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 September 30, 1995 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.)
11320 Random Hills Road, Suite 400
Fairfax, Virginia 22030
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 703-277-7000
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 November 6, 1995 was 22,514,209.
<PAGE>
INDEX
FORUM GROUP, INC., AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION PAGE
- ----------------------------- ----
Item 1. Financial Statements (Without Audit)
Condensed consolidated balance sheets --
September 30 and March 31, 1995 3
Condensed consolidated statements of operations --
Three and six months ended September 30, 1995 and 1994 5
Condensed consolidated statements of cash flows --
Six months ended September 30, 1995 and 1994 7
Notes to condensed consolidated financial statements --
September 30, 1995 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
PART II. OTHER INFORMATION
- --------------------------
Item 1. Legal Proceedings 26
Item 4. Submission Of Matters to a Vote of Security Holders 27
Item 6. Exhibits and Reports on Form 8-K 27
SIGNATURES 29
- ----------
EXHIBIT INDEX 30
- -------------
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
-----------------------------
FORUM GROUP, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Without Audit)
September 30, March 31,
1995 1995
------------- ------------
(in thousands)
ASSETS
------
Current Assets:
Cash and cash equivalents $ 37,851 $ 30,228
Accounts receivable, less allowances for
doubtful accounts of $620 and $487, respectively 8,915 7,992
Notes and other receivables 6,160 4,603
Prepaids and other current assets 3,463 4,851
---------- ----------
Total Current Assets 56,389 47,674
---------- ----------
Restricted Cash 18,849 13,098
Property and equipment:
Land and improvements 51,860 49,737
Buildings and leasehold improvements 279,567 263,411
Furniture and equipment 20,943 18,780
Construction in progress 16,113 5,249
---------- ----------
368,483 337,177
Less accumulated depreciation and amortization 25,014 19,820
---------- ----------
Property and Equipment, net 343,469 317,357
Investments:
Greenville Retirement Community, L.P. 3,138 3,331
Other 1,808 1,531
---------- ----------
Net Investments 4,946 4,862
---------- ----------
Deferred costs, net of accumulated amortization
of $1,186 and $1,948, respectively 8,571 12,778
Other assets 28,668 2,577
Excess of cost over net assets of business
acquired, net of accumulated amortization of
$37 and $0, respectively 1,054 -0-
---------- ----------
Total Assets $ 461,946 $ 398,346
---------- ----------
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
-----------------------------
FORUM GROUP, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Without Audit)
September 30, March 31,
1995 1995
------------- ------------
(in thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Current portion of long-term debt $ 56,710 $ 5,275
Accounts payable 4,471 3,846
Accrued expenses 18,238 15,295
Resident deposits and refundable resident fees 18,438 19,609
---------- ----------
Total Current Liabilities 97,857 44,025
Long-term debt, less current portion payable
within one year 260,319 264,761
Deferred income 7,627 7,294
---------- ----------
TOTAL LIABILITIES 365,803 316,080
Other partners' equity 17,649 16,600
Shareholders' equity:
Common stock, no par value - authorized 48,000
shares, issued 22,500 70,147 67,927
Accumulated earnings (deficit) 8,347 (2,261)
---------- ----------
Total Shareholders' Equity 78,494 65,666
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 461,946 $ 398,346
---------- ----------
See Notes to Condensed Consolidated Financial Statements.
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
-----------------------------
FORUM GROUP, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Without Audit)
Three Months Ended Six Months Ended
September 30, September 30,
------------------- -------------------
1995 1994 1995 1994
------------------- -------------------
(in thousands except per share amounts)
Revenues:
Net operating revenues $ 47,635 $ 36,188 $ 92,917 $ 62,931
Management fees 350 508 703 1,603
Investment and other income 751 817 1,557 1,069
-------- -------- -------- --------
TOTAL REVENUES 48,736 37,513 95,177 65,603
-------- -------- -------- --------
Costs and expenses:
Operating expenses 33,192 23,998 64,312 42,188
General and administrative
expenses 2,971 1,739 5,861 3,321
Relocation costs 315 -0- 577 -0-
Litigation expense 19 -0- 48 -0-
Depreciation and amortization 2,906 2,052 5,695 3,579
-------- -------- -------- --------
TOTAL COSTS AND EXPENSES 39,403 27,789 76,493 49,088
-------- -------- -------- --------
9,333 9,724 18,684 16,515
Interest expense (7,632) (5,778) (14,630) (10,434)
Gains from sales of cooperative
memberships 10,798 4,197 10,798 4,197
-------- -------- -------- --------
Income before minority
interests, income taxes and
extraordinary charge 12,499 8,143 14,852 10,278
Minority interests (162) (138) (350) (197)
-------- -------- -------- --------
Income before income taxes
and extraordinary charge 12,337 8,005 14,502 10,081
Income taxes 2,287 2,000 2,587 2,000
-------- -------- -------- --------
Income before extraordinary charge 10,050 6,005 11,915 8,081
Extraordinary charge -
early extinguishment of debt, net
of income tax benefit (1,307) -0- (1,307) -0-
-------- -------- -------- --------
NET INCOME 8,743 6,005 10,608 8,081
-------- -------- -------- --------
ACCUMULATED DEFICIT AT BEGINNING
OF PERIOD (396) (12,413) (2,261) (14,489)
-------- -------- -------- --------
ACCUMULATED EARNINGS (DEFICIT)
AT END OF PERIOD $ 8,347 $ (6,408) $ 8,347 $ (6,408)
-------- -------- -------- --------
See Notes to Condensed Consolidated Financial Statements.
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
-----------------------------
FORUM GROUP, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Without Audit)
Three Months Ended Six Months Ended
September 30, September 30,
------------------- -------------------
1995 1994 1995 1994
-------- -------- -------- --------
(in thousands except per share amounts)
Net Income $ 8,743 $ 6,005 $ 10,608 $ 8,081
-------- -------- -------- --------
Average number of common and
common equivalent shares
outstanding 23,562 22,920 23,561 22,846
-------- -------- -------- --------
Per common and common
equivalent share (primary
and fully diluted):
Income before
extraordinary charge $ 0.43 $ 0.26 $ 0.51 $ 0.35
Extraordinary charge (0.06) 0.00 (0.06) 0.00
-------- -------- -------- --------
Net income $ 0.37 $ 0.26 $ 0.45 $ 0.35
-------- -------- -------- --------
See Notes to Condensed Consolidated Financial Statements.
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
-----------------------------
FORUM GROUP, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Without Audit)
Six Months Ended
September 30,
-------------------------
1995 1994
---------- ----------
(in thousands)
Cash flows from operating activities:
Net income $ 10,608 $ 8,081
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation and amortization 5,695 3,579
Amortization of deferred costs 1,182 1,208
Other partners' and interest in losses
of consolidated companies 350 197
Net income of investments
on the equity method (196) (118)
Other accrued revenues and expenses, net (186) (129)
Tax benefit recorded as additional
shareholders' equity 2,100 -0-
Non-cash portion of extraordinary charge 1,509 -0-
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 21,062 12,818
---------- ----------
Cash flows from investing activities:
Purchases of retirement communities and businesses (18,618) (4,787)
Additions to property and equipment (14,403) (3,070)
Net proceeds from sales of investment in
Rancho San Antonio Retirement Housing Corporation -0- 8,713
Notes, investments and other receivables (15,702) 151
Other 1,024 331
---------- ----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (47,699) 1,338
---------- ----------
Cash flows from financing activities:
Proceeds from long-term debt 154,705 407
Payments on long-term debt (107,721) (1,752)
Proceeds from issuance of common stock
and warrants, net -0- 5,155
Deferred financing and other costs (5,874) (1,386)
Distributions to other partners (155) (155)
Resident deposits and restricted cash (6,695) (486)
---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 34,260 1,783
---------- ----------
Net increase in cash and cash equivalents 7,623 15,939
Cash and cash equivalents at beginning of period 30,228 18,331
---------- ----------
Cash and cash equivalents at end of period $ 37,851 $ 34,270
---------- ----------
See Notes to Condensed Consolidated Financial Statements.
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
-----------------------------
FORUM GROUP, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Without Audit)
September 30, 1995
Note A - Basis of Presentation
- ------------------------------
The balance sheet at March 31, 1995 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, 1995 (the "1995
10-K").
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and 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. The statements
have been prepared using the accounting policies described in the
consolidated financial statements of Forum Group included in the 1995
10-K. The unaudited condensed consolidated financial statements include
all adjustments which are necessary, in the opinion of management, to
present fairly, in all material respects, the Company's financial position
and results of operations for the applicable periods. Operating results
for the six-month period ended September 30, 1995 are not necessarily
indicative of the results that may be expected for the year ending March
31, 1996 and these financial statements should be read in conjunction with
the 1995 10-K.
Certain amounts in the fiscal year 1995 condensed consolidated financial
statements have been reclassified to conform to the fiscal year 1996
presentation.
-8-
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
-----------------------------
FORUM GROUP, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Without Audit)
September 30, 1995
Note B - Changes In Consolidation
- ---------------------------------
Forum Retirement Partners, L.P. ("Forum Partners") is a publicly traded
limited partnership which owns nine retirement communities. Forum Group
is the parent company of Forum Retirement, Inc., Forum Partners' general
partner (the "General Partner"), and has a long-term management agreement
with Forum Partners. In addition, Forum Group has a substantial
beneficial interest in Forum Partners. Prior to August 1, 1994, this
beneficial interest was less than 50%, and Forum Group's investment in
Forum Partners was accounted for on the equity method. Through the
acquisition of additional partnership units, Forum Group's beneficial
interest in Forum Partners increased to 56.4% on August 1, 1994.
Accordingly, as of that date, the assets, liabilities and financial
results of Forum Partners were included in the consolidated financial
statements of Forum Group. During October, 1994 Forum Group increased its
beneficial interest to 62.1%. The following pro forma amounts summarize
the effect on the condensed consolidated statement of operations for the
six months ended September 30, 1994, as if Forum Group's beneficial
interest in Forum Partners was 62.1% on April 1, 1994:
Six Months Ended
September 30, 1994
--------------------
(in thousands except
per share amount)
Total revenues $79,895
-------
Net income $ 8,407
-------
Net income per
common and common
equivalent share $ .37
-------
In an effort to increase its equity interest in Forum Partners, Forum
Group has commenced a tender offer for any and all outstanding preferred
depositary units (the "Units") representing preferred limited partners'
interests in Forum Partners not already owned by it at $2.83 per Unit in
cash. The tender offer is presently scheduled to expire at 12:00
Midnight, New York City time, on December 1, 1995, unless extended.
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
-----------------------------
FORUM GROUP, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Without Audit)
September 30, 1995
Note C - Other Investments
- --------------------------
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 ("Stonegates"). Summary
financial information for GRP as of and for the six months ended
September 30, 1995 is as follows (in thousands):
Net property $ 19,912
Other assets 1,263
---------
21,175
Less liabilities 22,917
---------
Net deficit $ (1,742)
---------
Revenues $ 3,437
Costs and expenses 3,008
---------
Net income $ 429
---------
Forum Group has entered into a co-investment agreement with National Guest
Homes, L.L.C. ("NGH"), a developer of assisted living facilities targeted
toward middle-income senior citizens. Forum Group's investment in
projects under construction is included in the consolidated financial
statements of Forum Group. Forum Group's investment in Forum - NGH
Operations I, L.L.C. ("NGH Operations"), a manager of assisted living
facilities, is accounted for on the cost method.
Note D - Long Term Debt
- -----------------------
On September 1, 1995, FGI Financing I Corporation ("FFI") and Forum Ohio
Healthcare, Inc. (collectively with FFI, the "Forum Pool Borrowers"), both
wholly owned subsidiaries of Forum Group, obtained a non-recourse mortgage
loan totaling $124.7 million. The loan is secured by first and second
liens on eight Forum Group retirement centers (the "Forum Pool
Properties"). The loan has cross-default and cross-collateral provisions.
The proceeds were used to repay existing indebtedness of $106.0 million,
loan closing costs, funding of the initial capital reserve account and
general corporate purposes.
The loan requires monthly payments based on a 25-year term and bears
interest at a fixed rate of 10.008% until September 2003, at which time
the rate increases to the greater of 15.008% or the 10-year Treasury rate
plus 5%. The loan matures in September 2020 but is open to prepayment
without penalty on and after September 2003. Prior to that time, after
October 1997, the loan is pre-payable subject to a yield maintenance
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
-----------------------------
FORUM GROUP, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Without Audit)
September 30, 1995
premium. Because the interest rate on the loan increases significantly in
September 2003, it is anticipated that the loan will be prepaid or
refinanced by September 2003.
As part of the original floating rate debt financing that was repaid with
the proceeds of the loan described in the preceding paragraph, FFI
entered into an interest rate cap agreement with a notional amount equal
to $93.3 million, which expires in March 2001. The agreement entitles FFI
to receive the amount, if any, by which one-month LIBOR exceeds 4.625% on
a notional amount of $93.3 million through expiration. The interest rate
cap agreement is included in other assets, and was amortized to interest
expense over the term of the agreement until September 1, 1995.
The interest rate cap agreement was not terminated upon refinancing
of the underlying debt on September 1, 1995. The market value and
unamortized cost of the interest rate cap agreement at that date was $7.3
million and $5.7 million, respectively. The difference between market
value and the unamortized cost of the interest rate cap was recorded as a
component of the extraordinary loss on extinquishment of debt, net of
deferred taxes of $0.3 million. As of September 30, 1995, the interest
rate cap is recorded in other assets at a market value of $7.4 million.
The change in market value subsequent to September 1, 1995 is recorded as
other income.
As noted above, Forum Group extinguished $106.0 million of debt prior to
its scheduled maturity. In connection with this transaction, Forum Group
incurred an extraordinary loss on extinguishment of debt of $2.6 million,
net of deferred income tax benefits of $0.6 million. Partially offsetting
this loss was the extraordinary gain of $1.2 million, net of deferred
income taxes of $0.3 million, as a result of recording the interest rate
cap agreement at market value upon extinguishment of the underlying debt.
Pursuant to a separate credit agreement, during the period from September
1, 1995 to September 1, 1999, Forum Group may borrow up to $50.0 million
to fund a portion of the expansions to the properties collaterallizing the
above-described mortgage loan.
Note E - Commitments and Contingencies
- --------------------------------------
For information concerning certain legal proceedings involving Forum
Group, see (i) Item 3 and Note 5 of the Notes to Consolidated Financial
Statements contained in Item 8 of Part I of the 1995 10-K, (ii) Item 1 of
Part II of the Quarterly Report on Form 10-Q of Forum Group for the
quarter ended June 30, 1995, and (iii) Item 1 of Part II of this report.
Such information is incorporated herein by reference.
Note F - Subsequent Event
- -------------------------
On October 31, 1995, Forum Group entered into a binding agreement to
acquire two assisted living and dementia-related senior housing
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
-----------------------------
FORUM GROUP, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Without Audit)
September 30, 1995
communities in the Northwestern United States in January, 1996 for
approximately $11.6 million. A third community in the Northwestern
United States currently under construction will also be acquired in
October, 1997, for an amount defined in the agreement once stabilized
occupancy has been established. Management of these assets will be
provided by the seller on a fee basis. The agreement also provides for
participation, on a joint venture basis, for the construction of
between 5 and 10 new communities in the Northwestern United States and
the right to develop the concept nationally.
-12-
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
FORUM GROUP, INC. AND SUBSIDIARIES
The following discussion and analysis covers any material changes in
financial condition since March 31, 1995 and any material changes in the
results of operations for the three and six months ended September 30,
1995 as compared to the same periods in 1994. This discussion and
analysis should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included in the
1995 10-K.
Results Of Operations
- ---------------------
Forum Group provides senior housing and healthcare services in 14 states
through the operation of 40 retirement communities ("RCs"). Forum Group
operates (i) fourteen RCs, including one nursing facility owned or leased
by Forum Group and one health center leased by Forum Group ("Owned
Communities"), (ii) four RCs owned by partnerships which are not wholly
owned by Forum Group but which are consolidated for financial reporting
purposes (the "Consolidated Partnership Communities"), (iii) nine RCs
owned by Forum Partners (discussed below) which are consolidated for
financial reporting purposes, (iv) five RCs pursuant to separate contracts
Forum Group acquired in May 1995 and one RC which opened in July, owned by
a partnership which is not wholly owned but which is consolidated for
financial reporting purposes, and (v) seven RCs owned by entities which
are not consolidated for financial reporting purposes (the "Unconsolidated
Communities"), one owned by GRP, one owned by Rancho San Antonio
Retirement Housing Corporation ("RSARHC") and five operated by Forum-NGH
Operations in which entity Forum Group has a majority non-voting interest.
In addition, Forum Group presently has two RCs under construction and two
non-performing first mortgage loans on RCs located in Florida which were
acquired in June, 1995.
Certain summary financial information for the Owned Communities, Forum
Partners, the Consolidated Partnership Communities, and other corporate
operations ("Corporate Operations") is presented below. The results of
Forum Partners' operations were not consolidated for financial reporting
purposes prior to August 1, 1994 (see Note B of Notes to Condensed
Consolidated Financial Statements). Accordingly, the periods in which the
financial results of Forum Partners are included in the Condensed
Consolidated Financial Statements of Forum Group are not comparable to
prior periods.
Effective August 1, 1994, Forum Group purchased additional Units in Forum
Partners to exceed a 50% equity ownership interest, and the operations of
Forum Partners are consolidated into Forum Group's consolidated financial
statements from that date. Forum Partners owns and operates nine RCs
which were 94% occupied as of September 30, 1995. Pro forma consolidated
operating results as if Forum Partners' results were consolidated from
April 1, 1994 based upon Forum Group's 62.1% equity ownership of Forum
Partners as of August 1, 1994 are as presented in the following table for
the three and six months ended September 30, 1994. The pro forma data are
presented for illustrative purposes only and are not necessarily
indicative of what Forum Group's actual results of operations would have
been had Forum Group owned 62.1% of the equity interest in Forum Partners
throughout the period presented. In an effort to increase its equity
-13-
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
FORUM GROUP, INC. AND SUBSIDIARIES
interest in Forum Partners, Forum Group has commenced a tender offer for
any and all outstanding preferred depositary Units representing preferred
limited partners' interests in Forum Partners not already owned by it at
$2.83 per unit in cash. The tender offer is presently scheduled to expire
at 12:00 Midnight, New York City time, on December 1, 1995, unless
extended. See Note B of Notes to Condensed Consolidated Financial
Statements included elsewhere herein for additional information relating
to Forum Partners.
As presented in the following tables, EBITDA (defined as earnings before
interest, taxes, depreciation, amortization and extraordinary charges)
reflects Forum Group's ability to satisfy principal and interest
obligations with respect to its indebtedness and to provide cash for other
purposes. EBITDA does not represent and should not be considered as an
alternative to net income or cash flow as determined pursuant to generally
accepted accounting principles.
-14-
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
FORUM GROUP, INC. AND SUBSIDIARIES
Three Months Ended September 30, 1995
-------------------------------------
($ in millions)
---------------------------Actual----------------------------
(a) Consolidated
Owned Forum Partnership Corporate
Communities Partners Communities Operations Consolidated
----------- ----------- ------------ ---------- ------------
Total
Revenues $26.4 $12.5 $ 7.5 $2.3 $48.7
Operating
Expenses 17.8 9.2 4.3 1.9 33.2
General and
Administrative
Expenses - .1 - 2.9 3.0
Relocation
Costs - - - .3 .3
EBITDA (b) 8.6 3.2 3.2 (2.8) 12.2
Gains from Sales
of Cooperative
Memberships - - - 10.8 10.8
Depreciation and
Amortization (1.4) (.7) (.5) (.3) (2.9)
Interest
Expense (4.7) (1.2) (1.5) (.2) (7.6)
Minority
Interests - - - (.2) (.2)
Income
Taxes - - - (2.3) (2.3)
Extraordinary
loss, net of
income taxes - - - (1.3) (1.3)
Net Income 8.7
- ----------------
(a) Effective August 1, 1994, Forum Group purchased additional Units in
Forum Partners to exceed a 50% equity ownership interest, and its
operations are consolidated into Forum Group's consolidated financial
statements from that date.
(b) After $.3 million of non-recurring expenses. See "Relocation Costs"
at page 20 for a discussion of this item.
-15-
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
FORUM GROUP, INC. AND SUBSIDIARIES
Six Months Ended September 30, 1995
-----------------------------------
($ in millions)
---------------------------Actual----------------------------
(a) Consolidated
Owned Forum Partnership Corporate
Communities Partners Communities Operations Consolidated
----------- ----------- ------------ ---------- ------------
Total
Revenues $50.8 $24.9 $15.0 $4.5 $95.2
Operating
Expenses 34.3 18.1 8.7 3.2 64.3
General and
Administrative
Expenses - 0.3 - 5.6 5.9
Relocation
Costs - - - 0.6 0.6
EBITDA (b) 16.5 6.5 6.3 (4.9) 24.4
Gains from Sales
of Cooperative
Memberships - - - 10.8 10.8
Depreciation and
Amortization (2.7) (1.5) (1.0) (0.5) (5.7)
Interest
Expense (8.3) (2.5) (3.1) (0.7) (14.6)
Minority
Interests - - - (0.4) (0.4)
Income
Taxes - - - (2.6) (2.6)
Extraordinary
loss, net of
income taxes - - - (1.3) (1.3)
Net Income 10.6
- ----------------
(a) Effective August 1, 1994, Forum Group purchased additional Units in
Forum Partners to exceed a 50% equity ownership interest, and its
operations are consolidated into Forum Group's consolidated financial
statements from that date.
(b) After $.6 million of non-recurring expenses. See "Relocation Costs"
at page 20 for a discussion of this item.
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
FORUM GROUP, INC. AND SUBSIDIARIES
Three Months Ended September 30, 1994
-------------------------------------
($ in millions)
------------------------Actual---------------------------
(a) Consolidated (a)
Owned Forum Partnership Corporate Pro Forma
Communities Partners Communities Operations Consolidated Consolidated
----------- -------- ------------ ---------- ------------ ------------
Total
Revenues $21.3 $8.0 $7.0 $1.2 $37.5 $41.3
Operating
Expenses 14.1 5.8 3.9 0.2 24.0 27.0
General and
Administrative
Expense - - - 1.7 1.7 1.7
Relocation
Costs - - - - - -
EBITDA 7.2 2.2 3.1 (0.7) 11.8 12.6
Gains from Sales
of Cooperative
Memberships - - - 4.2 4.2 4.2
Depreciation and
Amortization(1.1) (0.5) (0.5) - (2.1) (2.2)
Interest
Expense (3.4) (0.8) (1.4) (0.2) (5.8) (6.2)
Minority
Interests - - - (0.1) (0.1) (0.2)
Income
Taxes - - - (2.0) (2.0) (2.1)
Extraordinary
loss, net of
income taxes - - - - - -
Net Income 6.0 6.1
- ----------------
(a) Effective August 1, 1994, Forum Group purchased additional Units in
Forum Partners to exceed a 50% equity ownership interest, and its
operations are consolidated into Forum Group's consolidated
financial statements from that date. Pro forma operating results
are shown as if Forum Partners' results of operations were
consolidated from April 1, 1994.
-17-
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
FORUM GROUP, INC. AND SUBSIDIARIES
Six Months Ended September 30, 1994
-----------------------------------
($ in millions)
------------------------Actual---------------------------
(a) Consolidated (a)
Owned Forum Partnership Corporate Pro Forma
Communities Partners Communities Operations Consolidated Consolidated
----------- -------- ------------ ---------- ------------ ------------
Total
Revenues $42.3 $8.0 $13.7 $1.6 $65.6 $79.9
Operating
Expenses 27.9 5.8 8.0 0.5 42.2 53.1
General and
Administrative
Expense - - - 3.3 3.3 3.5
Relocation
Costs - - - - - -
EBITDA 14.4 2.2 5.7 (2.2) 20.1 23.3
Gains from Sales
of Cooperative
Memberships - - - 4.2 4.2 4.2
Depreciation and
Amortization(2.1) (0.5) (1.0) - (3.6) (4.7)
Interest
Expense (6.6) (0.8) (2.6) (0.4) (10.4) (12.0)
Minority
Interests - - - (0.2) (0.2) (0.3)
Income
Taxes - - - (2.0) (2.0) (2.1)
Extraordinary
loss, net of
income taxes - - - - - -
Net Income 8.1 8.4
- ----------------
(a) Effective August 1, 1994, Forum Group purchased additional Units in
Forum Partners to exceed a 50% equity ownership interest, and its
operations are consolidated into Forum Group's consolidated
financial statements from that date. Pro forma operating results
are shown as if Forum Partners' results of operations were
consolidated from April 1, 1994.
-18-
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
FORUM GROUP, INC. AND SUBSIDIARIES
Owned Communities. Total revenues for the three and six months ended
September 30, 1995 increased by $5.1 million (24%) from $21.3 million to
$26.4 million, and by $8.5 million (20%) from $42.3 million to $50.8
million, respectively, as compared to the same period of the previous
year. This increase was primarily attributable to increases in rental
rates, additional ancillary services and the acquisition in August 1994,
January 1995 and May 1995 of three RCs, Tiffany House ("Tiffany"), The
Forum at Fountainview ("Fountainview") and The Forum at the Woodlands
("Woodlands"), respectively. Combined occupancy, excluding Tiffany,
Fountainview and Woodlands, averaged 94.7% at September 30, 1995 compared
to 93.9% at September 30, 1994. Operating expenses for the three and six
months ended September 30, 1995 at the Owned Communities increased by
$3.7 million (26%), from $14.1 million to $17.8 million, and by $6.4
million (23%) from $27.9 million to $34.3 million, respectively, as
compared to the three- and six-month periods ended September 30, 1994.
(General and Administrative expenses ("G&A") for the Owned Communities
were included in operating expenses.) This increase was primarily
attributable to additional ancillary services, normal inflationary
increases and the acquisition of Tiffany, Fountainview and Woodlands.
EBITDA for the three and six months ended September 30, 1995 from the
Owned Communities increased by $.5 million (19%), from $7.2 million to
$8.6 million, and by $1.9 million (15%) from $14.4 million to $16.5
million, respectively, as compared to the same periods ended September
30, 1994.
Consolidated Partnership Communities. Total revenues for the three and
six months ended September 30, 1995 increased by $.5 million (7%), from
$7.0 million to $7.5 million, and by $1.3 million (9%) from $13.7 million
to $15.0 million, respectively, as compared to the same period of the
previous year. This increase was primarily attributable to favorable
changes in occupancy, increased utilization of ancillary healthcare
services and increases in residency fees and charges. Combined occupancy
increased from 93.9% at September 30, 1994 to 94.4% at September 30,
1995. Operating expenses for the Consolidated Partnership Communities
for this three and six months ended September 30, 1995 increased by $.4
million (10%), from $3.9 million to $4.3 million, and by $.7 million (9%)
from $8.0 million to $8.7 million, respectively, as compared to the three
and six months ended September 30, 1994. (G&A for the Owned Communities
are included in operating expenses.) The increase in expenses was
primarily attributable to the increase in occupancy, increased
utilization of ancillary healthcare services and normal inflationary
increases. EBITDA for the Consolidated Partnership Communities for the
three and six months ended September 30, 1995 increased by $.1 million
(3%), from $3.1 million to $3.2 million, and by $.6 million (11%) from
$5.7 million to $6.3 million, respectively, as compared to the three
months ended September 30, 1994.
Pro Forma. On a pro forma basis, assuming that Forum Partners' results
of operations were consolidated for the three and six months ended
September 30, 1994 (rather than from August 1, 1994, the actual date of
consolidation), total revenues for the three and six months ended
September 30, 1995 increased by $7.4 million (17%), from $41.3 million to
$48.7 million, and by $15.3 million (19%) from $79.9 million to $95.2
-19-
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
FORUM GROUP, INC. AND SUBSIDIARIES
million, respectively, as compared to the three and six months ended
September 30, 1994. This increase was primarily attributable to
increases in occupancy, rental rates, additional ancillary services and
the acquisition of Tiffany, Fountainview and Woodlands. Operating
expenses for the three and six months ended September 30, 1995 increased
by $6.2 million (23%), from $27.0 million to $33.2 million, and by $11.2
million (21%), from $53.1 million to $64.3 million, as compared to the
same periods of the previous year; G&A for the three and six months ended
September 30, 1995 increased by $1.3 million (76%), from $1.7 million to
$3.0 million and by $2.4 million (69%) from $3.5 million to $5.9 million,
respectively, as compared to the same periods of the previous year. The
increase in operating expenses was primarily attributable to additional
ancillary services, normal inflationary increases and the acquisition of
Tiffany, Fountainview and Woodlands. The increase in G&A was primarily
attributable to the factor described under the caption "General and
Administrative Expenses" below. EBITDA for the three and six months
ended September 30, 1995 decreased and increased by $.4 million (3%),
from $12.6 million to $12.2 million, and by $1.1 million (5%) from $23.3
million to $24.4 million, respectively, as compared to the same periods
of the previous year.
Unconsolidated Entities. Forum Group's equity in the earnings of
unconsolidated entities is reflected as Other income. Changes in Forum
Group's equity in the aggregate net earnings of Forum Partners and GRP
were not material to Forum Group's consolidated results of operations for
the three and six months ended September 30, 1995. Due to the changes in
financial statement presentation regarding Forum Partners (see Note B of
Notes to Condensed Consolidated Financial Statements), the equity
adjustment for that entity is not comparable between fiscal periods.
Consolidated Items. The following is a discussion of certain
consolidated items:
General and Administrative Expenses. For the three and six months ended
September 30, 1995, consolidated G&A increased by $1.3 million (76%),
from $1.7 million to $3.0 million, and by $2.6 million (79%) from $3.3
million to $5.9 million, respectively, compared to the same periods of
the previous year. This increase was primarily attributable to increased
home office staff costs to manage recent and projected growth through
acquisitions and development.
Relocation Costs. During the three and six months ended September 30,
1995, expenses of $.3 million and $.6 million, respectively, were
incurred in conjunction with the relocation of Forum Group's headquarters
from Indianapolis, Indiana to Fairfax, Virginia. Additional relocation
expenses are currently expected to be approximately $1.0 million. The
relocation is expected to benefit the Company as a result of future
growth and development targeted along the East Coast corridor, potential
acquisitions and the ability to attract exceptional talent necessary to
meet the Company's expected growth.
-20-
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
FORUM GROUP, INC. AND SUBSIDIARIES
Gains From Sale Of Cooperative Memberships. The operating results of
Rancho San Antonio Retirement Housing Corporation ("Rancho San Antonio"),
a cooperative corporation which owns an RC in Cupertino, California, were
included in the consolidated financial statements of Forum Group through
July 31, 1993 because Forum Group owned a majority of the cooperative
memberships. Effective August 1, 1993, due to continued sales of
cooperative memberships, Forum Group no longer owned in excess of 50%,
and accordingly, the financial statements of Rancho San Antonio were no
longer consolidated into Forum Group's financial statements from that
date. Sales of cooperative memberships have totaled $115 million through
September 30, 1995, and profits of these sales are recognized using the
cost recovery method. In August 1994, all of Forum Group's costs were
recovered through sale of memberships, and the investment was reduced to
zero. Remaining membership sales are recognized as gains from sales of
cooperative memberships. Proceeds from future sales of memberships are
estimated to approximate $4.0 million. For the three months ended
September 30, 1995, thirty-one memberships were sold and $10.8 million of
gains were recognized.
Litigation Expenses. Litigation expenses were not material to Forum
Group's results of operations for the three and six months ended
September 30, 1995 and 1994.
Depreciation. For the three and six months ended September 30, 1995,
consolidated depreciation expense increased by $.8 million and $2.1
million, compared to the previous fiscal period. This increase reflects
property additions, the August 1, 1994 consolidation of Forum Partners
for financial statement purposes and the acquisition of Tiffany,
Fountainview and Woodlands.
Interest Expense. Consolidated interest expense increased by $1.8
million, from $5.8 million to $7.6 million, and by $4.2 million from
$10.4 million to $14.6 million, respectively, during the three and six
months ended September 30, 1995, as compared to the same periods of the
previous year. This change was primarily attributable to changes in
average borrowing costs and increased indebtedness incurred to finance
acquisitions.
Minority Interests. There were no changes in the minority interests'
elimination for the three and six months ended September 30, 1995
compared to the same periods in the previous year.
Taxes. Due to the utilization of net operating loss carryforwards,
Forum Group had a $.2 million federal income tax liability at September
30, 1995 related to fiscal year 1996 estimated tax liability. Notes
and other receivables include federal income taxes receivable of $1.2
million at September 30, 1995 related to fiscal year 1995 tax return. As
of March 31, 1995, net operating loss carryforwards for tax purposes were
estimated to be approximately $158.0 million before the application of
certain net operating loss carryforward limitations. As a result of
these limitations, Forum Group expects the utilization of net operating
loss carryforwards will be limited to approximately $33.0 million. These
-21-
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
FORUM GROUP, INC. AND SUBSIDIARIES
net operating loss carryforwards will expire in varying amounts through
fiscal year 2009. For financial reporting purposes, any future benefit
of net operating loss carryforwards and net deferred tax assets arising
prior to the reorganization plan (April 2, 1992) will be reported as
additional shareholders' equity. The maximum future tax benefit to be
recognized through shareholders' equity was estimated to be approximately
$30.0 million at March 31, 1995.
Extraordinary Loss. On September 1, 1995, the Company extinguished $106
million of debt prior to its scheduled maturity. In connection with this
transaction, the Company incurred an extraordinary loss of $2.6 million,
net of $.6 million of income tax benefit. The interest rate cap
agreement related to part of the underlying extinguished debt was not
terminated. The difference between the market value of $7.3 million and
the unamortized cost of $5.7 million, net of taxes of $.3 million, was
netted with the extraordinary loss.
Net Income/Loss Per Share. The three and six months ended September 30,
1995 produced net income of $8.7 million ($0.37 per Common Share) and
$10.6 million ($0.45 per Common Share) compared to net income of $6.0
million ($0.26 per Common Share) and $8.1 million ($0.35 per Common
Share) for the comparable periods in 1994.
All per share data are based upon the weighted average number of shares
outstanding for the relevant periods.
Financial Condition
- -------------------
Liquidity And Capital Resources. At September 30, 1995, Forum Group had
cash and cash equivalents of $37.9 million, accounts receivable of $8.9
million, notes and other receivables of $6.2 million, prepaid and other
current assets of $3.5 million, and current liabilities of $97.9 million
(including $56.7 million of indebtedness due within one year). Forum
Group believes that its liquidity and the capital resources available to
it are adequate to meet its foreseeable working capital and strategic
growth requirements. The negative working capital at September 30, 1995
includes approximately $50.3 of debt which is currently due or matures
during May, 1996. As discussed under "Capital Structure" on page 24,
Forum Group believes it has the available cash on hand to extinguish
amounts currently due and adequate debt capacity to extend the $50.3
million. Forum Group is currently evaluating available alternatives with
respect to extinguishing or extending maturing obligations.
Forum Group has adopted a growth-oriented strategic plan which
contemplates the acquisition of businesses and assets as well as
additional capital investment in its existing properties. Forum Group's
acquisition strategy is designed to add additional properties in
strategically located markets, to establish joint ventures to develop or
acquire properties or businesses in the senior housing sector and to
pursue other opportunities relating to senior service, including home
health care and other home or community-based services to the seniors'
market.
-22-
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
FORUM GROUP, INC. AND SUBSIDIARIES
Forum Group also intends to seek to expand its existing properties
through additional capital investment. Forum Group's expansion strategy
is intended to modify the use of, or add capacity to, existing facilities
without incurring substantial land acquisition and common area build-out
costs, and to take advantage of other existing infrastructure investment
and personnel in place.
There necessarily can be no assurance that additional material
acquisitions or expansions will be completed or, if so, as to the timing
or terms thereof.
On October 31, 1995, Forum Group entered into a binding agreement to
acquire two assisted living and dementia-related senior housing
communities in the Northwestern United States in January, 1996. A third
community in the Northwestern United States currently under construction
will also be acquired in October, 1997, for an amount defined in the
agreement once stabilized occupancy has been established. Management of
these assets will be provided by the seller on a fee basis. The
agreement also provides for participation, on a joint venture basis, for
the construction of between 5 and 10 new communities in the Northwestern
United States and the right to develop the concept nationally.
Management believes that satisfactory sources of capital are available to
meet all funding obligations with respect to this acquisition.
Forum Group has an interest rate cap agreement with a notional amount of
$93.3 million which was not terminated upon refinancing of the underlying
debt in September, 1995. The interest rate cap had a market value of
approximately $6.1 million as of November 1, 1995. Management is
currently evaluating alternatives with respect to this agreement. See
Note E of Notes to Condensed Consolidated Financial Statements included
elsewhere herein for additional information relating to this agreement.
Forum Group is currently a party to a loan facility providing for up to
$100 million of acquisition financing. The unutilized amount of this
facility at November 1, 1995 was $70.1 million. At the option of Forum
Group, each borrowing under the facility may be converted to a ten-year
term loan after 18 months from the date of the borrowing. During the 18-
month period, Forum Group may repay the indebtedness using proceeds from
other financing sources, if any such financing becomes available on more
favorable terms. Absent conversion or refinancing, interest on the
acquisition loan is payable monthly in arrears at LIBOR plus 5.425%
(including service costs and other fees of 2.075%). Forum Group has an
option permitting it to increase the borrowings against the properties
acquired if the debt service coverage computed on a trailing 12-month
basis exceeds certain thresholds, in which event the increased borrowings
could be used to fund Forum Group's growth or for other corporate
purposes. While Forum Group believes that the existing acquisition
facility, together with its other capital resources, are sufficient to
finance its acquisition and capital investment strategy over the
intermediate term, Forum Group is also exploring the possible
modification or replacement of, or supplements to, that facility and
other possible financings and refinancings in order to provide greater
financial flexibility.
-23-
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
FORUM GROUP, INC. AND SUBSIDIARIES
Capital Structure. Forum Group's total long-term debt was $317 million
as of September 30, 1995, including $123.8 million of debt of
Consolidated Partnership Communities which was non-recourse to Forum
Group, Inc. Of the remaining $193.2 million, $170.1 million was non-
recourse to Forum Group. The current portion of long-term due within one
year at September 30, 1995 was $56.7 million. Of this total,
indebtedness of up to $50.3 million is currently due or matures during
May, 1996. Forum believes it has available cash on hand to extinguish
amounts currently due and adequate debt capacity to extend the $50.3
million. Forum is presently evaluating available alternatives with
respect to extinguishing or extending maturing obligations. Total long-
term indebtedness excludes $4.2 million of GRP debt, $0.5 million of
which is recourse to Forum Group, Inc.
On September 1, 1995, the Forum Pool Borrowers obtained a non-recourse
mortgage loan totaling $124.7 million. The loan is secured by first and
second liens on the Forum Pool Properties. The loan has cross-default and
cross-collateral provisions. The proceeds were used to repay existing
indebtedness of $106.0 million, loan closing costs, funding of the initial
capital reserve account and general corporate purposes. See Note D to the
Notes to Condensed Consolidated Financial Statements.
Pursuant to a separate credit agreement, during the period from September
1, 1995 to September 1, 1999, Forum Group may borrow up to $50 million to
fund a portion of the expansions to the properties collaterallizing the
above-described mortgage loan. See Note D to the Notes to Condensed
Consolidated Financial Statements.
Forum Group will continue to monitor conditions in the bank lending and
capital markets and, if appropriate in light of then-current market
conditions, Forum Group's then-existing capital structure and
requirements, Forum Group's growth strategy and other factors determined
to be relevant, may enter into one or more capital arrangements. Such
arrangements could include one or more issuances of indebtedness or other
financings. Although Forum Group intends to actively consider the
financing alternatives that may be available to it, there can be no
assurance that any such transactions will be completed or, if so, as to
the timing or terms thereof.
Cash Flow. Operating activities for the six months ended September 30,
1995 provided $21.1 million of cash compared to $12.8 million of cash
provided by operating activities during the same period of the previous
year, due principally to improved operating results.
Investing activities used $47.7 million of cash during the six months
ended September 30, 1995, compared to $1.3 million of cash provided by
investing activities during the same period of the previous year, due
principally to the purchase of two non-performing first mortgage loans on
RCs, acquisition of an RC and other businesses and additions to property
and equipment, including construction in progress.
-24-
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
FORUM GROUP, INC. AND SUBSIDIARIES
Financing activities provided $34.3 million of cash during the six months
ended September 30, 1995, compared to $1.8 million of cash provided by
financing activities during the same period of the previous year, due
principally to the proceeds from long-term debt used to finance
acquisition of an RC and the purchase of two non-performing first
mortgage loans.
-25-
<PAGE>
PART II. OTHER INFORMATION
--------------------------
FORUM GROUP, INC. AND SUBSIDIARIES
September 30, 1995
ITEM 1. LEGAL PROCEEDINGS
- --------------------------
On May 7, 1992, Charles S. Maddock, a resident of Stonegates, a
condominium RC in Greenville, Delaware, instituted an action against
Greenville Retirement Community, L.P. ("GRP"), the developer and managing
agent of, and owner of the service units (i.e., nursing, kitchen and
dining facilities) at Stonegates, in the Court of Chancery of the State
of Delaware in and for New Castle County (the "State Court Action").
Forum Group is the sole general partner of, and the owner of a 50%
beneficial interest in, GRP. Forum Group is also the operator and
manager of Stonegates pursuant to an operation and management agreement
with GRP under which, among other things, GRP delegated to Forum Group
all of GRP's duties and responsibilities as managing agent of Stonegates.
Mr. Maddock alleges that certain of the organizational documents of
Stonegates violate state law and that GRP and Forum Group have breached
their responsibilities under such documents. Mr. Maddock sought various
forms of injunctive and declaratory relief and damages. On August 21,
1992, Forum Group instituted an action (the "Bankruptcy Court Action") in
the bankruptcy court (the "Bankruptcy Court") with jurisdiction over
Forum Group's reorganization plan (the "Reorganization Plan") alleging
that the relief requested in the State Court Action effectively asserts a
claim against Forum Group, the assertion of which is barred under the
terms of the Reorganization Plan, and requesting injunctive relief
preventing the further prosecution of the State Court Action. On
December 13, 1994, Mr. Maddock and Forum Group entered a stipulation in
the Bankruptcy Court providing that Mr. Maddock will be enjoined from
asserting claims based upon acts or omissions of Forum Group or GRP
occurring prior to April 2, 1992 (the effective date of the
Reorganization Plan). The stipulation does not bar the assertion of a
claim arising after April 2, 1992 from either a new cause of action or a
new breach of any continuing agreement. On August 9, 1995 Mr. Maddock
was granted a motion to amend his complaint in the State Court Action.
This amended complaint (i) asserts claims only with respect to matters
accruing after the effective date of the Reorganization Plan, (ii) adds
Forum Group as a defendant, and (iii) adds a new claim asserting that GRP
and Forum Group conspired to violate federal anti-trust laws. Forum
Group believes that there are substantial defenses to Mr. Maddock's
claims; however, there necessarily can be no assurance as to the outcome
of these proceedings.
-26-
<PAGE>
PART II. OTHER INFORMATION
--------------------------
FORUM GROUP, INC. AND SUBSIDIARIES
September 30, 1995
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -----------------------------------------------------------
(a) The annual meeting of shareholders of Forum Group was held on
September 13, 1995.
(b) The shareholders voted on the following items at the meeting:
(i) The shareholders approved the election of directors to serve
until the 1996 annual meeting of shareholders of Forum Group,
with the votes for such election as follows:
Nominee Votes For Votes Withheld
Laurence M. Berg 21,022,190 13,710
Peter P. Copses 21,022,190 13,710
Daniel A. Decker 21,022,184 -0-
James E. Eden 21,022,191 13,709
Mark L. Pacala 21,022,184 13,716
Kurt C. Read 21,022,190 13,710
Antony P. Ressler 21,022,190 13,710
Robert A. Whitman 21,022,191 13,709
Margaret A. Wylde 21,022,191 13,709
(ii) The shareholders ratified the appointment of KPMG Peat Marwick
LLP as independent accountants to audit the consolidated
financial statements of Forum Group for the year ended March
31, 1996. The votes for ratification were 21,024,570, the
votes against ratification were 2,829, the votes abstained were
8,501 and there were no broker non-votes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ----------------------------------------
(a) Exhibits:
---------
10.1 Loan Agreement, dated as of September 1, 1995, by and among
FGI Financing I Corporation, Forum Ohio Healthcare, Inc. and
Nomura Asset Capital Corporation.
10.2 Credit Agreement, dated as of September 1, 1995, by and
between Forum Group, Inc. and Nomura Asset Capital
Corporation.
99.1 Item 3 and Note 5 of the Notes to Consolidated Financial
Statements contained in Item 8 of Part I of Forum Group,
Inc.'s Annual Report on Form 10-K for the year ended March
31, 1995 (incorporated by reference thereto).
99.2 Item 1 of Part II of Forum Group, Inc.'s Quarterly Report on
Form 10-Q for the quarter ended June 30, 1995 (incorporated by
reference thereto).
(b) Reports on Form 8-K: NONE
--------------------
-27-
<PAGE>
PART II. OTHER INFORMATION
--------------------------
FORUM GROUP, INC. AND SUBSIDIARIES
September 30, 1995
Items 2, 3 and 5 have been omitted from this Part II as inapplicable or
not required under the applicable instructions.
-28-
<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: November 14, 1995 By: /s/ Richard A. Huber
--------------------------------
Richard A. Huber
Vice President-Operations Finance
-29-
<PAGE>
EXHIBIT INDEX
-------------
DESCRIPTION
Exhibit No.:
------------
10.1 Loan Agreement, dated as of September 1, 1995, by and among
FGI Financing I Corporation, Forum Ohio Healthcare, Inc. and
Nomura Asset Capital Corporation.
10.2 Credit Agreement, dated as of September 1, 1995, by and
between Forum Group, Inc. and Nomura Asset Capital
Corporation.
99.1 Item 3 and Note 5 of the Notes to Consolidated Financial
Statements contained in Item 8 of Part I of Forum Group,
Inc.'s Annual Report on Form 10-K for the year ended March
31, 1995 (incorporated by reference thereto).
99.2 Item 1 of Part II of Forum Group, Inc.'s Quarterly Report on
Form 10-Q for the quarter ended June 30, 1995 (incorporated by
reference thereto).
-30-
<PAGE>
LOAN AGREEMENT
Dated as of September 1, 1995
by and among
FGI FINANCING I CORPORATION
and
FORUM OHIO HEALTHCARE, INC.
as Borrower
and
NOMURA ASSET CAPITAL CORPORATION
as Lender
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I CERTAIN DEFINITIONS 1
Section 1.1. Definitions 1
ARTICLE II GENERAL TERMS 33
Section 2.1. Amount of the Loan 33
Section 2.2. Use of Proceeds 33
Section 2.3. Security for the Loan 33
Section 2.4. Borrower's Notes 33
Section 2.5. Principal and Interest 34
Section 2.6. Voluntary Prepayment 35
Section 2.7. Mandatory Prepayment 36
Section 2.8. Application of Payments 38
Section 2.9. Method and Place of Payment 38
Section 2.10. Taxes 38
Section 2.11. Release of Collateral 39
Section 2.12. Central Cash Management 39
Section 2.13. Security Agreement 47
Section 2.14. Supplemental Mortgage Affidavits 52
Section 2.15. Securitization 53
ARTICLE III CONDITIONS PRECEDENT 54
Section 3.1. Conditions Precedent to
Effectiveness and Disbursement of the Loan 54
Section 3.2. Acceptance of Borrowings 58
Section 3.3. Form of Loan Documents and Related
Matters 59
ARTICLE IV REPRESENTATIONS AND WARRANTIES 59
Section 4.1. Borrower Representations 59
Section 4.2. Survival of Representations 70
ARTICLE V AFFIRMATIVE COVENANTS 70
Section 5.1. Borrower Covenants 70
ARTICLE VI NEGATIVE COVENANTS 84
Section 6.1. Borrower Negative Covenants 84
ARTICLE VII DEFAULTS 87
Section 7.1. Event of Default 87
Section 7.2. Remedies 90
Section 7.3. Remedies Cumulative 91
<PAGE>
ARTICLE VIII MISCELLANEOUS 92
Section 8.1. Survival 92
Section 8.2. Lender's Discretion 92
Section 8.3. Governing Law 92
Section 8.4. Modification, Waiver in Writing. 94
Section 8.5. Delay Not a Waiver 94
Section 8.6. Notices 94
SECTION 8.7. TRIAL BY JURY 95
Section 8.8. Headings 95
Section 8.9. Assignment 95
Section 8.10. Severability 96
Section 8.11. Preferences 96
Section 8.12. Waiver of Notice 96
Section 8.13. Remedies of Borrower 96
Section 8.14. Exculpation 97
Section 8.15. Exhibits Incorporated 99
Section 8.16. Offsets, Counterclaims and Defenses 99
Section 8.17. No Joint Venture or Partnership 99
Section 8.18. Waiver of Marshalling of Assets
Defense 99
Section 8.19. Waiver of Counterclaim 99
Section 8.20. Conflict; Construction of Documents 100
Section 8.21. Brokers and Financial Advisors 100
Section 8.22. Counterparts 100
Section 8.23. Estoppel Certificates 100
Section 8.24. Payment of Expenses 101
Section 8.25. Bankruptcy Waiver 101
Section 8.26. Indemnification 102
Section 8.27. Entire Agreement 103
Section 8.28. Cross Collateralization 103
Section 8.29. [Intentionally Deleted] 103
Section 8.30. Defeasance 103
SECTION 8.31. FINAL AGREEMENT 106
SECTION 8.32. NON-STANDARD TERMS; NO UNWRITTEN
ORAL AGREEMENTS 106
Exhibits
A - Allocated Loan Amounts
B - Assignment of Management Agreement and
Agreements Affecting Real Estate (Form)
C - Assignment of Leases and Rents (Form)
D - Collection Account Banks
E - Manager's Subordination (Form)
F - Engineering Reports
G - Environmental Reports
H - Individual Properties
I - Environmental Guaranty and Indemnity Agreement
(Form)
<PAGE>
J - Mortgage, Assignment of Rents, Security Agreement and
Fixture Filing (Form)
K - Deed of Trust, Assignment of Rents, Security Agreement
and Fixture Filing (Form)
L - Promissory Note (Form)
M - Letter of Instructions and Acknowledgement (Form)
N - Required Debt Service Payment Certificate (Form)
O - Cash Collateral Account Agreement (Form)
P - True Sale/Nonconsolidation Opinion of Jones, Day, Reavis
& Pogue (Form)
Q - Intentionally Deleted
R - Financing Statements
S - Opinion of Jones, Day, Reavis & Pogue (Form)
T - Intentionally Deleted
U - Opinion of Real Estate Counsel (Form)
V - Lien Search Reports
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
BB - Second Assignment of Agreements (Form)
CC - Second Assignment of Leases (Form)
DD - Second Mortgage (Form)
EE - Second Deed of Trust (Form)
FF - Knightsbridge Cash Collateral Agreement (Form)
GG - Securitization Indemnity
Schedules
1 - Capital Reserve Amounts
2 - Initial Capital Requirements
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT, made as of September 1, 1995, 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") and FGI
FINANCING I CORPORATION ("FFC"), a Delaware corporation and FORUM
OHIO HEALTHCARE, INC. ("FOH"; FFC and FOH, collectively,
"Borrower"), an Ohio corporation, each having an address at 11320
Random Hills Road, Suite 400, Fairfax, Virginia 22030
("Borrower").
RECITALS
WHEREAS, Borrower desires to obtain a loan (the "Loan")
from Lender in the aggregate amount of $124,666,650 (the "Loan
Amount");
WHEREAS, Lender is unwilling to make the Loan unless
Borrower joins in the execution and delivery of this Agreement,
the Notes and the other Loan Documents (all of the foregoing
capitalized terms as hereinafter defined) which shall establish
the terms and conditions of the Loan;
WHEREAS, Borrower and Lender contemplate that 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); and
WHEREAS, Borrower has agreed to establish certain
accounts and to grant to Servicer (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.
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:
<PAGE>
2
(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 specified in
Section 2.13(a).
"Accounts" means, with respect to each Borrower, any of
such Borrower's rights to payment for goods sold or leased or for
services rendered arising from the operation of such Borrower's
Individual Property or Individual Properties, as the case may be,
and not evidenced by an Instrument, including, without
limitation, all accounts and accounts receivable arising from the
operation of such Individual Property or Individual Properties,
as the case may be, now existing or hereafter coming into
existence, and all Proceeds thereof. In addition to the
foregoing, the term "Accounts" shall include the meaning such
term has in the New York Uniform Commercial Code.
"Accrued Interest" has the meaning specified in Section
2.5(c).
"Additional Interest" means, for the applicable period,
the amount by which interest calculated on the Principal
Indebtedness at the Revised Interest Rate exceeds interest
calculated on the Principal Indebtedness at the Base Interest
Rate.
"Adjusted Net Cash Flow" means for any period (and
calculated either for an Individual Property or the Individual
Properties) the Net Cash Flow for such period reduced by (i) an
allowance for Capital Reserve Amounts 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 with respect to the Individual
Properties and (y) 5% of Gross Revenue, to the extent that such
costs have not been included in Operating Expenses, and (iii) an
amount necessary to reflect a 5% vacancy factor if the actual
vacancy factor is less than 5%. All calculations of Adjusted Net
<PAGE>
3
Cash Flow shall be based on Net Cash Flow for the prior 12-month
period, taking into account only the Individual Properties
constituting the Mortgaged Property at the time the calculation
is made.
"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 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 Individual Property 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 a regular monthly
payment of principal pursuant to Section 2.5(b), 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 an Individual Property, 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
(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.
<PAGE>
4
"Annual Budget" has the meaning specified in Section
5.1(Q)(x).
"Approved Annual Budget" has the meaning specified in
Section 5.1(Q)(x).
"Assignment of Agreements" means, with respect to an
Individual Property, a first priority Assignment of Management
Agreement and Agreements Affecting Real Estate, in the form
attached hereto as Exhibit B, dated as of the Closing Date, from
the relevant Borrower, as assignor, to Lender, as assignee,
assigning to Lender (to the extent set forth in the Assignment of
Agreements) such Borrower's interest in and to all contracts
between such Borrower and third parties in connection with the
management and operation of the Individual Property, including,
without limitation, the Management Agreement, any agreements with
design professionals, all agreements, allocations and rights with
all utility services affecting the Individual Property and all
development agreements and Permits, as the same may hereafter
from time to time be supplemented, amended, modified or extended
by one or more written agreements supplemental thereto, and
"Assignments of Agreements" means all such instruments
collectively.
"Assignment of Leases" means, with respect to an
Individual Property, a first priority Assignment of Leases and
Rents, substantially in the form attached hereto as Exhibit C,
dated as of the Closing Date, from the relevant Borrower, as
assignor, to Lender, as assignee, with respect to an Individual
Property, assigning to Lender such Borrower's interest in and to
the Leases and the Rents with respect to such Individual Property
as collateral security for the Loan, as the same may hereafter
from time to time be supplemented, amended, modified or extended
by one or more agreements supplemental thereto, and "Assignments
of Leases" means all such instruments collectively.
"Bank" means LaSalle National Bank or any successor
bank hereafter selected by Lender in accordance with the terms
hereof.
"Base Interest Rate" means 10.008% per annum.
"Base Monthly Debt Service Amount" means initially
(i) $949,423.80 per month with respect to FFC's Note and (ii)
$187,865.92 with respect to FOH's Note; provided, however, that
the Base Monthly Debt Service Amount shall be recalculated by
Lender effective as of the next Payment Date following each
prepayment of a portion of the Loan in accordance with Section
2.5(a).
<PAGE>
5
"Basic Carrying Costs" means the following costs with
respect to the Mortgaged Property: (i) real property taxes and
assessments applicable to the Individual Properties, (ii)
insurance premiums for policies of insurance required to be
maintained by Borrower pursuant to this Agreement or the other
Loan Documents and (iii) at Lender's option, the rent payments
required under Section 5 of the Knightsbridge Lease.
"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.
"Benchmark Rate" means 6.358% per annum.
"Borrower" has the meaning specified in the first
paragraph of this Agreement.
"Business Day" means any day other than (i) a Saturday
or 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.
"Capital Improvement Costs" means costs incurred by
Borrower in connection with capital improvements to the
Individual Properties.
"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 Individual Property on Schedule 1 attached hereto.
"Capital Reserve Monthly Installment" means an amount
equal to 1/12th of the Capital Reserve Amount.
<PAGE>
6
"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 specified in
Section 2.12(b).
"CC Account Agreement" has the meaning specified in
Section 2.13(c).
"Certificate" has the meaning specified 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, and
any successor statutes thereto, and applicable U.S. Department of
Treasury Regulations.
"Collateral" means, collectively, the Land,
Improvements, Equipment, Rents, Accounts (including rights to
payment from patients or private insurers arising from the
operation of each Individual Property, and, to the extent
permitted by applicable law, all rights to payment from Medicare
and Medicaid programs or similar state or federal programs,
boards, bureaus or agencies), General Intangibles, Instruments,
Inventory, Money, Permits (to the full extent assignable), the
Knightsbridge Cash Collateral, 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. Following a defeasance pursuant to
Section 8.30, Collateral shall also include the pledged U.S.
Obligations.
"Collateral Security Instrument" means any right,
document or instrument, other than a Mortgage or a Second
Mortgage, given as security for the Loan (including, without
limitation, the Assignments of Leases, the Second Assignments of
Leases, the Assignments of Agreements, the Second Assignments of
Agreements, the Manager's Subordination and the Knightsbridge
Cash Collateral Agreement), as same may be supplemented, amended,
extended or modified from time to time.
<PAGE>
7
"Collection Account" has the meaning specified in
Section 2.12(a).
"Collection Account Bank" means the applicable bank for
each Individual Property 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 specified in
Section 2.12(h).
"Contingent Obligation" means any obligation (other
than Borrower's obligations under the Loan Documents) 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 specified in
Section 2.12(g).
"Debt Service" means, for any period, the principal
(exclusive of the 100% Excess Cash Flow payable pursuant to
<PAGE>
8
Section 2.5(c)), and interest payments at the Base Interest Rate
that would be due and payable in accordance with the Notes and
this Agreement during such period.
"Debt Service Coverage Ratio" means as of any date (and
calculated either for an Individual Property or for the
Individual Properties as a whole) the quotient obtained by
dividing Adjusted Net Cash Flow for the specified period by the
Imputed Debt Service for such period. All calculations of Debt
Service Coverage Ratios shall be made by Borrower, subject to
verification by Lender and KPMG Peat Marwick LLP or another
accounting firm acceptable to Lender (any "Big Six" accounting
firm 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 each of the trustees, 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 specified in
Section 8.14.
"Default Rate" means the per annum interest rate equal
to the lesser of (i) the Maximum Amount or (ii) the sum of 5%
plus the greater of (A) the Base Interest Rate or (B) the
Prepayment Treasury Rate.
"Defeasance Date" has the meaning specified in Section
8.30.
"Defeasance Deposit" means an amount equal to the total
cost incurred or to be incurred in the purchase by Borrower of
non-callable U.S. Treasuries necessary to meet the Scheduled
Defeasance Payments.
"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 all times
of deposit therein, or, if such depository institution or trust
<PAGE>
9
company (or holding company) does not have a long-term unsecured
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 A-1+, (ii) a
segregated trust account maintained with the trust department of
a federal or state chartered depository institution or trust
company acting in its fiduciary capacity which institution or
trust company is subject to regulations regarding fiduciary funds
on deposit substantially similar to 12 C.F.R. 9.10 (b), or
(iii) 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 as evidenced in writing. The Collection Accounts existing
as of the Closing Date shall be deemed to be Eligible Amounts.
"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 property condition
reports with respect to each Individual Property 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 either Borrower or any Individual
Property, whether for damages, contribution, indemnification,
cost recovery, compensation, injunctive relief, investigatory,
response, remedial or cleanup costs, damages to natural
resources, personal injuries, fines or penalties arising out of,
based on or resulting from (i) the presence, Use or Release into
the environment of any Hazardous Substance originating at or
from, or otherwise affecting, an Individual Property, (ii) any
fact, circumstance, condition or occurrence forming the basis of
any violation, or alleged violation, of any Environmental Law by
either Borrower or otherwise affecting an Individual Property or
(iii) any alleged injury or threat of injury to health, safety or
the environment by either Borrower or otherwise affecting an
Individual Property.
"Environmental Laws" means any and all applicable
federal, state, local and foreign laws, rules or regulations, any
<PAGE>
10
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
date hereof and as amended from time to time, relating to the
protection of human health or the environment, or the Release or
threatened Release of Hazardous Substances into the indoor or
outdoor environment including, without limitation, 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 Individual Property 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, with respect to each Borrower, all
fixtures, appliances, machinery, furniture, furnishings,
decorations, tools and supplies now owned or hereafter acquired
by Borrower and located upon the Land or the Improvements and
used in connection with the present or future operation and
occupancy of the Land and the Improvements, including, but not
limited to, all beds, linen, radios, televisions, carpeting,
telephones, cash registers, computers, lamps, glassware,
rehabilitation equipment, restaurant and kitchen equipment, and
any other building equipment, including, but not limited to, all
heating, lighting, incinerating, waste removal and power
equipment, engines, pipes, tanks, motors, conduits, switchboards,
security and alarm systems, plumbing, lifting, cleaning, fire
prevention, fire extinguishing, refrigeration, ventilating and
communications apparatus, air cooling and air conditioning
apparatus, escalators, elevators, ducts and compressors,
materials and supplies, and all other machinery, apparatus,
equipment, fixtures and fittings now owned or hereafter acquired
by such Borrower, any portion thereof or any appurtenances
thereto, together with all additions, replacements, parts,
fittings, accessions, attachments, accessories, modifications and
alterations of any of the foregoing to the extent relating to
such Borrower's Individual Property, provided, however, that,
with respect to any items which are leased and not owned by a
Borrower, the Equipment shall include the leasehold interest only
of such Borrower together with any options to purchase any of
said items and any additional or greater rights with respect to
such items which such 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
<PAGE>
11
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 specified in Section
7.1.
"Excess Cash Flow" has the meaning specified in Section
2.12(g)(ii)
"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.
"Finder" has the meaning specified in Section 8.21.
"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).
"FFC" has the meaning specified in the first paragraph
of this Agreement.
"FOH" has the meaning specified in the first paragraph
of this Agreement.
"GAAP" means generally accepted accounting principles
in the United States of America as of the date of the applicable
financial report.
"General Intangibles" means, with respect to each
Borrower, all intangible personal property of such Borrower
arising out of or directly relating to such Borrower's Individual
Properties (other than Accounts, Rents, Instruments, Inventory,
Money and Permits), including, without limitation, things in
action, settlements, judgments, contract rights, rights to
performance (including, without limitation, rights under
warranties), refunds of real estate taxes and assessments and
other rights to payment of Money, copyrights, trademarks and
patents now existing or hereafter in existence. In addition to
<PAGE>
12
the foregoing, the term "General Intangibles" shall include the
meaning such term has in the New York Uniform Commercial Code.
"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 an Individual
Property or all of the Individual Properties, the total dollar
amount of all income and receipts whatsoever received by Borrower
in the ordinary course of its business with respect to such
Individual Property or Individual Properties, 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
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, 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
<PAGE>
13
governmental charges, in each case whether general or special,
ordinary or extraordinary, foreseen or unforeseen, of every
character in respect of an Individual Property or 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) a
Borrower (including, without limitation, all income, franchise,
single business or other taxes imposed on such 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.
"Improvements" means, with respect to each Individual
Property, all buildings, structures and improvements of every
nature whatsoever now or hereafter situated on, placed or
constructed upon the Land, including, but not limited to, to the
extent of a 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 an Individual Property based on its
Allocated Loan Amount or for the Individual Properties as a whole
based on the Principal Indebtedness then outstanding) the
aggregate amount of principal (exclusive of the 100% Excess Cash
Flow payable pursuant to Section 2.5(c)) and interest payments at
the Base Interest Rate (excluding for purposes of such
calculations for the Individual Properties, as a whole, any
Scheduled Defeasance Payments) that would be due and payable
during the applicable period calculated using a debt constant of
10.947% per annum as calculated in Section 2.5(a).
<PAGE>
14
"Indebtedness" means the Principal Indebtedness,
together with all accrued and unpaid interest (including, without
limitation, Additional Interest and Accrued Interest) thereon and
all other obligations and liabilities due or to become due to
Lender pursuant hereto, under the Notes 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 Notes or any of the other Loan Documents.
"Indemnified Parties" has the meaning specified in
Section 8.26.
"Indemnity Agreement" means that certain 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 either
Borrower or in any Affiliate of either Borrower, and (ii) is not
connected with either Borrower or any Affiliate of either
Borrower as an officer, employee, promoter, underwriter, trustee,
partner, or person performing similar functions; provided,
however, a director will not be deemed to be not Independent
solely because such director is also a director of an Affiliate
of either Borrower.
"Individual Property" means the Land, the Improvements
and the Equipment (to the extent same shall be deemed to be
fixtures) encumbered by a Related Mortgage. All of the
"Individual Properties" collectively comprise the Mortgaged
Property. The Individual Properties are described on Exhibit H
attached hereto.
"Initial Capital Requirement" means $24,000, which is
the sum of the amounts specified in the Engineering Reports as
being necessary to complete the deferred maintenance items
identified therein, as specified for each Individual Property on
Schedule 2 attached hereto.
"Instruments" means, with respect to each Borrower, all
instruments, chattel paper, documents or other writing obtained
by such Borrower from or in connection with the operation of such
Borrower's Individual Properties evidencing a right to the
payment of Money, including, without limitation, all notes,
drafts, acceptances, documents of title, and policies and
certificates of insurance, including, but not limited to,
liability, hazard, rental and credit insurance, guarantees and
securities, now or hereafter received by such Borrower or in
<PAGE>
15
which such Borrower has or acquires an interest pertaining to the
foregoing. In addition to the foregoing, "Instruments" shall
include the meaning such term has in the New York Uniform
Commercial Code.
"Insurance Proceeds" has the meaning specified in
Section 2.12(h).
"Insurance Requirements" means all material terms of
any insurance policy required pursuant to this Agreement,
Mortgage or a Second 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 a
Payment Date, the period commencing on and including the 11th day
of the month of the prior Payment Date (or, in the case of the
first Payment Date, the Closing Date) and ending on and including
the 10th day of the month of the current Payment Date; provided,
however, that no Interest Accrual Period shall extend beyond the
Maturity Date.
"Interim Servicing Agreement" means an Interim
Servicing Agreement entered into by and between Lender and
Servicer with respect to the servicing of the Loan, as the same
may be amended from time to time.
"Inventory" means, with respect to each Borrower, all
goods now owned or hereafter acquired by such Borrower intended
for sale or lease, or to be furnished under contracts of service
by such Borrower in connection with such Borrower's Individual
Properties, including, without limitation, all inventories of
food, beverages and other comestibles held by such Borrower for
sale or use at or from such Borrower's Individual Properties, and
soap, paper supplies, medical supplies, drugs (excluding
pharmaceuticals requiring a license to distribute or sell) and
all other such goods, wares, merchandise and materials and
supplies of every nature held by such Borrower for sale to or for
consumption by guests or patients of such Borrower's Individual
Properties and all such other goods returned to or repossessed by
such Borrower. In addition to the foregoing, the term
"Inventory" shall include the meaning such term has in the New
York Uniform Commercial Code.
"Knightsbridge Cash Collateral" means $26,325,000.
<PAGE>
16
"Knightsbridge Cash Collateral Agreement" means the
Cash Collateral and Security Agreement, in the form attached
hereto as Exhibit GG, dated as of the Closing Date, between FOH
and Lender relating to the Knightsbridge Cash Collateral.
"Knightsbridge Cash Collateral Sub-Account" means the
Sub-Account of the Cash Collateral Account established and
maintained pursuant to Section 2.12 relating to the Knightsbridge
Cash Collateral.
"Knightsbridge Facility" means FOH's Individual
Property located at 4590 Knightsbridge Boulevard, Columbus, Ohio.
"Knightsbridge Lease" means that certain Amended and
Restated Ground Lease dated as of November 1, 1988 between
Richard L. Zimmerman, as landlord, and FOH, as tenant covering
the Knightsbridge Facility.
"Knightsbridge Loan" means that certain loan in the
original principal amount of $15,066,010.15 as evidenced by that
certain First Amended and Restated Mortgage Note, dated April 1,
1992, made by FOH to Teachers Insurance and Annuity Association
of America ("Teachers") and secured by, among other things, (i)
that certain Open-End Mortgage Deed and Security Agreement, dated
June 18, 1990, by Forum to Teachers, recorded on June 18, 1990 in
the Recorder's Office of Franklin County, Ohio in Official Record
15358, page B-02, and (ii) that certain Assignment and Security
Agreement, dated June 18, 1990, from Forum to Teachers, recorded
on June 18, 1990 in the Recorder's Office of Franklin County,
Ohio in Official Record 15358, page D-16, both as amended by that
certain First Amendment to Open-End Mortgage Deed and Security
Agreement and to Assignment and Security Agreement, dated as of
April 1, 1992, by and between Forum and Teachers, recorded on
April 10, 1992 in the Recorder's Office of Franklin County, Ohio
in Official Record 19126, page G-02.
"Land" has the meaning specified in the Mortgages and
the Second Mortgages.
"Leases" means, with respect to each Borrower, all
leases and other agreements or arrangements with or assumed by
such Borrower as landlord affecting the use or occupancy of all
or any portion of such Borrower's Individual Property now in
effect or hereafter entered into (including, without limitation,
lettings, subleases, licenses, concessions, tenancies and other
occupancy agreements with or assumed by such Borrower as landlord
covering or encumbering all or any portion of such Borrower's
Individual Property), together with any guarantees, supplements,
amendments, modifications, extensions and renewals of the same,
<PAGE>
17
and all additional remainders, reversions and other rights and
estates appurtenant thereto.
"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 either 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 specified in the first
paragraph of this Agreement.
"Letters of Instructions" has the meaning specified in
Section 2.12(b).
"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 either 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 specified in the Recitals
hereto.
"Loan Amount" has the meaning specified in the Recitals
hereto.
"Loan Documents" means this Agreement, the Notes, the
Mortgages, the Second Mortgages, the Assignments of Leases, the
Second Assignments of Leases, the Assignment of Agreements, the
Second Assignments of Agreements, the Indemnity Agreement, the
Manager's Subordination and all other agreements, instruments,
certificates and documents delivered by or on behalf of either
Borrower or any Affiliate to evidence or secure the Loan or
<PAGE>
18
otherwise in satisfaction of the requirements of this Agreement,
the Mortgages, the Second Mortgages or the other documents listed
above.
"Loss Proceeds" has the meaning specified in Section
2.12(h).
"Losses" has the meaning specified in Section 8.26.
"Management Agreement" means those certain Management
Agreements between Manager and FFC and FOH, respectively,
pertaining to the management of, the Individual Properties.
"Manager" means FGI, or any permitted successor or
assignee, as manager of an Individual Property or all of the
Individual Properties, as the case may be.
"Manager's Subordination" means the Manager's Consent
and Subordination of Management Agreement, in the form attached
hereto as Exhibit E, dated as of the Closing Date, executed by
Manager, the 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 either 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
Individual Property.
"Maturity Date" means September 11, 2020 with respect
to FFC's Note and September 11, 2018 with respect to FOH's Note,
or such earlier date resulting from acceleration.
"Maximum Amount" means the maximum rate of interest
designated by applicable Legal Requirements.
"Money" means, with respect to each Borrower, all of
such Borrower's rights, now or hereafter acquired in all moneys,
cash, rights to deposit or savings accounts, credit card receipts
or other items of legal tender obtained from or for use in
connection with the operation of such Borrower's Individual
Properties.
"Monthly Statement" has the meaning specified in
Section 2.12(g)(ii)(A).
"Mortgage" means, with respect to an Individual
Property, a first priority Mortgage, Assignment of Rents,
Security Agreement and Fixture Filing or Deed of Trust,
Assignment of Rents, Security Agreement and Fixture Filing,
substantially in the form attached hereto as Exhibit J and
<PAGE>
19
Exhibit K, respectively, dated as of the Closing Date, granted by
the relevant Borrower to Lender (or, in the case of a Deed of
Trust, to Deed of Trust Trustee for the benefit of Lender) with
respect to such Individual Property as security for the Loan, as
same may hereafter from time to time be supplemented, amended,
modified or extended by one or more written agreements
supplemental thereto, but shall exclude any such instrument
released by Lender pursuant to Section 2.11, and "Mortgages"
means all such instruments collectively.
"Mortgaged Property" means all the Individual
Properties encumbered by the Mortgages or Second 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.
"NACC" means Nomura Asset Capital Corporation.
"Net Cash Flow" means for any trailing 12 calendar
month period (and calculated either for an Individual Property or
for the Individual Properties as a whole) 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 closing costs, brokerage fees, sheriff's or
marshall's commissions or the like, 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
and the Second Mortgages or applicable law.
"Non-Prepayment Period" means the period commencing on
the Closing Date through and including the first to occur of (i)
the second anniversary of the Securitization Closing Date, or
(ii) the third anniversary of the Closing Date.
<PAGE>
20
"Notes" means and refers to the promissory notes, each
in the form attached hereto as Exhibit L, dated the Closing Date,
made by each Borrower to Lender pursuant to this Agreement, as
such notes 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 Individual Properties (or
of an Individual Property), including, without limitation:
(i) expenses in connection with the cleaning, repair
and maintenance of the Individual Properties (or of an
Individual Property);
(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 Individual Properties (or
of an Individual Property) and service to patients;
(iii) any management fees and expenses incurred with
respect to the Individual Properties (or of an Individual
Property);
(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 (other than income taxes);
(vii) business interruption, liability, casualty and
fidelity insurance premiums (which, in the case of any
policies covering more than one Individual Property, shall
be allocated among the Individual Properties pro rata in
proportion to the insured value of the Individual Properties
covered by such policies);
(viii) legal, accounting and other professional fees and
expenses incurred in connection with the ownership and
operation of the Individual Properties (or of an Individual
<PAGE>
21
Property) 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 Individual Properties (or an Individual
Property);
(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 Individual
Properties (or of an Individual Property).
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
Investments or the operation of the Individual Properties (or of
an Individual Property), including, without limitation:
(i) all amounts payable to Borrower by any Person as
Rent relating to the Individual Properties (or an Individual
Property);
(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 Individual Properties (or of an
Individual Property).
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
<PAGE>
22
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.
"Optional Prepayment Date" means September 11, 2003.
"Other Borrowings" means, with respect to a Borrower,
without duplication (but not including the Indebtedness or any
deferred fees payable in connection with the Transactions)
(i) all indebtedness of such Borrower for borrowed money or for
the deferred purchase price of property or services, (ii) all
indebtedness of such Borrower evidenced by a note, bond,
debenture or similar instrument, (iii) the face amount of all
letters of credit issued for the account of such Borrower and,
without duplication, all unreimbursed amounts drawn thereunder,
(iv) all indebtedness of such Borrower secured by a Lien on any
property owned by such Borrower whether or not such indebtedness
has been assumed and (v) all Contingent Obligations of such
Borrower.
"Payment Date" means, for each month, the eleventh day
of such month or if, in any such case, such day is not a Business
Day, the first Business Day following such day. The first
Payment Date shall be September 11, 1995.
"PBGC" means the Pension Benefit Guaranty Corporation
established under ERISA, or any successor thereto.
"Permits" means, with respect to an Individual
Property, all licenses, permits, allocations, authorizations,
approvals and certificates obtained by or in the name of, or
assigned to, Borrower and used in connection with the ownership,
operation, use or occupancy of such Individual Property,
including, without limitation, building permits, 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 by or in
the name of, or assigned to Borrower from any Governmental
Authority or private Person concerning ownership, operation, use
or occupancy of such Individual Property.
"Permitted Encumbrances" means, with respect to an
Individual Property, collectively, (i) the Lien created by the
<PAGE>
23
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 or Second 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 a Borrower and which do
not affect (x) the marketability of title to such Borrower's
Individual Property, (y) the fair market value thereof, or
(z) the use or operation thereof 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).
"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 that each Rating Agency,
with respect to clause (y), confirms in writing, that such
purchase will not cause a downgrade, qualification or
withdrawal of the then current ratings assigned to the
Certificates then outstanding;
(ii) repurchase agreements on obligations specified in
clause (i) maturing not more than two months from the date
of acquisition thereof, provided, however, that, the long-
term unsecured obligations of the party agreeing to
repurchase such obligations are rated by each Rating Agency
in its highest rating category and the short-term debt
obligations of the party agreeing to repurchase are rated at
least Duff-1+, F-1+ and S&P-A-1;
<PAGE>
24
(iii) 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 by the Rating Agencies, or such lower rating as will
not result in a downgrade, qualification or withdrawal of
the rating then assigned to the Certificates by any Rating
Agency as evidenced in writing;
(iv) 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;
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;
(v) commercial or finance company paper (including
both non-interest-bearing discount obligations and
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, and is
issued by a corporation the outstanding senior long-term
debt obligations of which are 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 a downgrade, qualification or withdrawal of the
rating then assigned to the Certificates by any Rating
Agency as evidenced in writing;
(vi) 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 by the Rating Agencies throughout the duration
of such agreements, or such lower rating as will not result
in a downgrade, qualification or withdrawal of the rating
then assigned to the Certificates by any Rating Agency as
evidenced in writing;
(vii) 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
<PAGE>
25
by the Rating Agencies as Permitted Investments with respect
to this definition;
(viii) any other demand, money market or time deposit,
or any other obligation, security or investment which each
Rating Agency confirms in writing will not result in a
downgrade, withdrawal or qualification of the then current
ratings assigned to the Certificates then outstanding; and
(ix) prior to the Securitization Closing Date, any
other demand, money market or time deposit, or any other
obligation, security or investment, that may be acceptable
to Lender and Borrower;
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, (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 or (z) such investment does not mature by the day
required pursuant to the terms of the Loan Documents (and, if not
specified, by the Maturity Date).
"Person" means any individual, corporation,
partnership, joint venture, limited liability company, 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.
"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.
"Premium Period" means the period commencing on the day
after the expiration of the Non-Prepayment Period and continuing
through and including the day preceding the Optional Prepayment
Date.
<PAGE>
26
"Prepayment Treasury Rate" means the yield, calculated
by linear interpolation (rounded to three decimal places) of the
yields of United States Treasury Constant Maturities with terms
(one longer and one shorter) most nearly approximating that of
noncallable United States Treasury obligations having maturities
as close as possible to ten years from (i) a prepayment or (ii)
the occurrence of a payment default which requires the payment of
Default Interest pursuant to the terms of this Agreement, as
applicable, as determined by Lender on the basis of Federal
Reserve Statistical Release H.15-Selected Interest Rates under
the heading U.S. Governmental Security/Treasury Constant
Maturities, or other recognized source of financial market
information selected by Lender for the week prior to the
prepayment date.
"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 of Borrower's rights, now or
hereafter acquired, in all proceeds, Rents, profits, products,
Accounts, chattel paper, deposit accounts, Instruments,
Equipment, Inventory, consumer goods, farm products, documents,
General Intangibles and other proceeds whether cash or non-cash,
movable or immovable, tangible or intangible (including Insurance
Proceeds and Condemnation Proceeds) from the Collateral,
including, without limitation, those from the sale, exchange,
transfer, collection, loss, damage, disposition, substitution or
replacement of any of the Collateral and all income, gain,
credit, distributions and similar items from or with respect to
the Collateral. In addition to the foregoing, "Proceeds" shall
also include the meaning as such term has in the New York Uniform
Commercial Code.
"Proceeds Deficiency" has the meaning specified in the
definition of "Allocated Loan Amount".
"Rating Agencies" means at least two of Fitch Investors
Service, L.P., Moody's Investors Service, Inc., Duff & Phelps
Credit Rating Co. and Standard & Poor's Rating Group, 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 specified in
Section 8.14.
"Reimbursement Contracts" means all third party
reimbursement contracts with respect to the Individual Properties
<PAGE>
27
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 Mortgage and Second Mortgage 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 specified in Section
2.7(a).
"Remedial Work" has the meaning specified 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.
"Rents" means, with respect to each Individual
Property, all rents (whether denoted as base rent, advance rent,
minimum rent, percentage rent, additional rent or otherwise),
issues, income, royalties, profits, revenues, proceeds, bonuses,
deposits (whether denoted as security deposits or otherwise),
termination fees, rejection damages, buy-out fees and any other
fees made or to be made in lieu of rent to a Borrower, any award
made hereafter to a Borrower in any court proceeding involving
any tenant, lessee, licensee or concessionaire under any of the
Leases in any bankruptcy, insolvency or reorganization
proceedings in any state or federal court, and all other
payments, rights and benefits of whatever nature from time to
time due to a Borrower under the Leases, including, without
limitation, (i) rights to payment earned under the Leases,
(ii) any payments or rights to payment with respect to conference
facilities, dining or bar facilities, parking facilities or other
facilities in any way contained within or associated with such
Individual Property, and (iii) all other income, consideration,
issues, accounts, profits or benefits of any nature arising from
the possession, use and operation of such Individual Property.
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28
"Required Debt Service Payment" has the meaning
specified in Section 2.12(f).
"Revised Interest Rate" means the sum of (i) the
greater of (A) the Base Interest Rate or (B) the Treasury Rate on
the applicable Optional Prepayment Date plus (ii) 5%.
"Scheduled Defeasance Payments" means:
(a) with respect to a defeasance of the Loan in
whole if defeasance is required pursuant to Section 2.6,
payments on or prior to, but as close as possible to, (i)
each scheduled Payment Date, after the Defeasance Date
through and including the Optional Prepayment Date, upon
which interest payments or interest and principal payments
are required under this Agreement and in amounts equal to
the scheduled payments due on such dates under this
Agreement and (ii) the Optional Prepayment Date, of the then
unpaid principal balance of the Loan and any accrued and
unpaid interest thereon; or
(b) with respect to any defeasance of the Loan in
part if defeasance is required pursuant to Section 2.6,
payments on or prior to, but as close as possible to, (i)
each scheduled Payment Date after the Defeasance Date and
through and including the Optional Prepayment Date, of a
proportionate share (based on the Principal Indebtedness
immediately prior to the Defeasance Date represented by the
amount of principal defeased) of the Base Monthly Debt
Service Amounts and (ii) the Optional Prepayment Date, of
the then unpaid portion of the amount of the principal so
defeased and any accrued and unpaid interest thereon; or
(c) with respect to any defeasance of a portion
of the Loan pursuant to Section 2.7(a), payments on or prior
to, but as close as possible to, (i) each scheduled Payment
Date after the Defeasance Date and through and including the
Optional Prepayment Date of a proportionate share (based on
the percentage determined by dividing the Release Price by
the Principal Indebtedness immediately prior to the
Defeasance Date) of the Base Monthly Debt Service Amounts
and (iii) the Optional Prepayment Date, of the then unpaid
portion of the Release Price and any accrued and unpaid
interest thereon.
"Second Assignment of Agreements" means, with respect
to an Individual Property, an Assignment of Management Agreement
and Agreements Affecting Real Estate in the form attached hereto
as Exhibit BB, dated as of the Closing Date, from the relevant
Borrower, as assignor, to Lender, as assignee, assigning to
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29
Lender (to the extent set forth in the Second Assignment of
Agreements) such Borrower's interest in and to all contracts made
between Borrower and third parties in connection with the
management and operation of the Individual Property, including,
without limitation, the Management Agreement, any agreements with
design professionals, all agreements, allocations and rights with
all utility services affecting the Individual Property and all
development agreements and Permits, as the same may hereafter
from time to time be supplemented, amended, modified or extended
by one or more written agreements supplemental thereto, and
"Second Assignments of Agreements" means all such instruments
collectively.
"Second Assignment of Leases" means, with respect to an
Individual Property, an Assignment of Leases and Rents in the
form attached hereto as Exhibit CC, dated as of the Closing Date,
from the relevant Borrower, as assignor, to Lender, as assignee,
assigning to Lender such Borrower's interest in and to Leases and
Rents with respect to such Individual Property as collateral
security for the Loan, as the same may hereafter from time to
time be supplemented, amended, modified or extended by one or
more written agreements supplemental thereto, and "Second
Assignments of Leases" means all such instruments collectively.
"Second Mortgage" means, with respect to an Individual
Property, a Mortgage, Assignment of Rents, Security Agreement and
Fixture Filing or Deed of Trust, Assignment of Rents, Security
Agreement and Fixture Filing, in the form attached hereto as
Exhibit DD and Exhibit EE, respectively, dated as of the Closing
Date, granted by the relevant Borrower to Lender (or in the case
of a Deed of Trust to a Deed of Trust Trustee for the benefit of
Lender) with respect to such Facility as security for the Loan,
as the same may hereafter from time to time be supplemented,
amended, modified or extended by one or more written agreements
supplemental thereto, but shall exclude any such instrument
released by Lender pursuant to Section 2.11 and "Second
Mortgages" means all such instruments collectively.
"Securitization" has the meaning specified 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 Agreement" has the meaning specified in
Section 8.30.
"Security Deposit Accounts" has the meaning specified
in Section 2.12(a).
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30
"Servicer" means Pacific Mutual Life Insurance Company,
a California corporation, any Person appointed as servicer under
the Pooling and Servicing Agreement or such Person's successor as
servicer.
"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
(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, has an Independent director
(mutually acceptable to Borrower and Lender; the present
Independent director being acceptable to Borrower and Lender),
(vi) does not commingle its assets with the assets of any other
Person, (vii) does not guarantee the obligations of any other
Person (other than as provided in the Loan Documents) and (viii)
holds itself out as being a Person separate and apart from any
other Person.
"Sub-Account" has the meaning specified 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 an Individual Property, 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 an
Individual Property or any portion thereof whether or not the
same shall have actually been commenced.
"Tax Fair Market Value" means the fair market value of
an Individual Property, and (x) shall not include the value of
any personal property or other property that is not an "interest
in real property" within the meaning of Treasury Regulation
1.860G-2 and 1.856-3(c), and (y) shall be reduced by the
"adjusted issue price" (within the meaning of Code 1272(a)(4))
of any indebtedness, other than the Loan, secured by a Lien
<PAGE>
31
affecting the Individual Property, which Lien is prior to or on a
parity with the Liens created under the Related Mortgage.
"Title Insurance Policies" means the loan policies 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, the fee payable to the Finder as described in
Section 8.21, 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.
"Transfer" means any transfer, sale, assignment or
conveyance of an Individual Property.
"Treasury Rate" means the yield, calculated by linear
interpolation (rounded to three decimal places) of the yields of
United States Treasury Constant Maturities with terms (one longer
and one shorter) most nearly approximating that of noncallable
United States Treasury obligations having maturities as close as
possible to (i) the last day of the Premium Period in the case of
the determination of a Yield Maintenance Premium or (ii) 10 years
from the Optional Prepayment Date in the case of the
determination of the Revised Interest Rate, as determined by
Lender on the basis of Federal Reserve Statistical Release H.15-
Selected Interest Rates under the heading U.S. Governmental
Security/Treasury Constant Maturities, or other recognized source
of financial market information selected by Lender for the week
prior to the prepayment date or the Optional Prepayment Date, as
applicable.
"Treasury Regulations" means the United States
Department of Treasury regulations issued pursuant to the Code in
temporary or final form.
"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).
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32
"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.
"Yield Maintenance Premium" means, with respect to any
prepayment (but not with respect to a defeasance pursuant to
Section 8.30) pursuant to Sections 2.6 or 2.7(a), the amount
computed as follows:
(i) If the Prepayment Treasury Rate at the time of
prepayment is less than or equal to the Benchmark Rate,
the Yield Maintenance Premium shall equal the sum of
(i) the amount calculated by discounting monthly to net
present value the product of (A) 8.3333% and (B) the
Base Interest Rate less the sum of (x) Treasury Rate
plus (y) 1.50% and (C) the amount prepaid, for the
period from the month in which the prepayment date
occurs through the end of the Premium Period using a
discount rate equal to the sum of (x) the Treasury Rate
plus (y) 1.50%, plus (ii) 2% of the amount being
prepaid; provided, however, if any such prepayment
occurs after the first 12 months of the Premium Period,
the Yield Maintenance Premium shall equal clause (i)
only.
(ii) If (A) the prepayment occurs during the first
three years of the Premium Period and (B) the
Prepayment Treasury Rate at the time of prepayment is
greater than the Benchmark Rate but less than the
Benchmark Rate plus 1.50%, the Yield Maintenance
Premium shall be computed as follows:
Prepayment Yield
Date Maintenance
(Months after Premium
Non-Prepayment (As % of
Period) Prepayment)
1-12 11.5%
13-18 9.5%
19-24 9.0%
25-30 8.0%
31-36 7.0%
(iii) Notwithstanding anything to the contrary, if a
Securitization has not occurred on or prior to December
15, 1995, the Yield Maintenance Premium shall be
<PAGE>
33
calculated as if a Securitization occurred on December
15, 1995.
ARTICLE II
GENERAL TERMS
Section 2.1. Amount of the Loan. On the Closing Date,
subject to the terms and conditions of this Agreement, Lender
shall lend to Borrower the Loan Amount. After any Principal
Indebtedness is repaid, Lender shall have no obligation to re-
advance the amount repaid.
Section 2.2. Use of Proceeds. (a) Proceeds of the
Loan shall be used for the following purposes: (i) to repay all
existing indebtedness on the Mortgaged Property and all related
costs and expenses of such repayment, (ii) to pay the Finder the
Finder's fee, (iii) to pay to Lender the financing and
Securitization fees and to pay or reimburse all other Transaction
Costs, (iv) to fund the Capital Reserve Sub-Account in the amount
of the Initial Capital Requirement and (v) to fund the
Knightsbridge Cash Collateral Sub-Account. There is no
restriction on the use of any proceeds in excess of the amounts
described in clauses (i), (ii), (iii), (iv) and (v).
(b) The Knightsbridge Cash Collateral shall be
disbursed from the proceeds of the Loan directly into the
Knightsbridge Cash Collateral Sub-Account and held therein in
accordance with the terms and provisions of the Knightsbridge
Cash Collateral Agreement. Any proceeds of the Loan in excess of
the amounts described in Section 2.2(a) shall be paid to FFC.
Section 2.3. Security for the Loan. The Notes and
Borrower's obligations hereunder and under the other Loan
Documents shall be secured by (a) the Mortgages and the Second
Mortgages, (b) the Assignments of Leases and the Second
Assignments of Leases, (c) the Assignments of Agreements and the
Second Assignments of Agreements, (d) the Knightsbridge Cash
Collateral Agreement and (e) the security interests and Liens
granted in this Agreement and in the other Loan Documents.
Section 2.4. Borrower's Notes. (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
Notes, duly executed and delivered by FFC and FOH. The Notes
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. All outstanding Indebtedness
shall be paid by Borrower on the Maturity Date.
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34
(b) Lender is hereby authorized, at its option, (i) to
endorse on a schedule attached to each Note (or on a continuation
of such schedule attached to each Note and made a part thereof)
an appropriate notation evidencing 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) Interest on
the Loan and the Notes shall accrue at a rate per annum equal to
(i) the Base Interest Rate on the Principal Indebtedness
commencing upon the Closing Date and continuing through and
including the day prior to the Optional Prepayment Date and (ii)
the Revised Interest Rate on the Principal Indebtedness and any
Accrued Interest commencing upon the Optional Prepayment Date and
continuing through the Maturity Date; provided, however, the Base
Monthly Debt Service Amount shall not be reamortized as a result
of the Revised Interest Rate. For each Interest Accrual Period,
interest at the Base Interest Rate shall be computed on the
actual number of days elapsed, based on a 360-day year (i.e.,
interest for each day during which any part of the Loan is
outstanding shall be computed at said rate divided by 360) and
the remaining amount of the monthly installment shall be applied
to principal. Upon a prepayment pursuant to Section 2.6, 2.7 or
2.12(i), the amount of the Base Monthly Debt Service Amount shall
be reduced proportionately (based on the percentage (expressed as
a decimal) obtained by dividing the amount of principal prepaid
by the Principal Indebtedness prior to such prepayment).
(b) Commencing with the Payment Date on
October 11, 1995, and on each and every Payment Date thereafter
until and including the Optional Prepayment Date, the principal
of and interest on the Notes shall be payable in monthly
installments equal to the Base Monthly Debt Service Amount;
provided, however, that additional payments of (i) $290,278.29
with respect to FFC's Note and (ii) $56,295.00 with respect to
FOH's Note shall be due on the September 11, 1995 Payment Date
constituting interest on the loan proceeds disbursed by Lender on
the Closing Date.
(c) Commencing on the first Payment Date after the
Optional Prepayment Date, and on each and every Payment Date
thereafter, the principal of and interest on the Notes shall be
payable in monthly installments equal to the sum of (i) the Base
Monthly Debt Service Amount plus (ii) 100% of the amount of
Excess Cash Flow attributable to the Mortgaged Properties for the
calendar month preceding the calendar month in which such Payment
<PAGE>
35
Date occurs, such additional payment of Excess Cash Flow to be
applied, first, to the Principal Indebtedness, second, to
Additional Interest accrued from and including the last Payment
Date, and third, to the Accrued Interest, if any. To the extent
the monthly amount of Excess Cash Flow is insufficient to fully
pay any such Additional Interest on any Payment Date, such
Additional Interest shall be deferred and added to any Additional
Interest previously deferred pursuant to this sentence and
remaining unpaid (collectively, the "Accrued Interest"). Amounts
payable from Excess Cash Flow pursuant to this Section 2.5(c)
shall not be included in determinations of Required Debt Service
Payments, nor shall failure to pay Additional Interest or Accrued
Interest prior to the Maturity Date constitute an Event of
Default or give rise to Default Interest or late payment
premiums.
(d) The entire outstanding principal balance of the
Loan (including, without limitation, any unpaid Additional
Interest and Accrued Interest), together with all accrued but
unpaid interest thereon, shall be due and payable to Lender on
the Maturity Date.
(e) Any interest (other than Additional Interest or
Accrued Interest) or principal installment not paid on the
Payment Date therefor or any portion of such installment paid
from funds from a Sub-Account other than the Debt Service Payment
Sub-Account on the Payment Date therefor will bear interest at
the Default Rate from the Payment Date until such amount is paid.
Any payment required pursuant to Section 7.1(iii) to satisfy a
deficiency in the Cash Collateral Account not paid to Lender when
due will bear interest at the Default Rate from the date due
until such amount is paid. Borrower shall be deemed to have made
a monthly payment of principal and interest if the funds
necessary to make such payment are available in the Debt Service
Sub-Account.
Section 2.6. Voluntary Prepayment or Defeasance. (a)
The Loan may not be prepaid in whole or in part during the Non-
Prepayment Period, except as provided in the Knightsbridge Cash
Collateral Agreement. During the Premium Period, Borrower (or
either one or both of FFC or FOH with respect to their respective
Notes and Individual Properties) shall have the right to prepay
the Loan in whole or in part pursuant to Section 2.6(b) or obtain
the release of one or more of the Mortgaged Properties by
defeasance as provided in Section 8.30. On or after the Optional
Prepayment Date, the Borrower (or either one or both of FFC or
FOH with respect to their respective Notes and Individual
Properties) may voluntarily prepay the Loan in whole or in part
without any Yield Maintenance Premium or any other premium or
penalty.
<PAGE>
36
(b) Borrower (or either one or both of FFC or FOH with
respect to their respective Notes and Individual Properties) may
prepay the Loan in whole or in part during the Premium Period;
provided, however, that (A) if at the time of the applicable
prepayment (i) the Prepayment Treasury Rate is less than or equal
to the Benchmark Rate or (ii) provided the prepayment occurs
within the first three years of the Premium Period, the
Prepayment Treasury Rate is greater than the Benchmark Rate but
less than the Benchmark Rate plus 1.50%, any such prepayment
shall include the applicable Yield Maintenance Premium and (B) if
at the time of the proposed prepayment (i) the Prepayment
Treasury Rate is equal or greater than the Benchmark Rate plus
1.50% or (ii) the Prepayment Treasury Rate is greater than the
Benchmark Rate and the proposed prepayment occurs after the first
three years of the Premium Period, Borrower, FFC and FOH cannot
prepay the Loan and can only obtain the release of one or more of
the Mortgaged Properties by defeasance as provided in Section
8.30.
(c) 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 ten 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).
(d) Any voluntary prepayment of the Loan in whole or
in part or any mandatory prepayment of a portion of the Loan
pursuant to Section 2.7(a) (other than a defeasance pursuant to
Section 8.30) is required to be made on a Payment Date.
Section 2.7. Mandatory Prepayment or Defeasance. (a)
Borrower may Transfer any Individual Property at any time after
the commencement of the Premium Period (including during the
Optional Prepayment Period); provided, however, that (i) Borrower
shall have given Lender at least 10 Business Days' prior written
notice of the Transfer, (ii) the Debt Service Coverage Ratio of
the remaining Individual Properties (considered as a whole) would
not be less than the greater of (A) 1.4OX or (B) the Debt Service
Coverage Ratio of all Individual Properties (including the
Individual Property to be transferred) (considered as a whole)
calculated immediately prior to the Transfer, (iii) Lender shall
have received an Officer's Certificate certifying that the
Principal Indebtedness, after deducting the Release Price, will
not, on the related prepayment date, exceed 125% of the sum of
<PAGE>
37
the Tax Fair Market Values of the remaining Individual Properties
as of the Securitization Closing Date, (iv) no Default or Event
of Default shall have occurred and be continuing, (v) Lender
shall have received from Borrower financial statements,
calculations and other backup information with respect to the
matters referred to in clauses (ii) and (iii) 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 (vi) upon the date of the consummation
of any such Transfer (which must be a Payment Date or the
Defeasance Date if Section 8.30 is applicable), Borrower shall
(x) Pay to Lender an amount equal to the product of any accrued
and unpaid interest at the Base Interest Rate and a fraction the
numerator of which is the applicable Release Price and the
denominator of which is the Principal Indebtedness immediately
prior to the applicable prepayment date) and (y) prepay
(including any applicable Yield Maintenance Premium on the
Release Price) or, if Section 8.30 is applicable, defease a
principal portion of the Loan in an amount equal to 125% of the
Allocated Loan Amount for such Individual Property (the "Release
Price") (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). On or after
the Optional Prepayment Date, the conditions of this
Section 2.7(a) shall apply to a Transfer of any Individual
Property, except that clause (vi) will be modified as follows:
"(vi) upon the date of the consummation of any such transfer
(which must be a Payment Date), Borrower shall prepay a principal
portion of the Loan in an amount equal to 125% of the Allocated
Loan Amount for such Individual Property (the "Release Price")
and pay an amount equal to the product of (x) the sum of any
accrued and unpaid Additional Interest plus the Accrued Interest
and (y) a percentage equal to the Release Price divided by the
Principal Indebtedness."
(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 an
Individual Property, Servicer shall prepay a portion of the Loan
by advancing the Loss Proceeds from the Cash Collateral Account
and applying such Loss Proceeds to (i) principal up to the
Allocated Loan Amount for such Individual Property and (ii)
either (x) interest on such principal amount to the immediately
succeeding Payment Date or (y) accrued interest on such principal
amount, if such payment is made on a Payment Date. No Yield
Maintenance Premium shall be applicable in the event of any
prepayment pursuant to this Section 2.7(b).
<PAGE>
38
(c) 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 and payments of Excess Cash Flow, of the Loan shall
be applied to pay: first, any reasonable out-of-pocket costs and
expenses of Lender (including the fees and charges of the Bank)
arising as a result of such repayment; second, any accrued and
unpaid interest at the Base Interest Rate 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; fourth, the outstanding principal amount of
the Loan or the portion thereof being repaid; fifth, currently
accruing Additional Interest; sixth, Accrued Interest; and
seventh, any other amounts due and owing under the Loan
Documents. Any partial prepayment of principal made pursuant to
Sections 2.5(c) from payments of Excess Cash Flow, shall be
applied to principal payments thereafter required in the inverse
order of their maturity and the Base Monthly Debt Service Payment
shall not be changed.
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 setoff 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
<PAGE>
39
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 2.12(i) or Section 2.03(d) of
the Mortgages or a defeasance or prepayment pursuant to Section
2.7(a), Lender shall, simultaneously with such payment, release
the Lien of the Related Mortgages and the related Assignment of
Leases, Second Assignment of Leases, Assignment of Agreements,
Second Assignment of Agreements 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 Individual Property (x) in the event of a Taking or
casualty affecting 100% of such Individual Property or (y) in an
amount equal to or exceeding the sum of the Allocated Loan Amount
for such Individual Property 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 Mortgages and the related Assignment of Leases, Second
Assignment of Leases, Assignment of Agreements, Second Assignment
of Agreements 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.
(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 or defeasance of the Loan in
whole as described in Section 8.30, 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 the end of the Non-Prepayment Period except as provided in
Section 2.11(b), Section 2.12(i) or Section 2.03(d) of the
Mortgages.
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 or occupants of the Individual Properties), Money and
Proceeds received from Accounts derived from the Individual
Properties shall be utilized first (i) to pay all amounts to
become due and payable under the Notes by funding the Debt
Service Payment Sub-Account to the extent required pursuant to
<PAGE>
40
Section 2.12(g)(i)(A), (ii) to fund the Basic Carrying Costs Sub-
Account to the extent required pursuant to Section 2.12(g)(i)(B),
(iii) to fund the Capital Reserve Sub-Account to the extent
required pursuant to Section 2.12(g)(i)(C), and (iv) to pay all
Operating Expenses. For each Individual Property, 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 and Forum Ohio Healthcare,
Inc. as Debtor and Pacific Mutual Life Insurance Company (as
servicer) as Secured Party pursuant to the Loan Agreement dated
as of September 1, 1995". 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, Money and Proceeds 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 Individual Property. All security deposits shall
be payable to Manager. Manager shall collect all security
deposits with respect to an Individual Property 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 Individual Property. 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 that, prior to a Collection
Account Bank's receipt of notice of the occurrence of an Event of
Default from Servicer (given at the request of Lender), 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 delivered to the Collection Account Banks (the
"Letters of Instruction"), Borrower has authorized and directed
the Collection Account Banks to transfer on a daily basis all
funds deposited in the Collection Accounts for the Individual
Properties in excess of $10,000 to account no. 67-7392-70-6 at
the 135 South LaSalle Street, Chicago, Illinois branch of the
<PAGE>
41
Bank entitled "Pacific Mutual Life Insurance Company (as
servicer) as Secured Party pursuant to a Loan Agreement dated as
of September 1, 1995 among FGI Financing I Corporation, Forum
Ohio Healthcare, Inc., Nomura Asset Capital Corporation" (the
"Cash Collateral Account"). 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 30 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 has
established the Cash Collateral Account in the name of Servicer,
and the Cash Collateral Account shall be under the sole dominion
and control of Servicer. 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, the Capital
Reserve Sub-Account and the Knightsbridge Cash Collateral Sub-
Account, each of which accounts (individually, a "Sub-Account"
collectively, the "Sub-Accounts") shall be either a separate
Eligible Account to which certain funds shall be allocated and
from which disbursements shall be made pursuant to the terms of
this Agreement or a ledger entry under the Cash Collateral
Account.
(d) Permitted Investments. Upon the request of
Borrower (which request may be made one time per month), 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 Servicer, and (iv) no Permitted Investment shall be
made unless Servicer 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,
<PAGE>
42
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. Neither
Lender nor any of its agents, including Servicer, shall have any
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, except that any interest earned with respect to the
Knightsbridge Cash Collateral Sub-Account shall remain in such
Sub-Account until disbursed in accordance with the Knightsbridge
Cash Collateral Agreement.
(f) Payment of Debt Service, Basic Carrying Costs and
Capital Improvement Costs. Not later than three Business Days
before each Payment Date during the term of the Loan, Lender or
Servicer shall deliver to Borrower a certificate in the form
attached hereto as Exhibit N, setting forth (i) the Debt Service,
excluding any Scheduled Defeasance Payments pursuant to Section
8.30, that will be payable to Lender on such Payment Date (the
"Required Debt Service Payment") 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, Money and
Proceeds received from Accounts) into the Cash Collateral Account
in the amount of such deficiency, and failure to make such
deposit by 12:00 noon, New York City time, on such Payment date
shall be an Event of Default hereunder.
<PAGE>
43
(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, Servicer 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 the account of Servicer
established under the Interim Servicing Agreement, or (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.
Borrower shall be deemed to have timely made the Required
Debt Service Payment pursuant to Section 2.9 regardless of
the time Servicer 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. At least five
Business Days prior to the date that payment of any Basic
Carrying Cost would become delinquent and not more
frequently than once each month, Borrower shall notify
Lender and Servicer in writing and request that Servicer pay
such Basic Carrying Cost on behalf of Borrower on or prior
to the delinquency date thereof. Together with each such
request, Borrower shall furnish Lender and Servicer copies
of bills and other documentation as may be reasonably
required by Lender or Servicer to establish that such Basic
Carrying Cost is then due. Servicer shall make such
payments out of the Basic Carrying Cost Sub-Account before
same shall become due or delinquent to the extent that there
are funds available in the Basic Carrying Cost Sub-Account
and Lender and Servicer have 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 Servicer shall transfer funds to Borrower
then allocated to the Capital Reserve Sub-Account for
payment of Capital Improvement Costs. Together with each
such request, Borrower shall furnish Lender and Servicer
with an Officer's Certificate detailing the work performed,
certifying the completion thereof and certifying that the
attached invoices relate to the work performed and have been
paid or will be paid from the funds transferred pursuant to
such request. In addition, Borrower shall submit such other
documentation as may be reasonably required by Lender or
Servicer to establish that such Capital Improvement Costs
are then due, which may include lien releases.
<PAGE>
44
(iv) Use of Knightsbridge Cash Collateral. The
Knightsbridge Cash Collateral shall be disbursed by Servicer
pursuant to the terms and provisions of the Knightsbridge
Cash Collateral Agreement.
(g) Monthly Funding of Sub-Accounts. (i) During each
month in the term of the Loan (each, the "Current Month")
commencing with September 1995 and continuing through the day
prior to the Optional Prepayment Date, all funds then in the
Collection Accounts in excess of $10,000 shall be transferred to
the Cash Collateral Account pursuant to the Letters of
Instructions referred to in Section 2.12(b), and Servicer shall
allocate all funds then on deposit in the Cash Collateral Account
among the Sub-Accounts as follows and in the following priority:
(A) first, to the Basic Carrying Costs Sub-Account,
until the amount required to pay the rent under the
Knightsbridge Lease for the next succeeding Current Month is
being held in the Basic Carrying Costs Sub-Account;
(B) second, 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;
(C) third, to the Basic Carrying Costs Sub-Account,
until an amount equal to the balance of the Basic Carrying
Costs Monthly Installment for the Current Month has been
allocated to the Basic Carrying Costs Sub-Account and
amounts required to pay the Basic Carrying Costs due in the
next succeeding Current Month are being held in the Basic
Carrying Costs Sub-Account; and
(D) fourth, 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.
Prior to the Optional Prepayment Date, and provided that (1) no
Event of Default has occurred and is continuing and (2) Lender
has received all financial information described in Section
5.1(Q) for the most recent periods for which the same are due,
(x) Lender or, upon the request of Lender, Servicer on Lender's
behalf shall notify Borrower as soon as reasonably practicable
after the minimum amounts set forth in clauses (A), (B), (C) and
(D) above have been deposited in the Cash Collateral Account and
allocated as aforesaid and that Servicer will disburse any funds
received in the Collection Accounts for the balance of such
Current Month to Borrower and (y) Lender agrees that in each
<PAGE>
45
Current Month any amounts deposited into or remaining in the Cash
Collateral Account after the minimum amounts set forth in clauses
(A), (B), (C) and (D) above have been allocated with respect to
the Current Month and any periods prior thereto shall be
disbursed by wire transfer (at Borrower's expense) (I) as soon as
practicable thereafter to the following account: Fifth Third Bank
of Central Indiana, Account No.: 747-60301, ABA No.: 074908594,
Account Name: FGI Financing I Corporation, or such other account
that Borrower may request and (II) therafter to such account
during such Current Month not less frequently than once per week.
Borrower shall use any funds distributed to Borrower (or to
Manager) pursuant to the foregoing to first pay all Operating
Expenses, and then for any purpose, including, without
limitation, dividends or other distributions. If an Event of
Default has occurred and so long as it is continuing, if so
elected by Lender, Servicer or Trustee, any amounts deposited
into or remaining in the Cash Collateral Account after Servicer
has allocated minimum amounts as hereinabove provided shall be
for the account of Lender and may be withdrawn by Lender to be
applied to amortize the principal amount of the Loan in the
inverse order of its maturity.
(ii) From and after the Optional Prepayment Date, in
each Current Month, all funds in the Collection Accounts in
excess of $10,000 shall be transferred to the Cash Collateral
Account and applied by Servicer as follows (A) to the allocation
to the Sub-Accounts of the minimum amounts set forth in clauses
(A), (B), (C) and (D) of paragraph (i), and (B) provided that (1)
no Event of Default has occurred and is continuing and (2) Lender
has received all financial information described in
Section 5.1(Q) for the most recent periods for which the same is
due, amounts required to pay Operating Expenses and Capital
Improvement Costs (other than Capital Improvement Costs to be
paid from funds in the Capital Reserve Sub-Account) in the
Current Month (as set forth for such month in the Approved Annual
Budget or as otherwise requested by Borrower and approved by
Lender in its sole discretion) shall be disbursed once a week to
an account specified by Borrower and used by Borrower to pay such
Operating Expenses and Capital Improvement Costs. All other
amounts transferred to the Cash Collateral Account in such
Current Month shall constitute "Excess Cash Flow" for such month
and shall be applied to the payment of principal and interest as
provided in Section 2.5(c) on the Payment Date in the next
Current Month.
(h) Loss Proceeds. In the event of a casualty or
Taking with respect to an Individual Property, unless pursuant to
the Related Mortgages the proceeds, net of Borrower's reasonable
collection costs approved by Lender, received under any insurance
policy required to be maintained by Borrower ("Insurance
<PAGE>
46
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 whereupon Lender or Servicer, as the case may
be, shall apply 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 Related Mortgages 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 Individual
Property; 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 Individual Property or
that such Individual Property 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 Mortgages. 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 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 Mortgages. 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
released to Borrower; provided, however, from and including the
Optional Prepayment Date, such excess proceeds shall be applied
by Servicer in accordance with Section 2.8.
<PAGE>
47
(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
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 Individual Property 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 Servicer on behalf of
<PAGE>
48
Lender (and after the Securitization Closing Date to Lender or
its assigns on behalf of the Certificateholders), and grants to
Servicer on behalf of Lender (and after the Securitization
Closing Date to Lender or its assigns on behalf of the
Certificateholders) a first and continuing security interest in
and to, the following property, whether now owned or existing or
hereafter acquired or arising 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) Representations and Covenants. Borrower
represents and covenants that (i) all Rents, Money and Proceeds
received from Accounts in excess of $10,000 (other than tenant
security deposits and other than funds received by Borrower or
Manager from the Cash Collateral Account) shall be deposited into
the Collection Accounts; (ii) other than the Collection Accounts
and the Security Deposit Accounts there are no other accounts
currently maintained by Borrower or any Manager for the
collection of Rents, Money or Proceeds received from Accounts;
(iii) as 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, Money or Proceeds received
from Accounts, other than such replacement Collection Accounts as
may be established pursuant to Section 2.13(l); (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 any Manager for the collection and
management of such security deposits; and (vi) as long as any
<PAGE>
49
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). The Collection Accounts and the
Security Deposit Accounts 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 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 a
part of its Letter of Instructions. Borrower, Servicer, Lender
and the Bank have also executed and delivered that certain 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 the Bank 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 Servicer'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 Servicer
to exercise and enforce Servicer'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
<PAGE>
50
permit to exist any Lien upon or with respect to all or any of
the Account Collateral, except for the Lien granted to Servicer
under this Agreement.
(f) Servicer's Right to Perform. If Borrower fails to
perform any covenant or obligation contained in this Agreement
and such failure shall continue for a period of five Business
Days after Borrower's receipt of written notice thereof from
Servicer, Servicer may, but shall have no obligation to, itself
perform, or cause performance of, such covenant or obligation,
and the reasonable expenses of Servicer incurred in connection
therewith shall be payable by Borrower to Servicer upon demand.
Notwithstanding the foregoing, Servicer shall have no obligation
to send notice to Borrower of any such failure unless directed to
do so by Lender.
(g) Servicer's Reasonable Care. Beyond the exercise
of reasonable care in the custody thereof, Servicer 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 Servicer, or the preservation of rights
against any Person or otherwise with respect thereto. Servicer
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 Servicer accords its own property, it being understood that
Servicer 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 Servicer'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 Servicer or Lender, or
Servicer's or Lender's agents, employees or bailees, except to
the extent that such loss or damage or diminution in value
results from Servicer's gross negligence or willful misconduct or
the gross negligence or willful misconduct of any such agent,
employee or bailee of Servicer.
(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 Servicer or Lender in exercising any right
or remedy hereunder or under the Loan Documents or the Manager's
Subordination 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.
<PAGE>
51
(i) No Waiver. Every right and remedy granted to
Servicer under this Agreement or by law may be exercised by
Servicer at any time and from time to time, and as often as
Servicer may deem it expedient. Any and all of Servicer'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
or interests therein or (iii) any delay, extension of time,
renewal, compromise or other indulgence granted by Servicer in
the event of any Default with respect to the Account Collateral
or otherwise hereunder. No delay or extension of time by
Servicer 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 Servicer, shall constitute a waiver
thereof, or limit, impair or prejudice Servicer'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) Servicer Appointed Attorney-In-Fact. Borrower
hereby irrevocably constitutes and appoints Servicer 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 Servicer 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 or defeasance in full of the
Indebtedness. Upon payment or defeasance 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 Servicer shall execute such instruments and
documents as may be reasonably requested by Borrower to evidence
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52
such termination and the release of the pledge and lien hereof,
provided, however, that Borrower shall pay on demand all of
Servicer's expenses in connection therewith.
(l) Replacement of a Collection Account Bank. As 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 Servicer, and Servicer's approval
of the successor, which approval shall not be unreasonably
withheld or delayed. In the event that the rating of long-term
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
Servicer, 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 Individual Property 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 Servicer evidence satisfactory to Servicer 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) Servicer's Reliance. Servicer 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. Servicer
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 relevant Borrower's obligations under such Borrower's Note.
The Lien created by each Second Mortgage is intended to encumber
the Individual Property described therein to the full extent of
the excess of the Indebtedness over the amount secured by
relevant Mortgage. As of the Closing Date, Borrower has paid all
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53
state, county and municipal recording and all other taxes imposed
upon the execution and recordation of the Mortgages and the
Second 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.
Section 2.15. Securitization. Borrower hereby
acknowledges that Lender, any of its Affiliates, 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 will cooperate fully
with Lender and the Rating Agencies in connection with 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) reviewing the portion of the offering documents describing
the Loan, Borrower, the Individual Properties, Manager,
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 any other
sections reasonably requested), (c) 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 by (i) providing such information as may be requested in
connection therewith and (ii) acting reasonably and promptly in
connection with its review and approval of the relevant portions
of the offering documents; (d) causing to be rendered an opinion
letter in substantially the form attached hereto as Exhibit P
(subject to changes in law or fact after the date hereof and
further subject to changes reasonably requested by the Rating
Agencies (to the extent such changes are consistent with
applicable law or facts)) and an opinion letter from each real
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54
estate counsel to Borrower in substantially the form attached
hereto as Exhibit U (subject to changes in law or fact after the
date hereof); and (e) re-making the representations and
warranties contained in the Loan Documents as of the
Securitization Closing Date, modified to reflect any changes in
knowledge, fact or law. Borrower agrees to pay its pro rata
share (based on the percentage of the aggregate loan amount
included in the Securitization represented by the principal
amount of this Loan) of the reasonable third party fees and
expenses in connection with the Securitization, including, but
not limited to, legal fees and disbursements, third-party due
diligence expenses, Rating Agency fees and expenses, the costs of
providing appraisals, environmental reports and engineering
reports as required by the Rating Agencies, and any servicing,
Trustee or special servicing fees and expenses, provided,
however, that the expenses to be reimbursed by Borrower shall not
exceed 0.875% of the portion of the Loan Amount included in such
Securitization. In connection with the Securitization, Lender
intends to use the Engineering Reports and the Environmental
Reports, updated as necessary due to the age of such Reports, to
the extent permitted by the Rating Agencies. On or prior to the
Securitization Closing Date, Borrower shall execute and deliver
to Lender an instrument substantially in the form attached hereto
as Exhibit GG (subject, however, to such reasonable changes as
Lender or the Rating Agencies shall request).
ARTICLE III
CONDITIONS PRECEDENT
Section 3.1. Conditions Precedent to Effectiveness and
Disbursement of the Loan. This Agreement shall become effective,
and the Loan shall be made, 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.
(i) Loan Agreement. Borrower shall have executed
and delivered this Agreement to Lender.
(ii) Notes. FFC and FOH each shall have executed
and delivered to Lender the Notes.
(iii) Mortgages. FFC shall have executed and
delivered the Mortgages and Second Mortgages with respect to
its Individual Properties to Lender, and the Mortgages and
Second Mortgages shall have been filed of record in the
appropriate filing offices in each of the jurisdictions in
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55
which the Individual Properties are located or irrevocably
delivered to a title agent for such recordation.
(iv) Assignments of Agreements. FFC shall have
executed and delivered the Assignments of Agreements and
Second Assignments of Agreements with respect to its
Individual Properties to Lender, and the Assignments of
Agreements and Second Assignments of Agreements shall have
been irrevocably delivered to a title agent for recordation.
(v) Assignments of Leases. FFC shall have
executed and delivered the Assignments of Leases and Second
Assignments of Leases with respect to its Individual
Properties to Lender and the Assignments of Leases and
Second Assignments of Leases shall have been filed of record
in the appropriate filing offices in each of the
jurisdictions in which the Individual Properties are located
or irrevocably delivered to a title agent for such
recordation.
(vi) CC Account Agreement. Borrower and Bank shall
have executed the CC Account Agreement and delivered to
Lender a copy thereof.
(vii) Letters of Instructions. FFC or FOH and a
Collection Account Bank shall have executed a Letter of
Instructions and delivered to Lender a copy thereof.
(viii) Financing Statements. FFC and FOH shall have
executed and delivered all financing statements specified on
Exhibit R attached hereto to Lender and such financing
statements shall have been filed of record in the
appropriate filing offices in each of the jurisdictions in
which the Individual Properties are located and all other
appropriate jurisdictions or irrevocably delivered to a
title agent for such recordation.
(ix) Indemnity Agreement. FGI shall have executed
and delivered to Lender the Indemnity Agreement.
(x) Manager's Subordination. Manager, FOH and FFC
shall have executed and delivered to Lender the Manager's
Subordination.
(xi) Knightsbridge Cash Collateral Agreement. FOH
shall have executed and delivered the Knightsbridge Cash
Collateral and Security Agreement to Lender and the
Knightsbridge Cash Collateral shall have been deposited in
the Knightsbridge Cash Collateral Sub-Account.
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56
(B) Opinions of Counsel. Lender shall have received
from Jones, Day, Reavis & Pogue, special counsel to Borrower and
Guarantor, its legal opinion in substantially the form attached
hereto as Exhibit S; 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) Corporate Documents. Lender shall have received
with respect to each of FFC, FOH and FGI its certificate of
incorporation, as amended, modified or supplemented to the
Closing Date, certified to be true, correct and complete by the
appropriate Secretary of State as of a date not more than 60 days
prior to the Closing Date, together with a good standing
certificate from such Secretary of State and a good standing
certificate from the Secretaries of State (or the equivalent
thereof) of each other State in which each such entity is
required to be qualified to transact business, each to be dated a
date not more than 60 days prior to the Closing Date.
(D) Certified Resolutions, etc. Lender shall have
received a certificate of the secretary or assistant secretary of
each of FFC, FOH and FGI dated the Closing Date, certifying (i)
the names and true signatures of its incumbent officers
authorized to sign the applicable Loan Documents, (ii) its by-
laws as in effect on the Closing Date, (iii) the resolutions of
its board of directors (or authorized committee) approving and
authorizing the execution, delivery and performance of all Loan
Documents executed by it, and (iv) that there have been no
changes in its certificate of incorporation since the date of the
most recent certification thereof by the appropriate Secretary of
State.
(E) Insurance. Lender shall have received
certificates of insurance demonstrating insurance coverage in
respect of each of the Individual Properties of types, in
amounts, with insurers and otherwise in compliance with the
terms, provisions and conditions set forth in the Related
Mortgages. Such certificates, except with respect to the
Knightsbridge Facility, shall indicate that Lender and Servicer
are named additional insured as their interests may appear and
shall contain a loss payee endorsement in favor of Lender and
Servicer with respect to the property policies required to be
maintained under the Mortgages. All insurance policies required
to be maintained hereunder shall be maintained throughout the
term of this Agreement in the types and amounts required under
the Mortgages.
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57
(F) Lien Search Reports. Lender shall have received
satisfactory (i.e., showing no Liens other than Permitted
Encumbrances) reports of UCC (collectively, the "UCC Searches"),
tax lien, judgment and litigation searches conducted by a search
firm acceptable to Lender with respect to the Collateral, FFC,
FOH and FGI, such searches to be conducted in each of the
locations set forth on Exhibit V attached hereto.
(G) Title Insurance Policies. Lender shall have
received commitments (in form and substance satisfactory to
Lender) to issue the Title Insurance Policies; provided, however,
no Title Insurance Policy shall be issued with respect to the
Knightsbridge Facility until the time Lender receives the Related
Mortgage with respect to the Knightsbridge Facility pursuant to
the Knightsbridge Cash Collateral Agreement.
(H) Financial Statements. Lender shall have received
the audited consolidated financial statements of FGI for the
fiscal year ending March 31, 1995, and the unaudited consolidated
financial statements of FGI for the three-month periods ended on
June 30, 1995. All audited financial statements must have been
prepared by a "Big Six" certified public accounting firm or other
firm acceptable to Lender in its sole discretion.
(I) Environmental Matters. Lender shall have received
Environmental Reports, acceptable to Lender, with respect to each
of the Individual Properties, such Environmental Reports to be
conducted by Independent environmental engineers acceptable to
Lender.
(J) Consents, Licenses, Approvals, etc. Lender shall
have received copies of all consents, licenses and approvals, if
any, required in connection with the execution, delivery and
performance by Borrower, and the validity and enforceability, of
the Loan Documents, and such consents, licenses and approvals
shall be in full force and effect.
(K) Additional Matters. Lender shall have received
such other Permits, certificates (including certificates of
occupancy (or their equivalent) for each Individual Property),
opinions, documents and instruments (including letters from the
appropriate Governmental Authorities regarding the zoning of each
Individual Property and evidence that utility services are
available for each Individual Property and that each Individual
Property is subject to separate tax assessment) relating to the
Loan as may have been reasonably requested by Lender, and all
corporate and other proceedings, all other documents (including,
without limitation, all documents referred to herein and not
appearing as exhibits hereto) and all legal matters in connection
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58
with the Loan shall be satisfactory in form and substance to
Lender.
(L) 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 both before and after giving effect to the making of
the Loan.
(M) No Default or Event of Default. No Default with
respect to the payment of money or Event of Default shall have
occurred and be continuing on the Closing Date either before or
after giving effect to the making of the Loan.
(N) 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.
(O) Surveys. Lender shall have received a Survey with
respect to each Individual Property.
(P) Engineering Reports. Lender shall have received
the Engineering Reports, acceptable to Lender, with respect to
the Individual Properties, such Engineering Reports to be
prepared by Independent Engineers acceptable to Lender.
(Q) 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.
(R) Estoppel Certificate. FOH shall have delivered an
estoppel certificate from the landlord under the Knightsbridge
Lease in form and substance satisfactory to Lender.
(S) Appraisals. Lender shall have received an
appraisal with respect to each Individual Property in form and
substance satisfactory to Lender.
Section 3.2. Acceptance of Borrowings. The acceptance
by FFC and FOH of the proceeds of the Loan shall constitute a
representation and warranty by FFC and FOH to Lender that all of
the conditions required to be satisfied under this Article III in
connection with the making of the Loan have been satisfied or
waived in accordance with Section 8.4.
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59
Section 3.3. Form of Loan Documents and Related
Matters. The Notes and all of the certificates, agreements,
legal opinions 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. FFC (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 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 an Individual Property is located, and (iii) has the
requisite corporate power to execute and deliver, and perform its
obligations under this Agreement, its respective Note, the
Mortgages, the Second Mortgages and all of the other Loan
Documents to which it is a party. FOH (i) is a duly organized
and validly existing corporation in good standing under the laws
of the State of Ohio, (ii) has the requisite corporate power and
authority to own its properties (including, without 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 an Individual Property is located, and (iii) has the
requisite corporate power to execute and deliver, and perform its
obligations under this Agreement, its respective Note, the
Mortgages, the Second Mortgages and all of the other Loan
Documents to which it is a party.
(B) Authorization. The execution and delivery by FFC
and FOH of this Agreement, the Notes, the Mortgages, the Second
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 FFC and FOH, (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 FFC or FOH or any indenture or
material agreement or other instrument to which FFC or FOH is a
party or by which FFC or FOH is bound, and (iii) will not be in
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60
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 FFC or FOH pursuant to, any
such indenture or material agreement or instrument. Other than
those obtained or filed on or prior to the Closing Date, neither
FFC nor FOH is 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, the Second Mortgages or the
other Loan Documents.
(C) Litigation. Except for claims that are fully
covered by valid policies of insurance held by FFC or FOH, 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 either FFC or FOH, threatened against FFC and FOH or
any Individual Property, which actions, suits or proceedings, if
determined against FFC, FOH or any Individual Property might
result in a Material Adverse Effect or a lower reimbursement rate
under the Reimbursement Contracts.
(D) Agreements. Neither FFC nor FOH is a party to any
agreement or instrument or subject to any restriction which is
reasonably likely to have a Material Adverse Effect. Neither FFC
nor FOH is 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 it or any Individual Property owned or
leased by it is bound.
(E) Title to the Mortgaged Property. FFC owns good,
marketable and insurable fee simple title to its Individual
Properties, free and clear of all Liens, other than the Permitted
Encumbrances applicable to that Individual Property. FOH owns a
good, marketable and insurable leasehold interest in its
Individual Property, free and clear of all Liens, other than the
Permitted Encumbrances applicable to that Individual Property and
the Knightsbridge Loan. There are no outstanding options to
purchase or rights of first refusal affecting any Individual
Property other than rights or options held by FFC or FOH and the
option applicable to the Individual Property known as Park Lane
as described in the commitment for the Park Lane Title Insurance
Policy.
(F) No Bankruptcy Filing. Neither FFC nor FOH is
contemplating either the filing of a petition by it under any
state or federal bankruptcy or insolvency laws or the liquidation
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61
of all or a major portion of FFC's or FOH's assets or property,
and neither FFC nor FOH has 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 11320 Random Hills Road, Suite 400, Fairfax, Virginia
22030.
(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 Individual Property 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 by
Borrower for the purpose of purchasing or acquiring any "margin
stock" within the meaning of Regulation U of the Board of
Governors of 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 Individual Properties 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 material adverse change in the financial position of
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62
either FFC or FOH or the Individual Properties, or in the results
of operations of either FFC or FOH. Borrower has not incurred
any obligation or liability, contingent or otherwise, not
reflected in such financial data which might materially adversely
affect its business operations or any Individual Property.
(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 Individual Property.
(M) Other Mortgage Debt. Except for the debt to be
repaid from the proceeds of the Loan, including the Knightsbridge
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 Individual
Property has adequate rights of access to public ways and is
served by adequate water, sewer, sanitary sewer and storm drain
Individual Properties. Except as otherwise disclosed by the
Surveys, all public utilities necessary to the continued use and
enjoyment of each Individual Property 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 Individual Property without passing over other property.
All roads necessary for the full utilization of each Individual
Property 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 Individual Property.
(P) Environmental Compliance. Except for matters set
forth in the "Summary" sections of the Environmental Reports
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,
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63
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
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
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64
that are in the possession of Borrower in relation to an
Individual Property which have not been made available to
Lender.
(Q) Solvency. None of the transactions contemplated
hereby will be or have been made with an actual intent to hinder,
delay or defraud any present or future creditors of FFC or FOH,
and, giving effect to the transactions contemplated hereby, the
fair saleable value of either Borrower's assets exceeds and will,
immediately following the making of the Loan, exceed such
Borrower's total liabilities, including, without limitation,
subordinated, unliquidated, disputed and contingent liabilities.
Each Borrower has received reasonably equivalent value in
exchange for its obligations under the Loan Documents. The fair
saleable value of either Borrower's assets is and will,
immediately following the making of the Loan, be greater than
such Borrower's probable liabilities, including the maximum
amount of its contingent liabilities on its debts as such debts
become absolute and matured. Either 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. Neither Borrower
intends to, nor believes 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 such Borrower).
(R) Not Foreign Person. Borrower is not a "foreign
person" within the meaning of 1445(f)(3) of the Code.
(S) Single-Purpose Entity.
(i) FFC 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. FOH is a duly
formed and existing Ohio corporation and a Single-Purpose
Entity. FFC is duly qualified as a foreign corporation in
each jurisdiction in which an Individual Property owned by
FFC is located.
(ii) FFC 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. FOH 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
Ohio relating to corporations.
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65
(iii) All customary formalities regarding the corporate
existence of each of FFC and FOH have been observed at all
times since its formation and will continue to be observed.
(iv) Each of FFC and FOH 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. Neither FFC nor FOH has at any time since its
formation commingled, and neither FFC or FOH will commingle,
its assets with those of its shareholders, any Affiliates of
its shareholders, or any other Person. Each of FFC and FOH
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) Each of FFC has at all times since its formation
paid, and FFC and FOH will continue to pay, its own
liabilities from its own separate assets.
(vi) Each of FFC and FOH has at all times since its
formation identified itself, and will continue to identify
itself, in all dealings with the public, under its own name
and as a separate and distinct entity. Neither FFC nor FOH
has at any time since its formation identified itself, and
neither FFC nor FOH will identify itself, as being a
division or a part of any other entity. Neither FFC nor FOH
has at any time since its formation identified, and neither
FFC nor FOH will identify its shareholders or any Affiliates
of its shareholders, as being a division or part of it.
(vii) Each of FFC and FOH has been at all times since
its formation and will continue to be adequately capitalized
in light of the nature of its business.
(viii) FFC has not at any time since its formation
assumed or guaranteed, and neither FFC nor FOH will 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 Individual Properties and except as
permitted by or pursuant to this Agreement. FFC 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. Neither FFC nor FOH has at any time since its
formation made, and neither FFC nor FOH will make, loans to
its shareholders (or any predecessor corporation), or any
Affiliates of its shareholders.
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66
(ix) Neither FFC nor FOH has at any time since its
formation entered into and was not a party to, and neither
FFC nor FOH will 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 FFC or FOH, as the case
may be, on terms which are no less favorable to FFC or FOH,
as the case may be, 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
Individual Property (i) with any other real property constituting
a separate tax lot, and (ii) with any portion of the Individual
Property 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 Individual Property as a single lien. Each
Individual Property 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 Individual Property, nor,
to the knowledge of Borrower, are there any contemplated
improvements to any Individual Property 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 Second Mortgage
creates a valid and enforceable second 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
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67
statements have been or will be timely filed or refiled, as
appropriate, in the appropriate recording offices.
(W) Enforceability. The Notes, each Mortgage, each
Second Mortgage and each other Loan Document executed by FFC or
FOH in connection therewith, including, without limitation, any
Collateral Security Instrument, is the legal, valid and binding
obligation of FFC and/or FOH, as the case may be, enforceable
against FFC and/or FOH, as the case may be, in accordance with
their terms, subject to bankruptcy, insolvency, fraudulent
conveyance 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 Notes,
each such Mortgage, each such Second Mortgage and the other Loan
Documents executed by Borrower are, as of the date hereof, not
subject to any right of rescission, set-off, counterclaim or
defense by FFC or FOH, including the defense of usury, nor will
the operation of any of the terms of the Notes, each such
Mortgage, each such Second Mortgage and other Loan Documents
executed by Borrower, or the exercise of any right thereunder,
render the Mortgages or the Second Mortgages unenforceable
against FFC or FOH, as the case may be, in whole or in part, or
subject to any right of rescission, set-off, counterclaim or
defense by FFC or FOH, as the case may be, including the defense
of usury, and neither FFC nor FOH has asserted any right of
rescission, set-off, counterclaim or defense with respect
thereto.
(X) Permitted Encumbrances. The Permitted
Encumbrances do not cause a Material Adverse Effect.
(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, except for assignments
relating to the indebtedness being paid with the proceeds of the
Loan.
(Z) Bed Capacity. Neither FFC, FOH nor Manager has
granted to any third party the right to reduce the number of
licensed beds in any Individual Property 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 Individual Property 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
Individual Property as set forth in Exhibit X attached hereto is
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68
true and correct. FFC, FOH and Manager are in compliance in all
material respects with the applicable provisions of nursing home,
nursing or assisted living laws, rules and regulations to which
their respective Individual Properties are subject. All
Reimbursement Contracts are in full force and effect with respect
to the Individual Properties. Borrower and Manager are current
in payment of all so-called provider specific taxes or other
assessments with respect to such Reimbursement Contracts.
(BB) Use of Individual Properties. Each Individual
Property is used exclusively as a skilled nursing home, assisted
living Individual Property and/or congregate care Individual
Property and uses ancillary thereto.
(CC) Certificate of Occupancy. FFC and FOH have
obtained all Permits necessary to use and operate their
respective Individual Properties for the use described in Section
4.1(BB). The use being made of each Individual Property is in
conformity in all material respects with the certificate of
occupancy and/or Permits for such Individual Property and any
other restrictions, covenants or conditions affecting such
Individual Property.
(DD) Flood Zone. Except as shown on the Surveys, none
of the Individual Properties is located in a flood hazard area as
defined by the Federal Insurance Administration.
(EE) Physical Condition. Each Individual Property 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) Tax Fair Market Value. As of the Closing Date,
(i) the Tax Fair Market Value of each Individual Property is
equal to or greater than the Allocated Loan Amount for such
Individual Property and (ii) the Tax Fair Market Value of the
Mortgaged Property is equal to or exceeds the Principal
Indebtedness.
(GG) Security Deposits. All security deposits with
respect to the Individual Properties on the date hereof have been
transferred to the Security Deposits Accounts on the date hereof,
and FFC and FOH are each 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. Except to the extent that
any misrepresentation of the following would not have a Material
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69
Adverse Effect, all material trademarks, trade names and service
marks that either FFC or FOH owns or has pending, or under which
it is licensed, are in good standing and uncontested. There is
no right under any trademark, tradename or servicemark necessary
to the business of either FFC or FOH as presently conducted or as
either FFC or FOH contemplates conducting its business. Neither
FFC nor FOH has infringed, is infringing, and neither FFC nor FOH
has received notice of infringement with respect to asserted
trademarks, tradenames and servicemarks of others. To the
knowledge of FFC and FOH, there is no infringement by others of
its material trademarks, tradenames and servicemarks.
(II) Investment Company Act; Public Utility Holding
Company Act. Neither FFC nor FOH is (i) an "investment company"
or a company "controlled" by an "investment company," within the
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. (i) The
authorized capital stock of FFC consists of 100 shares of common
stock, par value $.01 per share, of which 50 shares are issued
and outstanding and preferred stock is to be issued to Lender
after the date hereof pursuant to a Credit Agreement dated as of
the date hereof between FGI and Lender. Each outstanding share
of common stock is owned of record and beneficially by FGI.
(ii) The authorized capital stock of FOH consists of
750 shares of common stock, without par value, of which 500
shares are issued and outstanding and preferred stock is to be
issued to Lender after the date hereof pursuant to a Credit
Agreement dated as of the date hereof between FGI and Lender.
Each outstanding share of common stock is owned of record and
beneficially by FGI.
(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.
(MM) Knightsbridge Lease. The Knightsbridge lease is
in full force and effect and there are no defaults thereunder and
no event has occurred or is occurring which after notice or
passage of time or both will result in any default.
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70
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 Notes and making of the Loan and continue for as long as
any amount remains owing to Lender under this Agreement, the
Notes 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.
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 Mortgages):
(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 Individual Property 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 (it being agreed that any
reference therein to a rating by Fitch shall also require an
equivalent rating by Standard & Poors Rating Group).
Notwithstanding anything contained in the Mortgages, in each
case, however, if no providers of such insurance are rated as
required in the Mortgages, the requirement for such rating shall
be that rating by the Rating Agencies, as confirmed by the Rating
Agencies in writing, which will not cause the downgrading or
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71
withdrawl of the rating of any class of Certificates then
outstanding.
(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 FFC or FOH or the
Mortgage Property 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 an Individual Property or any
portion 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 Individual Property 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
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72
not furnished additional security as provided in clause (4)
below, or to any risk of criminal liability, and neither the
Individual Property 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)
reasonably relating to or incurred by Lender in connection
with monitoring, reviewing or performing any Remedial Work
in accordance herewith, together with interest thereon at
the Default Rate from the date of demand by Lender.
(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.
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(E) Environmental Matters; Inspection.
(i) Borrower shall not authorize a Hazardous Substance
to be present on, under or to emanate from an Individual
Property, or migrate from adjoining property controlled by
Borrower onto or into an Individual Property, except under
conditions permitted by applicable Environmental Laws and,
in the event that such Hazardous Substances are present on,
under or emanate from an Individual Property, or migrate
onto or into an Individual Property, 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 Individual Property 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 Individual Property,
provided that such inspections shall not unreasonably
interfere with the operation or the tenants, residents or
occupants of such Individual Property. 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
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 Individual Property)
in the following situations:
(x) If Lender has reasonable grounds to
believe, at the time any such inspection is ordered,
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74
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 Individual Property 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 Individual
Property, 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.
9601, et seq., which could reasonably be expected to
impair the value of Lender's security interests hereunder or
have a Material Adverse Effect;
(iii) all Environmental Claims asserted or threatened
against Borrower, against any other party occupying any
Individual Property or any portion thereof which become
known to Borrower or against such Individual Property, 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 Individual Property or on any real property
adjoining or in the vicinity of such Individual Property
which could reasonably be expected to lead to an
Environmental Claim against Borrower or Lender which such
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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 an Individual Property 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 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 and Trustee), asserted
against, resulting to, imposed on, or incurred by Lender, Deed of
Trust Trustee, Servicer, 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, or Trustee's negligence or willful
misconduct:
(i) events, circumstances, or conditions which could,
or do, form the basis for an Environmental Claim;
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76
(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 Individual Properties. Borrower shall
permit agents, representatives and employees of Lender to inspect
each Individual Property 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 Individual Property.
(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
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
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(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,
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 Individual
Property, 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 Notes, 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.
(P) Management of Mortgaged Property. Each of the
Individual Properties 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, as it pertains to the Individual Properties, may be
terminated by Lender upon 30 days prior written notice to
Borrower and Manager (i) upon the occurrence of an Event of
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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. Borrower may from
time to time appoint a successor manager to manage the Individual
Properties or any of the Individual Properties 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 Individual Properties
and/or congregate care Individual Properties (as the case may be)
in the state in which the Individual Property 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 Individual
Property and in connection with any services, equipment or
furnishings provided in connection with the operation of
each Individual Property, 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
such copies or extracts thereof as Lender shall desire.
After the occurrence of an Event of Default with respect to
Borrower or any Individual Property, Borrower shall pay any
costs and expenses incurred by Lender to examine Borrower's
accounting records with respect to such Individual Property,
as Lender shall reasonably determine to be necessary or
appropriate in the protection of Lender's interest.
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(ii) Borrower shall furnish to Lender annually, within
90 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 Individual Property,
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 Individual
Property for that quarter, and (y) census information for
each Individual Property 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 Individual Property 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 Individual Property 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, 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 an Individual
Property, any and all written notices (regardless of form)
from any licensing and/or certifying agency that the
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Individual Property's license or the Medicare or Medicaid
certification of the Individual Property is being revoked or
suspended, or that action is pending or being considered to
revoke or suspend the Individual Property'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 Individual Property with the Medicaid agency or the
date of actual filing of such cost report of the Individual
Property with such agency, whichever is earlier, a complete
and accurate copy of the annual Medicaid cost report for
each Individual Property, 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 FFC, FOH or FGI, 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 Individual Property 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) If the Loan is not repaid on the Optional
Prepayment Date, for (i) the period commencing on the
Optional Prepayment Date and continuing through the end of
the Borrower's current Fiscal Year and (ii) the Fiscal Year
commencing on April 1, 2004 and for each fiscal year
thereafter, Borrower shall submit to Lender for Lender's
written approval an annual budget (in the case of
clause (i), limited to the period set forth therein; each of
such budgets being, an "Annual Budget") for each of the
Individual Properties not later than thirty (30) days prior
to the commencement of such Fiscal Year (the Optional
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81
Prepayment Date in the case of clause (i)), in form and
substance reasonably satisfactory to Lender setting forth in
reasonable detail budgeted monthly amounts for Operating
Income, Operating Expenses, Capital Improvement Costs and
Excess Cash Flow for such Individual Properties. If Lender
objects to the proposed Annual Budget submitted by Borrower,
Lender shall advise Borrower of such objections within
fifteen (15) Business Days after receipt thereof (and
deliver to Borrower a reasonably detailed description of
such objection) and Borrower shall promptly revise such
Annual Budget and resubmit the same to Lender. Lender shall
advise Borrower of any objections to such revised Annual
Budget with ten (10) Business Days after receipt thereof
(and deliver to Borrower a reasonably detailed description
of such objection) and Borrower shall promptly revise the
same in accordance with the process described in this
sentence until Lender approves an Annual Budget. Each such
Annual Budget approved by Lender in accordance the terms
hereof shall hereinafter be referred to as an "Approved
Annual Budget". Until such time that Lender approves a
proposed Annual Budget, the most recently Approved Annual
Budget, if any, shall apply or, in the case of the period
covered by clause (i), Operating Expenses and Capital
Improvement Costs shall not exceed the amounts actually
spent in the same month of the prior Fiscal Year, provided,
however, that such Approved Annual Budget shall be adjusted
to reflect actual increases in Basic Carrying Costs.
(xi) After the Securitization Closing Date, Borrower
shall also furnish to the Rating Agencies 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 Individual Property to be conducted at all
times in a manner consistent with at least the level of operation
of such Individual Property 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 Individual Property at all
times at a level necessary to insure a level of quality care
for the patients of such Individual Property not lower than
that existing on the Closing Date;
(ii) to operate or cause to be operated each Individual
Property 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
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82
necessary for the continued use and operation of each
Individual Property 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
Individual Property to enable Borrower or Manager to operate
such Individual Property.
(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 Individual Property, and correct or cause to be corrected
any deficiency, the curing of which is a condition of continued
licensure or for full participation in 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 within the meaning of
Section 1.8606-2(b) of the Treasury Regulations prior to the
Securitization Closing Date, Borrower will, if requested by
Lender, represent that the Allocated Loan Amounts do not exceed
125% of the respective Tax Fair Market Values of each of the
Individual Properties 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
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(c) 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
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83
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
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.
(V) Knightsbridge Lease. FOH shall (i) observe and
perform the obligations imposed upon the tenant under the
Knightsbridge Lease and shall not do or permit to be done
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anything to impair the value of the Knightsbridge Lease as
security for the Debt; (ii) promptly send copies to Lender of all
notices of default which Borrower shall send or receive
thereunder; and (iii) give Lender prompt notice of the
commencement of any arbitration or appraisal proceeding under the
Knightsbridge Lease and keep Lender fully advised with respect
thereto.
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 Mortgages), it will
not do or permit, 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) Transfers. 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 Individual Property.
After the Securitization Closing Date, allow a transfer of the
outstanding capital stock of either FFC or FOH; provided,
however, the owners of the outstanding capital stock of either
FFC or FOH may transfer their stock in FFC or FOH, as the case
may be; provided, further, however, if such Transfer will result
in FGI and its Affiliates covered by the non-consolidation
opinion given in connection with the Securitization owning,
directly or indirectly, less than 50% of the outstanding stock of
FFC or FOH immediately after such Transfer, such Transfer may be
made only if (i) if the Rating Agencies shall so require, such
transferee shall have delivered to the Rating Agencies on the
date of transfer a substantive non-consolidation opinion
satisfactory to Lender, its counsel and the Rating Agencies from
such transferee's counsel, (ii) each Rating Agency confirms in
writing that such Transfer will not result in a qualification,
downgrade or withdrawal of the then current ratings on any class
of the Certificates, (iii) any other requirements of the Rating
Agencies in connection with such transfer are satisfied and (iv)
on or prior to the Transfer date, Borrower shall pay Lender a one-
time transfer fee equal to 1% of the Principal Indebtedness and
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85
all reasonable costs and expenses incurred by Lender incurred by
Lender in connection with such Transfer, including reasonable
attorneys' fees and disbursements.
(C) Other Borrowings. Incur, create, assume, become
or be liable in any manner with respect to Other Borrowings,
except that either FFC or FOH 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 $300,000 in aggregate at any Individual Property or
$2,000,000 in the aggregate at all the Individual Properties, 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.
(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. 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 FFC or FOH by any
Person, except for adequate consideration or in the ordinary
course of FFC's or FOH's business.
(G) Affiliate Transactions. Enter into, or be a party
to, any transaction with an Affiliate of FFC or FOH, except in
the ordinary course of business and on terms which are no less
favorable to FFC or FOH, as the case may be, 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 FFC
or FOH 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 Individual Properties;
provided, further, however, that the management fee charged by
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Manager shall not be more than the amounts provided for in the
Management Agreement as of the date hereof.
(H) Creation of Easements. Create, or permit any
Individual Property 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 an
Individual Property.
(I) Misapplication of Funds. Distribute any Rents,
Money or Proceeds 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, fail to deposit (if required to deposit) in the
applicable Collection Account any Rents, Money or Proceeds
received by FFC, FOH or Manager from any source other than the
Cash Collateral Account or misappropriate any security deposit or
portion thereof.
(J) Certain Restrictions. Enter into any agreement
which expressly restricts the ability of FFC or FOH to enter into
amendments, modifications or waivers of any of the Loan
Documents.
(K) 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 Individual Property, or assign,
transfer or remove or permit any other Person to assign, transfer
or remove any records pertaining to any Individual Property
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.
(L) 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.
(M) Leases. Enter into, amend or cancel Leases,
except as permitted by or pursuant to the Mortgages and the
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87
Second Mortgages. With respect to the Knightsbridge Lease, FOH
shall not (i) amend or modify such lease without Lender's prior
consent, (ii) execute any assignment of its interest in the
Knightsbridge Lease; or (iii) cancel or terminate the
Knightsbridge Lease without Lender's prior written consent.
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 any of 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 Notes or any other Loan Document executed and
delivered by Borrower, shall be false in any material
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88
respect as of the date such representation or warranty was
made;
(vii) if FFC, FOH or Guarantor makes an assignment for
the benefit of creditors;
(viii) if a receiver, liquidator or trustee shall be
appointed for FFC, FOH or Guarantor or if FFC, FOH or
Guarantor 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, FFC, FOH or Guarantor or
if any proceeding for the dissolution or liquidation of FFC,
FOH or Guarantor shall be instituted; provided, however,
that if such appointment, adjudication, petition or
proceeding was involuntary and not consented to by FFC, FOH
or Guarantor as the case may be, upon the same not being
discharged, stayed or dismissed within 90 days, or if FFC,
FOH or Guarantor shall generally not be paying its debts as
they become due;
(ix) if FFC or FOH 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 Section
6.1(B), the Mortgages, the Second Mortgages or any other
Loan Document;
(x) if any provision of the certificate of
incorporation or the by-laws of FFC or FOH affecting the
purpose for which such entity is formed is amended or
modified in any material respect which may adversely affect
Lender, Servicer, Trustee or any of the Certificateholders
(or in any respect, if such amendment or modification amends
any provision relating to FFC's or FOH's status as a Single-
Purpose Entity), or if FFC or FOH or any of their
stockholders fails to perform or enforce the provisions of
such organizational documents or attempts to dissolve FFC or
FOH, 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 Notes, the Mortgages, the Second Mortgages or any other
Loan Document occurs, whether as to Borrower or any
Individual Property or all or any portion of the Mortgaged
Property;
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89
(xii) if Borrower shall continue to be in Default under
any of the other terms, covenants or conditions of this
Agreement, the Notes, the Mortgages, the Second 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 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 FFC or FOH 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 one of its Individual
Properties:
(x) a termination of FFC's or FOH'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 with respect to either FFC's or
FOH's respective Individual Properties;
(xiv) if the Loan Amount exceeds 125% of the Tax Fair
Market 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;
(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, FFC, FOH or any ERISA Affiliate shall incur or
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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;
(xvi) if FOH shall default under the Knightsbridge Lease
beyond any applicable grace period;
(xvii) if FOH shall default under the Knightsbridge Loan
beyond any applicable grace period;
(xviii) if an Event of Default shall occur under the
Knightsbridge Cash Collateral Agreement; or
(xix) if Borrower fails to pay any of (A) the Finder's Fee
on the Closing Date or (B) Excess Cash Flow when due in
accordance with Section 2.5(c)
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
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
and other remedies available to Lender against Borrower under
this Agreement, the Notes, the Mortgages, the Second 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
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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 any Note shall be deemed to
have been accelerated only to the extent of the Net Proceeds
actually received by Lender with respect to any Individual
Property and applied in reduction of the Indebtedness evidenced
by such Note 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
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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 execution and delivery of this Agreement, the making by
Lender of the Loan and the execution and delivery by FFC and FOH
to Lender of the Notes, and shall continue in full force and
effect as 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 Mortgages, the
applicable Assignments of Lease, and the other Loan Documents
insofar as they concern such Individual Property. Whenever in
this Agreement any of the parties hereto 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 Notes, the Mortgages, the Second 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 Notes
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
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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
Individual Property 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 Notes, and this
Agreement and the Notes shall be governed by and construed in
accordance with the laws of the State of New York pursuant to
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,
New York, pursuant to 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
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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 Notes 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 Notes, 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,
the Notes 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 Notes 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,
Attention: Sheryl McAfee, if to Servicer at 700 Newport Center
Drive, Newport Beach, California 92660, Attention: Michelle A.
Curran,, 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
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95
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. EACH OF FFC, FOH AND
LENDER, 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 NOTES OR THE OTHER LOAN DOCUMENTS.
EACH OF FFC, FOH AND LENDER AGREES THAT THE OTHER PARTIES HERETO
MAY FILE A COPY OF THIS WAIVER WITH ANY COURT AS WRITTEN EVIDENCE
OF ITS KNOWING, VOLUNTARY AND BARGAINED AGREEMENT IRREVOCABLY TO
WAIVE ITS RIGHT TO TRIAL BY JURY, AND THAT, TO THE FULLEST EXTENT
THAT IT MAY LAWFULLY DO SO, ANY DISPUTE OR CONTROVERSY WHATSOEVER
BETWEEN FFC, FOH AND LENDER SHALL INSTEAD BE TRIED IN A COURT OF
COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
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.
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
Notes 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
Lender expects to sell, transfer and assign this Agreement, the
Notes, the Mortgages, the Second 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 (x) Servicer on
Lender's behalf (to the extent provided in the Interim Servicing
Agreement) or (y) after the Securitization Closing Date, by
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Servicer pursuant to the Pooling and Servicing Agreement on
behalf of Trustee. Following the assignment of this Agreement,
the Notes, the Mortgages, the Second Mortgages and the other Loan
Documents by NACC in connection with the Securitization, in
addition to providing notices to Lender's assignee in accordance
with instructions received from such assignee, Borrower shall
continue to send copies of all notices and other communications
(including, without limitation, reports under Section 5.1(Q)) to
NACC at the address set forth in Section 8.6 or to such other
address as may be designated by NACC pursuant to Section 8.6.
Borrower shall not be entitled to assign its rights under this
agreement.
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. 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 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
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
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this Agreement, the Notes, the Mortgages, the Second 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 either Borrower
to perform and observe the obligations contained in this
Agreement, the Notes, the Mortgages, the Second Mortgages or any
of the other Loan Documents executed and delivered by either
Borrower by any action or proceeding wherein a money judgment
shall be sought against either 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)
either Borrower's interest in the Mortgaged Property, (ii) the
Rents and Accounts arising from the Individual Properties to the
extent (x) received by either Borrower or Manager after the
occurrence of an Event of Default or (y) distributed to either
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 Notes or in any way affect or
impair the Liens of the Mortgages, the Second Mortgages or any of
the other Loan Documents or the right of Lender to foreclose the
Mortgages or the Second Mortgages following an Event of Default;
(b) impair the right of Lender to name either Borrower as a party
defendant in any action or suit for judicial foreclosure and sale
under any of the Mortgages or the Second Mortgages; (c) affect
the validity or enforceability of the Notes, the Mortgages, the
Second Mortgages or the other Loan Documents; (d) impair the
right of Lender to obtain the appointment of a receiver; (e)
impair the right of Lender to bring suit for actual damages,
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losses and costs resulting from fraud or intentional
misrepresentation by either Borrower or any other Person in
connection with this Agreement, the Notes, the Mortgages, the
Second Mortgages or the other Loan Documents; (f) impair the
right of Lender to obtain the Recourse Distributions received by
either Borrower, including, without limitation, the right to
proceed against such Borrower's shareholders to the extent any
such Recourse Distributions have actually theretofore been
distributed to such Borrower's shareholders; (g) impair the right
of Lender to bring suit with respect to either Borrower's
misappropriation of security deposits or Rents collected more
than one month in advance; (h) impair the right of Lender to
obtain Insurance Proceeds or Condemnation Proceeds due to Lender
pursuant to the Mortgages or the Second Mortgages; (i) impair the
right of Lender to enforce the provisions of Sections 4.1(P) or
5.1(D)-(I) even after repayment in full of the Indebtedness; (j)
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 Notes as provided in the Loan
Documents; (k) impair the right of Lender to bring suit with
respect to any misapplication of any funds; (l) impair the right
of Lender to enforce the Indemnity Agreement even after repayment
in full of the Indebtedness; or (m) impair the right of Lender to
sue for, seek or demand a deficiency judgment against either
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 (m) shall be enforceable against
either Borrower only to the extent of any of the Default
Collateral. The provisions of this Section 8.14 shall be
inapplicable to either 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 either Borrower shall institute any
proceeding for the dissolution or liquidation of itself, or if
either Borrower shall make an assignment for the benefit of
creditors, in which event Lender shall have recourse against all
of the assets of either Borrower and the interests in either
Borrower owned by, and the Recourse Distributions received by,
either Borrower's shareholders (but excluding the other assets of
either 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 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.
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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
Notes, the Mortgages, the Second 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 Notes, the Mortgages, the Second Mortgages and the other Loan
Documents which Borrower may otherwise have against any assignor
or this Agreement, the Notes, the Mortgages, the Second 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 Notes, the Mortgages, the Second 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
Persons 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.
Section 8.19. Waiver of Counterclaim. Borrower hereby
waives the right to assert a counterclaim, other than compulsory
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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 Notes, the Mortgages, the
Second 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 "Finder"). Borrower agrees to pay all
amounts required to be paid to the Advisor pursuant to that
certain engagement letter dated August 23, 1995 between Borrower,
Forum Ohio Healthcare, Inc., FGI and the Finder. Borrower and
Lender hereby agree to indemnify and hold each other and Servicer
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 Finder) 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,
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together with Borrower's request for such statement, an Officer's
Certificate stating that no Default or Event of Default exists as
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 on demand
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 Individual Property plus travel expenses,
accounting firm fees, costs of the 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 and (v) the Securitization, (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 and Bank.
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,
<PAGE>
102
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
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. Indemnification. Borrower shall
indemnify, defend and hold harmless Lender, and each of its
directors, officers, employees, attorneys, agents (including,
without limitation, Servicer), successors and assigns (the
"Indemnified Parties"), from and against all damages,
liabilities, claims, actions, penalties and fines (collectively
and severally, "Losses") which may be imposed upon, asserted
against or incurred or paid by any of them resulting from the
claims of any third party (other than Borrower) relating to or
arising out of (i) the Mortgaged Property prior to any
Indemnified Party asserting control thereover, any of the Loan
Documents, except for (A) Losses caused by the gross negligence
or willful misconduct of any Indemnified Party, or (B) any Losses
relating to a Securitization, such type of Losses to be
indemnified by Borrower only to the extent provided in
Section 2.15. Borrower shall reimburse each Indemnified Party
for any expenses (including the reasonable attorneys' fees and
disbursements) reasonably incurred in connection with the
investigation of, preparation for or defense of any actual or
threatened claim, action or proceeding arising from any Losses
subject to indemnity (including any such costs of responding to
discovery requests or subpoenas), regardless of whether Lender or
such other Indemnified Party is a party thereto. With reference
to the provisions set forth above in this Section 8.26 for
payment by Borrower of reasonable attorneys' fees incurred by the
Indemnified Parties in any action or claim brought by a third
party, Borrower shall diligently defend such Indemnified Party
and diligently conduct such defense, and, provided Borrower
demonstrates to the reasonable satisfaction of the applicable
Indemnified Party its ability to pay for any settlement amount
agreed to by Borrower, Borrower may settle any such action or
claim or consent to an entry of any judgment related thereto
without the prior written consent of any Indemnified Party to the
extent such judgment or claim is for the payment of money. If
the Indemnified Party desires to engage separate counsel, it may
do so at its own expense; provided, however, that such limitation
on the obligation of Borrower to pay the fees of separate counsel
for such Indemnified Party shall not apply if such Indemnified
Party has retained such separate counsel because of a reasonable
<PAGE>
103
belief (based upon reasonable inquiry) that Borrower is not
diligently defending it and/or not diligently conducting the
defense and so notifies Borrower. The Loan shall not be
considered to have been paid in full unless all obligations of
Borrower under this Section 8.26 shall have been fully performed
(except for contingent indemnification obligations for which no
claim has actually been made pursuant to this Agreement).
Section 8.27. Entire Agreement. This Agreement,
together with the Exhibits and Schedules hereto and the other
Loan Documents, constitutes the entire agreement among the
parties hereto with respect to the subject matter contained in
this Agreement, the Exhibits and Schedules hereto and the other
Loan Documents.
Section 8.28. Cross Collateralization. Without
limitation of any other right or remedy provided to Lender in
this Agreement or any of the other Loan Documents, FFC and FOH
covenant and agree that upon the occurrence of an Event of
Default, (i) Lender shall have the right to pursue all of its
rights and remedies in one proceeding, or separately and
independently in separate proceedings which it, as Lender, in its
sole and absolute discretion, shall determine from time to time,
(ii) Lender is not required to either marshall assets, sell
Collateral in any inverse order of alienation, or be subjected to
any "one action" or "election of remedies" law or rule, (iii) the
exercise by Lender of any remedies against any Collateral will
not impede Lender from subsequently or simultaneously exercising
remedies against any other Collateral, (iv) all Liens and other
rights, remedies and privileges provided to Lender in this
Agreement and in the other Loan Documents or otherwise shall
remain in full force and effect until Lender has exhausted all of
its remedies against the Collateral and all Collateral has been
foreclosed, sold and/or otherwise realized upon in satisfaction
of the Loan and (v) its Individual Properties shall be security
for the performance of all obligations of Borrower hereunder and
under the other Loan Documents.
Section 8.29. [Intentionally Deleted].
Section 8.30. Defeasance. (a) In the event that
prior to the Optional Prepayment Date, either Borrower exercises
its option to defease its Note pursuant to Section 2.6 or is
obligated to make a mandatory defeasance pursuant to Section
2.7(a), such Borrower shall defease the Loan in compliance with
the following conditions precedent:
(i) the delivery by such Borrower of not less than 10
Business Days' prior written notice to Lender specifying a
regularly scheduled Payment Date (the "Defeasance Date") on
<PAGE>
104
which the Defeasance Deposit is to be made and the principal
amount to be prepaid by defeasance;
(ii) the payment to Lender of all scheduled interest at
the Base Interest Rate and principal payments due and unpaid
on the Defeasance Date;
(iii) with respect to defeasance of the Loan in whole
pursuant to Section 2.6 only, the payment to Lender of all
other sums due under the applicable Note, the Mortgages, the
Second Mortgages and the other Loan Documents;
(iv) with respect to defeasance of the Loan pursuant to
Section 2.7(a) only, payment of all other amounts due under
the Related Mortgages;
(v) the payment to Lender of the Defeasance Deposit on
the Defeasance Date; and
(vi) the delivery to Lender of:
(A) a security agreement, in form and
substance reasonably satisfactory to Lender, creating a
first priority lien on the Defeasance Deposit and the
U.S. Treasuries purchased on behalf of either Borrower
with the Defeasance Deposit in accordance with this
provision of this Section 8.30 (the "Security
Agreement");
(B) with respect to defeasance of the Loan
in whole pursuant to Section 2.6 only, releases for
each of the Individual Properties from the Liens of the
Related Mortgages, the Assignments of Leases, the
Second Assignments of Leases, the Assignments of
Agreements, the Second Assignments of Agreements and
UCC-1 financing statements (for execution by Lender) in
forms appropriate for the jurisdiction in which each
Individual Property is located;
(C) with respect to defeasance of the Loan
pursuant to Section 2.7(a) only, the releases described
in Section 2.11(a) (for execution by Lender) in forms
appropriate for the jurisdiction in which the
applicable Individual Property is located;
(D) an Officer's Certificate certifying that
the requirements set forth in this Section 8.30 have
been satisfied;
<PAGE>
105
(E) an opinion of counsel for Borrower in
form satisfactory to Lender stating, among other
things, that (1) Lender has a perfected first priority
security interest in the Defeasance Deposit and the
U.S. Treasuries purchased by Lender on behalf of
Borrower and (2) any REMIC formed pursuant to the
Securitization will not fail to maintain its REMIC
status for federal income tax purposes as a result of
such defeasance; and
(F) such other certificates, documents or
instruments as Lender may reasonably request,
including, without limitation, those reasonably
required in connection with a Securitization,
including, without limitation, notice to the Rating
Agencies of any defeasance as well as any other notice
reasonably required in connection with such defeasance.
In connection with the conditions set forth above,
Borrower hereby appoints Lender as its agent and attorney-in-
fact for the purpose of using the Defeasance Deposit to
purchase noncallable U.S. Treasuries which provide Scheduled
Defeasance Payments, and Lender shall upon receipt of the
Defeasance Deposit purchase such U.S. Treasuries on behalf
of Borrower. Borrower, pursuant to the Security Agreement
or other appropriate document, shall authorize and direct
that the payments received from the U.S. Treasuries shall be
made directly to Lender and applied to satisfy the
obligations of Borrower under the Note.
(b) With respect to defeasance of the Loan in whole
pursuant to Section 2.6, upon compliance with the
requirements of Section 8.30(a), (i) the Mortgaged Property
shall be released from the liens of the Related Mortgages,
the Assignments of Leases, the Second Assignments of Leases,
the Assignments of Agreements, the Second Assignments of
Agreement and the UCC-1 financing statements and (ii) the
pledged U.S. Treasuries shall be the sole source of
collateral securing the Note. With respect to a defeasance
of the Loan pursuant to Section 2.7(a), upon compliance with
the requirements of Section 8.30(a) the applicable
Individual Property or Properties shall be released pursuant
to Section 2.11(a).
(c) Any portion of the Defeasance Deposit in excess of
the amount necessary to purchase the U.S. Treasuries
required by Section 8.30(a) above or to satisfy the other
requirements of Section 8.30(a) shall be remitted to
Borrower.
<PAGE>
106
(d) Borrower shall have the right to assign to Lender
(or, at Lender's option, to Lender's designee or nominee)
and Lender (or such designee or nominee) shall have the
obligation to assume, the obligations under the Loan
Documents relating to the principal amount so defeased.
SECTION 8.31. 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 8.32. 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/ Kurt C. Read By: /s/ C. M. Tierney
_______________________ _________________________
Name: Kurt Read C. M. Tierney
Title: Vice President Vice President
FORUM OHIO HEALTHCARE, INC.
By: /s/ Kurt C. Read
______________________
Name: Kurt Read
Title: Vice President
[Signature Page Follows]
<PAGE>
107
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/ Christopher M. Tierney
______________________
Christopher M. Tierney
Vice President
BORROWER:
FGI FINANCING I CORPORATION,
a Delaware corporation
By: /s/ Kurt C. Read
_______________________
Name: Kurt Read
Title: Vice President
FORUM OHIO HEALTHCARE, INC.,
an [Ohio] corporation
By: /s/ Kurt C. Read
_______________________
Name: Kurt Read
Title: Vice President
************************************************************
FORUM GROUP, INC.,
as Borrower
_____________________________
CREDIT AGREEMENT
Dated as of September 1, 1995
______________________________
NOMURA ASSET CAPITAL CORPORATION,
as Lender
************************************************************
<PAGE>
TABLE OF CONTENTS
Page
----
Section 1. Definitions and Accounting Matters 1
1.01 Certain Defined Terms 1
1.02 Accounting Terms and Determinations 17
Section 2. The Loan, Advances, Note and Prepayments 18
2.01 The Loan 18
2.02 Advances 18
2.03 Note 18
2.04 Optional Prepayments 19
2.05 Mandatory Prepayment 19
Section 3. Payments of Principal, Interest and Exit Fee 19
3.01 Repayment of the Loan 19
3.02 Interest 19
3.03 Cash Management. 20
3.04 Security Agreement 20
Section 4. Payments; Computations; Etc. 21
4.01 Payments 21
4.02 Computations 22
4.03 Minimum Amounts 22
4.04 Certain Notices 22
4.05 Set-off 23
4.06 Illegality 23
4.07 Compensation 23
Section 5. Conditions Precedent 24
5.01 Closing Date 24
5.02 Initial and Subsequent Advances 25
Section 6. Representations and Warranties 26
6.01 Corporate Existence 26
6.02 Financial Condition 27
6.03 Litigation 27
6.04 No Breach 27
6.05 Action 28
6.06 Approvals 28
6.07 Use of Credit 28
6.08 ERISA 28
6.09 Taxes 29
6.10 Investment Company Act 29
6.11 Public Utility Holding Company Act 29
6.12 Ownership of Stock or Partnership Interests 29
6.13 Environmental Matters 30
6.14 FGI SEC Reports 32
6.15 Agreements 32
6.16 No Bankruptcy Filing 32
6.17 Location of Chief Executive Offices 33
6.18 Compliance 33
(i)
<PAGE>
Section 7. Covenants of the Borrower 33
7.01 Financial Statements Etc. 33
7.02 Litigation; Environmental Claims 36
7.03 Existence, Etc. 37
7.04 Prohibition of Fundamental Changes 38
7.05 Limitation on Liens 38
7.06 Place of Business 38
7.07 Perform Loan Documents 38
7.08 Dividend Payments 39
7.09 Sale or Transfer of Facilities 39
7.10 Replacement of Manager 39
7.11 No Sale of Stock or Partnership Interests 39
7.12 Limitation on Issuance of Preferred Stock;
Cooperation with Rating Agencies 39
7.13 Use of Proceeds 40
7.14 Cooperate in Legal Proceedings 40
7.15 Further Assurances 40
Section 8. Events of Default 40
Section 9. Subordination. 43
9.01 Subordination to Senior Indebtedness 43
9.02 Borrower Not To Make Payments in Certain
Circumstances 44
9.03 Subordination in the Event of Acceleration,
Dissolution, Liquidation or Reorganization 45
9.04 Lender to Be Subrogated to Rights of Holders
of Senior Indebtedness 46
9.05 Obligations of the Borrower Unconditional 46
9.06 Subordination Rights Not Impaired by Acts or
Omissions of Borrower or Holders of Senior
Indebtedness 47
9.07 Further Assurances with Respect to
Subordination 47
9.08 Limitation on Subordination 47
9.09 Certain Definitions 48
Section 10. Miscellaneous 48
10.01 Waiver 48
10.02 Notices 48
10.03 Expenses, Etc. 49
10.04 Amendments, Etc. 50
10.05 Successors and Assigns 50
10.06 Assignments and Participations 50
10.07 Survival 51
10.08 Captions 52
10.09 Counterparts 52
10.10 Governing Law; Submission to Jurisdiction 52
10.11 Waiver of Jury Trial 52
10.12 Treatment of Certain Information 52
10.13 Brokers and Financial Advisors 53
10.14 Lender's Discretion 53
10.15 Severability 53
10.16 Preferences 53
10.17 Waiver of Notice 54
10.18 Remedies of Borrower 54
(ii)
<PAGE>
10.19 Waiver of Marshalling of Assets Defense 54
10.20 Waiver of Counterclaim 54
10.21 FINAL AGREEMENT 54
10.22 Tax Treatment 55
EXHIBIT A - Form of Note
EXHIBIT B - FFC Loan Agreement (without exhibits)
EXHIBIT C - Prohibited Transferees
EXHIBIT D - Form of Nonconsolidation Opinion
EXHIBIT E - FRP Loan Agreement (without exhibits)
(iii)
<PAGE>
THIS CREDIT AGREEMENT dated as of September 1, 1995, is
made by and between FORUM GROUP, INC., an Indiana corporation
(the "Borrower"), having an address at 11320 Random Hills Road,
Suite 400, Fairfax, Virginia 22030 and NOMURA ASSET CAPITAL
CORPORATION, a Delaware corporation (the "Lender"), having an
address at 2 World Financial Center, Building B, New York, New
York 10281-1198.
RECITALS:
The Borrower has requested that the Lender make from
time to time loans (each an "Advance"; collectively, the "Loan")
to the Borrower in an aggregate principal amount not exceeding
$50,000,000 (the "Loan Amount") and the Lender is prepared to
make such Advances upon the terms and conditions hereof.
Accordingly, the parties hereto agree as follows:
Section 1. Definitions and Accounting Matters.
1.01 Certain Defined Terms. As used herein, the
following terms shall have the following meanings (all terms
defined in this Section 1.01 or in other provisions of this
Agreement in the singular to have the same meanings when used in
the plural and vice versa):
"Account Collateral" shall have the meaning provided in
Section 3.04 hereof.
"Actual Excess Cash Flow" shall mean, with respect to
the month immediately preceding a Payment Date on which a
Mandatory Payment is due, (a) Adjusted Net Cash Flow minus (b)
Facility Owner Debt Service minus (c) Debt Service of the Loan
for the immediately following Payment Date.
"Adjusted Net Cash Flow" shall mean, at any date of
determination and with respect to the Collateral Facilities, the
sum of (a) with respect to the Subsidiary Facilities, "Adjusted
Net Cash Flow" (as such term is defined in the FFC Loan
Agreement) with respect to the immediately preceding month and
(b) with respect to any Approved Facilities, a term having
substantially the same meaning with respect to a comparable time
period contained in an Approved Facility Loan Agreement.
"Advance" shall have the meaning provided in the
Recitals hereto.
"Advance Termination Date" shall mean September 1,
1999.
<PAGE>
-2-
"Affiliate" of any specified Person shall mean 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
meaning correlative to the foregoing.
"Agreement" shall mean this Credit Agreement, as the
same may from time to time hereafter be modified, supplemented or
amended.
"Annualized NOI" shall mean, at any date of
determination and with respect to the Collateral Facilities, the
amount equal to the sum of (a) Adjusted Net Cash Flow, calculated
for the twelve months ended on the last day of the preceding
calendar quarter and based on the financial statements delivered
to the Lender for such quarter and (b) if written approval is
received from the Lender by the Borrower, which approval is in
the Lender's sole discretion and may be conditioned on, among
other things, satisfactory security arrangements, 50% of the
annualized management fees of the Borrower from the Collateral
Facilities.
"Approved Facilities" shall mean (i) the facilities
owned by FRPI as of the date hereof and (ii) any facilities owned
by an Affiliate of the Borrower which the Lender, in its sole
discretion, approves as acceptable for inclusion as Collateral
Facilities for purposes of calculating the Quarterly Test
(thereby enabling the Borrower to increase the principal amount
of outstanding Advances) and regarding which the following
actions are taken for the benefit of the Lender: (a) the
delivery of Preferred Stock issued by the owner of such facility
(or, in the case of facilities owned by FRPI, Preferred Stock
issued by either FRPI or FRP); and (b) the implementation of a
cash management arrangement established by the owner of such
facility similar in substance to the arrangement provided for in
Section 3.03 hereof. Upon written notice from the Lender that
such facility is acceptable (in the case of facilities described
in clause (ii) above only) and the provisions of clauses (a) and
(b) above having been satisfied, such facility shall be included
as a Collateral Facility hereunder.
"Approved Facility Loan Agreement" shall mean (i) the
FRP Loan Agreement and (ii) any loan agreement between the owner
<PAGE>
-3-
of an Approved Facility (other than FRPI) and the Lender or an
Affiliate of the Lender.
"Bankruptcy Code" shall mean the Federal Bankruptcy
Code of 1978, as amended from time to time.
"Business Day" shall mean any day other than (i) a
Saturday or a Sunday, and (ii) a day on which federally insured
depository institutions in (x) New York or (y) the state in which
the Collateral Agent is located are authorized or obligated by
law, governmental decree or executive order to be closed. When
used with respect to the determination of LIBOR, "Business Day"
shall mean a day on which banks are open for dealing in foreign
currency and exchange in London.
"Capital Lease Obligations" shall mean, for any Person,
all obligations of such Person to pay rent or other amounts under
a lease of (or other agreement conveying the right to use)
Property to the extent such obligations are required to be
classified and accounted for as a capital lease on a balance
sheet of such Person under GAAP, and, for purposes of this
Agreement, the amount of such obligations shall be the
capitalized amount thereof, determined in accordance with GAAP.
"Closing Date" shall mean September 1, 1995.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"Collection Accounts" shall mean, at any date of
determination, (a) with respect to Subsidiary Facilities,
"Collection Accounts" (as such term is defined in the FFC Loan
Agreement) and (b) with respect to any Approved Facilities, any
term having substantially the same meaning contained in an
Approved Facility Loan Agreement.
"Collection Banks" shall mean, at any date of
determination, (a) with respect to Subsidiary Facilities,
"Collection Banks" (as such term is defined in the FFC Loan
Agreement) and (b) with respect to any Approved Facilities, any
term having substantially the same meaning contained in an
Approved Facility Loan Agreement.
"Collateral Agent" shall mean the banking institution
at which the Lender establishes the Pledge Account.
"Collateral Facilities" shall mean, collectively,
Subsidiary Facilities and Approved Facilities.
<PAGE>
-4-
"Debt Service" shall mean, for any Payment Date, the
principal, if any, and interest payments that would be due and
payable on the Loan in accordance with the Note on such Payment
Date or otherwise in respect of the monthly period immediately
preceding such Payment Date.
"Default" shall mean an Event of Default or an event
that with notice or lapse of time or both would become an Event
of Default.
"Default Interest Period" shall mean, during any period
while any principal of any Advance or any other amount under this
Agreement, the Note or any other Loan Document is not paid when
due, each successive period within such period as the Lender
shall from time to time choose; provided that the first Default
Interest Period shall commence as of the date on which such
principal or other amount became due and each succeeding Default
Interest Period shall commence upon the expiry of the immediately
preceding Default Interest Period.
"Default Rate" shall mean, with respect to any Default
Interest Period, the per annum interest rate equal to the lesser
of (i) the maximum interest rate permitted by Legal Requirements
and (ii) the sum of LIBOR determined as of the immediately
preceding Interest Determination Date plus the Pricing Spread
plus 3%.
"Dollars" and "$" shall mean lawful money of the United
States of America.
"Environmental Claim" shall mean, with respect to any
Person, any written notice, claim, demand or other communication
(collectively, a "claim") by any other Person alleging or
asserting such first Person's liability for investigatory costs,
cleanup costs, governmental response costs, damages to natural
resources or other Property, personal injuries, fines or
penalties arising out of, based on or resulting from (i) the
presence, or Release into the environment, of any Hazardous
Material at any location, whether or not owned by such Person, or
(ii) circumstances forming the basis of any violation, or alleged
violation, of any Environmental Law. The term "Environmental
Claim" shall include, without limitation, any claim by any
governmental authority for enforcement, cleanup, removal,
response, remedial or other actions or damages pursuant to any
applicable Environmental Law, and any claim by any third party
seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from the presence of
<PAGE>
-5-
Hazardous Materials or arising from alleged injury or threat of
injury to health, safety or the environment.
"Environmental Laws" shall mean any and all Federal,
state, local and foreign laws, rules or regulations, and any
orders or decrees, in each case as in effect on the relevant
date, relating to the regulation or protection of human health,
safety or the environment or to emissions, discharges, releases
or threatened releases of pollutants, contaminants, chemicals or
toxic or hazardous substances or wastes into the indoor or
outdoor environment (including, without limitation, ambient air,
soil, surface water, ground water, wetlands, land or subsurface
strata), or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, chemicals or toxic or
hazardous substances or wastes.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time.
"ERISA Affiliate" shall mean 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 the
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 the Borrower is a
member.
"Event of Default" shall have the meaning provided in
Section 8 hereof.
"Exit Fee" shall mean the fee, if any, payable by the
Borrower to the Lender pursuant to Section 3.01 hereof in an
amount equal to the product of (i) $1,400,000 multiplied by (ii)
the quotient of (A) $70,000,000 minus the Permanent Financing
Amount, but not less than zero, divided by (B) $70,000,000.
"Facility Owner" shall mean (i) FFC, (ii) FOH and (iii)
any owner of an Approved Facility, as applicable.
"Facility Owner Debt Service" shall mean, at any date
of determination and with respect to the Collateral Facilities,
the sum of (a) with respect to the Subsidiary Facilities, the
amount of "Debt Service" (as such term is defined in the FFC Loan
Agreement) which shall be due on the immediately succeeding
"Payment Date" (as such term is defined in the FFC Loan
<PAGE>
-6-
Agreement) and (b) with respect to any Approved Facilities, the
amount of a term having substantially the same meaning contained
in an Approved Facility Loan Agreement.
"FFC" shall mean FGI Financing I Corporation, a
Delaware corporation and a wholly owned subsidiary of the
Borrower.
"FFC Loan Agreement" shall mean the Loan Agreement
dated as of the date hereof, by and among FFC, FOH and the
Lender, a copy of which is attached hereto as Exhibit B.
"FGI SEC Reports" shall have the meaning provided in
Section 6.02 hereof.
"FOH" shall mean Forum Ohio Healthcare, Inc., an Ohio
corporation and a wholly owned subsidiary of the Borrower.
"Finder" shall have the meaning provided in Section
10.13 hereof.
"FRI" shall mean Forum Retirement, Inc., a Delaware
corporation and a wholly owned subsidiary of the Borrower.
"FRP" shall mean Forum Retirement Partners, L.P., a
Delaware limited partnership, the general partner of which is FRI
and the limited partners of which include the Borrower.
"FRP Loan Agreement" shall mean the Loan Agreement
dated as of December 28, 1993 by and between FRP and the Lender,
a copy of which is attached hereto as Exhibit E.
"FRPI" shall mean FRP Financing I, Limited Partnership,
a Delaware limited partnership, the general partner of which is
FRI and the sole limited partner of which is FRP.
"GAAP" shall mean United States generally accepted
accounting principles as in effect on the Closing Date applied on
a basis consistent with those that, in accordance with the last
sentence of Section 1.02(a) hereof, are to be used in making the
calculations for purposes of determining compliance with this
Agreement. In the event of a change in United States generally
accepted accounting principles after the Closing Date (a "GAAP
Change"), Borrower and the Lender shall endeavor to agree upon
appropriate amendments to the Loan Documents that would leave the
parties in the same relative economic position, giving effect to
such GAAP Change, in which they would have been had such GAAP
<PAGE>
-7-
Change not become effective. Pending such agreement, the GAAP
Change will not be effective for any purpose of this Agreement.
"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.
"Guarantee" shall mean, without duplication, a
guarantee, an endorsement, a contingent agreement to purchase or
to furnish funds for the payment or maintenance of, or otherwise
to be or become contingently liable under or with respect to, the
Indebtedness, other obligations, net worth, working capital or
earnings of any Person, or a guarantee of the payment of
dividends or other distributions upon the stock or equity
interests of any Person, or an agreement to purchase, sell or
lease (as lessee or lessor) Property, products, materials,
supplies or services primarily for the purpose of enabling a
debtor to make payment of such debtor's obligations or an
agreement to assure a creditor against loss, and including,
without limitation, causing a bank or other financial institution
to issue a letter of credit or other similar instrument for the
benefit of another Person, but excluding endorsements for
collection or deposits or the guarantee of accounts payable in
the ordinary course of business. The amount of any Guarantee
shall equal the amount of the obligation so guaranteed or
otherwise supported. The terms "Guarantee" and "Guaranteed" used
as a verb shall have correlative meanings.
"Hazardous Material" shall mean, collectively, (a) any
petroleum or petroleum products, flammable materials, explosives,
radioactive materials, asbestos, urea formaldehyde foam
insulation, and transformers or other equipment that contain
polychlorinated biphenyls ("PCB's"), (b) any chemicals or other
materials or substances that 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 (c) any other
chemical or other material or substance, exposure to which is now
or hereafter prohibited, limited or regulated under any
Environmental Law.
"Indebtedness" shall mean, with respect to any Person
but without duplication: (a) obligations created, issued or
<PAGE>
-8-
incurred by such Person for borrowed money (whether by loan, the
issuance and sale of debt securities or the sale of Property to
another Person subject to an understanding or agreement,
contingent or otherwise, to repurchase such Property from such
Person); (b) obligations of such Person to pay the deferred
purchase or acquisition price of Property or services, other than
trade accounts payable (other than for borrowed money) arising,
and accrued expenses incurred, in the ordinary course of
business; (c) Indebtedness of others secured by a Lien on the
Property of such Person, whether or not the respective
indebtedness so secured has been assumed by such Person; (d)
obligations of such Person in respect of letters of credit or
similar instruments issued or accepted by banks and other
financial institutions for account of such Person (other than in
respect of workers' compensation or employee benefits); (e)
Capital Lease Obligations of such Person; and (f) any Guarantee
by such Person of any obligation referred to in clauses (a)
through (e).
"Interest Accrual Period" shall mean, with respect to a
Payment Date, the period commencing on and including the
preceding Payment Date (or in the case of the first Payment Date,
the initial date upon which an Advance is made hereunder) and
ending on and including the day preceding the Payment Date;
provided, however, that no Interest Accrual Period shall extend
beyond the day preceding the Maturity Date.
"Interest Determination Date" shall mean, with respect
to any Interest Reset Date, the date which is two Business Days
prior to such Interest Reset Date.
"Interest Reset Date" shall mean, with respect to the
period for which LIBOR has last been calculated, the eleventh day
of the calendar month in which such period for which LIBOR has
last been calculated ends, provided, however, that the first
Interest Reset Date shall be the date on which the initial
Advance is made hereunder.
"Legal Requirements" means all governmental statutes,
laws, rules, orders, regulations, ordinances, judgments, decrees
and injunctions of Governmental Authorities (including without
limitation Environmental Laws) applicable to a referenced Person
(whether now or hereafter enacted and in force), and all permits,
licenses and authorizations and regulations relating thereto.
"LIBOR" shall mean, with respect to any Interest Reset
Date, the rate (expressed as a percentage per annum) for deposits
in U.S. Dollars for a 30-day, 60-day or 90-day period, as
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selected by Borrower in accordance with Section 4.02, that
appears on Telerate Page 3750 as of 11:00 a.m., London time, on
the applicable Interest Determination Date for such Interest
Reset Date. If such rate does not appear on Telerate Page 3750
as of 11:00 a.m., London time, on the applicable Interest
Determination Date, LIBOR will be the arithmetic mean of the
offered rates (expressed as a percentage per annum) for deposits
in U.S. Dollars for a 30-day, 60-day or 90-day period, as
selected by Borrower in accordance with Section 4.02, that appear
on the Reuters Screen LIBO Page as of 11:00 a.m., London time, on
such Interest Determination Date, if at least two such offered
rates so appear. If fewer than two such offered rates appear on
the Reuters Screen LIBO Page as of 11:00 a.m., London time, on
such Interest Determination Date, Lender will request the
principal London office of any four major reference banks in the
London interbank market selected by Lender to provide such bank's
offered quotation (expressed as a percentage per annum) to prime
banks in the London interbank market for deposits in U.S. Dollars
for a 30-day, 60-day or 90-day period, as selected by Borrower in
accordance with Section 4.02, as of 11:00 a.m. London time, on
such Interest Determination Date for amounts of not less than
U.S. $1,000,000. If at least two such offered quotations are so
provided, LIBOR will be the arithmetic mean of such quotations.
If fewer than two such quotations are so provided, Lender will
request any three major banks in New York City selected by Lender
to provide such bank's rate (expressed as a percentage per annum)
for loans in U.S. Dollars to leading European banks for a 30-day,
60-day or 90-day period, as selected by the Borrower, as of
approximately 11:00 a.m., New York City time on the applicable
Interest Determination Date for amounts of not less than U.S.
$1,000,000. If at least two such rates are so provided, LIBOR
will be the arithmetic mean of such rates. If fewer than two
rates are so provided, then LIBOR will be LIBOR in effect on the
preceding Interest Reset Date.
"Lien" shall mean, with respect to any Property, any
mortgage, lien, pledge, charge, security interest or encumbrance
of any kind in respect of such Property. For purposes of this
Agreement and the other Loan Documents, a Person shall be deemed
to own subject to a Lien any Property that it has acquired or
holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title
retention agreement (other than an operating lease) relating to
such Property.
"Loan Amount" shall have the meaning provided in the
Recitals hereto.
<PAGE>
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"Loan Documents" shall mean, collectively, this
Agreement, the Note and the Security Documents.
"Loan" shall have the meaning provided for in the
Recitals hereto.
"Mandatory Payment" shall mean, with respect to any
Payment Date:
(a) during the Non-Prepayment Period, if the Borrower
has used less than 100% of the proceeds of the Advances for
the purpose of completing expansions of Collateral
Facilities, the greater of: (x) the product of (A) .75 and
(B) Actual Excess Cash Flow, and (y) the lesser of (i) the
Principal Amortization Amount for such Payment Date
(calculated pursuant to the Quarterly Test on the related
Test Date on which such Quarterly Test was not satisfied)
and (ii) Actual Excess Cash Flow; or
(b) during the Non-Prepayment Period, if the Borrower
has used 100% of the proceeds of the Advances for the
purpose of completing expansions of Collateral Facilities,
or after the Non-Prepayment Period, Actual Excess Cash Flow.
"Margin Stock" shall mean "margin stock" within the
meaning of Regulations G, T, U and X.
"Material Adverse Effect" shall mean a material adverse
effect on (a) the business, financial position or results of
operations of the Borrower and its Subsidiaries taken as a whole,
(b) the ability of the Borrower to perform, or the Lender to
enforce, any of the Loan Documents, or (c) the ability of the
Borrower to make timely payment of the principal of or interest
on the Advances or other amounts payable in connection therewith.
"Maturity Date" shall mean January 1, 2001.
"Multiemployer Plan" shall mean a multiemployer plan
defined as such in Section 3(37) of ERISA to which contributions
have been made by the Borrower or any ERISA Affiliate and that is
covered by Title IV of ERISA.
"Non-Prepayment Period" shall have the meaning ascribed
to such term in the FFC Loan Agreement.
<PAGE>
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"Note" shall mean the promissory note provided for by
Section 2.03 hereof and all promissory notes delivered in
substitution or exchange therefor, in each case as the same shall
be modified and supplemented and in effect from time to time.
"Operating Expense Amount" shall mean the sum of the
following as determined in good faith by the Borrower with
respect to the month in which such amount is being calculated:
(i) the amount of "Operating Expenses" (as defined in the FFC
Loan Agreement and (ii) the amount of a term having substantially
the same meaning contained in any Approved Facility Loan
Agreement.
"Outstanding Principal Cap" shall mean the following
Dollar amounts determined in accordance with the following
schedule:
Period Outstanding Principal Cap
------ -------------------------
Closing Date through September, 30, 1995 $3,000,000
October 1, 1995 through December 31, 1995 $8,000,000
January 1, 1996 through March 31, 1996 $18,000,000
April 1, 1996 through June 30, 1996 $28,000,000
July 1, 1996 through September 30, 1996 $38,000,000
October 1, 1996 through December 31, 1996 $45,000,000
January 1, 1997 and thereafter $50,000,000
"Payment Date" shall have the meaning provided in
Section 3.02 hereof.
"PBGC" shall mean the Pension Benefit Guaranty
Corporation or any entity succeeding to any or all of its
functions under ERISA.
"PCB's" shall have the meaning ascribed to such term in
the definition of "Hazardous Materials."
"Permanent Financing Amount" shall mean, at any date of
determination, the aggregate original principal amount of
permanent financing provided by the Lender or any of its
Affiliates (or any syndicate of lenders for which the Lender or
any of its Affiliates acts as agent) to the Borrower or any
Affiliate thereof after the Closing Date (other than pursuant to
this Agreement or the FFC Loan Agreement) and secured by any
Collateral Facilities (or, to the extent not included in the
Collateral Facilities, any facilities of FRPI). The Lender shall
determine in good faith the amount of permanent financing with a
<PAGE>
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maturity of a significant duration, using commercial mortgage
finance industry standards.
"Permitted Junior Securities" shall have the meaning
provided in Section 9.03(b) hereof.
"Person" shall mean any individual, corporation,
company, voluntary association, partnership, limited liability
company, joint venture, trust, unincorporated organization or
government (or any agency, instrumentality or political
subdivision thereof).
"Plan" shall mean an employee benefit or other plan
established or maintained by the Borrower or any ERISA Affiliate
and that is covered by Title IV of ERISA, other than a
Multiemployer Plan.
"Pledge Account" shall have the meaning provided in
Section 3.03 hereof.
"Preferred Stock" shall mean preferred stock of a
Facility Owner, having in the aggregate the following terms and
provisions:
(a) a cumulative cash dividend payable on each Payment
Date;
(b) a dividend rate equal to the interest rate on the
Loan reduced by the amount of interest actually so paid
thereunder;
(c) a liquidation preference equal to the principal
amount of the Advances from time to time outstanding,
accrued and unpaid interest thereon and all other amounts
due under the Loan Documents;
(d) mandatory redemptions in an amount equal to the
outstanding principal amount of the Loan, at a redemption
price equal to such principal amount;
(e) upon the occurrence and during the continuance of
a Triggering Event, voting rights in favor of the Lender to
elect not less than a majority of the board of directors;
(f) prior to such time as a Triggering Event occurs,
express terms negating dividend, liquidation preference,
mandatory redemption and voting rights specified in (a)-(e)
above;
<PAGE>
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(g) terms providing that the issuer of the Preferred
Stock shall not issue any other class of preferred stock or
other equity interest with a liquidation preference senior
to the Preferred Stock of such issuer to any Person or any
additional Preferred Stock to any Person (other than the
Lender); and
(h) terms providing that such issuer of the Preferred
Stock shall not incur any Indebtedness or Liens other than
those expressly permitted by this Agreement, the FFC Loan
Agreement or the Approved Facility Loan Agreements or
approved by the Lender in writing in its sole discretion.
Any Preferred Stock issued by a corporation may take the form of
a master share of such preferred stock issued on the initial
Advance Date with respect to the applicable Facility Owner.
Notwithstanding the foregoing, (i) in the event an owner of an
Approved Facility (other than FRPI) shall take the form of a
limited liability company or limited partnership, then references
to "Preferred Stock" shall mean special membership interests or
special limited partnership interests, respectively, of such
owner which have the same terms and provisions as those set forth
above and (ii) in the case of FRPI, "Preferred Stock" shall mean
special limited partnership interests of either FRPI or FRP.
"Preferred Stock Terms" shall mean (i) in the case of a
Facility Owner which is a corporation, a certificate of
designation, amendment to the certificate of incorporation or
other corporate action which implements the terms and provisions
of the Preferred Stock or (ii) in the case of a Facility Owner
which is a limited liability company or limited partnership,
provisions of or amendments to the operating agreement or limited
partnership agreement, respectively, which implement such terms
and provisions.
"Pricing Spread" shall mean 5.00% per annum.
"Prohibited Transferees" shall mean the Persons listed
on Exhibit C hereto.
"Property" shall mean any right or interest in or to
property of any kind whatsoever, whether real, personal or mixed
and whether tangible or intangible.
"Quarterly Funding Cap" shall mean the following Dollar
amounts determined in accordance with the following schedule:
<PAGE>
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Period Quarterly Funding Cap
------ ---------------------
Closing Date through
September 30, 1995 $ 3,000,000
October 1, 1995 through
December 31, 1995 $ 5,000,000
January 1, 1996 through
March 31, 1996 $10,000,000
April 1, 1996 through
June 30, 1996 $10,000,000
July 1, 1996 through
September 30, 1996 $10,000,000
October 1, 1996 through
December 31, 1996 $ 7,000,000
January 1, 1997 through
March 31, 1997 and
each subsequent calendar
quarter through the Advance
Termination Date $ 5,000,000
"Quarterly Test" shall mean the test used to determine
whether the Borrower may receive an Advance or Advances during
the applicable three month period under Section 5.02 or shall
make Mandatory Payments pursuant to Section 2.05. The
methodology of the Quarterly Test is to be performed, with
respect to the current Test Date, as follows:
I. Determine Annualized NOI of the Collateral
Facilities.
II. Divide Annualized NOI of the Collateral
Facilities by twelve to determine gross monthly net
operating income ("Gross Monthly NOI").
III. Subtract Facility Owner Debt Service from Gross
Monthly NOI to determine net monthly net operating
income ("Net Monthly NOI").
IV. Subtract the interest component of Debt Service
on the Loan (calculated assuming the interest rate in
effect for such month equals the Treasury Rate plus
5.0% (the "Test Rate")) which shall be due on the
immediately succeeding Payment Date from Net Monthly
NOI to determine excess cash flow ("Excess Cash
Flow").
<PAGE>
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V. Multiply Excess Cash Flow by .75 to determine the
principal amortization amount ("Principal
Amortization Amount").
VI. Repeat steps I through V for the 35 (if
paragraph (a) below applies) or 47 (if paragraph (b)
below applies) following monthly periods assuming
that (i) the Principal Amortization Amount for each
preceding period is applied to reduce the outstanding
principal amount of the Loan and (ii) Gross Monthly
NOI and the Test Rate remain constant.
The Quarterly Test shall be satisfied for the
applicable Test Date:
(a) if, during the Non-Prepayment Period, the
Borrower has used less than 100% of the proceeds of the
Advances for the purpose of completing expansions of the
Collateral Facilities, or if, after the Non-Prepayment
Period, the sum of the 36 Principal Amortization Amounts
calculated in accordance with the above methodology is equal
to or greater than the outstanding principal amount of the
Loan; or
(b) if, during the Non-Prepayment Period, the
Borrower has used 100% of the proceeds of the Advances for
the purpose of completing expansions of the Collateral
Facilities, the sum of the 48 Principal Amortization Amounts
calculated in accordance with the above methodology is equal
to or greater than the outstanding principal amount of the
Loan.
"Rating Agencies" shall have the meaning provided in
the FFC Loan Agreement or any Approved Facility Loan Agreement,
as applicable.
"Release" shall mean 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 Materials through ambient air, soil, surface water,
ground water, wetlands, land or subsurface strata).
"Reuters Screen LIBO Page" shall mean the display
designated as page "LIBO" on the Reuters Monitor Money Rates
Service (or such other page as may replace the LIBO page on the
service for the purpose of displaying interbank rates from London
in U.S. Dollars).
<PAGE>
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"Security Documents" shall mean, collectively, all
Uniform Commercial Code financing statements to be filed with
respect to the security interests in the Pledge Account created
pursuant to Section 3.04.
"Senior Indebtedness" shall mean principal of,
premium, if any, and accrued and unpaid interest (including,
without limitation, interest at the contract rate subsequent to
the commencement of any bankruptcy, insolvency or similar
proceeding with respect to the Borrower), fees, expenses and all
other obligations on or with respect to all Indebtedness of the
Borrower or any of its Subsidiaries; provided, however, that
there shall be excluded from such term (a) any of the
Indebtedness evidenced by this Agreement, the Note or any other
Loan Document or (b) Indebtedness, if any, which, by the terms of
the instrument evidencing such Indebtedness or pursuant to which
it is issued, ranks equally with or is expressly made junior and
subordinate in right of payment to the Subordinated Amounts.
"Subordinated Amounts" shall have the meaning
provided in Section 9.01.
"Subsidiary" shall mean, with respect to any Person,
any corporation, partnership or other entity of which at least a
majority of the securities or other ownership interests having by
the terms thereof ordinary voting power to elect a majority of
the board of directors or other persons performing similar
functions of such corporation, partnership or other entity
(irrespective of whether or not at the time securities or other
ownership interests of any other class or classes of such
corporation, partnership or other entity shall have or might have
voting power by reason of the happening of any contingency) is at
the time directly or indirectly owned or controlled by such
Person or one or more Subsidiaries of such Person or by such
Person and one or more Subsidiaries of such Person.
"Subsidiary Facilities" shall mean the "Individual
Properties" (as defined in the FFC Loan Agreement).
"Telerate Page 3750" shall mean the display
designated as "Page 3750" on The Dow Jones Telerate Service (or
such other page as may replace Page 3750 on that service or such
other service as may be nominated by the British Bankers'
Association as the information vendor for the purpose of
displaying British Bankers' Association Interest Settlement Rates
for U.S. Dollar deposits).
<PAGE>
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"Test Date" shall mean March 1, June 1, September 1
and December 1 of each calendar year, commencing December 1,
1995.
"Treasury Rate" shall mean the yield on the U.S.
Treasury issue (primary issue) with a maturity date closest to,
but not earlier than, the third anniversary of the date on which
such rate is calculated with such yield being based on the bid
price for such issue as published in The Wall Street Journal in
New York, New York on the date of calculation (or, if such bid
price is not published on that date, the next preceding date on
which such bid price is so published). In the event The Wall
Street Journal is no longer published or ceases to publish the
bid price for such U.S. Treasury issues, the Lender shall select
a comparable publication to determine the Treasury Rate.
"Triggering Event" shall mean the occurrence of an
Event of Default under this Agreement and the principal amount
and accrued interest on the Loan becoming due and payable (by
acceleration or otherwise).
1.02 Accounting Terms and Determinations.
(a) Except as otherwise expressly provided herein,
all accounting terms used herein shall be interpreted, and all
financial statements and certificates and reports as to financial
matters required to be delivered to the Lender hereunder shall
(unless otherwise disclosed to the Lender in writing at the time
of delivery thereof in the manner described in subsection (b)
below) be prepared, in accordance with GAAP applied on a basis
consistent with those used in the preparation of the latest
financial statements furnished to the Lender hereunder (which,
prior to the delivery of the first financial statements under
Section 7.01 hereof, shall mean the unaudited financial
statements as at June 30, 1995). All calculations made for the
purposes of determining compliance with this Agreement shall
(except as otherwise expressly provided herein) be made by
application of GAAP applied on a basis consistent with those used
in the preparation of the latest annual or quarterly financial
statements furnished to the Lender pursuant to Section 7.01
hereof.
(b) The Borrower shall deliver to the Lender at the
same time as the delivery of any annual or quarterly financial
statement under Section 7.01 hereof (i) a description in
reasonable detail of any material variation between the
application of accounting principles employed in the preparation
of such statement and the application of accounting principles
<PAGE>
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employed in the preparation of the next preceding annual or
quarterly financial statements and (ii) reasonable estimates of
the difference between such statements arising as a consequence
thereof.
Section 2. The Loan, Advances, Note and Prepayments.
2.01 The Loan. The Lender agrees, on the terms and
conditions of this Agreement, to make Advances to the Borrower in
Dollars during the period from and including the Closing Date to
but excluding the Advance Termination Date in an aggregate
principal amount up to but not exceeding the Loan Amount;
provided that the Lender shall not be required to make any
Advance which would cause either (x) the aggregate principal
amount of the Advances made during any calendar quarter to exceed
the applicable Quarterly Funding Cap or (y) the outstanding
aggregate principal amount of the Loan at any time to exceed the
applicable Outstanding Principal Cap.
2.02 Advances. The Borrower shall give the Lender
written notice of each Advance hereunder as provided in
Section 4.04 hereof. The Borrower may request no more than three
Advances in any three month period following a Test Date. The
Borrower shall certify as to the satisfaction or failure of the
Quarterly Test on each Test Date. On the date specified for each
Advance hereunder, the Lender shall, subject to the terms and
conditions of this Agreement, make available to the Borrower, in
immediately available funds, in an account of the Borrower
designated by the Borrower in the related notice of Advance, the
amount of such Advance minus the reasonable fees and
disbursements of counsel to the Lender.
2.03 Note.
(a) The Loan shall be evidenced by a single
promissory note of the Borrower substantially in the form of
Exhibit A hereto, dated the date hereof, payable to the Lender.
(b) The date and amount of each Advance made by the
Lender to the Borrower, and each payment made on account of the
principal thereof, shall be recorded by the Lender on its books
and, prior to any transfer of the Note, endorsed by the Lender on
the schedule attached to the Note or any continuation thereof;
provided that the failure of the Lender to make any such
recordation or endorsement shall not affect the obligations of
the Borrower to make a payment when due of any amount owing
hereunder or under the Note in respect of the Loan.
<PAGE>
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(c) The Lender shall not be entitled to have the
Note substituted or exchanged for any reason, except in
connection with a permitted assignment of the Loan and Note
pursuant to Section 10.06 hereof (and, if requested by the
Lender, the Borrower agrees to so exchange the Note).
2.04 Optional Prepayments. Subject to Section 4.03
hereof, the Borrower shall have the right to prepay the Loan at
any time or from time to time (without penalty or premium),
provided that the Borrower shall give the Lender notice of each
such prepayment as provided in Section 4.04 hereof (and, subject
to the terms hereof, upon the date specified in any such notice
of prepayment, the amount to be prepaid shall become due and
payable hereunder).
2.05 Mandatory Prepayment.
In the event that the Quarterly Test is not satisfied
on any Test Date, the Borrower shall make a principal payment
equal to the Mandatory Payment to the Lender on each Payment Date
thereafter until the subsequent Test Date; provided, however,
that the obligation to make a Mandatory Payment shall cease upon
the Borrower having prepaid the principal amount of the Loan
outstanding by an amount such that the Quarterly Test would have
been satisfied on such preceding Test Date. On each Payment Date
on which the Borrower makes a Mandatory Payment, the Borrower
shall deliver to the Lender a statement describing in reasonable
detail the calculation of the principal amount of the Loan paid.
Section 3. Payments of Principal, Interest and Exit
Fee.
3.01 Repayment of the Loan. The Borrower hereby
promises to pay to the Lender the entire outstanding principal
amount of the Loan, and the Loan shall mature, on the Maturity
Date. In addition, the Borrower shall pay to the Lender (a) any
Mandatory Payments when due as required by Section 2.05 and (b)
the Exit Fee on the Maturity Date.
3.02 Interest. The Borrower hereby promises to pay
to the Lender interest on the unpaid principal amount of each
Advance for the period from and including the date of such
Advance to but excluding the date such Advance shall be paid in
full, at a rate per annum equal to LIBOR plus the Pricing Spread.
Notwithstanding the foregoing, the Borrower hereby promises to
pay to the Lender interest at the applicable Default Rate on any
principal of any Advance and on any other amount payable by the
Borrower hereunder or under the Note that shall not be paid in
<PAGE>
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full when due (whether at stated maturity, by acceleration, by
mandatory prepayment or otherwise), for the period from and
including the due date thereof to but excluding the date the same
is paid in full. Accrued interest on each Advance shall be
payable monthly in arrears on the 11th day of the month following
the initial Advance made hereunder, and on the eleventh day of
each and every month thereafter, unless, in any such case, such
day is not a Business Day, in which event such interest shall be
payable on the first Business Day following such date (such date
for any particular month, the "Payment Date"), except that
interest payable at the Default Rate shall be payable from time
to time on demand. Promptly after the determination of any
interest rate provided for herein or any change therein, the
Lender shall give notice thereof to the Borrower.
3.03 Cash Management. Commencing on the date of the
initial Advance hereunder, the Borrower shall cause each Facility
Owner to direct each of the Collection Banks pursuant to a letter
of instructions, upon receipt by the Collection Banks of the
notice given each month pursuant to Section 2.12(b) of the FFC
Loan Agreement (or, with respect to an Approved Facility, any
comparable notice given pursuant to the related Approved Facility
Loan Agreement), to transfer no later than 3:00 p.m. on a daily
basis any amounts in the Collection Accounts (i) first to an
account designated by the Borrower until an amount equal to the
Operating Expense Amount for such month has been transferred to
such account and (ii) then to an account at the Collateral Agent
(regarding which the Lender shall have provided the Borrower the
identity of the Collateral Agent and the account number) (the
"Pledge Account") until the earlier of (a) the first day of the
succeeding month or (b) the date upon which an amount has been
deposited in the Pledge Account sufficient to pay Debt Service
(including the Mandatory Payment, if any) for the succeeding
Payment Date. In the event that sufficient funds shall have been
deposited in the Pledge Account to satisfy Debt Service
(including the Mandatory Payment, if any) for the succeeding
Payment Date prior to the first day of the succeeding month,
Borrower shall cause each Facility Owner to direct the Collection
Banks to transfer any amounts deposited in the Collection
Accounts to an account designated by Borrower until the first day
of the succeeding month.
3.04 Security Agreement. To secure the full and
punctual payment of the Loan, the Borrower hereby pledges to the
Lender, and grants to the Lender a first and continuing security
interest in and to, the following property, whether now owned or
existing or hereafter acquired or arising and regardless of where
located (collectively, the "Account Collateral"):
<PAGE>
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(i) all of Borrower's right, title and interest in
the Pledge Account and all moneys, securities, instruments
and other amounts, if any, from time to time deposited or
held in the Pledge Account;
(ii) all interest, dividends, money, instruments and
other property from time to time received, receivable or
otherwise payable in respect of, or received in exchange
for, any of the foregoing; and
(iii) to the extent not covered by clauses (i) or
(ii) above, all proceeds (as defined under the Uniform
Commercial Code of the applicable jurisdiction) of any or
all of the foregoing.
Section 4. Payments; Computations; Etc.
4.01 Payments. (a) Except as otherwise
specifically provided herein, all payments and prepayments under
this Agreement and the Note shall be made to the 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 shall be
made irrespective of, and without any deduction for, any set-offs
or counterclaims. Notwithstanding anything to the contrary
contained herein or in any other Loan Document, to the extent
that any payment or distribution is at any time made under or on
account of any of the Preferred Stock, the aggregate amount due
or to become due under this Agreement and the Note shall be
reduced by an amount equal to the amount of such payment or the
fair value of such distribution.
(c) All 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, if applicable, Default Rate
interest, if any, on the Loan; fourth, the outstanding principal
amount of the Loan or the portion thereof being repaid and fifth,
any other amounts due and owing under the Loan Documents.
<PAGE>
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(d) If the due date of any payment under this
Agreement or the Note would otherwise fall on a day that is not a
Business Day, such date shall be extended to the next succeeding
Business Day, and interest shall be payable for any principal so
extended for the period of such extension.
4.02 Computations. (a) Interest on Advances shall
be computed on the basis of a year of 360 days and actual days
elapsed (i.e., interest for each day during which the Advances
are outstanding shall be computed at said rate divided by 360).
(b) Borrower shall notify Lender in writing by
3:00 p.m. (New York time) on each Interest Determination Date
whether LIBOR shall be calculated on the basis of a 30-day, 60-
day or 90-day period provided that in no event shall Borrower
select a period which extends beyond the Maturity Date; provided,
further, that upon the occurrence and during the continuance of
an Event of Default hereunder, Lender shall determine such basis.
In the event Borrower fails to notify Lender in accordance with
the immediately preceding sentence, LIBOR shall be calculated on
the same basis as during the immediately prior Interest Accrual
Period.
4.03 Minimum Amounts. Except for Mandatory Payments
made pursuant to Section 2.05 hereof, each Advance and partial
prepayment of principal of Advances shall be in an amount at
least equal to $100,000.
4.04 Certain Notices. Notices by the Borrower to
the Lender of Advances and optional prepayments of Advances shall
be effective only if received by the Lender not later than
10:00 a.m. New York time on the number of Business Days prior to
the date of the relevant Advance or prepayment specified below:
Number of
Business
Notice Days Prior
------ ----------
Advances 5
Prepayment of Advances 2
Each such notice of borrowing or optional prepayment shall
specify the amount (subject to Section 4.03 hereof) of each
Advance to be borrowed or prepaid and the date of Advance or
optional prepayment (which shall be a Business Day). Notices of
Advances shall be irrevocable; notices of prepayment shall also
be irrevocable except that such notices may be conditioned upon
the receipt of proceeds of any financing or sale.
<PAGE>
-23-
4.05 Set-off. The Borrower agrees that, in addition
to (and without limitation of) any right of set-off, banker's
lien or counterclaim the Lender may otherwise have, the Lender
shall be entitled, at its option (to the fullest extent permitted
by law), to set off and apply any deposit (general or special,
time or demand, provisional or final), or other indebtedness,
held by it for the credit or account of the Borrower at any of
its offices, in Dollars or in any other currency, against any
principal of or interest on any of the Advances or any other
amount payable to the Lender hereunder, that is not paid when due
(regardless of whether such deposit or other indebtedness are
then due to the Borrower), in which case it shall promptly notify
the Borrower thereof.
4.06 Illegality. Notwithstanding any other
provision of this Agreement, in the event that it becomes
unlawful for the Lender to honor its obligation to make future
Advances hereunder, then the Lender shall promptly notify the
Borrower thereof and the Lender's obligation to make Advances
shall be suspended until such time as the Lender may again make
and maintain Advances.
4.07 Compensation. The Borrower shall pay to the
Lender, upon the request of the Lender, such amount or amounts
calculated in accordance with this Section 4.07 to compensate it
for any loss, cost or expense attributable to:
(a) any payment or mandatory or optional prepayment
of an Advance on a date other than the last day of the
Interest Accrual Period for such Advance; or
(b) any failure by the Borrower for any reason
(including, without limitation, the failure of any of the
conditions precedent specified in Section 5 hereof to be
satisfied) to borrow an Advance on the date for such
borrowing specified in the relevant notice of borrowing
given pursuant to Section 2.02 hereof.
Such compensation shall be an amount equal to the excess, if any,
of (i) the amount of interest that otherwise would have accrued
on the principal amount so paid, prepaid or not borrowed for the
period from the date of such payment, prepayment or failure to
borrow to the last day of the then current Interest Accrual
Period for such Advance (or, in the case of a failure to borrow,
the Interest Accrual Period for such Advance that would have
commenced on the date specified for such borrowing) at the
applicable rate of interest for such Advance provided for herein
over (ii) the amount of interest that otherwise would have
<PAGE>
-24-
accrued on such principal amount at a rate per annum equal to the
interest component of the amount the Lender would have bid in the
London interbank market for Dollar deposits of leading banks in
amounts comparable to such principal amount and with maturities
comparable to such period (as reasonably determined by the
Lender, or if the Lender shall cease to make such bids, the
equivalent rate, as reasonably determined by the Lender, derived
from Telerate Page 3750, Reuters LIBO Page or other publicly
available source as described in the definition of "LIBOR" in
Section 1.01 hereof).
Section 5. Conditions Precedent.
5.01 Closing Date. The obligation of the Lender to
execute and deliver this Agreement hereunder is subject to the
conditions precedent that the Lender shall have received the
following documents, each of which shall be satisfactory to the
Lender in form and substance:
(a) Corporate Documents. Certified copies of the
charter and by-laws (or equivalent documents) of the
Borrower and of all corporate authority for the Borrower
(including, without limitation, board of director or
executive committee resolutions and evidence of the
incumbency, including specimen signatures, of officers) with
respect to the execution, delivery and performance of the
Loan Documents and each other document to be delivered by
the Borrower from time to time in connection herewith and
the Advances hereunder (and the Lender may conclusively rely
on such certificate until it receives notice in writing from
the Borrower to the contrary).
(b) Officer's Certificate. A certificate of a
senior officer of the Borrower, dated the Closing Date, to
the effect set forth in the first sentence of Section 5.02
hereof (except as to 5.02(c)).
(c) Opinion of Counsel to the Borrower. An opinion,
dated the Closing Date, of Jones, Day, Reavis & Pogue,
counsel to the Borrower, covering such matters as the Lender
may reasonably request (and the Borrower hereby instructs
such counsel to deliver such opinion to the Lender).
(d) Note. The Note, duly completed and executed.
(e) Other Documents. Such other documents as the
Lender or special New York counsel to the Lender may
reasonably request.
<PAGE>
-25-
The obligation of the Lender to execute and deliver this
Agreement is also subject to the payment or provision for payment
by the Borrower of such fees as the Borrower shall have agreed to
pay or deliver to the Lender in connection herewith (including,
without limitation, the reasonable fees and expenses of Milbank,
Tweed, Hadley & McCloy, special New York counsel to the Lender),
in connection with the negotiation, preparation, execution and
delivery of this Agreement and the Note and the other Loan
Documents and the making of the Advances hereunder (to the extent
that statements for such fees and expenses have been delivered to
the Borrower).
5.02 Initial and Subsequent Advances. The
obligation of the Lender to make any Advance to the Borrower upon
the occasion of each Advance hereunder (including the initial
Advance) is subject to the further conditions precedent that,
both immediately prior to the making of such Advance and also
after giving effect thereto and to the intended use thereof:
(a) no Default shall have occurred and be
continuing;
(b) the representations and warranties made by the
Borrower in Section 6 hereof, and in each of the other Loan
Documents, shall be true and correct in all material
respects on and as of the date of the making of such Advance
with the same force and effect as if made on and as of such
date (or, if any such representation or warranty is
expressly stated to have been made as of a specific date, as
of such specific date);
(c) the Quarterly Test shall have been satisfied as
of the most recent Test Date; and
(d) 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, to the knowledge of the executive officers of the
Borrower, threatened, which 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 this Agreement.
Each notice of Advance by the Borrower hereunder shall constitute
a certification by the Borrower to the effect set forth in the
preceding sentence (both as of the date of such notice and,
unless the Borrower otherwise notifies the Lender in writing
prior to the date of such Advance, as of the date of such
<PAGE>
-26-
Advance). The obligation of the Lender to make each Advance
hereunder is also subject to the delivery to the Lender of the
following documents prior to the making of such Advance:
(a) Preferred Stock of each Facility Owner (or, if
applicable hereunder, of FRP) registered in the name of the
Lender together with a copy of the applicable Preferred
Stock Terms (except to the extent that Preferred Stock of
such Facility Owner (or, if applicable hereunder, of FRP)
shall have theretofore been delivered to the Lender
hereunder);
(b) concurrently with each delivery of Preferred
Stock pursuant to clause (a) above, an opinion of counsel to
the Borrower addressed to the Lender to the effect that (i)
the Preferred Stock so delivered to the Lender is duly
authorized, validly issued, fully paid and non-assessable
(to the extent applicable) and (ii) in the event that the
Borrower becomes a debtor under the Bankruptcy Code, such
Preferred Stock would not be determined to constitute
property of the Borrower's estate under Section 541 of the
Bankruptcy Code; and
(c) with respect to the initial Advance only, (i) an
opinion of counsel to the Borrower addressed to the Lender,
to the effect that to the knowledge of such counsel the
issuance of the shares of Preferred Stock so delivered to
the Lender do not violate any agreements to which any
Facility Owner is a party and (ii) a nonconsolidation
opinion of counsel to the Borrower addressed to the Rating
Agencies and the Lender in substantially the form attached
as Exhibit D hereto.
Section 6. Representations and Warranties. The
Borrower represents and warrants to the Lender that:
6.01 Corporate Existence. The Borrower and each
Facility Owner is a corporation, limited liability company or
limited partnership duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization.
Each Facility Owner (a) has all requisite corporate or
partnership power, and has all material governmental licenses,
authorizations, consents and approvals, necessary to own its
assets and carry on its business as now being or as proposed to
be conducted and (b) is qualified to do business and is in good
standing in all jurisdictions in which the nature of the business
conducted by it makes such qualification necessary and where
<PAGE>
-27-
failure so to qualify is reasonably likely to (either
individually or in the aggregate) have a Material Adverse Effect.
6.02 Financial Condition. The Borrower has
delivered to the Lender the audited consolidated financial
statements of the Borrower, and the unaudited consolidated
financial statements of the Borrower required to be delivered
pursuant to Section 7.01 hereof. All audited financial
statements have been prepared by a "Big Six" accounting firm,
Kenneth Leventhal & Company or another firm acceptable to the
Lender in its sole discretion. Since the delivery of such data,
except as otherwise disclosed in writing to the Lender, there has
been no change in the financial position of the Borrower or its
Subsidiaries or in the results of operations of the Borrower or
its Subsidiaries which change is reasonably likely to have a
Material Adverse Effect. No Facility Owner has incurred any
obligation or liability, contingent or otherwise, not reflected
in such financial data or in the materials which the Borrower
periodically files with the Securities and Exchange Commission
(the "FGI SEC Reports") which is reasonably likely to have a
Material Adverse Effect.
6.03 Litigation. Except as disclosed in the FGI SEC
Reports, there are no legal or arbitral proceedings, or any
proceedings by or before any governmental or regulatory authority
or agency, now pending or (to the knowledge of the executive
officers of the Borrower) threatened against the Borrower or any
Facility Owner that, if adversely determined, is reasonably
likely to (either individually or in the aggregate) have a
Material Adverse Effect.
6.04 No Breach. None of the execution and delivery
of this Agreement and the Note and the other Security Documents,
the consummation of the transactions herein and therein
contemplated or compliance with the terms and provisions hereof
and thereof will conflict with or result in a breach of, or
require any consent under, the charter or by-laws of the
Borrower, or any applicable law or regulation, or any order,
writ, injunction or decree of any court or governmental authority
or agency, or any material agreement or instrument to which the
Borrower is a party or by which it or any Property of any
Facility Owner is bound or to which any Facility Owner is
subject, or constitute a default under any such agreement or
instrument, or (except for the Liens created pursuant to Section
3.04 hereof) result in the creation or imposition of any Lien
upon any Property of Facility Owner pursuant to the terms of any
such agreement or instrument.
<PAGE>
-28-
6.05 Action. The Borrower has all necessary
corporate power and authority to execute, deliver and perform its
obligations under each of the Loan Documents. The execution,
delivery and performance by the Borrower of each of the Loan
Documents have been duly authorized by all necessary corporate
action on its part. This Agreement has been duly and validly
executed and delivered by the Borrower and constitutes, and each
of the Note and the other Loan Documents when executed and
delivered (in the case of the Note, for value) will constitute,
its valid and binding obligation, enforceable against the
Borrower in accordance with its terms, except as such
enforceability may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or similar laws
of general applicability affecting the enforcement of creditors'
rights and (b) the application of general principles of equity
(regardless of whether such enforceability is considered in a
proceeding in equity or at law).
6.06 Approvals. No authorizations, approvals or
consents of, and no filings or registrations with, any
governmental or regulatory authority or agency, or any securities
exchange, are a condition to the execution, delivery or
performance by the Borrower of this Agreement or any of the other
Loan Documents or for the legality, validity or enforceability
hereof or thereof, except for filings and recordings in respect
of the Liens created pursuant to the Security Documents.
6.07 Use of Credit. None of the Borrower or any
Facility Owner is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose,
whether immediate, incidental or ultimate, of buying or carrying
Margin Stock, and no part of the proceeds of the Advances
hereunder will be used to buy or carry any Margin Stock.
6.08 ERISA. The assets of the Borrower are not
"plan assets" under regulations currently promulgated under
ERISA. As of the date of each Advance, each Plan covering
employees of the Borrower or any Facility Owner, and, to the
knowledge of the executive officers of Borrower, each
Multiemployer Plan covering employees of the Borrower or any
Facility Owner, is in compliance in all material respects with,
and has been administered in all material respects in compliance
with, 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 the Borrower would be under an
obligation to furnish a report to the Lender under
Section 7.01(e) hereof; provided, however, that with respect to
the Borrower only, this representation and warranty shall apply
<PAGE>
-29-
only to the extent, if any, that a failure of the subject matter
of such representation and warranty to be true and correct would
result in joint and several liability with the Borrower on the
part of any Facility Owner.
6.09 Taxes. The Borrower and any Facility Owner (x)
are members of an affiliated group of corporations filing
consolidated returns for Federal income tax purposes, of which
the Borrower is the "common parent" (within the meaning of
Section 1504 of the Code) of such group, (y) have filed or had
filed on their behalf all Federal income tax returns and all
other material tax returns that are required to be filed by them
prior to the date of each Advance and (z) have paid all taxes
shown to be due pursuant to such returns or pursuant to any valid
assessment received by any of them; provided, however, that with
respect to the Borrower only, this representation and warranty
shall apply only to the extent, if any, that a failure of the
subject matter of such representation and warranty to be true and
correct would result in joint and several liability with the
Borrower on the part of any Facility Owner.
6.10 Investment Company Act. None of the Borrower
or any Facility Owner is an "investment company", or a company
"controlled" by an "investment company", within the meaning of
the Investment Company Act of 1940, as amended.
6.11 Public Utility Holding Company Act. None of
the Borrower or any Facility Owner is a "holding company", or an
"affiliate" of a "holding company" or a "subsidiary company" of a
"holding company", within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
6.12 Ownership of Stock or Partnership Interests.
Except for any Preferred Stock issued in accordance herewith (and
any limited partnership interests in FRP not owned by the
Borrower), each Facility Owner is a direct or indirect wholly
owned subsidiary of the Borrower. All of the outstanding
Preferred Stock is duly authorized, validly issued, fully paid
and nonassessable (to the extent applicable), without any
personal liability attaching to the ownership thereof, and has
not been issued in violation of any preemptive rights of
stockholders or partners, and is owned of record by the Lender
(except to the extent that the Lender shall have effected a
change in such record ownership subsequent to the delivery
thereof to the Lender hereunder), free and clear of all liens,
security interests, pledges, charges, encumbrances, stockholders'
agreements and voting trusts imposed by or resulting from any
action of Borrower or its Affiliates. Except for the
<PAGE>
-30-
contemplated issuance of Preferred Stock in accordance with the
provisions hereof, there is no commitment, plan or arrangement to
issue, and no outstanding option, warrant or other right calling
for the issuance of, any Preferred Stock or any security or other
instrument which by its terms is convertible into, exercisable
for or exchangeable for such Preferred Stock.
6.13 Environmental Matters. Each Facility Owner has
obtained all environmental, health and safety permits, licenses
and other authorizations required under all Environmental Laws to
carry on its business as now being or as proposed to be
conducted, except to the extent failure to have any such permit,
license or authorization would not (either individually or in the
aggregate) have a Material Adverse Effect. Each of such permits,
licenses and authorizations is in full force and effect and each
Facility Owner is in compliance with the terms and conditions
thereof, and is also in compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in any applicable
Environmental Law or in any regulation, code, plan, order,
decree, judgment, injunction, notice or demand letter issued,
entered, promulgated or approved thereunder, except to the extent
failure to comply therewith is not reasonably likely to (either
individually or in the aggregate) have a Material Adverse Effect.
In addition, except as disclosed in writing to the
Lender (whether before or after the date hereof):
(a) No notice, notification, demand, request for
information, citation, summons or order has been issued, no
complaint has been filed, no penalty has been assessed and
no investigation or review is pending or, to the knowledge
of the executive officers of the Borrower, threatened by any
governmental or other entity with respect to any alleged
failure by any Facility Owner to have any environmental,
health or safety permit, license or other authorization
required under any Environmental Law in connection with the
conduct of the business of any Facility Owner or with
respect to any generation, treatment, storage, recycling,
transportation, discharge or disposal, or any Release of any
Hazardous Materials generated by any Facility Owner.
(b) No Facility Owner owns, operates or leases a
treatment, storage or disposal facility requiring a permit
under the Resource Conservation and Recovery Act of 1976, as
amended, or under any comparable state or local statute; and
<PAGE>
-31-
(i) no PCB's are present at any site or
facility now owned, operated or leased by any
Facility Owner;
(ii) no asbestos or asbestos-containing
materials is present at any site or facility owned,
operated or leased by any Facility Owner;
(iii) there are no underground storage
tanks or surface impoundments for Hazardous
Materials, active or abandoned, at any site or
facility owned, operated or leased by any Facility
Owner;
(iv) no Hazardous Materials have been
Released at, on or under any site or facility owned,
operated or leased by any Facility Owner in a
reportable quantity established by statute,
ordinance, rule, regulation or order; and
(v) no Hazardous Materials have been
otherwise Released at, on or under any site or
facility owned, operated or leased by any Facility
Owner that would (either individually or in the
aggregate) have a Material Adverse Effect.
(c) No Facility Owner has transported or arranged
for the transportation of any Hazardous Material to any
location that is listed on the National Priorities List
("NPL") under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended
("CERCLA"), listed for possible inclusion on the NPL by the
Environmental Protection Agency in the Comprehensive
Environmental Response and Liability Information System, as
provided for by 40 C.F.R. 300.5 ("CERCLIS"), or on any
similar state or local list or that is the subject of
Federal, state or local enforcement actions or other
investigations that are reasonably likely to lead to
Environmental Claims against any Facility Owner.
(d) No Hazardous Material generated by any Facility
Owner has been recycled, treated, stored, disposed of or
Released by any Facility Owner at any location except in
conformity with applicable Environmental Law.
(e) No written notification of a Release of a
Hazardous Material has been filed by or on behalf of any
Facility Owner and no site or facility owned, operated or
leased by any Facility Owner is listed or proposed for
<PAGE>
-32-
listing on the NPL, CERCLIS or any similar state list of
sites requiring investigation or clean-up.
(f) No Liens have arisen under or pursuant to any
Environmental Laws on any site or facility owned, operated
or leased by any Facility Owner, and no government action
has been taken or is in process that is reasonably likely to
subject any such site or facility to such Liens and no
Facility Owner would be required to place any notice or
restriction relating to the presence of Hazardous Materials
at any site or facility owned by it in any deed to the real
property on which such site or facility is located.
(g) All environmental investigations, studies,
audits, tests, reviews or other analyses conducted by or
that are in the possession of any Facility Owner in relation
to facts, circumstances or conditions at or affecting any
site or facility owned, operated or leased by any Facility
Owner and that is reasonably likely to result in a Material
Adverse Effect have been made available to the Lender.
6.14 FGI SEC Reports. The FGI SEC Reports filed
since January 1, 1994 complied as to form with all Legal
Requirements applicable to them. Except for matters disclosed in
a subsequent FGI SEC Report, no FGI SEC Report filed since
January 1, 1994, as of the date of filing thereof, contained an
untrue statement of a material fact or omitted to state a
material fact necessary to make the statements made therein, in
light of the circumstances in which they were made, not
misleading.
6.15 Agreements. No Facility Owner is (x) a party
to any agreement or instrument or subject to any restriction
which is reasonably likely to have a Material Adverse Effect or
(y) in default 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 it is
bound which default is reasonably likely to have a Material
Adverse Effect.
6.16 No Bankruptcy Filing. The 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 the Borrower's assets or Property,
and the Borrower has no knowledge of any Person contemplating the
filing of any such petition against it.
<PAGE>
-33-
6.17 Location of Chief Executive Offices. The
location of the Borrower's principal place of business and chief
executive office is 11320 Random Hills Road, Suite 400, Fairfax,
Virginia 22030 or such other address as may be specified in a
notice given in accordance with Section 7.06.
6.18 Compliance. Each Facility Owner (x) complies
with all applicable Legal Requirements except for such failures
to comply which (individually or in the aggregate) are not
reasonably likely to have a Material Adverse Effect and (y) 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.
Section 7. Covenants of the Borrower. The Borrower
covenants and agrees with the Lender that, so long as any Advance
is outstanding and until payment in full of all amounts payable
by the Borrower hereunder:
7.01 Financial Statements Etc. The Borrower shall
deliver to the Lender:
(a) as soon as available and in any event within 45
calendar days after the end of each quarterly fiscal period
of each fiscal year of the Borrower ending after the date
hereof, consolidated statements of income, retained earnings
and cash flows of the Borrower and of each Facility Owner
for such period and for the period from the beginning of the
respective fiscal year to the end of such period, and the
related consolidated balance sheets of the Borrower and of
each Facility Owner as at the end of such period, setting
forth in each case in comparative form the corresponding
consolidated figures for the corresponding periods in the
preceding fiscal year (except that, in the case of balance
sheets, such comparison shall be to the last day of the
prior fiscal year), accompanied by a certificate of a senior
financial officer of the Borrower, which certificate shall
state that said consolidated financial statements present
fairly, in all material respects, the consolidated financial
condition and results of operations of the Borrower and such
Facility Owner, as the case may be, in conformity with GAAP,
as at the end of, and for, such period (subject to normal
year-end audit adjustments and the absence of notes,
schedules and other items customarily omitted from interim
period financial statements);
<PAGE>
-34-
(b) as soon as available and in any event within 90
calendar days after the end of each fiscal year of the
Borrower ending after the date hereof, consolidated
statements of income, retained earnings and cash flows of
the Borrower and of each Facility Owner for such fiscal year
and the related consolidated balance sheets of the Borrower
and of each Facility Owner as at the end of such fiscal
year, setting forth in each case in comparative form the
corresponding consolidated figures for the preceding fiscal
year, and accompanied (i) in the case of said consolidated
statements and balance sheet of the Borrower, by an opinion
thereon of Kenneth Leventhal & Company or another
independent certified public accountants of recognized
national standing, which opinion shall state that said
consolidated financial statements present fairly, in all
material respects, the consolidated financial condition and
results of operations of the Borrower as at the end of, and
for, such fiscal year in conformity with GAAP and (ii) in
the case of said consolidated statements and balance sheets
of a Facility Owner, by a certificate of a senior financial
officer of the Borrower, which certificate shall state that
said consolidated financial statements present fairly, in
all material respects, the consolidated financial condition
and results of operations of such Facility Owner, as at the
end of, and for, such fiscal year in conformity with GAAP;
(c) promptly upon their becoming available, copies
of all registration statements and regular periodic reports,
if any, that the Borrower shall have filed with the
Securities and Exchange Commission (or any governmental
agency substituted therefor) or any national securities
exchange (other than registration statements on Form S-8 or
similar forms and reports under Sections 13(d) and 16(a) of
the Securities and Exchange Act of 1934, as amended);
(d) promptly upon the mailing thereof to the
shareholders of the Borrower generally, copies of all
financial statements, reports and proxy statements so
mailed;
(e) as soon as possible, and in any event within ten
days, after an executive officer of the Borrower knows that
any of the events or conditions specified below with respect
to any Plan or Multiemployer Plan has occurred or exists, a
statement signed by a senior financial officer of the
Borrower setting forth details respecting such event or
condition and the action, if any, that the Borrower or its
ERISA Affiliate proposes to take with respect thereto (and a
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copy of any report or notice required to be filed with or
given to the PBGC by the 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 the
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 the Borrower or an ERISA
Affiliate to terminate any Plan;
(iii) the institution by the 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 the Borrower
or any ERISA Affiliate of a notice from a
Multiemployer Plan that such action has been taken by
the PBGC with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal
from a Multiemployer Plan by the 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 the
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 the
Borrower or any ERISA Affiliate to enforce
<PAGE>
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Section 515 of ERISA, which proceeding is not
dismissed within 30 days; and
(vi) the adoption of an amendment to any
Plan that, pursuant to Section 401(a)(29) of the Code
or Section 307 of ERISA, would result in the loss of
tax-exempt status of the trust of which such Plan is
a part if the Borrower or an ERISA Affiliate fails to
timely provide security to the Plan in accordance
with the provisions of said Sections;
(f) promptly after any executive officer of the
Borrower knows that any Default has occurred, a notice of
such Default describing the same in reasonable detail and,
together with such notice or as soon thereafter as possible,
a description of the action that the Borrower has taken or
proposes to take with respect thereto; and
(g) from time to time such other information
regarding the financial condition, operations, business or
prospects of the Borrower or any of its Subsidiaries
(including, without limitation, any Plan or Multiemployer
Plan and any reports or other information required to be
filed under ERISA) as the Lender may reasonably request.
The Borrower will furnish to the Lender, at the time it furnishes
each set of financial statements pursuant to paragraph (a) or (b)
above, a certificate of a senior financial officer of the
Borrower to the effect that, to the knowledge of such officer
after due inquiry, no Default has occurred and is continuing (or,
if any Default is known by such officer to have occurred and to
be continuing, describing the same in reasonable detail and
describing the action that the Borrower has taken or proposes to
take with respect thereto).
7.02 Litigation; Environmental Claims. The Borrower
will promptly give to the Lender notice of all legal or arbitral
proceedings, and of all proceedings by or before any governmental
or regulatory authority or agency, and any material development
in respect of such legal or other proceedings, affecting the
Borrower or any of its Subsidiaries, except proceedings that, if
adversely determined, are not reasonably likely to (either
individually or in the aggregate) have a Material Adverse Effect.
Without limiting the generality of the foregoing, the Borrower
will give to the Lender notice of the assertion of any
Environmental Claim by any Person against, or with respect to the
activities of, any Facility Owner and notice of any alleged
violation of or non-compliance with any Environmental Laws or any
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permits, licenses or authorizations, other than any Environmental
Claim or alleged violation that, if adversely determined, is not
reasonably likely to (either individually or in the aggregate)
have a Material Adverse Effect.
7.03 Existence, Etc. The Borrower will:
(a) preserve and maintain its legal existence and
will cause any Facility Owner to preserve and maintain its
respective legal existence and material rights, privileges,
licenses and franchises (provided that nothing in this
Section 7.03 shall prohibit any transaction not prohibited
by Section 7.04 hereof);
(b) and will cause any Facility Owner to comply with
the requirements of all applicable laws, rules, regulations
and orders of governmental or regulatory authorities if
failure to comply with such requirements is reasonably
likely to (either individually or in the aggregate) have a
Material Adverse Effect; provided, however, that the
Borrower's obligations as to its compliance with such
requirements as aforesaid shall be limited to those
requirements that, if not complied with by the Borrower,
would result in joint and several liability with the
Borrower on the part of any Facility Owner;
(c) and will cause any Facility Owner to, pay and
discharge all taxes, assessments and governmental charges or
levies imposed on it or on its income or profits or on any
of its Property prior to the date on which penalties attach
thereto, except for any such tax, assessment, charge or levy
the payment of which is being contested in good faith and by
proper proceedings and against which adequate reserves are
being maintained; provided, however, that the Borrower's
obligations to pay and discharge such taxes, assessments,
charges or levies shall apply as aforesaid only to such
taxes, assessments, charges or levies that, if not paid and
discharged by the Borrower, would result in joint and
several liability with the Borrower on the part of any
Facility Owner;
(d) cause any Facility Owner to maintain its
respective material Properties used in their respective
businesses in good working order and condition, ordinary
wear and tear excepted;
<PAGE>
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(e) and will cause any Facility Owner to, keep
records and books of account in conformity with GAAP
consistently applied; and
(f) will cause any Facility Owner to, permit
representatives of the Lender, during normal business hours,
to examine, copy and make extracts from its books and
records, to inspect any of the Properties of any Facility
Owner, and to discuss its business and affairs with its
officers, all to the extent reasonably requested by the
Lender.
7.04 Prohibition of Fundamental Changes. The
Borrower will not (i) liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or (ii) permit any
Facility Owner to (x) enter into any transaction of merger or
consolidation or amalgamation or liquidate, wind up or dissolve
itself (or suffer any liquidation or dissolution), (y) convey,
sell, lease, transfer or otherwise dispose of, in one transaction
or a series of transactions, all or a substantial part of its
business or Property, whether now owned or hereafter acquired
(including, without limitation, receivables and leasehold
interests, but excluding (a) obsolete or worn-out Property, tools
or equipment no longer used or useful in its business, (b) any
inventory or other Property sold or disposed of in the ordinary
course of business and on ordinary business terms and (c) any
transaction permitted by Section 7.09), or (z) make any material
change in the nature of its business objectives, purposes or
operations.
7.05 Limitation on Liens. The Borrower will not,
nor will it permit any Facility Owner to, create or incur any
Lien upon any of the Preferred Stock.
7.06 Place of Business. The Borrower shall not
change its chief executive office or its principal place of
business without giving the Lender at least 30 calendar days'
prior written notice thereof and promptly providing the Lender
such information as the Lender may reasonably request in
connection therewith.
7.07 Perform Loan Documents. The Borrower shall
observe, perform and satisfy or cause any Facility Owner to
observe, perform and satisfy all the terms, provisions, covenants
and conditions required to be observed, performed or satisfied by
it.
<PAGE>
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7.08 Dividend Payments. The Borrower shall cause
each Facility Owner to declare dividends or make other
distributions each month in an amount equal to the amount
transferred by the Collection Banks to the Pledge Account
pursuant to Section 3.03 hereof.
7.09 Sale or Transfer of Facilities. The Borrower
will not permit any Facility Owner to sell or transfer any of the
Collateral Facilities without, in any such case, the prior
written consent of the Lender, unless immediately following such
sale or transfer of the Quarterly Test would be satisfied (based
on a 36-month amortization).
7.10 Replacement of Manager. Subject to the rights
of the Lender or its assignee under the FFC Loan Agreement or any
Approved Facility Loan Agreement and subject to the prior
approval of the Rating Agencies, the Lender shall have the right
to designate a replacement manager for the Collateral Facilities
following the occurrence of an Event of Default of the type
described in clause (a) of Section 8 hereof. Such designation
right may be exercised by the Lender only upon 30 calendar days'
prior written notice to the Borrower, given after the occurrence
of such an Event of Default. Any successor manager so designated
by the Lender shall satisfy the criteria specified in Section
5.1(P) of the FFC Loan Agreement or comparable provision of an
Approved Facility Loan Agreement.
7.11 No Sale of Stock or Partnership Interests. The
Borrower will not sell, pledge, convey, assign its interest in or
otherwise transfer its ownership of the capital stock or
partnership interests of a Facility Owner, without in any such
case the prior written consent of the Lender.
7.12 Limitation on Issuance of Preferred Stock;
Cooperation with Rating Agencies. Prior to the repayment of the
Loan in full, (i) the Borrower shall not permit any Facility
Owner to issue Preferred Stock or any other equity interest with
a liquidation preference senior to the Preferred Stock of such
Facility Owner to any Person, other than the Lender and (ii) with
respect to FRPI, in the event the Preferred Stock shall be issued
by FRP, the Borrower shall not permit FRPI to issue Preferred
Stock or any other equity interest with a liquidation preference.
The Borrower shall cooperate fully with the Lender with respect
to the implementation of changes to the Preferred Stock Terms
requested by the Rating Agencies in connection with a
securitization of the mortgage loans executed pursuant to the FFC
Loan Agreement or any Approved Facility Loan Agreement; provided,
however, that no such changes shall materially adversely affect
<PAGE>
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the rights or materially increase the obligations of Borrower
under the Loan Documents or of any Facility Owner or FRP under
the terms of any such Preferred Stock.
7.13 Use of Proceeds. The Borrower shall use at
least 80% of the aggregate proceeds of the Advances hereunder for
expansions of the Collateral Facilities (in compliance with all
applicable legal and regulatory requirements, including, without
limitation, Regulations G, T, U and X and the Securities Act of
1933 and the Securities Exchange Act of 1934 and the regulations
thereunder). The Borrower shall use any proceeds of the Advances
which are not used for such expansions for any general corporate
purpose of the Borrower and its Subsidiaries permitted by law and
in such event shall notify the Lender promptly of such use of
proceeds.
7.14 Cooperate in Legal Proceedings. Except with
respect to any claim by the Borrower against the Lender, the
Borrower shall cooperate fully with the Lender with respect to
any proceedings before any Governmental Authority which may in
any way affect the rights of the Lender hereunder or any rights
obtained by the Lender under any of the Loan Documents and, in
connection therewith, not prohibit the Lender, at its election,
from participating in any such proceedings.
7.15 Further Assurances. The Borrower shall, at the
Borrower's sole cost and expense:
(i) execute and deliver or cause to be executed and
delivered to the Lender such documents, instruments,
certificates and other writings, and do such other acts
necessary, to evidence, preserve and/or protect the Lien on
the Pledge Account, as the Lender may reasonably require
(including, without limitation, executing and delivering UCC
filing statements); and
(ii) do and execute or cause to be done and executed
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 the Lender shall reasonably require
from time to time.
Section 8. Events of Default. If one or more of the
following events (herein called "Events of Default") shall occur
and be continuing:
<PAGE>
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(a) The Borrower shall default in the payment when
due (whether at stated maturity or upon mandatory or
optional prepayment) of any principal of or interest on any
Advance, any fee or any other amount payable by it hereunder
or under any other Loan Document; or
(b) The Borrower shall default in the payment when
due of any principal of or interest on any of its other
Indebtedness (other than any nonrecourse Indebtedness)
aggregating $5,000,000 or more, or any other event specified
in any note, agreement, indenture or other document
evidencing or relating to any of the Borrower's other
Indebtedness (other than any nonrecourse Indebtedness)
aggregating $5,000,000 shall occur, and such payment default
or other event shall result in such Indebtedness becoming
due prior to its stated maturity; or
(c) Any representation, warranty or certification
made or deemed made herein or in any other Loan Document (or
in any modification or supplement hereto or thereto) by the
Borrower, or any certificate furnished to the Lender
pursuant to the provisions hereof or thereof, shall prove to
have been false or misleading in any material respect as of
the time made or furnished; or
(d) The Borrower shall default in the performance of
any of its obligations under any of Sections 7.01(f), 7.04,
7.05, 7.06, 7.09, 7.11 or 7.12 hereof or any of the material
terms or provisions of the Preferred Stock shall not be
observed; or
(e) The Borrower shall default in the performance of
any of its other obligations in this Agreement or any other
Loan Document and such default shall continue unremedied for
a period of thirty or more days after notice thereof to the
Borrower by the Lender; provided, however, that if such non-
monetary default is susceptible of cure but cannot
reasonably be cured within such 30-day period and the
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; or
(f) The Borrower shall admit in writing its
inability to pay its debts as such debts become due; or
<PAGE>
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(g) The Borrower shall (i) apply for or consent to
the appointment of, or the taking of possession by, a
receiver, custodian, trustee, examiner or liquidator of
itself or of all or a material part of its Property,
(ii) make a general assignment for the benefit of its
creditors, (iii) commence a voluntary case under the
Bankruptcy Code, (iv) file a petition seeking to take
advantage of any other law relating to bankruptcy,
insolvency, reorganization, liquidation, dissolution,
arrangement or winding-up, or composition or readjustment of
debts, (v) fail to controvert in a timely manner, or
acquiesce in writing to, any petition filed against it in an
involuntary case under the Bankruptcy Code or (vi) take any
corporate action for the purpose of effecting any of the
foregoing; or
(h) A proceeding or case shall be commenced, without
the application or consent of the Borrower, in any court of
competent jurisdiction, seeking (i) its reorganization,
liquidation, dissolution, arrangement or winding-up, or the
composition or readjustment of its debts, (ii) the
appointment of a receiver, custodian, trustee, examiner,
liquidator or the like of the Borrower or of all or any
substantial part of its Property or (iii) similar relief in
respect of the Borrower under any law relating to
bankruptcy, insolvency, reorganization, winding-up, or
composition or adjustment of debts, and such proceeding or
case shall continue undismissed, or an order, judgment or
decree approving or ordering any of the foregoing shall be
entered and continue unstayed and in effect, for a period of
60 or more calendar days; or an order for relief against the
Borrower shall be entered in an involuntary case under the
Bankruptcy Code; or
(i) A final judgment or judgments for the payment of
money of $5,000,000 or more in the aggregate (exclusive of
judgment amounts covered by insurance) or of $10,000,000 or
more in the aggregate (regardless of insurance coverage)
shall be rendered by one or more courts, administrative
tribunals or other bodies having jurisdiction against any
Facility Owner and the same shall not be discharged (or
provision shall not be made for such discharge), or a stay
of execution thereof shall not be procured, within 30
calendar days from the date of entry thereof and any
Facility Owner shall not, within said period of 30 calendar
days, or such longer period during which execution of the
same shall have been stayed, appeal therefrom and cause the
execution thereof to be stayed during such appeal; or
<PAGE>
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(j) an "Event of Default" (as defined in the FFC
Loan Agreement or any Approved Facility Loan Agreement)
shall occur and shall result in the Indebtedness under the
FFC Loan Agreement or any Approved Facility Loan Agreement
becoming due prior to its stated maturity; or
(k) An event specified in Section 7.01(e) hereof
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, any Facility Owner shall be reasonably likely to
incur a liability to a Plan, a Multiemployer Plan or the
PBGC (or any combination of the foregoing) that (either
individually or in the aggregate) is reasonably likely to
have a Material Adverse Effect; or
(l) The Lien created pursuant to Section 3.04 hereof
shall at any time not constitute a valid and perfected Lien
on the collateral intended to be covered thereby (to the
extent perfection by filing, registration, recordation or
possession is required herein) in favor of the Lender, free
and clear of all other Liens, or the enforceability thereof
shall be contested by the Borrower;
THEREUPON: (1) in the case of an Event of Default other than one
referred to in clause (g) or (h) of this Section 8 with respect
to the Borrower, the Lender may, by notice to the Borrower,
terminate the Loan and/or declare the principal amount then
outstanding of, and the accrued interest on, the Advances and all
other amounts payable by the Borrower hereunder and under the
Note to be forthwith due and payable, whereupon such amounts
shall be immediately due and payable without presentment, demand,
protest or other formalities of any kind, all of which are hereby
expressly waived by the Borrower; and (2) in the case of the
occurrence of an Event of Default referred to in clause (g) or
(h) of this Section 8 with respect to the Borrower, the Loan
shall automatically be terminated and the principal amount then
outstanding of, and the accrued interest on, the Advances and all
other amounts payable by the Borrower hereunder and under the
Note shall automatically become immediately due and payable
without presentment, demand, protest or other formalities of any
kind, all of which are hereby expressly waived by the Borrower.
Section 9. Subordination.
9.01 Subordination to Senior Indebtedness.
Notwithstanding anything to the contrary contained in this
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Agreement, the Note or any other Loan Document (but subject to
Section 9.08), the rights of the Lender with respect to the
payment of amounts due under this Agreement, the Note or any
other Loan Document (collectively, the "Subordinated Amounts")
shall be junior and subordinate, to the extent and in the manner
provided in this Section 9, to the prior payment in full of
Senior Indebtedness. The Borrower shall give prompt written
notice to the Lender of any default or other event which would
prohibit the making of any payment on account of any Subordinated
Amount pursuant to the provisions of this Section 9.
9.02 Borrower Not To Make Payments in Certain
Circumstances.
(a) Upon the occurrence of any default in payment of
the principal of or premium, if any, or interest on any Senior
Indebtedness (whether at maturity, upon acceleration or
otherwise), then, subject to delivery of notice to the Lender by
the Borrower or the holder of such Senior Indebtedness, unless
and until such default shall have been cured or waived or shall
have ceased to exist, no direct or indirect payment in cash,
property or securities, by set-off or otherwise, shall be made or
agreed to be made by the Borrower or the Lender on account of any
Subordinated Amount.
(b) Upon the occurrence of an event of default
(other than in circumstances in which the terms of Section
9.02(a) hereof are applicable) with respect to any Senior
Indebtedness as a result of which the holders thereof are
entitled, under the terms of such Senior Indebtedness, to
accelerate the maturity thereof, upon written notice thereof
given to the Borrower by any holder or holders of such Senior
Indebtedness or their agents, representatives or trustees, then,
subject to delivery of notice to the Lender by the Borrower or
the holder of such Senior Indebtedness, unless and until such
event of default shall have been cured or waived or shall have
ceased to exist, no direct or indirect payment in cash, property
or securities, by set-off or otherwise, shall be made or agreed
to be made by the Borrower or the Lender on account of any
Subordinated Amount.
(c) In the event that, notwithstanding the
provisions of Section 9.02(a) or (b) hereof, any payment shall be
made on account of any Subordinated Amount in contravention of
Section 9.02(a) or (b) hereof, then, in any such case, except in
the case of any such default which shall have been cured or
waived or shall have ceased to exist, such payment shall (except
to the extent consisting of Permitted Junior Securities) be held
for the benefit of, and shall be paid over and delivered to, the
holders of such Senior Indebtedness (pro rata as to each of such
holders on the basis of the respective amounts of Senior
<PAGE>
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Indebtedness held by them, as such respective amounts are set
forth in a written notice to the Lender from the Borrower) or
their representatives, agents or trustees, for application to the
payment of all Senior Indebtedness remaining unpaid to the extent
necessary to pay all Senior Indebtedness in full in accordance
with its terms, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Indebtedness.
9.03 Subordination in the Event of Acceleration,
Dissolution, Liquidation or Reorganization. Upon (i) any amount
being declared due and payable or automatically becoming due and
payable pursuant to Section 8 hereof or (ii) any distribution of
assets of the Borrower in any dissolution, winding up,
liquidation (total or partial) or similar proceeding relating to
the Borrower (whether in bankruptcy, insolvency or receivership
proceedings or upon an assignment for the benefit of creditors or
otherwise):
(a) the holders of Senior Indebtedness shall first
be entitled to receive payment in full of all Senior
Indebtedness (or to have such payment duly provided for in a
manner satisfactory to them) before the Lender is entitled
to receive any direct or indirect payment in cash, property
or securities, by set-off or otherwise, on account of any
Subordinated Amount;
(b) any payment or distribution of assets of the
Borrower of any kind or character, whether in cash, property
or securities (other than securities (herein called
"Permitted Junior Securities") of the Borrower as
reorganized or readjusted or of the Borrower or any other
company, trust or corporation provided for by a plan of
reorganization or readjustment, the payment of which is
subordinate, at least to the extent provided in this Section
9 with respect to the Subordinated Amounts to the payment of
all Senior Indebtedness at the time outstanding and to the
payment of all securities issued in exchange therefor to the
holders of the Senior Indebtedness at the time outstanding),
to which the Lender would be entitled but for the provisions
of this Section 9 shall be paid by the liquidating trustee
or agent or other person making such payment or distribution
directly to the holders of the Senior Indebtedness or their
agents, representatives or trustees (pro rata as to each
such holder, agent, representative or trustee on the basis
of the respective amounts of unpaid Senior Indebtedness held
or represented by each), to the extent necessary to make
payment in full of all Senior Indebtedness remaining unpaid,
after giving effect to any concurrent payment or
<PAGE>
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distribution or provision therefor to the holders of such
Senior Indebtedness; and
(c) in the event that, notwithstanding the foregoing
provisions of this Section 9.03, any payment or distribution
of assets of the Borrower of any kind or character, whether
in cash, property or securities (other than Permitted Junior
Securities) shall be received by the Lender on account of
any Subordinated Amount before all Senior Indebtedness is
paid in full in accordance with its terms, or effective
provision made for its payment, such payment or distribution
shall be received and held for the benefit of and paid over
to the holders of the Senior Indebtedness remaining unpaid
or unprovided for or their agents, representatives or
trustees (pro rata as provided in Section 9.03(b) hereof)
for application to the payment of such Senior Indebtedness
until all such Senior Indebtedness shall have been paid in
full, after giving effect to any concurrent payment or
distribution or provision therefor to the holders of such
Senior Indebtedness.
9.04 Lender to Be Subrogated to Rights of Holders of
Senior Indebtedness. Subject to the payment in full of all
Senior Indebtedness, the Lender shall be subrogated to the rights
of the holders of Senior Indebtedness to receive payments or
distributions of assets of the Borrower applicable to the Senior
Indebtedness until all Subordinated Amounts shall be paid in
full, and for the purpose of such subrogation no payments or
distributions to the holders of Senior Indebtedness by or on
behalf of the Borrower or by or on behalf of the Lender by virtue
of this Section 9 which otherwise would have been made to the
Lender shall, as between the Borrower and the Lender, be deemed
to be payment by the Borrower to or on account of Senior
Indebtedness, it being understood that the provisions of this
Section 9 are intended solely for the purpose of defining the
relative rights of the Lender, on the one hand, and the holders
of Senior Indebtedness, on the other hand.
9.05 Obligations of the Borrower Unconditional.
Nothing contained in this Section 9 is intended to or shall
impair, as between the Borrower and the Lender, the obligation of
the Borrower, which is absolute and unconditional, to pay to the
Lender all Subordinated Amounts as and when the same shall become
due and payable, or is intended or shall affect the relative
rights of the Lender and creditors of the Borrower other than the
holders of Senior Indebtedness, nor, except as expressly provided
in this Section 9, shall anything herein prevent the Lender from
exercising all remedies otherwise permitted by applicable law
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upon default under this Agreement, the Note or any other Loan
Document, subject to the rights, if any, under this Section 9 of
the holders of Senior Indebtedness, in respect of cash, property
or securities of the Borrower received upon the exercise of any
such remedy. Upon any distribution of assets of the Borrower
referred to in this Section 9, the Lender shall be entitled to
rely upon any order or decree by any court of competent
jurisdiction in which such dissolution, winding up, liquidation
or reorganization proceedings are pending or a certificate of the
liquidating trustee or agent or other person making any
distribution to the Lender for the purpose of ascertaining the
persons entitled to participate in such distribution, the holders
of Senior Indebtedness and other indebtedness of the Borrower,
the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or
to this Section 9. Nothing contained in this Section 9 or
elsewhere in this Agreement is intended to or shall affect the
obligation of the Borrower to make, or prevent the Borrower from
making, at any time except as specifically provided in Sections
9.02 and 9.03 hereof, payments at any time in respect of the
Subordinated Amounts.
9.06 Subordination Rights Not Impaired by Acts or
Omissions of Borrower or Holders of Senior Indebtedness. No
right of any present or future holders of any Senior Indebtedness
to enforce subordination as provided herein shall at any time in
any way be prejudiced or impaired by any act or failure to act on
the part of the Borrower or by any act or failure to act by any
such holder, or by any noncompliance by the Borrower with the
terms of this Agreement, the Note or any other Loan Document,
regardless of any knowledge thereof which any such holder may
have or be otherwise charged with.
9.07 Further Assurances with Respect to
Subordination. At any time or from time to time upon the request
of any holder of Senior Indebtedness or its representative, agent
or trustee, the Lender shall execute and deliver such further
documents and do such other acts and things as any such holder,
representative, agent or trustee may reasonably request to effect
fully the subordination of the Subordinated Amounts to such
Senior Indebtedness to the extent and in the manner provided in
this Section 9.
9.08 Limitation on Subordination. Nothing in this
Section 9 shall affect, impair or subordinate the Lender's rights
in the Account Collateral, or its rights to receive and retain
the Account Collateral and to apply the same to the payment of
the Subordinated Amounts, it being expressly understood and
<PAGE>
-48-
agreed that the Lender is entitled to an unsubordinated first
priority security interest in the Account Collateral pursuant to
Section 3.04 hereof. None of the provisions hereof shall limit
in any way the Lender's ability to enforce its rights in the
Account Collateral and the Preferred Stock.
9.09 Certain Definitions. For purposes of this
Section 9, the term "Lender" means the initial Lender and any
successor or assign thereof.
Section 10. Miscellaneous.
10.01 Waiver. No failure on the part of the Lender
to exercise and no delay in exercising, and no course of dealing
with respect to, any right, power or privilege under this
Agreement or the Note shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or
privilege under this Agreement or the Note preclude any other or
further exercise thereof or the exercise of any other right,
power or privilege. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.
The Borrower irrevocably waives, to the fullest
extent permitted by applicable law, any claim that any action or
proceeding commenced by the Lender relating in any way to this
Agreement should be dismissed or stayed by reason, or pending the
resolution, of any action or proceeding commenced by the Borrower
relating in any way to this Agreement whether or not commenced
earlier. To the fullest extent permitted by applicable law, the
Borrower shall take all measures necessary for any such action or
proceeding commenced by the Lender to proceed to judgment prior
to the entry of judgment in any such action or proceeding
commenced by the Borrower.
10.02 Notices. All notices, requests and other
communications provided for herein and under the Security
Documents (including, without limitation, any modifications of,
or waivers, requests or consents under, this Agreement) shall be
given or made in writing (including, without limitation, by
telecopy) delivered to the intended recipient at the "Address for
Notices" specified below its name on the signature pages hereof);
or, as to any party, at such other address as shall be designated
by such party in a notice to each other party. Except as
otherwise provided in this Agreement, all such communications
shall be deemed to have been duly given when transmitted by
telecopier or personally delivered or, in the case of a mailed
<PAGE>
-49-
notice, upon receipt, in each case given or addressed as
aforesaid.
10.03 Expenses, Etc. The Borrower agrees to pay or
reimburse (or make provision therefor) the Lender for: (a) all
reasonable out-of-pocket costs and expenses of the Lender
(including, without limitation, the reasonable fees and expenses
of Milbank, Tweed, Hadley & McCloy, special New York counsel to
the Lender) in connection with (i) the negotiation, preparation,
execution and delivery of this Agreement and the other Loan
Documents and the making of the Advances hereunder and (ii) the
negotiation or preparation of any modification, supplement or
waiver of any of the terms of this Agreement or any of the other
Loan Documents (whether or not consummated) or any document
prepared pursuant to Section 9.07; (b) all reasonable
out-of-pocket costs and expenses of the Lender (including,
without limitation, the reasonable fees and expenses of legal
counsel) in connection with (i) any Default and any enforcement
or collection proceedings resulting therefrom, (including,
without limitation, all manner of participation in or other
involvement with (x) bankruptcy, insolvency, receivership,
foreclosure, winding up or liquidation proceedings, (y) judicial
or regulatory proceedings and (z) workout, restructuring or other
negotiations or proceedings (whether or not the workout,
restructuring or transaction contemplated thereby is consummated)
and (ii) the enforcement of this Section 10.03; and (c) all
transfer, stamp, documentary or other similar taxes, assessments
or charges levied by any governmental or revenue authority in
respect of this Agreement or any of the other Loan Documents or
any other document referred to herein or therein and all costs,
expenses, taxes, assessments and other charges incurred in
connection with any filing, registration, recording or perfection
of any security interest contemplated by any Security Document or
any other document referred to therein.
The Borrower hereby agrees to indemnify the Lender
and its directors, officers, employees, attorneys and agents
from, and hold each of them harmless against, any and all losses,
liabilities, claims, damages or expenses incurred by any of them
arising out of or by reason of any investigation or litigation or
other proceedings (including any threatened investigation or
litigation or other proceedings) relating to the Advances
hereunder or any actual or proposed use by the Borrower of the
proceeds of any of the Advances hereunder (including, without
limitation, the reasonable fees and disbursements of counsel
incurred in connection with any such investigation or litigation
or other proceedings) (but excluding any such losses,
liabilities, claims, damages or expenses incurred by reason of
<PAGE>
-50-
the gross negligence or willful misconduct of the Person to be
indemnified). Without limiting the generality of the foregoing,
the Borrower will indemnify the Lender from, and hold the Lender
harmless against, any losses, liabilities, claims, damages or
expenses described in the preceding sentence (but excluding, as
provided in the preceding sentence, any loss, liability, claim,
damage or expense incurred by reason of the gross negligence or
willful misconduct of the Person to be indemnified) arising under
any Environmental Law as a result of the past, present or future
operations of the Borrower or any of its Subsidiaries (or any
predecessor in interest to the Borrower or any of its
Subsidiaries), or the past, present or future condition of any
site or facility owned, operated or leased at any time by the
Borrower or any of its Subsidiaries (or any such predecessor in
interest), or any Release or threatened Release of any Hazardous
Materials at or from any such site or facility, excluding any
such Release or threatened Release that shall occur during any
period when the Lender shall be in possession of any such site or
facility following the exercise by the Lender of any of its
rights and remedies hereunder or under any of the Security
Documents, but including any such Release or threatened Release
occurring during such period that is a continuation of conditions
previously in existence, or of practices employed by the Borrower
and its Subsidiaries, at such site or facility.
10.04 Amendments, Etc. No provision of this
Agreement may be modified or supplemented except by an instrument
in writing signed by the Borrower and the Lender.
10.05 Successors and Assigns. This Agreement shall
be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns.
10.06 Assignments and Participations.
(a) The Borrower may not assign any of its rights or
obligations hereunder or under the Note without the prior consent
of the Lender.
(b) The Lender may assign the Loan and the Note;
provided, however, the Lender may not, without the prior written
consent of the Borrower, assign (x) its obligation hereunder to
make Advances to the Borrower or (y) the Loan or the Note to a
Prohibited Transferee. Upon execution and delivery by the
assignee to the Borrower of an instrument in writing pursuant to
which the assignee agrees to become the "Lender" hereunder, and
upon consent thereto by the Borrower to the extent required
above, the assignee shall have (unless otherwise provided in such
<PAGE>
-51-
assignment with the consent of the Borrower) the obligations,
rights and benefits of the Lender hereunder in respect of the
Loan and Advances theretofore held by the Lender, and the
assigning Lender shall be released from the Loan; provided, that
the Borrower shall in no event be required to recognize multiple
lenders under this Agreement.
(c) The Lender may sell or agree to sell to one or
more other Persons (each a "Participant") a participation in all
or any part of any Advances, or in the Loan; provided, that such
Participant shall not have any rights or obligations under this
Agreement or the Note or any other Loan Document (the
Participant's rights against the Lender in respect of such
participation to be those set forth in the agreements executed by
the Lender in favor of the Participant); and provided, further,
that no Prohibited Transferee may be a Participant. In no event
shall the Lender agree with the Participant to take or refrain
from taking any action hereunder or under any other Loan Document
except that the Lender may agree with the Participant that it
will not, without the consent of the Participant, agree to
(i) increase or extend the term of the Loan, (ii) extend the date
fixed for the payment of principal of or interest on the related
Advance or Advances or any portion of any fee hereunder payable
to the Participant, (iii) reduce the amount of any such payment
of principal or (iv) reduce the rate at which interest is payable
thereon, or any fee hereunder payable to the Participant, to a
level below the rate at which the Participant is entitled to
receive such interest or fee.
(d) The Lender may furnish any information
concerning the Borrower or any of its Subsidiaries in the
possession of the Lender from time to time to assignees and
participants (including prospective assignees and participants).
10.07 Survival. The obligations of the Borrower
under Section 10.03 hereof shall survive the repayment of the
Advances and the termination of this Agreement. In addition,
each representation and warranty made, or deemed to be made by a
notice of any Advance, herein or pursuant hereto shall survive
the making of such representation and warranty, and the Lender
shall not be deemed to have waived, by reason of making any
Advance, any Default that may arise by reason of such
representation or warranty proving to have been false or
misleading, notwithstanding that the Lender may have had notice
or knowledge or reason to believe that such representation or
warranty was false or misleading at the time such Advance was
made.
<PAGE>
-52-
10.08 Captions. The table of contents and captions
and section headings appearing herein are included solely for
convenience of reference and are not intended to affect the
interpretation of any provision of this Agreement.
10.09 Counterparts. This Agreement may be executed
in any number of counterparts, all of which taken together shall
constitute one and the same instrument and any of the parties
hereto may execute this Agreement by signing any such
counterpart.
10.10 Governing Law; Submission to Jurisdiction.
This Agreement and the Note shall be governed by, and construed
in accordance with, the law of the State of New York, without
giving effect to the conflict of law principles thereof. The
Borrower hereby submits to the nonexclusive jurisdiction of the
United States District Court for the Southern District of New
York and of the Supreme Court of the State of New York sitting in
New York County (including its Appellate Division), and of any
other appellate court in the State of New York, for the purposes
of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby. The Borrower
hereby irrevocably waives, to the fullest extent permitted by
applicable law, any objection that it may now or hereafter have
to the laying of the venue of any such proceeding brought in such
a court and any claim that any such proceeding brought in such a
court has been brought in an inconvenient forum.
10.11 Waiver of Jury Trial. EACH OF THE BORROWER
AND THE LENDER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY
IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT, THE NOTE OR THE TRANSACTIONS CONTEMPLATED HEREBY.
10.12 Treatment of Certain Information. The
Borrower acknowledges that from time to time financial advisory,
investment banking and other services may be offered or provided
to the Borrower or one or more of its Subsidiaries (in connection
with this Agreement or otherwise) by the Lender or by one or more
subsidiaries or affiliates of the Lender and the Borrower hereby
authorizes the Lender to share any information delivered to the
Lender by the Borrower and its Subsidiaries pursuant to this
Agreement, or in connection with the decision of the Lender to
enter into this Agreement, to any such subsidiary or affiliate,
but only in connection with the delivery of such services
directly to the Borrower or its Subsidiaries. Such authorization
shall survive the repayment of the Advances and the termination
of the Loan.
<PAGE>
-53-
10.13 Brokers and Financial Advisors. The Borrower
and the 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 "Finder"). Borrower agrees to pay all
amounts required to be paid to the Finder pursuant to that
certain letter agreement dated August 23, 1995, between Borrower
and the Finder. 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 Finder)
that such Person acted on behalf of the indemnifying party in
connection with the transactions contemplated herein. The
provisions of this Section 10.13 shall survive the expiration and
termination of this Agreement and the repayment of the Loan.
10.14 Lender's Discretion. Whenever pursuant to
this Agreement, the Lender exercises any right given to it to
approve or disapprove, or any arrangement or term is to be
satisfactory to the Lender, the decision of the 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 the
Lender and shall be final and conclusive.
10.15 Severability. Wherever possible, each
provision of this Agreement shall be interpreted in such manner
as to be effective and valid under applicable law, but if any
provision of this Agreement shall be prohibited by or invalid
under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating
the remainder of such provision or the remaining provisions of
this Agreement.
10.16 Preferences. To the extent the Borrower makes
a payment or payments to the Lender for the 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 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 the Lender.
<PAGE>
-54-
10.17 Waiver of Notice. The Borrower shall not be
entitled to any notices of any nature whatsoever from the 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 the Lender to the Borrower and except with
respect to matters for which the Borrower is not, pursuant to
applicable Legal Requirements, permitted to waive the giving of
notice. Borrower 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.
10.18 Remedies of Borrower. In the event that a
claim or adjudication is made that Lender or its agents has acted
unreasonably or unreasonably delayed acting in any case where by
law or under this Agreement or the other Loan Documents the
Lender or such agent, as the case may be, has an obligation to
act reasonably or promptly, the Borrower agrees that neither the
Lender nor its agents, Servicer, shall be liable for any monetary
damages, and the 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 the Lender has acted reasonably shall be
determined by an action seeking declaratory judgment.
10.19 Waiver of Marshalling of Assets Defense. To
the fullest extent the Borrower may legally do so, the Borrower
waives all rights to a marshalling of the assets of the Borrower
and Persons with interests in Borrower, 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 the Lender under the Loan Documents
to a sale of the assets of the Borrower for the collection of the
Loan without any prior or different resort for collection, or the
right of Lender to the payment of the Loan out of the Proceeds in
preference to every other claimant whatsoever.
10.20 Waiver of Counterclaim. The Borrower hereby
waives the right to assert a counterclaim, other than compulsory
counterclaim, in any action or proceeding brought against it by
the Lender or its agents.
10.21 FINAL AGREEMENT. THIS AGREEMENT, TOGETHER
WITH ALL OTHER WRITTEN AGREEMENTS BETWEEN BORROWER AND LENDER, IS
THE FINAL EXPRESSION OF THE CREDIT AGREEMENT BETWEEN THE BORROWER
<PAGE>
-55-
AND THE 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 THE BORROWER AND
THE LENDER.
10.22 Tax Treatment. It is the intention of the
parties that the Advances constitute indebtedness of the Borrower
for purposes of applicable federal, state and local tax laws and
that the sole relationship resulting from the execution and
delivery of this Agreement and the consummation of the
transactions contemplated hereby be, for purposes of all such
laws, solely that of debtor and creditor.
<PAGE>
-56-
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed and delivered as of the day
and year first above written.
BORROWER:
FORUM GROUP, INC.
By /s/ Kurt C. Read
_________________________
Title: Vice President
Address for Notices:
11320 Random Hills Road
Suite 400
Fairfax, Virginia 22030
Attention: Dennis L. Lehman
Telecopier No.: 703-277-7080
Telephone No.: 703-277-7036
LENDER:
NOMURA ASSET CAPITAL CORPORATION
By /s/ Ray Anthony
_________________________
Title: Vice President
Address for Notices:
2 World Financial Center
Building B
New York, New York 10281-1198
Attention: Ray Anthony
Telecopier No.: 212-667-1014
Telephone No.: 212-667-1850
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