SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL PERIOD ENDED June 30, 1997
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________________ to __________________
Commission File Number: 33-44980
THE CHESTNUT REAL ESTATE PARTNERSHIP THE CHESTNUT PARTNERSHIP
(Exact names of registrants as specified in their charters)
MARYLAND
(State or other jurisdiction of incorporation or organization)
52-1640655 42-1352739
(IRS Employer Identification No.) (IRS Employer Identification No.)
2330 West Joppa Road Lutherville, Maryland 21093
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (515) 245-7616
Former name, former address and former fiscal year, if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
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 _____
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding
of each of the issuer's classes of common stock, as of the latest practicable
date __N/A__
<PAGE>
THE CHESTNUT PARTNERSHIP
AND
THE CHESTNUT REAL ESTATE PARTNERSHIP
INDEX
Page
Part I FINANCIAL INFORMATION
Item 1 Financial Statements
The Chestnut Real Estate Partnership
and The Chestnut Partnership
o Separate and Combined Balance Sheets,
June 30, 1997 and December 31, 1996 3
o Separate and Combined Statement of
Operations, for the six months ended
June 30, 1997 and June 30, 1996 5
o Separate and Combined Statements of Partner's
Equity (Deficit) for the six months ended
June 30, 1997 and June 30, 1996 7
o Separate and Combined Statement of Cash Flow,
for the six months ended June 30, 1997
and June 30, 1996 8
o Notes to Financial Statements 10
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
PART II OTHER INFORMATION
Item 1 Legal Proceedings 15
Item 6 Exhibits and Reports on Form 8-K 15
SIGNATURES 124
<PAGE>
<TABLE>
<CAPTION>
THE CHESTNUT REAL ESTATE PARTNERSHIP ------------- JUNE 30, 1997 --------------
AND THE CHESTNUT PARTNERSHIP The
SEPARATE AND COMBINED BALANCE SHEETS The Chestnut
Chestnut Real Estate Combined
(UNAUDITED) Partnership Partnership Partnerships
------------ ------------ ------------
ASSETS
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 1,908,751 $ -- $ 1,908,751
Accounts receivable 212,365 -- 212,365
Prepaid expenses and other 270,142 -- 270,142
Assets whose use is limited or restricted:
Under bond indenture agreements, held in escrow
by trustee 439,320 -- 439,320
Under letter of credit agreement, held in escrow 57,874 -- 57,874
------------ ------------ ------------
Total current assets 2,888,452 -- 2,888,452
Assets whose use is limited or restricted:
Under bond indenture agreements, held in escrow
by trustee 1,633,116 -- 1,633,116
Under residency agreements, held in escrow 1,633,310 -- 1,633,310
Health Center reserves 1,321,650 -- 1,321,650
Phase III and IV construction funds 1,213,046 -- 1,213,046
Operating property, at cost, net of depreciation 219,937 53,438,697 53,658,634
Costs of acquiring intitial contracts, net of amortization 1,621,271 -- 1,621,271
Deferred bond financing costs, net of amortization 885,497 -- 885,497
------------ ------------ ------------
Total assets $ 11,416,279 $ 53,438,697 $ 64,854,976
============ ============ ============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Current liabilities:
Bonds payable, current portion $ 150,000 $ -- $ 150,000
Accounts payable 153,580 -- 153,580
Accrued expenses 265,815 -- 265,815
Accrued property taxes 287,162 -- 287,162
Accrued interest payable 135,475 -- 135,475
Advances payable 179,464 -- 179,464
Refundable deposits, residency agreements 934,570 -- 934,570
------------ ------------ ------------
Total current liabilities 2,106,067 -- 2,106,067
Construction costs payable 1,368,892 -- 1,368,892
Bonds payable, less current portion 13,505,000 -- 13,505,000
Loans from residents 41,588,250 -- 41,588,250
Advances payable to partners 7,800,000 -- 7,800,000
Refundable deposits, escrowed 739,250 -- 739,250
Deferred revenues from admission fees 2,051,096 -- 2,051,096
Equity in deficit of the Chestnut Partnership -- 57,742,276 --
Commitments and Contingencies
------------ ------------ ------------
Total liabilities 69,158,555 57,742,276 69,158,555
Partners' equity (deficit) (57,742,276) (4,303,579) (4,303,579)
------------ ------------ ------------
Total liabilities and partners' equity (deficit) $ 11,416,279 $ 53,438,697 $ 64,854,976
============ ============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE CHESTNUT REAL ESTATE PARTNERSHIP ----------- December 31, 1996 ------------
AND THE CHESTNUT PARTNERSHIP The
SEPARATE AND COMBINED BALANCE SHEETS The Chestnut
Chestnut Real Estate Combined
Partnership Partnership Partnerships
------------ ------------ ------------
ASSETS
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 1,394,227 $ -- $ 1,394,227
Accounts receivable 197,444 -- 197,444
Prepaid expenses and other 274,133 -- 274,133
Assets whose use is limited or restricted:
Under bond indenture agreements, held in escrow
by trustee 393,293 -- 393,293
Under letter of credit agreement, held in escrow 57,874 -- 57,874
------------ ------------ ------------
Total current assets 2,316,971 -- 2,316,971
Assets whose use is limited or restricted:
Under bond indenture agreements, held in escrow
by trustee 1,591,297 -- 1,591,297
Under residency agreements, held in escrow 1,280,777 -- 1,280,777
Health Center reserves 751,627 -- 751,627
Phase III and IV constuction funds 555,721 -- 555,721
Operating property, at cost, net of depreciation 305,421 48,615,205 48,920,626
Costs of acquiring intitial contracts, net of amortization 1,701,335 -- 1,701,335
Deferred bond financing costs, net of amortization 911,537 -- 911,537
------------ ------------ ------------
Total assets $ 9,414,686 $ 48,615,205 $ 58,029,891
============ ============ ============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Current liabilities:
Bonds payable, current portion $ 150,000 $ -- $ 150,000
Accounts payable 149,151 -- 149,151
Accrued expenses 213,581 -- 213,581
Accrued property taxes 142,485 -- 142,485
Accrued interest payable 235,595 -- 235,595
Advances payable 0 -- 0
Refundable deposits, residency agreements 743,167 -- 743,167
------------ ------------ ------------
Total current liabilities 1,633,979 1,633,979
Construction costs payable 1,703,277 -- 1,703,277
Bonds payable, less current portion 13,655,000 -- 13,655,000
Loans from residents 39,059,790 -- 39,059,790
Advances payable to partners 1,600,000 -- 1,600,000
Refundable deposits, escrowed 892,550 -- 892,550
Deferred revenues from admission fees 2,052,312 -- 2,052,312
Equity in deficit of the Chestnut Partnership -- 51,182,222 --
Commitments and Contingencies
------------ ------------ ------------
Total liabilities 60,596,908 51,182,222 60,596,908
Partners' equity (deficit) (51,182,222) (2,567,017) (2,567,017)
------------ ------------ ------------
Total liabilities and partners' equity (deficit) $ 9,414,686 $ 48,615,205 $ 58,029,891
============ ============ ============
</TABLE>
<PAGE>
THE CHESTNUT REAL ESTATE PARTNERSHIP
AND THE CHESTNUT PARTNERSHIP
SEPARATE AND COMBINED STATEMENT OF OPERATIONS
For the six month period ended June 30, 1997
<TABLE>
<CAPTION>
(UNAUDITED) The
The Chestnut
Chestnut Real Estate Combined
Partnership Partnership Partnerships
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Amortization of nonrefundable admission fees $ 374,983 $ -- $ 374,983
Apartment service fees 2,495,779 -- 2,495,779
Health Center revenues 932,850 -- 932,850
Capital reserve fees 33,070 -- 33,070
Other revenue 83,383 -- 83,383
Income from The Chestnut Partnership -- 477,972 --
----------- ----------- -----------
Total revenues 3,920,066 477,972 3,920,066
----------- ----------- -----------
Operating expenses:
Development fee amortization 85,484 -- 85,484
General and administrative 825,253 -- 825,253
Resident care 757,362 -- 757,362
Dietary 637,944 -- 637,944
Plant 409,441 -- 409,441
Housekeeping 167,478 -- 167,478
Depreciation and amortization 106,576 614,534 721,110
----------- ----------- -----------
2,989,537 614,534 3,604,071
----------- ----------- -----------
Income (loss) from operations 930,529 (136,562) 315,995
----------- ----------- -----------
Other income (expense)
Interest income 202,460 -- 202,460
Interest expense (655,016) -- (655,016)
----------- ----------- -----------
(452,556) -- (452,556)
----------- ----------- -----------
Net income (loss) $ 477,972 $ (136,562) $ (136,562)
=========== =========== ===========
</TABLE>
<PAGE>
THE CHESTNUT REAL ESTATE PARTNERSHIP
AND THE CHESTNUT PARTNERSHIP
SEPARATE AND COMBINED STATEMENT OF OPERATIONS
For the six month period ended June 30, 1996
<TABLE>
<CAPTION>
(UNAUDITED) The
The Chestnut
Chestnut Real Estate Combined
Partnership Partnership Partnerships
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Amortization of nonrefundable admission fees $ 486,825 $ -- $ 486,825
Apartment service fees 2,276,259 -- 2,276,259
Health Center revenues 925,316 -- 925,316
Capital reserve fees 31,713 -- 31,713
Other revenue 8,284 -- 8,284
Income from The Chestnut Partnership -- 107,849 --
----------- ----------- -----------
Total revenues 3,728,397 107,849 3,728,397
----------- ----------- -----------
Expenses:
Development fee amortization 132,061 -- 132,061
General and administrative 959,391 -- 959,391
Resident care 680,802 -- 680,802
Dietary 616,029 -- 616,029
Plant 407,889 -- 407,889
Housekeeping 159,656 -- 159,656
Depreciation and amortization 106,576 593,695 700,271
----------- ----------- -----------
$ 3,062,404 $ 593,695 $ 3,656,099
----------- ----------- -----------
Income (loss) from operations 665,993 (485,846) 72,298
----------- ----------- -----------
Other income (expense)
Interest income 100,680 -- 100,680
Interest expense (658,823) -- (658,823)
----------- ----------- -----------
(558,143) 0 (558,143)
----------- ----------- -----------
Net income (loss) 107,850 (485,846) (485,845)
=========== =========== ===========
</TABLE>
<PAGE>
THE CHESTNUT REAL ESTATE PARTNERSHIP
AND THE CHESTNUT PARTNERSHIP
SEPARATE AND COMBINED STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
For the six month period ended June 30, 1997 and the year ended
December 31, 1996
<TABLE>
<CAPTION>
(UNAUDITED) The
The Chestnut
Chestnut Real Estate Combined
Partnership Partnership Partnerships
------------ ------------ ------------
<S> <C> <C> <C>
Balance, December 31, 1995 $(47,407,626) $ (230,988) $ (230,988)
Net income (loss) 483,601 (736,029) (736,029)
Transfer ownership of land preacquisition and
project development assets to The Chestnut
Real Estate Partnership (2,658,197) -- --
Distribution to partners (1,600,000) (1,600,000) (1,600,000)
------------ ------------ ------------
Balance, December 31, 1996 $(51,182,222) $ (2,567,017) $ (2,567,017)
============ ============ ============
Balance, December 31, 1996 $(51,182,222) (2,567,017) $ (2,567,017)
Net income (loss) 477,972 (136,562) (136,562)
Transfer ownership of land preacquisition and
project development assets to The Chestnut
Real Estate Partnership (5,438,026) -- --
Contributions from partners -- -- --
Distributions to partners (1,600,000) (1,600,000) (1,600,000)
------------ ------------ ------------
Balance, June 30, 1997 $(57,742,276) $ (4,303,579) $ (4,303,579)
============ ============ ============
</TABLE>
<PAGE>
THE CHESTNUT REAL ESTATE PARTNERSHIP
AND THE CHESTNUT PARTNERSHIP
SEPARATE AND COMBINED STATEMENT OF CASH FLOWS
For the six month period ended June 30, 1997
<TABLE>
<CAPTION>
(UNAUDITED) The
The Chestnut
Chestnut Real Estate Combined
Partnership Partnership Partnerships
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 477,972 $ (136,562) $ (136,562)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation -- 614,534 614,534
Other amortization 106,576 -- 106,576
Amortization of nonrefundable admission fees (374,983) -- (374,983)
Amortization of development fees 85,484 -- 85,484
Admission fees received 373,600 -- 373,600
Income in Partnership -- (477,972) --
Change in operating assets and liabilities:
Accounts receivable (14,921) -- (14,921)
Prepaid expenses and other 3,991 -- 3,991
Accounts payable 3,958 -- 3,958
Accrued expenses 96,791 -- 96,791
----------- ----------- -----------
Net cash provided by operating activities 758,468 -- 758,468
----------- ----------- -----------
Cash flows from investing activities:
Increase in funds escrowed under residency agreements (352,533) -- (352,533)
Additions to operating property (5,438,026) -- (5,438,026)
Decrease in construction payable (334,385) -- (334,385)
Increase in Phase III and IV construction funds from partner advances (657,325) -- (657,325)
Increase in assets held by trustee (87,847) -- (87,847)
Decrease in funds escrowed under letter of credit agreement 0 -- 0
Increase in Health Center reserves (570,023) -- (570,023)
----------- ----------- -----------
Net cash used in investing activities (7,440,138) -- (7,440,138)
----------- ----------- -----------
Cash flows from financing activities:
Repayment of partner advances -- -- --
Contributions from partners -- -- --
Distributions to partners (1,600,000) -- (1,600,000)
Proceeds from partner advances 6,200,000 -- 6,200,000
Increase in advances payable 179,464 -- 179,464
Principal payments on bonds (150,000) -- (150,000)
Proceeds from loans from residents, deferred revenues
and refundable deposits, net 2,566,730 -- 2,566,730
----------- ----------- -----------
Net cash provided by financing activities 7,196,194 -- 7,196,194
----------- ----------- -----------
Net increase in cash 514,524 -- 514,524
Cash, beginning of period 1,394,227 -- 1,394,227
----------- ----------- -----------
Cash, end of period $ 1,908,751 $ -- $ 1,908,751
=========== =========== ===========
</TABLE>
<PAGE>
THE CHESTNUT REAL ESTATE PARTNERSHIP
AND THE CHESTNUT PARTNERSHIP
SEPARATE AND COMBINED STATEMENT OF CASH FLOWS
For the six month period ended June 30, 1996
<TABLE>
<CAPTION>
(UNAUDITED) The
The Chestnut
Chestnut Real Estate Combined
Partnership Partnership Partnerships
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 107,849 $ (485,845) $ (485,845)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation -- 593,695 593,695
Other amortization 106,576 -- 106,576
Amortization of nonrefundable admission fees (486,825) -- (486,825)
Amortization of development fees 132,061 -- 132,061
Admission fees received 248,465 -- 248,465
Income in Partnership -- (107,849) --
Change in operating assets and liabilities:
Accounts receivable 72,702 -- 72,702
Prepaid expenses and other 62,041 62,041
Accounts payable 68,941 -- 68,941
Accrued expenses 187,577 -- 187,577
----------- ----------- -----------
Net cash provided by operating activities 499,387 -- 499,387
----------- ----------- -----------
Cash flows from investing activities:
Increase in funds escrowed under residency agreements (1,969,248) -- (1,969,248)
Additions to project operating property (160,335) -- (160,335)
Increase in construction payable -- -- --
Increase in assets held by trustee (128,385) -- (128,385)
Increase in assets payable to trustee (516,541) -- (516,541)
Decrease in funds escrowed under letter of credit agreement 51,824 -- 51,824
Decrease in Health Center reserves -- -- --
----------- ----------- -----------
Net cash used in investing activities (2,722,685) -- (2,722,685)
----------- ----------- -----------
Cash flows from financing activities:
Repayment of partner advances -- -- --
Contributions from Partners -- -- --
Distribution to partners -- -- --
Increase in advances payable 70,994 -- 70,994
Principal payments on bonds (65,000) -- (65,000)
Decrease in Health Center reserves 178,470 -- 178,470
Proceeds from loans from residents, deferred revenues
and refundable deposits 1,796,520 -- 1,796,520
----------- ----------- -----------
Net cash provided by financing activities 1,980,984 -- 1,980,984
----------- ----------- -----------
Net decrease in cash (242,315) -- (242,315)
Cash, beginning of period 601,767 -- 601,767
----------- ----------- -----------
Cash, end of period $ 359,452 $ -- $ 359,452
=========== =========== ===========
</TABLE>
<PAGE>
THE CHESTNUT REAL ESTATE PARTNERSHIP
AND THE CHESTNUT PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
A. Basis for Presentation
The accompanying unaudited financial statements of The Chestnut Real
Estate Partnership (the Real Estate Partnership) and its subsidiary The
Chestnut Partnership (the Partnership), in the opinion of management,
reflect all adjustments (none of which were other than normal recurring
items), eliminations, and reclassification considered necessary for a
fair statement of the results of the interim periods presented. For
purposes of preparing the combined financial statements, all material
transactions between the Partnerships have been eliminated but not
displayed, including the elimination of the Real Estate partnership's
obligation to the Partnership.
Both the Real Estate Partnership and the Partnership are general
partnerships, and are sometimes referred to as "the Partnerships."
The Real Estate Partnership is owned 50% by Blakehurst Joint Venture
(Venture) and 50% by West Joppa Road Limited Partnership (West Joppa).
The Partnership is owned 1% by Venture, 1% by West Joppa, and 98% by
the Real Estate Partnership.
The Real Estate Partnership and the Partnership were formed to develop,
own, and operate a life care retirement community called Blakehurst
(Project) in the Towson area of Baltimore County, Maryland.
The Real Estate Partnership was organized by the Partnership solely for
the purpose of owning the property and buildings and other improvements
thereon that constitute the Project in order to minimize certain
mortgage recordation taxes, and to act as a general partner of the
Partnership. The publicly-held debt (both Series I and II) is a direct
obligation of the Partnership, and is guaranteed by the Real Estate
Partnership. The guaranty, however, is not intended to provide any
additional security for payment of the principal and interest on the
bonds than if the Partnership directly held the property and related
improvements itself. The partners of the Real Estate Partnership own no
other assets other than their interests in the Partnership. Therefore,
management believes the combining financial statements of the
Partnership and the Real Estate Partnership are the most informative,
because of the guaranty and because of the Operating and Use Agreement,
which obligates the Partnership to develop, operate and manage the
Project at its expense and which grants the Partnership use of the
property until dissolution, liquidation or other termination by mutual
agreement. The Partnerships have common, ultimate ownership and do not
have independent operating activities. Management believes this
presentation best portrays the relationship between the two entities.
B. Certain Accounting Policies
Cash
The Partnerships consider investments with maturities of three months
or less when purchased, to be cash equivalents.
Assets Where Use is Limited
Assets held by the Trustee under the escrow agreement are cash
equivalents as of June 30, 1997. Phase III and IV construction funds
advanced by the partners are also cash equivalents as of June 30, 1997.
<PAGE>
Deferred Revenues from Admission Fees
Admission fees are not advance fees in payment for future services of
for use of facility, because of the manner in which all operating
expenditures are allocated to the current residents. The non-refundable
admission fee is a payment in compensation to the Partnership for the
development risk and is non-refundable except in isolated cases where
the Partnership would cancel the Residency Agreement. In such cases,
the resident could be due a portion of the Administration Fee if
cancellation occurred within the first two years of the contract. The
refund is based on the remaining life of the resident, actuarially
determined. Accordingly, the Admission Fee and Resident Loan (together
the Entrance Payment) is amortized using the Life Table of the U.S.
Department of Health and Human Services, which in practice results in
amortization of the Admission Fee portion of the Entrance Payment on a
straight line over approximately two years. To date, the Partnership
has never cancelled a Residency Agreement and accordingly has never had
to refund any portion of the non-refundable admission fee after
occupancy. Nonetheless, the unamortized admission fees are reported as
deferred revenue.
Capitalization of Operating Expenses and Certain Revenues
Initial occupancy of the Project occurred in August of 1993, with
cessation of major construction of phase I occurring in December 1993,
at which time occupancy was 60%. Construction continued for tenant
requested improvements and an auditorium addition.
The Partnership ceased capitalization of operating expenses and certain
revenues in August 1994, because of the extended time frame between
initial occupancy, completion of major construction, and achievement of
substantial occupancy.
Costs of Acquiring Initial Contracts
Costs of acquiring initial contracts are expected to be recovered from
the future contract revenues and are therefore capitalized. These costs
capitalized are amortized over the life expectancy of the initial
residents, which based on actuarial data, is estimated to be
approximately 13 years.
Development Fee
The development fee incurred in connection with the development of the
Project is amortized on a pro rata basis as admission fee revenue is
recognized. Admission fees are being recognized over a 24 month period
from the date of move-in for those being received from Return of
Capital Contracts. Admission Fees from Traditional contracts are
amortized over the expected life of the resident.
C. Results of Operations
Admission fees are amortized over a twenty-four month period.
At the time of initial occupancy, residents are required to make a
non-refundable payment to a capital replacement reserve. This payment
is reported as income when received by the Partnerships.
The development fee incurred in connection with the development of the
Project is amortized on a pro-rata basis and admission fee revenue is
recognized.
D. Financing
In May, 1992, the Partnership completed the issuance of $14,000,000 of
Ten Year - Put Option Mortgage Bonds, 1992 Series I. The bonds carry an
initial rate of 9.5%.
In August, 1992, the Venture and West Joppa, each of which had
purchased $3,000,000 of Series I Bonds, sold their bonds back to the
Partnership in conjunction with the Partnership sales of $6,000,000 of
Ten Year - Put Option Mortgage Bonds, 1992 Series II. These bonds carry
an initial rate of 8.75%.
<PAGE>
In addition, $20,000,000 was provided by Venture and West Joppa. As of
December 31, 1995, all such advances from Partners had been repaid,
together with interest thereon.
For the construction of Phase II, an auditorium and miscellaneous
additional improvements, the partners funded the cost of approximately
$800,000.
For construction of Phase III, a 35 unit addition, the partners have
advanced $7,600,000 and the Partnerships have arranged to borrow an
additional $1,900,000, for a total of $9,500,000 of available funds.
The partners have also advanced $200,000 for initial design of Phase
IV.
E. Operating Property
Operating property includes construction costs in progress. As of June
30, 1997, $8,023,966 of costs had been incurred for Phase III
construction in progress and are included in operating property. As of
December 31, 1996, $2,665,333 had been incurred for construction of
Phase III. Also, at June 30, 1997, $53,764 had been incurred for
designs of Phase IV; no such costs had been incurred at December 31,
1996.
F. Transactions with partners
The Partnerships have agreements with Life Care Services Development
Corporation (LCSD) and Life Care Services Corporation (LCS), affiliates
through common ownership of Chestnut Village, Inc., a general partner
of Venture for development and for management of the community
respectively. LCSD administers planning, development, financing, and
marketing functions for the partnerships. LCS has been retained to
supervise the day-to-day operations of the community.
The partnerships has entered into a construction management agreement
with Mullan Contracting Company (Mullan), an affiliate through common
ownership of one partner of West Joppa for Phase III.
During the six months ended June 30, 1997, LCS was reimbursed $172,852
for its services and $161,112 for the six months ended June 30, 1996.
In addition, LCS was reimbursed in the six months ended June 30, 1997,
$410,865 for marketing of Phase III units.
In the six months ended June 30, 1997, LCSD was reimbursed $341,955 for
development fees and had no such reimbursement in the six months ended
June 30, 1996.
In the six months ended June 30, 1997, Mullan was paid $43,220 of
construction management fees, and reimbursed $3,981,222 for
construction costs; there was no such reimbursement in the six months
ended June 30, 1996.
G. Income Taxes
Income and losses of the Partnerships are included in the income tax
returns of the partners. Accordingly, the financial statements make no
provision for income taxes.
H. Contingencies
The realization of the costs of the Project in initially contingent
upon the sale of the remaining units, and resale of units vacated due
to death or transfer to the health center.
Subsequent to initial occupancy, maintenance of and efficient operation
of the Project are also critical to the long term success of the
Project.
<PAGE>
THE CHESTNUT PARTNERSHIP
AND
THE CHESTNUT REAL ESTATE PARTNERSHIP
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation.
Overall Financial Condition
The Project contains a total of 177 residential units, and a 50-bed health
center. As of June 30, 1997, 173 (97.7%) of the residential units have been
reserved or occupied. The apartment occupancy remained the same in the quarter,
during which there were 3 apartment units sold and one sale cancelled. As of
June 30, 1996, 95% of the residential units were sold or occupied.
As of June 30, 1997, the project had 117 full-time equivalent employees, none of
whom were members of a collective bargaining agreement.
The Partnership is accepting deposits on Phase III units. As of June 30, 1997,
32 of 35 units (91.4%) have been reserved by receipt by the Partnerships of
deposits equal to 10% of the Admission Fee. Construction is expected to be
completed such that occupancy will begin in late July 1997.
Results of Operations
As of June 30, 1997, 161 units (91%) were occupied and/or paying monthly service
fees. This occupancy compares to 158 (89%) of the units at June 30, 1996, and
163 units (92%) at December 31, 1996.
Amortization of non-refundable admission fees decreased because fewer residents
moved in during the six months ended June 30, 1996 than moved in during the six
months ended June 30, 1995.
On January 1, 1997, an average 4.8% increase in the monthly service fees became
effective. That increase together with an increase in average occupancy from
June 30, 1996 (87.9%) to the six months ended June 30, 1997 (90.4%), accounted
for the increase in apartment service fees.
Health center average occupancy in the first six months of 1996 was 92% compared
to an average occupancy of 91% in 1997. That decline, combined with an increase
in Medicare reimbursable rates, provided a modest increase in health center
revenues.
Capital reserve fees, which are a one-time payment from new residents related to
monthly service fees increased slightly because the apartment service fees
increased over the six months ended June 30, 1996.
Operating expenses were down about 1.5%, even though the average number of
full-time employees was 117 in the six months ended June 30, 1997, compared to
107 average full-time equivalent employees in 1996. Marketing expenditures have
declined in the current period as Phase I units are essentially completely sold.
The net loss decreased to approximately $137,000 at June 30, 1997, compared to a
net loss of approximately $486,000 at June 30, 1996.
Liquidity and Capital Resources
As of May 28, 1992, significant financing activities were concluded.
Construction financing and long-term financing both were achieved on that date.
Construction financing in the amount of $20,000,000 from a group of lenders was
achieved and the Partnership raised $14,000,000 (before deduction of costs of
underwriting) through long-term financing.
The Partnerships issued two types of taxable bonds in May, 1992. One type was
issued in underwritten public offering of $8,000,000 principal amount of
Blakehurst 10 Year Put Option Mortgage Bond 1992, Series I. Also in May the
<PAGE>
Partnership issued a private transaction to affiliates of the partnership, a
total of $6,000,000 principal amount of Blakehurst Retirement Community Put
Option Bonds, Private Placement Series on terms substantially identical to the
public offering except that the Private Placement Bonds provided for redemption
of such bonds from the proceeds of the sale of 1992 Series II Bonds. The
Partnership sold the 1992 Series II Bonds in the amount of $6,000,000 in August,
1992.
In 1993, the construction financing loan of $20,000,000 has been repaid, and in
1995 all of the Partners' advances (which initially totaled $20,000,000) were
repaid.
During the first quarter of 1996, an auditorium and miscellaneous additional
improvements, totaling approximately $800,000, which was funded by the Partners,
was essentially completed.
In 1996 the Partners advanced $6,200,000 for the construction of Phase III and
the design of Phase IV. In addition, $1,900,000 of long-term financing in
conjunction with Phase III was arranged.
During the six months ended June 30, 1997, the partnership distributed
$1,600,000 of Phase I proceeds from closings, after providing necessary working
capital funding as required in under the bond documents.
The net loss in being funded by the Partners from admission fees.
Net cash provided by operating activities increased by approximately $259,000 in
the six months ended June 30, 1997, compared to the six months ended June 30,
1996. The net income before depreciation/amortization provided cash of
approximately $585,000 in the six months ended June 30, 1997 compared to
approximately $215,000 in the six months ended June 30, 1996.
Net cash used by investing activities was approximately $4,700,000 more in the
six months ended June 30, 1997 compared to the six months ended June 30, 1996.
This change was due to the construction in progress for Phase III and the
Partners advances to fund Phase III construction.
Net cash provided by financing activities was approximately $5,200,000 better in
the six months ended June 30, 1997 compared to the six months ended June 30,
1996. Cash from Resident loans was $700,000 more in 1997 than in 1996 because of
more new residents. The partnerships distributed $1,600,000 from Phase I
closings and received $6,200,000 of advances from the Partners for construction
activities, in the six months ended June 30, 1997.
Because of the level of occupancy in Phase I and sales of Phase III, the
resident financing, and the long-term financing described above, the Partnership
believes adequate capital resources are available to successfully complete
occupancy of Phase III.
The long-term success of the Project is ultimately dependent upon maintaining
adequate levels of occupancy and operating of the Project efficiently.
<PAGE>
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
See attached Index to Exhibits - Page 16
B. Reports on Form 8-K
None
<PAGE>
INDEX TO EXHIBITS
Exhibit Page
No. Description of Exhibit No.
3.1 First Amended and Restated Agreement
of Partnership of The Chestnut Partnership
dated as of April 25, 1990; Assignment, Acceptance
and Consent dated April 25, 1990; Assignment,
Acceptance and Consent dated December 16, 1992. (1)
3.2 Agreement of Partnership of The Chestnut Real Estate
Partnership dated as of April 25, 1990; Assignment,
Acceptance and Consent dated April 25, 1990;
Assignment, Acceptance and Consent dated
December 16, 1991. (1)
4.1 Trust Indenture, dated as of May 1, 1992, Between
The Chestnut Partnership and Boatmen's National Bank
of Des Moines, as Trustee. (1)
4.1.1 First Supplemental Trust Indenture Dated as of
August 1, 1992, between The Boatmen's National
Bank of Des Moines, as Trustee. (1)
4.2 Guaranty Agreement dated as of May 1, 1992,
between The Chestnut Real Estate Partnership and
Boatmen's National Bank of Des Moines,. (1)
4.3 Owner's Guaranty of Payment and Performance dated
as of May 28, 1992, made by The Chestnut Real
Estate Partnership to The Sumitomo Trust & Banking
Co., Ltd., New York Branch. (1)
4.4 Indemnity Deed of Trust and Security Agreement
dated as of May 28, 1992, among The Chestnut Real
Estate Partnership; Boatmen's National Bank of
Des Moines, Des Moines, Iowa, as Trustee; and The
Sumitomo Trust & Banking Co., Ltd., New York
Branch. (1)
4.5 Form of Subordination Agreement between Life
Care Services Corporation, Continuing Care
Communities of America, Inc., West Joppa Road
Limited Partnership, and Boatmen's National Bank
of Des Moines, Des Moines, Iowa, as Trustee. (1)
4.6 Inter-creditor Agreement dated as of May 28, 1992,
between Boatmen's National Bank of Des Moines,
Des Moines, Iowa, as Trustee, and The Sumitomo
Trust & Banking Co., Ltd., New York Branch. (1)
<PAGE>
Exhibit Page
No. Description of Exhibit No.
10.1 Contract of Purchase and Sales dated as of June 8,
1988, between The Chestnut Partnership and The
Mission Helpers of the Sacred Heart, as amended. (1)
10.1.1 Letter Agreement dated March 23, 1992, from the
Chestnut Real Estate Partnership to the Mission
Helpers of Baltimore City. (1)
10.1.2 License Agreement dated April 23, 1992, between
The Chestnut Real Estate Partnership, and Herbert
R. O'Conor, III and Kathalee M. O'Conor. (1)
10.2 Escrow Agreement dated June 8, 1988, among The
Chestnut Partnership, The Mission Helpers of the
Sacred Heart and O'Connor Piper & Flynn. (1)
10.3 License Agreement dated June 20, 1991, between
Institute of Mission Helpers of Baltimore City and
The Chestnut Real Estate Partnership. (1)
10.4 Restrictive Covenant Agreement dated October 13,
1988, among The Chestnut Partnership and The
Ruxton-Riderwood-Lake Roland Area Improvement
Association, Inc. and the Advisory Board, as amended. (1)
10.5 Consent Order dated October 25, 1988. (1)
10.6 Form of Residency Agreement, with addendum. (1)
10.6.1 Form of Domiciliary Care Residency Agreement. (1)
10.6.2 Form of Addendum to Residency Agreement
Regarding Admittance to the Health Care Center. (1)
10.6.3 Form of Residency Agreement with amendment,
September 7, 1993 (2)
10.6.35 Residency Agreement dated April 25, 1996 (3)
10.6.4 Form of Domiciliary Care Residency Agreement
with addendum, July 29, 1993 (2)
10.6.5 Residency Agreement for Traditional Plan, dated
November 1, 1993 and approved for use in late
summer, 1994 (2)
10.6.55 Residency Agreement for Traditional Plan, dated April 25,
1996 (3)
10.7 Form of Assignment of Rights to Repayments between
Resident/Assignor and Assignee. (1)
<PAGE>
Exhibit Page
No. Description of Exhibit No.
10.8 Admission Fee Escrow Agreement dated as of
January 19, 1990, by and between The Chestnut
Partnership and American Security Bank, N.A. (1)
10.8.1 Amended and Restated Admission Fee Escrow Agreement - Phase I,
dated July 18, 1996, between The Chestnut Partnership and
The First National Bank of Maryland (3)
10.8.2 Amended and Restated Wait List Escrow Agreement,
dated July 18, 1996, between The Chestnut Partnership and
The First National Bank of Maryland (3)
10.8.3 Amended and Restated Health Center Resident Loans
Escrow Agreement, dated July 18, 1996, between The
Chestnut Partnership and The First National Bank of
Maryland (3)
10.8.4 Admission Fee Escrow Agreement - Phase II (Phase III), dated
April 29, 1996, between The Chestnut Partnership and The First
National Bank of Maryland (3)
10.9 Form of Guaranty Agreement by The Chestnut Real
Estate Partnership. (1)
10.10 Form of Indemnity Deed of Trust and Security
Agreement from The Chestnut Real Estate Partnership
to ____________, as trustee. (1)
10.11 Form of Subordination Agreement from ____________, as
trustee, to Boatmen's National Bank of Des Moines,
as Trustee and The Sumitomo Trust & Banking Co.,
Ltd. - New York Branch. (1)
10.12 Health Center Resident Loans Escrow Agreement
between The Chestnut Partnership and ____________,
as Escrow Agent. (1)
10.13 Development Agreement dated as of June 3, 1988,
between The Chestnut Partnership and Life Care
Services Corporation. (1)
10.13.1 Amendment to Development Agreement dated
December 30, 1994 between The Chestnut Partnership,
Life Care Services Corporation, Rosedale Care, Inc.,
and Continental Care, Inc. (2)
10.13.2 Amendment #2 to Development Agreement dated
October 30, 1996, between The Chestnut Partnership,
Life Care Services Corporation, Rosedale Care, Inc.,
and Continental Care, Inc. (3)
<PAGE>
Exhibit Page
No. Description of Exhibit No.
10.14 Management Agreement dated as of September 28,
1990, between The Chestnut Partnership and Life
Care Services Corporation. (1)
10.15 Services Agreement dated as of June 3, 1988,
between The Chestnut Partnership and West Joppa
Road Limited Partnership. (1)
10.16 Performance Agreement dated as of May 31, 1991,
between Chestnut Village, Inc. and Life Care
Services Corporation. (1)
10.17 Operating and Use Agreement between The
Chestnut Partnership and The Chestnut Real
Estate Partnership. (1)
10.18 Architect Agreement dated December 10, 1987,
between The Chestnut Partnership and D'Aleo, Inc.,
as amended. (1)
10.19 Construction Management Agreement dated
November 22, 1991, between The Chestnut Partnership
and The Weitz Company, Inc. (1)
10.19.1 Amendment No. 1 to Construction Management
Agreement. (1)
10.19.2 Construction Management Agreement dated July 11,
1996, between The Chestnut Partnership and The Mullan
Contracting Company. (3)
10.19.3 Supplement to Construction Management Agreement,
dated October 30, 1996, between The Chestnut
Partnership and The Mullan Contracting Company. (3)
10.20 Asbestos and HazMat Abatement Engineering
Agreement dated August 11, 1988, between The
Chestnut Partnership and ATEC Associates. (1)
10.20.1 March 31, 1992, letter from Atec Associates, Inc. to
Life Care Services Corporation regarding Removal of
Underground Fuel Storage Tanks. (1)
10.21 Construction Contract dated August 6, 1991, between
The Chestnut Partnership and Marcor of Maryland, Inc. (1)
10.22 Retail Lease Agreement dated February 2, 1990,
between Cockney's Tavern Partnership and Life Care
Services Corporation, as amended. (1)
<PAGE>
Exhibit Page
No. Description of Exhibit No.
10.23 Office Building Lease dated June 22, 1989, between
Cockney's Tavern Partnership and The Chestnut
Partnership. (1)
10.25 Construction Loan Agreement dated as of May 28,
1992, between The Sumitomo Trust & Banking Co.,
Ltd., New York Branch and The Chestnut Partnership
and The Chestnut Real Estate Partnership. (1)
10.26 $20,000,000 Promissory Note dated May 28, 1992,
from The Chestnut Partnership to The Sumitomo
Trust & Banking Co., Ltd. - New York Branch. (1)
10.27 Guaranty of Payment Note dated as of May 28,
1992, from Continuing Care Communities of America,
Inc. to The Sumitomo Trust & Banking Co., Ltd.
New York Branch. (1)
10.28 Guaranty of Payment dated as of May 28, 1992,
Continuing Care Communities of America, Inc. to
The Sumitomo Trust & Banking Co., Ltd.,
New York Branch. (1)
10.29 Guaranty of Completion dated as of May 28, 1992,
from Life Care Services Corporation to The Sumitomo
Trust & Banking Co., Ltd. - New York Branch. (1)
10.30 Purchase Money Mortgage dated as of March 23, 1992,
from the Chestnut Real Estate Partnership to the
Mission Helpers of Baltimore City. (1)
10.31 Environmental Indemnification Agreement dated as
of May 28, 1992, from The Chestnut Partnership,
The Chestnut Real Estate Partnership, and The
Sumitomo Trust & Banking Co., Ltd. - New York Branch. (1)
10.32 Owner's Certification letter dated as of May 28,
1992, to Boatmen's National Bank of Des Moines,
Iowa, as Trustee, and The Sumitomo Trust &
Banking Co., Ltd., New York Branch. (1)
10.33 Letter Agreement dated as of May 28, 1992, from
The Chestnut Real Estate Partnership to Boatmen's
National Bank of Des Moines, Des Moines, Iowa, as
Trustee, and The Sumitomo Trust & Banking Co.,
Ltd., New York Branch. (1)
10.34 Assignment and Security Agreement dated as of May
28, 1992, among The Chestnut Partnership and
American Security Bank to The Sumitomo Trust &
Banking Co., Ltd., New York Branch. (1)
<PAGE>
Exhibit Page
No. Description of Exhibit No.
10.35 Consent and Subordination Agreement dated as of
May 28, 1992, by The Chestnut Partnership. (1)
10.36 Assignment of Subcontracts dated as of May 28,
1992, from The Weitz Company, Inc. to The
Sumitomo Trust & Banking Co., Ltd., New York
Branch and Boatmen's National Bank of Des Moines.
(1)
10.41 Escrow Agreement I dated as of January 23, 1992,
among Prime Holdings, Inc., The Chestnut
Partnership, The Chestnut Real Estate
Partnership, and The Sumitomo Trust & Banking
Co., Ltd., New York Branch. (1)
10.42 Escrow Agreement II dated as of January 23, 1992,
among West Joppa Road Limited Partnership, The
Chestnut Partnership, The Chestnut Real Estate
Partnership, and The Sumitomo Trust & Banking
Co., Ltd., New York Branch. (1)
10.43 Security Agreement dated as of May 28, 1992,
between The Chestnut Partnership, Boatmen's
National Bank of Des Moines, as Bond Trustee, and
The Sumitomo Trust & Banking Co., Ltd., New York
Branch. (1)
10.44 Indemnity Collateral Assignment of Leases,
Residency Agreements, Rents and Fees dated as of
May 28, 1992, from The Chestnut Real Estate
Partnership to Boatmen's National Bank of Des
Moines, as Bond Trustee and The Sumitomo Trust &
Banking Co., Ltd., New York Branch. (1)
10.45 Collateral Assignment of Leases, Residence
Agreements, Rents and Fees dated as of May 28,
1992, among The Chestnut Partnership to Boatmen's
National Bank of Des Moines, Iowa, as Trustee and
The Sumitomo Trust & Banking Co., Ltd., New York
Branch. (1)
10.46 Collateral Assignment of Contracts, Plans and
Permits dated as of May 28, 1992, among The
Chestnut Partnership to Boatmen's National Bank
of Des Moines, Des Moines, Iowa, as Trustee and
The Sumitomo Trust & Banking Co., Ltd., New York
Branch. (1)
10.47 Term Loan Agreement dated July 3, 1997, between 23-78
Norwest Bank Iowa, N.A., and The Chestnut
Partnership. (4)
<PAGE>
Exhibit Page
No. Description of Exhibit No.
10.47.1 $1,900,000 Term Loan dated July 3, 1997, between 79-80
Norwest Bank Iowa, N.A., and The Chestnut
Partnership. (4)
10.47.2 Guaranty Agreement dated July 3, 1997, between 81-91
Norwest Bank Iowa, N.A., and The Chestnut
Partnership, Life Care Services Corporation and
Home Health Care Services Corporation. (4)
10.47.3 Indemnity Deed of Trust and Security Agreement 92-123
dated July 3, 1997, between The Chestnut Real
Estate Partnership and Norwest Bank Iowa, N.A.
(4)
10.50 Joint Venture Agreement of the Blakehurst Joint
Venture dated December 16, 1991, entered into by
and between Chestnut Village, Inc. and Prime
Holdings, Inc. (1)
10.52 Indemnity Agreement dated as of March 11, 1992,
among The Chestnut Partnership, The Chestnut Real
Estate Partnership, Mullan-North Oaks Limited
Partnership, Life Care Services Corporation and
North Oaks Properties, Inc. (1)
10.53 Construction Management Agreement with Mullan
Contracting Company, entered into July, 1994 (2)
27.1 Financial Data Schedule - The Chestnut
Partnership (4)
27.2 Financial Data Schedule - The Chestnut Real
Estate Partnership (4)
(1) Incorporated by reference from Registrants Statement on Form S-1
previously filed with Commission (Commission File No: 33-32197),
January 28, 1992, and August 7, 1992 and by Registrant's Form 10-
K filed December 31, 1992 and 1993.
(2) Incorporated by reference from the Registrant's Form 10-K,
December 31, 1994, previously filed with the Commission.
(3) Incorporated by reference from the Registrant's Form 10-K,
December 31, 1996, previously filed with the Commission.
(4) Filed herewith.
<PAGE>
SIGNATURES
THE CHESTNUT REAL ESTATE PARTNERSHIP
Pursuant to the requirements of the Securities Exchange Act of 1934, The
Chestnut Real Estate Partnership has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
THE CHESTNUT REAL ESTATE PARTNERSHIP
By: BLAKEHURST JOINT VENTURE, a
General Partner
By: CHESTNUT VILLAGE, INC.,
General Partner
Date: August 13, 1997 by: /s/ Stan G. Thurston
---------------------
Stan G. Thurston, President and
Chief Executive Officer
(Principal Executive Officer)
Date: August 13, 1997 by: /s/ Arthur V. Neis
-------------------
Arthur V. Neis, Treasurer
(Principal Financial and
Accounting Officer)
And By: THE WEST JOPPA ROAD LIMITED
PARTNERSHIP, General Partner
By: ROSEDALE CARE, INC.,
General Partner
Date: August 13, 1997 by: /s/ T. F. Mullan
-----------------
Thomas F. Mullan III, President
Date: August 13, 1997 by: /s/ J. A. Luetkemeyer, Jr.
---------------------------
John A. Luetkemeyer, Jr.,
President
<PAGE>
SIGNATURES
THE CHESTNUT PARTNERSHIP
Pursuant to the requirements of the Securities Exchange Act of 1934, The
Chestnut Partnership has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
THE CHESTNUT PARTNERSHIP
By: BLAKEHURST JOINT VENTURE, a
General Partner
By: CHESTNUT VILLAGE, INC.,
General Partner
Date: August 13, 1997 by: /s/ Stan G. Thurston
---------------------
Stan G. Thurston, President and
Chief Executive Officer
(Principal Executive Officer)
Date: August 13, 1997 by: /s/ Arthur V. Neis
-------------------
Arthur V. Neis, Treasurer
(Principal Financial and
Accounting Officer)
And By: THE WEST JOPPA ROAD LIMITED
PARTNERSHIP, General Partner
By: ROSEDALE CARE, INC.,
General Partner
Date: August 13, 1997 by: /s/ T. F. Mullan
-----------------
Thomas F. Mullan III, President
Date: August 13, 1997 by: /s/ J. A. Luetkemeyer, Jr.
---------------------------
John A. Luetkemeyer, Jr., President
And By: THE CHESTNUT REAL ESTATE
PARTNERSHIP, General Partner
By: CHESTNUT VILLAGE, INC.,
General Partner
Date: August 13, 1997 by: /s/ Stan G. Thurston
---------------------
Stan G. Thurston, President
Date: August 13, 1997 by: /s/ Arthur V. Neis
-------------------
Arthur V. Neis, Treasurer
EXHIBIT 10.47
------------------------------------------
TERM LOAN AGREEMENT
THE CHESTNUT PARTNERSHIP,
AS THE BORROWER,
AND
THE CHESTNUT REAL ESTATE PARTNERSHIP,
LCS HOLDINGS, INC.,
LIFE CARE SERVICES CORPORATION, AND
HOME HEALTH CARE SERVICES CORPORATION,
AS GUARANTORS,
AND
NORWEST BANK IOWA, NATIONAL ASSOCIATION
AS BANK
DATED AS OF
JULY 3, 1997
------------------------------------------
<PAGE>
TERM LOAN AGREEMENT
TERM LOAN AGREEMENT ("Agreement") dated as of July 3, 1997, among THE CHESTNUT
PARTNERSHIP, a Maryland general partnership (the "Borrower"), NORWEST BANK,
NATIONAL ASSOCIATION, a national banking association (the "Bank") and THE
CHESTNUT REAL ESTATE PARTNERSHIP, a Maryland General partnership ("CREP"), LCS
HOLDINGS, INC., an Iowa corporation ("LCS"), LIFE CARE SERVICES CORPORATION, an
Iowa corporation ("LCSC") and HOME HEALTH CARE SERVICES CORPORATION, an Iowa
corporation ("HHC"). (CREP, LCS, LCSC and HHC are each herein also referred to
as a "Guarantor", and together as the "Guarantors".)
R E C I T A L S
WHEREAS, the Borrower has certain rights with respect to the
development and operation of the real property more particularly described in
Exhibit A attached hereto and CREP is the owner of such property (the
"Property"); and
WHEREAS, the Borrower has constructed on such real property certain
existing improvements known as the Blakehurst Retirement Community (the
"Project") Phase I of which, consisting of 177 residential units, 36
comprehensive care beds and 14 domiciliary units ("Phase I") was constructed and
financed in part with the proceeds of two 1992 public bond issues which total
$14,000,000 (the "1992 Series Bonds"); and
WHEREAS, the issuance and repayment and other conditions of the 1992
Series Bonds are governed by the provisions of a May 1, 1992 Trust Indenture
between the Borrower and Boatmen's National Bank Des Moines (the "Bond
Trustee"), as supplemented by that certain August 1, 1992 First Supplemental
Trust Indenture between the Borrower and the Bond Trustee (collectively, the
"Trust Indenture"); and
WHEREAS, the repayment of the 1992 Series Bonds is secured both by the
lien evidenced and granted by a May 28, 1992 Indemnity Deed of Trust covering
the Property granted from CREP to trustees for the Bond Trustee (the "Bond
Mortgage") and by the security interests covering other aspects of the Project
granted by the Borrower or CREP to the Bond Trustee by a number of instruments
collectively defined under the Trust Indenture as the "Additional Security
Documents" (the "Additional Security Documents"); and
<PAGE>
WHEREAS, Section 3.10(d) of the Trust Indenture permits the Borrower to
incur additional debt for the purchase, construction or other acquisition of
additions or improvements to the Project, with such additional debt to be PARI
PASSU and equally and ratably secured with the 1992 Series Bonds by the lien of
the Bond Mortgage and the security interests of the Additional Security
Documents, provided that certain conditions specified by the Trust Indenture are
satisfied (any such debt, the "Additional Parity Debt");
WHEREAS, consistent with the Trust Indenture, the Borrower now intends
to construct 35 new independent living units and additional community support
improvements to the Project (the "Phase III Improvements") and
WHEREAS, the Borrower has requested the Bank to make a term loan (the
"Loan") to the Borrower in an aggregate amount not to exceed $1,900,000, the
proceeds of which shall be Additional Parity Debt and which are to be used to
defray a portion of the costs it will incur in developing and constructing the
Phase III Improvements; and
WHEREAS, the Guarantors desire the Loan to be made and are willing to
unconditionally guarantee the Loan; and
WHEREAS, consistent with the Trust Indenture, Borrower and Guarantors
are willing to both incur the debt represented by the Loan as Additional Parity
Debt on a PARI PASSU basis with the 1992 Series Bonds and to secure the Loan
equally and ratably with the Bond Mortgage and the Additional Security
Documents; and
WHEREAS, the Bank is willing to make the Loan to the Borrower on the
terms and subject to the conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto, in consideration of their mutual
covenants hereinafter set forth and intending to be legally bound hereby, agree
as follows:
SECTION 1. DEFINITIONS
1.1 DEFINED TERMS. In addition to the terms defined in other sections of this
Agreement, the following terms used in this Agreement shall have the following
meanings unless the context otherwise requires:
<PAGE>
"ACCELERATION" means the declaration of all Liabilities of the Borrower
hereunder to be immediately due and payable following an Event of Default in
accordance with the provisions of Sections 9 and 10 hereof.
"ADMISSION FEE ESCROW AGREEMENT (PHASE I)" shall mean the Amended and Restated
Admission Fee Escrow Agreement - Phase I dated as of July 18, 1996, between the
Borrower and the Escrow Agent, as the same may be amended, modified, or
supplemented from time to time in compliance with the provisions of the Loan
Documents.
"ADMISSION FEE ESCROW AGREEMENT (PHASE III)" shall mean the Admission Fee Escrow
Agreement dated as of April 24, 1996, between the Borrower and the Escrow Agent,
as the same may be amended, modified or supplemented from time to time in
compliance with the provisions of the Loan Documents. The said agreement relates
the Phase III Improvements but is titled as "Phase II" for regulatory reasons.
"AGREEMENT" means this Term Loan Agreement, as it may be amended, modified or
supplemented from time to time.
"APPRAISAL" shall mean a market value appraisal (including updates or
reappraisals that the Bank might require in its sole discretion) to be ordered
by the Bank showing the fair market value of the Mortgaged Property and the
Facility, such appraisals to be made by an appraiser acceptable to the Bank and
in accordance with the Uniform Standards of Professional Appraisal Practices,
and which shall be satisfactory to, and subject to approval by, the Bank.
"ASSIGNMENT OF RESIDENCY AGREEMENTS" shall mean the Assignment of Residency
Agreements and Revenues dated the date hereof and given by the Borrower and CREP
to the Bank as the same may be amended, modified or supplemented from time to
time in accordance with the terms thereof.
"ATTORNEY COSTS" means and includes all reasonable fees and disbursements of any
law firm or any external counsel.
"BANK" means Norwest Bank Iowa, National Association.
"BASE RATE" means, for any day, the rate of interest in effect for such day as
publicly announced from time to time by Bank, as its "base rate." (The "base
rate" is a rate set by Bank based upon various factors including Bank's costs
and desired return, general economic conditions and other factors, and is used
as a reference point for pricing some loans, which may be priced at, above,
<PAGE>
or below such announced rate.) Any change in the base rate announced by Bank
shall take effect at the opening of business on the day specified in the public
announcement of such change.
"BOND DOCUMENTS" shall mean the Trust Indenture and all other documents and
agreements executed and delivered to secure and support the Bond Financing.
"BOND FINANCING" shall mean the permanent financing entered into with respect to
the Facility pursuant to the Trust Indenture and the other Bond Documents.
"BOND MORTGAGE" shall mean the Indemnity Deed of Trust granted by CREP in favor
of the Bond Trustee as a part of the Bond Financing.
"BOND TRUSTEE" shall mean Boatmen's National Bank Des Moines, a national banking
association.
"BORROWER" shall mean The Chestnut Partnership, a Maryland General Partnership.
"BORROWING DATE" shall mean any date on which the Bank makes a Loan Advance
under this Agreement.
"BUSINESS DAY" shall mean any day on which the Bank's commercial lending
department is open for business.
"CAPITAL REPLACEMENT RESERVE ESCROW AGREEMENT" shall mean the Capital
Replacement Reserve Escrow Agreement, dated as of August 2, 1993 between the
Borrower and First National Bank of Maryland, as Escrow Agent, as the same may
be amended, modified or supplemented from time to time in compliance with the
provisions of the Loan Documents.
"CERTIFICATE OF COMPLETION" shall mean a certificate signed by the architect for
Project stating that the Project has been completed in substantial conformity
with the Plans.
"CLOSING DATE" shall mean such date on or before December 31, 1997 as the
Borrower shall specify on not less than 10 days' prior written notice to the
Bank, at which all conditions to the Initial Loan Advance shall be met, and the
Initial Loan Advance shall be made upon satisfaction of such conditions.
"COLLATERAL" shall mean the Mortgaged Property, and any other property of the
Borrower or any Guarantor with respect to which the Borrower or Guarantor has at
any time granted a security
<PAGE>
interest or lien pursuant to any Loan Document, or otherwise, to secure the
payment of the Loan, the Note, the Guaranty and all amounts due the Bank under
this Agreement, and the performance of the Borrower's and Guarantors'
obligations under this Agreement.
"COLLATERAL DOCUMENTS" shall mean the Mortgage, the Security Agreement, the
Assignment of Residency Agreements, the Facility Agreements Assignment, the
Escrow Assignment, the UCC Financing Statements, and any other agreement,
document, instrument, modification, or amendment to any Collateral Document,
pursuant to which the Borrower or any Guarantor has at any time granted the Bank
a Lien on Property to secure payment of the Loan, the Note, the Guarantee or any
amounts due the Bank under this Agreement, or to secure the performance of the
Borrower's or Guarantors' obligations under this Agreement, or to perfect any
such Lien.
"COMPLETION APPROVALS" shall mean all licenses, certificates of occupancy,
inspection approvals or other approvals required by any Government Authority
which are necessary to the full use, occupancy and operation of the Facility
after completion of the Phase III Improvements.
"COMBINED" shall mean accounts, assets, liabilities and items of income and
expense, as the case may be, of any Person combined together with such items of
another Person for presentation in accordance with GAAP.
"COMBINED CASH FLOW OF BORROWER AND CREP" shall mean, in respect of the twelve
month period immediately preceding the date of such determination, Combined Net
Income of Borrower and CREP plus (i) to the extent deducted in determining
Combined Net Income of Borrower and CREP for such a period (a) depreciation on
property taken during such period as determined on a Combined basis in
accordance with GAAP, (b) amortization in respect of property taken during such
period as determined on a Combined basis in accordance with GAAP and (c)
interest expense accrued during such period plus (minus) (ii) to the extent
taken into account in determining Combined Net Income of Borrower and CREP
during such period, provisions for income tax expense (benefit) during such
period as determined on a Combined basis in accordance with GAAP plus (minus)
(iii) net increases (decreases) during such period in nonrecourse, non-
amortizing loans from residents or life insurance companies to Borrower or CREP.
"COMBINED COVERAGE AMOUNT OF BORROWER AND CREP" shall mean, in respect of the
twelve month period immediately preceding the date of such determination, the
sum of all (a) interest expense on Indebtedness of Borrower and CREP accrued
during such period plus (b) the aggregate principal amount due and owing during
such period on all Indebtedness of Borrower and CREP.
<PAGE>
"COMBINED NET INCOME OF BORROWER AND CREP" shall mean, in respect of the twelve
month period immediately preceding the date of such determination, the net after
tax income of Borrower and CREP (excluding extraordinary gains and losses from
sales, exchanges, and other dispositions of property not in the ordinary course
of business) as determined on a Combined basis in accordance with GAAP.
"CONSENT AND SUBORDINATION AGREEMENT" shall mean the Consent and Subordination
Agreement dated the date hereof and given by Borrower to Bank, subordinating its
rights and interests in the Project to the Mortgage.
"CONTINENTAL" shall mean Continental Care, Inc., a Maryland Corporation.
"CREP" shall mean The Chestnut Real Estate Partnership, a Maryland general
partnership.
"DEVELOPMENT AGREEMENT" shall mean the Development Agreement, dated June 3,
1988, between the Borrower and LCSC, as amended by Amendments to Development
Agreement, dated as of December 30, 1994, October 30, 1996 and February 17, 1997
among the Borrower, LCSC, Rosedale, and Continental and with LCSD being a party
to the 1996 and 1997 amendments, and as the same may be amended, modified or
supplemented from time to time in compliance with the provisions of the Loan
Documents.
"EFFECTIVE RESIDENCY AGREEMENT" shall mean a Residency Agreement which is in
full force and effect, for which any statutory right of rescission has expired
and for which an entrance fee deposit in an amount not less than ten percent (10
%) of the total entrance fee shall have been made by the resident thereunder and
deposited in escrow pursuant to the Entrance Payments Escrow Agreement.
"ENVIRONMENTAL INDEMNITY AGREEMENT" shall mean the Environmental Indemnity
Agreement dated the date hereof given by the Borrower, CREP, LCS, LCSC and HHC
to Bank as the same may be amended, modified or supplemented from time to time
in accordance with the terms thereof.
"ENTRANCE PAYMENTS"shall mean payments by residents or prospective residents for
rights to occupy units located within the Property.
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"ENTRANCE PAYMENTS ESCROW AGREEMENTS" shall mean, collectively, the Admission
Fee Escrow Agreement (Phase I), the Admission Fee Escrow Agreement (Phase III),
the Health Center Resident Loans Escrow Agreement and the Wait List Escrow
Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended,
and any successor statute of similar import, together with the regulations
thereunder, in each case as in effect form time to time. References to sections
of ERISA shall be construed to also refer to any successor sections.
"ERISA AFFILIATE" means any corporation, trade or business that is, along with
the Borrower, a member of a controlled group of corporations or a controlled
group of trades or businesses, as described in Sections 414(b) and 414(c),
respectively, of the Code or Section 4001 of ERISA.
"ERISA PLAN" shall mean any benefit plan of Borrower or any ERISA Affiliate
which is subject to ERISA.
"ESCROW AGENT" shall mean The First National Bank of Maryland, a national
banking association.
"ESCROW AGREEMENTS" shall mean, collectively, the Entrance Payments Escrow
Agreements and the Capital Replacement Reserve Escrow Agreement
"ESCROW ASSIGNMENT" shall mean the Assignment of Escrow Agreements given by the
Borrower to the Bank, as the same may be amended, modified or supplemented from
time to time in accordance with the terms thereof, together with the consent of
the Escrow Agent.
"EVENT OF DEFAULT" shall mean any of the events of default set forth in Section
9 of this Agreement.
"FACILITY" shall mean the Improvements on the land and the development and
operation of such Improvements.
"FACILITY AGREEMENTS ASSIGNMENT" shall mean the Collateral Assignment of
Development Agreement, Management Agreement and Operating and Use Agreement
given by the Borrower to the Bank as the same may be amended, modified or
supplemented from time to time in accordance with the terms thereof, together
with the consents of CREP, LCSC, LCSD, Rosedale and Continental.
<PAGE>
"FINANCIAL STATEMENTS" shall mean the financial statements listed in Schedule
4.6.
"GAAP" shall mean generally accepted accounting principles in the United States,
applied on a basis consistent with the principles used in preparing the most
recent annual financial statements of the Borrower and the Guarantors furnished
to Bank and referred to in Section 4.6 hereof; provided, that (a) in making
determinations on a consolidated basis with respect to a Person and its
Subsidiaries, such consolidation shall be a proportionate consolidation and
shall include all Subsidiaries, and (b) in making determinations of the
aggregate Indebtedness of a Person and its Subsidiaries, any Indebtedness of
such Person or any such Subsidiary described in clause (i) of the definition of
Indebtedness herein shall be treated as if such Person or such Subsidiary were
an Obligor with respect to such Indebtedness.
"GOVERNMENTAL AUTHORITY" shall mean any government or political subdivision or
any agency, authority, bureau, central bank, commission, department or
instrumentality of either, or any court, tribunal, grand jury or arbitrator, in
each case whether foreign or domestic.
"GOVERNMENTAL BODY" shall mean any foreign, federal, state, municipal, or other
government, or any department, commission, board, bureau, agency, public
authority, or instrumentality thereof, or any court or arbitrator.
"GUARANTORS" shall mean CREP, LCS, LCSC and HHC, and "Guarantor" shall mean any
one of them.
"GUARANTY" shall mean the Guaranty Agreement dated the date hereof given by the
Guarantors to the Bank, as the same may be amended, modified or supplemented
from time to time in accordance with the terms thereof.
"HAZARDOUS SUBSTANCES" shall have the meaning assigned to that term in Section
1.02 of the Mortgage.
"HHC" shall mean Home Health Care Services Corporation, an Iowa corporation.
"HEALTH CARE RESIDENT LOANS ESCROW AGREEMENT" shall mean the Health Care
Resident Loans Escrow Agreement dated as of July 18, 1996, between the Borrower
and the Escrow Agent, as the same may be amended, modified or supplemented from
time to time in compliance with the provisions of the Loan Documents.
<PAGE>
"IMPROVEMENTS" shall mean, collectively, the Phase I and II Improvements and the
Phase III Improvements.
"INDEBTEDNESS" shall mean, as to any Person, all items of indebtedness,
obligation, or liability of that Person, whether matured or unmatured,
liquidated or unliquidated, direct or contingent, joint or several, including,
without limitation: (a) all indebtedness guaranteed, directly, or indirectly, in
any manner, or endorsed (other than for collection or deposit in the ordinary
course of business) or discounted with recourse; (b) all indebtedness in effect
guaranteed, directly or indirectly, through agreements, contingent or otherwise:
(1) to purchase the indebtedness; or (2) to purchase, sell, or lease (as lessee
or lessor) property, products, materials, or supplies, or to purchase or sell
services, primarily for the purpose of enabling the debtor to make payment of
the indebtedness or to assure the owner of the indebtedness against loss; or (3)
to supply funds to or in any other manner invest in the debtor; (c) all
indebtedness secured by (or for which the holder of the indebtedness has a
right, contingent or otherwise, to be secured by) any mortgage, deed of trust,
pledge, Lien, security interest, or other charge or encumbrance upon property
owned or acquired subject thereto, whether or not the liabilities secured
thereby have been assumed; (d) all indebtedness incurred as the lessee of
services, personal property, or real property under a lease reflected in the
lessee's balance sheet under GAAP; and (e) all indebtedness incurred as the
lessee of services, personal property, or real property under a lease that
should not be reflected in the lessee's balance sheet under GAAP.
"INTERCREDITOR AGREEMENT" shall mean the Intercreditor Agreement of even date
herewith among the Bank and the Bond Trustee, as the same may be amended,
modified or supplemented from time to time in accordance with the terms thereof,
together with the Acknowledgments of the Borrower and CREP.
"LAND" shall mean that certain tract or parcel of land described in Exhibit A
hereto.
"LCS" shall mean LCS Holdings, Inc., an Iowa corporation.
"LCSC" shall mean Life Care Services Corporation, an Iowa corporation.
"LCSD" shall mean LCS Development Corp., an Iowa corporation.
"LEASE" shall have the meaning assigned to that term in the Assignment of
Residency Agreements.
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"LIABILITIES" means all obligations of the Borrower hereunder and under each
other Loan Document to the Lenders, in each case howsoever created, arising or
evidenced, whether direct or indirect, absolute or contingent, now or hereafter
existing or due or to become due.
"LIBOR RATE" means for any LIBOR Interest Period the per annum rate (rounded
upwards, if necessary, to the nearest 1/16th of I percent) which is the British
Bankers Association interest settlement rate published on the Dow Jones Telerate
Screen at approximately 11: 00 a.m. London time on the day which is two London
Banking Days prior to the first day of the LIBOR Interest Period as the rate in
the London interbank market for U.S. dollar deposits having a term comparable to
the LIBOR Interest Period and in an amount comparable to the principal amount of
the Loan with respect to which the LIBOR Rate is being determined for that LIBOR
Interest Period.
"LIEN" shall mean any mortgage, pledge, assignment, lien, charge, encumbrance,
or security interest of any kind, or the interest of a vendor or lessor under
any conditional sale agreement, capital lease, or other title retention
agreement.
"LOAN DOCUMENTS" shall mean, collectively, this Agreement, the Note, the
Guaranty, the Mortgage, the Security Agreement, the Assignment of Residency
Agreements, the Facility Agreements Assignment, the Environmental Indemnity
Agreement, the Escrow Assignment, the Consent and Subordination Agreement, the
Subordination Agreement, the Intercreditor Agreement and any and all other
instruments, agreements and documents delivered by or on behalf of the Borrower
or any Guarantor in connection with the Loans, as the same may be amended,
modified or supplemented form time to time in accordance with their respective
terms.
"LOAN MATURITY DATE" shall have the meaning set forth in Section 2.5 of this
Agreement.
"LOAN TERMINATION DATE" means the earliest to occur of (a) the Loan Maturity
Date, (b) the termination of the Loan Commitment hereunder or (c) an
Acceleration.
"LOAN TRUSTEES" shall mean Paul R. Tyler and Richard A. Malm, as trustees under
the Mortgage for the benefit of the Bank.
" LOANS" shall mean the Loan Advances and the Loan.
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"LONDON BANKING DAY" means any day other than a Saturday, Sunday or other day on
which commercial banks in London, England are authorized or required by law to
close.
"MORTGAGE" shall mean the Indemnity Deed of Trust and Security Agreement dated
the date hereof and given by CREP to the Bank to secure the Guaranty, as the
same may be amended, modified or supplemented from time to time in accordance
with the terms thereof.
"MORTGAGED PROPERTY" shall mean the Land and the Facility.
"OPERATING AND USE AGREEMENT" shall mean the Operating and Use Agreement
(Blakehurst), dated as of April 1, 1992, between the Borrower and CREP, as the
same may be amended, modified or supplemented in compliance with the provisions
of the Loan Documents.
"PARTNERSHIP AGREEMENT" shall mean the complete Partnership Agreements of
Borrower and CREP.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity succeeding
to any or all of its functions under ERISA.
"PERMITTED SUBSTANCES" shall have the meaning assigned to that term in Section
1.02 of the Mortgage.
"PERSON" shall mean an individual, corporation, partnership, trust,
unincorporated association, joint venture, joint-stock company, government
(including political subdivisions), governmental authority or agency, or any
other entity.
"PHASE I AND II IMPROVEMENTS" shall mean the first two phases of a licensed,
continuing care retirement community commonly known as the Blakehurst Retirement
Community consisting of one hundred seventy-seven (177) independent living
units, a health center building containing fifty (50) beds, a clubhouse, an arts
and crafts studio, a woodworking shop, an auditorium and incidental improvements
and amenities which have been constructed upon the Land, together with all
equipment, fixtures and other personal property attached thereto or used in
connection therewith.
"PHASE III IMPROVEMENTS" shall mean the third phase of the Blakehurst Retirement
Community consisting of thirty-five (35) independent living units, a swimming
pool with whirlpool and locker
<PAGE>
rooms, an exercise room, additional surface parking, twelve (12) detached garage
units and nineteen (19) under-building garages, together with all equipment,
fixtures and other personal property attached thereto or used in connection
therewith.
"PLANS" shall mean the final plans and specifications for the construction of
the Phase III Improvements on the Land.
"PROJECT" shall mean the design and construction of the Phase III Improvements
on the Land, the development and operation of the Phase III Improvements and the
financing of such acquisition, design, construction, development and operation.
"PROPERTY" shall mean, collectively, the Land, the Improvements and the other
tangible property covered by the Mortgage and the Security Agreement.
"RESIDENCY AGREEMENTS" shall mean all contracts between the Borrower and
prospective residents of the Project relating to the acquisition by such
residents of a revocable license to occupy independent living units in the
Projects and "Residency Agreement" shall mean any one of them.
"RESIDENTS' LOANS" shall mean the loans made to the Borrower pursuant to the
Residency Agreements.
"RESIDENTS' LOAN DOCUMENTS" shall mean all documents and agreements executed and
delivered to secure and support the Residents' Loans.
"RESPONSIBLE OFFICER" of a Person shall mean the president, treasurer or chief
financial officer of the Person.
"ROSEDALE" shall mean Rosedale Care, Inc., a Maryland Corporation.
"SECURITY AGREEMENT" shall mean the Security Agreement dated the date hereof and
given by the Borrower to the Bank to secure the Note, as the same may be
amended, modified or supplemented in accordance with the terms thereof.
"SUBORDINATION AGREEMENT" shall mean the Amended and Restated Subordination
Agreement of even date herewith among the Borrower, CREP, the First National
Bank of Maryland, as trustee, the Bond Trustee, Paul R. Tyler and Richard A.
Malm, as trustees, John Obzud, as trustee) and
<PAGE>
Bank as the same may be amended, modified or supplemented from time to time in
accordance with the terms thereof.
"SUBSIDIARY" means any Person or in which a Person owns directly or indirectly
50 percent or more of (i) the combined voting power of all classes of stock
having general voting power under ordinary circumstances to elect a majority of
the board of directors of such Person, if it is a corporation, (ii) the capital
interest or profits interest of such Person, if it is a partnership, joint
venture or similar entity, or (iii) the beneficial interest of such Person, if
it is a trust, association or other incorporated organization.
"TITLE COMPANY" shall mean Chicago Title Insurance Company.
"TITLE POLICY" shall mean the policy of title insurance issued by the Title
Company to the Bank, insuring the Mortgage as required by Section 5.7 of this
Agreement.
"TRUST INDENTURE" shall mean the Trust Indenture, dated as of May 1, 1992,
between Borrower and the Bond Trustee, as the same may be amended, modified or
supplemented from time to time in compliance with the provisions of the Loan
Documents.
"UCC FINANCING STATEMENTS" shall mean the UCC Financing Statements, in form and
substance satisfactory to the Bank, describing the Collateral and naming the
Borrower and CREP as debtors and the Bank as secured party in form satisfactory
for filings as to each debtor with the Secretary of State of Maryland and in the
office of records of Baltimore County, Maryland.
"UNFUNDED LIABILITIES" means with regard to any Plan, the excess of the current
value of the Plan's benefits guaranteed under ERISA over the current value of
the Plan's assets allocable to such benefits.
"UNMATURED EVENT OF DEFAULT" means any event or condition which, with the lapse
of time or giving of notice to the Borrower or both, would constitute an Event
of Default.
"WAIT LIST ESCROW AGREEMENT" shall mean the Amended and Restated Wait List
Escrow Agreement dated as of July 18, 1996, between the Borrower and Escrow
Agent, as the same may be amended, modified or supplemented from time to time in
compliance with the provisions of the Loan Documents.
<PAGE>
1.2 CONSTRUCTION OF TERMS. Unless the context of this Agreement otherwise
clearly requires, references to the plural include the singular, the singular
the plural. A Section, an Exhibit or a Schedule is, unless otherwise stated, a
reference to a section hereof, an exhibit hereto or a schedule hereto, as the
case may be. Section captions used in this Agreement are for convenience only,
and shall not affect the construction of this Agreement. The words "hereof",
"herein" "hereunder", and similar terms in this Agreement refer to this
Agreement as a whole and not to any particular provision of this Agreement.
SECTION 2. AMOUNT AND TERMS OF LOAN.
2.1 AMOUNT. Subject to the terms and conditions of this Agreement, the Bank
agrees to make the loan in three or fewer equal advances at Borrower's option
(each one a "Loan Advance" and the first advance the "Initial Loan Advance" and
the last loan advance the "Final Loan Advance"), in an aggregate principal
amount of not more than One Million Nine Hundred Thousand and 00/100ths Dollars
($1,900,000.00) (the "Maximum Loan Amount").
2.2 NOTE. The loan shall be evidenced by a single properly executed promissory
note of the Borrower in the amount of One Million Nine Hundred Thousand and
00/100ths Dollars ($1,900,000.00) substantially in the form of Exhibit B
attached to this Agreement (completed with appropriate insertions) delivered to
the Bank at the Bank's main office in Des Moines, Iowa (the "Note").
2.3 INTEREST.
(a) RATE PRIOR TO DELINQUENCY. Except as provided below with respect to
principal and interest not paid when due, the entire unpaid amount of the Loan
made under this Agreement shall bear interest at a variable rate which is either
the "Adjusted LIBOR Rate" or the "Adjusted Base Rate," selected as provided in
Section 2.3(b) of this Agreement.
"Adjusted Base Rate" means the per annum rate equal to the sum of one quarter of
one percent (0.25 %) plus the Base Rate in effect from time to time. "Adjusted
LIBOR Rate" means, for each LIBOR Interest Period, the per annum rate equal to
the sum of three percent (3 %) per annum plus the LIBOR Rate as determined two
London Banking Days prior to the commencement date of such LIBOR Interest Period
and fixed at such rate for such LIBOR Interest Period.
<PAGE>
(b) SELECTION OF RATE. The rate of interest on the Loan shall be the
Adjusted Base Rate and shall change as, and when the Base Rate changes
effective, as of the opening of business on the date when a change in the Base
Rate becomes effective unless Borrower shall give notice to the Bank at least
two (2) Business Days prior to the start of any thirty (30), sixty (60), or
ninety (90) day period of its election to select the adjusted LIBOR Rate to
apply for any such period. A period subject to such a notice shall be a "LIBOR
Interest Period". The Adjusted LIBOR Rate determined as provided in Section
2.3(a) shall apply during any LIBOR Interest Period.
(c) DELINQUENT PAYMENT RATE. Any principal or interest with respect to
the Loan not paid when due (whether at maturity, by Acceleration or otherwise)
shall bear interest at a rate per annum equal to the Adjusted Base Rate plus
four percent (4 %) from the date the Bank gives notice to the Borrower that
interest is to accrue at such rate. The interest rate shall change as and when
the Base Rate changes, effective as of the opening of business on the date on
which a change in the Base Rate becomes effective, until paid.
(d) BASIS OF COMPUTATION. All interest shall be determined on the basis
of the unpaid balance due, from time to time, computed for the actual number of
days elapsed on the basis of a year of 360 days.
2.4 PAYMENT
(a) AMORTIZATION. Amortizing payments of principal and interest shall
be made with the Loan on each March 31, June 30, September 30 and December 31
beginning with the first such date which occurs at least ninety (90) days after
the last of the Loan Advances and until the Loan Termination Date. The first
payment shall include accrued interest in full, plus a regular amortizing
payment. The amount of each amortizing payment shall be calculated as of the
date of the first payment and shall be the amount required to fully amortize all
principal plus interest thereon in eighty equal quarterly payments assuming a
fixed future rate of interest at the rate then applicable and payments
calculated at the beginning of the interest period. The payment amount shall be
recomputed on each December 31 thereafter using the rate in effect as of such
date for payments in the following calendar year. The amortization calculation
shall affect the payment amount only and shall not reduce or increase the
accruals of interest as herein provided.
(b) DELINQUENT INTEREST. Any interest due pursuant to Section 2.3(c)
respecting delinquent payments is due as it accrues without notice or demand.
<PAGE>
(c) PAYMENT AT MATURITY. All principal and interest not previously paid
shall be due and payable in full without notice or demand on the Loan
Termination Date.
(d) PLACE OF PAYMENT. All payments hereunder, including payments with
respect to the Note, shall be made without set-off or counterclaim and shall be
made to the Bank in immediately available funds prior to 12:30 p.m., Des Moines
time, on the date due at the office of the Bank at 666 Walnut Street, Des
Moines, IA 50309, or at such other place as may be designated by the Bank to the
Borrower in writing. Any payments received after such time shall be deemed
received on the next Business Day. Whenever any payment to be made hereunder or
under the Note shall be stated to be due on a date other than a Business Day,
such payment may be made on the next succeeding Business Day, and such extension
of time shall be included in the computation of interest or any fees.
2.5 MATURITY. The Loan shall mature and the entire unpaid balance of principal
and interest shall be payable in full on a date, referred to herein as the "Loan
Maturity Date" which shall be the earliest of the following dates:
(a) The fifth anniversary date following the date of the
last of the Loan Advances; or
(b) The second, third or fourth anniversary date
following the date of the last of the Loan Advances,
if Bank shall give Borrower written notice of
maturity at least six months prior to any such date.
Bank may give such notice in its sole discretion for
any reason it deems sufficient.
2.6 PREPAYMENT. The Loan and the Note may be prepaid in whole or in part,
together with accrued interest to the date of prepayment on the amount prepaid,
at any time without premium or penalty. Any partial prepayment shall be applied
to principal installments of the Loan and the Note in the inverse order of their
maturities. Each payment applied to the Loan before an Event of Default shall be
applied first to unpaid accrued interest and then to principal. No amount of
principal paid to the Bank may be reborrowed, and the Maximum Loan Amount shall
be reduced, without notice to the Borrower, by the amount of any principal paid
to the Bank.
2.7 COMMITMENT FEE. The Borrower shall pay the Bank a commitment fee of Fourteen
Thousand Two Hundred Fifty and no/100ths Dollars ($14,250.00) (the "Loan
Commitment Fee"). The Loan Commitment Fee shall be fully earned upon execution
of this Agreement, and is
<PAGE>
nonrefundable. Any portion of the Loan Commitment Fee not paid before the
execution of this Agreement shall be paid in full at such time.
2.8 EXPIRATION OF COMMITMENT. The Bank's commitment to lend hereunder shall
expire on December 31, 1997. No further Loan Advance shall be required to be
made by Bank after such date whether or not Loan Advances which total the
Maximum Loan Amount have been made or requested on or before such date.
SECTION 3. COLLATERAL AND GUARANTY. To induce the Bank to enter into this
Agreement and make the Loan to the Borrower, the Borrower and Guaranty agree as
follows:
3.1 GUARANTY. Payment of the Loan and the Note shall be jointly and severally
guaranteed by the Guarantors pursuant to the Guaranty.
3.2 COLLATERAL. The Borrower agrees that full payment of the Loan, the Note, and
all future Indebtedness of the Borrower to the Bank and the performance of the
Borrower's obligations under this Agreement shall be secured by the Liens in the
Collateral granted under this Agreement and under the Collateral Documents,
including but not limited to a Lien in the Mortgaged Property granted by the
CREP pursuant to the Mortgage. The Borrower agrees to execute and deliver to the
Bank all agreements, documents, financing statements, and instruments, and to
take such further action, as the Bank reasonably deems necessary to vest and
fully perfect and maintain the Liens in the Collateral granted under this
Agreement and under the Collateral Documents.
3.3 PRIORITY. Bank shall have a first priority right of payment from Entrance
Payments arising from units in the Phase III Improvements, if and to the extent
there has been no default under the Trust Indenture. Bank shall otherwise have a
priority equal to, and ratable with, the Bond Trustee for the benefit of holders
of bonds and the Trust Indenture to share all recoveries in the Collateral PARI
PASSU, as provided in the Intercreditor Agreement and the Subordination
Agreement. Bank shall consent to an indemnity deed of trust junior to Bank's
Liens to secure repayment of Resident Loans, with Bank's priority to be
established by the Subordination Agreement.
3.4 FURTHER COLLATERAL. The Borrower and CREP hereby assign, transfer, and set
over to the Bank to secure the payment of the Loan and the performance of the
Borrower's obligations under this Agreement all of the Borrower's right, title,
and interest in and to, and grants the Bank a Lien on and a security interest
in, all amounts that might be owing from time to time by the Bank to
<PAGE>
the Borrower or CREP, including, without limitation, any balance or share
belonging to it and any deposit or other account with the Bank, which Lien and
security interest shall be independent of any right of setoff that the Bank may
have.
SECTION 4. REPRESENTATIONS OF BORROWER AND GUARANTORS. To induce the Bank to
enter into this Agreement and to make Loan Advances, the Borrower and each of
the Guarantors warrant and represent that:
4.1 ORGANIZATION AND QUALIFICATION. Each of the Borrower and CREP is a general
partnership duly organized, validly existing and in good standing under the laws
of the State of Maryland. Each of LCS, LCSC and HHC is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Iowa. Each of LCS, LCSC and HHC is duly qualified to do business as a foreign
corporation and is in good standing in the State of Maryland. Each of the
Partnership Agreements as furnished to the Bank is genuine, valid and complete.
4.2 AUTHORITY AND AUTHORIZATION. The Borrower has the power and authority to
execute and deliver this Agreement, to obtain the borrowings provided for
herein, to execute and deliver the Note in evidence of such borrowings, to
execute and deliver the other Loan Documents to which the Borrower is a party
and to perform its obligations hereunder and under the Note and the other Loan
Documents, and all such action has been duly and validly authorized by all
necessary partnership proceedings on its part. Each of the Guarantors has the
power and authority to execute and deliver this Agreement and the Loan Documents
to which it is a party and to perform its obligations thereunder, and all such
actions have been duly and validly authorized by all necessary corporate or
partnership proceedings.
4.3 EXECUTION AND BINDING EFFECT. This Agreement, the Note and the other Loan
Documents to which the Borrower is a party have been duly and validly executed
and delivered by the Borrower and constitute legal, valid and binding
obligations of the Borrower, enforceable in accordance with the terms hereof and
thereof, except as the enforceability thereof may be limited by bankruptcy,
insolvency or other similar laws of general application affecting the
enforcement of creditors' rights. The Mortgage, the Guaranty and the
Environmental Indemnity Agreement and the other Loan Documents to which any of
the Guarantors is a party have been duly and validly executed and delivered by
the Guarantors and constitute legal, valid and binding obligations of the
Guarantors, enforceable in accordance with the terms thereof, except as the
enforceability thereof may be limited by bankruptcy, insolvency or other similar
laws of general application affecting the enforcement of creditors' rights.
<PAGE>
4.4 AUTHORIZATION AND FILINGS. No authorization, consent, approval, license,
exemption or other action by, and no registration, qualification, designation,
declaration or filing with, any Governmental Authority is or will be necessary
or advisable in connection with the execution and delivery of this Agreement,
the Note or the other Loan Documents, consummation of the transactions herein or
therein contemplated or performance of or compliance with the terms and
conditions hereof or thereof, except those that have been obtained and except
the Completion Approvals. The Borrower has no reason to believe that the
Completion Approvals will not be obtained upon completion of construction of the
Project.
4.5 ABSENCE OF CONFLICTS. Neither the execution and delivery of this Agreement,
the Note or the other Loan Documents nor consummation of the transactions herein
or therein contemplated nor performance of or compliance with the terms and
conditions hereof or thereof will (a) violate any Law, (b) conflict with or
result in a breach of or a default under the partnership agreement of the
Borrower or the partnership agreement or articles of incorporation or bylaws, as
the case may be, of the Guarantors, or any agreement or instrument to which the
Borrower or any of the Guarantors is a party or by which any of them or any of
their respective properties (now owned or hereafter acquired) may be subject or
bound, including without limitation any easement, declaration, covenant or
restriction applicable to the Property, or (c) result in the creation or
imposition of any lien, charge, security interest or encumbrance upon any
property (now owned or hereafter acquired) of the Borrower or any of the
Guarantors, except those contemplated by the Loan Documents.
4.6 FINANCIAL CONDITION. The financial statements of the Borrower and CREP on a
combined basis and of each other Guarantor heretofore furnished to the Bank and
identified on Schedule 4.6 attached hereto were prepared in accordance with GAAP
and present fairly the financial condition at the respective dates indicated
therein and the results of operations and cash flows for the respective periods
indicated therein of such Person. Since the dates of the most recent of such
financial statements of each such Person, respectively, there has been no
material adverse change in the business, operations, condition (financial or
otherwise) or prospects of any of them from that reflected in such financial
statements.
4.7 DEFAULTS. No Event of Default and no Unmatured Event of Default has occurred
and is continuing or exists.
4.8 LITIGATION. There is no pending or, to the Borrower's or Guarantors'
knowledge after due inquiry, threatened proceeding by or before any Governmental
Authority against or affecting the
<PAGE>
Borrower or any of the Guarantors, or any of their respective Subsidiaries,
which if adversely decided would have a material adverse effect on the business,
operations, condition (financial or otherwise) or prospects of the Borrower or
any of the Guarantors, or on the ability of the Borrower or any of the
Guarantors to perform their respective obligations under the Loan Documents or
on the construction or operation of the Phase III Improvements or on the
ownership and operation of the Facility or on the validity of the Mortgage or
the priority of the lien thereof.
4.9 TITLE TO COLLATERAL. CREP has good and marketable title in fee simple to the
Land, and the Borrower has the uncontested right to the use and occupancy of the
Improvements. CREP or the Borrower has good and marketable title to all other
Property, in each case free and clear of all liens claims, encumbrances and
security interests except Permitted Encumbrances (as defined in Section 1.01 of
the Mortgage), and the Borrower and CREP will defend such title against the
claims and demands of all Persons.
4.10 COMPLIANCE WITH LAWS. The construction of the Phase III Improvements as
contemplated by the Plans, the intended use of the Phase III Improvements, and
the ownership, use and operation of the remainder of the Facility comply with
all applicable laws and all applicable private covenants. All authorizations,
certificates, permits, licenses and approvals required by any Governmental
Authority for the ownership, construction, occupancy and use of the Facility
will have been obtained at or before the date of each Loan Advance.
4.11 SUBDIVISION. The Land is a single parcel under applicable Laws regulating
subdivision and land development and may be leased, transferred or developed by
constructing the Facility (including without limitation on the Phase III
Improvements) thereon without the approval of any Governmental Authority having
jurisdiction to regulate or control subdivision or land development. The Land is
assessed separately from all other lands for purposes of ad valorem taxation.
4.12 STREETS. All streets necessary for the full utilization of the Property for
its current and intended purpose have been completed.
4.13 UTILITY SERVICES. All utility services necessary for the construction of
the Phase III Improvements and the operation thereof for their intended purpose
are available at the boundaries of the Land, including water supply and sanitary
and storm sewer facilities, electric, telephone and cable television facilities.
All utility services necessary for the operation of the Phase I and Phase
<PAGE>
II Improvements for their current purpose are installed on the Land, including
water supply and sanitary and storm sewer facilities, electric, telephone and
cable television facilities.
4.14 FLOOD AREA; FILLED LAND, HAZARDOUS SUBSTANCES. The land is not in an "area
of special flood hazard", as that term is defined in the National Flood
Insurance Act of 1968 (as amended and supplemented by the Flood Disaster
Protection Act of 1973). No portion of the Land consists of and no portion of
the Improvement is or will be located on filled in land. The Property does not
contain any Hazardous Substances (other than Permitted Substances).
4.15 SURVEY AND OTHER DOCUMENTS. All surveys furnished to the Bank accurately
depict the state of facts it or they purport to depict and each other document
furnished to Bank is a true, correct and complete copy thereof, has not been
modified or amended and is in full force and effect on the date hereof.
4.16 POWER TO CARRY ON BUSINESS. The Borrower and each Guarantor have all
requisite power and authority to own and operate its respective properties and
to carry on its respective business as now conducted and as presently planned to
be conducted.
4.17 EFFECTIVE RESIDENCY AGREEMENTS. As of the date hereof, there are thirty-one
(31) Effective Residency Agreements for the Phase III Improvements.
4.18 CONDEMNATION, ETC. The Borrower has no knowledge of any condemnation,
zoning or other land use regulation proceedings, either instituted or planned to
be institute which would adversely affect the construction of the Phase III
Improvements, or the current or proposed use and operation of the Facility.
4.19 BOND DOCUMENTS. Attached hereto as Schedule 4.20 is a list of all the Bond
Documents, true, correct and complete copies of which have been furnished to the
Bank.
4.20 RESIDENTS' LOAN DOCUMENTS. Attached hereto as Schedule 4.21 is a list of
all the Residents' Loan Documents, true, correct and complete copies of which
have been furnished to the Bank.
4.21 FACILITY AGREEMENTS. Attached hereto as Schedule 4.22 is a list of all
contracts and agreements entered into by either the Borrower or CREP with
respect to the operation and use of the Facility (other than (i) the Residency
Agreements and (ii) any contract or agreement which,
<PAGE>
by its terms, is terminable on sixty (60) days (or less) notice (the "Excluded
Contracts"), true, correct and complete copies of which have been furnished to
the Bank. The contracts and agreements reflected on Schedule 4.22, together with
the Excluded Contracts, are all of the contracts and agreements necessary or
desirable for the operation and use of the Facility.
4.22 USE OF LOAN PROCEEDS. The proceeds of the Loan will be used exclusively to
finance Borrower's costs related to the Phase III improvements.
4.23 NO MISREPRESENTATION. No representation or warranty contained in this
Agreement or any Loan Documents and no certificate or report furnished or to be
furnished by the Borrower in connection with the transactions contemplated by
this Agreement or in connection with any Loan Advance contains or will contain
any misstatement of material fact, or omits or will omit to state a material
fact required to be stated to make the statements in this Agreement or in the
certificate or report not misleading in the light of the circumstances in which
they are made.
4.24 ERISA. Borrower, CREP and their ERISA Affiliates are in full compliance
with ERISA as to any ERISA Plan. Neither Borrower nor any ERISA Affiliate has
any unfunded liabilities in any ERISA Plan.
4.25 TAXES. The Borrower and CREP have filed or caused to be filed all tax
returns required to be filed, and has paid or has made adequate provision for
the payment of all taxes shown to be due and payable on those returns and in any
assessments made against them. No tax Liens have been filed with respect to
those taxes, and no claims are being asserted with respect to those taxes that
are required by GAAP to be reflected in the Financial Statements, except as
reflected in the Financial Statements. The charges, accruals, and reserves on
the books of Borrower and CREP with respect to all federal, state, local, and
other taxes are considered by the Borrower and CREP to be adequate. The Borrower
and CREP know of no unpaid assessment that is or might be due and payable
against them or any of their Property, except those that are being contested in
good faith and by appropriate proceedings diligently conducted, and for which
adequate reserves have been set aside in accordance with GAAP.
4.26 FEDERAL RESERVE REGULATIONS; USE OF LOAN PROCEEDS. The Borrower is not
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying any margin stock
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System, as amended. No part of the proceeds of the Loan will be used,
directly or indirectly, for a purpose that violates any law, rule, or regulation
of any
<PAGE>
Governmental Body, including, without limitation, the provisions of Regulations
G, U, or X of the Board of Governors of the Federal Reserve System, as amended.
No part of the proceeds of the Loan will be used, directly or indirectly, to
purchase or carry any margin stock or to extend credit to others for the purpose
of purchasing or carrying any margin stock.
4.27 HAZARDOUS WASTE AND TOXIC SUBSTANCE STORAGE. To the best of the Borrower's
knowledge, no hazardous waste or substance or toxic substance has been stored,
used, or disposed of on the Land or in the Facility, nor has the Land been used
as a landfill or a dump.
4.28 ACCURACY OF INFORMATION. All information, reports and other papers and data
with respect to the Borrower, the Guarantors, the Project and the Facility
furnished to the Bank are complete and correct in all material respects, to the
extent necessary to give the Bank a true and accurate knowledge of the subject
matter. No fact is known to the Borrower or any Guarantor which materially and
adversely affects or in the future may (so far as it can foresee) materially and
adversely affect the business, assets or liabilities, financial condition,
results of operations, or business prospects of the Borrower or any of the
Guarantors which has not been set forth in the financial statements referred to
in Section 4.6 or in such information, reports, papers and data or otherwise
disclosed in writing to the Bank and the Lenders. No document furnished or
statement made by the Borrower or any Guarantor in connection with the
negotiation, preparation or execution of this Agreement contains any untrue
statement of a fact material to its creditworthiness or omits to state a
material fact necessary in order to make the statements contained therein not
misleading.
4.29 RELIANCE BY THE BANK. All representations and warranties made herein to the
Bank are made with the understanding that the Bank is relying upon the accuracy
of such representations and warranties. Notwithstanding that the Bank may
conduct its own investigation as to some or all of the matters covered by the
representations and warranties in this Agreement and the other Loan Documents,
the Bank is entitled to rely on all representations and warranties as a material
inducement to the Bank to make the extensions of credit evidenced by this
Agreement.
SECTION 5. CONDITIONS OF LENDING--INITIAL LOAN ADVANCE. In addition to the
requirements set forth in Section 6 and Section 7, the obligation of the Bank to
make the Initial Loan Advance under this Agreement is subject to the fulfillment
of the following conditions precedent at least 10 days before the Closing Date:
<PAGE>
5.1 APPROVALS. The Bank shall have received evidence satisfactory to it that all
approvals and consents of all Persons required to be obtained in connection with
the making of the Initial Loan Advance have been obtained and that all required
notices have been given.
5.2 COMMITMENT FEE. The Bank shall have received payment of the entire unpaid
balance of the Loan Commitment Fee.
5.3 AGREEMENT. The Bank shall have received and be in possession of this
Agreement, duly executed by all of the parties to this Agreement.
5.4 NOTE. The Bank shall have received and be in possession of the Note, duly
executed by or on behalf of the Borrower.
5.5 EFFECTIVE RESIDENCY AGREEMENTS. Borrower shall have certified to Bank in
writing that it has in effect no less than twenty-five (25) Effective Residency
Agreements for units within the Phase III Improvements. Such certificate shall
list the Effective Residency Agreements and identify the amounts of deposits
paid therewith, and shall state that deposits in an amount of at least ten
percent (10%) of the Total Entrance Payment have been made for each such
Residency Agreement.
5.6 OTHER LOAN DOCUMENTS. There shall have been delivered to Bank fully executed
counterparts of this Agreement, the Note, the Mortgage, the Security Agreement,
the Assignment of Residency Agreements, the Facility Agreements Assignment, the
Escrow Assignment, the Guaranty, the Environmental Indemnity Agreement, the
Subordination Agreement, the Consent and Subordination Agreement, the
Intercreditor Agreement, all other Loan Documents, and financing statements
sufficient to perfect all Liens created by the Mortgage, the Security Agreement
and the other Loan Documents.
5.7 TITLE POLICY. Not less than ten (10) days prior to the Closing, there shall
have been delivered to the Bank a preliminary report of title or title binder
issued by the Title Company acceptable to the Bank pursuant to which the Title
Company will issue the Title Policy, insuring the Mortgage in the Maximum Loan
Amount as a first lien upon CREP's fee interest in the Mortgaged Property shared
with the first lien granted pursuant to the Bond Documents, without exception
for filed or unfiled mechanics' liens or claims or for matters which an accurate
survey would disclose, subject only to such exceptions as may be approved in
writing by the Bank and containing any endorsements required by the Bank,
together with pro-forma copies of reinsurance
<PAGE>
agreements and direct access agreements with such other title insurance
companies in such form as the Bank may require, and UCC financing statement
searches against the Borrower and each Guarantor; and on the Closing Date, the
Title Policy and original executed counterparts of such reinsurance agreements
and such direct access agreements.
5.8 SURVEY. There shall have been delivered to the Bank an as-built survey or
surveys of the Land certified to the Title Company and the Bank as of a date no
earlier than thirty (30) days prior to the Closing Date, such certification to
meet the Bank's survey certification requirements, with the signature and seal
of a registered engineer or surveyor affixed thereto, showing all easements
affecting the Land and other matters apparent thereon, the relation of the Land
to public thoroughfares for access purposes, the location of the Phase I and
Phase II Improvements and any other existing improvements on the land and the
proposed location of the Phase III Improvements on the Land, and certifying that
the Land is or is not, as the case may be, in a flood hazard area for purposes
of the National Flood Insurance Program, together with a legal description of
the Land compatible with said survey and sufficient for purposes of the
Mortgage, and otherwise meeting the Lenders' standard survey requirements.
5.9 ZONING, APPROVALS AND UTILITIES. Evidence shall have been delivered to the
Bank of (i) satisfactory zoning and subdivision of the Land for the
construction, operation and use of the Phase I and Phase II Improvements and for
the construction and proposed operation and use of the Phase III Improvements
contemplated by the Plans, (ii) the issuance of all necessary permits, licenses
and approvals to own, operate and occupy the Facility and to construct, operate
and occupy the Phase III Improvements, other than the Completion Approvals,
including without limitation permits, licenses and approvals required under
federal, state and/or local laws or regulations with respect to zoning, safety,
building, fire protection, environmental, health, civil rights for the disabled
and similar matters, and (iii) proof of the availability to the Land of all
utility and municipal services required for construction, operation, use and
occupancy of the Phase III Improvements, and proof of the installation on the
Land of all utility and municipal services required for the operation, use and
occupancy of the Phase I and Phase II Improvements. Without limitation of the
foregoing, the Bank shall have received copies of (i) the application filed by
the Borrower for the Certificate of Registration, (ii) the Borrower's
"Disclosure Statement" prepared for an distributed to prospective residents,
(iii) the Certificate of Registration granted by the Office on Aging of the
State of Maryland (the "Department"), and (iv) all other correspondence between
the Department and the Borrower to the date hereof.
<PAGE>
5.10 APPRAISAL. The Bank shall have received an Appraisal of the Property
addressed to Bank, showing an opinion of fair market value in an amount
acceptable to Bank.
5.11 LIENS ON COLLATERAL. The Bank shall be satisfied that all steps necessary
to vest and perfect any Lien in the Collateral have been taken and that the
Liens in the Collateral are duly perfected Liens with priority over all other
liens, obligations and encumbrances except as provided in the Intercreditor
Agreement.
5.12 INSURANCE. The Bank shall have received evidence satisfactory to the Bank
that all types of casualty and hazard insurance (including flood insurance, if
required, and underground explosion and collapse hazard insurance) available
with respect to the Mortgaged Property and the other Collateral (including,
without limitation, materials and equipment stored on the land or elsewhere),
and public liability insurance and all other insurance coverage required under
the Loan Documents are in force and, insofar as casualty and hazard insurance is
concerned, insure the respective interests of the Bank and the Borrower in the
Mortgaged Property and the other Collateral, as such interests may appear, and
that workmen's compensation insurance (with amounts and coverage as required by
law) with respect to persons performing work on the construction of the Facility
is in force; and all such insurance will continue in force as long as the Loan
is outstanding. Such casualty and hazard insurance shall be in an amount at
least as great as the replacement value of the property insured and all such
insurance shall be evidenced by a certificate or certificates of insurance in
form and amount acceptable to the Bank, including a notation requiring 30 days'
written notice to the Bank before any policy cancellation.
5.13 CORPORATE DOCUMENTS. There shall have been delivered to the Bank such
evidence of the organization, good standing, foreign qualification and corporate
or partnership authorization as the Bank shall require with respect to the
Borrower and each of the Guarantors.
5.14 LEGAL OPINIONS. There shall have been delivered to the Bank an opinion of
one or more counsel for the Borrower and each of the Guarantors, which counsel
shall be subject to the approval of the Bank, dated the Closing Date, as to (i)
organization, foreign qualification and good standing, (ii) due authorization,
validity and enforceability of documents, absence of conflicts with Law and
documents and agreements, and absence of litigation, (iii) the sufficiency of
the Loan Documents to establish the Liens provided herein, and (iv) such other
matters as the Bank may reasonably request.
<PAGE>
5.15 SOILS REPORT. There shall have been delivered to the Bank a soils report,
prepared by an engineering firm acceptable to the Bank, which shall state that
the soil will support the Phase III Improvements when constructed in accordance
with the Plans.
5.16 ENVIRONMENTAL REPORTS. There shall have been delivered to the Bank (i) a
report prepared by an independent engineering firm or environmental consultant
(appropriately licensed and insured) acceptable to the Bank stating that after
due investigation of the Land, there is no evidence that there is any Hazardous
Substance (other than Permitted Substances), hazardous waste, toxic substance,
pollutant or other contaminant contained in or under the Land and (ii) test
results satisfactory to the Bank showing levels of radon gas in basement areas
of the Phase I and Phase II Improvements which are to be occupied on a regular
basis acceptable to the Bank.
5.17 FORM OF RESIDENCY AGREEMENT. There shall have been delivered to the Bank
the standard form of Residency Agreement to be used by the Borrower.
5.18 OTHER AGREEMENTS. There shall have been delivered to the Bank certified
copies of the Partnership Agreements, the Escrow Agreements, the Management
Agreement, the Development Agreement, the Operating and Use Agreement, the Bond
Documents, the Residents' Loan Documents, and each of the other contracts and
agreements reflected on Schedule 4.22.
5.19 APPROVAL OF DOCUMENTS. The Management Agreement, the Development Agreement,
the Operating and Use Agreement, the Escrow Agreements, the form of Residency
Agreement, the Residents' Loan Documents, the Trust Indenture, the other Bond
Documents, and each of the other contracts and agreements reflected on Schedule
4.22 shall be satisfactory in all respects to the Bank.
5.21 OTHER REQUIRED APPROVALS. Bank shall have received evidence satisfactory to
Bank that the Loans and the security given therefor and the Loan Documents
entered into a connection therewith have been approved by all parties from whom
such approval is required under the Bond Documents and the Residents' Loan
Documents.
5.22 APPROVAL OF ADMISSION FEE ESCROW AGREEMENT (PHASE III). There shall have
been delivered to the Bank evidence of the approval of the Admission Fee Escrow
Agreement (Phase III) by the Office of Aging of the State of Maryland.
5.23 DEPOSIT ACCOUNT. The Borrower shall have opened a deposit account at the
Bank.
<PAGE>
5.24 OTHER DOCUMENTS. The Bank shall have received all other documents,
instruments, and opinions that the Bank reasonably requires to evidence and
secure the Loan and the Note, to comply with the provisions of this Agreement,
and to comply with the requirements of regulatory authorities to which the Bank
is subject.
SECTION 6. CONDITIONS OF LENDING-ALL LOAN ADVANCES. The obligation of
the Bank to make any Loan Advance under this Agreement is subject to the
fulfillment of the following conditions precedent:
6.1 COMPLIANCE. On each Borrowing Date, (a) the Borrower shall be in compliance
with all the terms, covenants, and conditions of the Loan Documents, (b) there
shall exist no Event of Default or unmatured Event of Default, (c) the
representations and warranties contained in the Loan Documents shall be true and
correct with the same effect as though those representations and warranties had
been made on that Borrowing Date, and (d) Borrower shall have made all
certifications required under Sections 5, 6, and 7.
6.2 LOAN CLOSINGS. All documents required by this Agreement to be executed or
delivered by the Borrower to the Bank on or before the applicable Borrowing Date
shall have been executed and delivered to the Bank at its main office in Des
Moines, Iowa, and all actions required of any Person to be taken on or before
the applicable Borrowing Date shall have been taken.
6.3 OTHER DOCUMENTS. The Bank shall have received such other instruments,
documents, and opinions as the Bank shall reasonably require to evidence and
secure the Loan and to comply with the provisions of this Agreement and the
requirements of regulatory authorities to which the Bank is subject.
6.4 APPROVAL OF COUNSEL. All legal matters in connection with the making of each
Loan shall be reasonably satisfactory to the Bank's legal counsel.
SECTION 7. LOAN ADVANCES. Subject to the satisfaction of all conditions
precedent set forth in Sections 5 and 6 of this Agreement, Loan Advances shall
be made pursuant to this Agreement as follows:
7.1 LOAN ADVANCE. The Loan shall be made in one, two or three Loan Advances at
Borrower's option, with the number of Loan Advances to be selected by Borrower
at the time of its request for an Initial Loan Advance. If one Loan Advance is
selected, all Completion
<PAGE>
Approvals for all units of the Phase III Improvements shall be submitted with
the request for an Initial Loan Advance. If two Loan Advances are selected
partial occupancy permit or permits for not fewer than 18 units of the Phase III
Improvements, shall be submitted with the request for an Initial Loan Advance
and all Completion Approvals for all units of the Phase III Improvements shall
be submitted with the request for the Final Loan Advance. If three Loan Advances
are selected a partial occupancy permit for not fewer than 12 units of the Phase
III improvements shall be submitted with the Initial Loan Request, a partial
occupancy permit or permits for not fewer than 24 units of the Phase III
Improvements shall be submitted with the second request, and all Completion
Approvals for all units of the Phase III Improvements shall be submitted with
the request for a Final Advance.
7.2 REQUEST FOR LOAN ADVANCE. Each Loan Advance shall be made subject to the
provisions of this Section 6.1 as follows:
(a) Each request for Loan funds shall be signed and certified by the
Borrower and shall be accompanied by the following:
(i) Borrower's certificate that it is in compliance with all
terms, covenants and conditions of the Loan Documents;
(ii) Certified copies of the Occupancy Permits and Completion
Approvals as required for each Loan Advance; and
(iii) Borrower's certificate with supporting documents that all
contracts due for labor or material have been fully paid as of
the date of the certificate and that Borrower has segregated
funds sufficient to complete construction of the Project.
(b) Each request for loan funds, including all supporting
documentation, must be submitted at least four days before the Borrowing Date
designated in the request for loan funds.
7.2 DISBURSEMENTS. Before any default by the Borrower under this Agreement, each
Loan Advance shall be made by crediting the amount thereof to the deposit
account of the Borrower maintained with the Bank. Regardless of any other
provision of this Agreement or any other Loan Document, the Bank may withhold a
Loan Advance or discontinue the making of Loan Advances whenever the Borrower
has failed to comply with any provision of any Loan Document or is in default,
or if an event has occurred that with the passage of time or giving of notice
would
<PAGE>
constitute a default under any Loan Document. The Mortgage, Security Agreement,
Assignment of Leases and Rents, and Guaranty shall be and remain valid and
binding as security for the aggregate Loan amount advanced at any time with
interest thereon, whether or not the full amount of the Loan is advanced.
7.3 SATISFACTION OF CONDITIONS PRECEDENT. The Bank shall not be obligated to
make a Loan Advance unless the Bank is satisfied, in its sole discretion, that
the conditions precedent to the making of each such advance have been satisfied
by the Borrower.
7.4 OTHER BORROWING LIMITATIONS. The Bank shall have no obligation to lend if,
at the time of any requested advance, the Borrower is in default under this
Agreement or under the terms of any other Loan Document. All conditions and
requirements of this Agreement relating to the obligations of the Bank to make
any Loan Advance (including, without limitation, the conditions set forth in
Sections 5, 6 and 7 of this Agreement) are for the sole benefit of the Bank. The
Bank shall have the absolute right, in its sole discretion, to waive any such
condition or requirement as a condition precedent to making any Loan Advance.
Any such waiver shall be in writing and may be subject to such terms and
conditions as the Bank may require.
SECTION 8. COVENANTS OF BORROWER AND GUARANTORS. From the date of this
Agreement until payment in full of the principal and interest on the Loan and
the Note, and the payment in full of all other liabilities of the Borrower under
this Agreement, the Borrower and Guarantors covenant and agree:
8.1 LEGAL EXISTENCE. Borrower and each Guarantor will do or cause to be done all
things necessary to preserve and keep in full force and effect the legal
existence of Borrower and each Guarantor.
8.2 CONTROL. No change in majority control of Borrower or CREP shall occur
without the Bank's prior written consent.
8.3 PHASE III IMPROVEMENTS. Borrower shall construct the Phase III improvements
with diligence to completion, and shall cause the same to be completed in a good
and workmanlike manner in accordance with the Plans and in compliance with all
applicable laws, all applicable permits, licenses and approvals and all
applicable private covenants on or before December 31, 1997, free and clear of
all liens or claims of liens for materials supplied or work performed in
connection therewith.
<PAGE>
8.4 TAXES AND ASSESSMENTS. Borrower or CREP will duly pay and discharge (a) all
taxes, assessments, and charges imposed upon it or upon the Mortgaged Property
(except, if such taxes, assessments, or charges may be paid in installments and
the Borrower is not in default under this Agreement, then the Borrower may pay
such taxes, assessments, or charges in such installments, before they become
delinquent), and (b) all claims for labor, materials, and supplies, which taxes,
assessments, charges, and claims, if unpaid, might become a Lien or charge upon
the Mortgaged Property, provided, however, that the Borrower is not required to
pay such taxes, assessments, charges, or claims that it is appropriately
contesting in good faith.
8.5 ADVERSE EVENTS. Borrower will promptly notify the Bank of the occurrence of
an Event of Default and any event that in the exercise of reasonable business
judgment might have a material adverse effect on the Borrower's or CREP's
financial condition or that might have a material adverse effect on the
Borrower's or CREP's ability to perform its obligations under this Agreement or
under the Note or Guaranty.
8.6 FOUNDATION SURVEY. Borrower shall furnish to the Bank within forty-five (45)
days after the foundations of the Phase III Improvements have been located on
the land a survey certified by a registered engineer or surveyor satisfactory to
the Bank, in form and scope acceptable to the Bank, showing that the foundations
are located within the perimeter of the Land and any setback lines at the
location shown on the Plans.
8.7 AS-BUILT PLANS AND SPECIFICATIONS, SURVEY AND CERTIFICATE OF COMPLETION.
Borrower shall furnish to the Bank within forty-five (45) days after completion
of construction of the Phase III Improvements (a) as-built plans and
specifications for the Phase III Improvements, (b) an as-built survey of the
Property showing the completed Improvements and certified by a registered
engineer or surveyor satisfactory to the Bank, which survey and certification
shall be in form and scope satisfactory to the Bank, and (c) the Certificate of
Completion.
8.8 BORROWER FINANCIAL REPORTS. Borrower shall maintain a system of accounting
based on GAAP consistently applied, and combined for Borrower and CREP, and
furnish, or cause to be furnished, to the Bank:
(a) within one hundred five (105) days after the close of each
fiscal year of the Borrower and CREP, an unqualified audit report
certified by a nationally recognized accounting firm or any other
independent certified public accountants reasonably acceptable to Bank,
prepared in accordance with generally accepted
<PAGE>
accounting principles for the Borrower and CREP, including balance
sheets as of the end of such period, related profit and loss and
reconciliation of surplus statements, and a statement of cash flows,
accompanied by (i) a certificate of said accountants stating that, in
the course of their examination necessary for their certification of
such audit report, they have obtained no knowledge of any Event of
Default or Unmatured Event of Default, or if, in the opinion of such
accountants, any Event of Default or Unmatured Event of Default shall
exist, describing the nature and status thereof and (ii) said
accountants' letter to management,
(b) within thirty (30) days after the close of each fiscal
quarter of each fiscal year, of the Borrower, unaudited balance sheets
as at the close of each such quarter and profit and loss and
reconciliation of surplus statements and a statement of cash flows from
the previous quarter, from the previous year and from the beginning of
such fiscal year to the end of such quarter, and a comparison of such
figures to the budget, all certified by the Borrower's chief financial
officer or treasurer,
(c) together with the financial statements required by clauses
(a) and (b) of this Section 7.8, certificate signed by the Borrower's
chief financial officer or treasurer stating that no Event of Default
or Unmatured Event of Default exists, or if any Event of Default or
Unmatured Event of Default exists, describing the nature and status
thereof, and containing a computation of and showing compliance with
each of the financial ratios and restrictions contained in this Section
7.
8.9 LCS FINANCIAL REPORTS. LCS shall maintain a system of accounting based on
GAAP, consistently applied Consolidated with all of its Subsidiaries and shall
furnish or cause to be furnished to Bank:
(a) within one hundred five (105) days after the close of each fiscal
year of LCS, an unqualified audit report certified by a nationally
recognized accounting firm or any other independent certified public
accountants reasonably acceptable to Bank, prepared in accordance with
generally accepted accounting principles for LCS, including balance
sheets as of the end of such period, related profit and loss and
reconciliation of surplus statements, and a statement of cash flows.
<PAGE>
(b) within thirty (30) days after the close of each fiscal
quarter of each fiscal year, of LCS, unaudited balance sheets as at the
close of each such quarter and profit and loss and reconciliation of
surplus statement sand a statement of cash flows from the previous
quarter, from the previous year and from the beginning of such fiscal
year to the end of such quarter, and a comparison of such figures to
the budget, all certified by the chief financial officer or treasurer
of LCS.
8.10 FURTHER INFORMATION. The Borrower will promptly furnish to the Bank such
other information with respect to the financial condition, business or
operations of the Borrower and the Facility as the Bank may reasonably request
from time to time.
8.11 RESIDENCY AGREEMENTS. The Borrower shall maintain at all times Effective
Residency Agreements with respect to not less than twenty-five (25) of the
independent living units in the Project.
8.12 COMPLIANCES WITH LAWS. The Borrower shall comply with all laws and all
covenants, easements, declarations and restrictions which at any time are
applicable to the Facility.
8.13 COMPLIANCE WITH OTHER AGREEMENTS. The Borrower shall comply with the terms
and conditions of (i) all instruments, agreements and other documents delivered
by or on behalf of the Borrower in connection with (A) the Bond Financing,
including without limitation the Trust Indenture and the other Bond Documents,
and (B) the Residents' Loans, including without limitation the Residency
Agreements and the other Residents' Loan Documents, (ii) the Management
Agreement, (iii) the Development Agreement, (iv) the Operating and Use
Agreement, (v) the Escrow Agreements, and (vi) all of the other contracts and
agreements reflected on Schedule 4.22.
8.14 CAPITAL REPLACEMENT RESERVE REQUIREMENT. The Borrower shall maintain at all
times the reserves required pursuant to the provisions of the Capital
Replacement Reserve Escrow Agreement (regardless of whether or not such
agreement remain in full force and effect).
8.15 FLOOD INSURANCE. Will obtain special flood insurance to meet Federal
Emergency Management Agency ("FEMA") coverage requirements in amount equal to
the lesser of the amount of the Loan or the maximum insurance available under
the National Flood Insurance Program, if FEMA determines that the Mortgaged
Property is located in a flood hazard area.
<PAGE>
8.16 COMPLIANCE WITH ENVIRONMENTAL LAWS. Will at all times comply with all
applicable environmental, hazardous waste or substance, toxic substance, and
underground storage laws and regulations, and will obtain any permits, licenses,
or similar authorizations to construct, occupy, operate, or use any buildings,
improvements, fixtures, or equipment forming a part of the Facility by reason of
any applicable environmental, hazardous waste or substance, toxic substance, or
underground storage laws or regulations; and it will not permit the Facility or
any of its Property to be used to store or dispose of any hazardous waste or
substance, toxic substances, or any solid wastes, except as used in the ordinary
course of business and disposed of in accordance with all applicable law, and
will take all steps necessary to ensure that no hazardous waste or substances,
toxic substances, or solid wastes are disposed of or otherwise released on or to
the Mortgaged Property.
8.17 ERISA. Borrower, CREP and their ERISA affiliates shall maintain any ERISA
Plans in compliance with ERISA and shall not allow any condition to exist in
connection with any ERISA Plan which might constitute grounds for the PBGC to
institute proceedings to have such ERISA Plan terminated or a trustee appointed
to administer such ERISA Plan, and not engage in, or permit to exist or occur,
any other condition, event or transaction with respect to any ERISA Plan which
could result in the incurrence by the Borrower or CREP of any material
liability, fine or penalty.
8.18 DISPOSITION OF PROPERTY. Neither Borrower nor CREP shall sell, convey,
assign, lease, transfer, abandon or otherwise dispose of, voluntarily or
involuntarily, by operation of law or otherwise its legal or beneficial interest
in the Property, or any part thereof, except the Residency Agreements and leases
of space incidental to the operation of the Facility.
8.19 LIENS ON THE PROPERTY. Neither Borrower nor CREP shall at any time create,
incur, assume, or suffer to exist any indebtedness secured by a mortgage, deed
of trust, pledge, lien, security interest, charge or other encumbrance upon all
or any part of the Property, except the Bond Financing and the Residents' Loans.
8.20 MODIFICATION OF AGREEMENTS. Without the prior written consent of the Bank,
the Borrower shall not terminate or amend, modify or supplement in any respect
any of the following documents: The Management Agreement, the Development
Agreement, the Services Agreement, the Operating and Use Agreement, either of
the Escrow Agreements, the Contracts, the form of Residency Agreement, the
Residents' Loan Documents and all other documents related to the Residents'
Loans, including without limitation the Residency Agreements, the Bond Documents
<PAGE>
and all other documents given to evidence, secure and support the Bond
Financing, and any other contact or agreement identified on Schedule 3.22.
8.21 FEES AND EXPENSES. Will pay on demand, whether or not the Closing occurs or
any Loan Advance is made, all charges for title examination, surveys, recording
fees and taxes, the reasonable fees and disbursements of the Bank's legal
counsel for services in connection with this Agreement and in connection with
the Loan, and all other reasonable and necessary out-of-pocket expenses of the
Bank relating to the matters contemplated in this Agreement. All items required
to be furnished under this Agreement or under the Loan Documents shall be
furnished without cost to the Bank. If further or additional appraisals or
environmental studies are required by the Bank, the Borrower shall reimburse the
Bank, upon demand, for the cost of the appraisals or environmental studies. The
parties agree that such further appraisals will be needed only in the event of a
perceived reduction in the value of the Mortgaged Property and that additional
environmental studies will be needed only in the event of an environmental
accident or the discovery of new evidence of pre-existing environmental problems
with the Mortgaged Property.
8.22 INDEBTEDNESS. The Borrower and CREP shall not at any time create, incur,
assume or suffer to exist any indebtedness except: (a) indebtedness to the Bank
pursuant to this Agreement and the other Loan Documents, (b) indebtedness under
the Bond Financing pursuant to the Bond Documents, (c) indebtedness to the
Residents pursuant to the Residents' Loan Documents, and (d) trade debt incurred
in the ordinary course of business, without the prior written consent of Bank,
which Bank shall not unreasonably withhold.
8.23 COMBINED CASH FLOW COVERAGE. From and after December 31, 1998, the Combined
Cash Flow Coverage of the Borrower and CREP shall not at any time be less than
1.2 to 1.0. As used herein, "Combined Cash Flow Coverage of Borrower and CREP"
shall mean the ratio of Combined Cash Flow of Borrower and CREP to the Combined
Coverage Amount of Borrower and CREP.
SECTION 9. EVENTS OF DEFAULT. The occurrence of any or all of the following
events shall constitute an "Event of Default" under this Agreement:
(a) The Borrower shall be in default in the payment of any interest or
principal under the Note or any other payment required to be made under this
Agreement, as and when due and payable, and such default shall continue for a
period of more than five days after Bank shall have given Borrower notice of
such non-payment.
<PAGE>
(b) The Borrower shall default in the observance or performance of any
of the covenants, agreements, conditions, or undertakings to be performed or
observed by it pursuant to the terms of this Agreement or of any other Loan
Document and such default shall continue for a period of more than thirty days
after Bank shall have given Borrower notice of such non-payment.
(c) Any representation or warranty of the Borrower or any Guarantor
shall prove to be false or misleading in any material adverse respect.
(d) Any of the Guarantors shall default in the performance or
observance of any covenant, agreement, or duty under any Loan Document beyond
any applicable period of grace provided for therein;
(e) Any statement of fact or certificate furnished by the Borrower
under or pursuant to this Agreement or any other Loan Document proves to be
false or misleading in any material adverse respect as of the date of which the
facts set forth therein were stated or certified.
(f) The Borrower or CREP shall admit in writing its inability to pay
its debts generally, shall make a general assignment for the benefit of
creditors, or shall be adjudicated insolvent, or shall institute any proceedings
seeking to adjudicate it insolvent, seeking a liquidation, or seeking an
arrangement with creditors to take advantage of any bankruptcy, reorganization,
insolvency, readjustment of debt, dissolution, or liquidation law or statute, or
any action shall be taken by the Borrower for the purpose of effecting any of
the foregoing; or the Borrower shall file a petition commencing a case naming
itself as debtor under the United States Bankruptcy Code; or a petition shall be
filed commencing a case against the Borrower under the United States Bankruptcy
Code; or any proceeding shall be instituted against the Borrower seeking
liquidation of it and such proceedings shall remain undismissed or unstayed for
a period of 60 days.
(g) This Agreement or any other Loan Document or any other instrument
or document to be issued under this Agreement fails to be a valid act or
obligation of the Borrower or any Guarantor in accordance with its terms or
ceases to be in full force and effect, or any party to a Loan Document denies it
has any further liability or obligation, prospective or otherwise, under any
such Loan Document.
(h) Any change in the financial condition of the Borrower or CREP or
the occurrence of any event that would have a materially adverse effect on the
ability of the Borrower or CREP
<PAGE>
to repay the Note or the ability of the Borrower to fully discharge its
obligations under any Loan Document.
(i) There shall be any change in majority control of the Borrower or
CREP without the prior written approval of the Bank.
(j) Any partnership interest in the Borrower or CREP, including any
interest in the profits or losses of the Borrower or CREP shall have been
transferred, pledged, levied upon or encumbered.
(k) Final judgment for the payment of money in excess of One Hundred
Thousand Dollars ($100,000.00) shall be rendered against the Borrower or CREP
and the same shall remain undischarged for a period of 60 days, during which
execution shall not be effectively stayed.
(l) An "Event of Default" as defined in Article IV of the Mortgage
shall occur and be continuing; or
(m) The Borrower or CREP shall fail to keep in full force and effect
any permit or approval issued by any Governmental Authority with respect to the
construction, occupancy, operation or use of the Facility or with respect to the
matters contemplated hereby; or
(n) The Borrower shall abandon construction of the Phase III
Improvements and such abandonment shall continue for a period of ninety (90)
consecutive days; or
(o) The Phase III Improvements shall not have been completed in
accordance with the Plans, on or before December 31, 1997 or the Completion
Approvals shall not be obtained on or before December 31, 1997.
(p) The Property or any part thereof shall be condemned or damaged by
fire or other casualty, or any other event shall occur, in such manner as to
preclude, in the Bank's sole judgment, the completion of the Phase III
Improvements by December 31, 1997; or
(q) A survey at any time shall show that the Improvements encroach upon
any street, easement, right of way or adjoining property or violate any setback
requirement or that any adjoining structure encroaches on the Property to an
extent deemed material by the Bank; or
<PAGE>
(r) A default shall occur under the Bond Documents, the Residents' Loan
Documents, the Management Agreement, the Development Agreement, the Operating
and Use Agreement, either of the Escrow Agreements, any of the other contracts
or agreements identified on Schedule 3.22; or
(s) The Management Agreement, the Development Agreement, the Operating
and Use Agreement, any of the Contracts or any of the other contracts or
agreements identified on Schedule 3.22 shall be terminated.
(t) Any action, suit, or proceeding seeking to establish or enforce
liability under any federal, state, municipal, or local environmental, hazardous
waste or substance, toxic substance, or underground storage law or regulation
with respect to the Mortgaged Property shall be commenced against the Borrower
or CREP, or any Collateral before or by any Governmental Body and the Borrower
fails to diligently prosecute a defense, or a settlement is entered into or a
final judgment is rendered against the Borrower or CREP or any Collateral, which
settlement or judgment remains unsatisfied within a reasonable time thereafter.
SECTION 10, RIGHTS AND REMEDIES. The Bank shall have the following rights and
remedies upon the occurrence of any Event of Default described in Section 9 of
this Agreement:
10.1 TERMINATION OF COMMITMENTS. All obligations of the Bank to make a Loan
Advance shall terminate without further notice of any kind to the Borrower.
10.2 ACCELERATION OF INDEBTEDNESS. The Bank may declare the Note and any and all
other Indebtedness of the Borrower to the Bank to be forthwith due and payable,
both as to principal and interest, without presentment, demand, protests or
other notice of any kind, all of which are expressly waived, regardless of any
contrary provision of this Agreement or the Note or any other Loan Document,
agreement, document, or instrument to be issued or contemplated by this
Agreement.
10.3 PROTECTION AND ENFORCEMENT OF RIGHTS. The Bank may proceed to protect and
enforce its rights either by action in law or equity or by other appropriate
proceedings, whether for the specific performance (to the extent permitted by
applicable law and equitable principles) of any covenant or agreement contained
in this Agreement, any Loan Document, any other document, agreement, or
instrument to be issued or contemplated under this Agreement, any Note, or any
instrument evidencing any Indebtedness of the Borrower to the Bank, or in aid of
the exercise of
<PAGE>
any power granted in this Agreement, any Loan Document, any other agreement,
document, or instrument to be issued or contemplated under this Agreement, any
note, or any such instrument evidencing any Indebtedness of the Borrower to the
Bank, and may proceed to enforce the payment of the Note and all other
Indebtedness of the Borrower to the Bank and may enforce any other legal or
equitable right that the Bank may have under this Agreement or under any Note,
any Loan Document, or any other agreement, document, or instrument to be issued
or contemplated under this Agreement or otherwise available.
SECTION 11. RIGHT OF SETOFF. Upon the occurrence of an Event of Default, the
Borrower and CREP agree that the Bank shall have the right of setoff against the
liabilities of the Borrower to the Bank with respect to any account or funds of
the Borrower or CREP with the Bank and with respect to any other obligation of
any nature from the Bank to the Borrower or CREP.
SECTION 12. MISCELLANEOUS.
12.1 WAIVERS. No delay or failure on the part of the Bank in exercising any
right, power or privilege under this Agreement or under the terms and provisions
of the Notes held by it shall operate as a waiver thereof; nor shall any single
or partial exercise thereof preclude any further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies of the
Bank are cumulative and are not exclusive of any rights or remedies which the
Bank would otherwise have.
12.2 NOTICES. All notices, requests and consents under this Agreement shall be
in writing and shall be effective when received. Any notice or other
communication herein required or permitted to be given to any party may be given
in writing by depositing the same in the United States mail, certified mail,
postage prepaid, addressed to the party at the address set forth below:
(a) If to the Bank:
Norwest Bank Iowa,
National Association
Attention: Douglas Barclay
666 Walnut Street
Des Moines, Iowa 50309
<PAGE>
(b) If to the Borrower:
The Chestnut Partnership
c/o Mullan Enterprises, Inc.
The Foxleigh Building
2330 W. Joppa Road
Suite 210
Lutherville, Maryland 21093
(c) If to CREP:
The Chestnut Real Estate Partnership
c/o Mullan Enterprises, Inc.
The Foxleigh Building
2330 W. Joppa Road
Suite 210
Lutherville, Maryland 21093
(d) If to LCS:
LCS Holdings, Inc.
800 Second Avenue
Des Moines, Iowa 50309
Attention: President
(e) If to LCSC:
Life Care Services Corporation
800 Second Avenue
Des Moines, Iowa 50309
Attention: President
(f) If to HHC:
Home Health Care Services Corporation
800 Second Avenue
Des Moines, Iowa 50309
Attention: President
or at such other address as the party may designate in a notice in writing given
to the other party.
<PAGE>
12.3 SUCCESSORS AND ASSIGNS; SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
covenants, agreements, representations, and warranties made herein and in the
certificates delivered pursuant to this Agreement shall survive the making by
the Bank of the loans herein contemplated and shall continue in full force and
effect so long as any Indebtedness to the Bank is outstanding and unpaid.
Whenever in this Agreement any of the parties to this Agreement is referred to,
such reference shall be deemed to include the successors and assigns of such
party. All covenants, promises, and agreements by and on behalf of the Borrower
or of the Bank that are contained in this Agreement may be assigned by the Bank
and all such covenants, promises and agreements shall bind and inure to the
benefit of the successors and assigns of the Bank. This Agreement may not be
assigned by the Borrower.
12.4 COUNTERPARTS. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original and all of which together shall
constitute a single instrument.
12.5 BUSINESS DAYS. If any date specified herein shall not be a Business Day,
the date shall be deemed to be the next following Business Day.
12.6 FORUM SELECTION AND CONSENT TO JURISDICTION. Any litigation based on, or
arising out of, under or in connection with, this Agreement or any other Loan
Document, or any course of conduct, course of dealing, statements (whether oral
or written) or actions of the Bank, Borrower or the Guarantors shall be brought
and maintained exclusively in the courts of the state of Iowa or in the United
States District Court for the Southern District of Iowa; provided however, that
any suit seeking enforcement against any Collateral or other property might be
brought, at the Bank's option, in the courts of any jurisdiction where that
Collateral or other property might be found. The Borrower and each Guarantor
hereby expressly and irrevocably submit to the jurisdiction of the courts of the
state of Iowa and of the United States District Court for the Southern District
of Iowa for the purpose of any such litigation as set forth above and
irrevocably agree to be bound by any judgment rendered by those courts in
connection with the litigation. The Borrower and each Guarantor further
irrevocably consent to the service of process by registered mail, postage
prepaid, or by personal service within or without the state of Iowa. The
Borrower and each Guarantor hereby expressly and irrevocably waive, to the
fullest extent permitted by law, any objection that it might have or hereafter
might have to the laying of venue of any such litigation brought in any such
court referred to above and any claim that any such litigation has been brought
in an inconvenient forum. To the extent that the Borrower or any Guarantor has
or hereafter might acquire any immunity from jurisdiction of any court or from
any legal process
<PAGE>
(whether through service or notice, attachment prior to judgment, attachment in
aid of execution, or otherwise) with respect to itself or its property, the
Borrower and each Guarantor hereby irrevocably waives the immunity in respect of
its obligations under this Agreement.
12.7 WAIVER OF JURY TRIAL. The Bank, the Borrower and the Guarantors hereby
knowingly, voluntarily, and intentionally waive any rights any of them might
have to a trial by jury with respect to any litigation based on, or arising out
of, under, or in connection with this Agreement or any other Loan Document, or
any course of conduct, course of dealing, statements (whether oral or written),
or actions of the Bank, the Borrower or the Guarantors. Each of the parties
hereto acknowledges and agrees that it or he has received full and sufficient
consideration for this provision (and each other provision of each other Loan
Document to which it or he is a party) and that this provision is a material
inducement for each party entering into this Agreement and each other Loan
Document.
12.8 APPLICABLE LAW. The laws of the State of Iowa shall govern the validity,
interpretation, and enforcement of this Agreement except that the law of the
State of Maryland shall govern the validity, enforcement, and scope of the Liens
on Collateral located in Maryland.
12.9 BROKERAGE FEES. Borrower represents and warrants that no broker was
involved in procuring the Loan or in connection with this Agreement. The Bank
shall not be liable in any way for the payment of any brokerage fees or
commissions to any broker or other Person entitled to or claiming to be entitled
to fees or commissions in connection with this Agreement or the transactions
contemplated by this Agreement. The Borrower agrees to hold the Bank harmless
from all claims for brokerage fees or commissions that may be made in connection
with the transactions contemplated by this Agreement.
12.10 COSTS AND EXPENSES. The Borrower shall:
(a) Whether or not the transactions contemplated hereby are
consummated, pay or reimburse the Bank within five Business Days after
demand for all costs and expenses (including Attorney Costs) incurred
by the Bank in connection with the development, preparation, delivery,
administration and execution of, and any amendment, supplement, waiver
or modification to (in each case, whether or not consummated), this
Agreement, any Loan Document, and any other documents prepared in
connection herewith or therewith, and the consummation of the
transactions contemplated hereby and thereby; and
<PAGE>
(b) pay or reimburse the Bank within five Business Days after
demand for all costs and expenses (including Attorney Costs) incurred
by them in connection with the enforcement, attempted enforcement, or
preservation of any rights or remedies under this Agreement or any
other Loan Document during the existence of an Event of Default or
after acceleration of the Loans (including in connection with any
"workout" or restructuring regarding the Loans, and including in any
insolvency proceeding or appellate proceeding).
12.11 ENTIRE AGREEMENT. This Agreement represents the entire agreement of the
parties to this Agreement with respect to the matter stated herein. In instances
where the terms of this Agreement and the terms of any other Loan Document
conflict, the terms of this Agreement shall control. This Agreement and the
other Loan Documents supersede all prior understandings and agreements, whether
written or oral, among the parties hereto relating to the transactions provided
for herein and therein, including but not limited to the Letter of Commitment
dated January 24, 1997.
12.12 NO THIRD PARTY RIGHTS. Nothing in this Agreement, whether express or
implied, shall be construed to give to any Person other than the parties hereto
any legal or equitable right, remedy or claim under or in respect of this
Agreement, which is intended for the sole and exclusive benefit of the parties
hereto.
12.13 SEVERABILITY. The provisions of this Agreement are intended to be
severable. If any provision of this Agreement shall be held invalid or
unenforceable in whole or in part in any jurisdiction, such provision shall, as
to such jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without in any manner affecting the validity or enforceability
thereof in any other jurisdiction or the remaining provisions hereof in any
jurisdiction.
12.14 AMENDMENTS AND RELEASES. Modifications, amendments, or supplements of this
Agreement and any other Loan Document shall be made upon, but only upon, the
written agreement of the Bank and the Borrower.
12.15 ACKNOWLEDGMENT. The Borrower and each Guarantor hereby acknowledge receipt
of a copy of each Loan Document and each other document, instrument, and
agreement executed by any debtor in connection with the Indebtedness to the Bank
under this Agreement.
<PAGE>
IMPORTANT: READ BEFORE SIGNING. THE TERMS OF THIS AGREEMENT SHOULD BE READ
CAREFULLY BECAUSE ONLY THOSE TERMS IN WRITING ARE ENFORCEABLE. NO OTHER TERMS OR
ORAL PROMISES NOT CONTAINED IN THIS WRITTEN CONTRACT MAY BE LEGALLY ENFORCED.
YOU MAY CHANGE THE TERMS OF THIS AGREEMENT ONLY BY ANOTHER WRITTEN AGREEMENT.
IN WITNESS WHEREOF, the Borrower and CREP, LCS, LCSC, HHC and the Bank have
caused this Agreement to be duly executed all as of the day and year first above
written.
NORWEST BANK IOWA, NATIONAL ASSOCIATION
("BANK")
By: /s/ Douglas Barclay
----------------------------------
Douglas C. Barclay, Vice President
<PAGE>
THE CHESTNUT PARTNERSHIP ("BORROWER")
and THE CHESTNUT REAL ESTATE PARTNERSHIP
("CREP")
By: BLAKEHURST JOINT VENTURE, as a general partner of The Chestnut
Partnership; and by THE CHESTNUT REAL ESTATE PARTNERSHIP as a general
partner of The Chestnut Partnership, by Blakehurst Joint Venture as a
general partner of The Chestnut Real Estate Partnership
By: Chestnut Village, Inc., a general partner
By: /s/ Arthur V. Neis
---------------------------
Title: Treasurer
------------------------
<PAGE>
THE CHESTNUT PARTNERSHIP ("BORROWER")
and THE CHESTNUT REAL ESTATE PARTNERSHIP
("CREP")
By: WEST JOPPA ROAD LIMITED PARTNERSHIP as a general partner of The
Chestnut Partnership; and by THE CHESTNUT REAL ESTATE PARTNERSHIP as a
general partner of The Chestnut Partnership, by West Joppa Road Limited
Partnership as a general partner of The Chestnut Real Estate
Partnership
By: Rosedale Care, Inc., a general partner
By: /s/ T.F. Mullan
---------------------------
Title: Thomas F. Mullan, III
------------------------
President
<PAGE>
THE CHESTNUT PARTNERSHIP ("BORROWER")
and THE CHESTNUT REAL ESTATE PARTNERSHIP
("CREP")
By: WEST JOPPA ROAD LIMITED PARTNERSHIP as a general partner of The
Chestnut Partnership; and by THE CHESTNUT REAL ESTATE PARTNERSHIP as a
general partner of The Chestnut Partnership, by West Joppa Road Limited
Partnership as a general partner The Chestnut Real Estate Partnership
By: Continental Care, Inc., a general partner
By: /s/ J. A. Luetkemeyer, Jr.
---------------------------
Title: President
------------------------
<PAGE>
LCS HOLDINGS, INC. ("LCS ")
By: /s/ Arthur V. Neis
------------------------------------
Title: Treasurer
---------------------------------
LIFE CARE SERVICES CORPORATION ("LCSC")
By: /s/ Arthur V. Neis
------------------------------------
Title: Treasurer
---------------------------------
HOME HEALTH CARE SERVICES CORPORATION ("HHC")
By: /s/ Arthur V. Neis
------------------------------------
Title: Treasurer
---------------------------------
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION OF THE LAND
BEING KNOWN AND DESIGNATED as Lot No. 2 as shown on a plat entitled
"Amended Subdivision Plat of BLAKEHURST LIFE CARE COMMUNITY " dated March 18,
1992 and recorded among the Land Records of Baltimore County in Plat Book SM No.
64, folio 34, together with those two parcels of land binding on Lot No. 2 and
identified on the Plat as "Highway Widening Area No. 1 " containing 1.943 acres,
more or less, and "Highway Widening Area No. 3 ", containing 0.020 acres, more
or less.
BEING the same property which by Deed dated March 23, 1992 and recorded
among the Land Records of Baltimore County, Maryland in Liber SM No. 9109, folio
54, was granted and conveyed by Institute of Mission Helpers of Baltimore City
to The Chestnut Real Estate Partnership.
TOGETHER WITH the benefit of, and subject to the provisions of, that
certain Agreement of Restrictions and Purchase Option dated March 23, 1992 by
and between The Institute of Mission Helpers of Baltimore City and The Chestnut
Real Estate Partnership as recorded among the Land Records of Baltimore County
in Liber SM No. 9109, folio 141.
<PAGE>
EXHIBIT B
TERM LOAN NOTE
$1,900,000.00 June ___, 1997
Des Moines, Iowa
FOR VALUE RECEIVED, on the Term Loan Termination Date, and subject in any event
to the principal payments required to be made prior thereto, the undersigned,
THE CHESTNUT PARTNERSHIP, a Maryland general partnership (the "BORROWER"),
promises to pay to the order of NORWEST BANK IOWA, NATIONAL ASSOCIATION, a
national banking association (the "BANK"), the principal sum of One Million Nine
Hundred Thousand Dollars ($1,900,000.00) or, if less, the aggregate unpaid
principal amount of the Loan (as defined in the Term Loan Agreement referred to
below) made by the Bank to the Borrower pursuant to the Term Loan Agreement,
dated as of June ___, 1997, by and among the Borrower; Bank and Guarantors named
therein, (the "TERM LOAN AGREEMENT"), together with interest from the date
hereof on the unpaid principal balance of such Loan payable from time to time on
the dates and at the rates as are specified in the Term Loan Agreement.
Capitalized terms used and not otherwise defined herein shall have the same
meaning herein as in the Term Loan Agreement.
Both principal and interest are payable without set off, counterclaim or
deduction of any kind in lawful money of the United States of America at the
main banking office of Bank in Des Moines, Iowa, on the dates and in the manner
set forth in the Term Loan Agreement as it now exists or may be hereafter
amended, as appropriate. The principal amount of the Loan made by the Bank to
the Borrower, the amount of interest accrued thereon and the amount and date of
each payment of principal and interest thereon shall be recorded in the Bank's
records for the Borrower but the failure of the Bank to so record such
information shall not relieve the Borrower of its obligation to make payment of
such item when due. The Bank's records as to the aggregate unpaid principal
amount of its Loan and of any and unpaid accrued interest on such Loan shall be
conclusive evidence of the amount of the Borrower's obligation to the Bank in
respect of such Loan, in the absence of manifest error.
This promissory note is the Note referred to in the Term Loan Agreement, and is
entitled to the benefits and is subject to the terms of the Term Loan Agreement,
including, without limitation, the limitation on the maximum amount of Loan
available to be borrowed from the Bank. This Note is secured by the Liens
granted under the Term Loan Agreement and the other Loan Documents. This Note is
prepayable in the amounts and under the circumstance set forth in the Term Loan
Agreement, and its maturity is subject to Acceleration upon the terms and
conditions set forth therein.
If this Note is not paid when due (whether at maturity or upon Acceleration or
demand), the Borrower agrees to pay all costs of collection including reasonable
attorney fees and legal expenses incurred by the holder hereof.
<PAGE>
Presentment for payment, demand, notice of dishonor, protest, and notice of
protest are hereby expressly waived.
This Note is being delivered in the State of Iowa and shall be construed and
enforced in accordance with the laws of the State of Iowa.
IMPORTANT: READ BEFORE SIGNING. THE TERMS OF THIS AGREEMENT SHOULD BE READ
CAREFULLY BECAUSE ONLY THOSE TERMS IN WRITING ARE ENFORCEABLE. NO OTHER TERMS OR
ORAL PROMISES NOT CONTAINED IN THIS WRITTEN CONTRACT MAY BE LEGALLY ENFORCED.
YOU MAY CHANGE THE TERMS OF THIS AGREEMENT ONLY BY ANOTHER WRITTEN AGREEMENT.
THE CHESTNUT PARTNERSHIP
By: BLAKEHURST JOINT VENTURE, as a general
partner of The Chestnut Partnership; and by
THE CHESTNUT REAL ESTATE PARTNERSHIP as a
general partner of The Chestnut Partnership,
by Blakehurst Joint Venture as a general
partner of The Chestnut Real Estate
Partnership
By: Chestnut Village, Inc., a general partner
By:
----------------------------------------
Title:
---------------------------------
By: WEST JOPPA ROAD LIMITED PARTNERSHIP, as a
general partner of The Chestnut Partnership;
and by THE CHESTNUT REAL ESTATE PARTNERSHIP
as a general partner of The Chestnut
Partnership, by West Joppa Road Limited
Partnership as a general partner of The
Chestnut Real Estate Partnership
By: Rosedale Care, Inc., a general partner
By:
----------------------------------------
Title:
---------------------------------
By: Continental Care, Inc., a general partner
By:
----------------------------------------
Title:
---------------------------------
<PAGE>
SCHEDULE 4.6
LIST OF FINANCIAL STATEMENTS
Report on Audits of Separate and Combined Financial Statements of The Chestnut
Real Estate Partnership and The Chestnut Partnership for the years ended
December 31, 1996, 1995 and 1994.
LCS Holdings, Inc. and Subsidiaries Consolidated Financial Statements as of
March 31, 1996 and 1995 (With Independent Auditor's Report Thereon)
LCS Holdings, Inc. and Subsidiaries Consolidated Financial Statement as of
December 31, 1996 (unaudited)
<PAGE>
SCHEDULE 4.20
BOND DOCUMENTS
Trust Indenture, dated as of May 1, 1992, between Borrower and Bond Trustee
Indemnity Deed of Trust and Security Agreement, dated as of May 28, 1992, among
CREP, as Grantor, and David D. Gordon, as Trustee (for the benefit of Bond
Trustee and The Sumitomo Trust and Banking Company, Ltd. ("Sumitomo"))
Indemnity Collateral Assignment of Leases, Residency Agreements, Rents and Fees,
dated as of May 28, 1992 from CREP to Bond Trustee and Sumitomo.
Collateral Assignment of Leases, Residency Agreements, Rents and Fees, dated as
of May 28, 1992, from Borrower to Bond Trustee and Sumitomo
Security Agreement, dated as of May 1, 1992, among Borrower, Sumitomo and Bond
Trustee
Consent and Subordination Agreement, dated as of May 28, 1992, among Borrower,
Sumitomo and Bond Trustee
Guaranty Agreement, dated as of May 1, 1992, delivered by CREP to Bond Trustee
Subordination Agreement, dated as of August 2, 1993, among CREP, Borrower,
Trustee, Sumitomo, Bond Trustee, John Obzud, as Trustee, and David D. Gordon, as
Trustee
<PAGE>
SCHEDULE 4.21
RESIDENTS' LOAN DOCUMENTS
Disclosure Statement, together with the form of Residency Agreement, dated as of
August 1, 1994
Residency Guaranty Agreement, dated as of August 2, 1993, between CREP and the
Holders
Indemnity Deed of Trust and Security Agreement, dated as of August 2, 1993
between CREP and the Trustee
<PAGE>
SCHEDULE 4.22
FACILITY AGREEMENTS
All capitalized terms used herein shall have the same meanings assigned to such
terms in the TERM LOAN AGREEMENT to which this Schedule is attached.
Admission Fee Escrow Agreement - Phase I dated as of July 18, 1996 between
Borrower and the Escrow Agent.
Admission Fee Escrow Agreement - Phase III dated as of April 24, 1996, between
Borrower and the Escrow Agent.
Architect's Agreement dated January 1, 1996, between Borrower and architect.
Capital Replacement Reserve Escrow Agreement, dated as of August 2, 1993 between
the Borrower and Maryland National Bank, as Escrow Agent.
Construction Contract dated as of September 4, 1996, between the Borrower and
the general contractor, as supplemented on October 30, 1996.
Development Agreement, dated June 3, 1988, between the Borrower and LCSC, as
amended by Amendment to Development Agreement, dated as of December 30, 1994,
October 30, 1996 and February 17, 1997 among the Borrower, LCSC, Rosedale, and
Continental and with LCSD being a party to the 1996 and 1997 amendments, and as
the same may be amended, modified or supplemented from time to time in
compliance with the provisions of the Loan Documents.
Health Care Resident Loans Escrow Agreement dated as of July 18, 1996, between
the Borrower and the Escrow Agent.
Management Agreement, dated September 28, 1990, between the Borrower and LCSC.
Operating and Use Agreement, dated as of April 1, 1992, between the Borrower and
CREP.
Amended and Restated Wait List Escrow Agreement dated as of July 18, 1996,
between the Borrower and Escrow Agent.
EXHBIT 10.47.1
TERM LOAN NOTE
$1,900,000.00 July 3, 1997
Des Moines, Iowa
FOR VALUE RECEIVED, on the Term Loan Termination Date, and subject in any event
to the principal payments required to be made prior thereto, the undersigned,
THE CHESTNUT PARTNERSHIP, a Maryland general partnership (the "BORROWER"),
promises to pay to the order of NORWEST BANK IOWA, NATIONAL ASSOCIATION, a
national banking association (the "BANK"), the principal sum of One Million Nine
Hundred Thousand Dollars ($1,900,000.00) or, if less, the aggregate unpaid
principal amount of the Loan (as defined in the Term Loan Agreement referred to
below) made by the Bank to the Borrower pursuant to the Term Loan Agreement,
dated as of July 3, 1997, by and among the Borrower; Bank and Guarantors named
therein, (the "TERM LOAN AGREEMENT"), together with interest from the date
hereof on the unpaid principal balance of such Loan payable from time to time on
the dates and at the rates as are specified in the Term Loan Agreement.
Capitalized terms used and not otherwise defined herein shall have the same
meaning herein as in the Term Loan Agreement.
Both principal and interest are payable without set off, counterclaim or
deduction of any kind in lawful money of the United States of America at the
main banking office of Bank in Des Moines, Iowa, on the dates and in the manner
set forth in the Term Loan Agreement as it now exists or may be hereafter
amended, as appropriate. The principal amount of the Loan made by the Bank to
the Borrower, the amount of interest accrued thereon and the amount and date of
each payment of principal and interest thereon shall be recorded in the Bank's
records for the Borrower but the failure of the Bank to so record such
information shall not relieve the Borrower of its obligation to make payment of
such item when due. The Bank's records as to the aggregate unpaid principal
amount of its Loan and of any and unpaid accrued interest on such Loan shall be
conclusive evidence of the amount of the Borrower's obligation to the Bank in
respect of such Loan, in the absence of manifest error.
This promissory note is the Note referred to in the Term Loan Agreement, and is
entitled to the benefits and is subject to the terms of the Term Loan Agreement,
including, without limitation, the limitation on the maximum amount of Loan
available to be borrowed from the Bank. This Note is secured by the Liens
granted under the Term Loan Agreement and the other Loan Documents. This Note is
prepayable in the amounts and under the circumstance set forth in the Term Loan
Agreement, and its maturity is subject to Acceleration upon the terms and
conditions set forth therein.
If this Note is not paid when due (whether at maturity or upon Acceleration or
demand), the Borrower agrees to pay all costs of collection including reasonable
attorney fees and legal expenses incurred by the holder hereof.
Presentment for payment, demand, notice of dishonor, protest, and notice of
protest are hereby expressly waived.
<PAGE>
This Note is being delivered in the State of Iowa and shall be construed and
enforced in accordance with the laws of the State of Iowa.
IMPORTANT: READ BEFORE SIGNING. THE TERMS OF THIS AGREEMENT SHOULD BE READ
CAREFULLY BECAUSE ONLY THOSE TERMS IN WRITING ARE ENFORCEABLE. NO OTHER TERMS OR
ORAL PROMISES NOT CONTAINED IN THIS WRITTEN CONTRACT MAY BE LEGALLY ENFORCED.
YOU MAY CHANGE THE TERMS OF THIS AGREEMENT ONLY BY ANOTHER WRITTEN AGREEMENT.
THE CHESTNUT PARTNERSHIP
By: BLAKEHURST JOINT VENTURE, as a general
partner of The Chestnut Partnership; and by
THE CHESTNUT REAL ESTATE PARTNERSHIP as a
general partner of The Chestnut Partnership,
by Blakehurst Joint Venture as a general
partner of The Chestnut Real Estate
Partnership
By: Chestnut Village, Inc., a general partner
By: /s/ Arthur V. Neis
----------------------------------------
Title: Treasurer
--------------------------------
By: WEST JOPPA ROAD LIMITED PARTNERSHIP, as a
general partner of The Chestnut Partnership;
and by THE CHESTNUT REAL ESTATE PARTNERSHIP
as a general partner of The Chestnut
Partnership, by West Joppa Road Limited
Partnership as a general partner of The
Chestnut Real Estate Partnership
By: Rosedale Care, Inc., a general partner
By: /s/ T.J. Mullan
----------------------------------------
Title: President
--------------------------------
By: Continental Care, Inc., a general partner
By: J.A. Luetkemeyer, Jr.
----------------------------------------
Title: President
--------------------------------
EXHIBIT 10.47.2
GUARANTY AGREEMENT
GUARANTY AGREEMENT ("Guaranty"), dated as of July 3, 1997, made by THE
CHESTNUT REAL ESTATE PARTNERSHIP, a Maryland general partnership ("CREP"), LCS
HOLDINGS, INC., an Iowa corporation ("LCS"), LIFE CARE SERVICES CORPORATION, an
Iowa corporation ("LCSC"), and HOME HEALTH CARE SERVICES CORPORATION, an Iowa
corporation ("HHC") (CREP, LCS, LCSC and HHC are, collectively, the
"Guarantors"), in favor of NORWEST BANK IOWA, NATIONAL ASSOCIATION, a national
banking association (the "Bank").
RECITALS:
WHEREAS, pursuant to a Term Loan Agreement of even date herewith among
Bank, The Chestnut Partnership, as Borrower and the Guarantors as the same may
be amended, modified or supplemented from time to time (the "Loan Agreement"),
the Bank has agreed to make a loan of up to One Million Nine Hundred Thousand
Dollars ($1 900,000.00) to Bank (the "Loan"), and it is intended that
capitalized terms used herein and not otherwise defined herein shall have the
meanings assigned to them in the Loan Agreement;
WHEREAS, the Loan is evidenced by a Note of even date herewith made by
the Borrower to the Bank as the same may be extended, renewed, refinanced,
refunded, amended, modified or supplemented form time to time, and any
replacement or successor note (the "Note");
WHEREAS as used herein, the term "Loan Documents" shall include the
Loan Documents described in the Loan Agreement and all other documents delivered
by or on behalf of the Borrower in connection with the Loan;
WHEREAS, each of the Guarantors acknowledges receipt of copies of the
Loan Agreement, the Note and the other Loan Documents; and
WHEREAS, the execution and delivery by the Guarantors of this Guaranty
is a condition to the Bank's obligation to make a Loan to the Borrower pursuant
to the Loan Agreement, and the Guarantors expect to derive financial benefit
from the making of the Loan by the Bank to Borrower.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt of which is hereby acknowledged by the
Guarantors, and intending to be legally bound, the Guarantors hereby agree as
follows:
SECTION 1. GUARANTEE
1.1. GUARANTEED OBLIGATIONS. The Guarantors hereby jointly and
severally and unconditionally and irrevocably guarantee to Bank, and become
surety to the Bank for, the due,
<PAGE>
punctual and full payment and performance of, and covenant with Bank to duly,
punctually and fully pay and perform, the following (collectively, the
"Guaranteed Obligations"):
(a) all indebtedness of the Borrower to the Bank evidenced by the
Note or incurred under the Loan Agreement, both principal and
interest, and any refinancing or refunding thereof, and all
other amounts due or to become due under the Loan Agreement,
the Note and the other Loan Documents, and any refinancing or
refunding thereof, whether now existing or hereafter arising,
contracted or incurred, as and when such payment or
performance shall become due (whether by acceleration or
otherwise) in accordance with the terms of the Loan Documents;
(b) all covenants, agreements, obligations and liabilities of the
Borrower under the Loan Agreement, the Note and the other Loan
Documents, whether now existing or hereafter arising,
contracted or incurred, as and when such payment or
performance shall become due (whether by acceleration or
otherwise) in accordance with the terms of the Loan Documents;
1.2. GUARANTEE UNCONDITIONAL. The obligations of the Guarantors
hereunder are continuing, absolute and unconditional, irrespective of any
circumstance whatsoever which might otherwise constitute a legal or equitable
discharge or defense of a guarantor or surety. Without limiting the generality
of the foregoing, the obligations of the Guarantors hereunder shall remain in
full force and effect without regard to, and shall not be released, discharged
or in any way affected by:
(a) any amendment, modification or supplement to the Loan
Agreement, the Note or any other Loan Document;
(b) any exercise or nonexercise of or delay in exercising any
right, remedy, power or privilege under or in respect of this
Guaranty, the Loan Agreement, the Mortgage, the Note or any
other Loan Document (even if any such right, remedy, power or
privilege shall be lost thereby), or any waiver, consent,
indulgence or other action or inaction in respect thereof;
(c) any bankruptcy, insolvency, arrangement, composition,
assignment for the benefit of creditors or similar proceeding
commenced by or against the Borrower or any of the Guarantors;
(d) any failure to perfect or continue perfection of, or any
release or waiver of, any rights given to the Bank in any
property as security for the performance of any of the
Guaranteed Obligations;
(e) any extension of time for payment or performance of any of the
Guaranteed Obligations;
<PAGE>
(f) the genuineness, validity or enforceability of the Loan
Documents;
(g) any limitation of liability of the Borrower contained in any
Loan Document;
(h) any defense that may arise by reason of the failure of the
Bank to file or enforce a claim against the estate of the
Borrower in any bankruptcy or other proceeding;
(i) any voluntary or involuntary liquidation, dissolution, sale of
all or substantially all of the property of the Borrower, or
any marshalling of assets and liabilities, or other similar
proceeding affecting the Borrower or any of its assets;
(j) the release of the Borrower or any of the Guarantors from
performance or observance of any of the agreements, covenants,
terms or conditions contained in the Loan Documents by
operation of law;
(k) the failure of the Bank to keep the Guarantors advised of the
Borrower's financial condition, regardless of the existence of
any duty to do so;
(l) any sale or other transfer of the Collateral or any part
thereof or any foreclosure by Bank or any part thereof, or
(m) any other circumstances which might otherwise constitute a
legal or equitable discharge of a guarantor or surety.
No set-off, claim, reduction or diminution of any obligation, or any defense of
any kind or nature which the Borrower or any Guarantor now has or hereafter may
have against the Bank shall be available hereunder to any Guarantor against the
Bank.
1.3. NO NOTICE OR DUTY TO EXHAUST REMEDIES: WAIVER OF JURY TRIAL. Each
Guarantor hereby waives diligence, presentment, demand protest and all notices
of any kind, and waives any requirement that the Bank exhaust any right or
remedy, or proceed first or at any time, against the Borrower or any other
guarantor of, or any security for, any of the Guaranteed Obligations. This
Guaranty constitutes an agreement of suretyship as well as of guaranty, and Bank
may pursue its rights and remedies under this Guaranty and under the other Loan
Documents in whatever order, or collectively, and shall be entitled to payment
and performance hereunder notwithstanding such other Loan Documents and
notwithstanding any action taken by the Bank or inaction by the Bank to enforce
any of its rights or remedies against any other guarantor or any other Person or
property whatsoever. Each Guarantor waives any right to a trial by jury with
respect to any remedy or proceeding of the Bank with respect to this Guaranty.
1.4. WAVIER OF SUBROGATION, ETC. NOTWITHSTANDING ANY PAYMENTS MADE OR
OBLIGATIONS PERFORMED BY THE GUARANTORS BY REASON OF THIS GUARANTY (INCLUDING
BUT NOT LIMITED TO APPLICATION OF
<PAGE>
FUNDS ON ACCOUNT OF SUCH PAYMENTS OR OBLIGATIONS), EACH GUARANTOR HEREBY
IRREVOCABLY WAIVES AND RELEASES ANY AND ALL RIGHTS IT MAY HAVE AT ANY TIME
(WHETHER ARISING DIRECTLY OR INDIRECTLY, BY OPERATION OF LAW, CONTRACT OR
OTHERWISE) (A) TO ASSERT ANY CLAIM AGAINST THE BORROWER OR ANY OTHER PERSON, OR
AGAINST ANY DIRECT OR INDIRECT SECURITY, ON ACCOUNT OF PAYMENTS MADE OR
OBLIGATIONS PERFORMED UNDER OR PURSUANT TO THIS GUARANTY, INCLUDING WITHOUT
LIMITATION ANY AND ALL RIGHTS OF SUBROGATION, REIMBURSEMENT, EXONERATION,
CONTRIBUTION OR INDEMNITY, OR (B) TO REQUIRE THE MARSHALING OF ANY ASSETS OF THE
BORROWER, WHICH RIGHT OF MARSHALING MIGHT OTHERWISE ARISE FROM PAYMENTS MADE OR
OBLIGATIONS PERFORMED UNDER OR PURSUANT TO THIS GUARANTY, AND ANY AND ALL RIGHTS
THAT WOULD RESULT IN SUCH GUARANTOR BEING DEEMED A "CREDITOR" UNDER THE UNITED
STATES BANKRUPTCY CODE OF THE BORROWER OR ANY OTHER PERSON.
SECTION 2. REPRESENTATIONS, WARRANTIES AND COVENANTS
2.1. REPRESENTATIONS AND WARRANTIES. Each Guarantor hereby represents
warrants and certifies to Bank that the representations and warranties made by
the Borrower and Guarantors in the Loan Agreement are true and correct on the
date hereof.
2.2 COVENANTS. Each Guarantor hereby covenants with Bank that:
(a) Promptly upon becoming aware thereof, such Guarantor shall
give Bank notice of (i) the commencement, existence or threat
of any proceeding by or before any Governmental Authority
against or affecting such Guarantor or any of its Subsidiaries
which, if adversely decided, would have a material adverse
effect on the business, operations, condition (financial or
otherwise) or prospects of such Guarantor or on its ability to
perform its obligations hereunder or (ii) any material adverse
change in the business, operations, condition (financial or
otherwise) or prospects of such Guarantor.
(b) Such Guarantor shall permit such Persons as Bank may designate
to examine such Guarantor's books and records and take copies
and extracts therefrom and to discuss the affairs of such
Guarantor with its officers, employees and independent
accountants at such times and as often as the Bank may
reasonably request. Such Guarantor hereby authorizes such
officers, employees and independent accountants to discuss
with Bank the affairs of such Guarantor.
<PAGE>
SECTION 3. MISCELLANEOUS
3.1. EFFECT OF BANKRUPTCY PROCEEDINGS. This Guaranty SHALL be
effective, or be automatically reinstated, as the case may be, if at any time
payment, in whole or in part, of any of the Guaranteed Obligations is rescinded
or must otherwise be restored or returned by the Bank as a preference,
fraudulent conveyance or otherwise under any bankruptcy, insolvency or similar
law, all as though such payment had not been made. If an Event of Default at any
time shall have occurred and be continuing or exist and declaration of default
or acceleration under or with respect to any of the Loan Documents shall at such
time be prevented by reason of the pendency against the Borrower of a case or
proceeding under any bankruptcy or insolvency law, the Guarantors agree that,
for purposes of this Guaranty and their obligations hereunder, such Loan
Documents shall be deemed to have been declared in default or accelerated with
the same effect as if such Loan Documents had been declared in default and
accelerated in accordance with the terms thereof, and the Guarantors shall
forthwith pay the Guaranteed Obligations in full without further notice or
demand.
3.2 BANK'S RIGHT OF SET-OFF. If an Event of Default shall occur, the
Bank shall have the right, in addition to all other rights and remedies
available to it, to setoff against and to appropriate and apply to the unpaid
balance of the Guaranteed Obligations any debt owing to, and any other funds
held in any manner for the account of, any Guarantor by the Bank, including
without limitation all funds in all deposit accounts (general or special) now or
hereafter maintained by any Guarantor with the Bank. Such right shall exist
whether or not the Bank shall have made any demand under this Guaranty or any
other Loan Document and whether or not the Guaranteed Obligations or such
participation are matured or unmatured. Each Guarantor hereby confirms the
foregoing arrangements and the Bank's right of banker's lien and set-off and
nothing in this Guaranty or any other Loan Document shall be deemed any waiver
or prohibition of the Bank's right of banker's lien or setoff.
3.3 FURTHER ASSURANCES. From time to time upon the request of the Bank,
the Guarantors shall promptly and duty execute, acknowledge and deliver any and
all such further instruments and documents as the Bank may deem necessary or
desirable to confirm this Guaranty, to carry out the purpose and intent hereof
or to enable the Bank to enforce any of their respective rights hereunder.
3.4 AMENDMENTS, WAIVERS, ETC. This Guaranty cannot be amended,
modified, waived, changed, discharged or terminated except by an instrument in
writing signed by the party against whom enforcement of such amendment,
modification, waiver, change, discharge or termination is sought.
3.5 NO IMPLIED WAIVER; CUMULATIVE REMEDIES. No course of dealing and no
delay or failure of the Bank in exercising any right, power or privilege under,
this Guaranty or any other Loan Document shall affect any other or future
exercise thereof or exercise of any other right, power or privilege; nor shall
any single or partial exercise of any such right, power or privilege
<PAGE>
or any abandonment or discontinuance of steps to enforce such a right, power or
privilege preclude any further exercise thereof or of any other right, power or
privilege. The rights and remedies of the Bank under this Guaranty are
cumulative and not exclusive of any rights or remedies which they would
otherwise have under the other Loan Documents, at law or in equity.
3.6. NOTICES. All notices, requests, demands, directions and other
communications under the provisions of this Guaranty shall be delivered in
accordance with the terms of the Loan Agreement to the addresses set forth
therein.
3.7. EXPENSES. The Guarantors agree to pay or cause to be paid and to
save the Bank harmless against liability for the payment of all out-of-pocket
expenses, including reasonable fees and expenses of counsel for the Bank,
incurred by the Bank from time to time arising in connection with enforcement or
preservation of rights under this Guaranty, including but not limited to such
expenses as may be incurred by the Bank in connection with any default by the
Guarantors of any of their obligations hereunder.
3.8 SURVIVAL. All obligations of the Guarantors to make payments
hereunder or to indemnify the Bank (including indemnities by the Borrower of the
Bank under the Loan Documents) shall survive the payment and performance in full
of the Guaranteed Obligations.
3.9. JURISDICTION; ETC. Each of the Guarantors irrevocably (a) agrees
that the Bank may bring suit, action or other legal proceedings arising out of
this Guaranty in the courts of the State of Iowa in Polk County, Iowa, the
courts of the United States for the Southern District of Iowa; (b) consents to
the jurisdiction each such court in any such suit, action or proceeding; (c)
waives any objection which such Guarantor may have to the laying of the venue of
any such suit action or proceeding in any of such courts; and (d) waives any
right such Guarantor may have to a jury trial in connection with any such suit,
action or proceeding.
3.10. SEVERABILITY. If any term or provision of this Guaranty or the
application thereof to any Person or circumstance shall to any extent be invalid
or unenforceable, the remainder of this Guaranty, or the application or such
term or provision to Persons or circumstances other than those as to which it is
invalid or unenforceable, shall not be affected thereby, and each term and
provision of this Guaranty shall be valid and enforceable to the fullest extent
permitted by law.
3.11. COUNTERPARTS. This Guaranty may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which, when so executed, shall be deemed an original, but all such
counterparts shall constitute but one and the same instrument.
3.12. GOVERNING LAW. This Guaranty shall be governed by, and construed
in accordance with, the laws of the State of Iowa.
3.13. JOINT AND SEVERAL. The obligations of Guarantors hereunder shall
be joint and several.
<PAGE>
3.14. SUCCESSORS AND ASSIGNS. This Guaranty shall bind the Guarantors
and their respective successors and assigns, and shall inure to the benefit of
the Bank and its respective successors and assigns.
3.15. INTERCREDITOR AGREEMENT. The rights of the Bank under this
Guaranty are subject to the terms and conditions of an Intercreditor Agreement
of even date herewith among the Bank and the Bond Trustee, which terms and
conditions are incorporated herein by reference; provided, however, that the
incorporation of the Intercreditor Agreement herein shall not be deemed to
confer upon the Guarantors any rights with respect to the Intercreditor
Agreement, including without limitation any rights as third party beneficiaries
or rights to notice of, or to consent to, any modification, amendment or waiver
of or to any term or provision of the Intercreditor Agreement.
3.16 SUBORDINATION. The Borrower Obligations (as hereinafter defined)
are subordinate in right of payment to the hereinafter prior payment in full of
the Guaranteed Obligations described in clause (a) of Section 2.01. No payment
shall be made by or on behalf of the Borrower for or on account of any Borrower
Obligations, and none of the Guarantors shall ask for, demand, sue for, take or
receive from the Borrower, directly or indirectly, in cash, securities or
otherwise, by setoff, realization on collateral, exercise of any other remedies
or in any other manner, payment of all or any part of any Borrower Obligation.
As used herein, the term "Borrower Obligations" shall mean all obligations of
any kind or nature from time to time of the Borrower to any of the Guarantors,
whether such obligations are direct or indirect, otherwise secured or unsecured,
joint or several, absolute or contingent, due or to become due, whether for
payment or performance, now existing or hereafter arising; provided, however,
that Borrower Obligations shall not include obligations of the Borrower to LCSC
under the Development Agreement or the Management Agreement, which obligations
shall be subordinated to the extent set forth in the Acknowledgment and Consent
of LCSC to the Facility Agreements Assignment. No Guarantor shall sell, assign
or otherwise dispose of all or any part of its interest in any obligation or
indebtedness constituting or evidencing a Borrower Obligation unless such
purchaser, transferee or assignee agrees, in a manner satisfactory to the Bank,
to become bound by the foregoing subordination terms.
3.17. LIMITATION OF LIABILITY. Notwithstanding any other provision of
this Guaranty to the contrary, the liability of LCS and its Subsidiaries,
including without limitation LCSC and HHC, shall enforced only against the Gross
Revenues (as hereinafter defined) of LCS and its Subsidiaries. As used herein,
the term "Gross Revenues" shall mean any and all gross rents, income, receipts,
consideration, profits, cash, cash flow, accounts, accounts receivable, contract
rights or other obligations, fees, charges and revenues, and any and all
proceeds thereof, including without limitation any and all Entrance Payments (as
defined in the Loan Agreement) or management, consulting, development,
supervision, use, operation, maintenance or other fees of any tone or nature
whatsoever, now or hereafter received by or paid to or for the account or
benefit of LCS or its Subsidiaries in connection with any and all of their
respective businesses, projects and ventures, whether now or hereafter existing,
including without limitation their
<PAGE>
development of or other affiliation with any such businesses, projects and
ventures, all as determined in accordance with cash basis accounting, applied in
a consistent manner. LCS hereby agrees that it shall cause its Subsidiaries
other than the Borrower to dividend, distribute, loan or otherwise transfer any
unrestricted cash which is not reasonably required for use by any such
Subsidiary in connection with the development or ownership of its community, to
LCS,
IMPORTANT: READ BEFORE SIGNING. THE TERMS OF THIS GUARANTY SHOULD BE READ
CAREFULLY BECAUSE ONLY THOSE TERMS IN WRITING ARE ENFORCEABLE. NO OTHER TERMS OR
ORAL PROMISES NOT CONTAINED IN THIS WRITTEN CONTRACT MAY BE LEGALLY ENFORCED.
YOU MAY CHANGE THE TERMS OF THIS GUARANTY ONLY BY ANOTHER WRITTEN AGREEMENT.
IN WITNESS WHEREOF, the Guarantors have duly executed and delivered this
Guaranty as of the date first above written.
THE CHESTNUT REAL ESTATE PARTNERSHIP
By: BLAKEHURST JOINT VENTURE, as a
general partner
By: Chestnut Village, Inc., as a general partner
By: /s/ Arthur V. Neis
---------------------------------------------
Title: Treasurer
-------------------------------------
<PAGE>
THE CHESTNUT REAL ESTATE PARTNERSHIP
By: WEST JOPPA ROAD LIMITED PARTNERSHIP, as
a general partner
By: Rosedale Care, Inc., as a general partner
By: /s/ T.F. Mullan
---------------------------------------------
Title: Thomas F. Mullan, III
-------------------------------------
President
<PAGE>
THE CHESTNUT REAL ESTATE PARTNERSHIP
By: WEST JOPPA ROAD LIMITED PARTNERSHIP, as
a general partner
By: Continental Care, Inc., as a general partner
By: /s/ J.A. Luetkemeyer, Jr.
---------------------------------------------
Title: President
-------------------------------------
<PAGE>
LCS HOLDINGS, INC.
By: /s/ Arthur V. Neis
---------------------------------------------
Title: Treasurer
-------------------------------------
LIFE CARE SERVICES CORPORATION
By: /s/ Arthur V. Neis
---------------------------------------------
Title: Treasurer
-------------------------------------
HOME HEALTH CARE SERVICES
CORPORATION
By: /s/ Arthur V. Neis
---------------------------------------------
Title: Treasurer
-------------------------------------
EXHIBIT 10.47.3
This instrument prepared by and after recording return to:
Richard A. Malm
Dickenson, Mackaman, Tyler & Hagen, P.C.
1600 Hub Tower, 699 Walnut Street
Des Moines, Iowa 50309
INDEMNITY DEED OF TRUST AND SECURITY AGREEMENT
INDEMNITY DEED OF TRUST AND SECURITY AGREEMENT ("Deed of Trust"), dated
as of July 3, 1997, by THE CHESTNUT REAL ESTATE PARTNERSHIP, a Maryland general
partnership having an address of c/o Mullan Enterprises, Inc., The Foxleigh
Building, 2330 W. Joppa Road, Suite 210, Lutherville, Maryland 21093
("Grantor"), to Paul R. Tyler and Richard A. Malm as Trustees (either or both
are herein referred to as the "Trustee") and NORWEST BANK IOWA, NATIONAL
ASSOCIATION, a national banking association having an office at 666 Walnut
Street, Des Moines, Iowa 50309 (the "Bank"),
W I T N E S S E T H:
WHEREAS, The Chestnut Partnership, a Maryland general partnership
("Borrower") is justly indebted to the Bank in the principal sum of One Million
Nine Hundred Thousand Dollars ($1,900,000.00) (the "Loan"), or so much thereof
as may be advanced in accordance with a Loan Agreement of even date herewith
among Borrower, Grantor, Bank and others (as the same may be amended, modified
or supplemented from time to time, "Loan Agreement"), and to be repaid with
interest thereon in accordance with, a note of even date herewith made by
Borrower to the Bank in the principal amount of $1,900,000 (as the same may be
extended, renewed, refinanced, refunded, amended, modified or supplemented from
time to time, and any replacement or successor note the "Note");
WHEREAS, Grantor expects to derive financial benefit from the making of
the Loan by the Bank to Borrower; and
WHEREAS, Grantor has executed and delivered to the Bank a Guaranty
Agreement of even date herewith (the "Guaranty") pursuant to which Grantor has
guaranteed and become surety for, inter alia, the payment of the indebtedness
evidenced by the Note, both principal and interest, and all amounts due or to
become due under the Loan Agreement, the Note and the other Loan Documents (as
defined in the Loan Agreement), and any extensions, renewals, replacements or
modifications of any thereof, and the performance and observance of all
covenants, agreements, obligations and liabilities of Borrower under or pursuant
to the provisions of the Loan Agreement, the Note and the other Loan Documents,
and any extensions, renewals, replacements or modifications of any thereof (as
defined in the Guaranty, with certain other obligations, the "Guaranteed
Obligations");
<PAGE>
NOW, THEREFORE, in consideration of $10.00 and other good and valuable
consideration, the receipt of which is hereby acknowledged, and in order to
secure the Guaranteed Obligations, which are referred to herein as the "Secured
Obligations", Grantor, intending to be legally bound, does hereby grant,
bargain, sell, convey, warrant, assign, transfer, mortgage, pledge, grant a
first priority security interest in, set over and confirm unto Trustee, and
their successors and assigns, all of Grantor's estate, right, title, interest,
property, claim and demand, now owned or held or hereafter acquired or arising,
in and to the following property and rights (collectively, the "Mortgaged
Property"):
(a) the lands and premises more particularly described in Exhibit
A hereto, together with all and singular the tenements,
hereditaments and appurtenances hereunto belonging or in
anyway appertaining, and also (i) any land lying within the
right- of-way of any streets, open or proposed, adjoining the
same, (ii) any easements, rights-of-way and rights used in
connection therewith or as a means of access thereto, and
(iii) any and all sidewalks, alleys, strips and gores of land
adjacent thereto or used in connection therewith (all of the
foregoing being hereinafter collectively called the "Land");
(b) all buildings, structures and other improvements now or
hereafter erected or placed on the Land (collectively, the
"Improvements");
(c) all machinery, apparatus, equipment, furniture, furnishings,
fittings, fixtures, goods, chattels and other articles of
personal property now or hereafter located on, attached to or
used in connection with the Land or the Improvements (other
than any personal property owned by any resident occupying the
Improvements and used by such resident in connection with such
occupancy), and all replacements thereof, additions thereto
and substitutions therefor (all of the foregoing, being
hereinafter collectively called the "Equipment"), together
with all deposits or payments made on any Equipment in
connection with the conditional purchase thereof and all
leases by Grantors as lessee of Equipment;
(d) all licenses, permits, certificates, authorizations and
agreements from Governmental Authorities relating to the
ownership, construction, occupancy, operation, management or
use of the Land, the Improvements or the Equipment;
(e) all tradenames, trademarks, contracts, licenses and agreements
relating to the ownership design, construction, occupancy,
operation, management or use of the Land, the Improvements or
the Equipment;
(f) all the remainder or remainders, reversion or reversions,
rents, revenues, issues, profits, royalties, fees, charges,
income and other benefits derived from any of the foregoing,
including without limitation the Entrance Payments (as defined
in the Loan Agreement), all of which are hereby assigned to
Trustee, who is hereby
<PAGE>
authorized to collect and deceive the same, to give proper
receipts and acquittances therefor and to apply the same to
the payment of the Secured Obligations, notwithstanding the
fact that the same may not then be due and payable, subject,
however, to the right of Grantor to receive and use the same
to the extent otherwise permitted under the Loan Documents
unless and until an Event of Default (as defined in Section
4.01) shall occur;
(g) all proceeds of the conversion, voluntary or involuntary, of
any of the foregoing into cash or liquidated claims, including
all proceeds of the insurance required to be maintained by
this Deed of Trust, all awards or other compensation
heretofore or hereafter made to Grantor as the result of any
Condemnation (as defined in Section 2.05), all awards for
changes of the grades of streets and all awards for severance
damages, all of which are hereby assigned to Trustee, who is
hereby authorized to collect and receive the proceeds thereof,
to give proper receipts and acquittances therefor and, subject
to Section 2.06, to apply the same to the payment of the
Secured Obligations, notwithstanding the fact that the same
may not then be due and payable;
(h) any monies deposited with Trustee or Bank pursuant to the
terms hereof or of any other Loan Document;
(i) all equipment, inventory, accounts, contract rights, general
intangibles, instruments, documents and chattel paper (as
those terms are defined in the Uniform Commercial Code) of
Grantor; and
(j) all proceeds, both cash and non-cash, of any and all of the
foregoing;
TO HAVE AND TO HOLD the Mortgaged Property unto Trustee, their
successors and assigns, forever, but upon the trusts, and under the terms and
conditions of this Deed of Trust, which are set forth hereinafter;
IN TRUST, NEVERTHELESS, with POWER OF SALE, for the benefit and
security of Bank, its respective successors and assigns, and for the enforcement
of the Secured Obligations, all as herein provided;
PROVIDED, HOWEVER, that if Grantor shall pay, perform and discharge the
Secured Obligations in full and the Loan Agreement is terminated, then this Deed
of Trust and the estate hereby granted shall cease, terminate and become void;
GRANTER FURTHER AGREES WITH TRUSTEE AND BANK AS FOLLOWS:
<PAGE>
ARTICLE I REPRESENTATIONS AND WARRANTIES
Grantor represents and warrants to Trustee and Bank that:
1.01. TITLE. Grantor has good and marketable title to the Land and the
Improvements and has good title to all Equipment and other property and rights
comprising the Mortgaged Property, subject to no mortgage, lien, pledge, charge,
security interest or other encumbrance or adverse claim of any nature except
Permitted Encumbrances (as defined in this Section 1.01), and (b) has full power
and lawful authority to grant, bargain, sell, convey, warrant, assign, transfer,
mortgage, pledge, grant a security interest in, set over and confirm unto
Trustee, and its successors and assigns, the Mortgaged Property as herein
provided. Grantor will forever warrant and defend the title to the Mortgaged
Property and the validity and first priority of the lien or estate, and the
security interest, created hereby against the claims and demands of all persons
whomsoever. As used herein the term "Permitted Encumbrances" means (i) the
easements, rights of way and other exceptions set forth in Schedule B-2 of the
title policy insuring the lien of this Deed of Trust, including without
limitation that certain Indemnity Deed of Trust and Security Agreement dated as
of August 2, 1993 given by Grantor to NationsBank, N.A., f/k/a Maryland National
Bank ("NationsBank"), as trustee, and recorded among the Land Records of
Baltimore County, Maryland in Liber SM No. 10056, folio 70, which was amended by
an Indemnity Deed of Trust Modification Agreement of approximate even date
herewith to be recorded among the Land Records of Baltimore County, Maryland;
that certain UCC-1 Financing Statement between Grantor, as Debtor, and The First
National Bank of Maryland, as trustee ('First National"), and recorded among the
Land Records of Baltimore County, Maryland in Liber SM No. 10056, folio 100; and
that certain Amended and Restated Subordination Agreement of approximately even
date herewith among Grantor, Borrower, First National, as trustee, Boatmen's
National Bank, as bond trustee, John Obzud, as trustee, David D. Gordon, as
trustee, and Bank, to be recorded among the Land Records of Baltimore County,
Maryland immediately after the recording of this Deed of Trust pursuant to which
the lien of the Indemnity Deed of Trust recorded in Liber SM No. 10056, folio
170 and the UCC-1 recorded in Liber SM No. 10056 folio 100 shall be subordinated
to the lien created hereby; and (ii) any Impositions or Mechanics' Claims (both
as defined in Section 2.07) which are not due and payable or are being contested
in good faith at the time pursuant to and in compliance with the requirements of
Section 2.07.
1.02. HAZARDOUS SUBSTANCES. The Mortgaged Property does not contain (a)
any hazardous wastes, hazardous substances, hazardous materials, toxic
substances, hazardous air pollutants or toxic pollutants, as those terms are
used in, defined in or listed under the Resource Conservation and Recovery Act,
the Comprehensive Environmental Response, Compensation and Liability Act, the
Hazardous Materials Transportation Act, the Toxic Substances Control Act, the
Clean Air Act and the Clean Water Act, or in any regulations promulgating
pursuant thereto, or in any other applicable Law, including without limitation
those elements or compounds which are contained in the list of hazardous
substances adopted by the United States Environmental Protection Agency or the
list of toxic pollutants designated by Congress or said agency, or (b) petroleum
products, including without limitation, gasoline, diesel fuel, fuel oil, heating
oil,
<PAGE>
kerosene, motor oil, used oil and waste oil (all of the foregoing in clauses (a)
and (b) being herein collectively called "Hazardous Substances"); other than
Hazardous Substances described in clause (b) as to which Grantor remains in
compliance with all applicable Laws relating to the receipt, handling, use,
storage, treatment, shipment or disposal of the same ("Permitted Substances").
Grantor has at all times received, handled, used, stored, treated, shipped and
disposed of all Permitted Substances in compliance with all applicable Laws, and
has not received, handled, used, stored, treated, shipped or disposed of any
Hazardous Substances other than Permitted Substances. No release or threatened
release of Hazardous Substances has occurred on or in the Mortgaged Property.
There is no civil, criminal or administrative action, suit, demand, claim,
hearing, lien, notice or demand letter, notice of violation, investigation or
proceeding pending or threatened with respect to the condition, use or occupancy
of the Mortgaged Property which relates to Hazardous Substances or any Law
referred to in this Section 1.02. As used herein the term "Law" means any law
(including common law), constitution, statute, treaty, regulation, rule,
ordinance, order, injunction, writ, decree or award of, or permit, approval or
license granted by, any Governmental Authority, including without limitation
those relating to zoning, subdivision, building, safety, fire protection,
accessibility to, usability by or discrimination against disabled individuals,
or environmental matters. As used herein the term "Governmental Authority" means
any government or political subdivision or any agency, authority, bureau,
central bank, commission, department or instrumentality of either, or any court,
tribunal, grand jury or arbitrator, in each case whether foreign or domestic.
ARTICLE II AFFIRMATIVE COVENANTS
Grantor covenants to Trustee and the Bank as follows:
2.01. COMPLIANCE WITH LAWS; ETC. Grantor shall comply with all Laws and
all easements, declarations, covenants and restrictions which at any time are
applicable to the Mortgaged Property or Grantor, and shall comply with the
requirements of all policies of insurance required by this Deed of Trust and of
the insurers under such policies. Grantor shall make any replacements,
alterations or improvements to the Mortgaged Property as may be required by Law
or such requirements even if unforeseen and/or extraordinary. Grantor shall have
the right, after prior written notice to Bank, to contest by appropriate legal
proceedings diligently conducted in good faith, without cost or expense to any
of the Bank, the validity or application of any Law which does not subject any
of the Bank to any criminal or civil liability or jeopardize the lien of this
Deed of Trust, and Grantor may delay compliance with such Law until final
determination of such proceeding if compliance with such Law may legally be
delayed until, and such proceedings shall conclusively operate to prevent the
enforcement of such Law prior to, such final determination provided, however,
that, if in the judgment of any of the Bank any lien or charge against the
Mortgaged Property would or might be incurred by reason of such delay, Grantor
shall furnish to and maintain with Bank security, at all times satisfactory to
Bank, to assure the discharge of such lien or charge. Grantor shall keep, or
cause to be kept, in full force and effect all licenses, permits and
governmental authorizations and agreements necessary or desirable for the
ownership, construction, occupancy, operation, management or use of the
<PAGE>
Mortgaged Property. Grantor shall preserve and maintain unimpaired any and all
easements, rights of way, appurtenances and other interests and rights
constituting any portion of the Mortgaged Property.
2.02. MAINTENANCE AND REPAIR. Grantor shall not abandon or cause or
permit any waste to the Improvements or the Equipment, shall maintain the
Improvements and the Equipment in good repair, working order and condition,
except for reasonable wear and use, shall maintain the Improvements and the
Equipment in compliance with all Laws, and shall restore, replace or rebuild the
Improvements and the Equipment or any part thereof now or hereafter damaged or
destroyed by any casualty (whether or not insured against or insurable) or
affected by any Condemnation with Improvements or Equipment of equivalent value
and utility, whether or not the proceeds of insurance required hereunder or the
award payable in respect of such Condemnation are sufficient for the purpose or
are available to Grantor pursuant to Section 2.06 for the purpose. All repairs,
replacements, restorations, alterations and improvements to the Mortgaged
Property required by Section 2.01 or this Section 2.02 or permitted by Sections
2.03 or 2.06 shall be promptly performed in a good and workmanlike manner in
compliance with all applicable Laws, easements, declarations, restrictions,
covenants and insurance requirements, shall be equivalent in quality of
construction and class to the original construction of the Improvements and
shall be subject to the terms and conditions set forth in Section 2.06(c) as if
such repair, replacement, restoration, alteration or improvement were a
restoration thereunder.
2.03. ALTERATIONS. Grantor shall not permit the Improvements or the
Equipment to be removed, demolished or materially altered; provided, however,
that Grantor (i) shall make any replacements, alterations or improvements which
are required by Law and (ii) may remove worn out Equipment if the same is
concurrently replaced with Equipment of equivalent value and utility.
2.04. INSURANCE. Grantor shall maintain and keep in effect the
following policies of insurance:
(a) during the course of construction of the Phase III
Improvements (as defined in the Loan Agreement) or any other
construction or repair of Improvements or Equipment on the
Mortgaged Property, (i) builder's risk insurance (on a
completed value, non-reporting basis) against "all risks of
physical loss", including flood, collapse and transit
coverage, with deductibles not to exceed $5,000, in non-
reporting form, covering the total replacement cost of work
performed and equipment, supplies and materials furnished in
connection with such construction or repair of Improvements or
Equipment, together with "soft cost" endorsements and such
other endorsements as Bank may require, and (ii) worker's
compensation, employer's liability and all other statutory
forms of insurance now or hereafter required by Law covering
all persons employed in connection with such construction or
repair of the Improvements in such limits as may be required
by Law or as Bank may otherwise require;
<PAGE>
(b) policies of insurance against loss or damage to the
Improvements and the Equipment by or from fire, lightning,
windstorm, explosion, riot, riot attending a strike, civil
commotion, aircraft and vehicles, smoke and such other hazards
as are presently included in the so-called "fire and extended
coverage" insurance; vandalism, malicious mischief and such
other hazards as are presently included in the so-called "all
risks to physical loss" insurance; and such other insurable
hazards, including flood, as, under good insurance practices,
from time to time are insured against for improvements and
equipment having similar functions and uses in the area where
the Improvements and Equipment are located, in an amount which
shall not be less than the greater of (i) 100% of the "full
replacement cost" of the Improvements and the Equipment,
without deduction for physical depreciation, or (ii) an amount
sufficient to prevent Bank and Grantor from becoming
co-insurers within the terms of the applicable policies; the
term "full replacement cost" shall mean the actual cost of
replacing the Improvements and the Equipment, exclusive of the
cost of excavations, foundations and footings below the lowest
basement floor, and shall be determined from time to time at
the request of Bank (but not more frequently than once in any
24 calendar months) at the expense of Grantor, by an insurer
or by an appraiser, engineer, architect or contractor
designated by Grantor and approved by Bank;
(c) insurance against loss or damage to the major components of
the air conditioning and heating systems, fly-wheels, steam
pipes, steam turbines, steam engines, steam boilers, other
pressure vessels, high pressure piping and machinery and
elevators and escalators, if any, as are installed in the
Improvements, including insurance against physical damage to
the Improvements and the Equipment arising out of an accident
covered thereunder and against loss of occupancy or use
arising from breakdown of any of the foregoing, in such
amounts as are satisfactory to Bank;
(d) comprehensive general liability insurance on an "occurrence
basis" against claims for bodily injury, death or property
damage occurring on or about the Mortgaged Property (including
elevators and escalators, if any) and on or in the streets
adjoining the same, to afford protection in a "single limit"
of not less than $1,000,000 in the event of bodily injury to
or death of any number of persons or of damage to property
arising out of one occurrence;
(e) if the Land or any part thereof now or at anytime prior to
full payment and performance of the Secured Obligations is
situate in an area designated by the Federal Emergency
Management Agency (or any successor thereto) as an area of
special flood hazard for purposes of the National Flood
Insurance Program, such policies of flood insurance as Bank
shall request, so as to enable Bank and the Lenders to be in
compliance with all Laws with respect to flood insurance
coverage for the Mortgaged Property from time to time
applicable to Bank;
<PAGE>
(f) business interruption insurance and insurance against loss of
"rental value" for a period of twelve months, in such amounts
as are satisfactory to Bank;
(g) comprehensive automobile liability insurance against liability
for claims of bodily and personal injury and property damage
arising out of the use of all Borrower owned, non-owned and
hired motor vehicles by Borrower's agents and employees, in an
amount not less than $1,000,000 for any occurrence (or its
equivalent) and not less than $1,000,000 in the aggregate.
Such motor vehicle liability insurance shall be written by the
same insurance company that writes Grantor's If comprehensive
general liability insurance policy or by an insurance company
having the same parent company as the insurance company
writing the comprehensive general liability insurance, unless
Bank approves another insurance company, which approval shall
not be unreasonably withheld;
(h) workers' compensation, employer's liability insurance and all
other statutory forms of insurance now or hereafter prescribed
by law and in limits not less than the statutorily required
amounts covering all persons employed by or on behalf of
Grantor on or in the Mortgaged Property. Employer's liability
insurance must be maintained in an amount not less than
$1,000,000 per occurrence or its equivalent; and
(i) such other insurance with respect to the Mortgaged Property in
such amounts as may from time to time be required by Bank
against other insurable hazards or casualties which at the
time are commonly insured against in the case of premises
similarly situated, due regard being given to the height and
type of buildings and improvements, their construction,
location, use and occupancy.
All policies of insurance shall be subject to the approval of Bank as to
insurance companies, amounts, expiration dates, form and content and shall name
Trustee and Bank as additional insureds. All policies of insurance maintained by
Grantor pursuant to clauses (a) and (b) shall contain the "replacement cost
endorsement". All policies of insurance covering risks of physical loss shall
provide that losses thereunder shall be payable to Bank, as their interests may
appear, pursuant to a standard first mortgagee endorsement, without
contribution, substantially equivalent to the New York standard mortgagee
endorsement. At least 30 days prior to the expiration of any policy of
insurance, Grantor shall furnish Bank with evidence satisfactory to Bank of the
payment of the premium for, and the reissuance of a policy continuing, such
insurance as required by this Deed of Trust. All policies of insurance shall
contain an endorsement by the insurer that any loss shall be payable in
accordance with the terms of such policy notwithstanding any act or negligence
of Grantor which might otherwise give rise to a defense by the insurer to its
payment for such loss and a waiver by the insurer of all rights of subrogation
to any rights of Trustee or Bank or any of them and of all rights of setoff,
counterclaim or deduction against the insureds. All policies of insurance shall
also contain a provision to the effect that any cancellation of or amendment to
such insurance, including any reduction in the scope or limits of coverage,
shall not be effective as to
<PAGE>
Bank without at least 30 days' prior written notice to Bank. Grantor shall not
take out separate insurance with respect to the Mortgaged Property concurrent in
form or contributing in the event of loss with that required by this Deed of
Trust unless the same shall contain a standard non contributory lender's loss
payable endorsement in favor of and in scope and form satisfactory to Bank.
2.05. DAMAGE OR CONDEMNATION. In the event of any damage to or
destruction of the Improvements or the Equipment or any part thereof as a result
of any casualty ("Damage"), or in the event the Land, the Improvements or the
Equipment or any part thereof are taken or damaged as the result of the exercise
of the power of eminent domain or as the result of any other governmental action
for which compensation shall be given by any Governmental Authority
("Condemnation"), or if Grantor shall receive any notice or advice of any
Condemnation proceedings, Grantor shall give prompt notice thereof to Bank. Bank
shall have the right, and is hereby authorized and empowered and irrevocably
appointed attorney-in-fact of Grantor, to settle, adjust or compromise any
claims by any insureds for Damage under any policy or policies of insurance
required to be maintained by this Deed of Trust, or any claims for awards or
other compensation payable in connection with any Condemnation, except, so long
as no Event of Default exists, those claims involving amounts of less than
$50,000.
2.06. APPLICATION OF INSURANCE PROCEEDS AND CONDEMNATION AWARDS.
(a) BENEFICIARY ELECTION. All proceeds of the insurance required
to be maintained by this Deed of Trust (including proceeds of
business interruption or loss of rental value insurance)
payable in connection with any Damage, and all awards or other
compensation payable in connection with any Condemnation,
shall be deposited with Bank, except that any such proceeds or
awards or other compensation aggregating less than $50,000
shall not be required to be so deposited. Such proceeds or
awards or other compensation (after deducting therefrom all
costs and expenses, including reasonable attorneys' fees,
incurred by Bank in connection with the collection thereof
regardless of the particular nature thereof and whether
incurred with or without suit) ("Net Proceeds"), shall be
applied by Bank at Bank's option (x) to the payment of the
Secured Obligations in such order as Bank may determine (but
on a pro rata basis among the Note) or (y) to the payment of
the costs of restoring the Improvements and Equipment so
damaged or taken to their value, utility and condition
immediately prior to such Damage or Condemnation, including
the payment of all debt service on the Note as the same
becomes due until completion of the restoration (collectively,
"Restoration Costs"); provided, however, that, with respect to
any Damage or Condemnation occurring after completion of
construction of the Phase III Improvements at the request of
Grantor, Bank shall elect to apply the Net Proceeds as set
forth in clause (y) if no Event of Default or Potential
Default (as defined in the Loan Agreement) shall have occurred
and be continuing and if, in the sole judgment of Bank, (i)
the Improvements and Equipment so damaged can be restored
substantially to the
<PAGE>
value, utility and condition thereof immediately prior to such
Damage or Condemnation, (ii) the Net Proceeds deposited with
Bank, together with such supplemental amounts deposited by
Grantor with Bank for the purpose, shall be sufficient to pay
all Restoration Costs, (iii) such restoration can be expected
to be completed by the Maturity Date (as defined in the Note),
(iv) in the case of a Condemnation, the Land taken will not
materially adversely affect the value or utility of the
Facility (as defined in the Loan Agreement) even if the
Improvements and Equipment can be restored and (v) such Damage
or Condemnation and the time to complete such restoration
shall not materially adversely affect the ability of Borrower
to pay and perform its obligations under the Note and the
other Loan Documents, or the ability of Grantor to pay the
Secured Obligations, during such restoration or thereafter.
(b) APPLICATION TO RESTORATION. If Bank elects to apply the Net
Proceeds to the Restoration Costs, Grantor shall deposit with
Bank such additional amounts of money as may be necessary so
that the Net Proceeds and such additional monies
(collectively, "Restoration Funds") will be sufficient, in the
reasonable judgment of Bank, to pay all Restoration Costs
during such restoration. Provided that no Event of Default
shall have occur-red and be continuing or exist, such
Restoration Funds will be advanced by Bank from time to time
as the restoration work progresses upon the written request of
Grantor subject to compliance by Grantor with such reasonable
requirements and conditions as Bank shall impose, such
requirements and conditions to be substantially equivalent to
those imposed by Bank for advances of loan proceeds under the
Loan Agreement and to include those terms and conditions set
forth in Section 2.06(c). Bank shall not be required to apply
Restoration Funds as aforesaid unless they reasonably
determine that the amount thereof remaining after payment of
the amount requested will be sufficient to pay the Restoration
Costs in full, and Grantor shall promptly deposit with Bank
the amount of any deficiency, to be held and disbursed by Bank
as Restoration Funds in accordance with the provisions of this
Section 2.06. Upon completion of such restoration to the
satisfaction of Bank and the payment of the Restoration Costs
in full, the balance of any Restoration Funds not required to
be disbursed shall (i) in the case of a Damage, be disbursed
to Grantor or as Grantor may direct and (ii) in the case of a
Condemnation, be applied to the payment of the Secured
Obligations in such order as Bank may determine (but on a pro
rata basis among the Note) until the same have been paid in
full and then to Grantor or as Grantor may direct.
(c) PERMITS; PLANS; CONTRACTS. All restoration work following any
Damage or Condemnation pursuant to this Deed of Trust shall be
subject to the following terms and conditions:
<PAGE>
(i) no work shall be undertaken unless Grantor shall have
procured and paid for all permits, approvals and
authorizations of all Governmental Authorities
required in connection with all of the work; and
(ii) all work involving estimated Restoration Costs of
more than $25,000 (exclusive of debt service on the
Note) (x) shall be designed, constructed and
completed in accordance with detailed plans and
specifications and cost estimates acceptable to Bank
and prepared by an architect or engineer selected by
Grantor and reasonably satisfactory to Bank and (y)
shall be performed pursuant to fixed price
construction contracts which are secured by payment
and performance bonds in the amount of such
contracts, such contracts and bonds to be in form and
substance, and with contractors and sureties,
reasonably satisfactory to Bank and to be executed
and delivered prior to the commencement of any of the
work.
(d) PAYMENT OF DEFICIENCY. If (i) in the reasonable judgment of
Bank the Mortgaged Property cannot be restored substantially
to the value, utility and condition thereof immediately prior
to such Damage or Condemnation or such restoration cannot be
expected to be completed by the Maturity Date and (ii) the Net
Proceeds are not sufficient to pay the Secured Obligations in
full, Grantor shall promptly pay the deficiency.
2.07 TAXES AND IMPOSITIONS; MECHANICS' CLAIMS. Grantor shall pay,
before any fine, penalty, interest or cost attaches thereto, and in any event
not less than 10 days prior to the delinquency thereof, all taxes and
assessments, general and special, all water and sewer rents and all governmental
charges and levies of any kind or nature whatsoever, which are now or hereafter
assessed or imposed upon the Mortgaged Property or Grantor or become due and
payable from Grantor or create a lien upon the Mortgaged Property (all such
taxes, assessments, rents, charges and levies being herein collectively called
"Impositions"), as well as all claims for labor, materials or services which, if
unpaid, might become a lien thereon (herein collectively called "Mechanics'
Claims"), and shall furnish to Bank, as soon as reasonably possible, official
receipts of the appropriate taxing or other authority, or other proof
satisfactory to Bank, evidencing the payment of all Impositions; provided,
however, that if by law any Imposition is payable, or may at the option of the
taxpayer be paid, in installments, Grantor may pay the same, or cause the same
to be paid, together with any accrued interest on the unpaid balance thereof, in
installments as the same become due and before any fine, penalty, interest or
cost may be added thereto for the nonpayment thereof; and provided, further,
that, if Grantor (a) contests the validity or amount of any Imposition or
Mechanic's Claim in good faith and by appropriate proceedings which operate to
prevent any execution on any portion of the Mortgaged Property, (b) deposits and
maintains with Bank a bond or other security satisfactory to Bank in such amount
as Bank shall require to assure the discharge thereof, (c) furnish to Bank an
endorsement to each of Bank' title insurance policies insuring over such
Imposition or Mechanics' Claim and (d) thereafter diligently proceeds
<PAGE>
to cause such Imposition or Mechanics' Claim to be removed, paid or discharged
of record, Grantor may defer payment thereof during the pendency of such
contest.
2.08. TAX AND INSURANCE ESCROW. If requested by Bank upon the
occurrence of an Event of Default, Grantor shall pay to Bank on the first day of
each calendar month a sum equal to one twelfth (1/12th) of the real estate taxes
on the Mortgaged Property and premiums for insurance required hereby so as to
enable Bank to pay the same at least thirty days before they become due. Amounts
so paid shall not be trust funds but may at the option of Bank be commingled
with general funds of Bank. No interest shall be paid on such amounts. If an
Event of Default shall occur, Bank shall have the right to apply any amounts
paid to Bank under this Section 2.08 against all or any part of the Secured
Obligations. If such real estate taxes and insurance premiums shall exceed the
amounts paid into escrow under this Section 2.08, Grantor shall on demand pay
the deficiency. Grantor shall furnish to Bank tax and insurance bills in
sufficient time to enable Bank to pay such taxes and premiums, before interest
and penalties accrue thereon.
2.09. [INTENTIONALLY OMITTED.]
2.10. SECURITY INTEREST
(a) UCC SECURITY INTEREST. This Deed of Trust constitutes both a
mortgage and a "security agreement" within the meaning of the
Uniform Commercial Code of the applicable jurisdiction (the
"UCC") , and the Mortgaged Property includes both real and
personal property and all other rights and interests, whether
tangible or intangible in nature, of Grantor in the Mortgaged
Property. Grantor by executing and delivering this Deed of
Trust has granted to Trustee and Bank, as security for the
Secured Obligations, a security interest in and to those
portions of the Mortgaged Property in which a security
interest can be granted under the UCC. Portions of the
Mortgaged Property are or are to become fixtures as defined in
the UCC. This Deed of Trust constitutes and is effective as a
fixture filing as provided in Section 9402 of the UCC. This
Deed of Trust secures an obligation incurred for the
construction of improvements on the Land and is a
"construction mortgage" under Section 9313 of the UCC.
(b) LOCATIONS. Grantor shall maintain and keep the Equipment on
the Land; shall maintain and keep its principal place of
business and its chief executive office at c/o Mullan
Enterprises, Inc., The Foxleigh Building, 2330 West Joppa
Road, Suite 210, Lutherville, Maryland and at no other
location without thirty days' prior written notice to Bank,
and shall maintain and keep its records concerning the
Mortgaged Property at the Improvements and at no other
location without thirty days' prior written notice to Bank.
2.11. VISITATION. Grantor shall permit such persons as any of the Bank
may designate to visit and inspect the Mortgaged Property, to examine the books,
records and documents relating
<PAGE>
to the Mortgaged Property and take copies and extracts therefrom and to discuss
the affairs of Grantor relating thereto with the officers, employees and
independent accountants of Grantor at such times and as often as any of the Bank
may reasonably request. Grantor hereby authorizes such officers, employees and
independent accountants to discuss with Bank such affairs of Grantor.
2.12. LITIGATION AFFECTING MORTGAGED PROPERTY. Grantor shall appear in
and contest any action or proceeding purporting to affect the security hereof,
the validity or priority of the lien hereof or the rights or powers of Trustee
or Bank, and shall pay within a reasonable time after demand therefor all costs
and expenses, including costs of evidence of title and attorneys' fees, in any
such action or proceeding in which Trustee or Bank may appear.
2.13 INDEMNIFICATION. Neither Trustee nor the Bank shall have any
obligation or liability by reason of this Deed of Trust (or the liens or
security interests in the Mortgaged Property granted hereby) or arising out of
the Mortgaged Property, nor shall Trustee or the Bank be required or obligated
in any manner to perform or fulfill any obligations of Grantor with respect to
the Mortgaged Property. Grantor hereby agrees to indemnify and defend Trustee
and Bank against, and hold Trustee and the Bank harmless from, all costs, fines,
penalties, fees (including, without limitation, attorneys' fees), expenses,
liabilities, losses, claims and damages that may at any time be asserted against
or incurred by Trustee or the Bank as a result of, or arising out of, or in any
way related to or by reason of this Deed of Trust (or the liens or security
interests in the Mortgaged Property granted hereby), the Loan Agreement or any
other Loan Document or any transaction contemplated hereby or thereby, or any
event or matter involving the Mortgaged Property, including any cost, fine,
penalty, fee, expense, liability, loss, or damage arising from or related to any
Law concerning disabled individuals or any Law concerning Hazardous Substances
or other environmental matters and including any and all claims and demands
whatsoever which may be asserted against Trustee or the Bank by reason of any
alleged obligation on its part to perform or discharge any obligation with
respect to the Mortgaged Property.
2.14 ACTIONS BY TRUSTEE OR BANK TO PRESERVE MORTGAGED PROPERTY. If
Grantor shall fail to (a) effect, maintain and keep in force the insurance
required under the provisions of Section 2.04, (b) make the payments required by
Section 2.07 or (c) pay, perform or observe any of the other obligations
required by this Deed of Trust or any other Loan Document to be paid, performed
or observed by Grantor, then Trustee or Bank or any of them may effect,
maintain, keep in force, pay, perform or observe the same. In connection
therewith, Trustee or any of the Bank shall have the right, but not the
obligation, (i) to enter upon and take possession of the Mortgaged Property;
(ii) to make such additions, alterations, repairs and improvements to the
Mortgaged Property as Trustee or any of the Bank may consider necessary or
proper to keep the same in good condition and repair; (iii) to appear and
participate in any action or proceeding affecting or which may affect the
security hereof or thereof or the rights or powers of Trustee or any of the Bank
hereunder or thereunder; (iv) to contest or compromise any lien, encumbrance or
charge which in the judgment of Trustee or any of the Bank may affect the
security of this Deed of Trust or any other Loan Document, or to discharge the
same, either by paying the amount
<PAGE>
claimed to be due or depositing in court a bond for the amount claimed or
otherwise giving security for such claim, or in such other manner as is or may
be prescribed by law; and (v) in exercising such powers, to pay necessary
expenses including the fees and expenses of attorneys and all necessary or
desirable consultants. All sums so expended by Trustee or any of the Bank or
expended to sustain the lien or estate or security interest created by this Deed
of Trust or any other Loan Document or the priority hereof or thereof, or to
protect or enforce any of the rights of Trustee or any of the Bank under the
terms of this Deed of Trust or any other Loan Document, or to recover or enforce
any of the Secured Obligations or otherwise to secure the performance of any
obligation of Grantor under this Deed of Trust or any other Loan Document, shall
be paid by Grantor within five days after demand with interest at the Default
Rate (as defined in the Note) until paid. In any action or proceeding to
foreclose this Deed of Trust, or to recover, collect or enforce the Secured
Obligations, the provisions of law respecting the recovery of costs,
disbursements and allowances shall prevail unaffected by this covenant.
2.15. ESTOPPEL CERTIFICATES. Grantor, within five days after notice
from any of the Bank, shall furnish to Bank a statement stating the amount of
the Secured Obligations and stating whether any offsets or defenses exist
against the Secured Obligations. Upon the reasonable request of Grantor (not
more frequently than once every six months), Bank, within five days of such
request, shall furnish to Grantor a statement stating the amount of the Secured
Obligations.
ARTICLE III NEGATIVE COVENANTS
Grantor covenants to Trustee and Bank as follows:
3.01. LIENS; LEASES. Grantor shall not create, permit to accrue or
suffer to exist any assignment, mortgage, lien, security interest, pledge,
conditional sale or other title retention agreement, encumbrance or charge of,
in, to or upon the Mortgaged Property, other than Permitted Encumbrances.
Grantor shall not, without the prior written consent of the Bank, lease (as
lessee) any of the Equipment or Improvements.
3.02. MODIFICATIONS TO PROPERTY RESTRICTIONS. Grantor shall not
initiate, join in or consent to any change in any private covenant, zoning
ordinance or other public or private restriction which would detract from or
limit the value or utility of the Mortgaged Property.
3.03. HAZARDOUS SUBSTANCES. Grantor shall not (a) cause, permit or
allow the deposit or creation of, or permit the existence of, any Hazardous
Substances (other than Permitted Substances) at, on, in or under the Mortgaged
Property; (b) use, permit or allow the use of Hazardous Substances (other than
Permitted Substances) at, on, in or under the Mortgaged Property; or (c) cause,
permit or allow the release or threatened release of any Hazardous Substances
at, on, in, under or from the Mortgaged Property.
3.04. DISSOLUTION; CHANGE OF BUSINESS. Grantor shall not dissolve,
merge or consolidate with any other person or sell, transfer or otherwise
dispose of all or a substantial portion of its
<PAGE>
assets. Grantor shall engage only in the business of constructing, owning and
operating the Improvements as a continuing care facility and shall not engage in
any other business.
ARTICLE IV
EVENTS OF DEFAULT; REMEDIES
4.01. EVENTS OF DEFAULT. An Event of Default shall mean the occurrence
or existence of one or more of the following events or conditions (whatever the
reason for such Event of Default and whether voluntary, involuntary or effected
by operation of law):
(a) Borrower shall fail to pay when due principal of the Note and
such failure shall have continued for a period of more than
five days after Bank shall have given Borrower notice of such
non-payment; or
(b) Borrower or Grantor shall fail to pay when due interest on the
Note or any other amount due hereunder or under the Note or
any other Loan Document and such failure shall have continued
for a period of five days after Bank shall have given Borrower
notice of such non-payment; or
(c) Any representation or warranty made by Borrower, Grantor or
any Guarantor (as defined in the Loan Agreement) under this
Deed of Trust or any other Loan Document or any statement made
by Borrower, Grantor or any Guarantor in any financial
statement, certificate, report, exhibit or document furnished
by Borrower, Grantor or any Guarantor to Bank pursuant to or
in connection with this Deed of Trust or any other Loan
Document shall prove to have been false or misleading in any
material respect as of the time when made (including by
omission of material information necessary to make such
representation, warranty or statement not misleading); or
(d) Grantor shall default in the performance or observance of any
covenant contained in Sections 2.03, 2.04 or 2.16 or in
Article III; or
(e) Grantor shall default in the performance or observance of any
other covenant, agreement or duty under this Deed of Trust and
such default shall have continued for a period of thirty days
after written notice thereof to Grantor; or
(f) Grantor or Borrower or any Guarantor shall default in the
performance or observance of any covenant, agreement or duty
under the Note or any other Loan Document beyond any period of
grace with respect thereto; or
(g) An Event of Default set forth in the Loan Agreement, the
Guaranty or any other Loan Document shall occur; or
<PAGE>
(h) Grantor or Borrower or any Guarantor (i) shall default in any
payment of any obligation (or set of related obligations) in
respect of Indebtedness in excess of $500,000 in aggregate
amount beyond any period of grace with respect thereto or,- if
such obligation or obligations is or are payable or repayable
on demand, shall fail to pay or repay such obligation or
obligations when demanded or (ii) shall default in the
observance of any covenant, term or condition contained in any
agreement or instrument by which such obligation or
obligations is or are created, secured or evidenced if the
effect of such default is to cause, or to permit the holder or
holders of such obligation or obligations (or a trustee or
Bank on behalf of such holder or holders) to cause, all or
part of such obligation or obligations to become due before
its or their otherwise stated maturity; or
(i) One or more judgments for the payment of money shall have been
entered against Grantor or Borrower or any Guarantor, which
judgment or judgments exceed $100,000 in the aggregate, and
such judgment or judgments shall have remained undischarged
and unstayed for a period of thirty consecutive days; or
(j) A writ or warrant of attachment, garnishment, execution,
distraint or similar process shall have been issued against
Grantor or Borrower or any Guarantor or any of their
respective properties which shall have remained undischarged
and unstayed for a period of thirty consecutive days; or
(k) A material adverse change in the business, operations or
condition (financial or otherwise) of the Facility, Grantor,
Borrower shall have occurred; or
(l) Grantor shall sell or otherwise convey or transfer the
Mortgaged Property or any part thereof, or Grantor or any
Guarantor shall merge with or into or consolidate with any
Person (as defined in the Loan Agreement), or any stock of
Grantor or any Guarantor shall have been transferred, pledged,
levied upon or encumbered; or
(m) A proceeding shall have been instituted in respect of Grantor
or Borrower or any Guarantor
(i) seeking to have an order for relief entered in
respect of Grantor or Borrower or such Guarantor, or
seeking a declaration or entailing a finding that
Grantor or Borrower or such Guarantor is insolvent or
a similar declaration or finding, or seeking
dissolution, winding-up, charter revocation or
forfeiture, liquidation, reorganization, arrangement,
adjustment, composition or other similar relief with
respect to Grantor or Borrower or such Guarantor, its
assets or its debts under any law relating to
bankruptcy, Insolvency, relief of debtors or
protection of creditors,
<PAGE>
termination of legal entities or any other similar
law now or hereafter in effect, or
(ii) seeking appointment of a receiver, trustee,
custodian, liquidator, assignee, sequestrator or
other similar official for Grantor or Borrower or
such Guarantor or for all or any substantial part of
its property, and such proceeding shall result in the
entry, making or grant of any such order for relief,
declaration, finding, relief or appointment, or such
proceeding shall remain undismissed and unstayed for
a period of sixty consecutive days; or
(n) Grantor or Borrower or any Guarantor shall become insolvent,
shall become generally unable to pay its debts as they become
due, shall voluntarily suspend transaction of its business,
shall make a general assignment for the benefit of creditors,
shall institute a proceeding described in Section 4.01(m)(i)
or shall consent to any such order for relief, declaration,
finding or relief described therein, shall institute a
proceeding described in Section 4.01(m)(ii) or shall consent
to any such appointment or to the taking of possession by any
such official of all or any substantial part of its property
whether or not any such proceeding is instituted, shall
dissolve, wind-up or liquidate itself or any substantial part
of its property, or shall take any action in furtherance of
any of the foregoing.
4.02 REMEDIES.
(a) Primary Remedies. If an Event of Default shall occur, Bank or
Trustee (at the direction of Bank) for and on behalf of Bank,
may by notice to Grantor, declare the Secured Obligations
immediately due and payable without presentment, demand,
protest or further notice of any kind, all of which are hereby
expressly waived; provided, however, that, in the case of an
Event of Default specified in subsections (m) or (n) of
Section 4.01, the Secured Obligations shall automatically
become due and payable without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived;
and Bank or Trustee (at the direction of Bank) may, and if
requested by Bank, Trustee shall, exercise any other right,
power or remedy available to it at law or in equity, hereunder
or under any other Loan Document without demand, protest or
notice of any kind, all of which are hereby expressly waived,
except such as is expressly required hereby or by such other
Loan Document. Without limiting the generality of the
foregoing, Bank or Trustee (at the direction of Bank) may, and
if requested by Bank, Trustee shall:
(i) enter and take possession of the Mortgaged Property
or any part thereof, exclude Grantor and all persons
claiming under Grantor wholly or partly therefrom,
and operate, use, manage and control the same, or
cause the same to be operated by a person selected by
Bank, either in the name of
<PAGE>
Grantor or otherwise, and upon such entry, from time
to time, at the expense of Grantor and of the
Mortgaged Property, make all such repairs,
replacements, alterations, additions or improvements
thereto as Bank may deem proper, and collect and
receive the rents, revenues, issues, profits,
royalties, income and benefits thereof and apply the
same to the payment of all expenses which Bank or
Trustee may be authorized to incur under the
provisions of this Deed of Trust and applicable law,
the remainder to be applied to the payment,
performance and discharge of the Secured Obligations
in such order as Bank may determine until the same
have been paid in full;
(ii) institute an action for the foreclosure of this Deed
of Trust and the sale of the Mortgaged Property
pursuant to the judgment or decree of a court of
competent jurisdiction;
(iii) sell the Mortgaged Property to the highest bidder or
bidders at public auction at a sale or sales held at
such place or places and time or times and upon such
notice and in accordance with the provisions of
Section 7-105, Real Property Article Annotated Code
of Maryland, as amended, and Rules W70 through W77 of
the Maryland Rules of Procedure, as amended, or
otherwise in such manner as may be required by law,
or in the absence of any such requirement, as Bank
may deem appropriate, and from time to time adjourn
such sale by announcement at the time and place
specified for such sale or for such adjourned sale or
sales without further notice except such as may be
required by law and the Grantor grants to the Trustee
a power of sale and assents to the passage of a
decree for the sale of the Mortgaged Property upon
the occurrence of an Event of Default hereunder;
(iv) take all steps to protect and enforce the rights of
Trustee and Bank under this Deed of Trust by suit for
specific performance of any covenant herein
contained, or in aid of the execution of any power
herein granted or for the enforcement of any other
rights; and/or
(v) exercise any or all of the rights and remedies
available to a secured party under the UCC, including
the right to (A) enter the Mortgaged Property and
take possession of the Equipment without demand or
notice and without prior judicial hearing or legal
proceedings, which Grantor hereby expressly waives,
(B) require Grantor to assemble the Equipment, or any
portion thereof, and make it available to Bank at a
place or places designated by Bank and reasonably
convenient to both parties and (C) sell all or any
portion of the Equipment at public or private sale,
without prior notice to Grantor except as otherwise
required by law (and if notice is required by
<PAGE>
law, after ten days' prior written notice), at such
place or places and at such time or times and in such
manner and upon such terms, whether for cash or on
credit, as Bank in its sole discretion may determine.
As to any property subject to Article 9 of the UCC
included in the Mortgaged Property, Bank or Trustee
may proceed under the UCC or proceed as to both real
and personal property in accordance with the
provisions of this Deed of Trust and the rights and
remedies that Bank or Trustee may have at law or in
equity, in respect of real property, and treat both
the real and personal property included in the
Mortgaged Property as one parcel or package of
security. Grantor shall have the burden of proving
that any sale pursuant to this Section 4.02(a) or
pursuant to the UCC was conducted in a commercially
unreasonable manner.
(b) RECEIVER. If an Event of Default shall occur, Bank or Trustee
shall be entitled as a matter of right to the appointment of a
receiver of the Mortgaged Property and the rents, revenues,
issues, profits, royalties, income and benefits thereof,
without notice or demand, and without regard to the adequacy
of the security for the Secured Obligations or the solvency of
Grantor.
(c) ENVIRONMENTAL SITE ASSESSMENTS. If an Event of Default shall
occur, Grantor shall permit such persons as Bank may designate
("Site Reviewers") to visit the Mortgaged Property and perform
environmental site investigations and assessments ("Site
Assessments") on the Mortgaged Property for the purpose of
determining whether there exists on the Mortgaged Property any
environmental condition which could result in any liability,
cost or expense to the owner or occupier of the Mortgaged
Property. Such Site Assessments may include both above and
below the ground testing for environmental damage or the
presence of Hazardous Substances on the Mortgaged Property and
such other tests on the Mortgaged Property as may be necessary
to conduct the Site Assessments in the opinion of the Site
Reviewers. Grantor will supply to the Site Reviewers such
historical and operational information regarding the Mortgaged
Property as may be reasonably requested by the Site Reviewers
to facilitate the Site Assessments and will make available for
meetings with the Site Reviewers appropriate personnel having
knowledge of such matters. The cost of performing all Site
Assessments shall be paid by Grantor within five days after
demand by Bank with interest at the Default Rate until paid
(d) RIGHT OF SET-OFF. If an Event of Default shall occur, Bank and
the holder of any participation in the Note shall have the
right, in addition to all other rights and remedies available
to them, to set-off against and to appropriate and apply to
the unpaid balance of the Note and all other obligations of
Grantor hereunder or under any other Loan Document any debt
owing to, and any other funds held in any manner for the
account of, Grantor by Bank or such holder, including all
funds in all deposit accounts (general or special) now or
hereafter maintained by Grantor
<PAGE>
with the Bank or such holder. Such right shall exist whether
or not the Bank or any such holder shall have made any demand
under the Note or any such participation or any other Loan
Document and whether or not the Note or such participation or
such other obligations are matured or unmatured. Grantor
hereby confirms the foregoing arrangements and each such
Beneficiary's or holder's right of banker's lien and set-off
and nothing in this Deed of Trust or any other Loan Document
shall be deemed any waiver or prohibition of any such
Beneficiary's or holder's right of banker's lien or set-off.
(e) SALES BY PARCELS. In any sale made under or by virtue of this
Deed of Trust or pursuant to any judgment or decree of court,
the Mortgaged Property may be sold in one or more parts or
parcels or as an entirety and in such order as Bank or Trustee
may elect, without regard to the right of Grantor, or any
person claiming under them, to the marshalling of assets.
(f) EFFECT OF SALE. The purchaser at any sale made under or by
virtue of this Deed of Trust or pursuant to any judgment or
decree of court shall take title to the Mortgaged Property or
the part thereof so sold free and discharged of the estate of
Grantor therein, the purchaser being hereby discharged from
all liability to see to the application of the purchase money.
Any person, including any of the Bank may purchase at any such
sale. Trustee is hereby irrevocably appointed the attorney-in-
fact of Grantor in its name and stead to make all appropriate
transfers and deliveries of the Mortgaged Property or any
portions thereof so sold and, for this purpose, Trustee may
execute all appropriate instruments of transfer, and may
substitute one or more persons with like power, Grantor hereby
ratifying and confirming all that its said attorneys or such
substitute or substitutes shall lawfully do by virtue hereof.
Nevertheless, Grantor shall ratify and confirm, or cause to be
ratified and confirmed, any such sale or sales by executing
and delivering, or by causing to be executed and delivered, to
Trustee or Bank or to such purchaser or purchasers all such
instruments as may be advisable, in the judgment of Trustee or
Bank, for the purpose, and as may be designated, in such
request. Any sale or sales made under or by virtue of this
Deed of Trust, to the extent not prohibited by law, shall
operate to divest all the estate, right, title, interest,
property, claim and demand whatsoever, whether at law or in
equity, of Grantor in, to and under the Mortgaged Property, or
any portions thereof so sold, and shall be a perpetual bar
both at law and in equity against Grantor, its successors and
assigns, and against any and all persons claiming or who may
claim the same, or any part thereof, by, through or under
Grantor, or its successors or assigns. The powers and agency
herein granted are coupled with an interest and are
irrevocable.
(g) EVICTION OF GRANTOR AFTER SALE. If Grantor fails or refuses to
surrender possession of the Mortgaged Property after any sale
thereof, Grantor shall be deemed a tenant at sufferance,
subject to eviction by means of forcible entry and detainer
<PAGE>
proceedings, provided that this remedy is not exclusive or in
derogation of any other right or remedy available to Trustee
or Bank or any purchaser of the Mortgaged Property under any
provision of this Deed of Trust or pursuant to any judgment or
decree of court.
(h) CONFESSION OF JUDGMENT FOR ELECTMENT. For the purposes of the
remedies afforded Bank and Trustee in Section 4.02(a), Grantor
hereby authorizes any attorney of any court of record to
appear for Grantor to sign an agreement for entering an
amicable action of ejectment for possession of any of the
Mortgaged Property and to confess judgment thereon against
Grantor in favor of Bank and Trustee, whereupon a writ may
forthwith issue for the immediate possession of any of the
Mortgaged Property, without any prior writ or proceeding
whatsoever; and for so doing, this Deed of Trust or a copy
hereof verified by affidavit shall be a sufficient warrant.
(i) INSURANCE POLICIES. In the event of a foreclosure sale
pursuant to this Deed of Trust or other transfer of title or
assignment of the Mortgaged Property in extinguishment, in
whole or in part, of the Secured Obligations, all right, title
and interest of Grantor in and to all policies of insurance
required under the provisions of Section 2.04 shall inure to
the benefit of and pass to the successor in interest of
Grantor or the purchaser or grantee of the Mortgaged Property
or any part thereof so transferred.
4.03 APPLICATION OF PROCEEDS. The proceeds of any sale made either
under the power of sale hereby given or under a judgment, order or decree made
in any action to foreclose or to enforce this Deed of Trust, shall be applied:
(a) first to the payment of (i) all costs and expenses of such
sale, including reasonable attorneys' fees, appraiser's fees
and costs of procuring title searches, title insurance
policies and similar items and the reasonable fees and
expenses of Trustee and (ii) all charges, expenses and
advances incurred or made by the Bank or Trustee in order to
protect the lien or estate created by this Deed of Trust or
the security afforded hereby including any expenses of
entering, taking possession of and operating the Mortgaged
Property;
(b) then to the payment of any other Secured Obligations in
accordance with the Inter Creditor Agreement described in
Section 6.15 herein; and
(c) any balance thereof shall be paid to Grantors, or to whosoever
shall be legally entitled thereto, or as a court of competent
jurisdiction may direct.
4.04 RIGHT TO SUE WITHOUT PREJUDICE. If an Event of Default shall
occur, Trustee or Bank shall have the right from time to time to cause a sale of
the Mortgaged Property under the
<PAGE>
provisions of this Deed of Trust or to sue for any sums required to be paid by
Grantor under the terms of this Deed of Trust as the same respectively become
due, without regard to whether or not the Secured Obligations shall be due and
without prejudice to the right of Trustee or Bank thereafter to cause any such
sale or to being any action or proceeding of foreclosure or otherwise, or to
take other action, in respect of any Event of Default existing at the time such
earlier action or proceeding was commenced.
4.05 POWER TO MODIFY DOCUMENTS. Bank may at any time or from time to
time, without the consent of any junior lien or encumbrances and without any
obligation to give notice of any kind to any person and without in any manner
affecting the priority of the lien or security interest of this Mortgage on or
in any part of the Mortgaged Property (but subject, in all respects, to the
provisions of the Loan Agreement), renew or extend this Deed of Trust or any
other Loan Document or amend or modify the same in any way, or waive any of the
terms, covenants or conditions hereof or thereof in whole or in part, and may
release any portion of the Mortgaged Property or any other security, and grant
such extensions and indulgences in relation to the Secured Obligations as Bank
may determine. Bank and Trustee may at any time or from time to time subordinate
the lien or security interest of this Deed of Trust to any lease of space in the
Improvements or any other agreement with respect to the occupancy or use of any
part of the Mortgaged Property, or to any easement, restrictive covenant or
other encumbrance on any part of the Mortgaged Property, or to any other lien on
or security interest in any part of the Mortgaged Property, or to any other
interest of any person in or to any part of the Mortgaged Property, in each case
without the agreement or consent of Grantor or of the tenant or other party
holding the interest to which the lien or security interest hereof is being
subordinated or of any other person having a right or interest in any of the
Mortgaged Property, without any obligation to give notice of any kind to any
person, and without in any manner affecting (except to the extent specifically
provided in the instrument effecting such subordination) the priority of the
lien or security interest of this Deed of Trust on or in any part of the
Mortgaged Property.
4.06. REMEDIES CUMULATIVE.
(a) GENERALLY. No right or remedy herein conferred upon or
reserved to Bank or Trustee is intended to be exclusive of any
other right or remedy, and each and every such right and
remedy shall be cumulative and in addition to any other right
or remedy of Bank or Trustee under the Loan Documents or this
Deed of Trust, or at law or in equity. The failure of the Bank
or Trustee to insist at any time upon the strict observance or
performance of any of the provisions of this Deed of Trust, or
to exercise any right or remedy provided for herein or in the
Loan Documents, shall not impair any such right or remedy nor
be construed as a waiver or relinquishment thereof. Every
right and remedy given by this Deed of Trust or the Loan
Documents to Bank or Trustee, or to which Bank or Trustee may
otherwise
<PAGE>
be entitled, may be exercised from time to time and as often
as may be deemed expedient by Bank or Trustee, and no warrant
shall be exhausted by the exercise thereof. Bank and Trustee
may pursue inconsistent remedies.
(b) OTHER SECURITY. Bank and Trustee shall be entitled to enforce
payment and performance of any Secured Obligations and to
exercise all rights and powers under the Loan Documents or
this Deed of Trust, or at law or in equity, notwithstanding
that such Secured Obligations may now or hereafter be
otherwise secured. Neither the acceptance of this Deed of
Trust nor its enforcement, whether by court action or pursuant
to the power of sale or other powers herein contained, shall
prejudice or in any manner affect Bank's or Trustee's right to
realize upon or enforce any other security now or hereafter
held by Bank or Trustee in such order and manner as Bank or
any of them or Trustee in their sole discretion may determine.
4.07. WAIVER OF STAY, EXTENSION, MORATORIUM LAWS; EQUITY OF REDEMPTION.
Grantor shall not at any time (a) insist upon, plead or in any manner whatever
claim or take any benefit or advantage of any applicable present or future stay,
extension or moratorium Law or (b) claim, take or insist upon any benefit or
advantage of any present or future Law providing for the valuation or appraisal
of the Mortgaged Property prior to any sale or sales thereof which may be made
under or by virtue of the provisions of Section 4.02; and Grantor hereby waives
all benefit or advantage of any such Law or Laws. Grantor, for itself and all
who may claim under it, hereby waives any and all rights and equities of
redemption from sale under the power of sale created hereunder or from sale
under any order or decree of foreclosure of this Deed of Trust and all notice or
notices of seizure, and all right to have the Mortgaged Property marshaled upon
any foreclosure hereof. Neither Bank nor Trustee shall be obligated to pursue or
exhaust its rights or remedies as against any part of the Mortgaged Property
before proceeding against any other part thereof and Grantor hereby waives any
right or claim of right to have Bank or Trustee proceed in any particular order.
Grantor hereby waives and releases all errors, defects and imperfections in any
proceedings instituted by Bank or either of them or Trustee under this Deed of
Trust.
ARTICLE V
TRUSTEE
5.01. ACCEPTANCE BY TRUSTEE. Trustee accepts the trusts herein created
when this Deed of Trust, duly executed and acknowledged, is made a public record
as provided by law.
5.02. DUTIES AND COMPENSATION. Trustee, by its acceptance hereof,
covenants faithfully to perform and fulfill the trusts herein created, being
liable, however, only for its negligence or misconduct, and hereby waives any
statutory fee and agrees to accept reasonable compensation from Grantor in lieu
thereof for any services rendered by it in accordance with the tenus hereof.
<PAGE>
5.03. ACTION IN ACCORDANCE WITH INSTRUCTIONS. Upon receipt by Trustee
of instructions from Bank at any time or from time to time, Trustee shall (a)
give any notice or direction or exercise any right, remedy or power hereunder or
in respect of the Mortgaged Property as shall be specified in such instructions,
and (b) approve as satisfactory all matters required by the terms hereof to be
satisfactory to Trustee or Bank. Trustee may, but need not, take any of such
actions in the absence of such instructions.
5.04 RESIGNATION. Trustee may resign at any time upon giving of not
less than 30 days' prior notice to Bank, but will continue to act as trustee
until its successor shall have been chosen and qualified.
5.05 SUCCESSOR TRUSTEE. In the event of the Trustee's death, removal,
resignation, or refusal or inability to act as Trustee, Bank shall have the
irrevocable power, with or without cause, without notice of any kind, without
specifying any reason therefor, and without applying to any court, to select and
appoint a successor trustee by filing a deed or other instrument of appointment
for record in each office in which this Deed of Trust is recorded, and upon such
recordation the successor trustee shall become vested with the same powers,
rights, duties and authority of Trustee, as aforesaid, with the same effect as
if originally made Trustee hereunder. Such successor shall not be required to
give bond for the faithful performance of its duties unless required by Bank.
ARTICLE VI
MISCELLANEOUS
6.01 SECURITY AND PRIORITY OF ADVANCES. This Deed of Trust secures, and
the Secured Obligations include, future advances. All advances and indebtedness
arising and accruing from time to time under the Loan Agreement shall be secured
hereby to the same extent as though the Loan Agreement were fully incorporated
in this Deed of Trust. Under the Loan Agreement advances shall be made and
indebtedness shall be incurred from time to time hereafter, but each such
advance or indebtedness shall be secured hereby as if made on the date hereof.
6.02 CHANGES IN TAX LAW. In the event of the passage after the date of
this Deed of Trust of any Law deducting from the value of the Mortgaged
Property, for the purpose of taxation, any lien thereon, or changing in any way
the Laws now in force for the taxation of mortgages or deeds of trust, or debts
secured thereby, for state or local purposes, or the manner of the operation of
any such taxes so as to affect the interest of Bank or any of them or Trustee,
then and in such event, Grantor shall bear and pay the full amount of such
taxes, provided that if for any reason payment by Grantor of any such new or
additional taxes would be unlawful (including under the laws of usury) Bank may
either declare the whole sum secured by this Deed of Trust, with interest
thereon, to be immediately due and payable, or pay that amount or portion of
such taxes as would be unlawful to require Grantor to pay, in which event
Grantor shall concurrently therewith pay the balance of said taxes.
<PAGE>
6.03. FURTHER ASSURANCES.
(a) GENERALLY. From time to time upon the request of Bank or any
of them or Trustee, Grantor shall promptly and duly execute,
acknowledge and deliver any and all such further instruments
and documents as Bank or any of them or Trustee may deem
necessary or desirable to confirm this Deed of Trust, to carry
out the purpose and intent hereof, or to enable Bank or
Trustee to enforce any of their rights hereunder
(b) FILINGS. Grantor immediately upon the execution and delivery
of this Deed of Trust, and thereafter from time to time, shall
cause this Deed of Trust, any supplements hereto, any
financing statements and each instrument of further assurance
to be filed, registered or recorded and refiled, reregistered
or rerecorded in such manner and in such places as may be
required by any present or future Law in order to publish
notice of and perfect the lien and security interest or estate
created by this Deed of Trust on or in the Mortgaged Property,
and shall pay all fees and costs in connection therewith.
6.04 AMENDMENTS, WAIVERS, ETC. This Deed of Trust cannot be amended,
modified, waived, changed, discharged or terminated except by am instrument in
writing signed by the party against whom enforcement of such amendment,
modification, waiver, change, discharge or termination is sought.
6.05 NO IMPLIED WAIVER. No course of dealing and no delay or failure of
Bank or any of them or Trustee in exercising any right, power or privilege under
this Deed of Trust, the Note or any other Loan Document shall affect any other
or future exercise thereof or exercise of any other right, power or privilege;
nor shall any single or partial exercise of any such right, power or privilege
or any abandonment or discontinuance of steps to enforce such a right, power or
privilege preclude any further exercise thereof or of any other right, power or
privilege.
6.06 NOTICES. All notices, requests, demands, directions and other
communications (collectively "notices") under the provisions of this Deed of
Trust shall be in writing (including telexed communication) unless otherwise
expressly permitted hereunder or thereunder and shall be sent by first-class or
first-class express mail, or by telex or fax with confirmation in writing mailed
first-class, in all cases with charges prepaid, and any such properly given
notice shall be effective when received. All notices shall be sent to the
applicable party at its address stated on the first page hereof or in accordance
with the last unrevoked written direction from such party to the other party
hereto. Bank and Trustee may rely on any notice (including telephoned
communication) purportedly made by or on behalf of Grantor, and shall have no
duty to verify the identity or authority of the person giving such notice.
6.07 EXPENSES: TAXES: ATTORNEYS' FEES. Grantor agrees to pay or cause
to be paid and to save Bank and Trustee harmless against liability for the
payment of all reasonable out-of-pocket expenses, including fees and expenses of
counsel for Bank, Trustee or any of them, incurred by
<PAGE>
Bank, Trustee or any of them from time to time; (a) arising in connection with
the preparation, execution, delivery and performance of this Deed of Trust, the
Note and the other Loan Documents; (b) relating to any requested amendments,
waivers or consents to this Deed of Trust, the Note or any other Loan Document;
and (c) arising in connection with Bank' or Trustee's enforcement or
preservation of rights under this Deed of Trust, the Note or any other Loan
Document, including such expenses as may be incurred by Bank, Trustee or any of
them in the collection of the Note or the realization of security given for the
Note. Grantor agrees to pay all stamp, document, transfer, recording or filing
taxes or fees and similar impositions now or hereafter determined by Bank or any
of them or Trustee to be payable in connection with this Deed of Trust, the Note
or any other Loan Documents, and Grantor agrees to save Bank and Trustee
harmless from and against any and all present or future claims, liabilities or
losses with respect to or resulting from any omission to pay or delay in paying
any such taxes, fees or impositions. Grantor agrees to pay and to save Bank
harmless against liability for the payment of all reasonable out-of-pocket
expenses incurred by Bank, or any of them, in connection with their review of
any repair, replacement, alteration, improvement or restoration to the Mortgaged
Property in connection with the requirements of Sections 2.02, 2.03 and 2.06,
including the fees and expenses of counsel for Bank or any of them and of any
architect engaged by Bank or any of them to review plans and specifications,
inspect work or provide advice with respect to determinations to be made in
connection therewith. In the event of termination adversely to Grantor of any
action at law or suit in equity in relation to this Deed of Trust, the Note or
any other Loan Document, Grantor will pay, in addition to all other sums which
Grantor may be required to pay, a reasonable sum for attorneys' fees incurred by
Bank or Trustee in connection with such action or suit. All amounts payable by
Grantor under this Section 6.07 shall be paid within five days after demand with
interest at the Default Rate until paid.
6.08 ASSIGNMENT OF RESIDENCY AGREEMENTS. Concurrently herewith, Grantor
and Borrower have executed and delivered to Bank by separate instrument an
Assignment of Residency Agreements dated as of the date hereof and to be
recorded, pursuant to which each of Grantor and Borrower has assigned Bank all
of its right, title and interest in and to the Residency Agreements (as defined
in the Loan Agreement), including all fees payable under such Residency
Agreements, all as therein more specifically set forth, which Assignment of
Residency Agreements is incorporated herein by reference as fully and with the
same effect as if set forth herein at length.
6.09 JURISDICTION ETC. Grantor irrevocably (a) agrees that Bank or any
of them, may bring suit, action or other legal proceedings arising out of this
Deed of Trust (other than those brought for the foreclosure or other realization
on the real property security granted hereby), the Note or any other Loan
Document, or the transactions contemplated hereby or thereby, in the courts of
the State of Iowa in Polk County, Iowa, the courts of the United States for the
Southern District of Iowa; (b) consents to the jurisdiction of each such court
in any such suit, action or proceeding; (c) waives any objection which Grantor
may have to the laying of the venue of any such suit, action or proceeding in
any of such courts; and (d) waives any right it may have to a jury trial in
connection with any suit, action or proceeding arising out of this Deed of
Trust, the Note or any other Loan Document or the transactions contemplated
hereby or thereby.
<PAGE>
6.10 INTERPRETATION. Unless the context otherwise requires, (a) the
term "person" means an individual, corporation, partnership, trust,
unincorporated association, joint venture, joint-stock company, government
(including political subdivisions), governmental authority or agency, or any
other entity, (b) any reference in this Deed of Trust to "Grantors," "Trustee",
"Bank" or any other entity shall include its successors and assigns, (c) any
reference to an Article or Section shall refer to the specified Article or
Section of this Deed of Trust, (d) words importing the singular number include
the plural number, and vice versa, (e) the terms "hereof", "hereby", "hereto",
"hereunder" and similar terms refer to this entire Deed of Trust, (f) the term
"including" shall mean "including without limitation", and (g) any reference to
the Mortgaged Property shall refer to the Mortgaged Property or any part thereof
or any estate or interest therein. The captions or headings at the beginning of
each Article and Section hereof are for the convenience of the parties and are
not a part of this Deed of Trust.
6.11. INVALIDITY OF CERTAIN PROVISIONS. If the security interest, lien
or estate created by this Deed of Trust is invalid or unenforceable as to any
part of the Secured Obligations, or as to any part of the Mortgaged Property,
the unsecured or partially secured portion thereof shall be completely paid
prior to the payment of the remaining and secured or partially secured portion
thereof, and all payments made thereon, whether voluntary or pursuant to
foreclosure sale or other enforcement action or procedure, shall be considered
to have been first paid on and applied to the full payment of that portion
thereof which is not secured or fully secured by this Deed of Trust.
6.12 SEVERABILITY. If any term or provision of this Deed of Trust or
the application thereof to any person or circumstance shall to any extent be
invalid or unenforceable, the remainder of this Deed of Trust, or the
application of such term or provision to persons or circumstances other than
those as to which it is invalid or unenforceable, shall not be affected thereby,
and each term and provision of this Deed of Trust shall be valid and enforceable
to the fullest extent permitted by law.
6.13 GOVERNING LAW. This Deed of Trust shall be governed by, and
construed in accordance with, the laws of the state in which the Land is
located.
6.14 TIME OF ESSENCE; DURATION; SURVIVAL. Time is of the essence with
respect to all of Grantor's obligations under this Deed of Trust and the other
Loan Documents. All representations and warranties of Grantor contained herein
or in any other Loan Document or made in connection herewith or therewith shall
survive the making of and shall not be waived by the execution and delivery of
this Deed of Trust or the other Loan Documents, any investigation by Bank,
Trustee or any of them or the making of any loan advance under the Loan
Agreement. All covenants and agreements of Grantor contained herein or in any
other Loan Document shell continue in full force and effect from and after the
date hereof so long as Borrower may borrow under the Loan Agreement and until
payment in full of the Secured Obligations. Without limitations, it is
understood that all obligations of Grantor to make payments to or indemnify
Bank, Trustee or any of them shall survive the payment in full of the principal
of and interest on the Note.
<PAGE>
6.15. SUCCESSORS AND ASSIGNS. This Deed of Trust shall run with the
Land and shall apply to, inure to the benefit of and bind each of the parties
hereto and their respective successors and assigns.
6.16. INTERCREDITOR AGREEMENT. The rights of Bank under this Deed of
Trust are subject to the terms and conditions of an Intercreditor Agreement of
even date herewith among the Bank, and others which terms and conditions are
incorporated herein by reference; provided, however, that the incorporation of
the Intercreditor Agreement herein shall not be deemed to confer upon Grantor
any rights with respect to the Intercreditor Agreement, including without
limitation any rights as a third party beneficiary or rights to notice of, or to
consent to any modification, amendment or waiver of or to any term or provision
of the Intercreditor Agreement.
IMPORTANT: READ BEFORE SIGNING. THE TERMS OF THIS DEED OF TRUST SHOULD BE READ
CAREFULLY BECAUSE ONLY THOSE TERMS IN WRITING ARE ENFORCEABLE. NO OTHER TERMS OR
ORAL PROMISES NOT CONTAINED IN THIS WRITTEN CONTRACT MAY BE LEGALLY ENFORCED.
YOU MAY CHANGE THE TERMS OF THIS DEED OF TRUST ONLY BY ANOTHER WRITTEN
AGREEMENT.
<PAGE>
IN WITNESS WHEREOF, Grantor has duly executed and delivered this Deed
of Trust as of the date first above written.
THE CHESTNUT REAL ESTATE PARTNERSHIP
By: BLAKEHURST JOINT VENTURE, a general
partner
By: Chestnut Village, Inc., a general partner
By: /s/ Arthur V. Neis
-----------------------------------------
Title: Treasurer
--------------------------------------
STATE OF IOWA )
) ss
COUNTY OF POLK )
On this, the 17 day of June, 1997, before me, the undersigned officer,
a Notary Public in and for said County and State, personally appeared Arthur V.
Neis , who acknowledged himself to be the Treasurer of Chestnut Village, Inc.,
an Iowa corporation which is a general partner of Blakehurst Joint Venture,
which is a general partner of The Chestnut Real Estate Partnership, and that as
such officer, being authorized to do so, executed the foregoing instrument on
behalf of such corporation for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Sue Zimmerman
------------------------------------------
Notary Public
[Notarial Seal]
My commission expires: 12-9-99
<PAGE>
THE CHESTNUT REAL ESTATE PARTNERSHIP
By: WEST JOPPA ROAD LIMITED PARTNERSHIP, as a
general partner
By: Rosedale Care, Inc., a general partner
By: /s/ T.F. Mullan
-----------------------------------------
Thomas F. Mullan, III
Title: President
--------------------------------------
STATE OF MARYLAND )
) ss
COUNTY OF BALTIMORE )
On this, the 12th day of June, 1997, before me, the undersigned
officer, a Notary Public in and for said County and State, personally appeared
Thomas F. Mullan, III, who acknowledged himself to be the President of Rosedale
Care, Inc., a Maryland corporation which is a general partner of West Joppa Road
Limited Partnership, which is a general partner of The Chestnut Real Estate
Partnership, and that as such officer, being authorized to do so, executed the
foregoing instrument on behalf of such corporation for the purposes therein
contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Daun L. Smith
--------------------------------------------
Notary Public
[Notarial Seal]
My commission expires:
September 1, 2000
<PAGE>
THE CHESTNUT REAL ESTATE PARTNERSHIP
By: WEST JOPPA ROAD LIMITED PARTNERSHIP, as a
general partner
By: Continental Care, Inc. a general partner
By: /s/ J.A. Luetkemeyer, Jr.
-----------------------------------------
Title: President
--------------------------------------
STATE OF MARYLAND )
) ss
COUNTY OF BALTIMORE )
On this, the 12th day of June, 1997, before me, the undersigned
officer, a Notary Public in and for said County and State, personally appeared
John A. Luetkemeyer, Jr., who acknowledges himself to be the President of
Continental Care, Inc. a Maryland corporation which is a general partner of West
Joppa Road Limited Partnership, which is a general partner of The Chestnut Real
Estate Partnership, and that as such officer, being authorized to do so,
executed the foregoing instrument on behalf of such corporation for the purposes
therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Dolores F. Schafer
--------------------------------------------
Notary Public
[Notarial Seal]
My commission expires: July 1, 1999
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION OF THE LAND
BEING KNOWN AND DESIGNATED as Lot No. 2 as shown on a plat entitled,
"Amended Subdivision Plat of BLAKEHURST LIFE CARE COMMUNITY" dated March 18,
1992 and recorded among the Land Records of Baltimore County in Plat Book SM No.
64, folio 34, together with those two parcels of land binding on Lot No. 2 and
identified on the Plat as "Highway Widening Area No. 1 " containing 1. 943
acres, more or less, and "Highway Widening Area No. 3", containing 0.020 acres,
more or less.
BEING the same property which by Deed dated March 23, 1992 and recorded
among the Land Records of Baltimore County, Maryland in Liber SM No. 9109, folio
54, was granted and conveyed by Institute of Mission Helpers of Baltimore City
to The Chestnut Real Estate Partnership.
TOGETHER WITH the benefit of, and subject to the provisions of, that
certain Agreement of Restrictions and Purchase Option dated March 23, 1992 by
and between The Institute of Mission Helpers of Baltimore City and The Chestnut
Real Estate Partnership as recorded among the Land Records of Baltimore County
in Liber SM No. 9109, folio 141.
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<NAME> CHESTNUT PARTNERSHIP
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