respect to the Collateral and
Lender hereby agrees that it shall not sue for or make any claim with respect to
the Excepted Property. Notwithstanding the terms of this Section 8.35, Borrower
------- ----
shall be entitled to bring an Enforcement Action (but not an Insolvency
Proceeding) against Operator solely for the purpose of realizing and foreclosing
on the collateral pledged to Borrower pursuant to the Pledge Agreements (as
defined in the Operator Lease) executed by the Operator, provided, however, that
as a condition to bringing such Enforcement Action (but not an Insolvency
<PAGE>
139
Proceeding), SELCO shall first use its reasonable good faith efforts to exercise
its rights with respect to realizing on the Collateral by non-judicial means.
For the purposes of this Section, the following terms have the indicated
-------
meanings: (i) "Enforcement Action" means the commencement or the exercise of any
------------------
remedies against the Operator, including, without limitation, the commencement
of any litigation and the commencement of any Insolvency Proceeding; and (ii)
"Insolvency Proceeding" means any proceeding under Title 11 of the United States
---------------------
Code (11 U.S.C. Sec. 101 et seq.) or any insolvency, liquidation, reorganization
-- ---
or other similar proceeding concerning the Operator, any dissolution of the
Operator any proceeding (judicial or otherwise) concerning the application of
the assets of the Operator for the benefit of its creditors, the initiation of
any proceeding seeking the appointment of a trustee, receiver or other similar
custodian for all of any substantial part of the assets of the Operator or any
other action concerning the adjustment of the debts of the Operator or the
cessation of business by the Operator.
(c) Borrower shall deliver to Lender a copy of any and all notices of
default (or respecting acts or occurrences which could, with the giving of
notice, the passage of time, or both, constitute a default) that are delivered
by Borrower to Lender as required by law or otherwise given, whether in breach
of terms hereof or otherwise, to Operator by Borrower.
Section 8.36 Limitation of Liability. It is expressly understood and
-----------------------
agreed by the parties hereto that (a) this Loan Agreement is executed and
delivered by Wilmington Trust Company, not individually or personally but solely
as trustee of the Borrower, in the exercise of the powers and authority
conferred and vested in it under the Trust Agreement, (b) each of the
representations, undertakings and agreements herein made on the part of the
Borrower is made and intended not as personal representations, undertakings and
agreements by Wilmington Trust Company but is made and intended for the purpose
of binding only the Borrower and (c) under no circumstances shall Wilmington
Trust Company be personally liable for the payment of any indebtedness or
expenses of the Borrower or be liable for the breach or failure of any
obligation, representation, warranty or covenant made or undertaken by the
Borrower under this Loan Agreement or the other Loan Documents provided, that
--------
Wilmington Trust Company accepts the benefits running to it hereunder and agrees
that it shall be liable in its individual capacity for its own gross negligence
or willful misconduct to the extent expressly provided in the Trust Agreement
(as defined in the Operator Lease).
Section 8.37 Intentionally deleted.
Section 8.38 Buy-Up. On the Stabilization Date Payment Date,
------
regardless of the amount of the Recalculated Loan Amount, Lender shall have the
option in Lender's reasonable discretion to change the amortization schedule and
to decrease the Loan Amount (after giving effect to the resizing in Section
-------
8.32) in consideration for which Lender will agree to pay
- ----
<PAGE>
140
Borrower a buy-up payment. All such changes shall be determined by Lender in
Lender's discretion and Borrower and Operator each hereby agrees to be bound by
any and all of such changes, provided that such changes shall generally result
in (i) an interest rate approximating the Initial Interest Rate as of the
Stabilization Date Payment Date, (ii) an amortization schedule equal to the
number months from the Stabilization Date Payment Date to the Maturity Date
equal to the Number of Interest Accrual Periods in Amortization Schedule, (iii)
a Loan Amount (after giving effect to any changes in this Section 8.38) that
------------
would result in an outstanding Principal Indebtedness at the Optional Prepayment
Date (assuming all payments are timely made) equal to the outstanding Principal
Indebtedness at the Optional Prepayment Date (assuming all payments are timely
made) as if none of the changes required by this Section 8.38 had been made, and
------------
(iv) a buy up payment payable to Borrower equal to the excess of (a) the Loan
Amount on the Stabilization Date Payment Date (prior to giving effect to any
changes required by this Section 8.38) over (b) the Loan Amount on the
------------
Stabilization Date Payment Date (after giving effect to any changes required by
this Section 8.38). Borrower hereby agrees (i) to pay all Transaction Costs in
------------
connection with this Section 8.38 and (ii) to make any and all amendments,
------------
modifications and other changes to the Loan Documents as required by Lender in
Lender's reasonable discretion in connection with this Section 8.38. Subject to
------------
the following sentence, Lender agrees that Lender will treat and report the any
buy-up payment as additional issue price for Federal income tax purposes
pursuant to Treasury Regulation (S)1.1273-2(g)(3). Lender reserves the right to
change its treatment and reporting of any buy-up payment in the event of any
change, amendment or modification to any applicable law, rule, revenue ruling or
regulation or in the event Lender receives notice from the Internal Revenue
Service requiring a change in Lender's treatment on reporting of the buy-up
payment. Lender will notify Borrower and Operator in the event it is changing
its reporting or treatment of any buy-up payment.
Section 8.39 Cross-Default and Cross-Collateralization. (a) Borrower
-----------------------------------------
hereby agrees that (i) with respect to any Other Loan which contains terms
similar to those set forth in Section 8.32 with respect to stabilization and
------- ----
resizing of such Other Loan (a "Stabilization Loan"), the relevant Other
------------------
Borrower's obligations under such Other Loan and the Other Loan Documents shall
be cross-defaulted with this Loan until the earlier of (y) the date on which
such Stabilization Loan or this Loan has been resized pursuant to such terms and
transferred in a Securitization (as defined herein and in the relevant Other
Loan Agreements) for loans which have stabilized of which the Loan or applicable
Other Loans are not a part and (z) Lender's election to release the cross-
default and (ii) the Loan shall be cross-defaulted with any Other Loan which is
included in the same Securitization (as defined herein and in the relevant Other
Loan Agreement) as the Loan. During the term of any cross-default and with
respect to those Other Loans which are the subject of such cross-default,
without limitation to any other right or remedy provided to Lender in this
Agreement or any of the other Loan Documents, Borrower covenants and agrees that
upon the occurrence of an Event of Default (1) Lender shall have the right to
pursue all of its rights and remedies in one proceeding, or separately and
independently
<PAGE>
141
in separate proceedings which it, as Lender, in its sole and absolute
discretion, shall determine from time to time, (2) Lender is not required to
either marshall assets, sell Collateral (as defined in the Loan Documents and
the relevant Other Loan Documents) in any inverse order of alienation, or be
subjected to any "one action" or "election of remedies" law or rule, (3) the
exercise by Lender of any remedies against any Collateral (as defined in the
Loan Documents and the relevant Other Loan Documents) will not impede Lender
from subsequently or simultaneously exercising remedies against any other
Collateral (as defined in the Loan Documents and the relevant Other Loan
Documents) and (4) all Liens (as defined herein and in the relevant Other Loan
Agreements) and other rights, remedies and privileges provided to Lender in this
Agreement and the other Loan Documents and the relevant Other Loan Documents or
otherwise shall remain in full force and effect until Lender has exhausted all
of its remedies against the Collateral (as defined in the Loan Documents and the
relevant Other Loan Documents) and all Collateral (as defined in the Loan
Documents and the relevant Other Loan Documents) has been foreclosed, sold
and/or otherwise realized upon. Borrower hereby consents and agrees that
Operator's interest in the Facility shall be security for the performance of the
obligations of relevant Other Operators' obligations under the Other Loan and
the Other Loan Documents and the relevant Other Operator's interest in the
relevant Facility (as defined in the relevant Other Loan Agreement) shall be
security for the Operator's obligations hereunder and under the Loan Documents.
During the term of any cross-default and with respect to those Other Loans which
are the subject of such cross-default, without limitation to any other right or
remedy provided to Lender in this Agreement or any of the other Loan Documents
Borrower acknowledges and agrees (y) the obligations of the relevant Other
Borrower shall be cross-defaulted with the Borrower's obligation under the Loan
and (z) the Operator shall be jointly and severally liable for the obligations
of the relevant Other Operators under the applicable relevant Other Loan
Documents. Borrower hereby waives its right, title and interest in and to Excess
Proceeds and hereby agrees that, subject to this Loan Agreement, all such Excess
Proceeds are the property of Operator (provided, however, Operator has assigned
all its right, title and interest in and to any Excess Proceeds to Lender). If
Borrower receives any Excess Proceeds, Borrower hereby agrees to immediately
remit such Excess Proceeds to Lender.
(b) Operator hereby agrees that (i) with respect to any Other Loan
which is a Stabilization Loan, the relevant Other Operator's obligations under
such Other Loan and under the Other Loan Documents shall be cross-collateralized
and cross-defaulted with Operator's obligations hereunder and under the other
Loan Documents until the earlier of (y) the date on which such Stabilization
Loan or this Loan has been resized pursuant to such terms and transferred in a
Securitization (as defined herein and in the relevant Other Loan Agreements) for
loans which have stabilized of which the Loan or applicable Other Loans are not
a part and (z) Lender's election to release the cross-collateralization and
cross-default and (b) the Operator's obligations hereunder and under the other
Loan Documents shall be cross-collateralized and cross-defaulted with any Other
Operator's obligations under any Other Loan which is included in
<PAGE>
142
the same Securitization (as defined herein and in the relevant Other Loan
Agreement) as the Loan. During the term of any cross-collateralization and
cross-default and with respect to those Other Loans which are the subject of
such cross-collateralization and cross-default, without limitation to any other
right or remedy provided to Lender in this Agreement or any of the other Loan
Documents, Operator covenants and agrees that upon the occurrence of an Event of
Default (1) 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 sole and absolute discretion, shall determine from time to
time, (2) Lender is not required to either marshall assets, sell Collateral (as
defined in the Loan Documents and the relevant Other Loan Documents) in any
inverse order of alienation, or be subjected to any "one action" or "election of
remedies" law or rule, (3) the exercise by Lender of any remedies against any
Collateral (as defined in the Loan Documents and the relevant Other Loan
Documents) will not impede Lender from subsequently or simultaneously exercising
remedies against any other Collateral (as defined in the Loan Documents and the
relevant Other Loan Documents), (4) all Liens (as defined herein and in the
relevant Other Loan Agreements) and other rights, remedies and privileges
provided to Lender in this Agreement and the other Loan Documents and the
relevant Other Loan Documents or otherwise shall remain in full force and effect
until Lender has exhausted all of its remedies against the Collateral (as
defined in the Loan Documents and the relevant Other Loan Documents) and all
Collateral (as defined in the Loan Documents and the relevant Other Loan
Documents) has been foreclosed, sold and/or otherwise realized upon and (5)
Operator's interest in the Facility shall be security for the performance of the
obligations of each relevant Other Operator under the Other Loan Documents and
each Other Operator's interest in the relevant Facility (as defined in the
relevant Other Loan Agreement) shall be security for the performance of the
obligations of Operator hereunder and under the other Loan Documents. In
furtherance of the foregoing, Operator hereby grants to Lender a continuing
security interest in all of Operator's right, title and interest in any and all
proceeds to which Operator may be entitled after foreclosure on, or sale
pursuant to a power of sale of, the Facility (the "Excess Proceeds") and hereby
---------------
agrees that such Excess Proceeds may be applied by Lender to any Other
Operator's obligations under any Other Loan. During the term of any cross-
collateralization and cross-default and with respect to those Other Loans which
are the subject of such cross-collateralization and cross-default, without
limitation to any other right or remedy provided to Lender in this Agreement or
any of the other Loan Documents, Operator acknowledges and agrees that (w) it
shall be jointly and severally liable for the obligations of the relevant Other
Operators under the relevant Other Loan Documents, (y) the relevant Other
Operators shall be jointly and severally liable for the obligations of the
Operator under the Loan Documents and (z) the Borrower's obligations under the
Loan shall be cross-defaulted with the obligations of the relevant Other
Borrowers under the applicable relevant Other Loan Documents.
[Signatures on the following pages]
<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.
LENDER:
NOMURA ASSET CAPITAL CORPORATION, a Delaware
corporation
By:________________________________________
Name:
Title:
[signatures continued on following page]
<PAGE>
BORROWER:
THE HARBOR VILLAGE BUSINESS TRUST, a
Delaware Business trust
By: Wilmington Trust Company, a
Delaware banking corporation,
not in its individual capacity,
but solely as trustee under the Trust
By: ______________________
Name:
Title:
[signatures continue on the following page]
<PAGE>
OPERATOR:
BROOKDALE LIVING COMMUNITIES OF ILLINOIS-HV, INC.,
a Delaware corporation
By: ______________________
Name:
Title:
[signatures continued on following page]
<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 _____________,
1998 among ____________________ ("Borrower"), ________________
("Operator") and Nomura Asset Capital Corporation (together with
its successors and assigns "Lender")
Ladies and Gentlemen:
This certificate is delivered in accordance with Section 2.12(f) of
---------------
the Loan Agreement. All capitalized terms not defined herein shall have the
meanings ascribed to them in the Loan Agreement.
Operator hereby certifies that the Operating Expenses for the Interest
Accrual Period from ______________, ____ to ______________, ____ are
______________________ Dollars ($_________) and that such Operating Expenses are
equal to or less than the Operating Expenses for such period set forth on the
Operating Budget.
_______________________, a _____________
By: ____________________________________,
a _____________, its ______________
<PAGE>
EXHIBIT B
Additional Definitions
Base Adjusted NOI $1,068,000.00
Initial Capital Reserve Amount $ 0.00
Initial Construction Amount $3,350,000.00
Initial Secritization Expense Amount $ 33,750.00
Initial Trustee Expense Amount
B-1
<PAGE>
EXHIBIT C-1
Description of Construction Project
C-1
<PAGE>
EXHIBIT C-2
Description of Environmental Remediation
None
C-2
<PAGE>
EXHIBIT D
Within ten (10) days of receipt thereof from Lender (and in no event
later than the Stabilization Date Payment Date), the Secretary (or other
authorized Officer) of the Company will deliver to Lender amended and restated
articles of incorporation for the Company (the "Articles"), enforceable against
the Company and the other then existing shareholders in the Company (the "Other
Shareholders") in form and substance satisfactory to Lender in Lender's sole
discretion, provided, however, that (i) in the event the Company is a trust, the
Company will deliver to Lender an amended and restated trust agreement (an
"Agreement"), in form and substance satisfactory to Lender in Lender's sole
---------
discretion, and (ii) notwithstanding anything to the contrary set forth herein,
nothing contained in any such Articles or Agreement shall change the economic
provisions establishing (x) the Preferred Rate and Adjusted Preferred Rate set
forth in this Exhibit, (y) the methodology for calculating the Initial Capital
Amount set forth in this Exhibit or Section 8.32 of the Loan Agreement or (z)
the distribution priorities and amounts set forth in this Exhibit. The Articles
will contain, inter alia, the following terms (conformed as appropriate for a
----- ----
trust agreement):
1. Issuance of Preferred Stock. The consent and agreement of the Other
---------------------------
Shareholders to the issuance of preferred shares of stock in the Company (each,
a "Class B Equity Interests") to the Preferred Shareholder in an amount equal to
------------------------
the Class B Amount. Each Class B Equity Interests shall have a par value of
$5,000.00. The Company may issue fractional Class B Equity Interests.
2. Class A Shares. The total equity ownership interest of the Other
--------------
Shareholders in the Company shall consist of 1,000 shares of common stock in the
Company (each, a "Class A Share").
-------------
3. Purpose. Until the Loan has been paid in full and the Class B Equity
-------
Interests and the Other Class B Interests have been redeemed in full, the
Company shall at all times be a Single Purpose Entity.
4. Independent Director. Until the Loan has been paid in full and the
--------------------
Class B Equity Interests and the Other Class B Interests have been redeemed in
full, (a) no Independent Director may be removed unless a successor Independent
Director (which meets the requirements to be an Independent Director) has been
approved by the Preferred Shareholder, and (ii) in the event of a resignation,
death or incapacity of the Independent Director, or such position is otherwise
vacated, no action requiring the unanimous affirmative vote of the board of
directors of the Company shall be taken until a successor Independent Director
(which meets the requirements to be an Independent Director and has been
approved by the Preferred Shareholder) has been appointed.
D-1
<PAGE>
5. Dividends. On each Distribution Date, after the Company has made all
---------
payments required on such Distribution Date under the Loan Documents in
accordance with the terms thereof, and prior to making any distributions to the
Other Shareholders (except as provided hereunder), the Company shall distribute,
to the extent of funds available for distribution the following amounts in the
following priority:
(1) First, to the Preferred Shareholder, all Monthly Preferred Yield
Amounts (or portions thereof) with respect to prior Distribution Dates that have
not previously been paid (in the order of the Distribution Dates to which such
amounts relate, amounts with respect to the earliest Distribution Dates being
paid first) plus additional yield thereon at the Adjusted Preferred Rate
accruing from the Distribution Date on which the unpaid Monthly Preferred Yield
Amount would have been distributed had there been funds available to make such
distribution in the Preferred Cash Collateral Account;
(2) Second, to the Preferred Shareholder, the Monthly Preferred Yield
Amount with respect to the current Distribution Date;
(3) Third, to the Preferred Shareholder, all Monthly Redemption
Amounts (or portions thereof) with respect to prior Distribution Dates that have
not previously been paid (in the order of the Distribution Dates to which such
amounts relate, amounts with respect to the earliest Distribution Dates being
paid first);
(4) Fourth, to the Preferred Shareholder, the Monthly Redemption
Amount with respect to the current Distribution Date; and
(5) Fifth, provided all amounts due and payable to the Lender
pursuant to the Loan Documents and to the Preferred Shareholder hereunder have
been paid, and provided further that no Breach exists, in the sole discretion of
the Company, to the Other Shareholders pro rata in respect of the Class A Shares
--------
owned by each.
6. Liquidation Event Distributions. On the first Business Day after the
-------------------------------
Company receives any Liquidation Proceeds, the Company shall cause the
distribution of the Net Liquidation Proceeds After Debt Service to make the
following payments:
(1) All amounts described in paragraph 5(a)-(d) hereof for all
Distribution Dates occurring on or prior to such Business Day that have not
previously been paid, in the priority set forth in such clause;
(2) An amount equal to the sum of all Daily Preferred Yield Amounts
for each day occurring since the last Distribution Date on or prior to such
Business Day;
(3) In redemption of the Class B Equity Interests at their par value;
and
(4) To the Other Shareholders in accordance with the number of Class
A Shares owned by each of the Other Shareholders.
D-2
<PAGE>
7. Redemption of Class B Equity Interests.
--------------------------------------
(1) Upon each distribution by the Company of the Monthly Redemption
Amount or any other amounts in redemption of any Class B Equity Interests,
including fractions thereof, Class B Equity Interests having a par value equal
to such dividends shall automatically be transferred and surrendered by the
Preferred Shareholder to the Company and canceled.
(2) On any Distribution Date, in addition to the amounts referred to
herein, the Company in its sole discretion may make additional distributions to
the Preferred Shareholder to redeem its Class B Equity Interests, and upon
receipt of such distributions the Preferred Shareholder's Class B Equity
Interests having a par value equal to such distributions shall be redeemed and
automatically canceled.
(3) Upon any distribution by the Other Company of the Monthly
Redemption Amount (as defined in the Other Company Agreement) or any other
amounts in redemption of the Other Class B Interests, including fractions
thereof, Class B Equity Interests having a par value equal to such dividends (or
distributions) shall automatically be transferred and surrendered by the
Preferred Shareholder to the Company and canceled.
8. Preferred Shareholder's Consent. The consent of the Preferred
-------------------------------
Shareholder shall be necessary to approve:
(1) The payment of any Affiliated Party Expense or entering into any
contract, agreement or other obligation that provides for the payment of any
Affiliated Party Expense;
(2) The distribution to the Shareholders of any Company property
other than cash or any accumulation of cash in the Company in excess of the
operating needs of the Company, which cash would in the ordinary course of the
business of the Company be distributable to the Shareholders;
(3) The making of any prepayment of the Loan other than any mandatory
prepayment required by the Loan Documents, or any refinance of the Loan except
as otherwise permitted under the Loan Documents;
(4) Any replacement or change in the Officers of the Company or the
Manager of the Facility;
(5) Any amendment of any of the Loan Documents, any Management
Agreement, the Articles, or the Other Company Agreement;
(6) Any: (A) improvement, renovation or refurbishment of the Facility
to a materially higher standard or level than that of comparable properties in
the same geographic area and in the same market segment; (B) removal, demolition
or alteration of the improvements or the equipment (other than routine
replacement of such equipment) on the Facility to the extent
D-3
<PAGE>
that any such action would require the incurrence of an expenditure in excess of
$50,000; or (C) material increase in the square footage or gross leasable area
of the improvements on the Facility if any of the expenses in connection
therewith are paid or incurred by the Company;
(7) Any material change in the present method of conducting the
business or affairs of the Company;
(8) The issuance of any Shares or other evidence of interests in the
Company or the Other Company other than the Shares (or other evidence of
interests) outstanding on the date hereof;
(9) Such other matters as may reasonably be determined by Preferred
Shareholder.
9. Termination of Manager. The Preferred Shareholder shall have the same
----------------------
right to require the appointment of a manager pursuant to a Management Agreement
as is held by Lender pursuant to Section 5.1(b)(P) of the Loan Agreement
(regardless of whether the Loan is outstanding). In addition, in the event of a
Breach, in addition to all other rights of the Preferred Shareholder, the
Preferred Shareholder shall have the right to require the appointment of a
manager acceptable to Preferred Shareholder in its sole discretion.
10. Financial Reports. The Company will furnish to the Preferred
-----------------
Shareholder (i) a monthly report showing the Monthly Redemption Amount and the
Class B Equity Interests redeemed from the Preferred Shareholder in form and
substance reasonably satisfactory to the Preferred Shareholder; (ii) copies of
all financial reports required to be provided Lender under Section 5.1(b)(Q) or
-----------------
Section 5.1(a)(Q) as applicable, of the Loan Agreement (regardless of whether
- -----------------
the Loan is outstanding); and (iii) such additional calculations, statements,
data and other information regarding the Company and its assets, as the
Preferred Shareholder may reasonably request.
11. Rights of Preferred Shareholder to Transfer. The Preferred
-------------------------------------------
Shareholder shall be entitled to Transfer any of the Shares held by it to any
Person without the consent of the Company or the Other Shareholders provided
that such Transfer shall be in accordance with clause (viii) of the definition
of the term "Permitted Transfers" set forth in the Loan Agreement. Any such
transferee or assignee shall be deemed to be a substitute Preferred Shareholder.
12. Representations and Warranties. The Articles shall contain such
------------------------------
representations and warranties of the Company and the Other Shareholders as
Preferred Shareholder reasonably shall require.
13. Covenants. The Articles shall contain such covenants of the Company
---------
and the Other Shareholders as Preferred Shareholder reasonably shall require.
14. Investment Certificate A and Pledged Securities. To the extent SELCO
-----------------------------------------------
is a beneficial owner of, the Company or the Other Company, nothing in the
Articles or Agreement shall affect the prior claim and right of SELCO to receive
all distributions with respect to the
D-4
<PAGE>
Excepted Property.
15. Definitions. As used herein, all capitalized terms not otherwise
-----------
defined shall have the meanings ascribed to them in the Loan Agreement, and in
addition, the following terms shall have the following meanings:
"Adjusted Preferred Rate" means the lesser of: (i) a rate per annum
-----------------------
(adjusted on the first day of each Yield Accrual Period) equal to LIBOR plus
seven hundred (700) basis points; and (ii) the maximum rate permitted by
applicable law.
"Admittance Date" means the date on which the Preferred Shareholder
---------------
acquires Class B Equity Interests in the Company pursuant hereto.
"Affiliate" means with respect to any Person, a second Person which is
---------
controlled by, controls or is under common control with such first Person.
"Affiliated Party Expense" means any expense incurred pursuant to any
------------------------
contract or otherwise with any Affiliate of the Company, or any constituent
party of the Company, but excluding property management fees or expenses payable
pursuant to management agreements previously approved in writing by Preferred
Shareholder.
"Articles" has the meaning set forth in the recitals hereof.
--------
"Breach" means that any of the following have occurred:
------
(i) Failure of the Company to pay any amount when due;
(ii) Failure of the Company to pay to the Preferred Shareholder any
amount due to the Preferred Shareholder (regardless of availability of funds,
including without limitation, the occurrence of a Nonpayment Breach);
(iii) A default in the performance or breach of any covenant by the
Company to the Preferred Shareholder;
(iv) Any representation or warranty of the Company or any Other
Shareholder to the Preferred Shareholder shall have been false or misleading in
any material respect when made;
(v) (A) A bankruptcy, receivership or assignment for the benefit of
creditors by or against, or (B) the insolvency of the Company or any Officer
thereof;
(vi) An Event of Default;
(vii) The Preferred Cash Management Agreement shall cease to be in
full force and effect, or the Company or any Officer thereof shall so assert in
writing;
D-5
<PAGE>
(viii) The occurrence of a Breach under the Other Company Agreement
(as defined therein);
(ix) The occurrence of any other event determined by Preferred
Shareholder in its reasonable discretion.
"Breach Period" means upon the occurrence of any Nonpayment Breach, a
-------------
period of time equal to the greater of the period of time from and after the
Distribution Date that caused the occurrence of a Nonpayment Breach until the
entire Preferred Amount has been redeemed and all other amounts due to the
Preferred Shareholder hereunder have been paid in full.
"Company" means [INSERT NAME OF BORROWER OR OPERATOR, AS APPLICABLE].
-------
"Daily Preferred Yield Amount" means, with respect to any day, the product
----------------------------
of: (i) the Preferred Rate on such day; (ii) the Preferred Capital Amount on
such day (after giving effect to any distributions in respect of the Preferred
Capital Amount made on such day), increased by any Monthly Preferred Yield
Amounts (or portions thereof) with respect to Distribution Dates occurring on or
prior to such day that remain unpaid on such day; and (iii) 1/360.
"Determination Date" with respect to any Yield Accrual Period means the
------------------
date which is two London Business Days before the commencement of such Yield
Accrual Period.
"Distribution Date" means the 11th day of each month, or, if such day shall
-----------------
not be a Business Day, the next succeeding Business Day.
"Excess Cash Flow" means, with respect to any Distribution Date, an amount
----------------
equal to the greater of: (a) (i) the amount disbursed to the Company pursuant to
Section 2.12(g) of the Loan Agreement during the Yield Accrual Period ended in
the month in which such Distribution Date occurs minus (ii) any amounts payable
to the Preferred Shareholder as described in Paragraph 5 (a) or (b) hereof with
respect to such Yield Accrual Period; and (b) zero.
"Initial Preferred Capital Amount" shall mean an amount equal to the Class
--------------------------------
B Amount.
"LIBOR" means, with respect to each Yield Accrual Period following the
-----
Admittance Date, the rate (expressed as a percentage per annum) for deposits in
U.S. dollars for a one-month period that appears on Telerate Page 3750 (or the
successor thereto) as of 11:00 a.m., London, England time, on the related
Determination Date. If such rate does not appear on Telerate Page 3750 as of
11:00 a.m., London, England time, on such Determination Date, LIBOR shall be the
arithmetic mean of the offered rates (expressed as a percentage per annum) for
deposits in U.S. dollars for a one-month period that appear on the Reuters
Screen LIBOR Page as of 11:00 a.m., London, England time, on such Determination
Date, if at least two such offered rates so appear. If fewer than two such
offered rates appear on the Reuters Screen LIBOR Page as of 11:00 a.m., London,
England time, on such Determination Date, NACC shall request the principal
London, England office of any four major reference banks in the London interbank
market selected by
D-6
<PAGE>
NACC to provide such bank's offered quotation (expressed as a percentage per
annum) to prime banks in the London interbank market for deposits in U.S.
dollars for a one-month period as of 11:00 a.m., London, England time, on such
Determination Date for amounts approximately equal to the Preferred Amount. If
at least two such offered quotations are so provided, LIBOR shall be the
arithmetic mean of such quotations. If fewer than two such quotations are so
provided, the Preferred Shareholder shall request any three major banks in New
York City selected by the Preferred Shareholder to provide such bank's rate
(expressed as a percentage per annum) for loans in U.S. dollars to leading
European banks for a one month period as of approximately 11:00 a.m., New York
City time on the applicable Determination Date for amounts approximately equal
to the Preferred Amount. If at least two such rates are so provided, LIBOR shall
be the arithmetic mean of such rates. If fewer than two rates are so provided,
then LIBOR for the applicable Yield Accrual Period shall be LIBOR that was in
effect for the next preceding Yield Accrual Period. LIBOR shall be determined in
accordance with this section by the Preferred Shareholder or its agent.
"Liquidation Event" means: (i) any sale, transfer or other disposition or
-----------------
liquidation of the Facility or any portion thereof (including a foreclosure
sale); (ii) any casualty to the Facility or any portion thereof; (iii) any
condemnation of the Facility or any portion thereof; or (iv) any refinancing of
the Facility or the Loan.
"Liquidation Proceeds" means, with respect to any Liquidation Event, all
--------------------
amounts paid to or received by or on behalf of the Company on or after the
Admittance Date in connection with such Liquidation Event, including, without
limitation, proceeds of any sale, refinancing or other disposition or
liquidation, the amount of any award or payment in connection with any
condemnation or taking by eminent domain, and the amount of any insurance
proceeds paid in connection with any casualty loss, as applicable, other than,
in the case of a casualty loss or condemnation award, amounts required by the
terms of the Loan Documents to be applied to the restoration or repair of the
Facility or to repayment of the Loan.
"London Business Day" means any day other than a Saturday, Sunday or any
-------------------
other day on which banks in the City of London, England are closed for interbank
or foreign exchange transactions.
"Monthly Preferred Yield Amount" means, with respect to each Distribution
------------------------------
Date, the sum of the Daily Preferred Yield Amounts for each day in the related
Yield Accrual Period.
"Monthly Redemption Amount" means, with respect to each Yield Accrual
-------------------------
Period, an amount equal to:
(i) Except as provided in clause (ii) below, the product of (A) 75%
and (B) the Excess Cash Flow for such period; or
(ii) After the occurrence and during the continuance of any Breach
Period, the product of (A) 100% and (B) the Excess Cash Flow for such period.
D-7
<PAGE>
"NACC" means Nomura Asset Capital Corporation, together with its successors
----
and assigns.
"Net Liquidation Proceeds" means all Liquidation Proceeds less: (i) in the
------------------------
case of a sale other than a foreclosure sale under the Loan, such reasonable and
customary costs and expenses of sale (including brokerage commissions) as shall
be approved by the Preferred Shareholder; (ii) in the case of a foreclosure
sale, such costs and expenses incurred by the Lender under the Loan Documents as
the Lender shall be entitled to receive reimbursement for under the terms of the
Loan Documents or under applicable law; (iii) in the case of a casualty loss or
condemnation, such costs and expenses of collection of the related insurance
proceeds or condemnation award as shall be approved by the Lender, or if the
Loan has been paid in full, by the Preferred Shareholder in its sole discretion;
and (iv) in the case of a refinancing of the Loan, or the Facility, such costs
and expenses of such refinancing as shall be approved by the Preferred
Shareholder.
"Net Liquidation Proceeds After Debt Service" means, with respect to any
-------------------------------------------
Liquidation Event, the Net Liquidation Proceeds with respect thereto other than
any portion thereof applied to the payment of the Loan under the terms of the
Loan Documents.
"Nonpayment Breach" means the failure of the Company to pay, on any
-----------------
Distribution Date, the minimum amount necessary to amortize the Class B Amount
on a straight line basis over a sixty (60) month period, together with interest
thereon at the Preferred Rate.
"Officers" means the duly appointed officers of the Company, appointed
--------
pursuant to the Articles.
"Other Class B Interests" means the Class B beneficial interests or the
-----------------------
Class B Equity Interests, as applicable, held by Preferred Shareholder in the
Other Company.
"Other Company" means [INSERT NAME OF THE BORROWER OR OPERATOR, AS
-------------
APPLICABLE, TO THE EXTENT IT IS NOT THE COMPANY].
"Other Company Agreement" means the trust agreement or articles of
-----------------------
incorporation, as applicable, for the Other Company.
"Other Shareholders" has the meaning set forth in the recitals hereof.
------------------
"Preferred Amount" at any date means the sum of: (i) the sum of all Monthly
----------------
Preferred Yield Amounts for all Distribution Dates on or prior to such date that
have not previously been paid; (ii) the sum of all Daily Preferred Yield Amounts
for each day occurring in the period from the last Distribution Date on or prior
to such date (or if no Distribution Date has yet occurred, from the Admittance
Date) to such date; and (iii) the Preferred Capital Amount.
"Preferred Capital Amount" means the Initial Preferred Capital Amount less
------------------------
all distributions made to the Preferred Shareholder in redemption of the Class B
Preferred Shares pursuant hereto, plus any additional contributions of capital
made by the Preferred Shareholder.
D-8
<PAGE>
"Preferred Cash Collateral Account" means the account established pursuant
---------------------------------
to the Preferred Cash Management Agreement.
"Preferred Cash Management Agreement" means a Preferred Cash Management
-----------------------------------
Agreement to be entered into by the Company, Lender and LaSalle National Bank,
as bank, the material terms of which are described in Exhibit F.
---------
"Preferred Rate" means: (i) at any time when a Breach has occurred and is
--------------
continuing or during a Breach Period, the Adjusted Preferred Rate and (ii) at
any other time, a per annum rate equal to LIBOR plus five hundred (500) basis
points adjusted on the first day of each Yield Accrual Period. Each
determination of the Preferred Rate by the Preferred Shareholder pursuant to the
provisions of this Article shall be binding on the Company, absent manifest
error.
"Preferred Shareholder" means Lender or its affiliates, successors,
---------------------
assigns, designees or transferees.
"Reuters Screen LIBOR Page" means the display designated as page "LIBOR" on
-------------------------
the Reuters Monitor Money Rates Service (or such other page as may replace the
LIBOR page on the service for the purpose of displaying interbank rates from
London in U.S. Dollars).
"Secretary" means the secretary of the Company, as appointed in accordance
---------
with the Articles.
"Shareholders" means the holders of the Shares.
------------
"Shares" means Class A Shares and Class B Equity Interests, collectively.
------
"Telerate Page 3750" means the display designated as Page 3750 on the Dow
------------------
Jones Telerate Service (or such other page as may replace Page 3750 on that
service or such other service as may be nominated by the British Banker's
Association as the information vendor for the purpose of displaying British
Bankers' Association Interest Settlement Rates for the U.S. Dollar deposits).
"Yield Accrual Period" means: (i) with respect to the first Distribution
--------------------
Date occurring after the Admittance Date, the period commencing on the
Admittance Date and ending on the tenth (10th) day of the month in which such
Distribution Date occurs; and (ii) in the case of each subsequent Distribution
Date, the period from and including the eleventh (11th) day of the month
immediately preceding the month in which such Distribution Date occurs up to and
including the tenth (10th) day of the month in which such Distribution Date
occurs.
D-9
<PAGE>
EXHIBIT E
The documentation evidencing Lender's right to be a Preferred
Shareholder in the Company in accordance with Section 8.32(c)(ii) of the Loan
Agreement shall be based on the termsheet for the Amended and Restated Articles
of Incorporation of the Company (the "Articles") attached to the Loan Agreement
as Exhibit D and the termsheet for the Preferred Cash Management Agreement
---------
attached to the Loan Agreement as Exhibit F, with such changes as Lender shall
---------
require in Lender's sole and absolute discretion provided, however that
notwithstanding anything to the contrary set forth herein, nothing contained in
such documentation shall change the economic provisions establishing (x) the
Preferred Rate and Adjusted Preferred Rate set forth in this Exhibit, (y) the
methodology for calculating the Initial Capital Amount set forth in this Exhibit
or Section 8.32 of the Loan Agreement or (z) the distribution priorities and
amounts set forth in this Exhibit. These changes may include, but shall not be
limited to, the following (conformed if appropriate for a trust):
1. The Articles shall be amended to add an additional class of Shares
(the "Class C Equity Interests") to reflect the preferred shares of the Company
------------------------
to be received by the Preferred Shareholder described in Section 8.32(c)(ii) of
the Loan Agreement, which Class C Equity Interests shall be senior to the Class
A Shares and junior to the Class B Equity Interests (except as provided herein).
2. The Articles shall be amended and restated (in a manner satisfactory
to Lender in Lender's sole discretion) to reflect (i) the creation of Class C
Equity Interests, and (ii) the receipt by Lender of Class A Shares.
3. The "Preferred Rate" with respect to the Class C Equity Interests
--------------
(provided that a Breach has not occurred and is continuing) shall be a per annum
rate equal to LIBOR (as defined in the Articles) plus seven hundred (700) basis
points adjusted on the first day of each Yield Accrual Period.
4. The "Adjusted Preferred Rate" with respect to the Class C Equity
-----------------------
Interests shall mean the lesser of: (i) a rate per annum adjusted on the first
day of each Yield Accrual Period) equal to LIBOR plus nine hundred (900) basis
points; and (ii) the maximum rate permitted by applicable law.
5. The Company shall pay dividends in the following priority:
(i) First, to the Preferred Shareholder, all Monthly Preferred Yield
Amounts due with respect to the Class B Equity Interests (or portions thereof)
for prior Distribution Dates that have not previously been paid (in the order of
the Distribution Dates to which such amounts relate, amounts with respect to the
earliest Distribution Dates being paid first) plus additional yield thereon at
the Adjusted Preferred Rate accruing from the Distribution Date on which the
unpaid Monthly Preferred Yield Amount would have been distributed had there been
funds available to make such distribution in the Preferred Cash Collateral
Account;
E-1
<PAGE>
(ii) Second, to the Preferred Shareholder, the Monthly Preferred
Yield Amount due with respect to Class B Equity Interests for the current
Distribution Date;
(iii) Third, to the Preferred Shareholder, all Monthly Preferred Yield
Amounts due with respect to the Class C Equity Interests (or portions thereof)
for prior Distribution Dates that have not previously been paid (in the order of
the Distribution Dates to which such amounts relate, amounts with respect to the
earliest Distribution Dates being paid first) plus additional yield thereon at
the relevant Adjusted Preferred Rate accruing from the Distribution Date on
which the unpaid Monthly Preferred Yield Amount would have been distributed had
there been funds available to make such distribution in the Preferred Cash
Collateral Account;
(iv) Fourth, to the Preferred Shareholder, the Monthly Preferred
Yield Amount due with respect to Class C Equity Interests for the current
Distribution Date;
(v) Fifth, to the Preferred Shareholder, all Monthly Redemption
Amounts due with respect to Class C Equity Interests (or portions thereof) for
prior Distribution Dates that have not previously been paid (in the order of the
Distribution Dates to which such amounts relate, amounts with respect to the
earliest Distribution Dates being paid first);
(vi) Sixth, to the Preferred Shareholder, the Monthly Redemption
Amount with respect to the Class C Equity Interests for the current Distribution
Date;
(vii) Seventh, to the Preferred Shareholder, all Monthly Redemption
Amounts due with respect to Class B Equity Interests (or portions thereof) for
prior Distribution Dates that have not previously been paid (in the order of the
Distribution Dates to which such amounts relate, amounts with respect to the
earliest Distribution Dates being paid first);
(viii) Eighth, to the Preferred Shareholder, the Monthly Redemption
Amount with respect to the Class B Equity Interests for the current Distribution
Date; and
(ix) Ninth to the Other Shareholders (including, without limitation to
Preferred Shareholder), in accordance with the number of Class A Shares owned by
each of the Other Shareholders.
6. The Liquidation Event Distribution provisions will be amended to
provide for the redemption of the Class C Equity Interests at their par value,
after the redemption of the Class B Equity Interests but prior to any
distribution to the Other Shareholders.
7. The "Monthly Redemption Amount" with respect to Class C Equity
-------------------------
Interests shall be the product of (A) 100% and (B) the Excess Cash Flow for such
period.
8. Upon any distribution by the Company of the Monthly Redemption Amount
with respect to Class C Equity Interests, or any other amounts in redemption of
Class C Equity Interests, Class C Equity Interests having a par value equal to
such redemption amount shall be redeemed and otherwise cancelled.
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<PAGE>
9. Upon any distribution by the Other Company of the Monthly Redemption
Amount (as defined in the applicable Other Company Agreement) with respect to
the Other Class C Interests, or any other amounts in redemption of Other Class C
Interests, Class C Equity Interests having a par value equal to such redemption
amount shall be redeemed and otherwise cancelled. As used herein, "Other Class
-----------
C Interests" means the Class C beneficiary interests or the Class C Equity
- -----------
Interests, as applicable, held by Preferred Shareholder in the Other Company.
10. At the time Lender receives its Class C Equity Interests, Lender also
shall receive equity options (the "Warrants") in the Company, granting Lender
the right to receive Class A Shares in the Company (without payment of
additional consideration) equal to a percentage of the then outstanding Class A
Shares in the Company, such percentage to be derived by (i) dividing the Class C
Amount by the sum of the Equity Value of the Company and the Class C Amount, and
(ii) multiplying the result by eighty percent (80%); provided, however, such
percentage shall in no event be less than eighty percent (80%) of the then
outstanding Class A shares. As used herein, the "Equity Value of the Company"
---------------------------
shall be calculated by multiplying by ten the underwriting net operating income
of the Facility, based on the Underwriting NOI Criteria calculated by Lender in
Lender's reasonable discretion for the preceding twelve (12) calendar months
(for which Lender has been provided the financial information required by
Section 5.1(b)(Q) of the Loan Agreement) or such other methodology as is
- -----------------
satisfactory to Lender in its reasonable discretion, of the Property and
subtracting therefrom the sum of (i) the then outstanding Principal Indebtedness
together with any other amounts due on the Loan, (ii) the Class B Amount and
(iii) the Class C Amount. Notwithstanding anything to the contrary set forth
herein, (i)in no event shall the Equity Value of the Company be less than zero
and (ii) in no event shall the Class A Shares which Lender shall be entitled to
receive be less than twenty-five percent (25%) of the outstanding Class A Shares
of the Company.
11. Whenever distributions, including without limitation, liquidation
distributions, are made to any Class A Shares, Lender shall receive a
distribution equal to Lender's percentage ownership of Class A Shares in the
Company.
12. As the holder of its respective percentage of Class A Shares, Lender
may obtain such additional control rights as Lender requires in Lender's
reasonable discretion.
13. The Preferred Cash Management Agreement shall be modified (in Lender's
reasonable discretion) to provide for payment to Lender in respect of its Class
C and Class A Shares. Such amendment shall provide the Company with the right
described in Paragraph 7(2) of Exhibit D with respect to the Class C Equity
---------
Interests and any Class A Shares owned by NACC.
14. All capitalized terms not otherwise defined herein shall have the
meanings ascribed on Exhibit D or the Loan Agreement as applicable.
---------
15. Investment Certificate A and Pledge Securities. To the extent
----------------------------------------------
SELCO is a beneficial owner of the Company or the Other Company, nothing in the
Articles or the Agreement shall affect the prior claim or right of SELCO to
receive all distributions with respect
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to Excepted Property.
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<PAGE>
EXHIBIT F
Preferred Cash Management Terms
Lender and the Company will enter into a Preferred Cash Management
Agreement in form and substance satisfactory to Lender in Lender's discretion,
which will contain, without limitation, the following terms (conformed as
appropriate for a trust):
1. The Preferred Cash Collateral Account Bank shall maintain the
Preferred Cash Collateral Account, and shall maintain on a ledger-entry basis
the following sub-accounts thereof:
(i) the Company Sub-Account; and
(ii) the Preferred Disbursement Sub-Account.
2. The Preferred Cash Collateral Account Bank shall deposit into the
Preferred Cash Collateral Account the distributions (the "Equity Distributions")
--------------------
received from the Cash Collateral Account Bank for deposit into the Preferred
Cash Collateral Account.
3. During each Collection Period in which Lender is an equity owner in
the Borrower or Operator, Lender shall direct the Preferred Cash Collateral
Account Bank to disburse amounts from the Preferred Cash Collateral Account in
the following order and priority:
(a) First, to the Preferred Disbursement Sub-Account, an amount equal
-----
to all amounts due the Preferred Shareholder in respect of the Class B Equity
Interests and Class C Equity Interests (if any), in the order and priority set
forth in the Articles; pursuant to the Articles;
(b) Second, to the Preferred Disbursement Sub-Account, an amount
------
equal to all amounts due the Preferred Shareholder (if any) in respect of the
Class A Shares pursuant to the Articles; and
(c) Third, to the Company Sub-Account, any remaining funds.
-----
4. Amounts in the Preferred Disbursement Sub-Account will be disbursed to
the Preferred Shareholder and amounts in the Company Sub-Account will be
disbursed to the Company.
5. The Operator will pay the banking fees and expenses of the Preferred
Cash Collateral Account Bank.
6. The Preferred Cash Collateral Account shall be an Eligible Account (as
defined in the Loan Agreement).
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<PAGE>
7. If a Liquidation Event occurs, the Company shall deposit into the
Preferred Cash Collateral Account any Net Liquidation Proceeds After Debt
Service to be applied in accordance with the Articles.
8. All capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in Exhibit D.
---------
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<PAGE>
EXHIBIT G
Underwriting NOI Criteria
At the Stabilization Date, Lender shall determine the Adjusted Net
Operating Income of the Facility (as determined in accordance with the terms of
this Exhibit) on a trailing 12-month basis (based on the consecutive 12-month
-------
period ending in the month immediately preceding the Cut-Off Date for which
detailed financial information is available).
Adjusted Net Operating Income will be calculated based on the revenues
based on the trailing twelve (12) month period subject to adjustments for:
(a) all Operating Expenses, including without limitation, a
management fee equal to the greater of actual management fees or
five percent (5.0%) of total revenues;
(b) a reserve for capital expenditures and capital replacements equal
to at least $250 per unit (or such greater amount as shall be
indicated in the independent engineering reports);
(c) an adjustment for a vacancy allowance equal to the greater of (i)
the actual vacancy for the Facility, (ii) five percent (5%) of
Gross Revenues, and (iii) the market vacancy rate (but no less
than five (5%)) if actual vacancy is less than market or five
percent (5%);
(d) reserves for Basic Carrying Costs and Capital Expenses;
(e) verification of all sources of other income to determine whether
such income is recurring; and
(f) any other factors or matters that may have an impact on the
Adjusted Net Operating Income in accordance with Lender's
underwriting standards then in effect.
The expenses will be based on the trailing twelve (12) month period
preceding the Cut-Off Date for which full operating statements are available as
adjusted for any items that are non-recurring or not supported by historical
statements and for anticipated increases.
In determining Adjusted Net Operating Income, all pro forma
adjustments to revenue and expenses shall be approved by Lender in Lender's
reasonable discretion and shall be subject to Lender's full due diligence.
The above underwriting assumes that there is no material adverse
change
G-1
<PAGE>
anticipated in the operations of the Facility or in the Adjusted Net Operating
Income of the Facility from the Closing Date to and including the Cut-Off Date.
Other adjustments as determined by Lender in its discretion consistent
with its due diligence findings and prevailing market conditions.
All capitalized terms not otherwise defined herein shall have the
meanings ascribed to such terms in the Agreement.
G-2
<PAGE>
[EXECUTION COPY]
Exhibit 10.3
CERTIFICATE PLEDGE AGREEMENT
----------------------------
THIS CERTIFICATE PLEDGE AGREEMENT (together with all amendments,
supplements and other modifications made from time to time, this "Pledge
Agreement"), dated as of March 6, 1998, made by BROOKDALE LIVING COMMUNITIES OF
ILLINOIS - HV, INC., a Delaware corporation (the "Pledgor"), in favor of THE
HARBOR VILLAGE BUSINESS TRUST, a Delaware business trust (the "Pledgee"),
WILMINGTON TRUST COMPANY, a Delaware banking corporation, as valuation agent (in
such capacity, the "Valuation Agent").
W I T N E S S E T H:
-------------------
WHEREAS, as a condition to the occurrence of the Acquisition Date under the
Lease dated as of the date hereof (together with all amendments and other
modifications, if any, from time to time thereafter made thereto, the "Lease"),
among the Pledgor, between Lessee and the Pledgee, as Lessor, the Pledgor is
required to execute and deliver this Pledge Agreement;
WHEREAS, the Pledgor has duly authorized the execution, delivery and
performance of this Pledge Agreement; and
WHEREAS, it is in the best interests of the Pledgor to execute this Pledge
Agreement inasmuch as the Pledgor will derive substantial benefits from the
transactions contemplated by the Lease;
NOW, THEREFORE, for good and valuable consideration the receipt of which is
hereby acknowledged, the parties hereto agree as follows:
<PAGE>
Certificate Pledge Agreement
ARTICLE I
DEFINITIONS
SECTION 1.1 Certain Terms. Capitalized terms used but not otherwise
defined in this Pledge Agreement have the respective meanings specified in
Appendix 1 to the Lease; and the rules of interpretation set forth in Appendix 1
to the Lease shall apply to this Pledge Agreement.
ARTICLE II
PLEDGE
SECTION 2.1. Grant of Security Interest. The Pledgor hereby pledges,
hypothecates, assigns, charges, mortgages, delivers, and transfers to the
Pledgee and hereby grants to the Pledgee a continuing security interest in, all
of its right, title and interest in, to and under the following property (the
"Collateral"):
(a) Certificate A, a copy of which is annexed hereto as Schedule I,
and any replacement Certificate A to be provided pursuant to Section 7.13
hereof; and
(b) all payments made with respect to and all interest and proceeds
(as such term is defined in the Uniform Commercial Code as in effect in the
State of Ohio (the "U.C.C.")) of any of the foregoing.
SECTION 2.2 Security for Obligations. The security interest granted by the
Pledgor hereunder secures the satisfaction in full of all the Pledgor's payment
and non-payment obligations to Pledgee under the Operative Documents, including,
without limitation, the obligation to pay SELCO Basic Rent, Lessor Basic Rent,
Equity Balance and Supplemental Rent (to the extent the Lessor is entitled to
receive Supplement Rent) (collectively, the "Obligations").
SECTION 2.3 Delivery of Pledged Property. All certificates or instruments
representing or evidencing any Collateral, shall be delivered to and held by or
on behalf of the Pledgee pursuant hereto, shall be in suitable form for transfer
by delivery, and shall be accompanied by all necessary instruments of transfer
or assignment, duly executed in blank, all in form and substance satisfactory to
the Pledgee.
SECTION 2.4 Continuing Security Interest. This Pledge Agreement shall
create a continuing security interest in the Collateral and shall
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<PAGE>
Certificate Pledge Agreement
(a) remain in full force and effect until payment in full of all
Obligations, payment in full of the Equity Balance or the Pledgee takes
possession of the Collateral in accordance with Section 6.1,
(b) be binding upon the Pledgor and its successors, transferees and
assigns, and
(c) inure to the benefit of the Pledgee.
Upon the payment in full of all Obligations or payment in full of the Equity
Balance, the security interest granted herein shall terminate and all rights to
the Collateral (including all interest or income paid in respect thereto) shall
revert to the Pledgor. Upon any such termination, the Pledgee will, at the sole
expense of the Pledgor, and upon written instruction of the Pledgor, deliver to
the Pledgor, without any representations, warranties or recourse of any kind
whatsoever, all certificates and instruments representing or evidencing all
Collateral pledged by the Pledgor hereunder (including all such interest or
income), together with all other Collateral held by the Pledgee hereunder and
execute and deliver to the Pledgor such documents as the Pledgor shall
reasonably request to evidence such termination.
SECTION 2.5 Security Interest Absolute. All rights of the Pledgee and the
security interests granted to the Pledgee hereunder, and all obligations of the
Pledgor hereunder, shall be absolute and unconditional, irrespective of
(a) any lack of validity or enforceability of the Pledge Agreement or
any other Operative Document,
(b) the failure of the Pledgee to assert any claim or demand or to
enforce any right or remedy against the Pledgor or any other Person under
the provisions of any Operative Document or otherwise,
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of obligations the Obligations or any other
extension, compromise or renewal of any Obligation,
(d) any reduction, limitation, impairment or termination of any
Obligations for any reason, including any claim of waiver, release,
surrender, alteration or compromise, and shall not be subject to (and the
Pledgor hereby waives any right to or claim of) any defense or setoff,
counterclaim, recoupment or termination whatsoever by reason of the
invalidity, illegality, nongenuineness, irregularity, compromise,
unenforceability of, or any other event or occurrence affecting, the
Pledgee or otherwise,
(e) any amendment to, rescission, waiver, or other modification of,
or any consent to departure from, any of the terms of the any Operative
Document,
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<PAGE>
Certificate Pledge Agreement
(f) any addition, exchange, release, surrender or non-perfection of
any Collateral, or any amendment to or waiver or release of or addition to
or consent to departure from any guaranty, for any of the Obligations, or
(g) any other circumstances which might otherwise constitute a
defense available to, or a legal or equitable discharge of, the Pledgor or
Pledgee or any other Person.
SECTION 2.6 Waiver of Subrogation. The Pledgor hereby irrevocably waives
any claim or other rights which it may now or hereafter acquire against the
Pledgee or any other Person that arise from the existence, payment, performance
or enforcement of the Pledgor's obligations under this Pledge Agreement or any
other Operative Document, including any right of subrogation, reimbursement,
exoneration, or indemnification, any right to participate in any claim or remedy
against the Pledgee or any other Person or any collateral which the Pledgee now
has or hereafter acquires, whether or not such claim, remedy or right arises in
equity, or under contract, statute or common law, including the right to take or
receive from the Pledgee or any other Person, directly or indirectly, in cash or
other property or by set-off or in any manner, payment or security on account of
such claim or other rights. If any amount shall be paid to the Pledgor in
violation of the preceding sentence and the Obligations shall not have been paid
in cash in full, such amount shall be deemed to have been paid to the Pledgor
for the benefit of, and held in trust for, the Pledgee, and shall forthwith be
paid to the Pledgee to be credited and applied upon the Obligations, whether
matured or unmatured. The Pledgor acknowledges that it will receive direct and
indirect benefits from the financing arrangements contemplated by the Pledge
Agreement and that the waiver set forth in this Section is knowingly made in
contemplation of such benefits.
SECTION 2.7 Valuation of Collateral.
(a) The Valuation Agent shall determine every two (2) weeks (the date
of such valuation being a "Valuation Date") (i) the amount of the
Certificate A (inclusive of principal and accreted/compounded interest) as
of the Valuation Date (the "Certificate Value") and (ii) by obtaining
values from the issuer of the Certificate A and at least one reputable
broker of certificates of deposit, the fair market sales value of the
Certificate A if sold prior to maturity as of the Valuation Date as the
higher of two values received (the "Sales Value"). Each such valuation by
the Valuation Agent shall be binding on the Pledgor and the Pledgee, absent
manifest error. On any Valuation Date, in the event that the Sales Value
plus any collateral previously delivered by the Pledgor pursuant to Section
2.7(b) is less than the Certificate Value (a "Deficiency"), the Valuation
Agent shall give written notice of such Deficiency (a "Collateral Notice")
within two (2) Business Days after the Valuation Date via (i) overnight
mail or hand delivery and (ii) facsimile transmission, to each of the
Pledgee, the Pledgor and a third party (the "Custodian") to be reasonably
agreed to by the parties hereto that will establish the
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<PAGE>
Certificate Pledge Agreement
Collateral Account (as hereinafter defined) on behalf of the Pledgee and
Key Corporate Capital Inc.
(a) The Pledgor shall promptly, but in any event with five (5)
Business Days after receipt of a Collateral Notice (facsimile confirmation
receipt by the Valuation Agent being deemed receipt of notice by the
Pledgor and the Pledgee), wire transfer funds in U.S. Dollars to a
collateral account to be specified by the Pledgee to the Pledgor (the
"Collateral Account") in an amount equal to or exceeding the Deficiency.
The Pledgor's obligation to transfer such funds is hereinafter referred to
as the "Collateral Requirement." The Pledgor's failure to provide such
additional Collateral shall result in Pledgee having the immediate right to
all Collateral and all funds in the Collateral Account in accordance with
Section 6.1.
(b) On any Valuation Date, in the event that the Sales Value plus any
collateral previously delivered pursuant to Section 2.7(b), equals or
exceeds the Certificate Value (such excess being referred to herein as the
"Excess") and no Event of Default described in Section 6.1 or Default
relating thereto shall have occurred and be continuing, the Valuation Agent
shall provide written notice of such Excess (the "Excess Notice") within
two (2) Business Days after the Valuation Date in the manner described in
Section 2.7(a) to each of the Pledgor, the Pledgee and the Custodian. The
Custodian shall be directed thereafter to return the Excess to the Pledgor.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Warranties, etc. The Pledgor represents and warrants for
itself unto the Pledgee as at the date of each pledge and delivery hereunder by
the Pledgor to the Pledgee of any Collateral pledged by the Pledgor pursuant to
this Pledge Agreement as follows:
(a) Ownership, No Liens, etc. The Pledgor is the legal and beneficial
owner of, and has good and valid title to (and has full right and authority
to pledge and assign) the Collateral, free and clear of all Liens, security
interests, options, or other charges or encumbrances, except any Lien or
security interest granted pursuant hereto in favor of the Pledgee.
(b) Valid Security Interest. The delivery of the Collateral to the
Pledgee effective to create a valid, perfected, first priority security
interest in such Collateral and all proceeds thereof, securing the
Obligations. No filing or other action will be necessary to perfect or
protect such security interest.
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<PAGE>
Certificate Pledge Agreement
(c) Authorization, Approval, etc. No authorization, approval, or
other action by, and no notice to or filing with, any governmental
authority, regulatory body or any other Person is required either
(i) for the pledge by the Pledgor of any Collateral pursuant to
this Pledge Agreement or for the execution, delivery, and performance
of this Pledge Agreement by the Pledgor, or
(ii) for the exercise by the Pledgee of any of the rights
provided for in this Pledge Agreement, or, except as may be required
in connection with a disposition of any Collateral by laws affecting
the offering and sale of securities generally, the remedies in respect
of the Collateral pursuant to this Pledge Agreement.
ARTICLE IV
COVENANTS
SECTION 4.1 Certain Covenants.
(a) The Pledgor covenants and agrees that, so long as any portion of the
Obligations shall remain unpaid or unfulfilled:
(i) except as permitted by the Operative Documents, it will not
sell, assign, transfer, pledge, or encumber in any other manner the
Collateral owned by it (except in favor of the Pledgee hereunder);
(ii) the Pledgor will warrant and defend the right and title herein
granted unto the Pledgee in and to the Collateral (and all right, title,
and interest represented by the Collateral) against the claims and demands
of all Persons whomsoever;
(iii) at any time, and from time to time, at the expense of the
Pledgor, the Pledgor will promptly execute and deliver all further
instruments, and take all further action, that the Pledgee may reasonably
request, in order to perfect and protect any security interest granted or
purported to be granted hereby or to enable the Pledgee to exercise and
enforce its rights and remedies hereunder with respect to any Collateral.
(b) Each of the Pledgee and the Pledgor covenants to the Valuation Agent
that they will provide the Valuation Agent with prompt written notice of an
Event of Default
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<PAGE>
Certificate Pledge Agreement
that occurs during the term of this Pledge Agreement and of any cure of any
such Event of Default and notice of a failure of the Pledgor to satisfy the
Collateral Requirement.
ARTICLE V
THE PLEDGEE
SECTION 5.1 Pledgee Appointed Attorney-in-Fact. The Pledgor hereby
irrevocably appoints the Pledgee the Pledgor's attorney-in-fact, with full
authority in the place and stead of the Pledgor and in the name of the Pledgor
or otherwise, from time to time upon the occurrence and during the continuance
of any Event of Default described in Section 6.1, to take any action and to
execute any instrument which the Pledgee may deem necessary or advisable to
accomplish the purposes of this Pledge Agreement, including without limitation:
(a) to ask, demand, collect, sue for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with clause (a) above; and
(c) to file any claims or take any action or institute any proceedings
which the Pledgee may deem necessary or desirable for the collection of any
of the Collateral or otherwise to enforce the rights of the Pledgee with
respect to any of the Collateral.
The Pledgor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
SECTION 5.2 Pledgee May Perform. If the Pledgor fails to perform any
agreement contained herein, the Pledgee may itself perform, or cause performance
of, such agreement, and the expenses of the Pledgee incurred in connection
therewith shall be payable by the Pledgor pursuant to Section 6.3.
ARTICLE VI
REMEDIES
SECTION 6.1 Certain Remedies. If any Event of Default shall have occurred,
other than an Event of Default caused by an "Event of Default" pursuant to the
following provisions of each of the Nomura Loan Agreement and the Mezzanine Loan
Agreement which was caused
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<PAGE>
Certificate Pledge Agreement
solely by the Pledgee and not caused directly, indirectly or proximately by an
act or omission of the Pledgor: (i) Section 7.1(ix) (solely as to
representations and warranties of the Pledgee as of the date hereof pursuant to
Sections 4.1(a)(A), (B) or (C), and Sections 4.1(b)(A), (B), (C), (G), (H), (I),
(J), (L), (N), (Z), (AA) or (AJ) of each of the Nomura Loan Agreement and the
Mezzanine Loan Agreement, (ii) Section 7.1(x) (solely as to the Pledgee), (iii)
Section 7.1(xi) (solely as to the Pledgee), (iv) Section 7.1(xiii) (solely as to
the Pledgee), (v) Section 7.1(xv) (solely as to Section 5.1(a)(U)) or (vi)
Section 7.1(xvi) (solely as to Section 5.1(a)(T)) or if the Pledgor has failed
to comply with the Collateral Requirement in accordance with Section 2.7 or if
the Pledgor, Pledgee, the Valuation Agent and the Custodian have not entered
into the Amendment (as hereinafter defined) (which failure may be waived by the
Pledgee with the consent of Key Corporate Capital Inc.):
(a) The Pledgee may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default
under the U.C.C. (whether or not the U.C.C. applies to the affected
Collateral) and also may, without notice except as specified below, sell or
redeem, as applicable, the Collateral or any part thereof (to the extent
the Collateral can be used to satisfy the obligations of the Pledgor
pursuant to Section 2.2 of this Pledge Agreement), for cash, on credit or
for future delivery, and upon such other terms as the Pledgee may deem
commercially reasonable. Further, the Pledgee may distribute the Collateral
in any manner it deems appropriate upon seizing the Collateral.
(b) The Pledgee may (to the extent the Collateral is necessary to
satisfy the Pledgor's Obligations pursuant to Section 2.2 hereof):
(i) transfer all or any part of the Collateral into the name
of its nominee, with or without disclosing that such Collateral is
subject to the lien and security interest hereunder,
(ii) notify the parties obligated on any of the Collateral to
make payment to the Pledgee of any amount due or to become due
thereunder,
(iii) enforce collection of any of the Collateral by suit or
otherwise, and surrender, release or exchange all or any part thereof,
or compromise or extend or renew for any period (whether or not longer
than the original period) any obligations of any nature of any party
with respect thereto,
(iv) endorse any checks, drafts, or other writings in the
Pledgor's name to allow collection of the Collateral,
(v) take control of any proceeds of the Collateral, and
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<PAGE>
Certificate Pledge Agreement
(vi) execute (in the name, place and stead of the Pledgor)
endorsements, assignments, instruments of conveyance or
transfer with respect to all or any of the Collateral.
SECTION 6.2 Securities Laws. If the Pledgee shall exercise its right to
sell all or any of the Collateral pursuant to Section 6.1, the Pledgor agrees
that, upon request of the Pledgee, the Pledgor will, at its own expense do or
cause to be done all such acts and things as may be necessary to make such sale
of the Collateral owned by the Pledgor or any part thereof valid and binding and
in compliance with applicable law.
SECTION 6.3 Indemnity and Expenses. The Pledgor hereby jointly and
severally indemnifies and holds harmless the Pledgee and the Valuation Agent
from and against any and all claims, losses, and liabilities arising out of or
resulting from this Pledge Agreement (including enforcement of this Pledge
Agreement) except claims, issues or liabilities of the Valuation Agent resulting
from the Valuation Agent's gross negligence or wilful misconduct. Upon demand,
the Pledgor will pay to the Pledgee and the Valuation Agent the amount of any
and all reasonable expenses, including the reasonable fees and disbursements of
its counsel and of any experts and agents, which the Pledgee or the Valuation
Agent may incur in connection with:
(a) the administration of this Pledge Agreement;
(b) the custody, preservation, use, or operation of, or the sale of,
collection from, or other realization upon, any of the Collateral;
(c) the exercise or enforcement of any of its rights hereunder; or
(d) the failure by the Pledgor to perform or observe any of the
provisions hereof.
SECTION 6.4 Fees of Valuation Agent. The Pledgor agrees to pay the
Valuation Agent fees in accordance with the terms of the Nomura Loan Agreement
and the Mezzanine Loan Agreement.
ARTICLE 7.
THE VALUATION AGENT
SECTION 7.1 Successor Valuation Agent. At any time, the Pledgor shall have
the right to appoint a successor valuation agent to replace Wilmington Trust
Company (or any successor Valuation Agent) as the Valuation Agent hereunder, so
long as such successor valuation agent is
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Certificate Pledge Agreement
approved by the Pledgee and Key Corporate Capital Inc., each of which approval
shall not be unreasonably withheld. The Pledgor shall give the Valuation Agent
at least 30 days' prior written notice of the appointment and approval of a
successor valuation agent. At any time, the Valuation Agent shall have the right
to resign as Valuation Agent by giving the Pledgor and the Pledgee at least 30
days' prior written notice. Prior to the date of the Valuation Agent's
resignation, the Pledgor shall notify the Valuation Agent of the successor
valuation agent appointed by the Pledgor and approved by the Pledgee. Upon such
appointment of a successor valuation agent, such valuation agent shall succeed
to the rights, powers and duties of the Valuation Agent, and the term "Valuation
Agent" shall mean successor valuation agent effective upon such appointment and
approval, and the former Valuation Agent's rights, powers and duties as the
Valuation Agent shall be terminated, without any other or further act or deed on
the part of such former Valuation Agent or any of the parties to this Pledge
Agreement.
SECTION 7.2 No Duty.
-------
1. Notwithstanding anything to the contrary, the Valuation Agent shall
have no duties, obligations or responsibilities except as expressly set forth in
this Pledge Agreement. Except a set forth in this Pledge Agreement the Valuation
Agent shall have no fiduciary duty, obligation or responsibility in respect of
any party hereto or any indirect beneficiary of this Pledge Agreement or the
Collateral.
ARTICLE III
MISCELLANEOUS PROVISIONS
SECTION 8.1 Operative Document. This Pledge Agreement is an Operative
Document executed pursuant to the Lease and shall (unless expressly indicated
herein) be construed, administered and applied in accordance with the terms and
provisions of the Lease.
SECTION 8.2 Successors, Transferees and Assigns. This Pledge Agreement
shall be binding upon the Pledgor and its successors, transferees and assigns
and shall inure to the benefit of and be enforceable by the Pledgee and its
successors and permitted assigns. Except as provided in the Lessor Pledge
Agreement, without the express written consent of the Pledgor, which shall not
be unreasonably withheld, the Pledgee shall not have the right to assign this
Pledge Agreement to any person or entity which is not the Lessor under the
Lease.
SECTION 8.3 Amendments, etc. No amendment to or waiver of any provision of
this Pledge Agreement, nor consent to any departure by the Pledgor herefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Pledgee, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given. The parties
hereto agree to entered into an amendment to this Pledge Agreement (the
"Amendment") within fourteen (14) days of the date hereof providing for the
establishment of
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Certificate Pledge Agreement
the Collateral Account, the granting by the Pledgor to the Pledgee and the
Custodian of a security interest in the Collateral Account and the proceeds
thereof. The terms of such amendment shall be reasonably satisfactory to the
parties hereto and the Custodian.
SECTION 8.4 Protection of Collateral. The Pledgee may from time to time,
at its option, perform any act which the Pledgor agrees hereunder to perform and
which the Pledgor shall fail to perform after being requested in writing so to
perform (it being understood that no such request need be given after the
occurrence and during the continuance of an Event of Default described in
Section 6.1) and the Pledgee may from time to time take any other action which
the Pledgee reasonably deems necessary for the maintenance, preservation or
protection of any of the Collateral or of its security interest therein.
SECTION 8.5 Addresses for Notices. All notices, demands, requests,
consents, approvals and other communications hereunder shall be in writing
(including by facsimile) and directed (a) to the address or facsimile number
described in, and deemed received in accordance with the provisions of, Section
33.4 of the Lease and (b) in the case of the Valuation Agent, to Wilmington
Trust Company, 1100 North Market Street, Wilmington, Delaware 19890-0001,
facsimile number (302) 427-4605, telephone number (302) 651-1913, Attention:
Custody Department; provided, however, that all such notices and other
communications given by one by party hereto to another in connection with this
Pledge Agreement shall be given to all other parties hereto.
SECTION 8.6 No Waiver; Remedies. No failure on the part of the Pledgee to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
SECTION 8.7 Section Captions. Section captions used in this Pledge
Agreement are for convenience of reference only, and shall not affect the
construction of this Pledge Agreement.
SECTION 8.8 Severability. Wherever possible each provision of this Pledge
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Pledge Agreement shall be
prohibited by or invalid under such 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 Pledge Agreement.
SECTION 8.9 Governing Law. THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK. FOR
PURPOSES OF THE CREATION AND PERFECTION OF THE SECURITY INTEREST GRANTED UNDER
THIS PLEDGE AGREEMENT WITH RESPECT TO THE COLLATERAL, SUCH MATTERS SHALL
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Certificate Pledge Agreement
BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
OHIO.
SECTION 8.10 Waiver of Jury Trial. THE PLEDGOR HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS PLEDGE AGREEMENT. THE PLEDGOR ACKNOWLEDGES AND AGREES THAT
IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PLEDGEE ENTERING INTO THE LEASE.
SECTION 8.11 Execution in Counterparts. This Pledge Agreement may be
executed by the parties hereto in several counterparts, each of which shall be
deemed to be an original and all of which shall constitute together but one and
the same agreement.
SECTION 8.12 Pledge of Interest in Certificate A. The Pledgor hereby
consents to the terms of the Pledge Agreement, dated as of the date hereof,
between the Pledgee and Key Corporate Capital Inc. (the "Key Pledge Agreement"),
pursuant to which the Pledgee pledged and granted a security interest to Key
Corporate Capital Inc. in all the Pledgee's rights, title and, interest in and
to Certificate A and all payments and proceeds with respect thereto.
SECTION 8.13 Replacement of Issuing Bank; Replacement of Certificate A.
(a) The parties hereto hereby agree that if, at any time, (a) Fleet
National Bank or a successor provider of the Certificate A cannot continue
to provide the Certificate A or fails to maintain a rating of "A" (or an
equivalent thereto) or better with a nationally recognized rating agency,
or (b) the Pledgor and the Pledgee agree that another provider of the
Certificate A would be more satisfactory to their needs, the parties shall,
at Pledgor's cost and expense, arrange for a substitute financial
institution with a rating meeting such standard to issue an investment
certificate bearing interest at a rate no less than that of the Certificate
A and having the same maturity date of the Certificate A.
(b) The Pledgor shall provide to the Pledgee at the time of delivery
of any replacement Certificate A a Responsible Employee's Certificate
whereby a Responsible Employee shall certify that the Pledgor is solvent as
of such date. Upon receipt by the Pledgee of the aforementioned Responsible
Employee's Certificate and the replacement Certificate A, the Pledgee shall
transfer to the Pledgor the original Certificate A (or a replacement
provided pursuant to Section 8.13(a)) in the manner so instructed by the
Pledgor . The parties hereto agree that all references in this Pledge
Agreement to the Certificate A shall include any replacement thereof in
accordance with the terms hereof
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Certificate Pledge Agreement
and all security interests and rights granted hereunder with respect to the
original Certificate A shall apply to any replacement Certificate A.
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Certificate Pledge Agreement
IN WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the day and year first above written.
BROOKDALE LIVING COMMUNITIES OF
ILLINOIS - HV, INC.,
as Pledgor
By /s/ Darryl W. Copeland, Jr.
-----------------------------
Name: Darryl W. Copeland, Jr.
Title: Vice President
THE HARBOR VILLAGE BUSINESS
TRUST, as Pledgee
By Wilmington Trust Company, not in its
individual capacity but solely as trustee
under the Trust Agreement
By /s/ James P. Lawler
-----------------------------
Name: James P. Lawler
Title: Vice President
WILMINGTON TRUST COMPANY,
as Valuation Agent
By /s/ James P. Lawler
-----------------------------
Name: James P. Lawler
Title: Vice President
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Certificate Pledge Agreement
SCHEDULE I
TO PLEDGE AGREEMENT
[Copy of Certificate A]
<PAGE>
[EXECUTION COPY]
Exhibit 10.4
SECURITIES PLEDGE AGREEMENT
---------------------------
THIS SECURITIES PLEDGE AGREEMENT (together with all amendments, supplements
and other modifications made from time to time, this "Pledge Agreement"), dated
as of March 6, 1998, made by BROOKDALE LIVING COMMUNITIES OF ILLINOIS - HV,
INC., a Delaware corporation (the "Pledgor"), in favor of THE HARBOR VILLAGE
BUSINESS TRUST, a Delaware business trust (the "Pledgee") and WILMINGTON TRUST
COMPANY, a Delaware banking corporation, as custodian (in such capacity, the
"Custodian").
W I T N E S S E T H:
-------------------
WHEREAS, as a condition to the occurrence of the Acquisition Date under the
Lease dated as of the date hereof (together with all amendments and other
modifications, if any, from time to time thereafter made thereto, the "Lease"),
between the Pledgor, as Lessee and the Pledgee, as Lessor, the Pledgor is
required to execute and deliver this Pledge Agreement;
WHEREAS, the Pledgor has duly authorized the execution, delivery and
performance of this Pledge Agreement; and
WHEREAS, it is in the best interests of the Pledgor to execute this Pledge
Agreement inasmuch as the Pledgor will derive substantial benefits from the
transactions contemplated by the Lease;
WHEREAS, the Custodian has agreed to hold the securities pledged hereunder
for the benefit of the Pledgee to secure the Pledgee's rights under the
Operative Documents;
NOW, THEREFORE, for good and valuable consideration the receipt of which is
hereby acknowledged, the parties hereto agree as follows:
<PAGE>
Securities Pledge Agreement
ARTICLE I
DEFINITIONS
SECTION 1.1 Certain Terms. Capitalized terms used but not otherwise
defined in this Pledge Agreement have the respective meanings specified in
Appendix 1 to the Lease; and the rules of interpretation set forth in Appendix 1
to the Lease shall apply to this Pledge Agreement.
ARTICLE II
PLEDGE
SECTION 2.1 Grant of Security Interest. As collateral security for the
due and punctual payment in full of all the Pledgor's obligations due and owing
to Pledgee under the Operative Documents including, without limitation, the
payment of SELCO Basic Rent, Lessor Basic Rent, Equity Balance and Supplemental
Rent (to the extent that the Lessor is entitled to receive Supplemental Rent)
and the satisfaction of all non-payment obligations of the Pledgor under the
Operative Documents (collectively, the "Obligations"), the Pledgor hereby
pledges, hypothecates, assigns, charges, mortgages, delivers, and transfers to
the Custodian for the benefit of the Pledgee and hereby grants to the Custodian
for the benefit of the Pledgee a continuing security interest in, all of its
right, title and interest in, to and under the following property (the
"Collateral"):
(a) the Collateral Account (as hereinafter defined) and all moneys,
funds, instruments, and securities, including Pledged Property (as
hereinafter defined), now in or from time to time credited to or on deposit
in the Collateral Account;
(b) all interest, profit (whether of cash or securities) and
distributions of any of the foregoing; and
(c) all payments made with respect to and all proceeds (as such term
is defined in the Uniform Commercial Code as in effect in the State of New
York (the "U.C.C.")) of any of the foregoing.
Notwithstanding anything to the contrary contained herein or in any other
Operative Document (with the exception of Section 2.2(e) hereof regarding
Earnings (as hereinafter defined), Wilmington Trust Company (in its capacity as
Custodian under this Pledge Agreement) for the benefit of the Pledgee shall be
the only Person to have rights in and to the Collateral until the Obligations
have been fully satisfied and discharged in accordance with the provisions of
the Operative Documents or until the Collateral is distributed to the Pledgee in
accordance with
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Securities Pledge Agreement
Section 2.2 hereof upon the occurrence of an Event of Default described in
Section 6.1 or upon the failure by the Pledgor to satisfy the Collateral
Requirement in accordance with Section 2.4.
SECTION 2.2 Collateral Account; Release of Collateral; Distribution of
Earnings; Definitions.
(a) The Custodian shall establish a book entry sub-account at the
Federal Reserve Bank of Philadelphia (the "Collateral Account"). All book-
entry obligations of the United States Government issued in the form of an
entry on the records of the Federal Reserve Bank of Philadelphia shall be
(1) identified on the records of the Federal Reserve Bank of Philadelphia
for the account of Wilmington Trust Company or its agent and (2) identified
on the records of Custodian as part of the Collateral Account. The
Custodian shall mark its books and records with respect to the Collateral
to indicate the security interests of the Custodian in the Collateral for
the benefit of the Pledgee. The Custodian is irrevocably instructed to
instruct the Federal Reserve Bank of Philadelphia to record on its books
and records that the Pledged Property in the Collateral Account is held
subject to a security interest of the Custodian, for the benefit of the
Pledgee. The Custodian acknowledges receipt of this Pledge Agreement,
certifies that no notice of any other security agreement or claim affecting
the Collateral has been received by it, states that the Collateral will be
held in the Collateral Account for the benefit of the Pledgee and agrees to
hold the Collateral solely for the benefit of the Pledgee and subject to
the control of the Pledgee, as provided in this Pledge Agreement. Without
limiting the generality of the foregoing, if an Event of Default described
in Section 6.1 has occurred or the Pledgor has failed to comply with the
Collateral Requirement in accordance with Section 2.4(b), the Pledgee shall
provide written notice to the Custodian instructing the Custodian to
withdraw and release all Collateral in the Collateral Account to the
Pledgee as instructed by the Pledgee. Until the Obligations are paid in
full, the Pledgor shall have no right to make withdrawals from the
Collateral Account or to otherwise exercise any control with respect to any
securities or other property from time to time on deposit in or credited to
the Collateral Account, or provide substitute Collateral.
(b) The Pledgor shall deliver with any securities transferred
hereunder all appropriate undated bond powers, duly executed in blank and
any and all other forms related to transfer requested by the Custodian,
completed or executed so to make such transfer valid under applicable law
and the rules of any securities exchange or otherwise.
(c) The Pledgor and the Pledgee agree to do or take all actions (or
omit from taking actions) in order to make all transfers contemplated
hereby valid under applicable law and the rules of any securities exchange
or otherwise.
(d) (i) For the purpose of this Pledge Agreement, "Pledged Property"
shall mean direct obligations of the United States of America and
agencies guaranteed
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Securities Pledge Agreement
by the United States government having a final maturity of one year
from the date of purchase (which shall also be the date of issuance of
the instrument) thereof delivered and duly pledged in accordance with
Section 2.1 and maintained in accordance with Section 2.3, which
Pledged Property shall have a fair market value of not less than 105%
of $675,000 on the date deposited with the Custodian. Pledged Property
shall not include undistributed earnings on Pledged Property in the
Collateral Account.
(ii) For the purpose of this Pledge Agreement, the "Collateral
Requirement" shall be an amount equal to 105% of $675,000.
(e) The Pledgor and Pledgee agree that the Pledgor shall be entitled
to receive any and all proceeds, interest, or profits paid in respect
of the Pledged Property ("Earnings"). The Custodian is instructed to
release all such Earnings to the Pledgor upon each Payment Date on
which Lessor Basic Rent is due; provided, however, that the Pledgor
shall not have rights to Earnings upon the occurrence of an Event of
Default described in Section 6.1 or the failure by the Pledgor to
satisfy the Collateral Requirement in accordance with Section 2.4.
The Custodian hereby agrees to distribute any Earnings to the Pledgor
in accordance with the preceding sentence.
SECTION 2.3 Maintaining Pledged Property. The Pledgor shall maintain at
all times until the Termination (as hereinafter defined) Pledged Property in the
Collateral Account having a Collateral Value equal to or greater than the
Collateral Requirement. All Collateral shall be unrestricted and shall not be
subject to any Lien, except for the Liens of the Pledgee created by the
Operative Documents.
SECTION 2.4 Valuation; Deficiency or Surplus; Purchase of Pledged
Property.
(a) The Custodian shall determine the fair market value of the
Pledged Property held in the Collateral Account, on a weekly mark-to-market
basis. Each such valuation by the Custodian shall be binding on the Pledgor and
the Pledgee, absent manifest error. In the event that any such valuation shall
indicate that such fair market value of the Pledged Property shall be less than
the Collateral Requirement, the Custodian shall give written notice of same
within two (2) Business Days thereof via (i) overnight mail or hand delivery
and (ii) facsimile transmission, to each of the Pledgee and the Pledgor of such
deficiency.
(b) In the event that the fair market value of the Pledged Property
is less than the Collateral Requirement at anytime prior to the full
satisfaction and discharge of the Obligations in accordance with the terms of
the Operative Documents, the Pledgor shall promptly, but in any event with three
(3) Business Days after receipt of notice as described in (a) above (facsimile
confirmation receipt by the Custodian being deemed receipt of notice by the
Pledgor), transfer
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Securities Pledge Agreement
additional Pledged Property to the Collateral Account in an amount equal to or
exceeding the amount of the deficiency of the Collateral Requirement, so that
the Collateral Requirement is maintained at all times prior to the full
satisfaction and discharge of the Obligations. The Pledgor's failure to provide
such additional Pledged Property shall result in Pledgee having the immediate
right to all Pledged Property in accordance with Section 2.2. To the extent the
fair market value of the Collateral Account exceeds the Collateral Requirement
on the maturity date of the Pledged Property prior to the full satisfaction and
discharge of the Obligations in accordance with the terms of the Operative
Documents by an amount greater than five (5%) percent of the Collateral
Requirement and no Event of Default described in Section 6.1 or Default relating
thereto shall have occurred and be continuing, the Custodian is directed to
release such excess Collateral ("Excess Collateral") to the Pledgor within three
(3) Business Days of such maturity date.
(c) The Custodian is hereby irrevocably directed by the Pledgor and
the Pledgee to utilize the proceeds of matured Pledged Property, excluding
Excess Collateral, to immediately repurchase Pledged Property of the same type
and duration as those that had matured.
SECTION 2.5 Security for Obligations. The security interest granted by
the Pledgor hereunder secures the payment in full of all the Pledgor's
Obligations.
SECTION 2.6 Delivery of Pledged Property. All certificates or instruments
representing or evidencing any Collateral, shall be delivered to and held by or
on behalf of the Custodian pursuant hereto, shall be in suitable form for
transfer by delivery, and shall be accompanied by all necessary instruments of
transfer or assignment, duly executed in blank, all in form and substance
satisfactory to the Custodian.
SECTION 2.7 Continuing Security Interest. This Pledge Agreement shall
create a continuing security interest in the Collateral and shall
(a) become effective only upon the Custodian's receipt of an opinion
letter of counsel, to the effect that (i) this Pledge Agreement is binding
upon and enforceable against the Pledgor and (ii) that upon the delivery of
the Collateral to the Custodian, the security interest created hereunder is
a valid security interest,
(b) remain in full force and effect until (i) (x) the Pledgee
notifies the Custodian in writing that the Pledgor has either (A) paid the
Equity Balance or (B) performed all of its Obligations in full, and (y) the
Pledgor has paid all of its obligations to the Custodian in full pursuant
to Section 6.3 hereof and has fully performed all of its non-payment
obligations hereunder or (ii) the Collateral is withdrawn from the
Collateral Account and released to the Pledgee in accordance with the terms
hereof (each a "Termination"),
(c) be binding upon the Pledgor and its successors, transferees and
assigns, and
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Securities Pledge Agreement
(d) inure, together with the rights and remedies of the Custodian
hereunder, to the benefit of the Pledgee.
Upon Termination, the security interest granted herein shall terminate and all
rights, if any, to the Collateral shall revert to the Pledgor. Upon
Termination, the Custodian will, at the sole expense of the Pledgor, and upon
written instruction of the Pledgor, deliver to the Pledgor, without any
representations, warranties or recourse of any kind whatsoever, all certificates
and instruments representing or evidencing all Collateral owned by the Pledgor
and held by the Custodian hereunder and execute and deliver to the Pledgor such
documents as the Pledgor shall reasonably request to evidence the Termination,
whereupon the Custodian shall be automatically released and discharged from its
obligations hereunder.
SECTION 2.8 Security Interest Absolute. All rights of the Custodian and
the security interests granted to the Custodian hereunder, and all obligations
of the Pledgor hereunder, shall be absolute and unconditional, irrespective of
(a) any lack of validity or enforceability of this Pledge Agreement
or any other Operative Document,
(b) the failure of the Pledgee to assert any claim or demand or to
enforce any right or remedy against the Pledgor or any other Person under
the provisions of any Operative Document or otherwise,
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of obligations the Obligations or any other
extension, compromise or renewal of any Obligation,
(d) any reduction, limitation, impairment or termination of any
Obligations for any reason, including any claim of waiver, release,
surrender, alteration or compromise, and shall not be subject to (and the
Pledgor hereby waives any right to or claim of) any defense or setoff,
counterclaim, recoupment or termination whatsoever by reason of the
invalidity, illegality, nongenuineness, irregularity, compromise,
unenforceability of, or any other event or occurrence affecting, the
Pledgee or otherwise,
(e) any amendment to, rescission, waiver, or other modification of,
or any consent to departure from, any of the terms of the any Operative
Document,
(f) any addition, exchange, release, surrender or non-perfection of
any Collateral, or any amendment to or waiver or release of or addition to
or consent to departure from any guaranty, for any of the Obligations, or
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Securities Pledge Agreement
(g) any other circumstances which might otherwise constitute a
defense available to, or a legal or equitable discharge of, the Pledgor or
Pledgee or any other Person.
SECTION 2.9 Waiver of Subrogation. The Pledgor hereby irrevocably waives
any claim or other rights which it may now or hereafter acquire against the
Pledgee or any other Person that arise from the existence, payment, performance
or enforcement of the Pledgor's obligations under this Pledge Agreement or any
other Operative Document, including any right of subrogation, reimbursement,
exoneration, or indemnification, any right to participate in any claim or remedy
against the Pledgee or any other Person or any collateral which the Pledgee now
has or hereafter acquires, whether or not such claim, remedy or right arises in
equity, or under contract, statute or common law, including the right to take or
receive from the Pledgee or any other Person, directly or indirectly, in cash or
other property or by set-off or in any manner, payment or security on account of
such claim or other rights. If any amount shall be paid to the Pledgor in
violation of the preceding sentence and the Obligations shall not have been paid
in cash in full, such amount shall be deemed to have been paid to the Pledgor
for the benefit of, and held in trust for, the Pledgee, and shall forthwith be
paid to the Pledgee to be credited and applied upon the Obligations, whether
matured or unmatured. The Pledgor acknowledges that it will receive direct and
indirect benefits from the financing arrangements contemplated by the Pledge
Agreement and that the waiver set forth in this Section is knowingly made in
contemplation of such benefits.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Pledgor's Warranties, etc. The Pledgor represents and
warrants for itself unto the Pledgee as at the date of each pledge and delivery
hereunder by the Pledgor to the Pledgee of any Collateral pledged by the Pledgor
pursuant to this Pledge Agreement as follows:
(a) Ownership, No Liens, etc. The Pledgor is the legal and
beneficial owner of, and has good and valid title to (and has full right
and authority to pledge and assign) the Collateral, free and clear of all
Liens, security interests, options, or other charges or encumbrances,
except any Lien or security interest granted pursuant hereto in favor of
the Pledgee.
(b) Valid Security Interest. The delivery of the Collateral to the
Custodian and the issuance of control of the Collateral Account to the
Custodian is effective to create a valid, perfected, first priority
security interest in such Collateral and all proceeds thereof, securing the
Obligations. No filing or other action will be necessary to perfect or
protect such security interest.
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Securities Pledge Agreement
(c) Authorization, Approval, etc. No authorization, approval, or
other action by, and no notice to or filing with, any governmental
authority, regulatory body or any other Person is required either
(i) for the pledge by the Pledgor of any Collateral pursuant to
this Pledge Agreement or for the execution, delivery, and performance
of this Pledge Agreement by the Pledgor, or
(ii) for the exercise by the Pledgee of any of the rights
provided for in this Pledge Agreement, or, except as may be required
in connection with a disposition of any Collateral by laws affecting
the offering and sale of securities generally, the remedies in respect
of the Collateral pursuant to this Pledge Agreement.
ARTICLE IV
COVENANTS
SECTION 4.1 Certain Covenants.
(a) The Pledgor covenants and agrees that, so long as any portion of
the Obligations shall remain unpaid or unfulfilled:
(i) except as permitted by the Operative Documents, it will not
sell, assign, transfer, pledge, or encumber in any other manner the
Collateral owned by it (except in favor of the Pledgee hereunder);
(ii) the Pledgor will warrant and defend the right and title
herein granted unto the Pledgee in and to the Collateral (and all
right, title, and interest represented by the Collateral) against the
claims and demands of all Persons whomsoever; and
(iii) at any time, and from time to time, at the expense of the
Pledgor, the Pledgor will promptly execute and deliver all further
instruments, and take all further action, that the Pledgee may
reasonably request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable the
Pledgee to exercise and enforce its rights and remedies hereunder with
respect to any Collateral.
(b) The Pledgee covenants to the Custodian that it will provide the
Custodian with prompt written notice of an Event of Default that occurs
during the term of this Pledge Agreement and of any cure of any such Event
of Default.
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Securities Pledge Agreement
ARTICLE V
THE CUSTODIAN
SECTION 5.1 Custodian Appointed Attorney-in-Fact and Agent.
(a) The Pledgor hereby irrevocably appoints the Custodian the
Pledgor's attorney-in-fact, with full authority in the place and stead of
the Pledgor and in the name of the Pledgor or otherwise, from time to time
upon the occurrence of any Event of Default described in Section 6.1 or
upon the Pledgor's failure to comply with the Collateral Requirement in
accordance with the terms hereof, to take any action and to execute any
instrument which the Custodian may deem necessary or advisable to
accomplish the purposes of this Pledge Agreement, including without
limitation:
(i) to ask, demand, collect, sue for, recover, compromise,
receive and give acquittance and receipts for moneys due and to become
due under or in respect of any of the Collateral;
(ii) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with clause
(a) above; and
(iii) to file any claims or take any action or institute any
proceedings which the Custodian may deem necessary or desirable for
the collection of any of the Collateral or otherwise to enforce the
rights of the Custodian with respect to any of the Collateral.
The Pledgor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
(b) The Pledgee hereby appoints the Custodian as the Pledgee's agent
(i) for retaining physical possession of any cash included in the
Collateral and any physical certificates or instruments or other physical
representation or evidence of any Collateral in accordance with the
provisions of this Pledge Agreement and (ii) for holding the interest of
the Pledgee in all book-entry securities in accordance with the provisions
of this Pledge Agreement. All Collateral shall be credited to the
Collateral Account and segregated from all other property, including,
without limitation, that of the Pledgor and the Pledgee.
SECTION 5.2 Custodian May Perform. If the Pledgor fails to perform any
agreement contained herein, the Custodian may itself perform, or cause
performance of, such agreement,
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Securities Pledge Agreement
and the expenses of the Custodian incurred in connection therewith shall be
payable by the Pledgor pursuant to Section 6.3.
SECTION 5.3 No Duty.
(a) The powers conferred on the Custodian hereunder are solely to
protect the interests of the Pledgee in the Collateral, and shall not
impose any duty on it to exercise any such powers. Except for reasonable
care of any Collateral in its possession by the Custodian and the
accounting by the Custodian for moneys actually received by it hereunder,
the Custodian shall not have any duty as to any Collateral or
responsibility for
(i) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relative
to any Collateral, whether or not the Custodian has or is deemed to
have knowledge of such matters, or
(ii) taking any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral.
(b) Notwithstanding anything to the contrary, the Custodian shall
have no duties, obligations or responsibilities except as expressly set
forth in this Pledge Agreement. Except as set forth in this Pledge
Agreement, the Custodian shall have no fiduciary duty, obligation or
responsibility in respect of any party hereto or any indirect beneficiary
of this Pledge Agreement or the Collateral.
SECTION 5.4 Reasonable Care. The Custodian is required to exercise
reasonable care in the custody and preservation of any of the Collateral in its
possession; provided, however, the Custodian shall be deemed to have exercised
reasonable care in the custody and preservation of any of the Collateral, if it
takes such action for that purpose as the Pledgor reasonably requests in writing
at times other than upon the occurrence and during the continuance of any Event
of Default described in Section 6.1, but failure of the Custodian to comply with
any such request at any time shall not in itself be deemed a failure to have
exercised reasonable care but shall be used as a factor in determining whether
the Custodian has exercised reasonable care. The Custodian agrees to exercise
the same degree of care as exercised by banks generally for similar property in
exercising its duties under this Pledge Agreement.
SECTION 5.5 [Intentionally Omitted]
SECTION 5.6 Successor Custodian. At any time, the Pledgor shall have the
right to appoint a successor custodian to replace Wilmington Trust Company (or
any successor Custodian) as the Custodian hereunder, so long as such successor
custodian is approved by the Pledgee, which approval shall not be unreasonably
withheld. The Pledgor shall give the Custodian at least 30 days' prior written
notice of the appointment and approval of a successor
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Securities Pledge Agreement
custodian. At any time, the Custodian shall have the right to resign as
Custodian by giving the Pledgor and the Pledgee at least 30 days' prior written
notice. Prior to the date of the Custodian's resignation, the Pledgor shall
notify the Custodian of the successor custodian appointed by the Pledgor and
approved by the Pledgee. Upon such appointment of a successor custodian, such
custodian shall succeed to the rights, powers and duties of the Custodian, and
the term "Custodian" shall mean successor custodian effective upon such
appointment and approval, and the former Custodian's rights, powers and duties
as the Custodian shall be terminated, without any other or further act or deed
on the part of such former Custodian or any of the parties to this Pledge
Agreement.
ARTICLE VI
REMEDIES
SECTION 6.1 Certain Remedies. If any Event of Default shall have
occurred, other than an Event of Default caused by an "Event of Default"
pursuant to the following provisions of each of the Nomura Loan Agreement and
the Mezzanine Loan Agreement which was caused solely by the Pledgee and not
caused directly, indirectly or proximately by an act or omission of the Pledgor:
(i) Section 7.1(ix) (solely as to representations and warranties of the Pledgee
as of the date hereof pursuant to Sections 4.1(a)(A), (B) or (C), and Sections
4.1(b)(A), (B), (C), (G), (H), (I), (J), (L), (N), (Z), (AA) or (AJ) of each of
the Nomura Loan Agreement and the Mezzanine Loan Agreement, (ii) Section 7.1(x)
(solely as to the Pledgee), (iii) Section 7.1(xi) (solely as to the Pledgee),
(iv) Section 7.1(xiii) (solely as to the Pledgee), (v) Section 7.1(xv) (solely
as to Section 5.1(a)(U)) or (vi) Section 7.1(xvi) (solely as to Section
5.1(a)(T)), or if the Pledgor has failed to comply with the Collateral
Requirement in accordance with Section 2.4(b), and in accordance with the
instructions of the Pledgee in accordance with Section 2.2:
(a) The Custodian may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or in the other
Operative Documents or otherwise available to it, all the rights and
remedies of a secured party on default under the U.C.C. (whether or not the
U.C.C. applies to the affected Collateral) and also may, without notice
except as specified below, sell or redeem, as applicable, the Collateral or
any part thereof (to the extent the Collateral can be used to satisfy the
obligations of the Pledgor pursuant to Sections 2.1 and 2.5 of this Pledge
Agreement), for cash, on credit or for future delivery, and upon such other
terms as the Pledgee may deem commercially reasonable.
(b) The Custodian may (to the extent the Collateral is necessary to
satisfy the Pledgor's obligations pursuant to Sections 2.1 and 2.5 hereof):
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Securities Pledge Agreement
(i) transfer all or any part of the Collateral into the name of
the Custodian or its nominee, with or without disclosing that such
Collateral is subject to the lien and security interest hereunder,
(ii) notify the parties obligated on any of the Collateral to
make payment to the Custodian of any amount due or to become due
thereunder,
(iii) enforce collection of any of the Collateral by suit or
otherwise, and surrender, release or exchange all or any part thereof,
or compromise or extend or renew for any period (whether or not longer
than the original period) any obligations of any nature of any party
with respect thereto,
(iv) endorse any checks, drafts, or other writings in the
Pledgor's name to allow collection of the Collateral,
(v) take control of any proceeds of the Collateral, and
(vi) execute (in the name, place and stead of the Pledgor)
endorsements, assignments, instruments of conveyance or transfer with
respect to all or any of the Collateral.
SECTION 6.2 Securities Laws. If the Custodian shall exercise its right to
sell all or any of the Collateral pursuant to Section 6.1, the Pledgor agrees
that, upon request of the Custodian, the Pledgor will, at its own expense do or
cause to be done all such acts and things as may be necessary to make such sale
of the Collateral owned by the Pledgor or any part thereof valid and binding and
in compliance with applicable law.
SECTION 6.3 Indemnity and Expenses. The Pledgor hereby indemnifies and
holds harmless the Pledgee and the Custodian from and against any and all
claims, losses, and liabilities arising out of or resulting from this Pledge
Agreement (including enforcement of this Pledge Agreement) except claims, issues
or liabilities of the Custodian resulting from the Custodian's gross negligence
or wilful misconduct. Upon demand, the Pledgor will pay to the Custodian and
Pledgee the amount of any and all reasonable expenses, including the reasonable
fees and disbursements of its counsel and of any experts and agents, which the
Custodian or Pledgee may reasonably incur in connection with:
(a) the administration of this Pledge Agreement, including the
valuation of Collateral pursuant to Section 2.4 hereof;
(b) the custody, preservation, use, or operation of, or the sale of,
collection from, or other realization upon, any of the Collateral,
including pursuant to Section 7.3;
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Securities Pledge Agreement
(c) the exercise or enforcement of any of the rights of the Pledgee
hereunder; or
(d) the failure by the Pledgor to perform or observe any of the
provisions hereof.
SECTION 6.4 Fees of Custodian. The Pledgor agrees to pay the Custodian
fees in accordance with the terms of the Nomura Loan Agreement and the Mezzanine
Loan Agreement.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1 Operative Document. This Pledge Agreement is an Operative
Document executed pursuant to the Lease and shall (unless expressly indicated
herein) be construed, administered and applied in accordance with the terms and
provisions of the Lease.
SECTION 7.2 Successors, Transferees and Assigns. This Pledge Agreement
shall be binding upon the Pledgor and its successors, transferees and assigns
and shall inure to the benefit of and be enforceable by the Pledgee and the
Custodian and their respective successors and permitted assigns. Without the
express written consent of the Pledgor, which shall not be unreasonably
withheld, the Pledgee shall not have the right to assign this Pledge Agreement
to any person or entity which is not the Lessor under the Lease.
SECTION 7.3 Amendments, etc. No amendment to or waiver of any provision
of this Pledge Agreement, nor consent to any departure by the Pledgor herefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Pledgee, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given. The parties
hereto agree that this Pledge Agreement shall be amended to provide for the
replacement of the Collateral with a certificate of deposit substantially
similar to the terms of the Certificate A.
SECTION 7.4 Addresses for Notices. All notices, demands, requests,
consents, approvals and other communications hereunder shall be in writing
(including by facsimile) and directed (a) in the case of the Pledgor and the
Pledgee, to the addresses or facsimile numbers described in, and deemed received
in accordance with the provisions of, Section 33.4 of the Lease and (b) in the
case of the Custodian, to Wilmington Trust Company, 1100 North Market Street,
Wilmington, Delaware 19890-0001, facsimile number (302) 427-4605 telephone
number (302) 651-1913, Attention: Custody Department; provided, however, that
all such notices and other communications given by one by party hereto to
another in connection with this Pledge Agreement shall be given to all other
parties hereto.
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Securities Pledge Agreement
SECTION 7.5 No Waiver; Remedies. No failure on the part of the Pledgee
to exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
SECTION 7.6 Section Captions. Section captions used in this Pledge
Agreement are for convenience of reference only, and shall not affect the
construction of this Pledge Agreement.
SECTION 7.7 Severability. Wherever possible each provision of this
Pledge Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Pledge Agreement shall
be prohibited by or invalid under such 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 Pledge
Agreement.
SECTION 7.8 Governing Law. THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.
FOR PURPOSES OF THE CREATION AND PERFECTON OF THE SECURITY INTEREST GRANTED
UNDER THIS PLEDGE AGREEMENT SUCH MATTERS SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE.
SECTION 7.9 Waiver of Jury Trial. THE PLEDGOR HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS PLEDGE AGREEMENT. THE PLEDGOR ACKNOWLEDGES AND AGREES
THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND
THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PLEDGEE ENTERING INTO THE
LEASE.
SECTION 7.10 Execution in Counterparts. This Pledge Agreement may be
executed by the parties hereto in several counterparts, each of which shall be
deemed to be an original and all of which shall constitute together but one and
the same agreement.
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Securities Pledge Agreement
IN WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the day and year first above written.
BROOKDALE LIVING COMMUNITIES
OF ILLINOIS - HV, INC., as Pledgor
By /s/ Darryl W. Copeland, Jr.
---------------------------------
Name: Darryl W. Copeland, Jr.
Title: Vice President
THE HARBOR VILLAGE BUSINESS
TRUST, as Pledgee
By Wilmington Trust Company, not in
its individual capacity but solely
as trustee under the Trust Agreement
By /s/ Patricia A. Evans
---------------------------------
Name: Patricia A. Evans
Title: Financial Services Officer
WILMINGTON TRUST COMPANY,
as Custodian
By /s/ Patricia A. Evans
---------------------------------
Name: Patricia A. Evans
Title: Financial Services Officer
<PAGE>
[EXECUTION COPY]
Exhibit 10.5
INDEMNITY AGREEMENT
-------------------
THIS INDEMNITY AGREEMENT (this "Agreement"), made as of March 6, 1998, from
BROOKDALE LIVING COMMUNITIES, INC., a Delaware corporation, having an office at
77 West Wacker Drive, Chicago, Illinois 60601, Attention: Darryl W. Copeland,
Jr., Telefax Number (312) 977-3699 (the "Guarantor") to WILMINGTON TRUST
COMPANY, a Delaware banking corporation (the "Trustee") having an office at
Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001,
KEY CORPORATE CAPITAL INC., a Michigan corporation ("Key"), having an office at
54 State Street, Albany, New York 12207, Attention: Key Global Transaction
Support, Telefax Number (518) 487-4017, and SELCO SERVICE CORPORATION, an Ohio
corporation ("SELCO") having an office at c/o KeyCorp Leasing, 54 State Street,
Albany, New York 12207, Attention: John State, Telefax Number (518) 487-4017
(together with its successors and assigns pursuant to Section 9 hereof).
RECITALS
WHEREAS, pursuant to a Trust Agreement dated as of the date hereof between
the Trustee and SELCO (as modified and supplemented and in effect from time to
time, the "Trust Agreement"), The Harbor Village Business Trust (the "Trust") is
being formed with an initial capital contribution made by SELCO to the Trust
(the "Capital Contribution");
WHEREAS, the Trust and Brookdale Living Communities of Illinois - HV, Inc.
(the "Operator") are entering into a certain lease dated the date herewith (the
"Lease"), pursuant to which Operator shall manage and operate the Property;
WHEREAS, Key, as lender, and the Trust, as borrower, are parties to a Loan
Agreement, dated as of March 6, 1998, pursuant to which Key is making a loan to
the Trust (the "B Loan");
WHEREAS, SELCO is unwilling to make the Capital Contribution and Key is
unwilling to make the B Loan unless Guarantor indemnifies each Indemnitee
against certain liabilities, including those arising under Environmental Laws
(as herein defined), relating to the property being financed in connection with
the transactions contemplated by the Operative Documents, 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 "Facility") and from claims that may be
imposed upon any Indemnitee by third parties in connection with the Facility;
and
NOW, THEREFORE, in consideration of the making of the Capital Contribution
by SELCO and the covenants, agreements, representations and warranties set forth
in this Agreement, the parties hereby covenant, agree, represent and warrant as
follows:
<PAGE>
Indemnity Agreement
Section 1. Defined Terms. Unless the context otherwise requires,
capitalized terms used but not otherwise defined herein shall have the meanings
provided therefore in the Loan Agreement (the "Loan Agreement"), dated as of on
or about the date hereof among the Trust, the Operator and Nomura Asset Capital
Corporation (the "Lender") and the following terms shall have the following
meanings:
"After Tax Basis" shall have the meaning as set forth in the Lease.
"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 Indemnitee (solely with
respect to matters arising at or involving the Facility), Operator or the
Facility, 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
Facility, (ii) any fact, circumstance, condition or occurrence forming the basis
of any violation, or alleged violation, of any Environmental Law by any
Indemnitee (solely with respect to matters arising at or involving the
Facility), Operator or otherwise affecting the Facility or (iii) any alleged
injury or threat of injury to health, safety or the environment by any
Indemnitee (solely with respect to matters arising at or involving the
Facility), Operator or otherwise affecting the Facility 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, or the Release or threatened Release of
Hazardous Substances into the indoor or outdoor environment, including, without
limitation, ambient air, soil, surface water, ground water, wetlands, land or
subsurface strata or otherwise relating to the presence or Use of Hazardous
Substances.
"Environmental Reports" means the environmental audit reports, with respect
to the Facility, delivered to Lender prior to the date hereof and in connection
with the Loan or Mezzanine Loan (as defined in the Lease), 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.
"Governmental Authority" means any national or federal government, any
state, regional, local or other political subdivision thereof and any Person
with jurisdiction exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
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Indemnity 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.
"Indemnitee" means the Trustee, Key and SELCO and their respective
successors, permitted assigns, directors, shareholders, partners, officers,
employees and agents.
"Lease" means the Lease dated as of the date hereof between Brookdale
Living Communities of Illinois - HV, Inc. as lessee and the Trust as lessor.
"Operative Documents" shall have the meaning as set forth in the Lease.
"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 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.
"Securities Pledge Agreement" means the Securities Pledge Agreement dated
as of the date hereof by and between Brookdale Living Communities of Illinois -
HV, Inc., as pledgor in favor of the Trust, as pledgee and Wilmington Trust
Company, as custodian.
"SELCO" has the meaning provided in the first paragraph of this Agreement.
"Trust" has the meaning provided in the Recitals to this Agreement.
"Trust Agreement" has the meaning provided in the Recitals to this
Agreement.
"Trustee" has the meaning provided in the first paragraph of this
Agreement.
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Indemnity Agreement
"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.
Section 2. Indemnification.
(a) The Guarantor agrees to indemnify each Indemnitee in the same manner
and to the same extent as the Lessee has agreed to indemnify each Indemnitee (as
defined in the Lease) in Article XXVI of the Lease except with respect to (i)
any Claims (as defined in the Lease) which arise with respect to any
Environmental Claims or other environmental matters, it being understood that
Guarantor's indemnification obligations with respect to Environmental Claims and
other environmental matters shall be limited to the provisions set forth herein
without regard to any indemnification of Environmental Claims or other
environmental matters set forth in Article XXVI of the Lease and (ii) any Basic
Rent, Supplemental Rent, Shortfall Amount or any Claims for amounts arising
under Sections 26.6, 26.7, 26.8 or 26.9 of the Lease, it being understood that
Guarantor shall have no indemnification obligations with respect to any Claims
related thereto (the matters set forth in clauses (i) and (ii) above being
herein called the "Excluded Claims"). For purposes of enforcing and interpreting
the indemnity provided in this Section 2(a), the capitalized terms contained in
Article XXVI of the Lease shall have the meanings as set forth in Appendix 1 to
the Lease or as defined in Article XXVI of the Lease, as applicable. Further,
the Guarantor agrees to indemnify SELCO for all Claims of whatever kind or
nature arising in connection with SELCO's agreement to indemnify the Trustee
pursuant to Section 6.5 of the Trust Agreement but not including any Excluded
Claims.
(b) Subject to the limitations set forth in Section 14 hereof, Guarantor
agrees to indemnify, reimburse, defend (with counsel satisfactory to each
Indemnitee in each Indemnitee's reasonable discretion), and hold harmless each
Indemnitee, on an After-Tax Basis, 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 Indemnitee, 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 Facility, which presence, use or release requires or
could reasonably require Remedial Work;
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Indemnity Agreement
(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(b)(U), Section 4.1(d)(U), Sections 5.1(a)(D) through
5.1(a)(I), and Sections 5.1(b)(D) through 5.1(b)(I), inclusive of each of
the Loan Agreement and that certain Mezzanine Loan Agreement, dated as of
on or about the date hereof, among the Trust, the Operator and the Lender;
or
(v) any failure of Guarantor to fulfill each and every obligation
undertaken pursuant to this Agreement.
(c) Nothing in this Agreement shall be deemed to deprive any Indemnitee of
any rights or remedies provided to it elsewhere in this Agreement or in the
other Operative Document or otherwise available to it under law. Guarantor
waives and releases each Indemnitee 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 any Indemnitee.
(d) With respect to those matters for which Guarantor has agreed to
indemnify each Indemnitee hereunder, and to the maximum extent permitted by
applicable law, Guarantor waives and releases each Indemnitee 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 any Indemnitee.
Section 3. Payment. All payments due to any Indemnitee under this
Agreement shall be payable to such Indemnitee 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.
Section 4. Governing Law.
(a) The parties agree that the State of Illinois 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
Illinois 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 Illinois.
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Indemnity Agreement
(b) Any legal suit, action or proceeding against any Indemnitee 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 (S) 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 each Indemnitee 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.
Section 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.
Section 6. Delay Not a Waiver. Neither any failure nor any delay on the
part of any Indemnitee 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, neither Indemnitee shall 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.
Section 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
-6-
<PAGE>
Indemnity Agreement
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 SELCO or Key at
their addresses 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 Guarantor shall be delivered concurrently to each of the
following: Brookdale Living Communities of Illinois - HV, Inc., 77 West Wacker
Drive, Chicago, Illinois 60601, Attention: Darryl W. Copeland, Jr., Telefax
Number (312) 977-3699; Brookdale Living Communities of Illinois - HV, Inc., 77
West Wacker Drive, Chicago, Illinois 60601, Attention: Robert J. Rudnik,
Esquire, Telefax Number (312) 977-3701; and Douglas E. Wambach, Burke, Warren,
MacKay & Serritella, 330 North Wabash Avenue, 22nd Floor, Chicago, Illinois
60611-3607, Telefax Number (312) 840-7900. 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.
Section 8. Trial by Jury. GUARANTOR AND EACH INDEMNITEE, 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.
Section 9. Assignment. SELCO and Key shall have the right to assign this
Agreement and the obligations hereunder to any Institutional Lender (as defined
in the Lease), at any time. The Trustee shall have the right to assign this
Agreement and the obligations hereunder to any successor trustee of the Trust.
All references to each "Indemnitee" hereunder shall be deemed to include the
successors and assigns of each Indemnitee, including any trustee or servicer.
Section 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.
Section 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.
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<PAGE>
Indemnity Agreement
Section 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.
Section 13. Estoppel Certificates. Guarantor and the Indemnities each
hereby agree at any time and from time to time upon not less than 15 days prior
written notice by Guarantor or the Indemnitees 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 the Indemnitees obligation to
deliver the statement pursuant to this Section 13, that each Indemnitee 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).
Section 14. Survival. This Agreement shall survive (in perpetuity) the
closing and disbursement of the funds evidenced by the SELCO Debt and the
termination of the Lease, reconveyance, discharge or foreclosure of the
Mortgage, conveyance by deed in lieu of foreclosure, transfer, and any
subsequent conveyance of the Facility. Notwithstanding the foregoing, Guarantor
shall not indemnify any Indemnitee 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(b)(i) through 2(b)(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 Facility (a) by the affirmative act or gross
negligence of any Indemnitee or any employees, agents or bailees of any
Indemnitee or (b) subsequent to the termination of the Lease and return of the
Facility to Borrower or conveyance of the Facility as provided in Article XXIV
of the Lease.
Section 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.
Section 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 Operative Documents made in accordance therewith, (b) any extensions of time
for performance required by any of the Operative Documents, or (c) the release
or substitution in whole or in part, of any security for the SELCO Debt or other
evidence of debt issued pursuant to the Operative Documents; and in any of such
cases, whether with or without notice to Guarantor and with or without
consideration.
[Signature on the following page]
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<PAGE>
Indemnity Agreement
IN WITNESS WHEREOF, the Guarantor has caused this 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: /s/ Darryl W. Copeland, Jr.
--------------------------------------
Name: Darryl W. Copeland, Jr.
Title: Executive Vice President
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<PAGE>
EXHIBIT 10.6
GUARANTY AND SURETYSHIP AGREEMENT
---------------------------------
THIS GUARANTY AND SURETYSHIP AGREEMENT (as modified and supplemented
and in effect from time to time, this "Guaranty") is executed and delivered as
--------
of this ____ day of March, 1998 by BROOKDALE LIVING COMMUNITIES OF ILLINOIS-HV,
INC., a Delaware corporation having an address of c/o Brookdale Living
Communities, Inc. at 77 West Wacker Drive, Suite 4800, Chicago, Illinois 60601,
Attention: Darryl W. Copeland, Jr., Telefax Number (312) 977-3699 (the
"Guarantor"), in favor of NOMURA ASSET CAPITAL CORPORATION, a Delaware
---------
corporation, with offices at 2 World Financial Center, Building B, New York, New
York 10281-1198, Attention: Raymond M. Anthony, Telefax Number (212) 667-1666
(together with its successors and assigns, "Lender"), to secure certain
------
obligations of THE HARBOR VILLAGE BUSINESS TRUST, a Delaware business trust,
with offices at c/o Wilmington Trust Company, as Trustee, Rodney Square North,
1100 North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate
Trust Administration, Telefax Number (302) 651-8882 (the "Borrower").
--------
BACKGROUND
----------
A. Lender is lending to Borrower Fifteen Million Dollars
($15,000,000) (such amount together with the Earn-Out Advance, if any, the
"Loan"). The Loan is evidenced by a Loan Agreement by and among Lender,
----
Borrower, and Guarantor, dated as of the date hereof (as modified and
supplemented and in effect from time to time, the "Loan Agreement"), a
--------------
Promissory Note of even date herewith, and certain other collateral documents,
all dated of even date herewith. Capitalized terms when used herein without
definition shall have the same meaning as defined in the Loan Agreement.
B. Borrower and Guarantor are entering into a certain operator lease
dated the date herewith (the "Operator Lease"), pursuant to which Guarantor
--------------
shall lease, manage and operate the Property.
C. In order to induce Lender to make the Loan, the Guarantor has
agreed to execute and deliver this Guaranty to Lender. As security for the
performance of its obligations under this Guaranty and under the Loan Agreement,
the Guarantor has executed that certain Leasehold Mortgage, Assignment of Rents,
Security Agreement and Fixture Filing of even date herewith (as modified and
supplemented and in effect from time to time, the "Leasehold Mortgage"),
------------------
pursuant to which the Guarantor has pledged to Lender the Collateral (as defined
in the Leasehold Mortgage), that certain Assignment of Leases and Rents of even
date herewith (as modified and supplemented and in effect from time to time, the
"Assignment of Leases") pursuant to which the Guarantor has pledged to Lender
--------------------
the Leases and Rents (as defined in the Assignment of Leases). and that certain
Assignment of Agreements Affecting Real Estate of
<PAGE>
even date herewith (as modified and supplemented and in effect from time to
time, the "Assignment") pursuant to which the Guarantor has pledged to Lender
----------
the Additional Collateral (as defined in the Assignment).
AGREEMENTS
----------
In consideration of the premises recited above, and intending to be
legally bound hereby, the Guarantor, hereby agrees:
1. Obligations. The following guarantees and obligations (together,
-----------
the "Obligations") are undertaken by Guarantor:
-----------
(a) Guarantor hereby unconditionally, absolutely and irrevocably
guarantees and becomes surety to Lender for the prompt payment of the entire
amount of the Indebtedness in strict accordance with the terms of the Loan
Agreement. The obligations of Guarantor constitute a guarantee of payment and
not merely of collection, are absolute and unconditional under all circumstances
and shall not in any event be discharged, impaired, or otherwise affected except
by payment to Lender. Guarantor agrees that it will upon notice from Lender that
any Event of Default has occurred under the Note or under any Loan Document, pay
directly to Lender all of the then outstanding Indebtedness. Guarantor further
agrees that any payment required hereunder will be made to Lender regardless of
whether such sums have become due by reason of the maturity of the Note,
acceleration of the Indebtedness or otherwise. The proceeds of any amounts paid
pursuant to this Guaranty will be applied in such order and in such manner as
Lender may elect in its sole discretion.
(b) Lender shall have the right to require Guarantor to pay,
comply with and satisfy its obligations and liabilities under this Guaranty and
shall have the right to proceed immediately against Guarantor with respect
thereto, without being required to bring any proceeding or take any action of
any kind against Borrower or any other guarantor or any other person, entity or
property prior thereto, the liability of Guarantor hereunder being independent
of and separate from the liability of Borrower, any other guarantors and persons
and the availability of other collateral security for the Note and the Loan
Documents.
2. Cancellation. This Guaranty and all obligations and liabilities
------------
of Guarantor hereunder will be cancelled when the Indebtedness has been paid in
full or has been totally defeased as provided in the Loan Agreement; provided,
--------
however, that this Guaranty shall be reinstated and remain in full force and
- -------
effect for so long as such payment may be voided or rescinded in bankruptcy
proceedings as a preference or for any other reason.
3. Costs and Fees. Guarantor hereby agrees that if it does not
--------------
satisfy its obligations under this Guaranty in accordance with the terms hereof,
the same shall be considered an Event of Default hereunder and Lender shall have
the right, in addition to the other rights described in this Guaranty, to
collect from Guarantor all costs, fees and expenses
-2-
<PAGE>
(including reasonable attorneys' fees) incurred by Lender in connection with the
enforcement of this Guaranty against Guarantor, as well as interest thereon at
the Default Rate set forth in the Note, from and after the date any Event of
Default occurs and is continuing through the date of payment.
4. Bankruptcy of Borrower or Guarantor. The obligations of Guarantor
-----------------------------------
under this Guaranty shall not be discharged, impaired or otherwise affected by
the insolvency, bankruptcy, liquidation, readjustment, composition, dissolution
or other similar proceeding involving or affecting Borrower or Guarantor,
proceedings affecting the ownership of any of the above through merger,
consolidation or otherwise, inconsistent orders in or claims by parties to any
such proceedings or other release of obligations by operation of law.
5. Agreements and Waivers. Guarantor hereby:
----------------------
(a) agrees that its obligations hereunder shall not be released
or otherwise affected by any agreement, amendment, release, suspension,
compromise, forbearance, indulgence, waiver, extension, renewal, supplement or
modification of any of the Loan Documents, or any other obligations of Borrower
to Lender, provided, however, the Loan Documents may only be amended in
accordance with the terms of the Loan Agreement;
(b) consents that Lender may, without affecting the liability of
Guarantor under this Guaranty, (i) exchange, release or surrender any property
pledged by or on behalf of Borrower or any other guarantor of any liabilities of
Borrower to Lender, (ii) renew or change, with and subject to the consent of
Borrower and Operator, the terms of any of Borrower's liabilities to Lender, or
(iii) waive any of Lender's rights or remedies against Borrower or any other
guarantor of any obligations of Borrower;
(c) Intentionally omitted;
(d) agrees that its liability under this Guaranty shall be in
addition to that stated in any other guaranty that may be hereafter given by the
undersigned and shall not be reduced or affected by any payment made under any
such guaranty;
(e) agrees that any failure or delay by Lender to exercise any
right under this Guaranty or under any other guaranty or with respect to any of
the Loan Documents or otherwise with respect to the Indebtedness shall not be
construed as a waiver of the right to exercise the same or any other right
hereunder at any time and from time to time thereafter;
(f) Intentionally deleted;
(g) agrees that Lender shall have, as security for the
undertakings under this Guaranty, a lien upon, a security interest in and right
of set-off against the Collateral (as defined in the Leasehold Mortgage), the
Mortgaged Property (as defined in the Leasehold
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<PAGE>
Mortgage) and the Additional Collateral (as defined in the Assignment);
(h) agrees that Lender shall not, under any circumstances, be
required to exhaust remedies or proceed against Borrower, other sureties,
parties, or any other security for the Indebtedness before proceeding under this
Guaranty against the Guarantor;
(i) agrees that under no circumstances (other than total
defeasance of the Loan in accordance with the Loan Agreement or payment in full
of the Loan) shall it become subrogated to the claims or liens of Lender against
Borrower or any other guarantor and that all amounts due to Lender under the
Loan Documents shall have priority over any amounts, whether or not related to
the Loan Documents, payable now or hereafter from Borrower to Guarantor;
(j) agrees that the obligations undertaken in this Guaranty
shall not be affected by the lack of validity or enforceability of any Loan
Document, any change in the time, manner or place of payment or in any other
term in respect of any of the Indebtedness or any other amendment or waiver or a
consent to or any departure from the Loan Documents, provided, however, any
amendments to the Loan Documents shall be done in accordance with the Loan
Agreement;
(k) agrees it will neither take or cause to be taken any action,
or permit any inaction, which will violate or cause a default under any of the
Loan Documents;
(l) waives the right to marshalling of Borrower's assets or any
stay of execution and the benefit of all exemption laws, to the extent permitted
by law, other protection granted by law to guarantors, now or hereafter in
effect with respect to any action or proceeding brought by Lender against it;
(m) agrees that no single exercise of the 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 all of Guarantor's liabilities and obligations
hereunder have been satisfied;
(n) agrees that its liability under this Guaranty shall in no
way be released or otherwise affected by the commencement, existence or
completion of any proceeding against Borrower, any other guarantors or any other
person or entity or otherwise with respect to the collection of the
Indebtedness; and 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 entity
or otherwise with respect to the Indebtedness;
(o) waives, to the maximum extent permitted by applicable law,
any notice of (i) Lender's intention to act in reliance of this Guaranty, (ii)
any presentment, demand, protest or notice of dishonor, nonpayment or other
default with respect to the Indebtedness other
-4-
<PAGE>
than as required under the Loan Documents, if any, and (iii) the commencement or
prosecution of any enforcement proceeding against Borrower or any other
guarantor or any other person or entity with respect to the Indebtedness or
otherwise;
(p) represents and acknowledges that the indebtedness evidenced
by the Note is and will be of direct benefit, interest and advantage to it; and
(q) irrevocably waives all claims of waiver, release, surrender,
alteration or compromise and all defenses, set-offs, counterclaims, recoupments,
reductions, limitations or impairments and any other available defense at law or
in equity.
6. Intentionally Omitted.
7. Governing Law. (a) This Guaranty was negotiated in New York, and
-------------
made by Guarantor 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, including, without
limitation, matters of construction, validity and performance, this Guaranty and
the obligations arising hereunder shall be governed by, and construed in
accordance with, the laws 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. 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 Guaranty, and this Guaranty shall be governed by
and construed in accordance with the laws of the State of New York pursuant to
(S) 5-1401 of the New York General Obligations Law.
(b) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST GUARANTOR ARISING
OUT OF OR RELATING TO THIS GUARANTY SHALL BE INSTITUTED IN ANY FEDERAL OR STATE
COURT IN NEW YORK, NEW YORK, PURSUANT TO (S) 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 AND AGREES THAT SERVICE OF PROCESS UPON SAID AGENT AT SAID ADDRESS
(OR AT SUCH OTHER OFFICE AS MAY BE DESIGNATED BY GUARANTOR FROM TIME TO TIME IN
ACCORDANCE WITH THE TERMS HEREOF) WITH A COPY TO GUARANTOR AT ITS PRINCIPAL
EXECUTIVE OFFICES, ATTENTION: GENERAL COUNSEL AND WRITTEN NOTICE OF SAID SERVICE
OF GUARANTOR MAILED OR DELIVERED TO GUARANTOR IN THE
-5-
<PAGE>
MANNER PROVIDED HEREIN SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF
PROCESS UPON GUARANTOR, IN ANY SUCH SUIT, ACTION OR PROCEEDING. 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 (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 OR IS DISSOLVED WITHOUT LEAVING A
SUCCESSOR.
8. Modification, Waiver in Writing. No modification, amendment,
-------------------------------
extension, discharge, termination or waiver of any provision of this Guaranty,
or consent to any departure by the Guarantor therefrom, shall in any event be
effective unless the same shall be in a writing signed by Guarantor 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 the Guarantor shall entitle the
Guarantor to any other or future notice or demand in the same, similar or other
circumstances.
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
any other instrument given as security therefor, 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.
10. Notices. All notices, requests, demands, directions and other
-------
communications which may or are required to be given, served or sent by the
Guarantor or the Lender to the other shall be given, served or sent as provided
in the Loan Agreement and shall be effective in accordance with the terms of the
Loan Agreement provided that notices to Guarantor shall be sent to the address
set forth for the Guarantor in the first paragraph of this Guaranty with copies
delivered concurrently to each of the following: Brookdale Living Communities of
Illinois-HV, Inc., 77 West Wacker Drive, Chicago, Illinois 60601, Attention:
Darryl W. Copeland, Jr., Telefax Number (312) 977-3699; Brookdale Living
Communities of Illinois-HV, Inc., 77 West Wacker Drive, Chicago, Illinois 60601,
Attention: Robert J. Rudnik, Esquire, Telefax Number (312) 977-3699; and Burke,
Warren, MacKay & Serritella, 330 North Wabash Avenue, 22nd Floor, IBM Plaza,
Chicago, Illinois 60601-3607, Attention: Douglas E. Wambach, Esq.
11. TRIAL BY JURY. THE GUARANTOR AND LENDER, TO THE FULLEST EXTENT
-------------
THAT THEY MAY LAWFULLY DO SO, HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR
PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY TORT ACTION, BROUGHT BY ANY PARTY
HERETO WITH RESPECT TO THIS GUARANTY.
-6-
<PAGE>
12. Headings. The Section headings in this Guaranty are included
--------
herein for convenience of reference only and shall not constitute a part of this
Guaranty for any other purpose.
13. Assignment. Lender shall have the right to assign in whole or in
----------
part this Guaranty and the obligations hereunder to any Person, including,
without limitation, to a trustee or servicer before or after a Securitization.
14. Severability. Wherever possible, each provision of this Guaranty
------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Guaranty 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 Guaranty.
15. Waiver of Counterclaim. Guarantor hereby waives the right to
----------------------
assert a counterclaim, other than compulsory counterclaim, in any action or
proceeding brought against it by Lender or its agents.
16. Exculpation. This Guaranty is and shall be subject to the
-----------
exculpation provisions of Section 8.14 of the Loan Agreement.
------------
17. Cross-Default and Cross-Collateralization. Guarantor hereby
-----------------------------------------
agrees that (a) with respect to any Other Loan which contains terms similar to
those set forth in Section 8.32 with respect to stabilization and resizing of
------- ----
such Other Loan (a "Stabilization Loan"), the relevant Other Operator's
------------------
obligations under such Other Loan shall be cross-collateralized and cross-
defaulted with Guarantor's obligations hereunder and under the other Loan
Documents until the earlier of (i) the date on which such Stabilization Loan or
the Loan has been resized pursuant to such terms and transferred in a
Securitization (as defined in the Loan Agreement and in the relevant Other Loan
Agreements) for loans which have stabilized of which the Loan or applicable
Other Loans are not a part and (ii) Lender's election to release the cross-
collateralization and cross-default and (b) the Guarantor's obligations
hereunder and under the other Loan Documents shall be cross-collateralized and
cross-defaulted with any Other Operator's obligations under any Other Loan which
is included in the same Securitization (as defined in the Loan Agreement and in
the relevant Other Loan Agreement) as the Loan. During the term of any cross-
collateralization and cross-default and with respect to those Other Loans which
are the subject of such cross-collateralization and cross-default, without
limitation to any other right or remedy provided to Lender in 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 in one proceeding, or separately and independently in
separate proceedings which it, as Lender, in its sole and absolute discretion,
shall determine from time to time, (ii) Lender is not required to either
marshall assets, sell Collateral (as defined in the Loan Documents and the
relevant Other Loan Documents) in any inverse order of alienation, or be
subjected to any "one action" or "election of remedies" law or
-7-
<PAGE>
rule, (iii) the exercise by Lender of any remedies against any Collateral (as
defined in the Loan Documents and the relevant Other Loan Documents) will not
impede Lender from subsequently or simultaneously exercising remedies against
any other Collateral (as defined in the Loan Documents and the relevant Other
Loan Documents), (iv) all Liens (as defined in the Loan Agreement and in the
relevant Other Loan Agreements) and other rights, remedies and privileges
provided to Lender in this Guaranty and the other Loan Documents and the
relevant Other Loan Documents or otherwise shall remain in full force and effect
until Lender has exhausted all of its remedies against the Collateral (as
defined in the Loan Documents and the relevant Other Loan Documents) and all
Collateral (as defined in the Loan Documents and the relevant Other Loan
Documents) has been foreclosed, sold and/or otherwise realized upon and (v)
Guarantor's interest in the Facility shall be security for the performance of
the obligations of each relevant Other Operator under the Other Loan Documents
and each Other Operator's interest in the relevant Facility (as defined in the
relevant Other Loan Agreement) shall be security for the performance of the
obligations of Guarantor hereunder and under the other Loan Documents. In
furtherance of the foregoing, Guarantor has granted to Lender a continuing
security interest in all of Guarantor's right, title and interest in any and all
proceeds to which Guarantor may be entitled after foreclosure on, or sale
pursuant to a power of sale of, the Facility (the "Excess Proceeds") and has
---------------
agreed that such Excess Proceeds may be applied by Lender to any Other
Operator's obligations under any Other Loan. During the term of any cross-
collateralization and cross-default and with respect to those Other Loans which
are the subject of such cross-collateralization and cross-default, without
limitation to any other right or remedy provided to Lender in this Guaranty or
any of the other Loan Documents, Guarantor acknowledges and agrees that (x) it
shall be jointly and severally liable for the obligations of the relevant Other
Operators under the relevant Other Loan Documents, (y) the relevant Other
Operators shall be jointly and severally liable for the obligations of the
Guarantor under the Loan Documents and (z) the Borrower's obligations under the
Loan shall be cross-defaulted with the obligations of the relevant Other
Borrowers under the applicable relevant Other Loan Documents.
-8-
<PAGE>
IN WITNESS WHEREOF, Guarantor has executed and delivered this Guaranty
the date first written above.
BROOKDALE LIVING COMMUNITIES OF
ILLINOIS-HV, INC., a Delaware corporation
By: ____________________________________
Name:
Title:
<PAGE>
EXHIBIT 10.7
ENVIRONMENTAL INDEMNITY AGREEMENT
---------------------------------
THIS ENVIRONMENTAL INDEMNITY AGREEMENT (this "Agreement"), made as of March
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__, 1998, from BROOKDALE LIVING COMMUNITIES, INC., a Delaware corporation.
having an office at 77 West Wacker Drive, Suite 4800, Chicago, Illinois 60601,
Attention: Darryl W. Copeland, Jr., Telefax Number (312) 977-3699 (the
"Guarantor") to NOMURA ASSET CAPITAL CORPORATION, a Delaware corporation, having
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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").
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RECITALS
WHEREAS, pursuant to a Loan Agreement dated as of the date hereof between
The Harbor Village Business Trust, a Delaware business trust ("Borrower"),
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Brookdale Living Communities of Illinois-HV, Inc. ("Operator"), and Lender (as
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modified and supplemented and in effect from time to time, the "Loan
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Agreement"), at the request of Borrower and Operator, Lender has agreed to make
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the Closing Date Advance and may make the Earn-Out Advance (collectively, the
"Loan") to Borrower;
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WHEREAS, Borrower and Operator are entering into a certain operator lease
dated the date herewith (the "Operator Lease"), pursuant to which Operator shall
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manage and operate 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 and leasehold estate in the
land more particularly described in the Mortgages and all buildings, structures
and other improvements now or hereafter situated on such land (the "Facility");
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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:
1. Defined Terms. Unless the context otherwise requires, capitalized
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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:
<PAGE>
"Borrower" has the meaning provided in the Recitals to this Agreement.
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"Environmental Claim" means any written request for information by a
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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, Operator or the
Facility, 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
Facility, (ii) any fact, circumstance, condition or occurrence forming the basis
of any violation, or alleged violation, of any Environmental Law by Borrower,
Operator or otherwise affecting the Facility or (iii) any alleged injury or
threat of injury to health, safety or the environment by Borrower, Operator or
otherwise affecting the Facility from actions which are in violation of
Environmental Laws.
"Environmental Laws" means any and all applicable federal, state, local and
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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, or the Release or threatened Release of
Hazardous Substances into the indoor or outdoor environment, including, without
limitation, ambient air, soil, surface water, ground water, wetlands, land or
subsurface strata or otherwise relating to the presence or Use of Hazardous
Substances.
"Environmental Reports" means the environmental audit reports, with respect
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to the Facility, 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
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Agreement.
"Governmental Authority" means any national or federal government, any
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state, regional, local or other political subdivision thereof and any Person
with jurisdiction exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Hazardous Substance" means, collectively, (i) any petroleum or petroleum
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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
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<PAGE>
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
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Agreement.
"Loan" has the meaning provided in the Recitals to this Agreement.
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"Loan Agreement" has the meaning provided in the Recitals to this
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Agreement.
"Person" means any individual, corporation, limited liability company,
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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 any release, threatened release, spill, emission,
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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.
"Use" means, with respect to any Hazardous Substance, the generation,
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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.
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(a) Subject to the limitations set forth in Section 14 hereof,
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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,
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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
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<PAGE>
from the Facility, 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(b)(U), Section 4.1(d)(U), Sections 5.1(a)(D) through
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5.1(a)(I), and Sections 5.1(b)(D) through 5.1(b)(I), inclusive of the Loan
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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, Operator, 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
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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.
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(a) The parties agree that the State of Illinois 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
Illinois 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
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<PAGE>
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 Illinois.
(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 (S) 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,
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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
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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.
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<PAGE>
7. Notices. All notices, consents, approvals and requests required
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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
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requests directed to Lender shall be delivered concurrently to each of the
following: Joseph B. Heil, Esquire, Dechert Price & Rhoads, 1717 Arch Street,
4000 Bell Atlantic Tower, Philadelphia, PA 19103, Telefax Number 215/994-2222;
Two World Financial Center, Building B, New York, New York 10281-1198,
Attention: Raymond M. Anthony, Telefax Number (212) 667-1666; Two World
Financial Center, Building B, New York, NY 10281-1198, Attention Sheryl McAfee,
Telefax Number (212) 667-1022; and Two World Financial Center, Building B, New
York, NY 10281-1198, Attention: Legal Counsel, 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 of Illinois-HV, Inc., 77 West Wacker Drive, Chicago, Illinois 60601,
Attention: Darryl W. Copeland, Jr., Telefax Number (312) 977-3699; Brookdale
Living Communities of Illinois-HV, Inc., 77 West Wacker Drive, Chicago, Illinois
60601, Attention: Robert J. Rudnik, Esquire, Telefax Number (312) 977-3699; and
Douglas E. Wambach, Esq., Burke, Warren, MacKay & Serritella, 330 North Wabash
Avenue, 22nd Floor, Chicago, Illinois 60611, Telefax Number (312) 840-7900. 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
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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
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notice as having been properly given.
8. Trial by Jury. EACH OF GUARANTOR AND LENDER, TO THE FULLEST
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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
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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 Agreement, the
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<PAGE>
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
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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
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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
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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
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any time and from time to time upon not less than 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,
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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
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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
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matter).
14. Survival. This Agreement shall survive (in perpetuity) the
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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 Facility. 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
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directly and solely that such Losses result from Hazardous Substances being
placed on, above or under the Facility (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 or leasehold title to the Facility pursuant
to the Mortgages or either of them; or (ii) a foreclosure by Lender; or (iii)
acceptance by Lender or any designee of
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<PAGE>
a deed-in-lieu of foreclosure with respect to the Facility.
15. Time of the Essence. Time is of the essence with respect to each
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and every covenant, agreement and obligation of Guarantor under this Agreement.
16. Liability. The liability of Guarantor under this Agreement shall
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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.
[Signature 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:
Title:
<PAGE>
EXHIBIT 10.8
MEZZANINE LOAN AGREEMENT
Dated as of March __, 1998
by and among
THE HARBOR VILLAGE BUSINESS TRUST
(as Borrower)
BROOKDALE LIVING COMMUNITIES OF ILLINOIS-HV, INC.
(as Operator and Guarantor)
and
NOMURA ASSET CAPITAL CORPORATION
(as Mezzanine Lender)
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
<S> <C>
ARTICLE I CERTAIN DEFINITIONS............................................ 2
Section 1.1. Definitions............................................... 2
ARTICLE II GENERAL TERMS.................................................. 20
Section 2.1. Amount of the Mezzanine Loan........................... 20
Section 2.2. Use of Proceeds........................................ 20
Section 2.3. Security for the Mezzanine Loan........................ 20
Section 2.4. Borrower's Mezzanine Note.............................. 20
Section 2.5. Principal and Interest Payments........................ 21
Section 2.6. Intentionally deleted.................................. 22
Section 2.7. Prepayment............................................. 22
Section 2.8. Application of Payments................................ 22
Section 2.9. Payment of Debt Service, Method and Place of Payment... 23
Section 2.10. Taxes.................................................. 23
Section 2.11. Intentionally deleted.................................. 23
Section 2.12. Intentionally deleted.................................. 23
Section 2.13. Security Agreement..................................... 24
Section 2.15. Supplemental Mortgage Affidavits....................... 27
ARTICLE III CONDITIONS PRECEDENT........................................... 27
Section 3.1. Conditions Precedent to the Loan....................... 27
Section 3.2. Form of Mezzanine Loan Documents and Related Matters... 31
ARTICLE IV REPRESENTATIONS AND WARRANTIES................................. 32
Section 4.1. Representations and Warranties of Borrower and Operator 32
Section 4.2. Survival of Representations and Warranties............. 52
ARTICLE V AFFIRMATIVE COVENANTS.......................................... 53
Section 5.1. Borrower and Operator Covenants........................ 53
ARTICLE VI NEGATIVE COVENANTS............................................. 72
Section 6.1. Borrower and Operator Negative Covenants............... 72
</TABLE>
<PAGE>
<TABLE>
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<S> <C>
ARTICLE VII DEFAULTS
Section 7.1. Event of Default................................ 78
Section 7.2. Remedies........................................ 82
Section 7.3. Remedies Cumulative............................. 83
Section 7.4. Mezzanine Lender's Right to Perform............. 84
Section 7.5. Operator's Limited Right to Cure................ 84
ARTICLE VIII MISCELLANEOUS.......................................... 85
Section 8.1. Survival........................................ 85
Section 8.2. Mezzanine Lender's Discretion................... 86
Section 8.3. Governing Law................................... 86
Section 8.4. Modification, Waiver in Writing................. 87
Section 8.5. Delay Not a Waiver.............................. 87
Section 8.6. Notices......................................... 88
SECTION 8.7. TRIAL BY JURY................................... 89
Section 8.8. Headings........................................ 89
Section 8.9. Assignment...................................... 89
Section 8.10. Severability.................................... 89
Section 8.11. Preferences..................................... 90
Section 8.12. Waiver of Notice................................ 90
Section 8.13. Intentionally Omitted........................... 90
Section 8.14. Exculpation..................................... 90
Section 8.15. Exhibits Incorporated........................... 92
Section 8.16. Offsets, Counterclaims and Defenses............. 92
Section 8.17. No Joint Venture or Partnership................. 93
Section 8.18. Waiver of Marshalling of Assets Defense......... 93
Section 8.19. Waiver of Counterclaim.......................... 93
Section 8.20. Conflict; Construction of Documents............. 93
Section 8.21. Brokers and Financial Advisors.................. 93
Section 8.22. Counterparts.................................... 94
Section 8.23. Estoppel Certificates........................... 94
Section 8.24. Payment of Expenses............................. 94
Section 8.25. Bankruptcy Waiver............................... 95
Section 8.26. Entire Agreement................................ 95
Section 8.27. Dissemination of Information.................... 95
Section 8.28. Limitation of Interest.......................... 96
Section 8.29. Indemnification................................. 97
Section 8.30. Borrower and Operator Acknowledgments........... 97
Section 8.31. Publicity....................................... 98
Section 8.32. Recalculation of First Mortgage Loan Amount..... 98
Section 8.34. Amendments to Operator Lease.................... 98
Section 8.35. Subordination and Standstill ................... 99
</TABLE>
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Section 8.36. Limitation of Liability........................ 100
</TABLE>
<PAGE>
Exhibit 10.8
MEZZANINE LOAN AGREEMENT
THIS MEZZANINE LOAN AGREEMENT, made as of March ___, 1998, is by and
among NOMURA ASSET CAPITAL CORPORATION, a Delaware corporation, having an
address at 2 World Financial Center, Building B, New York, New York 10281-1198,
Attention: Raymond M. Anthony, Telefax Number (212) 667-1666 (together, with
its successors and assigns, "Mezzanine Lender"), THE HARBOR VILLAGE BUSINESS
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TRUST, a Delaware business trust with an address of c/o Wilmington Trust
Company, as Trustee, Rodney Square North, 1100 North Market Street, Wilmington,
Delaware 19890-0001, Attention: Corporate Trust Administration, Telefax Number
(302) 651-8882 (the "Borrower") and BROOKDALE LIVING COMMUNITIES OF ILLINOIS-HV,
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INC., a Delaware corporation, having an address of c/o Brookdale Living
Communities, Inc., 77 West Wacker Drive, Suite 4800, Chicago, Illinois 60601,
Attention: Darryl W. Copeland, Jr., Telecopier Number 312/997-3699 (the
"Operator").
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RECITALS
WHEREAS, Borrower desires to obtain a loan (the "Mezzanine Loan") from
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Mezzanine Lender in an aggregate principal amount of $1,750,000 (the "Mezzanine
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Loan Amount");
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WHEREAS, Mezzanine Lender is willing to make the Mezzanine Loan on the
condition that Borrower and Operator each joins in the execution and delivery of
this Agreement which shall establish the terms and conditions of the Mezzanine
Loan; and
WHEREAS, Mezzanine Lender, Borrower and Operator contemplate that all
or any portion of Mezzanine Lender's interest in the Mezzanine Loan and to the
Mezzanine Loan Documents may be assigned, in whole or in part, by Mezzanine
Lender to another Person.
NOW, THEREFORE, in consideration of the making of the Mezzanine Loan
by Mezzanine Lender and the covenants, agreements, representations and
warranties set forth in this Agreement, the parties hereby covenant, agree,
represent and warrant as follows:
ARTICLE I
CERTAIN DEFINITIONS
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Section 1.1. Definitions. For all purposes of this Agreement:
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(a) the capitalized terms defined in this Article I have the meanings
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assigned to them in this Article I, and include the plural as well as the
singular;
<PAGE>
2
(b) capitalized terms used in this Agreement and not otherwise
defined herein shall have those meanings assigned to them in the First Mortgage
Loan Agreement;
(c) all accounting terms have the meanings assigned to them in
accordance with GAAP;
(d) the words "herein", "hereof", and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section, or other subdivision; and
(e) the following terms have the following meanings:
"Account Collateral" has the meaning provided in Section 2.13(a).
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"Accounts" means the "Accounts" as defined and described in each of
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the Mezzanine Mortgages.
"Affiliate" of any specified Person means any other Person
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controlling, controlled by or under common control with such specified Person.
For the purposes of this Agreement, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities or other beneficial interests, by contract or otherwise; and the
terms "controls", "controlling" and "controlled" have the meanings correlative
to the foregoing.
"Agreement" and "Loan Agreement" each mean this Mezzanine Loan
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Agreement, as the same may from time to time hereafter be modified, supplemented
or amended.
"Annual Operating Budget" means an annual budget for the operations of
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the Facility (broken down on a month-by-month basis) prepared, and submitted by
Operator to Mezzanine Lender for the period from the Closing Date until December
31, 1998.
"Appraisals" means the appraisals, if any, with respect to the
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Facility delivered to Mezzanine Lender in connection with the Mezzanine Loan and
any more recent appraisal of the Facility delivered to Mezzanine Lender or
Mezzanine Lender's servicer, as applicable, each made by an Appraiser at the
request of Operator or Mezzanine Lender, as any of the same may be updated by
recertification from time to time (and pursuant to the terms of this Agreement)
by the Appraiser performing such Appraisal.
"Appraiser" means any Independent appraiser selected by Operator (and
---------
reasonably satisfactory to Mezzanine Lender) who is (i) a member of the
Appraisal Institute with
<PAGE>
3
a national practice and who has at least ten years experience with real estate
of the same type and in the geographic area of the Facility to be appraised or
(ii) otherwise reasonably acceptable to Mezzanine Lender.
"Base Payment" has the meaning set forth in Section 2.5(b).
------------ ------- ------
"Beneficial Owner" means SELCO Service Corporation, an Ohio
----------------
corporation.
"Beneficial Owner's Certificate" means the Beneficial Owner's
------------------------------
Certificate in form and substance satisfactory to Mezzanine Lender in Mezzanine
Lender's reasonable discretion dated as of the Closing Date.
"Borrower" has the meaning provided in the first paragraph of this
--------
Agreement.
"Borrower's Trustee" means Wilmington Trust Company, a Delaware
------------------
banking association, not in its individual capacity but solely as trustee under
the Trust Agreement.
"Business Day" means any day other than (i) a Saturday or a Sunday,
------------
and (ii) a day on which federally insured depository institutions in New York,
New York, Chicago, Illinois, Wilmington, Delaware or any jurisdiction in which
the Facility, Cash Collateral Account or Collection Account is located are
authorized or obligated by law, regulation, governmental decree or executive
order to be closed.
"Closing Date" means the date of this Agreement.
------------
"Collateral" means, collectively, the Land, Appurtenant Rights,
----------
Improvements, Equipment, Rents, Leases, Accounts, Account Collateral, General
Intangibles, goods, Instruments, Inventory, Money, Permitted Investments and (to
the full extent assignable) Permits, investment properties, and proceeds of
written letters of credit and all Proceeds and products of the foregoing, all
whether now owned or hereafter acquired and all other property which is or
hereafter may become subject to a Lien in favor of Mezzanine Lender as security
for the Mezzanine Loan; provided, however, the "Collateral" shall not include
the Excepted Property.
"Collateral Security Instrument" means any right, document or
------------------------------
instrument, other than the Mezzanine Mortgages, given as security for the
Mezzanine Loan (including, without limitation, the Mezzanine Assignments of
Leases and the Mezzanine Assignments of Agreements), as the same may hereafter
from time to time be supplemented, amended, extended or modified.
<PAGE>
4
"Collection Account Agreement" means the collection account agreement
----------------------------
by and among Borrower, Operator, First Mortgage Lender and Collection Account
Bank.
"Collection Account Bank" means, with respect to the Facility, the
-----------------------
applicable collection bank for the Facility and any successor bank hereafter
selected by Operator and reasonably approved by the First Mortgage Lender.
"Condemnation Proceeds" has the meaning set forth in the Mezzanine
---------------------
Mortgages.
"Debt Service" means, for any period, the principal, interest
------------
payments, Default Rate interest, Late Charges and Yield Maintenance Premium, if
any, that accrue or are due and payable in accordance with the Mezzanine Loan
Documents during such period.
"Default" means the occurrence of any event which, but for the giving
-------
of notice or the passage of time, or both, would be an Event of Default.
"Default Collateral" has the meaning provided in Section 8.14.
------------------ ------- ----
"Default Rate" means the per annum interest rate equal to the lesser
------------
of (i) the Maximum Amount or (ii) the Interest Rate plus five percent (5%).
"Equipment" means the "Equipment" defined and described in the
---------
Mezzanine Mortgages.
"Event of Default" has the meaning set forth in Section 7.1.
---------------- ------- ---
"Facility" means the Collateral relating to Borrower and Operator
--------
encumbered by the Mezzanine Loan Documents.
"First Leasehold Mortgage" means that certain Leasehold Mortgage,
------------------------
Assignment of Rents, Security Agreement and Fixture Filing dated as of the date
hereof, by Operator to the First Mortgage Lender.
"First Mortgage Debt" means the indebtedness of the Borrower to the
-------------------
First Mortgage Lender under the First Mortgage Loan Agreement.
"First Mortgage Lender" means NACC, its successors and assigns as
---------------------
holders of the First Mortgage Note.
<PAGE>
5
"First Mortgage Loan" means the first mortgage loan of even date
-------------------
hrewith made by NACC, as lender, to Borrower, as borrower, pursuant to the First
Mortgage Loan Agreement.
"First Mortgage Loan Agreement" means that certain loan agreement,
-----------------------------
dated as of the date hereof, by and among First Mortgage Lender, as lender,
Borrower, as borrower and Operator, as guarantor.
"First Mortgage Loan Documents" means all documents executed or
-----------------------------
delivered in connection with the First Mortgage Loan.
"First Mortgage" means that certain Mortgage, Assignment of Rents,
--------------
Security Agreement and Fixture Filing dated as of the date hereof, by Borrower
to the First Mortgage Lender and "First Mortgages" means the First Mortgage and
---------------
the First Leasehold Mortgage, collectively.
"First Mortgage Note" means that certain promissory note dated as of
-------------------
the date hereof made by Borrower to First Mortgage Lender in connection with the
First Mortgage Loan.
"Fiscal Year" means the 12-month period ending on December 31 of each
-----------
year or such other fiscal year of Borrower as Borrower may select from time to
time with the prior written consent of Mezzanine Lender not to be unreasonably
withheld or delayed.
"General Intangibles" means the "General Intangibles" defined and
-------------------
described in the Mezzanine Mortgages.
"Impositions" means the "Impositions" defined and described in the
-----------
Mezzanine Mortgages.
"Improvements" means the "Improvements" as defined and described in
------------
the Mezzanine Mortgages.
"Indebtedness" means, at any given time, the Principal Indebtedness,
------------
together with all accrued and unpaid interest thereon and all other obligations
and liabilities due or to become due to Mezzanine Lender pursuant hereto, under
the Mezzanine Note or in accordance with any of the other Mezzanine Loan
Documents, and all other amounts, sums and expenses paid by or payable to
Mezzanine Lender hereunder or pursuant to the Mezzanine Note or any of the other
Mezzanine Loan Documents.
<PAGE>
6
"Indemnified Party" shall have the meaning set forth in Section
----------------- -------
8.29.
- ----
"Instruments" means the "Instruments" defined and described in the
-----------
Mezzanine Mortgages.
"Insurance Proceeds" has the meaning set forth in the Mezzanine
------------------
Mortgages.
"Insurance Requirements" means all material terms of any insurance
----------------------
policy required pursuant to the Mezzanine Loan Documents and all material
regulations and then current standards applicable to or affecting the Facility
or any part thereof or any use or condition thereof, which may, at any time, be
recommended by the Board of Fire Underwriters, if any, having jurisdiction over
the Facility, or such other body exercising similar functions.
"Interest Accrual Period" means each period of time running from and
-----------------------
including the eleventh (11th) day of a calendar month to and including the tenth
(10th) day of the following calendar month during the term of the Mezzanine
Loan. If the Closing Date shall occur prior to the tenth (10th) day of a
calendar month, the first Interest Accrual Period shall commence on and include
the Closing Date and end on and include the tenth (10th) day of the calendar
month in which the Closing Date occurs. If the Closing Date shall occur after
the tenth (10th) day of a calendar month, the first Interest Accrual Period
shall commence on the Closing Date and end on and include the tenth (10th) day
of the calendar month following the month in which the Closing Date occurs. If
the Closing Date shall occur on the tenth (10th) day of a calendar month, the
first Interest Accrual Period shall consist of a one (1) day period consisting
of the Closing Date.
"Interest Rate" means _____%, per annum.
-------------
"Inventory" means all of the "Inventory" defined and described in
---------
the Mezzanine Mortgages.
"Land" has the meaning provided in the Mezzanine Mortgages.
----
"Late Charge" means the lesser of (i) five percent (5%) of any amount
-----------
which was due and payable but which was not paid within the applicable grace
period and (ii) the maximum late charge permitted to be charged under the laws
of the State of New York.
"Late Payment" means Borrower's failure to pay any amount hereunder
------------
when due, without giving effect to any cure period, if any.
"Leases" means all of the "Leases" defined and described in the
------
Mezzanine
<PAGE>
7
Mortgages.
"Legal Requirements" means all statutes, laws, rules, orders,
------------------
regulations, ordinances, judgments, decrees and injunctions of Governmental
Authorities affecting Borrower, Operator, the Mezzanine Loan Documents, the
Facility or any part thereof, or the ownership, construction, use, alteration or
operation thereof, or any part thereof, enacted and in force as of the relevant
date, and all Permits, Licenses and regulations relating thereto, and all
covenants, agreements, restrictions and encumbrances contained in any
instruments, either of record or known to Borrower or Operator, at any time in
force affecting the Facility or any part thereof, including, without limitation,
any which (i) may require repairs, modifications, or alterations in or to the
Facility or any part thereof, or (ii) in any way limit the use and enjoyment
thereof.
"Licenses" has the meaning set forth in Section 4.1(d)(AK)(ii).
-------- ------- --------------
"Lien" means any mortgage, deed of trust, deed to secure debt, lien
----
(statutory or other), pledge, easement, restrictive covenant, hypothecation,
assignment, preference, priority, security interest, or any other encumbrance or
charge on or affecting the Facility or any portion thereof or any Collateral, or
Operator or any interest therein, including, without limitation, 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.
"Liquidation Event" means (i) any sale, transfer or other disposition
-----------------
or liquidation of the Facility or any portion thereof (including a foreclosure
sale), (ii) any casualty to the Facility or any portion thereof, (iii) any
condemnation of the Facility or any portion thereof or (iv) any refinancing of
the Facility or the First Mortgage Loan.
"Liquidation Proceeds" means, with respect to any Liquidation Event,
--------------------
all amounts paid to or received by or on behalf of Borrower or Operator in
connection with such Liquidation Event, including, without limitation, proceeds
of any sale, refinancing or other disposition or liquidation, the amount of any
award or payment in connection with any condemnation or taking by eminent
domain, and the amount of any insurance proceeds paid in connection with any
casualty loss, as applicable, other than, in the case of a casualty loss or
condemnation award, amounts required or permitted by the terms of the First
Mortgage Loan Documents to be applied to the restoration or repair of the
Facility or to the repayment of the First Mortgage Loan.
"Losses" has the meaning provided in Section 5.1(b)(I).
------ ------- ---------
<PAGE>
8
"Material Adverse Effect" means a material adverse effect upon (i) the
-----------------------
business or the financial position or results of operation of Borrower or
Operator, as applicable, (ii) the ability of Borrower or Operator, as
applicable, to perform, or of Mezzanine Lender to enforce, any of the Mezzanine
Loan Documents or (iii) the value of (x) the Collateral (as defined herein and
in the First Mortgage Loan Agreement) taken as a whole or (y) the Facility.
"Material Lease" has the meaning set forth in the Mezzanine
--------------
Mortgages.
"Maturity Date" means the date which is one year after the Maturity
-------------
Date (as defined in the First Mortgage Loan Agreement).
"Maximum Amount" means the maximum rate of interest designated by
--------------
applicable laws relating to payment of interest and usury.
"Mezzanine Assignments of Agreements" means, collectively, the
-----------------------------------
Mezzanine Assignment of Agreements - Borrower and the Mezzanine Assignment of
Agreements - Operator.
"Mezzanine Assignment of Agreements - Borrower" means, with respect to
---------------------------------------------
the Facility, a Mezzanine Assignment of Agreements Affecting Real Estate, in
form and substance satisfactory to Mezzanine Lender in Mezzanine Lender's
reasonable discretion, dated as of the Closing Date, from Borrower, as assignor,
to Mezzanine Lender, as assignee, as the same may thereafter from time to time
be supplemented, amended, modified or extended by one or more written agreements
supplemental thereto.
"Mezzanine Assignment of Agreements - Operator" means, with respect to
---------------------------------------------
the Facility, a Mezzanine Assignment of Agreements Affecting Real Estate, in
form and substance satisfactory to Mezzanine Lender in its reasonable
discretion, dated as of the Closing Date from the Operator, as assignor, to
Mezzanine Lender, as assignee, as the same may thereafter from time to time be
supplemented, amended, modified or extended by one or more written agreements
supplemental thereto.
"Mezzanine Assignment of Leases - Borrower" means, with respect to the
-----------------------------------------
Facility, a Mezzanine Assignment of Leases and Rents, in form and substance
satisfactory to Mezzanine Lender in Mezzanine Lender's reasonable discretion,
dated as of the Closing Date from Borrower, as assignor, to Mezzanine Lender, as
assignee, assigning to Mezzanine Lender Borrower's interest in and to the Leases
(as defined in the Mezzanine Mortgages) and the Rents (as defined in the
Mezzanine Mortgage) with respect to the Facility as security for the Mezzanine
Loan, as the same may thereafter from time to time be supplemented, amended,
modified or extended by one or more written agreements supplemental thereto.
<PAGE>
9
"Mezzanine Assignment of Leases - Operator" means, with respect to the
-----------------------------------------
Facility, a Mezzanine Assignment of Leases and Rents, in form and substance
satisfactory to Mezzanine Lender in Mezzanine Lender's reasonable discretion,
dated as of the Closing Date from Operator, as assignor, to Mezzanine Lender, as
assignee, assigning to Mezzanine Lender Operator's interest in and to the Leases
(as defined in the Mezzanine Leasehold Mortgage) and the Rents (as defined in
the Mezzanine Leasehold Mortgage) with respect to the Facility as security for
the Mezzanine Loan, as the same may thereafter from time to time be
supplemented, amended, modified or extended by one or more written agreements
supplemental thereto.
"Mezzanine Assignments of Leases" means the Mezzanine Assignment of
-------------------------------
Leases - Borrower and Mezzanine Assignment of Leases - Operator, collectively.
"Mezzanine Environmental Guaranty" means the Mezzanine Environmental
--------------------------------
Indemnity Agreement in form and substance satisfactory to Mezzanine Lender in
Mezzanine Lender's reasonable discretion dated as of the Closing Date from the
Parent to Mezzanine Lender, as the same may thereafter be from time to time
supplemented, amended, modified or extended by one or more agreements
supplemental thereto.
"Mezzanine Guaranty" means a Mezzanine Guaranty and Suretyship
------------------
Agreement in form and substance satisfactory to Mezzanine Lender in Mezzanine
Lender's reasonable discretion dated as of the Closing Date from the Operator to
Mezzanine Lender as the same may thereafter from time to time be supplemented,
amended, modified or extended by one or more written agreements supplemental
thereto.
"Mezzanine Leasehold Mortgage" means, with respect to the Facility, a
----------------------------
Mezzanine Leasehold Mortgage, Assignment of Rents, Security Agreement and
Fixture Filing, in form and substance satisfactory to Mezzanine Lender in
Mezzanine Lender's reasonable discretion, dated as of the Closing Date, granted
by Operator to Mezzanine Lender with respect to the Facility as security for the
Mezzanine Guaranty, as the same may thereafter from time to time be
supplemented, amended, modified or extended by one or more written agreements
supplemental thereto.
"Mezzanine Lender" has the meaning provided in the first paragraph
----------------
of this Agreement.
"Mezzanine Loan" has the meaning provided in the Recitals hereto.
--------------
"Mezzanine Loan Amount" has the meaning provided in the Recitals
---------------------
hereto.
<PAGE>
10
"Mezzanine Loan Documents" means, collectively, this Agreement, the
------------------------
Mezzanine Note, the Mezzanine Mortgages, the Mezzanine Assignments of Leases,
the Mezzanine Assignments of Agreements, the Mezzanine Guaranty and all other
agreements, instruments, certificates and documents executed or delivered by or
on behalf of Borrower, Operator or any Affiliate to evidence or secure the
Mezzanine Loan or otherwise in satisfaction of the requirements of this
Agreement, the Mezzanine Mortgages or the other documents listed above.
"Mezzanine Mortgage" means, with respect to the Facility, a Mezzanine
------------------
Mortgage, Assignment of Rents, Security Agreement and Fixture Filing, in form
and substance satisfactory to Mezzanine Lender in Mezzanine Lender's reasonable
discretion, dated as of the Closing Date, granted by Borrower to Mezzanine
Lender with respect to the Facility as security for the Mezzanine Loan, as the
same may thereafter from time to time be supplemented, amended, modified or
extended by one or more written agreements supplemental thereto and "Mezzanine
---------
Mortgages" means, collectively, the Mezzanine Mortgage and the Mezzanine
- ---------
Leasehold Mortgage.
"Mezzanine Note" means and refers to the promissory note, in form and
--------------
substance satisfactory to Mezzanine Lender in Mezzanine Lender's reasonable
discretion, dated the Closing Date, made by Borrower to Mezzanine Lender
pursuant to this Agreement as such note may be modified, amended, supplemented,
extended or consolidated in writing, and any note(s) issued in exchange therefor
or in replacement thereof.
"Mortgaged Property" means, at any time, the Facility encumbered by
------------------
the Mezzanine Mortgages.
<PAGE>
11
"NAAC" means Nomura Asset Capital Corporation.
----
"Net Liquidation Proceeds" means all Liquidation Proceeds, less (i)
------------------------
in the case of a sale, other than a foreclosure sale under the First Mortgage
Loan, such reasonable and customary costs and expenses of sale (including
brokerage commissions) as shall be approved by the Mezzanine Lender pursuant to
the terms hereof, (ii) in the case of a foreclosure sale, such costs and
expenses incurred by the First Mortgage Lender under the First Mortgage Loan
Documents as the First Mortgage Lender shall be entitled to receive
reimbursement for under the terms of the First Mortgage Loan Documents or under
applicable law, (iii) in the case of a casualty loss or condemnation, such costs
and expenses of collection of the related insurance proceeds or condemnation
award as shall be approved by the First Mortgage Lender pursuant to the terms of
the First Mortgage Loan Documents, or if the First Mortgage Loan has been paid
in full, by the Mezzanine Lender under the Mezzanine Loan, and (iv) in the case
of a refinancing of the First Mortgage Loan, or the Facility, such costs and
expenses of such refinancing as shall be approved by the Mezzanine Lender.
"Net Liquidation Proceeds After Debt Service" means, with respect to
-------------------------------------------
any Liquidation Event, the Net Liquidation Proceeds with respect thereto other
than any portion thereof applied to the payment of the First Mortgage Debt under
the terms of the First Mortgage Loan Documents.
"Operator" has the meaning set forth in the first paragraph of this
--------
Agreement.
"Operator Lease" means that certain Lease dated on or about the
--------------
Closing Date between the Borrower and the Operator for the lease of all of the
Facility, together with any guarantees, supplements, amendments, modifications,
extensions and renewals of the same, and all additional remainders, reversions,
and other rights and estates appurtenant thereto.
"Other Borrowings" means, with respect to Operator or Borrower, as
----------------
applicable, without duplication (but not including the Indebtedness, the First
Mortgage Loan or any Transaction Costs payable in connection with the
Transactions), (i) all indebtedness of Borrower or Operator, as applicable, for
borrowed money or for the deferred purchase price of property or services, (ii)
all indebtedness of Borrower or Operator, as applicable, evidenced by a note,
bond, debenture or similar instrument, (iii) the face amount of all letters of
credit issued for the account of Borrower or Operator, as applicable, and,
without duplication, all unreimbursed amounts drawn thereunder, (iv) all
indebtedness of Borrower or Operator, as applicable, secured by a Lien on any
property owned by Borrower or Operator, as applicable, whether or not such
indebtedness has been assumed, (v) all Contingent Obligations of Borrower or
Operator, as applicable, and (vi) all payment obligations of Borrower or
Operator, as applicable, under any
<PAGE>
12
interest rate protection agreement (including, without limitation, any interest
rate swaps, caps, floors, collars or similar agreements) and similar agreements.
"Parent" means Brookdale Living Communities, Inc., a Delaware
------
corporation.
"Payment Date" means the eleventh (11th) day of each calendar month
------------
during the term of the Mezzanine Loan, provided, however, that for purposes of
making payments hereunder, but not for purposes of calculating interest accrual
periods, if the eleventh (11th) day of a given month shall not be a Business
Day, then the Payment Date for such month shall be the next succeeding Business
Day.
"Permits" means, all the "Permits" defined and described in the
-------
Mezzanine Mortgages.
"Permitted Encumbrances" means, with respect to the Facility,
----------------------
collectively, (i) the Liens created by the First Mortgages, the other First
Mortgage Loan Documents of record, the Liens created by the Mezzanine Mortgages
and the other Mezzanine Loan Documents of record (ii) all Liens and other
matters disclosed in the Title Insurance Policy concerning the Facility, or any
part thereof, (iii) Liens, if any, for Impositions imposed by any Governmental
Authority not yet due or delinquent or being contested in good faith and by
appropriate proceedings in accordance with the Mezzanine Mortgages, (iv) 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 after the 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
Facility, (C) the fair market value of the Facility or the fair market value of
the Facility as of the date of Completion of Construction, or (D) the
renovation, use or operation of the Facility as of the Closing Date and
thereafter, and (v) all other Liens to which Mezzanine Lender in its sole
discretion has given its prior written consent.
"Permitted Transfers" shall mean, provided that no Event of Default
-------------------
has occurred, (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 Facility or, if necessary for the operation of the
Facility, are replaced with equivalent property; (iii) all Leases which are not
Material Leases; (iv) all Material Leases which have been approved by First
Mortgage Lender in writing; (v) transfers of Equity Interests which in the
aggregate during the term of the Mezzanine Loan (a) do not exceed 49% of the
total interests in the Borrower or Operator, as applicable, and (b) do not
result in any partner's, member's, shareholder's, beneficial owner's or other
Person's interest in the Borrower or Operator (other than the Persons who own
interests in the Borrower or Operator on the Closing Date), as applicable,
exceeding 49% of the
<PAGE>
13
total interests in the Borrower or Operator, as applicable; (vi) any other
transfer of Equity Interests provided that (a) First Mortgage Lender shall have
consented to such transfer or transfers, (b) acceptable opinions relating to
such transfer or transfers shall have been delivered by Borrower or Operator, as
applicable, to Mezzanine Lender (including without limitation tax and bankruptcy
opinions), and (d) Borrower or Operator, as applicable, pays all reasonable
expenses incurred by Mezzanine Lender in connection with such transfer or
transfers; and (vii) a transfer of the Facility to a single purchaser including,
but not limited to, a transfer of the Facility by Borrower to the Operator
(pursuant to the Operator Lease or Section 8.33 or otherwise), not more than
------------
one time during the term of the Mezzanine Loan, provided that prior to such
transfer (a) First Mortgage Lender shall have consented to such transfer, (b)
acceptable opinions relating to such transfer shall have been delivered by
Borrower to Mezzanine Lender (including without limitation tax and bankruptcy
opinions), (c) the transferee assumes in writing all obligations of the
transferor under the Mezzanine Loan Documents and executes and delivers such
other documentation as may be required by Mezzanine Lender and (d) Borrower or
Operator pays all reasonable expenses incurred by Mezzanine Lender in connection
with such transfer.
"Physical Plant Standards" has the meaning provided in Section
------------------------ -------
4.1(d)(AK)(vii).
- ---------------
"Principal Indebtedness" means the principal amount of the entire
----------------------
Mezzanine Loan outstanding as the same may be increased or decreased, as a
result of prepayment or otherwise, from time to time.
"Proceeds" means all of the "Proceeds" defined and described in the
--------
Mezzanine Mortgages.
"Recourse Distributions" has the meaning provided in Section 8.14.
---------------------- ------------
"Remedial Work" has the meaning provided in Section 5.1(b)(D)(i).
------------- ------- ------------
"Rents" means all of the "Rents" defined and described in the
-----
Mezzanine Mortgages.
"Required Debt Service Payment" means, on any Payment Date, the Debt
-----------------------------
Service then due and payable by Borrower.
"Secretary's Certificate" means, with respect to Operator, the
-----------------------
certificate in form and substance satisfactory to Mezzanine Lender in Mezzanine
Lender's reasonable discretion dated as of the Closing Date.
<PAGE>
14
"Single-Purpose Entity" means a corporation, limited partnership,
---------------------
limited liability company or business trust which, at all times since its
formation and thereafter (a) was and will be organized solely for the purpose
of owning and/or operating the Facility, (b) has not and will not engage in any
business unrelated to the ownership and/or operation of the Facility, (c) has
not and will not have any assets other than those related to the Facility, (d)
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, membership, shareholder or beneficial
interests, or (A) as to The Harbor Village Business Trust, amend its trust
agreement or trust certificate, and (B) as to any other entity which owns or
operates the Facility, amend its limited partnership agreement, articles of
incorporation, articles of organization, certificate of formation or operating
agreement (as applicable), with respect to those portions of such documents
relating to its compliance with the definition of "Single-Purpose Entity",
without the prior written consent of Mezzanine Lender, which consent shall not
be unreasonably withheld, and, after a Securitization, written confirmation by
the Rating Agencies that a proposed amendment will not result in a downgrade,
withdrawal or qualification of the then applicable ratings assigned to the
securities issued in a Securitization, (e) if such entity is a limited
partnership, has and will have as its only general partners, general partners
which are and will be Single-Purpose Entities which are corporations, (f) if
such entity is a business trust, has and will have, as its trustee, an
Independent Eligible Trustee, (g) if such entity is a corporation, at all
relevant times, has and will have at least one Independent Director, (h) 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, (i) has not failed
and will not fail to correct any known misunderstanding regarding the separate
identity of such entity, (j) if such entity is a limited liability company, has
and will have at least one member that is and will be a Single-Purpose Entity
which is and will be a corporation, and such corporation is and will be the
managing member of such limited liability company, (k) without the unanimous
consent of all of the partners, directors (including without limitation all
Independent Directors), members, beneficial owners or trustees, 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, (l) has maintained and will maintain its accounts, books and
records separate from any other person or entity, (m) has maintained and will
maintain its books, records, resolutions and agreements as official records,
(n) has not commingled and will not commingle its funds or assets with those of
<PAGE>
15
any other entity, (o) has held and will hold its assets in its own name, (p) has
conducted and will conduct its business in its name, (q) has maintained and will
maintain its financial statements, accounting records and other entity documents
separate from any other person or entity, (r) has paid and will pay its own
liabilities out of its own funds and assets, (s) has observed and will observe
all partnership, corporate, limited liability company or business trust
formalities as applicable, (t) has maintained and will maintain an arms-length
relationship with its affiliates, (u) (a) if such entity owns the Facility, has
and will have no indebtedness other than the Indebtedness, the First Mortgage
Loan, the SELCO Debt and unsecured trade payables in the ordinary course of
business relating to the ownership and operation of the Facility which (1) do
not exceed, at any time, a maximum amount of Ten Thousand Dollars ($10,000) and
(2) are paid within ninety (90) days of the date incurred, or (b) if such entity
operates the Facility, has and will have no indebtedness other than as permitted
under this Loan Agreement and unsecured trade payables in the ordinary course of
business relating to the ownership and/or operation of the Facility which (1) do
not exceed, at any time, one percent (1%) of the Mezzanine Loan Amount plus the
Loan Amount (as defined in the First Mortgage Loan Agreement) and (2) are paid
within ninety (90) days of the date incurred, (v) 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, (w) has not acquired and will not acquire obligations or
securities of its partners, members, beneficial owners, trustees or
shareholders, (x) has allocated and will allocate fairly and reasonably shared
expenses, including, without limitation, shared office space and uses separate
stationery, invoices and checks, (y) except pursuant hereto, has not and will
not pledge its assets for the benefit of any other person or entity (other than,
with respect to Operator, the pledge by the Operator of Certificate A (as
defined in the SELCO Loan Agreement)), (z) 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, (aa)
has not made and will not make loans to any person or entity, (bb) has not and
will not identify its partners, members beneficial owners, trustees or
shareholders, or any affiliates of any of them as a division or part of it, (cc)
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, (dd) has not entered and will not
enter into or be a party to, any transaction with its partners, members,
beneficial owners, trustees, 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, (ee) has paid and will pay the
salaries of its own employees from its own funds, (ff) has maintained and will
maintain adequate capital in light of its contemplated business operations and
(gg) if such entity is a limited liability company, limited partnership or
trust, and such entity has one or more managing members, general partners or
trustees, as applicable, then such entity shall continue (and not dissolve) for
so long as a solvent managing member, general partner or trustee, as applicable,
exists and such entity's
<PAGE>
16
organizational documents shall contain such provision.
"Tax Fair Market Value" means, with respect to the Facility, the fair
---------------------
market value of the Facility, and (x) 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 (S)(S)1.860G-2 and 1.856-3(c), or is
not "qualifying real property" within the meaning of Treasury Regulation
(S)1.593-11(b)(iv), and (y) shall be reduced by the "adjusted issue price"
(within the meaning of Code (S) 1272(a)(4)) (the "Tax Adjusted Issue Price") of
------------------------
any indebtedness, other than the Mezzanine Loan, secured by a Lien affecting the
Facility, which Lien is prior to or on a parity with the Lien created under the
Mezzanine Mortgages.
"Title Instruction Letter" means an instruction letter in form and
------------------------
substance satisfactory to Mezzanine Lender in Mezzanine Lender's sole
discretion.
"Title Insurance Policy" means, with respect to the Facility, the loan
----------------------
policy of title insurance for the Facility issued by Title Insurer with respect
to the Facility in an amount acceptable to Mezzanine Lender and insuring the
second priority lien in favor of Mezzanine Lender created by the Mezzanine
Mortgage and, as to the Leasehold Estate, the Mezzanine Leasehold Mortgage and
acceptable to Mezzanine Lender in Mezzanine Lender's reasonable discretion.
"Title Insurer" means Lawyer's Title Insurance Corporation and any
-------------
reinsurer reasonably required by Mezzanine Lender and/or any other nationally
recognized title insurance company acceptable to Mezzanine Lender in Mezzanine
Lender's reasonable discretion, provided, however, that the reinsurer of any
Title Insurance Policy may include, in amounts reasonably acceptable to
Mezzanine Lender, Chicago Title Insurance Company, First American Title
Insurance Company or Stewart Title Insurance Company.
"Transaction Costs" means all fees, costs, expenses and disbursements
-----------------
paid or payable by Borrower relating to the Transactions, including, without
limitation, all appraisal fees, legal fees, accounting fees and the costs and
expenses described in Section 8.24.
------- ----
"Transactions" means each of the transactions contemplated by the
------------
Mezzanine Loan Documents.
"Transfer" means any conveyance, transfer (including, without
--------
limitation, any transfer of any direct or indirect legal or beneficial interest
(including, without limitation, any profit interest) in Borrower or the
Operator), sale, Lease (including, without limitation, any amendment, extension,
modification, waiver or renewal thereof), or Lien, whether by law or otherwise,
of, on or affecting any Collateral, Borrower or the Operator, other than a
Permitted
<PAGE>
17
Transfer.
"UCC" means, with respect to the Collateral, the Uniform Commercial
---
Code in effect in the jurisdiction in which the relevant Collateral is located.
"Yield Maintenance Premium" means if all or any portion of the
-------------------------
Mezzanine Note is accelerated, the amount that, when added to the amount
otherwise due as a result of such acceleration, would be sufficient to purchase
U.S. Obligations (A) having maturity dates on or prior to, but as close as
possible to, successive scheduled Payment Dates (after the date of such
acceleration of the Mezzanine Note) upon which Payment Dates interest and
principal payments would be required under the Mezzanine Note as though the
Maturity Date of the Mezzanine Note was the Optional Prepayment Date and (B) in
amounts sufficient to pay all scheduled principal and interest payments on the
Mezzanine Note as if the Maturity Date of the Mezzanine Note was the Optional
Prepayment Date (but without any adjustment of the monthly amortization
schedule).
ARTICLE II
GENERAL TERMS
-------------
Section 2.1. Amount of the Mezzanine Loan. Subject to the terms and
----------------------------
conditions of this Agreement, Mezzanine Lender shall lend Borrower the Mezzanine
Loan Amount.
Section 2.2. Use of Proceeds. Proceeds of the Mezzanine Loan shall
---------------
be deposited into the Construction Sub-Account to be disbursed in accordance
with the First Mortgage Loan Agreement.
Section 2.3. Security for the Mezzanine Loan. The Mezzanine Note and
-------------------------------
Borrower's obligations hereunder and under the other Mezzanine Loan Documents
shall be secured by the Mezzanine Mortgages, the Mezzanine Guaranty, the
Mezzanine Assignments of Leases, the Mezzanine Assignments of Agreements, and
the security interests and Liens granted in this Agreement and in the other
Mezzanine Loan Documents.
Section 2.4. Borrower's Mezzanine Note. (a) Borrower's obligation to
-------------------------
pay the principal of and interest on the Mezzanine Loan (including Late Charges
and Default Rate interest, and the Yield Maintenance Premium, if any), shall be
evidenced by this Agreement and by the Mezzanine Note, duly executed and
delivered by Borrower. The Mezzanine Note shall be payable as to principal,
interest, Late Charges and Default Rate interest and Yield Maintenance
<PAGE>
18
Premium, if any, as specified in this Agreement, with a final maturity on the
Maturity Date. Borrower shall pay all outstanding Indebtedness on the Maturity
Date.
(b) Mezzanine Lender is hereby authorized, at its sole option, to
endorse on a schedule attached to the Mezzanine Note (or on a continuation of
such schedule attached to the Mezzanine Note and made a part thereof) an
appropriate notation evidencing the date and amount of each payment of
principal, interest, Late Charges and Default Rate interest and Yield
Maintenance Premium, if any, in respect thereof, which books and records shall
be made available to Borrower, at Borrower's sole cost and expense on reasonable
advance notice, for examination at Mezzanine Lender's offices.
Section 2.5. Principal and Interest Payments.
-------------------------------
(a) Accrual of Interest. Interest shall accrue on the outstanding
-------------------
principal balance of the Mezzanine Note and all other amounts due to Mezzanine
Lender under the Mezzanine Loan Documents at the Interest Rate.
(b) Payment of Interest. Commencing on the first Payment Date
-------------------
after the Closing Date, Borrower shall pay to Mezzanine Lender monthly payments
of accrued interest only on the Principal Indebtedness. Each payment required to
be made by Borrower pursuant to this Section 2.5(b) is hereinafter sometimes
------- ------
referred to as a "Base Payment."
------------
(c) Payment Dates. All payments required to be made pursuant to
-------------
paragraphs (a) and (b) above shall be made beginning on the first Payment Date
- ----------
immediately after the end of the second Interest Accrual Period; provided,
however, that Borrower shall pay interest for the first Interest Accrual Period
on the Closing Date.
(d) Calculation of Interest. Interest shall accrue on the
-----------------------
outstanding principal balance of the Mezzanine Loan and all other amounts due to
Mezzanine Lender under the Mezzanine Loan Documents commencing upon the Closing
Date. Interest shall be computed on the actual number of days elapsed in each
year over a 360-day year.
(e) Default Rate Interest. Upon the earlier to occur of a Late
---------------------
Payment or an Event of Default, if any, the entire unpaid amount outstanding
hereunder and under the Mezzanine Note will bear interest at the Default Rate.
(f) Late Charge. If Borrower fails to make any payment of any
-----------
sums due under the Mezzanine Loan Documents after the same is due, and the same
remains unpaid after the expiration of any applicable cure period, if any,
Borrower shall pay a Late Charge.
<PAGE>
19
(g) Maturity Date. On the Maturity Date Borrower shall pay to
-------------
Mezzanine Lender all amounts owing under the Mezzanine Loan Documents, including
without limitation, interest, principal, Late Charges and Default Rate interest,
and any Yield Maintenance Premium. Notwithstanding the foregoing, it is the
intent of the parties that on the Stabilization Date Payment Date the Mezzanine
Loan will be rolled up into the First Mortgage Loan as described in Section
-------
8.32. The Yield Maintenance Premium shall only be due and payable on the date of
- ----
acceleration of the Mezzanine Note.
(h) Payment of Liquidation Proceeds. Upon the receipt of any
-------------------------------
Liquidation Proceeds, the Borrower shall be required, on the date of receipt
thereof, to apply the related Net Liquidation Proceeds After Debt Service to the
prepayment of principal on the Mezzanine Note, together with accrued interest
for the entire Interest Accrual Period in which such prepayment occurs, and all
other amounts then due and payable on the Mezzanine Note. The Borrower shall
notify the Mezzanine Lender of any Liquidation Event not later than one Business
Day following the first date on which the Borrower has knowledge of any
Liquidation Event.
Section 2.6. Intentionally Deleted.
Section 2.7. Prepayment. (a) Borrower may not voluntarily prepay
----------
the Mezzanine Loan prior to the Stabilization Date Payment Date. On and after
the Stabilzation Date Payment Date, Borrower may prepay the Mezzanine Loan
without the payment of a Yeild Maintenance Premium.
(b) If Borrower is required by Lender under the provisions of the
Mezzanine Mortgage to prepay the Mezzanine Loan or any portion thereof in the
event of damage to or destruction of or a Taking of all or any portion of the
Facility, Borrower shall prepay the Mezzanine Loan to the full extent of the Net
Liquidation Proceeds after Debt Service, and there shall be no Yield Maintenance
Premium or penalty assessed against Borrower by reason of such prepayment.
Section 2.8. Application of Payments. Prior to the occurrence and
-----------------------
continuance of an Event of Default, all proceeds of any repayment, including
prepayments, of the Mezzanine Loan shall be applied to pay: first, any costs
-----
and expenses of Mezzanine Lender, including, without limitation, the Mezzanine
Lender's reasonable attorney's fees and disbursements actually arising as a
result of such repayment or reasonably expended by Mezzanine Lender to protect
the Collateral; second, accrued and unpaid interest at, the Interest Rate;
------
third, to the Principal Indebtedness and fourth, any other amounts then due and
- ----- ------
owing under the Mezzanine Loan Documents. After the occurrence and during the
continuance of an Event of Default, all proceeds of repayment, including any
payment or recovery on the Collateral shall, unless
<PAGE>
20
otherwise provided in the Mezzanine Mortgages, be applied to amounts which
Borrower is obligated to pay under the Mezzanine Loan Documents in such order
and in such manner as Mezzanine Lender shall elect in its sole discretion.
Section 2.9. Payment of Debt Service, Method and Place of Payment. (a)
----------------------------------------------------
Except as otherwise specifically provided herein, all payments and prepayments
under this Agreement and the Mezzanine Note shall be made to Mezzanine Lender
not later than 12:00 noon, New York City time, on the date when due and shall be
made in lawful money of the United States of America in federal or other
immediately available funds to an account specified to Borrower by Mezzanine
Lender in writing, and any funds received by Mezzanine Lender after such time,
for all purposes hereof, shall be deemed to have been paid on the next
succeeding Business Day.
(b) All payments made by Borrower hereunder or by Borrower under the
other Mezzanine Loan Documents, shall be made irrespective of, and without any
deduction for, any set-offs or counterclaims.
(c) Unless a Cash Management Event has occurred and is continuing,
Borrower shall pay to the Mezzanine Lender or its designee, on or prior to each
Payment Date, the Required Debt Service Payment for such Payment Date. If a
Cash Management Event has occurred and is continuing, the First Mortgage Lender,
its designee or the Cash Collateral Account Bank, shall transfer to Mezzanine
Lender the amounts deposited in the Mezzanine Debt Service Payment Sub-Account
in accordance with the First Mortgage Loan.
Section 2.10. Taxes. All payments made by Borrower under this
-----
Agreement and under the other Mezzanine Loan Documents shall be made free and
clear of, and without deduction or withholding for or on account of, any present
or future income, stamp or other taxes, levies, imposts, duties, charges, fees,
deductions or withholdings, now or hereafter imposed, levied, collected,
withheld or assessed by any Governmental Authority (other than taxes imposed on
the income of Mezzanine Lender).
Section 2.11. Intentionally deleted.
Section 2.12. Intentionally deleted.
Section 2.13. Security Agreement. (a) Pledge of Accounts. To
------------------ ------------------
secure the full and punctual payment and performance of all of the Indebtedness,
each of Borrower and Operator hereby sells, assigns, conveys, pledges and
transfers to Mezzanine Lender and grants to Mezzanine Lender a second and
continuing security interest (subject to the security interest of the First
Mortgage Lender therein) in and to, the following property, whether now owned or
<PAGE>
21
existing or hereafter acquired or arising and regardless of where located
(collectively, the "Account Collateral"):
------------------
(i) all of the right, title and interest of Borrower and Operator
in the Cash Collateral Account (including all Sub-Accounts) and all Money
(except to the extent funds therein constitute any SELCO Required Quarterly
Payment) and Permitted Investments, if any, from time to time deposited or
held in the Cash Collateral Account;
(ii) all of the right, title and interest of Borrower and Operator
in the Collection Account and Security Deposit Account and all Money, if
any, from time to time deposited or held in the Collection Account and
Security Deposit Account;
(iii) all interest, dividends, Money, Instruments and other
property from time to time received, receivable or otherwise payable in
respect of, or in exchange for, any of the foregoing; and
(iv) to the extent not covered by clauses (i), (ii), or (iii)
----------- ---- -----
above, all Proceeds and products of any or all of the foregoing.
(b) Covenants. (A) Borrower covenants that (i) all Rents (as defined
---------
in the Mezzanine Mortgage) and Money received by Borrower, shall be deposited by
Borrower directly into the Collection Account or the Security Deposit Account,
as applicable, in accordance with Section 2.12(a) (provided, however, Lessor
------- -------
Basic Rent, SELCO Basic Rent and any Supplemental Rent (as each such term is
defined in the Operator Lease) to which Borrower is entitled shall not be
deposited in the Collection Account) and (ii) so long as any portion of the
Indebtedness is outstanding, Borrower shall not open (nor permit Operator or any
Person to open) any other account for the collection of Rents (as defined in the
Mezzanine Mortgage), Money or other items of Gross Revenue, other than a
replacement Collection Account or Security Deposit Account approved by Mezzanine
Lender in Mezzanine Lender's reasonable discretion.
(B) Operator covenants that (i) all Rents (as defined in the
Mezzanine Leasehold Mortgage) and Money received by Operator shall be deposited
by Operator directly into the Collection Account or the Security Deposit
Account, as applicable, in accordance with Section 2.12(a) and (ii) so long as
------- -------
any portion of the Indebtedness is outstanding, Operator shall not open any
other account for the collection of Rents (as defined in the Mezzanine Leasehold
Mortgage), Money or other items of Gross Revenue, other than a replacement
Collection Account or Security Deposit Account approved by Mezzanine Lender in
Mezzanine Lender's reasonable discretion.
<PAGE>
22
(c) Instructions and Agreements. On or before the Closing Date,
---------------------------
Borrower and Operator will submit to the Collection Account Bank for the
Facility a Collection Account Agreement to be executed by the Collection Account
Bank.
(d) Financing Statements; Further Assurances. Borrower and Operator
----------------------------------------
will execute and deliver to Mezzanine Lender for filing financing statements in
connection with the Account Collateral in the form required to properly perfect
Mezzanine Lender's security interest in the Account Collateral to the extent
that it may be perfected by such a filing. Each of Operator and Borrower agrees
that at any time and from time to time, at the expense of Borrower and/or
Operator, Borrower and Operator shall promptly execute and deliver all further
instruments, and take all further action, that Mezzanine Lender may request, in
order to perfect and protect the pledge and security interest granted or
purported to be granted hereby, or to enable Mezzanine Lender to exercise and
enforce Mezzanine Lender's rights and remedies hereunder with respect to, the
Account Collateral.
(e) Transfers and Other Liens. Each of Borrower and Operator agrees
-------------------------
that it will not sell or otherwise dispose of any of the Account Collateral
other than pursuant to the terms hereof, the First Mortgage Loan Documents and
of the other Loan Documents, or create or permit to exist any Lien upon or with
respect to all or any of the Account Collateral, except for the Lien granted to
Mezzanine Lender under this Agreement and to First Mortgage Lender under the
First Mortgage Loan Agreement.
(f) Mezzanine Lender's Reasonable Care. Beyond the exercise of
----------------------------------
reasonable care in the custody thereof, Mezzanine Lender shall not have any duty
as to any Account Collateral or any income thereon in its possession or control
or in the possession or control of any agents for, or of Mezzanine Lender, or
the preservation of rights against any Person or otherwise with respect thereto
other than the gross negligence or willful misconduct of Mezzanine Lender or its
agents, employees or bailees. Mezzanine Lender shall be deemed to have exercised
reasonable care in the custody of the Account Collateral in its possession if
the Account Collateral is accorded treatment substantially equal to that which
Mezzanine Lender accords its own property, it being understood that Mezzanine
Lender shall not be liable or responsible for (i) any loss or damage to any of
the Account Collateral, or for any diminution in value thereof from a loss of,
or delay in Mezzanine Lender's acknowledging receipt of, any wire transfer from
the Collection Account Bank or (ii) any loss, damage or diminution in value by
reason of the act or omission of Mezzanine Lender, or Mezzanine Lender's agents,
employees or bailees other than for gross negligence or willful misconduct of
Mezzanine Lender or its agents, employees or bailees.
(g) Mezzanine Lender Appointed Attorney-In-Fact. Each of Borrower and
-------------------------------------------
Operator, respectively, hereby irrevocably constitutes and appoints Mezzanine
Lender as
<PAGE>
23
Borrower's and Operator's true and lawful attorney-in-fact, with full power of
substitution, at any time after the occurrence and during the continuance of an
Event of Default to execute, acknowledge and deliver any instruments and to
exercise and enforce every right, power, remedy, option and privilege of
Borrower and Operator with respect to the Account Collateral, and do in the
name, place and stead of Borrower and Operator, all such acts, things and deeds
for and on behalf of and in the name of Borrower and Operator with respect to
the Account Collateral, which Borrower and Operator could or might do or which
Mezzanine Lender may deem necessary or desirable to more fully vest in Mezzanine
Lender the rights and remedies provided for herein with respect to the Account
Collateral and to accomplish the purposes of this Agreement. The foregoing
powers of attorney are irrevocable and coupled with an interest.
(h) Continuing Security Interest; Termination. This Section 2.13
----------------------------------------- ------- ----
shall create a continuing pledge of and security interest in the Account
Collateral and shall remain in full force and effect until payment in full of
the Indebtedness. Upon payment in full of the Indebtedness, each of Borrower
and Operator shall be entitled to the return, upon their request and at their
expense, of such of the Account Collateral as shall not have been sold or
otherwise applied pursuant to the terms hereof, and Mezzanine Lender shall
execute such instruments and documents as may be reasonably requested by
Borrower or Operator to evidence such termination and the release of the pledge
and Lien hereof, provided, however, that Borrower shall pay within ten (10)
-------- -------
calendar days following written demand all of Mezzanine Lender's expenses in
connection therewith.
Section 2.14. Intentionally deleted.
---------------------
Section 2.15. Supplemental Mortgage Affidavits. The Liens to be created by
--------------------------------
the Mezzanine Mortgages are intended to encumber the Facility described therein
to the full extent of Borrower's obligations under the Mezzanine Loan Documents.
As of the Closing Date, Borrower shall have paid all state, county and municipal
recording and all other taxes imposed upon the execution and recordation of the
Mezzanine Mortgages.
ARTICLE III
CONDITIONS PRECEDENT
--------------------
Section 3.1. Conditions Precedent to the Loan. (a) As a condition
--------------------------------
precedent to the making of the Mezzanine Loan, Borrower shall have satisfied
each of the conditions set forth in Article III of the First Mortgage Loan
Agreement and the following conditions (unless waived by Mezzanine Lender in
accordance with Section 8.4) with respect to the Facility on or before
------- ---
<PAGE>
24
the Closing Date:
(A) Mezzanine Loan Documents.
------------------------
(i) Mezzanine Loan Agreement. Borrower shall have executed and
------------------------
delivered this Agreement to Mezzanine Lender.
(ii) Mezzanine Note. Borrower shall have executed and delivered
--------------
to Mezzanine Lender the Mezzanine Note.
(iii) Mezzanine Mortgages. Borrower shall have executed and
-------------------
delivered to Mezzanine Lender the Mezzanine Mortgage and Operator shall
have executed and delivered to Mezzanine Lender the Mezzanine Leasehold
Mortgage and such Mezzanine Mortgages shall have been filed of record in
the appropriate filing offices in the jurisdiction in which the Facility is
located or irrevocably delivered to a title agent for such recordation.
(iv) Mezzanine Assignments of Leases. Borrower shall have
-------------------------------
executed and delivered to Mezzanine Lender the Mezzanine Assignment of
Leases - Borrower and Operator shall have executed and delivered to
Mezzanine Lender the Mezzanine Assignment of Leases - Operator and the
Mezzanine Assignments of Leases shall have been filed of record in the
appropriate filing offices in the jurisdiction in which the Facility is
located or irrevocably delivered to a title agent for such recordation.
(v) Mezzanine Assignments of Agreements. Borrower shall have
-----------------------------------
executed and delivered to Mezzanine Lender the Mezzanine Assignment of
Agreements - Borrower and Operator shall have executed and delivered to
Mezzanine Lender the Mezzanine Assignment of Agreements - Operator and the
Mezzanine Assignments of Agreements shall, to the extent prudent pursuant
to local practice, have been filed of record in the appropriate filing
offices in the jurisdiction in which the Facility is located or irrevocably
delivered to a title agent for such recordation.
(vi) Financing Statements. Borrower and Operator shall have
--------------------
executed and delivered to Mezzanine Lender all financing statements
required by Mezzanine Lender and such financing statements shall have been
filed of record in the appropriate filing offices in each of the
appropriate jurisdictions or irrevocably delivered to a title agent for
such recordation.
(vii) Intentionally deleted.
<PAGE>
25
(viii) Intentionally deleted.
(ix) Mezzanine Environmental Guaranty. The Parent shall have
--------------------------------
executed and delivered to Mezzanine Lender the Mezzanine Environmental
Guaranty.
(x) Intentionally deleted.
(xi) Mezzanine Guaranty. Operator shall have executed and
------------------
delivered the Mezzanine Guaranty and executed copies of such agreement
shall have been delivered to Mezzanine Lender.
(B) Opinions of Counsel. Mezzanine Lender shall have received from
-------------------
counsel reasonably satisfactory to Mezzanine Lender, legal opinions in form
and substance satisfactory to Mezzanine Lender in Mezzanine Lender's
reasonable discretion (including without limitation, bankruptcy opinions
regarding Borrower and Operator). All such legal opinions will be addressed
to Mezzanine Lender, dated as of the Closing Date, and in form and
substance reasonably satisfactory to Mezzanine Lender and its counsel. Each
of Borrower and Operator hereby instructs any of the foregoing counsel, to
the extent that such counsel represents Borrower or Operator, to deliver to
Mezzanine Lender such opinions addressed to Mezzanine Lender.
(C) Secretary's, Trustee's and Beneficial Owner's Certificates.
----------------------------------------------------------
Mezzanine Lender shall have received a Beneficial Owner's Certificate with
respect to Beneficial Owner, a Secretary's Certificate with respect to
Operator and a Trustee's Certificate from Borrower's Trustee.
(D) Insurance. Mezzanine Lender shall have received certificates of
---------
insurance demonstrating insurance coverage in respect of the Facility of
types, in amounts, with insurers and otherwise in compliance with the
terms, provisions and conditions set forth in the Mezzanine Mortgages.
Such certificates shall indicate that Mezzanine Lender is an additional
insured as its interests may appear and, to the extent required by the
Mezzanine Mortgages, shall contain a loss payee endorsement in favor of
Mezzanine Lender with respect to the property policies required to be
maintained under the Mezzanine Mortgages and the other policies required to
be maintained hereunder. All insurance policies required to be maintained
hereunder shall be maintained from the Closing Date throughout the term of
this Agreement in the types and amounts required hereunder and under the
Mezzanine Mortgages.
(E) Intentionally deleted.
<PAGE>
26
(F) Title Insurance Policy. Mezzanine Lender shall have received (i)
----------------------
a Title Insurance Policy or a marked up commitment (in form and substance
reasonably satisfactory to Mezzanine Lender in Mezzanine Lender's
reasonable discretion) from Title Insurer to issue the Title Insurance
Policy and (ii) a fully executed copy of the Title Instruction Letter from
the Title Insurer.
(G) Intentionally deleted.
(H) Consents, Licenses, Approvals. Mezzanine Lender shall have
-----------------------------
received copies of all consents, licenses and approvals, if any, required
in connection with the execution, delivery and performance by Borrower
under, and the validity and enforceability of, the Mezzanine Loan
Documents, and such consents, licenses and approvals shall be in full force
and effect.
(I) Additional Matters. Mezzanine Lender shall have received such
------------------
other Permits, certificates (including certificates of occupancy reflecting
the use of the Facility as of the Closing Date), opinions, documents and
instruments (including without limitation, written proof from the
appropriate Governmental Authority regarding the zoning of the Facility in
form and substance reasonably satisfactory to Mezzanine Lender in Mezzanine
Lender's reasonable discretion) relating to the Mezzanine Loan as may have
been reasonably requested by Mezzanine Lender and all other documents and
all legal matters in connection with the Mezzanine Loan shall be
satisfactory in form and substance to Mezzanine Lender.
(J) Representations and Warranties. The representations and
------------------------------
warranties herein and in the other Mezzanine Loan Documents shall be true
and correct in all material respects.
(K) Intentionally deleted.
(L) 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 litigation shall be pending or threatened, which in the good
faith judgment of Mezzanine Lender would enjoin, prohibit or restrain, or
impose or result in a Material Adverse Effect upon the making or repayment
of the Mezzanine Loan or the consummation of the Transactions.
(M) Transaction Costs. Borrower shall have paid or caused to be paid
-----------------
all Transaction Costs.
(b) Mezzanine Lender shall not make the Mezzanine Loan unless and
until each of the applicable conditions precedent set forth in Section 3.1(a) is
------- ------
satisfied and until Borrower and Operator each provides any other information
reasonably required by Mezzanine
<PAGE>
27
Lender.
(c) In connection with the Mezzanine Loan, Borrower and Operator shall
execute and/or deliver to Mezzanine Lender all additions, amendments,
modifications and supplements to the items set forth in this Section 3.1(a),
--------------
including without limitation, amendments, modifications and supplements to the
Mezzanine Note, Mezzanine Mortgages, Mezzanine Assignments of Leases and
Mezzanine Assignments of Agreements, if reasonably requested by Mezzanine Lender
to effectuate the provisions hereof, and to provide Mezzanine Lender with the
full benefit of the security intended to be provided under the Mezzanine Loan
Documents. Without in any way limiting the foregoing, such additions,
modifications and supplements shall include those deemed reasonably desirable by
Mezzanine Lender's counsel in the jurisdiction in which the Facility is located.
(d) The making of the Mezzanine Loan shall constitute, without the
necessity of specifically containing a written statement to such effect, a
confirmation, representation and warranty by Borrower and Operator to Mezzanine
Lender that all of the applicable conditions to be satisfied in connection with
the making of the Mezzanine Loan have been satisfied (unless waived by Mezzanine
Lender in accordance with Section 8.4,) and that all of the representations and
------- ---
warranties of Borrower set forth in the Mezzanine Loan Documents are true and
correct in all material respects as of the date of the making of the Mezzanine
Loan.
Section 3.2. Form of Mezzanine Loan Documents and Related Matters.
----------------------------------------------------
The Mezzanine Loan Documents and all of the certificates, agreements, legal
opinions and other documents and papers referred to in this Article III, unless
-----------
otherwise specified, shall be delivered to Mezzanine Lender, and shall be
reasonably satisfactory in form and substance to Mezzanine Lender.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
------------------------------
Section 4.1. Representations and Warranties of Borrower and Operator.
-------------------------------------------------------
(a) Closing Date Representations and Warranties of Borrower. Borrower
-------------------------------------------------------
represents and warrants that, as of the Closing Date:
(A) Organization. Borrower (i) is a duly organized and validly
------------
existing Entity in good standing under the laws of the State of its
formation, (ii) is duly qualified as a foreign Entity in each jurisdiction
in which the nature of its business, the Facility or any of the Collateral
makes such qualification necessary or desirable, (iii) has the requisite
<PAGE>
28
Entity power and authority to carry on its business as now being conducted,
and (iv) has the requisite Entity power to execute and deliver, and perform
its obligations under, the Mezzanine Loan Documents executed by Borrower.
(B) Authorization. The execution and delivery by Borrower of the
-------------
Mezzanine Loan Documents to which it is a party, Borrower's performance of
its obligations thereunder and the creation of the security interests and
Liens provided for by Borrower in the Mezzanine Loan Documents (i) have
been duly authorized by all requisite Entity action on the part of
Borrower, (ii) will not violate any provision of any applicable Legal
Requirements, any order of any court or other Governmental Authority, any
organizational document of Borrower or any indenture or agreement or other
instrument to which Borrower is a party or by which Borrower is bound,
(iii) will not be in conflict with, result in a breach of, or constitute
(with due notice or lapse of time or both) a default under, or result in
the creation or imposition of any Lien of any nature whatsoever upon any of
the property or assets of Borrower pursuant to, any such indenture or
agreement or instrument except as permitted under any of the Mezzanine Loan
Documents and (iv) have been duly executed and delivered by Borrower.
Except for the Mezzanine Mortgage, the Mezzanine Assignment of Rents-
Borrower, Mezzanine Assignment of Agreements-Borrower, and a memorandum of
the Operator Lease, all of which must be recorded in the Office of the
Recorder of Deeds of Cook County, Illinois and the Financing Statements,
which must be recorded in the Office of the Recorder of Deeds of Cook
County, Illinois and filed in the offices of the Secretary of the and the
Secretary of the State of Delaware and those consents, approvals and
authorizations obtained or filed on or prior to the Closing Date, Borrower
is not required to obtain any consent, approval or authorization from, or
to file any declaration or statement with, any Governmental Authority or
other agency in connection with or as a condition to the execution,
delivery or performance of the Mezzanine Loan Documents. The Mezzanine
Loan Documents to which Borrower is a party have been duly authorized,
executed and delivered by Borrower.
(C) Single-Purpose Entity.
---------------------
(i) Borrower has been, and will continue to be, a duly formed
and existing Entity, and a Single-Purpose Entity.
(ii) Borrower at all times since its formation has complied, and
will continue to comply, with the provisions of all of its organizational
documents, and the laws of the state in which Borrower was formed relating
to the Entity.
(iii) All customary formalities regarding the Entity existence
of
<PAGE>
29
Borrower have been observed at all times since its formation and will
continue to be observed.
(iv) Borrower has been at all times since its formation and will
continue to be adequately capitalized in light of the nature of its
business.
(b) Additional Closing Date Borrower Representations and Warranties.
---------------------------------------------------------------
Borrower represents and warrants that as of the Closing Date:
(A) Litigation. There are no actions, suits or proceedings at law or
----------
in equity by or before any Governmental Authority or other agency now
pending and served or, to the knowledge of Borrower, threatened against
Borrower or the Facility where a judgment adverse to Borrower would be
reasonably likely to individually or in the aggregate result in a Material
Adverse Effect.
(B) Agreements. Borrower is not a party to any agreement or
----------
instrument or subject to any restriction which is likely to have a Material
Adverse Effect. 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 agreement or instrument to which it is a
party or by which Borrower is bound would be reasonably likely result in a
Material Adverse Effect.
(C) No Bankruptcy Filing. Borrower is not contemplating either the
--------------------
filing of a petition by it under any state or federal bankruptcy or
insolvency laws or the liquidation of all or a major portion of Borrower's
assets or property, and Borrower has no knowledge of any Person
contemplating the filing of any such petition against it.
(D) Full and Accurate Disclosure. No statement of fact made by or on
----------------------------
behalf of Borrower in the Mezzanine Loan Documents or in any other document
or certificate delivered to Mezzanine Lender by Borrower contains any
untrue statement of a material fact or omits to state any material fact
necessary to make statements contained herein or therein not misleading.
There is no fact presently known to Borrower which has not been disclosed
to Mezzanine Lender which would have a Material Adverse Effect nor, as far
as Borrower can foresee, would have a Material Adverse Effect.
(E) Location of Chief Executive Offices. The location of Borrower's
-----------------------------------
principal place of business and the location of Borrower's chief executive
office is c/o Wilmington Trust Company, 1100 North Market Street,
Wilmington, Delaware 19890-0001.
(F) Compliance. Borrower and, to the best of Borrower's knowledge,
----------
<PAGE>
30
Borrower's ownership of the Facility comply in all material respects with
all applicable Legal Requirements, including without limitation, building
and zoning ordinances and codes. Borrower is not in default or violation
of any order, writ, injunction, decree or demand of any Governmental
Authority, the violation of which is reasonably likely to have a Material
Adverse Effect.
(G) 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, or by which Borrower
is bound, other than the First Mortgage Loan, the SELCO Debt and unsecured
trade payables incurred in the ordinary course of business relating to the
ownership of the Facility which do not exceed, at any time, a maximum
amount of Ten Thousand Dollars ($10,000) and are paid within ninety (90)
days of the date incurred, and other than obligations under the Mezzanine
Mortgage and the other Mezzanine Loan Documents. Except for the SELCO Debt
and the First Mortgage Loan, 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.
(H) ERISA. 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 Mezzanine Lender under
Section 5.1(a)(T).
------- ---------
(I) Solvency. Borrower (i) has not entered into this Agreement or any
--------
Mezzanine 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 Mezzanine Loan Documents. 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, without
limitation, subordinated, unliquidated, or disputed liabilities or
Contingent Obligations. The fair saleable value of Borrower's assets 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 Contingent Obligations or its debts as such debts
become absolute and matured. 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,
without limitation, Contingent Obligations and other commitments) beyond
its ability to pay such debts as they mature (taking into account the
<PAGE>
31
timing and amounts to be payable on or in respect of obligations of
Borrower).
(J) Not Foreign Person. Borrower is not a "foreign person" within the
------------------
meaning of (S) 1445(f)(3) of the Code.
(K) Intentionally Omitted.
(L) Investment Company Act; Public Utility Holding 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.
(M) No Defaults. No Default or Event of Default exists under or with
-----------
respect to any Mezzanine Loan Document.
(N) Labor Matters. Borrower is not a party to any collective
-------------
bargaining agreements.
(O) Title to the Mortgaged Property. Borrower owns good,
-------------------------------
indefeasible, marketable and insurable fee simple title to the Facility,
free and clear of all Liens, other than the Permitted Encumbrances
applicable to the Facility. Except as set forth in the Operator Lease,
Borrower has not granted any options to purchase or rights of first refusal
with respect to the Facility.
(P) Use of Proceeds; Margin Regulations. Borrower will use the
-----------------------------------
proceeds of the Mezzanine Loan for the purposes described in Section 2.2.
------- ---
No part of the proceeds of the Mezzanine 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 which would be inconsistent with such Regulation U or any
other Regulations of such Board of Governors, or for any purposes
prohibited by applicable Legal Requirements.
(Q) Intentionally deleted.
(R) Intentionally deleted.
<PAGE>
32
(S) Intentionally deleted.
(T) Intentionally deleted.
(U) Environmental Matters. Borrower represents, warrants and
---------------------
covenants as to itself and the Facility:
(i) There is no Environmental Claim pending or, to Borrower's
knowledge, threatened, and no penalties arising under Environmental Laws
have been assessed against Borrower.
(ii) There have been no environmental investigations, studies,
audits, reviews or other analyses conducted by or on behalf of Borrower
that are in the possession or control of Borrower in relation to the
Facility which have not been provided to Mezzanine Lender.
(V) Intentionally deleted.
(W) Intentionally deleted.
(X) Mezzanine Mortgages and Other Liens. The Mezzanine Mortgage
-----------------------------------
creates a valid and enforceable second mortgage Lien on the Borrower's fee
simple title to the Facility as security for the repayment of the
Indebtedness subject only to the Permitted Encumbrances applicable to the
Facility. Each Collateral Security Instrument executed by Borrower
establishes and creates a valid, subsisting and enforceable Lien on and a
security interest in, or claim to, the rights and property described
therein. All property covered by such Collateral Security Instrument which
is subject to the UCC is subject to a UCC financing statement filed and/or
recorded, as appropriate, (or irrevocably delivered to an agent for such
recordation or filing) in all places necessary to perfect a valid Lien
(second in priority to the First Mortgage Loan) with respect to the rights
and property that are the subject of such Collateral Security Instrument to
the extent governed by the UCC.
(Y) Enforceability. The Mezzanine Loan Documents executed by Borrower
--------------
in connection with the Mezzanine Loan, including, without limitation, any
Collateral Security Instrument executed by Borrower, are the legal, valid
and binding obligations of Borrower, enforceable against Borrower in
accordance with their terms, subject to bankruptcy, insolvency and other
limitations on creditors' rights generally and to equitable principles.
Such Mezzanine Loan Documents are, as of the Closing Date, not subject to
any right of rescission, set-off, counterclaim or defense by Borrower,
including the defense of usury, nor will the operation of any of the terms
of the Mezzanine Note, the Mezzanine Mortgage, or such other Mezzanine Loan
Documents executed by
<PAGE>
33
Borrower, or the exercise of any right thereunder, render the Mezzanine
Mortgage unenforceable against Borrower, in whole or in part, or subject to
any right of rescission, set-off, counterclaim or defense by Borrower,
including the defense of usury, and Borrower has not asserted any right of
rescission, set-off, counterclaim or defense with respect thereto.
(Z) No Liabilities. Borrower has no liabilities or obligations
--------------
including without limitation Contingent Obligations (and including, without
limitation, liabilities or obligations in tort, in contract, at law, in
equity, pursuant to a statute or regulation, or otherwise) other than those
liabilities and obligations expressly permitted by this Agreement.
(AA) No Prior Assignment. As of the Closing Date, (i) Mezzanine
-------------------
Lender is the assignee of Borrower's interest under the Operator Lease, and
(ii) except for the assignments in connection with the First Mortgage Loan,
there are no prior assignments, pledges or hypothecations by Borrower of
the Operator Lease or any portion of the Rent due and payable thereunder or
to become due and payable thereunder which are presently outstanding.
(BB) Intentionally deleted.
(CC) Intentionally deleted.
(DD) Intentionally deleted.
(EE) 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. 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.
(FF) Intentionally deleted.
(GG) Conduct of Business. Borrower does not conduct its business
-------------------
"also known as," "doing business as" or under any other name provided,
however, that the Facility is operated under the name "Harbor Village."
<PAGE>
34
(HH) Intentionally deleted.
(II) Intentionally deleted.
(JJ) Leases. (a) Borrower is the sole owner of the entire lessor's
------
interest in the Operator Lease; (b) the Operator Lease is valid and
enforceable obligation of Borrower; (c) none of the Rents under the
Operator Lease have been collected for more than one (1) month in advance;
(d) the Operator is the sole tenant of the Lessor; (e) to the knowledge of
Borrower after due inquiry, there exist no offsets or defenses to the
payment of any portion of the Rents under the Operator Lease; (f) except as
set forth in the Operator Lease, the Borrower has not granted the Operator
any option to purchase, right of first refusal to purchase, or any other
similar provision; (g) except for Permitted Encumbrances, Lessor has not
granted any Person any possessory interest in, or right to occupy, the
Facility except under and pursuant to the Operator Lease; and (h) the
Operator Lease is subordinate to the Mezzanine Loan Documents, pursuant to
its terms.
(c) Closing Date Representation and Warranties of Operator. Operator
------------------------------------------------------
represents and warrants that as of the Closing Date:
(A) Organization. Operator (i) is a duly organized and validly
------------
existing Entity in good standing under the laws of the State of its
formation, (ii) is duly qualified as a foreign Entity in each jurisdiction
in which the nature of its business, the Facility or any of the Collateral
makes such qualification necessary or desirable, (iii) has the requisite
Entity power and authority to carry on its business as now being conducted,
and (iv) has the requisite Entity power to execute and deliver, and perform
its obligations under, the Mezzanine Loan Documents executed by Operator.
(B) Authorization. The execution and delivery by Operator of the
-------------
Mezzanine Loan Documents to which it is a party, Operator's performance of
its obligations thereunder and the creation of the security interests and
Liens provided for by Operator in the Mezzanine Loan Documents (i) have
been duly authorized by all requisite Entity action on the part of
Operator, (ii) will not violate any provision of any applicable Legal
Requirements, any order of any court or other Governmental Authority, any
organizational document of Operator or any indenture or agreement or other
instrument to which Operator is a party or by which Operator is bound,
(iii) will not be in conflict with, result in a breach of, or constitute
(with due notice or lapse of time or both) a default under, or result in
the creation or imposition of any Lien of any nature whatsoever upon any of
the property or assets of Operator pursuant to, any such indenture or
agreement or instrument except as permitted under any of the Mezzanine Loan
Documents and (iv) have been duly executed and delivered by Operator.
Except for the Mezzanine Leasehold
<PAGE>
35
Mortgage, the Mezzanine Assignment of Rents-Operator, Mezzanine Assignment
of Agreements-Operator, and a memorandum of the Operator Lease, all of
which must be recorded in the Office of the Recorder of Deeds of Cook
County, Illinois and the Financing Statements, which must be recorded in
the Office of the Recorder of Deeds of Cook County, Illinois and filed in
the offices of the Secretary of the State of Illinois and the Secretary of
the State of Delaware and those consents, approvals and authorizations
obtained or filed on or prior to the Closing Date Operator is not required
to obtain any consent, approval or authorization from, or to file any
declaration or statement with, any Governmental Authority or other agency
in connection with or as a condition to the execution, delivery or
performance of the Mezzanine Loan Documents. The Mezzanine Loan Documents
to which Operator is a party have been duly authorized, executed and
delivered by Operator.
(C) Single-Purpose Entity.
---------------------
(i) Operator has been, and will continue to be, a duly formed
and existing Entity, and a Single-Purpose Entity.
(ii) Operator at all times since its formation has complied, and
will continue to comply, with the provisions of all of its organizational
documents, and the laws of the state in which Operator was formed relating
to the Entity.
(iii) All customary formalities regarding the Entity existence
of Operator have been observed at all times since its formation and will
continue to be observed.
(iv) Operator has been at all times since its formation and will
continue to be adequately capitalized in light of the nature of its
business.
(d) Additional Closing Date Operator Representations and Warranties.
---------------------------------------------------------------
Operator represents and warrants that, as of the Closing Date:
(A) Litigation. There are no actions, suits or proceedings at law or
----------
in equity by or before any Governmental Authority or other agency now
pending and served or, to the knowledge of Operator, threatened against
Operator or the Facility where a judgment adverse to Operator or the
Facility would be reasonably likely to individually or in the aggregate
result in a Material Adverse Effect.
(B) Agreements. Operator is not a party to any agreement or
----------
instrument or subject to any restriction which is likely to have a Material
Adverse Effect. Operator is
<PAGE>
36
not in default in any material respect in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in
any agreement or instrument to which it is a party or by which Operator or
the Facility is bound which would be reasonably likely result in a Material
Adverse Effect.
(C) No Bankruptcy Filing. Operator is not contemplating either the
--------------------
filing of a petition by it under any state or federal bankruptcy or
insolvency laws or the liquidation of all or a major portion of Operator's
assets or property, and Operator has no knowledge of any Person
contemplating the filing of any such petition against it.
(D) Full and Accurate Disclosure. No statement of fact made by or on
----------------------------
behalf of Operator in the Mezzanine Loan Documents or in any other document
or certificate delivered to Mezzanine Lender by Operator contains any
untrue statement of a material fact or omits to state any material fact
necessary to make statements contained herein or therein not misleading in
any material respect. There is no fact presently known to Operator which
has not been disclosed to Mezzanine Lender which would have a Material
Adverse Effect, nor, as far as Operator can foresee, would have a Material
Adverse Effect.
(E) Location of Chief Executive Offices. The location of Operator's
-----------------------------------
principal place of business and the location of Operator's chief executive
office is 77 West Wacker Drive, Chicago, Illinois 60601.
(F) Compliance. Operator, the Facility and Operator's use thereof and
----------
operations thereat comply in all material respects with all applicable
Legal Requirements, including without limitation, building and zoning
ordinances and codes. Operator is not in default or violation of any order,
writ, injunction, decree or demand of any Governmental Authority, the
violation of which is reasonably likely to have a Material Adverse Effect.
(G) Other Debt and Obligations. Operator has no financial obligation
--------------------------
under any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which Operator is a party, or by which Operator
or the Facility is bound, other than the First Mortgage Loan, unsecured
trade payables incurred in the ordinary course of business relating to the
ownership and operation of the Facility which do not exceed, at any time, a
maximum amount of one percent (1%) of the Mezzanine Loan Amount and the
Loan Amount (as defined in the First Mortgage Loan) and are paid within
ninety (90) days of the date incurred, and other than obligations under the
Mezzanine Leasehold Mortgage, the other Mezzanine Loan Documents, the
Operator Lease and those Pledge Agreements (as defined in the Operator
Lease) executed by Operator. Operator has not
<PAGE>
37
borrowed or received other debt financing that has not been heretofore
repaid in full and Operator has no known material contingent liabilities.
(H) ERISA. Each Plan and, to the knowledge of Operator, 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 Operator
would be under an obligation to furnish a report to Mezzanine Lender under
Section 5.1(b)(T).
------- ---------
(I) Solvency. Operator (i) has not entered into this Loan Agreement
--------
or any Mezzanine 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 Mezzanine Loan Documents. Giving
effect to the transactions contemplated hereby, the fair saleable value of
Operator's assets exceeds and will, immediately following the execution and
delivery of this Agreement, exceed Operator's total liabilities, including,
without limitation, subordinated, unliquidated, or disputed liabilities or
Contingent Obligations. The fair saleable value of Operator's assets is and
will, immediately following the execution and delivery of this Agreement,
be greater than Operator's probable liabilities, including the maximum
amount of its Contingent Obligations or its debts as such debts become
absolute and matured. Operator'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. Operator does not intend to, and does not believe
that it will, incur debts and liabilities (including, without limitation,
Contingent 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 Operator).
(J) Not Foreign Person. Operator is not a "foreign person" within the
------------------
meaning of (S) 1445(f)(3) of the Code.
(K) Intentionally Omitted.
(L) Investment Company Act; Public Utility Holding Company Act.
----------------------------------------------------------
Operator 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
<PAGE>
38
borrow money.
(M) No Defaults. No Default or Event of Default exists under or with
-----------
respect to any Mezzanine Loan Document.
(N) Labor Matters. Operator is not a party to any collective
-------------
bargaining agreements.
(O) Title to the Mortgaged Property. Operator owns good,
-------------------------------
indefeasible, marketable and insurable leasehold title to the Facility,
free and clear of all Liens, other than the Permitted Encumbrances
applicable to the Facility. Except as set forth in the Operator Lease,
there are no options to purchase or rights of first refusal affecting
Operator's interest in the Facility or, to Operator's knowledge, there are
no outstanding options to purchase or rights of first refusal affecting
Borrower's interest in the Facility. The Permitted Encumbrances do not and
will not materially and adversely affect (i) the ability of Operator to pay
in full all sums due under the Mezzanine Guaranty, or any of its other
obligations in a timely manner or (ii) the use of the Facility for the use
currently being made thereof, the operation of the Facility as currently
being operated or the value of the Facility.
(P) Intentionally deleted.
(Q) Financial Information. All historical financial data concerning
---------------------
Operator and, to the knowledge of Operator, the Facility that has been
delivered by Operator to Mezzanine Lender is true, complete and correct in
all material respects. Since the delivery of such data, except as
otherwise disclosed in writing to Mezzanine Lender, there has been no
material adverse change in the financial position of Operator or, to the
knowledge of Operator, the Facility, or in the results of operations of
Operator. Operator has not incurred any obligation or liability,
contingent or otherwise, not reflected in such financial data which might
materially adversely affect its business operations or the Facility.
(R) Condemnation. No Taking has been commenced or, to Operator's
------------
knowledge, is contemplated with respect to all or any portion of the
Facility or for the relocation of roadways providing access to the
Facility.
(S) Intentionally Omitted.
(T) Utilities and Public Access. The Facility has adequate rights of
---------------------------
access to public ways and is served by adequate water, sewer, sanitary
sewer and storm drain
<PAGE>
39
facilities as are adequate for full utilization of the Facility for its
current purpose. Except as otherwise disclosed by the Surveys, all public
utilities necessary to the continued use and enjoyment of the Facility as
presently used and enjoyed are located in the public right-of-way abutting
the premises, and all such utilities are connected so as to serve the
Facility either (i) without passing over other property or, (ii) if such
utilities pass over other property, pursuant to valid easements. All roads
necessary for the full utilization of the Facility for its current purpose
have been completed and dedicated to public use and accepted by all
Governmental Authorities or are the subject of access easements for the
benefit of the Facility.
(U) Environmental Compliance. Operator represents, warrants and
------------------------
covenants, as to itself and the Facility:
(i) Except as shown on the Environmental Reports delivered to
Mezzanine Lender prior to the Closing Date, Operator and the Facility are
in compliance in all material respects with all applicable Environmental
Laws in effect as of the date hereof, which compliance includes, but is not
limited to, the possession by Borrower or the Operator, as applicable, of
and compliance with all environmental, health and safety Permits, licenses
and other governmental authorizations required in connection with the
ownership and operation of the Facility under all Environmental Laws,
except where the failure to comply with such laws is not reasonably likely
to result in a Material Adverse Effect.
(ii) Except as shown on the Environmental Reports delivered to
Mezzanine Lender prior to the Closing Date, there is no Environmental Claim
pending or, to Operator's knowledge, threatened, and no penalties arising
under Environmental Laws have been assessed against Operator or, to
Operator's knowledge, the Borrower or the Facility or against any Person
whose liability for any Environmental Claim Operator has or may have
retained or assumed either contractually or by operation of law, and no
investigation or review is pending or, to the knowledge of Operator,
threatened by any Governmental Authority, citizens group, employee or other
Person with respect to any alleged failure by Borrower, Operator, or the
Facility to have any environmental, health or safety permit, license or
other authorization required under, or to otherwise comply with, any
Environmental Law in effect as of the date hereof or with respect to any
alleged liability of Borrower or Operator for any Use or Release of any
Hazardous Substances in violation of any Environmental Law in effect as of
the Closing Date or the presence, Use, or Release of any Hazardous
Substances at, on, in, under, or from any Facility in violation of any
Environmental Law in effect as of the Closing Date.
(iii) To the knowledge of Operator, except as may be disclosed
on the
<PAGE>
40
Environmental Reports delivered to Mezzanine Lender prior to the Closing
Date, there have been and are no past or present Releases or threats of
Release of any Hazardous Substance that are likely to form the basis of any
Environmental Claim against Borrower, Operator, the Facility or, to
Operator's knowledge, against any Person whose liability for any
Environmental Claim Operator has or may have retained or assumed either
contractually or by operation of law.
(iv) To the knowledge of Operator and except as disclosed in
the Environmental Reports, without limiting the generality of the
foregoing, there is not present at, on, in or under the Facility, PCB-
containing equipment, asbestos or asbestos containing materials,
underground or aboveground storage tanks or surface impoundments for
Hazardous Substances, lead in drinking water (except in concentrations that
comply with all Environmental Laws), or lead-based paint (nor have there
been any underground storage tanks present at, on, in, or under the
Facility) in violation of any Environmental Laws in effect as of the
Closing Date.
(v) No Liens are presently recorded with the appropriate land
records under or pursuant to any Environmental Law with respect to the
Facility and, to Operator's knowledge, no Governmental Authority has been
taking or is in the process of taking any action that could subject the
Facility to Liens under any Environmental Law.
(vi) There have been no environmental investigations, studies,
audits, reviews or other analyses conducted by or on behalf of Borrower or
Operator that are in the possession or control of Operator in relation to
the Facility which have not been provided to Mezzanine Lender.
(vii) Except as disclosed in the Environmental Report, no
conditions exist on the Facility which would require Borrower or Operator
under any Environmental Laws in effect as of the Closing Date to place a
notice on any deed to the Facility with respect to the presence, Use or
Release of Hazardous Substances at, on, in, under or from the Facility and
the Facility has no such notice in its deed.
(V) No Joint Assessment; Separate Lots. Operator has not permitted
----------------------------------
or initiated the joint assessment of the Facility (i) with any other real
property constituting a separate tax lot, and (ii) with any portion of the
Facility which may be deemed to constitute personal property, or 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 Facility as
a single lien. The Facility is comprised of one or more parcels, each of
which constitutes a separate tax lot and none of which constitutes a
portion of any other tax lot.
<PAGE>
41
(W) Assessments. Except as disclosed in the Title Insurance Policy,
-----------
there are no pending or, to the knowledge of Operator, proposed special or
other assessments for public improvements or otherwise affecting the
Facility, nor, to the knowledge of Operator, are there any contemplated
improvements to the Facility that may result in such special or other
assessments.
(X) Mortgages and Other Liens. The Mezzanine Leasehold Mortgage
-------------------------
creates a valid and enforceable second mortgage Lien on the Operator's
leasehold title to the Facility as security for the repayment of the
Indebtedness, subject only to the Permitted Encumbrances applicable to the
Facility. Each Collateral Security Instrument executed by Operator
establishes and creates a valid, subsisting and enforceable Lien on and a
security interest in, or claim to, the rights and property described
therein. All property covered by such Collateral Security Instrument which
is subject to the UCC is subject to a UCC financing statement filed and/or
recorded, as appropriate, (or irrevocably delivered to an agent for such
recordation or filing) in all places necessary to perfect a valid Lien
(second in priority to the First Mortgage Loan) with respect to the rights
and property that are the subject of such Collateral Security Instrument to
the extent governed by the UCC.
(Y) Enforceability. The Mezzanine Loan Documents executed by Operator
--------------
in connection with the Mezzanine Loan, including, without limitation, any
Collateral Security Instrument executed by Operator, are the legal, valid
and binding obligations of Operator, enforceable against Operator in
accordance with their terms, subject to bankruptcy, insolvency and other
limitations on creditors' rights generally and to equitable principles.
Such Mezzanine Loan Documents are, as of the Closing Date, not subject to
any right of rescission, set-off, counterclaim or defense by Operator,
including the defense of usury, nor will the operation of any of the terms
of the Mezzanine Note, the Mezzanine Mortgages, or such other Mezzanine
Loan Documents, or the exercise of any right thereunder, render the
Mezzanine Leasehold Mortgage unenforceable against Operator, in whole or in
part, or subject to any right of rescission, set-off, counterclaim or
defense by Operator, including the defense of usury, and Operator has not
asserted any right of rescission, set-off, counterclaim or defense with
respect thereto.
(Z) No Liabilities. Operator has no liabilities or obligations
--------------
including without limitation Contingent Obligations (and including, without
limitation, liabilities or obligations in tort, in contract, at law, in
equity, pursuant to a statute or regulation, or otherwise) other than those
liabilities and obligations expressly permitted by this Agreement.
(AA) No Prior Assignment. As of the Closing Date, (i) Mezzanine
-------------------
Lender is the assignee of Operator's interest under the Leases (as defined
in the Mezzanine Leasehold
<PAGE>
42
Mortgage), and (ii) except for the assignments in connection with the First
Mortgage Loan, 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.
(BB) Certificate of Occupancy. Operator has obtained (in its own name
------------------------
and/or in the Borrower's name, as applicable and in any event, in the name
of the Person(s) as required under all applicable Legal Requirements) all
Permits necessary to use and operate the Facility for the use described in
Section 3.1(S), and all such Permits are in full force and effect. The use
------- ------
being made of the Facility is in conformity in all respects with the
certificate of occupancy and/or Permits for the Facility and any other
restrictions, covenants or conditions affecting the Facility. Each
Facility contains all Equipment necessary to use and operate such Facility
as described in Section 3.1(S) in a manner consistent with the standards
--------------
applicable to properties of a similar nature in the geographic area in
which the Facility is located and in any event not less than the standards
applied by Affiliates of Operator for other comparable properties owned or
leased by such Affiliates in such geographic area.
(CC) Flood Zone. Except as shown on the Survey, the Facility is not
----------
located in a special flood hazard area as defined by the Federal Insurance
Administration.
(DD) Physical Condition. Except as disclosed in the Engineering
------------------
Reports, the Facility is free of material structural defects and all
building systems contained therein are in good working order in all
material respects subject to ordinary wear and tear.
(EE) Intellectual Property. All trademarks, trade names and service
---------------------
marks that Operator 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 Operator as presently conducted
or as Operator contemplates conducting its business. Operator 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 Operator's knowledge, there is no infringement by others of
trademarks, trade names and service marks of Operator.
(FF) Security Deposits. All security deposits with respect to the
-----------------
Facility on the Closing Date have been transferred to the Security Deposit
Account on or prior to the Closing Date, and Operator is in compliance with
all applicable Legal Requirements relating to such security deposits.
(GG) Conduct of Business. Operator does not conduct its business
-------------------
"also known
<PAGE>
43
as," "doing business as" or under any other name provided, however, that
the Facility is operated under the name "Harbor Village."
(HH) Title Insurance. The Facility 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 a valid second
mortgage lien on the Facility, which is in full force and effect and is
freely assignable to and will inure to the benefit of Mezzanine Lender and
any successor or assignee of Mezzanine Lender subject only to the Permitted
Encumbrances.
(II) Tax Fair Market Value. The Mezzanine Loan Amount does not exceed
---------------------
the Tax Fair Market Value of the Facility.
(JJ) Leases. (a) Subject to Borrower's reversionary interest under
------
the Operator Lease, Operator is the sole owner of the entire lessor's
interest in the Leases (as defined in the Mezzanine Leasehold Mortgage);
(b) such Leases are valid and enforceable; (c) the terms of all
alterations, modifications and amendments to such Leases are reflected in
the certified rent roll statement delivered to and approved by Mezzanine
Lender; (d) none of the Rents reserved in such Leases have been assigned or
otherwise pledged or hypothecated; (e) none of such Rents have been
collected for more than one (1) month in advance (provided, however,
Borrower may accept SELCO Basic Rent (as defined in the Operator Lease) and
the Lessor Basic Rent (as defined in the Operator Lease) in advance for a
period of three (3) months); (f) the premises demised under such Leases
have been completed and the tenants under such Leases have accepted the
same and have taken possession of the same on a rent-paying basis; (g) to
the knowledge of Operator, there exist no offsets or defenses to the
payment of any portion of such Rents; (h) no such Lease contains an option
to purchase, right of first refusal to purchase, or any other similar
provision; (i) except for Permitted Encumbrances, no Person has any
possessory interest in, or right to occupy, the Facility except under and
pursuant to a Lease (as defined in the Mezzanine Leasehold Mortgage); and
(j) each such Lease is subordinate to the Mezzanine Loan Documents,
pursuant to its terms.
(AK) Use-Specific Representations.
----------------------------
(i) Compliance with Laws. Borrower, Operator and the Facility
--------------------
comply in all material respects with all applicable federal, state and
local laws, regulations, quality and safety standards, accreditation and
certification standards and requirements of the applicable state and local
Department of Public Health (each a "DOH") and all other Governmental
---
Authorities relating to the operation of a managed residential community
with assisted living services.
<PAGE>
44
(ii) Licenses. All material governmental licenses, permits,
--------
regulatory agreements or other approvals or agreements necessary or
desirable for the use, establishment or operation of the Facility as
intended are held by the Borrower and/or the Operator, as applicable, and
in any event are held by the Person(s) required under all applicable Legal
Requirements and are in full force and effect, including, without
limitation, (a) a valid certificate of need for the provision of assisted
living services ("CON") to the extent required by applicable Legal
---
Requirements; (b) a valid license to provide assisted living services to
the extent required by applicable Legal Requirements to the extent required
by applicable Legal Requirements; and (c) a valid registration of the
Facility with DOH as a managed residential community with assisted living
services to the extent required by applicable Legal Requirements
(collectively, the "Licenses").
--------
(iii) Ownership of Licenses. The Licenses, including without
---------------------
limitation, each, if any, CON:
(a) may not be, and have not been, transferred to any
location other than the Facility;
(b) have not been pledged as collateral security for any
other loan or indebtedness;
(c) are held free from restrictions or known conflicts
which would materially impair the use or operation of the Facility as
intended, and are not provisional, probationary or restricted in any way;
and
(d) have at all applicable times been, and are, in full
force and effect.
(iv) Intentionally deleted.
(v) Intentionally deleted.
(vi) Governmental Proceedings and Notices. None of Operator or
------------------------------------
the Facility, or, to the knowledge of Operator, the 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:
(a) affect Operator's ability to accept and/or retain
tenants or
<PAGE>
45
result in the imposition of a fine, a sanction, a lower rate certification
or a lower reimbursement rate for services rendered to eligible tenants; or
(b) modify, limit or annul or result in the transfer,
suspension, revocation or imposition of probationary use on any License.
(vii) Physical Plant Standards. The Facility and the use
------------------------
thereof complies in all material respects with all 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 such Facility.
(viii) Past Violations. The Facility is in material
---------------
compliance with all local, federal and state laws and regulations relating
to independent living or congregate living facilities with assisted living
services and no statement of charges or deficiencies has been made or
penalty enforcement action has been undertaken against the Facility or
against Operator, or any partner, member, officer, director or stockholder
of Operator or, to the knowledge of Operator, against Borrower or any
beneficial owner of Borrower, by any Governmental Authority.
(ix) Intentionally deleted.
(x) Pledges of Receivables. Except for the pledge in
----------------------
connection with the First Mortgage Loan, Operator has not pledged its
receivables as collateral security for any other loan or indebtedness.
(xi) Intentionally deleted.
(xii) Resident Records. To the best of Operator's knowledge,
----------------
all resident records at the Facility are true, complete and correct in all
material respects. From and after the date hereof, all resident records at
the Facility shall be maintained in accordance with all applicable Legal
Requirements, including, without limitation, with respect to retention and
confidentiality.
Section 4.2. Survival of Representations and Warranties. Each of the
------------------------------------------
Operator and the Borrower agrees that (i) all of the representations and
warranties of Borrower and Operator set forth in this Agreement and in the other
Mezzanine Loan Documents delivered on the Closing Date are made as of the
Closing Date (except as expressly otherwise provided) and (ii) all
representations and warranties made by Borrower and Operator shall survive the
delivery of the Mezzanine Note and continue for so long as any amount remains
owing to Mezzanine Lender under this Agreement, the Mezzanine Note or any of the
other Mezzanine Loan
<PAGE>
46
Documents; provided, however, that the representations, warranties and covenants
-------- -------
of the Operator set forth in Section 4.1(d)(U) and Sections 5.1(b)(D) through
----------------- ------------------
5.1(b)(I), inclusive shall survive in perpetuity and shall not be subject to the
- ---------
exculpation provisions of Section 8.14. All representations, warranties,
-------------
covenants and agreements made in this Agreement or in the other Mezzanine Loan
Documents shall be deemed to have been relied upon by Mezzanine Lender
notwithstanding any investigation heretofore or hereafter made by Mezzanine
Lender or on its behalf.
ARTICLE V
AFFIRMATIVE COVENANTS
---------------------
Section 5.1. Borrower and Operator Covenants. (a) Borrower covenants
-------------------------------
and agrees that, from the date hereof and until payment in full of the
Indebtedness:
i. Existence; Compliance with Legal Requirements; Insurance.
--------------------------------------------------------
Borrower shall do or cause to be done all things necessary to preserve,
renew and keep in full force and effect its Entity existence, rights,
licenses, Permits and franchises necessary for the conduct of its business
and comply in all material respects with all applicable Legal Requirements
applicable to it. Borrower shall notify Mezzanine Lender promptly of any
written notice or order that Borrower receives from any Governmental
Authority relating to Borrower's or the Facility's failure to comply with
such applicable Legal Requirements and promptly take any and all actions
necessary to bring itself into compliance in all material respects with
applicable Legal Requirements (and shall comply in all materials respects
with the requirements of such Legal Requirements that at any time are
applicable to its ownership of the Facility) provided, that Borrower at its
expense may, after prior notice to the Mezzanine Lender, contest by
appropriate legal, administrative or other proceedings conducted in good
faith and with due diligence, the validity or application, in whole or in
part, of any such applicable Legal Requirements as long as (i) neither the
applicable Collateral nor any part thereof or any interest therein, will be
sold, forfeited or lost if Borrower pays the amount or satisfies the
condition being contested, and Borrower would have the opportunity to do
so, in the event of Borrower's failure to prevail in the contest, (ii)
Mezzanine Lender would not, by virtue of such permitted contest, be exposed
to any risk of any civil liability for which Borrower has not furnished
additional security as provided in clause (iii) below, or to any risk of
------------
criminal liability, and neither the applicable Collateral nor any interest
therein would be subject to the imposition of any Lien as a result of the
failure to comply with such Legal Requirement or of such proceeding and
(iii) Borrower shall have furnished to the Mezzanine Lender additional
security in respect of the claim being contested or the loss or damage that
may result from Borrower's failure to prevail in such contest in such
amount as may be reasonably
<PAGE>
47
requested by Mezzanine Lender but in no event less than one hundred and
twenty five percent (125%) of the amount of such claim. Borrower shall at
all times maintain, preserve and protect all franchises and trade names and
preserve all the remainder of its property necessary for the continued
ownership of the Facility.
(B) Impositions and Other Claims. Borrower shall pay and discharge or
----------------------------
cause to be paid and discharged all Impositions, as well as all lawful
claims for labor, materials and supplies or otherwise, which could become a
Lien, all as more fully provided in, and subject to any rights to contest
contained in, the Mezzanine Mortgages.
(C) Litigation. Borrower shall give prompt written notice to
----------
Mezzanine Lender of any litigation or governmental proceedings pending or
threatened against Borrower which is reasonably likely to have a Material
Adverse Effect.
(D) Environmental Remediation. Unless otherwise required by law,
-------------------------
Environmental Laws or any Governmental Authority and except as contemplated
in Exhibit C-2 to the First Mortgage Loan Agreement, Borrower shall not
-----------
undertake any Remedial Work, nor enter into any settlement agreement,
consent decree or other compromise relating to any Hazardous Substances or
Environmental Laws which is reasonably likely to have a Material Adverse
Effect. Notwithstanding the foregoing, if the presence or threatened
presence or Release of Hazardous Substances at, on, in, under, from or
about the Facility poses an immediate threat to the health, safety or
welfare of any Person or the environment, or is of such a nature that an
immediate response is necessary, Borrower may complete all necessary
Remedial Work. In such events, Borrower shall notify Mezzanine Lender as
soon as practicable and, in any event, within three Business Days, of any
action taken.
(E) Environmental Matters; Inspection.
---------------------------------
(i) Borrower shall not cause or authorize a Hazardous Substance
to be present at, on, in, under or to emanate from the Facility, or migrate
from adjoining property controlled by Borrower onto or into the Facility in
violation of any Environmental Law, except under conditions permitted by
applicable Environmental Laws and, in the event that such Hazardous
Substances are present at, on, in, under or emanate from the Facility, or
migrate onto or into the Facility, Borrower shall cause the performance of
Remedial Work, removal or remediation of such Hazardous Substances, in
accordance with this Agreement and Environmental Laws.
(ii) Mezzanine Lender shall have the right at all reasonable
times after ten (10) calendar days' prior written notice to Borrower and
subject to the rights of
<PAGE>
48
tenants therein to enter upon and inspect all or any portion of the
Facility. If Mezzanine Lender has reason to believe that Remedial Work may
be required, Mezzanine Lender may select or may require Operator to select
a consulting environmental Engineer reasonably satisfactory to Mezzanine
Lender to conduct and prepare environmental reports assessing the
environmental condition of the Facility. Mezzanine Lender shall be given a
reasonable opportunity to review any reports, data and other documents or
materials reviewed or prepared by the environmental Engineer. The
inspection rights granted to Mezzanine Lender in this Section 5.1(a)(E)
-----------------
shall be in addition to, and not in limitation of, any other inspection
rights granted to Mezzanine Lender in the Mezzanine Loan Documents, and
shall expressly include the right (if Mezzanine Lender has reason to
suspect that Remedial Work may be required) to conduct or require Operator
to conduct soil borings, establish ground water monitoring wells and
conduct other customary environmental tests, assessments and audits.
(F) Environmental Notices. Borrower shall promptly provide notice to
---------------------
Mezzanine Lender of:
(i) Environmental Claim asserted or threatened (in writing)
by any Governmental Authority or other Person with respect to any Hazardous
Substance at, on, in, under or emanating from the Facility, to which
Borrower has knowledge which could reasonably be expected to impair the
value of Mezzanine Lender's security interests hereunder or have a Material
Adverse Effect;
(ii) any Environmental Claim or proceeding, investigation or
inquiry commenced or threatened in writing by any Person or Governmental
Authority, against Borrower, with respect to the presence, suspected
presence, Release or threatened Release of Hazardous Substances from or
onto, in or under any property not owned by Borrower, including, without
limitation, proceedings under the Comprehensive Environmental Response,
Compensation, and Liability Act, as amended, 42 U.S.C. (S) 9601, et seq.,
-- ----
which could reasonably be expected to impair the value of Mezzanine
Lender's security interests hereunder or have a Material Adverse Effect;
(iii) all Environmental Claims asserted or threatened against
Borrower, against any other party occupying the Facility or any portion
thereof or against the Facility which become known to Borrower, which could
reasonably be expected to impair the value of Mezzanine Lender's security
interests hereunder or have a Material Adverse Effect;
(iv) the discovery by Borrower of any occurrence or condition on
the Facility or on any real property adjoining or in the vicinity of the
Facility which could
<PAGE>
49
reasonably be expected to lead to an Environmental Claim against Borrower
or Mezzanine Lender which such Environmental Claim is reasonably likely to
have a Material Adverse Effect; and
(v) the commencement or completion of any Remedial Work by
Borrower.
(G) Copies of Notices. Borrower shall immediately transmit to
-----------------
Mezzanine Lender copies of any citations, orders, notices or other written
communications received from any Person or any Governmental Authority and
any notices, reports or other written communications submitted to any
Governmental Authority with respect to the matters described in Section
-------
5.1(a)(F).
---------
(H) Environmental Claims. Mezzanine Lender may join and participate
--------------------
in, as a party if Mezzanine Lender so determines, any legal or
administrative proceeding or action concerning the Facility or any portion
thereof under any Environmental Law, if, in Mezzanine Lender's reasonable
judgment, the interests of Mezzanine Lender will not be adequately
protected by Borrower or Operator.
(I) Environmental Waiver. Borrower waives and releases Mezzanine
--------------------
Lender from any rights or defenses Borrower may have against Mezzanine
Lender 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 Mezzanine Lender.
(J) Access to Facility. Subject to the terms of Section 8.2 of the
------------------
Operator Lease, Borrower shall permit agents, representatives and employees
of Mezzanine Lender to inspect the Facility or any part thereof at such
reasonable times as may be requested by Mezzanine Lender upon advance
notice.
(K) Notice of Default. Borrower shall promptly advise Mezzanine
-----------------
Lender of any material adverse change in Borrower's condition, financial or
otherwise, or of the occurrence of any Default of which the Borrower has
knowledge or Event of Default of which Borrower has knowledge.
(L) Cooperate in Legal Proceedings. Except with respect to any claim
------------------------------
by Borrower against Mezzanine Lender, Borrower shall cooperate with
Mezzanine Lender with respect to any proceedings before any Governmental
Authority which may in any way affect the rights of Mezzanine Lender
hereunder or any rights obtained by Mezzanine Lender under any of the
Mezzanine Loan Documents and, in connection
<PAGE>
50
therewith, not prohibit Mezzanine Lender, at its election, from
participating in any such proceedings.
(M) Perform Mezzanine Loan Documents. Borrower shall observe, perform
--------------------------------
and satisfy all the terms, provisions, covenants and conditions required to
be observed, performed or satisfied by it, and shall pay when due all
costs, fees and expenses required to be paid by it, under the Mezzanine
Loan Documents executed and delivered by Borrower.
(N) Insurance Benefits. Borrower shall cooperate with Mezzanine
------------------
Lender in obtaining for Mezzanine Lender the benefits of any Insurance
Proceeds lawfully or equitably payable to Mezzanine Lender in connection
with the Facility, and Mezzanine 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 Mezzanine Lender in case of a fire or
other casualty affecting the Facility or any part thereof out of such
Insurance Proceeds, all as more specifically provided in the Mezzanine
Mortgage.
(O) Further Assurances. Borrower shall, at Borrower's sole cost and
------------------
expense:
(i) execute and deliver to Mezzanine Lender such documents,
instruments, certificates, assignments and other writings, and do such
other acts necessary, to evidence, preserve and/or protect the Collateral
at any time securing or intended to secure the Mezzanine Note, as Mezzanine
Lender may require in Mezzanine Lender's reasonable discretion; and
(ii) do and execute all and such further lawful acts, conveyances
and assurances for the better and more effective carrying out of the
intents and purposes of this Agreement and the other Mezzanine Loan
Documents, as Mezzanine Lender shall require from time to time in its
reasonable discretion.
(P) Intentionally deleted.
<PAGE>
51
(Q) Financial Reporting. Borrower shall furnish Mezzanine Lender with
-------------------
any of the financial statements, reports and information provided to the First
Mortgage Lender pursuant to Section 5.1(a)(Q) of the First Mortgage Loan
Agreement at the same time that it provides such financial statements, reports
and information to the First Mortgage Lender and Mezzanine Lender shall have the
same rights with respect to such financial statements, reports and information
as the First Mortgage Lender has under the First Mortgage Loan Agreement.
Borrower shall furnish to Mezzanine Lender such other financial information with
respect to Borrower as Mezzanine Lender may reasonably request.
(R) Intentionally deleted.
(S) Intentionally Omitted.
(T) Certain Matters Relating to ERISA. Borrower hereby represents,
---------------------------------
warrants and covenants that, at all times on and before the date upon which
Mezzanine Lender makes the Mezzanine Loan and at all times after the date
upon which Mezzanine Lender makes the Mezzanine Loan, neither Borrower nor
any ERISA Affiliate of Borrower (i) maintains, contributes to or is
obligated to contribute to, or has maintained, contributed to or been
obligated to contribute to, or will maintain, contribute to or be obligated
to contribute to any Plan (including, without limitation, any benefit plan
or other plan subject to minimum funding requirements of ERISA Section 302
or Code Section 412) or Multiemployer Plan and (ii) has been, is or will
become subject to any liability or obligation under or in connection with
ERISA. Any violation of this Section 5.1(a)(T) by Borrower shall constitute
-----------------
an Event of Default.
(U) Single Purpose Entity. Borrower shall at all times be a Single
---------------------
Purpose Entity.
(V) 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 Mezzanine Lender (which may include Mezzanine
Lender's requirement that Borrower, as the case may be, post security with
respect to the contested trade payable).
(W) SELCO Debt. Borrower (i) shall pay all amounts due with respect
----------
to the SELCO Debt when due, subject to applicable grace periods, (ii) shall
not permit a default with respect to the SELCO Debt to exist which default
is not cured within applicable grace periods and (iii) without Mezzanine
Lender's prior written consent, which shall not be unreasonably withheld
shall not amend, modify or supplement the loan documents evidencing the
SELCO Debt.
<PAGE>
52
(b) Operator covenants and agrees that, from the date hereof and until
payment in full of the Indebtedness:
(A) Existence; Compliance with Legal Requirements; Insurance.
--------------------------------------------------------
Operator shall do or cause to be done all things necessary to preserve,
renew and keep in full force and effect its Entity existence, rights,
Licenses, Permits and franchises necessary for the conduct of its business
and comply in all material respects with all applicable Legal Requirements
and Insurance Requirements applicable to it and the Facility. Operator
shall notify Mezzanine Lender promptly of any written notice or order that
Operator receives from any Governmental Authority relating to Operator's
failure to comply with such applicable Legal Requirements relating to the
Facility and promptly take any and all actions necessary to bring itself
and its operations at the Facility 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 Facility) provided, that Operator
at its expense may, after prior notice to the Mezzanine Lender, contest by
appropriate legal, administrative or other proceedings conducted in good
faith and with due diligence, the validity or application, in whole or in
part, of any such applicable Legal Requirements as long as (i) neither the
applicable Collateral nor any part thereof or any interest therein, will be
sold, forfeited or lost if Operator pays the amount or satisfies the
condition being contested, and Operator would have the opportunity to do
so, in the event of Operator's failure to prevail in the contest, (ii)
Mezzanine Lender would not, by virtue of such permitted contest, be exposed
to any risk of any civil liability for which Operator has not furnished
additional security as provided in clause (iii) below, or to any risk of
------------
criminal liability, and neither the applicable Collateral nor any interest
therein would be subject to the imposition of any Lien as a result of the
failure to comply with such Legal Requirement or of such proceeding and
(iii) Operator shall have furnished to the Mezzanine Lender additional
security in respect of the claim being contested or the loss or damage that
may result from Operator's failure to prevail in such contest in such
amount as may be reasonably requested by Mezzanine Lender but in no event
less than one hundred and twenty five percent (125%) of the amount of such
claim. Operator shall at all times maintain, preserve and protect all
franchises and trade names and preserve all the remainder of its property
necessary for the continued conduct of its business and keep the Facility
in good repair, working order and condition, except for reasonable wear and
use, and from time to time make, or cause to be made, all necessary
repairs, renewals, replacements, betterments and improvements thereto, all
as more fully provided in the Mezzanine Mortgages. Operator shall keep the
Facility insured at all times, by financially sound and reputable insurers,
to such extent and against such risks, and maintain liability and such
other insurance, as is more fully provided herein and in the
<PAGE>
53
Mezzanine Mortgages.
(B) Impositions and Other Claims. Operator shall pay and discharge or
----------------------------
cause to be paid and discharged all Impositions, as well as all lawful
claims for labor, materials and supplies or otherwise, which could become a
Lien, all as more fully provided in, and subject to any rights to contest
contained in, the Mezzanine Mortgages.
(C) Litigation. Operator shall give prompt written notice to
----------
Mezzanine Lender of any litigation or governmental proceedings pending or
threatened against Operator which is reasonably likely to have a Material
Adverse Effect.
<PAGE>
54
(D) Environmental Remediation.
-------------------------
(i) If any investigation, site monitoring, cleanup, removal,
abatement, restoration remedial work or other response action of any kind
or nature is required pursuant to an order or directive of any Governmental
Authority or under any applicable Environmental Law (collectively, the
"Remedial Work"), because of or in connection with the (x) past, present or
--------------
future presence, suspected presence, Release or threatened Release of a
Hazardous Substance at, on, in, under or from the Facility or any portion
thereof or (y) violation of or compliance with applicable Environmental
Laws, Operator shall promptly commence and diligently prosecute to
completion all such Remedial Work. Subject to the provisions of Exhibit C-
---------
2 of the First Mortgage Loan Agreement, in all events, such Remedial Work
-
shall be commenced within the time period ordered or directed by such
Governmental Authority or such shorter period as may be required under any
applicable Environmental Law; provided, however, that Operator shall not be
-------- ------- ----
required to commence such Remedial Work within the above specified time
periods: (x) if prevented from doing so by any Governmental Authority, (y)
if commencing such Remedial Work within such time periods would result in
Operator or such Remedial Work violating any Environmental Law or (z) if
Operator, at its expense and after prior notice to Mezzanine Lender, is
contesting by appropriate legal, administrative or other proceedings,
conducted in good faith and with due diligence, the need to perform
Remedial Work, as long as (1) Operator is permitted by the applicable
Environmental Laws to delay performance of the Remedial Work pending such
proceedings, (2) neither the Facility nor any part thereof or interest
therein will be sold, forfeited or lost if Operator performs the Remedial
Work being contested, and Operator would have the opportunity to do so, in
the event of Operator's failure to prevail in the contest, (3) Mezzanine
Lender would not, by virtue of such permitted contest, be exposed to any
risk of any civil liability for which Operator has not furnished additional
security as provided in clause (4) below, or to any risk of criminal
----------
liability, and neither the Facility nor any interest therein would be
subject to the imposition of any Lien for which Operator has not furnished
additional security as provided in clause (4) below, as a result of the
----------
failure to perform such Remedial Work and (4) Operator shall have furnished
to Mezzanine Lender additional security in respect of the Remedial Work
being contested and the loss or damage that may result from Operator's
failure to prevail in such contest in such amount as may be reasonably
requested by Mezzanine Lender but in no event less than 125% of the cost of
such Remedial Work and any loss or damage that may result from Operator's
failure to prevail in such contest.
(ii) All Remedial Work under clause (i) above shall be performed
----------
by contractors, and under the supervision of a consulting environmental
Engineer, each
<PAGE>
55
approved in advance by Mezzanine Lender which approval will not be
unreasonably withheld or delayed. All costs and expenses incurred in
connection with such Remedial Work shall be paid by Operator; provided,
however, Operator shall be entitled to disbursement of funds from the
Capital Reserve Sub-Account to pay for the Remedial Work described on
Exhibit C-2 of the First Mortgage Loan Agreement and provided, further,
-----------
that the terms of Section 2.12(f)(iii) have been satisfied to Mezzanine
------- ------------
Lender's discretion. If Operator does not timely commence and diligently
prosecute to completion the Remedial Work, Mezzanine Lender may (but shall
not be obligated to), upon sixty (60) days prior written notice to Operator
of its intention to do so, cause such Remedial Work to be performed.
Operator shall pay or reimburse Mezzanine Lender within ten (10) calendar
days following written demand for all Advances (as defined in the Mezzanine
Mortgages) and expenses (including reasonable attorneys' fees and
disbursements) relating to or incurred by Mezzanine Lender in connection
with monitoring, reviewing or performing any Remedial Work in accordance
herewith.
(iii) Unless otherwise required by law, Environmental Laws or
any Governmental Authority, Operator shall not commence any Remedial Work
under clause (i) above, nor enter into any settlement agreement, consent
----------
decree or other compromise relating to any Hazardous Substances or
Environmental Laws which is reasonably likely to have a Material Adverse
Effect. Notwithstanding the foregoing, if the presence or threatened
presence or Release of Hazardous Substances at, on, in, under, from or
about the Facility poses an immediate threat to the health, safety or
welfare of any Person or the environment, or is of such a nature that an
immediate response is necessary, Operator may complete all necessary
Remedial Work. In such events, Operator shall notify Mezzanine Lender as
soon as practicable and, in any event, within three (3) Business Days, of
any action taken.
(E) Environmental Matters; Inspection.
---------------------------------
(i) Operator shall not cause, allow or authorize a Hazardous
Substance to be present at, on, in, under or to emanate from the Facility,
or migrate from adjoining property controlled by Operator onto or into the
Facility in violation of any Environmental Law, except under conditions
permitted by applicable Environmental Laws and, in the event that such
Hazardous Substances are present at, on, in, under or emanate from the
Facility, or migrate onto or into the Facility, Operator shall cause the
performance of Remedial Work, removal or remediation of such Hazardous
Substances, in accordance with this Agreement and Environmental Laws.
Operator shall use reasonable efforts to prevent, and to seek the
remediation of, any migration of Hazardous Substances onto or into the
Facility from any adjoining property in violation of any Environmental Law.
<PAGE>
56
(ii) Mezzanine Lender shall have the right at all reasonable
times after ten (10) calendar days' prior written notice to Operator and
subject to the rights of tenants therein to enter upon and inspect all or
any portion of the Facility. If Mezzanine Lender has reason to believe that
Remedial Work may be required, Mezzanine Lender may select or may require
Operator to select a consulting environmental Engineer reasonably
satisfactory to Mezzanine Lender to conduct and prepare environmental
reports assessing the environmental condition of the Facility. Mezzanine
Lender shall be given a reasonable opportunity to review any reports, data
and other documents or materials reviewed or prepared by the environmental
Engineer. The inspection rights granted to Mezzanine Lender in this
Section 5.1(b)(E) shall be in addition to, and not in limitation of, any
------- ---------
other inspection rights granted to Mezzanine Lender in the Mezzanine Loan
Documents, and shall expressly include the right (if Mezzanine Lender has
reason to suspect that Remedial Work may be required) to conduct or require
Operator to conduct soil borings, establish ground water monitoring wells
and conduct other customary environmental tests, assessments and audits.
(iii) Operator agrees to bear and shall pay or reimburse
Mezzanine Lender within ten (10) calendar days following written demand for
all sums advanced and expenses incurred (including reasonable attorneys'
fees and disbursements, but excluding internal overhead, administrative and
similar costs of Mezzanine Lender) relating to, or incurred by Mezzanine
Lender in connection with, the inspections and reports described in this
Section 5.1(b)(E) in the following situations:
------- ---------
(x) If Mezzanine Lender has reasonable grounds to believe, at
the time any such inspection is ordered, that there exists an
occurrence or condition that could lead to an Environmental Claim;
(y) If any such inspection reveals an occurrence or condition
that could lead to an Environmental Claim;
(z) If an Event of Default with respect to the Facility exists
at the time any such inspection is ordered, and such Event of Default
relates to any representation, covenant or other obligation pertaining
to Hazardous Substances, Environmental Laws or any other environmental
matter.
(F) Environmental Notices. Operator shall promptly provide notice to
---------------------
Mezzanine Lender of:
(i) any Environmental Claim asserted or threatened (in
writing) by
<PAGE>
57
any Governmental Authority or other Person with respect to any Hazardous
Substance at, on, in, under or emanating from the Facility, which could
reasonably be expected to impair the value of Mezzanine Lender's security
interests hereunder or have a Material Adverse Effect;
(ii) any Environmental Claim or proceeding, investigation or
inquiry commenced or threatened in writing by any Person or Governmental
Authority, against Operator, with respect to the presence, suspected
presence, Release or threatened Release of Hazardous Substances from or
onto, in or under any property not owned by Operator, including, without
limitation, proceedings under the Comprehensive Environmental Response,
Compensation, and Liability Act, as amended, 42 U.S.C. (S) 9601, et seq.,
-- ----
which could reasonably be expected to impair the value of Mezzanine
Lender's security interests hereunder or have a Material Adverse Effect;
(iii) all Environmental Claims asserted or threatened against
Operator, against any other party occupying the Facility or any portion
thereof or against the Facility which become known to Operator, which could
reasonably be expected to impair the value of Mezzanine Lender's security
interests hereunder or have a Material Adverse Effect;
(iv) the discovery by Operator of any occurrence or condition
on the Facility or on any real property adjoining or in the vicinity of the
Facility which could reasonably be expected to lead to an Environmental
Claim against Operator or Mezzanine Lender which such Environmental Claim
is reasonably likely to have a Material Adverse Effect; and
(v) the commencement or completion of any Remedial Work.
(G) Copies of Notices. Operator shall immediately transmit to
-----------------
Mezzanine Lender copies of any citations, orders, notices or other written
communications received from any Person or any Governmental Authority and
any notices, reports or other written communications submitted to any
Governmental Authority with respect to the matters described in Section
-------
5.1(b)(F).
---------
(H) Environmental Claims. Mezzanine Lender may join and participate
--------------------
in, as a party if Mezzanine Lender so determines, any legal or
administrative proceeding or action concerning the Facility or any portion
thereof under any Environmental Law, if, in Mezzanine Lender's reasonable
judgment, the interests of Mezzanine Lender will not be adequately
protected by Operator. Operator agrees to bear and shall pay or reimburse
Mezzanine Lender within ten (10) calendar days following written demand for
all
<PAGE>
58
reasonable sums advanced and reasonable expenses (including reasonable
attorneys' fees and disbursements), incurred by Mezzanine Lender in
connection with any such action or proceeding.
(I) Indemnification. Operator agrees to indemnify, reimburse, defend
---------------
(with counsel reasonably satisfactory to Mezzanine Lender) and hold
harmless Mezzanine 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, attorneys' fees, disbursements and expenses, and
consultants' fees, disbursements and expenses, including costs of Remedial
Work (collectively, "Losses") asserted against, resulting to, imposed on,
------
or incurred by Mezzanine 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 Facility, which presence, Use or Release requires
or would reasonably likely require Remedial Work;
(iii) any Environmental Claim against Operator Mezzanine Lender,
or any Person whose liability for such Environmental Claim Operator has or
may have assumed or retained either contractually or by operation of law;
or
(iv) the breach of any representation, warranty or covenant set
forth in Section 4.1(b)(U), 4.1(d)(U) and Sections 5.1(a)(D) through
------- --------- --------- -------- ---------
5.1(a)(I) and 5.1(b)(D) through 5.1(b)(I), inclusive.
--------- --------- ---------
The indemnity provided in this Loan Agreement shall not be included in
any exculpation of Operator from personal liability provided in this Loan
Agreement or in any of the other Mezzanine Loan Documents. Nothing in this
Section 5.1(b)(I) shall be deemed to deprive Mezzanine Lender of any rights
------- ---------
or remedies provided to it elsewhere in this Agreement or the other
Mezzanine Loan Documents or otherwise available to it under law. Operator
waives and releases Mezzanine Lender from any rights or defenses Operator
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 Mezzanine Lender. Notwithstanding the foregoing,
Operator shall not indemnify Mezzanine 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 clauses (i) through (iv) to the extent that
------- --- ----
Operator can
<PAGE>
59
establish directly and solely that such Losses result from Hazardous
Substances being placed on, above or under the Facility (a) by the
affirmative act or gross negligence of Mezzanine Lender or any employees,
agents or bailees of Mezzanine Lender; or (b) subsequent to (i) Mezzanine
Lender taking title to the Facility; or (ii) a foreclosure by Mezzanine
Lender; or (iii) acceptance by Mezzanine Lender or its designees of a deed-
in-lieu of foreclosure with respect to the Facility.
(J) Access to Facility. Operator shall permit agents, representatives
------------------
and employees of Mezzanine Lender to inspect the Facility or any part
thereof at such reasonable times as may be requested by Mezzanine Lender
upon two (2) Business Days prior written notice and subject to the rights
of tenants under Leases (as defined in the Mezzanine Leasehold Mortgage);
provided, such written notice shall not be required upon the occurrence and
continuation of a Default or Event of Default.
(K) Notice of Default. Operator shall promptly advise Mezzanine
-----------------
Lender of any material adverse change in Operator's condition, financial or
otherwise, or of the occurrence of any Default of which Operator has
knowledge or Event of Default of which Operator has knowledge.
(L) Cooperate in Legal Proceedings. Except with respect to any claim
------------------------------
by Operator against Mezzanine Lender, Operator shall cooperate with
Mezzanine Lender with respect to any proceedings before any Governmental
Authority which may in any way affect the rights of Mezzanine Lender
hereunder or any rights obtained by Mezzanine Lender under any of the
Mezzanine Loan Documents and, in connection therewith, not prohibit
Mezzanine Lender, at its election, from participating in any such
proceedings.
(M) Perform Mezzanine Loan Documents. Operator shall observe, perform
--------------------------------
and satisfy all the terms, provisions, covenants and conditions required to
be observed, performed or satisfied by it, and shall pay when due all
costs, fees and expenses required to be paid by it, under the Mezzanine
Loan Documents executed and delivered by Operator.
(N) Insurance Benefits; Condemnation Claims. Borrower and Operator
---------------------------------------
shall cooperate with Mezzanine Lender in settling any insurance or
condemnation claim and/or obtaining for Mezzanine Lender the benefits of
any Insurance Proceeds lawfully or equitably payable to Mezzanine Lender in
connection with the Facility, and Mezzanine Lender shall be reimbursed for
any reasonable expenses incurred in connection therewith (including
reasonable attorneys' fees and disbursements) and the payment by Operator
of the expense of an Appraisal on behalf of Mezzanine Lender in case of a
fire or other
<PAGE>
60
casualty affecting the Facility or any part thereof out of such Insurance
Proceeds, all as more specifically provided in the Mezzanine Leasehold
Mortgage.
(O) Further Assurances. Operator shall, at Operator's sole cost and
------------------
expense:
(i) upon Mezzanine Lender's reasonable request therefor given
from time to time after the occurrence and during the continuance of any
Event of Default pay for (a) reports of UCC, federal tax lien, state tax
lien, judgment and pending litigation searches with respect to Operator and
(b) searches of title to the Facility, each such search to be conducted by
search firms reasonably designated by Mezzanine Lender in each of the
locations reasonably designated by Mezzanine Lender.
(ii) furnish to Mezzanine Lender, upon Mezzanine Lender's
reasonable request therefor, 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 required to be
furnished pursuant to the terms of the Mezzanine Loan Documents;
(iii) execute and deliver to Mezzanine Lender such documents,
instruments, certificates, assignments and other writings, and do such
other acts necessary, to evidence, preserve and/or protect the Collateral
at any time securing or intended to secure the Mezzanine Note, as Mezzanine
Lender may require in Mezzanine Lender's reasonable discretion; and
(iv) do and execute all and such further lawful acts,
conveyances and assurances for the better and more effective carrying out
of the intents and purposes of this Agreement and the other Mezzanine Loan
Documents, as Mezzanine Lender shall require from time to time in its
reasonable discretion.
(P) Management of Mortgaged Property. Without the prior written
--------------------------------
consent of the Mezzanine Lender, the Borrower will not execute a Management
Agreement or retain a manager to manage the Facility. To the extent
required by the First Mortgage Lender pursuant to Section 5.1(b)(P) of the
First Mortgage Loan Agreement, Operator will enter into a Management
Agreement with a manager identified by First Mortgage Lender which manager
shall be deemed acceptable to the Mezzanine Lender in its reasonable
discretion.
<PAGE>
61
(Q) Financial Reporting. Operator shall furnish Mezzanine Lender with
-------------------
any of the financial statements, reports and information provided to the First
Mortgage Lender pursuant to Section 5.1(b)(Q) of the First Mortgage Loan
Agreement at the same time that it provides such financial statements, reports
and information to the First Mortgage Lender and Mezzanine Lender shall have the
same rights with respect to such financial statements, reports and information
as the First Mortgage Lender has under the First Mortgage Loan Agreement.
Operator shall furnish to Mezzanine Lender such other financial information with
respect to Operator as Mezzanine Lender may reasonably request.
(R) Conduct of Business. Operator shall cause the operation of the
-------------------
Facility to be conducted at all times in a manner consistent with at least
the level of operation of the Facility as of the Closing Date, including,
without limitation, the following:
(i) to maintain or cause to be maintained the standard of
operations at the Facility at all times at a level necessary to insure a
level of quality for the Facility consistent with similar facilities in the
same competitive market;
(ii) to operate or cause to be operated the Facility in a
prudent manner in compliance in all material respects with applicable Legal
Requirements and Insurance Requirements relating thereto and cause all
Licenses, Permits, and any other agreements necessary for the continued use
and operation of the Facility to remain in effect; and
(iii) to maintain or cause to be maintained sufficient Inventory
and Equipment of types and quantities at the Facility to enable the
Operator to operate the Facility.
(S) Intentionally Omitted.
(T) ERISA. Operator shall deliver to Mezzanine Lender as soon as
-----
possible, and in any event within ten days after Operator knows or has
reason to believe that any of the events or conditions specified below with
respect to any Plan or Multiemployer Plan has occurred or exists, a
statement signed by a senior financial officer of Operator setting forth
details respecting such event or condition and the action, if any, that
Operator 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 Operator 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 a Plan, as to which
PBGC has not by regulation waived the requirement of Section 4043(a) of
ERISA that it be notified within
<PAGE>
62
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, without limitation, 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 Plan;
(ii) the distribution under Section 4041 of ERISA of a notice
of intent to terminate any Plan or any action taken by Operator or an ERISA
Affiliate to terminate any 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 Plan, or the receipt by Operator 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 Operator 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
Operator 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 Operator or any ERISA Affiliate to enforce
Section 515 of ERISA, which proceeding is not dismissed within 30 days;
(vi) the adoption of an amendment to any 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 Plan is a part if
Operator or an ERISA Affiliate fails to timely provide security to the Plan
in accordance with the provisions of said Sections; and
(vii) the imposition of a lien or a security interest in
connection with a Plan.
(U) Single Purpose Entity. Operator shall at all times be a Single
---------------------
Purpose Entity.
<PAGE>
63
(V) Trade Indebtedness. Operator will pay its trade payables within
------------------
ninety (90) days of the date incurred, unless Operator is in good faith
contesting Operator's obligation to pay such trade payables in a manner
reasonably satisfactory to Mezzanine Lender (which may include Mezzanine
Lender's requirement that Operator, as the case may be, post security with
respect to the contested trade payable).
(W) Intentionally Deleted.
---------------------
(X) Annual Operating Budgets. Operator shall submit to Mezzanine
------------------------
Lender Annual Operating Budgets at those times and in such form and
substance as set forth in the definition of "Annual Operating Budget" in
this Agreement.
(Y) Use Specific Covenants. Operator shall:
----------------------
(1) operate the Facility or cause the Facility to be operated in
full compliance with the laws and requirements referred to in Section
-------
4.1(d)(AK)(i); and
-------------
(2) operate the Facility or cause the Facility 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; and
(3) 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 Facility to the extent required pursuant to any Legal
Requirements and Operators right to contest in accordance with the
Mezzanine Leasehold Mortgage.
ARTICLE VI
NEGATIVE COVENANTS
------------------
Section 6.1. Borrower and Operator Negative Covenants. (a) Borrower
----------------------------------------
covenants and agrees that, until payment in full of the Indebtedness, it will
not do, directly or indirectly, any of the following unless Mezzanine Lender
consents thereto in writing:
<PAGE>
64
(A) Liens on the Mortgaged Property. Incur, create, assume, become or
-------------------------------
be liable in any manner with respect to, or permit to exist, any Lien with
respect to the Facility, except: (i) Liens in favor of Mezzanine Lender,
and (ii) the Permitted Encumbrances.
(B) Transfer. Except as expressly permitted by or pursuant to this
--------
Agreement or the Mezzanine Mortgages, allow any Transfer to occur, or enter
into a Management Agreement with respect to the Facility.
(C) Other Borrowings. Incur, except for the First Mortgage Loan, the
----------------
SELCO Debt and unsecured trade payables incurred in the ordinary course of
business relating to the ownership and operation of the Facility which do
not exceed, at any time, a maximum amount of Ten Thousand Dollars ($10,000)
and are paid within ninety (90) days of the date incurred, create, assume,
become or be liable in any manner with respect to Other Borrowings.
Notwithstanding the foregoing, Borrower may in good faith contest
Borrower's obligation to pay such trade payables in a manner satisfactory
to Mezzanine Lender (which may include Mezzanine Lender's requirement that
Borrower post security with respect to the contested trade payable (such
security not to exceed one hundred and twenty-five percent (125%) of the
amount of the claim being contested)).
(D) Intentionally Omitted.
---------------------
(E) Change In Business. Cease to be a Single-Purpose Entity or make
------------------
any material change in the scope or nature of its business objectives,
purposes or operations, or undertake or participate in activities other
than the continuance of its present business.
(F) Debt Cancellation. Except as permitted in the Operator Lease,
-----------------
cancel or otherwise forgive or release any material claim or debt owed to
Borrower by any Person, except for adequate consideration or in the
ordinary course of Borrower's business.
(G) Affiliate Transactions. Enter into, or be a party to, any
----------------------
transaction with an Affiliate of Borrower, except in the ordinary course of
business and on terms which are no less favorable to Borrower or such
Affiliate than would be obtained in a comparable arm's length transaction
with an unrelated third party, and, if the amount to be paid to the
Affiliate pursuant to the transaction or series of related transactions is
greater than $50,000 (determined annually on an aggregate basis) fully
disclosed to Mezzanine Lender in advance.
(H) Creation of Easements. Create, or permit the Facility or any part
---------------------
thereof to become subject to, any easement, license or restrictive
covenant, other than a Permitted
<PAGE>
65
Encumbrance.
(I) Misapplication of Funds. Distribute any Rents or Money received
-----------------------
from Accounts in violation of the provisions of Section 2.12.
------- ----
(J) Certain Restrictions. Enter into any agreement other than the
--------------------
Operator Lease and the First Mortgage Loan Agreement which expressly
restricts the ability of Borrower to enter into amendments, modifications
or waivers of any of the Mezzanine Loan Documents.
(K) Issuance of Equity Interests. Issue or allow to be created any
----------------------------
stocks or shares or shareholder, partnership, membership or beneficial
ownership interests, as applicable, or other ownership interests other than
the stocks, shares, shareholder, partnership, membership, or beneficial
ownership interests and other ownership interests which are outstanding or
exist on the Closing Date or any security or other instrument which by its
terms is convertible into or exercisable or exchangeable for stock, shares,
shareholder, partnership, membership or beneficial ownership interests or
other ownership interests in Borrower, except as contemplated by the First
Mortgage Loan Agreement.
(L) Assignment of Licenses and Permits. Except in connection with the
----------------------------------
First Mortgage Loan, consent to the assignment or transfer any of any
interest in any Permits pertaining to the Facility, or assign, transfer or
remove or permit any other Person to assign, transfer or remove any records
pertaining to the Facility without Mezzanine Lender's prior written consent
which consent may be granted or refused in Mezzanine Lender's reasonable
discretion.
(M) Place of Business. Change its chief executive office or its
-----------------
principal place of business or place where its books and records are kept
without giving Mezzanine Lender at least thirty (30) days' prior written
notice thereof and promptly providing Mezzanine Lender such information as
Mezzanine Lender may reasonably request in connection therewith.
(b) Operator covenants and agrees that, until payment in full of the
Indebtedness, it will not do, directly or indirectly, any of the following
unless Mezzanine Lender consents thereto in writing:
(A) Liens on the Mortgaged Property. Incur, create, assume, become or
-------------------------------
be liable in any manner with respect to, or permit to exist, any Lien with
respect to the Facility, except: (i) Liens in favor of Mezzanine Lender,
and (ii) the Permitted
<PAGE>
66
Encumbrances.
(B) Transfer; Joint Assessment. Except as expressly permitted by or
--------------------------
pursuant to this Agreement or the Mezzanine Mortgages, allow any Transfer
to occur or enter into a management agreement with respect to the Facility.
Operator shall not suffer, permit or initiate the joint assessment of the
Facility (i) with any other real property constituting a separate tax lot,
and (ii) with any portion of the Facility which may be deemed to constitute
personal property, or 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 Facility as a single lien.
(C) Other Borrowings. Incur, except for the First Mortgage Loan,
----------------
unsecured trade payables incurred in the ordinary course of business
relating to the ownership and operation of the Facility which do not
exceed, at any time, a maximum amount of one percent (1%) of the Mezzanine
Loan Amount plus the Loan Amount (as defined in the First Mortgage Loan
Agreement) and are paid within ninety (90) days of the date incurred,
create, assume, become or be liable in any manner with respect to Other
Borrowings. Notwithstanding the foregoing, Operator may in good faith
contest Operator's obligation to pay such trade payables in a manner
satisfactory to Mezzanine Lender (which may include Mezzanine Lender's
requirement that Operator post security with respect to the contested trade
payable (such security not to exceed one hundred and twenty-five percent
(125%) of the amount of the claim being contested)); provided, however, to
the extent the First Mortgage Lender has required Borrower to post such
security pursuant to the First Mortgage Loan, Borrower shall not be
required to post security pursuant to this Agreement.
(D) Intentionally Omitted.
---------------------
(E) Change In Business. Cease to be a Single-Purpose Entity or make
------------------
any material change in the scope or nature of its business objectives,
purposes or operations, or undertake or participate in activities other
than the continuance of its present business.
(F) Debt Cancellation. Cancel or otherwise forgive or release any
-----------------
material claim or debt owed to Operator by any Person, except for adequate
consideration or in the ordinary course of Operator's business.
(G) Affiliate Transactions. Enter into, or be a party to, any
----------------------
transaction with an Affiliate of Operator, except in the ordinary course of
business and on terms which are no less favorable to Operator or such
Affiliate than would be obtained in a comparable arm's length transaction
with an unrelated third party, and, if the amount to be paid to the
<PAGE>
67
Affiliate pursuant to the transaction or series of related transactions is
greater than $50,000 (determined annually on an aggregate basis) except as
(i) set forth in an Annual Operating Budget which is approved by Mezzanine
Lender pursuant to this Agreement or (ii) otherwise fully disclosed to
Mezzanine Lender in advance. Notwithstanding the foregoing, Operator may in
good faith contest Operator's obligation to pay such trade payables in a
manner satisfactory to Mezzanine Lender (which may include Mezzanine
Lender's requirement that Operator post security with respect to the
contested trade payable (such security not to exceed one hundred and
twenty-five percent (125%) of the amount of the claim being contested).
(H) Creation of Easements. Create, or permit the Facility or any part
---------------------
thereof to become subject to, any easement, license or restrictive
covenant, other than a Permitted Encumbrance.
(I) Misapplication of Funds. Distribute any Rents or Money received
-----------------------
from Accounts in violation of the provisions of Section 2.12.
------- ----
(J) Certain Restrictions. Enter into any agreement other than the
--------------------
Operator Lease which expressly restricts the ability of Operator to enter
into amendments, modifications or waivers of any of the Mezzanine Loan
Documents.
(K) Issuance of Equity Interests. Issue or allow to be created any
----------------------------
stocks or shares or shareholder, partnership, membership or beneficial
ownership interests, as applicable, or other ownership interests other than
the stocks, shares, shareholder, partnership, membership, or beneficial
ownership interests and other ownership interests which are outstanding or
exist on the Closing Date or any security or other instrument which by its
terms is convertible into or exercisable or exchangeable for stock, shares,
shareholder, partnership, membership or beneficial ownership interests or
other ownership interests in Operator, except as contemplated by the First
Mortgage Loan Agreement.
(L) Assignment of Licenses and Permits. Except in connection with the
----------------------------------
First Mortgage Loan, assign or transfer any of its interest in any Permits
pertaining to the Facility, or assign, transfer or remove or permit any
other Person to assign, transfer or remove any records pertaining to the
Facility without Mezzanine Lender's prior written consent which consent may
be granted or refused in Mezzanine Lender's reasonable discretion.
(M) Place of Business. Change its chief executive office or its
-----------------
principal place of business or place where its books and records are kept
without giving Mezzanine
<PAGE>
68
Lender at least thirty (30) days' prior written notice thereof and promptly
providing Mezzanine Lender such information as Mezzanine Lender may
reasonably request in connection therewith.
(N) Use Specific Negative Covenants: Operator shall not do any of the
-------------------------------
following unless Mezzanine Lender consents thereto in writing:
(1) transfer any License to any location other than the Facility
nor pledge any License as collateral security for any other loan or
indebtedness;
(2) rescind, withdraw, revoke, amend, modify, supplement, or
otherwise alter the nature, tenor or scope of any License for the
Facility which rescission, withdrawal, revocation, amendment,
modification, supplement or other alteration would have a Material
Adverse Effect; or
(3) enter into any resident care agreements with residents or
with any other persons which deviate in any material respect from the
standard form customarily used at the Facility; or
(4) fail to satisfy all requirements established by law,
regulation or administrative instruction for the operation of the
Facility; or
(5) fail to operate the Facility in a manner that is consistent
with all relevant standards of care and service in the community.
ARTICLE VII
DEFAULTS
--------
Section 7.1. Event of Default. The occurrence of one or more of the
----------------
following events shall be an "Event of Default" hereunder:
----------------
(i) if on any Payment Date the funds in the Debt Service
Payment Sub-Account are insufficient to pay the Required Debt Service
Payment due on such Payment Date; provided, however, that if a Cash
Management Event 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;
(ii) if on any Payment Date Borrower fails to pay the Required
Debt
<PAGE>
69
Service Payment due on such Payment Date; provided, however, that if a Cash
Management Event 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;
(iii) if Borrower fails to pay the outstanding Indebtedness on
the Maturity Date;
(iv) if on any Payment Date on which Borrower is required under
this Agreement to pay a Basic Carrying Costs Monthly Installment, Borrower
and/or Operator fails to pay the Basic Carrying Costs Monthly Installment
or the Capital Reserve Monthly Installment due on such Payment Date;
provided, however, that if a Cash Management Event has not occurred, such
failure shall not constitute an Event of Default if Borrower and/or
Operator shall cure such failure within five (5) days after such Payment
Date;
(v) if on the date any payment of a Basic Carrying Cost would
become delinquent, unless such Basic Carrying Cost was already paid, the
funds in the Basic Carrying Costs Sub-Account are insufficient to make such
payment;
(vi) the occurrence of the events identified elsewhere in the
Mezzanine Loan Documents as constituting an "Event of Default" hereunder or
thereunder;
(vii) a Transfer, unless the prior written consent of Mezzanine
Lender is obtained (which consent may be withheld with or without cause in
Mezzanine Lender's discretion);
(viii) if Borrower or Operator fails to pay any other amount
payable pursuant to this Agreement or any other Mezzanine Loan Document
when due and payable in accordance with the provisions hereof or thereof,
as the case may be, and such failure is not remedied within any applicable
grace periods;
(ix) if any representation or warranty made herein or in any
other Mezzanine Loan Document, or in any report, certificate, financial
statement or other Instrument, agreement or document furnished by Borrower
or Operator in connection with this Agreement, the Mezzanine Note or any
other Mezzanine Loan Document executed and delivered by Borrower or
Operator, shall be false in any material respect as of the date such
representation or warranty was made or remade;
(x) if Borrower or Operator makes an assignment for the
benefit of creditors;
<PAGE>
70
(xi) if a receiver, liquidator or trustee shall be appointed
for Borrower or Operator or if Borrower or Operator shall be adjudicated as
bankrupt or insolvent, or if 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 or Operator or if any proceeding for the dissolution or
liquidation of Borrower or Operator shall be instituted; provided, however,
-------- -------
that if such appointment, adjudication, petition or proceeding was
----
involuntary and not consented to by Borrower or Operator as the case may
be, upon the same not being discharged, stayed or dismissed within 90 days;
or if Borrower or Operator shall generally not be paying its debts as they
become due;
(xii) if either Borrower or Operator attempts to delegate its
obligations or assign its rights under this Agreement, any of the other
Mezzanine Loan Documents or any interest herein or therein, except as
permitted by this Agreement;
(xiii) except as permitted under this Agreement, if any provision
of any organizational document of Borrower is amended or modified in any
respect, or if Borrower, Operator or Borrower's Trustee 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 Operator; or
if Borrower or Operator or any of their respective partners, members,
beneficial owners, trustees or shareholders, as applicable, breaches any of
the covenants set forth in Sections 5.1(a)(U), 5.1(b)(U), 6.1(a)(E) or
-------- --------- --------- ---------
6.1(b)(E);
--------
(xiv) if Borrower or Operator fails to (A) notify Mezzanine
Lender of the occurrence of a Default under any of the Mezzanine Loan
Documents within ten (10) Business Days of the day on which Borrower or
Operator first has knowledge of such Default or (B) give any notice due to
any Person under any Mezzanine Loan Document (a) within five (5) Business
Days after such notice was due or (b) in accordance with the applicable
procedural requirements set forth in the Mezzanine Loan Documents;
(xv) if Borrower or Operator shall be in default under any of
the other obligations, agreements, undertakings, terms, covenants,
provisions or conditions of this Agreement, the Mezzanine Note, the
Mezzanine Mortgages or the other Mezzanine Loan Documents, not otherwise
referred to in this Section 7.1, for ten (10) Business Days after written
------- ---
notice to Borrower or Operator, as applicable, from Mezzanine Lender or its
successors or assigns, 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 written
notice to Borrower or Operator, as applicable, from Mezzanine Lender or its
successors or assigns, in the case of any other default (unless otherwise
provided herein or in such other Mezzanine Loan
<PAGE>
71
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) Business Day period and provided further that Borrower
shall have commenced to cure such default within such thirty (30) Business
Day period and thereafter diligently and expeditiously proceeds to cure the
same, such thirty (30) Business Day period shall be extended for such time
as is reasonably necessary for Borrower in the exercise of due diligence to
cure such default, but in no event shall such period exceed one hundred
twenty (120) days after the original notice from Mezzanine Lender;
provided, further, if Borrower or Operator provides to Mezzanine Lender a
-------- -------
certificate certifying and demonstrating that Borrower or Operator is
diligently attempting to cure such default as determined by Mezzanine
Lender in its reasonable discretion and such non-monetary default still is
capable of being cured as determined by Mezzanine Lender in its reasonable
discretion and if Borrower or Operator, as applicable, is diligently
attempting to cure such default, as determined by Mezzanine Lender in its
reasonable discretion, such period shall be extended by Mezzanine Lender in
its reasonable discretion for an additional period of time not to exceed
sixty (60) days;
(xvi) if an event or condition specified in Sections 5.1(a)(T)
-------- ---------
or 5.1(b)(T) 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 Mezzanine 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
Mezzanine Lender, a Material Adverse Effect;
(xvii) unless resulting from First Mortgage Lender's exercise of
its rights under the First Mortgage Loan, if without Mezzanine Lender's
prior written consent (A) any management agreement (other than the
Management Agreement) is entered into for the Facility or (B) after the
execution of a Management Agreement pursuant to Section 5.1(b)(P) there is
------- ---------
any change in or termination of such Management Agreement for the Facility;
(xviii) Intentionally deleted.
(xix) if Borrower 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 Facility and such agency commences a termination of any License;
(xx) if the Facility is assessed material fines or penalties
(as
<PAGE>
72
distinguished from establishment of standard settlement accounts) by any
state or health, licensing or similar agency having jurisdiction over
Borrower, Operator or the Facility;
(xxi) if (A) Borrower shall fail to pay any amount due with
respect to the SELCO Debt when due and such failure shall continue beyond
any applicable grace period or (B) a default or event of default shall
occur with respect to the SELCO Debt which shall continue beyond any
applicable grace period or (C) if any of the loan documents evidencing the
SELCO Loan is amended without the Mezzanine Lender's prior written consent;
(xxii) if Operator fails to provide Mezzanine Lender with the
written notice (together with the required deliveries) set forth in Section
-------
8.33 which failure is not remedied within five (5) days of the date such
----
written notice and deliveries were due;
(xxiii) Intentionally deleted;
(xxiv) an "Event of Default" occurs under the First Mortgage
Loan Agreement or any of the other First Mortgage Loan Documents.
Section 7.2. Remedies. (a) Upon the occurrence of an Event of Default
--------
and during the continuance thereof, all or any one or more of the rights, powers
and other remedies available to Mezzanine Lender against Borrower and Operator
under this Agreement, the Mezzanine Note, the Mezzanine Mortgage, the Mezzanine
Leasehold Mortgage or any of the other Mezzanine Loan Documents, or at law or in
equity may be exercised by Mezzanine Lender at any time and from time to time
(including, without limitation, the right to accelerate and declare the
outstanding principal amount, unpaid interest, Default Rate interest, Late
Charges, Yield Maintenance Premium and any other amounts owing by Borrower to be
immediately due and payable), without notice or demand, whether or not all or
any portion of the Indebtedness shall be declared due and payable, and whether
or not Mezzanine Lender shall have commenced any foreclosure proceeding or other
action for the enforcement of its rights and remedies under any of the Mezzanine
Loan Documents with respect to the Facility or all or any portion of the
Collateral. Any such actions taken by Mezzanine Lender shall be cumulative and
concurrent and may be pursued independently, singly, successively, together or
otherwise, at such time and in such order as Mezzanine Lender may determine in
its sole discretion, to the fullest extent permitted by law, without impairing
or otherwise affecting the other rights and remedies of Mezzanine Lender
permitted by law, equity or contract or as set forth herein or in the other
Mezzanine Loan Documents. Notwithstanding anything contained to the contrary
herein, the outstanding principal amount, unpaid interest, Default Rate
interest, Late Charges, Yield Maintenance Premium and any other amounts owing by
Borrower shall be accelerated and immediately due and payable, without any
election by Mezzanine Lender upon the occurrence of
<PAGE>
73
an Event of Default described in Section 7.1(x) or Section 7.1 (xi).
-------------- ----------------
Notwithstanding that this Agreement may refer to a continuing Event of Default,
and without limiting Borrower's or Operator's right to cure a Default which may,
with the passage of time, become an Event of Default, neither Borrower nor
Operator shall have any right pursuant to this Agreement to cure any Event of
Default unless this Agreement is amended by Borrower, Operator and Mezzanine
Lender in writing.
Section 7.3. Remedies Cumulative. The rights, powers and remedies of
-------------------
Mezzanine Lender under this Agreement shall be cumulative and not exclusive of
any other right, power or remedy which Mezzanine Lender may have against
Borrower or Operator pursuant to this Agreement or the other Mezzanine Loan
Documents executed by or with respect to Borrower or Operator, or existing at
law or in equity or otherwise. Mezzanine Lender's rights, powers and remedies
may be pursued singly, concurrently or otherwise, at such time and in such order
as Mezzanine Lender may determine in Mezzanine Lender's sole discretion. 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 shall 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 any 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.
Any and all of Mezzanine Lender's rights with respect to the Collateral shall
continue unimpaired, and Borrower and Operator shall be and remain obligated in
accordance with the terms hereof, notwithstanding (i) the release or
substitution of Collateral at any time, or of any rights or interest therein or
(ii) any delay, extension of time, renewal, compromise or other indulgence
granted by Mezzanine Lender in the event of any Default or Event of Default with
respect to the Collateral or otherwise hereunder. Notwithstanding any other
provision of this Agreement, Mezzanine Lender reserves the right to seek a
deficiency judgment or preserve a deficiency claim, in connection with the
foreclosure of the Mezzanine Mortgage or Mezzanine Leasehold Mortgage on the
Facility, to the extent necessary to foreclose on other parts of the Mortgaged
Property.
Section 7.4. Mezzanine Lender's Right to Perform. If Borrower or
-----------------------------------
Operator 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 Business Days after Borrower's or Operator's, as
applicable, receipt of written notice thereof, without in any way limiting
Section 7.1 hereof, from Mezzanine Lender, Mezzanine Lender may, but shall have
- -----------
no obligation to, itself perform, or cause performance of, such covenant or
obligation, and the expenses of Mezzanine Lender incurred in connection
therewith shall be payable by Borrower and Operator to Mezzanine Lender within
ten (10) calendar days after written demand therefor; provided, however, if
First Mortgage Lender is performing, or causing the performance of, such
covenant or obligations, Mezzanine Lender shall refrain from performing, or
causing the
<PAGE>
74
performance of such covenant or obligation. Notwithstanding the foregoing,
Mezzanine Lender shall have no obligation to send notice to Borrower or Operator
of any such failure.
Section 7.5. Operator's Limited Right to Cure. Notwithstanding
--------------------------------
anything in this Agreement or the Mezzanine Loan Documents to the contrary, if a
non-monetary Event of Default occurs and is continuing with respect to Borrower
which Event of Default was not caused directly or indirectly by Operator and
Mezzanine Lender desires to exercise its rights under this Article VII, provided
no Event of Default exists with respect to Operator, Mezzanine Lender shall give
Operator written notice of such Event of Default and of Mezzanine Lender's
intent to exercise its rights and remedies under this Article VII and Mezzanine
Lender shall abstain from exercising its rights and remedies under this Article
VII until the earlier to occur of (a) the date which is forty-five (45) days
after delivery of such written notice, (b) the occurrence of an Event of Default
with respect to Operator and (c) the occurrence of a monetary Event of Default
with respect to Borrower. Mezzanine Lender shall not exercise its rights under
this Article VII in connection with the Event of Default with respect to
Borrower identified in the written notice delivered to Operator if prior to the
dates or events described in clauses (a) through (c) of the foregoing sentence,
the following events and conditions shall have occurred or been satisfied, as
applicable, (i) the Operator has acquired fee simple title to the Facility or
acquired the beneficial interest of SELCO in Borrower, has assumed all of the
obligations of the Borrower under the Mezzanine Loan Documents and has executed
and delivered such other documentation as may be required by Mezzanine Lender
(ii) satisfactory opinions relating to such transfer shall have been delivered
by Operator to Mezzanine Lender, (iii) to the extent curable, Operator shall
have cured such non-monetary Event of Default, (iv) Operator pays all reasonable
expenses incurred by Mezzanine Lender in connection with such transfer, (v)
Operator shall have delivered to Mezzanine Lender an updated Title Insurance
Policy showing fee simple title to the Facility in Operator and insuring that
Mezzanine Lender has a valid second mortgage lien on the Operator's fee simple
interest in the Facility together with such modifications, amendments or
supplements to the Mezzanine Loan Documents as Mezzanine Lender may reasonably
request. Upon consummation of the transfer of fee simple title in the Facility
to the Operator and the assignment by the Borrower and assumption by the
Operator of the Borrower's obligations under the Mezzanine Loan Documents
executed by the Borrower, Operator shall be considered the "Borrower" under the
Mezzanine Loan Documents as well as the "Operator" under the Mezzanine Loan
Documents and shall have all of the obligations of "Borrower" under the
Mezzanine Loan Documents as well as the obligations of "Operator" under the
Mezzanine Loan Documents. If the events described in clauses (a) through (c) of
------- --- ---
the first sentence of this Section occur or the events or conditions described
-------
in the second sentence of this Section do not occur or are not satisfied prior
-------
to the occurrence of the events described in clauses (a) through (c) of the
------- --- ---
first sentence of this Section, Mezzanine Lender shall be entitled to exercise
-------
all of its rights and remedies pursuant to this Article VII.
<PAGE>
75
ARTICLE VIII
MISCELLANEOUS
-------------
Section 8.1. Survival. Subject to Section 4.2, this Agreement and all
-------- ------- ---
covenants, agreements, representations and warranties made herein and in the
certificates delivered pursuant hereto shall survive the execution and delivery
of this Agreement and the execution and delivery by Borrower to Mezzanine Lender
of the Mezzanine Note and the Operator of the Mezzanine Guaranty, and shall
continue in full force and effect so long as any portion of the Indebtedness is
outstanding and unpaid. Whenever in this Agreement any of the parties hereto is
referred to, such reference shall be deemed to include the successors and
assigns of such party. All covenants, promises and agreements in this Agreement
contained, by or on behalf of Borrower or Operator, shall inure to the benefit
of the respective successors and assigns of Mezzanine Lender. Nothing in this
Agreement or in any other Mezzanine Loan Document, express or implied, shall
give to any Person other than the parties and the holder(s) of the Mezzanine
Note, the Mezzanine Mortgage and the other Mezzanine Loan Documents, and their
legal representatives, successors and assigns, any benefit or any legal or
equitable right, remedy or claim hereunder.
Section 8.2. Mezzanine Lender's Discretion. Whenever pursuant to this
-----------------------------
Agreement, Mezzanine Lender exercises any right given to it to approve or
disapprove, or any arrangement or term is to be satisfactory to Mezzanine
Lender, the decision of Mezzanine 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 sole discretion of
Mezzanine Lender.
Section 8.3. Governing Law. (a) The proceeds of the Mezzanine Note
-------------
delivered pursuant hereto were disbursed from 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, 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 New York 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, Borrower and Operator each hereby
unconditionally and irrevocably waives any claim to assert that the law of any
other jurisdiction governs this Agreement and the Mezzanine Note, and this
Agreement and the Mezzanine Note shall be governed by and construed in
accordance with the laws of the State of New York pursuant to (S) 5-1401 of the
New York General Obligations Law.
(b) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST BORROWER OR OPERATOR
ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE INSTITUTED IN ANY FEDERAL
OR STATE COURT IN NEW YORK, NEW
<PAGE>
76
YORK, PURSUANT TO (S) 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW OR IN ANY
FEDERAL OR STATE COURT IN THE JURISDICTION IN WHICH THE COLLATERAL IS LOCATED
AND EACH OF OPERATOR AND BORROWER WAIVES ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING,
AND EACH OF OPERATOR AND BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION
OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. EACH OF OPERATOR AND
BORROWER 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 AND AGREES
THAT SERVICE OF PROCESS UPON SAID AGENT AT SAID ADDRESS (OR AT SUCH OTHER OFFICE
AS MAY BE DESIGNATED BY BORROWER OR OPERATOR FROM TIME TO TIME IN ACCORDANCE
WITH THE TERMS HEREOF) WITH A COPY TO BORROWER AND OPERATOR, AS APPLICABLE, AT
ITS PRINCIPAL EXECUTIVE OFFICES, ATTENTION: GENERAL COUNSEL AND WRITTEN NOTICE
OF SAID SERVICE OF BORROWER OR OPERATOR, AS APPLICABLE, MAILED OR DELIVERED TO
BORROWER OR OPERATOR, AS APPLICABLE, IN THE MANNER PROVIDED HEREIN SHALL BE
DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON BORROWER OR OPERATOR,
AS APPLICABLE, IN ANY SUCH SUIT, ACTION OR PROCEEDING. A COPY OF SERVICE OF
PROCESS WITH RESPECT TO BORROWER SHALL BE DELIVERED TO OPERATOR AND COPY OF
SERVICE OF PROCESS WITH RESPECT TO OPERATOR SHALL BE DELIVERED TO BORROWER;
PROVIDED, HOWEVER, FAILURE TO RECEIVE SUCH COPIES SHALL NOT AFFECT ANY OF
MEZZANINE LENDER'S RIGHTS HEREUNDER. EACH OPERATOR AND BORROWER (I) SHALL GIVE
PROMPT NOTICE TO MEZZANINE 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 (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 OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.
Section 8.4. Modification, Waiver in Writing. No modification,
-------------------------------
amendment, extension, discharge, termination or waiver of any provision of this
Agreement, the Mezzanine Note or any other Mezzanine Loan Document, or consent
to any departure by Borrower or Operator therefrom, shall in any event be
effective unless the same shall be in a writing signed by each of Borrower,
Operator, and Mezzanine 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
Operator or Borrower shall entitle
<PAGE>
77
Borrower or Operator to any other or future notice or demand in the same,
similar or other circumstances.
Section 8.5. Delay Not a Waiver. Neither any failure nor any delay
------------------
on the part of Mezzanine Lender in insisting upon strict performance of any
term, condition, covenant or agreement, or exercising any right, power, remedy
or privilege hereunder, or under the Mezzanine Note, or of any other Mezzanine
Loan Document, or any other instrument given as security therefor, 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,
the Mezzanine Note or any other Mezzanine Loan Document, Mezzanine 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, the Mezzanine Note or the other
Mezzanine Loan Documents, or to declare a default for failure to effect prompt
payment of any such other amount.
Section 8.6. Notices. All notices, consents, approvals and requests
-------
required or permitted hereunder or under any other Mezzanine Loan Document 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 (I) if to Mezzanine Lender at its address
set forth on the first page hereof, (II) if to Borrower at its designated
address set forth on the first page hereof, and (III) if to Operator at its
address set forth on the first page hereof, or, in each such case, at such other
address and to such other 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 8.6. A copy of all notices,
------- ---
consents, approvals and requests directed to Mezzanine Lender shall be delivered
concurrently to each of the following: Joseph B. Heil, Esquire, Dechert Price &
Rhoads, 1717 Arch Street, 4000 Bell Atlantic Tower, Philadelphia, PA 19103,
Telefax Number 215/994-2222; Two World Financial Center, Building B, New York,
NY 10281-1198, Attention: Raymond Anthony, Telefax Number (212) 667-1666; Two
World Financial Center, Building B, New York, NY 10281-1198, Attention: Sheryl
McAfee, Telefax Number (212) 667-1022; and Two World Financial Center, Building
B, New York, NY 10281-1198, Attention: Legal Counsel, Telefax Number (212)
667-1022. A copy of all notices, consents and approvals and requests addressed
to Borrower or to Operator shall be delivered concurrently to each of the
following: Brookdale Living Communities, Inc., 77 West Wacker Drive, Chicago,
Illinois 60601, Attention: Darryl W. Copeland, Jr., Telefax Number: (312) 977-
3699; Brookdale Living Communities, Inc., 77 West Wacker Drive, Chicago,
Illinois 60601, Attention: Robert J. Rudnik, Esq. Telefax Number: (312)
<PAGE>
78
977-3699; and Douglas E. Wambach, Esq., Burke, Warren, McKay & Serritella, 330
North Wabash Avenue, 22nd Floor, IBM Plaza, Chicago, Illinois 60611-3607,
Telefax Number (312) 840-7900; and Wilmington Trust Company, 1100 North Market
Street, Wilmington, Delaware 19890-0001, Attn: Corporate Trust Administration. 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 4:00 p.m. local time on a Business Day or if such confirmation
is received after 4:00 p.m. local time, the next succeeding Business Day,
provided that such telecopied notice was also delivered as required in this
Section 8.6. A party receiving a notice which does not comply with the technical
- -----------
requirements for notice under this Section 8.6 may elect to waive any
-----------
deficiencies and treat the notice as having been properly given.
SECTION 8.7. TRIAL BY JURY. BORROWER, OPERATOR AND MEZZANINE LENDER,
-------------
TO THE FULLEST EXTENT THAT THEY MAY LAWFULLY DO SO, HEREBY WAIVE TRIAL BY JURY
IN ANY ACTION OR PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY TORT ACTION,
BROUGHT BY ANY PARTY HERETO WITH RESPECT TO THIS AGREEMENT, THE MEZZANINE NOTE
OR THE OTHER MEZZANINE LOAN DOCUMENTS.
Section 8.8. Headings. The Article and Section headings in this
--------
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
Section 8.9. Assignment. Mezzanine Lender shall have the right to
----------
assign in whole or in part this Agreement and/or any of the other Mezzanine Loan
Documents and the obligations hereunder or thereunder to any Person and to
participate all or any portion of the Mezzanine Loan evidenced hereby, including
without limitation, any servicer; provided, however, any assignee shall be
specifically bound by the provisions of Section 8.32. Mezzanine Lender shall
------------
provide Borrower and Operator with written notice of any such assignment;
provided, however, that such notice shall not be a condition of Mezzanine
Lender's right to assign this Agreement and/or any of the Mezzanine Loan
Documents and the failure to deliver such notice shall not constitute a default
under this Loan Agreement.
Section 8.10. 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.
<PAGE>
79
Section 8.11. Preferences. Mezzanine Lender shall have no obligation
-----------
to marshal any assets in favor of Borrower or Operator or any other party or
against or in payment of any or all of the obligations of Borrower or Operator
pursuant to this Agreement, the Mezzanine Note or any other Mezzanine Loan
Document. Mezzanine Lender shall have the continuing and exclusive right to
apply or reverse and reapply any and all payments by Borrower or Operator to any
portion of the obligations of Borrower or Operator hereunder. To the extent
Borrower or Operator makes a payment or payments to Mezzanine Lender for
Borrower's or Operator's benefit, which payment or proceeds or any part thereof
are 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 obligations hereunder 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
Mezzanine Lender.
Section 8.12. Waiver of Notice. Borrower and Operator shall not be
----------------
entitled to any notices of any nature whatsoever from Mezzanine Lender except
with respect to matters for which this Agreement or the other Mezzanine Loan
Documents specifically and expressly provide for the giving of notice by
Mezzanine Lender to Borrower or Operator and except with respect to matters for
which Borrower or Operator is not, pursuant to applicable Legal Requirements,
permitted to waive the giving of notice. To the maximum extent permitted by
applicable Legal Requirements, Borrower and Operator each hereby expressly
waives the right to receive any notice from Lender with respect to any matter
for which this Agreement or the other Mezzanine Loan Documents does not
specifically and expressly provide for the giving of notice by Mezzanine Lender
to Borrower.
Section 8.13. Intentionally Omitted.
---------------------
Section 8.14. Exculpation. Except as otherwise set forth in this
-----------
Section 8.14 and Section 4.2 to the contrary, Mezzanine Lender shall not enforce
- ------- ---- ------- ---
the liability and obligation of Borrower or Operator to perform and observe the
obligations contained in this Agreement, the Mezzanine Note, the Mezzanine
Mortgages, the Mezzanine Guaranty or any of the other Mezzanine Loan Documents
executed and delivered by Borrower or Operator except that Mezzanine 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 Operator or any other Person solely for the purpose of
enabling Mezzanine Lender to realize upon (a) the Collateral, and (b) the Rents
and Accounts arising from the Facility 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 Operator (or any of their affiliates), after the
occurrence of an Event of Default or (y) distributed
<PAGE>
80
to (i) Borrower or its shareholders, partners, members or beneficial owners, as
applicable, or affiliates during or with respect to any period for which
Mezzanine Lender did not receive the full amounts it was entitled to receive as
prepayments of the Mezzanine Loan pursuant to Section 2.7 or (ii) Operator, or
-----------
its shareholders, partners, members or beneficial owners, as applicable, or
affiliates during or with respect to any period for which Mezzanine Lender did
not receive the full amounts it was entitled to receive as prepayments of the
Mezzanine Loan pursuant to Section 2.7 (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 Mezzanine Lender under the
- -------------
Mezzanine Loan Documents ((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 8.14 shall not, however, (a) impair
------- ----
the validity of the Indebtedness evidenced by the Mezzanine Loan Documents or in
any way affect or impair the Liens of the Mezzanine Mortgage or any of the other
Mezzanine Loan Documents or the right of Mezzanine Lender to foreclose the
Mezzanine Mortgage or Mezzanine Leasehold Mortgage following an Event of
Default; (b) impair the right of Mezzanine Lender to name any Person as a party
defendant in any action or suit for judicial foreclosure and sale under the
Mezzanine Mortgage or Mezzanine Leasehold Mortgage; (c) affect the validity or
enforceability of the Mezzanine Note, the Mezzanine Mortgage or the other
Mezzanine Loan Documents; (d) impair the right of Mezzanine Lender to obtain the
appointment of a receiver; (e) impair the right of Mezzanine 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 Facility, or wrongful removal or disposal of all or any portion
of the Facility by any Person in connection with this Agreement, the Mezzanine
Note, the Mezzanine Mortgage or the other Mezzanine Loan Documents; (f) impair
the right of Mezzanine Lender to obtain the Recourse Distributions received by
any Person; (g) intentionally omitted; (h) impair the right of Mezzanine Lender
to obtain Insurance Proceeds or Condemnation Proceeds due to Lender pursuant to
the Mezzanine Mortgage or Mezzanine Leasehold Mortgage; (i) impair the right of
Mezzanine Lender to enforce (against the parties liable therefore other than the
Borrower) the provisions of Sections 4.1(b)(U), 4.1(d)(U) or 5.1(b)(D)-(I) of
------------------ --------- -------------
this Agreement, Section 2.8 of the Mezzanine Mortgage or the Mezzanine Leasehold
-----------
Mortgage or the Mezzanine Environmental Guaranty even after repayment in full by
Borrower of the Indebtedness; (j) prevent or in any way hinder Mezzanine 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 securing the Mezzanine Note as provided in the Mezzanine Loan
Documents; (k) impair the right of Mezzanine Lender to bring suit with respect
to any intentional misapplication of any funds including without limitation any
intentional misappropriation of security deposits or Rents collected more then
one month in advance; or (l) impair the right of Mezzanine Lender to sue for,
seek or demand a deficiency judgment against any Person solely for the purpose
of foreclosing the Mortgaged Property 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
----------
<PAGE>
81
to the extent of any of the Default Collateral.
Section 8.15. Exhibits Incorporated. The information set forth on
---------------------
the cover, heading and recitals hereof, and the Exhibits attached hereto, if
any, are hereby incorporated herein as a part of this Agreement with the same
effect as if set forth in the body hereof.
Section 8.16. Offsets, Counterclaims and Defenses. Any assignee of
-----------------------------------
Mezzanine Lender's interest in and to this Agreement, the Mezzanine Note, the
Mezzanine Mortgages and the other Mezzanine Loan Documents shall take the same
free and clear of all offsets, counterclaims or defenses which are unrelated to
the Mezzanine Loan, this Agreement, the Mezzanine Note, the Mezzanine Mortgages
and the other Mezzanine Loan Documents which Borrower or Operator may otherwise
have against any assignor, and no such unrelated counterclaim or defense shall
be interposed or asserted by Borrower or Operator in any action or proceeding
brought by any such assignee upon this Agreement, the Mezzanine Note, the
Mezzanine Mortgages and other Mezzanine Loan 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 and Operator.
Section 8.17. No Joint Venture or Partnership. Borrower and
-------------------------------
Mezzanine Lender intend that the relationship created hereunder be solely that
of borrower and lender. Operator and Mezzanine Lender intend that the
relationship created hereunder be solely that of guarantor and lender. Nothing
herein is intended to create a joint venture, partnership, tenancy-in-common, or
joint tenancy relationship between Borrower and Mezzanine Lender or between
Operator and Mezzanine Lender nor to grant Mezzanine Lender any interest in the
Mortgaged Property other than that of mortgagee or lender.
Section 8.18. Waiver of Marshalling of Assets Defense. To the
---------------------------------------
fullest extent that Borrower and Operator may legally do so, each of Borrower
and Operator waives all rights to a marshalling of the assets of Borrower or
Operator, and others with interests in Borrower or Operator, and of the
Mortgaged 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 Mezzanine Lender under the Mezzanine Loan Documents to a sale of the Facility
for the collection of the Indebtedness without any prior or different resort for
collection, or the right of Mezzanine Lender to the payment of the Indebtedness
in preference to every other claimant whatsoever.
Section 8.19. Waiver of Counterclaim. Borrower and Operator each
----------------------
hereby waives the right to assert a counterclaim, other than compulsory
counterclaim, in any action or
<PAGE>
82
proceeding brought against Borrower or Operator, as applicable by Mezzanine
Lender or Mezzanine Lender's agents.
Section 8.20. Conflict; Construction of Documents. In the event of
-----------------------------------
any conflict between the provisions of this Agreement and the provisions of the
Mezzanine Note, the Mezzanine Mortgage or any of the other Mezzanine Loan
Documents, the provisions of this Agreement shall prevail. The parties hereto
acknowledge that they were represented by counsel in connection with the
negotiation and drafting of the Mezzanine Loan Documents and that the Mezzanine
Loan Documents shall not be subject to the principle of construing their meaning
against the party which drafted same.
Section 8.21. Brokers and Financial Advisors. Borrower, Operator and
------------------------------
Mezzanine Lender hereby represent that they have dealt with no financial
advisors, brokers, underwriters, placement agents, agents or finders in
connection with the transactions contemplated by this Agreement except Advisor.
Borrower and Operator each hereby agrees to indemnify and hold Mezzanine Lender
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 (other
than Advisor), that such Person acted on behalf of Borrower or Operator in
connection with the transactions contemplated herein. The provisions of this
Section shall survive the expiration and termination of this Agreement and the
- -------
repayment of the Indebtedness.
Section 8.22. 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.
Section 8.23. Estoppel Certificates. Borrower, Operator and
---------------------
Mezzanine Lender each hereby agree at any time and from time to time upon not
less than fifteen (15) Business Days prior written notice by Borrower, Operator
or Mezzanine 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 knowledge of such
certifying party, any Default or Event of Default has occurred, and, if so,
specifying each such Default or Event of Default; provided, however, that it
-------- ------- ----
shall be a condition precedent to Mezzanine Lender's obligation to deliver the
statement pursuant to this Section, that Mezzanine Lender shall have received,
-------
together with Borrower's or Operator's request for such statement, an Officer's
Certificate stating that no Default or Event of Default exists as of the date of
such certificate (or specifying such Default or Event of Default).
Section 8.24. Payment of Expenses. Borrower shall, whether or not
-------------------
the Transactions are consummated, pay all Transaction Costs, which shall
include, without
<PAGE>
83
limitation, reasonable out-of-pocket fees, costs, expenses, and disbursements of
Mezzanine Lender and its attorneys, local counsel, accountants and other
contractors in connection with (i) the negotiation, preparation, execution and
delivery of the Mezzanine Loan Documents and the documents and instruments
referred to therein, (ii) the creation, perfection or protection of Mezzanine
Lender's Liens in the Collateral (including, without limitation, fees and
expenses for title and lien searches and filing and recording fees, intangibles
taxes, personal property taxes, mortgage recording taxes, due diligence
expenses, travel expenses, accounting firm fees, costs of the Appraisals,
Environmental Reports (and an environmental consultant), Surveys and the
Engineering Reports), (iii) the negotiation, preparation, execution and delivery
of any amendment, waiver or consent relating to any of the Mezzanine Loan
Documents, and (iv) the preservation of rights under and enforcement of the
Mezzanine Loan Documents and the documents and instruments referred to therein,
including any restructuring or rescheduling of the Indebtedness.
Section 8.25. Bankruptcy Waiver. Borrower and Operator each hereby
-----------------
agrees 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 Operator
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 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 Mezzanine Lender, so as to permit Mezzanine Lender to exercise any and all of
its remedies, upon request of Mezzanine Lender made on notice to Borrower and
any other party in interest but without the need of further proof or hearing.
Borrower, Operator and any of their respective Affiliates shall not contest the
enforceability of this Section.
-------
Section 8.26. Entire Agreement. This Agreement, together with the
----------------
Exhibits hereto, if any, and the other Mezzanine 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 Mezzanine Loan
Documents and supersedes all prior agreements, understandings and negotiations
between the parties.
Section 8.27. Dissemination of Information. If Mezzanine Lender
----------------------------
determines at
<PAGE>
84
any time to sell, transfer or assign the Mezzanine Note, this Loan Agreement and
any other Mezzanine Loan Document and any or all servicing rights with respect
thereto, or to grant participations therein or issue mortgage pass-through
certificates or other securities evidencing a beneficial interest in a rated or
unrated public offering or private placement, Mezzanine Lender may forward to
each Investor and each prospective Investor, all documents and information which
Mezzanine Lender now has or may hereafter acquire relating to the Mezzanine
Loan, Borrower, Operator, any guarantor, any indemnitor and the Facility, which
shall have been furnished by Borrower, Operator, any guarantor, any indemnitor,
or any party to any Mezzanine Loan Document, or otherwise furnished in
connection with the Mezzanine Loan, as Mezzanine Lender in its sole discretion
determines necessary or desirable.
Section 8.28. Limitation of Interest. It is the intention of
----------------------
Borrower, Operator and Mezzanine Lender to conform strictly to applicable usury
laws. Accordingly, if the transactions contemplated hereby would be usurious
under applicable law, then, in that event, notwithstanding anything to the
contrary in any Mezzanine Loan Document, it is agreed as follows: (i) the
aggregate of all consideration which constitutes interest under applicable law
that is taken, reserved, contracted for, charged or received under any Mezzanine
Loan Document or otherwise in connection with the Mezzanine Loan shall under no
circumstances exceed the maximum amount of interest allowed by applicable law,
and any excess shall be credited to principal by Mezzanine Lender (or if the
Mezzanine Loan shall have been paid in full, refunded to Borrower); and (ii) in
the event that maturity of the Mezzanine Loan is accelerated by reason of an
election by Mezzanine Lender resulting from any default hereunder or otherwise,
or in the event of any required or permitted prepayment, then such consideration
that constitutes interest may never include more than the maximum amount of
interest allowed by applicable law, and any interest in excess of the maximum
amount of interest allowed by applicable law, if any, provided for in the
Mezzanine Loan Documents or otherwise shall be cancelled automatically as of the
date of such acceleration or prepayment and, if theretofore prepaid, shall be
credited to principal (or if the principal portion of the Mezzanine Loan and any
other amounts not constituting interest shall have been paid in full, refunded
to Borrower).
In determining whether or not the interest paid or payable under any
specific contingency exceeds the maximum amount allowed by applicable law,
Mezzanine Lender shall, to the maximum extent permitted under applicable law (a)
exclude voluntary prepayments and the effects thereof, and (b) amortize,
prorate, allocate and spread, in equal parts, the total amount of interest
throughout the entire contemplated term of the Mezzanine Loan so that the
interest rate is uniform throughout the entire term of the Mezzanine Loan;
provided, that if the Mezzanine Loan is paid and performed in full prior to the
end of the full contemplated term hereof, and if the interest received for the
actual period of existence thereof exceeds the maximum amount allowed by
applicable law, Mezzanine Lender shall refund to Borrower the amount of such
excess, and in such event, Mezzanine Lender shall not be subject to any
penalties
<PAGE>
85
provided by any laws for contracting for, charging or receiving interest in
excess of the maximum amount allowed by applicable law.
Section 8.29. Indemnification. Operator shall indemnify and hold
---------------
each of the Borrower, the Trust Company, Mezzanine Lender and each of its
affiliates (including its officers, directors, partners, employees and agents
and each other person, if any, controlling Mezzanine Lender or any of its
affiliates within the meaning of either Section 15 of the Securities Act of
1933, as amended, or Section 20 of the Securities Exchange Act of 1934, as
amended) (each, including the Borrower, the Trust Company, and the Mezzanine
Lender, an "Indemnified Party") harmless against any and all losses, claims,
-----------------
damages, costs, expenses (including the reasonable fees and disbursements of
outside counsel retained by any such person) or liabilities in connection with,
arising out of or as a result of the transactions and matters referred to or
contemplated by this Agreement (provided that the indemnity provided in Section
-------
2.14 shall apply to the matters to which it relates), except to the extent that
- ----
it is finally judicially determined that any such loss, claim, damage, cost,
expense or liability resulted directly and solely from the gross negligence,
fraud or willful misconduct of such Indemnified Party. In the event that any
Indemnified Party becomes involved in any action, proceeding or investigation in
connection with any transaction or matter referred to or contemplated in this
Agreement, Operator shall periodically reimburse any Indemnified Party upon
demand therefor in an amount equal to its reasonable legal and other expenses
(including the costs of any investigation and preparation) incurred in
connection therewith to the extent such legal or other expenses are the subject
of indemnification hereunder.
Section 8.30. Borrower and Operator Acknowledgments. Each of
-------------------------------------
Operator and Borrower hereby acknowledges to and agrees with Mezzanine Lender
that (i) the scope of Mezzanine Lender's 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 business of Borrower or Operator or their respective Affiliates and
(ii) Borrower and Operator each has been represented by competent legal counsel
and has consulted with such counsel prior to executing this Loan Agreement and
any of the other Mezzanine Loan Documents.
Section 8.31. Publicity. Mezzanine Lender shall have the right to
---------
issue press releases, advertisements and other promotional materials describing
Mezzanine Lender's participation in the origination of the Mezzanine Loan.
Section 8.32. Recalculation of First Mortgage Loan Amount. It is the
-------------------------------------------
intent of the parties hereto that on the Stabilization Date Payment Date the
Principal Indebtedness shall be rolled up into the First Mortgage Loan, the
First Mortgage Loan Documents amended to reflect such rollup and the recorded
Mezzanine Loan Documents released such that there is one loan to
<PAGE>
86
the Borrower in Aggregate Principal Indebtedness, as reduced or increased
pursuant to the terms of Section 8.32 of the First Mortgage Loan Agreement.
Section 8.33. Intentionally deleted.
---------------------
Section 8.34. Amendments to Operator Lease. Borrower hereby agrees
----------------------------
that it will not amend, modify or terminate the Operator Lease without the prior
written consent of the Mezzanine Lender not to be unreasonably withheld.
Mezzanine Lender hereby agrees that it will not amend, modify or waive without
the prior written consent of Borrower, not to be unreasonably withheld (a) any
provision of the Operator Lease regarding the determination of or obligation to
pay SELCO Basic Rent (as defined in the Operator Lease) or Lessor Basic Rent (as
defined in the Operator Lease) to the extent any waiver, modification or
amendment relates to SELCO Basic Rent or Lessor Basic Rent which is due and
payable to Borrower, (b) any provision of the Operator Lease regarding
indemnities in favor of Borrower or any of its Affiliates, agents, officers,
directors or employees to the extent any waiver, modification or amendment
relates to the period prior to acquisition of title to the Mortgaged Property by
Mezzanine Lender or its designee by foreclosure or deed-in-lieu of foreclosure,
(c) until after acquisition of title to the Mortgaged Property by Mezzanine
Lender or its designee by foreclosure or deed-in-lieu of foreclosure, Sections
19.1(ii), 22.1, 24.1, 24.2 and 25.1 of the Operator Lease; and (d) Section
20.2(k) of the Operator Lease.
Section 8.35. Subordination and Standstill.
----------------------------
<PAGE>
87
(a) Borrower hereby agrees that all of the indebtedness, liabilities
and obligations of Operator evidenced by the Operator Lease and those Pledge
Agreements (as defined in the Operator Lease) executed by Operator
(collectively, the "Subordinate Obligations") and the lien of any judgment
-----------------------
entered on behalf of Borrower in connection with the Subordinate Obligations,
whether in breach of the terms hereof or otherwise, is and shall be subject,
subordinate and rendered junior to the prior indefeasible payment in full of the
Indebtedness. Except as specifically provided in the following sentence, no
payment shall be made by Operator for or on account of the Subordinate
Obligations, and the Borrower shall not take or receive from Operator in cash or
other property or by setoff or in any other manner, including , without
limitation, from or by way of collateral, payment of all or any of the
Subordinate Obligations, unless and until the Indebtedness shall have been
indefeasibly paid in full. Notwithstanding the foregoing sentence, Borrower may
receive payments with respect to the related Subordinate Obligations as provided
in the First Mortgage Loan Agreement. If any payments are made to the Borrower
on account of the Subordinate Obligations contrary to the terms of this
Agreement or in excess of what the Borrower is entitled to receive under this
Agreement, Borrower shall hold the same in trust as trustee for Mezzanine
Lender, and shall promptly deliver to Mezzanine Lender in the form received,
endorsed or assigned, as may be appropriate for application on account of, or as
security for the Indebtedness.
(b) Until the Indebtedness is paid in full, Borrower shall not
institute any Enforcement Action (including, but not limited to, filing an
Insolvency Proceeding against Operator or acquiescing to the filing of an
Insolvency Proceeding by the Operator) against the Operator. Without limiting
the foregoing, in the event of an Insolvency Action with respect to the
Operator, (i) the Borrower hereby agrees that it shall not object to or oppose
any efforts by Mezzanine Lender to obtain relief in the Operator's bankruptcy
from the automatic stay under Section 362 of the United States Bankruptcy Code
or to seek to cause the Operator's bankruptcy estate to abandon the Facility or
any part thereof and (ii) so long as the beneficial interests of Borrower are
owned by SELCO, it shall not object to or oppose any efforts by Borrower to
obtain relief in the Operator's bankruptcy from the automatic stay under Section
362 of the United States Bankruptcy Code or to seek to cause the Operator's
estate to abandon the Facility or any part thereof. Notwithstanding the
foregoing, in the event Operator fails to pay to Borrower any SELCO Required
Quarterly Payment, Borrower shall be entitled to exercise its rights and
remedies with respect to the collateral pledged to Borrower pursuant to those
Pledge Agreements (as defined in the Operator Lease) executed by Operator.
Notwithstanding anything in this Agreement to the contrary, Borrower hereby
agrees it shall not sue for or make any claim with respect to the Collateral and
Mezzanine Lender hereby agrees that it shall not sue for or make any claim with
respect to the Excepted Property. Notwithstanding the terms of this Section
-------
8.35, Borrower shall be entitled to bring an Enforcement Action (but not an
- ----
Insolvency Proceeding) against Operator solely for the purpose of realizing and
foreclosing on the collateral
<PAGE>
88
pledged to Borrower pursuant to the Pledge Agreements (as defined in the
Operator Lease) executed by the Operator, provided, however, that as a condition
to bringing such Enforcement Action (but not an Insolvency Proceeding), SELCO
shall first us its reasonable good faith efforts to exercise its rights with
respect to realizing on the Collateral by non-judicial means. For the purposes
of this Section, the following terms have the indicated meanings: (i)
-------
"Enforcement Action" means the commencement or the exercise of any remedies
------------------
against the Operator, including, without limitation, the commencement of any
litigation and the commencement of any Insolvency Proceeding; and (ii)
"Insolvency Proceeding" means any proceeding under Title 11 of the United States
---------------------
Code (11 U.S.C. Sec. 101 et seq.) or any insolvency, liquidation, reorganization
-- ---
or other similar proceeding concerning the Operator, any dissolution of the
Operator any proceeding (judicial or otherwise) concerning the application of
the assets of the Operator for the benefit of its creditors, the initiation of
any proceeding seeking the appointment of a trustee, receiver or other similar
custodian for all of any substantial part of the assets of the Operator or any
other action concerning the adjustment of the debts of the Operator or the
cessation of business by the Operator.
(c) Borrower shall deliver to Mezzanine Lender a copy of any and all
notices of default (or respecting acts or occurrences which could, with the
giving of notice, the passage of time, or both, constitute a default) that are
delivered by Borrower to Mezzanine Lender as required by law or otherwise given,
whether in breach of terms hereof or otherwise, to Operator by Borrower.
Section 8.36. Limitation of Liability. It is expressly understood
-----------------------
and agreed by the parties hereto that (a) this Loan Agreement is executed and
delivered by Wilmington Trust Company, not individually or personally but solely
as trustee of the Borrower, in the exercise of the powers and authority
conferred and vested in it under the Trust Agreement, (b) each of the
representations, undertakings and agreements herein made on the part of the
Borrower is made and intended not as personal representations, undertakings and
agreements by Wilmington Trust Company but is made and intended for the purpose
of binding only the Borrower and (c) under no circumstances shall Wilmington
Trust Company be personally liable for the payment of any indebtedness or
expenses of the Borrower or be liable for the breach or failure of any
obligation, representation, warranty or covenant made or undertaken by the
Borrower under this Loan Agreement or the other Mezzanine Loan Documents
provided, that Wilmington Trust Company accepts the benefits running to it
- --------
hereunder and agrees that it shall be liable in its individual capacity for its
own gross negligence or willful misconduct to the extent expressly provided in
the Trust Agreement (as defined in the Operator Lease).
[Signatures on the following pages]
<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.
MEZZANINE LENDER:
NOMURA ASSET CAPITAL CORPORATION, a Delaware
corporation
By:__________________________________________
Name:
Title:
[signatures continued on following page]
<PAGE>
BORROWER:
THE HARBOR VILLAGE BUSINESS TRUST, a Delaware
business trust
By: Wilmington Trust Company, a
Delaware banking corporation,
not in its individual capacity,
but solely as trustee under the Trust
By: ______________________
Name:
Title:
[signatures continue on the following page]
<PAGE>
OPERATOR:
BROOKDALE LIVING COMMUNITIES OF ILLINOIS-HV, INC.,
a Delaware corporation
By: ______________________
Name:
Title:
[signatures continued on following page]
<PAGE>
EXHIBIT 10.9
MEZZANINE GUARANTY AND SURETYSHIP AGREEMENT
-------------------------------------------
THIS MEZZANINE GUARANTY AND SURETYSHIP AGREEMENT (as modified and
supplemented and in effect from time to time, this "Mezzanine Guaranty") is
------------------
executed and delivered as of this ____ day of March, 1998 by BROOKDALE LIVING
COMMUNITIES OF ILLINOIS-HV, INC., a Delaware corporation having an address of
c/o Brookdale Living Communities, Inc. at 77 West Wacker Drive, Suite 4800,
Chicago, Illinois 60601, Attention: Darryl W. Copeland, Jr., Telefax Number
(312) 977-3699 (the "Guarantor"), in favor of NOMURA ASSET CAPITAL CORPORATION,
---------
a Delaware corporation, with offices at 2 World Financial Center, Building B,
New York, New York 10281-1198, Attention: Raymond M. Anthony, Telefax Number
(212) 667-1666 (together with its successors and assigns, "Mezzanine Lender"),
----------------
to secure certain obligations of THE HARBOR VILLAGE BUSINESS TRUST, a Delaware
business trust, with offices at c/o Wilmington Trust Company, as Trustee, Rodney
Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001,
Attention: Corporate Trust Administration, Telefax Number (302) 651-8882 (the
"Borrower").
--------
BACKGROUND
----------
A. Mezzanine Lender is lending to Borrower One Million Seven Hundred
Fifty Thousand Dollars ($1,750,000) (such amount, the "Mezzanine Loan"). The
--------------
Mezzanine Loan is evidenced by a Mezzanine Loan Agreement by and among Mezzanine
Lender, Borrower, and Guarantor, dated as of the date hereof (as modified and
supplemented and in effect from time to time, the "Mezzanine Loan Agreement"), a
------------------------
Mezzanine Promissory Note (the "Mezzanine Note") of even date herewith, and
certain other collateral documents, all dated of even date herewith. Capitalized
terms when used herein without definition shall have the same meaning as defined
in the Mezzanine Loan Agreement.
B. Borrower and Guarantor are entering into a certain operator lease
dated the date herewith (the "Operator Lease"), pursuant to which Guarantor
--------------
shall lease, manage and operate the Property.
C. In order to induce Mezzanine Lender to make the Mezzanine Loan,
the Guarantor has agreed to execute and deliver this Mezzanine Guaranty to
Mezzanine Lender. As security for the performance of its obligations under this
Mezzanine Guaranty and under the Mezzanine Loan Agreement, the Guarantor has
executed that certain Mezzanine Leasehold Mortgage, Assignment of Rents,
Security Agreement and Fixture Filing of even date herewith (as modified and
supplemented and in effect from time to time, the "Mezzanine Leasehold
-------------------
<PAGE>
Mortgage"), pursuant to which the Guarantor has pledged to Mezzanine Lender the
- --------
Collateral (as defined in the Mezzanine Leasehold Mortgage), that certain
Mezzanine Assignment of Leases and Rents of even date herewith (as modified and
supplemented and in effect from time to time, the "Mezzanine Assignment of
-----------------------
Leases") pursuant to which the Guarantor has pledged to Mezzanine Lender the
- ------
Leases and Rents (as defined in the Mezzanine Assignment of Leases). and that
certain Mezzanine Assignment of Agreements Affecting Real Estate of even date
herewith (as modified and supplemented and in effect from time to time, the
"Mezzanine Assignment") pursuant to which the Guarantor has pledged to Mezzanine
--------------------
Lender the Additional Collateral (as defined in the Mezzanine Assignment).
AGREEMENTS
----------
In consideration of the premises recited above, and intending to be
legally bound hereby, the Guarantor, hereby agrees:
1. Obligations. The following guarantees and obligations (together,
-----------
the "Obligations") are undertaken by Guarantor:
-----------
(a) Guarantor hereby unconditionally, absolutely and irrevocably
guarantees and becomes surety to Mezzanine Lender for the prompt payment of the
entire amount of the Indebtedness in strict accordance with the terms of the
Mezzanine Loan Agreement. The obligations of Guarantor constitute a guarantee of
payment and not merely of collection, are absolute and unconditional under all
circumstances and shall not in any event be discharged, impaired, or otherwise
affected except by payment to Mezzanine Lender. Guarantor agrees that it will
upon notice from Mezzanine Lender that any Event of Default has occurred under
the Mezzanine Note or under any Mezzanine Loan Document, pay directly to
Mezzanine Lender all of the then outstanding Indebtedness. Guarantor further
agrees that any payment required hereunder will be made to Mezzanine Lender
regardless of whether such sums have become due by reason of the maturity of the
Mezzanine Note, acceleration of the Indebtedness or otherwise. The proceeds of
any amounts paid pursuant to this Mezzanine Guaranty will be applied in such
order and in such manner as Mezzanine Lender may elect in its sole discretion.
(b) Mezzanine Lender shall have the right to require Guarantor
to pay, comply with and satisfy its obligations and liabilities under this
Mezzanine Guaranty and shall have the right to proceed immediately against
Guarantor with respect thereto, without being required to bring any proceeding
or take any action of any kind against Borrower or any other guarantor or any
other person, entity or property prior thereto, the liability of Guarantor
hereunder being independent of and separate from the liability of Borrower, any
other guarantors and persons and the availability of other collateral security
for the Mezzanine Note and the Mezzanine Loan Documents.
2. Cancellation. This Mezzanine Guaranty and all obligations and
------------
liabilities of Guarantor hereunder will be cancelled when the Indebtedness has
been paid in full; provided, however, that this Mezzanine Guaranty shall be
-------- -------
reinstated and remain in full force and effect for so long as such payment may
be voided or rescinded in bankruptcy proceedings as a preference
-2-
<PAGE>
or for any other reason.
3. Costs and Fees. Guarantor hereby agrees that if it does not
--------------
satisfy its obligations under this Mezzanine Guaranty in accordance with the
terms hereof, the same shall be considered an Event of Default hereunder and
Mezzanine Lender shall have the right, in addition to the other rights described
in this Mezzanine Guaranty, to collect from Guarantor all costs, fees and
expenses (including reasonable attorneys' fees) incurred by Mezzanine Lender in
connection with the enforcement of this Mezzanine Guaranty against Guarantor, as
well as interest thereon at the Default Rate set forth in the Note, from and
after the date any Event of Default occurs and is continuing through the date of
payment.
4. Bankruptcy of Borrower or Guarantor. The obligations of
-----------------------------------
Guarantor under this Mezzanine Guaranty shall not be discharged, impaired or
otherwise affected by the insolvency, bankruptcy, liquidation, readjustment,
composition, dissolution or other similar proceeding involving or affecting
Borrower or Guarantor, proceedings affecting the ownership of any of the above
through merger, consolidation or otherwise, inconsistent orders in or claims by
parties to any such proceedings or other release of obligations by operation of
law.
5. Agreements and Waivers. Guarantor hereby:
----------------------
(a) agrees that its obligations hereunder shall not be released
or otherwise affected by any agreement, amendment, release, suspension,
compromise, forbearance, indulgence, waiver, extension, renewal, supplement or
modification of any of the Mezzanine Loan Documents, or any other obligations of
Borrower to Mezzanine Lender, provided, however, the Mezzanine Loan Documents
may only be amended in accordance with the terms of the Mezzanine Loan
Agreement;
(b) consents that Mezzanine Lender may, without affecting the
liability of Guarantor under this Mezzanine Guaranty, (i) exchange, release or
surrender any property pledged by or on behalf of Borrower or any other
guarantor of any liabilities of Borrower to Mezzanine Lender, (ii) renew or
change, with and subject to the consent of Borrower and Operator, the terms of
any of Borrower's liabilities to Mezzanine Lender, or (iii) waive any of
Mezzanine Lender's rights or remedies against Borrower or any other guarantor of
any obligations of Borrower;
(c) Intentionally omitted;
(d) agrees that its liability under this Mezzanine Guaranty
shall be in addition to that stated in any other guaranty that may be hereafter
given by the undersigned and shall not be reduced or affected by any payment
made under any such guaranty;
(e) agrees that any failure or delay by Mezzanine Lender to
exercise any right under this Mezzanine Guaranty or under any other guaranty or
with respect to any of the Mezzanine Loan Documents or otherwise with respect to
the Indebtedness shall not be construed as a waiver of the right to exercise the
same or any other right hereunder at any time
-3-
<PAGE>
and from time to time thereafter;
(f) Intentionally deleted;
(g) agrees that Mezzanine Lender shall have, as security for the
undertakings under this Mezzanine Guaranty, a lien upon, a security interest in
and right of set-off against the Collateral (as defined in the Mezzanine
Leasehold Mortgage), the Mortgaged Property (as defined in the Mezzanine
Leasehold Mortgage) and the Additional Collateral (as defined in the Mezzanine
Assignment) which lien is subject to the lien granted under the First Mortgage
Loan;
(h) agrees that Mezzanine Lender shall not, under any
circumstances, be required to exhaust remedies or proceed against Borrower,
other sureties, parties, or any other security for the Indebtedness before
proceeding under this Mezzanine Guaranty against the Guarantor;
(i) agrees that under no circumstances (other than payment in
full of the Mezzanine Loan) shall it become subrogated to the claims or liens of
Mezzanine Lender against Borrower or any other guarantor and that all amounts
due to Mezzanine Lender under the Mezzanine Loan Documents shall have priority
over any amounts, whether or not related to the Mezzanine Loan Documents,
payable now or hereafter from Borrower to Guarantor;
(j) agrees that the obligations undertaken in this Mezzanine
Guaranty shall not be affected by the lack of validity or enforceability of any
Mezzanine Loan Document, any change in the time, manner or place of payment or
in any other term in respect of any of the Indebtedness or any other amendment
or waiver or a consent to or any departure from the Mezzanine Loan Documents,
provided, however, any amendments to the Mezzanine Loan Documents shall be done
in accordance with the Mezzanine Loan Agreement;
(k) agrees it will neither take or cause to be taken any action,
or permit any inaction, which will violate or cause a default under any of the
Mezzanine Loan Documents;
(l) waives the right to marshalling of Borrower's assets or any
stay of execution and the benefit of all exemption laws, to the extent permitted
by law, other protection granted by law to guarantors, now or hereafter in
effect with respect to any action or proceeding brought by Mezzanine Lender
against it;
(m) agrees that no single exercise of the 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 Mezzanine Lender may elect until all of Guarantor's liabilities and
obligations hereunder have been satisfied;
(n) agrees that its liability under this Mezzanine Guaranty
shall in no way be released or otherwise affected by the commencement, existence
or completion of any proceeding against Borrower, any other guarantors or any
other person or entity or otherwise
-4-
<PAGE>
with respect to the collection of the Indebtedness; and Mezzanine 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 entity or otherwise with respect to
the Indebtedness;
(o) waives, to the maximum extent permitted by applicable law,
any notice of (i) Mezzanine Lender's intention to act in reliance of this
Mezzanine Guaranty, (ii) any presentment, demand, protest or notice of dishonor,
nonpayment or other default with respect to the Indebtedness other than as
required under the Mezzanine Loan Documents, if any, and (iii) the commencement
or prosecution of any enforcement proceeding against Borrower or any other
guarantor or any other person or entity with respect to the Indebtedness or
otherwise;
(p) represents and acknowledges that the indebtedness evidenced
by the Mezzanine Note is and will be of direct benefit, interest and advantage
to it; and
(q) irrevocably waives all claims of waiver, release, surrender,
alteration or compromise and all defenses, set-offs, counterclaims, recoupments,
reductions, limitations or impairments and any other available defense at law or
in equity.
6. Intentionally Omitted.
7. Governing Law. (a) This Mezzanine Guaranty was negotiated in
-------------
New York, and made by Guarantor and accepted by Mezzanine 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,
including, without limitation, matters of construction, validity and
performance, this Mezzanine Guaranty and the obligations arising hereunder shall
be governed by, and construed in accordance with, the laws 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. 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 Mezzanine Guaranty, and this
Mezzanine Guaranty shall be governed by and construed in accordance with the
laws of the State of New York pursuant to (S) 5-1401 of the New York General
Obligations Law.
(b) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST GUARANTOR ARISING
OUT OF OR RELATING TO THIS MEZZANINE GUARANTY SHALL BE INSTITUTED IN ANY FEDERAL
OR STATE COURT IN NEW YORK, NEW YORK, PURSUANT TO (S) 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
-5-
<PAGE>
PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY
FEDERAL OR STATE COURT AND AGREES THAT SERVICE OF PROCESS UPON SAID AGENT AT
SAID ADDRESS (OR AT SUCH OTHER OFFICE AS MAY BE DESIGNATED BY GUARANTOR FROM
TIME TO TIME IN ACCORDANCE WITH THE TERMS HEREOF) WITH A COPY TO GUARANTOR AT
ITS PRINCIPAL EXECUTIVE OFFICES, ATTENTION: GENERAL COUNSEL 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. GUARANTOR (I) SHALL GIVE
PROMPT NOTICE TO Mezzanine 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 (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 OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.
8. Modification, Waiver in Writing. No modification, amendment,
-------------------------------
extension, discharge, termination or waiver of any provision of this Mezzanine
Guaranty , or consent to any departure by the Guarantor therefrom, shall in any
event be effective unless the same shall be in a writing signed by Guarantor and
Mezzanine 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 the Guarantor shall entitle
the Guarantor to any other or future notice or demand in the same, similar or
other circumstances.
9. Delay Not a Waiver. Neither any failure nor any delay on the
------------------
part of Mezzanine Lender in insisting upon strict performance of any term,
condition, covenant or agreement, or exercising any right, power, remedy or
privilege hereunder, or any other instrument given as security therefor, 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.
10. Notices. All notices, requests, demands, directions and other
-------
communications which may or are required to be given, served or sent by the
Guarantor or the Mezzanine Lender to the other shall be given, served or sent as
provided in the Mezzanine Loan Agreement and shall be effective in accordance
with the terms of the Mezzanine Loan Agreement provided that notices to
Guarantor shall be sent to the address set forth for the Guarantor in the first
paragraph of this Mezzanine Guaranty with copies delivered concurrently to each
of the following: Brookdale Living Communities of Illinois-HV, Inc., 77 West
Wacker Drive, Chicago, Illinois 60601, Attention: Darryl W. Copeland, Jr.,
Telefax Number (312) 977-3699; Brookdale Living Communities of Illinois-HV,
Inc., 77 West Wacker Drive, Chicago, Illinois 60601, Attention: Robert J.
Rudnik, Esquire, Telefax Number (312) 977-3699; and Burke, Warren, MacKay &
Serritella, 330 North Wabash Avenue, 22nd Floor, IBM Plaza, Chicago, Illinois
60601-3607, Attention: Douglas E. Wambach, Esq.
-6-
<PAGE>
11. TRIAL BY JURY. THE GUARANTOR AND MEZZANINE LENDER, TO THE
-------------
FULLEST EXTENT THAT THEY MAY LAWFULLY DO SO, HEREBY WAIVE TRIAL BY JURY IN ANY
ACTION OR PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY TORT ACTION, BROUGHT BY
ANY PARTY HERETO WITH RESPECT TO THIS MEZZANINE GUARANTY.
12. Headings. The Section headings in this Mezzanine Guaranty are
--------
included herein for convenience of reference only and shall not constitute a
part of this Mezzanine Guaranty for any other purpose.
13. Mezzanine Assignment. Mezzanine Lender shall have the right to
--------------------
assign in whole or in part this Mezzanine Guaranty and the obligations hereunder
to any Person, including, without limitation, to a trustee or servicer before or
after a Securitization.
14. Severability. Wherever possible, each provision of this
------------
Mezzanine Guaranty shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Mezzanine Guaranty
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
Mezzanine Guaranty.
15. Waiver of Counterclaim. Guarantor hereby waives the right to
----------------------
assert a counterclaim, other than compulsory counterclaim, in any action or
proceeding brought against it by Mezzanine Lender or its agents.
16. Exculpation. This Mezzanine Guaranty is and shall be subject to
-----------
the exculpation provisions of Section 8.14 of the Mezzanine Loan Agreement.
------------
[Signatures on the following page]
-7-
<PAGE>
IN WITNESS WHEREOF, Guarantor has executed and delivered this
Mezzanine Guaranty the date first written above.
BROOKDALE LIVING COMMUNITIES OF
ILLINOIS-HV, INC., a Delaware corporation
By: ________________________________
Name:
Title:
<PAGE>
EXHIBIT 10.10
MEZZANINE ENVIRONMENTAL INDEMNITY AGREEMENT
-------------------------------------------
THIS MEZZANINE ENVIRONMENTAL INDEMNITY AGREEMENT (this "Agreement"),
---------
made as of __________ __, 1998, from BROOKDALE LIVING COMMUNITIES, INC., a
Delaware corporation. having an office at 77 West Wacker Drive, Suite 4800,
Chicago, Illinois 60601, Attention: Darryl W. Copeland, Jr., 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, "Mezzanine Lender").
----------------
RECITALS
WHEREAS, pursuant to a Mezzanine Loan Agreement dated as of the date
hereof between The Harbor Village Business Trust, a Delaware business trust
("Borrower"), Brookdale Living Communities of Illinois-HV, Inc. ("Operator"),
-------- --------
and Mezzanine Lender (as modified and supplemented and in effect from time to
time, the "Mezzanine Loan Agreement"), at the request of Borrower and Operator,
------------------------
Mezzanine Lender has agreed to make a loan (the "Mezzanine Loan") to Borrower;
--------------
WHEREAS, Borrower and Operator are entering into a certain operator
lease dated the date herewith (the "Operator Lease"), pursuant to which Operator
--------------
shall manage and operate the Facility.
WHEREAS, Mezzanine Lender is unwilling to make the Mezzanine Loan
unless Guarantor indemnifies Mezzanine Lender against certain liabilities
arising under Environmental Laws (as herein defined), relating to the property
being financed in connection with the Mezzanine Loan, which property consists of
the fee simple interest and leasehold estate in the land more particularly
described in the Mezzanine Mortgages and all buildings, structures and other
improvements now or hereafter situated on such land (the "Facility"); and
--------
NOW, THEREFORE, in consideration of the making of the Mezzanine Loan
by Mezzanine 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
Mezzanine Loan Agreement shall have the meanings provided therefore in the
Mezzanine Loan Agreement, and the following terms shall have the following
meanings:
"Borrower" has the meaning provided in the Recitals to this Agreement.
--------
<PAGE>
"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, Operator or the
Facility, 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
Facility, (ii) any fact, circumstance, condition or occurrence forming the basis
of any violation, or alleged violation, of any Environmental Law by Borrower,
Operator or otherwise affecting the Facility or (iii) any alleged injury or
threat of injury to health, safety or the environment by Borrower, Operator or
otherwise affecting the Facility 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, or the Release or threatened
Release of Hazardous Substances into the indoor or outdoor environment,
including, without limitation, ambient air, soil, surface water, ground water,
wetlands, land or subsurface strata or otherwise relating to the presence or Use
of Hazardous Substances.
"Environmental Reports" means the environmental audit reports, with
---------------------
respect to the Facility, delivered to Mezzanine Lender prior to the date hereof
and in connection with the Mezzanine Loan, and any amendments or supplements
thereto delivered to Mezzanine Lender prior to the date hereof.
"Guarantor" has the meaning provided in the first paragraph of this
---------
Agreement.
"Governmental Authority" means any national or federal government, any
----------------------
state, regional, local or other political subdivision thereof and any Person
with jurisdiction exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"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
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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.
"Mezzanine Lender" has the meaning provided in the first paragraph of
----------------
this Agreement.
"Mezzanine Loan" has the meaning provided in the Recitals to this
--------------
Agreement.
"Mezzanine 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 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.
"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 14 hereof,
----------
Guarantor agrees to indemnify, reimburse, defend (with counsel satisfactory to
Mezzanine Lender in Mezzanine Lender's sole discretion), and hold harmless
Mezzanine 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 Mezzanine 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;
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<PAGE>
ii) the presence, Use or Release of Hazardous Substances at, on, in,
under or from the Facility, 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(b)(U), Section 4.1(d)(U), Sections 5.1(a)(D) through
------- --------- ------- --------- -------- ---------
5.1(a)(I), and Sections 5.1(b)(D) through 5.1(b)(I), inclusive of the
--------- -------- --------- ---------
Mezzanine 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, Operator, or Borrower from personal liability
provided in the Mezzanine Loan Agreement or in any of the other Mezzanine Loan
Documents. Nothing in this Agreement shall be deemed to deprive Mezzanine
Lender of any rights or remedies provided to it elsewhere in this Agreement or
in the other Mezzanine Loan Documents or otherwise available to it under law.
Guarantor waives and releases Mezzanine 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 Mezzanine Lender.
(c) With respect to those matters for which Guarantor has agreed to
indemnify Mezzanine Lender hereunder, and to the maximum extent permitted by
applicable law, Guarantor waives and releases Mezzanine 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 Mezzanine Lender.
3. Payment. All payments due to Mezzanine Lender under this
-------
Agreement shall be payable to Mezzanine 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 Illinois 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
Illinois applicable to contracts made and performed in such State and any
applicable law of the
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<PAGE>
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 Illinois.
(b) Any legal suit, action or proceeding against Mezzanine 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 (S) 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 Mezzanine 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 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 Mezzanine 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, Mezzanine 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.
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<PAGE>
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 Mezzanine
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 Mezzanine Lender shall be delivered
concurrently to each of the following: Joseph B. Heil, Esquire, Dechert Price &
Rhoads, 1717 Arch Street, 4000 Bell Atlantic Tower, Philadelphia, PA 19103,
Telefax Number 215/994-2222; Two World Financial Center, Building B, New York,
New York 10281-1198, Attention: Raymond M. Anthony, Telefax Number (212) 667-
1666; Two World Financial Center, Building B, New York, NY 10281-1198,
Attention Sheryl McAfee, Telefax Number (212) 667-1022; and Two World Financial
Center, Building B, New York, NY 10281-1198, Attention: Legal Counsel, 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 of Illinois-HV, Inc., 77 West Wacker Drive,
Chicago, Illinois 60601, Attention: Darryl W. Copeland, Jr., Telefax Number
(312) 977-3699; Brookdale Living Communities of Illinois-HV, Inc., 77 West
Wacker Drive, Chicago, Illinois 60601, Attention: Robert J. Rudnik, Esquire,
Telefax Number (312) 977-3699; and Douglas E. Wambach, Esq., Burke, Warren,
MacKay & Serritella, 330 North Wabash Avenue, 22nd Floor, Chicago, Illinois
60611, Telefax Number (312) 840-7900. 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. Trial by Jury. EACH OF GUARANTOR AND MEZZANINE 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. Mezzanine 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 Mezzanine Loan, but not otherwise. All references to
"Mezzanine Lender" hereunder shall be
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<PAGE>
deemed to include the successors and assigns of Mezzanine 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 Mezzanine Lender each
---------------------
hereby agree at any time and from time to time upon not less than 15 days prior
written notice by Guarantor or Mezzanine 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 Mezzanine Lender's obligation
to deliver the statement pursuant to this Section 13, that Mezzanine 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. This Agreement shall survive (in perpetuity) the
--------
closing and disbursement of the funds evidenced by the Mezzanine Note, payment
of the Mezzanine Note, payment and performance of the Mezzanine Loan Obligations
(as such term is defined in the Mezzanine Mortgage), any release, reconveyance,
discharge or foreclosure of the Mezzanine Mortgage, conveyance by deed in lieu
of foreclosure, transfer, and any subsequent conveyance of the Facility.
Notwithstanding the foregoing, Guarantor shall not indemnify Mezzanine 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
Facility (a) by the affirmative act or gross negligence of Mezzanine Lender or
any employees, agents or bailees of Mezzanine Lender; or (b) subsequent to (i)
Mezzanine Lender taking fee or leasehold title to the Facility pursuant to the
Mezzanine Mortgages or either
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<PAGE>
of them; or (ii) a foreclosure by Mezzanine Lender; or (iii) acceptance by
Mezzanine Lender or any designee of a deed-in-lieu of foreclosure with respect
to the Facility.
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
Mezzanine Loan Documents made in accordance therewith, (b) any extensions of
time for performance required by any of the Mezzanine Loan Documents, or (c) the
release or substitution in whole or in part, of any security for the Mezzanine
Note or other evidence of debt issued pursuant to the Mezzanine Loan Documents;
and in any of such cases, whether with or without notice to Guarantor and with
or without consideration.
[Signature on the following page]
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<PAGE>
IN WITNESS WHEREOF, the Guarantor has caused this Mezzanine
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:
Title:
