UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934, for the Quarterly Period ended September 30, 1999.
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934, for the Transition Period from ________ to _______.
Commission File Number 0-22253
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BROOKDALE LIVING COMMUNITIES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 36-4103821
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation)
77 W. Wacker Drive, Suite 4400
Chicago, IL 60601
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(Address of principal (Zip Code)
executive offices)
(312) 977-3700
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address, or former
fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of November 10, 1999, 11,574,749 shares of the registrant's Common Stock,
$0.01 par value per share, were outstanding.
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BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES
FORM 10-Q
INDEX
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PAGE
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PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED). 3
Consolidated Balance Sheets as of September 30, 1999 and as of December 31, 1998 4
Consolidated Statements of Operations for the three months and nine months ended September 30, 1999 and 1998 5
Consolidated Statements of Cash Flows for the nine months ended September 30, 1999 and 1998 6
Notes to Consolidated Financial Statements 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. 11
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. 16
PART II: OTHER INFORMATION 18
ITEM 1. LEGAL PROCEEDINGS. 18
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS. 18
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. 18
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. 18
ITEM 5. OTHER INFORMATION. 18
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. 18
SIGNATURES 21
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PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED).
The information furnished in the accompanying unaudited consolidated
balance sheets, statements of operations, and statements of cash flows reflects
all adjustments which are, in the opinion of management, necessary for a fair
presentation of the aforementioned financial statements for the interim period.
Brookdale Living Communities, Inc. was incorporated on September 4,
1996 and commenced operations upon the completion of its initial public offering
on May 7, 1997. The consolidated financial statements of Brookdale Living
Communities, Inc. and its subsidiaries (the "Company") represent the results of
operations of 22 facilities the Company operated during the period ended
September 30, 1999.
The aforementioned financial statements should be read in conjunction
with the notes to the consolidated financial statements and Management's
Discussion and Analysis of Financial Condition and Results of Operations and the
consolidated financial statements for the year ended December 31, 1998 included
in the Company's Annual Report on Form 10-K, as filed with the Securities and
Exchange Commission on March 31, 1999.
3
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BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PAR VALUE AMOUNTS)
September 30, 1999 December 31, 1998
------------------ -----------------
ASSETS (unaudited) (audited)
<S> <C> <C>
Cash and cash equivalents.............................................. $ 4,231 $ 1,065
Short-term investments................................................. 41,000 --
Accounts receivable.................................................... 1,134 379
Notes receivable....................................................... 4,753 3,486
Reimbursable development costs......................................... 11,328 9,815
Prepaid expenses and other............................................. 5,924 4,752
------------- -------------
Total current assets............................................. 68,370 19,497
------------- -------------
Property, plant and equipment.......................................... 134,136 115,801
Accumulated depreciation............................................... (8,823) (5,689)
-------------- -------------
Property, plant and equipment, net............................... 125,313 110,112
------------- -------------
Property under development............................................. 8,588 11,221
Cash and investments - restricted...................................... 9,942 8,226
Investment certificates - restricted................................... 35,422 15,951
Letter of credit deposits.............................................. -- 13,919
Lease security deposits................................................ 75,910 55,453
Other, net............................................................. 21,047 10,254
------------- -------------
Total assets..................................................... $ 344,592 $ 244,633
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current portion of long-term debt...................................... $ 329 $ 3,310
Unsecured line of credit............................................... -- 10,997
Current portion of deferred gain on sale of property................... 806 806
Accrued interest payable............................................... 1,676 968
Accounts payable and accrued expenses.................................. 13,183 9,234
Tenant refundable entrance fees and security deposits.................. 6,656 5,838
Other.................................................................. 3,415 629
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Total current liabilities........................................ 26,065 31,782
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Long-term debt, less current portion................................... 92,322 92,570
Convertible subordinated notes......................................... 100,000 --
Deferred lease liability............................................... 3,181 2,849
Deferred gain on sale of property, less current portion................ 15,512 16,116
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Total liabilities................................................ 237,080 143,317
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STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 20,000 shares authorized, none issued. -- --
Common stock, $.01 par value, 75,000 shares authorized, 11,575 and 11,572
shares issued and outstanding at September 30, 1999 and
December 31, 1998, respectively.................................... 116 116
Additional paid-in-capital............................................. 94,134 94,101
Accumulated earnings................................................... 15,406 7,099
Treasury stock, 153 common shares at September 30, 1999 at cost........ (2,144) --
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Total stockholders' equity....................................... 107,512 101,316
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Total liabilities and stockholders' equity....................... $ 344,592 $ 244,633
============= =============
See accompanying notes to consolidated financial statements.
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4
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BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three months ended September 30, Nine months ended September 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUE
Resident fees............................................... $ 24,899 $ 18,868 $ 73,087 $ 51,723
Development fees............................................ 1,640 1,542 4,941 4,120
Management fees............................................. 113 72 258 188
----------- ---------- ----------- -----------
Total revenue........................................ 26,652 20,482 78,286 56,031
----------- ---------- ----------- -----------
EXPENSES
Facility operating.......................................... 13,475 10,715 39,163 28,993
General and administrative.................................. 1,317 1,280 3,752 3,776
Lease expense............................................... 6,368 4,790 19,014 12,782
Depreciation and amortization............................... 1,568 1,146 4,250 3,577
Write-off of deferred financing costs....................... -- -- 273 --
----------- ---------- ----------- -----------
Total operating expenses............................. 22,728 17,931 66,452 49,128
----------- ---------- ----------- -----------
Income from operations............................... 3,924 2,551 11,834 6,903
Interest income............................................. 2,716 1,277 6,205 2,918
Interest expense............................................ (2,055) (1,033) (4,970) (2,891)
------------ ----------- ------------ ------------
Income before income tax expense..................... 4,585 2,795 13,069 6,930
Income tax expense.......................................... (1,675) (982) (4,762) (2,485)
------------ ----------- ------------ ------------
Net income........................................... $ 2,910 $ 1,813 $ 8,307 $ 4,445
=========== ========== =========== ===========
Basic earnings per common share............................. $ 0.25 $ 0.19 $ 0.72 $ 0.47
=========== ========== =========== ===========
Weighted average shares used for computing basic earnings
per common share........................................ 11,555 9,569 11,566 9,489
=========== ========== =========== ===========
Diluted earnings per common share........................... $ 0.23 $ 0.19 $ 0.67 $ 0.46
=========== ========== =========== ===========
Weighted average shares used for computing diluted earnings
per common share........................................ 17,099 9,771 14,464 9,738
=========== ========== =========== ===========
See accompanying notes to consolidated financial statements.
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5
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BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
Nine months ended September 30,
1999 1998
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income........................................................... $ 8,307 $ 4,445
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization..................................... 4,250 3,577
Write-off of deferred financing costs............................. 273 --
Deferred income taxes............................................. 4,762 2,437
Change in deferred lease liability................................ 332 826
Deferred gain on sale of property................................. (604) (604)
Changes in:
Accounts receivable............................................ (755) (387)
Prepaid expenses and other..................................... (7,858) (7,367)
Accrued interest payable....................................... 708 312
Accounts payable and accrued expenses and other................ 3,546 1,815
Tenant refundable entrance fees and security deposits.......... 225 (67)
------------- ---------------
Net cash provided by operating activities.................. 13,186 4,987
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CASH FLOWS FROM INVESTING ACTIVITIES
Lease security deposits and acquisitions............................. (20,491) (18,647)
Increase in cash and investment certificates - restricted............ (1,196) (280)
Increase in investments - restricted................................. (19,471) (13,132)
Proceeds from sale of property under development, net................ 1,171 3,370
Property under development, net of related payables ................. (12,691) (15,680)
Payments received on notes receivable................................ 3,303 7,446
Purchases of short-term investments.................................. (55,000) --
Sales of short-term investments...................................... 14,000 --
Additions to property, plant and equipment and reimbursable
development costs, net of related accounts payable................ (9,812) (4,940)
-------------- ---------------
Net cash used in investing activities...................... (100,187) (41,863)
-------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long-term debt.......................................... (3,229) (213)
Proceeds from unsecured lines of credit.............................. 31,933 28,150
Repayment of unsecured lines of credit............................... (42,930) (7,500)
Proceeds from issuance of convertible subordinated notes, net of costs 94,286 --
Decrease (increase) in letter of credit deposits, net................ 13,919 (1,333)
Payment of financing costs........................................... (1,701) (957)
Proceeds from issuance of common stock, net.......................... 33 5,847
Purchases of treasury stock.......................................... (2,144) --
-------------- --------------
Net cash provided by financing activities.................. 90,167 23,994
------------- --------------
Net increase (decrease) in cash and cash equivalents....... 3,166 (12,882)
Cash and cash equivalents at beginning of period........... 1,065 13,292
------------- --------------
Cash and cash equivalents at end of period................. $ 4,231 $ 410
============= ==============
See accompanying notes to consolidated financial statements.
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6
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BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
Nine months ended September 30,
1999 1998
---- ----
Supplemental Disclosure of Cash Flow Information:
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Interest paid, net of amounts capitalized............................. $ 4,262 $ 3,056
============= ===============
Income taxes paid..................................................... $ 514 $ 651
============= ===============
Supplemental Schedule of Noncash Investing and Financing
Activities:
In connection with property acquisitions and net lease transactions, assets
acquired and liabilities assumed were as follows:
Fair value of assets acquired.................................... $ 20,066 $ 19,516
Less - cash consideration paid................................... 19,334 17,319
------------- ---------------
Liabilities assumed.............................................. $ 732 $ 2,197
============= ===============
See accompanying notes to consolidated financial statements.
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7
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BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE, UNITS AND SQUARE FOOT AMOUNTS)
(UNAUDITED)
1. ORGANIZATION
Brookdale Living Communities, Inc. was incorporated in Delaware on
September 4, 1996 and commenced operations upon the completion of the initial
public offering of its stock on May 7, 1997.
The consolidated financial statements of Brookdale Living Communities, Inc.
and its subsidiaries (the "Company") include the properties owned or leased by
the Company. The Company operates in the senior independent and assisted living
segment. The properties owned, leased or managed by the Company or under
construction as of September 30, 1999 (collectively, the "Properties") are
located throughout the United States as indicated on the following table:
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Property Name Date Owned or Leased Location
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Owned Facilities:
- -----------------
The Heritage of Des Plaines May 7, 1997 Des Plaines, IL
The Devonshire May 7, 1997 Lisle, IL
Hawthorn Lakes (1) May 7, 1997 Vernon Hills, IL
Edina Park Plaza May 7, 1997 Edina, MN
Leased Facilities:
- ------------------
The Hallmark May 7, 1997 Chicago, IL
The Springs of East Mesa May 7, 1997 Mesa, AZ
The Gables at Brighton May 7, 1997 Brighton, NY
The Park Place May 7, 1997 Spokane, WA
The Gables at Farmington November 24, 1997 Farmington, CT
The Classic at West Palm Beach December 18, 1997 West Palm Beach, FL
The Brendenwood Retirement Community December 22, 1997 Voorhees, NJ
Harbor Village March 6, 1998 Chicago, IL
The Atrium of San Jose May 12, 1998 San Jose, CA
The Chatfield July 2, 1998 West Hartford, CT
Ponce de Leon October 21, 1998 Santa Fe, NM
Woodside Terrace December 22, 1998 Redwood City, CA
River Bay Club January 19, 1999 Quincy, MA
Berkshire of Castleton September 14, 1999 Indianapolis, IN
Managed Facilities:
- -------------------
The Island on Lake Travis Lago Vista, TX
The Kenwood Minneapolis, MN
Heritage at Gaines Ranch (2) Austin, TX
Heritage at Southfield (2) Southfield, MI
Development Projects Under Construction (3):
- -------------------------------------------
Raleigh, North Carolina
Glen Ellyn, Illinois
New York (Battery Park City), New York
Pittsburgh (Mount Lebanon), Pennsylvania
(1) The Willows, a 54-unit assisted living addition, commenced operations in
July 1999.
(2) These projects were developed by the Company, commenced operations in July
1999 and are being managed by the Company for third party owners.
(3) The Company is developing these projects for third party owners.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments considered necessary
for a fair presentation have been included. Operating results for such interim
periods are not necessarily indicative of the results that may be expected for a
full fiscal year. For further information regarding significant accounting
policies, please refer to the financial statements and footnotes thereto for the
period ended December 31, 1998 included in the Company's Annual Report on Form
10-K, as filed with the Securities and Exchange Commission on March 31, 1999.
Principles of Consolidation
The consolidated financial statements include the financial statements of
Brookdale Living Communities, Inc. and its wholly owned subsidiaries. All
significant intercompany balances and transactions have been eliminated in
consolidation.
Use of Estimates
The preparation of the consolidated financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from these
estimates.
Development Fees
Development fees related to development activities for projects owned by
third parties are earned over the term of the development. Such fees are
recognized as revenues as the development services are provided to the owner
during the pre-construction and construction periods, which typically extend for
12 to 14 months.
Reclassifications
Certain prior period amounts have been reclassified to conform with the
current financial statement presentation.
3. RECENT DEVELOPMENTS
During July 1999, the Company opened two new facilities which were developed
by the Company and are now being managed by the Company for third party owners.
The 218-unit Heritage of Southfield facility is located in Southfield, Michigan,
and the 208-unit Heritage of Gaines Ranch facility is located in Austin, Texas.
On August 6, 1999, the Company sold certain development rights to a site in
Huntley, IL, to an unaffiliated third party. The site was purchased from an
affiliate of The Prime Group, Inc. and financed, in part, with the proceeds of a
loan made by the Company to the third party. The sales price was $2,903, of
which $871 was received in cash and $2,032 was received by the delivery of a
promissory note bearing interest at 12% which is secured by a mortgage on the
site. The Company will develop the site pursuant to a development agreement with
the owner.
On August 24, 1999, construction financing of $49,125 was put into place for
the Battery Park City, New York, New York project. The loan bears interest at
London Interbank Offered Rate ("LIBOR") plus 2.35% and matures February 28,
2001. The unaffiliated third party owner has entered into interest rate lock
agreements aggregating $32,850 with respect to the floating rate constructions
debt. The repayment of this loan is guaranteed by Brookdale Living Communities,
Inc. In connection with the construction financing, the third party owner repaid
the $1,400 promissory note, plus accrued interest, to the Company.
On September 8, 1999, the Company's Board of Directors authorized the
Company to repurchase up to 2,000 shares of its common stock. At September 30,
1999, the Company had repurchased 153 shares at an aggregate purchase price of
$2,144.
On September 14, 1999, the Company entered into an agreement to lease the
Berkshire of Castleton, a 145-unit senior independent and assisted living
facility located in Indianapolis, Indiana. The lease is an operating lease with
an initial five-year term and five one-year renewal option periods. The Company
has an option to acquire this facility at the end of the lease term.
On September 30, 1999, the Company entered into an operating lease agreement
for approximately 30,000 square feet of new corporate office space. The
operating lease commences on March 1, 2000, has a term of 10 years and requires
the payment of base rent at $16.50 per square foot escalating to $23.25 per
square foot plus operating expenses (as defined) over the term of the lease.
9
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In September 1999, Prime Group Realty Trust, the successor to the office and
industrial divisions of The Prime Group, Inc., exercised its option to acquire
the building.
The Company has entered into interest rate lock agreements on behalf of
third party owners of development projects with respect to interest rates on
floating rate construction debt. The agreements are designed to limit the
exposure to movements in floating interest rates on the development construction
project loans, and the Company is to be reimbursed by the third party for any
payments made pursuant to the agreements. The notional amount of the
construction loans being hedged is $53,500, and the approximate fair value of
such hedging contracts was $1,169 at September 30, 1999.
In connection with the replacement credit enhancements obtained on May 27,
1999, to secure the payment of principal and interest on the $65,000 tax-exempt
bonds secured by the Devonshire and Heritage of Des Plaines facilities, the
Company purchased $65,000 of interest rate caps, with a strike price of 6.35%, a
fair value of $492 at September 30, 1999 and an expiration date of June 1, 2004.
The Company's reimbursement obligations are non-recourse obligations secured by
mortgages on the Devonshire and Heritage of Des Plaines facilities; provided
however, Brookdale Living Communities, Inc. has a guaranteed reimbursement
obligation which is limited to $4,000.
4. INCOME TAXES
Income tax expense differs from the amounts computed by applying the U.S.
federal income tax rate of 34% to income before income tax expense principally
as a result of non-taxable amortization of the deferred gain on sale of a
property and state income taxes.
5. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings
per share for the three and nine months ended September 30, 1999 and 1998.
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Three months ended September 30, Nine months ended September 30,
1999 1998 1999 1998
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<S> <C> <C> <C> <C>
Numerator:
Numerator for basic earnings per common share $ 2,910 $ 1,813 $ 8,307 $ 4,445
Interest expense on convertible
subordinated notes, net of tax 941 -- 1,421 --
------------- -------------- ------------- -------------
Numerator for diluted earnings per share $ 3,851 $ 1,813 $ 9,728 $ 4,445
============= ============== ============= =============
Denominator:
Denominator for basic earnings per common share -
weighted-average shares 11,555 9,569 11,566 9,489
Effect of dilutive securities:
Employee stock options 64 202 108 249
Warrants -- -- -- --
Convertible subordinated notes 5,479 -- 2,790 --
------------- -------------- ------------- -------------
Denominator for diluted earnings per common share -
adjusted weighted-average shares and assumed
conversions 17,099 9,771 14,464 9,738
============= ============== ============= =============
Basic earnings per common share $ 0.25 $ 0.19 $ 0.72 $ 0.47
============= ============== ============= =============
Diluted earnings per common share $ 0.23 $ 0.19 $ 0.67 $ 0.46
============= ============== ============= =============
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6. PRO FORMA INFORMATION
The following unaudited pro forma condensed and consolidated statements of
operations are not necessarily indicative of what the actual results of
operations of the Company would have been assuming the Company had leased all of
the Leased Facilities and issued 11,575 shares and $100,000 of 5.5% convertible
subordinated notes at the beginning of each period presented, nor do they
purport to represent the results of operations of the Company for future
periods.
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Nine months Three months
ended September 30, ended September 30,
------------------- -------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue $80,831 $75,050 $27,242 $25,279
Net income 8,137 4,251 3,099 1,747
Basic earnings per share 0.70 0.37 0.27 0.15
Diluted earnings per share 0.64 0.37 0.24 0.15
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10
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The pro forma information does not include interest income on available cash
from the proceeds of the 5.5% convertible subordinated notes.
7. SUBSEQUENT EVENTS
On October 19, 1999, the Company obtained a $6,000 loan secured by The
Willows, a 54 unit assisted living addition at the Hawthorn Lakes facility in
Vernon Hills, Illinois. The loan bears interest at LIBOR plus 1.625%, payable in
monthly installments of interest only, and matures on April 18, 2002. The
Company has a guaranteed reimbursement obligation under the loan, which is
limited to 50% of the amount due under the loan plus $337 until the facility
meets certain performance requirements.
On October 21, 1999, the Company entered into a definitive purchase
agreement for the Benchmark of Hoffman Estates, a 289 - unit independent living
community located in Hoffman Estates, Illinois. The closing of this transaction
is subject to the completion of the Company's due diligence and other customary
closing contingencies. There can be no assurance that this transaction will
close in a timely manner, if at all.
As of November 10, 1999, the Company purchased an additional 427 shares of
the Company's common stock bringing the total to 580 shares at an aggregate
purchase price of $7,525 to date.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS).
The following discussion is based on and should be read in conjunction with
the Consolidated Financial Statements of the Company as of September 30, 1999
and December 31, 1998 and for the nine months and three months ended September
30, 1999 and 1998, including the related notes, and other information appearing
elsewhere in this Form 10-Q. Historical results and any apparent percentage
relationships with respect thereto are not necessarily indicative of future
operations.
CAUTIONARY STATEMENTS
This quarterly report on Form 10-Q contains "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. When
used in this report, the words "believes," "expects," "anticipates," "estimates"
and similar words and expressions are generally intended to identify
forward-looking statements. Statements that describe the Company's future
strategic plans, goals or objectives are also forward-looking statements.
Readers of this report are cautioned that any forward-looking statements,
including those regarding the intent, belief or current expectations of the
Company or management, are not guarantees of future performance, results or
events and involve risks and uncertainties and that actual results and events
may differ materially from those in the forward-looking statements as a result
of various factors, including, but not limited to:
- general economic conditions in the markets in which the Company
operates;
- competitive pressures within the industry and/or the markets in which
the Company operates;
- the successful completion of the acquisition of the facilities by the
Company, the successful completion of development activities, the
successful integration of newly acquired, leased or developed
facilities with the operations of the Company's existing facilities,
fluctuations in operating results or occupancy levels in the markets
in which the Company competes, and/or unanticipated changes in
expenses or capital expenditures;
- the effect of future legislation or regulatory changes on the
Company's operations; and
- other factors described from time to time in the Company's filings
with the Securities and Exchange Commission, including this Form 10-Q
and Brookdale's 1998 Annual Report on Form 10-K.
The forward-looking statements included in this report are made only as of the
date hereof. Except as required by law, the Company undertakes no obligation to
update such forward-looking statements to reflect subsequent events or
circumstances.
OVERVIEW
Brookdale provides seniors independent and assisted living services through
its owned, leased or managed facilities. As of September 30, 1999, the Company
operated 22 senior independent and assisted living facilities containing a total
of approximately 4,813 units. Four facilities are owned by the Company, 14
facilities are leased by the Company and four facilities (one of which is owned
by an affiliate of The Prime Group, Inc. ("PGI")) are managed by the Company
pursuant to management contracts. The Company's senior independent and assisted
living facilities offer residents a supportive, "home-like" setting as well as
assistance with activities of daily living. By providing residents a range of
service options as their needs change, the Company seeks to achieve greater
continuity of care, enabling senior residents to "age-in-place" and thereby
maintain their stay for a longer time period. The ability to allow residents to
age-in-place is beneficial to the Company's residents as well as their families
who are burdened with care decisions for their elderly relatives.
11
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The Company derives its revenues from resident fees, development fees and
management fees. Resident fees consist of charges for leasing units, providing
basic care services and, in certain instances, providing supplemental care
services to residents. Basic care services include meals, housekeeping services
within the resident units, social and recreational activities, scheduled
transportation, security, emergency call response, access to on-site medical
services and medical education and wellness programs. In addition to basic care
services, the Company offers custom tailored supplemental care services for
residents who desire or need such services. Optional supplemental care services
include check-in services and escort and companion services, and depending on
the particular facility and as dictated by state licensing requirements, the
Company also provides assistance with activities of daily living, such as
dressing, bathing, eating and medication administration or reminders. The
Company may expand its supplemental service offerings, as permitted by
applicable licensing, in order to capture incremental revenue and enable its
residents to remain in its facilities longer. Resident fees typically are paid
monthly by residents, their families or other responsible parties. As of
September 30, 1999, over 99% of the Company's revenue was derived from private
pay sources.
The Company derives additional revenue from development fees associated with
developing senior independent and assisted living facilities for unaffiliated
third parties and management fees from managing senior independent and assisted
living facilities pursuant to management contracts. Management services income
consists of management fees, which typically range from 3.0% to 5.0% of a
managed facility's total gross revenues. All such fees are recognized as
revenues when management services are rendered.
The Company classifies its operating expenses into the following categories:
(i) facility operating expenses, which include facility personnel payroll and
related costs, food, marketing and other direct facility expenses and real
estate taxes; (ii) general and administrative expenses, which primarily include
corporate and other overhead costs; (iii) lease expenses; and (iv) depreciation
and amortization.
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1999 TO NINE MONTHS ENDED
SEPTEMBER 30, 1998
For the nine months ended September 30, 1999, results reflect the operations
of the Company's 22 facilities. For the nine months ended September 30, 1998,
results reflect the operations of 16 facilities.
Revenue. Total revenue increased by $22,255, or 39.7%, to $78,286 for the
nine months ended September 30, 1999 when compared to the nine months ended
September 30, 1998. Resident fees increased by $21,364, or 41.3%, to $73,087. Of
the increase in total revenue, approximately $2,445 (or a "same store" increase
of 5.3%) reflects an increase in resident fees at the facilities that have been
operated during both periods, which resulted primarily from increases in monthly
charges under residency agreements. Approximately $18,919 of such increase
reflects revenue from facilities first leased after September 30, 1998. The
remaining $891 of the total revenue increase reflects increased revenue from
development and management fees associated with projects being developed or
managed by the Company for third-party owners.
Operating Expenses. Total operating expenses increased by $17,324 or 35.3%,
to $66,452 for the nine months ended September 30, 1999 when compared to the
nine months ended September 30, 1998. Facility operating expenses increased by
$10,170 or 35.1%, to $39,163 primarily due to the expenses associated with the
facilities first leased after September 30, 1998.
Lease expense increased by $6,232, or 48.8%, to $19,014 for the nine months
ended September 30, 1999 when compared to the nine months ended September 30,
1998 due primarily to the lease expense associated with the facilities first
leased after September 30, 1998. Depreciation and amortization increased by
$673, or 18.8%, to $4,250 for the nine months ended September 30, 1999 when
compared to the nine months ended September 30, 1998. This increase primarily
reflects the depreciation of additional furniture, fixtures and equipment at the
corporate office and improvements at the facilities.
For the nine months ended September 30, 1999, the Company wrote-off $273 of
deferred financing costs in connection with the replacement credit enhancement
for the $65,000 of tax-exempt bonds secured by the Devonshire and Heritage of
Des Plaines facilities.
Interest income increased by $3,287, or 112.6%, to $6,205 for the nine
months ended September 30, 1999 when compared to the nine months ended September
30, 1998 due to the investment of the net proceeds from the issuance of $100,000
of 5.5% convertible subordinated notes due 2009 and an increase in various
deposits and restricted investments.
Interest expense increased by $2,079, or 71.9%, to $4,970 for the nine
months ended September 30, 1999 when compared to the nine months ended September
30, 1998 due to increased borrowings under the lines of credit and the issuance
of $100,000 of 5.5% convertible subordinated notes due 2009.
Net Income. For the nine months ended September 30, 1999, the Company
generated net income of approximately $8,307, as compared to a net income of
$4,445 for the nine months ended September 30, 1998, due to the changes in
revenue and expenses described above.
12
<PAGE>
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1999 TO THREE MONTHS ENDED
SEPTEMBER 30, 1998
For the three months ended September 30, 1999, results reflect the
operations of the Company's 22 facilities. For the three months ended September
30, 1998, results reflect the operations of 16 facilities.
Revenue. Total revenue increased by $6,170, or 30.1%, to $26,652 for the
three months ended September 30, 1999 when compared to the three months ended
September 30, 1998. Resident fees increased by $6,031, or 32.0%, to $24,899. Of
the increase in total revenue, approximately $1,172 (or a "same store" increase
of 7%) reflects an increase in resident fees at the facilities that have been
operated during both periods, which resulted primarily from increases in monthly
charges under residency agreements. Approximately $4,859 of such increase
reflects revenue from facilities first leased after September 30, 1998. The
remaining $139 of the total revenue increase reflects increased revenue from
development and management fees associated with projects being developed or
managed by the Company for third-party owners.
Operating Expenses. Total operating expenses increased by $4,797, or 26.8%,
to $22,728 for the three months ended September 30, 1999 when compared to the
three months ended September 30, 1998. Facility operating expenses increased by
$2,760, or 25.7%, to $13,475 primarily due to the expenses associated with the
additional facilities leased after September 30, 1998.
Lease expense increased by $1,578, or 33.0%, to $6,368 for the three months
ended September 30, 1999 when compared to the three months ended September 30,
1998 due primarily to the lease expense for the facilities first leased after
September 30, 1998. Depreciation and amortization increased by $422, or 36.8%,
to $1,568 for the three months ended September 30, 1999 when compared to the
three months ended September 30, 1998. This increase primarily reflects the
depreciation of additional furniture, fixtures and equipment at the corporate
office and improvements at the facilities.
Interest income increased by approximately $1,439, or 112.7%, to $2,716 for
the three months ended September 30, 1999 when compared to the three months
ended September 30, 1998 due to the investment of the net proceeds from the
issuance of $100,000 of 5.5% convertible subordinated notes due 2009 and an
increase in various deposits and restricted investments.
Interest expense increased $1,022, or 98.9%, to $2,055 for the three months
ended September 30, 1999 when compared to the three months ended September 30,
1998 due to the issuance of $100,000 of 5.5% convertible subordinated notes due
2009.
Net Income. For the three months ended September 30, 1999, the Company
generated net income of approximately $2,910, as compared to a net income of
$1,813 for the three months ended September 30, 1998, due to the changes in
revenue and expenses described above.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1999, the Company had $4,231 in cash and cash equivalents
and $41,000 million in short-term investments.
Cash and cash equivalents (which does not include cash and
investments-restricted of $9,942, short-term investments of $41,000, investment
certificates - restricted of $35,422 and lease security deposits of $75,910)
increased by $3,166 to $4,231 at September 30, 1999 as compared to December 31,
1998, primarily due to the net proceeds from the issuance of $100,000 of 5.5%
convertible subordinated notes due 2009 and the release of the letter of credit
deposits upon the replacement credit enhancements securing the $65,000 million
tax-exempt bonds issued with respect to the Devonshire and Heritage of Des
Plaines facilities, offset by cash utilized for transaction costs and by cash
used for the lease security deposits on the River Bay Club and Berkshire of
Castleton facilities and the repayment of the unsecured lines of credit and
long-term debt.
Net cash provided by operating activities for the nine months ended
September 30, 1999 totaled approximately $13,186 as a result of increased
facility operations before depreciation and amortization and the commencement of
the lease of the River Bay Club and Berkshire of Castleton facilities leased
subsequent to December 31, 1998.
Net cash used in investing activities totaled approximately $100,187 for the
nine months ended September 30, 1999. Investing activities included cash paid
for lease security deposits in connection with the lease of the River Bay Club
and Berkshire of Castleton facilities of $19,334 and a $1,157 increase in
existing lease security deposits, the purchase of short-term investments of
$55,000 from the net proceeds from the issuance of $100,000 of 5.5% convertible
subordinated notes due 2009, the sale of $14,000 of such short-term investments,
an increase in investment certificates-restricted of $19,471, an increase in
property under development of $12,691 and other net uses of $6,534.
Net cash provided by financing activities was approximately $90,167 for the
nine months ended September 30, 1999. Financing activities included $94,286 of
net proceeds from the issuance of $100,000 of 5.5% convertible subordinated
notes due
13
<PAGE>
2009, proceeds from unsecured lines of credit of $31,933 and $13,919 million of
letter of credit deposits released in connection with the replacement of credit
enhancements on $65,000 tax-exempt bonds, offset by repayments of $42,930 on
borrowings under the unsecured lines of the credit, repayments of $3,229 on
long-term debt, payments of $2,144 to acquire treasury stock and other net uses
of $1,668.
The Company currently plans to acquire or lease at least 4 to 6 senior
independent and assisted living facilities per year containing an aggregate of
approximately 800 to 1,200 units and to commence development for third parties
of at least 3 new facilities per year each containing approximately 220 units.
The total construction costs, including construction period financing costs and
operating deficits during the lease-up period, for the 220-unit prototype are
estimated to be approximately $35 million, or approximately $159,000 per unit.
At September 30, 1999, the Company had 4 facilities under construction and
several sites under development for new senior independent and assisted living
facilities. The Company's estimated capital expenditures for the remainder of
1999 relating to sites under development aggregate approximately $2,000 to
$3,000. Capital expenditures for the remainder of 1999 related to the Company's
existing facilities, including projects under renovation, are estimated to be
approximately $2,000 to $3,000 in the aggregate. The Company anticipates that it
will use a combination of cash on hand, borrowings under lines of credit or
otherwise, lease transactions and cash generated from operations to fund its
acquisition and development activities. On May 14, 1999, the Company issued
$100,000 of 5.5% convertible subordinated notes due 2009. The convertible
subordinated notes bear interest at 5.5% per annum payable semi annually on June
30 and December 31 of each year. The convertible subordinated notes are
convertible into 5,479 shares of the Company's common stock, subject to
adjustment in certain circumstances. The convertible subordinated notes are
redeemable at the option of Brookdale beginning May 14, 2002, at specified
premiums. The holders of the convertible subordinated notes may require
Brookdale to repurchase the notes upon the occurrence of certain merger events,
as described in the convertible subordinated notes. In addition, in June 1998,
Brookdale received a $100,000 commitment from The Capital Company of America
(successor to Nomura Asset Capital Corporation) for development projects, of
which approximately $51,000 was committed to the Austin, Texas and Southfield,
Michigan development projects. The Company has an effective "shelf" registration
statement pursuant to which the Company may issue up to $200,000 of equity or
debt securities of which $33,000 of common stock was issued in November 1998.
The Company believes that it has sufficient funds available to finance its
acquisition and development programs for at least the next 12 months.
As of September 30, 1999, the Company had $65,000 of long-term indebtedness
in tax-exempt bonds with floating rates. The interest rates (exclusive of credit
enhancement and other fees) on such debt averaged 3.28% during the nine months
ended September 30, 1999, and the average interest rate on such debt was 3.81%
at September 30, 1999. The Company entered into interest rate caps for an
aggregate notional amount of $65,000, with a capped rate of 6.35% which expires
June 1, 2004. Such tax-exempt bonds contain covenants requiring the facilities
to maintain a minimum number of units for income qualified residents. The
Company may obtain similar bond financing for future facilities.
The Company is dependent on third-party financing for its acquisition,
leasing and development programs. Financing obtained in the future is generally
expected to contain terms and conditions and representations and warranties that
are customary for such loans and may contain financing covenants and other
restrictions that:
- require the Company to meet certain financial tests and maintain
certain amounts of funds in escrow;
- limit, among other things, the ability of the Company to borrow
additional funds, dispose of assets and engage in mergers or other
business combinations; and
- restrict the ability of the Company to operate competing facilities
within certain distances from mortgaged facilities.
There can be no assurance that financing for the Company's acquisition and
development program will be available to the Company on acceptable terms or at
all. A lack of funds may require the Company to delay or eliminate all or some
of its development projects and acquisition and leasing plans and could
therefore have a material adverse effect on the Company's growth plans and on
its future results of operations.
The ability of the Company to achieve its development plans will depend upon
a variety of factors, many of which will be outside its control. These factors
may include
- obtaining required governmental permits for the construction of new
facilities without experiencing significant delays;
- completing construction of new facilities on schedule and without
going significantly over budget;
- the ability to work with contractors and subcontractors who construct
the facilities;
- increased expenses due to delays caused by shortages of labor or
materials or adverse weather conditions; and
- changes in laws and regulations or how existing laws and regulations
are interpreted and applied.
The Company cannot assure that it will not experience delays in completing
facilities under construction or in development or that it will be able to
identify suitable sites at acceptable prices for future development activities.
If it fails to achieve its development plans, its growth could slow, which would
adversely impact its revenues and results of operations.
14
<PAGE>
The Company's growth plan includes the acquisition or lease of assisted
living facilities already in operation. The success of the Company's
acquisitions will be determined by numerous factors, including the Company's
ability to identify suitable acquisition candidates, competition for such
acquisitions, the purchase price, lease terms and conditions, the financial
performance of the facilities after acquisition and the ability of the Company
to effectively integrate and operate acquired facilities. Any failure to do so
may have a material adverse effect on the Company's business, financial
condition, revenues and earnings.
The long-term care industry is highly competitive and the assisted living
segment is becoming increasingly competitive. The Company competes with many
other companies that provide similar long-term care alternatives, such as home
health care agencies, facility-based service programs, retirement communities,
convalescent centers and other assisted living providers. In pursuing the
Company's development and operations strategies, the Company has experienced and
expects to continue to experience increased competition in its efforts to
develop, acquire and lease assisted living facilities. Some of the present and
potential competitors of the Company are significantly larger and have, or may
obtain, greater financial resources than the
Company. Consequently, the Company cannot assure that it will not encounter
increased competition that could limit its ability to attract residents or
expand its business, which could have a material adverse effect on its revenues
and earnings.
IMPACT OF INFLATION
Resident fees from senior independent and assisted living facilities owned
or leased by the Company, management fees from facilities managed by the Company
for third parties and development fees from facilities developed by the Company
for third parties are the Company's primary sources of revenue. These revenues
are affected by monthly resident fee rates and facility occupancy rates. The
rates charged for senior independent and assisted living services are highly
dependent upon local market conditions and the competitive environment in which
the facilities operate. Substantially all of the Company's residency agreements
allow for adjustments in the monthly fees payable thereunder not less frequently
than every 12 or 13 months, thereby enabling the Company to seek increases in
monthly fees due to inflation, demand or other factors. Any such increase would
be subject to market and competitive conditions. The Company believes, however,
that the ability to adjust the monthly fees payable under the residency
agreements on an annual basis serves to reduce the risk to the Company of the
adverse effect of inflation. In addition, employee compensation expense is a
principal cost element of facility operations and is also dependent upon local
market conditions. There can be no assurance that resident fees will increase or
that costs will not increase due to inflation or other causes. In addition, at
September 30, 1999, approximately $65,000 in principal amount of the Company's
indebtedness bore interest at a floating rate of approximately 3.81% and future
indebtedness may bear floating rate interest. The Company entered into interest
rate caps for an aggregate notional amount of $65,000, with a capped rate of
6.35% and an expiration date of June 1, 2004. Inflation, and its impact on
floating interest rates, could affect the amount of interest payments due on
such indebtedness.
READINESS FOR YEAR 2000
The Company has implemented a program to mitigate the potential impact of
the Year 2000 Issue throughout the Company. The Company's program has been
structured to address its internal computer systems and applications, network
services operations, facilities operations and third-party vendors and
suppliers. The Company believes that it is taking the necessary steps within its
control to mitigate the potential impact of the Year 2000 Issue on the Company.
Information Systems
The Company has upgraded its accounting and human resources systems, and is
in the process of upgrading its property management and marketing systems for
the Year 2000 Issue. The Company expects that the replacement of its systems
will mitigate the impact of the Year 2000 Issue on its accounting operations.
The corporate software was installed and became operational on May 1, 1999. The
Company has one vendor software package that is used to process property level
accounting information at each facility which had not been Year 2000 compliant,
but was remedied during the second quarter 1999. In June 1999, the Company
executed a contract for replacement software at the facilities it owns or
operates and commenced implementation.
Facilities
The Company has completed an assessment of each facility, including an
assessment of infrastructure equipment such as elevator, HVAC and security
systems, and other critical service provider readiness issues. The Company
completed its preliminary assessment by December 31, 1998 and completed the
updated assessment in June 1999. As of November 10, 1999, the Company's
assessment of the facilities and infrastructure equipment did not indicate that
any significant costs will need to be incurred to mitigate the Year 2000 Issue.
The aforementioned vendor software package at each facility is used for
resident billing and payable processing. The Company executed a contract to
purchase replacement software and commenced its implementation of this software
in June 1999,
15
<PAGE>
with an expected completion date of January 2000. The Company has undertaken
contingency planning for each of its facilities as necessary.
Third-Party Vendors and Suppliers
The Company's approach to third-party suppliers involves the process of
identification and prioritization of critical suppliers and communicating with
them about their plans and progress in addressing the Year 2000 Issue. This
evaluation, including prioritization of critical suppliers, and the subsequent
contingency planning was undertaken during the first quarter of 1999 and was
substantially completed in the third quarter of 1999. The Company will continue
to update these contingency plans throughout 1999.
Costs
The final cost to complete the projects discussed above, which were
undertaken primarily to facilitate Company growth and not just for Year 2000
readiness, has not yet been determined; however, the estimated total cost,
including capital expenditures, will approximate $3,500 to $4,000, of which
approximately $3,200 has been incurred through September 30, 1999. The Company's
costs include the costs of outside consultants and contractors and hardware and
software replacements and upgrades.
The Company anticipates that cash on hand, cash generated from operations
and additional debt financings will provide sufficient cash to fund Year 2000
compliance expenditures. The Company's allocation of other personnel resources
and planned expenditures has not resulted in the deferral of any information
technology projects. Remediation costs, other than the planned expenditures
described above, are not expected to be material.
Risks
Management believes that the Company's information technology and embedded
systems at the facilities will be substantially Year 2000 compliant prior to
January 1, 2000. While the Company exercises no control over such third parties,
the Company may face potential Year 2000 related risks and may experience
business interruption to its operations as a result of third-party vendors and
suppliers failing to address their Year 2000 compliance issues. The Company has
substantially completed its assessment of third-party vendors and suppliers to
identify Year 2000 compliance issues and does not expect a material impact upon
the Company and its operations. The Company has contingency plans in the event
of Year 2000 issues. Such plans involve, among other actions, manual
workarounds, alternate vendors and suppliers, and adjusting staffing strategies.
Project completion dates are based on management's best estimates, which
were derived utilizing numerous assumptions of future events, including the
ability of third parties to modify the Company's systems on a timely basis.
There can be no guarantee that the project will be completed in a timely manner.
Specific factors that might delay completion of the project include, but are not
limited to, the availability of qualified personnel, the ability to locate and
correct all relevant computer codes, and similar uncertainties. Although the
Company intends to continue preparations for Year 2000, it is not possible to
quantify potential indirect effects resulting from the lack of readiness of any
third-party with whom the Company conducts business. The Company is aware that
it is generally believed that the world's Year 200 problem, if corrected, may
result in a economic crisis of global proportions. The Company is unable to
determine whether such predictions are true or false. The Company expects that
the nature of its income should serve as a hedge against any short term
disruptions of business. However, if the worst case Year 2000 scenarios prove
true, the Company assumes that all companies (including the Company) may be
adversely affected in one way or another. Further, given the inherent
uncertainty in any Year 2000 assessment, there may be claims against the Company
based on Year 2000 Issues not currently anticipated by the Company.
Readers are cautioned that forward-looking statements contained in the Year
2000 disclosure should be read in conjunction with "Cautionary Statements" set
forth above.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company is exposed to interest rate risk primarily through its
borrowing and leasing activities. There is inherent risk from borrowings and
leasing as they mature or expire and are renewed at market rates. The extent of
this risk is not quantifiable or predictable because of the variability of
future interest rates and the Company's future financing requirements. The
Company does not enter into financial instruments transactions for trading or
other speculative purposes.
Long-term debt - As of September 30, 1999, the Company had $92,651 of
long-term debt at a weighted average interest rate of 5.13%. Included therein
are mortgage notes of $27,651, which bear fixed rates of interest ranging from
8.0% to 8.525% through maturity in 2027, and variable rate tax-exempt bonds of
$27,000, $6,000 and $32,000, which are payable interest only until maturity in
2025, 2025 and 2019, respectively.
16
<PAGE>
For fixed rate debt, changes in interest rates generally affect the fair
value, but not earnings or cash flows. Conversely, changes in interest rates for
variable rate debt generally do not impact fair value, but do affect future
earnings and cash flows.
The Company has entered into interest rate lock agreements on behalf of
third party owners of development projects to limit their exposure to movements
in variable interest rates. The notional aggregate amount of construction loans
being hedged is $53,500 and the fair value of such hedging contracts was
approximately $1,169 as of September 30, 1999. The Company is to be reimbursed
by the third party for any payments made pursuant to the interest rate lock
agreements.
If interest rates on the Company's variable rate debt, including tax-exempt
bonds, increased by 1 percentage point, the annual interest expense would
increase by approximately $650. The Company entered into interest rate caps for
its variable rate tax-exempt bonds for an aggregate notional amount of $65,000,
with a strike price of 6.35%, a fair value of $492 as of September 30, 1999 and
an expiration date of June 1, 2004.
Lease expense - The Company has entered into operating leases which have
fixed terms and are subject to renewal at the option of the Company. The Company
has an option to purchase all but four of these facilities prior to or at the
end of the respective lease terms. Four of the facilities leases require the
payment of additional rent of 10% of the excess of each year's revenue compared
to 1998.
17
<PAGE>
PART II: OTHER INFORMATION
ITEM 1. Legal Proceedings.
No material developments with respect to legal proceedings
occurred during the period covered by this quarterly
report.
ITEM 2. Changes in Securities and Use of Proceeds.
None
ITEM 3. Defaults Upon Senior Securities.
None
ITEM 4. Submission of Matters to a Vote of Security Holders.
None
ITEM 5. Other Information.
None
ITEM 6. Exhibits and Reports on Form 8-K.
(a) EXHIBITS:
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
3.1 Restated Certificate of Incorporation of Brookdale Living Communities,
Inc., as filed with the Securities and Exchange Commission on June 16,
1997 as Exhibit 3.1 to the Company's Form 10-Q for the period ended
March 31, 1997 (File No. 0-22253) and incorporated herein by reference
3.2 Amended and Restated By-laws of Brookdale Living Communities, Inc., as
filed with the Securities and Exchange Commission on June 16, 1997 as
Exhibit 3.2 to the Company's Form 10-Q for the period ended March 31,
1997 (File No. 0-22253) and incorporated herein by reference
4.1 Form of certificate representing Common Stock of Brookdale Living
Communities, Inc., as filed with the Securities and Exchange Commission
on March 17, 1997 as Exhibit 10.14 to the Company's Registration
Statement on Form S-1 (Registration No. 333-12259) and incorporated
herein by reference
10.1 Building Loan Agreement, dated as of August 24, 1999, by and among AH
Battery Park Owner, LLC, Key Corporate Capital Inc., Fleet National
Bank and European American Bank
10.2 Soft Cost Loan Agreement, dated as of August 24, 1999, by and among AH
Battery Park Owner, LLC, Key Corporate Capital Inc., Fleet National
Bank and European American Bank
10.3 Payment Guaranty, dated as of August 24, 1999, issued by Brookdale
Living Communities, Inc. in favor of Key Corporate Capital Inc.
10.4 Completion Guaranty, dated as of August 24, 1999, issued by Brookdale
Living Communities, Inc. for the benefit of Key Corporate Capital Inc.
10.5 Indemnity Agreement, dated as of August 24, 1999, issued by Brookdale
Living Communities, Inc. in favor of AH Battery Park Owner, LLC
18
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
10.6 Property Option Agreement, dated as of August 24, 1999, by and between
AH Battery Park Owner, LLC and Brookdale Living Communities of New
York-BPC, Inc.
10.7 Equity Option Agreement, dated as of August 24, 1999, by and among AH
Battery Park Member, LLC, AH Battery Park Owner, LLC and Brookdale
Living Communities of New York-BPC, Inc.
10.8 Amended and Restated Development Agreement, dated as of August 24,
1999, by and between AH Battery Park Owner, LLC and Brookdale Living
Communities of New York - BPC, Inc.
10.9 Management Agreement, dated as of August 24, 1999, by and between AH
Battery Park Owner, LLC and Brookdale Living Communities of New
York-BPC, Inc.
12 Statements Regarding Computation of Ratios of Earnings to Combined
Fixed Charges and Preferred Stock Dividends
27 Financial Data Schedule
19
<PAGE>
(b) REPORTS ON FORM 8-K:
No reports on Form 8-K were filed during the period covered by this
quarterly report.
20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BROOKDALE LIVING COMMUNITIES, INC.
----------------------------------
Registrant
Date: November 15, 1999 /s/ Mark J. Schulte
----------------- -------------------------------------------
Mark J. Schulte
President and
Chief Executive Officer
Date: November 15, 1999 /s/ Darryl W. Copeland, Jr.
----------------- ------------------------------------------
Darryl W. Copeland, Jr.
Executive Vice President and
Chief Financial Officer
21
EXECUTION COPY
--------------
================================================================================
BUILDING LOAN AGREEMENT
Dated as of August 24th, 1999
among
AH BATTERY PARK OWNER, LLC
as the Borrower,
THE FINANCIAL INSTITUTIONS NAMED HEREIN
as the Lenders
and
KEY CORPORATE CAPITAL, INC.
as the Agent
AMOUNT OF BUILDING LOAN:
THIRTY SIX MILLION FOUR HUNDRED FIFTY SIX THOUSAND
FOUR HUNDRED FOUR AND 00/100 DOLLARS
($36,456,404.00)
LOCATION OF PROPERTY:
455 North End Avenue
North Residential Neighborhood
Battery Park City
New York, New York
SECTION:1
BLOCK:16
LOT:P/03, Site 20B
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
ARTICLE PAGE
- ------- ----
ARTICLE I
PARTICULAR TERMS; DEFINITIONS..........................................3
Section 1.1 Definitions.............................................3
Section 1.2 Singular and Plural....................................16
ARTICLE II(A)
LOAN FACILITY.........................................................16
Section 2A.1 Loans..................................................16
Section 2A.2 Notes..................................................17
Section 2A.3 Interest Rate..........................................17
Section 2A.4 Payment of Interest....................................18
Section 2A.5 Payment of Principal...................................18
Section 2A.6 Prepayment.............................................18
Section 2A.7 Procedure for Payment..................................18
Section 2A.8 Indemnification........................................19
Section 2A.9 Reimbursement..........................................19
Section 2A.10 Changes................................................20
Section 2A.11 Extension Periods......................................21
Section 2A.12 Lenders' Rights........................................22
Section 2A.13 Acceleration of Maturity...............................22
Section 2A.14 Costs of Collection....................................23
Section 2A.15 Late Charges...........................................23
ARTICLE II(B)
LOAN DISBURSEMENTS/REQUIRED EQUITY....................................23
Section 2B.1 Procedure for Loan Borrowing and Interest Rate
Election...............................................23
Section 2B.2 Amount of Disbursements for Hard Costs.................24
Section 2B.3 Stored Materials.......................................25
Section 2B.4 Intentionally Omitted..................................26
Section 2B.5 Intentionally Omitted .................................26
Section 2B.6 Intentionally Omitted..................................26
Section 2B.7 Funding Limitations....................................26
Section 2B.7(A)Loan Balancing.........................................27
Section 2B.8 Retainage..............................................27
Section 2B.9 Place of Disbursement..................................28
Section 2B.10 Intentionally Omitted..................................28
Section 2B.11 Expenses and Disbursements Secured by Loan Documents...28
Section 2B.12 Other Limitations and Requirements.....................29
i
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TABLE OF CONTENTS
-----------------
ARTICLE PAGE
- ------- ----
Section 2B.13 Contract Verification..................................29
Section 2B.14 Budget Reallocations...................................29
Section 2B.15 Required Equity........................................30
Section 2B.16 Pro Rata; Commitments..................................31
Section 2B.17 Sharing of Setoffs.....................................31
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BORROWER............................32
Section 3.1 Representations and Warranties of Borrower.............32
ARTICLE IV
COVENANTS OF BORROWER.................................................37
Section 4.1 Affirmative Covenants of Borrower......................37
Section 4.2 Negative Covenants of Borrower.........................45
ARTICLE V
EVENTS OF DEFAULT.....................................................48
Section 5.1 Events of Default......................................48
Section 5.2 Grace Periods..........................................52
Section 5.3 Rights of Agent and Lenders............................52
Section 5.4 Limited Recourse Obligations...........................54
ARTICLE VI
CONDITIONS TO LENDERS'OBLIGATIONS TO MAKE LOAN DISBURSEMENTS..........54
Section 6.1 Conditions Precedent to First Disbursement.............54
Section 6.2 Documents To Be Delivered..............................54
Section 6.3 Conditions to Funding of Advances......................60
Section 6.4 Last Disbursement of Hard Costs........................61
ARTICLE VII
THE AGENT.............................................................63
Section 7.1 Appointment; Powers and Immunities.....................63
Section 7.2 Limitations on Agent...................................64
Section 7.3 Reliance by Agent......................................67
Section 7.4 Defaults...............................................68
Section 7.5 Rights of Agent as a Lender............................68
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TABLE OF CONTENTS
-----------------
ARTICLE PAGE
- ------- ----
Section 7.6 Indemnification........................................68
Section 7.7 Consequential Damages..................................69
Section 7.8 Payee of Note Treated as Owner.........................69
Section 7.9 Lenders' Knowledge; Nonreliance on Agent and Other
Lenders................................................69
Section 7.10 Failure to Act.........................................70
Section 7.11 Resignation or Removal of Agent........................70
Section 7.12 Reliance by Borrower...................................70
Section 7.13 Apportionment of Payments..............................70
Section 7.14 Successors and Assigns.................................71
ARTICLE VIII
GENERAL PROVISIONS....................................................73
Section 8.1 No Waiver; Modifications in Writing....................73
Section 8.2 Agent's Approval.......................................73
Section 8.3 Standing...............................................73
Section 8.4 Notices................................................73
Section 8.5 Amendments.............................................75
Section 8.6 Assignment.............................................75
Section 8.7 Governing Law..........................................75
Section 8.8 Severability of Provisions.............................75
Section 8.9 Headings...............................................75
Section 8.10 Waiver of Trial by Jury................................76
Section 8.11 Submission to Jurisdiction; Service of Process.........76
Section 8.12 Lender's Remedies Cumulative...........................76
Section 8.13 Counterparts...........................................77
Section 8.14 Trust Fund.............................................77
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ANNEX
-----
Annex I - List of the Lenders
EXHIBITS
--------
Exhibit A - Legal Description
Exhibit B - Permitted Encumbrances
Exhibit C - Affidavit Pursuant to Section 22
of the Lien Law of the State of New York
Exhibit D - Architect's Certificate
Exhibit E - Developer's Certificate
Exhibit F - Occupancy Schedule/Pro Forma Rentals
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THIS BUILDING LOAN AGREEMENT (this "AGREEMENT") dated as of this 24th day
of August, 1999, by and among AH BATTERY PARK OWNER, LLC, an Ohio limited
liability company, with an office at c/o Alliance Holdings, Inc., 723 Electronic
Drive, Suite 300, Horsham, Pennsylvania 19044 (the "BORROWER"), Key Corporate
Capital Inc., a Michigan corporation having an administrative office at 127
Public Square, Cleveland, Ohio 44114-1306 ("KCCI "), as agent (in such capacity,
the "AGENT"), and the financial institutions listed in Annex I hereto, including
KCCI, and each other financial institution which has been or may be assigned an
interest herein pursuant to Section 7.14, as evidenced by an Assignment and
Acceptance Agreement (each, a "LENDER" and, collectively, the "LENDERS").
W I T N E S S E T H:
WHEREAS, Borrower is the actual, beneficial and record ground lessee of a
certain tract of land consisting of approximately .449 acres located in the
Borough of Manhattan, City and State of New York, which is more particularly
described in EXHIBIT A attached hereto and made a part hereof (the "LAND");
WHEREAS, On or about June 30, 1999, Borrower executed the commitment
letter (the "Commitment Letter") of the Lenders to make loans to finance various
construction and non-construction costs relative to Borrower's development of a
218 unit independent living/assisted living complex to be known as The Hallmark
at Battery Park City containing a floor area of approximately 219,615 square
feet of "floor area" (as such term is defined in the Zoning Resolution of the
City of New York) to be built on the Land in accordance with this Agreement, and
in compliance with the Plans and all Requirements, as further described herein
under the definition of "IMPROVEMENTS", subject to all the conditions and
requirements of said Commitment Letter, all of which are incorporated by
reference herein, provided, however, in the event of a conflict between the
terms of the Commitment Letter and the terms of this Agreement or any of the
other Loan Documents, the terms of this Agreement and/or the Loan Documents
shall control in all cases.
WHEREAS, Pursuant to the Commitment Letter, the financing will consist of
two components; (i) the Building Loan (hereinafter defined) in the amount of
$36,456,404.00, which will be advanced ratably by the Lenders from time to time
in accordance with the terms of this Agreement, and (ii) the Soft Cost Loan
(hereinafter defined) in the amount of $12,668,596.00, which will be advanced
ratably by the Lenders to Borrower, upon and subject to the terms and conditions
set forth in that certain Soft Cost Loan Agreement of even date herewith between
Lender to Borrower (the "SOFT COST LOAN AGREEMENT").
WHEREAS, The Building Loan will be advanced to Borrower for and on account
of Hard Costs (as defined below) and the Soft Cost Loan will be advanced to
Borrower on account of Soft Costs (as defined below).
WHEREAS, This Agreement provides for the funding of Advances (hereinafter
defined) of the Building Loan for Hard Costs and for the repayment of the
Building Loan, all upon and subject to the terms and conditions set forth
herein.
<PAGE>
WHEREAS, The Building Loan is evidenced by one or more promissory notes,
of even date herewith, in the aggregate original principal amount of $36,456,404
(individually and collectively, the "BUILDING LOAN NOTE") and the Soft Cost Loan
is evidenced by one or more promissory notes, of even date herewith, in the
aggregate original principal amount of $12,668,596.00 (individually and
collectively, the "SOFT COST NOTE"). The Building Loan Note and this Agreement
are secured by a Building Loan Leasehold Mortgage, Security Agreement and
Assignment of Rents (the "BUILDING LOAN MORTGAGE"), of even date herewith, made
by Borrower in favor of the Lenders, and recorded in the Office of the City
Register, New York County, (the "OFFICIAL RECORDS"), covering the Property and
by other collateral as described herein and in the Commitment Letter. The Soft
Cost Note and the Soft Cost Loan Agreement are secured by a Soft Cost Leasehold
Mortgage, Security Agreement and Assignment of Rents (the "SOFT COST MORTGAGE"),
of even date herewith, made by Borrower in favor of the Lenders, recorded in the
Official Records, covering the Property and by other collateral as described in
the Soft Cost Loan Agreement and in the Commitment Letter.
WHEREAS, Completion (hereinafter defined) of construction of the
Improvements and the payment and performance by Borrower of all obligations of
Borrower under this Agreement and otherwise in connection with the Building Loan
and the Soft Cost Loan and the payment of all sums due with respect to both the
Building Loan and the Soft Cost Loan are to be guaranteed by the entity
identified under the definition of Guarantor below, who is executing a
Completion Guaranty, a Payment Guaranty and an Operating Deficit Guaranty, to be
dated of even date herewith (collectively, the "GUARANTY"), in favor of the
Lenders.
WHEREAS, In connection with the Building Loan and the Soft Cost Loan,
Borrower and Guarantor are executing in favor of the Lenders an Environmental
Indemnity Agreement, to be dated of even date herewith (the "ENVIRONMENTAL
INDEMNITY").
WHEREAS, Borrower and Developer (hereinafter defined) have also executed
and delivered to the Lenders in respect of the Building Loan and the Soft Cost
Loan, the Assignment of Contracts, Permits, Licenses and Approvals, of even date
herewith, relating to the Plans, the General Contract and the Architect=s
Agreement (all as defined below), and certain other contracts and rights and
interests of Borrower and Developer, as Borrower's agent, with respect to the
construction and operation of the Project (the "ASSIGNMENT OF CONTRACTS"),
including, without limitation, all contracts, rights and interests described
therein.
WHEREAS, The Commitment Letter, this Agreement, the Soft Cost Loan
Agreement, the Building Loan Note, the Soft Cost Note, the Building Loan
Mortgage, the Soft Cost Mortgage, the Security Agreement, the UCC Financing
Statements, the Assignment of Contracts, the Guaranty, the Environmental
Indemnity and all other documents evidencing or securing the Building Loan or
the Soft Cost Loan are referred to herein as the "LOAN DOCUMENTS."
WHEREAS, The Lenders have advised Borrower that, subject to the terms and
conditions of this Agreement, and based upon the representations, warranties,
covenants and undertakings of Borrower herein contained, the Lenders are willing
to make such Advances of the Loan to Borrower on the terms and conditions
hereinafter set forth.
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NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
PARTICULAR TERMS; DEFINITIONS
-----------------------------
Section 1.1 Definitions. For all purposes of this Agreement, the following
terms, except as otherwise expressly provided or unless the context requires
otherwise, shall have the respective meanings hereinafter specified:
"ADVANCE" - Shall have the meaning set forth in Section 2A.1.
"AFFILIATE" - With respect to any person (including any person,
corporation, limited liability company,
partnership or other business organization), any
person which directly or indirectly controls, or
is controlled by, or is under common control with
such person. For the purposes of this definition,
however, the parties acknowledge that Developer
and Guarantor are not currently Affiliates of
Borrower.
"AGENCY FEE" - A fee equal to $10,000 per annum payable to Agent,
for its own account, with the first such payment
payable by Borrower to Agent on the Closing Date,
with all subsequent payments being due on each
anniversary thereof through the Maturity Date as
the same may be extended by the First Extension
Period and the Second Extension Period (which
Agency Fee shall be prorated for partial years and
refunded as applicable).
"AGENT" - Key Corporate Capital Inc., a national banking
association and its successor appointed pursuant
to Section 7.11.
"AGENT'S INSPECTING
CONSULTANT" - Corbett & Chiusano Associates, Inc.
"AGENT'S INSPECTING
CONSULTANT FEES" - All reasonable fees and disbursements of Agent's
Inspecting Consultant.
"AGENT'S COUNSEL" - Jones, Day, Reavis & Pogue, and/or such other
counsel as Agent may select.
"AGENT'S COUNSEL FEES" - All reasonable fees and disbursements of Agent's
Counsel.
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<PAGE>
"AGGREGATE CHANGE ORDER
AMOUNT" - $1,000,000.
"APPLICABLE LIBOR RATE" - Shall have the meaning set forth in the Note.
"APPRAISAL" - A written appraisal report, prepared in response
to an engagement letter issued by Agent, at
Borrower's sole cost and expense, in accordance
with the Uniform Standards of Professional
Appraisal Practice applicable to Federally Related
Transactions as set out in Appendix A to the real
estate appraisal regulations adopted by the Office
of the Comptroller of the Currency pursuant to the
Financial Institutions Reform, Recovery and
Enforcement Act of 1989 ("FIRREA") (Sub-part C of
12 C.F.R. 34) by an appraiser reasonably
satisfactory to the Lenders who shall deliver to
the Lenders its written authorization for reliance
by the Lenders on the Appraisal.
"APPROVED LEASES" - Collectively, all leases or other rental or
occupancy agreements of the Improvements that
comport with the requirements of Section 4.2(i)
hereof and the Ground Lease, which have been
approved by Agent and the Ground Lessor (unless
such approval is not required pursuant to such
Section 4.2(i) or the Ground Lease, as
applicable), and are fully executed.
"ARCHITECT'S AGREEMENT" - The architect's agreement, dated December 8, 1998
entered into by Developer on Borrower's behalf,
and Borrower's Architect.
"ASSIGNMENT AND ACCEPTANCE
AGREEMENT" - An Assignment and Acceptance Agreement entered
into by KCCI or another Lender and an Assignee (as
defined in Section 7.14), pursuant to which the
Assignee shall acquire all or a portion of KCCI's
or such other Lender's Commitment and shall become
a Lender party to this Agreement.
"ASSIGNMENT OF CONTRACTS" - The Assignment of Contracts, Permits, Licenses and
Approvals dated the date hereof made by Borrower
and Developer to Agent for the ratable benefit of
Lenders.
"BANC ONE FINANCING" - Shall mean the equity financing obtained by Member
and/or Alliance Holdings, Inc. from Banc One
Capital Partners IV, Ltd., or an affiliate
thereof, as more particularly described in Section
2B.15 hereof.
4
<PAGE>
"BANKRUPTCY CODE" - The United States Bankruptcy Code, 11 U.S.C. " 101
et. seq., as amended from time to time, and all
regulations promulgated thereunder and rules of
practice and procedure applicable thereto.
"BORROWER" - Shall have the meaning set forth in the preamble
hereto.
"BORROWER'S ARCHITECT" - Schuman Lichtenstein Clamon Efron, Architects
"BUDGET" - Shall mean the Final Budget.
"BUILDING LOAN" - Shall have the meaning set forth in Section
2A.1(a).
"BUILDING LOAN AGREEMENT" - Shall have the meaning set forth in the Recitals
hereto.
"BUILDING LOAN MORTGAGE" - Shall have the meaning set forth in the Recitals
hereto.
"BUILDING LOAN NOTE" - Shall have the meaning set forth in the Recitals
hereto.
"CHANGE ORDER" - Any amendment or modification to the Plans, the
General Contract or any Major Contract.
"CHANGE ORDER AMOUNT" - $100,000.
"CLOSING DATE" - August 25, 1999.
"COLLATERAL" - The Premises, the Project and all property and
interests in property (now owned or hereafter
acquired) upon which a Lien is granted under any
of the Loan Documents.
"COMMITMENT" - Shall have the meaning set forth in Section 2B.16.
"COMMITMENT FEE" - The aggregate sum of $368,437.50, $184,219 of
which was previously paid by Borrower to KCCI, and
the remaining $184,218.50 of which is payable to
Agent, for its own account or for the ratable
benefit of the Lenders, on the Closing Date.
"COMPLETION" or
"COMPLETION OF THE
IMPROVEMENTS" - Shall be deemed to have occurred upon the
occurrence of all of the following: (i) the
Improvements comprising the Project shall be fully
paid and 100% complete in accordance with the
Plans, all Requirements and the requirements of
the Ground Lease, all as determined by Agent and
Agent's Inspecting Consultant in accordance with
the procedure set forth in Section 2B.2 below;
(ii)
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<PAGE>
all on-site and off-site improvements, including,
without limitation, all utility services and
fixtures and equipment required for access to and
operation of the Improvements shall be 100%
complete; (iii) a temporary certificate of
occupancy for the full use and occupancy of the
entire Premises has been issued (it being
expressly understood that Borrower shall proceed
as expeditiously as possible to secure a final
Certificate of Occupancy, in any event within two
(2) years of issuance of the temporary certificate
of occupancy) or its equivalent issued by the
applicable governmental authority for the
Improvements comprising the Project, and all other
reasonable evidence that the City of New York
and/or the Battery Park City Authority have
acknowledged the completion of all work required
by it to meet all legal requirements and the
requirements under the Ground Lease, as
applicable, including, without limitation, all
zoning and building requirements; (iv) all Permits
and Licenses, if any, required for the operation
of the Project as an independent living/assisted
living complex under all applicable legal
requirements have been issued; (v) all of the
requirements set forth in Section 6.4 of this
Agreement for the final disbursement of Hard Costs
shall have been satisfied; (vi) the opening of the
Project shall have been scheduled to occur within
thirty (30) days.
"COMPLETION DATE" - The date that occurs eighteen (18) calendar months
after the Closing Date, subject to extension for
Force Majeure (it being expressly understood,
however, that the Maturity Date shall not be
extended by reason of Force Majeure).
"COMPLETION GUARANTY" - The Completion Guaranty dated the date hereof made
by Guarantor in favor of Agent, for the ratable
benefit of the Lenders.
"CONSTRUCTION
ADMINISTRATION FEE" - A fee equal to $25,000, payable to Agent, for its
own account on the Closing Date.
"DEBT SERVICE
COVERAGE RATIO" - NOI, less the sum of (i) five percent (5%) of
Project Revenues, and (ii) an annual capital
expenditure reserve equal to $250 per unit,
divided by all interest, principal amortization
and other payments due with respect to the
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<PAGE>
Loans and any other debt (other than interest
payments pursuant to Mezzanine Financing permitted
hereunder) of Borrower during the applicable
period.
"DEFAULT RATE" - Shall have the meaning set forth in the Note. In
no event shall the Interest Rate or the Default
Rate exceed the maximum interest rate permitted
under applicable law.
"DEVELOPER" - Shall mean Brookdale Living Communities of New
York - BPC Inc., a Delaware corporation.
"DEVELOPMENT AGREEMENT" - The Amended and Restated Development Agreement
made as of August 24, 1999 by Borrower, as owner,
and Developer.
"DEVELOPMENT FEE" - The Development Fee set forth in the Budget.
"DOMESTIC BUSINESS DAY" - Any day other than a Saturday or Sunday or a day
when commercial banks are authorized or required
by law to close in Cleveland, Ohio.
"DRAW REQUEST" - A written statement of Borrower on a Standard AIA
Form G702 and G703 setting forth the Loan
disbursement sought by Borrower under this
Agreement, which shall constitute an affirmation
by Borrower that the representations and
warranties of Article III remain true and correct
as of the date thereof and will be so on the date
of disbursement, which draw request shall be (i)
signed by Borrower, or by Developer on behalf of
Borrower, approved in writing by Borrower's
Architect, all subject to confirmation and
approval by Agent and Agent's Inspecting
Consultant, and (ii) accompanied by lien waivers
or releases as required by Sections 6.3 and 6.4
below.
"ENGINEER" - Schuman Lichtenstein Clamon Efron, Architects
"ENGINEER'S AGREEMENT" - The engineer's agreement, dated December 8, 1998,
entered into by Developer on Borrower's behalf,
and the Engineer.
"ENVIRONMENTAL INDEMNITY
AGREEMENT" - The Environmental Indemnity Agreement dated the
date hereof made by Borrower and Guarantor in
favor of Agent for the ratable benefit of Lenders.
7
<PAGE>
"EURODOLLAR BUSINESS DAY" - Any Domestic Business Day on which commercial
banks are open for international business
(including dealings in dollar deposits) in London,
England.
"EVENT OF DEFAULT" - Shall have the meaning set forth in Article V
hereof.
"FFE" - Furniture, fixtures and equipment referred to in
the Budget.
"FACILITY SUMMARY REPORT" - Shall have the meaning set forth in Section
4.1(dd) hereof.
"FINAL BUDGET" - The budget delivered to, approved and initialed by
Agent on or before Closing Date, as same may be
amended from time to time with Agent's prior
written consent in accordance with Section
7.2(b)(iv) or as line items within same may be
reallocated in accordance with Section 2B.14.
"FINANCIAL STATEMENTS" - The financial statements of Borrower and Guarantor
heretofore delivered to Agent in connection with
the Loan, as supplemented from time to time.
"FORCE MAJEURE" - Delays in construction of the Improvements caused
by or attributable to acts of God, unusual weather
conditions, strikes, lockouts or labor disputes
(including those involving Borrower if Borrower
has used all reasonable means to conclude the
strike, lockout or labor dispute short of
conceding Borrower's position in the labor matter)
inability to obtain an adequate supply of
materials, fuel, water, electricity, labor or
other supplies, casualty, governmental action,
accidents, breakage, repairs, or other conditions,
matters or events which are not within the
reasonable control of Borrower and not
attributable to the bad faith of Borrower or its
agents, excluding the lack of funds, including,
without limitation, the lack of funds due to a
failure to perform any obligations hereunder,
provided (i) the Budget, at all times, remains in
balance, or if same is not in balance, Borrower
and/or Guarantors have complied with Section
2B.7(A) hereof, (ii) Borrower notifies Agent
within five (5) days of the occurrence of the
Force Majeure event and the length of the
anticipated delay, but in no event shall said
relief exceed ninety (90) days in the aggregate,
and (iii) Borrower has been granted similar relief
under the Ground Lease and all Requirements, as
necessary.
"FORWARD TREASURY LOCK
AGREEMENT" - The agreement, dated as of the date hereof,
between Borrower, as counterparty, and KCCI (which
shall name
8
<PAGE>
Guarantor as credit support provider), or dated as
of a future date, between Borrower and/or
Guarantor, as counterparty, and a third party
financial institution reasonably acceptable to
Agent, as the case may be, pursuant to which the
Interest Rate Protection Facility shall be
purchased in accordance with the requirements of
Section 4.1(kk) hereof, it being expressly
understood that notwithstanding anything contained
herein or in any of the other Loan Documents,
payments of additional interest and other amounts
due under the Forward Treasury Lock Agreement
shall be secured by the Soft Cost Mortgage, the
Guaranties and the other Loan Documents if, and
only to the extent that, KCCI and one or more of
the other Lenders are the parties providing the
Interest Rate Protection Facility.
"GENERAL CONTRACT" - The general contract, dated December 30, 1998,
entered into by Borrower, or by Developer on
Borrower's behalf, and the General Contractor
providing for a maximum fixed price.
"GENERAL CONTRACTOR" - HRH Construction Corporation
"GOVERNMENTAL AUTHORITY" - The United States, the City of New York, State of
New York and any political subdivision thereof,
and any agency, department, commission, board,
bureau or instrumentality of any of them which
exercises jurisdiction over Borrower, any of the
Guarantors or the Premises.
"GROUND LEASE" - That certain Ground Lease, dated as of August 24,
1999, between Battery Park City Authority, as
Ground Lessor, and Borrower, as Tenant, pursuant
to which Borrower holds the leasehold on the Land
and Improvements.
"GROUND LESSOR" - Battery Park City Authority.
"GUARANTY" OR "GUARANTIES"- Shall mean the Payment Guaranty, the Completion
Guaranty, the Operating Deficit Guaranty or any of
them.
"GUARANTOR" - Brookdale Living Communities, Inc., a Delaware
corporation, or any additional guarantor or
substitute Guarantor permitted under Section
4.2(m).
"HARD COSTS" - All costs that constitute "costs of the
improvement" under the New York Lien Law and
included in the Budget.
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"IMPROVEMENTS" - An assisted living/independent living complex
containing approximately 218 units and
approximately 219,615 square feet of "floor area"
(as such term is defined in the Zoning Resolution
of the City of New York), including without
limitation all on-site and off-site improvements,
including, without limitation, all utility
services and fixtures and equipment required for
access to and operation of the complex to be
constructed on the Land, all of which is more
particularly described in the Plans.
"INITIAL CLOSING" - The date of the initial funding of the Loan.
"INITIAL ESTIMATED COST" - Shall mean $62,624,077, i.e. the maximum amount of
the Loan ($49,125,000) plus the amount of the
Required Equity ($13,499,077).
"INTEREST RATE" - Shall mean the Prime Rate or Applicable LIBOR Rate
as provided in the Note.
"INTEREST RATE PROTECTION
FACILITY" - Shall mean the interest rate protection which
shall be purchased in accordance with the
requirements of Section 4.1(kk) hereof pursuant to
the Forward Treasury Lock Agreement (hereinafter
defined), it being expressly understood that all
amounts that may be due to KCCI (or any other
Lender who shall become a party to the Forward
Treasury Lock Agreement) shall be secured on a
pari passu basis by the Building Loan Mortgage,
the Soft Cost Mortgage, the Guaranties and the
other Loan Documents, and accordingly,
notwithstanding the second priority nature of the
Soft Cost Mortgage, all recoveries pursuant to the
Building Loan Mortgage, the Soft Cost Mortgage and
the other Loan Documents shall be shared on a pari
passu basis among the Lenders who are parties to
this Loan Agreement and the Lenders who are
parties to the Forward Treasury Lock Agreement in
accordance with their relative interests in the
Loan on the one hand and in the Forward Treasury
Lock Agreement on the other; it being expressly
understood, however, that, notwithstanding
anything contained herein or in any of the other
Loan Documents, the additional interest and other
amounts that may be due to the party providing the
Interest Rate Protection Facility shall be secured
by the Soft Cost Mortgage, the Guaranties and the
other Loan Documents if, and only to the extent
that, KCCI and one or more of the Lenders are the
parties providing the Interest Rate Protection
Facility.
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"INTERMEDIATE THRESHOLD" - Shall have the meaning set forth in Section
4.1(cc) hereof.
"LAND" - Shall have the meaning set forth in the Recitals
hereto.
"LEASEHOLD ENTITY" - Shall have the meaning set forth in Section
7.2(b)(ix) hereof.
"LENDER" or "LENDERS" - KCCI and the other financial institutions listed
in Annex I, and each other financial institution
which has been assigned an interest herein
pursuant to Section 7.14.
"LIEN" - Any mortgage, pledge, lien, security interest,
judgment lien, mechanic's lien, installment
purchase agreement or other third party right,
charge or encumbrance of any kind affecting the
Land.
"LIBOR INTEREST PERIOD" - Shall have the meaning set forth in the Note.
"LIBOR RATE" - Shall have the meaning set forth in the Note.
"LIQUID ASSETS" - Shall mean assets in the form of cash, cash
equivalents, obligations of (or fully guaranteed
as to principal and interest by) the United States
or any agency or instrumentality thereof (provided
the full faith and credit of the United States
supports such obligation or guarantee),
certificates of deposit issued by a commercial
bank having net assets of not less than
$500,000,000, securities listed and traded on a
recognized stock exchange or traded over the
counter and listed in the National Association of
Securities Dealers Automatic Quotations, liquid
debt instruments that have a readily ascertainable
value and are regularly traded in a recognized
financial market, or any unused portion of any
credit line maintained with a bank which must have
an Standard & Poor's rating of "A" or better, none
of which are subject to specific pledge, lien or
other encumbrance.
"LOAN" - Shall have the meaning set forth in Section
2A.1(a).
"LOAN DOCUMENTS" - Shall have the meaning set forth in the Recitals
hereto.
"MAJOR CONTRACTS" - Any contract entered into by Borrower relating to
the Improvements in an amount equal to or
exceeding $200,000.
"MAJOR CONTRACTOR" - Any contractor party to a Major Contract.
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"MAJOR SUBCONTRACT" - Any contract between the General Contractor and a
subcontractor relating to the Improvements in an
amount equal to or exceeding $200,000.
"MAJOR SUBCONTRACTOR" - Any subcontractor party to a Major Subcontract.
"MANAGEMENT AGREEMENT" - The Management Agreement made as of August 24th,
1999, by Borrower, as owner, and Developer, as
manager.
"MANAGEMENT FEE" - Shall mean the management fee payable to Manager
under the Management Agreement.
"MANAGER" - Brookdale Living Communities of New York - BPC
Inc., a Delaware corporation.
"MATURITY DATE" - February 28, 2001, subject to extension pursuant
to the terms of Section 2A.11 of this Agreement.
"MEMBER" - AH Battery Park Member, LLC, an Ohio limited
liability company, the sole member and manager of
Borrower.
"MEMBERSHIP AGREEMENT" - The Amended and Restated Operating Agreement of
Borrower, dated as of June 19, 1999.
"MEZZANINE FINANCING" - Shall have the meaning set forth in Section
2B.15(b) hereof.
"MORTGAGE" - The Building Loan Mortgage and the Soft Cost
Mortgage, each dated of even date herewith, made
by Borrower, as mortgagor, to Agent, as mortgagee,
for the ratable benefit of the Lenders, which
Building Loan Mortgage secures the Building Loan
Note and encumbers, among other things, and is a
first lien on, Borrower's leasehold interest in
the Premises and which Soft Cost Mortgage secures
the Soft Cost Note and encumbers, among other
things, and is a second lien on, Borrower's
leasehold interest in the Premises.
"NOI" - Project Revenues, less all ordinary and customary
operating expenses actually incurred and paid by
Borrower, other than the Management Fee (certified
by Borrower or by the Developer or Manager on
behalf of Borrower and approved by the Agent), in
connection with the ownership and operation of the
Project.
"NOTE" or "NOTES" - Shall have the meaning set forth in Section 2A.2.
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"OBLIGATION" - All obligations of Borrower to Agent and the
Lenders under this Agreement, the Notes or the
other Loan Documents or any related instrument or
document, howsoever created, arising or evidenced,
whether direct or indirect, absolute or
contingent, or now or hereafter existing, or due
or to become due.
"OPERATING DEFICIT
GUARANTY" - The Operating Deficit Guaranty dated the date
hereof made by Guarantor in favor of Agent, for
the ratable benefit of the Lenders.
"PAYMENT GUARANTY" - The Payment Guaranty dated the date hereof made by
Guarantor in favor of Agent, for the ratable
benefit of the Lenders.
"PERMITTED ENCUMBRANCES" - The items listed in Exhibit B hereto and any
easements or licenses granted with the written
consent of Agent, which shall not be unreasonably
withheld if such easements and/or licenses are
reasonably necessary for and beneficial to the
operation of the Project, or any other
encumbrances expressly permitted under this
Agreement.
"PLANS" - The preliminary and the final plans and
specifications, including all shop drawings (which
shop drawings will be kept at the Project site for
inspection by Agent or Agent's Inspecting
Consultant), for the construction and equipping of
the Improvements prepared (in accordance with, and
which conform to, the requirements set forth in
Article 11 of the Ground Lease, including, without
limitation, (a) the Requirements, the Master
Development Plan, the Design Guidelines and the
Construction Documents (as all of such terms are
defined in the Ground Lease) and (b) the
provisions of Section 11.02 of the Ground Lease
governing the review and approval by the lessor of
the plans and specifications) by Borrower's
Architect, and approved by Agent, Agent's
Inspecting Consultant and the Ground Lessor to the
full extent required under the Ground Lease and
(in the case of final plans, to the extent
necessary to satisfy any Requirement) the
applicable Governmental Authorities, as amended or
modified by all Change Orders approved hereunder
by Agent.
"POLLUTANT" - Any solid, liquid, gaseous or thermal contaminant,
including smoke, vapor, radon, soot, fumes, acids,
alkalis, chemicals, waste, petroleum products or
by products,
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asbestos (including, without limitation, friable
asbestos, airborne asbestos or any substance or
material containing asbestos), PCBs, phosphates,
lead or other heavy metals, chlorine, radon gas,
any "HAZARDOUS SUBSTANCE" or "POLLUTANT" or
"CONTAMINANT" as defined in the Comprehensive
Environmental Response, Compensation and Liability
Act, as amended, any "HAZARDOUS WASTE" as defined
in the Resource Conservation and Recovery Act, any
"POLLUTANT" as defined in the Clean Water Act
and/or any "HAZARDOUS AIR POLLUTANT" as defined in
the Clean Air Act, and the regulations adopted
pursuant thereto, or any other toxic or hazardous
wastes or materials as defined, identified or
classified under any Requirement, and any
regulations adopted pursuant thereto.
"PREMISES" - Borrower's leasehold interest in the Land, the
Improvements, the building materials, personal
property and all other items owned and/or leased
by Borrower and described in the granting clause
of the Mortgage, and any other personal property
owned and/or leased by Borrower and used in the
construction or operation of the Improvements,
including all fixtures, furnishings and equipment
necessary to operate the Improvements for its
intended purpose.
"PREPAYMENT" - Shall mean any mandatory or optional prepayment of
the Loan or any part thereof pursuant to Section
2A.6 hereof.
"PRIME RATE" - Shall have the meaning set forth in the Note.
"PROJECT" - The Premises, including without limitation, the
Land, the Improvements, all on-site and off-site
improvements, including without limitation, all
utility services and fixtures and equipment
required for access to or operation of the
Improvements.
"PROJECT DOCUMENTS" - The Ground Lease, the Development Agreement, the
Management Agreement, the Assignment of Contracts,
the General Contract, the Architect's Agreement,
the Engineer's Agreement, the Plans, all necessary
Project permits, the Approved Leases, the Major
Contracts and the Major Subcontracts.
"PROJECT REVENUES" - All fixed rent or other income (including expense
reimbursements) actually received by Borrower in
connection with its ownership and occupancy of the
Premises, as reasonably determined by Agent based
upon
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the most current Facility Summary Report then in
Agent's possession.
"PRO RATA" - Shall have the meaning set forth in Section
2B.16(i) hereof.
"PROTECTIVE ADVANCES" - Any disbursements and advances pursuant to any of
the Loan Documents (which disbursements and
advances shall be deemed to be "ADVANCES" made
hereunder) which Agent deems necessary or
desirable to preserve or protect the Collateral or
any portion thereof or to enhance the likelihood
or maximize the amount of repayment of the
Advances and other Obligations.
"REQUIRED EQUITY" - The aggregate sum of $13,499,077, to be
contributed by Borrower for costs incurred in the
development and construction of the Improvements,
which contribution may be made in the form of cash
and/or the Mezzanine Financing as more
particularly described in Section 2B.15 hereof.
"REQUIREMENT" - Any law, statute, ordinance, order, rule or
regulation of a Governmental Authority applicable
to Borrower, any Guarantors or the Premises,
including, but not limited to, laws, ordinances,
orders, rules or regulations with regard to
zoning, land use, building or environmental
matters.
"REQUISITE LENDERS" - Lenders (including Agent) whose Pro Rata
participation (not including the participation of
any of the Lenders which Agent has determined to
be in default), in the aggregate, are equal to or
greater than sixty-six and two-thirds percent (66
2/3%).
"RETAINAGE" - Shall have the meaning set forth in Section 2B.2
hereof.
"SIGNIFICANT PARTY" - Borrower or Guarantor.
"SOFT COST LOAN" - Shall have the meaning set forth in Section
2A.1(a) hereof.
"SOFT COST LOAN AGREEMENT"- Shall have the meaning set forth in the Recitals
hereto.
"SOFT COST MORTGAGE" - Shall have the meaning set forth in the Recitals
hereto.
"SOFT COST NOTE" - Shall have the meaning set forth in the Recitals
hereto.
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"SOFT COSTS" - All non-construction or soft costs that do not
constitute "costs of the improvement under the New
York Lien Law" and are delineated as such in the
Final Budget.
"STABILIZATION" - Shall have the meaning set forth in Section
4.1(cc) hereof.
"SUBSTANTIAL COMPLETION" - Shall be deemed to have occurred upon the last to
occur of the following dates: (i) the date of
issuance of a temporary certificate of occupancy
covering all of the Premises, and (ii) the date
upon which the first resident takes possession of
their unit.
"SUPERMAJORITY LENDERS" - Lenders (including Agent) whose Pro Rata
participation (not including the participation of
any of the Lenders which Agent has determined to
be in default), in the aggregate, are equal to or
greater than seventy-five percent (75%).
"TITLE INSURER" - The issuer of the title insurance policy required
by Section 6.2(m) hereof, which issuer shall be
Chicago Title Insurance Company.
"UCC FINANCING
STATEMENTS" - The UCC-1 Financing Statements executed by
Borrower, as debtor, in favor of Agent, as secured
party, to be filed in connection with the personal
property described in the Mortgage and the
Assignment of Contracts.
"UNANIMOUS LENDERS" - All of the Lenders (including Agent, but not
including the participation of any of the Lenders
which Agent has determined to be in default),
collectively.
Section 1.2 Singular and Plural. Words used herein in the singular, where
the context so permits, shall be deemed to include the plural and vice versa.
ARTICLE II(A)
LOAN FACILITY
-------------
Section 2A.1 Loans. (a) Subject to the terms and conditions of this
Agreement, including without limitation, (i) the funding limitations embodied in
Section 2B.7 hereof and (ii) the loan balancing requirements of Section 2B.7(A)
hereof, each Lender, severally, and not jointly, agrees to make a series of
advances to fund Hard Costs in an aggregate principal amount of up to
$36,456,404 (each an "ADVANCE" and collectively, the "ADVANCES"; all of the
Advances of all of the Lenders under this Agreement collectively, the "BUILDING
LOAN" and together with Advances in an aggregate principal amount of up to
$12,668,596 under the Soft Cost Loan
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Agreement, (the "SOFT COST Loan"; the Building Loan and Soft Cost Loan being
referred to collectively as the "LOAN" OR "LOANS"), to or for the benefit of
Borrower, in an aggregate principal amount for any Lender not to exceed the
amount set forth under the heading "LOAN COMMITMENT" opposite the name of such
Lender on Annex I.
(b) The Building Loan shall be fully secured by the Building Loan Mortgage
and the other Collateral described herein and in the other Loan Documents. The
Building Loan Mortgage shall secure the indebtedness described in the Building
Loan Note or Notes and herein, and any future loans, advances, payments and
disbursements by Lenders pursuant to this Agreement or the Building Loan
Mortgage shall be added to the principal indebtedness under the Building Loan
Notes.
(c) This Agreement shall remain in full force and effect after the Loan is
fully funded and throughout the term of the Loan and any extensions thereof for
the purpose of governing the rights and obligations of Borrower, Agent and
Lenders but not for the benefit of any third persons.
Section 2A.2 Notes. The Advances made by each Lender pursuant to Section
2A.1(a) shall be evidenced by one or more promissory notes of Borrower dated of
even date herewith (such Building Loan Notes and Soft Cost Notes, the "NOTE"or
"NOTES"), payable to the order of such Lender and representing the obligation of
Borrower to pay the unpaid principal amount of the Advances under the Loans made
by such Lender, with interest thereon at the Interest Rate and, after the
occurrence and during the continuance of any Event of Default, at the Default
Rate. Each Lender is hereby authorized to record the date and amount of each
Advance of the proceeds of the Loans made by such Lender and the date and amount
of each payment or prepayment of principal of the Loans made to such Lender on
the schedule annexed to and constituting a part of such Lender's Note, and any
such recordation shall constitute prima facie evidence of the accuracy of the
information so recorded in the absence of manifest error; provided, however,
that the failure by any Lender to make any such recordation on its Note shall
not affect any of the obligations of Borrower under such Note or this Agreement.
Section 2A.3 Interest Rate.
(a) Advances of the Loans shall bear interest at the Applicable
LIBOR Rate or the Prime Rate pursuant to the provisions of the Note. After the
occurrence and during the continuance of any Event of Default hereunder,
Advances of the proceeds of the Loan shall bear interest at the Default Rate.
(b) Notwithstanding the foregoing, only so much of the outstanding
principal amount of the Loan as would not become due and payable during the
applicable LIBOR Interest Period shall be designated as a LIBOR Rate Loan and
the remaining principal balance shall be designated as a Prime Rate Loan. Prime
Rate Loans will bear interest at the Prime Rate. "PRIME RATE" means the rate of
interest per annum announced by the Cleveland office of KeyBank National
Association ("KEYBANK") as its Prime Rate, whether or not such rate is publicly
announced. The Prime Rate is not necessarily the lowest rate charged by KeyBank
for commercial or other types of loans, it being understood that the Prime Rate
is only one of the bases for computing interest on loans made by the Agent and
that, by basing interest on the
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Prime Rate, the Agent and the Lenders have not committed to charge, and Borrower
has not in any way bargained for, interest based on a lower or the lowest rate
at which the Agent or the other Lenders may now or in the future make loans to
other borrowers. Any interest rate based on the Prime Rate shall be adjusted on
and as of the effective date of any change in the Prime Rate. Each determination
of the Prime Rate by the Agent shall be conclusive. As of August 23, 1999, the
Prime Rate is currently 8.0%.
Section 2A.4 Payment of Interest. Prior to maturity, whether by
acceleration or otherwise, interest on the Advances shall be payable at the
Interest Rate or Interest Rates provided in the Note, with each interest payment
being due on the twenty-fourth (24th) day of the first full calendar month
following the date on which the first Advance is made hereunder, and subsequent
interest payments being due thereafter monthly on the twenty-fourth (24th) day
of each month regardless of the applicable Interest Rate. After maturity, by
acceleration or otherwise, interest on the Advances shall be payable on the date
described in the preceding sentence or earlier, or more frequently, on demand of
Agent.
Section 2A.5 Payment of Principal. The entire principal amount of the
Loan, or so much thereof as may be outstanding on the Maturity Date (together
with all outstanding interest and other sums due hereunder or under the Notes,
the Mortgage and the other Loan Documents), shall be paid as provided herein and
in the Notes on the Maturity Date, or on such earlier date as may result from an
acceleration of the Maturity Date in accordance with Section 2A.13 hereof. If
the Maturity Date is extended in accordance with Section 2A.11(c), Borrower
shall make installment payments of the principal of the Advances monthly on the
twenty fourth (24th) day of each month, commencing with the first month
following such extension, in amounts determined in accordance with Section
2A.11, and the entire remaining principal amount of the Advances shall be paid
on the Maturity Date as so extended, or on such earlier date as may result from
an acceleration of the Maturity Date in accordance with Section 2A.13 or 5.3(a)
hereof.
Section 2A.6 Prepayment. Subject to the provisions of Sections 2A.8, 2A.9
and 2A.10 hereof, upon not less than three (3) Domestic Business Days' prior
written notice to Agent specifying the intended date of prepayment, Borrower
shall have the right to prepay the outstanding principal amount of the Advances,
in whole or in part, without premium or penalty but with all accrued interest
and breakage fees on the amount being prepaid to the date of such prepayment.
Each partial prepayment must equal at least $100,000 or some $100,000 increment
thereof. Amounts of principal prepaid will not be readvanced by Lenders as new
Advances.
Section 2A.7 Procedure for Payment. Each payment on the Notes, including
each prepayment of principal and each payment of interest, shall be made by
Borrower to Agent at its office at 127 Public Square, Cleveland, Ohio
44114-1306, in lawful money of the United States of America, in immediately
available funds, by 1:00 P.M., Cleveland, Ohio time, on the due date for such
payment without setoff or counterclaim. Subject to Section 7.13 below, Agent
shall distribute such payments ratably to the Lenders on the day of receipt, if
received by 1:00 P.M. as aforesaid, and on the following Domestic Business Day,
if received after 1:00 P.M., in like funds as received. The failure of Borrower
to make any such payment by the aforesaid time shall not constitute a default
hereunder, provided that such payment is made on such due date, but any such
payment received by Agent after 1:00 P.M., Cleveland, Ohio time, on such due
date shall be deemed to have been made on the next Domestic Business Day or
Eurodollar Business Day,
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as the case may be, for the purpose of calculating interest on the Advances. If
any payment under the Notes or any other Loan Document shall be due and payable
on a day which is not a Domestic Business Day or Eurodollar Business Day, as the
case may be, the due date thereof shall be extended to the next Domestic
Business Day or Eurodollar Business Day, as the case may be (except as otherwise
provided in the definition of LIBOR Interest Period), and interest shall be
payable at the applicable rate specified herein during such extension.
Section 2A.8 Indemnification. Notwithstanding anything to the contrary
contained herein or in any other Loan Document, Borrower agrees that if (a) any
repayment or prepayment of any Advance is made for any reason (other than as
contemplated in the last sentence of the definition of LIBOR Interest Period in
the Note) on a day prior to the last Eurodollar Business Day of the then
effective LIBOR Interest Period, or (b) by any other action of Borrower or by
reason of an acceleration of the Note, an Applicable LIBOR Rate is terminated on
a day prior to the last Eurodollar Business Day of the then effective LIBOR
Interest Period with respect to such Applicable LIBOR Rate, Borrower shall
indemnify each Lender against, and pay on demand directly to each Lender, any
loss, liability, expense, penalty or other charge suffered or incurred by such
Lender as a result of such repayment or termination of such Applicable LIBOR
Rate, including, without limitation, (i) any loss, liability, expense, penalty
or other charge suffered or incurred by such Lender during the period from the
date of receipt of such repayment or acceleration to the last Eurodollar
Business Day of the LIBOR Interest Period in question if the rate of interest
obtainable by such Lender upon the redeployment of an amount of funds equal to
such repayment is less than the interest rate computed by reference to the
Applicable LIBOR Rate in effect during the LIBOR Interest Period in question, or
(ii) any loss, liability or expense suffered or incurred by such Lender in
liquidating prior to maturity eurodollar deposits or other deposits, as the case
may be, in amounts which correspond to such payment. A certificate of such
Lender giving a reasonably detailed calculation of the amount of any such loss
or expense shall be deemed conclusive in the absence of manifest error. The
amounts payable by Borrower under this Section 2A.8 shall expressly exclude any
margin that any such Lender may have anticipated over any Applicable LIBOR Rate.
Section 2A.9 Reimbursement. Borrower agrees to reimburse each Lender for
its costs in complying during the term of the Notes with all applicable laws,
executive orders and regulations of the governments of the United States, the
United Kingdom and any other applicable government, and of any regulatory or
administrative agency thereof (including, without limitation, the Bank of
England, the Board of Governors of the Federal Reserve System or any other
governmental body claiming jurisdiction), including any increase in said costs
due to a change therein or in the interpretation thereof, which impose, modify
or deem applicable any reserve, asset maintenance or special deposit or capital
adequacy requirements on the obligation of Lender to make Advances or on
deposits obtained in the London interbank eurodollar market or other markets in
respect of Advances subject to LIBOR, or which subject such Lender to any tax
with respect to its Note or change the basis of taxation of payments to such
Lender of principal, interest or fees payable under its Note (except for any
tax, or changes in the rate of any tax, based upon the net income or profits of
such Lender) or which impose any other similar conditions with respect to the
Advances or the obligation of such Lender to make Advances under the Loan. The
increased cost to a Lender in complying with laws, executive orders or
regulations which impose, modify or deem applicable any reserve, asset
maintenance or special deposit or capital adequacy requirements on the
obligation of a Lender to make Advances under
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the Loan or on deposits obtained in the London interbank eurodollar market or
other markets shall be computed by determining the amount by which such
requirements effectively increase such Lender's cost of making and maintaining
the deposits attributable to the Advances subject to LIBOR and by computing the
additional interest which would have been owing to such Lender if such effective
increase had been added to the Applicable LIBOR Rate for purposes of determining
the Applicable LIBOR Rate during the affected period. A certificate of a Lender
giving a reasonably detailed calculation of the amount of such costs shall be
deemed conclusive in the absence of manifest error. Agent shall give Borrower
written notice of any such increased cost of any Lender's making and maintaining
the deposits attributable to Advances subject to LIBOR upon Agent's receipt of
notice of the same. Notwithstanding anything to the contrary stated in this
Section 2A.9, no such increased costs shall be recoverable from Borrower with
respect to any period more than 120 days prior to the date Agent shall provide
Borrower with written notice of such increased costs incurred by any Lender, and
such increased costs shall only be imposed by a Lender who actually is incurring
such increased costs and only so long as such Lender is exercising similar
rights against other borrowers to whom such Lender is lending money at rates
based on the LIBOR Rate. Furthermore, Borrower shall not be required to pay such
increased costs due solely to a change in location of the Lender's office
extending the Advances that are subject to LIBOR. Borrower may, during a period
of the fifteen (15) Domestic Business Days following receipt by Borrower of any
such notice to reimburse any such increased costs which are material in amount,
either (i) demand that the Lender requesting reimbursement of the increased
costs, within such period, assign its Advances bearing interest at the
Applicable LIBOR Rate to one or more assignees which Borrower or Agent
identifies, in accordance with any applicable provisions of this Agreement,
including, without limitation Section 7.14(b), upon payment in immediately
available funds of a purchase price therefor equal to the unpaid principal
amount thereof, together with interest accrued with respect thereto to the date
of such assignment and all fees and other charges accrued or payable under the
terms of this Agreement for the benefit of such Lender with respect thereto to
the date of such assignment, and if such payment is made within such period such
Lender shall so assign its Advances bearing interest at the Applicable LIBOR
Rate, or (ii) within such period, repay the portion of the Loan owing the Lender
who requests the increased costs, together with interest accrued with respect
thereto to the date of such repayment and all fees and other charges accrued or
payable under the terms of this Agreement with respect thereto for the benefit
of such Lender to the date of such repayment, any such repayment being for the
sole credit of such Lender and not for any other Lender. All expenses incurred
by Agent in connection with the foregoing shall be for the sole account of
Borrower and shall constitute an Obligation hereunder. Each Lender hereby
represents that, as of the date hereof, such Lender is not subject to Federal
Reserve Board reserve requirements. Any assignee of a portion of any Lender's
Commitment hereunder shall make the foregoing representation as of the closing
of such assignment.
Section 2A.10 Changes. Notwithstanding anything to the contrary contained
herein, in the Notes, in the Mortgage or in any other Loan Document, if, prior
to or during any LIBOR Interest Period with respect to which LIBOR is in effect,
any change in any law, treaty, regulation or official directive, or in the
interpretation thereof, by any governmental body charged with the administration
thereof, shall make it unlawful for any Lender to fund or maintain its funding
in eurodollars or other dollars of the Advances subject to the Applicable LIBOR
Rate or otherwise to give effect to such Lender's obligations as contemplated
hereby, (a) Agent may by notice to Borrower declare that such Lender's
obligations in respect of the
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Applicable LIBOR Rate are terminated forthwith, (b) the Applicable LIBOR Rate
shall forthwith cease to be in effect, and interest shall from and after such
date be calculated at the Prime Rate unless Borrower shall thereafter elect, in
accordance with the terms hereof, an individual Applicable LIBOR Rate not
subject to such illegality, and (c) Borrower agrees to indemnify such Lender
against any loss, cost, or expense actually incurred as provided in Section 2A.8
hereof. A certificate of such Lender giving a reasonably detailed calculation of
the amount of any such loss, expense, penalty or other charge shall be deemed
conclusive in the absence of manifest error. As noted in Section 2A.6 above,
Borrower may, in accordance with said Section, prepay the Loan at any time but
any such prepayment shall not diminish Borrower's obligations under Sections
2A.8, 2A.9 and 2A.10 hereof, through the date such Lender receives full payment
of its Note and all sums due with respect to the Notes, including without
limitation, any sums due under Sections 2A.8, 2A.9 and 2A.10 hereof.
Section 2A.11 Extension Periods.
(a) Provided the Loan is not then in default, Completion has been
achieved, the Improvements are then fully open and operating, and all
requirements for the final disbursement of Hard Costs set forth in Section 6.4
of this Agreement have been satisfied, Borrower may, subject to the requirements
of this Section 2A.11, extend the maturity of the Notes for the period from the
day next succeeding the Maturity Date through the date that occurs eighteen (18)
months after the Maturity Date (the "FIRST EXTENSION PERIOD"), and for an
additional period from the day next succeeding the last day of the First
Extension Period through the date that occurs twelve (12) months after the last
day of the First Extension Period (the "SECOND EXTENSION PERIOD"; the First
Extension Period and the Second Extension Period are sometimes hereinafter
collectively referred to as the "EXTENSION Periods").
(b) Borrower's right to extend the maturity of the Notes for the
First Extension Period shall be conditioned upon the satisfaction of the
following requirements, as determined by Agent: (i) Borrower shall have
delivered written notice of its desire to extend the maturity of the Notes and
said written notice must be delivered to Agent not later than sixty (60) days
prior to the then effective Maturity Date, (ii) at the time of delivery of such
notice, Completion shall have occurred and (iii) no Event of Default hereunder
or under any of the other Loan Documents shall have occurred and be continuing
and there shall be no outstanding payment default under the Loans.
(c) Borrower's right to extend the maturity of the Notes for the
Second Extension Period shall be conditioned upon the satisfaction of the
following requirements, as determined by Agent: (i) the maturity of the Notes
shall have been extended for the First Extension Period, (ii) Borrower shall
have delivered written notice of its desire to extend the maturity of the Notes
and said written notice must be delivered to Agent not later than sixty (60)
days prior to the expiration of the First Extension Period, which notice shall
be accompanied by payment of an extension fee equal to 25 basis points (.0025)
of the outstanding principal amount of the Notes (plus any unfunded principal
made available to Borrower during the Second Extension Period), (iii) no Event
of Default hereunder or under any of the other Loan Documents shall have
occurred and be continuing and there shall be no outstanding payment default
under the Loans and (iv) at the time of delivery of such notice, Completion
shall have occurred, and the Project shall have achieved, and be capable of
maintaining, based upon Agent's reasonable
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determination, a minimum Debt Service Coverage Ratio calculated on a prospective
basis for the first quarter of the Second Extension Period (i.e. including
actual figures from quarters 8, 9, 10 and 11 and including projected principal
payments during the Second Extension Period) of not less than 1.2 to 1.0, and
(v) in the event that the Requisite Lenders request a new or updated Appraisal,
Borrower furnishes to Agent an Appraisal, at Borrower's sole cost and expense,
reasonably satisfactory in all material respects to the Lenders and evidencing a
loan to value ratio not greater than 75%. Upon the extension of the Maturity
Date pursuant to this Section 2A.11(c), the outstanding principal balance of the
Loan shall amortize in equal monthly installments of principal payable beginning
on the first day of the Second Extension Period. The monthly principal
amortization payments shall be determined at the commencement of the Second
Extension Period based upon a 25-year amortization schedule; provided, that the
monthly principal amortization payments shall be adjusted from time to time,
based on the foregoing 25-year amortization schedule, to include the amount of
Advances, if any, made to Borrower during the Second Extension Period.
(d) In no event shall the Maturity Date of the Notes be extended
beyond the Extension Periods.
Section 2A.12 Lenders' Rights. Borrower acknowledges and agrees that an
individual Lender may wish to purchase one or more deposits in order to fund or
maintain its funding of the Advance subject to LIBOR during the applicable LIBOR
Interest Period. Any Lender shall be entitled to fund and maintain its funding
of all or any part of such Advance in any manner it sees fit, provided that all
determinations hereunder (including, without limitation, all determinations
under Sections 2A.8, 2A.9 and 2A.10 hereof) shall be made as if such Lender had
actually funded and maintained that Advance to be subject to LIBOR during the
applicable LIBOR Interest Period through the purchase of eurodollar deposits or
other deposits, as the case may be, in an amount equal to such Advance subject
to LIBOR and having a maturity corresponding to such LIBOR Interest Period.
Borrower agrees that for purposes of Sections 2A.8, 2A.9 and 2A.10 hereof any
reference to a Lender therein shall also include any Lender that has signed an
Assignment and Acceptance Agreement in accordance with Section 7.14(b) of this
Agreement to the extent of its Pro Rata share in such Advance bearing interest
at the Applicable LIBOR Rate, and in this respect Borrower agrees that Agent, on
behalf of any such assignee, may collect directly from Borrower, and Borrower
agrees to pay to Agent (but Borrower shall not be required to pay the same
directly to any such assignee), any sums owing to such participant under
Sections 2A.8, 2A.9 and 2A.10 hereof.
Section 2A.13 Acceleration of Maturity. The Notes, including all principal
thereof and interest thereon, however termed, shall become due and payable at
the option of Agent upon the occurrence of any of the following (subject to any
applicable cure periods specified in this Agreement):
(a) Any default shall occur and continue beyond any notice or cure
period under this Agreement, the Building Loan Mortgage or any other Loan
Document, or if a Significant Party shall be in default beyond any applicable
notice or cure period under or attempt to terminate any Loan Document;
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(b) A Significant Party shall fail to comply beyond any applicable
notice or cure period with any of the covenants made by it in this Agreement,
any Note, the Mortgage or in any other Loan Document, or at any time any
representation or warranty made by a Significant Party to Agent or any Lender in
this Agreement or in any other Loan Document or in any certificate or statement
delivered in connection therewith shall be false or misleading to an extent
deemed by Agent, in its reasonable judgment, to be material; or
(c) Any other Event of Default under this Agreement, the Mortgage or
any other Loan Document shall occur.
Section 2A.14 Costs of Collection. If any Note shall be collected by legal
proceedings or through any court or shall be referred to an attorney because of
any default, Borrower agrees to pay all reasonable attorney's fees and court
costs incurred by Agent as well as the Lenders.
Section 2A.15 Late Charges. In the event that any payment of interest,
principal, or principal and interest shall not be paid when due (whether by
acceleration or otherwise), a "LATE CHARGE" calculated at the rate of five
percent (5%) on such overdue installment shall be charged by Agent for the
purpose of defraying the expenses incident to handling such delinquent payments,
which "LATE CHARGE" shall be payable on the same day of the month as payments of
interest, provided, however, in no event shall Borrower be required to pay a
late fee greater than the maximum amount permitted under applicable laws. Such
charge shall be in addition to, and not in lieu of, any other remedy Agent or
any Lender may have and is in addition to any reasonable fees and charges of any
agents or attorneys which Agent is entitled to employ upon any default by
Borrower hereunder or under any other Loan Document, whether authorized herein
or by law.
ARTICLE II(B)
LOAN DISBURSEMENTS/REQUIRED EQUITY
----------------------------------
Subject to the provisions of this Agreement, and upon Borrower's
satisfaction of the applicable requirements of this Agreement, including,
without limitation, the conditions to disbursements set forth in Article VI
hereof, and also subject to the funding limitations of Section 2B.7, each Lender
severally, and not jointly, agrees to make Advances hereunder from time to time
in accordance with Article II(A), but not more than once a month except as
provided in Section 2A.3(b) regarding Loan interest and Section 2B.1, and
Borrower will accept each Lender's Advance representing a proportionate share of
the amount of the Loan as follows:
Section 2B.1 Procedure for Loan Borrowing and Interest Rate Election. Draw
Requests for Hard Costs and Soft Costs shall be submitted prior to Completion at
least once, but at all times no more than once, per month on or about the same
date of each month. Borrower shall submit a so-called "PENCIL COPY REQUISITION"
to Agent's Inspecting Consultant prior to the submission of a Draw Request.
Within five (5) Domestic Business Days of Agent's Inspecting Consultant's
receipt of the pencil copy requisition, Agent's Inspecting Consultant shall
review the pencil copy requisition, inspect the Project and provide comments to
Borrower. Borrower
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shall submit a total Draw Request, within ten (10) calendar days thereafter, in
duplicate to Agent and Agent's Inspecting Consultant which includes the Draw
Request for Hard Costs in accordance with Agent's Inspecting Consultant's
comments related thereto and the Draw Request for Soft Costs, and Borrower shall
simultaneously send a summary of the Draw Request to each of the other Lenders
for informational purposes. Within ten (10) Domestic Business Days of Agent's
receipt from Borrower of the total Draw Request, Agent shall review and approve
or disapprove the Draw Request and, if such Draw Request is approved, shall
cause the same to be funded within such ten (10) Domestic Business Day period,
subject, however, to satisfaction of the conditions set forth or referred to in
this Article II(B). All Draw Requests must be accompanied by such supporting
documentation as Agent may require, including, without limitation, a cost
breakdown, which must be certified as to accuracy by Borrower and be consistent
in form and substance with the cost breakdown set forth in the Budget in
aggregate total and itemization and limitations set forth in the General
Contract, if any, and lien waivers from all contractors, subcontractors and
suppliers supplying goods or services related to the Improvements in the sum of
all prior disbursements for all of Borrower's preceding Draw Requests, but only
including supporting invoices upon the specific request of Agent. The Budget
shall serve as the disbursement control for each line item, and neither Agent,
nor any Lender shall be required to disburse Loan proceeds or make Advances for
any line item in excess of the amounts specified in the Final Budget, (as the
same may be amended due to Budget reallocations pursuant to Section 2B.14
hereof), as payable from Loan proceeds. No later than three (3) Eurodollar
Business Days prior to the date of the requested Advance and disbursement of
Loan proceeds, Borrower shall notify Agent whether such Advance shall initially
bear interest at the Prime Rate or the Applicable LIBOR Rate or a combination
thereof subject to the limitations set forth in Section 2A.3 and Section 2A.10.
Upon receipt of such Draw Request from Borrower, Agent shall promptly, but no
later than two (2) Eurodollar Business Days prior to the anticipated
disbursement date, notify each Lender of the pending Draw Request and the
anticipated disbursement date. Provided that all of the conditions set forth in
Article VI have been satisfied and Agent approves the Draw Request, then by no
later than 11:00 a.m., Cleveland time, on the disbursement dates specified in
Agent's notice to each Lender, (A) each Lender other than Agent shall make
available to Agent an amount in immediately available funds equal to such
Lender's Pro Rata share of the Advances to be made and disbursed by Agent (as
determined by Agent), and Agent, as a Lender, shall also make available its Pro
Rata share of such Advances, and (B) Agent shall then make available to Borrower
the amount of such Advances, which shall correspond to the amount approved for
disbursement by Agent by wire transferring to the account of Borrower maintained
by Borrower or by Developer on behalf of Borrower as set forth in Section 2B.9
the aggregate amount of said Advances. No such Advances or disbursements shall
be made until the Title Insurer has verbally provided Agent with advice (i.e.,
no change in title not theretofore approved by Agent) required by Section 6.3(e)
hereof and has committed to issue the title continuation and endorsement
referred to therein.
Section 2B.2 Amount of Disbursements for Hard Costs.
(a) The amount of any disbursement for Hard Costs (excluding FFE)
shall not at any time exceed an amount equal to (i) the percentage of completion
evidenced by inspections of the Improvements by Agent's Inspecting Consultant,
times (ii) the estimated total Hard Costs set forth in the Budget and approved
by Agent, minus (iii) an amount equal to ten percent (10%)
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(or such greater amount as may be stipulated in the General Contract) of the
value of the work completed for which payment is sought (the "RETAINAGE"). The
foregoing retainage percentage may be reduced to 0% (or such greater amount as
may be stipulated in the General Contract) when the Improvements are 50%
completed and the other requirements of Section 2B.8 have been satisfied, but no
Retainage previously withheld shall be released to Borrower when the foregoing
reduction in percentage occurs. The aggregate of all of the Retainage shall only
be released in accordance with Section 2B.8 below.
(b) Prior to each disbursement hereunder, Agent's Inspecting
Consultant shall inspect the Improvements to verify that the Draw Request
accurately reflects the percentage of construction completed to date. The
percentage of completion of construction at any time and the estimated total
cost of Hard Costs shall be determined by Agent based upon advice from Agent's
Inspecting Consultant, and Agent's reasonable determination shall be final and
binding on Borrower. Agent's Inspecting Consultant may disapprove the amount, or
any portion thereof, requested for any work if it shall deem such work not to be
in accordance with the Plans or inferior in quality in any material respect to
the quality that is required in the Plans.
Section 2B.3 Stored Materials. In the case of items stored safely and
securely off-site in a bonded warehouse or on the premises of a fabricator or
some other secure facility reasonably acceptable to Agent and Agent's Inspecting
Consultant and not yet incorporated into the Improvements ("STORED MATERIALS"),
each Lender agrees that it will fund as part of an Advance its proportionate
share of the cost of Stored Materials at the times Hard Costs are funded and
prior to their incorporation into the Improvements provided that:
(a) Borrower or Developer has an obligation under the General
Contract or any purchase order to advance or pay for such Stored Materials;
(b) Agent has received executed conditional bills of sale (subject
only to receipt of payment) or other proof reasonably satisfactory to it
evidencing Borrower's unencumbered title in and to such Stored Materials;
(c) Agent, acting on behalf of Lenders, has been granted a first
priority security interest, subject only to any interest that the Ground Lessor
may have under the applicable provisions of the Ground Lease, and perfected same
through the filing of UCC-1 financing statements as required, in such Stored
Materials prior to or simultaneous with it making any such Advance;
(d) such Stored Materials are fully insured in an amount and with an
insurance company satisfactory to Agent, in its sole discretion, under a policy
containing a standard New York mortgagee endorsement or the equivalent thereof
as well as travel insurance with respect to off-site Stored Materials, and Agent
is provided a certificate of insurance evidencing such insurance;
(e) each item comprising such Stored Materials are properly and
securely stored and clearly marked with, among other things, Borrower's or
Developer's name and the job number so as to segregate and distinguish same from
the property of others, and Agent's
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Inspecting Consultant has inspected such Stored Materials and has approved the
identity, quality and quantity of same;
(f) Agent has received a bill of lading or other proof reasonably
satisfactory to it evidencing the warehouseman's receipt and acceptance of such
Stored Materials and a copy of the executed contract with the warehouseman,
which shall expressly provide that any security interest that such warehouseman
might have in the Stored Materials is subordinate to the security interest held
by the Agent on behalf of the Lenders;
(g) the value of Stored Materials shall not exceed $5,000,000.00 in
the aggregate, unless Agent, in its sole discretion agrees to a greater amount
for prefabricated Stored Materials;
(h) Borrower provides lien waivers from all suppliers supplying such
Stored Materials in the sum received by each such supplier for all of Borrower's
preceding Draw Requests; and
(i) Borrower has provided written notice to Agent and Agent's
Inspecting Consultant of an impending Draw Request covering any costs of Stored
Materials two weeks prior to the submission of such Draw Request.
(j) such Stored Materials are to be incorporated into the
Improvements within sixty (60) days of delivery to the Project Site or such
longer time as is not detrimental to the timely completion of the Project as
required hereunder, and is approved by Agent in its sole discretion.
Section 2B.4 Intentionally Omitted
Section 2B.5 Intentionally Omitted
Section 2B.6 Intentionally Omitted
Section 2B.7 Funding Limitations. At no time shall any Lender be obligated
to make Advances to Borrower for more than Lender's Pro Rata share of what such
Lender is then required to fund, pursuant to Draw Requests submitted by Borrower
and approved by Agent, to the party seeking payment or, in the case of
reimbursement, to the party seeking reimbursement, or to disburse (prior to the
satisfaction of the requirements for the reduction of Retainage set forth in
Section 2B.8 hereof) for Hard Costs (prior to the last Advance for Hard Costs
hereunder) Loan proceeds in amount(s) which exceed, separately for any
individual line item or in the aggregate for all line items, 90% of Hard Costs
(subject, however, to the provisions of Section 2B.8 hereof) multiplied by the
percentage of completion of construction then attained for the Improvements, as
determined by Agent's Inspecting Consultant. Agent shall not unreasonably
withhold its consent to a request by Borrower for access to funds from the
Contingency portion of the Budget, so long as there is not then an Event of
Default in existence and the Loan, is, and after such use of Contingency funds
shall remain, in balance.
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Section 2B.7(A) Loan Balancing. Anything contained in this Agreement to
the contrary notwithstanding, it is expressly understood and agreed that the
Loan shall at all times be "IN BALANCE." The Loan shall be deemed to be "IN
BALANCE" only at such time and from time to time, as Agent may determine in its
reasonable discretion, that the then undisbursed portion of the Loan and the
then unpaid portion of the Required Equity (it being expressly understood that
no Advances of the Loans shall be made until the Required Equity is fully paid)
equals or exceeds the amount necessary for the timely and full payment of all
costs and expenses relative to construction and leasing of the Project,
including without limitation, all Hard Costs and Soft Costs for (i) all work
done and not theretofore paid for or to be done in connection with the
completion of the construction of the Improvements in accordance with the Plans,
applicable Requirements and the Ground Lease, including, without limitation, the
installation of all utility services, fixtures and equipment required for access
to and operation of the Improvements both on-site and off-site, and (ii) all
other costs incurred and not theretofore paid for, or to be incurred in
connection with the Premises, including, without limitation all Hard Costs, all
Soft Costs, all interest on the Loan, and the amount of any interest reserve or
interest contingency (as reasonably determined by Agent). Borrower agrees that
if Agent reasonably determines that the Loan is not "IN BALANCE", Borrower
shall, within thirty (30) days after written demand by Agent, deposit the
deficiency with Agent (the "DEFICIENCY DEPOSIT"), which Deficiency Deposit shall
first be exhausted before any further disbursement of the Loans is made, or, if
the Loan is not in balance due, in whole or in part, to the insufficiency of the
interest reserve line item of the Budget, at Borrower's option, in lieu of
making a Deficiency Deposit with respect to such interest deficiency, direct the
Agent, by written notice, to permanently reduce the remaining available
Development Fee line item of the Budget in sufficient amount to increase the
interest reserve line item of the Budget and thereby cause the Loan to then be
"in balance" which notice shall be accompanied by the written consent of the
Developer to such permanent reduction of the payment of the Development Fee from
Loan proceeds. Notwithstanding anything contained in the foregoing to the
contrary, Borrower shall comply with all requirements of the New York Lien Law.
The Lenders shall not be obligated to make Advances and Agent shall not be
obligated to make any Loan disbursement of proceeds of Advances if and so long
as the Loan is not in balance. Among the various events that could cause the
Loan to be "OUT OF BALANCE" are determinations by Agent that (i) the Budget is
insufficient or inadequate, or (ii) the Improvements (based upon the progress
and pace of construction through the date of such determination) will not be
Completed and occupied in accordance with the Occupancy Schedule set forth on
EXHIBIT F. In making any determination as to the projected interest component of
any completion/lease up cost calculation, Agent shall use the then-current rates
on the Advances. In making any determination as to whether the Loan is in
balance, Agent shall consider, among other things, the Budget, the amount
available in the Contingency line item of the Budget, the progress of
construction and overall the status of the Project.
Section 2B.8 Retainage.
(a) The Retainage held-back but not disbursed by the Lenders as
Advances covering retention for Hard Costs in accordance with the provisions of
Section 2B.2 shall, subject to the terms and conditions hereof, be disbursed to
Borrower, or, at Agent's option after the occurrence and continuance of an Event
of Default hereunder or under any other Loan Document directly to the General
Contractor or any Major Subcontractor in accordance with the
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General Contract, upon satisfaction of the conditions for the receipt of the
final disbursement set forth in Section 6.4 hereof.
(b) Notwithstanding the foregoing restraints on the release of
Retainage, each Lender agrees, upon the written request of Borrower, to reduce
the retainage of the General Contractor with respect to all disbursements made
hereunder subsequent to the date of such written request from ten percent (10%)
to zero percent (0%) provided that, at the time such reduction in Retainage is
requested: (i) there is no default or any event which with the giving of notice
(if notice is required hereunder) or passage of time would constitute an Event
of Default by Borrower or any Guarantor hereunder or under any other Loan
Document, (ii) Developer on behalf of Borrower has a corresponding obligation
under the General Contract or applicable Major Contract to reduce, or there is a
corresponding provision in the General Contract or such Major Contract which
requires or permits, with the approval of Borrower and Agent, a reduction of the
percentage of Retainage at the time said reduction is requested, (iii) the
Improvements are at least fifty percent (50%) completed and Agent receives a
certification from Agent's Inspecting Consultant as to same along with a
certification that the completed construction is in accordance with the Plans;
and (iv) the work for which the disbursement is requested has been completed by
the contractor or subcontractor in question and Agent receives a certification
from Agent's Inspecting Consultant as to same. No Retainage previously withheld
shall be released to Borrower when the foregoing reduction in percentage occurs.
The aggregate of all of the Retainage remaining shall only be released after
Completion has occurred and all of the requirements of Section 6.4 have been
satisfied.
Section 2B.9 Place of Disbursement. All Loan disbursements shall be made
at Agent's office in Cleveland, Ohio or any other office of Agent hereafter
selected and notified to Borrower from time to time by Agent. Unless Agent and
Borrower otherwise agree, all disbursements will be made by wire transfer
directly into Developer's segregated construction loan account maintained for
the Project with LaSalle Bank National Association located in Chicago, Illinois.
During the term of the Development Agreement or the Management Agreement,
Borrower hereby specifically and irrevocably directs Agent to make all Advances
to the account of Developer as described in the preceding sentence, and receipt
of Advances by Developer, shall for all purposes satisfy any funding obligations
of Lenders hereunder.
Section 2B.10 Intentionally Omitted.
Section 2B.11 Expenses and Disbursements Secured by Loan Documents. (a
Agent may, at Agent's option, at any time and from time to time after the
occurrence of an Event of Default under any Loan Document while the same shall
be continuing, disburse, from the amounts made available to it by the Lenders,
all or any part of any particular Draw Request or the Retainage either (i) to
Borrower for disbursement in accordance with the Draw Request, (ii) to the
General Contractor, Major Subcontractor in accordance with the General Contract,
Major Contractor or other party, either directly or by check jointly payable to
Borrower and such party, for all costs payable to such party, (iii) at
Borrower's expense, to the Title Insurer, which shall pay said monies to the
parties owed payment; or (iv) to any Guarantor in connection with such
Guarantor's performance of the Guaranty Obligations (as defined in the
Completion Guaranty).
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(b) At any time and from time to time and whether before or after a
default hereunder, whether or not Borrower shall have submitted a Draw Request
therefor, Agent shall disburse to itself and for the ratable benefit of the
Lenders from Loan proceeds sums necessary to pay, when due, all interest due
Lenders and all expenses reimbursable to Agent and Lenders hereunder, including,
without limitation, Agent's Counsel Fees and Agent's Inspecting Consultant Fees.
Unless an Event of Default by Borrower hereunder exists, the foregoing
reimbursable expenses will not be funded by Agent without giving Borrower an
opportunity to review and approve same, which approval may not be unreasonably
withheld or delayed, it being understood that reasonable expenses which Borrower
fails to approve may nonetheless be funded by or reimbursed to Lender, which
will make final good faith determination as to whether expenses are reasonable.
No such disbursement shall be deemed to cure or remedy any default by Borrower
hereunder.
(c) The execution of this Agreement by Borrower constitutes an
irrevocable direction to make the disbursements in the manner set forth in
Sections 2B.11(a) and 2B.11(b), and no further authorization from Borrower shall
be necessary to warrant such disbursements, and all such disbursements shall
satisfy pro tanto the obligations of Lenders hereunder and shall be secured by
the lien of the Mortgage as fully as if made to Borrower, regardless of the
disposition thereof by the General Contractor, or any Major Contractor, Major
Subcontractor, Title Insurer or other person.
Section 2B.12 Other Limitations and Requirements. The making of any
disbursement by Agent shall not be deemed an acceptance or approval by Agent or
any Lender (for the benefit of Borrower or any third person) of the work done or
Improvements constructed. Notwithstanding anything contained herein to the
contrary, neither Agent nor any Lender shall have any obligation to lend
hereunder unless Agent is, at all times satisfied that the Improvements can be
constructed lien-free in accordance with the Plans, and be open and ready for
occupancy by the Completion Date for the sums set forth in the Budget.
Section 2B.13 Contract Verification. From time to time, Agent may forward
to all contractors, subcontractors, material suppliers, architects, engineers
and other parties listed on any Draw Request, a contract verification to
ascertain the correctness of the amount of the contract for each contractor,
subcontractor, material supplier, architect, engineer and any other party as
contained on the statement. In the event of any discrepancy between the amounts
shown by the executed copies of the contracts, the Draw Request, and the
verification of contract forms, Agent shall have the right to require that such
discrepancies be eliminated to its full satisfaction.
Section 2B.14 Budget Reallocations. Agent agrees not to unreasonably
withhold its consent to Budget reallocations requested by Borrower provided (i)
that at the time of any such request, there is no Event of Default then existing
hereunder or under any other Loan Document, (ii) the Loan is "in balance" as
defined in Section 2B.7, (iii) in the case of reallocation of savings, such
savings are actual cost savings for work completed and fully paid for in
connection with the construction of the Improvements or are cost savings that
will be realized upon completion of work in progress, all as documented to the
reasonable satisfaction of Agent, and all applicable requirements of the New
York Lien Law are complied with, at the sole expense of Borrower, as determined
by Agent in its sole discretion upon the advice of counsel, and (iv) under no
circumstances may items designated in the Budget as Hard Costs be allocated to
items
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designated in the Budget as Soft Costs, or vice versa until Agent shall have
granted its prior written consent thereto, which consent shall not be
unreasonably withheld, and all applicable requirements of the New York Lien Law
are complied with, at the sole expense of Borrower, as determined by Agent in
its sole discretion upon the advice of counsel.
Section 2B.15 Required Equity.
(a) Lender shall not be obligated to make any Advances hereunder
until Borrower shall have contributed the full amount of the Required Equity and
the full amount of the Required Equity shall have been fully disbursed to fund
Project costs set forth in the Budget and approved by the Agent, with evidence
of such payments delivered to the Agent promptly after the making thereof and
prior to disbursement of any proceeds of the Loan. The Required Equity may be
contributed by Borrower in the form of cash (including without limitation by
means of the Banc One Financing obtained by Member and/or Alliance Holdings,
Inc., provided same complies with Section 2B.15(b) hereof) or may be contributed
by means of the Mezzanine Financing, all on the terms set forth herein, or any
combination of cash and the Mezzanine Financing, prior to or following the
Closing Date or prior to or following the date in which the Required Equity is
fully funded. As of the date hereof, Borrower has delivered to Lender, in form
acceptable in all respects to Agent, evidence that Borrower has contributed or
shall contribute the full amount of the Required Equity (i) by paying, prior to
the Closing Date designated project costs approved in writing by Agent and
identified in the Budget and/or (ii) by procuring an irrevocable commitment or
commitments to fund Project costs incurred after the Closing Date and approved
by the Agent.
(b) For the purposes of this Agreement, "MEZZANINE FINANCING" shall
mean financing obtained by Borrower or Member from a lender reasonably
acceptable to the Requisite Lenders. Both the Mezzanine Financing and the Banc
One Financing must comply with the following terms and conditions: (i) such
financing shall at no time be secured by any interest in the Premises or any
part of the Project, but the Banc One Financing may be secured by a pledge of
the equity interest of Alliance Holdings, Inc. in Member and the Mezzanine
Financing may be secured by a pledge of the equity interest in Borrower by
Member; (ii) the Banc One Financing and the Mezzanine Financing shall be
subordinated to the Loans pursuant to a subordination and standstill agreement
in form and substance satisfactory to the Requisite Lenders; (iii) principal
payments in connection with such financing shall be deferred until the Loan has
been fully repaid, (iv) interest payments in connection with such financing
shall be deferred until such time as the Debt Service Coverage Ratio on the
Project has exceeded 1.4:1.0 for at least two (2) consecutive calendar quarters;
(v) the lender providing the Banc One Financing or the Mezzanine Financing shall
not have any right to prevent Agent from foreclosing on the Project or otherwise
enforcing its rights under this Agreement or the other loan documents executed
by Borrower in connection with the Loan and, in the event of a default by
Borrower or Member of any of the terms and conditions of the Banc One Financing
or the Mezzanine Financing, such lender shall not have any right to foreclose on
the Project, but subject to the terms and conditions of the subordination and
standstill agreement executed by such lender in favor of Lender, shall have the
right to foreclose on the equity interest of Borrower held by Member or on the
equity interest of Member held by the members of Member; and (vi) the terms and
conditions of such financing and the agreements embodying the same shall be
otherwise reasonably acceptable to the Requisite Lenders in all respects.
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Section 2B.16 Pro Rata; Commitments. (i) As used herein, the terms "PRO
RATA," "RATABLE," "PROPORTIONATE" and words of similar import when used with
reference to the Lenders mean (unless the context clearly otherwise indicates)
pro rata according to the unpaid principal amounts owing to the respective
Lenders under the Notes, or, if no principal is then owing to any Lender,
according to the Commitment, as the case may be, of the respective Lenders.
(ii) As used in this Agreement, the "COMMITMENT" of each Lender at
any time means (A) the decimal figure set forth in Annex I opposite the name of
the Lender multiplied by THIRTY SIX MILLION FOUR HUNDRED FIFTY SIX THOUSAND FOUR
HUNDRED FOUR AND 00/100 DOLLARS ($36,456,404.00) minus (B) the outstanding
principal balance of the Building Loan that was advanced by such Lender.
Section 2B.17 Sharing of Setoffs. Each Lender agrees that if it shall,
through the exercise of a right of Lender's lien, setoff or counterclaim against
Borrower, or pursuant to a secured claim under Section 506 of Title 11 of the
United States Code or other security or interest arising from, or in lieu of,
such secured claim, received by such Lender under any applicable bankruptcy,
insolvency or other similar law or otherwise, obtain payment (voluntary or
involuntary) in respect of any Advance or Advances as a result of which the
unpaid principal portion of its Advances shall be proportionately less than the
unpaid principal portion of the Advances of any other Lender, such Lender shall
be deemed simultaneously to have purchased from such other Lender at face value,
and shall promptly pay to such other Lender the purchase price for, a
participation in the Advance or Advances of such other Lender, so that the
aggregate unpaid principal amount of the Advances and participation in the
Advances held by each Lender shall be in the same proportion to the aggregate
unpaid principal amount of all the Advances then outstanding as the principal
amount of such Lender's Advances under its Note prior to such exercise of
Lender's lien, setoff or counterclaim or other event was to the principal amount
advanced under all of the Notes outstanding prior to such exercise of Lender's
lien, setoff or counterclaim or other event; provided, however, that if any such
purchase or purchases or adjustments shall be made pursuant to this Section and
the payment giving rise thereto shall thereafter be recovered, such purchase or
purchases or adjustments shall be rescinded to the extent of such recovery and
the purchase price or prices or adjustment restored without interest. Borrower
expressly consents to the foregoing arrangements and agrees that any Lender
holding a participation in an Advance deemed to have been so purchased may
exercise any and all rights of Lender's lien, setoff or counterclaim with
respect to any and all moneys owing by Borrower to such Lender by reason thereof
as fully as if such Lender had made an Advance directly to Borrower in the
amount of such participation.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BORROWER
------------------------------------------
Section 3.1 Representations and Warranties of Borrower. Borrower
represents and warrants that:
(a) Borrower. Borrower is a duly formed Ohio limited liability
company, is in good standing under the laws of the State of Ohio, is fully
authorized to do business in the State of New York, and has full power and
authority to consummate the transactions contemplated hereby;
(b) Borrower's Sole Member. The sole member of Borrower is Member.
Member is a duly formed Ohio limited liability company, is in good standing
under the laws of the State of Ohio, and has full power and authority to
consummate the transactions contemplated hereby as the sole member and manager
of Borrower. At all times while the Loan is outstanding, except as otherwise
permitted by Section 4.2(m) below, Member shall be the sole member and manager
of Borrower and shall own not less than one hundred percent (100%) of Borrower.
The sole member and manager of Member is Alliance Holdings, Inc. Alliance
Holdings, Inc. is a duly formed Pennsylvania corporation, and is in good
standing under the laws of Pennsylvania. At all times while the Loan is
outstanding, except as otherwise permitted by Section 4.2(m) below, Alliance
Holdings, Inc. shall be the sole member and manager of Member;
(c) Guarantor and Developer/Manager. Guarantor is a duly formed
Delaware corporation, is in good standing under the laws of Delaware and has
full power and authority to consummate the transactions contemplated by the
Guaranties. Developer is a duly formed Delaware corporation, is in good standing
under the laws of the Delaware, is fully authorized to do business in the State
of New York and has full power and authority to consummate the transactions
contemplated under the Development Agreement, the Management Agreement and the
Assignment of Contracts;
(d) Enforceability. All Loan Documents executed by Borrower have
been duly authorized, executed and delivered, constitute the valid and binding
obligations of Borrower, and are enforceable against Borrower in accordance with
their respective terms;
(e) Organizational Documents. The Membership Agreement has been duly
executed by the parties thereto, is in full force and effect, and there exist no
defaults thereunder or any event that with passage of time and the giving of
notice if notice is hereunder required would constitute a default thereunder;
(f) Financial Information. The Financial Statements of Borrower
heretofore delivered to Agent fairly and accurately present the financial
condition of Borrower as of the date thereof and no materially adverse change
has occurred in the financial condition reflected therein since the date
thereof. The Financial Statements have been prepared in accordance with sound
accounting methods, principles and standards consistently applied and do not
fail to state any information necessary to make such Financial Statements not
materially misleading;
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(g) Insolvency. Borrower is not insolvent (as such term is defined
in the Bankruptcy Code) and will not be rendered insolvent by execution of this
Agreement or any other Loan Document to which it is a party or by the
consummation of the transactions contemplated thereby;
(h) Budget. The Budget presents a full, accurate and complete
representation of all costs, expenses and fees which Borrower expects to incur
or pay or anticipates becoming obligated to pay to complete construction of the
Improvements;
(i) Litigation. There are no actions, suits or proceedings pending,
or to the knowledge of Borrower or Guarantor, as applicable, threatened, against
or affecting Borrower, Guarantor or the Premises with respect to which an
adverse decision is reasonably likely that would have a material adverse effect
on Borrower, Guarantor or the Premises, or involving the validity or
enforceability of the Mortgage, or the priority of the lien thereof, or the
validity or enforceability of any Loan Document to which Borrower or Guarantor
is a party, at law or in equity, before or by any Governmental Authority, and
Borrower is not operating under or subject to, in default or in violation with
respect to, any order, writ, injunction, decree or demand of any court or any
Governmental Authority which would reasonably be expected to materially and
adversely affect its ability to perform its obligations hereunder;
(j) Legal and Contractual Restrictions. The consummation of the
transactions contemplated hereby and the performance by Borrower or Guarantor of
their respective obligations under this Agreement, the Mortgage, the Notes, the
Security Agreement, the Payment Guaranty, the Completion Guaranty, the Operating
Deficit Guaranty, the Environmental Indemnity Agreement, or any other Loan
Document will not result in any breach of, or constitute a default under, any
mortgage, deed of trust, lease, bank loan or credit agreement, organizational
document or other material agreement or instrument to which Borrower or
Guarantor is a party or by which Borrower or Guarantor may be bound or affected;
(k) Governmental Authority. No authorization or approval or other
action by, and no notice to or filing with, any Governmental Authority or
regulatory body is required for the due execution, delivery and performance by
Borrower or Guarantors of the Loan Documents that is required prior to the date
hereof and has not yet been obtained;
(l) Other Contracts. There is no default on the part of Borrower
under or with respect to this Agreement, the Note, the Mortgage, any Approved
Lease or any other Loan Document, and no event has occurred and is continuing
which with the giving of notice (if notice is hereunder or thereunder required)
and the passage of time would constitute a default under any of the aforesaid
documents;
(m) Usury. The maximum interest rate or interest rates for the Loan
are not to Borrower's knowledge, after consultation with counsel, usurious;
(n) Counterclaims and Defenses. Borrower has no counterclaims,
offsets or defenses with respect to the Loan or with respect to the Notes or any
other Loan Document;
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(o) Lien of Mortgage. To Borrower's knowledge, after consultation
with counsel and the Title Insurer, the Building Loan Mortgage will, upon
recordation thereof be a good and valid first lien on Borrower=s leasehold
interest in the Premises (other than intangible personal property), subject to
the Permitted Encumbrances, and upon such filing and recordation and the filing
of the UCC Financing Statements in the proper offices, Agent will have a
perfected, good and valid first security interest in all items of personal
property described in the granting clause of the Building Loan Mortgage, the
Security Agreement and the Assignment of Contracts, subject to the Permitted
Encumbrances;
(p) Encumbrances. Except for the Permitted Encumbrances, the
Premises are not and will not be encumbered by any other Lien not expressly
permitted hereunder or hereafter approved in writing by Agent, it being
understood that Agent will not unreasonably withhold its approval of any
reasonably necessary beneficial easements;
(q) Approved Leases. With respect to the Approved Leases and any
other leases affecting the Premises, Borrower shall, on a continuing basis, be
deemed to have represented and warranted that the same are in full force and
effect, have not been modified or amended in any material respect without the
consent of Agent, not more than ten percent (10%) of Approved Leases are subject
to actual or alleged Borrower defaults, and all conditions to the effectiveness
thereof required to be satisfied as of the date hereof have been satisfied;
(r) Condemnation, Eminent Domain, Access. Borrower has not received
any notice of, and is not aware of, any actual, proposed or threatened exercise
of the power of eminent domain or other taking by any governmental or
quasi-governmental body or agency of all or any portion of the Premises or any
interest therein, and no condition exists and no application is pending that
would unreasonably inhibit use and occupancy of the Premises for its intended
purpose or adversely modify, restrict or inhibit full access, ingress or egress
to the Project from the adjacent roadways in any material respect;
(s) Casualty. The Premises have not suffered any casualty or loss
since the date of the appraisal required to be delivered to Agent under the
provisions of this Agreement;
(t) Pollutants. Except as specifically identified and disclosed in
the environmental reports delivered to Lender, the Premises has never been used
by Borrower to generate, manufacture, refine, produce, store, handle, transfer,
process or transport any Pollutants in violation of any Environmental Law and
Borrower has not used in the past, nor does Borrower intend to use, or permit to
be used, in the future, during construction or otherwise the Premises for the
purpose of generating, manufacturing, refining, producing, storing, handling,
transferring, processing or transporting of any Pollutant in violation of any
Environmental Law. Except as specifically identified and disclosed in the
environmental reports delivered to Lender, Borrower has no knowledge of any
Pollutant having been allowed to spill, leak, escape, be discharged, dumped,
emptied or otherwise disposed of or dealt with on the Premises or incorporated
into the Improvements or allowed to be discharged or drained into or on any
property adjacent to the Premises or into any waters on or adjacent to the
Premises or onto lands from which such Pollutants might seep, flow or drain into
such waters in violation of any Environmental Law. The Premises (i) is not
included or proposed to be included on the National Priorities List issued
pursuant to Comprehensive Conservation Environmental
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Response, Compensation and Liability Act ("CERCLA") by the United States
Environmental Protection Agency ("EPA") or on the inventory of other potential
"PROBLEM" sites issued by the EPA, (ii) has not otherwise been identified by EPA
as a potential CERCLA site or included or proposed for inclusion on any list or
inventory issued pursuant to any state environmental statute or issued by any
other Governmental Authority, and (iii) is not located in a "WETLANDS". Borrower
has not received any notice of, nor does Borrower have any knowledge of, any
occurrence or circumstance which with notice or passage of time would give rise
to a claim or Lien under or pursuant to any environmental rule, regulation,
Requirement or statute of any Governmental Authority pertaining to any
Pollutant.
(u) Subdivision. The Land consists of one separate tax lot and is
not part of a larger tract owned or leased by Borrower, and there are and will
be no encroachments on or from the Land except as shown on the survey delivered
by Borrower pursuant to this Agreement or as expressly permitted under
applicable Requirements and approved by Agent and any adjacent property owner
whose rights are affected by such encroachment;
(v) Access. The Project has access to legally dedicated and accepted
roads;
(w) Borrower is, or by January 1, 2000 shall be, Year 2000 Compliant
(as hereinafter defined). "Year 2000 Compliant" shall mean that all software,
embedded microchips, and other processing capabilities utilized by and material
to the business operations or financial condition of Borrower (including,
without limitation, business operations conducted by Developer on Borrower=s
behalf under the Development Agreement and the Management Agreement) are able to
interpret and manipulate data on and involving all calendar dates correctly and
without causing any abnormal ending scenario, including in relation to dates in
and after the year 2000. Upon Lender=s written request, Borrower shall
reasonably demonstrate (or shall cause Developer to reasonably demonstrate)
compliance with the preceding covenant.
(x) Plans. The Plans, have been approved by Borrower and Guarantor,
and before the initial Advance, said Plans shall be approved by Agent, the
Ground Lessor and, to the extent required by any Requirement or any restrictive
covenant, the appropriate Governmental Authority and the beneficiary of any such
covenant;
(y) Construction Performed. All construction heretofore or hereafter
performed complies and shall comply with all Requirements and the Ground Lease;
Borrower has fully paid for all work performed through the date hereof (except
for any retainage expressly provided for in the relevant Project Document) and
has received lien waivers for all such work; the Improvements will be
constructed wholly within the perimeter of the Land and substantially in
accordance with the Plans; there are no structural defects in the Improvements
(it being intended that the absence of structural defects shall be a
pre-condition to the funding of any Draw Request); no violation of any
Requirement or the Ground Lease exists with respect thereto and the anticipated
use thereof complies with all Requirements and the Ground Lease and restrictive
covenants affecting the Land and all requirements for such use have been
satisfied to the extent possible as of the date hereof;
(z) Utilities. All utility services necessary for the construction
of the Improvements and the operation thereof for their intended purpose are
available at the
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boundaries of the Land, including, without limitation, water supply, storm and
sanitary sewer facilities, gas, electrical, and telephone facilities and the
installation of said utility services to the Improvements can and will be
completed by the Completion Date. Borrower has received permission, to the
extent required, from the appropriate Governmental Authority and/or the provider
of each utility service to connect the Improvements into each utility service
provided the Improvements are constructed in accordance with the Plans;
(aa) Compliance. All zoning, planning, land use (including, without
limitation, the Zoning Resolution of the City of New York), construction,
renovation, and environmental approvals, authorizations, licenses or permits
necessary as of the date hereof to permit the Improvements to be constructed and
operated shall be listed on a schedule to be delivered by Borrower to Agent on
the Closing Date (together with copies of items listed in said schedule), and
have been or will be acquired by Borrower as and when required, are or will be
in full force and effect and Borrower has received no notice of a violation,
revocation or termination of same and any rights to appeal the granting of such
approvals have expired with no appeals being taken. Said permits are the only
permits necessary to construct the Improvements in accordance with all
Requirements. The Improvements, as described in the Plans and when completed,
will comply with all zoning, environmental, air quality, subdivision, planning,
building, land use (including, without limitation, the Zoning Resolution of the
City of New York), and other similar types of laws, rules, regulations,
ordinances, requirements, planning approvals and permit conditions imposed by
any Governmental Authority. Any zoning or subdivision approval is based on no
real property, or rights appurtenant thereto, other than the Land and rights
encumbered by the lien of the Mortgage. To Borrower's knowledge, after
consultation with counsel, the Improvements as, and to be, improved and used are
not in violation of any covenants, conditions or restrictions of any kind or
nature, whether or not of record, affecting all or any part of the Land or any
interest therein. No amendment or change in any such permit, license or variance
and no amendment or change in zoning or any other land use control has been
sought or obtained or will be sought or obtained;
(bb) Contracts. Borrower or Developer on Borrower's behalf has not
made and is not aware of any contract or arrangement of any kind binding on
Borrower or Developer on Borrower=s behalf in an amount in excess of $50,000,
except those disclosed in writing on a schedule to be delivered to Agent on the
Closing Date (or which may be entered into subsequent to the date hereof and
disclosed in writing to Agent);
(cc) Information. To Borrower's knowledge, no information,
certification or report submitted to Agent by or on behalf of Borrower pursuant
to this Agreement or otherwise in connection with the Loan or Borrower's
requests or applications therefor contains any material misstatement of fact or
fails to state a material fact necessary to make the information not misleading
in any material respect;
(dd) Draw Request. Each Draw Request, and the receipt of the funds
requested thereby, shall have the effect stated in the definition of the term
"DRAW REQUEST" and be accompanied by the items in said definition and such other
items as are required by this Agreement;
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(ee) Use of Proceeds. Borrower will employ the Loan proceeds in
accordance with the Budget and will not require and will not avail itself of any
additional extension of credit for any purpose without Agent's prior written
consent;
(ff) Broker. Borrower has not retained the services of any broker in
connection with the Loan (other than Shattuck Hammond Partners); and
(gg) Investment Company Act; Other Regulations. Borrower is not an
"INVESTMENT COMPANY", or a company "CONTROLLED" by an "INVESTMENT company,"
within the meaning of the Investment Company Act of 1940, as amended. Borrower
is not subject to regulation under any Federal or State statute or regulation
which limits its ability to incur the Obligations or any other indebtedness.
LENDER ACKNOWLEDGES THAT BORROWER HAS RELIED SOLELY ON THE
DEVELOPER'S CERTIFICATE IN THE FORM ATTACHED HERETO AND MADE A PART HEREOF AS
EXHIBIT E IN MAKING THE REPRESENTATIONS RELATING TO THE PREMISES AND THE PROJECT
(AS DISTINGUISHED FROM THOSE REPRESENTATIONS RELATING TO BORROWER AND ITS
ORGANIZATION) CONTAINED IN THIS SECTION 3.1 AND ELSEWHERE IN THIS AGREEMENT AND
OTHER LOAN DOCUMENTS. IN THE EVENT THAT DEVELOPER'S OBLIGATIONS UNDER THE
DEVELOPER'S CERTIFICATE SHALL TERMINATE PURSUANT TO THE TERMS THEREOF, BORROWER
SHALL BE DEEMED TO HAVE MADE ALL OF THE REPRESENTATIONS IN THIS ARTICLE 3.1 ON
ITS OWN ACCORD AND WITHOUT RELIANCE ON THE DEVELOPER'S CERTIFICATE. BORROWER
EXPRESSLY ACKNOWLEDGES AND AGREES THAT NOTWITHSTANDING THE FOREGOING
ACKNOWLEDGMENT BY LENDER, ANY MISREPRESENTATION CONTAINED HEREIN OR IN THE OTHER
LOAN DOCUMENTS, WHETHER OR NOT MADE IN RELIANCE ON THE DEVELOPER'S CERTIFICATE,
SHALL BE DEEMED A DEFAULT HEREUNDER BY BORROWER, SUBJECT TO ALL OF THE
APPLICABLE PROVISIONS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
ARTICLE IV
COVENANTS OF BORROWER
---------------------
Section 4.1 Affirmative Covenants of Borrower. Borrower covenants with
Agent, for itself and for the ratable benefit of the Lenders, that, throughout
the term of the Loan and any extensions thereof, Borrower will:
(a) Structure of Borrower. Comply with all Requirements in order to
maintain Borrower in good standing as a validly existing limited liability
company under the laws of the State of Ohio, authorized to do business in
the State of New York;
(b) Performance of Obligations. Promptly comply with all conditions
of this Agreement and the other Loan Documents with which Borrower is
required to comply and any Requirement, the Ground Lease and/or
restrictive covenant affecting the Land;
(c) Notices. Promptly (upon transmittal or receipt) deliver to Agent
copies of all material notices and correspondence with respect to: (i) any
Project Document, (ii)
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any Loan Document, (iii) the financial condition of Borrower, (iv) Agent's
and Lenders' security, and (v) any violation or potential violation of any
Requirement or any approval, authorization, or permit issued in regard to
the Premises or Improvements, and Borrower will promptly respond fully to
any inquiry of Agent made with respect thereto, and will permit Agent,
upon Agent's written request, to participate in any inquiry, hearing or
meeting with regard to any of the foregoing and will furnish Agent, on
demand, proof of compliance, or proof of the action Borrower is taking in
order to comply, reasonably satisfactory in all respects to Agent;
provided that Lender acknowledges that pursuant to the Development
Agreement and the Management Agreement, Borrower has delegated to
Developer certain of Borrower's duties under this Agreement and the other
Loan Documents. Accordingly, during the term of the Development Agreement
and/or Management Agreement, (i) Lender shall rely on any notice, demand
or request for Advances from Developer as if such notices, demands or
requests for Advances were made by Borrower, (ii) any notice, demand or
request for Advances or modifications not signed by Developer shall be
ineffective and (iii) Agent shall not act upon any request by Borrower for
a material modification to any of the Loan Documents unless the same is in
writing signed by both Borrower and Developer;
(d) Additional Documents. Execute and deliver to Agent, from time to
time, and as reasonably requested by Agent, such other documents as shall
be reasonably necessary to provide the rights and remedies to Agent and
Lenders granted or provided by the Loan Documents;
(e) Maintenance of Premises. Maintain the Premises in good repair
and safe condition at all times and if at any time any Pollutant shall be
discovered buried under, manufactured or processed or stored on the Land
in violation of Requirements, Borrower will promptly remove same in
accordance with any and all Requirements;
(f) Insurance. Maintain, at all times, insurance on the Premises in
accordance with the requirements of the Mortgage;
(g) Draw Request. Prior to Completion and satisfaction of all
requirements of Section 6.4 hereof, submit to Agent at least once, but no
more than once each calendar month a Draw Request (except Borrower may
make an additional Draw Request to pay Interest or as otherwise provided
herein);
(h) Payment of Fees. On the Closing Date and thereafter promptly
when due, pay the Commitment Fee, the Construction Administration Fee, the
Agency Fee, Agent's Counsel Fees, Agent's Inspecting Consultant fees, all
costs and expenses required to satisfy the conditions of this Agreement
and all costs and fees of whatever nature incurred by Agent acting on its
own behalf or as agent for itself and any participating Lenders in
connection with the negotiation, consummation, execution, closing,
syndication, administration and/or collection of the Loan, but
specifically excluding any expenses incurred in connection with the
negotiation, consummation, execution and closing of the Loan by any Lender
(other than KCCI (individually or as Agent)) in excess of $5,000 each.
Without limiting the generality of the foregoing, Borrower will pay: (i)
mortgage recording taxes and recording fees, title insurance premiums and
costs, escrow
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fees, flood zone determination fees, survey fees, appraisal costs, Agent's
environmental audit and site inspection fees; and (ii) all reasonable fees
and expenses incurred by Agent, and its respective agents and
representatives in connection with any Event of Default under any Loan
Document or the enforcement thereof. To the extent Agent, after the
Initial Closing, deems it necessary in its reasonable judgment to employ
counsel and/or consultants for any purpose relative to the Loan, the
reasonable fees and expenses of such counsel and/or consultants shall be
borne by Borrower. Any such fees and expenses incurred by Agent are to be
paid promptly by Borrower in no event later than ten (10) Business Days
from Agent's delivery of an invoice to Borrower. Borrower hereby agrees to
indemnify and hold Agent harmless with respect to all of the foregoing
costs, fees and expenses;
(i) Use of Proceeds. Borrower shall receive the Advances of the
Building Loan made hereunder and shall hold same in trust solely for, and
shall expend, Building Loan proceeds solely for the purpose of paying
costs of the improvement as defined in the New York Lien Law, and
identified in the Budget and Borrower shall utilize Advances of the Soft
Cost Loan solely for the purpose of paying costs identified in the Budget
as Soft Costs. Borrower represents and agrees that it will not require and
agrees that it will not avail itself of any additional extension of credit
for the requisition and development of the Premises or the construction of
the Improvements (except for financing expressly permitted hereunder). An
affidavit pursuant to Section 22 of the Lien Law of the State of New York,
is attached hereto as EXHIBIT C and made a part hereof;
(j) Construction. Cause the construction of the Improvements to be
prosecuted with diligence and continuity so as to complete and equip the
same in accordance with the Plans, the Ground Lease, all Requirements and
the Budget on or before the Completion Date free and clear of Liens or
claims for Liens other than Permitted Encumbrances. Borrower will promptly
deliver a copy of all proposed and executed Change Orders to Agent and
Agent's Inspecting Consultant;
(k) Standard of Construction. Construct and achieve Completion of
the Improvements substantially in accordance with the Plans to the
reasonable satisfaction of Agent and Agent's Inspecting Consultant and
will not permit, and will promptly remove, any encroachment on the Land
unless the same is insured over by the Title Insurer to the reasonable
satisfaction of Agent, and Borrower will not allow the Improvements to
encroach on any adjoining property or street, and if any such encroachment
exists Borrower will promptly remove same unless the same is insured over
by the Title Insurer to the reasonable satisfaction of Agent;
(l) Inspections. Subject to the Approved Leases, permit Agent,
Agent's Inspecting Consultant and/or Agent's agents and the other Lenders
at all reasonable times to enter upon the Premises, and to inspect the
Improvements and all materials to be used in the construction thereof and
to examine all Plans which are or may be kept at the construction site,
and will cooperate, and cause the General Contractor and the Major
Contractors (and will use good faith efforts to cause the Major
Subcontractors) to cooperate, with Agent's Inspecting Consultant to enable
it to perform its functions;
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(m) Correction of Defects. Upon demand of Agent based upon the
advice of Agent's Inspecting Consultant, correct any structural defect in
the Improvements or any departure from the Plans deemed by Agent to be
material, and the disbursement of any Loan proceeds shall not constitute a
waiver of Agent's right to require compliance with this covenant with
respect to any such defects or departures from the Plans; notwithstanding
the foregoing, neither Agent nor Agent's Inspecting Consultant shall have
any affirmative duty to Borrower or any third party to inspect for said
defects or to call them to the attention of Borrower or anyone else and
the failure to do so shall in no event give rise to any claim or liability
to or on the part of any party;
(n) Bonds. Obtain and deliver to Agent material and labor payment
bonds and performance bonds, which bonds must be reasonably acceptable to
Agent, for the General Contractor, naming Agent, for the ratable benefit
of the Lenders, as a dual obligee thereunder;
(o) Letter Agreements. Require Borrower's Engineer and Architect,
the General Contractor and each Major Contractor to timely execute and
deliver to Agent a letter in the form previously approved by the Agent;
(p) Foundation Survey. Deliver to Agent a foundation survey
complying with the requirements provided by Agent to Borrower on the
Closing Date upon completion of the foundation;
(q) As-Built Survey. Deliver to Agent an as-built ALTA/ACSM survey
complying with the requirements set forth in the Commitment Letter upon
Completion of the Improvements;
(r) Indemnification. Protect, defend, indemnify and hold Agent and
Lenders, and Agent's and each Lender's officers, directors, shareholders,
employees and agents harmless from all claims, expenses, costs, losses,
injury, liabilities (including liability for penalties), judgments, fines,
damages, settlements, causes of actions, suits, demands, including
attorneys fees and costs, arising from or related to: (i) any brokerage
commissions or finder's fees claimed by any broker or other party arising
by reason of the execution hereof or the consummation of the transactions
contemplated hereby (except by any such broker or other party retained by
Lender), (ii) any actions or omissions relative to the Premises including,
without limitation, contract, personal injury (other than for Agent's or
Lenders' gross negligence or wilful misconduct) or property damage claims,
(iii) the Improvements or the construction thereof, (iv) the existence of
any encroachment (except as shown on the survey delivered by Borrower
pursuant to this Agreement and approved by Agent or as may be permitted
under Section 4.1(k)) upon the Land or from any part of the Improvements
encroaching on any adjoining property, street or easement, and (v) any
action or lien pursuant to any environmental Requirement or clean up or
compensation act, including the failure to comply with the terms of any
order issued by any federal, state or municipal department or agency
having regulatory authority over environmental matters with regard to the
Premises or any other property owned by Borrower or the presence or
existence of any Pollutant in violation of Requirements. If any action,
suit or proceeding arising from any of the foregoing is
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brought against Agent or any Lender, Borrower will resist and defend such
action, suit or proceeding or cause the same to be resisted and defended
by counsel designated by Borrower (which counsel shall be reasonably
satisfactory to Agent), unless, due to a conflict of interest, Agent or
any Lender require such action, suit or proceeding to be resisted and
defended by counsel of its own selection and is represented by such
counsel (in which case Borrower shall be liable for the payment of Agent's
and such Lender's reasonable attorney's fees), provided that prior to the
occurrence and continuance of default, Agent or any Lender shall not
settle or release any claim without the written consent of Borrower, which
approval shall not be unreasonably withheld or delayed. If and to the
extent that the foregoing provisions of this Section may be unenforceable
for any reason, Borrower hereby agrees to make the maximum contribution to
payment and satisfaction of each of the indemnified liabilities which is
permissible under applicable law. If Borrower shall fail to do any act or
thing which it has covenanted to do hereunder or any representation or
warranty on the part of Borrower contained herein or in any Loan Document
shall be breached and such breach shall continue beyond any applicable
notice and grace periods, Agent or any Lender may (but shall not be
obligated to) do the same or cause it to be done or remedy any such
breach, and may expend its funds for such purpose; provided, however, that
no such action by Agent or any Lender shall relieve Borrower of any
liability in connection with such failure or breach or be deemed to
constitute a waiver of any default under this Agreement or such Loan
Document. Any and all amounts so expended by Agent or any Lender shall be
repayable to them by Borrower, promptly after Agent's demand therefor,
with interest at the Default Rate from the date of expenditure by Lender
to the date of repayment. The obligations of Borrower under this Section
4.1(r) shall survive the termination of this Agreement and the discharge
of Borrower's other obligations hereunder. Notwithstanding the foregoing,
to the extent the Guarantor shall have performed its obligations under the
Guaranties and/or the Environmental Indemnity pertaining to the preceding
obligations, neither Borrower nor any Guarantor shall be liable for
duplicative fees and costs incurred by Agent or Lenders in connection with
such obligations;
(s) Security Interests. Grant Agent, for the ratable benefit of
Lenders, a first lien and security interest, subject only to Permitted
Encumbrances and liens permitted hereunder and that the Ground Lessor may
have under the applicable provisions of the Ground Lease, in and to all
furnishings, fixtures and equipment and other personal property owned
and/or leased by Borrower and used in the operation of the Improvements
immediately upon acquisition of same or any part of same and will deliver
to Agent, promptly following demand, copies of all documents which
evidence Borrower's title to or a leasehold interest in any materials,
fixtures or articles incorporated in the Improvements. Borrower shall not
enter into conditional sales contracts or lease agreements for equipment
to be used in the construction or operation of the Improvements, except
for office equipment, furniture and other machinery or equipment used in
the day-to-day operation and maintenance of the Improvements, the value of
which in the aggregate shall not exceed $500,000;
(t) Permits. Obtain and keep all permits, licenses and
authorizations required for the construction, use and operation of
Premises, including without limitation the temporary certificate of
occupancy covering the Improvements, in full force and effect,
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promptly comply with all conditions thereof, and upon Agent's request,
promptly deliver to Agent evidence of compliance and promptly notify Agent
of any violation, revocation or termination of same;
(u) Easements. Procure such easements, cross easements or operating
agreements as Agent may reasonably deem necessary for the use of the
Premises and will submit same to Agent for approval prior to the execution
thereof by Borrower, accompanied by a drawing or survey showing the
location thereof;
(v) Compliance with Requirements. Promptly comply with all
Requirements which affect the Premises or for which a notice of violation
or non-compliance has been issued and promptly deliver to Agent evidence
of such compliance and copies of any such notices of violation or
non-compliance;
(w) Payment of Claims; Notice to Agent of Claims. Promptly pay all
costs and expenses incurred in connection with the Premises, and Borrower
shall cause the Premises to be kept free and clear of any Liens other than
Permitted Encumbrances. Within thirty (30) days after filing of any Lien,
Borrower shall cause such Lien to be discharged, released of record or
bonded over for a sum and in a manner by a reputable surety each in all
respects acceptable to Agent; notify Agent in writing within ten (10) days
thereof should any mortgage, lien, notice of lien, stop notice,
encumbrance or charge or any other security instrument whatsoever against
the Property (other than the Permitted Encumbrances), Improvements,
Personal Property, or other collateral covered by the Loan Documents or
any part thereof come to Borrower=s attention. Borrower shall do all acts
and execute all additional documents required by Agent to maintain the
priority of the lien of the Building Loan Mortgage and the Soft Cost
Mortgage and to comply with the Lien Law of the State of New York.
(x) Financial Statements. Furnish to Agent: (i) Commencing on
Completion and with respect to monthly statements ending upon the
achievement of the Intermediate Threshold with respect to Borrower, not
later than forty-five (45) days after the end of each calendar month, and,
not later than one hundred twenty (120) days after the close of Borrower's
fiscal year, a balance sheet, a statement of profit and loss, and a
statement of changes setting forth in comparative form figures for the
preceding month or year, as the case may be. The annual statements
delivered by Borrower shall be certified by an officer of Borrower or
Developer. After the Intermediate Threshold has occurred, Borrower may
submit quarterly statements in lieu of the monthly statements required
hereunder. All such financial statements shall be certified by an officer
of Borrower or Manager; (ii) With respect to Guarantor, not later than
forty-five (45) days after the end of each calendar quarter, and, not
later than one hundred twenty (120) days after the close of Guarantor's
fiscal year, a balance sheet, a statement of profit and loss, and a
statement of changes setting forth in comparative form figures for the
preceding year or quarter, as the case may be. The annual statements (but
not the quarterly statements) delivered by Guarantor shall be audited and
certified by Ernst & Young LLP or another firm of independent certified
public accountants, reasonably acceptable to Agent. All such financial
statements shall be certified by officer of Guarantor; (iii) Such other
financial
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statements required pursuant to the terms of the Mortgage or as may be
reasonably requested by Agent;
(y) Approved Leases. Use reasonable efforts to fully lease the
Improvements. All leases must comply with the leasing guidelines set forth
in Section 4.2(i) hereof. Borrower shall obtain the prior written approval
of Agent for each lease if required by Section 4.2(i).
(aa) Additional Documents. Execute and deliver to Agent, from time
to time, such other documents as shall be reasonably necessary to provide
the rights and remedies granted or provided by the Loan Documents;
(bb) Rent Rolls. From and after the date of Completion, deliver to
Agent, (i) not less than monthly prior to Stabilization and quarterly
thereafter, on or before the fifth (5th) day of such month or calendar
quarter, as the case may be, a rent roll and a "Leasing Report" relative
to any vacant units which shall summarize resident applications received
and leasing progress, certified by Borrower or Manager on behalf of
Borrower to be true and complete and containing Borrower's or Manager's
certification that, except as specifically noted, (1) all of the Leases
then in effect comport with the requirements of Section 4.2(i) hereof,
including the requirement that such Leases do not vary in any material way
from the form of lease previously approved by Agent and the requirement
that the fixed rent under each such Lease is not less than the rates set
forth on EXHIBIT F; (2) there have been no prepayments under such Leases
greater than thirty (30) days (except for security deposits shown on such
rent roll); and (3) the aggregate of (x) the revenues from such Leases and
(y) the pro forma rentals for the then vacant units determined in
accordance with the pro forma rentals set forth on Exhibit F are no less
than ninety-five percent (95%) of the total pro forma rentals set forth on
Exhibit F, and otherwise containing such information and being in such
form as Agent may reasonably require, and (ii) not less than one hundred
twenty (120) days following the end of Borrower=s fiscal year, an annual
pro forma operating statement for the Improvements, prior to Completion,
Borrower shall deliver to Agent a monthly Leasing Report;
(cc) Operating Budget/Cash Flow. Deliver to the Agent facility
summary reports for the Project in form and substance satisfactory to
Agent, which shall be broken down on a line item basis (including a line
item for NOI) and shall include an occupancy summary and a profit and loss
summary (each, a "FACILITY SUMMARY REPORT"). Such Facility Summary Reports
will be provided monthly from Substantial Completion until Stabilization
has been achieved, with quarterly reports being permitted after
Stabilization has been achieved, within forty-five (45) days after the end
of each calendar month or quarter, as applicable. As used
herein,"STABILIZATION" shall mean, and shall have been achieved, when the
Debt Service Coverage Ratio for the Project following the Intermediate
Threshold has exceeded 1.2 to 1.0 for at least three (3) consecutive
calendar months. As used HEREIN,"INTERMEDIATE THRESHOLD" (which must occur
no later than the twelfth (12th) month following Substantial Completion to
be effective) shall mean, and shall have been achieved when: (i) at least
six (6) months have elapsed since Substantial Completion; (ii) not less
than 87.5% of the units then scheduled to be occupied, as set forth in the
Occupancy Schedule attached hereto and made a part hereof as EXHIBIT F,
are
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then occupied and all payments are being made in accordance with the terms
of Approved Leases, and (iii) the NOI of the Project on a cumulative basis
for the period from Substantial Completion through the last day covered by
the most recent monthly Facility Summary Report submitted by Borrower and
approved by Agent, as set forth in such Facility Summary Report, is no
less than 87.5% of the projected NOI set forth in the Budget (or any
revised projected NOI approved by the Requisite Lenders in writing for
such respective period);
(dd) Debt Service Coverage Ratio. Achieve and maintain a minimum
Debt Service Coverage Ratio for the Project, as determined by Agent based
upon information provided by Borrower within forty-five (45) days of the
end of each calendar quarter, of (i) 1.0 to 1.0 at the end of quarters 5
and 6 following Substantial Completion; and (ii) 1.2 to 1.0 at the end of
quarter 7 following Substantial Completion, and each quarter subsequent
thereto, as determined quarterly on a rolling basis including up to four
quarters commencing with quarter 7. For example, in quarter 8, the
calculation will include figures from quarters 7 and 8 only; in quarter
10, the calculation will include figures from quarters 7, 8, 9 and 10.
(ee) Occupancy of the Project. Achieve and maintain occupancy of the
Project after Substantial Completion, as established to Agent's
satisfaction, at not less than the following scheduled levels measured at
the end of such period:
Quarter 2 following Substantial Completion: 43.75%
Quarter 3 following Substantial Completion: 55.13%
Quarter 4 following Substantial Completion: 65.63%
Quarter 5 following Substantial Completion: 76.13%
Quarter 6 following Substantial Completion: 83.13%
Quarters 7-10 following Substantial Completion: 83.13%
(ff) Guarantor's Net Worth. Provide to Agent a certificate, in form
reasonably acceptable to Agent, on a quarterly basis, within forty-five
days (45) of the end of each calendar quarter, evidencing that Guarantor's
minimum net worth is equal to $70,000,000.
(gg) Guarantor's Liquidity. Provide to Agent a certificate, in form
reasonably acceptable to Agent, on a quarterly basis, within forty-five
(45) days of the end of each calendar quarter, evidencing that Guarantor
has Liquid Assets equal to at least $5,000,000.
(hh) Compliance With Ground Lease. Comply in all respects with the
Ground Lease, including, without limitation, the provisions of Article 11
thereof governing construction of the Project, and the provisions of
Article 40 thereof governing non-discrimination and comply with all of the
instruments and agreements with which Borrower is required to comply
pursuant to the Ground Lease, including, without limitation, the Master
Lease, the Master Development Plan and the Design Guidelines.
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(ii) Post-Closing Conditions. Borrower shall satisfy the
Post-Closing Conditions set forth in Section 2B.7, if any, on or before
the Post-Closing Delivery Date and in no event later than the Post-Closing
Default Date.
(jj) Agent's Sign on the Premises. Authorize Agent (i) to erect, at
its option, and solely at Agent's expense, a sign on the Premises
indicating that Agent and the Lenders are the source of the financing for
the Improvements and (ii) to use Borrower's name and the location of the
Improvements in any published advertisement. Any sign must be in
compliance with applicable ordinances and the Ground Lease and shall be
removed upon Completion;
(kk) Borrower and/or Guarantor on Borrower's behalf shall establish
and maintain the Interest Rate Protection Facility and comply with the
Forward Treasury Lock Agreement. Borrower and/or Guarantor on Borrower's
behalf shall establish the Interest Rate Protection Facility by effecting
transactions pursuant to the Forward Treasury Lock Agreement as follows:
in an amount not less 25% of the aggregate original principal amount of
the Loan on or before the Closing Date; in an amount not less than 50% of
the aggregate original principal amount of the Loan on or before the
thirtieth (30th) day following the Closing Date; in an amount not less
than 75% of the aggregate original principal amount of the Loan on or
before the sixtieth (60th) day following the Closing Date; and in an
amount not less than 100% of the aggregate original principal amount of
the Loan on or before the ninetieth (90th) day following the Closing.
Section 4.2 Negative Covenants of Borrower. Borrower will not, without the
prior written consent of Agent throughout the term of the Loan and any
extensions thereof:
(a) Interest in Premises. Except for Approved Leases and other
Permitted Encumbrances, create, effect, consent to, contract for, agree to
make, suffer or permit any conveyance, sale, assignment, transfer, lien,
pledge, mortgage, security interest, encumbrance or alienation of the
Land, the Improvements or any interest in a portion of the Land or the
Improvements, whether effected directly, indirectly, voluntarily,
involuntarily, or by operation of law or otherwise. No other financing or
mortgaging of the Land or the Improvements shall be permitted while the
Loan or any portion thereof is outstanding, it being understood that
neither the BancOne financing nor the Mezzanine Financing (provided they
always comport with the requirements of Section 2B.15(b) hereof) shall
violate this provision;
(b) Ownership. Change the ownership (directly or indirectly) or the
structure of Borrower or its members, and no member shall sell, assign,
pledge, hypothecate or encumber or transfer its membership interest in
Borrower provided, however, that the foregoing provision shall not be
deemed violated by (i) a foreclosure and acquisition of the equity
interest in Borrower or Member by the lender (or an affiliate of the
lender) providing the Mezzanine Financing or the Banc One Financing,
provided that the Banc One Financing or Mezzanine Financing, as
applicable, and such foreclosure and acquisition, complies in all respects
with Section 2B.15(b) and the subordination and standstill agreement
delivered by such lender pursuant to Section 2B.15(b); (ii) an
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acquisition of the equity interest in Borrower directly by Developer (or
any other wholly owned subsidiary of the Guarantor) on the express terms
and conditions set forth in Section 4.2(m) hereof; or (iii) any change of
ownership of Alliance Holdings, Inc., provided Brookdale Living
Communities of New York - BPC, Inc. is then the Developer under the
Development Agreement and the Manager under the Management Agreement and
the foregoing agreements are then in full force and effect. Borrower shall
not permit or allow the Membership Agreement to be amended, terminated or
modified;
(c) Amendment to Documents. Except as permitted hereunder, (i)
modify or amend or terminate (other than by full performance thereof) any
Loan Document, or (ii) modify or amend or terminate any Project Document
(except as permitted in Section 4.2(d) below and except for non-material
changes to Approved Leases that do not have the effect of reducing the
aggregate revenues from the Leases to less than ninety-five percent (95%)
of the "gross potential rents" for the applicable period set forth on
Exhibit F hereto, without the prior consent of Agent which consent will
not be unreasonably withheld (as to Project Documents only);
(d) Change Orders. Without the written consent of Agent, Ground
Lessor (if required), any lessee under an Approved Lease (if required
under such Approved Lease), any Governmental Authority whose permission
may be required, or any other person or entity whose consent may be
required by any easement, agreement or other document, suffer or permit
any material modification of or material deviation from the Plans, nor
shall Borrower allow any change orders to be executed or permit the
performance of any work pursuant to any Change Order which exceeds the
Change Order Amount (whether an add or a deduct or a reallocation) or the
Aggregate Change Order Amount (whether an add or a deduct or a
reallocation), or which (regardless of the amount) adversely affects the
quality of the Improvements, or which adversely affects the quality of any
of the materials or equipment to be used in the Improvements, or which
increases or reduces the floor space as set forth in the Plans, or which
modifies any of the parameters set forth in the definition of
Improvements, or which might result in any increase in the Budget.
Borrower will not make any changes which could give rise to a defense by
the bonding company to its obligations under the payment and performance
bonds required hereunder, or which are deemed by Agent's Inspecting
Consultant to adversely affect the structural integrity of the
Improvements;
(e) Other Agreements. Execute any contract or become party to any
arrangement for the performance of work on the Premises in excess of
$200,000 without first providing written notice to Agent and, if Agent
shall so request, without providing a copy of such proposed contract to
Agent;
(f) Agreements Affecting the Premises. Without the prior consent of
Agent, which consent shall not be unreasonably withheld or delayed (such
consent having been granted with respect to the Development Agreement, the
Management Agreement, the Ground Lease, the General Contract, the
Architect's Agreement, Approved Leases and the Engineer's Agreement) enter
into any development, leasing, management or other similar agreement that
constitutes a Major Contract, or fail to provide a letter, in form and
substance satisfactory to Agent, executed by the other party to said
agreement
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(including those agreements to which Agent has consented) to the effect,
that upon a default under any Loan Document and Agent's acquisition and/or
obtaining control of the Premises on behalf of the Lenders through
foreclosure, sale or other means, such agreement shall terminate upon
Agent's request at no cost to Agent and Lenders (provided that no such
letter will be required if the agreement in question contains the
foregoing provision);
(g) Pollutants. Either during construction or thereafter, permit the
Premises to be used to generate, manufacture, prepare, produce, store,
handle, transfer, process, spill or empty or otherwise dispose of any
Pollutant in violation of any Requirement, and if same is found to exist,
Borrower shall take all steps to promptly remove such Pollutants in
accordance with all Requirements;
(h) Subdivision. File any application or seek any subdivision
approval for the Land or file or record any subdivision or parcel map or
accept any subdivision approval, nor shall Borrower consent to, join in,
knowingly permit or approve any change in the zoning of the Land unless
required by law or with Agent's prior written consent;
(i) Leasing and Leasing Guidelines. Borrower will not enter into any
lease of all or any portion of the Premises unless the following
conditions are met: such lease or similar agreement is an Approved Lease
or (1) such lease does not vary in any material way from the form of lease
provided to and approved by Agent (and the Ground Lessor, to the full
extent required under the Ground Lease, a copy of which consent, if
required, shall be delivered to Agent) prior to the execution of any such
lease by Borrower, (2) the fixed rent under such lease, when aggregated
with the fixed rent payable under all leases then in effect and the pro
forma rentals for the then vacant units set forth on Exhibit F, is not
less than ninety-five percent (95%) of the total pro forma rentals set
forth on Exhibit F, and (3) the term thereof shall be not less than six
(6) months;
(j) Termination of Lease. Terminate or accept the surrender of any
lease, (other than the agreements pursuant to which the assisted
living/independent living units are occupied), without the prior written
consent of Agent unless, with respect to termination of any lease, the
lessee is in default thereunder after the expiration of any notice or
grace periods;
(k) General Contract. Terminate or accept the surrender of, or amend
or modify, the General Contract, (except for Change Orders expressly
permitted hereunder) without the prior written consent of Agent, which
consent shall not be unreasonably withheld or delayed;
(l) Other Contracts. Terminate or accept the surrender of, or amend
or modify in any material respect, the Development Agreement or the
Management Agreement, without the prior written consent of Agent, which
consent shall not be unreasonably withheld or delayed; and
(m) Mergers, Admission of New Members. Except as expressly permitted
by Section 4.2(b) or this Section 4.2(m), none of Borrower, Member, or
Guarantor will
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merge or consolidate with, or sell, assign, lease or otherwise dispose of
all or substantially all of its assets to, any other person, or permit any
other person to be admitted as a new or substitute member or manager in
Borrower, except that Guarantor may directly or through a wholly-owned
Affiliate acquire (and assume all obligations of) Borrower or Member;
provided, however that, notwithstanding the foregoing, and only if there
are then no outstanding Events of Default, and (i) Agent shall have
received written notice thirty (30) days prior to any proposed merger or
consolidation of Guarantor, (ii) such Guarantor shall have delivered to
Agent copies of all documents to effect such merger or consolidation,
(iii) Agent shall have determined in its sole and absolute discretion that
following such proposed merger or consolidation the surviving entity will
meet the minimum net worth and liquidity requirements of Sections 4.1(ff)
and 4.1(gg) hereof), (iv) such Guarantor shall have caused to be delivered
to Agent such opinions of counsel as Agent may reasonably request, which
opinions shall be satisfactory to it in all respects, and (v) such
Guarantor shall have paid any and all expenses, including, without
limitation, reasonable legal expenses, in connection with Agent's review
of any of the foregoing, then no further approval of said transaction
shall be required, provided, the surviving entity assumes in writing all
obligations of Guarantor under the Guaranties to Lender.
ARTICLE V
EVENTS OF DEFAULT
-----------------
Section 5.1 Events of Default. The following shall constitute defaults
hereunder and upon the giving of notice and the passage of time, if any provided
in Section 5.2, shall, unless a right to cure exists under this Agreement or the
applicable Loan Document and such default is cured as provided herein or
therein, constitute "EVENTS OF DEFAULT" hereunder:
(a) if any default shall occur and continue beyond any notice (if
notice is required) and cure period (if a cure period is provided) under the
Mortgage or any other Loan Document including, without limitation the Soft Cost
Loan Agreement, or if a Significant Party shall be in default beyond applicable
notice and cure periods under or attempt to terminate any Loan Document, and
such default continues beyond any such notice and cure period;
(b) if Borrower shall fail to pay when due any installment of
interest or principal or the Agency Fee or any other sums payable, or if
Borrower shall fail to reimburse any Lender, when required, any sums due under
this Agreement, the Notes, the Mortgage or any other Loan Document, or if
Borrower shall fail to comply with any monetary covenant made by it in any Loan
Document;
(c) if a Significant Party shall fail to comply with any of the
nonmonetary covenants made by it in this Agreement (including, without
limitation, any violation of the negative covenants set forth in Section 4.2(b)
or 4.2(m) or the covenant to execute new Notes as provided in Section 7.14(b)),
the Notes, the Mortgage or in any other Loan Document, or if at any time any
representation or warranty made by a Significant Party to Agent or any Lender in
this Agreement or in any other Loan Document or in any certificate delivered in
connection
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herewith shall be false or misleading to an extent deemed by Agent, in its
reasonable judgment, to be material;
(d) if a judgment is entered against the Borrower, or if there is a
levy upon any ownership interest in the Borrower, which in the reasonable
judgment of Agent would materially and adversely affect the ability of such
party to perform any of its respective obligations under any Loan Document, or,
subject to the provisions of Section 1.06(c) of the Mortgage, a lien for the
performance of work, the supply of materials or otherwise, be filed against the
Premises and such judgment or lien remains unsatisfied or unbonded for a period
of thirty (30) days after notice of filing thereof, provided that within said
thirty (30) day period the Premises are not the subject of any writ, levy,
execution or sequestration; provided, however, the Borrower may timely appeal
same provided said appeal is in good faith, is diligently pursued, said appeal
is permitted by law, said appeal has the effect of staying any type of action on
such judgment or lien, the Borrower posts any security required by law which
security shall be reasonably satisfactory to Agent, and said appeal does not
subject Agent or the Premises to any civil or criminal penalties;
(e) if a Significant Party shall (i) suspend or discontinue its
business, or (ii) make an assignment for the benefit of creditors, or (iii)
admit in writing its inability to pay its debts as they become due, or (iv) file
a voluntary petition in bankruptcy, or (v) become insolvent (as defined in the
Bankruptcy Code), or (vi) file any petition or answer seeking for itself any
reorganization, arrangement, composition, readjustment of debt, liquidation or
dissolution or similar relief under any present or future statute, law or
regulation of any jurisdiction, or (vii) petition or apply to any tribunal for
any receiver, custodian or any trustee for any substantial part of its property,
or (viii) be the subject of any such proceeding commenced against it which
remains undismissed for a period of sixty (60) days, or (ix) file any answer
admitting or not contesting the material allegations of any such petition filed
against it, or of any order, judgment or decree approving such petition in any
such proceeding, or (x) seek, approve, consent to, or acquiesce in any such
proceeding, or in the appointment of any trustee, receiver, custodian,
liquidator, or fiscal agent for it, or any substantial part of its property, or
an order is entered appointing any such trustee, receiver, custodian, liquidator
or fiscal agent and such order remains in effect for sixty (60) days;
(f) if an order for relief is entered under the Bankruptcy Code or
any other decree or order is entered by a court of competent jurisdiction (i)
adjudicating a Significant Party bankrupt or insolvent, or (ii) approving as
properly filed a petition seeking reorganization, arrangement, adjustment or
composition of or in respect of a Significant Party, or (iii) appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator (or other
similar official) of a Significant Party or of any substantial part of the
property of any thereof (other than a decedent's estate), or (iv) ordering the
winding up or liquidation of the affairs of a Significant Party and any such
decree or order continues unstayed and in effect for a period of sixty (60)
days;
(g) if the Premises, or any interest therein, be sold or in any
manner encumbered or conveyed without the prior written consent of Agent, except
as expressly permitted hereunder (or if any interest in Borrower be sold,
assigned, pledged or encumbered except as permitted by Section 4.2(b) and
Section 4.2(m), including in connection with the Mezzanine Financing or the Banc
One Financing);
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(h) if the Premises or any part thereof shall be condemned or
damaged by fire or other casualty unless the requirements set forth in the
Mortgage for restoration of the Premises are promptly commenced and satisfied;
(i) if Borrower shall enter into any lease of the Premises which
does not qualify as an Approved Lease under this Agreement or if Borrower shall
be in default under ten percent (10%) or more of the Approved Leases;
(j) if, except as otherwise permitted hereunder in each case,
Borrower shall materially amend, modify or vary any Approved Lease, or if
Borrower shall consent to or acquiesce in the surrender of any Approved Lease,
or if more than ten percent (10%) of Approved Leases shall be terminated unless
a lessee is in default thereunder after the expiration of any notice or grace
periods;
(k) if any material provision of this Agreement or any of the Loan
Documents shall at any time for any reason cease to be valid and binding on any
Significant Party, or shall be declared to be null and void, or the validity or
enforceability thereof shall be contested by any Significant Party, or a
proceeding shall be commenced by any Governmental Authority having jurisdiction
over any Significant Party seeking to establish the invalidity or
unenforceability thereof, or a Significant Party shall deny that it has any or
further liability or obligation under this Agreement or any of the Loan
Documents; provided, however, that if a proceeding shall be commenced by any
Governmental Authority seeking to establish the invalidity or unenforceability
of this Agreement or any other Loan Document, a Significant Party may timely
contest the validity of such proceeding provided said contest is in good faith,
is diligently pursued, said contest is permitted by law, said contest has the
effect of staying any type of action pursuant to such proceeding, the
Significant Party posts any security required by law which security shall be
reasonably satisfactory to Agent, and said contest does not subject Agent, or
any Lender, or the Premises to any civil or criminal penalties;
(l) (i) if at any time any representation or warranty made by any
Significant Party in the Payment Guaranty, the Completion Guaranty, the
Operating Deficit Guaranty, the Environmental Indemnity Agreement or any other
Loan Document or any certificate executed by any Significant Party in connection
with the Loan or any other Loan Document shall be false or misleading to an
extent deemed material as reasonably determined by Agent, or (ii) if any
Guarantor shall fail to comply with any covenant made by it in the Payment
Guaranty, the Completion Guaranty, the Operating Deficit Guaranty, or the
Environmental Indemnity Agreement and such failure is not cured by Guarantor
within the time period provided in the Payment Guaranty, the Completion
Guaranty, the Operating Deficit Guaranty, or the Environmental Indemnity
Agreement, as the case may be, or if a default (except as set forth in (l)(i)
above) by Guarantor shall occur under the Payment Guaranty, the Completion
Guaranty, the Operating Deficit Guaranty, or the Environmental Indemnity
Agreement and shall continue beyond any applicable grace period, or if Guarantor
shall revoke or attempt to revoke, disavow, contest, commence any action or
raise any defense against its obligations under the Payment Guaranty, the
Completion Guaranty, the Operating Deficit Guaranty, or the Environmental
Indemnity Agreement;
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(m) if Borrower executes any conditional bill of sale, chattel
mortgage or other security instrument covering any materials, fixtures or
personal property used in the construction or operation of the Improvements, or
intended to be incorporated therein except as expressly permitted hereunder or
by Agent or required under the Ground Lease;
(n) if the construction of the Improvements is not carried on with
reasonable dispatch or at any time be discontinued for a period of ten (10) or
more consecutive Domestic Business Days for reasons other than Force Majeure or
if the Project does not open as scheduled within thirty (30) days of the
Completion Date;
(o) if the Improvements, in the reasonable judgment of Agent, (i)
are not or cannot be completed lien-free on or before the Completion Date,
subject to Force Majeure, or (ii) are not completed lien-free (it being
understood that Permitted Encumbrances are not prohibited liens hereunder), or
if Completion has not occurred on or before the Completion Date, subject to
Force Majeure;
(p) if Agent or its representatives or Agent's Inspecting Consultant
are not permitted, subject to Approved Leases, at all reasonable times, to enter
upon the Premises and to inspect the Improvements and the construction thereof
and all materials, fixtures and articles used or to be used in the construction
thereof and to examine all Plans, or if Borrower shall fail within seven (7)
days to furnish to Agent or its authorized representative, when requested in
writing, copies of such Plans;
(q) if the temporary certificate of occupancy or the permanent
Certificate of Occupancy, as applicable, covering the Project shall be revoked
or expire;
(r) if Borrower is unable to satisfy any condition of its right to
the receipt of an Advance requested hereunder for a period in excess of thirty
(30) days;
(s) if Agent's Inspecting Consultant certifies that the construction
of the Improvements is not substantially in accordance with the Plans or
substantially in accordance with applicable Requirements;
(t) except as expressly provided in Section 4.2(b) and 4.2(m), if at
any time while the Loan is outstanding, Member (or any successor entity
permitted hereunder or otherwise approved by Agent) shall own and control less
than one hundred percent (100%) of Borrower or shall cease to be the sole member
and manager of Borrower (subject to Developer's special management rights
pursuant to the Membership Agreement); or
(u) if Borrower shall fail to secure a Certificate of Occupancy for
the full use and occupancy of the entire Premises within two (2) years of the
date of issuance of the temporary certificate of occupancy;
(v) if Borrower shall be in default under the Ground Lease beyond
the applicable notice and cure periods afforded to Borrower thereunder;
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(w) if Borrower shall fail to satisfy the Post-Closing Conditions on
or before the Post-Closing Default Date; or
(x) if Borrower shall fail to cause Guarantor to establish, maintain
and comply with the Cap Agreement and the Interest Rate Protection Facility.
Section 5.2 Grace Periods. The defaults described in Section 5.1 shall
constitute Events of Default hereunder upon the giving of the following notices
and the passage of the following time periods:
(a) with respect to any default under Section 5.1(b) above, five (5)
Domestic Business Days after the occurrence of such default; notwithstanding
anything contained herein to the contrary, neither Agent nor any Lender shall
have any obligation to give written notice of such default;
(b) with respect to any non-monetary default under Sections 5.1(c),
(h), (l)(i) or (q) above, thirty (30) days after the date written notice of such
default is sent to Borrower by Agent, provided that if such default is not
curable within such thirty (30) day period, then Borrower shall have up to
ninety (90) additional days to cure same, provided Borrower promptly commences
and at all times is diligently attempting to cure such default, Agent has
determined in its reasonable discretion that the continued existence of such
default will not adversely affect the collateral for the Loan and that there are
no other defaults hereunder;
(c) with respect to any of the defaults described in Section 5.1(n),
(o), (p), (r) or (s) above, ten (10) days after the date notice of such default
is sent to Borrower by Agent and the same is not cured with such ten (10) day
period; and
(d) with respect to any of the defaults described in Sections
5.1(a), (d), (e), (f), (g), (i), (j), (k), (l)(ii), (m), (t) or (u) above, there
shall be no requirement that Agent or any Lender send notice of default and
there shall be no opportunity to cure, except as may be applicable in Section
5.1(l).
(e) notwithstanding anything contained herein or in any of the Loan
Documents, upon the occurrence of an Event of Default, in the event Agent (i)
declares the entire principal amount under the Notes then outstanding due and
payable in accordance with any of the Loan Documents or (ii) institutes
foreclosure proceedings in accordance with the terms of the Mortgage, Borrower
shall not have the right or opportunity to cure any Event of Default thereafter
without first receiving Lender's consent.
Section 5.3 Rights of Agent and Lenders. Subject to Section 6.3(b) hereof,
(a) upon the occurrence and during the continuation of a default, Agent and
Lenders may, without notice to Borrower, cease funding amounts not yet advanced
hereunder or under the Loan. Upon the occurrence and continuation of an Event of
Default, Agent may, in its sole discretion, at the same or different times, in
addition to any right or remedy available to it under the Mortgage or any other
Loan Document or permitted by law or equity, declare the Obligations and all
sums then owing by Borrower hereunder to be forthwith due and payable, whereupon
all such sums shall become and be immediately due and payable without
presentment, demand, notice and
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protest, notice of dishonor, notice of intent to accelerate, notice of
acceleration or notice of any other kind, except as may be specifically required
under this Agreement or the Note or the Mortgage, and Agent, for the ratable
benefit of the Lenders, shall have the right to enter into possession of the
Premises and perform any and all work and labor necessary to complete the
Improvements and employ watchmen to protect the Premises and the Improvements
and all sums expended by Agent in connection with the construction of the
Improvements shall be deemed to have been paid to Borrower and secured by the
lien of the Mortgage (as shall any other sums advanced by Agent for whatsoever
purpose relative to the Loan or the Improvements). For this purpose, Borrower
hereby constitutes and appoints Agent its true and lawful attorney-in-fact with
full power of substitution to complete the Improvements, and hereby empowers
said attorney or attorneys after the occurrence and during the continuance of an
Event of Default to do the following: to use any funds of Borrower including any
balance which may be held in escrow and any funds which may remain unadvanced
hereunder for the purpose of completing the Improvements; to make such additions
and changes and corrections in the Plans which shall be necessary to complete
the Improvements; to rent the Premises; to employ such contractors,
subcontractors, agents, architects and inspectors as shall be required for said
purposes; to pay, settle or compromise all existing bills and claims which are
or may be Liens against the Premises, or may be necessary or desirable for the
completion of the work or the clearance of title; to execute all applications
and certificates in the name of Borrower which may be required by any
construction contract; and to do any and every act with respect to the
construction of the Improvements which Borrower may do in its own behalf. It is
understood and agreed that this power of attorney shall be deemed to be a power
coupled with an interest and cannot be revoked. Said attorney-in-fact shall also
have power to prosecute and defend all actions or proceedings in connection with
the construction of the Improvements and to take such action and require such
performance as it deems necessary. Borrower hereby assigns and quitclaims to
Agent, for the ratable benefit of the Lenders, all sums not advanced hereunder
and all sums in escrow or any sums deposited with Agent which sums may be used
for any purpose associated with the Loan as Agent may desire.
(b) Agent shall have the right, after the occurrence and
continuation of an Event of Default, at its option, and in addition to any right
or remedy available to it under this Agreement, the Mortgage or any other Loan
Document, to effectuate the transfer in the name of Borrower of all permits,
rights and privileges relative to the construction, operation, zoning and
planning of the Improvements (the "PERMITS") to Agent, for the ratable benefit
of Lenders, to the extent permitted by law. For this purpose, Borrower hereby
constitutes and appoints Agent its true and lawful attorney-in-fact with full
power of substitution to complete the transfer and hereby empowers said attorney
or attorneys after the occurrence and during the continuation of an Event of
Default to execute any and all documents, certificates, applications and forms
for the transfer of the Permits and to pay all expenses necessary for such
transfer. It is understood and agreed that this power of attorney shall be
deemed to be a power coupled with an interest which cannot be revoked. Said
attorney-in-fact shall also have the power to prosecute and defend all actions
or proceedings in connection with the aforesaid transfer and to take such action
and require such performance as is deemed necessary.
(c) Agent shall have the right, after the occurrence and
continuation of an Event of Default, to apply any payments or recoveries it
receives on account of the Obligation to principal, interest, expenses and other
sums due with respect to the Loan in such order as Agent,
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in its sole discretion, may elect, regardless of the manner in which any such
payments or recoveries are allocated or reflected in any foreclosure, judgment,
or deficiency or allocation proceeding relative to foreclosure of the Mortgage.
Section 5.4 Limited Recourse Obligations. Notwithstanding anything to the
contrary contained herein or in any of the other Loan Documents, Borrower's
officers, directors, employees, members, partners, managers, shareholders,
incorporators or agents, but specifically excluding Borrower, Guarantor and
Developer (herein called the "BORROWER'S GROUP"), shall have no personal
liability for the payment of the Notes or for the performance or observance of
the covenants, representations and warranties of Borrower contained herein or in
any of the other Loan Documents, and Agent and the other Lenders agree not to
seek any damages or personal money judgment against any member of the Borrower's
Group for any default under the Notes or under any instrument now or hereafter
securing the Notes, but in such event will look solely to Borrower, Guarantor,
Developer and the security for the indebtedness evidenced by the Notes; provided
that nothing shall preclude Agent or any Lender from exercising its remedies
against Borrower, including, without limitation, obtaining and enforcing a
judgment against Borrower in connection with the foreclosure of the Mortgage or
any security interest created by the Loan Documents or making a claim in
bankruptcy for amounts owed as evidenced by the Loan Documents, and provided
further that nothing contained above shall be deemed (a) to limit or restrict
any other type of action or proceeding against Borrower nor affect the lien of
the Mortgages, (b) to be a release or impairment of the obligations of Borrower
under the Notes, this Mortgage or any other Loan Documents, (c) to limit the
Agent or any Lender from enforcing its rights under the Notes, the Mortgages,
the Building Loan Agreement, the Soft Cost Loan Agreement or any other Loan
Document, (d) to constitute a waiver, release or discharge of any indebtedness
or obligation under the Notes or secured by the Mortgages, the Security
Agreement or the Assignment of Contracts or (e) to affect the personal liability
of the Guarantor under the Completion Guaranty, the Payment Guaranty or the
Operating Deficit Guaranty.
ARTICLE VI
CONDITIONS TO LENDERS'
----------------------
OBLIGATIONS TO MAKE LOAN DISBURSEMENTS
--------------------------------------
Section 6.1 Conditions Precedent to First Disbursement. Neither Agent nor
any Lender shall be obligated to make any Advances or disburse any Loan proceeds
hereunder, including the first disbursement of Loan proceeds, until (a) Borrower
shall have contributed the full amount of the Required Equity and the full
amount of the Required Equity shall have been fully disbursed to fund Project
costs set forth in the Budget and approved by Agent, all as more particularly
set forth in Section 2B.15 hereof, (b) Borrower and Guarantor shall have
established the Interest Rate Protection Facility pursuant to the Forward
Treasury Lock Agreement and (c) all the other conditions of this Agreement,
including without limitation, this Article VI have been satisfied at or before
the Initial Closing.
Section 6.2 Documents To Be Delivered. On the Closing Date and prior to
Agent making the first disbursement of Loan proceeds hereunder, Agent shall have
received this Agreement and it shall also have received the following items, and
unless identified in Section
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2B.7 as a Post-Closing Condition, each of the following items heretofore
received by Agent shall be deemed to have been accepted and approved by Agent:
(a) the executed Soft Cost Loan Agreement;
(b) the executed Building Loan Notes and Soft Cost Notes;
(c) the executed Building Loan Mortgage and Soft Cost Mortgage;
(d) the executed Security Agreement;
(e) the UCC Financing Statements;
(f) the executed Assignment of Contracts;
(g) the executed Payment Guaranty;
(h) the executed Completion Guaranty;
(i) the executed Operating Deficit Guaranty;
(j) the executed Environmental Indemnity Agreement;
(k) a certified copy of the fully executed Ground Lease;
(l) Estoppel and Recognition Agreement executed by the Ground Lessor
and all other parties having an interest in the Land;
(m) certified copies of the fully executed Development Agreement and
the fully executed Management Agreement, each containing a provision that such
agreement is subordinate to the Mortgage, and that such agreement, at Agent's
election, may be terminated or continued upon any foreclosure of the Mortgage or
acquisition of title to the Premises by Agent or Leasehold Entity (as defined in
Section 7.2);
(n) an Appraisal of the Land and the Improvements and a Market
Feasibility Study prepared by Tellatin, Louis & Andreas, Inc., which shall be in
all respects satisfactory to Agent;
(o) the Commitment Fee, Construction Administration Fee, the first
installment of the Agency Fee, Agent's Inspecting Consultant Fees, the expenses
of the other Lenders (subject to the $5,000 cap on the expenses of each such
Lender set forth in Section 4.1(h)), and Agent's Counsel Fees which are then due
and payable;
(p) such advice from Agent's Inspecting Consultant as Agent shall
reasonably require with respect to the construction of the Improvements and
matters incidental thereto;
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(q) a current title commitment from the Title Insurer (in all
respects satisfactory to Agent's Counsel) which shall set forth a description of
the Land, shall have attached thereto copies of all instruments which appear as
exceptions in the commitment, and a paid ALTA Loan (Form 1992) title insurance
policy (the "POLICY") issued by the Title Insurer, covering the Premises, and in
form and substance reasonably acceptable to Agent and Agent's Counsel. The
Policy shall insure KCCI as Agent for itself and the other Lenders described in
this Agreement, as same may be amended from time to time, and their successors
and assigns, that the Building Loan Mortgage, for the full principal amount of
the Building Loan, is a valid first lien, and that the Soft Cost Mortgage, for
the full principal amount of the Soft Cost Loan, is a valid second lien, on
Borrower's leasehold interest in the Land, the Improvements, the Project and all
other real property subject to the granting clause of the Building Loan
Mortgage, free and clear of all defects and encumbrances except such as may be
set forth on EXHIBIT B attached hereto and made a part hereof or as Agent or
Agent's Counsel shall approve in writing (the "PERMITTED ENCUMBRANCES"). The
Policy shall contain: (i) full coverage against mechanic's and materialmen's
liens, including, without limitation, with respect to any work performed or
materials supplied in connection with the construction of the Improvements or
acquisition of the Land prior to the Initial Closing and the recording of the
Mortgage, (ii) other than the Permitted Encumbrances, no encroachments or survey
or other exceptions not theretofore approved by Agent and Agent's Counsel, (iii)
a pending disbursements endorsement obligating the Title Insurer to provide
title continuations and endorsements contemplated by Section 6.3(e) and other
provisions of this Agreement, and (iv) variable rate (additional interest),
comprehensive, and same as survey endorsements and such other endorsements and
affirmative insurance as Agent may require, including, without limitation,
appropriate insurance with regard to restrictions, covenants and other
agreements affecting the Premises or to the effect that the enforcement of same
will not result in a forfeiture or reversion of title or otherwise adversely
affect the Mortgage, as well as affirmative insurance that the proposed
Improvements comply with any such restrictions, covenants or agreements and
further against the forced removal of said Improvements or a comprehensive
endorsement, and with all so-called "Standard Exceptions" deleted;
(r) an original current ALTA/ACSM survey of the Premises, complying
with the requirements set forth in the Commitment Letter;
(s) an original current site plan of the Premises showing the
Improvements to be constructed and the relation of the Improvements by distances
to the perimeter of the Land and the set-back lines;
(t) evidence that all approvals required to be obtained at or prior
to such time under the Ground Lease have been obtained and all deliveries
required under the Ground Lease have been made (including, without limitation,
pursuant to Article 11 and Article 40 thereof);
(u) evidence of compliance with all applicable zoning requirements
and land use planning requirements, including, without limitation, an
Architect's Certificate of Compliance with local governmental zoning and
building ordinances, including, without limitation the Requirements, the Master
Development Plan, the Design Guidelines and the Construction Documents as
defined in the Ground Lease and the opinion of Borrower's counsel as to
compliance with the use provisions of the Zoning Code of the City of New York;
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(v) a list and copies (when obtained by Borrower) of, all approvals,
authorizations or permits required by any Governmental Authority, including land
use, zoning and planning, construction, environmental and operational for the
Premises for the purposes contemplated by the Plans;
(w) a certificate, in form and substance acceptable to Agent, from
Borrower that all approvals, authorizations, certificates, licenses, and permits
referred to in the preceding paragraph are or will be in full force and effect,
have not been and will not be amended or modified and Borrower has not received
any notice that there are any violations of said permits or that any Permits are
in default or have been revoked, suspended or terminated;
(x) all of the Engineer's or Architects' Contracts and the General
Contractor's contract, containing all of the provisions required pursuant to the
Ground Lease, including, without limitation, the provisions set forth in Section
11.05(b) of the Ground Lease and Section 40.2 (a) through (e) of the Ground
Lease), each certified by Borrower to be a true and complete copy thereof,
together with a letter signed by each of the Engineer, the Architect and the
General Contractor in a form substantially acceptable to Agent, which shall
provide (i) that such party shall complete the Project for Agent and the Lenders
at Agent's option and at Agent's request if a Loan default occurs, and otherwise
in accordance with this Agreement and (ii) that the agreement with such party
may be terminated upon foreclosure of the Mortgage or acquisition of the
Property by Agent or a Leasehold Entity;
(y) a list of all known and contemplated contractors,
subcontractors, and materialmen to be used for development of the Project, when
and as available;
(z) a complete set of Plans, certified by Developer on behalf of
Borrower, and evidence satisfactory to Agent of approval by the Ground Lessor,
Borrower's Architect and the General Contractor and all other necessary parties;
(aa) dual-obligee labor and material payment bonds and performance
bonds with respect to the General Contract (in amounts not less than the full
amount of the contract price thereunder unless waived by Agent in writing in its
sole discretion) and naming Borrower and Agent as co-obligees, said bonds to be
issued by companies reasonably acceptable to Agent and in form and amount
reasonably satisfactory to Agent;
(bb) letters from local utility companies or municipal authorities
stating that gas, electric, sewer and water will be available to the Premises
upon Completion of the Improvements in sufficient quantities to serve the
Improvements for their intended purpose;
(cc) soil analysis (including drainage) results, together with the
proposed methodology to develop the Project for its intended use based on soil
condition, certified by a qualified engineer, which has been approved by Agent
prior to the date hereof;
(dd) evidence (including a Phase I, and if warranted a Phase II,
environmental assessment) indicating that the Premises are free from all
Pollutants with respect to which remediation is required or the presence in
concentration of which is in violation of environmental laws, and are free of
all other contamination which, even if not so regulated, is
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known to pose a hazard to the health of any person on or about the Premises, and
that the Premises is not in a "Wetlands" or "Flood Plain" area, and contains no
underground storage tanks or oil or gas wells (it being expressly acknowledged
by Borrower that the Agent reserves the right, at Borrower's expense, to retain
an independent consultant to review any such evidence submitted by Borrower);
(ee) as to Borrower, (i) a copy of the Membership Agreement
certified by the sole member and manager of Borrower to be a true and complete
copy thereof; (ii) the limited liability certificate of Borrower; (iii) evidence
that the formation of Borrower and the filing of its limited liability
certificate comply with all Requirements; (iv) resolutions of the sole member
and manager of the sole member and manager of Borrower in all respects
acceptable to Agent;
(ff) as to Guarantor, (i) a copy of its bylaws, certified by an
officer of Guarantor to be a true and complete copy thereof; (ii) the
certificate of incorporation of Guarantor; (iii) evidence of Guarantor's
authority to execute the Loan Documents to which Guarantor is a party and the
Guaranties authorizing the action required of such Guarantor in all respects
acceptable to Agent and (iv) evidence that the formation of Guarantor and the
filing of its certificate of incorporation comply with all Requirements;
(gg) the Borrower's and Guarantor's Federal Tax I.D. Number;
(hh) as to Developer, (i) a copy of its bylaws, certified by an
officer of Developer to be a true and complete copy thereof; (ii) the
certificate of incorporation of Developer; (iii) evidence of Developer's
qualification to transact business in New York; (iv) evidence of Developer's
authority to execute the Development Agreement and the Management Agreement and
the Assignment of Contracts for the benefit of Lenders; (v) evidence that the
formation of Developer and the filing of its certificate of incorporation comply
with all Requirements;
(ii) an opinion of Borrower's and each Guarantor's counsel to the
effect that (i) upon due authorization and execution by the parties thereto and
upon such recording or filing thereof as may be specified in the opinion, the
Building Loan Notes, the Soft Cost Notes, the Building Loan Mortgage, the Soft
Cost Mortgage, this Agreement, the Soft Cost Loan Agreement, the Assignment of
Contracts, the Security Agreement, the Environmental Indemnity Agreement, the
Payment Guaranty, the Completion Guaranty, the Operating Deficit Guaranty and
the other Loan Documents will be legal, valid and binding instruments,
enforceable against Borrower or Guarantor, as the case may be, as a party
thereto in accordance with their respective terms, except as may be limited by
applicable bankruptcy, insolvency, reorganization or similar laws affecting the
rights of creditors generally; (ii) the amounts to be received by Agent, for the
ratable benefit of the Lenders, as interest constitute lawful interest and are
neither usurious nor illegal; (iii) there is no threatened or pending litigation
that might affect the Loans, the Premises, the Project or for which an adverse
decision is reasonably likely which would materially and adversely affect the
ability of the Guarantor or Borrower to perform their respective obligations
under the Loan Documents; (iv) the Loan and the transactions contemplated by the
Loan Documents do not violate any provision of any law, restriction or document
affecting Borrower, any Guarantor, the Project or the Premises; (v) Borrower is
a validly formed and existing limited liability company under the laws of the
State of Ohio, it is duly qualified to transact business in
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the State of New York, it has the legal capacity to own, develop and operate the
Premises, the Project and the Improvements and to perform its obligations under
the Loan Documents, and that the Loan and the execution of the Loan Documents
has been duly authorized by the sole member of Borrower and that the Loan
Documents have been duly executed and delivered; (vi) Guarantor is a validly
formed and existing corporation under the laws of the State of Delaware, it has
the legal capacity to perform its obligations under the Loan Documents to which
it is a party, and the execution of the Payment Guaranty, the Completion
Guaranty, the Operating Deficit Guaranty, the Environmental Indemnity Agreement
and the other Loan Documents to which Guarantor is a party have been duly
authorized by the board of directors of Guarantor and that the Loan Documents to
which Guarantor is a party have been duly executed and delivered by Guarantor;
(vii) such other matters concerning the Loan, the Loan Documents, Borrower,
Guarantors, the Premises, the Improvements and the Project as Agent or Agent's
Counsel may reasonably require (including an opinion with respect to zoning of
the Premises (only as to compliance of the contemplated use with applicable
Requirements) and the Project), provided, however, the opinion of the Borrower's
and the Guarantor's in-house legal counsel will be acceptable with respect to
the following items: (i) there is no pending, or to its best knowledge,
threatened, litigation that might affect the Loans, the Premises, the Project or
for which an adverse decision is reasonably likely which would materially and
adversely affect the ability of the Guarantor or Borrower to perform their
respective obligations under the Loan Documents; (ii) the Loan Documents shall
have been duly executed by Borrower and the Guarantor, as applicable, and (iii)
the Loans has been duly authorized by Borrower and the Guaranties duly
authorized by the Guarantor.;
(jj) the policies of insurance required by Agent pursuant to the
requirements of the Mortgage, (or certificates, to the extent permitted under
the Mortgage), accompanied by evidence of the payment of the premiums therefor;
(kk) advice from the Title Insurer to the effect that a search of
the public records discloses no conditional sales contracts, chattel mortgages,
leases of personalty, financing statements or title retention agreements filed
and/or recorded against Borrower, except the Mortgage and the financing
statements in favor of Agent, for the ratable benefit of the Lenders, filed in
connection with the Mortgage, the Security Agreement and the Assignment of
Contracts;
(ll) an analysis and verification of the Budget and line item
breakdown and timing to complete the Project prepared at Borrower's sole cost
and expense by independent third party consultants selected by Agent with no
conditions or facts objectionable to Agent;
(mm) the Final Budget, which shall include a cost breakdown and
separate itemization of all Hard Costs and Soft Costs for the Project by line
item, and such backup information or materials as Agent may require;
(nn) the Project development schedule provided by Borrower and
development supervisor setting forth the approximate start and finish dates of
all major stages of the Project (and providing that the development of the
Project has commenced prior to the date hereof ), in such format as Agent and
Borrower may reasonably agree;
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(oo) INTENTIONALLY OMITTED
(pp) current certified financial statements of Guarantor (and
Borrower, if the same have been prepared at the time of the Closing);
(qq) a list of deposits or other advances made by potential
occupants of the Project; and
(rr) all other items required by the Commitment Letter or the
Closing Checklist previously delivered by Agent's Counsel to Borrower.
Section 6.3 Conditions to Funding of Advances. Before the funding of any
Advance, each of the following conditions must be satisfied:
(a) Conditions Precedent. All conditions of Section 6.2 shall have
been and remain satisfied;
(b) Defaults. There shall be no default by Borrower or any
Guarantor, or any event which with the giving of notice (if required hereunder)
and passage of time would constitute a default, under any Loan Document, and all
such documents shall be in full force and effect; notwithstanding the foregoing,
and except for Section 5.1(r) defaults, Agent will not unreasonably refuse to
fund an Advance if the Borrower has otherwise satisfied all requirements for the
Advance, the default in question is non-monetary, and would be completely cured
by or in connection with the funding of the Advance.
(c) Representation and Warranties. The representations and
warranties made in Article III hereof shall be true and correct in all material
respects on and as of the date of the disbursement with the same effect as if
made on such date;
(d) Additional Documents. Agent shall have received and approved:
(i) a Draw Request, (ii) such advice from Agent's Inspecting Consultant (which
advice shall inure to Lenders' benefit only) as Agent shall reasonably require,
and (iii) such additional documents as Agent may reasonably require, including,
but not limited to, all Major Contracts;
(e) Title Endorsements. Agent shall have received, in connection
with each Draw Request, a notice of title continuation and an endorsement to the
title insurance policy theretofore delivered, indicating that, since the
preceding disbursement, there has been no change in the state of title not
theretofore approved by Agent, which endorsement shall have the effect of
increasing the coverage of the policy by an amount equal to the disbursement
then made, together with an update to the comprehensive endorsement;
(f) Loan Documents. Agent shall have reasonably approved all Loan
Documents and other items required to be submitted to it;
(g) Lien Waivers. Executed lien waivers or releases of lien (i) from
all contractors, subcontractors, suppliers and others which have or are
supplying labor, materials, goods or services related to the Project or the
Improvements in the sum of all prior
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disbursements for all of Borrower's preceding Draw Requests, and (ii) with
respect to any items of the type described in the preceding clause (i) in a
pending Draw Request for which Borrower is seeking reimbursement based on its
prior payment of that item, together with such evidence as Agent may require
that no notices of lien or stop notices have been filed and that nothing has
occurred which could, in Agent's sole opinion, jeopardize the superiority of the
lien of the Mortgage over any possible lien. Notwithstanding the foregoing,
monthly lien waivers shall not be required (except upon completion of their
contracts) from any party whose total contract price is less than $25,000;
(h) Loan in Balance. The Building Loan and the Soft Cost Loan shall,
in Agent's sole opinion, be "in balance" as defined in Section 2B.7(A) and Agent
shall be reasonably satisfied that Completion of Construction on or before the
Completion Date can reasonably be achieved;
(i) No Termination of Contracts, Licenses, Permits or Approvals .
None of the documents covered by the Assignment of Contracts or the bonds
relating to the General Contract shall have been terminated, modified or revoked
without Agent's prior written consent other than the Change Orders expressly
permitted hereunder pursuant to Section 4.2(d), and;
(i) Post-Closing Deliveries. On or before the Post-Closing Delivery
Date, the Post-Closing Conditions shall have been satisfied.
Section 6.4 Last Disbursement of Hard Costs. In the case of the last
disbursement of Hard Costs and release of the Retainage, all of the above
conditions shall be met or waived and Agent shall have received and approved:
(a) Certificate of Occupancy. A temporary certificate of use and
occupancy, certificate of completion or its equivalent covering all portions of
the Improvements or other evidence of the approval by any Governmental Authority
of the Improvements to the extent any such approval is a condition of the lawful
use and occupancy of the Improvements, including the approval by the local board
of fire underwriters or its equivalent, and evidence that Borrower has obtained
all permits required by any Requirement to operate the Improvements for their
intended purposes, provided that Borrower shall proceed as expeditiously as
possible to secure the final certificate of occupancy (in any event within two
(2) years of issuance of the temporary certificate of occupancy), or its
equivalent issued by the applicable governmental authority for the Improvements
comprising the Project, and all other reasonable evidence that the City of New
York and/or the Battery Park City Authority has acknowledged the completion of
all work required by it to meet all legal requirements and the requirements
under the Ground Lease, as applicable, including, without limitation, all zoning
and building requirements;
(b) Title Insurer's Advice. Advice from Title Insurer to the effect
that the Improvements have been constructed lien-free and an additional
endorsement to the Title Policy increasing coverage to include the final
Building Loan Advance and insuring such other matters as Agent may reasonably
require including, without limitation, that the Improvements do not encroach on
any easement, right-of-way or land of others and do not violate any Requirements
including, without limitation, those related to set-backs and height
restrictions;
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(c) As-Built Survey. A final "AS BUILT" ALTA/ACSM survey showing the
Improvements located wholly within the perimeter of the Land, and otherwise
complying with the requirements as provided in the Commitment Letter;
(d) Completion Certificates. Completion of Construction shall have
occurred and certificates of completion from Borrower=s Architect and Engineer
(and Agent's Inspecting Consultant) stating that the Improvements have been
completed substantially in accordance with the Plans and all applicable
requirements of the Ground Lease and of Governmental Authorities and that an
authorized representative of the party executing the certificate made such
periodic inspections of the Improvements during the course of construction as it
deemed necessary as the basis of such certification, and any other evidence
reasonably required by Agent that the Improvements have been substantially
completed in accordance with the Plans and in compliance with all requirements
of the Ground Lease and of Governmental Authorities, and that all items of a
"punch list" nature which Agent has identified have been waived in writing or
corrected to Agent's reasonable satisfaction.
(e) Architect=s Certificate/Compliance With Laws. An architect's
certificate (in the form of the sample attached hereto and made a part hereof as
EXHIBIT D) and such other evidence as Agent may require to establish that the
Improvements are free of structural defects and can be legally occupied and that
the use and occupancy of the Improvements as an assisted living/independent
living complex comply in all material respects with all applicable zoning,
subdivision and building codes and other Requirements, including, but not
limited to, compliance with the National Environmental Policy Act, Americans
with Disabilities Act and any other applicable Federal, state, municipal or
local Requirements. Such evidence of zoning compliance shall be in the form of a
letter (which must be in all regards acceptable to Agent) from Borrower's
Architect and/or its zoning counsel.
(f) Final Lien Waivers. Such final lien waivers, certificates and
estoppels as Agent or the Title Company may reasonably require from Borrower=s
Architect and Engineer, the General Contractor, and all subcontractors and
material suppliers which have performed work on the Improvements or provided
labor, materials or supplies in connection therewith certifying receipt of the
final payment of all sums owing to each of such parties from Borrower with
respect to the Improvements and stating that each such party has no claim
against Borrower, the Improvements or any Loan funds arising out of or in
connection with such work, labor, materials or supplies.
(g) Borrower's Affidavit. An affidavit duly executed by Borrower or
by Developer on behalf of Borrower stating that each person providing any
material or performing any work in connection with the construction or
Completion of the Improvements, the General Contractor and all subcontractors
and material suppliers have been paid in full or will be paid in full from the
proceeds of such final Advance, that all withholding taxes have been paid and
that lien waivers have been received from all contractors, subcontractors and
suppliers who have performed work or supplied materials in connection with the
construction of the Improvements for Borrower, the General Contractor and all
subcontractors.
(h) Final As-Built Plans and Specifications. A final set of as-built
site, architectural, structural, mechanical, plumbing, electrical and
landscaping Plans for the
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completed Improvements, marked to show all changes made during the course of
construction, and satisfactory to Agent.
(i) Warranties and Guaranties. Copies of all warranties and
guaranties issued in connection with the Improvements.
(j) Insurance. Borrower shall have delivered to Agent evidence
reasonably satisfactory to Agent that all property damage, business interruption
or rental loss, liability and other insurance coverage for the completed
Improvements, as required under the Loan Documents, are in full force and effect
with all premiums paid.
(k) Reserve Requirement. The undisbursed portion of the Building
Loan and/or the Soft Cost Loan shall include a reserve for interest and other
costs relative to the Property, the Building Loan and the Soft Cost Loan in all
respects acceptable to Agent, and both the Building Loan and the Soft Cost Loan
shall be in balance, as determined by Agent.
ARTICLE VII
THE AGENT
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Section 7.1 Appointment; Powers and Immunities. Subject to Section 7.2
below, each Lender hereby irrevocably appoints and authorizes Agent to act as
its agent hereunder and under the other Loan Documents with such powers as are
specifically delegated to Agent by the terms hereof and thereof, together with
such other powers as are reasonably incidental thereto. Unless expressly limited
by the terms of Section 7.2 below, all provisions of this Agreement or the other
Loan Documents which require the consent or approval of Agent shall be consented
to, or not consented to, and approved by, or not approved by, Agent in its sole
discretion. Agent: (a) shall have no duties or responsibilities except as
expressly set forth in this Agreement and the other Loan Documents, and shall
not by reason of this Agreement or any other Loan Document be a trustee for any
Lender; (b) shall not be responsible to the Lenders for any recitals,
statements, representations or warranties contained in this Agreement or any
other Loan Document, or in any certificate or other document referred to or
provided for in, or received by any Lender under, this Agreement or any other
Loan Document, or for the validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement or any other Loan Document or any other
document referred to or provided for herein or therein or for any failure by
Borrower to perform any of its obligations hereunder or thereunder; (c) shall
not be required to initiate or conduct any litigation or collection proceedings
hereunder or under any other Loan Document except to the extent requested by the
Unanimous Lenders or Requisite Lenders, as provided in Section 7.2 below, and
then only on terms and conditions satisfactory to Agent; (d) may consult with
the other Lenders, but shall have sole authority to approve all Draw Requests
hereunder and make any determinations required by Section 2B.15, (e) upon
Agent's determination that an Event of Default as set forth in Section 5.1 above
has occurred, may (i) declare that such Event of Default exists, (ii) accelerate
the Obligations as provided in Section 5.3 above, and (iii) manage litigation,
including foreclosure proceedings, and (f) shall not be responsible for any
action taken or omitted to be taken by it hereunder or under any other Loan
Document or any other document
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or instrument referred to or provided for herein or therein or in connection
herewith or therewith, except for its own gross negligence or willful
misconduct. In administering the Loan, Agent shall have no greater
responsibility to the Lenders than it would have if Agent were the sole Lender
hereunder and will be deemed to have exercised reasonable care in performing its
duties hereunder if it exercises the level of care substantially equal to that
which Agent accords its own loans. Agent may employ agents and attorneys-in-fact
and shall not be responsible for the negligence or misconduct of any such agents
or attorneys-in-fact selected by it with reasonable care. Except as expressly
provided herein, the provisions of this Article VII are solely for the benefit
of Agent and the Lenders, and Borrower shall not have any rights as a third
party beneficiary of any of the provisions hereof. In performing its functions
and duties under this Agreement and under the other Loan Documents, Agent shall
act solely as agent of the Lenders and does not assume and shall not be deemed
to have assumed any obligation towards or relationship of agency or trust with
or for Borrower. The duties of Agent shall be ministerial and administrative in
nature, and Agent shall not have by reason of this Agreement or any other Loan
Document a fiduciary relationship in respect of any Lender.
Section 7.2 Limitations on Agent. Notwithstanding anything to the contrary
contained in Section 7.1 above:
(a) Unanimous Lender Consent. The consent of the Unanimous Lenders
shall be required for the following actions, waivers and amendments:
(i) an increase in the principal amount of the Loan;
(ii) a reduction of the rate or amount of interest on any of
the Advances or any fees (other than the Agency Fee) or other
amounts payable to the Lenders except as provided hereunder;
(iii) the postponement of the Maturity Date (except with
respect to any extension permitted by the terms of Section 2A.11 of
this Agreement) or a waiver of any of the conditions to the
extension of the Maturity Date under Section 2A.11;
(iv) the assignment of any right or interest in or under this
Agreement or any of the other Loan Documents by Borrower;
(v) the release of any of the Collateral or the release of any
Guarantor or any other obligor under a Loan Document from any of its
obligations thereunder (except upon the complete and indefeasible
payment of the Loan and except upon Agent's determination that the
criteria for reduction of the Guaranty Obligations as set forth in
the Payment Guaranty have been met);
(vi) the amendment of the definition of "REQUISITE LENDERS,"
"SUPERMAJORITY LENDERS" or "UNANIMOUS LENDERS";
(vii) the amendment of any of the provisions of this Article
VII;
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(viii) the waiver or amendment of any of the affirmative
covenants of Borrower set forth in Section 4.1 (a) concerning the
structure of Borrower, Section 4.1 (e) concerning maintenance of the
Premises, Section 4.1 (h) concerning payment of fees, Section 4.1(i)
concerning use of proceeds of the Loan, Section 4.1(j) concerning
completion by the Completion Date, Section 4.1 (n) concerning bonds,
Section 4.1 (r) concerning indemnification, Section 4.1 (s)
concerning security interests, Section 4.1(x) concerning delivery of
Guarantor's financial statements, Section 4.1(bb) concerning
delivery of rent rolls and Leasing Reports as to both the delivery
of such items and compliance with the requirements thereof, Section
4.1(cc) concerning delivery of Facility Summary Reports as to both
the delivery of such items and compliance with the requirements
thereof, Section 4.1(dd) concerning Debt Service Coverage Ratios,
Section 4.1(ee) concerning minimum occupancy levels, Section 4.1(ff)
concerning Guarantor's net worth and Section 4.1(gg) concerning
Guarantor's liquidity;
(ix) the waiver or amendment of any of the negative covenants
of Borrower set forth in Section 4.2 (a) concerning interest in the
Premises, Section 4.2 (b) and Section 4.2(m) concerning ownership,
and Section 4.2 (g) concerning Pollutants;
(x) the waiver of any Event of Default described in Sections
5.1 (a) concerning default beyond the cure period, Section 5.1 (b)
concerning any monetary default, Section 5.1 (d) concerning judgment
against a Significant Party, Section 5.1 (e) concerning bankruptcy
proceedings, Section 5.1 (f) concerning a bankruptcy order, Section
5.1 (g) concerning transfer of the Premises, Section 5.1 (h)
concerning casualty or condemnation of the Premises, Section
5.1(l)(ii) concerning Guarantor's obligation under the Guaranties
and the Environmental Indemnity Agreement and Section 5.1(t)
concerning Member's ownership and control of Borrower;
(xi) the amendment of Section 2B.15 concerning Borrower's
obligation to contribute the Required Equity, the amendment of
Section 2B.15 concerning the requirement that the Mezzanine
Financing shall be subordinate to the Loans, the extension of the
grace periods set forth in Section 5.2, the amendment of Section 5.3
concerning rights of Agent and Lenders, Section 5.4 concerning
limited recourse obligations, Section 7.14 concerning successors and
assigns or Section 8.5 concerning amendments to this Agreement;
(xii) disposition of the Premises with financing by the
Leasehold Entity;
(xiii) the waiver of the covenants of Guarantor set forth in
the Guaranties as to Guarantor's minimum net worth and minimum
liquidity; and
(xiv) any amendment to the Ground Lease.
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(b) Requisite Lender Consent. The consent of the Requisite Lenders
shall be required for the following actions, waivers and amendments:
(i) the waiver of any Event of Default described in Sections
5.1 other than those requiring the consent of the Unanimous Lenders
pursuant to Section 7.2(a)(x) above;
(ii) the waiver of Borrower's obligation to pay the late fees
set forth in Section 2A.3;
(iii) actions taken by Agent under Section 2B.2(b) that
contradict the advice of Agent's Inspecting Consultant or the waiver
or amendment of any of the provisions set forth in Sections 2B.2(a)
concerning the release of Retainage, Section 2B.5 concerning
disbursement of the Development Fee, Section 2B.7 concerning funding
limitations, Section 2B.7(A) concerning loan balancing requirements,
and Section 2B.8 concerning reduction or release of Retainage for
Hard Costs except for the release of Retainage by Agent on a line
item basis as permitted by Section 2B.8;
(iv) an amendment to the Budget (other than a reallocation
pursuant to Section 2B.14) or the granting of consent to a Change
Order required pursuant to Section 4.2(d) to the extent such
amendment or Change Order is material, "material" meaning that (a)
individually or in the aggregate with all previous amendments, such
amendment or Change Order results in an increase or decrease in the
Budget in excess of $500,000 or (b) such amendment or Change Order
would reduce the value of the Project;
(v) the making of Protective Advances (with notice of same
made to the Lenders promptly thereafter) in an aggregate amount in
excess of $250,000; provided, however, that approval from the
Requisite Lenders shall not be required for Agent to fund Protective
Advances (with notice of same made to the Lenders promptly
thereafter), in any amount without limitation in the case of an
emergency (in Agent's reasonable judgment) or for sums expended for
real estate taxes, other governmental charges, insurance premiums
and utility charges;
(vi) the waiver or amendment of any of the affirmative
covenants of Borrower set forth in Section 4.1 (f) concerning
insurance, Section 4.1 (j) concerning construction of the
Improvements (other than the requirement of completion by the
Completion Date, which, as provided in Section 7.2(a)(viii) shall
require the consent of the Unanimous Lenders), Section 4.1 (k)
concerning standard of construction, Section 4.1 (m) concerning the
correction of defects, Section 4.1 (p) concerning the foundation
survey, Section 4.1 (q) concerning the as-built survey, and Section
4.1 (w) concerning the payment of claims;
(vii) the waiver or amendment of any of the negative covenants
of Borrower set forth in Section 4.2 (h) concerning subdivision of
the Land, and Section 4.2 (j) concerning termination of leases;
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(viii) the waiver or amendment of any of the provisions set
forth in Section 6.3 concerning conditions to funding, and Section
6.4 concerning the last disbursement of Hard Costs;
(ix) acquisition of the Premises by foreclosure by an entity
wholly owned and controlled (directly or indirectly) by Agent to
hold title to the Premises following foreclosure or acceptance of a
deed in lieu of foreclosure (the "LEASEHOLD Entity") or by
acceptance of a deed in lieu of foreclosure by the Leasehold Entity;
(x) structure of the entity to serve as the Leasehold Entity;
(xi) plan for management of the Premises by the Leasehold
Entity, including, for example, an operating budget and capital
improvements budget, leasing guidelines, management and leasing
agent criteria, and plan for marketing and disposition of the
Premises;
(xii) disposition of the Premises without financing by the
Leasehold Entity; and
(xiii) determinations as to the declaration of an Event of
Default and the exercise of Lender=s remedies hereunder or under the
other Loan Documents after an Event of Default.
(c) Supermajority Lender Consent. The consent of the Supermajority
Lenders shall be required for the following actions, waivers or amendments:
(i) any admission of any new or substitute member in or
manager of Borrower that requires Agent or Lender consent under
Section 4.2(b) or Section 4.2(m) hereof; or
(ii) any merger or consolidation involving any Guarantor that
requires Agent or Lender consent under Section 4.2(b) or Section
4.2(m) hereof.
(d) Lender Consent. At any time that Agent desires the consent of
the Lenders pursuant to this Section 7.2, Agent shall provide written notice of
the proposed action, waiver or amendment to each Lender together with Agent's
recommendation. Each Lender shall provide written notice to Agent within seven
(7) Domestic Business Days of such Lender's receipt of Agent's notice granting
or denying such Lender's consent to such proposed action, waiver or amendment.
Failure of any Lender to respond to Agent within such time frame shall be deemed
to be a grant of such Lender's consent in favor of the action, waiver or
amendment recommended by Agent in such notice.
Section 7.3 Reliance by Agent. Agent shall be entitled to rely upon any
certification, notice or other communication (including any thereof by
telephone, telecopy, telegram or cable) believed by it to be genuine and correct
and to have been signed or sent by or on behalf of the
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proper person or persons, and upon advice and statements of legal counsel,
independent accountants or other experts selected by Agent. As to any matters
not expressly provided for by this Agreement or any other Loan Document, Agent
shall in all cases be fully protected in acting, or in refraining from acting,
hereunder and thereunder in accordance with instructions signed by the Requisite
Lenders, and such instructions of the Requisite Lenders in any action taken or
failure to act pursuant thereto shall be binding on all of the Lenders.
Section 7.4 Defaults. Agent shall not be deemed to have knowledge of the
occurrence of a default or an Event of Default (other than the nonpayment of
principal of or interest on the Loans) unless Agent has received notice from a
Lender or Borrower specifying such default or Event of Default and stating that
such notice is a "NOTICE OF DEFAULT". In the event that Agent receives such a
notice of the occurrence of a default or an Event of Default, Agent shall give
prompt notice thereof to the Lenders. Agent shall give each Lender prompt notice
of each nonpayment of principal of or interest on the Loans whether or not it
has received any notice of the occurrence of such nonpayment. Agent shall take
such action hereunder with respect to such default or Event of Default as shall
be directed by the Unanimous Lenders or Requisite Lenders as provided in Section
7.2 above, provided that, unless and until Agent shall have received such
directions, Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such default or Event of
Default as it shall deem advisable in the best interests of the Lenders.
Section 7.5 Rights of Agent as a Lender. With respect to Advances made by
it, KCCI in its capacity as a Lender hereunder shall have the same rights and
powers hereunder as any other Lender and may exercise the same as though it were
not acting as Agent, and the term "LENDER" or "LENDERS" shall, unless the
context otherwise indicates, include KCCI in its individual capacity. Agent may
(without having to account therefor to any Lender) accept deposits from, lend
money to and generally engage in any kind of banking, trust or other business
with Borrower (and any of its Affiliates) as if it were not acting as Agent, and
Agent may accept fees and other consideration from Borrower for services in
connection with this Agreement or any other Loan Document or otherwise without
having to account for the same to the Lenders.
Section 7.6 Indemnification. Each Lender severally agrees to indemnify
Agent, to the extent Agent shall not have been reimbursed by Borrower (and if
Lenders indemnify Agent but Borrower later reimburses Agent, then Agent is to
return the earlier paid amount to the Lenders), ratably in accordance with its
Commitment, for any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses (including, without
limitation, counsel fees and disbursements) or disbursements of any kind and
nature whatsoever which may be imposed on, incurred by or asserted against Agent
in any way relating to or arising out of this Agreement or any other Loan
Document or any other documents contemplated by or referred to herein or therein
or the transactions contemplated hereby or thereby (excluding, unless an Event
of Default has occurred and is continuing, the normal administrative costs and
expenses incident to the performance of its agency duties hereunder) or the
enforcement of any of the terms hereof or thereof or any such other documents;
provided, however, that no Lender shall be liable for any of the foregoing to
the extent they arise from the gross negligence or willful misconduct of Agent.
If any indemnity furnished to Agent for any purpose shall, in the opinion of
Agent, be
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insufficient or become impaired, Agent may call for additional indemnity and
cease, or not commence, to do the acts indemnified against until such additional
indemnity is furnished.
Section 7.7 Consequential Damages. AGENT SHALL NOT BE RESPONSIBLE OR
LIABLE TO ANY LENDER, BORROWER OR ANY OTHER PERSON OR ENTITY FOR ANY PUNITIVE,
EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF THIS
AGREEMENT, THE OTHER LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY UNLESS AGENT DELIBERATELY FAILS TO REMIT TO ANY LENDER ITS PRO
RATA SHARE OF LOAN PAYMENTS MADE BY BORROWER OR FAILS TO ADVANCE MONIES ADVANCED
BY A LENDER TO FUND A DRAW REQUEST WHICH COMPLIED WITH ALL OF THE TERMS AND
CONDITIONS OF THIS AGREEMENT.
Section 7.8 Payee of Note Treated as Owner. Agent may deem and treat the
payee of any Note as the owner thereof for all purposes hereof unless and until
a written notice of the assignment or transfer thereof shall have been filed
with Agent and the provisions of Section 7.14 have been satisfied. Any requests,
authority or consent of any person who at the time of making such request or
giving such authority or consent is the holder of any Note shall be conclusive
and binding on any subsequent holder, transferee or assignee of that Note or of
any Note or Notes issued in exchange therefor or replacement thereof.
Section 7.9 Lenders' Knowledge; Nonreliance on Agent and Other Lenders.
Each Lender agrees that it has, independently and without reliance on Agent or
any other Lender, and based on such documents and information as it has deemed
appropriate, made its own credit analysis of Borrower and decision to enter into
this Agreement and that it will, independently and without reliance upon Agent
or any other Lender, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement or any of the other Loan
Documents. Agent shall not be required to keep itself informed as to the
performance or observance by Borrower of this Agreement or any of the other Loan
Documents or any other document referred to or provided for herein or therein or
to inspect the properties or books of Borrower or any other person. Except for
notices, reports and other documents and information expressly required to be
furnished to the Lenders by Agent hereunder or under the other Loan Documents,
Agent shall not have any duty or responsibility to provide any Lender with any
credit or other information concerning the affairs, financial condition or
business of Borrower or any other person (or any of their Affiliates) which may
come into the possession of Agent; provided that, (i) promptly after receipt
from Borrower and/or Guarantor, Agent shall send the Lenders copies of all
financial information furnished by Borrower and/or Guarantor (including, without
limitation, those set forth in Section 4.1(x) (financial statements), Section
4.1(bb) (rent rolls), Section 4.1(cc) (Facility Summary Reports), Section
4.1(ff) (certificates of Guarantor's net worth) and 4.1(gg) (certificates of
Guarantor's Liquid Assets) as well as all material notices furnished by Borrower
and/or Guarantor and (ii) upon the written request of a Lender, provided such
request is reasonable in scope under the circumstances, Agent shall request that
Borrower and/or Guarantor provide any information or documentation that Agent
shall have the right to request from Borrower and/or Guarantor hereunder or
under any of the other Loan Documents and upon the receipt of such information
or documentation shall promptly deliver the same to such Lender and any other
Lenders.
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Section 7.10 Failure to Act. Except for action expressly required of Agent
hereunder or under the other Loan Documents, Agent shall in all cases be fully
justified in failing or refusing to act hereunder and thereunder unless it shall
receive further assurances to its satisfaction by the Lenders of their
indemnification obligations under Section 7.6 against any and all liability and
expense which may be incurred by Agent by reason of taking, continuing to take,
or failing to take any such action.
Section 7.11 Resignation or Removal of Agent. Agent (a) may resign at any
time by giving notice thereof to the Lenders, Guarantor and Borrower, and (b)
may not be removed as Agent unless Lenders (other than Agent and other than any
Lender then in default) holding no less than 75% of the Commitments vote in
favor of such removal, or, in the case of a removal due to a material breach of
or material default in Agent's obligations under this Article VII that shall not
have been cured within thirty (30) days after written notice to Agent, may not
be removed as Agent unless Lenders holding no less than 75% of the Commitments,
excluding the Commitment of Agent, vote in favor of such removal, provided,
however, that in no event may the Agent be removed unless two (2) or more
Lenders vote in favor of such removal. Upon any such resignation or removal, the
Lenders (by majority vote and including KCCI, based upon their respective
outstanding Commitments) shall have the right to appoint a successor Agent,
subject to the rights of Guarantor set forth in 7.14(b) hereof. If no successor
Agent shall have been so appointed by the Lenders within 30 days after the
retiring Agent's notice of resignation, then the retiring Agent may, on behalf
of the Lenders, appoint a successor Agent. Any successor Agent shall be a bank
which is reasonably acceptable to Borrower (and Guarantor, as provided in
Section 7.14(b) hereof) and which has a combined capital and surplus of at least
$500,000,000. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring or
removed Agent, and the retiring or removed Agent shall be discharged from its
duties and obligations hereunder for matters occurring after the successor Agent
takes over. After any retiring Agent's resignation or removal hereunder as
Agent, the provisions of this Article VII shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as Agent hereunder.
Section 7.12 Reliance by Borrower. (a) Notwithstanding anything to the
contrary in this Agreement or in any Assignment and Acceptance Agreement, the
Lenders and Agent hereby agree that throughout the term of the Loan:
(b) Borrower, Developer and Guarantor shall have the right without
the need of any inquiry or investigation to rely on the appointment of Agent as
agent for all of the Lenders for the purposes and with the powers specifically
set forth herein and the continuance of that appointment throughout the term of
the Loan unless Borrower, Developer and Guarantor has received notice pursuant
to Section 7.11 of the resignation of Agent and designation of a replacement
Agent.
(c) The right of Borrower, Developer and Guarantor hereunder to rely
upon and look to Agent shall continue during the term of the Loan and no
dispute, complaint or claim between any Lender and Agent shall impair or negate
such right of Borrower to rely upon and look exclusively to Agent as set forth
in this Article VII; provided, however, that if and at such time as a
replacement Agent or co-Agent has been duly appointed in the place of Agent
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originally named herein (or in the place of any earlier replacement Agent or
co-Agent(s) appointed in accordance with the terms hereof), Borrower shall rely
on such replacement Agent or co-Agent(s) and shall no longer rely on any prior
Agent.
Section 7.13 Apportionment of Payments. All payments of principal and
interest in respect of outstanding Advances, all payments of fees (other than
the Construction Administration Fee and the Agency Fee) and all other payments
in respect of any other Obligations, shall be allocated among such of the
Lenders as are entitled thereto, in proportion to their respective Pro Rata
shares or otherwise as provided herein. Agent shall apply all payments in
respect of any Obligations and all proceeds of Collateral in the following
order: First, to pay principal of and interest on any portion of the Advances
which Agent may have advanced on behalf of any Lender other than KCCI for which
Agent has not then been reimbursed by such Lender or Borrower; Second, to pay
principal of and interest on any Protective Advance for which Agent has not then
been paid by Borrower or reimbursed by the Lenders; Third, to pay Obligations in
respect of any fees, expense reimbursements or indemnities then due to Agent;
Fourth, to pay any outstanding Obligations in respect of any fees, expense
reimbursements or indemnities then due to the Lenders; Fifth, to pay interest
due in respect of Advances; Sixth, to the ratable payment or prepayment of
principal outstanding on Loans in the order of priority determined by Agent;
Seventh, to the ratable payment of all other Obligations; and Eighth, as
Borrower designates.
Section 7.14 Successors and Assigns. (a) Subject to Section 7.14(b) below,
each Lender may at any time sell to one or more persons (each a "PARTICIPANT")
participating interests in its Pro Rata share of the Loan, any of its
Commitments or any other of its interests hereunder relating thereto, all on
such terms as such Lender may deem acceptable. In the event of any such sale of
a participating interest to a Participant, the assigning Lender's obligations
under this Agreement shall remain unchanged, such assigning Lender shall remain
solely responsible to the other parties hereto for the performance of such
obligations, such assigning Lender shall remain the holder of its Note issued
hereunder for all purposes under this Agreement, and Agent and Borrower shall
continue to deal solely and directly with such assigning Lender in connection
with the rights and obligations derived through the assigning Lender under this
Agreement.
(b) Each Lender may at any time assign to one or more banks or financial
institutions (each an "ASSIGNEE") all or any of its rights and obligations under
this Agreement, its Note and the other Loan Documents, and such Assignee shall
assume all such rights and obligations, pursuant to an Assignment and Acceptance
Agreement executed by such Assignee, all on such terms as such Lender and Agent
may deem acceptable, provided that (i) such Lender retains an interest of not
less than $10,000,000 in the Loan, (provided, however, that the amount of the
interest that European American Bank shall be required to retain shall be not
less than $5,000,000 and provided further that the foregoing minimums shall not
apply after an Event of Default hereunder or under any of the other Loan
Documents); (ii) such Lender assigns an interest of not less than $5,000,000
(provided, however, that the foregoing minimum shall not apply after an Event of
Default hereunder or under any of the other Loan Documents); (iii) such Lender
pays to Agent an administrative fee of $2,500.00 for each such assignment, and
(iv) Agent and Guarantor approve the Assignee, which approval shall not be
unreasonably withheld (provided, however that Guarantor shall not have the
foregoing approval rights with respect to such assignee following an Event of
Default hereunder or under any of the other Loan
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Documents). Guarantor shall also have the right to approve any replacement of
KCCI as the Agent hereunder and under the other Loan Documents, which approval
shall not be unreasonably withheld, except that (i) Guarantor shall not have
such approval rights following an Event of Default hereunder or under any of the
other Loan Documents and (ii) upon the resignation of KCCI, Fleet National Bank
shall be first considered as the replacement Agent and Guarantor shall have no
approval rights with respect to the appointment of Fleet National Bank as
replacement Agent. Upon the execution, delivery and acceptance of such
Assignment and Acceptance Agreement in accordance with this Agreement, from and
after the effective date of the assignment effected thereby, (x) the Assignee
thereunder shall be a party hereto and, to the extent of that portion of the
Loan covered by such Assignment and Acceptance Agreement, have the rights and
obligations of a Lender hereunder with a Commitment as set forth therein, and
(y) the assigning Lender shall, to the extent provided in such Assignment and
Acceptance Agreement, relinquish its rights and be released from its obligations
under this Agreement (and, in the case of an Assignment and Acceptance Agreement
covering all or the remaining portion of an assigning Lender's rights and
obligations under this Agreement, such Lender shall cease to be a party hereto).
Such Assignment and Acceptance Agreement shall be deemed to amend this Agreement
to the extent, and only to the extent, necessary to reflect the addition of such
Assignee as a Lender party to this Agreement and the resulting adjustment
arising from the purchase by such Assignee of all or a portion of the rights and
obligations of the assigning Lender under this Agreement, its Note and the other
Loan Documents. On or prior to the effective date of the assignment effected by
such Assignment and Acceptance Agreement, Borrower shall execute and deliver to
Agent in exchange for the assigning Lender's Note or Notes a new Note or Notes
to the order of the Assignee in an amount equal to the Commitment assumed by it
pursuant to such Assignment and Acceptance Agreement and a new Note or Notes to
the order of such assigning Lender in an amount equal to the Commitment retained
by it hereunder. Such new Note or Notes shall be dated as of the Closing Date
and shall otherwise be in the form of the Note or Notes replaced thereby. The
Note or Notes surrendered by the assigning Lender shall be marked "CANCELLED".
Borrower shall assist KCCI in the process of syndicating the Loans and
Commitments to the extent reasonably requested by KCCI.
(c) Borrower authorizes any Lender to disclose to any Participant,
Assignee or other transferee (each a "TRANSFEREE") and any prospective
Transferee any and all financial information in such Lender's possession
concerning Borrower which has been delivered to such Lender by Borrower pursuant
to this Agreement or which has been delivered to such Lender by Borrower in
connection with such Lender's credit evaluation prior to entering into this
Agreement.
(d) Anything in this Section 7.14 to the contrary notwithstanding, any
Lender may assign and pledge all or any portion of the Advances and/or
obligations owing to it to any Federal Reserve Bank or the United States
Treasury as collateral security pursuant to Regulation A of the Board of
Governors of the Federal Reserve System and any Operating Circular issued by
such Federal Reserve Bank, provided that any payment in respect of such assigned
Advances and/or obligations made by Borrower to the assigning and/or pledging
Lender in accordance with the terms of this Agreement shall satisfy Borrower's
obligations hereunder in respect of such assigned Advances and/or obligations to
the extent of such payment. No such assignment shall release the assigning
and/or pledging Lender from its obligations hereunder.
72
<PAGE>
(e) KCCI agrees to furnish to Borrower upon Borrower's written request a
copy of any Assignment and Acceptance Agreement between KCCI and any Assignee
executed pursuant to paragraph (b) above.
(f) This Agreement shall be binding on the parties hereto and their
respective successors and assigns.
ARTICLE VIII
GENERAL PROVISIONS
------------------
Section 8.1 No Waiver; Modifications in Writing. No Advance or
disbursement of Loan proceeds hereunder shall constitute a waiver of any of the
conditions of Agent's or any Lender's obligation to make further Advances or
disbursements. Agent may by written notice to Borrower, at any time and from
time to time, waive in whole or in part and absolutely or conditionally, any
default or Event of Default hereunder subject to the provisions of Section 7.2.
Any such waiver shall be subject to such conditions or limitations as shall be
specified in any such notice. In the case of any such waiver, the rights of
Borrower shall be otherwise unaffected, and any default or Event of Default so
waived shall be deemed to be cured and not continuing to the extent and on the
conditions or limitations set forth in such waiver, but no such waiver shall
extend to any subsequent or other default or Event of Default, or impair any
right, remedy or power consequent thereupon.
Section 8.2 Agent's Approval. All proceedings taken in connection with the
Loan and all Draw Requests, documents, agreements or contracts required or
contemplated by this Agreement or any other Loan Document shall be reasonably
satisfactory to Agent, and all parties thereto shall have received copies (or
certified copies where appropriate in such counsel's judgment) of all documents
which they may reasonably request in connection therewith.
Section 8.3 Standing. All conditions to the obligations of Agent and the
Lenders to make Advances and disbursements hereunder are imposed solely and
exclusively for the benefit of Agent, the Lenders and their assigns, and no
other person shall have standing to require satisfaction of such conditions in
accordance with their terms or be entitled to assume that Agent or Lenders will
refuse to make Advances or disbursements in the absence of strict compliance
with any or all thereof, and no other person shall, under any circumstances, be
deemed to be the beneficiary of such conditions, any or all of which may be
freely waived in whole or in part by Agent at any time if in its sole discretion
it deems it advisable to do so (subject to the provisions of Section 7.2
hereof), it being further understood that Agent and Lenders shall have no
obligation to see to it that the Improvements are properly and/or timely
completed or to supervise the construction of the Improvements or to supervise,
direct or review the distribution or disbursements of Loan proceeds. Neither
Agent nor any Lender, by making the Loan or by any other action taken pursuant
to the Loan Documents, shall be deemed to be a partner or joint venturer with
Borrower.
Section 8.4 Notices. All notices, demands, instructions and other
communications required or permitted to be given to or made upon either party
hereto or any other person shall be
73
<PAGE>
in writing and shall be personally delivered or sent by registered or certified
mail, postage prepaid, return receipt requested, or by prepaid courier, and
shall be deemed to be given for purpose of this Agreement in regard to
registered or certified mail, three (3) days after mailing, and in regard to
personal delivery or prepaid courier, on the day that such writing is delivered.
Unless otherwise specified in a notice sent or delivered in accordance with the
foregoing provisions of this Section, notices, demands, instructions and other
communications in writing shall be given to or made upon the following persons
at their respective addresses indicated below:
If to Borrower:
AH Battery Park Owner, LLC
c/o Alliance Holdings, Inc.
723 Electronic Drive, Suite 300
Horsham, PA 19044
Attention: David B. Fenkell
Telecopy: (215) 706-0877
with a copy to Developer:
Brookdale Living Communities of New York - BPC, Inc.
c/o Brookdale Living Communities, Inc.
77 West Wacker Drive, Suite 4400
Chicago, Illinois 60601
Attention: Darryl W. Copeland, Jr.
Telecopy: (312) 977-3699
and with a courtesy copy to:
Brookdale Living Communities, Inc.
77 West Wacker Drive, Suite 4400
Chicago, Illinois 60601
Attention: Robert J. Rudnik
Telecopy: (312) 977-3769
Squire, Sanders & Dempsey, LLP
1300 Huntington Center
41 South High Street
Columbus, Ohio 43215
Attention: David Cooper, Esq.
Telecopy: (614) 365-2499
74
<PAGE>
If to Agent:
Key Corporate Capital Inc.
127 Public Square
Cleveland, Ohio 44114-1306
Attention: Ms. Nancy A. Herman
Vice President
Telecopy: (216) 689-4997
with a courtesy copy to:
Jones, Day, Reavis & Pogue
901 Lakeside Avenue
Cleveland, Ohio 44114
Attention: Bernadette M. Mast, Esq.
Telecopy: (216) 579-0212
If to a Lender, to such Lender at its address or telecopier number set forth on
the signature page hereof or in the Assignment and Acceptance Agreement pursuant
to which it became a party hereto. Notices may alternatively be sent to such
other address as any of the parties may from time to time designate by written
notice given as herein required. Rejection or refusal to accept or inability to
deliver because of changed addresses or because no notice of changed address was
given shall be deemed a receipt of such notice. The effectiveness of such notice
will not be affected by the giving or lack thereof of courtesy copies of such
notice.
If any day on which any notice, demand, instruction or other communication
is given or sent by any party hereto is not a Domestic Business Day, such
notice, demand, instruction or other communication shall be deemed to have been
given or sent on the Domestic Business Day next succeeding such non-Domestic
Business Day.
Section 8.5 Amendments. Neither this Agreement nor any provision hereof
may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought, and in the case of the
Lenders, which is approved as provided in Section 7.2 hereof.
Section 8.6 Assignment. Borrower shall not assign or transfer any of its
rights hereunder without the prior written consent of Agent.
Section 8.7 Governing Law. This Agreement shall be governed by the laws of
the State of New York without regard to principles of conflict of laws.
Section 8.8 Severability of Provisions. Any provision of this Agreement
which is prohibited or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without affecting the validity or enforceability
of the rest of such provision.
Section 8.9 Headings. Article, Section and other headings used in this
Agreement are for convenience of reference only and shall not affect the
construction of this Agreement.
75
<PAGE>
Section 8.10 Waiver of Trial by Jury. AGENT, LENDERS AND BORROWER SHALL
AND DO HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
BROUGHT BY ANY OF THE PARTIES HERETO AGAINST ANY OTHER PARTY ON ANY MATTERS
WHATSOEVER ARISING OUT OF OR IN ANY WAY IN CONNECTION WITH THE LOAN, THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT.
Section 8.11 Submission to Jurisdiction; Service of Process
(a) The Borrower irrevocably submits to the non-exclusive
jurisdiction of the courts of the State of New York, the courts of the United
States for the Southern District of the State of New York, and appellate courts
from any thereof, over any suit, action or proceeding arising out of or relating
to this Note. The Borrower hereby irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of the venue of any such suit, action or proceeding brought in any such court
and any claim that any such suit, action or proceeding brought in such a court
has been brought in an inconvenient forum. Without limiting Borrower's right to
appeal any such final judgment in accordance with applicable Requirements,
Borrower agrees that a final judgment in any such suit, action or proceeding
brought in such a court shall be conclusive and binding upon Borrower.
(b) The Borrower hereby irrevocably appoints CT Corporation System
as its authorized agent to accept and acknowledge, on behalf of Borrower,
service of any and all process which may be served in any suit, action or
proceeding of the nature referred to above in any such court. The Borrower
represents and warrants that such agent has agreed in writing to accept such
appointment and that Borrower has delivered to the Agent a true copy of such
designation and acceptance. Said designation and appointment shall be
irrevocable. If such agent shall cease so to act, Borrower covenants and agrees
that it shall irrevocably designate and appoint without delay another such agent
satisfactory to the Agent and shall promptly deliver to the Agent evidence in
writing of such other agent's acceptance of such appointment.
(c) Process may be served in any suit, action or proceeding of the
nature referred to above (i) by the mailing of copies thereof by registered or
certified air mail, postage prepaid return receipt requested, to Borrower at its
address set forth above or to such other address of which Borrower shall have
given written notice to the Agent, or (ii) without affecting the efficacy of any
service made pursuant to clause (i) above, if Borrower shall not have filed an
appearance within twenty-one days after the date of such mailing, by serving a
copy thereof upon CT Corporation System, at its office at 1633 Broadway, New
York, New York 10014, as Borrower's agent for service of process. The Borrower
agrees that such service shall be deemed in every respect effective service of
process upon Borrower in any such suit, action or proceedings and shall, to the
fullest extent permitted by law, be taken and held to be valid personal service
upon and personal delivery to Borrower. Nothing in this Section shall affect the
right of the Agent to serve process in any manner permitted by law or limit the
right of the Agent to bring proceedings against Borrower in the courts of any
other jurisdiction or jurisdictions.
Section 8.12 Lender's Remedies Cumulative. Each and every right, remedy
and power hereby granted to Agent or any Lender or allowed it by law or other
agreement shall be cumulative and not exclusive and may be exercised by Agent or
such Lender from time to time.
76
<PAGE>
Section 8.13 Counterparts. This Agreement may be executed by the parties
hereto separately in any number of counterparts, each of which shall be an
original and all of which collectively shall constitute one and the same
agreement.
Section 8.14 Trust Fund. Borrower agrees that it will receive the Advances
secured by the Mortgage and will hold the right to receive such Advances as a
trust fund to be applied first for the purpose of paying the cost of improvement
(as defined in New York Lien Law), if any, and will apply the same first to the
payment of such costs before using any part of the total of the same for any
other purpose and will comply with Section 13 of the New York Lien Law. Borrower
will indemnify and hold Lender harmless against any loss or liability,
reasonable cost or expense, including, without limitation, any judgments,
reasonable attorneys' fees, costs of appeal, bonds and printing costs, arising
out of or relating to any proceeding instituted by any claimant alleging a
violation by Borrower or Lender of any applicable lien law including, without
limitation, any section of Article 3A of the New York Lien Law. The provision of
this Section shall survive the payment and performance of Borrower's obligations
under this Agreement and the other Loan Documents.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first set forth above.
Borrower: AH BATTERY PARK OWNER, LLC,
an Ohio limited liability company
BY: AH Battery Park Member, LLC, an Ohio
limited liability company, its sole
member and manager
By: Alliance Holdings, Inc., a
Pennsylvania corporation, its sole
member and manager
By: /s/ David B. Fenkell
------------------------------
Name: David B. Fenkell
----------------------
Title: President
-----------------------
The Agent: KEY CORPORATE CAPITAL INC.
By: /s/ Nancy A. Herman
-----------------------------
Nancy A. Herman
Vice President
The Lenders: KEY CORPORATE CAPITAL INC.
By: /s/ Nancy A. Herman
-----------------------------
Nancy A. Herman
Vice President
FLEET NATIONAL BANK
By: /s/ Patricia Marinilli
-----------------------------
Patricia Marinilli
Vice President
EUROPEAN AMERICAN BANK
By: /s/ Sophia Haliotis
-----------------------------
Sophia Haliotis
Group Vice President
<PAGE>
ANNEX I
Lender Pro Rata Share
------ --------------
Key Corporate Capital Inc. 45.03816794%
Fleet National Bank 34.60559796%
European American Bank 20.35623410%
<PAGE>
EXHIBIT A
---------
LEGAL DESCRIPTION
All that certain plot, piece or parcel of land, situate, lying and being in the
Borough of Manhattan, County of New York, City and State of New York, bounded
and described as follows:
BEGINNING at the intersection of the southerly line of Chambers Street and the
westerly line of North End Avenue;
THENCE southerly along the westerly line of North End Avenue, a distance of
196.00 feet to a point on the northerly line of Warren Street;
THENCE westerly along said northerly line of Warren Street, a distance of 100.00
feet to the division line between Parcel 20C on the west and Parcel 20B on the
east;
THENCE northerly along said division line at right angles to the preceding
course, a distance of 196.00 feet to the southerly line of Chambers Street;
THENCE easterly along said southerly line of Chambers Street, a distance of
100.00 feet to the point of BEGINNING.
<PAGE>
EXHIBIT B
---------
Permitted Encumbrances
1. Terms, covenants, conditions and provisions of Declaration of Covenants
and Restrictions made by Battery Park City Authority dated 3/15/84
recorded on 3/21/84 in Reel 776 Page 360.
2. Terms, covenants, conditions and provisions of unrecorded Settlement
Agreement made between the City of New York and New York State Urban
Development Corporation, dated as of 6/6/80 as recited in amendment to
Option to Purchase recorded in Reel 1133 Page 582. Said Agreement was
amended by unrecorded amendments dated 6/9/80, 8/15/86, 6/28/89, 12/30,89,
5/18/90, 10/15/93, 4/10/95 and 10/1/96.
3. Terms, covenants and conditions in connection with Option to Purchase,
dated 6/6/80 granted to the City of New York as set forth in Agreement
between New York State Urban Development Corporation, BPC Development
Corporation, Battery Park City Authority and the City of New York, dated
as of 6/6/80 recorded on 6/11/80 in Reel 527 Page 153, as amended by
Amendment to Option to Purchase between Battery Park City Authority and
the City of New York, dated 8/15/86 recorded 10/22/86 in Reel 1133 Page
582 and further amended by Second Amendment to Option to Purchase between
Battery Park City Authority and the City of New York, dated as of 5/18/90
recorded 5/30/90 in Reel 1697 Page 294.
4. Terms, covenants and conditions of the Declaration of Restrictions dated
6/15/83 made by Battery Park City Authority recorded on 6/20/83 in Reel
696 Page 551.
5. Unrecorded Memo of Understanding dated 11/8/79 among the Governor of the
State of New York, the Mayor of the City of New York and the President and
Chief Executive Officer of the Urban Development Corporation and Battery
Park City Authority as amended by unrecorded amendments recited in
Amendment to Option to Purchase recorded in Reel
1133 Page 582.
6. Unrecorded Westway Agreement dated 12/8/81 between Battery Park City
Authority, Battery Park City Development Corporation and the People of the
State of New York as amended by Unrecorded Amendment dated 9/9/82 and
further amended by the Second Unrecorded Amendment of Westway Agreement
dated 6/83 recited in that certain Easement and Conveyance between Battery
Park City Authority and the People of the State of New York dated 10/29/85
recorded 11/20/85 in Reel 987 Page 949.
7. Distinctive Street Improvement Maintenance Declaration dated 1/13/86
recorded 9/17/90 in Reel 1729 Page 352.
8. Memorandum of Ground Lease by the Battery Park City Authority, as ground
lessor, and AH Battery Park Owner, LLC, as ground lessee, dated as of
August 24, 1999, to be recorded in the Office of the City Register, New
York County
<PAGE>
9. Subordination, Nondisturbance and Attornment Agreement by the Battery City
Authority, as master lessor, and AH Battery Park Owner, LLC, as ground
lessee, dated as of August 24, 1999, to be recorded in the Office of the
City Register, New York County
10. Building Loan Leasehold Mortgage, Security Agreement and Assignment of
Leases and Rents, by AH Battery Park Owner, LLC, as mortgagor, in favor of
Key Corporate Capital Inc., as Agent for the Lenders and Mortgagee, dated
as of August 24, 1999, to be recorded in the Office of the City Register
New York County
11. Soft Cost Leasehold Mortgage, Security Agreement and Assignment of Leases
and Rents, by AH Battery Park Owner, LLC, as mortgagor, in favor of Key
Corporate Capital Inc., as agent for the Lenders and mortgagee, dated as
of August 24, 1999, to be recorded in the Office of the City Register New
York County
12. UCC-1 Financing Statements from AH Battery Park Owner, LLC, as debtor, in
favor of Key Corporate Capital Inc. as Agent for the Lenders and secured
party, dated as of August 24, 1999, to be filed in various jurisdictions
13. Recognition Agreement by the Battery Park City Authority, as ground
lessor, and KCCI and the other Lenders, dated as of August 24, 1999, to be
recorded in the Office of the City Register, New York County
14. Memorandum of Property Option Agreement by AH Battery Park Owner, LLC, as
grantee, and Brookdale Living Communities of New York - BPC, Inc., as
grantor, dated as of August 24, 1999, to be recorded in the Office of the
City Register, New York County, with respect to that certain Property
Option Agreement, which, by its terms, is subordinate to the Mortgages and
the other Loan Documents executed in favor of KCCI and the other Lenders
2
<PAGE>
EXHIBIT C
---------
Affidavit Pursuant to Section 22 of
-----------------------------------
the Lien Law of the State of New York
-------------------------------------
(See Attached)
<PAGE>
EXHIBIT D
Form of Architect's Certificate
-------------------------------
[LETTERHEAD OF ARCHITECT]
Dated:_____________
Key Corporate Capital Inc., as Agent
127 Public Square
Cleveland, Ohio 44114-1306
Attention: Ms. Nancy A. Herman
Vice President
Re: Loans in the aggregate maximum amount of $49,125,000 to AH Battery
Park Owner, LLC (the "BORROWER") for the construction of
improvements (the "PROJECT") located at 445 North End Avenue,
Battery Park City, New York, New York
Ladies and Gentlemen:
The undersigned is the Architect for the above Project pursuant to that
certain architect's agreement, dated __________________, 199_, with Brookdale
Living Communities of New York-BPC, Inc. ("DEVELOPER"), the developer of the
Project on behalf of the Borrower, a true copy of which agreement we deliver to
you herewith (which agreement, together with any and all renewals, extensions
and modifications thereof and all exhibits and addenda thereto is hereinafter
referred to collectively as the "ARCHITECT'S AGREEMENT").
In consideration of lenders ("LENDERS") for whom you are acting as Agent
(the "AGENT") making mortgage loans ("LOANS") to the Borrower to finance the
construction of the Project, we agree with respect to said Project that upon
receipt of written notice from the Agent that the Borrower has defaulted under
any of the loan documents, we shall continue to act as Architects for the
Project, PROVIDED that the Agent and/or the Lenders agrees to pay all sums owed
us as the Architects for work previously performed to the extent that the
Borrower has not received construction Loans designated for payment of such
work, and we as Architects shall be reimbursed in accordance with the provisions
of the Architect's Agreement for services thereafter rendered on the Agent's
behalf, PROVIDED that unless and until Lender requests that we continue
performance under the Architect's Agreement as provided in the preceding clause,
Lender shall not be liable for any of the obligations of Borrower to us under
the Architect's Agreement.
We further acknowledge and consent to the collateral assignment by the
Borrower to the Agent of (i) all its rights under the Architect's Agreement and
(ii) all plans, specifications, drawings, renderings, and models related to the
Project, to secure the Loans made by the Lenders to the Borrower in respect to
the Project and any other obligations which may also be secured thereby.
4
<PAGE>
We advise you that we are not aware of any breach or default under the
Architect's Agreement.
We agree that whether or not the Borrower elects to continue the
employment of us as Architects after the date hereof, the Agent shall hereafter
succeed to, and have all of the rights of the Borrower in, said plans,
specifications, drawings, renderings, and models (collectively, the "PLANS"),
and, without limiting the generality of the foregoing, may use such materials to
complete the Project.
We hereby agree that we will not, without Lender=s prior written approval,
agree to any alteration, modification, amendment to or release or discharge (in
whole or in part) of the Architect's Agreement or the Plans, or waive or claim
any waiver in respect of any provisions thereof, or perform any work pursuant to
any "material" change order. A change order shall be deemed "material" if (a) it
affects the value or use of the Project, or (b) it increases or decreases the
costs of construction of the Project by more than $100,000 or (c) when added to
other change orders not requiring the approval of Lender under clause (b) above,
it increases or decreases the costs of construction of the Project by more than
$1,000,000.
The rights of the Agent hereunder shall extend to its successors and
assigns (including any purchaser upon foreclosure of the mortgage securing the
Borrower's Loans, any receiver in possession of the Project, and any corporation
formed by or on behalf of any such person), and this letter also inures to the
benefit of any guarantor of the Loans that undertakes, at the Agent's request,
to complete the Project and perform the Borrower's obligations to the Agent and
the Lenders in respect thereof.
It shall not be necessary for you to acknowledge your agreement to the
foregoing, as this letter is intended to constitute, upon delivery of a signed
copy hereof, a binding obligation of the undersigned without the necessity of
any such acknowledgment by you.
The obligations of the undersigned hereunder may not be terminated without
the prior written consent of the Agent. This letter shall bind the successors
and assigns of the undersigned.
Very truly yours,
[NAME OF ARCHITECT]
By: ______________________________
Name:
Title:
5
<PAGE>
EXHIBIT E
---------
Developer's Certificate
-----------------------
Brookdale Living Communities of New York-BPC, Inc., a Delaware corporation
("Developer"), hereby represents and warrants to AH Battery Park Owner, LLC, an
Ohio limited liability company ("Borrower"), and Key Corporate Capital Inc.,
Fleet National Bank and European American Bank (collectively, "Lender") that
each of the representations and warranties contained in that certain Building
Loan Agreement and that certain Soft Cost Loan Agreement (collectively, the
"Loan Agreement") dated as of the date hereof by and between Borrower and Lender
and each of the Loan Documents (as defined in the Loan Agreement) which relate
to the Premises (as defined in the Loan Agreement) (specifically excluding any
representations or warranties relating to Borrower or its member and/or
affiliates) is true, correct and complete in all material respects.
Notwithstanding the foregoing, if any of the aforementioned representations
and/or warranties contained in the Loan Agreement and/or the Loan Documents are
limited to the knowledge or best knowledge of Borrower, then such
representations and/or warranties shall be limited to the knowledge or best
knowledge, respectively, of Developer. Developer's obligations hereunder shall
terminate (unless Developer or its affiliates have exercised its rights to
acquire the Property or an interest in Borrower or its member) upon the earlier
to occur of the (a) date upon which the Management Agreement (as defined in the
Loan Agreement and the Development Agreement (as defined in the Loan Agreement)
are terminated and (b) the date upon which the indebtedness evidenced by the
Note (as defined in the Loan Agreement) is repaid; provided, however, any
liability arising prior to such date shall not terminate. Notwithstanding
anything to the contrary contained herein, in no event shall any officer,
director, employee, member, manager, shareholder, incorporator or agent of
Developer or Developer's affiliates be personally liable for any of Developer's
obligations hereunder.
Dated: August ,1999
DEVELOPER:
BROOKDALE LIVING COMMUNITIES OF NEW YORK-BPC,INC.,
a Delaware corporation
By:
-----------------------------------------
Name:
-----------------------------------------
Its:
-----------------------------------------
<PAGE>
EXHIBIT F
---------
Occupancy Schedule/Pro Forma Rental
-----------------------------------
Minimum Occupancy Levels
- ------------------------
Quarter 2 following Substantial Completion: 43.75%
Quarter 3 following Substantial Completion: 55.13%
Quarter 4 following Substantial Completion: 65.63%
Quarter 5 following Substantial Completion: 76.13%
Quarter 6 following Substantial Completion: 83.13%
Quarters 7-10 following Substantial Completion: 83.13%
Pro Forma Rentals
- -----------------
MONTHLY FEE ANNUAL FEE TOTAL
UNIT MIX IL. # OF UNITS (PER UNIT) (PER UNIT) ANNUAL FEE
- -------- --- ---------- ----------- ---------- ----------
Studio IL 24 $3,750 $45,000 $ 1,080,000
One Bedroom IL 126 $4,550 $54,600 $ 6,879,600
Two Bedroom IL 48 $5,150 $61,800 $ 2,966,400
Studio AL 19 $4,250 $51,000 $ 969,000
One Bedroom AL 1 $5,050 $60,600 $ 60,600
218 $4,570 $54,842 $11,955,600
EXECUTION COPY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SOFT COST LOAN AGREEMENT
Dated as of August 24, 1999
among
AH BATTERY PARK OWNER, LLC
as the Borrower,
THE FINANCIAL INSTITUTIONS NAMED HEREIN
as the Lenders
and
KEY CORPORATE CAPITAL, INC.
as the Agent
AMOUNT OF SOFT COST LOAN:
TWELVE MILLION SIX HUNDRED SIXTY EIGHT THOUSAND FIVE HUNDRED
NINETY SIX AND 00/100 DOLLARS
($12,668,596.00)
LOCATION OF PROPERTY:
455 North End Avenue
North Residential Neighborhood
Battery Park City
New York, New York
SECTION:1
BLOCK:16
LOT:p/o3, Site 20B
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
ARTICLE PAGE
- ------- ----
ARTICLE I
PARTICULAR TERMS; DEFINITIONS............................................3
Section 1.1 Definitions...............................................3
Section 1.2 Singular and Plural......................................16
ARTICLE II(A)
LOAN FACILITY...........................................................16
Section 2A.1 Loans....................................................16
Section 2A.2 Notes....................................................17
Section 2A.3 Interest Rate............................................17
Section 2A.4 Payment of Interest......................................18
Section 2A.5 Payment of Principal.....................................18
Section 2A.6 Prepayment...............................................18
Section 2A.7 Procedure for Payment....................................18
Section 2A.8 Indemnification..........................................19
Section 2A.9 Reimbursement............................................19
Section 2A.10 Changes..................................................20
Section 2A.11 Extension Periods........................................21
Section 2A.12 Lenders' Rights..........................................22
Section 2A.13 Acceleration of Maturity.................................22
Section 2A.14 Costs of Collection......................................23
Section 2A.15 Late Charges.............................................23
ARTICLE II(B)
LOAN DISBURSEMENTS/REQUIRED EQUITY......................................23
Section 2B.1 Procedure for Loan Borrowing and Interest Rate Election..23
Section 2B.2 Intentionally Omitted....................................24
Section 2B.3 Intentionally Omitted....................................24
Section 2B.4 Soft Cost Disbursements..................................24
Section 2B.5 Disbursement of Development Fee..........................25
Section 2B.6 Advances for Operating Expenses..........................25
Section 2B.7 Funding Limitations......................................26
Section 2B.7(A)Loan Balancing...........................................26
Section 2B.8 Intentionally Omitted....................................27
Section 2B.9 Place of Disbursement....................................27
Section 2B.10 Intentionally Omitted....................................27
Section 2B.11 Expenses and Disbursements Secured by Loan Documents.....27
i
<PAGE>
TABLE OF CONTENTS
-----------------
ARTICLE PAGE
- ------- ----
Section 2B.12 Other Limitations and Requirements.......................28
Section 2B.13 Contract Verification....................................28
Section 2B.14 Budget Reallocations.....................................28
Section 2B.15 Required Equity..........................................29
Section 2B.16 Pro Rata; Commitments....................................30
Section 2B.17 Sharing of Setoffs.......................................30
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BORROWER..............................31
Section 3.1 Representations and Warranties of Borrower...............31
ARTICLE IV
COVENANTS OF BORROWER...................................................36
Section 4.1 Affirmative Covenants of Borrower........................36
Section 4.2 Negative Covenants of Borrower...........................44
ARTICLE V
EVENTS OF DEFAULT.......................................................47
Section 5.1 Events of Default........................................47
Section 5.2 Grace Periods............................................51
Section 5.3 Rights of Agent and Lenders..............................51
Section 5.4 Limited Recourse Obligations.............................53
ARTICLE VI
CONDITIONS TO LENDERS'
OBLIGATIONS TO MAKE LOAN DISBURSEMENTS..................................53
Section 6.1 Conditions Precedent to First Disbursement...............53
Section 6.2 Documents To Be Delivered................................53
Section 6.3 Conditions to Funding of Advances........................59
Section 6.4 Last Disbursement of Hard Costs..........................60
ARTICLE VII
THE AGENT...............................................................62
Section 7.1 Appointment; Powers and Immunities.......................62
Section 7.2 Limitations on Agent.....................................63
Section 7.3 Reliance by Agent........................................66
<PAGE>
TABLE OF CONTENTS
-----------------
ARTICLE PAGE
- ------- ----
Section 7.4 Defaults.................................................67
Section 7.5 Rights of Agent as a Lender..............................67
Section 7.6 Indemnification..........................................67
Section 7.7 Consequential Damages....................................68
Section 7.8 Payee of Note Treated as Owner...........................68
Section 7.9 Lenders' Knowledge; Nonreliance on Agent and Other
Lenders..................................................68
Section 7.10 Failure to Act...........................................69
Section 7.11 Resignation or Removal of Agent..........................69
Section 7.12 Reliance by Borrower.....................................69
Section 7.13 Apportionment of Payments................................70
Section 7.14 Successors and Assigns...................................70
ARTICLE VIII
GENERAL PROVISIONS......................................................72
Section 8.1 No Waiver; Modifications in Writing......................72
Section 8.2 Agent's Approval.........................................72
Section 8.3 Standing.................................................72
Section 8.4 Notices..................................................72
Section 8.5 Amendments...............................................74
Section 8.6 Assignment...............................................74
Section 8.7 Governing Law............................................74
Section 8.8 Severability of Provisions...............................74
Section 8.9 Headings.................................................74
Section 8.10 Waiver of Trial by Jury..................................75
Section 8.11 Submission to Jurisdiction; Service of Process...........75
Section 8.12 Lender's Remedies Cumulative.............................75
Section 8.13 Counterparts.............................................76
Section 8.14 Trust Fund...............................................76
iii
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ANNEX
-----
Annex I - List of the Lenders
EXHIBITS
--------
Exhibit A - Legal Description
Exhibit B - Permitted Encumbrances
Exhibit C - Operating Expense Certificate
Exhibit D - Architect's Certificate
Exhibit E - Developer's Certificate
Exhibit F - Occupancy Schedule/Pro Forma Rentals
iv
<PAGE>
THIS SOFT COST LOAN AGREEMENT (this "AGREEMENT") dated as of this 24th day
of August, 1999, by and among AH BATTERY PARK OWNER, LLC, an Ohio limited
liability company, with an office at c/o Alliance Holdings, Inc., 723 Electronic
Drive, Suite 300, Horsham, Pennsylvania 19044 (the "BORROWER"), Key Corporate
Capital Inc., a Michigan corporation having an administrative office at 127
Public Square, Cleveland, Ohio 44114-1306 ("KCCI "), as agent (in such capacity,
the "AGENT"), and the financial institutions listed in Annex I hereto, including
KCCI, and each other financial institution which has been or may be assigned an
interest herein pursuant to Section 7.14, as evidenced by an Assignment and
Acceptance Agreement (each, a "LENDER" and, collectively, the "LENDERS").
W I T N E S S E T H:
WHEREAS, Borrower is the actual, beneficial and record ground lessee of a
certain tract of land consisting of approximately .449 acres located in the
Borough of Manhattan, City and State of New York, which is more particularly
described in EXHIBIT A attached hereto and made a part hereof (the "LAND");
WHEREAS, On or about June 30, 1999, Borrower executed the commitment
letter (the "Commitment Letter") of the Lenders to make loans to finance various
construction and non- construction costs relative to Borrower's development of a
218 unit independent living/assisted living complex to be known as The Hallmark
at Battery Park City containing a floor area of approximately 219,615 square
feet of "floor area" (as such term is defined in the Zoning Resolution of the
City of New York) to be built on the Land in accordance with this Agreement, and
in compliance with the Plans and all Requirements, as further described herein
under the definition of "IMPROVEMENTS", subject to all the conditions and
requirements of said Commitment Letter, all of which are incorporated by
reference herein, provided, however, in the event of a conflict between the
terms of the Commitment Letter and the terms of this Agreement or any of the
other Loan Documents, the terms of this Agreement and/or the Loan Documents
shall control in all cases.
WHEREAS, Pursuant to the Commitment Letter, the financing will consist of
two components; (i) the Soft Cost Loan (hereinafter defined) in the amount of
$12,668,596.00, which will be advanced ratably by the Lenders from time to time
in accordance with the terms of this Agreement, and (ii) the Building Loan
(hereinafter defined) in the amount of $36,456,404.00, which will be advanced
ratably by the Lenders to Borrower, upon and subject to the terms and conditions
set forth in that certain Building Loan Agreement of even date herewith between
Lender to Borrower (the "BUILDING LOAN AGREEMENT").
WHEREAS, The Soft Cost Loan will be advanced to Borrower for and on
account of Soft Costs (as defined below) and the Building Loan will be advanced
to Borrower on account of Hard Costs (as defined below).
WHEREAS, This Agreement provides for the funding of Advances (hereinafter
defined) of the Soft Cost Loan for Soft Costs and for the repayment of the Soft
Cost Loan, all upon and subject to the terms and conditions set forth herein.
<PAGE>
WHEREAS, The Soft Cost Loan is evidenced by one or more promissory notes,
of even date herewith, in the aggregate original principal amount of
$12,668,596.00 (individually and collectively, the "SOFT COST NOTE") and the
Building Loan is evidenced by one or more promissory notes, of even date
herewith, in the aggregate original principal amount of $36,456,404
(individually and collectively, the "BUILDING LOAN NOTE"). The Soft Cost Note
and this Agreement are secured by a Soft Cost Leasehold Mortgage, Security
Agreement and Assignment of Rents (the "SOFT COST MORTGAGE"), of even date
herewith, made by Borrower in favor of the Lenders, and recorded in the Office
of the City Register, New York County, (the "OFFICIAL RECORDS"), covering the
Property and by other collateral as described herein and in the Commitment
Letter. The Building Loan Note and the Building Loan Agreement are secured by a
Building Loan Leasehold Mortgage, Security Agreement and Assignment of Rents
(the "BUILDING LOAN MORTGAGE"), of even date herewith, made by Borrower in favor
of the Lenders, recorded in the Official Records, covering the Property and by
other collateral as described in the Building Loan Agreement and in the
Commitment Letter.
WHEREAS, Completion (hereinafter defined) of construction of the
Improvements and the payment and performance by Borrower of all obligations of
Borrower under this Agreement and otherwise in connection with the Soft Cost
Loan and the Building Loan and the payment of all sums due with respect to both
the Soft Cost Loan and the Building Loan are to be guaranteed by the entity
identified under the definition of Guarantor below, who is executing a
Completion Guaranty, a Payment Guaranty and an Operating Deficit Guaranty, to be
dated of even date herewith (collectively, the "GUARANTY"), in favor of the
Lenders.
WHEREAS, In connection with the Soft Cost Loan and the Building Loan,
Borrower and Guarantor are executing in favor of the Lenders an Environmental
Indemnity Agreement, to be dated of even date herewith (the "ENVIRONMENTAL
INDEMNITY").
WHEREAS, Borrower and Developer (hereinafter defined) have also executed
and delivered to the Lenders in respect of the Soft Cost Loan and the Building
Loan, the Assignment of Contracts, Permits, Licenses and Approvals, of even date
herewith, relating to the Plans, the General Contract and the Architect's
Agreement (all as defined below), and certain other contracts and rights and
interests of Borrower and Developer, as Borrower's agent, with respect to the
construction and operation of the Project (the "ASSIGNMENT OF CONTRACTS"),
including, without limitation, all contracts, rights and interests described
therein.
WHEREAS, The Commitment Letter, this Agreement, the Building Loan
Agreement, the Soft Cost Note, the Building Loan Note, the Soft Cost Mortgage,
the Building Loan Mortgage, the Security Agreement, the UCC Financing
Statements, the Assignment of Contracts, the Guaranty, the Environmental
Indemnity and all other documents evidencing or securing the Soft Cost Loan or
the Building Loan are referred to herein as the "LOAN DOCUMENTS."
WHEREAS, The Lenders have advised Borrower that, subject to the terms and
conditions of this Agreement, and based upon the representations, warranties,
covenants and undertakings of Borrower herein contained, the Lenders are willing
to make such Advances of the Loan to Borrower on the terms and conditions
hereinafter set forth.
2
<PAGE>
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
PARTICULAR TERMS; DEFINITIONS
-----------------------------
Section 1.1 Definitions. For all purposes of this Agreement, the following
terms, except as otherwise expressly provided or unless the context requires
otherwise, shall have the respective meanings hereinafter specified:
"ADVANCE" - Shall have the meaning set forth in Section 2A.1.
"AFFILIATE" - With respect to any person (including any person,
corporation, limited liability company,
partnership or other business organization), any
person which directly or indirectly controls, or
is controlled by, or is under common control with
such person. For the purposes of this definition,
however, the parties acknowledge that Developer
and Guarantor are not currently Affiliates of
Borrower.
"AGENCY FEE" - A fee equal to $10,000 per annum payable to Agent,
for its own account, with the first such payment
payable by Borrower to Agent on the Closing Date,
with all subsequent payments being due on each
anniversary thereof through the Maturity Date as
the same may be extended by the First Extension
Period and the Second Extension Period (which
Agency Fee shall be prorated for partial years and
refunded as applicable).
"AGENT" - Key Corporate Capital Inc., a national banking
association and its successor appointed pursuant
to Section 7.11.
"AGENT'S INSPECTING
CONSULTANT" - Corbett & Chiusano Associates, Inc.
"AGENT'S INSPECTING
CONSULTANT FEES" - All reasonable fees and disbursements of Agent's
Inspecting Consultant.
"AGENT'S COUNSEL" - Jones, Day, Reavis & Pogue, and/or such other
counsel as Agent may select.
"AGENT'S COUNSEL FEES" - All reasonable fees and disbursements of Agent's
Counsel.
3
<PAGE>
"AGGREGATE CHANGE ORDER
AMOUNT" - $1,000,000.
"APPLICABLE LIBOR RATE" - Shall have the meaning set forth in the Note.
"APPRAISAL" - A written appraisal report, prepared in response
to an engagement letter issued by Agent, at
Borrower's sole cost and expense, in accordance
with the Uniform Standards of Professional
Appraisal Practice applicable to Federally Related
Transactions as set out in Appendix A to the real
estate appraisal regulations adopted by the Office
of the Comptroller of the Currency pursuant to the
Financial Institutions Reform, Recovery and
Enforcement Act of 1989 ("FIRREA") (Sub-part C of
12 C.F.R. 34) by an appraiser reasonably
satisfactory to the Lenders who shall deliver to
the Lenders its written authorization for reliance
by the Lenders on the Appraisal.
"APPROVED LEASES" - Collectively, all leases or other rental or
occupancy agreements of the Improvements that
comport with the requirements of Section 4.2(i)
hereof and the Ground Lease, which have been
approved by Agent and the Ground Lessor (unless
such approval is not required pursuant to such
Section 4.2(i) or the Ground Lease, as
applicable), and are fully executed.
"ARCHITECT'S AGREEMENT" - The architect's agreement, dated December 8, 1998
entered into by Developer on Borrower's behalf,
and Borrower's Architect.
"ASSIGNMENT AND ACCEPTANCE
AGREEMENT" - An Assignment and Acceptance Agreement entered
into by KCCI or another Lender and an Assignee (as
defined in Section 7.14), pursuant to which the
Assignee shall acquire all or a portion of KCCI's
or such other Lender's Commitment and shall become
a Lender party to this Agreement.
"ASSIGNMENT OF CONTRACTS" - The Assignment of Contracts, Permits, Licenses and
Approvals dated the date hereof made by Borrower
and Developer to Agent for the ratable benefit of
Lenders.
"BANC ONE FINANCING" - Shall mean the equity financing obtained by Member
and/or Alliance Holdings, Inc. from Banc One
Capital Partners IV, Ltd., or an affiliate
thereof, as more particularly described in Section
2B.15 hereof.
4
<PAGE>
"BANKRUPTCY CODE" - The United States Bankruptcy Code, 11 U.S.C. SS
101 et. seq., as amended from time to time, and
all regulations promulgated thereunder and rules
of practice and procedure applicable thereto.
"BORROWER" - Shall have the meaning set forth in the preamble
hereto.
"BORROWER'S ARCHITECT" - Schuman Lichtenstein Clamon Efron, Architects
"BUDGET" - Shall mean the Final Budget.
"BUILDING LOAN" - Shall have the meaning set forth in Section
2A.1(a) hereof.
"BUILDING LOAN AGREEMENT" - Shall have the meaning set forth in the Recitals
hereto.
"BUILDING LOAN MORTGAGE" - Shall have the meaning set forth in the Recitals
hereto.
"BUILDING LOAN NOTE" - Shall have the meaning set forth in the Recitals
hereto.
"CHANGE ORDER" - Any amendment or modification to the Plans, the
General Contract or any Major Contract.
"CHANGE ORDER AMOUNT" - $100,000.
"CLOSING DATE" - August 25, 1999.
"COLLATERAL" - The Premises, the Project and all property and
interests in property (now owned or hereafter
acquired) upon which a Lien is granted under any
of the Loan Documents.
"COMMITMENT" - Shall have the meaning set forth in Section 2B.16.
"COMMITMENT FEE" - The aggregate sum of $368,437.50, $184,219 of
which was previously paid by Borrower to KCCI, and
the remaining $184,218.50 of which is payable to
Agent, for its own account or for the ratable
benefit of the Lenders, on the Closing Date.
"COMPLETION" or
"COMPLETION OF THE
IMPROVEMENTS" - shall be deemed to have occurred upon the
occurrence of all of the following: (i) the
Improvements comprising the Project shall be fully
paid and 100% complete in accordance with the
Plans, all Requirements and the requirements of
the Ground Lease, all as determined by Agent and
Agent's Inspecting Consultant in accordance with
5
<PAGE>
the procedure set forth in Section 2B.2 below;
(ii) all on-site and off-site improvements,
including, without limitation, all utility
services and fixtures and equipment required for
access to and operation of the Improvements shall
be 100% complete; (iii) a temporary certificate of
occupancy for the full use and occupancy of the
entire Premises has been issued (it being
expressly understood that Borrower shall proceed
as expeditiously as possible to secure a final
Certificate of Occupancy, in any event within two
(2) years of issuance of the temporary certificate
of occupancy) or its equivalent issued by the
applicable governmental authority for the
Improvements comprising the Project, and all other
reasonable evidence that the City of New York
and/or the Battery Park City Authority have
acknowledged the completion of all work required
by it to meet all legal requirements and the
requirements under the Ground Lease, as
applicable, including, without limitation, all
zoning and building requirements; (iv) all Permits
and Licenses, if any, required for the operation
of the Project as an independent living/assisted
living complex under all applicable legal
requirements have been issued; (v) all of the
requirements set forth in Section 6.4 of this
Agreement for the final disbursement of Hard Costs
shall have been satisfied; (vi) the opening of the
Project shall have been scheduled to occur within
thirty (30) days.
"COMPLETION DATE" - The date that occurs eighteen (18) calendar months
after the Closing Date, subject to extension for
Force Majeure (it being expressly understood,
however, that the Maturity Date shall not be
extended by reason of Force Majeure).
"COMPLETION GUARANTY" - The Completion Guaranty dated the date hereof made
by Guarantor in favor of Agent, for the ratable
benefit of the Lenders.
"CONSTRUCTION
ADMINISTRATION FEE" - A fee equal to $25,000, payable to Agent, for its
own account on the Closing Date.
"DEBT SERVICE
COVERAGE RATIO" - NOI, less the sum of (i) five percent (5%) of
Project Revenues, and (ii) an annual capital
expenditure reserve equal to $250 per unit,
divided by all interest, principal
6
<PAGE>
amortization and other payments due with respect
to the Loans and any other debt (other than
interest payments pursuant to Mezzanine Financing
permitted hereunder) of Borrower during the
applicable period.
"DEFAULT RATE" - Shall have the meaning set forth in the Note. In
no event shall the Interest Rate or the Default
Rate exceed the maximum interest rate permitted
under applicable law.
"DEVELOPER" - Shall mean Brookdale Living Communities of New
York - BPC Inc., a Delaware corporation.
"DEVELOPMENT AGREEMENT" - The Amended and Restated Development Agreement
made as of August 24, 1999 by Borrower, as owner,
and Developer.
"DEVELOPMENT FEE" - The Development Fee set forth in the Budget.
"DOMESTIC BUSINESS DAY" - Any day other than a Saturday or Sunday or a day
when commercial banks are authorized or required
by law to close in Cleveland, Ohio.
"DRAW REQUEST" - A written statement of Borrower on a Standard AIA
Form G702 and G703 setting forth the Loan
disbursement sought by Borrower under this
Agreement, which shall constitute an affirmation
by Borrower that the representations and
warranties of Article III remain true and correct
as of the date thereof and will be so on the date
of disbursement, which draw request shall be (i)
signed by Borrower, or by Developer on behalf of
Borrower, approved in writing by Borrower's
Architect, all subject to confirmation and
approval by Agent and Agent's Inspecting
Consultant, and (ii) accompanied by lien waivers
or releases as required by Sections 6.3 and 6.4
below.
"ENGINEER" - Schuman Lichtenstein Clamon Efron, Architects
"ENGINEER'S AGREEMENT" - The engineer's agreement, dated December 8, 1998,
entered into by Developer on Borrower's behalf,
and the Engineer.
"ENVIRONMENTAL INDEMNITY
AGREEMENT" - The Environmental Indemnity Agreement dated the
date hereof made by Borrower and Guarantor in
favor of Agent for the ratable benefit of Lenders.
7
<PAGE>
"EURODOLLAR BUSINESS DAY" - Any Domestic Business Day on which commercial
banks are open for international business
(including dealings in dollar deposits) in London,
England.
"EVENT OF DEFAULT" - Shall have the meaning set forth in Article V
hereof.
"FFE" - Furniture, fixtures and equipment referred to in
the Budget.
"FACILITY SUMMARY REPORT" - Shall have the meaning set forth in Section
4.1(dd) hereof.
"FINAL BUDGET" - The budget delivered to, approved and initialed by
Agent on or before Closing Date, as same may be
amended from time to time with Agent's prior
written consent in accordance with Section
7.2(b)(iv) or as line items within same may be
reallocated in accordance with Section 2B.14.
"FINANCIAL STATEMENTS" - The financial statements of Borrower and Guarantor
heretofore delivered to Agent in connection with
the Loan, as supplemented from time to time.
"FORCE MAJEURE" - Delays in construction of the Improvements caused
by or attributable to acts of God, unusual weather
conditions, strikes, lockouts or labor disputes
(including those involving Borrower if Borrower
has used all reasonable means to conclude the
strike, lockout or labor dispute short of
conceding Borrower's position in the labor matter)
inability to obtain an adequate supply of
materials, fuel, water, electricity, labor or
other supplies, casualty, governmental action,
accidents, breakage, repairs, or other conditions,
matters or events which are not within the
reasonable control of Borrower and not
attributable to the bad faith of Borrower or its
agents, excluding the lack of funds, including,
without limitation, the lack of funds due to a
failure to perform any obligations hereunder,
provided (i) the Budget, at all times, remains in
balance, or if same is not in balance, Borrower
and/or Guarantors have complied with Section
2B.7(A) hereof, (ii) Borrower notifies Agent
within five (5) days of the occurrence of the
Force Majeure event and the length of the
anticipated delay, but in no event shall said
relief exceed ninety (90) days in the aggregate,
and (iii) Borrower has been granted similar relief
under the Ground Lease and all Requirements, as
necessary.
"FORWARD TREASURY LOCK
AGREEMENT" - The agreement, dated as of the date hereof,
between Borrower, as counterparty, and KCCI (which
shall name
8
<PAGE>
Guarantor as credit support provider), or dated as
of a future date, between Borrower and/or
Guarantor, as counterparty, and a third party
financial institution reasonably acceptable to
Agent, as the case may be, pursuant to which the
Interest Rate Protection Facility shall be
purchased in accordance with the requirements of
Section 4.1(kk) hereof, it being expressly
understood that notwithstanding anything contained
herein or in any of the other Loan Documents,
payments of additional interest and other amounts
due under the Forward Treasury Lock Agreement
shall be secured by the Soft Cost Mortgage, the
Guaranties and the other Loan Documents if, and
only to the extent that, KCCI and one or more of
the other Lenders are the parties providing the
Interest Rate Protection Facility.
"GENERAL CONTRACT" - The general contract, dated December 30, 1998,
entered into by Borrower, or by Developer on
Borrower's behalf, and the General Contractor
providing for a maximum fixed price.
"GENERAL CONTRACTOR" - HRH Construction Corporation
"GOVERNMENTAL AUTHORITY" - The United States, the City of New York, State of
New York and any political subdivision thereof,
and any agency, department, commission, board,
bureau or instrumentality of any of them which
exercises jurisdiction over Borrower, any of the
Guarantors or the Premises.
"GROUND LEASE" - That certain Ground Lease, dated as of August 24,
1999, between Battery Park City Authority, as
Ground Lessor, and Borrower, as Tenant, pursuant
to which Borrower holds the leasehold on the Land
and Improvements.
"GROUND LESSOR" - Battery Park City Authority.
"GUARANTY" OR "GUARANTIES"- Shall mean the Payment Guaranty, the Completion
Guaranty, the Operating Deficit Guaranty or any of
them.
"GUARANTOR" - Brookdale Living Communities, Inc., a Delaware
corporation, or any additional guarantor or
substitute Guarantor permitted under Section
4.2(m).
"HARD COSTS" - All costs that constitute "costs of the
improvement" under the New York Lien Law and
included in the Budget.
9
<PAGE>
"IMPROVEMENTS" - An assisted living/independent living complex
containing approximately 218 units and
approximately 219,615 square feet of "floor area"
(as such term is defined in the Zoning Resolution
of the City of New York), including without
limitation all on-site and off-site improvements,
including, without limitation, all utility
services and fixtures and equipment required for
access to and operation of the complex to be
constructed on the Land, all of which is more
particularly described in the Plans.
"INITIAL CLOSING" - The date of the initial funding of the Loan.
"INITIAL ESTIMATED COST" - Shall mean $62,624,077, i.e. the maximum amount of
the Loan ($49,125,000) plus the amount of the
Required Equity ($13,499,077).
"INTEREST RATE" - Shall mean the Prime Rate or Applicable LIBOR Rate
as provided in the Note.
"INTEREST RATE PROTECTION
FACILITY" - Shall mean the interest rate protection which
shall be purchased in accordance with the
requirements of Section 4.1(kk) hereof pursuant to
the Forward Treasury Lock Agreement (hereinafter
defined), it being expressly understood that all
amounts that may be due to KCCI (or any other
Lender who shall become a party to the Forward
Treasury Lock Agreement) shall be secured on a
pari passu basis by the Building Loan Mortgage,
the Soft Cost Mortgage, the Guaranties and the
other Loan Documents, and accordingly,
notwithstanding the second priority nature of the
Soft Cost Mortgage, all recoveries pursuant to the
Building Loan Mortgage, the Soft Cost Mortgage and
the other Loan Documents shall be shared on a pari
passu basis among the Lenders who are parties to
this Loan Agreement and the Lenders who are
parties to the Forward Treasury Lock Agreement in
accordance with their relative interests in the
Loan on the one hand and in the Forward Treasury
Lock Agreement on the other; it being expressly
understood, however, that, notwithstanding
anything contained herein or in any of the other
Loan Documents, the additional interest and other
amounts that may be due to the party providing the
Interest Rate Protection Facility shall be secured
by the Soft Cost Mortgage, the Guaranties and the
other Loan Documents if, and only to the extent
that, KCCI and one or more of the Lenders are the
parties providing the Interest Rate Protection
Facility.
10
<PAGE>
"INTERMEDIATE THRESHOLD" - Shall have the meaning set forth in Section
4.1(cc) hereof.
"LAND" - Shall have the meaning set forth in the Recitals
hereto.
"LEASEHOLD ENTITY" - Shall have the meaning set forth in Section
7.2(b)(ix) hereof.
"LENDER" or "LENDERS" - KCCI and the other financial institutions listed
in Annex I, and each other financial institution
which has been assigned an interest herein
pursuant to Section 7.14.
"LIEN" - Any mortgage, pledge, lien, security interest,
judgment lien, mechanic's lien, installment
purchase agreement or other third party right,
charge or encumbrance of any kind affecting the
Land.
"LIBOR INTEREST PERIOD" - Shall have the meaning set forth in the Note.
"LIBOR RATE" - Shall have the meaning set forth in the Note.
"LIQUID ASSETS" - Shall mean assets in the form of cash, cash
equivalents, obligations of (or fully guaranteed
as to principal and interest by) the United States
or any agency or instrumentality thereof (provided
the full faith and credit of the United States
supports such obligation or guarantee),
certificates of deposit issued by a commercial
bank having net assets of not less than
$500,000,000, securities listed and traded on a
recognized stock exchange or traded over the
counter and listed in the National Association of
Securities Dealers Automatic Quotations, liquid
debt instruments that have a readily ascertainable
value and are regularly traded in a recognized
financial market, or any unused portion of any
credit line maintained with a bank which must have
an Standard & Poor's rating of "A" or better, none
of which are subject to specific pledge, lien or
other encumbrance.
"LOAN" - Shall have the meaning set forth in Section
2A.1(a).
"LOAN DOCUMENTS" - Shall have the meaning set forth in the Recitals
hereto.
"MAJOR CONTRACTS" - Any contract entered into by Borrower relating to
the Improvements in an amount equal to or
exceeding $200,000.
"MAJOR CONTRACTOR" - Any contractor party to a Major Contract.
11
<PAGE>
"MAJOR SUBCONTRACT" - Any contract between the General Contractor and a
subcontractor relating to the Improvements in an
amount equal to or exceeding $200,000.
"MAJOR SUBCONTRACTOR" - Any subcontractor party to a Major Subcontract.
"MANAGEMENT AGREEMENT" - The Management Agreement made as of August 24th,
1999, by Borrower, as owner, and Developer, as
manager.
"MANAGEMENT FEE" - Shall mean the management fee payable to Manager
under the Management Agreement.
"MANAGER" - Brookdale Living Communities of New York - BPC
Inc., a Delaware corporation.
"MATURITY DATE" - February 28, 2001, subject to extension pursuant
to the terms of Section 2A.11 of this Agreement.
"MEMBER" - AH Battery Park Member, LLC, an Ohio limited
liability company, the sole member and manager of
Borrower.
"MEMBERSHIP AGREEMENT" - The Amended and Restated Operating Agreement of
Borrower, dated as of June 19, 1999.
"MEZZANINE FINANCING" - Shall have the meaning set forth in Section
2B.15(b) hereof.
"MORTGAGE" - The Soft Cost Mortgage and the Building Loan
Mortgage, each dated of even date herewith, made
by Borrower, as mortgagor, to Agent, as mortgagee,
for the ratable benefit of the Lenders, which
Building Loan Mortgage secures the Building Loan
Note and encumbers, among other things, and is a
first lien on, Borrower's leasehold interest in
the Premises and which Soft Cost Mortgage secures
the Soft Cost Note and encumbers, among other
things, and is a second lien on, Borrower's
leasehold interest in the Premises.
"NOI" - Project Revenues, less all ordinary and customary
operating expenses actually incurred and paid by
Borrower, other than the Management Fee (certified
by Borrower or by the Developer or Manager on
behalf of Borrower and approved by the Agent), in
connection with the ownership and operation of the
Project.
"NOTE" or "NOTES" - Shall have the meaning set forth in Section 2A.2.
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"OBLIGATION" - All obligations of Borrower to Agent and the
Lenders under this Agreement, the Notes or the
other Loan Documents or any related instrument or
document, howsoever created, arising or evidenced,
whether direct or indirect, absolute or
contingent, or now or hereafter existing, or due
or to become due.
"OPERATING DEFICIT
GUARANTY" - The Operating Deficit Guaranty dated the date
hereof made by Guarantor in favor of Agent, for
the ratable benefit of the Lenders.
"PAYMENT GUARANTY" - The Payment Guaranty dated the date hereof made by
Guarantor in favor of Agent, for the ratable
benefit of the Lenders.
"PERMITTED ENCUMBRANCES" - The items listed in Exhibit B hereto and any
easements or licenses granted with the written
consent of Agent, which shall not be unreasonably
withheld if such easements and/or licenses are
reasonably necessary for and beneficial to the
operation of the Project, or any other
encumbrances expressly permitted under this
Agreement.
"PLANS" - The preliminary and the final plans and
specifications, including all shop drawings (which
shop drawings will be kept at the Project site for
inspection by Agent or Agent's Inspecting
Consultant), for the construction and equipping of
the Improvements prepared (in accordance with, and
which conform to, the requirements set forth in
Article 11 of the Ground Lease, including, without
limitation, (a) the Requirements, the Master
Development Plan, the Design Guidelines and the
Construction Documents (as all of such terms are
defined in the Ground Lease) and (b) the
provisions of Section 11.02 of the Ground Lease
governing the review and approval by the lessor of
the plans and specifications) by Borrower's
Architect, and approved by Agent, Agent's
Inspecting Consultant and the Ground Lessor to the
full extent required under the Ground Lease and
(in the case of final plans, to the extent
necessary to satisfy any Requirement) the
applicable Governmental Authorities, as amended or
modified by all Change Orders approved hereunder
by Agent.
"POLLUTANT" - Any solid, liquid, gaseous or thermal contaminant,
including smoke, vapor, radon, soot, fumes, acids,
alkalis, chemicals, waste, petroleum products or
by products,
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asbestos (including, without limitation, friable
asbestos, airborne asbestos or any substance or
material containing asbestos), PCBs, phosphates,
lead or other heavy metals, chlorine, radon gas,
any "HAZARDOUS SUBSTANCE" or "POLLUTANT" or
"CONTAMINANT" as defined in the Comprehensive
Environmental Response, Compensation and Liability
Act, as amended, any "HAZARDOUS WASTE" as defined
in the Resource Conservation and Recovery Act, any
"POLLUTANT" as defined in the Clean Water Act
and/or any "HAZARDOUS AIR POLLUTANT" as defined in
the Clean Air Act, and the regulations adopted
pursuant thereto, or any other toxic or hazardous
wastes or materials as defined, identified or
classified under any Requirement, and any
regulations adopted pursuant thereto.
"PREMISES" - Borrower's leasehold interest in the Land, the
Improvements, the building materials, personal
property and all other items owned and/or leased
by Borrower and described in the granting clause
of the Mortgage, and any other personal property
owned and/or leased by Borrower and used in the
construction or operation of the Improvements,
including all fixtures, furnishings and equipment
necessary to operate the Improvements for its
intended purpose.
"PREPAYMENT" - Shall mean any mandatory or optional prepayment of
the Loan or any part thereof pursuant to Section
2A.6 hereof.
"PRIME RATE" - Shall have the meaning set forth in the Note.
"PROJECT" - The Premises, including without limitation, the
Land, the Improvements, all on-site and off-site
improvements, including without limitation, all
utility services and fixtures and equipment
required for access to or operation of the
Improvements.
"PROJECT DOCUMENTS" - The Ground Lease, the Development Agreement, the
Management Agreement, the Assignment of Contracts,
the General Contract, the Architect's Agreement,
the Engineer's Agreement, the Plans, all necessary
Project permits, the Approved Leases, the Major
Contracts and the Major Subcontracts.
"PROJECT REVENUES" - All fixed rent or other income (including expense
reimbursements) actually received by Borrower in
connection with its ownership and occupancy of the
Premises, as reasonably determined by Agent based
upon
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the most current Facility Summary Report then in
Agent's possession.
"PRO RATA" - Shall have the meaning set forth in Section
2B.16(i) hereof.
"PROTECTIVE ADVANCES" - Any disbursements and advances pursuant to any of
the Loan Documents (which disbursements and
advances shall be deemed to be "ADVANCES" made
hereunder) which Agent deems necessary or
desirable to preserve or protect the Collateral or
any portion thereof or to enhance the likelihood
or maximize the amount of repayment of the
Advances and other Obligations.
"REQUIRED EQUITY" - The aggregate sum of $13,499,077, to be
contributed by Borrower for costs incurred in the
development and construction of the Improvements,
which contribution may be made in the form of cash
and/or the Mezzanine Financing as more
particularly described in Section 2B.15 hereof.
"REQUIREMENT" - Any law, statute, ordinance, order, rule or
regulation of a Governmental Authority applicable
to Borrower, any Guarantors or the Premises,
including, but not limited to, laws, ordinances,
orders, rules or regulations with regard to
zoning, land use, building or environmental
matters.
"REQUISITE LENDERS" - Lenders (including Agent) whose Pro Rata
participation (not including the participation of
any of the Lenders which Agent has determined to
be in default), in the aggregate, are equal to or
greater than sixty-six and two-thirds percent (66
2/3%).
"RETAINAGE" - Shall have the meaning set forth in Section 2B.2
hereof.
"SIGNIFICANT PARTY" - Borrower or Guarantor.
"SOFT COST LOAN" - Shall have the meaning set forth in Section
2A.1(a).
"SOFT COST LOAN AGREEMENT"- Shall have the meaning set forth in the Recitals
hereto.
"SOFT COST MORTGAGE" - Shall have the meaning set forth in the Recitals
hereto.
"SOFT COST NOTE" - Shall have the meaning set forth in the Recitals
hereto.
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"SOFT COSTS" - All non-construction or soft costs that do not
constitute "costs of the improvement under the New
York Lien Law" and are delineated as such in the
Final Budget.
"STABILIZATION" - Shall have the meaning set forth in Section
4.1(cc) hereof.
"SUBSTANTIAL COMPLETION" - Shall be deemed to have occurred upon the last to
occur of the following dates: (i) the date of
issuance of a temporary certificate of occupancy
covering all of the Premises, and (ii) the date
upon which the first resident takes possession of
their unit.
"SUPERMAJORITY LENDERS" - Lenders (including Agent) whose Pro Rata
participation (not including the participation of
any of the Lenders which Agent has determined to
be in default), in the aggregate, are equal to or
greater than seventy-five percent (75%).
"TITLE INSURER" - The issuer of the title insurance policy required
by Section 6.2(m) hereof, which issuer shall be
Chicago Title Insurance Company.
"UCC FINANCING
STATEMENTS" - The UCC-1 Financing Statements executed by
Borrower, as debtor, in favor of Agent, as secured
party, to be filed in connection with the personal
property described in the Mortgage and the
Assignment of Contracts.
"UNANIMOUS LENDERS" - All of the Lenders (including Agent, but not
including the participation of any of the Lenders
which Agent has determined to be in default),
collectively.
Section 1.2 Singular and Plural. Words used herein in the singular, where
the context so permits, shall be deemed to include the plural and vice versa.
ARTICLE II(A)
LOAN FACILITY
-------------
Section 2A.Loans. (a) Subject to the terms and conditions of this
Agreement, including without limitation, (i) the funding limitations embodied in
Section 2B.7 hereof and (ii) the loan balancing requirements of Section 2B.7(A)
hereof, each Lender, severally, and not jointly, agrees to make a series of
advances to fund Soft Costs in an aggregate principal amount of up to
$12,668,596 (each an "ADVANCE" and collectively, the "ADVANCES"; all of the
Advances of all of the Lenders under this Agreement collectively, the "SOFT COST
LOAN" and together with Advances in an aggregate principal amount of up to
$36,456,404 under the Building Loan
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Agreement, (the "BUILDING LOAN"; the Soft Cost Loan and Building Loan being
referred to collectively as the "LOAN" OR "LOANS"), to or for the benefit of
Borrower, in an aggregate principal amount for any Lender not to exceed the
amount set forth under the heading "LOAN COMMITMENT" opposite the name of such
Lender on Annex I.
(b) The Soft Cost Loan shall be fully secured by the Soft Cost Mortgage
and the other Collateral described herein and in the other Loan Documents. The
Soft Cost Mortgage shall secure the indebtedness described in the Soft Cost Note
or Notes and herein, and any future loans, advances, payments and disbursements
by Lenders pursuant to this Agreement or the Soft Cost Mortgage shall be added
to the principal indebtedness under the Soft Cost Notes.
(c) This Agreement shall remain in full force and effect after the Loan is
fully funded and throughout the term of the Loan and any extensions thereof for
the purpose of governing the rights and obligations of Borrower, Agent and
Lenders but not for the benefit of any third persons.
Section 2A.2 Notes. The Advances made by each Lender pursuant to Section
2A.1(a) shall be evidenced by one or more promissory notes of Borrower dated of
even date herewith (such Soft Cost Notes and Building Loan Notes, the "NOTE"or
"NOTES"), payable to the order of such Lender and representing the obligation of
Borrower to pay the unpaid principal amount of the Advances under the Loans made
by such Lender, with interest thereon at the Interest Rate and, after the
occurrence and during the continuance of any Event of Default, at the Default
Rate. Each Lender is hereby authorized to record the date and amount of each
Advance of the proceeds of the Loans made by such Lender and the date and amount
of each payment or prepayment of principal of the Loans made to such Lender on
the schedule annexed to and constituting a part of such Lender's Note, and any
such recordation shall constitute prima facie evidence of the accuracy of the
information so recorded in the absence of manifest error; provided, however,
that the failure by any Lender to make any such recordation on its Note shall
not affect any of the obligations of Borrower under such Note or this Agreement.
Section 2A.3 Interest Rate.
(a) Advances of the Loans shall bear interest at the Applicable
LIBOR Rate or the Prime Rate pursuant to the provisions of the Note. After the
occurrence and during the continuance of any Event of Default hereunder,
Advances of the proceeds of the Loan shall bear interest at the Default Rate.
(b) Notwithstanding the foregoing, only so much of the outstanding
principal amount of the Loan as would not become due and payable during the
applicable LIBOR Interest Period shall be designated as a LIBOR Rate Loan and
the remaining principal balance shall be designated as a Prime Rate Loan. Prime
Rate Loans will bear interest at the Prime Rate. "PRIME RATE" means the rate of
interest per annum announced by the Cleveland office of KeyBank National
Association ("KEYBANK") as its Prime Rate, whether or not such rate is publicly
announced. The Prime Rate is not necessarily the lowest rate charged by KeyBank
for commercial or other types of loans, it being understood that the Prime Rate
is only one of the bases for computing interest on loans made by the Agent and
that, by basing interest on the Prime Rate, the Agent and the Lenders have not
committed to charge, and Borrower has not in
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any way bargained for, interest based on a lower or the lowest rate at which the
Agent or the other Lenders may now or in the future make loans to other
borrowers. Any interest rate based on the Prime Rate shall be adjusted on and as
of the effective date of any change in the Prime Rate. Each determination of the
Prime Rate by the Agent shall be conclusive. As of August 23, 1999 the Prime
Rate is currently 8%.
Section 2A.4 Payment of Interest. Prior to maturity, whether by
acceleration or otherwise, interest on the Advances shall be payable at the
Interest Rate or Interest Rates provided in the Note, with each interest payment
being due on the twenty-fourth (24th) day of the first full calendar month
following the date on which the first Advance is made hereunder, and subsequent
interest payments being due thereafter monthly on the twenty-fourth (24th) day
of each month regardless of the applicable Interest Rate. After maturity, by
acceleration or otherwise, interest on the Advances shall be payable on the date
described in the preceding sentence or earlier, or more frequently, on demand of
Agent.
Section 2A.5 Payment of Principal. The entire principal amount of the
Loan, or so much thereof as may be outstanding on the Maturity Date (together
with all outstanding interest and other sums due hereunder or under the Notes,
the Mortgage and the other Loan Documents), shall be paid as provided herein and
in the Notes on the Maturity Date, or on such earlier date as may result from an
acceleration of the Maturity Date in accordance with Section 2A.13 hereof. If
the Maturity Date is extended in accordance with Section 2A.11(c), Borrower
shall make installment payments of the principal of the Advances monthly on the
twenty fourth (24th) day of each month, commencing with the first month
following such extension, in amounts determined in accordance with Section
2A.11, and the entire remaining principal amount of the Advances shall be paid
on the Maturity Date as so extended, or on such earlier date as may result from
an acceleration of the Maturity Date in accordance with Section 2A.13 or 5.3(a)
hereof.
Section 2A.6 Prepayment. Subject to the provisions of Sections 2A.8, 2A.9
and 2A.10 hereof, upon not less than three (3) Domestic Business Days' prior
written notice to Agent specifying the intended date of prepayment, Borrower
shall have the right to prepay the outstanding principal amount of the Advances,
in whole or in part, without premium or penalty but with all accrued interest
and breakage fees on the amount being prepaid to the date of such prepayment.
Each partial prepayment must equal at least $100,000 or some $100,000 increment
thereof. Amounts of principal prepaid will not be readvanced by Lenders as new
Advances.
Section 2A.7 Procedure for Payment. Each payment on the Notes, including
each prepayment of principal and each payment of interest, shall be made by
Borrower to Agent at its office at 127 Public Square, Cleveland, Ohio
44114-1306, in lawful money of the United States of America, in immediately
available funds, by 1:00 P.M., Cleveland, Ohio time, on the due date for such
payment without setoff or counterclaim. Subject to Section 7.13 below, Agent
shall distribute such payments ratably to the Lenders on the day of receipt, if
received by 1:00 P.M. as aforesaid, and on the following Domestic Business Day,
if received after 1:00 P.M., in like funds as received. The failure of Borrower
to make any such payment by the aforesaid time shall not constitute a default
hereunder, provided that such payment is made on such due date, but any such
payment received by Agent after 1:00 P.M., Cleveland, Ohio time, on such due
date shall be deemed to have been made on the next Domestic Business Day or
Eurodollar Business Day, as the case may be, for the purpose of calculating
interest on the Advances. If any payment
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under the Notes or any other Loan Document shall be due and payable on a day
which is not a Domestic Business Day or Eurodollar Business Day, as the case may
be, the due date thereof shall be extended to the next Domestic Business Day or
Eurodollar Business Day, as the case may be (except as otherwise provided in the
definition of LIBOR Interest Period), and interest shall be payable at the
applicable rate specified herein during such extension.
Section 2A.8 Indemnification. Notwithstanding anything to the contrary
contained herein or in any other Loan Document, Borrower agrees that if (a) any
repayment or prepayment of any Advance is made for any reason (other than as
contemplated in the last sentence of the definition of LIBOR Interest Period in
the Note) on a day prior to the last Eurodollar Business Day of the then
effective LIBOR Interest Period, or (b) by any other action of Borrower or by
reason of an acceleration of the Note, an Applicable LIBOR Rate is terminated on
a day prior to the last Eurodollar Business Day of the then effective LIBOR
Interest Period with respect to such Applicable LIBOR Rate, Borrower shall
indemnify each Lender against, and pay on demand directly to each Lender, any
loss, liability, expense, penalty or other charge suffered or incurred by such
Lender as a result of such repayment or termination of such Applicable LIBOR
Rate, including, without limitation, (i) any loss, liability, expense, penalty
or other charge suffered or incurred by such Lender during the period from the
date of receipt of such repayment or acceleration to the last Eurodollar
Business Day of the LIBOR Interest Period in question if the rate of interest
obtainable by such Lender upon the redeployment of an amount of funds equal to
such repayment is less than the interest rate computed by reference to the
Applicable LIBOR Rate in effect during the LIBOR Interest Period in question, or
(ii) any loss, liability or expense suffered or incurred by such Lender in
liquidating prior to maturity eurodollar deposits or other deposits, as the case
may be, in amounts which correspond to such payment. A certificate of such
Lender giving a reasonably detailed calculation of the amount of any such loss
or expense shall be deemed conclusive in the absence of manifest error. The
amounts payable by Borrower under this Section 2A.8 shall expressly exclude any
margin that any such Lender may have anticipated over any Applicable LIBOR Rate.
Section 2A.9 Reimbursement. Borrower agrees to reimburse each Lender for
its costs in complying during the term of the Notes with all applicable laws,
executive orders and regulations of the governments of the United States, the
United Kingdom and any other applicable government, and of any regulatory or
administrative agency thereof (including, without limitation, the Bank of
England, the Board of Governors of the Federal Reserve System or any other
governmental body claiming jurisdiction), including any increase in said costs
due to a change therein or in the interpretation thereof, which impose, modify
or deem applicable any reserve, asset maintenance or special deposit or capital
adequacy requirements on the obligation of Lender to make Advances or on
deposits obtained in the London interbank eurodollar market or other markets in
respect of Advances subject to LIBOR, or which subject such Lender to any tax
with respect to its Note or change the basis of taxation of payments to such
Lender of principal, interest or fees payable under its Note (except for any
tax, or changes in the rate of any tax, based upon the net income or profits of
such Lender) or which impose any other similar conditions with respect to the
Advances or the obligation of such Lender to make Advances under the Loan. The
increased cost to a Lender in complying with laws, executive orders or
regulations which impose, modify or deem applicable any reserve, asset
maintenance or special deposit or capital adequacy requirements on the
obligation of a Lender to make Advances under the Loan or on deposits obtained
in the London interbank eurodollar market or other markets
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shall be computed by determining the amount by which such requirements
effectively increase such Lender's cost of making and maintaining the deposits
attributable to the Advances subject to LIBOR and by computing the additional
interest which would have been owing to such Lender if such effective increase
had been added to the Applicable LIBOR Rate for purposes of determining the
Applicable LIBOR Rate during the affected period. A certificate of a Lender
giving a reasonably detailed calculation of the amount of such costs shall be
deemed conclusive in the absence of manifest error. Agent shall give Borrower
written notice of any such increased cost of any Lender's making and maintaining
the deposits attributable to Advances subject to LIBOR upon Agent's receipt of
notice of the same. Notwithstanding anything to the contrary stated in this
Section 2A.9, no such increased costs shall be recoverable from Borrower with
respect to any period more than 120 days prior to the date Agent shall provide
Borrower with written notice of such increased costs incurred by any Lender, and
such increased costs shall only be imposed by a Lender who actually is incurring
such increased costs and only so long as such Lender is exercising similar
rights against other borrowers to whom such Lender is lending money at rates
based on the LIBOR Rate. Furthermore, Borrower shall not be required to pay such
increased costs due solely to a change in location of the Lender's office
extending the Advances that are subject to LIBOR. Borrower may, during a period
of the fifteen (15) Domestic Business Days following receipt by Borrower of any
such notice to reimburse any such increased costs which are material in amount,
either (i) demand that the Lender requesting reimbursement of the increased
costs, within such period, assign its Advances bearing interest at the
Applicable LIBOR Rate to one or more assignees which Borrower or Agent
identifies, in accordance with any applicable provisions of this Agreement,
including, without limitation Section 7.14(b), upon payment in immediately
available funds of a purchase price therefor equal to the unpaid principal
amount thereof, together with interest accrued with respect thereto to the date
of such assignment and all fees and other charges accrued or payable under the
terms of this Agreement for the benefit of such Lender with respect thereto to
the date of such assignment, and if such payment is made within such period such
Lender shall so assign its Advances bearing interest at the Applicable LIBOR
Rate, or (ii) within such period, repay the portion of the Loan owing the Lender
who requests the increased costs, together with interest accrued with respect
thereto to the date of such repayment and all fees and other charges accrued or
payable under the terms of this Agreement with respect thereto for the benefit
of such Lender to the date of such repayment, any such repayment being for the
sole credit of such Lender and not for any other Lender. All expenses incurred
by Agent in connection with the foregoing shall be for the sole account of
Borrower and shall constitute an Obligation hereunder. Each Lender hereby
represents that, as of the date hereof, such Lender is not subject to Federal
Reserve Board reserve requirements. Any assignee of a portion of any Lender's
Commitment hereunder shall make the foregoing representation as of the closing
of such assignment.
Section 2A.10 Changes. Notwithstanding anything to the contrary contained
herein, in the Notes, in the Mortgage or in any other Loan Document, if, prior
to or during any LIBOR Interest Period with respect to which LIBOR is in effect,
any change in any law, treaty, regulation or official directive, or in the
interpretation thereof, by any governmental body charged with the administration
thereof, shall make it unlawful for any Lender to fund or maintain its funding
in eurodollars or other dollars of the Advances subject to the Applicable LIBOR
Rate or otherwise to give effect to such Lender's obligations as contemplated
hereby, (a) Agent may by notice to Borrower declare that such Lender's
obligations in respect of the Applicable LIBOR Rate are terminated forthwith,
(b) the Applicable LIBOR Rate shall
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forthwith cease to be in effect, and interest shall from and after such date be
calculated at the Prime Rate unless Borrower shall thereafter elect, in
accordance with the terms hereof, an individual Applicable LIBOR Rate not
subject to such illegality, and (c) Borrower agrees to indemnify such Lender
against any loss, cost, or expense actually incurred as provided in Section 2A.8
hereof. A certificate of such Lender giving a reasonably detailed calculation of
the amount of any such loss, expense, penalty or other charge shall be deemed
conclusive in the absence of manifest error. As noted in Section 2A.6 above,
Borrower may, in accordance with said Section, prepay the Loan at any time but
any such prepayment shall not diminish Borrower's obligations under Sections
2A.8, 2A.9 and 2A.10 hereof, through the date such Lender receives full payment
of its Note and all sums due with respect to the Notes, including without
limitation, any sums due under Sections 2A.8, 2A.9 and 2A.10 hereof.
Section 2A.11 Extension Periods.
(a) Provided the Loan is not then in default, Completion has been
achieved, the Improvements are then fully open and operating, and all
requirements for the final disbursement of Hard Costs set forth in Section 6.4
of this Agreement have been satisfied, Borrower may, subject to the requirements
of this Section 2A.11, extend the maturity of the Notes for the period from the
day next succeeding the Maturity Date through the date that occurs eighteen (18)
months after the Maturity Date (the "FIRST EXTENSION PERIOD"), and for an
additional period from the day next succeeding the last day of the First
Extension Period through the date that occurs twelve (12) months after the last
day of the First Extension Period (the "SECOND EXTENSION PERIOD"; the First
Extension Period and the Second Extension Period are sometimes hereinafter
collectively referred to as the "EXTENSION PERIODS").
(b) Borrower's right to extend the maturity of the Notes for the
First Extension Period shall be conditioned upon the satisfaction of the
following requirements, as determined by Agent: (i) Borrower shall have
delivered written notice of its desire to extend the maturity of the Notes and
said written notice must be delivered to Agent not later than sixty (60) days
prior to the then effective Maturity Date, (ii) at the time of delivery of such
notice, Completion shall have occurred and (iii) no Event of Default hereunder
or under any of the other Loan Documents shall have occurred and be continuing
and there shall be no outstanding payment default under the Loans.
(c) Borrower's right to extend the maturity of the Notes for the
Second Extension Period shall be conditioned upon the satisfaction of the
following requirements, as determined by Agent: (i) the maturity of the Notes
shall have been extended for the First Extension Period, (ii) Borrower shall
have delivered written notice of its desire to extend the maturity of the Notes
and said written notice must be delivered to Agent not later than sixty (60)
days prior to the expiration of the First Extension Period, which notice shall
be accompanied by payment of an extension fee equal to 25 basis points (.0025)
of the outstanding principal amount of the Notes (plus any unfunded principal
made available to Borrower during the Second Extension Period), (iii) no Event
of Default hereunder or under any of the other Loan Documents shall have
occurred and be continuing and there shall be no outstanding payment default
under the Loans and (iv) at the time of delivery of such notice, Completion
shall have occurred, and the Project shall have achieved, and be capable of
maintaining, based upon Agent's reasonable determination, a minimum Debt Service
Coverage Ratio calculated on a prospective basis for the
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first quarter of the Second Extension Period (i.e. including actual figures from
quarters 8, 9, 10 and 11 and including projected principal payments during the
Second Extension Period) of not less than 1.2 to 1.0, and (v) in the event that
the Requisite Lenders request a new or updated Appraisal, Borrower furnishes to
Agent an Appraisal, at Borrower's sole cost and expense, reasonably satisfactory
in all material respects to the Lenders and evidencing a loan to value ratio not
greater than 75%. Upon the extension of the Maturity Date pursuant to this
Section 2A.11(c), the outstanding principal balance of the Loan shall amortize
in equal monthly installments of principal payable beginning on the first day of
the Second Extension Period. The monthly principal amortization payments shall
be determined at the commencement of the Second Extension Period based upon a
25-year amortization schedule; provided, that the monthly principal amortization
payments shall be adjusted from time to time, based on the foregoing 25-year
amortization schedule, to include the amount of Advances, if any, made to
Borrower during the Second Extension Period.
(d) In no event shall the Maturity Date of the Notes be extended
beyond the Extension Periods.
Section 2A.12 Lenders' Rights. Borrower acknowledges and agrees that an
individual Lender may wish to purchase one or more deposits in order to fund or
maintain its funding of the Advance subject to LIBOR during the applicable LIBOR
Interest Period. Any Lender shall be entitled to fund and maintain its funding
of all or any part of such Advance in any manner it sees fit, provided that all
determinations hereunder (including, without limitation, all determinations
under Sections 2A.8, 2A.9 and 2A.10 hereof) shall be made as if such Lender had
actually funded and maintained that Advance to be subject to LIBOR during the
applicable LIBOR Interest Period through the purchase of eurodollar deposits or
other deposits, as the case may be, in an amount equal to such Advance subject
to LIBOR and having a maturity corresponding to such LIBOR Interest Period.
Borrower agrees that for purposes of Sections 2A.8, 2A.9 and 2A.10 hereof any
reference to a Lender therein shall also include any Lender that has signed an
Assignment and Acceptance Agreement in accordance with Section 7.14(b) of this
Agreement to the extent of its Pro Rata share in such Advance bearing interest
at the Applicable LIBOR Rate, and in this respect Borrower agrees that Agent, on
behalf of any such assignee, may collect directly from Borrower, and Borrower
agrees to pay to Agent (but Borrower shall not be required to pay the same
directly to any such assignee), any sums owing to such participant under
Sections 2A.8, 2A.9 and 2A.10 hereof.
Section 2A.13 Acceleration of Maturity. The Notes, including all principal
thereof and interest thereon, however termed, shall become due and payable at
the option of Agent upon the occurrence of any of the following (subject to any
applicable cure periods specified in this Agreement):
(a) Any default shall occur and continue beyond any notice or cure
period under this Agreement, the Soft Cost Mortgage or any other Loan Document,
or if a Significant Party shall be in default beyond any applicable notice or
cure period under or attempt to terminate any Loan Document;
(b) A Significant Party shall fail to comply beyond any applicable
notice or cure period with any of the covenants made by it in this Agreement,
any Note, the Mortgage or
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in any other Loan Document, or at any time any representation or warranty made
by a Significant Party to Agent or any Lender in this Agreement or in any other
Loan Document or in any certificate or statement delivered in connection
therewith shall be false or misleading to an extent deemed by Agent, in its
reasonable judgment, to be material; or
(c) Any other Event of Default under this Agreement, the Mortgage or
any other Loan Document shall occur.
Section 2A.14 Costs of Collection. If any Note shall be collected by legal
proceedings or through any court or shall be referred to an attorney because of
any default, Borrower agrees to pay all reasonable attorney's fees and court
costs incurred by Agent as well as the Lenders.
Section 2A.15 Late Charges. In the event that any payment of interest,
principal, or principal and interest shall not be paid when due (whether by
acceleration or otherwise), a "LATE CHARGE" calculated at the rate of five
percent (5%) on such overdue installment shall be charged by Agent for the
purpose of defraying the expenses incident to handling such delinquent payments,
which "LATE CHARGE" shall be payable on the same day of the month as payments of
interest, provided, however, in no event shall Borrower be required to pay a
late fee greater than the maximum amount permitted under applicable laws. Such
charge shall be in addition to, and not in lieu of, any other remedy Agent or
any Lender may have and is in addition to any reasonable fees and charges of any
agents or attorneys which Agent is entitled to employ upon any default by
Borrower hereunder or under any other Loan Document, whether authorized herein
or by law.
ARTICLE II(B)
LOAN DISBURSEMENTS/REQUIRED EQUITY
----------------------------------
Subject to the provisions of this Agreement, and upon Borrower's
satisfaction of the applicable requirements of this Agreement, including,
without limitation, the conditions to disbursements set forth in Article VI
hereof, and also subject to the funding limitations of Section 2B.7, each Lender
severally, and not jointly, agrees to make Advances hereunder from time to time
in accordance with Article II(A), but not more than once a month except as
provided in Section 2A.3(b) regarding Loan interest and Section 2B.1, and
Borrower will accept each Lender's Advance representing a proportionate share of
the amount of the Loan as follows:
Section 2B.1 Procedure for Loan Borrowing and Interest Rate Election. Draw
Requests for Hard Costs and Soft Costs shall be submitted prior to Completion at
least once, but at all times no more than once, per month on or about the same
date of each month. Borrower shall submit a so-called "PENCIL COPY REQUISITION"
to Agent's Inspecting Consultant prior to the submission of a Draw Request.
Within five (5) Domestic Business Days of Agent's Inspecting Consultant's
receipt of the pencil copy requisition, Agent's Inspecting Consultant shall
review the pencil copy requisition, inspect the Project and provide comments to
Borrower. Borrower shall submit a total Draw Request, within ten (10) calendar
days thereafter, in duplicate to Agent and Agent's Inspecting Consultant which
includes the Draw Request for Hard Costs in
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accordance with Agent's Inspecting Consultant's comments related thereto and the
Draw Request for Soft Costs, and Borrower shall simultaneously send a summary of
the Draw Request to each of the other Lenders for informational purposes. Within
ten (10) Domestic Business Days of Agent's receipt from Borrower of the total
Draw Request, Agent shall review and approve or disapprove the Draw Request and,
if such Draw Request is approved, shall cause the same to be funded within such
ten (10) Domestic Business Day period, subject, however, to satisfaction of the
conditions set forth or referred to in this Article II(B). All Draw Requests
must be accompanied by such supporting documentation as Agent may require,
including, without limitation, a cost breakdown, which must be certified as to
accuracy by Borrower and be consistent in form and substance with the cost
breakdown set forth in the Budget in aggregate total and itemization and
limitations set forth in the General Contract, if any, and lien waivers from all
contractors, subcontractors and suppliers supplying goods or services related to
the Improvements in the sum of all prior disbursements for all of Borrower's
preceding Draw Requests, but only including supporting invoices upon the
specific request of Agent. The Budget shall serve as the disbursement control
for each line item, and neither Agent, nor any Lender shall be required to
disburse Loan proceeds or make Advances for any line item in excess of the
amounts specified in the Final Budget, (as the same may be amended due to Budget
reallocations pursuant to Section 2B.14 hereof), as payable from Loan proceeds.
No later than three (3) Eurodollar Business Days prior to the date of the
requested Advance and disbursement of Loan proceeds, Borrower shall notify Agent
whether such Advance shall initially bear interest at the Prime Rate or the
Applicable LIBOR Rate or a combination thereof subject to the limitations set
forth in Section 2A.3 and Section 2A.10. Upon receipt of such Draw Request from
Borrower, Agent shall promptly, but no later than two (2) Eurodollar Business
Days prior to the anticipated disbursement date, notify each Lender of the
pending Draw Request and the anticipated disbursement date. Provided that all of
the conditions set forth in Article VI have been satisfied and Agent approves
the Draw Request, then by no later than 11:00 a.m., Cleveland time, on the
disbursement dates specified in Agent's notice to each Lender, (A) each Lender
other than Agent shall make available to Agent an amount in immediately
available funds equal to such Lender's Pro Rata share of the Advances to be made
and disbursed by Agent (as determined by Agent), and Agent, as a Lender, shall
also make available its Pro Rata share of such Advances, and (B) Agent shall
then make available to Borrower the amount of such Advances, which shall
correspond to the amount approved for disbursement by Agent by wire transferring
to the account of Borrower maintained by Borrower or by Developer on behalf of
Borrower as set forth in Section 2B.9 the aggregate amount of said Advances. No
such Advances or disbursements shall be made until the Title Insurer has
verbally provided Agent with advice (i.e., no change in title not theretofore
approved by Agent) required by Section 6.3(e) hereof and has committed to issue
the title continuation and endorsement referred to therein.
Section 2B.2 Intentionally Omitted.
Section 2B.3 Intentionally Omitted.
Section 2B.4 Soft Cost Disbursements. Each Lender will, subject to the
terms and conditions of this Soft Cost Loan Agreement, make Advances to cover
its Pro Rata share of the disbursements for Soft Costs, provided said costs have
been expended or are then due and payable and in either case are supported by
invoices, bills or other documentation satisfactory to
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Agent, it being understood that invoices etc. shall not be required for items or
contracts having an individual value of less than $25,000 or an aggregate value
of $300,000 for all such items or contracts.
Section 2B.5 Disbursement of Development Fee. Provided that (i) the Loan
is "IN BALANCE" (as such term is defined in Section 2B.7(A) hereof), (ii)
construction of the Improvements is progressing to the reasonable satisfaction
of Agent, and (iii) there are sufficient Loan proceeds and other funds available
to Borrower to complete the Improvements in accordance with the Plans, as
certified by Agent's Inspecting Consultant, Borrower shall be entitled to
request that Advances be disbursed to pay from Loan proceeds up to 50% of the
Development Fee listed in the Budget (to the extent such amount has not been
permanently reduced pursuant to the "loan balancing" provisions of Section
2B.7(A) below, and to the extent consistent with the payment schedule set forth
in the Budget). In the event that at any time after Advances have been disbursed
for the payment of the Development Fee, the Development Fee is permanently
reduced pursuant to Section 2B.7(A), no further Advances shall be made for the
payment of the Development Fee unless and until the Advances theretofore made
for the payment of the Development Fee are less, in the aggregate, than the
product of (x) the Development Fee, as permanently reduced pursuant to Section
2B.7(A), and (y) the maximum percentage then permitted under this Section 2B.5
to be paid from Advances. Subject to the terms and conditions of this Soft Cost
Loan Agreement and the Development Agreement and the aforementioned restrictions
and reductions, the balance of the Development Fee shall be disbursed
twenty-five percent (25%) upon the end of the second (2nd) month following
Completion, including, without limitation, issuance of the temporary certificate
of occupancy covering all of the units comprising the Project, and the remaining
twenty-five percent (25%) after the end of the sixth (6th) month following
Completion provided that (i) the temporary certificate of occupancy covering the
Project is then in full force and effect; (ii) occupancy pursuant to Approved
Leases equals or is greater than 87.5% of the number of units projected to be
occupied at the applicable time pursuant to the Occupancy Schedule on EXHIBIT F,
(which, in the case of the sixth (6th) month following Completion, will be
deemed achieved by occupancy pursuant to Approved Leases of at least 95 units);
and (iii) NOI on the Project, on a cumulative basis for the period from
Completion through the last day covered by the most recent Facility Summary
Report submitted by Borrower and approved by Agent, as set forth in such
Facility Summary Report, is no less than 87.5% of the projected NOI for such
period as set forth in the Budget (or any revised projected NOI approved by the
Requisite Lenders in writing for such respective period).
Section 2B.6 Advances for Operating Expenses. Notwithstanding anything to
the contrary contained herein or any other Loan Document, from time to time (but
not more than once per month) Lender agrees to disburse Advances under this Soft
Cost Loan Agreement to pay operating expenses set forth in the approved Budget
then due or expected to become due in that month ("OPERATING EXPENSES") in
advance to Borrower or as directed by Manager, provided that (i) the Loan is "IN
BALANCE" (as such term is defined in Section 2B.7(A) hereof), (ii) construction
of the Improvements is progressing to the reasonable satisfaction of Agent,
(iii) there are sufficient Loan proceeds and other funds available to Borrower
to complete the Improvements in accordance with the Plans, as certified by
Agent's Inspecting Consultant, (iv) no Event of Default shall have occurred and
be continuing; (v) the timing and amount of disbursement is specifically
contemplated in the approved Budget; and (vi) such disbursement is
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requested by Borrower or Manager, as applicable, in writing, accompanied by (A)
an Operating Expense Certificate in the form annexed hereto and made a part
hereof as EXHIBIT C, and (B) reasonably detailed documentation, including,
without limitation, invoices, as to the amount, necessity and purpose therefor.
Subject to satisfaction of the preceding conditions, if Lender receives from
Borrower or Manager a valid request for a disbursement for payment of Operating
Expenses for the then current month at least five (5) Business Days in advance,
then the disbursement in respect of such Operating Expenses shall be made as
directed by Manager on the date so requested. Subsequent to the Completion Date,
not more frequently than once each calendar month and provided that no Event of
Default has occurred and is continuing, if in a given month the Borrower and/or
Manager requires amounts to pay operating expenses in excess of the Operating
Expenses set forth in the approved Budget ("EXTRA FUNDS"), Manager, at the time
it delivers the Operating Expense Certificate, may deliver a written request to
Lender for a disbursement of Extra Funds stating the amount of such Extra Funds
and the purpose for which such amount is intended with attachments of copies of
bills and other documentation as may be required by Lender to establish that
such Extra Funds are reasonable and that such amounts are then due or expected
to become due in that month. If Lender approves of such costs (such approval not
to be unreasonably withheld), Lender shall release the funds to Manager or its
designee within ten (10) Business Days of Lender's receipt of Manager's written
request.
Section 2B.7 Funding Limitations. At no time shall any Lender be obligated
to make Advances to Borrower for more than Lender's Pro Rata share of what such
Lender is then required to fund, pursuant to Draw Requests submitted by Borrower
and approved by Agent, to the party seeking payment or, in the case of
reimbursement, to the party seeking reimbursement. Agent shall not unreasonably
withhold its consent to a request by Borrower for access to funds from the
Contingency portion of the Budget, so long as there is not then an Event of
Default in existence and the Loan, is, and after such use of Contingency funds
shall remain, in balance.
Section 2B.7(A) Loan Balancing. Anything contained in this Agreement to
the contrary notwithstanding, it is expressly understood and agreed that the
Loan shall at all times be "IN BALANCE." The Loan shall be deemed to be "IN
BALANCE" only at such time and from time to time, as Agent may determine in its
reasonable discretion, that the then undisbursed portion of the Loan and the
then unpaid portion of the Required Equity (it being expressly understood that
no Advances of the Loans shall be made until the Required Equity is fully paid)
equals or exceeds the amount necessary for the timely and full payment of all
costs and expenses relative to construction and leasing of the Project,
including without limitation, all Hard Costs and Soft Costs for (i) all work
done and not theretofore paid for or to be done in connection with the
completion of the construction of the Improvements in accordance with the Plans,
applicable Requirements and the Ground Lease, including, without limitation, the
installation of all utility services, fixtures and equipment required for access
to and operation of the Improvements both on-site and off-site, and (ii) all
other costs incurred and not theretofore paid for, or to be incurred in
connection with the Premises, including, without limitation all Hard Costs, all
Soft Costs, all interest on the Loan, and the amount of any interest reserve or
interest contingency (as reasonably determined by Agent). Borrower agrees that
if Agent reasonably determines that the Loan is not "IN BALANCE", Borrower
shall, within thirty (30) days after written demand by Agent, deposit the
deficiency with Agent (the "DEFICIENCY DEPOSIT"), which Deficiency Deposit shall
first be exhausted before any further disbursement of the Loans is made, or, if
the Loan is not in balance due, in whole or in part, to the insufficiency of the
interest reserve line item of the
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Budget, at Borrower's option, in lieu of making a Deficiency Deposit with
respect to such interest deficiency, direct the Agent, by written notice, to
permanently reduce the remaining available Development Fee line item of the
Budget in sufficient amount to increase the interest reserve line item of the
Budget and thereby cause the Loan to then be "in balance" which notice shall be
accompanied by the written consent of the Developer to such permanent reduction
of the payment of the Development Fee from Loan proceeds. Notwithstanding
anything contained in the foregoing to the contrary, Borrower shall comply with
all requirements of the New York Lien Law. The Lenders shall not be obligated to
make Advances and Agent shall not be obligated to make any Loan disbursement of
proceeds of Advances if and so long as the Loan is not in balance. Among the
various events that could cause the Loan to be "OUT OF BALANCE" are
determinations by Agent that (i) the Budget is insufficient or inadequate, or
(ii) the Improvements (based upon the progress and pace of construction through
the date of such determination) will not be Completed and occupied in accordance
with the Occupancy Schedule set forth on EXHIBIT F. In making any determination
as to the projected interest component of any completion/lease up cost
calculation, Agent shall use the then-current rates on the Advances. In making
any determination as to whether the Loan is in balance, Agent shall consider,
among other things, the Budget, the amount available in the Contingency line
item of the Budget, the progress of construction and overall the status of the
Project.
Section 2B.8 Intentionally Omitted.
Section 2B.9 Place of Disbursement. All Loan disbursements shall be made
at Agent's office in Cleveland, Ohio or any other office of Agent hereafter
selected and notified to Borrower from time to time by Agent. Unless Agent and
Borrower otherwise agree, all disbursements will be made by wire transfer
directly into Developer's segregated construction loan account maintained for
the Project with LaSalle Bank National Association located in Chicago, Illinois.
During the term of the Development Agreement or the Management Agreement,
Borrower hereby specifically and irrevocably directs Agent to make all Advances
to the account of Developer as described in the preceding sentence, and receipt
of Advances by Developer, shall for all purposes satisfy any funding obligations
of Lenders hereunder.
Section 2B.10 Intentionally Omitted.
Section 2B.11 Expenses and Disbursements Secured by Loan Documents. (a)
Agent may, at Agent's option, at any time and from time to time after the
occurrence of an Event of Default under any Loan Document while the same shall
be continuing, disburse, from the amounts made available to it by the Lenders,
all or any part of any particular Draw Request or the Retainage either (i) to
Borrower for disbursement in accordance with the Draw Request, (ii) to the
General Contractor, Major Subcontractor in accordance with the General Contract,
Major Contractor or other party, either directly or by check jointly payable to
Borrower and such party, for all costs payable to such party, (iii) at
Borrower's expense, to the Title Insurer, which shall pay said monies to the
parties owed payment; or (iv) to any Guarantor in connection with such
Guarantor's performance of the Guaranty Obligations (as defined in the
Completion Guaranty).
(b) At any time and from time to time and whether before or after a
default hereunder, whether or not Borrower shall have submitted a Draw Request
therefor, Agent shall
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disburse to itself and for the ratable benefit of the Lenders from Loan proceeds
sums necessary to pay, when due, all interest due Lenders and all expenses
reimbursable to Agent and Lenders hereunder, including, without limitation,
Agent's Counsel Fees and Agent's Inspecting Consultant Fees. Unless an Event of
Default by Borrower hereunder exists, the foregoing reimbursable expenses will
not be funded by Agent without giving Borrower an opportunity to review and
approve same, which approval may not be unreasonably withheld or delayed, it
being understood that reasonable expenses which Borrower fails to approve may
nonetheless be funded by or reimbursed to Lender, which will make final good
faith determination as to whether expenses are reasonable. No such disbursement
shall be deemed to cure or remedy any default by Borrower hereunder.
(c) The execution of this Agreement by Borrower constitutes an
irrevocable direction to make the disbursements in the manner set forth in
Sections 2B.11(a) and 2B.11(b), and no further authorization from Borrower shall
be necessary to warrant such disbursements, and all such disbursements shall
satisfy pro tanto the obligations of Lenders hereunder and shall be secured by
the lien of the Mortgage as fully as if made to Borrower, regardless of the
disposition thereof by the General Contractor, or any Major Contractor, Major
Subcontractor, Title Insurer or other person.
Section 2B.12 Other Limitations and Requirements. The making of any
disbursement by Agent shall not be deemed an acceptance or approval by Agent or
any Lender (for the benefit of Borrower or any third person) of the work done or
Improvements constructed. Notwithstanding anything contained herein to the
contrary, neither Agent nor any Lender shall have any obligation to lend
hereunder unless Agent is, at all times satisfied that the Improvements can be
constructed lien-free in accordance with the Plans, and be open and ready for
occupancy by the Completion Date for the sums set forth in the Budget.
Section 2B.13 Contract Verification. From time to time, Agent may forward
to all contractors, subcontractors, material suppliers, architects, engineers
and other parties listed on any Draw Request, a contract verification to
ascertain the correctness of the amount of the contract for each contractor,
subcontractor, material supplier, architect, engineer and any other party as
contained on the statement. In the event of any discrepancy between the amounts
shown by the executed copies of the contracts, the Draw Request, and the
verification of contract forms, Agent shall have the right to require that such
discrepancies be eliminated to its full satisfaction.
Section 2B.14 Budget Reallocations. Agent agrees not to unreasonably
withhold its consent to Budget reallocations requested by Borrower provided (i)
that at the time of any such request, there is no Event of Default then existing
hereunder or under any other Loan Document, (ii) the Loan is "in balance" as
defined in Section 2B.7(A), (iii) in the case of reallocation of savings, such
savings are actual cost savings for work completed and fully paid for in
connection with the construction of the Improvements or are cost savings that
will be realized upon completion of work in progress, all as documented to the
reasonable satisfaction of Agent, and all applicable requirements of the New
York Lien Law are complied with, at the sole expense of Borrower, as determined
by Agent in its sole discretion upon the advice of counsel, and (iv) under no
circumstances may items designated in the Budget as Hard Costs be allocated to
items designated in the Budget as Soft Costs, or vice versa until Agent shall
have granted its prior written consent thereto, which consent shall not be
unreasonably withheld, and all applicable
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requirements of the New York Lien Law are complied with, at the sole expense of
Borrower, as determined by Agent in its sole discretion upon the advice of
counsel.
Section 2B.15 Required Equity.
(a) Lender shall not be obligated to make any Advances hereunder
until Borrower shall have contributed the full amount of the Required Equity and
the full amount of the Required Equity shall have been fully disbursed to fund
Project costs set forth in the Budget and approved by the Agent, with evidence
of such payments delivered to the Agent promptly after the making thereof and
prior to disbursement of any proceeds of the Loan. The Required Equity may be
contributed by Borrower in the form of cash (including without limitation by
means of the Banc One Financing obtained by Member and/or Alliance Holdings,
Inc., provided same complies with Section 2B.15(b) hereof) or may be contributed
by means of the Mezzanine Financing, all on the terms set forth herein, or any
combination of cash and the Mezzanine Financing, prior to or following the
Closing Date or prior to or following the date in which the Required Equity is
fully funded. As of the date hereof, Borrower has delivered to Lender, in form
acceptable in all respects to Agent, evidence that Borrower has contributed or
shall contribute the full amount of the Required Equity (i) by paying, prior to
the Closing Date designated project costs approved in writing by Agent and
identified in the Budget and/or (ii) by procuring an irrevocable commitment or
commitments to fund Project costs incurred after the Closing Date and approved
by the Agent.
(b) For the purposes of this Agreement, "MEZZANINE FINANCING" shall
mean financing obtained by Borrower or Member from a lender reasonably
acceptable to the Requisite Lenders. Both the Mezzanine Financing and the Banc
One Financing must comply with the following terms and conditions: (i) such
financing shall at no time be secured by any interest in the Premises or any
part of the Project, but the Banc One Financing may be secured by a pledge of
the equity interest of Alliance Holdings, Inc. in Member and the Mezzanine
Financing may be secured by a pledge of the equity interest in Borrower by
Member; (ii) the Banc One Financing and the Mezzanine Financing shall be
subordinated to the Loans pursuant to a subordination and standstill agreement
in form and substance satisfactory to the Requisite Lenders; (iii) principal
payments in connection with such financing shall be deferred until the Loan has
been fully repaid, (iv) interest payments in connection with such financing
shall be deferred until such time as the Debt Service Coverage Ratio on the
Project has exceeded 1.4:1.0 for at least two (2) consecutive calendar quarters;
(v) the lender providing the Banc One Financing or the Mezzanine Financing shall
not have any right to prevent Agent from foreclosing on the Project or otherwise
enforcing its rights under this Agreement or the other loan documents executed
by Borrower in connection with the Loan and, in the event of a default by
Borrower or Member of any of the terms and conditions of the Banc One Financing
or the Mezzanine Financing, such lender shall not have any right to foreclose on
the Project, but subject to the terms and conditions of the subordination and
standstill agreement executed by such lender in favor of Lender, shall have the
right to foreclose on the equity interest of Borrower held by Member or on the
equity interest of Member held by the members of Member; and (vi) the terms and
conditions of such financing and the agreements embodying the same shall be
otherwise reasonably acceptable to the Requisite Lenders in all respects.
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Section 2B.16 Pro Rata; Commitments. (i) As used herein, the terms "PRO
RATA," "RATABLE," "PROPORTIONATE" and words of similar import when used with
reference to the Lenders mean (unless the context clearly otherwise indicates)
pro rata according to the unpaid principal amounts owing to the respective
Lenders under the Notes, or, if no principal is then owing to any Lender,
according to the Commitment, as the case may be, of the respective Lenders.
(ii) As used in this Agreement, the "COMMITMENT" of each Lender at
any time means (A) the decimal figure set forth in Annex I opposite the name of
the Lender multiplied by THIRTY SIX MILLION FOUR HUNDRED FIFTY SIX THOUSAND FOUR
HUNDRED FOUR AND 00/100 DOLLARS ($36,456,404.00) minus (B) the outstanding
principal balance of the Soft Cost Loan that was advanced by such Lender.
Section 2B.17 Sharing of Setoffs. Each Lender agrees that if it shall,
through the exercise of a right of Lender's lien, setoff or counterclaim against
Borrower, or pursuant to a secured claim under Section 506 of Title 11 of the
United States Code or other security or interest arising from, or in lieu of,
such secured claim, received by such Lender under any applicable bankruptcy,
insolvency or other similar law or otherwise, obtain payment (voluntary or
involuntary) in respect of any Advance or Advances as a result of which the
unpaid principal portion of its Advances shall be proportionately less than the
unpaid principal portion of the Advances of any other Lender, such Lender shall
be deemed simultaneously to have purchased from such other Lender at face value,
and shall promptly pay to such other Lender the purchase price for, a
participation in the Advance or Advances of such other Lender, so that the
aggregate unpaid principal amount of the Advances and participation in the
Advances held by each Lender shall be in the same proportion to the aggregate
unpaid principal amount of all the Advances then outstanding as the principal
amount of such Lender's Advances under its Note prior to such exercise of
Lender's lien, setoff or counterclaim or other event was to the principal amount
advanced under all of the Notes outstanding prior to such exercise of Lender's
lien, setoff or counterclaim or other event; provided, however, that if any such
purchase or purchases or adjustments shall be made pursuant to this Section and
the payment giving rise thereto shall thereafter be recovered, such purchase or
purchases or adjustments shall be rescinded to the extent of such recovery and
the purchase price or prices or adjustment restored without interest. Borrower
expressly consents to the foregoing arrangements and agrees that any Lender
holding a participation in an Advance deemed to have been so purchased may
exercise any and all rights of Lender's lien, setoff or counterclaim with
respect to any and all moneys owing by Borrower to such Lender by reason thereof
as fully as if such Lender had made an Advance directly to Borrower in the
amount of such participation.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BORROWER
------------------------------------------
Section 3.1 Representations and Warranties of Borrower. Borrower
represents and warrants that:
(a) Borrower. Borrower is a duly formed Ohio limited liability
company, is in good standing under the laws of the State of Ohio, is fully
authorized to do business in the State of New York, and has full power and
authority to consummate the transactions contemplated hereby;
(b) Borrower's Sole Member. The sole member of Borrower is Member.
Member is a duly formed Ohio limited liability company, is in good standing
under the laws of the State of Ohio, and has full power and authority to
consummate the transactions contemplated hereby as the sole member and manager
of Borrower. At all times while the Loan is outstanding, except as otherwise
permitted by Section 4.2(m) below, Member shall be the sole member and manager
of Borrower and shall own not less than one hundred percent (100%) of Borrower.
The sole member and manager of Member is Alliance Holdings, Inc. Alliance
Holdings, Inc. is a duly formed Pennsylvania corporation, and is in good
standing under the laws of Pennsylvania. At all times while the Loan is
outstanding, except as otherwise permitted by Section 4.2(m) below, Alliance
Holdings, Inc. shall be the sole member and manager of Member;
(c) Guarantor and Developer/Manager. Guarantor is a duly formed
Delaware corporation, is in good standing under the laws of Delaware and has
full power and authority to consummate the transactions contemplated by the
Guaranties. Developer is a duly formed Delaware corporation, is in good standing
under the laws of the Delaware, is fully authorized to do business in the State
of New York and has full power and authority to consummate the transactions
contemplated under the Development Agreement, the Management Agreement and the
Assignment of Contracts;
(d) Enforceability. All Loan Documents executed by Borrower have
been duly authorized, executed and delivered, constitute the valid and binding
obligations of Borrower, and are enforceable against Borrower in accordance with
their respective terms;
(e) Organizational Documents. The Membership Agreement has been duly
executed by the parties thereto, is in full force and effect, and there exist no
defaults thereunder or any event that with passage of time and the giving of
notice if notice is hereunder required would constitute a default thereunder;
(f) Financial Information. The Financial Statements of Borrower
heretofore delivered to Agent fairly and accurately present the financial
condition of Borrower as of the date thereof and no materially adverse change
has occurred in the financial condition reflected therein since the date
thereof. The Financial Statements have been prepared in accordance with sound
accounting methods, principles and standards consistently applied and do not
fail to state any information necessary to make such Financial Statements not
materially misleading;
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(g) Insolvency. Borrower is not insolvent (as such term is defined
in the Bankruptcy Code) and will not be rendered insolvent by execution of this
Agreement or any other Loan Document to which it is a party or by the
consummation of the transactions contemplated thereby;
(h) Budget. The Budget presents a full, accurate and complete
representation of all costs, expenses and fees which Borrower expects to incur
or pay or anticipates becoming obligated to pay to complete construction of the
Improvements;
(i) Litigation. There are no actions, suits or proceedings pending,
or to the knowledge of Borrower or Guarantor, as applicable, threatened, against
or affecting Borrower, Guarantor or the Premises with respect to which an
adverse decision is reasonably likely that would have a material adverse effect
on Borrower, Guarantor or the Premises, or involving the validity or
enforceability of the Mortgage, or the priority of the lien thereof, or the
validity or enforceability of any Loan Document to which Borrower or Guarantor
is a party, at law or in equity, before or by any Governmental Authority, and
Borrower is not operating under or subject to, in default or in violation with
respect to, any order, writ, injunction, decree or demand of any court or any
Governmental Authority which would reasonably be expected to materially and
adversely affect its ability to perform its obligations hereunder;
(j) Legal and Contractual Restrictions. The consummation of the
transactions contemplated hereby and the performance by Borrower or Guarantor of
their respective obligations under this Agreement, the Mortgage, the Notes, the
Security Agreement, the Payment Guaranty, the Completion Guaranty, the Operating
Deficit Guaranty, the Environmental Indemnity Agreement, or any other Loan
Document will not result in any breach of, or constitute a default under, any
mortgage, deed of trust, lease, bank loan or credit agreement, organizational
document or other material agreement or instrument to which Borrower or
Guarantor is a party or by which Borrower or Guarantor may be bound or affected;
(k) Governmental Authority. No authorization or approval or other
action by, and no notice to or filing with, any Governmental Authority or
regulatory body is required for the due execution, delivery and performance by
Borrower or Guarantors of the Loan Documents that is required prior to the date
hereof and has not yet been obtained;
(l) Other Contracts. There is no default on the part of Borrower
under or with respect to this Agreement, the Note, the Mortgage, any Approved
Lease or any other Loan Document, and no event has occurred and is continuing
which with the giving of notice (if notice is hereunder or thereunder required)
and the passage of time would constitute a default under any of the aforesaid
documents;
(m) Usury. The maximum interest rate or interest rates for the Loan
are not to Borrower's knowledge, after consultation with counsel, usurious;
(n) Counterclaims and Defenses. Borrower has no counterclaims,
offsets or defenses with respect to the Loan or with respect to the Notes or any
other Loan Document;
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(o) Lien of Mortgage. To Borrower's knowledge, after consultation
with counsel and the Title Insurer, the Soft Cost Mortgage will, upon
recordation thereof be a good and valid second lien on Borrower's leasehold
interest in the Premises (other than intangible personal property), subject to
the Building Loan Mortgage and the Permitted Encumbrances, and upon such filing
and recordation and the filing of the UCC Financing Statements in the proper
offices, Agent will have a perfected, good and valid first security interest in
all items of personal property described in the granting clause of the Soft Cost
Mortgage, the Security Agreement and the Assignment of Contracts, subject to the
Building Loan Mortgage and the Permitted Encumbrances;
(p) Encumbrances. Except for the Permitted Encumbrances, the
Premises are not and will not be encumbered by any other Lien not expressly
permitted hereunder or hereafter approved in writing by Agent, it being
understood that Agent will not unreasonably withhold its approval of any
reasonably necessary beneficial easements;
(q) Approved Leases. With respect to the Approved Leases and any
other leases affecting the Premises, Borrower shall, on a continuing basis, be
deemed to have represented and warranted that the same are in full force and
effect, have not been modified or amended in any material respect without the
consent of Agent, not more than ten percent (10%) of Approved Leases are subject
to actual or alleged Borrower defaults, and all conditions to the effectiveness
thereof required to be satisfied as of the date hereof have been satisfied;
(r) Condemnation, Eminent Domain, Access. Borrower has not received
any notice of, and is not aware of, any actual, proposed or threatened exercise
of the power of eminent domain or other taking by any governmental or
quasi-governmental body or agency of all or any portion of the Premises or any
interest therein, and no condition exists and no application is pending that
would unreasonably inhibit use and occupancy of the Premises for its intended
purpose or adversely modify, restrict or inhibit full access, ingress or egress
to the Project from the adjacent roadways in any material respect;
(s) Casualty. The Premises have not suffered any casualty or loss
since the date of the appraisal required to be delivered to Agent under the
provisions of this Agreement;
(t) Pollutants. Except as specifically identified and disclosed in
the environmental reports delivered to Lender, the Premises has never been used
by Borrower to generate, manufacture, refine, produce, store, handle, transfer,
process or transport any Pollutants in violation of any Environmental Law and
Borrower has not used in the past, nor does Borrower intend to use, or permit to
be used, in the future, during construction or otherwise the Premises for the
purpose of generating, manufacturing, refining, producing, storing, handling,
transferring, processing or transporting of any Pollutant in violation of any
Environmental Law. Except as specifically identified and disclosed in the
environmental reports delivered to Lender, Borrower has no knowledge of any
Pollutant having been allowed to spill, leak, escape, be discharged, dumped,
emptied or otherwise disposed of or dealt with on the Premises or incorporated
into the Improvements or allowed to be discharged or drained into or on any
property adjacent to the Premises or into any waters on or adjacent to the
Premises or onto lands from which such Pollutants might seep, flow or drain into
such waters in violation of any Environmental Law. The Premises (i) is not
included or proposed to be included on the
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National Priorities List issued pursuant to Comprehensive Conservation
Environmental Response, Compensation and Liability Act ("CERCLA") by the United
States Environmental Protection Agency ("EPA") or on the inventory of other
potential "PROBLEM" sites issued by the EPA, (ii) has not otherwise been
identified by EPA as a potential CERCLA site or included or proposed for
inclusion on any list or inventory issued pursuant to any state environmental
statute or issued by any other Governmental Authority, and (iii) is not located
in a "WETLANDS". Borrower has not received any notice of, nor does Borrower have
any knowledge of, any occurrence or circumstance which with notice or passage of
time would give rise to a claim or Lien under or pursuant to any environmental
rule, regulation, Requirement or statute of any Governmental Authority
pertaining to any Pollutant.
(u) Subdivision. The Land consists of one separate tax lot and is
not part of a larger tract owned or leased by Borrower, and there are and will
be no encroachments on or from the Land except as shown on the survey delivered
by Borrower pursuant to this Agreement or as expressly permitted under
applicable Requirements and approved by Agent and any adjacent property owner
whose rights are affected by such encroachment;
(v) Access. The Project has access to legally dedicated and accepted
roads;
(w) Borrower is, or by January 1, 2000 shall be, Year 2000 Compliant
(as hereinafter defined). "Year 2000 Compliant" shall mean that all software,
embedded microchips, and other processing capabilities utilized by and material
to the business operations or financial condition of Borrower (including,
without limitation, business operations conducted by Developer on Borrower's
behalf under the Development Agreement and the Management Agreement) are able to
interpret and manipulate data on and involving all calendar dates correctly and
without causing any abnormal ending scenario, including in relation to dates in
and after the year 2000. Upon Lender's written request, Borrower shall
reasonably demonstrate (or shall cause Developer to reasonably demonstrate)
compliance with the preceding covenant.
(x) Plans. The Plans, have been approved by Borrower and Guarantor,
and before the initial Advance, said Plans shall be approved by Agent, the
Ground Lessor and, to the extent required by any Requirement or any restrictive
covenant, the appropriate Governmental Authority and the beneficiary of any such
covenant;
(y) Construction Performed. All construction heretofore or hereafter
performed complies and shall comply with all Requirements and the Ground Lease;
Borrower has fully paid for all work performed through the date hereof (except
for any retainage expressly provided for in the relevant Project Document) and
has received lien waivers for all such work; the Improvements will be
constructed wholly within the perimeter of the Land and substantially in
accordance with the Plans; there are no structural defects in the Improvements
(it being intended that the absence of structural defects shall be a
pre-condition to the funding of any Draw Request); no violation of any
Requirement or the Ground Lease exists with respect thereto and the anticipated
use thereof complies with all Requirements and the Ground Lease and restrictive
covenants affecting the Land and all requirements for such use have been
satisfied to the extent possible as of the date hereof;
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(z) Utilities. All utility services necessary for the construction
of the Improvements and the operation thereof for their intended purpose are
available at the boundaries of the Land, including, without limitation, water
supply, storm and sanitary sewer facilities, gas, electrical, and telephone
facilities and the installation of said utility services to the Improvements can
and will be completed by the Completion Date. Borrower has received permission,
to the extent required, from the appropriate Governmental Authority and/or the
provider of each utility service to connect the Improvements into each utility
service provided the Improvements are constructed in accordance with the Plans;
(aa) Compliance. All zoning, planning, land use (including, without
limitation, the Zoning Resolution of the City of New York), construction,
renovation, and environmental approvals, authorizations, licenses or permits
necessary as of the date hereof to permit the Improvements to be constructed and
operated shall be listed on a schedule to be delivered by Borrower to Agent on
the Closing Date (together with copies of items listed in said schedule), and
have been or will be acquired by Borrower as and when required, are or will be
in full force and effect and Borrower has received no notice of a violation,
revocation or termination of same and any rights to appeal the granting of such
approvals have expired with no appeals being taken. Said permits are the only
permits necessary to construct the Improvements in accordance with all
Requirements. The Improvements, as described in the Plans and when completed,
will comply with all zoning, environmental, air quality, subdivision, planning,
building, land use (including, without limitation, the Zoning Resolution of the
City of New York), and other similar types of laws, rules, regulations,
ordinances, requirements, planning approvals and permit conditions imposed by
any Governmental Authority. Any zoning or subdivision approval is based on no
real property, or rights appurtenant thereto, other than the Land and rights
encumbered by the lien of the Mortgage. To Borrower's knowledge, after
consultation with counsel, the Improvements as, and to be, improved and used are
not in violation of any covenants, conditions or restrictions of any kind or
nature, whether or not of record, affecting all or any part of the Land or any
interest therein. No amendment or change in any such permit, license or variance
and no amendment or change in zoning or any other land use control has been
sought or obtained or will be sought or obtained;
(bb) Contracts. Borrower or Developer on Borrower's behalf has not
made and is not aware of any contract or arrangement of any kind binding on
Borrower or Developer on Borrower's behalf in an amount in excess of $50,000,
except those disclosed in writing on a schedule to be delivered to Agent on the
Closing Date (or which may be entered into subsequent to the date hereof and
disclosed in writing to Agent);
(cc) Information. To Borrower's knowledge, no information,
certification or report submitted to Agent by or on behalf of Borrower pursuant
to this Agreement or otherwise in connection with the Loan or Borrower's
requests or applications therefor contains any material misstatement of fact or
fails to state a material fact necessary to make the information not misleading
in any material respect;
(dd) Draw Request. Each Draw Request, and the receipt of the funds
requested thereby, shall have the effect stated in the definition of the term
"DRAW REQUEST" and be accompanied by the items in said definition and such other
items as are required by this Agreement;
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(ee) Use of Proceeds. Borrower will employ the Loan proceeds in
accordance with the Budget and will not require and will not avail itself of any
additional extension of credit for any purpose without Agent's prior written
consent;
(ff) Broker. Borrower has not retained the services of any broker in
connection with the Loan (other than Shattuck Hammond Partners); and
(gg) Investment Company Act; Other Regulations. Borrower is not an
"INVESTMENT COMPANY", or a company "CONTROLLED" by an "INVESTMENT COMPANY,"
within the meaning of the Investment Company Act of 1940, as amended. Borrower
is not subject to regulation under any Federal or State statute or regulation
which limits its ability to incur the Obligations or any other indebtedness.
LENDER ACKNOWLEDGES THAT BORROWER HAS RELIED SOLELY ON THE
DEVELOPER'S CERTIFICATE IN THE FORM ATTACHED HERETO AND MADE A PART HEREOF AS
EXHIBIT E IN MAKING THE REPRESENTATIONS RELATING TO THE PREMISES AND THE PROJECT
(AS DISTINGUISHED FROM THOSE REPRESENTATIONS RELATING TO BORROWER AND ITS
ORGANIZATION) CONTAINED IN THIS SECTION 3.1 AND ELSEWHERE IN THIS AGREEMENT AND
OTHER LOAN DOCUMENTS. IN THE EVENT THAT DEVELOPER'S OBLIGATIONS UNDER THE
DEVELOPER'S CERTIFICATE SHALL TERMINATE PURSUANT TO THE TERMS THEREOF, BORROWER
SHALL BE DEEMED TO HAVE MADE ALL OF THE REPRESENTATIONS IN THIS ARTICLE 3.1 ON
ITS OWN ACCORD AND WITHOUT RELIANCE ON THE DEVELOPER'S CERTIFICATE. BORROWER
EXPRESSLY ACKNOWLEDGES AND AGREES THAT NOTWITHSTANDING THE FOREGOING
ACKNOWLEDGMENT BY LENDER, ANY MISREPRESENTATION CONTAINED HEREIN OR IN THE OTHER
LOAN DOCUMENTS, WHETHER OR NOT MADE IN RELIANCE ON THE DEVELOPER'S CERTIFICATE,
SHALL BE DEEMED A DEFAULT HEREUNDER BY BORROWER, SUBJECT TO ALL OF THE
APPLICABLE PROVISIONS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
ARTICLE IV
COVENANTS OF BORROWER
---------------------
Section 4.1 Affirmative Covenants of Borrower. Borrower covenants with
Agent, for itself and for the ratable benefit of the Lenders, that, throughout
the term of the Loan and any extensions thereof, Borrower will:
(a) Structure of Borrower. Comply with all Requirements in order to
maintain Borrower in good standing as a validly existing limited liability
company under the laws of the State of Ohio, authorized to do business in
the State of New York;
(b) Performance of Obligations. Promptly comply with all conditions
of this Agreement and the other Loan Documents with which Borrower is
required to comply and any Requirement, the Ground Lease and/or
restrictive covenant affecting the Land;
(c) Notices. Promptly (upon transmittal or receipt) deliver to Agent
copies of all material notices and correspondence with respect to: (i) any
Project Document, (ii)
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any Loan Document, (iii) the financial condition of Borrower, (iv) Agent's
and Lenders' security, and (v) any violation or potential violation of any
Requirement or any approval, authorization, or permit issued in regard to
the Premises or Improvements, and Borrower will promptly respond fully to
any inquiry of Agent made with respect thereto, and will permit Agent,
upon Agent's written request, to participate in any inquiry, hearing or
meeting with regard to any of the foregoing and will furnish Agent, on
demand, proof of compliance, or proof of the action Borrower is taking in
order to comply, reasonably satisfactory in all respects to Agent;
provided that Lender acknowledges that pursuant to the Development
Agreement and the Management Agreement, Borrower has delegated to
Developer certain of Borrower's duties under this Agreement and the other
Loan Documents. Accordingly, during the term of the Development Agreement
and/or Management Agreement, (i) Lender shall rely on any notice, demand
or request for Advances from Developer as if such notices, demands or
requests for Advances were made by Borrower, (ii) any notice, demand or
request for Advances or modifications not signed by Developer shall be
ineffective and (iii) Agent shall not act upon any request by Borrower for
a material modification to any of the Loan Documents unless the same is in
writing signed by both Borrower and Developer;
(d) Additional Documents. Execute and deliver to Agent, from time to
time, and as reasonably requested by Agent, such other documents as shall
be reasonably necessary to provide the rights and remedies to Agent and
Lenders granted or provided by the Loan Documents;
(e) Maintenance of Premises. Maintain the Premises in good repair
and safe condition at all times and if at any time any Pollutant shall be
discovered buried under, manufactured or processed or stored on the Land
in violation of Requirements, Borrower will promptly remove same in
accordance with any and all Requirements;
(f) Insurance. Maintain, at all times, insurance on the Premises in
accordance with the requirements of the Mortgage;
(g) Draw Request. Prior to Completion and satisfaction of all
requirements of Section 6.4 hereof, submit to Agent at least once, but no
more than once each calendar month a Draw Request (except Borrower may
make an additional Draw Request to pay Interest or as otherwise provided
herein);
(h) Payment of Fees. On the Closing Date and thereafter promptly
when due, pay the Commitment Fee, the Construction Administration Fee, the
Agency Fee, Agent's Counsel Fees, Agent's Inspecting Consultant fees, all
costs and expenses required to satisfy the conditions of this Agreement
and all costs and fees of whatever nature incurred by Agent acting on its
own behalf or as agent for itself and any participating Lenders in
connection with the negotiation, consummation, execution, closing,
syndication, administration and/or collection of the Loan, but
specifically excluding any expenses incurred in connection with the
negotiation, consummation, execution and closing of the Loan by any Lender
(other than KCCI (individually or as Agent)) in excess of $5,000 each.
Without limiting the generality of the foregoing, Borrower will pay: (i)
mortgage recording taxes and recording fees, title insurance premiums and
costs, escrow
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fees, flood zone determination fees, survey fees, appraisal costs, Agent's
environmental audit and site inspection fees; and (ii) all reasonable fees
and expenses incurred by Agent, and its respective agents and
representatives in connection with any Event of Default under any Loan
Document or the enforcement thereof. To the extent Agent, after the
Initial Closing, deems it necessary in its reasonable judgment to employ
counsel and/or consultants for any purpose relative to the Loan, the
reasonable fees and expenses of such counsel and/or consultants shall be
borne by Borrower. Any such fees and expenses incurred by Agent are to be
paid promptly by Borrower in no event later than ten (10) Business Days
from Agent's delivery of an invoice to Borrower. Borrower hereby agrees to
indemnify and hold Agent harmless with respect to all of the foregoing
costs, fees and expenses;
(i) Use of Proceeds. Borrower shall receive the Advances of the
Building Loan made under the Building Loan Agreement and shall hold same
in trust solely for, and shall expend, Building Loan proceeds solely for
the purpose of paying costs of the improvement as defined in the New York
Lien Law, and identified in the Budget and Borrower shall utilize Advances
of the Soft Cost Loan solely for the purpose of paying costs identified in
the Budget as Soft Costs. Borrower represents and agrees that it will not
require and agrees that it will not avail itself of any additional
extension of credit for the requisition and development of the Premises or
the construction of the Improvements (except for financing expressly
permitted hereunder).
(j) Construction. Cause the construction of the Improvements to be
prosecuted with diligence and continuity so as to complete and equip the
same in accordance with the Plans, the Ground Lease, all Requirements and
the Budget on or before the Completion Date free and clear of Liens or
claims for Liens other than Permitted Encumbrances. Borrower will promptly
deliver a copy of all proposed and executed Change Orders to Agent and
Agent's Inspecting Consultant;
(k) Standard of Construction. Construct and achieve Completion of
the Improvements substantially in accordance with the Plans to the
reasonable satisfaction of Agent and Agent's Inspecting Consultant and
will not permit, and will promptly remove, any encroachment on the Land
unless the same is insured over by the Title Insurer to the reasonable
satisfaction of Agent, and Borrower will not allow the Improvements to
encroach on any adjoining property or street, and if any such encroachment
exists Borrower will promptly remove same unless the same is insured over
by the Title Insurer to the reasonable satisfaction of Agent;
(l) Inspections. Subject to the Approved Leases, permit Agent,
Agent's Inspecting Consultant and/or Agent's agents and the other Lenders
at all reasonable times to enter upon the Premises, and to inspect the
Improvements and all materials to be used in the construction thereof and
to examine all Plans which are or may be kept at the construction site,
and will cooperate, and cause the General Contractor and the Major
Contractors (and will use good faith efforts to cause the Major
Subcontractors) to cooperate, with Agent's Inspecting Consultant to enable
it to perform its functions;
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(m) Correction of Defects. Upon demand of Agent based upon the
advice of Agent's Inspecting Consultant, correct any structural defect in
the Improvements or any departure from the Plans deemed by Agent to be
material, and the disbursement of any Loan proceeds shall not constitute a
waiver of Agent's right to require compliance with this covenant with
respect to any such defects or departures from the Plans; notwithstanding
the foregoing, neither Agent nor Agent's Inspecting Consultant shall have
any affirmative duty to Borrower or any third party to inspect for said
defects or to call them to the attention of Borrower or anyone else and
the failure to do so shall in no event give rise to any claim or liability
to or on the part of any party;
(n) Bonds. Obtain and deliver to Agent material and labor payment
bonds and performance bonds, which bonds must be reasonably acceptable to
Agent, for the General Contractor, naming Agent, for the ratable benefit
of the Lenders, as a dual obligee thereunder;
(o) Letter Agreements. Require Borrower's Engineer and Architect,
the General Contractor and each Major Contractor to timely execute and
deliver to Agent a letter in the form previously approved by the Agent;
(p) Foundation Survey. Deliver to Agent a foundation survey
complying with the requirements provided by Agent to Borrower on the
Closing Date upon completion of the foundation;
(q) As-Built Survey. Deliver to Agent an as-built ALTA/ACSM survey
complying with the requirements set forth in the Commitment Letter upon
Completion of the Improvements;
(r) Indemnification. Protect, defend, indemnify and hold Agent and
Lenders, and Agent's and each Lender's officers, directors, shareholders,
employees and agents harmless from all claims, expenses, costs, losses,
injury, liabilities (including liability for penalties), judgments, fines,
damages, settlements, causes of actions, suits, demands, including
attorneys fees and costs, arising from or related to: (i) any brokerage
commissions or finder's fees claimed by any broker or other party arising
by reason of the execution hereof or the consummation of the transactions
contemplated hereby (except by any such broker or other party retained by
Lender), (ii) any actions or omissions relative to the Premises including,
without limitation, contract, personal injury (other than for Agent's or
Lenders' gross negligence or wilful misconduct) or property damage claims,
(iii) the Improvements or the construction thereof, (iv) the existence of
any encroachment (except as shown on the survey delivered by Borrower
pursuant to this Agreement and approved by Agent or as may be permitted
under Section 4.1(k)) upon the Land or from any part of the Improvements
encroaching on any adjoining property, street or easement, and (v) any
action or lien pursuant to any environmental Requirement or clean up or
compensation act, including the failure to comply with the terms of any
order issued by any federal, state or municipal department or agency
having regulatory authority over environmental matters with regard to the
Premises or any other property owned by Borrower or the presence or
existence of any Pollutant in violation of Requirements. If any action,
suit or proceeding arising from any of the foregoing is
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brought against Agent or any Lender, Borrower will resist and defend such
action, suit or proceeding or cause the same to be resisted and defended
by counsel designated by Borrower (which counsel shall be reasonably
satisfactory to Agent), unless, due to a conflict of interest, Agent or
any Lender require such action, suit or proceeding to be resisted and
defended by counsel of its own selection and is represented by such
counsel (in which case Borrower shall be liable for the payment of Agent's
and such Lender's reasonable attorney's fees), provided that prior to the
occurrence and continuance of default, Agent or any Lender shall not
settle or release any claim without the written consent of Borrower, which
approval shall not be unreasonably withheld or delayed. If and to the
extent that the foregoing provisions of this Section may be unenforceable
for any reason, Borrower hereby agrees to make the maximum contribution to
payment and satisfaction of each of the indemnified liabilities which is
permissible under applicable law. If Borrower shall fail to do any act or
thing which it has covenanted to do hereunder or any representation or
warranty on the part of Borrower contained herein or in any Loan Document
shall be breached and such breach shall continue beyond any applicable
notice and grace periods, Agent or any Lender may (but shall not be
obligated to) do the same or cause it to be done or remedy any such
breach, and may expend its funds for such purpose; provided, however, that
no such action by Agent or any Lender shall relieve Borrower of any
liability in connection with such failure or breach or be deemed to
constitute a waiver of any default under this Agreement or such Loan
Document. Any and all amounts so expended by Agent or any Lender shall be
repayable to them by Borrower, promptly after Agent's demand therefor,
with interest at the Default Rate from the date of expenditure by Lender
to the date of repayment. The obligations of Borrower under this Section
4.1(r) shall survive the termination of this Agreement and the discharge
of Borrower's other obligations hereunder. Notwithstanding the foregoing,
to the extent the Guarantor shall have performed its obligations under the
Guaranties and/or the Environmental Indemnity pertaining to the preceding
obligations, neither Borrower nor any Guarantor shall be liable for
duplicative fees and costs incurred by Agent or Lenders in connection with
such obligations;
(s) Security Interests. Grant Agent, for the ratable benefit of
Lenders, a first lien and security interest, subject only to Permitted
Encumbrances and liens permitted hereunder and that the Ground Lessor may
have under the applicable provisions of the Ground Lease, in and to all
furnishings, fixtures and equipment and other personal property owned
and/or leased by Borrower and used in the operation of the Improvements
immediately upon acquisition of same or any part of same and will deliver
to Agent, promptly following demand, copies of all documents which
evidence Borrower's title to or a leasehold interest in any materials,
fixtures or articles incorporated in the Improvements. Borrower shall not
enter into conditional sales contracts or lease agreements for equipment
to be used in the construction or operation of the Improvements, except
for office equipment, furniture and other machinery or equipment used in
the day-to-day operation and maintenance of the Improvements, the value of
which in the aggregate shall not exceed $500,000;
(t) Permits. Obtain and keep all permits, licenses and
authorizations required for the construction, use and operation of
Premises, including without limitation the temporary certificate of
occupancy covering the Improvements, in full force and effect,
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promptly comply with all conditions thereof, and upon Agent's request,
promptly deliver to Agent evidence of compliance and promptly notify Agent
of any violation, revocation or termination of same;
(u) Easements. Procure such easements, cross easements or operating
agreements as Agent may reasonably deem necessary for the use of the
Premises and will submit same to Agent for approval prior to the execution
thereof by Borrower, accompanied by a drawing or survey showing the
location thereof;
(v) Compliance with Requirements. Promptly comply with all
Requirements which affect the Premises or for which a notice of violation
or non-compliance has been issued and promptly deliver to Agent evidence
of such compliance and copies of any such notices of violation or
non-compliance;
(w) Payment of Claims; Notice to Agent of Claims. Promptly pay all
costs and expenses incurred in connection with the Premises, and Borrower
shall cause the Premises to be kept free and clear of any Liens other than
Permitted Encumbrances. Within thirty (30) days after filing of any Lien,
Borrower shall cause such Lien to be discharged, released of record or
bonded over for a sum and in a manner by a reputable surety each in all
respects acceptable to Agent; notify Agent in writing within ten (10) days
thereof should any mortgage, lien, notice of lien, stop notice,
encumbrance or charge or any other security instrument whatsoever against
the Property (other than the Permitted Encumbrances), Improvements,
Personal Property, or other collateral covered by the Loan Documents or
any part thereof come to Borrower's attention. Borrower shall do all acts
and execute all additional documents required by Agent to maintain the
priority of the lien of the Soft Cost Mortgage and the Soft Cost Mortgage
and to comply with the Lien Law of the State of New York.
(x) Financial Statements. Furnish to Agent: (i) Commencing on
Completion and with respect to monthly statements ending upon the
achievement of the Intermediate Threshold with respect to Borrower, not
later than forty-five (45) days after the end of each calendar month, and,
not later than one hundred twenty (120) days after the close of Borrower's
fiscal year, a balance sheet, a statement of profit and loss, and a
statement of changes setting forth in comparative form figures for the
preceding month or year, as the case may be. The annual statements
delivered by Borrower shall be certified by an officer of Borrower or
Developer. After the Intermediate Threshold has occurred, Borrower may
submit quarterly statements in lieu of the monthly statements required
hereunder. All such financial statements shall be certified by an officer
of Borrower or Manager; (ii) With respect to Guarantor, not later than
forty-five (45) days after the end of each calendar quarter, and, not
later than one hundred twenty (120) days after the close of Guarantor's
fiscal year, a balance sheet, a statement of profit and loss, and a
statement of changes setting forth in comparative form figures for the
preceding year or quarter, as the case may be. The annual statements (but
not the quarterly statements) delivered by Guarantor shall be audited and
certified by Ernst & Young LLP or another firm of independent certified
public accountants, reasonably acceptable to Agent. All such financial
statements shall be certified by officer of Guarantor; (iii) Such other
financial
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statements required pursuant to the terms of the Mortgage or as may be
reasonably requested by Agent;
(y) Approved Leases. Use reasonable efforts to fully lease the
Improvements. All leases must comply with the leasing guidelines set forth
in Section 4.2(i) hereof. Borrower shall obtain the prior written approval
of Agent for each lease if required by Section 4.2(i).
(aa) Additional Documents. Execute and deliver to Agent, from time
to time, such other documents as shall be reasonably necessary to provide
the rights and remedies granted or provided by the Loan Documents;
(bb) Rent Rolls. From and after the date of Completion, deliver to
Agent, (i) not less than monthly prior to Stabilization and quarterly
thereafter, on or before the fifth (5th) day of such month or calendar
quarter, as the case may be, a rent roll and a "Leasing Report" relative
to any vacant units which shall summarize resident applications received
and leasing progress, certified by Borrower or Manager on behalf of
Borrower to be true and complete and containing Borrower's or Manager's
certification that, except as specifically noted, (1) all of the Leases
then in effect comport with the requirements of Section 4.2(i) hereof,
including the requirement that such Leases do not vary in any material way
from the form of lease previously approved by Agent and the requirement
that the fixed rent under each such Lease is not less than the rates set
forth on EXHIBIT F; (2) there have been no prepayments under such Leases
greater than thirty (30) days (except for security deposits shown on such
rent roll); and (3) the aggregate of (x) the revenues from such Leases and
(y) the pro forma rentals for the then vacant units determined in
accordance with the pro forma rentals set forth on Exhibit F are no less
than ninety-five percent (95%) of the total pro forma rentals set forth on
Exhibit F, and otherwise containing such information and being in such
form as Agent may reasonably require, and (ii) not less than one hundred
twenty (120) days following the end of Borrower's fiscal year, an annual
pro forma operating statement for the Improvements, prior to Completion,
Borrower shall deliver to Agent a monthly Leasing Report;
(cc) Operating Budget/Cash Flow. Deliver to the Agent facility
summary reports for the Project in form and substance satisfactory to
Agent, which shall be broken down on a line item basis (including a line
item for NOI) and shall include an occupancy summary and a profit and loss
summary (each, a "FACILITY SUMMARY REPORT"). Such Facility Summary Reports
will be provided monthly from Substantial Completion until Stabilization
has been achieved, with quarterly reports being permitted after
Stabilization has been achieved, within forty-five (45) days after the end
of each calendar month or quarter, as applicable. As used
herein,"STABILIZATION" shall mean, and shall have been achieved, when the
Debt Service Coverage Ratio for the Project following the Intermediate
Threshold has exceeded 1.2 to 1.0 for at least three (3) consecutive
calendar months. As used herein,"INTERMEDIATE THRESHOLD" (which must occur
no later than the twelfth (12th) month following Substantial Completion to
be effective) shall mean, and shall have been achieved when: (i) at least
six (6) months have elapsed since Substantial Completion; (ii) not less
than 87.5% of the units then scheduled to be occupied, as set forth in the
Occupancy Schedule attached hereto and made a part hereof as EXHIBIT F,
are
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then occupied and all payments are being made in accordance with the terms
of Approved Leases, and (iii) the NOI of the Project on a cumulative basis
for the period from Substantial Completion through the last day covered by
the most recent monthly Facility Summary Report submitted by Borrower and
approved by Agent, as set forth in such Facility Summary Report, is no
less than 87.5% of the projected NOI set forth in the Budget (or any
revised projected NOI approved by the Requisite Lenders in writing for
such respective period);
(dd) Debt Service Coverage Ratio. Achieve and maintain a minimum
Debt Service Coverage Ratio for the Project, as determined by Agent based
upon information provided by Borrower within forty-five (45) days of the
end of each calendar quarter, of (i) 1.0 to 1.0 at the end of quarters 5
and 6 following Substantial Completion; and (ii) 1.2 to 1.0 at the end of
quarter 7 following Substantial Completion, and each quarter subsequent
thereto, as determined quarterly on a rolling basis including up to four
quarters commencing with quarter 7. For example, in quarter 8, the
calculation will include figures from quarters 7 and 8 only; in quarter
10, the calculation will include figures from quarters 7, 8, 9 and 10.
(ee) Occupancy of the Project. Achieve and maintain occupancy of the
Project after Substantial Completion, as established to Agent's
satisfaction, at not less than the following scheduled levels measured at
the end of such period:
Quarter 2 following Substantial Completion: 43.75%
Quarter 3 following Substantial Completion: 55.13%
Quarter 4 following Substantial Completion: 65.63%
Quarter 5 following Substantial Completion: 76.13%
Quarter 6 following Substantial Completion: 83.13%
Quarters 7-10 following Substantial Completion: 83.13%
(ff) Guarantor's Net Worth. Provide to Agent a certificate, in form
reasonably acceptable to Agent, on a quarterly basis, within forty-five
days (45) of the end of each calendar quarter, evidencing that Guarantor's
minimum net worth is equal to $70,000,000.
(gg) Guarantor's Liquidity. Provide to Agent a certificate, in form
reasonably acceptable to Agent, on a quarterly basis, within forty-five
(45) days of the end of each calendar quarter, evidencing that Guarantor
has Liquid Assets equal to at least $5,000,000.
(hh) Compliance With Ground Lease. Comply in all respects with the
Ground Lease, including, without limitation, the provisions of Article 11
thereof governing construction of the Project, and the provisions of
Article 40 thereof governing non-discrimination and comply with all of the
instruments and agreements with which Borrower is required to comply
pursuant to the Ground Lease, including, without limitation, the Master
Lease, the Master Development Plan and the Design Guidelines.
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(ii) Post-Closing Conditions. Borrower shall satisfy the
Post-Closing Conditions set forth in Section 2B.7, if any, on or before
the Post-Closing Delivery Date and in no event later than the Post-Closing
Default Date.
(jj) Agent's Sign on the Premises. Authorize Agent (i) to erect, at
its option, and solely at Agent's expense, a sign on the Premises
indicating that Agent and the Lenders are the source of the financing for
the Improvements and (ii) to use Borrower's name and the location of the
Improvements in any published advertisement. Any sign must be in
compliance with applicable ordinances and the Ground Lease and shall be
removed upon Completion;
(kk) Borrower and/or Guarantor on Borrower's behalf shall establish
and maintain the Interest Rate Protection Facility and comply with the
Forward Treasury Lock Agreement. Borrower and/or Guarantor on Borrower's
behalf shall establish the Interest Rate Protection Facility by effecting
transactions pursuant to the Forward Treasury Lock Agreement as follows:
in an amount not less 25% of the aggregate original principal amount of
the Loan on or before the Closing Date; in an amount not less than 50% of
the aggregate original principal amount of the Loan on or before the
thirtieth (30th) day following the Closing Date; in an amount not less
than 75% of the aggregate original principal amount of the Loan on or
before the sixtieth (60th) day following the Closing Date; and in an
amount not less than 100% of the aggregate original principal amount of
the Loan on or before the ninetieth (90th) day following the Closing.
Section 4.2 Negative Covenants of Borrower. Borrower will not, without the
prior written consent of Agent throughout the term of the Loan and any
extensions thereof:
(a) Interest in Premises. Except for Approved Leases and other
Permitted Encumbrances, create, effect, consent to, contract for, agree to
make, suffer or permit any conveyance, sale, assignment, transfer, lien,
pledge, mortgage, security interest, encumbrance or alienation of the
Land, the Improvements or any interest in a portion of the Land or the
Improvements, whether effected directly, indirectly, voluntarily,
involuntarily, or by operation of law or otherwise. No other financing or
mortgaging of the Land or the Improvements shall be permitted while the
Loan or any portion thereof is outstanding, it being understood that
neither the BancOne financing nor the Mezzanine Financing (provided they
always comport with the requirements of Section 2B.15(b) hereof) shall
violate this provision;
(b) Ownership. Change the ownership (directly or indirectly) or the
structure of Borrower or its members, and no member shall sell, assign,
pledge, hypothecate or encumber or transfer its membership interest in
Borrower provided, however, that the foregoing provision shall not be
deemed violated by (i) a foreclosure and acquisition of the equity
interest in Borrower or Member by the lender (or an affiliate of the
lender) providing the Mezzanine Financing or the Banc One Financing,
provided that the Banc One Financing or Mezzanine Financing, as
applicable, and such foreclosure and acquisition, complies in all respects
with Section 2B.15(b) and the subordination and standstill agreement
delivered by such lender pursuant to Section 2B.15(b); (ii) an
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acquisition of the equity interest in Borrower directly by Developer (or
any other wholly owned subsidiary of the Guarantor) on the express terms
and conditions set forth in Section 4.2(m) hereof; or (iii) any change of
ownership of Alliance Holdings, Inc., provided Brookdale Living
Communities of New York - BPC, Inc. is then the Developer under the
Development Agreement and the Manager under the Management Agreement and
the foregoing agreements are then in full force and effect. Borrower shall
not permit or allow the Membership Agreement to be amended, terminated or
modified;
(c) Amendment to Documents. Except as permitted hereunder, (i)
modify or amend or terminate (other than by full performance thereof) any
Loan Document, or (ii) modify or amend or terminate any Project Document
(except as permitted in Section 4.2(d) below and except for non-material
changes to Approved Leases that do not have the effect of reducing the
aggregate revenues from the Leases to less than ninety-five percent (95%)
of the "gross potential rents" for the applicable period set forth on
Exhibit F hereto, without the prior consent of Agent which consent will
not be unreasonably withheld (as to Project Documents only);
(d) Change Orders. Without the written consent of Agent, Ground
Lessor (if required), any lessee under an Approved Lease (if required
under such Approved Lease), any Governmental Authority whose permission
may be required, or any other person or entity whose consent may be
required by any easement, agreement or other document, suffer or permit
any material modification of or material deviation from the Plans, nor
shall Borrower allow any change orders to be executed or permit the
performance of any work pursuant to any Change Order which exceeds the
Change Order Amount (whether an add or a deduct or a reallocation) or the
Aggregate Change Order Amount (whether an add or a deduct or a
reallocation), or which (regardless of the amount) adversely affects the
quality of the Improvements, or which adversely affects the quality of any
of the materials or equipment to be used in the Improvements, or which
increases or reduces the floor space as set forth in the Plans, or which
modifies any of the parameters set forth in the definition of
Improvements, or which might result in any increase in the Budget.
Borrower will not make any changes which could give rise to a defense by
the bonding company to its obligations under the payment and performance
bonds required hereunder, or which are deemed by Agent's Inspecting
Consultant to adversely affect the structural integrity of the
Improvements;
(e) Other Agreements. Execute any contract or become party to any
arrangement for the performance of work on the Premises in excess of
$200,000 without first providing written notice to Agent and, if Agent
shall so request, without providing a copy of such proposed contract to
Agent;
(f) Agreements Affecting the Premises. Without the prior consent of
Agent, which consent shall not be unreasonably withheld or delayed (such
consent having been granted with respect to the Development Agreement, the
Management Agreement, the Ground Lease, the General Contract, the
Architect's Agreement, Approved Leases and the Engineer's Agreement) enter
into any development, leasing, management or other similar agreement that
constitutes a Major Contract, or fail to provide a letter, in form and
substance satisfactory to Agent, executed by the other party to said
agreement
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(including those agreements to which Agent has consented) to the effect,
that upon a default under any Loan Document and Agent's acquisition and/or
obtaining control of the Premises on behalf of the Lenders through
foreclosure, sale or other means, such agreement shall terminate upon
Agent's request at no cost to Agent and Lenders (provided that no such
letter will be required if the agreement in question contains the
foregoing provision);
(g) Pollutants. Either during construction or thereafter, permit the
Premises to be used to generate, manufacture, prepare, produce, store,
handle, transfer, process, spill or empty or otherwise dispose of any
Pollutant in violation of any Requirement, and if same is found to exist,
Borrower shall take all steps to promptly remove such Pollutants in
accordance with all Requirements;
(h) Subdivision. File any application or seek any subdivision
approval for the Land or file or record any subdivision or parcel map or
accept any subdivision approval, nor shall Borrower consent to, join in,
knowingly permit or approve any change in the zoning of the Land unless
required by law or with Agent's prior written consent;
(i) Leasing and Leasing Guidelines. Borrower will not enter into any
lease of all or any portion of the Premises unless the following
conditions are met: such lease or similar agreement is an Approved Lease
or (1) such lease does not vary in any material way from the form of lease
provided to and approved by Agent (and the Ground Lessor, to the full
extent required under the Ground Lease, a copy of which consent, if
required, shall be delivered to Agent) prior to the execution of any such
lease by Borrower, (2) the fixed rent under such lease, when aggregated
with the fixed rent payable under all leases then in effect and the pro
forma rentals for the then vacant units set forth on Exhibit F, is not
less than ninety-five percent (95%) of the total pro forma rentals set
forth on Exhibit F, and (3) the term thereof shall be not less than six
(6) months;
(j) Termination of Lease. Terminate or accept the surrender of any
lease, (other than the agreements pursuant to which the assisted
living/independent living units are occupied), without the prior written
consent of Agent unless, with respect to termination of any lease, the
lessee is in default thereunder after the expiration of any notice or
grace periods;
(k) General Contract. Terminate or accept the surrender of, or amend
or modify, the General Contract, (except for Change Orders expressly
permitted hereunder) without the prior written consent of Agent, which
consent shall not be unreasonably withheld or delayed;
(l) Other Contracts. Terminate or accept the surrender of, or amend
or modify in any material respect, the Development Agreement or the
Management Agreement, without the prior written consent of Agent, which
consent shall not be unreasonably withheld or delayed; and
(m) Mergers, Admission of New Members. Except as expressly permitted
by Section 4.2(b) or this Section 4.2(m), none of Borrower, Member, or
Guarantor will
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merge or consolidate with, or sell, assign, lease or otherwise dispose of
all or substantially all of its assets to, any other person, or permit any
other person to be admitted as a new or substitute member or manager in
Borrower, except that Guarantor may directly or through a wholly-owned
Affiliate acquire (and assume all obligations of) Borrower or Member;
provided, however that, notwithstanding the foregoing, and only if there
are then no outstanding Events of Default, and (i) Agent shall have
received written notice thirty (30) days prior to any proposed merger or
consolidation of Guarantor, (ii) such Guarantor shall have delivered to
Agent copies of all documents to effect such merger or consolidation,
(iii) Agent shall have determined in its sole and absolute discretion that
following such proposed merger or consolidation the surviving entity will
meet the minimum net worth and liquidity requirements of Sections 4.1(ff)
and 4.1(gg) hereof), (iv) such Guarantor shall have caused to be delivered
to Agent such opinions of counsel as Agent may reasonably request, which
opinions shall be satisfactory to it in all respects, and (v) such
Guarantor shall have paid any and all expenses, including, without
limitation, reasonable legal expenses, in connection with Agent's review
of any of the foregoing, then no further approval of said transaction
shall be required, provided, the surviving entity assumes in writing all
obligations of Guarantor under the Guaranties to Lender.
ARTICLE V
EVENTS OF DEFAULT
-----------------
Section 5.1 Events of Default. The following shall constitute defaults
hereunder and upon the giving of notice and the passage of time, if any provided
in Section 5.2, shall, unless a right to cure exists under this Agreement or the
applicable Loan Document and such default is cured as provided herein or
therein, constitute "EVENTS OF DEFAULT" hereunder:
(a) if any default shall occur and continue beyond any notice (if
notice is required) and cure period (if a cure period is provided) under the
Mortgage or any other Loan Document including, without limitation the Building
Loan Agreement, or if a Significant Party shall be in default beyond applicable
notice and cure periods under or attempt to terminate any Loan Document, and
such default continues beyond any such notice and cure period;
(b) if Borrower shall fail to pay when due any installment of
interest or principal or the Agency Fee or any other sums payable, or if
Borrower shall fail to reimburse any Lender, when required, any sums due under
this Agreement, the Notes, the Mortgage or any other Loan Document, or if
Borrower shall fail to comply with any monetary covenant made by it in any Loan
Document;
(c) if a Significant Party shall fail to comply with any of the
nonmonetary covenants made by it in this Agreement (including, without
limitation, any violation of the negative covenants set forth in Section 4.2(b)
or 4.2(m) or the covenant to execute new Notes as provided in Section 7.14(b)),
the Notes, the Mortgage or in any other Loan Document, or if at any time any
representation or warranty made by a Significant Party to Agent or any Lender in
this Agreement or in any other Loan Document or in any certificate delivered in
connection
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herewith shall be false or misleading to an extent deemed by Agent, in its
reasonable judgment, to be material;
(d) if a judgment is entered against the Borrower, or if there is a
levy upon any ownership interest in the Borrower, which in the reasonable
judgment of Agent would materially and adversely affect the ability of such
party to perform any of its respective obligations under any Loan Document, or,
subject to the provisions of Section 1.06(c) of the Mortgage, a lien for the
performance of work, the supply of materials or otherwise, be filed against the
Premises and such judgment or lien remains unsatisfied or unbonded for a period
of thirty (30) days after notice of filing thereof, provided that within said
thirty (30) day period the Premises are not the subject of any writ, levy,
execution or sequestration; provided, however, the Borrower may timely appeal
same provided said appeal is in good faith, is diligently pursued, said appeal
is permitted by law, said appeal has the effect of staying any type of action on
such judgment or lien, the Borrower posts any security required by law which
security shall be reasonably satisfactory to Agent, and said appeal does not
subject Agent or the Premises to any civil or criminal penalties;
(e) if a Significant Party shall (i) suspend or discontinue its
business, or (ii) make an assignment for the benefit of creditors, or (iii)
admit in writing its inability to pay its debts as they become due, or (iv) file
a voluntary petition in bankruptcy, or (v) become insolvent (as defined in the
Bankruptcy Code), or (vi) file any petition or answer seeking for itself any
reorganization, arrangement, composition, readjustment of debt, liquidation or
dissolution or similar relief under any present or future statute, law or
regulation of any jurisdiction, or (vii) petition or apply to any tribunal for
any receiver, custodian or any trustee for any substantial part of its property,
or (viii) be the subject of any such proceeding commenced against it which
remains undismissed for a period of sixty (60) days, or (ix) file any answer
admitting or not contesting the material allegations of any such petition filed
against it, or of any order, judgment or decree approving such petition in any
such proceeding, or (x) seek, approve, consent to, or acquiesce in any such
proceeding, or in the appointment of any trustee, receiver, custodian,
liquidator, or fiscal agent for it, or any substantial part of its property, or
an order is entered appointing any such trustee, receiver, custodian, liquidator
or fiscal agent and such order remains in effect for sixty (60) days;
(f) if an order for relief is entered under the Bankruptcy Code or
any other decree or order is entered by a court of competent jurisdiction (i)
adjudicating a Significant Party bankrupt or insolvent, or (ii) approving as
properly filed a petition seeking reorganization, arrangement, adjustment or
composition of or in respect of a Significant Party, or (iii) appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator (or other
similar official) of a Significant Party or of any substantial part of the
property of any thereof (other than a decedent's estate), or (iv) ordering the
winding up or liquidation of the affairs of a Significant Party and any such
decree or order continues unstayed and in effect for a period of sixty (60)
days;
(g) if the Premises, or any interest therein, be sold or in any
manner encumbered or conveyed without the prior written consent of Agent, except
as expressly permitted hereunder (or if any interest in Borrower be sold,
assigned, pledged or encumbered except as permitted by Section 4.2(b) and
Section 4.2(m), including in connection with the Mezzanine Financing or the Banc
One Financing);
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(h) if the Premises or any part thereof shall be condemned or
damaged by fire or other casualty unless the requirements set forth in the
Mortgage for restoration of the Premises are promptly commenced and satisfied;
(i) if Borrower shall enter into any lease of the Premises which
does not qualify as an Approved Lease under this Agreement or if Borrower shall
be in default under ten percent (10%) or more of the Approved Leases;
(j) if, except as otherwise permitted hereunder in each case,
Borrower shall materially amend, modify or vary any Approved Lease, or if
Borrower shall consent to or acquiesce in the surrender of any Approved Lease,
or if more than ten percent (10%) of Approved Leases shall be terminated unless
a lessee is in default thereunder after the expiration of any notice or grace
periods;
(k) if any material provision of this Agreement or any of the Loan
Documents shall at any time for any reason cease to be valid and binding on any
Significant Party, or shall be declared to be null and void, or the validity or
enforceability thereof shall be contested by any Significant Party, or a
proceeding shall be commenced by any Governmental Authority having jurisdiction
over any Significant Party seeking to establish the invalidity or
unenforceability thereof, or a Significant Party shall deny that it has any or
further liability or obligation under this Agreement or any of the Loan
Documents; provided, however, that if a proceeding shall be commenced by any
Governmental Authority seeking to establish the invalidity or unenforceability
of this Agreement or any other Loan Document, a Significant Party may timely
contest the validity of such proceeding provided said contest is in good faith,
is diligently pursued, said contest is permitted by law, said contest has the
effect of staying any type of action pursuant to such proceeding, the
Significant Party posts any security required by law which security shall be
reasonably satisfactory to Agent, and said contest does not subject Agent, or
any Lender, or the Premises to any civil or criminal penalties;
(l) (i) if at any time any representation or warranty made by any
Significant Party in the Payment Guaranty, the Completion Guaranty, the
Operating Deficit Guaranty, the Environmental Indemnity Agreement or any other
Loan Document or any certificate executed by any Significant Party in connection
with the Loan or any other Loan Document shall be false or misleading to an
extent deemed material as reasonably determined by Agent, or (ii) if any
Guarantor shall fail to comply with any covenant made by it in the Payment
Guaranty, the Completion Guaranty, the Operating Deficit Guaranty, or the
Environmental Indemnity Agreement and such failure is not cured by Guarantor
within the time period provided in the Payment Guaranty, the Completion
Guaranty, the Operating Deficit Guaranty, or the Environmental Indemnity
Agreement, as the case may be, or if a default (except as set forth in (l)(i)
above) by Guarantor shall occur under the Payment Guaranty, the Completion
Guaranty, the Operating Deficit Guaranty, or the Environmental Indemnity
Agreement and shall continue beyond any applicable grace period, or if Guarantor
shall revoke or attempt to revoke, disavow, contest, commence any action or
raise any defense against its obligations under the Payment Guaranty, the
Completion Guaranty, the Operating Deficit Guaranty, or the Environmental
Indemnity Agreement;
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(m) if Borrower executes any conditional bill of sale, chattel
mortgage or other security instrument covering any materials, fixtures or
personal property used in the construction or operation of the Improvements, or
intended to be incorporated therein except as expressly permitted hereunder or
by Agent or required under the Ground Lease;
(n) if the construction of the Improvements is not carried on with
reasonable dispatch or at any time be discontinued for a period of ten (10) or
more consecutive Domestic Business Days for reasons other than Force Majeure or
if the Project does not open as scheduled within thirty (30) days of the
Completion Date;
(o) if the Improvements, in the reasonable judgment of Agent, (i)
are not or cannot be completed lien-free on or before the Completion Date,
subject to Force Majeure, or (ii) are not completed lien-free (it being
understood that Permitted Encumbrances are not prohibited liens hereunder), or
if Completion has not occurred on or before the Completion Date, subject to
Force Majeure;
(p) if Agent or its representatives or Agent's Inspecting Consultant
are not permitted, subject to Approved Leases, at all reasonable times, to enter
upon the Premises and to inspect the Improvements and the construction thereof
and all materials, fixtures and articles used or to be used in the construction
thereof and to examine all Plans, or if Borrower shall fail within seven (7)
days to furnish to Agent or its authorized representative, when requested in
writing, copies of such Plans;
(q) if the temporary certificate of occupancy or the permanent
Certificate of Occupancy, as applicable, covering the Project shall be revoked
or expire;
(r) if Borrower is unable to satisfy any condition of its right to
the receipt of an Advance requested hereunder for a period in excess of thirty
(30) days;
(s) if Agent's Inspecting Consultant certifies that the construction
of the Improvements is not substantially in accordance with the Plans or
substantially in accordance with applicable Requirements;
(t) except as expressly provided in Section 4.2(b) and 4.2(m), if at
any time while the Loan is outstanding, Member (or any successor entity
permitted hereunder or otherwise approved by Agent) shall own and control less
than one hundred percent (100%) of Borrower or shall cease to be the sole member
and manager of Borrower (subject to Developer's special management rights
pursuant to the Membership Agreement); or
(u) if Borrower shall fail to secure a Certificate of Occupancy for
the full use and occupancy of the entire Premises within two (2) years of the
date of issuance of the temporary certificate of occupancy;
(v) if Borrower shall be in default under the Ground Lease beyond
the applicable notice and cure periods afforded to Borrower thereunder;
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(w) if Borrower shall fail to satisfy the Post-Closing Conditions on
or before the Post-Closing Default Date; or
(x) if Borrower shall fail to cause Guarantor to establish, maintain
and comply with the Cap Agreement and the Interest Rate Protection Facility.
Section 5.2 Grace Periods. The defaults described in Section 5.1 shall
constitute Events of Default hereunder upon the giving of the following notices
and the passage of the following time periods:
(a) with respect to any default under Section 5.1(b) above, five (5)
Domestic Business Days after the occurrence of such default; notwithstanding
anything contained herein to the contrary, neither Agent nor any Lender shall
have any obligation to give written notice of such default;
(b) with respect to any non-monetary default under Sections 5.1(c),
(h), (l)(i) or (q) above, thirty (30) days after the date written notice of such
default is sent to Borrower by Agent, provided that if such default is not
curable within such thirty (30) day period, then Borrower shall have up to
ninety (90) additional days to cure same, provided Borrower promptly commences
and at all times is diligently attempting to cure such default, Agent has
determined in its reasonable discretion that the continued existence of such
default will not adversely affect the collateral for the Loan and that there are
no other defaults hereunder;
(c) with respect to any of the defaults described in Section 5.1(n),
(o), (p), (r) or (s) above, ten (10) days after the date notice of such default
is sent to Borrower by Agent and the same is not cured with such ten (10) day
period; and
(d) with respect to any of the defaults described in Sections
5.1(a), (d), (e), (f), (g), (i), (j), (k), (l)(ii), (m), (t) or (u) above, there
shall be no requirement that Agent or any Lender send notice of default and
there shall be no opportunity to cure, except as may be applicable in Section
5.1(l).
(e) notwithstanding anything contained herein or in any of the Loan
Documents, upon the occurrence of an Event of Default, in the event Agent (i)
declares the entire principal amount under the Notes then outstanding due and
payable in accordance with any of the Loan Documents or (ii) institutes
foreclosure proceedings in accordance with the terms of the Mortgage, Borrower
shall not have the right or opportunity to cure any Event of Default thereafter
without first receiving Lender's consent.
Section 5.3 Rights of Agent and Lenders. Subject to Section 6.3(b) hereof,
(a) upon the occurrence and during the continuation of a default, Agent and
Lenders may, without notice to Borrower, cease funding amounts not yet advanced
hereunder or under the Loan. Upon the occurrence and continuation of an Event of
Default, Agent may, in its sole discretion, at the same or different times, in
addition to any right or remedy available to it under the Mortgage or any other
Loan Document or permitted by law or equity, declare the Obligations and all
sums then owing by Borrower hereunder to be forthwith due and payable, whereupon
all such sums shall become and be immediately due and payable without
presentment, demand, notice and
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protest, notice of dishonor, notice of intent to accelerate, notice of
acceleration or notice of any other kind, except as may be specifically required
under this Agreement or the Note or the Mortgage, and Agent, for the ratable
benefit of the Lenders, shall have the right to enter into possession of the
Premises and perform any and all work and labor necessary to complete the
Improvements and employ watchmen to protect the Premises and the Improvements
and all sums expended by Agent in connection with the construction of the
Improvements shall be deemed to have been paid to Borrower and secured by the
lien of the Mortgage (as shall any other sums advanced by Agent for whatsoever
purpose relative to the Loan or the Improvements). For this purpose, Borrower
hereby constitutes and appoints Agent its true and lawful attorney-in-fact with
full power of substitution to complete the Improvements, and hereby empowers
said attorney or attorneys after the occurrence and during the continuance of an
Event of Default to do the following: to use any funds of Borrower including any
balance which may be held in escrow and any funds which may remain unadvanced
hereunder for the purpose of completing the Improvements; to make such additions
and changes and corrections in the Plans which shall be necessary to complete
the Improvements; to rent the Premises; to employ such contractors,
subcontractors, agents, architects and inspectors as shall be required for said
purposes; to pay, settle or compromise all existing bills and claims which are
or may be Liens against the Premises, or may be necessary or desirable for the
completion of the work or the clearance of title; to execute all applications
and certificates in the name of Borrower which may be required by any
construction contract; and to do any and every act with respect to the
construction of the Improvements which Borrower may do in its own behalf. It is
understood and agreed that this power of attorney shall be deemed to be a power
coupled with an interest and cannot be revoked. Said attorney-in-fact shall also
have power to prosecute and defend all actions or proceedings in connection with
the construction of the Improvements and to take such action and require such
performance as it deems necessary. Borrower hereby assigns and quitclaims to
Agent, for the ratable benefit of the Lenders, all sums not advanced hereunder
and all sums in escrow or any sums deposited with Agent which sums may be used
for any purpose associated with the Loan as Agent may desire.
(b) Agent shall have the right, after the occurrence and
continuation of an Event of Default, at its option, and in addition to any right
or remedy available to it under this Agreement, the Mortgage or any other Loan
Document, to effectuate the transfer in the name of Borrower of all permits,
rights and privileges relative to the construction, operation, zoning and
planning of the Improvements (the "PERMITS") to Agent, for the ratable benefit
of Lenders, to the extent permitted by law. For this purpose, Borrower hereby
constitutes and appoints Agent its true and lawful attorney-in-fact with full
power of substitution to complete the transfer and hereby empowers said attorney
or attorneys after the occurrence and during the continuation of an Event of
Default to execute any and all documents, certificates, applications and forms
for the transfer of the Permits and to pay all expenses necessary for such
transfer. It is understood and agreed that this power of attorney shall be
deemed to be a power coupled with an interest which cannot be revoked. Said
attorney-in-fact shall also have the power to prosecute and defend all actions
or proceedings in connection with the aforesaid transfer and to take such action
and require such performance as is deemed necessary.
(c) Agent shall have the right, after the occurrence and
continuation of an Event of Default, to apply any payments or recoveries it
receives on account of the Obligation to principal, interest, expenses and other
sums due with respect to the Loan in such order as Agent,
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in its sole discretion, may elect, regardless of the manner in which any such
payments or recoveries are allocated or reflected in any foreclosure, judgment,
or deficiency or allocation proceeding relative to foreclosure of the Mortgage.
Section 5.4 Limited Recourse Obligations. Notwithstanding anything to the
contrary contained herein or in any of the other Loan Documents, Borrower's
officers, directors, employees, members, partners, managers, shareholders,
incorporators or agents, but specifically excluding Borrower, Guarantor and
Developer (herein called the "BORROWER'S GROUP"), shall have no personal
liability for the payment of the Notes or for the performance or observance of
the covenants, representations and warranties of Borrower contained herein or in
any of the other Loan Documents, and Agent and the other Lenders agree not to
seek any damages or personal money judgment against any member of the Borrower's
Group for any default under the Notes or under any instrument now or hereafter
securing the Notes, but in such event will look solely to Borrower, Guarantor,
Developer and the security for the indebtedness evidenced by the Notes; provided
that nothing shall preclude Agent or any Lender from exercising its remedies
against Borrower, including, without limitation, obtaining and enforcing a
judgment against Borrower in connection with the foreclosure of the Mortgage or
any security interest created by the Loan Documents or making a claim in
bankruptcy for amounts owed as evidenced by the Loan Documents, and provided
further that nothing contained above shall be deemed (a) to limit or restrict
any other type of action or proceeding against Borrower nor affect the lien of
the Mortgages, (b) to be a release or impairment of the obligations of Borrower
under the Notes, this Mortgage or any other Loan Documents, (c) to limit the
Agent or any Lender from enforcing its rights under the Notes, the Mortgages,
the Soft Cost Loan Agreement, the Building Loan Agreement or any other Loan
Document, (d) to constitute a waiver, release or discharge of any indebtedness
or obligation under the Notes or secured by the Mortgages, the Security
Agreement or the Assignment of Contracts or (e) to affect the personal liability
of the Guarantor under the Completion Guaranty, the Payment Guaranty or the
Operating Deficit Guaranty.
ARTICLE VI
CONDITIONS TO LENDERS'
----------------------
OBLIGATIONS TO MAKE LOAN DISBURSEMENTS
--------------------------------------
Section 6.1 Conditions Precedent to First Disbursement. Neither Agent nor
any Lender shall be obligated to make any Advances or disburse any Loan proceeds
hereunder, including the first disbursement of Loan proceeds, until (a) Borrower
shall have contributed the full amount of the Required Equity and the full
amount of the Required Equity shall have been fully disbursed to fund Project
costs set forth in the Budget and approved by Agent, all as more particularly
set forth in Section 2B.15 hereof, (b) Borrower and Guarantor shall have
established the Interest Rate Protection Facility pursuant to the Forward
Treasury Lock Agreement and (c) all the other conditions of this Agreement,
including without limitation, this Article VI have been satisfied at or before
the Initial Closing.
Section 6.2 Documents To Be Delivered. On the Closing Date and prior to
Agent making the first disbursement of Loan proceeds hereunder, Agent shall have
received this Agreement and it shall also have received the following items, and
unless identified in Section
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2B.7 as a Post-Closing Condition, each of the following items heretofore
received by Agent shall be deemed to have been accepted and approved by Agent:
(a) the executed Building Loan Agreement;
(b) the executed Soft Cost Notes and Building Loan Notes;
(c) the executed Soft Cost Mortgage and Building Loan Mortgage;
(d) the executed Security Agreement;
(e) the UCC Financing Statements;
(f) the executed Assignment of Contracts;
(g) the executed Payment Guaranty;
(h) the executed Completion Guaranty;
(i) the executed Operating Deficit Guaranty;
(j) the executed Environmental Indemnity Agreement;
(k) a certified copy of the fully executed Ground Lease;
(l) Estoppel and Recognition Agreement executed by the Ground Lessor
and all other parties having an interest in the Land;
(m) certified copies of the fully executed Development Agreement and
the fully executed Management Agreement, each containing a provision that such
agreement is subordinate to the Mortgage, and that such agreement, at Agent's
election, may be terminated or continued upon any foreclosure of the Mortgage or
acquisition of title to the Premises by Agent or Leasehold Entity (as defined in
Section 7.2);
(n) an Appraisal of the Land and the Improvements and a Market
Feasibility Study prepared by Tellatin, Louis & Andreas, Inc., which shall be in
all respects satisfactory to Agent;
(o) the Commitment Fee, Construction Administration Fee, the first
installment of the Agency Fee, Agent's Inspecting Consultant Fees, the expenses
of the other Lenders (subject to the $5,000 cap on the expenses of each such
Lender set forth in Section 4.1(h)), and Agent's Counsel Fees which are then due
and payable;
(p) such advice from Agent's Inspecting Consultant as Agent shall
reasonably require with respect to the construction of the Improvements and
matters incidental thereto;
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(q) a current title commitment from the Title Insurer (in all
respects satisfactory to Agent's Counsel) which shall set forth a description of
the Land, shall have attached thereto copies of all instruments which appear as
exceptions in the commitment, and a paid ALTA Loan (Form 1992) title insurance
policy (the "POLICY") issued by the Title Insurer, covering the Premises, and in
form and substance reasonably acceptable to Agent and Agent's Counsel. The
Policy shall insure KCCI as Agent for itself and the other Lenders described in
this Agreement, as same may be amended from time to time, and their successors
and assigns, that the Building Loan Mortgage, for the full principal amount of
the Building Loan, is a valid first lien, and that the Soft Cost Mortgage, for
the full principal amount of the Soft Cost Loan, is a valid second lien, on
Borrower's leasehold interest in the Land, the Improvements, the Project and all
other real property subject to the granting clause of the Soft Cost Mortgage,
free and clear of all defects and encumbrances except such as may be set forth
on EXHIBIT B attached hereto and made a part hereof or as Agent or Agent's
Counsel shall approve in writing (the "PERMITTED ENCUMBRANCES"). The Policy
shall contain: (i) full coverage against mechanic's and materialmen's liens,
including, without limitation, with respect to any work performed or materials
supplied in connection with the construction of the Improvements or acquisition
of the Land prior to the Initial Closing and the recording of the Mortgage, (ii)
other than the Permitted Encumbrances, no encroachments or survey or other
exceptions not theretofore approved by Agent and Agent's Counsel, (iii) a
pending disbursements endorsement obligating the Title Insurer to provide title
continuations and endorsements contemplated by Section 6.3(e) and other
provisions of this Agreement, and (iv) variable rate (additional interest),
comprehensive, and same as survey endorsements and such other endorsements and
affirmative insurance as Agent may require, including, without limitation,
appropriate insurance with regard to restrictions, covenants and other
agreements affecting the Premises or to the effect that the enforcement of same
will not result in a forfeiture or reversion of title or otherwise adversely
affect the Mortgage, as well as affirmative insurance that the proposed
Improvements comply with any such restrictions, covenants or agreements and
further against the forced removal of said Improvements or a comprehensive
endorsement, and with all so-called "Standard Exceptions" deleted;
(r) an original current ALTA/ACSM survey of the Premises, complying
with the requirements set forth in the Commitment Letter;
(s) an original current site plan of the Premises showing the
Improvements to be constructed and the relation of the Improvements by distances
to the perimeter of the Land and the set-back lines;
(t) evidence that all approvals required to be obtained at or prior
to such time under the Ground Lease have been obtained and all deliveries
required under the Ground Lease have been made (including, without limitation,
pursuant to Article 11 and Article 40 thereof);
(u) evidence of compliance with all applicable zoning requirements
and land use planning requirements, including, without limitation, an
Architect's Certificate of Compliance with local governmental zoning and
building ordinances, including, without limitation the Requirements, the Master
Development Plan, the Design Guidelines and the Construction Documents as
defined in the Ground Lease and the opinion of Borrower's counsel as to
compliance with the use provisions of the Zoning Code of the City of New York;
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(v) a list and copies (when obtained by Borrower) of, all approvals,
authorizations or permits required by any Governmental Authority, including land
use, zoning and planning, construction, environmental and operational for the
Premises for the purposes contemplated by the Plans;
(w) a certificate, in form and substance acceptable to Agent, from
Borrower that all approvals, authorizations, certificates, licenses, and permits
referred to in the preceding paragraph are or will be in full force and effect,
have not been and will not be amended or modified and Borrower has not received
any notice that there are any violations of said permits or that any Permits are
in default or have been revoked, suspended or terminated;
(x) all of the Engineer's or Architects' Contracts and the General
Contractor's contract, containing all of the provisions required pursuant to the
Ground Lease, including, without limitation, the provisions set forth in Section
11.05(b) of the Ground Lease and Section 40.2 (a) through (e) of the Ground
Lease), each certified by Borrower to be a true and complete copy thereof,
together with a letter signed by each of the Engineer, the Architect and the
General Contractor in a form substantially acceptable to Agent, which shall
provide (i) that such party shall complete the Project for Agent and the Lenders
at Agent's option and at Agent's request if a Loan default occurs, and otherwise
in accordance with this Agreement and (ii) that the agreement with such party
may be terminated upon foreclosure of the Mortgage or acquisition of the
Property by Agent or a Leasehold Entity;
(y) a list of all known and contemplated contractors,
subcontractors, and materialmen to be used for development of the Project, when
and as available;
(z) a complete set of Plans, certified by Developer on behalf of
Borrower, and evidence satisfactory to Agent of approval by the Ground Lessor,
Borrower's Architect and the General Contractor and all other necessary parties;
(aa) dual-obligee labor and material payment bonds and performance
bonds with respect to the General Contract (in amounts not less than the full
amount of the contract price thereunder unless waived by Agent in writing in its
sole discretion) and naming Borrower and Agent as co-obligees, said bonds to be
issued by companies reasonably acceptable to Agent and in form and amount
reasonably satisfactory to Agent;
(bb) letters from local utility companies or municipal authorities
stating that gas, electric, sewer and water will be available to the Premises
upon Completion of the Improvements in sufficient quantities to serve the
Improvements for their intended purpose;
(cc) soil analysis (including drainage) results, together with the
proposed methodology to develop the Project for its intended use based on soil
condition, certified by a qualified engineer, which has been approved by Agent
prior to the date hereof;
(dd) evidence (including a Phase I, and if warranted a Phase II,
environmental assessment) indicating that the Premises are free from all
Pollutants with respect to which remediation is required or the presence in
concentration of which is in violation of environmental laws, and are free of
all other contamination which, even if not so regulated, is
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known to pose a hazard to the health of any person on or about the Premises, and
that the Premises is not in a "Wetlands" or "Flood Plain" area, and contains no
underground storage tanks or oil or gas wells (it being expressly acknowledged
by Borrower that the Agent reserves the right, at Borrower's expense, to retain
an independent consultant to review any such evidence submitted by Borrower);
(ee) as to Borrower, (i) a copy of the Membership Agreement
certified by the sole member and manager of Borrower to be a true and complete
copy thereof; (ii) the limited liability certificate of Borrower; (iii) evidence
that the formation of Borrower and the filing of its limited liability
certificate comply with all Requirements; (iv) resolutions of the sole member
and manager of the sole member and manager of Borrower in all respects
acceptable to Agent;
(ff) as to Guarantor, (i) a copy of its bylaws, certified by an
officer of Guarantor to be a true and complete copy thereof; (ii) the
certificate of incorporation of Guarantor; (iii) evidence of Guarantor's
authority to execute the Loan Documents to which Guarantor is a party and the
Guaranties authorizing the action required of such Guarantor in all respects
acceptable to Agent and (iv) evidence that the formation of Guarantor and the
filing of its certificate of incorporation comply with all Requirements;
(gg) the Borrower's and Guarantor's Federal Tax I.D. Number;
(hh) as to Developer, (i) a copy of its bylaws, certified by an
officer of Developer to be a true and complete copy thereof; (ii) the
certificate of incorporation of Developer; (iii) evidence of Developer's
qualification to transact business in New York; (iv) evidence of Developer's
authority to execute the Development Agreement and the Management Agreement and
the Assignment of Contracts for the benefit of Lenders; (v) evidence that the
formation of Developer and the filing of its certificate of incorporation comply
with all Requirements;
(ii) an opinion of Borrower's and each Guarantor's counsel to the
effect that (i) upon due authorization and execution by the parties thereto and
upon such recording or filing thereof as may be specified in the opinion, the
Soft Cost Notes, the Building Loan Notes, the Soft Cost Mortgage, the Building
Loan Mortgage, this Agreement, the Building Loan Agreement, the Assignment of
Contracts, the Security Agreement, the Environmental Indemnity Agreement, the
Payment Guaranty, the Completion Guaranty, the Operating Deficit Guaranty and
the other Loan Documents will be legal, valid and binding instruments,
enforceable against Borrower or Guarantor, as the case may be, as a party
thereto in accordance with their respective terms, except as may be limited by
applicable bankruptcy, insolvency, reorganization or similar laws affecting the
rights of creditors generally; (ii) the amounts to be received by Agent, for the
ratable benefit of the Lenders, as interest constitute lawful interest and are
neither usurious nor illegal; (iii) there is no threatened or pending litigation
that might affect the Loans, the Premises, the Project or for which an adverse
decision is reasonably likely which would materially and adversely affect the
ability of the Guarantor or Borrower to perform their respective obligations
under the Loan Documents; (iv) the Loan and the transactions contemplated by the
Loan Documents do not violate any provision of any law, restriction or document
affecting Borrower, any Guarantor, the Project or the Premises; (v) Borrower is
a validly formed and existing limited liability company under the laws of the
State of Ohio, it is duly qualified to transact business in
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the State of New York, it has the legal capacity to own, develop and operate the
Premises, the Project and the Improvements and to perform its obligations under
the Loan Documents, and that the Loan and the execution of the Loan Documents
has been duly authorized by the sole member of Borrower and that the Loan
Documents have been duly executed and delivered; (vi) Guarantor is a validly
formed and existing corporation under the laws of the State of Delaware, it has
the legal capacity to perform its obligations under the Loan Documents to which
it is a party, and the execution of the Payment Guaranty, the Completion
Guaranty, the Operating Deficit Guaranty, the Environmental Indemnity Agreement
and the other Loan Documents to which Guarantor is a party have been duly
authorized by the board of directors of Guarantor and that the Loan Documents to
which Guarantor is a party have been duly executed and delivered by Guarantor;
(vii) such other matters concerning the Loan, the Loan Documents, Borrower,
Guarantors, the Premises, the Improvements and the Project as Agent or Agent's
Counsel may reasonably require (including an opinion with respect to zoning of
the Premises (only as to compliance of the contemplated use with applicable
Requirements) and the Project), provided, however, the opinion of the Borrower's
and the Guarantor's in-house legal counsel will be acceptable with respect to
the following items: (i) there is no pending, or to its best knowledge,
threatened, litigation that might affect the Loans, the Premises, the Project or
for which an adverse decision is reasonably likely which would materially and
adversely affect the ability of the Guarantor or Borrower to perform their
respective obligations under the Loan Documents; (ii) the Loan Documents shall
have been duly executed by Borrower and the Guarantor, as applicable, and (iii)
the Loans has been duly authorized by Borrower and the Guaranties duly
authorized by the Guarantor.;
(jj) the policies of insurance required by Agent pursuant to the
requirements of the Mortgage, (or certificates, to the extent permitted under
the Mortgage), accompanied by evidence of the payment of the premiums therefor;
(kk) advice from the Title Insurer to the effect that a search of
the public records discloses no conditional sales contracts, chattel mortgages,
leases of personalty, financing statements or title retention agreements filed
and/or recorded against Borrower, except the Mortgage and the financing
statements in favor of Agent, for the ratable benefit of the Lenders, filed in
connection with the Mortgage, the Security Agreement and the Assignment of
Contracts;
(ll) an analysis and verification of the Budget and line item
breakdown and timing to complete the Project prepared at Borrower's sole cost
and expense by independent third party consultants selected by Agent with no
conditions or facts objectionable to Agent;
(mm) the Final Budget, which shall include a cost breakdown and
separate itemization of all Hard Costs and Soft Costs for the Project by line
item, and such backup information or materials as Agent may require;
(nn) the Project development schedule provided by Borrower and
development supervisor setting forth the approximate start and finish dates of
all major stages of the Project (and providing that the development of the
Project has commenced prior to the date hereof ), in such format as Agent and
Borrower may reasonably agree;
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(oo) INTENTIONALLY OMITTED
(pp) current certified financial statements of Guarantor (and
Borrower, if the same have been prepared at the time of the Closing);
(qq) a list of deposits or other advances made by potential
occupants of the Project; and
(rr) all other items required by the Commitment Letter or the
Closing Checklist previously delivered by Agent's Counsel to Borrower.
Section 6.3 Conditions to Funding of Advances. Before the funding of any
Advance, each of the following conditions must be satisfied:
(a) Conditions Precedent. All conditions of Section 6.2 shall have
been and remain satisfied;
(b) Defaults. There shall be no default by Borrower or any
Guarantor, or any event which with the giving of notice (if required hereunder)
and passage of time would constitute a default, under any Loan Document, and all
such documents shall be in full force and effect; notwithstanding the foregoing,
and except for Section 5.1(r) defaults, Agent will not unreasonably refuse to
fund an Advance if the Borrower has otherwise satisfied all requirements for the
Advance, the default in question is non-monetary, and would be completely cured
by or in connection with the funding of the Advance.
(c) Representation and Warranties. The representations and
warranties made in Article III hereof shall be true and correct in all material
respects on and as of the date of the disbursement with the same effect as if
made on such date;
(d) Additional Documents. Agent shall have received and approved:
(i) a Draw Request, (ii) such advice from Agent's Inspecting Consultant (which
advice shall inure to Lenders' benefit only) as Agent shall reasonably require,
and (iii) such additional documents as Agent may reasonably require, including,
but not limited to, all Major Contracts;
(e) Title Endorsements. Agent shall have received, in connection
with each Draw Request, a notice of title continuation and an endorsement to the
title insurance policy theretofore delivered, indicating that, since the
preceding disbursement, there has been no change in the state of title not
theretofore approved by Agent, which endorsement shall have the effect of
increasing the coverage of the policy by an amount equal to the disbursement
then made, together with an update to the comprehensive endorsement;
(f) Loan Documents. Agent shall have reasonably approved all Loan
Documents and other items required to be submitted to it;
(g) Lien Waivers. Executed lien waivers or releases of lien (i) from
all contractors, subcontractors, suppliers and others which have or are
supplying labor, materials, goods or services related to the Project or the
Improvements in the sum of all prior
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disbursements for all of Borrower's preceding Draw Requests, and (ii) with
respect to any items of the type described in the preceding clause (i) in a
pending Draw Request for which Borrower is seeking reimbursement based on its
prior payment of that item, together with such evidence as Agent may require
that no notices of lien or stop notices have been filed and that nothing has
occurred which could, in Agent's sole opinion, jeopardize the superiority of the
lien of the Mortgage over any possible lien. Notwithstanding the foregoing,
monthly lien waivers shall not be required (except upon completion of their
contracts) from any party whose total contract price is less than $25,000;
(h) Loan in Balance. The Soft Cost Loan and the Building Loan shall,
in Agent's sole opinion, be "in balance" as defined in Section 2B.7(A) and Agent
shall be reasonably satisfied that Completion of Construction on or before the
Completion Date can reasonably be achieved;
(i) No Termination of Contracts, Licenses, Permits or Approvals .
None of the documents covered by the Assignment of Contracts or the bonds
relating to the General Contract shall have been terminated, modified or revoked
without Agent's prior written consent other than the Change Orders expressly
permitted hereunder pursuant to Section 4.2(d), and;
(i) Post-Closing Deliveries. On or before the Post-Closing Delivery
Date, the Post-Closing Conditions shall have been satisfied.
Section 6.4 Last Disbursement of Hard Costs. In the case of the last
disbursement of Hard Costs and release of the Retainage, all of the above
conditions shall be met or waived and Agent shall have received and approved:
(a) Certificate of Occupancy. A temporary certificate of use and
occupancy, certificate of completion or its equivalent covering all portions of
the Improvements or other evidence of the approval by any Governmental Authority
of the Improvements to the extent any such approval is a condition of the lawful
use and occupancy of the Improvements, including the approval by the local board
of fire underwriters or its equivalent, and evidence that Borrower has obtained
all permits required by any Requirement to operate the Improvements for their
intended purposes, provided that Borrower shall proceed as expeditiously as
possible to secure the final certificate of occupancy (in any event within two
(2) years of issuance of the temporary certificate of occupancy), or its
equivalent issued by the applicable governmental authority for the Improvements
comprising the Project, and all other reasonable evidence that the City of New
York and/or the Battery Park City Authority has acknowledged the completion of
all work required by it to meet all legal requirements and the requirements
under the Ground Lease, as applicable, including, without limitation, all zoning
and building requirements;
(b) Title Insurer's Advice. Advice from Title Insurer to the effect
that the Improvements have been constructed lien-free and an additional
endorsement to the Title Policy increasing coverage to include the final Soft
Cost Loan Advance and insuring such other matters as Agent may reasonably
require including, without limitation, that the Improvements do not encroach on
any easement, right-of-way or land of others and do not violate any Requirements
including, without limitation, those related to set-backs and height
restrictions;
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(c) As-Built Survey. A final "AS BUILT" ALTA/ACSM survey showing the
Improvements located wholly within the perimeter of the Land, and otherwise
complying with the requirements as provided in the Commitment Letter;
(d) Completion Certificates. Completion of Construction shall have
occurred and certificates of completion from Borrower's Architect and Engineer
(and Agent's Inspecting Consultant) stating that the Improvements have been
completed substantially in accordance with the Plans and all applicable
requirements of the Ground Lease and of Governmental Authorities and that an
authorized representative of the party executing the certificate made such
periodic inspections of the Improvements during the course of construction as it
deemed necessary as the basis of such certification, and any other evidence
reasonably required by Agent that the Improvements have been substantially
completed in accordance with the Plans and in compliance with all requirements
of the Ground Lease and of Governmental Authorities, and that all items of a
"punch list" nature which Agent has identified have been waived in writing or
corrected to Agent's reasonable satisfaction.
(e) Architect's Certificate/Compliance With Laws. An architect's
certificate (in the form of the sample attached hereto and made a part hereof as
EXHIBIT D) and such other evidence as Agent may require to establish that the
Improvements are free of structural defects and can be legally occupied and that
the use and occupancy of the Improvements as an assisted living/independent
living complex comply in all material respects with all applicable zoning,
subdivision and building codes and other Requirements, including, but not
limited to, compliance with the National Environmental Policy Act, Americans
with Disabilities Act and any other applicable Federal, state, municipal or
local Requirements. Such evidence of zoning compliance shall be in the form of a
letter (which must be in all regards acceptable to Agent) from Borrower's
Architect and/or its zoning counsel.
(f) Final Lien Waivers. Such final lien waivers, certificates and
estoppels as Agent or the Title Company may reasonably require from Borrower's
Architect and Engineer, the General Contractor, and all subcontractors and
material suppliers which have performed work on the Improvements or provided
labor, materials or supplies in connection therewith certifying receipt of the
final payment of all sums owing to each of such parties from Borrower with
respect to the Improvements and stating that each such party has no claim
against Borrower, the Improvements or any Loan funds arising out of or in
connection with such work, labor, materials or supplies.
(g) Borrower's Affidavit. An affidavit duly executed by Borrower or
by Developer on behalf of Borrower stating that each person providing any
material or performing any work in connection with the construction or
Completion of the Improvements, the General Contractor and all subcontractors
and material suppliers have been paid in full or will be paid in full from the
proceeds of such final Advance, that all withholding taxes have been paid and
that lien waivers have been received from all contractors, subcontractors and
suppliers who have performed work or supplied materials in connection with the
construction of the Improvements for Borrower, the General Contractor and all
subcontractors.
(h) Final As-Built Plans and Specifications. A final set of as-built
site, architectural, structural, mechanical, plumbing, electrical and
landscaping Plans for the
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completed Improvements, marked to show all changes made during the course of
construction, and satisfactory to Agent.
(i) Warranties and Guaranties. Copies of all warranties and
guaranties issued in connection with the Improvements.
(j) Insurance. Borrower shall have delivered to Agent evidence
reasonably satisfactory to Agent that all property damage, business interruption
or rental loss, liability and other insurance coverage for the completed
Improvements, as required under the Loan Documents, are in full force and effect
with all premiums paid.
(k) Reserve Requirement. The undisbursed portion of the Soft Cost
Loan and/or the Building Loan shall include a reserve for interest and other
costs relative to the Property, the Soft Cost Loan and the Building Loan in all
respects acceptable to Agent, and both the Soft Cost Loan and the Building Loan
shall be in balance, as determined by Agent.
ARTICLE VII
THE AGENT
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Section 7.1 Appointment; Powers and Immunities. Subject to Section 7.2
below, each Lender hereby irrevocably appoints and authorizes Agent to act as
its agent hereunder and under the other Loan Documents with such powers as are
specifically delegated to Agent by the terms hereof and thereof, together with
such other powers as are reasonably incidental thereto. Unless expressly limited
by the terms of Section 7.2 below, all provisions of this Agreement or the other
Loan Documents which require the consent or approval of Agent shall be consented
to, or not consented to, and approved by, or not approved by, Agent in its sole
discretion. Agent: (a) shall have no duties or responsibilities except as
expressly set forth in this Agreement and the other Loan Documents, and shall
not by reason of this Agreement or any other Loan Document be a trustee for any
Lender; (b) shall not be responsible to the Lenders for any recitals,
statements, representations or warranties contained in this Agreement or any
other Loan Document, or in any certificate or other document referred to or
provided for in, or received by any Lender under, this Agreement or any other
Loan Document, or for the validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement or any other Loan Document or any other
document referred to or provided for herein or therein or for any failure by
Borrower to perform any of its obligations hereunder or thereunder; (c) shall
not be required to initiate or conduct any litigation or collection proceedings
hereunder or under any other Loan Document except to the extent requested by the
Unanimous Lenders or Requisite Lenders, as provided in Section 7.2 below, and
then only on terms and conditions satisfactory to Agent; (d) may consult with
the other Lenders, but shall have sole authority to approve all Draw Requests
hereunder and make any determinations required by Section 2B.15, (e) upon
Agent's determination that an Event of Default as set forth in Section 5.1 above
has occurred, may (i) declare that such Event of Default exists, (ii) accelerate
the Obligations as provided in Section 5.3 above, and (iii) manage litigation,
including foreclosure proceedings, and (f) shall not be responsible for any
action taken or omitted to be taken by it hereunder or under any other Loan
Document or any other document
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or instrument referred to or provided for herein or therein or in connection
herewith or therewith, except for its own gross negligence or willful
misconduct. In administering the Loan, Agent shall have no greater
responsibility to the Lenders than it would have if Agent were the sole Lender
hereunder and will be deemed to have exercised reasonable care in performing its
duties hereunder if it exercises the level of care substantially equal to that
which Agent accords its own loans. Agent may employ agents and attorneys-in-fact
and shall not be responsible for the negligence or misconduct of any such agents
or attorneys-in-fact selected by it with reasonable care. Except as expressly
provided herein, the provisions of this Article VII are solely for the benefit
of Agent and the Lenders, and Borrower shall not have any rights as a third
party beneficiary of any of the provisions hereof. In performing its functions
and duties under this Agreement and under the other Loan Documents, Agent shall
act solely as agent of the Lenders and does not assume and shall not be deemed
to have assumed any obligation towards or relationship of agency or trust with
or for Borrower. The duties of Agent shall be ministerial and administrative in
nature, and Agent shall not have by reason of this Agreement or any other Loan
Document a fiduciary relationship in respect of any Lender.
Section 7.2 Limitations on Agent. Notwithstanding anything to the contrary
contained in Section 7.1 above:
(a) Unanimous Lender Consent. The consent of the Unanimous Lenders
shall be required for the following actions, waivers and amendments:
(i) an increase in the principal amount of the Loan;
(ii) a reduction of the rate or amount of interest on any of
the Advances or any fees (other than the Agency Fee) or other
amounts payable to the Lenders except as provided hereunder;
(iii) the postponement of the Maturity Date (except with
respect to any extension permitted by the terms of Section 2A.11 of
this Agreement) or a waiver of any of the conditions to the
extension of the Maturity Date under Section 2A.11;
(iv) the assignment of any right or interest in or under this
Agreement or any of the other Loan Documents by Borrower;
(v) the release of any of the Collateral or the release of any
Guarantor or any other obligor under a Loan Document from any of its
obligations thereunder (except upon the complete and indefeasible
payment of the Loan and except upon Agent's determination that the
criteria for reduction of the Guaranty Obligations as set forth in
the Payment Guaranty have been met);
(vi) the amendment of the definition of "REQUISITE LENDERS,"
"SUPERMAJORITY LENDERS" or "UNANIMOUS LENDERS";
(vii) the amendment of any of the provisions of this Article
VII;
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(viii) the waiver or amendment of any of the affirmative
covenants of Borrower set forth in Section 4.1 (a) concerning the
structure of Borrower, Section 4.1 (e) concerning maintenance of the
Premises, Section 4.1 (h) concerning payment of fees, Section 4.1(i)
concerning use of proceeds of the Loan, Section 4.1(j) concerning
completion by the Completion Date, Section 4.1 (n) concerning bonds,
Section 4.1 (r) concerning indemnification, Section 4.1 (s)
concerning security interests, Section 4.1(x) concerning delivery of
Guarantor's financial statements, Section 4.1(bb) concerning
delivery of rent rolls and Leasing Reports as to both the delivery
of such items and compliance with the requirements thereof, Section
4.1(cc) concerning delivery of Facility Summary Reports as to both
the delivery of such items and compliance with the requirements
thereof, Section 4.1(dd) concerning Debt Service Coverage Ratios,
Section 4.1(ee) concerning minimum occupancy levels, Section 4.1(ff)
concerning Guarantor's net worth and Section 4.1(gg) concerning
Guarantor's liquidity;
(ix) the waiver or amendment of any of the negative covenants
of Borrower set forth in Section 4.2 (a) concerning interest in the
Premises, Section 4.2 (b) and Section 4.2(m) concerning ownership,
and Section 4.2 (g) concerning Pollutants;
(x) the waiver of any Event of Default described in Sections
5.1 (a) concerning default beyond the cure period, Section 5.1 (b)
concerning any monetary default, Section 5.1 (d) concerning judgment
against a Significant Party, Section 5.1 (e) concerning bankruptcy
proceedings, Section 5.1 (f) concerning a bankruptcy order, Section
5.1 (g) concerning transfer of the Premises, Section 5.1 (h)
concerning casualty or condemnation of the Premises, Section
5.1(l)(ii) concerning Guarantor's obligation under the Guaranties
and the Environmental Indemnity Agreement and Section 5.1(t)
concerning Member's ownership and control of Borrower;
(xi) the amendment of Section 2B.15 concerning Borrower's
obligation to contribute the Required Equity, the amendment of
Section 2B.15 concerning the requirement that the Mezzanine
Financing shall be subordinate to the Loans, the extension of the
grace periods set forth in Section 5.2, the amendment of Section 5.3
concerning rights of Agent and Lenders, Section 5.4 concerning
limited recourse obligations, Section 7.14 concerning successors and
assigns or Section 8.5 concerning amendments to this Agreement;
(xii) disposition of the Premises with financing by the
Leasehold Entity;
(xiii) the waiver of the covenants of Guarantor set forth in
the Guaranties as to Guarantor's minimum net worth and minimum
liquidity; and
(xiv) any amendment to the Ground Lease.
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(b) Requisite Lender Consent. The consent of the Requisite Lenders
shall be required for the following actions, waivers and amendments:
(i) the waiver of any Event of Default described in Sections
5.1 other than those requiring the consent of the Unanimous Lenders
pursuant to Section 7.2(a)(x) above;
(ii) the waiver of Borrower's obligation to pay the late fees
set forth in Section 2A.3;
(iii) actions taken by Agent under Section 2B.2(b) that
contradict the advice of Agent's Inspecting Consultant or the waiver
or amendment of any of the provisions set forth in Sections 2B.2(a)
concerning the release of Retainage, Section 2B.5 concerning
disbursement of the Development Fee, Section 2B.7 concerning funding
limitations, Section 2B.7(A) concerning loan balancing requirements,
and Section 2B.8 concerning reduction or release of Retainage for
Hard Costs except for the release of Retainage by Agent on a line
item basis as permitted by Section 2B.8;
(iv) an amendment to the Budget (other than a reallocation
pursuant to Section 2B.14) or the granting of consent to a Change
Order required pursuant to Section 4.2(d) to the extent such
amendment or Change Order is material, "material" meaning that (a)
individually or in the aggregate with all previous amendments, such
amendment or Change Order results in an increase or decrease in the
Budget in excess of $500,000 or (b) such amendment or Change Order
would reduce the value of the Project;
(v) the making of Protective Advances (with notice of same
made to the Lenders promptly thereafter) in an aggregate amount in
excess of $250,000; provided, however, that approval from the
Requisite Lenders shall not be required for Agent to fund Protective
Advances (with notice of same made to the Lenders promptly
thereafter), in any amount without limitation in the case of an
emergency (in Agent's reasonable judgment) or for sums expended for
real estate taxes, other governmental charges, insurance premiums
and utility charges;
(vi) the waiver or amendment of any of the affirmative
covenants of Borrower set forth in Section 4.1 (f) concerning
insurance, Section 4.1 (j) concerning construction of the
Improvements (other than the requirement of completion by the
Completion Date, which, as provided in Section 7.2(a)(viii) shall
require the consent of the Unanimous Lenders), Section 4.1 (k)
concerning standard of construction, Section 4.1 (m) concerning the
correction of defects, Section 4.1 (p) concerning the foundation
survey, Section 4.1 (q) concerning the as-built survey, and Section
4.1 (w) concerning the payment of claims;
(vii) the waiver or amendment of any of the negative covenants
of Borrower set forth in Section 4.2 (h) concerning subdivision of
the Land, and Section 4.2 (j) concerning termination of leases;
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(viii) the waiver or amendment of any of the provisions set
forth in Section 6.3 concerning conditions to funding, and Section
6.4 concerning the last disbursement of Hard Costs;
(ix) acquisition of the Premises by foreclosure by an entity
wholly owned and controlled (directly or indirectly) by Agent to
hold title to the Premises following foreclosure or acceptance of a
deed in lieu of foreclosure (the "LEASEHOLD ENTITY") or by
acceptance of a deed in lieu of foreclosure by the Leasehold Entity;
(x) structure of the entity to serve as the Leasehold Entity;
(xi) plan for management of the Premises by the Leasehold
Entity, including, for example, an operating budget and capital
improvements budget, leasing guidelines, management and leasing
agent criteria, and plan for marketing and disposition of the
Premises;
(xii) disposition of the Premises without financing by the
Leasehold Entity; and
(xiii) determinations as to the declaration of an Event of
Default and the exercise of Lender's remedies hereunder or under the
other Loan Documents after an Event of Default.
(c) Supermajority Lender Consent. The consent of the Supermajority
Lenders shall be required for the following actions, waivers or amendments:
(i) any admission of any new or substitute member in or
manager of Borrower that requires Agent or Lender consent under
Section 4.2(b) or Section 4.2(m) hereof; or
(ii) any merger or consolidation involving any Guarantor that
requires Agent or Lender consent under Section 4.2(b) or Section
4.2(m) hereof.
(d) Lender Consent. At any time that Agent desires the consent of
the Lenders pursuant to this Section 7.2, Agent shall provide written notice of
the proposed action, waiver or amendment to each Lender together with Agent's
recommendation. Each Lender shall provide written notice to Agent within seven
(7) Domestic Business Days of such Lender's receipt of Agent's notice granting
or denying such Lender's consent to such proposed action, waiver or amendment.
Failure of any Lender to respond to Agent within such time frame shall be deemed
to be a grant of such Lender's consent in favor of the action, waiver or
amendment recommended by Agent in such notice.
Section 7.3 Reliance by Agent. Agent shall be entitled to rely upon any
certification, notice or other communication (including any thereof by
telephone, telecopy, telegram or cable) believed by it to be genuine and correct
and to have been signed or sent by or on behalf of the
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proper person or persons, and upon advice and statements of legal counsel,
independent accountants or other experts selected by Agent. As to any matters
not expressly provided for by this Agreement or any other Loan Document, Agent
shall in all cases be fully protected in acting, or in refraining from acting,
hereunder and thereunder in accordance with instructions signed by the Requisite
Lenders, and such instructions of the Requisite Lenders in any action taken or
failure to act pursuant thereto shall be binding on all of the Lenders.
Section 7.4 Defaults. Agent shall not be deemed to have knowledge of the
occurrence of a default or an Event of Default (other than the nonpayment of
principal of or interest on the Loans) unless Agent has received notice from a
Lender or Borrower specifying such default or Event of Default and stating that
such notice is a "NOTICE OF DEFAULT". In the event that Agent receives such a
notice of the occurrence of a default or an Event of Default, Agent shall give
prompt notice thereof to the Lenders. Agent shall give each Lender prompt notice
of each nonpayment of principal of or interest on the Loans whether or not it
has received any notice of the occurrence of such nonpayment. Agent shall take
such action hereunder with respect to such default or Event of Default as shall
be directed by the Unanimous Lenders or Requisite Lenders as provided in Section
7.2 above, provided that, unless and until Agent shall have received such
directions, Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such default or Event of
Default as it shall deem advisable in the best interests of the Lenders.
Section 7.5 Rights of Agent as a Lender. With respect to Advances made by
it, KCCI in its capacity as a Lender hereunder shall have the same rights and
powers hereunder as any other Lender and may exercise the same as though it were
not acting as Agent, and the term "LENDER" or "LENDERS" shall, unless the
context otherwise indicates, include KCCI in its individual capacity. Agent may
(without having to account therefor to any Lender) accept deposits from, lend
money to and generally engage in any kind of banking, trust or other business
with Borrower (and any of its Affiliates) as if it were not acting as Agent, and
Agent may accept fees and other consideration from Borrower for services in
connection with this Agreement or any other Loan Document or otherwise without
having to account for the same to the Lenders.
Section 7.6 Indemnification. Each Lender severally agrees to indemnify
Agent, to the extent Agent shall not have been reimbursed by Borrower (and if
Lenders indemnify Agent but Borrower later reimburses Agent, then Agent is to
return the earlier paid amount to the Lenders), ratably in accordance with its
Commitment, for any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses (including, without
limitation, counsel fees and disbursements) or disbursements of any kind and
nature whatsoever which may be imposed on, incurred by or asserted against Agent
in any way relating to or arising out of this Agreement or any other Loan
Document or any other documents contemplated by or referred to herein or therein
or the transactions contemplated hereby or thereby (excluding, unless an Event
of Default has occurred and is continuing, the normal administrative costs and
expenses incident to the performance of its agency duties hereunder) or the
enforcement of any of the terms hereof or thereof or any such other documents;
provided, however, that no Lender shall be liable for any of the foregoing to
the extent they arise from the gross negligence or willful misconduct of Agent.
If any indemnity furnished to Agent for any purpose shall, in the opinion of
Agent, be
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insufficient or become impaired, Agent may call for additional indemnity and
cease, or not commence, to do the acts indemnified against until such additional
indemnity is furnished.
Section 7.7 Consequential Damages. AGENT SHALL NOT BE RESPONSIBLE OR
LIABLE TO ANY LENDER, BORROWER OR ANY OTHER PERSON OR ENTITY FOR ANY PUNITIVE,
EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF THIS
AGREEMENT, THE OTHER LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY UNLESS AGENT DELIBERATELY FAILS TO REMIT TO ANY LENDER ITS PRO
RATA SHARE OF LOAN PAYMENTS MADE BY BORROWER OR FAILS TO ADVANCE MONIES ADVANCED
BY A LENDER TO FUND A DRAW REQUEST WHICH COMPLIED WITH ALL OF THE TERMS AND
CONDITIONS OF THIS AGREEMENT.
Section 7.8 Payee of Note Treated as Owner. Agent may deem and treat the
payee of any Note as the owner thereof for all purposes hereof unless and until
a written notice of the assignment or transfer thereof shall have been filed
with Agent and the provisions of Section 7.14 have been satisfied. Any requests,
authority or consent of any person who at the time of making such request or
giving such authority or consent is the holder of any Note shall be conclusive
and binding on any subsequent holder, transferee or assignee of that Note or of
any Note or Notes issued in exchange therefor or replacement thereof.
Section 7.9 Lenders' Knowledge; Nonreliance on Agent and Other Lenders.
Each Lender agrees that it has, independently and without reliance on Agent or
any other Lender, and based on such documents and information as it has deemed
appropriate, made its own credit analysis of Borrower and decision to enter into
this Agreement and that it will, independently and without reliance upon Agent
or any other Lender, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement or any of the other Loan
Documents. Agent shall not be required to keep itself informed as to the
performance or observance by Borrower of this Agreement or any of the other Loan
Documents or any other document referred to or provided for herein or therein or
to inspect the properties or books of Borrower or any other person. Except for
notices, reports and other documents and information expressly required to be
furnished to the Lenders by Agent hereunder or under the other Loan Documents,
Agent shall not have any duty or responsibility to provide any Lender with any
credit or other information concerning the affairs, financial condition or
business of Borrower or any other person (or any of their Affiliates) which may
come into the possession of Agent; provided that, (i) promptly after receipt
from Borrower and/or Guarantor, Agent shall send the Lenders copies of all
financial information furnished by Borrower and/or Guarantor (including, without
limitation, those set forth in Section 4.1(x) (financial statements), Section
4.1(bb) (rent rolls), Section 4.1(cc) (Facility Summary Reports), Section
4.1(ff) (certificates of Guarantor's net worth) and 4.1(gg) (certificates of
Guarantor's Liquid Assets) as well as all material notices furnished by Borrower
and/or Guarantor and (ii) upon the written request of a Lender, provided such
request is reasonable in scope under the circumstances, Agent shall request that
Borrower and/or Guarantor provide any information or documentation that Agent
shall have the right to request from Borrower and/or Guarantor hereunder or
under any of the other Loan Documents and upon the receipt of such information
or documentation shall promptly deliver the same to such Lender and any other
Lenders.
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Section 7.10 Failure to Act. Except for action expressly required of Agent
hereunder or under the other Loan Documents, Agent shall in all cases be fully
justified in failing or refusing to act hereunder and thereunder unless it shall
receive further assurances to its satisfaction by the Lenders of their
indemnification obligations under Section 7.6 against any and all liability and
expense which may be incurred by Agent by reason of taking, continuing to take,
or failing to take any such action.
Section 7.11 Resignation or Removal of Agent. Agent (a) may resign at any
time by giving notice thereof to the Lenders, Guarantor and Borrower, and (b)
may not be removed as Agent unless Lenders (other than Agent and other than any
Lender then in default) holding no less than 75% of the Commitments vote in
favor of such removal, or, in the case of a removal due to a material breach of
or material default in Agent's obligations under this Article VII that shall not
have been cured within thirty (30) days after written notice to Agent, may not
be removed as Agent unless Lenders holding no less than 75% of the Commitments,
excluding the Commitment of Agent, vote in favor of such removal, provided,
however, that in no event may the Agent be removed unless two (2) or more
Lenders vote in favor of such removal. Upon any such resignation or removal, the
Lenders (by majority vote and including KCCI, based upon their respective
outstanding Commitments) shall have the right to appoint a successor Agent,
subject to the rights of Guarantor set forth in 7.14(b) hereof. If no successor
Agent shall have been so appointed by the Lenders within 30 days after the
retiring Agent's notice of resignation, then the retiring Agent may, on behalf
of the Lenders, appoint a successor Agent. Any successor Agent shall be a bank
which is reasonably acceptable to Borrower (and Guarantor, as provided in
Section 7.14(b) hereof) and which has a combined capital and surplus of at least
$500,000,000. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring or
removed Agent, and the retiring or removed Agent shall be discharged from its
duties and obligations hereunder for matters occurring after the successor Agent
takes over. After any retiring Agent's resignation or removal hereunder as
Agent, the provisions of this Article VII shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as Agent hereunder.
Section 7.12 Reliance by Borrower. (a) Notwithstanding anything to the
contrary in this Agreement or in any Assignment and Acceptance Agreement, the
Lenders and Agent hereby agree that throughout the term of the Loan:
(b) Borrower, Developer and Guarantor shall have the right without
the need of any inquiry or investigation to rely on the appointment of Agent as
agent for all of the Lenders for the purposes and with the powers specifically
set forth herein and the continuance of that appointment throughout the term of
the Loan unless Borrower, Developer and Guarantor has received notice pursuant
to Section 7.11 of the resignation of Agent and designation of a replacement
Agent.
(c) The right of Borrower, Developer and Guarantor hereunder to rely
upon and look to Agent shall continue during the term of the Loan and no
dispute, complaint or claim between any Lender and Agent shall impair or negate
such right of Borrower to rely upon and look exclusively to Agent as set forth
in this Article VII; provided, however, that if and at such time as a
replacement Agent or co-Agent has been duly appointed in the place of Agent
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originally named herein (or in the place of any earlier replacement Agent or
co-Agent(s) appointed in accordance with the terms hereof), Borrower shall rely
on such replacement Agent or co-Agent(s) and shall no longer rely on any prior
Agent.
Section 7.13 Apportionment of Payments. All payments of principal and
interest in respect of outstanding Advances, all payments of fees (other than
the Construction Administration Fee and the Agency Fee) and all other payments
in respect of any other Obligations, shall be allocated among such of the
Lenders as are entitled thereto, in proportion to their respective Pro Rata
shares or otherwise as provided herein. Agent shall apply all payments in
respect of any Obligations and all proceeds of Collateral in the following
order: First, to pay principal of and interest on any portion of the Advances
which Agent may have advanced on behalf of any Lender other than KCCI for which
Agent has not then been reimbursed by such Lender or Borrower; Second, to pay
principal of and interest on any Protective Advance for which Agent has not then
been paid by Borrower or reimbursed by the Lenders; Third, to pay Obligations in
respect of any fees, expense reimbursements or indemnities then due to Agent;
Fourth, to pay any outstanding Obligations in respect of any fees, expense
reimbursements or indemnities then due to the Lenders; Fifth, to pay interest
due in respect of Advances; Sixth, to the ratable payment or prepayment of
principal outstanding on Loans in the order of priority determined by Agent;
Seventh, to the ratable payment of all other Obligations; and Eighth, as
Borrower designates.
Section 7.14 Successors and Assigns. (a) Subject to Section 7.14(b) below,
each Lender may at any time sell to one or more persons (each a "PARTICIPANT")
participating interests in its Pro Rata share of the Loan, any of its
Commitments or any other of its interests hereunder relating thereto, all on
such terms as such Lender may deem acceptable. In the event of any such sale of
a participating interest to a Participant, the assigning Lender's obligations
under this Agreement shall remain unchanged, such assigning Lender shall remain
solely responsible to the other parties hereto for the performance of such
obligations, such assigning Lender shall remain the holder of its Note issued
hereunder for all purposes under this Agreement, and Agent and Borrower shall
continue to deal solely and directly with such assigning Lender in connection
with the rights and obligations derived through the assigning Lender under this
Agreement.
(b) Each Lender may at any time assign to one or more banks or financial
institutions (each an "ASSIGNEE") all or any of its rights and obligations under
this Agreement, its Note and the other Loan Documents, and such Assignee shall
assume all such rights and obligations, pursuant to an Assignment and Acceptance
Agreement executed by such Assignee, all on such terms as such Lender and Agent
may deem acceptable, provided that (i) such Lender retains an interest of not
less than $10,000,000 in the Loan, (provided, however, that the amount of the
interest that European American Bank shall be required to retain shall be not
less than $5,000,000 and provided further that the foregoing minimums shall not
apply after an Event of Default hereunder or under any of the other Loan
Documents); (ii) such Lender assigns an interest of not less than $5,000,000
(provided, however, that the foregoing minimum shall not apply after an Event of
Default hereunder or under any of the other Loan Documents); (iii) such Lender
pays to Agent an administrative fee of $2,500.00 for each such assignment, and
(iv) Agent and Guarantor approve the Assignee, which approval shall not be
unreasonably withheld (provided, however that Guarantor shall not have the
foregoing approval rights with respect to such assignee following an Event of
Default hereunder or under any of the other Loan
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Documents). Guarantor shall also have the right to approve any replacement of
KCCI as the Agent hereunder and under the other Loan Documents, which approval
shall not be unreasonably withheld, except that (i) Guarantor shall not have
such approval rights following an Event of Default hereunder or under any of the
other Loan Documents and (ii) upon the resignation of KCCI, Fleet National Bank
shall be first considered as the replacement Agent and Guarantor shall have no
approval rights with respect to the appointment of Fleet National Bank as
replacement Agent. Upon the execution, delivery and acceptance of such
Assignment and Acceptance Agreement in accordance with this Agreement, from and
after the effective date of the assignment effected thereby, (x) the Assignee
thereunder shall be a party hereto and, to the extent of that portion of the
Loan covered by such Assignment and Acceptance Agreement, have the rights and
obligations of a Lender hereunder with a Commitment as set forth therein, and
(y) the assigning Lender shall, to the extent provided in such Assignment and
Acceptance Agreement, relinquish its rights and be released from its obligations
under this Agreement (and, in the case of an Assignment and Acceptance Agreement
covering all or the remaining portion of an assigning Lender's rights and
obligations under this Agreement, such Lender shall cease to be a party hereto).
Such Assignment and Acceptance Agreement shall be deemed to amend this Agreement
to the extent, and only to the extent, necessary to reflect the addition of such
Assignee as a Lender party to this Agreement and the resulting adjustment
arising from the purchase by such Assignee of all or a portion of the rights and
obligations of the assigning Lender under this Agreement, its Note and the other
Loan Documents. On or prior to the effective date of the assignment effected by
such Assignment and Acceptance Agreement, Borrower shall execute and deliver to
Agent in exchange for the assigning Lender's Note or Notes a new Note or Notes
to the order of the Assignee in an amount equal to the Commitment assumed by it
pursuant to such Assignment and Acceptance Agreement and a new Note or Notes to
the order of such assigning Lender in an amount equal to the Commitment retained
by it hereunder. Such new Note or Notes shall be dated as of the Closing Date
and shall otherwise be in the form of the Note or Notes replaced thereby. The
Note or Notes surrendered by the assigning Lender shall be marked "CANCELLED".
Borrower shall assist KCCI in the process of syndicating the Loans and
Commitments to the extent reasonably requested by KCCI.
(c) Borrower authorizes any Lender to disclose to any Participant,
Assignee or other transferee (each a "TRANSFEREE") and any prospective
Transferee any and all financial information in such Lender's possession
concerning Borrower which has been delivered to such Lender by Borrower pursuant
to this Agreement or which has been delivered to such Lender by Borrower in
connection with such Lender's credit evaluation prior to entering into this
Agreement.
(d) Anything in this Section 7.14 to the contrary notwithstanding, any
Lender may assign and pledge all or any portion of the Advances and/or
obligations owing to it to any Federal Reserve Bank or the United States
Treasury as collateral security pursuant to Regulation A of the Board of
Governors of the Federal Reserve System and any Operating Circular issued by
such Federal Reserve Bank, provided that any payment in respect of such assigned
Advances and/or obligations made by Borrower to the assigning and/or pledging
Lender in accordance with the terms of this Agreement shall satisfy Borrower's
obligations hereunder in respect of such assigned Advances and/or obligations to
the extent of such payment. No such assignment shall release the assigning
and/or pledging Lender from its obligations hereunder.
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(e) KCCI agrees to furnish to Borrower upon Borrower's written request a
copy of any Assignment and Acceptance Agreement between KCCI and any Assignee
executed pursuant to paragraph (b) above.
(f) This Agreement shall be binding on the parties hereto and their
respective successors and assigns.
ARTICLE VIII
GENERAL PROVISIONS
------------------
Section 8.1 No Waiver; Modifications in Writing. No Advance or
disbursement of Loan proceeds hereunder shall constitute a waiver of any of the
conditions of Agent's or any Lender's obligation to make further Advances or
disbursements. Agent may by written notice to Borrower, at any time and from
time to time, waive in whole or in part and absolutely or conditionally, any
default or Event of Default hereunder subject to the provisions of Section 7.2.
Any such waiver shall be subject to such conditions or limitations as shall be
specified in any such notice. In the case of any such waiver, the rights of
Borrower shall be otherwise unaffected, and any default or Event of Default so
waived shall be deemed to be cured and not continuing to the extent and on the
conditions or limitations set forth in such waiver, but no such waiver shall
extend to any subsequent or other default or Event of Default, or impair any
right, remedy or power consequent thereupon.
Section 8.2 Agent's Approval. All proceedings taken in connection with the
Loan and all Draw Requests, documents, agreements or contracts required or
contemplated by this Agreement or any other Loan Document shall be reasonably
satisfactory to Agent, and all parties thereto shall have received copies (or
certified copies where appropriate in such counsel's judgment) of all documents
which they may reasonably request in connection therewith.
Section 8.3 Standing. All conditions to the obligations of Agent and the
Lenders to make Advances and disbursements hereunder are imposed solely and
exclusively for the benefit of Agent, the Lenders and their assigns, and no
other person shall have standing to require satisfaction of such conditions in
accordance with their terms or be entitled to assume that Agent or Lenders will
refuse to make Advances or disbursements in the absence of strict compliance
with any or all thereof, and no other person shall, under any circumstances, be
deemed to be the beneficiary of such conditions, any or all of which may be
freely waived in whole or in part by Agent at any time if in its sole discretion
it deems it advisable to do so (subject to the provisions of Section 7.2
hereof), it being further understood that Agent and Lenders shall have no
obligation to see to it that the Improvements are properly and/or timely
completed or to supervise the construction of the Improvements or to supervise,
direct or review the distribution or disbursements of Loan proceeds. Neither
Agent nor any Lender, by making the Loan or by any other action taken pursuant
to the Loan Documents, shall be deemed to be a partner or joint venturer with
Borrower.
Section 8.4 Notices. All notices, demands, instructions and other
communications required or permitted to be given to or made upon either party
hereto or any other person shall be
72
<PAGE>
in writing and shall be personally delivered or sent by registered or certified
mail, postage prepaid, return receipt requested, or by prepaid courier, and
shall be deemed to be given for purpose of this Agreement in regard to
registered or certified mail, three (3) days after mailing, and in regard to
personal delivery or prepaid courier, on the day that such writing is delivered.
Unless otherwise specified in a notice sent or delivered in accordance with the
foregoing provisions of this Section, notices, demands, instructions and other
communications in writing shall be given to or made upon the following persons
at their respective addresses indicated below:
If to Borrower:
AH Battery Park Owner, LLC
c/o Alliance Holdings, Inc.
723 Electronic Drive, Suite 300
Horsham, PA 19044
Attention: David B. Fenkell
Telecopy: (215) 706-0877
with a copy to Developer:
Brookdale Living Communities of New York - BPC, Inc.
c/o Brookdale Living Communities, Inc.
77 West Wacker Drive, Suite 4400
Chicago, Illinois 60601
Attention: Darryl W. Copeland, Jr.
Telecopy: (312) 977-3699
and with a courtesy copy to:
Brookdale Living Communities, Inc.
77 West Wacker Drive, Suite 4400
Chicago, Illinois 60601
Attention: Robert J. Rudnik
Telecopy: (312) 977-3769
Squire, Sanders & Dempsey, LLP
1300 Huntington Center
41 South High Street
Columbus, Ohio 43215
Attention: David Cooper, Esq.
Telecopy: (614) 365-2499
73
<PAGE>
If to Agent:
Key Corporate Capital Inc.
127 Public Square
Cleveland, Ohio 44114-1306
Attention: Ms. Nancy A. Herman
Vice President
Telecopy: (216) 689-4997
with a courtesy copy to:
Jones, Day, Reavis & Pogue
901 Lakeside Avenue
Cleveland, Ohio 44114
Attention: Bernadette M. Mast, Esq.
Telecopy: (216) 579-0212
If to a Lender, to such Lender at its address or telecopier number set forth on
the signature page hereof or in the Assignment and Acceptance Agreement pursuant
to which it became a party hereto. Notices may alternatively be sent to such
other address as any of the parties may from time to time designate by written
notice given as herein required. Rejection or refusal to accept or inability to
deliver because of changed addresses or because no notice of changed address was
given shall be deemed a receipt of such notice. The effectiveness of such notice
will not be affected by the giving or lack thereof of courtesy copies of such
notice.
If any day on which any notice, demand, instruction or other communication
is given or sent by any party hereto is not a Domestic Business Day, such
notice, demand, instruction or other communication shall be deemed to have been
given or sent on the Domestic Business Day next succeeding such non-Domestic
Business Day.
Section 8.5 Amendments. Neither this Agreement nor any provision hereof
may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought, and in the case of the
Lenders, which is approved as provided in Section 7.2 hereof.
Section 8.6 Assignment. Borrower shall not assign or transfer any of its
rights hereunder without the prior written consent of Agent.
Section 8.7 Governing Law. This Agreement shall be governed by the laws of
the State of New York without regard to principles of conflict of laws.
Section 8.8 Severability of Provisions. Any provision of this Agreement
which is prohibited or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without affecting the validity or enforceability
of the rest of such provision.
Section 8.9 Headings. Article, Section and other headings used in this
Agreement are for convenience of reference only and shall not affect the
construction of this Agreement.
74
<PAGE>
Section 8.10 Waiver of Trial by Jury. AGENT, LENDERS AND BORROWER SHALL
AND DO HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
BROUGHT BY ANY OF THE PARTIES HERETO AGAINST ANY OTHER PARTY ON ANY MATTERS
WHATSOEVER ARISING OUT OF OR IN ANY WAY IN CONNECTION WITH THE LOAN, THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT.
Section 8.11 Submission to Jurisdiction; Service of Process
(a) The Borrower irrevocably submits to the non-exclusive
jurisdiction of the courts of the State of New York, the courts of the United
States for the Southern District of the State of New York, and appellate courts
from any thereof, over any suit, action or proceeding arising out of or relating
to this Note. The Borrower hereby irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of the venue of any such suit, action or proceeding brought in any such court
and any claim that any such suit, action or proceeding brought in such a court
has been brought in an inconvenient forum. Without limiting Borrower's right to
appeal any such final judgment in accordance with applicable Requirements,
Borrower agrees that a final judgment in any such suit, action or proceeding
brought in such a court shall be conclusive and binding upon Borrower.
(b) The Borrower hereby irrevocably appoints CT Corporation System
as its authorized agent to accept and acknowledge, on behalf of Borrower,
service of any and all process which may be served in any suit, action or
proceeding of the nature referred to above in any such court. The Borrower
represents and warrants that such agent has agreed in writing to accept such
appointment and that Borrower has delivered to the Agent a true copy of such
designation and acceptance. Said designation and appointment shall be
irrevocable. If such agent shall cease so to act, Borrower covenants and agrees
that it shall irrevocably designate and appoint without delay another such agent
satisfactory to the Agent and shall promptly deliver to the Agent evidence in
writing of such other agent's acceptance of such appointment.
(c) Process may be served in any suit, action or proceeding of the
nature referred to above (i) by the mailing of copies thereof by registered or
certified air mail, postage prepaid return receipt requested, to Borrower at its
address set forth above or to such other address of which Borrower shall have
given written notice to the Agent, or (ii) without affecting the efficacy of any
service made pursuant to clause (i) above, if Borrower shall not have filed an
appearance within twenty-one days after the date of such mailing, by serving a
copy thereof upon CT Corporation System, at its office at 1633 Broadway, New
York, New York 10014, as Borrower's agent for service of process. The Borrower
agrees that such service shall be deemed in every respect effective service of
process upon Borrower in any such suit, action or proceedings and shall, to the
fullest extent permitted by law, be taken and held to be valid personal service
upon and personal delivery to Borrower. Nothing in this Section shall affect the
right of the Agent to serve process in any manner permitted by law or limit the
right of the Agent to bring proceedings against Borrower in the courts of any
other jurisdiction or jurisdictions.
Section 8.12 Lender's Remedies Cumulative. Each and every right, remedy
and power hereby granted to Agent or any Lender or allowed it by law or other
agreement shall be cumulative and not exclusive and may be exercised by Agent or
such Lender from time to time.
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<PAGE>
Section 8.13 Counterparts. This Agreement may be executed by the parties
hereto separately in any number of counterparts, each of which shall be an
original and all of which collectively shall constitute one and the same
agreement.
Section 8.14 Trust Fund. Borrower agrees that it will receive the Advances
secured by the Mortgage and will hold the right to receive such Advances as a
trust fund to be applied first for the purpose of paying the cost of
improvement(as defined in New York Lien Law), if any, and will apply the same
first to the payment of such costs before using any part of the total of the
same for any other purpose and will comply with Section 13 of the New York Lien
Law. Borrower will indemnify and hold Lender harmless against any loss or
liability, reasonable cost or expense, including, without limitation, any
judgments, reasonable attorneys' fees, costs of appeal, bonds and printing
costs, arising out of or relating to any proceeding instituted by any claimant
alleging a violation by Borrower or Lender of any applicable lien law including,
without limitation, any section of Article 3A of the New York Lien Law. The
provision of this Section shall survive the payment and performance of
Borrower's obligations under this Agreement and the other Loan Documents.
[SIGNATURE PAGE FOLLOWS]
76
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first set forth above.
Borrower: AH BATTERY PARK OWNER, LLC,
an Ohio limited liability company
BY: AH Battery Park Member, LLC, an Ohio limited
liability company, its sole member and manager
By: Alliance Holdings, Inc., a Pennsylvania
corporation, its sole member and manager
By: /s/ David B. Fenkell
----------------------------------
Name: David B. Fenkell
-------------------------
Title: President
-------------------------
The Agent: KEY CORPORATE CAPITAL INC.
By: /s/ Nancy A Herman
-------------------------------
Nancy A. Herman
Vice President
The Lenders: KEY CORPORATE CAPITAL INC.
By: /s/ Nancy A Herman
-------------------------------
Nancy A. Herman
Vice President
FLEET NATIONAL BANK
By: /s/ Patricia Marinilli
-------------------------------
Patricia Marinilli
Vice President
EUROPEAN AMERICAN BANK
By: /s/ Sophia Haliotis
-------------------------------
Sophia Haliotis
Group Vice President
<PAGE>
ANNEX I
Lender Pro Rata Share
------ --------------
Key Corporate Capital Inc. 45.03816794%
Fleet National Bank 34.60559796%
European American Bank 20.35623410%
<PAGE>
EXHIBIT A
---------
LEGAL DESCRIPTION
All that certain plot, piece or parcel of land, situate, lying and being in the
Borough of Manhattan, County of New York, City and State of New York, bounded
and described as follows:
BEGINNING at the intersection of the southerly line of Chambers Street and the
westerly line of North End Avenue;
THENCE southerly along the westerly line of North End Avenue, a distance of
196.00 feet to a point on the northerly line of Warren Street;
THENCE westerly along said northerly line of Warren Street, a distance of 100.00
feet to the division line between Parcel 20C on the west and Parcel 20B on the
east;
THENCE northerly along said division line at right angles to the preceding
course, a distance of 196.00 feet to the southerly line of Chambers Street;
THENCE easterly along said southerly line of Chambers Street, a distance of
100.00 feet to the point of BEGINNING.
<PAGE>
EXHIBIT B
Permitted Encumbrances
1. Terms, covenants, conditions and provisions of Declaration of Covenants
and Restrictions made by Battery Park City Authority dated 3/15/84
recorded on 3/21/84 in Reel 776 Page 360.
2. Terms, covenants, conditions and provisions of unrecorded Settlement
Agreement made between the City of New York and New York State Urban
Development Corporation, dated as of 6/6/80 as recited in amendment to
Option to Purchase recorded in Reel 1133 Page 582. Said Agreement was
amended by unrecorded amendments dated 6/9/80, 8/15/86, 6/28/89, 12/30,89,
5/18/90, 10/15/93, 4/10/95 and 10/1/96.
3. Terms, covenants and conditions in connection with Option to Purchase,
dated 6/6/80 granted to the City of New York as set forth in Agreement
between New York State Urban Development Corporation, BPC Development
Corporation, Battery Park City Authority and the City of New York, dated
as of 6/6/80 recorded on 6/11/80 in Reel 527 Page 153, as amended by
Amendment to Option to Purchase between Battery Park City Authority and
the City of New York, dated 8/15/86 recorded 10/22/86 in Reel 1133 Page
582 and further amended by Second Amendment to Option to Purchase between
Battery Park City Authority and the City of New York, dated as of 5/18/90
recorded 5/30/90 in Reel 1697 Page 294.
4. Terms, covenants and conditions of the Declaration of Restrictions dated
6/15/83 made by Battery Park City Authority recorded on 6/20/83 in Reel
696 Page 551.
5. Unrecorded Memo of Understanding dated 11/8/79 among the Governor of the
State of New York, the Mayor of the City of New York and the President and
Chief Executive Officer of the Urban Development Corporation and Battery
Park City Authority as amended by unrecorded amendments recited in
Amendment to Option to Purchase recorded in Reel 1133 Page 582.
6. Unrecorded Westway Agreement dated 12/8/81 between Battery Park City
Authority, Battery Park City Development Corporation and the People of the
State of New York as amended by Unrecorded Amendment dated 9/9/82 and
further amended by the Second Unrecorded Amendment of Westway Agreement
dated 6/83 recited in that certain Easement and Conveyance between Battery
Park City Authority and the People of the State of New York dated 10/29/85
recorded 11/20/85 in Reel 987 Page 949.
7. Distinctive Street Improvement Maintenance Declaration dated 1/13/86
recorded 9/17/90 in Reel 1729 Page 352.
8. Memorandum of Ground Lease by the Battery Park City Authority, as ground
lessor, and AH Battery Park Owner, LLC, as ground lessee, dated as of
August 24, 1999, to be recorded in the Office of the City Register, New
York County
<PAGE>
9. Subordination, Nondisturbance and Attornment Agreement by the Battery City
Authority, as master lessor, and AH Battery Park Owner, LLC, as ground
lessee, dated as of August 24, 1999, to be recorded in the Office of the
City Register, New York County
10. Building Loan Leasehold Mortgage, Security Agreement and Assignment of
Leases and Rents, by AH Battery Park Owner, LLC, as mortgagor, in favor of
Key Corporate Capital Inc., as Agent for the Lenders and Mortgagee, dated
as of August 24, 1999, to be recorded in the Office of the City Register
New York County
11. Soft Cost Leasehold Mortgage, Security Agreement and Assignment of Leases
and Rents, by AH Battery Park Owner, LLC, as mortgagor, in favor of Key
Corporate Capital Inc., as agent for the Lenders and mortgagee, dated as
of August 24, 1999, to be recorded in the Office of the City Register New
York County
12. UCC-1 Financing Statements from AH Battery Park Owner, LLC, as debtor, in
favor of Key Corporate Capital Inc. as Agent for the Lenders and secured
party, dated as of August 24, 1999, to be filed in various jurisdictions
13. Recognition Agreement by the Battery Park City Authority, as ground
lessor, and KCCI and the other Lenders, dated as of August 24, 1999, to be
recorded in the Office of the City Register, New York County
14. Memorandum of Property Option Agreement by AH Battery Park Owner, LLC, as
grantee, and Brookdale Living Communities of New York - BPC, Inc., as
grantor, dated as of August 24, 1999, to be recorded in the Office of the
City Register, New York County, with respect to that certain Property
Option Agreement, which, by its terms, is subordinate to the Mortgages and
the other Loan Documents executed in favor of KCCI and the other Lenders
<PAGE>
EXHIBIT C
[Operating Expense Certificate]
This certificate is delivered in accordance with Section 2B.6 of the Soft
Cost Loan Agreement. All capitalized terms not defined herein shall have the
meanings ascribed to them in the Soft Cost Loan Agreement. Manager hereby
certifies that (i) the Operating Expenses for the period from ______________,
____ to ______________, ____ are ______________________ Dollars ($_________),
(ii) that such Operating Expenses are equal to or less than the Operating
Expenses for such period set forth on the Budget and are now due and owing (or
will be coming due within 30 days) and (iii) all Operating Expenses incurred
prior to ___________, ____ have been paid in full.
AH BATTERY PARK OWNER, LLC,
an Ohio limited liability company
By: Brookdale Living Communities of New York-BPC, Inc.,
a Delaware corporation, as developer and manager
By: _________________________________________
Name:
Its:
<PAGE>
EXHIBIT D
---------
Form of Architect's Certificate
-------------------------------
[LETTERHEAD OF ARCHITECT]
Dated:_____________
Key Corporate Capital Inc., as Agent
127 Public Square
Cleveland, Ohio 44114-1306
Attention: Ms. Nancy A. Herman
Vice President
Re: Loans in the aggregate maximum amount of $49,125,000 to AH Battery
Park Owner, LLC (the "BORROWER") for the construction of
improvements (the "PROJECT") located at 445 North End Avenue,
Battery Park City, New York, New York
Ladies and Gentlemen:
The undersigned is the Architect for the above Project pursuant to that
certain architect's agreement, dated __________________, 199_, with Brookdale
Living Communities of New York-BPC, Inc. ("DEVELOPER"), the developer of the
Project on behalf of the Borrower, a true copy of which agreement we deliver to
you herewith (which agreement, together with any and all renewals, extensions
and modifications thereof and all exhibits and addenda thereto is hereinafter
referred to collectively as the "ARCHITECT'S AGREEMENT").
In consideration of lenders ("LENDERS") for whom you are acting as Agent
(the "AGENT") making mortgage loans ("LOANS") to the Borrower to finance the
construction of the Project, we agree with respect to said Project that upon
receipt of written notice from the Agent that the Borrower has defaulted under
any of the loan documents, we shall continue to act as Architects for the
Project, PROVIDED that the Agent and/or the Lenders agrees to pay all sums owed
us as the Architects for work previously performed to the extent that the
Borrower has not received construction Loans designated for payment of such
work, and we as Architects shall be reimbursed in accordance with the provisions
of the Architect's Agreement for services thereafter rendered on the Agent's
behalf, PROVIDED that unless and until Lender requests that we continue
performance under the Architect's Agreement as provided in the preceding clause,
Lender shall not be liable for any of the obligations of Borrower to us under
the Architect's Agreement.
We further acknowledge and consent to the collateral assignment by the
Borrower to the Agent of (i) all its rights under the Architect's Agreement and
(ii) all plans, specifications, drawings, renderings, and models related to the
Project, to secure the Loans made by the Lenders to the Borrower in respect to
the Project and any other obligations which may also be secured thereby.
<PAGE>
We advise you that we are not aware of any breach or default under the
Architect's Agreement.
We agree that whether or not the Borrower elects to continue the
employment of us as Architects after the date hereof, the Agent shall hereafter
succeed to, and have all of the rights of the Borrower in, said plans,
specifications, drawings, renderings, and models (collectively, the "PLANS"),
and, without limiting the generality of the foregoing, may use such materials to
complete the Project.
We hereby agree that we will not, without Lender's prior written approval,
agree to any alteration, modification, amendment to or release or discharge (in
whole or in part) of the Architect's Agreement or the Plans, or waive or claim
any waiver in respect of any provisions thereof, or perform any work pursuant to
any "material" change order. A change order shall be deemed "material" if (a) it
affects the value or use of the Project, or (b) it increases or decreases the
costs of construction of the Project by more than $100,000 or (c) when added to
other change orders not requiring the approval of Lender under clause (b) above,
it increases or decreases the costs of construction of the Project by more than
$1,000,000.
The rights of the Agent hereunder shall extend to its successors and
assigns (including any purchaser upon foreclosure of the mortgage securing the
Borrower's Loans, any receiver in possession of the Project, and any corporation
formed by or on behalf of any such person), and this letter also inures to the
benefit of any guarantor of the Loans that undertakes, at the Agent's request,
to complete the Project and perform the Borrower's obligations to the Agent and
the Lenders in respect thereof.
It shall not be necessary for you to acknowledge your agreement to the
foregoing, as this letter is intended to constitute, upon delivery of a signed
copy hereof, a binding obligation of the undersigned without the necessity of
any such acknowledgment by you.
The obligations of the undersigned hereunder may not be terminated without
the prior written consent of the Agent. This letter shall bind the successors
and assigns of the undersigned.
Very truly yours,
[NAME OF ARCHITECT]
By: ______________________________
Name:
Title:
<PAGE>
EXHIBIT E
---------
Developer's Certificate
-----------------------
Brookdale Living Communities of New York-BPC, Inc., a Delaware corporation
("Developer"), hereby represents and warrants to AH Battery Park Owner, LLC, an
Ohio limited liability company ("Borrower"), and Key Corporate Capital Inc.,
Fleet National Bank and European American Bank (collectively, "Lender") that
each of the representations and warranties contained in that certain Soft Cost
Loan Agreement and that certain Building Loan Agreement (collectively, the "Loan
Agreement") dated as of the date hereof by and between Borrower and Lender and
each of the Loan Documents (as defined in the Loan Agreement) which relate to
the Premises (as defined in the Loan Agreement) (specifically excluding any
representations or warranties relating to Borrower or its member and/or
affiliates) is true, correct and complete in all material respects.
Notwithstanding the foregoing, if any of the aforementioned representations
and/or warranties contained in the Loan Agreement and/or the Loan Documents are
limited to the knowledge or best knowledge of Borrower, then such
representations and/or warranties shall be limited to the knowledge or best
knowledge, respectively, of Developer. Developer's obligations hereunder shall
terminate (unless Developer or its affiliates have exercised its rights to
acquire the Property or an interest in Borrower or its member) upon the earlier
to occur of the (a) date upon which the Management Agreement (as defined in the
Loan Agreement and the Development Agreement (as defined in the Loan Agreement)
are terminated and (b) the date upon which the indebtedness evidenced by the
Note (as defined in the Loan Agreement) is repaid; provided, however, any
liability arising prior to such date shall not terminate. Notwithstanding
anything to the contrary contained herein, in no event shall any officer,
director, employee, member, manager, shareholder, incorporator or agent of
Developer or Developer's affiliates be personally liable for any of Developer's
obligations hereunder.
Dated: August ,1999
DEVELOPER:
BROOKDALE LIVING COMMUNITIES OF NEW YORK-BPC, INC.,
a Delaware corporation
By:
--------------------------------------------
Name:
--------------------------------------------
Its:
--------------------------------------------
<PAGE>
EXHIBIT F
---------
Occupancy Schedule/Pro Forma Rentals
------------------------------------
Minimum Occupancy Levels
Quarter 2 following Substantial Completion: 43.75%
Quarter 3 following Substantial Completion: 55.13%
Quarter 4 following Substantial Completion: 65.63%
Quarter 5 following Substantial Completion: 76.13%
Quarter 6 following Substantial Completion: 83.13%
Quarters 7-10 following Substantial Completion: 83.13%
Pro Forma Rentals
- -----------------
MONTHLY FEE ANNUAL FEE TOTAL
UNIT MIX IL. # OF UNITS (PER UNIT) (PER UNIT) ANNUAL FEE
- -------- -- ---------- -------- -------- ----------
Studio IL 24 $3,750 $45,000 $1,080,000
One Bedroom IL 126 $4,550 $54,600 $6,879,600
Two Bedroom IL 48 $5,150 $61,800 $2,966,400
Studio AL 19 $4,250 $51,000 $ 969,000
One Bedroom AL 1 $5,050 $60,600 $ 60,600
218 $4,570 $54,842 $11,955,600
PAYMENT GUARANTY
----------------
This PAYMENT GUARANTY (this "Guaranty"), dated as of the 24th day of
August, 1999, made by BROOKDALE LIVING COMMUNITIES, INC., a Delaware
corporation, having offices at 77 West Wacker Drive, Suite 4400, Chicago,
Illinois 60601 ("Guarantor"), for the benefit of KEY CORPORATE CAPITAL INC., a
Michigan corporation , having administrative offices at 127 Public Square,
Cleveland, Ohio 44114-1306 ("KCCI"), as the Agent (the "Agent") for the Lenders,
including KCCI, who are or hereafter become parties to the Loan Agreement
(hereinafter defined), each of which, including KCCI, is hereafter referred to
as a "Lender" or the "Lenders".
All capitalized terms appearing and not defined herein shall have the
same meanings ascribed to them in the Building Loan Agreement and/or Soft Cost
Loan Agreement, as may be amended from time to time, each of even date herewith,
(together the "Loan Agreement"), among AH Battery Park Owner, LLC, an Ohio
limited liability company (the"Borrower"), the Lenders named therein, and the
Agent.
W I T N E S S E T H:
WHEREAS, the Borrower is the actual, beneficial and record ground
lessee of a certain tract of land consisting of approximately .449 acres located
in the Borough of Manhattan, City and State of New York, known by the street
address 455 North End Avenue, New York, New York, which is more particularly
described in Exhibit A attached hereto (the "Land");
WHEREAS, the Borrower has requested the Lenders to make loan advances
(collectively, the "Loan") to it in the aggregate principal amount of up to
FORTY NINE MILLION ONE HUNDRED TWENTY FIVE THOUSAND AND 00/100 DOLLARS
($49,125,000.00) (the "Maximum Loan Amount"), to be used to finance Hard Costs
and Soft Costs of the Borrower's construction of the Improvements described in
the Loan Agreement, which include an independent living/assisted living complex
to be known as The Hallmark at Battery Park City containing approximately 218
units and approximately 219,615 square feet of floor area (as said term is
defined in the Zoning Resolution of the City of New York) to be built on the
Land in accordance with the Building Loan Agreement, and in compliance with the
Plans and all Requirements;
WHEREAS, the Loan will be advanced by the Lenders to the Borrower upon
the Borrower's compliance with, and subject to, the terms, conditions and
limitations of the Loan Agreement;
WHEREAS, the Loan will be evidenced by the Notes and secured by, among
other things, the Mortgage;
WHEREAS, the Guarantor is an Affiliate of the developer of the Project,
Brookdale Living Communities of New York - BPC, Inc. (the "Developer"), and both
Developer and Guarantor will derive a substantial benefit from the making of the
Loan;
WHEREAS, to induce the Lenders to make the Loan pursuant to the Loan
Agreement, to accept the Notes and to cause the Agent to accept the Mortgage,
the Borrower has agreed to procure and deliver this Guaranty to be executed by
the Guarantor and to be binding upon the Guarantor and its respective successors
and assigns;
WHEREAS, the Lenders are unwilling to extend credit to the Borrower
unless this Guaranty is executed by the Guarantor and delivered to the Agent;
and
<PAGE>
WHEREAS, it is a condition to the obligations of the Lenders to make
the Loan to the Borrower pursuant to the Loan Agreement that this Guaranty is
executed by the Guarantor and delivered to the Agent;
NOW, THEREFORE, in consideration of the Loan to the Borrower, in order
to induce the Lenders and the Agent to execute and deliver the Loan Agreement,
the Lenders to accept the Notes, and the Agent to accept the Mortgage, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, Guarantor, for itself, its successors and assigns, hereby
covenants and agrees with the Agent, for the benefit of the Agent and the
Lenders, and their respective successors and assigns, as follows:
1. Definitions. For purposes of this Guaranty only, the following
definitions shall apply:
"Budget" shall mean shall mean the budget delivered to, approved and
initialed by Agent on or before the Closing Date, as same may be amended (or
line items reallocated) in accordance with the Loan Agreement.
"Completion" shall mean and be deemed to have occurred upon the
occurrence of all of the following: (i) the Improvements comprising the Project
shall be fully paid and 100% complete in accordance with the Plans, all
Requirements and the requirements of the Ground Lease, all as determined by
Agent and Agent's Architect in accordance with the procedure set forth in
Section 2B.2 of the Loan Agreement; (ii) all on-site and off-site improvements,
including, without limitation, all utility services and fixtures and equipment
required for access to and operation of the Improvements shall be 100% complete;
(iii) a temporary certificate of occupancy for the full use and occupancy of the
entire Premises (and provided that Borrower shall proceed as expeditiously as
possible to secure the final Certificate of Occupancy, in any event within two
(2) years of issuance of the temporary certificate of occupancy) or its
equivalent issued by the applicable governmental authority for the Improvements
comprising the Project, and all other reasonable evidence that the City of New
York and/or the Battery Park City Authority have acknowledged the completion of
all work required by it to meet all legal requirements and the requirements
under the Ground Lease, as applicable, including, without limitation, all zoning
and building requirements; (iv) all Permits and Licenses, if any, required for
the operation of the Project as an independent living/assisted living complex
under all applicable legal requirements have been issued; (v) all of the
requirements set forth in Section 6.4 of the Building Loan Agreement for the
final disbursement of Hard Costs shall have been satisfied; (vi) the opening of
the Project shall have been scheduled to occur within thirty (30) days.
"Facility Summary Report" shall mean each facility summary report for
the Project required to be submitted by the Borrower to the Agent, which shall
be in form and substance satisfactory to Agent, shall be broken down on a line
item basis (including a line item for operating NOI) and shall include an
occupancy summary and a profit and loss summary.
"Guaranty Obligations" shall mean the prompt, absolute and
unconditional payment in full of:
(i) the aggregate outstanding principal amount of the Loan
and the amounts due to the Lenders under the Forward
Treasury Lock Agreement, which principal amount of the
Loan shall specifically include, without limitation,
any Advances of the Loan made to fund interest due on
such Loan, as calculated by the Agent upon the
occurrence of an Event of Default and acceleration of
the Notes in accordance with the provisions of the Loan
Agreement;
(ii) all interest and other charges on the Guaranty
Percentage then in effect pursuant to Section 3(a),
Section 3(b) or Section 3(c) hereof, as applicable, of
the aggregate outstanding principal amount of the Loan
and amounts due to the Lenders under the Forward
Treasury Lock Agreement, whether such interest accrues
at the regular interest rate or rates applicable
thereto or at the Default Rate, and whether such
interest and other charges accrue prior to or after the
Maturity Date, late charges, prepayment fees and
premiums, whether such interest accrues before or after
the filing of any petition under
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the Bankruptcy Code, as the same shall become due and
payable under the Loan Agreement and the Notes, and all
fees, charges and expenses and other sums now or
hereafter due to the Agent or the Lenders under the
Notes, the Loan Agreement, the Mortgage, or any other
Loan Document, including, without limitation, any and
all reasonable costs and expenses incurred by the Agent
or the Lenders in connection with the collection and
enforcement of the Notes, the Mortgage or any other
Loan Document, including, without limitation, all
reasonable attorney's fees and expenses, investigative
costs and all court costs, whether or not suit is filed
thereon, or whether at maturity, by acceleration or
otherwise.
"Guaranty Percentage" shall mean a percentage portion of the
aforementioned Guaranty Obligations determined as provided in Section 3.
"Intermediate Threshold" (which must occur no later than the twelfth
(12th) month following Completion to be effective) shall mean, and shall have
been achieved when: (i) at least six (6) months have elapsed since Completion;
(ii) Agent reasonably determining that not less than 87.5% of the units then
scheduled to be occupied under the Occupancy Schedule set forth in Exhibit H to
the Loan Agreement are then occupied and all payments are being made in
accordance with the terms of Approved Leases, and (iii) Agent reasonably
determining that the NOI of the Project on a cumulative basis for the period
from Completion through the last day covered by the most recent Facility Summary
Report submitted by Borrower and approved in writing by Agent, as set forth in
such Facility Summary Report, is no less than 87.5% of the projected NOI set
forth in the Budget (or any revised projected NOI approved by the Requisite
Lenders in writing for such respective period).
"Liquid Assets" shall mean assets in the form of cash, cash
equivalents, obligations of (or fully guarantied as to principal and interest
by) the United States or any agency or instrumentality thereof (provided the
full faith and credit of the United States supports such obligation or
guarantee), certificates of deposit issued by a commercial bank having net
assets of not less than $500,000,000, securities listed and traded on a
recognized stock exchange or traded over the counter and listed in the National
Association of Securities Dealers Automatic Quotations, liquid debt instruments
that have a readily ascertainable value and are regularly traded in a recognized
financial market, or any unused portion of any credit line maintained with a
bank which must have an Standard & Poor's rating of "A" or better, none of which
are subject to specific pledge, lien or other encumbrance.
"Loan Advances" shall mean Advances under the Building Loan Agreement
or the Soft Cost Loan Agreement.
"Loan Amount" shall mean FORTY NINE MILLION ONE HUNDRED TWENTY FIVE
THOUSAND AND 00/100 DOLLARS ($49,125,000.00) or such lesser amount as the
Borrower and the Agent agree upon in writing.
"NOI" shall mean shall mean Project Revenues, less all ordinary and
customary operating expenses actually incurred and paid by the Borrower (other
than fees due to the Manager as certified by Manager and approved by Agent), in
connection with the ownership and operation of the Project.
"Occupancy Schedule" shall mean occupancy of the Units comprising the
Project according to the following levels:
Quarter 2 following Completion: 43.75% of the Units
Quarter 3 following Completion: 55.13% of the Units
Quarter 4 following Completion: 65.63% of the Units
Quarter 5 following Completion: 76.13% of the Units
Quarter 6 following Completion: 83.13% of the Units
Quarters 7-10 following Completion: 83.13% of the Units
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"Project Revenues" shall mean all fixed rent and ancillary income
(including expense reimbursements) actually received by the Borrower in
connection with its ownership and occupancy of the Premises, as reasonably
determined by Agent based upon the most current Facility Summary Report then in
Agent's possession, and such other information as Agent may receive, including
current certified rent rolls and operating statements.
2. Guaranty. The Guarantor, as a primary obligor and not merely as
a surety, absolutely unconditionally and irrevocably guaranties the Guaranty
Obligations to the Agent and the Lenders.
3. Guaranty Percentage.
(a) 100% Guaranty. The Guaranty Percentage shall equal One Hundred
Percent (100%) of the amounts set forth in clause (i) of the definition of
Guaranty Obligations until reduced, if at all, as provided in this Section 3.
(b) 75% Guaranty. The Guaranty Percentage shall equal Seventy Five
Percent (75%) of the amounts set forth in clause (i) of the definition of
Guaranty Obligations (the "First Reduction") at such time as the following
requirements have been satisfied:
(i) at the time of the proposed reduction, there shall be
no outstanding Events of Default, or any event which
with the giving of notice and the passage of time would
constitute a default under any Loan Document; and
(ii) Completion shall have occurred (including, without
limitation, the issuance of a temporary certificate of
occupancy), and the last disbursement for Hard Costs
shall have been made and the Retainage shall have been
released, all in accordance with Section 6.4 of the
Building Loan Agreement.
(c) 50% Guaranty. At the commencement of any calendar quarter
following the First Reduction, the Borrower and the Guarantor may submit a
written request to the Agent (a "Requested Reduction Notice"), requesting a
reduction (the "Second Reduction") of the Guaranty Percentage to Fifty Percent
(50%), which Requested Reduction Notice may be submitted no more often than once
per calendar quarter, and shall be accompanied by reasonable evidence that
Guarantor has qualified for the Second Reduction. The Guaranty Percentage, upon
the determination by the Agent of the satisfaction of the following
requirements, shall equal Fifty Percent (50%). The Guaranty Percentage shall
equal Fifty Percent (50%) of the amounts set forth in clause (i) of the
definition of Guaranty Obligations when the following requirements have been
satisfied:
(i) at the time of the Requested Reduction Notice, there
shall be no outstanding Events of Default, or any event
which with the giving of notice and the passage of time
would constitute a default under any Loan Document;
(ii) the Intermediate Threshold shall have occurred, as
reasonably determined by Agent; and
(iii) all requirements for the First Reduction shall have
been, and remain, satisfied.
(d) The Guaranty Percentage shall at all times during the existence
of this Guaranty equal One Hundred Percent (100%) of the amounts set forth in
clause (ii) of the definition of Guaranty Obligations.
4. Representations, Warranties and Covenants of Guarantor. The
Guarantor hereby represents, warrants and covenants:
(a) Guarantor is a corporation duly organized and validly
existing under the laws of the State of Delaware and has full power and
authority to consummate the transactions contemplated hereby.
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(b) This Guaranty, the Completion Guaranty, the Operating
Deficit Guaranty and the Environmental Indemnity Agreement have been
duly executed and delivered by the Guarantor and constitute the valid
and binding obligations of the Guarantor and are enforceable against
the Guarantor in accordance with their respective terms.
(c) Guarantor is not insolvent (as such term is defined in
the Bankruptcy Code), and Guarantor will not be rendered insolvent by
execution of this Guaranty or any other Loan Document to which it is a
party or by the consummation of the transactions contemplated thereby.
(d) The consummation of the transactions contemplated
hereby and the performance by the Guarantor of the Guarantor's
obligations under this Guaranty, the Completion Guaranty, the Operating
Deficit Guaranty, the Environmental Indemnity Agreement or any other
Loan Document to which the Guarantor is a party will not result in any
breach of, give rise to a lien under, or constitute a default under,
any mortgage, deed of trust, lease, bank loan or credit agreement,
partnership agreement, corporate charter, by-laws or other agreement or
instrument to which the Guarantor is a party or by which it may be
bound or affected.
(e) The Financial Statements delivered by the Guarantor to
the Agent at or prior to the Closing fairly and accurately present the
financial condition of the Guarantor as of the date thereof, and no
material adverse change has occurred in the financial condition
reflected therein since the date thereof. The Financial Statements have
been prepared in accordance with sound accounting methods, principles
and standards consistently applied and do not omit facts, the omission
of which would make such Financial Statements materially misleading.
(f) Except as disclosed on Schedule 1 annexed hereto and
made a part hereof, there are no actions, suits or proceedings
involving claims in excess of $1,000,000 pending, or to the best
knowledge of the Guarantor threatened, against or affecting the
Guarantor or the Premises, or involving the validity or enforceability
of the Mortgage, or the priority of the liens thereof, at law or in
equity, before or by any Governmental Authority; and the Guarantor is
not operating under or subject to, in default of, or in violation with
respect to, any order, writ, injunction, decree or demand of any court
or any Governmental Authority involving claims in excess of $1,000,000
that reasonably could materially and adversely affect its ability to
perform its obligations hereunder.
(g) The Guarantor shall promptly provide the Agent with
written notice of any pending or threatened litigation against the
Guarantor or the Premises, with respect to which an adverse decision is
reasonably likely involving claims in excess of $1,000,000; or the
commencement against the Guarantor or the Premises of any proceedings
or investigations by a governmental or regulatory agency involving
claims in excess of $1,000,000 that reasonably could materially and
adversely affect its ability to perform its obligations hereunder.
(h) There is no default on the part of the Guarantor under
or with respect to this Guaranty, the Completion Guaranty, the
Operating Deficit Guaranty, the Environmental Indemnity Agreement or
any other Loan Document to which the Guarantor is a party, and no event
has occurred and is continuing which with the giving of notice and the
passage of time would constitute a default on the part of Guarantor
under any of the aforesaid documents.
(i) The Guarantor does not have any counterclaims, offsets
or defenses with respect to the Loan or with respect to its obligations
under this Guaranty, the Completion Guaranty, the Operating Deficit
Guaranty, the Environmental Indemnity Agreement, the Notes or any other
Loan Document to which it is a party.
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(j) The Guarantor will not join in any action, or consent
to amend, terminate or modify the organizational documents of the
Borrower without the prior written consent of the Agent.
(k) The Guarantor will promptly comply with all conditions
of this Guaranty and the other Loan Documents with which the Guarantor
is required to comply. The Guarantor will promptly and fully respond to
any inquiry of the Agent made with respect to the Loan, the Land, the
Improvements, or any of the matters covered by this Guaranty.
(l) The Guarantor will not modify or amend or terminate
(other than by full performance thereof) any Loan Document without the
prior written consent of the Agent.
(m) The Guarantor agrees to pay within ten (10) Domestic
Business Days of any written demand by the Agent to Guarantor all
expenses (including, without limitation, reasonable legal expenses) of,
or incidental to, or in any way relating to the enforcement or
protection of the rights of the Agent or the Lenders hereunder.
(n) The Guarantor is deriving or expects to derive a
financial or other advantage from each and every obligation incurred by
the Borrower to the Agent or the Lenders.
(o) The Guarantor hereby acknowledges receipt of copies of,
and hereby approves, the Plans, the Mortgage, the Loan Agreement and
the other Loan Documents.
(p) The Guarantor shall execute and deliver to the Agent,
from time to time, such other documents as shall be reasonably
necessary to give full effect to the rights and remedies granted or
provided by this Guaranty.
(q) The Guarantor shall furnish to the Agent (i) quarterly
internally-prepared Financial Statements, certified by an officer of
the Guarantor, within forty-five (45) days after the end of each
calendar quarter, (ii) annual audited Financial Statements, certified
by an officer of the Guarantor within one hundred twenty (120) days
after the end of each fiscal year of the Guarantor, (iii) quarterly
internally- prepared certificates evidencing that the Guarantor's net
worth is equal to at least $70,000,000, certified by an officer of the
Guarantor, within forty-five days after the end of each calendar
quarter, (iv) quarterly internally-prepared certificates evidencing
that the Guarantor has Liquid Assets equal to at least $5,000,000,
certified by an officer of the Guarantor, within forty-five (45) days
after the end of each calendar quarter, and (v) such other financial
information relating to the Guarantor as may be reasonably requested
from time to time by Agent.
(r) The Guarantor has implemented a program to assess,
remediate and mitigate the potential impact of the Year 2000 Issue
throughout the Guarantor's company. The Guarantor's program has been
structured to address its internal computer systems and applications,
network services operations, facilities operations and third-party
vendors and suppliers. The Guarantor believes that it is taking the
necessary steps within its control to mitigate the potential impact of
the Year 2000 Issue on the Guarantor and shall continue to do so.
(s) The Guarantor acknowledges and agrees, subject to the
limitations set forth in the succeeding sentence, that (i) in the
calculation of the aggregate outstanding principal balance of the Loan
for purposes of calculating the Guaranty Obligations hereunder said
aggregate outstanding principal balance of the Loan will not be reduced
or deemed reduced, either before or after an Event of Default, by any
payments or recoveries received or deemed received by the Lenders (or
by the Agent on behalf of the Lenders) as a result of a foreclosure or
a sale of the Premises; and (ii) the Agent and the Lenders may apply
any payments (other than payments made by the Guarantor hereunder) or
recoveries received after a default under any of the Loan Documents to
principal, interest, expenses and other sums due with respect
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to the Loan in such order as may be provided in the Loan Agreement or
the other Loan Documents, or, to the extent not so provided, in such
order as the Agent or any Lender, in its sole discretion, may elect,
regardless of the manner in which any such payments or recoveries are
allocated or reflected in any foreclosure, judgment, or deficiency or
allocation proceeding relative to the foreclosure of the Mortgage, and
any such payments or recoveries, regardless of how applied, shall not
reduce the amount of principal or other sums guaranteed hereby.
Notwithstanding the foregoing, (x) this provision shall not obligate
Guarantor to pay or reimburse Lender or Agent for any expense item for
which Lender has already received actual payment or reimbursement from
Borrower or Guarantor and (y) the liability of the Guarantor hereunder
shall not exceed the lesser of (1) the amount of the Guaranty
Obligations calculated in accordance with clause (i) of this paragraph
4(r) and (2) the amount of a deficiency judgment determined to be owing
following a foreclosure pursuant to the Loan Documents; provided,
however, that nothing herein or in any of the other Loan Documents
shall obligate the Agent or the Lenders to foreclose on collateral
before or as a condition to or as part of asserting claims under this
Guaranty.
5. Defaults. The following shall constitute a default hereunder
(each, an "Event of Default"):
(a) if the Guarantor shall (after ten (10) Domestic
Business Days have elapsed from date of written notice to Guarantor) fail to
timely perform, or cause to be timely performed, any Guaranty Obligation within
the period provided for performance by the Guarantor hereunder or by the
Borrower in the Loan Documents;
(b) if the Guarantor shall (after ten (10) Domestic
Business Days have elapsed from date of written notice to Guarantor) fail to
comply with any of the covenants made by it in this Guaranty (including, without
limitation, the provisions of Section 23 hereof) or in any other Loan Document,
including, without limitation, the Completion Guaranty, or if at any time any
representation or warranty made by the Guarantor to the Agent or the Lenders in
this Guaranty or in any other Loan Document or in any certificate or statement
delivered in connection herewith shall be false or misleading to an extent
deemed by the Agent, to be material, and, in any case, all required notices have
been given and all applicable cure periods have expired;
(c) if at any time the Guarantor shall revoke, or attempt
to revoke, this Guaranty;
(d) if at any time Guarantor's minimum net worth is not
equal to at least $70,000,000, or if at any time Guarantor's minimum liquidity
in the form of Liquid Assets is not equal to at least $5,000,000;
(e) if the Guarantor shall (i) suspend or discontinue its
business, (ii) make an assignment for the benefit of creditors, (iii) admit in
writing its inability to pay its debts as they become due, (iv) file a voluntary
petition in bankruptcy, (v) become insolvent as defined in the Bankruptcy Code,
(vi) file any petition or answer seeking for itself any reorganization,
arrangement, composition, readjustment of debt, liquidation or dissolution or
similar relief under any present or future statute, law or regulation of any
jurisdiction, (vii) petition or apply to any tribunal for any receiver,
custodian or any trustee for any substantial part of its property, (viii) be the
subject of any such proceeding commenced against it which remains undismissed
for a period of 60 days, (ix) file any answer admitting or not contesting the
material allegations of any such petition filed against it, or of any order,
judgment or decree approving such petition in any such proceeding, or (x) seek,
approve, consent to, or acquiesce in any such proceeding, or in the appointment
of any trustee, receiver, custodian, liquidator, or fiscal agent for it, or any
substantial part of its property or if an order is entered appointing any such
trustee, receiver, custodian, liquidator or fiscal agent and such order remains
in effect for 60 days; or
(f) if an order for relief is entered under the Bankruptcy
Code or any other decree or order is entered by a court of competent
jurisdiction (i) adjudicating the Guarantor bankrupt or insolvent, (ii)
approving as properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of the Guarantor, (iii) appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator (or other
similar official) of the Guarantor or of any substantial part of its property,
or (iv) ordering the winding up or liquidation of the affairs of the Guarantor
and any such decree or order continues unstayed and in effect for a period of 60
days.
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6. Remedies. Upon the occurrence of a default hereunder, in
addition to any other remedy provided for under this Guaranty or at law or in
equity, the Guarantor hereby authorizes the Agent, in the Agent's sole
discretion, at any time, to foreclose nonjudicially or judicially against any
real or personal property security it holds for the Guaranty Obligations or any
part thereof (it being understood that Guarantor is not required to secure this
Guaranty with any assets of Guarantor), or exercise any other remedy against the
Borrower, the Guarantor and any security.
7. Waiver of Election of Remedies. The Guarantor waives (to the
extent permitted by law) any right to require or compel the Agent or any Lender
to (a) proceed against the Borrower or any other guarantor; (b) proceed against
or exhaust any security for the Loan or the Guaranty Obligations; or (c) pursue
any other remedy in the Agent's or any Lender's power whatsoever; and failure of
the Agent or any Lender to do any of the foregoing shall not exonerate, release
or discharge the Guarantor from its absolute, unconditional and independent
liabilities to the Agent and the Lenders hereunder. The Guarantor hereby waives
(to the extent permitted by law) any and all legal requirements that the Agent
or any Lender shall institute any action or proceedings at law or in equity
against the Borrower or anyone else in respect of the Loan or the Loan Agreement
or any other Loan Document or resort to or seek to realize upon the security
held by the Agent or any of the Lenders, as a condition precedent to bringing an
action against the Guarantor upon this Guaranty.
8. Right of Separate Actions. The Agent may bring and prosecute a
separate action against any guarantor to enforce its liabilities hereunder,
whether or not any action is brought against any other person and whether or not
any other person is joined in any such action or actions. Nothing shall prohibit
the Agent or any Lender from exercising its rights against the Guarantor, the
Borrower, any security for the Guaranty Obligations or the Notes, or any other
person, simultaneously, jointly and/or severally. The Guarantor shall be bound
by each and every ruling, order and judgment obtained by the Agent or any Lender
against the Borrower in respect of the Loan and the Loan Documents, whether or
not the Guarantor is a party to the action or proceeding in which such ruling,
order or judgment is issued or rendered.
9. Waiver of Rights of Subrogation. The Guarantor hereby
irrevocably waives any rights to be subrogated to the rights of the Agent or any
of the Lenders with respect to the Guaranty Obligations and the Notes or any
other Loan Document. The Guarantor hereby agrees that it will not institute or
take any action seeking reimbursement against the Borrower or any other
guarantor until such time as the Agent and the Lenders shall have received
payment in full in cash in satisfaction of all the obligations of the Borrower
under the Notes and the other Loan Documents. No failure on the part of the
Agent or any Lender to exercise, and no delay in exercising, any right, remedy
or power hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise by the Agent or any Lender of any right, remedy or power
hereunder preclude any other or future exercise of any other right, remedy or
power. The foregoing provision is not intended to limit the Guarantor's rights
under the Development Agreement or the Management Agreement, provided all
relevant provisions of the Loan Agreement relative to Guarantor's exercise of
said rights are satisfied.
10. Waiver of Notice, Consent, etc.
(a) This Guaranty shall be construed as a continuing, absolute and
unconditional guaranty of payment.
(b) The Guarantor hereby waives acceptance and notice of acceptance
of this Guaranty by the Agent or any of the Lenders and notice of presentment,
demand, protest, notice of protest and of dishonor, notices of default and all
other notices relative to this Guaranty of every kind and description now or
hereafter provided by any agreement between the Borrower and the Agent or any of
the Lenders or any statute or rule of law except those specifically required by
this Guaranty.
(c) Except for any notices to Guarantor specifically required by any
of the Loan Documents, the Guarantor waives any and all notice of the creation,
renewal, extension or accrual of any of the obligations of the
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Borrower under any of the Loan Documents (with the exception of (i) changes in
the Maturity Date unless extended in accordance with Section 2A.11 of the Loan
Agreement or unless accelerated by the Agent pursuant to the terms of the Loan
Agreement, (ii) changes in the Maximum Loan Amount, and (iii) changes in the
amount of payments of principal and/or interest as scheduled), or of the
reliance by the Agent or any of the Lenders upon this Guaranty or any other Loan
Document. The obligations of the Borrower under any of the Loan Documents, and
each of them, shall conclusively be deemed to have been created, contracted, or
incurred in reliance upon this Guaranty and all dealings between the Borrower,
the Agent or any of the Lenders shall likewise be conclusively presumed to have
been made or consummated in reliance upon this Guaranty.
(d) The Guarantor hereby agrees that the terms, covenants and
provisions contained in the Loan Agreement, the Notes, the Mortgage or in any
other Loan Document may be altered, extended, modified, waived, released or
cancelled by the Agent or any of the Lenders, and the Guarantor agrees that this
Guaranty and its liability hereunder shall be in no way affected, diminished or
released by any such alteration, extension, modification, release, waiver or
cancellation (with the exception of (i) changes in the Maturity Date unless
extended in accordance with Section 2A.11 of the Loan Agreement or unless
accelerated by the Agent pursuant to the terms of the Loan Agreement, (ii)
changes in the Maximum Loan Amount, and (iii) changes in the amount of payments
of principal and/or interest as scheduled).
11. Waiver of Priority of Collateral. The Guarantor hereby agrees
that, in the event that any of its property is or may be hypothecated with
property of the Borrower, as security for any obligations of the Borrower under
any other Loan Document, any right of the Guarantor to have such other property
of the Borrower first applied to the discharge of such obligations is hereby
irrevocably waived by the Guarantor.
12. No Discharge; Remedies Cumulative. The Guarantor shall not be
discharged, released or exonerated, in any way, from its absolute, unconditional
and independent liabilities hereunder, even though any rights or defenses which
the Guarantor may have against the Agent or any of the Lenders or others may be
destroyed, diminished or otherwise affected by:
(a) any declaration by the Agent or any Lender of a default
in respect of any of the obligations of the Borrower under any of the
Loan Documents;
(b) the exercise by the Agent or any Lender of any rights
or remedies against the Borrower or any other person;
(c) the failure of the Agent or any Lender to exercise any
rights or remedies against the Borrower or any other person;
(d) the sale or enforcement of, or realization upon
(through judicial foreclosure, power of sale or any other means) any
security for any of the obligations of the Borrower under any of the
Loan Documents, or any security for any of the Guaranty Obligations,
even though (i) recourse may not thereafter be had against the Borrower
or any other person for any deficiency, or (ii) the Agent or any Lender
fails to pursue any such recourse which might otherwise be available,
whether by way of deficiency judgment following judicial foreclosure or
otherwise;
(e) any bankruptcy or reorganization of the Borrower or the
voluntary or involuntary participation by the Borrower in any
settlement or composition for the benefit of the Borrower's creditors
either in liquidation, readjustment, receivership, bankruptcy or
otherwise;
(f) the release of any other guarantor by agreement,
operation of law or otherwise; or
(g) any such action by the Agent or any Lender which would
release or limit the liability of the Guarantor to the Agent or any of
the Lenders even if the effect of that action is to deprive the
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Guarantor of the right to collect reimbursement from the Borrower for
any sums paid to the Agent or any Lender.
All rights and remedies of the Agent and the Lenders hereunder or under any of
the Loan Documents shall be cumulative and may be exercised singularly or
concurrently. The rights of the Agent and the Lenders under this Guaranty are in
addition to and not in diminution of the rights of the Agent and the Lenders
under any other Loan Document.
13. Continuing Guaranty. Subject to the terms of Section 20 hereof,
until all obligations of the Borrower to the Agent and the Lenders under the
Loan Documents are fulfilled to the satisfaction of the Agent and the Lenders
and each and every of the terms, covenants and conditions of this Guaranty are
fully performed and the Loan is fully repaid, the Guarantor shall not be
released by any act or thing which might, but for this provision, be deemed a
legal or equitable discharge of a surety, or by reason of any waiver, extension,
modification, forbearance or delay or other act or omission of the Agent or any
Lender or its failure to proceed promptly or otherwise, or by reason of any
action taken or omitted or circumstance which may or might vary the risk or
affect the rights or remedies of the Guarantor or by reason of any further
dealings between the Borrower and the Agent or any of the Lenders, whether
relating to the Loan or otherwise, and the Guarantor hereby expressly waives and
surrenders any defenses to its liability hereunder based upon any of the
foregoing acts, omissions, things or agreements or waivers of the Agent or any
of the Lenders; it being the purpose and intent of this Guaranty that the
obligations of the Guarantor hereunder are absolute and unconditional under any
and all circumstances. The Guarantor has also executed the Completion Guaranty
and the Operating Deficit Guaranty in favor of the Agent and the Lenders and (a)
payment or performance by the Guarantor of its obligations under this Guaranty
shall not decrease the Guarantor's liability under the Completion Guaranty or
the Operating Deficit Guaranty, and (b) payment or performance by the Guarantor
under the Completion Guaranty or the Operating Deficit Guaranty shall not
decrease or diminish the Guarantor's liability under this Guaranty.
14. Notices. All notices, demands, instructions and other
communications required or permitted to be given to or made upon any party
hereto or any other person shall be in writing and shall be personally delivered
or sent by registered or certified mail, postage prepaid, return receipt
requested, or telegram (with messenger delivery specified in the case of a
telegram), or by prepaid courier, and shall be deemed to be given for purpose of
this Guaranty in regard to registered or certified mail, three (3) Domestic
Business Days after mailing, and in regard to personal delivery, telegram, or
prepaid courier, on the day that such writing is delivered. Unless otherwise
specified in a notice sent or delivered in accordance with the foregoing
provisions of this Section, notices, demands, instructions and other
communications in writing shall be given to or made upon the following persons
at its addresses indicated below:
To Guarantor:
Brookdale Living Communities, Inc.
77 West Wacker Drive, Suite 4400
Chicago, Illinois 60601
Attention: Darryl W. Copeland, Jr.
Telecopy: (312) 977-3699
Brookdale Living Communities, Inc.
77 West Wacker Drive, Suite 4400
Chicago, Illinois 60601
Attention: Robert J. Rudnik, Esq.
Telecopy: (312) 977-3769
To the Agent:
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KeyCorporate Capital, Inc., as Agent
127 Public Square
Cleveland, Ohio 44114-1306
Attention: Ms. Nancy A. Herman
Vice President
with a courtesy copy to:
Jones, Day, Reavis & Pogue
901 Lakeside Avenue
Cleveland, Ohio 44114
Attention: Bernadette M. Mast, Esq.
with a courtesy copy to any Lender:
at its address specified in or pursuant
to the Loan Agreement
or at such other address as any of the persons identified above may from time to
time designate by written notice given as herein required. Rejection or refusal
to accept or inability to deliver because of changed addresses or because notice
of changed address was given shall be deemed a receipt of such notice. Failure
to provide a courtesy copy of any notice required hereunder shall not invalidate
any notice otherwise given in accordance with this Section.
If any day on which any notice, demand, instruction or other
communication is given or sent by any party hereto is not a Domestic Business
Day, such notice, demand, instruction or other communication shall be deemed to
have been given or sent on the Domestic Business Day next succeeding such
non-Domestic Business Day.
15. Submission to Jurisdiction. (a) The Guarantor irrevocably
submits to the non-exclusive jurisdiction of the courts of the State of New
York, the courts of the United States for the Southern District of the State of
New York, and appellate courts from any thereof, over any suit, action or
proceeding arising out of or relating to this Guaranty. The Guarantor hereby
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such suit, action
or proceeding brought in any such court and any claim that any such suit, action
or proceeding brought in such a court has been brought in an inconvenient forum.
Without limiting the Guarantor's right to appeal any such final judgment in
accordance with applicable Requirements, the Guarantor agrees that a final
judgment in any such suit, action or proceeding brought in such a court shall be
conclusive and binding upon the Guarantor.
(b) The Guarantor hereby irrevocably appoints CT Corporation System
as its authorized agent to accept and acknowledge, on behalf of the Guarantor,
service of any and all process which may be served in any suit, action or
proceeding of the nature referred to above in any such court. The Guarantor
represents and warrants that such agent has agreed in writing to accept such
appointment and that the Guarantor has delivered to the Agent a true copy of
such designation and acceptance. Said designation and appointment shall be
irrevocable. If such agent shall cease so to act, the Guarantor covenants and
agrees that it shall irrevocably designate and appoint without delay another
such agent satisfactory to the Agent and shall promptly deliver to the Agent
evidence in writing of such other agent's acceptance of such appointment.
(c) Process may be served in any suit, action or proceeding of the
nature referred to above (i) by the mailing of copies thereof by registered or
certified air mail, postage prepaid return receipt requested, to the Guarantor
at its address set forth above or to such other address of which the Guarantor
shall have given written notice to the Agent, or (ii) without affecting the
efficacy of any service made pursuant to clause (i) above, if the Guarantor
shall not have filed an appearance within twenty-one days after the date of such
mailing, by serving a
11
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copy thereof upon CT Corporation System, at its office at 1633 Broadway, New
York, New York 10019, as the Guarantor's agent for service of process. The
Guarantor agrees that such service shall be deemed in every respect effective
service of process upon the Guarantor in any such suit, action or proceedings
and shall, to the fullest extent permitted by law, be taken and held to be valid
personal service upon and personal delivery to the Guarantor. Nothing in this
Section shall affect the right of the Agent to serve process in any manner
permitted by law or limit the right of the Agent to bring proceedings against
the Guarantor in the courts of any other jurisdiction or jurisdictions.
16. Entire Agreement; Modification and Waiver. This Guaranty,
together with the Completion Guaranty, the Operating Deficit Guaranty and the
Environmental Indemnity Agreement, represent the entire agreement between the
Guarantor, on the one hand, and the Agent and the Lenders, on the other hand,
with respect to the matters referred to herein and therein and no waiver or
modification hereof or thereof shall be effective unless in writing and signed
by the Agent and the Guarantor. All approvals, consents and other actions by the
Agent hereunder shall be given or taken by the Agent in accordance with the
provisions regarding Agent powers provided in the Loan Agreement (including any
required instructions or consents by any specified percentage of Lenders or all
Lenders). No Lender shall have any power to amend, discharge or terminate this
Guaranty, all such actions being within the powers of the Agent (acting on
behalf of the Lenders as provided in Article VII of the Loan Agreement). This
Guaranty, the Completion Guaranty, the Operating Deficit Guaranty and the
Environmental Indemnity Agreement are independent agreements and shall be so
construed in accordance with their respective terms. The Completion Guaranty,
the Operating Deficit Guaranty and the Environmental Indemnity Agreement are
additional security and benefit to the Agent and the Lenders and are not in lieu
of and do not in any way diminish the Guaranty Obligations of the Guarantor
hereunder. The Guarantor shall be fully liable to the Agent and the Lenders
hereunder whether or not the Agent or any Lender has or shall obtain any other
or further guaranties, security or agreements, and irrespective of whether the
Completion Guaranty, the Operating Deficit Guaranty or the Environmental
Indemnity Agreement or other or further guaranties, security or agreements are
effective or enforceable or are released in whole or in part, voluntarily or
involuntarily or by operation of law or otherwise. Neither the Agent nor any
Lender shall have any obligation to pursue or attempt to pursue any remedies
under the Completion Guaranty, the Operating Deficit Guaranty or the
Environmental Indemnity Agreement or any other or further guaranties, security
or agreement and may enforce all rights and obligations hereunder, irrespective
of the existence or nonexistence of other or further guaranties, security or
agreements.
17. Governing Law. THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES AND OTHER PERSONS BENEFITTED HEREUNDER SHALL BE CONSTRUED, ENFORCED,
AND INTERPRETED ACCORDING TO THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE IN AND PERFORMED IN THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICT OF LAWS.
18. Successors and Assigns. This Guaranty shall be binding upon the
Guarantor and upon its successors and assigns and shall inure to the benefit of
the Agent and the Lenders and their respective successors and assigns.
19. Time of the Essence. Time shall be of the essence with regard to
the performance by the Guarantor of its obligations under this Guaranty.
20. Termination of Guaranty. This Guaranty shall terminate when all
of the Guaranty Obligations have been fully satisfied.
21. Singular and Plural. As used in this Guaranty, the singular
shall include the plural as the context requires.
22. Waiver of Trial by Jury. THE GUARANTOR, AND THE AGENT AND THE
LENDERS BY THEIR ACCEPTANCE OF THE BENEFITS HEREOF, EACH HEREBY IRREVOCABLY
WAIVE
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TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BETWEEN OR AMONG ANY OF
THEM, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, ARISING OUT OF OR IN ANY
WAY CONNECTED TO THE LOAN, THIS GUARANTY OR ANY OF THE OTHER LOAN DOCUMENTS.
23. Transfer of Property, Mergers, etc. The Guarantor hereby
covenants and agrees, that until this Guaranty is terminated in accordance with
its terms, (a) the Guarantor shall not, without the Agent's prior written
consent, directly or indirectly, convey, transfer or assign any property or
asset of any nature, whether real property, personal property or mixed, tangible
or intangible or any interest therein, for less than fair market value, if the
same would cause a reduction in Guarantor's net worth below $70,000,000 or a
reduction in Guarantor's minimum liquidity in the form of Liquid Assets below
$5,000,000, and (b) the Guarantor shall not merge or consolidate with, or sell,
assign, lease or otherwise dispose of all or substantially all of its assets to,
any other person; provided, that the Guarantor may consolidate with another
person, or merge with and into another person, or permit another person to merge
with and into the Guarantor, if the transaction complies with the requirements
of Section 4.2(m) of the Building Loan Agreement and the following requirements
are satisfied:
(i) the Agent shall have been provided by the Guarantor with such
information concerning such transaction as the Agent may
reasonably request;
(ii) no Event of Default hereunder or under the Loan Agreement, or
event which with notice and lapse of time would become such an
Event of Default, shall have occurred and be continuing;
(iii) the effectiveness and priority of the liens and security
interests created pursuant to the Loan Documents are not
impaired by reason of any such transaction; and
(iv) the resulting or surviving person (if other than the Guarantor)
shall be a corporation, partnership or limited liability
company, duly organized under the laws of the United States, any
State thereof, or the District of Columbia, and shall assume,
pursuant to a written instrument or instruments, satisfactory in
form and substance to the Agent, all of the obligations of the
Guarantor under this Guaranty and each other Loan Document to
which the Guarantor is a party.
24. Severability. If any term or provision of this Guaranty or any
application thereof shall be held to be invalid, illegal or unenforceable, the
remainder of this Guaranty and any other application of such term or provision
shall not be affected thereby.
25. Agent to Act on Behalf of Lenders, etc. The Lenders and the
Agent and their respective successors and assigns are beneficiaries of this
Guaranty, but any legal proceedings or other enforcement actions on behalf of
any Lender against the Guarantor with respect to this Guaranty shall be
undertaken and maintained by the Agent, acting on behalf and for the ratable
benefit of the Agent and the Lenders, with the proceeds of any such proceedings
or enforcement actions to be applied as provided in the Loan Documents.
26. Headings. The headings in this Guaranty are for purposes of
reference only and shall not limit or define the meaning hereof.
[SIGNATURE PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, this Guaranty has been executed by the undersigned
as of the date first above written.
BROOKDALE LIVING COMMUNITIES, INC.
By: /s/ Mark J. Schulte
------------------------------------
Name: Mark J. Schulte
Title: President and CEO
<PAGE>
State of ILLINOIS )
) SS.:
County of COOK )
On the 24th day of August, in the year 1999 before me, the undersigned, a notary
public in the State of Illinois, personally appeared Mark J. Schulte, personally
known to me or proved to me on the basis of satisfactory evidence to be the
individual whose name is subscribed to the within instrument and acknowledged to
me that he executed the same in his capacity, and that by his signature on the
instrument, the individual, or the person upon behalf of which the individual
acted, executed the instrument, and that such individual made such appearance
before the undersigned in the County of Cook, State of Illinois.
NOTARY SEAL
/s/ Donna Jean Elrod
---------------------------
Notary Public (affix seal)
<PAGE>
Schedule 1
----------
1. Complaint filed in the Supreme Court of the State of New York, Kings
County, on July 23, 1999, having Index # 25973/99, by John Oliver and
Stephanie Oliver, as plaintiffs, against Brookdale Living Community,
HRH Construction Corp. and Maxim Construction Corp., as defendants,
claiming damages in the amount of $6,000,000, resulting from injuries
allegedly sustained by John Oliver while working on the construction of
the Project.
15
COMPLETION GUARANTY
This COMPLETION GUARANTY (this "Guaranty"), dated as of the 24th day of
August 1999, made by BROOKDALE LIVING COMMUNITIES, INC., a Delaware corporation,
having offices at 77 West Wacker Drive, Suite 4400, Chicago, Illinois 60601
("Guarantor"), for the benefit of KEY CORPORATE CAPITAL INC,. a Michigan
corporation having administrative offices at 127 Public Square, Cleveland, Ohio
44114-1306 ("KCCI"), as the Agent (the "Agent") for the Lenders, including KCCI,
who are or hereafter become parties to the Loan Agreement (hereinafter defined),
each of which, including KCCI, is hereinafter referred to as a "Lender" or the
"Lenders".
All capitalized terms appearing and not defined herein shall have the
meanings ascribed to them in the Building Loan Agreement and/or the Soft Cost
Loan Agreement, as may be amended from time to time, each of even date herewith
(together, the "Loan Agreement"), among AH BATTERY PARK OWNER, LLC, an Ohio
limited liability company (the "Borrower"), the Lenders named therein, and the
Agent.
W I T N E S S E T H:
WHEREAS, the Borrower is the actual, beneficial and record ground
lessee of a certain tract of land consisting of approximately .449 acres located
in the Borough of Manhattan, City and State of New York, known by the street
address 455 North End Avenue, New York, New York, which is more particularly
described in Exhibit A attached hereto (the "Land");
WHEREAS, the Borrower has requested the Lenders to make loan advances
(collectively, the "Loan") to it in the aggregate principal amount of up to
FORTY NINE MILLION ONE HUNDRED TWENTY FIVE THOUSAND AND 00/100 DOLLARS
($49,125,000.00) (the "Maximum Loan Amount"), to be used to finance Hard Costs
and Soft Costs of the Borrower's construction of the Improvements described in
the Loan Agreement, which include an independent living/assisted living complex
to be known as The Hallmark at Battery Park City containing approximately 218
units and approximately 219,615 square feet of floor area (as said term is
defined in the Zoning Resolution of the City of New York) to be built on the
Land in accordance with the Building Loan Agreement, and in compliance with the
Plans and all Requirements;
WHEREAS, the Loan will be advanced by the Lenders to the Borrower upon
the Borrower's compliance with, and subject to, the terms, conditions and
limitations of the Loan Agreement;
WHEREAS, the Loan will be evidenced by the Notes and secured by, among
other things, the Mortgage;
WHEREAS, the Guarantor is an Affiliate of the developer of the Project,
Brookdale Living Communities of New York - BPC, Inc. (the "Developer"), and both
Developer and Guarantor will derive substantial benefit from the making of the
Loan;
WHEREAS, pursuant to the Loan Agreement, the Borrower is required,
among other things, to construct and achieve Completion of the Improvements and
to install certain fixtures, furnishings and equipment and other personalty in
accordance with the Plans and the terms of the Loan Agreement;
WHEREAS, to induce the Lenders to make the Loan pursuant to the Loan
Agreement, to accept the Notes and to cause the Agent to accept the Mortgage,
the Borrower has agreed to procure and deliver this
<PAGE>
Guaranty to be executed by the Guarantor and to be binding upon the Guarantor
and its respective successors and assigns;
WHEREAS, the Lenders are unwilling to extend credit to the Borrower
unless this Guaranty is executed by the Guarantor and delivered to the Agent;
and
WHEREAS it is a condition to the obligations of the Lenders to make
advances of the Loan to the Borrower pursuant to the Loan Agreement that this
Guaranty is executed by the Guarantor and delivered to the Agent;
NOW, THEREFORE, in consideration of the Loan to the Borrower, in order
to induce the Lenders and the Agent to execute and deliver the Loan Agreement,
the Lenders to accept the Notes, and the Agent to accept the Mortgage, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Guarantor, for itself, its successors and assigns,
hereby covenants and agrees with the Agent for the benefit of the Agent and the
Lenders, and their respective successors and assigns, as follows:
1. Guaranty. Subject to the Lenders' obligation to continue to make
advances to the extent they are secured by the Lien of the Mortgage as provided
in Section 4 hereof, the Guarantor, as a primary obligor and not merely as a
surety, absolutely, unconditionally and irrevocably guaranties to the Agent and
the Lenders (the matters hereinafter set forth in (a) through (d) of this
Section 1, and in Sections 2 and 3, shall collectively be defined as the
"Guaranty Obligations") that:
(a) The Borrower shall achieve Completion of the
Improvements on or before the Completion Date (including, without
limitation, the requirement that a temporary certificate of occupancy
be obtained), free and clear of all mechanics' liens and other charges
relating to the construction and Completion of the Improvements, in
compliance with the Plans, the applicable provisions of the Loan
Agreement and all Requirements and shall perform its obligation to
maintain either a temporary Certificate of Occupancy or permanent
Certificate of Occupancy in full force and effect at all times after
the same has been issued;
(b) The Borrower shall fully and punctually comply with the
Loan Balancing provisions of Section 2B.7(A) of the Loan Agreement;
(c) The Borrower shall fully and punctually pay and
discharge any and all costs and expenses and liabilities incurred for
or in connection with the construction, equipping, furnishing and
Completion of the Improvements, when and as the same may become due and
payable, and also pay and discharge any and all claims and demands for
labor and materials used and services rendered for or in connection
with the construction and Completion of the Improvements and/or the
installation of all items of fixtures, furnishings and equipment and
other personalty in connection therewith; and
(d) The Land, the Improvements and the installation of
fixtures, furnishings and equipment and other personalty in connection
therewith shall be and remain free and clear of any and all Liens and
claims from any and all persons or entities furnishing materials, labor
or services for or in connection with the construction, equipping,
furnishing or Completion of the Improvements and/or the installation of
all items of fixtures, furnishings and equipment and other personalty
in connection therewith, subject to (i) the Permitted Encumbrances and
any Liens permitted under the Building Loan Agreement and (ii)
Borrower's right to contest any such Liens as set forth in the Loan
Documents.
2. Indemnity, Reimbursement and Performance. For the purposes of
this Guaranty: "Completion" shall mean and be deemed to have occurred upon the
occurrence of all of the following: (i) the Improvements comprising the Project
shall be fully paid and 100% complete in accordance with the Plans, all
Requirements and the requirements of the Ground Lease, all as determined by
Agent and Agent's Architect in accordance with the procedure set forth in
Section 2B.2 of the Loan Agreement; (ii) all on-site and off-site
2
<PAGE>
improvements, including, without limitation, all utility services and fixtures
and equipment required for access to and operation of the Improvements shall be
100% complete; (iii) a temporary certificate of occupancy for the full use and
occupancy of the entire Premises (and provided that Borrower shall proceed as
expeditiously as possible to secure the final Certificate of Occupancy, in any
event within two (2) years of issuance of the temporary certificate of
occupancy) or its equivalent issued by the applicable governmental authority for
the Improvements comprising the Project, and all other reasonable evidence that
the City of New York and/or the Battery Park City Authority have acknowledged
the completion of all work required by it to meet all legal requirements and the
requirements under the Ground Lease, as applicable, including, without
limitation, all zoning and building requirements; (iv) all Permits and Licenses,
if any, required for the operation of the Project as an independent
living/assisted living complex under all applicable legal requirements have been
issued; (v) all of the requirements set forth in Section 6.4 of the Building
Loan Agreement for the final disbursement of Hard Costs shall have been
satisfied; (vi) the opening of the Project shall have been scheduled to occur
within thirty (30) days, and "Completion Date" shall mean the date that occurs
eighteen (18) calendar months after the Closing Date, subject to extension for
Force Majeure (it being expressly understood, however, that the Maturity Date
shall not be extended by reason of Force Majeure).
In the event that (a) the Borrower does not fully perform the
Guaranty Obligations, (b) the Completion of the Improvements or the installation
of all items of fixtures, furnishings and equipment and other personalty in
connection therewith are not accomplished on or before the Completion Date, or
(c) the Improvements and/or the installation of all items of fixtures,
furnishings and equipment and other personalty are not paid for in full or free
of all Liens, claims and demands upon the Completion thereof and after the
expiration of all applicable periods during which Liens therefor may be recorded
(except for the lien of the Mortgage, Permitted Encumbrances and other Liens
permitted under the Building Loan Agreement), subject to the Borrower's right to
contest any such Liens as set forth in the Loan Documents, then:
(x) The Guarantor shall, upon demand by the Agent, perform
the Guaranty Obligations, and complete or cause the completion of the
construction, furnishing and equipping of the Improvements, and/or the
installation of fixtures, furnishings and equipment and other
personalty in accordance with the Plans, all Requirements and this
Guaranty, as applicable;
(y) In the event that the Guarantor fail to commence
performance under subsection (x) immediately preceding within ten (10)
Domestic Business Days of the Agent's demand and diligently prosecute
such performance, and if the Agent shall (i) cause any construction,
furnishing or equipping of the Improvements and/or the installation of
all items of fixtures, furnishings and equipment and other personalty
in connection therewith, (ii) pay any costs in connection with the
construction, furnishing or equipping of the Improvements and/or the
installation of all items of fixtures, furnishings and equipment and
other personalty in connection therewith, or (iii) cause any such Lien,
claim or demand to be released or paid, then the Guarantor shall
promptly reimburse the Agent within ten (10) Domestic Business Days
after demand, for all sums paid and all costs and expenses incurred by
the Agent in connection therewith; and
(z) The Guarantor will fully indemnify, defend and save the
Agent and the Lenders harmless from all costs and damages (including
reasonable attorney's fees and any diminution in value or loss of
income attributable to the loss of any tenants) that the Agent or any
Lender may suffer by reason of the Guarantor's failure to promptly and
fully perform under subsections (x) and (y) above.
3. Projected Overruns/Loan Balancing. If at any time:
(a) The actual or projected cost of completing all work
represented by an individual line item of the Budget (including any Budget
Reallocations permitted under Section 2B.14 of the Building Loan Agreement), as
such cost is determined by the Agent, exceeds the amount set forth in the Budget
for such individual line item plus amounts previously deposited by the Guarantor
hereunder and/or by the Borrower under the Loan Documents with respect to such
individual line item, but not yet applied; or
3
<PAGE>
(b) The actual or projected costs associated with
construction, equipping, furnishing and achieving Completion of the
Improvements, as determined by the Agent, exceeds the sum of the undisbursed
portion of the Loan plus amounts previously deposited by the Guarantor hereunder
and/or by the Borrower under the Loan Documents, but not yet applied; or
(c) The Borrower shall fail to timely and fully comply with
its Loan balancing obligations under Section 2B.7(A) of the Building Loan
Agreement; then:
the Guarantor shall, if the Borrower shall so fail to, within ten (10) Domestic
Business Days after request by the Agent, deposit with the Agent cash in an
amount sufficient to cover such deficiency. The Agent shall hold and apply such
deposited cash for the purpose of meeting said excess costs when due, whether by
payment to the Borrower or by payment directly to the party owed such amounts.
The Lenders need not have advanced all Loan proceeds nor shall the Agent have
released Retainage or contingency amounts before making such requests. Any
determination as to estimated or actual Costs or the existence of a present or
projected deficiency or the amount of same shall be made by the Agent and the
Agent's Architect in its sole discretion.
4. Lender's Exercise of Rights Hereunder. Notwithstanding any
Lender's right to cease funding to the Borrower upon the occurrence of a default
pursuant to the terms of the Loan Agreement, in the event the Agent shall have
called upon the Guarantor under this Guaranty to complete the Improvements, and
said call upon Guarantor has not been rescinded by Agent, and provided that the
Guarantor has made whatever deposits are required by Section 1(c) or Section 3
hereof and provided further that there are no continuing uncured defaults by the
Guarantor hereunder or under any other Loan Document, the Lenders shall continue
to make Advances under the Loan Agreement (for the benefit of the Borrower and
the Guarantor) in accordance with the terms thereof, notwithstanding any default
or Event of Default by the Borrower under any Loan Document, provided that any
such Advances shall be secured, on a first priority basis (subject only to
Permitted Encumbrances and other Liens permitted under the Building Loan
Agreement), by the Lien of the Mortgage. The Guarantor covenants and agrees that
in consideration of the Lenders' making such Advances under the Loan Agreement
for the purpose of completing the Improvements, the Guarantor will comply, or
will cause the Developer and/or Borrower to comply, with all terms and
conditions of the Loan Agreement relative to any such Loan Advances to be made
by the Lenders. Nothing contained herein shall preclude the Agent's or any
Lender's right to require strict compliance with the terms of the Loan Agreement
by the Borrower.
5. Representations, Warranties and Covenants of the Guarantor. The
Guarantor hereby represents, warrants and covenants:
(a) The Guarantor is a corporation duly organized and
validly existing under the laws of the State of Delaware and has full
power and authority to consummate the transactions contemplated hereby.
(b) This Guaranty, the Payment Guaranty, the Operating
Deficit Guaranty, and the Environmental Indemnity Agreement have been
duly executed and delivered by the Guarantor and constitute the valid
and binding obligations of the Guarantor and are enforceable against
the Guarantor in accordance with their respective terms.
(c) Guarantor is not insolvent (as such term is defined in
the Bankruptcy Code), and Guarantor will not be rendered insolvent by
execution of this Guaranty or any other Loan Document to which it is a
party or by the consummation of the transactions contemplated thereby.
(d) The consummation of the transactions contemplated
hereby and the performance by the Guarantor of the Guarantor's
obligations under this Guaranty, the Payment Guaranty, the Operating
Deficit Guaranty, the Environmental Indemnity Agreement or any other
Loan Document to which the Guarantor is a party will not result in any
breach of, give rise to a lien under, or constitute a default under,
any mortgage, deed of trust, lease, bank loan or credit agreement,
partnership agreement,
4
<PAGE>
corporate charter, by-laws or other agreement or instrument to which
the Guarantor is a party or by which it may be bound or affected.
(e) The Financial Statements delivered by the Guarantor to
the Agent at or prior to the Closing fairly and accurately present the
financial condition of the Guarantor as of the date thereof, and no
material adverse change has occurred in the financial condition
reflected therein since the date thereof. The Financial Statements have
been prepared in accordance with sound accounting methods, principles
and standards consistently applied and do not omit facts, the omission
of which would make such Financial Statements materially misleading.
(f) Except as disclosed on Schedule 1 annexed hereto and
made a part hereof, there are no actions, suits or proceedings
involving claims in excess of $1,000,000 pending, or to the best
knowledge of the Guarantor threatened, against or affecting the
Guarantor or the Premises, or involving the validity or enforceability
of the Mortgage, or the priority of the liens thereof, at law or in
equity, before or by any Governmental Authority; and the Guarantor is
not operating under or subject to, in default of, or in violation with
respect to, any order, writ, injunction, decree or demand of any court
or any Governmental Authority involving claims in excess of $1,000,000
that reasonably could materially and adversely affect its ability to
perform its obligations hereunder.
(g) The Guarantor shall promptly provide the Agent with
written notice of any pending or threatened litigation against the
Guarantor or the Premises, with respect to which an adverse decision is
reasonably likely involving claims in excess of $1,000,000; or the
commencement against the Guarantor or the Premises of any proceedings
or investigations by a governmental or regulatory agency involving
claims in excess of $1,000,000 that reasonably could materially and
adversely affect its ability to perform its obligations hereunder.
(h) There is no default on the part of the Guarantor under
or with respect to this Guaranty, the Payment Guaranty, the
Environmental Indemnity Agreement or any other Loan Document to which
the Guarantor is a party, and no event has occurred and is continuing
which with the giving of notice and the passage of time would
constitute a default on the part of Guarantor under any of the
aforesaid documents.
(i) The Guarantor does not have any counterclaims, offsets
or defenses with respect to the Loan or with respect to its obligations
under this Guaranty, the Payment Guaranty, the Operating Deficit
Guaranty, the Environmental Indemnity Agreement, the Notes or any other
Loan Document to which it is a party.
(j) The Guarantor will not join in any action, or consent
to amend, terminate or modify the organizational documents of the
Borrower without the prior written consent of the Agent.
(k) The Guarantor will promptly comply with all conditions
of this Guaranty and the other Loan Documents with which the Guarantor
is required to comply. The Guarantor will promptly and fully respond to
any inquiry of the Agent made with respect to the Loan, the Land, the
Improvements, or any of the matters covered by this Guaranty.
(l) The Guarantor will not modify or amend or terminate
(other than by full performance thereof) any Loan Document without the
prior written consent of the Agent.
(m) The Guarantor agrees to pay within ten (10) Domestic
Business Days of any written demand by the Agent to Guarantors, all
expenses (including, without limitation, reasonable legal expenses) of,
or incidental to, or in any way relating to the enforcement or
protection of the rights of the Agent or the Lenders hereunder.
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(n) The Guarantor is deriving or expects to derive a
financial or other advantage from each and every obligation incurred by
the Borrower to the Agent or the Lenders.
(o) The Guarantor hereby acknowledges receipt of copies of,
and hereby approves, the Plans, the Mortgage, the Loan Agreement and
the other Loan Documents.
(p) The Guarantor shall execute and deliver to the Agent,
from time to time, such other documents as shall be reasonably
necessary to give full effect to the rights and remedies granted or
provided by this Guaranty.
(q) The Guarantor shall furnish to the Agent (i) quarterly
internally-prepared Financial Statements, certified by an officer of
the Guarantor, within forty-five (45) days after the end of each
calendar quarter, (ii) annual audited Financial Statements, certified
by an officer of the Guarantor within one hundred twenty (120) days
after the end of each fiscal year of the Guarantor, (iii) quarterly
internally-prepared certificates evidencing that the Guarantor's net
worth is equal to at least $70,000,000, certified by an officer of the
Guarantor, within forty-five days after the end of each calendar
quarter, (iv) quarterly internally-prepared certificates evidencing
that the Guarantor has Liquid Assets equal to at least $5,000,000,
certified by an officer of the Guarantor, within forty-five (45) days
after the end of each calendar quarter, and (v) such other financial
information relating to the Guarantor as may be reasonably requested
from time to time by Agent.
(r) The Guarantor has implemented a program to assess,
remediate and mitigate the potential impact of the Year 2000 Issue
throughout the Guarantor's company. The Guarantor's program has been
structured to address its internal computer systems and applications,
network services operations, facilities operations and third-party
vendors and suppliers. The Guarantor believes that it is taking the
necessary steps within its control to mitigate the potential impact of
the Year 2000 Issue on the Guarantor and shall continue to do so.
6. Defaults. The following shall constitute a default hereunder
(each, an "Event of Default"):
(a) if the Guarantor shall (after ten (10) Domestic
Business Days have elapsed from date of written notice to Guarantor)
fail to timely perform, or cause to be timely performed, any Guaranty
Obligation within the period provided for performance by the Guarantor
hereunder;
(b) if the Guarantor shall (after ten (10) Domestic
Business days have elapsed from date of written notice to Guarantor)
fail to comply with any of the covenants made by it in this Guaranty
(including, without limitation, the provisions of Section 25 hereof) or
in any other Loan Document, including, without limitation, the Payment
Guaranty, or if at any time any representation or warranty made by the
Guarantor to the Agent or the Lenders in this Guaranty or in any other
Loan Document or in any certificate or statement delivered in
connection herewith shall be false or misleading to an extent deemed by
the Agent to be material, and, in any case, all required notices have
been given and all applicable cure periods have expired;
(c) if at any time the Guarantor shall revoke, or attempt
to revoke, this Guaranty;
(d) if at any time Guarantor's minimum net worth is not
equal to at least $70,000,000, or if at any time Guarantor's minimum
liquidity in the form of Liquid Assets (as that term is defined in the
Payment Guaranty) is not equal to at least $5,000,000;
(e) if the Guarantor shall (i) suspend or discontinue its
business, (ii) make an assignment for the benefit of creditors, (iii)
admit in writing its inability to pay its debts as they become due,
(iv) file a voluntary petition in bankruptcy, (v) become insolvent as
defined in the Bankruptcy Code, (vi) file any petition or answer
seeking for itself any reorganization, arrangement, composition,
readjustment of
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debt, liquidation or dissolution or similar relief under any present or
future statute, law or regulation of any jurisdiction, (vii) petition
or apply to any tribunal for any receiver, custodian or any trustee for
any substantial part of its property, (viii) be the subject of any such
proceeding commenced against it which remains undismissed for a period
of 60 days, (ix) file any answer admitting or not contesting the
material allegations of any such petition filed against it, or of any
order, judgment or decree approving such petition in any such
proceeding, or (x) seek, approve, consent to, or acquiesce in any such
proceeding, or in the appointment of any trustee, receiver, custodian,
liquidator, or fiscal agent for it, or any substantial part of its
property or if an order is entered appointing any such trustee,
receiver, custodian, liquidator or fiscal agent and such order remains
in effect for 60 days;
(f) if an order for relief is entered under the Bankruptcy
Code or any other decree or order is entered by a court of competent
jurisdiction (i) adjudicating the Guarantor bankrupt or insolvent, (ii)
approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the
Guarantor, (iii) appointing a receiver, liquidator, assignee, trustee,
custodian, sequestrator (or other similar official) of the Guarantor or
of any substantial part of its property, or (iv) ordering the winding
up or liquidation of the affairs of the Guarantor and any such decree
or order continues unstayed and in effect for a period of 60 days; or
(g) If the Guarantor shall (after ten (10) days have
elapsed from date of written notice to Guarantor) fail to make any
payment or deposit required by this Guaranty.
7. Remedies. Upon the occurrence of a default hereunder, in
addition to any other remedy provided for under this Guaranty or at law or in
equity, the Guarantor hereby authorizes the Agent, in the Agent's sole
discretion, at any time, to foreclose nonjudicially or judicially against any
real or personal property security of Borrower or Guarantor it holds for the
Guaranty Obligations or any part thereof (it being understood that Guarantor is
not required to secure this Guaranty with any assets of Guarantor), or exercise
any other remedy against the Guarantor or any security.
8. Equitable Relief; Specific Performance. The Guarantor
acknowledges and agrees that it may be impossible to measure accurately the
damages to the Lenders resulting from a breach of the Guarantor's covenant to
complete, equip and install, or to cause the completion of the construction,
equipping and installation of, the Improvements and the fixtures, furnishings
and equipment and other personalty and the failure to satisfy the Guaranty
Obligations and that such a breach will cause irreparable injury to the Lenders
and that the Lenders may not have an adequate remedy at law in respect of such
breach and, as a consequence, agrees that such covenant shall be specifically
enforceable against the Guarantor and hereby waives and agrees not to assert any
defense against an action for specific performance of such covenant. This clause
shall not prejudice any Lender's rights to assert any and all claims for damages
incurred as a result of the Guarantor's default hereunder, and the Agent, for
the ratable benefit of the Lenders, may, before, during, or after any
foreclosure of the Mortgage, hold the Guarantor liable for any deficiency
arising from the Guarantor's default hereunder and for all losses and damages
sustained and expenses incurred by reason of the Borrower or the Guarantor
failing to construct, furnish, equip and achieve timely lien-free Completion of
the Improvements, furnishings and equipment in accordance with this Guaranty and
the Loan Agreement, including, without limitation, any and all costs associated
with such Completion.
9. Waiver of Election of Remedies. The Guarantor waives (to the
extent permitted by law) any right to require or compel the Agent or any Lender
to (a) proceed against the Borrower or any other guarantor; (b) proceed against
the Collateral or any other security for the Loan or the Guaranty Obligations;
or (c) pursue any other remedy in the Agent's or any Lender's power whatsoever;
and failure of the Agent or any Lender to do any of the foregoing shall not
exonerate, release or discharge the Guarantor from its absolute, unconditional
and independent liabilities to the Agent and the Lenders hereunder. The
Guarantor hereby waives (to the extent permitted by law) any and all legal
requirements that the Agent or any Lender shall institute any action or
proceedings at law or in equity against the Borrower or anyone else in respect
of the Loan or the Loan
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Agreement or any other Loan Document or resort to or seek to realize upon the
security held by the Agent or any of the Lenders, as a condition precedent to
bringing an action against the Guarantor upon this Guaranty.
10. Right of Separate Actions. The Agent may bring and prosecute a
separate action against the Guarantor to enforce its liabilities hereunder,
whether or not any action is brought against any other person and whether or not
any other person is joined in any such action or actions. Nothing shall prohibit
the Agent or any Lender from exercising its rights against any guarantor, the
Borrower, any security for the Guaranty Obligations or the Notes, or any other
person, simultaneously, jointly and/or severally. The Guarantor shall be bound
by each and every ruling, order and judgment obtained by the Agent or any Lender
against the Borrower in respect of the Loan and the Loan Documents, whether or
not the Guarantor is a party to the action or proceeding in which such ruling,
order or judgment is issued or rendered.
11. Waiver of Rights of Subrogation. The Guarantor hereby
irrevocably waives any rights to be subrogated to the rights of the Agent or any
of the Lenders with respect to the Guaranty Obligations and the Notes or any
other Loan Document. The Guarantor hereby agrees that it will not institute or
take any action seeking reimbursement against the Borrower or any other
guarantor until such time as the Agent and the Lenders shall have received
payment in full in cash in satisfaction of all the obligations of the Borrower
under the Notes and the other Loan Documents. No failure on the part of the
Agent or any Lender to exercise, and no delay in exercising, any right, remedy
or power hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise by the Agent or any Lender of any right, remedy or power
hereunder preclude any other or future exercise of any other right, remedy or
power. The foregoing provision is not intended to limit the Guarantor's rights
under the Development Agreement or the Management Agreement, provided all
relevant provisions of the Loan Agreement relative to Guarantor's exercise of
said rights are satisfied.
12. Waiver of Notice, Consent, etc.
(a) This Guaranty shall be construed as a continuing, absolute and
unconditional guaranty of completion.
(b) The Guarantor hereby waives acceptance and notice of acceptance
of this Guaranty by the Agent or any of the Lenders and notice of presentment,
demand, protest, notice of protest and of dishonor, notices of default and all
other notices relative to this Guaranty of every kind and description now or
hereafter provided by any agreement between the Borrower and the Agent or any of
the Lenders or any statute or rule of law except those specifically required by
this Guaranty.
(c) Except for any notices to Guarantor specifically required by any
of the Loan Documents, the Guarantor waives any and all notice of the creation,
renewal, extension or accrual of any of the obligations of the Borrower under
any of the Loan Documents (with the exception of (i) changes in the interest
rate, other than fluctuations in the Prime Rate or Applicable LIBOR Rate or a
change to the Default Rate pursuant to the terms of the Notes or Loan Agreement,
(ii) changes in the Maturity Date unless extended in accordance with Section
2A.11 of the Loan Agreement or unless accelerated by the Agent pursuant to the
terms of the Loan Agreement, (iii) changes in the Maximum Loan Amount, and (iv)
changes in the amount of payments of principal and/or interest as scheduled), or
of the reliance by the Agent or any of the Lenders upon this Guaranty or any
other Loan Document. The obligations of the Borrower under any of the Loan
Documents, and each of them, shall conclusively be deemed to have been created,
contracted, or incurred in reliance upon this Guaranty and all dealings between
the Borrower, the Agent or any of the Lenders shall likewise be conclusively
presumed to have been made or consummated in reliance upon this Guaranty.
(d) The Guarantor hereby agrees that the Plans and the conditions
for advances, if any, and any other terms, covenants and provisions contained in
the Loan Agreement, the Notes, the Mortgage or in any other Loan Document may be
altered, extended, modified, waived, released or cancelled by the Agent or any
of the Lenders, and the Guarantor agrees that this Guaranty and its liability
hereunder shall be in no way affected, diminished or released by any such
alteration, extension, modification, release, waiver or cancellation (with the
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exception of (i) changes in the interest rate, other than fluctuations in the
Prime Rate or Applicable LIBOR Rate or a change to the Default Rate pursuant to
the terms of the Notes or Loan Agreement, (ii) changes in the Maturity Date
unless extended in accordance with Section 2A.11 of the Loan Agreement or unless
accelerated by the Agent pursuant to the terms of the Loan Agreement, (iii)
changes in the Maximum Loan Amount, and (iv) changes in the amount of payments
of principal and/or interest as scheduled).
13. Waiver of Priority of Collateral. The Guarantor hereby agrees
that, in the event that any of its property is or may be hypothecated with
property of the Borrower, as security for any obligations of the Borrower under
any other Loan Document, any right of the Guarantor to have such other property
of the Borrower first applied to the discharge of such obligations is hereby
irrevocably waived by the Guarantor.
14. No Discharge; Remedies Cumulative. The Guarantor shall not be
discharged, released or exonerated, in any way, from its absolute, unconditional
and independent liabilities hereunder, even though any rights or defenses which
the Guarantor may have against the Agent or any of the Lenders or others may be
destroyed, diminished or otherwise affected by:
(a) any declaration by the Agent or any Lender of a default
in respect of any of the obligations of the Borrower under any of the
Loan Documents;
(b) the exercise by the Agent or any Lender of any rights
or remedies against the Borrower or any other person;
(c) the failure of the Agent or any Lender to exercise any
rights or remedies against the Borrower or any other person;
(d) the sale or enforcement of, or realization upon
(through judicial foreclosure, power of sale or any other means) any
security for any of the obligations of the Borrower under any of the
Loan Documents, or any security for any of the Guaranty Obligations,
even though (i) recourse may not thereafter be had against the Borrower
or any other person for any deficiency, or (ii) the Agent or any Lender
fails to pursue any such recourse which might otherwise be available,
whether by way of deficiency judgment following judicial foreclosure or
otherwise;
(e) any bankruptcy or reorganization of the Borrower or the
voluntary or involuntary participation by the Borrower in any
settlement or composition for the benefit of the Borrower's creditors
either in liquidation, readjustment, receivership, bankruptcy or
otherwise;
(f) the release of any other guarantor by agreement,
operation of law or otherwise; or
(g) any such action by the Agent or any Lender which would
release or limit the liability of the Guarantor to the Agent or any of
the Lenders even if the effect of that action is to deprive the
Guarantor of the right to collect reimbursement from the Borrower for
any sums paid to the Agent or any Lender.
All rights and remedies of the Agent and the Lenders hereunder or under any of
the Loan Documents shall be cumulative and may be exercised singularly or
concurrently. The rights of the Agent and the Lenders under this Guaranty are in
addition to and not in diminution of the rights of the Agent and the Lenders
under any other Loan Document.
15. Continuing Guaranty. Subject to the terms of Section 22 hereof,
until all obligations of the Borrower to the Agent and the Lenders under the
Loan Documents are fulfilled to the satisfaction of the Agent and the Lenders
and each and every of the terms, covenants and conditions of this Guaranty are
fully performed and the Loan are fully repaid, no Guarantor shall be released by
any act or thing which might, but for this provision, be deemed a legal or
equitable discharge of a surety, or by reason of any waiver, extension,
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modification, forbearance or delay or other act or omission of the Agent or any
Lender or its failure to proceed promptly or otherwise, or by reason of any
action taken or omitted or circumstance which may or might vary the risk or
affect the rights or remedies of the Guarantor or by reason of any further
dealings between the Borrower and the Agent or any of the Lenders, whether
relating to the Loan or otherwise, and the Guarantor hereby expressly waives and
surrenders any defenses to its liability hereunder based upon any of the
foregoing acts, omissions, things or agreements or waivers of the Agent or any
of the Lenders; it being the purpose and intent of this Guaranty that the
obligations of the Guarantor hereunder are absolute and unconditional under any
and all circumstances. The Guarantor has also executed the Payment Guaranty and
the Operating Deficit Guaranty in favor of the Agent and the Lenders and (a)
payment or performance by the Guarantor of its obligations under this Guaranty
shall not decrease the Guarantor's liability under the Payment Guaranty or the
Operating Deficit Guaranty, and (b) payment or performance by the Guarantor
under the Payment Guaranty or the Operating Deficit Guaranty shall not decrease
or diminish the Guarantor's liability under this Guaranty.
16. Notices. All notices, demands, instructions and other
communications required or permitted to be given to or made upon any party
hereto or any other person shall be in writing and shall be personally delivered
or sent by registered or certified mail, postage prepaid, return receipt
requested, or telegram (with messenger delivery specified in the case of a
telegram), or by prepaid courier, and shall be deemed to be given for purpose of
this Guaranty in regard to registered or certified mail, three (3) Domestic
Business Days after mailing, and in regard to personal delivery, telegram, or
prepaid courier, on the day that such writing is delivered. Unless otherwise
specified in a notice sent or delivered in accordance with the foregoing
provisions of this Section, notices, demands, instructions and other
communications in writing shall be given to or made upon the following persons
at its addresses indicated below:
To Guarantor:
Brookdale Living Communities, Inc.
77 West Wacker Drive, Suite 4400
Chicago, Illinois 60601
Attention: Darryl W. Copeland, Jr.
Telecopy: (312) 977-3699
Brookdale Living Communities, Inc.
77 West Wacker Drive, Suite 4400
Chicago, Illinois 60601
Attention: Robert J. Rudnik
Telecopy: (312) 977-3769
To the Agent:
Key Corporate Capital Inc., as Agent
127 Public Square
Cleveland, Ohio 44114-1306
Attention: Nancy A. Herman
Vice President
with a courtesy copy to:
Jones, Day, Reavis & Pogue
901 Lakeside Avenue
Cleveland, Ohio 44114
Attention: Bernadette M. Mast, Esq.
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with a courtesy copy to any Lender:
at its address specified in or pursuant
to the Loan Agreement
or at such other address as any of the persons identified above may from time to
time designate by written notice given as herein required. Rejection or refusal
to accept or inability to deliver because of changed addresses or because notice
of changed address was given shall be deemed a receipt of such notice. Failure
to provide a courtesy copy of any notice required hereunder shall not invalidate
any notice otherwise given in accordance with this Section.
If any day on which any notice, demand, instruction or other
communication is given or sent by any party hereto is not a Domestic Business
Day, such notice, demand, instruction or other communication shall be deemed to
have been given or sent on the Domestic Business Day next succeeding such
non-Domestic Business Day.
17. Submission to Jurisdiction. (a) The Guarantor irrevocably
submits to the non-exclusive jurisdiction of the courts of the State of New
York, the courts of the United States for the Southern District of the State of
New York, and appellate courts from any thereof, over any suit, action or
proceeding arising out of or relating to this Guaranty. The Guarantor hereby
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such suit, action
or proceeding brought in any such court and any claim that any such suit, action
or proceeding brought in such a court has been brought in an inconvenient forum.
Without limiting the Guarantor's right to appeal any such final judgment in
accordance with applicable Requirements, the Guarantor agrees that a final
judgment in any such suit, action or proceeding brought in such a court shall be
conclusive and binding upon the Guarantor.
(b) The Guarantor hereby irrevocably appoints CT Corporation System
as its authorized agent to accept and acknowledge, on behalf of the Guarantor,
service of any and all process which may be served in any suit, action or
proceeding of the nature referred to above in any such court. The Guarantor
represents and warrants that such agent has agreed in writing to accept such
appointment and that the Guarantor has delivered to the Agent a true copy of
such designation and acceptance. Said designation and appointment shall be
irrevocable. If such agent shall cease so to act, the Guarantor covenants and
agrees that it shall irrevocably designate and appoint without delay another
such agent satisfactory to the Agent and shall promptly deliver to the Agent
evidence in writing of such other agent's acceptance of such appointment.
(c) Process may be served in any suit, action or proceeding of the
nature referred to above (i) by the mailing of copies thereof by registered or
certified air mail, postage prepaid return receipt requested, to the Guarantor
at its address set forth above or to such other address of which the Guarantor
shall have given written notice to the Agent, or (ii) without affecting the
efficacy of any service made pursuant to clause (i) above, if the Guarantor
shall not have filed an appearance within twenty-one days after the date of such
mailing, by serving a copy thereof upon CT Corporation System, at its office at
1633 Broadway, New York, New York, as the Guarantor's agent for service of
process. The Guarantor agrees that such service shall be deemed in every respect
effective service of process upon the Guarantor in any such suit, action or
proceedings and shall, to the fullest extent permitted by law, be taken and held
to be valid personal service upon and personal delivery to the Guarantor.
Nothing in this Section shall affect the right of the Agent to serve process in
any manner permitted by law or limit the right of the Agent to bring proceedings
against the Guarantor in the courts of any other jurisdiction or jurisdictions.
18. Entire Agreement; Modification and Waiver. This Guaranty,
together with the Payment Guaranty, the Operating Deficit Guaranty and the
Environmental Indemnity Agreement, represent the entire agreement between the
Guarantor, on the one hand, and the Agent and the Lenders, on the other hand,
with respect to the matters referred to herein and therein and no waiver or
modification hereof or thereof shall be
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effective unless in writing and signed by the Agent and the Guarantor against
whom enforcement of the same is sought. All approvals, consents and other
actions by the Agent hereunder shall be given or taken by the Agent in
accordance with the provisions regarding the Agent powers provided in the Loan
Agreement (including any required instructions or consents by any specified
percentage of Lenders or all Lenders). No Lender shall have any power to amend,
discharge or terminate this Guaranty, all such actions being within the powers
of the Agent (acting on behalf of the Lenders as provided in Article VII of the
Loan Agreement). This Guaranty, the Payment Guaranty, the Operating Deficit
Guaranty and the Environmental Indemnity Agreement are independent agreements
and shall be so construed in accordance with their respective terms. The Payment
Guaranty, the Operating Deficit Guaranty and the Environmental Indemnity
Agreement are additional security and benefit to the Agent and the Lenders and
are not in lieu of and do not in any way diminish the Guaranty Obligations of
the Guarantor hereunder. The Guarantor shall be fully liable to the Agent and
the Lenders hereunder whether or not the Agent or any Lender has or shall obtain
any other or further guaranties, security or agreements, and irrespective of
whether the Payment Guaranty, the Operating Deficit Guaranty or the
Environmental Indemnity Agreement or other or further guaranties, security or
agreements are effective or enforceable or are released in whole or in part,
voluntarily or involuntarily or by operation of law or otherwise. Neither the
Agent nor any Lender shall have any obligation to pursue or attempt to pursue
any remedies under the Payment Guaranty, the Operating Deficit Guaranty, or the
Environmental Indemnity Agreement or any other or further guaranties, security
or agreement and may enforce all rights and obligations hereunder, irrespective
of the existence or nonexistence of other or further guaranties, security or
agreements.
19. Governing Law. THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES AND OTHER PERSONS BENEFITTED HEREUNDER SHALL BE CONSTRUED, ENFORCED,
AND INTERPRETED ACCORDING TO THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE IN AND PERFORMED IN THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICT OF LAWS.
20. Successors and Assigns. This Guaranty shall be binding upon the
Guarantor and upon its respective successors and assigns and shall inure to the
benefit of the Agent and the Lenders and their respective successors and
assigns.
21. Time of the Essence. Time shall be of the essence with regard to
the performance by Guarantor of its obligations under this Guaranty.
22. Termination of Guaranty. This Guaranty shall expire when all of
the Guaranty Obligations shall have been satisfied and all statutory mechanics'
lien filing periods have expired and no notices of lien have been filed that
remain unreleased or have not been bonded off in a manner satisfactory to Agent.
23. Singular and Plural. As used in this Guaranty, the singular
shall include the plural as the context requires.
24. Waiver of Trial by Jury. THE GUARANTOR, AND THE AGENT AND THE
LENDERS BY THEIR ACCEPTANCE OF THE BENEFITS HEREOF, EACH HEREBY IRREVOCABLY
WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BETWEEN OR AMONG
ANY OF THEM, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, ARISING OUT OF OR
IN ANY WAY CONNECTED TO THE LOAN, THIS GUARANTY OR ANY OF THE OTHER LOAN
DOCUMENTS.
25. Transfer of Property, Mergers, etc. The Guarantor hereby
covenants and agrees, that until this Guaranty is terminated in accordance with
its terms, (a) the Guarantor shall not, without the Agent's prior written
consent, directly or indirectly, convey, transfer or assign any property or
asset of any nature, whether real property, personal property or mixed, tangible
or intangible or any interest therein, for less than fair market value, if the
same would cause a reduction in Guarantor's net worth below $70,000,000 or a
reduction in Guarantor's minimum liquidity in the form of Liquid Assets below
$5,000,000, and (b) the Guarantor shall not
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merge or consolidate with, or sell, assign, lease or otherwise dispose of all or
substantially all of its assets to, any other person; provided, that the
Guarantor may consolidate with another person, or merge with and into another
person, or permit another person to merge with and into the Guarantor, if the
transaction complies with the requirements of Section 4.2(m) of the Building
Loan Agreement and the following requirements are satisfied:
(i) the Agent shall have been provided by the Guarantor with such
information concerning such transaction as the Agent may
request;
(ii) no Event of Default hereunder or under the Loan Agreement, or
event which with notice and lapse of time would become such an
Event of Default, shall have occurred and be continuing;
(iii) the effectiveness and priority of the liens and security
interests created pursuant to the Loan Documents are not
impaired by reason of any such transaction; and
(iv) the resulting or surviving person (if other than the Guarantor)
shall be a corporation, partnership or limited liability
company, duly organized under the laws of the United States, any
State thereof, or the District of Columbia, and shall assume,
pursuant to a written instrument or instruments, satisfactory in
form and substance to the Agent, all of the obligations of the
Guarantor under this Guaranty and each other Loan Document to
which the Guarantor is a party.
26. Severability. If any term or provision of this Guaranty or any
application thereof shall be held to be invalid, illegal or unenforceable, the
remainder of this Guaranty and any other application of such term or provision
shall not be affected thereby.
27. The Agent to Act on Behalf of Lenders, etc. The Lenders and the
Agent and their respective successors and assigns are beneficiaries of this
Guaranty, but any legal proceedings or other enforcement actions on behalf of
any Lender against the Guarantor with respect to this Guaranty shall be
undertaken and maintained by the Agent, acting on behalf and for the ratable
benefit of the Agent and the Lenders, with the proceeds of any such proceedings
or enforcement actions to be applied as provided in the Loan Documents.
28. Headings. The headings in this Guaranty are for purposes of
reference only and shall not limit or define the meaning hereof.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, this Guaranty has been executed by the undersigned
as of the date first above written.
BROOKDALE LIVING COMMUNITIES, INC.
By: /s/ Mark J. Schulte
----------------------------------
Name: Mark J. Schulte
Title: President and CEO
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State of ILLINOIS )
) SS.:
County of COOK )
On the 24th day of August, in the year 1999 before me, the undersigned, a notary
public of the State of Illinois, personally appeared Mark J. Schulte, personally
known to me or proved to me on the basis of satisfactory evidence to be the
individual whose name is subscribed to the within instrument and acknowledged to
me that he executed the same in his capacity, and that by his signature on the
instrument, the individual, or the person upon behalf of which the individual
acted, executed the instrument, and that such individual made such appearance
before the undersigned in the County of Cook, State of Illinois.
NOTARY SEAL
/s/ Donna Jean Elrod
--------------------------
Notary Public (affix seal)
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
All that certain plot, piece or parcel of land, situate, lying and being in the
Borough of Manhattan, County of New York, City and State of New York, bounded
and described as follows:
BEGINNING at the intersection of the southerly line of Chambers Street and the
westerly line of North End Avenue;
THENCE southerly along the westerly line of North End Avenue, a distance of
196.00 feet to a point on the northerly line of Warren Street;
THENCE westerly along said northerly line of Warren Street, a distance of 100.00
feet to the division line between Parcel 20C on the west and Parcel 20B on the
east;
THENCE northerly along said division line at right angles to the preceding
course, a distance of 196.00 feet to the southerly line of Chambers Street;
THENCE easterly along said southerly line of Chambers Street, a distance of
100.00 feet to the point of BEGINNING.
<PAGE>
Schedule 1
- ----------
1. Complaint filed in the Supreme Court of the State of New York, Kings
County, on July 23, 1999, having Index # 25973/99, by John Oliver and
Stephanie Oliver, as plaintiffs, against Brookdale Living Community,
HRH Construction Corp. and Maxim Construction Corp., as defendants,
claiming damages in the amount of $6,000,000, resulting from injuries
allegedly sustained by John Oliver while working on the construction of
the Project.
16
INDEMNITY AGREEMENT
-------------------
THIS INDEMNITY AGREEMENT (this "Agreement"), made as of August 24,
1999, from BROOKDALE LIVING COMMUNITIES, INC., a Delaware corporation having an
office at 77 West Wacker Drive, Suite 4400, Chicago, Illinois 60601, Attention:
Darryl W. Copeland, Facsimile Number (312) 977-3699 ("Guarantor") to the
Indemnified Parties (as hereinafter defined) including AH Battery Park Owner,
LLC, an Ohio limited liability company having an address 723 Electronic Drive,
Suite 300, Horsham, Pennsylvania 19044, Attention: David B. Fenkell, Facsimile
Number (215) 706-0877 (together with its successors and assigns, "Owner").
RECITALS
--------
WHEREAS, the sole member of Owner is AH Battery Park Member, LLC, an
Ohio limited liability company (the "Member");
WHEREAS, Owner intends to develop a congregate housing facility with an
assisted living component for the elderly in Battery Park City, New York, which
is currently referred to as "The Hallmark at Battery Park" (the "Project");
WHEREAS, Owner has obtained a loan from Key Corporate Capital, Inc.,
Fleet National Bank and European American Bank (collectively, the "Senior
Lender") for the acquisition, development and construction of the Project, in
the amount of up to $49,125,000 (the "Senior Loan");
WHEREAS, Owner and Brookdale Living Communities of New York-BPC, Inc.,
a Delaware corporation and an affiliate of Guarantor ("Manager"), are entering
into a certain management agreement dated the date herewith and a certain
development agreement dated the date herewith (collectively the "Management
Agreement"), pursuant to which Manager shall manage, operate and develop the
Property;
WHEREAS, Owner purchased Manager's interests in the Project from
Manager; and
WHEREAS, Owner is unwilling to enter into the Management Agreement
unless Guarantor indemnifies Owner against certain liabilities including those
arising under Environmental Laws (as herein defined), relating to the property
where the Project is located, which property consists of the fee simple interest
in the land (being more particularly described in the documents evidencing the
Senior Loan) and all buildings, structures and other improvements now or
hereafter situated on such land (the "Property").
NOW, THEREFORE, in consideration of entering into the Management
Agreement and the covenants, agreements, representations and warranties set
forth in this Agreement, the parties hereby covenant, agree, represent and
warrant as follows:
<PAGE>
1. Defined Terms. Unless the context otherwise requires,
capitalized terms used but not otherwise defined herein but defined in the
Building Loan Agreement dated as of the date hereof between Owner and Senior
Lender (the "Loan Agreement") shall have the meanings provided therefore in the
Loan Agreement, and the following terms shall have the following meanings:
"Environmental Claim" means any written request for information by a
Governmental Authority, or any written notice, notification, claim,
administrative, regulatory or judicial action, suit, judgment, demand or other
written communication by any Person or Governmental Authority requiring,
alleging or asserting liability with respect to any of the Indemnified Parties
or the Property, whether for damages, contribution, indemnification, cost
recovery, compensation, injunctive relief, investigatory, response, remedial or
cleanup costs, damages to natural resources, personal injuries, fines or
penalties arising out of, based on or resulting from (i) the presence, Use,
Release or threatened Release into the environment of any Hazardous Substance in
violation of any Environmental Law originating at or from, or otherwise
affecting, the Property, (ii) any fact, circumstance, condition or occurrence
forming the basis of any violation, or alleged violation, of any Environmental
Law by any of the Indemnified Parties or otherwise affecting the Property or
(iii) any alleged injury or threat of injury to health, safety or the
environment by any of the Indemnified Parties or otherwise affecting the
Property arising from actions which are in violation of Environmental Laws.
"Environmental Laws" means any and all applicable federal, state, local
and foreign laws, rules, regulations or municipal ordinances each as amended
from time to time, and any permits, approvals, licenses, registrations, filings
and authorizations, in each case as in effect as of the relevant date, relating
to the environment, health or safety, and pertaining to or imposing liability or
standards of conduct concerning environmental regulation, contamination or
clean-up, including the Comprehensive Environmental Response, Compensation and
Liability Act, the Resource Conservation and Recovery Act, the Emergency
Planning and Community Right-to-Know Act of 1986, the Hazardous Substances
Transportation Act, the Solid Waste Disposal Act, the Clean Water Act, the Clean
Air Act, the Toxic Substance Control Act, the Safe Drinking Water Act, the
Occupational Safety and Health Act, any state super-lien and environmental
clean-up statutes and all amendments to and regulations in respect of the
foregoing laws.
"Guarantor" has the meaning provided in the first paragraph of this
Agreement.
"Hazardous Substance" means, collectively, (i) any petroleum or
petroleum products or waste oils, explosives, radioactive materials, asbestos,
urea formaldehyde foam insulation, polychlorinated biphenyls ("PCBs"), lead in
drinking water, and lead based paint, the presence, generation, use,
transportation, storage or disposal of or exposure to which (x) is regulated or
could lead to liability under any Environmental Law or (y) is subject to notice
or reporting requirements under any Environmental Law, (ii) any chemicals or
other materials or substances which are now or hereafter become defined as or
included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous
2
<PAGE>
wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants,"
"contaminants," "pollutants" or words of similar import under any Environmental
Law and (iii) any other chemical or any other material or substance, exposure to
which is now or hereafter prohibited, limited or regulated under any
Environmental Law.
"Indemnified Parties" is defined in Section 2(a) of this Agreement.
"Owner" has the meaning provided in the Recitals to this Agreement.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, estate, trust, unincorporated association, or any
other entity, any federal, state, county or municipal government or any bureau,
department or agency thereof and any fiduciary acting in such capacity on behalf
of any of the foregoing.
"Release" means, with respect to any Hazardous Substances, any release,
threatened release, spill, emission, leaking, pumping, injection, deposit,
disposal, discharge, dispersal, leaching or migration into the indoor or outdoor
environment, including, without limitation, the movement of Hazardous Substances
through ambient air, soil, surface water, ground water, wetlands, land or
subsurface strata.
"Remedial Work" means any investigation, site monitoring, containment,
cleanup, removal, restoration or other work of any kind reasonably necessary or
required under an applicable Environmental Law.
"Use" means, with respect to any Hazardous Substance, the generation,
manufacture, processing, distribution, handling, use, treatment, recycling or
storage of such Hazardous Substance in violation of Environmental Laws or
transportation to or from the property of such Person of such Hazardous
Substance in violation of Environmental Laws.
2. Indemnification.
(a) Guarantor agrees to indemnify, reimburse, defend and
hold harmless Owner, Member, Alliance Holdings, Inc. and their directors,
officers, employees, partners, members, managers, shareholders and agents
(individually, an "Indemnified Party" and collectively, the "Indemnified
Parties") for, from and against all demands, claims, actions or causes of
action, assessments, losses, damages, liabilities, costs and expenses,
including, without limitation, interest, penalties, consequential damages,
reasonable attorneys' fees, reasonable disbursements and expenses, and
reasonable consultants' fees, disbursements and expenses, including costs of
Remedial Work (collectively "Losses"), asserted against, resulting to, imposed
on, or incurred by any of them, directly or indirectly, in connection with any
of the following:
i) events, circumstances, or conditions which are alleged
to, or do, form the basis for an Environmental Claim;
3
<PAGE>
ii) the presence, Use or Release of Hazardous Substances
at, on, in, under or from the Property, which presence, use or release
requires or could reasonably require Remedial Work;
iii) any Environmental Claim against any Person whose
liability for such Environmental Claim Guarantor has or may have
assumed or retained either contractually or by operation of law;
iv) any failure of Guarantor to fulfill each and every
obligation undertaken pursuant to this Agreement;
v) events, circumstances, or conditions relating to the
Project or the Manager which occur, are alleged to, or do, form the
basis for any claim under any applicable laws except to the extent
caused directly by Owner or any of the Indemnified Parties;
vi) any failure of the Manager to fulfill each and every
obligation undertaken pursuant to the Management Agreement; or
vii) anything occurring at or around, or in connection with,
the Project during the term of the Management Agreement except to the
extent caused directly by Owner or any of the Indemnified Parties.
It is specifically acknowledged and agreed that David B. Fenkell
is an Indemnified Party.
(b) Nothing in this Agreement shall be deemed to deprive an
Indemnified Party of any rights or remedies provided to such Indemnified Party
elsewhere in this Agreement or otherwise available to such Indemnified Party
under law. Guarantor waives and releases each Indemnified Party from any rights
or defenses Guarantor may have under common law or Environmental Laws for
liability arising from or resulting from the presence, Use or Release of
Hazardous Substances except to the extent directly caused by the gross
negligence, fraud or willful misconduct of such Indemnified Party.
3. Payment. All payments due to an Indemnified Party under
this Agreement shall be payable to such Indemnified Party within ten (10) days
after written demand therefor, and shall bear interest at ten percent (10%) per
annum from the date such payment is due until the date of payment.
4. Governing Law; Waiver of Jury Trial; Consent to Venue.
(a) The parties agree that the State of Ohio has a
substantial relationship to the parties and to the underlying transaction
embodied hereby, and in all respects, including, without limitation, matters of
construction, validity and performance, this Agreement and the obligations
arising hereunder shall be governed by, and construed in accordance with, the
laws of the State
4
<PAGE>
of Ohio applicable to contracts made and performed in such State and any
applicable law of the United States of America subject, however, as to
performance, to the Environmental Laws governing the Project. To the fullest
extent permitted by law, Guarantor hereby unconditionally and irrevocably waives
any claim to assert that the law of any other jurisdiction governs this
Agreement, and this Agreement shall be governed by and construed in accordance
with the laws of the State of Ohio subject, however, as to performance, to the
Environmental Laws governing the Project.
(b) THE GUARANTOR, AFTER CONSULTING OR HAVING HAD THE
OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY RELATED INSTRUMENT OR AGREEMENT, OR ANY OF
THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, OR ANY COURSE OF CONDUCT,
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE GUARANTOR. THE
GUARANTOR SHALL NOT SEEK TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY
ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A
JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED UNLESS THE FAILURE TO SO CONSOLIDATE
WOULD RESULT IN A MANDATORY LOSS OF SUCH CLAIM. IN THE EVENT OF A DISPUTE UNDER
THIS AGREEMENT, THE GUARANTOR HEREBY AGREES THAT EXCLUSIVE JURISDICTION AND
VENUE LIES IN A COURT OF COMPETENT JURISDICTION IN FRANKLIN COUNTY, OHIO.
5. Modification, Waiver in Writing. No modification,
amendment, extension, discharge, termination or waiver of any provision of this
Agreement or consent to any departure by Guarantor therefrom, shall in any event
be effective unless the same shall be in a writing signed by the party against
whom enforcement is sought, and then such waiver or consent shall be effective
only in the specific instance, and for the purpose, for which given. Except as
otherwise expressly provided herein, no notice to or demand on Guarantor shall
entitle Guarantor to any other or future notice or demand in the same, similar
or other circumstances.
6. Delay Not a Waiver. Neither any failure nor any delay
on the part of any Indemnified Party in insisting upon strict performance of any
term, condition, covenant or agreement or exercising any right, power, remedy or
privilege hereunder, shall operate as or constitute a waiver thereof, nor shall
a single or partial exercise thereof preclude any other future exercise, or the
exercise of any other right, power, remedy or privilege. In particular, and not
by way of limitation, by accepting payment after the due date of any amount
payable under this Agreement, an Indemnified Party shall not be deemed to have
waived any right either to require prompt payment when due of all other amounts
due under this Agreement, or to declare a default for failure to effect prompt
payment of any such other amount.
7. Notices. All notices, consents, approvals and requests
required or permitted hereunder shall be given in writing and shall be effective
for all purposes if hand delivered or sent by (a) hand delivery, with proof of
attempted delivery, (b) certified or registered
5
<PAGE>
United States mail, postage prepaid, (c) expedited prepaid delivery service,
either commercial or United States Postal Service, with proof of attempted
delivery, or (d) by telecopier (with answerback acknowledged) provided that such
telecopied notice must also be delivered by one of the means set forth in (a),
(b) or (c) above, addressed if to any Indemnified Party at the address of Owner
set forth on the first page hereof, and if to Guarantor at its designated
address set forth on the first page hereof, or at such other address and Person
as shall be designated from time to time by any party hereto, as the case may
be, in a written notice to the other parties hereto in the manner provided for
in this Section 7. A copy of all notices, consents, approvals and requests
directed to Owner shall be delivered concurrently to the following: Squire,
Sanders & Dempsey L.L.P., 41 South High Street, Suite 1300, Columbus, Ohio
43215, Attention: Paul F. Sefcovic, Esq., Facsimile Number (614) 365-2499. A
copy of all notices, consents, approvals and requests directed to Guarantor
shall be delivered concurrently to each of the following: Brookdale Living
Communities, Inc., 77 West Wacker Drive, Suite 4400, Chicago, Illinois 60601,
Attention: Darryl W. Copeland, Jr., Facsimile Number (312) 977-3699; Brookdale
Living Communities, Inc., 77 West Wacker Drive, Suite 4400, Chicago, Illinois
60601, Attention: Robert J. Rudnik, Esquire, Facsimile Number (312) 977-3769;
and Brookdale Living Communities, Inc., 77 West Wacker Drive, Suite 4400,
Chicago, Illinois 60601, Attention: Scott E. Jordan, Esquire, Facsimile Number
(312) 977-3769. A notice shall be deemed to have been given: (a) in the case of
hand delivery, at the time of delivery; (b) in the case of registered or
certified mail, when delivered or the first attempted delivery on a Business
Day; (c) in the case of expedited prepaid delivery upon the first attempted
delivery on a Business Day; or (d) in the case of telecopier, upon receipt of
answerback confirmation received prior to 5:00 p.m. local time on a Business Day
or if confirmation received thereafter on the next succeeding Business Day,
provided that such telecopied notice was also delivered as required in this
Section 7. A party receiving a notice which does not comply with the technical
requirements for notice under this Section 7 may elect to waive any deficiencies
and treat the notice as having been properly given.
8. Assignment. Guarantor shall not shall have the right to
assign this Agreement and the obligations hereunder to any Person without the
consent of David B. Fenkell. All references to "Indemnified Parties" hereunder
shall be deemed to include the heirs, successors and assigns of the Indemnified
Parties.
9. Severability. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
10. Heading and Recitals. The information set forth in the
heading and recitals hereof are hereby incorporated herein as a part of this
Agreement with the same effect as if set forth in the body hereof.
6
<PAGE>
11. Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed and delivered shall be an
original, but all of which shall together constitute one and the same
instrument.
12. Intentionally Omitted.
13. Survival. This Agreement shall survive in perpetuity.
Notwithstanding the foregoing, Guarantor shall not indemnify any Indemnified
Party with respect to any Losses incurred in connection with, or as a direct
result of, any or all of the matters described above in Section 2(a)(i) through
2(a)(iii) to the extent that Guarantor can establish directly and solely that
such Losses result from Hazardous Substances being placed on, above or under the
Property by the affirmative act or gross negligence of such Indemnified Party.
Guarantor agrees that this Agreement shall continue to be effective or shall be
reinstated as the case may be, if at any time any payment is made by Guarantor
to any Indemnified Party and such payment is rescinded or must otherwise be
returned by such Indemnified Party upon insolvency, bankruptcy, liquidation,
reorganization, readjustment, composition, dissolution, receivership,
conservatorship, winding up or other similar proceeding involving or affecting
Guarantor, all as though such payment had not been made.
14. Time of the Essence. Time is of the essence with
respect to each and every covenant, agreement and obligation of Guarantor under
this Agreement.
15. Termination. Notwithstanding anything to the contrary
contained herein, upon the sale of the Property by Owner or a sale of the equity
interest in Owner or Member to an unrelated third party purchaser, this
Agreement and the indemnity obligation provided hereunder shall terminate,
except to the extent any such obligations exist and remain unpaid or otherwise
unsatisfied; provided, however, that if subsequent to any such sale, Losses are
incurred as set forth in Section 2(a) and it is proven that such Losses occurred
as a result of actions or omissions of Manager or Guarantor, then the
indemnification provided herein shall continue to be effective or shall be
reinstated, as the case may be.
7
<PAGE>
IN WITNESS WHEREOF, the Guarantor has caused this Indemnity Agreement
to be duly executed by its duly authorized representative, all as of the day and
year first above written.
GUARANTOR:
BROOKDALE LIVING COMMUNITIES, INC.,
a Delaware corporation
By: /s/ Mark J. Schulte
--------------------------------
Name: Mark J. Schulte
Its: President
PROPERTY OPTION AGREEMENT
-------------------------
This Property Option Agreement (this "Agreement"), dated as of August
24, 1999, is made and entered into by and between AH Battery Park Owner, LLC, an
Ohio limited liability company (the "Grantor"), and Brookdale Living Communities
of New York-BPC, Inc., a Delaware corporation ("Brookdale").
RECITALS
--------
WHEREAS, the Grantor owns the leasehold interest in certain land
legally described on Schedule I attached hereto, together with all fixtures and
improvements thereon (such land, fixtures and improvements, together with any
additional fixtures and improvements constructed after the date hereof, shall
collectively be referred to as the "Land") subject in all cases to the terms and
provisions contained in that certain Ground Lease dated as of August 24, 1999
(the "Ground Lease") by and between Grantor, as lessee, and Battery Park City
Authority, as lessor ("Lessor");
WHEREAS, the Grantor has engaged Brookdale for the purpose of
developing a senior congregate and non-licensed assisted living facility in
Battery Park City, New York (the "Project") on the Land pursuant to that certain
Amended and Restated Development Agreement of even date herewith (as it may be
amended from time to time, the "Development Agreement") between the Grantor and
Brookdale;
WHEREAS, the Grantor has engaged Brookdale for the purpose of acting as
the manager of the Project pursuant to that certain Management Agreement of even
date herewith (as it may be amended from time to time, the "Management
Agreement") between the Grantor and Brookdale; and
WHEREAS, Key Corporate Capital, Inc., Fleet National Bank and European
American Bank (collectively, the "Senior Lender"), have agreed to make a loan
(the "Senior Loan") to the Grantor up to the sum of $49,125,000 to fund a
portion of the costs of the Project pursuant to (i) that certain Building Loan
Agreement of even date herewith (as it may be amended from time to time with the
consent of Brookdale, the "Senior Loan Agreement") between the Grantor and the
Senior Lender and (ii) the other "Loan Documents" (as such term is defined in
the Senior Loan Agreement; as the same may be amended from time to time with the
consent of Brookdale, collectively with Senior Loan Agreement, the "Senior Loan
Documents").
NOW, THEREFORE, in consideration of the mutual agreements contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantor and Brookdale hereby agree
as follows:
1
<PAGE>
1. The Option.
-----------
a. The Owner hereby grants an irrevocable option (the " Option") to
Brookdale (or its nominee) to purchase the Property (as
hereinafter defined) subject to the Permitted Exceptions (as
hereinafter defined) for the Purchase Price (as hereinafter
defined).
b. The Option shall terminate and expire on the date (the "Option
Termination Date") that is thirty (30) days after the stated
maturity date of the Senior Loan, as it may be extended.
2. The Property. For purposes of this Agreement, the term "Property" shall
mean any and all interests of the Owner in the following items: (a) the
Land and the Ground Lease, (b) all personal property and other tangible
property now or hereinafter located on the Land or used in connection
with the construction, development, operation or maintenance of the
Land, including, but not limited to, fixtures and equipment, and (c)
all other property now or hereafter used in connection with the
operation or maintenance of the Land, including, but not limited to,
contracts, leases, agreements, guaranties, plans and specifications,
licenses, books and records and all other items and instruments
pertaining to the Land and the Ground Lease.
3. Purchase Price. The purchase price (the "Purchase Price") for the
Property shall be the fair market value of the Property as agreed to by
the parties (or if the parties do not agree to such fair market value,
then as reflected in an appraisal of the Property, dated not more than
six (6) months before the Closing Date [as defined in Section 4
hereof], by a qualified MAI appraiser selected by Brookdale, less the
then outstanding principal amount of the Senior Loan if the Senior Loan
is being assumed by Brookdale (or its nominee).
4. Exercise of the Option. Brookdale may exercise the Option by giving the
Owner at least five (5) days' prior written notice (the "Option
Notice"). The Option Notice shall specify (a) the date (the "Closing
Date") of the exercise of the Option, which shall be not be later than
the Option Termination Date. If Brookdale exercises the Option prior to
the Option Termination Date but fails to close prior to the Option
Termination Date due to no fault of Grantor, then the Option shall
terminate and Brookdale's right shall cease and be null and void.
5. Closing. Upon receipt of the Option Notice, the parties will schedule a
closing (the "Closing") to occur on the Closing Date at the Chicago,
Illinois offices of counsel to Brookdale. If Brookdale (or its nominee)
exercises the Option, the Closing shall occur in accordance with the
provisions of Section 7 hereof.
6. Intentionally Omitted.
----------------------
2
<PAGE>
7. Closing of Purchase of Property.
--------------------------------
a. At the Closing of the purchase of the Property, the Purchase
Price shall be paid to the Owner by wire transfer of immediately
available funds to an account designated by the Owner.
b. At the Closing of the purchase of the Property, the Owner shall
deliver to Brookdale (or its nominee) the following items
(collectively, the "Property Conveyance Documents"):
i. Bill of Sale. A bill of sale (the "Bill of Sale")
conveying, transferring and otherwise assigning to
Brookdale (or its nominee) any and all of the Property,
other than the Land.
ii. Assignment of Leases and Agreements. An assignment of
leases and agreements (the "Assignment of Leases")
conveying, transferring and otherwise assigning to
Brookdale (or its nominee) any and all rights in any
leases, residency agreements or other agreements
affecting the Project or the Land, which Brookdale
previously approved.
iii. Special Warranty Deed. A Special Warranty Deed and/or
Assignment of Lease (the "Deed") conveying to Brookdale
(or its nominee) Owner's interest in and to the Ground
Lease, subject only to the encumbrances or other
exceptions (collectively, the "Permitted Exceptions")
(A) that existed on the Land on the date of the
conveyance of the Land to the Owner, (B) created by the
lien of the Hard Cost Mortgage, Assignment of Leases
and Rents and Security Agreement and the Soft Cost
Mortgage, Security Agreement and Assignment of Leases
and Rents of even date herewith (together, the
"Mortgages") made by the Owner in favor of the Senior
Lender and all other Senior Loan Documents unless the
Senior Loan is being repaid, (C) created by Brookdale
in connection with actions taken by it under the
Development Agreement or the Management Agreement, (D)
Permitted Encumbrances (as defined in the Senior Loan
Documents) that are consented to in writing by
Brookdale and (E) the Ground Lease.
iv. Other Documents. Such other documents or instruments
which are necessary to complete and perfect the
conveyance of Property to Brookdale or its nominee as
contemplated by this Agreement, including, without
limitation, any transfer declarations, 1099-S
Solicitations, owner's affidavits and
3
<PAGE>
undertakings required by the title company and similar
items required by local law or the title company.
c. The Owner and Brookdale shall each be solely responsible for its
own costs incurred in connection with the Closing; provided,
however, that Brookdale shall (i) pay all costs in connection
with the transfer of the Property, including transfer and
conveyance taxes, if any, and (ii) pay, or reimburse the Owner
for, all reasonable legal fees and expenses of the Owner
incurred in connection with such Closing in an amount not to
exceed $2,500 when aggregated with all other legal fees and
expenses paid or reimbursed by Brookdale pursuant to Section
4(a) of the Equity Option Agreement.
8. Intentionally Deleted.
----------------------
9. Owner Representations. The Owner represents and warrants to Brookdale
as follows as of the date hereof and as of the Closing Date:
a. The Owner is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of
Ohio and has all requisite power and authority to execute,
deliver and perform its obligations under this Agreement and the
Property Conveyance Documents and to own and operate its
property and to carry on its business as now conducted. The
Owner is duly qualified to do business in each jurisdiction
where the nature of its operations and applicable laws require
such qualification, except where the failure to be so qualified
would not have a material adverse effect on the Owner.
b. The execution, delivery and performance of this Agreement by the
Owner have been, and, if applicable, as of the Closing Date, the
execution, delivery and performance of the Property Conveyance
Documents by the Owner will have been, duly authorized by all
necessary partnership action, and this Agreement is, and when
executed and delivered, each of the Property Conveyance
Documents will be, the legal, valid and binding obligation of
the Owner, enforceable in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency or the laws
or equitable principles affecting the enforcement of creditors'
rights generally.
c. The execution, delivery and performance by the Owner of this
Agreement do not, and, if applicable, the execution, delivery
and performance by the Owner of the Property Conveyance
Documents will not, contravene the terms of the Partnership
Agreement, conflict with or result in any breach or
contravention of, or the creation of any lien under, any
agreements or instruments to which it is a party or by which it
or any of its property is bound or violate any state or federal
law and all required
4
<PAGE>
approvals therefor, if any, have been of, if applicable, will
have been as of the Closing Date, duly obtained.
d. The Owner is the owner of the Property, subject to the Permitted
Exceptions and has full power and authority to sell, convey,
assign and transfer to Brookdale the Property, free and clear of
all liens and encumbrances except the Permitted Exceptions.
e. There is no litigation or other proceeding pending against the
Owner which could have a material adverse effect on the Owner's
ability to consummate the transactions contemplated by this
Agreement and the Property Conveyance Documents.
10. Covenants. Until the earlier of the Closing or the Option Termination
Date, unless Brookdale otherwise consents in writing, the Owner shall
continue to own the Property, free of any liens, claims or
encumbrances, other than Permitted Exceptions.
11. Miscellaneous.
--------------
a. Equitable Relief. Grantor and Brookdale agree that money damages
or other remedy at law would not alone be sufficient or adequate
remedy for any breach or violation of, or a default under, this
Agreement by such Grantor and that, in addition to all other
remedies available to Brookdale, Brookdale shall be entitled to
an injunction restraining such breach, violation or default or
threatened breach, violation or default and to any other
equitable relief, including, without limitation, specific
performance, without bond or other security being required.
b. Notices. Any notices required or permitted to be sent hereunder
shall be delivered personally or by facsimile(with answer back
acknowledged) or mailed, certified mail, return receipt
requested, or delivered by overnight courier service to the
following addresses, or such other addresses as shall be given
by notice delivered hereunder, and shall be deemed to have been
given upon delivery, if delivered personally, upon receipt with
answer back acknowledged, if delivered by facsimile, three (3)
business days after mailing, if mailed, or one business day
after delivery to the courier, if delivery by overnight courier
service:
5
<PAGE>
If to Grantor: AH Battery Park Owner, LLC
c/o Alliance Holdings, Inc.
723 Electronic Drive
Suite 300
Horsham, Pennsylvania 19044
Attention: David B. Fenkell
Facsimile: (610) 902-0777
with a copy to: Squire, Sanders & Dempsey, L.L.P.
41 South High Street
Columbus, Ohio 43215
Attention: Paul F. Sefcovic
Facsimile: (614) 365-2499
If to Brookdale: Brookdale Living Communities of
New York-BPC, Inc.
c/o Brookdale Living Communities, Inc.
77 West Wacker Drive
Suite 4400
Chicago, Illinois 60601
Attention: Darryl W. Copeland, Jr.
Facsimile: (312) 977-3699
Attention: Robert J. Rudnik
Facsimile: (312) 977-3769
c. Entire Agreement. This Agreement (including the schedule hereto)
constitutes the entire agreement among the parties hereto with
respect to the subject matter hereof and supersedes all prior
agreements and understandings, oral and written, among the
parties hereto with respect to the subject matter hereof.
d. Binding Effect; Benefit. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their
respective successors and assigns. Brookdale may assign its
rights under this Agreement without the consent of Grantor. In
the event that Brookdale assigns its rights under this
Agreement, it shall so notify the other parties hereto, and
references herein to Brookdale shall be deemed to be references
to the assignee to whom such rights have been assigned upon the
execution and delivery by Brookdale and such assignee of an
assignment and assumption agreement with respect to this
Agreement and delivery of a copy thereof to each of the other
parties hereto.
e. Amendment; Waiver. No provision of this Agreement may be
amended, waived or otherwise modified without the prior written
consent of the parties hereto.
6
<PAGE>
f. Section Headings. The section headings contained in this
Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
g. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original
and all of which together shall be deemed to be one and the same
instrument.
h. Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois
(without giving effect to principles of conflicts of law).
i. Waiver of Jury Trial. Each party hereto (or joining in the
execution hereof), after consulting or having had the
opportunity to consult with counsel, knowingly, voluntarily and
intentionally waives any right any of them may have to a trial
by jury in any litigation based upon or arising out of this
Agreement, or any of the transactions contemplated by this
Agreement, or any course of conduct, dealing, statements
(whether oral or written) or actions of any of them. No such
party shall seek to consolidate, by counterclaim or otherwise,
any action in which a jury trial has been waived with any other
action in which a jury trial cannot be or has not been waived
unless failure to so consolidate would result in a loss of such
claim.
j. Mortgage. The parties hereto acknowledge and agree that (i) the
Option is subject and subordinate to the lien of the Mortgages
and the Ground Lease, and (ii) upon the entry of a final decree
of foreclosure with respect to the Property, or the conveyance
thereof pursuant to a power of sale, if applicable, or
conveyance deed in lieu of foreclosure, the Option shall be
extinguished notwithstanding that the Option Termination Date
may not yet have occurred.
k. Limitation of Personal Liability. Notwithstanding any other
provision of this Agreement to the contrary, (i) in no event
shall any officer, director, member, partner, manager,
shareholder, incorporator or agent of Grantor be personally
liable to Brookdale for any of such Grantor's obligations under
this Agreement, and (ii) if the Owner defaults in connection
with any representation or covenant of the Owner set forth in
this Agreement, it will not create any personal liability
against the Owner. Notwithstanding any other provision of this
Agreement to the contrary, (i) in no event shall any officer,
director, member, partner, manager, shareholder, incorporator or
agent of Brookdale be personally liable to Grantor for any of
Brookdale's obligations under this Agreement, and (ii) if
Brookdale defaults in
7
<PAGE>
connection with any representation or covenant of Brookdale set
forth in this Agreement, it will not create any personal
liability against the Brookdale.
l. Confidentiality. Grantor acknowledges that Brookdale may suffer
irreparable harm if the information provided to Grantor pursuant
to this Agreement or this Agreement was disclosed to any third
parties. Accordingly, Grantor shall keep this Agreement and all
such information confidential and shall not disclose any of such
information not already known to the public to any party except
Grantor's lenders, attorneys, accountants and other professional
advisors in connection with the transactions contemplated by
this Agreement or as otherwise required by law or court order.
Grantor shall endeavor to minimize the number of persons who
have copies of this Agreement and shall inform each of such
persons of the confidential nature thereof. The provisions of
this Section shall not prohibit an affiliate of Grantor from
participating in other similar transactions with parties other
than Brookdale or its affiliates.
[Signature Page to Follow]
8
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed and delivered this
Agreement as of the date first above written.
GRANTOR:
AH Battery Park Owner, LLC
By: AH Battery Park Member, LLC,
its sole member and manager
By: Alliance Holdings, Inc.,
its sole member and manager
By: /s/ David B. Fenkell
----------------------------
Name: David B. Fenkell
Its: President
BROOKDALE:
BROOKDALE LIVING COMMUNITIES
OF NEW YORK-BPC, INC.
By: /s/ Mark J. Schulte
--------------------------
Name: Mark J. Schulte
Its: President
<PAGE>
STATE OF PENNSYLVANIA )
) SS.
COUNTY OF MONTGOMERY )
The foregoing instrument was acknowledged before me this 18th day of
August, 1999, by David B. Fenkell, the President of Alliance Holdings, Inc., as
member and manager of AH Battery Park Member, LLC, which is the sole member of
AH Battery Park Owner, LLC.
NOTARY SEAL
/s/ Jospeh Hiltwine
--------------------------
NOTARY PUBLIC
Montgomery County, Pennsylvania
<PAGE>
STATE OF ILLINOIS )
)SS.
COUNTY OF COOK )
The foregoing instrument was acknowledged before me this 16th day of
August, 1999, by Mark J. Schulte, the President of Brookdale Living Communities
of New York-BPC, Inc., on behalf of said corporation.
NOTARY SEAL
/s/ Donna Jean Elrod
--------------------------
NOTARY PUBLIC
Cook County, Illinois
<PAGE>
SCHEDULE I
----------
LEGAL DESCRIPTION
-----------------
All that certain plot, piece or parcel of land, situate, lying and being in the
Borough of Manhattan, County of New York, City of New York and State of New
York, bounded and described as follows:
BEGINNING at the intersection of the southerly line of Chambers Street and the
westerly line of North End Avenue;
THENCE southerly along the westerly line of North End Avenue, a distance of
196.00 feet to a point on the northerly line of Warren Street;
THENCE westerly along said northerly line of Warren Street, a distance of 100.00
feet to the division line between Parcel 20C on the west and Parcel 20B on the
east;
THENCE northerly along said division line at right angles to the preceding
course, a distance of 196.00 feet to the southerly line of Chambers Street;
THENCE easterly along said southerly line of Chambers Street, a distance of
100.00 feet to the point of the BEGINNING.
EQUITY OPTION AGREEMENT
-----------------------
This Equity Option Agreement (this "Agreement"), dated as of August 24,
1999, is made and entered into by and among AH Battery Park Member, LLC, an Ohio
limited liability company (the "Member"), AH Battery Park Owner, LLC, an Ohio
limited liability company (the "Owner", and together with the Member shall be
individually referred to as an "Owner Related Entity" and shall be collectively
referred to as the "Owner Related Entities"), and Brookdale Living Communities
of New York-BPC, Inc., a Delaware corporation ("Brookdale").
RECITALS
--------
WHEREAS, the Member was formed on or about September of 1998 by the
filing and recording of the Member's Articles of Organization in the Office of
the Secretary of State of the State of Ohio, pursuant to an Operating Agreement
dated as of September 16, 1998 and amended and restated pursuant to an Amended
and Restated Operating Agreement dated as of June 19, 1999 (as so amended and
restated, and as it may be further amended from time to time with the consent of
Brookdale, the "Member Operating Agreement");
WHEREAS, the Member is the sole member and manager of, and owns one
hundred percent (100%) of the membership interests (the "Membership Interests")
in, the Owner;
WHEREAS, the Owner was formed on or about September of 1998 by the
filing and recording of the Owner's Articles of Organization in the Office of
the Secretary of State of the State of Ohio, pursuant to an Operating Agreement
dated as of September 16, 1998 and amended and restated pursuant to an Amended
and Restated Operating Agreement dated as of June 19, 1999 (as so amended and
restated, and as it may be further amended from time to time with the consent of
Brookdale, the "Owner Operating Agreement");
WHEREAS, the Owner intends to develop a senior congregate and
non-licensed assisted living facility in Battery Park City, New York, (the
"Project");
WHEREAS, Key Corporate Capital, Inc., Fleet National Bank and European
American Bank (collectively, the "Senior Lender"), have agreed to make a loan
(the "Senior Loan") to the Owner up to the sum of $49,125,000to fund a portion
of the costs of the Project pursuant to (i) that certain Building Loan Agreement
of even date herewith (as it may be amended from time to time with the consent
of Brookdale, the "Senior Loan Agreement") between the Owner and the Senior
Lender and (ii) the other "Loan Documents" (as such term is defined in the
Senior Loan Agreement; as the same may be amended from time to time with the
consent of Brookdale, collectively with Senior Loan Agreement, the "Senior Loan
Documents");
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<PAGE>
WHEREAS, Banc One Capital Partners IV, Ltd., an Ohio limited liability
company (the "Subordinate Lender"), has agreed to loan (the "Subordinate Loan")
to the Member an amount up to the sum of $13,674,590.00, which the Member has or
will contribute as equity to the Owner to fund a portion of the costs of the
Project, pursuant to (i) that certain Promissory Note of even date herewith (as
it may be amended from time to time with the consent of Brookdale, the
"Subordinate Note") from to the Member to the Subordinate Lender; (ii) the other
loan documents related to and/or securing the Subordinate Note; as the same may
be amended from time to time with the consent of Brookdale, collectively with
the Subordinate Note, the "Subordinate Loan Documents")(the Senior Loan
Documents and the Subordinate Loan Documents shall be collectively referred to
as the "Loan Documents");
WHEREAS Brookdale is the developer of the Project pursuant to that
certain Amended and Restated Development Agreement dated as of August 24, 1999
(as it may be amended from time to time, the "Development Agreement") between
the Owner and Brookdale and, upon substantial completion of the Project, will be
the manager of the Project pursuant to a Management Agreement of even date
herewith (as it may be amended from time to time, the "Management Agreement")
between the Owner and Brookdale; and
WHEREAS, the Member is willing to grant an option to Brookdale to
purchase the Membership Interests upon the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the mutual agreements contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Owner Related Entities and
Brookdale hereby agree as follows:
1. The Option. The Member hereby grants an irrevocable option (the
"Option") to Brookdale (or its nominee) to purchase the Membership
Interests at the Purchase Price (as defined in Section 2 hereof) in
accordance with the terms of this Agreement. The Option shall terminate
and expire on the date (the "Option Termination Date") that is thirty
(30) days after the stated maturity date of the Senior Loan, as it may
be extended.
2. Purchase Price. The purchase price (the "Purchase Price") for the
Membership Interests shall be an amount equal to the outstanding
balance under the Subordinate Loan, minus the aggregate amount of any
distributions made by the Owner to the Member.
3. Exercise of the Option. Brookdale may exercise the Option by giving the
Member, the Subordinate Lender, and the Escrow Agent (as defined in
Section 12 hereof) at least five (5) days' prior written notice (the
"Option Notice") at any time prior to the Option Termination Date. The
Option Notice shall specify the date (the "Closing Date") of the
exercise of the Option, which shall also be the date of the repayment
in full by Member of the Subordinate Loan, and in any case shall not be
later than the Option Termination Date. If Brookdale exercises the
Option prior to the Option Termination Date but fails to close prior to
the Option Termination Date due to no fault of any Owner Related
Entities, then the Option shall terminate and Brookdale's rights shall
cease and be null and void. The Member hereby appoints Brookdale as its
true and lawful attorney-in-fact for purposes of giving notice of
optional prepayment of the Subordinate Note, which appointment as
attorney-in-fact is irrevocable and is coupled with an interest.
2
<PAGE>
4. Closing.
--------
a. Upon receipt of the Option Notice, the Member and Brookdale
shall schedule a closing (the "Closing") to occur on the Closing
Date at the Chicago, Illinois offices of counsel to Brookdale.
The Member and Brookdale shall each be solely responsible for
its own costs incurred in connection with the Closing; provided,
however, that Brookdale shall pay, or reimburse the Member for,
all reasonable legal fees and expenses of the Member incurred in
connection with the Closing in an amount not to exceed $2,500
when aggregated with all other legal fees and expenses paid or
reimbursed by Brookdale pursuant to Section 7(c) of the Property
Option Agreement of even date herewith (as it may be amended
from time to time, the "Property Option Agreement") among the
Member, the Owner and Brookdale.
b. Contemporaneously with the execution and delivery of this
Agreement, the Member is delivering to the Escrow Agent an
Assignment and Acceptance Agreement in the form of Exhibit A
attached hereto (the "Assignment" and together with any other
documents and instruments delivered pursuant to Section 4(c)
below, the "Assignment Documents"), undated, but otherwise duly
executed by the Member.
c. At the Closing, the Escrow Agent shall, in accordance with the
escrow instructions set forth in Section 12 hereof, deliver the
Purchase Price to, or as directed by, the Member, and the
Assignment to Brookdale (or its nominee), and the Member shall
deliver to Brookdale (or its nominee) the following items:
i. original executed copies (or if unavailable, certified
copies) of the Member's and Owner's Articles of
Organization, the Member Operating Agreement, the Owner
Operating Agreement, all certified by an appropriate
officer of the relevant Owner Related Entity as of the
Closing Date, as being true, correct, complete and
unamended or if amended with the consent of Brookdale,
certified to such effect) and in full force and effect
as of such date;
ii. a certificate of an appropriate officer of each Owner
Related Entity, dated the Closing Date, certifying that
the representations and warranties of such Owner
Related Entity set forth in the applicable Section of
this Agreement are true, correct and complete as of the
Closing Date as though made by such Owner Related
Entity on the Closing Date;
iii. the books and records of each Owner Related Entity;
iv. such other documents and instruments of transfer as are
necessary to complete the transfer of the Membership
Interests; and
v. evidence that the Subordinate Loan will be repaid with
the Purchase Price.
3
<PAGE>
d. The representations and warranties made by the Owner Related
Entities as of the Closing Date shall survive the Closing.
e. Prior to the Closing, Brookdale may conduct Uniform Commercial
Code, tax lien, pending suit and judgment and any other
appropriate searches (collectively, the "Searches") against each
of the Owner Related Entities and the Project to confirm that no
liens and/or security interests have been created by any Owner
Related Entities (or their creditors) except those in favor of
Senior Lender or Subordinate Lender or those consented to by, or
requested or permitted by, Brookdale or its affiliates (an
"Unpermitted Exception"). If said Searches reveal any such
Unpermitted Exception, then the Owner Related Entities shall
cause such Unpermitted Exception to be released of record at its
sole cost and expense.
5. Grant of Security Interest.
---------------------------
a. To secure the performance by the Owner Related Entities of their
respective obligations hereunder and the repayment of any and
all indebtedness and other liabilities arising from any breach
by any of the Owner Related Entities of its obligations
hereunder the Property Option Agreement, the Management
Agreement or the Development Agreement (collectively, the
"Brookdale Documents") the Member hereby grants to Brookdale a
continuing security interest in the Membership Interests and all
proceeds thereof, including, without limitation, the right to
receive any and all payments or distributions of any and every
kind whatsoever, whether in cash, property or otherwise, at any
time made, owing or payable with respect to the Membership
Interests, together with all applicable rights, powers and
privileges of the Member as the sole member and manager of the
Owner pursuant to the Owner Operating Agreement (all of the
foregoing being hereinafter collectively referred to as the
"Collateral".
b. The Member does hereby irrevocably constitute and appoint
Brookdale its true and lawful attorney-in-fact, with full power
of substitution, for the Member and in its name, place and
stead, to ask, demand, collect, receive, receipt for, sue for,
compound and give acquittance for any and all sums or properties
which may be or become due, payable or distributable with
respect to the Collateral, with full power to settle, adjust or
compromise any claim thereunder as fully as the Member could do,
and to endorse or sign the name of the Member on all items,
instruments and commercial paper given in payment or in part
payment thereof, and all documents of satisfaction, discharge or
receipt required or requested in connection therewith, and, in
its discretion, to file any claim or take any other action or
proceeding, either in its own name or in the name of the Member,
or otherwise, which Brookdale may deem necessary or appropriate
to perfect Brookdale's security interest in or collect or
otherwise realize upon any and all of the Collateral, or effect
a transfer thereof pursuant to the Member Operating Agreement,
the Owner Operating Agreement or this Agreement, or which may be
necessary or appropriate to protect and preserve the right,
title and interest of Brookdale in and to the Collateral and the
security intended to be afforded hereby.
4
<PAGE>
c. Without limiting the foregoing, the Member agrees that it will,
upon request of Brookdale, execute and deliver such further
documents and instruments (including, without limitation,
Uniform Commercial Code Financing Statements) and do and perform
such other acts and things (including, without limitation,
obtaining such consents hereto, and giving such notices hereof,
as Brookdale may reasonably request from time to time) as
Brookdale may deem necessary or appropriate to more effectively
vest in and secure to Brookdale the Collateral or other rights
or interests due or hereafter to become due.
d. Upon the occurrence and continuance of default of any of the
Owner Related Entities under any of the Brookdale Documents, in
addition to the rights and remedies Brookdale may have
hereunder, it shall have all the rights and remedies of a
secured party under applicable law with respect to the
Collateral. All costs and expenses of any kind whatsoever, of
collection and enforcement of the obligations secured hereby or
any rights or remedies hereunder (including without limitation,
all costs of disposing of the Collateral, together with court
costs and reasonable attorneys' fees), or incurred in realizing
upon the Collateral or in enforcing this Agreement, shall be
deemed to be additional obligations secured hereby, and may be
deducted and retained by Brookdale from the proceeds of
disposition of the Collateral and applied to the payment and
satisfaction of such costs and expenses.
e. The security interest of Brookdale in the Collateral shall
terminate upon the earlier of the Closing or the Option
Termination Date, and upon such termination, Brookdale shall
promptly deliver to the Member the appropriate Uniform
Commercial Code termination statements.
6. Member Representations. The Member represents and warrants to Brookdale
as follows as of the date hereof and as of the Closing Date:
a. The Member is a limited liability company duly organized,
validly existing and in good standing under the laws of the
State of Ohio and has all requisite power and authority to
execute, deliver and perform its obligations under this
Agreement and the Assignment Documents and to own and operate
its property and to carry on its business as now conducted. The
Member is duly qualified to do business in each jurisdiction
where the nature of its operations and applicable laws require
such qualification, except where the failure to be so qualified
would not have a material adverse effect on the Member.
b. The execution, delivery and performance of this Agreement and
the Assignment Documents by the Member have been duly authorized
by all necessary organizational action, and this Agreement is
the legal, valid and binding obligation of the Member,
enforceable in accordance with its terms, except as enforcement
may be limited by bankruptcy, insolvency or the laws or
equitable principles affecting the enforcement of creditors'
rights generally.
5
<PAGE>
c. The execution, delivery and performance by the Member of this
Agreement and the Assignment Documents do not contravene the
terms of the Member's Articles of Organization or the Member
Operating Agreement, true, correct and complete copies of which
have been delivered to Brookdale, conflict with or result in any
breach or contravention of, or the creation of any lien under,
any agreements or instruments to which it is a party or by which
it or any of its property is bound or violate any state or
federal law and all required approvals therefor, if any, have
been duly obtained.
d. The Membership Interests constitute all of the membership
interests in the Owner, and the Member owns the Membership
Interests, free of any liens, claims or encumbrances, other than
the security interest created pursuant to this Agreement and the
interest of Brookdale created pursuant to the Member Operating
Agreement.
e. There is no litigation or other proceeding pending against the
Member which could have a material adverse effect on the
Member's ability to consummate the transactions contemplated by
this Agreement and the Assignment Documents.
f. The Member is the sole member and manager of the Owner other
than Brookdale's special management rights created pursuant to
the Member Operating Agreement. . The Member's sole place of
business is located at its address set forth in the notice
section of this Agreement.
g. The Membership Interests are not represented by any certificates
and/or similar instruments, and the Membership Operating
Agreement contains a description of the rights of Brookdale
pursuant to this Agreement.
h. There is no litigation or other proceeding pending against the
Member which could have a material adverse effect on the
Member's ability to consummate the transactions contemplated by
the Property Option Agreement and as of the Closing Date, if
applicable, the Assignment (as defined therein).
i. All of the representations and warranties of the Member set
forth in the Subordinate Loan Documents are true and correct as
though such representations and warranties were set forth herein
for Brookdale's benefit.
j. All of the representations and warranties of the Member set
forth in the Property Option Agreement are true and correct.
k. The Member has no outstanding liabilities, contingent or
otherwise, other than, as of the date hereof, (i) the
indebtedness evidenced by the Subordinated Notes and (ii)
liabilities for which Brookdale or the Subordinate Lender (or
any one or more of their affiliates) is liable to the Member.
7. Owner Representations. The Owner represents and warrants to Brookdale
as follows as of the date hereof and as of the Closing Date:
6
<PAGE>
a. The Owner is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of
Ohio and has all requisite power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and
to own and operate its property and to carry on its business as
now conducted. The Owner is duly qualified to do business in
each jurisdiction where the nature of its operations and
applicable laws require such qualification, except where the
failure to be so qualified would not have a material adverse
effect on the Owner.
b. The execution and delivery of this Agreement and the performance
by the Owner of its obligations hereunder have been duly
authorized by all necessary organizational action, and this
Agreement is the legal, valid and binding obligation of the
Owner, enforceable in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency or the laws
or equitable principles affecting the enforcement of creditors'
rights generally.
c. The execution and delivery of this Agreement and the performance
by the Owner of its obligations hereunder do not contravene the
terms of the Ownership Operating Agreement, a true, correct and
complete copy of which has been delivered to Brookdale, conflict
with or result in any breach or contravention of, or the
creation of any lien under, any agreements or instruments to
which it is a party or by which it or any of its property is
bound or violate any state or federal law and all required
approvals therefor, if any, have been duly obtained
d. There is no litigation or other proceeding pending against the
Owner which could have a material adverse effect on the Owner's
ability to consummate the transactions contemplated by the
Property Option Agreement and as of the Closing Date, if
applicable, the Property Conveyance Documents (as defined in the
Property Option Agreement).
e. All of the representations and warranties made on behalf of the
Owner relating to Owner (as opposed to the Project) set forth in
the Senior Loan Documents are true and correct as though such
representations and warranties were set forth herein for
Brookdale's benefit.
f. All of the representations and warranties of the Owner set forth
in the Property Option Agreement are true and correct.
g. The Owner has no outstanding liabilities, contingent or
otherwise, other than those incurred under or permitted by the
Senior Loan Documents, the Management Agreement and the
Development Agreement.
8. Member Covenants. Until the earlier of the Closing or the Option
Termination Date, unless Brookdale otherwise consents in writing, the
Member:
7
<PAGE>
a. Shall preserve and maintain its legal existence, rights,
franchises and privileges in the State of Ohio, and shall
qualify and remain qualified in each jurisdiction in which such
qualification is necessary or desirable in view of its business
and operations or the ownership of its property.
b. Shall at all times observe and comply with the provisions of its
Articles of Organization as in effect on the date hereof.
c. Shall not amend the Member's Articles of Organization or the
Member Operating Agreement and shall at all times observe and
comply with the provisions thereof.
d. Shall not cause or permit the dissolution of the Member or the
Owner.
e. Shall not permit the issuance of any member's interests (or any
other interests) in the Owner in addition to the Membership
Interests.
f. Shall continue to own the Membership Interests (which shall
continue to constitute 100% of the membership interests in the
Owner), free of any liens, claims or encumbrances, other than
the security interest created by this Agreement and the interest
of Brookdale created pursuant to the Member Operating Agreement.
g. Shall not file a voluntary petition in bankruptcy and shall use
its best efforts to contest any involuntary petition filed
against it.
h. Shall not permit or accept any distributions by the Owner or
Member.
i. Shall give Brookdale at least thirty (30) days' prior written
notice of any change in its place of business.
j. Shall not take any actions that might adversely affect
Brookdale's rights under, or be inconsistent with the terms of,
this Agreement.
9. Owner Covenants. Until the earlier of the Closing or the Option
Termination Date, unless Brookdale otherwise consents in writing, the
Owner:
a. Shall not amend the Articles of Organization or amend or consent
to the amendment of the Owner Operating Agreement, and shall at
all times observe and comply with the provisions thereof.
b. Shall not amend, or request any waiver of any provision of, the
Senior Loan Agreement and/or Senior Loan Documents.
c. Shall not permit any distributions by the Owner to Member.
8
<PAGE>
d. Shall give Brookdale at least thirty (30) days' prior written
notice of any change in its place of business.
e. Shall comply with all of the covenants applicable to it set
forth in the Senior Loan Documents (except for those
responsibilities delegated to Brookdale pursuant to the
Development Agreement or the Management Agreement) and shall
promptly deliver to Brookdale copies of all financial
statements, reports, notices, certificates or other writings
delivered to, or received from, the Senior Lender pursuant
thereto.
f. Shall not incur any liabilities or obligations, contingent or
otherwise, except expenses incurred in the ordinary course of
administering its business or those that are incurred under or
are necessary to comply or are permitted by with the provisions
of the Senior Loan Documents, and shall not enter into any
agreement or contract, whether oral or written, except this
Agreement, the Property Option Agreement, the Intercreditor
Agreement, the Senior Loan Documents to which it is a party, the
Development Agreement and the Management Agreement, and
agreements entered into in the ordinary course of administering
its business, which are terminable without penalty with no more
than thirty (30) days prior written notice.
g. Shall continue to own the Property (as defined in the Property
Option Agreement), free of any liens, claims, or encumbrances,
other than Permitted Exceptions (as defined in the Property
Option Agreement).
h. Shall not take any actions that might adversely affect
Brookdale's rights under, or be inconsistent with the terms of,
this Agreement other than as may be required by the Senior Loan
Documents.
10. Defaults. A "Default" shall mean the occurrence of one or more of the
following described events:
a. A material breach by any Owner Related Entity of any of the
representations and warranties contained herein.
b. Any Owner Related Entity defaults in the performance or
observation of any covenant of such Owner Related Entity
contained in this Agreement and such default shall continue
without cure for fifteen (15) days after notice thereof by
Brookdale to such Owner Related Entity and the Subordinate
Lender.
c. An "Event of Default" (as defined in the Subordinate Note)
occurs, which "Event of Default" has not been caused, directly
or indirectly, by Brookdale.
d. An "Event of Default" (as defined in the Senior Loan Documents)
occurs, which "Event of Default" has not been caused, directly
or indirectly, by Brookdale.
9
<PAGE>
e. An "Event of Default" (as defined in the Development Agreement)
by the Owner occurs.
f. An "Event of Default" (as defined in the Management Agreement)
by the Owner occurs.
g. Any Owner Related Entity makes an assignment for the benefit of
creditors.
h. Any Owner Related Entity petitions or applies to any tribunal
for the appointment of a trustee or receiver for itself or any
substantial part of its assets or the Member and/or Owner
commences any proceeding relating to it under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation law of any jurisdiction whether now
or hereafter in effect.
i. Any petitions or applications are filed, or any proceedings are
commenced, against any Owner Related Entity seeking the
adjudication of it as bankrupt and such Owner Related Entity by
any act indicates its admission or consent thereto, or
acquiescence therein, or any order is entered appointing a
trustee or receiver, or adjudicating such Owner Related Entity
bankrupt or insolvent, or approving the petition in any such
proceedings and such order remains unstayed or undischarged for
more than sixty (60) days.
j. Any order is entered in any proceeding against any Owner Related
Entity decreeing the dissolution of such Owner Related Entity
and such order remains unstayed or undischarged for more than
sixty (60) days.
k. Any judgment or order is entered in any proceedings which
affects the Membership Interests, or any lien, claim or other
encumbrance encumbers any thereof, other than, in the case of
the Membership Interests, the interest of Brookdale created
pursuant to the Operating Agreement.
11. Notice of Certain Events. Owner and each other Owner Related Entity
agrees to promptly give notice to Brookdale of:
a. Any Default known to Owner or such other Owner Related Entity;
b. Any notice of any default or "Event of Default" or any other
notice received from the Senior Lender under the Senior Loan
Documents (unless a copy of such notice is required to be
delivered to Brookdale pursuant thereto);
c. Any notice of any default or "Event of Default" or any other
notice received from the Subordinate Lender under the
Subordinate Loan Documents (unless a copy of such notice is
required to be delivered to Brookdale pursuant thereto); and
d. Any notice given by Owner or any other Owner Related Entity to
the Senior Lender or the Subordinate Lender.
10
<PAGE>
Each notice pursuant to this Section shall be accompanied by a
statement of the chief executive officer of the relevant Owner
Related Entity setting forth the details of the occurrence
referred to therein and, if applicable, stating what action such
Owner Related Entity proposes to take with respect thereto.
12. Appointment of Escrow Agent and Establishment of Escrow.
a. Brookdale and the Member agree to appoint Squire, Sanders &
Dempsey, LLP as Escrow Agent (in such capacity, together with
any successor thereto, the "Escrow Agent") pursuant to the terms
of the Escrow Agent Appointment Agreement attached hereto as
Exhibit B (the "Escrow Agent Appointment Agreement").
b. Brookdale and the Member hereby establish an escrow to hold the
Assignment and to facilitate the Closing.
c. The Escrow Agent agrees to act in accordance with the Escrow
Agent Appointment Agreement and this Section.
d. On the Closing Date, Brookdale (or its nominee) shall deliver to
the Escrow Agent, (i) the Purchase Price by wire transfer of
immediately available funds to an account designated by the
Escrow Agent, (ii) a certificate (the "Purchase Price
Certificate") of a Treasurer or an Assistant Treasurer of
Brookdale, dated as of the Closing Date or a date within the
preceding five (5) days, stating that (A) the Option Termination
Date has not occurred, (B) in the event that Brookdale desires
the Assignment to be delivered to a nominee, the name of such
nominee, (C) the Purchase Price has been accurately calculated
and showing such calculation, and (E) a payoff letter from the
Subordinate Lender confirming that, upon receipt the amount
referenced therein, the Subordinate Loan will have been paid in
full in accordance with the Subordinate Loan Documents.
e. On the Closing Date, upon receipt of the Purchase Price and the
Purchase Price Certificate, the Escrow Agent shall take the
following actions:
i. Date the Assignment the Closing Date, insert the name
of the "Assignee" in the preamble thereto and deliver
the Assignment to Brookdale (or its nominee); and
ii. Deliver the Purchase Price to the Member by wire
transfer of immediately available funds to an account
designated by the Member.
f. In the event that Brookdale assigns its rights under this
Agreement pursuant to Section 13(d) hereof, it shall so notify
the Escrow Agent.
11
<PAGE>
13. Miscellaneous.
--------------
a. Equitable Relief. Each Owner Related Entity and Brookdale agree
that money damages or other remedy at law would not alone be
sufficient or adequate remedy for any breach or violation of, or
a default under, this Agreement by such Owner Related Entity and
that, in addition to all other remedies available to Brookdale,
Brookdale shall be entitled to an injunction restraining such
breach, violation or default or threatened breach, violation or
default and to any other equitable relief, including, without
limitation, specific performance, without bond or other security
being required.
b. Notices. Any notices required or permitted to be sent hereunder
shall be delivered personally or by facsimile (with answer back
acknowledged) or mailed, certified mail, return receipt
requested, or delivered by overnight courier service to the
following addresses, or such other addresses as shall be given
by notice delivered hereunder, and shall be deemed to have been
given upon delivery, if delivered personally, upon receipt with
answer back acknowledged, if delivered by facsimile, three (3)
business days after mailing, if mailed, or one business day
after delivery to the courier, if delivery by overnight courier
service:
If to any Owner
Related Entities: AH Battery Park Member, LLC
c/o Alliance Holdings, Inc.
723 Electronic Drive
Suite 300
Horsham, Pennsylvania 19044
Attention: David B. Fenkell
Facsimile: (610) 902-0777
with a copy to: Squire, Sanders & Dempsey, L.L.P.
41 South High Street
Columbus, Ohio 43215
Attention: David Cooper, Jr.
Facsimile: (614) 365-2499
If to Brookdale: Brookdale Living Communities of
New York-BPC, Inc.
c/o Brookdale Living Communities, Inc.
77 West Wacker Drive
Suite 4400
Chicago, Illinois 60601
Attention: Darryl W. Copeland, Jr.
Facsimile: (312) 977-3699
Attention: Robert Rudnik and
Scott Jordan
Facsimile: (312) 977-3769
12
<PAGE>
A copy of any notice sent hereunder shall be sent to the Escrow
Agent at Squire, Sanders & Dempsey L.L.P., 41 South High Street,
Columbus, Ohio 43215, Attention: David Cooper, Jr., Facsimile:
(614) 365-2499 (or such other address as shall be given by
notice delivered hereunder).
c. Entire Agreement. This Agreement (including the schedule and
exhibits hereto) constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings, oral and
written, among the parties hereto with respect to the subject
matter hereof.
d. Binding Effect; Benefit. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their
respective successors and assigns. Brookdale may assign its
rights under this Agreement without the consent of any Owner
Related Entities. In the event that Brookdale assigns its rights
under this Agreement, it shall so notify the other parties
hereto, and references herein, including, without limitation, in
Section 12 hereof, and in the Escrow Agent Appointment
Agreement, to Brookdale shall be deemed to be references to the
assignee to whom such rights have been assigned upon the
execution and delivery by Brookdale and such assignee of an
assignment and assumption agreement with respect to the Escrow
Appointment Agreement and this Agreement and delivery of a copy
thereof to each of the other parties hereto and the Escrow
Agent.
e. No Third Party Beneficiaries. This Agreement is not intended to
and does not benefit or confer rights upon, and is not intended
to be and is not enforceable by, any persons or entities not
party to this Agreement, including, without limitation, the
Senior Lender and the Subordinate Lender.
f. Amendment; Waiver. No provision of this Agreement may be
amended, waived or otherwise modified without the prior written
consent of the parties hereto, and, in the case of any amendment
to, or waiver or modification of, the provisions of Section 12
hereof, the acknowledgment and agreement of the Escrow Agent.
g. Section Headings. The section headings contained in this
Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
h. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original
and all of which together shall be deemed to be one and the same
instrument.
i. Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois
(without giving effect to principles of conflicts of law).
13
<PAGE>
j. Waiver of Jury Trial. Each party hereto, after consulting or
having had the opportunity to consult with counsel, knowingly,
voluntarily and intentionally waives any right any of them may
have to a trial by jury in any litigation based upon or arising
out of this Agreement, or any of the transactions contemplated
by this Agreement, or any course of conduct, dealing, statements
(whether oral or written) or actions of any of them. No such
party shall seek to consolidate, by counterclaim or otherwise,
any action in which a jury trial has been waived with any other
action in which a jury trial cannot be or has not been waived
unless failure to so consolidate would result in a loss of such
claim.
k. Limitation of Personal Liability. Notwithstanding any other
provision of this Agreement to the contrary, (i) in no event
shall any officer, director, member, partner, manager,
shareholder, incorporator or agent of any Owner Related Entity
be personally liable to Brookdale for any of such Owner Related
Entity's obligations under this Agreement, and (ii) if the Owner
defaults in connection with any representation or covenant of
the Owner set forth in this Agreement, it will not create any
personal liability against the Owner or any lien rights against
the Property. Notwithstanding any other provision of this
Agreement to the contrary, in no event shall any officer,
director, member, partner, manager, shareholder, incorporator or
agent of Brookdale be personally liable to any Owner Related
Entity for any of Brookdale's obligations under this Agreement.
l. Confidentiality. Owner Related Entities acknowledge that
Brookdale may suffer irreparable harm if the information
provided to any of the Owner Related Entities pursuant to this
Agreement or this Agreement was disclosed to any third parties.
Accordingly, Owner Related Entities shall keep this Agreement
and all such information confidential and shall not disclose any
of such information not already known to the public to any party
except Owner Related Entities' lenders, attorneys, accountants
and other professional advisors in connection with the
transactions contemplated by this Agreement or as otherwise
required by law or court order. Owner Related Entities shall
endeavor to minimize the number of persons who have copies of
this Agreement and shall inform each of such persons of the
confidential nature thereof. The provisions of this Section
13(l) shall not prohibit any affiliate of any of the Owner
Related Entities from participating in other similar
transactions with parties other than Brookdale, Developer or
their affiliates.
[Signature page to follow]
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<PAGE>
IN WITNESS WHEREOF, the undersigned have executed and delivered this
Agreement as of the date first above written.
MEMBER:
AH Battery Park Member, LLC
By: Alliance Holdings, Inc.,
its sole member and manager
By: /s/ David B. Fenkell
------------------------------
Name: David B. Fenkell
Its: President
OWNER:
AH Battery Park Owner, LLC
By: AH Battery Park Member, LLC,
its sole member and manager
By: Alliance Holdings, Inc.,
its sole member and manager
By: /s/ David B. Fenkell
--------------------------
Name: David B. Fenkell
Its: President
BROOKDALE:
BROOKDALE LIVING COMMUNITIES
OF NEW YORK-BPC, INC.
By: /s/ Mark J. Schulte
-----------------------
Name: Mark J. Schulte
Its: President
<PAGE>
JOINDER
-------
The undersigned hereby joins in the execution and delivery of the
foregoing Agreement for the sole purpose of acknowledging and agreeing to the
provisions of Section 12 thereof.
SQUIRE, SANDERS & DEMPSEY, L.L.P.
By:
--------------------------------
Name:
---------------------------
<PAGE>
EXHIBIT A
ASSIGNMENT AND ACCEPTANCE AGREEMENT
THIS AGREEMENT made as of ___________________, by and between AH
BATTERY PARK MEMBER, LLC, an Ohio limited liability company ("Assignor"), and
_______________________________________ ("Assignee").
WITNESSETH:
1. For good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Assignor does hereby transfer, assign and
convey to Assignee a one hundred percent (100%) interest (the "Interest") as
Member in AH Battery Park Owner, LLC an Ohio limited liability company (the
"LLC").
2. Assignor does hereby warrant and represent that it is the sole
and lawful owner of the Interest herein transferred, free of any liens, claims
or encumbrances and that it has full power and authority to make such transfer.
3. Assignee does hereby accept the foregoing assignment and agrees
to become a Member of the LLC.
ASSIGNOR:
AH BATTERY PARK MEMBER, LLC
By: Alliance Holdings, Inc.,
its sole member and manager
By:
Title:
Its:
ASSIGNEE:
By:
Title:
<PAGE>
EXHIBIT B
AMENDED AND RESTATED DEVELOPMENT AGREEMENT
------------------------------------------
This AMENDED AND RESTATED DEVELOPMENT AGREEMENT (this "Agreement"),
dated as of August 24, 1999, is made and entered into by and between AH Battery
Park Owner, LLC, an Ohio limited liability company ("Owner"), and Brookdale
Living Communities of New York-BPC, Inc., a Delaware corporation ("Developer").
RECITALS
--------
WHEREAS, Owner is the ground lessee of certain real property located at
455 North End Avenue, Battery Park City, New York (the "Project") pursuant to
that certain Ground Lease dated as of August 24, 1999 (the "Ground Lease") by
and between Owner, as lessee, and the Battery Park City Authority, as lessor
(the "Lessor");
WHEREAS, Owner desires to develop the Project for use as a senior
congregate and non-licensed assisted living facility;
WHEREAS, Developer is experienced and qualified in the business of
developing facilities such as the Project, and Owner desires to engage Developer
to perform development services in connection with the construction of the
Project;
WHEREAS, Developer has commenced development of the Project and has
entered into or plans to enter into several contracts related thereto,
including, without limitation, (i) a construction contract with a general
contractor, (ii) an architectural contract with an architect and (iii) other
contracts related thereto, and hereafter shall enter into additional contracts
and amendments, change orders, modifications or supplements of or to any of the
foregoing (collectively, the "Construction Contracts");
WHEREAS, Owner desires to retain Developer to, and Developer is willing
to, perform development services in connection with the development and
construction of the Project on the terms and subject to the conditions set forth
in this Agreement; and
WHEREAS, Owner and Developer have entered into that certain Development
Agreement dated as of September 28, 1998 (the "Prior Development Agreement") and
have agreed to terminate the Prior Development Agreement pursuant to Section 21
hereof, and have agreed to enter into this Agreement, in each case effective as
of the date hereof.
AGREEMENTS
----------
NOW, THEREFORE, in consideration of the recitals and the mutual
promises and covenants herein contained and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
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<PAGE>
1. Responsibilities of Developer. Owner hereby engages Developer to
perform the services in connection with the development and
construction of the Project normally and customarily performed by a
developer of a commercial real estate project similar to the Project
and as further described herein, and Developer hereby accepts such
engagement and, subject to the conditions set forth in this Agreement,
agrees to provide such services, at Owner's expense. During the term of
this Agreement, subject to the terms and conditions of the Ground
Lease, Developer shall have full authority to develop and construct the
Project or cause the Project to be constructed as a senior congregate
and non-licensed assisted living facility, and shall have full and
complete control and reign over, and use of, the entire Project,
including its common areas. Without limiting the generality of the
foregoing, Developer shall, at Owner's expense, have full authority as
follows, subject in all cases to the terms of the Ground Lease:
a. Regulatory Compliance. Developer shall use reasonable
efforts to obtain and maintain all licenses, permits,
qualifications and approvals from any applicable
governmental or regulatory authority required for the
construction of the Project. In addition, Developer
shall supervise and coordinate the preparation and
filing of (and, where required to do so under
applicable law or regulations, file) all reports or
other information required by all state or other
governmental agencies having jurisdiction over the
Project and shall deliver copies of all such reports
and information to Owner simultaneously with such
filings. Developer shall cooperate with governmental
inspection and enforcement activities.
b. Equipment and Improvements. Developer shall, on behalf
of Owner, acquire or effect the acquisition of
equipment and improvements, which are needed to operate
the Project or its services.
c. Reports. Developer shall supervise and coordinate the
preparation of any construction information if and to
the extent needed to comply with any reporting
obligations imposed on the Owner by any Lender (as
hereinafter defined), mortgagees or lessors of the
Project except for those reporting obligations which
relate to matters which are within the exclusive
control of the Owner or its affiliates. Developer shall
prepare or cause to be prepared, at Owner's expense,
the tax returns of Owner (but not Owner's partners or
affiliates) for Owner's signature. All originals of the
books, forms and records generated by Developer in
connection with the construction of the Project shall
be Developer's property.
d. Contracts. Developer shall have the right and
authority, at the Owner's expense, to enter into,
perform, and modify its obligations and duties under
the Construction Contracts and any and all construction
contracts, architectural contracts, engineering
contracts and all other contracts and agreements now or
hereafter in force relating to the development and
construction of the Project and to deal with, and
enforce the obligations of, all parties thereto.
e. Legal Proceedings. Developer shall have the right and
authority, on its own behalf or through legal counsel
designated by Developer, to direct all legal matters
and proceedings that are within the scope of
Developer's authority
2
<PAGE>
pursuant to this Agreement. Without limiting the
generality of the foregoing, Developer is authorized
(without the prior written consent of Owner) to (i)
settle, in the name and on behalf of Owner and on such
terms and conditions as Developer may deem to be in the
best interests of the Project, any and all claims or
demands arising out of, or in connection with, the
operation of the Project, whether or not legal action
has been instituted and (ii) enter into such agreements
with any governmental agencies having jurisdiction over
the Project deemed necessary or desirable by Developer
in its sole and absolute judgment. All such amounts
paid in respect of any such settlements and agreements
shall be expenses of the Project and be paid by Owner
in addition to the Fees (as hereinafter defined).
Developer will give notice promptly to Owner of all
demands and claims and all settlements and legal
actions, but the failure to give such notice shall not
affect the preceding provisions of this paragraph.
f. Loan Documents. Developer shall, on its own behalf
and/or on Owner's behalf, be permitted to deal with the
providers of financing for the Project including,
without limitation, (A) the senior mortgage loans (the
"Mortgage Loan") made by Key Corporate Capital, Inc.,
Fleet National Bank and European American Bank
(collectively, "Senior Lender") secured by Owner's
interest in the Project and (B) any other equity or
mezzanine loans made to Owner or its member either as
of the date hereof or after the date of this
Agreement(the "Equity Loan") made by a lender
acceptable to Owner and Developer ("Equity Lender").
Senior Lender and Equity Lender shall be referred to
individually as a "Lender," and the loan documents
evidencing and/or securing the Mortgage Loan and the
Equity Loan are referred to collectively herein as the
"Loan Documents." The Loan Documents which evidence
and/or secure the Mortgage Loan are referred to
collectively herein as the "Mortgage Loan Documents."
Developer shall be responsible for complying with the
terms of the Loan Documents, at Owner's sole cost and
expense, with the exception of those provisions (i)
which are within the exclusive control of Owner and its
affiliates, e.g. filing of income tax returns and
certificates and notices relating to Owner's (and its
affiliates') organizational documents, etc., and (ii)
which relate to the repayment of the debt evidenced and
secured by the Loan Documents except to the extent that
Developer is administering the Mortgage Loan and Equity
Loan pursuant hereto and pursuant to that certain
Management Agreement (the "Management Agreement") of
even date herewith by and between Owner and Developer,
as manager. Owner (and its affiliates) shall not amend
or waive any provision of any of the Loan Documents
without the prior written consent of Developer.
3
<PAGE>
g. Ground Lease. Developer shall have the right and
authority, at the Owner's expense, to enter into,
perform, and modify its obligations and duties under
the Ground Lease. Owner shall not amend or waive any
provision of any of the Loan Documents without the
prior written consent of Developer, which may be
withheld in Developer's sole discretion. Developer
shall be responsible for performing, at Owner's
expense, all of Owner's obligations under the Ground
Lease, including without limitation, the construction
and development obligations specifically set forth in
the Ground Lease, including the Substantial Completion
of Buildings and the Civic Facilities on or prior to
the Scheduled Completion Date (as such terms are
defined in the Ground Lease) and all provisions
relating to regulatory compliance, e.g., obtaining
licenses and permits.
h. Other Matters. Developer shall, on its own behalf or,
if necessary, on Owner's behalf, be permitted to enter
into such other agreements, contracts, easements and to
perform such other acts as are necessary or desirable,
in Developer's sole and absolute discretion, for the
completion and operation of the Project.
2. Responsibilities of Owner. Owner shall not interfere with Developer in
connection with the development and construction of the Project in
accordance with the terms of this Agreement. Owner acknowledges and
agrees that the development and construction of the Project is within
the exclusive control of Developer, and Owner hereby grants Developer
sole and exclusive possession and control over the Project.
3. Exclusive Representative/Attorney-in-Fact. It is understood and agreed
that, during the term of this Agreement, Developer shall be the
exclusive representative of Owner for the purposes described in this
Agreement, including, without limitation, all acts, functions and
activities which would normally and customarily be performed by a
developer of real estate in connection with the construction of a major
commercial project. Any communications with Lessor, any Lender,
regulatory authorities, governmental agencies, contractors, materialmen
suppliers, employees of the Project shall be directed through
Developer. Any and all notices received by Owner relating to the
Project, the Ground Lease, the Loan Documents, the Owner or the direct
or indirect owners of interests in Owner shall immediately be forwarded
by Owner to Developer. During the term of this Agreement, Owner hereby
appoints Developer as its attorney-in-fact throughout the term of the
Agreement to take any action and execute any instruments or agreements
that Owner is obligated under, or that Owner has covenanted and agreed
hereunder, under the Ground Lease, or under the Loan Documents to take
or execute, or which Developer determines is necessary or appropriate
for Developer to perform its duties or satisfy its obligations
hereunder or to develop the Project as contemplated hereby, which
appointment as attorney-in-fact is irrevocable and coupled with an
interest.
4. Insurance. Developer shall arrange for and maintain all necessary and
proper hazard insurance covering the Project, including the furniture,
fixtures and equipment situated thereon, and as otherwise required
pursuant to the Mortgage Loan Documents and the Ground Lease, all
necessary and proper public liability insurance for the protection of
Developer, Owner and, to the extent required under the Ground Lease and
the Loan Documents, the Lessor or any Lender, respectively. Developer
shall also arrange for and maintain all employee health and
4
<PAGE>
worker's compensation insurance for the Project's personnel. Developer
shall maintain such other insurance as required pursuant to the
Mortgage Loan Documents and the Ground Lease. Any insurance provided
pursuant to this paragraph shall be an expense of the Project payable
by Owner.
5. Proprietary Interest. The systems, methods, procedures and controls
employed by Developer and any written materials or brochures developed
by Developer to document the same are to remain the property of
Developer and are not, at any time during or after the term of this
Agreement, to be utilized, distributed, copied or otherwise employed or
acquired by Owner, except as authorized by Developer.
6. Term of Agreement. Unless this Agreement is sooner terminated as
hereinafter expressly provided in Section 7 or as otherwise agreed in
writing by both parties, the term of this Agreement shall commence on
the date hereof and shall end upon Substantial Completion of the
Buildings and the Civic Facilities (as such terms are defined in the
Ground Lease), except with respect to the Owner's obligation to pay the
Fees and all other costs and expenses which are due and payable to
Developer under this Agreement, including without limitation the costs
and expenses described in Section 10 below, which shall survive until
the discharge in full of such obligations.
7. Events of Default and Remedies.
a. Event of Default. At the option of the non-defaulting
party, each of the following shall constitute an "Event
of Default" hereunder:
i. if Owner shall fail to pay or allow payment of
any installment of the Fees due to Developer in
accordance with Section 10 hereof or any other
amounts due to Developer under this Agreement
for a period of five (5) days after written
notice of such failure from Developer to Owner;
ii. if Owner fails to perform in any material
respect any term, provision, or covenant of
this Agreement (other than as set forth in
Section 7(a)(i)) and (A) such failure continues
for ten (10) days after written notice from
Developer to Owner specifying such failure to
perform (unless such failure cannot be cured by
the payment of money and cannot reasonably be
cured within such 10-day period, in which
event, Owner shall have an additional period,
not to exceed an additional thirty (30) days,
in which to cure the default) or (B) Owner
fails to endeavor diligently and continuously
to cure such default as promptly as is
practicable;
iii. if Developer fails to perform in any material
respect any term, provision, or covenant of
this Agreement and (A) subject to Section 8
below, such failure continues for thirty (30)
days after written notice from Owner specifying
such failure to perform (unless such failure
cannot reasonably be cured within such 30-day
period, in which event, Developer shall have an
additional period as
5
<PAGE>
is necessary to cure the default) or (B)
Developer fails to endeavor diligently and
continuously to cure such default as promptly
as is practicable;
iv. if either Owner, on the one hand, or Developer,
on the other, is dissolved or liquidated,
applies for or consents to the appointment of a
receiver, trustee or liquidator of all or a
substantial part of its assets, files a
voluntary petition in bankruptcy or is the
subject of an involuntary bankruptcy filing,
makes a general assignment for the benefit of
creditors, or files a petition or an answer
seeking reorganization or arrangement with
creditors or to take advantage of any
insolvency law, or if an order, judgment or
decree shall be entered by any court of
competent jurisdiction, on the application of a
creditor, adjudicating Owner or Developer
bankrupt or insolvent or approving a petition
seeking reorganization of Owner or Developer or
appointing a receiver, trustee or liquidator
for such party of all or a substantial part of
its assets, and such order, judgment or decree
shall continue unstayed and in effect for any
period of sixty (60) consecutive days; or
v. if Owner or any affiliate of Owner is in breach
or default of any of its obligations under that
certain Equity Option Agreement of even date
herewith with Developer or under that certain
Property Option Agreement of even date herewith
with Developer.
b. Remedies. At any time after the occurrence and during
the continuance of any Event of Default caused by
Owner, Developer may, at its option, do one or more of
the following: (i) terminate this Agreement by giving
written notice to Owner and/or (ii) exercise all rights
and remedies available at law or in equity. At any time
after the occurrence and during the continuance of an
Event of Default caused by Developer, Owner may, as its
sole option, terminate this Agreement in accordance
with the terms hereof and Developer shall have no other
liability to Owner hereunder.
8. Force Majeure. The parties will not be deemed to be in violation or
breach of their respective non-monetary obligations under this
Agreement if they are prevented from performing any of their respective
obligations hereunder for any reason beyond their control, including,
without limitation, strikes, shortages, war, acts of God, or any
applicable statute, regulation or rule of federal, state or local
government or agency thereof having jurisdiction over the Project or
the operations thereof.
9. Withdrawal of Funds by Developer.
a. Owner and Developer acknowledge and agree that the
efficient operation of the Project requires that
Developer have ready access to the funds required
therefor, including without limitation, the proceeds of
the Mortgage Loan and Equity Loan (collectively, the
"Loan Proceeds") plus the capital contribution from
Owner's members (the "Capital Contribution").
Accordingly, during the term of this Agreement, Owner
(i) irrevocably grants Developer the authority on
Owner's behalf to make draw requests for the Loan
Proceeds in accordance with the Mortgage Loan
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Documents, (ii) irrevocably authorizes each Lender to
disburse its Loan Proceeds directly to Developer in
accordance with such draw requests and the Loan
Documents, (including those provisions relating to
compliance with the Lien Law of the State of New York)
(iii) shall not be entitled to any portion of the Loan
Proceeds under the Loan Documents, and (iv) irrevocably
grants Developer the authority to establish and
maintain bank account(s) on Owner's behalf to deposit
and withdraw (without Owner's consent or approval) the
Loan Proceeds subject to compliance with the Loan
Documents and the Lien Law of the State of New York and
all funds necessary for the development, construction
and use of the Project. Concurrently with the execution
of this Agreement, Owner shall remit to Developer an
amount equal to the Capital Contribution to be used as
an advance payment on a portion of Developer's expected
construction costs.
b. Owner hereby assumes and agrees to pay with the
available Loan Proceeds and the Capital Contribution
(to the extent not previously disbursed to Developer)
as and when due (i) all costs, expenses and obligations
incurred by Developer through and including the date of
this Agreement in connection with the development and
construction of the Project which have not been paid as
of the date of this Agreement, which costs, expenses
and obligations include, but are not necessarily
limited to retainage held back from the general
contractor of the Project and accrued development fees
payable by Developer to its parent corporation,
Brookdale Living Communities, Inc. ("Brookdale"), and
(ii) all costs, expenses and obligations incurred by
Developer in connection with the development and
construction of the Project.
c. Owner acknowledges and agrees that the Loan Proceeds
and the Capital Contribution shall be used by
Developer, at its sole and absolute discretion but
subject to compliance with the Loan Documents and the
Lien Law of the State of New York, to pay all costs and
expenses incurred or to be incurred in connection with
the development and construction of the Project,
including, without limitation, to reimburse Developer,
Brookdale and their affiliates for any and all costs
and/or expenses paid or incurred by Developer,
Brookdale or their affiliates in connection with the
Ground Lease, any of the Loan Documents or the Project,
including, without limitation, ground rent, real estate
taxes, hard costs, soft costs, commitment fees, due
diligence deposits, draw fees, servicing fees and
extension fees or any other fees or expenses incurred
in connection with any of the Loan Documents or the
Ground Lease.
10. Fees. During the term of this Agreement, in addition to all other sums
owed by Owner to Developer under this Agreement, Developer shall be
entitled to receive development fees equal to the aggregate of Five
Million Dollars ($5,000,000) (collectively, the "Fees"), which shall be
payable by Owner as follows:
a. reimbursement to Developer of all corporate overhead
and administration costs, capitalized interest costs
and all other costs incurred by Developer (or its
affiliates) in connection with performing the services
under this Agreement up to an aggregate
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amount of One Million Five Hundred and NO/100 Dollars
($1,500,000.00), which shall be due and payable by
Owner to Developer from time to time within ten (10)
days following invoice by Developer to Owner; Developer
acknowledges receipt of $1,500,411.42 on account of the
Fees owed pursuant to this Section 10(a);
b. an additional amount equal to One Million Five Hundred
Thousand and NO/100 Dollars ($1,500,000.00) less the
aggregate amount of all sums paid and/or owed under
Section 10(a) above, which amount shall be deemed
earned proportionately on the same date(s) that
Developer submits its invoice(s) to Owner under Section
10(a) above, but shall be due and payable by Owner to
Developer in the following manner: i) $750,000.00
during the second month following completion of the
Project and, ii) $750,000.00 during the sixth month
following completion of the Project; and
c. an additional amount equal to Two Million Dollars
($2,000,000.00), which amount shall be deemed earned in
an equal amount and on the same date(s) as the sums
described to Section 10(a) and (b), but shall be due
and payable by Owner to Developer upon the repayment of
the Mortgage Loan.
In addition to the Fees, Owner agrees that Developer shall be entitled
to any "cost savings" realized by Developer. For the purposes of this
Agreement, "cost savings" shall mean any sums remaining in the
construction budget (the "Budget") referenced in the Mortgage Loan
Documents. Developer acknowledges that its right to receive any Fees or
other sums due and owing hereunder shall be subject and unconditionally
subordinate to (i) the payment by Owner to Ground Lessor of all Rental
(as defined in the Ground Lease) and (ii) the payment by Owner or its
sole member to any Lender of any sums due under any Loan Documents.
11. Assignment. This Agreement shall not be assigned (including by
operation of law, whether by merger or consolidation (excluding a
merger effected solely for the purpose of changing Owner's jurisdiction
of incorporation that does not affect the ownership interests of Owner
in any material respect) or otherwise) by Owner, on the one hand, or by
Developer, on the other, without the prior written consent of the other
party; provided, however, that to the extent permitted by applicable
law and regulations, and subject to the receipt of all required
licenses, permits, approvals and authorizations of applicable
governmental agencies, this Agreement may be assigned by Developer
(with Lessor's and Lender's consent) to one or more corporations or
other legal entities which control, or are controlled by or are under
common control with, directly or indirectly, Developer or Brookdale and
may be assigned by Owner pursuant to the Collateral Assignment of
Contracts, Permits, Licenses and Approvals to be made by Owner to the
Senior Lender.
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12. Notices. Any notices required or permitted to be sent hereunder shall
be delivered personally or by facsimile (with answer back acknowledged)
or mailed, certified mail, return receipt requested, or delivered by
overnight courier service to the following addresses, or such other
addresses as shall be given by notice delivered hereunder, and shall be
deemed to have been given upon delivery, if delivered personally, upon
receipt with answer back acknowledged, if delivered by facsimile, three
(3) business days after mailing, if mailed, or one business day after
delivery to the courier, if delivery by overnight courier service:
If to Owner, to:
AH Battery Park Owner, LLC
723 Electronic Drive, Suite 300
Horsham, Pennsylvania 19044
Attn: David Fenkell
Facsimile: 215-706-0877
With a copy to:
Squire, Sanders, & Dempsey, LLP
1300 Huntington Center, 41 South High Street
Columbus, Ohio 43215
Attn: David Cooper, Jr.
Facsimile: 614-365-2499
If to Developer, to:
Brookdale Living Communities of New York-BPC, Inc.
c/o Brookdale Living Communities, Inc.
77 West Wacker Drive
Suite 4400
Chicago, Illinois 60601
Attn: Darryl W. Copeland, Jr.
Facsimile: (312) 977-3699
With a copy to:
c/o Brookdale Living Communities, Inc.
77 West Wacker Drive
Suite 4400
Chicago, Illinois 60601
Attn: Robert J. Rudnik
Facsimile: (312) 977-3769
13. Relationship of the Parties. The relationship of Developer to Owner in
connection with this Agreement shall be that of an independent
contractor, and all acts performed by Developer
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during the term hereof shall be deemed to be performed in Developer's
capacity as an independent contractor. Nothing contained in this
Agreement is intended to or shall be construed to give rise to or
create a partnership or joint venture or lease between Owner, its
successors and assigns, on the one hand, and Developer, its successors
and assigns, on the other hand.
14. Entire Agreement. This Agreement and any documents executed in
connection herewith contain the entire agreement among the parties with
respect to the subject matter hereof and, subject to the restrictions
contained in Section 11 above, shall be binding upon their respective
successors and assigns, and shall be construed in accordance with the
laws of the state where the Project is located. This Agreement may not
be modified or amended except by written instrument signed by the
parties hereto.
15. Contract Modifications for Certain Legal Events. In the event any state
or federal laws or regulations, whether now existing or enacted or
promulgated after the effective date of this Agreement, are interpreted
by judicial decision, a regulatory agency or legal counsel of both
parties in such a manner as to indicate that the structure of this
Agreement may be in violation of such laws or regulations, Owner and
Developer agree to cooperate in restructuring their relationship and
this Agreement to eliminate such violation or to reduce the risk
thereof to the extent such restructuring can be accomplished upon
commercially reasonable terms; provided, that any such restructuring
shall, to the maximum extent possible, preserve the underlying economic
and financial arrangements between Owner and Developer. The parties
agree that such amendment may require either or both parties to obtain
appropriate regulatory licenses and approvals.
16. Captions. The captions used herein are for convenience of reference
only and shall not be construed in any manner to limit or modify any of
the terms hereof.
17. Severability. In the event one or more of the provisions contained in
this Agreement is deemed to be invalid, illegal or unenforceable in any
respect under applicable law, the validity, legality and enforceability
of the remaining provisions hereof shall not in any way be impaired
thereby.
18. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, and each such
counterpart shall together constitute but one and the same Agreement.
19. Limitation of Personal Liability. Notwithstanding any other provision
of this Agreement to the contrary, in no event shall any officer,
director, member, partner, manager, shareholder, incorporator or agent
of Owner or Developer (or their affiliates) be personally liable for
any of Owner's or Developer's, respectively, obligations under this
Agreement.
20. Confidentiality. Owner acknowledges that Developer may suffer
irreparable harm if the information provided to Owner pursuant to this
Agreement or this Agreement was disclosed to any third parties.
Accordingly, Owner shall keep this Agreement and all such information
confidential and shall not disclose any of such information not already
known to the public
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<PAGE>
to any party except Owner's lenders, attorneys, accountants and other
professional advisors in connection with the transactions contemplated
by this Agreement or as otherwise required by law or court order. Owner
shall endeavor to minimize the number of persons who have copies of
this Agreement and shall inform each of such persons of the
confidential nature thereof. The provisions of this Section 20 shall
not prohibit any affiliate of Owner from participating in other similar
transactions with parties other than Brookdale, Developer or their
affiliates.
21. Termination of Prior Development Agreement. Effective as of the date
hereof, the Prior Development Agreement is hereby superceded in its
entirety by this Agreement.
22. Telecopy. This Agreement and the signatures thereto may be transmitted
via telecopy.
23. Agreement not to Terminate. Notwithstanding any contrary provision
contained herein, prior to the Substantial Completion of the Buildings
(as defined in the Ground Lease), Owner and Developer shall not
terminate this Agreement or modify Developer's obligations under this
Agreement without Lessor's consent except as required by Lender under
the Loan Documents.
24. Third Party Beneficiaries. Lessor and Lender shall be deemed
third-party beneficiaries of this Agreement.
25. Subordination to Ground Lease and the Mortgage Loan Documents.
Notwithstanding anything contained herein to the contrary, this
Agreement shall not be binding upon Lessor if the Project reverts to
Lessor pursuant to the express provisions of the Ground Lease or the
Senior Lender in the event of a foreclosure or a conveyance by power of
sale or in lieu of foreclosure.
26. Agreement Not to File Liens. Developer agrees not to file any liens
against the Project for any unpaid Fees.
27. Agreement Not to Record. Developer and Owner agree not to record this
Agreement or a memorandum thereof.
28. Notice of Changes. Developer and Owner agree to provide Lessor written
notice of any changes to this Agreement required by any Lender.
11
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29. Conflict with Ground Lease or Mortgage Loan Documents. In the event of
a conflict between the obligations of the Developer hereunder and the
obligations of the Owner under the Ground Lease or the Mortgage Loan
Documents relating to the completion of the Project (and specifically
excluding any payment obligations under the Ground Lease), the terms of
the Ground Lease or the Mortgage Loan Documents, as the case may be
shall control in all cases.
30. Requirements of Ground Lease. Initially capitalized terms not defined
below shall have the same meanings ascribed to them in the Ground
Lease.
(a) Developer shall not discriminate against employees or
applicants for employment because of race, creed, color,
religion, national origin, ancestry, sex, age, disability or
marital status, shall comply with all applicable Federal, State
and local laws, ordinances, rules and regulations from time to
time in effect and the provisions of the Master Lease
prohibiting such discrimination or pertaining to equal
employment opportunities and shall undertake programs of
affirmative action to ensure that employees and applicants for
employment are afforded equal employment opportunities without
discrimination. Such action shall be taken with reference to,
but not limited to, recruitment, employment, job assignment,
promotion, upgrading, demotion, transfer, layoff or termination,
rates of pay or other forms of compensation, and selection for
training or retraining, including apprenticeship and on-the-job
training.
(b) Developer shall request each employment agency, labor union
and authorized representative of workers with which it has a
collective bargaining or other agreement or understanding, to
furnish it with a written statement that such employment agency,
labor union or representative will not discriminate because of
race, creed, color, religion, national origin, ancestry, sex,
age, disability or marital status and that such agency, union or
representative will cooperate in the implementation of
Developer's obligations hereunder.
(c) Developer shall state in all solicitations or advertisements
for employees placed by or on behalf of contractor that all
qualified applicants shall be afforded equal employment
opportunities without discrimination because of race, creed,
color, religion, national origin, ancestry, sex, age, disability
or marital status.
(d) Developer shall comply with all of the provisions of the
Civil Rights Law of the State of New York and Sections 291-299
of the Executive Law of the State of New York, shall upon
reasonable notice furnish all information and reports deemed
reasonably necessary by Landlord and shall permit access to its
relevant books, records and accounts for the purpose of
monitoring compliance with the Civil Rights Law and such
sections of the Executive Law.
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31. Further Ground Lease Requirements. Developer agrees hereby agrees that
immediately upon the purchase by Developer of any building materials to
be incorporated in the Buildings (as said term is defined in the Ground
Lease), or of any building materials to be incorporated in improvements
made thereto, such materials shall become the sole property of Ground
Lessor, notwithstanding that such materials have not been incorporated
in, or made a part of, such Buildings at the time of such purchase;
provided, however, Ground Lessor shall not be liable in any manner for
payment or otherwise to Developer in connection with the purchase of
any such materials and Ground Lessor shall have no obligation to pay
any compensation to Developer by reason of such materials becoming the
sole property of Ground Lessor.
32. Senior Lender's Right to Terminate. Notwithstanding anything to the
contrary contained herein, upon a default under any Mortgage Loan
Document and Senior Lender's acquisition and/or obtaining control of
the Project through foreclosure, sale or other means, this Agreement
shall terminate upon Lender's written request at no cost to Senior
Lender.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Development
Agreement to be executed and delivered in their names and on their behalf as of
the date first set forth above.
OWNER:
AH Battery Park Owner, LLC
By: AH Battery Park Member, LLC,
its sole member
By: Alliance Holdings, Inc.,
its sole manager and member
By: /s/ David B. Fenkell
------------------------------
Name: David B. Fenkell
Title: President
DEVELOPER:
Brookdale Living Communities of
New York-BPC, Inc.
By: /s/ Mark J. Schulte
-----------------------------------
Name: Mark J. Schulte
Title: President
<PAGE>
STATE OF PENNSYLVANIA )
) SS.
COUNTY OF MONTGOMERY )
The foregoing instrument was acknowledged before me this 18th day of
August, 1999, by David B. Fenkell, the President of Alliance Holdings, Inc., as
member and manager of AH Battery Park Member, LLC, which is the sole member of
AH Battery Park Owner, LLC.
NOTARY SEAL
/s/ Jospeh Hiltwine
------------------------------
NOTARY PUBLIC
Montgomery County, Pennsylvania
STATE OF ILLINOIS )
) SS.
COUNTY OF COOK )
The foregoing instrument was acknowledged before me this 16th day of
August, 1999, by Mark J. Schulte, the President of Brookdale Living Communities
of New York-BPC, Inc., on behalf of said corporation.
NOTARY SEAL
/s/ Donna Jean Elrod
------------------------------
NOTARY PUBLIC
Cook County, Illinois
MANAGEMENT AGREEMENT
--------------------
This MANAGEMENT AGREEMENT (this "Agreement"), dated as of August 24,
1999, is made and entered into by and between AH Battery Park Owner, LLC, an
Ohio limited liability company ("Owner"), and Brookdale Living Communities of
New York-BPC, Inc., a Delaware corporation ("Manager").
RECITALS
--------
WHEREAS, Owner is the ground lessee of certain real property located at
455 North End Avenue, Battery Park City, New York (the "Facility") pursuant to
that certain Ground Lease dated as of August 24, 1999 (the "Ground Lease") by
and between Owner, as lessee, and the Battery Park City Authority, as Lessor
(the "Lessor");
WHEREAS, Manager is qualified in the business of operating senior
independent and assisted living facilities such as the Facility, and Owner
desires to engage Manager to manage and operate the Facility; and
WHEREAS, Manager is willing to manage and operate the Facility on the
terms and subject to the conditions set forth in this Agreement.
AGREEMENTS
----------
NOW, THEREFORE, in consideration of the recitals and the mutual
promises and covenants herein contained and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. Responsibilities of Manager.
a. Owner hereby engages Manager to manage and operate the Facility,
and Manager hereby accepts such engagement and, subject to the
conditions set forth in this Agreement, agrees to manage and
operate the Facility, at Owner's expense, in accordance with the
terms set forth in this Agreement. During the term of this
Agreement, Manager shall have full authority to operate and
manage the Facility as a senior congregate and non-licensed
assisted living facility in accordance with the terms and
conditions hereof, and shall have full and complete control and
reign over, and use of, the entire Facility, including its
common areas. Without limiting the generality of the foregoing,
Manager shall, at Owner's expense, have full authority as
follows:
i. Operational Policies and Forms. Subject to the
applicable Annual Budget (as defined in Section
1(a)(xii) below), Manager shall establish and implement
such operational policies and procedures, and develop
such new policies and procedures, as Manager may deem
necessary to cause or to ensure the establishment and
maintenance of operational standards determined by
Manager to be appropriate for the nature of the
Facility.
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ii. Charges. Manager shall establish the schedules of
charges for residents of the Facility, including
appropriate charges for any and all special services
rendered to or for residents at the Facility.
iii. Information. Manager shall develop any informational
material, mass media releases, and other related
publicity materials, that Manager deems necessary or
appropriate for the operation of the Facility.
iv. Regulatory Compliance. Manager shall use reasonable
efforts to maintain all licenses, permits,
qualifications and approvals from any applicable
governmental or regulatory authority required for the
operation of the Facility. In addition, Manager shall
supervise and coordinate the preparation and filing of
(and, where required to do so under applicable law or
regulations, file) all reports or other information
required by all state or other governmental agencies
having jurisdiction over the Facility and shall deliver
copies of all such reports and information to Owner
simultaneously with such filings. Manager shall
cooperate with governmental inspection and enforcement
activities.
v. Equipment and Improvements. Subject to the applicable
Annual Budget and the Mortgage Loan Documents (as
hereinafter defined), Manager shall, on behalf of
Owner, acquire, or effect the acquisition of, equipment
and improvements which Manager determines are needed to
maintain or upgrade the quality of the Facility or its
services, to replace obsolete or run-down equipment, or
to correct any other deficiencies which may be
identified by Manager during the term of this
Agreement, and shall make, or engage third parties to
make, all such repairs, replacements and maintenance
and shall cause to be acquired all equipment, including
replacement equipment, that Manager determines to be
necessary for the operation of the Facility.
vi. Accounting. Manager shall supervise and coordinate
accounting support to, and prepare and maintain records
for, the Facility. All accounting procedures and
systems utilized in providing such support shall be in
accordance with the operating capital and cash programs
developed by Manager, which programs shall conform to
generally accepted accounting principles. Nothing
herein shall preclude Manager from engaging a third
party (including related or affiliated parties) to
assist Manager in the performance of the accounting
duties provided for herein.
vii. Reports. Manager shall supervise and coordinate the
preparation of any operational information if and to
the extent needed to comply with any reporting
obligations imposed on the Owner by any Lender (as
hereinafter defined) or lessors of the Facility except
for those reporting obligations which relate to matters
which are within the exclusive control of the Owner or
its affiliates. Manager shall prepare, or cause to be
prepared, at Owner's expense, the tax returns of Owner
(but not Owner's partners or affiliates) for Owner's
signature. Notwithstanding any provisions in this
Agreement to the contrary, Manager shall timely provide
to Owner (or to Owner's member(s) or partner(s) if
Owner is not subject to entity level taxes) the cash
necessary to pay any federal, state or local income or
other taxes that may be due and owing as a result of
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income generated from operations of the Facility during
the Term (as hereinafter defined) of this Agreement.
All originals of the books, forms, and records
generated by Manager in connection with the operation
of the Facility shall be Manager's property.
viii. Bank Accounts. Manager shall establish an account or
accounts and shall deposit therein all money received
by Manager on Owner's behalf from the operation of the
Facility. Withdrawals and payments from this account
shall be made only on checks signed by one or more
person or persons designated by Manager.
ix. Personnel. Manager shall have full power and authority
to recruit, hire, train, promote, direct, discipline
and fire all Facility personnel, including the
Executive Director of the Facility; establish salary
levels, personnel policies and employee benefits; and
establish employee performance standards, all as
Manager determines to be necessary or desirable during
the term of this Agreement to ensure the efficient and
satisfactory operation of all departments within, and
all services offered by, the Facility. All of the
foregoing obligations shall be undertaken in accordance
with the Annual Budgets and applicable law and
regulations. All of the Facility personnel shall be the
employees of Manager or its affiliates, unless
otherwise agreed by Owner and Manager, and all salary,
bonuses, fringe benefits, payroll taxes and related
expenses payable to or in respect of the Facility's
on-site personnel holding the position of Executive
Director of the Facility and all positions subordinate
thereto shall be expenses of the Facility.
x. Supplies and Equipment. Manager shall purchase, on
behalf of Owner, supplies and non-capital equipment
needed to operate the Facility within the budgetary
limits set forth in the Annual Budgets.
xi. Legal Proceedings. Manager shall have the right and
authority, on its own behalf or through legal counsel
designated by Manager, to direct all legal matters and
proceedings that are within the scope of Manager's
authority pursuant to this Agreement, including,
without limitation, instituting any legal actions or
proceedings determined by Manager to be necessary to
collect obligations owing to the Facility, to cancel or
to terminate any contract or agreement relating to the
Facility for breach thereof or default thereunder, and
to otherwise enforce the obligations of the residents,
sponsors, licensees, customers and any other users of
the Facility. Without limiting the generality of the
foregoing, Manager is authorized (without the prior
written consent of Owner) to (a) settle, in the name
and on behalf of Owner and on such terms and conditions
as Manager may deem to be in the best interests of the
Facility, any and all claims or demands arising out of,
or in connection with, the operation of the Facility,
whether or not legal action has been instituted and (b)
enter into such agreements with any governmental
agencies having jurisdiction over the Facility deemed
necessary or desirable by Manager in its sole and
absolute judgment. All such amounts paid in respect of
any such settlements shall be expenses of the Facility
and be paid by Owner. Manager will give notice promptly
to Owner of all demands and claims and all settlements
and legal actions, but the failure to give such notice
shall not affect the preceding provisions of this
paragraph.
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xii. Annual Budgets.
A. Preparation and Submission. At least forty-five
(45) days prior to each calendar year that
commences during the Term of this Agreement,
Manager shall submit to Owner a proposed annual
budget for the Facility projecting the revenues
available and funds required during such fiscal
year in order to manage and operate the
Facility and to make capital improvements that
Manager determines to be necessary or desirable
in order to keep the Facility's physical plant
in good condition and repair. The proposed
annual budget shall be based upon data and
information then available to Manager and shall
include, without limitation, estimated salaries
and fringe benefits for all personnel,
projected staffing patterns for the Facility,
estimates of required capital expenditures and
purchases of equipment, supplies, inventory,
food and similar items, and an estimate of the
level of rates and charges to residents of the
Facility sufficient to generate revenue
necessary to manage and operate the Facility
and make the capital improvements projected in
such budget. The proposed annual budget shall
be an estimate of revenues and costs, and Owner
and Manager acknowledge that (1) projected
revenue may not be actually received and (2)
projected costs may be exceeded by actual
expenses and capital expenditures incurred in
connection with the operation and maintenance
of the Facility. By submitting such a projected
budget, Manager will not be deemed to be
providing a guaranty or warranty as to the
projected revenue, expenses or capital
expenditures of the Facility.
B. Adoption. Each annual budget proposed by
Manager pursuant to subparagraph (A) above and,
to the extent any Lender has approval rights
with respect thereto, as finally approved by
such Lender or Lenders, shall constitute an
"Annual Budget" for all purposes under this
Agreement.
C. Efforts to Operate within Annual Budget.
Manager agrees to use reasonable efforts to
operate the Facility in accordance with the
Annual Budgets. Subject to the foregoing
limitation, Owner shall be responsible on a
periodic basis, as and when needed, for all
expenses and capital expenditures incurred in
connection with the operation and maintenance
of the Facility, including, without limitation,
Fees (defined below) and cost overruns which
exceed the amounts set forth in the then
current Annual Budget. Notwithstanding anything
in this Agreement, if Manager determines in
good faith that the incurrence of any
expenditure is required in order to comply with
applicable law or regulations or to provide
services in accordance with the senior
independent and assisted living industry's
then-prevailing standards in
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the area in which the Facility is located or is
otherwise desirable or appropriate for the
operation of the Facility, then Manager shall
be entitled to make such expenditures, and all
such expenditures shall be deemed, for all
purposes of this Agreement, to be in accordance
with the then current Annual Budget.
xiii. Collection of Accounts. Manager shall issue bills and
collect accounts and monies owed for goods and services
furnished by the Facility, including, but not limited
to, enforcing the rights of Owner and the Facility as
creditor under any contract or residency agreement or
in connection with the rendering of any services. All
of which, including, but not limited to rents and other
monies payable under residency agreements, shall be the
property of owner to be held and used in accordance
with the applicable provisions of this Agreement.
xiv. Contracts. Consistent with or as otherwise contemplated
by the Annual Budget, Manager shall negotiate, enter
into, secure, cancel and/or terminate such agreements
and contracts which Manager may deem necessary or
advisable for the operation of the Facility, including,
without limitation, the furnishing of concessions,
supplies, utilities, extermination, refuse removal and
other services. Where lawful, such agreements and
contracts may be entered into in the name of and on
behalf of Owner.
xv. Residency Agreements. Manager shall have the right and
authority to negotiate, enter into, amend, cancel
and/or terminate residency agreements with residents of
the Facility, as agent for Owner. All residency
agreements, leases and other occupancy agreements
entered into by Manager shall state that Manager is
acting as agent on behalf of Owner. Where lawful, such
residency agreements may be entered into in the name of
and on behalf of Owner.
xvi. Other Matters. Manager shall, on its own behalf and/or
on Owner's behalf, be permitted to enter into such
other agreements, contracts, easements and other
documents or commitments and to perform such other acts
as are necessary or desirable, in Manager's sole and
absolute discretion, for the operation of the Facility.
xvii. Loan Documents. Manager shall, on its own behalf and/or
on Owner's behalf, be permitted to deal with the
providers of financing for the Facility, including
without limitation, (A) the senior mortgage loans (the
"Mortgage Loan") made by Key Corporate Capital Inc.,
Fleet National Bank and European American Bank
(collectively, "Senior Lender") secured by Owner's
interest in the Facility and (B) any other equity or
mezzanine loans made to Owner or its member either as
of the date hereof or after the date of this
Agreement(the "Equity Loan") made by a lender
acceptable to Owner and Manager ("Equity Lender").
Senior Lender and Equity Lender shall be referred to
individually as a "Lender," and the loan documents
evidencing and/or securing the Mortgage Loan and the
Equity Loan are referred to collectively herein as the
"Loan Documents." The Loan Documents which evidence
and/or secure the Mortgage Loan are referred to
collectively herein as the "Mortgage Loan Documents."
Manager shall be responsible for complying with the
terms of the
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Loan Documents, at Owner's sole cost and expense, with
the exception of those provisions (i) which are within
the exclusive control of Owner and its affiliates, e.g.
filing of income tax returns and certificates and
notices relating to Owner's (and its affiliates')
organizational documents, etc., and (ii) which relate
to the repayment of the debt evidenced and secured by
the Loan Documents except to the extent that Manager is
administering the Mortgage Loan and the Equity Loan
pursuant hereto or pursuant to that certain Amended and
Restated Development Agreement of even date herewith by
and between Owner and Manager, as developer (the
"Development Agreement"). Owner (and its affiliates)
shall not amend or waive any provision of any of the
Loan Documents without the prior written consent of
Manager.
xviii. Ground Lease. Manager shall have the right and
authority, at the Owner's expense, to enter into,
perform, and modify its obligations and duties under
the Ground Lease. Owner shall not amend or waive any
provision of any of the Loan Documents without the
prior written consent of Manager, which may be withheld
in Manager's sole discretion.
2. Responsibilities of Owner. Owner shall not interfere with Manager in
connection with the management or operation of the Facility in
accordance with the terms of this Agreement. Owner acknowledges that
the management or operation of the Facility is within the exclusive
control of Manager and Owner hereby grants Manager sole and exclusive
possession and control over the Facility.
3. Exclusive Representative/Attorney-in-Fact. It is understood and agreed
that, during the term of this Agreement, Manager shall be the exclusive
representative of Owner for the purposes described in this Agreement.
Any communications with any Lender, regulatory authorities,
governmental agencies, contractors, suppliers, residents, sponsors,
licensees, customers, and guests of the Facility shall be directed
through Manager. Any and all notices received by Owner relating to the
Facility, the Ground Lease, the Loan Documents, the Owner, or the
direct or indirect owners of interests in Owner shall immediately be
forwarded by Owner to Manager. During the term of this Agreement, Owner
hereby appoints Manager as its attorney-in-fact throughout the term of
this Agreement to take any action and execute any instruments that
Owner is obligated under, or that Owner has covenanted and agreed
hereunder or under the Loan Documents or the Ground Lease to take or
execute or which Manager otherwise determines to be necessary or
appropriate for Manager to perform its duties or satisfy its
obligations hereunder or otherwise necessary or appropriate for the
management and operation of the Facility, which appointment as
attorney-in-fact is irrevocable and coupled with an interest.
4. Insurance. Subject to and in accordance with the Mortgage Loan
Documents and the Ground Lease, Manager shall arrange for and maintain
all necessary and proper hazard insurance covering the Facility,
including the furniture, fixtures and equipment situated thereon, all
necessary and proper public liability insurance for the protection of
Manager, Owner and, to the extent required under the Loan Documents and
the Ground Lease, any Lender and Ground Lessor, respectively. Manager
shall also arrange for and maintain all employee health and worker's
compensation insurance for the Facility's personnel. Manager shall, at
Owner's expense, also maintain such other insurance as required
pursuant to the Mortgage Loan Documents and the Ground Lease. Any
insurance provided pursuant to this paragraph shall be an expense of
the Facility payable by Owner.
6
<PAGE>
5. Proprietary Interest. The systems, methods, procedures and controls
employed by Manager and any written materials or brochures developed by
Manager to document the same are to remain the property of Manager and
are not, at any time during or after the term of this Agreement, to be
utilized, distributed, copied or otherwise employed or acquired by
Owner, except as authorized by Manager.
6. Term of Agreement. Unless this Agreement is sooner terminated as
hereinafter expressly provided in Section 7 or as otherwise agreed in
writing by both parties, the initial term (the "Term") of this
Agreement shall commence on the date hereof and shall end on the
"Maturity Date", as such term is defined in the Mortgage Loan Documents
and as the same may be extended pursuant to the Mortgage Loan Documents
(the "Termination Date"). Upon any termination of this Agreement
pursuant to the immediately preceding sentence, the parties hereto
shall have no further obligations or liabilities other than the right
of Manager to receive Fees through the Termination Date, and during any
such period for which Manager provides services or assists in the
management and operation of the Facility in connection therewith it
shall be entitled to receive an appropriate fee therefor. In addition,
upon any termination of this Agreement, all right, title and interest
of the Manager in and to any licenses, permits, qualifications,
approvals, leases, residency agreements, trade contracts and/or other
agreements that are necessary for the operation of the Facility shall,
at the option of Owner (to the extent assignable), be assigned to
Owner, except in connection with a synthetic lease transaction, in
which case such items shall be assigned to the lessee thereunder.
7. Events of Default and Remedies.
a. Event of Default. At the option of the non-defaulting party,
each of the following shall constitute an "Event of Default"
hereunder:
i. if Owner shall fail to pay or allow payment of any
installment of the Fees due to Manager in accordance
with Section 10 hereof or any other amounts due to
Manager under this Agreement for a period of five (5)
days after written notice of such failure from Manager
to Owner;
ii. if Owner fails to perform in any material respect any
term, provision, or covenant of this Agreement (other
than as set forth in Section 7(a)(i)) and (A) such
failure continues for ten (10) days after written
notice from Manager to Owner specifying such failure
(unless such failure cannot be cured by the payment of
money and cannot reasonably be cured within such 10-day
period, in which event, Owner shall have an additional
period, not to exceed an additional thirty (30) days,
in which to cure the default) or (B) Owner fails to
endeavor diligently and continuously to cure such
default as promptly as is practicable;
iii. if Manager fails to perform in any material respect any
term, provision, or covenant of this Agreement and (A)
subject to Section 8 below, such failure continues for
thirty (30) days after written notice from Owner
specifying such failure to perform (unless such failure
cannot reasonably be cured within such 30-day period,
in which event, Manager shall have an additional period
as is necessary to cure the default) or (B)
7
<PAGE>
Manager fails to endeavor diligently and continuously
to cure such default as promptly as is practicable; or
iv. if either Owner, on the one hand, or Manager, on the
other, is dissolved or liquidated, applies for or
consents to the appointment of a receiver, trustee or
liquidator of all or a substantial part of its assets,
files a voluntary petition in bankruptcy or is the
subject of an involuntary bankruptcy filing, makes a
general assignment for the benefit of creditors, or
files a petition or an answer seeking reorganization or
arrangement with creditors or to take advantage of any
insolvency law, or if an order, judgment or decree
shall be entered by any court of competent
jurisdiction, on the application of a creditor,
adjudicating Owner or Manager bankrupt or insolvent or
approving a petition seeking reorganization of Owner or
Manager or appointing a receiver, trustee or liquidator
for such party of all or a substantial part of its
assets, and such order, judgment or decree shall
continue unstayed and in effect for any period of sixty
(60) consecutive days; or
v. if Owner or any affiliate of Owner is in breach or
default of any of its obligations under that certain
Equity Option Agreement of even date herewith with
Manager or under that certain Property Option Agreement
of even date herewith with Manager.
b. Remedies. At any time after the occurrence and during the
continuance of any Event of Default caused by Owner, Manager
may, at its option, do one or more of the following: (i)
terminate this Agreement by giving written notice to Owner
and/or (ii) exercise all rights and remedies available at law or
in equity. At any time after the occurrence and during the
continuance of an Event of Default caused by Manager, Owner may,
as its sole option, terminate this Agreement in accordance with
the terms hereof and Manager shall have no other liability to
Owner hereunder.
8. Facility Operations.
a. No Guarantee of Profitability. Manager does not guarantee that
operation of the Facility will be profitable.
b. Force Majeure. The parties will not be deemed to be in violation
or breach of their respective non-monetary obligations under
this Agreement if they are prevented from performing any of
their respective obligations hereunder for any reason beyond
their control, including, without limitation, strikes,
shortages, war, acts of God, or any applicable statute,
regulation or rule of federal, state or local government or
agency thereof having jurisdiction over the Facility or the
operations thereof.
9. Withdrawal of Funds by Manager. Owner and Manager acknowledge and agree
that the efficient operation of the Facilityrequires that Manager have
ready access to the funds required therefor, including without
limitation, the proceeds of the Mortgage Loan and Equity Loan
(collectively, the "Loan Proceeds") plus any capital contributions from
Owner's members and their members (the "Capital Contribution").
Accordingly, Owner agrees not to withdraw any funds from the Facility's
bank account(s) (except as may be required to make the payments
required under the Loan Documents) without the prior written consent of
Manager, which may be withheld in Manager's sole
8
<PAGE>
and absolute discretion. Moreover, during the term of this Agreement,
Owner (a) irrevocably grants Manager the authority on Owner's behalf to
make draw requests for the Loan Proceeds in accordance with the
Mortgage Loan Documents, (b) irrevocably authorizes each Lender to
disburse its Loan Proceeds directly to Manager in accordance with such
draw requests and the Loan Documents, (including those provisions
relating to compliance with the Lien Law of the State of New York) (c)
shall not be entitled to any portion of the Loan Proceeds under the
Loan Documents, and (d) irrevocably grants Manager the authority to
establish and maintain bank account(s) on Owner's behalf to deposit and
withdraw (without Owner's consent or approval) the Loan Proceeds
subject to compliance with the Loan Documents and the Lien Law of the
State of New York and all funds necessary for the development,
construction, operation, maintenance and use of the Facility. Subject
to Manager's obligations in Section 1(a)(vii) of this Agreement,
Manager shall have the right (without Owner's prior consent) to use any
excess proceeds or revenues generated from the Facility's operations to
reduce the principal balance of either the Mortgage Loan or the Equity
Loan.
10. Fees. Upon substantial completion of the Facility, Manager shall be
entitled to receive management fees (the "Fees") equal to the greater
of (a) five percent (5%) of the gross revenues of the Facility during
each month or portion thereof occurring during such term or (b) $10,000
per month. Fees shall be paid on a monthly basis simultaneously with
the delivery by Manager to Owner of the monthly statements provided for
in Section 1(a)(vii). In addition to the Fees, Owner agrees to
reimburse Manager and Brookdale Living Communities, Inc. ("Brookdale")
for any and all costs and/or expenses paid, or incurred, by Manager or
Brookdale in connection with the Ground Lease any of the Loan
Documents, including, without limitation, rent, interest, principal,
commitment fees, due diligence deposits, draw fees, servicing fees,
structuring fees and extension fees or any other fees or expenses under
any of the Loan Documents or the Ground Lease. Manager acknowledges
that its right to receive any Fees or other sums due and owing
hereunder shall be subject and unconditionally subordinate to (i) the
payment by Owner to Ground Lessor of all Rental (as defined in the
Ground Lease) and (ii) the payment by Owner or its sole member to any
Lender of any sums due under any Loan Documents.
11. Assignment. This Agreement shall not be assigned (including by
operation of law, whether by merger or consolidation (excluding a
merger effected solely for the purpose of changing Owner's jurisdiction
of incorporation that does not affect the ownership interests of Owner
in any material respect) or otherwise) by Owner, on the one hand, or by
Manager, on the other, without the prior written consent of the other
party; provided, however, that Owner may assign this Agreement to the
Senior Lender pursuant to the Collateral Assignment of Collateral
Assignment of Contracts, Permits, Licenses and Approval and that to the
extent permitted by applicable law and regulations, and subject to the
receipt of all required licenses, permits, approvals and authorizations
of applicable governmental agencies, this Agreement may be assigned by
Manager to one or more corporations or other legal entities which
control, or are controlled by or are under common control with,
directly or indirectly, Manager or Brookdale.
12. Notices. Any notices required or permitted to be sent hereunder shall
be delivered personally or by facsimile (with answer back acknowledged)
or mailed, certified mail, return receipt requested, or delivered by
overnight courier service to the following addresses, or such other
addresses as shall be given by notice delivered hereunder, and shall be
deemed to have been given upon delivery, if delivered personally, upon
receipt with answer back acknowledged, if delivered by facsimile three
(3)
9
<PAGE>
business days after mailing, if mailed, or one business day after
delivery to the courier, if delivery by overnight courier service:
If to Owner, to:
AH Battery Park Owner, LLC
723 Electronic Drive, Suite 300
Horsham, Pennsylvania 43215
Attn: David Fenkell
Facsimile: 215-706-0877
With a copy to:
Squire, Sanders, & Dempsey, LLP
1300 Huntington Center, 41 South High Street
Columbus, Ohio 43215
Attn: David Cooper, Jr.
Facsimile: 614-365-2499
If to Manager, to:
Brookdale Living Communities of New York-BPC, Inc.
c/o Brookdale Living Communities, Inc.
77 West Wacker Drive
Suite 4400
Chicago, Illinois 60601
Attn: Darryl W. Copeland, Jr.
Facsimile: (312) 977-3699
With a copy to:
Brookdale Living Communities, Inc.
77 West Wacker Drive
Suite 4400
Chicago, Illinois 60601
Attn: Robert J. Rudnik
Facsimile: (312) 977-3769
13. Relationship of the Parties. The relationship of Manager to Owner in
connection with this Agreement shall be that of an independent
contractor, and all acts performed by Manager during the term hereof
shall be deemed to be performed in Manager's capacity as an independent
contractor. Nothing contained in this Agreement is intended to or shall
be construed to give rise to or create a partnership or joint venture
or lease between Owner, its successors and assigns, on the one hand,
and Manager, its successors and assigns, on the other hand.
10
<PAGE>
14. Entire Agreement. This Agreement and any documents executed in
connection herewith contain the entire agreement among the parties with
respect to the subject matter hereof and, subject to the restrictions
contained in Section 11 above, shall be binding upon their respective
successors and assigns, and shall be construed in accordance with the
laws of the state where the Facility is located. This Agreement may not
be modified or amended except by written instrument signed by the
parties hereto.
15. Contract Modifications for Certain Legal Events. In the event any state
or federal laws or regulations, whether now existing or enacted or
promulgated after the effective date of this Agreement, are interpreted
by judicial decision, a regulatory agency or legal counsel of both
parties in such a manner as to indicate that the structure of this
Agreement may be in violation of such laws or regulations, Owner and
Manager agree to cooperate in restructuring their relationship and this
Agreement to eliminate such violation or to reduce the risk thereof to
the extent such restructuring can be accomplished upon commercially
reasonable terms; provided, that any such restructuring shall, to the
maximum extent possible, preserve the underlying economic and financial
arrangements between Owner and Manager. The parties agree that such
amendment may require either or both parties to obtain appropriate
regulatory licenses and approvals.
16. Captions. The captions used herein are for convenience of reference
only and shall not be construed in any manner to limit or modify any of
the terms hereof.
17. Severability. In the event one or more of the provisions contained in
this Agreement is deemed to be invalid, illegal or unenforceable in any
respect under applicable law, the validity, legality and enforceability
of the remaining provisions hereof shall not in any way be impaired
thereby.
18. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, and each such
counterpart shall together constitute but one and the same Agreement.
19. Limitation of Personal Liability of Owner. Notwithstanding any other
provision of this Agreement to the contrary, in no event shall any
officer, director, member, partner, manager, shareholder, incorporator
or agent of Owner or of Owner's affiliates be personally liable to
Manager for any of Owner's obligations under this Agreement.
20. Limitation of Personal Liability of Manager. Notwithstanding any other
provision of this Agreement to the contrary, in no event shall any
officer, director, member, partner, manager, shareholder, incorporator
or agent of Manager or of Manager's affiliates be personally liable to
Owner for any of Manager's obligations under this Agreement.
21. Confidentiality. Owner acknowledges that Manager may suffer irreparable
harm if the information provided to Owner pursuant to this Agreement or
this Agreement was disclosed to any third parties. Accordingly, Owner
shall keep this Agreement and all such information confidential and
shall not disclose any of such information not already known to the
public to any party except Owner's lenders, attorneys, accountants and
other professional advisors in connection with the transactions
contemplated by this Agreement or as otherwise required by law or court
order. Owner shall endeavor to minimize the number of persons who have
copies of this Agreement and shall inform each of such persons of the
confidential nature thereof. The provisions of this Section 21 shall
not prohibit any
11
<PAGE>
affiliate of Owner from participating in other similar transactions
with parties other than Brookdale, Manager or their affiliates.
22. Requirements of Ground Lease. Initially capitalized terms not defined
below shall have the same meanings ascribed to them in the Ground
Lease.
a. Manager shall not discriminate against employees or applicants
for employment because of race, creed, color, religion, national
origin, ancestry, sex, age, disability or marital status, shall
comply with all applicable Federal, State and local laws,
ordinances, rules and regulations from time to time in effect
and the provisions of the Master Lease prohibiting such
discrimination or pertaining to equal employment opportunities
and shall undertake programs of affirmative action to ensure
that employees and applicants for employment are afforded equal
employment opportunities without discrimination. Such action
shall be taken with reference to, but not limited to,
recruitment, employment, job assignment, promotion, upgrading,
demotion, transfer, layoff or termination, rates of pay or other
forms of compensation, and selection for training or retraining,
including apprenticeship and on-the-job training.
b. Manager shall request each employment agency, labor union and
authorized representative of workers with which it has a
collective bargaining or other agreement or understanding, to
furnish it with a written statement that such employment agency,
labor union or representative will not discriminate because of
race, creed, color, religion, national origin, ancestry, sex,
age, disability or marital status and that such agency, union or
representative will cooperate in the implementation of Manager's
obligations hereunder.
c. Manager shall state in all solicitations or advertisements for
employees placed by or on behalf of contractor that all
qualified applicants shall be afforded equal employment
opportunities without discrimination because of race, creed,
color, religion, national origin, ancestry, sex, age, disability
or marital status.
d. Manager shall comply with all of the provisions of the Civil
Rights Law of the State of New York and Sections 291-299 of the
Executive Law of the State of New York, shall upon reasonable
notice furnish all information and reports deemed reasonably
necessary by Landlord and shall permit access to its relevant
books, records and accounts for the purpose of monitoring
compliance with the Civil Rights Law and such sections of the
Executive Law.
23. Senior Lender's Right to Terminate. Notwithstanding anything to the
contrary contained herein, upon a default under any Mortgage Loan
Document and Senior Lender's acquisition and/or obtaining control of
the Project through foreclosure, sale or other means, this Agreement
shall terminate upon Senior Lender's written request at no cost to
Senior Lender.
24. Recording. Manager may not record this Agreement or a memorandum
thereof without Ground Lessor's consent at any time.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Management
Agreement to be executed and delivered in their names and on their behalf as of
the date first set forth above.
OWNER:
AH Battery Park Owner, LLC
By: AH Battery Park Member, LLC, its sole member
By: Alliance Holdings, Inc., its sole
manager and member
By: /s/ David B. Fenkell
------------------------------
Name: David B. Fenkell
Title: President
MANAGER:
Brookdale Living Communities of New York-BPC, Inc.
By: /s/ Mark J. Schulte
-----------------------------------
Name: Mark J. Schulte
Title: President
<PAGE>
STATE OF PENNSYLVANIA )
) SS.
COUNTY OF MONTGOMERY )
The foregoing instrument was acknowledged before me this 18th day of
August, 1999, by David B. Fenkell, the President of Alliance Holdings, Inc., as
member and manager of AH Battery Park Member, LLC, which is the sole member of
AH Battery Park Owner, LLC.
NOTARY SEAL
/s/ Joseph Hiltwine
------------------------------
NOTARY PUBLIC
Montgomery County, Pennsylvania
STATE OF ILLINOIS )
) SS.
COUNTY OF COOK )
The foregoing instrument was acknowledged before me this 16th day of
August, 1999, by Mark J. Schulte, the President of Brookdale Living Communities
of New York-BPC, Inc., on behalf of said corporation.
NOTARY SEAL
/s/ Donna Jean Elrod
------------------------------
NOTARY PUBLIC
Cook County, Illinois
<TABLE>
<CAPTION>
EXHIBIT 12
BROOKDALE LIVING COMMUNITIES, INC.
STATEMENTS REGARDING COMPUTATION OF RATIOS
OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
(IN 000'S, EXCEPT RATIOS)
Three months ended September 30, Nine months ended September 30,
1999 1998 1999 1998
---- ---- ---- ----
EARNINGS
- --------
<S> <C> <C> <C> <C>
Income before income tax expense
per consolidated financial statements..............$ 4,585 $ 2,795 $ 13,069 $ 6,930
Interest cost (1).................................... 8,545 6,030 24,284 16,333
Interest cost (capitalized).......................... (465) (333) (1,312) (935)
Amortization of debt expense......................... 418 332 1,095 949
Preferred stock dividends............................ -- -- -- --
--------- --------- --------- ---------
Earnings.............................................$ 13,083 $ 8,824 $ 37,136 $ 23,277
======== ======== ======== ========
FIXED CHARGES
- -------------
Interest cost (1)....................................$ 8,545 $ 6,030 $ 24,284 $ 16,333
Amortization of debt expense......................... 418 332 1,095 949
Preferred stock dividends............................ -- -- -- --
--------- --------- --------- ---------
Total fixed charges..................................$ 8,963 $ 6,362 $ 25,379 $ 17,282
======== ======== ======== ========
Ratio of earnings to combined fixed charges and
preferred stock dividends.......................... 1.46 1.39 1.46 1.35
========= ========= ========= =========
Excess of earnings to combined fixed charges and
preferred stock dividends..........................$ 4,120 $ 2,462 $ 11,757 $ 5,995
========= ========= ========= =========
(1) Includes portion of rent expense representative of interest expense.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ACCOMPANYING FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 4,231
<SECURITIES> 41,000
<RECEIVABLES> 1,134
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 68,370
<PP&E> 134,136
<DEPRECIATION> 8,823
<TOTAL-ASSETS> 344,592
<CURRENT-LIABILITIES> 26,065
<BONDS> 92,322
0
0
<COMMON> 116
<OTHER-SE> 107,396
<TOTAL-LIABILITY-AND-EQUITY> 344,592
<SALES> 73,087
<TOTAL-REVENUES> 78,286
<CGS> 39,163
<TOTAL-COSTS> 66,452
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,970
<INCOME-PRETAX> 13,069
<INCOME-TAX> (4,762)
<INCOME-CONTINUING> 8,307
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,307
<EPS-BASIC> 0.72
<EPS-DILUTED> 0.67
</TABLE>
