<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For Quarter Ended December 31, 1993 Commission File Number 0-6350
FORUM GROUP, INC.
(Exact name of registrant as specified in its charter)
Indiana 61-0703072
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8900 Keystone Crossing, Suite 200
P.O. Box 40498
Indianapolis, Indiana 46240-0498
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 317-846-0700
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports)
and (2) has been subject to such filing requirements for the past 90
days:
Yes X No
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or 15(d)
of the Securities Exchange Act of 1934 subsequent to the distribution
of securities under a plan confirmed by a court:
Yes X No
The number of shares outstanding of the registrant's common stock
as of February 10, 1994 was 21,261,625.
<PAGE>
INDEX
FORUM GROUP, INC., AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION PAGE
- ----------------------------- ----
Item 1. Financial Statements (Without Audit)
Condensed consolidated balance sheets --
December 31 and March 31, 1993 3
Condensed consolidated statements of operations --
Three and nine months ended December 31, 1993 and 1992 4
Condensed consolidated statements of cash flows --
Nine months ended December 31, 1993 and 1992 5
Notes to condensed consolidated financial statements --
December 31, 1993 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II. OTHER INFORMATION
- --------------------------
Item 6. Exhibits and Reports on Form 8-K 19
SIGNATURES 22
- ----------
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
-----------------------------
FORUM GROUP, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Without Audit)
December 31, March 31,
1993 1993
ASSETS ------------- -----------
------ (in thousands)
Property and Equipment:
Land and improvements $ 34,486 $ 34,443
Buildings and leasehold improvements 175,717 175,064
Furniture and equipment 12,627 12,225
----------- -----------
222,830 221,732
Less accumulated depreciation and amortization 10,120 5,768
----------- -----------
212,710 215,964
Rancho San Antonio, property and equipment - net -0- 94,573
----------- -----------
212,710 310,537
Investments:
Forum Retirement Partners, L.P. 16,281 3,795
Greenville Retirement Community, L.P. 3,736 3,763
Rancho San Antonio Retirement Housing
Corporation 11,281 -0-
----------- -----------
31,298 7,558
----------- -----------
Cash and cash equivalents 14,334 5,817
Accounts receivable, less allowance for doubtful
accounts (December 31, $230; March 31, $219) 4,587 2,883
Notes, investments and other receivables 4,830 3,149
Land held for resale 1,638 1,638
Restricted cash 8,478 8,804
Deferred costs and other assets 9,116 4,165
Rancho San Antonio, current and other assets -0- 4,090
----------- -----------
$ 286,991 $ 348,641
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Liabilities:
Long-term debt, including $8,387 due
within one year $ 191,917 $ 200,098
Trade accounts payable 1,681 1,855
Accrued interest 1,614 708
Other accrued expenses 15,383 17,955
Resident deposits 19,089 16,558
Deferred income 4,650 4,585
Rancho San Antonio, liabilities -0- 30,820
----------- -----------
Total Liabilities 234,334 272,579
Rancho San Antonio, cooperative memberships -0- 55,910
Other partners' equity 1,686 1,707
Shareholders' equity:
Preferred stock - Series B, no par value -
authorized 2,000 shares, issued 25 shares
at March 31, 1993 -0- 4,870
Common stock, no par value - authorized 48,000
shares, issued 21,262 and 7,493 shares at
December 31 and March 31, 1993, respectively 58,813 20,934
Accumulated deficit (7,842) (7,359)
----------- -----------
Total Shareholders' Equity 50,971 18,445
----------- -----------
$ 286,991 $ 348,641
=========== ===========
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
FORUM GROUP, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Without Audit)
Three Months Ended Nine Months Ended
December 31, December 31,
------------------- ------------------
1993 1992 1993 1992
-------- -------- ------- --------
(in thousands except per share amounts)
Revenues:
Net operating revenues $ 27,855 $ 23,445 $ 79,620 $ 66,033
Facility sales, net and other 204 197 371 500
-------- -------- -------- --------
TOTAL REVENUES 28,059 23,642 79,991 66,533
-------- -------- -------- --------
Costs and expenses:
Operating expenses 19,587 18,086 57,450 51,900
General and administrative
expenses 732 1,474 2,470 3,791
Litigation expense 55 -0- 1,317 -0-
Depreciation 1,801 2,411 5,841 6,598
-------- -------- -------- --------
TOTAL COSTS AND EXPENSES 22,175 21,971 67,078 62,289
-------- -------- -------- --------
5,884 1,671 12,913 4,244
Other:
Investment income 248 201 645 1,033
Interest expense (4,357) (4,692) (13,241) (13,708)
-------- -------- -------- --------
(4,109) (4,491) (12,596) (12,675)
-------- -------- -------- --------
Income (loss) before minority interests
and extraordinary charge 1,775 (2,820) 317 (8,431)
Minority interests (143) 1,005 972 1,350
-------- -------- -------- --------
Income (loss) before extraordinary
charge 1,632 (1,815) 1,289 (7,081)
Extraordinary charge - early
extinguishment of debt (1,360) -0- (1,772) -0-
-------- -------- -------- --------
NET INCOME (LOSS) 272 (1,815) (483) (7,081)
ACCUMULATED DEFICIT AT BEGINNING
OF PERIOD (8,114) (5,266) (7,359) -0-
-------- -------- -------- --------
ACCUMULATED DEFICIT AT END OF
PERIOD $ (7,842) $ (7,081) $ (7,842) $ (7,081)
======== ========= ======== =========
Average number of common shares
outstanding 20,823 7,493 15,858 7,493
======== ========= ======== =========
Net income (loss) per common share:
Income (loss) before
extraordinary charge $ 0.08 $ (0.24) $ 0.08 $ (0.95)
Extraordinary charge (0.07) 0.00 (0.11) 0.00
-------- -------- -------- --------
Net income (loss) $ 0.01 $ (0.24) $ (0.03) $ (0.95)
======== ========= ======== =========
SEE Notes to Condensed Consolidated Financial Statements.
<PAGE>
FORUM GROUP, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Without Audit)
Nine Months Ended
December 31,
-------------------------
1993 1992
---------- ----------
(in thousands)
Cash flows from operating activities:
Net loss $ (483) $ (7,081)
Items which do not use (provide) cash:
Depreciation and amortization 6,617 6,824
Facility sales, net (84) (483)
Accrued revenues and expenses, net (5,843) (3,239)
Accrued interest 886 (134)
Other partners' interest in losses (earnings)
of consolidated partnerships 213 (1,351)
Equity in losses (earnings) of
unconsolidated entities (86) 512
Non-cash portion of extraordinary charge 1,630 -0-
---------- ----------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 2,850 (4,952)
---------- ----------
Cash flows from investing activities:
Additions to property and equipment (1,280) (4,959)
Disposals of property and equipment -0- 36,723
Rancho San Antonio - net (71) -0-
Construction costs payable -0- (5,395)
Disposals of land held for resale -0- 1,895
Advances on notes receivable (5) (750)
Investment in Forum Retirement Partners, L.P. (13,131) -0-
Other -0- (288)
---------- ----------
NET CASH (USED) PROVIDED BY INVESTING ACTIVITIES (14,487) 27,226
---------- ----------
Cash flows from financing activities:
Proceeds from long-term debt 90,711 12,802
Payments on long-term debt (101,533) (35,822)
Restructuring interest payment -0- (13,050)
Restructuring legal fees (52) (2,680)
Proceeds from issuance of common stock 32,999 -0-
Proceeds from Forum Retirement, Inc.'s
tender of Forum Group common stock 1,861 -0-
Recapitalization and tender offer costs (8,541) -0-
Proceeds from cooperative memberships 2,426 12,883
Net increase in restricted cash 2,371 3,612
Net distribution to other partners (72) (235)
Deferred financing and other costs (16) (1,124)
---------- ----------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 20,154 (23,614)
---------- ----------
Net increase (decrease) in cash and
cash equivalents 8,517 (1,340)
Cash and cash equivalents at beginning of period 5,817 7,542
---------- ----------
Cash and cash equivalents at end of period $ 14,334 $ 6,202
========== ==========
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
FORUM GROUP, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Without Audit)
December 31, 1993
Note A - Basis of Presentation
- ------------------------------
The balance sheet at March 31, 1993 has been derived from the audited
financial statements at that date included in the Annual Report on Form
10-K of Forum Group, Inc. ("Forum Group") filed with the Securities and
Exchange Commission for the fiscal year ended March 31, 1993 (the "1993
10-K").
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not
include all the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
Operating results for the nine-month period ended December 31, 1993 are
not necessarily indicative of the results that may be expected for the
fiscal year ending March 31, 1994. For further information, refer to
Forum Group's consolidated financial statements as of and for the year
ended March 31, 1993, and the footnotes thereto, included in the 1993
10-K.
Note B - Refinancing Agreements
- -------------------------------
Forum Group Recapitalization. As previously disclosed, in June, 1993
Forum Group consummated a recapitalization (the "FGI Recapitalization")
pursuant to a series of agreements and modifications thereto
(collectively, the "Acquisition Agreement") with a group of investors
comprised of Forum Holdings, L.P. ("Forum Holdings"), Apollo Investment
Fund, L.P. ("AIF") and Lion Advisors, L.P., on behalf of one or more
managed accounts ("Lion") (AIF and Lion, together with their affiliates
and assigns, are hereinafter collectively referred to as "Apollo") and
Healthcare Resources I, L.P. ("Healthcare Resources") (Forum Holdings,
Apollo and Healthcare Resources, together with their affiliates and
assigns, are hereinafter collectively referred to as the "Investors").
As a result of the FGI Recapitalization, including the Investors' Tender
Offer described below, the Investors acquired approximately 71.7% of the
outstanding shares of common stock of Forum Group ("Common Shares"). The
principal components of the FGI Recapitalization included (i) the
issuance and sale by Forum Group on February 1, 1993 of 25,000 shares of
preferred stock (which were exchanged on June 14, 1993 for 2,500,000
newly-issued Common Shares) for an aggregate purchase price of
$5,000,000, (ii) the issuance and sale by Forum Group on June 14, 1993 of
7,098,200 Common Shares, together with warrants exercisable to purchase
at a nominal price an aggregate of 1.1555 Common Shares for each Common
Share reserved in accordance with Forum Group's April 2, 1992, Plan of
Reorganization for the payment of disputed general unsecured claims (each
a "Reserved Share") issued on or after June 14, 1993 for an aggregate
purchase price of $20,000,000, (iii) the borrowing by Forum Group on June
14, 1993, of $50,000,000 pursuant to a new bank credit facility through a
consortium of lenders for which Citicorp USA, Inc. serves as agent (the
"Citibank Term Loan"), (iv) the issuance and sale by Forum Group on
<PAGE>
FORUM GROUP, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Without Audit)
December 31, 1993 (continued)
June 14, 1993 of $40,000,000 aggregate principal amount of senior
subordinated notes (the "Senior Subordinated Notes"), and (v) the
prepayment by Forum Group on June 14, 1993 of all amounts outstanding
under the senior secured term loan agreement which had been entered into
on April 2, 1992 with a consortium of banks for which Chemical Bank
served as agent. Of the 441,071 Reserved Shares as of March 31, 1993,
170,806 were issued prior to June 14, 1993, 4,984 were issued on August
24, 1993 and 265,281 continued to be reserved as of February 1, 1994.
Pursuant to the Acquisition Agreement, the Investors commenced a tender
offer on July 27, 1993 whereby the Investors offered to purchase Common
Shares from shareholders of Forum Group (other than Forum Group) for
$3.62 per share (the "Investors' Tender Offer"). The Investors' Tender
Offer expired on August 31, 1993 with 1,345,543 Common Shares having been
tendered by shareholders. Included in the Common Shares tendered as a
result of the Investors' Tender Offer were 513,993 Common Shares held by
Forum Retirement, Inc., a wholly owned subsidiary of Forum Group.
On February 1, 1994 the Citibank Term Loan and $30,000,000 aggregate
principal amount of the Senior Subordinated Notes were retired with the
proceeds of a refinancing loan (the "Refinancing Loan") (see Note D).
Forum Retirement Partners, L.P. Recapitalization. On October 7, 1993,
Forum Group announced that it had entered into an agreement with Forum
Retirement Partners, L.P. ("FRP") relating to Forum Group's
participation in a proposed recapitalization of FRP (the "FRP
Recapitalization Agreement"). Forum Group had a 22.1% equity investment
in FRP (prior to the FRP Recapitalization), is the parent company of
FRP's general partner and has a long-term management contract with FRP.
Pursuant to the FRP Recapitalization Agreement, $13 million of additional
equity was provided to FRP by a subsidiary of Forum Group through the
purchase of 6.5 million units of FRP's limited partnership interests
("Units") at a price of $2.00 per Unit. Subsequent to this purchase,
Forum Group owned 55.2% of the Units, subject to reduction as discussed
below.
As required by the FRP Recapitalization Agreement, FRP has made a public
offering whereby unitholders of record as of October 18, 1993 (other than
Forum Group and its affiliates) have the right to acquire additional
Units at $2.00 per unit, the same price paid by the Forum Group
subsidiary. The rights to acquire additional Units expire on February
25, 1994, subject to extension. Those rights are not directly or
indirectly transferable. The proceeds of that offering will be used to
repurchase Units from the Forum Group subsidiary at the same price paid
by that subsidiary. Should all of the eligible unitholders purchase the
Units being offered to them, Forum Group's percentage ownership will
return to 22.1%. Forum Group expects its percentage ownership to be less
than 50% upon completion of the offering; therefore, Forum Group's
investment in FRP is accounted for on the equity method.
Forum Group's subsidiary's acquisition of the 6.5 million Units described
above was financed by proceeds from the sale of 3,466,666 additional
Common Shares to the Investors for an aggregate purchase price of
$13,000,000. Immediately following their purchase of the 3,466,666
<PAGE>
FORUM GROUP, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Without Audit)
December 31, 1993 (continued)
Common Shares described above, the Investors owned a total of 16,217,922
Common Shares, increasing the Investor's percentage ownership of Forum
Group from approximately 71.7% to approximately 76.3%.
The agreement under which the 3,466,666 Common Shares were purchased by
the Investors provided that Forum Group will file and thereafter use its
best efforts to make effective a registration statement in connection
with an offering (the "FGI Offering") pursuant to which Forum Group
shareholders of record on October 18, 1993 (other than the Investors)
will have the right to acquire additional shares at $3.75 per Common
Share, the same price paid by the Investors. The right to purchase
Common Shares in the FGI Offering will not be directly or indirectly
assignable or transferable. It is presently expected that the FGI
Offering will be commenced in February 1994.
Note C - Change In Consolidation. The assets, liabilities and financial
results of Rancho San Antonio Retirement Housing Corporation ("RSARHC"),
a cooperative which owns The Forum at Rancho San Antonio ("Rancho San
Antonio"), a cooperative continuing care community in Cupertino,
California, were included in the consolidated financial statements of
Forum Group through July 31, 1993 since Forum Group owned a majority of
RSARHC's cooperative memberships. Effective August 1, 1993, due to
continued sales of cooperative memberships, Forum Group no longer owned
in excess of 50% of the memberships, and accordingly, the financial
statements of RSARHC are no longer included in Forum Group's consolidated
financial statements. Sales of cooperative memberships have totalled
$76,000,000 through December 31, 1993 and profits on these sales will be
recognized using the cost recovery method. Forum Group's continuing
ownership interest in RSARHC as the owner of 38% of the cooperative
memberships at December 31, 1993 is accounted for on the equity method.
Note D - Long-Term Debt. On February 1, 1994 proceeds of the Refinancing
Loan of $93,301,000 were used to retire the $49 million principal balance
of the Citibank Term Loan and $30 million of aggregate principal amount
of the Senior Subordinated Notes, and pay expenses totalling
approximately $10,366,000, $7,427,000 of which related to the purchase of
an interest rate cap agreement from a financial institution (which
effectively caps the interest rate on the Refinancing Loan at 8.925% per
annum), and prepayment premiums totalling approximately $3,000,000. The
Refinancing Loan requires monthly payments of principal based on a 25
year amortization to maturity on February 1, 2001, and bears interest at
a floating rate equal to the 30 day LIBOR rate plus 4.3%. As of the
closing date of the Refinancing Loan, the interest rate thereunder was
7.425%.
The write-off of deferred financing costs and other expenses associated
with the refinancing will result in extraordinary charges estimated at $8
million in Forum Group's fourth fiscal quarter.
<PAGE>
FORUM GROUP, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Without Audit)
December 31, 1993 (continued)
Note E - Investments. Summary financial information for FRP as of and
for the nine months ended December 31, 1993 is as follows (in thousands):
Net property $ 98,265
Other assets 12,215
---------
110,480
Less liabilities 71,868
---------
Net assets $ 38,612
=========
Revenues $ 33,740
Costs and expenses 34,836
Extraordinary charge - early
extinguishment of debt 2,917
---------
Net loss $ 4,013
=========
In December, 1993 FRP completed the refinancing of its long-term debt
and, as a result, recognized an extraordinary charge of $2,917,000 for
early extinguishment of debt. Forum Group's share of this charge is
presented as an extraordinary charge in the accompanying condensed
consolidated statement of operations.
Forum Group has a 50% beneficial interest in Greenville Retirement
Community, L.P. ("GRP"), a limited partnership which owns the Stonegates
retirement community in Wilmington, Delaware. Summary financial
information for GRP as of and for the nine months ended December 31, 1993
is as follows (in thousands):
Net property $ 20,684
Other assets 1,090
---------
21,774
Less liabilities 22,932
---------
Net deficit $ 1,158
=========
Revenues $ 4,516
Costs and expenses 4,182
---------
Net income $ 334
=========
Summary financial information for RSARHC as of and for the nine months
ended December 31, 1993 is as follows (in thousands):
Net property $ 97,677
Other assets 7,254
---------
104,931
Less liabilities 44,873
---------
Net assets $ 60,058
=========
Revenues $ 4,296
Costs and expenses 9,674
---------
Net loss $ 5,378
=========
<PAGE>
FORUM GROUP, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Without Audit)
December 31, 1993 (continued)
Note F - Operating Revenues. A change in the estimate of amounts
reimbursable by third party payors from prior years resulted in the
recognition of $1,115,000 of operating revenue in the nine month period
ended December 31, 1993. Forum Group participates in the Medicare
program and in certain Medicaid programs. These programs provide
reimbursement on the basis of allowable cost. Allowable cost is subject
to retroactive examination and adjustment by the agencies administering
the programs, and provisions are made in the financial statements for
potential adjustments that may result. To the extent that those
estimated provisions differ from the administering agencies'
determinations, operations are routinely charged or credited in the
period of such determinations. As a result, Forum Group changed its
estimate of amounts reimbursable by third party payors in 1993 from prior
years.
<PAGE>
FORUM GROUP, INC., AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
AS OF AND FOR THE THREE AND NINE MONTHS ENDING
December 31, 1993
Results Of Operations
- ---------------------
Forum Group operates (i) 10 retirement communities and one nursing home
owned directly by Forum Group, or wholly owned subsidiaries of Forum
Group, including one community owned by a nonprofit corporation
controlled by Forum Group (the "Owned Communities") , (ii) four
retirement communities owned by partnerships which are not wholly owned
by Forum Group but which are consolidated for financial reporting
purposes (the "Consolidated Partnership Communities"), (iii) 11
retirement communities owned by entities which are not consolidated for
financial reporting purposes (the "Unconsolidated Communities"),
including nine communities owned by FRP, one owned by GRP, and one owned
by RSARHC (which was consolidated for financial reporting purposes prior
to July 31, 1993) (see Note C to accompanying Condensed Consolidated
Financial Statements). The periods in which the financial results of the
consolidated components of Rancho San Antonio are included in the
financial statements of Forum Group are not comparable. Consequently,
Rancho San Antonio is presented separately below in order to present a
comparable disclosure of the other entities' financial results.
Certain summary financial information for the Owned Communities, Rancho
San Antonio, the Consolidated Partnership Communities, and other
corporate operations ("Corporate Operations") is presented below:
Nine Months Ended December 31, 1993
-----------------------------------
Consolidated
Owned Rancho Partnership Corporate
Communities San Antonio Communities Operations Totals
----------- ----------- ----------- ---------- --------
Net
Operating
Revenues $55,291 $ 4,106 $19,343 $ 880 $79,620
Operating
Expenses 38,542 4,009 12,027 2,872 57,450
General and
Administra-
tive Expense 0 0 (3) 2,473 2,470
Litigation
Expense 0 0 0 1,317 1,317
Depreciation 2,920 878 1,504 539 5,841
Interest
Expense 2,103 707 3,145 7,286 13,241
<PAGE>
FORUM GROUP, INC., AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Nine Months Ended December 31, 1992
Consolidated
Owned Rancho Partnership Corporate
Communities San Antonio Communities Operations Totals
----------- ----------- ----------- ---------- --------
Net
Operating
Revenues $45,586 $ 2,565 $17,067 $ 815 $66,033
Operating
Expenses 35,129 2,348 11,507 2,916 51,900
General and
Administra-
tive Expense 0 0 120 3,671 3,791
Litigation
Expense 0 0 0 0 0
Depreciation 2,844 2,186 1,481 87 6,598
Interest
Expense 1,865 1,637 3,339 6,867 13,708
Owned Communities. Net operating revenues for the three and nine months
ended December 31, 1993 increased by $3,318,000 (20%), from $16,240,000
to $19,558,000, and by $9,705,000 (21%), from $45,586,000 to $55,291,000,
respectively, as compared to the same periods of the previous year. A
change in the estimate of amounts reimbursable to third party payors from
prior years resulted in the recognition of $945,000 of operating revenue
in the nine month period ended December 31, 1993. The remaining portions
of the increases were primarily attributable to favorable changes in
occupancy, increased utilization of ancillary healthcare services and
increases in residency fees and charges. Combined occupancy increased
from 88% at December 31, 1992 to 93% at December 31, 1993. Operating
expenses, including general and administrative expenses and depreciation,
for the three and nine months ended December 31, 1993 at the Owned
Communities increased by $1,054,000 (8%), from $13,081,000 to
$14,135,000, and by $3,489,000 (9%), from $37,973,000 to $41,462,000,
respectively, as compared to the same periods of the previous year. The
remaining portions of the increases were primarily attributable to the
increase in occupancy, increased utilization of ancillary healthcare
services and normal inflationary increases. Net operating income,
comprised of operating revenue less operating expenses (including general
and administrative expenses and depreciation), for the three and nine
months ended December 31, 1993 at the Owned Communities increased by
$2,264,000, from $3,159,000 to $5,423,000, and by $6,216,000, from
$7,613,000 to $13,829,000, respectively, as compared to the same periods
of the previous year. Exclusive of the impact of the change in estimate
of reimbursable amounts discussed above, these increases constitute 68%
and 60%, respectively, of the increases in net operating revenues for the
three and nine month periods, which are indicative of the degree of
incremental operating income that results from increased occupancy.
<PAGE>
FORUM GROUP, INC., AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Rancho San Antonio. Due to the change in financial statement
presentation discussed above in Note C to the Condensed Consolidated
Financial Statements, the financial results of Rancho San Antonio are not
comparable between fiscal periods. Therefore, no discussion of
comparative variances regarding the consolidated portions of Rancho San
Antonio is presented. Net operating revenues for the consolidated
components of Rancho San Antonio for the three and nine months ended
December 31, 1993 increased by $404,000, from $954,000 to $1,358,000, and
by $1,541,000, from $2,565,000 to $4,106,000, respectively, as compared
to the same periods of the previous year. Occupancy of the consolidated
components of Rancho San Antonio increased from 49% at December 31, 1992
to 91% at December 31, 1993. Operating expenses, including general and
administrative expenses and depreciation, for the consolidated components
of Rancho San Antonio for the three and nine month periods decreased by
$1,119,000, from $2,112,000 to $993,000, and increased by $353,000, from
$4,534,000 to $4,887,000, respectively, as compared to the same periods
of the previous year. Net operating income, comprised of operating
revenue less operating expenses (including general and administrative
expenses and depreciation), for the consolidated components of Rancho San
Antonio for the three month period ended December 31, 1993 increased by
$1,523,000, from a loss of $1,158,000 to income of $365,000, as compared
to the same period of the previous year. Net operating losses, comprised
of operating revenue and operating expenses (including general and
administrative expenses and depreciation), for the consolidated
components of Rancho San Antonio for the nine month period ended December
31, 1993 decreased by $1,188,000, from $1,969,000 to $781,000, as
compared to the same period of the previous year.
Consolidated Partnership Communities. Net operating revenues for the
three and nine months ended December 31, 1993 increased by $760,000
(13%), from $5,960,000 to $6,720,000, and by $2,276,000 (13%), from
$17,067,000 to $19,343,000, respectively, as compared to the same periods
of the previous year. A change in the estimate of amounts reimbursable
to third party payors from prior years resulted in the recognition of
$142,000 of operating revenue in September, 1993. The remaining portions
of the increases were primarily attributable to favorable changes in
occupancy, increased utilization of ancillary healthcare services, and
increases in residency fees and charges. Combined occupancy increased
from 86% at December 31, 1992 to 90% at December 31, 1993. Operating
expenses, including general and administrative expenses and depreciation,
for the Consolidated Partnership Communities for the three and nine
months ended December 31, 1993 increased by $74,000 (2%), from $4,433,000
to $4,507,000, and by $420,000 (3%), from $13,108,000 to $13,528,000,
respectively, as compared to the same periods of the previous year. The
remaining portions of the increases were primarily attributable to the
increase in occupancy, increased utilization of ancillary healthcare
services and to normal inflationary increases. Net Operating Income,
comprised of operating revenue less operating expenses (including general
and administrative expenses and depreciation), for the Consolidated
Partnership Communities for the three and nine months ended December 31,
1993 increased by $686,000, from $1,527,000 to $2,213,000, and by
$1,856,000, from $3,959,000 to $5,815,000, respectively, as compared to
the same periods of the previous year. Exclusive of the impact of the
change in estimate of reimbursable amounts discussed above, these
<PAGE>
FORUM GROUP, INC., AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
increases constitute 90% and 80% of the increases in net operating
revenues for the three and nine months ended December 31, 1993, which are
indicative of the degree of incremental profits that result from
increased occupancy.
Corporate Operations. Revenues for the three and nine months ended
December 31, 1993 decreased $72,000, from $291,000 to $219,000, and
increased $65,000, from $815,000 to $880,000, respectively, compared to
the same periods of the previous year. Revenues are comprised of
management fees from GRP and RSARHC, a change in the estimate of amounts
reimbursable to third party payors from prior years for sold operations,
and rental income from certain residential units of Rancho San Antonio.
Operating expenses, including general and administrative expenses and
depreciation, for the three and nine months ended December 31, 1993
increased by $140,000 and decreased by $790,000, respectively, as
compared to the same periods of the previous year. These changes reflect
reductions in the headquarters staff and certain allocations of revenues
and expenses related to Rancho San Antonio. Corporate Operations
includes the unallocated interest expense of corporate debt.
Unconsolidated Communities. Forum Group's equity in the earnings of FRP,
which is reflected as other revenues, improved from losses of $51,000 and
$515,000 for the three and nine months ended December 31, 1992,
respectively, to revenue of $582,000 and $638,000 for the three and nine
months ended December 31, 1993, respectively. These increases primarily
reflect improved occupancy at the nine retirement communities owned by
FRP and managed by Forum Group. In December, 1993 FRP completed the
refinancing of its long-term debt and, as a result, recognized an
extraordinary charge of $2,917,000 for early extinguishment of debt.
Forum Group's share of this charge is presented as an extraordinary
charge in the accompanying condensed consolidated statement of
operations. Forum Group's equity in the earnings of GRP, which
is also reported as other revenues, increased from $98,000 and $215,000
for the three and nine months ended December 31, 1992, respectively, to
$88,000 and $232,000 for the three and nine months ended December 31,
1993, respectively. Forum Group's equity in the losses of the
unconsolidated component of Rancho San Antonio for the three and nine
months ended December 31, 1993 was $511,000 and $785,000, respectively.
Consolidated General and Administrative Expenses. For the three and nine
months ended December 31, 1993, consolidated general and administrative
expenses decreased by $742,000, from $1,474,000 to $732,000, and by
$1,321,000, from $3,791,000 to $2,470,000, respectively, compared to the
comparable periods in fiscal 1993. These decreases are primarily
attributable to decreases in salaries and wages of $384,000 and $935,000,
respectively, due to reductions in the headquarters staff. Those
decreases were partially offset by increases, in the amounts of $328,000
and $513,000, respectively, in Forum Group's directors' fees relating to
periods prior to, and expenses related to, the FGI Recapitalization.
Litigation Expenses. During the three and nine months ended December 31,
1993, expenses of $55,000 and $1,317,000, respectively, were incurred in
conjunction with certain litigation related to the FGI Recapitalization.
<PAGE>
FORUM GROUP, INC., AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Depreciation. For the three and nine months ended December 31, 1993,
consolidated depreciation expense decreased by $610,000 and by $757,000,
respectively, compared to the comparable periods in fiscal 1993. The
changes reflect the opening of the healthcare facility at Rancho San
Antonio, additional fixed asset additions over the past twelve months and
increases in other intangible assets.
Interest Expense. Interest expense attributable to the Owned Communities
and Corporate Operations increased by $196,000, from $3,021,000 to
$3,217,000, and by $657,000, from $8,732,000 to $9,389,000, during the
three and nine months ended December 31, 1993, respectively. These
changes are primarily attributable to changes in average borrowing costs.
Extraordinary Charge. During the three and nine months ended December
31, 1993 an extraordinary charge of $1,360,000 was recorded to reflect
Forum Group's share of FRP's extraordinary charge on the early
extinguishment of its debt. Additionally, during the nine months ended
December 31, 1993, expenses of $412,000 related to the early
extinguishment of debt in conjunction with the FGI Recapitalizaiton
were recorded.
Net Income/Loss Per Share. The three and nine months ended December 31,
1993 produced net income of $272,000 ($0.01 per Common Share) and net
loss of $483,000 ($0.03 per Common Share), respectively, compared to net
losses of $1,815,000 ($0.24 per Common Share) and $7,081,000 ($0.95 per
Common Share) for the three and nine months ended December 31, 1992. The
current nine month period was adversely affected by $1,317,000 ($0.08 per
Common Share) of expenses related to certain litigation related to the
FGI Recapitalization and extraordinary charges totalling $1,772,000
($0.11 per Common Share) related to the early extinguishment of Forum
Group's and FRP's debt.
All per share data are based upon the weighted average number of shares
outstanding for the relevant periods.
Financial Condition
Recapitalization. In June, 1993 Forum Group consummated the FGI
Recapitalization. As a result of the FGI Recapitalization, including the
Investors' Tender Offer, the Investors acquired approximately 71.7% of
the outstanding Common Shares. On February 1, 1994 the New Term Loan and
$30,000,000 aggregate principal amount of the New Senior Subordinated
Notes were retired with the proceeds of the Refinancing Loan. For a
discussion of the FGI Recapitalization and the Refinancing Loan, see Note
B of the Notes to Condensed Consolidated Financial Statements.
<PAGE>
FORUM GROUP, INC., AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
As a result of the FGI Recapitalization, Forum Group's long term debt as
of December 31, 1993 was as set forth below (in thousands):
Forum Group, Inc. (Owned Communities and Corporate Operations):
Citibank Term Loan $ 49,000
Senior Subordinated Notes 40,000
Mortgages and Capitalized Leases 23,378
Other 3,158
--------
Total Owned Communities and Corporate Operations (1) 115,536
Consolidated Partnership Communities (2) 76,381
--------
Total $191,917
========
(1) Excludes (i) indebtedness aggregating $4,535,000 of GRP, $569,000
of which is recourse to Forum Group and (ii) indebtedness aggregating
$9,645,000 of RSARHC which is non-recourse to Forum Group.
(2) These obligations are non-recourse to Forum Group.
Liquidity And Capital Resources. Following the FGI Recapitalization,
Forum Group's principal sources of funds are cash generated from
operating activities and asset sales. Forum Group's liquidity
requirements relate primarily to the funding of working capital needs,
and principal and interest payments on indebtedness (and, for the current
fiscal year, included approximately $5.9 million of expenses associated
with the FGI Recapitalization and $1.3 million of litigation expenses
relating to the FGI Recapitalization and will include additional expenses
relating to the Refinancing Loan presently estimated at approximately
$10.7 million). At December 31, 1993, Forum Group had cash and cash
equivalents of $14,334,000, accounts receivable of $4,587,000 and notes,
investments and other receivables of $4,830,000.
Forum Group believes that (i) cash from operations, (ii) cash and cash
equivalents, (iii) accounts receivable, and (iv) notes, investments and
other receivables, will provide adequate liquidity to meet its
foreseeable working capital requirements.
The term of Forum Group's prior bank debt required that a substantial
portion of excess cash flow be applied by Forum Group to reduce
indebtedness thereunder whereas the terms of the Refinancing Loan do not
require such prepayments and have an amortization period of 25 years (but
with a stated maturity of February 1, 2001). As a result, Forum Group
may use any excess cash flow to pursue its growth strategy. In addition,
the Refinancing Loan is generally on terms more favorable than the terms
applicable under Forum Group's prior long-term debt. The Refinancing
Loan also includes an option that, subject to certain conditions, enables
Forum Group to increase the amount of borrowings if the operating cash
flows from the assets pledged to secure the Refinancing Loan continue to
improve during the 24-month period ending February 1, 1996, in which
event the increased borrowing proceeds could be used to fund Forum
Group's growth through acquisitions of additional properties, to expand
or upgrade Forum Group's existing RCs or for other corporate purposes.
<PAGE>
FORUM GROUP, INC., AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
In addition, the Refinancing Loan permits Forum Group to convert the
initial floating interest rate structure (generally 4.1% over the LIBOR,
which at the closing of the Refinancing Loan was 3.125%, plus servicing
costs, presently estimated to be 0.2% per year) under the Refinancing
Loan to a fixed interest rate structure.
Forum Group intends to seek to grow through the acquisition of additional
properties and other assets. In connection with the FGI
Recapitalization, the Investors stated their intention to make up to $30
million of additional equity capital available to Forum Group for this
purpose. Although the Investors already invested an additional $13
million in Forum Group since the completion of the FGI Recapitalization,
such amount was contributed to the capital of FRP and used by FRP to pay
bank debt. Any additional equity investment by the Investors would be
subject to the negotiation of mutually acceptable terms. Accordingly,
there can be no assurance that any such additional investment will be
made or as to the timing and terms thereof. Forum Group has also entered
into a commitment letter agreement (the "Acquisition Commitment") with
Nomura Asset Capital Corporation ("Nomura") providing for up to $100
million in new debt financing (the "Acquisition Loan"), the proceeds of
which would be used, together with equity to be provided by Forum Group,
to fund the purchase price for acquisitions of skilled nursing home,
assisted living and other senior housing properties. Under the
acquisition facility, Nomura would advance $2.00 of debt financing for
each $1.00 of equity capital invested by Forum Group, which equity is
presently expected to be obtained from future offering of additional
Common Shares to shareholders (including the Investors), cash from
operations (including cash from sales of units in existing RCs, primarily
Rancho San Antonio), or a combination of the foregoing. During the 24-
month period in which amounts could be drawn to finance acquisitions
under the Acquisition Loan, Forum Group would have the right, subject to
the satisfaction of certain conditions, to convert the indebtedness
thereunder to seven-year debt under either a fixed or floating interest
rate structure. During such period, Forum Group could also repay such
indebtedness using proceeds from other financing sources, if any such
financing becomes available on more favorable terms. Forum Group would
have an option that would permit it to increase the borrowings against
the properties acquired if, at the end of 24 months after the initial
closing of the Acquisition Loan, the debt service coverage computed on a
trailing 12-month basis exceeded certain thresholds, in which event the
increased borrowings, like any increased borrowings under the Refinancing
Loan, could be used to fund Forum Group's growth or for other corporate
purposes.
There can be no assurance that any acquisitions will be completed or, if
so, as to the timing or terms thereof. The Acquisition Commitment is
subject to the negotiation of definitive documentation and certain
conditions. Moreover, Nomura's obligation to provide financing under the
acquisition facility, if completed, will be subject to a number of
conditions, and there can be no assurance that such conditions will be
satisfied.
<PAGE>
FORUM GROUP, INC., AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Participation in Recapitalization of FRP. In October 1993 Forum Group
entered into the FRP Recapitalization Agreement. Forum Group has a
substantial equity investment in FRP, is the parent company of FRP's
general partner and has a long-term management contract with FRP. For a
discussion of FRP's recapitalization, see Note B of the Notes to
Condensed Consolidate Financial Statements.
Cash Flow. Operating activities for the nine months ended December 31,
1993 provided $2,850,000 of cash compared to $4,952,000 of cash used by
operating activities during the nine months ended December 31, 1992, due
principally to significantly improved operating results in 1993.
Investing activities used $14,487,000 of cash during the nine months
ended December 31, 1993, compared $27,226,000 of cash provided by
investing activities during the nine months ended December 31, 1992, due
principally to Forum Group's participation in the FRP Refinancing and the
April, 1992 sale of two retirement communities.
Financing activities provided $20,154,000 of cash during the nine months
ended December 31, 1993, compared to $23,614,000 of cash used by
financing activities during the comparable period of 1992, due
principally to the impact of the FGI Recapitalization and the April, 1992
sale of two retirement communities.
<PAGE>
PART II. OTHER INFORMATION
FORUM GROUP, INC., AND SUBSIDIARIES
ITEM 1. LEGAL PROCEEDINGS
- -------------------------
Forum/Classic Claims. As previously reported, on April 29, 1993,
Forum/Classic, L.P., Dalfort Corporation, Diamond Investments, Ltd. and
Morris Weiser (collectively, the "Forum/Classic Plaintiffs") filed suit
in the Superior Court of Marion County, Indiana, against Forum Group, the
persons who then comprised the Board (the "Director Defendants"), and
AIF, Apollo Advisors, L.P., Evergreen Healthcare, Ltd., ("Evergreen"),
Investors Genpar, Inc., ("Genpar"), FL Advisors, L.P., Lion Forum
Holdings (collectively, the "Investor Defendants") alleging, among other
things, that the Director Defendants breached their fiduciary duties by
entering into the Acquisition Agreement (as originally in effect) that
the Investor Defendants knowingly participated in such alleged breaches
of fiduciary duties, that Forum Group breached an alleged contract to
enter into certain transactions proposed by Forum/Classic and Dalfort and
that the Investor Defendants induced such breach and interfered with an
alleged business relationship between Forum/Classic and Dalfort and Forum
Group. The Forum/Classic Plaintiffs sought, on behalf of themselves and
alleged other similarly situated shareholders, among other things, (i)
the rescission of the Acquisition Agreement (as originally in effect) and
certain related agreements and the issuance of the certain preferred
stock, (ii) an injunction prohibiting the consummation of the
transactions contemplated by the Acquisition Agreement (as originally in
effect) and certain related agreements, (iii) an order requiring Forum
Group to consummate the transactions proposed by Forum Classic and
Dalfort, (iv) attorney's fees, (v) expenses, and (vi) punitive damages
against the Director Defendants and the Investor Defendants. Following a
hearing (of a preliminary nature as to the Director Defendants and final
as to all other defendants), the presiding court entered an order (the
"Order") enjoining the defendants from taking any action to consummate a
transaction which did not provide shareholders the opportunity to receive
$3.62 per share, in cash, for their Common Shares but otherwise
permitting the defendants to proceed with the transactions contemplated
by the Acquisition Agreement. The court also concluded that (i) the
decision by the Director Defendants to enter into a February 1, 1993
agreement in principle with the predecessors in interest of the
Investor's was made in good faith after reasonable investigation, the
agreement in principle was conclusively presumed to be valid, and Forum
Group was bound thereby and (ii) no contract existed between Forum Group
and Forum/Classic or Dalfort. On June 11, 1993, the Forum/Classic
Plaintiffs filed a motion (the "Contempt Motion") to find Forum Group and
the Investor Defendants in contempt of the Order. The court denied the
Contempt Motion, but amended the Order to make it clear that in order to
be consistent with the Order, the transaction between Forum Group and the
Investors must provide for the payment of $3.62 per Common Share without
adjustment. The Forum/Classic Plaintiffs thereafter commenced an appeal
of the Order to the Indiana Court of Appeals (the "Appeals Court"). The
defendants then moved to dismiss the appeal on procedural grounds. On
October 4, 1993, the Appeals Court granted the defendants' motion. The
Forum/Classic Plaintiffs thereafter appealed the Appeals Court's ruling
to the Indiana Supreme Court which, on January 27, 1994, upheld the
Appeal Court's dismissal of the appeal. A hearing date for final
adjudication of the claims against the Director Defendants has not been
set.
<PAGE>
PART II. OTHER INFORMATION
FORUM GROUP, INC., AND SUBSIDIARIES
(continued)
Knapp Claims. On January 24, 1994, the Russell F. Knapp Revokable Trust,
(the "Knapp Trust"), a substantial holder of the publicly traded units of
FRP, filed a complaint (the "Knapp Trust Complaint") in the United States
District Court for the Northern District of Iowa against Forum
Retirement, Inc., the wholly-owned subsidiary of Forum Group which serves
as general partner of FRP ("FRI"), alleging breach of FRP's partnership
agreement, breach of fiduciary duty, fraud, and civil conspiracy. The
Knapp Trust Complaint alleges, among other things, that the Board of
Directors of FRI is not comprised of a majority of Independent Directors,
as required by the FRP's partnership agreement and as allegedly
represented in the 1986 Prospectus of FRP, and that FRI's Board of
Directors has approved and/or acquiesced in 8% management fees being
charged by Forum Group under the management agreement under which Forum
Group manages all of FRP's RC's. The Knapp Trust Complaint further
alleges that the "industry standard" for such fees is 4% thereby
resulting in an "overcharge" to FRP estimated by the Knapp Trust at $1.8
million per annum, beginning in 1994. The Knapp Trust is seeking the
restoration of certain former directors to the Board of Directors of FRI
and the removal of certain other directors from such Board, an injunction
prohibiting the payment of 8% management fees, and unspecified
compensatory and punitive damages. FRI believes that the allegations in
the Knapp Trust Complaint are without merit and intends vigorously to
defend against this litigation.
ITEM 2. CHANGES IN SECURITIES
- -----------------------------
When the Citibank Term Loan was paid with some of the proceeds of the
Refinancing Loan, certain negative covenants under the Citibank Term Loan
were removed. However, dividends and other distributions to shareholders
are still prohibited by the terms of the Senior Subordinated Notes as
long as such Notes remain outstanding. For more information on the
Senior Subordinated Notes, see Note B to Item 1.
The provisions of the Refinancing Loan place certain restrictions on the
ability of the borrower thereunder to pay dividends and incur additional
debt in certain circumstances. However, such restrictions will not apply
to FGI or any of its other affiliates other than the borrower under the
Refinancing Loan. For further information on the Refinancing Loan, see
Note D to Item 1.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ----------------------------------------
(a) Exhibits:
--------
Recapitalization Agreement made as of October 6, 1993 between Forum
Group, Inc. and Forum Retirement Partners, L.P. [incorporated by
reference to Exhibit 10(1) to Forum Group's Current Report on Form 8-K
dated October 6, 1993 (the "October, 1993 8-K")].
Stock Purchase Agreement dated as of October 6, 1993 among Forum Group,
Inc., Forum Holdings, L.P. and Apollo FG Partners, L.P. [incorporated by
reference to Exhibit 10(2) to the October, 1993 8-K].
<PAGE>
PART II. OTHER INFORMATION
FORUM GROUP, INC., AND SUBSIDIARIES
(continued)
Stock Purchase Agreement dated as of November 16, 1993, between Forum
Group, Inc. and Healthcare Resources, L.P. [incorporated by reference to
Exhibit 10(3) to Forum Group's Forum S-2 dated December 2, 1993 (the "FGI
Form S-2"].
Commitment Letter from Nomura Asset Capital Corporation to Forum Group,
Inc. dated October 21, 1993 refinancing the refinancing loan
[incorporated by reference to Exhibit 10(4) to the FGI Form S-2].
Commitment Letter from Nomura Asset Capital Corporation to Forum Group,
inc. dated October 21, 1993 referencing the acquisition loan
[incorporated by reference to Exhibit 10(5) to the FGI Form S-2].
Amended and Restated Loan Agreement dated February 1, 1994 between FGI
Financing I Corporation and Nomura Asset Capital Corporation.
Amendment, dated as of January 31, 1994, to Indenture, dated as of June
1, 1993, between Forum Group, as Issuer, and First National Trust
Association, as Trustee.
Waiver and Supplement, dated as of January 31, 1994, to Credit Agreement
dated as of June 10, 1993, among Forum Group, the Lenders named therein,
Citibank, N.A. as Issuing Bank and Citicorp, U.S.A., as Agent.
(b) Reports on Form 8-K:
-------------------
The following report on Form 8-K was filed during the last quarter of the
period covered by this report: Report on Form 8-K reporting "Other
Events" occurring on October 6, 1993, and filed on October 12, 1993.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FORUM GROUP, INC.
Date: February 14, 1994 By: \s\ Paul A. Shively
--------------------------------
Paul A. Shively
Senior Vice President and Treasurer
<PAGE>
AMENDED AND RESTATED
LOAN AGREEMENT
Dated as of February 1, 1994
by and among
FGI FINANCING I CORPORATION
as Borrower,
NOMURA ASSET CAPITAL CORPORATION
as Lender
and
BANKERS TRUST COMPANY
as Custodian
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
-----
<C> <S> <C>
ARTICLE I CERTAIN DEFINITIONS..................................... 2
Section 1.1. Definitions......................................... 2
ARTICLE II GENERAL TERMS........................................... 29
Section 2.1. Intentionally Deleted............................... 29
Section 2.2. Intentionally Deleted............................... 29
Section 2.3. Security for the Loan............................... 29
Section 2.4. Borrower's Note..................................... 29
Section 2.5. Principal and Interest.............................. 30
Section 2.6. Voluntary Prepayment................................ 31
Section 2.7. Mandatory Prepayment................................ 31
Section 2.8. Application of Payments............................. 33
Section 2.9. Method and Place of Payment......................... 33
Section 2.10. Taxes............................................... 34
Section 2.11. Release of Collateral............................... 34
Section 2.12. Central Cash Management............................. 35
Section 2.13. Security Agreement.................................. 42
Section 2.14. Supplemental Mortgage Affidavits.................... 47
Section 2.15. Securitization...................................... 47
Section 2.16. Refinancing......................................... 49
ARTICLE III CONDITIONS PRECEDENT.................................... 50
Section 3.1. Conditions Precedent to Effectiveness and
Disbursement of the Additional Loan................. 50
Section 3.2. Acceptance of Borrowings............................ 52
Section 3.3. Form of Loan Documents and Related Matters.......... 52
ARTICLE IV REPRESENTATIONS AND WARRANTIES.......................... 52
Section 4.1. Borrower Representations............................ 52
Section 4.2. Survival of Representations......................... 62
ARTICLE V AFFIRMATIVE COVENANTS................................... 62
Section 5.1. Borrower Covenants.................................. 62
ARTICLE VI NEGATIVE COVENANTS...................................... 75
Section 6.1. Borrower Negative Covenants......................... 75
ARTICLE VII DEFAULTS................................................ 78
Section 7.1. Event of Default.................................... 78
Section 7.2. Remedies............................................ 81
Section 7.3. Remedies Cumulative................................. 82
i
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
Page
-----
<C> <S> <C>
ARTICLE VIII MISCELLANEOUS........................................... 82
Section 8.1. Survival............................................ 82
Section 8.2. Lender's Discretion................................. 83
Section 8.3. Governing Law....................................... 83
Section 8.4. Modification, Waiver in Writing..................... 84
Section 8.5. Delay Not a Waiver.................................. 84
Section 8.6. Notices............................................. 85
Section 8.7. TRIAL BY JURY....................................... 85
Section 8.8. Headings............................................ 85
Section 8.9. Assignment.......................................... 85
Section 8.10. Severability........................................ 86
Section 8.11. Preferences......................................... 86
Section 8.12. Waiver of Notice.................................... 86
Section 8.13. Remedies of Borrower................................ 87
Section 8.14. Exculpation......................................... 87
Section 8.15. Exhibits Incorporated............................... 89
Section 8.16. Offsets, Counterclaims and Defenses................. 89
Section 8.17. No Joint Venture or Partnership..................... 89
Section 8.18. Waiver of Marshalling of Assets Defense............. 89
Section 8.19. Waiver of Counterclaim.............................. 89
Section 8.20. Conflict; Construction of Documents................. 90
Section 8.21. Brokers and Financial Advisors...................... 90
Section 8.22. Counterparts........................................ 90
Section 8.23. Estoppel Certificates............................... 90
Section 8.24. Payment of Expenses................................. 90
Section 8.25. Bankruptcy Waiver................................... 91
Section 8.26. FINAL AGREEMENT..................................... 92
Section 8.27. NON-STANDARD TERMS; NO UNWRITTEN ORAL AGREEMENTS.... 92
Section 8.28. Amendment........................................... 92
</TABLE>
Exhibits
<TABLE>
<C> <S>
A - Allocated Loan Amounts
B - Appraisals and Appraised Values
C - Modification of Assignment of Leases and Rents (Form)
D - Collection Account Banks
E - Debt Service Coverage Ratio
F - Engineering Reports
G - Environmental Reports
H - Facilities
I - Amended and Restated Environmental Guaranty and Indemnity Agreement
(Form)
J - Modification of Mortgage, Assignment of Rents, Security Agreement and
Fixture Filing (Form)
K - Amended, Restated and Consolidated Promissory Note (Form)
L - Amended and Restated Stock Pledge and Security Agreement (Form)
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
-----
<C> <S> <C>
M - Letter of Instructions and Acknowledgement (Form)
N - Required Debt Service Payment Certificate (Form)
O - Amended and Restated Cash Collateral Account Agreement
(Form)
P - True Sale/Nonconsolidation Opinion of Jones, Day,
Reavis & Pogue (Form)
Q - Refinancing Terms
R - Financing Statements
S - Opinion of Jones, Day, Reavis & Pogue (Form)
T - Opinion of John H. Sharpe, Esq. (Form)
U - Opinion of Real Estate Counsel (Form)
V - Intentionally Deleted
W - Litigation
X - Numbers of Nursing Beds, Assisted Living Units and
Independent Living Units
Y - Content of Quarterly Financial Information (Form)
Z - Officer's Certificate (Form)
AA - Prohibited Transferees
Schedules
- ---------
1 - Capital Improvement Costs Allowance
2 - Method of Calculating Adjusted Net Cash Flow (Prior to
February 1, 1995)
3 - Initial Capital Requirements
4 - Assignments of Leases
5 - Mortgages
</TABLE>
iii
<PAGE>
AMENDED AND RESTATED LOAN AGREEMENT
THIS AMENDED AND RESTATED LOAN AGREEMENT, made as of February 1, 1994, is
by and among NOMURA ASSET CAPITAL CORPORATION, a Delaware corporation, having an
address at 2 World Financial Center, Building B, New York, New York 10281-1198
("Lender"), FGI FINANCING I CORPORATION, a Delaware corporation, having an
address at 8900 Keystone Crossing, Suite 200, Indianapolis, Indiana 46240-0498
("Borrower"), and BANKERS TRUST COMPANY, a New York banking corporation, having
an address at 3 Park Plaza, 16th Floor, Irvine, California 92714 ("Custodian").
RECITALS
WHEREAS, Lender, Borrower and Custodian are parties to that certain Loan
Agreement dated as of January 20, 1994 (the "Original Loan Agreement") pursuant
to which Borrower obtained a loan (the "Original Loan") from Lender in the
aggregate amount of $69,260,929 (the "Original Loan Amount") which Original Loan
is evidenced by a Promissory Note dated January 31, 1994 by Borrower to Lender
(the "Original Note");
WHEREAS, Wingate Realty Finance Corporation ("Wingate"), Borrower and
Custodian are parties to that certain Loan Agreement dated as of February 1,
1994 (the "Wingate Loan Agreement") pursuant to which Borrower obtained a loan
(the "Wingate Loan") from Wingate in the aggregate amount of $24,040,378 (the
"Wingate Loan Amount") wihch Wingate Loan is evidenced by a Promissory Note
dated February 1, 1994 by Borrower to Wingate (the "Wingate Note")'
WHEREAS, pursuant to a Purchase Agreement dated as of the date hereof
between Wingate, as seller, and Lender, as purchaser, the Wingate Loan Agrement,
the Wingate Loan and all documents related to the Wingate Loan have been
assigned to and assumed by Lender;
WHEREAS, Borrower desires to have the Original Loan and the Wingate Loan
(collectively, the "Loan") consolidated into a single loan;
WHEREAS, Lender is unwilling to enter into this Agreement unless Borrower
joins in the execution and delivery of this Agreement, the Note and the other
Loan Documents (to the extent not executed and delivered in connection with the
original Loan or the Wingate Loan) which shall estalish the terms and
conditions of the Loan (all of the foregoing capitalized terms as hereeinafter
defined);
WHEREAS, Borrower and Lender contemplate that within several months after
the Closing Date, Lender's interest in and to the Loan may be assigned by Lender
to Trustee for the benefit of all Certificateholders in connection with the
Securitization (all of the foregoing capitalized terms as hereinafter defined);
WHEREAS, among the Loan Documents are certain Assignments of Leases (as
hereinafter defined), which Borrower and Lender anticipate will be assigned by
Lender to Trustee on the Securitization Closing Date (as hereinafter defined);
WHEREAS, in order further to effectuate the Assignments of Leases, Borrower
has agreed to establish certain accounts and to grant to Custodian (as
hereinafter defined), initially on behalf of Lender and after the Securitization
Closing Date on behalf of the Certificateholders, a security interest therein
upon the terms and conditions of the security agreement set forth in Section
2.13;
<PAGE>
2
WHEREAS, Bankers Trust Company, in its capacity as Custodian, is willing to
join in the security agreement set forth in Section 2.13 by execution and
delivery of this Agreement in that capacity; and
WHEREAS, Borrower, Lender and Custodian desire to amend, restate and
supersede in its entirety the Original Loan Agreement;
NOW, THEREFORE, in consideration of the making of the Loan by Lender and
the covenants, agreements, representations and warranties set forth in this
Agreement, the parties hereby covenant, agree, represent and warrant as follows:
ARTICLE I
CERTAIN DEFINITIONS
-------------------
Section 1.1. Definitions . For all purposes of this Agreement:
(1) the capitalized terms defined in this Article I have the meanings
assigned to them in this Article I, and include the plural as well as the
singular;
(2) all accounting terms have the meanings assigned to them in accordance
with generally accepted accounting principles in effect on the date hereof;
(3) the words "herein", "hereof", and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section, or other subdivision; and
(4) the following terms have the following meanings:
"Account Collateral" has the meaning provided in Section 2.13(a).
"Accounts" means any of Borrower's rights to payment for goods sold or
leased or for services rendered arising from the operation of the Facilities and
not evidenced by an Instrument, including, without limitation, all accounts and
accounts receivable arising from the operation of the Facilities. Accounts
shall include the proceeds thereof (whether cash or non-cash, movable or
immovable, tangible or intangible) received from the sale, exchange, transfer,
collection or other disposition or substitution thereof.
<PAGE>
3
"Adjusted Net Cash Flow" means for any period (and calculated either for a
Facility or the Facilities) the Net Cash Flow for such period reduced by (i) an
allowance for Capital Improvement Costs in the per annum amounts shown on
Schedule 1 attached hereto, (ii) annual management fees equal to the greater of
(x) actual management fees paid pursuant to the Management Agreement and (y) 5%
of Gross Revenue, to the extent that such costs have not been included in
Operating Expenses, and (iii) an
<PAGE>
4
amount necessary to reflect a 5% vacancy factor if the actual vacancy factor is
less than 5%. The initial calculation of Adjusted Net Cash Flow and all other
calculations of Adjusted Net Cash Flow made prior to February 1, 1995 shall be
made on the bases, and using the assumptions, described on Schedule 2 attached
hereto. All calculations of Adjusted Net Cash Flow made after February 1, 1995
shall be based on Net Cash Flow for the prior 12-month period, taking into
account only the Facilities constituting the Mortgaged Property at the time the
calculation is made.
"Advisor" has the meaning provided in Section 8.21.
"Affiliate" of any specified Person means any other Person controlling or
controlled by or under common control with such specified Person. For the
purposes of this definition, "control" when used with respect to any specified
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities or
other beneficial interests, by contract or otherwise; and the terms
"controlling" and "controlled" have the meanings correlative to the foregoing.
"Agreement" means this Amended and Restated Loan Agreement, as the same may
from time to time hereafter be modified, supplemented or amended.
"Allocated Loan Amount" means the portion of the Loan Amount allocated to
each Facility as set forth in Exhibit A attached hereto, as such amounts shall
be adjusted from time to time as hereinafter set forth. Upon each adjustment in
the amount of Principal Indebtedness due to either (i) a regular monthly payment
of principal pursuant to Section 2.5(a) or (ii) a prepayment of principal
pursuant to Sections 2.7(c) and (d), each Allocated Loan Amount shall be
decreased by an amount equal to the product of (i) the amount of such principal
payment and (ii) a fraction, the numerator of which is the applicable Allocated
Loan Amount (prior to the adjustment in question) and the denominator of which
is the total of all Allocated Loan Amounts prior to the adjustment to the
Principal Indebtedness resulting in the recalculation of the Allocated Loan
Amount. When the Principal Indebtedness is reduced as a result of Lender's
receipt of Net Proceeds or Loss Proceeds with respect to a Taking or casualty
affecting 100% of a Facility, the Allocated Loan Amount for the Individual
Property with respect to which the Net Proceeds or Loss Proceeds were received
shall be reduced to zero (such Allocated Loan Amount being referred to as the
"Withdrawn Allocated Amount"), and each other Allocated Loan Amount shall (i) if
the Withdrawn Allocated Amount exceeds the Net Proceeds or Loss Proceeds (such
excess being referred to as the "Proceeds Deficiency"), be increased by an
amount equal to the product of
<PAGE>
5
(1) the Proceeds Deficiency and (2) a fraction, the numerator of which is the
applicable Allocated Loan Amount (prior to the adjustment in question) and the
denominator of which is the aggregate of all of the Allocated Loan Amounts other
than the Withdrawn Allocated Amount or (ii) if the Net Proceeds or Loss Proceeds
are greater than or equal to the Withdrawn Allocated Amount, remain unadjusted.
"Amortization Date" means February 1, 2019.
"Appraisals" means the appraisals with respect to each Facility delivered
to Lender in connection with the Loan, as described on Exhibit B attached
hereto, and any more recent appraisal of any Facility made by an Appraiser at
the request of Borrower or Lender, as any of the same may be updated by
recertification from time to time by the Appraiser performing such Appraisal.
"Appraised Value" of any Facility means the fair market value of such
Facility as set forth in its Appraisal, the initial Appraised Value of each
Facility being set forth on Exhibit B attached hereto reduced by the sum of (i)
the "adjusted issue price" (within the meaning of Code (S) 1272(a)(4)) of any
indebtedness secured by a Lien affecting such Facility that is prior to or on a
parity with the Lien of the Mortgages and (ii) the fair market value of any
personal property or other property otherwise included in the fair market value
of the Facility, which property is not an "interest in real property" within the
meaning of Treas. Reg. (S)(S) 1.860G-2 and 1.856-3(c).
"Appraiser" means (i) an appraiser who prepared an Appraisal described on
Exhibit B attached hereto or (ii) any Independent appraiser selected by Lender
(and reasonably satisfactory to Borrower) who is a member of the American
Institute of Real Estate Appraisers with a national practice and who has at
least ten years experience with real estate of the same type and in the
geographic area of the Facility to be appraised.
"Assignment of Leases" means any one of the first priority Assignments of
Leases and Rents delivered to Lender pursuant to the Original Loan Agreement or
to Wingate pursuant to the Wingate Loan Agreement (as assigned to Lender) (as
specified on Schedule 4 attached hereto), as amended by the applicable
Modification of Assignment of Leases, as the same may hereafter from time to
time be further supplemented, amended, modified or extended by one or more
agreements supplemental thereto and "Assignment of Leases" means all such
instruments collectively.
"Assignment of Rate Cap Agreement" means that certain Assignment of Rate
Cap Agreement, dated as of the Original Closing Date, from Borrower, as
assignor, to Lender, as assignee, and consented to by the counterparty to the
Rate Cap Agreement.
<PAGE>
6
"Bank" means Bankers Trust Company or any successor bank hereafter selected
by Lender in accordance with the terms hereof.
"Basic Carrying Costs" means the following costs with respect to the
Mortgaged Property: (i) real property taxes and assessments applicable to the
Facilities and (ii) insurance premiums for policies of insurance required to be
maintained by Borrower pursuant to this Agreement or the other Loan Documents.
"Basic Carrying Costs Monthly Installment" means Lender's good faith
estimate of 1/12th of the annual amount of Basic Carrying Costs. Should the
Basic Carrying Costs for the current Fiscal Year or payment period not be
ascertainable at the time a monthly deposit is required to be made, the Basic
Carrying Costs Monthly Installment shall be Lender's good faith estimate based
on 1/12th of the aggregate Basic Carrying Costs for the prior Fiscal Year or
payment period with reasonable adjustments. As soon as the Basic Carrying Costs
are fixed for the current Fiscal Year or period, the next ensuing Basic Carrying
Costs Monthly Installment shall be adjusted to reflect any deficiency or surplus
in prior Basic Carrying Costs Monthly Installments.
"Basic Carrying Costs Sub-Account" means the Sub-Account of the Cash
Collateral Account established and maintained pursuant to Section 2.12 relating
to the payment of Basic Carrying Costs.
"Borrower" has the meaning provided in the first paragraph of this
Agreement.
"Business Day" means any day other than (i) a Saturday and a Sunday, and
(ii) a day on which federally insured depository institutions in (x) New York
State, (y) a state in which Servicer or any Collection Account Bank is located
or (z) the state in which the Corporate Trust Office is located are authorized
or obligated by law, governmental decree or executive order to be closed. When
used with respect to an Interest Determination Date, "Business Day" shall mean a
day on which banks are open for dealing in foreign currency and exchange in
London and New York City.
"Capital Improvement Costs" means costs incurred by Borrower in connection
with capital improvements to the Facilities.
"Capital Reserve Amount" means the amount of the annual replacement reserve
for capital expenditures which may be increased by Borrower but may not be less
than the amount shown for each Facility on Schedule 1 attached hereto.
<PAGE>
7
"Capital Reserve Monthly Installment" means an amount equal to 1/12th of
the Capital Reserve Amount.
"Capital Reserve Sub-Account" means the Sub-Account of the Cash Collateral
Account established and maintained pursuant to Section 2.12 relating to the
payment of Capital Improvement Costs.
"Cash Collateral Account" has the meaning provided in Section 2.12(b).
"CC Account Agreement" has the meaning specified in Section 2.13(c).
"Ceiling Cap Rate" means the then-applicable interest rate ceiling under
the Rate Cap Agreement.
"Certificate" has the meaning set forth in the Pooling and Servicing
Agreement.
"Certificateholder" means the Person in whose name a Certificate is
registered pursuant to the Pooling and Servicing Agreement.
"Closing Date" means the date on which this Agreement shall become
effective pursuant to Section 3.1.
"Code" means the Internal Revenue Code of 1986, as amended, and as it may
be further amended from time to time, any successor statutes thereto, and
applicable U.S. Department of Treasury regulations issued pursuant thereto in
temporary or final form.
"Collateral" means, collectively, the Land, Improvements, Equipment, Rents,
Accounts, General Intangibles, Instruments, Inventory, Money and rights to
payment from patients or private insurers arising from the operation of each
Facility (excluding all rights to payment from Medicare and Medicaid programs or
similar state or federal programs, boards, bureaus or agencies), and (to the
full extent assignable) Permits and all Proceeds, all whether now owned or
hereafter acquired and all other property which is or hereafter may become
subject to a Lien in favor of Lender as security for the Loan.
"Collateral Security Instrument" means any right, document or instrument,
other than a Mortgage, given as security for the Loan (including, without
limitation, an Assignment of Leases, the Stock Pledge and Security Agreements
and the Assignment of Rate Cap Agreement), as same may be amended or modified
from time to time.
<PAGE>
8
"Collection Account" has the meaning provided in Section 2.12(a).
"Collection Account Bank" means the applicable bank for each Facility
listed on Exhibit D attached hereto and any successor bank hereafter selected by
Borrower and approved by Lender in accordance with the terms hereof.
"Condemnation Proceeds" has the meaning provided in Section 2.12(h).
"Contingent Obligation" means any obligation of Borrower guaranteeing any
indebtedness, leases, dividends or other obligations ("primary obligations") of
any other Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of Borrower, whether
or not contingent, (i) to purchase any such primary obligation or any property
constituting direct or indirect security therefor, (ii) to advance or supply
funds (x) for the purchase or payment of any such primary obligation or (y) to
maintain working capital or equity capital of the primary obligor, (iii) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (iv) otherwise to assure or hold
harmless the owner of such primary obligation against loss in respect thereof,
except indemnities required by Stewart Title Guaranty Company in connection with
the issuance of the Title Insurance Policies. The amount of any Contingent
Obligation shall be deemed to be an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Contingent Obligation
is made (taking into account the non-recourse or limited recourse nature of such
Contingent Obligation, if applicable) or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof (assuming Borrower
is required to perform thereunder) as determined by Lender in good faith (taking
into account the non-recourse or limited recourse nature of such Contingent
Obligation, if applicable).
"Corporate Trust Office" means the principal office of the Trustee at which
at any particular time its corporate trust business shall be principally
administered.
"Current Month" has the meaning provided in Section 2.12(g).
"Custodial Account" has the meaning provided in Section 2.12(f)(i).
<PAGE>
9
"Custodian" means Bankers Trust Company or any Person appointed by the
Trustee as Custodian under the Pooling and Servicing Agreement or such Person's
successor in interest.
"Debt Service" means the principal and interest payment that would be due
and payable in accordance with the Note during an applicable period.
"Debt Service Coverage Ratio" means for any period (and calculated either
for a Facility or for the Facilities) the quotient obtained by dividing Adjusted
Net Cash Flow for the specified period by the Imputed Debt Service for such
period. The Debt Service Coverage Ratio as of the Closing Date for the
Facilities is 1.4 and the Debt Service Coverage Ratio for each Facility as of
the Closing Date is set forth on Exhibit E attached hereto. All calculations of
Debt Service Coverage Ratios shall be made by Borrower, subject to verification
by Lender and Peat Marwick & Co. or another accounting firm acceptable to Lender
(any "Big Six" accounting firm or Kenneth Leventhal & Company being deemed
acceptable to Lender).
"Debt Service Payment Sub-Account" means the Sub-Account of the Cash
Collateral Account established and maintained pursuant to Section 2.12 relating
to the payment of Debt Service.
"Deed of Trust Trustee" means the trustee, if any, under the Mortgages.
"Default" means the occurrence of any event which, but for the giving of
notice or the passage of time, or both, would be an Event of Default.
"Default Collateral" has the meaning provided in Section 8.14.
"Default Rate" means the per annum interest rate equal to the lesser of (i)
the Maximum Amount (as defined in the Note) or (ii) the sum of LIBOR determined
as of the immediately preceding Interest Determination Date plus the Pricing
Spread plus 3%.
"Eligible Account" means an account that is either at a Collection Account
Bank or: (i) an account maintained with a federal or state chartered depository
institution or trust company, the long-term unsecured debt obligations of which
(or, in the case of a depository institution or trust company that is the
principal subsidiary of a holding company, the long-term unsecured debt
obligations of such holding company) are rated by the Rating Agencies in the
highest rating category at the time of the deposit therein, or, if such
depository institution or trust company (or holding company) does not have a
long-term unsecured
<PAGE>
10
debt rating, the short-term unsecured debt obligations of such depository
institution or trust company (or holding company), as the case may be, are rated
by the Rating Agencies as AAA, (ii) an account the deposits in which are fully
insured by the FDIC, (iii) a trust account maintained with the trust department
of a federal or state chartered depository institution or trust company acting
in its fiduciary capacity, or (iv) after the Securitization Closing Date, an
account in any other insured depository institution reasonably acceptable to
Servicer and the Trustee if the maintenance of such account in such institution
will not result in the downgrading or withdrawal of the ratings then assigned to
the Certificates by each Rating Agency.
"Engineer" means (i) an engineer who prepared an Engineering Report
described on Exhibit F attached hereto or (ii) any reputable Independent
engineer licensed as such in the applicable state.
"Engineering Reports" means the structural engineering reports with respect
to each Facility delivered to Lender in connection with the Loan, as described
on Exhibit F attached hereto, and any amendments or supplements thereto
delivered to Lender.
"Environmental Claim" means any written request for information by a
Governmental Authority, or any written notice, notification, claim,
administrative, regulatory or judicial action, suit, judgment, demand or other
written communication by any Person or Governmental Authority alleging or
asserting liability with respect to Borrower or any Facility, whether for
damages, contribution, indemnification, cost recovery, compensation, injunctive
relief, investigatory, response, remedial or cleanup costs, damages to natural
resources, personal injuries, fines or penalties arising out of, based on or
resulting from (i) the presence, Use or Release into the environment of any
Hazardous Substance originating at or from, or otherwise affecting, a Facility,
(ii) any fact, circumstance, condition or occurrence forming the basis of any
violation, or alleged violation, of any Environmental Law by Borrower or
otherwise affecting a Facility or (iii) any alleged injury or threat of injury
to health, safety or the environment by Borrower or otherwise affecting a
Facility.
"Environmental Laws" means any and all applicable federal, state, local and
foreign laws, rules or regulations, any judicial or administrative orders,
decrees or judgments thereunder, and any permits, approvals, licenses,
registrations, filings and authorizations, in each case as in effect as of the
relevant date, relating to the environment or safety, or the Release or
threatened Release of Hazardous Substances into the indoor or outdoor
environment including, without limitation,
<PAGE>
11
ambient air, soil, surface water, ground water, wetlands, land or subsurface
strata or otherwise relating to the Use of Hazardous Substances.
"Environmental Reports" means the environmental audit reports with respect
to each Facility delivered to Lender in connection with the Loan, as described
on Exhibit G attached hereto, and any amendments or supplements thereto
delivered to Lender.
"Equipment" means all beds, linen, televisions, carpeting, telephones, cash
registers, computers, lamps, glassware, rehabilitation equipment, restaurant and
kitchen equipment, and other machinery and equipment owned by Borrower located
on, attached to or used in connection with the Facilities, provided, however,
that, with respect to any items which are leased and not owned by Borrower, the
Equipment shall include the leasehold interest only of Borrower together with
any options to purchase any of said items and any additional or greater rights
with respect to such items which Borrower may hereafter acquire.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated thereunder. Section
references to ERISA are to ERISA, as in effect at the date of this Agreement
and, as of the relevant date, any subsequent provisions of ERISA, amendatory
thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" means any corporation or trade or business that is a
member of any group of organizations (i) described in Section 414(b) or (c) of
the Code of which Borrower is a member and (ii) solely for purposes of potential
liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of the Code
and the lien created under Section 302(f) of ERISA and Section 412(n) of the
Code, described in Section 414(m) or (o) of the Code of which Borrower is a
member.
"Event of Default" has the meaning set forth in Section 7.1.
"Excess Cash Flow" means all available cash from the operation of the
Facilities after the monthly funding on the Sub-Accounts pursuant to Section
2.12(g), payment of Debt Service and Capital Improvement Costs (to the extent
not paid from the Sub-Accounts), payment of Operating Expenses and funding of
additional reserves at levels determined by Borrower to be prudent for working
capital, Capital Improvement Costs and other Borrower costs.
<PAGE>
12
"Facility" means the Land, the Improvements and the Equipment (to the
extent same shall be deemed to be fixtures) encumbered by a Related Mortgage and
"Facilities" means all Land, Improvements and Equipment covered by the
Mortgages. The Facilities are described on Exhibit H attached hereto.
"FGI" means Forum Group, Inc., an Indiana corporation which, directly or
through one or more subsidiaries, is the beneficial owner of all of the issued
and outstanding shares of capital stock of Borrower.
"Fiscal Year" means the 12-month period ending on March 31st of each year
or such other fiscal year of Borrower as Borrower may select from time to time
with the prior consent of Lender (which consent shall not be unreasonably
withheld).
"FKI" means Forum of Kentucky, Inc., a Kentucky corporation which is a
stockholder of Borrower and whose sole stockholder is FGI.
"GAAP" means generally accepted accounting principles in the United States
of America as of the date of the applicable financial report.
"General Intangibles" means all intangible personal property of Borrower
arising out of or directly relating to the Facilities (other than Accounts,
Rents, Instruments, Inventory, Money and Permits), including, without
limitation, things in action, contract rights, refunds of real estate taxes and
assessments and other rights to payment of Money.
"Governmental Authority" means any national or federal government, any
state, regional, local or other political subdivision thereof with jurisdiction
and any Person with jurisdiction exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.
"Gross Revenue" means with respect to a Facility, the total dollar amount
of all income and receipts whatsoever received by Borrower in the ordinary
course of its business with respect to such Facility, including all Rents, Money
and proceeds of any Accounts.
"Guarantor" means FGI, as guarantor under the Indemnity Agreement.
"Hazardous Substance" means, collectively, (i) any petroleum or petroleum
products or waste oils, explosives, radioactive materials, asbestos, urea
formaldehyde foam insulation, polychlorinated biphenyls ("PCBs"), lead in
drinking
<PAGE>
13
water, and lead-based paint, the presence, generation, use, transportation,
storage or disposal of which (x) is regulated or could lead to liability under
any Environmental Law or (y) is subject to notice or reporting requirements
under any Environmental Law, (ii) any chemicals or other materials or substances
which are now or hereafter become defined as or included in the definition of
"hazardous substances," "hazardous wastes," "hazardous materials," "extremely
hazardous wastes," "restricted hazardous wastes," "toxic substances," "toxic
pollutants," "contaminants," "pollutants" or words of similar import under any
Environmental Law and (iii) any other chemical or any other material or
substance, exposure to which is now or hereafter prohibited, limited or
regulated under any Environmental Law.
"Impositions" means all taxes (including, without limitation, all ad
valorem, sales (including those imposed on lease rentals), use, single business,
gross receipts, value added, intangible transaction privilege, privilege or
license or similar taxes), assessments (including, without limitation, to the
extent not discharged prior to the date hereof, all assessments for public
improvements or benefits, whether or not commenced or completed within the term
of the Related Mortgage), ground rents, water, sewer or other rents and charges,
excises, levies, fees (including, without limitation, license, permit,
inspection, authorization and similar fees), and all other governmental charges,
in each case whether general or special, ordinary or extraordinary, foreseen or
unforeseen, of every character in respect of an Individual Property, including
any Rents and Accounts (including all interest and penalties thereon), which at
any time prior to, during or in respect of the term hereof may be assessed or
imposed on or in respect of or be a lien upon (i) Borrower (including, without
limitation, all income, franchise, single business or other taxes imposed on
Borrower for the privilege of doing business in the jurisdiction in which such
Individual Property, or any other collateral delivered or pledged to Lender in
connection with the Loan, is located) or Lender, (ii) an Individual Property, or
any other collateral delivered or pledged to Lender in connection with the Loan,
or any part thereof or any Rents therefrom or any estate, right, title or
interest therein, or (iii) any occupancy, operation, use or possession of, or
sales from, or activity conducted on, or in connection with such Individual
Property or the leasing or use of such Individual Property or any part thereof,
or the acquisition or financing of the acquisition of such Individual Property
by Borrower. Nothing contained in this Agreement shall be construed to require
Borrower to pay any tax, assessment, levy or charge imposed on Lender, Servicer
or any Certificateholder in the nature of a franchise, capital levy, estate,
inheritance, succession, income or net revenue tax.
<PAGE>
14
"Improvements" means all buildings, structures and improvements of every
nature whatsoever now or hereafter situated on the Land, including, but not
limited to, to the extent of Borrower's interest therein, all gas and electric
fixtures, radiators, heaters, engines and machinery, boilers, ranges, elevators
and motors, plumbing and heating fixtures, carpeting and other floor coverings,
water heaters, awnings and storm sashes, and cleaning apparatus which are or
shall be attached to the Land or said buildings, structures or improvements.
"Imputed Debt Service" means for any period (and calculated either for a
Facility based on its Allocated Loan Amount or for the Facilities based on the
Principal Indebtedness then outstanding) the aggregate amount of principal and
interest payments that would be due and payable during the applicable period
calculated using the greater of (i) a debt constant computed on a [300]
month amortization schedule with interest at the Ceiling Cap Rate plus the
Pricing Spread or (ii) a debt constant computed on a [300] month
amortization schedule with interest at 10% per annum.
"Indebtedness" means the Principal Indebtedness, together with all other
obligations and liabilities due or to become due to Lender pursuant hereto,
under the Note or in accordance with any of the other Loan Documents, and all
other amounts, sums and expenses paid by or payable to Lender hereunder or
pursuant to the Note or any of the other Loan Documents.
"Indemnity Agreement" means that certain Amended and Restated Environmental
Guaranty and Indemnity Agreement, in the form attached hereto as Exhibit I,
dated as of the Closing Date, from Guarantor to Lender.
"Independent" means, when used with respect to any Person, a Person who (i)
does not have any direct financial interest or any material indirect financial
interest in Borrower or in any Affiliate of Borrower, and (ii) is not connected
with Borrower or any Affiliate of Borrower as an officer, employee, promoter,
underwriter, trustee, partner, director or person performing similar functions.
"Individual Property" means that portion of the Mortgaged Property located
at or otherwise pertaining to one of the Facilities. All of the "Individual
Properties" collectively comprise the Mortgaged Property.
"Initial Capital Requirement" means $360,370, which is the sum of the
amounts specified in the Engineering Reports as being necessary to complete the
deferred capital improvements identified therein, as specified for each Facility
on Schedule 3
<PAGE>
15
attached hereto, and which amount was funded to the Capital Reserve Sub-Account
pursuant to the Original Loan Agreement.
"Instruments" means all instruments, chattel paper, documents or other
writing obtained by Borrower from or in connection with the operation of the
Facilities evidencing a right to the payment of Money.
"Insurance Proceeds" has the meaning provided in Section 2.12(h).
"Insurance Requirements" means all material terms of any insurance policy
required pursuant to this Agreement or a Mortgage and all material regulations
and then current standards applicable to or affecting the applicable Individual
Property or any part thereof or any use or condition thereof, which may, at any
time, be recommended by the Board of Fire Underwriters, if any, having
jurisdiction over such Individual Property, or such other body exercising
similar functions.
"Interest Accrual Period" means, with respect to any Payment Date, the
period from and including the day after the preceding Payment Date to and
including such Payment Date; provided, however, that the first Interest Accrual
Period for the Loan shall be from February 1, 1994 to and including the first
Payment Date.
"Interest Determination Date" means, in connection with the calculation of
LIBOR for any Interest Accrual Period other than the first Interest Accrual
Period, the second Business Day preceding the first day of such Interest Accrual
Period. There shall be no Interest Determination Date for the first Interest
Accrual Period.
"Inventory" means all inventories of food, beverages and other comestibles
held by Borrower for sale or use at or from the Facilities, and soap, paper
supplies, medical supplies, drugs (excluding pharmaceuticals requiring a license
to distribute or sell) and all other such goods, wares and merchandise held by
Borrower for sale to or for consumption by guests or patients of the Facilities
and all such other goods returned to or repossessed by Borrower.
"Land" has the meaning provided in the Mortgages.
"Leases" means all leases, lettings, occupancy agreements, tenancies and
licenses (to the extent assignable) by Borrower as landlord of a Facility or any
part thereof now or hereafter entered into, and all amendments, extensions,
renewals and guarantees thereof, and all security therefor.
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16
"Legal Requirements" means all governmental statutes, laws, rules, orders,
regulations, ordinances, judgments, decrees and injunctions of Governmental
Authorities affecting either an applicable Individual Property or any part
thereof or the construction, use, alteration or operation thereof, or any part
thereof, enacted and in force as of the relevant date, and all permits, licenses
and authorizations and regulations relating thereto, and all covenants,
agreements, restrictions and encumbrances contained in any instruments, either
of record or known to Borrower, at any time in force affecting such Individual
Property or any part thereof, including, without limitation, any which may (i)
require repairs, modifications or alterations in or to such Individual Property
or any part thereof, or (ii) in any way limit the use and enjoyment thereof.
"Lender" has the meaning provided in the first paragraph of this Agreement.
"Letters of Instructions" has the meaning provided in Section 2.12(a).
"LIBOR" means the interest rate calculated as set forth below:
(a) On each Interest Determination Date, Lender shall determine LIBOR
for the next succeeding Interest Accrual Period on the basis of the
offered rates of the principal London offices of the Reference Banks for
one-month U.S. dollar deposits, as such rates appear on the display page
designated as "LIBOR" on the Reuters Monitor Money Rates Service, as of
11:00 a.m. (London time) on such Interest Determination Date and in
accordance with the following:
(i) If on any Interest Determination Date one or more Reference
Banks provide such offered quotations, LIBOR for the next Interest
Accrual Period shall be the arithmetic mean of such offered quotations
(if not a whole multiple of 1/32%, then rounded upwards to the nearest
whole multiple of 1/32%).
(ii) If on any Interest Determination Date no Reference Bank
provides such offered quotations, LIBOR for the next Interest Accrual
Period shall be the Reserve Interest Rate.
(iii) If on any Interest Determination Date Lender is required but
is unable to determine the Reserve Interest Rate in accordance with
the definition thereof set forth herein, LIBOR for the next Interest
Accrual Period shall be LIBOR as determined on the previous Interest
Determination Date.
<PAGE>
17
(b) The good faith establishment of LIBOR or, if applicable, the
Reserve Interest Rate, by Lender and Lender's subsequent good faith
calculation of the rates of interest applicable to the Loan for each
related Interest Accrual Period shall (in the absence of manifest error)
be final and binding. Lender shall notify Borrower of the rates of
interest established as aforesaid for an Interest Accrual Period on or
before the third Business Day of the month in which such Interest Accrual
Period commences.
(c) In determining LIBOR, or, if applicable, the Reserve Interest
Rate, Lender may (absent manifest error) conclusively rely and shall be
protected in relying upon the offered quotation (whether electronic,
written or oral) from the Reference Banks or, if applicable, the New York
City banks referred to in the definition of the term "Reserve Interest
Rate". Lender shall have no liability or responsibility to any Person
for (i) its selection of Reference Banks or, if applicable, such New York
City banks or (ii) its inability, following a good faith reasonable
effort, to obtain such quotations from the Reference Banks or, if
applicable, such New York City banks, all as provided in the definitions
of the terms "LIBOR" and "Reserve Interest Rate".
"Lien" means any mortgage, deed of trust, lien (statutory or other),
pledge, hypothecation, assignment, preference, priority, security interest, or
any other encumbrance or charge on or affecting an Individual Property or any
portion thereof or Borrower, or any interest therein, including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, the filing of any financing statement or similar instrument under the
Uniform Commercial Code or comparable law of any other jurisdiction, domestic or
foreign, and mechanic's, materialmen's and other similar liens and encumbrances.
"Loan" has the meaning provided in the Recitals hereto.
"Loan Amount" means $93,301,301, which is the total of the Original
Loan Amount and the Wingate Loan Amount.
"Loan Documents" means this Agreement, the Note, the Mortgages, the
Mortgage Modifications, the Assignments of Leases, the Modifications of the
Assignments of Leases, the Stock Pledge and Security Agreements, the Indemnity
Agreement the Rate Cap Agreement, the Assignment of Rate Cap Agreement, and all
other agreements, instruments, certificates and documents delivered by or on
behalf of Borrower or an Affiliate to evidence or secure the Loan or otherwise
in satisfaction of the requirements of the
<PAGE>
18
Original Loan Agreement or the Wingate Loan Agreement, this Agreement, the
Mortgages or the other documents listed above.
"Loss Proceeds" has the meaning provided in Section 2.12(h).
"Management Agreement" means that certain Management Agreement, dated as of
January 31, 1994, between Manager and Borrower pertaining to the
management of the Facilities.
"Manager" means FGI, or any permitted successor or assignee, as manager of
a Facility or all of the Facilities, as the case may be.
"Manager's Subordination" means the Amended and Restated Manager's Consent
and Subordination of Management Agreement, dated as of the Closing Date,
executed by Manager, Borrower and Lender.
"Material Adverse Effect" means a material adverse effect upon (i) the
business or the financial position or results of operation of Borrower, (ii) the
ability of Borrower to perform, or of Lender to enforce, any of the Loan
Documents or (iii) the value of (x) the Collateral taken as a whole or (y) any
Facility.
"Maturity Date" means February 1, 2001 or such earlier date resulting from
acceleration.
"Money" means all moneys, cash, rights to deposit or savings accounts or
other items of legal tender obtained from or for use in connection with the
operation of the Facilities.
"Mortgage" means any one of the first priority Mortgages, Assignments of
Rents, Security Agreements and Fixture Filings and Deeds of Trust, Assignments
of Rents, Security Agreements and Fixture Filings delivered to Lender pursuant
to the Original Loan Agreement or to Wingate pursuant to the Wingate Loan
Agreement (as assigned to Lender (as specified on Schedule 5 attached hereto),
as amended by the applicable Mortgage Modifications, as same may hereafter from
time to time be supplemented, amended, modified or extended by one or more
agreements supplemental thereto, but shall exclude any such instrument released
by Lender pursuant to Section 2.11, and "Mortgages" means all such instruments
collectively.
"Mortgage Modification" means a Modification of Mortgage, Assignment of
Rents, Security Agreement and Fixture Filing or a Modification of Deed of Trust,
Assignment of Rents, Security Agreement and Fixture Filing, in the form attached
hereto as Exhibit J, dated as of the Closing Date, between Borrower and Lender.
"Mortgaged Property" means all the Individual Properties encumbered by the
Mortgages then outstanding.
"Multiemployer Plan" means a multiemployer plan defined as such in Section
3(37) of ERISA to which contributions have been made by Borrower or any ERISA
Affiliate and which is covered by Title IV of ERISA.
<PAGE>
19
"Net Cash Flow" means for any period (and calculated either for a Facility
or for the Facilities) the excess, if any, of Operating Income for such period
over Operating Expenses for such period.
"Net Proceeds" means (i) either (x) the purchase price (at foreclosure or
otherwise) actually received by Lender from a third party purchaser with respect
to one or more Individual Properties as a result of the exercise by Lender of
its rights, powers, privileges and other remedies after the occurrence of an
Event of Default or (y) in the event that Lender is the purchaser at foreclosure
of one or more of such Individual Properties, the fair market value of such
Individual Properties, as determined by Lender in good faith, or at Borrower's
request and expense, an Appraiser, in either case less (ii) all reasonable costs
and expenses, including, without limitation, all attorneys' fees and
disbursements and any brokerage fees, if applicable, incurred by Lender in
connection with the exercise of such remedies; provided, however, that such
costs and expenses shall not be deducted to the extent such amounts previously
have been added to the Indebtedness in accordance with the terms of the
Mortgages or applicable law.
"Note" means and refers to the amended, restated and consolidated
promissory note, in the form attached hereto as Exhibit K, dated the Closing
Date, made by Borrower to Lender pursuant to this Agreement amending, restating
and consolidating the Original Note and the Wingate Note, as such note may be
modified, amended, supplemented, extended or consolidated, and any note(s)
issued in exchange therefor or in replacement thereof.
"Officer's Certificate" means a certificate delivered to Lender by Borrower
which is signed by an authorized officer of Borrower.
"Operating Expenses" means, for any period, all expenditures by Borrower
required to be expensed under GAAP during such period in connection with the
ownership, operation, maintenance, repair or leasing of the Facilities (or of a
Facility), including, without limitation:
(i) expenses in connection with the cleaning, repair and maintenance
of the Facilities (or of a Facility);
(ii) wages, benefits, payroll taxes, uniforms, insurance costs and all
other related expenses for employees of Borrower or any Affiliate engaged
in the repair, operation and maintenance of the Facilities (or of a
Facility) and service to patients;
<PAGE>
20
(iii) any management fees and expenses incurred with respect to the
Facilities (or of a Facility);
(iv) the cost of all electricity, oil, gas, water, steam, heat,
ventilation, air conditioning and any other energy, utility or similar item
and overtime services;
(v) the cost of cleaning supplies;
(vi) Impositions;
(vii) business interruption, liability, casualty and fidelity insurance
premiums (which, in the case of any policies covering more than one
Facility, shall be allocated among the Facilities pro rata in proportion to
the insured value of the Facilities covered by such policies);
(viii) legal, accounting and other professional fees and expenses
incurred in connection with the ownership and operation of the Facilities
(or of a Facility) including, without limitation, collection costs and
expenses;
(ix) costs and expenses of security and security systems provided to
and/or installed and maintained with respect to the Facilities (or a
Facility);
(x) trash removal and exterminating costs and expenses;
(xi) advertising and marketing costs;
(xii) costs of environmental audits and monitoring, environmental
remediation work or any other expenses incurred with respect to compliance
with Environmental Laws; and
(xiii) all other ongoing expenses which in accordance with GAAP should
be included in Borrower's annual financial statements as operating expenses
of the Facilities (or of a Facility).
Notwithstanding the foregoing, Operating Expenses shall not include (w) any
Capital Improvement Costs, (x) depreciation, amortization and other non-cash
charges, (y) any extraordinary items or (z) Debt Service and other payments in
connection with the Indebtedness. Operating Expenses shall be calculated on the
accrual basis of accounting and in accordance with GAAP.
"Operating Income" means, for any period, all regular ongoing income of
Borrower during such period from the Permitted
<PAGE>
21
Investments or the operation of the Facilities (or of a Facility), including,
without limitation:
(i) all amounts payable to Borrower by any Person as rent and other
amounts under Leases, license agreements, occupancy agreements or other
agreements relating to the Facilities (or a Facility);
(ii) business interruption proceeds; and
(iii) all other amounts which in accordance with GAAP are included in
Borrower's annual financial statements as operating income of the
Facilities (or of a Facility).
Notwithstanding the foregoing, Operating Income shall not include (v) any
condemnation or insurance proceeds (other than business interruption proceeds or
condemnation proceeds with respect to a temporary taking and, in either such
case, only to the extent allocable to such period or other applicable reporting
period), (w) any proceeds resulting from the sale, exchange, transfer, financing
or refinancing of all or any portion of one or more Individual Properties, (x)
any Rent attributable to a Lease prior to the date on which the actual payment
of Rent is required to be made thereunder, (y) any item of income otherwise
includable in Operating Income but paid directly to a Person other than
Borrower, or (z) security deposits received from tenants until forfeited.
Operating Income shall be calculated on the accrual basis of accounting and in
accordance with GAAP.
"Original Loan" has the meaning specified in the Recitals hereto.
"Original Loan Agreement" has the meaning specified in the Recitals hereto.
"Original Loan Amount" has the meaning specified in the Recitals hereto.
"Original Note" has the meaning specified in the Recitals hereto.
"Other Borrowings" means, with respect to Borrower, without duplication
(but not including the Indebtedness or any deferred fees payable in connection
with the Transaction) (i) all indebtedness of Borrower for borrowed money or for
the deferred purchase price of property or services, (ii) all indebtedness of
Borrower evidenced by a note, bond, debenture or similar instrument, (iii) the
face amount of all letters of credit issued for the account of Borrower and,
without duplication, all
<PAGE>
22
unreimbursed amounts drawn thereunder, (iv) all indebtedness of Borrower secured
by a Lien on any property owned by Borrower whether or not such indebtedness has
been assumed, (v) all Contingent Obligations of Borrower, and (vi) all payment
obligations of Borrower under any interest rate protection agreement (including,
without limitation, any interest rate swaps, caps, floors, collars or similar
agreements) and similar agreements (except the Rate Cap Agreement).
"Payment Date" has the meaning specified in Section 2.5.
"PBGC" means the Pension Benefit Guaranty Corporation established under
ERISA, or any successor thereto.
"Permits" means all licenses, permits and certificates used in connection
with the ownership, operation, use or occupancy of the Mortgaged Property,
including, without limitation, business licenses, 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 Authority or private Person concerning ownership, operation, use or
occupancy of the Mortgaged Property.
"Permitted Encumbrances" means, with respect to an Individual Property,
collectively, (i) the Lien created by the Related Mortgage or the other Loan
Documents of record, (ii) all Liens and other matters disclosed in the Title
Insurance Policy concerning such Individual Property or any part thereof, (iii)
Liens, if any, for Impositions imposed by any Governmental Authority not yet due
or delinquent or being contested in good faith and by appropriate proceedings in
accordance with Section 2.06(b) of the Mortgages, (iv) any mechanics' and
materialmen's Liens deleted from the exceptions to, or affirmatively insured
against collection with respect to, the Individual Property under the applicable
Title Insurance Policy, (v) without limiting the foregoing, any and all
governmental, public utility and private restrictions, covenants, reservations,
easements, licenses or other agreements of an inconsequential nature which may
hereafter be granted by Borrower and which do not affect (x) the marketability
of title to the Individual Property, (y) the fair market value thereof, or (z)
the use thereof as of the Original Closing Date (or, with respect to the
Additional Individual Properties, as of the Closing Date), (vi) deposits or
pledges to secure obligations under worker's compensation, social security or
similar laws, or under unemployment insurance, made in the ordinary course of
Borrower's business, (vii) rights of existing and future tenants and residents
as tenants and residents, as the case may be, only pursuant to Leases and (viii)
Liens permitted pursuant to Section 6.1(C).
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23
"Permitted Investments" means any one or more of the following obligations
or securities acquired at a purchase price of not greater than par, including
those issued by Lender, Servicer, Trustee or any of their respective Affiliates:
(i) direct obligations of, or obligations fully guaranteed as to
payment of principal and interest by, (x) the United States or any agency
or instrumentality thereof provided such obligations are backed by the full
faith and credit of the United States of America, or (y) FHLMC, FNMA, the
Federal Farm Credit System or the Federal Home Loan Banks provided such
obligations at the time of purchase or contractual commitment for purchase
are qualified by the Rating Agencies as a Permitted Investment hereunder as
evidenced in writing;
(ii) fully FDIC-insured demand and time deposits in or certificates of
deposit of, or bankers' acceptances issued by, any bank or trust company,
savings and loan association or savings bank;
(iii) repurchase obligations with respect to any security described in
clause (i) above entered into with a depository institution or trust
company (acting as principal) described in clause (ii) above;
(iv) general obligations of or obligations guaranteed by any State of
the United States or the District of Columbia receiving the highest long-
term unsecured debt rating available for such securities by the Rating
Agencies, or such lower rating as will not result in the downgrading or
withdrawal of the rating then assigned to the Certificates by any Rating
Agency as evidenced in writing;
(v) securities bearing interest or sold at a discount that are issued
by any corporation incorporated under the laws of the United States of
America or any State thereof or the District of Columbia and rated by the
Rating Agencies in their highest long-term unsecured rating categories at
the time of such investment or contractual commitment providing for such
investment; provided, however, that securities issued by any such
corporation will not be Permitted Investments to the extent that investment
therein will cause the then outstanding principal amount of securities
issued by such corporation and held as part of the Cash Collateral Account
to exceed 20% of the aggregate principal amount of all Permitted
Investments held in the Cash Collateral Account;
(vi) commercial or finance company paper (including both non-interest-
bearing discount obligations and
<PAGE>
24
interest-bearing obligations payable on demand or on a specified date not
more than one year after the date of issuance thereof) that is rated by the
Rating Agencies in their highest short-term unsecured debt rating available
at the time of such investment or contractual commitment providing for such
investment, and is issued by a corporation the outstanding senior long-term
debt obligations of which are then rated by the Rating Agencies in their
highest rating available in their long-term unsecured debt ratings, or such
lower rating as will not result in the downgrading or withdrawal of the
rating then assigned to the Certificates by any Rating Agency as evidenced
in writing;
(vii) guaranteed reinvestment agreements acceptable to the Rating
Agencies issued by any bank, insurance company or other corporation rated
in the highest long-term unsecured rating levels available to such issuers
by the Rating Agencies throughout the duration of such agreements, or such
lower rating as will not result in the downgrading or withdrawal of the
rating then assigned to the Certificates by any Rating Agency as evidenced
in writing;
(viii) units of taxable money market funds, which funds are regulated
investment companies, seek to maintain a constant net asset value per share
and invest solely in obligations backed by the full faith and credit of the
United States, which funds have been designated in writing by the Rating
Agencies as Permitted Investments with respect to this definition; and
(ix) if previously confirmed in writing to Trustee, any other demand,
money market or time deposit, or any other obligation, security or
investment, that may be acceptable to the Rating Agencies as a permitted
investment of funds backing securities having ratings equivalent to their
initial rating of the Certificates;
provided, however, that no instrument or security shall be a Permitted
Investment if (x) such instrument or security evidences a right to receive only
interest payments or (y) the right to receive principal and interest payments
derived from the underlying investment provide a yield to maturity in excess of
120% of the yield to maturity at par of such underlying investment.
"Person" means any individual, corporation, partnership, joint venture,
estate, trust, unincorporated association, any federal, state, county or
municipal government or any bureau, department or agency thereof and any
fiduciary acting in such capacity on behalf of any of the foregoing.
<PAGE>
25
"Plan" means an employee benefit or other plan established or maintained by
Borrower or any ERISA Affiliate and that is covered by Title IV of ERISA, other
than a Multiemployer Plan.
"Pooling and Servicing Agreement" means that certain Pooling and Servicing
Agreement to be entered into by and among Lender, as depositor, Servicer, as
servicer, and Trustee, as trustee, on the Securitization Closing Date.
"Pricing Spread" means 4.30%.
"Principal Indebtedness" means the Loan Amount, initially, as adjusted by
each increase or decrease in the principal amount of the Loan outstanding,
whether as a result of prepayment or otherwise.
"Proceeds" means all proceeds (including Insurance Proceeds and
Condemnation Proceeds), rents and profits from the Collateral, including,
without limitation, those from the sale, exchange, transfer, collection, loss,
damage, disposition, substitution or replacement of any of the Collateral.
"Proceeds Deficiency" has the meaning provided in the definition of
"Allocated Loan Amount".
"Rate Cap Agreement" means that certain Interest Rate and Currency Exchange
Agreement, dated as of the Original Closing Date, between Credit Suisse
Financial Products and Borrower, as supplemented by a related confirmation
between such parties, more particularly described in Section 3.1(A) of the
Original Loan Agreement, and any similar interest rate cap agreement
subsequently entered into by Borrower with respect to the Loan in accordance
with the terms hereof.
"Rating Agencies" means at least two of Fitch Investors Service, Inc.,
Moody's Investors Service, Inc., Duff & Phelps Credit Rating Co. and Standard &
Poor's Corporation, or any successor thereto, and any other nationally
recognized financial rating agency which may hereafter be engaged by Lender, or
its designees, to rate the Certificates.
"Recourse Distributions" has the meaning provided in Section 8.14.
"Reference Banks" means banks each of which shall (i) be a leading bank
engaged in transactions in Eurodollar deposits in the international Eurocurrency
market, (ii) have an established place of business in London and (iii) be
included within the Reuters Monitor Money Rates Service. Initially, the
Reference Banks shall be Bank of Tokyo, Ltd., Barclays Bank, Plc,
<PAGE>
26
National Westminster Bank, Plc and Bankers Trust Company. If any such Reference
Bank should be unwilling or unable to act as such or if Lender shall terminate
the appointment of any such Reference Bank or if any of the Reference Banks
should be removed from the Reuters Monitor Money Rates Service or in any other
way fail to meet the qualifications of a Reference Bank, Lender may designate
alternative Reference Banks meeting the criteria specified above.
"Refinancing" has the meaning provided in Section 2.16.
"Refinancing Date" means February 1, 1996 or a Payment Date prior to
February 1, 1996 on which the Refinancing occurs.
"Refinancing Escrow Closing Date" has the meaning provided in Section 2.16.
"Refinancing Notice" has the meaning provided in Section 2.16.
"Reimbursement Contracts" means all third party reimbursement contracts
with respect to the Facilities which are now or hereafter in effect with respect
to patients qualifying for coverage under the same, including Medicare and
Medicaid, and any successor program or other similar reimbursement programs and
private insurance agreements.
"Related Mortgage" means, with respect to a particular Individual Property,
the Mortgages encumbering such Individual Property.
"Release" means any release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the indoor
or outdoor environment, including, without limitation, the movement of Hazardous
Substances through ambient air, soil, surface water, ground water, wetlands,
land or subsurface strata.
"Release Price" has the meaning provided in Section 2.7(a).
"Remedial Work" has the meaning provided in Section 5.1(D)(i).
"REMIC" means "real estate mortgage investment conduit" for federal income
tax purposes.
"REMIC Trust" means the trust fund created pursuant to the Pooling and
Servicing Agreement or that portion thereof for which a REMIC election is made
under the Code.
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27
"Rents" means all rent and other payments of whatever nature from time to
time payable pursuant to any Lease (including, without limitation, rights to
payment earned under Leases for space in the Improvements for the operation of
ongoing retail businesses such as news stands, barber shops, beauty shops,
physicians' offices, pharmacies and specialty shops).
"Required Debt Service Payment" has the meaning provided in Section
2.12(f).
"Reserve Interest Rate" means the rate per annum which Lender determines to
be either (i) the arithmetic mean (rounded upwards if necessary to the nearest
whole multiple of 1/32%) of the one-month United States dollar lending rates
that leading New York City banks engaged in transactions in Eurodollar deposits
in the international Eurocurrency market selected by Lender are quoting, on the
relevant Interest Determination Date, to the principal London offices of at
least two of the Reference Banks to which such quotations are, in the opinion of
Lender, being so made, or (ii) in the event that Lender can determine no such
arithmetic mean, the lowest one-month United States dollar lending rate which
leading New York City banks engaged in transactions in Eurodollar deposits in
the international Eurocurrency market selected by Lender are quoting, on such
Interest Determination Date to leading European banks engaged in transactions in
Eurodollar deposits in the international Eurocurrency market.
"Securitization" has the meaning provided in Section 2.15.
"Securitization Closing Date" means the date on which the Pooling and
Servicing Agreement is executed and delivered and the Securitization is
effected.
"Security Deposit Accounts" has the meaning provided in Section 2.12(a).
"Servicer" means Bankers Trust Company, any Person appointed as servicer
under the Pooling and Servicing Agreement or such Person's successor in
interest.
"Single-Purpose Entity" means a Person, other than an individual, which (i)
is formed or organized solely for the purpose of holding, directly or
indirectly, an ownership interest in the Mortgaged Property, (ii) does not
engage in any business unrelated to the Mortgaged Property, (iii) does not have
any assets other than those related to its interest in the Mortgaged Property or
any indebtedness other than as permitted by this Agreement, the Mortgages or the
other Loan Documents, (iv) has its own separate books and records and has its
own accounts
<PAGE>
28
(other than the Collection Accounts and the Cash Collateral Account), in each
case which are separate and apart from the books and records and accounts
(except as set forth above) of any other Person, (v) if a corporation, at all
times has an Independent director (mutually acceptable to Borrower and Lender;
the present Independent director being acceptable to Borrower and Lender) who
has agreed to vote against any action described in Article FOURTH, paragraph (b)
of Borrower's certificate of incorporation and (vi) holds itself out as being a
Person separate and apart from any other Person.
"Stock Pledge and Security Agreements" means those certain first priority
Amended and Restated Stock Pledge and Security Agreements, in the form attached
hereto as Exhibit L, dated as of the Closing Date, made by FGI and FKI,
respectively, each as pledgor, in favor of Lender, as pledgee, with respect to
collateral security for the Loan.
"Sub-Account" has the meaning provided in Section 2.12(c).
"Survey" means a certified title survey of an Individual Property prepared
by a registered Independent surveyor satisfactory to Lender and the company
issuing the Title Insurance Policy for that Individual Property.
"Taking" means a taking or voluntary conveyance during the term hereof of
all or part of a Facility, or any interest therein or right accruing thereto or
use thereof, as the result of, or in settlement of, any condemnation or other
eminent domain proceeding by any Governmental Authority affecting a Facility or
any portion thereof whether or not the same shall have actually been commenced.
"Title Insurance Policies" means the loan policy of title insurance issued
by Stewart Title Guaranty Company with respect to each Individual Property and
insuring the first priority lien in favor of Lender created by the Related
Mortgage, subject only to the Permitted Encumbrances for that Individual
Property and containing such endorsements and affirmative assurances as Lender
shall reasonably require.
"Transaction Costs" means all costs and expenses paid or payable by
Borrower relating to the Transactions, including, without limitation, appraisal
fees, legal fees and accounting fees and the costs and expenses described in
Section 8.24.
"Transactions" means each of the transactions contemplated by the Loan
Documents, excluding, prior to delivery of the Refinancing Notice, the
Refinancing.
<PAGE>
29
"Transfer" means any transfer, sale, assignment or conveyance of a
Facility.
"Trustee" means any Person appointed as trustee under the Pooling and
Servicing Agreement or its successor in interest.
"UCC Searches" has the meaning specified in Section 3.1(F).
"Use" means, with respect to any Hazardous Substance, the generation,
manufacture, processing, distribution, handling, use, treatment, recycling or
storage of such Hazardous Substance or transportation to or from the property of
such Person of such Hazardous Substance.
"Wingate" has the meaning provided in the Recitals hereto.
"Wingate Loan" has the meaning provided in the Recitals hereto.
"Wingate Loan Agreement" has the meaning provided in the Recitals hereto.
"Wingate Loan Amount" has the meaning provided in the Recitals hereto.
"Wingate Note" has the meaning provided in the Recitals hereto.
"Yield Maintenance Premium" means, with respect to any prepayment pursuant
to Section 2.6 or Section 2.7(a), an amount calculated by discounting monthly to
net present value the product of (i) 8.3333% and (ii) the product of (x) .005
and (y) the amount prepaid, for the period from the month in which the
prepayment date occurs to February 1, 2000, using a discount rate equal to LIBOR
as of the prepayment date plus the Pricing Spread less .50%.
ARTICLE II
GENERAL TERMS
-------------
Section 2.1. Intentionally deleted.
Section 2.2. Intentionally deleted.
Section 2.3. Security for the Loan. The Note and Borrower's obligations
hereunder and under the other Loan Documents shall be secured by (a) the
Mortgages, (b) the Assignments of Leases, (c) the Stock Pledge and Security
Agreements, (d) the Assignment of Rate Cap Agreement and (e) the security
interest and Liens granted in this Agreement and in the other Loan Documents.
<PAGE>
30
Section 2.4. Borrower's Note. (a) Borrower's obligation to pay the
principal of and interest on the Loan and the Yield Maintenance Premium, if any,
shall be evidenced by the Note, duly executed and delivered by Borrower. The
Note shall be payable as to principal, interest and Yield Maintenance Premium,
if any, as specified in this Agreement, with a final maturity on the Maturity
Date.
(b) Lender is hereby authorized, at its option, (i) to endorse on a
schedule attached to the Note (or on a continuation of such schedule attached to
the Note and made a part thereof) an appropriate notation evidencing each
Allocated Loan Amount evidenced thereby and the date and amount of each payment
of principal, interest and Yield Maintenance Premium, if any, in respect
thereof, and/or (ii) to record the Allocated Loan Amounts and such payments in
its books and records. Such schedule and/or such books and records, as the case
may be, shall, absent manifest error, constitute prima facie evidence of the
accuracy of the information contained therein.
Section 2.5. Principal and Interest. (a) The principal of and interest
on the Loan shall be payable in 84 monthly installments, which installments will
be recalculated monthly on each Interest Determination Date (calculated to
amortize fully the Loan over the remaining term to the Amortization Date on the
basis of equal monthly combined installments of principal and interest (assuming
a constant rate of interest through the Amortization Date equal to the interest
rate determined as of such Interest Determination Date)). Principal and
interest on the Loan shall be payable in arrears on March 1, 1994, and on the
first day of each and every month thereafter, unless, in any such case, such day
is not a Business Day, in which event such principal and interest shall be
payable on the first Business Day following such date (such date for any
particular month, the "Payment Date"), with the entire outstanding principal
balance of the Loan, together with all accrued but unpaid interest thereon, due
and payable to Lender on the Maturity Date. Interest shall be computed on the
basis of a 360 day year with 12 30-day months. Interest shall accrue on the
outstanding principal balance of the Loan commencing upon February 1, 1994.
The Loan will, for the Interest Accrual Period beginning on February 1, 1994,
bear interest at a rate of 7.425% per annum. Thereafter, the Loan will bear
interest at a rate per annum during each Interest Accrual Period which shall be
equal to LIBOR determined as of the Interest Determination Date immediately
preceding such Interest Accrual Period plus the Pricing Spread.
(b) If Borrower fails to make (i) the payment due on the Maturity Date or
(ii) any other payment of principal of or interest on the Loan within five
Business Days of such payment
<PAGE>
31
becoming due, the unpaid amount will bear interest at the Default Rate from the
date due until paid. Borrower will be deemed to have made a monthly payment of
principal and interest if the funds necessary to make such payment are in the
Debt Service Payment Sub-Account on the Payment Date.
Section 2.6. Voluntary Prepayment. (a) After February 1, 1997, Borrower
may voluntarily prepay the Loan in whole or, unless an Event of Default shall
have occurred and be continuing, in part; provided, however, that, in the case
of any voluntary prepayment prior to February 1, 2000 such prepayment must be
accompanied by an amount representing a prepayment premium equal to the Yield
Maintenance Premium. The Loan may be prepaid prior to February 1, 1997 only (i)
in connection with the Refinancing, in which case an amount equal to the
Indebtedness (including interest calculated as provided in Section 2.6(c)) will
be paid to Lender on the Refinancing Date, or (ii) as otherwise specifically
described in Section 2.7.
(b) In the event of any such voluntary prepayment, Borrower shall give
Lender written notice (or telephonic notice promptly confirmed in writing) of
its intent to prepay, which notice shall be given at least five Business Days
prior to the date upon which prepayment is to be made and shall specify the date
and the amount of such prepayment. If any such notice is given, the amount
specified in such notice shall be due and payable on the date specified therein
(unless such notice is revoked by Borrower prior to the date specified therein
in which event Borrower shall immediately reimburse Lender for any costs
incurred in connection with the giving of such notice and its revocation).
(c) Any voluntary prepayment of the Loan in whole or mandatory prepayment
of a portion of the Loan pursuant to Section 2.7(a) which is made on a day from
the first to and including the fourteenth day of a month is required to include
interest accrued to the date of prepayment. Any voluntary prepayment of the
Loan in whole or mandatory prepayment of a portion of the Loan pursuant to
Section 2.7(a) which is made on a day from the fifteenth to and including the
last day of a month is required to include a full month's interest. Any
voluntary prepayment of the Loan in part is required to be made on a Payment
Date.
Section 2.7. Mandatory Prepayment. (a) Borrower may Transfer any
Individual Property at any time after February 1, 1997; provided, however, that
(i) Borrower shall have given Lender at least 30 days' prior written notice of
the Transfer, (ii) the Debt Service Coverage Ratio of the remaining Facilities
(considered on an aggregate basis) would not be less than 115% of the Debt
Service Coverage Ratio of such Facilities (considered on an aggregate basis)
calculated as of the Closing Date
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32
(iii) the Debt Service Coverage Ratio of the remaining Facilities (considered on
an aggregate basis) would not be less than 1.4, (iv) Lender shall have received
an Officer's Certificate certifying that the Principal Indebtedness, after
application of the Release Price, will not, on the date the Release Price is
paid, exceed 125% of the lesser of (x) the Appraised Value of the remaining
Facilities as of the Closing Date if the Loan has not been "significantly
modified" so as to result in a taxable exchange under Section 1001 of the Code
and, if so "significantly modified" prior to the Securitization Closing Date,
the Appraised Value of the remaining Facilities as of the date of such
"significant modification" and (y) the Appraised Value of the remaining
Facilities as of the Securitization Closing Date, (v) no Default or Event of
Default shall have occurred and be continuing, (vi) Lender shall have received
from Borrower financial statements, calculations and other backup information
with respect to the matters referred to in clauses (ii), (iii) and (iv) above,
all in form and substance reasonably satisfactory to Lender and accompanied by
an Officer's Certificate stating that such statements, calculations and
information are true, correct and complete in all material respects, and (vii)
upon the date of the consummation of any such Transfer, Borrower shall pay to
Lender (unless such notice is revoked by Borrower prior to the date specified
therein in which event Borrower shall immediately reimburse Lender for any
reasonable costs incurred in connection with the giving of such notice and its
revocation):
(w) interest accrued on the portion of the Loan being prepaid
(calculated as provided in Section 2.6(c));
(x) in the case of any prepayment prior to February 1, 2000, an
amount representing a prepayment premium equal to the Yield Maintenance
Premium;
(y) an amount equal to 125% of the Allocated Loan Amount for such
Individual Property (the "Release Price"); and
(z) all other amounts due under the Related Mortgage.
(b) If Borrower is required by Lender under the provisions of a Mortgage
to prepay the Loan or any portion thereof in the event of damage, destruction or
a Taking of a Facility, Servicer shall prepay a portion of the Loan (such
prepayment to be applied to the Allocated Loan Amount for such Facility) such
that the principal amount prepaid together with accrued interest thereon to the
date of prepayment exhausts the Insurance Proceeds or the Condemnation Proceeds
available for
<PAGE>
33
such prepayment by advancing the Loss Proceeds from the Custodial Account. No
Yield Maintenance Premium shall be applicable in the event of any prepayment
pursuant to this Section 2.7(b).
(c) If the Debt Service Coverage Ratio of the Facilities calculated as of
the end of any calendar quarter for the previous 12-month period based on the
Principal Indebtedness then outstanding (such calculation to be provided within
30 days after the end of each calendar quarter) (i) is less than 1.3, then on
each Payment Date after such calculation 50% of Excess Cash Flow for the prior
month shall be paid by Borrower to Lender (or by Lender to the extent such funds
are on deposit in the Cash Collateral Account) and applied to prepay the Loan
until the Debt Service Coverage Ratio as of the end of a calendar quarter for
the previous 12-month period based on the Principal Indebtedness then
outstanding increases to 1.3 or more, or (ii) is less than 1.2, then on each
Payment Date after such calculation 100% of Excess Cash Flow for the prior month
shall be paid by Borrower to Lender (or by Lender to the extent such funds are
on deposit in the Cash Collateral Account) and applied to prepay the Loan until
the Debt Service Coverage Ratio as of the end of a calendar quarter for the
previous 12-month period based on the Principal Indebtedness then outstanding
increases to 1.2 or more. No Yield Maintenance Premium shall be applicable in
the event of any prepayment pursuant to this Section 2.7(c).
(d) If Borrower fails to make any payment of principal of or interest on
the Loan when due (excluding the payment due on the Maturity Date), Borrower
shall, on each Payment Date thereafter until such amount has been paid, prepay
the Loan in an aggregate amount equal to the Excess Cash Flow for the prior
month. No Yield Maintenance Payment shall be applicable to prepayments pursuant
to this Section 2.7(d).
(e) Upon prepayment of the Loan in full, Borrower shall pay to Lender, in
addition to the amounts specified in Section 2.6 or this Section 2.7, as
applicable, any other amounts then due and payable to Lender pursuant to the
Loan Documents. All prepayments made pursuant to Section 2.6 or this Section
2.7 shall be applied in accordance with the provisions of Section 2.8.
Section 2.8. Application of Payments. All proceeds (including any Net
Proceeds) of any repayment, including prepayments, of the Loan shall be applied
to pay: first, any reasonable out-of-pocket costs and expenses of Lender
arising as a result of such repayment; second, any accrued and unpaid interest
then payable with respect to the Loan or the portion thereof being repaid;
third, the Yield Maintenance Premium, if any, on the Loan or the portion thereof
being repaid; and fourth,
<PAGE>
34
the outstanding principal amount of the Loan or the portion thereof being
repaid.
Section 2.9. Method and Place of Payment. (a) Except as otherwise
specifically provided herein, all payments and prepayments under this Agreement
and the Note shall be made to Lender not later than 12:00 noon, New York City
time, on the date when due and shall be made in lawful money of the United
States of America in federal or other immediately available funds to an account
specified to Borrower by Lender in writing, and any funds received by Lender
after such time shall, for all purposes hereof, be deemed to have been paid on
the next succeeding Business Day.
(b) All payments made by Borrower hereunder, or by Borrower under the
other Loan Documents, shall be made irrespective of, and without any deduction
for, any set-off or counterclaims.
Section 2.10. Taxes. All payments made by Borrower under this Agreement
shall be made free and clear of, and without deduction or withholding for or on
account of, any present or future income, stamp or other taxes, levies, imposts,
duties, charges, fees, deductions or withholdings, now or hereafter imposed,
levied, collected, withheld or assessed by any Governmental Authority (other
than taxes imposed on the income of Lender).
Section 2.11. Release of Collateral. (a) Notwith-standing any other
provision of this Agreement or any other Loan Document, upon a prepayment with
respect to any Individual Property as described in Section 2.7(a), Section
2.12(i) or Section 2.03(d) of the Mortgages, Lender shall, simultaneously with
such payment, release the Lien of the Related Mortgage and the Assignment of
Leases and UCC-1 financing statements and any other Liens in favor of Lender
relating to such Individual Property and shall release to Borrower any portion
of the Sub-Accounts relating to such Individual Property.
(b) If Lender (i) receives Loss Proceeds with respect to any Facility (x)
in the event of a Taking or casualty affecting 100% of such Facility or (y) in
an amount equal to or exceeding the sum of the Allocated Loan Amount for such
Facility and accrued and unpaid interest thereon and (ii) applies such Loss
Proceeds to reduce the Indebtedness in accordance with Section 2.7(b), Lender
shall simultaneously with such application release the Lien of the Related
Mortgage and Assignment of Leases and UCC-1 financing statements and any other
Liens in favor of Lender relating to such Individual Property.
<PAGE>
35
(c) Upon repayment of the Loan and all other amounts due hereunder and
under the Loan Documents in full in accordance with the terms hereof and
thereof, Lender shall, as promptly as possible after such payment, release its
Liens with respect to all Collateral, provided, however, that Lender shall have
no obligation to release any Lien with respect to Collateral prior to February
1, 1997 except as provided in Section 2.11(b), Section 2.12(i), Section 6.1(B)
or Section 2.03(d) of the Mortgages or on the Refinancing Date upon payment as
provided in Section 2.6(a).
Section 2.12. Central Cash Management. (a) Collection and Security
Deposit Accounts. Borrower hereby acknowledges and agrees that all of the Rents
(other than security deposits from tenants) and Money received from Accounts
derived from the Facilities shall be utilized first (i) to pay all amounts to
become due and payable under the Note by funding the Debt Service Payment Sub-
Account to the extent required pursuant to Section 2.12(g)(i), (ii) to fund the
Basic Carrying Costs Sub-Account to the extent required pursuant to Section
2.12(g)(ii), (iii) to fund the Capital Reserve Sub-Account to the extent
required pursuant to Section 2.12(g)(iii), and (iv) to pay all Operating
Expenses. For each Facility, Borrower shall open and maintain at the specified
Collection Account Bank a demand deposit account (a "Collection Account") and a
second demand deposit account that is fully segregated and distinct from the
Collection Account (a "Security Deposit Account"). Each Collection Account and
each Security Deposit Account shall be assigned a separate and unique
identification number by the Collection Account Banks and shall be opened and
maintained in the name "FGI Financing I Corporation as Debtor and Bankers Trust
Company (as custodian) as Secured Party pursuant to the Amended and Restated
Loan Agreement dated as of February 1, 1994". All payments constituting Rent
(other than security deposits from tenants) or made with respect to Accounts
shall be payable to Manager. Manager shall collect all such Rents and Money
received from Accounts and shall endorse all checks and deposit all such funds,
within one Business Day after receipt thereof, directly into the Collection
Account for the Facility. All security deposits shall be payable to Manager.
Manager shall collect all security deposits with respect to a Facility and shall
endorse all checks and deposit all such funds within one Business Day after
receipt thereof, directly into the Security Deposit Account for the Facility.
Borrower may designate a new financial institution to serve as a Collection
Account Bank hereunder as provided in Section 2.13(1). Each Collection Account
shall at all times be an Eligible Account. Borrower shall have no right of
withdrawal from the Collection Accounts or the Security Deposit Accounts except
(i) as provided in the Letters of Instructions delivered to the Collection
Account Banks (the "Letter of Instructions") in substantially the form attached
hereto as Exhibit M and (ii) that, prior to a
<PAGE>
36
Collection Account Bank's receipt of notice of the occurrence of an Event of
Default from Custodian (given at the request of Lender or Servicer), Borrower
may withdraw funds from the applicable Security Deposit Account to refund or
apply security deposits as required by the Leases or by applicable Legal
Requirements, and, after delivery of such notice, Lender, on written request
from Borrower with appropriate supporting materials, will direct the Collection
Account Banks to release funds from the Security Deposit Accounts to refund
security deposits as required by the Leases or by applicable Legal Requirements.
(b) Cash Collateral Account. Pursuant to the Letters of Instructions,
Borrower has authorized and directed the Collection Account Banks to transfer
all funds in excess of $5,000 deposited in the Collection Accounts for the
Facilities to account no. 11515 at the 4 Albany Street, New York, New York
branch of the Bank entitled "Bankers Trust Company (as custodian) as Secured
Party pursuant to an Amended and Restated Loan Agreement dated as of February 1,
1994 among FGI Financing I Corporation, Nomura Asset Capital Corporation and
Bankers Trust Company" (the "Cash Collateral Account") until the Collection
Account Bank has received a notice that sufficient funds have been deposited in
the Cash Collateral Account for the current month. Lender may elect to change
the financial institution at which the Cash Collateral Account shall be
maintained; provided, however, that Lender shall give Borrower and each
Collection Account Bank not fewer than ten Business Days' prior notice of each
change and the financial institution to which the Cash Collateral Account may be
transferred shall be subject to Borrower's reasonable approval. The Cash
Collateral Account shall at all times be an Eligible Account. Borrower
acknowledges that, pursuant to the terms of the Assignment of Rate Cap
Agreement, any payments made pursuant to the terms of the Rate Cap Agreement
shall be deposited directly into the Cash Collateral Account and allocated or
disbursed in the same manner as Rent deposited into the Cash Collateral Account.
Borrower has established the Cash Collateral Account in the name of Custodian,
and the Cash Collateral Account shall be under the sole dominion and control of
Custodian. Borrower shall have no right of withdrawal in respect of the Cash
Collateral Account.
(c) Establishment of Sub-Accounts. The Cash Collateral Account shall
contain the Debt Service Payment Sub-Account, the Basic Carrying Costs Sub-
Account and the Capital Reserve Sub-Account, each of which accounts
(individually, a "Sub-Account" and collectively, the "Sub-Accounts") shall be an
Eligible Account to which certain funds shall be allocated and from which
disbursements shall be made pursuant to the terms of this Agreement.
<PAGE>
37
(d) Permitted Investments. Upon the request of Borrower, Lender shall
direct the Bank to invest and reinvest any balance in the Cash Collateral
Account from time to time in Permitted Investments as instructed by Borrower;
provided, however, that (i) if Borrower fails to so instruct Lender, or upon the
occurrence of an Event of Default, Lender may direct the Bank to invest and
reinvest such balance in Permitted Investments as Lender shall determine in its
sole discretion, (ii) the maturities of the Permitted Investments on deposit in
the Cash Collateral Account shall, to the extent such dates are ascertainable,
be selected and coordinated to become due not later than the day before any
disbursements from the applicable Sub-Accounts must be made, (iii) all such
Permitted Investments shall be held in the name and be under the sole dominion
and control of Lender, and (iv) no Permitted Investment shall be made unless
Lender shall retain a perfected first priority Lien in such Permitted Investment
securing the Indebtedness and all filings and other actions necessary to ensure
the validity, perfection, and priority of such Lien have been taken. It is the
intention of the parties hereto that the entire amount deposited in the Cash
Collateral Account (or as much thereof as Lender may reasonably arrange to
invest) shall at all times be invested in Permitted Investments, and that the
Cash Collateral Account shall be a so-called "zero balance" account. All funds
in the Cash Collateral Account that are invested in a Permitted Investment are
deemed to be held in the Cash Collateral Account for all purposes of this
Agreement and the other Loan Documents. Lender shall have no liability for any
loss in investments of funds in the Cash Collateral Account that are invested in
Permitted Investments (unless invested contrary to Borrower's request prior to
an Event of Default) and no such loss shall affect Borrower's obligation to
fund, or liability for funding, the Cash Collateral Account and each Sub-
Account, as the case may be. Borrower agrees that Borrower shall include all
such earnings on the Cash Collateral Account as income of Borrower for federal
and applicable state tax purposes.
(e) Interest on Accounts. All interest paid or other earnings on the
Permitted Investments made hereunder shall be deposited into the Cash Collateral
Account and shall be subject to allocation and distribution like any other
monies deposited therein.
(f) Payment of Debt Service, Basic Carrying Costs and Capital Improvement
Costs. On or before the third Business Day of each month during the term of the
Loan, Lender shall notify Borrower of the Debt Service (the "Required Debt
Service Payment") that will be payable to Lender on the Payment Date in the next
calendar month. Not later than three Business Days before each Payment Date
during the term of the Loan, Lender shall deliver to Borrower a certificate in
the form attached
<PAGE>
38
hereto as Exhibit N, setting forth (i) the Required Debt Service Payment for
such Payment Date and (ii) whether sufficient funds exist in the Cash Collateral
Account to fund the Debt Service Payment Sub-Account, the Basic Carrying Costs
Sub-Account and the Capital Reserve Sub-Account in the required amounts. If any
such certificate states that the funds then allocated to the Sub-Accounts are
less than the amount of funds which are required to be on deposit therein on
such Payment Date, Borrower shall be obligated to deposit funds (in addition to
Rents and Money received from Accounts) into the Cash Collateral Account in the
amount of such deficiency, and failure to make such deposit shall be an Event of
Default hereunder.
(i) Payment of Debt Service. At or before 12:00 noon, New York City
time, on each Payment Date during the term of the Loan, Lender shall
transfer from the Debt Service Payment Sub-Account an amount equal to the
Required Debt Service Payment for such Payment Date (x) if on or prior to
the Securitization Closing Date, to itself, and (y) if after the
Securitization Closing Date, to the account of Servicer established under
the Pooling and Servicing Agreement, or such other account designated by
Servicer in accordance with the Pooling and Servicing Agreement (either of
such accounts, the "Custodial Account"). Borrower shall be deemed to have
timely made the Required Debt Service Payment pursuant to Section 2.9
regardless of the time Lender makes such transfer as long as sufficient
funds are then on deposit in the Debt Service Payment Sub-Account.
(ii) Payment of Basic Carrying Costs. If amounts are then allocated
to the Basic Carrying Cost Sub-Account, at least five Business Days prior
to the due date of any Basic Carrying Cost and not more frequently than
once each month, Borrower shall notify Lender in writing and request that
Lender pay such Basic Carrying Cost on behalf of Borrower on or prior to
the due date thereof. Together with each such request, Borrower shall
furnish Lender with copies of bills and other documentation as may be
reasonably required by Lender to establish that such Basic Carrying Cost is
then due. Lender shall make such payments out of the Basic Carrying Cost
Sub-Account before same shall be delinquent to the extent that there are
funds available in the Basic Carrying Cost Sub-Account and Lender has
received appropriate documentation to establish the amount(s) due and the
due date(s).
(iii) Payment of Capital Improvement Costs. Not more frequently than
once each month and provided that no Event of Default has occurred and is
continuing, upon Borrower's written request Lender shall transfer funds to
Borrower then allocated to the Capital Reserve Sub-Account for payment of
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39
Capital Improvement Costs. Together with each such request, Borrower shall
furnish Lender with copies of bills and other documentation as may be
reasonably required by Lender to establish that such Capital Improvement
Costs are then due.
(g) Monthly Funding of Sub-Accounts. During each month in the term of the
Loan commencing with February 1994 (each, the "Current Month"), until the notice
described in the Letters of Instructions has been received, all funds then in
the Collection Accounts in excess of $5,000 shall be transferred to the Cash
Collateral Account pursuant to the Letter of Instructions referred to in Section
2.12(b), and Lender shall allocate all funds then on deposit in the Cash
Collateral Account among the Sub-Accounts as follows and in the following
priority:
(i) first, to the Debt Service Payment Sub-Account, until an amount
equal to the Required Debt Service Payment for the Payment Date occurring
in the month following the Current Month has been allocated to the Debt
Service Payment Sub-Account;
(ii) second, if an Event of Default has occurred, to the Basic
Carrying Costs Sub-Account, until an amount equal to the Basic Carrying
Costs Monthly Installment for the Current Month has been allocated to the
Basic Carrying Costs Sub-Account; and
(iii) third, to the Capital Reserve Sub-Account, until an amount equal
to the Capital Reserve Monthly Installment for the Current Month has been
allocated to the Capital Reserve Sub-Account.
Lender or, upon the request of Lender, Custodian on Lender's behalf shall
notify Borrower and the Collection Account Banks as soon as reasonably
practicable after the minimum amounts set forth in clauses (i), (ii) and (iii)
above have been deposited in the Cash Collateral Account and allocated as
aforesaid, in a form of notice provided by Lender to Custodian in the event that
Lender has requested that Custodian give the notification referred to in this
sentence, sufficient, in the opinion of Borrower, Lender and the Collection
Account Banks, under the Letters of Instructions to terminate the sweep of the
Collection Accounts to the Cash Collateral Account described therein for the
Current Month. Provided that (i) no Event of Default has occurred and is
continuing, (ii) Lender has received all financial information described in
Section 5.1(Q) for the most recent periods for which the same are due and (iii)
no prepayments of the Loan from Excess Cash Flow are then required pursuant to
Sections 2.7(c) or (d), Lender agrees that in each Current Month any amounts
deposited into or remaining in the Cash Collateral Account after the minimum
amounts set forth in clauses
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40
(i), (ii) and (iii) above have been allocated with respect to the Current Month
and any periods prior thereto shall be disbursed to Borrower (or to Manager, as
Borrower may direct) by wire transfer (at Borrower's expense) (x) as soon as
practicable after the allocations in the stated minimum amounts have been
completed, (y) thereafter not less frequently than once per week and (z) in
addition upon specific request by Borrower. Borrower shall use any funds
distributed to Borrower (or to Manager) pursuant to the foregoing to first pay
all Operating Expenses, and all Excess Cash Flow may be retained by Borrower and
used for, or applied to, any purpose, including, without limitation, dividends
or other distributions. If an Event of Default has occurred and so long as it
is continuing, any amounts deposited into or remaining in the Cash Collateral
Account after Lender has allocated minimum amounts as hereinabove provided shall
be for the account of Lender and may be withdrawn by Lender to be applied as
provided in the Loan Documents.
If, on any Payment Date, the balance in the Debt Service Payment Sub-
Account is insufficient to make the payment of Required Debt Service Payment,
then a Default shall exist hereunder, and Lender may (but shall not be obligated
to) withdraw funds from the Basic Carrying Costs Sub-Account or the Capital
Reserve Sub-Account to pay such deficiency. In the event that Lender elects to
apply the proceeds of either such Sub-Account to pay any Required Debt Service
Payment, Borrower shall, upon demand, repay to Lender the amount of such
withdrawn funds to replenish such Sub-Account, and if Borrower shall fail to
repay such amounts within five days after such withdrawal, an Event of Default
shall exist hereunder, which Event of Default shall not be cured unless and
until Borrower repays such amount or all Sub-Accounts have again been fully
funded from Rents or Money received from Accounts. Lender may, at its sole
option, replenish such Sub-Account out of available Rents or Money received from
Accounts in subsequent months which Borrower would have otherwise been entitled
to receive.
(h) Loss Proceeds. In the event of a casualty or Taking with respect to a
Facility, unless pursuant to the Related Mortgage the proceeds, net of
Borrower's reasonable collection costs approved by Lender, received under any
insurance policy required to be maintained by Borrower ("Insurance Proceeds") or
the proceeds, net of Borrower's reasonable collection costs approved by Lender,
in respect of any Taking ("Condemnation Proceeds"), as the case may be, are to
be made available to Borrower for restoration, Lender and Borrower shall cause
all such Insurance Proceeds or Condemnation Proceeds (collectively, "Loss
Proceeds") to be paid directly to the Cash Collateral Account prior to the
Securitization Closing Date and to the Custodial Account after the
Securitization Closing Date, whereupon Lender or Servicer, as the case may be,
shall apply
<PAGE>
41
same to reduce the Indebtedness in accordance with Section 2.7(b). If Lender
agrees or is required pursuant to the provisions hereof or of the Mortgage to
make Loss Proceeds available for restoration, (i) all Insurance Proceeds
received in respect of business interruption coverage and (ii) any Condemnation
Proceeds received in connection with a temporary Taking shall be maintained in
the Cash Collateral Account, to be applied by Lender in the same manner as Rent
received from Manager with respect to the operation of such Facility; provided,
further, that in the event that the Insurance Proceeds of any such business
interruption insurance policy or Condemnation Proceeds of such temporary Taking
are paid in a lump sum in advance, Lender shall hold such Insurance Proceeds or
Condemnation Proceeds in a segregated interest-bearing escrow account at the
Bank, shall estimate, in Lender's reasonable discretion, the number of months
required for Borrower to restore the damage caused by the casualty to such
Facility or that such Facility will be affected by such temporary Taking, as the
case may be, shall divide the aggregate business interruption Insurance Proceeds
or Condemnation Proceeds in connection with such temporary Taking by such number
of months, and shall disburse from such escrow account into the Cash Collateral
Account each month during the performance of such restoration or pendency of
such temporary Taking such monthly installment of said Insurance Proceeds or
Condemnation Proceeds. In the event that Insurance Proceeds or Condemnation
Proceeds are to be applied toward restoration, Lender shall hold such funds in a
segregated interest-bearing escrow account at the Bank and shall disburse same
in accordance with the provisions of the Related Mortgage. If any Loss Proceeds
are received by Borrower, such Loss Proceeds shall be received in trust for
Lender, shall be segregated from other funds of Borrower, and shall be forthwith
paid to the Cash Collateral Account prior to the Securitization Closing Date and
to the Custodial Account after the Securitization Closing Date, or paid to
Lender to hold in a segregated interest-bearing escrow account, in each case to
be applied or disbursed in accordance with the foregoing, except as provided to
the contrary in Sections 2.05(e) and 2.12(c) of the Related Mortgage. Any Loss
Proceeds made available to Borrower for restoration in accordance herewith, to
the extent not used by Borrower in connection with, or to the extent they exceed
the cost of such restoration, shall be deposited into the Cash Collateral
Account prior to the Securitization Closing Date and into the Custodial Account
after the Securitization Closing Date, whereupon Lender or Servicer, as the case
may be, shall apply the same to reduce the Allocated Loan Amount applicable to
the affected Individual Property in accordance with Section 2.7(b).
(i) Payment of Basic Carrying Costs. Except to the extent that Lender is
obligated to pay Basic Carrying Costs from the Basic Carrying Costs Sub-Account
pursuant to the terms of
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42
Section 2.12(f), Borrower shall pay all Basic Carrying Costs with respect to
Borrower and each Individual Property in accordance with the provisions of the
Related Mortgage, subject, however, to Borrower's rights to contest payment of
same in accordance with the Related Mortgage. Borrower's obligation to pay (or
cause Lender to pay) Basic Carrying Costs pursuant to this Agreement shall
include, to the extent permitted by applicable law, Impositions resulting from
future changes in law which impose upon Lender or any Deed of Trust Trustee an
obligation to pay any property taxes or other Impositions or which otherwise
adversely affect Lender's or the Deed of Trust Trustee's interests. (In the
event such a change in law prohibits Borrower from assuming liability for
payment of any such Imposition, the Allocated Loan Amount and accrued and unpaid
interest thereon with respect to the affected Facility shall, at the option of
Lender, become due and payable, without payment of the Yield Maintenance
Premium, on the date that is 120 days after such change in law and failure to
pay such amounts on the date due shall be an Event of Default.) All funds
deposited in the Cash Collateral Account relating to the Basic Carrying Costs
shall be held by Lender pursuant to the provisions of this Agreement and shall
be applied in payment of the foregoing charges when and as payable, provided
that no Event of Default shall have occurred and be continuing. Should an Event
of Default occur, the proceeds on deposit in the Basic Carrying Costs Sub-
Account may be applied by Lender in payment of any Basic Carrying Costs for all
or any portion of the Mortgaged Property as Lender in its sole discretion may
determine; provided, however, that after the Securitization Closing Date Lender
shall not apply the proceeds of the Basic Carrying Costs Sub-Account as
aforesaid unless Lender receives notice from Servicer or becomes aware that
Servicer shall not be advancing such shortfall pursuant to the terms of the
Pooling and Servicing Agreement; and provided, further, that no such application
shall be deemed to have been made by operation of law or otherwise until
actually made by Lender as herein provided.
(j) The Bank's Reliance. The Bank may rely and shall be protected in
acting or refraining from acting upon any written notice, instruction or request
furnished to it hereunder and believed by it to be genuine and to have been
signed or presented by the proper party or parties. The Bank may rely on notice
from Lender as to the occurrence of an Event of Default.
Section 2.13. Security Agreement. (a) Pledge of Accounts. To secure
the full and punctual payment and performance of all of the Indebtedness,
Borrower hereby sells, assigns, conveys, pledges and transfers to Custodian
(initially on behalf of Lender and after the Securitization Closing Date on
behalf of the Certificateholders), and grants a first and continuing security
interest in and to, the following property, whether now owned or existing or
hereafter acquired or arising
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43
and regardless of where located (collectively, the "Account Collateral"):
(i) all of Borrower's right, title and interest in the Collection
Accounts and all Money, if any, from time to time deposited or held in each
Collection Account;
(ii) all of Borrower's right, title and interest in the Security
Deposit Accounts and all Money, if any, from time to time deposited or held in
each Security Deposit Account;
(iii) all of Borrower's right, title and interest in the Cash
Collateral Account and all Money and Permitted Investments, if any, from time to
time deposited or held in the Cash Collateral Account;
(iv) all interest, dividends, Money, Instruments and other property
from time to time received, receivable or otherwise payable in respect of, or in
exchange for, any of the foregoing; and
(v) to the extent not covered by clauses (i), (ii), (iii) or (iv)
above, all proceeds (as defined under the Uniform Commercial Code of the
applicable jurisdiction) of any or all of the foregoing.
(b) Covenants. Borrower covenants that (i) all Rents and Money
received from Accounts shall be deposited into the Collection Accounts; (ii)
there are no other accounts currently maintained by Borrower or Manager for the
collection of Rents or Money received from Accounts; (iii) so long as any
portion of the Indebtedness is outstanding, Borrower shall not open (nor permit
Manager to open) any other account for the collection of Rents or Money received
from Accounts, other than such replacement Collection Accounts as may be
established pursuant to Section 2.13(l) and the accounts into which funds may be
transferred by the Collection Account Banks after the sweep to the Cash
Collateral Account is terminated by Lender or Custodian in any month; (iv) all
security deposits posted by tenants shall be deposited in the Security Deposit
Accounts; (v) there are no other accounts currently maintained by Borrower or
Manager for the collection and management of such security deposits; (vi) so
long as any portion of the Indebtedness is outstanding, Borrower shall not open
(nor permit Manager to open) any other account for the collection and management
of such security deposits, other than such replacement Security Deposit Accounts
as may be established pursuant to Section 2.13(l); and (vii) Borrower has
instructed the counterparty to the Rate Cap Agreement to deposit any and all
payments thereunder into the Cash Collateral Account. The Collection Accounts
and the Security Deposit Accounts shall be subject to such applicable laws, and
such applicable
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44
regulations of the Board of Governors of the Federal Reserve System and of any
other banking authority or Governmental Authority, as may now or hereafter be in
effect, and to the rules, regulations and procedures of the Collection Account
Bank relating to demand deposit accounts from time to time in effect.
(c) Instructions and Agreements. Borrower has submitted to each
Collection Account Bank a Letter of Instructions, and each Collection Account
Bank has executed and returned the acknowledgement of instructions and notice
that is part of its Letter of Instructions. Borrower and the Bank have also
executed and delivered that certain Amended and Restated Cash Collateral Account
Agreement dated as of the date hereof (the "CC Account Agreement"), the form of
which is attached hereto as Exhibit O. Borrower agrees that prior to the
payment in full of the Indebtedness, the CC Account Agreement shall be
irrevocable by Borrower without the prior written consent of Lender. The Cash
Collateral Account shall be subject to such applicable laws, and such applicable
regulations of the Board of Governors of the Federal Reserve System and of any
other banking authority or Governmental Authority, as may now or hereafter be in
effect and the rules, regulations and procedures of the Bank relating to demand
deposit accounts from time to time in effect. All statements relating to the
Cash Collateral Account shall be issued by Custodian as provided in the CC
Account Agreement.
(d) Financing Statements; Further Assurances. Borrower has executed and
delivered to Lender for filing a financing statement or statements in connection
with the Account Collateral in the form required to properly perfect Custodian's
security interest in the Account Collateral to the extent that it may be
perfected by such a filing. Borrower agrees that at any time and from time to
time, at the expense of Borrower, Borrower shall promptly execute and deliver
all further instruments, and take all further action, that Lender may reasonably
request, in order to perfect and protect the pledge and security interest
granted or purported to be granted hereby, or to enable Custodian to exercise
and enforce Custodian's rights and remedies hereunder with respect to, any
Account Collateral.
(e) Transfers and Other Liens. Borrower agrees that it will not sell or
otherwise dispose of any of the Account Collateral other than pursuant to the
terms hereof, or create or permit to exist any Lien upon or with respect to all
or any of the Account Collateral, except for the Lien granted to Custodian under
this Agreement.
(f) Custodian's Right to Perform. If Borrower fails to perform any
covenant or obligation contained herein and such failure shall continue for a
period of five Business Days after Borrower's receipt of written notice thereof
from Custodian,
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45
Custodian may, but shall have no obligation to, itself perform, or cause
performance of, such covenant or obligation, and the reasonable expenses of
Custodian incurred in connection therewith shall be payable by Borrower to
Custodian upon demand. Notwithstanding the foregoing, Custodian shall have no
obligation to send notice to Borrower of any such failure unless directed to do
so by Lender or Servicer.
(g) Custodian's Reasonable Care. Beyond the exercise of reasonable care
in the custody thereof, Custodian shall not have any duty as to any Account
Collateral or any income thereon in its possession or control or in the
possession or control of any agents for, or of Custodian, or the preservation of
rights against any Person or otherwise with respect thereto. Custodian shall be
deemed to have exercised reasonable care in the custody of the Account
Collateral in its possession if the Account Collateral is accorded treatment
substantially equal to that which Custodian accords its own property, it being
understood that Custodian shall not be liable or responsible for (i) any loss or
damage to any of the Account Collateral, or for any diminution in value thereof
from a loss of, or delay in Custodian's acknowledging receipt of, any wire
transfer from the Collection Account Banks or (ii) any loss, damage or
diminution in value by reason of the act or omission of Custodian, or
Custodian's agents, employees or bailees, except to the extent that such loss or
damage or diminution in value results from Custodian's gross negligence or
willful misconduct or the gross negligence or willful misconduct of any such
agent, employee or bailee of Custodian.
(h) Remedies. The rights and remedies provided in this Section 2.13 are
cumulative and may be exercised independently or concurrently, and are not
exclusive of any other right or remedy provided at law or in equity. No failure
to exercise or delay by Custodian or Lender in exercising any right or remedy
hereunder or under the Loan Documents shall impair or prohibit the exercise of
any such rights or remedies in the future or be deemed to constitute a waiver or
limitation of any such right or remedy or acquiescence therein.
(i) No Waiver. Every right and remedy granted to Custodian under this
Agreement or by law may be exercised by Custodian at any time and from time to
time, and as often as Custodian may deem it expedient. Any and all of
Custodian's rights with respect to the pledge and security interest granted
hereunder shall continue unimpaired, and Borrower shall be and remain obligated
in accordance with the terms hereof, notwithstanding (i) any proceeding of
Borrower under the United States Bankruptcy Code or any bankruptcy, insolvency
or reorganization laws or statutes of any state, (ii) the release or
substitution of Account Collateral at any time, or of any rights
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46
or interests therein or (iii) any delay, extension of time, renewal, compromise
or other indulgence granted by Custodian in the event of any Default with
respect to the Account Collateral or otherwise hereunder. No delay or extension
of time by Custodian in exercising any power of sale, option or other right or
remedy hereunder, and no notice or demand which may be given to or made upon
Borrower by Custodian, shall constitute a waiver thereof, or limit, impair or
prejudice Custodian's right, without notice or demand, to take any action
against Borrower or to exercise any other power of sale, option or any other
right or remedy.
(j) Custodian Appointed Attorney-In-Fact. Borrower hereby irrevocably
constitutes and appoints Custodian as Borrower's true and lawful attorney-in-
fact, with full power of substitution, at any time after the occurrence and
during the continuation of an Event of Default, to execute, acknowledge and
deliver any instruments and to exercise and enforce every right, power, remedy,
option and privilege of Borrower with respect to the Account Collateral, and do
in the name, place and stead of Borrower, all such acts, things and deeds for
and on behalf of and in the name of Borrower with respect to the Account
Collateral, which Borrower could or might do or which Lender may deem necessary
or desirable to more fully vest in Custodian the rights and remedies provided
for herein with respect to the Account Collateral and to accomplish the purposes
of this Agreement. The foregoing powers of attorney are irrevocable and coupled
with an interest.
(k) Continuing Security Interest; Termination. This Section 2.13 shall
create a continuing pledge of and security interest in the Account Collateral
and shall remain in full force and effect until payment in full of the
Indebtedness. Upon payment in full of the Indebtedness, Borrower shall be
entitled to the return, upon its request and at its expense, of such of the
Account Collateral as shall not have been sold or otherwise applied pursuant to
the terms hereof, and Custodian shall execute such instruments and documents as
may be reasonably requested by Borrower to evidence such termination and the
release of the pledge and lien hereof, provided, however, that Borrower shall
pay on demand all of Custodian's expenses in connection therewith.
(l) Replacement of a Collection Account Bank. So long as no Event of
Default shall have occurred and be continuing, Borrower shall have the right at
any time to designate a successor Collection Account Bank to hold one or more of
the Collection Accounts or the Security Deposit Accounts upon 30 days' prior
written notice to Custodian, and Custodian's approval of the successor, which
approval shall not be unreasonably withheld or delayed. In the event that the
rating of long-term
<PAGE>
47
unsecured debt obligations of any Collection Account Bank issued by a Rating
Agency is withdrawn or reduced to a rating of BBB or lower, Borrower shall be
obligated to promptly select a new Collection Account Bank and, upon approval of
such selection by Custodian, to establish and maintain all the Collection
Accounts and the Security Deposit Accounts previously held at such Collection
Account Bank at said successor. Any successor selected hereunder shall be a
financial institution within reasonable proximity of the Facility related to
such Collection Account and such Security Deposit Account and capable of
offering Eligible Accounts. No such designation shall become effective until
Borrower has (i) delivered to the successor Collection Account Bank a written
letter of instructions substantially equivalent to the Letter of Instructions
and (ii) delivered to Custodian evidence satisfactory to Custodian that such
instructions have been delivered to the successor Collection Account Bank and
acknowledged by such successor's execution of an acknowledgement of instructions
and notice substantially in the form included in the Letter of Instructions and
such financing statements as may be necessary or appropriate have been prepared,
executed and delivered to a filing agency.
(m) Custodian's Reliance. Custodian may rely and shall be protected in
acting or refraining from acting upon any written notice, instruction or request
furnished to it hereunder and believed by it to be genuine and to have been
signed or presented by the proper party or parties. Custodian may rely on
notice from Lender or Servicer as to the occurrence of an Event of Default.
Section 2.14. Supplemental Mortgage Affidavits . The Lien created by each
Mortgage is intended to encumber the Individual Property described therein to
the full extent of all the Indebtedness. As of the Closing Date, Borrower has
paid all state, county and municipal recording and all other taxes imposed upon
the execution and recordation of the Mortgages in the applicable states. If at
any time Lender determines, based on applicable law, that Lender is not being
afforded the maximum amount of security available from any Individual Property
as a direct, or indirect, result of applicable taxes not having been paid with
respect to the Related Mortgage, Borrower agrees that Borrower will execute,
acknowledge and deliver to Lender, immediately upon Lender's request,
supplemental affidavits increasing the amount of Indebtedness for which all
applicable taxes have been paid to an amount determined by Lender to be equal to
the lesser of (a) the greater of the fair market value of such Individual
Property (i) as of the Closing Date and (ii) as of the date such supplemental
affidavits are to be delivered to Lender, and (b) the amount of the
Indebtedness, and Borrower shall, on demand, pay any such additional taxes.
<PAGE>
48
Section 2.15. Securitization . Borrower hereby acknowledges that Lender,
its successors or assigns, may securitize the Loan through the issuance of the
Certificates, which will be rated by the Rating Agencies (the "Securitization").
Borrower agrees that it shall cooperate with Lender in the Securitization
including, but not limited to, by (a) amending this Agreement and the other Loan
Documents, and executing such additional documents, as requested by the Rating
Agencies, provided that any such amendment (or additional documentation) does
not materially adversely affect the rights, or materially increase the
obligations, of Borrower under the Loan Documents; (b) providing such
information as may be requested in connection with the preparation of a private
placement memorandum or a registration statement required to privately place or
publicly distribute the Certificates in a manner which does not conflict with
federal or state securities laws; (c) providing in connection with each of (i) a
preliminary and a private placement memorandum or (ii) a preliminary and final
prospectus, as applicable, an indemnification certificate (x) certifying that
Borrower has carefully examined such memorandum or prospectus, as applicable,
including, without limitation, the sections entitled "Special Considerations",
"Description of the Mortgage Loan" and "The Underlying Mortgaged Properties",
"The Manager", "The Borrower" and "Certain Legal Aspects of the Mortgage Loan",
and such sections (and any other sections reasonably requested) do not contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made, in the light of the
circumstances under which they were made, not misleading, (y) indemnifying
Lender and the Advisor for any losses, claims, damages or liabilities (the
"Liabilities") to which Lender or the Advisor may become subject insofar as the
Liabilities arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in such sections or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated in such sections or necessary in order to make the
statements in such sections, in light of the circumstances under which they were
made, not misleading and (z) agreeing to reimburse Lender and the Advisor for
any legal or other expenses reasonably incurred by Lender and the Advisor in
connection with investigating or defending the Liabilities; provided, however,
that Borrower shall not be obligated to indemnify or reimburse Lender or the
Advisor in respect of any claims which are settled or compromised by Lender or
the Advisor without the consent of Borrower, which consent will not be
unreasonably withheld or delayed; (d) causing to be rendered such customary
opinion letters as shall be requested by the Rating Agencies, including, without
limitation, an opinion letter substantially in the form attached hereto as
Exhibit P (subject to changes in law or fact after the date hereof) and an
opinion letter from each real estate counsel to
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49
Borrower stating that the assignment of the Loan and the Loan Documents to the
Trustee is enforceable; (e) making such representations, warranties and
covenants with respect to Borrower (and its Affiliates), and the Mortgaged
Property, as may be requested by the Rating Agencies, but which do not
materially adversely affect the rights, or materially increase the obligations,
of Borrower under the Loan Documents; (f) establishing additional reserves
requested by the Rating Agencies; provided, however, that if such reserves are
in excess of $500,000, such excess shall be funded from Net Cash Flow; (g)
providing such information regarding the Mortgaged Property as may be requested
by the Rating Agencies or otherwise required in connection with the formation of
the REMIC, including, without limitation, recertified or updated Appraisals; and
(h) amending Borrower's certificate of incorporation, appointing or electing an
Independent director or making such other changes to the structure of Borrower
required by the Rating Agencies. Borrower hereby agrees to pay on the
Securitization Closing Date or, if earlier, within 180 days after the Closing
Date, upon demand, all reasonable costs incurred by Lender in connection with
the Securitization (or any attempt to securitize the Loan), including, without
limitation, the cost of preparing a private placement memorandum or prospectus,
Rating Agency fees, reasonable legal fees and disbursements (including, without
limitation, in connection with the rendering of legal opinions), the cost of
market studies and SEC filing fees. Borrower and Lender anticipate that the
Securitization will be done through a private placement.
Section 2.16. Refinancing . Borrower shall have the option to request
that Lender refinance the Loan prior to February 1, 1996 on the terms set forth
on Exhibit Q attached hereto (the "Refinancing"), provided, however, that if, at
any time after the Securitization Closing Date, Borrower requests that Lender
refinance the Loan pursuant to this Section 2.16, notwithstanding any other
provision of this Agreement, all references to "Lender" in this Section 2.16
shall not include Lender's assigns. Borrower shall exercise such option by
sending Lender a notice of its request (the "Refinancing Notice") which
Refinancing Notice shall include the requested principal amount of the
refinanced loan (which must meet the guidelines set forth under "Principal
Amount" on Exhibit Q attached hereto), the proposed date that the Refinancing
will close into escrow (the "Refinancing Escrow Closing Date") which shall be
not less than 30 days and not more than 45 days prior to the Refinancing Date
and the proposed Refinancing Date which must be on or prior to February 1, 1996
and shall be not less than 90 days and not more than 120 days from the date of
the Refinancing Notice. Upon receipt of the Refinancing Notice, Lender may
perform a due diligence review of Borrower, the Mortgaged Property and any other
factors deemed relevant to Lender or the Rating Agencies,
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50
which review may, in Lender's discretion, include receipt of updated Appraisals,
Engineering Reports and Environmental Reports. Borrower shall cooperate with
Lender and reimburse Lender for all of its reasonable costs and expenses,
including attorneys' fees and disbursements, in connection with such due
diligence review and the Refinancing, whether or not the Refinancing closes.
Based upon the results of such review, Lender shall determine, in its sole
discretion which must be exercised in good faith, whether or not to proceed with
the Refinancing, provided, however, that Lender shall be obligated to proceed
with the Refinancing if (i) the Rating Agencies indicate a rating of BB/Ba or
higher on the entire issue of new certificates or notes, (ii) the proposed
principal amount meets the guidelines set forth under "Principal Amount" on
Exhibit Q hereto and (iii) there is no Default or Event of Default in effect
during the period from the date of the Refinancing Notice to and including the
Refinancing Escrow Closing Date. There shall be a presumption that Lender will
proceed with the Refinancing if (x) there has not been any material adverse
change to the Mortgaged Property, the operations of the Facilities or the future
prospects of the operations of the Facilities since the Closing Date and (y) the
Facilities (considered on an aggregate basis) have (and are projected to
continue to have throughout the term of the refinanced loan) a Debt Service
Coverage Ratio of at least 1.4 on the proposed principal amount of the
refinanced loan. If (i) Lender agrees to proceed with the Refinancing (or is
required to so proceed pursuant to the terms of this Section 2.16) and (ii)
Borrower has not revoked the Refinancing Notice on or prior to the Refinancing
Escrow Closing Date, on the Refinancing Escrow Closing Date, Lender and Borrower
shall enter into loan documents substantially similar to the Loan Documents but
incorporating the terms set forth on Exhibit Q attached hereto and the
Refinancing shall be closed into escrow pending only the tender of the
Certificates, and the Loan shall be refinanced on the Refinancing Date.
ARTICLE III
CONDITIONS PRECEDENT
Section 3.1. Conditions Precedent to Effectiveness of this Agreement.
This Agreement shall become effective on the date that all of the following
conditions shall have been satisfied (or waived in accordance with Section 8.4)
(the "Closing Date"):
(A) Loan Documents.
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51
(i) Amended and Restated Loan Agreement. Borrower shall have
executed and delivered this Agreement to Lender.
(ii) Notes. Borrower shall have executed and delivered to Lender the
Note.
(iii) Mortgage Modifications. Borrower shall have executed and
delivered a Mortgage Modification for each Mortgage to Lender and the
Mortgage Modification shall have been filed of record in the appropriate
filing offices in each of the jurisdictions in which the Facilities are
located or irrevocably delivered to a title agent for such recordation.
(iv) Amended and Restated Stock Pledge and Security Agreements. FGI
and FKI shall have executed and delivered to Lender the Stock Pledge and
Security Agreements.
(v) Modification of Assignments of Leases. Borrower shall have
executed and delivered a Modification of Assignment of Leases for each
Assignment of Leases to Lender and the Modifications of Assignment of
Leases shall have been filed of record in the appropriate filing offices in
each of the jurisdictions in which the Facilities are located or
irrevocably delivered to a title agent for such recordation.
(vi) Amended and Restated CC Account Agreement. Borrower and Bank
shall have executed the CC Account Agreement and delivered to Lender a copy
thereof.
(vii) Letters of Instructions. Borrower and each of the Collection
Account Banks shall have executed a Letter of Instructions and delivered to
Lender a copy thereof.
(viii) Amended and Restated Indemnity Agreement. FGI shall have
executed and delivered to Lender the Indemnity Agreement.
(ix) Amended and Restated Manager's Subordination. Manager and
Borrower shall have executed and delivered to Lender the Manager's
Subordination.
(B) Opinions of Counsel. Lender shall have received from Jones, Day,
Reavis & Pogue, special counsel to Borrower, its legal opinion in substantially
the form attached hereto as Exhibit S; from John H. Sharpe, Esq., counsel to
Borrower, FGI and FKI, his legal opinion in substantially the form attached
hereto as Exhibit T; and from each real estate counsel to Borrower, its legal
opinion in substantially the form attached hereto as Exhibit U. Each of such
legal opinions will be addressed to Lender, dated the Closing Date, and in form
and substance satisfactory to Lender and its counsel. Borrower hereby instructs
such counsel to deliver to Lender such opinions addressed to Lender.
(C) Representations and Warranties. The representations and warranties
herein and in the other Loan Documents shall be true and correct in all material
respects on such date.
(D) No Default or Event of Defaults. No Default with respect to the
payment of money or Event of Default shall have occurred and be continuing on
such date.
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52
(E) No Injunction. No law or regulation shall have been adopted, no
order, judgment or decree of any Governmental Authority shall have been issued,
and no litigation shall be pending or threatened, which in the good faith
judgment of Lender would enjoin, prohibit or restrain, or impose or result in
the imposition of any material adverse condition upon, the making or repayment
of the Loan or the consummation of the Transactions.
(F) Transaction Costs. Borrower shall have paid (or agreed to pay at
closing from the proceeds of the Loan) all Transaction Costs for which bills
have been submitted.
Section 3.2. Execution of this Agreement. The execution by Borrower of
this Agreement shall constitute a representation and warranty by Borrower to
Lender that all of the conditions required to be satisfied under this Article
III in connection with the execution and delivery of this Agreement have been
satisfied or waived in accordance with Section 8.4.
Section 3.3. Form of Loan Documents and Related Matters. The Note and
all of the agreements and other documents and papers referred to in this Article
III, unless otherwise specified, shall be delivered to Lender, and shall be
satisfactory in form and substance to Lender in its sole discretion (unless the
form thereof is prescribed herein).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
------------------------------
Section 4.1. Borrower Representations. Borrower represents and warrants
that:
(A) Organization. Borrower (i) is a duly organized and validly existing
corporation in good standing under the laws of the State of Delaware, (ii) has
the requisite corporate power and authority to own its properties (including,
without
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53
limitation, the Mortgaged Property) and to carry on its business as now being
conducted and is qualified to do business in every jurisdiction in which a
Facility is located, and (iii) has the requisite corporate power to execute and
deliver, and perform its obligations under this Agreement, the Note, the
Mortgages and all of the other Loan Documents to which it is a party.
(B) Authorization. The execution and delivery by Borrower of this
Agreement, the Note, the Mortgages and each of the other Loan Documents,
Borrower's performance of its obligations thereunder and the creation of the
security interests and liens provided for in this Agreement and the other Loan
Documents (i) have been duly authorized by all requisite corporate action on the
part of Borrower, (ii) will not violate any provision of any Legal Requirements,
any order of any court or other Governmental Authority, the certificate of
incorporation or by-laws of Borrower or any indenture or material agreement or
other instrument to which Borrower is a party or by which Borrower is bound, and
(iii) will not be in conflict with, result in a breach of, or constitute (with
due notice or lapse of time or both) a default under, or result in the creation
or imposition of any Lien of any nature whatsoever upon any of the property or
assets of Borrower pursuant to, any such indenture or material agreement or
instrument. Other than those obtained or filed on or prior to the Closing Date,
Borrower is not required to obtain any consent, approval or authorization from,
or to file any declaration or statement with, any Governmental Authority or
other agency in connection with or as a condition to the execution, delivery or
performance of this Agreement, the Note, the Mortgages or the other Loan
Documents.
(C) Litigation. Except for claims that are fully covered by valid
policies of insurance held by Borrower, and except as set forth on Exhibit W,
there are no actions, suits or proceedings at law or in equity by or before any
Governmental Authority or other agency now pending and served or, to the
knowledge of Borrower, threatened against Borrower or any Individual Property,
which actions, suits or proceedings, if determined against Borrower or any
Individual Property might result in a Material Adverse Effect or a lower
reimbursement rate under the Reimbursement Contracts.
(D) Agreements. Borrower is not a party to any agreement or instrument or
subject to any restriction which is reasonably likely to have a Material Adverse
Effect. Borrower is not in default in any material respect in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in any agreement or instrument to which it is a party or by which
Borrower or any Individual Property is bound.
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54
(E) Title to the Mortgaged Property. Borrower owns good, marketable and
insurable fee simple title to each Facility, free and clear of all Liens, other
than the Permitted Encumbrances applicable to that Facility. There are no
outstanding options to purchase or rights of first refusal affecting any
Facility other than rights or options held by Borrower and the option applicable
to the Facility known as Park Lane as described in the commitment for the Park
Lane Title Insurance Policy.
(F) No Bankruptcy Filing. Borrower is not contemplating either the filing
of a petition by it under any state or federal bankruptcy or insolvency laws or
the liquidation of all or a major portion of Borrower's assets or property, and
Borrower has no knowledge of any Person contemplating the filing of any such
petition against it.
(G) Full and Accurate Disclosure. No statement of fact made by or on
behalf of Borrower in this Agreement or in any of the other Loan Documents
contains any untrue statement of a material fact or omits to state any material
fact necessary to make statements contained herein or therein not misleading.
There is no fact presently known to Borrower which has not been disclosed to
Lender which adversely affects, nor as far as Borrower can foresee, might
adversely affect, any Individual Property or the business, operations or
condition (financial or otherwise) of Borrower.
(H) Location of Chief Executive Offices. The location of Borrower's
principal place of business and chief executive office is 8900 Keystone
Crossing, Suite 200, Indianapolis, Indiana 46240-0498.
(I) Compliance. Except for matters set forth in the Engineering Reports
described on Exhibit F attached hereto and in the "Summary" sections of the
Environmental Reports described on Exhibit G attached hereto and except for
matters described in Section 4.1(P) (as to which the provisions of Section
4.1(P) shall apply), Borrower, each Facility and Borrower's use thereof and
operations thereat comply in all material respects with all applicable Legal
Requirements, including, without limitation, building and zoning ordinances and
codes. Borrower is not in default or violation of any order, writ, injunction,
decree or demand of any Governmental Authority, the violation of which is
reasonably likely to have a Material Adverse Effect.
(J) Use of Proceeds; Margin Regulations. Borrower will use the proceeds
of the Loan for the purposes described in Section 2.2. No part of the proceeds
of the Loan will be used for the purpose of purchasing or acquiring any "margin
stock" within the meaning of Regulation U of the Board of Governors of
<PAGE>
55
the Federal Reserve System or for any other purpose which would be inconsistent
with such Regulation U or any other Regulations of such Board of Governors, or
for any purposes prohibited by Legal Requirements.
(K) Financial Information. All historical financial data concerning
Borrower or the Facilities that has been delivered by Borrower to Lender is
true, complete and correct in all material respects. Since the delivery of such
data, except as otherwise disclosed in writing to Lender, there has been no
adverse change in the financial position of Borrower or the Facilities, or in
the results of operations of Borrower. Borrower has not incurred any obligation
or liability, contingent or otherwise, not reflected in such financial data
which might adversely affect its business operations or any Facility.
(L) Condemnation. No Taking has been commenced or, to Borrower's
knowledge, is contemplated with respect to all or any portion of any Individual
Property or for the relocation of roadways providing access to any Facility.
(M) Other Mortgage Debt. Except for the debt to be repaid from the
proceeds of the Loan, Borrower has not borrowed or received other debt financing
whether unsecured or secured by any Individual Property or any part thereof.
(N) ERISA. Each Plan, and, to the knowledge of Borrower, each
Multiemployer Plan, is in compliance in all material respects with, and has been
administered in all material respects in compliance with, its terms and the
applicable provisions of ERISA, the Code and any other federal or state law, and
no event or condition has occurred and is continuing as to which Borrower would
be under an obligation to furnish a report to Lender under Section 5.1(U)(i).
(O) Utilities and Public Access. Each Facility has adequate rights of
access to public ways and is served by adequate water, sewer, sanitary sewer and
storm drain facilities. Except as otherwise disclosed by the Surveys, all
public utilities necessary to the continued use and enjoyment of each Facility
as presently used and enjoyed are located in the public right-of-way abutting
the premises, and all such utilities are connected so as to serve such Facility
without passing over other property. All roads necessary for the full
utilization of each Facility for its current purpose have been completed and
dedicated to public use and accepted by all Governmental Authorities or are the
subject of access easements for the benefit of the Facility.
(P) Environmental Compliance. Except for matters set forth in the
"Summary" sections of the Environmental Reports
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56
described on Exhibit G attached hereto (true, correct and complete copies of
which have been provided to Lender by Borrower):
(i) Borrower is in compliance with all applicable Environmental Laws,
which compliance includes, but is not limited to, the possession by
Borrower of all environmental, health and safety permits, licenses and
other governmental authorizations required in connection with the ownership
and operation of the Individual Property under all Environmental Laws,
except where the failure to comply with such laws is not reasonably likely
to result in a Material Adverse Effect.
(ii) There is no Environmental Claim pending or, to Borrower's
knowledge, threatened, and no penalties arising under Environmental Laws
have been assessed, against Borrower or against any Person whose liability
for any Environmental Claim Borrower has or may have retained or assumed
either contractually or by operation of law, and no investigation or review
is pending or, to the knowledge of Borrower, threatened by any Governmental
Authority, citizens group, employee or other Person with respect to any
alleged failure by Borrower or the Individual Property to have any
environmental, health or safety permit, license or other authorization
required under, or to otherwise comply with, any Environmental Law or with
respect to any alleged liability of Borrower for any Use or Release of any
Hazardous Substances.
(iii) To the knowledge of Borrower after due inquiry, there have been
and are no past or present Releases of any Hazardous Substance that are
reasonably likely to form the basis of any Environmental Claim against
Borrower or, to Borrower's knowledge, against any Person whose liability
for any Environmental Claim Borrower has or may have retained or assumed
either contractually or by operation of law.
(iv) To the knowledge of Borrower after due inquiry, without limiting
the generality of the foregoing, there is not present at, on, in or under
the Individual Property, PCB-containing equipment, asbestos or asbestos
containing materials, underground storage tanks or surface impoundments for
Hazardous Substances, lead in drinking water (except in concentrations that
comply with all Environmental Laws), or lead-based paint.
(v) No liens are presently recorded with the appropriate land records
under or pursuant to any Environmental Law with respect to the Individual
Property and, to Borrower's knowledge, no Governmental Authority has
<PAGE>
57
been taking or is in the process of taking any action that could subject
the Individual Property to Liens under any Environmental Law.
(vi) There have been no environmental investigations, studies, audits,
reviews or other analyses conducted by or that are in the possession of
Borrower in relation to an Individual Property which have not been made
available to Lender.
(Q) Solvency. Giving effect to the transactions contemplated hereby, the
fair saleable value of Borrower's assets exceeds and will, immediately following
the making of the Loan, exceed Borrower's total liabilities, including, without
limitation, subordinated, unliquidated, disputed and contingent liabilities.
The fair saleable value of Borrower's assets is and will, immediately following
the making of the Loan, be greater than Borrower's probable liabilities,
including the maximum amount of its contingent liabilities on its debts as such
debts become absolute and matured. Borrower's assets do not and, immediately
following the making of the Loan will not, constitute unreasonably small capital
to carry out its business as conducted or as proposed to be conducted. Borrower
does not intend to, and does not believe that it will, incur debts and
liabilities (including, without limitation, Contingent Liabilities and other
commitments) beyond its ability to pay such debts as they mature (taking into
account the timing and amounts to be payable on or in respect of obligations of
Borrower).
(R) Not Foreign Person. Borrower is not a "foreign person" within the
meaning of (S) 1445(f)(3) of the Code.
(S) Single-Purpose Entity.
(i) Borrower at all times since its formation has been, and will
continue to be, a duly formed and existing Delaware corporation and a
Single-Purpose Entity. Borrower at all times since its formation has been,
and will continue to be, duly qualified as a foreign corporation in each
jurisdiction in which a Facility is located.
(ii) Borrower at all times since its formation has complied, and will
continue to comply, with the provisions of its certificate of incorporation
and its by-laws and the laws of the State of Delaware relating to
corporations.
(iii) All customary formalities regarding the corporate existence of
Borrower have been observed at all times since its formation and will
continue to be observed.
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58
(iv) Borrower has at all times since its formation accurately
maintained, and will continue to accurately maintain, its financial
statements, accounting records and other corporate documents separate from
those of its shareholders, Affiliates of its shareholders and any other
Person. Borrower has not at any time since its formation commingled, and
will not commingle, its assets with those of its shareholders, any
Affiliates of its shareholders, or any other Person. Borrower has at all
times since its formation accurately maintained, and will continue to
accurately maintain, its own bank accounts and separate books of account.
(v) Borrower has at all times since its formation paid, and will
continue to pay, its own liabilities from its own separate assets.
(vi) Borrower has at all times since its formation identified itself,
and will continue to identify itself, in all dealings with the public,
under Borrower's own name and as a separate and distinct entity. Borrower
has not at any time since its formation identified itself, and will not
identify itself, as being a division or a part of any other entity.
Borrower has not at any time since its formation identified, and will not
identify its shareholders or any Affiliates of its shareholders, as being a
division or part of Borrower.
(vii) Borrower has been at all times since its formation and will
continue to be adequately capitalized in light of the nature of its
business.
(viii) Borrower has not any time since its formation assumed or
guaranteed, and will not assume or guarantee, the liabilities of its
shareholders (or any predecessor corporation), any Affiliates of its
shareholders, or any other Persons, except for liabilities relating to the
Facilities and except as permitted by or pursuant to this Agreement.
Borrower has not at any time since its formation acquired, and will not
acquire, obligations or securities of its shareholders (or any predecessor
corporation), or any Affiliates of its shareholders. Borrower has not at
any time since its formation made, and will not make, loans to its
shareholders (or any predecessor corporation), or any Affiliates of its
shareholders.
(ix) Borrower has not at any time since its formation entered into and
was not a party to, and, will not enter into or be a party to, any
transaction with its shareholders (or any predecessor corporation) or any
Affiliates of its shareholders except in the ordinary course of business of
<PAGE>
59
Borrower on terms which are no less favorable to Borrower than would be
obtained in a comparable arm's length transaction with an unrelated third
party.
(T) No Joint Assessment; Separate Lots. Borrower shall not suffer, permit
or initiate the joint assessment of any Facility (i) with any other real
property constituting a separate tax lot, and (ii) with any portion of the
Facility which may be deemed to constitute personal property, or any other
procedure whereby the lien of any taxes which may be levied against such
personal property shall be assessed or levied or charged to the Facility as a
single lien. Each Facility is comprised of one or more parcels, each of which
constitutes a separate tax lot and none of which constitutes a portion of any
other tax lot.
(U) Assessments. Except as disclosed in the Title Insurance Policies,
there are no pending or, to the knowledge of Borrower, proposed special or other
assessments for public improvements or otherwise affecting any Facility, nor, to
the knowledge of Borrower, are there any contemplated improvements to any
Facility that may result in such special or other assessments.
(V) Mortgage and Other Liens. Each Mortgage creates a valid and
enforceable first mortgage Lien on the Individual Property described therein, as
security for the repayment of the Indebtedness, subject only to the Permitted
Encumbrances applicable to that Individual Property. Each Collateral Security
Instrument establishes and creates a valid, subsisting and enforceable Lien on
and a security interest in, or claim to, the rights and property described
therein. All property covered by any Collateral Security Instrument is subject
to a Uniform Commercial Code financing statement filed and/or recorded, as
appropriate, (or irrevocably delivered to a title agent for such recordation or
filing) in all places necessary to perfect a valid first priority lien with
respect to the rights and property that are the subject of such Collateral
Security Instrument to the extent governed by the Uniform Commercial Code. All
continuations and any assignments of any such financing statements have been or
will be timely filed or refiled, as appropriate, in the appropriate recording
offices.
(W) Enforceability. The Note, each Mortgage and each other Loan Document
executed by Borrower in connection therewith, including, without limitation, any
Collateral Security Instrument, is the legal, valid and binding obligation of
Borrower, enforceable against Borrower in accordance with its terms, subject to
bankruptcy, insolvency and other limitations on creditors' rights generally and
to equitable principles and the other matters described in the opinions
delivered pursuant to Section 3.1(B). The Note, each such Mortgage and the
other Loan
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60
Documents executed by Borrower are, as of the date hereof, not subject to any
right of rescission, set-off, counterclaim or defense by Borrower, including the
defense of usury, nor will the operation of any of the terms of the Note, each
such Mortgage and other Loan Documents executed by Borrower, or the exercise of
any right thereunder, render the Mortgages unenforceable against Borrower, in
whole or in part, or subject to any right of rescission, set-off, counterclaim
or defense by Borrower, including the defense of usury, and Borrower has not
asserted any right of rescission, set-off, counterclaim or defense with respect
thereto.
(X) Rate Cap Agreement. The Assignment of Rate Cap Agreement establishes
and creates a valid, subsisting and enforceable Lien on and a security interest
in, or claim to, the rights and property described therein. All property
covered by the Assignment of Rate Cap Agreement is subject to a Uniform
Commercial Code financing statement filed and/or recorded, as appropriate, in
all places necessary to perfect a valid first priority lien with respect to the
rights and property that are the subject of such document to the extent governed
by the Uniform Commercial Code.
(Y) No Prior Assignment. As of the date hereof, (i) Lender is the
assignee of Borrower's interest under the Leases and (ii) there are no prior
assignments of the Leases or any portion of the Rent due and payable or to
become due and payable which are presently outstanding.
(Z) Bed Capacity. Neither Borrower nor Manager has granted to any third
party the right to reduce the number of licensed beds in any Facility or to
apply for approval to move the right to any and all of the licensed beds to any
other location.
(AA) Compliance with Nursing Home Laws. To the extent required, each
Facility is duly licensed as a skilled and intermediate care nursing home under
the applicable laws of the state where it is located. The licensed bed capacity
of each Facility as set forth in Exhibit X attached hereto is true and correct.
Borrower and Manager are in compliance in all material respects with the
applicable provisions of nursing home, nursing facility or assisted living
facility laws, rules and regulations to which each Facility is subject. All
Reimbursement Contracts are in full force and effect with respect to the
Facilities. Borrower and Manager are current in payment of all so-called
provider specific taxes or other assessments with respect to such Reimbursement
Contracts.
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61
(BB) Use of Facilities. Each Facility is used exclusively as a skilled
nursing home, assisted living facility and/or congregate care facility and uses
ancillary thereto.
(CC) Certificate of Occupancy. Borrower has obtained all Permits
necessary to use and operate each Facility for the use described in Section
4.1(BB). The use being made of each Facility is in conformity in all material
respects with the certificate of occupancy and/or Permits for such Facility and
any other restrictions, covenants or conditions affecting such Facility.
(DD) Flood Zone. Except as shown on the Surveys, none of the Facilities
is located in a flood hazard area as defined by the Federal Insurance
Administration.
(EE) Physical Condition. Each Facility is free of structural defects and
all building systems contained therein are in good working order in all material
respects subject to ordinary wear and tear, except as disclosed in the
Engineering Reports described on Exhibit F.
(FF) Loan to Value Ratio. The Loan Amount does not exceed 125% of the sum
of the Appraised Values for the Facilities.
(GG) Security Deposits. All security deposits with respect to the
Facilities have been transferred to the Security Deposits Accounts, and Borrower
is in compliance with all Legal Requirements relating to such security deposits
as to which failure to comply is reasonably likely to have a Material Adverse
Effect.
(HH) Intellectual Property. All material trademarks, trade names and
service marks that Borrower owns or has pending, or under which it is licensed,
are in good standing and uncontested. There is no right under any trademark,
trade name or service mark necessary to the business of Borrower as presently
conducted or as Borrower contemplates conducting its business. Borrower has not
infringed, is not infringing, and has not received notice of infringement with
respect to asserted trademarks, trade names and service marks of others. To
Borrower's knowledge, there is no infringement by others of material trademarks,
trade names and service marks of Borrower.
(II) Investment Company Act; Public Utility Holding Company Act. Borrower
is not (i) an "investment company" or a company "controlled" by an "investment
company," within the
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62
meaning of the Investment Company Act of 1940, as amended, (ii) a "holding
company" or a "subsidiary company" of a "holding company" or an "affiliate" of
either a "holding company" or a "subsidiary company" within the meaning of the
Public Utility Holding Company Act of 1935, as amended, or (iii) subject to any
other federal or state law or regulation which purports to restrict or regulate
its ability to borrow money.
(JJ) Corporate Structure; Capitalization. The authorized capital stock of
Borrower consists of 100 shares of common stock, par value $.01 per share, of
which 50 shares are issued and outstanding. Each outstanding share of common
stock is validly authorized, validly issued, fully paid, and nonassessable,
without any personal liability attaching to the ownership hereof, and has not
been issued and is not owned or held in violation of any preemptive rights of
stockholders, and is owned of record and beneficially by FGI and FKI free and
clear of all liens, security interests, pledges, charges, encumbrances,
stockholders' agreements and voting trusts. There is no commitment, plan, or
arrangement to issue, and no outstanding option, warrant, or other right calling
for the issuance of, any share of capital stock of Borrower or any security or
other instrument which by its terms is convertible into, exercisable for, or
exchangeable for capital stock of Borrower. There is outstanding no security or
other instrument which by its terms is convertible into or exchangeable for
capital stock of Borrower. Borrower has no subsidiaries.
(KK) No Defaults. No Default or Event of Default exists under or with
respect to any Loan Document.
(LL) Labor Matters. Borrower is not a party to any collective bargaining
agreements.
Section 4.2. Survival of Representations. Borrower agrees that all of
the representations and warranties of Borrower set forth in Section 4.1 and
elsewhere in this Agreement and in the other Loan Documents are made as of the
Closing Date (except as expressly otherwise provided) and shall survive the
delivery of the Note and this agreement and continue for so long as any
amount remains owing to Lender under this Agreement, the Note or any of the
other Loan Documents; provided, however, that the representations set forth in
Section 4.1(P) shall survive in perpetuity. All representations, warranties,
covenants and agreements made in this Agreement or in the other Loan Documents
shall be deemed to have been relied upon by Lender notwithstanding any
investigation heretofore or hereafter made by Lender or on its behalf.
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63
ARTICLE V
AFFIRMATIVE COVENANTS
---------------------
Section 5.1. Borrower Covenants. Borrower covenants and agrees that,
from the date hereof and until payment in full of the Indebtedness (or with
respect to a particular Individual Property, the earlier release of its Related
Mortgage):
(A) Existence; Compliance with Legal Requirements; Insurance. Borrower
shall do or cause to be done all things necessary to preserve, renew and keep in
full force and effect its corporate existence, rights, licenses, Permits and
franchises necessary for the conduct of its business and comply in all material
respects with all Legal Requirements and Insurance Requirements applicable to it
and each Individual Property. Borrower shall at all times maintain, preserve
and protect all franchises and trade names and preserve all the remainder of its
property necessary for the continued conduct of its business and keep each
Facility in good repair, working order and condition, except for reasonable wear
and use, and from time to time make, or cause to be made, all reasonably
necessary repairs, renewals, replacements, betterments and improvements thereto,
all as more fully provided in the Mortgages. Borrower shall keep each
Individual Property insured at all times, by financially sound and reputable
insurers, to such extent and against such risks, and maintain liability and such
other insurance, as is more fully provided in the Mortgages.
(B) Impositions and Other Claims. Borrower shall pay and discharge or
cause to be paid and discharged all Impositions, as well as all lawful claims
for labor, materials and supplies or otherwise, which could become a Lien, all
as more fully provided in, and subject to any rights to contest contained in,
the Mortgages.
(C) Litigation. Borrower shall give prompt written notice to Lender of
any litigation or governmental proceedings pending or threatened (in writing)
against Borrower which is reasonably likely to have a Material Adverse Effect.
(D) Environmental Remediation.
(i) If any investigation, site monitoring, cleanup, removal,
restoration or other remedial work of any kind or nature is required
pursuant to an order or directive of any Governmental Authority or under
any applicable Environmental Law (collectively, the "Remedial Work"),
because of or in connection with the current or future presence, suspected
presence, Release or suspected Release of a Hazardous Substance on, under
or from a Facility or any portion
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64
thereof, Borrower shall promptly commence and diligently prosecute to
completion all such Remedial Work. In all events, such Remedial Work shall
be commenced within 30 days after any demand therefor by Lender or such
shorter period as may be required under any applicable Environmental Law;
provided, however, that Borrower shall not be required to commence such
Remedial Work within the above specified time periods: (x) if prevented
from doing so by any Governmental Authority, (y) if commencing such
Remedial Work within such time periods would result in Borrower or such
Remedial Work violating any Environmental Law or (z) if Borrower, at its
expense and after prior notice to Lender, is contesting by appropriate
legal, administrative or other proceedings conducted in good faith and with
due diligence the need to perform Remedial Work, as long as (1) Borrower is
permitted by the applicable Environmental Laws to delay performance of the
Remedial Work pending such proceedings, (2) neither the Facility nor any
part thereof or interest therein will be sold, forfeited or lost if
Borrower performs the Remedial Work being contested, and Borrower would
have the opportunity to do so, in the event of Borrower's failure to
prevail in the contest, (3) Lender would not, by virtue of such permitted
contest, be exposed to any risk of any civil liability for which Borrower
has not furnished additional security as provided in clause (4) below, or
to any risk of criminal liability, and neither the Facility nor any
interest therein would be subject to the imposition of any lien for which
Borrower has not furnished additional security as provided in clause (4)
below, as a result of the failure to perform such Remedial Work and (4)
Borrower shall have furnished to Lender additional security in respect of
the Remedial Work being contested and the loss or damage that may result
from Borrower's failure to prevail in such contest in such amount as may be
reasonably requested by Lender.
(ii) If requested by Lender, all Remedial Work under clause (i) above
shall be performed by contractors, and under the supervision of a
consulting Engineer, each approved in advance by Lender which approval will
not be unreasonably withheld or delayed. All costs and expenses reasonably
incurred in connection with such Remedial Work shall be paid by Borrower.
If Borrower does not timely commence and diligently prosecute to completion
the Remedial Work, Lender may (but shall not be obligated to), upon 30 days
prior written notice to Borrower of its intention to do so, cause such
Remedial Work to be performed. Borrower shall pay or reimburse Lender on
demand for all Advances (as defined in the Mortgages) and expenses
(including reasonable attorneys' fees and disbursements, but excluding
internal overhead, administrative and similar costs of Lender)
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65
reasonably relating to or incurred by Lender in connection with monitoring,
reviewing or performing any Remedial Work in accordance herewith.
(iii) Borrower shall not commence any Remedial Work under clause (i)
above, nor enter into any settlement agreement, consent decree or other
compromise relating to any Hazardous Substances or Environmental Laws which
is reasonably likely to have a Material Adverse Effect. Notwithstanding
the foregoing, if the presence or threatened presence of Hazardous
Substances on, under or about any Individual Property poses an immediate
threat to the health, safety or welfare of any Person or the environment,
or is of such a nature that an immediate response is necessary, Borrower
may complete all necessary Remedial Work. In such events, Borrower shall
notify Lender as soon as practicable and, in any event, within three
Business Days, of any action taken.
(E) Environmental Matters; Inspection.
(i) Borrower shall not authorize a Hazardous Substance to be present
on, under or to emanate from a Facility, or migrate from adjoining property
controlled by Borrower onto or into a Facility, except under conditions
permitted by applicable Environmental Laws and, in the event that such
Hazardous Substances are present on, under or emanate from a Facility, or
migrate onto or into a Facility, Borrower shall cause the removal or
remediation of such Hazardous Substances, in accordance with this Agreement
and Environmental Laws. Borrower shall use best efforts to prevent, and to
seek the remediation of, any migration of Hazardous Substances onto or into
any Facility from any adjoining property.
(ii) Upon reasonable prior written notice, Lender shall have the right
at all reasonable times to enter upon and inspect all or any portion of any
Facility, provided that such inspections shall not unreasonably interfere
with the operation or the tenants, residents or occupants of such Facility.
If Lender suspects that Remedial Work may be required, Lender may select a
consulting Engineer to conduct and prepare reports of such inspections.
Borrower shall be given a reasonable opportunity to review any reports,
data and other documents or materials reviewed or prepared by the Engineer,
and to submit comments and suggested revisions or rebuttals to same. The
inspection rights granted to Lender in this Section 5.1(E) shall be in
addition to, and not in limitation of, any other inspection rights granted
to Lender in this Agreement, and shall expressly include the right (if
Lender suspects that Remedial Work may be required) to
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66
conduct soil borings, establish ground water monitoring wells and conduct
other customary environmental tests, assessments and audits.
(iii) Borrower agrees to bear and shall pay or reimburse Lender on
demand for all sums advanced and expenses incurred (including reasonable
attorneys' fees and disbursements, but excluding internal overhead,
administrative and similar costs of Lender) reasonably relating to, or
incurred by Lender in connection with, the inspections and reports
described in this Section 5.1(E) (to the extent such inspections and
reports relate to any Facility) in the following situations:
(x) If Lender has reasonable grounds to believe, at the time any
such inspection is ordered, that there exists an occurrence or
condition that could lead to an Environmental Claim;
(y) If any such inspection reveals an occurrence or condition
that could lead to an Environmental Claim; or
(z) If an Event of Default with respect to any Facility exists
at the time any such inspection is ordered, and such Event of Default
relates to any representation, covenant or other obligation pertaining
to Hazardous Substances, Environmental Laws or any other environmental
matter.
(F) Environmental Notices. Borrower shall promptly provide notice to
Lender of:
(i) any Environmental Claim asserted by any Governmental Authority
with respect to any Hazardous Substance on, in, under or emanating from any
Facility, which could reasonably be expected to impair the value of
Lender's security interests hereunder or have a Material Adverse Effect;
(ii) any proceeding, investigation or inquiry commenced or threatened
in writing by any Governmental Authority, against Borrower, with respect to
the presence, suspected presence, Release or threatened Release of
Hazardous Substances from or onto, in or under any property not owned by
Borrower, including, without limitation, proceedings under the
Comprehensive Environmental Response, Compensation, and Liability Act, as
amended, 42 U.S.C. (S) 9601, et seq., which could reasonably be expected to
impair the value of Lender's security interests hereunder or have a
Material Adverse Effect;
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67
(iii) all Environmental Claims asserted or threatened against Borrower,
against any other party occupying any Facility or any portion thereof which
become known to Borrower or against such Facility, which could reasonably
be expected to impair the value of Lender's security interests hereunder or
have a Material Adverse Effect;
(iv) the discovery by Borrower of any occurrence or condition on any
Facility or on any real property adjoining or in the vicinity of such
Facility which could reasonably be expected to lead to an Environmental
Claim against Borrower or Lender which such Environmental Claim is
reasonably likely to have a Material Adverse Effect; and
(v) the commencement or completion of any Remedial Work.
(G) Copies of Notices. Borrower shall transmit to Lender copies of any
citations, orders, notices or other written communications received from any
Person and any notices, reports or other written communications submitted to any
Governmental Authority with respect to the matters described in Section 5.1(F).
(H) Environmental Claims. Lender and/or, to the extent authorized by
Lender, Deed of Trust Trustee, Trustee and/or Servicer, may join and participate
in, as a party if Lender so determines, any legal or administrative proceeding
or action concerning a Facility or any portion thereof under any Environmental
Law, if, in Lender's reasonable judgment, the interests of Lender, Deed of Trust
Trustee, Trustee or Servicer will not be adequately protected by Borrower.
Borrower agrees to bear and shall pay or reimburse Lender, Deed of Trust
Trustee, Trustee and/or Servicer, on demand for all reasonable sums advanced and
expenses incurred (including reasonable attorneys' fees and disbursements, but
excluding internal overhead, administrative and similar costs of Lender, Deed of
Trust Trustee, Trustee and Servicer) incurred by Lender, Deed of Trust Trustee,
Trustee and/or Servicer, in connection with any such action or proceeding.
(I) Indemnification. Borrower agrees to indemnify, reimburse, defend, and
hold harmless Lender, Deed of Trust Trustee, Servicer, Custodian and Trustee
for, from, and against all demands, claims, actions or causes of action,
assessments, losses, damages, liabilities, costs and expenses, including,
without limitation, interest, penalties, consequential damages, reasonable
attorneys' fees, disbursements and expenses, and reasonable consultants' fees,
disbursements and expenses (but excluding internal overhead, administrative and
similar costs of Lender, Deed of Trust Trustee, Servicer, Custodian and
Trustee), asserted
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against, resulting to, imposed on, or incurred by Lender, Deed of Trust Trustee,
Servicer, Custodian and Trustee, directly or indirectly, in connection with any
of the following, except to the extent same are directly and solely caused by
Lender's, Deed of Trust Trustee's, Servicer's, Custodian's or Trustee's gross
negligence or willful misconduct:
(i) events, circumstances, or conditions which are alleged to, or do, form
the basis for an Environmental Claim;
(ii) any Environmental Claim against any Person whose liability for
such Environmental Claim Borrower has or may have assumed or retained
either contractually or by operation of law; or
(iii) the breach of any representation, warranty or covenant set forth
in Section 4.1(P) and Sections 5.1(D) through 5.1(I), inclusive.
The indemnity provided in this Section 5.1(I) shall not be included in any
exculpation of Borrower or Guarantor from personal liability provided in this
Agreement or in any of the other Loan Documents. Nothing in this Section 5.1(I)
shall be deemed to deprive Lender of any rights or remedies provided to it
elsewhere in this Agreement or the other Loan Documents or otherwise available
to it under law.
(J) Access to Facilities. Borrower shall permit agents, representatives
and employees of Lender to inspect each Facility or any part thereof at such
reasonable times as may be requested by Lender upon reasonable advance notice,
subject, however, to the rights of the tenants, occupants and residents of the
Facility.
(K) Notice of Default. Borrower shall promptly advise Lender of any
material adverse change in Borrower's condition, financial or otherwise, or of
the occurrence of any Event of Default, or of the occurrence of any Default.
(L) Cooperate in Legal Proceedings. Except with respect to any claim by
Borrower against Lender, Borrower shall cooperate fully with Lender with respect
to any proceedings before any Governmental Authority which may in any way affect
the rights of Lender hereunder or any rights obtained by Lender under any of the
Loan Documents and, in connection therewith, not prohibit Lender, at its
election, from participating in any such proceedings.
(M) Perform Loan Documents. Borrower shall observe, perform and satisfy
all the terms, provisions, covenants and
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69
conditions required to be observed, performed or satisfied by it, and shall pay
when due all costs, fees and expenses required to be paid by it, under the Loan
Documents executed and delivered by Borrower.
(N) Insurance Benefits. Borrower shall cooperate with Lender in obtaining
for Lender the benefits of any Insurance Proceeds lawfully or equitably payable
to Lender in connection with each Individual Property, and Lender shall be
reimbursed for any expenses reasonably incurred in connection therewith
(including attorneys' fees and disbursements and the payment by Borrower of the
expense of an Appraisal on behalf of Lender in case of a fire or other casualty
affecting such Individual Property or any part thereof, but excluding internal
overhead, administrative and similar costs of Lender) out of such Insurance
Proceeds, all as more specifically provided in the Mortgages.
(O) Further Assurances. Borrower shall, at Borrower's sole cost and
expense:
(i) upon Lender's request therefor given from time to time (but,
other than in connection with the Securitization or the Refinancing, in no
event more often than once every two years during the term of this
Agreement), pay for (a) reports of UCC, tax lien, judgment and litigation
searches with respect to Borrower and (b) searches of title to each
Facility, each such search to be conducted by search firms designated by
Lender in each of the locations designated by Lender;
(ii) furnish to Lender all instruments, documents, boundary surveys,
footing or foundation surveys, certificates, plans and specifications,
Appraisals, title and other insurance reports and agreements, and each and
every other document, certificate, agreement and instrument required to be
furnished pursuant to the terms of the Loan Documents;
(iii) execute and deliver to Lender such documents, instruments,
certificates, assignments and other writings, and do such other acts
necessary, to evidence, preserve and/or protect the Collateral at any time
securing or intended to secure the Note, as Lender may reasonably require;
and
(iv) do and execute all and such further lawful and reasonable acts,
conveyances and assurances for the better and more effective carrying out
of the intents and purposes of this Agreement and the other Loan Documents,
as Lender shall reasonably require from time to time.
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70
(P) Management of Mortgaged Property. Each of the Facilities will be
managed at all times by Manager pursuant to the Management Agreement until
terminated as herein provided. Pursuant to the Manager's Subordination, Manager
has agreed that the Management Agreement is subject and subordinate in all
respects to the Liens of the Mortgages. The Management Agreement may be
terminated by Lender upon 30 days prior written notice to Borrower and Manager
(i) upon the occurrence of an Event of Default of the type described in clause
(i) or (ii) of Section 7.1, or (ii) if Manager commits any act which would
permit termination under the Management Agreement; provided, however, that after
the Securitization Closing Date a vote of at least 66-2/3% in interest of the
Certificateholders shall be required to so terminate the Management Agreement.
Borrower may from time to time appoint a successor manager to manage the
Facilities or any of the Facilities with Lender's prior written consent, which
consent shall not be unreasonably withheld or delayed. Notwithstanding the
foregoing, any successor property manager selected hereunder by Lender or
Borrower to serve as Manager shall be a reputable management company having at
least seven years' experience in the management of skilled nursing homes,
assisted living facilities and/or congregate care facilities (as the case may
be) in the state in which the Facility is located, and shall, if after the
Securitization Closing Date, (i) have qualifications such that the then current
ratings of no class of the Certificates would be downgraded or withdrawn by the
Rating Agencies upon such an appointment and (ii) be reasonably acceptable to
Servicer. Borrower further covenants and agrees that Manager (including any
successor property manager serving as Manager) shall at all times during the
term of the Loan maintain worker's compensation insurance as required by
Governmental Authorities.
(Q) Financial Reporting.
(i) Borrower shall keep and maintain or shall cause to be kept and
maintained on a Fiscal Year basis, in accordance with GAAP (or such other
accounting basis reasonably acceptable to Lender) consistently applied,
books, records and accounts reflecting in reasonable detail all of the
financial affairs of Borrower and all items of income and expense in
connection with the operation of each Facility and in connection with any
services, equipment or furnishings provided in connection with the
operation of each Facility, whether such income or expense may be realized
by Borrower or by any other Person whatsoever. Lender shall have the right
from time to time at all times during normal business hours upon reasonable
prior written notice to Borrower to examine such books, records and
accounts at the office of Borrower or other Person maintaining such books,
records and accounts and to make
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71
such copies or extracts thereof as Lender shall desire. After the
occurrence of an Event of Default with respect to Borrower or any Facility,
Borrower shall pay any costs and expenses incurred by Lender to examine
Borrower's accounting records with respect to such Facility, as Lender
shall reasonably determine to be necessary or appropriate in the protection
of Lender's interest.
(ii) Borrower shall furnish to Lender annually, within 120 days
following the end of each Fiscal Year, a complete copy of Borrower's
financial statement audited by an Independent certified public accountant
acceptable to Lender (Lender hereby agreeing that any "Big Six" certified
public accounting firm or Kenneth Leventhal & Company shall be acceptable
to Lender) in accordance with GAAP (or such other accounting basis
reasonably acceptable to Lender) consistently applied covering Borrower's
financial position and results of operations, including consolidated and
consolidating balance sheets for each Facility, for such Fiscal Year and
containing a statement of revenues and expenses, a statement of assets and
liabilities and a statement of Borrower's equity.
Together with Borrower's annual financial statements, Borrower shall
furnish to Lender an Officer's Certificate certifying as of the date
thereof (x) that the annual financial statements present fairly in all
material respects the results of operations and financial condition of
Borrower all in accordance with GAAP consistently applied, and (y) whether
there exists an Event of Default or Default, and if such Event of Default
or Default exists, the nature thereof, the period of time it has existed
and the action then being taken to remedy same.
(iii) Borrower shall furnish to Lender, within 45 days following the
end of each Fiscal Year quarter, in the form attached hereto as Exhibit Y,
(x) a true, complete and correct cash flow statement with respect to each
Facility for that quarter, and (y) census information for each Facility as
of the end of that quarter in sufficient detail to show by patient-mix
(i.e., private, Medicare, Medicaid (if applicable) and V.A.), the average
monthly census of the Facility and statements of occupancy rates, together
with an Officer's Certificate in substantially the form attached hereto as
Exhibit Z.
(iv) Borrower shall furnish to Lender, within 45 days after the end of
each Fiscal Year quarter, an aged accounts receivable report from each
Facility in sufficient detail to show amounts due from each class of
patient-mix by the account age classifications of 30 days, 60 days, 90
days,
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72
120 days, and over 120 days, accompanied by an Officer's Certificate.
(v) Borrower shall furnish to Lender, within three Business Days
after the receipt by Borrower or a Facility, any and all written notices
(regardless of form) from any licensing and/or certifying agency that the
Facility's license or the Medicare or Medicaid certification of the
Facility is being revoked or suspended, or that action is pending or being
considered to revoke or suspend the Facility's license or such
certification.
(vi) Borrower shall furnish to Lender, within ten days after the date
of the required filing of cost reports for each Facility with the Medicaid
agency or the date of actual filing of such cost report of the Facility
with such agency, whichever is earlier, a complete and accurate copy of the
annual Medicaid cost report for each Facility, which will be prepared by
Manager or by an Independent certified public accountant or by an
experienced cost report preparer acceptable to Lender (any "Big Six"
accounting firm and Kenneth Leventhal & Co. being deemed acceptable to
Lender), and promptly furnish Lender any amendments filed with respect to
such reports and all responses, audit reports or inquiries with respect to
such reports.
(vii) Borrower shall furnish to Lender copies of all SEC filings by
Borrower, FGI or FKI, other than Registration Statements on Form S-8 and
reports under Sections 13(d) and 16(a) of the Securities Exchange Act of
1934, as amended.
(viii) Borrower shall furnish to Lender, within 15 Business Days after
request, such further information with respect to the operation of any
Facility and the financial affairs of Borrower as may be reasonably
requested by Lender, including all business plans prepared for Borrower.
(ix) Borrower shall furnish to Lender, within 15 Business Days after
request, such further information regarding any Plan or Multiemployer Plan
and any reports or other information required to be filed under ERISA as
may be reasonably requested by Lender.
(x) After the Securitization Closing Date, Borrower shall also
furnish to Trustee a copy of each report, statement and other information
provided to Lender under this Section 5.1(Q).
(R) Conduct of Business. Borrower shall cause the operation of each
Facility to be conducted at all times in a manner consistent with at least
the level of operation of such
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73
Facility as of the date hereof, including, without limitation, the following:
(i) to maintain or cause to be maintained the standard of care for
the patients of each Facility at all times at a level necessary to insure a
level of quality care for the patients of such Facility not lower than that
existing on the Closing Date;
(ii) to operate or cause to be operated each Facility in a prudent
manner in compliance in all material respects with applicable Legal
Requirements and Insurance Requirements relating thereto and cause all
licenses, Permits, Reimbursement Contracts and any other agreements
necessary for the continued use and operation of each Facility or as may be
necessary for participation in the Medicare, Medicaid or other applicable
reimbursement programs to remain in effect; and
(iii) to maintain or cause to be maintained sufficient Inventory and
Equipment of types and quantities at each Facility to enable Borrower or
Manager to operate such Facility.
(S) Periodic Surveys. Borrower shall furnish (or cause Manager to
furnish) to Lender within ten Business Days after receipt, a copy of any
Medicare, Medicaid or other licensing agency annual licensing certificate,
survey or report and any statement of deficiencies, and within the time period
required by the particular agency for furnishing a plan of correction also
furnish or cause to be furnished to Lender a copy of the plan of correction
generated from such survey or report for the Facility, and correct or cause to
be corrected any deficiency, the curing of which is a condition of continued
licensure or for full participation in Medicare and Medicaid for existing
patients or for new patients to be admitted with Medicare or Medicaid coverage,
by the date required for cure by such agency (plus extensions granted by such
agency).
(T) Future Representation as to Loan to Value Ratio. If the Loan is
significantly modified prior to the Securitization Closing Date so as to result
in a taxable exchange under (S) 1001 of the Code, Borrower will, if requested by
Lender, represent that the Loan Amount does not exceed 125% of the sum of the
Appraised Values for the Facilities as of the date of such significant
modification.
(U) ERISA. Borrower shall deliver to Lender as soon as possible, and in
any event within ten days after Borrower knows or has reason to believe that any
of the events or conditions specified below with respect to any Plan or
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74
Multiemployer Plan has occurred or exists, a statement signed by a senior
financial officer of Borrower setting forth details respecting such event or
condition and the action, if any, that Borrower or its ERISA Affiliate proposes
to take with respect thereto (and a copy of any report or notice required to be
filed with or given to PBGC by Borrower or an ERISA Affiliate with respect to
such event or condition):
(i) any reportable event, as defined in Section 4043(b) of ERISA and
the regulations issued thereunder, with respect to a Plan, as to which PBGC
has not by regulation waived the requirement of Section 4043(a) of ERISA
that it be notified within 30 days of the occurrence of such event
(provided that a failure to meet the minimum funding standard of Section
412 of the Code or Section 302 of ERISA, including, without limitation, the
failure to make on or before its due date a required installment under
Section 412(m) of the Code or Section 302(e) of ERISA, shall be a
reportable event regardless of the issuance of any waivers in accordance
with Section 412(d) of the Code); and any request for a waiver under
Section 412(d) of the Code for any Plan;
(ii) the distribution under Section 4041 of ERISA of a notice of
intent to terminate any Plan or any action taken by Borrower or an ERISA
Affiliate to terminate any Plan;
(iii) the institution by PBGC of proceedings under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by Borrower or any ERISA Affiliate of
a notice from a Multiemployer Plan that such action has been taken by PBGC
with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal from a Multiemployer Plan by
Borrower or any ERISA Affiliate that results in liability under Section
4201 or 4204 of ERISA (including the obligation to satisfy secondary
liability as a result of a purchaser default) or the receipt by Borrower or
any ERISA Affiliate of notice from a Multiemployer Plan that it is in
reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA or
that it intends to terminate or has terminated under Section 4041A of
ERISA;
(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against Borrower or any ERISA Affiliate to enforce
Section 515 of ERISA, which proceeding is not dismissed within 30 days;
(vi) the adoption of an amendment to any Plan that, pursuant to
Section 401(a)(29) of the Code or Section 307 of
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75
ERISA, would result in the loss of tax-exempt status of the trust of which
such Plan is a part if Borrower or an ERISA Affiliate fails to timely
provide security to the Plan in accordance with the provisions of said
Sections; and
(vii) the imposition of a lien or a security interest in connection
with a Plan.
ARTICLE VI
NEGATIVE COVENANTS
------------------
Section 6.1. Borrower Negative Covenants. Borrower covenants and agrees
that, until payment in full of the Indebtedness (or, with respect to any
particular Individual Property, the earlier release of the Related Mortgage), it
will not do, directly or indirectly, any of the following unless Lender consents
thereto in writing:
(A) Liens on the Mortgaged Property. Incur, create, assume, become or be
liable in any manner with respect to, or permit to exist, any Lien with respect
to any Individual Property, except: (i) Liens in favor of Lender and (ii) the
Permitted Encumbrances.
(B) Transfer. Except as expressly permitted by or pursuant to this
Agreement or the Mortgages, allow any Transfer to occur, terminate the
Management Agreement, or enter into a management contract with respect to any
Facility. Prior to the first to occur of the Securitization Closing Date, the
date Lender sells the Loan and April 1, 1994 Borrower may Transfer undeveloped
portions of the Land which are not used in the operation of the Facilities as
currently operated and Lender shall release such portions of the Land from its
Liens, provided, however, that (i) at least 10 days prior to any such Transfer
Borrower shall deliver to Lender: (v) if requested by Lender, an updated
Appraisal for the Facility with respect to which such Transfer is to occur
reflecting the Appraised Value of such Facility without the portion of the Land
to be transferred, (w) a certificate by Borrower affirming that the
representations in Sections 4.1(T) and (FF) will be true following such
Transfer, (x) all documents necessary to show that the Transfer will be made in
accordance with all applicable Legal Requirements, including, if requested by
Lender, an opinion of Borrower's counsel to such effect, (y) a new Survey for
the Facility omitting the portion of the Land to be transferred but in all other
respects identical to the Survey for the Facility delivered on the Closing Date,
and (z) an endorsement to the Title Insurance Policy reflecting such Transfer
acceptable to Lender in its sole discretion, and (ii) Borrower shall pay all of
Lender's out-of-pocket expenses in
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connection with such Transfer, including Lender's attorneys' fees and
disbursements.
(C) Other Borrowings. Incur, create, assume, become or be liable in any
manner with respect to Other Borrowings, except that (i) Borrower may incur
secured or unsecured indebtedness relating solely to financing or leasing of
Equipment and costs associated with such indebtedness (x) which does not exceed
$150,000 in aggregate at any Facility or $1,000,000 in the aggregate at all the
Facilities, and (y) the proceeds of which are not distributed to Borrower except
as reimbursement for monies expended by Borrower to fund the financing or
leasing of such Equipment and (ii) FGI may make loans to Borrower provided that
such loans are unsecured, subordinate to the Loan and on terms satisfactory to
Lender.
(D) Dissolution. Dissolve, terminate, liquidate, merge with or
consolidate into another Person, except as expressly permitted pursuant to the
certificate of incorporation of Borrower; provided, however, that the surviving
Person(s) must be a Single-Purpose Entity.
(E) Change In Business. Enter into any line of business other than the
ownership and operation of the Mortgaged Property, or otherwise cease to be a
Single-Purpose Entity, or make any material change in the scope or nature of its
business objectives, purposes or operations, or undertake or participate in
activities other than the continuance of its present business.
(F) Debt Cancellation. Cancel or otherwise forgive or release any
material claim or debt owed to Borrower by any Person, except for adequate
consideration or in the ordinary course of Borrower's business.
(G) Affiliate Transactions. Enter into, or be a party to, any transaction
with an Affiliate of Borrower, except in the ordinary course of business and on
terms which are no less favorable to Borrower or such Affiliate than would be
obtained in a comparable arm's length transaction with an unrelated third party
and, if the amount to be paid to the Affiliate pursuant to the transaction or
series of related transactions is greater than $250,000, are fully disclosed to
Lender in advance; provided, however, that Lender hereby agrees that, provided
no Event of Default shall have occurred and be continuing with respect to
Borrower or any Individual Property, and subject to the provisions of Sections
5.1(P) and 5.1(Q), nothing contained in the foregoing shall prohibit payment by
Borrower of any fees or expenses to Manager in accordance with the terms of the
Management Agreement, and Lender hereby consents to Manager serving as manager
of the Facilities; provided, further, however, that the management fee charged
by Manager shall not be more than
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the amounts provided for in the Management Agreement as of the date hereof.
(H) Creation of Easements. Create, or permit any Facility or any part
thereof to become subject to, any easement, license or restrictive covenant,
other than a Permitted Encumbrance. Lender agrees that it will join in and
subordinate the Liens of the Mortgages to any easement, license or restrictive
covenant (i) which arises after the date hereof and (ii) that Lender, (A) in
Lender's reasonable discretion, deems to constitute a Permitted Encumbrance or
(B) in Lender's sole discretion, deems not to adversely affect the value of a
Facility.
(I) Misapplication of Funds. Distribute any Rents or Moneys received from
Accounts in violation of the provisions of Section 2.12, or fail to deliver any
security deposit to Manager for deposit into the Security Deposit Accounts, or
misappropriate any security deposit or portion thereof.
(J) Certain Restrictions. Enter into any agreement which expressly
restricts the ability of Borrower to enter into amendments, modifications or
waivers of any of the Loan Documents.
(K) Issuance of Capital Stock. Issue any shares of Borrower's stock other
than the shares which are outstanding on the Closing Date or any security or
other instrument which by its terms is convertible into or exercisable or
exchangeable for any shares of Borrower's capital stock, unless the Person(s) to
whom such shares are issued pledges such shares to Lender pursuant to an
agreement in the form of Exhibit L attached hereto.
(L) Assignment of Licenses and Permits. Assign or transfer any of its
interest in any Permits, certificates of need, or Reimbursement Contracts
(including rights to payment thereunder) pertaining to any Facility, or assign,
transfer or remove or permit any other Person to assign, transfer or remove any
records pertaining to any Facility including, without limitation, patient
records, medical and clinical records (except for removal of records (i) in the
ordinary course of business, (ii) as directed by the patients owning such
records or (iii) pursuant to court order or Legal Requirements) without Lender's
prior written consent, which consent may be granted or refused in Lender's sole
discretion.
(M) Place of Business. Change its chief executive office or its principal
place of business without giving Lender at least 30 days' prior written notice
thereof and promptly providing Lender such information as Lender may reasonably
request in connection therewith.
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(N) Leases. Enter into, amend or cancel Leases, except as permitted by or
pursuant to the Mortgages.
ARTICLE VII
DEFAULTS
--------
Section 7.1. Event of Default. The occurrence of one or more of the
following events shall be an "Event of Default" hereunder:
(i) if on any Payment Date the funds in the Debt Service Payment Sub-
Account are insufficient to pay the Required Debt Service Payment due on
such Payment Date;
(ii) if Borrower fails to pay the outstanding Indebtedness on the
Maturity Date;
(iii) if on the date any payment of a Basic Carrying Cost would become
delinquent, the funds in the Basic Carrying Costs Sub-Account required to
be reserved pursuant to Section 2.12(g), if any, together with any funds in
the Cash Collateral Account not allocated to another Sub-Account (excluding
all funds which are utilized in the calculation in clause (i) above to
prevent the determination of an Event of Default thereunder) are
insufficient to make such payment;
(iv) the occurrence of the event identified in Sections 2.12(f),
2.12(g) or 2.12(i) as constituting an "Event of Default";
(v) if Borrower fails to pay any other amount payable pursuant to
this Agreement or any other Loan Document when due and payable in
accordance with the provisions hereof or thereof, as the case may be, and
such failure continues for 30 days after Lender delivers written notice
thereof to Borrower;
(vi) if any representation or warranty made herein or in any other
Loan Document, or in any report, certificate, financial statement or other
Instrument, agreement or document furnished by Borrower in connection with
this Agreement, the Note or any other Loan Document executed and delivered
by Borrower, shall be false in any material respect as of the date such
representation or warranty was made;
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79
(vii) if Borrower, Guarantor or any of Borrower's stockholders makes an
assignment for the benefit of creditors;
(viii) if a receiver, liquidator or trustee shall be appointed for
Borrower, Guarantor or any of Borrower's stockholders or if Borrower,
Guarantor or any of Borrower's stockholders shall be adjudicated a bankrupt
or insolvent, or if any petition for bankruptcy, reorganization or
arrangement pursuant to federal bankruptcy law, or any similar federal or
state law, shall be filed by or against, consented to, or acquiesced in by,
Borrower, Guarantor or any of Borrower's stockholders or if any proceeding
for the dissolution or liquidation of Borrower, Guarantor or any of
Borrower's stockholders shall be instituted; provided, however, that if
such appointment, adjudication, petition or proceeding was involuntary and
not consented to by Borrower, Guarantor or any of Borrower's stockholders
as the case may be, upon the same not being discharged, stayed or dismissed
within 90 days, or if Borrower, Guarantor or any of Borrower's stockholders
shall generally not be paying its debts as they become due;
(ix) if Borrower attempts to delegate its obligations or assign its
rights under this Agreement, any of the other Loan Documents or any
interest herein or therein, or if any Transfer occurs other than in
accordance with the Mortgages or any other Loan Document;
(x) if any provision of the certificate of incorporation or the
by-laws of Borrower affecting the purpose for which Borrower is formed is
amended or modified in any material respect which may adversely affect
Lender, Servicer, Custodian, Trustee or any of the Certificateholders, or
if Borrower or any of its stockholders fails to perform or enforce the
provisions of such organizational documents or attempts to dissolve
Borrower, or if Borrower breaches any of its representations, warranties or
covenants set forth in Sections 4.1(S) or 6.1(E);
(xi) if an Event of Default as defined or described in the Note, the
Mortgages or any other Loan Document occurs, whether as to Borrower or any
Individual Property or all or any portion of the Mortgaged Property;
(xii) if Borrower shall continue to be in Default under any of the
other terms, covenants or conditions of this Agreement, the Note, the
Mortgages or the other Loan Documents, for ten days after notice to
Borrower from Lender or its successors or assigns, in the case of any
Default
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which can be cured by the payment of a sum of money (other than Events of
Default pursuant to clauses (i), (ii), (iii) and (iv) above as to which no
grace period is applicable), or for 30 days after notice from Lender or its
successors or assigns, in the case of any other Default (unless otherwise
provided herein or in such other Loan Document); provided, however, that if
such non-monetary Default is susceptible of cure but cannot reasonably be
cured within such 30 day period and provided further that Borrower shall
have commenced to cure such Default within such 30 day period and
thereafter diligently and expeditiously proceeds to cure the same, such 30
day period shall be extended for such time as is reasonably necessary for
Borrower in the exercise of due diligence to cure such Default, but in no
event shall such period exceed 180 days after the original notice from
Lender;
(xiii) if Borrower fails to correct within the time deadline set by any
Medicare, Medicaid or licensing agency, any deficiency that justifies
either of the following actions by such agency with respect to any
Facility:
(x) a termination of Borrower's Medicare contract, Medicaid
contract or nursing home license; or
(y) a ban on new admissions generally or on admission of patients
otherwise qualified for Medicare or Medicaid coverage;
(xiv) if the Loan Amount exceeds 125% of the Appraised Value of the
Mortgaged Property as of the Closing Date, unless (x) REMIC status is
maintained or regained due to corrective actions taken by Borrower within
any applicable cure period under the Code or otherwise, and (y) Borrower
furnishes Lender with an opinion of outside counsel reasonably acceptable
to Lender stating that the REMIC Trust is a valid REMIC for federal income
tax purposes; or
(xv) if an event or condition specified in Section 5.1(U) shall occur
or exist with respect to any Plan or Multiemployer Plan and, as a result of
such event or condition, together with all other such events or conditions,
Borrower or any ERISA Affiliate shall incur or in the opinion of Lender
shall be reasonably likely to incur a liability to a Plan, a Multiemployer
Plan or PBGC (or any combination of the foregoing) which would constitute,
in the determination of Lender, a Material Adverse Effect;
then, upon the occurrence of any such Event of Default and at any time
thereafter, Lender or its successors or assigns, may, in addition to any other
rights or remedies available to it pursuant
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to this Agreement, the Note, the Mortgages and the other Loan Documents, or at
law or in equity, take such action, without notice or demand, as Lender or its
successors or assigns, deems advisable to protect and enforce its rights against
Borrower and in and to all or any portion of the Mortgaged Property, including,
without limitation, declaring the entire Indebtedness to be immediately due and
payable and may enforce or avail itself of any or all rights or remedies
provided in the Loan Documents against Borrower and/or the Mortgaged Property,
including, without limitation, all rights or remedies available at law or in
equity.
Section 7.2. Remedies . (a) Upon the occurrence of an Event of Default,
all or any one or more of the rights, powers, other remedies available to Lender
against Borrower under this Agreement, the Note, the Mortgages or any of the
other Loan Documents executed by or with respect to Borrower, or at law or in
equity may be exercised by Lender at any time and from time to time, whether or
not all or any portion of the Indebtedness shall be declared due and payable,
and whether or not Lender shall have commenced any foreclosure proceeding or
other action for the enforcement of its rights and remedies under any of the
Loan Documents with respect to any Individual Property or all or any portion of
the Mortgaged Property. Any such actions taken by Lender shall be cumulative
and concurrent and may be pursued independently, singly, successively, together
or otherwise, at such time and in such order as Lender may determine in its sole
discretion, to the fullest extent permitted by law, without impairing or
otherwise affecting the other rights and remedies of Lender permitted by law,
equity or contract or as set forth herein or in the other Loan Documents.
(b) In the event of the foreclosure or other action by Lender to enforce
its remedies in connection with one or more of the Individual Properties or all
or any portion of the Mortgaged Property, whether such foreclosure sale (or
other remedy) yields Net Proceeds in an amount less than, equal to or more than
the Allocated Loan Amount of such Individual Property or Mortgaged Property,
Lender shall apply all Net Proceeds received to repay the Indebtedness in
accordance with Section 2.8, Allocated Loan Amounts shall be adjusted (or not
adjusted) in accordance with the definition of "Allocated Loan Amount", the
Indebtedness shall be reduced to the extent of such Net Proceeds and the
remaining portion of the Indebtedness shall remain outstanding and secured by
the Mortgages and the other Loan Documents, it being understood and agreed by
Borrower that Borrower is liable for the repayment of all the Indebtedness and
that any "excess" foreclosure proceeds are part of the cross-collateralized and
cross-defaulted security granted to Lender pursuant to the Mortgages; provided,
however, that the Note shall be deemed to have been accelerated only to the
extent of the Net Proceeds
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actually received by Lender with respect to any Individual Property and applied
in reduction of the Indebtedness in accordance with the provisions of the Note,
after payment by Borrower of all transaction costs and expenses and costs of
enforcement.
Section 7.3. Remedies Cumulative. The rights, powers and remedies of
Lender under this Agreement shall be cumulative and not exclusive of any other
right, power or remedy which Lender may have against Borrower pursuant to this
Agreement or the other Loan Documents executed by or with respect to Borrower,
or existing at law or in equity or otherwise. Lender's rights, powers and
remedies may be pursued singly, concurrently or otherwise, at such time and in
such order as Lender may determine in Lender's sole discretion. No delay or
omission to exercise any remedy, right or power accruing upon an Event of
Default shall impair any such remedy, right or power or shall be construed as a
waiver thereof, but any such remedy, right or power may be exercised from time
to time and as often as may be deemed expedient. A waiver of any Default or
Event of Default shall not be construed to be a waiver of any subsequent Default
or Event of Default or to impair any remedy, right or power consequent thereon.
Notwithstanding any other provision of this Agreement, Lender reserves the right
to seek a deficiency judgment or preserve a deficiency claim, in connection with
the foreclosure of a Mortgage on an Individual Property, to the extent necessary
to foreclose on other parts of the Mortgaged Property.
ARTICLE VIII
MISCELLANEOUS
-------------
Section 8.1. Survival. This Agreement and all covenants, agreements,
representations and warranties made herein and in the certificates delivered
pursuant hereto shall survive the making by Lender of the Loan and the execution
and delivery by Borrower to Lender of the Note, and shall continue in full force
and effect so long as any portion of the Indebtedness is outstanding and unpaid;
provided, however, that upon a prepayment with respect to a particular
Individual Property as described in Section 2.7(a) and upon satisfaction of the
other conditions set forth in Section 2.11, Borrower shall be released of all
liability under this Agreement (other than any liability with respect to
environmental matters arising under Sections 4.1(P) or 5.1(D) - (I), inclusive,
hereof), the Related Mortgage, the applicable Assignment of Lease, and the other
Loan Documents insofar as they concern such Individual Property, and Borrower's
stockholders shall be released of all liability under the Stock Pledge and
Security Agreements with respect to such Individual Property. Whenever in this
Agreement any of the parties hereto
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is referred to, such reference shall be deemed to include the successors and
assigns of such party. All covenants, promises and agreements in this Agreement
contained, by or on behalf of Borrower, shall inure to the benefit of the
respective successors and assigns of Lender. Nothing in this Agreement or in
any other Loan Document, express or implied, shall give to any Person other than
the parties and the holder(s) of the Note, the Mortgages and the other Loan
Documents, and their legal representatives, successors and assigns, any benefit
or any legal or equitable right, remedy or claim hereunder.
Section 8.2. Lender's Discretion. Whenever pursuant to this Agreement,
Lender exercises any right given to it to approve or disapprove, or any
arrangement or term is to be satisfactory to Lender, the decision of Lender to
approve or disapprove or to decide whether arrangements or terms are
satisfactory or not satisfactory shall (except as is otherwise specifically
herein provided) be in the sole discretion of Lender and shall be final and
conclusive.
Section 8.3. Governing Law. (a) This Agreement was negotiated in New
York, and made by Lender and accepted by Borrower in the State of New York, and
the proceeds of the Note delivered pursuant hereto were disbursed from New York,
which State the parties agree has a substantial relationship to the parties and
to the underlying transaction embodied hereby, and in all respects, including,
without limitation, matters of construction, validity and performance, this
Agreement and the obligations arising hereunder shall be governed by, and
construed in accordance with, the laws of the State of New York applicable to
contracts made and performed in such State and any applicable law of the United
States of America, except that at all times the provisions for the creation,
perfection and enforcement of the liens and security interests created pursuant
to the Mortgages and the other Loan Documents shall be governed by and construed
according to the law of the State in which the applicable Facility is located,
it being understood that, to the fullest extent permitted by law of such States,
the law of the State of New York shall govern the validity and the
enforceability of all Loan Documents, and the Indebtedness or obligations
arising hereunder or thereunder. To the fullest extent permitted by law,
Borrower hereby unconditionally and irrevocably waives any claim to assert that
the law of any other jurisdiction governs this Agreement and the Note, and this
Agreement and the Note shall be governed by and construed in accordance with the
laws of the State of New York pursuant to (S) 5-1401 of the New York General
Obligations Law.
(b) Any legal suit, action or proceeding against Lender or Borrower
arising out of or relating to this Agreement shall be instituted in any federal
or state court in New York,
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New York, pursuant to (S) 5-1402 of the New York General Obligations Law, and
Borrower waives any objection which it may now or hereafter have to the laying
of venue of any such suit, action or proceeding, and Borrower hereby irrevocably
submits to the jurisdiction of any such court in any suit, action or proceeding.
Borrower does hereby designate and appoint Jones, Day, Reavis & Pogue, 599
Lexington Avenue, New York, New York 10022, Attention: Robert A. Profusek,
Esq., as its authorized agent to accept and acknowledge on its behalf service of
any and all process which may be served in any such suit, action or proceeding
in any federal or state court in New York, New York, and agrees that service of
process upon said agent at said address (or at such other office in New York,
New York as may be designated by Borrower from time to time in accordance with
the terms hereof) with a copy to Borrower at its principal executive offices,
Attention: General Counsel, and written notice of said service of Borrower
mailed or delivered to Borrower in the manner provided herein shall be deemed in
every respect effective service of process upon Borrower, in any such suit,
action or proceeding in the State of New York. Borrower (i) shall give prompt
notice to Lender of any changed address of its authorized agent hereunder, (ii)
may at any time and from time to time designate a substitute authorized agent
with an office in New York, New York (which office shall be designated as the
address for service of process), and (iii) shall promptly designate such a
substitute if its authorized agent ceases to have an office in New York, New
York or is dissolved without leaving a successor.
Section 8.4. Modification, Waiver in Writing. No modification,
amendment, extension, discharge, termination or waiver of any provision of this
Agreement, the Note or any other Loan Document, or consent to any departure by
Borrower therefrom, shall in any event be effective unless the same shall be in
a writing signed by the party against whom enforcement is sought, and then such
waiver or consent shall be effective only in the specific instance, and for the
purpose, for which given. Except as otherwise expressly provided herein, no
notice to or demand on Borrower shall entitle Borrower to any other or future
notice or demand in the same, similar or other circumstances.
Section 8.5. Delay Not a Waiver. Neither any failure nor any delay on
the part of Lender in insisting upon strict performance of any term, condition,
covenant or agreement, or exercising any right, power, remedy or privilege
hereunder, or under the Note, or of any other Loan Document, or any other
instrument given as security therefor, shall operate as or constitute a waiver
thereof, nor shall a single or partial exercise thereof preclude any other
future exercise, or the exercise of any other right, power, remedy or privilege.
In particular, and not by way of limitation, by accepting payment after the due
date of any amount payable under this Agreement,
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85
the Note or any other Loan Document, Lender shall not be deemed to have waived
any right either to require prompt payment when due of all other amounts due
under this Agreement, the Note or the other Loan Documents, or to declare a
default for failure to effect prompt payment of any such other amount.
Section 8.6. Notices . All notices, consents, approvals and requests
required or permitted hereunder or under any other Loan Document shall be given
in writing and shall be effective for all purposes if hand delivered or sent by
(a) certified or registered United States mail, postage prepaid, or (b)
expedited prepaid delivery service, either commercial or United States Postal
Service, with proof of attempted delivery, and by telecopier (with answerback
acknowledged), addressed if to Lender at its address set forth on the first page
hereof, if to Custodian at its address set forth on the first page hereof, and
if to Borrower at its address set forth on the first page hereof, or at such
other address and Person as shall be designated from time to time by any party
hereto, as the case may be, in a written notice to the other parties hereto in
the manner provided for in this Section 8.6. A copy of all notices, consents,
approvals and requests directed to Lender shall be delivered to Milbank, Tweed,
Hadley & McCloy, 1 Chase Manhattan Plaza, New York, New York 10005, Attention:
Geoffrey K. Hurley and Servicer, at the address set forth in the Pooling and
Servicing Agreement, and a copy of all notices, consents, approvals and requests
directed to Borrower (other than statements setting forth the monthly amount
payable under the Note) shall be delivered to Jones, Day, Reavis & Pogue, 599
Lexington Avenue, New York, New York 10022, Attention: Robert A. Profusek, Esq.
A notice shall be deemed to have been given: in the case of hand delivery, at
the time of delivery; in the case of registered or certified mail, when
delivered or the first attempted delivery on a Business Day; or in the case of
expedited prepaid delivery and telecopy, upon the first attempted delivery on a
Business Day. A party receiving a notice which does not comply with the
technical requirements for notice under this Section 8.6 may elect to waive any
deficiencies and treat the notice as having been properly given.
SECTION 8.7. TRIAL BY JURY. BORROWER, TO THE FULLEST EXTENT THAT IT MAY
LAWFULLY DO SO, WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING, INCLUDING,
WITHOUT LIMITATION, ANY TORT ACTION, BROUGHT BY ANY PARTY HERETO WITH RESPECT TO
THIS AGREEMENT, THE NOTE OR THE OTHER LOAN DOCUMENTS.
Section 8.8. Headings. The Article and Section headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
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86
Section 8.9. Assignment. Lender shall have the right to assign this
Agreement and/or any of the other Loan Documents and the obligations hereunder
to any Person, except that the Note and, in connection with the initial offering
under the Securitization only, the Certificates may not be assigned, transferred
or sold to any Person listed on Exhibit AA attached hereto or their Affiliates.
The parties hereto acknowledge that following the execution and delivery of this
Agreement, the Note and the Mortgages, Lender expects to sell, transfer and
assign this Agreement, the Note, the Mortgages and the other Loan Documents to
Trustee on the Securitization Closing Date. All references to "Lender"
hereunder shall be deemed to include the assigns of Lender and the parties
hereto acknowledge that actions taken by Lender hereunder may be taken by
Servicer on Lender's behalf or, after the Securitization Closing Date, on behalf
of Trustee.
Section 8.10. Severability. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
Section 8.11. Preferences. Lender shall have no obligation to marshal
any assets in favor of Borrower or any other party or against or in payment of
any or all of the obligations of Borrower pursuant to this Agreement, the Note
or any other Loan Document. Lender shall have the continuing and exclusive
right to apply or reverse and reapply any and all payments by Borrower to any
portion of the obligations of Borrower hereunder. To the extent Borrower makes
a payment or payments to Lender for Borrower's benefit, which payment or
proceeds or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to be a trustee,
receiver or any other party under any bankruptcy law, state or federal law,
common law or equitable cause, then, to the extent of such payment or proceeds
received, the obligations hereunder or part thereof intended to be satisfied
shall be revived and continue in full force and effect, as if such payment or
proceeds had not been received by Lender.
Section 8.12. Waiver of Notice. Borrower shall not be entitled to any
notices of any nature whatsoever from Lender except with respect to matters for
which this Agreement or the other Loan Documents specifically and expressly
provide for the giving of notice by Lender to Borrower and except with respect
to matters for which Borrower is not, pursuant to applicable Legal Requirements,
permitted to waive the giving of notice. Borrower
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hereby expressly waives the right to receive any notice from Lender with respect
to any matter for which this Agreement or the other Loan Documents does not
specifically and expressly provide for the giving of notice by Lender to
Borrower.
Section 8.13. Remedies of Borrower. In the event that a claim or
adjudication is made that Lender or its agents, including, without limitation,
Servicer, has acted unreasonably or unreasonably delayed acting in any case
where by law or under this Agreement, the Note, the Mortgages or the other Loan
Documents, Lender or such agent, as the case may be, has an obligation to act
reasonably or promptly, Borrower agrees that neither Lender nor its agents,
including, without limitation, Servicer, shall be liable for any monetary
damages, and Borrower's sole remedies shall be limited to commencing an action
seeking injunctive relief or declaratory judgment. The parties hereto agree
that any action or proceeding to determine whether Lender has acted reasonably
shall be determined by an action seeking declaratory judgment.
Section 8.14. Exculpation. Notwithstanding anything herein or in any
other Loan Document to the contrary, except as otherwise set forth in this
Section 8.14 to the contrary, Lender shall not enforce the liability and
obligation of Borrower to perform and observe the obligations contained in this
Agreement, the Note, the Mortgages or any of the other Loan Documents executed
and delivered by Borrower by any action or proceeding wherein a money judgment
shall be sought against Borrower or its shareholders, except that Lender may
bring a foreclosure action, action for specific performance, or other
appropriate action or proceeding (including, without limitation, to obtain a
deficiency judgment) solely for the purpose of enabling Lender to realize upon
(i) Borrower's interest in the Mortgaged Property, (ii) the Rents and Accounts
arising from the Facilities to the extent (x) received by Borrower after the
occurrence of an Event of Default or (y) distributed to Borrower or its
shareholders during or with respect to any period for which Lender did not
receive the full amounts it was entitled to receive as prepayments of the Loan
pursuant to Sections 2.7(c) or (d) (all Rents and Accounts covered by clauses
(x) and (y) being hereinafter referred to as the "Recourse Distributions") and
(iii) any other collateral given to Lender under the Loan Documents ((i), (ii)
and (iii), collectively, the "Default Collateral"); provided, however, that any
judgment in any such action or proceeding shall be enforceable against Borrower
only to the extent of any such Default Collateral. The provisions of this
Section 8.14 shall not, however, (a) impair the validity of the Indebtedness
evidenced by the Note or in any way affect or impair the Liens of the Mortgages
or any of the other Loan Documents or the right of Lender to foreclose the
Mortgages following an Event of Default; (b) impair the right of Lender to name
Borrower as a party
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defendant in any action or suit for judicial foreclosure and sale under any of
the Mortgages; (c) affect the validity or enforceability of the Note, the
Mortgages or the other Loan Documents; (d) impair the right of Lender to obtain
the appointment of a receiver; (e) impair the enforcement of the Assignments of
Leases or the Stock Pledge and Security Agreements (subject to the nonrecourse
provisions thereof); (f) impair the right of Lender to bring suit for actual
damages, losses and costs resulting from fraud or intentional misrepresentation
by Borrower or any other Person in connection with this Agreement, the Note, the
Mortgages or the other Loan Documents; (g) impair the right of Lender to obtain
the Recourse Distributions received by Borrower, including, without limitation,
the right to proceed against Borrower's shareholders to the extent any such
Recourse Distributions have actually theretofore been distributed to Borrower's
shareholders; (h) impair the right of Lender to bring suit with respect to
Borrower's misappropriation of security deposits or Rents collected more than
one month in advance; (i) impair the right of Lender to obtain Insurance
Proceeds or Condemnation Proceeds due to Lender pursuant to the Mortgages; (j)
impair the right of Lender to enforce the provisions of Sections 4.1(P) or
5.1(D)-(I) even after repayment in full by Borrower of the Indebtedness; (k)
prevent or in any way hinder Lender from exercising, or constitute a defense, or
counterclaim, or other basis for relief in respect of the exercise of, any other
remedy against any or all of the collateral securing the Note as provided in the
Loan Documents; (l) impair the right of Lender to bring suit with respect to any
misapplication of any funds; (m) impair the right of Lender to enforce the
Indemnity Agreement even after repayment in full by Borrower of the
Indebtedness; or (n) impair the right of Lender to sue for, seek or demand a
deficiency judgment against Borrower solely for the purpose of foreclosing the
Mortgaged Property or any part thereof, or realizing upon the Default
Collateral; provided, however, that any such deficiency judgment referred to in
this clause (n) shall be enforceable against Borrower only to the extent of any
of the Default Collateral. The provisions of this Section 8.14 shall be
inapplicable to Borrower if any petition for bankruptcy, reorganization or
arrangement pursuant to federal or state law shall be filed by, consented to or
acquiesced in by or with respect to Borrower, or if Borrower shall institute any
proceeding for the dissolution or liquidation of Borrower, or if Borrower shall
make an assignment for the benefit of creditors, in which event Lender shall
have recourse against all of the assets of Borrower and the interests in
Borrower owned by, and the Recourse Distributions received by, Borrower's
shareholders (but excluding the other assets of Borrower's shareholders to the
extent Lender would not have had recourse against such assets other than in
accordance with the provisions of this Section 8.14). Notwithstanding the
foregoing, in the event an Individual Property is released from the lien created
by the Related
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Mortgage, Borrower shall be released in all respects from any further liability
with respect to the Loan other than any further liability for certain kinds of
environmental matters arising under Sections 4.1(P) or 5.1(D)-(I) as the same
applies to such Individual Property.
Section 8.15. Exhibits Incorporated. The information set forth on the
cover, heading and recitals hereof, and the Exhibits attached hereto, are hereby
incorporated herein as a part of this Agreement with the same effect as if set
forth in the body hereof.
Section 8.16. Offsets, Counterclaims and Defenses. Any assignee of
Lender's interest in and to this Agreement, the Note, the Mortgages and the
other Loan Documents shall take the same free and clear of all offsets,
counterclaims or defenses which are unrelated to this Agreement, the Note, the
Mortgages and the other Loan Documents which Borrower may otherwise have against
any assignor or this Agreement, the Note, the Mortgages and the other Loan
Documents, and no such unrelated counterclaim or defense shall be interposed or
asserted by Borrower in any action or proceeding brought by any such assignee
upon this Agreement, the Note, the Mortgages and other Loan Documents and any
such right to interpose or assert any such unrelated offset, counterclaim or
defense in any such action or proceeding is hereby expressly waived by Borrower.
Section 8.17. No Joint Venture or Partnership. Borrower and Lender
intend that the relationship created hereunder be solely that of borrower and
lender. Nothing herein is intended to create a joint venture, partnership,
tenancy-in-common, or joint tenancy relationship between Borrower and Lender nor
to grant Lender any interest in the Mortgaged Property other than that of
mortgagee or lender.
Section 8.18. Waiver of Marshalling of Assets Defense. To the fullest
extent Borrower may legally do so, Borrower waives all rights to a marshalling
of the assets of Borrower, FGI and others with interests in Borrower, and of the
Mortgaged Property, or to a sale in inverse order of alienation in the event of
foreclosure of the interests hereby created, and agrees not to assert any right
under any laws pertaining to the marshalling of assets, the sale in inverse
order of alienation, homestead exemption, the administration of estates of
decedents, or any other matters whatsoever to defeat, reduce or affect the right
of Lender under the Loan Documents to a sale of the Individual Property for the
collection of the Indebtedness without any prior or different resort for
collection, or the right of Lender or Deed of Trust Trustee to the payment of
the Indebtedness out of the Net Proceeds of the Individual Property in
preference to every other claimant whatsoever.
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Section 8.19. Waiver of Counterclaim. Borrower hereby waives the right
to assert a counterclaim, other than compulsory counterclaim, in any action or
proceeding brought against it by Lender or its agents, including, without
limitation, Servicer.
Section 8.20. Conflict; Construction of Documents. In the event of any
conflict between the provisions of this Agreement and the provisions of the
Note, the Mortgages or any of the other Loan Documents, the provisions of this
Agreement shall prevail. The parties hereto acknowledge that they were
represented by counsel in connection with the negotiation and drafting of the
Loan Documents and that the Loan Documents shall not be subject to the principle
of construing their meaning against the party which drafted same.
Section 8.21. Brokers and Financial Advisors. Borrower and Lender hereby
represent that they have dealt with no financial advisors, brokers,
underwriters, placement agents, agents or finders in connection with the
transactions contemplated by this Agreement except for Nomura Securities
International, Inc. (the "Advisor"). Borrower and Lender hereby agree to
indemnify and hold the other harmless from and against any and all claims,
liabilities, costs and expenses of any kind in any way relating to or arising
from a claim by any Person (other than the Advisor) that such Person acted on
behalf of the indemnifying party in connection with the transactions
contemplated herein. The provisions of this Section 8.21 shall survive the
expiration and termination of this Agreement and the repayment of the
Indebtedness.
Section 8.22. Counterparts. This Agreement may be executed in any number
of counterparts, each of which when so executed and delivered shall be an
original, but all of which shall together constitute one and the same
instrument.
Section 8.23. Estoppel Certificates. Borrower and Lender each hereby
agree at any time and from time to time upon not less than 15 days prior written
notice by Borrower or Lender to execute, acknowledge and deliver to the party
specified in such notice, a statement, in writing, certifying that this
Agreement is unmodified and in full force and effect (or if there have been
modifications, that the same, as modified, is in full force and effect and
stating the modifications hereto), and stating whether or not, to the knowledge
of such certifying party, any Default or Event of Default has occurred and is
then continuing, and, if so, specifying each such Default or Event of Default;
provided, however, that it shall be a condition precedent to Lender's obligation
to deliver the statement pursuant to this Section 8.23, that Lender shall have
received, together with Borrower's request for such statement, an Officer's
Certificate stating that no Default or Event of Default exists as
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of the date of such certificate (or specifying such Default or Event of
Default).
Section 8.24. Payment of Expenses. Borrower shall, whether or not the
Transactions are consummated, pay all Transaction Costs, which shall include,
without limitation, (a) reasonable out-of-pocket costs and expenses of Lender in
connection with (i) the negotiation, preparation, execution and delivery of the
Loan Documents and the documents and instruments referred to therein, (ii) the
creation, perfection or protection of Lender's Liens in the Collateral
(including, without limitation, fees and expenses for title and lien searches
and filing and recording fees, third party due diligence expenses of up to
$2,000 for each Facility plus travel expenses, accounting firm fees, costs of
the Appraisals, Environmental Reports (and an environmental consultant), and the
Engineering Reports), (iii) the negotiation, preparation, execution and delivery
of any amendment, waiver or consent relating to any of the Loan Documents, (iv)
the preservation of rights under and enforcement of the Loan Documents and the
documents and instruments referred to therein, including any restructuring or
rescheduling of the Indebtedness, (v) the Securitization and (vi) the
Refinancing, (b) the reasonable fees, expenses and disbursements of counsel to
Lender in connection with all of the foregoing, (c) after the Securitization
Closing Date, the cost of an annual rating review by the Rating Agencies and all
fees of Trustee, and (d) all fees of Servicer, Bank and Custodian. Prior to
retention of third parties, Lender shall consult with Borrower regarding the
services required and the third parties selected to assure that costs will be
reasonable in scope and amount.
Section 8.25. Bankruptcy Waiver. Borrower hereby agrees that, in
consideration of the recitals and mutual covenants contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, in the event Borrower shall (i) file with any bankruptcy
court of competent jurisdiction or be the subject of any petition under Title 11
of the U.S. Code, as amended, (ii) be the subject of any order for relief issued
under Title 11 of the U.S. Code, as amended, (iii) file or be the subject of any
petition seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or law relating to
bankruptcy, insolvency or other relief of debtors, (iv) have sought or consented
to or acquiesced in the appointment of any trustee, receiver, conservator or
liquidator or (v) be the subject of any order, judgment or decree entered by any
court of competent jurisdiction approving a petition filed against such party
for any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future federal or state act
or law relating to bankruptcy, insolvency or other relief for
<PAGE>
92
debtors, the automatic stay provided by the Federal Bankruptcy Code shall be
modified and annulled as to Lender, so as to permit Lender to exercise any and
all of its remedies, upon request of Lender made on notice to Borrower and any
other party in interest but without the need of further proof or hearing.
Neither Borrower nor any Affiliate of Borrower shall contest the enforceability
of this Section 8.25.
SECTION 8.26. FINAL AGREEMENT. THIS AGREEMENT, TOGETHER WITH ALL OTHER
WRITTEN AGREEMENTS BETWEEN BORROWER AND LENDER, IS THE FINAL EXPRESSION OF THE
CREDIT AGREEMENT BETWEEN BORROWER AND LENDER, AND SUCH WRITTEN CREDIT AGREEMENT
MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY PRIOR ORAL CREDIT AGREEMENT OR OF A
CONTEMPORANEOUS ORAL CREDIT AGREEMENT BETWEEN BORROWER AND LENDER.
SECTION 8.27. NON-STANDARD TERMS; NO UNWRITTEN ORAL AGREEMENTS. ANY
ADDITIONAL NON-STANDARD TERMS OF THE CREDIT AGREEMENT BETWEEN BORROWER AND
LENDER, INCLUDING THE REDUCTION TO WRITING OF A PREVIOUS ORAL CREDIT AGREEMENT
BETWEEN BORROWER AND LENDER, ARE SET FORTH IN THE SPACE BELOW (IF NONE, WRITE
"NONE"): NONE.
NO UNWRITTEN ORAL CREDIT AGREEMENT BETWEEN BORROWER AND LENDER EXISTS.
FGI FINANCING I CORPORATION NOMURA ASSET CAPITAL CORPORATION
BY:/s/ Daniel A. Decker BY:/s/ Raymond M. Anthony
_______________________ ------------------------
RAYMOND M. ANTHONY
VICE PRESIDENT VICE PRESIDENT
OTHER CREDIT PARTIES:
BANKERS TRUST COMPANY
BY:_______________________
KEVIN R. QUINN
ASSISTANT SECRETARY
Section 8.28. Restatement. This Agreement consolidates, amends, restates
and supersedes in its entirety the Original Loan Agreement and the Wingate Loan
Agreement.
[Signature Page Follows]
<PAGE>
93
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized representatives, all as of the day and
year first above written.
LENDER:
NOMURA ASSET CAPITAL CORPORATION,
a Delaware corporation
By: /s/ Raymond M. Anthony
-----------------------
Raymond M. Anthony
Vice President
BORROWER:
FGI FINANCING I CORPORATION,
a Delaware corporation
By: /s/ John H. Sharpe
-------------------
John H. Sharpe
Vice President
CUSTODIAN:
BANKERS TRUST COMPANY,
a New York banking corporation (as
Custodian only)
By: /s/ Kevin R. Quinn
--------------------
Kevin R. Quinn
Assistant Secretary
<PAGE>
Exhibit A
---------
ALLOCATED LOAN AMOUNTS
----------------------
Allocated
Facility Loan Amount
- -------- -----------
Desert Harbor [based on DSCR of
properties]
Tucson
Deer Creek
Overland Park
Brookside
Park Lane
Memorial Woods
___________________
TOTAL: $
<PAGE>
Exhibit B
---------
APPRAISALS AND APPRAISED VALUES
-------------------------------
<TABLE>
<CAPTION>
Facility Appraisal Appraised Value
- -------- --------- ---------------
<S> <C> <C>
Desert Harbor Appraiser: Tellatin, Louis $14,935,000
& Andreas, Inc.
Date: April 8, 1993
Tucson Appraiser: Tellatin, Louis $17,335,000
& Andreas, Inc.
Date: April 5, 1993, updated to
December 15, 1993 by
letters dated December 15,
1993 and January 15, 1994
Deer Creek Appraiser: Healthcare Property $13,693,875
Appraisers, Inc.
Date: March 25, 1993
Overland Park Appraiser: Tellatin, Louis $13,623,000
& Andreas, Inc.
Date: April 5, 1993, updated to
December 15, 1993 by
letters dated December 15,
1993 and January 15, 1994
Brookside Appraiser: Healthcare Property $15,275,500
Appraisers, Inc.
Date: March 17, 1993
Park Lane Appraiser: Tellatin, Louis $27,288,000
& Andreas, Inc.
Date: April 2, 1993, updated to
December 15, 1993 by
letters dated December 15,
1993 and January 15, 1994
Memorial Woods Appraiser: Tellatin, Louis $22,894,000*
& Andreas, Inc.
Date: March 30, 1993
</TABLE>
- -------------
[*Note: Confirm no value allocated to undeveloped land]
<PAGE>
Exhibit D
---------
COLLECTION ACCOUNT BANKS
------------------------
Facility Collection Account Bank
- -------- -----------------------
Desert Harbor Caliber Bank
Tucson Security Pacific Bank of Arizona
Deer Creek Barnett Bank
Overland Park Boatmen's Bank of Kansas
Brookside First National Bank of Louisville
Park Lane CoMerica
Memorial Woods Crosby State Bank
<PAGE>
Exhibit E
---------
DEBT SERVICE COVERAGE RATIOS
----------------------------
<TABLE>
<CAPTION>
Facility Debt Service Coverage Ratio
- -------- ---------------------------
<S> <C>
Desert Harbor 1.4
Tucson 1.4
Deer Creek 1.4
Overland Park 1.4
Brookside 1.4
Park Lane 1.4
Memorial Woods 1.4
</TABLE>
<PAGE>
Exhibit F
---------
ENGINEERING REPORTS
-------------------
Facility Engineering Report
- -------- ------------------
Desert Harbor Engineering Property Condition Report
Prepared by: Eckland Consultants, Inc.
Comm. No. 93-860-01-03
Date: November 24, 1993
Tucson Engineering Property Condition Report
Prepared by: Eckland Consultants, Inc.
Comm. No. 93-860-01-12
Date: November 24, 1993
Deer Creek Engineering Property Condition Report
Prepared by: Eckland Consultants, Inc .
Comm. No. 93-860-01-02
Date: November 24, 1993
Overland Park Engineering Property Condition Report
Prepared by: Eckland Consultants, Inc.
Comm. No. 93-860-01-09
Date: November 24, 1993
Brookside Engineering Property Condition Report
Prepared by: Eckland Consultants, Inc.
Comm. No. 93-860-01-01
Date: November 29, 1993
Park Lane Engineering Property Condition Report
Prepared by: Eckland Consultants, Inc.
Comm. No. 93-860-01-10
Date: November 24, 1993
Memorial Woods Engineering Property Condition Report
Prepared by: Eckland Consultants, Inc.
Comm. No. 93-860-01-08
Date: November 29, 1993
<PAGE>
Exhibit G
---------
ENVIRONMENTAL REPORTS
---------------------
Facility Environmental Report
- -------- --------------------
Desert Harbor Phase I Environmental Site Assessment
Prepared by: Law Engineering, Inc.
Project No. 3043626404
Date: December 15, 1993
Tucson Phase I Environmental Site Assessment
Prepared by: Law Engineering, Inc.
Project No. 3043626412
Date: December 15, 1993
Deer Creek Phase I Environmental Site Assessment
Prepared by: Law Engineering, Inc.
Project No. 534-05729-02
Date: December 22, 1993
Overland Park Phase I Environmental Site Assessment
Prepared by: Law Engineering, Inc.
Project No. 3043626408
Date: December 15, 1993
Brookside Phase I Environmental Site Assessment
Prepared by: Law Engineering, Inc.
Project No. 3043626401
Date: December 15, 1993
Park Lane Phase I Environmental Site Assessment
Prepared by: Law Engineering, Inc.
Project No. 304-36264-09
Date: December 15, 1993
Memorial Woods Phase I Environmental Site Assessment
Prepared by: Law Engineering, Inc.
Project No. 304-36264-07
Date: December 15, 1993
<PAGE>
Exhibit H
---------
FACILITIES
----------
Facility Location
- -------- --------
Desert Harbor 13840 N. Desert Harbor Drive
Peoria, Arizona 85345
Tucson 2500 N. Rosemont Boulevard
Tucson, Arizona 85712
Deer Creek 3001 Deer Creek Country Club Blvd.
Deerfield Beach, Florida 33442
Overland Park 3501 West 95th Street
Overland Park, Kansas 66206
Brookside 200 Brookside Drive
Louisville, Kentucky 40243
Park Lane 7831 Park Lane
Dallas, Texas 75225
Memorial Woods 777 N. Post Oak Road
Houston, Texas 77024
<PAGE>
Exhibit M
---------
LETTER OF INSTRUCTIONS
----------------------
January __, 1994
[To each Collection Account Bank]
Re: Amended and Restated Loan Agreement (the "Loan Agreement") dated as of
January 21, 1994 among FGI Financing I Corporation ("Borrower"),
Nomura Asset Capital Corporation ("Lender") and Bankers Trust Company
("Custodian")
Gentlemen:
This letter is with respect to the deposit account no. __________ (the
"Collection Account") and the deposit account no. _________ (the "Security
Deposit Account") which have been established at _____________ by Borrower with
respect to property known as _______________________.
1. Sweep Instructions. The undersigned hereby irrevocably
instructs and authorizes you, by 5:00 p.m. on each business day in each month,
beginning January __, 1994, to disburse all amounts that are then in the
Collection Account in excess of $5,000 by wire transfer of immediately available
funds as follows:
(a) to and including the day prior to the day on which Lender or
Custodian confirms to you by written notice that, for the current month, funds
have been deposited in the Cash Collateral Account and allocated to the Debt
Service Payment Sub-Account, the Basic Carrying Costs Sub-Account and the
Capital Reserve Sub-Account (each as defined in the Loan Agreement) in the
dollar amounts required by the Loan Agreement, to the following deposit account
(the "Cash Collateral Account"):
Bankers Trust Company
LA Asset Based
ABA #021001033
4 Albany Street
New York, NY 10006
Account No. 01-419-663
Reference: 11515
Attention: Tanya Ash
<PAGE>
and (b) for the day such notice is received from Custodian and each day
thereafter in the then-current month, to the following account (or such other
account as Borrower may request):
Account No. _______________
[name and address]
ABA No.: ________________
The instructions set forth herein are irrevocable and are not subject to
modification in any manner, except that Lender may by written notice to you
amend or rescind the instructions contained herein.
2. Notice of Pledge. Please take notice that Borrower has irrevocably
pledged to Custodian on behalf of Lender and granted to Custodian on behalf of
Lender a security interest in the Collection Account and the Security Deposit
Account and all renewals, replacements, substitutions and proceeds thereof.
Borrower has made this pledge and granted this security interest pursuant to
Section 2.13 of the Loan Agreement. Pursuant to the Loan Agreement, Borrower
waives all right of withdrawal from the Collection Account. Borrower reserves
its right to withdraw from and deposit into the Security Deposit Account,
subject to loss of that right upon your receipt of notice from Custodian of the
occurrence of an Event of Default as provided in the Acknowledgement below.
Borrower has irrevocably constituted and appointed Custodian as attorney-in-fact
at any time after the occurrence and during the continuation of an Event of
Default to transfer the Collection Account and the Security Deposit Account and
to demand and receive any and all amounts in or represented by the Collection
Account and the Security Deposit Account. Please acknowledge receipt of this
Notice and your agreement to the terms described below by executing and
returning the following Acknowledgement to the undersigned.
Very truly yours,
Borrower:
FGI FINANCING I CORPORATION,
a Delaware corporation
By:__________________________
Name:
Title:
<PAGE>
ACKNOWLEDGMENT
--------------
__________________________, a ______________________ ("Depository"), hereby
acknowledges receipt of the irrevocable sweep instructions set forth in Section
1 above and notice of the above-described pledges and security interests set
forth in Section 2 above. Except as to the amount of any fees and expenses
relating to the maintenance of the Collection Account and the Security Deposit
Account, or the completion of the funds transfers hereinabove described, and
except for set-off rights with respect to return items and overdrafts in the
Collection Account and the Security Deposit Account, Depository waives any right
of set-off against the Collection Account and the Security Deposit Account
whether now existing or hereafter arising by contract or as a matter of law.
Depository further agrees that Borrower shall have no right of withdrawal as to
the Collection Account and, upon receipt from Custodian of a notice of an Event
of Default under the Loan Agreement, no further right of withdrawal from the
Security Deposit Account. Upon and after receipt of such a notice, Depository
will make disbursements from the Security Deposit Account in accordance with
instructions received from Custodian. All such notices shall be delivered to
the address set forth above.
Depository:
___________________________
a _________________________
By:________________________
Name:
Title:
<PAGE>
Exhibit N
---------
REQUIRED DEBT SERVICE PAYMENT CERTIFICATE
-----------------------------------------
FGI Financing I Corporation
8900 Keystone Crossing
Suite 200
Indianapolis, Indiana 46240-0498
Attention: ________________
Re: Amended and Restated Loan Agreement (the "Loan Agreement"), dated as
of January 21, 1994, among FGI Financing I Corporation, Nomura Asset
Capital Corporation ("Lender") and Bankers Trust Company
Gentlemen:
This certificate is delivered in accordance with Section 2.12(f) of
the Loan Agreement. All capitalized terms not defined herein shall have the
meanings ascribed to them in the Loan Agreement.
Lender hereby certifies that the Required Debt Service Payment due on
____________, 19__ is _________________________ Dollars ($__________) and to
date, the funds deposited into the Cash Collateral Account which have been
allocated to the Debt Service Payment Sub-Account [are] [are not] sufficient to
make such payment. In addition, the funds deposited into the Cash Collateral
Account which have been allocated to the Capital Reserve Sub-Account [are][are
not] sufficient to constitute the Capital Reserve Monthly Installment for the
month. Finally, [no funds were required to be allocated to the Basic Carrying
Cost Sub-Account.] [the funds deposited into the Cash Collateral Account which
have been allocated to the Basic Carrying Costs Sub-Account [are][are not]
sufficient to constitute the Basic Carrying Costs Monthly Installment for the
month.] [The amount of the deficiency or deficiencies is, in total,
_________________________ Dollars ($_____________) and such amount should be
deposited into the Cash Collateral Account at least one Business Day prior to
(the applicable Payment Date)].
NOMURA ASSET CAPITAL CORPORATION
By:_____________________________
Name:
Title:
<PAGE>
Exhibit O
---------
AMENDED AND RESTATED CASH COLLATERAL ACCOUNT AGREEMENT
------------------------------------------------------
January 21, 1994
Bankers Trust Company
3 Park Plaza, 16th Floor
Irvine, California 92714
Attn: Kevin Quinn
Re: FGI Financing I Corporation ("Borrower")
--------
Ladies and Gentlemen:
Reference is made to deposit account no. 11515 (the "Account") maintained
with you (the "Bank") at your branch located at 4 Albany Street, New York, New
York 10006. The Account is further described as set forth in Schedule I
attached hereto. Pursuant to a Loan Agreement dated as of January 20, 1994
among Borrower, Nomura Asset Capital Corporation ("Lender") and Bankers Trust
Company (the "Custodian"), which has been amended and restated in its entirety
by the parties thereto as of January 21, 1994 (the "Loan Agreement"), Borrower
has established the Account to hold certain funds of Borrower, and Borrower has
granted a security interest in favor of the Custodian in and to the Account and
certain other collateral. Capitalized terms used but not otherwise defined
herein shall have the respective meanings given thereto in the Loan Agreement.
It is a condition to the continued maintenance of the Account with the Bank that
the Bank agrees to this letter agreement (this "Agreement").
By signing this Agreement, the parties agree with each other as follows:
1. Notwithstanding anything to the contrary in any other agreement
relating to the Account, the Account will at all times be entitled "Bankers
Trust Company (as custodian) as Secured Party pursuant to Amended and
Restated Loan Agreement dated as of January 21, 1994 among FGI Financing I
Corporation, Nomura Asset Capital Corporation and Bankers Trust Company",
and all withdrawals therefrom will be permitted only in accordance with the
Loan Agreement.
2. The Bank hereby waives any and all rights it may have at law or
otherwise to set off, or make any claim, against the Account, except for
the payment of the Bank's fees and expenses for maintenance of the Account
and except for set-off rights with respect to return items and overdrafts
in the Account.
<PAGE>
3. Notwithstanding any other provisions of this Agreement, it is
agreed that the Bank shall not be liable either directly or indirectly for
any action taken by it or any of its directors, officers, agents or
employees as depository institution, except for its or their own gross
negligence or willful misconduct. In no event shall the Bank be liable
either directly or indirectly for losses or delays resulting from force
majeure, computer malfunctions, interruption of communication facilities,
labor difficulties or other causes beyond the Bank's reasonable control or
for consequential damages.
4. The Bank shall receive standard and customary fees with respect
to the Account either through charges to the Account or, at Borrower's
option, through the maintenance of a compensating balance. The Bank shall
provide monthly statements of account for the Account to Borrower, with a
copy to each of Lender, Manager, Servicer and, after the Securitization
Closing Date, Trustee, in the Bank's usual form, which statement shall set
forth the fees and charges payable for the preceding month and indicate
whether there was a "balance shortfall" and, if so, the fees then due and
payable.
5. This Agreement shall be effective as of the date first above
written. To the extent that other agreements (other than the Loan
Agreement) are inconsistent with this Agreement, this Agreement shall
supersede any other agreement (other than the Loan Agreement) relating to
the matters referred to herein. Neither this Agreement nor any provisions
hereof may be changed, amended, modified or waived orally, but only by an
instrument in writing signed by the parties hereto. Any provisions of this
Agreement which may prove unenforceable under any law or regulation shall
not affect the validity of any other provision hereof.
6. All notices, demands, requests, consents, approvals and other
communications (each, a "Notice" or collectively, "Notices") required,
permitted, or desired, to be given hereunder shall be in writing sent by
telecopy or by registered or certified mail, postage prepaid, return
receipt requested or delivered by hand or reputable overnight courier
addressed to the party to be so notified at its address hereinafter set
forth, or to such other address as such party shall have specified most
recently by like Notice. Any such Notice shall be deemed to have been
received three days after the date such Notice is mailed or on the date of
sending by telecopy or delivery by hand or courier addressed to the parties
as follows:
<PAGE>
If to the Bank:
Bankers Trust Company
3 Park Plaza, 16th Floor
Irvine, California 92714
Attn: Lisa Harline
Telephone: (714) 253-3184
Telecopy: (714) 253-7577
If to Borrower:
FGI Financing I Corporation
8900 Keystone Crossing
Suite 200
Indianapolis, Indiana 46240-0498
Attn: Vice President
Telephone: (317) 575-1414
Telecopy: (317) 575-1246
With a copy to:
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
Attn: Robert A. Profusek, Esq.
Telephone: (212) 326-3800
Telecopy: (212) 755-7306
If to Lender:
Nomura Asset Capital Corporation
2 World Financial Center
Building B
New York, New York 10281-1198
Attn: Raymond M. Anthony
Telephone: (212) 667-1850
Telecopy: (212) 667-1014
With a copy to:
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
Attn: Geoffrey K. Hurley
Telephone: (212) 530-5003
Telecopy: (212) 530-5219
<PAGE>
If to Manager:
Forum Group, Inc.
8900 Keystone Crossing
Suite 200
Indianapolis, Indiana 46240-0498
Attn: General Counsel
Telephone: (317) 575-1414
Telecopy: (317) 575-1246
With a copy to:
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
Attn: Robert A. Profusek, Esq.
Telephone: (212) 326-3800
Telecopy: (212) 755-7306
If to Servicer:
Bankers Trust Company
3 Park Plaza, 16th Floor
Irvine, California 92714
Attn: Lisa Harline
Telephone: (714) 253-3184
Telecopy: (714) 253-7577
7. This Agreement shall be binding upon the parties and their respective
successors and permitted assigns, and it shall inure to the benefit of the
parties and their respective successors and permitted assigns. This Agreement
shall not be assignable by the Bank except to a successor bank selected by
Lender in accordance with Section 2.12(b) of the Loan Agreement and shall not be
assignable by Borrower. The Bank may assign this Agreement only (i) upon 30
days' prior written notice to Borrower, Manager, Lender and Servicer (and, after
the Securitization Closing Date, Trustee) in connection with the withdrawal by
the Bank as Custodian under the Loan Agreement and (ii) in connection with a
removal of the Bank as Custodian under the Loan Agreement (any such assignment
to become effective at the time the withdrawal or removal of the Bank as
Custodian under the Loan Agreement becomes effective). In connection with any
such withdrawal or removal, the Bank shall hold all funds in the Account until a
successor Custodian shall have been appointed under the Loan Agreement whereupon
such funds and any Permitted Investments held by the Bank under the Loan
Agreement shall be transferred to such successor Custodian and all other actions
required to be taken under
<PAGE>
the Loan Agreement shall be taken by the Bank at Borrower's sole cost.
In connection with any assignment of this Agreement by the Bank, a replacement
Schedule I shall be attached hereto setting forth information with respect to
the Account established with the successor bank.
8. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES
OF SUCH STATE.
9. This Agreement amends, restates and supersedes in its entirety the
Cash Collateral Account Agreement dated January 20, 1994 between the parties.
Very truly yours,
FGI FINANCING I CORPORATION,
a Delaware corporation
By:___________________________
John H. Sharpe
Vice President
ACKNOWLEDGED AND AGREED TO
AS OF THE DATE FIRST ABOVE
WRITTEN:
BANKERS TRUST COMPANY,
a New York banking corporation
By:_______________________
Kevin R. Quinn
Assistant Secretary
<PAGE>
6
SCHEDULE I
----------
Account Number Account Name
- -------------- ------------
Bankers Trust Company, as custodian, as Secured Party
pursuant to Amended and Restated Loan Agreement dated as
of January 21, 1994 among FGI Financing I Corporation,
Nomura Asset Capital Corporation and Bankers Trust
Company.
<PAGE>
Exhibit Q
---------
REFINANCING TERMS
-----------------
Defined terms used but not defined herein have the meanings set forth in
the Loan Agreement.
I. Principal Amount: Not less than the amount necessary
to repay the Loan in full and pay
expenses of the Refinancing; not
more than an amount (i) equal to
70% of the sum of the Appraised
Values of the Facilities as shown
on Appraisals dated not more than
six months prior to the Refinancing
Date and (ii) for which the Debt
Service Coverage Ratio would be
less than 1.4.
II. Maturity Date: 84 months from the Refinancing Date.
III. Amortization Date: [270/300] months from the
Refinancing Date.
IV. Interest Rate: Borrower to choose, prior to the
Refinancing Date, either fixed rate
or floating rate for refinanced
loan, calculated as set forth
below. The rates do not include
servicing costs, which must be paid
by Borrower.
A. Floating Rate: LIBOR plus a pricing spread based
on Debt Service Coverage Ratio of
refinanced loan as of the
Refinancing Date:
DSCR Range Pricing Spread
1.60 and above 2.80%
1.50-1.59 3.35%
1.40-1.49 4.10%
B. Fixed Rate: Seven year U.S. Treasury rate as of
the Refinancing Date plus pricing
spread based on Debt Service
Coverage Ratio of refinanced loan
as of the Refinancing Date:
DSCR Range Pricing Spread
1.60 and above 3.10%
1.50-1.59 3.65%
1.40-1.49 4.40%
<PAGE>
2
V. Prepayment: No prepayment for first 36 months
after Refinancing Date (except as
provided in Section 2.7(b) or
Section 2.7(c) of the Loan
Agreement). Prepayment during 37th
through 72nd month after
Refinancing Date requires payment
of yield maintenance premium.
Floating rate yield maintenance
premium would be calculated as
provided in Section 1.1 of the Loan
Agreement. Fixed rate yield
maintenance premium would be an
amount calculated by discounting
monthly to net present value the
product of (i) 8.3333% and (ii) the
product of (x) the greater of (A)
.5% and (B) the interest rate on
the refinanced notes less the
Discount Rate and (y) the amount
prepaid, for the period from the
month in which the prepayment date
occurs to February 1, 2000. The
"Discount Rate" shall be the sum of
the current (at the time of
prepayment) U.S. Treasury security
yield for a security having a term
comparable to the period from the
prepayment date to February 1, 2000
and 1.5%.
VI. Financing Fees: __% of the principal amount of the
refinanced loan allocated to the
Facilities not located in Arizona,
% of which is payable to Nomura
Securities International, Inc. for
financial advisory services and __%
of which is payable to Lender as an
underwriting fee.
VII. Reserve Accounts: Reserve accounts under the Loan
Agreement shall be continued, but
Borrower must provide additional
funding to the reserve accounts on
the Refinancing Date if required by
the Rating Agencies.
VIII. Rate Cap Agreement: If Borrower selects the floating rate
option, it will purchase an interest rate
cap agreement extending to the Maturity
Date,
<PAGE>
3
which agreement will be assigned to
Lender.
IX. Other Terms: All other terms shall be as provided in
the Loan Documents.
<PAGE>
EXHIBIT R
---------
FINANCING STATEMENTS
--------------------
I. Property Financing Statements
(Borrower as debtor and Lender as secured party on all)
Desert Harbor
i. Secretary of State of Arizona
ii. Maricopa County
Tucson
i. Secretary of State of Arizona
ii. Pima County
II. Accounts Financing Statements
(Borrower as debtor and Custodian as secured party on all)
i. Indiana
ii. Arizona
iii. Florida
iv. Kansas
v. Kentucky
vi. Texas
vii. New York
<PAGE>
EXHIBIT V
---------
Intentionally Deleted
<PAGE>
Exhibit W
---------
LITIGATION
----------
NONE
<PAGE>
Exhibit X
---------
NUMBERS OF NURSING BEDS, ASSISTED
LIVING UNITS AND INDEPENDENT LIVING UNITS
-----------------------------------------
<TABLE>
<CAPTION>
Assisted Independent
Nursing Living Living
Facility Beds Units Units
- -------- ------- -------- -----------
<S> <C> <C> <C>
Desert Harbor 57 30 154
Tucson 67 30 149
Deer Creek 60 30 180
Overland Park 60 30 117
Brookside 40 20 216
Park Lane 90 38 190
Memorial Woods 96 36 198
</TABLE>
<PAGE>
Exhibit Y
---------
CONTENT OF QUARTERLY FINANCIAL INFORMATION
------------------------------------------
[Facility]
Quarter ending __________________
A. Census Data
-----------
Number of days available
Number of days utilized during quarter
Number of beds licensed
Number of beds available
Census days for the quarter by payor mix (i.e. Medicaid, Private, Medicare,
VA/other)
Room rates for the quarter by payor mix (i.e., Medicaid, Private, Medicare,
VA/other)
B. Cash Flow Statement
-------------------
Operating Income
Patient - Medicaid
Patient - Private
Patient - Medicare
Patient - VA/Other
Gross Patient Revenues
Revenue Adjustments
Ancillary Revenues
Other Revenues
Total Operating Income
Operating Expenses
Nursing
Plant Operations
Housekeeping
Laundry & Linen
Dietary
Activities/Social Services
Administrative & General
Management Fees
Ancillary
Property
Other
Total Operating Expenses
Net Cash Flow
<PAGE>
2
Other Expenses
Depreciation
Amortization
Debt Service
Capital Improvement Costs
Any other non-cash items not previously detailed (if
applicable)
Total Other Expenses
Reserve Amounts (specify)
Excess Cash Flow
Distributions to Shareholders
Security Deposits
<PAGE>
Exhibit Z
---------
OFFICER'S CERTIFICATE (QUARTERLY FORM)
--------------------------------------
Nomura Asset Capital Corporation
2 World Financial Center
Building B
New York, New York 10281-1198
Attn: Raymond M. Anthony
RE: Amended and Restated Loan Agreement dated as of January 21, 1994 (together
with amendments, if any, the "Loan Agreement") among Nomura Asset Capital
Corporation, as Lender, FGI Financing I Corporation, as Borrower and
Bankers Trust Company, as Custodian
The undersigned officer of FGI Financing I Corporation, does hereby certify that
for the quarterly financial period ending _____________________:
1. No Default or Event of Default has occurred or exists except
_________________________.
2. The Debt Service Coverage Ratio of the Mortgaged Property for the preceding
twelve (12) months through the end of such period was
__________________________.
THE MANNER OF CALCULATION IS ATTACHED.
3. The quarterly financial information delivered herewith is true, correct and
complete.
4. All Operating Expenses and other expenses that had accrued as of the last
day of the period have been fully paid or otherwise reserved or provided
for.
5. All information provided herein is true and correct.
6. Capitalized terms not defined herein shall have the meanings given to such
terms in the Loan Agreement.
_____________________________
Name: ______________________
Title: ______________________
Dated this ____ day of ___________, 199_.
<PAGE>
Exhibit AA
----------
PROHIBITED TRANSFEREES
----------------------
Colson & Colson Construction Company
American Retirement Corporation
Parkside Senior Services
Capital Senior Services
Marriott
Cooperative Retirement Services
The Hillhaven Corporation
Beverly Enterprises
Brion, Inc.
Hyatt/Marmon/Dalfort
Manor Care
Integrated Health Services
Multicare
Citation Mortgage
<PAGE>
Schedule 1
----------
CAPITAL IMPROVEMENT COSTS ALLOWANCE
-----------------------------------
<TABLE>
<CAPTION>
Capital Improvement
Facility Cost Allowance
- -------- -------------------
<S> <C>
Desert Harbor $ 91,580
Tucson $ 93,480
Deer Creek $102,600
Overland Park $ 78,660
Brookside $128,000
Park Lane $121,485
Memorial Woods $125,400
--------
TOTAL: $741,205
</TABLE>
<PAGE>
Schedule 3
----------
INITIAL CAPITAL REQUIREMENTS
----------------------------
<TABLE>
<CAPTION>
Initial Capital
Facility Requirement
- -------- ---------------
<S> <C>
Desert Harbor $ -0-
Tucson $ -0-
Deer Creek $ 13,000
Overland Park $ 500
Brookside $331,870
Park Lane $15,000
Memorial Woods $ -0-
--------
TOTAL: $360,370
</TABLE>
<PAGE>
FIRST AMENDMENT
TO
INDENTURE AND NOTES
-------------------
THIS FIRST AMENDMENT TO INDENTURE AND NOTES (this "First Amendment") is
dated as of January __, 1994, between FORUM GROUP, INC., an Indiana corporation
(the "Company"), and FIRST TRUST NATIONAL ASSOCIATION, as Trustee (the
"Trustee").
RECITALS:
--------
A. The Company and the Trustee entered into an Indenture, dated as of
June 11, 1993 (the "Indenture"), providing for the issuance of the Company's 12-
1/2% Senior Subordinated Notes due 2003 (the "Notes").
B. The Company has requested amendments of certain provisions of the
Indenture and the Notes.
C. The registered holders of 100% in outstanding principal amount of the
Notes have consented to this First Amendment.
NOW, THEREFORE, for valuable consideration hereby acknowledged, each party
hereto agrees as follows for the benefit of the other and for the equal and
ratable benefit of the Holders of the Company's Notes:
Section 1. Definitions. Unless otherwise defined herein, capitalized
terms are used herein as defined in the Indenture.
Section 2. Amendment of Section 1.01.
(a) Section 1.01 of the Indenture is hereby amended by deleting the
definitions of Credit Agreement, Deferred Interest, Representative and Senior
Indebtedness and by inserting the following in appropriate alphabetical order:
"Citicorp Credit Agreement" means the Credit Agreement, dated as of
June 10, 1993, among the Company, the banks and financial institutions
signatory thereto (collectively, the "Banks"), Citibank, N.A., as issuing
bank, and Citicorp USA, Inc., as agent, as the same may be amended,
modified, supplemented, or extended, refinanced, refunded, restructured or
replaced from time to time (including any amendment or modification that
results in an increase in the principal amount of loans or other extension
of credit outstanding thereunder) in accordance with the terms of this
Indenture.
"Credit Agreement" means the Citicorp Credit Agreement and all other
agreements of the Company evidencing Senior Indebtedness, as the same may
be amended, modified,
<PAGE>
supplemented, extended, refinanced, refunded, restructured or replaced from
time to time in accordance with the terms of this Indenture.
"Nomura Loan Agreement" means the Loan Agreement, among FGI Financing
I Corporation, a subsidiary of the Company, Nomura Asset Capital
Corporation ("Nomura"), as lender, and Bankers Trust Company, as Custodian,
as the same may be amended, modified, supplemented, or extended,
refinanced, refunded, restructured or replaced from time to time (including
any amendment or modification that results in an increase in the principal
amount of loans or other extension of credit outstanding thereunder) in
accordance with the terms of this Indenture.
"Representative" means the agent or representative for Senior
Indebtedness under any Credit Agreement.
"Senior Indebtedness" means (i) the principal of and interest on
(including interest accrued after commencement, or that would have accrued
but for the commencement, of any proceeding pursuant to any Bankruptcy Law
with respect to the Company or any of its Subsidiaries, at the rate
specified in the Nomura Loan Agreement), and all other amounts payable with
respect to or in connection with, Debt of the Company or any of its
Subsidiaries arising under the Nomura Loan Agreement (including, without
limitation, any reimbursement obligation to the issuing bank thereof in
respect of letters of credit, and any obligation arising under the Nomura
Loan Agreement to pay any fee or to indemnity the Representative or any
lender thereunder or to pay, or reimburse the Representative or any lender
thereunder for payment of, any expenses incurred by the Representative or
such lender), and the principal of, interest (including such post-petition
interest) on and other amounts payable with respect to any Debt incurred to
refinance, replace or refund any Debt under the Nomura Loan Agreement, (ii)
the principal of and interest on (including interest accrued after
commencement, or that would have accrued but for the commencement, of any
proceeding pursuant to any Bankruptcy Law with respect to the Company or
any of its Subsidiaries, at the rate specified in the Citicorp Credit
Agreement), and all other amounts payable with respect to or in connection
with, Debt of the Company arising under the Citicorp Credit Agreement
(including, without limitation, any reimbursement obligation to the issuing
bank thereof in respect of letters of credit, and any obligation arising
under the Citicorp Credit Agreement to pay any fee or to indemnify the
Representative or any lender thereunder or to pay, or reimburse the
Representative or any lender thereunder for payment of, any expenses
incurred by the Representative or such lender), and the principal of,
interest (including such post-petition interest) on and other amounts
payable with respect to any
2
<PAGE>
Debt incurred to refinance, replace or refund any Debt under the Citicorp
Credit Agreement, (iii) Debt of the Company under any interest rate swap or
cap agreement or other agreements designed to hedge against fluctuations in
interest rates (collectively, "Interest Rate Swap Agreements"), provided,
that for purposes of determining the amount of Senior Indebtedness
outstanding as of any given date, the amount of Debt of the Company under
any Interest Rate Swap Agreement shall be deemed to be the amount of any
termination payment that the Company would be obligated to make if such
Interest Rate Swap Agreement were terminated on such date, and (iv)
reimbursement obligations, or guarantees in respect thereof, and any other
obligations owing in respect of any letter of credit issued in connection
with the industrial revenue bond on the facility known as "Lafayette at
Country Place." Notwithstanding any other provision hereof, the aggregate
principal amount of Senior Indebtedness outstanding at any time shall not
exceed in the aggregate the greater of (i) $80 million and (ii) the sum of
the outstanding principal amount under the Nomura Loan Agreement on the
date of the closing of the loan with Nomura, plus the outstanding
obligations under the Citicorp Credit Agreement (including all amounts
available to be drawn under any letters of credit issued thereunder) on the
date of the closing of the loan with Nomura.
(b) Section 1.01 of the Indenture is hereby further amended by inserting
"Citicorp" immediately before "Credit Agreement" in the seventh line of the
definitions of Unrestricted Cash and Unrestricted Subsidiary.
Section 3. Amendment of Section 3.01. Section 3.01 of the Indenture is
hereby amended by deleting therefrom the phrase "at any time on or after June 1,
1996."
Section 4. Amendment of Section 4.01.
(a) Section 4.01 of the Indenture is hereby amended by deleting the phrase
"deferred pursuant to this Section 4.01" from the fourteenth line of the first
paragraph of such Section.
(b) Section 4.01 of the Indenture is hereby further amended by deleting the
second, third and fourth paragraphs of such Section.
Section 5. Amendment of Notes. Each of the Notes outstanding under the
Indenture is hereby amended as follows:
(a) the second sentence of Paragraph 1 is deleted in its entirety;
(b) the last paragraph of Paragraph 2 is deleted in its entirety; and
3
<PAGE>
(c) Paragraph 5 is amended in its entirety to read as follows:
Redemption.
The Securities may be redeemed in whole or in part at any time, at the
option of the Company, at the Redemption Price (expressed as a percentage
of principal amount) set forth below with respect to the indicated
Redemption Date, in each case, together with any accrued but unpaid
interest to the Redemption Date.
<TABLE>
<CAPTION>
If redeemed during the
12-month period beginning
April 15 (except in 1994,
when the Redemption Price
is applicable beginning
January 18) Redemption Price
-------------------------- ----------------
<S> <C>
1994...................... 110.00%
1995...................... 109.00
1996...................... 108.00
1997...................... 106.67
1998...................... 105.33
1999...................... 104.90
2000...................... 102.67
2001...................... 101.33
2002 and thereafter....... 100.00
</TABLE>
Any such redemption will comply with Article III of the Indenture.
Section 6. Effectiveness. This First Amendment shall not be effective
until the refinancing with Nomura Asset Capital Corporation of certain of the
Company's outstanding indebtedness is completed.
Section 7. Representations and Warranties. The Company represents and
warrants to the Trustee that this First Amendment constitutes its legal, valid
and binding obligation, enforceable in accordance with its terms (subject as to
enforcement of remedies to any applicable bankruptcy, reorganization,
moratorium, or similar laws or principles of equity affecting the enforcement of
creditors' rights generally).
Section 8. Entire Agreement; Ratification. This First Amendment
represents the entire agreement between the parties and supersedes any prior
agreements or understandings with respect to the subject matter hereof. Except
as modified or supplemented in connection herewith, the Indenture and the Notes
shall continue in full force and effect.
4
<PAGE>
Section 9. GOVERNING LAW. THIS FIRST AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE UNITED
STATES OF AMERICA.
Section 10. Counterparts. This First Amendment may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument. In making proof hereof, it shall not be necessary to produce
or account for any counterpart other than one signed by the party against which
enforcement is sought.
IN WITNESS HEREOF, this First Amendment to Indenture and Notes is executed
as of the date first set forth above.
FORUM GROUP, INC.
(Seal)
Attest: ___________________ By_______________________
Title:
FIRST TRUST NATIONAL ASSOCIATION,
as Trustee
(Seal)
Attest: ___________________ By_______________________
Title:
5
<PAGE>
WAIVER AND SUPPLEMENT TO CREDIT AGREEMENT
Forum Group, Inc.
8900 Keystone Crossing
Suite 200
Indianapolis, IN 46240-0498
Attention: John H. Sharpe, General Counsel
Citicorp Loan
-------------
Ladies and Gentlemen:
Reference is made to the Credit Agreement dated as of June 10, 1993 (as
amended and supplemented, the "Credit Agreement"), among Forum Group, Inc. (the
"Borrower"), the banks and financial institutions listed on the signature pages
thereof, Citibank, N.A., as issuing bank, and Citicorp USA, Inc., as agent. All
capitalized terms used herein, but not defined herein, have the meanings
assigned in the Credit Agreement.
The Borrower has informed the Agent that the Borrower desires to refinance
the Advances under the Credit Agreement through a financing by Nomura Asset
Capital Corporation ("Nomura") involving the following transactions (the "Nomura
Transactions"): (1) the formation of FGI Financing I Corporation, a Delaware
corporation ("FGI Financing") and bankruptcy remote special purpose entity, to
be owned 88% by the Borrower and 12% by Forum of Kentucky, Inc. ("Kentucky");
(2) the transfer to FGI Financing by the Borrower of (a) The Forum at Desert
Harbor, (b) The Forum at Tucson, (c) The Forum at Deer Creek, (d) The Forum at
Overland Park, (e) The Forum at Memorial Woods and (f) The Forum at Park Lane
along with certain assets and liabilities related to the operation of the
properties transferred by the Borrower; (3) the transfer to FGI Financing by
Kentucky of The Forum at Brookside, along with certain related assets and
liabilities; (4) the licensure of operations of the properties transferred to
FGI Financing; (5) a loan agreement providing for a loan of not more than
$75,000,000 in principal amount (the "Nomura Loan") by and among FGI Financing,
Nomura, as lender, and Bankers Trust Company, as custodian, secured by all of
the properties owned by FGI Financing, except for properties located in Arizona;
(6) the pledge by the Borrower and Kentucky of their respective ownership
interests in FGI Financing to secure Borrower's obligations under the Nomura
Loan; (7) an indemnity and guaranty by the Borrower of certain
1
<PAGE>
liabilities under environmental laws relating to the properties transferred to
FGI Financing; (8) the use of the proceeds of the Nomura Loan to repay
outstanding indebtedness arising under the Credit Agreement; (9) a loan
agreement providing for a loan of not more than $25,000,000 in principal amount
(the "Wingate Loan") by and among FGI Financing, Wingate Realty Finance
Corporation, as lender, and Bankers Trust Company, as custodian, secured by the
properties owned by FGI Financing located in Arizona; (10) the use of the
proceeds of the Wingate Loan to partially redeem the Borrower's 12 1/2% Senior
Subordinated Notes due 2003 in a principal amount of not less than $25,000,000;
and (11) the purchase of the Wingate Loan by Nomura and the consolidation of the
Wingate Loan into the Nomura Loan through the amendment and restatement of the
documents related to the Nomura Loan.
In such connection, the Borrower has requested that the Lenders and the
Issuing Bank (a) release the Collateral described on its letter dated January
11, 1994 from the Borrower to the Agent, other than the Collateral described on
Exhibit A hereto, (the "Collateral to be Released") and (b) waive the following:
(i) compliance with Section 2.06(a) of the Credit Agreement insofar as it
requires one Business Day's prior notice of prepayment for the prepayment
effected as part of the Nomura Transactions, (ii) compliance with any provisions
of the Credit Agreement required for the Nomura Transactions and (iii) all other
compliance with Sections 5.01(b)(ii), (b)(iii), (d), (h), (i), (j), (k), (l),
(m), (o), (p), (q), (r) and (s), and Section 5.02 of the Credit Agreement for a
period of 45 days from the date of the consummation of the Nomura Transactions
(the "Waiver Period").
On the basis of the information provided by the Borrower in connection with
the Nomura Transactions, the Lenders, Issuing Bank and the Agent hereby agree,
in this specific instance, to release the Collateral to be Released and to waive
the foregoing provisions of the Credit Agreement to the extent described above,
upon and subject to the following terms and conditions:
1. The Nomura Transactions will be consummated and the Term Loan, together
with accrued interest thereon and fees and expenses in connection
therewith, shall be paid in full, on or before February 4, 1994.
2. Forum A/H, Inc. ("Forum A/H"), a wholly owned subsidiary of the Borrower,
will execute and deliver to the Agent a First Amendment to Forum A/H
Security Agreement (the "Amendment"), in the form of Exhibit B attached
hereto, not later than the consummation of the Nomura Transactions.
2
<PAGE>
If any of the foregoing conditions are not complied with or otherwise
satisfied, then the waivers granted herein shall be null and void.
In order to induce the Lenders, the Issuing Bank and the Agent to agree to
the foregoing, by its execution hereof, the Borrower hereby (a) represents and
warrants that Forum A/H does not have any Debt or any Liens on any of its
assets, except pursuant to the Collateral Documents, and (b) covenants and
agrees as follows:
1. On or before the expiration of the Waiver Period, if requested by the
Agent, Forum A/H will use its best efforts to effect the registration of
its pledge, under the Forum A/H Security Agreement, dated as of December
14, 1993, executed by Forum A/H on behalf of the Agent, as amended
("Forum A/H Security Agreement"), of the limited partnership units of
Forum Retirement Partners, L.P. (the "MLP") subject thereto by depositing
the certificates representing such limited partnership units with the
designated depositary, and completing all other requirements of transfer
pursuant to the terms of the Amended and Restated Agreement of Limited
Partnership of Forum Retirement Partners between Forum Retirement, Inc.
and Bruce R. Karr, together with the persons who become limited partners,
as amended, and the Depositary Agreement, dated as of December 29, 1986,
among the MLP, Forum Retirement, Inc., limited partners and assignees
holding depositary receipts and American Stock Transfer & Trust Company
(successor by assignment to Manufacturers Hanover Trust Company), as
amended.
2. The Borrower will not permit Forum A/H to suffer to exist any Debt or any
Liens on any of its assets, except pursuant to the Collateral Documents.
3. On or before the expiration of the Waiver Period, the Borrower will
either (i) execute and deliver a definitive agreement with respect to the
Reimbursement Obligation, in form and substance acceptable to the Agent
in its sole discretion, which agreement shall provide that the
Reimbursement Obligation shall be immediately due and payable upon any
drawing under the Letter of Credit, and shall provide for covenants
3
<PAGE>
assuring the Borrower's creditworthiness with respect to the Borrower's
Reimbursement Obligation, and shall provide for security for the
Borrower's obligations in respect of the Letter of Credit acceptable to
the Agent, or (ii) deposit cash in the L/C Collateral Account in an
amount equal to the then maximum amount available to be drawn under the
Letter of Credit.
4. All reasonable expenses of the Agent incurred in connection with this
letter, including the reasonable fees and expenses of counsel, will be
paid by the Borrower.
5. The Borrower will cause Forum A/H to deliver the notice to the depositary
of the limited partnership interests in Forum Retirement Partners, L.P.
as required by the Amendment, and will execute and deliver amendments to
financing statements as required by the Agent in connection therewith.
The Borrower's failure to comply with any of the foregoing covenants, other
than the covenants listed as numbers 2 and 5 above, shall be deemed an Event of
Default under the Credit Agreement as of the expiration of the Waiver Period.
The Borrower's failure to comply with either of the covenants listed as numbers
2 and 5 above shall be deemed an immediate Event of Default under the Credit
Agreement.
The release provided for herein and the waivers granted herein shall extend
only to the Collateral to be Released and the requirements of the Credit
Agreement to the limited extent expressly provided herein and shall not be
deemed to extend to any other or additional Collateral or state of facts or
circumstance or any other covenant, obligation, representation or warranty of
any party to the Credit Agreement or the other Loan Documents. The Credit
Agreement and the other Loan Documents, and each term, condition, covenant,
obligation, representation and warranty thereunder, shall otherwise be and
remain in full force and effect.
4
<PAGE>
THIS WAIVER AND SUPPLEMENT TO CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENT OF THE PARTIES.
THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES.
Dated as of January 31, 1994
CITICORP USA, INC., as Agent and as a Lender
By: /s/ Barbara A. Cohen
-----------------------
Title: Vice President
--------------------
CITIBANK, N.A., as Issuing Bank
By: /s/ Edward Lettieri
------------------------
Title: Vice President
---------------------
AGREED:
FORUM GROUP, INC.
By: /s/ Daniel A. Decker
-------------------------
Title: Vice President
----------------------
5
