SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 1999
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
Commission file number 1-13445.
CAPITAL SENIOR LIVING CORPORATION
---------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 75-2678809
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14160 Dallas Parkway, Suite 300, Dallas, Texas 75240
----------------------------------------------------
(Address of principal executive offices)
(972) 770-5600
--------------
(Issuer's telephone number, including area code)
Indicated by check whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the past 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
--- ---
As of May 13, 1999, the Registrant had outstanding 19,717,347 shares of
its Common Stock, $.01 par value.
1
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<TABLE>
<CAPTION>
CAPITAL SENIOR LIVING CORPORATION
INDEX
Page
Number
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets --
March 31, 1999 and December 31, 1998 3
Consolidated Statements of Income--
Three Months Ended March 31, 1999 and 1998 4
Consolidated Statements of Shareholders' Equity--
Three Months Ended March 31, 1999 5
Consolidated Statements of Cash Flows--
Three Months Ended March 31, 1999 and 1998 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About Market Risks 16
Part II. Other Information
Item 1. Legal Proceedings 17
Item 2. Changes in Securities 17
Item 6. Exhibits and Reports on Form 8-K 19
Signature
</TABLE>
2
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PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CAPITAL SENIOR LIVING CORPORATION
CONSOLIDATED BALANCE SHEETS
<S> <C> <C>
March 31, December 31,
1999 1998
------------------ ----------------
ASSETS (Unaudited) (Audited)
Current assets:
Cash and cash equivalents............................................... $ 28,769,902 $ 35,827,270
Accounts receivable, net................................................ 3,534,849 2,955,507
Accounts receivable from affiliates..................................... 10,081,883 7,217,127
Interest receivable..................................................... 342,228 189,482
Deferred taxes.......................................................... 287,040 287,040
Prepaid expenses and other.............................................. 433,688 448,790
------------ ------------
Total current assets................................................. 43,449,590 46,925,216
Property and equipment, net.................................................. 118,597,835 118,943,953
Deferred taxes............................................................... 10,007,805 10,108,715
Notes receivable from affiliates............................................. 20,279,961 11,728,162
Investments in limited partnerships.......................................... 14,259,700 14,536,972
Management contract rights, net.............................................. 183,649 195,631
Goodwill, net................................................................ 1,202,946 1,213,876
Deferred financing charges, net.............................................. 382,124 530,531
Other assets................................................................. 1,176,866 1,083,679
--------------- ---------------
Total assets......................................................... $209,540,476 $205,266,735
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................................ $ 2,504,491 $ 2,780,513
Accrued expenses........................................................ 1,980,054 2,231,895
Current portion of notes payable........................................ 48,444,720 48,419,050
Customer deposits....................................................... 850,358 851,375
Federal and state income taxes payable.................................. 1,763,546 1,668,602
------------ ------------
Total current liabilities............................................ 55,543,169 55,951,435
Deferred income from affiliates.............................................. 1,169,183 792,240
Deferred income.............................................................. 205,105 115,062
Notes payable, net of current portion........................................ 13,479,042 13,696,797
Line of credit............................................................... 19,395,275 18,974,186
Minority interest in consolidated partnerships............................... 11,380,145 11,220,836
Commitments and contingencies
Shareholders' equity:
Preferred stock, $.01 par value:
Authorized shares -- 15,000,000; no shares issued or outstanding..... -- --
Common stock, $.01 par value:
Authorized shares -- 65,000,000
Issued and outstanding shares -- 19,717,347 at March 31, 1999
and December 31, 1998............................................. 197,173 197,173
Additional paid-in capital.............................................. 91,740,251 91,740,251
Retained earnings....................................................... 16,431,133 12,578,755
------------ ------------
Total shareholders' equity........................................... 108,368,557 104,516,179
------------ ------------
Total liabilities and shareholders' equity........................... $209,540,476 $205,266,735
============ ============
</TABLE>
See accompanying notes.
3
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<TABLE>
<CAPTION>
CAPITAL SENIOR LIVING CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended March 31,
------------------------------
1999 1998
--------------- -------------
(Unaudited) (Unaudited)
<S> <C> <C>
Revenues:
Resident and health care revenue..................................... $ 9,902,677 $ 4,934,895
Rental and lease income.............................................. 1,092,771 1,067,501
Unaffiliated management services revenue............................. 697,404 637,928
Affiliated management services revenue............................... 112,252 379,449
Unaffiliated development fees........................................ 552,603 470,718
Affiliated development fees.......................................... 2,805,085 639,712
Other................................................................ 304,813 223,912
----------- -----------
Total revenues.................................................... 15,467,605 8,354,115
Expenses:
Operating expenses................................................... 5,968,021 3,755,226
General and administrative expenses.................................. 2,106,185 1,708,569
Depreciation and amortization........................................ 1,120,713 560,172
----------- -----------
Total expenses.................................................... 9,194,919 6,023,967
----------- -----------
Income from operations.................................................... 6,272,686 2,330,148
Other income (expense):
Interest income...................................................... 1,732,615 1,092,819
Interest expense..................................................... (1,478,427) (177,977)
----------- -----------
Income before income taxes and minority interest in
consolidated partnerships........................................... 6,526,874 3,244,990
Provision for income taxes................................................ (2,515,187) (1,232,252)
----------- -----------
Income before minority interest in consolidated partnerships.............. 4,011,687 2,012,738
Minority interest in consolidated partnerships............................ (159,309) (86,572)
----------- -----------
Net income................................................................ $ 3,852,378 $ 1,926,166
=========== ===========
Net income per share:
Basic and diluted.................................................... $ 0.20 $ 0.10
=========== ===========
Weighted average shares outstanding.................................. 19,717,347 19,717,347
=========== ===========
</TABLE>
See accompanying notes.
4
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<TABLE>
<CAPTION>
CAPITAL SENIOR LIVING CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<S> <C> <C> <C> <C> <C>
Common Stock Additional
--------------------------- Paid-In Retained
Shares Amount Capital Earnings Total
---------- -------- ---------- -------- ------------
Balance at December 31, 1998............ 19,717,347 $197,173 $91,740,251 $12,578,755 $104,516,179
Net income............................ -- -- -- 3,852,378 3,852,378
----------- -------- ----------- ----------- ------------
Balance at March 31, 1999............... 19,717,347 $197,173 $91,740,251 $16,431,133 $108,368,557
========== ======== =========== =========== ============
</TABLE>
See accompanying notes.
5
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<TABLE>
<CAPTION>
CAPITAL SENIOR LIVING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31,
1999 1998
---------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
Operating Activities
Net income................................................................. $ 3,852,378 $ 1,926,166
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization......................................... 1,120,713 560,172
Amortization of deferred financing charges............................ 143,420 --
Minority interest in consolidated partnerships........................ 159,309 86,572
Deferred taxes........................................................ 100,910 --
Deferred income from affiliates....................................... 376,943 --
Deferred income....................................................... 90,043 (34,006)
Changes in operating assets and liabilities:
Accounts receivable................................................ (579,342) (1,185,059)
Accounts receivable from affiliates................................ (2,864,756) (8,414)
Interest receivable................................................ (152,746) --
Federal and state income taxes payable............................. 94,944 500,417
Prepaid expenses and other......................................... 15,102 70,222
Accounts payable and accrued expenses.............................. (527,863) 257,922
Customer deposits.................................................. (1,017) 14,410
Other assets and due to affiliates................................. (93,975) (417,469)
------------ ----------
Net cash provided by operating activities.................................. 1,734,063 1,770,933
Investing Activities
Capital expenditures....................................................... (750,895) (1,465,805)
Change in investments in limited partnerships.............................. 277,272 (406,072)
----------- -----------
Net cash used in investing activities...................................... (473,623) (1,871,877)
Financing Activities
Proceeds from notes payable and line of credit............................. 421,089 1,658,263
Repayments of notes payable................................................ (192,085) (352,603)
Advances to affiliates..................................................... (8,551,799) (1,791,707)
Repurchase of HCP limited partnership interests............................ -- (125,529)
Deferred loan charges paid................................................. 4,987 (9,061)
----------- -----------
Net cash used in financing activities...................................... (8,317,808) (620,637)
----------- -----------
(Decrease) in cash and cash equivalents.................................... (7,057,368) (721,581)
Cash and cash equivalents at beginning of period........................... 35,827,270 48,125,225
----------- -----------
Cash and cash equivalents at end of period................................. $28,769,902 $47,403,644
=========== ===========
Supplemental disclosures:
Cash paid during the period for:
Interest $ 1,336,920 $ 168,603
=========== ===========
Income taxes $ 1,420,000 $ 692,000
=========== ===========
</TABLE>
See accompanying notes.
6
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CAPITAL SENIOR LIVING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999
(Unaudited)
1. BASIS OF PRESENTATION
Capital Senior Living Corporation, a Delaware corporation, was incorporated on
October 25, 1996. The accompanying consolidated financial statements include the
financial statements of Capital Senior Living Corporation (the "Company") and
its subsidiaries and limited partnerships owned and controlled by it or under
common ownership prior to the transfer of ownership in connection with the
November 5, 1997 public offering and formation transactions. All intercompany
balances and transactions have been eliminated in consolidation.
The accompanying consolidated balance sheet, as of December 31, 1998, has been
derived from audited consolidated financial statements of the Company for the
year ended December 31, 1998, and the accompanying unaudited consolidated
financial statements, as of March 31, 1999 and 1998, have been prepared pursuant
to the rules and regulations of the Securities and Exchange Commission. Certain
information and note disclosures normally included in the annual financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to those rules and regulations. For
further information, refer to the financial statements and notes thereto for the
year ended December 31, 1998 included in the Company's Annual Report on Form
10-K filed with the Securities and Exchange Commission on March 31, 1999.
In the opinion of the Company, the accompanying consolidated financial
statements contain all adjustments (all of which were normal recurring accruals)
necessary to present fairly the Company's financial position as of March 31,
1999, results of operations and cash flows for the three month periods ended
March 31, 1999 and 1998 and changes in shareholders' equity for the three month
period ended March 31, 1999. The results of operations for the three month
period ended March 31, 1999 are not necessarily indicative of the results for
the year ending December 31, 1999.
2. TRANSACTIONS WITH AFFILIATES
Effective April 1, 1998, the Company obtained a 19% limited partnership interest
in Triad Senior Living I, L.P. ("Triad I") for $330,243 in cash. The Company is
accounting for this investment under the equity method of accounting based on
the provisions of the Triad I partnership agreement. The Company is developing
senior living communities for Triad I. Additionally, the Company loaned money to
Triad I pursuant to an unsecured loan facility not to exceed $10,000,000, which
was increased to $13,000,000 on March 31, 1999. The principal is due March 12,
2003. The first draw under this loan facility was made on March 12, 1998.
Interest is due quarterly at 8% per annum. This loan may be prepaid without
penalty. At March 31, 1999, $10,247,730 has been advanced to Triad I under this
loan facility. The Company has deferred interest income and development fees
from Triad I of $105,378 and $272,734, respectively, as of March 31, 1999.
Effective September 23, 1998, the Company obtained a 19% limited partnership
interest in Triad Senior Living II, L.P. ("Triad II") for $74,100 in cash. The
Company is accounting for this investment under the equity method of accounting
based on the provisions of the Triad II partnership agreement. The Company is
developing senior living communities for Triad II. Additionally, the Company
loaned money to Triad II pursuant to an unsecured loan facility not to exceed
$7,000,000, which was increased to $10,000,000 on January 15, 1999. The
principal is due September 25, 2003. The first draw under this loan facility was
7
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CAPITAL SENIOR LIVING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999
(Unaudited)
made on September 25, 1998. Interest is due quarterly at 10.5% per annum. This
loan may be prepaid without penalty. At March 31, 1999, $4,795,966 has been
advanced to Triad II under this loan facility. The Company has deferred interest
income and development fees from Triad II of $17,119 and $110,815, respectively,
as of March 31, 1999.
Effective November 10, 1998, the Company obtained a 19% limited partnership
interest in Triad Senior Living III, L.P. ("Triad III") for $142,500 in cash.
The Company is accounting for this investment under the equity method of
accounting based on the provisions of the Triad III partnership agreement. The
Company is developing senior living communities for Triad III. Additionally, the
Company loaned money to Triad III pursuant to an unsecured loan facility not to
exceed $10,000,000. The principal is due February 8, 2004. The first draw under
this loan facility was made on February 8, 1999. Interest is due quarterly at
10.5% per annum. This loan may be prepaid without penalty. At March 31, 1999,
$3,455,039 has been advanced to Triad III under this loan facility. The Company
has deferred interest income and development fees from Triad III of $6,313 and
$216,836, respectively, as of March 31, 1999.
Effective December 22, 1998, the Company obtained a 19% limited partnership
interest in Triad Senior Living IV, L.P. ("Triad IV") for $142,500 in cash. The
Company is accounting for this investment under the equity method of accounting
based on the provisions of the Triad IV partnership agreement. The Company is
developing senior living communities for Triad IV. Additionally, the Company
loaned money to Triad IV pursuant to an unsecured loan facility not to exceed
$10,000,000. The principal is due December 30, 2003. The first draw under this
loan facility was made on December 30, 1998. Interest is due quarterly at 10.5%
per annum. This loan may be prepaid without penalty. At March 31, 1999,
$1,781,225 has been advanced to Triad IV under this loan facility. The Company
has deferred interest income and development fees from Triad IV of $7,369 and
$108,249, respectively, as of March 31, 1999.
The management agreements with the Triad entities provide the Company with an
option to purchase the communities developed by the Triad entities upon their
completion for an amount equal to the fair market value (based on a third-party
appraisal but not less than hard and soft costs and lease-up costs). The Company
also can purchase the partnership interests of the non-Company partners for an
amount equal to the amount such party paid for its interest, plus noncompounded
interest at 12% per annum. The Company has no commitments or obligations to
acquire any properties or additional partnership interests. Also, the Company
has no commitments relating to any of the secured loan facilities of any of the
above Triad entities.
The Company provides a guarantee of its subsidiaries' development
agreement and management agreement, which includes an operating deficit
obligation.
3. NET INCOME PER SHARE
Basic net income per share is calculated by dividing net income by the weighted
average number of common shares outstanding during the period. Diluted net
income per share considers the dilutive effect of outstanding options calculated
using the treasury stock method.
The average daily price of the common stock during the first quarter of 1999 did
not exceed the exercise price of the options, and therefore, the options are not
considered dilutive for purposes of calculating diluted net income per share.
8
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CAPITAL SENIOR LIVING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
March 31, 1999
(Unaudited)
4. CONTINGENCIES
On or about October 23, 1998, Robert Lewis filed a putative class action
complaint on behalf of certain holders of Assignee Interests in NHP Retirement
Housing Partners I Limited Partnership ("NHP") in the Delaware Court of Chancery
against NHP, the Company, Capital Senior Living Properties 2-NHPCT, Inc. and
Capital Realty Group Senior Housing, Inc. (collectively, the "Defendants"). Mr.
Lewis purchased 90 Assignee Interests in February 1993 for $180. The complaint
alleges among other things, that the Defendants breached, or aided and abetted a
breach of, the express and implied terms of the NHP Partnership Agreement in
connection with the sale of four properties by NHP to Capital Senior Living
Properties 2-NHPCT, Inc. The complaint seeks, among other relief, rescission of
the sale of those properties and unspecified damages. The Company believes the
complaint is without merit and intends to vigorously defend itself in this
action.
Triad I, Triad II, Triad III and the Company have agreed to settle (the
"Settlement") with Holiday Retirement Corporation as well as Colson & Colson
Construction Company and their architects (collectively, "Holiday") resolving
all claims among the parties relating to a lawsuit filed by Holiday, alleging
that copyright and related trade dress had been violated by the Company on five
communities owned by Triad I, in which the Company is a 19% limited partner and
provides development services under a third party development agreement. The
Company had denied all allegations and had filed a counterclaim against Holiday.
The Settlement was resolved without any cost to the Company.
The Company has pending claims incurred in the normal course of business which,
in the opinion of management, based on the advice of legal counsel, will not
have a material effect on the financial statements of the Company.
5. PENDING MERGERS
On February 7, 1999, the Company entered into definitive Agreements and
Plans of Merger with ILM Senior Living, Inc. and ILM II Senior Living, Inc. for
a combined transaction value of approximately $174 million, which includes
approximately $4 million of net liabilities. The primary assets of ILM Senior
Living, Inc. and ILM II Senior Living, Inc. collectively are 13 senior living
communities that have been managed by the Company under management agreements
since 1996. Under the two merger agreements, both ILM Senior Living, Inc. and
ILM II Senior Living, Inc. would separately merge with and into a wholly owned
direct subsidiary of the Company with the aggregate issued and outstanding
shares of ILM Senior Living, Inc. and ILM II Senior Living, Inc. common stock
eligible to receive 65% of the merger consideration in cash (approximately
$110.5 million) and 35% in 8% convertible trust preferred securities (with a
liquidation value of approximately $59.5 million). Both mergers have been
approved by the boards of directors of each company and each transaction
requires the approval of the applicable shareholders of either ILM Senior
Living, Inc. or ILM II Senior Living, Inc. The mergers also are subject to
certain other customary conditions, including regulatory approvals, and are
expected to be completed during the second half of 1999.
9
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CAPITAL SENIOR LIVING CORPORATION
March 31, 1999
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
The following discussion and analysis addresses (i) the Company's results of
operations for the three months ended March 31, 1999 and 1998, respectively, and
(ii) liquidity and capital resources of the Company and should be read in
conjunction with the Company's consolidated financial statements contained
elsewhere in this report.
The Company generates revenue from a variety of sources. For the three months
ended March 31, 1999, the Company's revenue was derived as follows: 64.0% from
the operation of 11 owned senior living communities that are operated by the
Company; 7.1% from lease rentals from triple net leases of three skilled nursing
communities and four physical rehabilitation centers; 5.2% from management fees
arising from management services provided for one affiliate owned and operated
senior living community and 15 third party owned and operated senior living
communities; and 21.7% derived from development fees earned for managing the
development and construction of new senior living communities for affiliated and
unaffiliated third parties.
The Company believes that the factors affecting the financial performance of
communities managed under contracts with third parties do not vary substantially
from the factors affecting the performance of owned and leased communities,
although there are different business risks associated with these activities.
The Company's third-party management fees are primarily based on a percentage of
gross revenues. As a result, the cash flow and profitability of such contracts
to the Company are more dependent on the revenues generated by such communities
and less dependent on net cash flow than for owned communities. Further, the
Company is not responsible for capital investments in managed communities. While
the management contracts are generally terminable only for cause, in certain
cases the contracts can be terminated upon the sale of a community, subject to
the Company's rights to offer to purchase such community.
The Company's triple net leases extend through the year 2000 for three of its
owned communities and through the year 2001 for four of its owned communities.
The base payments under these leases are fixed and are not subject to change
based upon the operating performance of these communities. Certain of these
leases have additional rent based on operating performance. Following
termination of the lease agreements, the Company may either convert and operate
the communities as assisted living and Alzheimer's care communities, sell the
communities or evaluate other alternatives.
The Company's current management contracts expire on various dates between
December 1999 and September 2009 and provide for management fees based generally
upon rates that vary by contract from 4% of net revenues to 7% of net revenues.
In addition, certain of the contracts provide for supplemental incentive fees
that vary by contract based upon the financial performance of the managed
community. The Company's development fees are generally based upon a percentage
of construction costs and are earned over the period commencing with the initial
development activities and ending with the opening of the community. As of March
31, 1999, development fees have been earned for services performed on 35
communities under development or expansion for third parties.
10
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CAPITAL SENIOR LIVING CORPORATION
March 31, 1999
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Results of Operations
The following tables set forth for the periods indicated, selected statements of
income data in thousands of dollars and expressed as a percentage of total
revenues.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1999 1998
----------------------------- -------------------------------
$ % $ %
-------------- ------------- ---------------- --------------
<S> <C> <C> <C> <C>
Revenues:
Resident and healthcare revenue $ 9,903 64.0% $4,935 59.1%
Rental and lease income 1,093 7.1 1,068 12.8
Unaffiliated management services revenue 697 4.5 638 7.6
Affiliated management services revenue 112 0.7 379 4.5
Unaffiliated development fees 553 3.6 471 5.6
Affiliated development fees 2,805 18.1 639 7.7
Other 305 2.0 224 2.7
------- ------ ------- ------
Total revenue 15,468 100.0 8,354 100.0
------- ------ ------- ------
Expenses:
Operating expenses 5,968 38.6 3,755 44.9
General and administrative expenses 2,108 13.6 1,709 20.5
Depreciation and amortization 1,121 7.2 560 6.7
------- ------ ------- ------
Total expenses 9,197 59.4 6,024 72.1
------- ------ ------- ------
Income from operations 6,271 40.6 2,330 27.9
Other income (expense):
Interest income 1,733 11.2 1,093 13.0
Interest expense (1,478) (9.6) (178) (2.1)
------- ------ ------- ------
Income before income taxes and minority interest
in consolidated partnerships 6,526 42.2 3,245 38.8
Provision for income taxes (2,515) (16.3) (1,232) (14.7)
------- ------ ------- ------
Income before minority interest in
consolidated partnerships 4,011 25.9 2,013 24.1
Minority interest in consolidated partnerships (159) (1.0) (87) (1.0)
------- ------ ------- ------
Net income $ 3,852 24.9% $ 1,926 23.1%
======= ====== ======= ======
</TABLE>
Three Months Ended March 31, 1999 Compared to the Three Months Ended March 31,
1998
Revenues. Total revenues were $15,468,000 in the three months ended March 31,
1999 compared to $8,354,000 for the three months ended March 31, 1998,
representing an increase of $7,114,000, or 85.2%. The primary components of this
increase were resident and healthcare revenue of $4,968,000, and development
fees of $2,248,000, offset by a decrease in affiliated management fees of
$267,000. The increases were due to the acquisition of six communities in 1998
and the addition of 23 development contracts for managing the development and
construction of new senior living communities owned by third parties. The
decrease is due to the loss of management fees from four of the communities
acquired in 1998.
Expenses. Total expenses were $9,197,000 in the first quarter of 1999 compared
to $6,024,000 in the first quarter of 1998, representing an increase of
$3,173,000 due mainly to the acquisition of the six communities in 1998.
11
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CAPITAL SENIOR LIVING CORPORATION
March 31, 1999
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Other income and expenses. Other income and expenses decreased $660,000, due to
an increase in interest income of $640,000 offset by an increase in interest
expense of $1,300,000. Interest income increased as a result of an increase in
interest earned from Triad I, Triad II, Triad III and Triad IV and interest from
NHP Notes due to the partial redemption of the NHP Notes and payment of accrued
interest. The increase in interest expense is due to the financing of the
acquisition of the six communities acquired in 1998.
Provision for income taxes. Provision for income taxes in the first quarter of
1999 was $2,515,000 compared to $1,232,000 in the first quarter of 1998. This
increase is due to the increase in income before income taxes.
Minority interest. Minority interest increased $72,000 due to the increase in
net income at HealthCare Properties, L.P. ("HCP").
Net income. As a result of the foregoing factors, net income increased
$1,926,000 to $3,852,000 for the three months ended March 31, 1999, as compared
to $1,926,000 for the three months ended March 31, 1998.
Liquidity and Capital Resources
In addition to approximately $29 million of cash balances on hand as of March
31, 1999, the Company's principal sources of liquidity are expected to be cash
flows from operations and amounts available for borrowing under its revolving
line of credit, which was amended on April 8, 1999 to increase the commitment
from $20 million to $34 million. There can be no assurance, however, that the
Company will continue to generate cash flows at or above current levels or that
the Company will be able to meet its anticipated need for working capital.
The Company derives the benefits and bears the risks attendant to the
communities it owns. The cash flows and profitability of owned communities
depends on the operating results of such communities and are subject to certain
risks of ownership, including the need for capital expenditures, financing and
other risks such as those relating to environmental matters.
The cash flows and profitability of the Company's owned communities that are
leased to third parties depend on the ability of the lessee to make timely lease
payments. At March 31, 1999, HCP was operating one of its properties and had
leased seven of its owned properties under triple net leases to third parties
until year 2000 or 2001. Four of these properties are leased until year 2001 to
HealthSouth Rehabilitation Corp. ("HealthSouth"), which provides acute spinal
injury intermediate care at these properties. HealthSouth closed one of these
communities in 1994 and closed another community in February of 1997 due to low
occupancy. HealthSouth has continued to make lease payments on a timely basis
for all four properties. Should the operators of the leased properties default
on payment of their lease obligations prior to termination of the lease
agreements, six of the seven lease contracts contain a continuing guarantee of
payment and performance by the parent company of the operators, which the
Company intends to pursue in the event of default. Following termination of
these leases, the Company will either convert and operate the communities as
assisted living and Alzheimer's care communities, sell the communities or
evaluate other alternatives. HCP's communities lessees are all current in their
lease obligations to HCP. The lessee for one property continues to fund a
deficit between the required lease payment and operator's cash flow.
12
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CAPITAL SENIOR LIVING CORPORATION
March 31, 1999
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
The cash flows and profitability of the Company's third-party management fees
are dependent upon the revenues and profitability of the communities managed.
While the management contracts are generally terminable only for cause, in
certain cases the contracts can be terminated upon the sale of a community,
subject to the Company's rights to offer to purchase such community.
The Company plans to continue to develop and acquire senior living communities.
The development of senior living communities typically involves a substantial
commitment of capital over a 12-month construction period during which time no
revenues are generated, followed by a 12- to 14-month lease-up period.
Effective April 1, 1998, Tri Point Communities, L.P. ("Tri Point"), a limited
partnership owned by the Company's founders (Messrs. Beck and Stroud) and their
affiliates, was organized and the interests of Messrs. Beck and Stroud were sold
at their cost to Triad Senior Living, Inc. and its affiliates which are
unrelated third parties. Tri Point was renamed Triad I. The new general partner
of Triad I owning 1%, is Triad Senior Living, Inc. The limited partners are
Blake N. Fail (principal owner of Triad Senior Living, Inc.), owning 80%, and
the Company, owning 19%. The development agreements between Triad I and the
Company provide for a development fee of 4% to the Company, as well as
reimbursement of expenses and overhead not to exceed 4%. Triad I has also
entered into management agreements with the Company providing for management
fees in an amount equal to the greater of 5% of gross revenues or $5,000 per
month per community, plus overhead reimbursement not to exceed 1% of gross
revenues and a $500 per unit lease up fee. The Company has an option to purchase
the partnership interests of Triad Senior Living, Inc. and Blake N. Fail for an
amount equal to the amount such party paid for its interest, plus noncompounded
interest of 12% per annum. The management agreements also provide the Company
with an option to purchase the communities developed by Triad I upon their
completion for an amount equal to the fair market value (based on a third-party
appraisal but not less than hard and soft costs and lease-up costs).
Triad I has entered into construction loan facilities aggregating approximately
$50,000,000 to fund its development activities and a take-out facility
aggregating approximately $50,000,000.
During 1998, the Company agreed to loan Triad I up to $10,000,000. On March 31,
1999, the loan amount was amended to up to $13,000,000. The principal is due
March 12, 2003. The first draw under this loan facility was made on March 12,
1998. Interest is due quarterly at 8% per annum. This loan may be prepaid
without penalty. At March 31, 1999, approximately $10,248,000 has been advanced
to Triad I under this loan facility.
Effective September 24, 1998, the Company and Triad II, a limited partnership,
entered into a Development and Turnkey Services Agreement in connection with the
development and management of the Company's planned new Waterford communities
where Triad II would own and finance the construction of the new communities.
Triad II was organized on September 23, 1998. The general partner of Triad II,
owning 1%, is Triad Partners II, Inc. The limited partners are Triad Partner II,
Inc., owning 80%, and the Company, owning 19%.
The Company has an option to purchase the partnership interests of Triad
Partners II, Inc. in Triad II for an amount equal to the amount such party paid
for its interests, plus noncompounded interest of 12% per annum. The management
agreements with Triad II also provide the Company with an option to purchase the
13
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CAPITAL SENIOR LIVING CORPORATION
March 31, 1999
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
communities developed by Triad II upon their completion for an amount equal to
the fair market value (based on a third-party appraisal but not less than hard
and soft costs and lease-up costs).
Triad II has entered into construction and mini-perm loan facilities aggregating
approximately $26,000,000 to fund its development activities.
During the third quarter of 1998, the Company agreed to loan Triad II up to
$7,000,000. On January 15, 1999, the loan amount was amended to up to
$10,000,000. The principal is due September 25, 2003. The first draw under this
loan facility was made on September 25, 1998, Interest is due quarterly at 10.5%
per annum. This loan may be prepaid without penalty. At March 31, 1999,
approximately $4,800,000 has been advanced to Triad II under this loan facility.
Effective November 10, 1998, the Company and Triad III, a limited partnership,
entered into a Development and Turnkey Services Agreement in connection with the
development and management of the Company's planned new Waterford communities
where Triad III would own and finance the construction of the new communities.
Triad III was organized on November 10, 1998. The general partner of Triad III,
owning 1% is Triad Partners III, Inc. The limited partners are Triad Partners
III, Inc., owning 80%, and the Company, owning 19%.
The Company has an option to purchase the partnership interests of Triad
Partners III, Inc. in Triad III for an amount equal to the amount such party
paid for its interests, plus noncompounded interest of 12% per annum. The
management agreements with Triad III also provide the Company with an option to
purchase the communities developed by Triad III upon their completion for an
amount equal to the fair market value (based on a third-party appraisal but not
less than hard and soft costs and lease-up costs).
Triad III has entered into construction and mini-perm loan facilities
aggregating approximately $51,000,000 to fund its development activities.
During the fourth quarter of 1998, the Company agreed to loan Triad III up to
$10,000,000. The principal is due February 8, 2004. Interest is due quarterly at
10.5% per annum. This loan may be prepaid without penalty. At March 31,1999,
approximately $3,455,000 has been advanced to Triad III under this loan
facility.
Effective December 30, 1998, the Company and Triad IV, a limited partnership,
entered into a Development and Turnkey Services Agreement in connection with the
development and management of the Company's planned new Waterford communities
where Triad IV would own and finance the construction of the new communities.
Triad IV was organized on December 22, 1998. The general partner of Triad IV,
owning 1%, is Triad Partners IV, Inc. The limited partners are Triad Partners
IV, Inc. owning 80%, and the Company, owning 19%.
The Company has an option to purchase the partnership interests of Triad
Partners IV, Inc. in Triad IV for an amount equal to the amount such party paid
for its interests, plus noncompounded interest of 12% per annum. The management
agreements with Triad IV also provide with Company with an option to purchase
the communities developed by Triad IV upon their completion or an amount equal
to the fair market value (based on a third-party appraisal but not less than
hard and soft costs and lease-up costs).
14
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CAPITAL SENIOR LIVING CORPORATION
March 31, 1999
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
The Company has made no determination as to whether it will exercise
its purchase options in Triad I, Triad II, Triad III and Triad IV. The Company
will evaluate the possible exercise of each purchase option based upon the
business and financial factors which may exist at the time those options may be
exercised.
Triad IV is negotiating commitments for loan facilities aggregating up to
$50,000,000 to fund its development activities.
During the fourth quarter of 1998, the Company agreed to loan Triad IV up to
$10,000,000. The principal is due December 30, 2003. The first draw under this
loan facility was made on December 30, 1998. Interest is due quarterly at 10.5%
per annum. This loan may be prepaid without penalty. At March 31, 1999,
approximately $1,781,000 has been advanced to Triad IV under this loan facility.
Year 2000 Issue
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs or hardware that have date-sensitive software or embedded
chips may recognize the year 2000 as a date other than the year 2000. This could
result in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices or engage in similar normal business activities.
Based on ongoing assessments, the Company has developed a program to modify or
replace significant portions of its software and certain hardware, which are
generally PC-based systems, so that those systems will properly recognize and
utilize dates beyond December 31, 1999. The Company has substantially completed
software reprogramming and software and hardware replacement as of March 31,
1999, with 100% completion targeted for September 30, 1999. The Company
presently believes that these modifications and replacements of existing
software and certain hardware will mitigate the Year 2000 Issue. However, if
such modifications and replacements are not completed timely, the Year 2000
Issue could have a material impact on the operations of the Company. The costs
of Year 2000 remediation are not expected to be material based on the Company's
operations.
The Company has assessed its exposure to operating equipment, and such exposure
is not significant due to the nature of the Company's business.
The Company is not aware of any external agency with a Year 2000 Issue that
would materially impact the Company's results of operations, liquidity or
capital resources. However, the Company has no means of determining whether or
ensuring that external agents will be Year 2000-ready. The inability of external
agents to complete their Year 2000 resolution process in a timely fashion could
materially impact the Company.
Management of the Company believes it has an effective program in place to
resolve the Year 2000 Issue in a timely manner. As noted above, the Company has
completed most but not all not all necessary phases of its Year 2000 program. In
the event that the Company does not complete the current program or any
additional phases, the Company could incur disruptions to its operations. In
addition, disruptions in the economy generally resulting from Year 2000 Issues
could also materially adversely affect the Company. The Company could be subject
to litigation or computer systems failure. The amount of potential liability and
cost revenue cannot be reasonably estimated at this time.
15
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CAPITAL SENIOR LIVING CORPORATION
March 31, 1999
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
The Company currently has no contingency plans in place in the event it does not
complete all phases of its Year 2000 program. The Company plans to evaluate the
status of completion in mid-1999 and determine whether such a plan is necessary.
Forward-Looking Statements
Certain information contained in this report constitutes "Forward-Looking
Statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended,
which can be identified by the use of forward-looking terminology such as "may,"
"will," "expect," "anticipate," "estimate" or "continue" or the negative thereof
or other variations thereon or comparable terminology. The Company cautions
readers that forward-looking statements, including, without limitation, those
relating to the Company's future business prospects, revenues, working capital,
liquidity, capital needs, interest costs and income, are subject to certain
risks and uncertainties that could cause actual results to differ materially
from those indicated in the forward-looking statements, due to several important
factors herein identified, among others, and their risks and factors identified
from time to time in the Company's reports filed with the Securities and
Exchange Commission.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company's primary market risk exposure is interest rate risk. At March 31,
1999, the Company had $67,095,275 million of variable rate debt tied to LIBOR,
consisting of one $19,395,275 revolving credit facility that matures on December
10, 2000, which was amended on April 8, 1999 to extend the maturity to April 8,
2002 (the "Bank One Facility") and one $47,700,000 credit facility that matures
on October 1, 1999 (the "Lehman Facility"). The Company expects to complete a
refinancing of the Lehman Facility with long term fixed rate mortgage loans
during the second or third quarter of 1999. Interest on the Bank One Facility is
based on LIBOR plus 1.7%. Interest on the Lehman Facility is based on LIBOR plus
1.875% At March 31, 1999, the LIBOR rate was 4.94%. An increase in interest
rates will increase the amount of interest expense incurred by the Company.
Other notes payable of $14,223,762 consists of fixed rate mortgage loans. Notes
receivable of $20,279,961 are also fixed rate financial instruments.
The Company is also exposed to market risks from fluctuations in interest rates
and the effects of those fluctuations on the market values of its cash
equivalent short-term investments. The cash equivalent short-term investments
consist primarily of overnight investments that are not significantly exposed to
interest rate risk, except to the extent that changes in interest rates will
ultimately affect the amount of interest income earned on these investments.
16
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CAPITAL SENIOR LIVING CORPORATION
March 31, 1999
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On or about October 23, 1998, Robert Lewis filed a putative class action
complaint on behalf of certain holders of Assignee Interests in NHP Retirement
Housing Partners I Limited Partnership ("NHP") in the Delaware Court of Chancery
against NHP, the Company, Capital Senior Living Properties 2-NHPCT, Inc. and
Capital Realty Group Senior Housing Inc. (collectively, the "Defendants"). Mr.
Lewis purchased 90 Assignee Interests in February 1993 for $180. The complaint
alleges among other things, that the Defendant's breach, or aided and abetted a
breach of, the express and implied terms of the NHP Partnership Agreement in
connection with the sale of four properties by NHP to Capital Senior Living
Properties 2-NHPCT, Inc. The complaint seeks, among other relief, rescission of
the sale of those properties and unspecified damages. The Company believes the
complaint is without merit and intends to vigorously defend itself in this
action.
Triad I, Triad II, Triad III and the Company have agreed to settle (the
"Settlement") with Holiday Retirement Corporation as well as Colson & Colson
Construction Company and their architects (collectively, "Holiday") resolving
all claims among the parties relating to a lawsuit filed by Holiday, alleging
that copyright and related trade dress had been violated by the Company on five
communities owned by Triad I, in which the Company is a 19% limited partner and
provides development services under a third party development agreement. The
Company had denied all allegations and had filed a counterclaim against Holiday.
The Settlement was resolved without any cost to the Company.
The Company has pending claims incurred in the normal course of business which,
in the opinion of management, based on the advice of legal counsel, will not
have a material effect on the financial statements of the Company.
Item 2. CHANGES IN SECURITIES (Use of proceeds from public offering)
The Company's initial Registration Statement on Form S-1, File No. 333-33379,
was declared effective by the Securities and Exchange Commission on October 30,
1997 (the "Offering"). The Offering was managed by Lehman Brothers Inc., J.C.
Bradford & Co., Donaldson, Lufkin & Jenrette Securities Corporation and Smith
Barney Inc. A total of 10,350,000 shares of Common Stock, including 1,350,000
shares subject to an over-allotment option, were registered. The net proceeds to
the Company from the sale of such shares were approximately $128,407,000, after
deducting underwriting discounts and commissions of approximately $9,742,000 and
Offering expenses of approximately $1,576,000 paid by the Company. From the
effective date of the Registration Statement through the end date of the period
covered by this report, the Company has used approximately $1,600,000 of the net
proceeds of the Offering for expenses associated with the Offering. In addition,
the Company used a portion of such net proceeds as follows: (i) approximately
$70,800,000 of such net proceeds to repay the indebtedness incurred by the
Company to acquire assets (including construction in progress) in the
transactions undertaken at the closing of the Offering (the "Formation
Transactions"); (ii) approximately $18,100,000 to repay certain notes issued in
conjunction with the Formation Transactions (the "Formation Note"); (iii)
approximately $5,800,000 to pay the balance of the purchase price to an
affiliate related to the purchase of assets on the Formation Transactions; (iv)
approximately $1,200,000 of such net proceeds to repay indebtedness to
affiliates; (v) approximately $8,246,000 of such net proceeds to acquire the
four senior living communities from NHP; (vi) approximately $505,000 of such net
proceeds to purchase land in Carmichael, CA; and (vii) approximately
$10,248,000, $4,800,000, $3,455,000 and $1,781,000 advanced to Triad I, Triad
17
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II, Triad III and Triad IV, respectively. There has not been a material change
in the use of proceeds described in the Company's prospectus.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
Item 5. OTHER INFORMATION
Not Applicable
18
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Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits:
10.1 1999 Amended and Restated Loan Agreement,
dated as of April 8, 1999, by and among
Capital Senior Living Properties, Inc., Bank
One, Texas, N.A. and the other Lenders
signatory thereto.
10.2 Amended and Restated Draw Promissory Note,
dated March 31, 1999, of Triad Senior Living
I, L.P., in favor of Capital Senior Living
Properties, Inc.
10.3 Amended and Restated Draw Promissory Note
(Fairfield), dated January 15, 1999, of
Triad Senior Living II, L.P., in favor of
Capital Senior Living Properties, Inc.
10.4 Amended and Restated Draw Promissory Note
(Baton Rouge), dated January 15, 1999, of
Triad Senior Living II, L.P., in favor of
Capital Senior Living Properties, Inc.
10.5 Amended and Restated Draw Promissory Note
(Oklahoma City), dated January 15, 1999, of
Triad Senior Living II, L.P., in favor of
Capital Senior Living Properties, Inc.
27.1 Financial Data Schedule
(B) Reports on Form 8-K
(i) The Registrant filed a report on Form 8-K,
dated February 7, 1999 to report entering
into an Agreement and Plan of Merger, dated
February 7, 1999, by and among the
Registrant, Capital Senior Living
Acquisition, LLC, Capital Senior Living
Trust I and ILM Senior Living, Inc.
(ii) The Registrant filed a report on Form 8-K,
dated February 7, 1999 to report entering
into an Agreement and Plan of Merger, dated
February 7, 1999, by and among the
Registrant, Capital Senior Living
Acquisition, LLC, Capital Senior Living
Trust I and ILM II Senior Living, Inc.
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CAPITAL SENIOR LIVING CORPORATION
March 31, 1999
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Capital Senior Living Corporation
(Registrant)
By: /s/ Lawrence A. Cohen
----------------------
Lawrence A. Cohen
Vice Chairman of the Board, Acting Chief Executive Officer and Chief
Financial Officer
(Principal Financial Officer and Duly Authorized Officer)
Date: May 14, 1999
20
1999 AMENDED AND RESTATED LOAN AGREEMENT
----------------------------------------
THIS 1999 AMENDED AND RESTATED LOAN AGREEMENT (this "Loan Agreement")
dated as of April 8, 1999, is made by and among BANK ONE, TEXAS, N.A., a
national banking association, individually and as agent ("Agent"), the LENDERS
referred to below, and CAPITAL SENIOR LIVING PROPERTIES, INC., a Texas
corporation ("Borrower").
RECITALS
--------
A. Reference is made to (i) that certain Loan Agreement dated as of
July 29, 1994 (the "First Agreement"), between Bank One, Texas, N.A. and Capital
Senior Living Communities, L.P. ("Original Borrower"), (ii) that certain
Restatement of Loan Agreement dated as of June 30, 1995 (the "Second Agreement")
between Bank One, Texas, N.A. and Original Borrower, (iii) that certain Amended
and Restated Loan Agreement dated as of June 30, 1997 between Original Borrower
and Lehman Brothers Holdings Inc. d/b/a Lehman Capital, a division of Lehman
Brothers Holdings Inc. ("Lehman") (the "Third Agreement"), (iv) that certain
Loan Assumption and Modification Agreement dated November 3, 1997 between
Lehman, Original Borrower and Borrower (the "Assumption and Modification"), (v)
that certain Amended and Restated Loan Agreement dated as of December 10, 1997
between Bank One, Texas, N.A. and Borrower (the "Fourth Agreement"), and (vi)
that certain 1998 Amended and Restated Loan Agreement dated as of September 1,
1998 between Bank One, Texas, N.A., a national banking association, individually
and as agent, the Lenders (as defined therein) and Borrower (the "Fifth
Agreement").
B. The parties hereto now desire to amend the First Agreement, Second
Agreement, Third Agreement, Assumption and Modification, Fourth Agreement and
Fifth Agreement in accordance with the terms of this Loan Agreement and restate
those agreements in their entirety.
C. The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
-----------
For purposes of this Loan Agreement, the following terms shall have the
respective meanings assigned to them.
1.1 Advances. The term "Advances" shall mean a disbursement by Agent of
any of the proceeds of the Loan which shall be used solely for the purposes set
forth in Section 1.54 herein.
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 1
<PAGE>
1.2 Agent. The term "Agent" shall mean Bank One, Texas, N.A., a
national banking association, as Agent hereunder, and its successors in such
capacity.
1.3 Affidavit of Borrower. The term "Affidavit of Borrower" shall mean
a sworn affidavit of Borrower (and such other parties as Agent may reasonably
require) to be delivered to Agent no later than forty-five (45) days after the
end of each calendar quarter in the form of Exhibit E.
1.4 Affiliate. The term "Affiliate" shall mean, as to any Person, each
other Person that directly or indirectly (through one or more intermediaries or
otherwise) controls, is controlled by, or is under common control with, such
Person. A Person shall be deemed to be "controlled by" any other Person if such
other Person possesses, directly or indirectly, power
(a) to vote 50% or more of the securities (on a fully diluted
basis) having ordinary voting power for the election of directors or
managing general partners or members; or
(b) beyond merely holding an officership or directorship, to
direct or cause the direction of the management and policies of such
Person whether by contract or otherwise.
1.5 Applicable LIBOR Margin. The term "Applicable LIBOR Margin" shall
mean one and seventy one-hundredths percent (1.70%) per annum.
1.6 Appraisals. The term "Appraisals" shall mean appraisals of the
Property in form and containing substance (including all assumptions and methods
of valuation) reasonably satisfactory to Agent and each prepared by an
independent appraiser who is a member of the American Institute of Real Estate
Appraisers and is satisfactory to Agent.
1.7 Assignment of Landlord's Interest in Leases. The term "Assignment
of Landlord's Interest in Leases" shall mean an assignment by Borrower to Agent
of Borrower's interest in all leases covering all or a part of the Property and
all rights derived therefrom.
1.8 Bank One. The term "Bank One" shall mean Bank One, Texas, N.A., a
national banking association, in its capacity as a Lender hereunder.
1.9 Bank Parties. The term "Bank Parties" shall mean Agent and all
Lenders. "Bank Party" means any one of the Bank Parties.
1.10 Base Rate. The term "Base Rate" shall mean the Agent's Prime Rate.
As used in this paragraph, Agent's "Prime Rate" means the base commercial rate
of interest as announced from time to time by Agent (which may not be the
lowest, best or most favorable rate of interest which Agent may charge on loans
to its customers). If Agent's Prime Rate changes after the date hereof the Base
Rate shall be automatically increased or decreased, as the case may be, without
notice to Borrower from time to time as of the effective time of each change in
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 2
<PAGE>
Agent's Prime Rate. The Base Rate shall in no event, however, exceed the Highest
Lawful Rate.
1.11 Base Rate Advance. The term "Base Rate Advance" shall mean an
Advance which does not bear interest at the LIBOR Adjusted Rate.
1.12 Borrower. The term "Borrower" shall mean all parties named
Borrower in the first paragraph of this Loan Agreement and any and all
subsequent record owners of the Property.
1.13 Borrowing. The term "Borrowing" shall mean a borrowing of new
Advances of a single Type pursuant to Section 2.4 or a continuation or
conversion of existing Advances into a single Type (and, in the case of LIBOR
Advances, with the same Interest Period) pursuant to Section 2.5.
1.14 Borrowing Base. The term "Borrowing Base" shall mean sixty-five
percent (65%) of the value of the Property (in the aggregate) as determined from
the Appraisals.
1.15 Business Day. The term "Business Day" means a day, other than a
Saturday or Sunday, on which commercial banks are open for business with the
public in Dallas, Texas. Any Business Day in any way relating to LIBOR Advances
(such as the day on which an Interest Period begins or ends) must also be a day
on which, in the judgment of Agent, significant transactions in dollars are
carried out in the interbank eurocurrency market.
1.16 Canton Regency. The term "Canton Regency" shall mean that certain
congregate community owned by Borrower in Canton, Ohio commonly known as Canton
Regency Retirement Community as further described in Exhibit B.
1.17 Code. The term "Code"shall mean the Uniform Commercial Code as in
force in the State of Texas.
1.18 Collateral. The term "Collateral" shall mean all property of any
kind which is subject to a Lien in favor of Lenders (or in favor of Agent for
the benefit of Lenders) or which, under the terms of any Loan Document, is
purported to be subject to such a Lien.
1.19 Commitment. The term "Commitment" shall mean the amount of
$34,000,000.
1.20 Commitment Period. The term "Commitment Period" shall mean the
period from and including the date hereof until and including April 1, 2002.
1.21 Continuation/Conversion Notice. The terms "Continuation/Conversion
Notice" shall mean a written or telephonic request, or a written confirmation,
made by Borrower which meets the requirements of Section 2.5.
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 3
<PAGE>
1.22 Cottonwood Village. The term "Cottonwood Village" shall mean that
certain congregate community owned by Borrower in Cottonwood, Arizona commonly
known as Cottonwood Village Retirement Community as further described in Exhibit
B.
1.23 CSLC. The term "CSLC" shall mean Capital Senior Living
Corporation, a Delaware corporation.
1.24 Current Assets. The term "Current Assets" shall mean all cash,
cash equivalents, customers' accounts and other receivables due within one year
from statement date, inventory, deposits, marketable securities, and prepaid
expenses to be consumed within one year from statement date.
1.25 Current Liabilities. The term "Current Liabilities" shall mean all
amounts due or to become due for payment within twelve (12) months of statement
date.
1.26 Current Ratio. The term "Current Ratio" shall mean the ratio of
Current Assets to Current Liabilities.
1.27 Debentures. The term "Debentures" shall mean the 8% Convertible
Subordinated Debentures to be issued pursuant to the terms of the form of Junior
Convertible Subordinated Indenture between CSLC and a to be named trustee, as
well as the corresponding preferred securities to be issued by Capital Senior
Living Trust I (contemplated for use in the "ILM transaction"), the forms of the
operative documents for which have been previously provided by Borrower to the
Bank Parties and only such forms, unless subsequent forms have been approved by
the Bank Parties, such approval not to be unreasonably withheld.
1.28 Debt. The term "Debt" means, as to any Person, (i) all obligations
of such Person for borrowed money or for the deferred purchase price of property
or services (other than accounts payable arising in the ordinary course of
business) or evidenced by bonds, notes, debentures or similar instruments, (ii)
all obligations of such Person under leases that are required to be capitalized
under GAAP, (iii) all Debt of others secured by a Lien on any asset of such
Person, whether or not such Debt is assumed by such Person and (iv) all Debt of
others guaranteed by such Person. Notwithstanding anything to the contrary
contained herein, the term "Debt" shall not include (i) the Debentures or (ii)
completion of construction guaranties or operating cash flow guaranties unless
they have been drawn, in which event, the term "Debt" shall include such
guaranties to the extent the same have been drawn and remain unpaid.
1.29 Debtor Relief Laws. The term "Debtor Relief Laws" shall mean any
applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement,
insolvency, reorganization, or similar laws affecting the rights or remedies of
creditors generally, as in effect from time to time.
1.30 Intentionally Omitted.
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 4
<PAGE>
1.31 Defaulting Lender. The term "Defaulting Lender" shall have the
meaning assigned such term in Section 3.1.
1.32 Eligible Transferee. The term "Eligible Transferee" shall mean a
Person which either (a) is a Lender, or (b) is consented to as an Eligible
Transferee by Agent and, so long as no Event of Default is continuing, by
Borrower, which consents in each case will not be unreasonably withheld
(provided that no Person organized outside the United States may be an Eligible
Transferee if Borrower would be required to pay withholding taxes on interest or
principal owed to such Person).
1.33 Environmental Indemnity Agreements. The term "Environmental
Indemnity Agreements" shall mean environmental indemnity agreements made by
Borrower in favor of Agent, including, without limitation, those certain
Environmental Indemnity Agreements dated as of even date herewith made by
Borrower in favor of Agent with respect to the Property.
1.34 ERISA. The term "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time, together with all rules and
regulations promulgated with respect thereto.
1.35 Event of Default. The term "Event of Default" shall mean the
occurrence of any one or more of the following:
(a) A failure by Borrower to make any payment of principal or
interest on any of the Notes within five (5) days of the due date;
(b) Except as otherwise specifically addressed elsewhere in
this section, a failure by Borrower to materially comply with any of
the other terms or conditions specified herein or in any other Loan
Document or the occurrence of an event of default under any of such
instruments and the continuation of such failure for a period of thirty
(30) days following written notice to Borrower of such failure;
provided, however, that in no event shall Agent be required to give
notice of any Event of Default more than two (2) times in any twelve
(12) month period;
(c) There shall be an event of default in connection with any
other obligation of Borrower payable to any Bank Party and the
continuation of such failure for a period of thirty (30) days following
written notice to Borrower of such failure; provided however, in no
event shall Agent be required to give notice of any Event of Default
more than two (2) times in any twelve (12) month period;
(d) The failure of Borrower to maintain the various financial
ratio tests and financial status called for herein and the continuation
of such failure for a period of thirty (30) days following written
notice to Borrower of such failure; provided however, in no event shall
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Agent be required to give notice of any Event of Default more than two
(2) times in any twelve (12) month period;
(e) The incorrectness of any material representation or
warranty made by Borrower to a Bank Party in any of the Loan Documents;
(f) The failure by Borrower and/or the Property and
Improvements materially to comply with any Governmental Requirements
including, without limitation, environmental laws, The Americans With
Disabilities Act of 1990, The Judicial Fair Housing Act, and any other
law, rule or regulation mandating accessibility; and the continuation
of such failure for a period of thirty (30) days following written
notice to Borrower of such failure; provided, however, in no event
shall Agent be obligated to give notice of an Event of Default more
than two (2) times in any twelve (12) month period;
(g) The appointment of a receiver, trustee, conservator, or
liquidator of Borrower, any of the Property, or any other property of
Borrower, and such appointment is not rescinded within ninety (90) days
following the appointment;
(h) The filing of any voluntary petition seeking an entry of
an order for relief as a debtor in a proceeding under the United States
Bankruptcy Code or seeking reorganization or rearrangement or taking
advantage of any Debtor Relief Laws, concerning Borrower or CSLC or the
admitting of material allegations of a petition filed against Borrower
or any one or more of said parties, in any bankruptcy, reorganization,
insolvency, conservatorship, or similar proceeding, or an admission in
writing by Borrower, or any one or more of said parties of an inability
to pay its debts as they become due;
(i) The filing of any involuntary petition seeking an entry of
an order for relief as a debtor in a proceeding under the United States
Bankruptcy Code or seeking reorganization or rearrangement or taking
advantage of any Debtor Relief Laws, concerning Borrower or CSLC and
any such petition is not rescinded or dismissed within ninety (90) days
following such filing;
(j) The making of a general assignment for the benefit of
creditors by Borrower;
(k) There shall be a material adverse change in the financial
circumstances of Borrower;
(l) Any sale, exchange, assignment or other transfer or con-
veyance of the Property or any interest therein;
(m) A replacement of the Manager without Majority Lenders'
prior written approval;
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 6
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(n) Borrower is adjudged in a final administrative decision to
have committed fraud or abuse against Medicare, Medicaid or any other
governmental health care program;
(o) The failure of Borrower to maintain any insurance coverage
required by this Loan Agreement or any of the Mortgages and such
failure continues for five (5) business days after receipt by Borrower
of written notice of such failure;
(p) The failure of Borrower to correct, within the time
deadlines set by any applicable Medicaid, Medicare or licensing agency,
any deficiency related to the Property which would result in:
(1) a termination of any Permit or Reimbursement
Contract; or
(2) a ban on new admissions with respect to the
Property; or
(q) The Borrower, Manager, or the Property shall be assessed
fines or penalties by any state health or licensing agency having
jurisdiction over such Persons or the Property in excess of $100,000,
which fine or penalty may not be appealed;
(r) The Property or any portion thereof is taken on execution
or other process of law in any action against Borrower;
(s) The holder of any lien or security interest on any of the
Property (without implying the consent of Agent to the existence or
creation of any such lien or security interest), declares a default
thereunder or institutes foreclosure or other proceedings for
enforcement of its remedies thereunder and such default is not cured
within ninety (90) days; or
(t) Borrower abandons all or any portion of the Property.
1.36 Existing Loan. The term "Existing Loan" shall mean the "Loan"
as defined in the Fourth Agreement.
1.37 Existing Loan Documents. The term "Existing Loan Documents"
shall mean the "Loan Documents" as defined in the Fourth Agreement.
1.38 Federal Funds Rate. The term "Federal Funds Rate" shall mean, for
any day, the rate per annum (rounded upwards, if necessary, to the nearest
1/100th of one percent) equal to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers on such day, as published by the Federal Reserve Bank
of New York on the Business Day next succeeding such day, provided that (i) if
the day for which such rate is to be determined is not a Business Day, the
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 7
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Federal Funds Rate for such day shall be such rate on such transactions on the
next preceding Business Day as so published on the next succeeding Business Day,
and (ii) if such rate is not so published for any day, the Federal Funds Rate
for such day shall be the average rate quoted to Agent on such day on such
transactions as determined by Agent.
1.39 Financial Statements. The term "Financial Statements" shall mean
such balance sheets, profit and loss statements, schedules of sources and
applications of funds, operating statements, with respect to Borrower, CSLC and
the Property, and other financial information of Borrower, as shall be
reasonably required by Agent, from time to time. All annual Financial Statements
of CSLC shall be certified by a certified public accountant, acceptable to
Agent. Ernst & Young, L.L.P. is acceptable to Agent. All other Financial
Statements shall be certified by an officer of Borrower. All Financial
Statements shall be in form reasonably satisfactory to Agent using GAAP,
consistently applied.
1.40 Financing Statements. The term "Financing Statements" shall mean
the Form UCC-1 or other financing statements, to be filed in the appropriate
offices for the perfection of a security interest in any of the personal
property securing the Loan.
1.41 GAAP. The term "GAAP" shall mean those generally accepted
accounting principles and practices which are recognized as such by the
Financial Accounting Standards Board (or any generally recognized successor).
1.42 Governmental Authority. The term "Governmental Authority" shall
mean the United States, the state, the county, the city, or any other political
subdivision in which the Property is located, and any other political
subdivision, agency, or instrumentality exercising jurisdiction over Borrower,
with respect to the Property.
1.43 Governmental Requirements. The term "Governmental Requirements"
shall mean all laws, ordinances, rules, and regulations of any Governmental
Authority applicable to Borrower or the Property, including but not limited to
those described above.
1.44 Guaranteed Debt. The term "Guaranteed Debt" means all Debt of
others guaranteed by CSLC whether by (a) a guaranty, direct or indirect, in any
manner, of any part or all of such obligation, or (b) an agreement, direct or
indirect, contingent or otherwise, the purpose of which is to insure in any way
the payment or performance (or payment of damages in the event of
nonperformance) of any part or all of such obligation. Notwithstanding anything
to the contrary contained herein, the term "Guaranteed Debt" shall not include
completion of construction guaranties, operating cash flow guaranties or
guaranties of the Debentures unless they have been drawn, in which event, the
term "Guaranteed Debt" shall include such guaranties to the extent the same have
been drawn and remain unpaid.
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 8
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1.45 The Harrison. The term "The Harrison" or "Eagle Valley" shall mean
that certain congregate care community owned by Borrower in Indianapolis,
Indiana known as The Harrison or Eagle Valley Retirement Community and as
further described on Exhibit B.
1.46 Hedging Contract. The term "Hedging Contract" means (a) any
agreement providing for options, swaps, floors, caps, collars, forward sales or
forward purchases involving interest rates, commodities or commodity prices,
equities, currencies, bonds, or indexes based on any of the foregoing, (b) any
option, futures or forward contract traded on an exchange, and (c) any other
derivative agreement or other similar agreement or arrangement.
1.47 Highest Lawful Rate. The term "Highest Lawful Rate" shall mean,
with respect to each Lender, the maximum nonusurious rate of interest that such
Lender is permitted under applicable Law to contract for, take, charge, or
receive with respect to its Advances. All determinations herein of the Highest
Lawful Rate, or of any interest rate determined by reference to the Highest
Lawful Rate, shall be made separately for each Lender as appropriate to assure
that the Loan Documents are not construed to obligate any Person to pay interest
to any Lender at a rate in excess of the Highest Lawful Rate applicable to such
Lender. To the extent that Chapter 303 of the Texas Finance Code is applicable,
the "weekly ceiling" specified in such Chapter 303 is the applicable ceiling,
provided that, if any applicable law permits greater interest, the law
permitting the greater interest shall apply.
1.48 Improvements. The term "Improvements" shall mean the buildings,
structures and other improvements located on the real property constituting
portions of the Property.
1.49 Insurance Policies. The term "Insurance Policies" shall mean the
insurance policies required pursuant to the terms of the Mortgages.
1.50 Interest Period. The term "Interest Period" shall mean, with
respect to each particular LIBOR Advance in a Borrowing, a period of 30, 60 or
90 days, as specified in the Request for Advance or Continuation/Conversion
Notice applicable thereto, beginning on and including the date specified in such
Request for Advance or Continuation/Conversion Notice (which must be a Business
Day), and ending on the 30th, 60th or 90th day thereafter, as the case may be,
provided that each Interest Period which would otherwise end on a day which is
not a Business Day shall end on the next succeeding Business Day (unless such
next succeeding Business Day is the first Business Day of a calendar month, in
which case such Interest Period shall end on the immediately preceding Business
Day). No Interest Period may be elected which would extend past the Maturity
Date.
1.51 Land. The term "Land" shall mean those certain parcels or tracts
of the real property described on Exhibit B attached hereto and incorporated
herein by reference.
1.52 Late Payment Rate. The term "Late Payment Rate" shall mean, at the
time in question, four percent (4.0%) per annum plus the Base Rate then in
effect; provided that, with respect to any LIBOR Advance with an Interest Period
extending beyond the date such LIBOR Advance becomes due and payable, "Late
Payment Rate" shall mean four percent (4.0%) per annum plus the related LIBOR
Adjusted Rate. The Late Payment Rate shall never exceed the Highest Lawful Rate.
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 9
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1.53 Law. The term "Law" shall mean any statute, law, regulation,
ordinance, rule, treaty, judgment, order, decree, permit, concession, franchise,
license, agreement or other governmental restriction of the United States or any
state or political subdivision thereof or of any foreign country or any
department, province or other political subdivision thereof.
1.54 Lenders. The term "Lenders" shall mean each signatory hereto
(other than Borrower) including Bank One, Guaranty Federal Bank, F.S.B., and
Comerica Bank - Texas, and any Eligible Transferee as holder of a Note.
1.55 Leverage Ratio. The term "Leverage Ratio" shall mean the Total
Funded Debt of CSLC divided by the Total Capital of CSLC.
1.56 Liabilities. The term "Liabilities" shall mean, as to any Person,
all indebtedness, liabilities and obligations of such Person, whether matured or
unmatured, liquidated or unliquidated, primary or secondary, direct or indirect,
absolute, fixed or contingent, and whether or not required to be considered
pursuant to GAAP.
1.57 LIBOR Advance. The term "LIBOR Advance" shall mean an Advance
which is properly designated as a LIBOR Advance pursuant to Section 2.4 or 2.5.
1.58 LIBOR Adjusted Rate. The term "LIBOR Adjusted Rate" shall mean,
with respect to each particular LIBOR Advance and the associated LIBOR Rate, the
rate per annum calculated by Agent (rounded upwards, if necessary, to the next
higher 0.01%) determined on a daily basis pursuant to the following formula:
LIBOR Adjusted Rate = LIBOR Rate + Applicable LIBOR Margin
No LIBOR Adjusted Rate shall ever exceed the Highest Lawful Rate.
1.59 LIBOR Rate. The term "LIBOR Rate" shall mean, with respect to each
particular LIBOR Advance, the offered rate for U.S. Dollar deposits of not less
than $1,000,000.00 for a period of time equal to each Interest Period as of
11:00 A.M. City of London, England time two (2) London Business Days prior to
the first date of each Interest Period as shown on the display designated as
"British Bankers Assoc. Interest Settlement Rates" on the Telerate System
("Telerate"), Page 3750 or Page 3740, or such other page or pages as may replace
such pages on Telerate for the purpose of displaying such other page or pages as
may replace such pages on Telerate for the purpose of displaying such rate.
Provided, however, that if such rate is not available on Telerate then such
offered rate shall be otherwise independently determined by Agent from an
alternate, substantially similar independent source available to Agent or shall
be calculated by Agent by a substantially similar methodology as that
theretofore used to determine such offered rate in Telerate. "London Business
Day" means any day other than a Saturday, Sunday or day on which banking
institutions are generally authorized or obligated by law or executive order to
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 10
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close in the City of London, England. Each change in the rate to be charged on
the Notes will become effective without notice on the commencement of each
Interest Period based upon the LIBOR Rate then in effect.
1.60 Lien. The term "Lien" shall mean with respect to any property or
assets, any right or interest therein of a creditor to secure Liabilities owed
to him or any other arrangement with such creditor which provides for the
payment of such Liabilities out of such property or assets or which allows him
to have such Liabilities satisfied out of such property or assets prior to the
general creditors of any owner thereof, including any lien, mortgage, security
interest, pledge, deposit, production payment, rights of a vendor under any
title retention or conditional sale agreement or lease substantially equivalent
thereto, tax lien, mechanic's or materialman's lien, or any other charge or
encumbrance for security purposes, whether arising by Law or agreement or
otherwise, but excluding any right of offset which arises without agreement in
the ordinary course of business. "Lien" also means any filed financing
statement, any registration of a pledge (such as with an issuer of
uncertificated securities), or any other arrangement or action which would serve
to perfect a Lien described in the preceding sentence, regardless of whether
such financing statement is filed, such registration is made, or such
arrangement or action is undertaken before or after such Lien exists.
1.61 Loan. The term "Loan" shall mean the Loan by Lenders to Borrower,
in an amount not to exceed $34,000,000, to (i) provide equity/capital loan
investments in Triad Senior Living related limited partnerships; (ii) fund the
tender and solicitation for purchase or similar type transactions by Borrower of
partnership interests in Healthcare Properties, L.P. and limited partnership
interests and pension notes in NHP Retirement Housing Partners I Limited
Partnership; (iii) fund the acquisition of other senior living communities; (iv)
fund the construction of improvements to properties owned by Borrower, and (v)
fund working capital of Borrower.
1.62 Loan Documents. The term "Loan Documents" shall mean this Loan
Agreement, the Mortgages, the Notes, the Assignments of Landlord's Interest in
Leases, the Financing Statements, the Security Agreement, the Environmental
Indemnity Agreements, the Notice of Final Agreement dated of even date herewith
between Borrower and Agent, the Specific Assignment, Subordination and
Attornment Agreement dated as of December 10, 1997 between Borrower, Bank One
and Manager, all other documents executed by Borrower in connection with this
Loan Agreement, and such other instruments securing the First Agreement, Second
Agreement, Third Agreement, Fourth Agreement and Fifth Agreement (as amended and
restated hereby) and the Loan as shall, from time to time, be executed and
delivered by Borrower, or any other party to Agent or the Lenders pursuant to
the First Agreement, Second Agreement, Third Agreement, Fourth Agreement or
Fifth Agreement (as amended and restated hereby) and this Loan Agreement,
including, without limitation, each Affidavit of Borrower.
1.63 Loan Fees. The term "Loan Fees" shall mean the fees described in
Section 5.16.
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 11
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1.64 Majority Lenders. The term "Majority Lenders" shall mean the
Lenders whose aggregate Percentage Shares equal or exceed sixty-six and
two-thirds percent (66 2/3 %).
1.65 Management Agreements. The term "Management Agreements" shall mean
the four (4) management agreements between Borrower and Manager pertaining to
Canton Regency, The Harrison, Towne Centre and Cottonwood Village, each dated
November 3, 1997.
1.66 Manager. The term "Manager" shall mean Capital Senior Living,
Inc., a Texas corporation.
1.67 Maturity Date. The term "Maturity Date" shall mean April 8, 2002.
1.68 Medicaid. The term "Medicaid" shall mean that certain program of
medical assistance, funded jointly by the federal government and the States, for
impoverished individuals who are aged, blind and/or disabled, and for members of
families with dependent children, which program is more fully described in Title
XIX of the Social Security Act (42 U.S.C. ss.ss. 1396 et seq.) and the
regulations promulgated thereunder.
1.69 Medicare. The term "Medicare" shall mean that certain federal
program providing health insurance for eligible elderly and other individuals,
under which physicians, hospitals, skilled nursing homes, home health care and
other providers are reimbursed for certain covered services they provide to the
beneficiaries of such program, which program is more fully described in Title
XVIII of the Social Security Act (42 U.S.C. ss.ss. 1395 et seq.) and the
regulations promulgated thereunder.
1.70 Mortgages. The term "Mortgages" shall mean the mortgages and deeds
of trust described in Exhibit I attached hereto and made a part hereof. Each of
the foregoing documents secures payment of the Notes and the payment and
performance of all obligations specified in the Mortgages and this Loan
Agreement, and evidences a valid and enforceable first lien on the Property
subject only to the matters reflected in the Title Insurance.
1.71 Net Worth. The term "Net Worth" means, at any time, the sum of
shareholders' equity in CSLC according to GAAP plus the Debentures.
1.72 Notes. The term "Notes" and "Note" shall have the meaning given to
such terms in Section 2.1.
1.73 Obligations. The term "Obligations" shall mean all Liabilities
from time to time owing by Borrower to any Bank Party under or pursuant to any
of the Loan Documents. The term "Obligation" means any part of the Obligations.
1.74 Permits. The term "Permits" shall mean all licenses, permits and
certificates used or useful in connection with the ownership, operation, use or
occupancy of the Property, including, without limitation, business licenses,
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 12
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state health department licenses, food service licenses, licenses to conduct
business, certificates of need and all such other permits, licenses and rights,
obtained from any governmental, quasi-governmental or private person or entity
whatsoever.
1.75 Percentage Share. The term "Percentage Share" shall mean, with
respect to any Lender (a) when used in Section 2.4, in any Request for Advance
or when no Advances are outstanding hereunder, the percentage set forth opposite
such Lender's name on the Lender Schedule attached hereto or any schedule
delivered by Agent pursuant to Section 10.13(c)(ii), and (b) when used
otherwise, the percentage obtained by dividing (i) the sum of the unpaid
principal balance of such Lender's Advances at the time in question, by (ii) the
sum of the aggregate unpaid principal balance of all Advances at such time.
1.76 Permitted Exceptions. The term "Permitted Exceptions" with respect
to the Property shall mean (i) title exceptions set forth in the Title
Insurance, (ii) liens for ad valorem real property taxes, ad valorem personal
property taxes and general or special assessments against real property and
other governmental charges not yet due or payable, (iii) liens created pursuant
to the Loan Documents, (iv) unrecorded leases of residents or patients, (v)
easements, rights of way, restrictions, reservations, conditions, minor defects
or irregularities in title and other similar charges or encumbrances, none of
which individually or in the aggregate have a material adverse affect upon the
Property as security for the Loan or interfere with the ordinary conduct of
business at the Property, and (vi) statutory liens of mechanics and materialmen
and other similar liens, in respect of liabilities which are not yet due or
which are being contested by Borrower in good faith.
1.77 Person. The term "Person" shall mean an individual, corporation,
partnership, limited liability company, association, joint stock company, trust
or trustee thereof, estate or executor thereof, unincorporated organization or
joint venture, Tribunal, or any other legally recognizable entity.
1.78 Post-Foreclosure Plan. The term "Post-Foreclosure Plan" shall have
the meaning given to such term in Section 9.10.
1.79 Prescribed Forms. The term "Prescribed Forms" shall have the mean-
ing given to such term in Section 3.6.
1.80 Property. The term "Property" shall mean collectively: (a) Canton
Regency, The Harrison, Towne Centre and Cottonwood Village, as well as the Land
and Improvements and all other property (real and personal, fixture or
otherwise) related thereto which is subject to the Mortgages, and (b) the
Collateral (as such term is defined in the Security Agreement). The term "any of
the Properties" shall mean any one or more of Canton Regency, The Harrison,
Towne Centre and Cottonwood Village and the term "any of the Property" shall
mean any of the Land, Improvements and Collateral. Further, in those instances
where required by the context in which it is used, the term "Property" shall
also mean "any of the Property" or "any of the Properties".
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1.81 Reimbursement Contracts. The term "Reimbursement Contracts" shall
mean all third party reimbursement contracts for the Property which are now or
hereafter in effect with respect to residents qualifying for coverage under the
same, including private insurance agreements.
1.82 Register. The term "Register" shall have the meaning given to such
term in Section 10.13(f).
1.83 Request for Advance. The term "Request for Advance" shall mean a
written or telephonic request, or a written confirmation, made by Borrower which
meets the requirements of Section 2.4.
1.84 Security Agreement. The term "Security Agreement" shall mean the
Amended and Restated Security Agreement dated June 30, 1997 between Lehman and
Original Borrower, as modified by Modification and Assumption of Amended and
Restated Security Agreement dated December 10, 1997 between Borrower and Bank
One, Modification of Amended and Restated Security Agreement dated September 1,
1998 between Agent and Borrower and Second Modification of Amended and Restated
Security Agreement of even date herewith between Agent and Borrower.
1.85 Subsidiary. The term "Subsidiary" shall mean any corporation,
limited liability company, association, partnership, joint venture or other
business or corporate entity, enterprise or organization which is directly or
indirectly (through one or more intermediaries) controlled by or owned fifty
percent or more by CSLC.
1.86 Survey. The term "Survey" shall mean a current certified as built
ALTA survey of each of the senior living communities constituting the Property
satisfactory to Agent.
1.87 Tangible Net Worth. The term "Tangible Net Worth" shall have the
meaning given to such term in Section 5.15(b).
1.88 Title Company. The term "Title Company" shall mean Lawyers Title
Insurance Company.
1.89 Title Insurance. The term "Title Insurance" shall mean the
policies of mortgage title insurance issued by Lawyers Title Insurance
Corporation with respect to the Mortgages.
1.90 Total Capital. The term "Total Capital" means, at any time, the
sum of Net Worth and Total Funded Debt.
1.91 Total Funded Debt. The term "Total Funded Debt" means, at any
time, the aggregate amount of CSLC's outstanding Debt, including contingent
liabilities created by way of Guaranteed Debt.
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 14
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1.92 Towne Centre. The term "Towne Centre" shall mean that certain
congregate care community owned by Borrower in Merrillville, Indiana commonly
known as Towne Centre Retirement Community as further described in Exhibit B.
1.93 Treasury Note Rate. The term "Treasury Note Rate" shall mean the
Treasury Constant Maturity Series yields reported, for the latest day for which
such yields shall have been so reported as of the applicable Business Day, in
Federal Reserve Statistical Release H.15 (519) (or any comparable successor
publication) for actively traded U.S. Treasury securities having a constant
maturity equal to ten years. Such implied yield shall be determined, if
necessary, by (i) converting U.S. Treasury bill quotations to bond-equivalent
yields in accordance with accepted financial practice and (ii) interpolating
linearly between reported yields. The term "Business Day" as used in this
paragraph means a day on which banks are open for business in New York, New
York.
1.94 Tribunal. The term "Tribunal" shall mean any government, any
arbitration panel, any court or any governmental department, commission, board,
bureau, agency or instrumentality of the United States of America or any state,
province, commonwealth, nation, territory, possession, county, parish, town,
township, village or municipality, whether now or hereafter constituted and/or
existing.
1.95 Type. The term "Type" shall mean, with respect to any Advances,
the characterization of such Advances as either Base Rate Advances or LIBOR
Advances.
1.96 Exhibits and Schedules; Additional Definitions. All Exhibits and
Schedules attached to this Agreement are a part hereof for all purposes.
1.97 Amendment of Defined Instruments. Unless the context otherwise
requires or unless otherwise provided herein the terms defined in this Agreement
or any other Loan Document which refer to a particular agreement, instrument or
document also refer to and include all renewals, extensions, supplements,
modifications, amendments and restatements of such agreement, instrument or
document, provided that nothing contained in this section shall be construed to
authorize any such renewal, extension, supplement, modification, amendment or
restatement.
1.98 References and Titles. All references in this Agreement to
Exhibits, Schedules, articles, sections, subsections and other subdivisions
refer to the Exhibits, Schedules, articles, sections, subsections and other
subdivisions of this Agreement unless expressly provided otherwise. Titles
appearing at the beginning of any subdivisions are for convenience only and do
not constitute any part of such subdivisions and shall be disregarded in
construing the language contained in such subdivisions. The words "this
Agreement", "this instrument", "herein", "hereof", "hereby", "hereunder" and
words of similar import refer to this Agreement as a whole and not to any
particular subdivision unless expressly so limited. The phrases "this section"
and "this subsection" and similar phrases refer only to the sections or
subsections hereof in which such phrases occur. The word "or" is not exclusive,
and the word "including" (in its various forms) means "including without
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 15
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limitation". Pronouns in masculine, feminine and neuter genders shall be
construed to include any other gender, and words in the singular form shall be
construed to include the plural and vice versa, unless the context otherwise
requires. The foregoing shall apply to all Loan Documents.
1.99 Calculations and Determinations. All calculations under the Loan
Documents of interest chargeable with respect to Advances and of fees and other
charges shall be made on the basis of actual days elapsed (including the first
day but excluding the last) and a year of 360 days. Each determination by a Bank
Party of amounts to be paid under Sections 3.2 through 3.6 or with respect to
the LIBOR Adjusted Rate, LIBOR Rate, Business Day or Interest Period, shall, in
the absence of manifest error, be conclusive and binding. Unless otherwise
expressly provided herein or unless Majority Lenders otherwise consent all
financial statements and reports furnished to any Bank Party hereunder shall be
prepared and all financial computations and determinations pursuant hereto shall
be made in accordance with GAAP.
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 16
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ARTICLE 2
AGREEMENTS OF LENDERS
---------------------
2.1 Commitments to Lend; Notes. Subject to the terms and conditions
hereof, each Lender agrees to make advances to Borrower (herein called such
Lender's "Advances") upon request from time to time during the Commitment Period
so long as each Advance by such Lender does not exceed such Lender's Percentage
Share of the aggregate amount of Advances then requested from all Lenders. The
aggregate amount of all Advances requested of all Lenders in any Request for
Advance must be greater than or equal to $500,000. Borrower may have no more
than four (4) Borrowings of LIBOR Advances outstanding at any time. The
obligation of Borrower to repay to each Lender the aggregate amount of all
Advances made by such Lender together with interest accruing in connection
therewith, shall be evidenced by a single promissory note (herein called such
Lender's "Note" and collectively with each other Lender's Notes, the "Notes")
made by Borrower payable to the order of such Lender in the form of Exhibit A
with appropriate insertions. The amount of principal owing on any Lender's Note
at any given time shall be the aggregate amount of all Advances theretofore made
by such Lender minus all payments of principal theretofore received by such
Lender on such Note. Interest on each Note shall accrue and be due and payable
as provided herein and therein, with LIBOR Advances bearing interest at the
LIBOR Adjusted Rate and Base Rate Advances bearing interest at the Base Rate
(subject to the applicability of the Late Payment Rate). Subject to the terms
and conditions hereof, Borrower may borrow, repay, and reborrow hereunder.
2.2 Limitation on Aggregate Amount of Advances. In no event shall
Lenders be required to make any Advances in excess of the stated principal
amount of the Loan or if the making of such Advance would cause Lenders to
violate any law, rule or regulation to which Lenders are subject limiting the
amount that may be advanced by Lenders as contemplated in this Loan Agreement.
2.3 Conditions to Advances. As a condition precedent to each Advance
hereunder, Borrower must satisfy the following requirements and, if required by
Agent, deliver to Agent evidence of such satisfaction:
(a) There shall then exist no Event of Default;
(b) The representations and warranties made in this Loan
Agreement shall be true and correct on and as of the date of each
Advance, with the same effect as if made on that date;
(c) There shall be no material adverse change or modification
in the financial condition of Borrower;
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 17
<PAGE>
(d) The total of all outstanding Advances together with the
requested Advance shall not exceed the Borrowing Base; and
(e) Borrower shall have satisfied all other requirements
herein for an Advance.
No Advance will be made under the Loan after March 1, 2002.
2.4 Requests for New Advances. Borrower must give to Agent written
notice of any requested Borrowing of new Advances to be advanced by Lenders.
Each such notice constitutes a "Request for Advance" hereunder and must:
(a) specify (i) the aggregate amount of any such Borrowing of
new Base Rate Advances and the date on which such Base Rate Advances
are to be advanced, or (ii) the aggregate amount of any such Borrowing
of new LIBOR Advances and the date on which such LIBOR Advances are to
be advanced (which shall be the first day of the Interest Period which
is to apply thereto); and
(b) be received by Agent not later than 10:00 a.m., Dallas,
Texas time, the third Business Day preceding the day on which any such
Base Rate Advances or LIBOR Advances are to be made.
Each such written request or confirmation must be made in the form and substance
of the "Request for Advance" attached hereto as Exhibit C, duly completed. Upon
receipt of any such Request for Advance, Agent shall give each Lender prompt
notice of the terms thereof. If Agent notifies each Lender that all conditions
precedent to such new Advances set forth in Section 2.3 have been met, each
Lender will on the date requested promptly remit to Agent at Agent's office in
Dallas, Texas the amount of such Lender's new Advance in immediately available
funds, and upon receipt of such funds, unless to its actual knowledge any
conditions precedent to such Advances have been neither met nor waived as
provided herein, Agent shall promptly make such Advances available to Borrower.
Unless Agent shall have received prompt notice from a Lender that such Lender
will not make available to Agent such Lender's new Advance because all
conditions precedent to such advance set forth in Section 2.3 have not been met,
Agent will assume that such Lender has made such Advance available to Agent in
accordance with this section and Agent will, in reliance upon such assumption,
make such Advance available to Borrower. If and to the extent such Lender shall
not so make its new Advance available to Agent, such Lender agrees to pay or
repay to Agent within three days after demand the amount of such Advance
together with interest thereon, for each day from the date such amount was made
available to Borrower until the date such amount is paid or repaid to Agent,
with interest at the Federal Funds Rate. If Lender does not pay or repay to
Agent such amount within such three-day period, Agent shall in addition to such
amount be entitled to recover from such Lender, on demand, interest thereon at
the Late Payment Rate, calculated from the date such amount was made available
to Borrower. The failure of any Lender to make any new Advance to be made by it
hereunder shall not relieve any other Lender of its obligation hereunder, if
any, to make its new Advance, but no Bank Party other than Agent shall be
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 18
<PAGE>
responsible for the failure of any other Bank Party to make any new Advance to
be made by such other Bank Party.
2.5 Continuations and Conversions of Existing Advances. Borrower may
make the following elections with respect to Advances already outstanding: to
convert Base Rate Advances to LIBOR Advances, to convert LIBOR Advances to Base
Rate Advances on the last day of the Interest Period applicable thereto, or to
continue LIBOR Advances beyond the expiration of such Interest Period by
designating a new Interest Period to take effect at the time of such expiration.
In making such elections, Borrower may combine existing Advances made pursuant
to separate Borrowings into one new Borrowing or divide existing Advances made
pursuant to one Borrowing into separate new Borrowings. To make any such
election, Borrower must give to Agent written notice of any such conversion or
continuation of existing Advances, with a separate notice given for each new
Borrowing. Each such notice constitutes a "Continuation/Conversion Notice"
hereunder and must:
(a) specify the existing Advances which are to be continued or
converted;
(b) specify (i) the aggregate amount of any Borrowing of Base
Rate Advances into which such existing Advances are to be continued or
converted and the date on which such continuation or conversion is to
occur, or (ii) the aggregate amount of any Borrowing of LIBOR Advances
into which such existing Advances are to be continued or converted and
the date on which such continuation or conversion is to occur (which
shall be the first day of the Interest Period which is to apply to such
LIBOR Advances); and
(c) be received by Agent not later than 10:00 a.m., Dallas,
Texas time, on the third Business Day preceding the day on which any
such continuation or conversion to LIBOR Advances is to occur.
Each such written request or confirmation must be made in the form and substance
of the "Continuation/Conversion Notice" attached hereto as Exhibit D, duly
completed. Upon receipt of any such Continuation/Conversion Notice, Agent shall
give each Lender prompt notice of the terms thereof. Each
Continuation/Conversion Notice shall be irrevocable and binding on Borrower.
During the continuance of any Event of Default, Borrower may not make any
election to convert existing Advances into LIBOR Advances or continue existing
Advances as LIBOR Advances. If for any reason Borrower fails to timely and
properly give any notice of continuation or conversion with respect to a
Borrowing of existing LIBOR Advances at least three days prior to the end of the
Interest Period applicable thereto, such LIBOR Advances shall automatically be
converted into Base Rate Advances at the end of such Interest Period. No new
funds shall be advanced by any Lender in connection with any continuation or
conversion of existing Advances pursuant to this section, and no such
continuation or conversion shall be deemed to be a new advance of funds for any
purpose; such continuations and conversions merely constitute a change in the
interest rate applicable to already outstanding Advances.
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 19
<PAGE>
Notwithstanding anything to the contrary contained herein, Borrower
shall have no more than four (4) LIBOR tranches of Advances in effect at any
time.
2.6 Use of Proceeds. In no event shall the funds from any Advances be
used directly or indirectly by any Person for personal, family, household or
agricultural purposes or for the purpose, whether immediate, incidental or
ultimate, of purchasing, acquiring or carrying any "margin stock" or any "margin
securities" (as such terms are defined respectively in Regulation U and
Regulation G promulgated by the Board of Governors of the Federal Reserve
System) or to extend credit to others directly or indirectly for the purpose of
purchasing or carrying any such margin stock or margin securities. Borrower
represents and warrants that Borrower is not engaged principally, or as one of
Borrower's important activities, in the business of extending credit to others
for the purpose of purchasing or carrying such margin stock or margin
securities.
2.7 Future Acquisitions. Borrower understands and agrees that so long
as Borrower has outstanding obligations to Lenders related to the Loan, Borrower
shall not, without the prior written consent of Majority Lenders, which consent
shall not be unreasonably withheld, incur any third party purchase money
indebtedness related to any other retirement community, nursing home facility,
or other real estate property if such property, development or proposed
investment is not generating positive cash flow from operations after payment of
operating expenses, maintenance capital expenditures and debt service of third
party financing.
2.8 No Waiver. No Advance shall constitute a waiver of any condition
precedent to the obligation of Lenders to make any further Advance or preclude
Agent from thereafter declaring the failure of Borrower to satisfy such
condition precedent to be an Event of Default.
2.9 Conditions Precedent for the Benefit of the Bank Parties. All
conditions precedent to the obligation of Lenders to make any Advance are
imposed hereby solely for the benefit of the Bank Parties, and no other party
may require satisfaction of any such condition precedent or be entitled to
assume that Lenders will refuse to make any Advance in the absence of strict
compliance with such conditions precedent.
2.10 Payments to Borrower or Affiliates. Notwithstanding anything to
the contrary in this Loan Agreement or any other instrument executed hereunder
or in connection herewith, Borrower shall not use any Advance to pay fees,
commissions, salaries, or other compensation of any kind to Borrower or to any
Affiliates or any persons or entities deemed by Majority Lenders to be
Affiliates of Borrower, whether directly or indirectly under any agreement,
including, without limitation, management agreements, unless such fees,
commissions, salaries or other compensation are specifically approved in a
separate written instrument signed by Majority Lenders, provided however,
Lenders hereby acknowledge their approval of Borrower's reimbursement of fees
and expenses payable under the Management Agreements and development agreements
associated with the Properties.
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 20
<PAGE>
2.11 Recourse. Borrower shall be liable for the indebtedness evidenced
by the Notes and for the performance of all agreements in the Mortgages and the
other Loan Documents to the full extent of the Property and other assets owned
by Borrower, whether pledged to a Bank Party or subject to a separate lien or
otherwise. If there is an Event of Default, any judicial proceedings brought by
Agent against Borrower shall be limited initially to the protection of the
Property and the enforcement and foreclosure of the liens and security interests
created by the Loan Documents. The collection of any deficiency remaining after
Agent has sought to satisfy the indebtedness and reasonable expenses incurred
subsequent to foreclosure of the liens and security interests created by the
Loan Documents shall be against the remaining assets of Borrower.
Notwithstanding the foregoing, Agent shall not be required to exercise its
rights and remedies with respect to a Property (including the Land, Improvements
and Collateral related to such Property) (the "Affected Property") which is
affected by any Hazardous Substance (as such term is defined in the
Environmental Indemnity Agreements) if as a result thereof, the value of all of
the Property after the exercise of such rights and remedies (taking into account
the costs to be incurred to clean up, remove, resolve, or minimize the impact
of, or otherwise deal with the Hazardous Substance) would be less than the
outstanding principal balance of the Loan prior to the exercise of such rights
and remedies. In the event of the circumstances described in the preceding
sentence, Agent shall only be required to exercise its rights and remedies with
respect to the Property other than the Affected Property before proceeding
directly against Borrower for the indebtedness and the performance of its
obligations under the Loan Documents. Nothing contained in this Section 2.11
shall alter, affect or impair or relieve Borrower from any of its obligations
under the Environmental Indemnity Agreements.
ARTICLE 3
PAYMENTS TO LENDERS
-------------------
3.1 General Procedures. Borrower will make each payment which it owes
under the Loan Documents to Agent for the account of the Bank Party to whom such
payment is owed. Each such payment must be received by Agent not later than
11:00 a.m., Dallas, Texas time, on the date such payment becomes due and
payable, in lawful money of the United States of America, without set-off,
deduction or counterclaim, and in immediately available funds. Any payment
received by Agent after such time will be deemed to have been made on the next
following Business Day. Should any such payment become due and payable on a day
other than a Business Day, the maturity of such payment shall be extended to the
next succeeding Business Day, and, in the case of a payment of principal or past
due interest, interest shall accrue and be payable thereon for the period of
such extension as provided in the Loan Document under which such payment is due.
Each payment under a Loan Document shall be due and payable at the place
provided therein and, if no specific place of payment is provided, shall be due
and payable at the offices of Agent. When Agent collects or receives money on
account of the Obligations, Agent shall distribute all money so collected or
received, and each Bank Party shall apply all such money so distributed, as
follows:
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 21
<PAGE>
(a) first, for the payment of all Obligations which are then
due (and if such money is insufficient to pay all such Obligations,
first to any reimbursements due Agent under this Agreement and then to
the partial payment of all other Obligations then due in proportion to
the amounts thereof, or as Bank Parties shall otherwise agree);
(b) then for the prepayment of amounts owing under the Loan
Documents (other than principal on the Notes) if so specified by
Borrower;
(c) then for the prepayment of principal on the Notes,
together with accrued and unpaid interest on the principal so prepaid;
(d) then for the payment or prepayment of any other Obliga-
tions; and
(e) last, only with respect to payment received by Agent under
any of the Mortgages, for the payment of all amounts which are due
under Hedging Contracts that are secured by such Mortgages.
All payments applied to principal or interest on any Note shall be applied first
to any interest then due and payable, then to principal then due and payable.
All distributions of amounts described in any of subsections (b), (c) or (d)
above shall be made by Agent pro rata to each Bank Party then owed Obligations
described in such subsection in proportion to all amounts owed to all Bank
Parties which are described in such subsection. Notwithstanding anything to the
contrary contained herein, in the event any Lender shall have failed to make an
Advance as contemplated under Section 2.4 hereof (a "Defaulting Lender") and the
Agent or another Lender or Lenders shall have made such Advance, payment
received by Agent for the amount of such Defaulting Lender or Lenders shall not
be distributed to such Defaulting Lender or Lenders until such Advance or
Advances shall have been repaid in full to Agent or the Lender or Lenders who
funded such Advance or Advances.
3.2 Capital Reimbursement. If either the introduction or implementation
of or the compliance with or any change in or in the interpretation of any Law,
or the introduction or implementation of or the compliance with any request,
directive or guideline from any central bank or other governmental authority
(whether or not having the force of Law) affects or would affect the amount of
capital required or expected to be maintained by any Bank Party or any
corporation controlling any Bank Party, then, upon demand by such Bank Party,
Borrower will pay to Agent for the benefit of such Bank Party, from time to time
as specified by such Bank Party, such additional amount or amounts which such
Bank Party shall determine to be appropriate to compensate such Bank Party or
any corporation controlling such Bank Party in light of such circumstances, to
the extent that such Bank Party reasonably determines that the amount of any
such capital would be increased or the rate of return on any such capital would
be reduced by or in whole or in part based on the existence of the face amount
of such Bank Party's Advances, or participations in commitments under this
Agreement.
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 22
<PAGE>
3.3 Increased Cost of LIBOR Advances. If any applicable Law (whether
now in effect or hereinafter enacted or promulgated, including Regulation D) or
any interpretation or administration thereof by any governmental authority
charged with the interpretation or administration thereof (whether or not having
the force of Law):
(a) shall change the basis of taxation of payments to any Bank
Party of any principal, interest, or other amounts attributable to any
LIBOR Advance or otherwise due under this Agreement in respect of any
LIBOR Advance (other than taxes imposed on the overall net income of
such Bank Party or any lending office of such Bank Party by any
jurisdiction in which such Bank Party or any such lending office is
located); or
(b) shall change, impose, modify, apply or deem applicable any
reserve, special deposit or similar requirements in respect of any
LIBOR Advance (excluding those for which such Bank Party is fully
compensated pursuant to adjustments made in the definition of LIBOR
Adjusted Rate) or against assets of, deposits with or for the account
of, or credit extended by, such Bank Party; or
(c) shall impose on any Bank Party or the interbank
eurocurrency deposit market any other condition affecting any LIBOR
Advance, the result of which is to increase the cost to any Bank Party
of funding or maintaining any LIBOR Advance or to reduce the amount of
any sum receivable by any Bank Party in respect of any LIBOR Advance by
an amount deemed by such Bank Party to be material,
then such Bank Party shall promptly notify Agent and Borrower in writing of the
happening of such event and of the amount required to compensate such Bank Party
for such event (on an after-tax basis, taking into account any taxes on such
compensation), whereupon (i) Borrower shall pay such amount to Agent for the
account of such Bank Party and (ii) Borrower may elect, by giving to Agent and
such Bank Party not less than three Business Days' notice, to convert all (but
not less than all) of any such LIBOR Advances into Base Rate Advances.
3.4 Availability. If (a) any change in applicable Laws, or in the
interpretation or administration thereof of or in any jurisdiction whatsoever,
domestic or foreign, shall make it unlawful or impracticable for any Bank Party
to fund or maintain LIBOR Advances, or shall materially restrict the authority
of any Bank Party to purchase or take offshore deposits of dollars (i.e.,
"eurodollars") or (b) any Bank Party determines that matching deposits
appropriate to fund or maintain any LIBOR Advance are not available to it, or
(c) any Bank Party determines that the formula for calculating the LIBOR
Adjusted Rate does not fairly reflect the cost to such Bank Party of making or
maintaining loans based on such rate, then, upon notice by such Bank Party to
Borrower and Agent, Borrower's right to elect LIBOR Advances from such Bank
Party shall be suspended to the extent and for the duration of such illegality,
impracticability or restriction and all LIBOR Advances of such Bank Party which
are then outstanding or are then the subject of any Request for Advance and
which cannot lawfully or practicably be maintained or funded shall immediately
become or remain, or shall be funded as, Base Rate Advances of such Bank Party.
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 23
<PAGE>
Borrower agrees to indemnify each Bank Party and hold it harmless against all
costs, expenses, claims, penalties, liabilities and damages which may result
from any such change in Law, interpretation or administration. Such
indemnification shall be on an after-tax basis, taking into account any taxes
imposed on the amounts paid as indemnity.
3.5 Funding Losses. In addition to its other obligations hereunder,
Borrower will indemnify each Bank Party against, and reimburse each Bank Party
on demand for, any loss or expense incurred or sustained by such Bank Party
(including any loss or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by a Bank Party to fund or
maintain LIBOR Advances), as a result of any payment or prepayment (whether
authorized or required hereunder or otherwise) of all or a portion of a LIBOR
Advance on a day other than the day on which the applicable Interest Period
ends, any payment or prepayment, whether required hereunder or otherwise, of an
Advance made after the delivery, but before the effective date, of a
Continuation/Conversion Notice, if such payment or prepayment prevents such
Continuation/Conversion Notice from becoming fully effective, the failure of any
Advance to be made or of any Continuation/Conversion Notice to become effective
due to any condition precedent not being satisfied or due to any other action or
inaction of Borrower, or any conversion (whether authorized or required
hereunder or otherwise) of all or any portion of any LIBOR Advance into a Base
Rate Advance or into a different LIBOR Advance on a day other than the day on
which the applicable Interest Period ends. Such indemnification shall be on an
after-tax basis, taking into account any taxes imposed on the amounts paid as
indemnity.
3.6 Reimbursable Taxes. Borrower covenants and agrees that:
(a) Borrower will indemnify each Bank Party against and
reimburse each Bank Party for all present and future income, stamp and
other taxes, levies, costs and charges whatsoever imposed, assessed,
levied or collected on or in respect of this Agreement or any LIBOR
Advances (whether or not legally or correctly imposed, assessed, levied
or collected), excluding, however, any taxes imposed on or measured by
the overall net income of Agent or such Bank Party or any lending
office of such Bank Party by any jurisdiction in which such Bank Party
or any such lending office is located (all such non-excluded taxes,
levies, costs and charges being collectively called "Reimbursable
Taxes" in this section). Such indemnification shall be on an after-tax
basis, taking into account any taxes imposed on the amounts paid as
indemnity.
(b) All payments on account of the principal of, and interest
on, each Bank Party's Note, and all other amounts payable by Borrower
to any Bank Party hereunder, shall be made in full without set-off or
counterclaim and shall be made free and clear of and without deductions
or withholdings of any nature by reason of any Reimbursable Taxes, all
of which will be for the account of Borrower. In the event of Borrower
being compelled by Law to make any such deduction or withholding from
any payment to any Bank Party, Borrower shall pay on the due date of
such payment, by way of additional interest, such additional amounts
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 24
<PAGE>
as are needed to cause the amount receivable by such Bank Party after
such deduction or withholding to equal the amount which would have been
receivable in the absence of such deduction or withholding. If Borrower
should make any deduction or withholding as aforesaid, Borrower shall
within 60 days thereafter forward to such Bank Party an official
receipt or other official document evidencing payment of such deduction
or withholding.
(c) If Borrower is ever required to pay any Reimbursable Tax
with respect to any LIBOR Advance, Borrower may elect, by giving to
Agent and such Bank Party not less than three Business Days' notice, to
convert all (but not less than all) of any such LIBOR Advance into a
Base Rate Advance, but such election shall not diminish Borrower's
obligation to pay all Reimbursable Taxes.
(d) Notwithstanding the foregoing provisions of this section,
Borrower shall be entitled, to the extent it is required to do so by
Law, to deduct or withhold (and not to make any indemnification or
reimbursement for) income or other similar taxes imposed by the United
States of America (other than any portion thereof attributable to a
change in federal income tax Laws effected after the date hereof) from
interest, fees or other amounts payable hereunder for the account of
any Bank Party, other than a Bank Party (i) who is a U.S. person for
Federal income tax purposes or (ii) who has the Prescribed Forms on
file with Agent (with copies provided to Borrower) for the applicable
year to the extent deduction or withholding of such taxes is not
required as a result of the filing of such Prescribed Forms, provided
that if Borrower shall so deduct or withhold any such taxes, it shall
provide a statement to Agent and such Bank Party, setting forth the
amount of such taxes so deducted or withheld, the applicable rate and
any other information or documentation which such Bank Party may
reasonably request for assisting such Bank Party to obtain any
allowable credits or deductions for the taxes so deducted or withheld
in the jurisdiction or jurisdictions in which such Bank Party is
subject to tax. As used in this section, "Prescribed Forms" means such
duly executed forms or statements, and in such number of copies, which
may, from time to time, be prescribed by Law and which, pursuant to
applicable provisions of (x) an income tax treaty between the United
States and the country of residence of the Bank Party providing the
forms or statements, (y) the Internal Revenue Code of 1986, as amended
from time to time, or (z) any applicable rules or regulations
thereunder, permit Borrower to make payments hereunder for the account
of such Bank Party free of such deduction or withholding of income or
similar taxes.
3.7 Replacement of Lenders. If any Bank Party seeks reimbursement for
increased costs under Sections 3.2 through 3.6, then within ninety days
thereafter -- provided no Event of Default then exists -- Borrower shall have
the right (unless such Bank Party withdraws its request for additional
compensation) to replace such Bank Party by requiring such Bank Party to assign
its Note and its commitments hereunder to an Eligible Transferee reasonably
acceptable to Agent and to Borrower, provided that: (i) all Obligations of
Borrower owing to such Bank Party being replaced (including such increased
costs, but excluding principal and accrued interest on the Note being assigned)
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 25
<PAGE>
shall be paid in full to such Bank Party concurrently with such assignment, and
(ii) the replacement Eligible Transferee shall purchase the Note being assigned
by paying to such Bank Party a price equal to the principal amount thereof plus
accrued and unpaid interest thereon. In connection with any such assignment,
Borrower, Agent, such Bank Party and the replacement Eligible Transferee shall
otherwise comply with Section 10.13. Notwithstanding the foregoing rights of
Borrower under this section, however, Borrower may not replace any Bank Party
which seeks reimbursement for increased costs under Section 3.2 through 3.6
unless Borrower is at the same time replacing all Bank Parties which are then
seeking such compensation.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BORROWER
------------------------------------------
Borrower hereby represents and warrants as follows:
4.1 Organization and Authority of Borrower. Borrower is a duly
organized, validly existing Texas corporation and in good standing under the
applicable laws of Texas, and is qualified to do business and is in good
standing in each state where its business activities require such qualification,
with full power, and authority to enter into this Loan Agreement. If the
issuance of any interest in Borrower, or in any constituent business entity of
Borrower is subject to any state or federal securities laws and/or the rules and
regulations of the Securities and Exchange Commission, each such issuance has
been and will be in compliance with all said laws and regulations to which it is
subject.
4.2 Execution and Delivery of Loan Documents. The execution and
delivery of the Loan Documents executed or delivered by Borrower, and the
consummation of the transactions contemplated thereby: (i) have been duly
authorized by all actions required under the terms and provisions of their
governing instruments, the laws of the State of Texas, and any applicable
requirement of a Governmental Authority; (ii) create legal, valid and binding
obligations on Borrower; (iii) do not require the approval or consent of any
Governmental Authority having jurisdiction over Borrower, or the property of
Borrower; and (iv) do not and will not constitute a violation of, or default
under, the governing instruments of Borrower, any requirement of a Governmental
Authority applicable to Borrower, or any mortgage, indenture, agreement,
commitment, or instrument to which Borrower is a party or by which any of its
assets are bound, nor create or cause to be created any mortgage, lien,
encumbrance, or charge against the assets of Borrower other than those expressly
permitted by the Loan Documents.
4.3 Information Supplied by Borrower. The Financial Statements of
Borrower and CSLC heretofore delivered to Agent are true, complete and correct
in all material respects, have been prepared on a consistent basis and fairly
and accurately present the respective financial conditions of the subjects
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 26
<PAGE>
thereof as of the respective dates thereof. No material adverse change has
occurred since the respective dates thereof.
4.4 Compliance With Laws. To Borrower's knowledge, the use of the
Property and Improvements comply with all Governmental Requirements, applicable
zoning ordinances, regulations and restrictive covenants affecting the Property
and all other requirements of a Governmental Authority, and all requirements for
such use have been satisfied.
4.5 Licenses; Permits. To Borrower's knowledge, all necessary licenses,
Permits and other necessary certificates are in full force and effect and have
been issued in Borrower's or Manager's name with respect to the Property and
Borrower and Manager are in good standing with all Governmental Authorities in
connection with all beds or units required to be licensed and other facilities
constituting a portion of the Property. Borrower further represents and warrants
that all necessary and applicable certificates of occupancy, permits and other
appropriate authorization and approval matters from Governmental Authorities
have been issued and are in existence with regard to the Property. No funds have
been received by Borrower or any other person or entity with respect to the
Property pursuant to Title VI of the Public Health Service Act, 42 U.S.C. ss.
291 et seq., as amended (the "Hill-Burton Act"), and the Property is not subject
to any provision or requirements of the Hill-Burton Act.
4.6 No Defaults. Borrower is not in default under any of the Loan
Documents, and no event has occurred which by notice, the passage of time or
otherwise would constitute an event of default under any of the Loan Documents.
Borrower is not in default in the payment of any indebtedness for borrowed money
or under the terms and provisions of any agreement or instrument evidencing any
such indebtedness, and, to Borrower's knowledge, it is not in default with
respect to any order, writ, injunction, decree or demand of any court or of any
other requirement of a Governmental Authority.
4.7 Access and Utilities. The Property has adequate rights of access to
public ways and all water, sanitary sewer and storm drain facilities. All public
utilities necessary or convenient to the full use and enjoyment of the Property
are available at the boundaries of the Property and same are in service. All
roads necessary for the full utilization of the Property for their intended
purposes are present or the necessary rights of way therefor have been acquired.
4.8 Lien Potential. Borrower has not made any contract or arrangement
of any kind which has given rise to (or the performance of which by the other
party thereto would give rise to) a lien or claim of lien on the Property, or
other collateral covered by the Loan Documents, except for the collateral
documents executed in connection with the Loan.
4.9 Complete Information. No representation or warranty of Borrower
contained in any of the Loan Documents, and no statement contained in any
certificate, schedule, list, financial statement or other instrument furnished
to Agent by or on behalf of Borrower contains, or will intentionally contain,
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 27
<PAGE>
any untrue statement of a material fact, or omits, or will intentionally omit,
to state a material fact necessary to make the statements contained herein or
therein not misleading. To Borrower's knowledge, all information material to the
transactions contemplated herein has been expressly disclosed in writing by
Borrower to Agent.
4.10 Investment Company Act. Borrower is not an investment company as
defined in the Investment Company Act of 1940, as amended.
4.11 Payment of Taxes. Borrower has filed all federal, state and other
tax returns and reports required to be filed, and has paid all taxes as shown on
said returns and reports and all assessments received by it to the extent that
such taxes and assessments have become due (except to the extent that the same
are being contested in good faith by appropriate proceedings diligently
prosecuted and as to which adequate reserves have been set aside in conformity
with GAAP).
4.12 The Financial Statements. Except with respect to the initial
Financial Statements of Borrower which were proformas only, the Financial
Statements are true, correct, and complete as of the dates specified therein and
fully and accurately present the financial condition of Borrower as of the dates
specified. No material adverse change has occurred in the financial condition of
Borrower since the date of the Financial Statements.
4.13 Suits, Actions. etc. There are no actions, suits, or proceedings
pending or, to Borrower's knowledge, threatened in any court or before or by any
individual, entity or Governmental Authority against or affecting Borrower which
could have a material adverse effect on the ability of each of any such parties
to perform their respective obligations under the Loan Documents or otherwise,
or against or affecting the Property, or involving the validity, enforceability,
or priority of any of the Loan Documents, at law or in equity. The consummation
of the transactions contemplated hereby, and the performance of any of the terms
and conditions hereof and of the other Loan Documents by Borrower, will not
result in a breach of, or constitute a default in, any mortgage, deed of trust,
lease, promissory note, loan agreement, credit agreement. partnership agreement,
or other agreement to which Borrower or by which Borrower may be bound.
4.14 Title to the Property. Borrower holds full legal and equitable
title to the Property subject only to the Permitted Exceptions.
4.15 ERISA Compliance.
(a) As of the date hereof and throughout the term of the Loan,
(i) Borrower is not and will not be an "employee benefit plan" as
defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), which is subject to Title I of ERISA,
and (ii) the assets of Borrower do not and will not constitute "plan
assets" of one or more such plans for purposes of Title I of ERISA; and
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 28
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(b) As of the date hereof and throughout the term of the Loan
(i) Borrower is not and will not be a "governmental plan" within the
meaning of Section 3(3) of ERISA and (ii) transactions by or with
Borrower are not and will not be subject to state statutes applicable
to Borrower regulating investments of and fiduciary obligations with
respect to governmental plans.
4.16 Management Agreements. The Management Agreements are in full force
and effect and there are no defaults by the Manager or Borrower thereunder.
4.17 Reimbursement Contracts. There is no action pending or threatened
to terminate (a) any Medicare or Medicaid Reimbursement Contract of any of the
Properties or to fail to renew any Medicare or Medicaid Reimbursement Contract,
or (b) any material Reimbursement Contract (other than Medicare and Medicaid) or
to fail to renew any material Reimbursement Contract (other than Medicare and
Medicaid).
4.18 Insider. Neither Borrower nor any Person having "control" (as that
term is defined in 12 U.S.C. ss. 375b(9) or in regulations promulgated pursuant
thereto) of Borrower is a "director" or an "executive officer" or "principal
shareholder" (as those terms are defined in 12 U.S.C. ss. 375b(8) or (9) or in
regulations promulgated pursuant thereto) of any Bank Party, of a bank holding
company of which any Bank Party is a Subsidiary or of any Subsidiary of a bank
holding company of which any Bank Party is a Subsidiary.
4.19 Federal Reserve Bank. Borrower represents and warrants that no
portion of any Advance or loan made hereunder shall be used directly or
indirectly to purchase ineligible securities, as defined by applicable
regulations of the Federal Reserve Board, underwritten by any affiliate of Banc
One Corporation during the underwriting period and for 30 days thereafter.
ARTICLE 5
COVENANTS AND AGREEMENTS OF BORROWER
------------------------------------
Borrower hereby covenants and agrees as follows:
5.1 Compliance with Governmental Requirements. Borrower shall timely
comply in all material respects with all Governmental Requirements and, if
requested by Agent, deliver to Agent evidence of such compliance.
5.2 Correction of Defects. Borrower shall correct or cause to be
corrected (a) any material defect in the Improvements, or (b) any encroachment
by any part of the Improvements or any other structure located on the Property
on any building line, easement, property line, or restricted area.
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 29
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5.3 Underground Storage Tanks. Borrower represents and warrants: (i)
Borrower has formally registered underground storage tanks ("UST's") located at
Towne Centre and Canton Regency with all Governmental Authorities; (ii) the
UST's are in full compliance with all Governmental Requirements; (iii) to the
best of Borrower's knowledge, the UST's do not leak and are in first class
condition; (iv) Borrower has conducted tightness tests on the UST's and has
provided or shall upon request provide Agent with copies of all such test
results, and shall comply with all future requirements, requests and
recommendations of Agent concerning the UST's; (v) Borrower conducted additional
tightness tests of the UST's on or before December 31, 1998; and (vi) Borrower
shall fully comply with all future obligations and otherwise maintain said UST's
in a manner so as to comply with all future Governmental Requirements.
5.4 Inspection of the Property. Borrower shall permit Agent, any
Governmental Authority, and their agents and representatives, to enter upon the
Property and any location for the purpose of inspection of the Property at all
reasonable times.
5.5 Notices by Governmental Authority, Fire and Casualty Losses, etc.
Borrower shall timely comply with and promptly furnish to Agent true and
complete copies of any official notice or claim by any Governmental Authority
pertaining to the Property. Borrower shall promptly notify Agent of any fire or
other casualty or any notice of taking or eminent domain action or proceeding
affecting the Property.
5.6 Expenses. Whether or not the transactions contemplated under this
Loan Agreement and the Loan Documents shall be consummated, Borrower shall pay
all expenses in connection with such transactions, including, without
limitation, the cost and expenses of preparation of this Loan Agreement and of
any other document or instrument Agent considers necessary or appropriate with
respect to the Loan, the cost and expenses incurred by or on behalf of any Bank
Party in connection with the enforcement or performance of and compliance with
any of the provisions of this Loan Agreement or any agreement or condition
contained in any other document or instrument required by Agent, and any other
costs and expenses related to the transactions contemplated under this Loan
Agreement. Furthermore, Borrower agrees to reimburse Agent for all other
expenses incurred by Agent associated with the due diligence examination of the
Property, review of all materials and records presented to Agent, travel
expenses incurred for inspection of the Property, attorney's fees incurred and
other costs and expenses related to the Loan. Borrower shall not pay the
attorneys' fees or other costs incurred by the Lenders in the negotiation and
execution of this Agreement.
5.7 Additional Acts. In addition to the acts recited herein and
contemplated to be performed, executed and/or delivered by Borrower, Borrower
hereby agrees, at any time, and from time to time, to perform, execute and/or
deliver to Agent any and all such further acts, additional instruments, or
further assurances as may be necessary or proper to (i) implement the intent of
the parties under this Loan Agreement; (ii) correct any errors in this Loan
Agreement or any other instrument relating thereto; (iii) assure Agent a valid
and direct first lien and prior first perfected security interest under the Loan
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 30
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Documents or any of them on the Property; (iv) create, perfect, preserve,
maintain and protect the liens and security interests created or intended to be
created by the Loan Documents; and (v) provide the rights and remedies to the
Bank Parties granted or provided for by the Loan Documents.
5.8 Inspection of Property. Books and Records. Borrower shall permit
Agent, at all reasonable times: (i) to examine and inspect the Property; and
(ii) examine, inspect and copy the books and records of Borrower pertaining to
the Loan and the Property, and all contracts, statements, invoices, bills, and
claims related thereto. All such books and records shall be maintained and kept
in accordance with generally accepted accounting principles, consistently
applied.
5.9 Defense of Actions. Agent may (but shall not be obligated to)
commence, appear in, or defend any action or proceeding purporting to affect the
Loan, the Property, or the respective rights and obligations of Agent, the
Lenders and Borrower pursuant to this Loan Agreement. Agent may (but shall not
be obligated to) pay all necessary expenses, including attorneys' fees and
expenses incurred in connection with such proceedings or actions, which Borrower
agrees to repay to Agent upon demand.
5.10 Prohibition of Assignment or Debt on the Property.
(a) Except as otherwise expressly permitted herein or in the
Mortgages, Borrower shall not assign or encumber any interest in the
Property without the prior written consent of Majority Lenders.
Borrower shall not (i) pledge any part of the Property, or (ii) dispose
of any asset (personal property or real property) related to the
Property belonging to Borrower without the prior written consent of
Majority Lenders; provided, however, that with respect to the purchase
of inventory, supplies and equipment necessary for the day-to-day
operation of any one or more of the facilities comprising the Property,
and the purchase of any equipment necessary for the repair and/or
replacement of any equipment or improvement used or operated in
connection with any one or more of the facilities comprising the
Property, nothing herein shall prohibit such purchases, replacements or
dispositions or require Majority Lenders' approval; further provided
however, nothing herein is intended to revise or diminish Borrower's
rights stated in Section 2.7 above in connection with the acquisition
of other properties which meet the financial criteria set forth
therein. Borrower shall make no loans whatsoever to anyone other than
CSLC and Subsidiaries of CSLC without the prior written consent of
Majority Lenders.
(b) Without the prior written consent of Majority Lenders,
Borrower shall not enter into any merger or consolidation with, or
sell, lease, transfer or dispose of all or substantially all of its
assets to, any entity.
(c) Borrower shall carry on and conduct its business in
substantially the same manner and substantially the same field of
enterprise as it is presently conducted.
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 31
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5.11 Payment of Claims. Borrower shall promptly pay or cause to be paid
when due all costs and expenses incurred in connection with the Property and the
Improvements, and Borrower shall keep the Property free and clear of any liens,
charges, or claims other than the lien of the Mortgages and other liens approved
in writing by Majority Lenders. Notwithstanding anything to the contrary
contained in this Loan Agreement, Borrower, provided it does so in good faith
and in diligent and continuous manner, may (a) contest the validity or amount of
any claim of any contractor, consultant, or other person providing labor,
materials, or services with respect to the Property, and (b) contest any tax or
special assessments levied by any Governmental Requirements, and such contest on
the part of Borrower shall not be a default hereunder and shall not release
Lenders from their obligations to make Advances hereunder; provided, however,
that during the pendency of any such contest, Borrower shall furnish to Agent
and the Title Company an indemnity bond with a corporate surety satisfactory to
Agent and the Title Company, a letter of credit issued by a financial
institution approved by Agent and the Title Company, or other security
acceptable to them, in an amount equal to twice the amount being contested plus
a reasonable additional sum to cover possible costs, interest, and penalties,
and provided further that Borrower shall pay any amount adjudged by a court of
competent jurisdiction to be due, with all costs, interest, and penalties
thereon, before such judgment becomes a lien on the Property.
5.12 Restrictions and Annexation. Borrower shall not impose any
restrictive covenants or encumbrances upon the Property, execute or file any
subdivision plat affecting the Property, take any action whatsoever to convert
the Property or any part thereof to a condominium or cooperative, or consent to
any action taken by any Governmental Authority without the prior written consent
of Majority Lenders.
5.13 Current Financial Statements.
(a) On or before the expiration of 45 days after each fiscal
quarter during the term of the Loan, Borrower shall deliver to Agent
Financial Statements of Borrower. On or before the expiration of 120
days after each fiscal year during the term of the Loan, Borrower shall
deliver to Agent annual audited Financial Statements of Capital Senior
Living Corporation (on a consolidated and consolidating basis).
(b) With respect to the Property, Borrower shall deliver to
Agent:
(1) Within 45 days after each fiscal quarter, monthly
and year-to-date Financial Statements of the operations of the
Property, in the form of Exhibit F, certified by an officer of
Borrower to be true and correct to the best of the officer's
knowledge and belief.
(2) If and when applicable, within twenty (20) days
of receipt, copies of all licensure and certification survey
reports and statements of deficiencies, and,
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 32
<PAGE>
attached thereto, a copy of any plan of correction generated
by the Borrower or Manager in connection with such survey or
report; and shall correct, in requisite time, any deficiency
the curing of which is a condition to continued licensure or
ability to operate.
(3) If and when applicable, within three (3) days of
receipt, any and all notices (regardless of form) from any and
all licensing and/or certifying agencies that the Property is
being downgraded to a substandard category, revoked, or
suspended or that any such action is pending or being
considered.
(4) If requested by Agent, within fifteen (15) days
of Agent's request, an aged accounts receivable report of the
Property.
(5) Within twenty (20) days of filing or receipt, all
Medicaid cost reports and amendments thereto filed with
respect to the Property, and all responses, audit reports or
other inquiries with respect to such cost reports.
(6) Within ten (10) days of receipt, a copy of the
Medicaid rate calculation worksheet (or the equivalent
thereof) issued by the appropriate Medicaid agency for the
Property.
(c) If Borrower routinely prepares more frequent Financial
Statements (unaudited) for interim periods, Borrower shall furnish
Agent copies of such interim statements (unaudited) when they are
prepared. In addition Borrower will promptly prepare and deliver, or
cause to be prepared and delivered, to Agent such other Financial
Statements as Agent may from time to time reasonably request. All
Financial Statements shall be prepared in accordance with GAAP,
consistently applied. Furthermore, Borrower shall execute and deliver
to Agent its Affidavit of Borrower in accordance with the terms set
forth in Section 1.3.
5.14 Tax Receipts. Borrower shall furnish Agent with receipts, or tax
statements marked "Paid" to evidence the payment of all taxes levied on the
Property on or before thirty (30) days prior to the date such taxes become
delinquent.
5.15 Financial Covenants. Borrower shall, at all times, comply with the
following financial covenants, maintain such amounts and ratios as set forth
herein, which shall in each instance be calculated on the basis of GAAP,
consistently applied. Compliance with the financial covenant requirements shall
be determined as of the dates of the financial statements to be provided to
Agent, and Borrower shall deliver schedules reflecting the calculation of such
amounts and the ratios concurrently with each set of financial statements.
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 33
<PAGE>
(a) Current Ratio. Borrower shall maintain a minimum Current
Ratio of 1.0 to 1.0 at all times. The Current Ratio shall be calculated
based upon Current Assets divided by Current Liabilities equals Current
Ratio:
As of the quarter ending ____________________:
$-------------/$------------- = ------------
Current Assets / Current Liabilities Current Ratio
For purposes of this calculation pre-paid expenses will be
classified as non-current assets.
(b) Tangible Net Worth. Borrower shall maintain a minimum of
$45,000,000 as Tangible Net Worth (as defined below) through the end of
each current fiscal year.
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 34
<PAGE>
As of the year ending ________________________:
Total Assets $_____________
Less: Total Liabilities $_____________
Intangibles $_____________
Goodwill $_____________
Equals: Tangible Net Worth $_____________
(c) Loan to Value Ratio. Throughout the term of the Loan,
Borrower will maintain a Loan to Value Ratio not to exceed sixty-five
percent (65%) as to the outstanding indebtedness payable to Lenders
under the Loan.
(d) Leverage Ratio. CSLC shall maintain a Leverage Ratio of
0.65 to 1.0 or less at all times. The Leverage Ratio shall be computed
as of the last day of the fiscal quarter being measured.
(e) Cash Flow Coverage. The Property (in the aggregate) shall
maintain a minimum Cash Flow Coverage ratio of 1.3 to 1.0, calculated
based on the prior three (3) months of operation. This ratio shall be
calculated as (1) net income from the normal operations of the Property
(without deduction for actual management fees paid or incurred), plus
interest expense (to the extent deducted in calculating net income) and
allowances for depreciation and amortization of the Property for said
period, less (i) the greater of actual capital expenditures for that
period or $150 per unit per year, and (ii) the greater of actual
management fees during that period or a five percent (5%) management
fee, divided by (2) an amount equivalent to the sum of (i) interest on
the Loan during such period at a rate of interest equal to 2.50% per
annum above the Treasury Note Rate and (ii) an amount equivalent to the
monthly installment of principal payable under the Loan during such
period assuming a 25-year amortization.
5.16 Fees.
(a) On each anniversary date of the Fifth Agreement (which
date is September 1 of each year), Borrower shall pay Agent for the
account of each Lender based on its Percentage Share a fee equal to one
eighth of one percent (0.125%) of the then unused portion (i.e., not
outstanding) of the stated principal amount of the Loan if the then
outstanding principal balance of the Loan is equal to or greater than
$10,200,000, and one-quarter of one percent (0.25%) of the then unused
portion of the stated principal amount of the Loan if the then
outstanding principal balance of the Loan is less than $10,200,000.
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 35
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(b) In consideration of Lenders' review and processing of any
amendment, waiver or other modification of any Loan Document, Borrower
will pay to Agent for the account of Lenders a modification fee in the
aggregate amount of $1,000 for each such amendment, waiver or
modification, due and payable on the effective date thereof.
5.17 Affiliated Transactions. Borrower agrees that all transactions
with third party entities will be fully negotiated and shall be on an
"arms-length" bona fide type basis. Although Borrower is not prohibited from
entering into service agreements or other contracts with affiliated entities,
any such agreements shall be on competitive terms, and shall otherwise be fair
and equitable. Any agreement with a third party affiliated entity shall be
subject to review and approval by Majority Lenders and shall be subject to
termination if same does not meet with Majority Lenders' reasonable approval;
provided however, Lenders acknowledge their consent and approval of the fees and
expenses payable under the Management Agreements and development agreements
associated with the Properties.
5.18 Operation of Business. Borrower shall conduct, or cause the
Manager to conduct, the operation of the Property at all times in a manner
consistent with the following:
(a) to maintain the standard of care for the residents of the
Property at all times at a level necessary to ensure quality care for
the residents of the Property in accordance with customary and prudent
industry standards;
(b) to operate the Property in a prudent manner and in
compliance with applicable laws and regulations relating thereto and
cause all Permits, Reimbursement Contracts, and any other agreements
necessary for the use and operation of the Property or as may be
necessary for applicable reimbursement programs to remain in effect
without reduction in the number of licensed units or units authorized
for use in applicable reimbursement programs;
(c) to maintain sufficient inventory and equipment types and
quantities at the Property to enable Borrower adequately to perform
operations of the Property;
(d) to keep all improvements and equipment located on or used
or useful in connection with the Property in good repair, working order
and condition, reasonable wear and tear excepted, and from time to time
make all needed and proper repairs, renewals, replacements, additions,
and improvements thereto to keep the same in good operating condition;
and
(e) to maintain sufficient cash in the operating accounts of
the Property in order to satisfy the working capital needs of the
Property .
5.19 Management Agreements. Borrower shall maintain the Management
Agreements in full force and effect and timely perform all of Borrower's
obligations thereunder and enforce performance of all obligations of the Manager
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 36
<PAGE>
thereunder and not permit the termination, amendment or assignment of the
Management Agreements unless the prior written consent of Majority Lenders is
first obtained, which consent may be in the sole and absolute discretion of
Majority Lenders. Borrower will not enter into any other management agreement
regarding the Property without Majority Lenders' prior written consent, which
may be in the sole and absolute discretion of Agent.
5.20 Notice of Fees or Penalties. Borrower shall immediately notify
Agent, upon Borrower's knowledge thereof, of the assessment by any state or any
Medicare, Medicaid, health or licensing agency of any fine or penalties against
Borrower, Manager or the Property.
5.21 Assignment of Licenses and Permits. Borrower shall not assign or
transfer any of its interest in any Permits or Reimbursement Contracts
(including rights to payment thereunder) pertaining to the Property, or assign,
transfer, or remove or permit any other person to assign, transfer, or remove
any records pertaining to the Property including, without limitation, resident
records, medical and clinical records (except for removal of such resident
records as directed by the residents owning such records), without Majority
Lenders' prior written consent, which consent may be granted or refused in
Majority Lenders' sole discretion.
5.22 Periodic Surveys. Borrower shall furnish to Agent, or cause the
Manager to furnish to Agent, within twenty (20) days of receipt, a copy of any
Medicare, Medicaid, or other licensing agency survey or report and any statement
of deficiencies and/or any other report required in Section 5.13 indicating that
any action is pending or being considered to downgrade the Property (or any
portion thereof) to a substandard category, and within the time period required
by the particular agency for furnishing a plan of correction also furnish or
cause to be furnished to Agent a copy of the plan of correction generated from
such survey or report to the Property, and correct or cause to be corrected any
deficiency, the curing of which is a condition of continued licensure or for
full participation in Medicaid/Medicare or other reimbursement programs pursuant
to any Reimbursement Contract for existing patients or for new patients to be
admitted with Medicaid or Medicare coverage, by the date required for cure by
such agency (plus extensions granted by such agency).
5.23 Further Assurances. Borrower will, on request of Agent, (i)
promptly correct any defect or error which may be discovered in the contents of
any Loan Document now or hereafter executed in connection herewith or in the
execution or acknowledgment thereof; (ii) execute, acknowledge, deliver and
record or file such further instruments (including without limitation further
deeds of trust, security agreements, financing statements, continuation
statements and assignments of rents or leases) and do such further acts as may
be necessary, desirable or proper to carry out more effectively the purposes of
the Loan Documents and to subject to the liens and security interests thereof
any property intended by the terms hereof and thereof to be covered hereby and
thereby including specifically, but without limitation, any renewals, additions,
substitutions, replacements, or appurtenances to the Property; and (iii)
execute, acknowledge, deliver, procure and record or file any document or
instrument (including specifically any financing statement) deemed advisable by
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 37
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the Agent to protect the liens or the security interests under the Loan
Documents against the rights or interests of third persons.
5.24 Ownership and Liens. Borrower will maintain good and marketable
title to all of the Property free and clear of all liens, security interests,
encumbrances or adverse claims, except for the liens and security interests
created by the Loan Documents and the Permitted Encumbrances. Borrower will not
permit any dispute, right of setoff, counterclaim or defense to exist with
respect to all or any part of the Property. Borrower will cause any lien,
financing statement or other security instrument with respect to the Property to
be terminated, except as may exist or as may have been filed in favor of Agent.
Borrower will defend at its expense Agent's right, title and security interest
in and to the Property against the claims of any third party.
5.25 Transfer or Encumbrance. Borrower will not (i) sell, assign by
operation of law or otherwise), transfer, exchange, lease or otherwise dispose
of any of the Property, (ii) grant a lien or security interest in or execute,
file or record any financing statement or other security instrument with respect
to the Property to any party other than Agent, or (iii) deliver actual or
constructive possession of any of the Property to any party other than Agent,
except for (A) sales and leases of inventory in the ordinary course of business,
and (B) the sale or the disposal of any item of equipment which is worn out or
obsolete and which has been replaced by an item of equal suitability and value,
owned by Borrower and made subject to the liens and security interests under the
Loan Documents, but which is otherwise free and clear of any lien, security
interest, encumbrance or adverse claim; provided, however, the exceptions
permitted in clauses (A) and (B) above shall automatically terminate upon the
occurrence of an Event of Default.
5.26 Bank Accounts; Offset. To secure the repayment of the Obligations,
Borrower hereby grants to each Bank Party a security interest, a lien, and a
right of offset, each of which shall be in addition to all other interests,
liens, and rights of any Bank Party at common law, under the Loan Documents, or
otherwise, and each of which shall be upon and against any and all moneys,
securities or other property (and the proceeds therefrom) of Borrower now or
hereafter held or received by or in transit to any Bank Party from or for the
account of Borrower, whether for safekeeping, custody, pledge, transmission,
collection or otherwise, any and all deposits (general or special, time or
demand, provisional or final) of Borrower with any Bank Party, and any other
credits and claims of Borrower at any time existing against any Bank Party,
including claims under certificates of deposit. At any time and from time to
time after the occurrence of any Event of Default, each Bank Party is hereby
authorized to foreclose upon, or to offset against the Obligations then due and
payable (in either case without notice to Borrower), any and all items
hereinabove referred to. The remedies of foreclosure and offset are separate and
cumulative, and either may be exercised independently of the other without
regard to procedures or restrictions applicable to the other.
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 38
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ARTICLE 6
RIGHTS AND REMEDIES OF BANK PARTIES
-----------------------------------
6.1 Acceleration. Upon and during the continuance of any Event of
Default, Agent at any time and from time to time may (and upon written
instructions from New Lenders, Agent shall), without notice to Borrower, do
either or both of the following: (1) terminate any obligation of Lenders to make
Advances hereunder, and (2) declare any or all of the Obligations immediately
due and payable, and all such Obligations shall thereupon be immediately due and
payable, without demand, presentment, notice of demand or of dishonor and
nonpayment, protest, notice of protest, notice of intention to accelerate,
declaration or notice of acceleration, or any other notice or declaration of any
kind, all of which are hereby expressly waived by Borrower.
6.2 Remedies. If any Event of Default shall occur and be continuing,
each Bank Party may protect and enforce its rights under the Loan Documents by
any appropriate proceedings, including proceedings for specific performance of
any covenant or agreement contained in any Loan Document, and each Bank Party
may enforce the payment of any Obligations due it or enforce any other legal or
equitable right which it may have. Notwithstanding the foregoing, no Lender may
exercise any rights or remedies granted to Agent, except that a Lender may
accelerate any Note payable to such Lender. All rights, remedies and powers
conferred upon Bank Parties under the Loan Documents shall be deemed cumulative
and not exclusive of any other rights, remedies or powers available under the
Loan Documents or at Law or in equity.
ARTICLE 7
INDEMNIFICATION
---------------
Borrower agrees to and does hereby indemnify the Bank Parties (for
purposes of this Article 7 the term "Bank Parties" shall include the directors,
officers, employees and agents of each Bank Party and any persons or entities
owned or controlled by, owning or controlling, or under common control or
affiliated with the Bank Parties) and hold the Bank Parties harmless as follows:
(a) against any and all claims, demands, causes of action,
judgments, penalties, loss, damage, liabilities, costs and expenses
(including, without limitation, attorneys' fees and court costs)
asserted against or incurred by any of the Bank Parties by reason of,
arising out of, or in connection with, any bodily injury or death or
property damage occurring in or upon or in the vicinity of the Property
through any cause whatsoever;
(b) against any and all claims, demands, causes of action,
judgments, penalties, loss, damage, liabilities, costs and expenses
(including, without limitation, attorneys' fees and court costs)
asserted against or incurred by any of the Bank Parties by reason of,
arising out of, or in connection with, any violation or breach by
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 39
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Borrower of any of the terms and provisions of the Loan Documents or
any of them; and
(c) against any and all claims, demands, causes of action,
judgments, penalties, loss, damage, liabilities, costs and expenses
(including, without limitation, attorneys' fees and court costs)
asserted against or incurred by any of the Bank Parties by reason of,
arising out of, or in connection with, the Loan, any of the Loan
Documents, or the Property.
WITHOUT LIMITATION, IT IS THE INTENTION OF BORROWER AND BORROWER AGREES THAT THE
FOREGOING INDEMNITIES SHALL APPLY TO EACH INDEMNIFIED PARTY WITH RESPECT TO
CLAIMS, DEMANDS, LIABILITIES, LOSSES, DAMAGES, CAUSES OF ACTION, JUDGMENTS,
PENALTIES, COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, REASONABLE
ATTORNEY'S FEES) WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF THE
NEGLIGENCE OF SUCH (AND/OR ANY OTHER) INDEMNIFIED PARTY OR ANY
STRICT LIABILITY. However, such indemnities shall not apply to any indemnified
party to the extent the subject of the indemnification is caused by or arises
out of the gross negligence or willful misconduct of such indemnified party.
ARTICLE 8
PARTIAL RELEASES
----------------
Borrower may, at any time and from time to time, obtain a release from
the lien and security interest created by a Mortgage and the Security Agreement
of that portion of the Property related to such Mortgage (the "Related
Property") as Borrower may designate, upon satisfaction of the following terms
and conditions:
(a) After giving effect to the release from the lien of a
Mortgage of the Related Property, the remaining Property (in the
aggregate) shall have (a) a Cash Flow Coverage of 1.3 to 1.0, and (b) a
Loan to Value Ratio of 65% or less. If any Lender, in its sole
discretion, requires new Appraisals in order to make such calculation,
Agent will order and Borrower will reimburse Agent the costs of such
Appraisals, which Appraisals must be in form and substance reasonably
satisfactory to Majority Lenders.
(b) At least seven (7) days prior to the date of such release,
Borrower shall deliver to the Agent at the Borrower's expense the form
of the release to be executed by the Agent (which form of release must
be satisfactory to the Agent in form and substance).
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 40
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(c) At the time of such release, there shall exist no Event of
Default, and no event shall have occurred which with the passage of
time or the giving of notice or both would constitute such an Event of
Default.
ARTICLE 9
AGENT
-----
9.1 Appointment and Authority. Each Lender which becomes a party to
this Loan Agreement hereby irrevocably authorizes Agent, and Agent hereby
undertakes, to receive payments of principal, interest and other amounts due
hereunder as specified herein and to take all other actions and to exercise such
powers under the Loan Documents as are specifically delegated to Agent by the
terms hereof or thereof, together with all other powers reasonably incidental
thereto. The relationship of Agent to the other Bank Parties is only that of one
commercial lender acting as administrative agent for others, and nothing in the
Loan Documents shall be construed to constitute Agent a trustee or other
fiduciary for any holder of any of the Notes or of any participation therein nor
to impose on Agent duties and obligations other than those expressly provided
for in the Loan Documents. With respect to any matters not expressly provided
for in the Loan Documents and any matters which the Loan Documents place within
the discretion of Agent, Agent shall not be required to exercise any discretion
or take any action, and it may request instructions from Lenders with respect to
any such matter, in which case it shall be required to act or to refrain from
acting (and shall be fully protected and free from liability to all Lenders in
so acting or refraining from acting) upon the instructions of Majority Lenders
(including itself), provided, however, that Agent shall not be required to take
any action which exposes it to a risk of personal liability that it considers
unreasonable or which is contrary to the Loan Documents or to applicable Law.
Upon receipt by Agent from Borrower of any communication calling for action on
the part of Lenders or upon notice from any other Bank Party to Agent of any
Event of Default, Agent shall promptly notify each other Bank Party thereof.
9.2 Exculpation, Agent's Reliance, Etc.
(a) Neither Agent nor any of its directors, officers, agents,
attorneys, or employees shall be liable for any action taken or omitted
to be taken by any of them under or in connection with the Loan
Documents, including their negligence of any kind, except that each
shall be liable for its own gross negligence or willful misconduct.
Without limiting the generality of the foregoing, Agent (i) may treat
the payee of any Note as the holder thereof until Agent receives
written notice of the assignment or transfer thereof in accordance with
this Loan Agreement, signed by such payee and in form satisfactory to
Agent; (ii) may consult with legal counsel (including counsel for
Borrower), independent public accountants and other experts selected by
it and shall not be liable for any action taken or omitted to be taken
in good faith by it in accordance with the advice of such counsel,
accountants or experts; (iii) makes no warranty or representation to
any other Bank Party and shall not be responsible to any other Bank
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 41
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Party for any statements, warranties or representations made in or in
connection with the Loan Documents; (iv) shall not have any duty to
ascertain or to inquire as to the performance or observance of any of
the terms, covenants or conditions of the Loan Documents on the part
of Borrower or to inspect the property (including the books and
records) of Borrower; (v) shall not be responsible to any other Bank
Party for the due execution, legality, validity, enforceability,
genuineness, sufficiency or value of any Loan Document or any
instrument or document furnished in connection therewith; (vi) may
rely upon the representations and warranties of Borrower and the
Lenders in exercising its powers hereunder; and (vii) shall incur no
liability under or in respect of the Loan Documents by acting upon any
notice, consent, certificate or other instrument or writing (including
any telecopy, telegram, cable or telex) believed by it to be genuine
and signed or sent by the proper Person or Persons.
(b) Agent shall have no obligation whatsoever to any Lender or
to any other Person to assure that any Collateral exists or is owned by
Borrower or is cared for, protected or insured or has been encumbered
or that the Liens granted to Agent herein or in any of the other Loan
Documents or pursuant hereto or thereto have been properly or
sufficiently or lawfully created, perfected, protected or enforced or
are entitled to any particular priority.
9.3 Credit Decisions. Each Bank Party acknowledges that it has,
independently and without reliance upon any other Bank Party, made its own
analysis of Borrower and the transactions contemplated hereby and its own
independent decision to enter into this Loan Agreement and the other Loan
Documents. Each Bank Party also acknowledges that it will, independently and
without reliance upon any other Bank Party and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Loan Documents.
9.4 Indemnification. Each Lender agrees to indemnify Agent (to the
extent not reimbursed by Borrower within ten (10) days after demand) from and
against such Lender's Percentage Share of any and all liabilities, obligations,
claims, losses, damages, penalties, fines, actions, judgments, suits,
settlements, costs, expenses or disbursements (including reasonable fees of
attorneys, accountants, experts and advisors) of any kind or nature whatsoever
(in this section collectively called "liabilities and costs") which to any
extent (in whole or in part) may be imposed on, incurred by, or asserted against
Agent growing out of, resulting from or in any other way associated with any of
the Collateral, the Loan Documents and the transactions and events (including
the enforcement thereof) at any time associated therewith or contemplated
therein [including any violation or noncompliance with any Environmental Laws
(as such term is defined in the Environmental Indemnity Agreements) by any
Person or any liabilities or duties of any Person with respect to Hazardous
Substances (as such term is defined in the Environmental Indemnity Agreements)
found in or released into the environment].
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 42
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THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND
COSTS ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM
OR THEORY OF STRICT LIABILITY, OR ARE CAUSED, IN WHOLE OR IN PART, BY ANY
NEGLIGENT ACT OR OMISSION OF ANY KIND BY AGENT,
provided only that no Lender shall be obligated under this section to indemnify
Agent for that portion, if any, of any liabilities and costs which is
proximately caused by Agent's own individual gross negligence or willful
misconduct, as determined in a final judgment. Cumulative of the foregoing, each
Lender agrees to reimburse Agent promptly upon demand for such Lender's
Percentage Share of any costs and expenses to be paid to Agent by Borrower under
Section 5.6 or Article 7 to the extent that Agent is not timely reimbursed for
such expenses by Borrower as provided in such section. If Agent is subsequently
reimbursed by Borrower, Agent shall reimburse each Lender its Percentage Share
of such reimbursed amount. As used in the section the term "Agent" shall refer
not only to the Person designated as such in Section 1.2 but also to each
director, officer, agent, attorney, employee, representative and Affiliate of
such Person.
9.5 Rights as Lender. In its capacity as a Lender, Agent shall have the
same rights and obligations as any Lender and may exercise such rights as though
it were not Agent. Agent may accept deposits from, lend money to, act as trustee
under indentures of, and generally engage in any kind of business with Borrower
or its Affiliates, all as if it were not Agent hereunder and without any duty to
account therefor to any other Lender.
9.6 Sharing of Set-Offs and Other Payments. Each Bank Party agrees that
if it shall, whether through the exercise of rights under Loan Documents or
rights of banker's lien, set-off, or counterclaim against Borrower or otherwise,
obtain payment of a portion of the aggregate Obligations owed to it which,
taking into account all distributions made by Agent under Section 3.1, causes
such Bank Party to have received more than it would have received had such
payment been received by Agent and distributed pursuant to Section 3.1, then (a)
it shall be deemed to have simultaneously purchased and shall be obligated to
purchase interests in the Obligations as necessary to cause all Bank Parties to
share all payments as provided for in Section 3.1, and (b) such other
adjustments shall be made from time to time as shall be equitable to ensure that
Agent and all Lenders share all payments of Obligations as provided in Section
3.1; provided, however, that nothing herein contained shall in any way affect
the right of any Bank Party to obtain payment (whether by exercise of rights of
banker's lien, set-off or counterclaim or otherwise) of indebtedness other than
the Obligations. Borrower expressly consents to the foregoing arrangements and
agrees that any holder of any such interest or other participation in the
Obligations, whether or not acquired pursuant to the foregoing arrangements, may
to the fullest extent permitted by Law exercise any and all rights of banker's
lien, set-off, or counterclaim as fully as if such holder were a holder of the
Obligations in the amount of such interest or other participation. If all or any
part of any funds transferred pursuant to this section is thereafter recovered
from the seller under this section which received the same, the purchase
provided for in this section shall be deemed to have been rescinded to the
extent of such recovery, together with interest, if any, if interest is required
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 43
<PAGE>
pursuant to Tribunal order to be paid on account of the possession of such funds
prior to such recovery.
9.7 Investments. Whenever Agent in good faith determines that it is
uncertain about how to distribute to Lenders any funds which it has received, or
whenever Agent in good faith determines that there is any dispute among Lenders
about how such funds should be distributed, Agent may choose to defer
distribution of the funds which are the subject of such uncertainty or dispute.
If Agent in good faith believes that the uncertainty or dispute will not be
promptly resolved, or if Agent is otherwise required to invest funds pending
distribution to Lenders, Agent shall invest such funds pending distribution; all
interest on any such investment shall be distributed upon the distribution of
such investment and in the same proportion and to the same Persons as such
investment. All moneys received by Agent for distribution to Lenders (other than
to the Person who is Agent in its separate capacity as a Lender) shall be held
by Agent pending such distribution solely as Agent for such Lenders, and Agent
shall have no equitable title to any portion thereof.
9.8 Benefit of Article 9. The provisions of this Article (other than
the following Section 9.9) are intended solely for the benefit of Bank Parties,
and no other Person, including Borrower, shall be entitled to rely on any such
provision or assert any such provision in a claim or defense against any Bank
Party. Bank Parties may waive or amend such provisions as they desire without
any notice to or consent of Borrower or any other Person.
9.9 Resignation. Agent may resign at any time by giving sixty (60) days
prior written notice thereof to Lenders and Borrower. Each such notice shall set
forth the date of such resignation. Upon any such resignation Lenders shall have
the right to appoint a successor Agent. A successor must be appointed for any
resigning Agent, and such Agent's resignation shall become effective when such
successor accepts such appointment. If, within thirty days after the date of the
resigning Agent's resignation, no successor Agent has been appointed and has
accepted such appointment, then the resigning Agent, subject to Borrower's
approval, which approval shall not unreasonably be withheld, may appoint a
successor Agent, which shall be a commercial bank organized or licensed to
conduct a banking or trust business under the Laws of the United States of
America or of any state thereof. Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, the resigning Agent shall be discharged from its
duties and obligations under this Loan Agreement and the other Loan Documents
and the successor Agent shall assume the duties and obligations of Agent under
this Agreement and the other Loan Documents. After any resigning Agent's
resignation hereunder the provisions of this Article 9 shall continue to inure
to its benefit as to any actions taken or omitted to be taken by it while it was
Agent under the Loan Documents.
9.10 Exercise of Remedies.
(a) Should Agent commence any proceeding or in any way seek to
enforce its rights or remedies under the Loan Documents, irrespective
of whether as a result thereof Agent shall acquire title to any
Collateral or part thereof, either through foreclosure, deed in lieu of
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 44
<PAGE>
foreclosure, or otherwise, each Lender, upon demand therefor from time
to time, shall contribute its share (based on its Percentage Share) of
the reasonable costs and/or expenses of any such enforcement or
acquisition, including, but not limited to, fees of receivers or
trustees, court costs, title company charges, filing and recording
fees, appraisers' fees and fees and expenses of attorneys to the
extent not otherwise reimbursed by Borrower. Without limiting the
generality of the foregoing, each Lender shall contribute its share
(based on its Percentage Share) of all reasonable costs and expenses
incurred by Agent (including reasonable attorneys' fees and expenses)
if Agent employs counsel for advice or other representation (whether
or not any suit has been or shall be filed) with respect to any
Collateral or any part thereof, or any of the Loan Documents, or the
attempt to enforce any security interest or Lien on any of the
Collateral, or to enforce any rights of Agent or any of Borrower's or
any other party's obligations under any of the Loan Documents, but not
with respect to any dispute between Agent and any other Lender(s). Any
loss of principal and interest resulting from any Event of Default
shall be shared by Lenders in accordance with their respective
Percentage Shares.
(b) In the event that all or any portion of the Collateral is
acquired by Agent as the result of a foreclosure or the acceptance of a
deed or assignment in lieu of foreclosure, or is retained in
satisfaction of all or any part of Borrower's obligations, title to any
such Collateral or any portion thereof shall be held in the name of
Agent or a nominee or subsidiary of Agent, as agent, for the ratable
benefit of Agent and Lenders. Agent shall prepare a recommended course
of action for such Collateral (the "Post-Foreclosure Plan"), which
shall be subject to the approval of the Majority Lenders. In the event
that Majority Lenders do not approve such Post-Foreclosure Plan, any
Lender shall be permitted to submit an alternative Post-Foreclosure
Plan to Agent and Agent shall submit any and all such additional
PostForeclosure Plans to the Lenders for evaluation and the approval of
Majority Lenders. Agent shall manage, operate, repair, administer,
complete, construct, restore or otherwise deal with the Collateral
acquired and administer all transactions relating thereto, including,
without limitation, employing a management agent, leasing agent and
other agents, contractors and employees, including agents for the sale
of such Collateral, and the collecting of rents and other sums from
such Collateral and paying the expenses of such Collateral. Upon demand
therefor from time to time, each Lender will contribute its share
(based on its Percentage Share) of all reasonable costs and expenses
incurred by Agent pursuant to the PostForeclosure Plan in connection
with the construction, operation, management, maintenance, leasing and
sale of such Collateral. In addition, Agent shall render or cause to be
rendered by the managing agent, to each of the Lenders, monthly, an
income and expense statement for such Collateral, and each of the
Lenders shall promptly contribute its Percentage Share of any operating
loss for such Collateral, and such other expenses and operating
reserves as Agent shall deem reasonably necessary pursuant to and in
accordance with the PostForeclosure Plan. To the extent there is net
operating income from such Collateral, Agent shall, in accordance with
the Post-Foreclosure Plan, determine the amount and timing of
distributions to Lenders. All such distributions shall be made to
Lenders in accordance with their respective Percentage Shares. Lenders
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 45
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acknowledge that title to any Collateral will not be held as a
permanent investment but will be liquidated as soon as practicable,
Agent shall undertake to sell such Collateral or portion thereof, at
such price and upon such terms and conditions as the Majority Lenders
shall determine to be most advantageous. Any purchase money mortgage
or deed of trust taken in connection with the disposition of such
Collateral or portion thereof in accordance with the immediately
preceding sentence shall name Agent, as agent for Lenders, as the
beneficiary or mortgagee. In such case, Agent and Lenders shall enter
into an agreement with respect to such purchase money mortgage
defining the rights of Lenders in the same Percentage Shares as
provided hereunder, which agreement shall be in all material respects
similar to this Loan Agreement insofar as this Loan Agreement is
appropriate or applicable.
ARTICLE 10
GENERAL TERMS AND CONDITIONS
----------------------------
10.1 Waivers and Amendments; Acknowledgments.
----------------------------------------
(a) Waivers and Amendments. No failure or delay (whether by
course of conduct or otherwise) by any Bank Party in exercising any
right, power or remedy which such Bank Party may have under any of the
Loan Documents shall operate as a waiver thereof or of any other right,
power or remedy, nor shall any single or partial exercise by any Bank
Party of any such right, power or remedy preclude any other or further
exercise thereof or of any other right, power or remedy. No waiver of
any provision of any Loan Document and no consent to any departure
therefrom shall ever be effective unless it is in writing and signed as
provided below in this section, and then such waiver or consent shall
be effective only in the specific instances and for the purposes for
which given and to the extent specified in such writing. No notice to
or demand on Borrower shall in any case of itself entitle Borrower to
any other or further notice or demand in similar or other
circumstances. This Agreement and the other Loan Documents set forth
the entire understanding between the parties hereto with respect to the
transactions contemplated herein and therein and supersede all prior
discussions and understandings with respect to the subject matter
hereof and thereof, and no waiver, consent, release, modification or
amendment of or supplement to this Agreement or the other Loan
Documents shall be valid or effective against any party hereto unless
the same is in writing and signed by (i) if such party is Borrower, by
Borrower, (ii) if such party is Agent, by Agent, and (iii) if such
party is a Lender, by such Lender or by Agent on behalf of such Lender
with the written consent of Majority Lenders (which consent has already
been given as to the termination of the Loan Documents as provided in
Section 10.14). Anything to the contrary herein notwithstanding, Agent
shall not, without the prior consent of each individual Lender, execute
and deliver on behalf of such Lender any waiver or amendment which
would: (1) increase the commitment of such Lender or subject such
Lender to any additional obligations, (2) reduce any fees payable to
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 46
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such Lender hereunder, or the principal of, or interest on, such
Lender's Notes, (3) postpone any date fixed for any payment of any
such fees, principal or interest, or release Borrower from its
obligation to pay such Lender's Notes, or (4) release any Collateral
except pursuant to the provisions of Article 8.
(b) Acknowledgments and Admissions. Borrower hereby
represents, warrants, acknowledges and admits that (i) it has been
advised by counsel in the negotiation, execution and delivery of the
Loan Documents to which it is a party, (ii) it has made an independent
decision to enter into this Agreement and the other Loan Documents to
which it is a party, without reliance on any representation, warranty,
covenant or undertaking by Agent or any Lender, whether written, oral
or implicit, other than as expressly set out in this Agreement or in
another Loan Document delivered on or after the date hereof, (iii)
there are no representations, warranties, covenants, undertakings or
agreements by any Bank Party as to the Loan Documents except as
expressly set out in this Agreement or in another Loan Document
delivered on or after the date hereof, (iv) no Bank Party has any
fiduciary obligation toward Borrower with respect to any Loan Document
or the transactions contemplated thereby, (v) the relationship pursuant
to the Loan Documents between Borrower, on one hand, and each Bank
Party, on the other hand, is and shall be solely that of debtor and
creditor, respectively, (vi) no partnership or joint venture exists
with respect to the Loan Documents between Borrower and any Bank Party,
(vii) Agent is not Borrower's Agent, but Agent for Lenders, (viii)
should an Event of Default occur or exist, each Bank Party will
determine in its sole discretion and for its own reasons what remedies
and actions it will or will not exercise or take or cause to be
exercised or taken by Agent on the request of Majority Lenders at that
time, (ix) without limiting any of the foregoing, Borrower is not
relying upon any representation or covenant by any Bank Party, or any
representative thereof, and no such representation or covenant has been
made, that any Bank Party will, at the time of an Event of Default, or
at any other time, waive, negotiate, discuss, or take or refrain from
taking any action permitted under the Loan Documents with respect to
any such Event of Default or any other provision of the Loan Documents,
and (x) all Bank Parties have relied upon the truthfulness of the
acknowledgments in this section in deciding to execute and deliver this
Agreement and to become obligated hereunder.
(c) Representation by Lenders. Each Lender hereby represents
that it will acquire its Note for its own account in the ordinary
course of its lending business; however, the disposition of such
Lender's property shall at all times be and remain within its control
and, in particular and without limitation, such Lender may sell or
otherwise transfer its Note, any participation interest or other
interest in its Note, or any of its other rights and obligations under
the Loan Documents, subject to the provisions of Section 10.13.
(d) Joint Acknowledgment. THIS WRITTEN AGREEMENT AND THE
OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OR PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 47
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THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
10.2 Notices. All notices, requests, consents, demands and other
communications required or permitted under any Loan Document shall be in
writing, unless otherwise specifically provided in such Loan Document (provided
that Agent may give telephonic notices to the other Bank Parties), and shall be
deemed sufficiently given or furnished if delivered by personal delivery, by
telecopy or telex, by delivery service with proof of delivery, or by registered
or certified United States mail, postage prepaid, to Borrower at the address of
Borrower specified on the signature pages hereto and to each Bank Party at its
address specified on the signature pages hereto (unless changed by similar
notice in writing given by the particular Person whose address is to be
changed). Any such notice or communication shall be deemed to have been given
(a) in the case of personal delivery or delivery service, as of the date of
first attempted delivery during normal business hours at the address provided
herein, (b) in the case of telecopy or telex, upon receipt, or (c) in the case
of registered or certified United States mail, five (5) days after deposit in
the mail; provided, however, that no Request for Advance or
Continuation/Conversion Notice shall become effective until actually received by
Agent.
10.3 Severability. In case any of the provisions of this Loan Agreement
shall for any reason be held to be invalid, illegal, or unenforceable, such
invalidity, illegality, or unenforceability shall not affect any other provision
hereof, and this Loan Agreement shall be construed as if such invalid, illegal,
or unenforceable provision had never been contained herein.
10.4 Form and Substance. All documents, certificates, insurance
policies, and other items required under this Loan Agreement to be executed
and/or delivered to Agent shall be in form and substance satisfactory to Agent.
10.5 Limitation on Interest. Bank Parties, Borrower and any other
parties to the Loan Documents intend to contract in strict compliance with
applicable usury law from time to time in effect. In furtherance thereof such
Persons stipulate and agree that none of the terms and provisions contained in
the Loan Documents shall ever be construed to create a contract to pay, for the
use, forbearance or detention of money, interest in excess of the maximum amount
of interest permitted to be charged by applicable law from time to time in
effect. Neither Borrower nor any present or future guarantors, endorsers, or
other Persons hereafter becoming liable for payment of any Obligation shall ever
be liable for unearned interest thereon or shall ever be required to pay
interest thereon in excess of the maximum amount that may be lawfully charged
under applicable law from time to time in effect, and the provisions of this
section shall control over all other provisions of the Loan Documents which may
be in conflict or apparent conflict herewith. Bank Parties expressly disavow any
intention to charge or collect excessive unearned interest or finance charges in
the event the maturity of any Obligation is accelerated. If (a) the maturity of
any Obligation is accelerated for any reason, (b) any Obligation is prepaid and
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 48
<PAGE>
as a result any amounts held to constitute interest are determined to be in
excess of the legal maximum, or (c) any Bank Party or any other holder of any or
all of the Obligations shall otherwise collect moneys which are determined to
constitute interest which would otherwise increase the interest on any or all of
the Obligations to an amount in excess of that permitted to be charged by
applicable law then in effect, then all sums determined to constitute interest
in excess of such legal limit shall, without penalty, be promptly applied to
reduce the then outstanding principal of the related Obligations or, at such
Bank Party's or holder's option, promptly returned to Borrower or the other
payor thereof upon such determination. In determining whether or not the
interest paid or payable, under any specific circumstance, exceeds the maximum
amount permitted under applicable law, Bank Parties and Borrower (and any other
payors thereof) shall to the greatest extent permitted under applicable law, (i)
characterize any non-principal payment as an expense, fee or premium rather than
as interest, (ii) exclude voluntary prepayments and the effects thereof, and
(iii) amortize, prorate, allocate, and spread the total amount of interest
throughout the entire stated term of the instruments evidencing the Obligations
in accordance with the amounts outstanding from time to time thereunder and the
maximum legal rate of interest from time to time in effect under applicable law
in order to lawfully charge the maximum amount of interest permitted under
applicable law. As used in this section the term "applicable Law" means the Laws
of the State of Texas or the Laws of the United States of America, whichever
Laws allow the greater interest, as such Laws now exist or may be changed or
amended or come into effect in the future.
10.6 No Third Party Beneficiary. This Loan Agreement is for the sole
benefit of Bank Parties, their successors and assigns, and Borrower, and is not
for the benefit of any third party.
10.7 Number and Gender. Whenever used herein the singular number shall
include the plural and the singular, and the use of any gender shall be
applicable to all genders. The duties, covenants, obligations, and warranties of
Borrower in this Loan Agreement shall be joint and several obligations of
Borrower, and of each Borrower, if more than one.
10.8 APPLICABLE LAW. THIS LOAN AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE LAWS OF THE
UNITED STATES APPLICABLE TO TRANSACTIONS WITHIN SUCH STATE. THIS LOAN AGREEMENT
IS FULLY PERFORMABLE IN DALLAS COUNTY, TEXAS.
10.9 Entire Agreement. The Loan Documents constitute the entire
understanding and agreement between Borrower and Bank Parties with respect to
the transactions arising in connection with the Loan and supersede all prior
written or oral understandings and agreements between Borrower and Bank Parties
with respect to the matters addressed in the Loan Documents. Borrower hereby
acknowledges that, except as incorporated in writing in the Loan Documents,
there are not, and were not, and no persons are or were authorized by Bank
Parties to make, any representations, understandings, stipulations, agreements
or promises, oral or written, with respect to the matters addressed in the Loan
Documents.
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 49
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10.10 Bank Parties Not a Joint Venturer. Notwithstanding anything to
the contrary herein contained, Bank Parties, by entering into this Loan
Agreement or by any action taken pursuant hereto, will not be deemed a partner
or joint venturer with Borrower, and Borrower will indemnify and hold Bank
Parties harmless from any and all damages resulting from such a construction of
the parties and their relationship.
10.11 Renewal and Modification. This Loan Agreement is being executed
in renewal and modification of the First Agreement, Second Agreement, Third
Agreement, Fourth Agreement and Fifth Agreement. To the extent the terms and
provisions of this Loan Agreement conflict with or otherwise contradict the
terms and provisions of the First Agreement, Second Agreement, Third Agreement,
Assumption and Modification, Fourth Agreement or Fifth Agreement, Borrower and
the Bank Parties hereby agree that this Loan Agreement shall be controlling.
10.12 WAIVER OF JURY TRIAL. THE UNDERSIGNED HEREBY VOLUNTARILY,
KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED UPON CONTRACT, TORT OR
OTHERWISE) BETWEEN OR AMONG THE UNDERSIGNED ARISING OUT OF OR IN ANY WAY RELATED
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY RELATIONSHIP BETWEEN THE
UNDERSIGNED. THIS PROVISION IS A MATERIAL INDUCEMENT TO THE LENDERS TO PROVIDE
THE FINANCING DESCRIBED HEREIN.
10.13 Joint and Several Liability; Parties in Interest; Assignments.
(a) All Obligations which are incurred by two or more Persons
shall be their joint and several obligations and liabilities. All
grants, covenants and agreements contained in the Loan Documents shall
bind and inure to the benefit of the parties thereto and their
respective successors and assigns; provided, however, that Borrower may
not assign or transfer any of its rights or delegate any of its duties
or obligations under any Loan Document without the prior consent of
Majority Lenders. Neither Borrower nor any Affiliates of Borrower shall
directly or indirectly purchase or otherwise retire any Obligations
owed to any Lender nor will any Lender accept any offer to do so,
unless each Lender shall have received substantially the same offer
with respect to the same Percentage Share of the Obligations owed to
it. If Borrower or any Affiliate of Borrower at any time purchases some
but less than all of the Obligations owed to all Bank Parties, such
purchaser shall not be entitled to any rights of any Bank Party under
the Loan Documents unless and until Borrower or its Affiliates have
purchased all of the Obligations.
(b) No Lender shall sell any participation interest in its
commitment hereunder or any of its rights under the Loan or under the
Loan Documents to any Person other than an Eligible Transferee, and
then only if the agreement between such Lender and such participant
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 50
<PAGE>
at all times provides: (i) that such participation exists only as a
result of the agreement between such participant and such Lender and
that such transfer does not give such participant any right to vote as
a Lender or any other direct claims or rights against any Person other
than such Lender, (ii) that such participant is not entitled to payment
from Borrower under Sections 3.2 through 3.6 of amounts in excess of
those payable to such Lender under such sections (determined without
regard to the sale of such participation), and (iii) unless such
participant is an Affiliate of such Lender, that such participant shall
not be entitled to require such Lender to take any action under any
Loan Document or to obtain the consent of such participant prior to
taking any action under any Loan Document, except for actions which
would require the consent of all Lenders under the last sentence of
subsection (a) of Section 10.1. No Lender selling such a participation
shall, as between the other parties hereto and such Lender, be relieved
of any of its obligations hereunder as a result of the sale of such
participation. Each Lender which sells any such participation to any
Person (other than an Affiliate of such Lender) shall give prompt
notice thereof to Agent and Borrower.
(c) Except for sales of participations under the immediately
preceding subsection (b), no Lender shall make any assignment or
transfer of any kind of its commitments or any of its rights under the
Notes or under the Loan Documents, except for assignments to an
Eligible Transferee, and then only if such assignment is made in
accordance with the following requirements:
(i) Each such assignment shall apply to all
Obligations owing to the assignor Lender hereunder and to the
unused portion of the assignor Lender's commitments, so that
after such assignment is made the assignor Lender shall have a
fixed (and not a varying) Percentage Share in its Note and be
committed to make that Percentage Share of all future
Advances, the assignee shall have a fixed Percentage Share in
such Note and be committed to make that Percentage Share of
all future Advances.
(ii) The parties to each such assignment shall
execute and deliver to Agent, for its acceptance and recording
in the "Register" (as defined below in this section ), an
Assignment and Acceptance in the form of Exhibit H attached
hereto, appropriately completed, together with the Note
subject to such assignment and a processing fee payable to
Agent of $2,500. Upon such execution, delivery, and payment
and upon the satisfaction of the conditions set out in such
Assignment and Acceptance, then (i) Borrower shall issue new
Notes to such assignor and assignee upon return of the old
Note to Borrower, and (ii) as of the "Effective Date"
specified in such Assignment and Acceptance the assignee
thereunder shall be a party hereto and a Lender hereunder and
Agent shall thereupon deliver to Borrower and each Lender a
schedule showing the revised Percentage Shares of such
assignor Lender and such assignee Lender and the Percentage
Shares of all other Lenders.
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 51
<PAGE>
(iii) Each assignee Lender which is not a United
States person (as such term is defined in Section 7701(a)(30)
of the Internal Revenue Code of 1986, as amended) for Federal
income tax purposes, shall (to the extent it has not already
done so) provide Agent and Borrower with the Prescribed Forms.
(iv) Each such assignment shall be for a minimum of
$2,000,000.
(d) Nothing contained in this section shall prevent or
prohibit any Lender from assigning or pledging all or any portion of
its Note to any Federal Reserve Bank as collateral security pursuant to
Regulation A of the Board of Governors of the Federal Reserve System
and any Operating Circular issued by such Federal Reserve Bank;
provided that no such assignment or pledge shall relieve such Lender
from its obligations hereunder.
(e) By executing and delivering an Assignment and Acceptance,
each assignee Lender thereunder will be confirming to and agreeing with
Borrower, Agent and each other Lender hereunder that such assignee
understands and agrees to the terms hereof, including Article 9 hereof.
(f) Agent shall maintain a copy of each Assignment and
Acceptance and a register for the recordation of the names and
addresses of Lenders and the Percentage Shares of, and principal amount
of the Advances owing to, each Lender from time to time (in this
section called the "Register"). The entries in the Register shall be
conclusive, in the absence of manifest error, and Borrower and each
Bank Party may treat each Person whose name is recorded in the Register
as a Lender hereunder for all purposes. The Register shall be available
for inspection by Borrower or any Bank Party at any reasonable time and
from time to time upon reasonable prior notice.
10.14 Termination; Limited Survival. In its sole and absolute
discretion Borrower may at any time that no Obligations are owing elect in a
written notice delivered to Agent to terminate this Loan Agreement. Upon receipt
by Agent of such a notice, if no Obligations are then owing this Loan Agreement
and all other Loan Documents shall thereupon be terminated and the parties
thereto released from all prospective obligations thereunder. Notwithstanding
the foregoing or anything herein to the contrary, any waivers or admissions made
by Borrower in any Loan Document, any Obligations under Sections 3.2 through
3.6, and any obligations which any Person may have to indemnify or compensate
any Bank Party shall survive any termination of this Loan Agreement or any other
Loan Document. At the request and expense of Borrower, Agent shall prepare and
execute all necessary instruments to reflect and effect such termination of the
Loan Documents. Agent is hereby authorized to execute all such instruments on
behalf of all Lenders, without the joinder of or further action by any Lender.
10.15 Arbitration. Borrower and the Bank Parties agree that upon the
written demand of any party, whether made before or after the institution of any
legal proceedings, but prior to the rendering of any judgment in that
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 52
<PAGE>
rendering of any judgment in that proceeding, all disputes, claims and
controversies between them, whether individual, joint, or class in nature,
arising from this Agreement, any other Loan Document or otherwise, including
without limitation contract disputes and tort claims, shall be resolved by
binding arbitration pursuant to the Commercial Rules of the American Arbitration
Association. Any arbitration proceeding held pursuant to this arbitration
provision shall be conducted in Dallas, Texas, or at any other place selected by
mutual agreement of the parties. No act to take or dispose of any property
encumbered by a mortgage or any other collateral for the Loan shall constitute a
waiver of this arbitration agreement or be prohibited by this arbitration
agreement. This arbitration provision shall not limit the right of any party
during any dispute, claim or controversy to seek, use, and employ ancillary or
preliminary rights and/or remedies, judicial or otherwise, for the purposes of
realizing upon, preserving, protecting, foreclosing upon or taking possession
of, any real or personal property, and any such action shall not be deemed an
election of remedies. Such remedies include, without limitation, obtaining
injunctive relief or a temporary restraining order, pursuing foreclosure
proceedings under a Mortgage, obtaining a writ of attachment or imposition of a
receivership, or exercising any rights relating to personal property, including
taking or disposing of such property with or without judicial process pursuant
to Article 9 of the Uniform Commercial Code or when applicable, a judgment by
confession of judgment. Any disputes, claims or controversies concerning the
lawfulness or reasonableness of an act, or exercise of any right or remedy
concerning any property encumbered by a Mortgage or any other collateral for the
Loan, including any claim to rescind, reform, or otherwise modify any agreement
relating to such property or collateral, shall also be arbitrated; provided,
however that no arbitrator shall have the right or the power to enjoin or
restrain any act of either party. Judgment upon any award rendered by any
arbitrator may be entered in any court having jurisdiction. Nothing in this
arbitration provision shall preclude either party from seeking equitable relief
from a court of competent jurisdiction. The statute of limitations, estoppel,
waiver, laches and similar doctrines which would otherwise be applicable in an
action brought by a party shall be applicable in any arbitration proceeding, and
the commencement of an arbitration proceeding shall be deemed the commencement
of any action for these purposes. The Federal Arbitration Act (Title 9 of the
United States Code) shall apply to the construction, interpretation, and
enforcement of this arbitration provision.
10.16 Extension of Loan. At any time during the term of the Loan,
Borrower may request an extension of the maturity date of the Loan, which
maturity date is April 8, 2002. Lenders, in their sole discretion, may reject
such request or may approve such request upon such terms and conditions as they
deem advisable; provided, however, all Lenders must approve an extension. A
request for extension shall be in writing and submitted in the form attached as
Exhibit G.
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 53
<PAGE>
ARTICLE 11
YEAR 2000
---------
11.1 Representations and Warranties. Borrower represents and warrants
as follows to the Bank Parties that: (i) as of the date of any request for an
Advance, (ii) as of the date of any renewal, extension or modification of this
Agreement, and (iii) at all times that this Agreement or the Lender's commitment
to make Advances under this Agreement is outstanding.
(a) All material devices, systems, machinery, information
technology, computer software and hardware, and other date sensitive
technology (jointly and severally, the "Systems") necessary for
Borrower to carry on its business as presently conducted and as
contemplated to be conducted in the future are Year 2000 Compliant or
will be Year 2000 Compliant within a period of time calculated to
result in no material disruption of any of Borrower's business
operations. For purposes of these provisions, "Year 2000 Compliant"
means that such Systems are designed to be used prior to, during and
after the Gregorian calendar year 2000 A.D. and will operate during
each such time period without error relating to date data, specifically
including any error relating to, or the product of, date data which
represents or references different centuries or more than one century.
(b) Borrower has: (1) undertaken a detailed inventory, review,
and assessment of all areas within its business and operations that
could be adversely affected by the failure of Borrower to be Year 2000
Compliant on a timely basis; (2) developed a detailed plan and time
line for becoming Year 2000 Compliant on a timely basis; and (3) to
date, implemented that plan in accordance with that timetable in all
material respects.
(c) Borrower has made or will timely make written inquiry of
each of its key suppliers, vendors, and customers, and has obtained or
will timely obtain in writing confirmations from all such persons, as
to whether such persons have initiated programs to become Year 2000
Compliant and on the basis of such confirmations, Borrower reasonably
believes that all such persons will be or become so compliant. For
purposes hereof, "key suppliers, vendors, and customers" refers to
those suppliers, vendors, and customers of Borrower whose business
failure would, with reasonable probability, result in a material
adverse change in the business, properties, condition (financial or
otherwise), or prospects of Borrower.
(d) The fair market value of all real and personal property,
if any, pledged to the Agent as Collateral to secure the Obligations is
not and shall not be less than currently anticipated or subject to
substantial deterioration in value because of the failure of such
Collateral to be Year 2000 Compliant.
11.2 Affirmative Covenants. Borrower covenants and agrees with the Bank
Parties that, while this Agreement is in effect, Borrower will:
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 54
<PAGE>
(a) Furnish such additional information, statements and other
reports with respect to Borrower's activities, course of action, and
progress towards becoming Year 2000 Compliant as Agent may request from
time to time.
(b) In the event of any change in circumstances that causes or
will likely cause any of Borrower's representations and warranties with
respect to its being or becoming Year 2000 Compliant to no longer be
true (hereinafter, referred to as a "Change in Circumstances") then
Borrower shall promptly, and in any event within ten (10) days of
receipt of information regarding a Change in Circumstances, provide
Agent with written notice (the "Notice") that describes in reasonable
detail the Change in Circumstances and how such Change in Circumstances
caused or will likely cause Borrower's representations and warranties
with respect to being or becoming Year 2000 Compliant to no longer be
true. Borrower shall, within ten (10) days of a request, also provide
Agent with any additional information Agent requests of Borrower in
connection with the Notice and/or a Change in Circumstances.
(c) Promptly upon its becoming available, furnish to Agent one
copy of each financial statement, report, notice, or proxy statement
sent by Borrower to stockholders generally and of each regular or
periodic report, registration statement or prospectus filed by Borrower
with any securities exchange or the Securities and Exchange Commission
or any successor agency, and of any order issued by any Governmental
Authority in any proceeding to which Borrower is a party. For purposes
of these provisions, "Governmental Authority" shall mean any court or
governmental entity (or any political subdivision or jurisdiction
thereof) having or asserting jurisdiction over Borrower or any of its
business, operations or properties.
(d) Give any representative of Agent reasonable access during
all business hours to, and permit such representative to examine, copy
or make excerpts from, any and all books, records and documents in the
possession of Borrower and relating to its affairs, and to inspect any
of the properties and Systems of Borrower, and to project test the
Systems to determine if they are Year 2000 Compliant in an integrated
environment, all at the sole cost and expense of Agent.
(Remainder of Page Left Intentionally Blank)
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 55
<PAGE>
EXECUTED and DELIVERED as of the date first recited.
AGENT and LENDER:
----------------
BANK ONE, TEXAS, N.A., a national banking
association
By: /s/ Craig F. Hartberg
-----------------------------------------
Name: Craig F. Hartberg
Title: Senior Vice President
Address:
1717 Main Street
Dallas, Texas 75201
Attention: Health Care Lending
Telephone: (214) 290-2749
Telecopy: (214) 290-2492
BORROWER:
CAPITAL SENIOR LIVING PROPERTIES, INC.,
a Texas corporation
By: /s/ David R. Brickman
-----------------------------------------
Name: David R. Brickman
Title: Vice President
Address:
14160 Dallas Parkway
Suite 300
Dallas, Texas 75240
Attention: James A. Stroud
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 56
<PAGE>
with a copy to:
Capital Senior Living Properties, Inc.
14160 Dallas Parkway
Suite 300
Dallas, Texas 75240
Attention: Jeffrey L. Beck
Telephone: (972) 770-5600
Telecopy: (972) 770-5666
LENDER:
GUARANTY FEDERAL BANK, F.S.B.
By: /s/ Deborah M.Laycock
--------------------------------------
Name: Deborah M. Laycock
Title: Vice President
Address:
8333 Douglas
Dallas, Texas 75225
Attn: Senior Housing Lending Division
Telephone: (214) 360-2610
Telecopy: (214) 360-8910
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 57
<PAGE>
LENDER:
COMERICA BANK - TEXAS
By: /s/ Karl F. Propst
-------------------------------------------
Name: Karl F. Propst
Title: Vice President
Address:
P.O. Box 650282
Dallas, Texas 75265
Attn: Karl F. Propst
Telephone: (214) 969-6536
Telecopy: (214) 969-6534
With a copy to:
P.O. Box 650282
Dallas, Texas 75265
Attn: Anita D. Vogel
Telephone: (214) 969-6535
Telecopy: (214) 969-6534
THE STATE OF TEXAS )
COUNTY OF DALLAS )
This instrument was acknowledged before me on April ___, 1999, by Craig
F. Hartberg, Senior Vice President of BANK ONE, TEXAS, N.A., a national banking
association, on behalf of said association.
--------------------------------------
Notary Public, State of Texas
--------------------------------------
(printed name)
My Commission Expires:
- ---------------------
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 58
<PAGE>
THE STATE OF TEXAS )
COUNTY OF DALLAS )
This instrument was acknowledged before me on April ___, 1999, by David
R. Brickman, Vice President of CAPITAL SENIOR LIVING PROPERTIES, INC., a Texas
corporation, on behalf of said corporation.
--------------------------------------
Notary Public, State of Texas
--------------------------------------
(printed name)
My Commission Expires:
- ---------------------
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 59
<PAGE>
THE STATE OF TEXAS )
COUNTY OF DALLAS )
This instrument was acknowledged before me on April ___, 1999, by
Deborah M. Laycock, Vice President of Guaranty Federal Bank, F.S.B., a federal
savings bank, on behalf of said bank.
--------------------------------------
Notary Public, State of Texas
--------------------------------------
(printed name)
My Commission Expires:
- ---------------------
THE STATE OF TEXAS )
COUNTY OF DALLAS )
This instrument was acknowledged before me on April ___, 1999, by Karl
F. Propst, Vice President of Comerica Bank - Texas, a Texas state bank, on
behalf of said bank.
--------------------------------------
Notary Public, State of Texas
--------------------------------------
(printed name)
My Commission Expires:
- ---------------------
1999 AMENDED AND RESTATED LOAN AGREEMENT -Page 60
<PAGE>
LENDER SCHEDULE
Lender Percentage
------ ----------
Bank One, Texas, N.A. 50%
Guaranty Federal Bank, F.S.B. 14.7058823%
Comerica Bank - Texas 35.2941176%
<PAGE>
EXHIBIT A
SECOND AMENDED AND RESTATED PROMISSORY NOTE
$_________________ Dallas, Texas [Date]
FOR VALUE RECEIVED, the undersigned, CAPITAL SENIOR LIVING PROPERTIES,
INC., a Texas corporation (herein called "Borrower"), hereby promises to pay to
the order of ___________________________________________________________________
(herein called "Lender"), the principal sum of ________________________________
____________________________________________ Dollars ($________________), or the
aggregate unpaid principal amount of the Advances made under this Note by Lender
to Borrower pursuant to the terms of the Loan Agreement (as hereinafter
defined), together with interest on the unpaid principal balance thereof as
hereinafter set forth, both principal and interest payable as herein provided in
lawful money of the United States of America at the offices of the Agent under
the Loan Agreement, 1717 Main Street, Dallas, Texas or at such other place
within Dallas County, Texas, as from time to time may be designated by the
holder of this Note.
This Note (a) is issued and delivered under that certain 1999 Amended
and Restated Loan Agreement dated April 8, 1999 among Borrower, Bank One, Texas,
N.A., as Agent, and the lenders (including Lender) referred to therein (herein,
as from time to time supplemented, modified, amended or restated, called the
"Loan Agreement"), and is a "Note" as defined therein, (b) is subject to the
terms and provisions of the Loan Agreement, which contains provisions for
payments hereunder and acceleration of the maturity hereof upon the happening of
certain stated events, and (c) is secured by and entitled to the benefits of
certain Loan Documents (as identified and defined in the Loan Agreement).
Payments on this Note shall be made and applied as provided herein and in the
Loan Agreement. Reference is hereby made to the Loan Agreement for a description
of certain rights, limitations of rights, obligations and duties of the parties
hereto and for the meanings assigned to terms used and not defined herein and to
the Loan Documents for a description of the nature and extent of the security
thereby provided and the rights of the parties thereto.
For the purposes of this Note, the following terms have the meanings
assigned to them below:
"Base Rate Payment Date" means (i) the first day of each
calendar month, beginning **__________________, _____, and (ii) any day
on which past due interest or principal is owed hereunder and is
unpaid. If the terms hereof or of the Loan Agreement provide that
payments of interest or principal hereon shall be deferred from one
Base Rate Payment Date to another day, such other day shall also be a
Base Rate Payment Date.
"LIBOR Rate Payment Date" means, with respect to any LIBOR
Advance: (i) the day on which the related Interest Period ends, and
(ii) any day on which past due interest or past due principal is owed
hereunder with respect to such LIBOR Advance and is unpaid. If the
terms hereof or of the Loan Agreement provide that payments of interest
or principal with respect to such LIBOR Advance shall be deferred from
one LIBOR Rate Payment Date to another day, such other day shall also
be a LIBOR Rate Payment Date.
<PAGE>
The principal amount of this Note, together with all interest accrued
hereon, shall be due and payable in full on April 8, 2002.
Base Rate Advances (exclusive of any past due principal or interest)
from time to time outstanding shall bear interest on each day outstanding at the
Base Rate in effect on such day. On each Base Rate Payment Date, Borrower shall
pay to the holder hereof all unpaid interest which has accrued on the Base Rate
Advances to but not including such Base Rate Payment Date. Each LIBOR Advance
(exclusive of any past due principal or interest) shall bear interest on each
day during the related Interest Period at the related LIBOR Adjusted Rate in
effect on such day. On each LIBOR Rate Payment Date relating to such LIBOR
Advance, Borrower shall pay to the holder hereof all unpaid interest which has
accrued on such LIBOR Advance to but not including such LIBOR Rate Payment Date.
All past due principal of and past due interest on the Advances shall bear
interest on each day outstanding at the Late Payment Rate in effect on such day,
and such interest shall be due and payable daily as it accrues. Notwithstanding
the foregoing provisions of this paragraph: (a) this Note shall never bear
interest in excess of the Highest Lawful Rate, and (b) if at any time the rate
at which interest is payable on this Note is limited by the Highest Lawful Rate
(by the foregoing clause (a) or by reference to the Highest Lawful Rate in the
definitions of Base Rate, LIBOR Adjusted Rate, and Late Payment Rate), this Note
shall bear interest at the Highest Lawful Rate and shall continue to bear
interest at the Highest Lawful Rate until such time as the total amount of
interest accrued hereon equals (but does not exceed) the total amount of
interest which would have accrued hereon had there been no Highest Lawful Rate
applicable hereto.
Notwithstanding the foregoing paragraph and all other provisions of
this Note, in no event shall the interest payable hereon, whether before or
after maturity, exceed the maximum amount of interest which, under applicable
law, may be charged on this Note, and this Note is expressly made subject to the
provisions of the Loan Agreement which more fully set out the limitations on how
interest accrues hereon. The term "applicable law" as used in this Note shall
mean the laws of the State of Texas or the laws of the United States, whichever
laws allow the greater interest, as such laws now exist or may be changed or
amended or come into effect in the future.
If this Note is placed in the hands of an attorney for collection after
default, or if all or any part of the indebtedness represented hereby is proved,
established or collected in any court or in any bankruptcy, receivership, debtor
relief, probate or other court proceedings, Borrower and all endorsers, sureties
and guarantors of this Note jointly and severally agree to pay reasonable
attorneys' fees and collection costs to the holder hereof in addition to the
principal and interest payable hereunder.
Borrower and all endorsers, sureties and guarantors of this Note hereby
severally waive demand, presentment, notice of demand and of dishonor and
nonpayment of this Note, protest, notice of protest, notice of intention to
accelerate the maturity of this Note, declaration or notice of acceleration of
the maturity of this Note, diligence in collecting, the bringing of any suit
against any party and any notice of or defense on account of any extensions,
renewals, partial payments or changes in any manner of or in this Note or in any
of its terms, provisions and covenants, or any releases or substitutions of any
security, or any delay, indulgence or other act of any trustee or any holder
hereof, whether before or after maturity.
***This Note amends restates and supersedes in its entirety that
certain Promissory Note dated ___________, ____ in the original principal amount
of $______________ made by Borrower payable to the order of ____________________
<PAGE>
(the "Original Note"). This Note is in no way intended to constitute, and does
not constitute, a novation of the indebtedness evidenced by the Original Note.
***
CAPITAL SENIOR LIVING PROPERTIES, INC., a
Texas corporation
By:
-----------------------------------
Name:
------------------------------
Title:
------------------------------
<PAGE>
EXHIBIT B
LEGAL DESCRIPTIONS
<PAGE>
EXHIBIT C
REQUEST FOR ADVANCE
-------------------
Reference is made to that certain 1999 Amended and Restated Loan
Agreement dated as of April 8, 1999 (as from time to time amended, the
"Agreement"), by and among Capital Senior Living Properties, Inc. ("Borrower"),
Bank One, Texas, N.A., as Agent, and certain financial institutions ("Lenders").
Terms which are defined in the Agreement are used herein with the meanings given
them in the Agreement. Pursuant to the terms of the Agreement Borrower hereby
requests Lenders to make Advances to Borrower in the aggregate principal amount
of $ __________ and specifies ____________, ____, as the date Borrower desires
for Lenders to make such Advances and for Agent to deliver to Borrower the
proceeds thereof.
To induce Lenders to make such Advances, Borrower hereby represents,
warrants, acknowledges, and agrees to and with Agent and each Lender that:
(e) The officers of Borrower signing this instrument are the
duly elected, qualified and acting officers of Borrower as indicated
below such officers' signatures hereto having all necessary authority
to act for Borrower in making the request herein contained.
(f) The representations and warranties of Borrower set forth
in the Agreement and the other Loan Documents are true and correct on
and as of the date hereof (except to the extent that the facts on which
such representations and warranties are based have been changed by the
extension of credit under the Agreement), with the same effect as
though such representations and warranties had been made on and as of
the date hereof.
(g) There does not exist on the date hereof any condition or
event which constitutes an Event of Default which has not been waived
in writing as provided in Section 10.1(a) of the Agreement; nor will
any such Event of Default exist upon Borrower's receipt and application
of the Loans requested hereby. Borrower will use the Advances hereby
requested in compliance with the Agreement.
(h) Except to the extent waived in writing as provided in
Section 10.1(a) of the Agreement, Borrower has performed and complied
in all material respects with all agreements and conditions in the
Agreement required to be performed or complied with by Borrower on or
prior to the date hereof, and each of the conditions precedent to
Advances contained in the Agreement remains satisfied.
(i) The Loan Documents have not been modified, amended or
supplemented by any unwritten representations or promises, by any
course of dealing, or by any other means not provided for in Section
10.1(a) of the Agreement. The Agreement and the other Loan Documents
are hereby ratified, approved, and confirmed in all respects.
(j) The purpose of this requested Advance is: ___________
___________________________.
<PAGE>
The officers of the Borrower signing this instrument hereby certify
that, to the best of their knowledge after due inquiry, the above
representations, warranties, acknowledgments, and agreements of Borrower are
true, correct and complete.
IN WITNESS WHEREOF, this instrument is executed as of ____________,
_____.
CAPITAL SENIOR LIVING PROPERTIES, INC., a
Texas corporation
By:
---------------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
Approved by:
Keith Johannessen, President of Capital Senior
Living Corporation
or
James A. Stroud, Chief Operating Officer of
Capital Senior Living Corporation
<PAGE>
EXHIBIT D
CONTINUATION/CONVERSION NOTICE
------------------------------
Reference is made to that certain 1999 Amended and Restated Loan
Agreement dated as of April 8, 1999 (as from time to time amended, the
"Agreement"), by and among Capital Senior Living Properties, Inc. ("Borrower"),
Bank One, Texas, N.A., as Agent, and certain financial institutions ("Lenders").
Terms which are defined in the Agreement and which are used but not defined
herein are used herein with the meanings given them in the Agreement. Pursuant
to the terms of the Agreement, Borrower hereby elects LIBOR Advances in the
aggregate amount of $ __________ with an Interest Period beginning on
__________________ and continuing for a period of __________________.
To meet the conditions set out in the Agreement for the making of such
election, Borrower hereby represents, warrants, acknowledges and agrees that:
(a) The officer of the Borrower signing this instrument is a
duly elected, qualified and acting officer of Borrower, having all
necessary authority to act for Borrower in making the election herein
contained.
(b) There does not exist on the date hereof any condition or
event which constitutes an Event of Default which has not been waived
in writing as provided in Section 10.1(a) of the Agreement.
(c) The Loan Documents have not been modified, amended or
supplemented by any unwritten representations or promises, by any
course of dealing, or by any other means not provided for in Section
10.1(a) of the Agreement. The Agreement and the other Loan Documents
are hereby ratified, approved, and confirmed in all respects.
The officer of the Borrower signing this instrument hereby certifies
that, to the best of his knowledge after due inquiry, the above representations,
warranties, acknowledgments, and agreements of Borrower are true, correct and
complete.
<PAGE>
IN WITNESS WHEREOF this instrument is executed as of
__________________.
CAPITAL SENIOR LIVING PROPERTIES, INC., a
Texas corporation
By:
---------------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
Approved by:
------------------------------------------------
Keith Johannessen, President of Capital Senior
Living Corporation
or
James A. Stroud, Chief Operating Officer of
Capital Senior Living Corporation
<PAGE>
EXHIBIT E
COMPLIANCE CERTIFICATE
Bank One, Texas, N.A., as Agent
1717 Main Street
Dallas, Texas 75201
Attn: Health Care Lending
RE: 1999 Amended and Restated Loan Agreement dated April 8, 1999 (together
with amendments, if any, the "Loan Agreement"), by and between Bank
One, Texas, N.A., as Agent, Lenders (as defined in the Loan Agreement),
and Capital Senior Living Properties, Inc., as Borrower
The undersigned officer of Borrower, does hereby certify that for the quarterly
financial period ending _____________:
1. No Event of Default has occurred or exists except
------------------------------.
2. The Current Ratio of Borrower (Section 5.15(a)) is _______ to
1.0.
3. The Tangible Net Worth of Borrower (Section 5.15(b)) is
$___________.
4. The Loan to Value Ratio (Section 5.15(c)) is _______ to 1.0.
5. The Leverage Ratio (Section 5.15(d)) is _______ to 1.0.
6 The Cash Flow Coverage of the Property (Section 5.15(e)) is
_______ to 1.0.
7. All representations and warranties contained in the Loan
Agreement and other Loan Documents are true and correct in all
material respects as though given on the date hereof, except
______________________________.
8. All information provided herein is true and correct.
<PAGE>
9. Capitalized terms not defined herein shall have the meanings
given to such terms in the Loan Agreement.
CAPITAL SENIOR LIVING PROPERTIES, INC., a
Texas corporation
By:
---------------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
Dated this _____ day of ____________________, ____.
<PAGE>
EXHIBIT F
FINANCIAL REPORTS
<PAGE>
EXHIBIT G
REQUEST FOR EXTENSION
Bank One, Texas, N.A., as Agent
1717 Main Street
Dallas, Texas 75201
Attn: Health Care Lending
RE: 1999 Amended and Restated Loan Agreement dated April 8, 1999 (together
with amendments, if any, the "Loan Agreement"), by and among Bank One,
Texas, N.A., as Agent, Lenders (as defined in the Loan Agreement), and
Capital Senior Living Properties, Inc., as Borrower
Borrower hereby requests that the maturity date of the Loan be extended
from April 8, 2002 to ____________________. Borrower acknowledges that Agent and
Lenders have no obligation to approve this request and Agent and Majority
Lenders, in their sole discretion, may reject this request. Borrower agrees to
submit to Agent such information, if any, as may be requested by Agent or
Lenders in considering this request.
Capitalized terms not defined herein shall have the meanings given to
such terms in the Loan Agreement.
CAPITAL SENIOR LIVING PROPERTIES, INC.,
a Texas corporation
By:
---------------------------------------------
Name:
----------------------------------------
Title:
Dated this _____ day of ____________________, ____.
<PAGE>
EXHIBIT H
ASSIGNMENT AND ACCEPTANCE
Reference is made to the 1999 Amended and Restated Loan Agreement dated
as of April 8, 1999 (the "Loan Agreement") among CAPITAL SENIOR LIVING
PROPERTIES, INC., a Texas corporation (the "Borrower"), the Lenders (as defined
in the Loan Agreement) and Bank One, Texas, N.A., as agent for the Lenders (the
"Agent"). Terms defined in the Loan Agreement are used herein with the same
meaning.
The "Assignor" and the "Assignee" referred to on Schedule 1 agree as
follows:
1. The Assignor hereby sells and assigns to the Assignee, without
recourse and without representation or warranty except as expressly set forth
herein, and the Assignee hereby purchases and assumes from the Assignor, an
interest in and to the Assignor's rights and obligations under the Loan
Agreement and the other Loan Documents as of the date hereof equal to the
percentage interest specified on Schedule 1 of all outstanding rights and
obligations under the Loan Agreement and the other Loan Documents. After giving
effect to such sale and assignment, the Assignee's Commitment and the amount of
the Advances owing to the Assignee will be as set forth on Schedule 1.
2. The Assignor (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Loan Documents
or the execution, legality, validity, enforceability, genuineness, sufficiency
or value of the Loan Documents or any other instrument or document furnished
pursuant thereto; (iii) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or any
Bank Party or the performance or observance by the Borrower or any Bank Party of
any of its obligations under the Loan Documents or any other instrument or
document furnished pursuant thereto; and (iv) attaches the Note held by the
Assignor and requests that the Agent exchange such Note for new Notes payable to
the order of the Assignee in an amount equal to the Commitment assumed by the
Assignee pursuant hereto and to the Assignor in an amount equal to the
Commitment retained by the Assignor, if any, as specified on Schedule 1.
3. The Assignee (i) confirms that it has received a copy of the Loan
Agreement, together with such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment and Acceptance; (ii) agrees that it will, independently and without
reliance upon the Agent, the Assignor or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Loan
Agreement; (iii) appoints and authorizes the Agent to take such action as agent
on its behalf and to exercise such powers and discretion under the Loan
Agreement as are delegated to the Agent by the terms thereof, together with such
powers and discretion as are reasonably incidental thereto; (iv) agrees that it
will perform in accordance with their terms all of the obligations that by the
terms of the Loan Agreement are required to be performed by it as a Lender; and
(v) attaches any other forms required by Agent.
<PAGE>
4. Following the execution of this Assignment and Acceptance, it will
be delivered to the Agent for acceptance and recording by the Agent. The
effective date for this Assignment and Acceptance (the "Effective Date") shall
be the date of acceptance hereof by the Agent, unless otherwise specified on
Schedule 1.
5. Upon such acceptance pursuant to the Loan Agreement and recording by
the Agent, as of the Effective Date, (i) the Assignee shall be a party to the
Loan Agreement and, to the extent provided in this Assignment and Acceptance,
have the rights and obligations of a Lender thereunder and (ii) the Assignor
shall, to the extent provided in this Assignment and Acceptance, relinquish its
rights and be released from its obligations under the Loan Agreement.
6. Upon such acceptance pursuant to the Loan Agreement and recording by
the Agent, from and after the Effective Date, the Agent shall make all payments
under the Loan Agreement and the Notes in respect of the interest assigned
hereby (including, without limitation, all payments of principal, interest and
commitment fees with respect thereto) to the Assignee. The Assignor and Assignee
shall make all appropriate adjustments in payments under the Loan Agreement and
the Notes for periods prior to the Effective Date directly between themselves.
7. This Assignment and Acceptance shall be governed by, and construed
in accordance with, the laws of the State of Texas.
8. This Assignment and Acceptance may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of Schedule 1 to this Assignment and Acceptance by telecopier shall
be effective as delivery of a manually executed counterpart of this Assignment
and Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused Schedule
1 to this Assignment and Acceptance to be executed by their officers thereunto
duly authorized as of the date specified thereon.
<PAGE>
SCHEDULE 1
to
ASSIGNMENT AND ACCEPTANCE
Percentage interest assigned: ________%
Assignee's Commitment: $_______
Aggregate outstanding principal amount
of Advances assigned: $_______
Principal amount of Note payable to Assignee: $_______
Principal amount of Note payable to Assignor: $_______
Effective Date (if other than date
of acceptance by Agent): _______, 19__
[NAME OF ASSIGNOR], as Assignor
By:
-------------------------------------------
Title:
Dated:____________________ , 19 _
Domestic Lending Office:
LIBOR Lending Office:
[NAME OF ASSIGNEE], as Assignee
By:
-------------------------------------------
Title:
Dated:_____________________, 19 _
Domestic Lending Office:
<PAGE>
Eurodollar Lending Office:
<PAGE>
EXHIBIT I
Lake County, Indiana
- --------------------
Mortgage Security Agreement Assignment of Rents and Fixture Filing
dated July 29, 1994, recorded as Instrument No. 94054609 in the office
of Recorder of Lake County, Indiana, as modified by Modification and
Extension of Lien dated June 30, 1995, recorded as Instrument No.
95041757 in the office of Recorder of Lake County, Indiana, further
modified by Second Modification and Extension of Lien dated June 30,
1997, recorded as Instrument No. 97044593 in the office of Recorder of
Lake County, Indiana, further modified by Extension, Assumption and
Modification Agreement between Bank One, Texas, N.A. and Capital Senior
Living Properties, Inc., dated December 10, 1997, further modified by
Modification Agreement between Bank One, Texas, N.A., as Agent, and
Capital Senior Living Properties, Inc., dated September 1, 1998, and
further modified by Second Modification Agreement between Bank One,
Texas N.A., as Agent, and Capital Senior Living Properties, Inc. dated
April 8, 1999.
Marion County, Indiana
- ----------------------
Mortgage Security Agreement Assignment of Rents and Fixture Filing
dated July 29, 1994, recorded as Instrument No. 1994-0119830 in the
office of Recorder of Marion County, Indiana, as modified by
Modification and Extension of Lien dated June 30, 1995, recorded as
Instrument No. 1995-0095291 in the office of Recorder of Marion County,
Indiana, further modified by Second Modification and Extension of Lien
dated June 30, 1997, recorded as Instrument No. 97-92756 in the office
of Recorder of Marion County, Indiana, further modified by Extension,
Assumption and Modification Agreement between Bank One, Texas, N.A. and
Capital Senior Living Properties, Inc., dated December 10, 1997,
further modified by Modification Agreement between Bank One, Texas,
N.A., as Agent, and Capital Senior Living Properties, Inc., dated
September 1, 1998, and further modified by Second Modification
Agreement between Bank One, Texas N.A., as Agent, and Capital Senior
Living Properties, Inc. dated April 8, 1999.
Stark County, Ohio
- ------------------
Open End Mortgage dated July 29, 1994, recorded in Volume 1688, Page
222 in the office of Recorder of Stark County, Ohio, as modified by
Modification and Extension of Lien dated June 30, 1995, recorded as
Instrument No. 95033519 in the office of Recorder of Stark County,
Ohio, further modified by Second Modification and Extension of Lien
dated June 30, 1997, recorded as Instrument No. 97036695 in the office
of Recorder of Stark County, Ohio, further modified by Extension,
Assumption and Modification Agreement between Bank One, Texas, N.A. and
Capital Senior Living Properties, Inc., dated December 10, 1997,
further modified by Modification Agreement between Bank One, Texas,
N.A., as Agent, and Capital Senior Living Properties, Inc., dated
September 1, 1998, and further modified by Second Modification
Agreement between Bank One, Texas N.A., as Agent, and Capital Senior
Living Properties, Inc. dated April 8, 1999.
REDAL:197108.1 99999-00001
<PAGE>
Yavapai County, Arizona
- -----------------------
Deed of Trust, Assignment of Leases and Rents Security Agreement and
Fixture Filing of even date herewith to be recorded in the office of
the Recorder of Yavapai County, Arizona.
AMENDED AND RESTATED DRAW PROMISSORY NOTE
Amount: $13,000,000.00 Date: March 31, 1999
----------------------- --------------------
FOR VALUE RECEIVED, the undersigned, promises to pay to Capital Senior
Living Properties, Inc., a Texas corporation, the sum draw down up to Thirteen
Million and No/100 Dollars ($13,000,000.00), the principal due five (5) years
from the date of the first draw down and interest due quarterly at the rate of
eight percent (8%) per annum, both principal and interest payable at office at
14160 Dallas Parkway, Suite 300, Dallas, Texas 75240.
This note amends and restates the Draw Promissory Note dated April 1,
1998, between Maker and Capital Senior Living Properties, Inc.
The accrued interest on this note is payable quarterly after the first
draw down.
All past due principal and interest shall bear interest from maturity
at the rate of twelve percent (12%) per annum.
This note may be prepaid without penalty.
Failure to pay any installment of principal and interest, or any other
part thereof, when due shall, at the election of the holder and without notice,
mature the whole note and it shall at once become due and payable.
It is hereby specifically agreed that if this note is placed in the
hands of an attorney for collection, or if collected by suit or through the
Probate Court or any other legal proceedings, the undersigned agrees to pay
reasonable attorneys' fees.
All makers, endorsers, sureties and guarantors hereby waive presentment
for payment of this note, notice of nonpayment, protests, notice of protest,
diligence, or any notice of, or defense on account of, any extension,
extensions, renewal, renewals, or change in any manner of or in this note, or in
any of its terms, provisions or covenants, or of any delay, indulgence or other
act of any holder of the aforesaid note.
TRIAD SENIOR LIVING I, L.P.,
a Texas limited partnership
By: Triad Senior Living, Inc.,
Its General Partner
BY: /s/ Blake N. Fail
--------------------------
TITLE: President
-----------------------
AMENDED AND RESTATED DRAW PROMISSORY NOTE
(Fairfield)
Amount: $3,507,293.00 Date: January 15, 1999
------------------------ -------------------------
FOR VALUE RECEIVED, the undersigned, promises to pay to Capital Senior
Living Properties, Inc., a Texas corporation, the sum draw down up to Three
Million Five Hundred Seven Thousand Two Hundred Ninety-Three and No/100 Dollars
($3,507,293.00), the principal due five (5) years from the date of the first
draw down and interest due quarterly at the rate of ten percent (10%) per annum,
both principal and interest payable at office at 14160 Dallas Parkway, Suite
300, Dallas, Texas 75240.
This note amends and restates the Draw Promissory Note dated September
24, 1998, between Maker and Capital Senior Living Properties, Inc.
The accrued interest on this note is payable quarterly after the first
draw down.
All past due principal and interest shall bear interest from maturity
at the rate of twelve percent (12%) per annum.
This note may be prepaid without penalty.
Failure to pay any installment of principal and interest, or any other
part thereof, when due shall, at the election of the holder and without notice,
mature the whole note and it shall at once become due and payable.
It is hereby specifically agreed that if this note is placed in the
hands of an attorney for collection, or if collected by suit or through the
Probate Court or any other legal proceedings, the undersigned agrees to pay
reasonable attorneys' fees.
All makers, endorsers, sureties and guarantors hereby waive presentment
for payment of this note, notice of nonpayment, protests, notice of protest,
diligence, or any notice of, or defense on account of, any extension,
extensions, renewal, renewals, or change in any manner of or in this note, or in
any of its terms, provisions or covenants, or of any delay, indulgence or other
act of any holder of the aforesaid note.
TRIAD SENIOR LIVING II, L.P.,
a Texas limited partnership
By: Triad Partners II, Inc.,
Its General Partner
BY: /s/ Blake N. Fail
-------------------------------
TITLE: President
----------------------------
AMENDED AND RESTATED DRAW PROMISSORY NOTE
(Baton Rouge)
Amount: $3,734,907.00 Date: January 15, 1999
--------------------------- -------------------------
FOR VALUE RECEIVED, the undersigned, promises to pay to Capital Senior
Living Properties, Inc., a Texas corporation, the sum draw down up to Three
Million Seven Hundred Thirty Four Thousand Nine Hundred Seven and No/100 Dollars
($3,734,907.00), the principal due five (5) years from the date of the first
draw down and interest due quarterly at the rate of ten and one-half percent
(10.5%) per annum, both principal and interest payable at office at 14160 Dallas
Parkway, Suite 300, Dallas, Texas 75240.
This note amends and restates the Draw Promissory Note dated September
24, 1998, between Maker and Capital Senior Living Properties, Inc.
The accrued interest on this note is payable quarterly after the first
draw down.
All past due principal and interest shall bear interest from maturity
at the rate of twelve percent (12%) per annum.
This note may be prepaid without penalty.
Failure to pay any installment of principal and interest, or any other
part thereof, when due shall, at the election of the holder and without notice,
mature the whole note and it shall at once become due and payable.
It is hereby specifically agreed that if this note is placed in the
hands of an attorney for collection, or if collected by suit or through the
Probate Court or any other legal proceedings, the undersigned agrees to pay
reasonable attorneys' fees.
All makers, endorsers, sureties and guarantors hereby waive presentment
for payment of this note, notice of nonpayment, protests, notice of protest,
diligence, or any notice of, or defense on account of, any extension,
extensions, renewal, renewals, or change in any manner of or in this note, or in
any of its terms, provisions or covenants, or of any delay, indulgence or other
act of any holder of the aforesaid note.
TRIAD SENIOR LIVING II, L.P.,
a Texas limited partnership
By: Triad Partners II, Inc.,
Its General Partner
BY: /s/ Blake N. Fail
--------------------------------
TITLE: President
------------------------------
AMENDED AND RESTATED DRAW PROMISSORY NOTE
(Oklahoma City)
Amount: $2,757,800.00 Date: January 15, 1999
------------------------- -------------------------
FOR VALUE RECEIVED, the undersigned, promises to pay to Capital Senior
Living Properties, Inc., a Texas corporation, the sum draw down up to Two
Million Seven Hundred Fifty Seven Thousand Eight Hundred and No/100 Dollars
($2,757,800.00), the principal due five (5) years from the date of the first
draw down and interest due quarterly at the rate of ten and one-half percent
(10.5%) per annum, both principal and interest payable at office at 14160 Dallas
Parkway, Suite 300, Dallas, Texas 75240.
This note amends and restates the Draw Promissory Note dated September
24, 1998, between Maker and Capital Senior Living Properties, Inc.
The accrued interest on this note is payable quarterly after the first
draw down.
All past due principal and interest shall bear interest from maturity
at the rate of twelve percent (12%) per annum.
This note may be prepaid without penalty.
Failure to pay any installment of principal and interest, or any other
part thereof, when due shall, at the election of the holder and without notice,
mature the whole note and it shall at once become due and payable.
It is hereby specifically agreed that if this note is placed in the
hands of an attorney for collection, or if collected by suit or through the
Probate Court or any other legal proceedings, the undersigned agrees to pay
reasonable attorneys' fees.
All makers, endorsers, sureties and guarantors hereby waive presentment
for payment of this note, notice of nonpayment, protests, notice of protest,
diligence, or any notice of, or defense on account of, any extension,
extensions, renewal, renewals, or change in any manner of or in this note, or in
any of its terms, provisions or covenants, or of any delay, indulgence or other
act of any holder of the aforesaid note.
TRIAD SENIOR LIVING II, L.P.,
a Texas limited partnership
By: Triad Partners II, Inc.,
Its General Partner
BY: /s/ Blake N. Fail
--------------------------------
TITLE: President
------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Financial Data Statement for Capital Senior Living Corporation
</LEGEND>
<CIK> 0001043000
<NAME> Capital Senior Living Corporation
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 28,769,902
<SECURITIES> 14,259,700
<RECEIVABLES> 14,437,774
<ALLOWANCES> (821,042)
<INVENTORY> 0
<CURRENT-ASSETS> 43,449,590
<PP&E> 135,989,611
<DEPRECIATION> (17,391,776)
<TOTAL-ASSETS> 209,540,476
<CURRENT-LIABILITIES> 55,543,169
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 108,368,557
<TOTAL-LIABILITY-AND-EQUITY> 209,540,476
<SALES> 0
<TOTAL-REVENUES> 15,467,605
<CGS> 0
<TOTAL-COSTS> 9,194,919
<OTHER-EXPENSES> 159,309
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,478,427
<INCOME-PRETAX> 6,367,565
<INCOME-TAX> 2,515,187
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,852,378
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
