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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 28, 1998
Capital Senior Living Corporation
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(Exact name of registrant as specified in its charter)
Delaware 1-17445 75-2678809
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(State or other jurisdiction of (Commission File (IRS Employer
incorporation) Number) Identification No.)
14160 Dallas Parkway, Suite 300, Dallas, Texas 75240
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (972) 770-5600
(Not Applicable)
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(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets
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On October 28, 1998, Capital Senior Living Corporation (the "Company"),
through Capital Senior Living Properties 2-Gramercy, Inc. and Capital Senior
Living Properties 2-NHPCT, Inc., both indirect wholly-owned subsidiaries,
completed the acquisition of two senior living communities from Gramercy Hill
Enterprises, a Texas limited partnership ("Gramercy"), and Tesson Heights
Enterprises, a Texas limited partnership ("Tesson"), for aggregate consideration
of approximately $34,000,000, pursuant to the terms of certain Asset Purchase
Agreements, attached hereto as Exhibit 2.1 and Exhibit 2.2, dated as of July 28,
1998, by and between Gramercy and Tesson, respectively, and Capital Senior
Living Properties, Inc. The funds for the Tesson transaction were provided from
working capital of the Company and from the proceeds of a loan pursuant to the
terms of the Loan Agreement, dated as of September 30, 1998, with Lehman
Brothers Holdings Inc. d/b/a Lehman Capital, a division of Lehman Brothers
Holdings Inc. The funds for the Gramercy transaction were provided from working
capital of the Company, the assumption of a $6,400,000 promissory note and from
the proceeds of a $1,980,000 loan from WMF Washington Mortgage Corp.
The senior living communities acquired by the Company are Gramercy Hill
in Lincoln, Nebraska and Tesson Heights, in St. Louis, Missouri. The purchase
price for the properties was determined through negotiations between the
parties, which was the result of an active bid process.
Item 7. Financial Statements and Exhibits
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(a) Financial Statements of business acquired.
The financial statements required are not included in this
Form 8-K Current Report, but will be filed not later than
seventy-five days after the date of this Form 8-K Current
Report.
(b) Pro forma financial information.
The pro forma financial statements required are not included
in this Form 8-K Current Report, but will be filed not later
than seventy-five days after the date of this Form 8-K Current
Report.
(c) Exhibits.
*2.1 Asset Purchase Agreement, dated as of July 28, 1998, by and
between Capital Senior Living Properties, Inc. and Gramercy Hill
Enterprises.
*2.2 Asset Purchase Agreement, dated as of July 28, 1998, by and
between Capital Senior Living Properties, Inc. and Tesson Heights
Enterprises.
2.3 Loan Agreement, dated as of September 30, 1998, by and between
Capital Senior Living Properties 2 - NHPCT, Inc. and Lehman
Brothers Holdings Inc. d/b/a Lehman Capital, a division of Lehman
Brothers Holdings Inc. (filed as Exhibit 2.3 to Form 8-K of the
Company, dated September 30, 1998).
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*2.4 Assumption and Release Agreement, effective as of October 28,
1998, among Gramercy Hill Enterprises, Andrew C. Jacobs, Capital
Senior Living Properties 2- Gramercy, Inc., Capital Senior Living
Corporation and Fannie Mae.
*2.5 Multifamily Note, dated December 4, 1997, of Gramercy Hill
Enterprises in favor of Washington Mortgage Financial Group, Ltd.
*2.6 Multifamily Deed of Trust, dated December 4, 1997, among Gramercy
Hill Enterprises, Ticor Title Insurance Company and Washington
Mortgage Financial Group, Inc.
*2.7 Multifamily Note, dated October 28, 1998, of Capital Senior
Living Properties 2- Gramercy, Inc. in favor of WMF Washington
Mortgage Corp.
*2.8 Multifamily Deed of Trust, Assignment of Rents and Security
Agreement, dated October 28, 1998, among Capital Senior Living
Properties 2-Gramercy, Inc., Chicago Title Insurance Company and
WMF Washington Mortgage Corp.
*99.1 Press Release, dated October 29, 1998.
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*Filed herewith
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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 hereunto duly authorized.
CAPITAL SENIOR LIVING CORPORATION
(Registrant)
Date: November 12, 1998
By: /s/ Lawrence A. Cohen
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Lawrence A. Cohen
Chief Financial Officer
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<TABLE>
<CAPTION>
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EXHIBIT INDEX
Sequentially
Exhibit No. Exhibit Description Numbered Page
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*2.1 Asset Purchase Agreement, dated as of July 28, 1998, by
and between Capital Senior Living Properties, Inc. and
Gramercy Hill Enterprises.
*2.2 Asset Purchase Agreement, dated as of July 28, 1998, by
and between Capital Senior Living Properties, Inc. and
Tesson Heights Enterprises.
2.3 Loan Agreement, dated as of September 30, 1998, by
and between Capital Senior Living Properties 2 - NHPCT,
Inc. and Lehman Brothers Holdings Inc. d/b/a Lehman
Capital, a division of Lehman Brothers Holdings Inc.
(filed as Exhibit 2.3 to Form 8-K of the Company, dated
September 30, 1998).
*2.4 Assumption and Release Agreement, effective as of
October 28, 1998, among Gramercy Hill Enterprises,
Andrew C. Jacobs, Capital Senior Living Properties 2-
Gramercy, Inc., Capital Senior Living Corporation and
Fannie Mae.
*2.5 Multifamily Note, dated December 4, 1997, of Gramercy
Hill Enterprises in favor of Washington Mortgage
Financial Group, Ltd.
*2.6 Multifamily Deed of Trust, dated December 4, 1997,
among Gramercy Hill Enterprises, Ticor Title Insurance
Company and Washington Mortgage Financial Group,
Inc.
*2.7 Multifamily Note, dated October 28, 1998, of Capital
Senior Living Properties 2-Gramercy, Inc. in favor of
WMF Washington Mortgage Corp.
*2.8 Multifamily Deed of Trust, Assignment of Rents and Security
Agreement, dated October 28, 1998, among Capital Senior
Living Properties 2-Gramercy, Inc., Chicago Title Insurance
Company and WMF Washington Mortgage Corp.
*99.1 Press Release, dated October 29, 1998
<FN>
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*Filed herewith
</FN>
</TABLE>
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ASSET PURCHASE AGREEMENT
Dated as of July 28, 1998
between
Capital Senior Living Properties, Inc.,
a Texas corporation
and
Gramercy Hill Enterprises,
a Texas general partnership
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<TABLE>
<CAPTION>
<S> <C>
Table of Contents
Page
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Article I. DEFINITIONS........................................................................1
Section 1.1 Definitions...............................................................1
Section 1.2 Interpretation............................................................5
Article II. SALE AND PURCHASE OF ACQUIRED ASSETS...............................................5
Section 2.1 Purchase And Sale.........................................................5
Section 2.2 Acquired Assets and Excluded Assets.......................................6
Section 2.3 Assumption of Certain Liabilities and Obligations.........................8
Article III. PURCHASE PRICE....................................................................11
Section 3.1 Purchase Price...........................................................11
Section 3.2 Allocation of Purchase Price.............................................11
Article IV. THE CLOSING.......................................................................11
Section 4.1 Closing Date.............................................................11
Section 4.2 Transactions To Be Effected At The Closing...............................12
Article V. REPRESENTATIONS AND WARRANTIES OF SELLER..........................................12
Section 5.1 Seller's Organization; Good Standing.....................................12
Section 5.2 Authority; Execution and Delivery.......................................12
Section 5.3 Consents; No Violation, Etc..............................................13
Section 5.4 Financial Statements; Undisclosed Liabilities............................13
Section 5.5 Title to Acquired Assets.................................................13
Section 5.6 Real Property............................................................13
Section 5.7 Accounts Receivable......................................................14
Section 5.8 Absence of Certain Changes or Events.....................................14
Section 5.9 Employment Matters .....................................................14
Section 5.10 Employee Benefit Plans...................................................14
Section 5.11 Litigation...............................................................14
Section 5.12 Compliance with Laws.....................................................15
Section 5.13 Sufficiency of Acquired Assets...........................................15
Section 5.14 Contracts................................................................15
Section 5.15 Environmental Matters....................................................16
Section 5.16 Interests in Seller......................................................16
Section 5.17 No Brokers...............................................................16
Section 5.18 Exclusive Representations and Warranties.................................16
Article VI. REPRESENTATIONS AND WARRANTIES OF PURCHASER.......................................16
Section 6.1 Purchaser's Organization; Good Standing..................................16
Section 6.2 Authority; Execution and Delivery........................................16
Section 6.3 Consents; No Violations, Etc.............................................17
Section 6.4 Litigation...............................................................17
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Section 6.5 No Brokers...............................................................17
Section 6.6 ERISA....................................................................17
Section 6.7 Availability of Funds....................................................17
Article VII. CERTAIN COVENANTS AND AGREEMENTS..................................................17
Section 7.1 Covenants of Seller Relating to Conduct of Business......................17
Section 7.2 Purchaser's Access to Information........................................18
Section 7.3 Purchaser's Preservation of Records......................................18
Section 7.4 Legal Conditions to Closing..............................................19
Section 7.5 Employee Matters.........................................................19
Section 7.6 Collection of Receivables................................................20
Section 7.7 Expenses.................................................................20
Section 7.8 Financial Information....................................................21
Section 7.9 Bulk Transfer Laws.......................................................21
Section 7.10 Actions of Purchaser.....................................................21
Section 7.11 No Additional Representations............................................21
Section 7.12 Maintenance; Repair; Risk of Loss........................................22
Section 7.13 NO REPRESENTATIONS BY SELLER.............................................23
Section 7.14 RELEASE..................................................................23
Section 7.15 Disclosure Supplement....................................................24
Article VIII. CONDITIONS PRECEDENT..............................................................24
Section 8.1 Conditions to Each Party's Obligations...................................24
Section 8.2 Conditions to Obligations of Purchaser...................................25
Section 8.3 Conditions to the Obligations of Seller..................................26
Article IX. TERMINATION, AMENDMENT AND WAIVER.................................................28
Section 9.1 Termination..............................................................28
Section 9.2 Amendments and Waivers...................................................30
Article X. INDEMNIFICATION.................................................................30
Section 10.1 Indemnification by Seller................................................30
Section 10.2 Indemnification by Purchaser.............................................31
Section 10.3 Losses Net of Insurance, etc.............................................32
Section 10.4 Termination of Indemnification...........................................32
Section 10.5 Procedure................................................................33
Article XI. General Provisions..............................................................34
Section 11.1 Notices..................................................................34
Section 11.2 Headings.................................................................35
Section 11.3 Survival of Representations and Warranties...............................35
Section 11.4 Severability.............................................................35
Section 11.5 Counterparts.............................................................36
Section 11.6 Entire Agreement; No Third Party Beneficiaries...........................36
Section 11.7 Governing Law............................................................36
Section 11.8 Consent to Jurisdiction..................................................36
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Section 11.9 Publicity................................................................36
Section 11.10 Assignment...............................................................36
</TABLE>
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of July 28, 1998 (this
"Agreement"), is by and between Capital Senior Living Properties, Inc., a Texas
corporation (or its permitted assigns as provided in Section 11.10 hereof), as
purchaser ("Purchaser"), and Gramercy Hill Enterprises, a Texas general
partnership, as seller ("Seller").
WHEREAS, Seller is engaged in the Business; and
WHEREAS, Seller desires to sell to Purchaser, and Purchaser
desires to purchase from Seller, substantially all of the assets used in
connection with the Business, all upon the terms and subject to the conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto hereby agree as
follows:
Article I. DEFINITIONS
Section 1.1 Definitions. As used in this Agreement, the following
terms shall have the meanings set forth below:
"Acquired Assets" shall have the meaning set forth in Section
2.2(a).
"Acquired Employees" shall have the meaning set forth in
Section 7.5(a).
"Affiliate" shall mean, with respect to any person, any other
person that directly or indirectly Controls, is Controlled by or is under common
Control with such first person. A person shall be deemed to "Control" another
person if such first person has the power to direct or cause the direction of
such other person, whether through ownership of securities, by contract or
otherwise.
"Assumed Liabilities" shall have the meaning set forth in
Section 2.3(a).
"Benefit Plan" shall have the meaning set forth in Section
5.10.
"Business" shall mean the operation of the 148-unit full
service retirement community (including 89 independent living units and 59
assisted living units) located at 6800 "A" Street, Lincoln, Nebraska.
"Business Account Payable" shall mean any account payable of
Seller that relates primarily to or arises primarily out of the operation of the
Business.
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"Business Account Receivable" shall mean any account
receivable of Seller that relates primarily to or arises primarily out of the
operation of the Business.
The term "business day" shall mean any day other than a
Saturday, Sunday or other day on which banks in the City of New York are
permitted or required to close by law or regulation.
"Business Equipment" shall mean all furniture, medical and
other equipment, tools, and other tangible property (except for the Excluded
Assets) that are used or held primarily for use in the Business.
"Business Inventory" shall mean all inventory of goods and
supplies used or maintained in connection with the Business including, but not
limited to, food, cleaning materials, disposables, linens, consumables, office
supplies, drugs and medical supplies.
"Business Names" shall mean all of Seller's goodwill relating
to the Business and Seller's rights to the use in the Business of the names and
marks "Gramercy Hill" and any and all formative, variants and derivatives
thereof.
"Closing" and "Closing Date" shall have the respective
meanings set forth in Section 4.1 or Section 7.12(b), as applicable.
"Closing Date Undertaking" shall have the meaning set forth in
Section 8.3(d).
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Confidentiality Agreement" shall have the meaning set forth
in Section 7.2.
"Contracts" shall mean contracts, leases, indentures,
agreements, commitments, purchase orders and all other legally binding
arrangements, whether in existence on the date hereof or subsequently entered
into, including all amendments thereto.
"Disclosure Schedule" shall mean the Schedules referred to in
Article V of this Agreement.
"Environmental Law" shall mean any applicable Governmental
Rule issued, promulgated or entered into by any Governmental Entity relating to
the environment, to the preservation or reclamation of natural resources, or to
Hazardous Substances.
"Escrow Amount" shall have the meaning set forth in Section
4.2(c).
"Excel" shall mean Excel Retirement Communities, Inc.
"Excluded Assets" shall have the meaning set forth in Section
2.2(b).
"Excluded Liabilities" shall have the meaning set forth in
Section 2.3(b).
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"Facility" shall mean the real property located in Lincoln,
Nebraska on which the Business is operated, as such real property is more
specifically described in Exhibit A, together with Seller's right, title and
interest in all buildings, fixtures and improvements thereon.
"Financial Statements" shall have the meaning set forth in
Section 5.4.
"First Six-Month Period" shall have the meaning set forth in
Section 10.1.
"General Assignment and Bill of Sale" shall have the meaning
set forth in Section 8.2(d).
"Governmental Entity" shall mean any court, administrative
agency or commission or other governmental authority or instrumentality, whether
domestic or foreign.
"Governmental Rule" shall mean any law, judgment, order,
decree, statute, ordinance, rule or regulation issued or promulgated by any
Governmental Entity.
"Gramercy Hill Limited Partnership" shall mean Gramercy Hill
Limited Partnership, a Nebraska limited partnership and the owner of a majority
of the partnership interests in Seller.
"Hazardous Substance" means any materials listed in 49 C.F.R.
__ss.__172.101 and any materials defined as toxic or hazardous pursuant to 42
U.S.C.A. ss. 9601 (14) or any other Environmental Law.
"HSR Act" shall mean Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Lender" shall mean the mortgagee (together with its permitted
assigns) pursuant to the Mortgage.
"Lien" shall mean any mortgage, claim, charge, lien, security
interest, easement, right of way, pledge, covenant, restriction or encumbrance
of any nature whatsoever.
"Loss" shall mean any loss, liability, claim, damage or
expense, including reasonable legal fees and expenses.
"Management Contract" shall mean the management contract
between Excel and Seller pursuant to which Excel manages the Facility.
"Marketing Materials" shall mean all advertising materials,
customer lists, training materials and market research materials.
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"Material Adverse Effect" shall mean an effect which,
individually or together with other adverse effects, is materially adverse to
the business, assets, financial condition or results of operations of the
Business taken as a whole, other than an effect relating to the economy in
general or changes relating to the Business' industry in general.
"Mortgage" shall mean the mortgage or deed of trust in respect
of the Facility, between Washington Mortgage Financial Group, Ltd. and Seller
and related documents, true and correct copies of which have previously been
delivered to Purchaser.
"Partnership Agreement" shall mean the Amended and Restated
Partnership Agreement of Gramercy Hill Enterprises dated as of January 31, 1985,
as amended by the First Amendment dated as of December 23, 1986.
"Partnership Consent" shall have the meaning set forth in
Section 5.2.
"Permitted Lien" shall mean (i) any Lien disclosed in Schedule
I, (ii) any Lien for Taxes, assessments and other governmental charges that are
not yet due and payable or that may thereafter be paid without penalty, or that
are being contested in good faith by appropriate proceedings and (iii)<0- 95>any
imperfection of title or other covenants, restrictions or encumbrance that,
individually or in the aggregate with other such imperfections, covenants,
restrictions and encumbrances, is not substantial in character or amount and
does not materially interfere with the use of the Acquired Assets in the
Business as presently conducted.
The term "person" shall mean any individual, corporation,
partnership, limited liability company, joint venture, trust, business
association, organization, Governmental Entity or other entity.
"Personal Property" shall mean all of the Acquired Assets
other than the Facility.
"Purchase Price" shall have the meaning set forth in Section
_3.1.
"Purchaser" shall mean Capital Senior Living Properties, Inc.,
a Texas corporation.
"Purchaser Indemnified Parties" shall have the meaning set
forth in Section 10.1.
"Salomon Smith Barney" shall mean Salomon Brothers Inc and
Smith Barney Inc., collectively.
"Second Six-Month Period" shall have the meaning set forth in
Section 10.1.
"Seller" shall mean Gramercy Hill Enterprises, a Texas general
partnership.
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"Seller Indemnified Parties" shall have the meaning set forth
in Section 10.2.
"Tax" shall mean all Federal, state, local and foreign taxes
and assessments, including all interest, penalties and additions with respect
thereto.
"Tax Return" shall have the meaning set forth in Section 3.2.
"Termination Date" shall have the meaning set forth in Section
11.3.
"Third Party Claim" shall have the meaning set forth in
Section 10.5(b).
"WARN Act" shall have the meaning set forth in Section 7.5.
Section 1.2 Interpretation
a. When used in this Agreement the words
"include", "includes" and "including" shall
be deemed to be followed by the words
"without limitation".
b. When used in this Agreement, the word
"primarily" shall be deemed to be followed
by the words "or exclusively".
c. Any terms defined in the singular shall have
a comparable meaning when used in the
plural, and vice versa.
d. When used in this Agreement, the word "or"
is not exclusive.
e. All references to Articles, Sections,
Exhibits, Schedules and Appendices shall be
deemed references to Articles, Sections,
Exhibits, Schedules and Appendices to this
Agreement.
f. This Agreement shall be deemed drafted
jointly by all the parties hereto and shall
not be specifically construed against any
party hereto based on any claim that such
party or its counsel drafted this Agreement.
Article II. SALE AND PURCHASE OF ACQUIRED ASSETS
Section 2.1 Purchase And Sale. Upon the terms and subject to the
conditions of this Agreement, on the Closing Date, Seller shall sell, assign,
transfer, convey and deliver to Purchaser, and Purchaser shall purchase, acquire
and accept, all of Seller's right, title and interest in, to and under the
Acquired Assets.
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Section 2.2 Acquired Assets and Excluded Assets.
a. The term "Acquired Assets" shall mean the
properties, assets, goodwill and rights of
whatever kind and nature, real or personal,
tangible or intangible, other than the
Excluded Assets, of Seller existing on the
Closing Date that relate primarily to or
arise primarily out of the operation of the
Business, including:
(i) the Facility;
(ii) all Business Equipment;
(iii) all Business Inventory;
(iv) all Business Accounts Receivable;
(v) all Business Names;
(vi) all right, title and interest of
Seller in and to the Contracts to
which Seller is a party or by which
Seller is bound that are listed in
Schedule 5.14 (other than those
Contracts which are identified on
Schedule 5.14 as Contracts not being
assumed by Purchaser), and all
other Contracts to which Seller is a
party on the Closing Date that
relate primarily to or arise
primarily out of the operation of
the Business that are not required
to be listed in such Schedule 5.14
and which were entered into in the
ordinary course of the Business, in
each case, to the extent such
Contracts are assignable;
(vii) all Marketing Materials that relate
primarily to or arise primarily out
of the operation of the Business
that are in the possession of
Seller;
(viii) all records and lists pertaining to
residents, accounts and suppliers,
personnel records, books, ledgers,
files and other printed and written
materials reasonably necessary for
Purchaser's continuing operation of
the Business, other than books,
records and other data relating to
the Excluded Assets and the Excluded
Liabilities and other books and
records reasonably retained by
Seller; and
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(ix) all of Seller's rights against third
parties pursuant to the warranties
and guarantees identified on
Schedule 2.2(a).
b. The term "Excluded Assets" shall mean the
following:
(i) cash on hand or in banks (except
security deposits and other deposits
from tenants) and cash equivalents
owned by Seller relating to the
operations of the Business;
(ii) all rights of Seller under this
Agreement and the agreements,
instruments and certificates
delivered in connection with this
Agreement;
(iii) all records prepared in connection
with the sale of the Business,
including the bids and other
information received from third
persons in respect of the Business
and analyses relating to the
Business;
(iv) any assets under any Benefit Plan;
(v) all rights relating to the Excluded
Liabilities;
(vi) business records reasonably retained
by Seller; provided, however, that
Purchaser may retain copies of such
records that are reasonably required
in the operation of the Business by
Purchaser;
(vii) any tax refunds, insurance refunds
from prepaid insurance, insurance
deposits or recoveries from claims
with respect to periods (or portions
thereof) ending prior to the Closing
Date, except as provided in Section
7.12(b) hereof;
(viii) manuals developed by Excel relating
to personnel, marketing and account-
ing policies and procedures;
(ix) the Management Contract;
(x) furniture, computers and similar
tangible property not located at the
Facility and identified on Schedule
2.2(b); and
(xi) all of Seller's rights, claims,
causes of action or rights of
set-off against third parties
relating to the Business or Acquired
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Assets with respect to periods (or
portions thereof) ending on or prior
to the Closing Date.
c. Nothing in this Agreement shall be construed
as an attempt by Seller to assign any
Contract to the extent that such Contract is
not assignable without the necessary consent
of the other party or parties thereto.
Seller shall use reasonable efforts, in
cooperation with Purchaser, to secure any
necessary consent to assignment of those
Contracts indicated with an asterisk on
Schedule 5.14 which consent has not been
obtained prior to the Closing Date;
provided, however, that Seller shall not be
required to make any payment to any person
or forego any benefits in order to obtain
such consent.
Section 2.3 Assumption of Certain Liabilities and Obligations.
a. Upon the terms and subject to the conditions of this
Agreement, Purchaser shall assume, effective as of the
Closing, and agrees to pay, perform and discharge when
due, and agrees to indemnify Seller and its Affiliates
and hold Seller and its Affiliates harmless from and
after the Closing from, the Assumed Liabilities (as
defined below). "Assumed Liabilities" means the
following and only the following:
(i) all obligations and liabilities of
Seller pursuant to the Mortgage and
pursuant to the Contracts included
in the Acquired Assets; provided
that (x) all payments pursuant to
the Mortgage which are due prior to
the Closing Date and (y) all
payments pursuant to the Contracts
included in the Acquired Assets
which are due prior to the Closing
Date shall have been paid by Seller;
(ii) all Business Accounts Payable for
which payment is made by Seller to
Purchaser pursuant to Section 2.3(c)
hereof;
(iii) any obligation or liability for
Taxes for any periods that are
attributable to the Business or
relating to the Acquired Assets,
relating to any periods (or portions
thereof) beginning on or after the
Closing Date; and
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(iv) the obligations of Seller with
respect to accrued but untaken
vacation and sick days earned by
Acquired Employees as of the Closing
Date, to the extent that Seller has
paid Purchaser for such obligations
as provided in Section 7.5(c).
b. The term "Excluded Liabilities" shall mean:
(i) any obligation or liability for
Taxes that relates primarily to or
arises primarily as a result of any
of the Excluded Assets;
(ii) any obligation or liability for
income Taxes that relates solely to
or arises solely as a result of the
sale or transfer from Seller to
Purchaser of any of the Acquired
Assets;
(iii) any obligation or liability of
Seller for Taxes attributable to the
Business or relating to the Acquired
Assets for any periods (or portions
thereof) ending on or prior to the
Closing;
(iv) all obligations and liabilities of
Seller in respect of any current or
former employee of Seller engaged in
the Business, which obligation or
liability arises out of acts or
conditions that occurred prior to
the Closing Date, including, without
limitation, any liability or
obligation under bonus programs
maintained by Seller;
(v) except as otherwise provided in
Section 7.5(c), any obligation or
liability of Seller arising under or
in connection with any Benefit Plan;
(vi) all payments due prior to the
Closing Date pursuant to (x) the
Mortgage and (y) the Contracts
included in the Acquired Assets;
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(vii) all Business Accounts Payable for
which payment is not made by Seller
to Purchaser pursuant to Section
2.3(c) hereof;
(viii) any liability under the Management
Contract; and
(ix) any obligations of Seller with
respect to accrued but untaken
vacation and sick days earned by
Acquired Employees as of the Closing
Date, except to the extent that
Seller shall have paid Purchaser for
such obligations as provided in
Section 7.5(c).
c. Except as to those items which are to be apportioned as
provided in Section 2.3(d) below, with regard to
expenses incurred in respect of Business Accounts
Payable during periods (or portions thereof) ending on
or prior to the Closing Date, Seller agrees (i) to pay
all Business Accounts Payable due and payable prior to
the Closing Date and (ii) at the Closing, to pay to
Purchaser an amount equal to the estimated cost of
Business Accounts Payable not previously paid.
d. Any ad valorem, use, real and personal property,
intangible and other similar Taxes, installments or
special assessments, utility, water or similar payments
arising from, or relating to, the Acquired Assets or
the conduct of the Business (including such other items
as are normally apportioned at the closings of
properties similar to the Facility in Lancaster County,
Nebraska), which relate to periods both before and
after the Closing Date, shall be prorated and adjusted
between Seller and Purchaser as of the Closing Date on
a per diem basis and Seller shall be responsible only
for the portion of such amounts allocable to the period
prior to the Closing Date and Purchaser shall be
responsible for the remainder.
e. Except as otherwise agreed to by the parties, whenever
it is necessary to deter- mine the liability for Taxes
for a portion of a taxable year or period that begins
before and ends on or after the Closing Date, the
determination of the Taxes for the portion of the year
or period ending on, and the portion of the year or
period beginning on or after, the Closing Date shall be
determined by assuming that the taxable year or period
ended at the close of business on the Closing Date.
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f. Except for the Assumed Liabilities, all obligations and
liabilities arising as a result of the ownership by
Seller prior to the Closing of, or the operation prior
to the Closing of the activities conducted at, the
Facility (including all obligations and liabilities
relating to personal injury or Environmental Laws)
shall be the responsi- bility of Seller. All
obligations and liabilities arising as a result of the
ownership by Purchaser subsequent to the Closing of, or
the operation subsequent to the Closing of the
activities conducted at, the Facility (including all
obligations and liabilities relating to personal injury
or Environmental Laws) shall be the responsi- bility of
Purchaser.
Article III. PURCHASE PRICE
Section 3.1 Purchase Price. The purchase price for the Acquired Assets
shall be an amount in cash (the "Purchase Price") equal to (x) $11,000,000 less
(y) the principal amount of the Mortgage outstanding as of the Closing Date.
Section 3.2 Allocation of Purchase Price. On or prior to the Closing
Date, Seller and Purchaser shall mutually agree on an allocation of the Purchase
Price and the amount of the Assumed Liabilities (and other capitalized costs)
among the Acquired Assets in accordance with Section 1060 of the Code and the
regulations promulgated thereunder and all applicable provisions of state, local
and foreign law (such allocations, the "Section 1060 Allocations"). If Seller
and Purchaser are unable to agree with respect to the Section 1060 Allocations,
Seller and Purchaser shall select a firm of independent certified public
accountants mutually acceptable to Seller and Purchaser from among Price
Waterhouse Coopers LLP, KPMG Peat Marwick LLP, Deloitte & Touche LLP, Ernst &
Young LLP, and Arthur Andersen LLP to determine such allocations. The
conclusions of such accounting firm shall be binding on the parties. The fees
and expenses of such accounting firm shall be shared equally by Seller and
Purchaser. Each of the parties hereto agrees (i) to prepare and file reports,
returns, declarations, statements, forms, extensions or other documents filed or
required to be filed with any federal, state, local or other governmental
department, court or other authority in respect of any Tax ("Tax Returns"),
including Form 8594, in a manner consistent with the Section 1060 Allocations,
as finally determined pursuant to this Section 3.2, (ii) to report this
transaction for federal, state, local and foreign income tax purposes in
accordance with the Section 1060 Allocations, as finally determined pursuant to
this Section 3.2, and (iii) to use its best efforts to sustain the Section 1060
Allocations, as finally determined pursuant to this Section 3.2, in any
subsequent tax audit or dispute.
Article IV. THE CLOSING
Section 4.1 Closing Date. The closing of the sale and transfer of the
Acquired Assets (hereinafter called the "Closing") shall take place at the
offices of Dewey Ballantine LLP, 1301 Avenue of the Americas, New York, New York
10019, on the last business day of the month in which all of the conditions to
each party's obligations under Article VIII have been satisfied or waived, or at
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such other time, date and place as shall be mutually agreed to by the parties
hereto (such date of the Closing being hereinafter referred to as the "Closing
Date").
Section 4.2 Transactions To Be Effected At The Closing. At the
Closing:
a. Seller shall deliver or cause to be delivered to
Purchaser all documents referred to in Section 8.2, in
each case appropriately executed;
b. Purchaser shall deliver or cause to be delivered to
Seller (i) the Closing Date Undertaking, appropriately
executed; and (ii) all other documents referred to in
Section 8.3, in each case appropriately executed; and
c. Purchaser shall pay (i) $2,300,000 of the Purchase
Price (the "Escrow Amount") by wire transfer to an
escrow account to be established prior to the Closing
Date and (ii) the remainder of the Purchase Price
(which remainder shall be equal to (x) $11,000,000 less
(y) the principal amount of the Mortgage outstanding as
of the Closing Date less (z) the Escrow Amount) by wire
transfer to such bank account or accounts as may be
designated by Seller. Purchaser shall be provided with
wire transfer instructions at least two business days
prior to the Closing Date. The Escrow Amount shall be
disbursed to Seller by the escrow agent at such times
and by such amounts as the indemnification obligations
of Seller to the Purchaser Indemnified Parties are
reduced in accordance with the provisions of Article X
hereof.
Article V. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser as follows:
Section 5.1 Seller's Organization; Good Standing. Seller is a general
partnership, duly organized, validly existing and in good standing under the
laws of the State of Texas. Seller has the requisite power and authority to own
the Acquired Assets and to carry on the Business as currently conducted. Seller
is duly qualified to conduct business as a foreign entity in the State of
Nebraska.
Section 5.2 Authority; Execution and Delivery. Seller has the requisite
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Seller, and the consummation of the transactions contemplated hereby have
been duly and validly authorized, subject to the consent of at least 51% in
interests of the Class A Limited Partners of Gramercy Hill Limited Partnership
(the "Partnership Consent"). Seller agrees to make a good faith effort to obtain
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the Partnership Consent. This Agreement has been duly executed and delivered by
Seller and, assuming the due authorization, execution and delivery of this
Agreement by Purchaser, constitutes the legal, valid and binding obligation of
Seller, enforceable against Seller in accordance with its terms, subject to the
Partnership Consent, and subject to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and other similar laws affecting
creditors' rights generally from time to time in effect and to general
principles of equity (including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing) regardless of whether considered in
a proceeding in equity or at law.
Section 5.3 Consents; No Violation, Etc. Except for the applicable
requirements of the HSR Act and the rules and regulations promulgated thereunder
and except as set forth on Schedule 5.3, the execution and delivery of this
Agreement do not, and the consummation of the transactions contemplated hereby
and the compliance with the terms hereof will not (i) violate any Governmental
Rule applicable to Seller, (ii) subject to the Partnership Consent, conflict
with the Partnership Agreement, (iii) subject to the receipt of all required
consents to the assumption by Purchaser of all obligations and liabilities of
Seller pursuant to the Mortgage, conflict with any Contract set forth on
Schedule 5.14, or (iv) require any approval, authorization, consent, license,
exemption, filing or registration with any court, arbitrator or Governmental
Entity, except for such approvals, authorizations, consents, actions or filings
which have been obtained or made or which, if not obtained or made, would not
have a Material Adverse Effect or materially interfere with Seller's performance
of its obligations hereunder. Seller is not a "foreign person" as defined in
Section 1445 of the Code and the regulations relating thereto.
Section 5.4 Financial Statements; Undisclosed Liabilities. Attached
hereto as Schedule 5.4 are the audited financial statements of Seller as of
December 31, 1995, December 31, 1996 and December 31, 1997 and unaudited
financial statements for the six months ended June 30, 1998 (the "Financial
Statements"). The Financial Statements have been prepared from the books and
records of Seller and fairly present in all material respects the financial
condition and results of operations of Seller for the periods indicated (except
in each case as described in Schedule 5.4 and as may be described in the notes
included therein). There are no liabilities or obligations related to the
Business which would reasonably be expected to have a Material Adverse Effect,
except (i) as reflected in the Financial Statements, (ii) as disclosed in the
Disclosure Schedule, (iii) for purchase contract and orders for inventory
entered into in the ordinary course of business, (iv) for liabilities incurred
in the ordinary course of business since December 31, 1997 and (v) for Excluded
Liabilities.
Section 5.5 Title to Acquired Assets. Seller has good and valid title
to all the Acquired Assets, free and clear of all Liens other than Permitted
Liens. This Section 5.5 does not relate to the Facility, which is exclusively
the subject of Section 5.6.
Section 5.6 Real Property. Seller has good and insurable fee title to
the Facility, free and clear of all Liens other than (i) Permitted Liens, (ii)
easements, covenants, rights-of-way, and other encumbrances or restrictions
shown on the title commitment or survey previously delivered to Purchaser by
Seller, (iii) any grants or reservation of surface or subsurface rights of
others in and to the removal and mining of oil, gas or minerals, including
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rights of ingress and egress with respect thereto, (iv) zoning, building, land
use and other restrictions imposed under any Governmental Rule and (v)
easements, covenants, rights-of-way or other encumbrances, restrictions or
imperfections of title not shown on the title commitment or survey previously
delivered to Purchaser by Seller, none of which items set forth in clauses
(iii), (iv) or (v), individually or in the aggregate, materially interfere with
the use of the Facility in the Business as presently conducted.
Section 5.7 Accounts Receivable. All the trade accounts receivable of
Seller that relate primarily to or arise primarily out of the operation of the
Business as of the Closing Date will represent actual sales made in the ordinary
course of business.
Section 5.8 Absence of Certain Changes or Events. Except as set forth
in Schedule 5.8, to Seller's actual knowledge, since December 31, 1997, Seller
has conducted the Business in the ordinary course consistent with past practice,
and there has not occurred any event or condition which would reasonably be
expected to have a Material Adverse Effect.
Section 5.9 Employment Matters
a. Schedule 5.9(a) sets forth, as of the date
hereof, all collective bargaining or similar
agreements with any labor unions or
associations representing employees of the
Business.
b. Except as set forth on Schedule 5.9(b), the
Business is in compliance with all
applicable laws, regulations and orders
relating to the employment of labor,
including all such laws, regulations and
orders relating to wages and hours, labor
relations, civil rights, safety and health,
workers' compensation, except for such
noncompliance which would not have a
Material Adverse Effect.
Section 5.10 Employee Benefit Plans. Schedule 5.10 contains a list and
a brief description of each "employee benefit plan" (as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")),
and all other employee compensation and fringe benefit plans or arrangements
(including, without limitation, all bonus, incentive and stock compensation
plans) maintained or contributed to by the Business for the benefit of any
employees of the Business (collectively, the "Benefit Plans"). Seller has made
available to Purchaser complete and correct copies of (i) each Benefit Plan (or,
in the case of any unwritten Plan, a description thereof) and (ii) the most
recent summary plan description of each Benefit Plan (if such description was
required).
Section 5.11 Litigation. As of the date hereof, there is no suit,
claim, action, investigation or proceeding pending or threatened in writing
against Seller that relates to the Business or the Acquired Assets which (i) if
adversely determined would be reasonably expected to result in a Material
Adverse Effect or (ii) challenges or seeks to prevent or enjoin the transactions
contemplated by this Agreement.
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Section 5.12 Compliance with Laws. Except as set forth on Schedule
5.12, Seller is in compliance in all material respects with all Governmental
Rules applicable to it which relate primarily to the Acquired Assets, except
where the failure to so comply would not reasonably be expected to have a
Material Adverse Effect. Except as set forth in Schedule 5.12, Seller has not
received any written notice since January 1, 1997 of any asserted violation of
any such Governmental Rules and Seller has not received any written notice that
any investigation or review by any Governmental Entity with respect to the
Business is pending or that any such investigation or review is contemplated,
except where the outcome of such investigation or review if adversely determined
would not reasonably be expected to have a Material Adverse Effect. This Section
5.12 does not relate to environmental matters, which are exclusively the subject
of Section 5.15.
Section 5.13 Sufficiency of Acquired Assets. Except as set forth in
Schedule 5.13 and except for the fact that the Management Contract is an
Excluded Asset, the Acquired Assets are sufficient for the operation of the
Business in substantially the same manner as it is currently conducted.
Section 5.14 Contracts. Except for Contracts listed on Schedule 5.14,
and except for Contracts relating to Excluded Assets, Seller is not a party to
or bound by any contract primarily relating to the Acquired Assets, or the
Assumed Liabilities which is:
(i) an indenture, note, loan or credit
agreement or other Contract relating
to the borrowing of money by Seller
or to the direct or indirect
guarantee or assumption by Seller of
the obligation of any other person
in excess of $10,000;
(ii) a lease or similar agreement under
which Seller is a lessee of, or
holds or operates, any real property
owned by any third party;
(iii) a Contract involving future payment
for goods or services by Seller of
more than $10,000 (unless terminable
without payment or penalty upon no
more than 30 days' notice);
(iv) a Contract involving the obligation
of Seller to deliver in the future
products or services for payment of
more than $10,000 (unless terminable
without payment or penalty upon no
more than 30 days' notice);
(v) a Contract evidencing any Lien on
the Acquired Assets (other than
Permitted Liens or Liens created in
the ordinary course of business); or
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(vi) a Contract with or Permit by or from
any Governmental Entity, the loss of
which would materially interfere
with the operation of the Business
as presently conducted.
Except as disclosed in Schedule 5.14, each Contract listed thereon is a valid
and binding obligation of Seller. Except as disclosed in Schedule 5.14, Seller
has not received any notice of default or notice of the intention of any party
to any such Contract to terminate such Contract. Complete and correct copies of
all Contracts referred to in Schedule 5.14, together with all modifications and
amendments thereto, have been made available to Purchaser.
Section 5.15 Environmental Matters. Seller has made available to
Purchaser a complete and correct copy of the Phase I Environmental Site
Assessment of the Facility, dated as of September 12, 1997.
Section 5.16 Interests in Seller. No partnership interests in Seller
are held by any entity other than (i) Gramercy Hill Limited Partnership and (ii)
Gramercy Hill Corp., a Nebraska corporation.
Section 5.17 No Brokers. Except for Salomon Smith Barney, the fees and
expenses of which will be paid by Seller, Seller has not entered into any
agreement, arrangement or understanding with any person or firm which will
result in the obligation to pay any finder's fee, brokerage commission or
similar payment in connection with the transactions contemplated hereby.
Section 5.18 Exclusive Representations and Warranties. Other than the
representations and warranties set forth herein, Seller is not making any other
representation or warranty, express or implied, with respect to the Business or
the Acquired Assets.
Article VI. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
Section 6.1 Purchaser's Organization; Good Standing. Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas. Purchaser is duly qualified to conduct business as a
foreign corporation in the State of Nebraska. Purchaser has all requisite
corporate power and authority to carry on its business as it is currently being
conducted.
Section 6.2 Authority; Execution and Delivery. Purchaser has the
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by Purchaser and the consummation of the transactions
contemplated hereby have been duly and validly authorized. This Agreement has
been duly executed and delivered by Purchaser and, assuming the due
authorization, execution and delivery of this Agreement by Seller, constitutes
the legal, valid and binding obligation of Purchaser, enforceable against
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Purchaser in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and other similar
laws affecting creditors' rights generally from time to time in effect and to
general principles of equity (including, without limitation, concepts of
materiality, reasonableness, good faith and fair dealing) regardless of whether
considered in a proceeding in equity or at law.
Section 6.3 Consents; No Violations, Etc. Except for the applicable
requirements of the HSR Act and the rules and regulations promulgated
thereunder, the execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby and the compliance with the
terms hereof will not (i) violate any applicable law, (ii) conflict with any
provision of the certificate of incorporation or by-laws of Purchaser or (iii)
require any approval, authorization, consent, license, exemption, filing or
registration with any court, arbitrator or Governmental Entity, except for such
approvals, authorizations, consents, actions or filings which have been obtained
or made or which, if not obtained or made, would not materially interfere with
Purchaser's performance of its obligations hereunder.
Section 6.4 Litigation. As of the date hereof, there is no suit, claim,
action, investigation or proceeding pending or threatened in writing against or
affecting Purchaser or any of its Affiliates which if adversely determined would
be reasonably expected to prevent or materially delay the ability of Purchaser
to perform its obligations hereunder.
Section 6.5 No Brokers. Purchaser has not entered into any agreement,
arrangement or understanding with any person or firm which will result in the
obligation to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
Section 6.6 ERISA. Purchaser is not acquiring the Acquired Assets with
the assets of any "employee benefit plan" as defined in Section 3(3) of ERISA.
Section 6.7 Availability of Funds. Purchaser has cash available that is
sufficient to enable it to make payment of the Purchase Price and any other
amounts to be paid by it hereunder.
Article VII. CERTAIN COVENANTS AND AGREEMENTS
Section 7.1 Covenants of Seller Relating to Conduct of Business. During
the period from the date of this Agreement and continuing until the Closing,
Seller agrees (except as expressly provided in this Agreement, Schedule 7.1 or
the Disclosure Schedule, or to the extent that Purchaser shall otherwise consent
in writing) that:
a. Ordinary Course. Seller shall carry on the
Business and operate the Acquired Assets in
the ordinary course in substantially the
same manner as presently conducted, maintain
the business records of the Business in
substantially the same manner as presently
maintained and use reasonable efforts to
preserve intact the Business' present
business organization, keep available the
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services of the Business' present employees
and preserve the Business' relationships
with residents, customers, suppliers and
others having business dealings with the
Business; provided, however, that nothing
contained herein shall be deemed to require
the expenditures of any funds outside the
ordinary course of business.
b. No Dispositions. Seller shall not sell,
lease, or transfer, or agree to sell, lease,
or transfer, any of the Acquired Assets,
except Business Inventory in the ordinary
course of business consistent with prior
practice.
c. No Salary Increases. Seller shall not
increase the salary of any employee of the
Business, except pursuant to existing
employment contracts or in the ordinary
course of business consistent with prior
practice.
d. No Additional Material Contracts. Seller
shall not enter into any Contract that would
be required to be listed on Schedule 5.14 if
it were in effect on the date hereof,
including any such Contract for the purchase
of capital assets, without the prior written
consent of Purchaser (which consent shall
not be unreasonably withheld).
e. Other Actions. Seller shall not knowingly
take any action that would reasonably be
expected to result in any of the
representations and warranties of Seller set
forth in this Agreement becoming untrue in
any material respect or in any of the
conditions of the Closing set forth in
Article VIII not being satisfied.
f. Advise of Changes. Seller shall advise
Purchaser within three business days after
Seller becomes aware of the occurrence of
any matter or event that occurs after the
date hereof and on or prior to the Closing
Date which is material to the Business.
Section 7.2 Purchaser's Access to Information. Seller shall afford to
Purchaser and its accountants, counsel and other representatives reasonable
access upon reasonable advance notice and during normal business hours during
the period prior to the Closing to all the properties, books, contracts,
commitments, Tax Returns and records of the Business (other than the Excluded
Assets). Purchaser acknowledges that any information being provided to it or its
representatives by Seller pursuant to this Agreement is subject to the terms of
a confidentiality agreement between Purchaser and Seller, dated May 5, 1998 (the
"Confidentiality Agreement"), which terms are incorporated herein by reference.
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Section 7.3 Purchaser's Preservation of Records
a. Purchaser agrees that, at its own expense, it (i) shall
preserve and keep the books, contracts, commitments and
records included in the Acquired Assets for a period of
three years from the Closing Date, or for any longer
periods as may be required by any Governmental Entity
or as may be made prudent by the circumstances of any
ongoing litigation, and (ii) shall provide Seller with
reasonable access to the foregoing upon reasonable
notice and during normal business hours. In the event
Purchaser wishes to destroy such copies and records
after the time specified above, it shall first give 60
days' prior written notice to Seller, and Seller shall
have the right, at its option and expense, and upon
prior written notice given to Purchaser within such 60
day period, to take possession of all or any portion of
such copies and records.
b. Purchaser acknowledges and agrees that Seller shall
retain copies of certain personnel records included in
the Acquired Assets which relate to Seller's
liabilities in respect of the Acquired Employees'
post-employment benefits.
c. All information received or retained by Seller or any
representative of Seller pursuant to paragraph (a) or
(b) of this Section 7.3 shall be treated as
confidential by Seller and by such representatives and,
except to the extent such information is or becomes
generally available, Seller and its representatives
shall use all reasonable efforts to maintain the
confidentiality of such information. If Seller or any
of its representatives is required to disclose any such
information by or to any Governmental Entity, Seller
shall, to the extent feasible, prior to such
disclosure, notify Purchaser of such requirement.
Purchaser shall have the right, at its own expense, to
seek confidential treatment of any information to be so
disclosed.
Section 7.4 Legal Conditions to Closing. Each of Seller and Purchaser
agrees to take all reasonable actions necessary to comply promptly with all
legal requirements which may be imposed on it with respect to the Closing
(including the prompt filing of the premerger notification report under the HSR
Act and the furnishing of all information required under the HSR Act), and shall
cooperate with and furnish information to each other and to other parties in
connection with any such legal requirements.
Section 7.5 Employee Matters
a. Offer of Employment. Purchaser shall offer employment,
effective on the Closing Date, in a comparable position
and at no less favorable base salary, to each person
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currently employed by Seller primarily in connection
with the Business. Such employment shall be subject to
a 90-day probationary period. All such employees of the
Business who accept Purchaser's offer of employment
shall be referred to herein as "Acquired Employees."
b. Provision of Similar Benefits. Purchaser shall provide
benefits to Acquired Employees that are, in the
aggregate, substantially similar to those provided to
similarly situated new employees of Purchaser and its
Affiliates generally.
c. Vacation and Other Pay. On or prior to the Closing
Date, Seller shall pay to Purchaser an amount equal to
the aggregate liability of Seller with respect to
accrued but untaken vacation and sick days earned by
Acquired Employees as of the Closing Date, and
Purchaser shall assume the obligations of Seller with
respect to such accrued but untaken vacation and sick
days.
d. WARN Act. Purchaser agrees to provide any required
notice under the Worker Adjustment and Retraining
Notification Act, as amended (the "WARN Act"), and any
similar statute, and to otherwise comply with any such
statute with respect to any "plant closing" or "mass
layoff" (as defined in the WARN Act), or similar event
affecting Acquired Employees and occurring on or after
the Closing Date. Purchaser shall indemnify and hold
harmless Seller and its Affiliates with respect to any
liability under the WARN Act or similar statute arising
from the actions of Purchaser or its Affiliates on or
after the Closing Date.
Section 7.6 Collection of Receivables. From and after the Closing,
Purchaser shall have the right and authority to collect for its own account all
accounts receivable and other items that are included in the Acquired Assets and
to endorse with the name of Seller any checks or drafts received with respect to
any such accounts receivable or other items. Seller agrees to deliver to
Purchaser any cash or other property received directly or indirectly by it with
respect to such accounts receivables and other items.
Section 7.7 Expenses. Except as provided in Section 9.1 hereof in
respect of termination of this Agreement pursuant to Section 9.1(a)(ii) hereof,
whether or not the Closing occurs, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such costs and expenses. Notwithstanding the foregoing or
any other provisions of this Agreement, (i) Purchaser and Seller shall share
equally (x) any sales, use, transfer, stamp, documentary or similar Taxes
applicable to the conveyance and transfer from Seller to Purchaser of the
Acquired Assets (except for filing fees, Taxes and related expenses the payment
of which is specifically governed by clauses (ii) and (iii) below), (y) any
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governed by clauses (ii) and (iii) below), (y) any other transfer or documentary
Taxes or any filing or recording fees and related expenses applicable to such
conveyance and transfer (except for filing fees, Taxes and related expenses the
payment of which is specifically governed by clauses (ii) and (iii) below), and
(z) if title insurance is obtained by Purchaser, the cost of the title insurance
premium for a standard form owner's policy which insures the Facility for an
amount not exceeding the Purchase Price, such policy to be in the ALTA form in
use in the State of Nebraska, (ii) Purchaser shall pay (x) any sales Taxes
payable in connection with the transfer of Personal Property and (y) the cost of
any endorsements requested by Purchaser to the standard form of owner's title
insurance policy, and (iii) Seller shall pay any filing fees, transfer Taxes and
related expenses with respect to the transfer of the Facility to Purchaser.
Purchaser shall prepare and timely file all returns and other documents required
in connection with the foregoing and shall provide Seller with evidence of
filing of such returns and documents and payment of such sales, use, transfer,
stamp, documentary and similar Taxes promptly thereafter. Notwithstanding the
foregoing or any other provisions of this Agreement, Purchaser and Seller agree
that all fees incurred in connection with any filing made pursuant to the HSR
Act shall be paid by Purchaser.
Section 7.8 Financial Information. After the Closing, upon reasonable
written notice, Purchaser and Seller shall furnish or cause to be furnished to
each other and their respective accountants, counsel and other representatives
reasonable access, during normal business hours, to such information (including
records pertinent to the Business) and assistance relating to the Business as is
reasonably necessary for financial reporting and accounting matters, the
preparation and filing of any returns, reports or forms or the defense of any
Tax audit, proceeding, claim or assessment.
Section 7.9 Bulk Transfer Laws. Purchaser hereby waives compliance by
Seller with the provisions of any so-called "bulk transfer law" of any
jurisdiction in connection with the sale of the Acquired Assets to Purchaser.
Seller shall indemnify and hold harmless Purchaser against any and all
liabilities that may be asserted by third parties against Purchaser as a result
of noncompliance with any such bulk transfer law.
Section 7.10 Actions of Purchaser. Purchaser shall not knowingly take
any action that would reasonably be expected to result in any of the
representations or warranties of Purchaser set forth in this Agreement becoming
untrue in any material respect or in any of the conditions of the Closing set
forth in Article VIII not being satisfied.
Section 7.11 No Additional Representations. Purchaser acknowledges that
it and its representatives have been permitted full and complete access to the
Acquired Assets that it and its representatives have desired or requested to see
or review, and that its representatives have had a full opportunity to meet with
Seller and representatives of Seller and employees of the Business to discuss
the Business. Purchaser acknowledges that it and its representatives have
received or have had an opportunity to review prior to the date hereof all
written materials which Seller is required to deliver or make available, as the
case may be, to Purchaser pursuant to this Agreement on or prior to the date
hereof. Purchaser acknowledges that neither Seller nor any other person has made
any representation or warranty, express or implied, as to the accuracy or
completeness of any information regarding the Business or the Acquired Assets
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except as expressly set forth in this Agreement and the Disclosure Schedule, and
that neither Seller nor any other person will be subject to any liability to
Purchaser or any other person resulting from the distribution to Purchaser, or
Purchaser's use of, any such information in any form, including the Confidential
Memorandum dated Spring 1998 relating to the Business, any documents or
materials made available to Purchaser in any "data room," and any management
presentation in expectation of the transactions contemplated hereby.
Section 7.12 Maintenance; Repair; Risk of Loss
a. Until the Closing, Seller shall maintain the Facility
in substantially its present condition, subject to
ordinary wear and tear. Notwithstanding the foregoing,
Seller shall have no obligation to make any structural
repairs or capital improvements.
b. Prior to the Closing, the risk of loss or damage
(except ordinary wear and tear) by fire or other
casualty to the Facility, and the risk of condemnation
of the Facility, is on Seller. In case of damage beyond
ordinary wear and tear or a condemnation, (i) if the
estimated cost to repair the damage or restore to
substantially the condition existing before the
casualty or condemnation shall be less than $550,000,
or if the estimated time to repair the damage or
restore is less than 120 days, Seller may, at Seller's
option, elect to proceed to Closing and assign to
Purchaser the proceeds of any insurance or award
applicable to such casualty or condemnation, or proceed
promptly to repair and restore, at Seller's expense,
such damage in a good and workmanlike manner, using
equivalent materials, in which case the Closing shall
be adjourned, pending completion of such repair and
restoration, or (ii) in any other case, either party
may terminate this Agreement upon written notice to the
other given within five (5) business days of obtaining
actual knowledge of such casualty or condemnation.
Purchaser may preserve this Agreement following receipt
of a termination notice from Seller by notifying
Seller, in writing, within five (5) business days of
Seller's election to terminate, of Purchaser's election
to purchase the Property in its damaged condition
without abatement of Purchase Price (but with an
assignment from Seller of all insurance and/or
condemnation proceeds). Notwithstanding any other
provision of this Agreement, if there is an adjournment
of the Closing Date by Seller pursuant to this Section
7.12(b), the Closing Date shall be any business day
selected by Seller after substantial completion of
restoration on ten (10) days' notice to Purchaser.
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Section 7.13 NO REPRESENTATIONS BY SELLER. OTHER THAN AS EXPRESSLY SET
FORTH IN THIS AGREEMENT, SELLER HAS NOT MADE AND DOES NOT MAKE ANY
REPRESENTATIONS OR WARRANTIES AS TO THE PHYSICAL OR ENVIRONMENTAL CONDITION,
LAYOUT, LEASES, FOOTAGE, RENTS, INCOME, EXPENSES, ZONING, OPERATIONS, OR ANY
OTHER MATTER OR THING AFFECTING OR RELATING TO THE FACILITY, INCLUDING, WITHOUT
LIMITATION, THE ENVIRONMENTAL CONDITION THEREOF. PURCHASER ACKNOWLEDGES THAT NO
SUCH REPRESENTATIONS HAVE BEEN MADE OTHER THAN AS SPECIFICALLY SET FORTH IN THIS
AGREEMENT AND AGREES UPON CLOSING TO TAKE THE FACILITY "AS IS, WHERE IS" AND
WITH ALL FAULTS, LATENT AND PATENT. WITH RESPECT TO ANY ITEMS OF PERSONAL
PROPERTY CONTAINED WITHIN THE FACILITY, SELLER HAS NOT MADE AND DOES NOT MAKE
ANY REPRESENTATIONS, PROMISES OR WARRANTIES (EXPRESS OR IMPLIED AND WHETHER
DEALING WITH MERCHANTABILITY, FITNESS FOR USE OR OTHERWISE). PURCHASER HEREBY
WAIVES, TO THE EXTENT PERMITTED BY LAW, ANY AND ALL IMPLIED WARRANTIES. NO ORAL
WARRANTIES, REPRESENTATIONS OR STATEMENTS SHALL BE CONSIDERED A PART HEREOF.
SELLER ASSUMES NO RESPONSIBILITY FOR THE CONDITION OF THE FACILITY OR PERSONAL
PROPERTY, HAS MADE NO REPRESENTATIONS WITH RESPECT THERETO AND SHALL HAVE NO
LIABILITY FOR THE ACCURACY OF ANY INSPECTION REPORT RELATING THERETO, PURCHASER
HEREBY ACKNOWLEDGING THAT PURCHASER HAS INSPECTED THE FACILITY AND PERSONAL
PROPERTY AND IS SATISFIED WITH THE CONDITION THEREOF, INCLUDING, WITHOUT
LIMITATION, THE ENVIRONMENTAL CONDITION OF THE FACILITY.
Section 7.14 RELEASE. WITHOUT LIMITING THE PROVISIONS OF SECTION 7.13
ABOVE, PURCHASER HEREBY RELEASES SELLER AND (AS THE CASE MAY BE) SELLER'S
OFFICERS, DIRECTORS, SHAREHOLDERS, TRUSTEES, PARTNERS, EMPLOYEES, MANAGERS AND
AGENTS FROM ANY AND ALL CLAIMS, DEMANDS, CAUSES OF ACTIONS, LOSSES, DAMAGES,
LIABILITIES, COSTS AND EXPENSES (INCLUDING ATTORNEY'S FEES WHETHER THE SUIT IS
INSTITUTED OR NOT) WHETHER KNOWN OR UNKNOWN, LIQUIDATED OR CONTINGENT
(HEREINAFTER COLLECTIVELY CALLED THE "CLAIMS") ARISING FROM OR RELATING TO
(i)_ ANY DEFECTS (PATENT OR LATENT), ERRORS OR OMISSIONS IN THE DESIGN OR
CONSTRUCTION OF THE FACILITY WHETHER THE SAME ARE THE RESULT OF NEGLIGENCE OR
OTHERWISE, OR (ii)_ ANY OTHER CONDITIONS, INCLUDING ENVIRONMENTAL AND OTHER
PHYSICAL CONDITIONS, AFFECTING THE FACILITY WHETHER THE SAME ARE A RESULT OF
NEGLIGENCE OR OTHERWISE. THE RELEASE SET FORTH IN THIS SECTION SPECIFICALLY
INCLUDES, WITHOUT LIMITATION, ANY CLAIMS UNDER ANY ENVIRONMENTAL LAWS OF THE
UNITED STATES, THE STATE IN WHICH THE FACILITY IS LOCATED OR ANY POLITICAL
SUBDIVISION THEREOF OR UNDER THE AMERICANS WITH DISABILITIES ACT OF 1990, AS ANY
23
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OF THOSE LAWS MAY BE AMENDED FROM TIME TO TIME AND ANY REGULATIONS, ORDERS,
RULES OF PROCEDURES OR GUIDELINES PROMULGATED IN CONNECTION WITH SUCH LAWS,
REGARDLESS OF WHETHER THEY ARE IN EXISTENCE ON THE DATE OF THIS AGREEMENT.
PURCHASER ACKNOWLEDGES THAT PURCHASER HAS BEEN REPRESENTED BY INDEPENDENT LEGAL
COUNSEL OF PURCHASER'S SELECTION AND PURCHASER IS GRANTING THIS RELEASE OF ITS
OWN VOLITION AND AFTER CONSULTATION WITH PURCHASER'S COUNSEL. THE RELEASE SET
FORTH HEREIN DOES NOT APPLY TO THE REPRESENTATIONS OF SELLER EXPRESSLY SET FORTH
IN THIS AGREEMENT OR ANY INDEMNITY OR WARRANTY MADE BY SELLER IN THIS AGREEMENT
OR ANY DOCUMENT DELIVERED BY SELLER AT CLOSING.
Section 7.15 Disclosure Supplement. From time to time prior to 5:00
p.m. New York City time on July 30, 1998, Seller may supplement or amend the
Disclosure Schedule with respect to any matter hereafter arising or any
information obtained after the date hereof. Any supplement to or amendment of
the Disclosure Schedule shall be treated for all purposes of this Agreement as
though the matters identified or described therein had been included in the
Disclosure Schedule delivered by Seller contemporaneously with the execution and
delivery of this Agreement.
Article VIII. CONDITIONS PRECEDENT
Section 8.1 Conditions to Each Party's Obligations. The obligation of
Purchaser to purchase the Acquired Assets and assume the Assumed Liabilities and
the obligation of Seller to sell, assign, convey and deliver the Acquired Assets
to Purchaser shall be subject to the satisfaction prior to the Closing of the
following conditions:
a. HSR. Any applicable waiting period under the HSR Act
shall have expired or been terminated.
b. No Litigation, Injunctions, or Restraints. No temporary
restraining order, preliminary or permanent injunction
or other legal restraint or prohibition preventing the
consummation of the transactions contemplated by this
Agreement shall be in effect.
c. Lender Consent. All required consents to the assumption
by Purchaser of all obligations and liabilities of
Seller pursuant to the Mortgage shall have been
obtained. Any fees charged by Lender in connection with
such consent shall be the responsibility of Seller.
Purchaser agrees to provide any reasonable form of
assumption of Mortgage required by Lender.
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Section 8.2 Conditions to Obligations of Purchaser. The obligation of
Purchaser to purchase the Acquired Assets and assume the Assumed Liabilities is
subject to the satisfaction on and as of the Closing of each of the following
conditions:
a. Representations and Warranties. The representations and
warranties of Seller set forth in this Agreement shall
be true and correct as of the Closing as though made on
and as of the Closing, except (i) to the extent such
representations and warranties relate to an earlier
date (in which case such representations and warranties
shall be true and correct as of such earlier date) and
(ii) except for breaches of representations and
warranties as to matters that, individually or in the
aggregate (and without regard to any materiality
qualifications contained therein), are not reasonably
likely to have a Material Adverse Effect, and Purchaser
shall have received a certificate of Seller to such
effect.
b. Performance of Obligations of Seller. Seller shall have
performed or complied in all material respects with all
obligations, conditions and covenants required to be
performed by it under this Agreement at or prior to the
Closing, and Purchaser shall have received a
certificate of Seller to such effect.
c. Opinion of Counsel to Seller.1 Purchaser shall have
received an opinion of counsel to Seller, dated the
Closing Date, to the effect that:
(i) Seller is a general partnership duly
organized, validly existing and in
good standing under the laws of the
State of Texas. Seller is duly
qualified to conduct business as a
foreign entity in the State of
Nebraska.
(ii) Seller has the power and authority
to execute this Agreement and to
consummate the transactions
contemplated hereby; the execution
and delivery of this Agreement by
Seller and the consummation of the
transactions contemplated hereby
have been duly authorized; and this
Agreement has been duly executed and
delivered by Seller and, assuming
- --------
1 Opinion to be given by Nebraska/Texas counsel.
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the due authorization, execution and
delivery of this Agreement by
Purchaser, constitutes the legal,
valid and binding obligation of
Seller enforceable against Seller in
accordance with its terms, subject
to applicable bankruptcy,
insolvency, reorganization,
moratorium, fraudulent transfer and
other similar laws affecting
creditors' rights generally from
time to time in effect and to
general principles of equity
(including, without limitation,
concepts of materiality,
reasonableness, good faith and fair
dealing) regardless of whether
considered in a proceeding in equity
or at law.
d. Deliveries. Seller shall have executed and delivered to
Purchaser (i) a deed, with covenants against grantor's
acts, for the real property included in the Facility;
(ii) a general assignment and bill of sale in
substantially the form set forth on Exhibit B hereto
(the "General Assignment and Bill of Sale") and (iii)
any required transfer tax forms and affidavits.
e. Absence of Certain Changes. Between the date of this
Agreement and the Closing Date, no event shall have
occurred, other than the announcement by a competitor
or potential competitor of a plan or intention to
construct a facility that would compete with the
Business and other than decreases in occupancy levels
due to natural attrition, which event would reasonably
be expected to result in an annualized decrease in the
combined net operating income before debt service for
calendar year 1998 of (i) the Business and (ii) the
business conducted at the 186-unit retirement community
located at 12335 West Bend Drive, St. Louis, Missouri
(the "Tesson Heights Business") of $300,000 or more, as
compared to annualized combined net operating income
before debt service of the Business and the Tesson
Heights Business for 1998 based on the seven-month
period ended July 31, 1998.
f. GAAP Financial Statements. Prior to the Closing, Seller
shall have provided Purchaser with audited financial
statements relating to the Business as of December 31,
1996 and December 31, 1997, which audited financial
statements shall be prepared in accordance with
generally accepted accounting principles.
Section 8.3 Conditions to the Obligations of Seller. The obligations
of Seller to sell, assign, convey, and deliver the Acquired Assets, or to cause
the Acquired Assets to be sold, assigned, conveyed or delivered, as applicable,
is subject to the satisfaction on and as of the Closing of each of the following
conditions:
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a. Representations and Warranties. The representations and
warranties of Purchaser set forth in this Agreement
shall be true and correct in all material respects as
of the Closing as though made on and as of the Closing,
except to the extent such representations and
warranties expressly relate to an earlier date (in
which case such representations and warranties shall be
true and correct as of such earlier date), and Seller
shall have received a certificate signed by an
authorized officer of Purchaser to such effect.
b. Performance of Obligations of Purchaser. Purchaser
shall have performed in all material respects all
obligations required to be performed by it under this
Agreement at or prior to the Closing, and Seller shall
have received a certificate signed by an authorized
officer of Purchaser to such effect.
c. Opinion of Purchaser's Counsel. Seller shall have
received an opinion of counsel to Purchaser, dated the
Closing Date, to the effect that:
(i) Purchaser is a corporation duly
organized, validly existing and in
good standing under the laws of its
state of incorporation. Purchaser is
duly qualified to conduct business
as a foreign corporation in the
State of Nebraska.
(ii) Purchaser has the requisite corpor-
ate power and authority to execute
this Agreement and to consummate the
transactions contemplated hereby;
the execution and delivery of this
Agreement and the consummation of
the transactions contemplated hereby
have been duly authorized by all
necessary corporate action on the
part of Purchaser; and this
Agreement has been duly executed and
delivered by Purchaser and, assuming
the due authorization, execution and
delivery of this Agreement by
Seller, constitutes the legal, valid
and binding obligation of Purchaser
enforceable against Purchaser in
accordance with its terms, subject
to applicable bankruptcy,
insolvency, reorganization,
moratorium, fraudulent transfer and
other similar laws affecting
creditors' rights generally from
27
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time to time in effect and to
general principles of equity
(including, without limitation,
concepts of materiality, reasonable-
ness, good faith and fair dealing)
regardless of whether considered in
a proceeding in equity or at law.
d. Deliveries. Purchaser shall have executed and delivered
(i) a Closing Date Undertaking in substantially the
form set forth on Exhibit C hereto (the "Closing Date
Undertaking") and (ii) any required transfer tax forms
and affidavits.
e. Partnership Consent. The Partnership Consent shall have
been obtained.
Article IX. TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination
a. Notwithstanding anything to the contrary in this
Agreement, this Agreement may be terminated and the
transactions contemplated hereby abandoned at any time
prior to the Closing:
(i) by Purchaser by giving written
notice to Seller at any time prior
to 5:00 p.m., New York City time, on
July 30, 1998; provided, however,
that if Seller shall have supple-
mented or amended the Disclosure
Schedule after 5:00 p.m., New York
City time, on July 28, 1998, then
the time during which Purchaser may
terminate this Agreement pursuant to
this Section 9.1(a)(i) shall be ex-
tended from 5:00 p.m., New York City
time, on July 30, 1998 until 5:00
p.m., New York City time, on August
3, 1998;
(ii) by Purchaser or Seller at any time
from and after 5:00 p.m., New York
City time, on August 13, 1998 until
such time as Seller shall have
advised Purchaser that (x) Seller
has obtained the Partnership Consent
and (y) the consent of at least 51%
in interests of the Class A Limited
Partners of the Tesson Heights
Limited Partnership to the trans-
actions contemplated by that certain
Asset Purchase Agreement dated as of
July 28, 1998 between Capital Senior
Living Properties, Inc. and Tesson
Heights Enterprises has been
obtained;
(iii) by mutual written consent of Seller
and Purchaser;
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(iv) by Seller if any of the conditions
set forth in Sections 8.1 or 8.3
shall have become incapable of
fulfillment and shall not have been
waived by Seller; or
(v) by Purchaser if any of the
conditions set forth in Sections 8.1
or 8.2 shall have become incapable
of fulfillment and shall not have
been waived by
Purchaser;
(vi) by Seller or Purchaser if the
Closing does not occur on or prior
to October 31, 1998; or
(vii) as provided for in Section 7.12(b);
provided, however, that the party seeking termination pursuant to clause (iv),
(v), (vi) or (vii) is not in breach in any material respects of any of its
representations, warranties, covenants or agreements contained in this
Agreement; and further provided, that in the event of termination of this
Agreement by Purchaser or Seller pursuant to clause (ii) above, Seller shall
promptly reimburse Purchaser for third party fees and expenses and for other
out-of-pocket expenses (but not internal time charges) reasonably incurred by
Purchaser in connection with the transactions contemplated hereby, upon
presentation by Purchaser of substantiating evidence thereof, up to a maximum
reimbursement equal to the sum of (x) $30,000 plus (y) the amount of any filing
fees paid by Purchaser in connection with filings made pursuant to the HSR Act
prior to the date of such termination.
b. In the event of termination by Seller, on the one hand,
or Purchaser, on the other hand, pursuant to this
Section 9.1, written notice thereof shall forthwith be
given to the other party and the transactions
contemplated by this Agreement shall be terminated,
without further action by any party. If the
transactions contemplated by this Agreement are
terminated as provided herein:
(i) Purchaser shall return all documents
and other material received from
Seller relating to the Business and
to the transactions contemplated
hereby, whether so obtained before
or after the execution hereof, to
Seller; and
(ii) all confidential information
received by Purchaser with respect
to Seller or the Business shall be
treated in accordance with the
Confidentiality Agreement, which
shall remain in full force and
effect notwithstanding the
termination of this Agreement.
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c. If this Agreement is terminated and the transactions
contemplated hereby are abandoned, this Agreement shall
become null and void and of no further force and
effect, except for the provisions of the last sentence
of Section 7.2 and the provisions of Sections 7.7, 9.1,
11.7, 11.8 and 11.9. Nothing in this Section 9.1 shall
be deemed to release any party from any liability for
any breach by such party of the terms and provisions of
this Agreement.
Section 9.2 Amendments and Waivers. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto. By an instrument in writing, Purchaser, on the one hand, or Seller, on
the other hand, may waive compliance by the other party with any term or
provision of this Agreement that such other party was or is obligated to comply
with or perform.
Article X. INDEMNIFICATION
Section 10.1 Indemnification by Seller
a. Seller hereby agrees to indemnify Purchaser and its
Affiliates and their respective officers, directors and
employees (the "Purchaser Indemnified Parties")
against, and agrees to hold them harmless from, any
Loss to the extent such Loss arises from or in
connection with the foregoing:
(i) any breach by Seller of any
representation or warranty contained
in this Agreement or any other
agreement or documents delivered in
connection herewith;
(ii) any breach by Seller of any of its
covenants contained in this
Agreement;
(iii) any and all claims made by third
parties arising out of the operation
of the Business by Seller prior to
the Closing Date; or
(iv) any Excluded Liability.
Notwithstanding the foregoing, the indemnifications in favor of the Purchaser
Indemnified Parties contained in this Section 10.1 shall be effective only as
follows: (x) there shall be no indemnification in respect of any individual Loss
or group of related Losses in an amount less than $10,000; and (y) with regard
to Losses in respect of which notice is given to Seller that indemnification is
sought pursuant to this Section 10.1 during the period from the Closing Date
until the 180th day after the Closing Date (the "First Six-Month Period"), the
indemnifications in favor of the Purchaser Indemnified Parties shall not be
effective once the aggregate dollar amount of all such Losses actually paid by
Seller in respect of which notice is or was given during the First Six-Month
Period aggregates $2,300,000, and Seller shall thereafter have no further
obligations or liabilities with respect to cany Losses in excess of such amount;
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<PAGE>
and (z) with regard to Losses in respect of which notice is given to Seller that
indemnification is sought pursuant to this Section 10.1 during the period from
the 181st day after the Closing Date until the 365th day after the Closing Date
(the "Second Six-Month Period"), the indemnifications in favor of the Purchaser
Indemnified Parties shall not be effective once the aggregate dollar amount of
all such Losses actually paid by Seller in respect of which notice is or was
given during the Second Six-Month Period aggregates an amount equal to (A)
$1,150,000 less (B) the amount of Losses actually paid by Seller in respect of
which notice was given to Seller that indemnification was sought pursuant to
this Section 10.1 during the First Six-Month Period, and Seller shall thereafter
have no further obligations or liabilities with respect to any Losses in excess
of such amount; provided, however, that the foregoing limitations on Seller's
indemnification obligations pursuant to this Section 10.1 shall not apply to any
indemnification by Seller for any Losses asserted against, imposed upon or
incurred by the Purchaser Indemnified Parties resulting from any Excluded
Liability or resulting from the operation of the Business by Seller prior to the
Closing Date.
1. Purchaser acknowledges and agrees that its sole and
exclusive remedy with respect to any and all claims
relating to the subject matter of this Agreement
shall be pursuant to the indemnification provisions
set forth in this Article X. In furtherance of the
foregoing, Purchaser hereby waives, to the fullest
extent permitted under applicable law, any and all
rights, claims and causes of action it may have
against Seller arising under or based upon any
Governmental Rule.
Section 10.2 Indemnification by Purchaser
a. Purchaser hereby agrees to indemnify Seller and its
Affiliates and their respective officers, general
partners, limited partners, directors, officers and
employees (the "Seller Indemnified Parties") against,
and agrees to hold them harmless from, any Loss to the
extent such Loss arises from or in connection with:
(i) any breach by Purchaser of any
representation or warranty contained
in this Agreement or any other
agreement or document delivered in
connection herewith;
(ii) any breach by Purchaser of any
covenant contained in this
Agreement;
(iii) any and all claims made by third
parties arising out of the operation
of the Business by Purchaser after
the Closing Date; or
(iv) any Assumed Liability, including any
obligations or liability included in
Section 2.3(a)(iv).
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<PAGE>
Notwithstanding the foregoing, the indemnifications in favor of the Seller
Indemnified Parties contained in this Section 10.2 shall be effective only as
follows: (x) there shall be no indemnification in respect of any individual Loss
or group of related Losses in an amount less than $10,000; and (y) with regard
to Losses in respect of which notice is given to Purchaser that indemnification
is sought pursuant to this Section 10.2 during the First Six-Month Period, the
indemnifications in favor of the Seller Indemnified Parties shall not be
effective once the aggregate dollar amount of all such Losses actually paid by
Purchaser in respect of which notice is or was given during the First Six-Month
Period aggregates $2,300,000, and Purchaser shall thereafter have no further
obligations or liabilities with respect to any Losses in excess of such amount;
and (z) with regard to Losses in respect of which notice is given to Purchaser
that indemnification is sought pursuant to this Section 10.2 during the Second
Six-Month Period, the indemnifications in favor of the Seller Indemnified
Parties shall not be effective once the aggregate dollar amount of all such
Losses actually paid by Purchaser in respect of which notice is or was given
during the Second Six-Month Period aggregates an amount equal to (A) $1,150,000
less (B) the amount of Losses actually paid by Purchaser in respect of which
notice was given to Purchaser that indemnification was sought pursuant to this
Section 10.2 during the First Six-Month Period, and Purchaser shall thereafter
have no further obligations or liabilities with respect to any Losses in excess
of such amount; provided, however, that the foregoing limitations on Purchaser's
indemnification obligations pursuant to this Section 10.2 shall not apply to any
indemnification by Purchaser for any Losses asserted against, imposed upon or
incurred by the Seller Indemnified Parties resulting from any Assumed Liability
or resulting from the operation of the Business by Purchaser after the Closing
Date.
b. Seller acknowledges and agrees that its sole and
exclusive remedy with respect to any and all claims
relating to the subject matter of this Agreement shall
be pursuant to the indemnification provisions set forth
in this Article X. In furtherance of the foregoing,
Seller hereby waives, to the fullest extent permitted
under applicable law, any and all rights, claims and
causes of action it may have against Purchaser arising
under or based upon any Governmental Rule.
Section 10.3 Losses Net of Insurance, etc. The amount of any Loss for
which indemnification is provided under this Article X shall be net of any
amounts recovered or recoverable by the indemnified party under insurance
policies with respect to such Loss.
Section 10.4 Termination of Indemnification. The obligations to
indemnify and hold harmless any party, (a) pursuant to Sections 10.1(a)(i) and
10.2(a)(i), shall terminate when the applicable representation or warranty
terminates pursuant to Section 11.3 and (b) pursuant to the other clauses of
Sections 10.1 and 10.2, shall not terminate.
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<PAGE>
Section 10.5 Procedure.
a. In order for an indemnified party (the "indemnified
party") to be entitled to any indemnification provided
for under this Agreement, such indemnified party shall,
following the discovery of the matters giving rise to
any Loss, notify the indemnifying party (the
"indemnifying party") in writing of its claim for
indemnification for such Loss, specifying in reasonable
detail the nature of such Loss and the amount of the
liability estimated to accrue therefrom; provided,
however, that failure to give such notification shall
not affect the indemnification provided hereunder
except to the extent the indemnifying party shall have
been actually prejudiced as a result of such failure
(except that the indemnifying party shall not be liable
for any expenses incurred during the period in which
the indemnified party failed to give such notice and
except that, with regard to claims for indemnification
in respect of which notice is required to be given
during the First Six-Month Period or the Second
Six-Month Period, as the case may be, pursuant to the
provisions of Sections 10.1 and 10.2 above, the
indemnifying party shall have no liability for claims
in respect of which notice has not been received within
the required time period). Thereafter, the indemnified
party shall deliver to the indemnifying party, within
five business days after the indemnified party's
receipt of such notice, all information and
documentation reasonably requested by the indemnifying
party with respect to such Loss.
b. If the indemnification sought pursuant hereto involves
a claim made by a third party against the indemnified
party (a "Third Party Claim"), the indemnifying party
shall be entitled to participate in the defense of such
Third Party Claim and, if it so chooses, to assume the
defense of such Third Party Claim with counsel selected
by the indemnifying party. Should the indemnifying
party so elect to assume the defense of a Third Party
Claim, the indemnifying party shall not be liable to
the indemnified party for any legal expenses
subsequently incurred by the indemnified party in
connection with the defense thereof. If the
indemnifying party assumes such defense, the
indemnified party shall have the right to participate
in the defense thereof and to employ counsel, at its
own expense, separate from the counsel employed by the
indemnifying party, it being understood that the
indemnifying party shall control such defense. The
indemnifying party shall be liable for the fees and
expenses of counsel employed by the indemnified party
for any period during which the indemnifying party has
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<PAGE>
not assumed the defense thereof (other than during any
period in which the indemnified party shall have failed to
give notice of the Third Party Claim as provided above). If
the indemnifying party chooses to defend or prosecute a
Third Party Claim, all of the parties hereto shall cooperate
in the defense or prosecution thereof. Such cooperation
shall include the retention and (upon the indemnifying
party's request) the provision to the indemnifying party of
records and information which are reasonably relevant to
such Third Party Claim, and making employees available on a
mutually convenient basis to provide additional information
and explanation of any material provided hereunder. If the
indemnifying party chooses to defend or prosecute any Third
Party Claim, the indemnified party will agree to any
settlement, compromise or discharge of such Third Party
Claim which the indemnifying party may recommend and which
by its terms obligates the indemnifying party to pay the
full amount of the liability in connection with such Third
Party Claim. Whether or not the indemnifying party shall
have assumed the defense of a Third Party Claim, the
indemnified party shall not admit any liability with respect
to, or settle, compromise or discharge, such Third Party
Claim without the indemnifying party's prior written
consent.
Article XI. General Provisions
Section 11.1 Notices. All notices, requests and other communica-
tions hereunder shall be in writing and shall be sent, delivered or mailed,
addressed as follows:
a. if to Purchaser, to:
David R. Brickman, Esq.
Capital Senior Living Corporation
14160 Dallas Parkway, Suite 300
Dallas, Texas 75240
and
Mr. Lawrence Cohen
Capital Senior Living Corporation
237 Park Avenue
21st Floor
New York, New York 10017
with a copy (which shall not constitute
notice) to:
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Jenkens & Gilchrist
1445 Ross Avenue
Suite 3200
Dallas, Texas 75202-2799
Attention: Winston W. Walp II, Esq.
b. if to Seller, to:
Andrew C. Jacobs
Gramercy Hill Corp.
c/o Interactive Teleservices
1033 O Street
Suite 304
Lincoln, Nebraska 68508
with a copy (which shall not constitute
notice) to:
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, NY 10019
Attention: Denise A. Cerasani, Esq.
Aileen C. Meehan, Esq.
Each such notice, request or other communication shall be given (i) by hand
delivery, (ii) by certified mail or (iii) by nationally recognized courier
service. Each such notice, request or communication shall be effective when
delivered at the address specified in this Section 11.1 (or in accordance with
the latest unrevoked direction from the receiving party).
Section 11.2 Headings. The table of contents and headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
Section 11.3 Survival of Representations and Warranties. All
representations and warranties of Seller and Purchaser contained herein or made
pursuant hereto shall survive the Closing Date for a period of one year after
the Closing Date. Any right of indemnification pursuant to Article X hereof with
respect to a claimed breach of a representation or warranty shall expire at the
date of termination of the representation or warranty claimed to be breached
(the "Termination Date"), unless on or prior to the Termination Date the party
from whom indemnification is sought shall have received notice in accordance
with the provisions of Section 10.5 herein.
Section 11.4 Severability. If any provision of this Agreement, or the
application thereof to any person, place or circumstances, shall be held by a
court of competent jurisdiction to be invalid, unenforceable, or void, the
remainder of this Agreement and such provisions as applied to other persons,
places, and circumstances shall remain in full force and effect; provided,
however, that in the event that the terms and conditions of this Agreement are
35
<PAGE>
materially altered as a result of this paragraph, the parties hereto will
renegotiate the terms and conditions of this Agreement to resolve any
inequities.
Section 11.5 Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
Section 11.6 Entire Agreement; No Third Party Beneficiaries. This
Agreement and the Confidentiality Agreement constitute the entire agreement and
supersedes all prior agreements and understandings, both written and oral, among
the parties hereto with respect to the subject matter hereof. Except as
specifically provided herein or therein, such agreements are not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder or thereunder.
Section 11.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Nebraska, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law.
Section 11.8 Consent to Jurisdiction. Each of Purchaser and Seller
irrevocably submits to the non-exclusive jurisdiction of any Nebraska state
court and any Federal Court located in the State of Nebraska for the purposes of
any suit, action or other proceeding arising out of this Agreement or any
transaction contemplated hereby. Each of Purchaser and Seller further agrees
that service of any process, summons, notice or document by U.S. registered mail
to such party's respective address set forth in Section 11.1 shall be effective
service of process for any action, suit or proceeding in Nebraska with respect
to any matters to which it has submitted to jurisdiction as set forth above in
the immediately preceding sentence. Each of Purchaser and Seller irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement or the transactions contemplated
hereby in any Nebraska state court and any Federal Court located in the State of
Nebraska and hereby further irrevocably and unconditionally waives and agrees
not to plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum.
Section 11.9 Publicity. Except as may be required by applicable
securities laws upon the advice of counsel, neither Seller, on the one hand, nor
Purchaser, on the other hand, shall issue or cause the publication of any press
release or other public announcement with respect to the transactions
contemplated by this Agreement without the consent of the other party, which
consent shall not be unreasonably withheld.
Section 11.10 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto without the prior written consent (which consent shall not be
unreasonably withheld) of the other parties, except that Purchaser may assign
its rights, interests and obligations hereunder to any Affiliate of Capital
Senior Living Corporation without the prior written consent of Seller, provided
that, prior to any such assignment to an Affiliate of Capital Senior Living
Corporation,
36
<PAGE>
Purchaser executes and delivers to Seller a written guaranty, in form reasonably
satisfactory to Seller, of the performance of all of Purchaser's obligations
under this Agreement. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the parties hereto
and their respective successors and assigns.
IN WITNESS WHEREOF, Purchaser and Seller have caused this
Agreement to be signed by their respective parties thereunto duly authorized,
all of the date first written above.
CAPITAL SENIOR LIVING
PROPERTIES, INC.
By: /s/ David R. Brickman
---------------------------
David R. Brickman
Vice President
ATTEST:
By: /s/ Scott Shamblin
------------------
Scott Schamblin
Director of Investor Services
GRAMERCY HILL ENTERPRISES, a
Texas general partnership
By: Gramercy Hill Limited Partnership,
a Nebraska limited partnership
By: Gramercy Hill Corp., a Nebraska
corporation
By: /s/ Andrew C. Jacobs
------------------------------
Andrew C. Jacobs
President
ATTEST:
By: /s/ Stephanie Clerc
-------------------
Stephanie Clerc
NY--187218.7
37
<PAGE>
GRAMERCY HILL CORP., a
Nebraska Corporation
By: /s/ Andrew C. Jacobs
--------------------------------
Andrew C. Jacobs
President
By: /s/ Stephanie Clerc
-------------------
Stephanie Clerc
38
ASSET PURCHASE AGREEMENT
Dated as of July 28, 1998
between
Capital Senior Living Properties, Inc.,
a Texas corporation
and
Tesson Heights Enterprises,
a Texas general partnership
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
TABLE OF CONTENTS
Page
Article I. DEFINITIONS....................................................................................1
Section 1.1. Definitions................................................................................1
Section 1.2. Interpretation.............................................................................4
Article II. SALE AND PURCHASE OF ACQUIRED ASSETS...........................................................5
Section 2.1. Purchase And Sale..........................................................................5
Section 2.2. Acquired Assets and Excluded Assets........................................................5
Section 2.3. Assumption of Certain Liabilities and Obligations..........................................7
Article III. PURCHASE PRICE.................................................................................9
Section 3.1. Purchase Price.............................................................................9
Section 3.2. Allocation of Purchase Price...............................................................9
Article IV. THE CLOSING....................................................................................9
Section 4.1. Closing Date...............................................................................9
Section 4.2. Transactions To Be Effected At The Closing................................................10
Article V. REPRESENTATIONS AND WARRANTIES OF SELLER......................................................10
Section 5.1. Seller's Organization; Good Standing......................................................10
Section 5.2. Authority; Execution and Delivery.........................................................10
Section 5.3. Consents; No Violation, Etc...............................................................11
Section 5.4. Financial Statements; Undisclosed Liabilities.............................................11
Section 5.5. Title to Acquired Assets..................................................................11
Section 5.6. Real Property.............................................................................11
Section 5.7. Accounts Receivable.......................................................................11
Section 5.8. Absence of Certain Changes or Events......................................................11
Section 5.9. Employment Matters........................................................................12
Section 5.10. Employee Benefit Plans................................................................12
Section 5.11. Litigation............................................................................12
Section 5.12. Compliance with Laws..................................................................12
Section 5.13. Sufficiency of Acquired Assets........................................................12
Section 5.14. Contracts.............................................................................13
Section 5.15. Environmental Matters.................................................................13
Section 5.16. Interests in Seller...................................................................13
Section 5.17. No Brokers............................................................................13
Section 5.18. Exclusive Representations and Warranties..............................................14
Article VI. REPRESENTATIONS AND WARRANTIES OF PURCHASER...................................................14
Section 6.1. Purchaser's Organization; Good Standing...................................................14
Section 6.2. Authority; Execution and Delivery.........................................................14
Section 6.3. Consents; No Violations, Etc..............................................................14
Section 6.4. Litigation................................................................................14
i
<PAGE>
Section 6.5. No Brokers................................................................................14
Section 6.6. ERISA.....................................................................................15
Section 6.7. Availability of Funds.....................................................................15
Article VII. CERTAIN COVENANTS AND AGREEMENTS..............................................................15
Section 7.1. Covenants of Seller Relating to Conduct of Business.......................................15
Section 7.2. Purchaser's Access to Information.........................................................16
Section 7.3. Purchaser's Preservation of Records.......................................................16
Section 7.4. Legal Conditions to Closing...............................................................16
Section 7.5. Employee Matters..........................................................................17
Section 7.6. Collection of Receivables.................................................................17
Section 7.7. Expenses..................................................................................17
Section 7.8. Financial Information.....................................................................18
Section 7.9. Bulk Transfer Laws........................................................................18
Section 7.10. Actions of Purchaser..................................................................18
Section 7.11. No Additional Representations.........................................................18
Section 7.12. Maintenance; Repair; Risk of Loss.....................................................19
Section 7.13. NO REPRESENTATIONS BY SELLER..........................................................19
Section 7.14. RELEASE...............................................................................20
Section 7.15. Disclosure Supplement.................................................................20
Article VIII. CONDITIONS PRECEDENT..........................................................................21
Section 8.1. Conditions to Each Party's Obligations....................................................21
Section 8.2. Conditions to Obligations of Purchaser....................................................21
Section 8.3. Conditions to the Obligations of Seller...................................................22
Article IX. TERMINATION, AMENDMENT AND WAIVER.............................................................23
Section 9.1. Termination...............................................................................23
Section 9.2. Amendments and Waivers....................................................................25
Article X. INDEMNIFICATION...............................................................................25
Section 10.1. Indemnification by Seller.............................................................25
Section 10.2. Indemnification by Purchaser..........................................................26
Section 10.3. Losses Net of Insurance, etc..........................................................27
Section 10.4. Termination of Indemnification........................................................27
Section 10.5. Procedure.............................................................................27
Article XI. GENERAL PROVISIONS............................................................................28
Section 11.1. Notices...............................................................................28
Section 11.2. Headings..............................................................................30
Section 11.3. Survival of Representations and Warranties............................................30
Section 11.4. Severability..........................................................................30
Section 11.5. Counterparts..........................................................................30
Section 11.6. Entire Agreement; No Third Party Beneficiaries........................................30
Section 11.7. Governing Law.........................................................................30
Section 11.8. Consent to Jurisdiction...............................................................30
ii
<PAGE>
Section 11.9. Publicity.............................................................................31
Section 11.10. Assignment..............................................................................31
</TABLE>
iii
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of July 28, 1998 (this
"Agreement"), is by and between Capital Senior Living Properties, Inc., a Texas
corporation (or its permitted assigns as provided in Section 11.10 hereof), as
purchaser ("Purchaser"), and Tesson Heights Enterprises, a Texas general
partnership, as seller ("Seller").
WHEREAS, Seller is engaged in the Business; and
WHEREAS, Seller desires to sell to Purchaser, and Purchaser
desires to purchase from Seller, substantially all of the assets used in
connection with the Business, all upon the terms and subject to the conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto hereby agree as
follows:
Article I. DEFINITIONS
Section 1.1. Definitions. As used in this Agreement,
the following terms shall have the meanings set forth below:
"Acquired Assets" shall have the meaning set forth in Section 2.2(a).
"Acquired Employees" shall have the meaning set forth in Section 7.5(a).
"Affiliate" shall mean, with respect to any person, any other person that
directly or indirectly Controls, is Controlled by or is under common Control
with such first person. A person shall be deemed to "Control" another person if
such first person has the power to direct or cause the direction of such other
person, whether through ownership of securities, by contract or otherwise.
"Assumed Liabilities" shall have the meaning set forth in Section 2.3(a).
"Benefit Plan" shall have the meaning set forth in Section 5.10.
"Business" shall mean the operation of the 186-unit full service retirement
community (including 128 independent living units and 58 assisted living units)
located at 12335 West Bend Drive, St. Louis, Missouri.
"Business Account Payable" shall mean any account payable of Seller that
relates primarily to or arises primarily out of the operation of the Business.
"Business Account Receivable" shall mean any account receivable of Seller
that relates primarily to or arises primarily out of the operation of the
Business.
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The term "business day" shall mean any day other than a
Saturday, Sunday or other day on which banks in the City of New York are
permitted or required to close by law or regulation.
"Business Equipment" shall mean all furniture, medical and
other equipment, tools, and other tangible property (except for the Excluded
Assets) that are used or held primarily for use in the Business.
"Business Inventory" shall mean all inventory of goods and
supplies used or maintained in connection with the Business including, but not
limited to, food, cleaning materials, disposables, linens, consumables, office
supplies, drugs and medical supplies.
"Business Names" shall mean all of Seller's goodwill relating
to the Business and Seller's rights to the use in the Business of the names and
marks "Tesson Heights" and any and all formative, variants and derivatives
thereof.
"Closing" and "Closing Date" shall have the respective
meanings set forth in Section 4.1 or Section 7.12(b), as applicable.
"Closing Date Undertaking" shall have the meaning set forth in
Section 8.3(d).
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Confidentiality Agreement" shall have the meaning set forth
in Section 7.2.
"Contracts" shall mean contracts, leases, indentures,
agreements, commitments, purchase orders and all other legally binding
arrangements, whether in existence on the date hereof or subsequently entered
into, including all amendments thereto.
"Disclosure Schedule" shall mean the Schedules referred to in
Article V of this Agreement.
"Environmental Law" shall mean any applicable Governmental
Rule issued, promulgated or entered into by any Governmental Entity relating to
the environment, to the preservation or reclamation of natural resources, or to
Hazardous Substances.
"Escrow Amount" shall have the meaning set forth in Section
4.2(c).
"Excel" shall mean Excel Retirement Communities, Inc.
"Excluded Assets" shall have the meaning set forth in Section
2.2(b).
"Excluded Liabilities" shall have the meaning set forth in
Section 2.3(b).
"Facility" shall mean the real property located in St. Louis,
Missouri on which the Business is operated, as such real property is more
specifically described in Exhibit A, together with Seller's right, title and
interest in all buildings, fixtures and improvements thereon.
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<PAGE>
"Financial Statements" shall have the meaning set forth in
Section 5.4.
"First Six-Month Period" shall have the meaning set forth in
Section 10.1.
"General Assignment and Bill of Sale" shall have the meaning
set forth in Section 8.2(d).
"Governmental Entity" shall mean any court, administrative
agency or commission or other governmental authority or instrumentality, whether
domestic or foreign.
"Governmental Rule" shall mean any law, judgment, order,
decree, statute, ordinance, rule or regulation issued or promulgated by any
Governmental Entity.
"Tesson Heights Limited Partnership" shall mean Tesson Heights
Limited Partnership, a Missouri limited partnership and the owner of a majority
of the partnership interests in Seller.
"Hazardous Substance" means any materials listed in 49 C.F.R.
_ss._172.101 and any materials defined as toxic or hazardous pursuant to 42
U.S.C.A. ss. 9601 (14) or any other Environmental Law.
"HSR Act" shall mean Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Lien" shall mean any mortgage, claim, charge, lien, security
interest, easement, right of way, pledge, covenant, restriction or encumbrance
of any nature whatsoever.
"Loss" shall mean any loss, liability, claim, damage or
expense, including reasonable legal fees and expenses.
"Management Contract" shall mean the management contract
between Excel and Seller pursuant to which Excel manages the Facility.
"Marketing Materials" shall mean all advertising materials,
customer lists, training materials and market research materials.
"Material Adverse Effect" shall mean an effect which,
individually or together with other adverse effects, is materially adverse to
the business, assets, financial condition or results of operations of the
Business taken as a whole, other than an effect relating to the economy in
general or changes relating to the Business' industry in general.
"Partnership Agreement" shall mean the Amended and Restated
Partnership Agreement of Tesson Heights Enterprises dated as of December 30,
1985.
"Partnership Consent" shall have the meaning set forth in
Section 5.2.
3
<PAGE>
"Permitted Lien" shall mean (i) any Lien disclosed in Schedule
1, (ii) any Lien for Taxes, assessments and other governmental charges that are
not yet due and payable or that may thereafter be paid without penalty, or that
are being contested in good faith by appropriate proceedings and (iii) any
imperfection of title or other covenants, restrictions or encumbrance that,
individually or in the aggregate with other such imperfections, covenants,
restrictions and encumbrances, is not substantial in character or amount and
does not materially interfere with the use of the Acquired Assets in the
Business as presently conducted.
The term "person" shall mean any individual, corporation,
partnership, limited liability company, joint venture, trust, business
association, organization, Governmental Entity or other entity.
"Personal Property" shall mean all of the Acquired Assets
other than the Facility.
"Purchase Price" shall have the meaning set forth in Section
"Purchaser" shall mean Capital Senior Living Properties, Inc.,
a Texas corporation.
"Purchaser Indemnified Parties" shall have the meaning set
forth in Section 10.1.
"Salomon Smith Barney" shall mean Salomon Brothers Inc and
Smith Barney Inc., collectively.
"Second Six-Month Period" shall have the meaning set forth in
Section 10.1.
"Seller" shall mean Tesson Heights Enterprises, a Texas
general partnership.
"Seller Indemnified Parties" shall have the meaning set forth
in Section 10.2.
"Tax" shall mean all Federal, state, local and foreign taxes
and assessments, including all interest, penalties and additions with respect
thereto.
"Tax Return" shall have the meaning set forth in Section 3.2.
"Termination Date" shall have the meaning set forth in Section
11.3.
"Third Party Claim" shall have the meaning set forth in
Section 10.5(b).
"WARN Act" shall have the meaning set forth in Section 7.5.
Section 1.2. Interpretation.
(a) When used in this Agreement the words "include",
"includes" and "including" shall be deemed to be followed by
the words "without limitation".
(b) When used in this Agreement, the word "primarily"
shall be deemed to be followed by the words "or exclusively".
4
<PAGE>
(c) Any terms defined in the singular shall have a
comparable meaning when used in the plural, and vice versa.
(d) When used in this Agreement, the word "or" is not
exclusive.
(e) All references to Articles, Sections, Exhibits,
Schedules and Appendices shall be deemed references to
Articles, Sections, Exhibits, Schedules and Appendices to this
Agreement.
(f) This Agreement shall be deemed drafted jointly by
all the parties hereto and shall not be specifically construed
against any party hereto based on any claim that such party or
its counsel drafted this Agreement.
Article II. SALE AND PURCHASE OF ACQUIRED ASSETS
Section 2.1. Purchase And Sale. Upon the terms
and subject to the conditions of this Agreement, on the Closing Date, Seller
shall sell, assign, transfer, convey and deliver to Purchaser, and Purchaser
shall purchase, acquire and accept, all of Seller's right, title and interest
in, to and under the Acquired Assets.
Section 2.2. Acquired Assets and Excluded Assets.
(a) The term "Acquired Assets" shall mean the properties, assets, goodwill and
rights of whatever kind and nature, real or personal, tangible or intangible,
other than the Excluded Assets, of Seller existing on the Closing Date that
relate primarily to or arise primarily out of the operation of the Business,
including:
(i) the Facility;
(ii) all Business Equipment;
(iii) all Business Inventory;
(iv) all Business Accounts Receivable;
(v) all Business Names;
(vi) all right, title and interest of Seller in and to the
Contracts to which Seller is a party or by which Seller
is bound that are listed in Schedule 5.14 (other than
those Contracts which are 1 identified on Schedule 5.14
as Contracts not being assumed by Purchaser), and all
other Contracts to which Seller is a party on the
Closing Date that relate primarily to or arise
primarily out of the operation of the Business that are
not required to be listed in such Schedule 5.14 and
which were entered into in the ordinary course of the
Business, in each case, to the extent such Contracts
are assignable;
5
<PAGE>
(vii)all Marketing Materials that relate primarily to or
arise primarily out of the operation of the Business
that are in the possession of Seller;
(viii) all records and lists pertaining to residents,
accounts and suppliers, personnel records, books,
ledgers, files and other printed and written materials
reasonably necessary for Purchaser's continuing
operation of the Business, other than books, records
and other data relating to the Excluded Assets and the
Excluded Liabilities and other books and records
reasonably retained by Seller; and
(ix) all of Seller's rights against third parties pursuant
to the warranties and guarantees identified on Schedule
2.2(a).
(b) The term "Excluded Assets" shall mean the following:
(i) cash on hand or in banks (except security deposits
and other deposits from tenants) and cash equivalents
owned by Seller relating to the operations of the
Business;
(ii) all rights of Seller under this Agreement and the
agreements, instruments and certificates delivered in
connection with this Agreement;
(iii) all records prepared in connection with the sale of
the Business, including the bids and other
information received from third persons in respect of
the Business and analyses relating to the Business;
(iv) any assets under any Benefit Plan;
(v) all rights relating to the Excluded Liabilities;
(vi) business records reasonably retained by Seller;
provided, however, that Purchaser may retain copies
of such records that are reasonably required in the
operation of the Business by Purchaser;
(vii) any tax refunds, insurance refunds from prepaid
insurance, insurance deposits or recoveries from
claims with respect to periods (or portions thereof)
ending prior to the Closing Date, except as provided
in Section 7.12(b) hereof;
(viii) manuals developed by Excel relating to personnel,
marketing and accounting policies and procedures;
(ix) the Management Contract;
6
<PAGE>
(x) furniture, computers and similar tangible property
not located at the Facility and identified on
Schedule 2.2(b); and
(xi) all of Seller's rights, claims, causes of action or
rights of set-off against third parties relating to
the Business or Acquired Assets with respect to
periods (or portions thereof) ending on or prior to
the Closing Date.
(c) Nothing in this Agreement shall be construed as an attempt
by Seller to assign any Contract to the extent that such Contract is not
assignable without the necessary consent of the other party or parties thereto.
Seller shall use reasonable efforts, in cooperation with Purchaser, to secure
any necessary consent to assignment of those Contracts indicated with an
asterisk on Schedule 5.14 which consent has not been obtained prior to the
Closing Date; provided, however, that Seller shall not be required to make any
payment to any person or forego any benefits in order to obtain such consent.
Section 2.3. Assumption of Certain Liabilities and
Obligations. (a) Upon the terms and subject to the conditions of this Agreement,
Purchaser shall assume, effective as of the Closing, and agrees to pay, perform
and discharge when due, and agrees to indemnify Seller and its Affiliates and
hold Seller and its Affiliates harmless from and after the Closing from, the
Assumed Liabilities (as defined below). "Assumed Liabilities" means the
following and only the following:
(i) all obligations and liabilities of
Seller pursuant to the Contracts
included in the Acquired Assets;
provided that all payments pursuant
to the Contracts included in the
Acquired Assets which are due prior
to the Closing Date shall have been
paid by Seller;
(ii) all Business Accounts Payable for
which payment is made by Seller to
Purchaser pursuant to Section 2.3(c)
hereof;
(iii) any obligation or liability for
Taxes for any periods that are
attributable to the Business or
relating to the Acquired Assets,
relating to any periods (or portions
thereof) beginning on or after the
Closing Date; and
(iv) the obligations of Seller with
respect to accrued but untaken
vacation and sick days earned by
Acquired Employees as of the Closing
Date, to the extent Seller has paid
Purchaser for such obligations as
provided in Section 7.5(c).
(b) The term "Excluded Liabilities" shall mean:
(i) any obligation or liability for Taxes that
relates primarily to or arises primarily as a
result of any of the Excluded Assets;
7
<PAGE>
(ii) any obligation or liability for income Taxes
that relates solely to or arises solely as a
result of the sale or transfer from Seller
to Purchaser of any of the Acquired Assets;
(iii) any obligation or liability of Seller for
Taxes attributable to the Business or
relating to the Acquired Assets for any
periods (or portions thereof) ending on or
prior to the Closing;
(iv) all obligations and liabilities of Seller in
respect of any current or former employee of
Seller engaged in the Business, which
obligation or liability arises out of acts
or conditions that occurred prior to the
Closing Date, including, without limitation,
any liability or obligation under bonus
programs maintained by Sellers;
(v) except as otherwise provided in Section
7.5(c), any obligation or liability of
Seller arising under or in connection with
any Benefit Plan;
(vi) all payments due prior to the Closing Date
pursuant to the Contracts included in the
Acquired Assets;
(vii) all Business Accounts Payable for which
payment is not made by Seller to Purchaser
pursuant to Section 2.3(c) hereof;
(viii) any liability under the Management Contract;
and
(ix) the obligations of Seller with respect to
accrued but untaken vacation and sick days
earned by Acquired Employees as of the
Closing Date, except to the extent Seller
has paid Purchaser for such obligations as
provided in Section 7.5(c).
(c) Except as to those items which are to be apportioned as
provided in Section 2.3(d) below, with regard to expenses incurred in respect of
Business Accounts Payable during periods (or portions thereof) ending on or
prior to the Closing Date, Seller agrees (i) to pay all Business Accounts
Payable due and payable prior to the Closing Date and (ii) at the Closing, to
pay to Purchaser an amount equal to the estimated cost of Business Accounts
Payable not previously paid.
(d) Any ad valorem, use, real and personal property,
intangible and other similar Taxes, installments or special assessments,
utility, water or similar payments arising from, or relating to, the Acquired
Assets or the conduct of the Business (including such other items as are
normally apportioned at the closings of properties similar to the Facility in
St. Louis County, Missouri), which relate to periods both before and after the
Closing Date shall be prorated and adjusted between Seller and Purchaser as of
the Closing Date on a per diem basis and Seller shall be responsible only for
the portion of such amounts allocable to the period prior to the Closing Date
and Purchaser shall be responsible for the remainder.
8
<PAGE>
(e) Except as otherwise agreed to by the parties, whenever it
is necessary to determine the liability for Taxes for a portion of a taxable
year or period that begins before and ends on or after the Closing Date, the
determination of the Taxes for the portion of the year or period ending on, and
the portion of the year or period beginning on or after, the Closing Date shall
be determined by assuming that the taxable year or period ended at the close of
business on the Closing Date.
(f) Except for the Assumed Liabilities, all obligations and
liabilities arising as a result of the ownership by Seller prior to the Closing
of, or the operation prior to the Closing of the activities conducted at, the
Facility (including all obligations and liabilities relating to personal injury
or Environmental Laws) shall be the responsibility of Seller. All obligations
and liabilities arising as a result of the ownership by Purchaser subsequent to
the Closing of, or the operation subsequent to the Closing of the activities
conducted at, the Facility (including all obligations and liabilities relating
to personal injury or Environmental Laws) shall be the responsibility of
Purchaser.
Article III. PURCHASE PRICE
Section 3.1. Purchase Price. The purchase price for the
Acquired Assets shall be $23,000,000, in cash (the "Purchase Price").
Section 3.2. Allocation of Purchase Price. On or prior to the
Closing Date, Seller and Purchaser shall mutually agree on an allocation of the
Purchase Price and the amount of the Assumed Liabilities (and other capitalized
costs) among the Acquired Assets in accordance with Section 1060 of the Code and
the regulations promulgated thereunder and all applicable provisions of state,
local and foreign law (such allocations, the "Section 1060 Allocations"). If
Seller and Purchaser are unable to agree with respect to the Section 1060
Allocations, Seller and Purchaser shall select a firm of independent certified
public accountants mutually acceptable to Seller and Purchaser from among Price
Waterhouse Coopers LLP, KPMG Peat Marwick LLP, Deloitte & Touche LLP, Ernst &
Young LLP, and Arthur Andersen LLP to determine such allocations. The
conclusions of such accounting firm shall be binding on the parties. The fees
and expenses of such accounting firm shall be shared equally by Seller and
Purchaser. Each of the parties hereto agrees (i) to prepare and file reports,
returns, declarations, statements, forms, extensions or other documents filed or
required to be filed with any federal, state, local or other governmental
department, court or other authority in respect of any Tax ("Tax Returns"),
including Form 8594, in a manner consistent with the Section 1060 Allocations,
as finally determined pursuant to this Section 3.2, (ii) to report this
transaction for federal, state, local and foreign income tax purposes in
accordance with the Section 1060 Allocations, as finally determined pursuant to
this Section 3.2, and (iii) to use its best efforts to sustain the Section 1060
Allocations, as finally determined pursuant to this Section 3.2, in any
subsequent tax audit or dispute.
Article IV. THE CLOSING
Section 4.1. Closing Date. The closing of the sale and
transfer of the Acquired Assets (hereinafter called the "Closing") shall take
place at the offices of Dewey Ballantine LLP, 1301 Avenue of the Americas, New
York, New York 10019, on the last business day of the month in
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which all of the conditions to each party's obligations under Article VIII have
been satisfied or waived, or at such other time, date and place as shall be
mutually agreed to by the parties hereto (such date of the Closing being
hereinafter referred to as the "Closing Date").
Section 4.2. Transactions To Be Effected At The Closing.
At the Closing:
(a) Seller shall deliver or cause to be delivered to Purchaser
all documents referred to in Section 8.2, in each case appropriately
executed;
(b) Purchaser shall deliver or cause to be delivered to Seller
(i) the Closing Date Undertaking, appropriately executed; and (ii) all
other documents referred to in Section 8.3, in each case appropriately
executed; and
(c) Purchaser shall pay (i) $6,750,000 of the Purchase Price
(the "Escrow Amount") by wire transfer to an escrow account to be
established prior to the Closing Date and (ii) the remainder of the
Purchase Price ($16,250,000) by wire transfer to such bank account or
accounts as may be designated by Seller. Purchaser shall be provided
with wire transfer instructions at least two business days prior to the
Closing Date. The Escrow Amount shall be disbursed to Seller by the
escrow agent at such times and by such amounts as the indemnification
obligations of Seller to the Purchaser Indemnified Parties are reduced
in accordance with the provisions of Article X hereof.
Article V. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser as follows:
Section 5.1. Seller's Organization; Good Standing. Seller is a
general partnership, duly organized, validly existing and in good standing under
the laws of the State of Texas. Seller has the requisite power and authority to
own the Acquired Assets and to carry on the Business as currently conducted.
Seller is duly qualified to conduct business as a foreign entity in the State of
Missouri.
Section 5.2. Authority; Execution and Delivery. Seller has the
requisite power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Seller, and the consummation of the transactions contemplated hereby have
been duly and validly authorized, subject to the consent of at least 51% in
interests of the Class A Limited Partners of Tesson Heights Limited Partnership
(the "Partnership Consent"). Seller agrees to make a good faith effort to obtain
the Partnership Consent. This Agreement has been duly executed and delivered by
Seller and, assuming the due authorization, execution and delivery of this
Agreement by Purchaser, constitutes the legal, valid and binding obligation of
Seller, enforceable against Seller in accordance with its terms, subject to the
Partnership Consent, and subject to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and other similar laws affecting
creditors' rights generally from time to time in effect and to general
principles of equity (including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing) regardless of whether considered in
a proceeding in equity or at law.
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Section 5.3. Consents; No Violation, Etc. Except for the
applicable requirements of the HSR Act and the rules and regulations promulgated
thereunder and except as set forth on Schedule 5.3, the execution and delivery
of this Agreement do not, and the consummation of the transactions contemplated
hereby and the compliance with the terms hereof will not (i) violate any
Governmental Rule applicable to Seller, (ii) subject to the Partnership Consent,
conflict with the Partnership Agreement, (iii) conflict with any Contract set
forth on Schedule 5.14, or (iv) require any approval, authorization, consent,
license, exemption, filing or registration with any court, arbitrator or
Governmental Entity, except for such approvals, authorizations, consents,
actions or filings which have been obtained or made or which, if not obtained or
made, would not have a Material Adverse Effect or materially interfere with
Seller's performance of its obligations hereunder. Seller is not a "foreign
person" as defined in Section 1445 of the Code and the regulations relating
thereto.
Section 5.4. Financial Statements; Undisclosed Liabilities.
Attached hereto as Schedule 5.4 are the audited financial statements of Seller
as of December 31, 1995, December 31, 1996 and December 31, 1997 and unaudited
financial statements for the six months ended June 30, 1998 (the "Financial
Statements"). The Financial Statements have been prepared from the books and
records of Seller and fairly present in all material respects the financial
condition and results of operations of Seller for the periods indicated (except
in each case as described in Schedule 5.4 and as may be described in the notes
included therein). There are no liabilities or obligations related to the
Business which would reasonably be expected to have a Material Adverse Effect,
except (i) as reflected in the Financial Statements, (ii) as disclosed in the
Disclosure Schedule, (iii) for purchase contract and orders for inventory
entered into in the ordinary course of business, (iv) for liabilities incurred
in the ordinary course of business since December 31, 1997 and (v) for Excluded
Liabilities.
Section 5.5. Title to Acquired Assets. Seller has good and
valid title to all the Acquired Assets, free and clear of all Liens other than
Permitted Liens. This Section 5.5 does not relate to the Facility, which is
exclusively the subject of Section 5.6.
Section 5.6. Real Property. Seller has good and insurable fee
title to the Facility, free and clear of all Liens other than (i) Permitted
Liens, (ii) easements, covenants, rights-of-way, and other encumbrances or
restrictions shown on the title commitment or survey previously delivered to
Purchaser by Seller, (iii) any grants or reservation of surface or subsurface
rights of others in and to the removal and mining of oil, gas or minerals,
including rights of ingress and egress with respect thereto, (iv) zoning,
building, land use and other restrictions imposed under any Governmental Rule
and (v) easements, covenants, rights-of-way or other encumbrances, restrictions
or imperfections of title not shown on the title commitment or survey previously
delivered to Purchaser by Seller, none of which items set forth in clauses
(iii), (iv) or (v), individually or in the aggregate, materially interfere with
the use of the Facility in the Business as presently conducted.
Section 5.7. Accounts Receivable. All the trade accounts
receivable of Seller that relate primarily to or arise primarily out of the
operation of the Business as of the Closing Date will represent actual sales
made in the ordinary course of business.
Section 5.8. Absence of Certain Changes or Events. Except
as set forth in Schedule 5.8, to Seller's actual knowledge, since December 31,
1997, Seller has conducted the Business in the
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ordinary course consistent with past practice, and there has not occurred any
event or condition which would reasonably be expected to have a Material Adverse
Effect.
Section 5.9. Employment Matters.
(a) Schedule 5.9(a) sets forth, as of the date hereof, all
collective bargaining or similar agreements with any labor unions or
associations representing employees of the Business.
(b) Except as set forth on Schedule 5.9(b), the Business is in
compliance with all applicable laws, regulations and orders relating to
the employment of labor, including all such laws, regulations and
orders relating to wages and hours, labor relations, civil rights,
safety and health, workers' compensation, except for such noncompliance
which would not have a Material Adverse Effect.
Section 5.10. Employee Benefit Plans. Schedule 5.10 contains a
list and a brief description of each "employee benefit plan" (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), and all other employee compensation and fringe benefit plans or
arrangements (including, without limitation, all bonus, incentive and stock
compensation plans) maintained or contributed to by the Business for the benefit
of any employees of the Business (collectively, the "Benefit Plans"). Seller has
made available to Purchaser complete and correct copies of (i) each Benefit Plan
(or, in the case of any unwritten Plan, a description thereof) and (ii) the most
recent summary plan description of each Benefit Plan (if such description was
required).
Section 5.11. Litigation. As of the date hereof, there is no
suit, claim, action, investigation or proceeding pending or threatened in
writing against Seller that relates to the Business or the Acquired Assets which
(i) if adversely determined would be reasonably expected to result in a Material
Adverse Effect or (ii) challenges or seeks to prevent or enjoin the transactions
contemplated by this Agreement.
Section 5.12. Compliance with Laws. Except as set forth on
Schedule 5.12, Seller is in compliance in all material respects with all
Governmental Rules applicable to it which relate primarily to the Acquired
Assets, except where the failure to so comply would not reasonably be expected
to have a Material Adverse Effect. Except as set forth in Schedule 5.12, Seller
has not received any written notice since January 1, 1997 of any asserted
violation of any such Governmental Rules and Seller has not received any written
notice that any investigation or review by any Governmental Entity with respect
to the Business is pending or that any such investigation or review is
contemplated, except where the outcome of such investigation or review if
adversely determined would not reasonably be expected to have a Material Adverse
Effect. This Section 5.12 does not relate to environmental matters, which are
exclusively the subject of Section 5.15.
Section 5.13. Sufficiency of Acquired Assets. Except as set
forth in Schedule 5.13 and except for the fact that the Management Contract is
an Excluded Asset, the Acquired Assets are sufficient for the operation of the
Business in substantially the same manner as it is currently conducted.
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Section 5.14. Contracts. Except for Contracts listed on
Schedule 5.14, and except for Contracts relating to Excluded Assets, Seller is
not a party to or bound by any contract primarily relating to the Acquired
Assets, or the Assumed Liabilities which is:
(i) an indenture, note, loan or credit agreement
or other Contract relating to the borrowing
of money by Seller or to the direct or
indirect guarantee or assumption by Seller
of the obligation of any other person in
excess of $10,000;
(ii) a lease or similar agreement under which
Seller is a lessee of, or holds or operates,
any real property owned by any third party;
(iii) a Contract involving future payment for
goods or services by Seller of more than
$10,000 (unless terminable without payment
or penalty upon no more than 30 days'
notice);
(iv) a Contract involving the obligation of
Seller to deliver in the future products or
services for payment of more than $10,000
(unless terminable without payment or
penalty upon no more than 30 days' notice);
(v) a Contract evidencing any Lien on the
Acquired Assets (other than Permitted Liens
or Liens created in the ordinary course of
business); or
(vi) a Contract with or Permit by or from any
Governmental Entity, the loss of which would
materially interfere with the operation of
the Business as presently conducted.
Except as disclosed in Schedule 5.14, each Contract listed thereon is a valid
and binding obligation of Seller. Except as disclosed in Schedule 5.14, Seller
has not received any notice of default or notice of the intention of any party
to any such Contract to terminate such Contract. Complete and correct copies of
all Contracts referred to in Schedule 5.14, together with all modifications and
amendments thereto, have been made available to Purchaser.
Section 5.15. Environmental Matters. Seller has made
available to Purchaser a complete and correct copy of the Phase I Environmental
Site Assessment of the Facility, dated as of April 7, 1998.
Section 5.16. Interests in Seller. No partnership
interests in Seller are held by any entity other than (i) Tesson Heights Limited
Partnership and (ii) A.C. Jacobs & Co., Inc., a Missouri corporation.
Section 5.17. No Brokers. Except for Salomon Smith Barney,
the fees and expenses of which will be paid by Seller, Seller has not entered
into any agreement, arrangement or
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understanding with any person or firm which will result in the obligation to pay
any finder's fee, brokerage commission or similar payment in connection with the
transactions contemplated hereby.
Section 5.18. Exclusive Representations and Warranties. Other
than the representations and warranties set forth herein, Seller is not making
any other representation or warranty, express or implied, with respect to the
Business or the Acquired Assets.
Article VI. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
Section 6.1. Purchaser's Organization; Good Standing.
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of the State of Texas. Purchaser is duly qualified to conduct
business as a foreign corporation in the State of Missouri. Purchaser has all
requisite corporate power and authority to carry on its business as it is
currently being conducted.
Section 6.2. Authority; Execution and Delivery. Purchaser has
the requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by Purchaser and the consummation of the transactions
contemplated hereby have been duly and validly authorized. This Agreement has
been duly executed and delivered by Purchaser and, assuming the due
authorization, execution and delivery of this Agreement by Seller, constitutes
the legal, valid and binding obligation of Purchaser, enforceable against
Purchaser in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and other similar
laws affecting creditors' rights generally from time to time in effect and to
general principles of equity (including, without limitation, concepts of
materiality, reasonableness, good faith and fair dealing) regardless of whether
considered in a proceeding in equity or at law.
Section 6.3. Consents; No Violations, Etc. Except for the
applicable requirements of the HSR Act and the rules and regulations promulgated
thereunder, the execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby and the compliance with the
terms hereof will not (i) violate any applicable law, (ii) conflict with any
provision of the certificate of incorporation or by-laws of Purchaser or (iii)
require any approval, authorization, consent, license, exemption, filing or
registration with any court, arbitrator or Governmental Entity, except for such
approvals, authorizations, consents, actions or filings which have been obtained
or made or which, if not obtained or made, would not materially interfere with
Purchaser's performance of its obligations hereunder.
Section 6.4. Litigation. As of the date hereof, there is no
suit, claim, action, investigation or proceeding pending or threatened in
writing against or affecting Purchaser or any of its Affiliates which if
adversely determined would be reasonably expected to prevent or materially delay
the ability of Purchaser to perform its obligations hereunder.
Section 6.5. No Brokers. Purchaser has not entered into any
agreement, arrangement or understanding with any person or firm which will
result in the obligation to pay any
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finder's fee, brokerage commission or similar payment in connection with the
transactions contemplated hereby.
Section 6.6. ERISA. Purchaser is not acquiring the Acquired
Assets with the assets of any "employee benefit plan" as defined in Section 3(3)
of ERISA.
Section 6.7. Availability of Funds. Purchaser has cash
available that is sufficient to enable it to make payment of the Purchase Price
and any other amounts to be paid by it hereunder.
Article VII. CERTAIN COVENANTS AND AGREEMENTS
Section 7.1. Covenants of Seller Relating to Conduct of
Business. During the period from the date of this Agreement and continuing until
the Closing, Seller agrees (except as expressly provided in this Agreement,
Schedule 7.1 or the Disclosure Schedule, or to the extent that Purchaser shall
otherwise consent in writing) that:
(a) Ordinary Course. Seller shall carry on the Business and
operate the Acquired Assets in the ordinary course in substantially the
same manner as presently conducted, maintain the business records of
the Business in substantially the same manner as presently maintained
and use reasonable efforts to preserve intact the Business' present
business organization, keep available the services of the Business'
present employees and preserve the Business' relationships with
residents, customers, suppliers and others having business dealings
with the Business; provided, however, that nothing contained herein
shall be deemed to require the expenditures of any funds outside the
ordinary course of business.
(b) No Dispositions. Seller shall not sell, lease, or
transfer, or agree to sell, lease, or transfer, any of the Acquired
Assets, except Business Inventory in the ordinary course of business
consistent with prior practice.
(c) No Salary Increases. Seller shall not increase the salary
of any employee of the Business, except pursuant to existing employment
contracts or in the ordinary course of business consistent with prior
practice.
(d) No Additional Material Contracts. Seller shall not enter
into any Contract that would be required to be listed on Schedule 5.14
if it were in effect on the date hereof, including any such Contract
for the purchase of capital assets, without the prior written consent
of Purchaser (which consent shall not be unreasonably withheld).
(e) Other Actions. Seller shall not knowingly take any action
that would reasonably be expected to result in any of the
representations and warranties of Seller set forth in this Agreement
becoming untrue in any material respect or in any of the conditions of
the Closing set forth in Article VIII not being satisfied.
(f) Advise of Changes. Seller shall advise Purchaser within
three business days after Seller becomes aware of the occurrence of any
matter or event that occurs after the date hereof and on or prior to
the Closing Date which is material to the Business.
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Section 7.2. Purchaser's Access to Information. Seller shall
afford to Purchaser and its accountants, counsel and other representatives
reasonable access upon reasonable advance notice and during normal business
hours during the period prior to the Closing to all the properties, books,
contracts, commitments, Tax Returns and records of the Business (other than the
Excluded Assets). Purchaser acknowledges that any information being provided to
it or its representatives by Seller pursuant to this Agreement is subject to the
terms of a confidentiality agreement between Purchaser and Seller, dated May 5,
1998 (the "Confidentiality Agreement"), which terms are incorporated herein by
reference.
Section 7.3. Purchaser's Preservation of Records.
(a) Purchaser agrees that, at its own expense, it (i) shall
preserve and keep the books, contracts, commitments and records
included in the Acquired Assets for a period of three years from the
Closing Date, or for any longer periods as may be required by any
Governmental Entity or as may be made prudent by the circumstances of
any ongoing litigation, and (ii) shall provide Seller with reasonable
access to the foregoing upon reasonable notice and during normal
business hours. In the event Purchaser wishes to destroy such copies
and records after the time specified above, it shall first give 60
days' prior written notice to Seller, and Seller shall have the right,
at its option and expense, and upon prior written notice given to
Purchaser within such 60 day period, to take possession of all or any
portion of such copies and records.
(b) Purchaser acknowledges and agrees that Seller shall retain
copies of certain personnel records included in the Acquired Assets
which relate to Seller's liabilities in respect of the Acquired
Employees' post-employment benefits.
(c) All information received or retained by Seller or any
representative of Seller pursuant to paragraph (a) or (b) of this
Section 7.3 shall be treated as confidential by Seller and by such
representatives and, except to the extent such information is or
becomes generally available, Seller and its representatives shall use
all reasonable efforts to maintain the confidentiality of such
information. If Seller or any of its representatives is required to
disclose any such information by or to any Governmental Entity, Seller
shall, to the extent feasible, prior to such disclosure, notify
Purchaser of such requirement. Purchaser shall have the right, at its
own expense, to seek confidential treatment of any information to be so
disclosed.
Section 7.4. Legal Conditions to Closing. Each of Seller and
Purchaser agrees to take all reasonable actions necessary to comply promptly
with all legal requirements which may be imposed on it with respect to the
Closing (including the prompt filing of the premerger notification report under
the HSR Act and the furnishing of all information required under the HSR Act),
and shall cooperate with and furnish information to each other and to other
parties in connection with any such legal requirements.
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Section 7.5. Employee Matters.
(a) Offer of Employment. Purchaser shall offer employment,
effective on the Closing Date, in a comparable position and at no less
favorable base salary, to each person currently employed by Seller
primarily in connection with the Business. Such employment shall be
subject to a 90-day probationary period. All such employees of the
Business who accept Purchaser's offer of employment shall be referred
to herein as "Acquired Employees."
(b) Provision of Similar Benefits. Purchaser shall provide
benefits to Acquired Employees that are, in the aggregate,
substantially similar to those provided to similarly situated new
employees of Purchaser and its Affiliates generally.
(c) Vacation and Other Pay. On or prior to the Closing Date,
Seller shall pay to Purchaser an amount equal to, the aggregate
liability of Seller with respect to accrued but untaken vacation and
sick days earned by Acquired Employees as of the Closing Date, and
Purchaser shall assume the obligations of Seller with respect to such
accrued but untaken vacation and sick days.
(d) WARN Act. Purchaser agrees to provide any required notice
under the Worker Adjustment and Retraining Notification Act, as amended
(the "WARN Act"), and any similar statute, and to otherwise comply with
any such statute with respect to any "plant closing" or "mass layoff"
(as defined in the WARN Act), or similar event affecting Acquired
Employees and occurring on or after the Closing Date. Purchaser shall
indemnify and hold harmless Seller and its Affiliates with respect to
any liability under the WARN Act or similar statute arising from the
actions of Purchaser or its Affiliates on or after the Closing Date.
Section 7.6. Collection of Receivables. From and after the
Closing, Purchaser shall have the right and authority to collect for its own
account all accounts receivable and other items that are included in the
Acquired Assets and to endorse with the name of Seller any checks or drafts
received with respect to any such accounts receivable or other items. Seller
agrees to deliver to Purchaser any cash or other property received directly or
indirectly by it with respect to such accounts receivables and other items.
Section 7.7. Expenses. Except as provided in Section 9.1
hereof in respect of termination of this Agreement pursuant to Section
9.1(a)(ii) hereof, whether or not the Closing occurs, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such costs and expenses.
Notwithstanding the foregoing or any other provisions of this Agreement, (i)
Purchaser and Seller shall share equally (x) any sales, use, transfer, stamp,
documentary or similar Taxes applicable to the conveyance and transfer from
Seller to Purchaser of the Acquired Assets (other than sales Taxes payable in
connection with the transfer of Personal Property, which shall be governed by
clause (ii) below), (y) any other transfer or documentary Taxes or any filing or
recording fees and related expenses applicable to such conveyance and transfer
(including filing fees and related expenses with respect to the transfer of the
Facility to Purchaser), and (z) if title insurance is obtained by Purchaser, the
cost of the title insurance premium for a standard form owner's policy which
insures the Facility for an amount not exceeding the Purchase Price, such policy
to be in the ALTA form in use in the State of Missouri, and (ii)
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Purchaser shall pay (x) any sales Taxes payable in connection with the transfer
of Personal Property and (y) the cost of any endorsements requested by Purchaser
to the standard form of owner's title insurance policy. Purchaser shall prepare
and timely file all returns and other documents required in connection with the
foregoing and shall provide Seller with evidence of filing of such returns and
documents and payment of such sales, use, transfer, stamp, documentary and
similar Taxes promptly thereafter. Notwithstanding the foregoing or any other
provisions of this Agreement, Purchaser and Seller agree that all fees incurred
in connection with any filing made pursuant to the HSR Act shall be paid by
Purchaser.
Section 7.8. Financial Information. After the Closing, upon
reasonable written notice, Purchaser and Seller shall furnish or cause to be
furnished to each other and their respective accountants, counsel and other
representatives reasonable access, during normal business hours, to such
information (including records pertinent to the Business) and assistance
relating to the Business as is reasonably necessary for financial reporting and
accounting matters, the preparation and filing of any returns, reports or forms
or the defense of any Tax audit, proceeding, claim or assessment.
Section 7.9. Bulk Transfer Laws. Purchaser hereby waives
compliance by Seller with the provisions of any so-called "bulk transfer law" of
any jurisdiction in connection with the sale of the Acquired Assets to
Purchaser. Seller shall indemnify and hold harmless Purchaser against any and
all liabilities that may be asserted by third parties against Purchaser as a
result of noncompliance with any such bulk transfer law.
Section 7.10. Actions of Purchaser. Purchaser shall not
knowingly take any action that would reasonably be expected to result in any of
the representations or warranties of Purchaser set forth in this Agreement
becoming untrue in any material respect or in any of the conditions of the
Closing set forth in Article VIII not being satisfied.
Section 7.11. No Additional Representations. Purchaser
acknowledges that it and its representatives have been permitted full and
complete access to the Acquired Assets that it and its representatives have
desired or requested to see or review, and that its representatives have had a
full opportunity to meet with Seller and representatives of Seller and employees
of the Business to discuss the Business. Purchaser acknowledges that it and its
representatives have received or have had an opportunity to review prior to the
date hereof all written materials which Seller is required to deliver or make
available, as the case may be, to Purchaser pursuant to this Agreement on or
prior to the date hereof. Purchaser acknowledges that neither Seller nor any
other person has made any representation or warranty, express or implied, as to
the accuracy or completeness of any information regarding the Business or the
Acquired Assets except as expressly set forth in this Agreement and the
Disclosure Schedule, and that neither Seller nor any other person will be
subject to any liability to Purchaser or any other person resulting from the
distribution to Purchaser, or Purchaser's use of, any such information in any
form, including the Confidential Memorandum dated Spring 1998 relating to the
Business, any documents or materials made available to Purchaser in any "data
room," and any management presentation in expectation of the transactions
contemplated hereby.
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Section 7.12. Maintenance; Repair; Risk of Loss.
(a) Until the Closing, Seller shall maintain the Facility in
substantially its present condition, subject to ordinary wear and tear.
Notwithstanding the foregoing, Seller shall have no obligation to make
any structural repairs or capital improvements.
(b) Prior to the Closing, the risk of loss or damage (except
ordinary wear and tear) by fire or other casualty to the Facility, and
the risk of condemnation of the Facility, is on Seller. In case of
damage beyond ordinary wear and tear or a condemnation, (i) if the
estimated cost to repair the damage or restore to substantially the
condition existing before the casualty or condemnation shall be less
than $1,150,000, or if the estimated time to repair the damage or
restore is less than 120 days, Seller may, at Seller's option, elect to
proceed to Closing and assign to Purchaser the proceeds of any
insurance or award applicable to such casualty or condemnation, or
proceed promptly to repair and restore, at Seller's expense, such
damage in a good and workmanlike manner, using equivalent materials, in
which case the Closing shall be adjourned, pending completion of such
repair and restoration, or (ii) in any other case, either party may
terminate this Agreement upon written notice to the other given within
five (5) business days of obtaining actual knowledge of such casualty
or condemnation. Purchaser may preserve this Agreement following
receipt of a termination notice from Seller by notifying Seller, in
writing, within five (5) business days of Seller's election to
terminate, of Purchaser's election to purchase the Property in its
damaged condition without abatement of Purchase Price (but with an
assignment from Seller of all insurance and/or condemnation proceeds).
Notwithstanding any other provision of this Agreement, if there is an
adjournment of the Closing Date by Seller pursuant to this Section
7.12(b), the Closing Date shall be any business day selected by Seller
after substantial completion of restoration on ten (10) days' notice to
Purchaser.
Section 7.13. NO REPRESENTATIONS BY SELLER. OTHER THAN AS
EXPRESSLY SET FORTH IN THIS AGREEMENT, SELLER HAS NOT MADE AND DOES NOT MAKE ANY
REPRESENTATIONS OR WARRANTIES AS TO THE PHYSICAL OR ENVIRONMENTAL CONDITION,
LAYOUT, LEASES, FOOTAGE, RENTS, INCOME, EXPENSES, ZONING, OPERATIONS, OR ANY
OTHER MATTER OR THING AFFECTING OR RELATING TO THE FACILITY, INCLUDING, WITHOUT
LIMITATION, THE ENVIRONMENTAL CONDITION THEREOF. PURCHASER ACKNOWLEDGES THAT NO
SUCH REPRESENTATIONS HAVE BEEN MADE OTHER THAN AS SPECIFICALLY SET FORTH IN THIS
AGREEMENT AND AGREES UPON CLOSING TO TAKE THE FACILITY "AS IS, WHERE IS" AND
WITH ALL FAULTS, LATENT AND PATENT. WITH RESPECT TO ANY ITEMS OF PERSONAL
PROPERTY CONTAINED WITHIN THE FACILITY, SELLER HAS NOT MADE AND DOES NOT MAKE
ANY REPRESENTATIONS, PROMISES OR WARRANTIES (EXPRESS OR IMPLIED AND WHETHER
DEALING WITH MERCHANTABILITY, FITNESS FOR USE OR OTHERWISE). PURCHASER HEREBY
WAIVES, TO THE EXTENT PERMITTED BY LAW, ANY AND ALL IMPLIED WARRANTIES. NO ORAL
WARRANTIES, REPRESENTATIONS OR STATEMENTS SHALL BE CONSIDERED A PART HEREOF.
SELLER ASSUMES NO RESPONSIBILITY FOR THE CONDITION OF THE FACILITY OR PERSONAL
PROPERTY, HAS MADE NO REPRESENTATIONS WITH RESPECT THERETO AND SHALL HAVE NO
LIABILITY FOR
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THE ACCURACY OF ANY INSPECTION REPORT RELATING THERETO, PURCHASER HEREBY
ACKNOWLEDGING THAT PURCHASER HAS INSPECTED THE FACILITY AND PERSONAL PROPERTY
AND IS SATISFIED WITH THE CONDITION THEREOF, INCLUDING, WITHOUT LIMITATION, THE
ENVIRONMENTAL CONDITION OF THE FACILITY.
Section 7.14. RELEASE. WITHOUT LIMITING THE PROVISIONS OF
SECTION 7.13 ABOVE, PURCHASER HEREBY RELEASES SELLER AND (AS THE CASE MAY BE)
SELLER'S OFFICERS, DIRECTORS, SHAREHOLDERS, TRUSTEES, PARTNERS, EMPLOYEES,
MANAGERS AND AGENTS FROM ANY AND ALL CLAIMS, DEMANDS, CAUSES OF ACTIONS, LOSSES,
DAMAGES, LIABILITIES, COSTS AND EXPENSES (INCLUDING ATTORNEY'S FEES WHETHER THE
SUIT IS INSTITUTED OR NOT) WHETHER KNOWN OR UNKNOWN, LIQUIDATED OR CONTINGENT
(HEREINAFTER COLLECTIVELY CALLED THE "CLAIMS") ARISING FROM OR RELATING TO
(i)_ANY DEFECTS (PATENT OR LATENT), ERRORS OR OMISSIONS IN THE DESIGN OR
CONSTRUCTION OF THE FACILITY WHETHER THE SAME ARE THE RESULT OF NEGLIGENCE OR
OTHERWISE, OR (ii)_ANY OTHER CONDITIONS, INCLUDING ENVIRONMENTAL AND OTHER
PHYSICAL CONDITIONS, AFFECTING THE FACILITY WHETHER THE SAME ARE A RESULT OF
NEGLIGENCE OR OTHERWISE. THE RELEASE SET FORTH IN THIS SECTION SPECIFICALLY
INCLUDES, WITHOUT LIMITATION, ANY CLAIMS UNDER ANY ENVIRONMENTAL LAWS OF THE
UNITED STATES, THE STATE IN WHICH THE FACILITY IS LOCATED OR ANY POLITICAL
SUBDIVISION THEREOF OR UNDER THE AMERICANS WITH DISABILITIES ACT OF 1990, AS ANY
OF THOSE LAWS MAY BE AMENDED FROM TIME TO TIME AND ANY REGULATIONS, ORDERS,
RULES OF PROCEDURES OR GUIDELINES PROMULGATED IN CONNECTION WITH SUCH LAWS,
REGARDLESS OF WHETHER THEY ARE IN EXISTENCE ON THE DATE OF THIS AGREEMENT.
PURCHASER ACKNOWLEDGES THAT PURCHASER HAS BEEN REPRESENTED BY INDEPENDENT LEGAL
COUNSEL OF PURCHASER'S SELECTION AND PURCHASER IS GRANTING THIS RELEASE OF ITS
OWN VOLITION AND AFTER CONSULTATION WITH PURCHASER'S COUNSEL. THE RELEASE SET
FORTH HEREIN DOES NOT APPLY TO THE REPRESENTATIONS OF SELLER EXPRESSLY SET FORTH
IN THIS AGREEMENT OR ANY INDEMNITY OR WARRANTY MADE BY SELLER IN THIS AGREEMENT
OR ANY DOCUMENT DELIVERED BY SELLER AT CLOSING.
Section 7.15. Disclosure Supplement. From time to time prior
to 5:00 p.m. New York City time on July 30, 1998, Seller may supplement or amend
the Disclosure Schedule with respect to any matter hereafter arising or any
information obtained after the date hereof. Any supplement to or amendment of
the Disclosure Schedule shall be treated for all purposes of this Agreement as
though the matters identified or described therein had been included in the
Disclosure Schedule delivered by Seller contemporaneously with the execution and
delivery of this Agreement.
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Article VIII. CONDITIONS PRECEDENT
Section 8.1. Conditions to Each Party's Obligations. The
obligation of Purchaser to purchase the Acquired Assets and assume the Assumed
Liabilities and the obligation of Seller to sell, assign, convey and deliver the
Acquired Assets to Purchaser shall be subject to the satisfaction prior to the
Closing of the following conditions:
(a) HSR. Any applicable waiting period under the HSR Act shall
have expired or been terminated.
(b) No Litigation, Injunctions, or Restraints. No temporary
restraining order, preliminary or permanent injunction or other legal
restraint or prohibition preventing the consummation of the
transactions contemplated by this Agreement shall be in effect.
Section 8.2. Conditions to Obligations of Purchaser. The obli-
gation of Purchaser to purchase the Acquired Assets and assume the Assumed Lia-
bilities is subject to the satisfaction on and as of the Closing of each of the
following conditions:
(a) Representations and Warranties. The representations and
warranties of Seller set forth in this Agreement shall be true and
correct as of the Closing as though made on and as of the Closing,
except (i) to the extent such representations and warranties relate to
an earlier date (in which case such representations and warranties
shall be true and correct as of such earlier date) and (ii) except for
breaches of representations and warranties as to matters that,
individually or in the aggregate (and without regard to any materiality
qualifications contained therein), are not reasonably likely to have a
Material Adverse Effect, and Purchaser shall have received a
certificate of Seller to such effect.
(b) Performance of Obligations of Seller. Seller shall have
performed or complied in all material respects with all obligations,
conditions and covenants required to be performed by it under this
Agreement at or prior to the Closing, and Purchaser shall have received
a certificate of Seller to such effect.
(c) Opinion of Counsel to Seller.* Purchaser shall have
received an opinion of counsel to Seller, dated the Closing Date, to
the effect that:
(i) Seller is a general partnership duly
organized, validly existing and in good
standing under the laws of the State of
Texas. Seller is duly qualified to conduct
business as a foreign entity in the State of
Missouri.
(ii) Seller has the power and authority to
execute this Agreement and to consummate the
transactions contemplated hereby; the
execution and
- --------
*Opinion to be given by Missouri/Texas counsel.
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delivery of this Agreement by Seller and the
consummation of the transactions
contemplated hereby have been duly
authorized; and this Agreement has been duly
executed and delivered by Seller and,
assuming the due authorization, execution
and delivery of this Agreement by Purchaser,
constitutes the legal, valid and binding
obligation of Seller enforceable against
Seller in accordance with its terms, subject
to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent
transfer and other similar laws affecting
creditors' rights generally from time to
time in effect and to general principles of
equity (including, without limitation,
concepts of materiality, reasonableness,
good faith and fair dealing) regardless of
whether considered in a proceeding in equity
or at law.
(d) Deliveries. Seller shall have executed and delivered to
Purchaser (i) a deed, with covenants against grantor's acts, for the
real property included in the Facility; (ii) a general assignment and
bill of sale in substantially the form set forth on Exhibit B hereto
(the "General Assignment and Bill of Sale") and (iii) any required
transfer tax forms and affidavits.
(e) Absence of Certain Changes. Between the date of this
Agreement and the Closing Date, no event shall have occurred, other
than the announcement by a competitor or potential competitor of a plan
or intention to construct a facility that would compete with the
Business and other than decreases in occupancy levels due to natural
attrition, which event would reasonably be expected to result in an
annualized decrease in the combined net operating income before debt
service for calendar year 1998 of (i) the Business and (ii) the
business conducted at the 148-unit retirement community located at 6800
"A" Street, Lincoln, Nebraska (the "Gramercy Hill Business") of
$300,000 or more, as compared to annualized combined net operating
income before debt service of the Business and the Gramercy Hill
Business for 1998 based on the seven-month period ended July 31, 1998.
(f) GAAP Financial Statements. Prior to the Closing, Seller
shall have provided Purchaser with audited financial statements
relating to the Business as of December 31, 1996 and December 31, 1997,
which audited financial statements shall be prepared in accordance with
generally accepted accounting principles.
Section 8.3. Conditions to the Obligations of Seller. The
obligations of Seller to sell, assign, convey, and deliver the Acquired Assets,
or to cause the Acquired Assets to be sold, assigned, conveyed or delivered, as
applicable, is subject to the satisfaction on and as of the Closing of each of
the following conditions:
(a) Representations and Warranties. The representations and
warranties of Purchaser set forth in this Agreement shall be true and
correct in all material respects as of the Closing as though made on
and as of the Closing, except to the extent such representations and
warranties expressly relate to an earlier date (in which case such
representations and warranties shall be true and correct as of such
earlier date), and Seller shall have received a certificate signed by
an authorized officer of Purchaser to such effect.
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(b) Performance of Obligations of Purchaser. Purchaser shall
have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing, and
Seller shall have received a certificate signed by an authorized
officer of Purchaser to such effect.
(c) Opinion of Purchaser's Counsel. Seller shall have received
an opinion of counsel to Purchaser, dated the Closing Date, to the
effect that:
(i) Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of its
state of incorporation. Purchaser is duly qualified to
conduct business as a foreign corporation in the State
of Missouri.
(ii) Purchaser has the requisite corporate power and
authority to execute this Agreement and to consummate
the transactions contemplated hereby; the execution and
delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly
authorized by all necessary corporate action on the
part of Purchaser; and this Agreement has been duly
executed and delivered by Purchaser and, assuming the
due authorization, execution and delivery of this
Agreement by Seller, constitutes the legal, valid and
binding obligation of Purchaser enforceable against
Purchaser in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and other similar laws
affecting creditors' rights generally from time to time
in effect and to general principles of equity
(including, without limitation, concepts of
materiality, reasonableness, good faith and fair
dealing) regardless of whether considered in a
proceeding in equity or at law.
(d) Deliveries. Purchaser shall have executed and delivered
(i) a Closing Date Undertaking in substantially the form set forth on
Exhibit C hereto (the "Closing Date Undertaking") and (ii) any required
transfer tax forms and affidavits.
(e) Partnership Consent. The Partnership Consent shall have
been obtained.
Article IX. TERMINATION, AMENDMENT AND WAIVER
Section 9.1. Termination
(a) Notwithstanding anything to the contrary in this
Agreement, this Agreement may be terminated and the transactions
contemplated hereby abandoned at any time prior to the Closing:
(i) by Purchaser by giving written notice to Seller at any
time prior to 5:00 p.m., New York City time, on July
30, 1998; provided, however, that if Seller shall have
supplemented or amended the Disclosure
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Schedule after 5:00 p.m., New York City time, on July
18, 1998, then the time during which Purchaser may
terminate this Agreement pursuant to this Section
9.1(a)(i) shall be extended from 5:00 p.m., New York
City time, on July 30, 1998 until 5:00 p.m., New York
City time, on August 3, 1998.
(ii) by Purchaser or Seller at any time from and after 5:00
p.m., New York City time, on August 13, 1998 until such
time as Seller shall have advised Purchaser that (x)
Seller has obtained the Partnership Consent and (y) the
consent of at least 51% in interests of the Class A
Limited Partners of the Gramercy Hill Limited
Partnership to the transactions contemplated by that
certain Asset Purchase Agreement dated as of July 28,
1998 between Capital Senior Living Properties, Inc. and
Gramercy Hill Enterprises has been obtained;
(iii) by mutual written consent of Seller and
Purchaser;
(iv) by Seller if any of the conditions set forth
in Sections 8.1 or 8.3 shall have become
incapable of fulfillment and shall not have
been waived by Seller; or
(v) by Purchaser if any of the conditions set
forth in Sections 8.1 or 8.2 shall have
become incapable of fulfillment and shall
not have been waived by Purchaser;
(vi) by Seller or Purchaser if the Closing does
not occur on or prior to October 31, 1998;
or
(vii) as provided for in Section 7.12(b);
provided, however, that the party seeking termination pursuant to clause (iv),
(v), (vi) or (vii) is not in breach in any material respects of any of its
representations, warranties, covenants or agreements contained in this
Agreement; and further provided, that in the event of termination of this
Agreement by Purchaser or Seller pursuant to clause (ii) above, Seller shall
promptly reimburse Purchaser for third party fees and expenses and for other
out-of-pocket expenses (but not internal time charges) reasonably incurred by
Purchaser in connection with the transactions contemplated hereby, upon
presentation by Purchaser of substantiating evidence thereof, up to a maximum
reimbursement equal to the sum of (x) $45,000 plus (y) the amount of any filing
fees paid by Purchaser in connection with filings made pursuant to the HSR Act
prior to the date of such termination.
(b) In the event of termination by Seller, on the one hand, or
Purchaser, on the other hand, pursuant to this Section 9.1, written
notice thereof shall forthwith be given to the other party and the
transactions contemplated by this Agreement shall be terminated,
without further action by any party. If the transactions contemplated
by this Agreement are terminated as provided herein:
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(i) Purchaser shall return all documents and
other material received from Seller relating
to the Business and to the transactions
contemplated hereby, whether so obtained
before or after the execution hereof, to
Seller; and
(ii) all confidential information received by
Purchaser with respect to Seller or the
Business shall be treated in accordance with
the Confidentiality Agreement, which shall
remain in full force and effect
notwithstanding the termination of this
Agreement.
(c) If this Agreement is terminated and the transactions
contemplated hereby are abandoned, this Agreement shall become null and
void and of no further force and effect, except for the provisions of
the last sentence of Section 7.2 and the provisions of Sections 7.7,
9.1, 11.7, 11.8 and 11.9. Nothing in this Section 9.1 shall be deemed
to release any party from any liability for any breach by such party of
the terms and provisions of this Agreement.
Section 9.2. Amendments and Waivers. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto. By an instrument in writing, Purchaser, on the one hand, or
Seller, on the other hand, may waive compliance by the other party with any term
or provision of this Agreement that such other party was or is obligated to
comply with or perform.
Article X. INDEMNIFICATION
Section 10.1. Indemnification by Seller.
(a) Seller hereby agrees to indemnify Purchaser and its
Affiliates and their respective officers, directors and employees (the
"Purchaser Indemnified Parties") against, and agrees to hold them
harmless from, any Loss to the extent such Loss arises from or in
connection with the foregoing:
(i) any breach by Seller of any representation
or warranty contained in this Agreement or
any other agreement or documents delivered
in connection herewith;
(ii) any breach by Seller of any of its covenants
contained in this Agreement;
(iii) any and all claims made by third parties
arising out of the operation of the Business
by Seller prior to the Closing Date; or
(iv) any Excluded Liability.
Notwithstanding the foregoing, the indemnifications in favor of the Purchaser
Indemnified Parties contained in this Section 10.1 shall be effective only as
follows: (x) there shall be no indemnification in respect of any individual Loss
or group of related Losses in an amount less than $10,000; and (y)
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<PAGE>
with regard to Losses in respect of which notice is given to Seller that
indemnification is sought pursuant to this Section 10.1 during the period from
the Closing Date until the 180th day after the Closing Date (the "First
Six-Month Period"), the indemnifications in favor of the Purchaser Indemnified
Parties shall not be effective once the aggregate dollar amount of all such
Losses actually paid by Seller in respect of which notice is or was given during
the First Six-Month Period aggregates $6,750,000, and Seller shall thereafter
have no further obligations or liabilities with respect to any Losses in excess
of such amount; and (z) with regard to Losses in respect of which notice is
given to Seller that indemnification is sought pursuant to this Section 10.1
during the period from the 181st day after the Closing Date until the 365th day
after the Closing Date (the "Second Six-Month Period"), the indemnifications in
favor of the Purchaser Indemnified Parties shall not be effective once the
aggregate dollar amount of all such Losses actually paid by Seller in respect of
which notice is or was given during the Second Six-Month Period aggregates an
amount equal to (A) $3,375,000 less (B) the amount of Losses actually paid by
Seller in respect of which notice was given to Seller that indemnification was
sought pursuant to this Section 10.1 during the First Six-Month Period, and
Seller shall thereafter have no further obligations or liabilities with respect
to any Losses in excess of such amount; provided, however, that the foregoing
limitations on Seller's indemnification obligations pursuant to this Section
10.1 shall not apply to any indemnification by Seller for any Losses asserted
against, imposed upon or incurred by the Purchaser Indemnified Parties resulting
from any Excluded Liability or resulting from the operation of the Business by
Seller prior to the Closing Date.
(b) Purchaser acknowledges and agrees that its sole and
exclusive remedy with respect to any and all claims relating to the
subject matter of this Agreement shall be pursuant to the
indemnification provisions set forth in this Article X. In furtherance
of the foregoing, Purchaser hereby waives, to the fullest extent
permitted under applicable law, any and all rights, claims and causes
of action it may have against Seller arising under or based upon any
Governmental Rule.
Section 10.2. Indemnification by Purchaser.
(a) Purchaser hereby agrees to indemnify Seller and its
Affiliates and their respective officers, general partners, limited
partners, directors, officers and employees (the "Seller Indemnified
Parties") against, and agrees to hold them harmless from, any Loss to
the extent such Loss arises from or in connection with:
(i) any breach by Purchaser of any
representation or warranty contained in this
Agreement or any other agreement or document
delivered in connection herewith;
(ii) any breach by Purchaser of any covenant
contained in this Agreement;
(iii) any and all claims made by third parties
arising out of the operation of the Business
by Purchaser after the Closing Date; or
(iv) any Assumed Liability, including any
obligations or liability included in Section
2.3(a)(iv).
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Notwithstanding the foregoing, the indemnifications in favor of the Seller
Indemnified Parties contained in this Section 10.2 shall be effective only as
follows: (x) there shall be no indemnification in respect of any individual Loss
or group of related Losses in an amount less than $10,000; and (y) with regard
to Losses in respect of which notice is given to Purchaser that indemnification
is sought pursuant to this Section 10.2 during the First Six-Month Period, the
indemnifications in favor of the Seller Indemnified Parties shall not be
effective once the aggregate dollar amount of all such Losses actually paid by
Purchaser in respect of which notice is or was given during the First Six-Month
Period aggregates $6,750,000, and Purchaser shall thereafter have no further
obligations or liabilities with respect to any Losses in excess of such amount;
and (z) with regard to Losses in respect of which notice is given to Purchaser
that indemnification is sought pursuant to this Section 10.2 during the Second
Six-Month Period, the indemnifications in favor of the Seller Indemnified
Parties shall not be effective once the aggregate dollar amount of all such
Losses actually paid by Purchaser in respect of which notice is or was given
during the Second Six-Month Period aggregates an amount equal to (A) $3,375,000
less (B) the amount of Losses actually paid by Purchaser in respect of which
notice was given to Purchaser that indemnification was sought pursuant to this
Section 10.2 during the First Six-Month Period, and Purchaser shall thereafter
have no further obligations or liabilities with respect to any Losses in excess
of such amount; provided, however, that the foregoing limitations on Purchaser's
indemnification obligations pursuant to this Section 10.2 shall not apply to any
indemnification by Purchaser for any Losses asserted against, imposed upon or
incurred by the Seller Indemnified Parties resulting from any Assumed Liability
or resulting from the operation of the Business by Purchaser after the Closing
Date.
(b) Seller acknowledges and agrees that its sole and exclusive
remedy with respect to any and all claims relating to the subject
matter of this Agreement shall be pursuant to the indemnification
provisions set forth in this Article X. In furtherance of the
foregoing, Seller hereby waives, to the fullest extent permitted under
applicable law, any and all rights, claims and causes of action it may
have against Purchaser arising under or based upon any Governmental
Rule.
Section 10.3. Losses Net of Insurance, etc. The amount of any
Loss for which indemnification is provided under this Article X shall be net of
any amounts recovered or recoverable by the indemnified party under insurance
policies with respect to such Loss.
Section 10.4. Termination of Indemnification. The obligations
to indemnify and hold harmless any party, (a) pursuant to Sections 10.1(a)(i)
and 10.2(a)(i), shall terminate when the applicable representation or warranty
terminates pursuant to Section 11.3 and (b) pursuant to the other clauses of
Sections 10.1 and 10.2, shall not terminate.
Section 10.5. Procedure.
(a) In order for an indemnified party (the "indemnified
party") to be entitled to any indemnification provided for under this
Agreement, such indemnified party shall, following the discovery of the
matters giving rise to any Loss, notify the indemnifying party (the
"indemnifying party") in writing of its claim for indemnification for
such Loss, specifying in reasonable detail the nature of such Loss and
the amount of the liability estimated to accrue therefrom; provided,
however, that failure to give such notification shall not affect the
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indemnification provided hereunder except to the extent the
indemnifying party shall have been actually prejudiced as a result of
such failure (except that the indemnifying party shall not be liable
for any expenses incurred during the period in which the indemnified
party failed to give such notice and except that, with regard to claims
for indemnification in respect of which notice is required to be given
during the First Six-Month Period or the Second Six-Month Period, as
the case may be, pursuant to the provisions of Sections 10.1 and 10.2
above, the indemnifying party shall have no liability for claims in
respect of which notice has not been received within the required time
period). Thereafter, the indemnified party shall deliver to the
indemnifying party, within five business days after the indemnified
party's receipt of such notice, all information and documentation
reasonably requested by the indemnifying party with respect to such
Loss.
(b) If the indemnification sought pursuant hereto involves a
claim made by a third party against the indemnified party (a "Third
Party Claim"), the indemnifying party shall be entitled to participate
in the defense of such Third Party Claim and, if it so chooses, to
assume the defense of such Third Party Claim with counsel selected by
the indemnifying party. Should the indemnifying party so elect to
assume the defense of a Third Party Claim, the indemnifying party shall
not be liable to the indemnified party for any legal expenses
subsequently incurred by the indemnified party in connection with the
defense thereof. If the indemnifying party assumes such defense, the
indemnified party shall have the right to participate in the defense
thereof and to employ counsel, at its own expense, separate from the
counsel employed by the indemnifying party, it being understood that
the indemnifying party shall control such defense. The indemnifying
party shall be liable for the fees and expenses of counsel employed by
the indemnified party for any period during which the indemnifying
party has not assumed the defense thereof (other than during any period
in which the indemnified party shall have failed to give notice of the
Third Party Claim as provided above). If the indemnifying party chooses
to defend or prosecute a Third Party Claim, all of the parties hereto
shall cooperate in the defense or prosecution thereof. Such cooperation
shall include the retention and (upon the indemnifying party's request)
the provision to the indemnifying party of records and information
which are reasonably relevant to such Third Party Claim, and making
employees available on a mutually convenient basis to provide
additional information and explanation of any material provided
hereunder. If the indemnifying party chooses to defend or prosecute any
Third Party Claim, the indemnified party will agree to any settlement,
compromise or discharge of such Third Party Claim which the
indemnifying party may recommend and which by its terms obligates the
indemnifying party to pay the full amount of the liability in
connection with such Third Party Claim. Whether or not the indemnifying
party shall have assumed the defense of a Third Party Claim, the
indemnified party shall not admit any liability with respect to, or
settle, compromise or discharge, such Third Party Claim without the
indemnifying party's prior written consent.
Article XI. GENERAL PROVISIONS
Section 11.1. Notices. All notices, requests and other
communications hereunder shall be in writing and shall be sent, delivered or
mailed, addressed as follows:
(a) if to Purchaser, to:
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David R. Brickman, Esq.
Capital Senior Living Corporation
14160 Dallas Parkway, Suite 300
Dallas, Texas 75240
and
Mr. Lawrence Cohen
Capital Senior Living Corporation
237 Park Avenue
21st Floor
New York, New York 10017
with a copy (which shall not constitute notice) to:
Jenkens & Gilchrist
1445 Ross Avenue
Suite 3200
Dallas, Texas 75202-2799
Attention: Winston W. Walp II, Esq.
if to Seller, to:
Andrew C. Jacobs
Tesson Heights Corp.
c/o Interactive Teleservices
1033 O Street
Suite 304
Lincoln, Nebraska 68508
with a copy (which shall not constitute notice) to:
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, NY 10019
Attention: Denise A. Cerasani, Esq.
Aileen C. Meehan, Esq.
Each such notice, request or other communication shall be given (i) by hand
delivery, (ii) by certified mail or (iii) by nationally recognized courier
service. Each such notice, request or communication shall be effective when
delivered at the address specified in this Section 11.1 (or in accordance with
the latest unrevoked direction from the receiving party).
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Section 11.2. Headings. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
Section 11.3. Survival of Representations and Warranties. All
representations and warranties of Seller and Purchaser contained herein or made
pursuant hereto shall survive the Closing Date for a period of one year after
the Closing Date. Any right of indemnification pursuant to Article X hereof with
respect to a claimed breach of a representation or warranty shall expire at the
date of termination of the representation or warranty claimed to be breached
(the "Termination Date"), unless on or prior to the Termination Date the party
from whom indemnification is sought shall have received notice in accordance
with the provisions of Section 10.5 herein.
Section 11.4. Severability. If any provision of this
Agreement, or the application thereof to any person, place or circumstances,
shall be held by a court of competent jurisdiction to be invalid, unenforceable,
or void, the remainder of this Agreement and such provisions as applied to other
persons, places, and circumstances shall remain in full force and effect;
provided, however, that in the event that the terms and conditions of this
Agreement are materially altered as a result of this paragraph, the parties
hereto will renegotiate the terms and conditions of this Agreement to resolve
any inequities.
Section 11.5. Counterparts. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
Section 11.6. Entire Agreement; No Third Party Beneficiaries.
This Agreement and the Confidentiality Agreement constitute the entire agreement
and supersedes all prior agreements and understandings, both written and oral,
among the parties hereto with respect to the subject matter hereof. Except as
specifically provided herein or therein, such agreements are not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder or thereunder.
Section 11.7. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of Missouri,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of law.
Section 11.8. Consent to Jurisdiction. Each of Purchaser and
Seller irrevocably submits to the non-exclusive jurisdiction of any Missouri
state court and any Federal Court located in the State of Missouri for the
purposes of any suit, action or other proceeding arising out of this Agreement
or any transaction contemplated hereby. Each of Purchaser and Seller further
agrees that service of any process, summons, notice or document by U.S.
registered mail to such party's respective address set forth in Section 11.1
shall be effective service of process for any action, suit or proceeding in
Missouri with respect to any matters to which it has submitted to jurisdiction
as set forth above in the immediately preceding sentence. Each of Purchaser and
Seller irrevocably and unconditionally waives any objection to the laying of
venue of any action, suit or proceeding arising out of this Agreement or the
transactions contemplated hereby in any Missouri state court and any Federal
Court located in the State of Missouri and hereby further irrevocably and
unconditionally
30
<PAGE>
waives and agrees not to plead or claim in any such court that any such action,
suit or proceeding brought in any such court has been brought in an inconvenient
forum.
Section 11.9. Publicity. Except as may be required by
applicable securities laws upon the advice of counsel, neither Seller, on the
one hand, nor Purchaser, on the other hand, shall issue or cause the publication
of any press release or other public announcement with respect to the
transactions contemplated by this Agreement without the consent of the other
party, which consent shall not be unreasonably withheld.
Section 11.10. Assignment. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent (which consent shall not be
unreasonably withheld) of the other parties, except that Purchaser may assign
its rights, interests and obligations hereunder to any Affiliate of Capital
Senior Living Corporation without the prior written consent of Seller, provided
that, prior to any such assignment to an Affiliate of Capital Senior Living
Corporation, Purchaser executes and delivers to Seller a written guaranty, in
form reasonably satisfactory to Seller, of the performance of all of Purchaser's
obligations under this Agreement. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties hereto and their respective successors and assigns.
31
<PAGE>
IN WITNESS WHEREOF, Purchaser and Seller have caused this Agreement to
be signed by their respective parties thereunto duly authorized, all of the date
first written above.
CAPITAL SENIOR LIVING PROPERTIES, INC.
By: /s/ David R. Brickman
-------------------------
David R. Brickman
Vice President
ATTEST:
By: /s/ Scott Shamblin
------------------
Scott Shamblin
Director of Investor Services
TESSON HEIGHTS ENTERPRISES,
a Texas general partnership
By: Tesson Heights Limited Partnership,
a Missouri limited partnership
By: A.C. Jacobs & Co., Inc., a Missouri
corporation
By: /s/ Andrew C. Jacobs
--------------------------
Andrew C. Jacobs
President
ATTEST:
By: /s/ Stephanie Clerc
-------------------
Stephanie Clerc
A.C. JACOBS & CO., INC. a
Missouri corporation
By: /s/ Andrew C. Jacobs
-------------------------
Andrew C. Jacobs
President
By: /s/ Stephanie Clerc
-------------------
Stephanie Clerc
32
ASSUMPTION AND RELEASE AGREEMENT
This Assumption and Release Agreement ("Agreement") is made
effective as of October 28, 1998 by and among GRAMERCY HILL ENTERPRISES, a Texas
general partnership ("Transferor"), ANDREW C. JACOBS, ("Original Key
Principal"), CAPITAL SENIOR LIVING PROPERTIES 2-GRAMERCY, INC., a Delaware
corporation ("Transferee"), CAPITAL SENIOR LIVING CORPORATION, a Delaware
corporation (the "New Key Principal") and Fannie Mae.
RECITALS:
A. Fannie Mae is the holder of that certain Multifamily Note
(as modified by the Addendum to Multifamily Note, the "Note"), dated December 4,
1997, in the original principal amount of $6,400,000.00 made by Transferor, to
WASHINGTON MORTGAGE FINANCIAL GROUP, LTD. ("Original Lender"), which Note
evidences a loan ("Loan") made by Original Lender to Transferor. To secure the
repayment of the Note, Transferor also executed and delivered a Multifamily Deed
of Trust, Assignment of Rents and Security Agreement, including a Rider to
Multifamily Instrument (the "Security Instrument"), dated December 4, 1997,
recorded in the official records of Lancaster County, State of Nebraska on
December 4, 1997, as Instrument No. 97- 50461 that grants a lien on the property
described in Exhibit A to this Agreement (the "Property"). The Transferor is
liable for the payment and performance of all of Transferor's obligations under
the Note, the Security Instrument and all other documents executed in connection
with the Loan, as listed on Exhibit B to this Agreement (collectively, the "Loan
Documents"). Each of the Loan Documents has been duly assigned or endorsed to
Fannie Mae. The current servicer of the Loan is WMF Washington Mortgage Corp.
("Servicer").
B. The Original Key Principal is liable for the obligations under
the Acknowledgement and Agreement of Key Principal to Personal Liability for the
Exceptions to Non-Recourse Liability contained in the Note and Security
Instrument (the "Acknowledgement").
C. Fannie Mae has been asked to consent to the transfer of the
Property to the Transferee and the assumption by the Transferee of the
obligations of the Transferor under the Loan Documents.
D. Fannie Mae has been asked to consent to the release of the
Original Key Principal from his obligations under the Acknowledgement and to
accept the assumption by the New Key Principal of the Original Key Principal's
obligations under the Acknowledgement.
E. Fannie Mae has agreed to consent to the transfer of the
Property by Transferor to Transferee subject to the terms and conditions stated
below.
In consideration of the foregoing and the mutual covenants and
promises set forth in this Agreement and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Fannie Mae,
Transferor, Original Key Principal, Transferee and New Key Principal agree as
follows:
1. Assumption of Obligations. The Transferee agrees to assume all of
the payment and performance obligations of the Transferor set forth in
the Note, the Security Instrument and the other Loan Documents in
accordance with their respective terms and conditions, as the same may
be modified by this Agreement, including without limitation, payment
of all sums due under the Note. The Transferee further agrees to abide
by and be bound by all of the terms of the Loan Documents, all as
though each of the Loan Documents had been made, executed and
delivered by the Transferee.
Assumption and Release Agreement - Fannie Mae Multistate Form 4520
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<PAGE>
2. Transferor's and Original Key Principal's Representations and
Warranties. The Transferor and the Original Key Principal represent and
warrant to Fannie Mae as of the date of this Agreement that:
(a) The Note has an unpaid principal balance of $6,334,660.06, and
prior to default bears interest at the rate of seven and
sixty-nine hundredths percent (7.69%) per annum;
(b) The Note requires that monthly payments of principal and interest
in the amount of $48,089.21 be made on or before the first (1st)
day of each month, continuing to and including January 1, 2008,
when all sums due under the Loan Documents will be immediately
due and payable in full;
(c) The Security Instrument is a valid first lien on the Property for
the full unpaid principal amount of the Loan and all other
amounts as stated in the Security Instrument;
(d) There are no defenses, offsets or counterclaims to the Note, the
Security Instrument or the other Loan Documents;
(e) There are no defaults by the Transferor under the provisions of
the Note, the Security Instrument or the other Loan Documents;
(f) All provisions of the Note, the Deed of Trust and other Loan
Documents are in full force and effect;
(g) There are no subordinate liens of any kind covering or relating
to the Property, nor are there any mechanics' liens or liens for
unpaid taxes or assessments encumbering the Property, nor has
notice of a lien or notice of intent to file a lien been
received; and
The Transferor and Original Key Principal understand and intend that
Fannie Mae will rely on the representations and warranties contained
herein.
3. Transferee's and the New Key Principal's Representations and
Warranties. The Transferee and the New Key Principal represent and
warrant to Fannie Mae as of the date of this Agreement that neither
Transferee nor any New Key Principal has any knowledge that any of the
representations made by Transferor and Original Key Principal in
Paragraph 2 above are not true and correct.
4. Consent to Transfer. Fannie Mae hereby consents to the transfer of
the Property and to the assumption by the Transferee of all of the
obligations of the Transferor under the Loan Documents, subject to the
terms and conditions set forth in this Agreement. Fannie Mae's consent
to the transfer of the Property to the Transferee is not intended to be
and shall not be construed as a consent to any subsequent transfer
which requires the Lender's consent pursuant to the terms of the
Security Instrument.
5. Assumption by the New Key Principal of Liability for the Exceptions
to Non-Recourse. New Key Principal hereby assumes all liability under
the provisions of the Acknowledgement.
6. Release of Transferor. In reliance on the Transferor's and the
Original Key Principal's and the Transferee's representations and
warranties in this Agreement, Fannie Mae releases Transferor and
Original Key Principal from all of their respective obligations under
the Loan Documents, provided, however, that the Transferor is not
released from any liability pursuant to this Agreement or paragraph D
(Environmental Hazards) of the Rider to Multifamily Instrument executed
by the Transferor as a part of the Security Instrument for any
liability that relates to the period prior to the date hereof,
Assumption and Release Agreement - Fannie Mae Multistate Form 4520
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<PAGE>
regardless of when such environmental hazard is discovered. If any
material element of the representations and warranties made by the
Transferor and Original Key Principal contained herein is false as of
the date of this Agreement, then the release set forth in this
Paragraph 6 will be canceled as of the date of this Agreement and the
Transferor and Original Key Principal will remain obligated under the
Loan Documents as though there had been no such release.
7. Priority/Modification. This Agreement embodies and constitutes the
entire understanding among the parties with respect to the transactions
contemplated herein, and all prior or contemporaneous agreements,
understandings, representations, and statements, oral or written, are
merged into this Agreement. Neither this Agreement nor any provision
hereof may be waived, modified, amended, discharged, or terminated
except by an instrument in writing signed by the party against which
the enforcement of such waiver, modification, amendment, discharge, or
termination is sought, and then only to the extent set forth in such
instrument. Except as expressly modified hereby, the Note, Security
Instrument and other Loan Documents shall remain in full force and
effect and this Agreement shall have no effect on the priority or
validity of the liens set forth in the Security Instrument or the Loan
Documents, which are incorporated herein by reference. Transferor and
the Original Key Principal hereby ratify the agreements made by them to
Fannie Mae in connection with the Loan and agree that, except to the
extent modified hereby, all of such agreements remain in full force and
effect.
8. No Impairment of Lien. Nothing set forth herein shall affect the
priority or extent of the lien of any of the Loan Documents, nor,
except as expressly set forth herein, release or change the liability
of any party who may now be or after the date of this Agreement, become
liable, primarily or secondarily, under the Loan Documents.
9. Costs. The Transferee and the Transferor agree to pay all fees and
costs (including attorneys' fees) incurred by Fannie Mae and the
Servicer in connection with Fannie Mae's consent to and approval of the
transfer of the Property and a transfer fee of $63,346.60 in
consideration of the consent to that transfer.
10. Financial Information. The Transferee and New Key Principal
represent and warrant to Fannie Mae that all financial information and
information regarding the management capability of Transferee and New
Key Principal provided to the Servicer or Fannie Mae was true and
correct as of the date provided to the Servicer or Fannie Mae and
remains materially true and correct as of the date of this Agreement.
Assumption and Release Agreement - Fannie Mae Multistate Form 4520
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<PAGE>
11. Addresses. Transferee's address for notice hereunder and under the
Loan Documents is:
Capital Senior Living Properties 2-Gramercy, Inc.
c/o Capital Senior Living Corporation
14160 Dallas Parkway, Suite 300
Dallas, Texas 75240
Attention: David R. Brickman
Transferor's address for notice hereunder and under the Loan Documents
is:
Gramercy Hill Enterprises
c/o Interactive Teleservices
21 East State Street
18th Floor
Cleveland, Ohio 43215
12. Complete Release. Transferee and Transferor and the Original Key
Principal and the New Key Principal, jointly and severally as between
Transferee and New Key Principal, unconditionally and irrevocably
release and forever discharge Original Lender, Fannie Mae, and their
respective successors, assigns, agents, directors, officers, employees,
and attorneys, and each current or substitute trustee under the
Security Instrument (collectively, the "Indemnitees") from all Claims,
as defined below, and jointly and severally agree to indemnify
Indemnitees, and hold them harmless from any and all claims, losses,
causes of action, costs and expenses of every kind or character in
connection with the Claims or the transfer of the Property.
Notwithstanding the foregoing, Transferor shall not be responsible for
any Claims arising from the action or inaction of Transferee and New
Key Principal, and Transferee and New Key Principal shall not be
responsible for any Claims arising from the action or inaction of
Transferor. As used in this Agreement, the term "Claims" shall mean any
and all possible claims, demands, actions, costs, expenses and
liabilities whatsoever, known or unknown, at law or in equity,
originating in whole or in part, on or before the date of this
Agreement, which the Transferor, Original Key Principal, or any of
their respective partners, members, officers, agents or employees, may
now or hereafter have against the Indemnitees, if any and irrespective
of whether any such Claims arise out of contract, tort, violation of
laws, or regulations, or otherwise in connection with any of the Loan
Documents, including, without limitation, any contracting for,
charging, taking, reserving, collecting or receiving interest in excess
of the highest lawful rate applicable thereto and any loss, cost or
damage, of any kind or character, arising out of or in any way
connected with or in any way resulting from the acts, actions or
omissions of Indemnitees, including any requirement that the Loan
Documents be modified as a condition to the transactions contemplated
by this Agreement, any charging, collecting or contracting for
prepayment premiums, transfer fees, or assumption fees, any breach of
fiduciary duty, breach of any duty of fair dealing, breach of
confidence, breach of funding commitment, undue influence, duress,
economic coercion, violation of any federal or state securities or Blue
Sky laws or regulations, conflict of interest, NEGLIGENCE, bad faith,
malpractice, violations of the Racketeer Influenced and Corrupt
Organizations Act, intentional or negligent infliction of mental
distress, tortious interference with contractual relations, tortious
interference with corporate governance or prospective business
advantage, breach of contract, deceptive trade practices, libel,
slander, conspiracy or any claim for wrongfully accelerating the Note
or wrongfully attempting to foreclose on any collateral relating to the
Note, but in each case only to the extent permitted by applicable law.
Transferor and Transferee agree that Fannie Mae and Original Lender
have no fiduciary or similar obligations to Transferor or Transferee
and that their relationship is strictly that of creditor and debtor.
This release is accepted by Fannie Mae and Original Lender pursuant to
Assumption and Release Agreement - Fannie Mae Multistate Form 4520
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<PAGE>
this Agreement and shall not be construed as an admission of liability
on the part of either. Transferor and Transferee and the Original Key
Principal and New Key Principal hereby represent and warrant that they
are the current legal and beneficial owners of all Claims, if any,
released hereby and have not assigned, pledged or contracted to assign
or pledge any such Claim to any other person.
13. Miscellaneous.
(a) This Agreement shall be construed according to and governed by the
laws of the jurisdictions in which the Property is located without
regard to its conflicts of law principles.
(b) If any provision of this Agreement is adjudicated to be invalid,
illegal or unenforceable, in whole or in part, it will be deemed
omitted to that extent and all other provisions of this Agreement will
remain in full force and effect.
(c) No change or modification of this Agreement shall be valid unless
the same is in writing and signed by all parties hereto.
(d) The captions contained in this Agreement are for convenience of
reference only and in no event define, describe or limit the scope or
intent of this Agreement or any of the provisions or terms hereof.
(e) This Agreement shall be binding upon and inure to the benefit of
the parties and their respective heirs, legal representatives,
successors and assigns.
(f) This Agreement may be executed in any number of counterparts with
the same effect as if all parties hereto had signed the same document.
All such counterparts shall be construed together and shall constitute
one instrument, but in making proof hereof it shall only be necessary
to produce one such counterpart.
(g) THIS WRITTEN AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS AMENDED,
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Assumption and Release Agreement - Fannie Mae Multistate Form 4520
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
TRANSFEREE:
CAPITAL SENIOR LIVING PROPERTIES
2-GRAMERCY, INC., a Delaware corporation
By: /s/ Lawrence A. Cohen
--------------------------------------
Lawrence A. Cohen
Chief Financial Officer
Date: As of October 28, 1998
STATE OF New York, Nassau County ss:
The foregoing instrument was acknowledged before me this 28th
day of October, 1998, by Lawrence A. Cohen, Chief Financial Officer of Capital
Senior Living Properties 2-Gramercy, Inc., a Delaware corporation, on behalf of
the corporation.
Witness my hand and notarial seal in said state and county,
the date aforesaid.
/s/ Jason H. Kim
---------------------------
Notary Public
My Commission Expires: 5/5/99
Assumption and Release Agreement - Fannie Mae Multistate Form 4520
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<PAGE>
NEW KEY PRINCIPAL:
CAPITAL SENIOR LIVING CORPORATION,
a Delaware corporation
By: /s/ Lawrence A. Cohen
---------------------------------------------
Lawrence A. Cohen
Chief Financial Officer
Address: 14160 Dallas Parkway, Suite 300
Dallas, Texas 75240
Date: As of October 28, 1998
STATE OF New York, Nassau County ss:
The foregoing instrument was acknowledged before me this 28th day of
October, 1998, by Lawrence A. Cohen, Chief Financial Officer of Capital Senior
Living Corporation, a Delaware corporation, on behalf of the corporation.
Witness my hand and notarial seal in said state and county, the date
aforesaid.
/s/ Jason H. Kim
--------------------
Notary Public
My Commission Expires: 5/5/99
Assumption and Release Agreement - Fannie Mae Multistate Form 4520
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7
<PAGE>
TRANSFEROR:
GRAMERCY HILL ENTERPRISES, a Texas
general partnership
By: Gramercy Hill Limited Partnership, a Nebraska
limited partnership, its general partner
By: Gramercy Hill Corp., a Nebraska
corporation, its general partner
By: /s/ Andrew C. Jacobs
-----------------------------------
Andrew C. Jacobs
President
Date: As of October 28, 1998
STATE OF Ohio, Franklin County ss:
The foregoing instrument was acknowledged before me this 27th
day of October, 1998, by Andrew C. Jacobs, president of Gramercy Hill
Corporation, a Nebraska corporation, general partner of Gramercy Hill Limited
Partnership, a Nebraska limited partnership, general partner of Gramercy Hill
Enterprises, a Texas general partnership, on behalf of Gramercy Hill
Enterprises.
Witness my hand and notarial seal in said state and county,
the date aforesaid.
/s/ Gail M. Kelley
--------------------------------
Notary Public
My Commission Expires:
--------------------------------------
Assumption and Release Agreement - Fannie Mae Multistate Form 4520
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<PAGE>
ORIGINAL KEY PRINCIPAL:
/s/ Andrew C. Jacobs (SEAL)
-------------------------------------------
Name: Andrew C. Jacobs
Address: c/o Interactive Teleservices
21 East State Street
18th Floor
Cleveland, Ohio 43215
Date: As of October 28, 1998
STATE OF Ohio, Franklin County ss:
The foregoing instrument was acknowledged before me this 27th day of
October, 1998, by Andrew C. Jacobs in his individual capacity.
Witness my hand and notarial seal in said state and county, the date
aforesaid.
/s/ Gail M. Kelley
-----------------------------------
Notary Public
My Commission Expires:
----------------------------------------
Assumption and Release Agreement - Fannie Mae Multistate Form 4520
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<PAGE>
FANNIE MAE
By: /s/ Douglas Higgs
----------------------------------------
Name: Douglas Higgs
Title: Assistant Vice President
STATE OF District of Columbia County ss:
The foregoing instrument was acknowledged before me this 21st day of
October, 1998, by Douglas Higgs, Asst. V.P. of Fannie Mae, a corporation
organized under the laws of the United States of America, on behalf of the
corporation.
Witness my hand and notarial seal in said state and county, the date
aforesaid.
/s/ Paulette M. Gayles
--------------------------------
Notary Public
My Commission Expires:
------------------------------------
Assumption and Release Agreement - Fannie Mae Multistate Form 4520
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<PAGE>
EXHIBIT A
to
ASSUMPTION AND RELEASE AGREEMENT
Lot Seventy-nine (79) of Irregular Tracts in the Southeast Quarter of Section
28, Township 10 North, Range 7 East of The 6th P.M., Lincoln, Lancaster County,
Nebraska
Assumption and Release Agreement - Fannie Mae Multistate Form 4520
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A-1
<PAGE>
EXHIBIT B
to
ASSUMPTION AND RELEASE AGREEMENT
a. Multifamily Note dated December 4, 1997, by Gramercy Hill Enterprises
("Original Borrower") for the benefit of Washington Mortgage Financial
Group, Ltd. ("Original Lender"), as modified by an Addendum to Note dated
December 4, 1997.
b. Deed of Trust, Assignment of Rents and Security Agreement, including a
Rider to Multifamily Instrument, dated December 4, 1997, by Original
Borrower for the benefit of Original Lender.
c. Two (2) Financing Statements dated December 4, 1997, listing Original
Borrower as debtor, Original Lender as secured party and Fannie Mae as
assignee.
d. Replacement Reserve and Security Agreement dated December 4, 1997 by and
between Original Borrower and Original Lender.
e. Completion/Repair and Security Agreement dated December 4, 1997 by and
between Original Borrower and Original Lender.
f. Assignment of Management Agreement dated December 4, 1997 by and between
Original Borrower, Original Lender and Manager.
g. Agreement to Amend or Comply dated December 4, 1997 executed by Original
Borrower.
Assumption and Release Agreement - Fannie Mae Multistate Form 4520
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B-1
MULTIFAMILY NOTE
US$6,400,000.00 Lincoln, Nebraska
December 4, 1997
FOR VALUE RECEIVED, the undersigned promise to pay WASHINGTON MORTGAGE
FINANCIAL GROUP, LTD., a Delaware corporation, or order the principal sum of Six
Million Four Hundred Thousand and no/100 Dollars, with interest on the unpaid
principal balance from the date of this Note, until paid, at the rate of 7.69
percent per annum. The principal and interest shall be payable at 1593 Spring
Hill Road, Suite 400, Vienna, Virginia 22182 or such other place as the holder
hereof may designate in writing, in consecutive monthly installments of
Forty-Eight Thousand Eighty-Nine and 21/100ths Dollars (US$48,089.21) on the 1st
day of each month beginning February 1, 1998(herein "amortization commencement
date"), until the entire indebtedness evidenced hereby is fully paid, except
that any remaining indebtedness, if not sooner paid, shall be due and payable on
January 1, 2008.
If any installment under this Note is not paid when due, the entire
principal amount outstanding hereunder and accrued interest thereon shall at
once become due and payable, at the option of the holder hereof. The holder
hereof may exercise this option to accelerate during any default by the
undersigned regardless of any prior forbearance. In the event of any default in
the payment of this Note, and if the same is referred to an attorney at law for
collection or any action at law or in equity is brought with respect hereto, the
undersigned shall pay the holder hereof all expenses and costs.
If any installment under this Note is not received by the holder hereof
within ten (10) calendar days after the installment is due, the undersigned
shall pay to the holder hereof a late charge of five (5) percent of such
installment, such late charge to be immediately due and payable without demand
by the holder hereof. If any installment under this Note remains past due for
thirty (30) calendar days or more, the outstanding principal balance of this
Note shall bear interest during the period in which the undersigned is in
default at a rate of 11.69 percent per annum, or, if such increased rate of
interest may not be collected from the undersigned under applicable law, then at
the maximum increased rate of interest, if any, which may be collected from the
undersigned under applicable law.
SEE ATTACHED ADDENDUM TO MULTIFAMILY NOTE
From time to time, without affecting the obligation of the undersigned
or the successors or assigns of the undersigned to pay the outstanding principal
balance of this Note and observe the covenants of the undersigned contained
herein, without affecting the guaranty of any person, corporation, partnership
or other entity for payments of the outstanding principal balance of this Note,
without giving notice to or obtaining the consent of the undersigned, the
successors or assigns of the undersigned or guarantors, and without liability on
the part of the holder hereof, the holder hereof may, at the option of the
holder hereof, extend the time for payment of said outstanding principal
- 1 -
<PAGE>
balance or any part thereof, reduce the payments thereon, release anyone liable
on any of said outstanding principal balance, accept a renewal of this Note,
modify the terms and time of payment of said outstanding principal balance, join
in any extension or subordination agreement, release any security given herefor,
take or release other or additional security, and agree in writing with the
undersigned to modify the rate of interest or period of amortization of this
Note or change the amount of the monthly installments payable hereunder.
Presentment, notice of dishonor, and protest are hereby waived by all
makers, sureties, guarantors and endorsers hereof. This Note shall be the joint
and several obligation of all makers, sureties, guarantors and endorsers, and
shall be binding upon them and their successors and assigns.
The indebtedness evidenced by this Note is secured by a Mortgage or
Deed of Trust dated of even date herewith. This Note shall be governed by the
law of the jurisdiction in which the Property subject to the Mortgage or Deed of
Trust is located.
BORROWER:
GRAMERCY HILL ENTERPRISES, a Texas
General partnership
By: Gramercy Hill Limited Partnership, a Nebraska
limited partnership, its general partner
By: Gramercy Hill Corp., a Nebraska corporation,
its general partner
By: /s/ Andrew C. Jacobs
--------------------------------
Andrew C. Jacobs, President
PAY TO THE ORDER OF
--------------------------------
, WITHOUT RECOURSE.
----------------------
WASHINGTON MORTGAGE FINANCIAL
GROUP, LTD., a Delaware corporation
By: /s/ Sharon D. Singleton
----------------------------------------------
Sharon D. Singleton
Assistant Vice President
The attached Addendum to Multifamily Note, dated the date of this Multifamily
Note, is incorporated into and deemed to amend and supplement this Multifamily
Note.
- 2 -
<PAGE>
ADDENDUM TO MULTIFAMILY NOTE
THIS ADDENDUM TO MULTIFAMILY NOTE (the "Addendum") is made this 4th day
of December, 1997, and is incorporated into and shall be deemed to amend and
supplement the Multifamily Note (the "Multifamily Note") made by the undersigned
(the "Borrower") to WASHINGTON MORTGAGE FINANCIAL GROUP, LTD., a Delaware
corporation and its successors, assigns and transferees (the "Lender"), dated
the same date as this Addendum (the Multifamily Note as amended and supplemented
by this Addendum, any other addendum to the Multifamily Note, and any future
amendments to the Multifamily Note is referred to as the "Note"). The debt
evidenced by the Note is secured by a Multifamily Mortgage, Deed of Trust or
Deed to Secure Debt of the same date (the "Multifamily Instrument"), covering
the property described in the Multifamily Instrument and defined therein as the
"property," located at:
6800 A Street, Lincoln, Nebraska 68510
- --------------------------------------------------------------------------------
(Property Address)
This Property is located entirely within the State of Nebraska [Insert name of
state in which the property is located] (the "Property Jurisdiction"). The
Multifamily Instrument is amended and supplemented by the Rider to Multifamily
Instrument (the "Rider") and any other rider to Multifamily Instrument given by
Borrower to Lender and dated the same date as the Multifamily Instrument. (The
Multifamily Instrument as amended and supplemented by the Rider and any other
rider to the Multifamily Instrument and any future ;amendments to the Instrument
is referred to as the "Instrument".)
The term "Loan Documents" when used in this Addendum shall mean, collectively,
the following documents: (i) the Instrument, (ii) the Note, and (iii) all other
documents or agreements, including any Collateral Agreements (as defined in the
Rider) or O&M Agreement (as defined in the Rider), arising under, related to, or
made in connection with, the loan evidenced by the Note, as such Loan Documents
may be amended.
The covenants and agreements of this Addendum, and the covenants and agreements
of any other addendum to the Multifamily Note, shall be incorporated into and
shall amend and supplement the covenants and agreements of the Multifamily Note
as if this Addendum and the other addenda were a part of the Multifamily Note,
and all references to the Note in the Loan Documents shall mean the Note as so
amended and supplemented. Any conflict between the provisions of the Multifamily
Note and this Addendum shall be resolve in favor of this Addendum.
ADDITIONAL COVENANTS. In addition to the covenants and agreements made
in the Multifamily Note Borrower and Lender further covenant and agree as
follows:
- 3 -
<PAGE>
A. Prepayments
1. Yield Maintenance Period
During the first 9.5 [insert applicable number of years] years of the
Note term beginning with the date of the Note (the "Yield Maintenance Period")
and upon giving Lender 60 days prior written notice, Borrower may prepay the
entire unpaid principal balance of the Note on the last Business Day before a
scheduled monthly payment date by paying, in addition to the entire unpaid
principal balance, accrued interest and any other sums due Lender at the time of
prepayment, a prepayment premium equal to the greater of:
(a) 1% of the entire unpaid principal balance of the Note, or
(b) The product obtained by multiplying (1) the entire unpaid
principal balance of the Note at the time of prepayment
times (2) the difference obtained by subtracting from the
interest rate on the Note the yield rate (the "Yield Rate")
on the 6.125% U.S. Treasury Security due August, 2007 (the
"Specified U.S. Treasury Security"), as the Yield Rate is
reported in the Wall Street Journal on the fifth Business
Day preceding (x) the date notice of prepayment is given to
Lender where prepayment is voluntary, or (y) the date Lender
accelerates the loan, times (3) the present value factor
calculator using the following formula:
1 - (1+4)-n
-----------
r
(r = Yield Rate
n = the number of years, and any fraction thereof,
remaining between the prepayment date and the
expiration of the Yield Maintenance Period)
In the event that no Yield Rate is published for the Specified
U.S. Treasury Security, then the nearest equivalent U.S. Treasury Security shall
be selected at Lender's sole discretion. If the publication of such Yield Rates
in the Wall Street Journal is discontinued, Lender shall determine such Yield
Rates for another source selected by Lender.
Except as provided in paragraph A.3 of this Addendum, no partial
prepayments are permitted.
2. After Yield Maintenance Period
After the expiration of the Yield Maintenance Period and upon
giving Lender 60 days prior written notice, Borrower may prepay the entire
unpaid principal balance of the Note on the last Business Day before a scheduled
monthly payment date by paying, in addition to the entire unpaid principal
balance, accrued interest and any other sums due Lender at the time of
prepayment, a prepayment premium equal to 1% of the entire unpaid principal
balance of the Note. No prepayment premium shall be due for any full prepayment
made by Borrower in accordance with the provisions of the preceding sentence
within 90 days of the maturity date of the Note.
Except as provided in paragraph A.3 of this Addendum, no partial
prepayments are permitted.
- 4 -
<PAGE>
3. Partial Prepayments
Borrower shall have no right to make a partial prepayment of the
outstanding indebtedness during the Note term. However, in the event that Lender
shall require a partial prepayment of the outstanding indebtedness after a
default under the Note, the Instrument or any of the other Loan Documents, by
applying field held by Lender pursuant to any Collateral Agreement (as defined
in Uniform Covenant 2B of the Instrument) against the indebtedness secured by
the Instrument, or, if Lender shall for any other reason accept a partial
prepayment by Borrower of the outstanding indebtedness, except as otherwise
provided in paragraph A.4 of this Addendum, a prepayment premium shall be due
and payable to Lender as follows:
(a) After Yield Maintenance Period. If Lender shall require or
accept a partial prepayment after the expiration of the
Yield Maintenance Period, the partial prepayment shall be
made on the last Business Day before a scheduled monthly
payment date and a prepayment premium equal to 1% of the
partial principal prepayment amount shall be due and payable
to Lender. No prepayment premium shall be due for any
partial prepayment made by Borrower in accordance with the
provisions of the preceding sentence within 90 days of the
maturity date of the Note.
(b) During Yield Maintenance Period. If Lender shall require or
accept a partial prepayment during the Yield Maintenance
Period, the partial prepayment shall be made on the last
Business Day before a scheduled monthly payment date and a
prepayment premium shall be due and payable to Lender equal
to the greater of:
(i) 1% of the amount of principal being prepaid, or
(ii) the product obtained by multiplying (A) the amount of
the principal which is being prepaid, times (B) the
difference obtained by subtracting from the interest
rate on the Note the yield rate (the "Partial
Prepayment Yield Rate") on the Specified U.S. Treasury
Security, as the Partial Prepayment Yield Rate is
reported in the Wall Street Journal on the fifth
Business Day preceding (1) the day Lender accelerates
the loan (in connection with any partial prepayment
made in connection with an acceleration of the loan),
or (2) the day Lender applies funds held under any
Collateral Agreement (other than in connection with an
acceleration of the loan), times (C) the present value
factor calculated using the following formula:
1 - (1 + y)-n
-------------
y
[y = Partial Prepayment Yield Rate
n = the number of years, and any fraction thereof,
remaining between the prepayment date and the
expiration of the Yield Maintenance Period]
- 5 -
<PAGE>
When the total amount to be applied toward the unpaid
principal balance of the loan and the prepayment premium is known, but the
amounts to be allocated toward the unpaid principal balance of the loan and the
prepayment premium, respectively, are unknown, the Lender shall determine the
allocation between the prepaid principal amount and the prepayment premium as
follows:
Given: a = total amount to be applied
b = prepaid principal amount
c = prepayment premium
N = note rate
F = present value factor = 1 - (1 + y)-n
-------------
y
"y" and "n" have the same meanings as set
forth in subparagraph (ii) above]
Then: a = b + c
b = a
-----------
F (N-y) + 1
c = a - b
Except as provided in the next sentence, any partial
prepayment of the outstanding indebtedness shall not extend the due date of any
subsequent monthly installments or change the amount of such installments,
unless Lender shall otherwise agree in writing. Upon any partial prepayment,
Lender shall have the option, in its sole and absolute discretion, to recast the
monthly installments due under the Note so that the maturity date of the Note
shall remain the same.
4. Premium Due Whether Voluntary or Involuntary Prepayment; Insurance
and Condemnation Proceeds
Borrower shall pay the prepayment premium due under this paragraph
A whether the prepayment is voluntary or involuntary (in connection with
Lender's acceleration of the unpaid principal balance of the Note) or the
Instrument is satisfied or released by foreclosure (whether by power of sale or
judicial proceeding), deed in lieu of foreclosure or by any other means.
Notwithstanding any other provision herein to the contrary, Borrower shall not
be required to pay any prepayment premium in connection with any prepayment
occurring as a result of the application of insurance proceeds or condemnation
awards under the Instrument.
- 6 -
<PAGE>
5. Notice; Business Day
Any notice to Lender provided for in this Addendum shall be given
in the manner provided in the Instrument. The term "Business Day" means any day
other than a Saturday, a Sunday, or any other day on which Lender is not open
for
B. Borrower's Exculpation
Subject to the provisions of paragraph C and notwithstanding any other
provision in the Note or Instrument, the personal liability of Borrower, any
general partner of Borrower (if the Borrower is a partnership), and any "Key
Principal" (collectively, the individual(s) whose name(s) is (are) set forth at
the foot of this Addendum) to pay the principal of and interest on the debt
evidenced by the Note and any other agreement evidencing Borrower's obligations
under the Note and the Instrument shall be limited to (1) the real and personal
property described as the "Property" in the Instrument, (2) the personal
property described in or pledged under any Collateral Agreement (as defined in
Uniform Covenant 2B of the Instrument) executed in connection with the loan
evidenced by the Note, (3) the rents, profits, issues, products and income of
the Property received or collected by or on behalf of Borrower (the "Rents and
Profits") to the extent such receipts are necessary first, to pay the reasonable
expenses of operating, managing, maintaining and repairing the Property,
including but not limited to real estate taxes, utilities, assessments,
insurance premiums, repairs, replacements and ground rents, if any (the
"Operating Expenses") then due and payable as of the time of receipt of such
Rents and Profits, and then, to pay the principal and interest due under the
Note and any other sums due under the Instrument or any other Loan Document
(including but not limited to deposits or reserves due under any Collateral
Agreement), except to the extent that Borrower did not have the legal right,
because of a bankruptcy, receivership or similar judicial proceeding, to direct
the disbursement of such sums.
Except as provided in paragraph C, Lender shall not seek (a) any judgment
for a deficiency against Borrower, any general partner of Borrower (if Borrower
is a partnership) or any Key Principal, or Borrower's or any general partner's
or Key Principal's heirs, legal representatives, successors or assigns, in any
action to enforce any right or remedy under the Instrument, or (b) any judgment
on the Note except as may be necessary in any action brought under the
Instrument to enforce the lien against the Property or to exercise any remedies
under any Collateral Agreement.
C. Exceptions to Non-Recourse Liability
If, without obtaining the Lender's prior written consent, (i) a Transfer
shall occur which, pursuant to Uniform Covenant 19 of the Instrument, gives
Lender the right, at its option, to declare all sums secured by the Instrument
immediately due and payable, (ii) Borrower shall encumber the Property with the
lien of any subordinate instrument in connection with any financing by Borrower,
or, (iii) Borrower shall violate the single asset covenant of paragraph J of the
Rider, any of such events shall constitute a default by Borrower under the Note,
the Instrument and the other Loan Documents, and if such event shall continue
for 30 days, paragraph B shall not apply from and after the date which is 30
days after such event and the Borrower, any general partner of Borrower (if
Borrower is a partnership) and Key Principal (each individually on a joint or
several basis if more than one) shall be personally liable on a joint and
- 7 -
<PAGE>
several basis for full recourse liability under the Note and the other Loan
Documents.
Notwithstanding paragraph B, Borrower, any general partner of Borrower
(if Borrower is a partnership) and Key Principal (each individually on a joint
and several basis if more than one) shall be personally liable on a joint and
several basis, in the amount of any loss, damage or cost (including, but not
limited to, attorneys fees) resulting from (A) fraud or intentional
misrepresentation by Borrower or Borrower's agents or employees or any Key
Principal or general partner of Borrower in connection with obtaining the loan
evidenced by the Note, or in complying with any of Borrower's obligations under
the Loan Documents, (B) insurance proceeds, condemnation awards, security
deposits from tenants or other sums or payments received by or on behalf of the
Borrower in its capacity as owner of the Property and not applied in accordance
with the provisions of the Instrument (except to the extent that Borrower did
not have the legal right because of a bankruptcy, receivership or similar
judicial proceeding, to direct disbursement of such sums or payments, (C) all
Rents and Profits, (except tot he extent that Borrower did not have the legal
right, because of a bankruptcy, receivership or similar judicial proceeding, to
direct the disbursement of such sums), and not applied, first, to the payment of
the reasonable Operating Expenses as such Operating Expenses become due and
payable, and then, to the payment of principal and interest then due and payable
under the Note and any other sums due under the Instrument and all other Loan
Document (including but not limited to deposits or reserves payable under any
Collateral Agreement), (D) Borrower's failure to pay transfer fees and charges
due Lender under paragraph 19(c) of the Instrument, or (E) Borrower's failure
following a default under any of the Loan Documents to deliver to Lender on
demand all Rents and Profits, security deposits (except to the extent that
Borrower did not have the legal right because of a bankruptcy, receivership or
similar judicial proceeding to direct the disbursement of such sums), books and
records relating to the Property.
No provision of paragraphs B or C shall (i) affect any guaranty or
similar agreement executed in connection with the debt evidenced by the Note,
(ii) release or reduce the debt evidenced by the Note, (iii) impair the right of
Lender to enforce the provisions of paragraph D of the Rider, (iv) impair the
lien of the Instrument, or (v) impair the right of Lender to enforce the
provisions of any Collateral Agreement.
D. Business, Commercial or Investment Purpose
Borrower represents that the Loan evidenced by the Note is being made
solely for business, commercial or investment purposes.
E. Governing Law
1. Choice of Law
The validity of the Note, and the other Loan Documents, each of their
terms and provisions, and the rights and obligations of Borrower under the Note,
and the other Loan Documents shall be governed by, interpreted, construed, and
enforced pursuant to and in accordance with the laws of the Property
Jurisdiction.
- 8 -
<PAGE>
2. Consent to Jurisdiction
Borrower irrevocably consents to the exclusive jurisdiction of any and
all state and federal courts with jurisdiction in the Property Jurisdiction over
Borrower and Borrower's assets. Borrower agrees that such assets shall be used
to first satisfy all claims of creditors organized or domiciled in the United
States of America ("USA") and that no assets of the Borrower in the USA shall be
considered part of any foreign bankruptcy estate.
Borrower agrees that any controversy arising under or in relation to the
Note, the Instrument or any of the other Loan Documents shall be litigated
exclusively in the Property Jurisdiction shall have exclusive jurisdiction over
all controversies which may arise under or in relation to the Note, including
without limitation those controversies relating to the execution,
interpretation, breach, enforcement, or compliance with the Note, the
Instrument, or any other issue arising under, related to, or in connection with
any of the Loan Documents. Borrower irrevocably consents to service,
jurisdiction, and venue of such courts for any litigation arising from the Note,
the Instrument or any of the other Loan Documents, and waives any other venue to
which it might be entitled by virtue of domicile, habitual residence, or
otherwise.
F. Successors and Assigns
The provisions of the Note, the Instrument, and all other Loan Documents
shall be binding on the successors and assigns, including, but not limited to,
any receiver, trustee, representative or other person appointed under foreign or
domestic bankruptcy, receivership, or similar proceedings of Borrower and any
person having an interest in Borrower.
G. No Third Party Beneficiary
Borrower acknowledges and agrees that (i) any loss sharing arrangement or
arrangement for interim advancement of funds that originally is made by the
Lender named in the Note to Federal National Mortgage Association is made
pursuant to a contractual obligation of such Lender to Federal National Mortgage
Association that is independent of, and separate and distinct from, the
obligation of Borrower for the full and prompt payment of the indebtedness
evidenced by the Note, (ii) Borrower shall not be deemed to be a third party
beneficiary of such loss sharing arrangement or arrangement for interim
advancement of funds, and (iii) no such loss sharing or interim advancement
arrangement shall constitute any person or entity making such payment as a
guarantor or surety of the Borrower's obligations, notwithstanding the fact the
obligations under any such loss sharing or interim advancement arrangement may
be calculated with reference to amounts payable under the Note or other Loan
Documents.
- 9 -
<PAGE>
BY SIGNING BELOW, Borrower accepts and agrees to the covenants and
agreements contained in this Addendum.
BORROWER:
GRAMERCY HILL ENTERPRISES, a Texas
general partnership
By: Gramercy Hill Limited Partnership, a Nebraska
limited partnership, its general partner
By: Gramercy Hill Corp., a Nebraska
corporation, its general partner
By:/s/ Andrew C. Jacobs
---------------------------------
Andrew C. Jacobs, President
Acknowledgment and Agreement of Key Principal to
Personal Liability for the Exception to Non-Recourse
Key Principal (each for himself if more than one) hereby represents to
Lender that he has a direct or indirect ownership interest in the Borrower and
that he participates in the management of Borrower.
BY SIGNING BELOW, the undersigned Key Principal (each for himself if more
than one) understands, accepts and agrees to the provisions of paragraph C
above. No transfer of Key Principal's ownership interest in Borrower or in any
other entity which directly or indirectly has an ownership interest in Borrower
shall release Key Principal from liability hereunder, unless the Borrower and
Key Principal shall have complied with the provisions of Uniform Covenant 19 of
the Instrument and Lender shall have approved the transfer and the substituted
Key Principal. Key Principal shall have no right of subrogation against the
Borrower or any general partner of Borrower by reason of any payment by Key
Principal pursuant to paragraph C.
Key Principal:
/s/ Andrew C. Jacobs (Seal)
----------------------------
Name: Andrew C. Jacobs
Address: 1033 O Street, Suite 304
Lincoln, Nebraska 68508
- 11 -
MULTIFAMILY DEED OF TRUST,
ASSIGNMENT OF RENTS AND SECURITY AGREEMENT
THIS DEED OF TRUST (herein "Instrument") is made this 4th day of
December, 1997, among the Trustor/Grantor, GRAMERCY HILL ENTERPRISES, a Texas
general partnership whose address is c/o Andrew Jacobs, 1033 O Street, Suite
304, Lincoln, Nebraska 68508 (herein "Borrower"), TICOR TITLE INSURANCE COMPANY,
c/o Nebraska Title Company, 100 Court House Plaza, 9th Street, Lincoln, Nebraska
68508 (herein "Trustee"), and the Beneficiary, WASHINGTON MORTGAGE FINANCIAL
GROUP, LTD., a corporation organized and existing under the laws of the State of
Delaware, whose address is 1593 Spring Hill Road, Suite 400, Vienna, Virginia
22182 (herein "Lender").
BORROWER, in consideration of the indebtedness herein recited and the
trust herein created, irrevocably grants, conveys and assigns to Trustee, in
trust, with power of sale, the following described property located in Lincoln
(Lancaster County), State of Nebraska:
* Delete bracketed material if not completed.
For a complete legal description of the property subject to this Instrument, see
Exhibit A attached hereto and incorporated herein by this reference.
1
<PAGE>
*/all other equipment necessary for the operation of the foregoing and any and
all other personal property on the Property site, and together with the
following items: utility deposits, unearned premiums, accrued, accruing or to
accrue under insurance policies now or hereafter obtained by the Borrower and
all proceeds of any conversion of the "Property" (as hereinafter defined) or any
part thereof, including, without limitation, proceeds of hazard and title
insurance and all awards and compensation for the taking by eminent domain,
condemnation or otherwise, of all or any part of the Property or any easement
therein.
TOGETHER with all buildings, improvements and tenements now or
hereafter erected on the property, and all heretofore or hereafter vacated
alleys and streets abutting the property, and all easements, rights,
appurtenances, rents (subject however to the assignment of rents to Lender
herein), royalties, mineral, oil and gas rights and profits, water, water
rights, and water stock appurtenant to the property, and all fixtures,
machinery, equipment, engines, boilers, incinerators, building materials,
appliances and goods of every nature whatsoever now or hereafter located in, or
on, or used, or intended to be used in connection with the property, including,
but not limited to, those for the purposes of supplying or distributing heating,
cooling, electricity, gas, water, air and light; and all elevators, and related
machinery and equipment, fire prevention and extinguishing apparatus, security
and access control apparatus, plumbing, bath tubs, water heaters, water closets,
sinks, ranges, stoves, refrigerators, dishwashers, disposals, washers, dryers,
awnings, storm windows, storm doors, screens, blinds, shades, curtains and
curtain rods, mirrors, cabinets, paneling, rugs, attached floor coverings,
furniture, pictures, antennas, trees and plants, and *see above
---------------------------
- --------------------------------------------------------------------------------
all of which, including replacements and additions thereto, shall be deemed to
be and remain a part of the real property covered by this Instrument; and all of
the foregoing, together with said property (or the leasehold estate in the event
this Instrument is on a leasehold) are herein referred to as the "Property".
TO SECURE TO LENDER (a) the repayment of the indebtedness evidenced by
Borrower's note dated of even date herewith (herein "Note") in the principal sum
of Six Million Four Hundred Thousand and No/100 Dollars, with interest thereon,
with the balance of the indebtedness, if not sooner paid, due and payable on
January 1, 2008, and all renewals, extensions and modifications thereof; (b) the
repayment of any future advances, with interest thereon, made by Lender to
Borrower pursuant to paragraph 31 hereof (herein "Future Advances"); (c) the
performance of the covenants and agreements of Borrower contained in a
Construction Loan Agreement between Lender and Borrower dated N/A , 19__, if
any, as provided in paragraph 25 hereof; (d) the payment of all other sums, with
interest thereon, advanced in accordance herewith to protect the security of
2
<PAGE>
this Instrument; and (e) the performance of the covenants and agreements of
Borrower herein contained.
Borrower covenants that Borrower is lawfully seised of the estate
hereby conveyed and has the right to grant, convey and assign the Property (and,
if this Instrument is on a leasehold, that the ground lease is in full force and
effect without modification except as noted above and without default on the
part of either lessor or lessee thereunder), that the Property is unencumbered,
and that Borrower will warrant and defend generally the title to the Property
against all claims and demands, subject to any easements and restrictions listed
in a schedule of exceptions to coverage in any title insurance policy insuring
Lender's interest in the Property.
1. PAYMENT OF PRINCIPAL AND INTEREST. Borrower shall promptly pay when due the
principal of and interest on the indebtedness evidenced by the Note, any
prepayment and late charges provided in the Note and all other sums secured by
this Instrument.
2. FUNDS FOR TAXES, INSURANCE AND OTHER CHARGES. Subject to applicable law or to
a written waiver by lender, borrower shall pay to lender on the day monthly
installments of principal or interest are payable under the note (or on another
day designated in writing by lender), until the note is paid in full, a sum
(herein "funds") equal to one-twelfth of (a) the yearly water and sewer rates
and taxes and assessments which may be levied on the property, (b) the yearly
ground rents, if any, (c) the yearly premium installments for fire and other
hazard insurance, rent loss insurance and such other insurance covering the
property as lender may require pursuant to paragraph 5 hereof, (d) the yearly
premium installments for mortgage insurance, if any, and (e) if this instrument
is on a leasehold, the yearly fixed rents, if any, under the ground lease, all
as reasonably estimated initially and from time to time by Lender on the basis
of assessments and bills and reasonable estimates thereof. Any waiver by Lender
of a requirement that Borrower pay such Funds may be revoked by Lender, in
Lender's sole discretion, at any time upon notice in writing to Borrower. Lender
may require Borrower to pay to Lender, in advance, such other Funds for other
taxes, charges, premiums, assessments and impositions in connection with
Borrower or the Property which Lender shall reasonably deem necessary to protect
Lender's interests (herein "Other Impositions"). Unless otherwise provided by
applicable law, Lender may require Funds for Other Impositions to be paid by
Borrower in a lump sum or in periodic installments, at Lender's option.
The Funds shall be held in an institution(s) the deposits or accounts
of which are insured or guaranteed by a Federal or state agency (including
Lender if Lender is such an institution). Lender shall apply the Funds to pay
said rates, rents, taxes, assessments, insurance premiums and Other Impositions
so long as Borrower is not in breach of any covenant or agreement of Borrower in
this Instrument. Lender shall make no charge for so holding and applying the
Funds, analyzing said account or for verifying and compiling said assessments
and bills, unless Lender pays Borrower interest, earnings or profits on the
Funds and applicable law permits Lender to make such a charge. Borrower and
Lender may agree in writing at the time of execution of this Instrument that
interest on the Funds shall be paid to Borrower, and unless such agreement is
made or applicable law requires interest, earnings or profits to be paid, Lender
shall not be required to pay Borrower any interest, earnings or profits on the
Funds. Lender shall give to Borrower, without charge, an annual accounting of
the Funds in Lender's normal format showing credits and debits to the Funds and
3
<PAGE>
the purpose for which each debit to the Funds was made. The Funds are pledged as
additional security for the sums secured by this Instrument.
If the amount of the Funds held by Lender at the time of the annual
accounting thereof shall exceed the amount deemed necessary by Lender to provide
for the payment of water and sewer rates, taxes, assessments, insurance
premiums, rents and Other Impositions, as they fall due, such excess shall be
credited to Borrower on the next monthly installment or installments of Funds
due. If at any time the amount of the Funds held by Lender shall be less than
the amount deemed necessary by Lender to pay water and sewer rates, taxes,
assessments, insurance premiums, rents and Other Impositions, as they fall due.
Borrower shall pay to Lender any amount necessary to make up the deficiency
within thirty days after notice from Lender to Borrower requesting payment
thereof.
Upon Borrower's breach of any covenant or agreement of Borrower in this
Instrument, Lender may apply, in any amount and in any order as Lender shall
determine in Lender's sole discretion, any Funds held by Lender at the time of
Application (i) to pay rates, rents, taxes, assessments, insurance premiums and
Other Impositions which are now or will hereafter become due, or (ii) as a
credit against sums secured by this Instrument. Upon payment in full of all sums
secured by this Instrument, Lender shall promptly refund to Borrower any Funds
held by Lender.
3. APPLICATION OF PAYMENTS. Unless applicable law provides otherwise, all
payments received by Lender from Borrower under the Note or this Instrument
shall be applied by Lender in the following order of priority: (i) amounts
payable to Lender by Borrower under paragraph 2 hereof; (ii) interest payable on
the Note; (iii) principal of the Note; (iv) interest payable on advances made
pursuant to paragraph 8 hereof, (v) principal of advances made pursuant to
paragraph 8 hereof; (vi) interest payable on any Future Advance, provided that
if more than one Future Advance is outstanding, Lender may apply payments
received among the amounts of interest payable on the Future Advances in such
order as Lender, in Lender's sole discretion, may determine; (vii) principal of
any Future Advance, provided that if more than one Future Advance is
outstanding, Lender may apply payments received among the principal balances of
the Future Advances in such order as Lender, in Lender's sole discretion, may
determine; and (viii) any other sums secured by this Instrument in such order as
Lender, at Lender's option, may determine; provided, however, that Lender may,
at Lender's option, apply any sums payable pursuant to paragraph 8 hereof prior
to interest on and principal of the Note, but such application shall not
otherwise affect the order of priority of application specified in this
paragraph 3.
4. CHARGES; LIENS. Borrower shall pay all water and sewer rates, rents, taxes,
assessments, premiums, and Other Impositions attributable to the Property at
Lender's option in the manner provided under paragraph 2 hereof or, if not paid
in such manner, by Borrower making payment when due, directly to the payee
thereof, or in such other manner as Lender may designate in writing. Borrower
shall promptly furnish to Lender all notices of amounts due under this paragraph
4, and in the event Borrower shall make payment directly, Borrower shall
promptly furnish to Lender receipts evidencing such payments. Borrower shall
promptly discharge any lien which has, or may have, priority over or equality
with, the lien of this Instrument, and Borrower shall pay, when due, the claims
of all persons supplying labor or materials to or in connection with the
Property. Without Lender's prior written permission, Borrower shall not allow
any lien inferior to this Instrument to be perfected against the Property.
4
<PAGE>
5. HAZARD INSURANCE. Borrower shall keep the improvements now existing or
hereafter erected on the Property insured by carriers at all times satisfactory
to Lender against loss by fire, hazards included within the term "extended
coverage", rent loss and such other hazards, casualties, liabilities and
contingencies as Lender (and, if this Instrument is on a leasehold, the ground
lease) shall require and in such amounts and for such periods as Lender shall
require. All premiums on insurance policies shall be paid, at Lender's option,
in the manner provided under paragraph 2 hereof, or by Borrower making payment,
when due, directly to the carrier, or in such other manner as Lender may
designate in writing.
All insurance policies and renewals thereof shall be in a form
acceptable to Lender and shall include a standard mortgage clause in favor of
and in form acceptable to Lender. Lender shall have the right to hold the
policies, and Borrower shall promptly furnish to Lender all renewal notices and
all receipts of paid premiums. At least thirty days prior to the expiration date
of a policy, Borrower shall deliver to Lender a renewal policy in form
satisfactory to Lender. If this Instrument is on a leasehold, Borrower shall
furnish Lender a duplicate of all policies, renewal notices, renewal policies
and receipts of paid premiums if, by virtue of the ground lease, the originals
thereof may not be supplied by Borrower to Lender.
In the event of loss, Borrower shall give immediate written notice to
the insurance carrier and to Lender. Borrower hereby authorizes and empowers
Lender as attorney-in-fact for Borrower to make proof of loss, to adjust and
compromise any claim under insurance policies, to appear in and prosecute any
action arising from such insurance policies, to collect and receive insurance
proceeds, and to deduct therefrom Lender's expenses incurred in the collection
of such proceeds; provided however, that nothing contained in this paragraph 5
shall require Lender to incur any expense or take any action hereunder. Borrower
further authorizes Lender, at Lender's option, (a) to hold the balance of such
proceeds to be used to reimburse Borrower for the cost of reconstruction or
repair of the Property or (b) to apply the balance of such proceeds to the
payment of the sums secured by this Instrument, whether or not then due, in the
order of application set forth in paragraph 3 hereof (subject, however, to the
rights of the lessor under the ground lease if this Instrument is on a
leasehold).
If the insurance proceeds are held by Lender to reimburse Borrower for
the cost of restoration and repair of the Property, the Property shall be
restored to the equivalent of its original condition or such other condition as
Lender may approve in writing. Lender may, at Lender's option, condition
disbursement of said proceeds on Lender's approval of such plans and
specifications of an architect satisfactory to Lender, contractor's cost
estimates, architect's certificates, waivers of liens, sworn statements of
mechanics and materialmen and such other evidence of costs, percentage
completion of construction, application of payments, and satisfaction of liens
as Lender may reasonably require. If the insurance proceeds are applied to the
payment of the sums secured by this Instrument, any such application of proceeds
to principal shall not extend or postpone the due dates of the monthly
installments referred to in paragraphs 1 and 2 hereof or change the amounts of
such installments. If the Property is sold pursuant to paragraph 27 hereof or if
Lender acquires title to the Property, Lender shall have all of the right, title
and interest of Borrower in and to any insurance policies and unearned premiums
thereon and in and to the proceeds resulting from any damage to the Property
prior to such sale or acquisition.
5
<PAGE>
6. PRESERVATION AND MAINTENANCE OF PROPERTY; LEASEHOLDS. Borrower (a) shall not
commit waste or permit impairment or deterioration of the Property, (b) shall
not abandon the Property, (c) shall restore or repair promptly and in a good and
workmanlike manner all or any part of the Property to the equivalent of its
original condition, or such other condition as Lender may approve in writing, in
the event of any damage, injury or loss thereto, whether or not insurance
proceeds are available to cover in whole or in part the costs of such
restoration or repair, (d) shall keep the Property, including improvements,
fixtures, equipment, machinery and appliances thereon in good repair and shall
replace fixtures, equipment, machinery and appliances on the Property when
necessary to keep such items in good repair, (e) shall comply with all laws,
ordinances, regulations and requirements of any governmental body applicable to
the Property, (f) shall provide for professional management of the Property by a
residential rental property manager satisfactory to Lender pursuant to a
contract approved by Lender in writing, unless such requirement shall be waived
by Lender in writing, (g) shall generally operate and maintain the Property in a
manner to ensure maximum rentals, and (h) shall give notice in writing to Lender
of and, unless otherwise directed in writing by Lender, appear in and defend any
action or proceeding purporting to affect the Property, the security of this
Instrument or the rights or powers of Lender. Neither Borrower nor any tenant or
other person shall remove, demolish or alter any improvement now existing or
hereafter erected on the Property or any fixture, equipment, machinery or
appliance in or on the Property except when incident to the replacement of
fixtures, equipment, machinery and appliances with items of like kind.
If this Instrument is on a leasehold, Borrower (i) shall comply with
the provisions of the ground lease, (ii) shall give immediate written notice to
Lender of any default by lessor under the ground lease or of any notice received
by Borrower from such lessor of any default under the ground lease by Borrower,
(iii) shall exercise any option to renew or extend the ground lease and give
written confirmation thereof to Lender within thirty days after such option
becomes exercisable, (iv) shall give immediate written notice to Lender of the
commencement of any remedial proceedings under the ground lease by any party
thereto and, if required by Lender, shall permit Lender as Borrower's
attorney-in-fact to control and act for Borrower in any such remedial
proceedings and (v) shall within thirty days after request by Lender obtain from
the lessor under the ground lease and deliver to Lender the lessor's estoppel
certificate required thereunder, if any. Borrower hereby expressly transfers and
assigns to Lender the benefit of all covenants contained in the ground lease,
whether or not such covenants run with the land, but Lender shall have no
liability with respect to such covenants nor any other covenants contained in
the ground lease.
Borrower shall not surrender the leasehold estate and interests herein
conveyed nor terminate or cancel the ground lease creating said estate and
interests, and Borrower shall not, without the express written consent of
Lender, alter or amend said ground lease. Borrower covenants and agrees that
there shall not be a merger of the ground lease, or of the leasehold estate
created thereby, with the fee estate covered by the ground lease by reason of
said leasehold estate or said fee estate, or any part of either, coming into
common ownership, unless Lender shall consent in writing to such merger, if
Borrower shall acquire such fee estate, then this Instrument shall
simultaneously and without further action be spread so as to become a lien on
such fee estate.
7. USE OF PROPERTY. Unless required by applicable law or unless Lender has
otherwise agreed in writing, Borrower shall not allow changes in the use for
which all or any part of the Property was intended at the time this Instrument
was executed. Borrower shall not initiate or acquiesce in a change in the zoning
classification of the Property without Lender's prior written consent.
6
<PAGE>
8. PROTECTION OF LENDER'S SECURITY. If Borrower fails to perform the covenants
and agreements contained in this Instrument, or if any action or proceeding is
commenced which affects the Property or title thereto or the interest of Lender
therein, including, but not limited to, eminent domain, insolvency, code
enforcement, or arrangements or proceedings involving a bankruptcy or decedent,
then Lender at Lender's option may make such appearances, disburse such sums and
take such action as Lender deems necessary, in its sole discretion, to protect
Lender's interest, including, but not limited to, (i) disbursement of attorney's
fees, (ii) entry upon the Property to make repairs, (iii) procurement of
satisfactory insurance as provided in paragraph 5 hereof, and (iv) if this
Instrument is on a leasehold, exercise of any option to renew or extend the
ground lease on behalf of Borrower and the curing of any default of Borrower in
the terms and conditions of the ground lease.
Any amounts disbursed by Lender pursuant to this paragraph 8, with
interest thereon, shall become additional indebtedness of Borrower secured by
this Instrument. Unless Borrower and Lender agree to other terms of payment,
such amounts shall be immediately due and payable and shall bear interest from
the date of disbursement at the rate stated in the Note unless collection from
Borrower of interest at such rate would be contrary to applicable law, in which
event such amounts shall bear interest at the highest rate which may be
collected from Borrower under applicable law. Borrower hereby covenants and
agrees that Lender shall be subrogated to the lien of any mortgage or other lien
discharged, in whole or in part, by the indebtedness secured hereby. Nothing
contained in this paragraph 8 shall require Lender to incur any expense or take
any action hereunder.
9. INSPECTION. Lender may make or cause to be made reasonable entries upon and
inspections of the Property.
10. BOOKS AND RECORDS. SEE ATTACHED RIDER TO MULTIFAMILY
INSTRUMENT.
11. CONDEMNATION. Borrower shall promptly notify Lender of any action or
proceeding relating to any condemnation or other taking, whether direct or
indirect, of the Property, or part thereof, and Borrower shall appear in and
prosecute any such action or proceeding unless otherwise directed by Lender in
writing. Borrower authorizes Lender, at Lender's option, as attorney-in-fact for
Borrower, to commence, appear in and prosecute, in Lender's or Borrower's name,
any action or proceeding relating to any condemnation or other taking of the
Property, whether direct or indirect, and to settle or compromise any claim in
connection with any condemnation or other taking, whether direct or indirect, of
the Property, or part thereof, or for conveyances in lieu of condemnation, are
hereby assigned to and shall be paid to Lender subject, if this Instrument is on
a leasehold, to the rights of lessor under the ground lease.
Borrower authorizes Lender to apply such awards, payments, proceeds or
damages, after the deduction of Lender's expenses incurred in the collection of
such amounts, at Lender's option, to restoration or repair of the Property or to
payment of the sums secured by this Instrument, whether or not then due, in the
order of application set forth in paragraph 3 hereof, with the balance, if any,
7
<PAGE>
to Borrower. Unless Borrower and Lender otherwise agree in writing, any
application of proceeds to principal shall not extend or postpone the due date
of the monthly installments referred to in paragraphs 1 and 2 hereof or change
the amount of such installments. Borrower agrees to execute such further
evidence of assignment of any awards, proceeds, damages or claims arising in
connection with such condemnation or taking as Lender may require.
12. BORROWER AND LIEN NOT RELEASED. From time to time, Lender may, at Lender's
option, without giving notice to or obtaining the consent of Borrower,
Borrower's successors or assigns or of any junior lienholder or guarantors,
without liability on Lender's part and notwithstanding Borrower's breach of any
covenant or agreement of Borrower in this Instrument, extend the time for
payment of said indebtedness or any part thereof, reduce the payments thereon,
release anyone liable on any of said indebtedness, accept a renewal note or
notes therefor, modify the terms and time of payment of said indebtedness,
release from the lien of this Instrument any part of the Property, take or
release other or additional security, reconvey any part of the Property, consent
to any map or plan of the Property, consent to the granting of any easement,
join in any extension or subordination agreement, and agree in writing with
Borrower to modify the rate of interest or period of amortization of the Note or
change the amount of the monthly installments payable thereunder. Any actions
taken by Lender pursuant to the terms of this paragraph 12 shall not affect the
obligation of Borrower or Borrower's successors or assigns to pay the sums
secured by this Instrument and to observe the covenants of Borrower contained
herein, shall not affect the guaranty of any person, corporation, partnership or
other entity for payment of the indebtedness secured hereby, and shall not
affect the lien or priority of lien hereof on the Property. Borrower shall pay
Lender a reasonable service charge, together with such title insurance premiums
and attorney's fees as may be incurred at Lender's option, for any such action
if taken at Borrower's request.
13. FORBEARANCE BY LENDER NOT A WAIVER. Any forbearance by Lender in exercising
any right or remedy hereunder, or otherwise afforded by applicable law, shall
not be a waiver of or preclude the exercise of any right or remedy. The
acceptance by Lender of payment of any sum secured by this Instrument after the
due date of such payment shall not be a waiver of Lender's right to either
require prompt payment when due of all other sums so secured or to declare a
default for failure to make prompt payment. The procurement of insurance or the
payment of taxes or other liens or charges by Lender shall not be a waiver of
Lender's right to accelerate the maturity of the indebtedness secured by this
Instrument, nor shall Lender's receipt of any awards, proceeds or damages under
paragraphs 5 and 11 hereof operate to cure or waive Borrower's default in
payment of sums secured by this Instrument.
14. ESTOPPEL CERTIFICATE. Borrower shall within ten days of a written request
from Lender furnish Lender with a written _________, ______ acknowledged,
setting forth the sums secured by this Instrument and any right of set-off,
counterclaim or other defense which exists against such sums and the obligations
of this Instrument.
15. UNIFORM COMMERCIAL CODE SECURITY AGREEMENT. This Instrument is intended to
be a security agreement pursuant to the Uniform Commercial Code for any of the
items specified above as part of the Property which, under applicable law, may
be subject to a security interest pursuant to the Uniform Commercial Code, and
Borrower hereby grants Lender a security interest in said items. Borrower agrees
that Lender may file this Instrument, or a reproduction therreof, in the real
8
<PAGE>
estate records or other appropriate index, as a financing statement for any of
the items specified above as part of the Property. Any reproduction of this
Instrument or of any other security agreement or financing statement shall be
sufficient as a financing statement. In addition, Borrower agrees to execute and
deliver to Lender, upon Lender's request, any financing statements, as well as
extensions, renewals and amendments thereof, and reproductions of this
Instrument in such form as Lender may require to perfect a security interest
with respect to said items. Borrower shall pay all costs of filing such
financing statements and any extensions, renewals, amendments and releases
thereof, and shall pay all reasonable costs and expenses of any record searches
for financing statements Lender may reasonably require. Without the prior
written consent of Lender, Borrower shall not create or suffer to be created
pursuant to the Uniform Commercial Code any other security interest in said
items, including replacements and additions thereto. Upon Borrower's breach of
any covenant or agreement of Borrower contained in this Instrument, including
the covenants to pay when due all sums secured by this Instrument, Lender shall
have the remedies of a secured party under the Uniform Commercial Code and, at
Lender's option, may also invoke the remedies provided in paragraph 27 of this
Instrument as to such items. In exercising any of said remedies, Lender may
proceed against the items of real property and any items of personal property
specified above as part of the Property separately or together in any order
whatsoever, without in any way affecting the availability of Lender's remedies
under the Uniform Commercial Code or of the remedies provided in paragraph 27 of
this Instrument.
16. LEASES OF THE PROPERTY. As used in this paragraph 16, the word "lease" shall
mean "sublease" if this Instrument is on a leasehold. Borrower shall comply with
and observe Borrower's obligations as landlord under all leases of the Property
or any part thereof. Borrower will not lease any portion of the Property for
non-residential use except with the prior written approval of Lender. Borrower,
at Lender's request, shall furnish Lender with executed copies of all leases now
existing or hereafter made of all or any part of the Property, and all leases
now or hereafter entered into will be in form and substance subject to the
approval of Lender. All leases of the Property shall specifically provide that
such leases are subordinate to this Instrument; that the tenant attorns to
Lender, such attornment to be effective under Lender's acquisition of title to
the Property; that the tenant agrees to execute such further evidences of
attornment as lender may from time to time request; that the attornment of the
tenant shall not be terminated by foreclosure; and that Lender may, at Lender's
option, accept or reject such attornments. Borrower shall not, without Lender's
written consent, execute, modify, surrender or terminate, either orally or in
writing, any lease now existing or hereafter made of all or any part of the
Property providing for a term of three years or more, permit an assignment or
sublease of such a lease without Lender's written consent, or request or consent
to the subordination of any lease of all or any part of the Property to any lien
subordinate to this Instrument. If Borrower becomes aware that any tenant
proposes to do, or is doing, any act or thing which may give rise to any right
of set-off against rent, Borrower shall (i) take such steps as shall be
reasonably calculated to prevent the accrual of any right to a set-off against
rent, (ii) notify Lender thereof and of the amount of said set-offs, and (iii)
within ten days after such accrual, reimburse the tenant who shall have acquired
such right to set-off or take such other steps as shall effectively discharge
such set-off and as shall assure that rents thereafter due shall continue to be
payable without set-off or deduction.
Upon Lender's request, Borrower shall assign to lender, by written
instrument satisfactory to Lender, all leases now existing or hereafter made of
all or any part of the Property and all security deposits made by tenants in
9
<PAGE>
connection with such leases of the Property. Upon assignment by Borrower to
lender of any leases of the Property, Lender shall have all of the rights and
powers possessed by Borrower prior to such assignment and Lender shall have the
right to modify, extend or terminate such existing leases and to execute new
leases, in Lender's sole discretion.
17. REMEDIES CUMULATIVE. Each remedy provided in this Instrument is distinct and
cumulative to all other rights or remedies under this Instrument or afforded by
law or equity, and may be exercised concurrently, independently, or
successively, in any order whatsoever.
18. ACCELERATION IN CASE OF BORROWER'S INSOLVENCY. If Borrower shall voluntarily
file a petition under the Federal Bankruptcy Act, as such Act may from time to
time be amended, or under any similar or successor Federal statute relating to
bankruptcy, insolvency, arrangements or reorganizations, or under any similar or
successor Federal statute relating to bankruptcy, insolvency, arrangements or
reorganizations, or under any state bankruptcy or insolvency act, or file an
answer in an involuntary proceeding admitting insolvency or inability to pay
debts, or if Borrower shall fail to obtain a vacation or stay of involuntary
proceedings brought for the reorganization, dissolution or liquidation of
Borrower, or if Borrower shall be adjudged a bankrupt, or if a trustee or
receiver shall, be appointed for Borrower or Borrower's property, or if the
Property shall become subject to the jurisdiction of a Federal bankruptcy court
or similar state court, or if Borrower shall make an assignment for the benefit
of Borrower's creditors, or if there is an attachment, execution or other
judicial seizure of any portion of Borrower's assets and such seizure is not
discharged within ten days, then lender may, at Lender's option, declare all of
the sums secured by this Instrument to be immediately due and payable without
prior notice to Borrower, and lender may invoke any remedies permitted by
paragraph 27 of this Instrument. Any attorney's fees and other expenses incurred
by Lender in connection with Borrower's bankruptcy or any of the other aforesaid
events shall be additional indebtedness of Borrower secured by this Instrument
pursuant to paragraph 8 hereof.
19. [removed]
20. SEE ATTACHED RIDER TO MULTIFAMILY INSTRUMENT
21. SUCCESSORS AND ASSIGNS BOUND; JOINT AND SEVERAL LIABILITY; AGENTS; CAPTIONS.
The covenants and agreements herein contained shall bind, and the rights
hereunder shall inure to, the respective successors and assigns of Lender and
Borrower, subject to the provisions of paragraph 19 hereof. All covenants and
agreements of Borrower shall be joint and several. In exercising any rights
hereunder or taking any actions provided for herein, Lender may act through its
employees, agents or independent contractors as authorized by Lender. The
captions and headings of the paragraphs of this Instrument are for convenience
only and are not to be used to interpret or define the provisions hereof.
22. UNIFORM MULTIFAMILY INSTRUMENT; GOVERNING LAW; SEVERABILITY. This form of
multifamily instrument combines uniform covenants for national use and
non-uniform covenants with limited variations by jurisdiction to constitute a
uniform security instruments covering real property and related fixtures and
personal property. This Instrument shall be governed by the law of the
jurisdiction in which the Property is located. In the event that any provision
of this Instrument or the Note conflicts with applicable law, such conflict
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<PAGE>
shall not affect other provisions of this Instrument or the Note which can be
given effect without the conflicting provisions, and to this end the provisions
of this Instrument and the Note are declared to be severable. In the event that
any applicable law limiting the amount of interest or other charges permitted to
be collected from Borrower is interpreted so that any charge provided for in
that Instrument or in the Note, whether considered separately or together with
other charges levied in connection with this Instrument and the Note, violates
such law, and Borrower is entitled to the benefit of such law, such charge is
hereby reduced to the extent necessary to eliminate such violation. The amounts,
if any, previously paid to Lender in excess of the amounts payable to Lender
pursuant to such charges as reduced shall be applied by Lender to reduce the
principal of the indebtedness evidenced by the Note. For the purpose of
determining whether any applicable law limiting the amount of interest or other
charges permitted to be collected from Borrower has been violated, all
indebtedness which is secured by this Instrument or evidenced by the Note and
which constitutes interest, as well as all other charges levied in connection
with such indebtedness which constitute interest, shall be deemed to be
allocated and spread over the stated term of the Note. Unless otherwise required
by applicable law, such allocation and spreading shall be effected in such a
manner that the rate of interest computed thereby is uniform throughout the
stated term of the Note.
23. WAIVER OF STATUTE OF LIMITATIONS. Borrower hereby waives the right to assert
any statute of limitations as a bar to the enforcement of the lien of this
Instrument or to any action brought to enforce the Note or any other obligation
secured by this Instrument.
24. WAIVER OF MARSHALING. Notwithstanding the existence of any other security
interests in the Property held by Lender or by any other party, Lender shall
have the right to determine the order in which any or all of the Property shall
be subjected to the remedies provided herein. Lender shall have the right to
determine the order in which any or all portions of the indebtedness secured
hereby are satisfied from the proceeds realized upon the exercise of the
remedies provided herein. Borrower, any party who consents to this Instrument
and any party who now or hereafter acquires a security interest in the Property
and who has actual or constructive notice hereof hereby waives any and all right
to require the marshaling of assets in connection with the exercise of any of
the remedies permitted by applicable law or provided herein.
25. [removed]
26. ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION. As part
of the consideration for the indebtedness evidenced by the Note, Borrower hereby
absolutely and unconditionally assigns and transfers to Lender all the rents and
revenues of the Property, including those now due, past due, or to become due by
virtue of any lease or other agreement for the occupancy or use of all or any
part of the Property, regardless of to whom the rents and revenues of the
Property are payable. Borrower hereby authorizes Lender or Lender's agents to
collect the aforesaid rents and revenues and hereby directs each tenant of the
Property to pay such rents to Lender or Lender's agents, provided, however, that
prior to written notice given by Lender to Borrower of the breach by Borrower of
any covenant or agreement of Borrower in this Instrument, Borrower shall collect
and receive all rents and revenues of the Property as trustee for the benefit of
Lender and Borrower, to apply the rents and revenues so collected to the sums
secured by this Instrument in the order provided in paragraph 3 hereof with the
balance, so long as no such breach has occurred, to the account of Borrower, ,
11
<PAGE>
it being intended by Borrower and Lender that this assignment of rents
constitutes an absolute assignment and not an assignment for additional security
only. Upon delivery of written notice by Lender to Borrower of the breach by
Borrower of any covenant or agreement of Borrower in this Instrument, and
without the necessity of Lender entering upon and taking and maintaining full
control of the Property in person, by agent or by a counter-appointed receiver,
Lender shall immediately be entitled to possession of all rents and revenues of
the Property as specified in this paragraph 26 of the same becoming due and
payable, including but not limited to rents then due and unpaid, and all such
rents shall immediately upon delivery of such notice be held by Borrower as
trustee for the benefit of Lender only provided, however, that the written
notice by Lender to Borrower of the breach by Borrower shall contain a statement
that Lender exercises its rights to such rents. Borrower agrees that commencing
upon delivery of such written notice of Borrower's breach by Lender to Borrower,
each tenant of the Property shall make such rents payable to and pay such rent
to Lender or Lender's agents on Lender's written demand to each tenant therefor,
delivered to each tenant personally, by mail or by delivering such demand to
each rental unit, without any liability on the part of said tenant to inquire
further as to the existence of a default by Borrower.
Borrower hereby covenants that Borrower has not executed any prior
assignment of said rents, that Borrower has not performed, and will not perform,
any acts or has not executed, and will not execute, any instrument which would
prevent Lender from exercising its rights under this paragraph 26, and that at
the time of execution of this Instrument there has been no anticipation or
prepayment of any of the rents of the Property for more than two months prior to
the due dates of such rents. Borrower covenants that Borrower will not hereafter
collect or accept payment of any rents of the Property more than two months
prior to the due dates of such rents. Borrower further covenants that Borrower
will execute and deliver to Lender such further assignments of rents and
revenues of the Property as Lender may from time to time request.
Upon Borrower's breach of any covenant or agreement of Borrower in this
Instrument, Lender may in person, by agent or by a court-appointed receiver,
regardless of the adequacy of Lender's security, enter upon and take and
maintain full control of the Property in order to perform all acts necessary and
appropriate for the operation and maintenance thereof including, but not limited
to, the execution, cancellation or modification of leases, the collection of all
rents and revenues of the Property, the making of repairs to the Property and
the execution or termination of contracts providing for the management or
maintenance of the Property, all on such terms as are deemed best to protect the
security of this Instrument. In the event Lender elects to seek the appointment
of a receiver for the Property upon Borrower's breach of any covenant or
agreement of Borrower in this Instrument, Borrower hereby expressly consents to
the appointment of such receiver. Lender or the receiver shall be entitled to
receive a reasonable fee for so managing the Property.
All rents and revenues collected subsequent to delivery of the written
notice by Lender to Borrower of the breach by Borrower of any covenant or
agreement of Borrower in this Instrument shall be applied first to the costs, if
any, of taking control of and managing the Property and collecting the rents,
including, but not limited to, attorney's fees, receiver's fees, premiums on
receiver's bonds, costs of repairs to the Property, premiums on insurance
policies, taxes, assessments and other charges on the Property, and the costs of
discharging any obligation or liability of Borrower as lessor or landlord of the
Property and then to the sums secured by this Instrument. Lender or the receiver
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<PAGE>
shall have access to the books and records used in the operation and maintenance
of the Property and shall be liable to account only for those rents actually
received. Lender shall not be liable to Borrower, anyone claiming under or
through Borrower or anyone having an interest in the Property by reason of
anything done or left undone by Lender under this paragraph 26.
If the rents of the Property are not sufficient to meet the costs, if
any, of taking control of and managing the Property and collecting the rents,
any funds expended by Lender for such purposes shall become indebtedness of
Borrower to Lender secured by this Instrument pursuant to paragraph 8 hereof.
Unless Lender and Borrower agree in writing to other terms of payment, such
amounts shall be payable upon notice from Lender to Borrower requesting payment
thereof and shall bear interest from the date of disbursement at the rate stated
in the Note unless payment of interest at such rate would be contrary to
applicable law, in which event such amounts shall bear interest at the highest
rate which may be collected from Borrower under applicable law.
Any entering upon and taking and maintaining of control of the Property
by Lender or the receiver and any application of rents as provided herein shall
not cure or waive any default hereunder or invalidate any other right or remedy
of Lender under applicable law or provided herein. This assignment of rents of
the Property shall terminate at such time as this Instrument ceases to secure
indebtedness held by Lender.
Non-Uniform Covenants. Borrower and Lender further covenant and agree as
follows:
27. ACCELERATION; REMEDIES. Upon Borrower's breach of any covenant or agreement
of Borrower in this Instrument, including, but not limited to, the covenants to
pay when due any sums secured by this Instrument, Lender at Lender's option may
declare all of the sums secured by this Instrument to be immediately due and
payable without further demand, and may invoke the power of sale and any other
remedies permitted by applicable law or provided herein. Borrower acknowledges
that the power of sale herein granted may be exercised by Lender without prior
judicial hearing. Borrower has the right to bring an action to assert the
non-existence of a breach or any other defense of Borrower to acceleration and
sale. Lender shall be entitled to collect all costs and expenses incurred in
pursuing such remedies, including, but not limited to, attorney's fees and costs
of documentary evidence, abstracts and title reports.
If the power of sale is invoked, Trustee shall record a notice of
default in each country in which the Property or some part thereof is located
and shall mail copies of such notice in the manner prescribed by applicable law
to Borrower and to the other persons prescribed by applicable law Trustee shall
give notice of sale and Trustee shall sell the Property according to the laws of
Nebraska. Trustee may sell the Property at the time and place and under the
terms designated in the notice of sale in one or more parcels and in such order
as Trustee may determine. Trustee may postpone sale of all or any parcel of the
Property by public announcement at the time and place of any previously
scheduled sale. Lender or Lender's designee may purchase the Property at any
sale.
Trustee shall deliver to the purchaser Trustee's deed conveying the
Property so sold without any covenant or warranty, expressed or implied. The
recitals in the Trustee's deed shall be prima facie evidence of the truth of the
statements made therein. Trustee shall apply the proceeds of the sale in the
following order, (a) to all costs and expenses of the sale, including, but not
limited to, Trustee's fees of not more than 5% of the gross sale price,
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<PAGE>
attorney's fees and costs of title evidence: (b) to all sums secured by this
Instrument in such order as Lender, in Lender's sold discretion, directs; and
(c) the excess, if any, to the person or persons legally entitled thereto.
28. RECONVEYANCE. Upon payment of all slums secured by this Instruments, Lender
shall request Trustee to reconvey the Property and shall surrender this
Instrument and all notes evidencing indebtedness secured by this Instrument to
Trustee. Trustee shall reconvey the Property without warranty to the person or
persons legally entitled thereto. such person or persons shall pay Trustee's
reasonable costs incurred in so reconveying the Property.
29. SUBSTITUTE TRUSTEE. Lender, at Lender's option, may from time to time remove
Trustee and appoint a successor trustee to any Trustee appointed hereunder by an
instrument recorded in the county in which this Instrument is recorded. Without
conveyance of the Property, the successor trustee shall succeed to all the
title, power and duties conferred upon the Trustee herein and by applicable law.
30. REQUEST FOR NOTICES. Borrower requests that copies of the notice of default
and notice of sale be sent to Borrower's address stated below.
31. FUTURE ADVANCES. Upon request of Borrower, Lender, at Lender's option so
long as this Instrument secures indebtedness held by Lender, may make Future
Advances to Borrower. Such Future Advances, with interest thereon, shall be
secured by this Instrument when evidenced by promissory notes stating that said
notes are secured hereby. At no time shall the principal amount of the
indebtedness secured by this Instrument, not including sums advanced in
accordance herewith to protect the security of this Instrument, exceed the
original amount of the Note (US$6,400,000.00) plus the additional sum of US$
N/A.
32. *See below.
* The attached Rider to Multifamily Instrument, dated the date of this
Multifamily Instrument, is incorporated into and deemed to amend and
supplement this Multifamily Instrument.
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In Witness Whereof, Borrower has executed this Instrument or has caused
the same to be executed by its representative thereunto duly authorized.
BORROWER:
GRAMERCY HILL ENTERPRISES,
a Texas general partnership
By: Gramercy Hill Limited Partnership, a Nebraska
limited partnership, its general partner
By: Gramercy Hill Corp., a Nebraska
corporation, its general partner
By: /s/ Andrew C. Jacobs
-----------------------------
Andrew C. Jacobs,
Borrower's Address:
c/o Andrew C. Jacobs
1033 O Street, Suite 304
Lincoln, Nebraska 68508
STATE OF NEBRASKA, Lancaster County ss:
The foregoing instrument was acknowledged before me this 4th day of
December, 1997, by Andrew C. Jacobs, president of Gramercy Hill Corporation, a
Nebraska Corporation, general partner of Gramercy Hill Enterprises, a Texas
general partnership, on behalf of Gramercy Hill Enterprises.
Witness my hand and notarial seal in said state and county, the aforesaid
date.
/s/ Rhonda J. Jacob
-----------------------------------
Notary Public
My Commission Expires:
-----------------------
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EXHIBIT A
LOT SEVENTY-NINE (79) OF IRREGULAR TRACTS IN THE SOUTHEAST QUARTER OF SECTION
28, TOWNSHIP 10 NORTH, RANGE 7 EAST OF THE 6TH P.M., LINCOLN, LANCASTER COUNTY,
NEBRASKA.
16
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RIDER TO MULTIFAMILY INSTRUMENT
THIS RIDER TO MULTIFAMILY INSTRUMENT (the "Rider") is made this 4th day
of December, 1997, and is incorporated into and shall be deemed to amend and
supplement the Multifamily Mortgage, Deed of Trust or Deed to Secure Debt of the
same date (the "Instrument"), given by the undersigned GRAMERCY HILL
ENTERPRISES, a Texas general partnership (the "Borrower"), to secure Borrower's
Multifamily Note of the same date (the "Note") with Addendum to Multifamily Note
of the same date (the "Addendum") to WASHINGTON MORTGAGE FINANCIAL GROUP, LTD.,
a Delaware corporation, 1593 Spring Hill Road, Suite 400, Vienna, Virginia 22182
[Insert address of Lender], and its successors, assigns and transferees (the
"Lender"), covering the property described in the Instrument and defined therein
as the "Property," located at: 6800 A Street, Lincoln, Nebraska 68510 [Property
Address] The Property is located entirely within the State of Nebraska [Insert
name of state in which the Property is located] (the "Property Jurisdiction").
The term "Loan Documents" when used in this Rider shall mean,
collectively, the following documents: (i) the Instrument, as modified by this
Rider and any other riders to the Instrument given by Borrower to lender and
covering the Property; (ii) the Note, as modified by the Addendum and any other
addendum to the Note; and (iii) all other documents or agreements, including any
Collateral Agreements (as defined below) or O&M Agreements (as defined below),
arising under, related to, or made in connection with, the loan evidenced by the
Note, as such Loan Documents may be amended from time to time. Any conflict
between the provisions of the Instrument and the Rider shall be resolved in
favor of the Rider.
The covenants and agreements of this Rider, and the covenants and
agreements of any other riders to the Instrument given by Borrower to Lender and
covering the Property, shall be incorporated into and shall amend and supplement
the covenants and agreements of the Instrument as if this Rider and the other
riders were a part of the Instrument and all references to the Instrument in the
Loan Documents shall mean the Instrument as so amended and supplemented.
ADDITIONAL COVENANTS. In addition to the covenants and agreements made
in the Instrument, Borrower and Lender further covenant and agree as follows:
A. Funds for Taxes, Insurance and Other Charges
Uniform Covenant 2 of the Instrument ("Funds for Taxes, Insurance and
Other Charges") is amended to change the title to "Funds for Taxes, Insurance
and Other Charges; Collateral Agreements." Existing Uniform Covenant 2 is
amended to become Uniform Covenant 2A. The following new Uniform Covenant 2B is
added at the end of Uniform Covenant 2A;
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2B Replacement Reserve Agreement, Completion/Repair Agreement, Achievement
Agreement and Other Collateral Agreements
(a) Replacement Reserve Agreement
Borrower shall deposit with Lender the amounts required by the
Replacement Reserve and Security Agreement (the "Replacement Reserve Agreement")
between Borrower and Lender, dated the date of the Note, at the times required
by the Replacement Reserve Agreement, and shall perform all other obligations as
and when required pursuant to the Replacement Reserve Agreement.
(b) Completion/Repair Agreement
Borrower shall deposit with Lender the amount required by the
Completion/Repair and Security Agreement (the "Completion/Repair Agreement")
between Borrower and Lender (if any), dated the date of the Note, at the time
required by the Completion/Repair Agreement, and shall perform all other
obligations as and when required pursuant to the Completion/Repair Agreement.
(c) Achievement Agreement
Borrower shall perform all of its obligations as and when required
pursuant to the Achievement Agreement between Borrower and Lender (if any),
dated the date of the Note.
(d) Collateral Agreements
As used herein, the term "Collateral Agreement" shall mean any of the
Replacement Reserve Agreement, the Completion/Repair Agreement, the Achievement
Agreement and any similar agreement which has been entered into between Borrower
and Lender in connection with the loan evidenced by the Note.
B. Application of Payments
Uniform Covenant 3 of the Instrument ("Application of Payments") is
amended to add the following sentence at the end thereof:
Notwithstanding the preceding sentence, (i) Lender shall be permitted
to apply any partial payment received from Borrower in any manner determined by
Lender and in any order of priority of application as determined by Lender, in
Lender's sole discretion, and (ii) upon any breach of any covenant or agreement
of Borrower in the Instrument, the Note or any other Loan Document, Lender shall
be permitted to apply any funds held pursuant to any Collateral Agreement in any
manner which is permitted pursuant to such Collateral Agreement and in any order
of priority of application as determined by Lender, in Lender's sole discretion.
C. Hazard Insurance; Restoration of Property
Uniform Covenant 5 of the Instrument ("Hazard Insurance") is amended to
add the following sentence at the end thereof:
Lender shall not exercise Lender's option to apply insurance proceeds
to the payment of the sums secured by the Instrument if all of the following
conditions are met: (i) Borrower is not in breach or default of any provision of
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<PAGE>
the Instrument, the Note or any other Loan Document; (ii) Lender determines that
there will be sufficient funds to restore and repair the Property to a condition
approved by lender; (iii) Lender determines that the rental income of the
Property, after restoration and repair of the Property to a condition approved
by lender, will be sufficient to meet all operating costs and other expenses,
payments for reserves and loan repayment obligations relating to the Property;
and (iv) Lender determines that restoration and repair of the Property to a
condition approved by lender will be completed prior to the earlier of either
(1) the maturity date of the Note or (2) within one year of the date of the loss
or casualty to the Property.
D. Environmental Hazards Provision
In addition to Borrower's covenants and agreements under Uniform
Covenant 6 of the Instrument ("Preservation and Maintenance of Property;
Leaseholds"), Borrower further covenants and agrees that Borrower shall not:
(a) cause or permit the presence, use, generation, manufacture,
production, processing, installation, release, discharge, storage
(including aboveground and underground storage tanks for petroleum or
petroleum products), treatment, handling, or disposal of any Hazardous
Materials (as defined below) (excluding the safe and lawful use and
storage of quantities of hazardous Materials customarily used in the
operation and maintenance of comparably multifamily properties or for
normal household purposes) on or under the Property, or in any way
affecting the Property or its value, or which may form the basis for
any present or future demand, claim or liability relating to
contamination, exposure, cleanup or other remediation of the Property
or;
(b) cause or permit the transportation to, from or across the Property of
any Hazardous Material excluding the safe and lawful use and storage
of quantities of Hazardous Materials customarily used in the operation
and maintenance of comparable multifamily properties or from normal
household purposes); or
(c) cause or exacerbate any occurrence or condition on the Property that
is or may be in violation of Hazardous Materials Law (as defined
below).
(The matters described in (a), (b) and (c) above are referred to collectively
below as "Prohibited Activities or Conditions.")
Except with respect to any matters which have been disclosed in writing
by Borrower to lender prior to the date of the Instrument, or matters which have
been disclosed in an environmental hazard assessment report of the Property
received by lender prior to the date of the Instrument, Borrower represents and
warrants that it has not at any time caused or permitted any Prohibited
Activities or Conditions and to the best of its knowledge, no Prohibited
Activities or Conditions exist or have existed on or under the Property.
Borrower shall take all appropriate steps (including but not limited to
appropriate lease provisions) to prevent its employees, agents, and contractors,
and all tenants and other occupants on the Property, from causing, permitting or
exacerbating any Prohibited Activities or Conditions. Borrower shall not lease
or allow the sublease of all or any portion of the Property for non-residential
use to any tenant or subtenant that, in the ordinary course of its business,
19
<PAGE>
would cause, permit or exacerbate any Prohibited Activities or Conditions, and
all non-residential leases and subleases shall provide that tenants and
subtenants shall not cause, permit or exacerbate any Prohibited Activities or
Conditions.
If Borrower has disclosed that Prohibited Activities or Conditions
exist on the Property, Borrower shall comply in a timely manner with, and cause
all employees, agents, and contractors of Borrower and any other persons present
on the Property to so comply with, (1) any program of operations and maintenance
("O&M Program") relating to the Property that is acceptable to lender with
respect to one or more Hazardous Materials (which O&M Program may be set forth
in an agreement of Borrower (an "O&M Agreement")) and all other obligations set
forth in any O&M Agreement, and (2) all Hazardous Materials Laws. Any O&M
Program shall be performed by qualified personnel. All costs and expenses of the
O&M Program shall be paid by Borrower, including without limitation Lender's
fees and costs incurred in connection with the monitoring and review of the O&M
Program and Borrower's performance thereunder. If Borrower fails to timely
commence or diligently continue and complete the O&M Program and comply with any
O&M Agreement, then Lender may, at Lender's option, declare all of the sums
secured by the Instrument to be immediately due and payable, and Lender may
invoke any remedies permitted by paragraph 27 of the Instrument.
Borrower represents that Borrower has not received, and has no
knowledge of the issuance of, any claim, citation or notice of any pending or
threatened suits, proceedings, orders, or governmental inquiries or opinions
involving the Property that allege the violation of any Hazardous Materials Law
("Governmental Actions").
Borrower shall promptly notify Lender in writing of: (i) the occurrence
of any Prohibited Activity of Condition on the Property; (ii) Borrower's actual
knowledge of the presence on or under any adjoining property of any Hazardous
Materials which can reasonably be expected to have a material adverse impact on
the Property or the value of the Property, discovery of any occurrence or
condition on the Property or any adjoining real property that could cause any
restrictions on the ownership, occupancy, transferability or use of the Property
under Hazardous Materials Law. Borrower shall cooperate with any governmental
inquiry, and shall comply with any governmental or judicial order which arises
from any alleged Prohibited Activities or Conditions; (iii) any Governmental
Action; and (iv) any claim made or threatened by any third party against
Borrower, Lender, or the Property relating to loss or injury resulting from any
Hazardous Materials. Any such notice by Borrower shall not relieve Borrower of,
or result in a waiver of any obligation of Borrower under this paragraph D.
Borrower shall pay promptly the costs of any environmental audits,
studies or investigations (including but not limited to advice of legal counsel)
and the removal of any Hazardous Materials from the Property required by Lender
as a condition of its consent to any sale or transfer under paragraph 19 of the
Instrument of all or any part of the Property or any transfer occurring upon a
foreclosure or a deed in lieu of foreclosure or any interest therein, or
required by lender following a reasonable determination by Lender that there may
be Prohibited Activities or Conditions on or under the Property. Borrower
authorizes Lender and its employees, agents and contractors to enter onto the
Property for the purpose of conducting such environmental audits, studies and
investigations. Any such costs and expenses incurred by Lender (including but
not limited to fees and expenses of attorneys and consultants, whether incurred
20
<PAGE>
in connection with any judicial or administrative process or otherwise) which
Borrower fails to pay promptly shall become immediately due and payable and
shall become additional indebtedness secured by the Instrument pursuant to
Uniform Covenant 8 of the Instrument.
Borrower shall hold harmless, defend and indemnify Lender and its
officers, directors, trustees, employees, and agents from and against all
proceedings (including but not limited to Government Actions), claims, damages,
penalties, costs and expenses (including without limitation fees and expenses of
attorneys and expert witnesses, investigatory fees, and cleanup and remediation
expenses, whether or not incurred within the context of the judicial process),
arising directly or indirectly from (i) any breach of any representation,
warranty, or obligation of Borrower contained in this paragraph D or (ii) the
presence or alleged presence of hazardous Materials on or under the Property.
lender agrees that the liability created under this paragraph shall be limited
to the assets of Borrower and Lender shall not seek to recover any deficiency
from any natural persons who are general partners of Borrower (if Borrower is a
partnership).
The term "Hazardous Materials," for purposes of this paragraph D,
includes petroleum and petroleum products, flammable explosives, radioactive
materials (excluding radioactive materials in smoke detectors), polychlorinated
biphenyls, lead, asbestos in any form that is or could become friable, hazardous
waste, toxic or hazardous substances or other related materials whether in the
form of a chemical, element, compound, solution, mixture or otherwise including,
but not limited to, those materials defined as "hazardous substances,"
"extremely hazardous substances," "hazardous chemicals," "hazardous materials,"
"toxic substances," "solid waste," "toxic chemicals," "air pollutants," "toxic
pollutants," "hazardous wastes," "extremely hazardous waste," or "restricted
hazardous waste" by Hazardous Materials Law or regulated by Hazardous Materials
Law in any manner whatsoever.
The term "Hazardous Materials Law," for the purposes of this paragraph
D, means all federal, state, and local laws, ordinances and regulations and
standards, rules, policies and other binding governmental requirements and any
court judgments applicable to Borrower or to the Property relating to industrial
hygiene or to environmental or unsafe conditions or to human health including,
but not limited to, those relating to the generation, manufacture, storage,
handling, transportation, disposal, release, emission or discharge of Hazardous
Materials, those in connection with the construction, fuel supply power
generation and transmission, waste disposal of any other operations or processes
relating to the Property, and those relating to the atmosphere, soil, surface
and ground water, wetlands, stream sediments and vegetation on, under, in or
about the Property.
The representations, warranties, covenants, agreements, indemnities and
undertakings of Borrower contained in this paragraph D shall be in addition to
any and all other obligations and liabilities that Borrower may have to Lender
under applicable law.
The representations, warranties, covenants, agreements, indemnities and
undertakings of Borrower contained in this paragraph D shall continue and
survive notwithstanding the satisfaction, discharge, release, assignment,
termination, subordination or cancellation of the Instrument or the payment in
full of the principal of and interest on the Note and all other sums payable
under the Loan Documents or the foreclosure of the Instrument or the tender or
delivery of a deed in lieu of foreclosurer or the release of any portion of the
21
<PAGE>
Property from the lien of the Instrument, except with respect to any Prohibited
Activities or Conditions or violation of any of the Hazardous Materials Laws
which first commences and occurs after the satisfaction, discharge, release,
assignment, termination or cancellation of the Instrument following the payment
in full of the principal of and interest on the Note and all other sums payable
under the Loan Documents or which first commences or occurs after the actual
dispossession from the entire Property of the Borrower and all entities which
control, are controlled by, or are under common control with the Borrower (each
of the foregoing persons or entities is hereinafter referred to as a
"Responsible Party") following foreclosure of the Instrument or acquisition of
the Property by a deed in lieu of foreclosure. Nothing in the foregoing sentence
shall relieve the Borrower from any liability with respect to any prohibited
Activities or Conditions or violation of Hazardous Materials Laws where such
Prohibited Activities or Conditions or violation of Hazardous Materials Laws
commences or occurs, or is present as a result of, any act or omission by any
Responsible Party or by any person or entity acting on behalf of a Responsible
Party.
E. Books, Records and Financial Information
Uniform Covenant 10 of the Instrument ("Books and Records") is amended
to read as follows:
Borrower shall keep and maintain at all times and upon Lender's
request, Borrower shall make available at the Property address, complete and
accurate books of accounts and records in sufficient detail to correctly reflect
the results of the operation of the Property and copies of all written
contracts, leases and other instruments which affect the Property (including but
not limited to all bills, invoices and contracts for electrical service, gas
service, water and sewer service, waste management service, telephone service
and management services). These books, records, contracts, leases and other
instruments shall be subject to examination and inspection at any reasonable
time by lender. Borrower shall furnish to lender the following: (i) within 120
days after the end of each fiscal year of Borrower, a statement of income and
expenses of the Property and a statement of changes in financial position, and
when requested by lender, a balance sheet, each in reasonable detail and
certified by Borrower and, if Lender shall require, the foregoing statements
shall be audited by an independent certified public accountant; (ii) together
with the foregoing financial statements and at any other time upon Lender's
request, a rent schedule for the Property, in the form required by lender and
certified by Borrower, showing the name of each tenant, and for each tenant, the
space occupied, the lese expiration date, the rent payable, the rent paid and
any other information requested by Lender; (iii) upon lender's request, an
accounting of all security deposits held in connection with any lease of any
part of the Property, including the name and identification number of the
accounts in which such security deposits are held, the name and address of the
financial institutions in which such security deposits are held and the name of
the person to contact at such financial institution, along with any authority or
release necessary for Lender to access information regarding such accounts; and
(iv) promptly upon Borrower's receipt, copies of any complaint filed against the
Borrower or the Property management alleging any violation of fair housing law,
handicap access or the Americans with Disabilities Act and any final
administrative or judicial dispositions of such complaints. If Borrower shall
fail to timely provide the financial statements required by clause (i) above,
Lender shall have the right to have the Borrower's books and records audited in
order to obtain such financial statements, and any such costs and expenses
incurred by Lender which Borrower fails to pay promptly shall become immediately
22
<PAGE>
due and payable and shall become additional indebtedness secured by the
Instrument pursuant to paragraph 8 of the Instrument.
F. Transfers of the Property or Significant Interests in Borrower;
Transfer Fees
Uniform Covenant 19 of the Instrument ("Transfers of the Property or
Beneficial Interests in Borrower, Assumption") is amended to read as set forth
below:
Transfers of the Property or Significant Interests in Borrower; Transfer Fees
(a) Definitions
For purposes of the Instrument (and the Rider), the following terms
have the respective meanings set forth below:
(1) The term "Key Principal" means the natural person(s)
identified as such at the foot of the Rider, and any
natural person who becomes a Key Principal after the
date of the Note and are identified as such in an
amendment or supplement to the Loan Documents.
(2) The term "Transfer" means a sale, assignment,
transfer or other disposition (whether voluntary or
by operation of law) of, or the granting or creating
of a lien, encumbrance or security interest in, the
Property or in ownership interests, and the issuance
of other creation of ownership interests in an entity
and the reconstitution of one type of entity to
another type of entity.
(3) A "Significant Interest" in any entity shall mean the
following:
(i) if the entity is a general partnership or a
joint venture, (A) any partnership interest
in the general partnership, or (B) any
interest of a joint venturer in a joint
venture;
(ii) if the entity is a limited partnership, (A)
any limited partnership interest in the
entity which, together with all other
limited partnership interests in the entity
Transferred since the date of the Note,
exceeds 49% of all of the limited
partnership interests in the entity, or (B)
any general partnership interest in the
entity;
(iii) if the entity is a limited liability
company, any membership interest which,
together with all other membership interests
in the limited liability company Transferred
since the date of the Note, exceeds 49% of
all of the membership interests in the
limited liability company;
(iv) if the entity is a corporation, any voting
stock in the corporation which, together
with all other voting stock of the
corporation Transferred since the date of
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<PAGE>
the Note, exceeds d49% of alld of the voting
stock of the corporation; or
(v) if the entity is a trust, any beneficial
interest in such trust which, together with
all other beneficial interests in the trust
Transferred since the date of the Note,
exceeds 49% of all of the beneficial
interests in the trust.
(b) Acceleration of the Loan Upon Transfers of the Property or
Significant Interests
Lender may, at Lender's option, declare all sums secured by
the Instrument immediately due and payable and Lender may invoke any
remedies permitted by paragraph 27 of the Instrument if, without the
Lender's prior written consent, any of the following shall occur:
(1) a Transfer of all or any part of the Property or any
interest in the Property;
(2) a Transfer of any Significant Interest in Borrower;
(3) a Transfer of any Significant Interest in a
corporation, partnership, limited liability company,
joint venture, or trust which owns a Significant
Interest in the Borrower;
(4) if the Borrower is a trust, or if any trust owns a
Significant Interest in the Borrower, the addition,
deletion or substitution of a trustee of such trust,
which addition, deletion or substitution has not been
approved by Lender; or
(5) a Transfer of all or any part of any Key Principal's
ownership interest (other than the limited
partnership interests) in the Borrower, or in any
other entity which owns, directly or indirectly,
through one or more intermediate entities, an
ownership interest in the Borrower.
(c) Transfers Permitted with Lender's Prior Consent
Lender shall consent to a Transfer which would otherwise violate this
paragraph 19 if, prior to the Transfer:
(1) Borrower causes to be submitted to Lender all
information required by lender to evaluate the
transferee and the Property as if a new loan were
being made to the transferee and secured by the
Property, in the case of a Transfer of all or any
part of the Property or an interest therein, or to
the Borrower (as reconstituted after the proposed
Transfer), in the case of a Transfer of Significant
Interests;
(2) The transferee, in the case of a Transfer of all or
any part of the Property or an interest therein, or
the Borrower (as reconstituted after the proposed
24
<PAGE>
Transfer), in the case of a Transfer of Significant
Interests, meet the eligibility, credit, management
and other standards, and the Property meets the
physical maintenance and replacement reserve
requirements, customarily applied by lender for
approval of new borrowers and properties for loans
secured by liens on multifamily properties;
(3) In the case of a Transfer of all or any part of the
Property, the proposed transferee (i) executes an
agreement acceptable to Lender pursuant to which the
proposed transferee agrees, upon consummation of the
Transfer, to assume and to pay and perform all
obligations of the Borrower under the Note, the
Instrument and the other Loan Documents, (ii) causes
one or more individuals acceptable to Lender to
execute and deliver to Lender an amendment or
supplement to the Loan Documents as "Key Principal,"
and (iii) executes such documents and otherwise
provides such documents and information as required
by lender in connection with the Transfer;
(4) In the case of a Transfer of a Principal's ownership
interest pursuant to paragraph 19(b)(5), (i) the
Borrower (as reconstituted after the proposed
Transfer) executes an agreement acceptable to Lender
that ratifies and confirms the obligations of
Borrower under the Note, the Instrument and the other
Loan Documents, (ii) one or more individuals
acceptable to lender execute and deliver to Lender an
amendment or supplement to the Loan Documents as "Key
Principal," and (iii) the Borrower executes such
documents and otherwise provides such documents and
information as required by Lender in connection with
the Transfer; and
(5) Borrower pays to lender a $3000 non-refundable
application fee and a transfer fee equal to one
percent (1%) of the sums secured by the Instrument.
In addition, Borrower shall be required to reimburse
Lender for all of Lender's out of pocket expenses
incurred in connection with the assumption, to the
extent such expenses exceed $3000.
(d) No Acceleration of the Loan For Transfers Caused By Certain
Events
Notwithstanding the foregoing provisions of this covenant, Lender shall
not be entitled to declare sums secured by the Instrument immediately
due and payable or to invoke any remedy permitted by paragraph 27 of
the Instrument solely upon the occurrence of any of the following:
(1) A Transfer that occurs by inheritance, devise, or
bequest or by operation of law upon the death of a
natural person who is an owner of the Property or the
owner of a direct or indirect ownership interest in
the Borrower.
(2) The grant of a leasehold interest in individual
dwelling units for a term of two years or less and
leases for commercial uses as long as commercial
leases do not exceed 20 percent of the rentable space
of the Property (measured as required by lender) and
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<PAGE>
provided that all such leasehold interests do not
contain an option to purchase the Property.
(3) A sale or other disposition of obsolete or worn out
personal property which is contemporaneously replaced
by comparable personal property of equal or greater
value which is free and clear of liens, encumbrances
and security interests other than those created by
the Loan Documents.
(4) The creation of a mechanic's or materialmen's lien or
judgment lien against the Property which is released
of record or otherwise remedied to Lender's
satisfaction, within 30 days of the date of creation.
(5) The grant of an easement, if prior to the granting of
the easement the Borrower causes to be submitted to
Lender all information required by Lender to evaluate
the easement, and if Lender determines the easement
will not materially affect the operation of the
property or Lender's interest in the Property and
Borrower pays to Lender, on demand, all cost and
expenses incurred by Lender in connection with
reviewing Borrower's request.
G. Notice
Uniform Covenant 20 of the Instrument ("Notice") is amended to read as
follows:
Each notice, demand, consent, or other approval (collectively,
"notices" and singly, "notice") given under the Note, the Instrument, and any
other Loan Document, shall be in writing to the other party, and if to Borrower,
at its address set forth below Borrower's signature on the Instrument, and if to
Lender at its address set forth at the beginning of the Rider, or at such other
address as such party may designate by notice to the other party and shall be
deemed given (a) three (3) Business Days after mailing, by certified or
registered U.S. mail, return receipt requested, postage prepaid, (b) one (1)
Business Day after delivery, fee prepaid, to a national overnight delivery
service (such as Federal Express, Purolator Courier, or U.P.S. Next Day Air), or
(c) when delivered, if personally delivered with proof of delivery thereof.
Borrower and Lender each agrees that it will not refuse or reject
delivery of any notice given hereunder, that it will acknowledge, in writing,
the receipt of the same upon request by the other party and that any notice
rejected or refused by it shall be deemed for all purposes of this Agreement to
have been received by the rejecting party on the date so refused or rejected, as
conclusively established by the records of the United States Postal Service or
the courier service. As used in the Instrument, the term "Business Day" means
any day other than a Saturday, a Sunday or any other day on which Lender is not
open for business.
Lender shall not be required to deliver notice to Key Principal in
connection with any notice given to Borrower. However, if Lender shall deliver
notice to Key Principal, such notice shall be given in the manner provided in
this Uniform Covenant 20, at Key Principal's address set forth at the foot of
the Rider.
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H. Governing Law
In addition to the governing law provision of Uniform Covenant 22 of
the Instrument ("Uniform Multifamily Instrument; Governing Law; Severability"),
the Borrower and Lender covenant and agree as follows:
(a) Choice of Law
The validity of the Instrument and the other Loan Documents, each of
their terms and provisions, and the rights and obligations of Borrower under the
Instrument and the other Loan Documents, shall be governed by, interpreted,
construed, and enforced pursuant to and in accordance with the laws of the
Property Jurisdiction.
(b) Consent to Jurisdiction
Borrower consents to the exclusive jurisdiction of any and all state
and federal courts with jurisdiction in the Property Jurisdiction over Borrower
and the Borrower's assets. Borrower agrees that such assets shall be used first
to satisfy all claims of creditors organized or domiciled in the United States
of America ("USA") and that no assets of the Borrower in the USA shall be
considered part of any foreign bankruptcy estate.
Borrower agrees that any controversy arising under or in relation to
the Note, the Instrument or any of the other Loan Documents shall be litigated
exclusively in the Property Jurisdiction. The state and federal courts and
authorities with jurisdiction in the Property Jurisdiction shall have exclusive
jurisdiction over all controversies which may arise under or in relation to the
Note, and any security for the debt evidenced by the Note, including without
limitation those controversies relating to the execution, interpretation,
breach, enforcement, or compliance with the Note, the Instrument, or any other
issue arising under, related to, or in connection with any of the Loan
Documents. Borrower irrevocably consents to service, jurisdiction, and venue of
such courts for any litigation arising from the Note, the Instrument or any of
the other Loan Documents and waives any other venue to which it might be
entitled by virtue of domicile, habitual residence or otherwise.
I. Acceleration; Remedies
Covenant 27 of the Instrument ("Acceleration; Remedies") is amended to
add the following at the end of the first paragraph:
Upon the breach of any covenant or agreement by Borrower in the
Instrument (including, but not limited to, the covenants to pay when due sums
secured by the Instrument), or any other Loan Document, Lender, at Lender's
option may, in addition to any remedies specified in this covenant, invoke any
other remedies provided in any Collateral Agreement.
If Borrower is in default under any promissory note (other than the
Note) evidencing a loan (the "Subordinate Loan") secured by a security
instrument (other than the Instrument) covering all or any portion of the
Property (the "Subordinate Instrument") or under any Subordinate Instrument or
other loan document executed in connection with the Subordinate Loan (and
whether or not the Borrower has obtained the prior approval of the Lender to the
27
<PAGE>
placement of such Subordinate Instrument on the Property) which default remains
uncured after any applicable cure period. Borrower also then will be in default
under the Note and the Instrument. In that event, the entire unpaid principal
balance of the Note, accrued interest and any other sums due Lender secured by
the Instrument then will become due and payable, at Lender's option. If Lender
exercises this option to accelerate, Lender will do so in accordance with the
provisions of the Note and the Instrument, and the Lender may invoke any and all
remedies permitted by applicable law, the Note, the Instrument, or any of the
other Loan Documents.
J. Single Asset Borrower
Until the debt evidenced by the Note is paid in full, Borrower shall
not (1) acquire any real or personal property other than the Property and assets
(such as accounts) related to the operation and maintenance of the Property; or
(2) operate any business other than the management and operation of the
Property.
K. Non-Recourse Liability
Subject to the provisions of paragraph L and notwithstanding any other
provision in the Note or Instrument, the personal liability of Borrower, any
general partner of Borrower (if Borrower is a partnership), and any Key
Principal to pay the principal of and interest on the debt evidenced by the Note
and any other agreement evidencing Borrower's obligations under the Note and the
Instrument shall be limited to (1) the real and personal property described as
the "Property" in the Instrument, (2) the personal property described in and
pledged under any Collateral Agreement executed in connection with the loan
evidenced by the Note, (3) the rents, profits, issues, products and income of
the Property received or collected by or on behalf of Borrower (the "Rents and
Profits") to the extent such receipts are necessary, first, to pay the
reasonable expenses of operating, managing, maintaining and repairing the
Property, including but not limited to real estate taxes, utilities,
assessments, insurance premiums, repairs, replacements and ground rents, if any
(the "Operating Expenses") then due and payable as of the time of receipt of
such Rents and Profits, and then, to pay the principal and interest due under
the Note, and any other sums due under the Instrument or any other Loan Document
(including but not limited to deposits or reserves due under any Collateral
Agreement), except to the extent that Borrower did not have the legal right,
because of bankruptcy, receivership or similar judicial proceeding, to direct
the disbursement of such sums.
Except as provided in paragraph L, Lender shall not seek (a) any
judgment for a deficiency against Borrower, any general partner of Borrower (if
Borrower is a partnership) or any Key Principal, or Borrower's or any such
general partner's or Key Principal's heirs, legal representatives, successors or
assigns, in any action to enforce any right or remedy under the Instrument, or
(b) any judgment on the Note except as may be necessary in any action brought
under the Instrument to enforce the lien against the Property or to exercise any
remedies under any Collateral Agreement.
L. Exceptions to Non-Recourse Liability
If, without obtaining Lender's prior written consent, (i) a Transfer
shall occur which, pursuant to Uniform Covenant 19 of the Instrument, gives
Lender the right, at its option, to declare all sums secured by the Instrument
28
<PAGE>
immediately due and payable, (ii) Borrower shall encumber the Property with the
lien of any Subordinate Instrument in connection with any financing by Borrower,
or (iii) Borrower shall violate the single asset covenant in paragraph J of the
Rider, any of such events shall constitute a default by Borrower under the Note,
the Instrument and the other Loan Documents and if such event shall continue for
30 days, paragraph K shall not apply from and after the date which is 30 days
after such event and the Borrower, any general partner of Borrower (if Borrower
is a partnership) and Key Principal (each individually on a joint and several
basis if more than one) shall be personally liable on a joint and several basis
for full recourse liability under the note and the other Loan Documents.
Notwithstanding paragraph K, Borrower, any general partner of Borrower
(if Borrower is a partnership) and Key Principal (each individually on a joint
and several basis if more than one), shall be personally liable on a joint and
several basis, in the amount of any loss, damage or cost (including but not
limited to attorneys' fees resulting from (A) fraud or intentional
misrepresentation by Borrower or Borrower's agents or employees or any Key
Principal or general partner of Borrower in connection with obtaining the loan
evidenced by the Note, or in complying with any of Borrower's obligations under
the Loan Documents, (B) insurance proceeds, condemnation awards, security
deposits from tenants and other sums or payments received by or on behalf of
Borrower in its capacity as owner of the Property and not applied in accordance
with the provisions of the Instrument (except to the extent that Borrower did
not have the legal right, because of a bankruptcy, receivership or similar
judicial proceeding, to direct disbursement of such sums or payments), (C) all
Rents and Profits (except to the extent that Borrower did not have the legal
right, because of bankruptcy, receivership or similar judicial proceeding, to
direct the disbursement of such sums), and not applied, first, to the payment of
the reasonable Operating Expenses as such Operating Expenses become due and
payable, and then, to the payment of principal and interest then due and payable
under the Note and all other sums due under the Instrument and all other Loan
Documents (including but not limited to deposits or reserves payable under any
Collateral Agreement), (D) Borrower's failure to pay transfer fees and charges
due under paragraph 19(c) of the Instrument, or (E) Borrower's failure following
a default under any of the Loan Documents to deliver to Lender on demand all
Rents and Profits, and security deposits (except to the extent that Borrower did
not have the legal right because of a bankruptcy, receivership or similar
judicial proceeding to direct disbursement of such sums), books and records
relating to the Property.
No provision of paragraphs K or L shall (i) affect any guaranty or
similar agreement executed in connection with the debt evidenced by the Note,
(ii) release or reduce the debt evidenced by the Note, (iii) impair the right of
Lender to enforce the provisions of paragraph D of the Rider, (iv) impair the
lien of the Instrument or (v) impair the right of Lender to enforce the
provisions of any Collateral Agreement.
M. Waiver of Jury Trial
Borrower and Key Principal (each for himself if more than one) (i)
covenant and agree not to elect a trial by jury with respect to any issue
arising under any of the Loan Documents triable by a jury and (ii) waive any
right to trial by jury to the extent that any such right shall now or hereafter
exist. This waiver of right to trial by jury is separately given, knowingly and
voluntarily with the benefit of competent legal counsel by the Borrower and Key
Principal, and this waiver is intended to encompass individually each instance
29
<PAGE>
and each issue as to which the right to a jury trial would otherwise accrue.
Further, Borrower and Key Principal hereby certify that no representative or
agent of the Lender (including, but not limited to, the Lender's counsel) has
represented, expressly or otherwise, to Borrower or Key Principal that Lender
will not seek to enforce the provisions of this paragraph M.
BY SIGNING BELOW, Borrower accepts and agrees to the covenants and
agreements contained in this Rider.
BORROWER:
GRAMERCY HILL ENTERPRISES,
a Texas general partnership
By: Gramercy Hill Limited Partnership,
a Nebraska limited partnership,
its general partner
By: Gramercy Hill Corp.,
a Nebraska corporation,
its general partner
By: /s/ Andrew C. Jacobs
------------------------------
Andrew C. Jacobs, President
Acknowledgment and Agreement of Key Principal to
Personal Liability for the Exceptions to Non-Recourse
-----------------------------------------------------
Key Principal (each for himself if more than one) hereby represents to
Lender that he has a direct or indirect ownership interest in the Borrower and
that he participates in the management of the Borrower.
BY SIGNING BELOW, the undersigned Key Principal (each for himself, if
more than one) understands, accepts and agrees to the provisions of paragraphs
F, G, L and M above. No transfer of Key Principal's ownership interest in
Borrower or in any entity which directly or indirectly has ownership interest in
Borrower shall release Key Principal from liability hereunder, unless the
Borrower and Key Principal shall have complied with the provisions of paragraph
F above and Lender shall have approved the transfer and the substituted Key
Principal. Key Principal shall have no right of subrogation against the Borrower
or any general partner of Borrower by reason of any payment by Key Principal
pursuant to paragraph L.
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KEY PRINCIPAL:
/s/ Andrew C. Jacobs (Seal)
-----------------------------------
Name: Andrew C. Jacobs
Address: 1033 O Street, Suite 304
Lincoln, Nebraska 68508
STATE OF NEBRASKA ss.
ss.
COUNTY OF LANCASTER ss.
The foregoing instrument was acknowledged before me this 4th day of
December, 1997, by Andrew C. Jacobs in his individual capacity.
Witness my hand and notarial seal in said state and county, the date
aforesaid.
/s/ Rhonda J. Jacob
----------------------------------------------
Notary Public in and for the State of Nebraska
Printed Name of Notary: _____________________
My Commission Expires: _____________________
31
<PAGE>
SECOND RIDER TO MULTIFAMILY INSTRUMENT
(Seniors Housing)
THIS SECOND RIDER TO MULTIFAMILY INSTRUMENT (the "Rider") is made this
4th day of December, 1997, and is incorporated into and shall be deemed to amend
and supplement the Multifamily Mortgage Deed of Trust or Deed to Secure Debt of
the same date (the "Instrument"), given by the undersigned, GRAMERCY HILL
ENTERPRISES, a Texas general partnership (the "Borrower"), to secure Borrower's
Multifamily Note of the same date (the "Note") with Addendum to Multifamily Note
of the same date (the "Addendum") to WASHINGTON MORTGAGE FINANCIAL GROUP, LTD.,
a Delaware corporation, 1593 Spring Hill Road, Suite 400, Vienna, Virginia 22182
and its successors, assigns and transferees (the "Lender"), covering the
property described in the instrument and defined therein as the "Property,"
located at 6800 A Street, Lincoln, Nebraska 68510. The Property is located
entirely within the State of Nebraska.
ADDITIONAL COVENANTS. In addition to the covenants and agreements made
in the Instrument, Borrower and Lender further represent, covenant and agree as
follows:
A. DEFINITIONS.
1. The term "Property" shall also include, where applicable, payments
received from occupants, second-party charges added to base rental income, base
and/or additional meal sales, commercial operations located on the Property or
provided as a service to the occupants of the Property, rental from guest
suites, personal lease charges, furniture leases, and laundry services, and any
and all other services provided to third parties in connection with the
Property, and any and all other personal property on the real property site,
excluding personal property belonging to occupants of the real property (other
than property belonging to Borrower) and together with the following items:
permits, licenses and contracts, all rights to payments from Medicare or
Medicaid programs or similar federal, state or local programs, boards, bureaus
or agencies and rights to payment from residents or private insurers, arising
from the operation of the Property as a community residential, adult congregate
living facility, including independent assisted living or nursing care
facilities, all personal property acquired by Borrower after the date hereof or
in connection with the ownership and operation of the Property as a community
residence or adult congregate living facility, utility deposits, unearned
premiums, accrued, accruing or to accrue under insurance policies now or
hereafter obtained by the Borrower and all proceeds of any conversion of
Property or any part thereof including, without limitation, proceeds of hazard
and title insurance and all awards and compensating for the taking of eminent
domain, condemnation or otherwise, of all or any part of the Property or any
easement therein; including replacements and additions thereto.
2. The term "Lease" shall also include any occupancy agreements
pertaining to occupants of the Property, including both residential and
commercial agreements.
3. The term "Hazardous Materials" shall also include any medical
products or devices, including, but not limited to, those materials defined as
"medical waste" or "biological waste" under relevant statutes or regulations
pertaining to hazardous materials law.
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<PAGE>
B. BORROWER'S REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants to Lender as follows:
1. The Property is duly licensed as an adult congregate living
facility, or otherwise legally authorized to operate as an adult congregate
living facility, under the applicable laws of Property Jurisdiction.
2. Borrower and the Property (and the operation thereof) are in
compliance in all material respects with the applicable provisions of all laws,
statutes regulations, ordinances, orders, standards, restrictions and rules of
any federal, state or local government or quasi-government body, agency, board,
or authority having jurisdiction over the operation of the Property, including,
without limitation: (a) health care and fire safety codes; (b) laws regulating
the handling and disposal of medical or biological waste; (c) the applicable
provisions of adult congregate living facility laws, rules, regulations and
published interpretations thereof to which the Borrower or the Property is
subject; and (d) all criteria established to classify the Property as housing
for older persons under the Fair Housing Amendments Act of 1988.
3. If required, Borrower has a current provider agreement under any and
all applicable federal, state and local laws for reimbursement: (a) to an adult
congregate living facility; or (b) for other type of care provided at such
facility. There is no decision not to renew any provider agreement related to
the Property, nor is there any action pending or threatened to impose material
intermediate or alternative sanctions with respect to the Property.
4. Borrower and the Property are not subject to any proceeding, suit or
investigation by any federal state or local government or quasi-government body,
board, authority, or other administrative or investigative body which may result
in the imposition of a fine, alternative, interim or final sanction, or which
would have a material adverse effect on Borrower or the operation of the
Property, or which would result in the appointment of a receiver or manager or
would result in the revocation, transfer, surrender, suspension or other
impairment of the operating certificate, license, permit, approval or
authorization of the Property to operate as an adult congregate facility.
5. Upon Lender's request, copies of resident care agreements shall be
provided to Lender. All resident records at the Property are true and correct in
all material respects.
6. Neither the execution and delivery of the Note, the Instrument or
the Loan Documents, Borrower's performance thereunder, the recordation of the
instrument, nor the exercise of any remedies by Lender will adversely affect the
licenses, regulations, permits, certificates, authorizations and approvals
necessary for the operation of the Property as an adult congregate living
facility in the Property jurisdiction.
7. Borrower is not a participant in any federal program whereby any
federal, state or local government or quasi-government body, agency, board or
other authority may have the right to recover funds by reason of the advance of
federal funds. Borrower has received no notice, and is not aware of any
violation of applicable antitrust laws of any federal, state or local government
or quasi-government body, agency, board or other authority.
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<PAGE>
8. In the event any existing management agreement is terminated or
Lender acquires the Property through foreclosure or otherwise, neither Borrower,
Lender, any subsequent manager, nor any subsequent purchaser (through
foreclosure or otherwise) must obtain a certificate of need from any applicable
state health care regulatory authority or agency (other than giving such notice
required under the applicable state law or regulation) prior to applying for any
applicable license, registration, permit, certificate, authorization or approval
necessary for the operation of the Property as an adult congregate living
facility, provided that no service or the unit compliment is changed.
C. ADDITIONAL DEFAULTS. The following shall constitute a breach of a covenant or
agreement under the Instrument.
1. If Borrower shall fail to correct, within the time deadlines set by
any federal, state or local licensing agency, any deficiency that justifies any
action by such agency with respect to the Property that may have a material
adverse affect on the income of the Property or Borrower's interest in the
Property, including, without limitation, a termination, revocation or suspension
of any applicable license, registration, permit, certificate, authorization or
approval necessary for the operation of the Property as an adult congregate
living facility.
2. If, without the consent of Lender: (a) Borrower ceases to operate
the Property as an adult congregate living facility; (b) Borrower ceases to
provide full kitchens (except ovens), separate bathrooms, and areas for eating,
sitting and sleeping in each unit (unless such kitchens did not exist at the
time the Instrument was executed); (c) Borrower ceases to provide other
facilities and services normally associated with "independent living units,"
including, without limitation, (i) central dining services providing one to
three meals per day; (ii) periodic housekeeping, (iii) laundry services, and
(iv) customary transportation services; (d) Borrower provides or contracts for
skilled nursing care for any of the units other than that level of care which
Borrower would be permitted to provide or contract for at an adult congregate
living facility under state, or local statutes, regulations, orders, standards,
rules or restrictions as may be amended from time to time; (e) skilled nursing
care is provided in a number of units exceeding twenty percent (20%) of the
total number of independent and assisted living units; (f) non-residential space
exceeds ten percent (10%) of the net rental area; or (g) the Property is no
longer classified as housing for older persons pursuant to the Fair Housing
Amendments Act of 1988, as it may be amended from time to time hereafter.
BY SIGNING BELOW, Borrower accepts and agrees to the covenants and
agreements contained in this Second Rider.
34
<PAGE>
BORROWER:
GRAMERCY HILL ENTERPRISES,
a Texas general partnership
By: Gramercy Hill Limited Partnership,
a Nebraska limited partnership,
its general partner
By: Gramercy Hill Corp.,
a Nebraska corporation,
its general partner
By: /s/ Andrew C. Jacobs
-----------------------------
Andrew C. Jacobs, President
35
MULTIFAMILY NOTE
US $1,980,000.00 October 28, 1998
FOR VALUE RECEIVED, the undersigned ("Borrower") jointly and severally
(if more than one) promises to pay to the order of WMF WASHINGTON MORTGAGE
CORP., a Delaware corporation, formerly known as Washington Mortgage Financial
Group, Ltd., the principal sum of One Million Nine Hundred Eighty Thousand and
00/100 Dollars (US $1,980,000.00), with interest on the unpaid principal balance
at the annual rate of seven and eight hundredths percent (7.08%).
1. Defined Terms. As used in this Note, (i) the term "Lender" means the
holder of this Note, and (ii) the term "Indebtedness" means the principal of,
interest on, or any other amounts due at any time under, this Note, the Security
Instrument or any other Loan Document, including prepayment premiums, late
charges, default interest, and advances to protect the security of the Security
Instrument under Section 12 of the Security Instrument. Event of Default, Key
Principal and other capitalized terms used but not defined in this Note shall
have the meanings given to such terms in the Security Instrument (as defined in
Paragraph 5).
2. Address for Payment. All payments due under this Note shall be
payable at 1593 Spring Hill Road, Suite 400, Vienna, Virginia 22182, or such
other place as may be designated by written notice to Borrower from or on behalf
of Lender.
3. Payment of Principal and Interest. Principal and interest shall be
paid as follows:
(a) Unless disbursement of principal is made by Lender to Borrower on
the first day of the month, interest for the period beginning on the date of
disbursement and ending on and including the last day of the month in which such
disbursement is made shall be payable simultaneously with the execution of this
Note. Interest under this Note shall be computed on the basis of a 360-day year
consisting of twelve 30-day months.
(b) Consecutive monthly installments of principal and interest, each in
the amount of Fourteen Thousand Ninety-Five and 44/100 Dollars (US $14,095.44),
shall be payable on the first day of each month beginning on December 1, 1998,
until the entire unpaid principal balance evidenced by this Note is fully paid.
Any accrued interest remaining past due for 30 days or more shall be added to
and become part of the unpaid principal balance and shall bear interest at the
rate or rates specified in this Note, and any reference below to "accrued
interest" shall refer to accrued interest which has not become part of the
unpaid principal balance. Any remaining principal and interest shall be due and
payable on January 1, 2010 or on any earlier date on which the unpaid principal
balance of this Note becomes due and payable, by acceleration or otherwise (the
"Maturity Date"). The unpaid principal balance shall continue to bear interest
after the Maturity Date at the Default Rate set forth in this Note until and
including the date on which it is paid in full.
(c) Any regularly scheduled monthly installment of principal and
interest that is received by Lender before the date it is due shall be deemed to
have been received on the due date solely for the purpose of calculating
interest due.
4. Application of Payments. If at any time Lender receives, from
Borrower or otherwise, any amount applicable to the Indebtedness which is less
than all amounts due and payable at such time, Lender may apply that payment to
amounts then due and payable in any manner and in any order determined by
Lender, in Lender's discretion. Borrower agrees that neither Lender's acceptance
of a payment from Borrower in an amount that is less than all amounts then due
and payable nor Lender's application of such payment shall constitute or be
deemed to constitute either a waiver of the unpaid amounts or an accord and
satisfaction.
1
<PAGE>
5. Security. The Indebtedness is secured, among other things, by a
multifamily mortgage, deed to secure debt or deed of trust dated as of the date
of this Note (the "Security Instrument"), and reference is made to the Security
Instrument for other rights of Lender concerning the collateral for the
Indebtedness.
6. Acceleration. If an Event of Default has occurred and is continuing,
the entire unpaid principal balance, any accrued interest, the prepayment
premium payable under Paragraph 10, if any, and all other amounts payable under
this Note and any other Loan Document shall at once become due and payable, at
the option of Lender, without any prior notice to Borrower. Lender may exercise
this option to accelerate regardless of any prior forbearance.
7. Late Charge. If any monthly amount payable under this Note or under
the Security Instrument or any other Loan Document is not received by Lender
within 10 days after the amount is due, Borrower shall pay to Lender,
immediately and without demand by Lender, a late charge equal to 5 percent of
such amount. Borrower acknowledges that its failure to make timely payments will
cause Lender to incur additional expenses in servicing and processing the loan
evidenced by this Note (the "Loan"), and that it is extremely difficult and
impractical to determine those additional expenses. Borrower agrees that the
late charge payable pursuant to this Paragraph represents a fair and reasonable
estimate, taking into account all circumstances existing on the date of this
Note, of the additional expenses Lender will incur by reason of such late
payment. The late charge is payable in addition to, and not in lieu of, any
interest payable at the Default Rate pursuant to Paragraph 8.
8. Default Rate. So long as any monthly installment or any other
payment due under this Note remains past due for 30 days or more, interest under
this Note shall accrue on the unpaid principal balance from the earlier of the
due date of the first unpaid monthly installment or other payment due, as
applicable, at a rate (the "Default Rate") equal to the lesser of 4 percentage
points above the rate stated in the first paragraph of this Note or the maximum
interest rate which may be collected from Borrower under applicable law. If the
unpaid principal balance and all accrued interest are not paid in full on the
Maturity Date, the unpaid principal balance and all accrued interest shall bear
interest from the Maturity Date at the Default Rate. Borrower also acknowledges
that its failure to make timely payments will cause Lender to incur additional
expenses in servicing and processing the Loan, that, during the time that any
monthly installment or payment under this Note is delinquent for more than 30
days, Lender will incur additional costs and expenses arising from its loss of
the use of the money due and from the adverse impact on Lender's ability to meet
its other obligations and to take advantage of other investment opportunities,
and that it is extremely difficult and impractical to determine those additional
costs and expenses. Borrower also acknowledges that, during the time that any
monthly installment or other payment due under this Note is delinquent for more
than 30 days, Lender's risk of nonpayment of this Note will be materially
increased and Lender is entitled to be compensated for such increased risk.
Borrower agrees that the increase in the rate of interest payable under this
Note to the Default Rate represents a fair and reasonable estimate, taking into
account all circumstances existing on the date of this Note, of the additional
costs and expenses Lender will incur by reason of the Borrower's delinquent
payment and the additional compensation Lender is entitled to receive for the
increased risks of nonpayment associated with a delinquent loan.
2
<PAGE>
9. Limits on Personal Liability.
(a) Except as otherwise provided in this Paragraph 9, Borrower shall
have no personal liability under this Note, the Security Instrument or any other
Loan Document for the repayment of the Indebtedness or for the performance of
any other obligations of Borrower under the Loan Documents, and Lender's only
recourse for the satisfaction of the Indebtedness and the performance of such
obligations shall be Lender's exercise of its rights and remedies with respect
to the Mortgaged Property and any other collateral held by Lender as security
for the Indebtedness. This limitation on Borrower's liability shall not limit or
impair Lender's enforcement of its rights against any guarantor of the
Indebtedness or any guarantor of any obligations of Borrower.
(b) Borrower shall be personally liable to Lender for the repayment of
a portion of the Indebtedness equal to any loss or damage suffered by Lender as
a result of (1) failure of Borrower to pay to Lender upon demand after an Event
of Default, all Rents to which Lender is entitled under Section 3(a) of the
Security Instrument and the amount of all security deposits collected by
Borrower from tenants then in residence; (2) failure of Borrower to apply all
insurance proceeds and condemnation proceeds as required by the Security
Instrument; (3) failure of Borrower to comply with Section 14(d) or (e) of the
Security Instrument relating to the delivery of books and records, statements,
schedules and reports; (4) fraud or written material misrepresentation by
Borrower, Key Principal or any officer, director, partner, member or employee of
Borrower in connection with the application for or creation of the Indebtedness
or any request for any action or consent by Lender; or (5) failure to apply
Rents, first, to the payment of reasonable operating expenses (other than
Property management fees that are not currently payable pursuant to the terms of
an Assignment of Management Agreement or any other agreement with Lender
executed in connection with the Loan) and then to amounts ("Debt Service
Amounts") payable under this Note, the Security Instrument or any other Loan
Document (except that Borrower will not be personally liable (i) to the extent
that Borrower lacks the legal right to direct the disbursement of such sums
because of a bankruptcy, receivership or similar judicial proceeding, or (ii)
with respect to Rents that are distributed in any calendar year if Borrower has
paid all operating expenses and Debt Service Amounts for that calendar year).
(c) Borrower shall become personally liable to Lender for the repayment
of all of the Indebtedness upon the occurrence of any of the following Events of
Default: (1) Borrower's acquisition of any property or operation of any business
not permitted by Section 33 of the Security Instrument; or (2) a Transfer that
is an Event of Default under Section 21 of the Security Instrument.
(d) To the extent that Borrower has personal liability under this
Paragraph 9, Lender may exercise its rights against Borrower personally without
regard to whether Lender has exercised any rights against the Mortgaged Property
or any other security, or pursued any rights against any guarantor, or pursued
any other rights available to Lender under this Note, the Security Instrument,
any other Loan Document or applicable law. For purposes of this Paragraph 9, the
term "Mortgaged Property" shall not include any funds that (1) have been applied
by Borrower as required or permitted by the Security Instrument prior to the
occurrence of an Event of Default, or (2) Borrower was unable to apply as
required or permitted by the Security Instrument because of a bankruptcy,
receivership, or similar judicial proceeding.
3
<PAGE>
10. Voluntary and Involuntary Prepayments.
(a) A prepayment premium shall be payable in connection with any
prepayment made under this Note as provided below:
(1) Borrower may voluntarily prepay all (but not less than
all) of the unpaid principal balance of this Note on the last Business
Day of a calendar month if Borrower has given Lender at least 30 days
prior notice of its intention to make such prepayment. Such prepayment
shall be made by paying (A) the amount of principal being prepaid, (B)
all accrued interest, (C) all other sums due Lender at the time of such
prepayment, and (D) the prepayment premium calculated pursuant to
Schedule A. For all purposes, including the accrual of interest, any
4
<PAGE>
prepayment received by Lender on any day other than the last calendar
day of the month shall be deemed to have been received on the last
calendar day of such month. For purposes of this Note, a "Business Day"
means any day other than a Saturday, Sunday or any other day on which
Lender is not open for business.
(2) Upon Lender's exercise of any right of acceleration under
this Note, Borrower shall pay to Lender, in addition to the entire
unpaid principal balance of this Note outstanding at the time of the
acceleration, (A) all accrued interest and all other sums due Lender
under this Note and the other Loan Documents, and (B) the prepayment
premium calculated pursuant to Schedule A.
(3) Any application by Lender of any collateral or other
security to the repayment of any portion of the unpaid principal
balance of this Note prior to the Maturity Date and in the absence of
acceleration shall be deemed to be a partial prepayment by Borrower,
requiring the payment to Lender by Borrower of a prepayment premium.
The amount of any such partial prepayment shall be computed so as to
provide to Lender a prepayment premium computed pursuant to Schedule A
without Borrower having to pay out-of-pocket any additional amounts.
(b) Notwithstanding the provisions of Paragraph 10(a), no prepayment
premium shall be payable with respect to (A) any prepayment made no more than 90
days before the Maturity Date, or (B) any prepayment occurring as a result of
the application of any insurance proceeds or condemnation award under the
Security Instrument.
(c) Schedule A is hereby incorporated by reference into this Note.
(d) Any required prepayment of less than the unpaid principal balance
of this Note shall not extend or postpone the due date of any subsequent monthly
installments or change the amount of such installments, unless Lender agrees
otherwise in writing.
(e) Borrower recognizes that any prepayment of the unpaid principal
balance of this Note, whether voluntary or involuntary or resulting from a
default by Borrower, will result in Lender's incurring loss, including
reinvestment loss, additional expense and frustration or impairment of Lender's
ability to meet its commitments to third parties. Borrower agrees to pay to
Lender upon demand damages for the detriment caused by any prepayment, and
agrees that it is extremely difficult and impractical to ascertain the extent of
such damages. Borrower therefore acknowledges and agrees that the formula for
calculating prepayment premiums set forth on Schedule A represents a reasonable
estimate of the damages Lender will incur because of a prepayment.
5
<PAGE>
(f) Borrower further acknowledges that the prepayment premium
provisions of this Note are a material part of the consideration for the loan
evidenced by this Note, and acknowledges that the terms of this Note are in
other respects more favorable to Borrower as a result of the Borrower's
voluntary agreement to the prepayment premium provisions.
11. Costs and Expenses. Borrower shall pay on demand all expenses and
costs, including fees and out-of-pocket expenses of attorneys and expert
witnesses and costs of investigation, incurred by Lender as a result of any
default under this Note or in connection with efforts to collect any amount due
under this Note, or to enforce the provisions of any of the other Loan
Documents, including those incurred in post-judgment collection efforts and in
any bankruptcy proceeding (including any action for relief from the automatic
stay of any bankruptcy proceeding) or judicial or non-judicial foreclosure
proceeding.
12. Forbearance. Any forbearance by Lender in exercising any right or
remedy under this Note, the Security Instrument, or any other Loan Document or
otherwise afforded by applicable law, shall not be a waiver of or preclude the
exercise of that or any other right or remedy. The acceptance by Lender of any
payment after the due date of such payment, or in an amount which is less than
the required payment, shall not be a waiver of Lender's right to require prompt
payment when due of all other payments or to exercise any right or remedy with
respect to any failure to make prompt payment. Enforcement by Lender of any
security for Borrower's obligations under this Note shall not constitute an
election by Lender of remedies so as to preclude the exercise of any other right
or remedy available to Lender.
13. Waivers. Presentment, demand, notice of dishonor, protest, notice
of acceleration, notice of intent to demand or accelerate payment or maturity,
presentment for payment, notice of nonpayment, grace, and diligence in
collecting the Indebtedness are waived by Borrower, Key Principal, and all
endorsers and guarantors of this Note and all other third party obligors.
14. Loan Charges. Borrower agrees to pay an effective rate of interest
equal to the sum of the interest rate provided for in this Note and any
additional rate of interest resulting from any other charges of interest or in
the nature of interest paid or to be paid in connection with the loan evidenced
by this Note and any other fees or amounts to be paid by Borrower pursuant to
any of the other Loan Documents. Neither this Note nor any of the other Loan
Documents shall be construed to create a contract for the use, forbearance or
detention of money requiring payment of interest at a rate greater than the
maximum interest rate permitted to be charged under applicable law. If any
applicable law limiting the amount of interest or other charges permitted to be
collected from Borrower in connection with the Loan is interpreted so that any
interest or other charge provided for in any Loan Document, whether considered
separately or together with other charges provided for in any other Loan
Document, violates that law, and Borrower is entitled to the benefit of that
law, that interest or charge is hereby reduced to the extent necessary to
eliminate that violation. The amounts, if any, previously paid to Lender in
excess of the permitted amounts shall be applied by Lender to reduce the unpaid
principal balance of this Note. For the purpose of determining whether any
applicable law limiting the amount of interest or other charges permitted to be
collected from Borrower has been violated, all Indebtedness that constitutes
interest, as well as all other charges made in connection with the Indebtedness
that constitute interest, shall be deemed to be allocated and spread ratably
over the stated term of the Note. Unless otherwise required by applicable law,
such allocation and spreading shall be effected in such a manner that the rate
of interest so computed is uniform throughout the stated term of the Note.
15. Commercial Purpose. Borrower represents that the Indebtedness is
being incurred by Borrower solely for the purpose of carrying on a business or
commercial enterprise, and not for personal, family or household purposes.
16. Counting of Days. Except where otherwise specifically provided, any
reference in this Note to a period of "days" means calendar days, not Business
Days.
6
<PAGE>
17. Governing Law. This Note shall be governed by the law of the
jurisdiction in which the Land is located.
18. Captions. The captions of the paragraphs of this Note are for
convenience only and shall be disregarded in construing this Note.
19. Notices. All notices, demands and other communications required or
permitted to be given by Lender to Borrower pursuant to this Note shall be given
in accordance with Section 31 of the Security Instrument.
20. Consent to Jurisdiction and Venue. Borrower and Key Principal each
agrees that any controversy arising under or in relation to this Note shall be
litigated exclusively in the jurisdiction in which the Land is located (the
"Property Jurisdiction"). The state and federal courts and authorities with
jurisdiction in the Property Jurisdiction shall have exclusive jurisdiction over
all controversies which shall arise under or in relation to this Note. Borrower
and Key Principal each irrevocably consents to service, jurisdiction, and venue
of such courts for any such litigation and waives any other venue to which it
might be entitled by virtue of domicile, habitual residence or otherwise.
21. WAIVER OF TRIAL BY JURY. BORROWER, KEY PRINCIPAL AND LENDER EACH
(A) AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF
THIS NOTE OR THE RELATIONSHIP BETWEEN THE PARTIES AS LENDER, KEY PRINCIPAL AND
BORROWER THAT IS TRIABLE OF RIGHT BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY
JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR
IN THE FUTURE. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH
PARTY, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.
ATTACHED SCHEDULES. The following Schedules are attached to this Note:
X Schedule A Prepayment Premium (required)
- -----
X Schedule B Modifications to Multifamily Note
- -----
7
<PAGE>
IN WITNESS WHEREOF, Borrower has signed and delivered this Note or has
caused this Note to be signed and delivered by its duly authorized
representative.
BORROWER:
CAPITAL SENIOR LIVING PROPERTIES 2-
GRAMERCY, INC., a Delaware corporation
By: /s/ Lawrence A. Cohen
--------------------------------------
Lawrence A. Cohen
Chief Financial Officer
75-2782556
---------------------------------------------
Borrower's Social Security/Employer ID Number
8
<PAGE>
PAY TO THE ORDER OF ___________________
_________________, WITHOUT RECOURSE.
WMF WASHINGTON MORTGAGE CORP., a
Delaware corporation, formerly known as
Washington Mortgage Financial Group,
Ltd.
By: /s/ Sharon D. Singleton
----------------------------------
Sharon D. Singleton
Assistant Vice President
Fannie Mae Loan Number: _________________
9
<PAGE>
ACKNOWLEDGMENT AND AGREEMENT OF KEY PRINCIPAL TO
PERSONAL LIABILITY FOR EXCEPTIONS TO NON-RECOURSE LIABILITY
Key Principal, who has an economic interest in Borrower or who will
otherwise obtain a material financial benefit from the Loan, hereby absolutely,
unconditionally and irrevocably agrees to pay to Lender, or its assigns, on
demand, all amounts for which Borrower is personally liable under Paragraph 9 of
the Multifamily Note to which this Acknowledgment is attached (the "Note"). The
obligations of Key Principal shall survive any foreclosure proceeding, any
foreclosure sale, any delivery of any deed in lieu of foreclosure, and any
release of record of the Security Instrument. Lender may pursue its remedies
against Key Principal without first exhausting its remedies against the Borrower
or the Mortgaged Property. All capitalized terms used but not defined in this
Acknowledgment shall have the meanings given to such terms in the Security
Instrument. As used in this Acknowledgment, the term "Key Principal" (each if
more than one) shall mean only those individuals or entities that execute this
Acknowledgment.
The obligations of Key Principal shall be performed without demand by
Lender and shall be unconditional irrespective of the genuineness, validity, or
enforceability of the Note, or any other Loan Document, and without regard to
any other circumstance which might otherwise constitute a legal or equitable
discharge of a surety or a guarantor. Key Principal hereby waives the benefit of
all principles or provisions of law, which are or might be in conflict with the
terms of this Acknowledgment, and agrees that Key Principal's obligations shall
not be affected by any circumstances which might otherwise constitute a legal or
equitable discharge of a surety or a guarantor. Key Principal hereby waives the
benefits of any right of discharge and all other rights under any and all
statutes or other laws relating to guarantors or sureties, to the fullest extent
permitted by law, diligence in collecting the Indebtedness, presentment, demand
for payment, protest, all notices with respect to the Note including this
Acknowledgment, which may be required by statute, rule of law or otherwise to
preserve Lender's rights against Key Principal under this Acknowledgment,
including notice of acceptance, notice of any amendment of the Loan Documents,
notice of the occurrence of any default or Event of Default, notice of intent to
accelerate, notice of acceleration, notice of dishonor, notice of foreclosure,
notice of protest, notice of the incurring by Borrower of any obligation or
indebtedness and all rights to require Lender to (a) proceed against Borrower,
(b) proceed against any general partner of Borrower, (c) proceed against or
exhaust any collateral held by Lender to secure the repayment of the
Indebtedness, or (d) if Borrower is a partnership, pursue any other remedy it
may have against Borrower, or any general partner of Borrower.
At any time without notice to Key Principal, and without affecting the
liability of Key Principal hereunder, (a) the time for payment of the principal
of or interest on the Indebtedness may be extended or the Indebtedness may be
renewed in whole or in part; (b) the time for Borrower's performance of or
compliance with any covenant or agreement contained in the Note, or any other
Loan Document, whether presently existing or hereinafter entered into, may be
extended or such performance or compliance may be waived; (c) the maturity of
the Indebtedness may be accelerated as provided in the Note or any other Loan
Document; (d) the Note or any other Loan Document may be modified or amended by
Lender and Borrower in any respect, including an increase in the principal
amount; and (e) any security for the Indebtedness may be modified, exchanged,
surrendered or otherwise dealt with or additional security may be pledged or
mortgaged for the Indebtedness.
Key Principal acknowledges that Key Principal has received a copy of
the Note and all other Loan Documents. Neither this Acknowledgment nor any of
its provisions may be waived, modified, amended, discharged, or terminated
except by an agreement in writing signed by the party against which the
enforcement of the waiver, modification, amendment, discharge, or termination is
sought, and then only to the extent set forth in that agreement. Key Principal
agrees to notify Lender (in the manner for giving notices provided in Section 31
of the Security Instrument) of any change of Key Principal's address within 10
Business Days after such change of address occurs. Any notices to Key Principal
shall be given in the manner provided in Section 31 of the Security Instrument.
Key Principal agrees to be bound by Paragraphs 20 and 21 of the Note.
10
<PAGE>
THIS ACKNOWLEDGMENT IS AN INSTRUMENT SEPARATE FROM, AND NOT A PART OF, THE
NOTE. BY SIGNING THIS ACKNOWLEDGMENT, KEY PRINCIPAL DOES NOT INTEND TO BECOME AN
ACCOMMODATION PARTY TO, OR AN ENDORSER OF, THE NOTE.
IN WITNESS WHEREOF, Key Principal has signed and delivered this
Acknowledgment or has caused this Acknowledgment to be signed and delivered by
its duly authorized representative.
KEY PRINCIPAL:
Capital Senior Living Corporation, a
Delaware corporation
By: /s/ Lawrence A. Cohen
-----------------------------------------
Lawrence A. Cohen
Chief Financial Officer
Address: 14160 Dallas Parkway, Suite 300
Dallas, Texas 75240
Social Security/Employer ID No.: 75-2678809
11
<PAGE>
SCHEDULE A
PREPAYMENT PREMIUM
Any prepayment premium payable under Paragraph 10 of this Note shall be
computed as follows:
(a) If the prepayment is made during the first 10.58 years beginning
on the date of the Note (the "Yield Maintenance Period"), the
prepayment premium shall be the greater of:
(i) 1% of the unpaid principal balance of this Note; or
(ii) The product obtained by multiplying:
(A) the amount of principal being prepaid,
by
(B) the difference obtained by subtracting from the
interest rate on this Note the yield rate (the "Yield
Rate") on the 12.5% U.S. Treasury Security due August,
2014 (the "Specified U.S. Treasury Security"), as the
Yield Rate is reported in The Wall Street Journal on
the fifth Business Day preceding (x) the date notice of
prepayment is given to Lender where prepayment is
voluntary, or (y) the date Lender accelerates the Loan,
by
(C) the present value factor calculated using the following
formula:
1 - (1 + r)-n
-------------
r
[r = Yield Rate
n = the number of 365-day
years (or 366-day
years, if applicable),
and any fraction
thereof, remaining
between the Prepayment
Date and the
expiration of the
Yield Maintenance
Period]
A-1
<PAGE>
In the event that no Yield Rate is
published for the Specified U.S.
Treasury Security, then the nearest
equivalent U.S. Treasury Security
shall be selected at Lender's
discretion. If the publication of
such Yield Rates in The Wall Street
Journal is discontinued, Lender
shall determine such Yield Rates
from another source selected by
Lender.
For purposes of subparagraph
(ii)(C), the "Prepayment Date" shall
be (x) in the case of a voluntary
prepayment, the date on which the
prepayment is made, and (y) in any
other case, the date on which Lender
accelerates the unpaid principal
balance of this Note.
(b) If the prepayment is made after the expiration of the
Yield Maintenance Period but more than 90 days before
the Maturity Date, the prepayment premium shall be 1%
of the unpaid principal balance of this Note.
/s/ LAC
-----------------------------------
INITIAL(S)
A-2
<PAGE>
SCHEDULE B
MODIFICATIONS TO MULTIFAMILY NOTE
The following modifications are made to the text of the Note that
precedes this Exhibit:
1. Section 9(b) of the Instrument is hereby amended to add the following
sub-paragraph (6) at the end thereof:
"(6) failure of Borrower to pay to Lender, upon demand after
an Event of Default, all income or payments due for services
provided to tenants, and all payments on account of rents or
services from Medicare, Medicaid, or any other third party
provider;"
2. Section 9(b)(3) of the Instrument is hereby amended to read as follows:
"Failure of Borrower to comply with Sections 14(d), 14 (e), or
(f) of the Security Instrument relating to the delivery of
books and records, statements schedules and reports."
3. Section 9(c) of the Instrument is hereby amended to add the following
paragraphs (3) at the end thereof:
"Borrower's failure to renew, continue, extend, or maintain
all permits, licenses or other certificates required to
legally operate the Mortgaged Property as a seniors housing
congregate living facility, as defined in the Security
Instrument;"
4. All capitalized terms used in this Exhibit not specifically defined herein
shall have the meanings set forth in the text of the Instrument that precedes
this Exhibit.
BORROWER'S INITIALS: /s/ LAC
-------------------------
B-1
Prepared by, and after recording return to:
Bernice H. Cilley
Mays & Valentine, L.L.P.
P.O. Box 1122
Richmond, Virginia 23218-1122
MULTIFAMILY DEED OF TRUST,
ASSIGNMENT OF RENTS
AND SECURITY AGREEMENT
(NEBRASKA)
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT Form 4028
(NEBRASKA) 4/98
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
TABLE OF CONTENTS
-----------------
PAGE
1. DEFINITIONS..............................................................................................1
2. UNIFORM COMMERCIAL CODE SECURITY AGREEMENT...............................................................7
3. ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER;
LENDER IN POSSESSION.....................................................................................7
4. ASSIGNMENT OF LEASES; LEASES AFFECTING THE
MORTGAGED PROPERTY......................................................................................10
5. PAYMENT OF INDEBTEDNESS; PERFORMANCE UNDER
LOAN DOCUMENTS; PREPAYMENT PREMIUM......................................................................12
6. EXCULPATION.............................................................................................12
7. DEPOSITS FOR TAXES, INSURANCE AND OTHER CHARGES.........................................................12
8. COLLATERAL AGREEMENTS...................................................................................13
9. APPLICATION OF PAYMENTS.................................................................................13
10. COMPLIANCE WITH LAWS....................................................................................14
11. USE OF PROPERTY.........................................................................................14
12. PROTECTION OF LENDER'S SECURITY.........................................................................14
13. INSPECTION..............................................................................................15
14. BOOKS AND RECORDS; FINANCIAL REPORTING..................................................................15
15. TAXES; OPERATING EXPENSES...............................................................................17
16. LIENS; ENCUMBRANCES.....................................................................................18
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT Form 4028
(NEBRASKA) 4/98
(i)
<PAGE>
17. PRESERVATION, MANAGEMENT AND MAINTENANCE
OF MORTGAGED PROPERTY...................................................................................18
18. ENVIRONMENTAL HAZARDS...................................................................................19
19. PROPERTY AND LIABILITY INSURANCE........................................................................24
20. CONDEMNATION............................................................................................26
21. TRANSFERS OF THE MORTGAGED PROPERTY OR INTERESTS
IN BORROWER.............................................................................................27
22. EVENTS OF DEFAULT.......................................................................................30
23. REMEDIES CUMULATIVE.....................................................................................31
24. FORBEARANCE.............................................................................................32
25. LOAN CHARGES............................................................................................32
26. WAIVER OF STATUTE OF LIMITATIONS........................................................................33
27. WAIVER OF MARSHALLING...................................................................................33
28. FURTHER ASSURANCES......................................................................................33
29. ESTOPPEL CERTIFICATE....................................................................................33
30. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE........................................................33
31. NOTICE..................................................................................................34
32. SALE OF NOTE; CHANGE IN SERVICER........................................................................34
33. SINGLE ASSET BORROWER...................................................................................35
34. SUCCESSORS AND ASSIGNS BOUND............................................................................35
35. JOINT AND SEVERAL LIABILITY.............................................................................35
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT Form 4028
(NEBRASKA) 4/98
(ii)
<PAGE>
36. RELATIONSHIP OF PARTIES; NO THIRD PARTY BENEFICIARY.....................................................35
37. SEVERABILITY; AMENDMENTS................................................................................35
38. CONSTRUCTION............................................................................................35
39. LOAN SERVICING..........................................................................................36
40. DISCLOSURE OF INFORMATION...............................................................................36
41. NO CHANGE IN FACTS OR CIRCUMSTANCES.....................................................................36
42. SUBROGATION.............................................................................................36
43. ACCELERATION; REMEDIES..................................................................................36
44. RECONVEYANCE............................................................................................37
45. SUBSTITUTE TRUSTEE......................................................................................37
46. REQUEST FOR NOTICES.....................................................................................37
47. WAIVER OF TRIAL BY JURY.................................................................................37
</TABLE>
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT Form 4028
(NEBRASKA) 4/98
(iii)
<PAGE>
MULTIFAMILY DEED OF TRUST,
ASSIGNMENT OF RENTS AND
SECURITY AGREEMENT
THIS MULTIFAMILY DEED OF TRUST, ASSIGNMENT OF RENTS AND SECURITY
AGREEMENT (the "Instrument") is dated as of the 28th day of October, 1998, among
CAPITAL SENIOR LIVING PROPERTIES 2-GRAMERCY, INC., a corporation organized and
existing under the laws of Delaware, whose address is c/o Capital Senior Living
Corporation, 14160 Dallas Parkway, Suite 300, Dallas, Texas 75240, as grantor
("Borrower"), to CHICAGO TITLE INSURANCE COMPANY, c/o Nebraska Title Company,
100 Court House Plaza, 9th Street, Lincoln, Nebraska 68508, as trustee
("Trustee"), for the benefit of WMF WASHINGTON MORTGAGE CORP., formerly known as
Washington Mortgage Financial Group, Ltd., a corporation organized and existing
under the laws of Delaware, whose address is 1593 Spring Hill Road, Suite 400,
Vienna, Virginia 22182, as beneficiary ("Lender").
Borrower, in consideration of the Indebtedness and the trust created by
this Instrument, irrevocably grants, conveys and assigns to Trustee, in trust,
with power of sale, the Mortgaged Property, including the Land located in the
County of Lancaster, State of Nebraska and described in Exhibit A attached to
this Instrument.
TO SECURE TO LENDER the repayment of the Indebtedness evidenced by
Borrower's Multifamily Note payable to Lender dated as of the date of this
Instrument, and maturing on January 1, 2010, in the principal amount of
$1,980,000.00, and all renewals, extensions and modifications of the
Indebtedness, and the performance of the covenants and agreements of Borrower
contained in the Loan Documents.
Borrower represents and warrants that Borrower is lawfully seized of
the Mortgaged Property and has the right, power and authority to mortgage,
grant, convey and assign the Mortgaged Property, and that the Mortgaged Property
is unencumbered. Borrower covenants that Borrower will warrant and defend
generally the title to the Mortgaged Property against all claims and demands,
subject to any easements and restrictions listed in a schedule of exceptions to
coverage in any title insurance policy issued to Lender contemporaneously with
the execution and recordation of this Instrument and insuring Lender's interest
in the Mortgaged Property.
COVENANTS. Borrower and Lender covenant and agree as follows:
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT Form 4028
(NEBRASKA) 4/98
1
<PAGE>
1. DEFINITIONS. The following terms, when used in this Instrument
(including when used in the above recitals), shall have the following meanings:
(a) "Borrower" means all persons or entities identified as
"Borrower" in the first paragraph of this Instrument, together with
their successors and assigns.
(b) "Collateral Agreement" means any separate agreement
between Borrower and Lender for the purpose of establishing replacement
reserves for the Mortgaged Property, establishing a fund to assure
completion of repairs or improvements specified in that agreement, or
assuring reduction of the outstanding principal balance of the
Indebtedness if the occupancy of or income from the Mortgaged Property
does not increase to a level specified in that agreement, or any other
agreement or agreements between Borrower and Lender which provide for
the establishment of any other fund, reserve or account.
(c) "Environmental Permit" means any permit, license, or other
authorization issued under any Hazardous Materials Law with respect to
any activities or businesses conducted on or in relation to the
Mortgaged Property.
(d) "Event of Default" means the occurrence of any event
listed in Section 22.
(e) "Fixtures" means all property which is so attached to the
Land or the Improvements as to constitute a fixture under applicable
law, including: machinery, equipment, engines, boilers, incinerators,
installed building materials; systems and equipment for the purpose of
supplying or distributing heating, cooling, electricity, gas, water,
air, or light; antennas, cable, wiring and conduits used in connection
with radio, television, security, fire prevention, or fire detection or
otherwise used to carry electronic signals; telephone systems and
equipment; elevators and related machinery and equipment; fire
detection, prevention and extinguishing systems and apparatus; security
and access control systems and apparatus; plumbing systems; water
heaters, ranges, stoves, microwave ovens, refrigerators, dishwashers,
garbage disposers, washers, dryers and other appliances; light
fixtures, awnings, storm windows and storm doors; pictures, screens,
blinds, shades, curtains and curtain rods; mirrors; cabinets, paneling,
rugs and floor and wall coverings; fences, trees and plants; swimming
pools; and exercise equipment.
(f) "Governmental Authority" means any board, commission,
department or body of any municipal, county, state or federal
governmental unit, or any subdivision of any of them, that has or
acquires jurisdiction over the Mortgaged Property or the use, operation
or improvement of the Mortgaged Property.
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT Form 4028
(NEBRASKA) 4/98
2
<PAGE>
(g) "Hazardous Materials" means petroleum and petroleum
products and compounds containing them, including gasoline, diesel fuel
and oil; explosives; flammable materials; radioactive materials;
polychlorinated biphenyls ("PCBs") and compounds containing them; lead
and lead-based paint; asbestos or asbestos-containing materials in any
form that is or could become friable; underground or above-ground
storage tanks, whether empty or containing any substance; any substance
the presence of which on the Mortgaged Property is prohibited by any
federal, state or local authority; any substance that requires special
handling; and any other material or substance now or in the future
defined as a "hazardous substance," "hazardous material," "hazardous
waste," "toxic substance," "toxic pollutant," "contaminant," or
"pollutant" within the meaning of any Hazardous Materials Law.
(h) "Hazardous Materials Laws" means all federal, state, and
local laws, ordinances and regulations and standards, rules, policies
and other governmental requirements, administrative rulings and court
judgments and decrees in effect now or in the future and including all
amendments, that relate to Hazardous Materials and apply to Borrower or
to the Mortgaged Property. Hazardous Materials Laws include, but are
not limited to, the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. Section 9601, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., the
Toxic Substance Control Act, 15 U.S.C. Section 2601, et seq., the Clean
Water Act, 33 U.S.C. Section 1251, et seq., and the Hazardous Materials
Transportation Act, 49 U.S.C. Section 5101, et seq., and their state
analogs.
(i) "Impositions" and "Imposition Deposits" are defined in
Section 7(a).
(j) "Improvements" means the buildings, structures,
improvements, and alterations now constructed or at any time in the
future constructed or placed upon the Land, including any future
replacements and additions.
(k) "Indebtedness" means the principal of, interest on, and
all other amounts due at any time under, the Note, this Instrument or
any other Loan Document, including prepayment premiums, late charges,
default interest, and advances as provided in Section 12 to protect the
security of this Instrument.
(l) [Intentionally omitted]
(m) "Key Principal" means the natural person(s) or entity
identified as such at the foot of this Instrument, and any person or
entity who becomes a Key Principal after the date of this Instrument
and is identified as such in an amendment or supplement to this
Instrument.
FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT Form 4028
(NEBRASKA) 4/98
3
<PAGE>
(n) "Land" means the land described in Exhibit A.
(o) "Leases" means all present and future leases, subleases,
licenses, concessions or grants or other possessory interests now or
hereafter in force, whether oral or written, covering or affecting the
Mortgaged Property, or any portion of the Mortgaged Property (including
proprietary leases or occupancy agreements if Borrower is a cooperative
housing corporation), and all modifications, extensions or renewals.
(p) "Lender" means the entity identified as "Lender" in the
first paragraph of this Instrument and its successors and assigns, or
any subsequent holder of the Note.
(q) "Loan Documents" means the Note, this Instrument, all
guaranties, all indemnity agreements, all Collateral Agreements, O&M
Programs, and any other documents now or in the future executed by
Borrower, Key Principal, any guarantor or any other person in
connection with the loan evidenced by the Note, as such documents may
be amended from time to time.
(r) "Loan Servicer" means the entity that from time to time is
designated by Lender to collect payments and deposits and receive
notices under the Note, this Instrument and any other Loan Document,
and otherwise to service the loan evidenced by the Note for the benefit
of Lender. Unless Borrower receives notice to the contrary, the Loan
Servicer is the entity identified as "Lender" in the first paragraph of
this Instrument.
(s) "Mortgaged Property" means all of Borrower's present and
future right, title and interest in and to all of the following:
(i) the Land;
(ii) the Improvements;
(iii) the Fixtures;
(iv) the Personalty;
(v) all current and future rights, including air
rights, development rights, zoning rights and other similar
rights or interests, easements, tenements, rights-of-way,
strips and gores of land, streets, alleys, roads, sewer
rights, waters, watercourses, and appurtenances related to or
benefitting the Land or the
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Improvements, or both, and all rights-of-way, streets, alleys
and roads which may have been or may in the future be vacated;
(vi) all proceeds paid or to be paid by any insurer
of the Land, the Improvements, the Fixtures, the Personalty or
any other part of the Mortgaged Property, whether or not
Borrower obtained the insurance pursuant to Lender's
requirement;
(vii) all awards, payments and other compensation
made or to be made by any municipal, state or federal
authority with respect to the Land, the Improvements, the
Fixtures, the Personalty or any other part of the Mortgaged
Property, including any awards or settlements resulting from
condemnation proceedings or the total or partial taking of the
Land, the Improvements, the Fixtures, the Personalty or any
other part of the Mortgaged Property under the power of
eminent domain or otherwise and including any conveyance in
lieu thereof;
(viii) all contracts, options and other agreements
for the sale of the Land, the Improvements, the Fixtures, the
Personalty or any other part of the Mortgaged Property entered
into by Borrower now or in the future, including cash or
securities deposited to secure performance by parties of their
obligations;
(ix) all proceeds from the conversion, voluntary or
involuntary, of any of the above into cash or liquidated
claims, and the right to collect such proceeds;
(x) all Rents and Leases;
(xi) all earnings, royalties, accounts receivable,
issues and profits from the Land, the Improvements or any
other part of the Mortgaged Property, and all undisbursed
proceeds of the loan secured by this Instrument and, if
Borrower is a cooperative housing corporation, maintenance
charges or assessments payable by shareholders or residents;
(xii) all Imposition Deposits;
(xiii) all refunds or rebates of Impositions by any
municipal, state or federal authority or insurance company
(other than refunds applicable to periods before the real
property tax year in which this Instrument is dated);
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(xiv) all tenant security deposits which have not
been forfeited by any tenant under any Lease; and
(xv) all names under or by which any of the above
Mortgaged Property may be operated or known, and all
trademarks, trade names, and goodwill relating to any of the
Mortgaged Property.
(t) "Note" means the Multifamily Note described on page 1 of
this Instrument, including the Acknowledgment and Agreement of Key
Principal to Personal Liability for Exceptions to Non-Recourse
Liability (if any), and all schedules, riders, allonges and addenda, as
such Multifamily Note may be amended from time to time.
(u) "O&M Program" is defined in Section 18(a).
(v) "Personalty" means all furniture, furnishings, equipment,
machinery, building materials, appliances, goods, supplies, tools,
books, records (whether in written or electronic form), computer
equipment (hardware and software) and other tangible personal property
(other than Fixtures) which are used now or in the future in connection
with the ownership, management or operation of the Land or the
Improvements or are located on the Land or in the Improvements, and any
operating agreements relating to the Land or the Improvements, and any
surveys, plans and specifications and contracts for architectural,
engineering and construction services relating to the Land or the
Improvements and all other intangible property and rights relating to
the operation of, or used in connection with, the Land or the
Improvements, including all governmental permits relating to any
activities on the Land.
(w) "Property Jurisdiction" is defined in Section 30(a).
(x) "Rents" means all rents (whether from residential or
non-residential space), revenues and other income of the Land or the
Improvements, including parking fees, laundry and vending machine
income and fees and charges for food, health care and other services
provided at the Mortgaged Property, whether now due, past due, or to
become due, and deposits forfeited by tenants.
(y) "Taxes" means all taxes, assessments, vault rentals and
other charges, if any, general, special or otherwise, including all
assessments for schools, public betterments and general or local
improvements, which are levied, assessed or imposed by any public
authority or quasi-public authority, and which, if not paid, will
become a lien, on the Land or the Improvements.
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(z) "Transfer" means (A) a sale, assignment, transfer or other
disposition (whether voluntary, involuntary or by operation of law);
(B) the granting, creating or attachment of a lien, encumbrance or
security interest (whether voluntary, involuntary or by operation of
law); (C) the issuance or other creation of an ownership interest in a
legal entity, including a partnership interest, interest in a limited
liability company or corporate stock; (D) the withdrawal, retirement,
removal or involuntary resignation of a partner in a partnership or a
member or manager in a limited liability company; or (E) the merger,
dissolution, liquidation, or consolidation of a legal entity.
"Transfer" does not include (i) a conveyance of the Mortgaged Property
at a judicial or non-judicial foreclosure sale under this Instrument or
(ii) the Mortgaged Property becoming part of a bankruptcy estate by
operation of law under the United States Bankruptcy Code. For purposes
of defining the term "Transfer," the term "partnership" shall mean a
general partnership, a limited partnership, a joint venture and a
limited liability partnership, and the term "partner" shall mean a
general partner, a limited partner and a joint venturer.
2. UNIFORM COMMERCIAL CODE SECURITY AGREEMENT. This Instrument
is also a security agreement under the Uniform Commercial Code for any of the
Mortgaged Property which, under applicable law, may be subject to a security
interest under the Uniform Commercial Code, whether acquired now or in the
future, and all products and cash and non-cash proceeds thereof (collectively,
"UCC Collateral"), and Borrower hereby grants to Lender a security interest in
the UCC Collateral. Borrower shall execute and deliver to Lender, upon Lender's
request, financing statements, continuation statements and amendments, in such
form as Lender may require to perfect or continue the perfection of this
security interest. Borrower shall pay all filing costs and all costs and
expenses of any record searches for financing statements that Lender may
require. Without the prior written consent of Lender, Borrower shall not create
or permit to exist any other lien or security interest in any of the UCC
Collateral. If an Event of Default has occurred and is continuing, Lender shall
have the remedies of a secured party under the Uniform Commercial Code, in
addition to all remedies provided by this Instrument or existing under
applicable law. In exercising any remedies, Lender may exercise its remedies
against the UCC Collateral separately or together, and in any order, without in
any way affecting the availability of Lender's other remedies. This Instrument
constitutes a financing statement with respect to any part of the Mortgaged
Property which is or may become a Fixture.
3. ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN
POSSESSION.
(a) As part of the consideration for the Indebtedness,
Borrower absolutely and unconditionally assigns and transfers to Lender
all Rents. It is the intention of Borrower to establish a present,
absolute and irrevocable transfer and assignment to Lender of all Rents
and to authorize and empower Lender to collect and receive all Rents
without the necessity of further action on the part of Borrower.
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Promptly upon request by lender, Borrower agrees to execute and
request by Lender, Borrower agrees to execute and deliver such further
assignments as Lender may from time to time require. Borrower and
Lender intend this assignment of Rents to be immediately effective and
to constitute an absolute present assignment and not an assignment for
additional security only. For purposes of giving effect to this
absolute assignment of Rents, and for no other purpose, Rents shall
not be deemed to be a part of the "Mortgaged Property," as that term
is defined in Section 1(s). However, if this present, absolute and
unconditional assignment of Rents is not enforceable by its terms
under the laws of the Property Jurisdiction, then the Rents shall be
included as a part of the Mortgaged Property and it is the intention
of the Borrower that in this circumstance this Instrument create and
perfect a lien on Rents in favor of Lender, which lien shall be
effective as of the date of this Instrument.
(b) After the occurrence of an Event of Default, Borrower
authorizes Lender to collect, sue for and compromise Rents and directs
each tenant of the Mortgaged Property to pay all Rents to, or as
directed by, Lender. However, until the occurrence of an Event of
Default, Lender hereby grants to Borrower a revocable license to
collect and receive all Rents, to hold all Rents in trust for the
benefit of Lender and to apply all Rents to pay the installments of
interest and principal then due and payable under the Note and the
other amounts then due and payable under the other Loan Documents,
including Imposition Deposits, and to pay the current costs and
expenses of managing, operating and maintaining the Mortgaged Property,
including utilities, Taxes and insurance premiums (to the extent not
included in Imposition Deposits), tenant improvements and other capital
expenditures. So long as no Event of Default has occurred and is
continuing, the Rents remaining after application pursuant to the
preceding sentence may be retained by Borrower free and clear of, and
released from, Lender's rights with respect to Rents under this
Instrument. From and after the occurrence of an Event of Default, and
without the necessity of Lender entering upon and taking and
maintaining control of the Mortgaged Property directly, or by a
receiver, Borrower's license to collect Rents shall automatically
terminate and Lender shall without notice be entitled to all Rents as
they become due and payable, including Rents then due and unpaid.
Borrower shall pay to Lender upon demand all Rents to which Lender is
entitled. At any time on or after the date of Lender's demand for
Rents, Lender may give, and Borrower hereby irrevocably authorizes
Lender to give, notice to all tenants of the Mortgaged Property
instructing them to pay all Rents to Lender, no tenant shall be
obligated to inquire further as to the occurrence or continuance of an
Event of Default, and no tenant shall be obligated to pay to Borrower
any amounts which are actually paid to Lender in response to such a
notice. Any such notice by Lender shall be delivered to each tenant
personally, by mail or by delivering such demand to each rental unit.
Borrower shall not interfere with and shall cooperate with Lender's
collection of such Rents.
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(c) Borrower represents and warrants to Lender that Borrower
has not executed any prior assignment of Rents (other than an
assignment of Rents securing indebtedness that will be paid off and
discharged with the proceeds of the loan evidenced by the Note), that
Borrower has not performed, and Borrower covenants and agrees that it
will not perform, any acts and has not executed, and shall not execute,
any instrument which would prevent Lender from exercising its rights
under this Section 3, and that at the time of execution of this
Instrument there has been no anticipation or prepayment of any Rents
for more than two months prior to the due dates of such Rents. Borrower
shall not collect or accept payment of any Rents more than two months
prior to the due dates of such Rents.
(d) If an Event of Default has occurred and is continuing,
Lender may, regardless of the adequacy of Lender's security or the
solvency of Borrower and even in the absence of waste, enter upon and
take and maintain full control of the Mortgaged Property in order to
perform all acts that Lender in its discretion determines to be
necessary or desirable for the operation and maintenance of the
Mortgaged Property, including the execution, cancellation or
modification of Leases, the collection of all Rents, the making of
repairs to the Mortgaged Property and the execution or termination of
contracts providing for the management, operation or maintenance of the
Mortgaged Property, for the purposes of enforcing the assignment of
Rents pursuant to Section 3(a), protecting the Mortgaged Property or
the security of this Instrument, or for such other purposes as Lender
in its discretion may deem necessary or desirable. Alternatively, if an
Event of Default has occurred and is continuing, regardless of the
adequacy of Lender's security, without regard to Borrower's solvency
and without the necessity of giving prior notice (oral or written) to
Borrower, Lender may apply to any court having jurisdiction for the
appointment of a receiver for the Mortgaged Property to take any or all
of the actions set forth in the preceding sentence. If Lender elects to
seek the appointment of a receiver for the Mortgaged Property at any
time after an Event of Default has occurred and is continuing,
Borrower, by its execution of this Instrument, expressly consents to
the appointment of such receiver, including the appointment of a
receiver ex parte if permitted by applicable law. Lender or the
receiver, as the case may be, shall be entitled to receive a reasonable
fee for managing the Mortgaged Property. Immediately upon appointment
of a receiver or immediately upon the Lender's entering upon and taking
possession and control of the Mortgaged Property, Borrower shall
surrender possession of the Mortgaged Property to Lender or the
receiver, as the case may be, and shall deliver to Lender or the
receiver, as the case may be, all documents, records (including records
on electronic or magnetic media), accounts, surveys, plans, and
specifications relating to the Mortgaged Property and all security
deposits and prepaid Rents. In the event Lender takes possession and
control of the Mortgaged Property, Lender may exclude Borrower and its
representatives from the Mortgaged Property. Borrower acknowledges and
agrees that the exercise by Lender of any of the rights conferred under
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this Section 3 shall not be construed to make Lender a
mortgagee-in-possession of the Mortgaged Property so long as Lender
has not itself entered into actual possession of the Land and
Improvements.
(e) If Lender enters the Mortgaged Property, Lender shall be
liable to account only to Borrower and only for those Rents actually
received. Lender shall not be liable to Borrower, anyone claiming under
or through Borrower or anyone having an interest in the Mortgaged
Property, by reason of any act or omission of Lender under this Section
3, and Borrower hereby releases and discharges Lender from any such
liability to the fullest extent permitted by law.
(f) If the Rents are not sufficient to meet the costs of
taking control of and managing the Mortgaged Property and collecting
the Rents, any funds expended by Lender for such purposes shall become
an additional part of the Indebtedness as provided in Section 12.
(g) Any entering upon and taking of control of the Mortgaged
Property by Lender or the receiver, as the case may be, and any
application of Rents as provided in this Instrument shall not cure or
waive any Event of Default or invalidate any other right or remedy of
Lender under applicable law or provided for in this Instrument.
4. ASSIGNMENT OF LEASES; LEASES AFFECTING THE MORTGAGED PROPERTY.
(a) As part of the consideration for the Indebtedness,
Borrower absolutely and unconditionally assigns and transfers to Lender
all of Borrower's right, title and interest in, to and under the
Leases, including Borrower's right, power and authority to modify the
terms of any such Lease, or extend or terminate any such Lease. It is
the intention of Borrower to establish a present, absolute and
irrevocable transfer and assignment to Lender of all of Borrower's
right, title and interest in, to and under the Leases. Borrower and
Lender intend this assignment of the Leases to be immediately effective
and to constitute an absolute present assignment and not an assignment
for additional security only. For purposes of giving effect to this
absolute assignment of the Leases, and for no other purpose, the Leases
shall not be deemed to be a part of the "Mortgaged Property," as that
term is defined in Section 1(s). However, if this present, absolute and
unconditional assignment of the Leases is not enforceable by its terms
under the laws of the Property Jurisdiction, then the Leases shall be
included as a part of the Mortgaged Property and it is the intention of
the Borrower that in this circumstance this Instrument create and
perfect a lien on the Leases in favor of Lender, which lien shall be
effective as of the date of this Instrument.
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(b) Until Lender gives notice to Borrower of Lender's exercise
of its rights under this Section 4, Borrower shall have all rights,
power and authority granted to Borrower under any Lease (except as
otherwise limited by this Section or any other provision of this
Instrument), including the right, power and authority to modify the
terms of any Lease or extend or terminate any Lease. Upon the
occurrence of an Event of Default, the permission given to Borrower
pursuant to the preceding sentence to exercise all rights, power and
authority under Leases shall automatically terminate. Borrower shall
comply with and observe Borrower's obligations under all Leases,
including Borrower's obligations pertaining to the maintenance and
disposition of tenant security deposits.
(c) Borrower acknowledges and agrees that the exercise by
Lender, either directly or by a receiver, of any of the rights
conferred under this Section 4 shall not be construed to make Lender a
mortgagee-in-possession of the Mortgaged Property so long as Lender has
not itself entered into actual possession of the Land and the
Improvements. The acceptance by Lender of the assignment of the Leases
pursuant to Section 4(a) shall not at any time or in any event obligate
Lender to take any action under this Instrument or to expend any money
or to incur any expenses. Lender shall not be liable in any way for any
injury or damage to person or property sustained by any person or
persons, firm or corporation in or about the Mortgaged Property. Prior
to Lender's actual entry into and taking possession of the Mortgaged
Property, Lender shall not (i) be obligated to perform any of the
terms, covenants and conditions contained in any Lease (or otherwise
have any obligation with respect to any Lease); (ii) be obligated to
appear in or defend any action or proceeding relating to the Lease or
the Mortgaged Property; or (iii) be responsible for the operation,
control, care, management or repair of the Mortgaged Property or any
portion of the Mortgaged Property. The execution of this Instrument by
Borrower shall constitute conclusive evidence that all responsibility
for the operation, control, care, management and repair of the
Mortgaged Property is and shall be that of Borrower, prior to such
actual entry and taking of possession.
(d) Upon delivery of notice by Lender to Borrower of Lender's
exercise of Lender's rights under this Section 4 at any time after the
occurrence of an Event of Default, and without the necessity of Lender
entering upon and taking and maintaining control of the Mortgaged
Property directly, by a receiver, or by any other manner or proceeding
permitted by the laws of the Property Jurisdiction, Lender immediately
shall have all rights, powers and authority granted to Borrower under
any Lease, including the right, power and authority to modify the terms
of any such Lease, or extend or terminate any such Lease.
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(e) Borrower shall, promptly upon Lender's request, deliver to
Lender an executed copy of each residential Lease then in effect. All
Leases for residential dwelling units shall be on forms approved by
Lender, shall be for initial terms of at least six months and not more
than two years, and shall not include options to purchase. If customary
in the applicable market, residential Leases with terms of less than
six months may be permitted with Lender's prior written consent.
(f) Borrower shall not lease any portion of the Mortgaged
Property for non-residential use except with the prior written consent
of Lender and Lender's prior written approval of the Lease agreement.
Borrower shall not modify the terms of, or extend or terminate, any
Lease for non-residential use (including any Lease in existence on the
date of this Instrument) without the prior written consent of Lender.
Borrower shall, without request by Lender, deliver an executed copy of
each non-residential Lease to Lender promptly after such Lease is
signed. All non-residential Leases, including renewals or extensions of
existing Leases, shall specifically provide that (1) such Leases are
subordinate to the lien of this Instrument (unless waived in writing by
Lender); (2) the tenant shall attorn to Lender and any purchaser at a
foreclosure sale, such attornment to be self-executing and effective
upon acquisition of title to the Mortgaged Property by any purchaser at
a foreclosure sale or by Lender in any manner; (3) the tenant agrees to
execute such further evidences of attornment as Lender or any purchaser
at a foreclosure sale may from time to time request; (4) the Lease
shall not be terminated by foreclosure or any other transfer of the
Mortgaged Property; (5) after a foreclosure sale of the Mortgaged
Property, Lender or any other purchaser at such foreclosure sale may,
at Lender's or such purchaser's option, accept or terminate such Lease;
and (6) the tenant shall, upon receipt after the occurrence of an Event
of Default of a written request from Lender, pay all Rents payable
under the Lease to Lender.
(g) Borrower shall not receive or accept Rent under any Lease
(whether residential or non-residential) for more than two months in
advance.
5. PAYMENT OF INDEBTEDNESS; PERFORMANCE UNDER LOAN DOCUMENTS;
PREPAYMENT PREMIUM. Borrower shall pay the Indebtedness when due in accordance
with the terms of the Note and the other Loan Documents and shall perform,
observe and comply with all other provisions of the Note and the other Loan
Documents. Borrower shall pay a prepayment premium in connection with certain
prepayments of the Indebtedness, including a payment made after Lender's
exercise of any right of acceleration of the Indebtedness, as provided in the
Note.
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6. EXCULPATION. Borrower's personal liability for payment of
the Indebtedness and for performance of the other obligations to be
performed by it under this Instrument is limited in the manner, and to
the extent, provided in the Note.
7. DEPOSITS FOR TAXES, INSURANCE AND OTHER CHARGES.
(a) Borrower shall deposit with Lender on the day monthly
installments of principal or interest, or both, are due under the Note
(or on another day designated in writing by Lender), until the
Indebtedness is paid in full, an additional amount sufficient to
accumulate with Lender the entire sum required to pay, when due (1) any
water and sewer charges which, if not paid, may result in a lien on all
or any part of the Mortgaged Property, (2) the premiums for fire and
other hazard insurance, rent loss insurance and such other insurance as
Lender may require under Section 19, (3) Taxes, and (4) amounts for
other charges and expenses which Lender at any time reasonably deems
necessary to protect the Mortgaged Property, to prevent the imposition
of liens on the Mortgaged Property, or otherwise to protect Lender's
interests, all as reasonably estimated from time to time by Lender. The
amounts deposited under the preceding sentence are collectively
referred to in this Instrument as the "Imposition Deposits". The
obligations of Borrower for which the Imposition Deposits are required
are collectively referred to in this Instrument as "Impositions". The
amount of the Imposition Deposits shall be sufficient to enable Lender
to pay each Imposition before the last date upon which such payment may
be made without any penalty or interest charge being added. Lender
shall maintain records indicating how much of the monthly Imposition
Deposits and how much of the aggregate Imposition Deposits held by
Lender are held for the purpose of paying Taxes, insurance premiums and
each other obligation of Borrower for which Imposition Deposits are
required. Any waiver by Lender of the requirement that Borrower remit
Imposition Deposits to Lender may be revoked by Lender, in Lender's
discretion, at any time upon notice to Borrower.
(b) Imposition Deposits shall be held in an institution (which
may be Lender, if Lender is such an institution) whose deposits or
accounts are insured or guaranteed by a federal agency. Lender shall
not be obligated to open additional accounts or deposit Imposition
Deposits in additional institutions when the amount of the Imposition
Deposits exceeds the maximum amount of the federal deposit insurance or
guaranty. Lender shall apply the Imposition Deposits to pay Impositions
so long as no Event of Default has occurred and is continuing. Unless
applicable law requires, Lender shall not be required to pay Borrower
any interest, earnings or profits on the Imposition Deposits. Borrower
hereby pledges and grants to Lender a security interest in the
Imposition Deposits as additional security for all of Borrower's
obligations under this Instrument and the other Loan Documents. Any
amounts deposited with Lender under this Section 7 shall not be trust
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funds, nor shall they operate to reduce the Indebtedness, unless
applied by Lender for that purpose under Section 7(e).
(c) If Lender receives a bill or invoice for an Imposition,
Lender shall pay the Imposition from the Imposition Deposits held by
Lender. Lender shall have no obligation to pay any Imposition to the
extent it exceeds Imposition Deposits then held by Lender. Lender may
pay an Imposition according to any bill, statement or estimate from the
appropriate public office or insurance company without inquiring into
the accuracy of the bill, statement or estimate or into the validity of
the Imposition.
(d) If at any time the amount of the Imposition Deposits held
by Lender for payment of a specific Imposition exceeds the amount
reasonably deemed necessary by Lender, the excess shall be credited
against future installments of Imposition Deposits. If at any time the
amount of the Imposition Deposits held by Lender for payment of a
specific Imposition is less than the amount reasonably estimated by
Lender to be necessary, Borrower shall pay to Lender the amount of the
deficiency within 15 days after notice from Lender.
(e) If an Event of Default has occurred and is continuing,
Lender may apply any Imposition Deposits, in any amounts and in any
order as Lender determines, in Lender's discretion, to pay any
Impositions or as a credit against the Indebtedness. Upon payment in
full of the Indebtedness, Lender shall refund to Borrower any
Imposition Deposits held by Lender.
8. COLLATERAL AGREEMENTS. Borrower shall deposit with Lender such
amounts as may be required by any Collateral Agreement and shall perform all
other obligations of Borrower under each Collateral Agreement.
9. APPLICATION OF PAYMENTS. If at any time Lender receives, from
Borrower or otherwise, any amount applicable to the Indebtedness which is less
than all amounts due and payable at such time, then Lender may apply that
payment to amounts then due and payable in any manner and in any order
determined by Lender, in Lender's discretion. Neither Lender's acceptance of an
amount which is less than all amounts then due and payable nor Lender's
application of such payment in the manner authorized shall constitute or be
deemed to constitute either a waiver of the unpaid amounts or an accord and
satisfaction. Notwithstanding the application of any such amount to the
Indebtedness, Borrower's obligations under this Instrument and the Note shall
remain unchanged.
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10. COMPLIANCE WITH LAWS. Borrower shall comply with all laws,
ordinances, regulations and requirements of any Governmental Authority and all
recorded lawful covenants and agreements relating to or affecting the Mortgaged
Property, including all laws, ordinances, regulations, requirements and
covenants pertaining to health and safety, construction of improvements on the
Mortgaged Property, fair housing, zoning and land use, and Leases. Borrower also
shall comply with all applicable laws that pertain to the maintenance and
disposition of tenant security deposits. Borrower shall at all times maintain
records sufficient to demonstrate compliance with the provisions of this Section
10. Borrower shall take appropriate measures to prevent, and shall not engage in
or knowingly permit, any illegal activities at the Mortgaged Property that could
endanger tenants or visitors, result in damage to the Mortgaged Property, result
in forfeiture of the Mortgaged Property, or otherwise materially impair the lien
created by this Instrument or Lender's interest in the Mortgaged Property.
Borrower represents and warrants to Lender that no portion of the Mortgaged
Property has been or will be purchased with the proceeds of any illegal
activity.
11. USE OF PROPERTY. Unless required by applicable law, Borrower shall
not (a) except for any change in use approved by Lender, allow changes in the
use for which all or any part of the Mortgaged Property is being used at the
time this Instrument was executed, (b) convert any individual dwelling units or
common areas to commercial use, (c) initiate or acquiesce in a change in the
zoning classification of the Mortgaged Property, or (d) establish any
condominium or cooperative regime with respect to the Mortgaged Property.
12. PROTECTION OF LENDER'S SECURITY.
(a) If Borrower fails to perform any of its obligations under
this Instrument or any other Loan Document, or if any action or
proceeding is commenced which purports to affect the Mortgaged
Property, Lender's security or Lender's rights under this Instrument,
including eminent domain, insolvency, code enforcement, civil or
criminal forfeiture, enforcement of Hazardous Materials Laws,
fraudulent conveyance or reorganizations or proceedings involving a
bankrupt or decedent, then Lender at Lender's option may make such
appearances, disburse such sums and take such actions as Lender
reasonably deems necessary to perform such obligations of Borrower and
to protect Lender's interest, including (1) payment of fees and
out-of-pocket expenses of attorneys, accountants, inspectors and
consultants, (2) entry upon the Mortgaged Property to make repairs or
secure the Mortgaged Property, (3) procurement of the insurance
required by Section 19, and (4) payment of amounts which Borrower has
failed to pay under Sections 15 and 17.
(b) Any amounts disbursed by Lender under this Section 12, or
under any other provision of this Instrument that treats such
disbursement as being made under this Section 12, shall be added to,
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and become part of, the principal component of the Indebtedness, shall
be immediately due and payable and shall bear interest from the date of
disbursement until paid at the "Default Rate", as defined in the Note.
(c) Nothing in this Section 12 shall require Lender to incur
any expense or take any action.
13. INSPECTION. Lender, its agents, representatives, and designees may
make or cause to be made entries upon and inspections of the Mortgaged Property
(including environmental inspections and tests) during normal business hours, or
at any other reasonable time.
14. BOOKS AND RECORDS; FINANCIAL REPORTING.
(a) Borrower shall keep and maintain at all times at the
Mortgaged Property or the management agent's offices, and upon Lender's
request shall make available at the Mortgaged Property, complete and
accurate books of account and records (including copies of supporting
bills and invoices) adequate to reflect correctly the operation of the
Mortgaged Property, and copies of all written contracts, Leases, and
other instruments which affect the Mortgaged Property. The books,
records, contracts, Leases and other instruments shall be subject to
examination and inspection at any reasonable time by Lender.
(b) Borrower shall furnish to Lender all of the following:
(i) within 120 days after the end of each fiscal year
of Borrower, a statement of income and expenses for Borrower's
operation of the Mortgaged Property for that fiscal year, a
statement of changes in financial position of Borrower
relating to the Mortgaged Property for that fiscal year and,
when requested by Lender, a balance sheet showing all assets
and liabilities of Borrower relating to the Mortgaged Property
as of the end of that fiscal year;
(ii) within 120 days after the end of each fiscal
year of Borrower, and at any other time upon Lender's request,
a rent schedule for the Mortgaged Property showing the name of
each tenant, and for each tenant, the space occupied, the
lease expiration date, the rent payable for the current month,
the date through which rent has been paid, and any related
information requested by Lender;
(iii) within 120 days after the end of each fiscal
year of Borrower, and at any other time upon Lender's request,
an accounting of all security deposits held pursuant to all
Leases, including the name of the institution (if any) and the
names and identification numbers of the accounts (if any) in
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which such security deposits are held and the name of the
person to contact at such financial institution, along with
any authority or release necessary for Lender to access
information regarding such accounts;
(iv) within 120 days after the end of each fiscal
year of Borrower, and at any other time upon Lender's request,
a statement that identifies all owners of any interest in
Borrower and the interest held by each, if Borrower is a
corporation, all officers and directors of Borrower, and if
Borrower is a limited liability company, all managers who are
not members;
(v) upon Lender's request, a monthly property
management report for the Mortgaged Property, showing the
number of inquiries made and rental applications received from
tenants or prospective tenants and deposits received from
tenants and any other information requested by Lender;
(vi) upon Lender's request, a balance sheet, a
statement of income and expenses for Borrower and a statement
of changes in financial position of Borrower for Borrower's
most recent fiscal year; and
(vii) if required by Lender, a statement of income
and expense for the Mortgaged Property for the prior month or
quarter.
(c) Each of the statements, schedules and reports required by
Section 14(b) shall be certified to be complete and accurate by an
individual having authority to bind Borrower, and shall be in such form
and contain such detail as Lender may reasonably require. Lender also
may require that any statements, schedules or reports be audited at
Borrower's expense by independent certified public accountants
acceptable to Lender.
(d) If Borrower fails to provide in a timely manner the
statements, schedules and reports required by Section 14(b), Lender
shall have the right to have Borrower's books and records audited, at
Borrower's expense, by independent certified public accountants
selected by Lender in order to obtain such statements, schedules and
reports, and all related costs and expenses of Lender shall become
immediately due and payable and shall become an additional part of the
Indebtedness as provided in Section 12.
(e) If an Event of Default has occurred and is continuing,
Borrower shall deliver to Lender upon written demand all books and
records relating to the Mortgaged Property or its operation.
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(f) Borrower authorizes Lender to obtain a credit report on
Borrower at any time.
(g) If an Event of Default has occurred and Lender has not
previously required Borrower to furnish a quarterly statement of income
and expense for the Mortgaged Property, Lender may require Borrower to
furnish such a statement within 45 days after the end of each fiscal
quarter of Borrower following such Event of Default.
15. TAXES; OPERATING EXPENSES.
(a) Subject to the provisions of Section 15(c) and Section
15(d), Borrower shall pay, or cause to be paid, all Taxes when due and
before the addition of any interest, fine, penalty or cost for
nonpayment.
(b) Subject to the provisions of Section 15(c), Borrower shall
pay the expenses of operating, managing, maintaining and repairing the
Mortgaged Property (including insurance premiums, utilities, repairs
and replacements) before the last date upon which each such payment may
be made without any penalty or interest charge being added.
(c) As long as no Event of Default exists and Borrower has
timely delivered to Lender any bills or premium notices that it has
received, Borrower shall not be obligated to pay Taxes, insurance
premiums or any other individual Imposition to the extent that
sufficient Imposition Deposits are held by Lender for the purpose of
paying that specific Imposition. If an Event of Default exists, Lender
may exercise any rights Lender may have with respect to Imposition
Deposits without regard to whether Impositions are then due and
payable. Lender shall have no liability to Borrower for failing to pay
any Impositions to the extent that any Event of Default has occurred
and is continuing, insufficient Imposition Deposits are held by Lender
at the time an Imposition becomes due and payable or Borrower has
failed to provide Lender with bills and premium notices as provided
above.
(d) Borrower, at its own expense, may contest by appropriate
legal proceedings, conducted diligently and in good faith, the amount
or validity of any Imposition other than insurance premiums, if (1)
Borrower notifies Lender of the commencement or expected commencement
of such proceedings, (2) the Mortgaged Property is not in danger of
being sold or forfeited, (3) Borrower deposits with Lender reserves
sufficient to pay the contested Imposition, if requested by Lender, and
(4) Borrower furnishes whatever additional security is required in the
proceedings or is reasonably requested by Lender, which may include the
delivery to Lender of the reserves established by Borrower to pay the
contested Imposition.
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(e) Borrower shall promptly deliver to Lender a copy of all
notices of, and invoices for, Impositions, and if Borrower pays any
Imposition directly, Borrower shall promptly furnish to Lender receipts
evidencing such payments.
16. LIENS; ENCUMBRANCES. Borrower acknowledges that, to the extent
provided in Section 21, the grant, creation or existence of any mortgage, deed
of trust, deed to secure debt, security interest or other lien or encumbrance (a
"Lien") on the Mortgaged Property (other than the lien of this Instrument) or on
certain ownership interests in Borrower, whether voluntary, involuntary or by
operation of law, and whether or not such Lien has priority over the lien of
this Instrument, is a "Transfer" which constitutes an Event of Default.
17. PRESERVATION, MANAGEMENT AND MAINTENANCE OF MORTGAGED PROPERTY.
(a) Borrower (1) shall not commit waste or permit impairment
or deterioration of the Mortgaged Property, (2) shall not abandon the
Mortgaged Property, (3) shall restore or repair promptly, in a good and
workmanlike manner, any damaged part of the Mortgaged Property to the
equivalent of its original condition, or such other condition as Lender
may approve in writing, whether or not insurance proceeds or
condemnation awards are available to cover any costs of such
restoration or repair, (4) shall keep the Mortgaged Property in good
repair, including the replacement of Personalty and Fixtures with items
of equal or better function and quality, (5) shall provide for
professional management of the Mortgaged Property by a residential
rental property manager satisfactory to Lender under a contract
approved by Lender in writing, and (6) shall give notice to Lender of
and, unless otherwise directed in writing by Lender, shall appear in
and defend any action or proceeding purporting to affect the Mortgaged
Property, Lender's security or Lender's rights under this Instrument.
Borrower shall not (and shall not permit any tenant or other person to)
remove, demolish or alter the Mortgaged Property or any part of the
Mortgaged Property except in connection with the replacement of
tangible Personalty.
(b) If, in connection with the making of the loan evidenced by
the Note or at any later date, Lender waives in writing the requirement
of Section 17(a)(5) above that Borrower enter into a written contract
for management of the Mortgaged Property and if, after the date of this
Instrument, Borrower intends to change the management of the Mortgaged
Property, Lender shall have the right to approve such new property
manager and the written contract for the management of the Mortgaged
Property and require that Borrower and such new property manager enter
into an Assignment of Management Agreement on a form approved by
Lender. If required by Lender (whether before or after an Event of
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Default), Borrower will cause any Affiliate of Borrower to whom fees
are payable for the management of the Mortgaged Property to enter into
an agreement with Lender, in a form approved by Lender, providing for
subordination of those fees and such other provisions as Lender may
require. "Affiliate of Borrower" means any corporation, partnership,
joint venture, limited liability company, limited liability
partnership, trust or individual controlled by, under common control
with, or which controls Borrower (the term "control" for these
purposes shall mean the ability, whether by the ownership of shares or
other equity interests, by contract or otherwise, to elect a majority
of the directors of a corporation, to make management decisions on
behalf of, or independently to select the managing partner of, a
partnership, or otherwise to have the power independently to remove
and then select a majority of those individuals exercising managerial
authority over an entity, and control shall be conclusively presumed
in the case of the ownership of 50% or more of the equity interests).
18. ENVIRONMENTAL HAZARDS.
(a) Except for matters covered by a written program of
operations and maintenance approved in writing by Lender (an "O&M
Program") or matters described in Section 18(b), Borrower shall not
cause or permit any of the following:
(i) the presence, use, generation, release,
treatment, processing, storage (including storage in above
ground and underground storage tanks), handling, or disposal
of any Hazardous Materials on or under the Mortgaged Property
or any other property of Borrower that is adjacent to the
Mortgaged Property;
(ii) the transportation of any Hazardous Materials
to, from, or across the Mortgaged Property;
(iii) any occurrence or condition on the Mortgaged
Property or any other property of Borrower that is adjacent to
the Mortgaged Property, which occurrence or condition is or
may be in violation of Hazardous Materials Laws; or
(iv) any violation of or noncompliance with the terms
of any Environmental Permit with respect to the Mortgaged
Property or any property of Borrower that is adjacent to the
Mortgaged Property.
The matters described in clauses (1) through (4) above are referred to
collectively in this Section 18 as "Prohibited Activities or Conditions".
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(b) Prohibited Activities and Conditions shall not include the
safe and lawful use and storage of quantities of (1) pre-packaged
supplies, cleaning materials and petroleum products customarily used in
the operation and maintenance of comparable multifamily properties, (2)
cleaning materials, personal grooming items and other items sold in
pre-packaged containers for consumer use and used by tenants and
occupants of residential dwelling units in the Mortgaged Property; and
(3) petroleum products used in the operation and maintenance of motor
vehicles from time to time located on the Mortgaged Property's parking
areas, so long as all of the foregoing are used, stored, handled,
transported and disposed of in compliance with Hazardous Materials
Laws.
(c) Borrower shall take all commercially reasonable actions
(including the inclusion of appropriate provisions in any Leases
executed after the date of this Instrument) to prevent its employees,
agents, and contractors, and all tenants and other occupants from
causing or permitting any Prohibited Activities or Conditions. Borrower
shall not lease or allow the sublease or use of all or any portion of
the Mortgaged Property to any tenant or subtenant for nonresidential
use by any user that, in the ordinary course of its business, would
cause or permit any Prohibited Activity or Condition.
(d) If an O&M Program has been established with respect to
Hazardous Materials, Borrower shall comply in a timely manner with, and
cause all employees, agents, and contractors of Borrower and any other
persons present on the Mortgaged Property to comply with the O&M
Program. All costs of performance of Borrower's obligations under any
O&M Program shall be paid by Borrower, and Lender's out-of-pocket costs
incurred in connection with the monitoring and review of the O&M
Program and Borrower's performance shall be paid by Borrower upon
demand by Lender. Any such out-of-pocket costs of Lender which Borrower
fails to pay promptly shall become an additional part of the
Indebtedness as provided in Section 12.
(e) Borrower represents and warrants to Lender that, except as
previously disclosed by Borrower to Lender in writing:
(i) Borrower has not at any time engaged in, caused
or permitted any Prohibited Activities or Conditions;
(ii) to the best of Borrower's knowledge after
reasonable and diligent inquiry, no Prohibited Activities or
Conditions exist or have existed;
(iii) except to the extent previously disclosed by
Borrower to Lender in writing, the Mortgaged Property does not
now contain any underground storage tanks, and, to the best of
Borrower's knowledge after reasonable and diligent inquiry,
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the Mortgaged Property has not contained any underground
storage tanks in the past. If there is an underground storage
tank located on the Property which has been previously dis-
closed by Borrower to Lender in writing, that tank complies
with all requirements of Hazardous Materials Laws;
(iv) Borrower has complied with all Hazardous
Materials Laws, including all requirements for notification
regarding releases of Hazardous Materials. Without limiting
the generality of the foregoing, Borrower has obtained all
Environmental Permits required for the operation of the
Mortgaged Property in accordance with Hazardous Materials Laws
now in effect and all such Environmental Permits are in full
force and effect;
(v) no event has occurred with respect to the
Mortgaged Property that constitutes, or with the passing of
time or the giving of notice would constitute, noncompliance
with the terms of any Environmental Permit;
(vi) there are no actions, suits, claims or
proceedings pending or, to the best of Borrower's knowledge
after reasonable and diligent inquiry, threatened that involve
the Mortgaged Property and allege, arise out of, or relate to
any Prohibited Activity or Condition; and
(vii) Borrower has not received any complaint, order,
notice of violation or other communication from any
Governmental Authority with regard to air emissions, water
discharges, noise emissions or Hazardous Materials, or any
other environmental, health or safety matters affecting the
Mortgaged Property or any other property of Borrower that is
adjacent to the Mortgaged Property.
The representations and warranties in this Section 18 shall be continuing
representations and warranties that shall be deemed to be made by Borrower
throughout the term of the loan evidenced by the Note, until the Indebtedness
has been paid in full.
(f) Borrower shall promptly notify Lender in writing upon the
occurrence of any of the following events:
(i) Borrower's discovery of any Prohibited Activity
or Condition;
(ii) Borrower's receipt of or knowledge of any
complaint, order, notice of violation or other communication
from any Governmental Authority or other person with regard to
present or future alleged Prohibited Activities or Conditions
or any other environmental, health or safety matters affecting
the Mortgaged Property or cany other property of Borrower that
is adjacent to the Mortgaged Property; and
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(iii) any representation or warranty in this Section
18 becomes untrue after the date of this Agreement.
Any such notice given by Borrower shall not relieve Borrower of, or result in a
waiver of, any obligation under this Instrument, the Note, or any other Loan
Document.
(g) Borrower shall pay promptly the costs of any environmental
inspections, tests or audits ("Environmental Inspections") required by
Lender in connection with any foreclosure or deed in lieu of
foreclosure, or as a condition of Lender's consent to any Transfer
under Section 21, or required by Lender following a reasonable
determination by Lender that Prohibited Activities or Conditions may
exist. Any such costs incurred by Lender (including the fees and
out-of-pocket costs of attorneys and technical consultants whether
incurred in connection with any judicial or administrative process or
otherwise) which Borrower fails to pay promptly shall become an
additional part of the Indebtedness as provided in Section 12. The
results of all Environmental Inspections made by Lender shall at all
times remain the property of Lender and Lender shall have no obligation
to disclose or otherwise make available to Borrower or any other party
such results or any other information obtained by Lender in connection
with its Environmental Inspections. Lender hereby reserves the right,
and Borrower hereby expressly authorizes Lender, to make available to
any party, including any prospective bidder at a foreclosure sale of
the Mortgaged Property, the results of any Environmental Inspections
made by Lender with respect to the Mortgaged Property. Borrower
consents to Lender notifying any party (either as part of a notice of
sale or otherwise) of the results of any of Lender's Environmental
Inspections. Borrower acknowledges that Lender cannot control or
otherwise assure the truthfulness or accuracy of the results of any of
its Environmental Inspections and that the release of such results to
prospective bidders at a foreclosure sale of the Mortgaged Property may
have a material and adverse effect upon the amount which a party may
bid at such sale. Borrower agrees that Lender shall have no liability
whatsoever as a result of delivering the results of any of its
Environmental Inspections to any third party, and Borrower hereby
releases and forever discharges Lender from any and all claims,
damages, or causes of action, arising out of, connected with or
incidental to the results of, the delivery of any of Lender's
Environmental Inspections.
(h) If any investigation, site monitoring, containment,
clean-up, restoration or other remedial work ("Remedial Work") is
necessary to comply with any Hazardous Materials Law or order of any
Governmental Authority that has or acquires jurisdiction over the
Mortgaged Property or the use, operation or improvement of the
Mortgaged Property under any Hazardous Materials Law, Borrower shall,
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by the earlier of (1) the applicable deadline required by Hazardous
Materials Law or (2) 30 days after notice from Lender demanding such
action, begin performing the Remedial Work, and thereafter diligently
prosecute it to completion, and shall in any event complete the work
by the time required by applicable Hazardous Materials Law. If
Borrower fails to begin on a timely basis or diligently prosecute any
required Remedial Work, Lender may, at its option, cause the Remedial
Work to be completed, in which case Borrower shall reimburse Lender on
demand for the cost of doing so. Any reimbursement due from Borrower
to Lender shall become part of the Indebtedness as provided in Section
12.
(i) Borrower shall cooperate with any inquiry by any
Governmental Authority and shall comply with any governmental or
judicial order which arises from any alleged Prohibited Activity or
Condition.
(j) Borrower shall indemnify, hold harmless and defend (i)
Lender, (ii) any prior owner or holder of the Note, (iii) the Loan
Servicer, (iv) any prior Loan Servicer, (v) the officers, directors,
shareholders, partners, employees and trustees of any of the foregoing,
and (vi) the heirs, legal representatives, successors and assigns of
each of the foregoing (collectively, the "Indemnitees") from and
against all proceedings, claims, damages, penalties and costs (whether
initiated or sought by Governmental Authorities or private parties),
including fees and out-of-pocket expenses of attorneys and expert
witnesses, investigatory fees, and remediation costs, whether incurred
in connection with any judicial or administrative process or otherwise,
arising directly or indirectly from any of the following:
(i) any breach of any representation or warranty of
Borrower in this Section 18;
(ii) any failure by Borrower to perform any of its
obligations under this Section 18;
(iii) the existence or alleged existence of any Pro-
hibited Activity or Condition;
(iv) the presence or alleged presence of Hazardous
Materials on or under the Mortgaged Property or any property
of Borrower that is adjacent to the Mortgaged Property; and
(v) the actual or alleged violation of any Hazardous
Materials Law.
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(k) Counsel selected by Borrower to defend Indemnitees shall
be subject to the approval of those Indemnitees. However, any
Indemnitee may elect to defend any claim or legal or administrative
proceeding at the Borrower's expense.
(l) Borrower shall not, without the prior written consent of
those Indemnitees who are named as parties to a claim or legal or
administrative proceeding (a "Claim"), settle or compromise the Claim
if the settlement (1) results in the entry of any judgment that does
not include as an unconditional term the delivery by the claimant or
plaintiff to Lender of a written release of those Indemnitees,
satisfactory in form and substance to Lender; or (2) may materially and
adversely affect Lender, as determined by Lender in its discretion.
(m) Lender agrees that the indemnity under this Section 18
shall be limited to the assets of Borrower and Lender shall not seek to
recover any deficiency from any natural persons who are general
partners of Borrower.
(n) Borrower shall, at its own cost and expense, do all of the
following:
(i) pay or satisfy any judgment or decree that may be
entered against any Indemnitee or Indemnitees in any legal or
administrative proceeding incident to any matters against
which Indemnitees are entitled to be indemnified under this
Section 18;
(ii) reimburse Indemnitees for any expenses paid or
incurred in connection with any matters against which
Indemnitees are entitled to be indemnified under this Section
18; and
(iii) reimburse Indemnitees for any and all expenses,
including fees and out-of-pocket expenses of attorneys and
expert witnesses, paid or incurred in connection with the
enforcement by Indemnitees of their rights under this Section
18, or in monitoring and participating in any legal or
administrative proceeding.
(o) In any circumstances in which the indemnity under this
Section 18 applies, Lender may employ its own legal counsel and
consultants to prosecute, defend or negotiate any claim or legal or
administrative proceeding and Lender, with the prior written consent of
Borrower (which shall not be unreasonably withheld, delayed or
conditioned), may settle or compromise any action or legal or
administrative proceeding. Borrower shall reimburse Lender upon demand
for all costs and expenses incurred by Lender, including all costs of
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settlements entered into in good faith, and the fees and out-of-pocket
expenses of such attorneys and consultants.
(p) The provisions of this Section 18 shall be in addition to
any and all other obligations and liabilities that Borrower may have
under applicable law or under other Loan Documents, and each Indemnitee
shall be entitled to indemnification under this Section 18 without
regard to whether Lender or that Indemnitee has exercised any rights
against the Mortgaged Property or any other security, pursued any
rights against any guarantor, or pursued any other rights available
under the Loan Documents or applicable law. If Borrower consists of
more than one person or entity, the obligation of those persons or
entities to indemnify the Indemnitees under this Section 18 shall be
joint and several. The obligation of Borrower to indemnify the
Indemnitees under this Section 18 shall survive any repayment or
discharge of the Indebtedness, any foreclosure proceeding, any
foreclosure sale, any delivery of any deed in lieu of foreclosure, and
any release of record of the lien of this Instrument.
19. PROPERTY AND LIABILITY INSURANCE.
(a) Borrower shall keep the Improvements insured at all times
against such hazards as Lender may from time to time require, which
insurance shall include but not be limited to coverage against loss by
fire and allied perils, general boiler and machinery coverage, and
business income coverage. Lender's insurance requirements may change
from time to time throughout the term of the Indebtedness. If Lender so
requires, such insurance shall also include sinkhole insurance, mine
subsidence insurance, earthquake insurance, and, if the Mortgaged
Property does not conform to applicable zoning or land use laws,
building ordinance or law coverage. If any of the Improvements is
located in an area identified by the Federal Emergency Management
Agency (or any successor to that agency) as an area having special
flood hazards, and if flood insurance is available in that area,
Borrower shall insure such Improvements against loss by flood.
(b) All premiums on insurance policies required under Section
19(a) shall be paid in the manner provided in Section 7, unless Lender
has designated in writing another method of payment. All such policies
shall also be in a form approved by Lender. All policies of property
damage insurance shall include a non-contributing, non-reporting
mortgage clause in favor of, and in a form approved by, Lender. Lender
shall have the right to hold the original policies or duplicate
original policies of all insurance required by Section 19(a). Borrower
shall promptly deliver to Lender a copy of all renewal and other
notices received by Borrower with respect to the policies and all
receipts for paid premiums. At least 30 days prior to the expiration
date of a policy, Borrower shall deliver to Lender the original (or a
duplicate original) of a renewal policy in form satisfactory to Lender.
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(c) Borrower shall maintain at all times commercial general
liability insurance, workers' compensation insurance and such other
liability, errors and omissions and fidelity insurance coverages as
Lender may from time to time require.
(d) All insurance policies and renewals of insurance policies
required by this Section 19 shall be in such amounts and for such
periods as Lender may from time to time require, and shall be issued by
insurance companies satisfactory to Lender.
(e) Borrower shall comply with all insurance requirements and
shall not permit any condition to exist on the Mortgaged Property that
would invalidate any part of any insurance coverage that this
Instrument requires Borrower to maintain.
(f) In the event of loss, Borrower shall give immediate
written notice to the insurance carrier and to Lender. Borrower hereby
authorizes and appoints Lender as attorney-in-fact for Borrower to make
proof of loss, to adjust and compromise any claims under policies of
property damage insurance, to appear in and prosecute any action
arising from such property damage insurance policies, to collect and
receive the proceeds of property damage insurance, and to deduct from
such proceeds Lender's expenses incurred in the collection of such
proceeds. This power of attorney is coupled with an interest and
therefore is irrevocable. However, nothing contained in this Section 19
shall require Lender to incur any expense or take any action. Lender
may, at Lender's option, (1) hold the balance of such proceeds to be
used to reimburse Borrower for the cost of restoring and repairing the
Mortgaged Property to the equivalent of its original condition or to a
condition approved by Lender (the "Restoration"), or (2) apply the
balance of such proceeds to the payment of the Indebtedness, whether or
not then due. To the extent Lender determines to apply insurance
proceeds to Restoration, Lender shall do so in accordance with Lender's
then-current policies relating to the restoration of casualty damage on
similar multifamily properties.
(g) Lender shall not exercise its option to apply insurance
proceeds to the payment of the Indebtedness if all of the following
conditions are met: (1) no Event of Default (or any event which, with
the giving of notice or the passage of time, or both, would constitute
an Event of Default) has occurred and is continuing; (2) Lender
determines, in its discretion, that there will be sufficient funds to
complete the Restoration; (3) Lender determines, in its discretion,
that the rental income from the Mortgaged Property after completion of
the Restoration will be sufficient to meet all operating costs and
other expenses, Imposition Deposits, deposits to reserves and loan
repayment obligations relating to the Mortgaged Property; (4) Lender
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determines, in its discretion, that the Restoration will be completed
before the earlier of (A) one year before the maturity date of the
Note or (B) one year after the date of the loss or casualty; and (5)
upon Lender's request, Borrower provides Lender evidence of the
availability during and after the Restoration of the insurance
required to be maintained by Borrower pursuant to this Section 19.
(h) If the Mortgaged Property is sold at a foreclosure sale or
Lender acquires title to the Mortgaged Property, Lender shall
automatically succeed to all rights of Borrower in and to any insurance
policies and unearned insurance premiums and in and to the proceeds
resulting from any damage to the Mortgaged Property prior to such sale
or acquisition.
20. CONDEMNATION.
(a) Borrower shall promptly notify Lender of any action or
proceeding relating to any condemnation or other taking, or conveyance
in lieu thereof, of all or any part of the Mortgaged Property, whether
direct or indirect (a "Condemnation"). Borrower shall appear in and
prosecute or defend any action or proceeding relating to any
Condemnation unless otherwise directed by Lender in writing. Borrower
authorizes and appoints Lender as attorney-in-fact for Borrower to
commence, appear in and prosecute, in Lender's or Borrower's name, any
action or proceeding relating to any Condemnation and to settle or
compromise any claim in connection with any Condemnation. This power of
attorney is coupled with an interest and therefore is irrevocable.
However, nothing contained in this Section 20 shall require Lender to
incur any expense or take any action. Borrower hereby transfers and
assigns to Lender all right, title and interest of Borrower in and to
any award or payment with respect to (i) any Condemnation, or any
conveyance in lieu of Condemnation, and (ii) any damage to the
Mortgaged Property caused by governmental action that does not result
in a Condemnation.
(b) Lender may apply such awards or proceeds, after the
deduction of Lender's expenses incurred in the collection of such
amounts, at Lender's option, to the restoration or repair of the
Mortgaged Property or to the payment of the Indebtedness, with the
balance, if any, to Borrower. Unless Lender otherwise agrees in
writing, any application of any awards or proceeds to the Indebtedness
shall not extend or postpone the due date of any monthly installments
referred to in the Note, Section 7 of this Instrument or any Collateral
Agreement, or change the amount of such installments. Borrower agrees
to execute such further evidence of assignment of any awards or
proceeds as Lender may require.
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21. TRANSFERS OF THE MORTGAGED PROPERTY OR INTERESTS IN
BORROWER.
(a) The occurrence of any of the following events shall
constitute an Event of Default under this Instrument:
(i) a Transfer of all or any part of the Mortgaged
Property or any interest in the Mortgaged Property;
(ii) a Transfer of a Controlling Interest in Borrower;
(iii) a Transfer of a Controlling Interest in any
entity which owns, directly or indirectly through one or more
intermediate entities, a Controlling Interest in Borrower;
(iv) a Transfer of all or any part of Key Principal's
ownership interests (other than limited partnership interests)
in Borrower, or in any other entity which owns, directly or
indirectly through one or more intermediate entities, an
ownership interest in Borrower;
(v) if Key Principal is an entity, (A) a Transfer of
a Controlling Interest in Key Principal, or (B) a Transfer of
a Controlling Interest in any entity which owns, directly or
indirectly through one or more intermediate entities, a
Controlling Interest in Key Principal;
(vi) if Borrower or Key Principal is a trust, the
termination or revocation of such trust; and
(vii) a conversion of Borrower from one type of legal
entity into another type of legal entity, whether or not there
is a Transfer.
Lender shall not be required to demonstrate any actual impairment of its
security or any increased risk of default in order to exercise any of its
remedies with respect to an Event of Default under this Section 21.
(b) The occurrence of any of the following events shall not
constitute an Event of Default under this Instrument, notwithstanding
any provision of Section 21(a) to the contrary:
(i) a Transfer to which Lender has consented;
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(ii) a Transfer that occurs by devise, descent, or by
operation of law upon the death of a natural person;
(iii) the grant of a leasehold interest in an
individual dwelling unit for a term of two years or less not
containing an option to purchase;
(iv) a Transfer of obsolete or worn out Personalty or
Fixtures that are contemporaneously replaced by items of equal
or better function and quality, which are free of liens,
encumbrances and security interests other than those created
by the Loan Documents or consented to by Lender;
(v) the grant of an easement, if before the grant
Lender determines that the easement will not materially affect
the operation or value of the Mortgaged Property or Lender's
interest in the Mortgaged Property, and Borrower pays to
Lender, upon demand, all costs and expenses incurred by Lender
in connection with reviewing Borrower's request; and
(vi) the creation of a tax lien or a mechanic's,
materialman's or judgment lien against the Mortgaged Property
which is bonded off, released of record or otherwise remedied
to Lender's satisfaction within 30 days of the date of
creation.
(c) Lender shall consent, without any adjustment to the rate
at which the Indebtedness secured by this Instrument bears interest or
to any other economic terms of the Indebtedness, to a Transfer that
would otherwise violate this Section 21 if, prior to the Transfer,
Borrower has satisfied each of the following requirements:
(i) the submission to Lender of all information re-
quired by Lender to make the determination required by this
Section 21(c);
(ii) the absence of any Event of Default;
(iii) the transferee meets all of the eligibility,
credit, management and other standards (including any
standards with respect to previous relationships between
Lender and the transferee and the organization of the
transferee) customarily applied by Lender at the time of the
proposed Transfer to the approval of borrowers in connection
with the origination or purchase of similar mortgages, deeds
of trust or deeds to secure debt on multifamily properties;
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(iv) the Mortgaged Property, at the time of the
proposed Transfer, meets all standards as to its physical
condition that are customarily applied by Lender at the time
of the proposed Transfer to the approval of properties in
connection with the origination or purchase of similar
mortgages on multifamily properties;
(v) in the case of a Transfer of all or any part of
the Mortgaged Property, or direct or indirect ownership
interests in Borrower or Key Principal (if an entity), if
transferor or any other person has obligations under any Loan
Document, the execution by the transferee or one or more
individuals or entities acceptable to Lender of an assumption
agreement (including, if applicable, an Acknowledgment and
Agreement of Key Principal to Personal Liability for
Exceptions to Non-Recourse Liability) that is acceptable to
Lender and that, among other things, requires the transferee
to perform all obligations of transferor or such person set
forth in such Loan Document, and may require that the
transferee comply with any provisions of this Instrument or
any other Loan Document which previously may have been waived
by Lender;
(vi) if a guaranty has been executed and delivered in
connection with the Note, this Instrument or any of the other
Loan Documents, the Borrower causes one or more individuals or
entities acceptable to Lender to execute and deliver to Lender
a guaranty in a form acceptable to Lender; and
(vii) Lender's receipt of all of the following:
(1) a non-refundable review fee in the
amount of $3,000 and a transfer fee equal to 1
percent of the outstanding Indebtedness immediately
prior to the Transfer.
(2) In addition, Borrower shall be required
to reimburse Lender for all of Lender's out-of-pocket
costs (including reasonable attorneys' fees) incurred
in reviewing the Transfer request, to the extent such
expenses exceed $3,000.
(d) For purposes of this Section, the following terms shall
have the meanings set forth below:
(i) "Initial Owners" means, with respect to Borrower
or any other entity, the persons or entities who on the date
of the Note own in the aggregate 100% of the ownership
interests in Borrower or that entity.
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(ii) A Transfer of a "Controlling Interest" shall
mean, with respect to any entity, the following:
(1) if such entity is a general partnership
or a joint venture, a Transfer of any general
partnership interest or joint venture interest which
would cause the Initial Owners to own less than 51%
of all general partnership or joint venture interests
in such entity;
(2) if such entity is a limited partnership,
a Transfer of any general partnership interest;
(3) if such entity is a limited liability
company or a limited liability partnership, a
Transfer of any membership or other ownership
interest which would cause the Initial Owners to own
less than 51% of all membership or other ownership
interests in such entity;
(4) if such entity is a corporation (other
than a Publicly-Held Corporation) with only one class
of voting stock, a Transfer of any voting stock which
would cause the Initial Owners to own less than 51%
of voting stock in such corporation;
(5) if such entity is a corporation (other
than a Publicly-Held Corporation) with more than one
class of voting stock, a Transfer of any voting stock
which would cause the Initial Owners to own less than
a sufficient number of shares of voting stock having
the power to elect the majority of directors of such
corporation; and
(6) if such entity is a trust, the removal,
appointment or substitution of a trustee of such
trust other than (A) in the case of a land trust, or
(B) if the trustee of such trust after such removal,
appointment or substitution is a trustee identified
in the trust agreement approved by Lender.
(iii) "Publicly-Held Corporation" shall mean a
corporation the outstanding voting stock of which is
registered under Section 12(b) or 12(g) of the Securities and
Exchange Act of 1934, as amended.
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22. EVENTS OF DEFAULT. The occurrence of any one or more of the
following shall constitute an Event of Default under this Instrument:
(a) any failure by Borrower to pay or deposit when due any
amount required by the Note, this Instrument or any other Loan
Document;
(b) any failure by Borrower to maintain the insurance coverage
required by Section 19;
(c) any failure by Borrower to comply with the provisions of
Section 33;
(d) fraud or material misrepresentation or material omission
by Borrower, or any of its officers, directors, trustees, general
partners or managers, Key Principal or any guarantor in connection with
(A) the application for or creation of the Indebtedness, (B) any
financial statement, rent roll, or other report or information provided
to Lender during the term of the Indebtedness, or (C) any request for
Lender's consent to any proposed action, including a request for
disbursement of funds under any Collateral Agreement;
(e) any Event of Default under Section 21;
(f) the commencement of a forfeiture action or proceeding,
whether civil or criminal, which, in Lender's reasonable judgment,
could result in a forfeiture of the Mortgaged Property or otherwise
materially impair the lien created by this Instrument or Lender's
interest in the Mortgaged Property;
(g) any failure by Borrower to perform any of its obligations
under this Instrument (other than those specified in Sections 22(a)
through (f)), as and when required, which continues for a period of 30
days after notice of such failure by Lender to Borrower, but no such
notice or grace period shall apply in the case of any such failure
which could, in Lender's judgment, absent immediate exercise by Lender
of a right or remedy under this Instrument, result in harm to Lender,
impairment of the Note or this Instrument or any other security given
under any other Loan Document;
(h) any failure by Borrower to perform any of its obligations
as and when required under any Loan Document other than this Instrument
which continues beyond the applicable cure period, if any, specified in
that Loan Document; and
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(i) any exercise by the holder of any other debt instrument
secured by a mortgage, deed of trust or deed to secure debt on the
Mortgaged Property of a right to declare all amounts due under that
debt instrument immediately due and payable.
23. REMEDIES CUMULATIVE. Each right and remedy provided in this
Instrument is distinct from all other rights or remedies under this Instrument
or any other Loan Document or afforded by applicable law, and each shall be
cumulative and may be exercised concurrently, independently, or successively, in
any order.
24. FORBEARANCE.
(a) Lender may (but shall not be obligated to) agree with
Borrower, from time to time, and without giving notice to, or obtaining
the consent of, or having any effect upon the obligations of, any
guarantor or other third party obligor, to take any of the following
actions: extend the time for payment of all or any part of the
Indebtedness; reduce the payments due under this Instrument, the Note,
or any other Loan Document; release anyone liable for the payment of
any amounts under this Instrument, the Note, or any other Loan
Document; accept a renewal of the Note; modify the terms and time of
payment of the Indebtedness; join in any extension or subordination
agreement; release any Mortgaged Property; take or release other or
additional security; modify the rate of interest or period of
amortization of the Note or change the amount of the monthly
installments payable under the Note; and otherwise modify this
Instrument, the Note, or any other Loan Document.
(b) Any forbearance by Lender in exercising any right or
remedy under the Note, this Instrument, or any other Loan Document or
otherwise afforded by applicable law, shall not be a waiver of or
preclude the exercise of any other right or remedy. The acceptance by
Lender of payment of all or any part of the Indebtedness after the due
date of such payment, or in an amount which is less than the required
payment, shall not be a waiver of Lender's right to require prompt
payment when due of all other payments on account of the Indebtedness
or to exercise any remedies for any failure to make prompt payment.
Enforcement by Lender of any security for the Indebtedness shall not
constitute an election by Lender of remedies so as to preclude the
exercise of any other right available to Lender. Lender's receipt of
any awards or proceeds under Sections 19 and 20 shall not operate to
cure or waive any Event of Default.
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25. LOAN CHARGES. If any applicable law limiting the amount of interest
or other charges permitted to be collected from Borrower is interpreted so that
any charge provided for in any Loan Document, whether considered separately or
together with other charges levied in connection with any other Loan Document,
violates that law, and Borrower is entitled to the benefit of that law, that
charge is hereby reduced to the extent necessary to eliminate that violation.
The amounts, if any, previously paid to Lender in excess of the permitted
amounts shall be applied by Lender to reduce the principal of the Indebtedness.
For the purpose of determining whether any applicable law limiting the amount of
interest or other charges permitted to be collected from Borrower has been
violated, all Indebtedness which constitutes interest, as well as all other
charges levied in connection with the Indebtedness which constitute interest,
shall be deemed to be allocated and spread over the stated term of the Note.
Unless otherwise required by applicable law, such allocation and spreading shall
be effected in such a manner that the rate of interest so computed is uniform
throughout the stated term of the Note.
26. WAIVER OF STATUTE OF LIMITATIONS. Borrower hereby waives the right
to assert any statute of limitations as a bar to the enforcement of the lien of
this Instrument or to any action brought to enforce any Loan Document.
27. WAIVER OF MARSHALLING. Notwithstanding the existence of any other
security interests in the Mortgaged Property held by Lender or by any other
party, Lender shall have the right to determine the order in which any or all of
the Mortgaged Property shall be subjected to the remedies provided in this
Instrument, the Note, any other Loan Document or applicable law. Lender shall
have the right to determine the order in which any or all portions of the
Indebtedness are satisfied from the proceeds realized upon the exercise of such
remedies. Borrower and any party who now or in the future acquires a security
interest in the Mortgaged Property and who has actual or constructive notice of
this Instrument waives any and all right to require the marshalling of assets or
to require that any of the Mortgaged Property be sold in the inverse order of
alienation or that any of the Mortgaged Property be sold in parcels or as an
entirety in connection with the exercise of any of the remedies permitted by
applicable law or provided in this Instrument.
28. FURTHER ASSURANCES. Borrower shall execute, acknowledge, and
deliver, at its sole cost and expense, all further acts, deeds, conveyances,
assignments, estoppel certificates, financing statements, transfers and
assurances as Lender may require from time to time in order to better assure,
grant, and convey to Lender the rights intended to be granted, now or in the
future, to Lender under this Instrument and the Loan Documents.
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29. ESTOPPEL CERTIFICATE. Within 10 days after a request from Lender,
Borrower shall deliver to Lender a written statement, signed and acknowledged by
Borrower, certifying to Lender or any person designated by Lender, as of the
date of such statement, (i) that the Loan Documents are unmodified and in full
force and effect (or, if there have been modifications, that the Loan Documents
are in full force and effect as modified and setting forth such modifications);
(ii) the unpaid principal balance of the Note; (iii) the date to which interest
under the Note has been paid; (iv) that Borrower is not in default in paying the
Indebtedness or in performing or observing any of the covenants or agreements
contained in this Instrument or any of the other Loan Documents (or, if the
Borrower is in default, describing such default in reasonable detail); (v)
whether or not there are then existing any setoffs or defenses known to Borrower
against the enforcement of any right or remedy of Lender under the Loan
Documents; and (vi) any additional facts requested by Lender.
30. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE.
(a) This Instrument, and any Loan Document which does not
itself expressly identify the law that is to apply to it, shall be
governed by the laws of the jurisdiction in which the Land is located
(the "Property Jurisdiction").
(b) Borrower agrees that any controversy arising under or in
relation to the Note, this Instrument, or any other Loan Document shall
be litigated exclusively in the Property Jurisdiction. The state and
federal courts and authorities with jurisdiction in the Property
Jurisdiction shall have exclusive jurisdiction over all controversies
which shall arise under or in relation to the Note, any security for
the Indebtedness, or any other Loan Document. Borrower irrevocably
consents to service, jurisdiction, and venue of such courts for any
such litigation and waives any other venue to which it might be
entitled by virtue of domicile, habitual residence or otherwise.
31. NOTICE.
(a) All notices, demands and other communications ("notice")
under or concerning this Instrument shall be in writing. Each notice
shall be addressed to the intended recipient at its address set forth
in this Instrument, and shall be deemed given on the earliest to occur
of (1) the date when the notice is received by the addressee; (2) the
first Business Day after the notice is delivered to a recognized
overnight courier service, with arrangements made for payment of
charges for next Business Day delivery; or (3) the third Business Day
after the notice is deposited in the United States mail with postage
prepaid, certified mail, return receipt requested. As used in this
Section 31, the term "Business Day" means any day other than a
Saturday, a Sunday or any other day on which Lender is not open for
business.
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(b) Any party to this Instrument may change the address to
which notices intended for it are to be directed by means of notice
given to the other party in accordance with this Section 31. Each party
agrees that it will not refuse or reject delivery of any notice given
in accordance with this Section 31, that it will acknowledge, in
writing, the receipt of any notice upon request by the other party and
that any notice rejected or refused by it shall be deemed for purposes
of this Section 31 to have been received by the rejecting party on the
date so refused or rejected, as conclusively established by the records
of the U.S. Postal Service or the courier service.
(c) Any notice under the Note and any other Loan Document
which does not specify how notices are to be given shall be given in
accordance with this Section 31.
32. SALE OF NOTE; CHANGE IN SERVICER. The Note or a partial interest in
the Note (together with this Instrument and the other Loan Documents) may be
sold one or more times without prior notice to Borrower. A sale may result in a
change of the Loan Servicer. There also may be one or more changes of the Loan
Servicer unrelated to a sale of the Note. If there is a change of the Loan
Servicer, Borrower will be given notice of the change.
33. SINGLE ASSET BORROWER. Until the Indebtedness is paid in full,
Borrower (a) shall not acquire any real or personal property other than the
Mortgaged Property and personal property related to the operation and
maintenance of the Mortgaged Property; (b) shall not operate any business other
than the management and operation of the Mortgaged Property; and (c) shall not
maintain its assets in a way difficult to segregate and identify.
34. SUCCESSORS AND ASSIGNS BOUND. This Instrument shall bind, and the
rights granted by this Instrument shall inure to, the respective successors and
assigns of Lender and Borrower. However, a Transfer not permitted by Section 21
shall be an Event of Default.
35. JOINT AND SEVERAL LIABILITY. If more than one person or entity
signs this Instrument as Borrower, the obligations of such persons and entities
shall be joint and several.
36. RELATIONSHIP OF PARTIES; NO THIRD PARTY BENEFICIARY.
(a) The relationship between Lender and Borrower shall be
solely that of creditor and debtor, respectively, and nothing contained
in this Instrument shall create any other relationship between Lender
and Borrower.
(b) No creditor of any party to this Instrument and no other
person shall be a third party beneficiary of this Instrument or any
other Loan Document. Without limiting the generality of the preceding
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sentence, (1) any arrangement (a "Servicing Arrangement") between the
Lender and any Loan Servicer for loss sharing or interim advancement
of funds shall constitute a contractual obligation of such Loan
Servicer that is independent of the obligation of Borrower for the
payment of the Indebtedness, (2) Borrower shall not be a third party
beneficiary of any Servicing Arrangement, and (3) no payment by the
Loan Servicer under any Servicing Arrangement will reduce the amount
of the Indebtedness.
37. SEVERABILITY; AMENDMENTS. The invalidity or unenforceability of any
provision of this Instrument shall not affect the validity or enforceability of
any other provision, and all other provisions shall remain in full force and
effect. This Instrument contains the entire agreement among the parties as to
the rights granted and the obligations assumed in this Instrument. This
Instrument may not be amended or modified except by a writing signed by the
party against whom enforcement is sought.
38. CONSTRUCTION. The captions and headings of the sections of this
Instrument are for convenience only and shall be disregarded in construing this
Instrument. Any reference in this Instrument to an "Exhibit" or a "Section"
shall, unless otherwise explicitly provided, be construed as referring,
respectively, to an Exhibit attached to this Instrument or to a Section of this
Instrument. All Exhibits attached to or referred to in this Instrument are
incorporated by reference into this Instrument. Any reference in this Instrument
to a statute or regulation shall be construed as referring to that statute or
regulation as amended from time to time. Use of the singular in this Agreement
includes the plural and use of the plural includes the singular. As used in this
Instrument, the term "including" means "including, but not limited to."
39. LOAN SERVICING. All actions regarding the servicing of the loan
evidenced by the Note, including the collection of payments, the giving and
receipt of notice, inspections of the Property, inspections of books and
records, and the granting of consents and approvals, may be taken by the Loan
Servicer unless Borrower receives notice to the contrary. If Borrower receives
conflicting notices regarding the identity of the Loan Servicer or any other
subject, any such notice from Lender shall govern.
40. DISCLOSURE OF INFORMATION. Lender may furnish information regarding
Borrower or the Mortgaged Property to third parties with an existing or
prospective interest in the servicing, enforcement, evaluation, performance,
purchase or securitization of the Indebtedness, including trustees, master
servicers, special servicers, rating agencies, and organizations maintaining
databases on the underwriting and performance of multifamily mortgage loans.
Borrower irrevocably waives any and all rights it may have under applicable law
to prohibit such disclosure, including any right of privacy.
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41. NO CHANGE IN FACTS OR CIRCUMSTANCES. All information in the
application for the loan submitted to Lender (the "Loan Application") and in all
financial statements, rent rolls, reports, certificates and other documents
submitted in connection with the Loan Application are complete and accurate in
all material respects. There has been no material adverse change in any fact or
circumstance that would make any such information incomplete or inaccurate.
42. SUBROGATION. If, and to the extent that, the proceeds of the loan
evidenced by the Note are used to pay, satisfy or discharge any obligation of
Borrower for the payment of money that is secured by a pre-existing mortgage,
deed of trust or other lien encumbering the Mortgaged Property (a "Prior Lien"),
such loan proceeds shall be deemed to have been advanced by Lender at Borrower's
request, and Lender shall automatically, and without further action on its part,
be subrogated to the rights, including lien priority, of the owner or holder of
the obligation secured by the Prior Lien, whether or not the Prior Lien is
released.
43. ACCELERATION; REMEDIES. At any time during the existence of an
Event of Default, Lender, at Lender's option, may declare the Indebtedness to be
immediately due and payable without further demand, and may invoke the power of
sale and any other remedies permitted by applicable law or provided in this
Instrument or in any other Loan Document. Borrower acknowledges that the power
of sale granted in this Instrument may be exercised by Lender without prior
judicial hearing. Borrower has the right to bring an action to assert the
non-existence of an Event of Default or any other defense of Borrower to
acceleration and sale. Lender shall be entitled to collect all costs and
expenses incurred in pursuing such remedies, including attorneys' fees, costs of
documentary evidence, abstracts and title reports.
If the power of sale is invoked, Trustee shall record a notice of
default in each county in which the Mortgaged Property is located and shall mail
copies of such notice in the manner prescribed by applicable law to Borrower and
to the other persons prescribed by applicable law. Trustee shall give notice of
sale and Trustee shall sell the Mortgaged Property according to the laws of
Nebraska. Trustee may sell the Mortgaged Property at the time and place and
under the terms designated in the notice of sale in one or more parcels and in
such order as Trustee may determine. Trustee may postpone sale of all or any
part of the Mortgaged Property by public announcement at the time and place of
any previously scheduled sale. Lender or Lender's designee may purchase the
Mortgaged Property at any sale.
Trustee shall deliver to the purchaser at the sale, within a reasonable
time after the sale, a Trustee's deed conveying the Mortgaged Property so sold
without any covenant or warranty, express or implied. The recitals in Trustee's
deed shall be prima facie evidence of the truth of the statements made therein.
Trustee shall apply the proceeds of the sale in the following order: (a) to all
costs and expenses of the sale, including Trustee's fees of not more than 5% of
the gross sale price, attorneys' fees and costs of title evidence; (b) to the
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Indebtedness in such order as Lender, in Lender's discretion, directs; and (c)
the excess, if any, to the person or persons legally entitled thereto.
44. RECONVEYANCE. Upon payment of the Indebtedness, Lender shall
request Trustee to reconvey the Mortgaged Property and shall surrender this
Instrument and the Note to Trustee. Trustee shall reconvey the Mortgaged
Property without warranty to the person or persons legally entitled thereto.
Such person or persons shall pay Trustee's reasonable costs incurred in so
reconveying the Mortgaged Property.
45. SUBSTITUTE TRUSTEE. Lender, at Lender's option, may from time to
time remove Trustee and appoint a successor trustee to any Trustee appointed
under this Instrument by an instrument recorded in the county in which this
Instrument is recorded. Without conveyance of the Mortgaged Property, the
successor trustee shall succeed to all the title, power and duties conferred
upon the Trustee herein and by applicable law.
46. REQUEST FOR NOTICES. Borrower requests that copies of the notice of
default and notice of sale be sent to Borrower at Borrower's address stated in
the first paragraph on page 1 of this Instrument.
47. WAIVER OF TRIAL BY JURY. BORROWER AND LENDER EACH (A) COVENANTS AND
AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF
THIS INSTRUMENT OR THE RELATIONSHIP BETWEEN THE PARTIES AS BORROWER AND LENDER
THAT IS TRIABLE OF RIGHT BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY
WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN
THE FUTURE. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH
PARTY, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.
ATTACHED EXHIBITS. The following Exhibits are attached to this
Instrument:
[X] Exhibit A Description of the Land (Required)
[X] Exhibit B Modifications to Instrument (Second Lien)
[X] Exhibit C Modifications to Instrument (Seniors Housing)
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IN WITNESS WHEREOF, Borrower has signed and delivered this Instrument
or has caused this Instrument to be signed and delivered by its duly authorized
representative.
CAPITAL SENIOR LIVING PROPERTIES
2-GRAMERCY, INC., a Delaware corporation
By: /s/ Lawrence A. Cohen
----------------------------
Lawrence A. Cohen,
Chief Financial Officer
STATE OF NEW YORK )
) ss.
CITY/COUNTY OF NASSAU )
The foregoing instrument was acknowledged before me this 28th day of
October, 1998, by Lawrence A. Cohen, Chief Financial Officer on behalf of
Capital Senior Living Properties 2- Gramercy, Inc., a corporation, and
acknowledged the same to be his voluntary act and deed and the voluntary act and
deed of said corporation.
Witness my hand and notarial seal at New York City in said county, the
date aforesaid.
/s/ Jason H. Kim
--------------------------------
Notary Public
My commission expires:
5/5/98
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KEY PRINCIPAL
Key Principal
Name: Capital Senior Living Corporation
Address: 14160 Dallas Parkway, Suite 300
Dallas, Texas 75240
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EXHIBIT A
Lot Seventy-nine (79) of Irregular Tracts in the Southeast Quarter of Section
28, Township 10 North, Range 7 East of The 6th P.M., Lincoln, Lancaster County,
Nebraska.
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EXHIBIT B
MODIFICATIONS TO INSTRUMENT
(Second Lien)
1. The following new Sections are added to the end of the Instrument
after the last number Section:
"48. SUBORDINATE MORTGAGE. Notwithstanding any provisions of
this Instrument or any other Loan Document to the contrary, it is
understood and agreed that the lien, terms, covenants and conditions of
this Instrument are and shall be subordinate in all respects, including
in right of payment, to the indebtedness evidenced by a Multifamily
Note dated October 28, 1998, in the original principal amount of
$1,980,000.00 (as the same may be modified, amended, or refinanced, the
"Senior Note") made by the Borrower and secured by a Multifamily Deed
of Trust, Assignment of Rents and Security Agreement dated the same
date as the Senior Note (the "Senior Instrument").
49. CROSS-DEFAULT. If Borrower is in default under the Senior
Note, the Senior Instrument, or any other loan document executed in
connection with the indebtedness evidenced by the Senior Note, which
default remains uncured after any applicable cure period, such default
shall constitute an Event of Default under the Note and this
Instrument. The occurrence of an Event of Default under the Note or
this Instrument shall constitute an Event of Default under the Senior
Note and Senior Instrument.
50. PARTIES INTENT REGARDING MERGER. It is the intent of the
parties hereto that (i) in the event that Lender or any of Lender's
successors, assigns or transferee, obtains title to the Mortgaged
Property (by virtue of a foreclosure sale, a deed in lieu of
foreclosure or otherwise) and such party is also or subsequently
becomes the holder of the Senior Note and Senior Instrument, such
party's title interest and lien interest SHALL NOT merge so as to
effect an extinguishment of the Senior Instrument by operation of the
doctrine of merger, and (ii) in the event that the holder of the Senior
Note and Senior Instrument obtains title to the Mortgaged Property
pursuant to the Senior Instrument (by virtue of a foreclosure sale, a
deed in lieu of foreclosure or otherwise) and such party is also or
subsequently becomes the holder of the Note and Instrument, such
party's title interest and lien interest SHALL NOT merge so as to
effect an extinguishment of this Instrument by operation of the
doctrine of merger. Borrower further acknowledges and agrees that no
course of conduct by Borrower, Lender or holder of the Senior Note, or
any of their successors, assigns or transferees subsequent to the date
hereof shall be used to demonstrate any intent contrary to the express
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intent stated herein. The parties agree that the holder of the Senior
Note is a third party beneficiary of the provisions of this paragraph
and that no amendments, modifications, waivers or other limitations of
this paragraph shall be effective without the prior written agreement
of the holder of the Senior Note.
51. WAIVER OF COLLECTION OF IMPOSITION DEPOSITS. Lender hereby
waives collection of funds for Imposition Deposits to be collected
under Section 7 of this Instrument so long as such amounts are
collected pursuant to the Senior Instrument. In the event that
Imposition Deposits are no longer collected from Borrower pursuant to
the Senior Instrument, Lender shall collect such amounts pursuant to
such Section 7 of this Instrument.
52. WAIVER OF COLLECTION OF REPLACEMENT RESERVES. Lender shall
waive collection of funds for replacement reserves pursuant to the
Replacement Reserve and Security Agreement executed in connection with
this Instrument (the "Subordinate Replacement Reserve Agreement") so
long as replacement reserves are collected pursuant to the Replacement
Reserve and Security Agreement executed in connection with the Senior
Instrument (the "Senior Replacement Reserve Agreement"). Borrower
hereby assigns to Lender all amounts in the "Replacement Reserve" (as
defined in the Senior Replacement Reserve Agreement) as additional
security for all of the Borrower's obligations under the Note."
2. All capitalized terms used in this Exhibit not specifically defined
herein shall have the meanings set forth in the text of the Instrument that
precedes this Exhibit.
/s/ LAC
------------------------------
INITIALS
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EXHIBIT C
MODIFICATIONS TO INSTRUMENT
(Seniors Housing)
The following modifications are made to the text of the Instrument that
precedes this Exhibit:
1. Section 1 of the Instrument is hereby amended to add the following
paragraph (aa) at the end thereof:
"(aa) "Seniors Housing congregate living facility" means a residential
housing facility which qualifies as "housing for older persons" under
the Fair Housing Amendments Act of 1988 and includes congregate living
units and assisted living units, but which does not include any nursing
care units."
2. Section 1(o) of the Instrument is hereby amended to add the
following sentence at the end thereof:
"The term "Leases" shall also include any occupancy agreements
pertaining to occupants of the Mortgaged Property, including both
residential and commercial agreements."
3. Section 1(g) of the Instrument is hereby amended to add the
following sentence at the end thereof:
"The term "Hazardous Materials" shall also include any medical products
or devices, including, but not limited to, those materials defined as
"medical waste" or "biological waste" under relevant statutes or
regulations pertaining to hazardous materials law."
4. Section 1(s)(11) of the Instrument is hereby amended to add the
following sentence at the end thereof:
"payment of all proceeds from any private insurance for tenants to
cover rental charges and charges for services at the Mortgaged
Property, and the right to payments from Medicare or Medicaid programs,
or similar federal, state or local programs, boards, bureaus or
agencies and rights to payment from residents or private insurers
("Third Party Payments"), due for the rents of tenants or for the
services at the Mortgaged Property." Each of the foregoing shall be
considered "Rents" for the purposes of the actions and rights set forth
in Section 3 of the Instrument."
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5. Section 1(s) of the Instrument is hereby amended to add the
following paragraphs (16), (17), (18), and (19) at the end thereof:
"(16) all payments due, or received, from occupants, second party
charges added to base rental income, base and/or additional meal sales,
commercial operations located on the Mortgaged Property or provided as
a service to the occupants of the Mortgaged Property, rental from guest
suites, seasonal lease charges, furniture leases, and laundry services,
and any and all other services provided to third parties in connection
with the Mortgaged Property, and any and all other personal property on
the real property site, excluding personal property belonging to
occupants of the real property (other than property belonging to
Borrower);
(17) all permits, licenses and contracts relating to the operation and
authority to operate the Mortgaged Property as a Seniors Housing
congregate living facility;
(18) all rights to payments from Medicare or Medicaid programs, or
similar federal, state or local programs, boards, bureaus or agencies
and rights to payment from residents or private insurers ("Third Party
Payments"), arising from the operation of the Mortgaged Property as a
Seniors Housing congregate living facility, utility deposits, unearned
premiums, accrued, accruing or to accrue under insurance policies now
or hereafter obtained by the Borrower and all proceeds of any
conversion of the Mortgaged Property or any part thereof including,
without limitation, proceeds of hazard and title insurance and all
awards and compensation for the taking by eminent domain, condemnation
or otherwise, of all or any part of the Mortgaged Property or any
easement therein; and,
(19) all of Borrower's inventory, accounts, accounts receivable,
contract rights, general intangibles, and all proceeds thereof."
6. Section 1(v) of the Instrument is hereby amended to add the
following sentence at the end thereof:
"The term "Personalty" shall also include all personal property
currently owned or acquired by Borrower after the date hereof of in
connection with the ownership and operation of the Mortgaged Property
as a Seniors Housing congregate living facility, all kitchen or
restaurant supplies, dining room facilities, medical facilities, or
related furniture and equipment, and any other equipment, supplies or
furniture owned by Borrower and leased to any third party service
provider or facility operator under any use, occupancy, or lease
agreements, as well as all licenses, permits, certificates, and
approvals required for the operation of the Mortgaged Property as a
Seniors Housing congregate living facility, including replacements and
additions thereto."
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7. Section 3(b) of the Instrument is hereby amended to add the
following sentence at the end thereof:
"Lender is further authorized to give notice to all third party
providers, including insurers, any governmental provider, or Medicare
or Medicaid or any similar program or provider, at Lender's option,
instructing them to pay all Rents to Lender."
8. Section 3(c) of the Instrument is hereby amended to add the
following sentence at the end thereof:
"Because of the special regulatory requirements applicable to the
Mortgaged Property as a Seniors Housing congregate living facility,
including the requirement that operators be approved and licensed,
Borrower (and any licensed operator of the Mortgaged Property), in
order to induce Lender to lend funds hereunder, hereby agrees that upon
the occurrence of an Event of Default, that it shall continue to
provide all necessary services required under any operating agreement
or applicable licensing or regulatory requirements and shall fully
cooperate with Lender and any receiver as may be appointed by a court,
in performing these services and agree to arrange for an orderly
transition to a replacement licensed operator or provider of the
necessary services."
9. Section 11 of the Instrument is hereby amended to add the following
sentences at the end thereof:
"Borrower further covenants and agrees that it shall not permit more
than 20% of its total units or more than 20% of its total income to be
derived from units relying on Medicaid or Medicare payments. Borrower
further covenants and agrees that it shall limit the use and occupancy
of the Mortgaged Property to tenants that meet the standards for
congregate living or assisted living, and that it shall not accept
tenants that require skilled nursing care or permit tenants requiring
skilled nursing care to remain at the Mortgaged Property as a routine
matter."
10. Section 12(a) of the Instrument is hereby amended to add the
following sentence at the end thereof:
"and, (5) payments for any required licensing fees, permits, or other
expenses related to the operation of the Mortgaged Property by or on
behalf of the Lender as a Seniors Housing congregate living facility,
any fines or penalties that may be assessed against the Mortgaged
Property, any costs incurred to bring the Mortgaged Property into full
compliance with applicable codes and regulatory requirements, and any
fees or costs related to Lender's employment of a licensed operator for
the Mortgaged Property."
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11. Section 14(b) of the Instrument is hereby amended to add the
following sections (8) and (9) at the end thereof:
"(8) copies of all inspection reports, reviews, and certifications
prepared by, for, or on behalf of any licensing or regulatory authority
relating to the Mortgaged Property and any legal actions, orders,
notices, or reports relating to the Mortgaged Property issued by the
applicable regulatory or licensing authorities; and,
(9) Upon the request of Lender, copies of all reports relating to the
services and operations of the Mortgaged Property, including, if
applicable, Medicaid cost reports and records relating to account
balances due to or from Medicaid or any private insurer."
12. Section 17(a) of the Instrument is hereby amended to add the
following sentence at the end thereof:
"Borrower further covenants and agrees that it shall maintain and
operate the Mortgaged Property as a Seniors Housing congregate living
facility at all times in accordance with the standards required by any
applicable license or permit and as required by any regulatory
authority, that it shall maintain in good standing all operating
licenses and permits, and that it shall cause to renew and extend all
such required operating licenses or permits, and shall not fail to take
any action necessary to keep all such licenses and permits in good
standing and full force and effect. Borrower will immediately provide
lender with any notice or order which may adversely impact the
Mortgaged Property, its operations or its compliance with licensing and
regulatory requirements."
13. Section 21(a) of the Instrument is hereby amended to add the
following section (8) at the end thereof:
"and, (8) a Transfer to a separate entity, or change in the holder, of
the operating license or permit allowing the Mortgaged Property to
operate as a Seniors Housing congregate living facility."
14. Section 22(a) of the Instrument is hereby amended to add the
following sections (g), (h), and (i) at the end thereof:
"(g) any failure by Borrower to comply with the use and licensing
requirements set forth in Section 11, including but not limited to
Borrower's loss of its license or other legal authority to operate the
Mortgaged Property as a Seniors Housing congregate living facility;
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(h) any failure by Borrower to correct, within the time deadlines set
by any federal, state or local licensing agency, any deficiency that
justifies any action by such agency with respect to the Mortgaged
Property that may have a material adverse affect on the income and
operation of the Mortgaged Property or Borrower's interest in the
Mortgaged Property, including, without limitation, a termination,
revocation or suspension of any applicable license, registration,
permit, certificate, authorization or approval necessary for the
operation of the Mortgaged Property as Seniors Housing congregate
living facility.
(i) if, without the consent of Lender: (a) Borrower ceases to operate
the Mortgaged Property as a Seniors Housing congregate living facility;
(b) Borrower ceases to provide full kitchens (except ovens) separate
bathrooms, and areas for eating, sitting and sleeping in each unit
(unless such kitchens did not exist at the time the Instrument was
executed); (c) Borrower ceases to provide other facilities and services
normally associated with congregate or assisted living units,
including, without limitation, (i) central dining services providing
one to three meals per day, (ii) periodic housekeeping, (iii) laundry
services, and (iv) customary transportation services; (d) Borrower
provides or contracts for skilled nursing care for any of the units;
(e) non-residential space exceeds ten percent (10%) of the net rental
area; or, (f) the Mortgaged Property is no longer classified as housing
for older persons pursuant to the Fair Housing Amendments Act of 1988,
as it may be amended from time to time hereafter."
15. The former Sections 22 (g), (h), and (i) are hereby changed to be
Sections 22(j), (k), and (l), respectively.
16. Section 43 of the Instrument is hereby amended to add the following
sentence at the end thereof:
"In addition to the remedies set forth herein and elsewhere in this
Instrument, Lender shall be entitled to mandate the use of a lockbox
bank account, to be maintained under the control and supervision of
Lender, for all income of the Mortgaged Property, including, but not
limited to, Rents, service charges, insurance payments, third party
providers including Medicare and Medicaid and any other governmental or
private program by which the rents or occupancy charges are being paid.
Lender may, upon an Event of Default, cause the removal of Borrower
from any Mortgaged Property operations. Until such time as Lender has
located a replacement licensed operator, Borrower or its related or
affiliated entity acting as the licensed operator, shall continue to
provide all required services to maintain the Mortgaged Property in
full compliance with all licensing and regulatory requirements as a
Seniors Housing congregate living facility. Borrower acknowledges that
its failure to perform this service shall constitute a form of waste of
the
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Mortgaged Property, causing irreparable harm to Lender and the
Mortgaged Property, and shall constitute sufficient cause for the
appointment of a receiver."
17. The following new Section is added to the Instrument after the last
numbered Section:
53. BORROWER'S REPRESENTATIONS AND WARRANTIES. In
addition to any other representations and warranties contained in this
Instrument, Borrower hereby represents and warrants to Lender as
follows:
(a) The Mortgaged Property is duly licensed as a
Seniors Housing congregate living facility, and is in all respects
otherwise legally authorized to operate the Mortgaged Property as
Seniors Housing congregate living facility, under the applicable laws
of the Mortgaged Property Jurisdiction;
(b) Borrower and the Mortgaged Property (and the
operation thereof) are in compliance in all material respects with the
applicable provisions of all laws, statutes, regulations, ordinances,
orders, standards, restrictions and rules of any federal, state or
local government or quasi-government body, agency, board or authority
having jurisdiction over the operation of the Mortgaged Property,
including, without limitation: (a) health care and fire safety codes;
(b) laws regulating the handling and disposal of medical or biological
waste; (c) the applicable provisions of Seniors Housing congregate
living facility laws, rules, regulations and published interpretations
thereof to which the Borrower or the Mortgaged Property is subject; and
(d) all criteria established to classify the Mortgaged Property as
housing for older persons under the Fair Housing Amendments Act of
1988;
(c) If required, Borrower has a current provider
agreement under any and all applicable federal, state and local laws
for reimbursement: (a) to a Seniors Housing congregate living facility;
or (b) for other type of care provided at such facility. There is no
decision not to renew any provider agreement related to the Mortgaged
Property, nor is there any action pending or threatened to impose
material intermediate or alternative sanctions with respect to the
Mortgaged Property;
(d) Borrower and the Mortgaged Property are not
subject to any proceeding, suit or investigation by any federal, state
or local government or quasi-government body, agency, board authority
or any other administrative or investigative body which may result in
the imposition of a fine, alternative, interim or final sanction, or
which would have a material adverse effect on Borrower or the operation
of the Mortgaged Property, or which would result in the appointment of
a receiver or manager
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or would result in the revocation, transfer, surrender, suspension or
other impairment of the operating certificate, license, permit,
approval or authorization of the Mortgaged Property to operate as an
Seniors Housing congregate facility;
(e) Upon Lender's request, copies of resident care
agreements shall be provided to Lender. All resident records at the
Mortgaged Property are true and correct in all material respects;
(f) Neither the execution and delivery of the Note,
the Instrument or the Loan Documents, Borrower's performance
thereunder, the recordation of the Instrument, nor the exercise of any
remedies by Lender, will adversely affect the licenses, registrations,
permits, certificates, authorizations and approvals necessary for the
operation of the Mortgaged Property as a Seniors Housing congregate
living facility in the Mortgaged Property Jurisdiction;
(g) Borrower is not a participant in any federal
program whereby any federal, state or local, government or
quasi-governmental body, agency, board or other authority may have the
right to recover funds by reason of the advance of federal funds.
Borrower has received no notice, and is not aware of any violation of
applicable antitrust laws of any federal, state or local, government or
quasi-government body, agency, board or other authority; and,
(h) In the event any existing management agreement is
terminated or Lender acquires the Mortgaged Property through
foreclosure or otherwise, neither Borrower, Lender, any subsequent
manager, nor any subsequent purchaser (through foreclosure or
otherwise) must obtain a certificate of need from any applicable state
health care regulatory authority or agency (other than giving such
notice required under the applicable state law or regulation) prior to
applying for any applicable license, registration, permit, certificate,
authorization or approval necessary for the operation of the Mortgaged
Property as a Seniors Housing congregate living facility, provided that
no service or the unit complement is changed."
18. All capitalized terms used in this Exhibit not specifically defined
herein shall have the meanings set forth in the text of the Instrument that
precedes this Exhibit.
/s/ LAC
----------------------------
INITIALS
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Friday October 30, 7:00 am Eastern Time
Company Press Release
Capital Senior Living Corporation Completes Acquisition of Two Senior Living
Communities
DALLAS--(BUSINESS WIRE)--Oct. 30, 1998--Capital Senior Living Corporation
(NYSE:CSU news), one of the country's largest developers and operators of senior
living communities, today announced that it has completed the acquisition of two
senior living communities with a capacity for 358 residents for $34 million
including cash and assumption of debt. The acquisition, previously announced on
August 4, 1998, will increase the Company's resident capacity in operation,
expansion and development to approximately 11,000.
The two communities acquired by the Company are Gramercy Hill in Lincoln, NE and
Tesson Heights in St. Louis, MO. Both communities integrate independent and
assisted living to provide a continuum of care to its residents. Gramercy Hill
has a resident capacity for 101 independent living residents and 59 assisted
living residents and a current occupancy of 98%. Tesson Heights has a resident
capacity for 140 independent living residents and 58 assisted living residents
and a current occupancy of 96%. Residents in both communities enjoy amenities
such as gracious living areas, beauty parlor/barber shop, library, exercise
rooms, broad range of activity and recreational programs and attractively
landscaped grounds. The communities also provide meal service, housekeeping,
transportation, emergency call response and personal care services.
"We are excited to own such high quality communities which are consistent with
our operating philosophy of providing our residents a continuum of care so they
can age in place," commented Jeffrey L. Beck, Chief Executive Officer. "The
acquisitions are also consistent with our growth strategy of cluster
concentration, offering marketing and operating synergies with our current
operations in these markets. We are extremely pleased that with these
acquisitions and the acquisition of the NHP properties we have met our two-year
plan for acquisitions a year ahead of schedule."
ABOUT THE COMPANY
The Company is one of the country's largest developers and operators of senior
living communities. The Company currently operates 35 communities in 17 states
with a capacity of approximately 5,800 residents. The Company currently has 30
communities under construction or development, which will have a capacity of
approximately 4,600 residents, including 23 new Waterford Communities with a
capacity of approximately 3,200 residents. The Company is negotiating terms for
additional sites. The Company is also expanding nine existing communities to
accommodate approximately 600 additional residents. Upon completion of these
developments and expansions, the Company is expected to increase its capacity to
approximately 11,000 residents. The Company's operating philosophy emphasizes a
continuum of care, which integrates independent living, assisted living and
personal care to provide residents with the opportunity to age in place.
<PAGE>
This forward-looking statements in this release are subject to certain risks and
uncertainties that could cause results to differ materially, including, but not
without limitation to, the Company's ability to find suitable acquisition
properties at favorable terms, financing, licensing, business conditions, risks
of downturns in economic conditions generally, and satisfaction of closing
conditions such as those pertaining to licensure. These and other risks are
detailed the Company's reports filed with the Securities and Exchange
Commission.
- -----------------------
Contact:
Capital Senior Living Corporation
Scott Shamblin, 972-770-5600
