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): May 27, 1999
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BROOKDALE LIVING COMMUNITIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-22253 36-4103821
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(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification Number)
77 West Wacker Drive, Suite 4400, Chicago, Illinois 60601
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (312) 977-3700.
NOT APPLICABLE
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
On May 27, 1999, the Federal Home Loan Mortgage Corporation ("Freddie
Mac") issued replacement credit enhancements to secure the payment of interest
on and principal of (i) tax-exempt bonds with a current outstanding aggregate
principal balance of $32,000,000 issued with respect to The Heritage facility
located in Des Plaines, Illinois, owned by River Oaks Partners ("River Oaks"),
an Illinois general partnership wholly-owned, directly or indirectly, by
Brookdale Living Communities, Inc. ("Brookdale"), and (ii) tax-exempt bonds with
a current outstanding aggregate principal balance of $27,000,000 issued with
respect to The Devonshire facility located in Lisle, Illinois, owned by The
Ponds of Pembroke Limited Partnership ("Ponds LP"), an Illinois limited
partnership wholly-owned, directly or indirectly, by Brookdale, and (iii)
tax-exempt bonds with a current outstanding aggregate principal balance of
$6,000,000 issued with respect to The Devonshire facility. The Freddie Mac
credit enhancements expire on the final maturity date of the respective bond
issues. River Oaks and Ponds LP are obligated to reimburse Freddie Mac for all
amounts funded by Freddie Mac under the respective credit enhancements, which
obligations are cross-defaulted, cross-collateralized and secured by mortgages
on The Heritage facility and The Devonshire facility. In addition, Brookdale has
guaranteed the reimbursement obligations of River Oaks and Ponds LP, which
guaranty is limited to $4,000,000.
The Freddie Mac credit enhancements require River Oaks and Ponds LP to
fund a principal reserve account commencing July 1, 1999 based on a 30-year
amortization of the bond issues. River Oaks and Ponds LP are required to
maintain an interest rate cap for the entire term of each credit enhancement.
Interest rate caps with a strike price of 6.35% and expiring on June 1, 2004
have been purchased.
In connection with the replacement of the credit enhancements Brookdale
received the release of $14,464,449 that was previously on deposit as cash
collateral for the benefit of the prior credit enhancement providers. Brookdale
expects to use these funds for the payment of transaction costs and for working
capital and general corporate purposes.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
Exhibit
No. Description
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10.1 Limited Guaranty, dated as of May 27, 1999, by
and between Brookdale Living Communities, Inc.
and Glaser Financial Group, Inc.
10.2 Reimbursement and Security Agreement, dated as
of May 1, 1999, by and between Federal Home
Loan Mortgage Corporation and The Ponds of
Pembroke Limited Partnership
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Exhibit
No. Description
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10.3 Reimbursement and Security Agreement, dated as
of May 1, 1999, by and between Federal Home
Loan Mortgage Corporation and River Oaks
Partners
10.4 Reimbursement and Security Agreement, dated as
of May 1, 1999, by and between Federal Home
Loan Mortgage Corporation and The Ponds of
Pembroke Limited Partnership
99.1 Press Release of Brookdale Living Communities,
Inc., dated May 28, 1999
<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: June 21, 1999 By: /s/ Robert J. Rudnik
----------------------------------------
Robert J. Rudnik
Executive Vice President
General Counsel and Secretary
LIMITED GUARANTY
(MULTISTATE)
This Limited Guaranty ("Guaranty") is entered into as of May 27, 1999,
by the undersigned (the "Guarantor" whether one or more), for the benefit of
GLASER FINANCIAL GROUP, INC., a Minnesota corporation, and/or any subsequent
holder of the Security Instrument or the Reimbursement Agreement (the "Lender").
RECITALS
A. THE VILLAGE OF LISLE, ILLINOIS (the "Devonshire Issuer") has
issued and sold its $27,000,000 Village of Lisle Illinois Multi-Family Housing
Revenue Bonds (Ashley of Lisle Project)(the "Ashley of Lisle Bonds") pursuant to
an Amended and Restated Trust Indenture dated as of December 1, 1987, between
the Issuer and American National Bank and Trust Company of Chicago ("American
National") as supplemented by First Supplement to Amended and Restated Trust
Indenture dated as of October 1, 1994, Second Supplement to Amended and Restated
Trust Indenture dated as of November 1, 1994, Third Supplement to Amended and
Restated Trust Indenture dated as of May 1, 1997 and Fourth Supplement to
Amended and Restated Trust Indenture dated on or about the date hereof (the
"Ashley of Lisle Indenture"). Proceeds of the Ashley of Lisle Bonds were loaned
by the Issuer to The Ponds of Pembroke Limited Partnership, an Illinois limited
partnership (the "Ponds of Pembroke") (the "Ashley of Lisle Loan") upon the
terms and conditions of a certain Amended and Restated Loan Agreement dated as
of December 1, 1987, between the Issuer and Borrower as supplemented by First
Supplement to Amended and Restated Loan Agreement dated as of December 1, 1987,
Second Supplement to Amended and Restated Loan Agreement dated as of November 1,
1994, and Third Supplement to Amended and Restated Loan Agreement dated on or
about the date hereof (the "Ashley of Lisle Financing Agreement") for the sole
and exclusive purpose of financing the acquisition, construction and equipping
of a certain congregate care and assisted living facility within the
geographical boundaries of Lisle, Illinois (the "Devonshire Project").
B. The Issuer has also issued and sold its $6,000,000 the Village of
Lisle, Illinois Multifamily Housing Revenue Bonds, Series 1991 (Devonshire of
Lisle Project) (the "Devonshire of Lisle Bonds") pursuant to a certain Trust
Indenture dated as of October 15, 1991, amended and restated as of January 15,
1993, between the Issuer and Amalgamated Bank of Chicago ("Amalgamated")
supplemented by First Supplement to Trust Indenture dated as of May 1, 1987, and
Second Supplement to Trust Indenture dated on or about the date hereof (the
"Devonshire of Lisle Indenture"). Proceeds of the Devonshire of Lisle Bonds were
loaned by the Issuer to the Borrower (the "Devonshire of Lisle Loan") upon the
terms and conditions of a certain Loan Agreement dated as of October 15, 1991,
as amended and restated as of January 15, 1993, between the Issuer and Borrower
as supplemented by First Supplement to Loan Agreement dated on or about the date
hereof (the "Devonshire of Lisle Financing Agreement")
LIMITED GUARANTY (FREDDIE MAC) - MULTISTATE PAGE 1
<PAGE>
for the sole and exclusive purpose of providing additional financing for the
acquisition, construction and equipping of the Devonshire Project.
C. The Ashley of Lisle Loan and the Devonshire of Lisle Loan are
herein collectively referred to as the "Devonshire Loans"; and the Ashley of
Lisle Financing Agreement and the Devonshire of Lisle Financing Agreement are
herein collectively referred to as the "Devonshire Financing Agreements"; and
the Ashley of Lisle Indenture and the Devonshire of Lisle Indenture are herein
collectively referred to as the "Devonshire Indentures"; and American National
and Amalgamated are herein collectively referred to as the "Bond Trustees".
D. The Illinois Development Finance Authority (the "Heritage
Issuer") has issued and sold its Thirty-Six Million and No/100 Dollar
($36,000,000.00) Illinois Development Finance Authority Qualified Residential
Rental Bonds ("River Oaks Project") (the "Heritage Bonds") pursuant to an
Indenture of Trust dated as of December 1, 1989 between the Heritage Issuer and
American National as trustee for the holders of the Heritage Bonds, as
supplemented by First Supplement to Trust Indenture dated as of December 1,
1996, Second Supplement to Trust Indenture dated as of February 1, 1997 and
Third Supplement to Trust Indenture dated on or about the date hereof (the
"Heritage Indenture"). Proceeds of the Heritage Bonds were loaned by the
Heritage Issuer (the "Heritage Loan") to River Oaks Partners, an Illinois
general partnership ("River Oaks") upon the terms and conditions of a certain
Loan Agreement dated as of December 1, 1989 between the Heritage Issuer and
River Oaks, as supplemented by First Supplement to Loan Agreement dated as of
December 1, 1996, Second Supplement to Loan Agreement dated as of February 1,
1997 and Third Supplement to Loan Agreement dated on or about the date hereof
(the "Heritage Financing Agreement") for the sole and exclusive purpose of
financing the acquisition, construction and equipping of a congregate care and
assisted living facility within the geographical boundaries of Des Plaines,
Illinois (the "Heritage Project").
E. The Devonshire Loans and the Heritage Loan are herein
collectively referred to as the "Loans"; and the Devonshire Financing Agreements
and the Heritage Financing Agreement are herein collectively referred to as the
"Financing Agreements"; and the Devonshire Indentures and the Heritage Indenture
are herein collectively referred to as the "Indentures".
F. The Ponds of Pembroke and River Oaks are herein collectively
referred to as the "Borrowers" or the "Other Borrower"; and the Ashley of Lisle
Bonds, the Devonshire of Lisle Bonds and the Heritage Bonds are herein
collectively referred to as the "Bonds".
G. FEDERAL HOME LOAN MORTGAGE CORPORATION ("Freddie Mac") has
entered into three (3) separate Direct Pay Credit Enhancement Agreements, each
dated as of May 1, 1999 with American National and Amalgamated, one with
American National with respect to the Ashley of Lisle Bonds, one with
Amalgamated with respect to the Devonshire of Lisle Bonds and one with American
National with respect to the Heritage Bonds (collectively the
LIMITED GUARANTY (FREDDIE MAC) - MULTISTATE PAGE 2
<PAGE>
"Credit Enhancement Agreements") pursuant to each of which Freddie Mac has
agreed to make certain advances to the applicable Bond Trustee (a) with respect
to amounts due under the applicable Loan for the applicable Project and (b) to
provide funds to purchase the applicable Bonds tendered under certain
circumstances in accordance with the applicable Indenture. The Ponds of Pembroke
has entered into two Reimbursement and Security Agreements of even date
herewith, one for the Ashley of Lisle Bonds and one for the Devonshire of Lisle
Bonds, and River Oaks has entered into a Reimbursement and Security Agreement
for the Heritage Bonds, each with Freddie Mac (collectively the "Reimbursement
Agreements") to evidence The Ponds of Pembroke's and River Oaks' obligations to
reimburse Freddie Mac for advances under the applicable Credit Enhancement
Agreement, and this Guaranty secures each Borrower's repayment and all other
obligations under the Reimbursement Agreements.
H. Lender has entered into certain Servicing Agreements with Freddie
Mac to service payment and performance of the Reimbursement Agreements.
I. The Reimbursement Agreements will be further secured pari passu
by two separate Multi-Family Mortgage, Assignment of Rents and Security
Agreement dated as of the date hereof (the "Security Instruments") one
encumbering the Devonshire Project and the other encumbering the Heritage
Project, (collectively, the "Projects") all as more fully described in the
Security Instruments and that certain Cross-Collateralization Agreement (the
"Cross-Collateralization Agreement") dated of even date herewith between Lender,
The Ponds of Pembroke, River Oaks and consented to by the Guarantor.
J. As a condition to entering into the Credit Enhancement
Agreements, Freddie Mac requires that the Guarantor execute this Guaranty.
NOW, THEREFORE, in order to induce Lender to enter into the Servicing
Agreement and in order to induce Freddie Mac to enter into the Credit
Enhancement Agreements, and in consideration thereof, Guarantor agrees as
follows:
1. "Indebtedness" and other capitalized terms used but not defined
in this Guaranty shall have the meanings assigned to them in the Security
Instruments, such that the definitions of such terms shall include the
definitions thereof in the Security Instruments collectively and in the
Cross-Collateralization Agreement. "Indebtedness" as used herein shall mean the
aggregate of all Indebtedness of each Borrower under both Security Instruments
and shall also include the "Combined Obligations" of each Borrower under the
Cross-Collateralization Agreement.
2. Guarantor hereby absolutely, unconditionally and irrevocably
guarantees to Lender the full and prompt payment when due, whether at maturity
or earlier, by reason of acceleration or otherwise, and at all times thereafter,
and the full and prompt performance when due, of all of the following:
LIMITED GUARANTY (FREDDIE MAC) - MULTISTATE PAGE 3
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(a) A portion of the Indebtedness equal to Four Million Dollars
($4,000,000.00) (the "Base Guaranty").
(b) In addition to the Base Guaranty, all other amounts for which
either Borrower is personally liable under Paragraphs 7.11(b)
through 7.11(f) of each of the Reimbursement Agreements.
(c) The payment and performance of all of each Borrower's obligations
under Section 18 of both of the Security Instruments.
(d) The entire Indebtedness, in the event that (i) either Borrower
voluntarily files for bankruptcy protection under the United
States Bankruptcy Code or voluntarily becomes subject to any
reorganization, receivership, insolvency proceeding or other
similar proceeding pursuant to any other federal or state law
affecting debtor and creditor rights, or (ii) an order for relief
is entered against either Borrower in any involuntary bankruptcy
proceeding filed (or joined in) by any partner or partners of
such Borrower or any creditor of either Borrower which is a
Controlling Entity (as defined in the Security Instruments)
pursuant to the United States Bankruptcy Code or other federal or
state law affecting debtor and creditor rights.
(e) All costs and expenses, including reasonable fees and out of
pocket expenses of attorneys and expert witnesses, incurred by
Lender in enforcing its rights under this Guaranty.
(f) All of the Indebtedness upon the occurrence of an "Event of Tax
Liability" under the Bond Documents caused by either Borrower or
anyone acting on either Borrower's behalf or acting at either
Borrower's direction, or in the event any of the interest payable
on the Bonds is caused by either Borrower or anyone acting on
behalf of either Borrower or acting at either Borrower's
direction to be deemed included in any Bondholder's gross income
for federal income tax purposes.
For purposes of determining Guarantor's liability under this Guaranty, all
payments made by either Borrower with respect to the Indebtedness or the
Combined Obligations and all amounts received by Lender from the enforcement of
its rights under either of the Security Instruments and/or the
Cross-Collateralization Agreement shall be applied first to the portion of the
Indebtedness or Combined Obligations for which neither The Ponds of Pembroke,
River Oaks nor Guarantor has personal liability.
3. The obligations of Guarantor under this Guaranty shall survive
any foreclosure proceeding, any foreclosure sale, any delivery of any deed in
lieu of foreclosure, and any release of record of the Security Instruments, or
the Cross-Collateralization Agreement, and, in addition,
LIMITED GUARANTY (FREDDIE MAC) - MULTISTATE PAGE 4
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the obligations of Guarantor relating to Borrowers' obligations under Section 18
of the Security Instruments shall survive any repayment or discharge of the
Indebtedness.
4. Guarantor's obligations under this Guaranty constitute an
unconditional guaranty of payment and not merely a guaranty of collection.
5. The obligations of Guarantor under this Guaranty shall be
performed without demand by Lender and shall be unconditional irrespective of
the genuineness, validity, regularity or enforceability of the Reimbursement
Agreements, the Cross-Collateralization Agreement, the Security Instruments, or
any other Loan Document, and without regard to any other circumstance which
might otherwise constitute a legal or equitable discharge of a surety or a
guarantor. Guarantor hereby waives the benefit of all principles or provisions
of law, statutory or otherwise, which are or might be in conflict with the terms
of this Guaranty and agrees that Guarantor's obligations shall not be affected
by any circumstances, whether or not referred to in this Guaranty, which might
otherwise constitute a legal or equitable discharge of a surety or a guarantor.
Guarantor hereby waives the benefits of any right of discharge under any and all
statutes or other laws relating to guarantors or sureties and any other rights
of sureties and guarantors thereunder. Without limiting the generality of the
foregoing, Guarantor hereby waives, to the fullest extent permitted by law,
diligence in collecting the Indebtedness, presentment, demand for payment,
protest, all notices with respect to the Reimbursement Agreements, the
Cross-Collateralization Agreement and this Guaranty which may be required by
statute, rule of law or otherwise to preserve Lender's rights against Guarantor
under this Guaranty, including, but not limited to, notice of acceptance, notice
of any amendment of the Loan Documents, notice of the occurrence of any default
or Event of Default, notice of intent to accelerate, notice of acceleration,
notice of dishonor, notice of foreclosure, notice of protest, and notice of the
incurring by Borrower of any obligation or indebtedness. Guarantor also waives,
to the fullest extent permitted by law, all rights to require Lender to (a)
proceed against either Borrower under the Cross-Collateralization Agreement or
any other guarantor of either Borrowers' payment or performance with respect to
the Indebtedness (an "Other Guarantor") (b) if either Borrower or any Other
Guarantor is a partnership, proceed against any general partner of either
Borrower or the Other Guarantor, (c) proceed against or exhaust any collateral
held by Lender to secure the repayment of the Indebtedness or the Combined
Obligations, including without limitation, under the Cross-Collateralization
Agreement, or (d) pursue any other remedy it may now or hereafter have against
either Borrower, or, if either Borrower is a partnership, any general partner of
such Borrower.
6. At any time or from time to time and any number of times, without
notice to Guarantor and without affecting the liability of Guarantor, (a) the
time for payment of the principal of or interest on the Indebtedness or the
Combined Obligations may be extended or the Indebtedness or the Combined
Obligations may be renewed in whole or in part or the Credit either Enhancement
Agreements or the Reimbursement Agreements extended or modified; (b) the time
for Borrowers' or any other party liable for the Indebtedness, or performance of
or
LIMITED GUARANTY (FREDDIE MAC) - MULTISTATE PAGE 5
<PAGE>
compliance with any covenant or agreement contained in the Reimbursement
Agreements, the Cross-Collateralization Agreement, the Security Instruments or
any other Loan Document, whether presently existing or hereinafter entered into,
may be extended or such performance or compliance may be waived; (c) the
maturity of the Indebtedness or the Combined Obligations may be accelerated as
provided in the Reimbursement Agreements, the Cross-Collateralization Agreement,
the Security Instruments, or any other Loan Document; (d) the Reimbursement
Agreements, the Cross-Collateralization Agreement, the Security Instruments, or
any other Loan Document may be modified or amended by Lender and any party to
such instrument in any respect, including, but not limited to, an increase in
the principal amount; and (e) any security for the Indebtedness or the Combined
Obligations may be modified, exchanged, surrendered or otherwise dealt with or
additional security may be pledged or mortgaged for the Indebtedness.
7. If more than one person executes this Guaranty, the obligations
of those persons under this Guaranty shall be joint and several. Lender, in its
sole and absolute discretion, may (a) bring suit against Guarantor, or any one
or more of the persons constituting Guarantor, and any Other Guarantor, jointly
and severally, or against any one or more of them; (b) compromise or settle with
any one or more of the persons constituting Guarantor for such consideration as
Lender may deem proper; (c) release one or more of the persons constituting
Guarantor, or any Other Guarantor, from liability; and (d) otherwise deal with
Guarantor and any Other Guarantor, or any one or more of them, in any manner,
and no such action shall impair the rights of Lender to collect from Guarantor
any amount guaranteed by Guarantor under this Guaranty. Nothing contained in
this paragraph shall in any way affect or impair the rights or obligations of
Guarantor with respect to any Other Guarantor.
8. Any indebtedness of either Borrower held by Guarantor or any
Other Guarantor now or in the future is and shall be subordinated to the
Indebtedness and any such indebtedness of either Borrower shall be collected,
enforced and received by Guarantor, as trustee for Lender, but without reducing
or affecting in any manner the liability of Guarantor under the other provisions
of this Guaranty.
9. Guarantor shall have no right of, and hereby waives any claim
for, subrogation or reimbursement against the Borrowers or any general partner
of either Borrower by reason of any payment by Guarantor under this Guaranty,
whether such right or claim arises at law or in equity or under any contract or
statute, until the Indebtedness has been paid in full and there has expired the
maximum possible period thereafter during which any payment made by either
Borrower to Lender with respect to the Indebtedness could be deemed a preference
under the United States Bankruptcy Code.
10. If any payment by either Borrower or any other party is held to
constitute a preference under any applicable bankruptcy, insolvency, or similar
laws, or if for any other reason Lender is required to refund any sums to either
Borrower or any other party, such refund shall not constitute a release of any
liability of Guarantor under this Guaranty. It is the intention
LIMITED GUARANTY (FREDDIE MAC) - MULTISTATE PAGE 6
<PAGE>
of Lender and Guarantor that Guarantor's obligations under this Guaranty shall
not be discharged except by Guarantor's performance of such obligations and then
only to the extent of such performance.
11. Guarantor shall from time to time, upon request by Lender,
deliver to Lender such financial statements as Lender may reasonably require.
12. Lender may assign its rights under this Guaranty in whole or in
part and upon any such assignment, all the terms and provisions of this Guaranty
shall inure to the benefit of such assignee to the extent so assigned. The terms
used to designate any of the parties herein shall be deemed to include the
heirs, legal representatives, successors and assigns of such parties; and the
term "Lender" shall include, in addition to Lender, any lawful owner, holder or
pledgee of the Reimbursement Agreements or successor to Freddie Mac under any of
the Reimbursement Agreements.
13. This Guaranty and the other Loan Documents represent the final
agreement between the parties and may not be contradicted by evidence of prior,
contemporaneous or subsequent oral agreements. There are no unwritten oral
agreements between the parties. All prior or contemporaneous agreements,
understandings, representations, and statements, oral or written, are merged
into this Guaranty and the other Loan Documents. Guarantor acknowledges that it
has received copies of the Reimbursement Agreements, the Cross-Collateralization
Agreement and all other Loan Documents. Neither this Guaranty nor any of its
provisions may be waived, modified, amended, discharged, or terminated except by
an agreement in writing signed by the party against which the enforcement of the
waiver, modification, amendment, discharge, or termination is sought, and then
only to the extent set forth in that agreement.
14. Guarantor agrees that any controversy arising under or in
relation to this Guaranty shall be litigated exclusively in the jurisdiction
where the Land is located (the "Property Jurisdiction"). The state and federal
courts and authorities with jurisdiction in the Property Jurisdiction shall have
exclusive jurisdiction over all controversies which shall arise under or in
relation to this Guaranty, the Reimbursement Agreements, the Security
Instruments or any other Loan Document. Guarantor irrevocably consents to
service, jurisdiction, and venue of such courts for any such litigation and
waives any other venue to which it might be entitled by virtue of domicile,
habitual residence or otherwise.
15. GUARANTOR AND LENDER EACH (A) AGREES NOT TO ELECT A TRIAL BY JURY
WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS GUARANTY OR THE RELATIONSHIP
BETWEEN THE PARTIES AS GUARANTOR AND LENDER THAT IS TRIABLE OF RIGHT BY A JURY
AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE
EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF RIGHT TO
TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY,
LIMITED GUARANTY (FREDDIE MAC) - MULTISTATE PAGE 7
<PAGE>
KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.
ATTACHED EXHIBIT. The following Exhibit is attached to this Guaranty:
|X| Exhibit A Modifications to Guaranty
IN WITNESS WHEREOF, Guarantor has signed and delivered this Guaranty or
has caused this Guaranty to be signed and delivered by its duly authorized
representative.
BROOKDALE LIVING COMMUNITIES, INC.,
a Delaware corporation
By: /s/ Darryl W. Copeland, Jr.
---------------------------------------
Darryl W. Copeland, Jr.
Its: Executive Vice President
By: /s/ Robert J. Rudnik
---------------------------------------
Robert J. Rudnik
Its: Secretary
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
On this 27 day of May, 1999, before me, the undersigned, a Notary
Public in and for said state, personally appeared Darryl W. Copeland, Jr.,
personally known to me, or proved to me on the basis of satisfactory evidence,
to be the person who executed the within instrument as the Executive Vice
President of Brookdale Living Communities, Inc., a Delaware corporation, the
corporation that executed the within instrument, and acknowledged to me that
such corporation executed the same.
WITNESS my hand and official seal.
Signature: /s/ Nicole Kristin Genova
-----------------------------
Name: Nicole Kristin Genova
My Commission Expires: May 28, 2002
LIMITED GUARANTY (FREDDIE MAC) - MULTISTATE PAGE 8
<PAGE>
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
On this 27 day of May, 1999, before me, the undersigned, a Notary
Public in and for said state, personally appeared Robert J. Rudnik, personally
known to me, or proved to me on the basis of satisfactory evidence, to be the
person who executed the within instrument as the Secretary of Brookdale Living
Communities, Inc., a Delaware corporation, the corporation that executed the
within instrument, and acknowledged to me that such corporation executed the
same.
WITNESS my hand and official seal.
Signature: /s/ Nicole Kristin Genova
-----------------------------
Name: Nicole Kristin Genova
My Commission Expires: May 28, 2002
LIMITED GUARANTY (FREDDIE MAC) - MULTISTATE PAGE 9
<PAGE>
EXHIBIT A
"Modifications to Guaranty"
The Guaranty to which this Exhibit A is attached is modified to add at the end
thereof new paragraphs 16 and 17 as follows:
16. Cross-Collateralization. The obligations of Guarantor shall not be impaired
or otherwise affected by the existence of any Event of Default by either
Borrower under the Cross-Collateralization Agreement dated of even date
herewith, any action taken by Lender to enforce its rights under or realize upon
collateral for any of the "Indebtedness" as defined in the
Cross-Collateralization Agreement, or the fact that Lender may be seeking to
realize upon some but not all of the collateral for the "Indebtedness" as
defined in the Cross-Collateralization Agreement.
17. Release. The Base Guaranty set forth in paragraph 2(a) hereof but no other
guaranties set forth herein shall be deemed deleted from this Guaranty and of no
further force or effect at such time as each of the following conditions have
been satisfied: i) the total principal amount held in the Principal Reserve
Funds for both the Heritage Project and the Devonshire Project shall be not less
than $4,000,000; ii) there is no default under the Bond Documents or the Loan
Documents; iii) no Monetary Default has occurred under either the Bond Documents
or the Loan Documents within the 24 month period immediately preceding the
proposed date of deletion of paragraph 2(a) hereof of this Guaranty; iv) both
the Devonshire Project and the Heritage Project are, in the opinion of an
engineer chosen by Lender in its discretion at the Borrower's expense, in good
physical condition and without any deferred maintenance requirements; and v)
Lender determines in its sole discretion that the Combined Debt Coverage Ratio
for both the Devonshire Project and the Heritage Project (the Devonshire Project
and the Heritage Project being herein collectively referred to as the
("Properties")) is at least 1.65 for a period of at least three consecutive
calendar months. As used herein, the term "Monetary Default" means a failure to
pay in full when due any amounts due and owing under the Bond Documents or the
Loan Documents. As used herein the term "Combined Debt Coverage Ratio" means for
any period the combined Properties' ratio of (a) current gross potential rent
roll annualized times 95% plus current other income annualized less the greater
of the expenses of the Properties underwritten by Freddie Mac (Heritage Project
expenses of $3,172,428 and Devonshire Project expenses of $4,541,516) which
include real estate taxes or the Properties' actual trailing twelve months'
operating expenses which include real estate taxes, (b) divided by (i) for those
Bonds that will bear interest at a floating rate, the notional annual debt
service will be calculated by adding the deposits to the principal reserve fund
created in the Mortgages for the next twelve months plus the annualized four
week average interest rate on the Bonds for the four weeks ending on the reset
date immediately prior to the calculation date, plus the actual fixed spread,
that equals the sum of the Servicing Fee, Freddie Mac's Credit Facility Fee,
Freddie Mac's Liquidity Facility Fee, Trustee Fee, Issuer Fee and Remarketing
Agent Fee, plus 200 basis points or (ii) for those
LIMITED GUARANTY (FREDDIE MAC) - MULTISTATE PAGE A-10
<PAGE>
Bonds that will bear interest at a fixed rate, annual debt service based upon
the annual fixed rate of the Bonds projected by the Remarketing Agent all as
defined in the documents evidencing and securing the Indebtedness and the Credit
Enhancement Documents.
LIMITED GUARANTY (FREDDIE MAC) - MULTISTATE PAGE A-11
EXECUTION COPY
REIMBURSEMENT AND SECURITY AGREEMENT
between
FEDERAL HOME LOAN MORTGAGE CORPORATION
and
THE PONDS OF PEMBROKE LIMITED PARTNERSHIP
Dated as of May 1, 1999
Relating to
$6,000,000
Village of Lisle, Illinois
Multi-Family Housing Revenue Bonds, Series 1991
(Devonshire of Lisle Project)
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1. Definitions................................................2
Section 1.2. Interpretation............................................11
ARTICLE II
REPRESENTATIONS, COVENANTS, WARRANTIES AND CONDITIONS
Section 2.1. Representations, Covenants and Warranties.................11
Section 2.2. Conditions................................................15
ARTICLE III
COVENANTS OF THE OWNER
Section 3.1. Affirmative Covenants of the Owner........................18
Section 3.2. Reimbursement and Replenishment Obligations of
the Owner...............................................23
Section 3.3. Freddie Mac Credit Enhancement Fees; Liquidity Use Fee;
Servicing...............................................25
Section 3.4. Indemnification...........................................26
Section 3.5. Purchased Bonds...........................................26
Section 3.6. Liability of the Owner....................................26
Section 3.7. Neither Freddie Mac nor Servicer Liable...................27
Section 3.8. Waivers and Consents......................................28
Section 3.9. Subrogation...............................................28
Section 3.10. Payment of Costs, Fees and Expenses.......................28
ARTICLE IV
INTEREST RATE PROTECTION
Section 4.1. Interest Rate Protection..................................30
Section 4.2. Cap Agreement Terms.......................................31
Section 4.3. Freddie Mac Right to Convert to Adjustable Rate or
the Fixed Rate..........................................33
ARTICLE V
UNIFORM COMMERCIAL CODE SECURITY AGREEMENT....................................34
i
<PAGE>
ARTICLE VI
EVENTS OF DEFAULTS; REMEDIES
Section 6.1. Events of Default.........................................34
Section 6.2. Remedies; Waivers.........................................35
Section 6.3. No Remedy Exclusive.......................................36
ARTICLE VII
MISCELLANEOUS
Section 7.1. Counterparts..............................................36
Section 7.2 Amendments, Changes and Modifications.....................36
Section 7.3 Payment Procedure.........................................36
Section 7.4 Payments on Business Days.................................37
Section 7.5 Governing Law; Severability...............................37
Section 7.6 Notices...................................................37
Section 7.7 Further Assurances and Corrective Instruments.............37
Section 7.8 Term of this Agreement....................................37
Section 7.9 Assignments; Transfers; Third-Parties Rights..............38
Section 7.10 Headings..................................................38
Section 7.11 Limitation on Personal Liability..........................38
Section 7.12 Consent of Freddie Mac....................................39
Section 7.13 Disclaimer; Acknowledgments...............................40
Section 7.14. Entire Agreement..........................................40
Section 7.15. Survival of Representation and Warranties.................40
Section 7.16. Waiver of Claims..........................................40
Section 7.17. Waivers of Jury Trial.....................................40
Exhibit A - Principal Reserve Fund Schedule
ii
<PAGE>
REIMBURSEMENT
AND SECURITY AGREEMENT
THIS REIMBURSEMENT AND SECURITY AGREEMENT (the "Agreement") is made and
entered into as of the 1st day of May, 1999, by and between the FEDERAL HOME
LOAN MORTGAGE CORPORATION ("Freddie Mac"), a corporate instrumentality of the
United States and THE PONDS OF PEMBROKE LIMITED PARTNERSHIP (the "Owner"), a
limited partnership duly organized and existing under the laws of the State of
Illinois.
W I T N E S S E T H:
WHEREAS, Village of Lisle, Illinois (the "Issuer"), a municipal
corporation, political subdivision and body politic of the State of Illinois,
has heretofore authorized the issuance of its $6,000,000 Multi-Family Housing
Revenue Bonds, Series 1991 (Devonshire of Lisle Project) (the "Bonds"); and
WHEREAS, the Bonds have been issued pursuant to that certain Trust
Indenture dated as of August 15, 1991, as amended and restated by that certain
Trust Indenture, dated as of January 15, 1993 (as amended, the "Indenture")
between the Issuer and Amalgamated Bank of Chicago (the "Trustee"), a state bank
duly organized and validly existing under the laws of the State of Illinois; and
WHEREAS, the proceeds of the Bonds were used by the Issuer to fund a loan
(the "Loan") to the Owner, the proceeds of which were used to finance the
acquisition, construction and equipping of the Project; and
WHEREAS, the Owner has requested that Freddie Mac provide credit
enhancement for the Loan in substitution for the existing Qualified Credit
Instrument outstanding with respect to the Bonds; and
WHEREAS, Freddie Mac has agreed to provide credit enhancement for the Loan
by making payments to the Trustee in respect of the principal of and interest on
the Loan upon the terms set forth in the Credit Enhancement Agreement dated as
of even date herewith (the "Credit Enhancement Agreement") between Freddie Mac
and the Trustee; and
WHEREAS, the Indenture and the Bonds provide that, during the period the
Bonds bear interest at the Floating Rate, the Bonds may be tendered or deemed
tendered for payment of the Purchase Price on each Settlement Date; and
WHEREAS, the payment of the Purchase Price of Bonds tendered or deemed
tendered pursuant to terms of the Indenture will be payable from proceeds of the
remarketing of the Bonds and from moneys, securities and certain investment
earnings thereon held in certain funds under the Indenture or held by the Tender
Agent, and to the extent that such moneys are insufficient to
<PAGE>
pay the Purchase Price of tendered Bonds, the Issuer and Trustee have requested
that Freddie Mac agree to make certain payments to the Trustee in respect of the
Purchase Price under the circumstances and upon the terms set forth in the
Credit Enhancement Agreement; and
WHEREAS, Freddie Mac is willing to execute and deliver the Credit
Enhancement Agreement to the Trustee upon the satisfaction by the Servicer (as
hereinafter defined) of the terms and conditions of that certain Letter of
Commitment dated as of May 14, 1999 (the "Commitment") between Freddie Mac and
the seller named therein (the "Servicer"); and
WHEREAS, the Owner's obligations under this Agreement will be secured by
the Reimbursement Security Documents, including a Reimbursement Mortgage, and
certain rights of subrogation to the rights of the Bondholders under the Loan
Documents.
NOW, THEREFORE, in consideration of the agreement of Freddie Mac to
execute and deliver the Credit Enhancement Agreement to the Trustee and the
material covenants and undertakings set forth in this Agreement and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Freddie Mac and the Owner do hereby agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1. Definitions. All defined terms not otherwise specifically
defined in this Agreement shall have the same meanings, respectively, as the
defined terms contained in the Indenture. Unless otherwise expressly provided in
this Agreement or unless the context clearly requires otherwise, the following
terms shall have the respective meanings set forth below for all purposes of
this Agreement.
"Advance" means either a Credit Advance or a Liquidity Advance.
"Affiliate", as applied to any Person, means any other Person directly or
indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including with
correlative meanings, the terms "controlling", "controlled by" and Aunder common
control with), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities,
partnership interests or by contract or otherwise.
"Agreement" means this Reimbursement and Security Agreement, as the same
may be amended, modified or supplemented from time to time.
"Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy" as now and hereafter in effect, or any successor statute.
2
<PAGE>
"Base Recourse" means the dollar amount specified in section 7.11(b)
hereof, for which the Owner is personally liable hereunder.
"Bondholder" or "bondholder" shall have the meaning given that term in the
Indenture.
"Bond Counsel" means any attorney at law or firm of attorneys of
nationally recognized standing in matters pertaining to the exclusion from gross
income of interest on bonds for federal income tax purposes issued by states and
political subdivisions and which is acceptable to Freddie Mac.
"Bond Documents" means the Bonds, the Indenture, the Financing Agreement,
the Regulatory Agreement (and any other agreement relating to rental
restrictions on the Project), the Tax Certificate, the Remarketing Agreement,
any bond purchase agreement, any tender agent agreement, and all other
documents, instruments and agreements executed and delivered in connection with
the issuance, sale, delivery and/or remarketing of the Bonds as each such
agreement or instrument may be amended, modified or supplemented from time to
time.
"Bond Fee Component" means the regular, ongoing fees due from time to time
to the Trustee, the Remarketing Agent, the Paying Agent, the Bond Registrar, the
Tender Agent, any rebate analyst with respect to the Bonds and any other fees
and expenses set forth in Section 4.3 of the Financing Agreement, expressed in
terms of a percentage of the principal amount of Outstanding Bonds (including
Purchased Bonds) on an annual basis.
"Borrower Documents" means the Bond Documents, the Loan Documents, the
Reimbursement Security Documents and the Cap Documents.
"Business Day" means any day, other than (i) a Saturday, Sunday, or legal
holiday, (ii) a day on which banking institutions located in (A) New York, New
York, or (B) Chicago, Illinois, or (C) the locality and state in which the home
office of Freddie Mac, or the office of Freddie Mac at which a request for
funding on the Credit Enhancement Agreement may be made, are authorized by law
to close, or (iii) a day on which the New York Stock Exchange is closed.
"Cap" shall have the meaning set forth in Section 4.1.
"Cap Agreement" means that certain Rate Cap Agreement, dated May 24, 1999,
between the Owner and the Counterparty, as such agreement may be amended,
modified, supplemented or restated from time to time, and any successor interest
rate cap agreement approved in writing by Freddie Mac.
"Cap Assignment" means (a) the Interest Rate Hedge Assignment and Security
Agreement, dated as of May 1, 1999, between the Owner and Freddie Mac, as their
interests may appear or (b) any assignment by the Owner of any subsequent Cap to
Freddie Mac, in each case as such agreement may be amended, modified or
supplemented from time to time.
"Cap Deposit" shall have the meaning set forth in Section 4.2(f).
3
<PAGE>
"Cap Documents" shall have the meaning set forth herein in Section 4.1.
"Cap Fee Escrow" means the escrow account to be held by the Servicer to
provide for payments made by the Owner as required by Section 3.1(h) for the
purchase of a Subsequent Cap.
"Cap Reserve Account" means the escrow account held by the Servicer in
which the Cap Deposit is held as additional security for Freddie Mac.
"Closing Date" means the date the Credit Enhancement Agreement is
delivered by Freddie Mac.
"Combined Debt Service Coverage Ratio" means, for any period, the ratio of
(a) current gross potential rent roll annualized times 95% plus current other
income from services provided at both of the Projects annualized less the
greater of (x) the Freddie Mac underwritten expenses (Heritage expenses of
$3,172,428 and Devonshire expenses of $4,541,516) which includes real estate
taxes or (y) the combined Projects' actual trailing twelve months' operating
expenses which includes real estate taxes, (b) divided by the debt service for
the bonds financing both Projects. For those bonds that after the Rate
Conversion Date will bear interest at a Floating Rate, the notional annual debt
service will be calculated by adding the deposits to the Principal Reserve Fund
for the next twelve months plus the annualized four week average interest rate
on the bonds for the four weeks ending on the reset date immediately prior to
the calculation date, plus the actual fixed spread, that equals the sum of the
Servicing Fee, the Freddie Mac Credit Facility Fee, the Freddie Mac Liquidity
Facility Fee, the Trustee's fees, the Issuer's fee and the Remarketing Agent's
fee, plus 200 basis points. For those bonds that after the Rate Conversion Date
will bear interest at a new Adjustable Rate or Fixed Rate, annual debt service
(including principal) will be calculated based upon the annual Adjustable Rate
or Fixed Rate of the bonds projected by the Remarketing Agent plus the actual
fixed spread that equals the sum of the Servicing Fee, the Freddie Mac Credit
Facility Fee, the Trustee's fee and the Issuer's fee.
"Conversion to Maturity Date" means the date on which the interest rate on
the Bonds is converted to the Fixed Rate.
"Counterparty" means the counterparty named in the Cap Agreement who is
obligated to make payments in accordance with the terms thereof.
"Credit Advance" means an advance by Freddie Mac under the Credit
Enhancement Agreement to pay any Guaranteed Payment.
"Credit Enhancement Agreement" means the Credit Enhancement Agreement
dated as of May 1, 1999 between the Trustee and Freddie Mac, as such Credit
Enhancement Agreement may from time to time be amended.
"Cross-Collateralization Agreement" means that certain
Cross-Collateralization Agreement dated as of May 1, 1999 among the Servicer,
the Owner and the Other Owner, as consented to by Guarantor, as assigned to
Freddie Mac.
4
<PAGE>
"Default" means any event that has occurred which, with the giving of
notice or the passage of time or both, would constitute an Event of Default.
"Default Rate" means the base rate or prime rate of Citibank, N.A. until
such time as another "Money Center" bank is designated by Freddie Mac in its
discretion by notice to the Owner, plus four percent (4%).
"Event of Default" means the occurrence of an event of default as
described in Section 6.1 hereof.
"Financing Agreement" means that certain Loan Agreement dated as of August
15, 1991 as amended and restated by that certain Loan Agreement, dated as of
January 15, 1993, between the Issuer and the Owner, as amended through the
Closing Date and as the same may be further amended, modified or supplemented
from time to time.
"Fixed Rate Period" means any period the Bonds bear interest at an
Adjustable Rate or the Fixed Rate.
"Floating Rate" means, collectively, the meanings given the terms "Weekly
Rate" and "Monthly Rate" in the Indenture.
"Floating Rate Period" means any period the Bonds bear interest at the
Floating Rate.
"Freddie Mac" means the Federal Home Loan Mortgage Corporation, a
corporate instrumentality of the United States, and its successors.
"Freddie Mac Credit Enhancement Fee" means the sum of the Freddie Mac
Credit Facility Fee and the Freddie Mac Liquidity Facility Fee.
"Freddie Mac Credit Enhancement Payment" means the amount required to be
paid by Freddie Mac to the Trustee with respect to any Guaranteed Payment
pursuant to Section 3.1(a)(i) of the Credit Enhancement Agreement, and with
respect to any payment of Purchase Price for tendered Bonds pursuant to Section
3.1(b)(i) of the Credit Enhancement Agreement.
"Freddie Mac Credit Facility Fee" means an amount equal to .825% per annum
of the outstanding principal balance of the Loan, payable as provided in Section
3.3.
"Freddie Mac Liquidity Facility Fee" means an amount equal to .125% per
annum of the outstanding principal balance of the Loan, payable as provided in
Section 3.3.
"Freddie Mac Reimbursement Amount" means the amounts required hereunder to
be reimbursed by the Owner to Freddie Mac in respect of any Freddie Mac Credit
Enhancement Payments made by Freddie Mac under the Credit Enhancement Agreement,
which amounts shall be equal to the sum of all Freddie Mac Credit Enhancement
Payments made by Freddie Mac and not previously reimbursed by or on behalf of
the Owner, together with any Liquidity Use Fees,
5
<PAGE>
late charges, default interest and other amounts payable to Freddie Mac under
the Reimbursement Security Documents (except any share of collected late charges
that the Servicer is entitled to retain as additional servicing compensation) as
a result of a default under the Borrower Documents.
"General Partner" means Brookdale Holdings, Inc., a Delaware corporation.
"Governmental Authority" shall have the meaning set forth in the
Reimbursement Mortgage.
"Guaranteed Payment" shall have the meaning set forth in the Credit
Enhancement Agreement.
"Guarantor" means Brookdale Living Communities, Inc., a Delaware
corporation, in its capacity as the Guarantor under the Guaranty.
"Guaranty" means that certain Limited Guaranty dated May 27, 1999 by the
Guarantor in favor of the Servicer and assigned to Freddie Mac.
"Indenture" means that certain Trust Indenture, dated as of August 15,
1991, as amended and restated by that certain Trust Indenture, dated as of
January 15, 1993, between the Issuer and Trustee pursuant to which the Bonds are
issued and secured, as amended through the Closing Date and as the same may be
further amended, modified or supplemented from time to time.
"Investment Obligations" shall have the meaning set forth in the
Indenture.
"Issuer" means Village of Lisle, Illinois and its successors.
"Liquidity Advance" means an advance by Freddie Mac pursuant to the terms
of the Credit Enhancement Agreement to pay the Purchase Price of tendered Bonds.
"Liquidity Commitment" means the obligation of Freddie Mac to provide
funds to the Trustee, as provided in Section 3.1(b) of the Credit Enhancement
Agreement, to enable the Trustee to purchase, on behalf of and as agent for the
Owner, tendered Bonds which have not been remarketed by the Remarketing Agent
pursuant to the Remarketing Agreement and Indenture and, therefore, with respect
to which there are no proceeds of remarketing.
"Liquidity Commitment Termination Date" means the day immediately
following the earliest of (a) the Maturity Date, (b) the Conversion to Maturity
Date, (c) the Substitution Date or (d) the Termination Date.
"Liquidity Rate" means the base rate or prime rate of interest of
Citibank, N.A. until such time as another "Money Center" bank is designated by
Freddie Mac in its discretion by notice to the Owner, plus two percent (2%) per
annum.
6
<PAGE>
"Liquidity Use Fee" means, with respect to each Liquidity Advance, an
amount equal to (x) the amount of the Liquidity Advance multiplied by (y) the
Liquidity Rate and (z) further multiplied by a fraction, the numerator of which
is the number of days that such Liquidity Advance is outstanding (i.e., until
Freddie Mac is reimbursed) and the denominator of which is 365 days or 366 days,
as applicable. The Liquidity Use Fee shall be reduced by an amount equal to the
Freddie Mac Credit Enhancement Fee assessed and actually paid for the
calculation period on the amount of funds related to the Liquidity Advance.
"Loan" means the loan by the Issuer to the Owner with respect to the
Project pursuant to the Financing Agreement.
"Loan Documents" means the Financing Agreement and any related documents
evidencing the obligations of the Owner under the Financing Agreement or
securing payment or performance of such obligations or otherwise pertaining to
such obligations, as each such document, agreement or instrument may be amended,
modified or supplemented from time to time.
"Moody's" means "Moody's" Investors Service, Inc., a corporation organized
and existing under the laws of the State of Delaware, and its successors and
assigns, if such successors and assigns shall continue to perform the functions
of a securities rating agency.
"Notice" means any notice delivered by the Trustee to Freddie Mac and the
Issuer pursuant to Section 3.1(a)(i) or Section 3.1(b)(i) of the Credit
Enhancement Agreement.
"Obligations" means the obligations of the Owner (a) to pay principal and
interest and any other amounts on the Loan when due and payable pursuant to the
Loan Documents, (b) to pay all amounts, including fees, costs, charges and
expenses payable under this Agreement and the other Reimbursement Security
Documents and (c) to observe and perform each of the terms, conditions and
provisions of the Borrower Documents.
"Other Owner" means River Oaks Partners, an Illinois general partnership,
and any successor to or assignee of its rights and obligations.
"Other Project" means that certain senior living facility located in the
State, commonly known as The Heritage, located at 800 South River Road, Des
Plaines, Illinois, and owned by the Other Owner.
"Other Reimbursement Agreements" means collectively and/or individually
those two certain Reimbursement and Security Agreements each dated the date
hereof, one between Freddie Mac and the Other Owner and the other between
Freddie Mac and the Owner.
"Other Reimbursement Mortgage" means that certain Multifamily Mortgage,
Assignment of Rents and Security Agreement dated May 27, 1999, together with all
riders and addenda thereto, from the Other Owner to Freddie Mac granting a first
priority mortgage and a security interest in the Other Project to secure the
obligations of the Other Owner under the Other
7
<PAGE>
Reimbursement Agreement relating to the property owned by the Other Owner, as
the same may be amended, modified or supplemented from time to time.
"Owner" means The Ponds of Pembroke Limited Partnership, an Illinois
limited partnership, and any successor to or assignee of its rights and
obligations.
"Person" means an individual, estate, trust, corporation, partnership,
limited liability company or any other organization or entity (whether
governmental or private).
"Pledge Agreement" means that certain Pledge, Security and Custody
Agreement dated as of the date hereof, by and between the Trustee, as custodian,
and the Owner, and relating to Purchased Bonds, as the same may be amended,
modified or supplemented from time to time.
"Prepayment/Substitution Premium" means, with respect to any voluntary or
involuntary prepayment (or deemed prepayment pursuant to Section 3.1(g) hereof),
of the Loan, the product obtained by multiplying
(A) the amount of principal prepaid, by
(B) one-twelfth (1/12) of .95%, representing the sum of the Freddie
Mac Credit Facility Fee and the Freddie Mac Liquidity Facility Fee payable to
Freddie Mac, by
(C) the Present Value Factor.
The "Present Value Factor" is the following factor:
n
1 - 1
--------
1 + ARR
---------------
ARR
Where:
n = number of months remaining until the 15th anniversary of the Closing
Date.
ARR (Assumed Reinvestment Rate) = one-twelfth (1/12) of the yield rate as
of the date 5 Business Days before the prepayment date, on the 9.25% U.S.
treasury security due February 1, 2016, as reported in The Wall Street Journal,
expressed as a decimal calculated to five digits. In the event that no yield is
published on the applicable date for the treasury security used to determine the
Assumed Reinvestment Rate, the Servicer, in its discretion, shall select the
non-callable treasury security maturing in the same year as the treasury
security specified above with the lowest yield published in The Wall Street
Journal as of the applicable date. If the publication of such yield rates in The
Wall Street Journal is discontinued for any reason, the Servicer shall select a
security with a comparable rate and term to the treasury security used to
determine the Assumed Reinvestment Rate. The selection of an alternate security
pursuant to this paragraph shall be made in Freddie Mac's discretion.
8
<PAGE>
"Principal Reserve Fund" means the Principal Reserve Fund established with
the Servicer pursuant to this Agreement, to which the Owner is required to
contribute pursuant to Section 3.1(b) hereof and the Reimbursement Mortgage.
"Principal Reserve Schedule" means the schedule attached as Exhibit A to
this Agreement of required deposits to be made by the Owner to the Principal
Reserve Fund.
"Project" means the "Mortgaged Property" as such term is defined in the
Reimbursement Mortgage.
"Projects" means the Project and the Other Project.
"Purchased Bonds" shall have the meaning given the term "Pledged Bonds" in
the Indenture. Additionally, a Bond shall no longer be a "Purchased Bond" on the
date on which such Bond is remarketed to any person other than Freddie Mac, the
Owner, any partner or member of the Owner or the Issuer.
"Purchase Price" means, with respect to any Bond required or permitted to
be purchased pursuant to the Indenture, the principal amount of such Bond plus
interest accrued thereon to the Settlement Date.
"Rating Agency" means Moody's or S&P or any other nationally recognized
rating agency maintaining a rating on the Bonds.
"Reimbursement Mortgage" means that certain Multifamily Mortgage,
Assignment of Rents and Security Agreement dated May 27, 1999, together with all
riders and addenda thereto, from the Owner granting a first priority mortgage
and a security interest in the Project to Freddie Mac to secure the obligations
of the Owner under this Agreement, as the same may be amended, modified or
supplemented from time to time.
"Reimbursement Security Documents" means, collectively, this Agreement,
the Reimbursement Mortgage, the Pledge Agreement, the Replacement Reserve
Agreement, the title insurance policy with respect to the Project for the
benefit of Freddie Mac, UCC Fixture Filings and Financing Statements, the Cap
Agreement, the Cross-Collateralization Agreement, the Cap Assignment and any
other Cap Documents, any Collateral Agreements (as defined in the Reimbursement
Mortgage) and any related documents evidencing the obligations of the Owner
under this Agreement or the Reimbursement Mortgage or securing payment or
performance of such obligations or otherwise pertaining to performance of such
obligations, as each such document, agreement or instrument may be amended,
supplemented, otherwise modified or amended and restated from time to time in
accordance with its respective terms.
"Replacement Reserve Agreement" means the Replacement Reserve and Security
Agreement between the Owner and the Servicer relating to the Reimbursement
Mortgage, as the same may be amended, modified or supplemented from time to
time.
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"Required Mortgage Payment" shall have the meaning set forth in the Credit
Enhancement Agreement.
"S&P" means Standard & Poor's Ratings Service, a division of The
McGraw-Hill Companies, Inc.
"Servicer" means the eligible servicing institution designated by Freddie
Mac from time to time (which may be Freddie Mac if Freddie Mac elects to service
the Loan), or its successor, as servicer of each Loan. Initially, Glaser
Financial Group, Inc., a Minnesota corporation, shall serve as the Servicer.
"Servicing Agreement" means the Servicing Agreement dated as of May 1,
1999 between the Servicer and Freddie Mac concerning the servicing of this
Agreement.
"Servicing Fee" means the monthly fee due the Servicer under the Servicing
Agreement in an amount equal to one-twelfth of .05% of the outstanding principal
balance of the Loan.
"Settlement Date" means, prior to the Liquidity Commitment Termination
Date and during the Floating Rate Period, (a) any Business Day specified by a
Bondholder as the date on which Bonds owned by such Bondholder are to be
purchased in accordance with the provisions of the Indenture, (b) each Rate
Conversion Date, (c) any Substitution Date and (d) any date on which the Bonds
are subject to mandatory tender in accordance with the provisions of the
Indenture.
"State" means the State of Illinois.
"Subsequent Cap" shall have the meaning set forth in Section 4.1(a).
"Term" has the meaning set forth in Section 7.8.
"Termination Date" shall have the meaning set forth in the Credit
Enhancement Agreement.
"Trustee" means Amalgamated Bank of Chicago and its successors and any
other corporation or association resulting from or surviving any consolidation
or merger to which it or its successors may be a party and any successor trustee
at any time serving as successor trustee under the Indenture.
"Underwriting Rate" means 6.69% per annum.
"Uniform Commercial Code" means the Uniform Commercial Code as from time
to time in effect in each applicable jurisdiction.
"Withdrawal" means the withdrawal of funds from the Principal Reserve Fund
to make any payment due from the Owner under the Borrower Documents other than a
payment to reimburse Freddie Mac for a Freddie Mac Credit Enhancement Payment.
10
<PAGE>
Section 1.2. Interpretation. In this Agreement, unless the context
otherwise requires, words of the masculine gender shall be deemed and construed
to include correlative words of the feminine and neuter genders. Unless the
context shall otherwise indicate, words importing the singular number shall
include the plural number and vice versa, and words importing persons shall
include partnerships, corporations and associations, including public bodies, as
well as natural persons. The terms "hereby", "hereof", "hereto", "herein",
"hereunder", and any similar terms, as used in this Agreement, refer to this
Agreement. Any reference in this Agreement to an "Exhibit", a "Section", a
"Subsection", a "Paragraph" or a "subparagraph" shall, unless otherwise
explicitly provided, be construed as referring, respectively, to an Exhibit
attached to this Agreement, a section of this Agreement, a subsection of the
section of this Agreement in which the reference appears, a paragraph of the
subsection within this Agreement in which the reference appears, or a
subparagraph of the paragraph within which the reference appears. All Exhibits
attached to or referred to in this Agreement are incorporated by reference into
this Agreement.
ARTICLE II
REPRESENTATIONS, COVENANTS, WARRANTIES AND CONDITIONS
Section 2.1. Representations, Covenants and Warranties. The
representations, covenants and warranties set forth in the Reimbursement
Mortgage are hereby incorporated by reference as if fully set forth herein. The
Owner acknowledges that such representations, covenants and warranties, together
with the other representations and agreements of the Owner contained in this
Agreement, are relied upon by Freddie Mac and serve as a basis for the
undertakings of Freddie Mac contained in this Agreement. The Owner makes the
following additional representations, covenants and warranties as to the Loan
and the Project.
(a) Occupancy; Rents. As of May 3, 1999, physical occupancy of the Project
is at least 96%, and the gross monthly rents (net of concessions) from occupied
dwelling units at the Project is at least $700,000.00.
(b) Location of Improvements. All improvements to the Project that have
been included in its appraised value lie within the boundaries of the land, or
to the extent that any such improvements encroach onto any adjoining land, each
such encroachment does not materially and adversely affect the value, use or
salability of the Project. No improvements on neighboring properties encroach
onto the Project, or all such encroachments do not materially and adversely
affect the value, use or salability of the Project.
(c) No Damage. There exists no unrepaired or unrestored damage to the
Project from fire or other casualty since March 16, 1999 (the date of Freddie
Mac's inspection of the Project) through the Closing Date. There exists no
material unrepaired or unrestored damage to the Project from fire or other
casualty since the Closing Date that has not been disclosed to Freddie Mac. For
the purposes of this subsection (c) "material" shall mean unrepaired or
unrestored damage equal to or greater than $250,000.
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(d) Property Condition.
(i) The Project is in good and habitable condition.
(ii) There are no deficiencies in the repair or maintenance of the
Project that threaten the health or safety of its tenants and
their invited guests.
(iii) There is no material uncured violation at the Project of any
building or housing code or similar law or ordinance.
(iv) The physical configuration of the Project is not in material
violation of the Americans with Disabilities Act.
(v) If Freddie Mac has inspected the Project and informed the
Servicer that specified repairs must be made, those repairs
have been completed or funds to complete them have been placed
in escrow as required by Freddie Mac.
(e) Condemnation. No part of the Project has been taken by condemnation or
any similar proceeding since March 16, 1999, and the Owner is not aware, after
diligent inquiry, of any pending or threatened condemnation or similar
proceeding with respect to all or any part of the Project.
(f) Loan Documents. The Loan Documents have been validly authorized and
executed by the Owner.
(g) Insurance. The Project is covered by hazard, flood (if the Project is
in a flood zone), liability and rent loss insurance in compliance with the terms
and conditions of the Reimbursement Mortgage. Without limiting the generality of
the foregoing, if the Project is located in whole or in part in a Special Flood
Hazard Area ("SFHA") identified by the Federal Emergency Management Agency, (i)
each building that lies within the SFHA is covered by flood insurance in an
amount at least equal to the lesser of (A) its insurable replacement cost, (B)
its prorated portion of the unpaid principal balance of the Loan, based upon
square footage of the building and square footage of all buildings comprising
the Project, or (C) the maximum limit of coverage available under the National
Flood Insurance Program, and (ii) the community where the Project is located
participates in the National Flood Insurance Program.
(h) Defaults. All payments due under the terms of the Loan Documents have
been made and there have been no delinquencies of 30 days or more within the 12
months preceding the Closing Date. There are no material non-monetary defaults
under the terms of the Bond Documents or the Loan Documents and there have been
no material non-monetary defaults that have remained uncured for 30 days or more
within the 12 months preceding the Closing Date.
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(i) Undisclosed Information. Except as disclosed to Freddie Mac in
writing, the Owner knows of no fact or circumstance affecting the Owner or the
Project that materially and adversely affects the Owner's ability to meet its
obligations under the Loan in a timely manner.
(j) Insolvency. No bankruptcy, insolvency, reorganization or comparable
proceedings have ever been instituted by or against the Owner, the Guarantor, or
any affiliate of the Guarantor or the partners of the Owner, and no such
proceeding is now pending or contemplated, nor have any of the foregoing parties
defaulted under a personal or commercial mortgage loan or entered into a workout
or forbearance agreement related to such mortgage loans and the Owner and the
Guarantor each has the ability to pay its debts as they come due.
(k) Enforceability. The Borrower Documents to which the Owner is a party
are valid and binding obligations of the Owner, enforceable in accordance with
their respective terms, except to the extent that such enforceability may be
limited by laws regarding bankruptcy, creditors' rights and general principles
of equity.
(l) Liens. The Reimbursement Mortgage, if and when properly recorded in the
appropriated records, together with any Uniform Commercial Code financing
statements required to be filed in connection therewith, will create a valid,
perfected first lien on the Project, subject only to the exceptions set forth in
Schedule B of the title insurance policy issued to Freddie Mac in accordance
with the terms hereof.
(m) Taxes Paid. Prior to the Closing Date, all real property taxes and
assessments that have become due and payable (including water and sewer charges
that by law will become a lien on the Project) have been paid in full, or an
escrow of funds sufficient to pay them has been established. After the Closing
Date and subject to the right of the Owner to contest such matters expressly
provided in the Reimbursement Mortgage, all real property taxes and assessments
that have become due and payable (including water and sewer charges that by law
will become a lien on the Project) have been paid in full, or an escrow of funds
sufficient to pay them has been established
(n) The Guaranty. The Guaranty has been validly authorized and executed by
the Guarantor.
(o) Mortgage and Project Characteristics. Except as disclosed to Freddie
Mac in writing, the Loan and the Project include none of the following features:
i. A prepayment lockout provision still in effect.
ii. A principal balance that includes capitalization of
interest, taxes, hazard insurance premiums, or late charges.
iii. Cross-collateralization with any other mortgage, except as
contemplated hereby.
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iv. Commercial rents which constitute more than 25 percent of
effective gross revenue, or commercial tenants that occupy
more than 25 percent of the total square footage of the
improvements.
v. more than 5 percent of the residential space is master
leased to a single lessee.
vi. The Project is under construction or rehabilitation (other
than repairs required or approved in writing by Freddie Mac)
or initial lease-up.
vii. More than 20 percent of the Project is used for student
and/or military housing.
viii. A non-elevator structure with four or more floors
constituting a portion of the Project.
ix. Other than with respect to the Bonds when they bear interest
at the Fixed Rate or an Adjustable Rate, a payment interval
that is not monthly.
x. A leasehold estate as all or a part of the Project.
xi. A lender equity participation feature.
xii. A mobile home park property as part or all of the Project.
xiii. Accruals of interest in excess of payment obligations.
xiv. A Project with economic occupancy below 90 percent.
xv. A Project that is encumbered by any secondary or subordinate
financing.
(p) Title Insurance. The title insurance policy satisfies the requirements
of the Servicer. If the Owner has delivered a marked-up title insurance
commitment pending issuance of the final title insurance policy, then that
commitment obligates the title insurer to issue a policy having the above
characteristics.
(q) Survey. The survey delivered to Freddie Mac is identical to the survey
previously submitted to Freddie Mac, and satisfies the requirements of Section
2.2(v)(k).
(r) Single Tax Parcel. The Project consists of property identified as all
of a single tax parcel or, if identified as multiple tax parcels, the Project
constitutes the entirety of those tax parcels. Any tax parcel or parcels within
which the Project is located does not include property that is not subject to
the Reimbursement Mortgage.
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(s) Access. The Project does not share ingress and egress through an
easement or private road or share on-site or off-site recreational facilities
and amenities that are not located on the Project and under the exclusive
control of the Owner; or where there is shared ingress and egress or amenities,
there exists an easement or joint use and maintenance agreement, a copy of which
has been delivered to Freddie Mac, under which (i) access to and use and
enjoyment of the easement or private road and/or recreational facilities and
amenities is perpetual, (ii) the number of parties sharing such easement and/or
recreational facilities and amenities must be specified, (iii) the Owner's
responsibilities and share of expenses are specified, and (iv) the failure to
pay any maintenance fee will not result in a loss of usage of the easement.
(t) Zoning. The overall character of the existing use of the Project is
consistent with the zoning classification of the Project, or is a legal
nonconforming use that is permitted notwithstanding any inconsistency with such
classification. Except as disclosed to Freddie Mac in writing, the Project does
not violate any density or building setback requirements of the applicable
zoning law. No proceedings are pending or threatened to, the Owner's knowledge,
that would result in a change of the zoning of the Project.
(u) Federal Income Tax Matters. The Owner has not taken any action, or
permitted to be taken any action that would impair the exclusion from gross
income for federal income tax purposes of the interest payable on any of the
Bonds. The Owner is in compliance with all material requirements of any tax
certificate relating to the Bonds.
Section 2.2. Conditions. The obligation of Freddie Mac to enter into
the Credit Enhancement Agreement is subject to the satisfaction of the
following conditions precedent on or prior to the Closing Date:
(i) the payment by the Owner of Freddie Mac's and the Servicer's
fees, costs and expenses which are due and payable on or before such
Closing Date in accordance with the Borrower Documents;
(ii) the delivery to the title insurance company for filing and/or
recording in all applicable jurisdictions (or such filing and/or recording
having been provided for in a manner satisfactory to Freddie Mac) of all
documents, including, without limitation, duly executed and acknowledged
copies of the Reimbursement Mortgage and the Other Reimbursement Mortgage,
UCC-1 financing statements and other appropriate instruments, in form and
substance satisfactory to Freddie Mac and in proper form for recordation,
as may be necessary in the opinion of Freddie Mac to perfect the lien
created by the foregoing and each applicable Reimbursement Security
Document and the payment of all taxes, fees and other charges payable in
connection with such execution, delivery, recording and filing;
(iii) there shall have occurred no material adverse change in the
financial condition, business or prospects of the Owner, or in the
physical condition, operating performance or value of the Project from
that shown in the application to Freddie Mac delivered by the Owner to the
Servicer;
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(iv) there shall exist no Event of Default or Default; and
(v) the receipt by Freddie Mac or, if Freddie Mac so designates,
the Servicer, on or prior to the Closing Date of the following, each dated
as of the Closing Date except as otherwise agreed to, in form and
substance satisfactory to Freddie Mac in all respects:
(a) a copy certified to be true, accurate and complete by an
officer of the Guarantor, of resolutions of the Guarantor
authorizing the transactions contemplated by the Guaranty and the
Cross-Collateralization Agreement (which certification shall state
that such authorization is in full force and effect on the Closing
Date), of its certificate of incorporation and bylaws and any
amendments relating thereto, and a certificate issued by the
Delaware Secretary of State to the effect that the Guarantor is in
good corporate standing under Delaware law;
(b) a copy, certified to be true, accurate and complete by an
officer of the General Partner, of resolutions of the board of
directors of the General Partner, authorizing the General Partner,
in its capacity as managing general partner of the Owner, and on
behalf of the Owner, to execute, deliver and perform the Borrower
Documents, and in its corporate capacity to execute, deliver and
perform, on behalf of the Owner, the Borrower Documents to which the
Owner is a party and other matters contemplated thereby, and of all
other documents evidencing any other necessary action (which
certification shall state that such approvals are in full force and
effect on the Closing Date);
(c) copies, certified to be true, accurate and complete by an
officer of the General Partner, of the General Partner's certificate
of incorporation and bylaws and any amendments thereto (which
certification shall state that such documents, as amended, are in
full force and effect on the Closing Date), together with a
Certificate of Good Standing of the General Partner issued by the
Secretary of State of the State of Delaware and a certificate of the
General Partner's authorization to transact business in the State of
Illinois issued by the Illinois Secretary of State;
(d) copies, certified to be true, accurate and complete by an
officer of the General Partner, of the limited partnership agreement
of the Owner and any amendments thereto (which certification shall
state that such documents, as amended, are in full force and effect
on the Closing Date), together with a certified copy of the
certificate of limited partnership of the Owner, as amended, issued
by the Illinois Secretary of State and a certificate of existence of
the Owner issued by the Illinois Secretary of State;
(e) copies, certified to be true, accurate and complete by an
officer of the General Partner, on behalf of the Owner, of all
consents, licenses and
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approvals necessary for the Owner to enter into the Borrower
Documents and the transactions contemplated by this Agreement and
the other Borrower Documents;
(f) a certificate of an officer of the General Partner
certifying the names, titles and the signatures of the officers of
the General Partner authorized to execute the Borrower Documents for
itself or on behalf of the Owner, as applicable, and a certificate
of an officer of the Guarantor certifying the names, titles and the
signatures of the officers of the Guarantor authorized to execute
the Guaranty for itself or on behalf of the Guarantor, as
applicable;
(g) a certificate of the General Partner, on behalf of the
Owner, confirming that the conditions precedent set forth in the
Borrower Documents have been satisfied and that the representations
and warranties of the Owner contained in the other Borrower
Documents are true, correct and complete in all material respects on
and as of the Closing Date;
(h) opinions of counsel to the Owner and the Guarantor and
counsel to the Servicer each in form and substance satisfactory to
Freddie Mac addressing all matters required by Freddie Mac;
(i) fully executed copies of each Borrower Document, duly
executed and delivered by the parties thereto (other than Freddie
Mac), each of which shall be in full force and effect;
(j) a recent environmental report pertaining to the Project,
and all related due diligence completed to Freddie Mac's
satisfaction;
(k) a current survey relating to the Project reflecting all
liens, encumbrances, easements and encroachments, such survey to be
certified to Freddie Mac;
(l) such opinions of Bond Counsel and Issuer's counsel as
Freddie Mac shall require in form and substance satisfactory to
Freddie Mac;
(m) certified copies of all consents and authorizations, if
any, necessary for the Issuer to execute, deliver and perform its
obligations under the Bond Documents and any other Borrower
Documents to which it is a party;
(n) certified copies of the Issuer's charter or certificate of
incorporation and by-laws, if any, and of the resolution or
resolutions of the Issuer authorizing the execution, delivery and
performance of its obligations under the Bond Documents and any
other Borrower Documents to which it is a party and certified copies
of all other documents evidencing any other official action of the
Issuer taken with respect thereto as each is then in full force;
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(o) a true and correct copy of rating letters from any Rating
Agency rating the Bonds;
(p) the Cap Documents and each Cap Assignment, containing
terms and conditions consistent with this Agreement and in form and
substance satisfactory to Freddie Mac and a legal opinion of counsel
to the Counterparty in form and substance satisfactory to Freddie
Mac;
(q) such documentation as shall be necessary to evidence the
Investment Obligations to be in place as of each applicable Closing
Date including, but not limited to, with respect to funds in the
Principal Reserve Fund;
(r) a Certificate of Insurance naming Freddie Mac as
additional insured delivered on the Closing Date and a duplicate
copy of the blanket insurance policy that covers the Project within
thirty days following the Closing Date;
(s) evidence that the Owner has established all escrows and
reserves required by the Reimbursement Mortgage and the Borrower
Documents; and
(t) such other documents, instruments, certificates, approvals
(and, if requested by Freddie Mac, certified duplicates of executed
copies thereof) or opinions as Freddie Mac or the Servicer may
request.
ARTICLE III
COVENANTS OF THE OWNER
Section 3.1. Affirmative Covenants of the Owner. The Owner enters into the
following covenants and agreements with Freddie Mac, which covenants and
agreements shall apply continuously during the Term of this Agreement.
(a) (i) On the Closing Date, the Owner shall pay to the Servicer interest
accrued on the Loan for the period beginning on the day following the last
payment of interest on the Loan through and including the day preceding
the Closing Date and the fees payable in advance on the Closing Date to
Freddie Mac and the Servicer pursuant to Section 3.3 hereof.
(ii) The Owner shall pay to the Servicer on the first day of each
month while the Loan is outstanding, the sum of the interest accrued on
the Loan for the preceding month, the fees payable to Freddie Mac and the
Servicer pursuant to Section 3.3 hereof and one-twelfth of the Bond Fee
Component payable pursuant to the Financing Agreement. Pursuant to the
Servicing Agreement, the Servicer shall remit to Freddie Mac the Freddie
Mac Credit Enhancement Fee, shall remit to the Trustee the Bond Fee
Component (to be distributed by the Trustee to the other parties entitled
thereto) and shall
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retain the Servicing Fee. Amounts received by the Servicer in respect of
interest on the Loan shall be applied to the reimbursement of Freddie Mac
for amounts paid in respect of interest on the Loan pursuant to the Credit
Enhancement Agreement.
(iii) The Owner shall fund, and replenish, to the extent funds are
withdrawn (except if funds are withdrawn to reimburse Freddie Mac for a
payment under the Credit Enhancement Agreement), the Principal Reserve
Fund as and when required by the Reimbursement Mortgage and this
Agreement. The Owner shall also replenish the Principal Reserve Fund by
delivery to the Servicer of an amount equal to any loss resulting from the
investment of amounts on deposit in the Principal Reserve Fund, as and
when such loss is incurred and irrespective of the reason for such loss.
(b) (i) The Owner shall pay to the Servicer for deposit into the Principal
Reserve Fund held by the Servicer that portion of the scheduled monthly
payments specified in the Principal Reserve Schedule and designated for
deposit to the Principal Reserve Fund as required by the Reimbursement
Mortgage. Any interest earned on or profits realized from amounts on
deposit in the Principal Reserve Fund shall be deposited into the
Principal Reserve Fund and, provided that there is no deficiency in the
Principal Reserve Fund, the Cap Fee Escrow or any rebate account that may
be established with respect to the Bonds, that no default exists under the
Loan and that no Event of Default exists under any of the Borrower
Documents, shall be paid to the Owner on the Interest Payment Date next
succeeding receipt of such interest or profits by the Servicer. Amounts
determined by any rebate analyst with respect to the Bonds to be rebatable
arbitrage as provided in the Indenture shall be paid by the Servicer to
the Trustee to be transferred by the Trustee from the Principal Reserve
Fund to any rebate account that may be established with respect to the
Bonds. Amounts on deposit in the Principal Reserve Fund shall be applied
by the Servicer as provided in paragraphs (ii) and (iii) of this
subsection.
(ii) Amounts on deposit in the Principal Reserve Fund may be used,
solely at the direction of Freddie Mac:
(A) to reimburse Freddie Mac on each redemption date for amounts
paid under the Credit Enhancement Agreement in respect of principal of the
Loan in order to effect the optional redemption of the Bonds pursuant to
the Indenture.
(B) to reimburse Freddie Mac for amounts paid under the Credit
Enhancement Agreement in respect of principal of the Loan in order to
effect the mandatory redemption of Bonds pursuant to the Indenture.
(C) to reimburse Freddie Mac for amounts paid under the Credit
Enhancement Agreement in respect of interest on the Loan.
(D) to reimburse Freddie Mac for amounts paid under the Credit
Enhancement Agreement for payment of the Purchase Price of Bonds pursuant
to the Indenture.
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(E) if a default has occurred and is continuing under this Agreement
or any other Borrower Document, for any other use related to the Project
approved in writing by Freddie Mac.
(iii) Any amounts remaining in the Principal Reserve Fund after
payment in full of the principal of and interest on the Bonds and payment
in full of the fees, charges and expenses of the Trustee and other amounts
required to be paid by the Owner under the Indenture or any other Borrower
Document, including but not limited to, any rebate amount due and payable
and any fees payable to the Issuer or Freddie Mac, shall be paid to the
Owner.
(iv) Amounts on deposit in the Principal Reserve Fund shall be
applied to reimburse Freddie Mac for amounts paid under the Credit
Enhancement Agreement in order to effect the redemption of Bonds, and the
corresponding reduction of amounts owed under the Financing Agreement.
During a Floating Rate Period, and subject to Section 3.1(g) hereof, the
Owner may request, with the consent of Freddie Mac, that the Trustee
redeem Bonds in accordance with the Indenture, and amounts then on
deposit in the Principal Reserve Fund shall be applied to reimburse
Freddie Mac for amounts paid under the Credit Enhancement Agreement to
effect such redemption. The Owner acknowledges and agrees that the Loan
shall not be deemed to have been amortized by reason of deposits into the
Principal Reserve Fund until such deposits have been withdrawn from the
Principal Reserve Fund and applied to the reimbursement of Freddie Mac
for amounts paid in connection with the redemption of Bonds as provided
in the Indenture.
(v) Amounts on deposit in the Principal Reserve Fund shall be
invested and reinvested by the Servicer in (A) (i) non-AMT tax-exempt
obligations rated in the highest short term rating category by Moody's or
S&P or (ii) with the approval of the Servicer and Bond Counsel, other
investments permitted under the Indenture which, in either case, shall
mature or be subject to tender or redemption at par on or prior to the
earlier of (1) six months from the date of investment or (2) the date
such monies are needed for the purposes hereof or (B) with the approval
of the Servicer, Bond Counsel and Freddie Mac, a guaranteed investment
contract rated in the highest short term rating category by Moody's or
S&P, as applicable.
(c) The interest rate on the Bonds may be adjusted from the Floating Rate
to the Fixed Rate or an Adjustable Rate, in each case as provided in, and
subject to the terms and conditions of, the Indenture and this Agreement.
(d) If Freddie Mac so directs, (i) at any time after the occurrence of any
Event of Default or (ii) at any time after Freddie Mac determines in its sole
discretion to remove the then-existing Remarketing Agent and to designate a new
Remarketing Agent, the Owner shall immediately take such action as is required
under the Remarketing Agreement and consistent with the Indenture to remove the
existing Remarketing Agent and replace such Remarketing
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Agent, without interruption of service, with a Remarketing Agent acceptable to
Freddie Mac in its discretion.
(e) The Owner agrees that it will not change the Remarketing Agent, or
appoint or engage any Person as Remarketing Agent or change the fees payable to
any Remarketing Agent, without Freddie Mac's prior written consent.
(f) Notwithstanding any provisions of the Borrower Documents to the
contrary, the Owner may not elect to replace the Credit Enhancement Agreement
with a Substitute Credit Facility or to convert the Bonds to a Fixed Rate or an
Adjustable Rate without credit enhancement (a) at any time prior to the 15th
anniversary of the Closing Date unless the Owner shall pay to Freddie Mac
immediately prior to such substitution, in addition to any other amounts due
under this Agreement and the other Borrower Documents, an amount equal to the
Prepayment/Substitution Premium calculated based on the assumption that the Loan
is being prepaid in full on the day immediately preceding the effective date of
the Substitute Credit Facility and (b) at any time, unless (i) the Owner shall
have received a written statement from Freddie Mac to the effect the Freddie Mac
has been paid in full for all fees, expenses and other amounts owed to Freddie
Mac under this Agreement and all Freddie Mac Reimbursement Amounts have been
paid in full (including any Prepayment/Substitution Premium), which written
statement (if accurate) Freddie Mac agrees to deliver to Owner upon request, and
(ii) the provision of any Substitute Credit Facility shall result in a rating on
the Bonds by the Rating Agency required by the definition of the term
"Substitute Credit Facility" in the Financing Agreement. If the Owner provides
notice to Freddie Mac that it wishes to provide a Substitute Credit Facility and
thereafter does not provide a Substitute Credit Facility, the Owner agrees to
pay all costs incurred by Freddie Mac in connection with arranging for the
proposed Substitute Credit Facility, including attorneys' fees.
(g) (i) The Owner may not elect to voluntarily prepay the Loan, in whole
or in part, unless the Owner has given Freddie Mac at least 30 days prior
notice of its intention to make such prepayment and, on the Business Day
preceding the effective date of such prepayment, the Owner shall have:
(A) deposited with Freddie Mac the amount of principal being
prepaid and all interest accrued thereon (and on the Bonds that will
be redeemed as a result of the prepayment) through the date of such
prepayment;
(B) paid to Freddie Mac the Prepayment/Substitution Premium,
if the prepayment is effective before the 15th anniversary of the
Closing Date, and all other sums due to Freddie Mac hereunder at the
time of such prepayment; and
(C) deposited with the Trustee Available Moneys in the amount
of any prepayment premium payable in connection with the optional
redemption of the Bonds.
(ii) A Prepayment/Substitution Premium shall be due upon an
involuntary prepayment of all or part of the Loan, as follows:
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(A) Upon acceleration of the Bonds under Section 10.01 of the
Indenture after an Event of Default;
(B) Upon any application by Freddie Mac of any collateral or
other security to the repayment of the Obligations before the
fifteenth anniversary of the Closing Date and in the absence of
acceleration, which shall be deemed to be an involuntary partial
prepayment by the Owner with respect to which Owner shall pay the
Prepayment/Substitution Premium for purposes of this subsection
(g)(ii).
(iii) No Prepayment/Substitution Premium shall be payable with
respect to any prepayment occurring as a result of the application of any
insurance proceeds or condemnation award under the Reimbursement Mortgage;
provided Freddie Mac shall have consented to such prepayment.
(iv) Any prepayment, whether voluntary or involuntary, shall not be
credited against the unpaid principal balance of the Loan until the date
on which the resulting redemption of a like amount of Bonds is completed.
(v) The Owner recognizes that any prepayment of the unpaid principal
balance of the Loan, whether voluntary or involuntary or resulting from a
default by the Owner, and any replacement of Freddie Mac as Credit
Instrument Obligor under the Indenture, will result in Freddie Mac's
incurring loss, including loss of income, additional expense and
frustration or impairment of Freddie Mac's ability to meet its commitments
to third parties. The Owner agrees to pay to Freddie Mac upon demand
damages for the detriment caused by any prepayment, and agrees that it is
extremely difficult and impractical to ascertain the extent of such
damages. The Owner therefore acknowledges and agrees that the formula for
calculating the Prepayment/Substitution Premium represents a reasonable
estimate of the damages Freddie Mac will incur because of a prepayment or
replacement of Freddie Mac as Credit Instrument Obligor and that its
obligation to pay such damages will be satisfied upon the payment of the
Prepayment/Substitution Premium.
(vi) The Owner further acknowledges that the Prepayment/Substitution
Premium provisions of this Agreement are a material part of the
consideration for the Credit Enhancement Agreement, and acknowledges that
the terms of this Agreement are in other respects more favorable to the
Owner as a result of the Owner's voluntary agreement to the
Prepayment/Substitution Premium provisions.
(h) The Owner agrees to pay to the Servicer for deposit to the Cap Fee
Escrow monthly on the first (1st) day of each month an amount that will result
in the accumulation by the expiration of the Cap, without regard to earnings in
the Cap Fee Escrow, of funds expected to be sufficient to pay in full the cost
of an extension or renewal of the Cap Agreement on the same terms for an
additional five (5) years, or such lesser term as may be expressly approved by
Freddie Mac in writing at its sole discretion. During the first twelve (12)
months after the date of this Agreement, the monthly deposit shall be equal to a
fraction, the numerator of which is 125% of the cost of the first Cap Agreement
and the denominator of which is sixty (60). Thereafter, the
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amount of the monthly deposit shall be recomputed by Freddie Mac annually based
upon the Servicer's estimation of the cost of such extension or renewal. Amounts
on deposit in the Cap Fee Escrow shall be invested and reinvested by the
Servicer in Investment Obligations which shall mature or be redeemable at par on
the earlier of (i) six months from the date of investment or (ii) the date such
monies are needed for the purposes hereof.
(i) Amounts received by the Owner from the Counterparty pursuant to the
Cap Agreement shall be paid by the Counterparty to Freddie Mac, or if designated
by Freddie Mac, to the Servicer, and if paid to the Owner, shall be paid by the
Owner to the Servicer immediately and until paid to the Servicer, shall be held
in trust for the benefit of Freddie Mac.
(j) Each of the covenants of the Owner set forth in the Borrower Documents
are hereby incorporated in this Agreement by this reference as if fully set
forth herein. The Owner shall comply with all terms and conditions of each
Borrower Document to which it is a party or by which it is bound and shall use
its best efforts to cause the Trustee and the Issuer at all times to comply with
the terms of the Bond Documents to which either of them is a party.
(k) The Owner shall not:
(i) take, or omit to take, any action that, if taken or omitted,
would jeopardize or adversely affect the tax-exempt status of the
interest payable on the Bonds;
(ii) acquire any real or personal property other than the Project
and assets (such as accounts) related to the operations and
maintenance of the Project or engage in any business or activity
other than in connection with the ownership, management and
operation of the Project;
(iii) except as permitted in the Reimbursement Mortgage, amend,
modify, supplement or waive any provision of its partnership
agreement in any manner without the prior written consent of Freddie
Mac;
(iv) dissolve or liquidate in whole or in part;
(v) merge or consolidate with any Person;
(vi) enter into, or permit to exist, any subordinate financing with
respect to the Project without the prior written consent of Freddie
Mac; or
(vii) voluntarily prepay the Loan except in accordance with Section
3.1(g) hereof.
Section 3.2. Reimbursement and Replenishment Obligations of the
Owner.
(a) The Owner shall:
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(i) By 2:00 p.m. Washington, D.C. time, on the date of each Credit
Advance, reimburse Freddie Mac for each Credit Advance, by payment to the
Servicer for immediate remittance to Freddie Mac, of the amount of that
Credit Advance.
(ii) Reimburse Freddie Mac for each Liquidity Advance, by payment to
the Servicer for remittance to Freddie Mac of the amount of that Liquidity
Advance on the first to occur of:
(A) 90 days following the Liquidity Advance;
(B) the effective date of any Substitute Credit Facility;
(C) if the related Purchased Bonds are remarketed by the
Remarketing Agent, the date on which the proceeds of that
remarketing are delivered to the Trustee or the Tender Agent;
(D) the date on which the related Purchased Bonds are redeemed
or otherwise paid in full and canceled;
(E) the date on which the Credit Enhancement Agreement
expires;
(F) the maturity date of the Loan; or
(G) the date the principal of and interest on the Loan are
accelerated.
(iii) After first paying all amounts payable pursuant to clause (i)
above, by 2:00 p.m., Washington, D.C. time, on each date on which the
Servicer shall have made a Withdrawal, replenish any Withdrawal by paying
to the Servicer for deposit into the Principal Reserve Fund, the amount of
such Withdrawal. For purposes of this subsection (iii), it is a condition
precedent to the obligation of the Owner to replenish a Withdrawal that
the Owner be notified of such Withdrawal by the Servicer. A prior billing
by the Servicer to the Owner for a reimbursement obligation that remains
unpaid by the Owner shall constitute sufficient notice for purposes of the
foregoing sentence.
(b) Subject to Section 7.3, the Owner's obligation to reimburse Freddie
Mac for amounts described in clause (i) of Section 3.2(a) shall be reduced as
and to the extent that amounts paid by the Owner to the Servicer in respect of
interest on the Loan or amounts deposit in the Principal Reserve Fund are
applied to such reimbursement.
(c) The Owner's obligation to reimburse Freddie Mac for amounts described
in clause (ii) of Section 3.2(a) shall be reduced as and to the extent that
remarketing proceeds become available and are applied to such reimbursement.
(d) The Owner agrees to pay interest on any amounts due to Freddie Mac or
the Servicer, as applicable, pursuant to Section 3.2(a) (i) or (iii) from the
date such amounts are paid by Freddie Mac or withdrawn from the Principal
Reserve Fund until
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payment or replenishment by the Owner in full (after as well as before
judgment), at the Default Rate.
Section 3.3. Freddie Mac Credit Enhancement Fees; Liquidity Use Fee;
Servicing. In addition to any other fees and amounts payable to Freddie Mac
under the Financing Agreement, this Agreement or the Loan Documents, the Owner
shall in consideration of Freddie Mac providing the Credit Enhancement
Agreement, pay the following fees to Freddie Mac and the Servicer with respect
to the Credit Enhancement Agreement, the Loan and the Bonds:
(a) On or before the Closing Date, Freddie Mac shall be paid an
application fee in the amount of 0.1% of the principal amount of the Bonds,
together with its expenses and the fees and expenses of its outside counsel by
wire transfer in accordance with instructions provided by Freddie Mac. The
Freddie Mac Credit Enhancement Fee shall be payable to Freddie Mac (i) in
advance on the Closing Date, in an amount equal to one twelfth of the Freddie
Mac Credit Enhancement Fee prorated for the period from the Closing Date to the
last day of the month during which the Closing Date shall have occurred and (ii)
in arrears on the first day of each month commencing on the first day of the
second full month following the month in which the Closing Date occurs in an
amount equal to one twelfth of the Freddie Mac Credit Enhancement Fee. The Owner
shall have a credit on each monthly payment date for an amount equal to one
twelfth of the Freddie Mac Credit Facility Fee times the balance in the
Principal Reserve Fund held by the Servicer immediately prior to such monthly
payment date. Freddie Mac shall also be entitled to be paid all amounts accrued
during the immediately preceding calendar month as the Liquidity Use Fee
pursuant to paragraph (b) hereof.
(b) The Owner shall pay to the Servicer, for the account of and remittance
to Freddie Mac, the Liquidity Use Fee with respect to each Liquidity Advance on
the first day of each month and on the date the Liquidity Advance is fully
reimbursed. The Liquidity Use Fee shall be payable so long as any Liquidity
Advance remains unreimbursed, in whole or in part, to Freddie Mac as provided in
Section 3.2 of this Agreement; provided, however, if the Liquidity Advance is
not fully reimbursed by the 90th day following the date of the Liquidity
Advance, the Owner shall be in default hereunder and thereafter the Liquidity
Use Fee shall be calculated using the Default Rate in place of the Liquidity
Rate for the period commencing on the 90th day following the Liquidity Advance
to the date the Liquidity Advance together with interest accrued thereon is
fully reimbursed. The Liquidity Use Fee shall not be due to Freddie Mac to the
extent Freddie Mac is reimbursed for funds provided under the Credit Enhancement
Agreement by 2:00 p.m., Washington, D.C. time (subject to the provisions of
Section 3.2 of this Agreement), on the date on which a Liquidity Advance is
made. Any reimbursement payment received after 2:00 p.m., Washington, D.C. time,
on such date shall be treated as if it were paid at 9:00 a.m., Washington, D.C.
time, on the next Business Day. The Liquidity Use Fee shall not be due during
any Fixed Rate Period, but shall be due during any period the Bonds bear
interest at the Floating Rate. The Liquidity Use Fee shall be otherwise due and
payable as provided in this Agreement.
(c) The Owner shall pay to the Servicer the Servicing Fee (i) in advance
on the Closing Date, prorated for the period from the Closing Date to the last
day of the month in which
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the Closing Date shall have occurred and (ii) in arrears, on the first day of
each month, commencing on the first day of the second full month following the
month in which the Closing Date occurs.
Section 3.4. Indemnification. The Owner shall indemnify and hold harmless
Freddie Mac and its officers, directors, officials, employees, agents,
attorneys, accountants, advisors, consultants and servants, past, present or
future, from and against (a) any and all claims by or on behalf of any Person
arising from any cause whatsoever in connection with the Loan, the Indenture,
any of the Borrower Documents, the Servicing Agreement, the Project, the
Remarketing Agreement, this Agreement, the Credit Enhancement Agreement or the
issuance of the Bonds; (b) any and all claims arising from any act or omission
of the Owner or any of its agents, contractors, servants, employees or licensees
in connection with the Loan, the Indenture, any of the Borrower Documents, the
Credit Enhancement Agreement, the Servicing Agreement, the Project, the
Remarketing Agreement, this Agreement or the issuance of Bonds; and (c) all
costs, counsel fees, expenses or liabilities incurred in connection with any
such claim or proceeding brought thereon; except that the Owner shall not be
required to indemnify any person for damages caused by the gross negligence,
willful misconduct or unlawful acts of such person or any such claims, costs,
expenses or liabilities arising or resulting from Freddie Mac's failure to fund
under the Credit Enhancement Agreement in accordance with its terms. In the
event that any action or proceeding is brought or claim made against Freddie
Mac, or any of its officers, directors, officials, employees, agents, attorneys,
accountants, advisors, consultants or servants, with respect to which indemnity
may be sought hereunder, the Owner, upon written notice thereof from the
indemnified party, shall assume the investigation and defense thereof, including
the employment of counsel reasonably acceptable to Freddie Mac and the payment
of all related expenses. The indemnified party shall have the right to approve a
settlement to which it is a party and to employ separate counsel in any such
action or proceedings and to participate in the investigation and defense
thereof, and the Owner shall pay the reasonable fees and expenses of such
separate counsel. The provisions of this Section shall survive the termination
of this Agreement.
Section 3.5. Purchased Bonds. The Owner acknowledges that Purchased Bonds
will be purchased by the Trustee as agent for and on behalf of the Owner and
registered in the name of the Owner, to the extent that Freddie Mac has provided
the funds to purchase such Purchased Bonds, and that such Purchased Bonds will
be pledged to Freddie Mac pursuant to the Pledge Agreement.
Section 3.6. Liability of the Owner. The obligation of the Owner to repay
the Loan and to make any and all payments to Freddie Mac required by this
Agreement or any other Borrower Document shall not be subject to diminution by
set-off, recoupment, counterclaim, abatement or otherwise. Until the latest of
the date on which (i) all the Bonds have been fully paid (or provision made
therefor as a legal defeasance) in accordance with the Indenture, (ii) the
Credit Enhancement Agreement has been terminated in accordance with its terms,
and (iii) all amounts due and owing Freddie Mac under this Agreement or any
other Borrower Document have been paid, the Owner (a) shall continue to have the
obligation to repay the Loan as aforesaid, and (b)
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shall perform and observe all of its other obligations contained in this
Agreement, the Borrower Documents and all other documents contemplated hereby or
thereby.
The obligations of the Owner under this Agreement shall be absolute,
unconditional and irrevocable and shall be paid and performed strictly in
accordance with the terms of this Agreement under all circumstances whatsoever,
including, without limitation, the following circumstances: (a) any invalidity
or unenforceability of any of the Borrower Documents or any other agreement or
instrument related to the Borrower Documents; (b) any amendment or waiver of, or
any consent to or departure from, the terms of the Credit Enhancement Agreement,
any of the other Borrower Documents, or any other agreement or instrument
related to the Borrower Documents, any extensions of time or other modifications
of the terms and conditions for any act to be performed in connection with the
Credit Enhancement Agreement; (c) the existence of any claim, set-off, defense
or other right which the Owner may have at any time against Freddie Mac, the
Servicer, the Issuer, the Trustee, the Tender Agent, the Remarketing Agent, or
any other Person, whether in connection with this Agreement, any of the other
Borrower Documents, the Project, or any unrelated transaction; (d) the surrender
or impairment of any security for the performance or observance of any of the
agreements or terms of this Agreement or the other Borrower Documents; (e)
defect in title to the Project, any acts or circumstances that may constitute
failure of consideration, destruction of, damage to or condemnation of the
Project, commercial frustration of purpose, or any change in the tax or other
laws of the United States of America or of any State or any political
subdivision of the same, (f) the breach by Freddie Mac, the Servicer, the
Issuer, the Trustee, the Tender Agent, the Remarketing Agent, or any other
Person of its obligations under any Borrower Document or (g) any other
circumstance, happening or omission whatsoever.
Section 3.7. Neither Freddie Mac nor Servicer Liable. Neither Freddie Mac,
the Servicer nor any of their respective officials, officers, directors,
members, shareholders, agents, independent contractors or employees shall be
responsible for or liable to the Owner or any of its officials, officers,
directors, shareholders, members, partners, affiliates, independent contractors
or employees for (i) any act or omission of Freddie Mac, the Servicer or any
other Person made in good faith with respect to the validity, sufficiency,
accuracy or genuineness of documents, or of any endorsement(s) thereon (except
for documents and endorsements provided by Freddie Mac or the Servicer, as
applicable), even if such documents should be in fact prove to be in any or all
respects invalid, insufficient, fraudulent or forged; (ii) the validity or
sufficiency of any instrument transferring or assigning or purporting to
transfer or assign the Credit Enhancement Agreement or the rights or benefits
under the Credit Enhancement Agreement or proceeds under the Credit Enhancement
Agreement, in whole or in part, that may prove to be invalid or ineffective for
any reason; (iii) for failure of the Trustee to comply fully with all conditions
required in order to effect any applicable Advance; (iv) for errors, omissions,
interruptions or delays in transmission or delivery of any messages, by mail,
cable, telegraph, telex, telecopier or otherwise; (v) for any loss or delay in
the transmission or otherwise of any document or draft required in order to make
any Advance; and (vi) for any consequences arising from causes beyond the
control of Freddie Mac or the Servicer, as applicable. In furtherance and not in
limitation of the foregoing, Freddie Mac (or the Servicer) may accept documents
that appear on their face to be valid and in order, without any responsibility
for further investigation. None of
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the above shall affect, impair, or prevent
the vesting of any rights or powers of Freddie Mac or the Servicer under this
Agreement.
In furtherance and extension and not in limitation of the specific
provisions set forth above, any action taken or omitted by Freddie Mac or the
Servicer under or in connection with any Borrower Document or any related
certificates or other documents, if taken or omitted in good faith, shall be
binding upon the Owner, the Trustee, the Issuer, the Remarketing Agent and the
Tender Agent and shall not under any circumstance put Freddie Mac under any
resulting liability to any of them.
Section 3.8. Waivers and Consents. THE OWNER AGREES TO BE BOUND BY THIS
AGREEMENT AND, TO THE EXTENT PERMITTED BY LAW, (A) WAIVES AND RENOUNCES ANY AND
ALL REDEMPTION AND EXEMPTION RIGHTS AND THE BENEFIT OF ALL VALUATION AND
APPRAISAL PRIVILEGES AGAINST THE INDEBTEDNESS AND OBLIGATIONS EVIDENCED BY THIS
AGREEMENT AND THE OTHER BORROWER DOCUMENTS OR BY ANY EXTENSION OR RENEWAL OF
THIS AGREEMENT AND THE OTHER BORROWER DOCUMENTS; (B) WAIVES PRESENTMENT AND
DEMAND FOR PAYMENT, NOTICES OF NONPAYMENT AND OF DISHONOR, PROTEST OF DISHONOR
AND NOTICE OF PROTEST; (C) WAIVES ALL NOTICES IN CONNECTION WITH THE DELIVERY
AND ACCEPTANCE OF THIS AGREEMENT AND THE OTHER BORROWER DOCUMENTS AND ALL OTHER
NOTICES IN CONNECTION WITH THE PERFORMANCE, DEFAULT OR ENFORCEMENT OF THE
PAYMENT OF ANY OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER BORROWER DOCUMENTS
EXCEPT AS REQUIRED BY THIS AGREEMENT OR THE OTHER BORROWER DOCUMENTS; (D) AGREES
THAT ITS LIABILITIES UNDER THIS AGREEMENT AND THE OTHER BORROWER DOCUMENTS SHALL
BE UNCONDITIONAL AND WITHOUT REGARD TO THE LIABILITY OF ANY OTHER PERSON AND (E)
AGREES THAT ANY CONSENT, WAIVER OR FORBEARANCE UNDER THIS AGREEMENT AND THE
OTHER BORROWER DOCUMENTS WITH RESPECT TO AN EVENT SHALL OPERATE ONLY FOR SUCH
EVENT AND NOT FOR ANY SUBSEQUENT EVENT.
Section 3.9. Subrogation. The Owner acknowledges that, to the extent of
any payment made by Freddie Mac pursuant to the Credit Enhancement Agreement,
Freddie Mac is to be fully subrogated to the extent of such payment and any
additional interest due on any late payment, to the rights of the Bondholders to
any moneys paid or payable under the applicable Bonds and all security therefor
under the Indenture. The Owner agrees to such subrogation and further agrees to
execute such instruments and to take such actions as, in the judgment of Freddie
Mac, are necessary to evidence such subrogation and to perfect the rights of
Freddie Mac to the extent necessary to provide reimbursement hereunder.
Section 3.10. Payment of Costs, Fees and Expenses. In addition to the
Owner's obligations set forth in Section 3.2 of this Agreement and in the other
Borrower Documents, the Owner hereby agrees absolutely and unconditionally to
pay, or cause to be paid, to Freddie Mac or the Servicer, as the case may be, or
in the case of subsection (v) below, to the appropriate
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governmental entity, in each case within ten (10) Business Days following
written demand, the following:
(i) any and all fees, costs, charges and expenses (including the
fees and expenses of attorneys, accountants and other experts, but not
including additional compensation for cost or use of funds in paying
Advances) which Freddie Mac or the Servicer may pay or incur in connection
with any payment under the Credit Enhancement Agreement, including
payments of any fees and charges in connection with any accounts
established to facilitate payments under the Credit Enhancement Agreement,
or the performance of Freddie Mac's obligations under the Credit
Enhancement Agreement;
(ii) the amount of any fees, costs, or charges or expenses
(including the fees and expenses of attorneys, accountants and other
experts) incurred by Freddie Mac or the Servicer in connection with the
administration or enforcement or preservation of rights or remedies under
this Agreement or any of the Borrower Documents or in connection with the
foreclosure upon, sale of or other disposition of any security granted
pursuant to the Borrower Documents;
(iii) other than Advances or Withdrawals, any payments or advances
made by Freddie Mac or the Servicer on behalf of the Owner pursuant to any
of the Borrower Documents;
(iv) all costs and expenses incurred in connection with or related
to the execution and delivery of the Credit Enhancement Agreement, the
sale of the Bonds or the Obligations and the preparation and review of
this Agreement and the other Borrower Documents and the consummation of
the transactions contemplated hereby and thereby, including fees payable
to any agencies rating the Bonds or the Obligations, any tax or
governmental charge imposed in connection with the execution and delivery
of the Credit Enhancement Agreement and the fees and disbursements of
Freddie Mac's and the Servicer's counsel and accountants, including fees
and expenses relating to any (a) amendments, consents or waivers to this
Agreement or any of the Borrower Documents (whether or not any such
amendments, consents or waivers are entered into), (b) requests by the
Owner for Freddie Mac to consider providing credit enhancement for any
other bond issue, (c) any proposed Cap arrangement or proposed investments
under the Indenture, (d) any adjustment or conversion of the interest rate
on the Bonds, (e) any tender, purchase, refunding, reoffering or
remarketing of the Bonds, (f) collection, disbursement or application of
insurance or condemnation awards, proceeds, damages or other payments
including, without limitation, all costs incurred in connection with the
application of insurance or condemnation awards to restore or repair the
Project, including, reasonable appraiser fees and (g) any fees or expenses
incurred by the Trustee, the Issuer, Freddie Mac or the Servicer in
connection with any audit of the Project or the Bonds by the Internal
Revenue Service;
(v) together with interest, fines and penalties, any and all
documentary stamp, recording, transfer, mortgage, intangible, filing or
other taxes or fees and any and all
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liabilities with respect to or resulting therefrom which may be payable in
connection with the execution and delivery of, or the consummation or
administration of any of the transactions contemplated by, or any
amendment, supplement, or modification of, or any waiver or consent under
or in respect of, or any filing of record, recordation, release or
discharge of, this Agreement, any Borrower Document, and any such other
documents; and
(vi) interest on any and all amounts referred to in paragraphs (i)
through (iv) of this Section 3.10 from the date when due under this
Agreement until payment of all such amounts in full, payable at the
Default Rate.
ARTICLE IV
INTEREST RATE PROTECTION
Section 4.1. Interest Rate Protection.
(a) To protect against fluctuations in interest rates, the Owner shall
make arrangements for an interest rate cap (a "Cap") to be in place and
maintained at all times with respect to the Bonds, during any period in which
the Bonds bear interest at the Floating Rate. If the Bonds are issued bearing
interest at the Floating Rate, the Cap must be in place on the Closing Date for
a period beginning on the Closing Date and ending not earlier than the date
which is the fifth (5th) anniversary of the Closing Date (the "Initial Cap
Period"). A Cap also shall be in place and maintained at all times during any
other period that the Floating Rate is in effect (a "Subsequent Cap") whether or
not a default shall have occurred under the applicable Cap Documents (as defined
below) and shall be in place on the effective date of a conversion to a Floating
Rate. A Subsequent Cap must be fully executed and delivered on terms and
conditions consistent with this Agreement and except as permitted by Section
4.2(f) shall have a Strike Rate (as hereinafter defined) equal to the Strike
Rate for the Cap initially provided hereunder. A Subsequent Cap must have an
effective date not later than the day following the last day of the Initial Cap
Period or any Subsequent Cap Period. Any Subsequent Cap must expire on the
earliest of (1) a date which is not earlier than the fifth (5th) anniversary of
the effective date of such Subsequent Cap, (2) the date on which the Credit
Enhancement Agreement terminates or (3) the maturity date of the Bonds. Each Cap
shall be secured and documented on terms and conditions approved by, and with a
Counterparty acceptable to, Freddie Mac. Prior to the Owner seeking any bids
from any Counterparty for a Subsequent Cap, the Owner shall obtain the prior
written consent of Freddie Mac. Each Cap shall be evidenced and governed by such
documents (the "Cap Documents") as shall be acceptable to, and which shall in
form and content be acceptable to, Freddie Mac. Not later than the day following
the last day of the Initial Cap Period or any Subsequent Cap Period, the Owner
shall ensure that either (a) a Subsequent Cap is in full force and effect if the
Bonds bear interest at the Floating Rate or (b) the Bonds have been converted to
a Fixed Rate or an Adjustable Rate, in each case, in accordance with this
Agreement and the other Borrower Documents.
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(b) Notwithstanding any provision hereof or in the Bond Documents to the
contrary, the Owner shall not cause any adjustment of the rate on the Bonds to a
Fixed Rate or an Adjustable Rate (with the intention of having the Credit
Enhancement Agreement remain in effect for the benefit of the Bonds), without
the prior written consent of Freddie Mac. Freddie Mac does not intend to grant
such consent unless all of the following conditions are satisfied:
(i) The sum of the Fixed Rate on the Bonds or the Adjustable Rate,
as applicable, the Bond Fee Component, the Freddie Mac Credit Enhancement
Fee and the Servicing Fee must be less than or equal to the Underwriting
Rate.
(ii) In the case of an adjustment to an Adjustable Rate, the
Adjustable Rate period must be five (5) years or more.
(iii) The Project's and the Other Project's Combined Debt Service
Coverage Ratio, as determined by Freddie Mac, must not be less than
1.65:1.
Section 4.2. Cap Agreement Terms.
(a) Cap Agreement Payment Terms. Under each Cap arrangement, the
Counterparty shall pay a floating amount, computed in accordance with the Cap
Documents, to the extent that the BMA Index Rate exceeds the fixed cap rate (the
"Strike Rate"). Except as otherwise provided in Section 4.2(f), the Strike Rate
must be equal to or less than 300 basis points over the BMA Index Rate. The BMA
Index Rate for the Cap initially provided for this purpose shall be the lower of
(i) the BMA Index Rate as of the bid date of the Cap or (ii) the average of the
BMA Index Rate for the six (6) week period prior to and including the bid date
of the Cap. The Cap must provide for monthly settlement on the first day of each
month. If the BMA Index Rate is not published on any reset date under the Cap,
the Counterparty must determine an appropriate index as a substitute for the BMA
Index Rate on each such reset date. The index so determined shall provide a rate
of interest that is equivalent to the prevailing rate of interest borne by bonds
that are rated in the highest short-term rating category by Moody's and S&P in
respect of issuers of not less than five "high grade" component issuers selected
by the Counterparty which shall include, without limitation, issuers of general
obligation bonds, and that are subject to tender by holders thereof for purchase
on not more than seven (7) days notice and the interest on which is (a)
variable, determined on a weekly basis, (b) excludable from gross income for
federal income tax purposes, and (c) not subject to a "minimum tax" or similar
tax unless all tax-exempt bonds are subject to such tax.
(b) Cap Assignment; Delivery of Cap Payments. The Owner shall assign each
Cap in effect from time to time pursuant to this Agreement to Freddie Mac
pursuant to the Cap Assignment, which Cap Assignment must be acceptable in form
and content to Freddie Mac. The Counterparty shall make any and all payments
under the Cap (and the Cap Documents and the Cap Assignment shall direct the
Counterparty to make any such payments) directly to the Servicer, which shall
pay to the Owner such Cap payments provided that the Owner is not in default
hereunder.
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(c) Termination. The Owner shall neither terminate, transfer nor consent
to any transfer of any existing Cap without Freddie Mac's prior written consent
as long as the Owner is required to maintain a Cap pursuant to this Agreement.
Prior to termination of an existing Cap on a date prior to its scheduled
termination date, the Owner shall, so long as the Floating Rate is in effect,
obtain a new Cap satisfying the terms of this Agreement, which new Cap must be
effective on or before or on the date immediately following the last date on
which the existing Cap is in effect.
(d) Performance Under Cap Documents. The Owner agrees to comply fully
with, and to otherwise perform when due, its obligations under, all Cap
Documents and all other agreements evidencing, governing or securing any Cap
arrangement. The Owner shall not exercise without Freddie Mac's prior written
consent, and shall exercise at Freddie Mac's direction, any rights or remedies
under any Cap Document, including without limitation the right of termination.
(e) Amount of Bonds Covered by Cap. The notional amount of any Cap shall
be based on the principal amount of the Bonds outstanding less the amount of
monies in the Principal Reserve Fund immediately prior to the commencement of a
Cap Period.
(f) Right to Purchase Subsequent Cap Above Strike Rate. The Owner may, by
giving Freddie Mac and the Servicer at least thirty (30) days written notice
prior to the purchase of a Subsequent Cap, purchase such Subsequent Cap based on
a Strike Rate that is in excess of the Strike Rate required to be maintained
pursuant to Section 4.2(a) of this Agreement, provided that there is deposited
with, and held by, the Servicer in the Cap Reserve Account as additional
security to Freddie Mac an amount (the "Cap Deposit") determined by Freddie Mac
in its discretion, which amount must be sufficient to cover any payment
shortfall over the term of the Subsequent Cap based on the difference between
the Strike Rate required to be maintained pursuant to Section 4.2(a) of this
Agreement, and the Strike Rate provided for in the Subsequent Cap to be
acquired. The methodology for determining the amount of the Cap Deposit shall be
in Freddie Mac's discretion. The Cap Deposit held by the Servicer shall be
maintained, invested and disposed of on such terms and conditions as shall be
acceptable to Freddie Mac in its discretion. Provided that the Owner is not in
default under the Loan Documents or that an Event of Default has not occurred
under this Agreement, the Servicer shall release to the Owner monthly on each
Interest Payment Date an amount equal to one-sixtieth (1/60th) of the Cap
Deposit held by the Servicer and shall release to the Owner on the Rate
Conversion Date all amounts held in the Cap Reserve Account. Any earnings in
respect of the Cap Deposit that have accrued shall also, pursuant to the
Indenture, be released by the Servicer to the Owner on each such Interest
Payment Date and on the Termination Date.
(g) Fees to Counterparty. Fees to the Counterparty must be paid in full
upon delivery of the Cap Agreement.
(h) Additional Collateral. The Cap Agreement shall provide unless waived
in writing by Freddie Mac that if the long-term, unsecured and unsubordinated
indebtedness of the Counterparty shall cease to be rated at least Aa3 by Moody's
or AA- by S&P or such
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indebtedness shall cease to be rated by Moody's or S&P, then such party's
obligations under the Cap Agreement shall be required to be collateralized on
such terms and conditions as are acceptable to Freddie Mac including without
limitation the delivery of cash collateral to a custodian.
Section 4.3. Freddie Mac Right to Convert to Adjustable Rate or
the Fixed Rate.
(a) If the Counterparty fails to escrow collateral as provided in the Cap
Agreement and as required pursuant to Section 4.2(h), the Owner shall be
required to enter into a Subsequent Cap within thirty (30) days after such
failure to escrow collateral.
(b) At least sixty (60) days prior to the date on which a Cap terminates,
if the Bonds bear interest at the Floating Rate the Owner shall give notice, and
provide evidence satisfactory, to Freddie Mac and the Servicer that it will
either (i) secure a Subsequent Cap or (ii) convert the Bonds to an Adjustable
Rate or the Fixed Rate, in each case in accordance with Section 4.1 of this
Agreement and the requirements of the Indenture.
(c) If the Owner fails to deliver a Subsequent Cap as required by Section
4.3(a) hereof, or pursuant to Section 4.3(b) hereof fails to provide the
foregoing notice or satisfactory evidence or if the Owner has indicated that it
will secure a Subsequent Cap and has not provided to Freddie Mac and the
Servicer a copy of such Subsequent Cap which has been executed and delivered
prior to the date required by Section 4.3(a) or, in the case of Section 4.3(b),
at least thirty (30) days prior to the termination date of the existing Cap and
which meets the requirements of this Agreement, Freddie Mac is hereby granted
irrevocably the right, but not the obligation, to either (i) direct the Trustee
on behalf of the Owner that the interest rate on the Bonds be (A) adjusted to an
Adjustable Rate pursuant to the Indenture, (B) converted to the Fixed Rate, or
(C) adjusted to, or remain at, the Floating Rate pursuant to the Indenture,
without a Cap being in place or (ii) purchase a Subsequent Cap upon such terms
as it deems satisfactory in its own name or for the account of the Owner with
funds on deposit in the Cap Fee Escrow. If Freddie Mac exercises the foregoing
right, it shall not be deemed to waive its right to declare an Event of Default
under this Agreement because of the Owner's failure to comply with the
requirements of Sections 4.1 and 4.2 of this Agreement. Freddie Mac shall have
the right at any time to revoke any prior direction it may give in connection
with any proposed conversion of the interest rate on the Bonds as contemplated
above in this Section 4.3(c), without waiving any of its rights under this
Agreement. Freddie Mac shall have the further right, in its discretion, to take
no action upon the Owner's failure to provide timely notice or evidence as
required by this Section 4.3 or otherwise to comply with Section 4.1 of this
Agreement, without waiving any of its rights under this Agreement. The Owner
hereby appoints Freddie Mac as the Owner's attorney-in-fact, with full authority
in the place and stead of the Owner and in the name of the Owner or otherwise,
from time to time in Freddie Mac's discretion, to take any action and to execute
any instrument which Freddie Mac may deem necessary or advisable to accomplish
the purposes of this Section 4.3. The Owner agrees that the power of attorney
established pursuant to this Section 4.3 shall be deemed coupled with an
interest and shall be irrevocable.
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ARTICLE V
UNIFORM COMMERCIAL CODE SECURITY AGREEMENT
This Agreement is also a security agreement under the Uniform Commercial
Code for the Cap Reserve Account, the Cap Fee Escrow, the Principal Reserve
Funds and all funds and accounts and investments of funds and accounts now or
hereafter held by the Trustee under the Indenture (to the extent the Owner
retains any interest therein) and by the Servicer with respect to payments
payable under the Loan or the Reimbursement Security Documents, and all products
and cash and non-cash proceeds thereof (collectively, "UCC Collateral") for all
obligations due under this Agreement and under any of the Borrower Documents,
and the Owner hereby grants to Freddie Mac a security interest in the UCC
Collateral. The Owner shall execute and deliver to Freddie Mac upon Freddie
Mac's request, financing statements, continuation statements, and other account
agreements and amendments, in such form as Freddie Mac may require to perfect or
continue the perfection of this security interest. The Owner shall pay all
filing costs and all costs and expenses of any record searches for financing
statements that Freddie Mac may require. Without the prior written consent of
Freddie Mac, the Owner shall not create or permit to exist any other lien or
security interest in any of the UCC Collateral (other than as created under the
Indenture). The Owner covenants and agrees that it will defend Freddie Mac's
rights and security interests created by this Article against the claims and
demands of all Persons. If an Event of Default has occurred and is continuing,
Freddie Mac shall have the remedies of a secured party under the Uniform
Commercial Code, in addition to all remedies provided by this Agreement or
existing under applicable law. In exercising any remedies, Freddie Mac may
exercise its remedies against the UCC Collateral separately or together and in
any order, without in any way affecting the availability of the other remedies
available to Freddie Mac.
ARTICLE VI
EVENTS OF DEFAULT; REMEDIES
Section 6.1. Events of Default. The occurrence of any one or more
of the following events shall constitute an Event of Default hereunder:
(i) the Owner shall fail to pay when due any amount payable by the
Owner under this Agreement, including, without limitation, any fees, costs
or expenses;
(ii) the Owner shall fail to observe or perform any other term,
covenant, condition or agreement set forth in this Agreement;
(iii) the Owner shall fail to observe or perform any other term,
covenant, condition or agreement set forth in any of the other Borrower
Documents or there shall otherwise occur an "Event of Default" under the
Reimbursement Mortgage or an event of default under any of the other
Borrower Documents (taking into account any applicable notice requirements
and cure periods expressly provided in the applicable document);
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(iv) any representation or warranty made by or on behalf of the
Owner in this Agreement, in any other Borrower Document or in any
certificate delivered by the Owner to Freddie Mac or to the Servicer
pursuant to this Agreement or any other Borrower Document shall be
inaccurate or incorrect in any material respect when made or deemed made;
(v) Freddie Mac shall have given the Owner written notice that
Purchased Bonds have not been remarketed as of the ninetieth (90th) day
following purchase by the Trustee on behalf of the Owner and the Owner has
not reimbursed Freddie Mac for the applicable Liquidity Advance and
Liquidity Use Fee or has not paid in full all fees and other amounts due
to Freddie Mac under this Agreement;
(vi) while the Credit Enhancement Agreement is in effect for the
benefit of the Loan, a period during which the Bonds bear interest at an
Adjustable Rate expires and the Owner has not either (i) received the
prior written consent of Freddie Mac to a change in interest mode or the
maintenance of the existing mode or (ii) delivered a Substitute Credit
Facility in accordance with the terms of the Bond Documents. or
(vii) an event of default has occurred under either of the Other
Reimbursement Agreements or the Other Reimbursement Mortgage (taking into
account any applicable notice requirements and cure periods expressly
provided in the applicable document).
Section 6.2. Remedies; Waivers.
(a) Remedies. Upon the occurrence of an Event of Default described in
paragraphs (i) through (vii) of Section 6.1, Freddie Mac may declare all the
obligations of the Owner hereunder to be immediately due and payable, in which
case all such obligations shall become due and payable, without presentment,
demand, protest or notice of any kind, including notice of default, notice of
intent to accelerate or notice of acceleration. In addition to the foregoing,
Freddie Mac shall have the right to take such action at law or in equity,
without notice or demand, as it deems advisable to protect and enforce the
rights of Freddie Mac against the Owner in and to the Project conveyed by the
Reimbursement Mortgage, including, but not limited to, the following actions:
(i) demand cash collateral or Investment Obligations in the full
amount of the obligations under the Bonds whether or not then due and
payable by Freddie Mac under the Credit Enhancement Agreement;
(ii) give written notice to the Trustee stating that an Event of
Default has occurred and is continuing hereunder and directing the Trustee
accelerate or cause the mandatory tender of the Bonds; and
(iii) exercise any rights and remedies available to Freddie Mac
under any of the Borrower Documents.
(b) Waivers. Freddie Mac shall have the right, to be exercised in its
discretion, to waive any Event of Default under this Agreement. Unless such
waiver
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expressly provides to the contrary, any waiver so granted shall extend only to
the specific event or occurrence which gave rise to the Event of Default so
waived and not to any other similar event or occurrence which occurs subsequent
to the date of such waiver.
Section 6.3. No Remedy Exclusive. Unless otherwise expressly provided, no
remedy conferred upon or reserved in this Agreement is intended to be exclusive
of any other available remedy, but each remedy shall be cumulative and shall be
in addition to other remedies given under the Borrower Documents or existing at
law or in equity. No delay or omission to exercise any right or power accruing
under any Borrower Document upon the happening of any event set forth in Section
6.1 shall impair any such right or power or shall be construed to be a waiver of
such event, but any such right and power may be exercised from time to time and
as often as may be deemed expedient. In order to entitle Freddie Mac to exercise
any remedy reserved to Freddie Mac in this Article, it shall not be necessary to
give any notice, other than such notice as may be required under the applicable
provisions of any of the other Borrower Documents. The rights and remedies of
Freddie Mac specified in this Agreement are for the sole and exclusive benefit,
use and protection of Freddie Mac, and Freddie Mac is entitled, but shall have
no duty or obligation to the Owner, the Trustee, the Bondholders or otherwise,
(a) to exercise or to refrain from any right or remedy reserved to Freddie Mac
hereunder, or (b) to cause the Trustee or any other party to exercise or to
refrain from exercising any right or remedy, available to it under any of the
Borrower Documents.
ARTICLE VII
MISCELLANEOUS
Section 7.1. Counterparts. This Agreement may be executed in
counterparts by Freddie Mac and the Owner, and each such counterpart shall be
considered an original and all such counterparts shall constitute one and the
same instrument.
Section 7.2. Amendments, Changes and Modifications. This Agreement may be
amended, changed, modified, altered or terminated only by a written instrument
or written instruments signed by the parties to this Agreement. No course of
dealing between the Owner and Freddie Mac, nor any delay in exercising any
rights hereunder, shall operate as a waiver of any rights of Freddie Mac
hereunder. Unless otherwise specified in such waiver or consent, a waiver or
consent given hereunder shall be effective only in the specific instance and for
the specific purpose for which given.
Section 7.3. Payment Procedure. The Owner agrees that all amounts due to
Freddie Mac under Section 3 of this Agreement shall be paid to the Servicer for
remittance to Freddie Mac pursuant to the Servicing Agreement. All payments to
be made to the Servicer, for the account of Freddie Mac, pursuant to this
Agreement shall be paid in immediately available funds to the Servicer in
accordance with instructions given to the Owner by the Servicer. Except as
otherwise provided above in this Section 7.3, all payments to be made to Freddie
Mac pursuant to this Agreement shall be made in lawful currency of the United
States of America and in immediately available funds to an account designated in
writing by Freddie Mac before 2:00 p.m. (Washington, D.C. time) on the date when
due, unless the Owner is otherwise instructed in
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writing by Freddie Mac. Notwithstanding the foregoing, in connection with the
Owner's obligation to reimburse Freddie Mac by 2:00 p.m., Washington, D.C. time
for certain payments made by Freddie Mac as provided in this Section 3 of this
Agreement, such payment will, unless otherwise directed pursuant to this Section
7.3, be deemed to have been timely made if made in lawful currency of the United
States of America and in immediately available funds to the Servicer, for
remittance to Freddie Mac, to an account designated in writing by the Servicer,
before 2:00 p.m., Washington, D.C. time and otherwise in accordance with the
requirements of this Section 7.3.
Section 7.4. Payments on Business Days. In any case where the date of
payment to Freddie Mac or the expiration of any time period hereunder occurs on
a day which is not a Business Day, then such payment or expiration of such time
period need not occur on such date but may be made on the next succeeding
Business Day with the same force and effect as if made on the day of maturity or
expiration of such period, except that interest shall continue to accrue for the
period after such date to the next Business Day.
Section 7.5. Governing Law; Severability. This Agreement shall be
construed, and the rights and obligations of Freddie Mac and the Owner hereunder
determined, in accordance with federal statutory or common law ("federal law").
Insofar as there may be no applicable rule or precedent under federal law and
insofar as to do so would not frustrate the purposes of any provision of this
Agreement, the local law of the State of Illinois shall be deemed reflective of
federal law. The parties agree that any legal actions between Freddie Mac and
the Owner regarding each party hereunder shall be originated in the United
States District Court in and for the Northern District of Illinois, and the
parties hereby consent to the jurisdiction and venue of said Court in connection
with any action or proceeding initiated concerning this Agreement.
The invalidity or enforceability of any provision of this Agreement shall
not affect the validity of any other provision and all other provisions shall
remain in full force and effect.
Section 7.6. Notices. All notice, directions, certificates or other
communications hereunder to Freddie Mac, the Owner, or the Servicer shall be
given in accordance with the Reimbursement Mortgage. All notice, directions,
certificates or other communications to the Issuer, the Trustee, the Remarketing
Agent or the Tender Agent shall be given in accordance with the Indenture.
Section 7.7. Further Assurances and Corrective Instruments. To the extent
permitted by law, the parties to this Agreement agree that they will, from time
to time, execute, acknowledge and deliver, or cause to be executed, acknowledged
and delivered, such supplements to this Agreement and such further instruments
as Freddie Mac may request and as may be reasonably required in the opinion of
Freddie Mac or its counsel to effectuate the intention of or facilitate the
performance of this Agreement or any other Borrower Document.
Section 7.8. Term of this Agreement. The term of this Agreement (the
"Term") shall continue in full force and effect, and Owner shall not be released
from liability under this Agreement, until the latest of (a) the Termination
Date, (b) the date on which Freddie Mac has no further liability (accrued or
contingent) under the Credit Enhancement Agreement and (c) the
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date on which the Owner shall pay or cause to be paid to Freddie Mac or the
Bondholders all amounts to be paid by the Owner under this Agreement, under the
other Borrower Documents and otherwise with respect to the Obligations.
Notwithstanding such termination, the provisions of Section 3.4 hereof and
Section 18 of the Reimbursement Mortgage shall survive the expiration or
termination of this Agreement.
Section 7.9. Assignments; Transfers; Third-Parties Rights. The Owner shall
not assign this Agreement, or delegate any of its obligations hereunder, without
the prior written consent of Freddie Mac. This Agreement may not be transferred
in any respect without the prior written consent of Freddie Mac. Nothing in this
Agreement shall confer any right upon any Bondholder or any other Person other
than the parties hereto and their successors and permitted assigns.
Section 7.10. Headings. Article and section headings used herein
are for convenience of reference only, are not part of this Agreement and are
not to affect the construction of, or to be taken into consideration in
interpreting, this Agreement.
Section 7.11. Limitation on Personal Liability.
(a) Except as otherwise provided in this Section 7.11, the Owner shall
have no personal liability under this Agreement or any other Borrower Document
for the payment of the payment obligations or for the performance of any other
obligations of the Owner under the Borrower Documents, and Freddie Mac's only
recourse for the satisfaction or performance of the Obligations shall be Freddie
Mac's exercise of its rights and remedies with respect to the Project and any
other collateral held by Freddie Mac as security for the Obligations. This
limitation on the Owner's liability shall not limit or impair Freddie Mac's
enforcement of its rights against any guarantor of the Obligations.
(b) The Owner shall be personally liable to Freddie Mac for the repayment
of a portion of the Obligations equal to 0 percent of the unpaid principal
balance of this Reimbursement Agreement, plus any other amounts for which Owner
has personal liability under this Section 7.11.
(c) In addition to Owner's personal liability under Section 7.11(b), the
Owner shall be personally liable to Freddie Mac for the repayment of a further
portion of the Obligations equal to any loss or damage suffered by Freddie Mac
as a result of (1) failure of the Owner to pay to Freddie Mac upon demand after
an Event of Default all rents to which Freddie Mac is entitled under Section
3(a) of the Reimbursement Mortgage and the amount of all security deposits
collected by the Owner from tenants then in residence; (2) failure of the Owner
to apply all insurance proceeds and condemnation proceeds as required by the
Reimbursement Mortgage; (3) failure of the Owner to comply with Section 14(d) or
(e) of the Reimbursement Mortgage relating to the delivery of books and records,
statements, schedules and reports or (4) failure of the Owner to pay insurance
premiums for fire, hazard or other insurance required by the Reimbursement
Mortgage.
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(d) For purposes of determining the Owner's personal liability under
Section 7.11(b) and Section 7.11(c), all payments made by the Owner or any
guarantor with respect to the Obligations and all amounts received by Freddie
Mac from the enforcement of its rights under the Reimbursement Mortgage shall be
applied first to the portion of the Obligations for which the Owner has no
personal liability.
(e) The Owner shall become personally liable to Freddie Mac for the
repayment of all of the Obligations upon the occurrence of any of the following
Events of Default: (1) the Owner's acquisition of any property or operation of
any business not permitted by Section 33 of the Reimbursement Mortgage; (2) a
Transfer (as defined in the Reimbursement Mortgage) (including, but not limited
to, a lien or encumbrance) that is an Event of Default under Section 21 of the
Reimbursement Mortgage, other than a Transfer consisting solely of the
involuntary removal or involuntary withdrawal of a general partner in a limited
partnership or a manager in a limited liability company; or (3) fraud or
intentional written material misrepresentation by the Owner or any officer,
director, partner, member or employee of the Owner in connection with the
application for or creation of the Obligations or any request for any action or
consent by Freddie Mac.
(f) In addition to any personal liability for the Obligations, the Owner
shall be personally liable to Freddie Mac for (1) the performance of all of the
Owner's obligations under Section 18 of the Reimbursement Mortgage (relating to
environmental matters); (2) the costs of any audit under Section 14(d) of the
Reimbursement Mortgage; (3) any costs and expenses incurred by Freddie Mac in
connection with the collection of any amount for which the Owner is personally
liable under this Section, including fees and out of pocket expenses of
attorneys and expert witnesses and the costs of conducting any independent audit
of the Owner's books and records to determine the amount for which the Owner has
personal liability; and (4) payment to Freddie Mac of any Surplus Proceeds (as
such term is defined in the Reimbursement Mortgage) actually received by the
Owner or the General Partner.
(g) To the extent that the Owner has personal liability under this Section
7.11, Freddie Mac may exercise its rights against the Owner personally without
regard to whether Freddie Mac has exercised any rights against the Project or
any other security, or pursued any rights against any guarantor, or pursued any
other rights available to Freddie Mac under this Agreement, the Reimbursement
Mortgage, any other Borrower Document or applicable law. For purposes of this
Section, the term "Project" shall not include any funds that (1) have been
applied by the Owner as required or permitted by the Reimbursement Mortgage
prior to the occurrence of an Event of Default or (2) the Owner was unable to
apply as required or permitted by the Reimbursement Mortgage because of a
bankruptcy, receivership, or similar judicial proceeding.
Section 7.12. Consent of Freddie Mac. Whenever Freddie Mac shall have any
right or option to exercise any discretion, to determine any matter, to accept
any presentation or to approve any matter, such exercise, determination,
acceptance or approval shall, without exception, be in Freddie Mac's sole and
absolute discretion.
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Section 7.13. Disclaimer; Acknowledgments. Approval by Freddie Mac of the
Owner, the Loan, the Bonds or otherwise shall not constitute a warranty or
representation by Freddie Mac as to any matter. Nothing set forth in this
Agreement, in any of the other Borrower Documents or in the subsequent conduct
of the parties shall be deemed to constitute Freddie Mac as the partner or joint
venturer of any Person for any purpose whatsoever.
Section 7.14. Entire Agreement. This Agreement and the Borrower Documents
constitute the entire contract between the parties relative to the subject
matter hereof. Any previous agreement among the parties with respect to the
subject matter hereof is superseded by this Agreement and the Borrower
Documents. Nothing in this Agreement or the Borrower Documents, expressed or
implied, is intended to confer upon any party other than the parties hereto and
thereto any rights, remedies, obligations or liabilities under or by reason of
this Agreement or the Borrower Documents; provided, however, that as to Persons
other than Freddie Mac and the Owner that are parties to any of the Borrower
Documents, such Persons shall not have any rights, remedies, obligations or
liabilities under this Agreement or any of the Borrower Documents except under
such Borrower Documents to which such Persons are directly parties to.
Section 7.15. Survival of Representation and Warranties. All statements
contained in any Borrower Document, or in any certificate, financial statement
or other instrument delivered by or on behalf of the Owner pursuant to or in
connection with this Agreement (including but not limited to any such statement
made in or in connection with any amendment hereto or thereto) shall constitute
representations and warranties made under this Agreement. All representations
and warranties made under this Agreement (i) shall be made and shall be true at
and as of the date of this Agreement and the Closing Date and (ii) shall survive
the execution and delivery of this Agreement, regardless of any investigation
made by Freddie Mac or on its behalf. In addition, the representations set forth
in Section 2.1 (c), (d), (e), (f), (i), (j), (k), (l), (m), (n), (r), (s), (t),
(u) and (v) shall be deemed made on the date of any Advance under the Credit
Enhancement Agreement.
Section 7.16. Waiver of Claims. IN ORDER TO INDUCE FREDDIE MAC TO EXECUTE
AND DELIVER THE CREDIT ENHANCEMENT AGREEMENT, THE OWNER HEREBY REPRESENTS AND
WARRANTS THAT IT HAS NO CLAIMS, SET-OFFS OR DEFENSES AS OF THE CLOSING DATE IN
CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR IN CONNECTION
WITH ANY OF THE OTHER BORROWER DOCUMENTS. TO THE EXTENT ANY SUCH CLAIMS,
SET-OFFS OR DEFENSES MAY EXIST, WHETHER KNOWN OR UNKNOWN, THEY ARE EACH HEREBY
WAIVED AND RELINQUISHED IN THEIR ENTIRETY.
Section 7.17. Waivers of Jury Trial. THE OWNER AND FREDDIE MAC EACH (A)
COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE
ARISING OUT OF THIS AGREEMENT OR THE RELATIONSHIP BETWEEN THE PARTIES AS
BORROWER AND LENDER THAT IS TRIABLE OF RIGHT BY A JURY AND (B) WAIVES ANY RIGHT
TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT
EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF RIGHT TO TRIAL
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BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH THE
BENEFIT OF COMPETENT LEGAL COUNSEL.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Owner and Freddie Mac have executed this
Reimbursement Agreement as of the day and year first above written.
THE PONDS OF PEMBROKE LIMITED
PARTNERSHIP, an Illinois limited partnership,
as Owner
By: Brookdale Holdings, Inc., a Delaware
corporation, its managing general partner
By: /s/ Darryl W. Copeland, Jr.
-----------------------------------------
Name: Darryl W. Copeland, Jr.
Title: Vice President
FEDERAL HOME LOAN MORTGAGE
CORPORATION, as Freddie Mac
By: /s/ Richard C. Martinez
-----------------------------------------
Richard C. Martinez
Director
Multifamily Loan Production
[Signature Page to Devonshire of Lisle Reimbursement Agreement]
<PAGE>
EXHIBIT A
PRINCIPAL RESERVE FUND SCHEDULE
EXECUTION COPY
REIMBURSEMENT AND SECURITY AGREEMENT
BETWEEN
FEDERAL HOME LOAN MORTGAGE CORPORATION
AND
RIVER OAKS PARTNERS
DATED AS OF MAY 1, 1999
RELATING TO
$36,000,000
ILLINOIS DEVELOPMENT FINANCE AUTHORITY
QUALIFIED RESIDENTIAL RENTAL BONDS
(RIVER OAKS PROJECT)
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1. Definitions.....................................................2
Section 1.2. Interpretation.................................................10
ARTICLE II
REPRESENTATIONS, COVENANTS, WARRANTIES AND CONDITIONS
Section 2.1. Representations, Covenants and Warranties......................10
Section 2.2. Conditions.....................................................14
ARTICLE III
COVENANTS OF OWNER
Section 3.1. Affirmative Covenants of the Owner.............................17
Section 3.2. Reimbursement and Replenishment Obligations of the Owner.......23
Section 3.3. Freddie Mac Credit Enhancement Fees;
Liquidity Use Fee; Servicing...............................24
Section 3.4. Indemnification................................................25
Section 3.5. Purchased Bonds................................................25
Section 3.6. Liability of the Owner.........................................25
Section 3.7. Neither Freddie Mac nor Servicer Liable........................26
Section 3.8. Waivers and Consents...........................................27
Section 3.9. Subrogation....................................................27
Section 3.10. Payment of Costs, Fees and Expenses............................27
ARTICLE IV
INTEREST RATE PROTECTION
Section 4.1. Interest Rate Protection.......................................29
Section 4.2. Cap Agreement Terms............................................30
Section 4.3. Freddie Mac Right to Convert to Fixed Rate.....................32
ARTICLE V
UNIFORM COMMERCIAL CODE SECURITY AGREEMENT....................................32
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ARTICLE VI
EVENTS OF DEFAULT; REMEDIES
Section 6.1. Events of Default..............................................33
Section 6.2. Remedies; Waivers..............................................34
Section 6.3. No Remedy Exclusive............................................34
ARTICLE VII
MISCELLANEOUS
Section 7.1. Counterparts...................................................35
Section 7.2. Amendments, Changes and Modifications..........................35
Section 7.3. Payment Procedure..............................................35
Section 7.4. Payments on Business Days......................................35
Section 7.5. Governing Law; Severability....................................36
Section 7.6. Notices........................................................36
Section 7.7. Further Assurances and Corrective Instruments..................36
Section 7.8. Term of this Agreement.........................................36
Section 7.9. Assignments; Transfers; Third-Parties Rights...................36
Section 7.10. Headings.......................................................37
Section 7.11. Limitation on Personal Liability...............................37
Section 7.12. Consent of Freddie Mac.........................................38
Section 7.13. Disclaimer; Acknowledgements...................................38
Section 7.14. Entire Agreement...............................................38
Section 7.15. Survival of Representation and Warranties......................39
Section 7.16. Waiver of Claims...............................................39
Section 7.17. Waivers of Jury Trial..........................................39
Exhibit A - Principal Reserve Fund Deposits
ii
<PAGE>
REIMBURSEMENT
AND SECURITY AGREEMENT
THIS REIMBURSEMENT AND SECURITY AGREEMENT (the "Agreement") is made and
entered into as of the 1st day of May, 1999, by and between the FEDERAL HOME
LOAN MORTGAGE CORPORATION ("Freddie Mac"), a corporate instrumentality of the
United States and RIVER OAKS PARTNERS (the "Owner"), a general partnership duly
organized and existing under the laws of the State of Illinois.
W I T N E S S E T H:
WHEREAS, Illinois Development Finance Authority (the "Issuer"), a
political subdivision, body politic and corporate duly organized and validly
existing under the Constitution and laws of the State of Illinois, has
heretofore authorized the issuance of its $36,000,000 Qualified Residential
Rental Bonds (River Oaks Project) (the "Bonds"); and
WHEREAS, the Bonds have been issued pursuant to that certain Trust
Indenture dated as of December 1, 1989 (as amended, the "Indenture") between the
Issuer and American National Bank and Trust Company of Chicago (the "Trustee"),
a national banking association, duly organized and existing under the laws of
the United States; and
WHEREAS, the proceeds of the Bonds were used by the Issuer to fund a loan
(the "Loan") to the Owner, the proceeds of which were used to finance the
acquisition, construction and equipping of the Project; and
WHEREAS, the Owner has requested that Freddie Mac provide credit
enhancement for the Loan in substitution for the existing Qualified Credit
Instrument outstanding with respect to the Bonds; and
WHEREAS, Freddie Mac has agreed to provide credit enhancement for the Loan
by making payments to the Trustee in respect of the principal of and interest on
the Loan upon the terms set forth in the Credit Enhancement Agreement dated as
of even date herewith (the "Credit Enhancement Agreement")
between Freddie Mac and the Trustee; and
WHEREAS, the Indenture and the Bonds provide that, during the Floating
Rate Period, the Bonds may be tendered or deemed tendered for payment of the
Purchase Price on each Settlement Date; and
WHEREAS, the payment of the Purchase Price of Bonds tendered or deemed
tendered pursuant to terms of the Indenture will be payable from proceeds of the
remarketing of the Bonds and from moneys, securities and certain investment
earnings thereon held in certain funds under the Indenture or held by the Tender
Agent, and to the extent that such moneys are insufficient to pay the Purchase
Price of tendered Bonds, the Issuer and Trustee have requested that Freddie Mac
agree to make certain payments to the Trustee in respect of the Purchase Price
under the circumstances and upon the terms set forth in the Credit Enhancement
Agreement; and
<PAGE>
WHEREAS, Freddie Mac is willing to execute and deliver the Credit
Enhancement Agreement to the Trustee upon the satisfaction by the Servicer (as
hereinafter defined) of the terms and conditions of that certain Letter of
Commitment dated as of May 14, 1999 (the "Commitment") between Freddie Mac and
the seller named therein (the "Servicer"); and
WHEREAS, the Owner's obligations under this Agreement will be secured by
the Reimbursement Security Documents, including a Reimbursement Mortgage, and
certain rights of subrogation to the rights of the Bondholders under the Loan
Documents.
NOW, THEREFORE, in consideration of the agreement of Freddie Mac to
execute and deliver the Credit Enhancement Agreement to the Trustee and the
material covenants and undertakings set forth in this Agreement and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Freddie Mac and the Owner do hereby agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1. DEFINITIONS. All defined terms not otherwise specifically
defined in this Agreement shall have the same meanings, respectively, as the
defined terms contained in the Indenture. Unless otherwise expressly provided in
this Agreement or unless the context clearly requires otherwise, the following
terms shall have the respective meanings set forth below for all purposes of
this Agreement.
"Advance" means either a Credit Advance or a Liquidity Advance.
"Affiliate", as applied to any Person, means any other Person directly or
indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities,
partnership interests or by contract or otherwise.
"Agreement" means this Reimbursement and Security Agreement, as the same
may be amended, modified or supplemented from time to time.
"Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy" as now and hereafter in effect, or any successor statute.
"Base Recourse" means the dollar amount specified in section 7.11(b)
hereof, for which the Owner is personally liable hereunder.
"Bondholder" or "bondholder" shall have the meaning given that term in the
Indenture.
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"Bond Counsel" means any attorney at law or firm of attorneys of
nationally recognized standing in matters pertaining to the exclusion from gross
income of interest on bonds for federal income tax purposes issued by states and
political subdivisions and which is acceptable to Freddie Mac.
"Bond Documents" means the Bonds, the Indenture, the Financing Agreement,
the Regulatory Agreement (and any other agreement relating to rental
restrictions on the Project), the Arbitrage Regulation Agreement, the
Remarketing Agreement, any bond purchase agreement, any tender agent agreement,
and all other documents, instruments and agreements executed and delivered in
connection with the issuance, sale, delivery and/or remarketing of the Bonds as
each such agreement or instrument may be amended, modified or supplemented from
time to time.
"Bond Fee Component" means the regular, ongoing fees due from time to time
to the Trustee, the Remarketing Agent, the Paying Agent, the Bond Registrar, the
Tender Agent, any rebate analyst with respect to the Bonds and any other fees
and expenses set forth in Section 4.3 of the Financing Agreement, expressed in
terms of a percentage of the principal amount of Outstanding Bonds (including
Purchased Bonds) on an annual basis.
"Borrower Documents" means the Bond Documents, the Loan Documents, the
Reimbursement Security Documents and the Cap Documents.
"Business Day" means any day, other than (i) a Saturday, Sunday, or legal
holiday, (ii) a day on which banking institutions located in (A) New York, New
York, or (B) Chicago, Illinois, or (C) in the locality and state in which the
home office of Freddie Mac, or the office of Freddie Mac at which a request for
funding on the Credit Enhancement Agreement may be made, are authorized by law
to close, or (iii) a day on which the New York Stock Exchange is closed.
"Cap" shall have the meaning set forth in Section 4.1.
"Cap Agreement" means that certain Rate Cap Agreement, dated May 24, 1999,
between the Owner and the Counterparty, as such agreement may be amended,
modified, supplemented or restated from time to time, and any successor interest
rate cap agreement approved in writing by Freddie Mac.
"Cap Assignment" means (a) the Interest Rate Hedge Assignment and Security
Agreement, dated as of May 1, 1999, between the Owner and Freddie Mac, as their
interests may appear or (b) any assignment by the Owner of any subsequent Cap to
Freddie Mac, in each case as such agreement may be amended, modified or
supplemented from time to time.
"Cap Deposit" shall have the meaning set forth in Section 4.2(f).
"Cap Documents" shall have the meaning set forth herein in Section 4.1.
"Cap Fee Escrow" means the escrow account to be held by the Servicer to
provide for payments made by the Owner as required by Section 3.1(h) for the
purchase of a Subsequent Cap.
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"Cap Reserve Account" means the escrow account held by the Servicer in
which the Cap Deposit is held as additional security for Freddie Mac.
"Closing Date" means the date the Credit Enhancement Agreement is
delivered by Freddie Mac.
"Combined Debt Service Coverage Ratio" means, for any period, the ratio of
(a) current gross potential rent roll annualized times 95% plus current other
income from services provided at both of the Projects annualized less the
greater of (x) the Freddie Mac underwritten expenses (Heritage expenses of
$3,172,428 and Devonshire expenses of $4,541,516) which includes real estate
taxes or (y) the combined Projects' actual trailing twelve months' operating
expenses which includes real estate taxes, (b) divided by the debt service for
the bonds financing both Projects. For those bonds that after the Conversion
Date will bear interest at a Floating Rate, the notional annual debt service
will be calculated by adding the deposits to the Principal Reserve Fund for the
next twelve months plus the annualized four week average interest rate on the
bonds for the four weeks ending on the reset date immediately prior to the
calculation date, plus the actual fixed spread, that equals the sum of the
Servicing Fee, the Freddie Mac Credit Facility Fee, the Freddie Mac Liquidity
Facility Fee, the Trustee's fees, the Issuer's fee and the Remarketing Agent's
fee, plus 200 basis points. For those bonds that after the Conversion Date will
bear interest at a new Fixed Rate, annual debt service (including principal)
will be calculated based upon the annual Fixed Rate of the bonds projected by
the Remarketing Agent plus the actual fixed spread that equals the sum of the
Servicing Fee, the Freddie Mac Credit Facility Fee, the Trustee's fee and the
Issuer's fee.
"Conversion to Maturity Date" means the date on which the interest rate on
the Bonds is converted to a Fixed Rate to the final maturity date of the Bonds.
"Counterparty" means the counterparty named in the Cap Agreement who is
obligated to make payments in accordance with the terms thereof.
"Credit Advance" means an advance by Freddie Mac under the Credit
Enhancement Agreement to pay any Guaranteed Payment.
"Credit Enhancement Agreement" means the Credit Enhancement Agreement
dated as of May 1, 1999 between the Trustee and Freddie Mac, as such Credit
Enhancement Agreement may from time to time be amended.
"Cross-Collateralization Agreement" means that certain
Cross-Collateralization Agreement dated as of May 1, 1999 among the Servicer,
the Owner and the Other Owner, as consented to by Guarantor, as assigned to
Freddie Mac.
"Default" means any event that has occurred which, with the giving of
notice or the passage of time or both, would constitute an Event of Default.
"Default Rate" means the base rate or prime rate of Citibank, N.A. until
such time as another "Money Center" bank is designated by Freddie Mac in its
discretion by notice to the Owner, plus four percent (4%).
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"Event of Default" means the occurrence of an event of default as
described in Section 6.1 hereof.
"Financing Agreement" means that certain Loan Agreement dated as of
December 1, 1989, between the Issuer and the Owner, as amended through the
Closing Date and as the same may be further amended, modified or supplemented
from time to time.
"Freddie Mac" means the Federal Home Loan Mortgage Corporation, a
corporate instrumentality of the United States, and its successors.
"Freddie Mac Credit Enhancement Fee" means the sum of the Freddie Mac
Credit Facility Fee and the Freddie Mac Liquidity Facility Fee.
"Freddie Mac Credit Enhancement Payment" means the amount required to be
paid by Freddie Mac to the Trustee with respect to any Guaranteed Payment
pursuant to Section 3.1(a)(i) of the Credit Enhancement Agreement, and with
respect to any payment of Purchase Price for tendered Bonds pursuant to Section
3.1(b)(i) of the Credit Enhancement Agreement.
"Freddie Mac Credit Facility Fee" means an amount equal to .825% per annum
of the outstanding principal balance of the Loan, payable as provided in Section
3.3.
"Freddie Mac Liquidity Facility Fee" means an amount equal to .125% per
annum of the outstanding principal balance of the Loan, payable as provided in
Section 3.3.
"Freddie Mac Reimbursement Amount" means the amounts required hereunder to
be reimbursed by the Owner to Freddie Mac in respect of any Freddie Mac Credit
Enhancement Payments made by Freddie Mac under the Credit Enhancement Agreement,
which amounts shall be equal to the sum of all Freddie Mac Credit Enhancement
Payments made by Freddie Mac and not previously reimbursed by or on behalf of
the Owner, together with any Liquidity Use Fees, late charges, default interest
and other amounts payable to Freddie Mac under the Reimbursement Security
Documents (except any share of collected late charges that the Servicer is
entitled to retain as additional servicing compensation) as a result of a
default under the Borrower Documents.
"General Partner" means Brookdale Holdings, Inc., a Delaware corporation.
"Governmental Authority" shall have the meaning set forth in the
Reimbursement Mortgage.
"Guaranteed Payment" shall have the meaning set forth in the Credit
Enhancement Agreement.
"Guarantor" means Brookdale Living Communities, Inc., a Delaware
corporation, in its capacity as the Guarantor under the Guaranty.
"Guaranty" means that certain Limited Guaranty dated May 27, 1999 by the
Guarantor in favor of the Servicer and assigned to Freddie Mac.
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"Indenture" means that certain Trust Indenture, dated as of December 1,
1989, between the Issuer and Trustee pursuant to which the Bonds are issued and
secured, as amended through the Closing Date and as the same may be further
amended, modified or supplemented from time to time.
"Investment Obligations" shall have the meaning set forth in the
Indenture.
"Issuer" means Illinois Development Finance Authority and its successors.
"Liquidity Advance" means an advance by Freddie Mac pursuant to the terms
of the Credit Enhancement Agreement to pay the Purchase Price of tendered Bonds.
"Liquidity Commitment" means the obligation of Freddie Mac to provide
funds to the Trustee, as provided in Section 3.1(b) of the Credit Enhancement
Agreement, to enable the Trustee to purchase, on behalf of and as agent for the
Owner, tendered Bonds which have not been remarketed by the Remarketing Agent
pursuant to the Remarketing Agreement and Indenture and, therefore, with respect
to which there are no proceeds of remarketing.
"Liquidity Commitment Termination Date" means the day immediately
following the earliest of (a) the Maturity Date, (b) the Conversion to Maturity
Date, (c) the Substitution Date or (d) the Termination Date.
"Liquidity Rate" means the base rate or prime rate of interest of
Citibank, N.A. until such time as another "Money Center" bank is designated by
Freddie Mac in its discretion by notice to the Owner, plus two percent (2%) per
annum.
"Liquidity Use Fee" means, with respect to each Liquidity Advance, an
amount equal to (x) the amount of the Liquidity Advance multiplied by (y) the
Liquidity Rate and (z) further multiplied by a fraction, the numerator of which
is the number of days that such Liquidity Advance is outstanding (i.e., until
Freddie Mac is reimbursed) and the denominator of which is 365 days or 366 days,
as applicable. The Liquidity Use Fee shall be reduced by an amount equal to the
Freddie Mac Credit Enhancement Fee assessed and actually paid for the
calculation period on the amount of funds related to the Liquidity Advance.
"Loan" means the loan by the Issuer to the Owner with respect to the
Project pursuant to the Financing Agreement and evidenced by the Note.
"Loan Documents" means the Note, the Financing Agreement and any related
documents evidencing the obligations of the Owner under the Note or securing
payment or performance of such obligations or otherwise pertaining to such
obligations, as each such document, agreement or instrument may be amended,
modified or supplemented from time to time.
"Moody's" means Moody's Investors Service, Inc., a corporation organized
and existing under the laws of the State of Delaware, and its successors and
assigns, if such successors and assigns shall continue to perform the functions
of a securities rating agency.
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"Note" means the promissory note from the Owner to the Issuer, including
all riders and addenda thereto, evidencing the Owner's obligation to repay the
Loan, as the same may be amended, modified or supplemented from time to time.
"Notice" means any notice delivered by the Trustee to Freddie Mac and
the Issuer pursuant to Section 3.1(a)(i) or Section 3.1(b)(i) of the Credit
Enhancement Agreement.
"Obligations" means the obligations of the Owner (a) to pay principal and
interest and any other amounts on the Loan when due and payable pursuant to the
Loan Documents, (b) to pay all amounts, including fees, costs, charges and
expenses payable under this Agreement and the other Reimbursement Security
Documents and (c) to observe and perform each of the terms, conditions and
provisions of the Borrower Documents.
"Other Owner" means The Ponds of Pembroke Limited Partnership, an
Illinois limited partnership, and any successor to or assignee of its rights
and obligations.
"Other Project" means that certain senior living facility located in the
State, commonly known as The Devonshire, located at 1700 Robin Lane, Lisle,
Illinois, and owned by the Other Owner.
"Other Reimbursement Agreements" means collectively and/or individually
those two certain Reimbursement and Security Agreements each dated the date
hereof and each between Freddie Mac and the Other Owner.
"Other Reimbursement Mortgage" means that certain Multifamily Mortgage,
Assignment of Rents and Security Agreement dated May 27, 1999, together with all
riders and addenda thereto, from the Other Owner to Freddie Mac granting a first
priority mortgage and a security interest in the Other Project to secure the
obligations of the Other Owner under the Other Reimbursement Agreements, as the
same may be amended, modified or supplemented from time to time.
"Owner" means River Oaks Partners, an Illinois general partnership, and
any successor to or assignee of its rights and obligations.
"Person" means an individual, estate, trust, corporation, partnership,
limited liability company or any other organization or entity (whether
governmental or private).
"Pledge Agreement" means that certain Pledge, Security and Custody
Agreement dated as of the date hereof, by and between the Trustee, as custodian,
and the Owner, and relating to Purchased Bonds, as the same may be amended,
modified or supplemented from time to time.
"Prepayment/Substitution Premium" means, with respect to any voluntary or
involuntary prepayment (or deemed prepayment pursuant to Section 3.1(g) hereof),
of the Loan, the product obtained by multiplying
(A) the amount of principal prepaid, by
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(B) one-twelfth (1/12) of .95%, representing the sum of the Freddie
Mac Credit Facility Fee and the Freddie Mac Liquidity Facility Fee payable to
Freddie Mac, by
(C) the Present Value Factor.
The "Present Value Factor" is the following factor:
N
1 - 1
---------
1 + ARR
----------------
ARR
Where:
n = number of months remaining until the 15th anniversary of the Closing
Date.
ARR (Assumed Reinvestment Rate) = one-twelfth (1/12) of the yield rate as
of the date 5 Business Days before the prepayment date, on the 9.25% U.S.
treasury security due February 1, 2016, as reported in The Wall Street Journal,
expressed as a decimal calculated to five digits. In the event that no yield is
published on the applicable date for the treasury security used to determine the
Assumed Reinvestment Rate, the Servicer, in its discretion, shall select the
non-callable treasury security maturing in the same year as the treasury
security specified above with the lowest yield published in The Wall Street
Journal as of the applicable date. If the publication of such yield rates in The
Wall Street Journal is discontinued for any reason, the Servicer shall select a
security with a comparable rate and term to the treasury security used to
determine the Assumed Reinvestment Rate. The selection of an alternate security
pursuant to this paragraph shall be made in Freddie Mac's discretion.
"Principal Reserve Fund" means the Principal Reserve Fund established with
the Servicer pursuant to this Agreement, to which the Owner is required to
contribute pursuant to Section 3.1(b) hereof and the Reimbursement Mortgage.
"Principal Reserve Schedule" means the schedule attached as Exhibit A to
this Agreement of required deposits to be made by the Owner to the Principal
Reserve Fund.
"Project" means the "Mortgaged Property" as such term is defined in the
Reimbursement Mortgage.
"Projects" means the Project and the Other Project.
"Purchased Bonds" shall have the meaning given the term "Pledged Bonds" in
the Indenture. Additionally, a Bond shall no longer be a "Purchased Bond" on the
date on which such Bond is remarketed to any person other than Freddie Mac, the
Owner, any partner or member of the Owner or the Issuer.
"Purchase Price" means, with respect to any Bond required or permitted to
be purchased pursuant to the Indenture, the principal amount of such Bond plus
interest accrued thereon to the Settlement Date.
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"Rating Agency" means Moody's or S&P or any other nationally recognized
rating agency maintaining a rating on the Bonds.
"Reimbursement Mortgage" means that certain Multifamily Mortgage,
Assignment of Rents and Security Agreement dated May 27, 1999, together with all
riders and addenda thereto, from the Owner granting a first priority mortgage
and a security interest in the Project to Freddie Mac to secure the obligations
of the Owner under this Agreement, as the same may be amended, modified or
supplemented from time to time.
"Reimbursement Security Documents" means, collectively, this Agreement,
the Reimbursement Mortgage, the Pledge Agreement, the Replacement Reserve
Agreement, the title insurance policy with respect to the Project for the
benefit of Freddie Mac, UCC Fixture Filings and Financing Statements, the Cap
Agreement, the Cross-Collateralization Agreement, the Cap Assignment and any
other Cap Documents, any Collateral Agreements (as defined in the Reimbursement
Mortgage) and any related documents evidencing the obligations of the Owner
under this Agreement or the Reimbursement Mortgage or securing payment or
performance of such obligations or otherwise pertaining to performance of such
obligations, as each such document, agreement or instrument may be amended,
supplemented, otherwise modified or amended and restated from time to time in
accordance with its respective terms.
"Replacement Reserve Agreement" means the Replacement Reserve and Security
Agreement between the Owner and the Servicer relating to the Reimbursement
Mortgage, as the same may be amended, modified or supplemented from time to
time.
"Required Mortgage Payment" shall have the meaning set forth in the Credit
Enhancement Agreement.
"S&P" means Standard & Poor's Ratings Service, a division of The
McGraw-Hill Companies, Inc.
"Servicer" means the eligible servicing institution designated by Freddie
Mac from time to time (which may be Freddie Mac if Freddie Mac elects to service
the Loan), or its successor, as servicer of each Loan. Initially, Glaser
Financial Group, Inc., a Minnesota corporation, shall serve as the Servicer.
"Servicing Agreement" means the Servicing Agreement dated as of May 1,
1999 between the Servicer and Freddie Mac concerning the servicing of this
Agreement.
"Servicing Fee" means the monthly fee due the Servicer under the Servicing
Agreement in an amount equal to one-twelfth of .05% of the outstanding principal
balance of the Loan.
"Settlement Date" means, prior to the Liquidity Commitment Termination
Date and during the Floating Rate Period, (a) any Business Day specified by a
Bondholder as the date on which Bonds owned by such Bondholder are to be
purchased in accordance with the provisions of the Indenture, (b) each Fixed
Rate Conversion Date, (c) any Substitution Date and (d) any date on which the
Bonds are subject to mandatory tender in accordance with the provisions of the
Indenture.
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"State" means the State of Illinois.
"Subsequent Cap" shall have the meaning set forth in Section 4.1(a).
"Term" has the meaning set forth in Section 7.8.
"Termination Date" shall have the meaning set forth in the Credit
Enhancement Agreement.
"Trustee" means American National Bank and Trust Company of Chicago and
its successors and any other corporation or association resulting from or
surviving any consolidation or merger to which it or its successors may be a
party and any successor trustee at any time serving as successor trustee under
the Indenture.
"Underwriting Rate" means 6.66% per annum.
"Uniform Commercial Code" means the Uniform Commercial Code as from time
to time in effect in each applicable jurisdiction.
"Withdrawal" means the withdrawal of funds from the Principal Reserve Fund
to make any payment due from the Owner under the Borrower Documents other than a
payment to reimburse Freddie Mac for a Freddie Mac Credit Enhancement Payment.
SECTION 1.2. INTERPRETATION. In this Agreement, unless the context
otherwise requires, words of the masculine gender shall be deemed and construed
to include correlative words of the feminine and neuter genders. Unless the
context shall otherwise indicate, words importing the singular number shall
include the plural number and vice versa, and words importing persons shall
include partnerships, corporations and associations, including public bodies, as
well as natural persons. The terms "hereby", "hereof", "hereto", "herein",
"hereunder", and any similar terms, as used in this Agreement, refer to this
Agreement. Any reference in this Agreement to an "Exhibit", a "Section", a
"Subsection", a "Paragraph" or a "subparagraph" shall, unless otherwise
explicitly provided, be construed as referring, respectively, to an Exhibit
attached to this Agreement, a section of this Agreement, a subsection of the
section of this Agreement in which the reference appears, a paragraph of the
subsection within this Agreement in which the reference appears, or a
subparagraph of the paragraph within which the reference appears. All Exhibits
attached to or referred to in this Agreement are incorporated by reference into
this Agreement.
ARTICLE II
REPRESENTATIONS, COVENANTS, WARRANTIES AND CONDITIONS
SECTION 2.1. REPRESENTATIONS, COVENANTS AND WARRANTIES. The
representations, covenants and warranties set forth in the Reimbursement
Mortgage are hereby incorporated by reference as if fully set forth herein. The
Owner acknowledges that such representations, covenants and warranties, together
with the other representations and agreements of the Owner contained in this
Agreement, are relied upon by Freddie Mac and serve as a basis for the
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undertakings of Freddie Mac contained in this Agreement. The Owner makes the
following additional representations, covenants and warranties as to the Loan
and the Project.
(a) Occupancy; Rents. As of May 4, 1999, physical occupancy of the Project
is at least 96%, and the gross monthly rents (net of concessions) from occupied
dwelling units at the Project is at least $532,000.00.
(b) Location of Improvements. All improvements to the Project that have
been included in its appraised value lie within the boundaries of the land, or
to the extent that any such improvements encroach onto any adjoining land, each
such encroachment does not materially and adversely affect the value, use or
salability of the Project. No improvements on neighboring properties encroach
onto the Project, or all such encroachments do not materially and adversely
affect the value, use or salability of the Project.
(c) No Damage. There exists no unrepaired or unrestored damage to the
Project from fire or other casualty since March 16, 1999 (the date of Freddie
Mac's inspection of the Project) through the Closing Date. There exists no
material unrepaired or unrestored damage to the Project from fire or other
casualty since the Closing Date that has not been disclosed to Freddie Mac. For
the purposes of this subsection (c) "material" shall mean unrepaired or
unrestored damage equal to or greater than $250,000.
(d) Property Condition.
(i) The Project is in good and habitable condition.
(ii) There are no deficiencies in the repair or maintenance of the
Project that threaten the health or safety of its tenants and
their invited guests.
(iii) There is no material uncured violation at the Project of any
building or housing code or similar law or ordinance.
(iv) The physical configuration of the Project is not in material
violation of the Americans with Disabilities Act.
(v) If Freddie Mac has inspected the Project and informed the
Servicer that specified repairs must be made, those repairs
have been completed or funds to complete them have been placed
in escrow as required by Freddie Mac.
(e) Condemnation. No part of the Project has been taken by condemnation or
any similar proceeding since March 16, 1999, and the Owner is not aware, after
diligent inquiry, of any pending or threatened condemnation or similar
proceeding with respect to all or any part of the Project.
(f) Loan Documents. The Loan Documents have been validly authorized and
executed by the Owner.
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(g) Insurance. The Project is covered by hazard, flood (if the Project is
in a flood zone), liability and rent loss insurance in compliance with the terms
and conditions of the Reimbursement Mortgage. Without limiting the generality of
the foregoing, if the Project is located in whole or in part in a Special Flood
Hazard Area ("SFHA") identified by the Federal Emergency Management Agency, (i)
each building that lies within the SFHA is covered by flood insurance in an
amount at least equal to the lesser of (A) its insurable replacement cost, (B)
its prorated portion of the unpaid principal balance of the Loan, based upon
square footage of the building and square footage of all buildings comprising
the Project, or (C) the maximum limit of coverage available under the National
Flood Insurance Program, and (ii) the community where the Project is located
participates in the National Flood Insurance Program.
(h) Defaults. All payments due under the terms of the Loan Documents have
been made and there have been no delinquencies of 30 days or more within the 12
months preceding the Closing Date. There are no material non-monetary defaults
under the terms of the Bond Documents or the Loan Documents and there have been
no material non-monetary defaults that have remained uncured for 30 days or more
within the 12 months preceding the Closing Date.
(i) Undisclosed Information. Except as disclosed to Freddie Mac in
writing, the Owner knows of no fact or circumstance affecting the Owner or the
Project that materially and adversely affects the Owner's ability to meet its
obligations under the Loan in a timely manner.
(j) Insolvency. No bankruptcy, insolvency, reorganization or comparable
proceedings have ever been instituted by or against the Owner, the Guarantor, or
any affiliate of the Guarantor or the partners of the Owner, and no such
proceeding is now pending or contemplated, nor have any of the foregoing parties
defaulted under a personal or commercial mortgage loan or entered into a workout
or forbearance agreement related to such mortgage loans and the Owner and the
Guarantor each has the ability to pay its debts as they come due.
(k) Enforceability. The Borrower Documents to which the Owner is a party
are valid and binding obligations of the Owner, enforceable in accordance with
their respective terms, except to the extent that such enforceability may be
limited by laws regarding bankruptcy, creditors' rights and general principles
of equity.
(l) Liens. The Reimbursement Mortgage, if and when properly recorded in
the appropriated records, together with any Uniform Commercial Code financing
statements required to be filed in connection therewith, will create a valid,
perfected first lien on the Project, subject only to the exceptions set forth in
Schedule B of the title insurance policy issued to Freddie Mac in accordance
with the terms hereof.
(m) Taxes Paid. Prior to the Closing Date, all real property taxes and
assessments that have become due and payable (including water and sewer charges
that by law will become a lien on the Project) have been paid in full, or an
escrow of funds sufficient to pay them has been established. After the Closing
Date and subject to the right of the Owner to contest such matters expressly
provided in the Reimbursement Mortgage, all real property taxes and assessments
that have become due and payable (including water and sewer charges that by law
will become a lien
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on the Project) have been paid in full, or an escrow of funds sufficient to pay
them has been established.
(n) The Guaranty. The Guaranty has been validly authorized and executed by
the Guarantor.
(o) Mortgage and Project Characteristics. Except as disclosed to Freddie
Mac in writing, the Loan and the Project include none of the following features:
i. A prepayment lockout provision still in effect.
ii. A principal balance that includes capitalization of interest,
taxes, hazard insurance premiums, or late charges.
iii. Cross-collateralization with any other mortgage, except as
contemplated hereby.
iv. Commercial rents which constitute more than 25 percent of
effective gross revenue, or commercial tenants that occupy
more than 25 percent of the total square footage of the
improvements.
v. more than 5 percent of the residential space is master leased
to a single lessee.
vi. The Project is under construction or rehabilitation (other
than repairs required or approved in writing by Freddie Mac)
or initial lease-up.
vii. More than 20 percent of the Project is used for student and/or
military housing.
viii. A non-elevator structure with four or more floors constituting
a portion of the Project.
ix. Other than with respect to the Bonds when they bear interest
at the Fixed Rate, a payment interval that is not monthly.
x. A leasehold estate as all or a part of the Project.
xi. A lender equity participation feature.
xii. A mobile home park property as part or all of the Project.
xiii. Accruals of interest in excess of payment obligations.
xiv. A Project with economic occupancy below 90 percent.
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xv. A Project that is encumbered by any secondary or subordinate
financing.
(p) Title Insurance. The title insurance policy satisfies the requirements
of the Servicer. If the Owner has delivered a marked-up title insurance
commitment pending issuance of the final title insurance policy, then that
commitment obligates the title insurer to issue a policy having the above
characteristics.
(q) Survey. The survey delivered to Freddie Mac is identical to the survey
previously submitted to Freddie Mac, and satisfies the requirements of Section
2.2(v)(k).
(r) Single Tax Parcel. The Project consists of property identified as all
of a single tax parcel or, if identified as multiple tax parcels, the Project
constitutes the entirety of those tax parcels. Any tax parcel or parcels within
which the Project is located does not include property that is not subject to
the Reimbursement Mortgage.
(s) Access. The Project does not share ingress and egress through an
easement or private road or share on-site or off-site recreational facilities
and amenities that are not located on the Project and under the exclusive
control of the Owner; or where there is shared ingress and egress or amenities,
there exists an easement or joint use and maintenance agreement, a copy of which
has been delivered to Freddie Mac, under which (i) access to and use and
enjoyment of the easement or private road and/or recreational facilities and
amenities is perpetual, (ii) the number of parties sharing such easement and/or
recreational facilities and amenities must be specified, (iii) the Owner's
responsibilities and share of expenses are specified, and (iv) the failure to
pay any maintenance fee will not result in a loss of usage of the easement.
(t) Zoning. The overall character of the existing use of the Project is
consistent with the zoning classification of the Project, or is a legal
nonconforming use that is permitted notwithstanding any inconsistency with such
classification. Except as disclosed to Freddie Mac in writing, the Project does
not violate any density or building setback requirements of the applicable
zoning law. No proceedings are pending or threatened to, the Owner's knowledge,
that would result in a change of the zoning of the Project.
(u) Federal Income Tax Matters. The Owner has not taken any action, or
permitted to be taken any action that would impair the exclusion from gross
income for federal income tax purposes of the interest payable on any of the
Bonds. The Owner is in compliance with all material requirements of any tax
certificate relating to the Bonds.
SECTION 2.2. CONDITIONS. The obligation of Freddie Mac to enter into the
Credit Enhancement Agreement is subject to the satisfaction of the following
conditions precedent on or prior to the Closing Date:
(i) the payment by the Owner of Freddie Mac's and the Servicer's
fees, costs and expenses which are due and payable on or before such
Closing Date in accordance with the Borrower Documents;
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(ii) the delivery to the title insurance company for filing and/or
recording in all applicable jurisdictions (or such filing and/or recording
having been provided for in a manner satisfactory to Freddie Mac) of all
documents, including, without limitation, duly executed and acknowledged
copies of the Reimbursement Mortgage and the Other Reimbursement Mortgage,
UCC-1 financing statements and other appropriate instruments, in form and
substance satisfactory to Freddie Mac and in proper form for recordation,
as may be necessary in the opinion of Freddie Mac to perfect the lien
created by the foregoing and each applicable Reimbursement Security
Document and the payment of all taxes, fees and other charges payable in
connection with such execution, delivery, recording and filing;
(iii) there shall have occurred no material adverse change in the
financial condition, business or prospects of the Owner, or in the
physical condition, operating performance or value of the Project from
that shown in the application to Freddie Mac delivered by the Owner to the
Servicer;
(iv) there shall exist no Event of Default or Default; and
(v) the receipt by Freddie Mac or, if Freddie Mac so designates,
the Servicer, on or prior to the Closing Date of the following, each dated
as of the Closing Date except as otherwise agreed to, in form and
substance satisfactory to Freddie Mac in all respects:
(a) a copy certified to be true, accurate and complete by an
officer of the Guarantor, of resolutions of the Guarantor
authorizing the transactions contemplated by the Guaranty and the
Cross-Collateralization Agreement (which certification shall state
that such authorization is in full force and effect on the Closing
Date), of its certificate of incorporation and bylaws and any
amendments relating thereto, and a certificate issued by the
Delaware Secretary of State to the effect that the Guarantor is in
good corporate standing under Delaware law;
(b) a copy, certified to be true, accurate and complete by an
officer of the General Partner, of resolutions of the board of
directors of the General Partner, authorizing the General Partner,
in its capacity as managing general partner of the Owner, and on
behalf of the Owner, to execute, deliver and perform the Borrower
Documents, and in its corporate capacity to execute, deliver and
perform, on behalf of the Owner, the Borrower Documents to which the
Owner is a party and other matters contemplated thereby, and of all
other documents evidencing any other necessary action (which
certification shall state that such approvals are in full force and
effect on the Closing Date);
(c) copies, certified to be true, accurate and complete by an
officer of the General Partner, of the General Partner's certificate
of incorporation and bylaws and any amendments thereto (which
certification shall state that such documents, as amended, are in
full force and effect on the Closing Date), together with a
Certificate of Good Standing of the General Partner issued by the
Secretary of State of the State of Delaware and a certificate of the
General Partner's
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authorization to transact business in the State of Illinois issued
by the Illinois Secretary of State;
(d) copies, certified to be true, accurate and complete by an
officer of the General Partner, of the partnership agreement of the
Owner and any amendments thereto (which certification shall state
that such documents, as amended, are in full force and effect on the
Closing Date);
(e) copies, certified to be true, accurate and complete by an
officer of the General Partner, on behalf of the Owner, of all
consents, licenses and approvals necessary for the Owner to enter
into the Borrower Documents and the transactions contemplated by
this Agreement and the other Borrower Documents;
(f) a certificate of an officer of the General Partner
certifying the names, titles and the signatures of the officers of
the General Partner authorized to execute the Borrower Documents for
itself or on behalf of the Owner, as applicable, and a certificate
of an officer of the Guarantor certifying the names, titles and the
signatures of the officers of the Guarantor authorized to execute
the Guaranty for itself or on behalf of the Guarantor, as
applicable;
(g) a certificate of the General Partner, on behalf of the
Owner, confirming that the conditions precedent set forth in the
Borrower Documents have been satisfied and that the representations
and warranties of the Owner contained in the other Borrower
Documents are true, correct and complete in all material respects on
and as of the Closing Date;
(h) opinions of counsel to the Owner and the Guarantor and
counsel to the Servicer each in form and substance satisfactory to
Freddie Mac addressing all matters required by Freddie Mac;
(i) fully executed copies of each Borrower Document, duly
executed and delivered by the parties thereto (other than Freddie
Mac), each of which shall be in full force and effect;
(j) a recent environmental report pertaining to the Project,
and all related due diligence completed to Freddie Mac's
satisfaction;
(k) a current survey relating to the Project reflecting all
liens, encumbrances, easements and encroachments, such survey to be
certified to Freddie Mac;
(l) such opinions of Bond Counsel and Issuer's counsel as
Freddie Mac shall require in form and substance satisfactory to
Freddie Mac;
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(m) certified copies of all consents and authorizations, if
any, necessary for the Issuer to execute, deliver and perform its
obligations under the Bond Documents and any other Borrower
Documents to which it is a party;
(n) certified copies of the Issuer's charter or certificate of
incorporation and by-laws, if any, and of the resolution or
resolutions of the Issuer authorizing the execution, delivery and
performance of its obligations under the Bond Documents and any
other Borrower Documents to which it is a party and certified copies
of all other documents evidencing any other official action of the
Issuer taken with respect thereto as each is then in full force;
(o) a true and correct copy of rating letters from any Rating
Agency rating the Bonds;
(p) the Cap Documents and each Cap Assignment, containing
terms and conditions consistent with this Agreement and in form and
substance satisfactory to Freddie Mac and a legal opinion of counsel
to the Counterparty in form and substance satisfactory to Freddie
Mac;
(q) such documentation as shall be necessary to evidence the
Investment Obligations to be in place as of each applicable Closing
Date including, but not limited to, with respect to funds in the
Principal Reserve Fund;
(r) a Certificate of Insurance naming Freddie Mac as
additional insured delivered on the Closing Date and a duplicate
copy of the blanket insurance policy that covers the Project within
thirty days following the Closing Date;
(s) evidence that the Owner has established all escrows and
reserves required by the Reimbursement Mortgage and the Borrower
Documents; and
(t) such other documents, instruments, certificates, approvals
(and, if requested by Freddie Mac, certified duplicates of executed
copies thereof) or opinions as Freddie Mac or the Servicer may
request.
ARTICLE III
COVENANTS OF THE OWNER
SECTION 3.1. AFFIRMATIVE COVENANTS OF THE OWNER. The Owner enters into the
following covenants and agreements with Freddie Mac, which covenants and
agreements shall apply continuously during the Term of this Agreement.
(a) (i) On the Closing Date, the Owner shall pay to the Servicer interest
accrued on the Loan for the period beginning on the day following the last
payment of interest on the Loan through and including the day preceding
the Closing Date and the fees payable
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in advance on the Closing Date to Freddie Mac and the Servicer pursuant to
Section 3.3 hereof.
(ii) The Owner shall pay to the Servicer on the first day of each
month while the Loan is outstanding, the sum of the interest accrued on
the Loan for the preceding month, the fees payable to Freddie Mac and the
Servicer pursuant to Section 3.3 hereof and one-twelfth of the Bond Fee
Component payable pursuant to the Financing Agreement. Pursuant to the
Servicing Agreement, the Servicer shall remit to Freddie Mac the Freddie
Mac Credit Enhancement Fee, shall remit to the Trustee the Bond Fee
Component (to be distributed by the Trustee to the other parties entitled
thereto) and shall retain the Servicing Fee. Amounts received by the
Servicer in respect of interest on the Loan shall be applied to the
reimbursement of Freddie Mac for amounts paid in respect of interest on
the Loan pursuant to the Credit Enhancement Agreement.
(iii) The Owner shall fund, and replenish, to the extent funds are
withdrawn (except if funds are withdrawn to reimburse Freddie Mac for a
payment under the Credit Enhancement Agreement), the Principal Reserve
Fund as and when required by the Reimbursement Mortgage and this
Agreement. The Owner shall also replenish the Principal Reserve Fund by
delivery to the Servicer of an amount equal to any loss resulting from the
investment of amounts on deposit in the Principal Reserve Fund, as and
when such loss is incurred and irrespective of the reason for such loss.
(b) (i) The Owner shall pay to the Servicer for deposit into the Principal
Reserve Fund held by the Servicer that portion of the scheduled monthly
payments specified in the Principal Reserve Schedule and designated for
deposit to the Principal Reserve Fund as required by the Reimbursement
Mortgage. Any interest earned on or profits realized from amounts on
deposit in the Principal Reserve Fund shall be deposited into the
Principal Reserve Fund and, provided that there is no deficiency in the
Principal Reserve Fund, the Cap Fee Escrow or any rebate account that may
be established with respect to the Bonds, that no default exists under the
Loan and that no Event of Default exists under any of the Borrower
Documents, shall be paid to the Owner on the Interest Payment Date next
succeeding receipt of such interest or profits by the Servicer. Amounts
determined by any rebate analyst with respect to the Bonds to be rebatable
arbitrage as provided in the Indenture shall be paid by the Servicer to
the Trustee to be transferred by the Trustee from the Principal Reserve
Fund to any rebate account that may be established with respect to the
Bonds. Amounts on deposit in the Principal Reserve Fund shall be applied
by the Servicer as provided in paragraphs (ii) and (iii) of this
subsection.
(ii) Amounts on deposit in the Principal Reserve Fund may be used,
solely at the direction of Freddie Mac:
(A) to reimburse Freddie Mac on each redemption date for amounts
paid under the Credit Enhancement Agreement in respect of principal of the
Loan in order to effect the optional redemption of the Bonds pursuant to
the Indenture.
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(B) to reimburse Freddie Mac for amounts paid under the Credit
Enhancement Agreement in respect of principal of the Loan in order to
effect the mandatory redemption of Bonds pursuant to the Indenture.
(C) to reimburse Freddie Mac for amounts paid under the Credit
Enhancement Agreement in respect of interest on the Loan.
(D) to reimburse Freddie Mac for amounts paid under the Credit
Enhancement Agreement for payment of the Purchase Price of Bonds pursuant
to the Indenture.
(E) if a default has occurred and is continuing under this Agreement
or any other Borrower Document, for any other use related to the Project
approved in writing by Freddie Mac.
(iii) Any amounts remaining in the Principal Reserve Fund after
payment in full of the principal of and interest on the Bonds and payment
in full of the fees, charges and expenses of the Trustee and other amounts
required to be paid by the Owner under the Indenture or any other Borrower
Document, including but not limited to, any rebate amount due and payable
and any fees payable to the Issuer or Freddie Mac, shall be paid to the
Owner.
(iv) Amounts on deposit in the Principal Reserve Fund shall be
applied to reimburse Freddie Mac for amounts paid under the Credit
Enhancement Agreement in order to effect the redemption of Bonds, and the
corresponding reduction of amounts owed under the Note. During a Floating
Rate Period, and subject to Section 3.1(g) hereof, the Owner may request,
with the consent of Freddie Mac, that the Trustee redeem Bonds in
accordance with the Indenture, and amounts then on deposit in the
Principal Reserve Fund shall be applied to reimburse Freddie Mac for
amounts paid under the Credit Enhancement Agreement to effect such
redemption. The Owner acknowledges and agrees that the Loan shall not be
deemed to have been amortized by reason of deposits into the Principal
Reserve Fund until such deposits have been withdrawn from the Principal
Reserve Fund and applied to the reimbursement of Freddie Mac for amounts
paid in connection with the redemption of Bonds as provided in the
Indenture.
(v) Amounts on deposit in the Principal Reserve Fund shall be
invested and reinvested by the Servicer in (A) (i) non-AMT tax-exempt
obligations rated in the highest short term rating category by Moody's or
S&P or (ii) with the approval of the Servicer and Bond Counsel, other
investments permitted under the Indenture which, in either case, shall
mature or be subject to tender or redemption at par on or prior to the
earlier of (1) six months from the date of investment or (2) the date
such monies are needed for the purposes hereof or (B) with the approval
of the Servicer, Bond Counsel and Freddie Mac, a guaranteed investment
contract rated in the highest short term rating category by Moody's or
S&P, as applicable.
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(c) The interest rate on the Bonds may be adjusted from the Floating Rate
to the Fixed Rate, in each case as provided in, and subject to the terms and
conditions of, the Indenture and this Agreement.
(d) If Freddie Mac so directs, (i) at any time after the occurrence of any
Event of Default or (ii) at any time after Freddie Mac determines in its sole
discretion to remove the then-existing Remarketing Agent and to designate a new
Remarketing Agent, the Owner shall immediately take such action as is required
under the Remarketing Agreement and consistent with the Indenture to remove the
existing Remarketing Agent and replace such Remarketing Agent, without
interruption of service, with a Remarketing Agent acceptable to Freddie Mac in
its discretion.
(e) The Owner agrees that it will not change the Remarketing Agent, or
appoint or engage any Person as Remarketing Agent or change the fees payable to
any Remarketing Agent, without Freddie Mac's prior written consent.
(f) Notwithstanding any provisions of the Borrower Documents to the
contrary, the Owner may not elect to replace the Credit Enhancement Agreement
with an Alternate Security or to convert the Bonds to a Fixed Rate without
credit enhancement (a) at any time prior to the 15th anniversary of the Closing
Date unless the Owner shall pay to Freddie Mac immediately prior to such
substitution, in addition to any other amounts due under this Agreement and the
other Borrower Documents, an amount equal to the Prepayment/Substitution Premium
calculated based on the assumption that the Loan is being prepaid in full on the
day immediately preceding the effective date of the Alternate Security and (b)
at any time, unless (i) the Owner shall have received a written statement from
Freddie Mac to the effect the Freddie Mac has been paid in full for all fees,
expenses and other amounts owed to Freddie Mac under this Agreement and all
Freddie Mac Reimbursement Amounts have been paid in full (including any
Prepayment/Substitution Premium), which written statement (if accurate) Freddie
Mac agrees to deliver to Owner upon request, and (ii) the provision of any
Alternate Security shall result in a rating on the Bonds by the Rating Agency
required by the definition of the term "Alternate Security" in the Financing
Agreement. If the Owner provides notice to Freddie Mac that it wishes to provide
an Alternate Security and thereafter does not provide an Alternate Security, the
Owner agrees to pay all costs incurred by Freddie Mac in connection with
arranging for the proposed Alternate Security, including attorneys' fees.
(g) (i) The Owner may not elect to voluntarily prepay the Loan, in whole
or in part, unless the Owner has given Freddie Mac at least 30 days prior
notice of its intention to make such prepayment and, on the Business Day
preceding the effective date of such prepayment, the Owner shall have:
(A) deposited with Freddie Mac the amount of principal being
prepaid and all interest accrued thereon (and on the Bonds that will
be redeemed as a result of the prepayment) through the date of such
prepayment;
(B) paid to Freddie Mac the Prepayment/Substitution Premium,
if the prepayment is effective before the 15th anniversary of the
Closing Date, and all other sums due to Freddie Mac hereunder at the
time of such prepayment; and
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(C) deposited with the Trustee Available Moneys in the amount
of any prepayment premium payable in connection with the optional
redemption of the Bonds.
(ii) A Prepayment/Substitution Premium shall be due upon an
involuntary prepayment of all or part of the Loan, as follows:
(A) Upon acceleration of the Note under Section 10.01 of the
Indenture after an Event of Default;
(B) Upon any application by Freddie Mac of any collateral or
other security to the repayment of the Obligations before the
fifteenth anniversary of the Closing Date and in the absence of
acceleration, which shall be deemed to be an involuntary partial
prepayment by the Owner with respect to which Owner shall pay the
Prepayment/Substitution Premium for purposes of this subsection
(g)(ii).
(iii) No Prepayment/Substitution Premium shall be payable with
respect to any prepayment occurring as a result of the application of any
insurance proceeds or condemnation award under the Reimbursement Mortgage;
provided Freddie Mac shall have consented to such prepayment.
(iv) Any prepayment, whether voluntary or involuntary, shall not be
credited against the unpaid principal balance of the Loan until the date
on which the resulting redemption of a like amount of Bonds is completed.
(v) The Owner recognizes that any prepayment of the unpaid principal
balance of the Loan, whether voluntary or involuntary or resulting from a
default by the Owner, and any replacement of Freddie Mac as Credit
Instrument Obligor under the Indenture, will result in Freddie Mac's
incurring loss, including loss of income, additional expense and
frustration or impairment of Freddie Mac's ability to meet its commitments
to third parties. The Owner agrees to pay to Freddie Mac upon demand
damages for the detriment caused by any prepayment, and agrees that it is
extremely difficult and impractical to ascertain the extent of such
damages. The Owner therefore acknowledges and agrees that the formula for
calculating the Prepayment/Substitution Premium represents a reasonable
estimate of the damages Freddie Mac will incur because of a prepayment or
replacement of Freddie Mac as Credit Instrument Obligor and that its
obligation to pay such damages will be satisfied upon the payment of the
Prepayment/Substitution Premium.
(vi) The Owner further acknowledges that the Prepayment/Substitution
Premium provisions of this Agreement are a material part of the
consideration for the Credit Enhancement Agreement, and acknowledges that
the terms of this Agreement are in other respects more favorable to the
Owner as a result of the Owner's voluntary agreement to the
Prepayment/Substitution Premium provisions.
(h) The Owner agrees to pay to the Servicer for deposit to the Cap Fee
Escrow monthly on the first (1st) day of each month an amount that will result
in the accumulation by the expiration of the Cap, without regard to earnings in
the Cap Fee Escrow, of funds expected to be
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sufficient to pay in full the cost of an extension or renewal of the Cap
Agreement on the same terms for an additional five (5) years, or such lesser
term as may be expressly approved by Freddie Mac in writing at its sole
discretion. During the first twelve (12) months after the date of this
Agreement, the monthly deposit shall be equal to a fraction, the numerator of
which is 125% of the cost of the first Cap Agreement and the denominator of
which is sixty (60). Thereafter, the amount of the monthly deposit shall be
recomputed by Freddie Mac annually based upon the Servicer's estimation of the
cost of such extension or renewal. Amounts on deposit in the Cap Fee Escrow
shall be invested and reinvested by the Servicer in Investment Obligations which
shall mature or be redeemable at par on the earlier of (i) six months from the
date of investment or (ii) the date such monies are needed for the purposes
hereof.
(i) Amounts received by the Owner from the Counterparty pursuant to the
Cap Agreement shall be paid by the Counterparty to Freddie Mac, or if designated
by Freddie Mac, to the Servicer, and if paid to the Owner, shall be paid by the
Owner to the Servicer immediately and until paid to the Servicer, shall be held
in trust for the benefit of Freddie Mac.
(j) Each of the covenants of the Owner set forth in the Borrower Documents
are hereby incorporated in this Agreement by this reference as if fully set
forth herein. The Owner shall comply with all terms and conditions of each
Borrower Document to which it is a party or by which it is bound and shall use
its best efforts to cause the Trustee and the Issuer at all times to comply with
the terms of the Bond Documents to which either of them is a party.
(k) The Owner shall not:
(i) take, or omit to take, any action that, if taken or omitted,
would jeopardize or adversely affect the tax-exempt status of the
interest payable on the Bonds;
(ii) acquire any real or personal property other than the Project
and assets (such as accounts) related to the operations and
maintenance of the Project or engage in any business or activity
other than in connection with the ownership, management and
operation of the Project;
(iii) except as permitted in the Reimbursement Mortgage, amend,
modify, supplement or waive any provision of its partnership
agreement in any manner without the prior written consent of Freddie
Mac;
(iv) dissolve or liquidate in whole or in part;
(v) merge or consolidate with any Person;
(vi) enter into, or permit to exist, any subordinate financing with
respect to the Project without the prior written consent of Freddie
Mac; or
(vii) voluntarily prepay the Loan except in accordance with Section
3.1(g) hereof.
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SECTION 3.2. REIMBURSEMENT AND REPLENISHMENT OBLIGATIONS OF THE
OWNER.
(a) The Owner shall:
(i) By 2:00 p.m. Washington, D.C. time, on the date of each Credit
Advance, reimburse Freddie Mac for each Credit Advance, by payment to the
Servicer for immediate remittance to Freddie Mac, of the amount of that
Credit Advance.
(ii) Reimburse Freddie Mac for each Liquidity Advance, by payment to
the Servicer for remittance to Freddie Mac of the amount of that Liquidity
Advance on the first to occur of:
(A) 90 days following the Liquidity Advance;
(B) the effective date of any Alternate Security;
(C) if the related Purchased Bonds are remarketed by the
Remarketing Agent, the date on which the proceeds of that
remarketing are delivered to the Trustee or the Tender Agent;
(D) the date on which the related Purchased Bonds are redeemed
or otherwise paid in full and canceled;
(E) the date on which the Credit Enhancement Agreement
expires;
(F) the maturity date of the Note; or
(G) the date the principal of and interest on the Note are
accelerated.
(iii) After first paying all amounts payable pursuant to
clause (i) above, by 2:00 p.m., Washington, D.C. time, on each date on
which the Servicer shall have made a Withdrawal, replenish any Withdrawal
by paying to the Servicer for deposit into the Principal Reserve Fund, the
amount of such Withdrawal. For purposes of this subsection (iii), it is a
condition precedent to the obligation of the Owner to replenish a
Withdrawal that the Owner be notified of such Withdrawal by the Servicer.
A prior billing by the Servicer to the Owner for a reimbursement
obligation that remains unpaid by the Owner shall constitute sufficient
notice for purposes of the foregoing sentence.
(b) Subject to Section 7.3, the Owner's obligation to reimburse
Freddie Mac for amounts described in clause (i) of Section 3.2(a) shall be
reduced as and to the extent that amounts paid by the Owner to the
Servicer in respect of interest on the Loan or amounts deposit in the
Principal Reserve Fund are applied to such reimbursement.
(c) The Owner's obligation to reimburse Freddie Mac for amounts
described in clause (ii) of Section 3.2(a) shall be reduced as and to the
extent that remarketing proceeds become available and are applied to such
reimbursement.
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(d) The Owner agrees to pay interest on any amounts due to Freddie
Mac or the Servicer, as applicable, pursuant to Section 3.2(a) (i) or
(iii) from the date such amounts are paid by Freddie Mac or withdrawn from
the Principal Reserve Fund until payment or replenishment by the Owner in
full (after as well as before judgment), at the Default Rate.
SECTION 3.3. FREDDIE MAC CREDIT ENHANCEMENT FEES; LIQUIDITY USE FEE;
SERVICING. In addition to any other fees and amounts payable to Freddie Mac
under the Financing Agreement, this Agreement or the Loan Documents, the Owner
shall in consideration of Freddie Mac providing the Credit Enhancement
Agreement, pay the following fees to Freddie Mac and the Servicer with respect
to the Credit Enhancement Agreement, the Loan and the Bonds:
(a) On or before the Closing Date, Freddie Mac shall be paid an
application fee in the amount of 0.1% of the principal amount of the Bonds,
together with its expenses and the fees and expenses of its outside counsel by
wire transfer in accordance with instructions provided by Freddie Mac. The
Freddie Mac Credit Enhancement Fee shall be payable to Freddie Mac (i) in
advance on the Closing Date, in an amount equal to one twelfth of the Freddie
Mac Credit Enhancement Fee prorated for the period from the Closing Date to the
last day of the month during which the Closing Date shall have occurred and (ii)
in arrears on the first day of each month commencing on the first day of the
second full month following the month in which the Closing Date occurs in an
amount equal to one twelfth of the Freddie Mac Credit Enhancement Fee. The Owner
shall have a credit on each monthly payment date for an amount equal to one
twelfth of the Freddie Mac Credit Facility Fee times the balance in the
Principal Reserve Fund held by the Servicer immediately prior to such monthly
payment date. Freddie Mac shall also be entitled to be paid all amounts accrued
during the immediately preceding calendar month as the Liquidity Use Fee
pursuant to paragraph (b) hereof.
(b) The Owner shall pay to the Servicer, for the account of and remittance
to Freddie Mac, the Liquidity Use Fee with respect to each Liquidity Advance on
the first day of each month and on the date the Liquidity Advance is fully
reimbursed. The Liquidity Use Fee shall be payable so long as any Liquidity
Advance remains unreimbursed, in whole or in part, to Freddie Mac as provided in
Section 3.2 of this Agreement; provided, however, if the Liquidity Advance is
not fully reimbursed by the 90th day following the date of the Liquidity
Advance, the Owner shall be in default hereunder and thereafter the Liquidity
Use Fee shall be calculated using the Default Rate in place of the Liquidity
Rate for the period commencing on the 90th day following the Liquidity Advance
to the date the Liquidity Advance together with interest accrued thereon is
fully reimbursed. The Liquidity Use Fee shall not be due to Freddie Mac to the
extent Freddie Mac is reimbursed for funds provided under the Credit Enhancement
Agreement by 2:00 p.m., Washington, D.C. time (subject to the provisions of
Section 3.2 of this Agreement), on the date on which a Liquidity Advance is
made. Any reimbursement payment received after 2:00 p.m., Washington, D.C. time,
on such date shall be treated as if it were paid at 9:00 a.m., Washington, D.C.
time, on the next Business Day. The Liquidity Use Fee shall not be due during
any Fixed Rate Period, but shall be due during any period the Bonds bear
interest at the Floating Rate. The Liquidity Use Fee shall be otherwise due and
payable as provided in this Agreement.
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(c) The Owner shall pay to the Servicer the Servicing Fee (i) in advance
on the Closing Date, prorated for the period from the Closing Date to the last
day of the month in which the Closing Date shall have occurred and (ii) in
arrears, on the first day of each month, commencing on the first day of the
second full month following the month in which the Closing Date occurs.
SECTION 3.4. INDEMNIFICATION. The Owner shall indemnify and hold harmless
Freddie Mac and its officers, directors, officials, employees, agents,
attorneys, accountants, advisors, consultants and servants, past, present or
future, from and against (a) any and all claims by or on behalf of any Person
arising from any cause whatsoever in connection with the Loan, the Indenture,
any of the Borrower Documents, the Servicing Agreement, the Project, the
Remarketing Agreement, this Agreement, the Credit Enhancement Agreement or the
issuance of the Bonds; (b) any and all claims arising from any act or omission
of the Owner or any of its agents, contractors, servants, employees or licensees
in connection with the Loan, the Indenture, any of the Borrower Documents, the
Credit Enhancement Agreement, the Servicing Agreement, the Project, the
Remarketing Agreement, this Agreement or the issuance of Bonds; and (c) all
costs, counsel fees, expenses or liabilities incurred in connection with any
such claim or proceeding brought thereon; except that the Owner shall not be
required to indemnify any person for damages caused by the gross negligence,
willful misconduct or unlawful acts of such person or any such claims, costs,
expenses or liabilities arising or resulting from Freddie Mac's failure to fund
under the Credit Enhancement Agreement in accordance with its terms. In the
event that any action or proceeding is brought or claim made against Freddie
Mac, or any of its officers, directors, officials, employees, agents, attorneys,
accountants, advisors, consultants or servants, with respect to which indemnity
may be sought hereunder, the Owner, upon written notice thereof from the
indemnified party, shall assume the investigation and defense thereof, including
the employment of counsel reasonably acceptable to Freddie Mac and the payment
of all related expenses. The indemnified party shall have the right to approve a
settlement to which it is a party and to employ separate counsel in any such
action or proceedings and to participate in the investigation and defense
thereof, and the Owner shall pay the reasonable fees and expenses of such
separate counsel. The provisions of this Section shall survive the termination
of this Agreement.
SECTION 3.5. PURCHASED BONDS. The Owner acknowledges that Purchased Bonds
will be purchased by the Trustee as agent for and on behalf of the Owner and
registered in the name of the Owner, to the extent that Freddie Mac has provided
the funds to purchase such Purchased Bonds, and that such Purchased Bonds will
be pledged to Freddie Mac pursuant to the Pledge Agreement.
SECTION 3.6. LIABILITY OF THE OWNER. The obligation of the Owner to repay
the Loan and to make any and all payments to Freddie Mac required by this
Agreement or any other Borrower Document shall not be subject to diminution by
set-off, recoupment, counterclaim, abatement or otherwise. Until the latest of
the date on which (i) all the Bonds have been fully paid (or provision made
therefor as a legal defeasance) in accordance with the Indenture, (ii) the
Credit Enhancement Agreement has been terminated in accordance with its terms,
and (iii) all amounts due and owing Freddie Mac under this Agreement or any
other Borrower Document have been paid, the Owner (a) shall continue to have the
obligation to repay the Loan as aforesaid, and (b)
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shall perform and observe all of its other obligations contained in this
Agreement, the Borrower Documents and all other documents contemplated hereby or
thereby.
The obligations of the Owner under this Agreement shall be absolute,
unconditional and irrevocable and shall be paid and performed strictly in
accordance with the terms of this Agreement under all circumstances whatsoever,
including, without limitation, the following circumstances: (a) any invalidity
or unenforceability of any of the Borrower Documents or any other agreement or
instrument related to the Borrower Documents; (b) any amendment or waiver of, or
any consent to or departure from, the terms of the Credit Enhancement Agreement,
any of the other Borrower Documents, or any other agreement or instrument
related to the Borrower Documents, any extensions of time or other modifications
of the terms and conditions for any act to be performed in connection with the
Credit Enhancement Agreement; (c) the existence of any claim, set-off, defense
or other right which the Owner may have at any time against Freddie Mac, the
Servicer, the Issuer, the Trustee, the Tender Agent, the Remarketing Agent, or
any other Person, whether in connection with this Agreement, any of the other
Borrower Documents, the Project, or any unrelated transaction; (d) the surrender
or impairment of any security for the performance or observance of any of the
agreements or terms of this Agreement or the other Borrower Documents; (e)
defect in title to the Project, any acts or circumstances that may constitute
failure of consideration, destruction of, damage to or condemnation of the
Project, commercial frustration of purpose, or any change in the tax or other
laws of the United States of America or of any State or any political
subdivision of the same, (f) the breach by Freddie Mac, the Servicer, the
Issuer, the Trustee, the Tender Agent, the Remarketing Agent, or any other
Person of its obligations under any Borrower Document or (g) any other
circumstance, happening or omission whatsoever.
SECTION 3.7. NEITHER FREDDIE MAC NOR SERVICER LIABLE. Neither Freddie Mac,
the Servicer nor any of their respective officials, officers, directors,
members, shareholders, agents, independent contractors or employees shall be
responsible for or liable to the Owner or any of its officials, officers,
directors, shareholders, members, partners, affiliates, independent contractors
or employees for (i) any act or omission of Freddie Mac, the Servicer or any
other Person made in good faith with respect to the validity, sufficiency,
accuracy or genuineness of documents, or of any endorsement(s) thereon (except
for documents and endorsements provided by Freddie Mac or the Servicer, as
applicable), even if such documents should be in fact prove to be in any or all
respects invalid, insufficient, fraudulent or forged; (ii) the validity or
sufficiency of any instrument transferring or assigning or purporting to
transfer or assign the Credit Enhancement Agreement or the rights or benefits
under the Credit Enhancement Agreement or proceeds under the Credit Enhancement
Agreement, in whole or in part, that may prove to be invalid or ineffective for
any reason; (iii) for failure of the Trustee to comply fully with all conditions
required in order to effect any applicable Advance; (iv) for errors, omissions,
interruptions or delays in transmission or delivery of any messages, by mail,
cable, telegraph, telex, telecopier or otherwise; (v) for any loss or delay in
the transmission or otherwise of any document or draft required in order to make
any Advance; and (vi) for any consequences arising from causes beyond the
control of Freddie Mac or the Servicer, as applicable. In furtherance and not in
limitation of the foregoing, Freddie Mac (or the Servicer) may accept documents
that appear on their face to be valid and in order, without any responsibility
for further investigation. None of
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the above shall affect, impair, or prevent the vesting of any rights or powers
of Freddie Mac or the Servicer under this Agreement.
In furtherance and extension and not in limitation of the specific
provisions set forth above, any action taken or omitted by Freddie Mac or the
Servicer under or in connection with any Borrower Document or any related
certificates or other documents, if taken or omitted in good faith, shall be
binding upon the Owner, the Trustee, the Issuer, the Remarketing Agent and the
Tender Agent and shall not under any circumstance put Freddie Mac under any
resulting liability to any of them.
SECTION 3.8. WAIVERS AND CONSENTS. THE OWNER AGREES TO BE BOUND BY THIS
AGREEMENT AND, TO THE EXTENT PERMITTED BY LAW, (A) WAIVES AND RENOUNCES ANY AND
ALL REDEMPTION AND EXEMPTION RIGHTS AND THE BENEFIT OF ALL VALUATION AND
APPRAISAL PRIVILEGES AGAINST THE INDEBTEDNESS AND OBLIGATIONS EVIDENCED BY THIS
AGREEMENT AND THE OTHER BORROWER DOCUMENTS OR BY ANY EXTENSION OR RENEWAL OF
THIS AGREEMENT AND THE OTHER BORROWER DOCUMENTS; (B) WAIVES PRESENTMENT AND
DEMAND FOR PAYMENT, NOTICES OF NONPAYMENT AND OF DISHONOR, PROTEST OF DISHONOR
AND NOTICE OF PROTEST; (C) WAIVES ALL NOTICES IN CONNECTION WITH THE DELIVERY
AND ACCEPTANCE OF THIS AGREEMENT AND THE OTHER BORROWER DOCUMENTS AND ALL OTHER
NOTICES IN CONNECTION WITH THE PERFORMANCE, DEFAULT OR ENFORCEMENT OF THE
PAYMENT OF ANY OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER BORROWER DOCUMENTS
EXCEPT AS REQUIRED BY THIS AGREEMENT OR THE OTHER BORROWER DOCUMENTS; (D) AGREES
THAT ITS LIABILITIES UNDER THIS AGREEMENT AND THE OTHER BORROWER DOCUMENTS SHALL
BE UNCONDITIONAL AND WITHOUT REGARD TO THE LIABILITY OF ANY OTHER PERSON AND (E)
AGREES THAT ANY CONSENT, WAIVER OR FORBEARANCE UNDER THIS AGREEMENT AND THE
OTHER BORROWER DOCUMENTS WITH RESPECT TO AN EVENT SHALL OPERATE ONLY FOR SUCH
EVENT AND NOT FOR ANY SUBSEQUENT EVENT.
SECTION 3.9. SUBROGATION. The Owner acknowledges that, to the extent of
any payment made by Freddie Mac pursuant to the Credit Enhancement Agreement,
Freddie Mac is to be fully subrogated to the extent of such payment and any
additional interest due on any late payment, to the rights of the Bondholders to
any moneys paid or payable under the applicable Bonds and all security therefor
under the Indenture. The Owner agrees to such subrogation and further agrees to
execute such instruments and to take such actions as, in the judgment of Freddie
Mac, are necessary to evidence such subrogation and to perfect the rights of
Freddie Mac to the extent necessary to provide reimbursement hereunder.
SECTION 3.10. PAYMENT OF COSTS, FEES AND EXPENSES. In addition to the
Owner's obligations set forth in Section 3.2 of this Agreement and in the other
Borrower Documents, the Owner hereby agrees absolutely and unconditionally to
pay, or cause to be paid, to Freddie Mac or the Servicer, as the case may be, or
in the case of subsection (v) below, to the appropriate
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governmental entity, in each case within ten (10) Business Days following
written demand, the following:
(i) any and all fees, costs, charges and expenses (including the
fees and expenses of attorneys, accountants and other experts, but not
including additional compensation for cost or use of funds in paying
Advances) which Freddie Mac or the Servicer may pay or incur in connection
with any payment under the Credit Enhancement Agreement, including
payments of any fees and charges in connection with any accounts
established to facilitate payments under the Credit Enhancement Agreement,
or the performance of Freddie Mac's obligations under the Credit
Enhancement Agreement;
(ii) the amount of any fees, costs, or charges or expenses
(including the fees and expenses of attorneys, accountants and other
experts) incurred by Freddie Mac or the Servicer in connection with the
administration or enforcement or preservation of rights or remedies under
this Agreement or any of the Borrower Documents or in connection with the
foreclosure upon, sale of or other disposition of any security granted
pursuant to the Borrower Documents;
(iii) other than Advances or Withdrawals, any payments or advances
made by Freddie Mac or the Servicer on behalf of the Owner pursuant to any
of the Borrower Documents;
(iv) all costs and expenses incurred in connection with or related
to the execution and delivery of the Credit Enhancement Agreement, the
sale of the Bonds or the Obligations and the preparation and review of
this Agreement and the other Borrower Documents and the consummation of
the transactions contemplated hereby and thereby, including fees payable
to any agencies rating the Bonds or the Obligations, any tax or
governmental charge imposed in connection with the execution and delivery
of the Credit Enhancement Agreement and the fees and disbursements of
Freddie Mac's and the Servicer's counsel and accountants, including fees
and expenses relating to any (a) amendments, consents or waivers to this
Agreement or any of the Borrower Documents (whether or not any such
amendments, consents or waivers are entered into), (b) requests by the
Owner for Freddie Mac to consider providing credit enhancement for any
other bond issue, (c) any proposed Cap arrangement or proposed investments
under the Indenture, (d) any adjustment or conversion of the interest rate
on the Bonds, (e) any tender, purchase, refunding, reoffering or
remarketing of the Bonds, (f) collection, disbursement or application of
insurance or condemnation awards, proceeds, damages or other payments
including, without limitation, all costs incurred in connection with the
application of insurance or condemnation awards to restore or repair the
Project, including, reasonable appraiser fees and (g) any fees or expenses
incurred by the Trustee, the Issuer, Freddie Mac or the Servicer in
connection with any audit of the Project or the Bonds by the Internal
Revenue Service;
(v) together with interest, fines and penalties, any and all
documentary stamp, recording, transfer, mortgage, intangible, filing or
other taxes or fees and any and all liabilities with respect to or
resulting therefrom which may be payable in connection with
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the execution and delivery of, or the consummation or administration of
any of the transactions contemplated by, or any amendment, supplement, or
modification of, or any waiver or consent under or in respect of, or any
filing of record, recordation, release or discharge of, this Agreement,
any Borrower Document, and any such other documents; and
(vi) interest on any and all amounts referred to in paragraphs (i)
through (iv) of this Section 3.10 from the date when due under this
Agreement until payment of all such amounts in full, payable at the
Default Rate.
ARTICLE IV
INTEREST RATE PROTECTION
SECTION 4.1. INTEREST RATE PROTECTION.
(a) To protect against fluctuations in interest rates, the Owner shall
make arrangements for an interest rate cap (a "Cap") to be in place and
maintained at all times with respect to the Bonds, during any period in which
the Bonds bear interest at the Floating Rate. If the Bonds are issued bearing
interest at the Floating Rate, the Cap must be in place on the Closing Date for
a period beginning on the Closing Date and ending not earlier than the date
which is the fifth (5th) anniversary of the Closing Date (the "Initial Cap
Period"). A Cap also shall be in place and maintained at all times during any
other period that the Floating Rate is in effect (a "Subsequent Cap") whether or
not a default shall have occurred under the applicable Cap Documents (as defined
below) and shall be in place on the effective date of a conversion to a Floating
Rate. A Subsequent Cap must be fully executed and delivered on terms and
conditions consistent with this Agreement and except as permitted by Section
4.2(f) shall have a Strike Rate (as hereinafter defined) equal to the Strike
Rate for the Cap initially provided hereunder. A Subsequent Cap must have an
effective date not later than the day following the last day of the Initial Cap
Period or any Subsequent Cap Period. Any Subsequent Cap must expire on the
earliest of (1) a date which is not earlier than the fifth (5th) anniversary of
the effective date of such Subsequent Cap, (2) the date on which the Credit
Enhancement Agreement terminates or (3) the maturity date of the Bonds. Each Cap
shall be secured and documented on terms and conditions approved by, and with a
Counterparty acceptable to, Freddie Mac. Prior to the Owner seeking any bids
from any Counterparty for a Subsequent Cap, the Owner shall obtain the prior
written consent of Freddie Mac. Each Cap shall be evidenced and governed by such
documents (the "Cap Documents") as shall be acceptable to, and which shall in
form and content be acceptable to, Freddie Mac. Not later than the day following
the last day of the Initial Cap Period or any Subsequent Cap Period, the Owner
shall ensure that either (a) a Subsequent Cap is in full force and effect if the
Bonds bear interest at the Floating Rate or (b) the Bonds have been converted to
a Fixed Rate, in each case, in accordance with this Agreement and the other
Borrower Documents.
(b) Notwithstanding any provision hereof or in the Bond Documents to the
contrary, the Owner shall not cause any adjustment of the rate on the Bonds to a
Fixed Rate (with the intention of having the Credit Enhancement Agreement remain
in effect for the benefit of the
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Bonds), without the prior written consent of Freddie Mac. Freddie Mac does not
intend to grant such consent unless all of the following conditions are
satisfied:
(i) The sum of the Fixed Rate on the Bonds, the Bond Fee Component,
the Freddie Mac Credit Enhancement Fee and the Servicing Fee must be less
than or equal to the Underwriting Rate.
(ii) In the case of an adjustment to the Fixed Rate that ends on a
day prior to the maturity date of the Bonds, the Fixed Rate Period must be
five (5) years or more.
(iii) The Project's and the Other Project's Combined Debt Service
Coverage Ratio, as determined by Freddie Mac, must not be less than
1.65:1.
SECTION 4.2. CAP AGREEMENT TERMS.
(a) Cap Agreement Payment Terms. Under each Cap arrangement, the
Counterparty shall pay a floating amount, computed in accordance with the Cap
Documents, to the extent that the BMA Index Rate exceeds the fixed cap rate (the
"Strike Rate"). Except as otherwise provided in Section 4.2(f), the Strike Rate
must be equal to or less than 300 basis points over the BMA Index Rate. The BMA
Index Rate for the Cap initially provided for this purpose shall be the lower of
(i) the BMA Index Rate as of the bid date of the Cap or (ii) the average of the
BMA Index Rate for the six (6) week period prior to and including the bid date
of the Cap. The Cap must provide for monthly settlement on the first day of each
month. If the BMA Index Rate is not published on any reset date under the Cap,
the Counterparty must determine an appropriate index as a substitute for the BMA
Index Rate on each such reset date. The index so determined shall provide a rate
of interest that is equivalent to the prevailing rate of interest borne by bonds
that are rated in the highest short-term rating category by Moody's and S&P in
respect of issuers of not less than five "high grade" component issuers selected
by the Counterparty which shall include, without limitation, issuers of general
obligation bonds, and that are subject to tender by holders thereof for purchase
on not more than seven (7) days notice and the interest on which is (a)
variable, determined on a weekly basis, (b) excludable from gross income for
federal income tax purposes, and (c) not subject to a "minimum tax" or similar
tax unless all tax-exempt bonds are subject to such tax.
(b) Cap Assignment; Delivery of Cap Payments. The Owner shall assign each
Cap in effect from time to time pursuant to this Agreement to Freddie Mac
pursuant to the Cap Assignment, which Cap Assignment must be acceptable in form
and content to Freddie Mac. The Counterparty shall make any and all payments
under the Cap (and the Cap Documents and the Cap Assignment shall direct the
Counterparty to make any such payments) directly to the Servicer, which shall
pay to the Owner such Cap payments provided that the Owner is not in default
hereunder.
(c) Termination. The Owner shall neither terminate, transfer nor consent
to any transfer of any existing Cap without Freddie Mac's prior written consent
as long as the Owner is required to maintain a Cap pursuant to this Agreement.
Prior to termination of an existing Cap on a date prior to its scheduled
termination date, the Owner shall, so long as the Floating Rate is in effect,
obtain a new Cap satisfying the terms of this Agreement, which new Cap must be
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effective on or before or on the date immediately following the last date on
which the existing Cap is in effect.
(d) Performance Under Cap Documents. The Owner agrees to comply fully
with, and to otherwise perform when due, its obligations under, all Cap
Documents and all other agreements evidencing, governing or securing any Cap
arrangement. The Owner shall not exercise without Freddie Mac's prior written
consent, and shall exercise at Freddie Mac's direction, any rights or remedies
under any Cap Document, including without limitation the right of termination.
(e) Amount of Bonds Covered by Cap. The notional amount of any Cap shall
be based on the principal amount of the Bonds outstanding less the amount of
monies in the Principal Reserve Fund immediately prior to the commencement of a
Cap Period.
(f) Right to Purchase Subsequent Cap Above Strike Rate. The Owner may, by
giving Freddie Mac and the Servicer at least thirty (30) days written notice
prior to the purchase of a Subsequent Cap, purchase such Subsequent Cap based on
a Strike Rate that is in excess of the Strike Rate required to be maintained
pursuant to Section 4.2(a) of this Agreement, provided that there is deposited
with, and held by, the Servicer in the Cap Reserve Account as additional
security to Freddie Mac an amount (the "Cap Deposit") determined by Freddie Mac
in its discretion, which amount must be sufficient to cover any payment
shortfall over the term of the Subsequent Cap based on the difference between
the Strike Rate required to be maintained pursuant to Section 4.2(a) of this
Agreement, and the Strike Rate provided for in the Subsequent Cap to be
acquired. The methodology for determining the amount of the Cap Deposit shall be
in Freddie Mac's discretion. The Cap Deposit held by the Servicer shall be
maintained, invested and disposed of on such terms and conditions as shall be
acceptable to Freddie Mac in its discretion. Provided that the Owner is not in
default under the Loan Documents or that an Event of Default has not occurred
under this Agreement, the Servicer shall release to the Owner monthly on each
Interest Payment Date an amount equal to one-sixtieth (1/60th) of the Cap
Deposit held by the Servicer and shall release to the Owner on the Conversion
Date all amounts held in the Cap Reserve Account. Any earnings in respect of the
Cap Deposit that have accrued shall also, pursuant to the Indenture, be released
by the Servicer to the Owner on each such Interest Payment Date and on the
Termination Date.
(g) Fees to Counterparty. Fees to the Counterparty must be paid in full
upon delivery of the Cap Agreement.
(h) Additional Collateral. The Cap Agreement shall provide unless waived
in writing by Freddie Mac that if the long-term, unsecured and unsubordinated
indebtedness of the Counterparty shall cease to be rated at least Aa3 by Moody's
or AA- by S&P or such indebtedness shall cease to be rated by Moody's or S&P,
then such party's obligations under the Cap Agreement shall be required to be
collateralized on such terms and conditions as are acceptable to Freddie Mac
including without limitation the delivery of cash collateral to a custodian.
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SECTION 4.3. FREDDIE MAC RIGHT TO CONVERT TO FIXED RATE.
(a) If the Counterparty fails to escrow collateral as provided in the Cap
Agreement and as required pursuant to Section 4.2(h), the Owner shall be
required to enter into a Subsequent Cap within thirty (30) days after such
failure to escrow collateral.
(b) At least sixty (60) days prior to the date on which a Cap terminates,
if the Bonds bear interest at the Floating Rate the Owner shall give notice, and
provide evidence satisfactory, to Freddie Mac and the Servicer that it will
either (i) secure a Subsequent Cap or (ii) convert the Bonds to the Fixed Rate,
in each case in accordance with Section 4.1 of this Agreement and the
requirements of the Indenture.
(c) If the Owner fails to deliver a Subsequent Cap as required by Section
4.3(a) hereof, or pursuant to Section 4.3(b) hereof fails to provide the
foregoing notice or satisfactory evidence or if the Owner has indicated that it
will secure a Subsequent Cap and has not provided to Freddie Mac and the
Servicer a copy of such Subsequent Cap which has been executed and delivered
prior to the date required by Section 4.3(a) or, in the case of Section 4.3(b),
at least thirty (30) days prior to the termination date of the existing Cap and
which meets the requirements of this Agreement, Freddie Mac is hereby granted
irrevocably the right, but not the obligation, to either (i) direct the Trustee
on behalf of the Owner that the interest rate on the Bonds be (A) adjusted to a
Fixed Rate pursuant to the Indenture, (B) converted to a Fixed Rate for a Fixed
Rate Period ending on the maturity date of the Bonds pursuant to the Indenture,
or (C) adjusted to, or remain at, the Floating Rate pursuant to the Indenture,
without a Cap being in place or (ii) purchase a Subsequent Cap upon such terms
as it deems satisfactory in its own name or for the account of the Owner with
funds on deposit in the Cap Fee Escrow. If Freddie Mac exercises the foregoing
right, it shall not be deemed to waive its right to declare an Event of Default
under this Agreement because of the Owner's failure to comply with the
requirements of Sections 4.1 and 4.2 of this Agreement. Freddie Mac shall have
the right at any time to revoke any prior direction it may give in connection
with any proposed conversion of the interest rate on the Bonds as contemplated
above in this Section 4.3(c), without waiving any of its rights under this
Agreement. Freddie Mac shall have the further right, in its discretion, to take
no action upon the Owner's failure to provide timely notice or evidence as
required by this Section 4.3 or otherwise to comply with Section 4.1 of this
Agreement, without waiving any of its rights under this Agreement. The Owner
hereby appoints Freddie Mac as the Owner's attorney-in-fact, with full authority
in the place and stead of the Owner and in the name of the Owner or otherwise,
from time to time in Freddie Mac's discretion, to take any action and to execute
any instrument which Freddie Mac may deem necessary or advisable to accomplish
the purposes of this Section 4.3. The Owner agrees that the power of attorney
established pursuant to this Section 4.3 shall be deemed coupled with an
interest and shall be irrevocable.
ARTICLE V
UNIFORM COMMERCIAL CODE SECURITY AGREEMENT
This Agreement is also a security agreement under the Uniform Commercial
Code for the Cap Reserve Account, the Cap Fee Escrow, the Principal Reserve
Funds and all funds and accounts and investments of funds and accounts now or
hereafter held by the Trustee under the
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Indenture (to the extent the Owner retains any interest therein) and by the
Servicer with respect to payments payable under the Loan or the Reimbursement
Security Documents, and all products and cash and non-cash proceeds thereof
(collectively, "UCC Collateral") for all obligations due under this Agreement
and under any of the Borrower Documents, and the Owner hereby grants to Freddie
Mac a security interest in the UCC Collateral. The Owner shall execute and
deliver to Freddie Mac upon Freddie Mac's request, financing statements,
continuation statements, and other account agreements and amendments, in such
form as Freddie Mac may require to perfect or continue the perfection of this
security interest. The Owner shall pay all filing costs and all costs and
expenses of any record searches for financing statements that Freddie Mac may
require. Without the prior written consent of Freddie Mac, the Owner shall not
create or permit to exist any other lien or security interest in any of the UCC
Collateral (other than as created under the Indenture). The Owner covenants and
agrees that it will defend Freddie Mac's rights and security interests created
by this Article against the claims and demands of all Persons. If an Event of
Default has occurred and is continuing, Freddie Mac shall have the remedies of a
secured party under the Uniform Commercial Code, in addition to all remedies
provided by this Agreement or existing under applicable law. In exercising any
remedies, Freddie Mac may exercise its remedies against the UCC Collateral
separately or together and in any order, without in any way affecting the
availability of the other remedies available to Freddie Mac.
ARTICLE VI
EVENTS OF DEFAULT; REMEDIES
SECTION 6.1. EVENTS OF DEFAULT. The occurrence of any one or more
of the following events shall constitute an Event of Default hereunder:
(i) the Owner shall fail to pay when due any amount payable by the
Owner under this Agreement, including, without limitation, any fees, costs
or expenses;
(ii) the Owner shall fail to observe or perform any other term,
covenant, condition or agreement set forth in this Agreement;
(iii) the Owner shall fail to observe or perform any other term,
covenant, condition or agreement set forth in any of the other Borrower
Documents or there shall otherwise occur an "Event of Default" under the
Reimbursement Mortgage or an event of default under any of the other
Borrower Documents (taking into account any applicable notice requirements
and cure periods expressly provided in the applicable document);
(iv) any representation or warranty made by or on behalf of the
Owner in this Agreement, in any other Borrower Document or in any
certificate delivered by the Owner to Freddie Mac or to the Servicer
pursuant to this Agreement or any other Borrower Document shall be
inaccurate or incorrect in any material respect when made or deemed made;
(v) Freddie Mac shall have given the Owner written notice that
Purchased Bonds have not been remarketed as of the ninetieth (90th) day
following purchase by the Trustee on behalf of the Owner and the Owner has
not reimbursed Freddie Mac for the applicable Liquidity Advance and
Liquidity Use Fee or has not paid in full all fees and other amounts due
to Freddie Mac under this Agreement;
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(vi) while the Credit Enhancement Agreement is in effect for the
benefit of the Loan, a Fixed Rate Period expires and the Owner has not
either (i) received the prior written consent of Freddie Mac to a change
in interest mode or the maintenance of the existing mode or (ii) delivered
an Alternate Security in accordance with the terms of the Bond Documents.
or
(vii) an event of default has occurred under either of the Other
Reimbursement Agreements or the Other Reimbursement Mortgage (taking into
account any applicable notice requirements and cure periods expressly
provided in the applicable document).
SECTION 6.2. REMEDIES; WAIVERS.
(a) Remedies. Upon the occurrence of an Event of Default described
in paragraphs (i) through (vii) of Section 6.1, Freddie Mac may declare
all the obligations of the Owner hereunder to be immediately due and
payable, in which case all such obligations shall become due and payable,
without presentment, demand, protest or notice of any kind, including
notice of default, notice of intent to accelerate or notice of
acceleration. In addition to the foregoing, Freddie Mac shall have the
right to take such action at law or in equity, without notice or demand,
as it deems advisable to protect and enforce the rights of Freddie Mac
against the Owner in and to the Project conveyed by the Reimbursement
Mortgage, including, but not limited to, the following actions:
(i) demand cash collateral or Investment Obligations in the full
amount of the obligations under the Bonds whether or not then due and
payable by Freddie Mac under the Credit Enhancement Agreement;
(ii) give written notice to the Trustee stating that an Event of
Default has occurred and is continuing hereunder and directing the Trustee
accelerate or cause the mandatory tender of the Bonds; and
(iii) exercise any rights and remedies available to Freddie Mac
under any of the Borrower Documents.
(b) Waivers. Freddie Mac shall have the right, to be exercised in
its discretion, to waive any Event of Default under this Agreement. Unless
such waiver expressly provides to the contrary, any waiver so granted
shall extend only to the specific event or occurrence which gave rise to
the Event of Default so waived and not to any other similar event or
occurrence which occurs subsequent to the date of such waiver.
SECTION 6.3. NO REMEDY EXCLUSIVE. Unless otherwise expressly provided, no
remedy conferred upon or reserved in this Agreement is intended to be exclusive
of any other available remedy, but each remedy shall be cumulative and shall be
in addition to other remedies given under the Borrower Documents or existing at
law or in equity. No delay or omission to exercise any right or power accruing
under any Borrower Document upon the happening of any event set forth in Section
6.1 shall impair any such right or power or shall be construed to be a waiver of
such event, but any such right and power may be exercised from time to time and
as often as may be deemed expedient. In order to entitle Freddie Mac to exercise
any remedy reserved to Freddie Mac in this Article, it shall not be necessary to
give any notice, other than such notice as may be
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required under the applicable provisions of any of the other Borrower Documents.
The rights and remedies of Freddie Mac specified in this Agreement are for the
sole and exclusive benefit, use and protection of Freddie Mac, and Freddie Mac
is entitled, but shall have no duty or obligation to the Owner, the Trustee, the
Bondholders or otherwise, (a) to exercise or to refrain from any right or remedy
reserved to Freddie Mac hereunder, or (b) to cause the Trustee or any other
party to exercise or to refrain from exercising any right or remedy, available
to it under any of the Borrower Documents.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. COUNTERPARTS. This Agreement may be executed in counterparts
by Freddie Mac and the Owner, and each such counterpart shall be considered an
original and all such counterparts shall constitute one and the same instrument.
SECTION 7.2. AMENDMENTS, CHANGES AND MODIFICATIONS. This Agreement may be
amended, changed, modified, altered or terminated only by a written instrument
or written instruments signed by the parties to this Agreement. No course of
dealing between the Owner and Freddie Mac, nor any delay in exercising any
rights hereunder, shall operate as a waiver of any rights of Freddie Mac
hereunder. Unless otherwise specified in such waiver or consent, a waiver or
consent given hereunder shall be effective only in the specific instance and for
the specific purpose for which given.
SECTION 7.3. PAYMENT PROCEDURE. The Owner agrees that all amounts due to
Freddie Mac under Section 3 of this Agreement shall be paid to the Servicer for
remittance to Freddie Mac pursuant to the Servicing Agreement. All payments to
be made to the Servicer, for the account of Freddie Mac, pursuant to this
Agreement shall be paid in immediately available funds to the Servicer in
accordance with instructions given to the Owner by the Servicer. Except as
otherwise provided above in this Section 7.3, all payments to be made to Freddie
Mac pursuant to this Agreement shall be made in lawful currency of the United
States of America and in immediately available funds to an account designated in
writing by Freddie Mac before 2:00 p.m. (Washington, D.C. time) on the date when
due, unless the Owner is otherwise instructed in writing by Freddie Mac.
Notwithstanding the foregoing, in connection with the Owner's obligation to
reimburse Freddie Mac by 2:00 p.m., Washington, D.C. time for certain payments
made by Freddie Mac as provided in this Section 3 of this Agreement, such
payment will, unless otherwise directed pursuant to this Section 7.3, be deemed
to have been timely made if made in lawful currency of the United States of
America and in immediately available funds to the Servicer, for remittance to
Freddie Mac, to an account designated in writing by the Servicer, before 2:00
p.m., Washington, D.C. time and otherwise in accordance with the requirements of
this Section 7.3.
SECTION 7.4. PAYMENTS ON BUSINESS DAYS. In any case where the date of
payment to Freddie Mac or the expiration of any time period hereunder occurs on
a day which is not a Business Day, then such payment or expiration of such time
period need not occur on such date but may be made on the next succeeding
Business Day with the same force and effect as if made
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on the day of maturity or expiration of such period, except that interest shall
continue to accrue for the period after such date to the next Business Day.
SECTION 7.5. GOVERNING LAW; SEVERABILITY. This Agreement shall be
construed, and the rights and obligations of Freddie Mac and the Owner hereunder
determined, in accordance with federal statutory or common law ("federal law").
Insofar as there may be no applicable rule or precedent under federal law and
insofar as to do so would not frustrate the purposes of any provision of this
Agreement, the local law of the State of Illinois shall be deemed reflective of
federal law. The parties agree that any legal actions between Freddie Mac and
the Owner regarding each party hereunder shall be originated in the United
States District Court in and for the Northern District of Illinois, and the
parties hereby consent to the jurisdiction and venue of said Court in connection
with any action or proceeding initiated concerning this Agreement.
The invalidity or enforceability of any provision of this Agreement shall
not affect the validity of any other provision and all other provisions shall
remain in full force and effect.
SECTION 7.6. NOTICES. All notice, directions, certificates or other
communications hereunder to Freddie Mac, the Owner, or the Servicer shall be
given in accordance with the Reimbursement Mortgage. All notice, directions,
certificates or other communications to the Issuer, the Trustee, the Remarketing
Agent or the Tender Agent shall be given in accordance with the Indenture.
SECTION 7.7. FURTHER ASSURANCES AND CORRECTIVE INSTRUMENTS. To the extent
permitted by law, the parties to this Agreement agree that they will, from time
to time, execute, acknowledge and deliver, or cause to be executed, acknowledged
and delivered, such supplements to this Agreement and such further instruments
as Freddie Mac may request and as may be reasonably required in the opinion of
Freddie Mac or its counsel to effectuate the intention of or facilitate the
performance of this Agreement or any other Borrower Document.
SECTION 7.8. TERM OF THIS AGREEMENT. The term of this Agreement (the
"Term") shall continue in full force and effect, and Owner shall not be released
from liability under this Agreement, until the latest of (a) the Termination
Date, (b) the date on which Freddie Mac has no further liability (accrued or
contingent) under the Credit Enhancement Agreement and (c) the date on which the
Owner shall pay or cause to be paid to Freddie Mac or the Bondholders all
amounts to be paid by the Owner under this Agreement, under the other Borrower
Documents and otherwise with respect to the Obligations. Notwithstanding such
termination, the provisions of Section 3.4 hereof and Section 18 of the
Reimbursement Mortgage shall survive the expiration or termination of this
Agreement.
SECTION 7.9. ASSIGNMENTS; TRANSFERS; THIRD-PARTIES RIGHTS. The Owner shall
not assign this Agreement, or delegate any of its obligations hereunder, without
the prior written consent of Freddie Mac. This Agreement may not be transferred
in any respect without the prior written consent of Freddie Mac. Nothing in this
Agreement shall confer any right upon any Bondholder or any other Person other
than the parties hereto and their successors and permitted assigns.
36
<PAGE>
SECTION 7.10. HEADINGS. Article and section headings used herein
are for convenience of reference only, are not part of this Agreement and are
not to affect the construction of, or to be taken into consideration in
interpreting, this Agreement.
SECTION 7.11. LIMITATION ON PERSONAL LIABILITY.
(a) Except as otherwise provided in this Section 7.11, the Owner shall
have no personal liability under this Agreement or any other Borrower Document
for the payment of the payment obligations or for the performance of any other
obligations of the Owner under the Borrower Documents, and Freddie Mac's only
recourse for the satisfaction or performance of the Obligations shall be Freddie
Mac's exercise of its rights and remedies with respect to the Project and any
other collateral held by Freddie Mac as security for the Obligations. This
limitation on the Owner's liability shall not limit or impair Freddie Mac's
enforcement of its rights against any guarantor of the Obligations.
(b) The Owner shall be personally liable to Freddie Mac for the repayment
of a portion of the Obligations equal to 0 percent of the unpaid principal
balance of this Reimbursement Agreement, plus any other amounts for which Owner
has personal liability under this Section 7.11.
(c) In addition to Owner's personal liability under Section 7.11(b), the
Owner shall be personally liable to Freddie Mac for the repayment of a further
portion of the Obligations equal to any loss or damage suffered by Freddie Mac
as a result of (1) failure of the Owner to pay to Freddie Mac upon demand after
an Event of Default all rents to which Freddie Mac is entitled under Section
3(a) of the Reimbursement Mortgage and the amount of all security deposits
collected by the Owner from tenants then in residence; (2) failure of the Owner
to apply all insurance proceeds and condemnation proceeds as required by the
Reimbursement Mortgage; (3) failure of the Owner to comply with Section 14(d) or
(e) of the Reimbursement Mortgage relating to the delivery of books and records,
statements, schedules and reports or (4) failure of the Owner to pay insurance
premiums for fire, hazard or other insurance required by the Reimbursement
Mortgage.
(d) For purposes of determining the Owner's personal liability under
Section 7.11(b) and Section 7.11(c), all payments made by the Owner or any
guarantor with respect to the Obligations and all amounts received by Freddie
Mac from the enforcement of its rights under the Reimbursement Mortgage shall be
applied first to the portion of the Obligations for which the Owner has no
personal liability.
(e) The Owner shall become personally liable to Freddie Mac for the
repayment of all of the Obligations upon the occurrence of any of the following
Events of Default: (1) the Owner's acquisition of any property or operation of
any business not permitted by Section 33 of the Reimbursement Mortgage; (2) a
Transfer (as defined in the Reimbursement Mortgage) (including, but not limited
to, a lien or encumbrance) that is an Event of Default under Section 21 of the
Reimbursement Mortgage, other than a Transfer consisting solely of the
involuntary removal or involuntary withdrawal of a general partner in a limited
partnership or a manager in a limited liability company; or (3) fraud or
intentional written material misrepresentation by the Owner or any officer,
director, partner, member or employee of the Owner in connection with
37
<PAGE>
the application for or creation of the Obligations or any request for any action
or consent by Freddie Mac.
(f) In addition to any personal liability for the Obligations, the Owner
shall be personally liable to Freddie Mac for (1) the performance of all of the
Owner's obligations under Section 18 of the Reimbursement Mortgage (relating to
environmental matters); (2) the costs of any audit under Section 14(d) of the
Reimbursement Mortgage; (3) any costs and expenses incurred by Freddie Mac in
connection with the collection of any amount for which the Owner is personally
liable under this Section, including fees and out of pocket expenses of
attorneys and expert witnesses and the costs of conducting any independent audit
of the Owner's books and records to determine the amount for which the Owner has
personal liability; and (4) payment to Freddie Mac of any Surplus Proceeds (as
such term is defined in the Reimbursement Mortgage) actually received by the
Owner or the General Partner.
(g) To the extent that the Owner has personal liability under this Section
7.11, Freddie Mac may exercise its rights against the Owner personally without
regard to whether Freddie Mac has exercised any rights against the Project or
any other security, or pursued any rights against any guarantor, or pursued any
other rights available to Freddie Mac under this Agreement, the Reimbursement
Mortgage, any other Borrower Document or applicable law. For purposes of this
Section, the term "Project" shall not include any funds that (1) have been
applied by the Owner as required or permitted by the Reimbursement Mortgage
prior to the occurrence of an Event of Default or (2) the Owner was unable to
apply as required or permitted by the Reimbursement Mortgage because of a
bankruptcy, receivership, or similar judicial proceeding.
SECTION 7.12. CONSENT OF FREDDIE MAC. Whenever Freddie Mac shall have any
right or option to exercise any discretion, to determine any matter, to accept
any presentation or to approve any matter, such exercise, determination,
acceptance or approval shall, without exception, be in Freddie Mac's sole and
absolute discretion.
SECTION 7.13. DISCLAIMER; ACKNOWLEDGMENTS. Approval by Freddie Mac of the
Owner, the Loan, the Bonds or otherwise shall not constitute a warranty or
representation by Freddie Mac as to any matter. Nothing set forth in this
Agreement, in any of the other Borrower Documents or in the subsequent conduct
of the parties shall be deemed to constitute Freddie Mac as the partner or joint
venturer of any Person for any purpose whatsoever.
SECTION 7.14. ENTIRE AGREEMENT. This Agreement and the Borrower Documents
constitute the entire contract between the parties relative to the subject
matter hereof. Any previous agreement among the parties with respect to the
subject matter hereof is superseded by this Agreement and the Borrower
Documents. Nothing in this Agreement or the Borrower Documents, expressed or
implied, is intended to confer upon any party other than the parties hereto and
thereto any rights, remedies, obligations or liabilities under or by reason of
this Agreement or the Borrower Documents; provided, however, that as to Persons
other than Freddie Mac and the Owner that are parties to any of the Borrower
Documents, such Persons shall not have any rights, remedies, obligations or
liabilities under this Agreement or any of the Borrower Documents except under
such Borrower Documents to which such Persons are directly parties to.
38
<PAGE>
SECTION 7.15. SURVIVAL OF REPRESENTATION AND WARRANTIES. All statements
contained in any Borrower Document, or in any certificate, financial statement
or other instrument delivered by or on behalf of the Owner pursuant to or in
connection with this Agreement (including but not limited to any such statement
made in or in connection with any amendment hereto or thereto) shall constitute
representations and warranties made under this Agreement. All representations
and warranties made under this Agreement (i) shall be made and shall be true at
and as of the date of this Agreement and the Closing Date and (ii) shall survive
the execution and delivery of this Agreement, regardless of any investigation
made by Freddie Mac or on its behalf. In addition, the representations set forth
in Section 2.1 (c), (d), (e), (f), (i), (j), (k), (l), (m), (n), (r), (s), (t),
(u) and (v) shall be deemed made on the date of any Advance under the Credit
Enhancement Agreement.
SECTION 7.16. WAIVER OF CLAIMS. IN ORDER TO INDUCE FREDDIE MAC TO EXECUTE
AND DELIVER THE CREDIT ENHANCEMENT AGREEMENT, THE OWNER HEREBY REPRESENTS AND
WARRANTS THAT IT HAS NO CLAIMS, SET-OFFS OR DEFENSES AS OF THE CLOSING DATE IN
CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR IN CONNECTION
WITH ANY OF THE OTHER BORROWER DOCUMENTS. TO THE EXTENT ANY SUCH CLAIMS,
SET-OFFS OR DEFENSES MAY EXIST, WHETHER KNOWN OR UNKNOWN, THEY ARE EACH HEREBY
WAIVED AND RELINQUISHED IN THEIR ENTIRETY.
SECTION 7.17. WAIVERS OF JURY TRIAL. THE OWNER AND FREDDIE MAC EACH (A)
COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE
ARISING OUT OF THIS AGREEMENT OR THE RELATIONSHIP BETWEEN THE PARTIES AS
BORROWER AND LENDER THAT IS TRIABLE OF RIGHT BY A JURY AND (B) WAIVES ANY RIGHT
TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT
EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY
GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT
LEGAL COUNSEL.
[SIGNATURE PAGE FOLLOWS]
39
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IN WITNESS WHEREOF, the Owner and Freddie Mac have executed this
Reimbursement Agreement as of the day and year first above written.
RIVER OAKS PARTNERS, an Illinois
general partnership, as Owner
By: Brookdale Holdings, Inc., a Delaware
corporation, its managing partner
By: /s/ Darryl W. Copeland, Jr.
----------------------------------------
Name: Darryl W. Copeland, Jr.
Title: Vice President
FEDERAL HOME LOAN MORTGAGE
CORPORATION, as Freddie Mac
By: /s/ Richard C. Martinez
----------------------------------------
Richard C. Martinez
Director
Multifamily Loan Production
[Signature Page to River Oaks Reimbursement Agreement]
<PAGE>
EXHIBIT A
Principal Reserve Fund Deposits
EXECUTION COPY
REIMBURSEMENT AND SECURITY AGREEMENT
between
FEDERAL HOME LOAN MORTGAGE CORPORATION
and
THE PONDS OF PEMBROKE LIMITED PARTNERSHIP
Dated as of May 1, 1999
Relating to
$27,000,000
Village of Lisle, Illinois
Multi-Family Housing Revenue Bonds
(Ashley of Lisle Project)
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1. Definitions................................................2
Section 1.2. Interpretation............................................10
ARTICLE II
REPRESENTATIONS, COVENANTS, WARRANTIES AND CONDITIONS
Section 2.1. Representations, Covenants and Warranties.................11
Section 2.2. Conditions................................................15
ARTICLE III
COVENANTS OF THE OWNER
Section 3.1. Affirmative Covenants of the Owner........................18
Section 3.2. Reimbursement and Replenishment Obligations
of the Owner..............................................23
Section 3.3. Freddie Mac Credit Enhancement Fees;
Liquidity Use Fee; Servicing..............................24
Section 3.4. Indemnification...........................................25
Section 3.5. Purchased Bonds...........................................26
Section 3.6. Liability of the Owner....................................26
Section 3.7. Neither Freddie Mac nor Servicer Liable...................27
Section 3.8. Waivers and Consents......................................27
Section 3.9. Subrogation...............................................28
Section 3.10. Payment of Costs, Fees and Expenses.......................28
ARTICLE IV
INTEREST RATE PROTECTION
Section 4.1. Interest Rate Protection..................................29
Section 4.2. Cap Agreement Terms.......................................30
Section 4.3. Freddie Mac Right to Convert to Fixed Rate................32
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ARTICLE V
UNIFORM COMMERCIAL CODE SECURITY AGREEMENT..............................33
ARTICLE VI
EVENTS OF DEFAULT; REMEDIES
Section 6.1. Events of Default.........................................34
Section 6.2. Remedies; Waivers.........................................34
Section 6.3. No Remedy Exclusive.......................................35
ARTICLE VII
MISCELLANEOUS
Section 7.1. Counterparts..............................................35
Section 7.2. Amendments, Changes and Modifications.....................36
Section 7.3. Payment Procedure.........................................36
Section 7.4. Payments on Business Days.................................36
Section 7.5. Governing Law; Severability...............................36
Section 7.6. Notices...................................................37
Section 7.7. Further Assurances and Corrective Instruments.............37
Section 7.8. Term of this Agreement....................................37
Section 7.9. Assignments; Transfers; Third-Parties Rights..............37
Section 7.10. Headings..................................................37
Section 7.11. Limitation on Personal Liability..........................37
Section 7.12. Consent of Freddie Mac....................................39
Section 7.13. Disclaimer; Acknowledgments...............................39
Section 7.14. Entire Agreement..........................................39
Section 7.15. Survival of Representation and Warranties.................39
Section 7.16. Waiver of Claims..........................................39
Section 7.17. Waivers of Jury Trial.....................................40
ii
<PAGE>
REIMBURSEMENT
AND SECURITY AGREEMENT
THIS REIMBURSEMENT AND SECURITY AGREEMENT (the "Agreement") is made and
entered into as of the 1st day of May, 1999, by and between the FEDERAL HOME
LOAN MORTGAGE CORPORATION ("Freddie Mac"), a corporate instrumentality of the
United States and THE PONDS OF PEMBROKE LIMITED PARTNERSHIP (the "Owner"), a
limited partnership duly organized and existing under the laws of the State of
Illinois.
W I T N E S S E T H:
WHEREAS, Village of Lisle, Illinois (the AIssuer"), a municipal
corporation, political subdivision and body politic of the State of Illinois,
has heretofore authorized the issuance of its $27,000,000 Multi-Family Housing
Revenue Bonds (Ashley of Lisle Project) (the ABonds); and
WHEREAS, the Bonds have been issued pursuant to that certain Amended and
Restated Trust Indenture dated as of December 1, 1987 (as amended, the
"Indenture") between the Issuer and American National Bank and Trust Company of
Chicago (the "Trustee"), a national banking association, duly organized and
existing under the laws of the United States; and
WHEREAS, the proceeds of the Bonds were used by the Issuer to fund a loan
(the "Loan") to the Owner, the proceeds of which were used to finance the
acquisition, construction and equipping of the Project; and
WHEREAS, the Owner has requested that Freddie Mac provide credit
enhancement for the Loan in substitution for the existing Qualified Credit
Instrument outstanding with respect to the Bonds; and
WHEREAS, Freddie Mac has agreed to provide credit enhancement for the Loan
by making payments to the Trustee in respect of the principal of and interest on
the Loan upon the terms set forth in the Credit Enhancement Agreement dated as
of even date herewith (the "Credit Enhancement Agreement") between Freddie Mac
and the Trustee; and
WHEREAS, the Indenture and the Bonds provide that, during the Floating
Rate Period, the Bonds may be tendered or deemed tendered for payment of the
Purchase Price on each Settlement Date; and
WHEREAS, the payment of the Purchase Price of Bonds tendered or deemed
tendered pursuant to terms of the Indenture will be payable from proceeds of the
remarketing of the Bonds and from moneys, securities and certain investment
earnings thereon held in certain funds under the Indenture or held by the Tender
Agent, and to the extent that such moneys are insufficient to pay the Purchase
Price of tendered Bonds, the Issuer and Trustee have requested that Freddie
<PAGE>
Mac agree to make certain payments to the Trustee in respect of the Purchase
Price under the circumstances and upon the terms set forth in the Credit
Enhancement Agreement; and
WHEREAS, Freddie Mac is willing to execute and deliver the Credit
Enhancement Agreement to the Trustee upon the satisfaction by the Servicer (as
hereinafter defined) of the terms and conditions of that certain Letter of
Commitment dated as of May 14, 1999 (the ACommitment") between Freddie Mac and
the seller named therein (the "Servicer"); and
WHEREAS, the Owner's obligations under this Agreement will be secured by
the Reimbursement Security Documents, including a Reimbursement Mortgage, and
certain rights of subrogation to the rights of the Bondholders under the Loan
Documents.
NOW, THEREFORE, in consideration of the agreement of Freddie Mac to
execute and deliver the Credit Enhancement Agreement to the Trustee and the
material covenants and undertakings set forth in this Agreement and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Freddie Mac and the Owner do hereby agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1. Definitions. All defined terms not otherwise specifically
defined in this Agreement shall have the same meanings, respectively, as the
defined terms contained in the Indenture. Unless otherwise expressly provided in
this Agreement or unless the context clearly requires otherwise, the following
terms shall have the respective meanings set forth below for all purposes of
this Agreement.
"Advance" means either a Credit Advance or a Liquidity Advance.
"Affiliate", as applied to any Person, means any other Person directly or
indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities,
partnership interests or by contract or otherwise.
"Agreement" means this Reimbursement and Security Agreement, as the same
may be amended, modified or supplemented from time to time.
"Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy" as now and hereafter in effect, or any successor statute.
"Base Recourse" means the dollar amount specified in section 7.11(b)
hereof, for which the Owner is personally liable hereunder.
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<PAGE>
"Bondholder" or "bondholder" shall have the meaning given that term in the
Indenture.
"Bond Counsel" means any attorney at law or firm of attorneys of
nationally recognized standing in matters pertaining to the exclusion from gross
income of interest on bonds for federal income tax purposes issued by states and
political subdivisions and which is acceptable to Freddie Mac.
"Bond Documents" means the Bonds, the Indenture, the Financing Agreement,
the Regulatory Agreement (and any other agreement relating to rental
restrictions on the Project), the Remarketing Agreement, any bond purchase
agreement, any tender agent agreement, and all other documents, instruments and
agreements executed and delivered in connection with the issuance, sale,
delivery and/or remarketing of the Bonds as each such agreement or instrument
may be amended, modified or supplemented from time to time.
"Bond Fee Component" means the regular, ongoing fees due from time to time
to the Trustee, the Remarketing Agent, the Paying Agent, the Bond Registrar, the
Tender Agent, any rebate analyst with respect to the Bonds and any other fees
and expenses set forth in Section 4.3 of the Financing Agreement, expressed in
terms of a percentage of the principal amount of Outstanding Bonds (including
Purchased Bonds) on an annual basis.
"Borrower Documents" means the Bond Documents, the Loan Documents, the
Reimbursement Security Documents and the Cap Documents.
"Business Day" means any day, other than (i) a Saturday, Sunday, or legal
holiday, (ii) a day on which banking institutions located in (A) New York, New
York, or (B) Chicago, Illinois, or (C) in the locality and state in which the
home office of Freddie Mac, or the office of Freddie Mac at which a request for
funding on the Credit Enhancement Agreement may be made, are authorized by law
to close, or (iii) a day on which the New York Stock Exchange is closed.
"Cap" shall have the meaning set forth in Section 4.1.
"Cap Agreement" means that certain Rate Cap Agreement, dated May 24, 1999,
between the Owner and the Counterparty, as such agreement may be amended,
modified, supplemented or restated from time to time, and any successor interest
rate cap agreement approved in writing by Freddie Mac.
"Cap Assignment" means (a) the Interest Rate Hedge Assignment and Security
Agreement, dated as of May 1, 1999, between the Owner and Freddie Mac, as their
interests may appear or (b) any assignment by the Owner of any subsequent Cap to
Freddie Mac, in each case as such agreement may be amended, modified or
supplemented from time to time.
"Cap Deposit" shall have the meaning set forth in Section 4.2(f).
"Cap Documents" shall have the meaning set forth herein in Section 4.1.
3
<PAGE>
"Cap Fee Escrow" means the escrow account to be held by the Servicer to
provide for payments made by the Owner as required by Section 3.1(h) for the
purchase of a Subsequent Cap.
"Cap Reserve Account" means the escrow account held by the Servicer in
which the Cap Deposit is held as additional security for Freddie Mac.
"Closing Date" means the date the Credit Enhancement Agreement is
delivered by Freddie Mac.
"Combined Debt Service Coverage Ratio" means, for any period, the ratio of
(a) current gross potential rent roll annualized times 95% plus current other
income from services provided at both of the Projects annualized less the
greater of (x) the Freddie Mac underwritten expenses (Heritage expenses of
$3,172,428 and Devonshire expenses of $4,541,516) which includes real estate
taxes or (y) the combined Projects' actual trailing twelve months' operating
expenses which includes real estate taxes, (b) divided by the debt service for
the bonds financing both Projects. For those bonds that after the Conversion
Date will bear interest at a Floating Rate, the notional annual debt service
will be calculated by adding the deposits to the Principal Reserve Fund for the
next twelve months plus the annualized four week average interest rate on the
bonds for the four weeks ending on the reset date immediately prior to the
calculation date, plus the actual fixed spread, that equals the sum of the
Servicing Fee, the Freddie Mac Credit Facility Fee, the Freddie Mac Liquidity
Facility Fee, the Trustee's fees, the Issuer's fee and the Remarketing Agent's
fee, plus 200 basis points. For those bonds that after the Conversion Date will
bear interest at a new Fixed Rate, annual debt service (including principal)
will be calculated based upon the annual Fixed Rate of the bonds projected by
the Remarketing Agent plus the actual fixed spread that equals the sum of the
Servicing Fee, the Freddie Mac Credit Facility Fee, the Trustee's fee and the
Issuer's fee.
"Conversion to Maturity Date" means the date on which the interest rate on
the Bonds is converted to a Fixed Rate to the final maturity date of the Bonds.
"Counterparty" means the counterparty named in the Cap Agreement who is
obligated to make payments in accordance with the terms thereof.
"Credit Advance" means an advance by Freddie Mac under the Credit
Enhancement Agreement to pay any Guaranteed Payment.
"Credit Enhancement Agreement" means the Credit Enhancement Agreement
dated as of May 1, 1999 between the Trustee and Freddie Mac, as such Credit
Enhancement Agreement may from time to time be amended.
"Cross-Collateralization Agreement" means that certain
Cross-Collateralization Agreement dated as of May 1, 1999 among the Servicer,
the Owner and the Other Owner, as consented to by Guarantor, as assigned to
Freddie Mac.
"Default" means any event that has occurred which, with the giving of
notice or the passage of time or both, would constitute an Event of Default.
4
<PAGE>
"Default Rate" means the base rate or prime rate of Citibank, N.A. until
such time as another "Money Center" bank is designated by Freddie Mac in its
discretion by notice to the Owner, plus four percent (4%).
"Event of Default" means the occurrence of an event of default as
described in Section 6.1 hereof.
"Financing Agreement" means that certain Amended and Restated Loan
Agreement dated as of December 1, 1987, between the Issuer and the Owner, as
amended through the Closing Date and as the same may be further amended,
modified or supplemented from time to time.
"Freddie Mac" means the Federal Home Loan Mortgage Corporation, a
corporate instrumentality of the United States, and its successors.
"Freddie Mac Credit Enhancement Fee" means the sum of the Freddie Mac
Credit Facility Fee and the Freddie Mac Liquidity Facility Fee.
"Freddie Mac Credit Enhancement Payment" means the amount required to be
paid by Freddie Mac to the Trustee with respect to any Guaranteed Payment
pursuant to Section 3.1(a)(i) of the Credit Enhancement Agreement, and with
respect to any payment of Purchase Price for tendered Bonds pursuant to Section
3.1(b)(i) of the Credit Enhancement Agreement.
"Freddie Mac Credit Facility Fee" means an amount equal to .825% per annum
of the outstanding principal balance of the Loan, payable as provided in Section
3.3.
"Freddie Mac Liquidity Facility Fee" means an amount equal to .125% per
annum of the outstanding principal balance of the Loan, payable as provided in
Section 3.3.
"Freddie Mac Reimbursement Amount" means the amounts required hereunder to
be reimbursed by the Owner to Freddie Mac in respect of any Freddie Mac Credit
Enhancement Payments made by Freddie Mac under the Credit Enhancement Agreement,
which amounts shall be equal to the sum of all Freddie Mac Credit Enhancement
Payments made by Freddie Mac and not previously reimbursed by or on behalf of
the Owner, together with any Liquidity Use Fees, late charges, default interest
and other amounts payable to Freddie Mac under the Reimbursement Security
Documents (except any share of collected late charges that the Servicer is
entitled to retain as additional servicing compensation) as a result of a
default under the Borrower Documents.
"General Partner" means Brookdale Holdings, Inc., a Delaware corporation.
"Governmental Authority" shall have the meaning set forth in the
Reimbursement Mortgage.
5
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"Guaranteed Payment" shall have the meaning set forth in the Credit
Enhancement Agreement.
"Guarantor" means Brookdale Living Communities, Inc., a Delaware
corporation, in its capacity as the Guarantor under the Guaranty.
"Guaranty" means that certain Limited Guaranty dated May 27, 1999 by the
Guarantor in favor of the Servicer and assigned to Freddie Mac.
"Indenture" means that certain Amended and Restated Trust Indenture, dated
as of December 1, 1987, between the Issuer and Trustee pursuant to which the
Bonds are issued and secured, as amended through the Closing Date and as the
same may be further amended, modified or supplemented from time to time.
"Investment Obligations" shall have the meaning set forth in the
Indenture.
"Issuer" means Village of Lisle, Illinois and its successors.
"Liquidity Advance" means an advance by Freddie Mac pursuant to the terms
of the Credit Enhancement Agreement to pay the Purchase Price of tendered Bonds.
"Liquidity Commitment" means the obligation of Freddie Mac to provide
funds to the Trustee, as provided in Section 3.1(b) of the Credit Enhancement
Agreement, to enable the Trustee to purchase, on behalf of and as agent for the
Owner, tendered Bonds which have not been remarketed by the Remarketing Agent
pursuant to the Remarketing Agreement and Indenture and, therefore, with respect
to which there are no proceeds of remarketing.
"Liquidity Commitment Termination Date" means the day immediately
following the earliest of (a) the Maturity Date, (b) the Conversion to Maturity
Date, (c) the Substitution Date or (d) the Termination Date.
"Liquidity Rate" means the base rate or prime rate of interest of
Citibank, N.A. until such time as another "Money Center" bank is designated by
Freddie Mac in its discretion by notice to the Owner, plus two percent (2%) per
annum.
"Liquidity Use Fee" means, with respect to each Liquidity Advance, an
amount equal to (x) the amount of the Liquidity Advance multiplied by (y) the
Liquidity Rate and (z) further multiplied by a fraction, the numerator of which
is the number of days that such Liquidity Advance is outstanding (i.e., until
Freddie Mac is reimbursed) and the denominator of which is 365 days or 366 days,
as applicable. The Liquidity Use Fee shall be reduced by an amount equal to the
Freddie Mac Credit Enhancement Fee assessed and actually paid for the
calculation period on the amount of funds related to the Liquidity Advance.
"Loan" means the loan by the Issuer to the Owner with respect to the
Project pursuant to the Financing Agreement and evidenced by the Note.
6
<PAGE>
"Loan Documents" means the Note, the Financing Agreement and any related
documents evidencing the obligations of the Owner under the Note or securing
payment or performance of such obligations or otherwise pertaining to such
obligations, as each such document, agreement or instrument may be amended,
modified or supplemented from time to time.
"Moody's" means Moody's Investors Service, Inc., a corporation organized
and existing under the laws of the State of Delaware, and its successors and
assigns, if such successors and assigns shall continue to perform the functions
of a securities rating agency.
"Note" means the amended and restated promissory note from the Owner to
the Issuer, including all riders and addenda thereto, evidencing the Owner's
obligation to repay the Loan, as the same may be amended, modified or
supplemented from time to time.
"Notice" means any notice delivered by the Trustee to Freddie Mac and the
Issuer pursuant to Section 3.1(a)(i) or Section 3.1(b)(i) of the Credit
Enhancement Agreement.
"Obligations" means the obligations of the Owner (a) to pay principal and
interest and any other amounts on the Loan when due and payable pursuant to the
Loan Documents, (b) to pay all amounts, including fees, costs, charges and
expenses payable under this Agreement and the other Reimbursement Security
Documents and (c) to observe and perform each of the terms, conditions and
provisions of the Borrower Documents.
"Other Owner" means River Oaks Partners, an Illinois general partnership,
and any successor to or assignee of its rights and obligations.
"Other Project" means that certain senior living facility located in the
State, commonly known as The Heritage, located at 800 South River Road, Des
Plaines, Illinois, and owned by the Other Owner.
"Other Reimbursement Agreements" means collectively and/or individually
those two certain Reimbursement and Security Agreements each dated the date
hereof, one between Freddie Mac and the Other Owner and the other between
Freddie Mac and the Owner.
"Other Reimbursement Mortgage" means that certain Multifamily Mortgage,
Assignment of Rents and Security Agreement dated May 27, 1999, together with all
riders and addenda thereto, from the Other Owner to Freddie Mac granting a first
priority mortgage and a security interest in the Other Project to secure the
obligations of the Other Owner under the Other Reimbursement Agreement relating
to the property owned by the Other Owner, as the same may be amended, modified
or supplemented from time to time.
"Owner" means The Ponds of Pembroke Limited Partnership, an Illinois
limited partnership, and any successor to or assignee of its rights and
obligations.
"Person" means an individual, estate, trust, corporation, partnership,
limited liability company or any other organization or entity (whether
governmental or private).
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"Pledge Agreement" means that certain Pledge, Security and Custody
Agreement dated as of the date hereof, by and between the Trustee, as custodian,
and the Owner, and relating to Purchased Bonds, as the same may be amended,
modified or supplemented from time to time.
"Prepayment/Substitution Premium" means, with respect to any voluntary or
involuntary prepayment (or deemed prepayment pursuant to Section 3.1(g) hereof),
of the Loan, the product obtained by multiplying
(A) the amount of principal prepaid, by
(B) one-twelfth (1/12) of .95%, representing the sum of the
Freddie Mac Credit Facility Fee and the Freddie Mac Liquidity Facility Fee
payable to Freddie Mac, by
(C) the Present Value Factor.
The "Present Value Factor" is the following factor:
n
1 - 1
-----------
1 + ARR
------------------
ARR
Where:
n = number of months remaining until the 15th anniversary of the Closing
Date.
ARR (Assumed Reinvestment Rate) = one-twelfth (1/12) of the yield rate as
of the date 5 Business Days before the prepayment date, on the 9.25% U.S.
treasury security due February 1, 2016, as reported in The Wall Street Journal,
expressed as a decimal calculated to five digits. In the event that no yield is
published on the applicable date for the treasury security used to determine the
Assumed Reinvestment Rate, the Servicer, in its discretion, shall select the
non-callable treasury security maturing in the same year as the treasury
security specified above with the lowest yield published in The Wall Street
Journal as of the applicable date. If the publication of such yield rates in The
Wall Street Journal is discontinued for any reason, the Servicer shall select a
security with a comparable rate and term to the treasury security used to
determine the Assumed Reinvestment Rate. The selection of an alternate security
pursuant to this paragraph shall be made in Freddie Mac's discretion.
"Principal Reserve Fund" means the Principal Reserve Fund established with
the Servicer pursuant to this Agreement, to which the Owner is required to
contribute pursuant to Section 3.1(b) hereof and the Reimbursement Mortgage.
"Principal Reserve Schedule" means the schedule attached as Exhibit A to
this Agreement of required deposits to be made by the Owner to the Principal
Reserve Fund.
"Project" means the "Mortgaged Property" as such term is defined in the
Reimbursement Mortgage.
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"Projects" means the Project and the Other Project.
"Purchased Bonds" shall have the meaning given the term "Pledged Bonds" in
the Indenture. Additionally, a Bond shall no longer be a "Purchased Bond" on the
date on which such Bond is remarketed to any person other than Freddie Mac, the
Owner, any partner or member of the Owner or the Issuer.
"Purchase Price" means, with respect to any Bond required or permitted to
be purchased pursuant to the Indenture, the principal amount of such Bond plus
interest accrued thereon to the Settlement Date.
"Rating Agency" means Moody's or S&P or any other nationally recognized
rating agency maintaining a rating on the Bonds.
"Reimbursement Mortgage" means that certain Multifamily Mortgage,
Assignment of Rents and Security Agreement dated May 27, 1999, together with all
riders and addenda thereto, from the Owner granting a first priority mortgage
and a security interest in the Project to Freddie Mac to secure the obligations
of the Owner under this Agreement, as the same may be amended, modified or
supplemented from time to time.
"Reimbursement Security Documents" means, collectively, this Agreement,
the Reimbursement Mortgage, the Pledge Agreement, the Replacement Reserve
Agreement, the title insurance policy with respect to the Project for the
benefit of Freddie Mac, UCC Fixture Filings and Financing Statements, the Cap
Agreement, the Cross-Collateralization Agreement, the Cap Assignment and any
other Cap Documents, any Collateral Agreements (as defined in the Reimbursement
Mortgage) and any related documents evidencing the obligations of the Owner
under this Agreement or the Reimbursement Mortgage or securing payment or
performance of such obligations or otherwise pertaining to performance of such
obligations, as each such document, agreement or instrument may be amended,
supplemented, otherwise modified or amended and restated from time to time in
accordance with its respective terms.
"Replacement Reserve Agreement" means the Replacement Reserve and Security
Agreement between the Owner and the Servicer relating to the Reimbursement
Mortgage, as the same may be amended, modified or supplemented from time to
time.
"Required Mortgage Payment" shall have the meaning set forth in the Credit
Enhancement Agreement.
"S&P" means Standard & Poor's Ratings Service, a division of The
McGraw-Hill Companies, Inc.
"Servicer" means the eligible servicing institution designated by Freddie
Mac from time to time (which may be Freddie Mac if Freddie Mac elects to service
the Loan), or its successor, as servicer of each Loan. Initially, Glaser
Financial Group, Inc., a Minnesota corporation, shall serve as the Servicer.
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"Servicing Agreement" means the Servicing Agreement dated as of May 1,
1999 between the Servicer and Freddie Mac concerning the servicing of this
Agreement.
"Servicing Fee" means the monthly fee due the Servicer under the Servicing
Agreement in an amount equal to one-twelfth of .05% of the outstanding principal
balance of the Loan.
"Settlement Date" means, prior to the Liquidity Commitment Termination
Date and during the Floating Rate Period, (a) any Business Day specified by a
Bondholder as the date on which Bonds owned by such Bondholder are to be
purchased in accordance with the provisions of the Indenture, (b) each Fixed
Rate Conversion Date, (c) any Substitution Date and (d) any date on which the
Bonds are subject to mandatory tender in accordance with the provisions of the
Indenture.
"State" means the State of Illinois.
"Subsequent Cap" shall have the meaning set forth in Section 4.1(a).
"Term" has the meaning set forth in Section 7.8.
"Termination Date" shall have the meaning set forth in the Credit
Enhancement Agreement.
"Trustee" means American National Bank and Trust Company of Chicago and
its successors and any other corporation or association resulting from or
surviving any consolidation or merger to which it or its successors may be a
party and any successor trustee at any time serving as successor trustee under
the Indenture.
"Underwriting Rate" means 6.69% per annum.
"Uniform Commercial Code" means the Uniform Commercial Code as from time
to time in effect in each applicable jurisdiction.
"Withdrawal" means the withdrawal of funds from the Principal Reserve Fund
to make any payment due from the Owner under the Borrower Documents other than a
payment to reimburse Freddie Mac for a Freddie Mac Credit Enhancement Payment.
Section 1.2. Interpretation. In this Agreement, unless the context
otherwise requires, words of the masculine gender shall be deemed and construed
to include correlative words of the feminine and neuter genders. Unless the
context shall otherwise indicate, words importing the singular number shall
include the plural number and vice versa, and words importing persons shall
include partnerships, corporations and associations, including public bodies, as
well as natural persons. The terms "hereby", "hereof", "hereto", "herein",
"hereunder", and any similar terms, as used in this Agreement, refer to this
Agreement. Any reference in this Agreement to an "Exhibit", a "Section", a
"Subsection", a "Paragraph" or a "subparagraph" shall, unless otherwise
explicitly provided, be construed as referring, respectively, to an Exhibit
attached to this Agreement, a section of this Agreement, a subsection of the
section of this Agreement in which the reference appears, a paragraph of the
subsection within this Agreement in which the
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reference appears, or a subparagraph of the paragraph within which the reference
appears. All Exhibits attached to or referred to in this Agreement are
incorporated by reference into this Agreement.
ARTICLE II
REPRESENTATIONS, COVENANTS, WARRANTIES AND CONDITIONS
Section 2.1. Representations, Covenants and Warranties. The
representations, covenants and warranties set forth in the Reimbursement
Mortgage are hereby incorporated by reference as if fully set forth herein. The
Owner acknowledges that such representations, covenants and warranties, together
with the other representations and agreements of the Owner contained in this
Agreement, are relied upon by Freddie Mac and serve as a basis for the
undertakings of Freddie Mac contained in this Agreement. The Owner makes the
following additional representations, covenants and warranties as to the Loan
and the Project.
(a) Occupancy; Rents. As of May 3, 1999, physical occupancy of the Project
is at least 96%, and the gross monthly rents (net of concessions) from occupied
dwelling units at the Project is at least $700,000.00.
(b) Location of Improvements. All improvements to the Project that have
been included in its appraised value lie within the boundaries of the land, or
to the extent that any such improvements encroach onto any adjoining land, each
such encroachment does not materially and adversely affect the value, use or
salability of the Project. No improvements on neighboring properties encroach
onto the Project, or all such encroachments do not materially and adversely
affect the value, use or salability of the Project.
(c) No Damage. There exists no unrepaired or unrestored damage to the
Project from fire or other casualty since March 16, 1999 (the date of Freddie
Mac's inspection of the Project) through the Closing Date. There exists no
material unrepaired or unrestored damage to the Project from fire or other
casualty since the Closing Date that has not been disclosed to Freddie Mac. For
the purposes of this subsection (c) "material" shall mean unrepaired or
unrestored damage equal to or greater than $250,000.
(d) Property Condition.
(i) The Project is in good and habitable condition.
(ii) There are no deficiencies in the repair or maintenance of the
Project that threaten the health or safety of its tenants and
their invited guests.
(iii) There is no material uncured violation at the Project of any
building or housing code or similar law or ordinance.
(iv) The physical configuration of the Project is not in material
violation of the Americans with Disabilities Act.
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(v) If Freddie Mac has inspected the Project and informed the
Servicer that specified repairs must be made, those repairs
have been completed or funds to complete them have been placed
in escrow as required by Freddie Mac.
(e) Condemnation. No part of the Project has been taken by condemnation or
any similar proceeding since March 16, 1999, and the Owner is not aware, after
diligent inquiry, of any pending or threatened condemnation or similar
proceeding with respect to all or any part of the Project.
(f) Loan Documents. The Loan Documents have been validly authorized and
executed by the Owner.
(g) Insurance. The Project is covered by hazard, flood (if the Project is
in a flood zone), liability and rent loss insurance in compliance with the terms
and conditions of the Reimbursement Mortgage. Without limiting the generality of
the foregoing, if the Project is located in whole or in part in a Special Flood
Hazard Area ("SFHA") identified by the Federal Emergency Management Agency, (i)
each building that lies within the SFHA is covered by flood insurance in an
amount at least equal to the lesser of (A) its insurable replacement cost, (B)
its prorated portion of the unpaid principal balance of the Loan, based upon
square footage of the building and square footage of all buildings comprising
the Project, or (C) the maximum limit of coverage available under the National
Flood Insurance Program, and (ii) the community where the Project is located
participates in the National Flood Insurance Program.
(h) Defaults. All payments due under the terms of the Loan Documents have
been made and there have been no delinquencies of 30 days or more within the 12
months preceding the Closing Date. There are no material non-monetary defaults
under the terms of the Bond Documents or the Loan Documents and there have been
no material non-monetary defaults that have remained uncured for 30 days or more
within the 12 months preceding the Closing Date.
(i) Undisclosed Information. Except as disclosed to Freddie Mac in
writing, the Owner knows of no fact or circumstance affecting the Owner or the
Project that materially and adversely affects the Owner's ability to meet its
obligations under the Loan in a timely manner.
(j) Insolvency. No bankruptcy, insolvency, reorganization or comparable
proceedings have ever been instituted by or against the Owner, the Guarantor, or
any affiliate of the Guarantor or the partners of the Owner, and no such
proceeding is now pending or contemplated, nor have any of the foregoing parties
defaulted under a personal or commercial mortgage loan or entered into a workout
or forbearance agreement related to such mortgage loans and the Owner and the
Guarantor each has the ability to pay its debts as they come due.
(k) Enforceability. The Borrower Documents to which the Owner is a party
are valid and binding obligations of the Owner, enforceable in accordance with
their respective terms,
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except to the extent that such enforceability may be limited by laws regarding
bankruptcy, creditors' rights and general principles of equity.
(l) Liens. The Reimbursement Mortgage, if and when properly recorded in the
appropriated records, together with any Uniform Commercial Code financing
statements required to be filed in connection therewith, will create a valid,
perfected first lien on the Project, subject only to the exceptions set forth in
Schedule B of the title insurance policy issued to Freddie Mac in accordance
with the terms hereof.
(m) Taxes Paid. Prior to the Closing Date, all real property taxes and
assessments that have become due and payable (including water and sewer charges
that by law will become a lien on the Project) have been paid in full, or an
escrow of funds sufficient to pay them has been established. After the Closing
Date and subject to the right of the Owner to contest such matters expressly
provided in the Reimbursement Mortgage, all real property taxes and assessments
that have become due and payable (including water and sewer charges that by law
will become a lien on the Project) have been paid in full, or an escrow of funds
sufficient to pay them has been established.
(n) The Guaranty. The Guaranty has been validly authorized and executed by
the Guarantor.
(o) Mortgage and Project Characteristics. Except as disclosed to Freddie
Mac in writing, the Loan and the Project include none of the following features:
i. A prepayment lockout provision still in effect.
ii. A principal balance that includes capitalization of interest,
taxes, hazard insurance premiums, or late charges.
iii. Cross-collateralization with any other mortgage, except as
contemplated hereby.
iv. Commercial rents which constitute more than 25 percent of
effective gross revenue, or commercial tenants that occupy
more than 25 percent of the total square footage of the
improvements.
v. more than 5 percent of the residential space is master leased
to a single lessee.
vi. The Project is under construction or rehabilitation (other
than repairs required or approved in writing by Freddie Mac)
or initial lease-up.
vii. More than 20 percent of the Project is used for student and/or
military housing.
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viii. A non-elevator structure with four or more floors constituting
a portion of the Project.
ix. Other than with respect to the Bonds when they bear interest
at the Fixed Rate, a payment interval that is not monthly.
x. A leasehold estate as all or a part of the Project.
xi. A lender equity participation feature.
xii. A mobile home park property as part or all of the Project.
xiii. Accruals of interest in excess of payment obligations.
xiv. A Project with economic occupancy below 90 percent.
xv. A Project that is encumbered by any secondary or subordinate
financing.
(p) Title Insurance. The title insurance policy satisfies the requirements
of the Servicer. If the Owner has delivered a marked-up title insurance
commitment pending issuance of the final title insurance policy, then that
commitment obligates the title insurer to issue a policy having the above
characteristics.
(q) Survey. The survey delivered to Freddie Mac is identical to the survey
previously submitted to Freddie Mac, and satisfies the requirements of Section
2.2(v)(k).
(r) Single Tax Parcel. The Project consists of property identified as all
of a single tax parcel or, if identified as multiple tax parcels, the Project
constitutes the entirety of those tax parcels. Any tax parcel or parcels within
which the Project is located does not include property that is not subject to
the Reimbursement Mortgage.
(s) Access. The Project does not share ingress and egress through an
easement or private road or share on-site or off-site recreational facilities
and amenities that are not located on the Project and under the exclusive
control of the Owner; or where there is shared ingress and egress or amenities,
there exists an easement or joint use and maintenance agreement, a copy of which
has been delivered to Freddie Mac, under which (i) access to and use and
enjoyment of the easement or private road and/or recreational facilities and
amenities is perpetual, (ii) the number of parties sharing such easement and/or
recreational facilities and amenities must be specified, (iii) the Owner's
responsibilities and share of expenses are specified, and (iv) the failure to
pay any maintenance fee will not result in a loss of usage of the easement.
(t) Zoning. The overall character of the existing use of the Project is
consistent with the zoning classification of the Project, or is a legal
nonconforming use that is permitted notwithstanding any inconsistency with such
classification. Except as disclosed to Freddie Mac in writing, the Project does
not violate any density or building setback requirements of the
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applicable zoning law. No proceedings are pending or threatened to, the Owner's
knowledge, that would result in a change of the zoning of the Project.
(u) Federal Income Tax Matters. The Owner has not taken any action, or
permitted to be taken any action that would impair the exclusion from gross
income for federal income tax purposes of the interest payable on any of the
Bonds. The Owner is in compliance with all material requirements of any tax
certificate relating to the Bonds.
Section 2.2. Conditions. The obligation of Freddie Mac to enter into
the Credit Enhancement Agreement is subject to the satisfaction of the
following conditions precedent on or prior to the Closing Date:
(i) the payment by the Owner of Freddie Mac's and the Servicer's
fees, costs and expenses which are due and payable on or before such
Closing Date in accordance with the Borrower Documents;
(ii) the delivery to the title insurance company for filing and/or
recording in all applicable jurisdictions (or such filing and/or recording
having been provided for in a manner satisfactory to Freddie Mac) of all
documents, including, without limitation, duly executed and acknowledged
copies of the Reimbursement Mortgage and the Other Reimbursement Mortgage,
UCC-1 financing statements and other appropriate instruments, in form and
substance satisfactory to Freddie Mac and in proper form for recordation,
as may be necessary in the opinion of Freddie Mac to perfect the lien
created by the foregoing and each applicable Reimbursement Security
Document and the payment of all taxes, fees and other charges payable in
connection with such execution, delivery, recording and filing;
(iii) there shall have occurred no material adverse change in the
financial condition, business or prospects of the Owner, or in the
physical condition, operating performance or value of the Project from
that shown in the application to Freddie Mac delivered by the Owner to the
Servicer;
(iv) there shall exist no Event of Default or Default; and
(v) the receipt by Freddie Mac or, if Freddie Mac so designates,
the Servicer, on or prior to the Closing Date of the following, each dated
as of the Closing Date except as otherwise agreed to, in form and
substance satisfactory to Freddie Mac in all respects:
(a) a copy certified to be true, accurate and complete by an
officer of the Guarantor, of resolutions of the Guarantor
authorizing the transactions contemplated by the Guaranty and the
Cross-Collateralization Agreement (which certification shall state
that such authorization is in full force and effect on the Closing
Date), of its certificate of incorporation and bylaws and any
amendments relating thereto, and a certificate issued by the
Delaware Secretary of State to the effect that the Guarantor is in
good corporate standing under Delaware law;
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(b) a copy, certified to be true, accurate and complete by an
officer of the General Partner, of resolutions of the board of
directors of the General Partner, authorizing the General Partner,
in its capacity as managing general partner of the Owner, and on
behalf of the Owner, to execute, deliver and perform the Borrower
Documents, and in its corporate capacity to execute, deliver and
perform, on behalf of the Owner, the Borrower Documents to which the
Owner is a party and other matters contemplated thereby, and of all
other documents evidencing any other necessary action (which
certification shall state that such approvals are in full force and
effect on the Closing Date);
(c) copies, certified to be true, accurate and complete by an
officer of the General Partner, of the General Partner's certificate
of incorporation and bylaws and any amendments thereto (which
certification shall state that such documents, as amended, are in
full force and effect on the Closing Date), together with a
Certificate of Good Standing of the General Partner issued by the
Secretary of State of the State of Delaware and a certificate of the
General Partner's authorization to transact business in the State of
Illinois issued by the Illinois Secretary of State;
(d) copies, certified to be true, accurate and complete by an
officer of the General Partner, of the limited partnership agreement
of the Owner and any amendments thereto (which certification shall
state that such documents, as amended, are in full force and effect
on the Closing Date), together with a certified copy of the
certificate of limited partnership of the Owner, as amended, issued
by the Illinois Secretary of State and a certificate of existence of
the Owner issued by the Illinois Secretary of State;
(e) copies, certified to be true, accurate and complete by an
officer of the General Partner, on behalf of the Owner, of all
consents, licenses and approvals necessary for the Owner to enter
into the Borrower Documents and the transactions contemplated by
this Agreement and the other Borrower Documents;
(f) a certificate of an officer of the General Partner
certifying the names, titles and the signatures of the officers of
the General Partner authorized to execute the Borrower Documents for
itself or on behalf of the Owner, as applicable, and a certificate
of an officer of the Guarantor certifying the names, titles and the
signatures of the officers of the Guarantor authorized to execute
the Guaranty for itself or on behalf of the Guarantor, as
applicable;
(g) a certificate of the General Partner, on behalf of the
Owner, confirming that the conditions precedent set forth in the
Borrower Documents have been satisfied and that the representations
and warranties of the Owner contained in the other Borrower
Documents are true, correct and complete in all material respects on
and as of the Closing Date;
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(h) opinions of counsel to the Owner and the Guarantor and
counsel to the Servicer each in form and substance satisfactory to
Freddie Mac addressing all matters required by Freddie Mac;
(i) fully executed copies of each Borrower Document, duly
executed and delivered by the parties thereto (other than Freddie
Mac), each of which shall be in full force and effect;
(j) a recent environmental report pertaining to the Project,
and all related due diligence completed to Freddie Mac's
satisfaction;
(k) a current survey relating to the Project reflecting all
liens, encumbrances, easements and encroachments, such survey to be
certified to Freddie Mac;
(l) such opinions of Bond Counsel and Issuer's counsel as
Freddie Mac shall require in form and substance satisfactory to
Freddie Mac;
(m) certified copies of all consents and authorizations, if
any, necessary for the Issuer to execute, deliver and perform its
obligations under the Bond Documents and any other Borrower
Documents to which it is a party;
(n) certified copies of the Issuer's charter or certificate of
incorporation and by-laws, if any, and of the resolution or
resolutions of the Issuer authorizing the execution, delivery and
performance of its obligations under the Bond Documents and any
other Borrower Documents to which it is a party and certified copies
of all other documents evidencing any other official action of the
Issuer taken with respect thereto as each is then in full force;
(o) a true and correct copy of rating letters from any Rating
Agency rating the Bonds;
(p) the Cap Documents and each Cap Assignment, containing
terms and conditions consistent with this Agreement and in form and
substance satisfactory to Freddie Mac and a legal opinion of counsel
to the Counterparty in form and substance satisfactory to Freddie
Mac;
(q) such documentation as shall be necessary to evidence the
Investment Obligations to be in place as of each applicable Closing
Date including, but not limited to, with respect to funds in the
Principal Reserve Fund;
(r) a Certificate of Insurance naming Freddie Mac as
additional insured delivered on the Closing Date and a duplicate
copy of the blanket
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insurance policy that covers the Project within thirty days
following the Closing Date;
(s) evidence that the Owner has established all escrows and
reserves required by the Reimbursement Mortgage and the Borrower
Documents; and
(t) such other documents, instruments, certificates, approvals
(and, if requested by Freddie Mac, certified duplicates of executed
copies thereof) or opinions as Freddie Mac or the Servicer may
request.
ARTICLE III
COVENANTS OF THE OWNER
Section 3.1. Affirmative Covenants of the Owner. The Owner enters into the
following covenants and agreements with Freddie Mac, which covenants and
agreements shall apply continuously during the Term of this Agreement.
(a) (i) On the Closing Date, the Owner shall pay to the Servicer interest
accrued on the Loan for the period beginning on the day following the last
payment of interest on the Loan through and including the day preceding
the Closing Date and the fees payable in advance on the Closing Date to
Freddie Mac and the Servicer pursuant to Section 3.3 hereof.
(ii) The Owner shall pay to the Servicer on the first day of each
month while the Loan is outstanding, the sum of the interest accrued on
the Loan for the preceding month, the fees payable to Freddie Mac and the
Servicer pursuant to Section 3.3 hereof and one-twelfth of the Bond Fee
Component payable pursuant to the Financing Agreement. Pursuant to the
Servicing Agreement, the Servicer shall remit to Freddie Mac the Freddie
Mac Credit Enhancement Fee, shall remit to the Trustee the Bond Fee
Component (to be distributed by the Trustee to the other parties entitled
thereto) and shall retain the Servicing Fee. Amounts received by the
Servicer in respect of interest on the Loan shall be applied to the
reimbursement of Freddie Mac for amounts paid in respect of interest on
the Loan pursuant to the Credit Enhancement Agreement.
(iii) The Owner shall fund, and replenish, to the extent funds are
withdrawn (except if funds are withdrawn to reimburse Freddie Mac for a
payment under the Credit Enhancement Agreement), the Principal Reserve
Fund as and when required by the Reimbursement Mortgage and this
Agreement. The Owner shall also replenish the Principal Reserve Fund by
delivery to the Servicer of an amount equal to any loss resulting from the
investment of amounts on deposit in the Principal Reserve Fund, as and
when such loss is incurred and irrespective of the reason for such loss.
(b) (i) The Owner shall pay to the Servicer for deposit into the Principal
Reserve Fund held by the Servicer that portion of the scheduled monthly
payments specified in the Principal Reserve Schedule and designated for
deposit to the Principal Reserve Fund
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as required by the Reimbursement Mortgage. Any interest earned on or
profits realized from amounts on deposit in the Principal Reserve Fund
shall be deposited into the Principal Reserve Fund and, provided that
there is no deficiency in the Principal Reserve Fund, the Cap Fee Escrow
or any rebate account that may be established with respect to the Bonds,
that no default exists under the Loan and that no Event of Default exists
under any of the Borrower Documents, shall be paid to the Owner on the
Interest Payment Date next succeeding receipt of such interest or profits
by the Servicer. Amounts determined by any rebate analyst with respect to
the Bonds to be rebatable arbitrage as provided in the Indenture shall be
paid by the Servicer to the Trustee to be transferred by the Trustee from
the Principal Reserve Fund to any rebate account that may be established
with respect to the Bonds. Amounts on deposit in the Principal Reserve
Fund shall be applied by the Servicer as provided in paragraphs (ii) and
(iii) of this subsection.
(ii) Amounts on deposit in the Principal Reserve Fund may be used,
solely at the direction of Freddie Mac:
(A) to reimburse Freddie Mac on each redemption date for amounts
paid under the Credit Enhancement Agreement in respect of principal of the
Loan in order to effect the optional redemption of the Bonds pursuant to
the Indenture.
(B) to reimburse Freddie Mac for amounts paid under the Credit
Enhancement Agreement in respect of principal of the Loan in order to
effect the mandatory redemption of Bonds pursuant to the Indenture.
(C) to reimburse Freddie Mac for amounts paid under the Credit
Enhancement Agreement in respect of interest on the Loan.
(D) to reimburse Freddie Mac for amounts paid under the Credit
Enhancement Agreement for payment of the Purchase Price of Bonds pursuant
to the Indenture.
(E) if a default has occurred and is continuing under this Agreement
or any other Borrower Document, for any other use related to the Project
approved in writing by Freddie Mac.
(iii) Any amounts remaining in the Principal Reserve Fund after
payment in full of the principal of and interest on the Bonds and payment
in full of the fees, charges and expenses of the Trustee and other amounts
required to be paid by the Owner under the Indenture or any other Borrower
Document, including but not limited to, any rebate amount due and payable
and any fees payable to the Issuer or Freddie Mac, shall be paid to the
Owner.
(iv) Amounts on deposit in the Principal Reserve Fund shall be
applied to reimburse Freddie Mac for amounts paid under the Credit
Enhancement Agreement in order to effect the redemption of Bonds, and the
corresponding reduction of amounts owed under the Note. During a Floating
Rate Period, and subject to Section 3.1(g) hereof, the Owner may request,
with the consent of Freddie Mac, that the Trustee redeem Bonds in
accordance with the Indenture, and amounts then on deposit in the
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Principal Reserve Fund shall be applied to reimburse Freddie Mac for
amounts paid under the Credit Enhancement Agreement to effect such
redemption. The Owner acknowledges and agrees that the Loan shall not be
deemed to have been amortized by reason of deposits into the Principal
Reserve Fund until such deposits have been withdrawn from the Principal
Reserve Fund and applied to the reimbursement of Freddie Mac for amounts
paid in connection with the redemption of Bonds as provided in the
Indenture.
(v) Amounts on deposit in the Principal Reserve Fund shall be
invested and reinvested by the Servicer in (A) (i) non-AMT tax-exempt
obligations rated in the highest short term rating category by Moody's or
S&P or (ii) with the approval of the Servicer and Bond Counsel, other
investments permitted under the Indenture which, in either case, shall
mature or be subject to tender or redemption at par on or prior to the
earlier of (1) six months from the date of investment or (2) the date
such monies are needed for the purposes hereof or (B) with the approval
of the Servicer, Bond Counsel and Freddie Mac, a guaranteed investment
contract rated in the highest short term rating category by Moody's or
S&P, as applicable.
(c) The interest rate on the Bonds may be adjusted from the Floating Rate
to the Fixed Rate, in each case as provided in, and subject to the terms and
conditions of, the Indenture and this Agreement.
(d) If Freddie Mac so directs, (i) at any time after the occurrence of any
Event of Default or (ii) at any time after Freddie Mac determines in its sole
discretion to remove the then-existing Remarketing Agent and to designate a new
Remarketing Agent, the Owner shall immediately take such action as is required
under the Remarketing Agreement and consistent with the Indenture to remove the
existing Remarketing Agent and replace such Remarketing Agent, without
interruption of service, with a Remarketing Agent acceptable to Freddie Mac in
its discretion.
(e) The Owner agrees that it will not change the Remarketing Agent, or
appoint or engage any Person as Remarketing Agent or change the fees payable to
any Remarketing Agent, without Freddie Mac's prior written consent.
(f) Notwithstanding any provisions of the Borrower Documents to the
contrary, the Owner may not elect to replace the Credit Enhancement Agreement
with an Alternate Security or to convert the Bonds to a Fixed Rate without
credit enhancement (a) at any time prior to the 15th anniversary of the Closing
Date unless the Owner shall pay to Freddie Mac immediately prior to such
substitution, in addition to any other amounts due under this Agreement and the
other Borrower Documents, an amount equal to the Prepayment/Substitution Premium
calculated based on the assumption that the Loan is being prepaid in full on the
day immediately preceding the effective date of the Alternate Security and (b)
at any time, unless (i) the Owner shall have received a written statement from
Freddie Mac to the effect the Freddie Mac has been paid in full for all fees,
expenses and other amounts owed to Freddie Mac under this Agreement and all
Freddie Mac Reimbursement Amounts have been paid in full (including any
Prepayment/Substitution Premium), which written statement (if accurate) Freddie
Mac agrees to
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deliver to Owner upon request, and (ii) the provision of any Alternate Security
shall result in a rating on the Bonds by the Rating Agency required by the
definition of the term "Alternate Security" in the Financing Agreement. If the
Owner provides notice to Freddie Mac that it wishes to provide an Alternate
Security and thereafter does not provide an Alternate Security, the Owner agrees
to pay all costs incurred by Freddie Mac in connection with arranging for the
proposed Alternate Security, including attorneys' fees.
(g) (i) The Owner may not elect to voluntarily prepay the Loan, in whole
or in part, unless the Owner has given Freddie Mac at least 30 days prior
notice of its intention to make such prepayment and, on the Business Day
preceding the effective date of such prepayment, the Owner shall have:
(A) deposited with Freddie Mac the amount of principal being
prepaid and all interest accrued thereon (and on the Bonds that will
be redeemed as a result of the prepayment) through the date of such
prepayment;
(B) paid to Freddie Mac the Prepayment/Substitution Premium,
if the prepayment is effective before the 15th anniversary of the
Closing Date, and all other sums due to Freddie Mac hereunder at the
time of such prepayment; and
(C) deposited with the Trustee Available Moneys in the amount
of any prepayment premium payable in connection with the optional
redemption of the Bonds.
(ii) A Prepayment/Substitution Premium shall be due upon an
involuntary prepayment of all or part of the Loan, as follows:
(A) Upon acceleration of the Note under Section 1001 of the
Indenture after an Event of Default;
(B) Upon any application by Freddie Mac of any collateral or
other security to the repayment of the Obligations before the
fifteenth anniversary of the Closing Date and in the absence of
acceleration, which shall be deemed to be an involuntary partial
prepayment by the Owner with respect to which Owner shall pay the
Prepayment/Substitution Premium for purposes of this subsection
(g)(ii).
(iii) No Prepayment/Substitution Premium shall be payable with
respect to any prepayment occurring as a result of the application of any
insurance proceeds or condemnation award under the Reimbursement Mortgage;
provided Freddie Mac shall have consented to such prepayment.
(iv) Any prepayment, whether voluntary or involuntary, shall not be
credited against the unpaid principal balance of the Loan until the date
on which the resulting redemption of a like amount of Bonds is completed.
(v) The Owner recognizes that any prepayment of the unpaid principal
balance of the Loan, whether voluntary or involuntary or resulting from a
default by the
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Owner, and any replacement of Freddie Mac as Credit Instrument Obligor
under the Indenture, will result in Freddie Mac's incurring loss,
including loss of income, additional expense and frustration or impairment
of Freddie Mac's ability to meet its commitments to third parties. The
Owner agrees to pay to Freddie Mac upon demand damages for the detriment
caused by any prepayment, and agrees that it is extremely difficult and
impractical to ascertain the extent of such damages. The Owner therefore
acknowledges and agrees that the formula for calculating the
Prepayment/Substitution Premium represents a reasonable estimate of the
damages Freddie Mac will incur because of a prepayment or replacement of
Freddie Mac as Credit Instrument Obligor and that its obligation to pay
such damages will be satisfied upon the payment of the
Prepayment/Substitution Premium.
(vi) The Owner further acknowledges that the Prepayment/Substitution
Premium provisions of this Agreement are a material part of the
consideration for the Credit Enhancement Agreement, and acknowledges that
the terms of this Agreement are in other respects more favorable to the
Owner as a result of the Owner's voluntary agreement to the
Prepayment/Substitution Premium provisions.
(h) The Owner agrees to pay to the Servicer for deposit to the Cap Fee
Escrow monthly on the first (1st) day of each month an amount that will result
in the accumulation by the expiration of the Cap, without regard to earnings in
the Cap Fee Escrow, of funds expected to be sufficient to pay in full the cost
of an extension or renewal of the Cap Agreement on the same terms for an
additional five (5) years, or such lesser term as may be expressly approved by
Freddie Mac in writing at its sole discretion. During the first twelve (12)
months after the date of this Agreement, the monthly deposit shall be equal to a
fraction, the numerator of which is 125% of the cost of the first Cap Agreement
and the denominator of which is sixty (60). Thereafter, the amount of the
monthly deposit shall be recomputed by Freddie Mac annually based upon the
Servicer's estimation of the cost of such extension or renewal. Amounts on
deposit in the Cap Fee Escrow shall be invested and reinvested by the Servicer
in Investment Obligations which shall mature or be redeemable at par on the
earlier of (i) six months from the date of investment or (ii) the date such
monies are needed for the purposes hereof.
(i) Amounts received by the Owner from the Counterparty pursuant to the
Cap Agreement shall be paid by the Counterparty to Freddie Mac, or if designated
by Freddie Mac, to the Servicer, and if paid to the Owner, shall be paid by the
Owner to the Servicer immediately and until paid to the Servicer, shall be held
in trust for the benefit of Freddie Mac.
(j) Each of the covenants of the Owner set forth in the Borrower Documents
are hereby incorporated in this Agreement by this reference as if fully set
forth herein. The Owner shall comply with all terms and conditions of each
Borrower Document to which it is a party or by which it is bound and shall use
its best efforts to cause the Trustee and the Issuer at all times to comply with
the terms of the Bond Documents to which either of them is a party.
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(k) The Owner shall not:
(i) take, or omit to take, any action that, if taken or omitted,
would jeopardize or adversely affect the tax-exempt status of the
interest payable on the Bonds;
(ii) acquire any real or personal property other than the Project
and assets (such as accounts) related to the operations and
maintenance of the Project or engage in any business or activity
other than in connection with the ownership, management and
operation of the Project;
(iii) except as permitted in the Reimbursement Mortgage, amend,
modify, supplement or waive any provision of its partnership
agreement in any manner without the prior written consent of Freddie
Mac;
(iv) dissolve or liquidate in whole or in part;
(v) merge or consolidate with any Person;
(vi) enter into, or permit to exist, any subordinate financing
with respect to the Project without the prior written consent of
Freddie Mac; or
(vii) voluntarily prepay the Loan except in accordance with Section
3.1(g) hereof.
Section 3.2. Reimbursement and Replenishment Obligations of the
Owner.
(a) The Owner shall:
(i) By 2:00 p.m. Washington, D.C. time, on the date of each
Credit Advance, reimburse Freddie Mac for each Credit Advance, by payment
to the Servicer for immediate remittance to Freddie Mac, of the amount of
that Credit Advance.
(ii) Reimburse Freddie Mac for each Liquidity Advance, by payment
to the Servicer for remittance to Freddie Mac of the amount of that
Liquidity Advance on the first to occur of: (A) 90 days following the
Liquidity Advance;
(B) the effective date of any Alternate Security;
(C) if the related Purchased Bonds are remarketed by the
Remarketing Agent, the date on which the proceeds of that
remarketing are delivered to the Trustee or the Tender Agent;
(D) the date on which the related Purchased Bonds are
redeemed or otherwise paid in full and canceled;
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(E) the date on which the Credit Enhancement Agreement
expires;
(F) the maturity date of the Note; or
(G) the date the principal of and interest on the Note are
accelerated.
(iii) After first paying all amounts payable pursuant to clause
(i) above, by 2:00 p.m., Washington, D.C. time, on each date on which the
Servicer shall have made a Withdrawal, replenish any Withdrawal by paying
to the Servicer for deposit into the Principal Reserve Fund, the amount of
such Withdrawal. For purposes of this subsection (iii), it is a condition
precedent to the obligation of the Owner to replenish a Withdrawal that
the Owner be notified of such Withdrawal by the Servicer. A prior billing
by the Servicer to the Owner for a reimbursement obligation that remains
unpaid by the Owner shall constitute sufficient notice for purposes of the
foregoing sentence.
(b) Subject to Section 7.3, the Owner's obligation to reimburse Freddie
Mac for amounts described in clause (i) of Section 3.2(a) shall be reduced as
and to the extent that amounts paid by the Owner to the Servicer in respect of
interest on the Loan or amounts deposit in the Principal Reserve Fund are
applied to such reimbursement.
(c) The Owner's obligation to reimburse Freddie Mac for amounts described
in clause (ii) of Section 3.2(a) shall be reduced as and to the extent that
remarketing proceeds become available and are applied to such reimbursement.
(d) The Owner agrees to pay interest on any amounts due to Freddie Mac or
the Servicer, as applicable, pursuant to Section 3.2(a) (i) or (iii) from the
date such amounts are paid by Freddie Mac or withdrawn from the Principal
Reserve Fund until payment or replenishment by the Owner in full (after as well
as before judgment), at the Default Rate.
Section 3.3. Freddie Mac Credit Enhancement Fees; Liquidity Use Fee;
Servicing. In addition to any other fees and amounts payable to Freddie Mac
under the Financing Agreement, this Agreement or the Loan Documents, the Owner
shall in consideration of Freddie Mac providing the Credit Enhancement
Agreement, pay the following fees to Freddie Mac and the Servicer with respect
to the Credit Enhancement Agreement, the Loan and the Bonds:
(a) On or before the Closing Date, Freddie Mac shall be paid an
application fee in the amount of 0.1% of the principal amount of the Bonds,
together with its expenses and the fees and expenses of its outside counsel by
wire transfer in accordance with instructions provided by Freddie Mac. The
Freddie Mac Credit Enhancement Fee shall be payable to Freddie Mac (i) in
advance on the Closing Date, in an amount equal to one twelfth of the Freddie
Mac Credit Enhancement Fee prorated for the period from the Closing Date to the
last day of the month during which the Closing Date shall have occurred and (ii)
in arrears on the first day of each month commencing on the first day of the
second full month following the month in which the Closing Date occurs in an
amount equal to one twelfth of the Freddie Mac Credit Enhancement Fee. The Owner
shall have a credit on each monthly payment date for an amount equal to one
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twelfth of the Freddie Mac Credit Facility Fee times the balance in the
Principal Reserve Fund held by the Servicer immediately prior to such monthly
payment date. Freddie Mac shall also be entitled to be paid all amounts accrued
during the immediately preceding calendar month as the Liquidity Use Fee
pursuant to paragraph (b) hereof.
(b) The Owner shall pay to the Servicer, for the account of and
remittance to Freddie Mac, the Liquidity Use Fee with respect to each Liquidity
Advance on the first day of each month and on the date the Liquidity Advance is
fully reimbursed. The Liquidity Use Fee shall be payable so long as any
Liquidity Advance remains unreimbursed, in whole or in part, to Freddie Mac as
provided in Section 3.2 of this Agreement; provided, however, if the Liquidity
Advance is not fully reimbursed by the 90th day following the date of the
Liquidity Advance, the Owner shall be in default hereunder and thereafter the
Liquidity Use Fee shall be calculated using the Default Rate in place of the
Liquidity Rate for the period commencing on the 90th day following the Liquidity
Advance to the date the Liquidity Advance together with interest accrued thereon
is fully reimbursed. The Liquidity Use Fee shall not be due to Freddie Mac to
the extent Freddie Mac is reimbursed for funds provided under the Credit
Enhancement Agreement by 2:00 p.m., Washington, D.C. time (subject to the
provisions of Section 3.2 of this Agreement), on the date on which a Liquidity
Advance is made. Any reimbursement payment received after 2:00 p.m., Washington,
D.C. time, on such date shall be treated as if it were paid at 9:00 a.m.,
Washington, D.C. time, on the next Business Day. The Liquidity Use Fee shall not
be due during any Fixed Rate Period, but shall be due during any period the
Bonds bear interest at the Floating Rate. The Liquidity Use Fee shall be
otherwise due and payable as provided in this Agreement.
(c) The Owner shall pay to the Servicer the Servicing Fee (i) in advance
on the Closing Date, prorated for the period from the Closing Date to the last
day of the month in which the Closing Date shall have occurred and (ii) in
arrears, on the first day of each month, commencing on the first day of the
second full month following the month in which the Closing Date occurs.
Section 3.4. Indemnification. The Owner shall indemnify and hold harmless
Freddie Mac and its officers, directors, officials, employees, agents,
attorneys, accountants, advisors, consultants and servants, past, present or
future, from and against (a) any and all claims by or on behalf of any Person
arising from any cause whatsoever in connection with the Loan, the Indenture,
any of the Borrower Documents, the Servicing Agreement, the Project, the
Remarketing Agreement, this Agreement, the Credit Enhancement Agreement or the
issuance of the Bonds; (b) any and all claims arising from any act or omission
of the Owner or any of its agents, contractors, servants, employees or licensees
in connection with the Loan, the Indenture, any of the Borrower Documents, the
Credit Enhancement Agreement, the Servicing Agreement, the Project, the
Remarketing Agreement, this Agreement or the issuance of Bonds; and (c) all
costs, counsel fees, expenses or liabilities incurred in connection with any
such claim or proceeding brought thereon; except that the Owner shall not be
required to indemnify any person for damages caused by the gross negligence,
willful misconduct or unlawful acts of such person or any such claims, costs,
expenses or liabilities arising or resulting from Freddie Mac's failure to fund
under the Credit Enhancement Agreement in accordance with its terms. In the
event that any action or proceeding is brought or claim made against Freddie
Mac, or any of its officers,
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directors, officials, employees, agents, attorneys, accountants, advisors,
consultants or servants, with respect to which indemnity may be sought
hereunder, the Owner, upon written notice thereof from the indemnified party,
shall assume the investigation and defense thereof, including the employment of
counsel reasonably acceptable to Freddie Mac and the payment of all related
expenses. The indemnified party shall have the right to approve a settlement to
which it is a party and to employ separate counsel in any such action or
proceedings and to participate in the investigation and defense thereof, and the
Owner shall pay the reasonable fees and expenses of such separate counsel. The
provisions of this Section shall survive the termination of this Agreement.
Section 3.5. Purchased Bonds. The Owner acknowledges that Purchased Bonds
will be purchased by the Trustee as agent for and on behalf of the Owner and
registered in the name of the Owner, to the extent that Freddie Mac has provided
the funds to purchase such Purchased Bonds, and that such Purchased Bonds will
be pledged to Freddie Mac pursuant to the Pledge Agreement.
Section 3.6. Liability of the Owner. The obligation of the Owner to repay
the Loan and to make any and all payments to Freddie Mac required by this
Agreement or any other Borrower Document shall not be subject to diminution by
set-off, recoupment, counterclaim, abatement or otherwise. Until the latest of
the date on which (i) all the Bonds have been fully paid (or provision made
therefor as a legal defeasance) in accordance with the Indenture, (ii) the
Credit Enhancement Agreement has been terminated in accordance with its terms,
and (iii) all amounts due and owing Freddie Mac under this Agreement or any
other Borrower Document have been paid, the Owner (a) shall continue to have the
obligation to repay the Loan as aforesaid, and (b) shall perform and observe all
of its other obligations contained in this Agreement, the Borrower Documents and
all other documents contemplated hereby or thereby.
The obligations of the Owner under this Agreement shall be absolute,
unconditional and irrevocable and shall be paid and performed strictly in
accordance with the terms of this Agreement under all circumstances whatsoever,
including, without limitation, the following circumstances: (a) any invalidity
or unenforceability of any of the Borrower Documents or any other agreement or
instrument related to the Borrower Documents; (b) any amendment or waiver of, or
any consent to or departure from, the terms of the Credit Enhancement Agreement,
any of the other Borrower Documents, or any other agreement or instrument
related to the Borrower Documents, any extensions of time or other modifications
of the terms and conditions for any act to be performed in connection with the
Credit Enhancement Agreement; (c) the existence of any claim, set-off, defense
or other right which the Owner may have at any time against Freddie Mac, the
Servicer, the Issuer, the Trustee, the Tender Agent, the Remarketing Agent, or
any other Person, whether in connection with this Agreement, any of the other
Borrower Documents, the Project, or any unrelated transaction; (d) the surrender
or impairment of any security for the performance or observance of any of the
agreements or terms of this Agreement or the other Borrower Documents; (e)
defect in title to the Project, any acts or circumstances that may constitute
failure of consideration, destruction of, damage to or condemnation of the
Project, commercial frustration of purpose, or any change in the tax or other
laws of the United States of America or of any State or any political
subdivision of the same, (f) the breach by Freddie Mac, the Servicer, the
Issuer, the Trustee, the Tender Agent, the Remarketing Agent, or any other
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Person of its obligations under any Borrower Document or (g) any other
circumstance, happening or omission whatsoever.
Section 3.7. Neither Freddie Mac nor Servicer Liable. Neither Freddie Mac,
the Servicer nor any of their respective officials, officers, directors,
members, shareholders, agents, independent contractors or employees shall be
responsible for or liable to the Owner or any of its officials, officers,
directors, shareholders, members, partners, affiliates, independent contractors
or employees for (i) any act or omission of Freddie Mac, the Servicer or any
other Person made in good faith with respect to the validity, sufficiency,
accuracy or genuineness of documents, or of any endorsement(s) thereon (except
for documents and endorsements provided by Freddie Mac or the Servicer, as
applicable), even if such documents should be in fact prove to be in any or all
respects invalid, insufficient, fraudulent or forged; (ii) the validity or
sufficiency of any instrument transferring or assigning or purporting to
transfer or assign the Credit Enhancement Agreement or the rights or benefits
under the Credit Enhancement Agreement or proceeds under the Credit Enhancement
Agreement, in whole or in part, that may prove to be invalid or ineffective for
any reason; (iii) for failure of the Trustee to comply fully with all conditions
required in order to effect any applicable Advance; (iv) for errors, omissions,
interruptions or delays in transmission or delivery of any messages, by mail,
cable, telegraph, telex, telecopier or otherwise; (v) for any loss or delay in
the transmission or otherwise of any document or draft required in order to make
any Advance; and (vi) for any consequences arising from causes beyond the
control of Freddie Mac or the Servicer, as applicable. In furtherance and not in
limitation of the foregoing, Freddie Mac (or the Servicer) may accept documents
that appear on their face to be valid and in order, without any responsibility
for further investigation. None of the above shall affect, impair, or prevent
the vesting of any rights or powers of Freddie Mac or the Servicer under this
Agreement.
In furtherance and extension and not in limitation of the specific
provisions set forth above, any action taken or omitted by Freddie Mac or the
Servicer under or in connection with any Borrower Document or any related
certificates or other documents, if taken or omitted in good faith, shall be
binding upon the Owner, the Trustee, the Issuer, the Remarketing Agent and the
Tender Agent and shall not under any circumstance put Freddie Mac under any
resulting liability to any of them.
Section 3.8. Waivers and Consents. THE OWNER AGREES TO BE BOUND BY THIS
AGREEMENT AND, TO THE EXTENT PERMITTED BY LAW, (A) WAIVES AND RENOUNCES ANY AND
ALL REDEMPTION AND EXEMPTION RIGHTS AND THE BENEFIT OF ALL VALUATION AND
APPRAISAL PRIVILEGES AGAINST THE INDEBTEDNESS AND OBLIGATIONS EVIDENCED BY THIS
AGREEMENT AND THE OTHER BORROWER DOCUMENTS OR BY ANY EXTENSION OR RENEWAL OF
THIS AGREEMENT AND THE OTHER BORROWER DOCUMENTS; (B) WAIVES PRESENTMENT AND
DEMAND FOR PAYMENT, NOTICES OF NONPAYMENT AND OF DISHONOR, PROTEST OF DISHONOR
AND NOTICE OF PROTEST; (C) WAIVES ALL NOTICES IN CONNECTION WITH THE DELIVERY
AND ACCEPTANCE OF THIS AGREEMENT AND THE OTHER BORROWER DOCUMENTS AND ALL OTHER
NOTICES IN CONNECTION WITH THE PERFORMANCE, DEFAULT OR
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ENFORCEMENT OF THE PAYMENT OF ANY OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER
BORROWER DOCUMENTS EXCEPT AS REQUIRED BY THIS AGREEMENT OR THE OTHER BORROWER
DOCUMENTS; (D) AGREES THAT ITS LIABILITIES UNDER THIS AGREEMENT AND THE OTHER
BORROWER DOCUMENTS SHALL BE UNCONDITIONAL AND WITHOUT REGARD TO THE LIABILITY OF
ANY OTHER PERSON AND (E) AGREES THAT ANY CONSENT, WAIVER OR FORBEARANCE UNDER
THIS AGREEMENT AND THE OTHER BORROWER DOCUMENTS WITH RESPECT TO AN EVENT SHALL
OPERATE ONLY FOR SUCH EVENT AND NOT FOR ANY SUBSEQUENT EVENT.
Section 3.9. Subrogation. The Owner acknowledges that, to the extent of
any payment made by Freddie Mac pursuant to the Credit Enhancement Agreement,
Freddie Mac is to be fully subrogated to the extent of such payment and any
additional interest due on any late payment, to the rights of the Bondholders to
any moneys paid or payable under the applicable Bonds and all security therefor
under the Indenture. The Owner agrees to such subrogation and further agrees to
execute such instruments and to take such actions as, in the judgment of Freddie
Mac, are necessary to evidence such subrogation and to perfect the rights of
Freddie Mac to the extent necessary to provide reimbursement hereunder.
Section 3.10. Payment of Costs, Fees and Expenses. In addition to the
Owner's obligations set forth in Section 3.2 of this Agreement and in the other
Borrower Documents, the Owner hereby agrees absolutely and unconditionally to
pay, or cause to be paid, to Freddie Mac or the Servicer, as the case may be, or
in the case of subsection (v) below, to the appropriate governmental entity, in
each case within ten (10) Business Days following written demand, the following:
(i) any and all fees, costs, charges and expenses (including the
fees and expenses of attorneys, accountants and other experts, but not
including additional compensation for cost or use of funds in paying
Advances) which Freddie Mac or the Servicer may pay or incur in connection
with any payment under the Credit Enhancement Agreement, including
payments of any fees and charges in connection with any accounts
established to facilitate payments under the Credit Enhancement Agreement,
or the performance of Freddie Mac's obligations under the Credit
Enhancement Agreement;
(ii) the amount of any fees, costs, or charges or expenses
(including the fees and expenses of attorneys, accountants and other
experts) incurred by Freddie Mac or the Servicer in connection with the
administration or enforcement or preservation of rights or remedies under
this Agreement or any of the Borrower Documents or in connection with the
foreclosure upon, sale of or other disposition of any security granted
pursuant to the Borrower Documents;
(iii) other than Advances or Withdrawals, any payments or advances
made by Freddie Mac or the Servicer on behalf of the Owner pursuant to any
of the Borrower Documents;
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(iv) all costs and expenses incurred in connection with or related
to the execution and delivery of the Credit Enhancement Agreement, the
sale of the Bonds or the Obligations and the preparation and review of
this Agreement and the other Borrower Documents and the consummation of
the transactions contemplated hereby and thereby, including fees payable
to any agencies rating the Bonds or the Obligations, any tax or
governmental charge imposed in connection with the execution and delivery
of the Credit Enhancement Agreement and the fees and disbursements of
Freddie Mac's and the Servicer's counsel and accountants, including fees
and expenses relating to any (a) amendments, consents or waivers to this
Agreement or any of the Borrower Documents (whether or not any such
amendments, consents or waivers are entered into), (b) requests by the
Owner for Freddie Mac to consider providing credit enhancement for any
other bond issue, (c) any proposed Cap arrangement or proposed investments
under the Indenture, (d) any adjustment or conversion of the interest rate
on the Bonds, (e) any tender, purchase, refunding, reoffering or
remarketing of the Bonds, (f) collection, disbursement or application of
insurance or condemnation awards, proceeds, damages or other payments
including, without limitation, all costs incurred in connection with the
application of insurance or condemnation awards to restore or repair the
Project, including, reasonable appraiser fees and (g) any fees or expenses
incurred by the Trustee, the Issuer, Freddie Mac or the Servicer in
connection with any audit of the Project or the Bonds by the Internal
Revenue Service;
(v) together with interest, fines and penalties, any and all
documentary stamp, recording, transfer, mortgage, intangible, filing or
other taxes or fees and any and all liabilities with respect to or
resulting therefrom which may be payable in connection with the execution
and delivery of, or the consummation or administration of any of the
transactions contemplated by, or any amendment, supplement, or
modification of, or any waiver or consent under or in respect of, or any
filing of record, recordation, release or discharge of, this Agreement,
any Borrower Document, and any such other documents; and
(vi) interest on any and all amounts referred to in paragraphs (i)
through (iv) of this Section 3.10 from the date when due under this
Agreement until payment of all such amounts in full, payable at the
Default Rate.
ARTICLE IV
INTEREST RATE PROTECTION
Section 4.1. Interest Rate Protection.
(a) To protect against fluctuations in interest rates, the Owner shall
make arrangements for an interest rate cap (a "Cap") to be in place and
maintained at all times with respect to the Bonds, during any period in which
the Bonds bear interest at the Floating Rate. If the Bonds are issued bearing
interest at the Floating Rate, the Cap must be in place on the Closing Date for
a period beginning on the Closing Date and ending not earlier than the date
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which is the fifth (5th) anniversary of the Closing Date (the "Initial Cap
Period"). A Cap also shall be in place and maintained at all times during any
other period that the Floating Rate is in effect (a "Subsequent Cap") whether or
not a default shall have occurred under the applicable Cap Documents (as defined
below) and shall be in place on the effective date of a conversion to a Floating
Rate. A Subsequent Cap must be fully executed and delivered on terms and
conditions consistent with this Agreement and except as permitted by Section
4.2(f) shall have a Strike Rate (as hereinafter defined) equal to the Strike
Rate for the Cap initially provided hereunder. A Subsequent Cap must have an
effective date not later than the day following the last day of the Initial Cap
Period or any Subsequent Cap Period. Any Subsequent Cap must expire on the
earliest of (1) a date which is not earlier than the fifth (5th) anniversary of
the effective date of such Subsequent Cap, (2) the date on which the Credit
Enhancement Agreement terminates or (3) the maturity date of the Bonds. Each Cap
shall be secured and documented on terms and conditions approved by, and with a
Counterparty acceptable to, Freddie Mac. Prior to the Owner seeking any bids
from any Counterparty for a Subsequent Cap, the Owner shall obtain the prior
written consent of Freddie Mac. Each Cap shall be evidenced and governed by such
documents (the "Cap Documents") as shall be acceptable to, and which shall in
form and content be acceptable to, Freddie Mac. Not later than the day following
the last day of the Initial Cap Period or any Subsequent Cap Period, the Owner
shall ensure that either (a) a Subsequent Cap is in full force and effect if the
Bonds bear interest at the Floating Rate or (b) the Bonds have been converted to
a Fixed Rate, in each case, in accordance with this Agreement and the other
Borrower Documents.
(b) Notwithstanding any provision hereof or in the Bond Documents to the
contrary, the Owner shall not cause any adjustment of the rate on the Bonds to a
Fixed Rate (with the intention of having the Credit Enhancement Agreement remain
in effect for the benefit of the Bonds), without the prior written consent of
Freddie Mac. Freddie Mac does not intend to grant such consent unless all of the
following conditions are satisfied:
(i) The sum of the Fixed Rate on the Bonds, the Bond Fee Component,
the Freddie Mac Credit Enhancement Fee and the Servicing Fee must be less
than or equal to the Underwriting Rate.
(ii) In the case of an adjustment to the Fixed Rate that ends on a
day prior to the maturity date of the Bonds, the Fixed Rate Period must be
five (5) years or more.
(iii) The Project's and the Other Project's Combined Debt Service
Coverage Ratio, as determined by Freddie Mac, must not be less than
1.65:1.
Section 4.2. Cap Agreement Terms.
(a) Cap Agreement Payment Terms. Under each Cap arrangement, the
Counterparty shall pay a floating amount, computed in accordance with the Cap
Documents, to the extent that the BMA Index Rate exceeds the fixed cap rate (the
"Strike Rate"). Except as otherwise provided in Section 4.2(f), the Strike Rate
must be equal to or less than 300 basis points over the BMA Index Rate. The BMA
Index Rate for the Cap initially provided for this purpose shall be the lower of
(i) the BMA Index Rate as of the bid date of the Cap or (ii) the average of the
BMA
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Index Rate for the six (6) week period prior to and including the bid date of
the Cap. The Cap must provide for monthly settlement on the first day of each
month. If the BMA Index Rate is not published on any reset date under the Cap,
the Counterparty must determine an appropriate index as a substitute for the BMA
Index Rate on each such reset date. The index so determined shall provide a rate
of interest that is equivalent to the prevailing rate of interest borne by bonds
that are rated in the highest short-term rating category by Moody's and S&P in
respect of issuers of not less than five "high grade" component issuers selected
by the Counterparty which shall include, without limitation, issuers of general
obligation bonds, and that are subject to tender by holders thereof for purchase
on not more than seven (7) days notice and the interest on which is (a)
variable, determined on a weekly basis, (b) excludable from gross income for
federal income tax purposes, and (c) not subject to a "minimum tax" or similar
tax unless all tax-exempt bonds are subject to such tax.
(b) Cap Assignment; Delivery of Cap Payments. The Owner shall assign each
Cap in effect from time to time pursuant to this Agreement to Freddie Mac
pursuant to the Cap Assignment, which Cap Assignment must be acceptable in form
and content to Freddie Mac. The Counterparty shall make any and all payments
under the Cap (and the Cap Documents and the Cap Assignment shall direct the
Counterparty to make any such payments) directly to the Servicer, which shall
pay to the Owner such Cap payments provided that the Owner is not in default
hereunder.
(c) Termination. The Owner shall neither terminate, transfer nor consent
to any transfer of any existing Cap without Freddie Mac's prior written consent
as long as the Owner is required to maintain a Cap pursuant to this Agreement.
Prior to termination of an existing Cap on a date prior to its scheduled
termination date, the Owner shall, so long as the Floating Rate is in effect,
obtain a new Cap satisfying the terms of this Agreement, which new Cap must be
effective on or before or on the date immediately following the last date on
which the existing Cap is in effect.
(d) Performance Under Cap Documents. The Owner agrees to comply fully
with, and to otherwise perform when due, its obligations under, all Cap
Documents and all other agreements evidencing, governing or securing any Cap
arrangement. The Owner shall not exercise without Freddie Mac's prior written
consent, and shall exercise at Freddie Mac's direction, any rights or remedies
under any Cap Document, including without limitation the right of termination.
(e) Amount of Bonds Covered by Cap. The notional amount of any Cap shall
be based on the principal amount of the Bonds outstanding less the amount of
monies in the Principal Reserve Fund immediately prior to the commencement of a
Cap Period.
(f) Right to Purchase Subsequent Cap Above Strike Rate. The Owner may, by
giving Freddie Mac and the Servicer at least thirty (30) days written notice
prior to the purchase of a Subsequent Cap, purchase such Subsequent Cap based on
a Strike Rate that is in excess of the Strike Rate required to be maintained
pursuant to Section 4.2(a) of this Agreement, provided that there is deposited
with, and held by, the Servicer in the Cap Reserve Account as additional
security to Freddie Mac an amount (the "Cap Deposit") determined by Freddie Mac
in its
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discretion, which amount must be sufficient to cover any payment shortfall over
the term of the Subsequent Cap based on the difference between the Strike Rate
required to be maintained pursuant to Section 4.2(a) of this Agreement, and the
Strike Rate provided for in the Subsequent Cap to be acquired. The methodology
for determining the amount of the Cap Deposit shall be in Freddie Mac's
discretion. The Cap Deposit held by the Servicer shall be maintained, invested
and disposed of on such terms and conditions as shall be acceptable to Freddie
Mac in its discretion. Provided that the Owner is not in default under the Loan
Documents or that an Event of Default has not occurred under this Agreement, the
Servicer shall release to the Owner monthly on each Interest Payment Date an
amount equal to one-sixtieth (1/60th) of the Cap Deposit held by the Servicer
and shall release to the Owner on the Conversion Date all amounts held in the
Cap Reserve Account. Any earnings in respect of the Cap Deposit that have
accrued shall also, pursuant to the Indenture, be released by the Servicer to
the Owner on each such Interest Payment Date and on the Termination Date.
(g) Fees to Counterparty. Fees to the Counterparty must be paid in full
upon delivery of the Cap Agreement.
(h) Additional Collateral. The Cap Agreement shall provide unless waived
in writing by Freddie Mac that if the long-term, unsecured and unsubordinated
indebtedness of the Counterparty shall cease to be rated at least Aa3 by Moody's
or AA- by S&P or such indebtedness shall cease to be rated by Moody's or S&P,
then such party's obligations under the Cap Agreement shall be required to be
collateralized on such terms and conditions as are acceptable to Freddie Mac
including without limitation the delivery of cash collateral to a custodian.
Section 4.3. Freddie Mac Right to Convert to Fixed Rate.
(a) If the Counterparty fails to escrow collateral as provided in the Cap
Agreement and as required pursuant to Section 4.2(h), the Owner shall be
required to enter into a Subsequent Cap within thirty (30) days after such
failure to escrow collateral.
(b) At least sixty (60) days prior to the date on which a Cap terminates,
if the Bonds bear interest at the Floating Rate the Owner shall give notice, and
provide evidence satisfactory, to Freddie Mac and the Servicer that it will
either (i) secure a Subsequent Cap or (ii) convert the Bonds to the Fixed Rate,
in each case in accordance with Section 4.1 of this Agreement and the
requirements of the Indenture.
(c) If the Owner fails to deliver a Subsequent Cap as required by Section
4.3(a) hereof, or pursuant to Section 4.3(b) hereof fails to provide the
foregoing notice or satisfactory evidence or if the Owner has indicated that it
will secure a Subsequent Cap and has not provided to Freddie Mac and the
Servicer a copy of such Subsequent Cap which has been executed and delivered
prior to the date required by Section 4.3(a) or, in the case of Section 4.3(b),
at least thirty (30) days prior to the termination date of the existing Cap and
which meets the requirements of this Agreement, Freddie Mac is hereby granted
irrevocably the right, but not the obligation, to either (i) direct the Trustee
on behalf of the Owner that the interest rate on the Bonds be (A) adjusted to a
Fixed Rate pursuant to the Indenture, (B) converted to a Fixed Rate
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for a Fixed Rate Period ending on the maturity date of the Bonds pursuant to the
Indenture, or (C) adjusted to, or remain at, the Floating Rate pursuant to the
Indenture, without a Cap being in place or (ii) purchase a Subsequent Cap upon
such terms as it deems satisfactory in its own name or for the account of the
Owner with funds on deposit in the Cap Fee Escrow. If Freddie Mac exercises the
foregoing right, it shall not be deemed to waive its right to declare an Event
of Default under this Agreement because of the Owner's failure to comply with
the requirements of Sections 4.1 and 4.2 of this Agreement. Freddie Mac shall
have the right at any time to revoke any prior direction it may give in
connection with any proposed conversion of the interest rate on the Bonds as
contemplated above in this Section 4.3(c), without waiving any of its rights
under this Agreement. Freddie Mac shall have the further right, in its
discretion, to take no action upon the Owner's failure to provide timely notice
or evidence as required by this Section 4.3 or otherwise to comply with Section
4.1 of this Agreement, without waiving any of its rights under this Agreement.
The Owner hereby appoints Freddie Mac as the Owner's attorney-in-fact, with full
authority in the place and stead of the Owner and in the name of the Owner or
otherwise, from time to time in Freddie Mac's discretion, to take any action and
to execute any instrument which Freddie Mac may deem necessary or advisable to
accomplish the purposes of this Section 4.3. The Owner agrees that the power of
attorney established pursuant to this Section 4.3 shall be deemed coupled with
an interest and shall be irrevocable.
ARTICLE V
UNIFORM COMMERCIAL CODE SECURITY AGREEMENT
This Agreement is also a security agreement under the Uniform Commercial
Code for the Cap Reserve Account, the Cap Fee Escrow, the Principal Reserve
Funds and all funds and accounts and investments of funds and accounts now or
hereafter held by the Trustee under the Indenture (to the extent the Owner
retains any interest therein) and by the Servicer with respect to payments
payable under the Loan or the Reimbursement Security Documents, and all products
and cash and non-cash proceeds thereof (collectively, "UCC Collateral") for all
obligations due under this Agreement and under any of the Borrower Documents,
and the Owner hereby grants to Freddie Mac a security interest in the UCC
Collateral. The Owner shall execute and deliver to Freddie Mac upon Freddie
Mac's request, financing statements, continuation statements, and other account
agreements and amendments, in such form as Freddie Mac may require to perfect or
continue the perfection of this security interest. The Owner shall pay all
filing costs and all costs and expenses of any record searches for financing
statements that Freddie Mac may require. Without the prior written consent of
Freddie Mac, the Owner shall not create or permit to exist any other lien or
security interest in any of the UCC Collateral (other than as created under the
Indenture). The Owner covenants and agrees that it will defend Freddie Mac's
rights and security interests created by this Article against the claims and
demands of all Persons. If an Event of Default has occurred and is continuing,
Freddie Mac shall have the remedies of a secured party under the Uniform
Commercial Code, in addition to all remedies provided by this Agreement or
existing under applicable law. In exercising any remedies, Freddie Mac may
exercise its remedies against the UCC Collateral separately or together and in
any order, without in any way affecting the availability of the other remedies
available to Freddie Mac.
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ARTICLE VI
EVENTS OF DEFAULT; REMEDIES
Section 6.1. Events of Default. The occurrence of any one or more
of the following events shall constitute an Event of Default hereunder:
(i) the Owner shall fail to pay when due any amount payable by the
Owner under this Agreement, including, without limitation, any fees, costs
or expenses;
(ii) the Owner shall fail to observe or perform any other term,
covenant, condition or agreement set forth in this Agreement;
(iii) the Owner shall fail to observe or perform any other term,
covenant, condition or agreement set forth in any of the other Borrower
Documents or there shall otherwise occur an "Event of Default" under the
Reimbursement Mortgage or an event of default under any of the other
Borrower Documents (taking into account any applicable notice requirements
and cure periods expressly provided in the applicable document);
(iv) any representation or warranty made by or on behalf of the
Owner in this Agreement, in any other Borrower Document or in any
certificate delivered by the Owner to Freddie Mac or to the Servicer
pursuant to this Agreement or any other Borrower Document shall be
inaccurate or incorrect in any material respect when made or deemed made;
(v) Freddie Mac shall have given the Owner written notice that
Purchased Bonds have not been remarketed as of the ninetieth (90th) day
following purchase by the Trustee on behalf of the Owner and the Owner has
not reimbursed Freddie Mac for the applicable Liquidity Advance and
Liquidity Use Fee or has not paid in full all fees and other amounts due
to Freddie Mac under this Agreement;
(vi) while the Credit Enhancement Agreement is in effect for the
benefit of the Loan, a Fixed Rate Period expires and the Owner has not
either (i) received the prior written consent of Freddie Mac to a change
in interest mode or the maintenance of the existing mode or (ii) delivered
an Alternate Security in accordance with the terms of the Bond Documents.
or
(vii) an event of default has occurred under either of the Other
Reimbursement Agreements or the Other Reimbursement Mortgage (taking into
account any applicable notice requirements and cure periods expressly
provided in the applicable document).
Section 6.2. Remedies; Waivers.
(a) Remedies. Upon the occurrence of an Event of Default described in
paragraphs (i) through (vii) of Section 6.1, Freddie Mac may declare all the
obligations of the Owner hereunder to be immediately due and payable, in which
case all such obligations shall become due and payable, without presentment,
demand, protest or notice of any kind, including notice of default, notice of
intent to accelerate or notice of
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acceleration. In addition to the foregoing, Freddie Mac shall have the right to
take such action at law or in equity, without notice or demand, as it deems
advisable to protect and enforce the rights of Freddie Mac against the Owner in
and to the Project conveyed by the Reimbursement Mortgage, including, but not
limited to, the following actions:
(i) demand cash collateral or Investment Obligations in the full
amount of the obligations under the Bonds whether or not then due and
payable by Freddie Mac under the Credit Enhancement Agreement;
(ii) give written notice to the Trustee stating that an Event of
Default has occurred and is continuing hereunder and directing the Trustee
accelerate or cause the mandatory tender of the Bonds; and
(iii) exercise any rights and remedies available to Freddie Mac
under any of the Borrower Documents.
(b) Waivers. Freddie Mac shall have the right, to be exercised in
its discretion, to waive any Event of Default under this Agreement. Unless
such waiver expressly provides to the contrary, any waiver so granted
shall extend only to the specific event or occurrence which gave rise to
the Event of Default so waived and not to any other similar event or
occurrence which occurs subsequent to the date of such waiver.
Section 6.3. No Remedy Exclusive. Unless otherwise expressly provided, no
remedy conferred upon or reserved in this Agreement is intended to be exclusive
of any other available remedy, but each remedy shall be cumulative and shall be
in addition to other remedies given under the Borrower Documents or existing at
law or in equity. No delay or omission to exercise any right or power accruing
under any Borrower Document upon the happening of any event set forth in Section
6.1 shall impair any such right or power or shall be construed to be a waiver of
such event, but any such right and power may be exercised from time to time and
as often as may be deemed expedient. In order to entitle Freddie Mac to exercise
any remedy reserved to Freddie Mac in this Article, it shall not be necessary to
give any notice, other than such notice as may be required under the applicable
provisions of any of the other Borrower Documents. The rights and remedies of
Freddie Mac specified in this Agreement are for the sole and exclusive benefit,
use and protection of Freddie Mac, and Freddie Mac is entitled, but shall have
no duty or obligation to the Owner, the Trustee, the Bondholders or otherwise,
(a) to exercise or to refrain from any right or remedy reserved to Freddie Mac
hereunder, or (b) to cause the Trustee or any other party to exercise or to
refrain from exercising any right or remedy, available to it under any of the
Borrower Documents.
ARTICLE VII
MISCELLANEOUS
Section 7.1. Counterparts. This Agreement may be executed in
counterparts by Freddie Mac and the Owner, and each such counterpart shall be
considered an original and all such counterparts shall constitute one and the
same instrument.
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Section 7.2. Amendments, Changes and Modifications. This Agreement may be
amended, changed, modified, altered or terminated only by a written instrument
or written instruments signed by the parties to this Agreement. No course of
dealing between the Owner and Freddie Mac, nor any delay in exercising any
rights hereunder, shall operate as a waiver of any rights of Freddie Mac
hereunder. Unless otherwise specified in such waiver or consent, a waiver or
consent given hereunder shall be effective only in the specific instance and for
the specific purpose for which given.
Section 7.3. Payment Procedure. The Owner agrees that all amounts due to
Freddie Mac under Section 3 of this Agreement shall be paid to the Servicer for
remittance to Freddie Mac pursuant to the Servicing Agreement. All payments to
be made to the Servicer, for the account of Freddie Mac, pursuant to this
Agreement shall be paid in immediately available funds to the Servicer in
accordance with instructions given to the Owner by the Servicer. Except as
otherwise provided above in this Section 7.3, all payments to be made to Freddie
Mac pursuant to this Agreement shall be made in lawful currency of the United
States of America and in immediately available funds to an account designated in
writing by Freddie Mac before 2:00 p.m. (Washington, D.C. time) on the date when
due, unless the Owner is otherwise instructed in writing by Freddie Mac.
Notwithstanding the foregoing, in connection with the Owner's obligation to
reimburse Freddie Mac by 2:00 p.m., Washington, D.C. time for certain payments
made by Freddie Mac as provided in this Section 3 of this Agreement, such
payment will, unless otherwise directed pursuant to this Section 7.3, be deemed
to have been timely made if made in lawful currency of the United States of
America and in immediately available funds to the Servicer, for remittance to
Freddie Mac, to an account designated in writing by the Servicer, before 2:00
p.m., Washington, D.C. time and otherwise in accordance with the requirements of
this Section 7.3.
Section 7.4. Payments on Business Days. In any case where the date of
payment to Freddie Mac or the expiration of any time period hereunder occurs on
a day which is not a Business Day, then such payment or expiration of such time
period need not occur on such date but may be made on the next succeeding
Business Day with the same force and effect as if made on the day of maturity or
expiration of such period, except that interest shall continue to accrue for the
period after such date to the next Business Day.
Section 7.5. Governing Law; Severability. This Agreement shall be
construed, and the rights and obligations of Freddie Mac and the Owner hereunder
determined, in accordance with federal statutory or common law ("federal law").
Insofar as there may be no applicable rule or precedent under federal law and
insofar as to do so would not frustrate the purposes of any provision of this
Agreement, the local law of the State of Illinois shall be deemed reflective of
federal law. The parties agree that any legal actions between Freddie Mac and
the Owner regarding each party hereunder shall be originated in the United
States District Court in and for the Northern District of Illinois, and the
parties hereby consent to the jurisdiction and venue of said Court in connection
with any action or proceeding initiated concerning this Agreement.
The invalidity or enforceability of any provision of this Agreement shall
not affect the validity of any other provision and all other provisions shall
remain in full force and effect.
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Section 7.6. Notices. All notice, directions, certificates or other
communications hereunder to Freddie Mac, the Owner, or the Servicer shall be
given in accordance with the Reimbursement Mortgage. All notice, directions,
certificates or other communications to the Issuer, the Trustee, the Remarketing
Agent or the Tender Agent shall be given in accordance with the Indenture.
Section 7.7. Further Assurances and Corrective Instruments. To the extent
permitted by law, the parties to this Agreement agree that they will, from time
to time, execute, acknowledge and deliver, or cause to be executed, acknowledged
and delivered, such supplements to this Agreement and such further instruments
as Freddie Mac may request and as may be reasonably required in the opinion of
Freddie Mac or its counsel to effectuate the intention of or facilitate the
performance of this Agreement or any other Borrower Document.
Section 7.8. Term of this Agreement. The term of this Agreement (the
"Term") shall continue in full force and effect, and Owner shall not be released
from liability under this Agreement, until the latest of (a) the Termination
Date, (b) the date on which Freddie Mac has no further liability (accrued or
contingent) under the Credit Enhancement Agreement and (c) the date on which the
Owner shall pay or cause to be paid to Freddie Mac or the Bondholders all
amounts to be paid by the Owner under this Agreement, under the other Borrower
Documents and otherwise with respect to the Obligations. Notwithstanding such
termination, the provisions of Section 3.4 hereof and Section 18 of the
Reimbursement Mortgage shall survive the expiration or termination of this
Agreement.
Section 7.9. Assignments; Transfers; Third-Parties Rights. The Owner shall
not assign this Agreement, or delegate any of its obligations hereunder, without
the prior written consent of Freddie Mac. This Agreement may not be transferred
in any respect without the prior written consent of Freddie Mac. Nothing in this
Agreement shall confer any right upon any Bondholder or any other Person other
than the parties hereto and their successors and permitted assigns.
Section 7.10. Headings. Article and section headings used herein
are for convenience of reference only, are not part of this Agreement and are
not to affect the construction of, or to be taken into consideration in
interpreting, this Agreement.
Section 7.11. Limitation on Personal Liability.
(a) Except as otherwise provided in this Section 7.11, the Owner shall
have no personal liability under this Agreement or any other Borrower Document
for the payment of the payment obligations or for the performance of any other
obligations of the Owner under the Borrower Documents, and Freddie Mac's only
recourse for the satisfaction or performance of the Obligations shall be Freddie
Mac's exercise of its rights and remedies with respect to the Project and any
other collateral held by Freddie Mac as security for the Obligations. This
limitation on the Owner's liability shall not limit or impair Freddie Mac's
enforcement of its rights against any guarantor of the Obligations.
(b) The Owner shall be personally liable to Freddie Mac for the repayment
of a portion of the Obligations equal to 0 percent of the unpaid principal
balance of this
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Reimbursement Agreement, plus any other amounts for which Owner has personal
liability under this Section 7.11.
(c) In addition to Owner's personal liability under Section 7.11(b), the
Owner shall be personally liable to Freddie Mac for the repayment of a further
portion of the Obligations equal to any loss or damage suffered by Freddie Mac
as a result of (1) failure of the Owner to pay to Freddie Mac upon demand after
an Event of Default all rents to which Freddie Mac is entitled under Section
3(a) of the Reimbursement Mortgage and the amount of all security deposits
collected by the Owner from tenants then in residence; (2) failure of the Owner
to apply all insurance proceeds and condemnation proceeds as required by the
Reimbursement Mortgage; (3) failure of the Owner to comply with Section 14(d) or
(e) of the Reimbursement Mortgage relating to the delivery of books and records,
statements, schedules and reports or (4) failure of the Owner to pay insurance
premiums for fire, hazard or other insurance required by the Reimbursement
Mortgage.
(d) For purposes of determining the Owner's personal liability under
Section 7.11(b) and Section 7.11(c), all payments made by the Owner or any
guarantor with respect to the Obligations and all amounts received by Freddie
Mac from the enforcement of its rights under the Reimbursement Mortgage shall be
applied first to the portion of the Obligations for which the Owner has no
personal liability.
(e) The Owner shall become personally liable to Freddie Mac for the
repayment of all of the Obligations upon the occurrence of any of the following
Events of Default: (1) the Owner's acquisition of any property or operation of
any business not permitted by Section 33 of the Reimbursement Mortgage; (2) a
Transfer (as defined in the Reimbursement Mortgage) (including, but not limited
to, a lien or encumbrance) that is an Event of Default under Section 21 of the
Reimbursement Mortgage, other than a Transfer consisting solely of the
involuntary removal or involuntary withdrawal of a general partner in a limited
partnership or a manager in a limited liability company; or (3) fraud or
intentional written material misrepresentation by the Owner or any officer,
director, partner, member or employee of the Owner in connection with the
application for or creation of the Obligations or any request for any action or
consent by Freddie Mac.
(f) In addition to any personal liability for the Obligations, the Owner
shall be personally liable to Freddie Mac for (1) the performance of all of the
Owner's obligations under Section 18 of the Reimbursement Mortgage (relating to
environmental matters); (2) the costs of any audit under Section 14(d) of the
Reimbursement Mortgage; (3) any costs and expenses incurred by Freddie Mac in
connection with the collection of any amount for which the Owner is personally
liable under this Section, including fees and out of pocket expenses of
attorneys and expert witnesses and the costs of conducting any independent audit
of the Owner's books and records to determine the amount for which the Owner has
personal liability; and (4) payment to Freddie Mac of any Surplus Proceeds (as
such term is defined in the Reimbursement Mortgage) actually received by the
Owner or the General Partner.
(g) To the extent that the Owner has personal liability under this Section
7.11, Freddie Mac may exercise its rights against the Owner personally without
regard to whether
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Freddie Mac has exercised any rights against the Project or any other security,
or pursued any rights against any guarantor, or pursued any other rights
available to Freddie Mac under this Agreement, the Reimbursement Mortgage, any
other Borrower Document or applicable law. For purposes of this Section, the
term "Project" shall not include any funds that (1) have been applied by the
Owner as required or permitted by the Reimbursement Mortgage prior to the
occurrence of an Event of Default or (2) the Owner was unable to apply as
required or permitted by the Reimbursement Mortgage because of a bankruptcy,
receivership, or similar judicial proceeding.
Section 7.12. Consent of Freddie Mac. Whenever Freddie Mac shall have any
right or option to exercise any discretion, to determine any matter, to accept
any presentation or to approve any matter, such exercise, determination,
acceptance or approval shall, without exception, be in Freddie Mac's sole and
absolute discretion.
Section 7.13. Disclaimer; Acknowledgments. Approval by Freddie Mac of the
Owner, the Loan, the Bonds or otherwise shall not constitute a warranty or
representation by Freddie Mac as to any matter. Nothing set forth in this
Agreement, in any of the other Borrower Documents or in the subsequent conduct
of the parties shall be deemed to constitute Freddie Mac as the partner or joint
venturer of any Person for any purpose whatsoever.
Section 7.14. Entire Agreement. This Agreement and the Borrower Documents
constitute the entire contract between the parties relative to the subject
matter hereof. Any previous agreement among the parties with respect to the
subject matter hereof is superseded by this Agreement and the Borrower
Documents. Nothing in this Agreement or the Borrower Documents, expressed or
implied, is intended to confer upon any party other than the parties hereto and
thereto any rights, remedies, obligations or liabilities under or by reason of
this Agreement or the Borrower Documents; provided, however, that as to Persons
other than Freddie Mac and the Owner that are parties to any of the Borrower
Documents, such Persons shall not have any rights, remedies, obligations or
liabilities under this Agreement or any of the Borrower Documents except under
such Borrower Documents to which such Persons are directly parties to.
Section 7.15. Survival of Representation and Warranties. All statements
contained in any Borrower Document, or in any certificate, financial statement
or other instrument delivered by or on behalf of the Owner pursuant to or in
connection with this Agreement (including but not limited to any such statement
made in or in connection with any amendment hereto or thereto) shall constitute
representations and warranties made under this Agreement. All representations
and warranties made under this Agreement (i) shall be made and shall be true at
and as of the date of this Agreement and the Closing Date and (ii) shall survive
the execution and delivery of this Agreement, regardless of any investigation
made by Freddie Mac or on its behalf. In addition, the representations set forth
in Section 2.1 (c), (d), (e), (f), (i), (j), (k), (l), (m), (n), (r), (s), (t),
(u) and (v) shall be deemed made on the date of any Advance under the Credit
Enhancement Agreement.
Section 7.16. Waiver of Claims. IN ORDER TO INDUCE FREDDIE MAC TO EXECUTE
AND DELIVER THE CREDIT ENHANCEMENT AGREEMENT, THE OWNER
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HEREBY REPRESENTS AND WARRANTS THAT IT HAS NO CLAIMS, SET-OFFS OR DEFENSES AS OF
THE CLOSING DATE IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT OR IN CONNECTION WITH ANY OF THE OTHER BORROWER DOCUMENTS. TO THE
EXTENT ANY SUCH CLAIMS, SET-OFFS OR DEFENSES MAY EXIST, WHETHER KNOWN OR
UNKNOWN, THEY ARE EACH HEREBY WAIVED AND RELINQUISHED IN THEIR ENTIRETY.
Section 7.17. Waivers of Jury Trial. THE OWNER AND FREDDIE MAC EACH (A)
COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE
ARISING OUT OF THIS AGREEMENT OR THE RELATIONSHIP BETWEEN THE PARTIES AS
BORROWER AND LENDER THAT IS TRIABLE OF RIGHT BY A JURY AND (B) WAIVES ANY RIGHT
TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT
EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY
GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT
LEGAL COUNSEL.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Owner and Freddie Mac have executed this
Reimbursement Agreement as of the day and year first above written.
THE PONDS OF PEMBROKE LIMITED
PARTNERSHIP, an Illinois limited partnership,
as Owner
By: Brookdale Holdings, Inc., a Delaware
corporation, its managing general partner
By: /s/ Darryl W. Copeland, Jr.
---------------------------------------------
Name: Darryl W. Copeland, Jr.
Title: Vice President
FEDERAL HOME LOAN MORTGAGE
CORPORATION, as Freddie Mac
By: /s/ Richard C. Martinez
---------------------------------------------
Richard C. Martinez
Director
Multifamily Loan Production
[Signature Page to Ashley of Lisle Reimbursement Agreement]
<PAGE>
EXHIBIT A
Principal Reserve Fund Deposits
FOR FURTHER INFORMATION:
AT THE COMPANY: AT FLEISHMAN HILLARD:
Mark J. Schulte Sharon J. Erikson
President and Chief Executive Officer Vice President
(312) 977-3700 (312) 751-8878
FOR IMMEDIATE RELEASE
FRIDAY, MAY 28, 1999
BROOKDALE LIVING COMMUNITIES, INC. REPLACES
CREDIT ENHANCEMENT ON $65 MILLION OF TAX EXEMPT INDEBTEDNESS
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Chicago, May 28, 1999 - Brookdale Living Communities, Inc. (NASDAQ: BLCI), a
national provider of senior and assisted living services to the elderly, today
announced that on Thursday, May 27, 1999, the company closed on the replacement
credit enhancement on $65 million of its tax exempt bond financing. The new
credit enhancement is being provided by the Federal Home Loan Mortgage
Corporation (Freddie Mac), and was arranged by Glaser Financial Group, Inc. Upon
completion of the transaction, Brookdale received approximately $14.4 million
that was previously on deposit as collateral for the benefit of the prior credit
enhancement providers. Brookdale expects to use these funds, after payments for
transaction fees and expenses, for working capital and general corporate
purposes. The complete terms of the transaction will be filed with the
Securities and Exchange Commission shortly.
Brookdale Living Communities, Inc. is a provider of senior and assisted living
services to the elderly, with 19 facilities in 12 states containing an aggregate
of approximately 4,188 units in upscale urban and suburban communities.
This news release contains certain forward-looking statements. When used in this
news release, the words "believes," "expects," "anticipates," "estimates" and
similar words or expressions are generally intended to identify forward-looking
statements. These forward-looking statements involve risks and uncertainties,
such as the risks detailed in the Company's filings with the Securities and
Exchange Commission.
CONTACT: Mark J. Schulte, President and Chief Executive Officer, Brookdale
Living Communities, Inc., 312-977-3700, or Sharon J. Erikson, Vice President,
Fleishman Hillard, 312-751-8878.
